Suburban Real Estate Services, Inc. v. Carlson ( 2022 )

2022 IL 126935IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 126935)
SUBURBAN REAL ESTATE SERVICES, INC., et al., Appellees, v.
WILLIAM ROGER CARLSON JR. et al., Appellants.
Opinion filed January 21, 2022.
JUSTICE THEIS delivered the judgment of the court, with opinion.
Chief Justice Anne M. Burke and Justices Garman, Neville, Michael J. Burke,
Overstreet, and Carter concurred in the judgment and opinion.
OPINION
¶1 In this case, we consider whether a legal malpractice claim was barred by the
two-year statute of limitations in section 13-214.3(b) of the Code of Civil Procedure
(735 ILCS 5/13-214.3(b) (West 2016)). The Cook County circuit court found that
the limitations period on the claim had expired because plaintiffs’ payment of
attorney fees to new counsel constituted an injury triggering the statute. The
appellate court reversed, finding that no realized injury that would trigger the
limitations period existed until there was an adverse judgment in the underlying
action. 2020 IL App (1st) 191953. For the following reasons, we affirm the
appellate court’s judgment.
¶2 BACKGROUND
¶3 Bryan Barus is the principal and sole owner of Suburban Real Estate Services,
Inc. (Suburban), a commercial real estate management company (collectively
plaintiffs). In February 2006, Suburban and another company, ROC, owned by
Michael Siurek, formed a new company named ROC/Suburban LLC
(ROC/Suburban). The new company acted as a vendor to Suburban, supplying
commercial property management services. Under the operating agreement,
Suburban and ROC each owned a 50% interest in ROC/Suburban.
¶4 In May 2010, Barus retained William Roger Carlson Jr. and his law firm
Carlson Partners, Ltd., (collectively defendants) for legal advice in unwinding
Suburban’s relationship with ROC/Suburban. After obtaining defendants’
assistance, Barus sent a “break-up” letter to Siurek, notifying him of the steps he
planned to take to terminate Suburban’s relationship with ROC/Suburban.
¶5 In August 2010, ROC sued Suburban, alleging that the actions taken by
Suburban, by and through Barus, pursuant to the “break-up” letter constituted a
breach of fiduciary duty owed to ROC/Suburban. In October 2010, Barus retained
the law firm of Gaspero & Gaspero, Attorneys at Law, P.C. (Gaspero Law Firm),
to defend Suburban in the ROC litigation.
¶6 In June 2015, after a bench trial, the trial court entered judgment for ROC. The
court found that Suburban, through Barus, had breached its fiduciary duties and
ordered it to pay ROC 50% of the fair value of the assets that Barus had improperly
transferred out of ROC/Suburban. The court awarded damages against Suburban in
the amount of $336,652.26.
¶7 Thereafter, in May 2016, plaintiffs filed a legal malpractice action against
defendants. In their first amended complaint, they alleged that defendants were
negligent in that they failed to properly advise plaintiffs of the proper steps to obtain
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a judicial dissolution of ROC/Suburban, recommended and/or approved the self-
help actions that resulted in plaintiffs breaching fiduciary duties owed to
ROC/Suburban, and failed to advise them of the consequences of these actions.
They further alleged that, as a direct and proximate cause of defendants’
negligence, they suffered damages in excess of $600,000.
¶8 Defendants moved for summary judgment pursuant to section 2-1005 of the
Code of Civil Procedure (735 ILCS 5/2-1005 (West 2018)), asserting that the legal
malpractice claim was barred by the two-year statute of limitations (735 ILCS 5/13-
214.3(b) (West 2018)). They argued that the plaintiffs sustained an injury resulting
from defendants’ alleged negligence beginning in November 2010, when they
retained new counsel and began paying them attorney fees. Defendants argued
plaintiffs knew they were injured in April 2013 at the latest, when the trial judge in
the underlying action told plaintiffs’ new counsel that a malpractice action was a
certainty and when plaintiffs sought advice about whether a malpractice claim
should be filed.
¶9 In support, defendants attached various exhibits, including the deposition
testimony of both Carmen and Lisa Gaspero of the Gaspero Law Firm. According
to their testimony, at a pretrial settlement conference in April 2013, the trial judge
made it clear to Carmen and Lisa Gaspero that he would likely find Barus liable for
breach of fiduciary duty if the ROC lawsuit went to trial. The court also voiced its
belief that the attorney representing Barus in June 2010 “one hundred percent”
committed malpractice. After the pretrial conference, the Gasperos consulted with
a lawyer specializing in legal malpractice claims to evaluate a potential claim
against defendants. That lawyer advised them to wait until the ROC litigation was
resolved to file a claim.
¶ 10 Based on this evidence, defendants argued that plaintiffs knew or should have
known of their injury and that it was caused by the alleged negligence of defendants
no later than April 2013. Accordingly, defendants maintained that this action,
commenced in May 2016, was barred because it was brought more than two years
after the statute of limitations began to run.
¶ 11 In response, plaintiffs argued that, if Suburban had prevailed in the underlying
lawsuit, defendants’ advice could not have caused any pecuniary injury. Thus,
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plaintiffs maintained that the cause of action did not accrue until June 2015, when
a judgment was entered in the underlying litigation in favor of ROC.
¶ 12 The trial court granted summary judgment in favor of defendants, finding that
plaintiffs had notice of the malpractice claim as early as 2010, when ROC filed the
underlying lawsuit, and no later than April 2013, when the trial judge told counsel
that plaintiffs’ malpractice action was a certainty and when counsel sought advice
as to when a malpractice action should be filed.
¶ 13 The appellate court reversed and remanded, finding that plaintiffs timely filed
their legal malpractice claim. 2020 IL App (1st) 191953, ¶¶ 34, 36. The court
reasoned that plaintiffs did not suffer a realized injury until the trial court found a
breach of fiduciary duty and entered a judgment against them in June 2015. Id. ¶ 26.
The court further rejected defendants’ theory that plaintiffs’ payment of attorney
fees purportedly related to defendants’ negligent advice constituted an injury,
triggering the statute of limitations. Id. ¶¶ 27-32. We subsequently allowed
defendants’ petition for leave to appeal. Ill. S. Ct. R. 315 (eff. Oct. 1, 2020).
Additionally, we allowed the Attorneys’ Liability Assurance Society Ltd. to file an
amicus curiae brief in support of defendants’ position. Ill. S. Ct. R. 345 (eff. Sept.
20, 2010).
¶ 14 ANALYSIS
¶ 15 The issue before this court is whether summary judgment in favor of defendants
was appropriate because plaintiffs’ legal malpractice claim was time-barred under
section 13-214.3(b) of the Code of Civil Procedure (735 ILCS 5/13-214.3(b) (West
2016)). Summary judgment is proper when “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 a judgment as
a matter of law.” 735 ILCS 5/2-1005(c) (West 2018). 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). Our standard of review is de novo.
Cohen v. Chicago Park District, 2017 IL 121800, ¶ 17.
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¶ 16 Section 13-214.3(b) provides that a claim for legal malpractice accrues when
the client “knew or reasonably should have known of the injury for which damages
are sought.” (735 ILCS 5/13-214.3(b) (West 2018)). Thus, to discern when a claim
accrues, we identify the injury and then determine when the injury was discovered
or should have been discovered. Id. Much of the parties’ disagreement in this case
stems from a misunderstanding of the nature of the injury in a legal malpractice
claim. Accordingly, we begin our analysis by explaining what is meant by “injury”
in the context of a legal malpractice claim.
¶ 17 The “injury” in a legal malpractice claim is not a personal injury or the
attorney’s negligent act. “Rather, it is a pecuniary injury to an intangible property
interest caused by the lawyer’s negligent act or omission.” Northern Illinois
Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill. 2d 294, 306
(2005). Thus, in a legal malpractice action, a client is not considered “injured”
unless and until he has suffered a loss for which monetary damages may be sought.
Id. No action can be sustained against the attorney unless that negligence
proximately caused damage to the client. Id. at 306-07.
¶ 18 “The existence of actual damages is therefore essential to a viable cause of
action for legal malpractice.” Id. at 307. “Unless the client can demonstrate that he
has sustained a monetary loss as the result of some negligent act on the lawyer’s
part, his cause of action cannot succeed.” Id. Demonstrating the existence of
damages requires “more than supposition or conjecture,” and where damages are
speculative, no cause of action for malpractice exists. Id.¶ 19 This court has often applied this legal framework to ascertain when a cause of
action accrues in the typical case, where an attorney’s negligence allegedly
occurred during the attorney’s representation of a client in underlying litigation. As
this court has explained, no injury exists, and therefore no actionable claim arises,
unless and until the attorney’s negligence results in the loss of the underlying cause
of action. See, e.g., Tri-G, Inc. v. Burke, Bosselman & Weaver, 222 Ill. 2d 218, 226
(2006). In this type of legal malpractice claim, commonly referred to as a “ ‘case
within a case,’ ” the allegation is that the client suffered a monetary loss and but for
the attorney’s negligence the client would have recovered in the underlying
litigation. Id. Thus, the injury does not accrue, and the statute of limitations does
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not begin to run, until a judgment or settlement or dismissal of the underlying
action. Id.¶ 20 In some cases, as in this case, the alleged negligence relates to legal advice
given by a transactional attorney during his representation of a client. After
allegedly following counsel’s legal advice, the client is subsequently sued by a
party involved in the transaction. Thus, to determine when a legal malpractice claim
accrued, we must first discern the alleged injury for which damages are sought.
¶ 21 Here, plaintiffs alleged that defendants were negligent in recommending and/or
approving the self-help actions taken in unwinding a company. Further, plaintiffs
alleged defendants’ negligence resulted in a lawsuit being filed against them and
an adverse finding that plaintiffs breached fiduciary duties owed to that company.
As a result of the adverse finding, plaintiffs alleged that they suffered a monetary
loss that but for defendants’ negligence they would not have otherwise owed.
Accordingly, plaintiffs maintain that the judgment in the underlying litigation gave
rise to actual damages directly attributable to the negligent advice of counsel.
Plaintiffs rely on Lucey v. Law Offices of Pretzel & Stouffer, Chartered, 301 Ill.
App. 3d 349 (1998), and Warnock v. Karm Winand & Patterson, 376 Ill. App. 3d
364 (2007), in support of their position.
¶ 22 We find that these cases involve similar circumstances to plaintiffs’ claim and
support plaintiffs’ position that their claim was timely filed. In Lucey, the plaintiff
sought legal advice regarding whether he could solicit clients from his current
employer before resigning to start his own company. Lucey, 301 Ill. App. 3d at 351.
After following the advice, the plaintiff was sued by the former employer. Id. at
352. The plaintiff eventually hired other counsel to represent him in that lawsuit.
While the lawsuit by the former employer was pending, the plaintiff sued the
defendant law firm for malpractice. Id.
¶ 23 The appellate court held that the legal malpractice action did not accrue until
the former employer’s lawsuit against the plaintiff concluded. Id. at 358. Since it
was possible that the plaintiff could prevail against the former employer, the
damages were “entirely speculative until a judgment is entered against the former
client or he is forced to settle.” Id. at 355. Thus, the plaintiff would not sustain any
“actual” damages unless and until the former employer’s lawsuit was resolved
adversely to him. Id. at 359. The court also reasoned that requiring a client to bring
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a provisional malpractice suit would undermine judicial economy and the attorney-
client relationship. Id. at 357.
¶ 24 Similarly, in Warnock, 376 Ill. App. 3d at 365, the defendant law firm
represented the plaintiffs in a real estate transaction. The plaintiffs alleged that the
law firm failed to properly draft certain letter agreements during the sale of their
property, which ultimately resulted in an adverse judgment in subsequent litigation
brought by the buyers for unjust enrichment. Id. at 366-67. Specifically, the trial
court found that the letters drafted by their attorneys rendered the liquidated
damages clause in their real estate contract unenforceable. Id. at 366.
¶ 25 The appellate court found that, while the filing of the buyer’s lawsuit may have
alerted the plaintiffs to the possibility that the letter agreements were incorrectly
drafted and motivated plaintiffs to hire new counsel, plaintiffs had no actionable
damages prior to the adverse judgment from the circuit court, which found the letter
agreements were drafted in contravention of Illinois law. Id. at 371. Accordingly,
the Warnock court concluded that the statute of limitations did not begin to run until
the adverse judgment was entered by the court. Id.
¶ 26 These cases aptly illustrate the rule that “[u]nless the client can demonstrate that
he has sustained a monetary loss as the result of some negligent act on the lawyer’s
part, his cause of action cannot succeed.” Northern Illinois Emergency Physicians,
216 Ill. 2d at 307. It is “the realized injury to the client, not the attorney’s
misapplication of expertise, [which] marks the point in time for measuring
compliance with a statute of limitations period.” Hermitage Corp. v. Contractors
Adjustment Co., 166 Ill. 2d 72, 90 (1995).
¶ 27 Defendants maintain that plaintiffs’ payment of attorney fees to new counsel
constituted an injury that triggered the statute of limitations for a legal malpractice
claim—regardless of any adverse judgment or settlement. At the latest, they argue
the cause of action accrued in 2013 when they were told by the trial judge in a
pretrial conference that plaintiffs’ counsel committed malpractice and when
plaintiffs researched the possibility of filing a malpractice claim. In support,
defendants rely on cases like Nelson v. Padgitt, 2016 IL App (1st) 160571,
Construction Systems, Inc. v. FagelHaber, LLC, 2019 IL App (1st) 172430, and
Zweig v. Miller, 2020 IL App (1st) 191409.
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¶ 28 These decisions merely stand for the proposition that in some cases, prior to a
judgment, there may be an actual loss for which the client could seek monetary
damages attributable to attorney neglect. In each decision, the client suffered a
monetary loss attributable to the attorney’s neglect, and the client discovered the
injury when hiring new counsel to mitigate that loss.
¶ 29 For example, in Nelson, the client hired an attorney to negotiate an employment
contract. The contract stipulated that the client would lose his salary and
commission on termination for cause. Nelson, 2016 IL App (1st) 160571, ¶ 15. The
client was subsequently terminated for cause, resulting in a loss of salary and
commission under the agreement. Id. ¶ 4. When the client filed suit against his
employer for breach of contract and fraud, the court granted summary judgment in
favor of the employer. Id. ¶ 6. Thereafter, the client filed a legal malpractice action
alleging that the attorney failed to negotiate an employment contract that was in his
best interest. Id. ¶ 7.
¶ 30 The appellate court found that the client had been injured when he was fired
and was told that he was being terminated under the terms of the employment
agreement. Id. ¶¶ 15-17. As the court explained, “Nelson suffered an economic
injury on his firing because the agreement also stipulated a loss of salary and
commission on termination for cause.” Id. ¶ 15. At the latest, he knew when he filed
the lawsuit against his employer that there was a connection between his financial
loss and the attorney’s work on the employment agreement. Id. The client knew
that “his economic loss from the firing stemmed directly from [the employer’s]
reliance on the employment agreement, which had been negotiated by [the attorney]
and plainly did not include the economic protections that [the client] allegedly had
instructed [the attorney] to include.” Id. ¶ 22. He did not need the adverse judgment
to know that he had been injured by the attorney. Id.
¶ 31 Similarly, in Construction Systems, Inc., the client sought an attorney’s
assistance to perfect a mechanic’s lien. 2019 IL App (1st) 172430, ¶ 4. The attorney
failed to properly perfect the lien and failed to notify the lender who financed the
construction of the property of its lien. The lender subsequently recorded a
mortgage lien on the property. Id. Thereafter, the client joined an ongoing lawsuit
against the owner of the property related to the priority and validity of various liens
on the property. It hired new counsel to attempt to mitigate the lost priority of its
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lien and to protect its interest in enforcing it. Id. ¶ 6. The client ultimately settled
his underlying lien claim for less than the lien amount. He then filed a legal
malpractice action against his attorney alleging that his failure to properly perfect
the lien resulted in his lien being subordinate to the lender’s mortgage lien. Id. ¶ 8.
¶ 32 The appellate court rejected the client’s argument that the injury was unknown
until the underlying lien litigation was settled. Id. ¶¶ 26-29. Although the client did
not know the extent of his damages, the court found that the client had suffered a
loss directly attributable to the attorney’s negligence and that he was aware of the
loss when the client paid legal fees to new counsel in the litigation he joined to
mitigate the error in failing to properly perfect the lien. Id. ¶ 29.
¶ 33 Lastly, in Zweig, 2020 IL App (1st) 191409, ¶ 5, the plaintiff retained a law
firm to review documents for a business investment. Under the deal, plaintiff would
make a $2 million capital contribution to the business in exchange for a minority
ownership interest in it. Id. Subsequently, the plaintiff discovered that, contrary to
his intentions, the documents he signed allowed for his investment to be distributed
to the members of the business’s holding company. Id. ¶ 9. The plaintiff hired new
attorneys and commenced litigation against the holding company to recoup his loss.
Id. ¶ 13. The plaintiff settled the holding company action and then sued his original
attorney for malpractice, alleging that the attorney’s negligence was a direct cause
of the legal expenses he incurred to rectify the damage he sustained when the
holding company distributed his $2 million. Id. ¶¶ 15, 19.
¶ 34 The appellate court found that the plaintiff’s cause of action accrued at the latest
when he filed suit to compel the holding company members to rectify the damage
he sustained when it distributed his $2 million and to achieve the result he initially
sought. Id. ¶ 35. The court further found that the outcome of the underlying
litigation would not have negated the injury caused by defendant’s alleged
malpractice. Id.
¶ 35 In each of these cases, there was a pecuniary loss directly attributable to an
attorney’s neglect prior to any adverse judgment or settlement. In Nelson, there was
a loss of salary and commission directly attributable to the drafting of the
employment agreement; in Construction Systems, Inc., there was a loss of lien
priority directly attributable to the failure to properly perfect the lien; and in Zweig,
there was a loss of $2 million to the holding company in direct contravention of the
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plaintiff’s directive. Further, in each case, the clients knew or should have known
of the loss when they took affirmative action to mitigate the damages incurred by
the attorneys’ neglect.
¶ 36 In contrast, this is not a case where, prior to any adverse ruling, plaintiffs knew
or should have known they had suffered a monetary loss caused by defendants’
negligent advice. Merely hiring new counsel to defend against a lawsuit challenging
the attorney’s legal advice and incurring fees does not, standing alone, trigger a
cause of action for malpractice. By providing legal representation, an attorney is
not guaranteeing the client he or she represents that the client will never be sued or
agreeing to indemnify the client if it is sued. See Jackson Jordan, Inc. v. Leydig,
Voit & Mayer, 158 Ill. 2d 240, 253 (1994) (holding that “[i]t would be a strange
rule if every client were required to seek a second legal opinion whenever it found
itself threatened with a lawsuit”); Lucey, 301 Ill. App. 3d at 356 (rejecting the
assertion that “subsequently incurred attorney fees will, in every case,
automatically give rise to a cause of action for legal malpractice against former
counsel”).
¶ 37 Although plaintiffs may have been alerted in April 2013 to the trial court’s
assertion that counsel misadvised them in unwinding the company, the possibility
of damages would not be actionable unless and until the ROC litigation ended
adversely to plaintiffs with a finding that plaintiffs breached their fiduciary duties
to ROC/Suburban. It was not until then that plaintiffs became obligated to pay a
sum that they otherwise would not have had to pay but for defendants’ alleged
negligence. Had the action resulted in an outcome favorable to plaintiffs, no cause
of action for legal malpractice would have accrued. See Northern Illinois
Emergency Physicians, 216 Ill. 2d at 307 (where damages are speculative, no cause
of action for malpractice exists).
¶ 38 CONCLUSION
¶ 39 In sum, the statute of limitations on plaintiffs’ legal malpractice claim began to
accrue in June 2015 when the trial court in the underlying case entered judgment
against plaintiffs. Plaintiffs timely filed their complaint less than a year later in May
2016. Accordingly, we affirm the judgment of the appellate court, which reversed
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the trial court’s summary judgment order and remanded for further proceedings.
¶ 40 Appellate court judgment affirmed.
¶ 41 Circuit court judgment reversed.
¶ 42 Cause remanded.
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