Court Opinion

ID: 3149981
Source: CourtListenerOpinion
Date Created: 2015-10-27 22:02:54.953917+00
Date Added: 2024-06-11T11:55:29.047403
License: Public Domain

2015 IL App (1st) 142989
                                            No. 1-14-2989
                                     Opinion filed October 27, 2015
                                                                                     Second Division

                                                 IN THE

                                   APPELLATE COURT OF ILLINOIS

                                            FIRST DISTRICT

                                                          )
     JAMES JANOUSEK, Individually and on Behalf           )     Appeal from the Circuit Court
     of Bureaus Investment Group, LLC,                    )     of Cook County.
                                                          )
            Plaintiff-Appellant,                          )
                                                          )     No. 12 L 7439
     v.                                                   )
                                                          )
     KATTEN MUCHIN ROSENMAN LLP and                       )     The Honorable
     HOWARD M. RICHARD,                                   )     John C. Griffin,
                                                          )     Judge, presiding.
            Defendants-Appellees.                         )

            JUSTICE HYMAN delivered the judgment of the court, with opinion.
            Presiding Justice Pierce and Justice Simon concurred in the judgment and opinion.

                                                 OPINION

¶1          At issue is when the two year statute of limitations period, which applies to claims

     against lawyers arising out of the performance of their professional services, had begun to run.

     Plaintiff James Janousek sued a law firm and one of its lawyers alleging aiding and abetting of a

     client's breach of fiduciary duties owed to him. On defendants' motion for summary judgment,

     the court held that, under the discovery rule, Janousek knew more than two years before he filed

     his complaint against defendants that he had been wrongfully injured by his former business
     1-14-2989

     associates, thereby triggering the statute of limitations. We affirm. On these facts Janousek has

     failed to timely file his complaint.

¶2                                          BACKGROUND

¶3          In 1999, James Janousek, together with Burton and Michael Slotky, formed Bureaus

     Investment Group LLC (BIG), an Illinois member-managed limited liability company to

     purchase delinquent debt accounts. The Slotkys also named Janousek president of The Bureaus,

     Inc., a debt collection agency that serviced BIG's accounts. Howard M. Richard, an attorney at

     Katten Muchin Rosenman LLP, signed and filed BIG's articles of organization. Fast forward

     eight years, and the relationship between Janousek and the Slotkys had so far deteriorated that on

     October 1, 2007, the Slotkys terminated Janousek's employment at The Bureaus. Janousek

     contends that after his termination, the Slotkys "froze" him out of BIG by refusing to allow him

     to participate in management or control of BIG or to access current financial information

     pertaining to BIG and its accounts. Janousek further contends that less than a month after

     terminating him, the Slotkys formed another debt-purchasing entity, Bureaus Investment Group

     III, LLC (BIG III). Janousek alleges that since October 2007, the Slotkys, through BIG III, have

     been purchasing debt pools, misappropriating BIG's opportunities, and competing with BIG.

¶4          On June 19, 2009, Janousek's attorney sent a letter to the Slotkys and BIG, stating "[w]e

     have spent a considerable amount of time with James Janousek investigating the circumstances

     surrounding what has transpired with The Bureaus Inc. and its related entities *** since the

     actions committed by you and your father in October 2007." The letter warned that if the Slotkys

     did not purchase all of Janousek's interests in BIG and compensate him "for the harm you

     wrought," he would file a lawsuit by July 7 and warned the Slotkys not to use BIG's attorneys or

     funds in defending the suit.

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¶5           The Slotkys did not comply with Janousek's demands. On July 7, 2009, Janousek made

     good on his threat and filed a complaint alleging the Slotkys, BIG, and others breached their

     fiduciary duties by competing with and usurping opportunities from BIG, as well as acting

     unfairly toward Janousek in conducting BIG's business. (That case remains pending in the circuit

     court.) Katten filed an appearance in the BIG litigation on behalf of all defendants, and Janousek

     moved to disqualify Katten from representing BIG, which was granted. Katten and Richard,

     however, continued to represent the Slotkys. (Burton Slotky died in November 2014 and Michael

     Slotky is not a party to this case.)

¶6           Nearly three years passed before Janousek, individually and on behalf of BIG, filed a

     two-count complaint against Katten and Richard, alleging they aided and abetted the Slotkys in

     breaching their fiduciary duties. In his complaint, filed on July 2, 2012, Janousek alleged, in part,

     that in 2007, Katten and Richard: (1) advised the Slotkys on freezing Janousek out of the

     management and ownership of BIG, (2) advised the Slotkys to form BIG III, a competing debt

     purchasing entity, to exclude Janousek from profits, (3) assisted the Slotkys in forming BIG III

     and advised them regarding BIG III's relationships with banks and other financial institutions, (4)

     advised and assisted the Slotkys in converting BIG investors into BIG III investors, and (5)

     advised and permitted the Slotkys to allow BIG to pay for their representation and advice.

¶7           On February 2, 2013, Katten and Richard filed their answers and affirmative defenses.

     Sixteen months later, on June 5, 2014, defendants filed a motion for summary judgment on its

     fourth affirmative defense, that the two year statute of limitations under section 13-214.3 of the

     Code of Civil Procedure (Code) (735 ILCS 5/13-214.3 (West 2012)) barred Janousek's lawsuit.

     Defendants contended that Janousek was on "inquiry notice" of his injury and its cause on July 7,

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       2009, the date he filed the underlying lawsuit against the Slotkys, but did not file his complaint

       against defendants until almost three years later.

¶8            Janousek responded that he could not have been on inquiry notice based on a suspicion

       that Katten had aided and abetted the Slotkys in breaching their fiduciary duties. He further

       asserted that the limitations period did not begin until 2011, because he did not learn of

       defendants' substantial assistance in the Slotkys' breaches of their fiduciary duties until the

       defendants, on behalf of the Slotkys, produced hundreds of pages of documents in late 2010 in

       response to discovery requests and until the Slotkys sat for depositions in October 2011. After

       argument, the circuit court granted the summary judgment motion. The court stated "I looked at

       the two complaints and compared them. *** [A]iding and abetting [is] something that's related to

       this underlying complaint in such a way that it establishes the requisite knowledge to trigger the

       beginning of the statute of limitations. I don't think diligence comes into play, so I'm going to

       grant the motion for summary judgment on the statute of limitations."

¶9                                                  ANALYSIS

¶ 10                                         Statute of Limitations

¶ 11          Janousek contends the circuit court erred in granting summary judgment because,

       although he suspected defendants of wrongdoing, a reasonable jury could conclude he did not

       know of their wrongdoing until after uncovering it through discovery in the underlying lawsuit

       and that he acted diligently in discovering the wrongdoing, particularly in light of defendants'

       refusal to turn over documents by claiming attorney-client privilege. We review the trial court's

       decision to grant summary judgment de novo. Outboard Marine Corp. v. Liberty Mutual

       Insurance Co., 154 Ill. 2d 90, 102 (1992).

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¶ 12          Section 13-214.3(b) of the Code states that 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 2012). Although this provision most frequently applies to cases filed

       by clients against their own attorney, in Evanston Insurance Co. v. Riseborough, 2014 IL

       114271, our supreme court held that it applies to any claim concerning an attorney's professional

       services and not just cases where the attorney rendered services to the plaintiff.

¶ 13          Section 13-214.3(b) incorporates the discovery rule, "which delays commencement of the

       statute of limitations until the plaintiff knew or reasonably should have known of the injury and

       that it may have been wrongfully caused." Dancor International, Ltd. v. Friedman, Goldberg &

       Mintz, 288 Ill. App. 3d 666, 672 (1997). Significantly, "under the discovery rule, a statute of

       limitations may run despite the lack of actual knowledge of negligent conduct.” (Emphasis in

       original.) SK Partners I, LP v. Metro Consultants, Inc., 408 Ill. App. 3d 127, 130 (2011). A

       statute of limitations begins to run when the purportedly injured party “has a reasonable belief

       that the injury was caused by wrongful conduct, thereby creating an obligation to inquire further

       on that issue.” Dancor, 288 Ill. App. 3d at 673. 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 v.

       Kalis, 352 Ill. App. 3d 736, 744 (2004). A person knows or reasonably should know an injury is

       “wrongfully caused” when he or she possesses sufficient information concerning an injury and

       its cause to put a reasonable person on inquiry to determine whether actionable conduct had

       occurred. Hoffman v. Orthopedic Systems, Inc., 327 Ill. App. 3d 1004, 1011 (2002). Under well

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       settled law, once a party knows or reasonably should know both of the injury and that it was

       wrongfully caused, “the burden is upon the injured person to inquire further as to the existence of

       a cause of action.” (Internal quotation marks omitted.) Castello, 352 Ill. App. 3d at 745. When a

       party knew or reasonably should have known his or her injury was wrongfully caused raises a

       question of fact, unless only one conclusion can be drawn at some particular point from

       undisputed facts. Nolan v. Johns-Manville Asbestos, 85 Ill. 2d 161, 169 (1981).

¶ 14          Janousek contends that although he knew of his injury and may have suspected by July

       2010 that defendants played a role, mere suspicion, while investigating whether a cause of action

       exists, does not affect the statute of limitations. For support, Janousek relies on LaManna v. G.D.

       Searle & Co., 204 Ill. App. 3d 211 (1990) and Young v. McKiegue, 303 Ill. App. 3d 380 (1999).

       In LaManna, the plaintiff alleged she became infertile because of an infection caused by

       defendant's contraceptive device. In reversing the trial court's grant of summary judgment in

       defendant's favor, this court held that the statute of limitations begins to run at the point when the

       party reasonably should have known that an injury was wrongfully caused and not when a party

       is suspicious or attempts to discover whether the injury is wrongfully caused. LaManna, 204 Ill.

       App. 3d at 218.

¶ 15          Janousek insists that, as in LaManna, he only suspected that defendants may have

       contributed to his injury by aiding and abetting the Slotkys in breaching their fiduciary duties

       and did not know for certain their role in aiding and abetting the Slotkys until late 2010 or early

       2011, after engaging in discovery in the underlying lawsuit. We disagree with Janousek's

       characterization of the decision. In LaManna, the plaintiff was not investigating what caused her

       wrongful injury, but whether she was indeed injured and whether any wrongful cause existed. It

       was possible the plaintiff was not infertile, as one doctor told her, or that the cause of her

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       infertility involved something other than the contraceptive device. Conversely, Janousek

       believed no later than July 7, 2009, and likely sooner, that the Slotkys breached their fiduciary

       duties and any injury he suffered, namely the lost profits going to BIG III rather than BIG,

       directly resulted from the breach of fiduciary duties.

¶ 16          Similarly, Young v. McKiegue, 303 Ill. App. 3d 380 (1999), fails to support Janousek's

       argument because there, the statute of limitations tolled while the plaintiff investigated whether

       her injury—her husband's death in the hospital—had been wrongfully caused. Until two medical

       experts reviewed her husband's medical records and determined that the physicians caring for her

       husband had deviated from the standard of care, she did not know or have reason to know that

       her injury was wrongfully caused. Id. at 389.

¶ 17          In a letter to the Slotkys dated June 19, 2009, Janousek's attorney stated that if they did

       not compensate Janousek for the "the harm you wrought" he would file a lawsuit by July 7. This

       letter shows that Janousek knew no later than June 19 that he had been wrongfully injured.

¶ 18          Next, Janousek argues, even though he knew he had been injured by the Slotkys' breach

       of their fiduciary duties in July 2009, the role Katten and Richard played in the Slotkys' breaches

       did not manifest itself until the Slotkys complied with his discovery requests in late 2010 and sat

       for depositions in 2011. Janousek asserts that because this second potential cause of his injury

       remained unknown until, at the earliest, late 2010, he timely filed his aiding and abetting

       complaint. Janousek cites Mitsias v. I-Flow Corp., 2011 IL App (1st) 101126 for support. In

       Mitsias, following shoulder surgery, the plaintiff experienced severe shoulder pain and doctors

       diagnosed chondrolysis, a condition that causes destruction of cartilage. Id. ¶ 6. The plaintiff

       sued the surgeon and the hospital where the surgery occurred, alleging medical malpractice. Id. ¶

       7. During the deposition of one of her physicians, the plaintiff learned, six years after her

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       surgery, that research had uncovered a link between the pain pump used during her surgery and

       cartilage destruction. Id. ¶ 8. Plaintiff voluntarily dismissed her complaint and refiled, adding

       product liability claims against the pain pump manufacturer. Id. ¶ 10. The trial court granted the

       product liability defendants' motions to dismiss plaintiff's complaint as untimely, finding that the

       statute of limitations on the medical malpractice claim and the products liability claim started at

       the same time, when plaintiff knew she had been injured and that the injury had been wrongfully

       caused. Id. ¶ 14.

¶ 19          The appellate court reversed, finding that the plaintiff had not slumbered on her rights

       because "there is no question that plaintiff could not have known of any potential products

       liability cause of action against the pain pump manufacturers while the causal link between her

       injury and the pain pump used upon her was not scientifically discoverable. As has been

       discussed, our supreme court has expressed concern that plaintiffs should not be 'held to a

       standard of knowing the inherently unknowable.' " Id. ¶ 29 (quoting Nolan, 85 Ill. 2d at 171).

¶ 20          Janousek asserts that as in Mitsias, his inability to discover this second cause of his injury

       tolls the statute of limitations. We disagree. First, unlike in Mitsias where scientific research

       revealed a claim otherwise unknown, Janousek's claim that defendants aided and abetted the

       Slotkys' breach of their fiduciary duties was not “unknowable.” 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 disqualify Katten 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

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       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. Janousek knew 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.

¶ 22          Blue Water Partners, Inc. v. Mason, 2012 IL App (1st) 102165 and Carlson v. Fish, 2015

       IL App (1st) 140526 are illustrative. In Blue Water, the plaintiffs sued their former partners

       alleging, among other claims, wrongful diversion of business opportunities and breach of

       promise. Blue Water, 2012 IL App (1st) 102165, ¶ 16. In short, the plaintiffs alleged that their

       business partners improperly formed a company to directly compete with the company plaintiff

       and defendants had formed earlier. Id. ¶ 17. The trial court ruled in defendants' favor, finding

       that plaintiffs extinguished their claims against defendants when both parties signed a series of

       documents releasing the other from all claims. Id. ¶ 18. Plaintiffs then sued their attorneys

       alleging they committed legal malpractice by assisting defendants in creating the competing

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       company. Id. ¶ 23. The trial court found the legal malpractice claim time-barred because when

       plaintiffs signed the release they knew or should have known that defendants engaged in

       purportedly wrongful conduct by helping plaintiffs' former partners incorporate the competing

       company. Id. ¶ 32. In affirming the trial court, the appellate court held that the limitations period

       on plaintiff's claim against his lawyer began at the same time as his claim against his former

       partner because the two claims were inseparable. Id. ¶ 67.

¶ 23          In Carlson, the plaintiff settled a dispute with his two business partners but later decided

       that the settlement was inadequate and that his partners had defrauded him. Carlson, 2015 IL

       App (1st) 140526. More than two years later, the plaintiff filed a legal malpractice complaint

       against his lawyers for their representation in the settlement negotiations. Id. ¶ 17. The circuit

       court granted defendants' motion to dismiss on statute of limitations grounds, finding that the

       cause of action accrued when the plaintiff knew he had been injured and identified his former

       partners as the cause, an event more than two years before he filed his malpractice claim. Id. ¶

       19. We affirmed the dismissal. Plaintiff asserted the discovery rule suspended the statute of

       limitations while he was investigating whether he had a claim against his former partners. The

       appellate court disagreed and held that the plaintiff's knowledge that he had been injured and that

       the injury was wrongfully caused, even if he may not yet have known that his lawyers'

       representation was partly responsible or that their conduct gave rise to a legal malpractice cause

       of action, commenced the statute of limitations against them. Id. ¶ 39. The court stated that "In

       short, [plaintiff's] identification of one wrongful cause of his injuries initiates his limitations

       period as to all other causes, particularly when, as here, he claims his partners engaged in fraud

       and the defendants failed to protect him from fraud, those claims are inseparable." Id.

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¶ 24          As in Blue Water and Carlson, Janousek's knowledge of a wrongful cause of his injury,

       namely his former associates' breach of their fiduciary duties, initiates the two year statute of

       limitations. Moreover, his claims against Katten and Richard and the Slotkys are uniquely

       intertwined and inseparable, as he claims that the former aided and abetted the latter in their

       breach. Further, contrary to Janousek's contention, his diligent inquiry into the defendants' role in

       aiding and abetting the Slotkys wrongdoing does not toll the statute of limitation. As noted,

       under the discovery rule, the limitations period begins “when a person knows or reasonably

       should know of his injury and also knows or reasonably should know that it was wrongfully

       caused.” Knox College v. Celotex Corp., 88 Ill. 2d 407, 415 (1981). At that point, the injured

       party bears the burden of inquiring further as to the existence of a cause of action. Witherell v.

       Weimer, 85 Ill. 2d 146, 156 (1981). Once a plaintiff is aware of his or her wrongful injury,

       diligent inquiry will not provide a basis for tolling the statute of limitations. Mitsias, 2011 IL

       App (1st) 101126, ¶ 31. Thus, the statute of limitation began to run no later than July 2009, when

       Janousek filed his complaint against the Slotkys, more than two years before he filed his

       complaint against defendants.

¶ 25                                       Attorney-Client Privilege

¶ 26          Finally, Janousek suggests public policy should preclude attorneys from raising an

       attorney-client privilege delaying disclosure of their wrongdoing long enough to raise a statute of

       limitations defense. Specifically, Janousek asserts that defendants obstructed discovery by

       claiming that he requested documents in discovery protected by the attorney-client privilege, and

       then defended on the statute of limitations having expired in the interim. He contends that

       permitting the defendants to engage in this type of conduct will set a precedent for other

       attorneys and adversely affect the practice of law. And he contends that the attorney-client

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       privilege did not benefit the Slotkys because it exposed them to liability that otherwise could

       have been shared by defendants.

¶ 27          The attorney-client privilege refers to a client's right to refuse to disclose confidential

       communications "between attorney and client made for the purpose of obtaining legal advice."

       Genentech, Inc. v. United States International Trade Comm'n, 122 F.3d 1409, 1415 (Fed. Cir.

       1997). Thus, the privilege, which belongs to the client, may be asserted by an attorney on a

       client's behalf. The privilege precludes a client and a lawyer from being required to produce

       privileged communications in, for example, the discovery process. If a communication is

       privileged, it is absolutely privileged, regardless of need, hardship, or cost. Leah M. Christensen,

       A Comparison of the Duty of Confidentiality and the Attorney-Client Privilege in the U.S. and

       China: Developing a Rule of Law, 34 T. Jefferson L. Rev. 171, 176 (2011). The attorney-client

       privilege raises the possibility that a court may not become aware of all of the facts in a case and

       may actually prevent the discovery of the truth. Id. But that is hardly a trade-off given the

       centrality of the attorney-client privilege to an open and just legal system. Thus, contrary to

       Janousek's argument, public policy weighs in favor of protecting attorney-client communications

       over mandating disclosure of documents deemed by the client to be privileged.

¶ 28          Furthermore, we disagree with Janousek's contention that any purported delay in turning

       over documents or responding to discovery requests precluded him from uncovering the role

       defendants may have played in assisting the Slotkys in breaching their fiduciary duties. As noted,

       Janousek knew that defendants had represented BIG and the Slotkys for many years and knew by

       July 2009 that the Slotkys had formed BIG III, which he contends in his underlying lawsuit

       improperly competed with and usurped opportunities from BIG. Richard's name appeared on

       BIG III's articles of organization, which are of public record. Thus, although documents

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       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.

¶ 29          Affirmed.

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