The opinion
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
In re: )
) Case No. 14 B 34232
CONCEPTS AMERICA, INC., )
)
Debtor. ) Chapter 7
______________________________________________ )
)
ROGER A. GREENFIELD, RESTAURANTS-AMERICA )
CONSULTING GROUP, INC., RESTAURANTS- )
AMERICA TRADEMARK, INC., CONCEPTS )
RESTAURANT HOLDING LLC, CONCEPTS )
RESTAURANT MANAGEMENT LLC, TAPSMITH )
MANAGEMENT, INC., HOPWORKS MANAGEMENT, ) Adv. 19 A 23
INC., ROSEMONT RESTAURANT, LLC, 1645 W. )
JACKSON, INC., PRIME BAR AMERICA, LLC, PRIME )
BAR CHICAGO, LLC, PRIME BAR TAMPA, LLC and )
1840 PICKWICK, LLC, )
)
Plaintiffs, )
) JudgeDavid D. Cleary
v. )
)
R. KYMN HARP and ROBBINS, SALOMON & )
PATT, LTD., )
)
Defendants. )
MEMORANDUM OPINION
This matter comes before the court on the motion of R. Kymn Harp and Robbins,
Salomon & Patt, Ltd. (“Defendants” or “RSP Defendants”) to dismiss the legal malpractice
actionfiled by Roger Greenfield and entities in which he holds an interest (the “Greenfield
Entities”and with Roger Greenfield, “Plaintiffs”). Plaintiffs seek a finding that they had an
attorney/client relationship with RSP Defendants,RSP Defendants owed them a duty of care,
and RSP Defendants breached that duty. Plaintiffs allege that as a direct result of those breaches
of RSP Defendants’ duty, they sustained damages.
Having reviewed the complaint and the memoranda filed in support of and in response to
the motion to dismiss, the court denies the motion.Plaintiffs shall amend the complaint as
described below.
I. BACKGROUNDFACTS
In resolving a motion to dismiss, the court considers well-pleaded facts and the
reasonable inferences drawn from them in the light most favorable to the plaintiff. Reger Dev.,
LLC v. National City Bank, 592 F. 3rd 759, 763 (7th Cir.), cert. denied, 561 U.S. 1026 (2010).
For purposes of deciding this motion, the court accepts the following well-pleaded facts as true:
Roger Greenfieldis an individual who has had national success in opening, operating and
maintaining restaurants and in providing restaurant consulting services. (Amended Complaint,
EOD 60at ¶¶1 and 6). The Greenfield Entities are companies in which Greenfield holds an
interest either directly or indirectly. (Amended Complaint at ¶ 2).
R. Kymn Harp is an attorney employed by and acting on behalf of Robbins, Salomon &
Patt, Ltd. (Amended Complaint at ¶¶3 –5).
Plaintiffs retained RSP Defendants to advise Greenfield, individually, and the Greenfield
Entities regarding corporate structure, creditors and leases, as well as litigation matters.
(Amended Complaint at ¶ 7). The firm litigated on behalf ofGreenfield from 2012 through 2014
and advised him on individual liability. (Amended Complaint at ¶¶7–8).
Concepts America, Inc.(“Concepts”), a holding company for many of the Greenfield
Entities, was the guarantor on many of theirrestaurant leases. (Amended Complaint at ¶ 10).
An involuntary petition was filed against Concepts on September 19, 2014. In re
Concepts America, Inc., Case No. 14 B 34232, EOD 1. An order for relief was entered in
Concepts’ bankruptcy case on November 18, 2014. (Id.at EOD 11).
Creditors elected Brian Audetteas the Chapter 7 trustee in Concepts’ bankruptcy case.
(Id.at EOD 37). He filed an adversary complaint against Greenfield and numerous other
defendants, including the Greenfield Entities and RSP Defendants (the “Trustee’s Complaint”).
(Id.at EOD98). Several counts of the complaint are based on the theory that Greenfield was
involved in and carried out a scheme to defraud creditors and transfer assets.
The Trustee’s Complaint alleges that several entities related to Greenfield and Concepts
began to default on leases that Concepts had guaranteed. Audette v. Kasemir, 16 A 691, EOD
237 at ¶ 110.
During this same time period, RSP Defendants recommendedthat five of Greenfield’s
most successful restaurants be transferred away from Concepts. The objective was to shield
those restaurants from creditors in the event of a Concepts bankruptcy case. (Amended
Complaint at ¶¶12-14).
RSP Defendants advised Greenfield to create two new subsidiaries,Concepts Restaurant
Holding, LLC (“Holding”) and Concepts Restaurant Management, LLC (“Concepts RM”). He
would then transfer 100% of the stock of those five successful restaurants from Concepts to these
new entities. The new subsidiaries would furnish no consideration for the transfer. Although
Concepts remained a 100% member of Holding, Greenfield claims to own 50% of Concepts RM.
(Amended Complaint at ¶ 13).
RSP Defendants structured the new operating agreements for Holding and Concepts RM
in a manner such that a Concepts bankruptcy would allow for dissociation by the new
subsidiaries from Concepts. In other words, if Concepts became a debtor under the Bankruptcy
Code, ownershipand control of the successful restaurants would be takenaway from it (the
“Subsidiary Transfer”).(Amended Complaint at ¶ 14).
Greenfield followed RSP Defendants’advice regarding theformation of Holdings and
Concepts RM and thetransfer of Concepts’interest in the restaurants. RSP Defendants did not
tell Greenfieldthat he could be personally liable for fraudulent transfers in the event Concepts
filed for bankruptcy. (Amended Complaint at ¶ 14).
RSP Defendants had knowledge of Concepts’solvency. The Subsidiary Transfer
occurredat a time when it appeared Concepts was insolvent. RSP Defendants did not advise
Greenfield that the Subsidiary Transfer could expose him to personal liabilityin the event
Concepts could not pay its creditors. (Amended Complaint at ¶¶16and 18). Neither did the firm
advise Greenfield that Concepts’ insolvency triggered a fiduciary duty to creditors by virtue of
his status as an officer. (Amended Complaint at ¶ 18).
On March 29, 2013, RSP Defendants attempted to memorialize its advice regarding the
Subsidiary Transferin a memorandum to Greenfield (the “March 29 Memorandum”)titled,
“Strategic Plan to Maximize Value of Concepts America, Inc.” (Amended Complaint at ¶ 19
and Ex. 1).
RSP Defendants continued to represent and advise Plaintiffs duringConcepts’
bankruptcy case. At no time did the firm disclosethat its conduct could have caused an injury to
Plaintiffs or might subject the Plaintiffs to an adversary proceeding in the bankruptcy case.
(Amended Complaint at ¶ 21).
Greenfield followed RSP Defendants’ advice when he took the actions described in the
Trustee’s Complaint, includingthe allegations that heand the Greenfield Entities were involved
in the improper or fraudulent transfer of assets. (Amended Complaint at ¶ 23).
The Trustee filed his adversary complaint on November 17, 2016, and its filing was the
first the Plaintiffs knew that RSP Defendants’ advice wrongfully caused Plaintiffs’injury.
(Amended Complaint at ¶ 25).
Greenfield and the Greenfield Entities reached a compromise with the Trustee regarding
the Trustee’s Complaint. Plaintiffs, along with some of the other defendants to the Trustee’s
Complaint, agreed to pay the total sum of $1,325,000. Concepts America, Case No. 14 B
34232, EOD 181. (Amended Complaint at ¶ 26). Plaintiffs also owe professional fees.
(Amended Complaint at ¶ 24).
II. DISCUSSION
RSP Defendants move to dismiss this complaint pursuant to Fed. R. Bankr. P. 7012(b),
which incorporates Fed. R. Civ. P. 12(b)(6). Defendants argue that the complaint fails to state a
claim upon which relief may be granted.
A. Standards for Reviewing Complaints and Motions to Dismiss
Fed. R. Civ. P. 8, made applicable in adversary proceedings pursuant to Fed. R. Bankr. P.
7008, provides guidance for plaintiffs regarding the requirements for stating a claim.
(a) Claim for Relief. A pleading that states a claim for relief must contain:
(1) a short and plain statement of the grounds for the court’s jurisdiction,
unless the court already has jurisdiction and the claim needs no new
jurisdictional support;
(2) a short and plain statement of the claim showing that the pleader is
entitled to relief; and
(3) a demand for the relief sought, which may include relief in the
alternative or different types of relief.
This pleading standard does not require detailed allegations, “but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)(citation omitted). “Rule 8 marks a notable and generous departure from the
hypertechnical, code-pleading regime of a prior era, but it does not unlock the doors of discovery
for a plaintiff armed with nothing more than conclusions.” Id.at 678-79.
As the Seventh Circuit instructs:
In evaluating the sufficiency of the complaint, we construe it in the light most
favorable to the nonmoving party, accept well-pleaded facts as true, and draw all
inferences in [the nonmoving party’s] favor. Although a party neednot plead
detailed factual allegations to survive a motion to dismiss, mere labels and
conclusions or a formulaic recitation of the elements of a cause of action will not
do. Instead, [t]o survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its
face.
Berger, et al. v. National Collegiate Athletic Association, et al., 843 F. 3rd 285, 289-90 (7th Cir.
2016) (citations and quotations omitted). Although well-pleaded facts are viewed in a plaintiff’s
favor, allegations that are no more than conclusions are not presumed to be true for purposes of
deciding this motion to dismiss.
B. The Complaint: Legal Malpractice
The complaint contains a single count for legal malpractice. Plaintiffs seek a finding that
they had an attorney/client relationship with RSP Defendants,that RSP Defendants owed them a
duty of care, and that it breached that duty in the following ways:
-- advising Greenfield to “restructure” operations so that successor entities andPlaintiffs
were subjected to claims of fraud and fraudulent transfer, (Amended Complaint at ¶ 28(a));
-- failing to advise Greenfield that as a Concepts officer he may owe afiduciary duty to
creditors once Concepts became insolvent,(Amended Complaint at ¶ 28(b));
-- advising Greenfield to execute documentation that would allow the Trustee to transfer
and/or obtain ownership rights in Townhouse and Grillroom,(Amended Complaint at ¶ 28(c));
-- continuing to represent Plaintiffs when the allegations of fraud and fraudulent transfer
were made by creditors against Greenfield,(Amended Complaint at ¶ 28(d));
-- advising Plaintiffs to form additional subsidiaries and transfer Concepts’interest in
solvent restaurants while Concepts was insolvent,(Amended Complaint at ¶ 28(e)); and
-- failing to properly advise Greenfield of the conflict of interest and his right to
independent counsel, (Amended Complaint at ¶ 28(f)).
To prevail on a legal malpractice claim, “a plaintiff must plead and prove that (1) the
defendant attorneys owed the plaintiff a duty of due care arising from the attorney-client
relationship; (2) the defendants breached that duty; and (3) as a direct and proximate result of
that breach, the plaintiff suffered injury.” Stevens v. McGuireWoods LLP, 43 N.E. 3rd 923, 927
(Ill. 2015)(citation omitted).Seealso Mihailovich v. Laatsch, 359 F. 3rd 892, 904-05 (7th Cir.),
cert. denied, 543 U.S. 926 (2004). Plaintiffs seek a finding that theyhad an attorney/client
relationship with RSP Defendants,the firm owed them a duty of care, and it breached that duty.
Plaintiffs allege that as a direct result of that breach, they sustained damages.
C. RSP Defendants’ Motion to Dismiss
In their motion to dismiss, RSP Defendants allege that this complaint fails to state a claim
upon which relief can be granted for several reasons: (1) Greenfield did not have an attorney-
client relationship with RSP Defendants; (2) the cause of action belongs solely to Brian Audette,
the Concepts trustee; (3) Greenfield cannot assert that he was unaware of his fiduciary
obligations once Concepts became insolvent; (4)RSP Defendants did not have a duty to advise
Greenfield on his fiduciary obligations; (5) an alleged violation of professional ethics does not
give rise to a cause of action under Illinois law; and (6)Plaintiffs cannot plead actual damages
proximately caused by RSP Defendants’ alleged negligence.1
The court will address each of these arguments in turn.
1. The complaint alleges an attorney-client relationship between RSP Defendants
and Greenfield,and the malpractice action may not belong exclusively to the
Concepts trustee.
RSP Defendants’ first argument is that the complaint fails to state a claim because there
was no attorney-client relationship between itself and Greenfield with respect to the Subsidiary
Transfer. This overlaps with RSP Defendants’second argument, that any cause of action for
legal malpractice arising from the Subsidiary Transferbelongs to the Concepts trustee, who
stepped into Concepts’ shoes.
One of the elements a plaintiff must prove in order to prevail in a legal malpractice action
is the existence of an attorney-client relationship between the plaintiff and the defendant.2 See
Griffin v. Goldenhersh,752 N.E. 2nd 1232, 1238(Ill App. Ct. 2001). RSP Defendants argues that
Greenfield’s relationship with Harp and the firm was through theirrepresentation of corporate
entities in which Greenfieldhad an ownership interest. Therefore, no attorney-client relationship
existed between Greenfield and RSP Defendants regardingthe Subsidiary Transfer, and he
cannot maintain a malpractice actionbased on it.
1RSP Defendantsalso argued that Greenfield could not assert in paragraph 28(c) thatthe firmbreached its duty by
failingto protect his ownership interests in Grillroom and Townhouse,because Concepts had the legal ownership
rights to those restaurants. In their response, Plaintiffs agree with this argument and ask that “the dismissal of ¶
28(c) be without prejudice to refiling that claim. . .”. That subparagraph is not pled as an independent claim for
relief that can be dismissed pursuant to Fed. R. Civ. P.12(b)(6). Instead, the court will strike paragraph 28(c) as
immaterial, pursuant to Fed. R. Civ. P. 12(f). The court need not grant leave to refile. If Plaintiffs later decide to
present evidence on this issue, the court may permit the pleadings to be amended at that time or, if the evidence is
taken without objection, simply treat the issue as if it were raised in the pleadings. Fed. R. Civ. P. 15(b).
2 An exception not relevant here is ifthe attorney was hired for the primary purpose of benefitingor influencinga
third party. In that situation, the third party may maintain a malpractice action even though there is no privity
between it and thelawyer. See Pelham v. Griesheimer, 440 N.E. 2nd96, 100 (Ill. 1982).
In support of its argument,RSP Defendants direct the court to Reynolds v. Henderson &
Lyman, 903 F. 3rd 693 (7th Cir. 2018). Brian Reynolds brought a malpractice action, alleging that
a law firm gave negligent advice to limited liability companies he co-owned and managed. The
Circuit affirmed the District Court’s grant of summary judgment for the law firm because
Reynolds “did not have a personal attorney-client relationship with” it. Id.at 695.
In that case, however, Reynolds admitted that he never asked the law firm to represent
him, and the law firm “never said anything that suggested it thought it was representing him. In
other words, the parties never entered into any agreement that would have created an attorney-
client relationship between them. [The law firm] did have an attorney-client relationship with the
LLCs that Reynolds co-owned and managed, but that is different.” Id.
By contrast, Plaintiffs allegein the Amended Complaint that theyretained RSP
Defendants to advise Greenfield, individually, and the Greenfield Entities regarding corporate
structure, creditors and leases, as well as litigation matters. The firm litigated on behalf of
Greenfield from 2012 through 2014 and advised him on individual liability. In this very motion
to dismiss, RSP Defendants state at paragraph 2that it “represented the Debtor Concepts
America, Inc. in various matters, as well as Roger Greenfield in certain matters.”
Unlike Reynolds, which decided a summary judgment motion, this court is reviewinga
motion to dismiss. Plaintiffs need only allegesufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face. In light of the allegation that Greenfield retained
RSP Defendants to advise him regarding various issues,including corporate structure,the court
cannot dismiss the malpractice complaint on the grounds that there was no attorney-client
relationshipregarding the Subsidiary Transfer.
Discovery may reveal that RSP Defendants did not represent Greenfield individually with
regard tothe Subsidiary Transfer. If such evidenceis adduced at trial or presented on summary
judgment, the court may conclude that the malpractice claims regarding the Subsidiary Transfer
belong only to theConcepts trustee. Alternatively,it may become clearthat Concepts did not
retain RSP Defendants with respect to the Subsidiary Transfer, and the cause of action belongs to
Greenfield. Indeed,the evidence might show that both Greenfield and Concepts were RSP
Defendants’ clients regarding the Subsidiary Transfer. See Goldfarb Corp. v. Much, Shelist,
Freed, Denenberg Ament & Rubenstein, P.C., 2016 WL 3019426, *21 (Il. App. Ct. May 25,
2016) (“Dual representation can and does occur, despite apparent conflicts.”). At this time,
however, Greenfield alleged sufficient factual matter to state a claim to relief that is plausible on
its face.
2. The complaint does not contain sufficient allegations to support the claim that
Greenfield retained RSP Defendants to advise him as to his fiduciary duties once
Concepts became insolvent.
Paragraph 28(b) of the Amended Complaint alleges that RSP Defendants breached its
duty to Greenfield by failing to advise him that as an officer of Concepts, he may owe a fiduciary
duty to creditors once Concepts became insolvent.
RSP Defendants argue first that Greenfield did not allege that he retained the firm to
advise him of his fiduciary obligations. Secondly, the firm asserts that Greenfieldshould have
known about those duties because: (1) he is a sophisticated restaurant operator; (2) Concepts had
a general counsel, Rachel Dennis; and (3) Greenfield was previously sued for breach of fiduciary
duty. The Chapter 7 Bankruptcy Estate of Restaurant Development Group, Inc. v. Greenfield, et
al., 07 A 937. In order to find that Greenfield knew of his fiduciary duties from prior litigation,
RSP Defendants invite this court to take judicial notice of Restaurant Development Group.
The court will take up the secondargument first. RSP Defendants cite no authority for
the proposition that a sophisticated businessperson should be aware of their fiduciary duties
without the need for legal advice. Neither does it provide support for the theorythat a lawyer
need not give thelegal advice for which a client retained him because that client is experienced
in business or was a defendant in a similarlawsuit. Instead, RSP Defendants cite Keef v.
Widuch, 747 N.E. 2nd 992, 998 (Il. App. Ct. 2001), presumably asking the court to reason
backward from Keef’s statement “that the typical injured worker is uninformed about the
possibility of a third-party action” and relies on his attorney.
RSP Defendants’second argument is not correct. When RSP Defendants assert that
experienced businesspeople do not need legal advice to be aware of the full scope of their
fiduciary duties, RSP Defendants areessentially stating that legal advice is unnecessary and
redundant. Should the court conclude that an attorney commits no malpractice in failing to give
legal advice whenthe client “should have known better?”
Even if the court did find this argument persuasive, RSP Defendants ask the court to take
judicial notice of a prior bankruptcy case without highlighting a document or ruling. The court
declines the invitation to comb through thedocket of either In re Restaurant Development, Inc.
or Restaurant Development Group v. Greenfieldfor a relevant fact of which it could take judicial
notice, or to assume that Greenfield’s previous lawyers gave him adviceon his fiduciary duties
that he should have remembered several years later.
But RSP Defendants’ first argument has merit. “An attorney’s duty to a client is
measured by the representation sought by the client and the scope of the authority conferred.”
Simon v. Wilson, 684 N.E. 2nd 791, 801 (Il. App. Ct. 1997)(citation omitted). See Oakland
Police & Fire Ret. Sys. v. Mayer Brown, LLP, 861 F. 3rd 644, 651 (7th Cir. 2017). Without an
allegation in the complaint that Greenfield retained RSP Defendants to advise him on his
fiduciary duties, the complaint fails to state a claim the firm owed Greenfield a duty to do so.
The complaint alleges only that Plaintiffs retained RSP Defendants to advise Greenfield,
individually, and the Greenfield Entities regarding corporate structure, creditors and leases, as
well as litigation matters. While this statement was sufficient to allege representationregarding
the Subsidiary Transfer, it does not support a claim to relief based on failure to advise Greenfield
regarding his fiduciary duties. The complaint alleges that RSP Defendants did not advise
Greenfield that he could face personal liability to Concepts’ creditors if Concepts was insolvent
when the transfers were made. That allegation is irrelevant if corporate governance advice was
not within the scope of RSP Defendants’ retention.
IfPlaintiffs wish to allege that RSP Defendants breached its duty of careby failing to
advise Greenfield of his fiduciary duties as Concepts approached insolvency,theymust amend
their complaint regardingthe scope of RSP Defendants’ retention.
3. The complaint does not contain sufficient allegations to support the claim that
that RSP Defendants breached fiduciary duties by continuing to represent
Plaintiffs and not advising of their alleged wrongdoing.
Plaintiffs allege that RSP Defendants continued to represent and advise them during the
bankruptcy case without disclosing that the firm’s conduct caused an injury or would result in
Plaintiffs being sued by the Concepts trustee. Plaintiffs also allegethat the firm breached its
fiduciary duty by failing to properly advise of a conflict of interest and of Greenfield’s right to
independent counsel, and by continuing to represent them when creditors alleged fraudulent
transfers.
RSP Defendants argue that there is no authority to support the proposition that an
attorney has a duty to advise its client of his own alleged malpractice. See Fitch v. McDermott,
Will and Emery, LLP,929 N.E. 2nd 1167,1184(Il. App. Ct. 2010)(court found “no case that
would require an attorney to affirmatively advise his client of his negligence and the statute of
limitations for suing him”).
In response, Plaintiffs argue themselves out of a claim:
Plaintiffs are not alleging that Defendants had a duty to “advise Greenfield of
their ‘alleged wrongdoing’” as was rejected in Fitch v. McDermott, 929 N.E.2d
1167 (2nd Dist. 2010). (See 19-00023–Dkt. 69, at pg. 11). Instead, these
allegations clearly invoke Defendants’ obligations under Illinois Rules of
Professional Conduct Rule 1.4(b), to provide necessary information to a client,
and Rule 1.7(b), to obtain informed consent when the lawyer’s personal interests
pose a significant risk of materially limiting the representation. Perhaps
recognizing this, Defendants shift their argument to suggest that the Amended
Complaint does not causally relate any damages to these accusations. However,
¶¶ 29 -31 of the Amended Complaint clearly assert that Defendants’ failings
under these Rules proximately caused unnecessary defense/professional fees in
the AdversaryCase and seeks disgorgement of those fees from Defendants.
Moreover, had Defendants met their obligations under these Rules, their advice
regarding the “Exercise of Rights Document” in November of 2014 could have
been evaluated, and rejected, by independent counsel. (See 19-00023–Dkt. 60, at
¶¶ 21 and 23). Accordingly, Defendants’ second basis for dismissal under Rule
12(b)(6) also fails.
(Response at 7).
Plaintiff’s focus on the Illinois Rules of Professional Conduct is fatal. “[A] violation of
the Rules in and of itself does not establish liability in a legal malpractice case, and there is a
difference between having a ‘duty’ to do something under the Rules and determining just what
that ‘something’ – i.e., the standard of care –encompasses.” Ball v. Kotter, 723 F. 3rd 813, 823
(7th Cir. 2013)(citations omitted). The Illinois Rules of Professional Conduct may be relevant to
determining the standard of care, but they “do not create private rights of action.” Signal
Financial Holdings LLC v. LookingGlass Financial LLC, 2019 WL 6467323, *4(N.D. Ill. Dec.
2, 2019).
In their response and reply, the parties engage in a dispute over whether RSP Defendants’
advice to Greenfield to effectuate another component of the Subsidiary Transfer, the “Exercise of
Rights Document,” constituted a breach of the firm’s duty of care or caused any damages. As
the court quoted above from Plaintiffs’ response, “had Defendants met their obligations under
[the Illinois Rules of Professional Conduct], their advice regarding the ‘Exercise of Rights
Document’ in November of 2014 could have been evaluated, and rejected, by independent
counsel.” RSP Defendants reject the argument that their advice regarding the “Exercise of
Rights Document” caused any damages, “because the advice, in itself, was not the basis for the
Trustee’s recovery of the $659,363.76 in the Adversary Proceedings –it was the Trustee’s
allegations of Plaintiff Greenfield’s subsequent actions in diverting money away from Concepts
to his own benefit.” (Reply at 12).
It is not possiblefor the court to evaluate the parties’arguments on this point, because the
first mention of the “Exercise of Rights Document”is in Plaintiffs’ response, not this complaint.
There are no allegations in the complaint for the court to review in order to decidewhether
advising Greenfield to effectuate the “Exercise of Rights Document” supports a claim that RSP
Defendants breached its duty of care to Plaintiffs.
If Plaintiffs wish to allege that RSP Defendants breached its duty of care by failing to
provide necessary information and to obtain informed consent,Plaintiffs must amend their
complaint to allegesufficient factual matter, accepted as true, to state a claim to relief.
Allegations in a brief are not incorporated intothe complaint.
4. Plaintiffs sufficientlypled actual damages proximately caused by RSP
Defendants’ alleged breaches of the duty of care.
Damages are a requiredelement of a legal malpractice claim. “Even if negligence on the
part of the attorney is established, no action will lie against the attorney unless that negligence
proximately caused damage to the client. The existence of actual damages is therefore essential
to a viable cause of action for legal malpractice.” Northern Illinois Emergency Physicians v.
Landau, Omahana & Kopka, Ltd., 837 N.E. 2nd 99, 107(Ill. 2005)(citations omitted).
Proximate cause is also an integral component of a claim for malpractice. “Plaintiff is
required to establish that but for the negligence of counsel, he would have successfully
prosecuted or defendedagainst the claim in the underlying suit.” Ignarski v.Norbut, 648 N.E.
2nd 285, 288 (Il.App. Ct.1995). See Stevens v. Sharif, 2019 WL 4862171, *2 (N.D. Ill. Sept. 30,
2019),appeal filed,19-3149 (7th Cir. Oct. 29, 2019). Damages are not presumed in a legal
malpractice action.
RSP Defendants argue that Plaintiffs’ complaint fails toallege that they would not have
incurred costs to defendthe Trustee’s Complaint or paid to settle with the Concepts trustee “but
for” RSP Defendants’ actions. This is because “the Trustee has alleged numerous bases for
liability independent of any claims against RSP Defendants.” (Memorandum in Support at 14).
Moreover, many of the allegations in the Trustee’s Complaint concern actions taken prior to
November 16, 2012, which is the end of the six-yearlookback period for a malpractice
complaint filed on November 16, 2018. See 735 ILCS 5/13-214.3(c)(West 2020).
In response, Plaintiffs argue that proximate cause is a fact-laden issue and should be
decided by a trier of fact. See Abrams v. City of Chicago, 811 N.E. 2nd 670, 674 (Ill. 2004)
(“Proximate cause is generally an issue of material fact in a negligence case.”). While the
Trustee’s Complaint contains numerous allegations against Greenfield, at this stage of the
adversary proceeding it is impossible to determine what portion of theirdefense costs and the
settlement are attributable to RSP Defendants’ alleged malpractice.
In theirattempt to refute Plaintiffs’ contention that it is speculative whether Greenfield
would have been sued by the trustee even if he had not acted on RSP Defendants’ advice, the
Defendants undercut their own argument.
This Court may take judicial notice that the claims brought by the Trustee against
Greenfield and his entities unequivocally demonstrate that Greenfield would have
been sued without these allegations regarding Defendants’ legal representation.
On the claims involving the “Subsidiary Transfer” and “Exercise of Rights
Document,” the Adversary Complaint sought recovery of $659,363.76 in
payments allegedly subsequently diverted by Roger Greenfield and Ted Kasemir
from Grillroom and Townhouse. In contrast, on the claims against Greenfield
unrelated to Defendants’ representation, the Trustee alleged theories seeking
recovery of millions of dollars on behalf of landlord creditors, including
allegations that Greenfield induced the landlords to accept Concepts as a
guarantor based upon fraudulent Consolidated Financials resulting in their $9
million proof of claims and allegations that Greenfield diverted millions of dollars
from Concepts for his own benefit. The Trustee also alleged Alter Ego theories
against the Greenfield entities named in the legal malpractice complaint, seeking
to pierce the corporate veil of the entities based upon their commingling of
millions of dollars of funds and seeking to recover their assets to satisfy the
creditor claims.
(Replyat 3(citations omitted) (emphasis added)).
Clearly the recovery sought by the Trustee on other claims dwarfs the recovery sought for
Greenfield’s actions regardingthe Subsidiary Transfer. But in theitalicizedportion of this
excerpt, RSP Defendants admit that part of the Trustee’s Complaint is based on actions
Greenfield took while acting on the advice of his attorneys. The Plaintiffs need not show that all
the claims brought by the Trustee against the Greenfield Entities were the result of RSP
Defendants’allegedly negligent legal advice. So long as claims exist that would not have been
brought “but for” RSP Defendants’ representation, this complaint survives a motion to dismiss.
It is a question of fact as to how much of Greenfield’s defense costs and settlement liability are
attributable to those actions. Questions of fact are not addressed by a motion to dismiss. That
issuecan be resolved by the evidence adduced at trial.
RSP Defendants further argue in reply that where there is only the possibility of harm,
actual damages are absent. It posits that “unless and until a bankruptcy court ruled that
Greenfield had to pay a judgment based upon these Defendants’ advice,” actual damages had not
been incurred.(Reply at 5). Therefore, Greenfield has not sufficiently pled this element of a
legal malpractice.
For this proposition, RSP Defendants cite Lucey v. Law Offices of Pretzel and Stouffer,
Chtd.,703 N.E. 2nd 473 (Il. App.Ct.1998). In Lucey, however, there remained the possibility
that the legal malpractice plaintiff would prevail in the underlying action. There is no such
possibility here. Greenfield and the Greenfield Entities settled with the Trustee, foreclosing the
possibility that they would defeat the Trustee’s claims. See Lucey, 703 N.E. 2nd at 478
(“damages are entirely speculative until a judgment is entered against the former client or he is
forced to settle”) (emphasis added).
RSP Defendants’theory would have the court hold that no matter how strong a
malpractice plaintiff’s position is in the underlying “case within a case,” any settlement vitiates
that client’s ability to bring a malpractice action. If thematter is settled for even one dollar less
than the damages pled, nodamages have been incurred for purposes of a legal malpractice claim
because “there has been no court ruling that these Defendants’ advice to Plaintiffs was
improper.” (Reply at 7).
This theory is not valid. Plaintiffs’ damages have been fixed at a maximum amount; the
dollar amount of the settlement. RSP Defendants may seek to prove that only a small amount –
or none–of that settlement is attributable to the claims in the Trustee’s Complaint that are based
onRSP Defendants’ advice. That proof, however, must wait for trial. This proceeding is only at
the motion to dismiss stage. Plaintiffs need only plead sufficient facts for the court to infer that it
is plausible they will present a viable cause of action. Since Plaintiffs settled with the Trustee,
they suffered damages. It is plausible for the court to infer that at least some of those damages
are attributable to the claims based on Greenfield’s actions in reliance on RSP Defendants’
advice.
Hl. CONCLUSION
For the reasons stated above, the motion to dismiss is denied. Plaintiff is given leave to
amend the complaint as described herein. Any amended complaint must contain a statement that
the Plaintiffs do or do not consent to entry of final orders or judgment by the bankruptcy court as
required by Fed. R. Bankr. P. 7008.
Da) “D Woe
Date: August 17, 2020
DAVID D. CLEARY
United States Bankruptcy Judge
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