Appeals panel reverses dismissal of legal malpractice suit

The former attorneys of a man who claims their legal malpractice nearly cost him ownership of his $1. 4 million Lake Shore Drive condo will have to face him in court again.

In an unpublished order issued Dec. 23, a panel of the First District Appellate Court reversed the ruling of Cook County Circuit Judge Joan Powell, who granted the defendants’ request to dismiss the suit based on the statute of limitations, and remanded the case for further proceedings.

Justice Thomas Hoffman delivered the order, in which Justices Joy Cunningham and Mathias Delort concurred.

Todd Hatoff and his partner, Marshall Erb, contracted to buy a condominium on North Lake Shore Drive for $1.4 million in 2007, according to the court’s order that notes Hatoff put down $500,000 of his own money, plus a mortgage of $950,000, to pay for the condo.

Hatoff hired the law firm of Arnstein & Lehr LLP, now a defendant in his suit, to represent him in the purchase. The plan was that Hoffman and Erb would eventually be co-owners once Erb could financially contribute to the renovation, mortgage and other expenses related to the condo.

Attorney Konstantinos Armiros allegedly advised Hoffman to put the condo in a land trust, and created a trust agreement where both Hoffman and Erb owned equally beneficial interests.

The order notes that Hatoff alleges that Jay P. Tarshis, another attorney at Arnstein & Lehr, also participated in the drafting of the land trust. Both Armiros and Tarshis are named as defendants in Hatoff's suit.

On Aug. 9, 2007, Armiros recommended the Law Office of Amy Felton P.C., another defendant in Hatoff’s complaint, be brought on to help with the closing. Hatoff agreed and was charged by Felton a flat fee of $550 for the firm’s assistance.

Hatoff closed on the condo the next day, with the land trust holding the title. More than a year later, the panel’s order states that Erb and Hatoff signed a co-ownership agreement giving Hatoff 92.5 percent ownership of the property and Erb the remaining 7.5 percent.

But in order for the co-ownership agreement to go into effect, both Erb and Hatoff needed to sign a letter of direction for the land trustee acceptance. Erb and Hatoff were supposedly both willing to sign the letter, but Armiros allegedly never prepared it.

Things turned sour in Erb and Hatoff’s relationship, which ended when Erb threatened Hatoff with a shotgun, according to the order. Hatoff filed a criminal complaint and sought a restraining order against Erb, after which time, Erb moved out of the condo.

Following the incident, Armiros allegedly made an attempt to get the two to sign the letter of direction for the land trust, but at that point Erb refused.

Erb eventually filed a suit against Hatoff, Armiros and Arnstein & Lehr, alleging the co-ownership agreement was unenforceable and that Hatoff was trying to strip him of his rightful ownership of the condo.

Hatoff filed a counterclaim involving claims of conversion, assault, breach of contract and unjust enrichment.

Hatoff claimed that the Felton law firm and its namesake, Amy Muran Felton, negligently represented him in 2007 in the closing on the condo and were liable for Armiros’ failing to get the land trustee to accept the co-ownership agreement in a timely manner.

He also alleged that the Felton defendants breached their fiduciary responsibility to him by not learning about the ownership interest between Hatoff and Erb and insisting the closing be postponed until the ownership issue was settled completely.

On June 26, 2012, the Felton defendants moved to dismiss Hatoff’s claims, asserting that the statute of limitations had elapsed for the 2007 real estate closing because Hatoff knew the land trust agreement split the ownership equally.

Additionally, it alleged that Hatoff failed to establish that the Fenton defendants had a joint venture relationship with the Arnstein defendants and therefore, weren’t liable for the Arnstein’s negligence.

The Arnstein defendants also moved to dismiss the legal malpractice claims, citing the same reasons as the Felton defendants.

The circuit court granted both motions to dismiss. Hatoff filed a motion to reconsider and while the court was considering that, he filed an amended complaint containing essentially the same allegations.

With the filing of the amended complaint, the defendants once again submitted a motion to dismiss based on the statute of limitations, and the court again granted their request.

In its order, the panel notes that the Felton defendants' motion and supporting affidavit “merely refute the plaintiff's allegations in the … complaint relating to the legal relationship between them and the Arnstein defendants.”

Writing for the court, Hoffman noted that the motions to dismiss filed by the Felton defendants were “not the appropriate means to resolve such factual disputes.”

The appeals panel notes in its order that it was tasked with determining when Hatoff began to be harmed by legal malpractice, not whether there were instances of legal malpractice.

Hoffman wrote that in their motions to dismiss, the “defendants have merely offered proof to refute the plaintiff's well-pleaded factual allegations regarding causation, which is insufficient to warrant a dismissal.”