Court Opinion

ID: 3147085
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:26:04.108821+00
Date Added: 2024-06-11T12:28:45.239638
License: Public Domain

THIRD DIVISION
                                                                       MARCH 31, 2008

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ROBERT GOLDSTEIN and                                           )     Appeal from the
DEBORAH J. GOLDSTEIN,                                          )     Circuit Court of
                                                               )     Cook County.
        Plaintiffs and Counterdefendants-Appellees,            )
                                                               )
        v.                                                     )     No. 03 CH 20274
                                                               )
DABS ASSET MANAGER, INC., an Illinois                          )
Corporation, ALLEN R. HOCHFELDER and                           )
STEPHANIE HOCHFELDER,                                          )     Honorable
                                                               )     Judge David R. Donnersberger,
        Defendants and Counterplaintiffs-Appellants.           )     Judge Presiding.

        JUSTICE CUNNINGHAM delivered the opinion of the court:

        The plaintiffs Robert and Deborah Goldstein filed a lawsuit for preliminary injunction in the

circuit court of Cook County against Allen and Stephanie Hochfelder and DABS Asset Manager, Inc.

(DABS), to enjoin them from filing a lawsuit against Super Wash, Inc., and its owner, Robert Black.

The Hochfelders filed a counterclaim against the Goldsteins, arguing that they breached their fiduciary

duties to DABS and that Robert Goldstein committed legal malpractice as the attorney for DABS.

The Hochfelders argue that the trial court erred by granting the Goldsteins’ motion for summary

judgment on count I of the counterclaims brought by the Hochfelders and additionally by dismissing

count IV of the counterclaim. In count I, the Hochfelders sought to recover their legal fees expended

in defending against the Goldsteins’ lawsuit for injunction. In count IV, they assert that Robert

Goldstein committed legal malpractice. For the following reasons, we affirm the judgment of the

circuit court.
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                                         BACKGROUND

       The plaintiffs, Robert and Deborah Goldstein and the defendants, Allen and Stephanie

Hochfelder are all shareholders in the defendant corporation, DABS Asset Manager, Inc. (DABS).

All parties allege that they are directors and shareholders of DABS. However, the record does not

specify the positions held by each individual. Under the shareholder agreement, the Hochfelders

owned 740 shares of the company and the Goldsteins owned 240 shares. Pursuant to the shareholder

agreement, all actions and decisions regarding the company were to be made jointly and authorized

exclusively by Robert Goldstein and Allen Hochfelder.

       DABS was also a general partner in a company known as Limavern Washes, L.P. (Limavern),

a limited partnership. Scott Hochfelder, Allen and Stephanie Hochfelder’s son, was a limited partner

of Limavern. In 1995, Limavern purchased a carwash in Lima, Ohio, from Super Wash, Inc.

Limavern hired Super Wash to manage and operate the carwash under the “Super Wash” trade name.

In the summer of 2002, Super Wash informed Limavern that it could no longer use the “Super Wash”

name unless it entered into a franchise agreement. Limavern subsequently entered into a franchise

agreement and a new management agreement with Super Wash.

        In November 2003, Allen and Stephanie Hochfelder announced their intent to have DABS

file a lawsuit against Super Wash and its owner, Robert Black. The Goldsteins opposed the lawsuit

and filed a lawsuit seeking a preliminary injunction against Allen and Stephanie Hochfelder and DABS

to enjoin them from filing a lawsuit against Super Wash and Robert Black. The Hochfelders filed a

counterclaim against the Goldsteins alleging that the Goldsteins breached their fiduciary duty to

DABS by filing the preliminary injunction action and that Robert Goldstein engaged in legal

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malpractice by drafting the original DABS shareholder agreement to give himself a disproportionate

share of control. The Hochfelders sought damages including their attorney fees for defending

themselves in the preliminary injunction lawsuit filed by the Goldsteins.

         In August 2004, the court denied the Goldsteins’ motion for preliminary injunction.

However, the Hochfelders did not commence a lawsuit against Super Wash. In the interim, Scott

Hochfelder, Stephanie and Allen’s son and a limited partner of Limavern, filed a derivative lawsuit

on behalf of Limavern against Super Wash and Robert Black. All parties involved, including the

Goldsteins and the Hochfelders, who were not individual parties to Scott’s derivative lawsuit, entered

into two confidential agreements which had the effect of settling the derivative lawsuit. After the

settlement and the circuit court’s dismissal of the Goldsteins’ lawsuit for injunction, the Hochfelders

continued to pursue counts I and IV in their counterclaim against the Goldsteins. In count I, the

Hochfelders alleged that Robert Goldstein breached his fiduciary duties by filing an action to enjoin

them from filing a lawsuit against Super Wash and Robert Black. The Hochfelders sought to recover

the legal fees they incurred in defending themselves against the Goldsteins’ injunctive action. In count

IV, the Hochfelders alleged that Robert Goldstein committed legal malpractice as the attorney for

DABS by drafting the shareholder agreement in 1995 in a manner that gave him a disproportionate

share of control in the governance of DABS.

        The Goldsteins filed a motion for summary judgment for count I of the Hochfelders’

counterclaim pursuant to section 2-1005 of the Code of Civil Procedure (735 ILCS 5/2-1005 (West

2004)), arguing that the Hochfelders could not recover attorney fees because Illinois common law

does not allow for the recovery of this type of fee. They also filed a motion to dismiss count IV

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pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2004)), arguing

that the statute of repose barred the Hochfelders’ claim for legal malpractice because Robert

Goldstein drafted the shareholder agreement in 1995 and the Hochfelders did not file their

counterclaim until 2004.

        The trial court granted the motion for summary judgment and dismissed count IV of the

counterclaim with prejudice. The court held that the Hochfelders could not recover damages for

defending themselves against the lawsuit in the counterclaim. The court also dismissed count IV of

the counterclaim and held that the claim was barred by the six-year statute of repose contained within

section 13-214.3 of the Code of Civil Procedure (735 ILCS 5/13-214.3 (West 2004)).

                                             ANALYSIS

       On appeal, the Hochfelders argue that the trial court erroneously granted summary judgment

for count I and erroneously dismissed count IV of their complaint. They argue that their claim for

attorney fees under count I is not prohibited by the American rule and, further, their legal malpractice

claim is not barred by the statute of repose. Their argument is that the Goldsteins breached their

fiduciary duty by filing the preliminary injunction action to prevent the filing of a lawsuit against

Super Wash and Robert Black. They contend that the breach caused them to incur attorney fees and

it is those fees which constitute the damages. The Hochfelders further contend that these damages

are permitted under Illinois law because they are sought in a separate counterclaim and are not a

request for damages in the preliminary injunction action. As to count IV, the Hochfelders argue that

the statute of repose does not bar their action against Robert Goldstein for legal malpractice because

the malpractice action is based on his filing the preliminary injunction action in 2003, and not the

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drafting of the shareholder agreement in 1995.

        “[Summary] judgment shall be rendered if the pleadings, depositions, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law.” 735 ILCS 5/2-1005(c) (2007). The

appellate court reviews an order granting summary judgment de novo. Morris v. Margulis, 197 Ill.

2d 28, 35, 754 N.E.2d 314, 318 (2001).

        Generally in Illinois under the American rule, a successful litigant may not recover litigation

expenses in the absence of a statute or a contractual agreement between the parties permitting

recovery of such fees. Duignan v. Lincoln Towers Insurance Agency, Inc., 282 Ill. App. 3d 262, 267,

667 N.E.2d 608, 613 (1996); Krantz v. Chessick, 282 Ill. App. 3d 322, 329, 668 N.E.2d 77, 81

(1996). However, a plaintiff may be able to recover attorney fees, “at least to the extent that they

were not incurred in the same action in which they are awarded, where the defendant’s tortious

conduct proximately caused the plaintiff to incur them.”            Calcagno v. PersonalCare Health

Management, Inc., 207 Ill. App. 3d 493, 565 N.E.2d 1330 (1991).

        In this case, the Goldsteins filed a lawsuit for a preliminary injunction against DABS and the

Hochfelders to prevent the filing of an action against Super Wash and Robert Black. The Hochfelders

then filed a counterclaim against the Goldsteins alleging that filing the lawsuit for injunction was a

breach of the Goldsteins fiduciary duty to DABS. However, while the lawsuit for injunction brought

by the Goldsteins and the counterclaim filed by the Hochfelders are separate actions, the Hochfelders

may not pursue their counterclaim for attorney fees against the Goldsteins. As the court explains in

Sorenson v. Fio Rito, 90 Ill. App. 3d 368, 372, 413 N.E.2d 47, 51 (1980), “the policy against

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awarding [attorney] fees was intended to apply only where a successful litigant seeks to recover his

costs in maintaining the lawsuit.” The Hochfelders argue that the Goldsteins’ tortious conduct (the

breach of fiduciary duty) was the filing of the lawsuit. They posit that since that conduct gave rise

to a separate action (their counterclaim), attorney fees are recoverable. Thus, they argue that their

attorney fees are appropriate damages in the lawsuit. We disagree with this reasoning.

       It is irrelevant whether the Hochfelders requested their attorney fees in a separate tort action.

The American rule prohibits recovery of the fees under these facts and circumstances. In Ritter v.

Ritter, 381 Ill. 549, 555, 46 N.E.2d 41, 44 (1943), the court reasoned that “[i]f the wrongful conduct

of a defendant causing the plaintiff to sue him would give rise to an independent tort and a separate

cause of action, there would be no end to the litigation, for immediately upon the entry of judgment

the plaintiff would start another action against the defendant for his attorney fees and expenses

incurred in obtaining the preceding judgment.”

       Further, the instant case is distinguishable from cases where a party recovers attorney fees that

were not expended in maintaining the litigation. For example in Sorenson, 90 Ill. App. 3d. at 372,

413 N.E.2d at 51, the plaintiff was allowed to recover attorney fees expended in attempting to

recover “refunds of tax penalties which were assessed against her solely as a result of the defendant's

negligence.” The court explained that the plaintiff was entitled to the fees because they were separate

from the fees accrued in the execution of the lawsuit. Sorenson, 90 Ill. App. 3d. at 371-72, 413

N.E.2d at 51. Here, the Hochfelders incurred attorney fees defending themselves in the preliminary

injunction lawsuit. All of the litigation for which they are seeking attorney fees arose from that

lawsuit. Thus, the fees they seek cannot be recovered in a separate action. The trial court correctly

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granted the motion for summary judgment.

       Next, the Hochfelders argue that the trial court erroneously held that the statute of repose

barred their claim because it was not filed within the requisite six years after the alleged malpractice

occurred. In their counterclaim, the Hochfelders pled that Robert Goldstein was the attorney for

DABS when he drafted the shareholder agreement that gave him a disproportionate share of control

in the governance of DABS. They contend that Robert Goldstein breached his duty of loyalty and

care and used his disproportionate share of control of DABS to file the preliminary injunction action

against them.

       “Section 2-619(5) of the [Code of Civil Procedure] authorizes the dismissal of a complaint

for failure to file within the repose period. 735 ILCS 5/2-619(5) (West 2000).” O’Brien v. Scovil,

332 Ill. App. 3d 1088, 1090, 774 N.E.2d 466, 467 (2002). “[A] statute of repose extinguishes the

action itself after a fixed period of time, regardless of when the action accrued.” DeLuna v. Burciaga,

223 Ill. 2d 49, 61, 857 N.E.2d 229, 237 (2006). “The attorney malpractice statute of repose

designates that an action may not be commenced more than six years after the date on which the

negligent act or omission occurred. 735 ILCS 5/13-214.3(c) (West 2000).” O’Brien, 332 Ill. App.

3d at 1090, 774 N.E.2d at 467. The period of repose “begins to run on the last date on which the

attorney performs the work involved in the alleged negligence.” Fricka v. Bauer, 309 Ill. App. 3d 82,

86-87, 772 N.E.2d 718-22 (1999).

       In a transactional setting, the statute of repose may cut off a malpractice action before it

accrues. Lucey v. Law Offices of Pretzel & Stouffer, Chartered, 301 Ill. App. 3d 349, 362, 703

N.E.2d 473, 482 (1998). The client is “infrequently in control of [the] outside events which call into

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question the accuracy of the legal advice he received.” Lucey, 301 Ill. App. 3d at 362, 703 N.E.2d

at 482. However, the statute of repose will still prevent the commencement of a legal malpractice

action more than six years after the date on which the negligent act occurred. Lucey, 301 Ill. App.

3d at 362, 703 N.E.2d at 482, 735 ILCS 5/13-214.3(c) (West 2000).

       In this case, the Hochfelders claim that Robert Goldstein committed legal malpractice by

drafting the shareholder agreement to allocate himself a disproportionate share of control. The

shareholder agreement was drafted in 1995 and the Hochfelders filed their counterclaim in January

2004. The statute of repose extinguished any action for legal malpractice arising out of the 1995

action in 2001. The Hochfelders argue that the filing of the lawsuit by Goldstein in 2003 coupled

with his exercise of disproportionate control of DABS was a continuation of his breach of duty and

loyalty. We do not agree. This act is insufficient to constitute a separate act that would delay

triggering the statute of repose until 2003. Their argument and counterclaim regarding Robert

Goldstein positioning himself to facilitate the alleged breach is premised upon the drafting of the

agreement in 1995. The court explained in Fricka v. Bauer, 309 Ill. App. 3d 82, 86-87, 722 N.E.2d

718, 722 (1999), that “the attorney malpractice period of repose *** begins to run on the last date

on which the attorney performs the work involved in the alleged negligence.” The last act Robert

Goldstein performed as the attorney for DABS, in relation to this claim, was the drafting of the

shareholder agreement. Nothing in the record suggests that Robert Goldstein was acting in his

capacity as attorney for DABS when he and Stephanie Goldstein initiated the preliminary injunction

proceeding. But rather, as Goldstein asserts, he was acting as a shareholder of DABS. Therefore,

the last affirmative act in which he engaged in his capacity as attorney for DABS was the drafting

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of the shareholder agreement in 1995. Thus, the statute of repose expired for that act in 2001. The

trial court correctly dismissed this count of the Hochfelders’ counterclaim.

       Accordingly, the order of the circuit court of Cook County is affirmed.

       Affirmed.

       QUINN, P.J., and GREIMAN, J., concur.

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