Illinois Supreme Court Holds Lost Punitive Damages Not Recoverable in Legal Malpractice Action
August, 2006
by Edward M. Kay and Melinda S. Kollross
In a 4-3 split opinion, the Illinois Supreme Court follows California and New York in holding that lost punitive damages are not recoverable in a legal malpractice action. Tri-G v. Burke,
Bosselman & Weaver, 2006 WL 1702282 (Ill. 6/22/06).
Facts
Tri-G brought a legal malpractice action against law firm Burke, Bosselman & Weaver (Burke) for damages it sustained from Burke’s failure to prosecute a complaint Tri-G had previously filed against Elgin Federal Bank (Elgin Federal). Following a trial on the merits, a jury found that Burke had been negligent in handling Tri-G’s case against Elgin Federal and that but for that negligence, Tri-G would have recovered $1,168,775 in compensatory damages and an equal sum in punitive damages from -Elgin Federal. Accordingly, the jury returned a verdict in favor of Tri-G and against Burke for $2,337,550.
Burke appealed and Tri-G cross-appealed. The appellate court affirmed the judgment in part, reversed in part, and remanded the cause to the trial court for further proceedings. The appellate court expressly rejected Burke’s arguments that the award of punitive damages to Tri-G was either improper as a matter of law or excessive in light of the evidence adduced at trial. It held that Illinois law permits a legal malpractice plaintiff to receive an award of lost punitive damages from a defendant attorney and concluded that the punitive damages award made in this case was justified by the evidence.
The appellate court majority viewed Tri-G’s lost punitive damages in the underlying case as an element of compensatory damages in the malpractice action, and held that such compensatory damages were not prohibited by Code of Civil Procedure Section 2-1115, which provides that “[i]n all cases, whether in tort, contract of otherwise, in which the plaintiff seeks damages by reason of legal, medical, hospital, or other healing art malpractice, no punitive, exemplary, vindictive or aggravated damages shall be allowed.” 735 ILCS 5/2-1115 (West 2002). In reaching this result, the appellate court acknowledged the divergence of authority on this issue, noting that New York and California courts have held, based on public policy, that lost punitive damages are not recoverable in a legal malpractice action. See Ferguson v. Lieff, Cabraser, Heimann & Bernstein, LLP, 30 Cal. 4th 1037, 69 P.3d 965, 135 Cal. Rptr. 2d 46 (2003), and Summerville v. Lipsig, 270 A.D.2d 213, 704 N.Y.S.2d 598 (2000). One justice dissented solely on the issue of lost punitive damages. That justice would have followed precedent from New York and California and held that “a plaintiff may not recover punitive damages lost by reason of attorney malpractice.”
The Illinois Supreme Court granted review.
Analysis
A legal malpractice action does not involve personal injury, nor the attorney’s negligent act itself. Rather, it is a pecuniary injury to an intangible property interest caused by the lawyer’s negligent act or omission The fact that the attorney may have breached his/her duty of care is not, in itself, sufficient to sustain the client’s cause of action. Even if negligence on the part of the attorney is established, no action will lie against the attorney unless that negligence proximately caused damage to the client. The existence of actual damages is therefore essential to a viable cause of action for legal malpractice. Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill. 2d 294, 306-07 (2005).
The theory underlying a cause of action for legal malpractice is that the plaintiff client would have been compensated for an injury caused by a third party, absent negligence on the part of the client’s attorney. Where the alleged legal malpractice involves litigation, no actionable claim exists unless the attorney’s negligence resulted in the loss of an underlying cause of action. If the underlying action never reached trial because of the attorney’s negligence, the plaintiff is required to prove that but for the attorney’s negligence, the plaintiff would have been successful in that underlying action. A legal malpractice plaintiff must therefore litigate a “case within a case.” Cedeno v. Gumbiner, 347 Ill. App. 3d 169, 174 (2004).
Whether a plaintiff in a legal malpractice action may recover as an element of damages punitive damages he or she would have recovered in the underlying action but for the attorney’s professional negligence is a question of first impression in Illinois. Noting that “[t]he dissent in the appellate court, the dissent which follows in this case, and the split among courts from other jurisdictions illustrates that sound arguments can be made for both sides of the issue,” the Illinois Supreme Court nevertheless concluded that “the approach taken by the courts of California and New York and urged by Burke in this case represents the sounder view. Lost punitive damages are not recoverable in a subsequent action for legal malpractice.”
The Court recognized that disallowing lost punitive damages means that plaintiffs in legal malpractice actions may not receive as much money as they might have if the underlying action had been handled properly. However, the Court explained that compensating plaintiffs is but one of several factors that must be balanced in assessing whether lost punitive damages should be recognized in legal malpractice actions. There is no reason in logic or the law why it should be given preeminent effect where, as here, the jury has already awarded full compensation to the plaintiff for all the damages it actually sustained.
The Court reasoned that punitive, or exemplary, damages are not awarded as compensation, but serve instead to punish the offender and to deter that party and others from committing similar acts of wrongdoing in the future. Loitz v. Remington Arms Co., 138 Ill. 2d at 414. Allowing Tri-G to recover its lost punitive damages from Burke would not advance that policy in any way. To the contrary, holding the law firm liable for the intentional or willful and wanton misconduct of a third party would tear the concept of punitive damages from its doctrinal moorings.
The Court also noted that Section 2-1115 of the Code of Civil Procedure expressly bars recovery of punitive damages in a legal malpractice action and that Tri-G was “attempting to evade reach of this statute” by characterizing lost punitive damages as “compensatory.” The Court found this approach unpersuasive, proclaiming that “[i]f the General Assembly has determined that lawyers cannot be compelled to pay punitive damages based on their own misconduct, as section 2-1115 decrees, it would be completely nonsensical to hold that they can nevertheless be compelled to pay punitive damages attributable to the misconduct of others. Any construction of the law that permits such a result would be absurd and unjust.” •
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