ILLINOIS OFFICIAL REPORTS

Appellate Court

Goldfine v. Barack, Ferrazzano, Kirschbaum & Perlman, 2013 IL App (1st) 111779

Appellate Court

Caption

MORTON GOLDFINE and ADRIENNE GOLDFINE, PlaintiffsAppellants and Cross-Appellees, v. BARACK, FERRAZZANO,

KIRSCHBAUM AND PERLMAN, PETER BARACK, DENNIS

FERRAZZANO, HOWARD KIRSCHBAUM, CHARLES PERLMAN,

RAY RAZNER, DEBRA CAFARO, DAVID NADOFF, THOMAS

PAGE, DAVID SELMER, ROBERT SHAPIRO, WENDI SLOANE

WEITMAN, and JILL ANN COLEMAN, Defendants-Appellees and

Cross-Appellants.

 District & No. First District, Sixth Division

Docket No. 1-11-1779

Filed June 28, 2013

Held

(Note: This syllabus

constitutes no part of

the opinion of the court

but has been prepared

by the Reporter of

Decisions for the

convenience of the

reader.)

Plaintiffs proved their claims for a violation of the Illinois Securities Law

and for legal malpractice arising from defendant law firm’s failure to

preserve plaintiffs’ right to recover for the securities violation, and the

award of statutory damages, attorney fees, costs and expenses was

affirmed; however, the cause was remanded for application of the correct

formula for calculating the mandatory statutory damages pursuant to the

Illinois Securities Law, a recalculation of the award for attorney fees, and

an opportunity for plaintiffs to file a petition under the Illinois Securities

Law for additional attorney fees and costs for defending the appeal. 

Decision Under 

Review

Appeal from the Circuit Court of Cook County, No. 05-L-6360; the Hon.

Dennis J. Burke, Judge, presiding.
Judgment Affirmed in part and reversed in part; cause remanded with directions.

Counsel on

Appeal

Law Offices of Edward T. Joyce & Associates, P.C. (Edward T. Joyce

and Rowena T. Parma, of counsel), and Martin J. Oberman, both of

Chicago, and Steven J. Plotkin, of Evanston, for appellants.

Jenner & Block LLP, of Chicago (Jeffrey D. Colman, Barry Levenstam,

and Irina Y. Dmitrieva, of counsel), for appellees.

Panel PRESIDING JUSTICE LAMPKIN delivered the judgment of the court,

with opinion.

Justice Reyes concurred in the judgment and opinion.

Justice Gordon concurred in part and dissented in part, with opinion.

OPINION

¶ 1 This is a legal malpractice case based on an underlying cause of action for a violation of

the Illinois Securities Law of 1953 (Illinois Securities Law) (815 ILCS 5/1 et seq. (West

2010)). Plaintiffs Morton and Adrienne Goldfine brought a legal malpractice action against

defendants, the law firm of Barack, Ferrazzano, Kirschbaum & Perlman (BFKP) and several

partners of that law firm, to recover damages plaintiffs sustained as a result of defendants’

failure to preserve plaintiffs’ Illinois Securities Law cause of action against Shearson

Lehman Brothers Holdings, Inc., and others.

¶ 2 The trial court found that plaintiffs proved their underlying Illinois Securities Law claim

and ruled in their favor on their legal malpractice claim. The trial court awarded them

statutory damages for their Illinois Securities Law claim and attorney fees, costs and

expenses.

¶ 3 On appeal, plaintiffs argue that the trial court erred (1) in calculating the amount of their

mandatory statutory award for damages under the Illinois Securities Law, and (2) in denying

their full claim for attorney fees, costs and expenses.

¶ 4 In their cross-appeal, defendants argue that the award of interest, attorney fees and costs

should be reversed because the fee-shifting and interest provisions of the Illinois Securities

Law are punitive and coercive and, thus, fall within the category of damages that are barred

by statute in legal malpractice actions. Defendants also argue that the trial court erred in

finding that plaintiffs proved (1) their underlying Illinois Securities Law claim where Mr.

Goldfine’s reliance on his broker’s representations concerning stock purchases was not

reasonable, and (2) that defendants’ legal malpractice proximately caused plaintiffs’

damages.

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¶ 5 For the reasons that follow, we reject defendants’ argument that the award of statutory

damages under the Illinois Securities Law is barred by statute in legal malpractice actions.

We also affirm the trial court’s findings that plaintiffs proved their underlying Illinois

Securities Law claim and legal malpractice action. Further, we affirm the trial court’s award

of plaintiffs’ costs and expenses. However, we find that the trial court failed to apply the

correct mathematical formula to calculate plaintiffs’ mandatorystatutory award for damages

under the Illinois Securities Law. Specifically, the clear and unambiguous language of

section 13(A) of the Illinois Securities Law (815 ILCS 5/13(A) (West 2010)) required the

circuit court to calculate plaintiffs’ award of 10% interest on the full amount they had paid

for the stocks at issue before the circuit court deducted the amount plaintiffs had received

from a settlement. In addition, the trial court’s attorney fees award was based on a percentage

of the court’s incorrect damage calculation. Accordingly, we reverse the trial court’s award

of damages and attorney fees and remand this matter to the trial court to calculate plaintiffs’

section 13(A) damages consistent with this order and to determine a reasonable amount of

attorney fees based on the correct amount of damages.

¶ 6 I. BACKGROUND

¶ 7 The “case within a case” on which plaintiffs’ malpractice claim is predicated was

plaintiffs’ cause of action against Shearson Lehman Brothers Holdings, Inc. (Shearson), and

other individuals and firms (the Shearson defendants) for violations of the Illinois Securities

Law. That cause of action arose from plaintiffs’ 12 separate purchases of First Capital

Holdings (FCH) stock through Shearson broker Michael Steinberg, who was the office

manager of Shearson’s Peoria, Illinois, office and a close personal friend of the plaintiffs.

Plaintiffs’ purchases were made between 1987 and 1990 and totaled $4,745,254.45.

¶ 8 In the spring of 1991, FCH filed for bankruptcy, and plaintiffs’ FCH stock became

worthless. In 1991, plaintiffs retained the defendant law firm BFKP to: identify and evaluate

plaintiffs’ claims arising from their investments in FCH stock; negotiate a settlement of those

claims with the Shearson defendants; and–if no settlement could be effected–preserve

plaintiffs’ claims until they retained a contingent-fee lawyer to file suit. BFKP did not

achieve a settlement of plaintiffs’ claims.

¶ 9 When plaintiffs retained BFKP, plaintiffs had a viable claim against the Shearson

defendants for rescission under the Illinois Securities Law. The Illinois Securities Law

mandates that victims of securities fraud are entitled to recover their entire stock purchase

price, plus 10% interest on that purchase from the date of the purchases to the date of

judgment, plus their attorney fees, costs and expenses. 815 ILCS 5/13(A) (West 2010).

However, in order to bring that Illinois Securities Law claim, the purchaser must serve a

notice of rescission within six months of learning of his right to this statutory remedy. 815

ILCS 5/13(B) (West 2010). BFKP, however, never served the rescission notice, never

advised plaintiffs to do so, and never sought to toll the time to serve the rescission notice.

¶ 10 In 1992, plaintiffs hired new counsel to prosecute their claims against the Shearson

defendants in the underlying case. Although plaintiffs’ complaint included the Illinois

Securities Law claim, that claim was dismissed by the trial court as time-barred, and that

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dismissal was ultimately affirmed on appeal. Goldfine v. Steinberg, No. 1-00-1004 (2004)

(unpublished order under Supreme Court Rule 23). Meanwhile, in 1994, plaintiffs filed the

instant malpractice action against defendants BFKP and its partners to recover the damages

plaintiffs would have recovered under the Illinois Securities Law if defendants’ negligence

had not barred plaintiffs from pursuing their Illinois Securities Law claim. In 1996, while the

underlying Steinberg case was pending, a stipulated order was entered that delayed the

malpractice trial until after the resolution of the Steinberg case.

¶ 11 In 1999, the trial court dismissed plaintiffs’ remaining claims in the Steinberg case, and

plaintiffs appealed. In 2004, this court remanded to the trial court two of plaintiffs’ claims

against the Shearson defendants–common law fraud and violation of the Illinois Consumer

Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq.

(West 2004)). In 2007, plaintiffs settled their non-Illinois Securities Law claims in the

underlying Steinberg case for $3.2 million.

¶ 12 Thereafter, this malpractice case proceeded to a bench trial. The trial court heard both

plaintiffs’ “case within a case” claim under the Illinois Securities Law and their malpractice

claim against BFKP and its partners for failing to preserve the Illinois Securities Law claim

in the underlying Steinberg case. Over nearly eight weeks, the court heard numerous

witnesses, both live and videotaped, and through deposition testimony, and the parties

introduced voluminous exhibits.

¶ 13 On July 12, 2010, the trial court ruled that, after the plaintiffs’ first purchase of FCH

stock, the Shearson defendants violated the IllinoisSecurities Law concerning plaintiffs’ next

11 FCH stock purchases. The trial court accepted and credited Mr. Goldfine’s testimony and

found that plaintiffs were entitled to relief under Section 13(A) of the Illinois Securities Law.

The court also heard extensive testimony from the defendant lawyers who had handled

plaintiffs’ representation and expert witnesses for both sides. The court found that BFKP had

breached its duties to plaintiffs by negligently failing to carry out its assignment to preserve

plaintiffs’ Illinois Securities Law claim and that the loss of that claim had been caused by

BFKP’s negligent conduct. The trial court ruled that plaintiffs’ damages would be calculated

according to the following formula: plaintiffs’ $3.2 million settlement would be deducted

from the total they had paid for their 11 stock purchases, and then 10% interest would be

calculated on the remaining amount based on the various dates of those stock purchases. The

court ordered the parties to calculate the exact amount to enter in a judgment order, ordered

plaintiffs to prepare the judgment order, and gave plaintiffs leave to file their petition for

attorney fees.

¶ 14 Plaintiffs moved the court to modify or clarify its July 2010 order. Plaintiffs argued, inter

alia, that the trial court’s damage calculation formula was erroneous and contrary to

precedent as set forth in Kugler v. Southmark Realty Partners III, 309 Ill. App. 3d 790

(1999). Thereafter, the parties filed briefs on the damage calculation issue and various

motions and responses concerning plaintiffs’ petition for attorney fees. On September 22,

2010, after argument was held on plaintiffs’ motion to modify the July 2010 order, the trial

court denied plaintiffs’ motion and ordered them to file their petition for attorney fees and

costs. Specifically, the trial court stated that this legal malpractice case was “very unique”

and distinguishable from Kugler. Moreover, the trial court agreed with the special

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concurrence in Kugler and thought it would be a windfall and unfair to defendants to apply

the Kugler damage calculation formula in the instant case. Accordingly, the trial court

adopted defendants’ damage calculation and held that the court would wait for plaintiffs’

petition for attorney fees and costs before entering judgment.

¶ 15 After argument was held on plaintiffs’ petition for attorney fees, costs and expenses, the

trial court ruled, on May 17, 2011, that a contingency fee of 40% of the recovered amount

was reasonable. The court stated that plaintiffs’ counsel would have received a contingency

fee pursuant to their retainer agreement and it was difficult to separate the time plaintiffs’

counsel had allotted to either the malpractice or Illinois Securities Law claim. The court

denied costs and expenses to one of plaintiffs’ counsel because the court could not

“determine the specific nature of the costs and whetherthe costs specifically pertained to this

case.” The court, however, granted in full costs and expenses to the plaintiffs’ other counsel.

¶ 16 On May 24, 2011, the trial court entered judgment in this case and adopted the securities

purchase price and interest calculation proposed by defendants. Specifically, the trial court

took the sum of $4,506,602.05, which represented the total amount of plaintiffs’ 11 stock

purchases made in 1988, 1989 and 1990, and deducted $3.2 million, which was the amount

of the 2007 Steinberg settlement. However, because those stocks were purchased on 11

different dates, the trial court applied a “proportionate reduction of $3,200,000.00

(71.00693%)” to each purchase to obtain a “net” purchase price for each of the 11 stock

purchases. The total sum of those net purchase prices was $1,306,602.29. Using the net

purchase price for each of the 11 purchases and the corresponding date of sale for each

purchase, the trial court then calculated a 10% annual interest award, through May 24, 2011,

of $2,785,149.91. This resulted in a total section 13(A) award, before attorneyfees, costs and

expenses, of $4,091,752.19. Furthermore, the trial court awarded plaintiffs attorney fees of

40% on the $4,091,752.19 award, or $1,636,700.80, and $207,167.28 in costs and expenses.

Accordingly, the court entered a total award of $5,935,620.10 in favor of plaintiffs and

against defendants.

¶ 17 Plaintiffs appealed, contending the trial court failed to calculate their statutory damages

according to the mathematical formula in section 13(A) of the Illinois Securities Law.

Plaintiffs also argue the trial court erred by failing to award reasonable attorney fees,

expenses and costs. Defendants cross-appealed, contending that the award of interest,

attorney fees and costs should be reversed because the fee-shifting and interest provisions

of section 13(A) are punitive and coercive and, thus, fall within the category of damages that

are barred by statute in legal malpractice actions. Defendants also argue that the trial court

erred in finding that plaintiffs proved their underlying Illinois Securities Law claim where

Mr. Goldfine’s reliance on his broker’s representations concerning stock purchases was not

reasonable, and where plaintiffs failed to prove that anymalpractice proximately caused any

damage.

¶ 18 II. ANALYSIS

¶ 19 A. Calculation of Section 13(A) Damages

¶ 20 Plaintiffs argue that the trial court misapplied the section 13(A) damage formula when

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the court deducted from plaintiffs’ stock purchase price the $3.2 million settlement plaintiffs

had received in 2007 from the Steinberg case before the court calculated the mandatory 10%

annual interest. We agree.

¶ 21 “A legal malpractice plaintiff is entitled to recover those sums which would have been

recovered if the underlying suit had been successfully prosecuted.” Weisman v. Schiller,

Ducanto &Fleck, 314 Ill. App. 3d 577, 580 (2000). Here, the trial court found that plaintiffs

proved their “case within a case,” i.e., that they would have prevailed on their Illinois

Securities Law claim against the Shearson defendants and were entitled to statutory damages

pursuant to section 13(A) based on $4,506,602.05 in FCH stock purchases. Section 13(A)

provides, in pertinent part:

“A. Every sale of a security made in violation of the provisions of this Act shall be

voidable at the election of the purchaser ***; and the issuer, controlling person,

underwriter, dealer or other person by or on behalf of whom said sale was made, and

each underwriter, dealer or salesperson who shall have participated or aided in any way

in making the sale, and in case the issuer, controlling person, underwriter or dealer is a

corporation or unincorporated association or organization, each of its officers and

directors (or persons performing similar functions) who shall have participated or aided

in making the sale, shall be jointly and severally liable to the purchaser as follows:

(1) for the full amount paid, together with interest from the date of payment for

the securities sold at the rate of the interest or dividend stipulated in the securities

sold (or if no rate is stipulated, then at the rate of 10% per annum) less any income

or other amounts received by the purchaser on the securities, upon offer to tender to

the seller or tender into court of the securities sold or, where the securities were not

received, of any contract made in respect of the sale; or

(2) if the purchaser no longer owns the securities, for the amounts set forth in

clause (1) of this subsection A less any amounts received by the purchaser for or on

account of the disposition of the securities.” (Emphases added.) 815 ILCS 5/13(A)

(West 2010).

The issue here is the proper interpretation of the Illinois Securities Law, which is a question

of law and, thus, reviewed by this court de novo. Woods v. Cole, 181 Ill. 2d 512, 516 (1998).

¶ 22 In construing the statute, the court must look primarily to the words of the statute as

evidence ofthe legislature’s intent. Lemont-Bromberek Combined School District No. 113(a)

v. Walter, 279 Ill. App. 3d 847, 849 (1996). Judicial construction is only necessary when the

statute is unclear or ambiguous. Buckellew v. Board of Education of Georgetown-Ridge

Farm Community Unit School District No. 4, 215 Ill. App. 3d 506, 511 (1991). The court

must construe the statute as it is and, regardless of the court’s opinion regarding the

desirability of the results surrounding the operation of the statute, the court “may not, under

the guise of construction, supplyomissions, remedydefects, annex newprovisions,substitute

different provisions, add exceptions, limitations, or conditions, or otherwise change the law

so as to depart from the plain meaning of the language employed in the statute.” Id.

¶ 23 This court previously construed section 13(A) of the Illinois Securities Law in Kugler,

309 Ill. App. 3d 790. The trial court in Kugler found that the broker defendants were liable

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under the Illinois Securities Law to the class of plaintiffs who had purchased securities

during the years of 1985 and 1986. Id. at 792. On May 11, 1998, the trial court entered

judgment for plaintiffs in the amount of $902,759.48, pursuant to section 13(A) of the

Illinois Securities Law. Id. at 793. On appeal, the defendants challenged the trial court’s

calculation of damages, contending the trial court had failed to deduct $2,952.05 in accrued

interest and $12.50 in sale proceeds from the damages where two class members, who

originally paid in excess of $7,000 for the securities, sold them for $12.50 on December 31,

1995. Id. at 793, 798.

¶ 24 The majorityopinion in Kuglerfound that the clear and unambiguous language of section

13(A) provided that the statutory damages were calculated as the full amount the purchaser

had paid for his securities, plus accrued interest from the date of payment of the securities

at 10% per annum, less any income or other amounts received upon the disposition of the

securities. Id. at 797. Although the majority opinion thought “a purchaser who sells his

securities should be entitled only to interest up to the date of sale and not beyond,” the

majority would not “depart from the plain meaning of the statute” and could not “supply

omissions, remedy defects, or otherwise change the law.” Id. at 797-98. See also Ryon M.

McCabe, Statutory Damages Under the Florida Securities and Investor Protection Act: How

to Calculate and Apply Rescission Damages, 83 Fla. B. J. 32, 33-36 (October 2009) (citing

Kugler and noting that Illinois, like Florida, provides a unique measure of statutoryrescission

damages and powerful tool for investors that differs from traditional compensatoryor out-ofpocket damages); 12A Joseph C. Long, Blue Sky Law § 9:15 n.10 (June 2010) (noting that

the statutes in Florida, Illinois and Texas do not require a deduction of interest earned on the

proceeds of the sale of the original securities).

¶ 25 The special concurrence in Kugler disagreed with the majority’s interest calculation,

finding it to “constitute a windfall and an effective double recovery to the purchaser.”

Kugler, 309 Ill. App. 3d at 798 (Gordon, J., specially concurring). The special concurrence

argued that interest should be charged against the original purchase price up to the time the

security is resold. Once the security is resold, interest should be charged up to the date of

judgment based on the difference between the original purchase price and the amount

recouped on the resale. Id. According to the special concurrence, the language of section

13(A)(2) releases the seller of the securities from any obligation to repay the amount the

purchaser recovered on any resale and, thus, it “naturally follows that the interest obligation

is correspondinglydiminished.” Id. at 799. Nevertheless, the special concurrence thought the

amount of money in dispute was de minimus and did not warrant a remand or adjustment.

Id. The calculation formula preferred by the special concurrence seems to be: damages =

(original purchase price + statutory interest from purchase to judgment date - any income

received on the securities) - (value of securities when resold + statutory interest from resale

to judgment date). The special concurrence’s formula would supply a mechanism, which is

not provided in the clear language of the statute, to reduce a damage award by the amount

of interest earned on the proceeds of a resale.

¶ 26 To support the proposition that section 13(A) did not need to be construed to include

interest on the proceeds of the resale, the special concurrence relied on a dictionary definition

of the word “interest” as a “ ‘price paid for borrowing money generally expressed as a

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percentage of the amount borrowed paid on one year.’ ” Id. (quoting Webster’s Third New

International Dictionary 1178 (1993)). The special concurrence contended that because a

13(A) damage award is reduced by any money recovered on resale, the amount borrowed or

principal for purposes of calculating 13(A) interest must also reflect that reduction. Id. The

special concurrence’s rationale, however, is not persuasive. Section 13(A) does not address

situations involving borrowed money but, rather, the sale of securities in violation of

securities law. Accordingly, the more apt definition for interest here is “an excess over and

above an exact equivalent.” Webster’s Third New International Dictionary 1178 (1993); see

also Black’s Law Dictionary816 (7th ed. 1999) (defining interest as the “compensation fixed

by agreement or allowed by law for the use or detention of money, or for the loss of money

by one who is entitled to its use”).

¶ 27 To the extent that any accrued interest results in a surplus award to a plaintiff, the clear

language of the statute indicates that the legislature chose not to permit the liable defendant

to reap the benefits of the plaintiff’s good fortune in obtaining income on the securities

gratuitouslyor the plaintiff’s efforts to minimize the harm done bythe defendant. In choosing

who should receive any windfall from a surplus interest award, i.e., compensation over and

above that necessary to compensate the plaintiff for injuries sustained by the defendant’s

tortious conduct, the legislature deemed the plaintiff far more deserving than the defendant.

The legislature, however, curtailed anydouble recoverybyrequiring the amount of anyresale

or income received on the securities to be deducted from the 13(A) damage award. The

legislature could have easily required any surplus interest award to also be offset but chose

not to do so. Even if we were so inclined, we are in no position to bring about such a change.

¶ 28 Here, the trial court cited the Kugler special concurrence to support the interest

calculation used in the instant case. However, the trial court’s attempt to apply the formula

suggested bytheKuglerspecial concurrence, which addressed a situation involving the resale

of securities, to the instant situation, which concerns the deduction of a settlement award,

reveals the erroneous reasoning underlying the special concurrence’s position. When the

situation involves a resale of securities, like in Kugler, a deduction to the interest calculation

based on the difference between the original purchase price and the amount recouped on the

resale would remedy fairly easily a perceived statutory defect or omission in the Illinois

Securities Law concerning a purported failure to deduct interest on the proceeds of the resale.

The instant case, however, establishes that a court, under the guise of statutory construction,

must significantly revise the clear statutory language of section 13(A) to effectuate the

accrued-interest policy concerns raised by the defendants, trial court and partial dissent here

and the Kugler special concurrence.

¶ 29 Here, 11 stock purchases were made on 11 different dates during 1988, 1989 and 1990,

and the original purchase prices ranged from as low as $13,106.44 on May 20, 1988, to as

high as $1,184,940.25 on February23, 1990. Between 17 and 19 years elapsed from the dates

plaintiffs had purchased the stocks to the date they received the $3.2 million settlement from

the Shearson defendants in 2007. Over three more years elapsed before plaintiffs received

the judgment in this malpractice action against defendants for their negligent failure to

preserve plaintiffs’ Illinois Securities Law claim against the Shearson defendants. Due to

securities violations and legal malpractice, plaintiffs were denied the use of over $4.5 million

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for about 20 years. Under these circumstances, why should the 2007 $3.2 million settlement

reach back almost 20 years to be deducted from plaintiffs’ original purchase price and

thereby cut off their entitlement under the statute to accrued interest? Although the trial court

thought it would be fair in 2010 to apply the 2007 $3.2 million settlement to each purchase

price as a proportionate reduction (see supra ¶ 16), there is absolutely no statutory basis for

the court to exercise that discretion. Moreover, if the legislature had intended to require a

deduction of interest earned on the proceeds of a resale or other recovered amounts, the

legislature was surely capable of drafting that requirement into the statute or amending the

statute after Kugler was issued.

¶ 30 Like the Kugler majority, we cannot depart from the plain meaning of the statute, which

provides that the 10% interest is calculated on the full amount paid for the securities before

deductions are made for any income or amounts received by the purchaser on the securities.

Consequently, we find that the trial court erred when it deducted the $3.2 million settlement

from the total purchase price before calculating the interest. Accordingly, we reverse the trial

court’s judgment concerning the damage calculation and remand this matter for an

adjustment of plaintiffs’ damages in accordance with this order. Here, the full amount of the

purchase price on the 11 stock purchases at issue was $4,506,602.05. According to plaintiffs,

the correct interest calculation on that amount, which must account for the 11 different dates

of purchase of those stocks, at 10% annually from the date of payment for the shares until

the July 12, 2010 order by the trial court should have been $9,230,916.38, for a total of

$13,737,518.43. Then, the $3.2 million 2007 settlement should have been deducted from

$13,737,518.43, for a damage award of $10,537,518.43. Although the trial court used the

wrong purchase price and interest calculation, the trial court correctly ruled that the 10%

interest calculation had to be updated through the date of the final judgment on May 24,

2011. Because this court has ruled in plaintiffs’ favor concerning the interest calculation, the

$9,230,916.38 interest calculation must be updated again.

¶ 31 Plaintiffs also argue that the trial court should not have deducted the entire $3.2 million

settlement from plaintiffs’ damage award because they actually received only $1,657,000 of

that settlement where they expended $1,543,000 in costs and attorney fees in order to obtain

that settlement. We disagree. In the underlying Steinberg case, plaintiffs and the Shearson

defendants entered a settlement agreement after plaintiffs’ Illinois Securities Law claim was

dismissed as time-barred and that dismissal was affirmed on appeal. The release in the

Steinberg case provided that plaintiffs released any and all claims against the Shearson

defendants that related to any of the matters alleged in their underlying lawsuit, or their

account with the Shearson defendants, or their investments in the common stock of FCH.

However, the release expressly provided that nothing therein affected plaintiffs’ right to

pursue their legal malpractice claims. Applying the plain language of section 13(A), the $3.2

million plaintiffs received in the settlement of their statutory and common law fraud claims

constitutes “other amounts received by the purchaser on the securities.” Moreover, section

13(A) makes no provision for stock purchasers like plaintiffs to deduct fees or costs from

those “other amounts received.”

¶ 32 Defendants argue that this court should reject plaintiffs’ challenge to the trial court’s

calculation of damages because the trial court simply applied the measure of damages in

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accordance with the testimony of plaintiffs’ securities law expert witness Michael Moirano.

Specifically, defendants assert Moirano testified that, under the Illinois Securities Law, the

10% interest is calculated on the purchase price after deductions are made for any dividends

or other amounts received. Defendants contend that plaintiffs should not be permitted to

abandon their expert’s testimony after inducing the trial court to rely on it.

¶ 33 According to the record, plaintiffs’ counsel, on redirect examination, questioned Moirano

regarding how he would advise a client about pursuing an Illinois Securities Law claim as

opposed to a claim for punitive damages or margin interest based on the greater value of the

rescission damages available under the Illinois Securities Law. Moirano answered:

“A. If it were in the six-month [Illinois Securities Law] period, I would explain to

him that the margin interest, in my opinion, under any circumstance, would be very

difficult to get, but under the Illinois statute, because you got ten percent interest from

the date of purchase, unless you’re paying really ten percent interest on whatever it is you

borrowed, you’re going to get that–an equivalent amount of money and more by persuing

[sic] that claim. And it would be the best–the quickest way to go.

Q. Now, you were asked about damages under the Illinois Securities Law. Is that

damage analysis strictly mechanical?

A. You mean on a loss causation analysis?

Q. Right.

A. No, absolutely not.

Q. Damages under the Illinois Securities Law?

A. Oh, the Illinois Securities Law. Excuse me, yes. You get your money back. You

get how much you paid. So whatever you paid, you get back.

Q. And you get ten percent from the date of purchase to the date of payment, right?

A. Correct.”

¶ 34 Thereafter, Moirano testified that the trial court determines the reasonable amount of

attorney fees for the prevailing plaintiff under the Illinois Securities Law. He continued:

“A. *** [Y]ou’re just going to say, ‘Hopefully we’ll get all our attorneys’ fees back,’

or whatever the deal is on the attorneys’ fees, so the client is made whole. That’s the

intent of the statute, make the client whole, plus ten percent interest today.

***

THE COURT: I have a couple of questions. Mr. Moirano, you just were asked about

damages under the [Illinois Securities Law]?

A. Yes.

THE COURT: You stated it’s mechanical. Doesn’t it also state you get the purchase

price back of the securities, less any income, or other amounts received by the purchaser

on the securities?

A. Yes. So if you got dividends–if you sold some of the shares, you get a net.

THE COURT: Right.

A. You get put back to where you were.

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THE COURT: You get back to the beginning, from the front end?

A. Yes.

THE COURT: And then the ten percent kicks in?

A. Yes.”

¶ 35 Redirect examination continued, and plaintiffs’ counsel questioned Moirano regarding

how a reasonable lawyer would advise a client about the expense of pursuing other claims

in addition to an Illinois Securities Law claim, and the risk of not pursuing all the claims.

Moirano responded:

“A. You know your liability. You should know what the evidence of your liability

is. So you can tell the client, ‘On the liability side, under the [Illinois Securities Law]

claim, we can probably either get a summary judgment or you’re going to be–I’m fairly

confident that you can prevail on that. Your damages are going to be “X.” They’re going

to get your money back, less whatever you received, times ten percent.’ ”

¶ 36 Plaintiffs respond that at the bench trial, the formula by which plaintiffs’ Illinois

Securities Law damages were to be calculated was never an issue because the calculation was

purely a matter of law and neither Moirano nor any other expert disclosed or offered Illinois

Supreme Court Rule 213 (eff. Jan. 1, 2007) opinions on the subject. Plaintiffs add that the

above-quoted exchange shows that the trial court sua sponte asked Moirano a question for

which he had not prepared and which he answered without having the words of the statute

in front of him. Moreover, plaintiffs submitted their motion to modify the trial court’s

damage calculation as soon as the trial court issued its July 2010 order indicating that it had

misapplied the section 13(A) formula, so no party was prejudiced nor was any extra expense

incurred.

¶ 37 We agree with plaintiffs that the trial court’s question to Moirano was confusingly

worded and the meaning of Moirano’s testimony in the above-quoted exchange is less than

clear. Moirano may well have understood the trial court’s question to mean that the 10%

interest “kicks in” from “the beginning” or “front end” as required by Kugler. In any event,

the manner in which the statutory damages must be calculated is purely a question of law,

and nothing Moirano said could override the plain language of section 13(A) and this court’s

explicit holding in Kugler.

¶ 38 Next, defendants argue that this court should reject blind adherence to Kuglerin the very

different context of this case because Kugler, which addressed an Illinois Securities Law

claim, did not address a legal malpractice action or how damages should be assessed against

negligent attorneys for the loss of an Illinois Securities Law claim. Defendants’ argument

lacks merit. Like the Illinois Securities Law, no statute or common law precedent

establishing private causes of action contains the superfluous language that the statutory or

common law damages in such causes of action also apply in the event the plaintiff’s lawyer

is sued for malpractice because he negligently caused the action to be time barred. Illinois

law is clear that a “legal malpractice plaintiff is entitled to recover those sums which would

have been recovered if the underlying suit had been successfully prosecuted.” Weisman, 314

Ill. App. 3d at 580.

¶ 39 Next, defendants argue that even if Kugler does apply here, plaintiffs failed to prove the

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amount of any interest award because they failed to introduce any evidence showing when

they reasonably would have obtained recovery against the Shearson defendants, and thereby

stopped the running of section 13(A) interest, absent defendants’ legal malpractice.

Defendants’ argument lacks merit. The award of interest under section 13(A) is controlled

by the clear, unambiguous language of the statute, and the statute does not require the

purchaser of securities to submit the type of proof–which would be purely speculative–urged

by defendants.

¶ 40 B. Award of Section 13(A) Interest, Fees and Costs

in a Legal Malpractice Action

¶ 41 Defendants argue that the 10% interest, attorneyfees, and costs recoverable under section

13(A) of the Illinois Securities Law constitute punitive damages and, thus, are barred in legal

malpractice actions by section 2-1115 of the Code of Civil Procedure (Code) (735 ILCS 5/2-

1115 (West 2010)). We review this issue of law de novo (Tri-G, Inc. v. Burke, Bosselman

& Weaver, 222 Ill. 2d 218, 254 (2006)), and conclude that defendants’ argument lacks merit.

¶ 42 Section 2-1115 of the Code provides:

“Punitive damages not recoverable in healing art and legal malpractice cases. In all cases,

whether in tort, contract or 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 2010).

Furthermore, a statute is penal if it (1) imposes automatic liability for a violation of its terms;

(2) sets forth a predetermined amount of damages; and (3) imposes damages without regard

to the actual damages suffered by the plaintiff. Landis v. Marc Realty, L.L.C., 235 Ill. 2d 1,

13 (2009). “By contrast, a statute is remedial where it ‘imposes liability only when actual

damage results from a violation’ and where ‘liability is contingent upon damage being

proven by the plaintiff.’ ” Id. (quoting McDonald’s Corp. v. Levine, 108 Ill. App. 3d 732, 738

(1982)).

¶ 43 Defendants argue the section 13(A) fee-shifting and interest provisions are coercive and

punitive in nature and fall within the category of damages the legislature has barred in section

2-1115. Defendants contend that they had no ability to rescind plaintiffs’ stock purchases to

stop the interest and fees from accumulating. Further, defendants contend that assessing

millions of dollars in interest, fees, and costs against attorneys would neither punish the

actual wrongdoers nor compel compliance with securities laws.

¶ 44 To support the proposition that section 13(A) interest, fees, and costs constitute punitive

damages, defendants cite Foreman v. Holsman, 10 Ill. 2d 551, 553-54 (1957) (“this civil

remedy is intended to afford an additional punishment for an offending party”); Gowdy v.

Richter, 20 Ill. App. 3d 514, 530 (1974) (the “penal character” of the Illinois Securities Law

fee-shifting provision warns violators that they will be responsible for reasonable attorney

fees incurred in returning the purchaser to his status quo); Jacobs v. James, 215 Ill. App. 3d

499, 505 (1991) (“[t]he goals of the fee-shifting provision of the Securities Law are to (1)

penalize defendants for illegal acts, and (2) remove the expense of legal representation as an

obstacle to plaintiffs bringing suit”); Condux v. Neldon, 83 Ill. App. 3d 575, 577 (1980) (the

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Illinois Securities Law rescission provision “is a penalty, designed to compel promoters to

register their stock”); and Bain v. Financial Security Life Insurance Co., 53 Ill. App. 3d 702,

708 (1977) (“securities laws *** provide both criminal and civil penalties for violations

thereof” and “provide for sanctions against those violating such laws”).

¶ 45 The cases cited by defendants do not support the contention that section 13(A) interest,

fees and costs constitute punitive damages. Although statements were made by the court in

those cases about sanctions or penalties under the securities laws, defendants take those

statements out of context, and none of those cases held that section 13(A) interest, attorney

fees and costs constituted punitive damages.

¶ 46 We find that the 10% interest, attorney fees and costs awarded under section 13(A) of the

Illinois Securities Law do not constitute barred punitive damages under section 2-1115 of the

Code. Section 13(A) interest, fees and costs are not imposed as a predetermined amount

without regard to the actual damages suffered bythe plaintiff. Rather, 13(A) interest, fees and

costs are all components of the remedial damages that aremandated by statute to compensate

the plaintiff who has proven that actual damage resulted from the defendant’s violation of

the Illinois Securities Law. See Standard Mutual Insurance Co. v. Lay, 2013 IL 114617,

¶¶ 31-33 (the statutory damages of $500 per violation under the Telephone Consumer

Protection Act of 1991 (47 U.S.C. § 227(b)(3) (2006))were not punitive damages but, rather,

compensated consumers for a harm suffered and provided an incentive for private parties to

enforce the statute). Moreover, there is no provision in the Illinois Securities Law for the

recovery of punitive damages. See Peterson v. Baloun, 715 F. Supp. 212, 216 (N.D. Ill.

1989) (the court struck a punitive damage claim under the Illinois Securities Law because

it does not provide a remedy of punitive damages); Anvil Investment Limited Partnership v.

Thornhill Condominiums, Ltd., 85 Ill. App. 3d 1108, 1119 (1980) (a punitive damage award

for willful acts of abuse was a court-created remedy and was separate from and in addition

to the 10% interest and attorney fees mandated by section 13(A) of the Illinois Securities

Law).

¶ 47 Defendants also cite Tri-G, Inc., 222 Ill. 2d 218, to support the proposition that section

13(A) interest, attorney fees and costs cannot be imposed on negligent lawyers, but

defendants’ reliance on that case is misplaced. Tri-G, the plaintiff client, sued a law firm for

failing to prosecute Tri-G’s previously filed complaint against a bank. Id. at 225. Tri-G’s

“case within a case” against the bank involved certain construction loans the bank had made

to Tri-G, and Tri-G alleged breach of contract, common law fraud, and violation of the

Consumer Fraud Act against the bank. Id. at 226. Tri-G’s complaint against the bank was

dismissed with prejudice after Tri-G’s counsel was not prepared to proceed when the case

was called for trial. Id. at 227. Tri-G then sued its counsel for negligence, and a trial on the

merits was held. The jury found that, but for counsel’s negligent handling of Tri-G’s case

against the bank, Tri-G would have recovered $1,168,775 in compensatory damages and an

equal sum in punitive damages from the bank. Id. at 225. Accordingly, the circuit court

entered judgment on the jury’s verdict in favor of Tri-G and against the law firm for

$2,337,550. Id.

¶ 48 On appeal, a majority of our supreme court held, inter alia, that lost punitive damages

were not recoverable in a subsequent legal malpractice action. Id. at 267. The majority stated

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that the jury had already awarded full compensation to Tri-G for all the damages it actually

sustained and an award of punitive damages against the law firm would not advance the

policy behind the concept of punitive damages to punish the willful and wanton misconduct

of offenders like the bank and deter them from committing similar acts of wrongdoing in the

future. Id. The majority concluded that because section 2-1115 of the Code decrees that

lawyers cannot be compelled to pay punitive damages based on their own misconduct, “it

would be completely nonsensical to hold that they can nevertheless be compelled to pay

punitive damages attributable to the misconduct of others.” Id. at 267-68. The dissent viewed

Tri-G’s lost punitive damages in the underlying case as an element of compensatory damages

in the malpractice action and argued that such compensatory damages were not prohibited

by section 2-1115. Id. at 269-70 (Freeman, J., concurring in part and dissenting in part,

joined by McMorrow and Fitzgerald, JJ.).

¶ 49 The holding in Tri-G concerning lost punitive damages is not applicable in the instant

case. In Tri-G, the court reversed only the portion of the jury award for the lost punitive

damages Tri-G would have recovered against the bank in the underlying case. In doing so,

the court noted that the jury had already fully compensated Tri-G for all the damages it

actually had sustained. Here, in contrast, plaintiffs’ legal malpractice award against

defendants is remedial statutory compensation for plaintiffs’ lost Illinois Securities Law

claim. Absent the section 13(A) interest, attorney fees and costs, plaintiffs would not be fully

compensated for all their damages under the Illinois Securities Law. Moreover, unlike

punitive damages, section 13(A) relief is calculated by the court according to an objective,

precise mathematical formula. The 10% interest, attorney fees and costs are all components

of the statutorily mandated relief to which plaintiffs would have been entitled under the

Illinois Securities Law if defendants’ negligence had not caused their claim to have been time

barred. Consequently, the uncertainties and difficulties of proof that apply to true punitive

damage awards do not apply to section 13(A) damage awards. The section 13(A) relief can

in no way be deemed punitive damages as barred by Tri-G and section 2-1115 of the Code.

¶ 50 Similarly, defendants’ reliance on Tri-G’s holding rejecting Tri-G’s claims for

prejudgment interest is also misplaced. Specifically, Tri-G sought damages equal to the

amount of postjudgment interest on the hypothetical judgment Tri-G would have received

against the bank in the underlying case but for the law firm’s negligence. Id. at 256. The

court rejected this claim because the:

“ ‘recovery of interest in this State, not contracted for, finds its only authority in the

statute. It is purely statutory.’ ” Id. (quoting Blakeslee’s Storage Warehouses, Inc. v. City

of Chicago, 369 Ill. 480, 483 (1938)).

Unlike the situation in Tri-G, here, section 13(A) explicitly requires that a stock purchaser

entitled to rescission is also entitled to recover 10% interest on the purchase price from the

date of the purchase. That 10% interest is a component of the statutorily mandated remedial

relief to which plaintiffs would have been entitled under the Illinois Securities Law if

defendants’ negligence had not caused plaintiffs’ Illinois Securities Law claim to be time

barred.

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¶ 51 C. Attorney Fees, Costs and Expenses

¶ 52 The Illinois Securities Law provides, “[i]f the purchaser shall prevail in any action

brought to enforce any of the remedies provided in this subsection, the court shall assess

costs together with reasonable fees and expenses of the purchaser’s attorney against the

defendant.” 815 ILCS 5/13(A) (West 2010). Plaintiffs asked the trial court to award them

$5,272,282.60 in attorney fees, and $556,811.64 in costs and expenses for proving their

Illinois Securities Law “case within a case”; they did not ask for any fees, costs and expenses

incurred in proving the malpractice portion of their case. The trial court, however, awarded

plaintiffs $1,636,700.80 in attorney fees and $207,167.28 in costs and expenses. On appeal,

plaintiffs argue that the award of fees, costs, and expenses was not reasonable.

¶ 53 “The touchstone in an award of attorney fees is reasonableness ***.” Jacobs, 215 Ill.

App. 3d at 506. In determining the reasonable value of attorney fees, the court should

consider the skill and standing of the attorney; the nature of the cause and the novelty and

difficulty of the questions at issue; the amount and importance of the subject matter; the

degree of responsibility involved in management of the cause; the time and labor required;

the usual customary charges in the community; the benefits resulting to the client; and the

reasonable connection between the fees sought and the amount involved in the litigation. Id.

at 505; J.B. Esker & Sons, Inc. v. Cle-Pa’s Partnership, 325 Ill. App. 3d 276, 283 (2001).

The party seeking such fees should provide documentation in a form sufficient in detail to

help the court in assessing reasonableness. McNiff v. Mazda Motor of America, Inc., 384 Ill.

App. 3d 401, 404 (2008). Sufficient detail includes detailed time records and descriptions

of the work performed. Losurdo Brothers v. Arkin Distribution Co., 125 Ill. App. 3d 267,

275 (1984). This court reviews a circuit court’s award of attorney fees and costs for an abuse

of discretion. Sampson v. Miglin, 279 Ill. App. 3d 270, 281 (1996).

¶ 54 The trial court awarded plaintiffs $1,636,700.80 in attorney fees, which was calculated

by applying a 40% contingent fee to an Illinois Securities Law damage award of

$4,091,752.19. On appeal, plaintiffs do not contest the application of the 40% contingent fee

so long as it is applied to a statutorily correct calculation of plaintiffs’ Illinois Securities Law

damages. Although we agree with plaintiffs that the trial court used an incorrect damage

calculation formula (see supra ¶¶ 26-30), and we have remanded this cause for the trial court

to correct that calculation, we will not hold that plaintiffs are automatically entitled to an

attorney fee of 40% of the recalculated damage award.

¶ 55 Contingency fee agreements can be a relevant factor in determining the reasonableness

of attorney fees. McNiff, 384 Ill. App. 3d at 406. Trial courts, however, may base fee awards

on either the lodestar analysis or percentage method. See Ryan v. City of Chicago, 274 Ill.

App. 3d 913, 924 (1995). A percentage method may be appropriate where the litigation

lasted for many years and the allocation of myriad time entries to specific matters or issues

is very difficult. Id. Alternatively, a lodestar approach shifts the emphasis from a fair

percentage of recovery to the value of the time expended by counsel. Id. at 922.

¶ 56 Here, the trial court based the fee award “upon the issues raised on the billing statements,

the necessity of the work and the possible overlapping of hours spent in other causes of

action.” Moreover, the trial court noted that it was difficult, in reviewing the attorneys’ time

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sheets, “to separate the time allotted to the malpractice claim and the [Illinois Securities Law]

claim.” We will not assume that the trial court, which considered the connection between the

fees sought and the amount of the award, would have awarded plaintiffs a 40% contingent

fee of a much larger Illinois Securities Law damage award based on plaintiffs’ purchase

price, plus 10% interest, less the $3.2 million settlement. Accordingly, we reverse the

$1,636,700.80 attorney fee award and remand this matter to the trial court to determine

reasonable attorney fees based on the correct amount of plaintiffs’ Illinois Securities Law

damages.

¶ 57 Finally, plaintiffs argue that the trial court abused its discretion by rejecting the entirety

of plaintiffs’ submission of approximately$350,000 of costs incurred bythe Plotkin law firm

between 1992 and 2000. According to the record, the trial court awarded $207,167.28 for

costs incurred by the Law Offices of Edward T. Joyce & Associates, P.C., in connection with

the prosecution of the Illinois Securities Law portion of the legal malpractice litigation from

June 2008 through July 2010. The trial court stated that it could “understand both by the

affidavit and the description of the charges that each charge is either a ‘cost’ or an ‘expense’

under the statute.” The trial court, however, denied the costs and expenses submitted by the

Plotkin law firm because it was “impossible for [the court] to determine the specific nature

of the costs and whether the costs specifically pertained to this case.” We find no abuse of

discretion by the trial court, which was careful to limit the award to the costs and expenses

that pertained only to the underlying Illinois Securities Law claim within the malpractice

case, and not the non-Illinois Securities Law claims against the Shearson defendants in the

Steinberg case.

¶ 58 D. The Illinois Securities Law Claim and Reasonable Reliance

¶ 59 Defendants argue that plaintiffs failed to prove their underlying Illinois Securities Law

claim because Mr. Goldfine’s reliance on his broker’s representations concerning the stock

purchases was not reasonable.

¶ 60 A dispute concerning the issue of whether a plaintiff’s reliance was reasonable presents

a question of fact. See Central States Joint Board v. Continental Assurance Co., 117 Ill. App.

3d 600, 607 (1983). A court of review will reverse the judgment of a trial court, which was

in a superior position to evaluate the credibility of the witnesses and the weight of their

testimony, onlywhere the findings are against the manifest weight of the evidence. Id. at 604.

After reviewing the record in this case and the applicable law, we conclude that the trial

court’s findings were not against the manifest weight of the evidence.

¶ 61 Defendants contend the trial court failed to evaluate each of plaintiffs’ purchases

separately. According to defendants, such an evaluation would have shown that plaintiffs’

loss resulted from Mr. Goldfine’s unreasonably risky decisions to purchase $2.1 million of

FCH stock in February and August of 1990 without seeking any additional information on

FCH or learning anything about FCH’s business or the insurance industry, and despite the

substantial public information about FCH’s large junk bond holdings, precarious financial

condition, and negative net worth at that time.

¶ 62 Specifically, defendants argue that by 1990, Mr. Goldfine had access to abundant public

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information about problems at FCH, including a March 12, 1990 Wall Street Journal article

reporting that FCH’s bond portfolio was $400 million “underwater.” Defendants argue that

Mr. Goldfine was a sophisticated investor who had lost money in junk bond investments

before, and a “person may not enter into a transaction with his eyes closed to available

information and then charge that he has been deceived by another.” Id. at 606. Defendants

state that the nondiscretionary account Mr. Goldfine had with Shearson meant that Shearson

broker Steinberg did not have a fiduciaryrelationship with Mr. Goldfine.Defendants add that

plaintiffs’ friendship with Steinberg did not make Mr. Goldfine’s reliance on Steinberg’s

representations reasonable.

¶ 63 According to the record, plaintiffs’ evidence showed that they had been personal friends

with Steinberg and his family for more than 25 years. Overthe years, they had attended many

social and religious functions together, including the confirmations or weddings of their

children. Mr. Goldfine was a workers’ compensation attorney, and he never practiced

securities law. Due to their long-standing relationship and Steinberg’s prominent position

with Shearson, plaintiffs placed great trust and confidence in his securitiesrecommendations.

Mr. Goldfine never purchased a security Steinberg did not recommend or endorse. Steinberg

purchased FCH for himself in July 1987. When Goldfine, in October 1987, asked Steinberg

to recommend a high quality stock, Steinberg recommended FCH and said he knew all about

the company, which had tremendous growth potential. Steinberg also said that Shearson was

interested in FCH, had authorized its brokers to sell FCH products, and Shearson would not

have allowed its brokers to sell FCH policies and annuities without checking FCH out

thoroughly. Steinberg did not mention, and Mr. Goldfine was unaware of, a negative June

1987 Barron’s article about FCH. As a result of Steinberg’s recommendation, Mr. Goldfine

made his first purchase of FCH stock. Thereafter, Mr. Goldfine received FCH’s 1987 annual

report, which touted FCH’s remarkable growth, and Steinberg discussed the report with Mr.

Goldfine and told him the report was terrific.

¶ 64 In 1987, E.F. Hutton had sold Hutton Life, an insurance subsidiary, to FCH and had

entered into an agreement that required Hutton’s stockbrokers and insurance sales personnel

to continue selling Hutton Life products to its clients. In November 1987, Hutton expressed

an interest in being acquired by Shearson, so Shearson sent a team of employees and

attorneys to conduct a comprehensive due diligence examination of Hutton. Shearson also

sent Sam Weinhoff, its senior executive and a managing director with insurance expertise,

to examine Hutton’s insurance investments and to determine the degree of risk in FCH’s

investment portfolios. Weinhoff found that Hutton owned $30 million of FCH’s preferred

stock, but it was worth only 50% of its carrying value. This raised solvency questions. In

addition, Weinhoff found that FCH was insolvent, with a negative tangible economic net

worth of $97.3 million.

¶ 65 In December 1987, Shearson received from Perry Burns, its executive vice president,

another report that looked at 43 contemporaneous FCH bond purchases, described the great

danger associated with the FCH investment portfolio, called FCH’s bond portfolio “scary!”

and identified problems that might arise after Shearson owned Hutton. Further, in a

December 1987 memo, Weinhoff informed Shearson that FCH had a negative tangible net

worth of $227.3 million. Thereafter, a memo from Burns indicated that FCH’s bond

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portfolios were difficult to analyze because FCH’s records were “shoddy and inaccurate.”

¶ 66 Shearson acquired Hutton in January 1988 for $800 million to $900 million and thereby

inherited the agreement obligating Shearson to sell to its clients the products of FCH’s

insurance subsidiaries. Shearson considered disavowing that agreement, but FCH threatened

to sue, so Shearson permitted the Hutton brokers to continue selling and Shearson brokers

to start selling FCH’s insurance products and annuities. Shearson brokers like Steinberg

viewed this as an endorsement of FCH.

¶ 67 From late 1987 through FCH’s demise in May 1991, Shearson knew about FCH’s

disastrous financial condition but concealed that information from its own brokers, like

Steinberg. Shearson steadily, continuouslyand vigorously told its own brokers that FCH was

financially solid and there were no risks. If the truth about FCH had been revealed, customers

would have redeemed their FCH insurance products for cash and there would have been a

classic “run on the bank.” Then FCH, which did not have the money to redeem those

products, would have collapsed, and Shearson’s existence would have been threatened.

Consequently, in May 1988, Shearson decided to purchase control of FCH to avert its

bankruptcy and a “run on the bank.” Shearson knew and intended that its acquisition of FCH

would convey the false impression to Shearson’s brokers, life specialists, FCH shareholders

and others that Shearson, after due diligence, had concluded that FCH was a financially

sound company and a good investment.

¶ 68 Steinberg read the May 4, 1988 press releases to Mr. Goldfine, emphasized Shearson’s

endorsement of FCH based on Shearson’s actions, and stated that the price of FCH

represented a bargain. As a result, on May 11, 1988, plaintiffs purchased additional shares

of FCH stock. Over the next few weeks, Steinberg continued to recommend FCH to Mr.

Goldfine and informed him that former Hutton brokers had discussed FCH’s products and

profitability with Steinberg. As a result, plaintiffs bought additional FCH shares again in

May 1988.

¶ 69 In August 1988, Shearson and FCH concluded the acquisition agreement announced in

May, and press releases touted the benefits of combining FCH’s product innovation with

Shearson’s distribution network and financial strength. Steinberg conveyed that information

to Mr. Goldfine. In November 1988, Shearson had purchased 44% of FCH’s stock and

appointed four directors to FCH’s new six-member board. Thereafter, Shearson, through

presentations, meetings, press releases and other documents, touted its relationship with FCH

and encouraged its brokers and life specialists to sell FCH’s insurance products and not

redeem existing products. The 1988 annual report of FCH reported record-setting growth and

reinforced the image that FCH was a safer, more secure company. Shearson, however, knew

in late December 1989 that FCH’s month-end portfolio showed that its high-yield bonds

were $181.4 million underwater.

¶ 70 Steinberg attended regular meetings with other Shearson branch managers and senior

executives and received glowing reports about FCH. When Steinberg returned from a New

York meeting in late 1989, he was “pumped up” and told Mr. Goldfine about his discussions

with the Shearson executives running FCH and its profitability. Based on Steinberg’s

recommendation, plaintiffs bought more FCH shares in December 1989. In mid-January

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1990, Shearson, through Steinberg, recommended that Mr. Goldfine buy more FCH stock

and represented that FCH would have record sales and earnings. Steinberg touted FCH’s

book value and stated that American Express Company would buy FCH because it was

making so much money. Relying on that information, plaintiffs bought additional FCH stock

in January 1990.

¶ 71 On January 22, 1990, the stock of First Executive Life Insurance Company (First

Executive), a large and well known company, dropped significantly. FCH’s stock dropped

at the same time, and the New York Stock Exchange asked FCH to comment about the price

of its stock. In a press release, FCH attributed the current weakness only to announcements

by other financial institutions concerning their portfolios. FCH falsely touted its own credit

analysis of its bonds and falsely claimed that its high-yield performance was better than the

general market. FCH described its investment philosophy in reassuring terms and stated that

it soon expected explosive record earnings. Steinberg read the press release to Mr. Goldfine

and explained that FCH’s stock price had dropped because the market had confused FCH

with First Executive, which had a horrendous bond portfolio and a huge mortgage portfolio

with significant defaults. Steinberg said that FCH’s stock was a bargain. Based on that

information and Steinberg’s recommendation, plaintiffs bought additional shares of FCH

stock.

¶ 72 The negative news articles about First Executive’s junk bond portfolio drew attention to

FCH’s junk bond portfolio, and Shearson financial consultants were starting to ask questions

about FCH’s financial position and portfolio composition. Shearson sought to remove any

anxiety among the financial consultants, noting that business was down in the aftermath of

the First Executive news and redemptions were starting to increase. Consequently, Shearson

executives reinforced the message that FCH was not like First Executive and was not

experiencing similar problems. Shearson concealed from Steinbergand othersales personnel

the negative and worsening information about FCH and the continuing deterioration in the

quality of its bond portfolio.

¶ 73 In February 1990, Steinberg read to Mr. Goldfine a press release announcing FCH’s

record net income for 1989 and explained that FCH’s low stock price reflected the market’s

continued confusion of FCH with First Executive. Steinberg recommended that Mr.Goldfine

purchase more FCH shares, explaining that Shearson executives had told Steinberg that FCH

was in terrific shape and was being marketed as an American Express Company. Steinberg

told Goldfine that Shearson’s brokers had sold about $3 billion in FCH annuities and

Steinberg believed nothing could happen to FCH because the brokers would leave Shearson

if it did. Based on that information and Steinberg’s recommendations, plaintiffs bought more

FCH shares. Steinberg did not know that Shearson had determined that the portfolios of

FCH’s insurance subsidiaries were more than $320 million underwater as of January 31,

1990.

¶ 74 In August 1990, the stock market generallyplummeted, but FCH’s pressrelease indicated

that its revenue and book value had increased although its earnings had gone down

somewhat. Steinberg and Mr. Goldfine viewed the market drop as a buying opportunity.

Based on Steinberg’s representations that FCH was a Shearson/American Express Company

and the purchase of FCH stock was a bargain, plaintiffs bought additional FCH stock.

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Steinberg even bought additional stock for himself in October 1990. Shearson continued to

respond to negative news by playing up the relationship between FCH and

Shearson/American Express Company to its sales personnel and emphasized that there was

nothing wrongwith FCH. FCH’s 1990 annual report, which plaintiffs received in April 1991,

concealed its problems from the shareholders and depicted FCH very positively, showing

shareholders’ equity approaching $400 million. Mr. Goldfine, still believing everything was

fine at FCH, wrote FCH on April 26, 1991, and expressed his displeasure about not receiving

any response about becoming an FCH board member.

¶ 75 When a state insurance commissioner asked American Express Company to contribute

$50 million to bolster FCH’s capital position, American Express Company declined. FCH’s

bank lenders filed an involuntary bankruptcy petition on May 10, 1991. On May 16, 1991,

Mr. Goldfine wrote a letter to Steinberg threatening litigation and stating that he wanted the

return of the money he had paid for FCH stock.

¶ 76 Based upon the evidence presented at trial, we cannot conclude that the trial court’s

determination–that Mr. Goldfine reasonably relied on Steinberg’s recommendations to buy

FCH stock–was against the manifest weight of the evidence. A judgment is not against the

manifest weight of the evidence unless the opposite conclusion is clearly evident. Snelson

v. Kamm, 204 Ill. 2d 1, 35 (2003). Plaintiffs’ evidence showed that, from Mr. Goldfine’s

FCH stock purchases in 1988 through 1990, Shearson continued to conceal material

information about FCH’s poor financial condition and disseminated very positive but false

information about FCH whenever any negative information about FCH appeared in the

media. Plaintiffs’ expert James Feltman of Mesirow Financial Consulting testified that

Shearson and its operating officers had knowledge of the significant and material differences

between the information they publicly disclosed about FCH and their actual knowledge of

FCH’s financial condition. Feltman explained that no publicly available documents would

have permitted an individual shareholder to conclude that FCH was insolvent prior to May

1991. Even people who were closely involved with FCH, securities and insurance–and were

far more sophisticated investors than Mr. Goldfine–had accepted and relied on the

misinformation disseminated by Shearson. Specifically, plaintiffs presented the testimony

of a Shearson stockbroker, a Shearson life specialist, and a managing general agent and sales

producer for FCH’s insurance products.

¶ 77 Contrary to defendants’ assertions on appeal, the trial court did not conclude that Mr.

Goldfine’s reliance on the information he received from Steinbergwas reasonable simplydue

to their friendship. Mr. Goldfine purchased only stock that Steinberg recommended or

endorsed, and Steinberg had a long and proven track record of providing plaintiffs with

reliable and sound trading advice. Although their relationship played a role in Mr. Goldfine’s

confidence in Steinberg’s recommendations, Mr. Goldfine knew that Steinberg had

purchased FCH stock for himself and was receiving positive reports about FCH’s condition

directly from the Shearson executives who were on the board of FCH and running it.

¶ 78 In addition, plaintiffs presented extensive evidence that Shearson countered any negative

information that surfaced concerning FCH’s financial condition by withholding material

information from its brokers and investors, providing glowing reports about FCH, and taking

actions that indicated Shearson had confidence in FCH. That pattern of concealment and

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dissemination of half-truths continued over a three-year period and included the time of

plaintiffs’ last FCH stock purchases in February and August of 1990. Shearson’s

concealment and misrepresentations had convinced even Steinberg that FCH stock was a

good investment, and he bought FCH stock for himself as late as October 1990. The

numerous communications between Steinberg and Mr. Goldfine in the context of the

information Shearson disseminated and the information it concealed support the trial court’s

determination that Mr.Goldfine’s reliance on Steinberg’s recommendations to purchaseFCH

stock in 1988, 1989 and 1990 was reasonable.

¶ 79 Moreover, the trial court stated that it “thoroughly considered all of the evidence”

presented at trial, and the record shows that the trial court received evidence relating to each

individual stock purchase before the court concluded that, although plaintiffs did not meet

their burden of proof concerning their first 1987 FCH stock purchase, they did prove their

Illinois Securities Law claim concerning their 11 subsequent FCH stock purchases in 1988,

1989 and 1990.

¶ 80 E. Legal Malpractice and Proximate Cause

¶ 81 Defendants argue plaintiffs failed to prove that defendants’ legal malpractice proximately

caused plaintiffs’loss. Specifically, defendants argue plaintiffs failed to present anyevidence

showing that, absent defendants’ malpractice, plaintiffs, if they still had their Illinois

Securities Law claim, would have either received a larger settlement or foregone settlement,

tried their case and won greater damages. Defendants contend plaintiffs were required to

establish that they would have risked all their non-Illinois Securities Law claims valued at

$16 million to $19 million and rejected the $3.2 million settlement for a trial on the Illinois

Securities Law issues in the Steinberg case. Defendants complain that Mr. Goldfine never

testified that, with a viable Illinois Securities Law claim, he would have rejected the $3.2

million settlement and risked going to trial.

¶ 82 “To prevail on a legal malpractice claim, the plaintiff client must plead and prove that

the defendant attorneys owed the client a duty of due care arising from the attorney-client

relationship, that the defendants breached that duty, and that as a proximate result, the client

suffered injury.” Tri-G, Inc., 222 Ill. 2d at 225-26. The injury in a legal malpractice action

is a pecuniary injury to an intangible property interest caused by the lawyer’s negligent act

or omission. Id. at 226.

“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.” Id.

A settlement by successor counsel does not necessarily bar a malpractice action against prior

counsel. McCarthy v. Pedersen & Houpt, 250 Ill. App. 3d 166, 172 (1993). An attorney

malpractice action should be allowed where the plaintiff can show that he settled for a lesser

amount than he could reasonably expect absent the malpractice. Webb v. Damisch, 362 Ill.

App. 3d 1032, 1042 (2005). See also Brooks v. Brennan, 255 Ill. App. 3d 260, 268 (1994)

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(summary judgment awarded to the defendant where the plaintiff failed to show that she

either would have settled the case for a greater amount or received greater damages from a

judge or jury). Proximate causation in a legal malpractice case is generally a factual issue to

be decided by the trier of fact. First National Bank of LaGrange v. Lowrey, 375 Ill. App. 3d

181, 202 (2007) (noting that issues that could cause reasonable persons to reach different

results should never be determined as questions of law).

¶ 83 Plaintiffs respond that there is no evidence in the record to support defendants’

assumption that the non-Illinois Securities Law claims were worth $16 million to $19

million. According to the record, plaintiffs’ expert Moirano testified that the Illinois

Securities Law claim had greater, not lesser, value than plaintiffs’ non-Illinois SecuritiesLaw

claims because the Illinois Securities Law claim did not require proof of either loss causation

or the defendants’ intent to mislead and the statutory damages under section 13(A) mandated

the return of the purchase price, plus 10% interest and attorney fees, costs and expenses. The

record also refutes defendants’ assertion that plaintiffs sought only the loss of settlement

value. According to the record, plaintiffs clearly alleged in their fifth amended complaint

three distinct and alternative elements of loss–their lost Illinois Securities Law claim, the

severely reduced settlement value of the Steinberg case, and additional monetary damages.

Moreover, that complaint expressly stated that plaintiffs sought to recover the entire value

of the damages they would have recovered by winning their Illinois Securities Law claim.

Plaintiffs did not try their case on the theory that they would have achieved a higher

settlement in the Steinberg case if their Illinois Securities Law claim had not been barred.

¶ 84 We find that plaintiffs proved defendants’ negligence proximately caused plaintiffs’

damages. Plaintiffs did file their Illinois Securities Law claim, and it was dismissed as time

barred because no timely six-month rescission notice had been served. Plaintiffs appealed

that dismissal, but the dismissal was affirmed bythis court. A legal malpractice plaintiff must

“recreate and litigate the action which was never filed” (Nika v. Danz, 199 Ill. App. 3d 296,

308 (1990)), and plaintiffs met that requirement. Plaintiffs also established that the damages

they were entitled to receive under the Illinois Securities Law were greater than the $3.2

million settlement they received in 2007 when they settled the non-Illinois Securities Law

claims against the Shearson defendants.

¶ 85 Defendants also argue that plaintiffs’ release of the Shearson defendants bars plaintiffs’

further recovery here. According to defendants, the $3.2 million Steinberg settlement

constituted full and complete satisfaction of all injuries plaintiffs sustained by investing in

FCH stock, and they may not receive two recoveries. We disagree. A release will not be

construed to include claims not within the contemplation of the parties. Thornwood, Inc. v.

Jenner &Block, 344 Ill. App. 3d 15, 21 (2003). As discussed above (supra ¶ 31), the release

here expressly provided that it did not affect plaintiffs’ legal malpractice claim. Moreover,

when the parties entered that settlement agreement in 2007, plaintiffs’ Illinois Securities Law

claim had already been dismissed as time barred and that dismissal had been affirmed on

appeal. In addition, there is no double recovery here because the $3.2 million settlement is

deducted from plaintiffs’ section 13(A) damages.

¶ 86 Finally, defendants argue that plaintiffs proximately caused their losses by failing, after

defendants stopped representing them, to plead the Illinois Securities Law’s six-month notice

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requirement with sufficient particularity to withstand the Shearson defendants’ motion to

dismiss. According to defendants, plaintiffs could have preserved their Illinois Securities

Law claim by alleging in the Steinberg case that they did not learn they had an Illinois

Securities Law claim until they retained their successor counsel in October 1992 and the

Illinois Securities Law’s rescission notice was served within six months of that date.

¶ 87 Defendants’ argument lacks merit. On May 16, 1991, Mr. Goldfine wrote Shearson and

demanded a return of the complete purchase price for all of his FCH stock. That letter

indicated that Mr. Goldfine was aware of his right to rescission, but defendants, who were

retained byplaintiffs in 1991, neverserved the rescission notice within the six-month period.

Plaintiffs retained successor counsel on October 31, 1992, and Mr. Goldfine told successor

counsel that he had never heard of an Illinois Securities Law claim. In 1993, successor

counsel pleaded that the six-month notice period did not start to run until October 1992,

when plaintiffs learned of their Illinois Securities Law claim from successor counsel.

However, the Shearson defendants submitted the May 16, 1991 letter to the trial court in the

Steinberg case, and, on the basis of that letter, plaintiffs’ Illinois Securities Law claim was

dismissed as untimely.

¶ 88 Furthermore, according to the testimony of defendant Ray Rezner, plaintiffs’ former

counsel, when Rezner met with Mr. Goldfine on August 9, 1991, Rezner informed him that

he had a claim under the Illinois Securities Law but advised him not to pursue it or serve the

required notice of rescission. Rezner also testified that he met with plaintiffs’ successor

counsel in October 1994 and told them he had advised plaintiffs in August 1991 of their

Illinois Securities Law claim but urged them not to file the rescission notice.

¶ 89 Based on defendant Rezner’s sworn testimony that he advised plaintiffs no later than

August 9, 1991 of their rights under the Illinois Securities Law, plaintiffs’ Illinois Securities

Law claim was barred before they retained their successor counsel. The record establishes

that successor counsel could not have filed any meritorious pleading that would have

prevented the dismissal of plaintiffs’ Illinois Securities Law claim for failure to serve a

timely six-month notice.

¶ 90 III. CONCLUSION

¶ 91 Plaintiffs have made a request to this court for the award of additional attorney fees and

costs incident to defending this appeal as authorized by section 13(A) of the Illinois

Securities Law (815 ILCS 5/13(A) (West 2010)). We believe plaintiffs are entitled to such

fees and costs and the amounts thereof should be determined by the trial court upon petition

and hearing. Yohnka v. Darling Nells, Inc., 136 Ill. App. 3d 309, 313 (1985).

¶ 92 For the foregoing reasons, we affirm the circuit court’s findings that plaintiffs proved

their underlying Illinois Securities Law claim and legal malpractice action. We also affirm

the circuit court’s award of plaintiffs’ costs and expenses. However, we find that the circuit

court failed to apply the correct mathematical formula to calculate plaintiffs’ mandatory

statutory award for damages under the Illinois Securities Law. In addition, the circuit court’s

attorney fees award was based on a percentage of that incorrect damage calculation.

Accordingly, we reverse the circuit court’s award of damages and attorney fees and remand

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this matter to the circuit court to calculate plaintiffs’ statutory damages consistent with this

order, to determine a reasonable amount of attorney fees based on the correct damages, and

to award attorney fees and costs incident to the appeal.

¶ 93 Affirmed in part and reversed in part; cause remanded with directions.

¶ 94 JUSTICE GORDON, concurring in part and dissenting in part.

¶ 95 I agree to the disposition of this case except as to the majority’s calculation of interest,

to which I respectfully dissent because the plain and clear language of section 13(A) of the

Illinois Securities Law of 1953 (the Illinois Securities Law) does not allow interest charged

against that part of a principal the plaintiff has already recovered on. 815 ILCS 5/13(A)

(West 2010). Section 13(A) states that every sale of securities in violation of the Illinois

Securities Law shall be voidable at the election of the purchaser, and the sellers as well as

those who have aided the illegal sale of securities shall be held jointly and severally liable

to the purchaser

“(1) for the full amount paid, together with interest from the date of payment for the

securities sold at the rate of the interest or dividend stipulated in the securities sold ***

less any income or other amounts received by the purchaser on the securities, upon offer

to tender to the seller or tender into court of the securities sold or, where the securities

were not received, of any contract made in respect of the sale; or

(2) if the purchaser no longer owns the securities, for the amounts set forth in clause

(1) of this subsection A less any amounts received by the purchaser for or on account of

the disposition of the securities.” 815 ILCS 5/13(A) (West 2010).

The plain and clear language of section 13(A) only entitles the plaintiff to interest charged

against the principal balance that remains after credits are given for payments made.

¶ 96 Since the majority has extensively related the facts, I will repeat here only those facts

from which our disagreement arises. Between 1987 and 1990, plaintiffs Morton and

Adrienne Goldfine made 12 separate purchases of First Capital Holdings (FCH) stock

through a broker at Shearson Lehman Brothers Holdings, Inc. (Shearson). The purchases

totaled $4,745,254.45. FCH filed for bankruptcy in the spring of 1991, and plaintiffs retained

the law firm of Barack, Ferrazzano, Kirschbaum & Perlman (BFKP) to negotiate a settlement

with Shearson and preserve plaintiffs’ claims in case a settlement failed to materialize. The

Illinois Securities Law required plaintiffs to file a rescission notice within six months of

learning of their right to a statutory remedy. 815 ILCS 5/13(B)(West 2010). However, BFKP

did not file a rescission notice after learning of plaintiffs’ right to the statutory remedy, and

plaintiffs were later time barred from litigating their Illinois Securities Law claims. Goldfine

v. Steinberg, No. 1-00-1004 (2004) (unpublished order under Supreme Court Rule 23).

Plaintiffs then filed this legal malpractice action against BFKP while simultaneously

pursuing other available claims against Shearson. In 2007, plaintiffs settled with Shearson

for $3.2 million.

¶ 97 After plaintiffs’ settlement with Shearson, plaintiffs litigated their legal malpractice

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claims against BFKP in a bench trial. The trial court found that in the underlying claim the

Shearson defendants violated the Illinois Securities Law in the last 11 of the plaintiffs’ 12

FCH stock purchases, and it found that the law firm was negligent in not filing a timely

rescission notice on the legal malpractice claim. The trial court then applied a “proportionate

reduction of $3,200,000.00 (71.00693%)” to each of the 11 purchases to obtain a “net”

purchase price for each transaction which combined for a total of $1,306,602.29. The trial

court lastly calculated an annual interest award of 10% from the date of each sale through

May 24, 2011. The resultant award from the Illinois Securities Law claim equaled

$4,091,752.19, and plaintiffs recovered an additional $1,843,868.08 in attorney fees and

costs for damages.

¶ 98 The majority follows Kugler v. Southmark Realty Partner III, 309 Ill. App. 3d 790, 797-

98 (1999), in holding that the 10% annual interest award must be calculated on the full

amount paid for the securities, before deductions are made for any income or amounts

received by plaintiff. The trial court followed the special concurrence given in Kugler by

Justice Joseph Gordon. Kugler, 309 Ill. App. 3d at 798-99 (Gordon, J., specially concurring).

According to the Kugler special concurrence, the majority’s interpretation of section 13(A)

of the Illinois Securities Law of 1953 does not follow the plain language of the statute

because such an interpretation strains the meaning of the word “interest” while also

conferring a windfall on plaintiffs and leading to an absurd result. Kugler, 309 Ill. App. 3d

at 798-99 (Gordon, J., specially concurring). In other words, the majority gives the plaintiff

a double recovery. Kugler, 309 Ill. App. 3d at 798 (Gordon, J., specially concurring) (“Since

the purchaser has the use of the money received from the resale, any interest received against

that sum would constitute a windfall and an effective double recovery to the purchaser.”).

¶ 99 Section 13(A)(1) provides that defendants are jointly and severally liable for the full

amount paid, along with accrued interest less any income or other amounts that the purchaser

received for the security. 815 ILCS 5/13(A)(1) (West 2010). For purchasers who no longer

own the securities, section 13(A)(2) permits recovery of the amounts set forth in clause (1)

less any amounts received “for or on account of the disposition of the securities.” 815 ILCS

5/13(A)(2) (West 2010). As punishment for an offending party, courts may also grant

plaintiffs recovery of attorney fees. 815 ILCS 5/13(A) (West 2010); see also Foreman v.

Holsman, 10 Ill. 2d 551, 553-54 (1957).

¶ 100 While judicial construction of any statute becomes necessary only when the meaning of

the statute is unclear or ambiguous (Kugler, 309 Ill. App. 3d at 797), a court must not create

rights that do not exist in the statutory language. Gonzalez v. Profile Sanding Equipment,

Inc., 333 Ill. App. 3d 680, 693 (2002) (citing Lemont-Bromberek Combined School District

No. 113(a) v. Walter, 279 Ill. App. 3d 847, 850 (1996)). Also, the court must assume that the

legislature did not intend for the statute’s provision to produce an absurd result or a double

recovery. Stewart v. Industrial Comm’n, 115 Ill. 2d 337, 341 (1987) (citing City of

Springfield v. Board of Election Commissioners, 105 Ill. 2d 336, 341 (1985), and

Fitzsimmons v. Norgle, 104 Ill. 2d 369, 373 (1984)); see also Kugler, 309 Ill. App. 3d at 798

(Gordon, J., specially concurring).

¶ 101 Here, the plain language of the statute does not clearly support the majority’s

interpretation. By its common definition, the word “interest” constitutes the “ ‘price paid for

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borrowing money generally expressed as a percentage of the amount borrowed paid in one

year.’ ” Kugler, 309 Ill. App. 3d at 799 (Gordon, J., specially concurring) (quoting Webster’s

Third New International Dictionary 1178 (1986)). Interest as a general rule serves a

compensatory purpose. See 47 C.J.S. Interest and Usury § 4 (2005); compare Black’s Law

Dictionary 816 (7th ed. 1999) (defining interest as the “compensation fixed by agreement or

allowed by law for the use or detention of money, or for the loss of money by one who is

entitled to its use” (emphasis added)), with Ballentine’s Law Dictionary 648 (3d ed. 1969)

(defining interest as “compensation allowed by law, or fixed by the parties, for the use,

detention, or forbearance of moneyor its equivalent” (emphasis added)). Because the interest

therefore correlates with the principal and serves a compensatory purpose under the common

definition, the interest accrual is generally expected to cease once the principal is recovered.

Kugler, 309 Ill. App. 3d at 799 (Gordon, J., specially concurring). Had the legislature

intended for the interest to continue to accrue even against principal already recovered by the

plaintiff, then it would have explicitly drafted that counterintuitive requirement into the

statute. Justice Joseph Gordon’s special concurrence does not permit the liable defendant to

reap the benefits of obtaining income on the securities gratuitously because the liable

defendant still must pay interest against whatever part of the principal the plaintiff has not

recovered. By allowing for interest to accrue on principal that has already been recovered,

the majority creates for plaintiffs a right that does not exist in the statutory language: namely,

a right to recovery beyond the loss incurred from the transactions and attorney fees.

Furthermore, plaintiffs were free to dispose of the moneys gained from the settlement with

the Shearson defendants as they pleased. The majority’s decision allows plaintiffs to collect

interest on such moneys already in their possession, thereby giving plaintiffs a double

recovery while concurrently permitting them to reap the benefits of such moneys from

investments elsewhere.

¶ 102 The legislature could not have intended for section 13(A)’s prohibition of double

recovery on amounts received from the securities to permit a double recovery on the interest.

To the extent that section 13(A) serves a punitive purpose, it does so by permitting courts to

grant plaintiffs recoveryfor attorneyfees. 815 ILCS 5/13(A) (West 2010); see also Foreman,

10 Ill. 2d at 553-54. Yet construing the same section to permit recovery beyond losses and

litigation expenses would contradict the demonstrably compensatory motivation behind the

legislature’s decision to subtract from a plaintiff purchaser’s recovery any amounts received

on the securities or as a result of their disposition. The majority’s interpretation, which holds

that section 13(A)’s explicit denial of recovery for amounts received nonetheless permits

recovery based on the interest of those same amounts, ultimately rests on the assumption that

the legislature intended to produce the absurd result of a windfall recovery. I cannot concur

with this assumption, and, thus, I must respectfully dissent.

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