Statute of Limitations

Cause of Action Before an Adverse Judgment

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Construction Systems provided labor and material for a building project.  When the owner of the project failed to pay, Construction Systems retained the law firm FagelHaber to record a lien against the subject property.  To that end, FagelHaber conducted a tract search.  One month later, Cosmopolitan Bank and Trust (“Cosmopolitan”) recorded a mortgage on the property.  FagelHaber waited six months before serving notice of Construction Systems’ lien on the project owner and construction manager.  In that time, it did not update the tract search and so did not discover Cosmopolitan’s mortgage or include Cosmopolitan on the service list.  Construction Systems retained Karen Berres (“Berres”) as new counsel during the litigation surrounding its mechanic’s lien, and executed a general release in settlement with FagelHaber concerning disagreements over outstanding fees.

Three years later, the mechanic’s lien litigation settled for approximately $1.3 million less than the recorded lien.  Id. at ¶12.  Construction Systems sued FagelHaber for legal malpractice, claiming FagelHaber’s failure to perfect the mechanic’s lien caused it to be subordinate to Cosmopolitan’s mortgage lien.  At issue was whether Construction Systems’ general release with FagelHaber included a release of legal malpractice actions.  The court granted summary judgement for FagelHaber, but that decision was reversed on appeal.  On remand, FagelHaber moved unsuccessfully for summary judgment again, this time on statute of limitations grounds.  FagelHaber then moved successfully to compel production of Berres’ bills, which showed her various attempts to address FagelHaber’s error.  FagelHaber used these bills to move for reconsideration of its earlier motion to dismiss, claiming they demonstrated that Construction Systems’ attorney knew of FagelHaber’s mistake more than two years before suing for malpractice.  The motion was granted.

At issue on appeal was whether FagelHaber’s failure to perfect the mechanic’s lien was “plainly obvious” such that the malpractice action would have accrued before entry of an adverse judgment.  Id. at ¶20.  In affirming the motion, the appellate court held that both FagelHaber’s negligence and the injury it caused became obvious when Berres discovered the defect in the lien and Construction Systems paid her for her attempts to address it.  Id. at ¶29.  All of this occurred before an adverse judgment had been issued against Construction Systems, but the court held that an adverse judgment is only a necessary prerequisite where it was needed to discover a defendant’s mistake.  Id. at ¶27.  “Actual knowledge of FagelHaber’s negligence,” the court explained, “was not required under the discovery rules.”  Id. at ¶24.  Rather, “the limitations period was triggered when Construction Systems had a reasonable belief that its injury was caused by FagelHaber’s negligence.”  Id.

Construction Systems, Inc. v. FagelHaber , 2019 IL App (1st) 172430

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

Fifth District Holds Two-Year Statute of Limitations for Actions Against Lawyers is Not Just for Malpractice

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Defendants Betty A. Lauth, Rose Zimmer, Carol Heilman, Ralph Bauer, and Ruth Smith (the “Lauths”) filed a mortgage foreclosure action against Donald, Lauretta, Karla, and David Bauer (the “Bauers”).  The Lauths were represented by E.T. Graham, Jr. and The Law Firm of Beavers, Graham & Calvert (the “BGC Defendants”).  The trial court entered an order of foreclosure on October 18, 2013.  Id. at ¶4.  On March 14, 2017, the Bauers sued the BGC Defendants and others on several counts, including civil conspiracy.  Id. at ¶25.  They alleged that the BGC Defendants conspired to file and present documents in the underlying foreclosure action that were “false representations of the evidence,” leading the court to enter a $280,000 judgment against them.  Id. at ¶25.  The trial court dismissed the civil conspiracy counts as to the BGC Defendants based upon the two-year statute of limitations for actions against attorneys: 735 ILCS 5/13-214.3(b).  It states that a claim based on tort, contract, or otherwise “against an attorney arising out of an act or omission in the performance of professional services” must be commenced within two years from the time the party bringing the action knew or reasonably should have known of the injury for which damages are being sought.  Id. at ¶26.

On appeal, the Bauers argued that the two-year statute of limitations applied only to cases of legal malpractice, not civil conspiracy.  The Fifth District rejected this argument, and affirmed dismissal.  It explained that “[a]s there is no language in the statute restricting its application to legal malpractice claims, the plain language of the statute directs that the two-year limitation applies to all claims against an attorney arising out of acts or omissions in the performance of the professional services, and not just legal malpractice claims.”  Id.

Bauer v. Niemerg , 2019 IL App (5th) 180229-U

(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.)

Miller v. Davis , 2018 IL App (4th) 170337-U

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Mark Miller was committed to the Department of Human Services as a sexually violent person, but his commitment was reversed on appeal because of ineffective representation by his former trial attorney, W. Keith Davis.  For this, Miler sued Davis pro se for legal malpractice, filing his complaint on October 25, 2013.  Davis was not served until almost three years later on October 14, 2016, well after the two-year statute of limitations had lapsed.  Davis moved to dismiss with prejudice pursuant to Illinois Supreme Court Rule 103(b) for failure to exercise reasonable diligence in service.  The trial court granted Davis’ motion.

On appeal, the dismissal was affirmed.  The appellate court explained that Miller’s status as a pro se litigant did not exempt him from compliance with the same rules of procedure as a litigant represented by counsel.  Moreover, it noted that “there was a lengthy period of time, over two years, where Miller did nothing to move his case forward.”  Id. at ¶ 23.  Although the record indicated Davis knew of Miller’s complaint soon after it was filed, the appellate court held that “the presence of actual knowledge and the absence of prejudice do not require this court to find reasonable diligence” as they do not “outweigh the other factors.”  Id. at ¶ 24.

Miller v. Davis , 2018 IL App (4th) 170337-U

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

 

Anne v. Altenbernt, 2018 IL App (2d) 170614-U

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On February 10, 2017, Remesh Anne filed a legal malpractice complaint against his former attorney, Marc Altenbernt, who had represented Anne through the dissolution of Anne’s marriage. He alleged that Altenbernt had failed to properly inform the Court of the nature of his wife’s state retirement plan during the dissolution proceedings, resulting in the Court grossly undervaluing the plan when it divided up the marital property between Anne and his wife.

Altenbernt moved to dismiss, citing the statute of limitations imposed by 735 ILCS 5/13-214.3(b) (“An action for damages based on tort, contract, or otherwise […] against an attorney arising out of an act or omission in the performance of professional services […] must be commenced within 2 years from the time the person bringing the action knew or reasonably should have known of the injury for which damages are sought.”). Altenbernt contended that, at the latest, Anne knew or should have known to inquire further about any actionable wrong on the day the final judgment had been issued: January 15, 2015. The trial court dismissed Anne’s claim.

On appeal, Anne argued that the date by which he knew or should have known about any wrongdoing was February 12, 2015, when his new attorney told him of Altenbernt’s error. This would mean he filed his complaint against Altenbernt two days before the statute of limitations had expired. The Appellate Court of Illinois, Second District, disagreed, and affirmed the dismissal. In so doing, it held that “as a matter of law, plaintiff’s duty of inquiry began no later than January 27, 2015, when he retained his new attorney.” Id. at ¶16.

Anne v. Altenbernt, 2018 IL App (2d) 170614-U

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

 

Killian v. Minchella, 2017 IL App (1st) 163429-U, appeal denied, 98 N.E.3d 65 (Ill. 2018)

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice case. The court examined whether unpaid judgments constituted damages to the plaintiff. Although the court noted that an unpaid judgment could damage a malpractice plaintiff, it held that the malpractice complaint failed to state a claim because it failed to allege that the plaintiffs had paid or would have to pay a judgment in excess of what they would have paid in the absence of negligence.

The court also affirmed on statute of limitations grounds. It held that the entry of a non-final summary judgment order put the plaintiff on notice of the alleged malpractice. Thus, the statute began to run at that time. The court rejected the argument that the statute of limitations did not run until the summary judgment became final and appealable.

Killian v. Minchella, 2017 IL App (1st) 163429-U, appeal denied, 98 N.E.3d 65 (Ill. 2018)

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

Hilton v. Foley & Lardner, LLP

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In this unpublished opinion, the First District affirmed the dismissal of conversion and breach of fiduciary duty claims brought by an individual and affirmed the grant of summary judgment with respect to legal malpractice claims brought by an LLC.

As to the individual’s claims, the court affirmed the dismissal on statute of limitations grounds.  The plaintiff should have known of the defendant lawyer’s conflicted representation of the plaintiff when his lawyer wrote a letter to defendant’s lawyer on the issue.  Moreover, the court noted that the two-year statute of limitations applies to any claim against a lawyer (even if it is not a legal malpractice claim) sounding in tort, contract or otherwise and arising out of professional services, even if the claim is brought by a non-client.

As to the LLC’s claim, the court held that there was no evidence that the lawyer’s conduct proximately caused any loss.   There was no evidence that another lawyer representing the LLC would have acted differently and the plaintiff did not depose managing member of the LLC to try to adduce that evidence.

Hilton v. Foley & Lardner, LLP, 2017 IL App (1st) 162450-U

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