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Robert Jaworski, et al v. Erwin Cohn

October 18, 2011

ROBERT JAWORSKI, ET AL., PLAINTIFFS,
v.
ERWIN COHN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendants' motion to dismiss. For the reasons stated below, the motion to dismiss is granted.

BACKGROUND

Plaintiffs contend that in 2001 they retained Defendant Erwin Cohn and Defendant Charles Cohn (collectively referred to as "Cohns") as counsel to represent Plaintiffs for claims relating to the alleged mishandling of Plaintiffs' investment funds. Plaintiffs contend that the Cohns initiated arbitration proceedings (Underlying Proceedings) on behalf of Plaintiffs and that the Cohns committed legal malpractice in several ways. Plaintiffs contend, for example, that the Cohens settled claims with Daniel M. Brush (Brush) for $10,000 without informing Plaintiffs of the settlement and without informing Plaintiffs of the risks associated with relieving Brush of personal exposure to liability to Plaintiffs. Plaintiffs also contend that, in the Underlying Proceedings, an award was entered in favor of Plaintiffs against Ellen M. Aleshire (Aleshire) for a total of $400,000 and the Cohens failed to file an adversary action in Aleshire's bankruptcy proceedings to protect the debt. Plaintiffs also contend that the Cohens allowed a claim to be dismissed against ABN Amro (Amro) before ascertaining whether Amro's security deposit could be used to satisfy an award in favor of Plaintiffs. In addition, Plaintiffs contend that the Cohns improperly advised them to relieve Kevin Kowalski (Kowalski) of personal liability in order to get testimony from Kowalski to support their other claims. Plaintiffs also contend that the Cohns allowed the claims against Dennis Wenmouth (Wenmouth), Robert E. McBride (McBride), and Dennis Pasqual (Pasqual) to be dismissed and that such individuals possessed funds and/or assets to satisfy an award. The Cohns now move to dismiss the instant action, arguing that the court lacks subject matter jurisdiction.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(1) (Rule 12(b)(1)) requires a court to dismiss an action when it lacks subject matter jurisdiction. United Phosphorus, Ltd. v. Angus Chemical Co., 322 F.3d 942, 946 (7th Cir. 2003). If the concern of the court or party challenging subject matter jurisdiction is that "subject matter jurisdiction is not evident on the face of the complaint, the motion to dismiss pursuant to Rule 12(b)(1) would be analyzed as any other motion to dismiss, by assuming for purposes of the motion that the allegations in the complaint are true." Id.; see also Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995)(stating that when reviewing a motion to dismiss brought under Rule 12(b)(1), this court "must accept as true all well-pleaded factual allegations, and draw reasonable inferences in favor of the plaintiff"). However, if the complaint appears on its face to indicate that the court has subject matter jurisdiction, "but the contention is that there is in fact no subject matter jurisdiction, the movant may use affidavits and other material to support the motion." United Phosphorus, Ltd., 322 F.3d at 946 (emphasis in original). For the purpose of determining subject matter jurisdiction, this court "may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Ezekiel, 66 F.3d at 897 (quoting Capitol Leasing Co. v. Federal Deposit Insurance Corp., 999 F.2d 188, 191 (7th Cir. 1993)). The burden of proof in a Rule 12(b)(1) motion is "on the party asserting jurisdiction." United Phosphorus, Ltd., 322 F.3d at 946.

DISCUSSION

The Cohns argue that this court lacks subject matter jurisdiction in the instant action. Plaintiffs allege in the amended complaint that this court has diversity subject matter jurisdiction. (A Compl. Par. 1-2). Pursuant to 28 U.S.C. § 1332(a), "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States. . . ." Id. In the instant action, there is no dispute that Plaintiffs are citizens of Arizona and South Carolina and Defendants are citizens of Illinois. The Cohns argue that the amount in controversy requirement is not met in this case.

When the amount in controversy is not contested, the "plaintiff's good faith allegation of the amount in controversy" will be accepted "unless it appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount." McMillian v. Sheraton Chicago Hotel & Towers, 567 F.3d 839, 844 (7th Cir. 2009)(internal quotations omitted). If the amount in controversy is challenged, "the plaintiff must support its assertion with competent proof." Id. (internal quotations omitted)(stating that "[t]he plaintiff must prove the "jurisdictional facts by a preponderance of the evidence" and the plaintiff "must do more than "point to the theoretical availability of certain categories of damages").

In the instant action, the Plaintiffs assert in the amended complaint only that they believe that they suffered damages in excess of $500,000. (A Compl. Par. 11). However, the proper sum for the amount in controversy requirement in a malpractice case, is the sum that Plaintiffs would have actually been able to recover from the defendants in the underlying action, absent the malpractice. Klump v. Duffus, 71 F.3d 1368, 1373 (7th Cir. 1995). The Cohns argue that the financial conditions of the respondents in the Underlying Proceedings shows that Plaintiffs would not have been able to collect the amount in controversy from the respondents in those proceedings.

In Klump v. Duffus, 71 F.3d 1368 (7th Cir. 1995), the Seventh Circuit indicated that in a legal malpractice action, in determining the amount that a plaintiff would have recovered, absent the malpractice, the ability to collect any award that would have been obtained should be taken into consideration. Id. at 1373. The Seventh Circuit indicated that relevant considerations includes matters such as the defendants' "employment status, financial position, asset ownership, insurance coverage, and all other evidence relevant to determining the amount of money that" the plaintiff "would have actually collected from" the defendants in the underlying suit. Id. at 1373-75. Plaintiffs have submitted an affidavit by Rebecca Wing (Wing), who is an attorney. Wing indicates that, in her professional judgment, the respondents in the arbitration would have been jointly and severally liable. (Wing Aff. Par. 10-11).

I. AMRO

Plaintiffs also contend that the Cohns committed malpractice by allowing claims to be dismissed against Amro before ascertaining whether Amro's security deposit could be used to satisfy an award in favor of Plaintiffs. The Cohns acknowledge that the deposit amount was $50,000. Plaintiffs contend that, according to Wing, AMRO "would have paid up to [the] $50,000 deposit which they were holding to settle the arbitration matter against them if [the] Cohen[s] had leaned on them to apply the $50,000 deposit to settle [P]laintiff[s'] claim." (Ans. 5). However, Plaintiffs fail to show that such a conclusion is anything other than speculation on the part of Wing. Wing's own deposition testimony indicates that AMRO had itself filed a motion to dismiss based on a New York Stock Exchange rule protecting it from liability. (Wing Dep. 51-52). Plaintiffs' contention ...


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