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FOURTH DIVISION
December 16, 2004

No. 1-03-1299

Plaintiff Robert Kopka (Kopka) appeals from an order of thecircuit court of Cook County dismissing his amended complaintwhich alleged breach of fiduciary duty, breach of retainer andnegligence against defendants Kamensky & Rubenstein (K&R) a lawfirm, Altschuler, Melvoin & Glasser (AMG) an accounting firm, andMorton Kessel and Barry Rosenthal, partners at AMG. On appeal,Kopka contends that the circuit court erred in finding that hisamended complaint failed to adequately allege that K&R and AMGowed plaintiff, personally, a duty of care or a fiduciary dutywhere he was neither in privity with nor an intended third-partybeneficiary of the attorney-client and accountant-clientrelationships with K&R and AMG.

I. Background

Landau, Omahana & Kopka (LOK Illinois) was an Illinois lawfirm and closely held corporation. Kopka, Byron Landau and GailOmahana were the only shareholders of the corporation. Kopka,Landau and Omahana were also the sole shareholders of a Michigancorporation (LOK Michigan) and are the general partners of anIndiana partnership (LOK Indiana). Kopka refers to all threefirms jointly as "LOK." Barry Rosenthal and Morton Kessel arepartners at AMG, an Illinois accounting firm. K&R is an Illinoislaw firm.

On December 5, 1998, Kopka tendered his 30-day writtennotice of resignation, effective January 4, 1999, from all threeLOK firms. According to the terms of the shareholders'agreement, LOK was responsible for repurchasing Kopka's shares atthe original issue price, but the corporation failed torepurchase these shares. At the time of Kopka's resignation, LOKowed a $5.5 million promissory note to the American National Bankand Trust of Chicago (American National). Kopka, Landau andOmahana had executed individual personal guarantees for the note.

On January 7, 1999, Kopka formed a new law firm in Indiana,named Kopka, Landau & Pinkus. On January 11, 1999, K&R assistedLandau and Omahana to incorporate a new firm in Illinois, namedLandau & Omahana, Ltd. (LO). Kopka alleges that Landau andOmahana, with assistance from K&R, converted assets from LOK foruse at their new firm. Kopka also alleges that LOK retained AMGto "provide tax and accounting services for the LOK entities,"but that AMG assisted Landau and Omahana in securing financingfor their new firm. Kopka maintains that AMG misrepresented LO'sfinancial position to American National, so that this new firmwas treated as a successor to LOK and was therefore allowed touse LOK's assets. Kopka alleged that LO collected accounts-receivable funds owed to LOK and did not credit the funds towardLOK's debt.

In March 1999, American National accelerated the note owedby LOK and demanded payment in full. On March 26, 1999, AmericanNational filed a complaint in the circuit court of Cook County,against LOK, Kopka, Landau, Omahana and others. Kopka claimsthat he personally paid $150,000 for partnership obligations ofLOK Indiana during litigation with American National. InNovember 2000, Kopka reached a settlement with American National,paying a sum of money in exchange for a release of his personalguaranty of the LOK loan.

On September 19, 2002, Kopka filed an amended complaintalleging breach of fiduciary duty, breach of retainer, andnegligence against defendants K&R, AMG, Kessel and Rosenthal. Kopka alleged that Landau and Omahana depleted the assets of LOKwith the assistance of K&R and AMG, depriving him of payment forhis shares upon his resignation and causing American National tofile suit to recover on his personal guaranty for LOK's note.

K&R and AMG, Kessel and Rosenthal filed independent motionsto dismiss Kopka's amended complaint pursuant to section 2-615 ofthe Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-615(West 2002)). Both motions asserted that Kopka lacked standingto assert his claims, failed to allege the existence of a dutyand failed to state actionable claims for breach of contract andnegligence. Kessel and Rosenthal also moved to dismiss on thebasis that Kopka failed to allege any breaches by themindividually.

On April 4, 2003, the circuit court granted defendants'motions and dismissed Kopka's amended complaint pursuant tosection 2-615 of the Code. The court held, inter alia, thatKopka alleged sufficient facts to establish standing to bring hisclaims; that Kopka failed to establish that K&R and AMG owed him,personally, a fiduciary duty and duty of care where he wasneither in privity with K&R or AMG, nor an intended third-partybeneficiary of K&R or AMG's relationships with LOK; and that Kopka failed to allege facts in support of his negligence claimto establish that any alleged breach of the duty of careproximately caused an injury.

On appeal, Kopka contends that the circuit court erred infinding that he failed to establish that K&R and AMG owed him aduty of care and fiduciary duty. Kopka maintains that, pursuantto current trends in case law, neither privity nor status as anintended third-party beneficiary is necessary to establish hisnegligence and breach-of-fiduciary-duty claims against K&R andAMG. Rather, Kopka asserts that K&R and AMG, as attorneys andaccountants for LOK, owed him a duty of care and fiduciary dutybecause he was a shareholder in two of the LOK entities and ageneral partner of the other entity.

II. ANALYSIS

A. Standard of Review

This court reviews a trial court's dismissal based uponsection 2-615 de novo. Hopewell v. Vitullo, 299 Ill. App. 3d513, 516 (1998). A section 2-615 motion attacks the legalsufficiency of a complaint, and this court's inquiry is limitedto whether the allegations of the complaint, when viewed in thelight most favorable to the plaintiff, are sufficient to state acause of action upon which relief can be granted. Vernon v.Schuster, 179 Ill. 2d 338, 344 (1997). In order to withstand amotion to dismiss based on section 2-615, a complaint must allegefacts sufficiently setting forth the essential elements of thecause of action. Urbaitis v. Commonwealth Edison, 143 Ill. 2d458, 475 (1991). This court must accept as true all well-pledfactual allegations contained in the complaint and construe allreasonable inferences therefrom in favor of plaintiff. Vernon,179 Ill. 2d at 341. However, a plaintiff cannot rely simply onconclusions of law or fact unsupported by specific factualallegations. Anderson v. Vanden Dorpel, 172 Ill. 2d 399, 408(1996).
 

B. Kopka's Claim that He Pled Sufficient Facts to State a Cause
of Action for Negligence Where He Established that K&R and AMG
Owed Him a Duty of Care

Kopka first contends that the circuit court erred in findingthat he failed to set forth sufficient facts to support a claimfor negligence. Kopka specifically argues that the courterroneously determined that K&R and AMG did not owe him a duty ofcare because Kopka failed to establish privity or that he was anintended third-party beneficiary of K&R and AMG's relationshipswith LOK. Kopka maintains that the existence of privity orstatus as an intended third-party beneficiary is not necessary toestablish a duty of care in this case. Rather, Kopka assertsthat K&R and AMG, as the attorneys and accountants for LOK, owedhim a duty of care because he was a general partner in LOKIndiana and a shareholder in LOK Illinois and LOK Michigan,closely held corporations. We disagree.

To state a cause of action for negligence properly, aplaintiff must establish the following elements: that thedefendant owed a duty of care to the plaintiff; that thedefendant breached that duty; and that the breach was theproximate cause of the plaintiff's injuries. Nowak v. Coghill,296 Ill. App. 3d 886, 892 (1998). Whether a duty exists is aquestion of law for the determination of the trial court. Nowak,296 Ill. App. 3d at 892. In order for the trial court to findthe existence of a duty, the defendant and the plaintiff muststand in such a relationship to one another that the law imposesupon the defendant an obligation of reasonable conduct for thebenefit of the plaintiff. Schechter v. Blank, 254 Ill. App. 3d560, 563 (1993). Consequently, an attorney can only be liable innegligence to persons to whom he or she owes a duty. Schechter,254 Ill. App. 3d at 563.

The general rule in Illinois is that an attorney owes a dutyof care only to his client and not to third parties. Pelham v.Griesheimer, 92 Ill. 2d 13, 19 (1982). This limited liabilityserves to protect the personal, highly confidential and fiduciarynature of the attorney-client relationship. Schechter, 254 Ill.App. 3d at 564. However, a narrow exception to this privityrequirement has been carved out in limited circumstances. Anattorney or an accountant owes a duty to a third party only wherehired by the client specifically for the purpose of benefittingthat third party. Pelham, 92 Ill. 2d at 21; Builders Bank v.Barry Finkel & Associates, 339 Ill. App. 3d 1, 8-9 (2003). Inorder for a nonclient third party to succeed in a negligenceaction against an attorney, he must prove that the primarypurpose and intent of the attorney-client relationship itself wasto benefit or influence the third party. Pelham, 92 Ill. 2d at21. Similarly, in order for a nonclient third party to succeedin a negligence action against an accountant, he must prove thatthe primary intent of the client was for the professionalservices to benefit or influence the third party. Builders Bank,339 Ill. App. 3d at 8.

Section 30.1 of the Illinois Public Accounting Act (Act)(225 ILCS 450/30.1 (West 2002)) specifically provides that anaccountant may be held liable to persons not in privity when"such person, partnership or corporation was aware that a primaryintent of the client was for the professional services to benefitor influence the particular person bringing the action."

In this case, Kopka acknowledges that he did not allege thathe was in privity with either K&R or AMG or that he was anintended third-party beneficiary of the services K&R and AMGprovided for LOK. There were no facts alleged in the amendedcomplaint indicating that Kopka individually retained either K&Ror AMG or that Kopka was an intended third-party beneficiary ofthe services provided. Rather, LOK hired K&R and AMG in December1998, after Kopka gave notice of his intent to resign from LOKbut before such resignation became effective on January 4, 1999.

However, Kopka maintains that the circuit court should haveimposed a duty of care, irrespective of the existence of privityor status as a third-party beneficiary, because the services K&Rand AMG provided to LOK directly impacted him as a shareholderand general partner where he was personally liable for LOK'sobligations. In making this argument, Kopka relies on thedecision of the Indiana Supreme Court in Rice v. Strunk, 670 N.E.2d 1280 (Ind. 1996). In Rice, the general partner of apartnership brought legal malpractice and fraud claims againstthe law firm that had represented the partnership. The SupremeCourt of Indiana determined that the attorneys for thepartnership had an attorney-client relationship with both thepartnership and each individual partner. The court alsodetermined that to the extent that the partners agree that thepartnership will be managed in a form other than by all thepartners acting in aggregate, the attorney-client relationshipwill run to the partnership as an entity acting through its dulyauthorized management. Rice, 670 N.E. 2d at 1288-89.

However, we find that Kopka's contentions and reliance onRice are contrary to Illinois law. In Felty v. Hartweg, 169 Ill.App. 3d 406 (1988), the appellate court rejected a similarargument. In Felty, the plaintiff argued that the appellatecourt should impose a duty on the closely held corporation'sattorney to the corporation's minority shareholders where, interalia, the attorney knew or should have known that theshareholders would rely on his services. The appellate courtdetermined that the plaintiff failed to establish the existenceof an implied attorney-client relationship between the attorneyand these shareholders or that these shareholders were intendedthird-party beneficiaries of the relationship between theattorney and the corporation. The court therefore declined torecognize any duty owed by the corporate attorney to the minorityshareholders. In doing so, the appellate court observed that"[e]ven in closely held corporations, minority shareholders oftenhave conflicting interests with the corporation." Felty, 169Ill. App. 3d at 410.

Similarly, in Torres v. Divis, 144 Ill. App. 3d 958, 964(1986), the appellate court refused to impose on an attorney,retained by only one of several incorporators for the purpose oforganizing a corporation, a duty to act on behalf of all of theincorporators in the absence of an agreement that the attorneywas to do so. Furthermore, in Bevelheimer v. Gierach, 33 Ill.App. 3d 988, 993-94 (1975), the appellate court determined thatthe sole shareholder of the corporation, who had procured a leaseand assigned it to the corporation, had no cause of actionagainst the corporation's attorney, who allegedly breached hispromise to renew the lease. The court noted that the soleshareholder and the corporation were two distinct entities andbecause the lease was assigned to the corporation, any duty theattorney owed regarding the lease was to the corporation and notto the sole shareholder personally. Bevelheimer, 33 Ill. App. 3dat 993.

Kopka, nonetheless, argues that this court's decision inThornwood, Inc. v. Jenner & Block, 344 Ill. App. 3d 15 (2003),demonstrates a new trend to broaden the scope of an attorney'sliability to persons who are neither in privity with nor intendedthird-party beneficiaries of the attorney-client relationship.

However, we find Kopka's reliance on Thornwood, Inc.unconvincing.

In Thornwood, Inc., the plaintiff alleged that the attorneysfor his former partner aided and abetted his former partner inbreaching his fiduciary duty, as well as in a scheme to defraudand a scheme of fraudulent inducement. The trial courtdetermined that the plaintiff had previously released his claimsagainst the attorneys and dismissed the plaintiff's complaint. This court reversed, holding that the plaintiff raised a materialissue of fact as to whether the release he signed was valid. Indoing so, this court noted that an attorney should not bepermitted to " ' "use his license to practice law as a shield toprotect himself from the consequences of his participation [inassisting a client in the commission of a tort]." ' " Thornwood,Inc., 344 Ill. App. 3d at 28, quoting Celano v. Frederick, 54Ill. App. 2d 393, 400 (1964), quoting Wahlgren v. Bausch & LombOptical Co., 68 F.2d 660, 664 (7th Cir. 1934).

Unlike the present case, the plaintiff in Thornwood, Inc.did not file a claim for direct professional negligence or breachof a fiduciary duty against his former partnership's attorneys. Rather, the plaintiff in Thornwood, Inc. accused his formerpartner's attorneys of aiding and abetting his former partner inbreaching his fiduciary duty, as well as aiding and abetting ascheme to defraud and a scheme of fraudulent inducement. Here,Kopka seeks to impose a direct duty of care on the corporation'sattorneys and accountants to him absent any showing of privity orstatus as an intended third-party beneficiary. Contrary toKopka's contentions, this court did not impose such a duty on theattorneys in Thornwood, Inc. or hold that attorneys for apartnership are obligated to treat each partner's interestequally. Instead, this court determined that there was no reasonto impose a per se bar that would prevent imposing liability uponattorneys who knowingly and substantially assist their clients inthe commission of a tort. Thornwood, Inc., 344 Ill. App. 3d at28-29.

Kopka also argues that a trend in the case law exists tosupport expanding the duty of care owed by accountants to personswho are neither in privity nor intended third-party beneficiariesbut, rather, to all persons who accountants foresee will rely ontheir work. Kopka contends that this trend is supported by thefact that privity is no longer a prerequisite to imposing a dutyupon an accountant, relying on the appellate court holdings inBrumley v. Touche Ross & Co., 123 Ill. App. 3d 636 (1984)(Brumley I), and Brumley v. Touche, Ross & Co., 139 Ill. App. 3d831 (1985) (Brumley II).

In Brumley I, the appellate court reviewed the issue ofaccountant liability at common law and looked to two IllinoisSupreme Court cases for guidance: Rozny v. Marnul, 43 Ill. 2d 54(1969), and Pelham, 92 Ill. 2d at 13. The court in Roznyrecognized that a nonprivity party could bring an action inIllinois against a surveyor for negligent misrepresentation. ThePelham court held that an attorney could owe a duty to a thirdparty who was not his client if the attorney was acting at thedirection of or on behalf of his client to benefit or influencethe third party. Based on these opinions, the Brumley I courtheld that an accountant owed a duty to third parties who reliedon his report or opinion if the accountant was acting at thedirection of or on behalf of his client to benefit or influencethe third-party. Brumley I, 123 Ill. App. 3d at 642. The courtin Brumley II then considered an amended complaint and clarifiedits previous holding by stating: "[T]o be sufficient plaintiff'scomplaint must allege facts showing that the purpose and intentof the accountant-client relationship was to benefit or influencethe third-party plaintiff." Brumley II, 139 Ill. App. 3d at 836.

One year after the decision in Brumley II, section 30.1 ofthe Act was enacted. 225 ILCS 450/30.1 (West 2002). It nowgoverns liability to third parties not in privity with anaccountant and sets forth the only circumstances under which anaccountant may be sued by a third-party for negligence inrendering his professional services. Builders Bank, 339 Ill.App. 3d at 8.

Relative to the pleadings in the case at bar, section 30.1of the Act provides that an accountant may be held liable to athird party when "such person, partnership or corporation wasaware that a primary intent of the client was for theprofessional services to benefit or influence the particularperson bringing the action." 225 ILCS 450/30.1 (2)(West 2002). In construing section 30.1 of the Act, this court has held thatfor a nonprivity third party to hold an accountant liable, theparty must show: (1) the intent of the client for theaccountant's work to benefit or influence the third party; and(2) the accountant's knowledge of that intent. Builders Bank,339 Ill. App. 3d at 7, citing Chestnut Corp. V. Pestine, Brinati,Gamer, Ltd., 281 Ill. App. 3d 719, 724 (1996). Accordingly, wereject Kopka's assertion that the corporation's accountant, AMG,owed a duty of due care to all persons who would foreseeably relyon its statements, as this is not the law in Illinois. BuildersBank, 339 Ill. App. 3d at 7.

Further, we find that the circuit court properly dismissedKopka's negligence claim where he failed to allege factssupporting a breach of any duty and how such a breach proximatelycaused an injury. Nowak, 296 Ill. App. 3d at 892. Kopkapleaded that K&R was negligent by representing the interests ofLandau and Omahana ahead of those of his own, when K&R assistedin the incorporation of LO, which allegedly diverted funds fromLOK. However, as the circuit court noted, Kopka failed to pleadany facts indicating how any acts of K&R proximately caused LOKto fail to repurchase his shares in the corporation because thefact that LO was incorporated was not a proximate cause of anydamages incurred by Kopka. Kopka also failed to indicate how hisasserted damages in having to pay partnership obligations wasattributable to K&R's actions. In addition, Kopka pleaded thatAMG was negligent in failing to properly provide tax services andfor preparing projections of LOK's revenue, when LOK was nolonger operating, for the purpose of allowing Landau and Omahanato divert LOK's assets. However, Kopka failed to plead any factsto show that any of these alleged actions by AMG were a breach ofa duty that proximately caused him to suffer damages, includingLOK's failure to re-purchase his shares in the corporation andKopka's obligation to pay partnership obligations.

C. Kopka's Claim that the Circuit Court Erred in Finding that
K&R and AMG did not Personally Owe Him a Fiduciary Duty

Kopka also contends that the circuit court erred bydismissing his breach of fiduciary duty claims, where both K&Rand AMG had a fiduciary relationship with LOK and therefore alsoowed him a fiduciary duty based on his status as shareholder andpartner in the LOK entities. We disagree.

An attorney can be liable for malpractice only to one towhom the attorney owes a duty. Felty, 169 Ill. App. 3d at 408. A fiduciary relationship exists between an attorney and client,and the attorney owes the client the utmost fidelity, honesty,and good faith. Felty, 169 Ill. App. 3d at 408. On the otherhand, an attorney owes a duty to a nonclient only when thenonclient is an intended beneficiary of an attorney-clientrelationship. Felty, 169 Ill. App. 3d at 408. Similarly, for anonprivity third party to hold an accountant liable, the partymust show that the client intended for the accountant's work tobenefit or influence the third party and that the accountant hadknowledge of that intent. Builders Bank, 339 Ill. App. 3d at 7.

In this case, Kopka acknowledges that he failed to allegethat he was in privity or an intended third-party beneficiary ofK&R and AMG's relationships with LOK. Rather, Kopka asserts thatthis court should find that since K&R and AMG owed a fiduciaryduty to LOK, they should also owe him a fiduciary duty as ashareholder and partner of that corporation. However, this courtrejected a similar argument in Hager-Freeman v. Spircoff, 229Ill. App. 3d 262, 278 (1992). In that case, this court held thatthe attorney for a corporation, even a closely held one, does nothave a specific fiduciary duty toward the individualshareholders. Hager-Freeman, 229 Ill. App. 3d at 277-78, citingFelty, 169 Ill. App. 3d 406. In Felty, the appellate courtacknowledged that even in such closely held corporations,shareholders often have conflicting interests with thecorporation. Felty, 169 Ill. App. 3d at 410. This court hastherefore declined to impose a fiduciary duty upon an attorney toa corporation's shareholders, in the absence of privity or statusas intended third-party beneficiary.

Kopka acknowledges that the appellate court's decision inFelty has not been criticized or overruled by subsequentdecisions, but argues that it is neither controlling norauthoritative in this case. However, Kopka fails to demonstratewhy this court should disregard the decision in Felty and holdthat a fiduciary duty may be established in the absence ofprivity or status as an intended third-party beneficiary. Rather, Kopka cites Illinois Rockford Corp. v. Kulp, 41 Ill. 2d215 (1968) and Helms v. Duckworth, 249 F.2d 482 (D.C. Cir. 1957),in support of his argument that LOK's attorneys and accountantsowed the corporation's shareholders and partners a fiduciaryduty. However, both Illinois Rockford Corp. and Helms addressthe fiduciary duties that shareholders of a closely heldcorporation owe to other shareholders. Neither case imposes afiduciary duty on a corporation's attorneys or accountants to thecorporation's shareholders. Therefore, we find no reason todepart from the decisions in Felty and Hager-Freeman.

Kopka also argues that a duty should be imposed upon K&R andAMG to LOK's shareholders and partners, as a matter of publicpolicy, so that accountants and attorneys will not be immunizedfrom liability for damages that arise out of their acts andomissions. We reject Kopka's argument because failing to imposea duty on the corporation's attorneys and accountants does notimmunize them from liability where claims for damages may beasserted by the entity that retained them or by recognized third-party beneficiaries. In addition, the failure to impose such aduty does not preclude a partner or shareholder in a closely heldcorporation from pursuing an action against his fellowshareholders or partners. See Borys v. Rudd, 207 Ill. App. 3d610, 620 (1990) (partners have a fiduciary relationship); seealso Doherty v. Kahn, 289 Ill. App. 3d 544, 560 (1997), citingHagshenas v. Gaylord, 199 Ill. App. 3d 60, 71 (1990)(shareholders in a closely held corporation owe a fiduciary dutyto each other).

We note that while Kopka's complaint seeks to hold K&R andAMG liable for their actions that allegedly assisted his formerpartner Omahana, and current partner Landau, in converting theassets of LOK, Kopka has not chosen to seek legal redress fromeither LO or Omahana and Landau personally. Kopka's decision toproceed in this manner does not support the creation of a publicpolicy that would impose upon accountants and lawyers forcorporations and partnerships a duty to shareholders and partnersindividually.

Accordingly, we find that Kopka failed to establish that K&Rand AMG owed a fiduciary duty to him personally and that thecircuit court therefore properly dismissed his claim.

III. Conclusion

For the reasons stated, we affirm the dismissal by thecircuit court of Cook County of plaintiff's amended complaint forfailure to state a cause of action.

Affirmed.

REID, P.J. and GREIMAN, J., concur.