Statute of Limitations/Repose

Claim Based On Failure To Discover Phony Screen Shot Dismissed on Statute of Limitations Grounds

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Plaintiff alleged that he retained lawyers to conduct due diligence with respect to film investments he was contemplating.   The lawyers allegedly failed to discover that a screen shot of a bank statement provided to prove that others had invested in the film was “phony.”  Plaintiff alleged that this negligence caused him to invest funds that he lost.

The defendant lawyers moved to dismiss and the circuit court granted the motion on statute of limitations grounds. 

The appellate court affirmed dismissal.  The court held that the two year statute of limitations began to run when the plaintiff had enough knowledge to inquire whether it was injured and that the injuries were wrongfully caused.  The court held that there were at least four dates by which plaintiff had such knowledge: when the defendants sent plaintiff an email pointing out the phony screen shot, which necessarily told plaintiff that they had not previously discovered the phony screen shot; when defendants filed two lawsuits on plaintiff’s behalf that described the fraud; and when judgment was entered against the fraudster in one of those suits.  The court rejected plaintiff’s argument that equitable estoppel tolled the statute of limitations for several reasons.  First, the court held that a lawyer has no duty to advise a client that the lawyer may have committed malpractice; second, acts constituting alleged malpractice cannot be the same acts invoked to create equitable estoppel; third, regardless of defendants’ alleged conduct, the plaintiff had sufficient information to know that it had a malpractice claim.

Bill A. Busbice, Jr., an individual, Ollawood Productions, LLC, Ecibsub, LLC v. Troutman Sanders, LLP, Robert E. Browne, Jr., Michael D. Friedman and Paul Gale, 2021 IL App (1st) 200848-U

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

Northern District of Illinois Grants Motion to Dismiss On Statute of Limitations Grounds

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The Northern District of Illinois granted a motion to dismiss a legal malpractice claim on statute of limitations grounds.   The plaintiff alleged that his lawyer negligently failed to advise him that a settlement agreement with his former employer would adversely affect his pension.

The court held that the plaintiff’s malpractice claim accrued when he signed the settlement agreement.  Because that was more than six years before he filed suit, his malpractice claim was barred by the statute of repose.

The court held that because the plaintiff did not allege that the lawyer purposefully misled him or that he could not have discovered the truth, his complaint was not saved by the fraudulent concealment or equitable estoppel doctrines.

William Saunders v. Michael S. Hedrick; 2021 WL 63370

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

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

Third District Reverses Dismissal of Legal Malpractice Claim

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The Third District reversed the dismissal of a legal malpractice claim that the trial court had dismissed on collateral estoppel grounds.  The trial court held that collateral estoppel barred the claim due to the dismissal of a related federal court action.

The appellate court held that because some of the alleged acts of malpractice occurred prior to the plaintiffs consent to certain actions (which was the basis for dismissal in the federal court) collateral estoppel did not bar the action.

The court held that the statute of limitations also did not justify dismissing the action.   When the savings statue (which tolls the statute of limitations while a federal action is pending) was considered, plaintiff adequately alleged that he did not know of the malpractice more than two years prior to filing suit.

David Bielfeldt and Karen Wales v. Lee Graves, Elm One Call Locators, Inc. and Graves Law Offices, P.C.,
2021 IL App (3d) 20118-U

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

Claim Barred By Statute of Repose Despite Alleged Fraudulent Concealment

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In 2019 plaintiff brought a legal malpractice claim against the lawyer who represented her in connection with her divorce, which was finalized in 2013. Plaintiff alleged that, in 2013, she was assured she would receive “permanent” maintenance from her husband. When her husband retired, however, maintenance stopped. Plaintiff alleged that she contacted her lawyer in 2017 and was reassured that her maintenance was permanent. She filed suit in 2019.

The circuit court dismissed on statute of limitations and statute of repose grounds.  The appellate court affirmed.

The court held that the lawyer’s “last act” of representation occurred in 2013, when the allegedly defective marital settlement agreement and divorce judgment were entered. Therefore, the six year statute of repose barred the claim.

The court held that the lawyer’s alleged continuing representation in 2017 did not toll the statute of repose because Illinois does not recognize the continuous representation doctrine. The court held that the lawyer’s alleged fraudulent concealment did not save plaintiff’s claim.   Plaintiff had actual knowledge of her claim in 2017 when another lawyer advised her she may have a claim.   At that time, 14 months remained within the statute of repose.   Because there was a reasonable amount of time left in the limitations period, she would not be give the benefit of the five year fraudulent concealment statute.

Christine Dema v. Corine O’Hara and Shuflit & O’Hara, 2021 IL App (1st) 201003-U

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

First District Reverses Dismissal on Statute of Limitations Grounds

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The First District reversed the dismissal of a legal malpractice claim on statute of limitations grounds.

Plaintiff argued that the law firm that represented his mother failed to properly assess her mental capacity when it helped her change her estate plan at the behest of his brother.  Consequently, when he was appointed her guardian, he had to expend funds to correct the estate plan.

The law firm moved to dismiss on statute of limitations grounds and argued that plaintiff was aware of wrongdoing more than two years prior to filing suit because he knew of his brother’s alleged undue influence.  The court held that there was an issue of fact whether plaintiff’s knowledge of his brother’s wrongdoing put him on inquiry notice of the law firm’s wrongdoing.  The court also held that the mother’s claims were tolled while she suffered from a disability, even though her son held her power of attorney, allegedly knew of her claims and could have brought suit on her behalf.

P. Andrew Katz, Individually and as Limited Guardian for the Estate of Alyce K. Newman v. Michael Hartz, Elizabeth Kreasy, and Katten Muchin Rosenman, LLP; 2021 IL App (1st) 200331

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

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.)