Page 16 - John Hundley 2010

issue were attorneys’ services rendered in connection with the client’s withdrawal as trustee in a
structured-settlement arrangement. According to the evidence adduced at trial, the trustee’s
lawyers knew when it withdrew from the trust that the trust assets were being turned over to a
firm which was not authorized to act as trustee in Illinois and was improperly affiliated with a
party to the structured settlements. After that party spent trust assets on other failing business
ventures (and personal items, it was alleged), the victims who were supposed to receive payments
from the structured settlement sued and the trustee was forced to pay large sums to settle the claims.
The lawyers attempted to invoke the “case within a case” rule but the court rejected that attempt,
noting that in connection with the withdrawal as trustee the lawyers provided transactional legal
services. The court held that “proving a case-within-a-case is not always required in transaction-
based legal malpractice cases where damages can otherwise be established.” The relevant principle,
it said, is that the plaintiff should “recover all the damages proximately caused by [the lawyers’]
breach” of duty, and case-within-a-case is not the exclusive way of proving such damages.
But a variant of case-within-a-case arose in connection with the client’s settlement of the post-
withdrawal claims brought by the victims, the lawyers arguing that the client had to prove it would
have lost those cases. The court had two key responses to this issue. First, it rejected the premise
that certainty of loss was required, because “rules should not be encouraged which allow a
defendant no alternative but to litigate”. Second, it employed a “reasonableness” test for whether
the cases should have been settled, and ruled that this “was a question for the trier of fact”. The jury
had found the settlements reasonable, and the court deferred to it. The court similarly deferred to the
jury on the measure of damages (both sides appealed with respect to that).

Several observations regarding this decision may be offered. First, the court’s deferral to the jury
on the causation and damage issues likely will draw criticism as ducking critical decisions. But we
think that those actions have a different import, because implicitly the deferrals to the jury’s deci-
sions on those issues necessarily mean that those issues properly went to the jury. Admitted-
ly, this message is a bit understated, but that is in keeping with Union Planters’ whole approach.
For example, even on its key issues the court purports not to be plowing new
ground. Only by remembering how “carved in stone” the “case within a case” rule
had become does one appreciate the significance of Union Planters’ departure
therefrom. And only by consulting its citations does one appreciate that those
decisions did not so much require the result Union Planters reached as permit it.

Moreover, the court’s distinction between litigation and transactional contexts
may prove unreliable. In Union Planters itself the negligent withdrawal was effected
through a court order, and the subject damages were incurred in an additional series
of suits. Hence, characterizing the case as involving transactional malpractice was not a foregone
conclusion (and is another example of Union Planters’ understated significance). How the transaction
v. litigation distinction will be applied in future cases is unclear.

Perhaps that is why Union Planters qualifies case-within-a-case as only generally the rule even in
the litigation context. Or perhaps it seeks to align itself with those who would chip away at that rule
even in the litigation context.
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