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Appellate Court Rules Legal Malpractice Claim Is Untimely

Source: Janousek v. KATTEN MUCHIN ROSENMAN LLP, Ill: Appellate Court, 1st Dist., 2nd Div. 2015 – Google Scholar

Illinois has a two-year statute of limitations period which applies to legal malpractice claims. Here, the Appellate Court held that the two-year statute operated to bar claims against a law firm that allegedly assisted its client in a breach of fiduciary duty.

Facts:

In 1999, Janousek formed a liability company with Burton and Michael Slotky. The LLC was known as Bureaus Investment Group or BIG. The LLC was formed by an attorney at Katten Muchin. Eight years later, the relationship between Janousek and the Slotkys had deteriorated. On October 1, 2007, BIG terminated Janousek’s employment and allegedly froze him out of the business by refusing to let him participate in the business. Around that time the Slokys formed another entity Bureaus Investment Group III, known as BIG III. Janousek alleged that since October 2007, the Slotkys and have misappropriated BIG’s opportunities by diverting business opportunities to BIG III.

On June 19, 1999, Janousek’s attorney wrote to the Slotkys and BIG and alleged that they had violated Janousek’s rights and requesting that they purchase Janousek’s interest in BIG. On July 7, 2009, Janousek sued the Slotkys and BIG alleging that they had usurped corporate opportunities. Katten filed an appearance for BIG and the Slotkys, but, on Janousek’s motion, was disqualified from representing BIG.

Three years later, Janousek, individually and on behalf of BIG, filed a complaint against Katten and Richard alleging that they had “aided and abetted the Slotkys in breaching their fiduciary duties.”

On a motion for summary judgment, the circuit court dismissed the lawsuit on the ground that it was filed after the two-year statute of limitations had run. The attorney defendants argued that Janousek was on inquiry notice of the alleged breach on July 7, 2009 when he filed his case against BIG and the Slotkys.

Janousek responded that he was not aware of the wrongful actions of the attorney defendants until he received certain documents in late 2010. The circuit court disagreed and granted summary judgment.

The appellate court affirmed. Janousek argued that, although he suspected that the attorney defendants had acted wrongfully he had to wait to obtain proof.

The Appellate court disagreed. It held that Janousek knew he was injured in June 2019, when his lawyer wrote to the Slotkys. The court then held that Janousek should have known that he had a claim against the attorney defendants. It explained:

Janousek knew that Howard Richard, whom he identified in his complaint as Burton Slotky’s nephew and Michael Slotky’s cousin, had represented BIG when it filed its article of incorporation in 2007, as Richard signed the document as “organizer.” He also knew that Richard continued to act as the Slotkys’ attorney after Janousek’s employment ended and he filed his lawsuit against the Slotkys; while Janousek filed a motion to disqualifyKatten from representing BIG, he did not object to Katten’s continued representation of the Slotkys and BIG III. Further, Janousek knew of the formation of BIG III and could have requested a copy of the articles of incorporation from the Illinois Secretary of State, which lists Richard as the “organizer” of BIG III. Although Janousek contends that he was unable to determine defendants’ role, that information was of public record. Thus, unlike the scientifically unknowable injury in Mitsias, Janousek’s claims against defendants were knowable before July 2, 2010.

¶ 21 More importantly, as stated already, 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.” (Emphasis and internal quotation marks omitted.) Castello, 352 Ill. App. 3d at 744. Janousekknew that he had been wrongfully injured no later than July 2009, and thus, even though he may not yet have known that defendants’ representation was partly responsible and that their conduct gave rise to a cause of action, the statute of limitations began to run because Janousek did have knowledge of the injury and that his injury was wrongfully caused. In short, Janousek’s claims against his partners for fraud cannot be separated from a claim that defendants failed to protect him from that very same fraud.

In sum, once Janousek knew that his former business partners had breached their fiduciary duties the statute of limitations began to run on the legal malpractice (aiding and abetting a breach of fiduciary duty) claim.  The court puts it this way: “Thus, although documents disclosed by the Slotkys in late 2010 and their depositions in early 2011 may have further solidified Janousek’s determination that he had a claim against defendants, he knew well before then that he had been wrongfully injured by his former business associates, which triggered the statute of limitations on his aiding and abetting claim against defendants.”

Comment: I’m not sure that this opinion makes sense. Under Rule 137, Janousek was required to obtain information about the wrongful actions of the attorneys before he sued them, or he risked being sanctioned. What this case does show is that the Illinois courts have become more strict in applying the two-year statute of limitations in recent years. Plaintiffs who argue that they were unaware of the role of the lawyer until later have lost their cases. That being said, the reasoning does not make any sense to me. Janousek and his lawyers should have had the right to investigate their claims against Katten and Richard before suing.

Edward X. Clinton, Jr.