First District dismisses legal malpractice suit over failed retail development project

By Jonathan Bilyk | Sep 9, 2013

A land development company embroiled in a dispute with its former attorneys over a collapsed retail development project has been barred from suing the lawyers for malpractice, after an appeals panel determined the developers waited too long to file suit.

In an unpublished order issued Sept. 3, the First District Appellate Court upheld the judgment of Cook County Circuit Judge Sanjay Taylor, who tossed out a legal malpractice action that land developer Faysal Mohamed and his company, Area Wide 79th & Western LLC brought against attorney Francis Keldermans of Holland & Knight LLP.

The appellate court order was written by Justice Maureen E. Connors, and Justices Sheldon Harris and John B. Simon concurred.

The case stemmed from a troubled retail development project at West 79th Street and South Western Avenue in Chicago that fell apart after Keldermans and Holland & Knight, which represented Mohamed and Area Wide, failed to include proper language in a lease.

According to court documents, Mohamed and Keldermans had a longstanding prior professional relationship, as Keldermans had represented Mohamed and “his various business ventures” for more than two decades.

So when Mohamed, through Area Wide, sought to develop the corner to serve as the site of a new Walgreens store and a TCF Bank branch, he turned to Keldermans to represent him in negotiations and arrangements for leases and land sales with the retailer and the bank.

The project’s viability hinged on an easement arrangement with Walgreens that would essentially allow customers to access TCF Bank through Walgreens’ parking and drive areas. Without those easements, the TCF site “would be otherwise inaccessible,” and the land would be worthless to TCF.

However, the court order indicated that Keldermans failed to include such easement language in Area Wide’s lease contract with Walgreens. And the mistake was not discovered until after both Walgreens and Area Wide had signed the lease deal.

Keldermans and Mohamed later asked Walgreens to modify the lease to include the easements, but Walgreens refused.

TCF on May 9, 2008 backed out of its arrangement to buy the land for $2.2 million, leaving Area Wide unable to pay the mortgage on the site. Area Wide’s lender foreclosed on the mortgage on the property in 2010.

Mohamed and Area Wide, however, waited until April 10, 2012, to file a legal malpractice claim against Keldermans and Holland & Knight.

In response, the law firm argued that the plaintiff had filed suit two years beyond the statute of limitations. Under state law, legal malpractice claims must be brought within two years of when the alleged malpractice became apparent.

Taylor, the trial judge, set that date at May 9, 2008, when TCF cancelled its purchase contract with Area Wide, meaning the time limit under which Mohamed could bring his malpractice action expired in May 2010.

Under that reasoning, Taylor granted Keldermans’ request to dismiss Mohamed’s suit.

Mohamed later appealed, arguing that the statute of limitations should not apply in this case because he believed his lawyers had misrepresented the situation to Area Wide, causing them to be “lulled into a false sense of security by defendants’ (Holland & Knight’s) repeated assurances that negotiations with Walgreens were on track and would result in the (easements) being granted.”

On behalf of the appeals panel, Connors wrote that the court believed Mohamed’s lawyers had not hidden their mistakes from Area Wide and “did nothing to hide the alleged malpractice from plaintiff (Mohamed.)”

Connors wrote that Mohamed had conceded in court that, by the time negotiations with Walgreens had begun to seek to insert easement language into the completed lease, “the damage was not only done but plaintiffs knew that Keldermans was at fault.”

“So by May 9, 2008, plaintiffs knew that Keldermans’ negligence cost them the sale price of the TCF contract,” Connors wrote.

The justices also noted “there is no indication anywhere in the complaint or affidavits that defendants were negotiating with Walgreens in bad faith merely as a delaying tactic, or that they knew all along that it would be impossible to obtain” the easements.

Therefore, the panel held, the time limits specified by law must apply to the case.

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