Illinois State Contract Cases 2012 (Part 1): Attorney Suing Client, the Moorman Doctrine

Illinois Contract Cases

Hess v. Loyd

Attorney Lawrence Hess sued a client of his former law firm alleging breach of contract, among other claims. The circuit and appellate courts denied his claims and imposed sanctions for bringing the claims for an improper purpose.

Hess’s employment agreement and breach of contract suit

Hess had an employment contract with his former law firm, Kanoski & Associates, where he had been an associate. The contract stated, “Employee acknowledges that while licensed employees must perform all legal services, the clients contracting for said services are clients of the Corporation and not of any individual employee.”

The Loyds had a contingency fee contract with Kanoski & Associates relating to a medical malpractice claim, and the case was assigned to Hess. Hess left Kanoski & Associates while the case was pending and had Carr, a lawyer at Hess’s new firm, write a letter to the Loyds instructing them that Hess was their attorney and that he was at a new firm. The Loyds responded that Hess was not their attorney and asked him not to contact them again. Hess filed a notice of attorney lien on the Loyds’s medical malpractice case and sued the Loyds.

The Illinois circuit court dismissed Hess’s suit and found that Hess had instituted the lawsuit against the Loyds to harass them and gain an advantage against other parties. The circuit court also found that the Loyds were entitled to a sanction award.

Dismissal and sanctions upheld on appeal

The Illinois Court of Appeals affirmed the trial court’s judgment and stated, “We find the conduct of Mr. Hess, through his attorney, Mr. Carr, in suing a client of his former law firm for unpaid legal fees and tortious conduct for contesting his attorney lien when his employment contract clearly stated the firm’s clients were not his clients and he was to be paid for his services by salary, amounts to egregious, bad-faith, and harassing pleading, and it was well within the circuit court’s discretion to impose sanctions.”

Olson v. Hunter’s Point Homes, LLC

Plaintiff homeowners sued the owner of a subdivision, real estate agents, and various individuals alleging fraud, deceptive business practices, negligence, misrepresentation, and promissory estoppel. The plaintiffs had purchased homes in the Hunter Point Homes subdivision in Granite City, Illinois, but the majority of the lots behind the houses were covered by easements in favor of Illinois Power, so that garages, fences, and other structures couldn’t be built on the lots.

Illinois circuit court decision

The circuit court dismissed the cases based on the Moorman doctrine, which prevents a party from recovering in negligence for a purely economic loss.

Illinois Appellate Court reverses in part and affirms in part

The appellate court reversed the circuit court’s ruling as to most of the claims based on exceptions to the Moorman doctrine. Although a party can’t recover for purely economic losses in a negligence action, economic loss is recoverable where a party intentionally makes false representations. In addition, there is an exception to the Moorman doctrine where a party who is in the business of supplying information for the guidance of others in their business transactions makes a negligent representation. Thus, the court reversed the circuit court’s ruling on all counts that were dismissed based on the Moorman doctrine except the negligence count against the owner of the subdivision.

The appellate court also addressed the defendants’ arguments that the complaints should be dismissed because the alleged misrepresentations were representations of facts contained in public records. The court determined that whether the misrepresentations could be discovered by the plaintiffs if they exercised ordinary prudence was a question of fact that prevented dismissal.

The appellate court affirmed dismissal of the promissory estoppel claims, because promissory estoppel is unavailable when there is an enforceable contract between the parties.

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