Weisblatt v. Chicago Bar Ass'n
Annotate this Case
THIRD DIVISION
September 3, 1997
No. 1-96-4461
JUSTINE WEISBLATT, )
)
Plaintiff-Appellant, ) APPEAL FROM THE CIRCUIT
) COURT OF COOK COUNTY.
v. )
)
CHICAGO BAR ASSOCIATION, )
an Illinois not-for-profit ) HONORABLE LORETTA C.
corporation, ) DOUGLAS, JUDGE PRESIDING.
)
Defendant-Appellee. )
JUSTICE GORDON delivered the opinion of the court:
Plaintiff, Justine Weisblatt, appeals from the dismissal of
her complaint against defendant, the Chicago Bar Association (the
"CBA"), and from the trial court's denial of leave to file an
amended complaint. In both complaints, the plaintiff alleged
that the Chicago Bar Association was liable for the negligent
referral that its Lawyer Referral Service made to her.
The CBA moved to dismiss the complaint pursuant to section
2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West
1996) arguing that the complaint failed to state a cause of
action. In her response to that motion, the plaintiff asserted
two theories of liability. The plaintiff argued that the CBA was
liable to the plaintiff for its negligent referral under the
voluntary undertaking doctrine and as a "referring lawyer" under
Rule 1.5(f) and (g) of the Illinois Rules of Professional Conduct
(134 Ill. 2d R. 1.5(f), (g)). In granting the motion to dismiss,
the trial court found that the plaintiff could not plead damages
against the CBA since her malpractice action against the attorney
to whom she had been referred was pending; that the CBA had no
duty to insure that lawyers who participate in its referral
service have adequate malpractice insurance; that no precedent
existed for a cause of action against the CBA for voluntary
undertaking; and that the plaintiff's claim was barred by the
economic loss doctrine stated in Moorman Manufacturing Co. v.
National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443 (1982).
The plaintiff filed a motion to reconsider and for leave to
file an amended complaint which explicitly raised the two
theories of recovery alleged in plaintiff's response to the CBA's
motion to dismiss, namely, negligent referral under the voluntary
undertaking doctrine and negligent referral in failing to comply
with the duties of a "referring lawyer" under the Rules of
Professional Conduct. In that pleading, the plaintiff also
alleged that her malpractice lawsuit against M.S., which sought
in excess of one million dollars, had been settled for $167,000,
the maximum amount available under his malpractice insurance
policy. The trial court denied plaintiff's motion to reconsider
and for leave to file her amended complaint; and the plaintiff
filed her notice of appeal.
The plaintiff raises the following issues: (1) whether the
trial court abused its discretion in denying plaintiff leave to
file an amended complaint; (2) whether plaintiff's amended
complaint stated a claim based upon the voluntary undertaking
doctrine; (3) whether plaintiff's amended complaint stated a
claim for legal malpractice based upon the Illinois Rules of
Professional Conduct; and (4) whether the plaintiff's amended
complaint stated a cause of action for negligent representation.
The decision to allow the filing of an amended complaint
rests within the sound discretion of the trial court and will not
be reversed absent a manifest abuse of discretion. E.g., Loyola
Academy v. S & S Roof Maintenance, Inc., 146 Ill. 2d 263, 586 N.E.2d 1211, 1216 (1992); Trans World Airlines, Inc. v. Martin
Automatic, Inc., 215 Ill. App. 3d 622, 575 N.E.2d 592 (1991).
Four factors have been established to determine whether the trial
court has abused its discretion. They are: (1) whether the
proposed amendment would cure the defective pleading; (2) whether
other parties would sustain prejudice or surprise by virtue of
the proposed amendment; (3) whether the proposed amendment is
timely; and (4) whether previous opportunities to amend the
pleading could be identified. City of Elgin v. County of Cook,
169 Ill. 2d 53, 660 N.E.2d 875 (1995); Marczak v. Drexel National
Bank, 186 Ill. App. 3d 640, 542 N.E.2d 787 (1989); Kupianen v.
Graham, 107 Ill. App. 3d 373, 437 N.E.2d 774 (1982). Our
disposition of the instant appeal turns on the first factor and
whether the amended complaint stated a cause of action. See City
of Elgin, 169 Ill. 2d 53, 660 N.E.2d 875; Caballero v. Rockford
Punch Press & Manufacturing Co., 244 Ill. App. 3d 333, 614 N.E.2d 362 (1993); Bernstein v. Lind-Waldock & Co., 153 Ill. App. 3d
108, 505 N.E.2d 1114 (1987) (it is appropriate for the trial
court to deny leave to amend when no cause of action can be
stated). See also Marczak, 186 Ill. App. 3d at 643, 542 N.E.2d
at 789 ("[t]he court may consider the ultimate efficacy of a
claim in passing on a motion to amend a pleading and may deny
leave if the proposed amendment does not cure the defect").
I. Voluntary Undertaking
In count I of her amended complaint, the plaintiff alleged
that the CBA provided an attorney referral service from which
members of the public could obtain the names of attorneys with
purported expertise in specified areas of the law. She alleged
that the attorney participants were required to demonstrate to
the CBA expertise and adequate malpractice insurance. The
plaintiff further alleged that she telephoned the CBA Lawyer
Referral Service seeking the name of a lawyer who specialized in
legal malpractice. The plaintiff alleged that the Lawyer
Referral Service gave her the name of M.S. and told her that he
specialized in legal malpractice matters. The plaintiff alleged
that the CBA owed a duty of reasonable care to see that attorneys
who participated in the lawyer referral service possessed
expertise and that they had adequate malpractice insurance. The
plaintiff alleged that the CBA was negligent and breached that
duty of care because M.S. did not have expertise in the area of
legal malpractice and did not have adequate malpractice
insurance. In support of her allegation that M.S. did not have
expertise in legal malpractice, the plaintiff alleged that M.S.
negligently advised her to settle her fee dispute with her
divorce attorney and caused her to release a collectible
malpractice claim against that attorney worth in excess of one
million dollars. The plaintiff alleged that she suffered
economic damages in that she was unable to pursue her malpractice
claim against her divorce attorney and that M.S.'s malpractice
insurance was inadequate to cover the loss she suffered as a
result of her inability to sue her divorce attorney.
In reliance on Nelson v. Union Wire Rope Corp., 31 Ill. 2d 69, 199 N.E.2d 769 (1964) and Cross v. Wells Fargo Alarm
Services, 82 Ill. 2d 313, 412 N.E.2d 472 (1980), the plaintiff
argues that she pled a cause of action for negligent performance
of a voluntary undertaking. As espoused in Nelson and Cross, the
voluntary undertaking doctrine imposes liability upon one who
gratuitously undertakes to render services to another and who
fails to perform those services with due care or with such
competence and skill as he or she possessed. Cross, 82 Ill. 2d 313, 412 N.E.2d 472; Nelson, 31 Ill. 2d 69, 199 N.E.2d 769. See
Siklas v. Ecker Center for Mental Health, Inc., 248 Ill. App. 3d
124, 617 N.E.2d 507 (1993).
The CBA argues that the voluntary undertaking doctrine is
inapplicable to the instant case because it only imposes
liability for bodily injury or physical damage that results when
the undertaking is negligently performed. The CBA argues that,
since the plaintiff herein did not suffer any physical damage,
she cannot allege a cause of action based upon the voluntary
undertaking doctrine.
In Illinois, the voluntary undertaking doctrine generally
has been applied to allow recovery where the injury has been of a
bodily or physical nature. See, e.g., Nelson, 31 Ill. 2d 69, 199 N.E.2d 769 (involving personal injuries and wrongful deaths);
Cross, 82 Ill. 2d 313, 412 N.E.2d 472 (involving bodily
injuries); Huber v. Seaton, 165 Ill. App. 3d 445, 519 N.E.2d 73
(1988) (involving property damage). Our court recently held that
there can be no recovery under the voluntary undertaking doctrine
unless physical injury or damage has occurred. See Furtak v.
Moffett, 284 Ill. App. 3d 255, 671 N.E.2d 827 (1996). But see
Stefan v. State Farm Mutual Automobile Insurance Co., 284 Ill.
App. 3d 727, 672 N.E.2d 1329 (1996) (applying voluntary
undertaking doctrine to economic injury without discussion of
that issue). See also Northfield Insurance Co. v. St. Paul
Surplus Lines Insurance Co., 545 N.W.2d 57 (Minn. Ct. App. 1996);
Southwestern Bell Telephone Co. v. Delanney, 809 S.W.2d 493 (Tex.
1991) (stating that physical injury is required to obtain
recovery under the voluntary undertaking doctrine). But see
Lloyd v. State Farm Mutual Automobile Insurance Co., 176 Ariz.
247, 860 P.2d 1300 (1992); Chew v. Paul D. Meyer M.D., P.A., 72
Md. App. 132, 527 A.2d 828 (1987) (allowing economic loss
recovery under voluntary undertaking claim). The Restatement
(Second) of Torts also limits recovery under that doctrine to
cases wherein physical injury has occurred. It states that
"[o]ne who undertakes *** to render services to another *** is
subject to liability to the other for physical harm resulting
***." (Emphasis added). Restatement (Second) of Torts 323, at
135 (1965).
Here, the plaintiff seeks economic loss recovery in tort
based upon the breach of the duty imposed by the voluntary
undertaking doctrine. She seeks to recover the damages she was
unable to recover against her divorce attorney who allegedly
failed to obtain a sufficient share of her marital estate. It
would appear that Illinois and many other jurisdictions would
limit recovery under the voluntary undertaking doctrine to bodily
injury or physical damage which is the context within which this
doctrine developed.
Moreover, even if economic loss was not specifically
excluded from recovery under the voluntary undertaking doctrine,
it would be so excluded under the general maxim in tort recovery
which provides that economic loss is not recoverable in tort.
See Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443 (1982) ("[t]ort theory is appropriately suited
for personal injury or property damage resulting from a sudden or
dangerous occurrence"). See also Collins v. Reynard, 154 Ill. 2d 48, 607 N.E.2d 1185 (1992) (Miller, CJ, specially concurring) for
extensive list of cases wherein Moorman doctrine applied to
prohibit economic loss recovery in tort. The only exceptions to
this prohibition are in the areas of fraudulent and negligent
representations (Moorman, 91 Ill. 2d at 88-89, 435 N.E.2d at 452;
Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656 (1969)) and
professional malpractice (Congregation of the Passion v. Touche
Ross & Co., 159 Ill. 2d 137, 636 N.E.2d 503 (1994) (accountant
malpractice); Collins v. Reynard, 154 Ill. 2d 48, 607 N.E.2d 1185
(1992) (legal malpractice)). As shall be more fully discussed
below, plaintiff's amended complaint does not allege a cause of
action that falls within any of these Moorman exceptions.
In the cases cited by the plaintiff wherein economic loss
recovery was permitted for the negligent performance of a
voluntary undertaking only one, Chew v. Paul D. Meyer M.D., P.A.,
72 Md. App. 132, 527 A.2d 828, is informative. In Chew, the
plaintiff sought economic damages against the defendant doctor
based upon the doctor's failure to timely complete plaintiff's
insurance forms, the untimeliness of which caused plaintiff's job
termination. The plaintiff alleged alternative theories of
recovery, namely, breach of contract and negligent performance of
a gratuitous undertaking. Finding that the voluntary undertaking
count stated a cause of action, even though it sought economic
loss recovery only, the court partially rejected the Restatement
(Second) of Torts requirement for physical damage. That
rejection was limited, however, to situations involving
contractual undertakings, when an " 'intimate nexus *** by
contractual privity or its equivalent' " exists between the
parties. Chew, 72 Md. App. at 140, 527 A.2d at 831-32 citing
Jacques v. First National Bank, 307 Md. 527, 534, 515 A.2d 756,
759-60 (1986).
Chew is not applicable to the instant case for several
reasons. First, as noted above, the Moorman economic loss
doctrine, with certain exceptions not here applicable, prohibits
economic loss recovery in tort in Illinois. Second, Chew
diverges from the general rule on voluntary undertaking which
limits liability to physical damage. Third, Chew's divergence
from that general rule was specifically limited to voluntary
undertaking actions which alleged an "intimate nexus" or
contractual relationship between the parties. In the instant
case, the plaintiff has not alleged the existence of a
contractual relationship. While there may have been a
contractual relationship between the CBA and the referral service
attorney participants, the relationship between the CBA and the
plaintiff was strictly gratuitous and lacked contractual privity.
II. Legal Malpractice
A. Liability as a "Referring Lawyer"
The plaintiff next argues that her amended complaint falls
within the recognized exception to the Moorman economic loss
doctrine in that it alleges legal malpractice. In Collins v.
Reynard, 154 Ill. 2d 48, 50, 607 N.E.2d 1185, 1186 (1992), our
supreme court held that "a complaint against a lawyer for
professional malpractice may be couched in either contract or
tort ***." As later explained in Congregation of the Passion v.
Touche Ross & Co., 159 Ill. 2d 137, 636 N.E.2d 503 (1994), the
economic loss doctrine does not bar a tort action in the service
industry where duties are not defined by contract but arise
outside of the contract. In Touche Ross, the court noted that
"attorneys owe an extracontractual duty which arises not from
contract, but from the traditional responsibilities a lawyer owes
to a client." Touche Ross, 159 Ill. 2d at 162, 636 N.E.2d at 514
citing 2314 Lincoln Park West Condominium Ass'n v. Mann, Gin,
Ebel & Frazier, Inc., 136 Ill. 2d 302, 318, 555 N.E.2d 346, 353
(1990).
Plaintiff's legal malpractice count does not allege
negligence in the performance of duties arising from a
contractual relationship between the CBA and herself. Rather,
she alleges that the CBA was negligent in the performance of its
duties as a "referring lawyer" set forth in Rule 1.5(f) and (g)
of the Illinois Rules of Professional Conduct (134 Ill. 2d R.
1.5(f), (g)). Rule 1.5(f) prohibits a lawyer from dividing a fee
for legal services with another lawyer who is not in the same
firm, unless the client consents in writing to certain specified
disclosures. 134 Ill. 2d R. 1.5(f). Rule 1.5(g) provides:
"A division of fees shall be made in proportion to the
services performed and responsibility assumed by each
lawyer, except where the primary service performed by
one lawyer is the referral of the client to another
lawyer and
(1) the receiving lawyer discloses that the
referring lawyer has received or will receive
economic benefit from the referral and the extent
and basis of such economic benefit, and
(2) the referring lawyer agrees to assume the
same legal responsibility for the performance of
the services in question as would a partner of the
receiving lawyer." 134 Ill. 2d R. 1.5(g).
In her amended complaint, the plaintiff alleged that the CBA
lawyer referral service required lawyer participants to pay
referral fees when individuals referred to them by the CBA
retained them to provide legal services. The plaintiff alleged
that, by requiring the attorney participants to pay a referral
fee, the CBA acted as a "referring lawyer" under the Illinois
Rules of Professional Conduct. The plaintiff further alleged
that, as a "referring lawyer," the CBA owed the plaintiff the
same duties for the performance of services as the receiving
attorney.
The CBA argued in the trial court and continues to argue on
appeal that the CBA is not a "lawyer" and is not subject to Rules
1.5(f) and (g) of the Rules of Professional Conduct. We agree.
The mere receipt of a referral fee does not by itself make an
entity an insurer or otherwise responsible for the conduct of the
lawyer to whom the matter is referred. Only where the referring
entity is a lawyer can such a responsibility and is such a
responsibility imposed under Rule 1.5.
Rule 1.5 expressly governs the division of fees and
professional responsibilities between lawyers. The objective of
that Rule, as discussed in the Committee Commentary to Rule 2-107
of the Illinois Code of Professional Responsibility, the
predecessor to Rule. 1.5, is to encourage referrals to
experienced lawyers and to discourage the practice of creating
"make-work" by the referring attorney for purposes of earning the
referral fee. So long as the referring lawyer maintains
responsibility for the work of the receiving lawyer, the referral
fee is justified. In this regard, the Committee Commentary
states:
"To require actual participation in a case before a fee
may be earned discourages some lawyers from referring
cases they know could be better handled by another.
This is not in the interest of the client or the
lawyer. Currently, referring lawyers are sometimes
given make-work tasks after referral to 'earn' a fee.
This practice does not encourage the efficient delivery
of legal services and may drive up legal fees. The
public is best served by encouraging lawyers to refer
matters to those more skilled in a particular area by
permitting them to earn a referral fee so long as there
is full disclosure to the client and responsibility is
maintained by the referring lawyer." 107 Ill. 2d R. 2-
107, Committee Commentary (rev. June 26, 1981).
Given this purpose, one can discern that Rule 1.5 and its
predecessor Rule 2-107 were intended to govern referrals made by
lawyers and not those made by lawyer referral services.
The CBA is not a lawyer. The CBA is not licensed to
practice law nor was it engaged by the plaintiff to represent
her. The CBA is a not-for-profit organization that provides many
services including a lawyer referral service. The rule governing
the receipt of referral fees by a non-lawyer referring entity,
such as the CBA, is Rule 7.2(b). 134 Ill. 2d R. 7.2(b). That
rule recognizes lawyer referral services and permits lawyers to
"pay the usual charges of a not-for-profit lawyer referral
service or other legal service organization." 134 Ill. 2d R.
7.2(b). While that rule allows lawyer referral services to
collect referral fees, it does not, however, impose any duty or
responsibility upon the lawyer referral service or legal service
organization to monitor or maintain responsibility for the legal
services ultimately rendered by the lawyer receiving the
referral. Thus, the mere taking of a referral fee as a referring
agency under Rule 7.2(b) rather than as a referring lawyer under
Rule 1.5 will not suffice to make the CBA an insurer or otherwise
vicariously accountable for the actions of the attorney to whom
the matter is referred.
B. Negligent Representation
The plaintiff finally urges, albeit in her reply brief, that
her amended complaint sufficiently alleges another Moorman
exception, negligent representation. Since a motion to dismiss
should not be granted if a good cause of action is stated in the
factual pleadings, even if that cause of action is asserted for
the first time on appeal (Reuben H. Donnelley Corp. v. Brauer,
275 Ill. App. 3d 300, 655 N.E.2d 1162 (1995)), we will address
plaintiff's negligent misrepresentation contention.
Citing to Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656
(1969), the Moorman court stated that economic loss is
recoverable where one who is in the business of supplying
information for the guidance of others in their business
transactions negligently supplies false information. Moorman, 91 Ill. 2d 69, 435 N.E.2d 443. In order to maintain an action for
negligent representation, a plaintiff must allege: (a) a false
statement of material fact; (2) carelessness or negligence in
ascertaining the truth of the statement by defendant; (3) an
intention to induce the other party to act; (4) action by the
other party in reliance on the truth of the statements; (5)
damage to the other party resulting from such reliance; and (6)
duty owed by defendant to plaintiff to communicate accurate
information. Rosenstein v. Standard & Poor's Corp., 264 Ill.
App. 3d 818, 636 N.E.2d 665 (1993). See generally Restatement
(Second) of Torts 552 (1977).
The relevant allegations in the plaintiff's amended
complaint state that the CBA "provide[d] an attorney referral
service by which members of the public may obtain from this
service the names of attorneys with purported expertise in
specified areas of law"; that the CBA told the plaintiff that
M.S. specialized in legal malpractice matters; that the CBA told
the plaintiff to call the CBA back "if it '[did] not work out
with him' "; that M.S. breached his duties to the plaintiff with
respect to his representation of the plaintiff in her claim
against her divorce attorney; and that, "[b]ut for the negligence
of the CBA in referring plaintiff to M.S. as a legal malpractice
specialist," plaintiff would have been able to bring a lawsuit
against her divorce attorney. These allegations do not
sufficiently allege a cause of action against the CBA for
negligent representation.
Arguably, by making the referral, the CBA was engaged in the
business of providing information, albeit as a not-for-profit
organization. However, the plaintiff has not alleged that the
information provided to her by the CBA was false. The plaintiff
did not allege that M.S. had no expertise in the legal
malpractice field or that he was incompetent with respect to any
other legal malpractice matters he had handled. She only alleged
that M.S. mishandled her legal malpractice claim. That single
occurrence would not establish a lack of expertise or experience
so as to make the CBA's representation false. To hold otherwise,
would transform the CBA into a guarantor of the attorneys who
participate in its lawyer referral service. By representing that
an attorney has expertise in a given area of the law, the CBA was
merely stating that the attorney had practiced in that area and
was familiar with the law. That fact is not negated when one
alleges a single occurrence in which the attorney erred.
For the foregoing reasons, the judgment of the Circuit Court
of Cook County is affirmed.
Affirmed.
COUSINS, P.J. and LEAVITT, J., concur.
September 3, 1997
No. 1-96-4461
JUSTINE WEISBLATT, )
)
Plaintiff-Appellant, ) APPEAL FROM THE CIRCUIT
) COURT OF COOK COUNTY.
v. )
)
CHICAGO BAR ASSOCIATION, )
an Illinois not-for-profit ) HONORABLE LORETTA C.
corporation, ) DOUGLAS, JUDGE PRESIDING.
)
Defendant-Appellee. )
JUSTICE GORDON delivered the opinion of the court:
Plaintiff, Justine Weisblatt, appeals from the dismissal of
her complaint against defendant, the Chicago Bar Association (the
"CBA"), and from the trial court's denial of leave to file an
amended complaint. In both complaints, the plaintiff alleged
that the Chicago Bar Association was liable for the negligent
referral that its Lawyer Referral Service made to her.
The CBA moved to dismiss the complaint pursuant to section
2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West
1996) arguing that the complaint failed to state a cause of
action. In her response to that motion, the plaintiff asserted
two theories of liability. The plaintiff argued that the CBA was
liable to the plaintiff for its negligent referral under the
voluntary undertaking doctrine and as a "referring lawyer" under
Rule 1.5(f) and (g) of the Illinois Rules of Professional Conduct
(134 Ill. 2d R. 1.5(f), (g)). In granting the motion to dismiss,
the trial court found that the plaintiff could not plead damages
against the CBA since her malpractice action against the attorney
to whom she had been referred was pending; that the CBA had no
duty to insure that lawyers who participate in its referral
service have adequate malpractice insurance; that no precedent
existed for a cause of action against the CBA for voluntary
undertaking; and that the plaintiff's claim was barred by the
economic loss doctrine stated in Moorman Manufacturing Co. v.
National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443 (1982).
The plaintiff filed a motion to reconsider and for leave to
file an amended complaint which explicitly raised the two
theories of recovery alleged in plaintiff's response to the CBA's
motion to dismiss, namely, negligent referral under the voluntary
undertaking doctrine and negligent referral in failing to comply
with the duties of a "referring lawyer" under the Rules of
Professional Conduct. In that pleading, the plaintiff also
alleged that her malpractice lawsuit against M.S., which sought
in excess of one million dollars, had been settled for $167,000,
the maximum amount available under his malpractice insurance
policy. The trial court denied plaintiff's motion to reconsider
and for leave to file her amended complaint; and the plaintiff
filed her notice of appeal.
The plaintiff raises the following issues: (1) whether the
trial court abused its discretion in denying plaintiff leave to
file an amended complaint; (2) whether plaintiff's amended
complaint stated a claim based upon the voluntary undertaking
doctrine; (3) whether plaintiff's amended complaint stated a
claim for legal malpractice based upon the Illinois Rules of
Professional Conduct; and (4) whether the plaintiff's amended
complaint stated a cause of action for negligent representation.
The decision to allow the filing of an amended complaint
rests within the sound discretion of the trial court and will not
be reversed absent a manifest abuse of discretion. E.g., Loyola
Academy v. S & S Roof Maintenance, Inc., 146 Ill. 2d 263, 586 N.E.2d 1211, 1216 (1992); Trans World Airlines, Inc. v. Martin
Automatic, Inc., 215 Ill. App. 3d 622, 575 N.E.2d 592 (1991).
Four factors have been established to determine whether the trial
court has abused its discretion. They are: (1) whether the
proposed amendment would cure the defective pleading; (2) whether
other parties would sustain prejudice or surprise by virtue of
the proposed amendment; (3) whether the proposed amendment is
timely; and (4) whether previous opportunities to amend the
pleading could be identified. City of Elgin v. County of Cook,
169 Ill. 2d 53, 660 N.E.2d 875 (1995); Marczak v. Drexel National
Bank, 186 Ill. App. 3d 640, 542 N.E.2d 787 (1989); Kupianen v.
Graham, 107 Ill. App. 3d 373, 437 N.E.2d 774 (1982). Our
disposition of the instant appeal turns on the first factor and
whether the amended complaint stated a cause of action. See City
of Elgin, 169 Ill. 2d 53, 660 N.E.2d 875; Caballero v. Rockford
Punch Press & Manufacturing Co., 244 Ill. App. 3d 333, 614 N.E.2d 362 (1993); Bernstein v. Lind-Waldock & Co., 153 Ill. App. 3d
108, 505 N.E.2d 1114 (1987) (it is appropriate for the trial
court to deny leave to amend when no cause of action can be
stated). See also Marczak, 186 Ill. App. 3d at 643, 542 N.E.2d
at 789 ("[t]he court may consider the ultimate efficacy of a
claim in passing on a motion to amend a pleading and may deny
leave if the proposed amendment does not cure the defect").
I. Voluntary Undertaking
In count I of her amended complaint, the plaintiff alleged
that the CBA provided an attorney referral service from which
members of the public could obtain the names of attorneys with
purported expertise in specified areas of the law. She alleged
that the attorney participants were required to demonstrate to
the CBA expertise and adequate malpractice insurance. The
plaintiff further alleged that she telephoned the CBA Lawyer
Referral Service seeking the name of a lawyer who specialized in
legal malpractice. The plaintiff alleged that the Lawyer
Referral Service gave her the name of M.S. and told her that he
specialized in legal malpractice matters. The plaintiff alleged
that the CBA owed a duty of reasonable care to see that attorneys
who participated in the lawyer referral service possessed
expertise and that they had adequate malpractice insurance. The
plaintiff alleged that the CBA was negligent and breached that
duty of care because M.S. did not have expertise in the area of
legal malpractice and did not have adequate malpractice
insurance. In support of her allegation that M.S. did not have
expertise in legal malpractice, the plaintiff alleged that M.S.
negligently advised her to settle her fee dispute with her
divorce attorney and caused her to release a collectible
malpractice claim against that attorney worth in excess of one
million dollars. The plaintiff alleged that she suffered
economic damages in that she was unable to pursue her malpractice
claim against her divorce attorney and that M.S.'s malpractice
insurance was inadequate to cover the loss she suffered as a
result of her inability to sue her divorce attorney.
In reliance on Nelson v. Union Wire Rope Corp., 31 Ill. 2d 69, 199 N.E.2d 769 (1964) and Cross v. Wells Fargo Alarm
Services, 82 Ill. 2d 313, 412 N.E.2d 472 (1980), the plaintiff
argues that she pled a cause of action for negligent performance
of a voluntary undertaking. As espoused in Nelson and Cross, the
voluntary undertaking doctrine imposes liability upon one who
gratuitously undertakes to render services to another and who
fails to perform those services with due care or with such
competence and skill as he or she possessed. Cross, 82 Ill. 2d 313, 412 N.E.2d 472; Nelson, 31 Ill. 2d 69, 199 N.E.2d 769. See
Siklas v. Ecker Center for Mental Health, Inc., 248 Ill. App. 3d
124, 617 N.E.2d 507 (1993).
The CBA argues that the voluntary undertaking doctrine is
inapplicable to the instant case because it only imposes
liability for bodily injury or physical damage that results when
the undertaking is negligently performed. The CBA argues that,
since the plaintiff herein did not suffer any physical damage,
she cannot allege a cause of action based upon the voluntary
undertaking doctrine.
In Illinois, the voluntary undertaking doctrine generally
has been applied to allow recovery where the injury has been of a
bodily or physical nature. See, e.g., Nelson, 31 Ill. 2d 69, 199 N.E.2d 769 (involving personal injuries and wrongful deaths);
Cross, 82 Ill. 2d 313, 412 N.E.2d 472 (involving bodily
injuries); Huber v. Seaton, 165 Ill. App. 3d 445, 519 N.E.2d 73
(1988) (involving property damage). Our court recently held that
there can be no recovery under the voluntary undertaking doctrine
unless physical injury or damage has occurred. See Furtak v.
Moffett, 284 Ill. App. 3d 255, 671 N.E.2d 827 (1996). But see
Stefan v. State Farm Mutual Automobile Insurance Co., 284 Ill.
App. 3d 727, 672 N.E.2d 1329 (1996) (applying voluntary
undertaking doctrine to economic injury without discussion of
that issue). See also Northfield Insurance Co. v. St. Paul
Surplus Lines Insurance Co., 545 N.W.2d 57 (Minn. Ct. App. 1996);
Southwestern Bell Telephone Co. v. Delanney, 809 S.W.2d 493 (Tex.
1991) (stating that physical injury is required to obtain
recovery under the voluntary undertaking doctrine). But see
Lloyd v. State Farm Mutual Automobile Insurance Co., 176 Ariz.
247, 860 P.2d 1300 (1992); Chew v. Paul D. Meyer M.D., P.A., 72
Md. App. 132, 527 A.2d 828 (1987) (allowing economic loss
recovery under voluntary undertaking claim). The Restatement
(Second) of Torts also limits recovery under that doctrine to
cases wherein physical injury has occurred. It states that
"[o]ne who undertakes *** to render services to another *** is
subject to liability to the other for physical harm resulting
***." (Emphasis added). Restatement (Second) of Torts 323, at
135 (1965).
Here, the plaintiff seeks economic loss recovery in tort
based upon the breach of the duty imposed by the voluntary
undertaking doctrine. She seeks to recover the damages she was
unable to recover against her divorce attorney who allegedly
failed to obtain a sufficient share of her marital estate. It
would appear that Illinois and many other jurisdictions would
limit recovery under the voluntary undertaking doctrine to bodily
injury or physical damage which is the context within which this
doctrine developed.
Moreover, even if economic loss was not specifically
excluded from recovery under the voluntary undertaking doctrine,
it would be so excluded under the general maxim in tort recovery
which provides that economic loss is not recoverable in tort.
See Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443 (1982) ("[t]ort theory is appropriately suited
for personal injury or property damage resulting from a sudden or
dangerous occurrence"). See also Collins v. Reynard, 154 Ill. 2d 48, 607 N.E.2d 1185 (1992) (Miller, CJ, specially concurring) for
extensive list of cases wherein Moorman doctrine applied to
prohibit economic loss recovery in tort. The only exceptions to
this prohibition are in the areas of fraudulent and negligent
representations (Moorman, 91 Ill. 2d at 88-89, 435 N.E.2d at 452;
Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656 (1969)) and
professional malpractice (Congregation of the Passion v. Touche
Ross & Co., 159 Ill. 2d 137, 636 N.E.2d 503 (1994) (accountant
malpractice); Collins v. Reynard, 154 Ill. 2d 48, 607 N.E.2d 1185
(1992) (legal malpractice)). As shall be more fully discussed
below, plaintiff's amended complaint does not allege a cause of
action that falls within any of these Moorman exceptions.
In the cases cited by the plaintiff wherein economic loss
recovery was permitted for the negligent performance of a
voluntary undertaking only one, Chew v. Paul D. Meyer M.D., P.A.,
72 Md. App. 132, 527 A.2d 828, is informative. In Chew, the
plaintiff sought economic damages against the defendant doctor
based upon the doctor's failure to timely complete plaintiff's
insurance forms, the untimeliness of which caused plaintiff's job
termination. The plaintiff alleged alternative theories of
recovery, namely, breach of contract and negligent performance of
a gratuitous undertaking. Finding that the voluntary undertaking
count stated a cause of action, even though it sought economic
loss recovery only, the court partially rejected the Restatement
(Second) of Torts requirement for physical damage. That
rejection was limited, however, to situations involving
contractual undertakings, when an " 'intimate nexus *** by
contractual privity or its equivalent' " exists between the
parties. Chew, 72 Md. App. at 140, 527 A.2d at 831-32 citing
Jacques v. First National Bank, 307 Md. 527, 534, 515 A.2d 756,
759-60 (1986).
Chew is not applicable to the instant case for several
reasons. First, as noted above, the Moorman economic loss
doctrine, with certain exceptions not here applicable, prohibits
economic loss recovery in tort in Illinois. Second, Chew
diverges from the general rule on voluntary undertaking which
limits liability to physical damage. Third, Chew's divergence
from that general rule was specifically limited to voluntary
undertaking actions which alleged an "intimate nexus" or
contractual relationship between the parties. In the instant
case, the plaintiff has not alleged the existence of a
contractual relationship. While there may have been a
contractual relationship between the CBA and the referral service
attorney participants, the relationship between the CBA and the
plaintiff was strictly gratuitous and lacked contractual privity.
II. Legal Malpractice
A. Liability as a "Referring Lawyer"
The plaintiff next argues that her amended complaint falls
within the recognized exception to the Moorman economic loss
doctrine in that it alleges legal malpractice. In Collins v.
Reynard, 154 Ill. 2d 48, 50, 607 N.E.2d 1185, 1186 (1992), our
supreme court held that "a complaint against a lawyer for
professional malpractice may be couched in either contract or
tort ***." As later explained in Congregation of the Passion v.
Touche Ross & Co., 159 Ill. 2d 137, 636 N.E.2d 503 (1994), the
economic loss doctrine does not bar a tort action in the service
industry where duties are not defined by contract but arise
outside of the contract. In Touche Ross, the court noted that
"attorneys owe an extracontractual duty which arises not from
contract, but from the traditional responsibilities a lawyer owes
to a client." Touche Ross, 159 Ill. 2d at 162, 636 N.E.2d at 514
citing 2314 Lincoln Park West Condominium Ass'n v. Mann, Gin,
Ebel & Frazier, Inc., 136 Ill. 2d 302, 318, 555 N.E.2d 346, 353
(1990).
Plaintiff's legal malpractice count does not allege
negligence in the performance of duties arising from a
contractual relationship between the CBA and herself. Rather,
she alleges that the CBA was negligent in the performance of its
duties as a "referring lawyer" set forth in Rule 1.5(f) and (g)
of the Illinois Rules of Professional Conduct (134 Ill. 2d R.
1.5(f), (g)). Rule 1.5(f) prohibits a lawyer from dividing a fee
for legal services with another lawyer who is not in the same
firm, unless the client consents in writing to certain specified
disclosures. 134 Ill. 2d R. 1.5(f). Rule 1.5(g) provides:
"A division of fees shall be made in proportion to the
services performed and responsibility assumed by each
lawyer, except where the primary service performed by
one lawyer is the referral of the client to another
lawyer and
(1) the receiving lawyer discloses that the
referring lawyer has received or will receive
economic benefit from the referral and the extent
and basis of such economic benefit, and
(2) the referring lawyer agrees to assume the
same legal responsibility for the performance of
the services in question as would a partner of the
receiving lawyer." 134 Ill. 2d R. 1.5(g).
In her amended complaint, the plaintiff alleged that the CBA
lawyer referral service required lawyer participants to pay
referral fees when individuals referred to them by the CBA
retained them to provide legal services. The plaintiff alleged
that, by requiring the attorney participants to pay a referral
fee, the CBA acted as a "referring lawyer" under the Illinois
Rules of Professional Conduct. The plaintiff further alleged
that, as a "referring lawyer," the CBA owed the plaintiff the
same duties for the performance of services as the receiving
attorney.
The CBA argued in the trial court and continues to argue on
appeal that the CBA is not a "lawyer" and is not subject to Rules
1.5(f) and (g) of the Rules of Professional Conduct. We agree.
The mere receipt of a referral fee does not by itself make an
entity an insurer or otherwise responsible for the conduct of the
lawyer to whom the matter is referred. Only where the referring
entity is a lawyer can such a responsibility and is such a
responsibility imposed under Rule 1.5.
Rule 1.5 expressly governs the division of fees and
professional responsibilities between lawyers. The objective of
that Rule, as discussed in the Committee Commentary to Rule 2-107
of the Illinois Code of Professional Responsibility, the
predecessor to Rule. 1.5, is to encourage referrals to
experienced lawyers and to discourage the practice of creating
"make-work" by the referring attorney for purposes of earning the
referral fee. So long as the referring lawyer maintains
responsibility for the work of the receiving lawyer, the referral
fee is justified. In this regard, the Committee Commentary
states:
"To require actual participation in a case before a fee
may be earned discourages some lawyers from referring
cases they know could be better handled by another.
This is not in the interest of the client or the
lawyer. Currently, referring lawyers are sometimes
given make-work tasks after referral to 'earn' a fee.
This practice does not encourage the efficient delivery
of legal services and may drive up legal fees. The
public is best served by encouraging lawyers to refer
matters to those more skilled in a particular area by
permitting them to earn a referral fee so long as there
is full disclosure to the client and responsibility is
maintained by the referring lawyer." 107 Ill. 2d R. 2-
107, Committee Commentary (rev. June 26, 1981).
Given this purpose, one can discern that Rule 1.5 and its
predecessor Rule 2-107 were intended to govern referrals made by
lawyers and not those made by lawyer referral services.
The CBA is not a lawyer. The CBA is not licensed to
practice law nor was it engaged by the plaintiff to represent
her. The CBA is a not-for-profit organization that provides many
services including a lawyer referral service. The rule governing
the receipt of referral fees by a non-lawyer referring entity,
such as the CBA, is Rule 7.2(b). 134 Ill. 2d R. 7.2(b). That
rule recognizes lawyer referral services and permits lawyers to
"pay the usual charges of a not-for-profit lawyer referral
service or other legal service organization." 134 Ill. 2d R.
7.2(b). While that rule allows lawyer referral services to
collect referral fees, it does not, however, impose any duty or
responsibility upon the lawyer referral service or legal service
organization to monitor or maintain responsibility for the legal
services ultimately rendered by the lawyer receiving the
referral. Thus, the mere taking of a referral fee as a referring
agency under Rule 7.2(b) rather than as a referring lawyer under
Rule 1.5 will not suffice to make the CBA an insurer or otherwise
vicariously accountable for the actions of the attorney to whom
the matter is referred.
B. Negligent Representation
The plaintiff finally urges, albeit in her reply brief, that
her amended complaint sufficiently alleges another Moorman
exception, negligent representation. Since a motion to dismiss
should not be granted if a good cause of action is stated in the
factual pleadings, even if that cause of action is asserted for
the first time on appeal (Reuben H. Donnelley Corp. v. Brauer,
275 Ill. App. 3d 300, 655 N.E.2d 1162 (1995)), we will address
plaintiff's negligent misrepresentation contention.
Citing to Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656
(1969), the Moorman court stated that economic loss is
recoverable where one who is in the business of supplying
information for the guidance of others in their business
transactions negligently supplies false information. Moorman, 91 Ill. 2d 69, 435 N.E.2d 443. In order to maintain an action for
negligent representation, a plaintiff must allege: (a) a false
statement of material fact; (2) carelessness or negligence in
ascertaining the truth of the statement by defendant; (3) an
intention to induce the other party to act; (4) action by the
other party in reliance on the truth of the statements; (5)
damage to the other party resulting from such reliance; and (6)
duty owed by defendant to plaintiff to communicate accurate
information. Rosenstein v. Standard & Poor's Corp., 264 Ill.
App. 3d 818, 636 N.E.2d 665 (1993). See generally Restatement
(Second) of Torts 552 (1977).
The relevant allegations in the plaintiff's amended
complaint state that the CBA "provide[d] an attorney referral
service by which members of the public may obtain from this
service the names of attorneys with purported expertise in
specified areas of law"; that the CBA told the plaintiff that
M.S. specialized in legal malpractice matters; that the CBA told
the plaintiff to call the CBA back "if it '[did] not work out
with him' "; that M.S. breached his duties to the plaintiff with
respect to his representation of the plaintiff in her claim
against her divorce attorney; and that, "[b]ut for the negligence
of the CBA in referring plaintiff to M.S. as a legal malpractice
specialist," plaintiff would have been able to bring a lawsuit
against her divorce attorney. These allegations do not
sufficiently allege a cause of action against the CBA for
negligent representation.
Arguably, by making the referral, the CBA was engaged in the
business of providing information, albeit as a not-for-profit
organization. However, the plaintiff has not alleged that the
information provided to her by the CBA was false. The plaintiff
did not allege that M.S. had no expertise in the legal
malpractice field or that he was incompetent with respect to any
other legal malpractice matters he had handled. She only alleged
that M.S. mishandled her legal malpractice claim. That single
occurrence would not establish a lack of expertise or experience
so as to make the CBA's representation false. To hold otherwise,
would transform the CBA into a guarantor of the attorneys who
participate in its lawyer referral service. By representing that
an attorney has expertise in a given area of the law, the CBA was
merely stating that the attorney had practiced in that area and
was familiar with the law. That fact is not negated when one
alleges a single occurrence in which the attorney erred.
For the foregoing reasons, the judgment of the Circuit Court
of Cook County is affirmed.
Affirmed.
COUSINS, P.J. and LEAVITT, J., concur.
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