The First District Examines Standards for Reviewing Section 2-615 Motions in Legal Malpractice Cases and Clarifies the Solvency Rule

By Kimberly A. Davis, Momkus McCluskey LLC, Lisle, Illinois

In July 2007, the First District Appellate Court addressed the sufficiency of a legal malpractice complaint in Visvardis v. Ferleger, PC., 375 Ill.App.3d 719, 873 N.E.2d 436 (1^st Dist. 2007). This decision was published "to criticize and clarify the rule in Illinois requiring plaintiffs in legal malpractice cases to plead the solvency of the underlying defendants." Id. at 439.

The legal malpractice complaint originated out of an underlying action filed by Spiro Visvardis ("Spiro") against several defendants including his brother, Nick Visvardis ("Nick"). Spiro and Nick formed an industrial sandblasting and painting company, Techco, and each were one-half shareholders. Spiro managed the work sites, while Nick oversaw finances. Nick's wife, Maria, was employed to handle accounting matters at Techco. Nick and Maria also established two other corporations called Tecorp and Omega Industries. In 1997, Spiro sued Nick, Maria, Tecorp and Omega Industries for breach of fiduciary and fraud, and sought both equitable relief and money damages.

In May 2000 defendants filed a motion for summary judgment. Spiro's counsel, Ferleger, filed a response that included an expert's opinions regarding the amount of damages incurred by Spiro. The court granted said motion, noting that Freleger "failed to produce a single fact in his response." Id. at 439. In support of Spiro's motion to reconsider, Ferleger filed 30 exhibits, affidavits, a chart and additional documentation. The trial judge denied Spiro's motion to reconsider since Ferleger's response included an expert's affidavit that indicated the expert lacked documentation required to render opinions regarding Spiro's allegations. In denying a motion to reconsider, the trial court noted that Ferleger should have filed a motion to compel to obtain the requisite documents, and that Ferleger had produced "an unorganized bulk of fact, charges, lists...that are supposedly facts...." Spiro retained new counsel to appeal the trial court's order, but the appellate court affirmed.

In July 2002, Spiro sued Ferleger for legal malpractice. In response, Ferleger filed a section 2-615 motion to dismiss, wherein Ferleger relied upon the trial and appellate court's rulings in the underlying action. 735 ILCS 5/2-615 (West 2002). A section 2-615 motion is limited to attacking the legal sufficiency of the pleading. Id. In considering such a motion, the Court should limit the issue to "whether, when taken as true, the facts alleged in the complaint set forth a good and sufficient cause of action." Visvardis at 440, citing Scott Wetzel Services v. Regard, 271 Ill.App.3d 478, 480, 648 N.E.2d 1020 (1^st Dist. 1995).

In granting defendants' section 2-615 motion to dismiss, the trial court relied upon facts outside of Spiro's fourth amended complaint (e.g. findings of the trial and appellate courts in the underlying action that allegations in Spiro's complaint were "insufficient to sustain the case" and noted that "even if Ferleger had not committed the alleged malpractice, Spiro would have lost his claim against the original defendants"). Visvardis at 440. Spiro appealed, citing that the trial court should have limited its consideration of defendants' section 2-615 motion to the sufficiency of the allegations within said complaint. Id. Ferleger responded, in essence, that Spiro is collaterally estopped from re-litigating an issue already decided by the appellate court in the underlying case. Since Spiro's arguments in the underlying appeal were properly limited to the sufficiency of the allegations in his complaint and the trial court in the malpractice action relied upon the findings of the trial and appellate courts for the underlying action, the First District confined its examination of the trial court's ruling to a de novo review of the dismissal and standards for reviewing section 2-615 motions to dismiss.

Each element of the cause of action that forms the basis of a complaint must be alleged by the plaintiff in order to survive a section 2-615 motion to dismiss. Urbaitis v. Commonwealth Edison, 143 Ill.2d 458, 575 N.E.2d 548 (Ill. 1991). In ruling on such a motion, the court must take all well-pleaded allegations of fact in the complaint, construe pleadings liberally, and draw all reasonable inferences in the plaintiff's favor. Visvardis at 441. Additionally, in order to plead a cause of action for legal malpractice, a plaintiff must allege that "(1) the attorney owed the plaintiff a duty arising from the attorney-client relationship, (2) the attorney breached that duty, and (3) the attorney's breach proximately caused the plaintiff to sustain damages." Id. at 442. See also, Pelham v. Griesheimer, 92 Ill.2d 13, 440 N.E.2d 96 (Ill. 1982).

Since Ferleger did not challenge the allegations regarding the existence of an attorney-client relationship and breach of duty, the Court limited its discussion to the prong involving causation and damages. Further, because the complaint in the underlying action alleged a breach of fiduciary duty, the Court initially examined the elements necessary to properly allege such a cause of action and noted that the complaint alleged facts sufficient to support an inference that Nick owed fiduciary duties to Spiro and that a trier of fact could find that Nick breached said duties.

A plaintiff seeking to recover for loss of a cause of action must plead and prove (1) that but for the attorney's negligence, he would have won a judgment against the defendant; and (2) that the defendant in the underlying action and had some monies available to pay damages that could have been awarded. Sheppard v. Krol, 218 Ill.App.3d 254, 259, 578 N.E.2d 212 (1st Dist. 1991) (emphasis added). Several courts around the country have criticized the collectability element, or solvency rule, in legal malpractice cases. See, e.g. Lindenman v. Kreitzer, 7 A.D.3d 30 775 N.Y.S.2d 4 (NY 2004) (when relevant, defendant attorney should bear burden of uncertainties associated with proving uncollectabilty); Power Constructors, Inc. v. Taylor & Hintze, 960 P.2d 20, 31 (AK 1998) (adopts rule requiring negligent attorney to prove uncollectability of judgment). Notwithstanding such criticism, the solvency rule remains in effect in Illinois. Visvardis at 443.

Ferleger argued that Spiro's fourth amended complaint must have alleged sufficient facts supporting that on the projected date of judgment, the defendants in the underlying action had sufficient financial ability to satisfy the debt. The Visvardis Court disagreed, and held that the plaintiff need only "plead facts supporting an inference that after the date of the malpractice, and some time before the judgment against the underling defendant would be come unenforceable due to its age, the underlying defendant would have some funds available for payment of some part of the damages." Visvardis at 443 (emphasis added).

The Court ruled that Spiro sufficiently alleged facts inferring supporting a finding that Spiro's cause of action against Nick was viable and, therefore, said complaint was sufficient to withstand Ferleger's section 2-615 motion to dismiss. The Court also noted that Ferleger should have brought a motion to dismiss under section 2-619(a) (4) [that the cause of action is barred by prior judgment]. Id. at 444; 735 ILCS 5/2-619 (West 2002).

Although the solvency rule remains a mandate for legal malpractice plaintiffs, the First District's clarification of the rule in Visvardis serves to clarify, and seemingly relax, the prior standard by allowing plaintiff's to plead facts supporting an inference that the defendant would have some ability to satisfy some portion of damages within a relevant time period.