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
“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