In 2005, a van containing six family members slipped off the edge of an Illinois roadway. In the rollover crash, everyone was hurt and one passenger died. The crash occurred in a construction zone. A guardrail had been removed and was not replaced. All lines had not been repainted on the repaved road, and pieces of asphalt laid on the shoulder.
In the lawsuit against the construction companies, the defendant attorneys told the plaintiffs that the two companies were operating as a joint venture with a $1 million liability insurance policy. The parties settled for $1 million. The plaintiffs signed a release of all claims, which stated that plaintiffs agreed that they were not relying on any statements by any parties’ attorneys. Four years later, the plaintiffs discovered that the companies in fact carried separate liability policies.
The U.S. District Court for the Northern District of Illinois ruled as a matter of law that the failure to identify the individual policies violated Federal Rule of Civil Procedure 26. The undisclosed policies would have covered plaintiffs’ claim, and no joint venture agreement existed under Illinois law; therefore, joint venture exclusions and the individual policies were inapplicable.
The jury signed a verdict for damages for all six in the amount of $8,169,512.84 for negligent misrepresentation.
However, the U.S. Court of Appeals for the 7th Circuit reversed. The appellate court explained that the district court erred in allowing plaintiffs to rely on a federal rule of civil procedure for a duty of care. When deciding, before trial, the plaintiffs reasonably relied on insurance policy disclosures.
Under Federal Rule of Civil Procedure 26, the defendants were obligated to handle the insurance policies that “may” apply. The appeals panel stated that the district court judge erred in using the federal rule as a source for the defendants’ alleged duty of care under Illinois negligence law, because “no authority establishes the federal rules as a predicate for a state law negligence claim,” though the court remanded for further proceedings because the alleged duty might be “rooted in” some other source.
The defendant, Southern Illinois Asphalt Co., worked on the highway repaving project when the rollover crash occurred. There was a dispute about whether the asphalt company performed this work as part of a joint venture with another contractor.
Another issue focused on what was said in a conversation between Komron Allahyari, the attorney who represented the plaintiffs in the first lawsuit, and Richard Green, who was hired to defend both of the alleged joint ventures by the insurance company that issued their $1 million policy.
The lawyers reportedly talked a few days after Allahyari filed the first lawsuit. A day later Allahyari received a Rule 26 disclosure and sent a letter demanding payment of the $1 million policy within 30 days. The insurance company promptly capitulated.
Later, according to plaintiffs, they learned that (a) there was no joint venture and (b) the defendants had millions of liability coverage under their own insurance policies.
The other company settled the second suit, and pretrial rulings trimmed the remaining issues. Jurors were asked to decide whether Southern Illinois Asphalt Co. intended to induce reliance on the Rule 26 disclosure and, if so, what was the amount of damages.
In addition to the mistake about the duty of care, the 7th Circuit concluded that the district court erred by (1) resolving the other elements of the negligent misrepresentation claim as a matter of law; (2) ruling that Allahyari’s testimony was sufficient to establish intent to induce reliance; (3) limiting Green’s testimony; and (4) refusing to let the defendant attack Allahyari’s credibility with evidence that he “resigned his law license in lieu of disbarment for alleged acts of dishonesty, fraud, deceit or misrepresentations.”
The district court initially excluded Allahyari from speculating as to Green’s motive in disclosing only the joint venture policy. During trial, though, after questions from plaintiffs’ counsel, the district court reversed field and over defendant’s objections, allowed Allahyari to speak to whether the disclosure was done to induce settlement.
The district court’s initial ruling on this question was correct and should have controlled. Federal Rule of Evidence 602 requires a witness to have personal knowledge of a matter, and Allahyari could not know what Green intended when serving the initial disclosures.
No evidence, direct or circumstantial, was presented on this inducement element other than Allahyari’s testimony which was conjecture based on plaintiffs’ theory of the case.
A plaintiff’s conjecture as to defendant’s motive is not enough to establish inducement. See, e.g., Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824 (7th Cir. 2007). Any reliability of this evidence was vitiated by pretrial rulings which incorrectly cramped what evidence Green could offer about his phone call with Allahyari. It was an abuse of discretion to admit this evidence.
At trial, therefore, the jury heard from an attorney recognized as an expert, but who had lost his law license under a cloud and whose qualifications and credentials could not be impeached. That attorney was allowed to give evidence on another lawyer’s intent whose testimony on the same facts had been incorrectly limited.
Such circumstances also constituted an abuse of discretion. And because Allahyari’s testimony was the only evidence on this element of plaintiffs’ claim, no other trial evidence supported the jury’s verdict, which therefore led to the appeals panel’s reversal.
Turubchuk v. Southern Illinois Asphalt Co., No. 18-3507 (April 29, 2020).
Kreisman Law Offices has been handling catastrophic injury lawsuits, product liability cases, automobile defect lawsuits, rollover crash cases and wrongful death cases for individuals, families and loved ones who have been injured, harmed or killed by the carelessness or negligence of another for more than 40 years in and around Chicago, Cook County and its surrounding areas, including Round Lake Beach, Cicero, Westchester, Elmhurst, Lombard, Glen Ellyn, Downers Grove, Romeoville, Mokena, Frankfort, Midlothian, South Holland, Sauk Village, Crete, Beecher, Burr Ridge, Park Ridge, Gurnee, Crystal Lake, Libertyville, Chicago (Near West Side, Humboldt Park, Chinatown, Old Town, Lincoln Park, Bucktown, North Center, Belmont Cragin, Lower West Side, Englewood, Chatham, Calumet Heights, Washington Heights, Pullman, Beverly), Evergreen Park, Oak Lawn, Bedford Park and Burbank, Ill.
Robert D. Kreisman has been an active member of the Illinois and Missouri bars since 1976.
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