Statute of Limitations/Repose

Knowledge of Injury Governs a Statute of Limitations, not Knowledge of a Claim

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Jeffrey Mandalis (“Mandalis”) sued his former attorneys, David Wentzel and Scott Blake (the “Defendants”), claiming they negligently and fraudulently misrepresented the terms of a settlement agreement in a dispute between several members of Mandalis’ family concerning ownership of certain assets.  He also alleged that the Defendants failed to disclose their potentially conflicting representation of his aunt in the same matter, and that they did not inform him when they mediated the family dispute.  Further, allegedly without Mandalis’ knowledge, Blake initialed a settlement term sheet that included all of Mandalis’ rights and claims.  When Mandalis confronted the Defendants, they supposedly misrepresented the nature of the settlement, saying some of his relatives had agreed to settle only as to their interests, and that he would receive his share of the assets later.

Subsequent mediations were inconclusive, so the Defendants asked Mandalis to agree to a binding mediation- arbitration on October 13, 2013.  On October 24, 2013, the Defendants finally informed Mandalis that he should seek separate counsel.  Mandalis did so within three days, but alleged that the Defendants continued to mislead him as to his interest in the family assets until eight days before the November 27, 2013 closing date.  Despite all, Mandalis attended the closing and signed the closing documents for fear that that further dispute would diminish his share of the assets.  He filed his initial complaint in December 2015.  The Defendants moved to dismiss his suit as untimely per the two-year statute of limitations and for failure to allege sufficient facts to support his causes of action.  The trial court granted the motion.  Mandalis moved to reconsider, and appealed when his motion was denied.

The First District affirmed, stating that statutes of limitations do “not require that the injured party have actual knowledge of the alleged malpractice.”  Id. at ¶ 43.  Rather, “knowledge that an injury has been wrongfully caused does not mean knowledge of a specific defendant’s negligent conduct or knowledge of the existence of a cause of action.”  Id.  The First District highlighted that “there can be no doubt that the plaintiff actually knew of his injury in March 2013, such that the filing of his complaint against the defendants in December 2015, was barred by the two-year statute of limitations.”  Id. at ¶ 47.  It clarified that Mandalis “was not only in possession of sufficient information about his injury to be placed on inquiry to determine whether actionable conduct was involved, but in fact had actual knowledge of both the injury and the cause of that injury in March 2013.”  Id.   Nevertheless, it went on, “[i]f the plaintiff did not actually know of his injury after the March mediation settlement, in the very least, he certainly should have known of it after the entry of the October 13, 2013, binding arbitration award enforcing that settlement.”  Id. at ¶ 48.  Mandalis countered that, even if he was injured in October 2013, the Defendants tolled the statute of limitations by fraudulently concealing their misconduct.  In particular, he claimed the Defendants reassured him that his stated goals remained viable.  The First District rejected this argument too.  “Contrary to the plaintiff’s position,” it explained, “he nowhere alleged that the defendants failed to disclose any material facts to him.”  Id. at ¶ 56.  It also pointed out that “the plaintiff admitted that he subsequently participated in the binding arbitration knowing full well that the arbitration award would enforce the terms of that term sheet.”  Id.

Mandalis v. Wentzel, 2019 IL App (1st) 180455-U, opinion corrected and superseded, 2019 IL App (1st) 18-0455-U

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

 

Clients Need Not Seek a Second Opinion on their Attorney’s Strategy

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Attorney William Kohn (“Kohn”) represented Dr. Veerasikku Bommiasamy (“Bommiasamy”) in an employment matter.  Two of the defendants in that matter moved for summary judgment on various counts of the complaint, but Kohn missed the deadline to file Bommiasamy’s response.  The circuit court granted Kohn an extension.  The next day, Kohn filed a motion for leave to respond instanter and to reset the briefing and hearing dates.  The motion was denied, and summary judgment was granted after oral arguments in March, 2013.  Kohn appealed, and sought multiple extensions of time to file the record on appeal.  He then sought two extensions to file his brief, but then failed to file it at all.  Consequently, Bommiasamy’s appeal was dismissed for want of prosecution in December, 2014.

Bommiasamy sued Kohn for breach of contract and professional negligence in February, 2017.  Kohn, after receiving another extension, moved to dismiss.  He argued that since the underlying case had been dismissed four years earlier, Bommiasamy’s complaint against him was barred by Illinois’ two-year statute of limitations for legal malpractice claims.  735 ILCS 5/13-214.3(b).  Kohn’s motion was granted, and Bommiasamy appealed.

The First District reversed, holding that “the actions of Mr. Kohn in personally appealing the circuit court’s decision, seeking numerous extensions, and failing to file an appellate brief culminating in a dismissal of the appeal, estop any reliance by Mr. Kohn on the date that the circuit court entered the summary judgment order as the start of the limitations period.”  Id. at ¶28.  “To rule otherwise” it explained, “would force a client in Dr. Bommiasamy’s position to seek a second opinion regarding the legal strategy of the underlying case, which is unreasonable.”  Id.  Kohn argued in the alternative that Bommiasamy’s complaint was still untimely because it was filed more than two years after the appellate court affirmed dismissal of the underlying case.  The First District disagreed on this point as well.  It held that, per the discovery rule, “Bommiasamy’s affidavit contains sufficient facts to raise a factual question on whether the late discovery of the appellate court’s ruling tolled the statute of limitations.”  Id. at ¶32.  Among these facts were that “Kohn did not communicate the progress of the appeal, the failure to file a brief, or the dismissal of the case.”  Id.

Bommiasamy v. Kohn, 2019 IL App (1st) 172445-U – First District, First Division

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

Firing One Attorney and Seeking Counsel from Another Strongly Suggests a Client is Aware of His Injuries

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William Moser (“Moser”) retained Joseph Phelps of Rinella & Rinella, LTD (the “Defendants”) to represent him in the dissolution of his marriage.  He executed a settlement agreement on October 26, 2006.   On May 3, 2016, Moser sued the Defendants for legal malpractice.  He alleged that the Defendants lied to him in order to make him sign the settlement agreement.  Moser testified at his deposition a year later that he felt “in August of 2013 that they had ignored issues in the case” and “basically misrepresented… what was going on.”   Id. at ¶10.  Further questioning established that Moser knew of the Defendants’ alleged malpractice by February, 2014 and that the latest harm he suffered occurred in March, 2014 when he was forced to pay his ex-wife’s attorney’s fees.

The Defendants moved for summary judgment, asserting Moser’s claims were time-barred by Illinois’ two-year statute of limitations for legal malpractice actions.  735 ILCS 5/13-214.3(b).  Their motion cited specific portions of Moser’s testimony wherein he “admitted to being fully aware of each of defendants’ alleged acts of negligence and resulting damages more than two years’ prior to the filing of his complaint” and an August, 2013 e-mail he had sent firing them “for cause.”  Id. at ¶¶11-12.  Moser countered that the issue was one for a jury, but the Court granted the motion given Moser’s explicit admissions in the record.

The First District affirmed, explaining that “the limitations period commences when the plaintiff is injured, rather than when the plaintiff realizes the consequences of the injury or the full extent of her injuries.”  Id. at ¶26.  Moser countered that the Defendants had fraudulently concealed their actions with reassurances that they were doing everything correctly, thereby delaying Moser’s discovery and pursuit of his claim and tolling the statute of limitations.  But Moser had not presented any specific material misrepresenta-tions or omissions by the Defendants, and the First District found it “hard to imagine how plaintiff could have been lulled by defendants into not filing a claim when plaintiff was already in touch with another law firm when he fired defendants” in August, 2013.  Id. at ¶43.

Moser v. Phelps, 2019 IL App (1st) 180852-U

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

Injury Starts the Limitations Period, Not Malpractice

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Mansour Nasrabadi (“Nasrabadi”) hired attorney Taher Kameli (“Kameli”) to represent him throughout the EB 5 visa process; a program by which a foreign national may obtain permanent U.S. residency upon investing at least $500,000 in a qualifying enterprise.  Kameli advised Nasrabadi that investing in the Aurora Fund (the “Fund”), which Kameli owned, would satisfy EB 5 requirements.  He explained that the Fund would lend the money to another entity for the construction of an assisted living facility and that Nasrabadi would have a first priority security interest in the facility’s assets and real estate.  Nasrabadi agreed, signed a conflict waiver, and gave $500,000 to the Fund by a transaction in which Kameli also represented him.

Nasrabadi later sued for malpractice and breach of fiduciary duty, alleging that Kameli never acquired the promised security interest for his money and that Kameli failed to inform Nasrabadi that his conflicts were unwaivable.  Rather, Nasrabadi claimed that Kameli kept his money for personal use and secured a separate first priority mortgage loan to finance the facility.  Thus, when the bank holding Kameli’s and the Fund’s first priority loan foreclosed, it had priority over Nasrabadi’s interest.

Kameli moved to dismiss Nasrabadi’s claim for malpractice for being duplicative and untimely.  On the matter of duplicity, Kameli cited the rule that “when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury, the later claim should be dismissed.”  Id. at 3.  The Court did not hold that such a rule applied here as it was “not clear at this point in the proceedings whether Kameli’s alleged failure to secure priority for the Fund’s loan to the Facility… can be said to be within the scope of his representation of Nasrabadi.”  Id. at 3.

Regarding timeliness, Kameli’s arguments failed as well.  There, he asserted that Nasrabadi’s claims were based on the engagement letter signed eight years ago, well outside Illinois’ two-year statute of limitations and six-year statute of repose for legal malpractice.  735 ILCS 5/13-214.3(b); 735 ILCS 5/13-214.3(c).  The Court disagreed, stating that “the injury in a legal malpractice action is not the attorney’s negligent act itself” but “the loss for which a client may seek monetary damages.”  Id. at 4.  However, the alleged injury in this case was the loss of Nasrabadi’s investment, not the signing of the engagement letter.  Nasrabadi did not plead facts establishing precisely when that loss took place, but a complaint “does not have to anticipate” the affirmative defense of timeliness.  Id.  “As long as the Court can imagine a scenario in which the claim is timely,” the Court explained, “it is improper to dismiss it on the pleadings.”  Id.

Nasrabadi v. Kameli , No. 18 C 8514, 2019 WL 2173791 (N.D. Ill. May 20, 2019)

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

 

Firing One Attorney and Seeking Counsel from Another Strongly Suggests a Client is Aware of His Injuries

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William Moser (“Moser”) retained Joseph Phelps of Rinella & Rinella, LTD (the “Defendants”) to represent him in the dissolution of his marriage.  He executed a settlement agreement on October 26, 2006.  On May 3, 2016, Moser sued the Defendants for legal malpractice.  He alleged that the Defendants lied to him in order to make him sign the settlement agreement.  Moser testified at his deposition a year later that he felt “in August of 2013 that they had ignored issues in the case” and “basically misrepresented… what was going on.”  Id. at ¶10.  Further questioning established that Moser knew of the Defendants’ alleged malpractice by February, 2014 and that the latest harm he suffered occurred in March, 2014 when he was forced to pay his ex-wife’s attorney’s fees.

The Defendants moved for summary judgment, asserting Moser’s claims were time-barred by Illinois’ two-year statute of limitations for legal malpractice actions.  735 ILCS 5/13-214.3(b).  Their motion cited specific portions of Moser’s testimony wherein he “admitted to being fully aware of each of defendants’ alleged acts of negligence and resulting damages more than two years’ prior to the filing of his complaint” and an August, 2013 e-mail he had sent firing them “for cause.”  Id. at ¶¶11-12.  Moser countered that the issue was one for a jury, but the Court granted the motion given Moser’s explicit admissions in the record.

The First District affirmed, explaining that “the limitations period commences when the plaintiff is injured, rather than when the plaintiff realizes the consequences of the injury or the full extent of her injuries.”  Id. at ¶26.  Moser countered that the Defendants had fraudulently concealed their actions with reassurances that they were doing everything correctly, thereby delaying Moser’s discovery and pursuit of his claim and tolling the statute of limitations.  But Moser had not presented any specific material misrepresentations or omissions by the Defendants, and the First District found it “hard to imagine how plaintiff could have been lulled by defendants into not filing a claim when plaintiff was already in touch with another law firm when he fired defendants” in August, 2013. Id. at ¶43.

Moser v. Phelps, 2019 IL App (1st) 180852-U

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

Settling Questions Before Settling an Estate

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Francisco Contreras and his wife, Sandra, hired Fluxgold & Baron, P.C. (“Fluxgold”) to represent them in a lawsuit against a hospital and its staff.  The matter settled for $18.75 million.  Francisco then hired Waterville Advisors, LLC (“Waterville”) to help him purchase four annuities for himself using approximately one-third of the settlement money.  Waterville prepared an annuitant checklist for Francisco, who input his personal information, but failed to designate a beneficiary.  Waterville notified Fluxgold, and received a new signed checklist with Sandra designated the primary beneficiary, and her and Francisco’s minor daughter the secondary.  When Francisco died intestate two years later, Sandra was appointed representative of his estate.

Francisco’s three adult sons from a previous relationship filed a petition for citation to recover assets in the probate court, arguing that Sandra had exercised undue influence over Francisco to insert herself and her daughter as beneficiaries of the annuities, rather than no one.  The court converted Sandra’s role from an independent to a supervised administrator, at which Francisco’s sons moved to have Sandra’s position terminated entirely.  Francisco’s sons sued Fluxgold and its employees as well, insisting that Fluxgold and several employees were negligent and breached their duty to Francisco, his estate, and heirs by permitting Sandra to exercise her influence over Francisco and failing to use reasonable care and diligence.  Fluxgold successfully moved to dismiss, citing the statute of repose for actions against attorneys where the injury does not occur until the death of the person for whom the legal services were rendered (735 ILCS 5/13-214.3(d)).

On appeal, the First District held that “this cause most certainly falls within the auspices of section 13214.3(d),” but that questions still remained which precluded its application.  Id. at ¶46.  Specifically, facts had not yet been established as to “whether plaintiffs’ legal malpractice action against defendants was commenced ‘within the time for filing claims against the estate’ as provided in the Probate Act via incorporation by section 13-214.3(d).”  Id. at ¶68.  This was due in part to Sandra’s as yet undetermined status as a supervised administrator.  Were she to be removed, it would “directly impact when plaintiffs were required to file their claim.”  Id. at ¶74.  Also, proper publication and notice to the creditors of Francisco’s estate still needed to be accomplished.  Doing so could “restart the clock” for filing claims against the estate.  Id.  In light of so many open issues, the First District reversed and remanded, holding that the trial court lacked the “reasonable certainty” necessary for dismissal.  ¶78.

Estate of Contreras by Contreras v. Fluxgold, 2019 IL App (1st) 172916-U

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

 

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.)