A state appeals panel has determined a Cook County judge was right to end a legal malpractice claim in which a construction company said its lawyers caused them to lose $1 million by not perfecting their lien on a Chicago condominium development.
In an opinion issued Jan. 15, a three-justice panel of the Illinois First District Appellate Court said Cook County Judge John Griffin was right to grant summary judgment based on expired statutory limitations. Justice Mary Anne Mason wrote the opinion; Justices Aurelia Pucinski and Michael Hyman concurred.
In May 2002, Construction Systems began working to convert a 21-story office building at 6 Michigan Avenue — across the street from Millennium Park — into condominiums. In August 2003, the company hired the FagelHaber law firm of Chicago to lodge a lien against the investment group behind the project, which had stopped making payments.
FagelHaber merged with the Thompson Coburn firm in 2007.
6 N. Michigan Avenue, Chicago
In the underlying dispute between Construction Systems and FagelHaber, the contractor alleges the law firm should have known a bank already had a lien on the investment group. Yet, even after learning that fact, Construction Systems said FagelHaber attorneys didn’t serve notice on that bank as an interested party, and then withdrew from the case the next year without telling Construction Systems about the preceding lien. The January 2009 lawsuit said FagelHaber’s conduct resulted in Construction Systems’ lien being subordinate, costing it $1.3 million.
In July 2015 the same justices considered an appeal on the dispute from Griffin’s courtroom, overturning his May 2014 dismissal and remanding the case for further proceedings. That ruling centered on a 2004 release agreement between the two parties, with the panel saying it wasn’t clear both sides considered potential legal malpractice claims when settling a fee dispute.
With the case back in circuit court, FagelHaber said Construction Systems didn’t have a right to sue because it waited until January 2009 despite knowing about the underlying allegations as far back as February 2005, as evidenced by paying legal fees to attorney Karen Berres, of the Fuller & Berres firm, to sort out the disagreement.
Construction Systems, in circuit court and on appeal, said the two-year statutory limitations window didn’t open until an August 2007 circuit court ruling on the lien priority or a December 2007 settlement of that litigation.
“Essentially, Construction Systems claims that there can be no actual knowledge of a defect unless and until the defect is raised as a defense,” Mason wrote.
The panel disputed that point, however, noting: “Construction Systems filed the amended pleadings incorporating the alternative bases for lien priority in 2005. Consequently, no genuine issue of material fact exists as to when Construction Systems discovered FagelHaber’s negligence because the record clearly establishes that Construction Systems discovered the defect in its mechanic’s lien as early as March 21, 2005,” the date of invoice for work Berres performed earlier that year.
Mason further explained that invoice represents not just knowledge of the error but also a legal injury since it only had to pay for those legal services to correct FagelHaber’s alleged malpractice. The panel said Construction Systems’ appeal relied on cases where an attorney’s negligence couldn’t have reasonably been discovered before a trial court issued an adverse judgment, but the underlying dispute was already known when Griffin ruled against Construction Systems in August 2007.
Although final damages weren’t known until the parties settled the lien litigation, that didn’t prevent Construction Systems from filing the malpractice claim in a timely fashion, nor is it uncommon for parties to make an agreement tolling statutory limitations on malpractice claims until underlying litigation is resolved, justices said. As such, Griffin was correct to grant summary judgment.
Construction Systems has been represented by Carponelli & Krug, of Barrington, and the Spellmire Law Firm LLC, of Chicago.
Thompson Coburn represented the interests of the former FagelHaber firm, and has been represented by the firm of Donohue Brown Mathewson & Smyth, of Chicago.