Appeals panel: Palos developer's heirs waited too long to sue Kovitz, FGMK for helping siblings' alleged scheme

By D.M. Herra | Jan 17, 2019

A state appellate court found seven siblings involved in an intense family dispute over their mother’s estate are time barred from suing accountants and attorneys they claim helped to deny them their millions of dollars.

Seven adult children of prominent Palos Park developer Michael O’Malley and his wife, Eileen, have been engaged in a long-running legal dispute with three other siblings they claim tricked Eileen O’Malley into amending her estate plan before her 2009 death, as a number of lawsuits have been filed in the matter against various defendants connected with the matter since 2011.

In this case, Illinois First District Appellate Justices Jesse Reyes, Robert E. Gordon and Eileen O’Neill Burke ruled a Cook County judge was right to dismiss a legal malpractice claim against attorney Michael P. Rhoades and law firm Kovitz Shifrin & Nesbit P.C., and an accounting malpractice complaint against accountant Cornelius Murphy and accounting firm FGMK LLC, because the claims were filed after the statute of limitations had expired.

The plaintiffs in the case are identified as Mary M. Shannon, Daniel L. O’Malley, Patrick O’Malley, Eileen M. O’Malley, Paul S. O’Malley, Timothy J. O’Malley and Terrence A. O’Malley. In addition to Rhoades, Murphy and their respective firms, the siblings sued their brothers William and Thomas O’Malley, their sister Joan O’Malley Gross, Frank K. Neidhart Jr., McCarthy Duffy LLP, Smart & Associates, Marquette Bank and Thomas Montgomery.

Prior to her death in February 2009, Eileen O’Malley owned the Palos Country Club in Orland Park. The club was managed by her sons William and Thomas, but was losing money. In 2006, the plaintiffs claim Rhoades conspired with the three O’Malley defendants to trick Eileen O’Malley into giving them the club as a gift. The O’Malley defendants, with the help of Murphy, then converted a $9 million loan Eileen had made to the club into a gift to the club that would not need to be repaid.

After their mother’s death, the O’Malley plaintiffs embarked on a legal battle against their siblings. Rhoades, Murphy and their firms were not named in the initial complaint. The accounting malpractice and legal malpractice claims were not filed until a consolidated amended complaint was filed in June 2012.

The accounting defendants argued that charges of accounting fraud must be filed within two years of the time plaintiffs know, or should know, of their injury. Likewise, the law defendants argued claims of legal malpractice must be filed within two years of the date the plaintiff suffered an injury. The defendants claimed any injury suffered by the O’Malley children as a result of their mother’s amended estate plan occurred the day she died, which means the claim was filed at least 16 months too late.

The plaintiffs maintained the statute of limitations against the accountants didn’t kick in until Murphy gave a deposition in August 2011 detailing the extent of his firm’s involvement in the transactions the O’Malley children contend depleted their mother’s estate. Both the trial and appellate courts, however, sided with the defendants, who said the children “had knowledge of their injuries” as early as July 2009, when they first contested their mother’s will. Later in 2009, William O’Malley swore an affidavit in which he specifically referenced the way tax returns had been manipulated, which should have tipped off the plaintiffs they may have been injured by the accounting firm, the appellate justices wrote.

In legal malpractice, the statute of limitations is six years after the act was committed, unless the injury caused by the act does not occur until the client’s death – in that case, the statute of limitations is two years. The O’Malley plaintiffs argued the six-year rule applied because all of the attorneys’ actions took place while their mother was still alive, but the attorneys maintained the O’Malley children were not injured until after their mother’s death.

Both the trial and appellate courts agreed with the defendants. The appellate justices went so far as to point out that, even if they disagreed with the trial court about the claim being time barred under one subsection, it is also time barred under a separate subsection of the law.

After dissecting all of the arguments, the appellate justices found the accounting malpractice charge should have been filed by August of 2011 and the legal malpractice charge by February of 2012, at the latest.

According to Cook County court records, the plaintiffs have been represented by the firms of Konicek & Dillon and Roetzel & Andress, each of Chicago. 

Defendants have been represented by the firms of Swanson Martin & Bell and Pretzel & Stouffer, each of Chicago. 

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Organizations in this Story

Circuit Court of Cook County FGMK LLC Illinois First District Appellate Court Konicek & Dillon Kovitz Shifrin & Nesbit Pretzel & Stouffer Roetzel and Andress Swanson Martin & Bell LLP

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