A state appeals panel has found a businessman involved in a dispute with business partners over the fate of an Evanston debt collection company didn’t move fast enough to bring a legal malpractice claim against Chicago law firm Katten Muchin Rosenman for allegedly helping those partners freeze him out of the company’s management and then working to torpedo the venture by forming a new company specifically to compete against the first venture.
On Oct. 27, a three-justice panel of the Illinois First District Appellate Court upheld the ruling of Cook County Circuit Judge John C. Griffin, who had ruled business James Janousek had brought his complaint against Katten Muchin at least one year too late, as the clock on the two-year window in which he needed to bring the malpractice suit began ticking the moment he first believed the law firm had wronged him, and not when he obtained evidence to back those suspicions.
The ruling arose out of dispute that spilled in Cook County court between Janousek and his erstwhile business partners, Burton and Michael Slotky. Janousek and the Slotkys had partnered in 1999 to launch a business venture, Bureaus Investment Group LLC, to purchase delinquent debt portfolios. Janousek served as president of The Bureaus Inc., an affiliated debt collection agency to service BIG’s accounts.
In 2007, the relationship between Janousek and the Slotkys had fallen apart, and the Slotkys fired Janousek from his role at The Bureaus Inc. At that point, Janousek contended the Slotkys further moved to freeze him out of management of BIG, and ultimately created BIG III, a corporate entity designed to compete with the original BIG.
Janousek filed suit against the Slotkys in 2009. Howard Richard, a relative of the Slotkys and an attorney with Katten Muchin, the firm which had represented BIG in the past, filed an appearance on behalf of the Slotkys and BIG. The court approved Janousek’s request to disqualify Katten from representing BIG, but the firm and Richard continued to represent the Slotkys in the case.
During discovery on that case, Janousek said he uncovered correspondence and other documents leading him to believe Richard and Katten Muchin, while ostensibly representing BIG, had helped the Slotkys freeze him out of management at the company and form the competing company, among other allegations.
Janousek filed suit against Richard and Katten in July 2012, three years after bringing his underlying lawsuit against the Slotkys and moving to disqualify Katten from representing BIG in the case.
Katten responded by asking the judge to dismiss the case, because Janousek should have been on “inquiry notice” when he first filed his lawsuit in July 2009 of the potential harm allegedly caused him by the firm’s alleged actions in assisting the Slotkys.
The judge agreed, finding for the Katten firm.
Janousek appealed, arguing the clock on the statute of limitations should not have started until at least late 2010, when he first received the documents confirming to him the assistance rendered by Richard and Katten to the Slotkys.
On appeal, however, the justices said Janousek’s arguments do not hold up.
Just as the trial judge, the justices said Janousek knew as recently as July 2009 of the harm he had suffered and had expressed his intent to sue in a letter to the Slotkys. Likewise, he knew of the familial and business relationships between Richard and the Slotkys.
“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,” the justices wrote. “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 opinion was authored by Justice Michael B. Hyman, with justices Daniel J. Pierce and John B. Simon concurring.
Janousek was represented in the case by the firm of Schwartz & Kanyock, of Chicago.