Statute of Limitations/Repose

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.)

 

Nature of Act or Omission Determines what Statutes of Limitations and Repose to Apply Against an Attorney

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Partners for Payment Relief DE IV, LLC (“PPR”), as an assignee of a mortgagee, filed a complaint to foreclose against the mortgagor, John Daily (“Daily”), for lack of payment on a second mortgage.  Three months later, Daily sued his former attorneys, Barash & Everett, LLC (“Barash”) and Clinton A. Block (“Block”), who had represented him during Chapter 13 bankruptcy proceedings years before, for implied indemnity.  He alleged that they had advised Daily that this second mortgage would be “stripped off or avoided” in his bankruptcy.   Id. at ¶4.  This, Daily asserted, constituted professional negligence in that the Barash and Block failed to provide Daily with competent legal advice, and failed to timely seek a discharge of the second mortgage.  Barash and Block moved to dismiss Daily’s complaint as untimely under Illinois’ statutes of limitations and repose.  The trial court granted the motion with prejudice, finding that the claim was barred by both the statute of limitations and repose.

On appeal, the Third District addressed Daily’s argument that a legal malpractice action brought in an indemnity action should be governed by the limitations period in 735 ILCS 5/13-204 (Contribution and indemnity) rather than 735 ILCS 5/13-214.3(c) (Attorneys).  Citing the Illinois Supreme Court, it stated that “13-214.3 of the Code unambiguously applies to all claims brought against an attorney arising out of actions or omissions in the performance of professional services.”  Id. ¶11.  This was because “pursuant to the express language of section 214.3 of the Code, it is the nature of the act or omission, rather than the identity of the plaintiff, that determines whether the statute applies to a claim brought against an attorney.”  Id.   Here, the claims against Barash and Block, though stated as an implied indemnity action, were all claims against attorneys arising out of actions or omissions in the performance of professional services.  Thus, the Court held that “section 13-214.3 of the Code governs the action, rather than the general contribution an indemnity statue.”  Id. at ¶12.

Partners for Payment Relief DE IV, LLC v. Daily, 2019 IL App (3d) 170757, 128 N.E.3d 444

(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.)

 

Neuman v. Gaffney, 2018 IL App (2d) 180184-U

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In September 1997, a Federal District Court ruled partially in favor of a class of plaintiffs against the State of Illinois for hiring discrimination, although the ruling did not address back pay or other pay relief.  In April 1999, attorney John Gaffney (“Gaffney”) filed a putative class action against the State of Illinois for back pay on behalf of John Mittvick (“Mittvick”) and Edward Urban as plaintiffs and class representatives.  The State moved to dismiss without prejudice, asserting the plaintiffs had failed to timely file charges of discrimination with the Equal Employment Opportunity Commission.  Before that motion could be granted, Gaffney filed his own motion to dismiss without prejudice, which was granted.  Gaffney notified his clients of this by letter, telling them he could no longer represent them and that they should join another class action on this matter already in progress.

Nearly sixteen years later, Robert Neuman (“Neuman”) filed a petition to intervene in the 1999 case, having supposedly just learned of it.  He claimed that he was an absent class member in the 1997 and 1999 cases, and that the 1999 case had not been validly dismissed.  The District Court dismissed Neuman’s petition, holding that dismissal of the 1999 case was valid.  Neuman appealed, but lost when the Seventh Circuit held that he “was already aware of a possible case in 2001 and that a diligent person would have investigated.”  Id. at ¶9.  Neuman then sued Gaffney for legal malpractice, alleging Gaffney had breached his fiduciary duty to notify unknown and unnamed absent class members prior to dismissal of the 1999 suit.  Gaffney successfully moved to dismiss because the six-year statute of repose for legal malpractice claims in Illinois had already lapsed.

On appeal, Neuman argued that the statute of repose should not have been applied because Gaffney had fraudulently concealed important information like the fact that the 1999 case had been voluntarily dismissed, which caused Mittvick not to pursue it further. This alleged concealment, he argued, would toll the statute of repose.  However, the appellate court held that whether or not Gaffney specified to Mittvick that his case had been dismissed voluntarily made no difference.  After reviewing Gaffney’s letter to Mittvick, the Court declared, “there is no indication that he attempted to conceal anything relevant from Mittvick.  He told Mittvick that the complaint had been dismissed and that Mittvick would have to seek a new attorney going forward.”  Id. at ¶22.  Despite Neuman’s insistence that Gaffney’s letter contained misrepresentations, the Court held that “such misrepresentations, even fraudulent ones, are not equivalent to acts of fraudulent concealment.”  Id.

Neuman v. Gaffney, 2018 IL App (2d) 180184-U

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

Doyle v. Hood, 2018 IL App (2d) 171041

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Harry Doyle retained the defendants, attorney Thomas Hood and Thomas B. Hood Law Offices, P.C., to prepare his will and a revocable living trust for his disabled wife, Patricia.  The living trust established a supplemental trust, with Patricia as its bene-ficiary.  Harry executed the necessary documents in December 2011.  Upon Harry’s death in January 2012, his son, Michael, became executor of his will and trustee of both trusts.  In late 2013, Patricia was admitted to a long-term-care facility.  Six months after that, an application for long-term benefits was filed on her behalf before the Department of Human Services.  The DHS subtracted a $2,000.00 asset allowance from the supple-mental trust, and imposed a spend-down of the remaining funds.  An appeal was filed on Patricia’s behalf, but the DHS found instead that a considerably higher penalty was owed.

Michael, as trustee, sued the defendants for professional negligence in May 2017.  He alleged that no penalty would have been assessed if the defendants had created the trust from Harry’s will instead of the living trust.  The defendants moved to dismiss, arguing that the claim was time-barred because it was filed more than two years after Harry’s death.  The trial court granted the motion, and Michael appealed.  The appellate court agreed with the defendants that the two-year statute of limitations applied, since the injury in this case occurred “when the Supplemental Trust could no longer be amended or revoked and was actually funded, both of which occurred upon Harry’s death.”   Id. at ¶ 28; (“When the injury caused by the act or omission does not occur until the death of the person for whom the professional services were rendered, the action may be com-menced within 2 years after the date of the person’s death…”), 735 ILCS 5/13-214(d).  The appellate court clarified that this exception “’applies instead of […] the six-year statute of repose.’”  Id. at ¶ 22, citing Wackrow v. Niemi, 231 Ill. 2d 418, 427 (2008).

Doyle v. Hood, 2018 IL App (2d) 171041

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

Arjmand v. Mirabelli, 2017 IL App (1st) 162225-U

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In this unpublished opinion, the First District affirmed the dismissal of a malpractice claim on statute of limitations grounds. The court rejected the plaintiff’s argument that defendants were equitably estopped from raising a statute of limitations defense because defendants told plaintiff that their strategy was correct finding that the defendants did not knowingly make any false representations. The court held that a trial court order vacating a marital settlement agreement damaged the malpractice plaintiff because it imposed costs of further litigation, even though the damages may have been speculative at that time. The court further held that the plaintiff knew of the injury when he received the order.

Arjmand v. Mirabelli, 2017 IL App (1st) 162225-U

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

 

 

Barefoot Architect , Inc. v. Sabo & Zahn, 2017 IL App (1st) 162616-U

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice claim on statute of limitations grounds and a breach of fiduciary duty claim resulting from a bankruptcy case where the plaintiff had hired attorneys other than the defendants to represent in those proceedings. The court held that, ordinarily, a cause of action for malpractice accrues when a court enters an adverse judgment against a malpractice plaintiff. Here, the statute of limitations had run even using the date the appellate court entered an adverse judgment against the plaintiff. The court held that the lawyers’ statements that the court had erred did not establish were insufficient to preclude application of the statute of limitations under theories of fraudulent concealment or equitable estoppel.

Barefoot Architect , Inc. v. Sabo & Zahn, 2017 IL App (1st) 162616-U

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