Goldfine v. Barack, Ferrazzano, Kirschbaum and Perlman
993 N.E.2d 1013
Ill. App. Ct.2013Background
- Morton and Adrienne Goldfine bought FCH stock (12 purchases totaling ~$4.75M) through Shearson broker Michael Steinberg between 1987–1990; FCH later became worthless.
- Plaintiffs retained BFKP in 1991 to evaluate and preserve claims; BFKP never served the six‑month rescission notice required by the Illinois Securities Law, so the statutory claim was later dismissed as time‑barred.
- Plaintiffs settled remaining non‑securties claims against Shearson in 2007 for $3.2M and sued BFKP for legal malpractice in 1994 to recover what they would have obtained under the Illinois Securities Law rescission remedy.
- At bench trial the court found (1) plaintiffs would have prevailed on their Illinois Securities Law claims for 11 purchases and (2) BFKP negligently caused the loss of that claim; it calculated damages by deducting the $3.2M settlement from the purchase price first, then applying 10% statutory interest, and awarded 40% contingency fees plus costs.
- On appeal the court affirmed liability (both securities and malpractice) and costs, but reversed the damages and attorney‑fee awards because the trial court applied the wrong formula for the mandatory 10% interest, and remanded to recalculate damages and reasonable fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper formula for §13(A) damages (order of deduction vs. interest) | Interest must be computed on the full purchase price; deduct settlement only after calculating interest | Trial court/defendants argue deduct settlement first (apply proportionate reduction) | Court: interest is calculated on full purchase price first (Kugler majority); remand to recalculate damages accordingly |
| Recoverability of §13(A) components (10% interest, fees, costs) in malpractice suit | These are remedial statutory components of rescission damages and should be recoverable as lost recovery | Defendants: interest and fee shifting are punitive/coercive and barred by §2‑1115 (malpractice punitive‑damages bar) | Court: §13(A) items are remedial (not punitive); recoverable in malpractice action |
| Reasonable reliance for underlying securities claim | Goldfine relied reasonably on broker Steinberg given relationship and Shearson’s misleading assurances | Defendants: Goldfine was sophisticated and had public information; reliance was unreasonable | Court: factual finding that reliance was reasonable is not against manifest weight; securities claim was proven |
| Proximate causation for malpractice (would plaintiffs have obtained greater recovery absent malpractice) | Plaintiffs reconstructed the ‘‘case within a case’’ and showed §13(A) recovery would exceed the $3.2M settlement | Defendants: plaintiffs cannot prove they would have rejected the 2007 settlement or that malpractice caused greater loss | Court: plaintiffs met proximate‑cause requirement; malpractice caused loss of the §13(A) remedy; release did not bar recovery (settlement deducted in computing damages) |
Key Cases Cited
- Kugler v. Southmark Realty Partners III, 309 Ill. App. 3d 790 (1999) (interpreting §13(A) to calculate 10% interest on full purchase price before deducting amounts received)
- Tri‑G, Inc. v. Burke, Bosselman & Weaver, 222 Ill. 2d 218 (2006) (lost punitive damages are not recoverable in malpractice; discussion of limits on recoverable hypothetical awards)
- Weisman v. Schiller, Ducanto & Fleck, 314 Ill. App. 3d 577 (2000) (legal malpractice measure: recover what would have been recovered in underlying action)
- Standard Mut. Ins. Co. v. Lay, 2013 IL 114617 (2013) (statutory damages can be remedial rather than punitive; used to support that statutory awards compensate harm and incentivize enforcement)