West Bend Mutual Insurance Co. v. Schumacher
2016 U.S. App. LEXIS 22976
| 7th Cir. | 2016Background
- West Bend sued its former counsel Paul Schumacher and firm RLGZ for legal malpractice arising from Schumacher’s defense of a 2005–2006 workers’ compensation claim by John Marzano.
- Alleged attorney failures: inadequate investigation, failure to depose an IME (Dr. Nelson), disclosure of defense facts to claimant’s counsel, not securing a key witness, and an unauthorized stipulation conceding compensability at an IWCC hearing.
- West Bend alleges these acts forced it to pay temporary total disability and medical benefits and to enter a disputed settlement, and that practical obstacles made reversing payments unrealistic.
- District court dismissed the second amended complaint under Rule 12(b)(6) for failing to plead causation and damages with sufficient specificity; West Bend appealed.
- The Seventh Circuit majority affirmed, holding the complaint did not plausibly plead the “case-within-a-case” showing that, but for counsel’s negligence, West Bend would have prevailed or substantially reduced liability.
- A dissent argued the complaint pleaded concrete facts (e.g., claimant worked the day of injury, continued working two weeks, prior knee condition) that plausibly described lost defenses and should survive dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of pleadings under Twombly/Iqbal | West Bend: alleged facts show concrete lost defenses (no compensable injury) and causation for payments/settlement | Defendants: allegations speculative; plaintiff could have contested later so no causation | Held: pleadings insufficient — plaintiff failed to plausibly allege that but for counsel’s errors the underlying outcome would have been more favorable |
| Case-within-a-case requirement in IL malpractice law | West Bend: alleged defenses (worked day of incident, worked after incident, prior knee condition) would likely have led to winning or lower payout | Defendants: even if mistakes occurred, payments and later settlement were not necessarily caused by the stipulation; settlement terms suggest no admission of liability | Held: Illinois law requires plausible allegations showing loss of meritorious defense; complaint did not meet that standard |
| Whether paying benefits precludes later contesting liability | West Bend: paying benefits made contesting impractical and recovery unlikely | Defendants: payment pending resolution does not bar contesting liability; practical ability remained | Held: Court treats practical prejudice as a factual claim but finds complaint’s allegations too conclusory to establish that payments caused irrecoverable damages |
| Standard for amendment after multiple attempts | West Bend: further factual development available; has offered to present more evidence | Defendants: plaintiff already had multiple chances; dismissal appropriate | Held: After multiple amendments without curing the pleading defects, dismissal with prejudice was affirmed as complaint remained conclusory on causation/damages |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard requiring plausible factual allegations)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Bible v. United Student Aid Funds, Inc., 799 F.3d 633 (7th Cir. standard of review on Rule 12(b)(6))
- Swanson v. Citibank, N.A., 614 F.3d 400 (description of pleading that "presents a story that holds together")
- McCauley v. City of Chicago, 671 F.3d 611 (context-specific plausibility inquiry)
- Mihailovich v. Laatsch, 359 F.3d 892 (explaining "two cases" or case-within-a-case requirement in malpractice suits)