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Appellate Court Revives Legal Malpractice Claim And Discusses Discovery Rule

Katz v. Katten Muchin 2021 IL App (1st) 200331, is a malpractice case in which the Illinois Appellate court reversed the dismissal of a legal malpractice case.  Andre Katz filed a petition to be appointed the temporary guardian of his mother on June 9, 2017. He learned that his mother had retained Katten Muchin to revise her estate plan to his detriment. On November 16, 2017, Katz took the deposition of one of the lawyers at Katten Muchin who had represented his mother and who had re-drafted the estate plan to Katz’s detriment (and to the advantage of his brother).

On June 27, 2019, Katz filed the legal malpractice action against Katten Muchin. Katten Muchin argued that the two-year statute of limitations had run because Katz was aware that Katten Muchin had done estate planning work for his mother on June 9, 2017, more than two years before the lawsuit was filed. The trial court dismissed the case on statute of limitations grounds.

Katz appealed. He argued that he was unaware that the lawyers were the cause of his injury until he took the deposition of the Katten Muchin lawyer on November 16, 2017. The Appellate Court reversed the dismissal of the Complaint on the ground that there was an issue of fact as to when Katz discovered his injury.  The opinion carefully discusses the discovery rule and how it is applied.

¶ 28 When an injured person possesses “sufficient information concerning his injury and its cause to put a reasonable person on inquiry to determine whether actionable conduct is involved” “is usually a question of fact.” Knox College v. Celotex Corp., 88 Ill. 2d 407, 416 (1981). It may be decided as a matter of law only when the facts and the reasonable inferences to be drawn from those facts are undisputed. Janetis v. Christensen, 200 Ill. App. 3d 581, 586 (1990).

¶ 29 Here, Andre acknowledges that he was aware of his injury—the changes to Ms. Newman’s estate plan—no later than June 9, 2017, when he petitioned to become her guardian, but argues that he was unaware that Katten’s conduct was a wrongful cause of that injury until he deposed Mr. Hartz on November 16, 2017. This distinction, if valid, is critical to the timeliness of Andre’s claims, as June 9, 2017, was more than two years before the filing of his complaint on June 27, 2019, but November 16, 2017, was less than two years before that date.

¶ 30 Katten’s position is that, although Andre may not have been aware of the precise actions Katten’s lawyers did or did not take to ascertain Ms. Newman’s mental capacity, Andre’s actions—both in petitioning to become Ms. Newman’s temporary guardian to avoid further injury if Ms. Newman and Leonard retained control of her affairs and in calling Mr. Hartz to inform him of the appointment—indicate that he was on inquiry notice of his injury and that it was connected to Ms. Newman’s May 2017 visits to Katten. We agree with Katten that on June 9, 2017, Andre knew of his injury and had reason to believe it was wrongfully caused by Leonard. Whether claims against Katten were within the scope of the reasonable inquiry triggered by that notice, however, is somewhat more nuanced.

¶ 31 The relevant cases lie along a spectrum. On one end of this spectrum is Janousek v. Katten Muchin Rosenman LLP, 2015 IL App (1st) 142989, a case Katten relies on. The plaintiff in Janousek sued Katten for aiding and abetting his former business partners in breaches of their fiduciary duties. Id. ¶¶ 5-6. The plaintiff argued he was not on notice of the law firm’s role in the breach until the business partners agreed to be deposed. Id. ¶ 18. The law firm, however, argued that the limitations period began running more than two years earlier, when the plaintiff wrote a letter to the business partners demanding that they compensate him for the harm they had caused him. Id. ¶ 4. This court concluded that the plaintiff’s claims against the law firm were time-barred. Id. ¶¶ 17, 21. Although the plaintiff did not yet know the precise nature of the lawyers’ role, he knew that they had been used by his business partners, and his claims against the lawyers for aiding and abetting the wrongdoing of the business partners were, in this court’s view, “uniquely intertwined and inseparable” from claims against the former business partners that the plaintiff was certainly aware of more than two years before the suit was filed. Id. ¶¶ 21, 24.

¶ 32 At the other end of the spectrum is Landreth v. Raymond P. Fabricius, P.C.,2018 IL App (3d) 150760, a case Andre relies on. In Landreth, the plaintiff was a contractor for a city government. Id. ¶ 5. Two years into the contract, the city stopped paying the plaintiff. Id. When the plaintiff sued the city for breach of contract four years later, he discovered that the city’s position was that the agreement was void because it conflicted with the municipal code. Id. ¶ 6. The court held that there was a factual issue as to whether the plaintiff had any basis for inquiring, before the city raised that defense, whether he had a malpractice claim against the lawyer who drafted the agreement. Id. ¶¶ 37-38. Because it could reasonably have appeared, until the city raised its voidness defense, that the contract was valid and the city was simply breaching its contractual obligations, there may have been no reason to inquire into whether the agreement itself was problematic or the lawyer who drafted it had some liability. Id.

¶ 33 The facts presented here lie somewhere between these two ends of the spectrum. While in Janousek the third-parties’ breaches of their fiduciary duties and the law firm’s assistance in aiding and abetting those breaches were “uniquely intertwined and inseparable,” here one might argue that Leonard’s conduct in orchestrating changes to Ms. Newman’s will and Katten’s alleged failure to assess her mental capacity to make those changes were distinct acts, such that a reasonable investigation into the one might not reveal the other. Until Mr. Hartz’s deposition, it may reasonably have appeared to Andre that Katten had played, at most, an unwitting role in Leonard’s scheme to isolate Ms. Newman, conceal her condition from those around her, and manipulate her to his own advantage. But the case is not as similar to Landreth as Andre would have us conclude. Andre knew that Leonard’s wrongful conduct could not have been accomplished without Katten’s assistance. The plaintiff in Landreth, conversely, had no reason to think that the city’s conduct in breaching its contract had anything to do with its law firm’s role in drafting it.

¶ 34 Whether claims against Katten fall within the scope of a reasonable inquiry triggered by facts known to Andre when he filed his guardianship petition is, in our view, a question of fact. The record presents starkly different descriptions of Ms. Newman’s condition during the relevant period. Mr. Hartz described her in his deposition as lucid and capable of holding a conversation alone with him, answering his questions and articulating reasonable justifications for the proposed changes to her estate plan. Andre himself described her in his complaint as suffering only from the “early stages” of dementia. Andre’s guardianship petition, however, describes someone with much more severe cognitive impairments manifesting themselves several months before the meetings with Mr. Hartz. If Ms. Newman’s condition was not too severe, or if she still had both good and bad days, Andre may have had no reason to believe that Mr. Hartz (a lawyer he knew professionally) and Mr. Hartz’s reputable law firm had failed to do anything it should have in connection with the matter. Andre believed that Leonard was isolating Ms. Newman and otherwise concealing the extent of her condition from those in a position to take notice of it, including perhaps the lawyers at Katten. And nothing in the record indicates that Katten had anything to gain by ignoring its duties to push through changes for what Mr. Hartz described as a “modest” estate.

¶ 35 The bottom line here is that Andre has not been deposed. What he knew of his mother’s mental state at the time she visited Katten and whether he had any reason to suspect that the firm’s lawyers failed to take reasonable steps to ascertain their elderly client’s capacity before making significant changes to her recently modified estate plan are questions of fact and credibility that cannot be resolved on the record before us. At this juncture, we conclude that dismissal was improper because we are unable to say as a matter of law that claims against Katten were within the reasonable scope of Andre’s inquiry notice.

Comment: this is a thoughtful opinion on an always difficult area of the law – the application of the discovery rule. If you have a question about a legal malpractice case, do not hesitate to contact me.

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