Estoppel

At-Issue Waiver in Legal Malpractice Case Not Automatic

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Rabbi Stanley Kroll (“Kroll”) had an employment contract with his Synagogue which included a deferred compensation retirement plan (the “Plan”).  In 2016, the Synagogue asked Kroll to retire early.  Kroll agreed, but on his last day a Synagogue officer told him that a tax issue had arisen with the Plan, promising it would be resolved. Kroll found out later that the issue had not been resolved, thereby subjecting his deferred compensation to heavy penalties.  Kroll also alleged that the Synagogue had not set aside enough money to fund the Plan and had retained the law firm Cozen O’Connor (“Cozen”) without his knowledge to help it reduce payments to him.  Kroll sued the Synagogue, settled, and then sued Cozen.  Cozen issued subpoenas “to obtain [Kroll’s] confidential communications with the lawyers who advised or represented him after his departure from the Synagogue.”  Id. at 3.  It argued that because Kroll had relied on the discovery rule to toll the running of the statute of limitations, he had placed the question of when his claims accrued and when he learned of his injuries at issue.  Cozen claimed that this constituted a waiver of the attorney-client privilege and the work-product doctrine as to communications between Kroll and his attorneys that showed when he learned of his injury.  Id.

Kroll moved to quash or modify the subpoenas and the Court granted his motion in full. It explained that although the privileged communications sought might address what Kroll knew about his injuries and when, they were not vital to Cozen’s defenses.  Id. at 5. The matter was “early in discovery” at the time, and the Court “had no basis to conclude […] that [Kroll’s] privileged communications […] are the only source of evidence about when [Kroll] learned, and what he learned, about the nature of his alleged injuries.”  Id. at 5.

Kroll v. Cozen O’Connor, 2020 WL 3077556 (N.D. Ill. June 10, 2020)

(This is for informational purposes and is not legal advice.)

 

Attorney Aiding and Abetting and Assignment of Malpractice Claims

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Rabbi Stanley Kroll (“Kroll”) had a thirty-year employment contract with his Synagogue. The contract included a deferred compensation plan (the “Plan”) to fund Kroll’s retirement.  The Synagogue was allowed to amend the Plan unilaterally, but not in any way that divested credits to the account or rights to which Kroll would be entitled if the Plan were terminated before an amendment took effect.  Id. at 1.  The Synagogue asked Kroll to retire six years early. Kroll agreed, but on his last day, a Synagogue officer told him that a tax issue had arisen, promising it would be resolved.  Kroll found out later that the issue had not been resolved, thereby subjecting his deferred compensation to heavy taxes and penalties.  Moreover, the Synagogue did not have sufficient funds to pay Kroll, and had amended the Plan to eliminate benefits to which Kroll would otherwise be entitled. Kroll sued the Synagogue, which settled and assigned to him all causes of action related to the Plan that it might have against the law firm it used to amend it: Cozen O’Connor (“Cozen”). Kroll then sued Cozen on multiple counts, but Cozen moved to dismiss. The motion was granted in part and denied in part.

To begin, the Court noted that legal malpractice claims may not be assigned in Illinois except under three exceptions.  However, none of these exceptions applied. It explained that “Kroll is a stranger to [the Synagogue] and Cozen’s attorney-client relationship and was owed no duty by Cozen.”  Id. at 4.  The Court also granted dismissal of Kroll’s aiding and abetting breach of fiduciary duty claim.  It said that no fiduciary duty existed between Kroll and the Synagogue, so Cozen could not have aided a breach of that duty. Id. at 7.  The Court dismissed Kroll’s fraudulent concealment claim as well, since Kroll did not allege facts sufficient to explain how a Cozen attorney used his position of superiority and legal knowledge to take advantage of Kroll’s trust and confidence in him, “especially given that [the attorney] represented the opposing party.”  Id. at 8, emphasis in original.

Conversely, the Court rejected Cozen’s argument that Kroll’s claims were barred by Illinois’ two-year statute of limitations for claims arising out of an attorney’s performance of professional services.  Here, it held that Kroll had demonstrated possible equitable tolling or estoppel when he asserted that a Synagogue officer misled him about resolving the tax issue and that a Cozen attorney misrepresented the enforceability of the Plan’s amendment.  Id. at 5.  Kroll’s claim that Cozen aided and abetted the Synagogue’s fraud was allowed to stand as well.  The Court, quoting an Illinois case, saw “no reason to impose a per se bar that prevents imposing liability upon attorneys who knowingly and substantially assist their clients in causing another party’s injury.”  Id. at 6. Here, the Court agreed that Kroll had pleaded facts sufficient to assert the Synagogue’s fraud and Cozen’s assistance therein.

Rabbi Stanley Kroll, Plaintiff, v. Cozen O’Connor, 2020 WL 919005

(This is for informational purposes and is not legal advice.)

Hanmi Bank v. Chuhak & Tecson, P.C., Michael Gilmartin, and Cary Fleisher, 2018 IL App (1st) 180089

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In 2009, Hanmi Bank (“the Bank”) filed six foreclosure actions in an Illinois circuit court and one in the Northern District of Illinois.  All were voluntarily dismissed without prejudice in July, 2011.  The same month, it filed a new foreclosure complaint in the Northern District of Illinois and a concurrent foreclosure action in the Eastern District of Wisconsin.  It then replaced its counsel with Chuhak & Tecson, P.C. (“Chuhak”), which was aware that the 2009 suits had been voluntarily dismissed.  Meanwhile, the defendants filed a declaratory judgment action against the Bank, to which the Bank filed a counterclaim.  When the Bank voluntarily dismissed its July, 2011 lawsuit, the defendants successfully moved to dismiss the counterclaim.  Summary judgment was then granted against the Bank in the Eastern District of Wisconsin for res judicata.  Chuhak assured the Bank that both rulings would be reversed on appeal, but neither was.  In the meantime, Chuhak allegedly had an internal discussion about whether it had committed malpractice, and notified their insurer.

The Bank sued Chuhak for legal malpractice in March, 2017, accusing it of professional negligence in the voluntary dismissal of the Bank’s suit in the Northern District of Illinois, which made it impossible for the Bank to foreclose on the properties involved.  It further alleged that Chuhak breached its fiduciary duty in making misrepresentations to the Bank to conceal its potential malpractice.  Chuhak successfully moved to dismiss, arguing that the Bank’s claims were barred by the two-year statute of limitations for legal malpractice.  The Bank moved to file an amended complaint that would assert Chuhak was estopped from raising the statute of limitations argument due to its false assurances that “lulled the Bank into waiting to file its legal malpractice complaint.”  Id. at ¶17.  The Appellate Court reversed, holding that the Trial Court came to the wrong conclusion as to “whether the proposed amendment will cure the defective pleading.”  Id. at ¶21-22.  Indeed, it found that the Bank’s proposed amendment would cure its defective complaint and that “the trial court abused its discretion by denying the Bank leave to file.”  Id. at ¶29.  “While the trial court does have wide discretion,” it explained, “any doubt as to whether a plaintiff should be granted leave to file an amended complaint should be decided in favor of allowance of the amendment.”  Id. at ¶21.

Hanmi Bank v. Chuhak & Tecson, P.C., Michael Gilmartin, and Cary Fleisher, 2018 IL App (1st) 180089

(This is for informational purposes and is not legal advice.)

Gines v. Wilson, 2018 IL App (4th) 170811-U

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Cordell Gines filed a pro se complaint against his defense attorneys, Ryan R. Wilson, Lawrence Bapst, and Martin J. Ryan, alleging legal malpractice and a breach of fiduciary duty. Specifically, Gines alleged that the defendants had caused him to serve a sentence for various criminal acts of which he had been convicted that was at least five years longer than it should have been. The defendants filed a motion to dismiss, which the court granted. It found that Gines had failed to allege facts sufficient to state a claim upon which relief could be granted because he did not plead facts presenting arguments defendants failed to make that would have resulted in a reversal or modification of his conviction or sentence. The court also found that collateral estoppel barred Gines’ claim for malpractice. Gines appealed.

The appellate court affirmed the dismissal, stating that “a legal malpractice cause of action does not accrue until the plaintiff’s conviction is overturned.” Id. at ¶ 30. It explained that because another court had already established the correctness of Gines’ sentence, Gines was collaterally estopped form challenging the validity of the same sentence in the current action. Thus he could not overturn it so as to sue the defendants for malpractice.

Gines v. Wilson, 2018 IL App (4th) 170811-U

(This is for informational purposes and is not legal advice.)

Arjmand v. Mirabelli, 2017 IL App (1st) 162225-U

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In this unpublished opinion, the First District affirmed the dismissal of a malpractice claim on statute of limitations grounds. The court rejected the plaintiff’s argument that defendants were equitably estopped from raising a statute of limitations defense because defendants told plaintiff that their strategy was correct finding that the defendants did not knowingly make any false representations. The court held that a trial court order vacating a marital settlement agreement damaged the malpractice plaintiff because it imposed costs of further litigation, even though the damages may have been speculative at that time. The court further held that the plaintiff knew of the injury when he received the order.

Arjmand v. Mirabelli, 2017 IL App (1st) 162225-U

(This is for informational purposes and is not legal advice.)

 

 

Barefoot Architect , Inc. v. Sabo & Zahn, 2017 IL App (1st) 162616-U

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice claim on statute of limitations grounds and a breach of fiduciary duty claim resulting from a bankruptcy case where the plaintiff had hired attorneys other than the defendants to represent in those proceedings. The court held that, ordinarily, a cause of action for malpractice accrues when a court enters an adverse judgment against a malpractice plaintiff. Here, the statute of limitations had run even using the date the appellate court entered an adverse judgment against the plaintiff. The court held that the lawyers’ statements that the court had erred did not establish were insufficient to preclude application of the statute of limitations under theories of fraudulent concealment or equitable estoppel.

Barefoot Architect , Inc. v. Sabo & Zahn, 2017 IL App (1st) 162616-U

(This is for informational purposes and is not legal advice.)

Abrahamson v. Greenberg Traurig, LLP, 2017 Il App (1st) 162226-U

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice claim on statute of limitations and statute of repose grounds.  It rejected the plaintiff’s argument that equitable estoppel and fraudulent concealment tolled the statutes.

Abrahamson v. Greenberg Traurig, LLP, 2017 Il App (1st) 162226-U

(This is for informational purposes and is not legal advice.)

Pastry Partners, Inc. v. Greenswag

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In this unpublished opinion, the First District affirmed the grant of summary judgment for the defendants on statute of limitations grounds.   The court held that the plaintiff knew of its injury before an adverse judgment was entered against it and that the statute began to run before the judgment was entered.   The court also rejected the plaintiff’s arguments based upon equitable tolling, equitable estoppel and judicial estoppel.

Pastry Partners, Inc. v. Greenswag, 2016 IL App (1st) 152259-U

(This is for informational purposes and is not legal advice.)

Recent Illinois Case: Hexum v. Parker

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In this unpublished opinion, the Third District held that the trial court erred when dismissing a legal malpractice claim on collateral estoppel grounds. The court held that the issues in the plaintiff’s underlying divorce case were different from the issues in his malpractice case against his divorce attorney.

Hexum v. Parker, 2017 IL App (3d) 150514-U

(This is for informational purposes and is not legal advice.)

Recent Illinois Case: Dobbins v. Zager

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In this unpublished order, the First District affirmed the dismissal of a legal malpractice claim on statute of repose grounds.   The court held that neither equitable estoppel nor fraudulent concealment saved the claim.  The court emphasized that misrepresentations that toll the statute of repose must be different from the representations that constitute the alleged malpractice.

Dobbins v. Zager, 2016 IL App (1st) 151175-U

(This is for informational purposes and is not legal advice.)