No. 1-14-2989 Opinion filed October 27, 2015 Second Division

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

) JAMES JANOUSEK, Individually and on Behalf ) Appeal from the Circuit Court of Bureaus Investment Group, LLC, ) of Cook County. ) Plaintiff-Appellant, ) ) No. 12 L 7439 v. ) ) KATTEN MUCHIN ROSENMAN LLP and ) The Honorable HOWARD M. RICHARD, ) John C. Griffin, ) Judge, presiding. Defendants-Appellees. )

JUSTICE HYMAN delivered the judgment of the court, with opinion. Presiding Justice Pierce and Justice Simon concurred in the judgment and opinion.

OPINION

¶1 At issue is when the two year statute of limitations period, which applies to claims

against lawyers arising out of the performance of their professional services, had begun to run.

Plaintiff James Janousek sued a law firm and one of its lawyers alleging aiding and abetting of a

client's breach of fiduciary duties owed to him. On defendants' motion for summary judgment,

the court held that, under the discovery rule, Janousek knew more than two years before he filed

his complaint against defendants that he had been wrongfully injured by his former business 1-14-2989

associates, thereby triggering the statute of limitations. We affirm. On these facts Janousek has

failed to timely file his complaint.

¶2 BACKGROUND

¶3 In 1999, James Janousek, together with Burton and Michael Slotky, formed Bureaus

Investment Group LLC (BIG), an Illinois member-managed limited liability company to

purchase delinquent debt accounts. The Slotkys also named Janousek president of The Bureaus,

Inc., a debt collection agency that serviced BIG's accounts. Howard M. Richard, an attorney at

Katten Muchin Rosenman LLP, signed and filed BIG's articles of organization. Fast forward

eight years, and the relationship between Janousek and the Slotkys had so far deteriorated that on

October 1, 2007, the Slotkys terminated Janousek's employment at The Bureaus. Janousek

contends that after his termination, the Slotkys "froze" him out of BIG by refusing to allow him

to participate in management or control of BIG or to access current financial information

pertaining to BIG and its accounts. Janousek further contends that less than a month after

terminating him, the Slotkys formed another debt-purchasing entity, Bureaus Investment Group

III, LLC (BIG III). Janousek alleges that since October 2007, the Slotkys, through BIG III, have

been purchasing debt pools, misappropriating BIG's opportunities, and competing with BIG.

¶4 On June 19, 2009, Janousek's attorney sent a letter to the Slotkys and BIG, stating "[w]e

have spent a considerable amount of time with James Janousek investigating the circumstances

surrounding what has transpired with The Bureaus Inc. and its related entities *** since the

actions committed by you and your father in October 2007." The letter warned that if the Slotkys

did not purchase all of Janousek's interests in BIG and compensate him "for the harm you

wrought," he would file a lawsuit by July 7 and warned the Slotkys not to use BIG's attorneys or

funds in defending the suit.

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¶5 The Slotkys did not comply with Janousek's demands. On July 7, 2009, Janousek made

good on his threat and filed a complaint alleging the Slotkys, BIG, and others breached their

fiduciary duties by competing with and usurping opportunities from BIG, as well as acting

unfairly toward Janousek in conducting BIG's business. (That case remains pending in the circuit

court.) Katten filed an appearance in the BIG litigation on behalf of all defendants, and Janousek

moved to disqualify Katten from representing BIG, which was granted. Katten and Richard,

however, continued to represent the Slotkys. (Burton Slotky died in November 2014 and Michael

Slotky is not a party to this case.)

¶6 Nearly three years passed before Janousek, individually and on behalf of BIG, filed a

two-count complaint against Katten and Richard, alleging they aided and abetted the Slotkys in

breaching their fiduciary duties. In his complaint, filed on July 2, 2012, Janousek alleged, in part,

that in 2007, Katten and Richard: (1) advised the Slotkys on freezing Janousek out of the

management and ownership of BIG, (2) advised the Slotkys to form BIG III, a competing debt

purchasing entity, to exclude Janousek from profits, (3) assisted the Slotkys in forming BIG III

and advised them regarding BIG III's relationships with banks and other financial institutions, (4)

advised and assisted the Slotkys in converting BIG investors into BIG III investors, and (5)

advised and permitted the Slotkys to allow BIG to pay for their representation and advice.

¶7 On February 2, 2013, Katten and Richard filed their answers and affirmative defenses.

Sixteen months later, on June 5, 2014, defendants filed a motion for summary judgment on its

fourth affirmative defense, that the two year statute of limitations under section 13-214.3 of the

Code of Civil Procedure (Code) (735 ILCS 5/13-214.3 (West 2012)) barred Janousek's lawsuit.

Defendants contended that Janousek was on "inquiry notice" of his injury and its cause on July 7,

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2009, the date he filed the underlying lawsuit against the Slotkys, but did not file his complaint

against defendants until almost three years later.

¶8 Janousek responded that he could not have been on inquiry notice based on a suspicion

that Katten had aided and abetted the Slotkys in breaching their fiduciary duties. He further

asserted that the limitations period did not begin until 2011, because he did not learn of

defendants' substantial assistance in the Slotkys' breaches of their fiduciary duties until the

defendants, on behalf of the Slotkys, produced hundreds of pages of documents in late 2010 in

response to discovery requests and until the Slotkys sat for depositions in October 2011. After

argument, the circuit court granted the summary judgment motion. The court stated "I looked at

the two complaints and compared them. *** [A]iding and abetting [is] something that's related to

this underlying complaint in such a way that it establishes the requisite knowledge to trigger the

beginning of the statute of limitations. I don't think diligence comes into play, so I'm going to

grant the motion for summary judgment on the statute of limitations."

¶9 ANALYSIS

¶ 10 Statute of Limitations

¶ 11 Janousek contends the circuit court erred in granting summary judgment because,

although he suspected defendants of wrongdoing, a reasonable jury could conclude he did not

know of their wrongdoing until after uncovering it through discovery in the underlying lawsuit

and that he acted diligently in discovering the wrongdoing, particularly in light of defendants'

refusal to turn over documents by claiming attorney-client privilege. We review the trial court's

decision to grant summary judgment de novo. Outboard Marine Corp. v. Liberty Mutual

Insurance Co.,

(1992).

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¶ 12 Section 13-214.3(b) of the Code states that an action for damages based on tort, contract,

or otherwise against an attorney arising out of an act or omission in the performance of

professional services "must be commenced within 2 years from the time the person bringing the

action knew or reasonably should have known of the injury for which damages are sought." 735

ILCS 5/13-214.3(b) (West 2012). Although this provision most frequently applies to cases filed

by clients against their own attorney, in Evanston Insurance Co. v. Riseborough,

, our supreme court held that it applies to any claim concerning an attorney's professional

services and not just cases where the attorney rendered services to the plaintiff.

¶ 13 Section 13-214.3(b) incorporates 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,

(1997). Significantly, "under the discovery rule, a statute of

limitations may run despite the lack of actual knowledge of negligent conduct.” (Emphasis in

original.) SK Partners I, LP v. Metro Consultants, Inc.,

(2011). A

statute of limitations begins to run when the purportedly injured party “has a reasonable belief

that the injury was caused by wrongful conduct, thereby creating an obligation to inquire further

on that issue.” Dancor,

. Knowledge that an injury has been wrongfully

caused “does not mean knowledge of a specific defendant's negligent conduct or knowledge of

the existence of a cause of action.” (Emphasis and internal quotation marks omitted.) Castello v.

Kalis,

(2004). A person knows or reasonably should know an injury is

“wrongfully caused” when he or she possesses sufficient information concerning an injury and

its cause to put a reasonable person on inquiry to determine whether actionable conduct had

occurred. Hoffman v. Orthopedic Systems, Inc.,

(2002). Under well

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settled law, once a party knows or reasonably should know both of the injury and that it was

wrongfully caused, “the burden is upon the injured person to inquire further as to the existence of

a cause of action.” (Internal quotation marks omitted.) Castello,

. When a

party knew or reasonably should have known his or her injury was wrongfully caused raises a

question of fact, unless only one conclusion can be drawn at some particular point from

undisputed facts. Nolan v. Johns-Manville Asbestos,

(1981).

¶ 14 Janousek contends that although he knew of his injury and may have suspected by July

2010 that defendants played a role, mere suspicion, while investigating whether a cause of action

exists, does not affect the statute of limitations. For support, Janousek relies on LaManna v. G.D.

Searle & Co.,

(1990) and Young v. McKiegue,

(1999).

In LaManna, the plaintiff alleged she became infertile because of an infection caused by

defendant's contraceptive device. In reversing the trial court's grant of summary judgment in

defendant's favor, this court held that the statute of limitations begins to run at the point when the

party reasonably should have known that an injury was wrongfully caused and not when a party

is suspicious or attempts to discover whether the injury is wrongfully caused. LaManna,

.

¶ 15 Janousek insists that, as in LaManna, he only suspected that defendants may have

contributed to his injury by aiding and abetting the Slotkys in breaching their fiduciary duties

and did not know for certain their role in aiding and abetting the Slotkys until late 2010 or early

2011, after engaging in discovery in the underlying lawsuit. We disagree with Janousek's

characterization of the decision. In LaManna, the plaintiff was not investigating what caused her

wrongful injury, but whether she was indeed injured and whether any wrongful cause existed. It

was possible the plaintiff was not infertile, as one doctor told her, or that the cause of her

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infertility involved something other than the contraceptive device. Conversely, Janousek

believed no later than July 7, 2009, and likely sooner, that the Slotkys breached their fiduciary

duties and any injury he suffered, namely the lost profits going to BIG III rather than BIG,

directly resulted from the breach of fiduciary duties.

¶ 16 Similarly, Young v. McKiegue,

(1999), fails to support Janousek's

argument because there, the statute of limitations tolled while the plaintiff investigated whether

her injury—her husband's death in the hospital—had been wrongfully caused. Until two medical

experts reviewed her husband's medical records and determined that the physicians caring for her

husband had deviated from the standard of care, she did not know or have reason to know that

her injury was wrongfully caused.

.

¶ 17 In a letter to the Slotkys dated June 19, 2009, Janousek's attorney stated that if they did

not compensate Janousek for the "the harm you wrought" he would file a lawsuit by July 7. This

letter shows that Janousek knew no later than June 19 that he had been wrongfully injured.

¶ 18 Next, Janousek argues, even though he knew he had been injured by the Slotkys' breach

of their fiduciary duties in July 2009, the role Katten and Richard played in the Slotkys' breaches

did not manifest itself until the Slotkys complied with his discovery requests in late 2010 and sat

for depositions in 2011. Janousek asserts that because this second potential cause of his injury

remained unknown until, at the earliest, late 2010, he timely filed his aiding and abetting

complaint. Janousek cites Mitsias v. I-Flow Corp.,

for support. In

Mitsias, following shoulder surgery, the plaintiff experienced severe shoulder pain and doctors

diagnosed chondrolysis, a condition that causes destruction of cartilage. Id. ¶ 6. The plaintiff

sued the surgeon and the hospital where the surgery occurred, alleging medical malpractice. Id. ¶

7. During the deposition of one of her physicians, the plaintiff learned, six years after her

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surgery, that research had uncovered a link between the pain pump used during her surgery and

cartilage destruction. Id. ¶ 8. Plaintiff voluntarily dismissed her complaint and refiled, adding

product liability claims against the pain pump manufacturer. Id. ¶ 10. The trial court granted the

product liability defendants' motions to dismiss plaintiff's complaint as untimely, finding that the

statute of limitations on the medical malpractice claim and the products liability claim started at

the same time, when plaintiff knew she had been injured and that the injury had been wrongfully

caused. Id. ¶ 14.

¶ 19 The appellate court reversed, finding that the plaintiff had not slumbered on her rights

because "there is no question that plaintiff could not have known of any potential products

liability cause of action against the pain pump manufacturers while the causal link between her

injury and the pain pump used upon her was not scientifically discoverable. As has been

discussed, our supreme court has expressed concern that plaintiffs should not be 'held to a

standard of knowing the inherently unknowable.' " Id. ¶ 29 (quoting Nolan,

).

¶ 20 Janousek asserts that as in Mitsias, his inability to discover this second cause of his injury

tolls the statute of limitations. We disagree. First, unlike in Mitsias where scientific research

revealed a claim otherwise unknown, Janousek's claim that defendants aided and abetted the

Slotkys' breach of their fiduciary duties was not “unknowable.” Janousek knew that Howard

Richard, whom he identified in his complaint as Burton Slotky's nephew and Michael Slotky's

cousin, had represented BIG when it filed its article of incorporation in 2007, as Richard signed

the document as "organizer." He also knew that Richard continued to act as the Slotkys' attorney

after Janousek's employment ended and he filed his lawsuit against the Slotkys; while Janousek

filed a motion to disqualify Katten from representing BIG, he did not object to Katten's

continued representation of the Slotkys and BIG III. Further, Janousek knew of the formation of

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BIG III and could have requested a copy of the articles of incorporation from the Illinois

Secretary of State, which lists Richard as the "organizer" of BIG III. Although Janousek

contends that he was unable to determine defendants' role, that information was of public record.

Thus, unlike the scientifically unknowable injury in Mitsias, Janousek's claims against

defendants were knowable before July 2, 2010.

¶ 21 More importantly, as stated already, knowledge that an injury has been wrongfully

caused “does not mean knowledge of a specific defendant's negligent conduct or knowledge of

the existence of a cause of action.” (Emphasis and internal quotation marks omitted.) Castello,

. 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.

¶ 22 Blue Water Partners, Inc. v. Mason,

and Carlson v. Fish,

are illustrative. In Blue Water, the plaintiffs sued their former partners

alleging, among other claims, wrongful diversion of business opportunities and breach of

promise. Blue Water,

. In short, the plaintiffs alleged that their

business partners improperly formed a company to directly compete with the company plaintiff

and defendants had formed earlier. Id. ¶ 17. The trial court ruled in defendants' favor, finding

that plaintiffs extinguished their claims against defendants when both parties signed a series of

documents releasing the other from all claims. Id. ¶ 18. Plaintiffs then sued their attorneys

alleging they committed legal malpractice by assisting defendants in creating the competing

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company. Id. ¶ 23. The trial court found the legal malpractice claim time-barred because when

plaintiffs signed the release they knew or should have known that defendants engaged in

purportedly wrongful conduct by helping plaintiffs' former partners incorporate the competing

company. Id. ¶ 32. In affirming the trial court, the appellate court held that the limitations period

on plaintiff's claim against his lawyer began at the same time as his claim against his former

partner because the two claims were inseparable. Id. ¶ 67.

¶ 23 In Carlson, the plaintiff settled a dispute with his two business partners but later decided

that the settlement was inadequate and that his partners had defrauded him. Carlson,

. More than two years later, the plaintiff filed a legal malpractice complaint

against his lawyers for their representation in the settlement negotiations. Id. ¶ 17. The circuit

court granted defendants' motion to dismiss on statute of limitations grounds, finding that the

cause of action accrued when the plaintiff knew he had been injured and identified his former

partners as the cause, an event more than two years before he filed his malpractice claim. Id. ¶

19. We affirmed the dismissal. Plaintiff asserted the discovery rule suspended the statute of

limitations while he was investigating whether he had a claim against his former partners. The

appellate court disagreed and held that the plaintiff's knowledge that he had been injured and that

the injury was wrongfully caused, even if he may not yet have known that his lawyers'

representation was partly responsible or that their conduct gave rise to a legal malpractice cause

of action, commenced the statute of limitations against them. Id. ¶ 39. The court stated that "In

short, [plaintiff'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." Id.

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¶ 24 As in Blue Water and Carlson, 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. Moreover, his claims against Katten and Richard and the Slotkys are uniquely

intertwined and inseparable, as he claims that the former aided and abetted the latter in their

breach. Further, contrary to Janousek's contention, his diligent inquiry into the defendants' role in

aiding and abetting the Slotkys wrongdoing does not toll the statute of limitation. As noted,

under the discovery rule, the limitations period begins “when a person knows or reasonably

should know of his injury and also knows or reasonably should know that it was wrongfully

caused.” Knox College v. Celotex Corp.,

(1981). At that point, the injured

party bears the burden of inquiring further as to the existence of a cause of action. Witherell v.

Weimer,

(1981). Once a plaintiff is aware of his or her wrongful injury,

diligent inquiry will not provide a basis for tolling the statute of limitations. Mitsias,

. Thus, the statute of limitation began to run no later than July 2009, when

Janousek filed his complaint against the Slotkys, more than two years before he filed his

complaint against defendants.

¶ 25 Attorney-Client Privilege

¶ 26 Finally, Janousek suggests public policy should preclude attorneys from raising an

attorney-client privilege delaying disclosure of their wrongdoing long enough to raise a statute of

limitations defense. Specifically, Janousek asserts that defendants obstructed discovery by

claiming that he requested documents in discovery protected by the attorney-client privilege, and

then defended on the statute of limitations having expired in the interim. He contends that

permitting the defendants to engage in this type of conduct will set a precedent for other

attorneys and adversely affect the practice of law. And he contends that the attorney-client

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privilege did not benefit the Slotkys because it exposed them to liability that otherwise could

have been shared by defendants.

¶ 27 The attorney-client privilege refers to a client's right to refuse to disclose confidential

communications "between attorney and client made for the purpose of obtaining legal advice."

Genentech, Inc. v. United States International Trade Comm'n,

, 1415 (Fed. Cir.

1997). Thus, the privilege, which belongs to the client, may be asserted by an attorney on a

client's behalf. The privilege precludes a client and a lawyer from being required to produce

privileged communications in, for example, the discovery process. If a communication is

privileged, it is absolutely privileged, regardless of need, hardship, or cost. Leah M. Christensen,

A Comparison of the Duty of Confidentiality and the Attorney-Client Privilege in the U.S. and

China: Developing a Rule of Law,

, 176 (2011). The attorney-client

privilege raises the possibility that a court may not become aware of all of the facts in a case and

may actually prevent the discovery of the truth.

But that is hardly a trade-off given the

centrality of the attorney-client privilege to an open and just legal system. Thus, contrary to

Janousek's argument, public policy weighs in favor of protecting attorney-client communications

over mandating disclosure of documents deemed by the client to be privileged.

¶ 28 Furthermore, we disagree with Janousek's contention that any purported delay in turning

over documents or responding to discovery requests precluded him from uncovering the role

defendants may have played in assisting the Slotkys in breaching their fiduciary duties. As noted,

Janousek knew that defendants had represented BIG and the Slotkys for many years and knew by

July 2009 that the Slotkys had formed BIG III, which he contends in his underlying lawsuit

improperly competed with and usurped opportunities from BIG. Richard's name appeared on

BIG III's articles of organization, which are of public record. Thus, although documents

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disclosed by the Slotkys in late 2010 and their depositions in early 2011 may have further

solidified Janousek's determination that he had a claim against defendants, he knew well before

then that he had been wrongfully injured by his former business associates, which triggered the

statute of limitations on his aiding and abetting claim against defendants.

¶ 29 Affirmed.

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