2015 IL App (1st) 131883 

No. 1-13-1883 

 SECOND DIVISION

April 28, 2015 

______________________________________________________________________________ 

IN THE

APPELLATE COURT OF ILLINOIS

FIRST JUDICIAL DISTRICT 

_________________________________________________________________________________

MERITURN PARTNERS, LLC, MERITURN ) Appeal from the Circuit Court 

FUND MANAGEMENT, LLC, MERITURN ) of Cook County. 

FUND, LP, SSI INVESTORS, LLC, and SSI ) 

HOLDCO, INC., ) 

 ) 

Plaintiffs-Appellees and Cross-Appellants, ) 

 ) No. 10 L 3985 

 ) 

BANNER AND WITCOFF, LTD. and JOSEPH ) 

BERGHAMMER, ) 

 ) Honorable William J. Haddad 

 Defendants-Appellants and Cross-Appellees. ) Judge Presiding. 

 

PRESIDING JUSTICE SIMON delivered the judgment of the court, with opinion. 

Justices Neville and Liu concur in the judgment and opinion.

O P I N I O N 

¶ 1 This is a legal malpractice case in which a jury found that the plaintiffs were entitled to a 

judgment of $6 million. Defendants appeal arguing that they should be made to pay less; 

plaintiffs cross-appeal arguing that they are entitled to more. We affirm the judgment entered by 

the trial court. 
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¶ 2 BACKGROUND 

¶ 3 Plaintiff Meriturn Partners, LLC is a private equity company. Meriturn, together with 

other individuals and companies, invests in troubled businesses, attempting to turn them around 

for a profit. Defendant Joseph Berghammer is an attorney who specializes in the area of

intellectual property and is employed by defendant Banner & Witcoff, Ltd., a law firm. 

¶ 4 In 2005, Meriturn began to explore an investment in a company called Sustainable 

Solutions, Inc. Sustainable Solutions was in the business of repurposing industrial waste into 

usable products. Lee Hansen, one of the founders of Meriturn, took the most active role on the 

Meriturn side of the undertaking. After conducting a preliminary investigation into the sensibility 

of the investment, Meriturn and Sustainable Solutions agreed on a "term sheet" that outlined the 

general terms of the proposed transaction. However, a final decision on whether to invest was 

reserved until more thorough due diligence could be conducted. Meriturn retained Jeffrey 

Hechtman, an attorney, to structure and oversee the transaction. Because Sustainable Solutions' 

business relied on a number of proprietary processes that were the subject of patents, Hechtman 

recommended that Meriturn retain counsel that regularly worked on intellectual property matters. 

Hechtman recommended Berghammer of Banner & Witcoff to Lee Hansen and introduced them to 

each other.

¶ 5 After an initial consultation, Berghammer agreed to perform due diligence on certain 

intellectual property issues involved in the proposed transaction. In a letter to Hansen, 

Berghammer memorialized the initiation of the representation and set forth the basic terms of the 

parties' relationship. The letter refers only to the representation of Meriturn Partners, LLC. 

However, Meriturn's typical investment strategy was to arrange and manage a transaction in which 
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some of the money from its fund would be invested along with some of its individual clients' 

money. For this particular transaction, Meriturn Fund was to commit $3 million of its money and 

the other $3 million was to come from an investor group represented by Walter McCormack and 

Cary Steinbeck. The structure of the transaction required the creation and utilization of multiple 

business entities. While due diligence was being performed by Berghammer, there were certain 

instances in which Berghammer communicated with the representatives of the investor group, 

such as on conference calls and via email. The parties dispute whether Berghammer was fully 

aware of the structure of the transaction and of the role played by the outside investor group. The 

main issue in this appeal is whether Berghammer and Banner & Witcoff represented only Meriturn 

in its portion of the investment or if they also represented the outside investor group. 

¶ 6 Banner & Witcoff undertook the patent review and the research into the patents was 

principally assigned to Paul Rivard, a partner at Banner & Witcoff. This transaction was Rivard's 

first or second patent due diligence project. Eventually, Banner & Witcoff communicated to 

Meriturn that all of the patents at issue in the transaction were owned and controlled by Sustainable 

Solutions. Relying on this advice, Meriturn went forward with the investment. A new business 

entity was formed that encapsulated Meriturn's takeover of the previous iteration of Sustainable 

Solutions. 

¶ 7 Lee Hansen became chairman of the board of the new iteration of Sustainable Solutions. 

Soon after the transaction was completed, it was learned that Joy Nunn, the owner of the prior 

iteration of Sustainable Solutions and the president of the new company, was engaged in 

double-dealing and other misdeeds. It was also soon learned that one of the patents, the '179 

patent, was owned by Nunn's in-laws and not Sustainable Solutions, and that Banner & Witcoff's 
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legal advice was, therefore, erroneous. The company quickly faltered and lost a potential 

business opportunity with a company called SEM. Sustainable Solutions' proposed venture with 

SEM would have purportedly included a $23 million investment by SEM resulting in multimillion 

dollar internally-projected royalties each year for Sustainable Solutions. However, plaintiffs 

allege that, upon learning that Sustainable Solutions did not own the '179 patent, the proposed 

venture fell apart.

¶ 8 This case followed. The case was tried to a jury that returned a verdict in the plaintiffs' 

favor for $6 million. Defendants appeal the judgment arguing that they only represented 

Meriturn and, therefore, that they are not liable for the $3 million loss incurred by the outside 

investor group. Defendants also argue that the investment was not totally lost and that there was 

undisputed evidence that some residual value of the investment remained. Plaintiffs cross-appeal 

arguing that they are entitled to a new trial on the issue of lost profits because the negligent acts of 

defendants deprived them of the gains that would have been realized from this or another 

investment.

¶ 9 ANALYSIS

¶ 10 We must first determine whether the plaintiffs other than Meriturn Partners LLC itself are 

entitled to recover for legal malpractice committed by defendants. Defendants maintain that 

Banner & Witcoff agreed to represent Meriturn and Meriturn only. To prevail on a legal 

malpractice claim, a plaintiff must prove the existence of an attorney-client relationship with the 

defendant. USF Holland, Inc. v. Radogno, Cameli & Hoag, P.C., 2014 IL App (1st) 131727, ¶ 

53. To form an attorney-client relationship, both the attorney and the client must consent to its 

formation. Kensington's Wine Auctioneers & Brokers, Inc. v. John Hart Fine Wine, Ltd., 392 Ill. 
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App. 3d 1, 13 (2009). Consent can be express or implied. Zych v. Jones, 84 Ill. App. 3d 647, 651 

(1980). A client cannot unilaterally create the relationship, and the putative client's belief that the 

attorney is representing him is only one consideration. Rosenbaum v. White, 692 F.3d 593, 601 

(7th Cir. 2012). However, if an attorney knows that a person is relying on his performance of 

services and he performs for that person's benefit without limitation, an attorney-client relationship 

can be found. Restatement (Third) of the Law Governing Lawyers § 14 (2000). Whether an 

attorney-client relationship exists, and thus whether the attorney owes a duty to a particular person, 

is a question of law. Blue Water Partners, Inc. v. Mason, 2012 IL App (1st) 102165, ¶ 38. 

However, findings of fact often must be made concerning the formation of the attorney-client 

relationship to, for example, resolve disputes concerning communications, acts undertaken, or the 

parties' respective understandings. See, e.g., Hotze v. Daleiden, 229 Ill. App. 3d 301, 306-09 

(1992). 

¶ 11 The written retention agreement at issue in this case was expressly between Meriturn 

Partners, LLC and defendants. Accordingly, the plaintiffs other than Meriturn were required to 

prove that defendants orally agreed to the representation or assented by other conduct. 

Defendants argue that plaintiffs presented no evidence that Berghammer did anything to indicate 

he represented anyone other than Meriturn itself. Berghammer testified that he had never heard 

of the other named plaintiffs until this litigation began and that he never agreed to represent anyone 

other than Meriturn. Although there were conference calls and emails between Berghammer and 

individuals other than Hansen, Berghammer testified that he simply understood the other people to 

be part of Meriturn. 

¶ 12 On the other hand, Hechtman, the lawyer leading the transaction, testified that he was fully 
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aware that he represented Meriturn and the outside investor group and that he told Berhammer 

about the structure of the transaction. Hechtman testified that he notified Berghammer that 

defendants were providing representation for the entire transaction and that he gave Berghammer 

the background of some of the investors. Lee Hanson similarly testified that he explained the 

mechanics of the transaction to Berghammer and informed Berghammer that other investors were 

going to be involved. Hanson testified that Berghammer was retained to perform the intellectual 

property work for the entire transaction. Berghammer also gave legal advice on conference calls 

and in emails to the representatives of the outside investor group that were reportedly introduced to 

him as investors. 

¶ 13 The evidence shows that Berghammer consented to perform services for the transaction as 

a whole, not just for Meriturn. He knew that other investors were going to be involved and knew 

that their investment was dependent on his work. Despite being told of the existence of other 

investors and their obvious interest in his performance of services, Berghammer never attempted 

to limit the scope of the representation to only Meriturn's investment activity. Berghammer knew 

that there were investors on a conference call in which he gave legal advice and never expressed 

any concern about exchanging confidential information. Berghammer also claimed to have 

expertise in the area of intellectual property due diligence in the context of targeting companies so, 

considering the circumstances, when he was specifically advised about the structure of the 

transaction, he should have known that his legal advice was flowing to people outside of Meriturn. 

The trial court denied defendants' motion to dismiss and their motion for a judgment 

notwithstanding the verdict on the basis that no attorney-client relationship existed. To the extent 

that it matters, it is clear that any factual disputes were resolved against defendants. The trial 
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court did not err by finding that Berghammer owed a duty to the investors other than Meriturn. 

¶ 14 Even if we had found that no attorney-client relationship existed between defendants and 

the outside investors, those plaintiffs could recover on the basis that they were known third-party 

beneficiaries to the undisputed attorney-client relationship between Meriturn and defendants. If a 

nonclient is an intended third-party beneficiary of the relationship between the client and the 

attorney, the attorney's duty to the client may extend to the non-client as well. In re Estate of 

Powell, 2014 IL 115997, ¶ 14. The key consideration in determining whether an attorney owes a 

duty to a nonclient thirdparty is whether the attorney is acting at the direction of or on behalf of the 

client to benefit or influence a thirdparty. Id. 

¶ 15 Here, because the aim of the representation was to provide advice about patent ownership 

for the entire transaction, defendants' duty extended to the outside investors who were to directly 

benefit from defendants' services. Defendants knew or should have foreseen that a breach of the 

requisite duty of care would result in a loss for both Meriturn and the outside investors. There 

was evidence introduced at trial that Berghammer even directly gave some of the outside investors 

legal advice. It is undisputed that defendants were retained to provide legal services concerning 

the entire $6 million investment. Thus, defendants were at least acting at the direction of 

Meriturn for the benefit of the investors and, therefore, defendants have no legal basis to escape 

liability when, knowing the structure of the transaction, they performed services for the entire 

transaction without limitation. 

¶ 16 Defendants also argue that the trial court erred when it did not reduce the jury award of $6 

million by the salvageable value of the company. Defendants maintain that there was undisputed 

evidence introduced at trial that demonstrated that the salvage value of the investment was 
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$345,000. Plaintiffs, however, introduced evidence that the investment was completely lost. 

The jury heard defendants' argument and the evidence defendants believed supported that 

proposition and the jury rejected it. A jury's award of damages will not be disturbed unless it 

bears no reasonable relationship to the loss suffered. Newbrough v. Lockwood Dairy, 223 Ill. 

App. 3d 665, 669 (1992). In this case, the jury's verdict reflects that it sided with the plaintiffs and 

found that the investment was a total loss. The jury resolved the proximate causation question of 

fact in plaintiffs' favor—finding that the malpractice committed by defendants caused a $6 million 

loss. The jury was entitled to reject the evidence offered concerning the salvage value. Even if 

there was some residual value at the time the company began to deteriorate, it would not have been 

against the manifest weight of the evidence for the jury to project, based on the evidence presented, 

that the loss was ultimately everything that was invested. There was evidence to support the 

amount of the jury's award and, thus, the trial court did not err by entering judgment in the amount 

of the jury verdict. 

¶ 17 In a cross-appeal, plaintiffs contend that they are entitled to a new trial on the issue of lost 

profits. Plaintiffs presented two lost-profit theories in the trial court: an alternative investment 

theory and a sales projection theory. The trial court granted a motion in limine in defendants' 

favor concerning the sales projection theory which precluded plaintiffs from presenting that theory 

at trial. The trial court allowed plaintiffs to go forward on their alternative investment theory and, 

after presenting evidence on that theory at trial, the jury awarded plaintiffs no damages for lost 

profits. 

¶ 18 The proper measure of damages in a legal malpractice case puts a plaintiff in a position he 

would have been had the attorney not been negligent. Gaylor v. Campion, Curran, Rausch, 
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Gummerson & Dunlop, P.C., 2012 IL App (2d) 110718, ¶ 61. Recovery of lost profits cannot be 

based upon conjecture or speculation and the evidence must afford a reasonable basis for the 

computation of damages. Drs. Sellke & Conlon, Ltd. v. Twin Oaks Realty, Inc., 143 Ill. App. 3d 

168, 174 (1986). The plaintiff bears the burden of proving lost profit damages to a reasonable

degree of certainty. SK Hand Tool Corp. v. Dresser Industries, Inc., 284 Ill. App. 3d 417, 426 

(1996). The existence and amount of damages in a legal malpractice case is a question for the 

jury and great weight must be given to the jury's determination. Union Planters Bank, N.A. v. 

Thompson Coburn LLP, 402 Ill. App. 3d 317, 356 (2010). 

¶ 19 The alternative investment theory was predicated on the idea that, had defendants 

discovered Sustainable Solutions' nonownership of the '179 patent, plaintiffs would not have 

invested in Sustainable Solutions and they would have made profits by investing the money 

elsewhere. In support of their alternative investment theory, plaintiffs offered the expert 

testimony of Lawrence Levine. Levine opined that the jury should award damages for lost profits 

in this case in an amount equal to Meriturn's average rate of return over the history of its 

investments. 

¶ 20 The jury was entitled to reject plaintiffs' theory that they would have made as much on this 

or another investment as they had made on previous investments. The jury was not required to 

find that, based on past performance, this or any other investment plaintiffs might have made 

would have made any money at all. Meriturn lost 51% on one of its investments and 87 % on 

another. Some investments make money and some do not. There are countless things that could 

have gone right or wrong during the course of the new venture. Conditions vary with each 

endeavor and a trier of fact is not required to assume that a particular venture will be profitable. 
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Drs. Sellke & Conlon, 143 Ill. App. 3d at 174-75; see also Resolution Trust Corp. v. Stroock & 

Stroock & Lavan, 853 F. Supp. 1422, 1429 (S.D. Fla. 1994) (holding that lost profit damages were 

not available to a client that received poor investment advice from his attorney because there was 

no basis for concluding what the client would have done as an alternative to the chosen investment 

and, therefore, there was no basis for predicting whether any such alternative investment would 

have produced greater or lesser returns than the chosen investment). 

¶ 21 While average past investment returns might be related to the future returns on another 

investment in some cases, there is no rule that requires a jury to conflate the two. Scott Stringer 

testified as an expert on defendants' behalf that Levine's methodology was flawed. Stringer stated 

that, in the context of this case, the results of previous investments were not reliable indicators of 

the result of a future investment. Stringer testified that, for example, Levine totally failed to 

account for the economic downturn from 2007 to 2012, right at the time that this investment was 

made. When expert witnesses present conflicting opinions, it is the province of the jury to resolve 

the disputes. Matthews v. Aganad, 394 Ill. App. 3d 591, 599 (2009). Evidence was also 

introduced from which the jury could have found that, while defendants' malpractice caused the 

initial investment to be lost, it was not the proximate cause of any future losses. For example, the 

jury might have concluded the company would not have ultimately been profitable based on the 

double-dealing and other deceitful actions of Nunn rather than the nonownership of the patent. In 

2007, the only year for which actual profits and losses were measured, Sustainable Solutions had 

nearly a $4 million operating loss. There is also evidence in the record that SEM, the company 

with which Sustainable Solutions was to partner and make millions of dollars per year, went 

bankrupt the following year. The jury was free to conclude that the malpractice caused the loss of 
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the investment, but that some factor other than defendants' negligence justified a finding that 

lost-profit damages were not warranted.

¶ 22 The sales projection theory was predicated on the idea that had Sustainable Solutions 

actually owned the '179 patent, plaintiffs would have obtained profits from the operations of 

Sustainable Solutions. Plaintiffs claim that they should have at least been able to present 

evidence of their internally projected profits from the investment or of the projections for the 

proposed venture with SEM that deteriorated as a result of Sustainable Solutions not owning the 

patent.

¶ 23 Because the trial court ruled that plaintiffs could not recover under this theory as a matter 

of law, we review its decision de novo. McWilliams v. Dettore, 387 Ill. App. 3d 833, 844 (2009). 

The trial court essentially relied on the "new business rule" to conclude that plaintiffs were not 

entitled to lost profits under this theory. The new business rule precludes expert speculation 

about possible lost profits where there is no historical data to demonstrate a likelihood of future 

profits. SK Hand Tool, 284 Ill. App. 3d at 427. The idea is that a business must have been 

established before it is interrupted so that the evidence of lost profits is not speculative. Id. 

¶ 24 Plaintiffs contend that neither Meriturn nor Sustainable Solutions was a new business. 

That is true, but the venture for which they seek profits was a new business. The result plaintiffs 

seek requires a number of assumptions to be made in their favor. In fact, the projections that 

plaintiffs claim support their right to lost profits are all future suppositions. They were possible. 

Not probable nor reasonably certain. This case deals with an unestablished venture that sought to 

go to market with an unestablished product using an unestablished process. The trial court did not 

err by precluding plaintiffs from presenting evidence on their sales projection theory. 
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¶ 25 Put simply, we will never know whether Sustainable Solutions would have been profitable 

had it simply owned the '179 patent. It never was. Perhaps it was a losing investment as others 

had been for Meriturn. There is no evidence that convinces us that it was reasonably certain that

Sustainable Solutions would have been successful. The jury was charged with assessing an 

amount of damages that, in its estimation, it believed flowed from defendants' negligence. We 

see no reason to disturb the result at which it arrived. 

¶ 26 Accordingly, we affirm.

¶ 27 Affirmed.