Court Opinion

ID: 3173523
Source: CourtListenerOpinion
Date Created: 2016-01-29 17:03:38.35485+00
Date Added: 2024-06-11T11:57:49.364386
License: Public Domain

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                             Illinois Official Reports                         Reporter of Decisions
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                                                                               this document
                                    Appellate Court                            Date: 2016.01.26 14:47:32
                                                                               -06'00'

             Janousek v. Katten Muchin Rosenman LLP, 2015 IL App (1st) 142989

Appellate Court         JAMES JANOUSEK, Individually and on Behalf of Bureaus
Caption                 Investment Group, LLC, Plaintiff-Appellant, v. KATTEN MUCHIN
                        ROSENMAN LLP and HOWARD M. RICHARD, Defendants-
                        Appellees.

District & No.          First District, Second Division
                        Docket No. 1-14-2989

Filed                   October 27, 2015

Decision Under          Appeal from the Circuit Court of Cook County, No. 12-L-7439; the
Review                  Hon. John C. Griffin, Judge, presiding.

Judgment                Affirmed.

Counsel on              Thomas Kanyock, Andrew R. Schwartz, and Karen I. Jeffreys, all of
Appeal                  Schwartz & Kanyock, LLC, of Chicago, for appellant.

                        Timothy J. Patenode, John F. Anzelc, and Evan B. Elsner, all of
                        Katten Muchin Rosenman LLP, of Chicago, for appellees.

Panel                   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 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.
¶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

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       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, 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).
¶ 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.

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¶ 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 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 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

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       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
       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 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.

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¶ 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 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.
¶ 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

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       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 limitations 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
       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 disclosed by the Slotkys in late 2010 and their depositions in early 2011 may have

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       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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