Champaign, ILA legal malpractice case in Illinois where the judge found in favor of the defendant, a lawyer, will be appealed. The crux of the matter pertains to just what constitutes a conflict of interest, and what defines a financial loss.
As summarized in the 10/6/10 issue of the News-Gazette, distributed in Champaign, Illinois, prominent businessman George Shapland and lawyer Tom Harrington Sr., founded Devonshire Realty in 1977, an enterprise that eventually became known as the Devonshire Group and which specializes today in the commercial real estate sector. Harrington is also reported to represent Shapland.
The legal malpractice suit hinges on the sale of a successful automotive dealership in Champaign and how that sale affected the plaintiffs, Arizona residents Dennis and Lana Noonan.
As reported by the News-Gazette, Dennis Noonan was once the president of the Worden-Martin dealership. He married into the family, as Lana Noonan is the daughter of dealership co-founder Lloyd Worden. The Noonans also owned a 20 percent share in the enterprise. Up until 2008, the Noonans received a share of earnings paid to shareholders averaging 85 to 90 percent of total earnings.
However, that changed in 2008, four years after Shapland bought a controlling interest in the corporation. At the time of the sale, in 2004, the Noonans were offered $3,125,000 for their 20 percent interest, but declined to sell.
Things began to unravel for the Noonans when the corporation's board voted in 2008 to reduce the payout to shareholders to 38.5 percent of earnings, with the corporation retaining 61.5 percent.
Dennis and Lana Noonan then sold their shares to Shapland for $2,334,812 together with their interest in real estate leased to the dealership for $1,517,000.
Champaign attorney Harrington Sr. represented both the Noonans and Shapland. The Noonans allege that in May 2006 Harrington issued a legal opinion to Shapland that preceded a vote by the corporation's board to alter the payment amount to shareholders. The Noonans maintain that had they known about that opinion, they would have sold their shares to Shapland at that time. They claim to have been blindsided when they finally received a copy of the memo on October 15, 2007.
"By withholding his opinion until after he knew the majority shareholder and the corporation were going to act to increase retained earnings, defendant (Harrington) deprived the plaintiffs (the Noonans) of time to oppose that action and made it more likely that plaintiffs would suffer harm to their pecuniary interests," the Noonans' suit stated.
The Noonans filed a malpractice lawsuit against Harrington Sr. with a legal malpractice lawyer. However, Chief US District Judge Michael McCluskey dismissed the case in September, ruling that the Noonans had not suffered a financial loss as a result.
He said the $2,334,812 they received from the sale of shares exceeded the $2,189,000 they would have received in dividend income. What's more, the $1,517,000 realized from the sale of real estate exceeded the $1,161,000 they would have received from leasing the real estate.
In his opinion of the legal malpractice suit, Judge McCuskey stated that to prove legal malpractice, the Noonans had to show that Harrington breached his "duty of due care" and that they suffered economic damage as a result. In his view, they did not.
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