Huang v. Brenson , 2014 IL App (1st) 123231 ( 2014 )

Illinois Official Reports
Appellate Court
Huang v. Brenson, 2014 IL App (1st) 123231
Appellate Court JOHN Z. HUANG, Individually, and JOHN Z. HUANG, P.C.,
Caption Plaintiffs-Appellants, v. IAN BRENSON, Individually, and THE
LAW OFFICES OF IAN BRENSON, Defendants-Appellees.
District & No. First District, Third Division
Docket No. 1-12-3231
Filed March 5, 2014
Held In a legal malpractice action against defendants who represented
(Note: This syllabus plaintiffs in an underlying legal malpractice action, the dismissal of
constitutes no part of the plaintiffs’ claims was affirmed, since plaintiffs lost the underlying
opinion of the court but malpractice action against them because of the intervening
has been prepared by the misapplication of the law by the trial court in that action, not the
Reporter of Decisions malpractice of plaintiffs’ counsel, plaintiffs were vindicated on appeal
for the convenience of due to counsel’s preservation of the issue of noneconomic damages in
the reader.) the underlying malpractice action, plaintiffs’ counsel did not
proximately cause plaintiffs’ damages, and plaintiffs failed to plead
that defendants breached any fiduciary duty by failing to tell plaintiffs
of settlement demands made in the underlying malpractice action.
Decision Under Appeal from the Circuit Court of Cook County, No. 10-L-14082; the
Review Hon. Randye A. Kogan, Judge, presiding.
Judgment Affirmed.
Counsel on Jenna M. Smith, of John Z. Huang & Associates, of Chicago, for
Appeal appellants.
Jason M. Kuzniar and Lauren M. Kim, both of Wilson, Elser,
Moskowitz, Edelman & Dickler LLP, of Chicago, for appellees.
Panel PRESIDING JUSTICE HYMAN delivered the judgment of the court,
with opinion.
Justices Neville and Pucinski concurred in the judgment and opinion.
OPINION
¶1 Plaintiffs, a lawyer and his firm, brought this legal malpractice claim against the lawyer
who defended him in a legal malpractice claim brought by a former client. In the original case,
plaintiffs’ professional liability insurer retained defendants Ian Brenson and the Law Offices
of Ian Brenson (collectively, Brenson) to represent plaintiffs John Z. Huang and his firm John
Z. Huang, P.C. (collectively, Huang). The former client prevailed against Huang. (Ultimately,
that judgment was reversed on appeal.) Huang’s legal malpractice case against Brenson was
dismissed, and this appeal followed.
¶2 We hold that Huang failed to plead facts that establish a cognizable claim, and, therefore,
we affirm.
¶3 BACKGROUND
¶4 Yongping Zhou, a Chinese citizen, was convicted in 1998 of domestic violence. He
received a one-year suspended sentence. As a result, in early 2001, the Immigration and
Naturalization Service (INS) detained Zhou and served him with a notice of intent to deport to
China, giving 10 days to rebut the charges and contest the deportation. Through a friend, Zhou
retained Huang, an immigration lawyer, to represent him in the INS proceedings. Huang
represented Zhou from February 2001 until June 2001, when Zhou terminated the relationship
and retained another attorney.
¶5 The new attorney represented Zhou in the INS proceedings. After hearing Zhou’s
testimony, the judge denied Zhou’s request for asylum and rejected his torture and persecution
claims. Zhou hired several more attorneys before he was able to have his conviction for
domestic violence vacated. After spending two years in prison, Zhou was released on bond in
2003 from INS detention.
¶6 In May 2003, Zhou sued Huang for legal malpractice. Zhou’s amended complaint alleged
that Huang acted negligently, and he sought damages for emotional distress, physical abuse,
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isolation, humiliation, pain and suffering, loss of education, and loss of income. Huang’s
professional liability insurer retained Brenson to represent Huang.
¶7 Five years later, Brenson moved for summary judgment on Huang’s behalf, arguing that
Zhou could not recover noneconomic damages in a legal malpractice action. The circuit court
denied that motion and set the matter for a jury trial. Before trial, Brenson moved in limine to
exclude evidence of noneconomic damages, which the judge denied as well. During the
three-week trial, Zhou only presented evidence on damages for emotional distress, loss of
normal life, psychological damages, and the cost of future psychological care–damages that
are all noneconomic in nature. Brenson argued that the jury should be instructed that it could
not award damages based on noneconomic injury, but the trial judge declined the instruction.
The jury awarded Zhou $4 million.
¶8 After the trial, Huang terminated Brenson and hired two new attorneys for posttrial and
asset discovery proceedings: one paid for by his insurer, and the other Huang paid. The trial
court granted a remittitur and reduced Zhou’s judgment to $1 million, which Zhou rejected.
Huang then moved for judgment n.o.v. and for a new trial. The judge denied the motion, and
both Zhou and Huang appealed.
¶9 In that appeal, Huang argued that the trial court erred in allowing Zhou to recover
nonpecuniary damages. The appellate court agreed, holding that Zhou was “prohibited from
recovering damages for emotional distress in the instant action.” Zhou v. John Z. Huang, P.C.,
No. 1-08-2807 (2010) (unpublished order under Supreme Court Rule 23). The court reversed
and remanded with instructions to enter judgment n.o.v. in favor of Huang and his firm. The
supreme court denied Zhou’s petition for leave to appeal. Zhou v. John Z. Huang, P.C., 239 Ill.
2d 592 (2011) (table).
¶ 10 In December 2010, Huang filed this case in the circuit court, alleging Brenson committed
legal malpractice while defending the Zhou malpractice case. Huang’s second amended
complaint contained 10 counts, including 8 counts alleging “negligence/legal malpractice” on
the following grounds:
$ Brenson negligently conducted discovery, causing Huang to be unprepared for his
deposition (count I);
$ Brenson failed to communicate with Huang for eight months, contributing to
Huang’s being unprepared at trial (count II);
$ Brenson failed to procure an expert for trial (count III);
$ Brenson failed to depose or call as witnesses the immigration judge, INS officers,
Zhou’s former wife, or other attorneys who represented Zhou in the immigration
proceeding (count IV);
$ Brenson failed to advise Huang of the possibility of a multimillion dollar verdict
(count VII);
$ at trial, Brenson failed to introduce key documents into evidence (count VIII);
$ at trial, Brenson failed to object to inadmissible evidence (count IX); and
$ Brenson failed to move the case forward in a timely manner, leaving it pending in
the circuit court for five years (count X).
¶ 11 Huang also filed claims for breach of fiduciary duty. In count V, Huang alleged that
Brenson concurrently represented Huang and the professional liability insurance company,
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and, as a result, failed to relay several of Zhou’s settlement offers to Huang. Similarly, in count
VI, Huang alleged that Brenson breached his fiduciary duty of loyalty by failing to relay
Zhou’s settlement offers. He sought damages of $154,855 for attorney fees paid to the posttrial
and appellate counsel.
¶ 12 Brenson moved to dismiss the second amended complaint, which the trial court granted.
Dismissed with prejudice were most of the legal malpractice claims (counts I, II, III, IV, VIII,
IX, and X). The circuit judge reasoned that Brenson could not be held responsible for a judicial
mistake that required an appeal to correct. The court further dismissed counts V, VI, and VII
without prejudice because Huang did not allege that his insurer was willing to settle the case,
or that he could settle the case on his own.
¶ 13 Huang repleaded counts V, VI, and VII in a fourth amended complaint. Brenson again
moved to dismiss, and, again, the circuit judge dismissed. The trial court held that the fourth
amended complaint failed to “adequately allege that Huang had the authority to demand his
insurance company settle, and that Lloyd’s [the insurer] would have paid the demand.”
¶ 14 Huang now appeals the dismissal of the second and fourth amended complaints.
¶ 15 STANDARD OF REVIEW
¶ 16 We review motions to dismiss under sections 2-619 and 2-615 of the Code of Civil
Procedure de novo. Dratewska-Zator v. Rutherford, 2013 IL App (1st) 122699, ¶ 16; 735 ILCS
5/2-615, 2-619(a) (West 2008). Accordingly, we may affirm or reverse on any basis found in
the record. Raintree Homes, Inc. v. Village of Long Grove, 209 Ill. 2d 248, 261 (2004).
¶ 17 Dismissal is proper under section 2-615 when it is clear that the plaintiff has not pled a set
of facts that would entitle it to relief. Central Austin Neighborhood Ass’n v. City of Chicago,
2013 IL App (1st) 123041, ¶ 8. Opposition to a section 2-615 motion cannot rely on mere
conclusions of law unsupported by specific factual allegations. Karimi v. 401 North Wabash
Venture, LLC, 2011 IL App (1st) 102670, ¶ 13. Though, for the purposes of the motion,
well-pleaded factual allegations and reasonable inferences are treated as true. Illinois
Insurance Guaranty Fund v. Liberty Mutual Insurance Co., 2013 IL App (1st) 123345, ¶ 14.
¶ 18 A motion under section 2-619 admits the legal sufficiency of the pleading, but asserts
affirmative matter. Czarobski v. Lata, 227 Ill. 2d 364, 369 (2008). These motions dispose of
issues of law and easily proved issues of fact early in the litigation. Id. Construing the
pleadings and supporting documents in the light most favorable to the nonmoving party, we
consider whether the existence of a genuine issue of material fact precluded dismissal. Id.
¶ 19 ANALYSIS
¶ 20 Forfeiture of Issue of Proximate Cause
¶ 21 Brenson argues that Huang forfeited the issue of proximate cause by not raising it in the
trial court. We disagree.
¶ 22 Failure to raise an issue in the trial court generally results in forfeiture of that issue on
appeal. Fillmore v. Walker, 2013 IL App (4th) 120533, ¶ 27. Issues raised on appeal must be at
least “commensurate with” those raised before the trial court. Greer v. Illinois Housing
Development Authority, 122 Ill. 2d 462, 509 (1988). Here, Brenson raised the issue of
proximate cause in the motion to dismiss the second amended complaint, and Huang argued in
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response that the trial judge’s mistake in Zhou did not excuse Brenson’s negligence. Huang’s
responsive briefing was sufficient to preserve the issue for our review. Accordingly, Huang did
not forfeit the proximate cause issue.
¶ 23 Legal Malpractice
¶ 24 Huang argues that the trial court erred in ruling that Brenson did not proximately cause
Huang’s damages. We disagree.
¶ 25 The elements of a cause of action for legal malpractice are: (i) the defendant attorney owed
the plaintiff client a duty of due care arising from an attorney-client relationship; (ii) the
attorney breached that duty; (iii) the client suffered an injury in the form of actual damages;
and (iv) the actual damages resulted as a proximate cause of the breach. Nelson v. Quarles &
Brady, LLP, 2013 IL App (1st) 123122, ¶ 28. A legal malpractice plaintiff may recover as
actual damages the attorney fees proximately caused by the defendant’s malpractice, “so long
as the plaintiff can demonstrate she [or he] would not have incurred the fees in the absence of
the defendant’s negligence.” Nettleton v. Stogsdill, 387 Ill. App. 3d 743, 753 (2008).
¶ 26 There are two tests of proximate cause. Under the traditional “but for” test, a plaintiff must
plead facts establishing that, but for the attorney’s malpractice, plaintiff would have prevailed
in the underlying action. Estate of Powell v. John C. Wunsch, P.C., 2013 IL App (1st) 121854,
¶ 29. Under the other test, the “substantial factor” test, the plaintiff must show that the
defendant’s negligence was a material element and a substantial factor in bringing about the
injury. Thacker v. UNR Industries, Inc., 151 Ill. 2d 343, 355 (1992).
¶ 27 Proximate cause further requires a showing of legal cause, that is to say, foreseeability. The
defendant’s actions are the legal cause of the plaintiff’s injury where a reasonable person in the
defendant’s position could foresee the plaintiff’s injury as a likely result of the defendant’s
conduct. Gaylor v. Campion, Curran, Rausch, Gummerson & Dunlop, P.C., 2012 IL App (2d)
110718, ¶ 62. Proximate cause is generally an issue for the trier of fact, and should not be
decided as a matter of law unless the facts are undisputed and reasonable persons could not
differ in the result. Nettleton v. Stogsdill, 387 Ill. App. 3d at 753.
¶ 28 “Where there are successive negligent actors, however, the negligence of the second actor,
under certain circumstances, may be deemed a superceding cause–relieving the original
negligent actor of liability, as a matter of law.” Lopez v. Clifford Law Offices, P.C., 362 Ill.
App. 3d 969, 979 (2005). “A foreseeable intervening cause does not break the chain of legal
causation and to avoid liability, a defendant must show that the intervening event was
unforeseeable as a matter of law. [Citation.] Where varying inferences are possible,
foreseeability is a question of fact for the jury.” Calloway v. Bovis Lend Lease, Inc., 2013 IL
App (1st) 112746, ¶ 79. An attorney should not be held liable for malpractice where a judge’s
“misapplication of the law served as an intervening cause.” Cedeno v. Gumbiner, 347 Ill. App.
3d 169, 176 (2004).
¶ 29 In Cedeno v. Gumbiner, the plaintiff client’s deceased mother was injured while exiting a
bus. Cedeno, 347 Ill. App. 3d at 170. She retained defendant attorney who referred the case to
another defendant attorney. Id. The second attorney sent the Chicago Transit Authority (CTA)
the required notice of claim for personal injuries, but the notice had the wrong date of injury.
Id. The client discharged the second attorney and retained a third, who filed a complaint in the
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circuit court against the CTA. Id. at 170-71. Eventually the CTA moved for summary
judgment, asserting that the date on the notice was incorrect and invalidated the client’s claim.
Id. at 171 (citing 70 ILCS 3605/41 (West 1998)). This notice requirement was later eliminated.
See Pub. Act 96-12 (eff. June 1, 2009) (amending 70 ILCS 3605/41).
¶ 30 The circuit court erroneously granted the CTA summary judgment, and the third attorney
timely filed a notice of appeal. Cedeno, 347 Ill. App. 3d at 171. Eventually that appeal was
dismissed for want of prosecution. Id. The client filed a legal malpractice action, alleging that
her first and second attorneys (but not the third) were negligent in issuing a defective written
notice of the accident. Id. The attorneys moved for and were granted summary judgment, and
the appellate court affirmed. Id. Regarding causation, the panel noted that if “the underlying
cause remained actionable upon the discharge of the former attorney, plaintiff can prove no set
of facts which connect defendant’s conduct with any damage plaintiff sustained.” Id. at 174.
Because the client’s claim was “actionable after defendants’ discharge, and the circuit court’s
misapplication of the law served as an intervening cause, it cannot be said that plaintiff’s
damages proximately resulted from defendants’ Notice.” Id. at 176.
¶ 31 Huang asserts that, but for Brenson’s negligence in preparing for and trying his case,
Huang would not have had to procure posttrial and appellate counsel to correct Brenson’s
mistake. In support, Huang cites Nettleton v. Stogsdill. There, the defendant attorney
represented the plaintiff client during her dissolution of marriage petition. Nettleton, 387 Ill.
App. 3d at 745. One day before the trial on the petition, the attorney requested a continuance
due to his being engaged in another trial at the same time. Id. The trial court denied the motion,
and at trial, the attorney again moved for a continuance. Id. at 745-46. The trial court granted a
two-day continuance. Id. at 746. At the next trial date, the attorney moved to voluntarily
nonsuit the dissolution petition, which the trial court denied on the basis of improper notice. Id.
The attorney then called the client to the stand, asked her to state and spell her name, and then
rested the case. Id. The trial court held that the client had failed to prove her case and dismissed
her petition. Id.
¶ 32 The client filed suit against the attorney alleging malpractice in failing to prepare for the
trial on the original petition. Id. at 746-47. The trial court granted summary judgment in favor
of the attorney, holding that the plaintiff failed to prove her damages were proximately caused
by the attorney’s negligence. Id. at 747. The appellate court disagreed, holding in part that a
genuine issue of material fact precluded summary judgment. Id. at 754. Specifically:
“[A] reasonable person could conclude that defendants were the proximate cause of at
least some of plaintiff’s attorney fees. We acknowledge, as the trial court did, that
‘divorces continue for all kinds of reasons’ and that many factors, such as ‘decisions
that [plaintiff] made regarding counsel, regarding what to accept, what not to accept,
how much maintenance that she wanted and her feelings,’ may have contributed to the
lengthy duration of the second dissolution proceeding and, thus, perhaps not all of
plaintiff’s attorney fees were proximately caused by defendants’ alleged malpractice.
We hold, however, that how much of plaintiff’s attorney fees was attributable to
defendants’ alleged malpractice versus how much was attributable to other factors
presented a genuine issue of material fact warranting a denial of the motion for
summary judgment.” (Emphasis added.) Id.
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¶ 33 The issue is proximate cause. To prevail, a plaintiff must plead facts showing that, but for
defendant’s acts of alleged malpractice, the plaintiff would not have incurred additional
attorney fees after trial and on appeal. In his second amended complaint, Huang alleged that
Brenson was negligent in his representation during pretrial discovery, in preparing for trial,
and at the trial itself. Huang essentially alleges that he should have won at trial and did not win
because of Brenson’s negligence. But, as was the case in Cedeno, Huang’s case remained
viable “after defendants’ discharge and the circuit court’s misapplication of the law served as
an intervening cause.” Cedeno, 347 Ill. App. 3d at 176. Not only did it remain viable, but
Huang was vindicated on appeal as a result of Brenson’s efforts to preserve the damages issue
in the trial court.
¶ 34 Unlike the client in Nettleton, Huang cannot attribute damages to Brenson’s failure at trial.
In malpractice cases like this one, which turn on the attorney’s conduct during litigation, “a
plaintiff must generally prove a case-within-a-case to establish proximate cause.” Union
Planters Bank, N.A. v. Thompson Coburn LLP, 402 Ill. App. 3d 317, 343 (2010). For the
case-within-a-case, as a matter of law, in Zhou v Huang, the trial court should have granted
Huang summary judgment or a directed verdict on all of Zhou’s claims for damages. Huang
does not contend that Brenson in any way contributed to the trial court’s error. See Skinner v.
Stone, Raskin & Israel, 724 F.2d 264, 266 (2d Cir. 1983) (“unless the trial court’s mistake was
a superseding rather than a contributing cause of the defective default judgment, [the
attorneys] may be held liable if their negligence was a proximate contributing cause”). Thus,
the trial court’s error acted as an intervening cause, relieving Brenson’s alleged negligence.
See Cedeno, 347 Ill. App. 3d at 175-76; Crestwood Cove Apartments Business Trust v. Turner,
2007 UT 48, ¶ 33, 164 P.3d 1247 (“summary judgment is appropriate where there is no doubt
that judicial error, rather than attorney malpractice, caused a client’s losses”).
¶ 35 Citing Governmental Interinsurance Exchange v. Judge, 221 Ill. 2d 195 (2006), Huang
further argues that the issue of proximate cause should not have been decided as a matter of
law. In that case, the plaintiff, Kendall County, Illinois, and its insurer retained the defendant
attorneys in a personal injury suit. Governmental Interinsurance Exchange, 221 Ill. 2d at
201-02. The attorney moved for summary judgment, arguing that the Local Governmental and
Governmental Employees Tort Immunity Act (745 ILCS 10/1-101 et seq. (West 2010))
immunized the county from liability. Governmental Interinsurance Exchange, 221 Ill. 2d at
201-02. The trial court denied the motion for summary judgment, and at trial the jury returned
a verdict against the county. Id. The attorney appealed on behalf of the county, but failed to
perfect the appeal on the merits. Id. at 202-04.
¶ 36 The county and its insurer filed suit against the attorney alleging appellate malpractice. The
circuit court granted summary judgment to the attorneys on the issue of proximate cause, and
the appellate and supreme courts affirmed. Id. at 209, 221. Our supreme court reasoned in part
that “the issue of proximate cause in an appellate legal malpractice action presents a question
of law for the court and not a question of fact for a jury.” Id. at 212.
¶ 37 The case before us does not involve appellate malpractice, and is therefore distinguishable
from Judge. Moreover, proximate cause may be determined as a matter of law where (i) the
facts are undisputed, and (ii) there can be no difference in the judgment of reasonable persons
as to the inferences that may be drawn from the facts. Nettleton v. Stogsdill, 387 Ill. App. 3d at
753 (citing Public Taxi Service, Inc. v. Barrett, 44 Ill. App. 3d 452, 456 (1976)). Brenson
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raised no factual dispute in his motion to dismiss, and Huang points to no inferences that give
rise to a dispute regarding proximate cause, such as occurred in Nettleton, 387 Ill. App. 3d at
754. Accordingly, the circuit court did not err in deciding Brenson did not proximately cause
Huang’s damages as a matter of law.
¶ 38 Estoppel
¶ 39 In his reply brief, Huang assert that Brenson should be estopped from relying on the work
of the posttrial and appellate attorneys, citing Kohler v. Woollen, Brown & Hawkins, 15 Ill.
App. 3d 455 (1973), in support. Kohler is distinguishable. In Kohler, the attorneys, who
represented two estates against the decedents’ insurance company, procured an arbitration
award against the insurance company, which the circuit court vacated on the grounds that the
demand for arbitration was not filed within two years from the death of the decedents. Id. at
457. In the circuit court, the appellate court, and in a petition for leave to appeal to the supreme
court, the attorney asserted the validity of the arbitration awards. Id. at 458. Later, in the
malpractice case, the attorney tried to deny the validity of those awards, and the appellate court
held that they were estopped from doing so. Id.
¶ 40 The Kohler case is an example of judicial estoppel.
“The doctrine of judicial estoppel promote[s] the truth and *** protect[s] the
integrity of the court system by preventing litigants from deliberately shifting positions
to suit the exigencies of the moment. [Citation.] Judicial estoppel is flexible but five
elements are generally necessary: (1) the two positions must be taken by the same
party; (2) the positions must be taken in judicial proceedings; (3) the positions must be
given under oath; (4) the party must have successfully maintained the first position and
received some benefit; and (5) the two positions must be totally inconsistent.
[Citation.] Judicial estoppel applies to statements of fact and not to legal opinions or
conclusions.” (Internal quotation marks omitted.) Nelson v. Quarles & Brady, LLP,
2013 IL App (1st) 123122, ¶ 59 (quoting United Automobile Insurance Co. v. Buckley,
2011 IL App (1st) 103666, ¶ 35).
¶ 41 Judicial estoppel is inapplicable because Huang has not asserted or shown any of the
elements of judicial estoppel, and defendants do not assert any factual position in this litigation
that is contrary to a position taken in the underlying case.
¶ 42 Breach of Fiduciary Duty
¶ 43 Huang argues that the trial court erred in holding that he failed to plead facts showing a
conflict of interest. Huang notes that Brenson’s affidavit attached to the motion to dismiss
stated, “I was retained by [plaintiffs] and their liability insurance carrier to defend them in
[Zhou’s] lawsuit.” Huang contends this statement was a judicial or evidentiary admission that
Brenson had a conflict of interest. We agree that plaintiffs pleaded the existence and breach of
a fiduciary duty, but hold that they did not plead facts showing defendants’ breach proximately
caused any damage.
¶ 44 To establish a claim for breach of fiduciary duty, the plaintiff must allege: (i) the existence
of a fiduciary duty; (ii) the breach of that duty; and (iii) damages proximately caused by the
breach. Wolinsky v. Kadison, 2013 IL App (1st) 111186, ¶ 73. Attorneys have a fiduciary duty
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to their clients. Brush v. Gilsdorf, 335 Ill. App. 3d 356, 360 (2002). “The fiduciary duty owed
by an attorney to a client encompasses the obligations of fidelity, honesty, and good faith.”
Metrick v. Chatz, 266 Ill. App. 3d 649, 656 (1994).
¶ 45 When an insurance company pays for an attorney to defend its insured, that does not
automatically create a conflict of interest. An attorney hired by an insurance company to
defend the company’s insured owes a fiduciary duty to both the insurance company and the
insured. Nandorf, Inc. v. CNA Insurance Cos., 134 Ill. App. 3d 134, 137 (1985). While, in
reality, the attorney’s loyalty may follow the purse strings, the attorney owes the insured the
same professional obligations as he or she would to any client. Id. Conflicts of interests arise in
these situations where the attorney puts the interests of the insurance company before those of
the client. Id. For example, where the insurance company and insured disagree about whether
to settle a case, a conflict arises, and the attorney cannot “continue to represent both without a
full and frank disclosure of the circumstances” to his or her clients. Rogers v. Robson, Masters,
Ryan, Brumund & Belom, 74 Ill. App. 3d 467, 474 (1979). The existence of an undisclosed
conflict of interest only satisfies the breach element, but not the causation element, of a breach
of fiduciary duty claim. Pippen v. Pedersen & Houpt, 2013 IL App (1st) 111371, ¶ 27.
¶ 46 In his fourth amended complaint, Huang alleged that Brenson failed to communicate
several settlement offers from Zhou, and failed to advise him of the risk of going to trial.
Failure to properly communicate a settlement offer to a client is typically considered a breach
of fiduciary duty. See Rogers v. Robson, Masters, Ryan, Brumund & Belom, 74 Ill. App. 3d at
475 (“By failing to inform [the client] of the proposed settlement, [the attorney] foreclosed [the
client] from alternatives that were available to him. *** Having failed to provide [the client]
with the proper disclosure of the facts and then obtaining [the client’s] consent to continued
representation, [the attorney] breached a duty which, if damages and proximate cause are
established, will make [the attorney] liable to [the client] for the loss caused by the lack of
disclosure.”). Accordingly, plaintiffs properly pleaded the existence of a fiduciary duty and its
breach.
¶ 47 But, Huang still fails to allege facts showing proximate cause. Huang alleges that, if
Brenson had notified him of Zhou’s settlement offers, he would have accepted and “demanded
that their insurance company accept it because it was within their policy limits,” which was
$500,000. Huang also alleges that the insurance company offered to settle the case for $50,000.
Huang alleges in the fourth amended complaint that the insurance company had offered to
settle Zhou’s case for $100,000. But exhibits show that the insurer only offered half of that
amount. The exhibits control over plaintiffs’ allegations. Ringgold Capital IV, LLC v. Finley,
2013 IL App (1st) 121702, ¶ 21. Huang essentially alleges that, if Brenson had properly
communicated Zhou’s settlement demands to him, the case would have settled and not
proceeded to trial, or the costly posttrial, and appeal.
¶ 48 There are three possibilities where a settlement would have precluded the trial: (i) if
plaintiffs could force their insurance company to settle, (ii) if plaintiffs could settle using their
own assets, or (iii) if plaintiffs could use a combination of insurance company funds and their
own assets to settle the case. Huang does not allege that he was willing or able to use his own
assets to settle the case, foreclosing on the second and third possibilities. Nor does Huang
allege facts showing that the professional liability insurer would have accepted Zhou’s
settlement offers. An insurance company need not always cede to the demands of its insured to
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settle. “If an opportunity appears to settle within the policy limits, thereby protecting the
insured from excess liability, the insurer must faithfully consider it, giving the insured’s
interests at least as much respect as its own. [Citation.] The insurer need not submit to
extortion; it may reject a bad deal without waiving the protection the policy limit gives it
against the vagaries of lawsuits. But if the honest and prudent course is to settle, the insurer
must follow that route.” La Rotunda v. Royal Globe Insurance Co., 87 Ill. App. 3d 446, 454
(1980). “[A]n insurer that undertakes the defense of a suit against the insured, where the
damages sought are in excess of the policy limits, cannot arbitrarily refuse a settlement within
policy limits.” Haddick v. Valor Insurance Co., 315 Ill. App. 3d 752, 755 (2000).
¶ 49 Huang does not allege facts that show the insurer would have or should have, in good faith,
accepted Zhou’s settlement demands. While, on several occasions, Zhou demanded that Huang
settle the case for $400,000, $500,000, $2 million, or $3 million, Huang does not allege or
assert facts showing that these demands were reasonable. Examining Zhou’s written demands,
we do not find citations to any cases or jury verdicts on claims similar to Zhou’s. Moreover, it
is not clear that, even if Brenson had properly informed Huang of Zhou’s demands, Huang
could have convinced or forced the insurance company to settle and avoid going to trial.
Accordingly, Huang failed to plead that defendants’ breach of fiduciary duty–failing to relay
Zhou’s settlement demands–proximately caused his damages.
¶ 50 CONCLUSION
¶ 51 Based on the foregoing, we affirm the dismissal of plaintiffs’ claims.
¶ 52 Affirmed.
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