Court of Appeals of Illinois, First District, First Division
USF HOLLAND, INC., a Michigan Corporation, Plaintiff-Appellant,
RADOGNO, CAMELI, and HOAG, P.C., an Illinois Corporation, and PERRY W. HOAG, Defendants-Appellees
Appeal from the Circuit Court of Cook County. No. 08 L 6760. Honorable Thomas L. Hogan, Judge Presiding.
Williams, Montgomery & John, Ltd., Chicago, Illinois, (Michael C. Bruck, Alyssa M. Reiter and Megan Rees, of counsel), for APPELLANT.
Donohue, Brown, Mathewson & Smyth, LLC, Chicago, Illinois, (Norman J. Barry, Jr. and Karen Kies DeGrand, of counsel), for APPELLEES.
JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Justice Connors and Justice Harris concurred in the judgment and opinion.
[¶1] This appeal arises from the trial court's order granting summary judgment in favor of defendants-appellees Radogno, Cameli, & Hoag, P.C. (Radogno) and Perry W. Hoag dismissing the legal malpractice claim asserted against them by their former client, plaintiff-appellee USF Holland, Inc. (USF).
[¶3] The legal malpractice claim at issue in this appeal concerns the defense of a personal injury lawsuit against USF arising from a motor vehicle accident in Indiana. On June 19, 2002, a truck driven by Dale Gilchrist, a USF employee, attempted a left-hand turn on a highway in Michigan City, Indiana, and collided with an oncoming car driven by Anthony Hardin. Lisa Keppen, a passenger in Hardin's car, was severely injured in the collision and was rendered a paraplegic.
[¶4] Within weeks of the accident, USF retained the Radogno law firm, of which Hoag is a partner, to represent USF in the event a related lawsuit was filed. On December 4, 2003, Keppen filed a complaint in the circuit court of Cook County against USF (which, although a Michigan corporation, allegedly conducted business in Illinois sufficient to subject it to the jurisdiction of Illinois courts). The complaint also named as defendants USF's parent corporation, USFreightways Corporation, and Gilchrist; Radogno represented these defendants as well as USF. Among other allegations, Keppen's lawsuit alleged that Gilchrist had negligently operated the truck and that USF had violated Illinois statutes governing the maintenance and operation of commercial motor vehicles involved in interstate commerce.
[¶5] Correspondence dated January 14, 2004 from Radogno to USF, entitled " Status Report," discussed Radogno's strategy for the Keppen action. That correspondence indicated Radogno's view that " Indiana state court would be the preferred location to litigate this matter." The report explained that " [t]he jury verdict potential for a catastrophic injury is lower in northern Indiana than in Cook County, Illinois." In addition, Radogno's report noted that " Indiana allows apportionment of fault to a 'non-party' (in this case driver Anthony Hardin)," but that " Illinois would require us to file a contribution action against Hardin" as a third-party defendant. However, Radogno noted that the circuit court " probably does not have jurisdiction over Hardin," who was not an Illinois resident. Radogno also advised that, although Illinois courts could exercise jurisdiction over USF because it was " doing business" within the state, it believed USF " ha[d] a viable motion to dismiss and transfer to Indiana based on the doctrine of forum non conveniens." Thus, Radogno stated that its plan was to file a motion to dismiss the Keppen action against USF on this basis.
[¶6] Radogno did not file an answer or plead any affirmative defenses to Keppen's complaint, but responded on February 17, 2004 by filing a motion to dismiss under the doctrine of forum non conveniens. On the same date, Radogno filed a motion to dismiss Gilchrist, an Indiana resident, due to lack of personal jurisdiction. The parties conducted limited discovery related to the forum non conveniens motion and fully briefed the motions to dismiss. There is no explanation in the record, but the motions were not decided until June 29, 2005, approximately 16 months after they were filed. On that date, the circuit court granted the motion to dismiss Gilchrist
from the case but denied USF's motion to dismiss under the doctrine of forum non conveniens.
[¶7] Pursuant to Supreme Court Rule 306(a)(2), this court granted USF's request for leave to file an interlocutory appeal of the order denying the forum non conveniens motion to dismiss. Ill. S.Ct. R. 306(a)(2) (eff. Jan. 1, 2004). On December 30, 2005, we affirmed the trial court's denial of the forum non conveniens motion. Keppen v. USF Holland, Inc., 362 Ill.App.3d 1228 (2005) (unpublished order under Supreme Court Rule 23).
[¶8] Following the unsuccessful appeal of the denial of its forum non conveniens motion, USF elected to change its defense counsel. In early 2006, Radogno withdrew as USF's counsel and USF's successor counsel, the law firm Patton & Ryan, LLC, took over the legal defense of USF and USFreightways in the Keppen lawsuit. Notably, no answer or affirmative defenses had been filed on behalf of USF prior to the change in its counsel from Radogno to Patton & Ryan.
[¶9] On June 20, 2006, through its successor counsel, Patton & Ryan, USF and USFreightways Corp. filed an answer which included a single affirmative defense to the Keppen lawsuit. The affirmative defense claimed that " the sole proximate cause of the occurrence which is the subject of [Keppen's complaint] was the negligence of nonparty, Anthony Hardin." Specifically, the affirmative defense alleged Keppen's injuries were the result of Hardin's negligence in: " (a) [f]ailing to keep his vehicle under proper control; (b) failing to yield the right of way ***; (c) failing to take those steps necessary to avoid the collision; (d) driving his vehicle at an excessive rate of speed; and (e) failing to maintain a proper and sufficient lookout." Notably, the affirmative defense did not cite any particular statutory basis or otherwise indicate that it relied upon either Illinois or Indiana state law.
[¶10] In response, on July 11, 2006, Keppen filed a motion to strike the affirmative defense claiming that the defense was barred under either Illinois or Indiana law. Keppen's motion to strike argued that " Illinois law does not provide for a 'non-party' defense" and asserted that the Illinois statutory deadline for USF to assert a contribution claim against Hardin had expired in December 2005, two years after the filing of Keppen's complaint. See 735 ILCS 5/13-204 (West 2004). In addition, Keppen's motion to strike argued that under section 34-51-2-16 of the Indiana Code of Civil Procedure, USF was required to plead any nonparty defense no later than 45 days before the expiration of the 2-year limitations period governing Keppen's negligence claim and that this deadline had also passed. Ind. Code Ann. § 34-51-2-16 (West 2004). Thus, Keppen's motion argued that " under either Illinois or Indiana law, a non-party defense is untimely, and not allowed."
[¶11] The record on appeal does not indicate that Keppen's motion to strike the affirmative defense was opposed by USF's successor counsel, and there is no record of any oral argument on that motion. On September 12, 2006, the trial court granted Keppen's motion to strike USF's affirmative defense. The corresponding written order did not indicate the basis on which the court struck the affirmative defense or whether it relied on Illinois or Indiana law in doing so. The record on appeal does not indicate that USF's successor counsel moved to reconsider that order, sought interlocutory appeal on the issue, or otherwise sought clarification from the trial court as to its grounds for striking the defense.
[¶12] Following the order striking the affirmative defense, USF and Keppen eventually settled Keppen's claims against all defendants for the sum of $5.65 million in September 2007. A portion of the settlement proceeds, $3.65 million, was funded by USF's insurer. The remaining $2 million was funded through a payment by YRC Worldwide, Inc. (YRCW), a corporation of which USF is a subsidiary.
[¶13] On June 20, 2008, USF filed a complaint against the Radogno law firm and Hoag individually, asserting one count of legal malpractice and one count of breach of contract. USF alleged that " as a direct and proximate result of [Radogno's] negligence *** USF was left without its primary defense to the Keppen Suit and, therefore, faced significant exposure that it would not have otherwise faced had Defendants not violated their standard of care. As a consequence, USF was forced to settle the Keppen Suit for the sum of $5,650,000." USF claimed that Hoag had recommended a forum non conveniens motion to dismiss the suit and transfer the case to Indiana state court because " the verdict potential of the Keppen Suit was higher in Illinois" and because " an Indiana jury could find USF 'not guilty' because under Indiana law the jury could allocate 100% of the fault to a non-party such as Hardin in accordance with the Indiana Comparative Fault Act."
[¶14] USF further alleged that " although the premise for moving to transfer the Keppen Suit to Indiana was so that the Indiana non-party defense and Hardin's fault could be asserted," Radogno " failed to timely file a 'non-party defense' as an affirmative defense."  Specifically, USF claimed Radogno had allowed the deadline to lapse, arguing that under the language of section 34-51-2-16 of the Indiana Code: " If a defendant is served with summons and complaint more than 150 days prior to the expiration of the limitation of action that the claimant may have against the nonparty, the defendant shall plead any 'non-party defense' not later than forty-five days before the expiration of that limitation of action."  See Ind. Code Ann. § 34-51-2-16 (West 2004).
[¶15] USF claimed that " [a]bsent the ability to present evidence of Hardin's fault" through the Indiana nonparty defense, " USF's primary defense *** was lost, which significantly increased the exposure at trial and any settlement value of the case." USF alleged that Radogno had breached its duty of care by, among other things, " needlessly pursu[ing] a forum non conveniens motion while allowing the time limits for raising the non-party fault or contribution claim to expire, losing those claims forever." USF claimed that " [a]lthough Hardin was at fault for all, or nearly all, of Keppen's injuries," Radogno's " failure to timely file or preserve any actions, motions or defenses relating to Hardin's fault rendered it impossible to allocate any fault to Hardin." USF further alleged that if Radogno had " complied with [the] applicable standard of care and timely and appropriately raised Hardin's fault as a defense[,] *** USF could have successfully defended the Keppen Suit or settled it for a minimal sum." USF's complaint also included a breach of contract claim which alleged that Radogno had violated its " agree[ment] to defend USF in the Keppen Suit and to comply with the applicable standard of care[,] *** including
but not limited to preserving defenses and filing pleadings *** on a timely basis."
[¶16] Radogno filed a motion to dismiss USF's malpractice suit on September 19, 2008. That motion argued that USF's claim that Radogno had been negligent in failing to assert the nonparty defense under Indiana law had been " waived by virtue of USF's failure to create a record in the Keppen case from which this Court or any court could analyze and rule on the propriety and judicial basis of the trial court's decisions in the Keppen case." Radogno specifically argued there was an insufficient record to assess the alleged failure to assert the Indiana nonparty defense, as USF's successor counsel had " failed to file a written opposition to the Keppen motion to strike the non-party defense," " failed to create a record or transcript of the hearing on the Keppen motion to strike," failed to seek review or reconsideration of the order granting the motion to strike, and failed to obtain clarification from the Keppen court as to whether it had applied Illinois or Indiana law.
[¶17] Apart from its waiver argument, Radogno's motion to dismiss additionally argued that the Indiana nonparty defense could have been asserted even after Radogno ceased to represent USF. Radogno argued that the governing Indiana statute " grants discretion to the trial court to alter the time period for filing a non-party defense," and thus the defense was " arguably viable." Radogno's motion further emphasized that Keppen, as Hardin's passenger at the time of the accident, was " aware of a possible cause of action against Hardin" and thus " she could not have been surprised or prejudiced" when successor counsel filed USF's affirmative defense naming Hardin.
[¶18] Radogno also argued that " given the statutory provision that the Indiana non-party defense be filed with the 'defendant's first answer,' and the trial court's prolonged consideration of the USF motion to dismiss for forum non conveniens, the Keppen court had both discretion and good reason to 'alter' the time for filing the non-party defense" under the Indiana statute. Ind. Code Ann. § 34-51-2-16 (West 2004). Radogno thus argued that since the nonparty defense had remained viable, USF could not recover on the theory that Radogno had failed to preserve this defense.
[¶19] USF's opposition to the motion to dismiss argued that it did not need to create a record in the underlying litigation in order to preserve its legal malpractice case, and further argued that USF's conduct in the underlying action did not amount to a waiver of the claim that Radogno failed to preserve the Indiana nonparty defense. USF also argued that the language in section 34-51-2-16 of the Indiana Code allowing a trial court discretion to depart from the 150/45-day rule was inapplicable, since the statute allows the alteration of the 150/45-day deadline only if " consistent with: (1) giving the defendant a reasonable opportunity to discover the existence of a nonparty defense; and (2) giving the claimant a reasonable opportunity to add the nonparty as an additional defendant to the action before the expiration of the period of limitation applicable to the claim." Ind. Code Ann. § 34-51-2-16 (West 2004). USF argued that neither of these conditions was met and thus the trial court did not have discretion to permit a later assertion of the nonparty defense. USF specifically argued that the first condition--giving the defendant time to discover the nonparty defense--was inapplicable because Radogno " was obviously aware of the nonparty defense *** only weeks after Keppen filed suit." USF argued that the second
statutory condition, which was intended to allow plaintiffs the opportunity to add new defendants, did not support any departure from the statutory time limit to assert the defense, as " Keppen knew that Hardin was a potential defendant because she was a passenger in his vehicle when she was seriously injured." Thus, USF maintained the trial court in the Keppen lawsuit " had no discretion to alter the limitations period because the time for filing a claim against Hardin had long expired while [Radogno] was still involved in the case."
[¶20] The trial court heard oral argument on Radogno's motion to dismiss on January 12, 2009. In denying Radogno's motion, the court found that " [a] plain reading of [section 34-51-2-16 of the Indiana Code] shows that an alteration of the time limitation for filing a nonparty defense can only be given to allow the defendant a reasonable opportunity to discover the existence of a nonparty defense and allow the plaintiff a reasonable time to add that nonparty as a joint defendant." The court found that USF " was served within 150 days before the expiration of the statute of limitations, but defendant did not plead any nonparty defense prior to 45 days" before the end of the limitation period. The court concluded that " [Radogno] ha[s] not shown that after they were discharged by USF *** both of the grounds for altering the limitation period for [the] nonparty defense existed, making it a viable defense that USF's successor counsel would have been responsible for pursuing."
[¶21] The trial court also acknowledged that it did not decide, and had not been not asked to decide, whether the Keppen court had relied on Illinois or Indiana law when it struck the affirmative defense naming nonparty Hardin. The court indicated this would be a question for a jury in assessing the underlying " case within a case." The trial court further noted that Radogno had cited no case supporting its argument that USF " was responsible for making a record for this Court to review as if this were an appeal of the underlying case." The motion to dismiss was denied in an order dated January 12, 2009.
[¶22] Radogno filed its answer and two affirmative defenses to the malpractice complaint on February 23, 2009. Radogno pleaded an affirmative defense of waiver on the grounds that USF, through its successor counsel, had failed to oppose Keppen's motion to strike USF's affirmative defense and failed to seek reconsideration or clarification as to whether the Keppen court was applying Indiana or Illinois law. Radogno argued that USF, " [b]y virtue of its failure to create a record in the Keppen court establishing the state law followed by the Keppen court in striking the Indiana non-party defense," had " waived any right in the current litigation to seek a conflict of law determination for this court which, without benefit of a record[,] *** cannot speculate as to the reasons for the Keppen court's decision." Radogno's second affirmative defense, entitled " comparative fault," similarly alleged that USF was " negligent in its defense of the Keppen litigation" by failing to promptly file an Indiana nonparty defense, failing to oppose Keppen's motion to strike, and failing to seek clarification or reconsideration of the Keppen court's ruling.
[¶23] Following denial of Radogno's motion to dismiss, the parties engaged in extensive discovery, including depositions of fact and expert witnesses. USF filed a motion for partial summary judgment on June 24, 2011 with respect to the breach element of its malpractice claim. USF argued there was no genuine issue of material fact that Radogno and Hoag " breached their duty of care by failing to preserve or protect [USF's] best defense to the [Keppen lawsuit] within the applicable
statutes of limitation" under the Indiana Code and Illinois law. On September 12, 2011, Radogno responded by opposing plaintiff's motion as well as making a cross-motion seeking a partial summary judgment ruling that, as a matter of law, Radogno had not breached its duty of care in its representation of USF. With respect to the viability of the nonparty defense under Indiana law, Radogno again argued that USF had " waived" any claim that Indiana law applied in the Keppen case" due to, inter alia, the failure of successor counsel to specifically plead the Indiana statutory nonparty defense, its failure to oppose Keppen's motion to strike USF's " sole proximate cause" affirmative defense concerning Hardin, and its failure to seek an explicit choice of law ruling from the Keppen court.
[¶24] Radogno's cross-motion separately argued that, even if Indiana law had governed the Keppen action, the Indiana nonparty defense remained viable at the time Radogno was replaced as USF's counsel. Relying on the language of section 34-51-2-16 of the Indiana Code permitting the trial court to alter the time limitations of the 150/45-day rule, Radogno argued that USF, through its successor counsel, " clearly had the right to ask the Keppen court to 'alter' the filing period of a non-party defense," but had failed to do so. Radogno argued that the assertion of the defense even after expiration of the 150/45-day deadline would be appropriate since " Keppen was aware of a cause of action against Hardin because he was the driver of the car in which she was injured," and she thus had " reasonable opportunity" to sue Hardin prior to the expiration of her limitation period. Radogno further argued that: " Given the statutory provision that the Indiana non-party defense be filed with the 'defendant's first answer,' and the prolonged consideration of [USF]'s forum non conveniens motion, the Keppen court had the discretion and good reason to 'alter' the time for filing a non-party defense naming Hardin--if Indiana law applied." Ind. Code Ann. § 34-51-2-16 (West 2004). In addition, Radogno asserted that departure from the 150/45-day rule would be especially warranted because, as the Keppen court had never specifically determined that Indiana law governed the underlying action, USF had never gained " actual knowledge" of a nonparty defense. Id.
[¶25] Apart from the cross-motions on the issue of whether a breach had occurred, on September 9, 2011, Radogno filed a separate motion seeking summary judgment on the basis that USF could not establish the element of damages to support a malpractice claim. Radogno contended that summary judgment in its favor was warranted since entities other than USF had funded the $5.65 million settlement of the Keppen suit, such that USF had not suffered actual damages. Specifically, Radogno argued that discovery had revealed that USF had been acquired in 2005 by YRCW, which had since funded the defense of the Keppen lawsuit and paid $2 million of the Keppen settlement. Radogno further contended that the remaining $3.65 million of settlement funds had been paid by an insurer, National Union/AIG. Citing the decision in Sterling Radio Stations, Inc. v. Weinstine, 328 Ill.App.3d 58, 765 N.E.2d 56, 262 Ill.Dec. 230 (2002), for the proposition that the collateral source rule does not apply in a legal malpractice action and damages paid on behalf of a plaintiff by independent sources
are not recoverable, Radogno claimed USF could not establish that it had suffered any damages from the Keppen settlement.
[¶26] On February 22, 2012, the trial court, a different judge than the one who ruled on Radogno's motion to dismiss on January 12, 2009, issued a memorandum opinion and order addressing: (1) USF's motion for summary judgment on the element of breach of the standard of care; (2) Radogno's cross-motion for summary judgment on that issue, and (3) Radogno's motion for summary judgment on the issue of damages.
[¶27] First, the court addressed the parties' cross-motions for summary judgment with respect to the element of breach and concluded that neither party was entitled to summary judgment on that issue. With respect to USF's argument that Radogno had failed to preserve the nonparty defense, the court examined section 34-51-2-16 of the Indiana Code and concluded that since Keppen filed her complaint more than 150 days prior to the expiration of her personal injury statute of limitation period, USF's " non-party defense should have been filed 45 days prior to the expiration of Keppen's *** statute of limitation," or by ...