Winniczek, Hilary M. v. Nagelberg, Sheldon ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2106
HILARY MAREK WINNICZEK and
DANUTA WINNICZEK,
Plaintiffs-Appellants,
v.
SHELDON B. NAGELBERG,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 6962—James F. Holderman, Judge.
____________
ARGUED NOVEMBER 30, 2004—DECIDED JANUARY 7, 2005
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Before BAUER, POSNER, and EASTERBROOK, Circuit Judges.
POSNER, Circuit Judge. The district court dismissed for
failure to state a claim a diversity suit that charges breach of
contract, legal malpractice, and breach of fiduciary duty, all
in violation of Illinois law. The plaintiffs are Hilary
Winniczek and his wife, Danuta; the defendant is a lawyer,
Sheldon Nagelberg. The complaint, our only source of facts,
alleges the following. Winniczek was charged with a variety
2 No. 04-2106
of federal criminal offenses arising from his participation in
a scheme to help people obtain commercial drivers’ licenses
fraudulently. He hired a lawyer named Petro to represent
him. Nagelberg got wind of the matter and advised the
Winniczeks that Petro was inexperienced in federal criminal
matters and they should fire Petro and hire him; and they
did so. Nagelberg then told them that Winniczek had a
good defense to the criminal charges but that it would cost
the Winniczeks $150,000 in fees, plus $20,000 in expenses, to
present the defense. They paid him the $170,000 over the
course of the year preceding the scheduled date of the
criminal trial. As soon as Nagelberg was fully paid, he told
the Winniczeks that he wouldn’t take the case to trial
because Winniczek had made statements to the authorities
when he was represented by Petro that scotched any
defense he might have had, and as a result Winniczek had
no choice but to plead guilty. Nagelberg then departed the
scene and another lawyer represented Winniczek at the plea
hearing. Winniczek pleaded guilty and was sentenced to 22
months in prison.
Winniczek does not claim to be innocent of the crimes for
which he was convicted, and this dooms his claim for legal
malpractice. (His wife, not having been represented by
Nagelberg, obviously has no malpractice claim.) Under
Illinois law, as that of other states, a criminal defendant can-
not bring a suit for malpractice against his attorney merely
upon proof that the attorney failed to meet minimum stand-
ards of professional competence and that had he done so the
defendant would have been acquitted on some technicality;
the defendant (that is, the malpractice plaintiff) must also
prove that he was actually innocent of the crime, Kramer v.
Dirksen, 695 N.E.2d 1288, 1290 (Ill. App. 1998); Moore v.
Owens, 698 N.E.2d 707, 709 (Ill. App. 1998); Levine v. Kling,
123 F.3d 580, 581-82 (7th Cir. 1997) (Illinois law), which
No. 04-2106 3
Winniczek cannot prove. This “actual innocence” rule pre-
sumably has an exception for the case in which, although
the defendant is guilty, he received an unlawful penalty,
though we cannot find any cases on the point; but the ex-
ception would not be applicable to Winniczek either.
The “actual-innocence” rule differs from the rule applica-
ble to malpractice arising out of civil matters. There the only
requirement is, as in all tort cases, that the plaintiff prove he
was injured by the defendant’s negligence. If the malprac-
tice involved the handling of a lawsuit, all he has to prove
is that he would have won had it not been for the lawyer’s
negligence. Cedeno v. Gumbiner, 806 N.E.2d 1188, 1192 (Ill.
App. 2004); Owens v. McDermott, Will & Emery, 736 N.E.2d
145, 155 (Ill. App. 2000); Lucey v. Law Offices of Pretzel &
Stouffer, Chartered, 703 N.E.2d 473, 476-77 (Ill. App. 1998);
Mihailovich v. Laatsch, 359 F.3d 892, 904-05 (7th Cir. 2004)
(Illinois law). It would be irrelevant that the negligence had
consisted in failing to make a purely technical argument.
See McKnight v. Dean, 270 F.3d 513, 517-18 (7th Cir. 2001).
The reason for the difference is not that criminals are dis-
favored litigants, though there are hints of such a rationale
in some cases. Kramer v. Dirksen, supra, 695 N.E.2d at 1290;
Peeler v. Hughes & Luce, 909 S.W.2d 494, 497 (Tex. 1995);
Labovitz v. Feinberg, 713 N.E.2d 379, 383 and n. 9 (Mass. App.
1999). It is that the scope for collateral attacks on judgments
is broader in criminal than in civil matters. A criminal
defendant can establish ineffective assistance of counsel, the
counterpart to malpractice, Praxair, Inc. v. Hinshaw &
Culbertson, 235 F.3d 1028, 1031 (7th Cir. 2000) (Illinois law);
McCord v. Bailey, 636 F.2d 606, 609 (D.C. Cir. 1980), and thus
get his conviction vacated, by proving that had it not been
for his lawyer’s failure to come up to minimum professional
standards, he would have been acquitted. He can do this
even if, as in a case in which his only defense was that
4 No. 04-2106
illegally seized evidence had been used against him, the
ground for acquittal would have been unrelated to innocence.
Owens v. United States, 387 F.3d 607, 609-11 (7th Cir. 2004),
and cases cited in id. at 611. Since a criminal defendant thus
has a good remedy for his lawyer’s malpractice—namely to
get his conviction voided—he has less need for a damages
remedy than the loser of a civil lawsuit, who would have no
chance of getting the judgment in the suit set aside just
because his lawyer had booted a good claim or defense.
This analysis shows that the logic of the “actual innocence”
rule does not extend to a case in which the complaint is not
that the plaintiff lost his case because of his lawyer’s neg-
ligence, but that he was overcharged. The fact that one of
the plaintiffs, namely Mrs. Winniczek, wasn’t even charged
with a crime merely underscores the district court’s error.
She is seeking restitution of money obtained from her by
false pretenses or breach of an implied contract. Wood v.
Wabash County, 722 N.E.2d 1176, 1178-79 (Ill. App. 1999);
Owen Wagener & Co. v. U.S. Bank, 697 N.E.2d 902, 907 (Ill.
App. 1998); Perlman v. Zell, 185 F.3d 850, 852 (7th Cir. 1999)
(Illinois law); Europlast, Ltd. v. Oak Switch Systems, Inc., 10
F.3d 1266, 1272 (7th Cir. 1993) (ditto); cf. People v. Emmel, 127
N.E. 53, 56 (Ill. 1920). But so is Winniczek, in count one of
the complaint, which is for breach of contract or, what need
not be distinguished in this case (for all that is important is
that the Winniczeks are complaining only about an over-
charge, and not about the failure of Nagelberg to gain
Winniczek an acquittal or a lighter sentence), breach of the
fiduciary obligation that Nagelberg, as Winniczek’s lawyer,
owed him. Everen Securities, Inc. v. A.G. Edwards & Sons, Inc.,
719 N.E.2d 312, 318 (Ill. App. 1999); Lagen v. Balcor Co., 653
N.E.2d 968, 975 (Ill. App. 1995); Pommier v. Peoples Bank
Marycrest, 967 F.2d 1115, 1119 (7th Cir. 1992) (Illinois law);
Burdett v. Miller, 957 F.2d 1375, 1381 (7th Cir. 1992) (same);
No. 04-2106 5
United Artists Theatre Co. v. Walton, 315 F.3d 217, 233 (3d Cir.
2003); In re Baylis, 313 F.3d 9, 20 (1st Cir. 2002); Restatement
(Second) of Agency § 13, comment a (1958). Only count two
is for malpractice, and only that count is barred by the
requirement, in a malpractice suit growing out of a criminal
conviction, of proving actual innocence of the crime.
To see why count one is not about malpractice, imagine
that Nagelberg had promised to represent Winniczek for a
fee of $50,000, plus $25,000 in prepaid expenses of which
any amount not expended was to be returned to Winniczek.
Suppose further that Nagelberg had done a superb though
ultimately unsuccessful job in representing Winniczek but
had incurred expenses of only $5,000 and refused to refund
the balance of the $25,000 in prepaid expenses. There would
be no malpractice, in the sense of incompetent representa-
tion—and there would be nothing in the thinking behind
the actual-innocence rule to suggest that Winniczek should
not be allowed to enforce his contract just because he had
been convicted. So we are not surprised that the courts that
have confronted this type of case—no Illinois court has—
have held that the actual-innocence rule is not a bar. Bird,
Marella, Boxer & Wolpert v. Superior Court, 130 Cal. Rptr. 2d
782 (App. 2003); Van Polen v. Wisch, 23 S.W.3d 510, 516 (Tex.
App. 2000); Labovitz v. Feinberg, supra, 713 N.E.2d at 385. As
explained in Bird, Marella, “a fee dispute between a con-
victed criminal defendant client and his former counsel does
not entail the policy considerations which arise from a
malpractice suit. The client does not seek to shift the
punishment for his criminal acts to his former counsel nor
is the client’s own criminal act the ‘ultimate source of his
predicament’ as evidenced by the fact a client acquitted of
the criminal charges against him could have suffered the
same unlawful billing practices . . . . Furthermore a fee
dispute between client and counsel does not give rise to the
6 No. 04-2106
practical problems and pragmatic difficulties inherent in a
malpractice action brought by a convicted criminal defen-
dant client. . . . [T]here is no difficulty in quantifying dam-
ages for a wrongful conviction or a longer prison sentence
and there is no problem of applying a standard of proof
within a standard of proof. A judgment for the client in a fee
dispute is not inconsistent with a judgment for the People in
the criminal case. And, there is no duplication of effort since
a fee dispute obviously cannot be resolved through
postconviction relief.” 130 Cal. Rptr. 2d at 789 (emphasis in
original).
We expect that if and when such a case is presented to an
Illinois court, it will decide it the same way. Nagelberg
argues, however, that the Winniczeks’ complaint alleges
only malpractice (which the actual-innocence rule bars). But
that is not correct. The complaint has two counts, remember,
and only the second is captioned “professional negligence”
(i.e., malpractice); the first is captioned “breach of
contract/fiduciary duty.” It is true that the narrative portion
of count one accuses Nagelberg not only of overcharging and
of charging for services not rendered but also of being care-
less, for example in failing to read the statements by
Winniczek to the authorities that showed he had no defense.
But the fact that a breach of contract is negligent rather than
willful does not change the character of the breach. Some-
times a contract is broken willfully, sometimes unavoidably
(circumstances beyond the promisor’s control, but not rising
to the level at which he would have a defense of impos-
sibility or force majeure, might have prevented him from ful-
filling his promise), and sometimes carelessly (the promisor
should have realized he couldn’t fulfill his promise—that he
had bitten off more than he could chew). Since liability for
breach of contract is, in general, strict liability, Zapata
Hermanos Sucesores, S.A. v. Hearthside Baking Co., 313 F.3d
No. 04-2106 7
385, 389 (7th Cir. 2002) (Illinois law); Venture Associates Corp.
v. Zenith Data Systems Corp., 96 F.3d 275, 279 (7th Cir. 1996)
(ditto); Patton v. Mid-Continent Systems, Inc., 841 F.2d 742,
750 (7th Cir. 1988), the cause, character, and mental element
of the breach usually are immaterial.
The point is that in count one—unlike count two—the
Winniczeks are not trying to blame Nagelberg for the fact
that Winniczek was convicted; that would be a malpractice
claim and, if it could be maintained (it could not, because of
the actual-innocence rule), the measure of damages would
be the cost to Winniczek of being convicted, imprisoned, and
fined. Levine v. Kling, supra, 123 F.3d at 582 (Illinois law); cf.
Sterling Radio Stations, Inc. v. Weinstine, 765 N.E.2d 56, 62 (Ill.
App. 2002); Mungo v. Taylor, 355 F.3d 969, 974 (7th Cir. 2004)
(Illinois law); Stewart v. Hall, 770 F.2d 1267, 1269 (4th Cir.
1985); Woodruff v. Tomlin, 593 F.2d 33, 44 (6th Cir. 1979). In
count one the Winniczeks are trying to recover damages
differently measured from what would be appropriate in a
malpractice suit, where the wrong is not an overcharge but
a conviction. The recovery of the overcharge is not barred
by the actual-innocence rule.
Nagelberg argues that, even so, the Winniczeks’ exclusive
remedy is to complain to the Illinois Attorney Registration
and Disciplinary Commission that Nagelberg violated his
ethical obligations to Winniczek; the ARDC could in turn
seek an order from the Supreme Court of Illinois that
Nagelberg refund all or part of his fee to the Winniczeks.
E.g., In re Holz, 533 N.E.2d 818, 824 (Ill. 1988). But this mode
of proceeding might not (we do not say would not— it is an
open question) provide any relief if Nagelberg merely broke
his contract with them. The Illinois Rules of Professional
Conduct, while providing relief against overcharging a
client, Rule 1.5; Cripe v. Leiter, 703 N.E.2d 100, 105-06 (Ill.
1998), do not say in so many words that a lawyer’s breaking
8 No. 04-2106
his contract with a client is a violation of professional ethics
even if it is a contract about the lawyer’s fee. In any event,
there is no basis in Illinois law for supposing that filing a
complaint with the ARDC is a condition precedent to
bringing a suit against one’s attorney for breach of contract
just because the breach may also have involved a violation
of the attorney’s ethical duties.
Nor is there a basis for supposing that only the court in
which, as it were, the breach of the lawyer’s contract with
his client occurred has exclusive jurisdiction over the con-
tract suit. That is not the rule in ordinary civil malpractice,
see McKnight v. Dean, supra, 270 F.3d at 516 (Illinois law); In
re Witko, 374 F.3d 1040, 1042 (11th Cir. 2004); Fornarotto v.
American Waterworks Co., 144 F.3d 276, 285 n. 10 (3d Cir.
1998); Byers v. Burleson, 713 F.2d 856, 857-59 (D.C. Cir. 1983),
and there is no reason to make it the rule in a case—which
is not even a malpractice case—arising from a criminal pro-
ceeding. See Woidtke v. St. Clair County, 335 F.3d 558, 560
(7th Cir. 2003) (Illinois law); Diaz v. Paul J. Kennedy Law
Firm, 289 F.3d 671, 672-73 (10th Cir. 2002); Settle v. Fluker,
978 F.2d 1063 (8th Cir. 1992) (per curiam). Quite apart from
the fact that Winniczek pleaded guilty, so that the judge had
no opportunity to observe the lawyer’s services, or the
absence thereof, to his client, were it not for the happen-
stance that the parties were of diverse citizenship the federal
court in which Winniczek was convicted would not have
had jurisdiction over this suit.
The dismissal of count two is affirmed, but the dismissal
of count one is reversed and the case remanded for further
proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
No. 04-2106 9
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-7-05