2015 IL 118652

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

(Docket No. 118652)

JAMES R. STEVENS et al., Appellees, v. McGUIREWOODS LLP, Appellant.

Opinion filed September 24, 2015.

JUSTICE THOMAS delivered the judgment of the court, with opinion.

Chief Justice Garman and Justices Freeman, Kilbride, Karmeier, Burke, and 

Theis concurred in the judgment and opinion.

OPINION

¶ 1 The issue in this legal malpractice case is whether the circuit court of Cook 

County properly entered summary judgment in favor of defendant, McGuireWoods 

LLP. We hold that it did.

¶ 2 BACKGROUND

¶ 3 Plaintiffs are former minority shareholders in Beeland Management LLC 

(Beeland). In 2005, plaintiffs hired the law firm of McGuireWoods LLP 

(McGuireWoods) to bring certain claims against Beeland’s managers, Tom Price 

and Alan Goodman, and against Beeland’s owner and majority shareholder, Jim 
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Rogers. The gist of these claims was that Rogers, Price, and Goodman had 

misappropriated Beeland’s trademarks and other intellectual property, to the 

detriment of Beeland. Plaintiffs brought these claims both in their individual 

capacities and derivatively on behalf of Beeland. In August 2008, the trial court 

dismissed without prejudice all of the claims brought against Price and Goodman, 

as well as three of the nine counts brought against Rogers.

¶ 4 At this point, plaintiffs retained new counsel who sought and received leave to 

file an amended complaint. In addition to restating the original claims brought 

against Rogers, Price, and Goodman, the amended complaint added seven new 

counts against Beeland’s corporate counsel, Sidley Austin LLP (Sidley). As with 

the original claims, plaintiffs brought the new claims against Sidley both in their 

individual capacities and derivatively on behalf of Beeland. In response, Sidley 

filed a motion to dismiss on the grounds that (1) all of the claims brought against it 

were untimely under the relevant statutes of limitations and repose (see 735 ILCS 

5/13-214.3 (West 2010)); (2) several of the counts failed to state a claim upon 

which relief may be granted (see 735 ILCS 5/2-615 (West 2010)); and (3) plaintiffs 

lacked standing to sue Sidley in their individual capacities because, as Beeland’s 

corporate counsel, Sidley’s duty ran solely to the corporation and not to its 

individual shareholders. The trial court granted Sidley’s motion. In doing so, the 

trial court dismissed with prejudice all of plaintiffs’ claims against Sidley on the 

grounds that those claims were untimely under section 13-214.3. In addition, the 

trial court dismissed with prejudice all of plaintiffs’ individual claims against 

Sidley on the grounds plaintiffs lacked standing to sue Sidley in their individual 

capacities. Finally, the trial court dismissed all but one of plaintiffs’ claims against 

Sidley under section 2-615 for failing to state a claim upon which relief can be 

granted.

¶ 5 Four months later, in July 2011, plaintiffs settled with Rogers and the 

underlying case was dismissed in its entirety and with prejudice. In addition, 

plaintiffs relinquished all of their ownership interest in Beeland. 

¶ 6 Shortly thereafter, in October 2011, plaintiffs filed a one-count complaint 

against McGuireWoods for breach of fiduciary duty. Because plaintiffs had 

relinquished all of their ownership interest in Beeland, plaintiffs brought this 

complaint solely in their individual capacities. According to plaintiffs’ complaint, 

McGuireWoods owed plaintiffs a duty to “act with the skill, loyalty, competence 

and diligence of an ordinary reasonable attorney,” which duty McGuireWoods 
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breached by “failing to assert *** obvious claims against Sidley in a timely 

manner.” Plaintiffs further alleged that, as a direct and proximate result of 

McGuireWoods’s breach, the value of the underlying case was “materially 

compromised” so that plaintiffs were forced to settle for significantly less money 

than the case originally was worth. Plaintiffs therefore sought: (1) damages in an 

amount to be proven at trial but “in no event less than $10 million”; (2) the 

disgorgement of all legal fees paid to McGuireWoods in connection with its 

handling of the underlying case; and (3) any other further relief that the court 

deemed equitable.

¶ 7 After taking limited discovery, the parties filed cross-motions for summary 

judgment. In its motion, McGuireWoods argued that plaintiffs’ claim for breach of 

fiduciary duty was precluded by the doctrine of collateral estoppel. More 

specifically, McGuireWoods argued that plaintiffs were bound by the trial court’s 

determination in the underlying case that plaintiffs lacked standing to sue Sidley in 

their individual capacities. Given this, McGuireWoods argued, plaintiffs’ claim for 

breach of fiduciary duty necessarily failed because, even if McGuireWoods had 

brought plaintiffs’ individual claims against Sidley in a timely manner, those 

claims would have failed as a matter of law for lack of standing. In other words, 

according to McGuireWoods, because plaintiffs had no standing to sue Sidley in 

the first place, plaintiffs could not possibly have been injured by McGuireWoods’s

failure to sue Sidley in a timely manner. The trial court agreed with 

McGuireWoods and granted its motion for summary judgment. Plaintiffs moved 

for reconsideration, and the trial court denied that motion.

¶ 8 Plaintiffs appealed, and the appellate court affirmed in part and reversed in part. 

2014 IL App (1st) 133952-U. In affirming, the appellate court held that, because 

the trial court in the underlying case had determined that plaintiffs lacked standing 

to bring claims against Sidley in their individual capacities, plaintiffs were 

collaterally estopped from now asserting that they would have prevailed on those 

claims had McGuireWoods asserted them in a timely manner. Id. ¶ 33. However, 

the appellate court then noted that, unlike its handling of plaintiffs’ individual

claims against Sidley, the trial court in the underlying action never ruled on the 

merits of plaintiffs’ derivative claims against Sidley. Id. Rather, it dismissed 

plaintiffs’ derivative claims with prejudice solely because those claims were 

untimely. Id. Thus, the appellate court explained, it remains to be seen whether 

plaintiffs would have prevailed on their derivative claims against Sidley had those 

claims been timely brought. Id. ¶ 36. The appellate court therefore remanded the 
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case to the trial court for a determination as to whether plaintiffs “would have been 

successful in a derivative suit against Sidley but for McGuireWoods’s failure to 

bring Sidley into the action in a timely manner.” Id.

¶ 9 McGuireWoods appealed to this court, and we allowed its petition for leave to 

appeal. Ill. S. Ct. R. 315 (eff. July 1, 2013).

¶ 10 DISCUSSION

¶ 11 The issue in this court, as it was in the appellate court, is whether the trial court 

erred in granting McGuireWoods’s motion for summary judgment. Summary 

judgment is proper when “the pleadings, depositions, and admissions on file, 

together with the affidavits, if any, show that there is no genuine issue as to any 

material fact and that the moving party is entitled to a judgment as a matter of law.”

735 ILCS 5/2-1005(c) (West 2012). Where the parties file cross-motions for 

summary judgment, as they did in this case, they concede the absence of a genuine 

issue of material fact, agree that only questions of law are involved, and invite the 

court to decide the issues based on the record. Martin v. Keeley & Sons, Inc., 2012 

IL 113270, ¶ 25. This court reviews summary judgment orders de novo. Schultz v. 

Illinois Farmers Insurance Co., 237 Ill. 2d 391, 399-400 (2010).

¶ 12 The basis of a legal malpractice claim is that, absent the former attorney’s 

negligence, the plaintiff would have been compensated for an injury caused by a 

third party. Eastman v. Messner, 188 Ill. 2d 404, 411 (1999). To prevail on such a 

claim, a plaintiff must plead and prove that (1) the defendant attorneys owed the 

plaintiff a duty of due care arising from the attorney-client relationship; (2) the 

defendants breached that duty; and (3) as a direct and proximate result of that 

breach, the plaintiff suffered injury. Northern Illinois Emergency Physicians v. 

Landau, Omahana & Kopka, Ltd., 216 Ill. 2d 294, 306 (2005). For purposes of a 

legal malpractice claim, a plaintiff is not considered to be injured unless and until 

he has suffered a loss for which he may seek monetary damages. Id. The existence 

of actual damages therefore is essential to a viable cause of action for legal 

malpractice, and “[u]nless the client can demonstrate that he has sustained a 

monetary loss as the result of some negligent act on the lawyer’s part, his cause of 

action cannot succeed.” Id. at 307. Actual damages are never presumed in a legal 
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malpractice action. Id. Rather, a plaintiff in a legal malpractice suit must establish 

what the result in the underlying action would have been, absent the alleged 

negligence. Eastman, 188 Ill. 2d at 411. Moreover, the plaintiff can be in no better 

position by bringing suit against the attorney than if the underlying action had been 

prosecuted successfully. Id. at 411-12. Thus, a plaintiff’s damages in a legal 

malpractice suit are limited to “the actual amount the plaintiff would have 

recovered had he been successful in the underlying case.” Id. at 412.

¶ 13 Here, plaintiffs are suing McGuireWoods solely in their individual capacities. 

Their complaint alleges that McGuireWoods owed plaintiffs a duty to “act with the 

skill, loyalty, competence and diligence of an ordinary reasonable attorney,” and 

that McGuireWoods breached this duty by “failing to assert *** obvious claims 

against Sidley in a timely manner.” The complaint further alleges that, as a direct 

and proximate result of that breach, plaintiffs suffered monetary damages of no less 

than $10 million. Thus, to prevail on this claim, plaintiffs would have to prove not 

only that they would have succeeded on their claims against Sidley had those 

claims been timely brought, but also that they would have recovered monetary 

damages for those claims in their individual capacities. Otherwise, plaintiffs’ cause 

of action against McGuireWoods cannot succeed. See Northern Illinois Emergency 

Physicians, 216 Ill. 2d at 307.

¶ 14 Unfortunately for plaintiffs, they cannot possibly show that, in their individual 

capacities, they would have recovered monetary damages from the timely assertion 

of their claims against Sidley. And this is true not only of plaintiffs’ individual 

claims against Sidley, but also of plaintiffs’ derivative claims against Sidley. 

Taking plaintiffs’ individual claims first, we agree entirely with the trial and 

appellate courts below that plaintiffs are bound by the trial court’s determination in 

the underlying case that, in their individual capacities, plaintiffs lacked any and all 

standing to sue Sidley. In other words, it is settled for purposes of this case that, in 

their individual capacities, plaintiffs had no right to sue Sidley in the first place.

Given this, McGuireWoods’s failure to assert plaintiffs’ individual claims against 

Sidley in a timely manner cost plaintiffs precisely nothing. The trial and appellate 

courts were exactly right on this point, and we note that plaintiffs themselves no 

longer contest this portion of the trial court’s judgment.

¶ 15 As for plaintiffs’ derivative claims against Sidley, though we reach the exact 

same conclusion, we do so for a different reason. To be sure, and as the appellate 

court below correctly noted, the trial court in the underlying case never concluded 
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that plaintiffs lacked standing to bring derivative claims against Sidley, nor did it 

determine that those claims lacked substantive merit. In this sense, plaintiffs’ 

derivative claims stand in a very different position from plaintiffs’ individual 

claims, as the possibility at least remains that plaintiffs could have prevailed on 

their derivative claims against Sidley had McGuireWoods asserted those claims in 

a timely manner. That said, plaintiffs have an insurmountable problem even as to 

their derivative claims. And the insurmountable problem is that, even assuming that 

McGuireWoods had successfully prosecuted plaintiffs’ derivative claims against 

Sidley, plaintiffs would not have recovered anything from the resulting judgment in 

their individual capacities. This is because derivative claims always and only 

belong to the corporation on whose behalf they are brought, and any damages 

awarded in a derivative suit flow exclusively and directly to the corporation, not to 

the nominal plaintiffs. See Brown v. Tenney, 125 Ill. 2d 348, 355-57 (1988). Put 

another way, the nominal plaintiff in a derivative action serves only as a 

“champion” of the corporation’s claims. Id. at 357. The result is that the nominal 

plaintiff benefits only indirectly from a successful shareholder derivative suit, for 

example through an increased value on their shares. Id. Though long-settled at 

common law, these principles also have been codified in the Limited Liability 

Company Act, which states expressly that, once the nominal plaintiff’s fees and 

expenses have been paid, the trial court “shall direct the plaintiff to remit to the 

limited liability company” the remainder of all judgment or settlement proceeds. 

805 ILCS 180/40-15 (West 2008). In other words, once the costs of bringing a 

derivative suit are paid, everything recovered belongs to and remits to the LLC, not

to the nominal plaintiffs.

¶ 16 Given these principles, it would be impossible for plaintiffs to prove that, in 

their individual capacities, they would have recovered monetary damages from the 

timely assertion of their derivative claims against Sidley. Indeed, even assuming 

that plaintiffs could prove beyond any shadow of a doubt that, absent 

McGuireWoods’s alleged negligence, plaintiffs would have prevailed on their 

derivative claims against Sidley, both common law principles and the express 

terms of the Limited Liability Company Act would mandate that any proceeds 

recovered remit solely and directly to Beeland. And while it is true that plaintiffs 

might have benefited indirectly under such circumstances from an increased value 

on their Beeland shares, the loss of that benefit is not something for which plaintiffs 

can recover in a legal malpractice suit. On the contrary, damages in a legal 

malpractice claims are limited to the amount that the plaintiffs would have 
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recovered in the underlying action, and it goes without saying that any resulting 

increase in share price would have formed no part of the judgment awarded or 

recovered in a successful derivative suit against Sidley. That would be an indirect 

benefit common to all shareholders, and therefore it cannot be recovered in the 

present action against McGuireWoods. 

¶ 17 Looked at another way, plaintiffs in this case are attempting through a legal 

malpractice suit to put themselves in a vastly superior position to that which they 

would have been in had they prevailed in the underlying case. As discussed above, 

had McGuireWoods successfully prosecuted plaintiffs’ derivative claims against 

Sidley in the underlying case, plaintiffs would have recovered nothing in their 

individual capacities. Rather, the resulting judgment or settlement would have 

remitted entirely and directly to Beeland, with plaintiffs benefiting only indirectly 

and like all other shareholders through any resulting increase in Beeland’s share 

price. Now, however, plaintiffs are seeking to recover from McGuireWoods 

damages in excess of $10 million, and they are seeking to recover those damages in 

their individual capacities based upon McGuireWoods’s alleged failure to assert 

derivative claims. In other words, through a legal malpractice suit against 

McGuireWoods, plaintiffs are attempting to collect for themselves the full amount 

of a judgment that, in the underlying case, would have been awarded entirely to 

Beeland. This is entirely inappropriate and absolutely proscribed by our case law. 

See Eastman, 188 Ill. 2d at 411-12 (the plaintiff in a legal malpractice suit can be in 

no better position by bringing suit against the attorney than if the underlying action 

had been prosecuted successfully). 

¶ 18 In opposition to this result, plaintiffs offer three arguments, none of which is 

persuasive. The first we have already addressed, namely, that plaintiffs would have 

benefited personally from the timely assertion of their derivative claims against 

Sidley in the form of “equity restored to the corporate entity or damages recovered 

on its behalf.” This is just another way of describing the increase in share value that 

may have resulted from a judgment entered against Sidley. As discussed above, 

that is an indirect benefit that plaintiffs would have experienced on the same terms 

and to the same extent as every other Beeland shareholder. That benefit would not 

have formed any part of the underlying judgment, nor would it have been awarded 

to plaintiffs personally by the trial court. As a result, the loss of that benefit is not 

recoverable against McGuireWoods in this legal malpractice suit, and it therefore 

cannot form a basis for allowing the present litigation to move forward. 
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¶ 19 Second, plaintiffs argue that, notwithstanding the well-settled common law and 

statutory rules governing the ownership and distribution of damages in shareholder 

derivative suits, the trial court in the underlying case would have had the discretion 

to award any resulting damages in the derivative suit to plaintiffs personally, had it 

concluded that equity so required. In support, plaintiffs cite this court’s 1897 

decision in Brown v. DeYoung, 167 Ill. 549 (1897). According to plaintiffs, Brown

represents a “derivative suit” in which, for equitable reasons, this court ordered the 

defendant majority shareholder to pay damages directly to the minority shareholder 

plaintiffs personally, rather than to the corporation. Plaintiffs further contend that, 

in light of Brown, “equity may permit—and in some circumstances, equity may 

demand—that minority shareholders be the personal recipients of restitution or 

damages recovered on derivative claims.” Thus, plaintiffs argue, McGuireWoods’s 

assertion that “shareholders cannot recover individually on derivative claims” is 

“erroneous,” “unsupportable,” and “simply wrong.” 

¶ 20 For two very important reasons, plaintiffs are mistaken. To begin with, 

plaintiffs’ entire argument rests on the premise that Brown involved a derivative 

suit. In fact, Brown did not involve a derivative suit. Rather, the plaintiffs in Brown

were minority shareholders who sued the corporation and two of its officers 

directly for misappropriation of corporate funds. In other words, and in stark 

contrast to a derivative suit, the plaintiffs in Brown were not suing a third party on 

the corporation’s behalf; rather, they were suing the corporation itself on their own

behalf. Consequently, anything this court had to say about the equitable distribution 

of the judgment in that case is immaterial to the present controversy, which, unlike 

Brown, involves textbook derivative claims governed by well-settled legal 

principles. Second, even if Brown did involve a derivative suit (which it did not), 

the trial court in the underlying case would have had no discretion to ignore the 

interceding statutory mandate that, in a derivative action brought on behalf of an 

LLC, all judgment or settlement proceeds remit to the corporation, not to the 

nominal plaintiffs. 805 ILCS 180/40-15 (West 2008). So as it turns out, 

McGuireWoods has it exactly right—in Illinois, shareholders cannot recover 

personally on LLC derivative claims, both at common law and by statute. That is 

the settled law of this state, and it is the rule that governs this case. 

¶ 21 Finally, plaintiffs argue that, were this court to rule in McGuireWoods’s favor, 

the result would be to “render an entire class of legal practitioners immune from 

challenge to their fiduciary duties.” According to plaintiffs, this is because a ruling 

in McGuireWoods’s favor would be tantamount to a declaration that “[a]ttorneys 
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handling the derivative actions of minority shareholders [are] immune to legal 

malpractice cases.” Such a decision, plaintiffs insist, “would leave a person who 

hired a lawyer to bring a derivative action *** with no remedy against the lawyer 

for breach of the lawyer’s fiduciary duty.” Once again, plaintiffs are mistaken. The 

fact that plaintiffs may not recover from McGuireWoods in this particular case 

does not mean that McGuireWoods, or for that matter any other attorney handling 

shareholder derivative suits, is “immune to legal malpractice cases.” On the 

contrary, there is any number of parties who, even in this case, could have pursued 

a legal malpractice action against McGuireWoods for its handling of the derivative 

claims against Sidley. To begin with, there is Beeland itself, who after all owns the 

claims that plaintiffs sought to bring derivatively against Sidley. In addition, there 

are Beeland’s remaining minority shareholders, who, if Beeland declined to sue, 

could have brought a derivative malpractice suit against McGuireWoods on 

Beeland’s behalf. Finally, and most importantly, plaintiffs themselves could have 

brought a derivative malpractice suit against McGuireWoods had they not divested 

themselves of any and all ownership interest in Beeland prior to filing the present 

lawsuit. See, e.g., Lower v. Lanark Mutual Fire Insurance Co., 151 Ill. App. 3d 

471, 473 (1986) (“plaintiff in a shareholder’s derivative suit must have been a 

shareholder at the time of the transaction of which he complains and must maintain 

his status as a shareholder throughout the entire pendency of the action”); see also 

805 ILCS 180/40-5 (West 2008) (derivative action on behalf of an LLC must be 

brought by a “member or transferee who is a substituted member”). Indeed, when 

they divested themselves of their ownership interest in Beeland, plaintiffs also 

divested themselves of their right to assert claims on Beeland’s behalf, including 

those related to McGuireWoods’s failure to sue Sidley on Beeland’s behalf. Thus, 

it is not the case either that McGuireWoods is “immune to legal malpractice” with 

respect to shareholder derivative actions, or that plaintiffs who hire attorneys to 

handle such actions have “no remedy against the lawyer for breach of the lawyer’s 

fiduciary duty.” On the contrary, McGuireWoods remained at all times liable for 

any malpractice it might have committed with respect to the derivative claims 

against Sidley, and there are several potential plaintiffs who could have pursued a 

malpractice claim against it. These plaintiffs, however, are no longer among them.

¶ 22 On this last point, we feel compelled to address an issue that, though raised in 

the trial court, has not been briefed or argued in this court—namely, plaintiffs’ 

standing to sue McGuireWoods for its failure to assert the derivative claims against 

Sidley. Ordinarily, McGuireWoods’s failure to raise this issue would result in 
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forfeiture, as the lack of standing is an affirmative defense that is forfeited if not 

raised. See Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252-53 (2010). 

In this case, however, we choose to override the forfeiture in the interest of 

maintaining a sound and uniform body of precedent. See Jackson v. Board of 

Election Commissioners, 2012 IL 111928, ¶ 33. Indeed, we would not want anyone 

to construe our silence on this point as a tacit recognition that plaintiffs have 

standing to sue McGuireWoods for its failure to assert the derivative claims against 

Sidley. The fact is, plaintiffs do not have such standing, and it is therefore best for 

this court both to state that explicitly and to explain why that is the case.

¶ 23 As discussed above, the law in Illinois is well-settled that, to bring a derivative 

claim, the plaintiff must have been a shareholder at the time of the transaction of 

which he complains and must maintain his status as a shareholder throughout the 

entire pendency of the action. This is true both at common law (see Lower, 151 Ill.

App. 3d at 473) and under the Limited Liability Company Act (see 805 ILCS 

180/40-5 (West 2008)). The underlying rationale for this rule is that, because a 

shareholder will receive at least an indirect benefit (in terms of increased 

shareholder equity) from a corporate recovery, he has as adequate interest in 

vigorously litigating the claims. Lower, 151 Ill. App. 3d at 473. By contrast, a

nonshareholder, or one who loses his shareholder interest during the course of the 

litigation, may lose any incentive to pursue the litigation adequately. Id. at 473-74. 

Here, plaintiffs concede that they relinquished any and all ownership in Beeland 

prior to filing the present lawsuit against McGuireWoods. And yet, in their suit 

against McGuireWoods, plaintiffs are attempting to prove that McGuireWoods was 

negligent for failing to assert certain claims belonging to Beeland. Plaintiffs have 

absolutely no standing to do this. To be sure, plaintiffs initially had standing to 

assert derivative claims against Sidley on Beeland’s behalf, as plaintiffs were 

minority shareholders in Beeland when they filed the underlying case. But having 

now relinquished their ownership interest in Beeland, plaintiffs likewise 

relinquished their ability to “champion” Beeland’s claims against Sidley, including 

by extension whether McGuireWoods was negligent for failing to assert those 

claims in a timely manner. At the time they filed the present action against 

McGuireWoods, plaintiffs had no ownership stake in Beeland whatsoever. Rather, 

plaintiffs stood in exactly the same relationship to Beeland as every other member 

of the general public, none of whom has the right to initiate litigation against 

McGuireWoods for failing to assert certain legal claims belonging to Beeland. The 

gravamen of standing is a real interest in the outcome of the controversy, and 
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standing is shown by demonstrating some injury to a legally cognizable interest.

Powell v. Dean Foods Co., 2012 IL 111714, ¶ 35. Having sold their interest in 

Beeland, plaintiffs cannot demonstrate either of these things with respect to 

McGuireWoods’s failure to assert derivative claims against Sidley. Those claims 

always and only belonged to Beeland, a company in which plaintiffs no longer have 

any interest or stake. Consequently, though the parties do not raise it, and though it 

does not form the primary basis for our decision in this case, we wish to state 

explicitly that, with respect to McGuireWoods’s failure to assert derivative claims 

against Sidley, plaintiffs simply do not have standing to sue McGuireWoods for 

malpractice.

¶ 24 CONCLUSION

¶ 25 For the reasons set forth above, we hold that (1) plaintiffs are bound by the trial 

court’s determination in the underlying case that plaintiffs had no standing to bring 

individual claims against Sidley; and (2) even assuming they were successful, 

plaintiffs could not have collected personally on any judgment entered against 

Sidley on the derivative claims. Consequently, McGuireWoods’s failure to assert 

the contested claims against Sidley in a timely manner caused no injury to plaintiffs 

in their individual capacities, which is the only capacity in which they are now 

proceeding. The trial court was correct to enter summary judgment in favor of 

McGuireWoods, and we therefore reverse the appellate court’s decision to the 

extent that it reverses the trial court’s judgment.

¶ 26 Appellate court judgment affirmed in part and reversed in part.

¶ 27 Circuit court judgment affirmed.