Zweig v. Miller

2020 IL App (1st) 191409

182 N.E.3d 159

450 Ill.Dec. 713

Arie ZWEIG, Individually and as Trustee of the Arie Zweig Self Declaration of Trust Dated June 28, 1990, Plaintiff-Appellant,

v.Gerald MILLER and Vanasco, Genelly & Miller, Defendants-Appellees.

No. 1-19-1409

Appellate Court of Illinois, First District, Fourth Division.

Opinion filed December 31, 2020

Robert D. Sweeney, John J. Scharkey, and Garrett H. Nye, of Sweeney, Scharkey & Blanchard LLC, of Chicago, for appellants.

Adam R. Vaught, Terrance P. McAvoy, and Steven R. Bonanno, of Hinshaw & Culbertson LLP, of Chicago, for appellees.

OPINION

JUSTICE LAMPKIN delivered the judgment of the court, with opinion.

¶ 1 This appeal arose from the legal malpractice action that plaintiff, Arie Zweig, individually and as trustee of the Arie Zweig Self Declaration of Trust Dated June 28, 1990, filed against defendants, Gerald Miller and Vanasco, Genelly & Miller. The trial court granted summary judgment in favor of defendants based on the court's determination that plaintiff's legal malpractice claim was barred by the two-year statute of limitations set forth in section 13-214.3(b) of the Code of Civil Procedure (Code) ( 735 ILCS 5/13-214.3(b) (West 2016)).

¶ 2 On appeal, plaintiff argues that his malpractice action was timely filed within two years of the date he settled the underlying litigation that involved a business investment where defendants had represented him. Specifically, plaintiff argues that his malpractice cause of action accrued when that underlying litigation settled because he did not suffer a pecuniary loss until the settlement occurred. He also argues that filing his malpractice action before the settlement would have been premature and contrary to the strong policy rationale against "prophylactic malpractice cases," wherein the legal malpractice case is completely dependent on the outcome of the pending underlying case. Alternatively, plaintiff argues that a genuine issue of material fact exists regarding when he knew or should have known of his injury.

¶ 3 For the reasons that follow, we hold that summary judgment in favor of defendants was proper because plaintiff failed to file his complaint within the two-year statute of limitations, which began to run, at the latest, when he knew, as a matter of law, of his injury and that it was wrongfully caused, i.e. , when he incurred legal fees directly caused by hiring additional counsel to attempt to achieve a result in the underlying case that was not achieved during defendants' representation. Accordingly, we affirm the judgment of the trial court.¹

¶ 4 I. BACKGROUND

¶ 5 In December 2010, plaintiff Zweig and his wife had dinner with their close friends, Mr. and Mrs. Bozorgi, who discussed an investment opportunity. The Bozorgis asked plaintiff to join them in a partnership, Bedford Med, LLC (Bedford), to build an ambulatory surgical center and medical office building. They asked him to invest $2 million for a 40% membership, which would be increased to 49% when the project was finished. Bedford was owned by a holding company, which was owned by four members of the Bozorgi family. Plaintiff forwarded the materials for the investment to his counsel, defendants Miller and Vanasco, Genelly & Miller, whom plaintiff had retained for his business transactions for over 20 years. One document of the materials included exhibit D, which provided:

"The Company shall distribute (in preference to any other Distribution) up to [redacted] as and when the Company receives such funds from the Investor upon the issuance of Membership Interests by the Company to the Investor (whether in a single issuance or in a series of issuances). Upon each such preferential Distribution to Magna, Investor's and Magna's Capital Contributions shall be deemed to be adjusted on a dollar for dollar basis and Magna's and Investor's Percentage Interests shall be adjusted accordingly."

¶ 6 In his deposition, plaintiff explained that English was not his native language, so he relied on defendants to adequately review the documents, advise him about the implications of the documents he would sign, and recommend any amendments so that the agreement reflected his intentions.

¶ 7 However, Miller stated in his deposition that ever since his initial representation of plaintiff in 1986, plaintiff always made his own business decisions and never sought investment advice or any financial analysis of any proposed or actual investments from defendants. Regarding the Bedford investment, plaintiff told Miller that he was contributing capital investment funds to increase the equity in Bedford, not to purchase shares of stock. Plaintiff said it was a "done deal" with his great friends and he wanted Miller to review only the issue of what kind of management control plaintiff would have as a minority owner in Bedford. The nature, scope and extent of plaintiff's engagement of defendants was limited to reviewing plaintiff's management authority. Plaintiff personally handled all other aspects of the investment on his own. Based on their long relationship, where plaintiff would negotiate defendant's invoices to remove charges for services he deemed unnecessary or not requested, Miller reviewed just the management provisions of the agreement and found them to be "pretty standard" and thought they "looked fine." Miller also looked at the contribution agreement and transfer provisions that would affect plaintiff's ability to use his trust.

¶ 8 In 2011, plaintiff signed the documents and submitted his investment funds.

He did not communicate with Miller concerning the Bedford investment until mid-2013, when plaintiff mentioned an unchallenged real estate assessment regarding Bedford and that he had not received its financial and tax information.

¶ 9 On September 25, 2013, plaintiff and Miller met with the Bozorgis and their attorney to discuss management and tax issues involving Bedford. At that meeting, plaintiff and Miller were shocked when the Bozorgis' counsel disclosed that plaintiff's investment had been taken out of Bedford and distributed to the Bozorgi holding company members. Plaintiff and Miller objected, stating that plaintiff's investment was a capital contribution, not a purchase and sale, and the Bozorgis had no authority to distribute that investment. The Bozorgis, however, asserted they had a clear right under exhibit D to take the money out.

¶ 10 According to Miller's deposition, he argued at the meeting that the contract was a contribution agreement and pointed out contract provisions that prohibited the distribution and required management approval of anything in exhibit D, which referred to only $1.6 million. The meeting became very acrimonious. Plaintiff said the Bozorgis were stealing and cheating him and he never would have agreed to such a deal. Mr. Bozorgi suggested they could sit down and resolve the problem, but his daughter remained entrenched. The meeting ended shortly thereafter. Miller walked to the parking garage with plaintiff and his wife, and plaintiff said he would try to talk to Mr. Bozorgi and "see what's going on here." Plaintiff asked Miller to talk to the Bozorgis' counsel. Miller had not read or seen exhibit D before that meeting.

¶ 11 In his deposition, plaintiff said Miller assured him that the Bozorgis had breached their contract, which prohibited the transfer of his investment. Plaintiff trusted Miller and believed the transfer was some mistake by Mr. Bozorgi's daughter and would be resolved soon. A few days after the meeting, plaintiff spoke to a business colleague who was an experienced real estate developer. When the colleague read exhibit D, he said, "Oh my God, how did you sign those things?" and told plaintiff he never should have signed the agreement. Then plaintiff gave his wife exhibit D to read, and she told him he should not have invested because exhibit D stated that the holding company would take his money.

¶ 12 Plaintiff, Miller, the Bozorgis, and their counsel had several discussions and eventually seemed to reach an agreement to resolve the matter. However, after Miller drafted a settlement agreement in the spring of 2014, the Bozorgis refused to sign it.

¶ 13 On August 8, 2014, plaintiff sued the Bozorgi holding company members and other related entities and individuals (the holding company actions), alleging breach of contract, breach of fiduciary duty, and a statutory violation. Plaintiff sought an accounting, the return of his investment and damages he suffered from his involvement with Bedford. Plaintiff hired other counsel to handle the holding company actions because defendants were not litigators. The first payment of legal fees to plaintiff's other counsel in the holding company actions was made by December 12, 2014, in the amount of $55,721.20. The holding company actions eventually consisted of four cases in court and an arbitration forum. Defendants' involvement in the holding company actions was limited to consulting and reviewing briefs.

¶ 14 On July 1, 2015, plaintiff and defendants entered an agreement to toll the statute of limitations for any malpractice action plaintiff might have against defendants. Specifically, they agreed to toll the limitation period for six months or the remainder of any applicable limitations period, whichever was longer, following the entry of final non-appealable judgments in all the holding company actions or the execution of a settlement agreement that fully and finally settled the holding company actions.

¶ 15 On September 15, 2016, the parties settled the holding company actions. Ultimately, plaintiff's other counsel in the holding company actions were paid over $2 million. All of those payments were made by R.A. Zweig, Inc., which was an S corporation wholly owned by plaintiff.

¶ 16 Defendants continued to work for plaintiff until well into 2016, when plaintiff terminated the relationship, stating that he was sending his legal work to a family member's law firm.

¶ 17...