Cameron v. Bogusz

711 N.E.2d 1194, 305 Ill. App. 3d 267, 238 Ill. Dec. 533, 1999 Ill. App. LEXIS 339

• Court: Appellate Court of Illinois
• Decided: May 21, 1999
• Docket: 1-98-0604
• Status: Published

Opinion

JUSTICE HARTMAN

delivered the opinion of the court:

Plaintiff Emmett Cameron entered a settlement agreement with his employer, Joslyn Manufacturing Co. (Joslyn), paying Joslyn $60,000 in exchange for its discharge of a workman’s compensation lien it had filed against the proceeds of Cameron’s legal malpractice claim. While settlement negotiations were taking place, an opinion was filed in the Appellate Court, Fifth District, holding that an employer may not assert a lien against damages recovered in an employee’s legal malpractice action. Subsequently, Cameron sought rescission of the settlement, arguing that he was unaware of the appellate court decision at the time of the settlement. The circuit court denied Cameron’s motion to rescind the agreement and adjudicate the lien. He appeals, raising in issue whether his reliance upon federal case law, later repudiated by a state appellate court, justifies rescission of the settlement.

On February 8, 1988, Cameron, an employee of Joslyn Manufacturing, was injured during the course of his employment when a block of zinc oxide fell on him from a defective high lift roller and carrier assembly system. Cameron retained the law firms of Richard P. Bogusz, Ltd., and Kroll & Rubin, Ltd. (collectively, Bogusz and Kroll) to represent him. Bogusz and Kroll filed a claim on Cameron’s behalf with the Illinois Industrial Commission; as a result of that claim, Joslyn paid worker’s compensation benefits totalling $105,891.05 to Cameron.

On November 16, 1990, Cameron, represented by other counsel, filed a complaint against the manufacturer of the allegedly defective high lift roller and carrier assembly system. The manufacturer successfully moved for summary judgment on the ground that the action was barred by the applicable statute of limitations, which this court affirmed (Cameron v. Industrial Kinetics, Inc., 247 Ill. App. 3d 1100 (1993) (unpublished order under Supreme Court Rule 23)). Consequently, Cameron filed a legal malpractice claim against Bogusz and Kroll, alleging negligence in failing to investigate and file suit within the statute of limitations period.

Joslyn filed a petition to intervene in Cameron’s legal malpractice suit, alleging that it had paid Cameron the sum of $105,891.05 and, pursuant to section 5 of the Workers’ Compensation Act (the Act) (820 ILCS 305/5 (West 1994)), it possessed a valid lien in that amount upon any proceeds recovered in Cameron’s pending suit against Bogusz and Kroll. 1 Thereafter, Cameron settled his legal malpractice claim against Bogusz and Kroll for $250,000, resolving that suit. At this time, Cameron also entered into settlement negotiations with Joslyn as to its lien. Following negotiations with Joslyn, on September 26, 1997, Cameron forwarded a document, entitled “Release of Workmen’s Compensation Lien,” to Joslyn for signature; Cameron and Joslyn ultimately settled the asserted lien for $60,000.

Shortly thereafter, Cameron filed his “Motion to Adjudicate Workmen’s Compensation Lien,” alleging that, at the time he and Joslyn entered into the settlement agreement, both mistakenly relied upon Williams v. Katz, 23 F.3d 190 (7th Cir. 1994) (Williams), which held that an employer may assert a lien for worker’s compensation benefits in a related legal malpractice action filed by the injured employee. Seeking rescission of the settlement agreement and return of the $60,000 paid in satisfaction of the lien, Cameron argued that a “new decision has emanated from the 5th Appellate Circuit,” contradicting and repudiating the Williams opinion. That case, Woodward v. Pratt, Bradford & Tobin, P.C., 291 Ill. App. 3d 807, 684 N.E.2d 1028 (1997) (Woodward), held that since “the plaintiffs allegedly negligent lawyers did not cause the injury that led to the compensation payments” the employer’s lien lies against the “injurer” and not the attorneys. (Emphasis omitted.) 291 Ill. App. 3d at 814. Cameron argued that, in light of the “new” case, his reliance upon Williams was a “mistake of fact” requiring rescission. The circuit court denied Cameron’s motion and he appeals.

Cameron initially contends that his settlement agreement with Joslyn satisfying the asserted lien is subject to rescission because it was based on “a mutual mistake of fact as to the law.” Specifically, Cameron maintains that both he and Joslyn entered into the settlement agreement with the understanding that a worker’s compensation hen could be asserted in a legal malpractice action, relying upon Williams. Cameron deems his reliance upon Williams a “mistake of fact as to the law” in light of the Woodward opinion, filed September 8, 1997, which “disagreed” with Williams and held contrary to that case. See Woodward, 291 Ill. App. 3d at 814. Joslyn responds that no mutual or unilateral mistake of fact occurred upon which to base the rescission of the settlement agreement, but that the mistake was one of law.

In Williams, the Seventh Circuit Court of Appeals held that, under Illinois law, a worker’s compensation lien attached to any recovery an employee might have, including a legal malpractice claim. Despite the plaintiffs arguments that no lien attached because the attorneys did not cause his bodily injury, the Williams court found that the plaintiff sought the same damages from his attorneys (in the legal malpractice claim) that he would have sought in the medical malpractice action that the attorneys failed to pursue. Williams, 23 F.3d at 192.

In Woodward, the Illinois Appellate Court, Fifth District, rejected the reasoning employed by Williams, finding that section 5(b) of the Workers’ Compensation Act grants an employer two distinct rights: the right to have a lien on any recovery against the tortfeasor and the right to file suit against the tortfeasor should the employee fail to do so in the three months preceding the expiration of the statute of limitations period. Woodward, 291 Ill. App. 3d at 813; 820 ILCS 305/5(b) (West 1996). The Woodward court concluded, based on the clear language of the Act, that the lien applied only to recovery from the third-party tortfeasor:

“The plaintiffs allegedly negligent lawyers did not cause the injury that led to compensation payments. The third paragraph of section 5(b) states that ‘the employer may have or claim a lien upon any award *** out of which such employee might be compensated from such third party.’ [Citation.] This third party is the ‘injurer’ whose acts or omissions caused the expenditure of medical and hospital payments [citation], not the lawyer who was allegedly negligent in failing to sue the injurer.

*** It is important to note that the cause of action contemplated by section 5(b) is expressly stated to be a cause of action for ‘injury’ or ‘death.’ Once the limitations period expires, both the employee and the employer lose their cause of action for injury or death. The new cause of action then held by the employee against his attorney is not for injury or death. Rather, any damages recovered are for ‘pecuniary injuries to intangible property interests.’ [Citation.] The legal malpractice action is personal and nonassignable.” (Emphasis in original.) Woodward, 291 Ill. App. 3d at 814.

Accordingly, an employer’s purported lien pursuant to section 5(b) of the Act does not attach to an employee’s legal malpractice claim against his attorneys. See also Eastman v. Messner, 302 Ill. App. 3d 526, 531, 707 N.E.2d 49 (1998) (“section 5(b) does not apply to legal malpractice actions”) 2 ; Mosier v. Danz, 302 Ill. App. 3d 731, 738, 706 N.E.2d 83 (1999) (“an employer may not assert a lien under section 5(b) of the Act against damages received by its employee from the employee’s attorney in a legal malpractice action”).

The question in the case sub judice is, therefore, whether Cameron’s “belief’ (premised upon the Williams case) that Joslyn’s lien attached to his malpractice claim requires rescission of the settlement and return of the $60,000 payment in satisfaction of the lien. Although Cameron claims that “a mutual mistake of fact as to the law” occurred which mandates the rescission of the agreement, his argument fails.

“Illinois public policy generally favors the peaceful and voluntary resolution of disputes.” Haisma v. Edgar, 218 Ill. App. 3d 78, 86, 578 N.E.2d 163 (1991). “[E]quity will not lend its aid to reform a written instrument in the absence of fraud, accident, or mutual mistake, sufficiently alleged and clearly proved.” Darst v. Lang, 367 Ill. 119, 122, 10 N.E.2d 659 (1937). Absent mistake or fraud, a settlement is presumed to be valid and “conclusive on the parties thereto as to all matters included therein.” Haisma, 218 Ill. App. 3d at 86. In the event of a mutual mistake of fact as to a material matter affecting the substance of the transaction an agreement may be rescinded. Boyd v. Aetna Life Insurance Co., 310 Ill. App. 547, 550-51, 35 N.E.2d 99 (1941). In the absence of mistake or fraud, the settlement agreement will not be disturbed or set aside lightly. Knoll v. Swanson, 92 Ill. App. 2d 398, 404, 234 N.E.2d 543 (1968).

In the instant case, Cameron contends that the settlement agreement was negotiated and entered into while both he and Joslyn were under the mistaken belief that the law enunciated in Williams was applicable. He describes his reliance upon Williams as a “mutual mistake of fact as to the law.” Although Cameron deems the “mistake” one of “fact,” the only “mistake” was one of failure to anticipate developments in case law and not one of “fact” material to the settlement agreement itself. See Holbrook v. Tomlinson, 304 Ill. 579, 585, 136 N.E. 745 (1922) (rescission cannot be granted for a “mistake of law, pure and simple”).

A mistake of fact is a mistake, “not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in an unconscious ignorance or forgetfulness of a fact past or present material to the contract, or belief in the present existence of a thing material to the contract which does not exist, or in the past existence of a thing which had not existed.” Boyd, 310 Ill. App. at 555. A mutual mistake is one where both parties understand that the real agreement is what one party alleges it to be, then, unintentionally, a drafted and signed contract does not express the true agreement. Village of Oak Park v. Schwerdtner, 288 Ill. App. 3d 716, 718, 681 N.E.2d 586 (1997). The party asserting mutual mistake must show that both parties were mistaken as to a material matter at the time of the execution of the instrument. Casanas v. Nelson, 140 Ill. App. 3d 341, 346, 489 N.E.2d 358 (1986); see also Spies v. De Mayo, 396 Ill. 255, 272, 72 N.E.2d 316 (1947) (“the mistake must be of fact and not of law, mutual and common to both parties, and in existence at the time of the execution of the instrument, showing that at such time the parties intended to say a certain thing but mistakenly expressed another”).

Cameron’s reliance on the holding in Williams when settling the case is not a mistake of fact requiring rescission. Cameron cannot argue that the rule of law expounded in Woodward was not in existence at the time of the settlement agreement; that case was decided sometime during the parties’ settlement negotiations. 3 Moreover, although Cameron argues that his decision to settle was driven by his mistaken belief that the Williams case controlled, decisions of the federal courts construing state statutes are not binding on this court. See Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 182, 384 N.E.2d 353 (1978); Watson v. Hartford Casualty Insurance Co., 205 Ill. App. 3d 88, 92, 562 N.E.2d 1261 (1990). Cameron, like the plaintiff in Woodward, could have challenged the reasoning of Williams, but chose to accept and accede to the holding of the seventh circuit. Unlike the plaintiff in Woodward, who, notwithstanding the Williams case, challenged his employer’s lien upon the proceeds of his legal malpractice case, Cameron opted to settle his employer’s lien for a sum considerably less than the amount to which Joslyn alleged it was statutorily entitled.

In a related vein, Cameron alternatively asserts that the settlement must be rescinded because he agreed to the settlement under a unilateral “mistake of fact as to the law.” The requirements for rescission based upon unilateral mistake are: (1) the mistake is related to a material feature of the contract; (2) it occurred notwithstanding the exercise of reasonable care; (3) it is of such grave consequence that enforcement of the contract would be unconscionable; and (4) the other party can be placed in statu quo. Brzozowski v. Northern Trust Co., 248 Ill. App. 3d 95, 100, 618 N.E.2d 405 (1993); Wil-Fred’s, Inc. v. Metropolitan Sanitary District of Greater Chicago, 57 Ill. App. 3d 16, 21, 372 N.E.2d 946 (1978). Here, Cameron’s “mistake” did not relate to a material feature of the settlement agreement.

Cameron asserts that allowing Joslyn to retain the $60,000 “would be unconscionable and a denial of fundamental justice” because Cameron’s reliance on Williams was “a grave mistake.” If such reliance was a mistake, it was not the type of mistake that justifies rescission. Allowance of rescission in the instant case would be tantamount to holding that no contract or settlement agreement would ever be final. Subsequent or concurrent developments in the law would always operate to provide the dissatisfied party a ground to revisit an agreement, which at the time was satisfactory but in retrospect became burdensome or undesirable. Such a result would run counter to the public policy of this state. See Johnson v. Hermanson, 221 Ill. App. 3d 582, 585, 582 N.E.2d 265 (1991) (“Public policy favors settlements and dictates that, in the absence of fraud or duress, settlements once made should be final”).

Accordingly, the circuit court’s order denying Cameron’s motion to adjudicate the lien is affirmed.

Affirmed.

GREIMAN and THEIS, JJ., concur.

1 Kroll & Rubin, Ltd., one of the law firms being sued by Cameron for legal malpractice, sought to dismiss Joslyn’s lien claim on the basis that such a claim was not authorized by the Act; on December 16, 1996, the circuit court denied the motion.

2 The Illinois Supreme Court has granted leave to appeal on this issue. Eastman v. Messner, 183 Ill. 2d 567 (1999), pet. for leave to appeal allowed.

3 The Woodward decision was filed on September 8, 1997. According to the record and the parties’ briefs in the case sub judice, settlement negotiations continued after the Woodward case was filed. The record is unclear, however, when the settlement agreement was finalized, although the record reflects that in a letter from Cameron to Joslyn (dated September 26, 1997), Cameron submitted a “release of workmen’s compensation lien” form for Joslyn’s signature; this letter was received by Joslyn on September 29, 1997. Cameron’s brief states that the settlement agreement occurred on September 24, 1997. In any event, the Woodward case was filed before any settlement was finalized on or after September 24, 1997.