United States District Court, N.D. Illinois, Eastern Division
William J. Stevens, Plaintiff,
Richard Sharif, Defendant.
MEMORANDUM OPINION AND ORDER
Honorable Thomas M. Durkin United States District Judge.
Stevens, an attorney, alleges that his former client, Richard
Sharif, failed to pay him for legal services. R. 1. Sharif
has filed a counterclaim for malpractice against Stevens. R.
51. Stevens has moved to dismiss Sharif’s counterclaim
for failure to state a claim pursuant to Federal Rule of
Civil Procedure 12(b)(6). R. 63. For the following reasons,
Stevens’s motion is denied.
12(b)(6) motion challenges the sufficiency of the
complaint. See, e.g., Hallinan v. Fraternal Order of
Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir.
2009). A complaint must provide “a short and plain
statement of the claim showing that the pleader is entitled
to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to
provide defendant with “fair notice” of the claim
and the basis for it. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007). This standard “demands more
than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). While “detailed factual allegations”
are not required, “labels and conclusions, and a
formulaic recitation of the elements of a cause of action
will not do.” Twombly, 550 U.S. at 555. The
complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Iqbal, 556 U.S.
at 678 (quoting Twombly, 550 U.S. at 570).
“‘A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.’” Mann v.
Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting
Iqbal, 556 U.S. at 678). In applying this standard,
the Court accepts all well-pleaded facts as true and draws
all reasonable inferences in favor of the non-moving party.
Mann, 707 F.3d at 877.
agreed to represent Sharif in bankruptcy proceedings and
subsequent appeals. R. 1 ¶ 7. Although neither party
addresses the details of the bankruptcy proceedings in this
case, the Supreme Court reviewed the facts in Wellness
International Network, Ltd. v. Sharif, 135 S.Ct. 1932,
1940 (2015). According to the Supreme Court, Sharif entered
into a business contract with Wellness International Network
but later sued the company in a federal court in Texas.
Id. “Sharif repeatedly ignored Wellness’
discovery requests and other litigation obligations,
resulting in an entry of default judgment [and an award of
attorney’s fees] for Wellness.” Id.
as a result of the debt he incurred in the Wellness
case, Sharif filed for Chapter 7 bankruptcy in the Northern
District of Illinois in 2009. Id. Sharif was unable
to discharge his debts, in part, because Wellness discovered
a loan application document in which Sharif purported to own
over $5 million in assets in a trust established in the name
of Sharif’s mother. Id.
alleges Stevens committed malpractice when he failed to
present evidence that Sharif did not own the trust. R. 51
¶ 3. Sharif contends that this evidence would have
formed a basis for the bankruptcy court to discharge his
debt. Id. ¶ 10. Instead, in July 2010, the
bankruptcy court found that the trust’s assets were
property of Sharif’s bankruptcy estate and subject to
Sharif’s creditors. See Wellness Int’l,
135 S.Ct. 1932 at 1941.
also alleges that Stevens committed malpractice when he
failed to raise an objection to the bankruptcy court’s
jurisdiction on appeal. R. 51 ¶ 4. Before briefing on
Sharif’s appeal began in the district court, the
Supreme Court decided Stern v. Marshall, 564 U.S.
463 (2011). In Stern, the Supreme Court held that a
bankruptcy court could not “enter final judgment on a
state law counterclaim that is not resolved in the process of
ruling on a creditor’s proof of claim, ”
id. at 503, because the authority of bankruptcy
courts is not derived from Article III of the Constitution.
Id. at 483-503. On the basis of the Stern decision,
Sharif alleges that the bankruptcy court lacked jurisdiction
to enter a final judgment regarding ownership of the trust,
and that Stevens should have made this argument before the
district court and the Seventh Circuit. See R. 51.
failed to cite Stern in the briefs he filed on
Sharif’s behalf in the district court. See R. 68-1 at
1-2. Stevens did, however, move to file a supplemental brief
addressing Stern after the Seventh Circuit issued
its decision in In re Ortiz, 665 F.3d 906 (7th Cir.
2011), which explained Stern’s impact.
Id. The district court denied this motion and
affirmed the bankruptcy court’s decision. See
Sharifeh v. Fox, 2012 WL 469980 (N.D. Ill. Feb. 10,
again represented by Stevens, appealed the district
court’s decision. See R. 68-1. In his opening
brief in the Seventh Circuit, Stevens again failed to make an
argument based on Stern. Id. at 2. He did,
however, include this argument in his reply brief.
Id. Despite Steven’s failure to raise a
Stern objection in his opening brief, the Seventh
Circuit held that a Stern objection could not be
waived, and reversed the district court, holding “the
bankruptcy court lacked constitutional authority to enter
final judgment.” Wellness Int’l Network, Ltd.
v. Sharif, 727 F.3d 751, 775-76 (7th Cir. 2013).
2015, the Supreme Court reversed the Seventh Circuit, holding
that adjudication by an Article III judicial body was a
personal right and could be waived by a litigant, as opposed
to a constitutional right that cannot be waived. Wellness
Int’l, 135 S.Ct. at 1942-47. It remanded the case
to the Seventh Circuit, with instructions to decide whether
Sharif waived this jurisdictional right by failing to raise a
Stern objection until his reply brief. Id.
at 1949. On remand, the Seventh Circuit held that Sharif
“waited too long to raise his Stern objection because
he did not mention the issue until his reply brief, ”
and on that basis, the court affirmed the district
court’s decision against Sharif. Wellness
Int’l Network, Ltd. v. Sharif, 617 Fed.
App’x 589, 590-91 (7th Cir. 2015).
Illinois state law, “[i]n an action for legal
malpractice the plaintiff must plead and prove that: the
defendant attorney owed the plaintiff a duty of due care
arising from the attorney-client relationship; that the
defendant breached that duty; and that as a proximate result,
the plaintiff suffered injury in the form of actual
damages.” Governmental Interinsurance Exch. v.
Judge, 850 N.E.2d 183, 186-87 (Ill. 2006). “In
Illinois the question of whether a lawyer has exercised a
reasonable degree of care and skill in representing and
advising his client had always been one of fact.”
Nelson v. Quarles and Brady, LLP, 997 N.E.2d 872,
880 (Ill.App.Ct. 1st Dist. 2013). “However, although
the question of whether a lawyer has breached a duty to his
client presents a factual question, courts have held that the
issue may be decided as a matter of law under the doctrine of
judgmental immunity which provides that an attorney will
generally be immune from liability, as a matter of law, for
acts or omissions during the conduct of litigation, which are
the result of an honest exercise of professional
judgment.” Id. at 880-81; see also Smiley
v. Manchester Ins. & Indem. Co., 375 N.E.2d 118, 122
(Ill. 1978) (“It is clear that an attorney is liable to
his client only when he fails to exercise a reasonable degree
of care and skill; and he is not liable for mere errors of
judgment.”). Additionally, many courts have
characterized “judgmental immunity” as protecting
an attorney from liability for a decision “where the
law is unsettled” or “the decision is
tactical.” See Nelson, 997 ...