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.)

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.)

Nothing Is Not a Plan: District Court Holds Doing Nothing Does Not Involve Judgment, Strategy, or Tactics

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Michael Cadena retained attorney Helen Ogar to represent him in a child custody dispute.  Cadena won custody of his minor son, and was encouraged by the Department of Children and Family Services to relocate for the child’s safety.  Cadena e-mailed Ogar repeatedly asking if there were any legal barriers to him moving to another state with his son.  Ogar did not respond substantively.  After Cadena moved to Massachusetts, he was arrested and jailed.  He also lost custody of his son.  Cadena, now a citizen of Massachusetts, sued Ogar and her law firm in federal court based upon diversity jurisdiction.

The defendants moved to dismiss, arguing that the domestic relations exception to federal diversity jurisdiction barred Cadena’s lawsuit from federal court.  The court denied the motion, explaining that Cadena was “suing his lawyer for malpractice pursuant to lack of advice on whether or not he could cross state lines… an independent civil action.”  Id.  at 2.

Ogar and her firm also moved to dismiss for failure to state a claim.  They alleged that Cadena did not explain how counsel’s deficient performance did not involve an exercise of judgment, strategy, or trial tactics as required in Person v. Behnke, 242 Ill. App. 3d 933, 940 (4th Dist. 1993), which required such an allegation in a legal malpractice action arising out of allegedly deficient advice in a child custody case.  The court disagreed, and held that while Cadena “failed to expressly plead” that the alleged malpractice did not involve judgment,  his assertion that the defendants did “nothing” implicitly pleaded as much.  Id.  Ogar did find success in arguing that Cadena was not entitled to damages for emotional distress or loss of normal life.  There, the court held that “legal malpractice is not sufficient basis to support damages for emotional distress,” even in custody cases.  Id. at 3.  Regarding loss of normal life, the court held that such damages “belong almost universally to the realm of personal injury cases.”  Id.

Cadena v. Ogar, No. 19-CV-01092, 2019 WL 3325787 (C.D. Ill. July 24, 2019)

(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.)

Jamison v. Goldman, 2018 IL App (1st) 173168-U

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Ismaaeel Jamison (“Ismaaeel”) assaulted multiple passengers on a Chicago city bus.  When police arrived, officers shot and tazed Ismaaeel before arresting him.  The next month, Gloria Jamison (“Gloria”), Ismaaeel’s mother, hired attorney Steven Goldman (“Goldman”) as defense counsel for the criminal charges against her son.  She alleged Goldman also agreed to handle Ismaaeel’s planned civil suit against the city for use of excessive force.  In the meantime, Goldman and one of his employees allegedly assured Ismaaeel and Gloria that they had two years in which to file.  However, this was only true with respect to a federal claim for deprivation of rights.  A “distinctly separate” state tort claim against the City must be filed within one year. Id. at ¶20.

Nearly two years later, no civil suit having been filed, Gloria asked attorney Michelle Gonzalez (“Gonzalez”) to file a civil lawsuit against the city on Ismaaeel’s behalf.   Gonzalez did so, but failed to appear for two consecutive status hearings, resulting in dismissal for want of prosecution.  By then the statute of limitations for Ismaaeel’s federal claim had expired as well, and Ismaaeel never filed a motion to vacate the dismissal.  Rather, he sued Goldman for malpractice for not filing a civil complaint.  Goldman moved successfully for summary judgment, denying that he agreed to represent Ismaaeel in the civil suit, and that Ismaaeel “could not show any damages from this alleged malpractice because Gonzalez’s failure to pursue the §1983 case operates as a superseding cause.”  Id. at ¶9.

The Appellate Court reversed, holding that Ismaaeel had presented sufficient evidence to create a question of damages insofar as he “lost his respondeat superior cause of action against the City… because Goldman did not file the complaint within one year of the incident” and “might have recovered damages… on a different cause of action” as well.  Id. at ¶20.  Moreover, “Gloria’s corroborated testimony sufficiently creates a material issue of fact as to whether Goldman ever agreed to file a civil complaint against the City on Ismaaeel’s behalf.”  Id. at ¶23.  “Even if the trier of fact finds that Goldman did not agree to file the civil complaint,” the Appellate Court added, “Goldman could still bear liability for misinforming his client that he had two years to file his civil claim, where tort claims against the City must be filed not later than one year after the date of injury.”  Id.

Jamison v. Goldman, 2018 IL App (1st) 173168-U

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