Preferred Personnel Services, Inc., v. Meltzer, Purtill and Stelle, LLC, __ N.E. 2d __, 2009 WL 168259 (Ill. App. 1 Dist. 2009)

Brief Summary
Plaintiff joined a legal malpractice proceeding with the still unresolved underlying proceeding arguably giving rise to the malpractice claim. After the defendant on the underlying claim was dismissed on statute of limitations grounds, the court held that the plaintiff could not use collateral estoppel against the law firm to prevent it from arguing the statute of limitations issue.

Complete Summary
Preferred Personnel Services (“Preferred”), a temporary staffing agency, hired law firm Meltzer, Purtill & Stelle, LLC (“Meltzer”) to sue Preferred’s insurance broker, Gallagher. Preferred was allegedly forced to cease operations as a result of Gallagher’s having failed to obtain workers’ compensation insurance on behalf of Preferred. After Meltzer failed to commence a proceeding against Gallagher and to respond to Preferred’s inquiries about the case, Preferred hired new counsel and sued both Meltzer and Gallagher.

Defendants moved for dismissal. Gallagher’s motion was based on the statute of limitations. Meltzer’s motion was based on the principle that a malpractice claim is premature if the underlying claim is still potentially viable. The trial court granted Gallagher’s motion but denied Meltzer’s. Preferred appealed the ruling on Gallagher’s motion. The appellate court affirmed. On remand, Preferred moved, based on collateral estoppel and the law of the case, to foreclose Meltzer from arguing that the statute of limitations had not run. The trial court granted Preferred’s motion and certified three issues for interlocutory appeal.

The first issue was whether Meltzer had standing to argue directly against Gallagher’s statute of limitations defense. The appellate court held that Meltzer did not have standing because the cause of action for malpractice did not accrue until Preferred experienced actual damages — which did not happened until the statute of limitations issue was resolved in favor of Gallagher. The court asserted that “Illinois courts essentially do not allow malpractice cases to proceed simultaneously with the underlying litigation.”  Id. at *6. Preferred argued that disallowing such simultaneous actions puts the plaintiff at risk of the malpractice limitations period expiring before the underlying litigation is resolved. The court, however, noted that the malpractice limitations period did not begin to run until the underlying claim was dismissed. Finally, the court noted that this issue was more properly a question of ripeness than of standing.

The next issue was whether Preferred could use offensive collateral estoppel to bar Meltzer from arguing the applicability of the statute of limitations to Preferred’s claims against Gallagher. Meltzer sought to present a defense based on the theory that Preferred prematurely abandoned its claims against Gallagher in order to pursue Meltzer. Given Meltzer’s lack of standing, the court held that Meltzer did not have an incentive and opportunity to litigate the limitations issue, and therefore that the doctrine of collateral estoppel did not apply.

Third, the court addressed whether the law of the case doctrine barred Meltzer from arguing the limitations issue. Although issues that have been decided on a prior appeal generally may not be reconsidered, the court noted that the first appeal in this case only involved Preferred and Gallagher. The court held that because Meltzer was not a party to the first appeal, the law of the case doctrine did not apply to Meltzer.

Significance of Opinion
Whether this opinion sets out a universal per se rule against joining a legal malpractice claim with an underlying claim is unclear. Regardless, it does make clear that doing so may result no judicial economy and no advantage for the plaintiff.

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