In a recent article in the Chicago Daily Law Bulletin a decision by the Illinois Appellate Court was discussed dealing with the failure to schedule legal malpractice claims in a bankruptcy proceeding (Unfortunately, the case itself is unpublished, Dawn and Donald Patrzykont v. Randall A. Wolff, No. 1-07-0238). According to the article, a couple of weeks ago the Illinois Appellate Court dismissed a couple’s legal-malpractice lawsuit based on a lack of standing because of their failure to list the cause of action as an asset during their bankruptcy proceeding. The Court wrote that when a debtor files a bankruptcy petition, he must file a schedule of assets and liabilities, including any cause of action that accrued prior to the bankruptcy filing. A trustee is then assigned to handle the debtor’s property , with the trustee having the exclusive right to pursue the causes of action listed in the bankruptcy schedule. The Court further explains that a trustee can abandon a scheduled asset, but if an asset is not properly scheduled (like in the present case) it is not abandoned when the bankruptcy case is closed. Consequently, if a legal malpractice action is unscheduled in the client’s bankruptcy the claim remains the asset of the bankruptcy estate (not the client) even after the bankruptcy case is closed.
Articles on Law.com and MichiganMessenger.com detail how a $30 million legal malpractice suit brought against the Law Firm Wiley Rein by Blackwater Security Consulting has been dismissed for a second time. In 2004, a wrongful death suit was filed against Blackwater by the families of four former employees who were brutally killed in Fallujah, Iraq. The employees were security guards on a mission that went terribly wrong – they were ambushed, burned, beheaded, mutilated and their bodies were paraded around Fallujah and hung from a bridge as reporters captured the incident on film. PBS story here.
After losing the wrongful death suit, Blackwater filed suit against the attorneys who represented them arguing that the law firm should have had the wrongful death case removed from state court in North Carolina to federal court – where the company alleges it had a better chance of winning. The theory for removal was based on a statute that requires all suits against “federal officers” be heard in federal court. In both dismissals of the case, the judges found that Blackwater’s argument that a federal court would have ruled differently from the state court purely speculative since the federal court might well have ruled that the private security company’s employees were not federal officers.