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Webster Bank, N.A. v. Pierce & Associates, P.C.

United States District Court, N.D. Illinois, Eastern Division

October 18, 2016

WEBSTER BANK, N.A., Plaintiff,
v.
PIERCE & ASSOCIATES, P.C., Defendant.

          MEMORANDUM OPINION AND ORDER

          Virginia M. Kendall United States District Court Judge Northern District of Illinois

         Plaintiff Webster Bank, N.A. (“The Bank”) brings this Complaint against Defendant Pierce & Associates, P.C. (“Pierce”). (Dkt. 24.) The Bank alleges attorney malpractice (Count I) or alternatively breach of contract (Count II) in six matters involving the Bank's clients (Adam, Jasinski, Kovin, Richters, Urbieta, and Manzo) arising from Pierce's handling of mortgage foreclosures and breach of notes cases. Further, the Bank alleges breach of fiduciary duty (Count III) and fraud (Count IV) in three matters involving clients (Nielsen, Rinaldi, and Allegrettis) where Pierce allegedly failed to disclose conflicts of interest. The Bank claims $350, 000.00 in damages and seeks punitive damages for breach of fiduciary duty and fraud. Pierce moves to dismiss all claims pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). [30] For the following reasons, the motion is granted in part and denied in part.

         BACKGROUND

         In 2009, Webster Bank retained Pierce to represent it in filing mortgage foreclosures and breach of note actions in Illinois.[1] (Dkt. 24, at 3-4.) Pierce represented itself as competent in these matters. (Id.) The Bank and Pierce formed an attorney-client relationship where the Bank paid a flat fee to Pierce for each matter handled. Pierce's responsibilities included preparing, filing, and prosecuting mortgage foreclosure actions and breach of note actions, as well as defending mortgage foreclosures by senior lien holders on behalf of the Bank. (Id. at 5.)

         The Bank alleges that Pierce failed to fulfill these duties and responsibilities in matters related to nine of its client cases. In three of these matters (Adam, Kovin, and Manzo), subsequent counsel ultimately settled or corrected the breach of note or mortgage foreclosure suits. (Dkt. 24, at 5-7, 9-11, 13-14, ¶¶ 21-36, 55-74, 95-103.) In another three matters (Jasinski, Richters, and Urbieta), subsequent counsel did not or could not resurrect breach of note suits. (Dkt. 24, at 7-9, 11-13, ¶¶ 37-54, 75-94.) In the remaining three matters (Nielsen, Rinaldi, and Allegrettis), subsequent counsel represented the Bank in mortgage foreclosure cases where Pierce did not disclose that it simultaneously represented a senior lien holder on the same foreclosures. (Dkt. 24, at 14-18, ¶¶ 104-140.)

         A. Suits Ultimately Settled or Corrected by Counsel

         The Bank alleges that Pierce failed to properly file and prosecute three suits involving their clients: John Adam, Bradly Kovin, and Ruth Manzo.

         First, the Bank alleges that Pierce mishandled a case involving its client John Adam (“Adam”) in the Circuit Court of Cook County (Case 2012 L 53). (Dkt. 24, at 5-7, ¶¶ 21-36.) In that case, the Bank held a note from Adam that was secured by his second mortgage. Adam filed for bankruptcy in November 2009, which was discharged in February 2010. On behalf of the Bank, Pierce filed a Complaint to Recover Note against Adam on July 26, 2012, without running a search for prior bankruptcy. In January 2014, Adam re-opened his case and sought an Order of Civil Contempt against the Bank and Pierce for seeking to enforce the Bank's note against him after it had been discharged. At that point, the Bank retained and paid separate counsel in the Civil Contempt Proceeding, which was ultimately settled. The Bank incurred attorney fees and costs for this after February 23, 2014. The Bank alleges that Pierce's mishandling of the Adam matter caused approximately $19, 363.00 in damages to pay for subsequent counsel and court costs associated with the Civil Contempt Proceeding.

         The Bank further alleges that Pierce mishandled the case involving its client Bradly Kovin (“Kovin”) in the Circuit Court of Lake County (Case Nos. 11 L 233 & 13 L 684). (Dkt. 24, at 9-11, ¶¶ 55-74.) Kovin breached a note held by the Bank. After Pierce filed and voluntarily dismissed Case No. 11 L 233, Pierce re-filed the matter as Case No. 13 L 684. Pierce failed to file an affidavit testifying to the amount in controversy, appear at a scheduling conference, comply with state rules about disclosing witnesses and scheduling orders, and timely reply to Kovin's affirmative defenses. The Bank retained and paid separate counsel, who sought leave to answer the affirmative defenses, obtain a scheduling order, and file an affidavit on the amount in controversy. The Bank and subsequent counsel ultimately settled this case with Kovin. Because the Bank had to pay for subsequent counsel and lost damages to which it would have been entitled had the promissory note been fully enforced rather than settled, the Bank alleges that Pierce's handling of the Kovin matter caused the Bank $130, 484.11 in damages ($116, 528.05 in debt forgiveness and $13, 956.06 in attorneys' fees).

         The Bank also alleges that Pierce mishandled the case of Ruth Manzo (“Manzo”) in the Circuit Court of Lake County (Case No. 10 CH 330). (Dkt. 24, at 13-13, ¶¶ 95-103.) Manzo defaulted on a Housing and Urban Development (“HUD”) loan for a property mortgaged by the Bank. The Bank retained Pierce to have the Sheriff execute the deed for the mortgage foreclosure action in its favor. Instead, Pierce had the Sheriff execute the deed in favor of HUD. The Bank repeatedly requested that Pierce correct the error. The Bank accordingly retained and paid subsequent counsel, who filed an appearance and ultimately had the deed recorded correctly. Because the Bank had to pay for subsequent counsel and additional court costs, the Bank alleges that Pierce's handling of Manzo's matter caused $2, 013.75 in damages.

         B. Suits that Were Not, or Could Not Be, Settled or Corrected

         The Bank further alleges that Pierce failed to properly handle three breach of note suits involving their clients Kristen Jasinski, George and Mary Richter, and Kenneth Urbieta.

         The Bank alleges that Pierce mishandled cases in the Circuit Court of Cook County involving its client Kristen Jasinski (“Jasinski”) (Case Nos. 10 L 1972, 12 L 6848, & 13 L 10056). (Dkt. 24, at 7-9, ¶¶ 37-54.) When Jasinski breached a note held by the Bank, Pierce filed Case No. 10 L 1972 against her and later dismissed it voluntarily. Pierce later filed Case No. 12 L 6848, but failed to appear in court, so the court dismissed the case for want of prosecution. Pierce successfully moved to vacate this dismissal, but moved to voluntarily dismiss it again at the same hearing, which the court granted. Pierce later filed Case No. 13 L 10056. The court granted Jasinski's Motion to Dismiss because Illinois statute 735 ILCS 5/13-217 does not allow a party to file a third cause of action after voluntarily dismissing the same action twice before. Pierce failed to notify the Bank about the court dismissing Case No. 12 L 6848 and the implications of filing Case No. 13 L 10056. The Bank retained and paid separate counsel to attempt to vacate Pierce's voluntary dismissal of Case No. 12 L 6848. They did not succeed. Because the Bank had to pay for subsequent counsel and lost damages to which it was would have been entitled, the Bank alleges that Pierce's handling of the Jasinski matter caused $176, 217.24 in damages.[2]

         The Bank also alleges that Pierce mishandled its case involving George and Mary Richter (“Richters”) in the Circuit Court of Lake County (Case No. 10 L 636). (Dkt. 24, at 11-12, ¶¶ 75-83.) The Richters filed for bankruptcy and were discharged on April 5, 2010. Pierce filed Case No. 10 L 636 on July 8, 2010, without running a search for prior bankruptcies. On January 4, 2011, the court entered a default judgment against the Richters when they failed to appear. In early 2015, Pierce informed the Bank that the Richters had filed for bankruptcy and obtained a discharge. The Bank accordingly retained and paid separate counsel to vacate the judgment, dismiss the lawsuit, and record a release of the memorandum ...


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