Articles Posted in Statute of Limitations Defense

Illinois has a statute of limitations (2 years from discovery) and a statute of repose (6 years from the alleged negligent act by the attorney). In estate planning matters, Illinois also has another provision 735 ILCS 5/13-214.3(d) which governs injuries that occur on the death of the client.

In 2002, LeRoy Voga retained James Nash, an estate planning attorney, to prepare an estate plan, including a trust. LeRoy Voga passed away on September 26, 2006.

In January or February 2009, plaintiffs, Voga’s children, sued on a number of theories, including legal malpractice. Plaintiffs alleged that the trust caused them to incur estate taxes they would not otherwise have incurred. They voluntarily dismissed the case without prejudice, but refiled the case in February 2010. After lengthy proceedings in the trial court, including the filing of two amended complaints, the trial court dismissed the case pursuant to Section 13-214.3(d).

This is the relevant text of the Illinois Statute of Limitations for attorney malpractice:

(b) An action for damages based on tort, contract, or otherwise (i) against an attorney arising out of an act or omission in the performance of professional services or (ii) against a non-attorney employee arising out of an act or omission in the course of his or her employment by an attorney to assist the attorney in performing professional services must be commenced within 2 years from the time the person bringing the action knew or reasonably should have known of the injury for which damages are sought.

(c) Except as provided in subsection (d), an action described in subsection (b) may not be commenced in any event more than 6 years after the date on which the act or omission occurred.

(d) 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 commenced within 2 years after the date of the person’s death unless letters of office are issued or the person’s will is admitted to probate within that 2 year period, in which case the action must be commenced within the time for filing claims against the estate or a petition contesting the validity of the will of the deceased person, whichever is later, as provided in the Probate Act of 1975.”

The trial court held that the purported injury did not occur until the death of Larry Voga. Therefore, "'since the injury did not occur until the death of Larry Voga, the action must have been commenced within 2 year s of his death, unless letter[s] of office were issued. Letters of office were not issued following Voga's death, rendering the suit untimely."

The plaintiffs argued that Section (d) contains the word “may,” which should be permissive rather than mandatory. The Appellate Court disagreed and cited numerous prior cases, including cases decided by the Illinois Supreme Court. According to the court, “may” really means “shall.”

The court was very careful to review all of the confusing cases under subsection (d) of the Section 214. Given the thoughtful discussion of the statute and the review of the prior caselaw, it is a pity that the case is unpublished.

The case is captioned Voga v. Nash, 2014 Il App (2d) 130750-U.

EVANSTON INSURANCE COMPANY v. RISEBOROUGH, Ill: Supreme Court 2014 – Google Scholar.

The Illinois Statute of Repose bars claims against a lawyer arising out of actions that occurred more than six years before the case was filed. In this case, an insurance company (Evanston) sued two lawyers and alleged that the lawyer defendants wrongfully entered into a settlement agreement on behalf of Evanston’s insured.

The lawyer defendants moved to dismissed based upon the Statute of Repose. (735 ILCS 5/13-214.3 (West 2008). The trial court granted the motion, but the Illinois Appellate Court reversed. It held that the statute of repose did not apply because Evanston was not a client of the lawyer defendants.

The Illinois Supreme Court, in turn, reversed and held that the Statute of Repose applies to any claim against a lawyer arising out of the lawyer’s professional services.

The Court explained:

“¶ 19 The appellate court’s conclusion that section 13-214.3 applies only to a claim asserted by a client of the attorney is contrary to the plain language expressed in the statute. There is nothing in section 13-214.3 that requires the plaintiff to be a client of the attorney who rendered the professional services. The statute does not refer to a “client” nor does it place any restrictions on who may bring an action against an attorney. The statute simply provides that an action for damages against an attorney “arising out of an act or omission in the performance of professional services” is subject to the six-year repose period. Thus, under the express language of the statute, it is the nature of the act or omission, rather than the identity of the plaintiff, that determines whether the statute of repose applies to a claim brought against an attorney…

The complaint alleged damages to Evanston based on defendant’s actions in executing the agreement in the absence of Kiferbaum’s authorization. Thus, under the plain, unambiguous language of the statute, Evanston’s claims in its second amended complaint “arose out of” defendants’ actions “in the performance of professional services” on behalf of Kiferbaum, defendants’ client. We hold that the statute of repose in section 13-214.3(c) applies to Evanston’s second amended complaint, which was properly dismissed as time-barred pursuant to the statute.”

This case brings clarity to the law.

One final note. On June 7, 2012, I wrote an article in which I argued that the Appellate Court’s decision was erroneous:

“Comment: This is a highly controversial decision that should be heard by the Illinois Supreme Court.
The opinion should have been published as a matter of course so that those who follow these issues could comment on it.

My view is that the holding of the panel is erroneous.  These lawyers were doing legal work, defending their client from a claim.  They signed an agreement as agents of the client.  Later, the client and the insurance company threw the lawyers under the bus and the insurer brought a claim against them.  Since the lawyers were doing legal work, they are entitled to the protections of the Statute of Repose.  They should be protected and the case should be dismissed.  This is, in my view, an easy case for the Illinois Supreme Court. It cries out for review.”

Edward X. Clinton, Jr.

Cabrera v Collazo 2014 NY Slip Op 00622.

This is an opinion of the New York Supreme Court, Appellate Division. The facts were simple. The attorney missed the applicable statute of limitations and the client’s claim was barred. In such cases, the lawyer is liable for legal malpractice if the client can prove that, but for the attorney’s error, he would have won the underlying case.

Here, the lawyer’s estate raised an unusual defense. The attorney defendant passed away before the statute of limitations on the client’s claim ran. The lawyer’s estate is really making this argument: the lawyer passed away while the client’s claim was still viable, therefore, the client could have chosen another lawyer and filed the claim in timely fashion.

The Court correctly rejected the claim:

“Plaintiff is entitled to the inference that Tanzman died as a result of a chronic, terminal illness that he knew, or should have known, presented the immediate risk that his ability to represent his clients’ interests might be impaired (see Yuko Ito v Suzuki, 57 AD3d 205, 207 [1st Dept 2008]). Here, defendants offered no evidence to elaborate on the cause or circumstances surrounding Tanzman’s death. The submitted certificate of death for Tanzman merely states that Tanzman passed away on October 24, 2010 at Memorial Sloan-Kettering Cancer Center. The record suggests that plaintiff had cancer, and that his death may have been foreseeable, but the nature and duration of his illness cannot be determined from the death certificate and defendants’ other submissions”

In other words, if the attorney died a sudden and unexpected death (think of a heart attack or an accident) the attorney’s estate might be able to raise that as a defense. Then the estate would be correct that the attorney’s failure to file did not cause an injury to the client. Here, where the lawyer had cancer, it was the lawyer’s duty to notify the client that there could be a problem and to obtain successor counsel, if needed. Lawyers have fiduciary duties to the clients – those duties are created to protect clients. Here, the Court is correctly holding that the lawyer who is terminally ill has a duty to tell his clients so they can make other plans.

In sum, this is a thoughtful opinion that considers the issue in some depth and provides guidance for the future.

Edward X. Clinton, Jr.

800 SOUTH WELLS COMMERCIAL, LLC v. HORWOOD MARCUS AND BERK CHARTERED, Ill: Appellate Court, 1st Dist., 4th Div. 2013 – Google Scholar.

Plaintiff alleged that Horwood Marcus & Berk (HMB) aided and abetted a breach of fiduciary duty by Nicholas Gouletas and John Cadden.

Legal malpractice is governed by a two-year statute of limitations in Illinois. 735 ILCS 5/13-214.3(b). Breaches of fiduciary duty are governed by a five-year statute of limitations. The question presented was which statute of limitations applies when a lawyer is alleged to have aided and abetted a breach of fiduciary duty. Plaintiff argued that the two-year statute of limitations only applies in legal malpractice cases. The court, relying on the plain language of Section 13-214.3(b) disagreed because the text of the statute does not refer specifically to legal malpractice claims.

The court reasoned as follows:

¶ 13 The two-year statute of limitations in section 13-214.3(b) of the Code provides that it applies to claims “against an attorney arising out of an act or omission in the performance of professional services.” 735 ILCS 5/13-214.3(b) (West 2010). As there is no language in the statute restricting its application to legal malpractice claims or claims brought by an attorney’s client, the plain language of the statute directs that the two-year limitation applies to all claims against an attorney arising out of acts or omissions in the performance of professional services, and not just legal malpractice claims or claims brought against an attorney by a client. Had the legislature intended to restrict the applicability of the statute of limitations to malpractice claims, it could have explicitly done so in the text of the statute as it did when it prohibited the recovery of punitive damages in legal malpractice cases (735 ILCS 5/2-1115 (West 2010)), but chose not to do so in this instance.”

In so holding, the Appellate Court disagreed with a case decided in the Fourth Appellate District, Ganci v. Blauvelt, 294 Ill. App. 3d 508, 515 (1998).

Steinmetz v. WOLGAMOT, Ill: Appellate Court, 1st Dist., 1st Div. 2013 – Google Scholar.

In 1997, Dr. Steinmetz enrolled in a program known as AEGIS, which the defendants informed him would protect his assets and reduce his tax liabilities. The IRS disagreed and sent Dr. Steinmetz a deficiency notice on December 31, 1999. Years later the doctor sued the promoters of the tax shelter for fraud and his lawyer for legal malpractice.

The trial court granted the lawyer’s motion for summary judgment and the appellate court affirmed. In Illinois, the discovery rule applies. The plaintiff must bring his case within two years of the discovery of the legal malpractice. Here, the plaintiff claimed that he was unaware of the problem for many years (while his tax controversy with the IRS was being resolved). The Court disagreed. It held that the statute of limitations was triggered on December 31, 1999, when he received the Notice of Deficiency from the IRS. Because the doctor did not bring his case until December 2005, his claim was barred.

The appellate court then considered whether the lawsuit was barred if the doctor did not learn that he had a cause of action against the defendants until October 2003, when he retained other counsel to resolve his dispute with the Illinois Department of Revenue. The appellate court explained its reasoning as follows:

“¶ 39 In sum, all these notifications and subpoenas from 1999 to 2003 informed plaintiff that, far from reducing his tax liability as promised by defendants, his participation in the AEGIS program was increasing his tax liabilities and subjecting him to potential criminal prosecution and loss of his medical license. By the time plaintiff retained Meyer Capel on October 10, 2003, to handle any proceedings brought against him by the Illinois Department of Professional Regulation in connection with his failure to pay taxes under AEGIS, he reasonably should have known that he was injured by his participation in the AEGIS program, that his injury was wrongfully caused, and that he had an actionable claim against defendants. Plaintiff still did not file suit for legal malpractice until more than two years later, December 22, 2005. Thus, even under plaintiff’s reading of Khan as holding that the two-year limitations period does not begin to run until plaintiff realizes he has an actionable claim, plaintiff’s legal malpractice action against defendants still was not timely filed. Accordingly, the trial court correctly found plaintiff’s legal malpractice action was time-barred as a matter of law.”

Comment: this is an unfortunate situation where the plaintiff paid the defendants to participate in a program to reduce his taxes that, in reality, increased his taxes and put him in jeopardy of criminal prosecution and the loss of his medical license. The key question was when he should have discovered that the lawyers were negligent. In this case, the retention of a new lawyer to resolve the tax disputes indicated that the plaintiff was aware that he had been injured by participating in the tax shelter.

In sum, this is a classic statute of limitations defense.

VALUKAS v. BOTTI MARINACCIO, LTD, Dist. Court, ND Illinois 2013 – Google Scholar.

This is a decision dismissing a divorce malpractice claim on statute of limitations grounds. The plaintiff, James Valukas, hired the defendant law firm to represent him in his divorce. Valukas claimed that the law firm negligently drafted a marital settlement agreement, allowing his ex-wife to make a claim for a portion of the payout on certain stock options.

Defendant raised a statute of repose defense, arguing that the alleged error occurred outside of the limitations period. The statute of repose bars any claim against an attorney that occurred more than 6 years prior to the filing of the lawsuit.

Valukas countered that even though he filed his case after the limitations period had run, the limitations period should not apply because of equitable estoppel. Valukas argued that the lawyer misrepresented and concealed a material fact (the alleged error) so the statute of repose should not apply.

The district court, after trial, entered a directed verdict for the defendant. It held that Valukas had knowledge of the problem with the marital settlement agreement before the limitations period had run. Valukas was aware that there were issues surrounding the interpretation of the stock option provision in the marital settlement agreement.  Thus, he knew or should have known that there were drafting problems with the agreement. Because Valukas knew or should have known of the problem, equitable estoppel did not apply.

This is a thoughtful opinion and, because the opinion comes after trial, the facts were fully developed by the parties.

Edward X. Clinton, Jr.

O’KELLYN v. Dawson, 2013 PA Super 25 – Pa: Superior Court 2013 – Google Scholar.

This is a case where a lawyer was accused of legal malpractice for failing to properly document a settlement of a divorce case. The settlement related to an award of maintenance. The parties agreed on a certain amount. The lawyer did not draft up the papers and obtain the signature of the other spouse. As a result, the court entered a maintenance award that was substantially greater than the agreed upon amount.

The client was unhappy because he was required to pay far more maintenance than he agreed to pay. He sued the lawyer and, after a jury trial, obtained an award of damages in the amount of $100,363.64.

The Superior Court affirmed the verdict and rejected the lawyer’s argument that the statute of limitations had run. The statute of limitations issue centered on when the client had reason to discover the alleged error of the lawyer. The court affirmed a ruling that the date of discovery of the alleged error by the lawyer was the date of the adverse divorce court decision awarding the maintenance.

It is very difficult to prove legal malpractice in divorce cases. Here, the legal malpractice was not a divorce issue. Rather it was a claim that the lawyer botched the settlement documentation, an error that could occur in any case.

Edward X. Clinton, Jr.

Osborne v. Keeney, Ky: Supreme Court 2012 – Google Scholar.

This is a legal malpractice case in which the plaintiff alleged that her lawyer failed to file a lawsuit on time and missed the applicable statute of limitations.  The Kentucky Supreme Court upheld the claim and addressed other issues as well.  The court held that punitive damages are not recoverable against an attorney in a legal malpractice case.

The opinion reaffirms that the plaintiff in a legal malpractice case must prove a case within a case.  The court set forth the method for proving the case within a case requirement:

“The manner in which the plaintiff can establish what should have happened in the underlying action, but for the attorney’s conduct, will depend on the nature of the attorney’s error.[15] When dealing with a situation such as the instant case where a claim is lost, including, but not limited to, because it is barred by an applicable statute of limitations, a plaintiff must recreate an action that was never tried.[16] The plaintiff must bear the burden the plaintiff would have borne in the original trial. And the lawyer is entitled to any defense that the defendant would have been able to assert in the original trial. This is what is commonly known in Kentucky law as the suit-within-a-suit approach. While this approach has been repeatedly affirmed, the actual procedure for trying such a case remains elusive. Here, we are presented with the question of how a jury should be instructed in a suit-within-a-suit.

When trying a suit-within-a-suit, especially when the reason for the lost claim is the expiration of the relevant statute of limitations,[17] ”all the issues that would have been litigated in the [barred] action are litigated between the plaintiff and the plaintiff’s former lawyer.”[18] And, in recreating the litigation, the usual instructions that should be given in the underlying case, including any special verdict forms, are those to be used in the malpractice trial.[19] Several states have used this commonsense approach to instructing the jury.[20]

One justice dissented on the punitive damages issue.

Edward X. Clinton, Jr.

 

The caption of this case is Evanston Insurance Company v. Riseborough and Jacobson and Riseborough, 1-10-2660.

The opinion is not available online or on the website of the Appellate Court.  I learned of this case when I read an excellent article by the Chicago Daily Law Bulletin.  I am amazed that an opinion of this importance is not published or easily available.  I had to send someone to the Appellate Court clerk’s office to obtain a copy of the opinion.

The case is of importance because it holds that the legal malpractice statute of limitations does not apply to a suit brought by a non-client against an attorney arising out of the performance of professional services.

The dispute arouse out of a personal injury action filed against Kieferbaum Construction.  The defendant lawyers represented Kieferbaum in the lawsuit.  The plaintiff was an excess liability carrier.  The excess liability carriers filed declaratory judgment actions to determine their rights under their policies.

On October 23, 2000, the parties in the personal injury case and insurance carriers entered into a “Fund and Fight Agreement” (FFA) which allowed the subcontractor’s insurance carriers to fund a settlement for the plaintiff in the personal injury case.  The FFA allowed them to continue to fight amongst themselves over coverage issues.

The defendant lawyers signed the FFA as the agents of Kieferbaum construction.

In the coverage litigation Evanston sought repayment of the $1 million it had contributed to the settlement.

Kieferbaum then executed an affidavit in which it claimed that the defendant lawyers had no authority to enter into the FFA on Kieferbaum’s behalf.

Evanston then sued the defendant lawyers alleging breach of implied warranty of authority, fraudulent misrepresentation and negligent misrepresentation.  The defendants argued that the case was barred by the Statute of Repose, 735 ILCS 5/13-214.3.  The trial court dismissed the case and Evanston appealed.

The appellate court held that the statute of repose does not apply to an action brought by a non-client against an attorney.  Section 13-214.3 of the Code states in relevant part “(b) an action for damages based on tort, contract or otherwise (i) against an attorney arising out of an act or omission in the performance of professional services…must be commenced with 2 years from the time the person bringing the action knew or reasonably should have known of the injury for which damages are sought.”

The appellate court held that the phrase “arising out of an act or omission in the performance of professional services,” referred to an attorney-client relationship.  Because Evanston had not attorney-client relationship with the lawyers, the statute of repose did not apply.

Comment: This is a highly controversial decision that should be heard by the Illinois Supreme Court.  My view is that the holding of the panel is erroneous.  These lawyers were doing legal work, defending their client from a claim.  They signed an agreement as agents of the client.  Later, the client and the insurance company threw the lawyers under the bus and the insurer brought a claim against them.  Since the lawyers were doing legal work, they are entitled to the protections of the Statute of Repose.  They should be protected and the case should be dismissed.  This is, in my view, an easy case for the Illinois Supreme Court.  It cries out for review.


Edward X. Clinton, Jr.


Mitchell v. Schoen, Dist. Court, ND Illinois 2012 – Google Scholar:

 

The district court has granted summary judgment to a defendant attorney who admittedly filed a personal injury case after the statute of limitations expired.

 

The district court summarizes the procedural history of the case as follows:

 

On September 1, 2006, three years and one day after Mitchell’s injury, Schoen filed a personal injury action on Mitchell’s behalf in Illinois state court. Mitchell alleged common law tort claims and claims arising under the Jones Act. The statute of limitations in Illinois for common law torts and actions under the Jones Act are two and three years, respectively. On June 7, 2007, Schoen delivered a letter to Mitchell, admitting a potential basis for Mitchell to pursue a legal malpractice claim against him based on an expired statute of limitations, and suggesting that Mitchell seek alternative counsel. On October 17, 2007, Schoen withdrew as counsel for Mitchell in the underlying action. On February 15, 2008, months after Schoen withdrew as counsel, the underlying action was dismissed for want of prosecution.


Mitchell’s subsequent counsel in the underlying action never attempted to vacate the dismissal for want of prosecution. Instead, subsequent counsel filed a complaint related to the August 2003 accident in the United States District Court for the Northern District of Indiana. The federal case was dismissed, with prejudice, on October 6, 2009 as untimely. Thereafter, Mitchell filed the instant legal malpractice case on February 11, 2011.”

 

The legal malpractice action began to run on February 15, 2008 when the federal case was dismissed for want of prosecution.

 

The court explained:

 

“A plaintiff is injured for purposes of legal malpractice, and the statute of limitations period begins to run, when a plaintiff has suffered a loss for which it may seek damages. Woidtke,335 F.3d at 564. When Mitchell’s underlying action was dismissed for want of prosecution on February 15, 2008, the statute of limitations on his claims under the Jones Act had already expired. Dismissal after a statute of limitations has expired is effectively a dismissal with prejudice. Hassebrock v. Bernhoft, 2012 WL 384528 at *3 (S.D.Ill. Feb. 6, 2012) (citingCardenas v. City of Chicago, 646 F.3d 1001, 1008 (7th Cir. 2011)). Accordingly, the two-year statute of limitations period for Mitchell’s legal malpractice and breach of fiduciary duty claims against defendants began to run no later than February 15, 2008 and expired no later than February 15, 2010, almost a year before he filed the instant suit on February 11, 2011.

 

Under Illinois law, a dismissal for want of prosecution is generally not a final and appealable order. Flores v. Dugan, 91 Ill.2d 108, 115 (1982). Further, 735 ILCS 5/13-217, commonly referred to as the Illinois saving statute (“saving statute”), provides most plaintiffs with the option of refiling an action within one year of the entry of a dismissal for want of prosecution order, or within the remaining statute of limitations, whichever is greater. Citing to the saving statute, Mitchell argues that the statute of limitations applicable to his pending claims did not begin to run until February 15, 2009, one year after the underlying action was dismissed for want of prosecution.

 

Unfortunately for Mitchell, the saving statute is not applicable to the underlying action and does not toll the two-year statute of limitations applicable to the instant legal malpractice case for at least two reasons. First, the saving statute only applies to cases that were timely filed at their inception. Bryson v. News America Publications, Inc., 174 Ill.2d 77, 107 (1996)Jain v. Johnson, 398 Ill.App.3d 135, 138 (2nd Dist. 2010). According to Mitchell, the underlying action was not timely filed at its inception because it was filed one day after the three-year statute of limitations applicable to claims arising under the Jones Act. Second, the saving statute does not apply to cases filed under the Jones Act and cannot extend the applicable three-year statute of limitations. Picciotto v. RGB Riverboat, 323 Ill.App.3d, 708, 709 (2nd Dist. 2001)Stephen v. Selvic Marine Towing, Co., 201 Ill.App.3d, 554, 559 (1st Dist 1990).”

 

Comment:  Plaintiff should have sued his lawyer as soon as possible after the lawyer admitted that he missed the statute of limitations in the underlying case.