Statute of Limitations/Repose

Summary Judgment Dismissed Because Damages Speculative Until Judgment Entered

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The First District reversed the grant of summary judgment on statute of limitations grounds.   The trial court held that plaintiffs had suffered injury  and knew it when they paid fees to a new lawyer to correct the allegedly negligent lawyers work.  The Appellate Court held that the plaintiff’s injury was speculative until a judgment was entered against him in the underlying action.

Suburban Real Estate Services, Inc. and Bryan Barus v. William Roger Carlson Jr. and Carlson Partners, Ltd., 2020 IL App (1st) 191953

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

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

Fraudulent Concealment Does Not Toll Statute of Limitations Where Plaintiff Has Time Within Statute to File Suit

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The First District held that the fraudulent concealment statute did not save an action barred by the two year statute of limitations.   Plaintiffs accused a lawyer of wrongfully entering into a settlement without authority and argued that the lawyer fraudulently concealed the fact that he had done so.  They argued that they had five years to bring their action under the fraudulent concealment statute.   The court held, however, that the five year concealment statute does not apply if a plaintiff has a reasonable time left within the original two year statute to bring its action.  In this case, the underlying court enforced the unauthorized settlement within months of it being made.   Therefore, plaintiffs had ample time to bring their action within the two year period and the five year period was inapplicable. 

Country Line Nurseries & Landscaping, Inc. v. Michael Collins, 2020 IL App (1st) 200615

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

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

Statute of Limitations Dooms Malpractice Claim Because Adverse Court Decision Educated Plaintiff About Counsel’s Error

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In this unpublished opinion, the Fifth District affirmed the dismissal of a legal malpractice claim on statute of limitations grounds. The court held that the plaintiff/condominium owner knew of improper advice by the condominium association’s attorney when a court held that the attorney’s advice regarding a special assessment was incorrect.

Sunil Sekhri v. Chuhak & Tecson, P.C., K. Shaylan Baldwin, David Bloomberg, and James R. Stevens, 2020 IL App (1st) 192494-U, July 31, 2020

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

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.)

 

CLO’s Wage Arbitration Did Not Bar Employer’s Malpractice Suit Under Res Judicata

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Richard Fisher (“Fisher”) was the Chief Legal Officer for UFT Commercial Finance, LLC (“UFT”).  UFT’s CEO was Joanne Marlowe (“Marlowe”) (together with UFT, “the Plaintiffs”).  As CLO, Fisher allegedly advised the Plaintiffs they did not need directors and officers insurance (“D&O Insurance”) and that such insurance would not protect Marlowe from personal liability should the company lose a wage claim or something similar.  Fisher also drafted employment agreements for UFT, some of which included supplements with accrual and deferment provisions.  He also drafted and executed his own agreement.  During Fisher’s third year as CLO, Marlowe told Fisher his employment would not be extended and Fisher resigned. Fisher then initiated arbitration proceedings against UFT and Marlowe for wages owed.  The arbitrator found the Plaintiffs jointly and severally liable to Fisher, with UFT individually liable for an additional sum.  In response, the Plaintiffs sued Fisher for professional negligence in that he, among other things, failed to fully and properly advise them of the legal consequences of the employment agreements and arbitration clauses, failed to advise them of the conflict of interest he had in executing his own agreement, and wrongly discouraged their purchase of D&O insurance.  Fisher moved for dismissal and sanctions.

Fisher first argued that the earlier arbitration award barred the Plaintiffs’ action under res judicata.  The Court disagreed, explaining that the arbitration concerned whether Fisher was entitled to wages while the instant case concerned whether Fisher was negligent in giving, or failing to give, legal advice.  The court also did not agree that the majority of the Plaintiffs’ claims were time-barred by the two-year statute of limitations for legal malpractice since the Plaintiffs “could not have reasonably known that they were injured until they lost the arbitration.”  Id. at 5.  Nevertheless, allegations of negligence related to Fisher’s employment agreement were still barred by the six-year statute of repose for legal malpractice because UFT and Marlowe filed suit more than six years after it was executed.  The Court also held that Fisher did not owe a duty to Marlowe since “[a]n attorney for an organization owes a duty to the organization, and not its individual shareholders, officers, or directors” unless that individual is an intended third-party beneficiary.  Id. at 6.  Moreover, the Court agreed that the Plaintiffs failed to establish proximate causation as to their use of supplemental employment agreements, not acquiring D&O Insurance, and not retaining independent counsel. Regarding employment agreements, the Court held that the Plaintiffs failed to allege damages from the agreements with employees other than Fisher himself.  However, the Court denied Fisher’s motion for sanctions.  It explained that it did “not believe that the claims brought by Plaintiffs are wholly baseless or frivolous” or that “this suit was brought for the sole purpose of harassing and embarrassing Fisher.”  Id. at 8.

UFT Commercial Fin., LLC v. Fisher, No. 19 C 7669; 2020 WL 2513097 (N.D. Ill. May 15, 2020)

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

 

 

 

Defendant May File Untimely Counterclaim if Plaintiff’s Claim Arose Before Counterclaim Was Barred

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Paul Abramson (“Abramson”) had hired attorney Alisa Levin of Levin Law, Ltd. (together “Levin”) in October, 2015, but terminated Levin after a dispute arose over the amounts billed.  In March, 2017, Abramson published a scathing review on Levin Law’s Yelp profile.  Levin published a response and sued Abramson for defamation and false light invasion of privacy.  Abramson then counterclaimed for legal malpractice, breach of fiduciary duty, and defamation. Levin moved to dismiss Abramson’s counterclaims.  Id. at 1.

Levin argued that Abramson’s counterclaims were time-barred and failed to state a claim. The Court disagreed as to timeliness, citing  735 ILCS 5/13-207, which “specifically states that the defendant in a lawsuit is permitted to bring a counterclaim that would otherwise be barred by the statute of limitations” provided the plaintiff’s claim arose “before the cause of action brought as a counterclaim was barred.”  Id. at 4.  With respect to Abramson’s claims for legal malpractice and breach of fiduciary duty, the Court held that even if their accrual had begun in December, 2015 when Levin’s representation of Abramson ended, the two-year statute of limitations for claims arising out of the provision of legal services would not have ended until December, 2017.  However, Levin’s claims arose when the Yelp review went up in March, 2017 and so were timely.  Id. at 5.  The court reached the same conclusion as to Abramson’s defamation claim.  Id. at 4.

Though not time-barred, the Court did conclude that Abramson had failed to state claims for legal malpractice and breach of fiduciary duty.  Specifically, Abramson’s claim for legal malpractice did “not explain how he lost the case or why Levin’s actions caused him to lose” nor did it explain how he “would have prevailed on the underlying claim in the absence of [Levin’s] missteps.”  Id. at 12.  His claim for breach of fiduciary duty likewise “fail[ed] to plausibly allege that this breach proximately caused any injury.”  Id. at 13.

Levin v. Abramson, No. 18-cv-1723, 2020 WL 2494649 (N.D. Ill. May 13, 2020)

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

Failure to Return Clients’ Documents Covered by Two-Year Statute of Limitations

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The law firm Deer, Stone & Maya (“DSM”) represented Carlos Rocha and Arize 11, Inc. (together “Plaintiffs”) in various matters related to their business with FedEx.  Id. at ¶13. Plaintiffs sued DSM for conversion, among other things, claiming that DSM failed to return certain legal files to them.  Id. at ¶79.  DSM moved to dismiss this claim as untimely, and the motion was granted.

On appeal, DSM maintained that the conversion claim was governed by the two-year statute of limitations for acts or omissions in performance of professional legal services. Id. at ¶82.  The appellate court agreed, citing various allegations in the complaint such as when the plaintiffs “made repeated demands of DSM for the sale agreement and other documents […] and neither Deer nor Stone complied.”  Id.  Moreover, the plaintiffs’ brief described the conversion count as “aris[ing] solely from the DSM Defendants’ assumption of unauthorized control and dominion over undisbursed amounts deposited in DSM’s client trust account for Plaintiffs and Plaintiffs’ legal files and other documents never returned on account of DSM’s unsubstantiated claim for fees.”  Id., (emphasis added by court).

As for whether the statute of limitations had passed, the court noted that the allegations in the plaintiffs’ conversion count were similar to the allegations in a termination letter Rocha sent to Jeffrey Deer of DSM in May, 2012.  Id. at ¶85.  Thus, “the statute of limitations period against the DSM defendants commenced at the latest in May 2012, when Rocha sent the termination letter.”  Id.  Plaintiffs countered that the statute of limitations should have tolled in this matter due to their need for discovery, but they cited no case law supporting this assertion.  Id. at ¶86.  Consequently, the argument was forfeited.

Rocha v. FedEx Corp., 2020 IL App (1st) 190041

(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.)

Illinois Appellate Court Reverses Summary Judgment Based on Statute of Limitations

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The First District reversed the trial court’s grant of summary judgment in a legal malpractice case that had been based on the statute of limitations and statute of repose.

Clients sued their lawyers for legal malpractice in connection with advice related to litigation regarding the propriety of a mortgage lien on their residence.   Allegedly, poor advice led the clients to reject settlement offers, and they were injured when an adverse judgment was entered against them. 

The lawyers moved for summary judgment.  The trial court found that clients had been injured when they entered into a forbearance agreement in 2009 and that they  learned of the alleged malpractice in February 2012 when the learned that a lien had been recorded on their residence.  Therefore, their August 2016 complaint was barred by the two year statute of limitations.  Alternatively, the court held that the six year statute of repose barred the action because the negligence occurred in 2009.  The Appellate Court reversed.  It found that plaintiffs’ claims did not accrue in 2012, when they became aware of the mortgage lien, but in 2015, when an adverse judgment was entered against them.  The Court further held that the statue of repose was triggered in 2012, not 2009, by lawyers efforts to remove the lien commenced.   The Court held that, even if the statute of repose began to run in 2009, it was equitably tolled by the lawyers’ conduct.  In particular, the lawyers reassured the plaintiffs “at every turn” that their position was correct.

Louis Hermansen and Cheryl Hermansen v. James J. Riebandt, Lee F. DeWald, Lester A. Ottenheimer, III, 2020 IL App. (1st) 191735, September 30, 2020

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

Attorney’s Omissions or Inaction May Constitute Fraudulent Concealment

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Robert Brandolino (“Brandolino”) retained Douglas Schlak (“Schlak”) to assist him in a real estate sale.  Brandolino held a life estate in the property to be sold, while his three sons (the “Plaintiffs”) held remainder interests.  The Plaintiffs granted Schlak power of attorney so that he could represent them and their father in the transaction .  When the sale was concluded, Brandolino gave each son $100,000, which they believed was a gift for their help in facilitating the sale.  Thirteen years later, however, the Plaintiffs discovered previously unknown papers in Brandolino’s home explaining their true interest in the property.  These included several documents signed by Schlak on the Plaintiffs’ behalf without their knowledge or consent, tax and closing forms, and papers explaining that Brandolino’s supposed gift to the Plaintiffs was actually payment for their interest in the property.

The Plaintiffs sued Schlak for legal malpractice.  They alleged that Schlak never explained their interests to them or advised them to seek separate counsel given the possible conflict with Brandolino’s interests.  Rather Schlak purportedly induced them not to attend the closing, signed documents on their behalf without permission, failed to deliver various documents to them after the sale, and otherwise intentionally withheld material information.  Had they been properly counseled, the Plaintiffs insisted they would have demanded more money for their remainder interests.

Schlak moved to dismiss the Plaintiffs’ complaint as untimely, since it had been filed more than thirteen years after his alleged malpractice.  At hearing, the Court explained that “in Illinois, a statute of repose provides that legal malpractice claims ‘may not be commenced in any event more than 6 years after the date on which the act or omission occurred.’” Id. at 2, 735 ILCS 5/13-214.3(c).  However, the Court noted that fraudulent concealment tolls the statute of repose “until the plaintiff has had a reasonable opportunity to discover the malpractice.”  Id. at 3, 735 ILCS 5/13-215.  Here, the Plaintiffs argued that Schlak’s deliberate failure to provide them with material information relating to the property sale constituted fraudulent concealment, which tolled the statute of repose until they uncovered the fraud many years later.  Schlak countered that fraudulent concealment requires “affirmative actions, as opposed to mere silence.”  Id.  The Court conceded that Schlak’s position is generally correct, except where two parties maintain a special relationship like that of an attorney and client.  In this case, the Court held that discovery could reveal Schlak’s actions or lack thereof amounted to fraudulent concealment that prevented the Plaintiffs from discovering their claim.  Schlak’s motion to dismiss was therefore denied.

Brandolino v. Schlak, No. 19-CV-00102, 2019 WL 3287891 (N.D. Ill. July 22, 2019)

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