Blythe Holdings, Incorporated, et al v. John DeAngelis, et al
Filing
Filed opinion of the court by Judge Bauer. The district court s grant of summary judgment to defendants DeAngelis and Brown Udell on all counts is AFFIRMED. William J. Bauer, Circuit Judge; Frank H. Easterbrook, Circuit Judge and Ann Claire Williams, Circuit Judge. [6569553-1] [6569553] [13-2114]
Case: 13-2114
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In the
United States Court of Appeals
For the Seventh Circuit
No. 13‐2114
BLYTHE HOLDINGS, INCORPORATED,
et al.,
Plaintiffs‐Appellants,
v.
JOHN A. DEANGELIS, et al.,
Defendants‐Appellees.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 06 C 5262 — Robert M. Dow, Jr., Judge.
ARGUED JANUARY 24, 2014 — DECIDED APRIL 21, 2014
Before BAUER, EASTERBROOK, and WILLIAMS, Circuit Judges.
BAUER, Circuit Judge. Blythe Holdings, Incorporated (“Bly‐
the”) entered into a contract with Tracy Williams (“Williams”)
of Flawless Financial to pursue the acquisition of vacant lots on
the south side of Chicago. Blythe also contracted with attorney
John DeAngelis (“DeAngelis”) to assist with the transaction; he
submitted an application on behalf of Blythe to the City of
Chicago. Before the application process was complete, Blythe
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brought suit against DeAngelis and his firm, Brown Udell &
Pomerantz, Ltd. (“Brown Udell”), claiming legal malpractice
and unjust enrichment. The district court granted summary
judgment in favor of DeAngelis and Brown Udell on the
legal malpractice claim and granted Brown Udell’s motion for
summary judgment on the unjust enrichment claim. Blythe
now appeals to this court. For the reasons that follow, we
affirm.
I. BACKGROUND
Stephanie Hill (“Hill”) formed the corporation Blythe in
order to pursue the acquisition of several hundred vacant lots
located in Chicago’s 16th Ward. Hill was the sole owner and
employee of Blythe.
On October 25, 2005, Blythe entered into a consulting
agreement with Williams of Flawless Financial. In this
agreement, Williams was to “deliver up to 400 residential
building lots to Blythe Holdings, Inc. or assigns for $1 million
or $2,500 per lot in a minimum 6‐9 months time period.” The
agreement required Blythe “to pay legal fees for a total of
$50,000 to the attorney recommended by Flawless Financial
and deliver a retainer fee of $25,000 to begin the process.”
Williams recommended attorney DeAngelis to assist Blythe
with the acquisition of the lots.
Pursuant to this recommendation, Blythe entered into a
representation agreement with DeAngelis, who agreed “to
provide legal and consulting services in connection with
[Blythe’s] acquisition of approximately 400 vacant lots” and “to
provide such consultation and advice … as is necessary in
connection with fostering the successful conclusion of the
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Application [to the City of Chicago].” At the time, DeAngelis
was employed as an attorney with Brown Udell. DeAngelis
drafted the retainer agreement with Blythe on Brown Udell
letterhead, but never informed anyone at Brown Udell of his
decision to represent Blythe. On December 1, 2005, Blythe paid
DeAngelis a $25,000 retainer fee pursuant to the terms of the
agreement. The check was made payable to “John DeAngelis,
Esq.,” and was deposited by DeAngelis into the “John A.
DeAngelis Client Fund Account” at Northern Trust Company.
DeAngelis never notified anyone at Brown Udell that he had
received a $25,000 check from Blythe and never shared any
portion of the fees he received from Blythe with Brown Udell.
On December 15, 2005, Hill wrote to DeAngelis informing
him that Blythe would be transferring $270,000 to his Client
Fund Account. Blythe directed DeAngelis to distribute the
funds in the following manner: “$250,000 to Flawless Financial
as final payment for the 100 residential lots provided by the
City of Chicago and deeded to Blythe Holdings, Inc., … and
$20,000 to Flawless Financial for Consulting Fees.” Several
Blythe investors then transferred $250,000 to the “John A.
DeAngelis Client Fund Account.” The next day, DeAngelis
transferred $249,978 to an account held in the names of
Flawless Financial and Williams. None of the funds transferred
to Flawless Financial and Williams were ever used to purchase
lots from the City of Chicago on behalf of Blythe.1
1
Blythe brought RICO claims against Williams and Flawless Financial in
a related action, claiming that Blythe was the victim of a “real estate based
scheme to defraud investors.” On May 3, 2013, the district court entered a
(continued...)
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On May 12, 2006, DeAngelis submitted an Application for
Purchase of Redevelopment Project Area Property to the City
of Chicago’s Department of Planning and Development on
behalf of Blythe in an effort to obtain the vacant lots. The
application was actually submitted on behalf of Chicago 100,
Inc., a second corporation formed by Hill for the express
purpose of acquiring the city lots. To simplify matters, we omit
mention of Chicago 100, Inc., and refer to Hill’s corporations
solely as “Blythe” in this opinion. Michelle Nolan (“Nolan”),
Project Manager at the Department of Planning and
Development, reviewed the application. Though the
application contained multiple errors, Nolan stated that none
were fatal to Blythe’s efforts to acquire the vacant lots.
In mid‐May, Stephen Forte, a Blythe investor, contributed
an additional $250,000 to Blythe to pursue the acquisition of
the city lots. In June, Nolan wrote to Hill, explaining that
Blythe still needed to submit several items in order to
move forward with its application. Nolan outlined the steps
that Blythe needed to take before the application process
would be complete, including gaining approvals from the
Chicago Development Commission and the City Council. At
this point, however, Blythe made no further attempts to move
forward with the project, to amend its application, or to pursue
the requisite approvals.
On June 23, 2006, DeAngelis wrote to Blythe, stating that he
“need[ed] input from [Blythe]” to complete the application, but
1
(...continued)
final default judgment against Flawless Financial and Williams in an
amount exceeding $9 million.
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he received no response. Blythe asserts that by this point, it
lacked the funds necessary to move forward with the
application. When asked about the $250,000 that Blythe had
obtained from investor Stephen Forte in mid‐May, Hill
responded that she “[could] not recall” what happened to the
funds. Blythe then brought suit against DeAngelis and his
former law firm, Brown Udell, claiming legal malpractice by
both parties and unjust enrichment on the part of Brown Udell.
DeAngelis and Brown Udell moved for summary judgment
and the district court found in their favor on all counts. Blythe
now appeals.
II. DISCUSSION
A. Standard of Review
We review a district court’s grant of summary judgment
de novo. Pagel v. TIN Inc., 695 F.3d 622, 624 (7th Cir. 2012).
Summary judgment is proper when there is “no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a); Anderson v.
Liberty Lobby, 477 U.S. 242, 247 (1986). “[T]he mere existence of
some alleged factual dispute between the parties will not
defeat an otherwise properly supported motion for summary
judgment.” Id. at 247–48. “[T]he nonmoving party must come
forward with ‘specific facts showing there is a genuine issue
for trial.’” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). “Where the record taken as a whole
could not lead a rational trier of fact to find for the non‐moving
party, there is no ‘genuine issue for trial.’” Id. (citing First Nat.
Bank of Ariz. v. Cities Service Co., 391 U.S. 253, 289 (1968)).
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B. Legal Malpractice Claim
Blythe first contends that DeAngelis and Brown Udell
committed legal malpractice. To prevail on a legal malpractice
claim, a plaintiff must demonstrate: “(1) the existence of an
attorney‐client relationship that establishes a duty on the part
of the attorney; (2) a negligent act or omission constituting a
breach of that duty; (3) proximate cause establishing that ‘but
for’ the attorney’s negligence, the plaintiff would have
prevailed in the underlying action; and (4) damages.” Owens v.
McDermott, Will & Emery, 316 Ill. App. 3d 340, 351 (2000)
(quoting Serafin v. Seith, 284 Ill. App. 3d 577, 586–87 (1996)).
“[N]o malpractice exists unless counsel’s negligence has
resulted in the loss of the underlying action.” Mihailovich v.
Laatsch, 359 F.3d 892, 905 (7th Cir. 2004) (quoting Ignaski v.
Norbut, 207 Ill. App. 3d 522, 525 (1995)).
Here, an attorney‐client relationship existed between
DeAngelis and Blythe and that established a duty on
DeAngelis’ part. It could be argued that DeAngelis breached
his duty to Blythe, since the application he filed to the City of
Chicago on Blythe’s behalf was riddled with errors.
Nevertheless, even if DeAngelis breached his duty to Blythe,
Blythe still must prove that but for DeAngelis’ negligence, it
would have acquired the vacant city lots in order to prevail on
its legal malpractice claim.
Mitchell v. Schain addressed a similar issue. 332 Ill. App. 3d
618 (2002). In Mitchell, the plaintiff retained defendants to
represent him in a property dispute. He discharged defendants
and retained another attorney, Koukios, to represent him
instead; three years later, plaintiff’s right to bring his claim
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expired. Plaintiff then brought legal malpractice claims against
the defendants and Koukios. Defendants moved for summary
judgment arguing that because plaintiff’s cause of action
remained viable when defendants were discharged, they were
not the proximate cause of plaintiff’s damages as a matter
of law. The court granted defendants’ motion for summary
judgment and plaintiff appealed, contending that, but for
defendants’ alleged malpractice, he would not have been
foreclosed from bringing his claim. The court of appeals
affirmed the court’s grant of summary judgment in favor of
defendants, stating, “[t]here is no question that plaintiff’s cause
of action was viable, as a matter of law, well after defendants
were discharged …. It therefore follows that defendants’
alleged negligence did not cause plaintiff’s damages, the loss
of a viable cause of action.” Id. at 622.
Here, though the application submitted by DeAngelis to the
city on behalf of Blythe contained errors, these errors did not
ultimately prevent Blythe from obtaining the vacant city lots,
nor did Blythe prove that its ability to obtain the vacant lots
was lost. Nolan, Project Manager at the Department of
Planning and Development, testified that any errors in the
application submitted by DeAngelis were nonfatal, and
pointed out that the lots were still available for purchase well
after Blythe’s application was submitted. Since Blythe’s ability
to acquire the vacant lots remained legally viable well after any
alleged malpractice by DeAngelis, it was Blythe’s failure to
move forward with the application process, not malpractice on
the part of DeAngelis, that doomed Blythe’s real estate deal.
In addition, Blythe submitted no evidence to support a
finding that it would have successfully completed the
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application process and obtained the vacant lots but for
DeAngelis’ alleged malpractice. Though Blythe asserts that the
deposition testimony of Alderman Shirley Coleman
(“Coleman”) conclusively shows that Blythe would have been
successful in obtaining the city lots, we disagree. While
Coleman stated that “it appeared to her that Blythe had the
ability and financial wherewithal to develop the project” and
that she was “willing to do what needed to be done in order to
assist Blythe to get its sought development done,” Blythe still
needed to gain approvals from the Chicago Development
Commission as well as the City Council before the application
process was complete. The district court specifically addressed
Coleman’s testimony and found her “speculation … woefully
inadequate to prove that [Blythe] would have successfully
completed the numerous steps required to acquire the lots.”
Blythe offered no evidence demonstrating that either the
commission or the council would have approved its
application; to the contrary, Blythe’s owner, Hill, admitted in
her deposition testimony that she had “no way of knowing”
whether the City of Chicago would have granted Blythe the
necessary approvals.
Since Blythe failed to prove that DeAngelis’ claimed
malpractice foreclosed its ability to obtain the vacant lots or
that ultimately it would have been successful in acquiring the
property, we affirm the district court’s grant of summary
judgment in favor of DeAngelis on Blythe’s legal malpractice
claim.
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C. Supervisory Liability Claim
Blythe also asserts that Brown Udell is liable for legal
malpractice pursuant to an agency theory of supervisory
liability. Since Blythe failed to prove that DeAngelis committed
legal malpractice, its malpractice claim against Brown Udell
has no merit.
D. Unjust Enrichment Claim
Lastly, Blythe contends that the district court erred when it
granted summary judgment to Brown Udell on its unjust
enrichment claim. Blythe asserts that since DeAngelis entered
into a representation agreement with Blythe and accepted a
$25,000 retainer fee from Blythe while he was employed as an
attorney for Brown Udell, the firm constructively accepted the
retainer fee and was unjustly enriched. Blythe now seeks the
return of these funds. In response, Brown Udell asserts that
since it never received any portion of these funds from
DeAngelis, it was never unjustly enriched, and Blythe cannot
recover.
Unjust enrichment is a remedy that lies where a “defendant
has unjustly retained a benefit to the plaintiff’s detriment
and … the defendant’s retention of the benefit violates the
fundamental principles of justice, equity, and good
conscience.” Hess v. Kanoski & Associates, 668 F.3d 446, 455 (7th
Cir. 2012) (quoting A.P. Properties, Inc. v. Rattner, 960 N.E.2d
618, 621 (Ill. App. Ct. 2011)). “[U]njust enrichment does not
seek to compensate a plaintiff for loss or damages suffered but
seeks to disgorge a benefit that the defendant unjustly retains.
Cleary v. Philip Morris, Inc., 656 F.3d 511, 518 (7th Cir. 2011).
“[T]he essence of the cause of action is that one party is
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enriched, and it would be unjust for that party to retain the
enrichment.” Firemen’s Annuity & Benefit Fund of the City of
Chicago v. Municipal Employees’, Officers’, & Officials’ Annuity &
Benefit Fund in Chicago, 219 Ill. App. 3d 707, 712 (1991).
Here, the undisputed evidence supports a finding that
Brown Udell never received any portion of the funds from
DeAngelis. Though DeAngelis received a check for $25,000
from Blythe, this check was made out to “John DeAngelis,
Esq.,” and was deposited into DeAngelis’ personal “Client
Fund Account” at Northern Trust Company. No partners at
Brown Udell had access to this account or received any portion
of these funds. In his deposition, DeAngelis admitted that he
never told anyone at Brown Udell about his agreement to
represent Blythe, and never shared any portion of the $25,000
he received from Blythe with Brown Udell. Since Brown Udell
never received any funds from Blythe, no unjust enrichment
occurred.
Even assuming that DeAngelis was acting as an authorized
agent of Brown Udell at the time he contracted to represent
Blythe, imputing the contract to Brown Udell, Blythe’s unjust
enrichment claim still fails. A claim for unjust enrichment is
“based upon an implied contract; where there is a specific
contract that governs the relationship of the parties, the
doctrine has no application.” People ex rel. Hartigan v. E & E
Hauling, Inc., 153 Ill. 2d 473, 497 (1992). “Under Illinois law, a
plaintiff may not state a claim for unjust enrichment when a
contract governs the relationship between the parties.” First
Commodity Traders, Inc. v. Heinhold Commodities, Inc., 766 F.2d
1007, 1011 (7th Cir. 1985) (citing LaThrop v. Bell Federal
Savings & Loan Ass’n, 68 Ill. 2d 375, 391 (1977)).
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Here, it is undisputed that the retainer agreement signed by
DeAngelis and Blythe was a valid and binding contract. Under
this contract, DeAngelis agreed “to provide legal and
consulting services [to Blythe] in connection with [Blythe’s]
acquisition of approximately 400 vacant lots” and “to provide
such consultation and advice … as is necessary in connection
with fostering the successful conclusion of the Application.” In
return, Blythe agreed to pay DeAngelis $25,000, which it later
deposited into DeAngelis’ “Client Fund Account.”
Since Blythe never challenged the contract’s validity, the
appropriate remedy was a breach of contract claim; unjust
enrichment has no application. We affirm the district court’s
grant of summary judgment in favor of Brown Udell on this
ground as well.
III. CONCLUSION
For the reasons stated above, we affirm the district court’s
grant of summary judgment to defendants DeAngelis and
Brown Udell on all counts.
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