Reformation of Settlement Agreement Terms Improper Equitable Remedy Regardless of Breach

It is well established in Indiana that the reformation of terms of a contract as an equitable remedy for a breach is an extreme remedy.  Courts may only reform a written contract if (1) there has been a mutual mistake by the parties in the formation; or (2) one party makes a mistake while the other party commits fraud or inequitable conduct.  See Meyer v. Marine Builders, Inc., 797 N.E. 760, 722 (Ind. Ct. App. 2003); see also New Life Cmty. Church of God v. Admomatis, 672 N.E.2d 433, 438 (Ind. Ct. App. 1996).  Misconduct by a party that amounts to a breach does trigger a court’s ability to reform a contract.

For example, in Wagner v. Wagner, a court attempted to modify a settlement agreement provision that was in breach by one of the parties, but was reversed because the facts did not trigger the availability of the equitable remedy of reformation.  Here, a father and son were general partners of numerous partnerships that owned apartment buildings.  A business dispute arose between them which resulted in litigation.  The father alleged during this litigation that funds had been misappropriated from the business.  Ultimately the matter was settled, and one provision that was incorporated in the settlement agreement was that the father would prepare all partnership tax returns.

A subsequent suit was filed by the son because the father failed to prepare partnership tax returns as required by the settlement agreement.  After a bench trial, the court concluded that the father breached the agreement because he refused to prepare the tax returns, which was an obligation he agreed to undertake under the settlement agreement.  As a result of this breach, the trial court entered an order stating that the son was entitled to use a different account for future tax returns.  However, the Court reversed this equitable remedy imposed by the trial court because there was no basis to support rescission or modification of the contract as there was no fraud, illegality, mutual mistake, or a contract provision providing for rescission in the event of breach. 

Wagner v. Wagner, 02A03-1610-PL-2473 (Ind. Ct. App. 2017).

Hamilton County Adoption Attorney Receives Public Reprimand For Several Violations of Rules of Professional Conduct

A Hamilton County Indiana adoption attorney was recently publicly reprimanded by the Indiana Supreme Court for violating Professional Rules of Conduct 1.7 (Conflicts of Interest), 1.8 (Conflicts of Interest), and 8.4 (General Misconduct).  Here, the attorney was hired by a couple to represent them in the adoption of a child.  Before the attorney’s retention, the couple had previously already reached an agreement with the birth mother to allow them to adopt the child.

However, when the attorney contacted the birth mother, she expressed concerns with his current clients and asked the attorney for profiles of other prospective adoptive parents.  Despite representing the couple, the attorney nevertheless showed the birth mother the profiles of other potential adoptive parents.  Eventually the birth mother selected a different couple than the attorney’s original clients. 

The attorney never informed his original clients that the adoptive mother had concerns with them or that he showed her different options until after the decision was made.  Thereafter, the attorney sat down with them to discuss reimbursement of fees the couple advanced to him.  The couple and the attorney appeared to have resolved the issue at this meeting, however, at the conclusion of the meeting, the attorney presented them with a release purporting to bar them from filing a “claim” to the Indiana Supreme Court disciplinary commission.

The attorney erred in this circumstance by failing to disclose to his clients that the birth mother had concerns with selecting them as adoptive parents.  But, the most critical error was then representing the birth mother in her selection of an alternative set of adoptive parents without obtaining consent from the original clients.

Alex Passo and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana.  If you have a matter that you would like to discuss with Alex, you may reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Attorney Escapes Legal Malpractice Claim Due to No Actual Knowledge that his Partner Stole Funds from Client

The Court of Appeals of Indiana recently affirmed a trial court’s order granting summary judgment for a defendant attorney in a legal malpractice case. The basis for the summary judgment order was that there was no question of fact of whether the attorney deviated from the standard of care.  The case was an offshoot of a progeny of cases that arose from the theft and deceit committed by former Indianapolis attorney, William Conour (“Conour”).  In this instance, one of Conour’s clients sued his former colleague, Timothy Devereux (“Devereux”), for failing to notify her that there were potentially red flags of the handling of her personal injury settlement proceeds by Conour.

In the case, Rene DiBenedetto v. Devereux, DiBenedetto was involved in a head-on collision in 2010. 2017 Ind. App. LEXIS 274 (Ind. App. 2017).  She subsequently engaged Conour to handled the claims. Early in the following year, Conour settled DiBenedetto’s claim against the tortfeasor and their insurance company for $50,000.  However, the release preserved DiBenedetto’s right to bring a claim under her insurance policy for Underinsured Motorist (UIM) coverage.

In 2011, when Conour was out of the office, DiBenedetto and her father visited the law office on an unscheduled visit and inquired about the status of the case.  Devereux had not been handling the matter; but, checked the on the status of the case with a paralegal and reviewed the entries on firm’s case management program.  He then became aware that a check was cut for $50,000 by the tortfeasor’s insurance company and that DiBenedetto’s medical liens were just shy of $35,000.  He then explained that despite the check being over the medical liens, it was typical in cases such as this one that there not be a disbursement until all of the liens were settled.  He then instructed DiBenedetto to follow-up with Conour about the status of the case.

Later in 2011, DiBenedetto’s UIM claim was settled; but, once again, she never received any of the proceeds.  Devereux resigned from the law firm during this time period due to his concerns about Conour’s actions.  In 2012, Conour was charged with stealing millions of dollars from his clients, including DiBenedetto, and ultimately plead guilty in 2013.

DiBenedetto subsequently brought a legal malpractice claim against Devereux alleging that he breached his duty to her by not providing accurate information relating to her settlement proceeds.  Devereux argued that it was common practice for personal injury attorneys to hold money in trust while settling underinsurance claims.  Therefore, he had no reason to suspect at the time that there was any misdoing by Conour. The trial court was persuaded by this explanation and granted summary judgment.

Thereafter, DiBenedetto appealed, arguing that there was a question of fact, because she introduced an affidavit from an attorney that Devereux deviated from the standard of care.  In the affidavit, the attorney stated Devereux “should have taken some actions to protect [her] by investigating further” since he knew that the funds had not been disbursed for several months.  However, a split appellate court affirmed summary judgment, holding that Devereux had a duty to provide accurate information, and he provided it in this instance.  Therefore, there was no deviation, and summary judgment was appropriate.

Alex Passo and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana.  If you have a legal malpractice case that you would like to discuss with Alex, you can reach him at 312-750-1820 or apasso@pattersonlawfirm.com.