Opinion
No. 98 C 1591
June 19, 2000
MEMORANDUM OPINION AND ORDER
Following a jury trial, plaintiffs Emil and Alex Arifin filed a motion for a new trial pursuant to Federal Rule of Civil Procedure 59(a) and a motion for "judgment as a matter of law and notwithstanding the jury's verdict" pursuant to Federal Rule of Civil Procedure 59(e). For the following reasons, plaintiffs' motions are DENIED.
BACKGROUND
Plaintiffs Emil and Alex Arifin filed a second amended complaint against defendant Lewis Matuszewich, alleging professional negligence in Matuszewich's setting up an account in a manner that allowed plaintiffs' former business partner to withdraw funds plaintiffs deposited in the account without their approval. Following discovery, approximately one month before trial was set to begin, this court denied plaintiffs' motion for leave to file a third amended complaint alleging a new time and manner in which the parties formed an attorney-client relationship.
This case was tried before a jury. In a series of special interrogatories, the jury returned a verdict in favor of Alex Arifin, finding that an attorney-client relationship existed between Alex Arifin and Matuszewich at the time of the alleged negligence, that the total damages suffered by Alex Arifin was $318,000, and that Alex Arifin was 50% responsible for his own injury, thereby reducing the total damages award to $159,000. As to Emil Arifin, the jury found that no attorney client relationship existed between Emil Arifin and defendant Matuszewich. Based upon that finding, Matuszewich did not owe Emil Arifin a duty of care, and could not be held liable for his damages. The jury thus found in favor of Matuszewich as to Emil Arifin, and Emil Arifin recovered no damages.
Plaintiffs have moved for a new trial and for "judgment as a matter of law and notwithstanding the verdict." Plaintiffs did not move for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(a) at the close of evidence.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 59(a) governs plaintiffs' motion for a new trial. Under Rule 59(a), "A new trial may be granted to all or any of the parties and on all or any of the issues (1) in any action in which there has been a trial by jury, for any of the reasons for which trials have heretofore been granted in actions at law in the courts of the United States." A motion for a new trial will be granted if the clear weight of the evidence is against the jury verdict, the damages are excessive, or for some other reason the trial was not fair to the moving party. Scaggs v. Consolidated Rail Corp., 6 F.3d 1290, 1293 (7th Cir. 1993).
As to plaintiffs' motion for "judgment as a matter of law and notwithstanding the jury's verdict," this court notes that plaintiffs' motion for "judgment as a matter of law" is barred by plaintiffs' failure to preserve it for post-trial consideration by making the motion at the close of evidence. See Fed.R.Civ.P. 50(b); Mid-America Tablewares, Inc. v. Mogi Trading Co., 100 F.3d 1353, 1364 (7th Cir. 1996). Therefore, this court treats plaintiffs' second motion solely a motion to alter or amend a judgment under Rule 59(e). Motions to alter or amend a judgment under Rule 59(e) must clearly establish either a manifest error of law or fact or must present newly discovered evidence. Federal Deposit Ins. Corp. v. Meyer, 781 F.2d 1260, 1268 (7th Cir. 1986); LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263, 1267 (7th Cir. 1995). These motions cannot be used to raise arguments which could, and should, have been made before the judgment issued. Meyer, 781 F.2d at 1268
ANALYSIS
I. Motion For New Trial Based on Evidence Concerning the Formation of an Attorney-Client Relationship After November 21. 1996Plaintiffs argue that the jury verdict against Emil Arifin must be set aside. Specifically, the jury answered Special Interrogatory No. 2, whether an attorney-client relationship had formed between Emil Arifin and defendant, in the negative. As such, the jury found that plaintiff Emil Arifin failed to satisfy an essential element of his claim. Plaintiffs argue that this court erred in refusing to allow plaintiffs to present evidence demonstrating that an attorney-client relationship formed between plaintiffs and defendant some time after November 21, 1996. Plaintiffs base their arguments in three related alleged errors committed by this court: refusing to allow plaintiffs to amend their complaint to include specific allegations that an attorney-client relationship formed between plaintiffs and Lewis Matuszewich after November 21, 1996, granting defendant's motion in limine regarding the timing of the formation of the attorney-client relationship, and giving jury instructions limiting the timing of the formation of an attorney-client relationship to before November 21, 1996.
Plaintiffs first argue that this court erred in refusing to allow them to amend their complaint to contain a specific allegation that an attorney-client relationship formed between plaintiffs and defendant between November 21, 1996 and April 1, 1997. Plaintiffs requested leave to file a third amended complaint on March 2, 2000, just over one month before trial, two months after the close of fact discovery, and several days after the close of expert discovery. This court denied the motion, reasoning that defendant would be prejudiced by a "twelfth hour" addition of a new theory for the existence of an attorney-client relationship. Plaintiffs now argue that the amendment was not, in fact, a new theory for the attorney-client relationship, but rather simply made clear what the parties had understood all along: that plaintiffs were alleging that an attorney-client relationship formed sometime prior to the time Emil Arifin deposited $2,000,000 in the NRB account. Plaintiffs further argue that the motion was not, as this court found, a "twelfth hour" request, because there was still one full month before trial.
A. Denial of Leave to File Proposed Third Amended Complaint
This court disagrees with plaintiffs' assessment of their proposed third amended complaint. Plaintiffs' second amended complaint stated: "Prior to November 21, 1996, . . . the Arifins hired Matuszewich to assist in establishing a limited liability company for the Tech Cotton Venture and to represent their interests in matters related to this goal." November 21, 1996 was the date of the alleged malpractice, and plaintiffs inserted the allegation that the attorney-client relationship had formed prior to November 21, 1996 in response to defendant's motion to dismiss plaintiffs' original complaint on the ground that there was no attorney-client relationship between plaintiffs and defendant. It was thus clear from the pleadings that plaintiffs intended to establish that an attorney-client relationship formed prior to November 21, 1996. Fact and expert discovery proceeded accordingly, with both parties focusing on whether an attorney-client relationship existed between the parties prior to the time of the alleged malpractice. Plaintiffs' proposed amendment stated: "Through and ongoing course of conduct between the Arifins and Matuszewich during the period November 21, 1996 to April 1, 1997, an attorney-client relationship formed between the Arifins and Matuszewich." (Proposed Third Amended Complaint ¶ 13.)
This court continues to view plaintiffs' proposed amendment as a "twelfth hour" attempt to introduce a new legal theory to this case: that an attorney-client relationship formed after the time of the alleged malpractice through some unspecified course of conduct. Allowing such a change in the legal theory of this case would have unfairly prejudiced defendant. In conducting discovery, defendant, understandably, never questioned plaintiffs as to conduct which they believed formed the an attorney-client relationship, nor questioned its own legal expert about this theory. Defendant would have been entitled to discovery on those issues, were the court to allow the amendment. Given the undue delay and prejudice that would have resulted from plaintiffs proposed amendment, this court was within its discretion in denying the motion for leave to file plaintiffs' third amended complaint. Eastern Nat Gas v. Aluminum Co. of America, 126 F.3d 996, 999 (7th Cr. 1997).
B. Grant of Defendant's Motion In Limine
Prior to trial, defendant filed a motion in limine to bar any evidence regarding the formation of an attorney-client relationship after November 21, 1996. This court granted the motion, barring plaintiffs from presenting evidence to show that an attorney-client relationship formed after November 21, 1996 on the basis that the plaintiffs should not be permitted to present evidence supporting a theory of relief that this court had not permitted them to plead. This court did not prohibit plaintiffs from presenting evidence concerning events after November 21, 1996, which supported the theory of a pre-existing attorney-client relationship. Thus, plaintiffs were free to introduce evidence of communications and conduct between the parties which suggested that they had formed an attorney-client relationship before November 21, 1996.
Plaintiffs, not surprisingly, argue that this court erred in granting defendant's motion in limine on the basis that plaintiffs should have been granted leave to file their third amended complaint in the first place. This court has already rejected that argument However, plaintiffs also argue that the decision to grant the motion in limine was wrong even if this court properly denied the motion for leave to file a third amended complaint because the second amended complaint contained sufficient allegations to mandate the admission of evidence demonstrating the formation of an attorney-client relationship after November 21, 1996. Plaintiffs point out that only paragraph 12 of their second amended complaint is limited to the time prior to November 21, 1996, while the rest of the complaint alleges the relationship generally, as permitted by the Rules of Civil Procedure. Plaintiffs argue that defendant was on notice of plaintiffs' claims that an attorney-client relationship formed "sometime before" Emil Arifin deposited his $2,000,000.
Plaintiffs have failed to demonstrate that evidence concerning the formation of an attorney-client relationship after November 21, 1996, should have been allowed. First, there is no reason to think that defendant was some how "on notice" that, despite a specific allegation in paragraph 12 of plaintiffs' second amended complaint regarding when the attorney-client relationship was formed, plaintiffs intended to introduce evidence concerning the formation of the relationship at a different time. Second, plaintiffs have given no reason to believe that the admission of such evidence would have changed the result. The evidence presented by plaintiffs at trial showed that defendant's negligent act occurred in November of 1996. If an attorney-client relationship did not exist between Emil Arifin and Matszewich at that time, then Emil Arifin has no cause of action against defendant, regardless of whether an attorney-client relationship formed at a later date. As such, evidence of the formation of an attorney-client relationship between the parties was properly limited to prior to November 21, 1996, and the jury was properly instructed to consider only whether an attorney-client relationship had formed prior to that time.
II. Jury Instructions Regarding the Formation of an Attorney-Client Relationship
Plaintiffs also argue that this court erred in instructing the jury on the formation of an attorney-client relationship. In addition to the Illinois Pattern Instruction concerning the duty of care owed by an attorney to the client, this court provided the jury two additional instructions concerning the formation and scope of an attorney-client relationship. Plaintiffs first argue that this court should have given only the Illinois Pattern Jury Instruction regarding the duty of care owed by an attorney to a client, and that no instruction on the formation of an attorney-client relationship was necessary. This argument is unavailing; plaintiffs themselves suggested jury instructions covering the same subject matter as those given by this court, and there are no Illinois Pattern Instructions concerning the formation of an attorney-client relationship. As such, plaintiffs' true objection is with which additional instructions this court gave the jury, not that additional instructions were given in general.
This court did give Illinois Pattern Instruction 105.01, which defines professional negligence and instructs the jury how to determine whether a defendant possessed and applied the knowledge and used the skill and care which the law requires.
Illinois Supreme Court Rule 239 provides that where a court determines that the Illinois Pattern Instructions does not contain an instruction or accurately state the law on a subject, the court may provide its own non-IPI instruction to the jury. Given the importance of the whether an attorney-client relationship existed between the parties in this litigation, an instruction on the formation of that relationship was proper.
The first instruction about which plaintiffs complain was given as Court's Instruction No. 13. It states: "An attorney-client relationship is generally a voluntary relationship that requires the mutual consent of the attorney and client." Plaintiffs argue that the correct law in Illinois is that the relationship depends upon the intent and belief of the client, and is not dependent on the consent of the attorney. This court considered the case law submitted in support of the possible instructions prior to trial, and found that this case is more analogous to those cited by defendant, which stand for the proposition that an attorney-client relationship is voluntary and requires the consent of the parties. The cases cited by plaintiffs concern an attorney's obligation of confidentiality and loyalty to a would-be client who divulged information to his or her would-be attorney. See e.g., Morris v. Marguiles, 307 Ill. App.3d 1024, 718 N.E.2d 709, 717-19 (5th Dist. 1999) (collecting cases); Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1319 (7th Cir. 1978) (professional relationship depends on client's intent for purposes of the privilege for attorney-client relationship). In this case, by contrast, the Arifins alleged that Matuszewich owed them a duty of care and had an affirmative duty to act in their best interests. In order to find such a heightened duty of reasonable care, the jury should be instructed that some evidence of consent on behalf of the attorney is required. See e.g., In re Chicago Flood Litigation, 289 Ill. App.3d 937, 941, 682 N.E.2d 421, 425 (1st Dist. 1997). Moreover, the jury was instructed that consent can be inferred from the actions of the parties, and need not be express. As such, the jury was instructed to consider the intentions of the parties, insofar as the parties' conduct revealed those intentions.
Plaintiffs further argue that Court's Instruction No. 15 did not correctly state the law. That instruction provided: "An attorney employed by an organization represents an organization, not its individual members, and he is obligated to proceed in the best interest of the organization." Plaintiffs dispute this instruction on the basis that it is "directly counter" to the writings of their own expert. The instruction, however, was taken directly from the Illinois Rule of Professional Conduct 1.13. That plaintiffs' expert did not agree with the standards of conduct prescribed by the Rules of Precessional Responsibility does not mean that plaintiffs were entitled to an instruction restating their expert's opinion, even if that opinion is contained in a textbook.
Illinois Rule of Professional Conduct 1.13(a) states: "A lawyer employed or retained by an organization represents the organization acting though its duly authorized constituents." Rule 1.13(b) states, in part, that "the lawyer shall proceed as is reasonably necessary in the best interests of the organization."
III. Request to Enter Judgment Notwithstanding the Verdict of the Jury with Regard to the Jury's Allocation of Comparative Negligence Against Alex Arifin
Plaintiffs argue that the jury and this court's entry of a verdict in which plaintiffs' total damages was reduced by plaintiffs' contributory negligence was premised upon a "manifest error of law or fact." The jury found in favor of Alex Arifin on his professional negligence claim against defendant. The jury further found Alex Arifin's total damages to be $318,000. The jury reduced that damage award by 50%, finding that Alex Arifin was 50% responsible for his own injury. Accordingly, the jury reduced Alex Arifin's award to $159,000. Plaintiffs argue that defendant and the jury failed to grasp the difference between "failure to mitigate" and "comparative fault."
Comparative fault is, of course, a different legal concept than failure to mitigate. Comparative fault refers to a party's fault in causing his or her own injury. Failure to mitigate, on the other hand, refers to a party's failure to limit or minimize the damage which he or she has already incurred. See generally American Intern. Adjustment Co. v. Galvin, 86 F.3d 1455, 1469-72 (7th Cir. 1996) (Posner, C.J., dissenting). According to plaintiffs, Alex Arifin could not have been contributorily negligent, because defendant's negligent act was setting up the account in a manner which allowed Schude to withdraw monies without plaintiffs' knowledge or approval, an act for which Alex Arifin had no duty to "do anything further." This court agrees that Alex Arifin cannot be considered contributorily negligent in the manner the account was set up; like the plaintiff in the Greycas case, he was not required to take "duplicative precautions" regarding the account. See Greycas, Inc. v. Proud, 826 F.2d 1560 (7th Cir. 1987). Plaintiffs' argument fails nonetheless.
In arguing that Alex Arifin could not be considered contributorily negligent, plaintiffs necessarily start from the premise that their injury occurred the moment the account was set up as a sole signatory account. Only if the injury is limited to that time can plaintiffs complain that Alex Arifin's own negligence, if any, could not have contributed to it, because the only "negligence" on the part of Alex Arifin occurred after the account was set up. However, viewing the evidence in the light most favorable to the jury verdict, as this court must, Roggow v. Mineral Processing Corp., 894 F.2d 246, 249 (7th Cir. 1990), it is reasonable to believe that the jury determined that plaintiffs' injury occurred at the time plaintiffs' money was spent without their permission. Because plaintiffs contend that Schude was able to spend approximately two million dollars from the account, it is entirely reasonable to believe that the jury found as it did because the jury determined that plaintiffs' injury occurred when the two million dollars were lost. Considering plaintiffs injury to have occurred when the money was "lost," plaintiffs' failure to do anything to correct the manner in which the account was set up, or to otherwise stop Schude from spending the money, predated the time of their injury. Action or inaction that predates an injury is properly labeled as comparative fault, not failure to mitigate.
Plaintiffs rely heavily upon Judge Posner's dissent in American Intern. Adjustment Co. v. Galvin, 86 F.3d 1455, 1469-72 (7th Cir. 1996) to argue that the jury confused contributory negligence with mitigation of damages. In Galvin, Judge Posner illustrated the difference between comparative negligence and failure to mitigate by relating the time of injury to the time of the plaintiffs misconduct in a series of "hang-gliding" examples. However, those hang-gliding scenarios do little to aid plaintiffs' case here. In those examples, the time of the injury is precise: the moment that the hang-glider crashes. While a hang-gliding injury may be increased by subsequent negligent care, there can be no doubt that the plaintiff suffers injury when he or she crashes. Otherwise, there would be no need to see a doctor. Here, by contrast, the time of the injury is not precise. The injury can reasonably be viewed as having occurred when plaintiffs' money was spent in a manner they had not contemplated, such that plaintiffs' negligence made the injury "more likely to occur." Therefore, plaintiffs' negligence is reasonably viewed as within the realm of contributory negligence. See id. at 1470-71. There is no reason to assume, as plaintiffs do, that the jury found the injury had occurred when the account was set up in the improper manner, and only then did the plaintiffs fail to mitigate the damage that had already been done.
The court must view the verdict in the light most favorable to the verdict. Roggow, 894 F.2d at 249. In that light, plaintiffs' injury occurred when their money was spent against their wishes, and plaintiffs' misconduct in failing to prevent the money from being spent in that manner contributed to that injury. Because the jury's verdict is not based upon a manifest error of law or fact, it must be upheld under Rule 59(a), and there is no basis to vacate or modify the verdict under Rule 59(e). Again, to the extent plaintiffs' motion requests judgment as a matter of law, that request is waived for the failure to raise it at the close of evidence. See Fed.R.Civ.P. 50(b).
CONCLUSION
For the reasons stated, plaintiffs' motions for a new trial and for judgment as a matter of law and notwithstanding the jury's verdict are DENIED.