Statute of Limitations

Court Again Affirms Inquiry Notice Standard

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The First District Appellate Court concluded that Plaintiffs, Brian Scheinblum and Chicago Hotel Partners, LLC (“CHP”), did not timely file their legal malpractice complaint against the law firm of Schain Banks Kenny & Schwartz, Ltd.’s (“Schain Banks”).  Brian Scheinblum, et al., v. Schain Banks Kenny & Schwartz, LTD, 2021 IL App (1st) 200798. 

According to Plaintiffs, they retained Schain Banks in 2015 to file a complaint for declaratory judgment and specific enforcement of a contract related to developing a hotel on certain floors of a building located at 55 East Washington Street in Chicago (the “Pittsfield Building”).  Schain Banks helped Plaintiffs’ successfully settle the dispute.  At the same time, without Plaintiffs’ knowledge, Schain Banks was advising another party on how to stop the development of a hotel at the Pittsfield Building.  Subsequently, the City of Chicago passed a downzoning ordinance related to the Pittsfield Building on March 16, 2016 that killed Plaintiffs’ plan to open a hotel causing them a “tremendous financial loss.”  Id. at ¶ 7.

In granting Schain Banks’ motion to dismiss, the Court held that Plaintiffs should have known they were injured when the City passed the downzoning ordinance.  On appeal, Plaintiffs argued that they had “no way of knowing” they should have investigated their own attorneys’ involvement in the passage of the ordinance.  Id. at ¶ 21.  Plaintiffs alleged that they only became aware of Schain Banks’ involvement after it sued the City, and obtained a 2015 Schain Banks’ email providing legal advice on how to rezone the building, through discovery in October 2017.  The Court disagreed.  The Court concluded, “Because plaintiffs developed a reasonable belief that the downzoning was caused by wrongful conduct, they had an obligation to inquire further on that issue.”  Id. at ¶ 19.  The court stressed that it was not necessary for Plaintiffs to know that their lawyers were involved in wrongdoing; they needed only know that there was wrongdoing by somebody in order for them to be required to inquire whether their lawyers were involved.

Brian Scheinblum, et al., v. Schain Banks Kenny & Schwartz, Ltd., 2021 IL App (1st) 200798

(This is for information purposes only and not legal advice.)

Three Months And A Day Is “More Than” Reasonable

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The Second District Appellate Court affirmed the Circuit Court of McHenry County’s decision to not apply the five-year statute of limitations for fraudulent concealment when (1) Plaintiff’s concealment claim was identical to his legal malpractice claim; and (2) Plaintiff had a “reasonable time” to file his legal malpractice claim within the normal two-year limitations period.  Harold Crowe v. Randall Taradash & The Taradash Law Offices, 2021 IL App (2d) 200316-U.  The court reasoned that this case was analogous to Barratt v. Goldberg, 296 Ill. App. 3d 252, 258 (1998), and further held that three months and one day was “more than a reasonable time” for Plaintiff to file his claim. Id. at ¶ 30.

Harold Crowe v. Randall Taradash & The Taradash Law Offices, 2021 IL App (2d) 200316-U.

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

Accountant’s Assertion that Plaintiff “Potentially [had] A Real Problem” Amounts to Inquiry Notice

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In a nineteen-page opinion, the Illinois Appellate Court for the First District affirmed the dismissal of a legal malpractice case against the law firm of Michael Best & Friedrich, LLP as time barred.  The court stated that legal malpractice claims must be brought within the two-year statute of limitations period set forth in section 13-214.3(b) of the Illinois Code of Civil Procedure.  It added that this statute of limitations incorporates the “discovery rule,” and that discovery “may rest upon so-called inquiry notice.”  Carlson v. Michael Best & Friedrich LLP, 2021 IL App (1st) 191961, ¶ 81.  A party is on inquiry notice when s/he knows or reasonably should have known of an injury and that the injury was wrongfully caused.  Inquiry notice starts the statute of limitations clock.

In this case, the court held that the Plaintiff should have been aware that he was wrongfully injured when his accountant informed him that he “potentially [had] a real problem” regarding a proposed settlement agreement and further stated, “I don’t know what happened here… but you left 12 million on the table.  You should be able to go back and get it.”  Id. at ¶ 82.  The court rejected Plaintiff’s claim that he believed these statements were made in “jest” and were not reasonably calculated to put him on notice of a potential legal malpractice claim.  Id.  Instead, the court concluded that the statements put the Plaintiff on inquiry notice and he should have investigated his attorneys’ actions.

Carlson v. Michael Best & Friedrich LLP, 2021 IL App (1st) 191961

Illinois Legal Malpractice and Defense of Lawyers Blog — Novack and Macey LLP

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