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Q: Legal Question ( Answered 5 out of 5 stars,   0 Comments )
Subject: Legal Question
Category: Miscellaneous
Asked by: dailychaos-ga
List Price: $50.00
Posted: 17 Nov 2002 07:03 PST
Expires: 17 Dec 2002 07:03 PST
Question ID: 109310
My neighbor receives royalties from a rock quarry her family owns (but
can never sell due to the structure of her father's will).  It is not
a huge sum, but she depends on this money for her retirement.  Most of
her money, recently, however, has gone to pay the legal expenses of
lawsuits brought on by the other beneficiaries (she has voted against
going forward with every one of these lawsuits).  The latest lawsuit
the others have voted for is to recover the legal fees (lack of
fiduciary responsibility and legal malpractice) from the previous
lawsuit, a substantial sum. On this particular lawsuit, she has the
option to "opt out", as it will be privately funded by the
beneficiaries since it is against their own trust officer and a legal
firm. She is approaching full retirement and simply cannot afford to
spend any more money on this course of action. I am not an attorney,
but I am wondering that if the rest of the family prevails and their
legal fees are returned (or portion thereof), would she be entitled to
recover a portion of it since she had a minority vote on whether to
pursue the original lawsuit in the first place and was in essence,
forced to pay? The statute of limitations on this original suit (to
sue for anything regarding it) expires at the beginning of next year. 
Thank you for helping a great member of the neighborhood for the last
20 years.  Except for that time her grandson replaced the chalk on his
sister's hopscotch board with real paint on my driveway! :)

Request for Question Clarification by expertlaw-ga on 17 Nov 2002 08:47 PST
Dear dailychaos.

In what state will this litigation occur?

Clarification of Question by dailychaos-ga on 17 Nov 2002 09:44 PST
Thank you so much for seeking to answer my question, Expertlaw!  Wow,
that was fast!!  The trust officer and bank is located in Illinois and
the quarry (and most of the beneficiaries) are located in Kentucky. 
My neighbor lives in Michigan.  There seems to be a controversy over
jurisdiction right now.  The rest of her family will be filing their
case on Monday through a Kentucky lawyer, but I have no idea on what
the answer will be over jurisdiction or whether there is any
reciprocity between Illinois and Kentucky.  Hope this helps your
search, I may have to go pick up my neighbor off the floor cause I
believe she nearly fainted when I told her Expertlaw was already
working on it! :)  Thanks again for the help!

Request for Question Clarification by expertlaw-ga on 17 Nov 2002 20:24 PST
Dear dailychaos,

Please be aware that, absent additional specifics, any answer will
necessarily be tentative. Is that okay?

Clarification of Question by dailychaos-ga on 17 Nov 2002 21:51 PST
Of course!  I probably have asked this question a little too early,
but my friend has been so upset over this, that I thought I'd may as
well get the ball rolling.  I appreciate your candidness and look
forward to reading what you find.  Also, Expertlaw, any caselaw you
may come across with similar circumstances to this case would be
greatly appreciated.  Thank you again for your effort!
Subject: Re: Legal Question
Answered By: expertlaw-ga on 19 Nov 2002 11:00 PST
Rated:5 out of 5 stars
Dear dailychaos,

The short answer to your question is "probably not". There are a
number of factors that can affect the risk to your friend of joining
this lawsuit, as well as the likelihood that she can recover if she
does not join.

Explanation of Case Law Citations 
In case you are not familiar with citations to case law, they
typically take the following form: <Volume Number> <Publication> <Page
Number>. Thus, 406 Ill. 102 refers to volume 406 of the Illinois
Reporter, at page 102. Similarly, 285 Ill. App. 3d 350 refers to
Volume 285 of the Illinois Appellate Digest 3rd, at page 350. If two
page numbers are referenced, e.g., 262 Ill. App. 3d 61, 68, it means
that the case begins at page 61, but that the portion of the case
relevant to the legal issue under discussion can be found on page 68.

I. Retaining an Attorney

For an overview of the process of hiring an attorney, you may wish to
review the following article, " How To Hire An Attorney", from the
ExpertLaw website:

As you may know, lawyers are usually retained in one of two ways.
First, they may be retained at an hourly rate (or, sometimes, for a
flat fee). Second, they may be retained on a "contingent fee", meaning
that they take as their fee a percentage of any amount the plaintiff
ultimately receives by way of verdict or settlement. Depending on the
state, contingent fees typically run between one third and one half of
the amount recovered.

While it is true that a contingent fee can (and often does) exceed the
amount that would be paid on an hourly basis, the contingent fee
allows clients to retain attorneys they could not otherwise afford. It
also insulates them from having to pay enormous legal fees in the
event that there is a small verdict or settlement, or in the event
that they lose at trial. Where the client pays by the hour and must
advance costs, the attorney faces no personal risk for proceeding with
litigation - the client bears the risk.

It seems implicit within your question that the legal fees associated
with the past litigation you describe were incurred on an hourly
basis. The first question your friend should consider is how the
lawyer will be retained for the planned additional litigation.

If it is possible to pursue the additional litigation on a contingent
fee basis, this would typically limit your friend's exposure to a
percentage of costs incurred during the course of litigation. (For
example, filing fees and other court costs, deposition fees, expert
witness fees, etc.) Your friend may feel more comfortable joining the
litigation on a contingent fee basis, particularly if these costs will
be shared by the larger group.

If, however, there is no attorney willing to take on this litigation
on a contingent fee basis, your friend should ask herself why. Legal
malpractice lawsuits are frequently taken on a contingent fee. When
they are not, it is usually because the attorney retained to handle
the case doubts the merits of the action, or because the attorney does
not believe that the ultimate recovery will justify the time and money
he would have to invest in the case.

Thus, if the litigation will proceed on a contingent fee basis, your
friend may feel more comfortable about joining the litigation. If not,
she should try to investigate why the contingent fee option was not
explored or was not available, and should consider that information
when deciding if she should join the litigation.

II. Breach of Fiduciary Duty

A. What is a Fiduciary Relationship?

A fiduciary relationship is founded upon trust and confidence. By
virtue of the trust and confidence vested in him, the fiduciary gains
certain power or influence. Illinois courts have observed that "at the
heart of a fiduciary relationship is trust, loyalty, and faith in the
discretion of the fiduciary." Implied in this fiduciary relationship
is a "good faith" requirement that the fiduciary will not engage in
conduct adverse to his or her patient. See, e.g., Best v Taylor
Machine Works, 179 Ill. 2d 367; 689 N.E.2d 1057 (1997).

There is an article on fiduciary relationships between Illinois
attorneys and their clients on the law firm website of Hinshaw and

As a result, to support a cause of action for breach of fiduciary
duty, a plaintiff must ordinarily demonstrate:

1. A breach by a fiduciary of obligations to another;

2. That the defendant knowingly induced or participated in the breach;

3. That the plaintiff suffered damages as a result of the breach.

B. What This Means

In order to prove a breach of fiduciary relationship by the trust
officer, it will be necessary to establish first that the officer's
duties extended to the subject of the litigation. It will then be
necessary to establish the trust officer's involvement in the breach
of fiduciary duty. Finally, it will be necessary to prove that this
breach cased the plaintiffs to suffer damages.

Without knowing more about the trust officer's relationship to the
alleged wrongful conduct, it is difficult for me to provide further
information on this point to help your friend assess her options.

III. Legal Malpractice

A. Elements of Legal Malpractice

Under Illinois law, to establish a claim for legal malpractice, a
plaintiff must establish:

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 establishing that "but for" the attorney's
negligence, the plaintiff would have prevailed in the underlying
action; and

4. Damages.

This standard is described in Serafin v. Seith, 284 Ill App 3d 577,
586-87, 672 NE2d 302 (1996). The same standard, with slightly
different wording, applies in Kentucky. McNeely v Spencer, 2002 Ky.
App. LEXIS 2029 (Ky. App. 2002).

B. What this means

In an attempt to recover attorney fees expended by a firm for poor
representation in prior litigation, the first element is easy. There
is an attorney-client relationship. The other elements require proving
what lawyers call the "case within a case" – that, but for the legal
malpractice, the plaintiffs would have won the original action, or
would have recovered more money. Often, this is not easy. The two
principal reasons that this is difficult are: The defendant law firm
will know the original case and all of its weaknesses, inside and out.
Typically, the firm will also be able to disclose information at the
second trial, in order to show the merits of its services, that would
otherwise be protected by attorney-client privilege. (The malpractice
accusation can open the door to the introduction of certain
information that would otherwise be privileged.) Also, if the original
case were easy to prove, it is likely that the original firm would
have prevailed or would have been able to obtain a larger settlement.

Granted, there are some forms of legal malpractice which may be easier
to prove. For example, if a law firm neglects to file a meritorious
case on time, and the "statute of limitations" expires, it is
ordinarily not particularly difficult to prevail.

Your friend's choice of whether or not to join this litigation may be
affected by the nature of the prior litigation, and the reasons why
the plaintiffs do not believe the performance of the original law firm
was adequate. If the original law firm lost because they made an
obvious mistake, it is less of a risk to join the suit than if they
lost or settled after long, protracted, difficult litigation.

IV. Recovering Money When You Are Not A Party

A. How Recovery *Might* Be Possible

As a near universal rule, if you are not a party to a civil lawsuit,
you are not entitled to recover damages as part of that lawsuit. The
defendants will ordinarily pay damages only to the plaintiffs.

An exception might arise (with strong emphasis on "might") if the
plaintiffs successfully recover all of the legal fees invested in the
prior litigation, including your neighbor's share. However, the right
to recover would not come from the litigation, but from other
considerations – principles of "unjust enrichment" to the plaintiffs,
who are obtaining a "windfall".

Unless the plaintiffs who recover a disproportionate settlement or
award voluntarily turn over the excess, your friend would have to
initiate litigation against them to obtain any amount of the judgment.
Litigation within families can be very unpleasant. Additionally, as
there would be no actual contract between the parties, the cause of
action would have to be based on "equitable principles", such as the
concept of "unjust enrichment" mentioned above.

A typical case of "unjust enrichment" would be the following. A
contractor arrives at a home to put in a new driveway. The homeowner
watches as the contractor tears out the old driveway, hauls away the
rubble, then pours and finishes a new driveway. The homeowner then
comes outside and says, "Sorry – you were supposed to be working on my
neighbor's house. Thanks for the free driveway." Despite the absence
of a contract between the homeowner and the contractor, a court can
compel the homeowner to pay for the driveway by finding that the
homeowner should have told the contractor about the mistake before the
work began, and that to allow the homeowner to retain the contractor's
work for free would constitute "unjust enrichment".

It would be difficult for your friend to make a similar argument, not
so much because the plaintiffs did not arguably receive a recovery
larger than they deserved, but because she had the opportunity to join
the litigation and chose not to do so. In common parlance, this would
make her a "free rider" – somebody who wants the benefits of somebody
else's work, but without taking any cost or risk upon herself. A court
would likely be reluctant to recognize her claim.

Additionally, this would be a novel claim, and one which a court might
not even entertain. I am not aware of any comparable circumstances
where claims of this type have been made, let alone where they have
been made successfully.

Please note that there is a possibility that, if the trust officer's
actions caused a diminishment of the value of a trust, and if that
value is restored to the trust as part of the settlement (rather than
being paid directly to the plaintiffs), your friend might benefit from
that act of restoration. However, without knowing more facts, I don't
know if this is possible, and under the circumstances (the significant
investment you describe in prior litigation) it seems more likely that
the plaintiffs will opt instead for a cash award or settlement.

B. Why Recovery for a Non-Plaintiff is Unlikely

In addition to the difficulty of applying equitable remedies under the
circumstances, as outlined above, most civil litigation results in
settlement. Most settlements are for less than the total amount of
damage suffered by the plaintiff. This results from factors including
the fact that the defendant needs an incentive to settle, and the fact
that the plaintiff faces the risk of losing at trial (or winning a
smaller amount that might be otherwise justified).

If, for example, there were four plaintiffs in the original
litigation, and three pursued the original law firm for malpractice,
they would have a strong incentive to settle for 75% of the attorney
fees they incurred. That 75% would allow them to recover their full
investment in the case. As the fourth person is not a party, she has
no say in how the money is distributed.

Additionally, there is nothing which compels the parties to
characterize the settlement as reimbursement for attorney fees. It may
well be possible for the plaintiffs in the malpractice action to
negotiate terms under which the recovery of more than their pro rata
share would nonetheless be justified. For example, they may be able to
claim punitive damages. (Illinois allows punitive damages claims for
breach of fiduciary duty.)

V. Conclusions

The best way for your friend to look at this is as an opportunity to
cut her losses. It is true that she may recover some of her prior
losses if she joins the new litigation, and that if she fails to join
it is unlikely that she would share in any ultimate recovery. At the
same time, if she does not join, she will not have to share in the
legal expenses associated with the lawsuit, which could once again be
substantial, in the event that it is not successful or results in only
a small recovery.

If in fact a lawsuit has now been filed, it would likely help your
friend to obtain a copy of the lawsuit, and to have it reviewed by a
lawyer in the jurisdiction where it was filed. She may be able to get
an idea of how difficult the case will be to win, and how much is
likely to be incurred in legal fees.

Search Strategy:

Searches on LexisOne, a database of recent U.S. case law (free
registration required).

Search terms used on LexisOne:
"breach of fiduciary duty" /s elements
"fiduciary duty"
"fiduciary relationship"
"legal malpractice" /s elements

Google searches:

"breach of fiduciary duty" illinois

"elements of a fiduciary relationship" Kentucky

I hope this information helps clarify the issues for your neighbor,

- expertlaw
dailychaos-ga rated this answer:5 out of 5 stars
WOW!!  For the first time EVER, I feel like I was given a legal
briefing WRITTEN IN GOOD 'OLE PLAIN ENGLISH!!  Easy to understand,
covered all the topics (with limited information presented in the
question) and most of all, INSIGHTFUL!!  Thank you so very much,
Expertlaw-ga!!  I'll pass along the info..

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