United States District Court, Northern District of Illinois
April 22, 2003
BELL, BOYD, & LLOYD, LLC
The opinion of the court was delivered by: James Zagel, District Judge
This is a suit for legal malpractice by plaintiff Washington Group International, Inc., successor by merger to Raytheon Engineers & Constructors, Inc. ("Raytheon"). Defendant has moved to dismiss the complaint, which has since been amended.
The malpractice claim arises out of an original contractor's claim of mechanic's lien on a steel mill, which defendant filed on behalf of Raytheon. The bases of Raytheon's claims are that defendant was negligent (1) in preparing the 1998 Mechanic's Lien because it contained a "patently incorrect property description"; (2) in its representation of Raytheon in the Calumet Litigation because it failed to discover the allegedly incorrect property descriptions in Mechanic's Liens at issue in that case; and (3) in failing to advise Raytheon regarding time limitations under the Illinois M echanic's Lien Act. In addition, Raytheon alleges that defendant's allegedly negligent conduct weakened Raytheon's settlement position.
To state a claim for legal malpractice under Illinois law, a plaintiff must allege: (1) the existence of an attorney-client privilege; (2) a duty on the part of the attorney arising out of that relationship; (3) a negligent act or omission that breached that duty; (4) proximate cause showing that, but for the attorney's negligence, the plaintiff would have not suffered an injury; and (5) damages. Cleveland v. Rotman, 297 F.3d 569, 572 (7th Cir. 2002). Defendant's position is that Raytheon cannot meet elements 3, 4, and 5, and even if he could meet element 1 and 2, then 3, 4 and 5 are still lacking.
The crux of defendant's argument is that Raytheon's complaint is barred by collateral estoppel as a result of an adversary proceeding in federal bankruptcy court in which Raytheon was a party. In re Acme Metals, Inc., 257 B.R. 714 (D.Del. 2000). In Acme, Acme sought a declaration that the Raytheon's lien (the same one at issue in this case) was invalid. On Acme's partial summary judgment motion, the court ruled that the property description in the lien was sufficient to affect a lien on the steel mill. The court also held that even though the lien sufficiently described the property, the lien could never be effective, no matter when it was filed or what kind of property description it contained, because the underlying construction work under the contract was not completed within three years of commencement, a requirement under Section 6 of the Illinois Mechanic's Lien Act, 770 ILCS 60/6. Defendant argues that the question of whether the property description at issue was incorrect was directly addressed and answered in Acme and thus, the issue cannot be relitigated. With respect to defendant's alleged failure to alert Raytheon to the three-year time limitation, defendant asserts that Raytheon represented to the Bankruptcy Court that the construction work under the contract was being done at least through March 26, 1999, well beyond the three-year limit, so any alleged "failure" on defendant's part to notify Raytheon of the three-year limit when Raytheon retained defendant in late Spring of 1997 could not have caused Raytheon to fail to meet the three-year requirement. With respect to the alleged damage to Raytheon's settlement position, defendant argues that this claim rests upon the issue of whether the property description in the lien was "patently incorrect," and because dismissal is proper on that issue, dismissal is proper on the settlement issue as well.
Raytheon's primary answer to these arguments is that the Bankruptcy Court's decision was erroneous. In fact, Raytheon goes so far as to assert "it is a certainty that the Bankruptcy Court's ruling on the `three-year' rule would have been reversed." Raytheon also asserts that with respect to the correctness of the property description in the lien, an Illinois court would have invalidated the lien because it would have found the property description to be "patently incorrect." Finally, Raytheon argues that collateral estoppel does not apply to this case because the purpose of collateral estoppel is to prevent repetitive litigation and inconsistent results, not to protect attorneys from their malpractice.
Raytheon's arguments regarding the correctness of the Bankruptcy Court's decision are unpersuasive. There is no evidence that the Bankruptcy Court's decision would have been reversed, and there is no evidence that an Illinois court would have found differently. The Bankruptcy Court applied Illinois law, and Raytheon provides nothing but its own speculation that the court applied Illinois law improperly. Since Acme and Raytheon settled their case and dismissed their appeals with prejudice, whether the Bankruptcy Court's decision might have been reversed is a question that will never be answered. In any event, even if Raytheon was right about its argument regarding the "three-year rule," the lien would have been ineffective anyway. Raytheon argued to the court that the "three-year rule" applies only if the contract fails to specify a time for completion. Even if the case were reversed, and Raytheon's argument was accepted, the contract completion date was June 16, 1997, and the contract was not completed by that date. In addition, Raytheon provides no evidence that the Bankruptcy Court's decision with respect to the property description was wrong, other than its own strong belief that it was wrong. Ironically, in the Bankruptcy Court, it was Raytheon who argued that the property description was sufficient, and it won that argument. For Raytheon to now argue the exact opposite is disingenuous.
With respect to Raytheon's allegation that it could have met the three-year requirement had defendant notified it of the requirement, the facts of this case allege that defendant was retained in 1997, and commencement of the construction occurred sometime in the fall of 1994. Considering that in 1997, there was approximately two years of work left on the steel mill, Raytheon's argument that it could have completed that two years of construction within a few months had it known that its three years were almost up is too difficult to accept, and the complaint fails to allege that the work could have been completed within such a short period of time. More significantly, Raytheon's position in Reno was that the three-year rule did not apply, and Raytheon clearly has held that belief up to the present. Thus, it appears that Raytheon's failure to meet the three-year requirement is due to Raytheon's belief of its inapplicability rather than any inaction on defendant's part.
Collateral estoppel bars a claim if (1) the issue sought to be precluded is the same as the one involved in a prior action; (2) the issue was actually litigated; (3) the determination was essential to the final judgment; and (4) the party against whom the estoppel is invoked was fully represented in the prior action. Havovo of America, Ltd. v. Freeman, Atkins, & Coleman, Ltd., 58 F.3d 303, 307 (7th Cir. 1995). While Raytheon correctly points out that collateral estoppel cannot be used to shield an attorney from his own malpractice, in this case, collateral estoppel is appropriate because there is no valid underlying cause of action. Raytheon has failed to show that but for defendant's negligence, it would have been successful in the underlying action. Thus, because all of the elements of collateral estoppel are clearly met here, and there is no showing that defendant's actions were the proximate cause of any damage to Raytheon, I am dismissing the complaint. Consequently, I am also denying Raytheon's request for attorneys' fees.
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