Economic Loss Doctrine Prevents Set-Off Under Illinois’ Joint Tortfeasor Contribution Act

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Kevin Driscoll (“Driscoll”), the court-appointed receiver of AlphaMetrix Group, LLC (“AMG”), sued AMG’s former lawyers Juris Kins and Davis McGrath, LLC for legal malpractice.  The defendants moved to resolve the question of whether they were entitled to a set-off under Illinois’ Joint Tortfeasor Contribution Act (the “Act”), arguing that they could set-off up to $4 million due to a previous settlement agreement between Driscoll and former officers of AMG.  The Northern District of Illinois held that the Act did not apply because of the prior settlement related to breach of contract and breach of fiduciary duty claims.  It explained that, under the Act, “[w]hen a release or covenant not to sue […] is given in good faith to one or more persons liable in tort arising out of the same injury […] it reduces the recovery on any claim against the others to the extent of any amount stated in the release.”  740 Ill. Comp. Stat. 100/2(c).  Moreover, under the economic loss doctrine, “[w]hen only economic loss is incurred, the plaintiff may only raise contract theories even if the defendant’s alleged conduct constituted a tort as well as a breach of contract.”  Id. at 3.  In this case, the Court found that “no matter how Defendants creatively reframe the Receiver’s allegations [against the former officers], the claims could not have been brought in tort.”  Id.  Consequently, the lawyers were not entitled to set-off the prior settlement of claims against the former officers.

Driscoll v. Kins, No. 16 C 9359, 2019 WL 4014089 (N.D. Ill. Aug. 26, 2019)

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