“Sins of the Lawyer”: Seventh Circuit Rules Against Company in Legal Malpractice Case

Hon._William_J._BauerThe U.S. Court of Appeals for the Seventh Circuit ruled that an Illinois baking machinery manufacturer, Bakery Machinery & Fabrication Inc., is liable to a default judgment blamed on the alleged legal malpractice of its attorney, James Hinterlong of Grand Ridge, Ill. Judge William Bauer ruled that the company was still responsible for the actions of its lawyer, even if the company were kept in the dark.

In a unanimous panel decision, Judge Bauer began his analysis with the memorable line: “This case is an example of how the sins of a lawyer can be visited upon the client.” The panel detailed how the company is still liable despite what it said were failures in representation including missing court filing deadlines, skipping court dates, and failing to file electronically as required.

The company was suing Traditional Baking Inc. (a cookie baking company) over non-payment for an oven. Traditional Baking alleged in a counter-claim that the late delivery of the oven resulted in lost profits and, due to the default, the trial judge entered a default judgment of $582,000 in Traditional Baking’s favor. The company insists that it was told by its counsel that the case was going well and that his malpractice constituted an “exceptional circumstances.” Hinterlong did not have malpractice insurance and the company is currently suing him for his personal assets.

The court stated:

BMF’s beef is against Hinterlong, not the court’s ruling on the case. Deception of a client becomes the liability of the client’s attorney and not the client’s opponent. See Tolliver, 786 F.2d at 319 (“Holding the client responsible for the lawyer’s deeds ensures that both clients and lawyers take care to comply. If the lawyer’s neglect protected the client from ill consequences, neglect would become all too common.”). Since clients must be held accountable for their attorney’s actions, it does not matter where the actions fall between “mere negligence” and “gross misconduct.” See 7108 West Grand Avenue, 15 F.3d at 635. “Malpractice, gross or otherwise, may be a good reason to recover from the lawyer but does not justify prolonging litigation against the original adversary.” Id. at 633. See United States v. Di Mucci, 879 F.2d 1488, 1496 (7th Cir. 1989) (“It seems clear to us that the law in this circuit is that an attorney’s conduct must be imputed to his client in any context.”) (emphasis in original).

BMF has sued its lawyer, but was unfortunately welcomed with, not surprisingly, Hinterlong’s lack of malpractice insurance. From our reading of the case, this is the “exceptional circumstance” that BMF suffers: that it cannot recover from an uninsured Hinterlong. This reason, though, does not deem the district court’s denial of the motion to vacate an abuse of discretion under Rule 60(b)(6); BMF voluntarily chose Hinterlong, without, presumably, inquiring into his insured status. See Link v. Wabash Railroad Co., 370 U.S. 626, 633-34 (1962) (“Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation . . . .”).

I have mixed feelings about this ruling. This is a harsh result for the company since the company does not appear at fault here and the opinion may sweep a bit too broadly. I found the opinion to be well-written and well-based on precedent. Yet, if a client is given no information about a default or prior motions, there would seem credible claims of exceptional circumstances. The opinion does not leave much room for such recovery in future cases. The fact that this is a default puts it into a different category from cases that went to verdict where courts are particularly reluctant to force a successful litigant to retry the case. In some cases , it may be more equitable to impose costs on the company but allow the default to be lifted under new counsel.

Nevertheless, the panel viewed this case as reinforcing the discretion of the trial court in such cases and most courts would likely support this result. Ironically, the ruling reinforces the need for in-house counsel who can keep track of the performance of outside counsel. However, many companies cannot afford such redundant representational teams.

Here is the opinion: sinsofatty

For the story, click here.

13 thoughts on ““Sins of the Lawyer”: Seventh Circuit Rules Against Company in Legal Malpractice Case”

  1. When I was in private practice as a sole practitioner, it was very difficult to maintain malpractice insurance. The first 5 years I was able to pay it, but after that, it became too expensive. It was scary, but I had no choice.

  2. AY:

    “Equity may abhor a forfeiture, but apparently the Seventh Circuit has no such qualms.


    Did I misread the statement that Federal Courts are the General Courts of Equity? Maybe some opinion, somewhere, someplace, sometime.”


    U.S. Constitution
    Article III

    Section 1. The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish. The judges, both of the supreme and inferior courts, shall hold their offices during good behaviour, and shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office.

    Section 2. The judicial power shall extend to all cases, in law and EQUITY, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority;–to all cases affecting ambassadors, other public ministers and consuls;–to all cases of admiralty and maritime jurisdiction;–to controversies to which the United States shall be a party;–to controversies between two or more states;–between a state and citizens of another state;–between citizens of different states;–between citizens of the same state claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects. [emphasis added]

    Right you are again!

  3. A number of states are considering mandatory malpractice insurance (which would have been nice in this case). This seems to benefit the large firms, but increases the burden on struggling solo and small firms. Any thoughts?

  4. The truth is that decisions in this type of situation are all over the board. It typically is treated as a discretionary determination by the trial court. The rationale is that the actions of the lawyer as agent are attributable to the client as principal and that the client is free to pursue a malpractice action against his attorney. The difficulty with a malpractice suit (in addition to the lack of insurance in this instance) is that the client must establish (to prove damages) that it would have prevailed had it been able to proceed with the case on its merits. In addition, negligence per se is not necessarily a disciplinary issue. And even if the lawyer in this case is suspended or disbarred, that won’t restore the client’s economic position.

    There is no simple solution. My preference would be for the court to grant a timely filed motion to vacate, as suggested by Jim Byrne, and to impose monetary sanctions against the offending lawyer under the court’s inherent authority to enforce compliance with the rules and control its docket.

  5. Ineffective assistance of counsel must be expanded to include civil actions.

    If, in a criminal case, an attorney was blatantly ineffective, and the judge fined you $500K. That decision would/should be reversed and remanded on appeal.

    However, when the same thing is done in a civil setting; it’s too bad -tough cookies?

    A default judgment should only be permitted to stand if it is clear that there is no intent to challenge a claim. A motion to vacate should have been submitted and sustained.

    When judicial economy becomes overtly harmful; judicial economy must give way to fairness.

  6. My distinct, albeit non-legal opinion, is that had the case been tried and lost, than too bad, judgment stands. However, given that the attorney’s incompetence led to a default judgment, then fairness demands a “do-over.” Isn’t the real problem though, and it seems to me rarely addressed, that we have so underfunded our Court Systems and created thereby a
    logjam that requires such rulings just to move business along, the entire system is then flawed. The idea that many civil and criminal cases take years to be heard, with the entailed huge expense for lawyers fees, gives lie to the maxim “justice swift and certain.”

    Judges themselves bear some responsibility, ala the Minnesota Senatorial case, should the Minnesota Supreme Court have taken so much time to rule unanimously?

  7. eniobob 1, July 1, 2009 at 9:13 am

    Well believe it or not if the attorney in question should face charges he will find a shoulder to cry on here:

    I thought, yes I did. Got me in trouble again. That at first you were being sympathetic. I then read the link, you are cruel. But that is funny.

  8. mespo727272 1, July 1, 2009 at 9:26 am

    Equity may abhor a forfeiture, but apparently the Seventh Circuit has no such qualms.


    Did I misread the statement that Federal Courts are the General Courts of Equity? Maybe some opinion, somewhere, someplace, sometime.

  9. Equity may abhor a forfeiture, but apparently the Seventh Circuit has no such qualms.

  10. The attorney should be disbarred in order to protect the public. I would hope that the Court has referred this attorney to the appropriate disciplinary authority, or that he is otherwise being investigated.

  11. I think you want to end (turn off) the quote (“The court stated…”) before the part that starts “I have mixed feelings about this ruling.”

  12. This is BS. But I understand the need for finality in a Judgment. But come on a default? Well with the US Sct and Roberts unless the state gives you the right, you don’t have it with us.

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