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November 9, 2004.

THOMAS C. RICHARDSON, Trustee of the Bankruptcy Estate of MARK G. DALEN, Plaintiff,
KENNETH T. KUBIESA, et al., Defendants.

The opinion of the court was delivered by: JOAN GOTTSCHALL, District Judge


Plaintiff Thomas Richardson, trustee for the estate of Mark G. Dalen ("Dalen"), sued Dalen's former attorney, Kenneth T. Kubiesa ("Kubiesa") and Kubiesa's former law firm, Power & Cronin, Ltd. ("Power"), alleging that Kubiesa committed legal malpractice by (1) failing to adequately represent Dalen's interests during the sale of Dalen's 50% share in Metropolitan Plant and Flower, Inc. ("Metropolitan") (Count I), (2) failing to adequately represent Dalen's creditor interests during Metropolitan's subsequent bankruptcy (Count II), and (3) failing to inform Dalen of the risks presented by an adversary action filed against Dalen by Metropolitan's principals and failing to inform Dalen of an opportunity to settle that adversary action for less than $100,000 (Count III).

The court granted summary judgment in favor of defendants on Counts I and II of the complaint; only Count III remains. On October 25-26, 2004, the court conducted a two-day bench trial on Dalen's remaining malpractice claim and the parties have each submitted written closing statements. Additionally, defendants have filed a "Bench Memorandum" which the court has taken with the case. Having examined the entire record and having determined the credibility of witnesses, after viewing their demeanor and considering their interests, the court finds that plaintiff has failed to establish the elements of his claim by a preponderance of the evidence and, therefore, rules in favor of defendants on Count III of plaintiff's compaint.


  Dalen's Sale Of His 50% Share Of Metropolitan

  In 1991, Mark Dalen started Metropolitan — which manufactured and sold artificial flowers, houseplants and trees — with one of his longtime business associates, Maxwell "Mack" Clamage, and Mack Clamage's son, Ed Clamage. Dalen owned a 50% stake in Metropolitan and the remaining 50% of the company was owned by the Clamages. Metropolitan was immediately successful and grew rapidly. However, as their company grew, disagreements began to arise between Dalen and the Clamages about how the business should be run. Eventually, the relationship between Dalen and the Clamages deteriorated to the point that the Clamages sought to buy-out Dalen's share of the company. Dalen agreed to enter negotiations to sell his shares and hired defendant Kubiesa — Dalen's friend and longtime legal counsel — to represent him in the sale. Dalen and the Clamages eventually settled on a purchase price of approximately $3.6 million, including a $1.1 million down payment and the remainder to be paid over time. After several banks refused to provide financing for the transaction, the Clamages finally obtained financing for the purchase price from NBD Bank ("NBD"). On April 18, 1994, both the financing transaction and the stock purchase closed.

  Metropolitan's Bankruptcy And The Adversary Claim Against Dalen

  For a while, Metropolitan made regular payments to Dalen. Including its $1.1 million down payment, Metropolitan paid Dalen a total of $1.9 million. However, by September of 1995, Metropolitan's financial condition began to decline, in part due to the enormous debt burden that Metropolitan assumed in purchasing Dalen's shares. Strapped for cash, Metropolitan stopped making payments due Dalen in October of 1995. Even with that temporary relief, Metropolitan's financial woes deepened and on February 14, 1996, Metropolitan filed a Chapter II bankruptcy petition in the Northern District of Illinois.

  On April 15, 1996, Metropolitan (now wholly owned by the Clamages) filed an amended adversary complaint in the bankruptcy court against NBD and Dalen, seeking to set aside the sale of Dalen's shares to Metropolitan as a fraudulent conveyance. Specifically, the Clamages alleged that the purchase of the Dalen shares was an illegal leveraged buy-out, that the purchase price was not justified by Metropolitan's then-existing assets, and that Dalen knew that the purchase would drive Metropolitan into insolvency. The Clamages demanded the return of the $1.9 million that Metropolitan paid Dalen for the shares.

  Efforts to Settle the Adversary Claim

  During a hearing on the adversary claim, Bankruptcy Court Judge Susan Sonderby recommended that the parties attempt to resolve their dispute by engaging in a settlement conference mediated by Bankruptcy Court Judge Ronald Barliant. The parties agreed and conducted a settlement conference on May 7 and 8, 1996. During their negotiations with NBD, the Clamages determined that they could reach a global settlement of the adversary claim if Dalen contributed approximately $100,000 towards a larger settlement payment to NBD. Both Ed Clamage and Kubiesa testified that, at some point during the first day of the settlement conference, Ed Clamage approached Kubiesa with that settlement scenario. Kubiesa did not accept the offer and informed the Clamages that any settlement scenario should include payment to Dalen rather than from Dalen. As discussed in detail below, Kubiesa and Dalen dispute whether Kubiesa informed Dalen of Ed Clamage's settlement scenario.

  Undeterred, the Clamages decided to communicate their settlement offer directly to Dalen. On or about May 21, 1996, Mack Clamage called Dalen and asked him to contribute between $75,000 to $100,000 to the settlement with NBD. Dalen refused, stating that (1) he had no intention of paying any money to the Clamages, (2) that, in any event, he had no money to contribute towards a settlement, and (3) that he wanted the Clamages to pay him. Dalen informed Kubiesa of the phone call by facsimile and reiterated his position that "I had no money. Had no intention of paying any money and I wanted this settled." (Def. Ex. 9.)

  Ultimately, Dalen's defense of the Clamages' adversary action was unsuccessful. On April 17, 1998, Judge Sonderby entered summary judgment against Dalen in the amount of $1.9 million. Dalen entered into an agreement to satisfy the judgment for $525,000. However, Dalen was unable to come up with the ...

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