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Touching on what one judge called “the core of the relationship between an attorney and a client,” the Illinois Supreme Court has ruled that a client cannot be liable for the intentional tort of its lawyer. The May 20 decision in Horwitz v. Holabird & Root, No. 89351, brings Illinois into line with courts in six other states. Yet courts in Texas, Oregon, Indiana, Maine, Arkansas and Alaska have said that clients can be liable in some instances. But the 4-3 ruling in the first impression Illinois case was far from unconditional. And, in a dissent, Chief Justice Mary Ann G. McMorrow warned that the majority implicitly questioned “the ability of attorneys to bind their clients in any legal or business dealings conducted by the attorney on behalf of the client.” According to the majority opinion, penned by Justice Thomas L. Kilbride, courts in California, Florida, Georgia, New Jersey, New York and North Carolina have said that clients cannot be held liable for the acts of their lawyers. Illinois virtually joined the yes list, avoiding it only by saying: “As a fiduciary relationship, there are a myriad of circumstances where attorneys act as agents for their clients. The situation at hand is simply not one of them.” Situation at hand Underlying the Illinois ruling was an action filed against Holabird & Root, a 124-year-old Chicago architectural firm, accusing it of tortious interference with a business relationship. The agent of that alleged interference was its lawyers. Holabird had hired the Chicago law firm Sabo & Zahn to bring a collection action against a local real estate developer. The attorneys won a $150,000 judgment against the developer, Horwitz Matthews Inc. (HM), then began enforcement proceedings to collect on it. Responding to a citation to discover assets, HM provided Sabo & Zahn with various tax returns. Those returns, the court noted, were subject to a confidentiality agreement barring Sabo’s lawyers from disseminating information gleaned from them to anyone outside the firm. Despite that agreement, when the Sabo attorneys allegedly found irregularities in the returns, they told about 40 of the developer’s associates and investors by mail that Horwitz had apportioned to itself a greater percentage of some partnership business than it was entitled to, and that investor losses were underreported. Written on Sabo & Zahn stationery, the letters bore the legend: “We represent Holabird & Root who have a judgment against Horwitz Matthews,” the court said. HM sued Sabo & Zahn and Holabird. The trial court granted summary judgment for Holabird, ruling that the architects could not be held liable for the acts of its lawyers. But Illinois’ intermediate appellate court reversed, holding that the relationship between Holabird and Sabo & Zahn was one of principal and agent. It rejected the architects’ argument that the law firm was an independent contractor. Firm acted independently The Illinois Supreme Court, however, said that Sabo & Zahn was unquestionably acting as an independent contractor and reinstated summary judgment for Holabird. “Were we to hold otherwise,” Kilbride said, “we would in effect compel clients in similar cases to oversee or micromanage every action taken by their attorneys during the course of the attorney-client relationship, and obligate clients to take control of their representation at the slightest hint of potentially wrongful conduct on the part of their attorneys.” Los Angeles attorney Kevin Rosen, who chairs the legal malpractice defense group at Gibson, Dunn & Crutcher, agreed with Kilbride’s take on micromanagement. “It’s not what we want clients to have the responsibility of doing . . . policing their lawyers. We have ethical rules and criminal regulations for that,” said Rosen, who was not involved in the case. Rosen also said that the majority decision was generally consistent with the prevailing law around the country. “An attorney is an independent contractor; therefore the strict agency relationship that might otherwise govern a strict agency relationship doesn’t apply.” He noted, however, that there are practical issues associated with the prevailing rule. “It’s difficult to prove ratification and authorization when communications are privileged. You have to pierce the privilege or convincingly argue that it’s been waived,” Rosen said. He noted, however, that if there was proof of authorization to commit a tortious or illegal act, then the client can be held liable. “Once complicit, you are effectively talking about direct liability.” Chicago lawyer Michael L. Shakman, a partner in the boutique legal malpractice defense firm Miller Shakman & Hamilton, said there may be a “subtext” to the ruling. “[L]awyers sometimes market their services by purporting to be the meanest junkyard dog on the block . . . . And some clients believe that hiring the meanest, nastiest lawyer is the thing to do. It’s not,” said Shakman, who also is not involved in the case. “That kind of attitude may sometimes get lawyers into positions where the lawyer is pushing the envelope and the client may not know precisely what the lawyer is doing.” Steven M. Teff, an associate in the Downers Grove, Ill., firm of David Izzo & Associates, represented Holabird. Agreeing with the ruling, he said, “you have to allow the client to rely on their lawyer.” Horwitz’s lawyer, David Novoselsky of Chicago, said that he would petition the court for a rehearing. Noting the 4-3 split and a 3 1/2-year delay between argument and decision, he said that several justices who heard the case had left the bench by the time the court ruled. Citing McMorrow’s dissent, he also said that there was enough evidence in the record that Holabird had ratified Sabo’s actions to send the case to a jury. Sabo’s attorney, Terrence P. McAvoy of Chicago’s Hinshaw & Culbertson, said that his client was simply seeking to enforce the judgment it had obtained for its client by discovering assets that may satisfy it. Its actions, he said, were shielded by Illinois’ qualified attorney privilege rule. Dormant while the appeal was pending, the case against Sabo will now go forward, he and Novoselsky said. Harris’ e-mail is [email protected].

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