Bethany Krajelis Jun. 19, 2014, 3:44pm

Attorneys handling wrongful death suits owe a duty to the decedent’s beneficiaries when it comes to time to distribute funds from the action, the Illinois Supreme Court held today.

In a unanimous ruling, the high court rejected the argument of the defendants in a legal malpractice case that they only had a duty to the estate’s administrator, saying such an assertion “is at odds with the very purpose” of the state’s Wrongful Death Act and ignores a trio of its past decisions.

Justice Charles Freeman delivered the court’s nine-page opinion in the case that Cook County Public Guardian Robert F. Harris brought against attorneys John C. Wunsch, Jeremy L. Dershow and Jill M. Webb, the Chicago law firms of John C. Wunsch P.C. and Phillips Law Offices Ltd., and Leona Smith, the administrator of her husband’s estate and guardian of her disabled son.

It appears Dershow previously worked at the Wunsch law firm, but attorney records show he now practices at Mulherin, Rehfeldt & Varchetto, P.C. in Wheaton. Wunsch continues to work at his firm and Webb still practices at Phillips Law Offices.

The underlying wrongful death suit in this case stems from the 1999 death of Smith’s husband, Perry. Prior to his death, he and Smith were appointed as co-guardians of their disabled son Powell’s person, but not of his estate.

After Perry died, Smith was appointed special administrator of his estate and hired the Wunsch law firm to file a wrongful death suit against the doctors and hospital that treated him. It did so in 2001 on behalf of Smith, both individually and as the estate’s administrator.

The suit resulted in two settlements in 2005. After attorney’s fees and costs, the first settlement was for $15,000 and was distributed equally between Smith and her and her husband’s two children, Powell and Emma.

The settlement provided that Powell’s share was to be paid to Smith on his behalf. Smith put both of their settlement funds into a joint account and did not notify the probate court that Powell was to receive the $5,000 or that she had accepted it in on his behalf, according to the court’s opinion.

Before the second settlement was reached, Wunsch referred the case to Webb and Smith signed an attorney-client agreement with both the Wunsch and Phillips law firms to represent her in the litigation.

The second settlement, which Emma waived her right to get any money from, gave Smith and Powell each about $118,000. Smith again placed both her and her son’s shares into a joint account.

The order in the second settlement didn’t provide that the probate court was to administer and distribute Powell’s money even though he didn’t have no guardian was appointed of his estate to receive his share.

Wunsch, the opinion notes, allegedly told Smith and Emma it was “too much trouble” to go through the probate court to distribute Powell’s funds because it would mean Smith would have to get the court’s OK every time she needed money for her disabled son.

In 2008, after visiting her mother’s home, Emma allegedly became concerned about her brother’s well-being and petitioned the probate court to remove Smith as guardian of Powell’s person. The court granted Emma’s petition and appointed her plenary guardian of her brother’s persona and estate.

The assets in the joint account of Smith and Powell were subsequently frozen, which led to the discovery that Smith had withdrawn all but about $26,000 from the account she shared with her son and had never provided any accounting of the expenditures.

Harris, the public guardian, filed the suit in the Cook County Circuit Court, accusing the lawyers and law firms of professional negligence in regards to the two settlements and Leona of fraud, breach of fiduciary duty and unjust enrichment.

The lawyer and law firm defendants then sought the dismissal of the counts against them, saying the public guardian’s suit failed to state a cause of action for legal malpractice.

Finding that the suit failed to allege proximate cause and that the defendants didn't owe Powell a duty, the circuit court granted their motions to dismiss.

A panel of the First District Appellate Court, however, reversed in part, determining that the suit sufficiently alleged the lawyers and law firm defendants owed Powell a legal duty as an intended beneficiary of the settlements.

It affirmed the lower court’s finding on the legal malpractice count over the first settlement, saying it didn’t allege proximate cause since the Wrongful Death Act only requires the supervision of the probate court on settlements more than $5,000, but reversed the dismissal of the count over the second settlement because it was more than $5,000 and as such, required probate court supervision.

The panel held that even though the lawyer and law firm defendants were retained by Smith as the estate administrator, they had a duty to Powell under Section 2 of Wrongful Death Act as it provides that any amount recovered in a wrongful death action shall be for the benefit of the surviving spouse and deceased’s next of kin.

Despite not having a direct attorney-client relationship with Powell, the panel said its holding was supported by the Supreme Court’s 2006 decision in DeLuna v. Burciaga and its 2012 holding in Carter v. SSC Odin Operating Co.

The defendants appealed to the Supreme Court, which affirmed the appeal panel's ruling in today's opinion.

In its analysis, Freeman wrote the court first had to determine whether the lawyer and law firm defendants owed Powell a duty.

“Our starting point is the traditional, general rule that an attorney is liable only to his client, not to third persons,” Freeman wrote. “However, if a non-client is an intended third-party beneficiary of the relationship between the client and the attorney, the attorney’s duty to the client may extend to the non-client as well.”

Pointing to the court’s 1982 ruling in Pelham v. Griesheimer, Freeman said the “key consideration” to this question “is whether the attorney is acting at the direction of or on behalf of the client to benefit or influence a third party.”

In Pelham, the court determined that in order for a non-client to win a negligence action against an attorney, he or she must pass the “intent to directly benefit test,” in which “he must prove that the primary purpose and intent of the attorney-client relationship itself was to benefit or influence the third party.”

With that holding in mind, Freeman said the court then looked to the Wrongful Death Act, which among other provisions, provides such an action must be brought by a personal representative of the deceased, but says any amount recovered is for the benefit of the surviving spouse and deceased’s next of kin.

“We have characterized the role of a personal representative in a wrongful death action as ‘merely a nominal party to this action, effectively filing suit as a statutory trustee on behalf of the surviving spouse and next of kin, who are the true parties in interest,’” Freeman wrote, citing another case quoted in Carter.

Like the appellate court, the Supreme Court also looked to its prior decisions in DeLuna and Carter to reach its ruling.

“In DeLuna, although primarily concerned with the application of the legal malpractice statute of repose, we determined that an attorney who was hired to bring a medical malpractice and wrongful death action owed plaintiffs, the decedent’s children, a fiduciary duty,” Freeman wrote. We reasoned that since the wrongful death action was “indisputably brought for [the children’s] benefit,” the attorney owed the children a fiduciary duty.”

He said although the issue in Carter focused on the enforceability of an arbitration agreement, the court’s “opinion examined the provisions of the [Wrongful Death] Act at great length” and in doing so, “we noted  that the legislature does not treat a wrongful death action like other assets of the deceased’s estate.”

“Rather,” Freeman wrote of the Carter ruling, “amounts recovered in a wrongful death action are not subject to the provisions of the Probate Act of 1975 but are distributed to the decedent’s surviving spouse and next of kin per their degree of dependency.”

Based on the Wrongful Death Act’s language and purpose, as well as the court’s decisions in Pelham, DeLuna and Carter, the Supreme Court held in this case “that an attorney who brings a wrongful death action owes a legal duty to the decedent’s beneficiaries at the distribution of funds phase of the action.”

“Clearly, the underlying purpose of a wrongful death action is to compensate those beneficiaries named in the action rather than the decedent’s estate,” Freeman wrote. “Therefore, the primary purpose and intent of an attorney-client relationship between the personal representative of the deceased and the attorney who brings a wrongful death action is to benefit the decedent’s beneficiaries, as we determined in DeLuna.”

He added, “Since the beneficiaries named in a wrongful death action are intended beneficiaries of the action rather than merely incidental beneficiaries, as was the case in Pelham, the attorney’s duty extends to them.”

Although the defendants argued on appeal that an attorney’s duty shouldn’t extend to the deceased’s beneficiaries because there is the “potential for conflicts” when it comes to the distribution of settlement funds, Freeman said they failed to specifically allege there was a conflict between the beneficiaries here.

“Since we will not decide an issue that has no bearing on the case before us, we need not address defendant contention because no specific conflict was alleged here,” Freeman wrote. “Therefore, we make no determination as to the scope of an attorney’s duty in a wrongful death action when a conflict among the beneficiaries is specifically alleged.”

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