David Grochocinski v. Mayer Brown Rowe & Maw, LLP
719 F.3d 785
| 7th Cir. | 2013Background
- CMGT, Inc. engaged Mayer Brown for financing-related services; Spehar Capital advised CMGT to seek investors and would receive fees.
- Spehar Capital sued CMGT, resulting in a $17,045,780 default judgment in California that CMGT could not pay; Spehar alleged damages based on speculative valuations.
- CMGT entered bankruptcy; trustee Grochocinski was appointed and considered a malpractice claim against Mayer Brown to recover on the default judgment.
- Spehar Capital and the trustee entered a post-petition financing agreement to fund the malpractice investigation, with Spehar to receive a large share of any net recovery.
- Trustee filed state court malpractice action (Counts I-II) in Illinois federal-diversity-removed proceeding; main theory centered on advice/defense failures by Mayer Brown.
- District court granted summary judgment for Mayer Brown on judicial estoppel, attributing Spehar Capital’s prior positions to the trustee via nonparty preclusion rationale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether judicial estoppel can apply using Spehar's positions to bind the trustee | Grochocinski argues estoppel should apply, preventing inconsistent positions. | Mayer Brown argues flexible judicial estoppel can bind based on nonparty conduct in the California suit. | Yes; district court proper to apply judicial estoppel against trustee. |
| Whether the court’s use of judicial estoppel forecloses the malpractice claim | Grochocinski contends there are triable issues on causation and duty that survive estoppel. | Mayer Brown asserts estoppel collapses causation by invalidating Spehar’s asserted basis for the claim. | Yes; estoppel defeats plaintiff’s theory, warranting summary judgment for Mayer Brown. |
| Whether Spehar's intervention was timely and appropriate | Spehar seeks intervention to protect reputation and interests due to alleged fraud findings. | District court properly denied intervention as untimely and prejudicial. | Intervention denied as untimely. |
| Whether sanctions against trustee/Joyce were warranted | Spehar and Mayer Brown contend sanctions justified for frivolous/conductive litigation. | Court concluded no basis for sanctions against trustee or Joyce under inherent powers or §1927. | Sanctions denied. |
Key Cases Cited
- New Hampshire v. Maine, 532 U.S. 742 (2001) (judicial estoppel factors and equitable considerations)
- Taylor v. Sturgell, 553 U.S. 880 (2008) (non-party preclusion and exceptions under Taylor)
- In re Cassidy, 892 F.2d 637 (7th Cir. 1990) (judicial estoppel makes courts protect integrity of process)
- In re Knight-Celotex, LLC, 695 F.3d 714 (7th Cir. 2012) (flexible, equitable approach to judicial estoppel)
- Montana v. United States, 440 U.S. 147 (1979) (claim preclusion rationale for consistency in litigation outcomes)