Case Title: Morris v. Margulis

Citation: 

Docket Number: 88685

State: illinois

Court: Illinois Supreme Court

Date: 2001-07-19T00:00:00Z

Document:
Docket No. 88685-Agenda 24-September 2000.
EDWARD MORRIS, Appellee, v. ARTHUR MARGULIS et al. 								(Bryan Cave, L.L.P., et al., Appellants).
Opinion filed July 19, 2001.

	JUSTICE FITZGERALD delivered the opinion of the court:
	Following a federal jury trial, Edward Morris was convicted
of mail fraud and wire fraud for his involvement in a public note
offering by a now-defunct St. Louis savings and loan association.
After his conviction was affirmed on appeal, Morris filed a breach
of fiduciary duty complaint in the St. Clair County circuit court
against, among others, a St. Louis law firm, which had represented
Morris in several unrelated personal matters and served as the
savings and loan association's corporate counsel, and four of the
firm's partners. Morris alleged that these defendants breached their
fiduciary duty to him when two of the partners drafted questions
for the federal prosecutor to use in cross-examining Morris. The
trial court granted summary judgment to the defendants, and the
appellate court reversed. 307 Ill. App. 3d 1024. We allowed the
defendants' petition for leave to appeal. Morris v. Margulis, 187 Ill. 2d 571 (2000); see 177 Ill. 2d R. 315(a). We now reverse the
appellate court and affirm the trial court's award of summary
judgment to the defendants.
BACKGROUND
	After the savings and loan industry was deregulated in the
1980s, Germania Bank (Germania), a St. Louis savings and loan
association, expanded its loan portfolio beyond traditional
residential real estate loans into larger residential and commercial
projects. These projects diluted the bank's loan loss reserves, its
protection against loan defaults. In early 1987, as Germania
responded to concerns from its independent auditors and federal
regulators about the adequacy of its loan loss reserves, Morris, the
bank's chief executive officer, proposed that the bank make a $10
million public offering of subordinated capital notes, or
"Schnotes." Following a September 1987 internal review of
Germania's loan portfolio, the bank management recommended
that the bank's executive committee add $9.3 million in loan loss
reserves. The executive committee rejected this recommendation
and, instead, approved only an additional $1.2 million in reserves.
This decision allowed the bank to show a quarterly profit
immediately before the Schnote offering. Germania's Schnote
offering circular, however, assured potential investors that the bank
had made adequate provision for estimated loan losses. The
Schnote sales began in October 1987 and proceeded into March
1988.
	In a year-end audit for 1987, Germania's independent auditors
recommended an additional $6.5 to $13 million in loan loss
reserves. In February 1988, near the conclusion of the Schnote
offering, the bank's board of directors ultimately approved $9.4
million in additional reserves. Germania's financial condition
quickly deteriorated. In 1990, Germania was seized by the Office
of Thrift Supervision, and the Resolution Trust Corporation
became its conservator. The Schnotes became worthless.
	The federal government then began civil and criminal
investigations into the Schnote offering, which resulted in an
indictment against Morris for mail fraud and wire fraud. The
government charged that Morris, as Germania's chief executive
officer, disseminated the Schnote offering circular without
disclosing the need for additional loan loss reserves. Morris
initially asked Bryan Cave, L.L.P. (Bryan Cave), a St. Louis law
firm and Germania's corporate counsel, to represent him in the
criminal case stemming from the Schnote offering. The firm
previously had represented Morris in personal matters-estate
planning, domestic relations, and employment compensation.
Bryan Cave declined to represent Morris in the criminal case,
however, because of a potential conflict of interest. John Goebel,
a Bryan Cave partner, was an outside director of Germania and had
been named as a defendant in civil litigation related to the Schnote
offering. Goebel was represented by Bryan Cave partner Daniel
O'Neill, who asserted that Goebel was also a subject in the
government's criminal investigation. Morris' wife, a Bryan Cave
contract attorney, did receive guidance from O'Neill in drafting
Morris' response to an investigation by the Securities and
Exchange Commission (SEC).
	In October 1993, Morris' federal criminal trial began. Arthur
Margulis, Morris' defense attorney, outlined an advice-of-counsel
defense in his opening statement:
			"Let's talk about what the evidence is going to show you
about the concealment of this September [1987] analysis.
First, I anticipate that Jimmy New [Germania's chief
financial officer] is going to testify for the Government,
and I think he is going to tell you that he said to Ed Morris
after the meeting, don't you think we ought to talk to our
lawyers and see if we're supposed to disclose this to
anybody, and Ed Morris said yes, I do, I think we should,
and he contacted John Goebel at Bryan Cave. That's the
largest law firm in this area. He contacted him, told him
the situation, and John Goebel said I don't think in view of
what you told me, in view of the way it was prepared, I
don't think there is any reason to disclose it. Jimmy New
will tell you that Ed Morris came back to him and said we
don't have to disclose it.
* * *
			The Schnote sales go ahead, but as soon as the
[independent auditor's] report came out with the analysis
that they needed the nine million, it was Ed Morris who
stopped the Schnote sales. Ed Morris again goes to Bryan
Cave, John Goebel the lawyer and said should we offer the
people who have bought this the right to rescind, and the
advice is, the legal advice is, let's wait and see what
happens, and six days later the sales resume and they sold
out.
			Throughout everything I am telling you, ladies and
gentlemen, Ed Morris *** consulted the lawyers on a
regular basis, not just about the offering circular but about
the marketing to make sure they were in compliance with
the law, and they were assured at every step of the way
that they were."
	O'Neill and Thomas Archer, another Bryan Cave partner
representing Goebel, heard Margulis' opening statement. In
response, O'Neill drafted and delivered to the federal prosecutor a
three-page document entitled "Possible Areas of Inquiry"
containing 15 multipart questions for use in cross-examining
Morris. The proposed questions sought to show the lack of
evidence that Morris relied upon Goebel's legal advice in failing
to disclose Germania's inadequate loan loss reserves. Several days
later, Morris' wife surreptitiously discovered the questions in a
search she made of the law firm's computer system; she dictated
them and gave an audio tape to Margulis' associate.
	At trial, Morris did not testify that he had relied upon Goebel's
legal advice. Asked whether he and Goebel discussed Germania's
disclosing the recommended reserve increase, Morris replied,
"[N]ot that I remember, I don't think we discussed it." The
proposed questions were not used by the government. Morris was
convicted on two counts of mail fraud and one count of wire fraud
and was sentenced to 46 months' imprisonment. His convictions
and sentence were affirmed on appeal (United States v. Morris, 80 F.3d 1151 (7th Cir. 1996)), and the United States Supreme Court
denied his petition for a writ of certiorari (Morris v. United States,
519 U.S. 868, 136 L. Ed. 2d 120, 117 S. Ct. 181 (1996)).
	While Morris' federal appeal was pending, he filed a breach
of fiduciary duty complaint against, among others, defendants
Bryan Cave and its partners Goebel, O'Neill, Archer, and Alan
Dixon.(1) The defendants moved for summary judgment.
Specifically, they contended that they did not breach any fiduciary
duty which they may have owed to Morris by providing the federal
prosecutor with the proposed cross-examination questions.
According to the defendants, ethics rules allowed them to defend
themselves against the accusation in defense counsel's opening
statement that Goebel had advised Morris not to reveal the need for
greater loan loss reserves. The defendants also contended that no
attorney-client relationship existed between the parties with respect
to Germania matters, that Morris could not recover damages for his
conviction because the conviction was never overturned, that the
proposed questions were not a proximate cause of the conviction
and would not support recovery for emotional distress, and that the
complaint was barred by the applicable statute of limitations. The
trial court granted summary judgment to the defendants.
	The appellate court reversed. The court concluded that an
attorney-client relationship may have existed between Bryan Cave
and Morris with respect to Germania matters. 307 Ill. App. 3d at
1037. The court held that the opening statement did not waive
Morris' attorney-client privilege because the accusation against the
defendants did not arise in Morris' own testimony. 307 Ill. App. 3d
at 1038. Additionally, the court held that Morris did not have to
establish his actual innocence of the criminal charges as part of his
cause of action against the defendants, that he could recover
damages for his emotional distress, and that he timely filed his
complaint. 307 Ill. App. 3d at 1039-40. This appeal followed.(2)
ANALYSIS
	The defendants raise six issues on appeal. We focus upon their
final issue: whether summary judgment was appropriate because
Morris' breach of fiduciary duty claims were time-barred under
section 13-214.3 of the Code of Civil Procedure. See 735 ILCS
5/13-214.3 (West 1994).
	Summary judgment should be granted if "there is no genuine
issue as to any material fact and *** the moving party is entitled to
a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West
1998); Petrovich v. Share Health Plan of Illinois, Inc., 188 Ill. 2d 17, 30-31 (1999). Summary judgment can aid in the expeditious
disposition of a lawsuit, but it is a drastic measure and should be
allowed only "when the right of the moving party is clear and free
from doubt." Purtill v. Hess, 111 Ill. 2d 229, 240 (1986). If the
plaintiff fails to establish any element of his claim, summary
judgment is appropriate. Pyne v. Witmer, 129 Ill. 2d 351, 358
(1989). Our standard of review is de novo. Jones v. Chicago HMO
Ltd., 191 Ill. 2d 278, 291 (2000).
	Section 13-214.3(b) provides:
			"An action for damages based on tort, contract, or
otherwise *** against an attorney arising out of an act or
omission in the performance of 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." 735
ILCS 5/13-214.3(b) (West 1994).
	Section 13-214.3(b) contains its own "discovery" rule. Under
the discovery rule a limitations period begins to run only when the
plaintiff  "knows or reasonably should know of his injury and also
knows or reasonably should know that it was wrongfully caused."
Witherell v. Weimer, 85 Ill. 2d 146, 156 (1981); accord Jackson
Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 249 (1994).
Normally, the discovery date will be a question of fact. Knox
College v. Celotex Corp., 88 Ill. 2d 407, 416 (1981). "Where it is
apparent from the undisputed facts, however, that only one
conclusion can be drawn, the question becomes one for the court."
Witherell, 85 Ill. 2d  at 156.
	In his deposition Morris testified that he first learned of the
proposed cross-examination questions "[s]ometime during the
[federal] trial. *** I think it was, my best recollection, it was in the
middle of my testimony." Morris later clarified that he received a
copy of the questions "the tail end of the week before the
conviction" or "[a]t least the week before" the jury returned its
guilty verdict on November 10, 1993. When asked by the
defendants' attorney if he felt damaged at the time he saw the
questions, Morris answered:
			"Oh, yes, sir, absolutely damaged.
* * *
			That the firm that I had used for years, the firm that,
great friends that I had, sharing information during the
time prior to the indictment with my wife, all of a sudden
had been using information *** to try to convict me. Hell,
yes, I would have thought I was damaged, hell, yes."
Thus, Morris discovered his alleged injury and its wrongful cause
before his November 10, 1993, conviction, but he did not file his
complaint until November 13, 1995, more than two years later.
	Morris still contends that his complaint was timely. In support,
Morris relies upon his own affidavit opposing the defendants'
summary judgment motion, in which he stated that he did not
discover his claim against the defendants until April 1995, when
his attorney in his federal appeal advised that Morris may have a
claim against the defendants. This affidavit, however, contradicts
his deposition testimony, and we have held previously that a
party's later submission of an affidavit inconsistent with that
party's deposition testimony will not raise a disputed issue of fact
or prevent the entry of summary judgment. See Vesey v. Chicago
Housing Authority, 145 Ill. 2d 404, 422 (1991). Additionally,
Morris did not need a professional opinion concerning the
defendants' putative misconduct to know that he was wrongfully
injured. See Butler v. Mayer, Brown & Platt, 301 Ill. App. 3d 919,
923 (1998).
	Morris further contends that Goebel made a "deal" with the
federal prosecutor to refute Morris' advice-of-counsel defense, but
never informed Morris about this arrangement before his criminal
trial began. This secret betrayal, Morris contends, was "tantamount
to fraud," and the limitations period accordingly was tolled under
section 13-215 of the Code of Civil Procedure. Section 13-215
provides:
			"If a person liable to an action fraudulently conceals the
cause of such action from the knowledge of the person
entitled thereto, the action may be commenced at any time
within 5 years after the person entitled to bring the same
discovers that he or she has such cause of action, and not
afterwards." 735 ILCS 5/13-215 (West 1998).
	The appellate court agreed with Morris: "If Bryan Cave had an
attorney-client relationship with Morris, then the act of secretly
providing cross-examination questions or other assistance to the
United States Attorney would constitute a breach of the duty of
loyalty. Because the act was secret, it would be a fraudulent
concealment." 307 Ill. App. 3d at 1041, citing Chicago Park
District v. Kenroy, Inc., 78 Ill. 2d 555 (1980).
	We need not decide whether section 13-215 tolls the
limitations period in section 13-214.3(b), or whether the
defendants fraudulently concealed Morris' breach of fiduciary duty
claim when they gave the proposed questions to the federal
prosecutor without telling Morris. "If at the time the plaintiff
discovers the 'fraudulent concealment' a reasonable time remains
within the applicable statute of limitations, [section 13-215] does
not toll the running of the limitation period." Anderson v. Wagner,
79 Ill. 2d 295, 322 (1979); accord Serafin v. Seith, 284 Ill. App. 3d
577, 590 (1996); Muskat v. Sternberg, 211 Ill. App. 3d 1052, 1061
(1991) ("This rule is logical because once a party discovers the
fraud, it is no longer concealed, and if time remains within which
to file the action, section 13-215 cannot operate to toll the
limitations period").
	By his deposition testimony Morris acknowledged that he
discovered the alleged fraudulent concealment shortly after it
occurred and prior to his conviction. His claim accrued, and the
limitations period began, at the same time the concealment ended.
Accordingly, he had two years in which to file his breach of
fiduciary duty claim. See Barratt v. Goldberg, 296 Ill. App. 3d 252,
258-59 (1998) (holding that an entire two-year limitations period
constitutes ample time to file a legal malpractice complaint once
the defendants' fraudulent concealment is discovered). Section
13-215 was inapplicable, and Morris' complaint was time-barred.


CONCLUSION


	For the reasons we have discussed, the judgment of the
appellate court is reversed and the judgment of the circuit court is
affirmed.
Appellate court reversed;
circuit court affirmed.
 
1.      1Morris' original complaint also contained breach of fiduciary duty
counts against Margulis and his firm. Morris amended his complaint to
add civil conspiracy counts against Bryan Cave, O'Neill, and Archer,
alleging that Goebel had conspired with the federal prosecutor to obtain
Morris' conviction. The Bryan Cave defendants removed the case to
federal district court. See 28 U.S.C. §1442(a)(1) (1994). The federal
court dismissed the counts against Margulis. When Morris voluntarily
dismissed his conspiracy counts (see Fed. R. Civ. P. 41(a)(2)),
supplemental jurisdiction over his remaining fiduciary duty counts
disappeared (see 28 U.S.C. §1367(c)(3) (1994)). The case then was
remanded to the St. Clair County circuit court to proceed against these
defendants.

2.      2We granted leave to the Illinois State Bar Association to file a brief
as amicus curiae in support of the defendants on the limitations period
issue. See 155 Ill. 2d R. 345.