vara

r

No. 03 C341 ‘ Page 4

appellant had standing to bring the malpractice claim against appellee.
A bankruptcy court, like any other federal court, lacks constitutional power to rule

absent an actual controversy where the litigants have something at stake. Matter of FedPak

Systems, Inc., 80 F.3d 207, 211 (7% Cir. 1996). Standing consists of three components:
First, the plaintiff must have suffered an injury in fact — an invasion ofa legally-
protected interest which is (a) concrete and particularized, and (b) actual or
imminent, not conjectural or hypothetical. Second, there must be a causal
connection between the injury and the conduct complained of.... Third, it must
be likely ... that the injury will be redressed by a favorable decision.

id, at 212, quoting Lujan y. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

Appellant’s complaint consists of five allegations against appellee. First, it claims that
Rovell committed malpractice in failing to serve all of Taylor’s partners. Second, Adco alleges
that Rovell represented HJV when filing the motion to dismiss Mobil, despite the fact that this
representation was adverse to Adco’s interest. Third, Adco claims that Rovell testified at the
hearing on the dismissal order, again adversely to Adco’s interest. Fourth, appellant claims
that Rovell improperly entered into the settlement on behalf of both HJV and Adco. Finally,
Adco alleges that Rovell failed to deliver proceeds from the settlement to Adco.

It is undisputed that Adco and Rovell created an attorney-client relationship on
February 24, 1988. This relationship saddled Rovell with the responsibility to avoid actual and
potential conflicts of interest. Appellant is correct in asserting that this is a Personal duty,
owed to Adco as the client rather than to the litigation. Moreover, there is no limit as to the
duration of this duty. Appellant spends much of its briefs detailing the duty owed by Rovell

and how his subsequent involvement in the Taylor litigation on behalf of HJV breached this

duty.


No. 03 C341 Page3

to HJV.

After a status conference on March 25, 1992, Stone asked Rovell to drop Mobil as a
defendant as a result of the settlement agreement. Rovell did so, dropping Mobil with respect
to both Adco and HJV. Adco then formally terminated Rovell’s services and his authority to
act on its behalf and filed a motion asking the court to strike Adco as a party to the dismissal
order and farther “requesting Rovell to be required to prove his authority to act on behalf of
the plaintiffs, Adco and HJV,” as is allowed under Oklahoma law. After a hearing, at which
Rovell testified, the court found that the assignment of the claims was valid and that Stone, on
behalf of HJV, had the right to control the litigation. Adco appealed but the order was
affirmed because the appellate court determined that the assignment was valid and that Adco
therefore Jacked standing to complain about decisions relating to the litigation.

Rovell then tried the case against Taylor on behalf of HJV, as the owner of Adco’s
claims. Before the trial he reached a high-low settlement pursuant to which plaintiffs would
receive no less than $200,000 and no more than $850,000, regardless of the verdict. A jury
subsequently returned a verdict of $120 million — $100 million in compensatory damages and
$20 million in punitive damages. Because the actual recovery did not provide a return on the
initial investment, Adco received nothing from the settlement.

DISCUSSION

This court has jurisdiction over this appeal pursuant to 28 U.S.C. § 158(a)(1). Acting
as an appellate court in bankruptcy proceedings, we accept the bankruptcy court’s findings
of fact unless clearly erroneous but review issues of law de novo. Matter of UNR Industries,

Inc., 986 F.2d 207, 208 (7" Cir. 1993). The sole question presented on appeal is whether



No. 03 C 341 Page 5

The issue before us, however, is whether appellant has standing to bring a tort claim
against Rovell, not whether he breached a fiduciary duty owed Adco. Even assuming that
Rovell did so, Adco does not adequately allege any injury related to Rovell’s alleged
misconduct. Appellant’s allegations all involve events in the litigation against Taylor which
occurred after the assignment letter. In reviewing the legal issues of the case, we are not in
a position to question the validity of the assignment. Treating the assignment as valid, Adco
cannot claim any injury that could be remedied by a favorable decision against Rovell. While
it was certainly possible that a breach of duty by Rovell as Adco’s attorney could have caused
an injury to appellant, it could not have done so within the context of the Taylor litigation in
which Adco had no protected interest.

HIV was free to hire Rovell as its attorney, and free to accept the settlement offers from
Mobil and then from Taylor. In fact, HJV could have immediately dropped the lawsuits
against Taylor and Mobil, leaving Adco without a potential remedy against either defendant.
Adco realized this and accepted the risk when assigning its rights to HJV.

CONCLUSION
For the foregoing reasons, the bankruptcy court’s order granting summary judgment

in favor of appellee-debtor is affirmed.

fore B. Mor

JAMES B. MORAN
Senior Judge, U. S. District Court

Me bS_, 2003.

"We note that Adco would have a concrete injury if Rovell had represented both parties while
negotiating the assignment of the litigation interests. As it is, Rovell did not know about the assignment until
four years after the letter from Adco to HJV.



© Misfite Opder Form (06/97)

0 United States District Court, Northern District of Illinois (2)

Nor Magistrate Judge James B. Moran “than Assigned Judge

CASE NUMBER 03 C 341 DATE 5/15/2003

CASE Adco Oil Company vs. Michael J. Rovell

TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: ofthe motion being presented]
Memorandum Opinion and Order

DOCKET ENTRY:
(1) Oo Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motiondue__.
(3) a Answer brief to motion due___. Reply to answer briefdue___.
(4) Oo Ruling/Hearing on setfor_ at
(5) a Status hearing[held/continued to] [set for/re-set for]on___——ssetfor__——saat
(6) a Pretrial conference[held/continued to] [set for/re-set for]on__—_—ssetfor_——ssat_—
(7) Qa Trial[set for/re-set for]on__at
(8) Oo [Bench/Jury trial] [Hearing] held/continued to__—_at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OOFRCP4(m) OLocal Rule 41.1 OFRCP41(aX1) CFRCP4I1(a)(2).

(10) Ml [Otherdocket entry} Enter Memorandum Opinion and Order. The bankruptcy court’s order granting
summary judgment in favor of appellee-debtor is affirmed.

di) @ [For further detail see order attached to the original minute order.]
No notices required, advised in open court,

No notices required, number of notices

‘Notices mailed by judge’s staff.
Notified counsel by telephone.
oY | Docketing to mail notices.

vo | Mail AO 450 form.

na 20

Copy to judge/magistrate judge. SCNETING
courtroom CH to Fi ut 27
WAH deputy’s
initials

U.S. BitatceesORBURT



IN THE UNITED STATES DISTRICT COURT DOCKETED
FOR THE NORTHERN DISTRICT OF ILLINOIS MAY 1-9 a9
EASTERN DIVISION 3
ADCO OIL COMPANY,
Appellant,
vs. No. 03 C341

MICHAEL J. ROVELL,

weve we ew

Appellee.

MEM P. E!

On October 21, 1994, claimant-appellant Adco Oil Company (Adco) brought suit in the
United States District Court, Western District of Oklahoma, against debtor-appellee Michaek
J. Rovell (Rovell), alleging legal malpractice due to a conflict of interest that arose when Rovell
represented Adco and a co-plaintiff. When Rovell sought bankruptcy relief the litigation was
removed to the United States Bankruptcy Court, Northern District of Mlinois, Eastern
Division. On December 11, 1002, the Honorable Robert E. Ginsberg entered a final order
granting summary judgment in favor of appellee Rovell because appellant did not have
standing to bring the malpractice claim. For the following reasons, the order of the
bankruptcy court is affirmed.

BACKGROUND

In 1986, Adco discovered a method for despacing and respacing Oklahoma gas fields,
which could have been worth as much as hundreds of millions of dollars. It hired attorney
Guy Taylor to assist in the initial development of the project, which involved leases overlying

Iand owned by Mobil Oil Company (Mobil). Adco entered into a general partnership



oa

No, 03 C 341 Page2

pursuant to Oklahoma law: the Hugoton Joint-Venture (HJV). The majority partner and
largest financial contributor to HJV was Judson Stone. Pursuant to the partnership
agreement Adco contributed no capital, only its method, but was entitled to 20% of the profits
after the initial return on the investment (approximately $1.1 million). Taylor’s improper
disclosure of confidential information to Mobil resulted in the failure of the joint venture.

On February 24, 1988, Adco hired defendant-appellee Rovell on an hourly basis to
determine whether it had a malpractice claim against Taylor. While Rovell was initially
retained by Adco, he talked to other members of HJV, including Stone, while investigating the
possible lawsuit. On March 16, 1988, unbeknownst to Rovell, Adco sent a letter to HJV
agreeing to assign all rights in the potential lawsuit against Taylor to HJV and allowing Stone
to contro] the litigation in exchange for continuing to receive 20% of all HJV profits.

On June 10, 1988, Rovell filed a state court claim in Oklahoma alleging fraud and
malpractice against Taylor on behalf of Adco and HJV, subsequently adding Mobil as a
defendant. Jenner & Block, Rovell’s law firm, requested further engagement letters from both
Adco and HJV, as parties to the lawsuit.

In 1989, Stone, on behalf of Adco and HJV told Rovell that the plaintiffs could no
longer afford to pay him to represent them. Rovell agreed with Stone to keep his name as
counsel of record so as to avoid demonstrating financial weakness to Mobil.

In March 1992, through other counsel, HJV reached a settlement agreement with Mobil
in the amount of $250,000, which would require HJV to return the leases to Mobil. Stone then
asked Rovell, now with a new law firm, to rejoin the litigation on a contingency basis, and

Rovell agreed. Stone also advised Rovell of Adco’s March 16, 1988, letter assigning the claims