Court Opinion

ID: 4700518
Source: CourtListenerOpinion
Date Created: 2021-07-01 18:00:39.859379+00
Date Added: 2024-06-11T08:06:11.005040
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                       ____________________
No. 20-2887
LINDA S. BERGAL,
                                                  Plaintiff-Appellant,
                                 v.

BEN M. ROTH, et al.,
                                               Defendants-Appellees.
                       ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
            No. 18-cv-03562 — Manish S. Shah, Judge.
                       ____________________

       ARGUED APRIL 15, 2021 — DECIDED JULY 1, 2021
                ____________________

   Before KANNE, ROVNER, and HAMILTON, Circuit Judges.
    HAMILTON, Circuit Judge. Plaintiﬀ Linda Bergal brought
this malpractice case against her attorney Ben Roth, his law
ﬁrm, and accountant Joseph Sanders. She alleges the
defendants duped her into disclaiming a $1.5 million mutual
fund account owned by her late husband, Dr. Milton Bergal.
The district court dismissed Linda’s claims as barred under
the doctrine of issue preclusion (collateral estoppel) based on
2                                                     No. 20-2887

a state-court judgment that she obtained her claim on the
account through undue inﬂuence. We aﬃrm.
I. Factual and Procedural Background
    We review de novo the district court’s dismissal on the
pleadings under Federal Rule of Civil Procedure 12(c), treat-
ing plaintiﬀ’s factual allegations as true and viewing the
pleadings in the light reasonably most favorable to the plain-
tiﬀ. Unite Here Local 1 v. Hyatt Corp., 862 F.3d 588, 595 (7th Cir.
2017). Linda (we use ﬁrst names because several Bergals are
at the center of the case) alleges that in 2009, she and her hus-
band Milton set up an estate plan with the help of attorney
Roth. Under the plan, Milton created a trust and designated
himself as sole trustee. Upon his death, his wife Linda and his
accountant, defendant Joseph Sanders, would become co-
trustees. One of Milton’s assets was a $1.5 million mutual
fund account with Vanguard. Before his death, Milton
changed the designation on the Vanguard account so that it
would not fund his trust but be transferred on death directly
to Linda as the sole primary beneﬁciary. He changed other
accounts too, switching their designations for transfer on
death from the trust to Linda.
    Milton died in 2016. A few weeks later, Linda met with
Roth, Sanders, and Milton’s son, David Bergal, to discuss the
estate. Linda was under the impression that Roth was still her
attorney. Roth and Sanders convinced Linda to waive her
rights as co-trustee and to disclaim her interest in the Van-
guard account by suggesting that she had acquired these in-
terests through wrongdoing. Roth then transferred the dis-
claimed Vanguard account directly to David instead of to the
trust. He sent David an email saying: “We had Linda disclaim
and all the remaining form (sic) needed to be sent in were
No. 20-2887                                                   3

forwarded to you. That account is about $1,500,000.00 and I
assume you have completed the liquidation process and those
funds are in your possession.” Months later, attorney Roth
sent the following email to accountant Sanders: “I was happy
we were able to transfer the $1,500,000 to David prior to the
lawsuit being ﬁled, at least everybody is funded and can
move forward.”
    In February 2017, David ﬁled suit against Linda in an In-
diana state court alleging that she exerted undue inﬂuence on
Milton and that the trust was the proper owner of certain as-
sets Milton had transferred to Linda. The case went to trial,
and the jury found that Linda had illegally obtained assets
(including the Vanguard account) through undue inﬂuence.
The Indiana court issued a judgment ordering her, among
other things, to restore the Vanguard account to the trust.
    The Indiana Court of Appeals aﬃrmed all aspects of the
trial court’s order, except regarding a separate retirement ac-
count unrelated to this case. Bergal v. Bergal, 153 N.E.3d 243
(Ind. App. 2020). Notably, as to the $1.5 million Vanguard ac-
count, the appellate court clariﬁed that if it is already in Da-
vid’s possession, Linda does not need to take any further ac-
tion to restore it:
       To the extent that Linda points out that she has
       already disclaimed the Vanguard TOD [transfer
       on death] account, we note that this is for the
       trial court to evaluate following her accounting.
       Obviously, if she has already disclaimed this ac-
       count and if it is now owned by David, Linda
       need take no further action regarding this Asset.
4                                                    No. 20-2887

Id. at 262 n.23. No further review is pending in the state courts.
The Indiana Supreme Court denied transfer on March 4, 2021.
Bergal v. Bergal, 166 N.E.3d 904 (Ind. 2021).
    In the meantime, though, on May 18, 2018, Linda had ﬁled
this case in federal court in Illinois invoking diversity
jurisdiction under 28 U.S.C. § 1332. The operative complaint
asserts legal malpractice claims against Roth and his law ﬁrm,
Roetzel & Andress, LPA, and a professional malpractice claim
against accountant Sanders. The complaint also alleges
common-law fraud and conspiracy against Roth and Sanders.
These claims present two core theories of liability. First, Linda
asserts that Roth and Sanders committed malpractice and
fraud by duping her into disclaiming certain assets, including
the Vanguard account. Second, Linda argues that even if Roth
did not commit malpractice by advising her to give up the
Vanguard account, he did so by transferring the account to
David rather than the trust. The logic behind this second
theory is that, by transferring the account to David, Roth
compounded Linda’s liability in the Indiana case because the
court ordered her to restore the account to the trust even
though she had already disclaimed it. The only reason the
Vanguard account is not already in the trust, she says, is
because Roth negligently transferred it to David instead.
   The district court granted judgment on the pleadings,
holding that issue preclusion based on the Indiana judgment
foreclosed all of Linda’s claims because the Indiana jury’s
ﬁnding of undue inﬂuence showed that Roth and Sanders’s
advice to disclaim her illegally obtained interests was neither
negligent nor fraudulent.
No. 20-2887                                                    5

II. Analysis
    We agree with the district court that the Indiana judgment
forecloses Linda’s claims of malpractice and fraud against the
defendants. “The eﬀect of a judgment in subsequent litigation
is determined by the law of the jurisdiction that rendered the
judgment.” In re Catt, 368 F.3d 789, 790–91 (7th Cir. 2004), cit-
ing 28 U.S.C. § 1738. Here, an Indiana court rendered a judg-
ment against Linda after a jury found that she had illegally
acquired estate interests by exerting undue inﬂuence over
Milton. That ﬁnding is now ﬁnal because the Indiana Court of
Appeals did not disturb it and the Indiana Supreme Court de-
nied transfer. Bergal, 153 N.E.3d at 247, transfer denied, 166
N.E.3d 904. Moreover, on appeal, the Indiana Court of Ap-
peals further clariﬁed that, under the trial court’s judgment,
“if [Linda] has already disclaimed this [Vanguard TOD] ac-
count and if it is now owned by David, Linda need take no
further action regarding this Asset.” Id. at 262 n.23. Accord-
ingly, Linda cannot relitigate these issues here because they
were necessarily decided against her in the Indiana case. See
Sullivan v. American Cas. Co. of Reading, 605 N.E.2d 134, 137
(Ind. 1992) (elements of issue preclusion under Indiana law).
These issues decided in the Indiana litigation foreclose both
of Linda’s theories of liability in this case.
    First, given the ﬁnding of undue inﬂuence, the defendants
clearly did not commit malpractice or fraud in advising Linda
to disclaim the property she had obtained illegally. This was
not malpractice but sound advice. Better to return the prop-
erty promptly and voluntarily rather than ﬁght through
costly litigation that the client will lose.
    Linda asks us to draw a diﬀerent inference about the real
intent behind defendants’ advice. For support, she points to
6                                                  No. 20-2887

the email in which Roth told Sanders he “was happy we were
able to transfer the $1,500,000 to David prior to the lawsuit
being ﬁled, at least everybody is funded and can move for-
ward.” Linda says this email shows the defendants’ intent
was not to persuade her to return ill-gotten gains but to pres-
sure her to disclaim the accounts in order to fund themselves
and David in future litigation against her. Absent the Indiana
judgment, perhaps we might be able to give Linda the beneﬁt
of that inference at the pleading stage. But given the jury’s
ﬁnding that Linda illegally obtained her interests through un-
due inﬂuence, any claim premised on the theory that she
should have retained the Vanguard account must fail. As the
district court correctly concluded, the ﬁnding of undue inﬂu-
ence forecloses Linda’s theory that the defendants committed
malpractice and fraud by tricking her to disclaim assets to
serve their own interests.
    Second, the Indiana Court of Appeals also deﬁnitively
foreclosed Linda’s second theory of malpractice—that Roth
added to her supposed injury by transferring the Vanguard
account to David instead of the trust. Linda says she is wor-
ried that she has been ordered to transfer the account to the
trust and that now she might be held liable for failing to com-
ply because she no longer controls the account. However im-
probable that might have seemed earlier, the Indiana Court of
Appeals made it impossible, explaining that if David already
has the account, then Linda “need take no further action re-
garding this Asset.” Bergal, 153 N.E.3d at 262 n.23. So even if
Roth erred by transferring the account to David instead of to
the trust of which he is the beneﬁciary, that decision could not
cause Linda any injury, which is a necessary element of a legal
malpractice claim. See Northern Illinois Emergency Physicians v.
Landau, Omahana & Kopka, Ltd., 216 Ill. 2d 294, 307, 837 N.E.2d
No. 20-2887                                                                 7

99, 107 (2005) (“The existence of actual damages is … essential
to a viable cause of action for legal malpractice.”), citing Palm-
ros v. Barcelona, 672 N.E.2d 1245, 1247 (Ill. App. 1996). 1
    Because the Indiana judgment against the plaintiﬀ fore-
closes both of plaintiﬀ’s theories of liability, we AFFIRM the
judgment of the district court.

    1  At oral argument, Linda’s counsel tried to spin a new theory of
damages—that Linda was forced to pay for her defense in the Indiana case
only because David was able to fund his pursuit of the case using the
Vanguard account that should have been transferred to the trust instead.
This is a troubling theory, built on the assumption that a party who won
his case would not have been able to win it without money. Whatever
weight this odd argument might deserve, it was forfeited because it was
not squarely raised until oral argument and, at best, was first hinted at in
the plaintiff’s reply brief. See Wonsey v. City of Chicago, 940 F.3d 394, 398–
99 (7th Cir. 2019) (“[A]rguments raised for the first time in a reply brief
are waived. The same goes for arguments not raised until oral argument.”)
(citations omitted).