In a surprising decision this past Fall, the Illinois Appellate Court for the First District, which covers Cook County, Illinois, ruled that the statute of limitations barred the plaintiff’s claim against his former lawyers for breach of fiduciary duty even though the plaintiff had no idea that his lawyers were involved at the time, the court determined he know or should have known about his claim.
In Scheinblum v. Schain Banks Kenny & Schwartz, Ltd., 2021 IL App (1st) 200798, Brian Scheinblum and his company, Chicago Hotel Partners, LLC, sued their former attorneys relating to their representation of Scheinblum in connection with a real estate development. The defendants represented Scheinblum in a case to enforce a contract where floors 2-9 of the Pittsfield Building in downtown Chicago were supposed to be conveyed to another entity in which Scheinblum was a beneficial owner for development into a hotel.
The defendants reached a successful settlement for Scheinblum and the property was conveyed. Unknown to Scheinblum, another attorney in the Schain Banks law firm was representing an unsuccessful bidder for the property, Lynd, in his efforts to stop development of the hotel. Lynd, counseled by the Schain Banks attorney, convinced the Alderman to spot zone the property as residential only, derailing Scheinblum’s plans to develop a hotel. Two of Scheinblum’s partners in the project sued the City of Chicago over the zoning change.
In that case, an email from the Schain Banks attorney to Lynd laying out the strategy for convincing the Alderman to rezone the property and kill the hotel development was turned over in discovery. Scheinblum then sued Schain Banks for breach of fiduciary duty for concurrently representing a client whose interests were opposed to Scheinblum’s.
Schain Banks moved to dismiss on the basis that the case was not filed within the applicable statute of limitations. The circuit court granted the motion. In a surprise ruling, the court of appeals determined that as soon as Scheinblum knew that he had been harmed and that the harm was wrongfully caused by someone (in that case, the City of Chicago), the statute of limitations on his claims against Schain Banks started to run even though Scheinblum had no way of knowing that Schain Banks had been behind Lynd’s successful efforts at rezoning.
Citing cases that stood for the proposition that the statute of limitations begins to run when the plaintiff knows or should know that it has been harmed and the harm was wrongfully caused, the court held it made no difference that Scheinblum had no reason to suspect Schain Banks’ involvement until the email was produced. The Court held that as long as Scheinblum knew someone had wrongfully caused the injury, the statute of limitations started to run and Scheinblum knew when his partners filed the lawsuit against the City of Chicago, more than two years prior to when Scheinblum sued Schain Banks.
This was not the first time an Illinois court ruled that knowledge of the harm and that it wrongfully caused is sufficient to start the statute of limitations running, but in the cases relied on by the Scheinblum court for this proposition, the plaintiff always had some information implicating the attorneys’ involvement when their statute of limitations was deemed to have started running. Shrock v. Ungaretti & Harris, Ltd., 2019 IL App (1st) 181698; Janousek v. Katten Muchin Rosenman LLP, 2015 IL App (1st) 142989; Castello v. Kalis, 352 Ill, App. 3d 376 (1dt Dist. 2004).
For further information on this case or if you have a business dispute that you would like to discuss, please contact Kristi Browne at firstname.lastname@example.org.