Discovery Rule and Legal Malpractice in Illinois

Understanding the Legal Malpractice Statute of Limitations and the Discovery Rule is Important.

In Illinois, if you intend on filing a lawsuit against your former attorney, the lawsuit “must be commenced within two years from the time you knew or reasonably should have known of the injury for which damages are sought.” 735 ILCS 5/13-214.3(b) (West 2012). This two-year time bar (i.e., statute of limitations) incorporates an important legal concept known as the discovery rule, which “delays commencement of the statute of limitations until the plaintiff knew or reasonably should have known of the injury and that it may have been wrongfully caused.” Dancor International, Ltd. v. Friedman, Goldberg & Mintz, 288 Ill. App. 3d 666, 672 (1997). Knowing how the discovery rule applies to your case is therefore crucial, since your failure to meet the statute of limitations can defeat your claim before it even begins.

Actual Knowledge vs. Inquiry Notice

The discovery rule applies uniquely to legal malpractice cases, as detailed in Janousek v. Katten Muchin Rosenman LLP & Howard M. Richard, 2015 IL App (1st) 142989. The case arises from a dispute between three members of an LLC that was originally formed in 1999. Howard M. Richard of Katten Muchin Rosenman LLP acted as the attorney for the LLC at the time of formation. In October 2007, relations between members were deteriorating and James Janousek’s employment with the LLC was terminated. Shortly thereafter, the other two members of the LLC formed a new LLC to compete against the old LLC, once again using Howard M. Richard to incorporate. In June of 2009, Mr. Janousek sent a demand to the original LLC and its other two members seeking compensation for breaches of their fiduciary duties. The fiduciary breach lawsuit was filed the following month.

Nearly three years later, while the fiduciary breach lawsuit was still pending, Mr. Janousek brought a malpractice suit against Howard M. Richard and Katten Muchin Rosenman LLP, alleging that they aided and abetted the fiduciary breaches in the underlying LLC dispute. Mr. Janousek attempted to argue that he was not aware of the wrongful conduct by Howard M. Richard and Katten Muchin Rosenman LLP until he received discovery documents in the fiduciary breach lawsuit in late 2010. In dismissing Mr. Janousek’s malpractice claim on summary judgment, the Court rejected this argument, holding instead that,

Janousek knew that he had been wrongfully injured no later than July 2009, and thus, even though he may not yet have known that defendants’ representation was partly responsible and that their conduct gave rise to a cause of action, the statute of limitations began to run because Janousek did have knowledge of the injury and that his injury was wrongfully caused. In short, Janousek’s claims against his partners for fraud cannot be separated from a claim that defendants failed to protect him from that very same fraud.

The Court later added that, “Janousek’s knowledge of a wrongful cause of his injury, namely his former associates’ breach of their fiduciary duties, initiates the two year statute of limitations[]” because these claims are “uniquely intertwined and inseparable.”

In other words, even if Mr. Janousek did not have actual knowledge of the cause of action for malpractice against Howard M. Richard and Katten Muchin Rosenman LLP in July of 2009, the statute of limitations for that claim nevertheless began to run at that time. Mr. Janousek’s duty to inquire into the wrongdoing of Howard M. Richard and Katten Muchin Rosenman LLP was triggered in July of 2009 merely because he was aware of the “wrongful injury” he suffered. Mr. Janousek’s knowledge of one wrongful cause of his injury (i.e., fiduciary breach) initiated his limitations period as to other causes (i.e., malpractice).

Knowable vs. Unknowable

Mr. Janousek also attempted to argue that his malpractice cause of action was “unknowable” until late 2010. Illinois courts have indeed held that plaintiffs should not be “held to a standard of knowing the inherently unknowable.” Mitsias v. I-Flow Corp., 2011 IL App (1^st) 101126. In Mitsias, six years after the plaintiff underwent shoulder surgery, new research had uncovered a link between the pain pump used during her surgery and the injury she suffered. The Appellate Court in Mitsias allowed plaintiffs product liability claim to proceed because the link between the pain pump and her injury was not “scientifically discoverable” until the research revealed the connection six years later. In Janousek, however, the Appellate Court held that, “unlike the scientifically unknowable injury in Mitsias, Janousek’s claims against defendants were knowable before July 2, 2010.”

Knowledge of Wrongful Injury

The statute of limitations in a legal malpractice claim begins to run when the injured party knew or should have known his or her injury was wrongfully caused, not necessarily when the injured party knew or should have known his or her attorney’s malpractice was partially to blame for the injury.

In Carlson v. Fish, 31 N.E.3d 404, 410, 2015 IL App (1st) 140526, 391 Ill. Dec. 728 (2015), the three managing partners of an options trading company agreed to nonbinding mediation, during which they entered into a settlement agreement dividing the shares of the company. The mediation was held in February 2008. In September 2008, one of the partners sent an email to his attorney in the partnership dispute expressing his dissatisfaction with the result of mediation and saying his partners tricked him into taking less money. On November 13, 2008, he emailed his attorney again saying he wanted to initiate a fraud suit against his partners. On November 19, 2008, he was informed by a new law firm that he may have a malpractice claim against the attorney representing him in the partnership dispute, in addition to the fraud claim against his former partners. Nearly two years after that, on November 18, 2010, the partner filed the malpractice lawsuit.

In ruling that the malpractice lawsuit was untimely, the Illinois Appellate Court found that,

Carlson knew that he had been wrongfully injured no later than November 13, 2008, and thus even though he may not yet have known that defendants’ representation was partly responsible and that their conduct gave rise to a legal malpractice cause of action, the statute of limitations commenced because Carlson did have knowledge that he was injured and that his injury was wrongfully caused. In short, Carlson’s identification of one wrongful cause of his injuries initiates his limitations period as to all other causes, particularly when, as here, he claims his partners engaged in fraud and the defendants failed to protect him from fraud, those claims are inseparable.

Judgment in the Underlying Case

In legal malpractice cases, there is often an underlying case that gives rise to the legal malpractice claim. In most instances, the statute of limitations in the underlying case will run concurrently with the statute of limitations in the malpractice case. Therefore, an individual or business wanting to bring a malpractice claim cannot simply wait for the underlying case to be resolved, either through judgment or settlement, before bringing the malpractice case.

This point was made clear in Blue Water Partners, Inc. v. Mason, 2012 IL App (1st) 102165, 363 Ill.Dec. 482, 975 N.E.2d 284, where the Court ruled that,

Had the plaintiffs prevailed in the [underlying] suit, the same jury could then have determined whether any damages suffered by the plaintiffs by [defendant]’s wrongful conduct were “proximately caused” as well by the defendant attorneys…The litigation at the center of the [underlying] suit did not give rise to any “uncertainty *** as to *** damages”…proximately caused by the defendant attorneys, which had to await a judgment in the [underlying] suit before a legal malpractice suit accrued as to the defendant attorneys. Of course, had the defendant attorneys been sued along with [defendant] in 1999, the verdict in [defendant]’s favor would have meant as well a verdict for the defendant attorneys, which is the same result we reach here.

If you feel that you suffered economic damages as a result of an action or inaction by your lawyer, you should contact a malpractice lawyer as soon as possible. Waiting for the underlying case to resolve is not an option. Waiting for an appeal of the underlying case to be completed is not an option. The best question to ask yourself is “When did the lawyer’s action or inaction cost me money?” The answer to that question is often the date on which the statute of limitations began to run. In other words, when you are out of pocket, you are deemed to have “discovered” the injury and the statute of limitations begins to run.