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Liability Minute

  • September 23, 2014 | Practice News
    Don’t let cybersecurity breaches lead to legal malpractice: The fax is back

    ISBA Mutual Liability Minute

    By Joseph R. Marconi & Brian C. Langs1, Johnson & Bell, Ltd., Chicago

    Back in July of 2011, we warned of a then popular e-mail/fraudulent check scheme whereby lawyers would receive e-mails from alleged potential foreign clients looking to collect debts from customers. Those scammers convinced the unsuspecting lawyers to deposit fraudulent “settlement checks” into client accounts and wire the “clients’ share” to foreign accounts after the bogus checks cleared. When the frauds were eventually uncovered by the banks, the lawyers were left with liability to the banks for the fraudulent check and wire transfers.2 Since then, newer, more complex electronic scams have surfaced whereby hackers intercept e-mails between lawyers and clients that contain wire transfer instructions. After intercepting such an e-mail, the hacker changes the instructions in the e-mail to wire money to his own untraceable account. The hacker forwards his bogus wiring instructions to the unsuspecting recipient, all while “masking” his identity as the sender and making it appear to the recipient as if the instruction came from the correct sender, whether lawyer or client.

  • September 11, 2014 | Practice News
    Debt Collectors Beware: Venue Provision of FDCPA Reinterpreted

    Recent federal court decision reinterprets the Fair Debt Collection Practices Act (FDCPA) and may create venue defense for current or future debtor defendants in debt collection suits.

    By: Joseph R. Marconi 1

    In Suesz v. Med-1 Solutions, LLC, 2014 U.S. App. LEXIS 12562 (7th Cir. 2014), the Seventh Circuit recently reinterpreted the venue provision of the federal Fair Debt Collection Practices Act (“FDCPA”). The issue for the court was whether township small claims courts in Marion County, Indiana (Indianapolis) constituted separate “judicial districts or similar legal entities” for purposes of section 1692i of the FDCPA. The en banc majority held that debt collectors must file collection actions in the “smallest geographic area that is relevant for determining venue in the court system in which the case is filed.”

    Implications for Cook County Lawyers
    In doing so, the Seventh Circuit not only overruled its own 1996 precedent in Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996), but also applied the en banc Suesz decision retroactively. Debt collectors previously relied on Newsom to file collection actions in a court in the debtor’s county — but not in the township or intra-county small claims court in the area where the debtor resided or where the debtor contract was signed. Per Suesz, for those of us in Cook County, collection lawsuits should be filed in the Municipal District where the debtor resides or where the contract was signed. For lawsuits that are already pending, an immediate motion to transfer to the appropriate Municipal District is most prudent.

  • July 8, 2014 | Practice News
    Liability Minute: Not Only Shareholders Get Pierced

    Omittance is no quittance. — Shakespeare

    How many lawyers assist a client in forming a corporation, but merely assist in filing the annual reports and do nothing else? Failure to advise of the risk associated with this minimal approach may now more likely result in veil-piercing to reach the client for individual liability.

    By Joseph R. Marconi1

    Illinois courts have long held that the failure to follow corporate procedure may lead to the individual liability of a shareholder, director, or officer. Now, according to a recent case in the Appellate Court for the First District, even a non-shareholder — who is not an officer, director, or employee of a corporation — may be found individually liable for a judgment against a corporation where he exercises only equitable ownership and control over a corporation, even if there were no allegations that he engaged in any wrongdoing in the underlying case.

  • April 25, 2013 | Practice News
    Liability Minute: The Contractual Arbitration Limitation Period for Uninsured Motorist Insurance Policies
    By Joseph R. Marconi, for ISBA Mutual 

    Even neophyte attorneys understand that their clients’ actions can be barred if they miss a statutory limitations period. However, experienced attorneys may forget that when handling claims against insurance companies under their clients’ uninsured or underinsured motorist coverage a contractual two-year limitation2 will trump any longer statutory period. Failure to adhere to the two-year limitation period will terminate a claim as surely as a blown statute.

    The Illinois Insurance Code (“Insurance Code”) (215 ILCS 5/1 et seq.) requires two provisions for all auto insurance policies issued in the state: uninsured or underinsured insurance coverage (”UM/UIM”) and a mandatory arbitration provision with respect to “any dispute with respect to coverage and the amount of damages …” 215 ILCS 5/143a. Practitioners need to realize that as a result, UM/UIM policies typically contain within them a contractual two-year limitations period for demanding arbitration of any claim against their clients’ UM/UIM carrier.

    1 comment (Most recent May 1, 2013)
  • January 10, 2013 | Practice News
    Liability Minute: The Incredible Shrinking Limitations Period

    Claims involving special defendants, such as municipalities, mass transit companies, school and port districts, are subject to a special one year limitations period. Certain claimants, including policemen, firemen, and guardsmen, must make claims for death benefits within a year of death. In some cases, a special notice requirement is also imposed, as early as six months from the triggering event. This article reviews the main instances of these special limitations periods.

    By Joseph R. Marconi1

    One of the cardinal rules of malpractice avoidance is to always be cognizant of any statute of limitations that applies to your clients’ potential actions and to timely file their claims.

    1 comment (Most recent January 10, 2013)
  • September 7, 2012 | Practice News
    Liability Minute: Court Rejects the Fiduciary Duty Exception

    Two recent cases out of the First District of the Appellate Court in Illinois have bolstered the right of attorneys to assert the attorney client and work product privileges to withhold documents in the context of a malpractice claim against them. In Garvey v. Seyfarth Shaw LLP, 2012 Ill. App. LEXIS 132; 966 N.E. 2d 523 (1st Dist. Mar. 1, 2012) and MDA City Apartments, LLC v. DLA Piper LLP (US), 2012 Ill. App. LEXIS 201 (1st Dist. Mar. 22, 2012), the Court rejected the application of the “fiduciary-duty” exception to the attorney client and work product privileges. The opinions give instruction as to the underlying facts and factors which will frame and preserve an attorney’s asserted privilege as against his or her former client.

  • June 25, 2012 | Practice News
    Liability Minute: Illinois Attorney General Providing Debt Settlement Services

    When elephants fight, the grass trembles.
    — African Folk Saying

    For the past several years, Illinois Attorney General ("IAG"), Lisa Madigan, and the State of Illinois have conducted a campaign against companies that purport to assist distressed homeowners and debtors in dealing with their debt situation.1 The primary weapons in the IAG's arsenal are two statutes: the Mortgage Rescue Fraud Act, 765 ILCS 940/1 et seq. (eff. Jan. 1, 2007) ("MRFA"); and, the Debt Settlement Consumer Protection Act, 225 ILCS 429/1 et seq. (eff. Aug. 3, 2010) ("DSCPA").

    Caught In The Cross-Fire Lawyers Run Afoul of The Illinois Attorney General Providing Debt Settlement Services

    By Joseph R. Marconi 2

    These statutes aim to address the allegation that many of these companies do not provide actual relief to debtors but rather worsen their situation through undeserved and excessive fees (while making fraudulent or misleading claims in the process). Among other restrictions and requirements, the statutes limit fees, including the taking of "up front" fees. See, 765 ILCS 940/50(1); 225 ILCS 429/125(a) and (b).3 The IAG's office is aggressively pursuing actions based on two laws.

  • March 15, 2012 | Practice News
    Balancing act: The ARDC is monitoring the balance on your client trust accounts

    By Joseph R. Marconi[1]

    The Rules of Professional Conduct now requires attorneys to provide consent for the banks holding client funds to automatically report overdraws to the ARDC. This is an early detection system for possible financial malfeasance and a call for more discipline in managing and accounting for client funds.

    Illinois Rule of Professional Conduct 1.15 requires attorneys to hold client property in an interest-bearing trust account separate from the attorney’s own property.  These accounts include Interest on Lawyers Trust Accounts (IOLTAs) and non-IOLTA trust accounts.  In an article from last year, In “Eligible” IOLTAs We Trust, we noted some of the September 2011 changes to this rule. One of the more significant changes to Rule 1.15 is the automatic overdraft notification provision, Rule 1.15(h).  The rule requires the financial institution at which the trust account is established to promptly notify the ARDC if a trust account is overdrawn, regardless of whether or not the instrument is honored.

    To implement the reporting requirement, the rule mandates that all attorneys admitted to practice in Illinois “shall, as a condition thereof, be conclusively deemed to have consented to the reporting and production requirements mandated by this Rule.”  Likewise, to be eligible to offer client trust accounts, financial institutions must agree to comply with the reporting requirement.

  • November 18, 2011 | Practice News
    What can you count on these days?

    Does a statutory limitations period stated in calendar years end on the anniversary date or the day before the anniversary date? Two recent cases, one withdrawn and one with an Illinois Supreme Court Justice's pointed dissent, indicate that the answer you have been counting on may be subject to challenge.

    By Joseph R. Marconi[1], for ISBA Mutual

    Lawyers understand that every right, no matter how important, can be summarily extinguished if papers are not timely filed. The statutory timeliness of many key filings (such as a complaint) is set forth in terms of calendar years- i.e., the filing must occur "within one/two/three/ten years" of a "triggering event" (such as an injury or a contract breach). One important statutory deadline is the time within which to file a petition to vacate a judgment. The applicable deadline is found at 735 ILCS 5/2-1401(c) ("Section 1401(c)"), "the petition must be filed not later than two (2) years after the entry of the order or judgment."

    Section 1401(c) identifies a clear triggering event-"entry of the order or judgment"-which is easily and unmistakably determinable. It also provides a clear time period within which to file-two years- a factor which is also easily and unmistakably determinable. The only possible variable is when to start counting down the two years-either on the day of the triggering event, or the day after the triggering event. If one starts counting on the day of the triggering event, then filing on the (second) anniversary date is one day too late, and thus, untimely. However, if one starts counting on the day after the triggering event, then filing on the second anniversary date is timely.

  • September 22, 2011 | Practice News
    In “Eligible” IOLTAs We Trust

    By Joseph R. Marconi[1]

    Effective September 1, 2011, the Illinois Supreme Court has amended Rule 1.15 of the Illinois Rules of Professional Conduct respecting the safekeeping of client funds deposited in trust accounts. As professional fiduciaries, attorneys have long been required to keep their clients’ funds separate from their own. Now, the Supreme Court has limited the options for accounts to hold client funds, imposed new record keeping requirements on attorneys, and now requires banks to notify the ARDC when client accounts are overdrawn.

    Specifically, Rule 1.15(a) limits the type of accounts in which client funds can be deposited to two kinds. The first is an Interest on Lawyers Trust Account (IOLTA).  IOLTAs are pooled trust accounts that bear interest or dividends on nominal or short-term client funds—those funds advanced for costs or which belong in part to a client and “presently or potentially” to the lawyer.  The interest or dividends is paid to the Lawyers Trust Fund of Illinois (LTF) which donates the funds to organizations providing legal services to the poor.[2] An attorney or law firm can establish an IOLTA account by: