Court Opinion

ID: 2999033
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:49:53.387829+00
Date Added: 2024-06-11T18:01:42.859823
License: Public Domain

In the
    United States Court of Appeals
                 For the Seventh Circuit
                            ____________

Nos. 05-2203 & 05-2447
TIG INSURANCE COMPANY,
individually and as subrogee
of Illinois State University,
                                                 Plaintiff-Appellant,

                                   v.

GIFFIN WINNING COHEN & BODEWES,
P.C., an Illinois professional corporation,
and CAROL HANSEN POSEGATE,
                                      Defendants-Appellees.
                        ____________
             Appeals from the United States District Court
         for the Northern District of Illinois, Eastern Division.
           No. 00 C 2737—Samuel Der-Yeghiayan, Judge.
                            ____________
      ARGUED FEBRUARY 8, 2006—DECIDED APRIL 7, 2006
                     ____________

    Before MANION, KANNE, and EVANS, Circuit Judges.
  EVANS, Circuit Judge. TIG Insurance Company appeals
the dismissal of its malpractice case against the Giffin
Winning law firm1 and one of its attorneys, Carol Hansen
Posegate.

1
    Its full name is Giffin, Winning, Cohen & Bodewes, P.C.
2                                   Nos. 05-2203 & 05-2447

  To explain the malpractice claim we must reach back to
the underlying lawsuit, in which Giffin Winning, at least for
a time, represented Illinois State University (ISU) in a
class-action, gender-discrimination lawsuit brought by
several female professors. In the suit, Varner v. Illinois
State University, which was assigned to District Judge
Michael M. Mihm, the plaintiffs contended that they were
being paid less than male professors and that ISU retali-
ated against female professors who complained about the
discrimination. Their attorney was Joel Bellows. TIG was
ISU’s liability insurer at the time and it paid the attorney
fees which are at the heart of the present malpractice
action; TIG, in turn, was reimbursed by its reinsurers.
  The malpractice alleged in the present case arose out of
discovery problems in the Varner case. The major problem
involved Giffin Winning’s failure to produce three docu-
ments called gender equity studies (two of which are at
issue here) in their response to a discovery request. The
response was signed in October 1996. A month later the
Varner case was stayed. Soon thereafter, the law firm of
Latham & Watkins filed an appearance on behalf of ISU
and essentially took control of ISU’s defense, though Giffin
Winning remained of record. Latham had an attorney-client
relationship with ISU’s insurer TIG. Giffin Winning did not.
  The facts show that Giffin Winning received two gender
equity studies from ISU in 1994—while the Varner case was
still pending before the Equal Employment Opportunity
Commission. Two years later, when the law firm received
the second request for documents, the subject of the October
1996 response at issue here, they routed the request to
William Gorrell, the former executive director for Informa-
tion Systems and the head of the Planning Policy depart-
ment at ISU. He did not at that time forward the studies to
Giffin Winning for production and the law firm did not
produce them on its own. On this point, Judge Mihm later
Nos. 05-2203 & 05-2447                                     3

said that Gorrell was the one who “dropped the ball en-
tirely.”
  During the stay in the Varner case, Bellows talked with
Gorrell, who by then was no longer employed by ISU and
had his own lawsuit pending against the school for wrongful
termination. He independently provided Bellows with the
gender equity studies. He also executed an affidavit detail-
ing particulars of a “planning policy database” on which he
said the studies were based.
  Once the stay was lifted, Bellows confronted Latham with
the studies. (The Latham firm was now representing ISU).
Bellows demanded that ISU turn over the database on
which he alleged the studies were based. Apparently
thinking the best defense is a good offense, Latham’s first
response apparently was to point fingers, saying Bellows
had also not adequately complied with discovery requests.
Also at this time, Latham began preparing a motion to
disqualify Bellows for improperly soliciting privileged
information from Gorrell.
   For his part, Bellows filed a motion for sanctions against
both ISU and Giffin Winning, in part based on the failure
to produce the gender equity studies. As relevant here,
Bellows’ contention in his motion for sanctions was not
simply that the studies were not produced. After all, he now
had the studies. Rather, he claimed that the gender equity
studies were not produced because of a conspiracy to hide
the “Planning Policy database.” To have produced the
studies, he argued, “would have alerted the Varner plain-
tiffs to the existence of the databases . . . .”
  We now arrive at the essence of the case—the pivotal
facts about the database. At a 4-day hearing on the pending
motions, Gorrell testified that the database contained
variables relevant to the issue of gender equity and was
maintained in a format which enabled a user to prepare
comparative studies. He testified that the gender equity
4                                       Nos. 05-2203 & 05-2447

studies were prepared from this database. He said he had
done one of the studies himself, though he also said he had
never personally accessed the database. The actual data
processing, he said, was done by his research assistant,
Anna Wells, and her preparation of the data for his 1994
study would have taken her no more than a day or two
using the database:
    Q     How long did it take Anna Wells to compile the
          information for the 1994 study?
    A     It could be done in a day or two.
  That apparently was news to Wells. She testified that she
did not use any database in compiling the data.
    Q     Ms. Wells, when you collected the information
          reflected in these tables, was there a single
          source that you could go to to collect all the
          information reflected in the tables?
    A     No.
    Q     Was there a single database maintained by the
          Planning Policy department that contained all of
          the information reflected in these tables?
    A     No.
She used hard copy (probably the same 279 banker boxes of
material which had, in fact, been produced to Bellows), and
it took her “a few weeks, several weeks” to locate the
information and format it for use. Why? Because, as Judge
Mihm found, there was no database and never had been:
        I don’t believe that the plaintiffs have ever established
        the existence of the kind of database that I thought was
        being alleged here, that there was some button at ISU
        that could be punched that would involve a print-out of
        all this information. That clearly is not true . . . .
Nos. 05-2203 & 05-2447                                            5

The nonexistence of the database—which Bellows said there
was an alleged conspiracy to hide—is not seriously con-
tested.
  Nevertheless, Judge Mihm sanctioned Giffin Winning
$10,000 for discovery lapses, a sanction which was later
vacated. Judge Mihm, however, wisely denied Bellows’
request for a default judgment based on the failure to
produce the gender equity studies. He remarked that “I
don’t believe it was appropriate—but even if I had ordered
that, I think that would have been reversed on appeal.” In
addition, although he denied Latham’s motion to disqualify
Bellows because of his contact with Gorrell, Judge Mihm
sanctioned Bellows $10,000 as well. Ultimately, the Varner
case was settled; mercifully, we think.2
   We now get to the present malpractice action that TIG
filed against Giffin Winning in which the damages TIG
alleges are the attorney fees it paid Latham to defend
against the sanction motion—a whopping $1.2 million, give
or take, for the work of 27 attorneys and various paralegals.
It seems that when Latham said it took the motion seri-
ously, it meant it. As we said, TIG paid the bill and was
subsequently reimbursed by its reinsurers.
  Several issues swirl around in this appeal from the
district court’s grant of summary judgment for Giffin
Winning. Two involve strictly legal issues: Does our
holding in Garris v. Schwartz, 551 F.2d 156 (7th Cir. 1977),
preclude a legal malpractice action in which the damages
are solely attorney fees, and does the collateral source rule
apply in this case, thus precluding TIG’s recovery of

2
    The case has a lengthy appellate history, having proceeded
twice to the U.S. Supreme Court. Varner v. Illinois State Univer-
sity, 972 F. Supp. 458 (C.D. Ill. 1997), affirmed, 150 F.3d 706 (7th
Cir. 1998), vacated, 528 U.S. 1110 (2000), on remand, 226 F.3d
927 (7th Cir. 2000), cert. denied, 533 U.S. 902 (2001).
6                                   Nos. 05-2203 & 05-2447

damages for which it has already been compensated.
Another issue involves the striking of expert testimony.
Others involve whether summary judgment was proper,
specifically whether there was sufficient evidence of
damages to survive summary judgment and whether the
issue of causation could be resolved on summary judgment.
  Our focus will be on the issue of causation. We emphasize,
however, that, by concentrating on that single issue, we do
not imply anything at all about the application of the
collateral source rule in these circumstances or the contin-
ued viability of Garris v. Schwartz. We are deliberately
skipping the larger issue of whether a malpractice claim
can be based on attorney fees (the question posed by Garris
v. Schwartz). What we are saying is that, assuming such a
cause of action exists (which we are assuming only for the
present discussion), TIG’s claim would fail as a matter of
law.
  The elements of a legal malpractice action in Illinois are
well-settled. They are: “(1) the existence of an attorney-
client relationship that establishes a duty on the part of the
attorney; (2) a negligent act or omission constituting a
breach of that duty; (3) proximate cause; and (4) damages.”
Lopez v. Clifford Law Offices, 841 N.E.2d 465, 470-471 (Ill.
App. 2005), citing cases. A legal malpractice case is similar
to any other negligence claim, and traditional principles
apply. Id. Proximate cause describes two distinct require-
ments—cause in fact and legal cause. First Springfield
Bank & Trust v. Galman, 720 N.E.2d 1068 (Ill. 1999);
see also Abrams v. City of Chicago, 811 N.E.2d 670 (Ill.
2004). Cause in fact exists only if the defendant’s conduct
was a “material element and a substantial factor in bring-
ing about the injury.” Abrams, at 675. Legal cause, on the
other hand, is largely a question of foreseeability. The
relevant inquiry is whether “the injury is of a type that a
reasonable person would see as a likely result of his or her
conduct.” (Emphasis in original.) Abrams, at 675, quoting
Nos. 05-2203 & 05-2447                                       7

Galman. The occurrence must have been “reasonably”
foreseeable: “Not what actually happened, but what the
reasonably prudent person would then have foreseen as
likely to happen, is the key to the question of reasonable-
ness.” Cunis v. Brennan, 308 N.E.2d 617, 619 (Ill. 1974),
quoting 2 Law of Torts (1956), sec. 16.9 at 929.
  This is not the same as (but, in this case, necessarily a bit
difficult to distinguish from) a determination as to whether
the fees themselves are reasonable. For purposes of proxi-
mate cause, if the fees do not reflect work reasonably,
foreseeably related to the negligence alleged in the case, it
does not matter that in some other sense they might be
“reasonable.” We draw this distinction in response to TIG’s
argument, relying on Medcom Holding Co. v. Baxter
Travenol Laboratories, Inc., 200 F.3d 518 (7th Cir. 1999),
that because the fees were paid, they are prima facie
reasonable. In this situation, we find the argument breath-
taking, say nothing of irrelevant. But in any case, TIG
overstates the holding of Medcom. The case states that “[i]f
the bills were paid, this strongly implies that they meet
market standards.” At 520. It goes on to state that an
indemnity agreement for “commercially-reasonable fees no
matter how the bills are stated” should be enforced. At 520.
But we emphasized the modifier—“Notice the
qualification: commercially-reasonable fees.” At 521. Upon
remand, the district court was instructed to ask whether
the fees were reasonable; that is, “were they fees that
commercial parties would have incurred and paid knowing
that they had to cover the outlay themselves?” TIG perhaps
overstates the principle set out in Medcom; that, however,
is not our present concern.
  Proximate cause is the issue on which this case falters.
Having said that, we recognize that the Illinois courts
indicate that proximate cause should ordinarily be decided
not as a matter or law, but by a trier of fact. Lopez, supra.
8                                   Nos. 05-2203 & 05-2447

However, in a situation in which it is clear as a matter of
law that the injury could not have been foreseeable, Illinois
courts have upheld summary judgment on the issue.
Abrams, supra. The situation before us is such a case.
  The fundamental negligence allegedly committed by
Giffin Winning in the Varner case was a failure to produce
documents—especially gender equity studies—pursuant to
a discovery request. The attorneys had routed the request
to Gorrell, who was at that point still employed by ISU. He
did not forward the studies to the attorneys. However, the
attorneys had copies of the studies, which they also failed
to produce. This is a clear breakdown of the discovery
process, which we infer was not going at all smoothly on
either side of this case.
  In this all-too-common situation, the question for us is
whether it would be reasonably foreseeable that a failure to
produce these documents would result in the injury alleged
here. Could the attorneys foresee that Gorrell, who failed to
produce the documents when they turned the request over
to him, would then, after he became disgruntled with ISU,
independently provide the documents to Bellows? Beyond
that, would reasonable people foresee that Gorrell would
mislead Bellows about a database which did not exist?
Would reasonable people then think that, upon hearing
Gorrell’s story, Bellows’ first impulse would be to move for
sanctions including default judgment in the case? Would
reasonable people foresee that, next, a large law firm,
apparently thinking of Judge Mihm as a bit trigger-happy,
would jump into high gear out of fear of default judgment
and launch an army of 27 attorneys, plus paralegals, to
defend against the possibility that Judge Mihm might grant
default judgment on the basis of an alleged conspiracy to
hide something which does not exist? In other words, was
the Latham response to a failure to produce documents and
the resulting injury foreseeable?
Nos. 05-2203 & 05-2447                                     9

   We think it was not as a matter of law. Our point can be
illustrated by a very different sort of negligence action. In
Abrams, the city failed to send an ambulance for a woman,
Abrams (of course), who was in labor. A friend, who then
drove her to the hospital, ran a red light and collided with
a car driven by a drug-and-alcohol-impaired driver with a
suspended license. Abrams was seriously injured and spent
2 weeks in a coma; sadly, her baby died. The court found,
however, that as a matter of law there was no proximate
cause. The city could not have foreseen the situation that
unfolded. Perhaps a bit callously, the court remarked that
“[m]illions of women in labor make it safely to the hospital
each year by private transportation.” Abrams, 811 N.E.2d
at 677.
   It is also true—though less tragically so—that countless
failures to produce documents occur in the federal courts
every year. That is not a good thing. But we are not at a
point at which it is foreseeable that such a failure will
spawn a million-dollar bill for attorney fees. If it were,
litigation would become more of a blood sport than it
already is. Lawyers would be even more obsessive about
irrelevant and tedious details. No good could come of it.
  There is, in fact, nothing which distinguishes the failure
to produce in this case with countless others. Judge Mihm
himself made this point in response to Bellows’ argument
that this was the worst discovery abuse he had ever seen.
Judge Mihm said:
    But you said in your 34 years of practice this was the
    most shocking thing you had ever seen in terms of this
    discovery issue. I wonder what kind of practice you’ve
    had if that’s the case because, boy, in the scheme of
    things, I’ve seen things 50 times worse than this.
What is foreseeable as a result of a failure to produce
documents is the reasonable procedure set out in Civil Rule
10                                 Nos. 05-2203 & 05-2447

of Civil Procedure 37, which provides for sanctions only
after other reasonable efforts to work out disagreements
fail. It may be that, as Judge Mihm also said, that did not
happen enough in this case. But ISU and Giffin Winning
could hardly be expected to foresee all this trouble over a
phantom database. Why would they? It was ISU’s alleged
database and Giffin Winning was representing ISU at the
time. They knew of no database; they were hiding no
database; there was no database. For Giffin Winning’s
carelessness in failing to produce documents (which Bellows
had in his possession), the sanction of $10,000 might well
have been sustained on appeal. But as a matter of law, the
injury alleged here was not reasonably foreseeable.
  Accordingly, the judgment of the district court dismissing
this case is AFFIRMED.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—4-7-06