Appeals panel: Terra art foundation waited too long to bring $6.9 million malpractice suit vs DLA Piper

By Scott Holland | Aug 15, 2016

An art foundation has lost again in its bid to hold responsible a law firm it blames for a $6.9 million loss, after a state appeals court said the foundation waited too long to sue its former lawyers over alleged missteps the lawyers committed while representing the foundation in a River North land deal.

The Illinois First District Appellate Court ruled Aug. 12 to uphold Cook County Circuit Court Judge Sanjay T. Tailor’s dismissal of Terra Foundation for American Art’s complaint against DLA Piper. The original complaint, filed in February 2015, centered on the actions of DLA Piper and two of its Chicago-based lawyers, John Heuberger and Elizabeth Belkin, who represented the foundation during the sale and subsequent development of its River North property at Michigan Avenue and Erie Street. 

Justice Mary K. Rochford wrote the majority opinion; justices Thomas E. Hoffman and Mathias W. Delort concurred. 

Terra Foundation is dedicated to preserving and displaying historical American art. In 2005, the foundation struck a deal with a company identified as NM Project Company, a business entity associated with Prism Development Co., to construct a 40-story tower on the site, now known as the Ritz-Carlton Residents on North Michigan Avenue. 

The dispute between Terra and DLA Piper concerned the amount of space in the project dedicated to retail space, and thus under Foundation ownership, with the Foundation accusing the lawyers of failing to adequately inform it of proceedings and represent its interests. Terra and Prism landed in arbitration, resulting in Terra having to pay NM Project $3.8 million. 

According to Rochford’s analysis, Tailor’s dismissal of Terra’s complaint should be viewed through the statute of repose. Terra’s appeal to reverse the dismissal contended the repose period should not have begin until Feb. 13, 2013, the closing date on the property sale, as the alleged malpractice should be treated differently because it related to the transaction and representation throughout. They said the repose rules should for representation in a transaction should be treated differently than allegations of malpractice arising out of litigation. 

However, Rochford cited multiple cases in which state appellate courts have said the repose clock begins to run at the first incidence of malpractice, and that repose is not tolled by a continued attorney-client relationship. 

“We conclude that the event giving rise to Terra’s injuries occurred on May 29, 2007,” Rochford wrote, when Terra and NM Project chose a method of measuring the retail parcel without language Terra asked DLA Piper attorneys to include. That meant a malpractice suit would have had to be filed by May 29, 2013 — “its October 2014 complaint therefore was untimely.” Rochford further noted two arbitration rulings against Terra happened before the May 2013 repose deadline, as did the closing. 

In considering Terra’s argument about the distinction between transactional malpractice and litigation malpractice, Rochford cited state law on repose, which she wrote “contains no limiting language” that would support Terra’s appeal: “We cannot read the statute of repose as having differing rules of application depending on whether the negligent misconduct takes place in a transactional or a litigation setting.” 

Rochford analyzed Terra’s attempted use of the 2015 First District Appellate Court’s decision in Lamet v. Levin, as establishing a statute of repose for litigation malpractice only. She found the discussion in Lamet did “not require a different holding” in Terra’s complaint, writing the court’s “statements, as to when the negligent act generally occurs in a transactional case and a litigation case, should not be read as a bright line rule that, in a transactional setting, the statute of repose always begins to run when the attorney’s representation ends.” 

Since the complaint was time-barred regarding repose, the justices did not consider the statute of limitations. The justices affirmed the circuit court dismissal with prejudice, as well as its denial of leave to file an amended complaint. 

The Terra Foundation was represented by the firm of Chapman Spingola, of Chicago. 

DLA Piper was represented by the firm of Much Shelist, of Chicago.

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Chapman Spingola LLP DLA Piper Much Shelist

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