"Lost Punitives" Are Recoverable in Legal Malpractice Claim
January, 2005
As a matter of first impression in Illinois, the Illinois appellate court has joined the U.S. District Court for the District of Columbia as well as Arizona, Colorado, Kansas and South Dakota in finding that plaintiffs may recover punitive damages they allegedly lost as a result of legal malpractice in the underlying suit. Tri-G, Inc. v. Burke Bosselman and Weaver, 817 N.E.2d 1230 (Ill. App.).
Facts
In the underlying action, the law firm, BBW, represented a real estate company (Tri-G) in litigation against a bank (Elgin Federal). Because BBW was not prepared to proceed with trial on the day the case was called, the case was dismissed by the court with prejudice. Tri-G had sought damages from Elgin Federal resulting from Elgin Federal's alleged breach of contract and breach of an escrow agreement.
In its malpractice suit against BBW, Tri-G alleged that BBW had failed to prepare witnesses, attend certain depositions, and properly prepare for trial, and that BBW had plead consumer fraud and common law fraud, both of which would have entitled Tri-G to recover punitive damages. A jury returned a verdict of $2,337,550.00, of which $1,168,775.00 was for punitive damages that Tri-G could have recovered from Elgin Federal in the underlying action.
Analysis
After examining pertinent law from numerous jurisdictions, the majority determined that the punitive damage award to Tri-G was permissible because it was in reality an award of compensatory damages. “When, as in this case, a jury has determined that the plaintiff would have been entitled to punitive damages but for the negligence of the attorney, then such damages must be recoverable in order for the plaintiff to made whole,” the majority wrote. “We note that this result is consistent with the general principle in this state that a legal malpractice plaintiff is entitled to recover those sums which would have been recovered if the underlying suit had been successfully prosecuted.” In so ruling, the majority rejected the holdings and reasoning of states such as California and New York, which have determined that “lost” punitive damages are not recoverable in legal malpractice cases as a matter of public policy. Those states reason that “lost” punitive damages are speculative and “would increase malpractice insurance costs or cause insurers to cease providing professional liability insurance to attorneys, thereby placing great costs upon attorneys who would then pass those costs on to their clients.”
Learning Point:
The Tri-G dissent opined that “lost” punitive damages should not be recoverable from a negligent attorney in a legal malpractice action because they are “inconsistent with Illinois public policy to transfer punishment and deterrence intended for a malicious, fraudulent, or deliberately oppressive wrongdoer [Elgin Federal's fraudulent conduct toward Tri-G] to another who has not acted with such wanton disregard [BBW's negligent conduct toward Tri-G].” According to the dissent, “[t]he majority defies the above principles and punishes negligent attorneys for the reprehensible and fraudulent conduct of Elgin Federal. I fear that in doing so, the majority has set in motion a train that may be difficult to stop. If attorneys can be liable for lost punitive damages, can they also be liable for inadequate punitive damages?” The majority rejected this position summarily:
The dissent appears to believe that the purpose of punitive damages is served only if the wrongdoer itself is made to pay damages. We disagree. Illinois views punitive damages as a punishment designed to serve three distinct purposes: (1) to act as retribution against the wrongdoer; (2) to deter the wrongdoer from committing similar wrongs in the future; and (3) to deter others from similar conduct. The latter two purposes are served as effectively by the judgment against BBW as if Elgin Federal itself had been made to pay. The fact that Elgin Federal has fortuitously dodged a bullet does not significantly undermine the specific deterrent to Elgin Federal nor diminish at all the general deterrent to others. The aim of retribution is satisfied because Elgin Federal is branded with the stigma of having been judged worthy of sanction for outrageous conduct.
Clearly, this issue is not settled in Illinois. We will continue to monitor this new development and update our readers accordingly.
Back to CM Report of Recent Decisions (2005v1) 2005 Volume 1 Table of Contents
