The 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
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