Landscaping Co. Gets Clipped: Malpractice Action Time-Barred and Fraudulent Concealment Claim Rejected | Hinshaw & Culbertson – Lawyers for the Profession®
An Illinois appeals court ruled that plaintiffs’ malpractice lawsuit was statute barred because plaintiffs knew, or reasonably should have known, of their undue damage more than two years prior to filing. The court also dismissed plaintiffs’ fraudulent cover-up suit. Another division of the same court previously (and accurately) stated: “[t]Applying a statute of limitations, especially on unlawful acts, can be difficult, technical and, as this case shows, fatal for those who do not adequately foresee their possibility. “Carlson v. Fish, IL App 2015 (1.) 140526, 1 (Hyman, J.).
Plaintiffs, County Line and its owner (Collins) were embroiled in a contract dispute with the Glencoe Park District (the park). In September 2013, County Line filed a breach of contract complaint against the park, demanding around $ 75,000. The park filed a counterclaim for breach of contract. County Line was represented by a variety of attorneys throughout the case.
On May 29, 2014, the defendant (Defendant) attended a status hearing and appealed to the court despite not filing an appearance for County Line. The defendant told the court that he had spoken to Collins and was reviewing the file. The court continued the case through June 10, 2014, and ordered County Line to file an appearance by then. On June 10, 2014, the defendant requested another sequel and the case continued through June 18, 2014. On June 18, 2014, the defendant reappeared but failed to appear, and Collins was present in court. After the status hearing on June 18, 2014, the defendant raised the prospect of reaching an agreement with the park’s attorney. The parties discussed a settlement with a one-time payment of $ 17,500 to County Line. The park’s attorney informed the defendant the next day that the park agreed to the settlement. The attorney emailed the defendant a clearance that Collins was supposed to sign by June 24th so the court could dismiss the case to the next scheduled status on June 26th, 2014.
On June 24, 2014, the park’s attorney was contacted by an attorney named Joshua Slade, who told him that Collins had spoken to him about representing County Line. Slade stated that he had no knowledge of a settlement. The park’s attorney then contacted the defendant, who was unaware that Collins was contacting other lawyers. The defendant stated that he had sent the release to Collins by June 24, but could not contact him. On June 26, 2014, another attorney (Zohaib Ali) filed an appearance for County Line. Ali stated that he was not aware of an agreement and requested a continuation. The case continued through July 24, 2014. On July 1, 2014, the park filed a motion for enforcement of the oral settlement agreement and for sanctions. County Line submitted a response that denied there was any settlement. County Line argued that the defendant had no authority to make settlement offers on County Line’s behalf. County Line’s response was backed up by Collins’ affidavit acknowledging that he and the defendant had discussed the possibility of a settlement with the park’s attorney, but Collins did not believe the case would be resolved when he called the court on June 18, left that his attorney forwarded the park’s motion to enforce settlement and sanctions on August 4, 2014. Collins claimed that it was at this time that he first “read and reviewed”[ed] the alleged settlement agreement that [was discussed] on June 18, 2014. “
On September 23, 2014, the court granted the park’s motion to enforce the settlement and impose sanctions. The court found that Collins’s affidavit was not credible and that Collins had changed his mind following the agreement. Alternatively, the court found that Collins had ratified the defendant’s actions for settlement in settlement talks. County Line appealed. On December 23, 2015, the court upheld the court’s finding that the parties had entered into an enforceable settlement agreement and ratified Collins. However, the court overturned the court’s sanctions order. County Line, 2015 IL App (1.) 143776, ¶37. In custody, the court dismissed the case on July 14, 2016, unscathed.
On October 26, 2016, plaintiffs filed this lawsuit for unlawful conduct. In their amended complaint, they alleged that the defendant had entered into settlement negotiations with the park on June 18, 2014 “on his own initiative and to decide”. Plaintiffs alleged that the defendant never informed Collins of the settlement offer or his acceptance. That defendant “fraudulently concealed … that he had entered into the settlement agreement” and instead told Collins that he was not representing County Line. Plaintiffs alleged that Collins did not become aware of a cause of action against the defendant until December 23, 2015. The appeals court upheld the court’s order to enforce the settlement. The plaintiffs alleged that the deadline for bringing charges against the defendant for the alleged cover-up had been extended to December 23, 2020.
In compensation, the plaintiffs alleged that they had been forced to accept a nominal settlement and charged attorney fees to appeal the court order to enforce the settlement. The plaintiffs alleged that they would not have suffered this damage without the alleged conduct of the defendant. The defendant’s motion to dismiss, argued that plaintiffs should have known of their violation by September 23, 2014, when the court issued its order to enforce the settlement. The plaintiffs thus had until September 23, 2016 to file their complaint about misconduct. Since they filed their complaint more than two years later, their claims were time barred. The court denied the request. The defendant filed a re-examination request, which was granted, and the case was dismissed without prejudice.
The appeals court upheld. The court first found that illegal activity in Illinois “must be commenced within two years of the date the person filing the lawsuit knew or should have known of the violation for which damages are sought.” 735 ILCS 5 / 13-214.3 (b). This provision contains the discovery rule which “sets the beginning of the limitation period until the injured party knows or should reasonably know and reasonably knows or should reasonably know that the infringement was wrongly caused”. Khan v Deutsche Bank AG, 2012 IL 112219, ¶20. The court then stated:
It is important that knowing that an injury was wrongly caused is not the same as knowing the negligent behavior of a particular defendant or knowing that there was a cause for action. (Emphasis in the original.) Rather, this knowledge exists when there is an injury. A person “has sufficient information about his injury and its cause to allow a reasonable person to investigate to determine whether it is actionable behavior.” At this point the statute of limitations “begins to run and the party is obliged to conduct further inquiries to determine whether a criminal error has been committed.” [internal citations omitted].
The court ruled that plaintiffs’ violation resulted from the June 18, 2014 settlement agreement. Even though Collins was unaware of the settlement on June 18, he admitted in his affidavit that he knew of the alleged settlement on August 4, 2014. The court recognized that “[f]or for the purpose of an illegal act, a client is not considered injured unless and until he has suffered a loss for which he can claim financial compensation. “Northern Illinois Emergency Physicians, 216 Ill.2d at 306. Generally under the Illinois Adverse Verdict Rule, that loss occurs when the plaintiff has received a negative judgment or a dismissal of the underlying complaint due to the attorney’s negligence. See eg Lucey v Law Offices of Pretzel & Stouffer, 301 Ill.App.3d 349, 356 (1998). Here the court enforced the settlement on September 23, 2014. The plaintiffs should therefore have had sufficient knowledge that they had suffered an injury and about their possibly unlawful cause on September 23, 2014. At that point, plaintiffs had a duty to further inquire whether a criminal offense had been committed. The limitation period therefore began on September 23, 2014, and plaintiffs had until September 23, 2016 to file their misconduct complaint, because the plaintiffs failing to do so, their complaint was statute barred.
Plaintiffs then argued a fraudulent cover-up, which plaintiffs often use in misconduct when faced with a statute of limitations. They alleged that the defendant was fraudulently concealing that he was serving as County Line’s attorney and settling the case without authority or consent. Plaintiffs alleged that under Section 13-215 of Illinois’ Fraudulent Concealment Act, they had five years from the date they learned of a violation of the lawsuit. The plaintiffs asserted that the five-year limitation period began on June 18, 2014 at the earliest. The court rightly found that concealment can only be achieved by positive acts or representations “designed to weigh or induce” an applicant to delay the filing of a lawsuit. Barratt v. Goldberg, 296, Fig. 3d 252, 257 (1998). However, the court recognized that there is a well-regulated law in Illinois “that if the plaintiff discovers the fraudulent concealment and has reasonable time within the relevant statute of limitations” to file a lawsuit, section 13-215 does not apply for extension The statute of limitations applies to the action. The court concluded that, despite the alleged concealment of the accused, the plaintiffs had sufficient knowledge of an unjustifiably caused violation no later than September 23, 2014, when the court enforced the settlement. The plaintiffs still had enough time to file a complaint within the two-year limitation period, which only expired on June 18, 2016. The five-year fraudulent concealment law therefore did not apply.
Importance of the decision
This case is noteworthy in that the court ruled that the plaintiff’s wrongdoing was statute-barred because plaintiffs (objectively) knew or should reasonably have known of their wrongly caused violations more than two years prior to filing the lawsuit. Plaintiffs’ fraudulent cover-up suit was also denied because they still had sufficient time to bring suit within the original statute of limitations when they admittedly discovered the alleged “cover-up”. Experienced lawyers and dabblers would be well advised to heed Justice Hyman’s warning cited in the brief summary above.
County Line Nurseries & Landscaping, Inc. v Kenney, 2020 IL App (1st) 200615 (11/20/20)