An appeals court has tossed out the window a lawsuit by the would-be developers of a Loop hotel, who alleged their attorneys improperly advised another client how to thwart the project through spot zoning. The appellate justices said the developers waited too long to lodge their malpractice action.
The ruling was recently penned by Justice Maureen Connors, with concurrence from Justices Sheldon Harris and Sharon Oden Johnson, of the Illinois First District Appellate Court. The decision was filed under Illinois Supreme Court Rule 23, which may limit its use as precedent.
The ruling dashed the effort by developer Brian Scheinblum and his company, Chicago Hotel Partners, to press a $120 million suit against the Chicago firm of Schain Banks Kenny & Schwartz.
In 2015, Scheinblum hired the firm to help bring about his plan to install an eight-floor hotel in the 38-story Pittsfield Building, at 55 E. Washington St. By December that year, income-generating tenants had been removed and demolition began to prepare for renovation.
At the same time, a lawyer with Schain Banks, Anthony Casaccio, started advising Adam D. Lynd, who wanted to buy a stake in the Pittsfield. Casaccio allegedly told Lynd how to stop the hotel by having the building "downzoned," Scheinblum claimed. Lynd then approached Chicago Alderman Brendan Reilly, donated to Reilly's election campaign, and the City Council ended up rezoning the Pittsfield in March 2016, which stopped the hotel project "dead in its tracks," according to Scheinblum.
Lynd wished the building to be entirely residential, court papers said.
Scheinblum said he dealt primarily with attorneys Marty Schwartz and Tyler Manic at Schain Banks, but retained the entire firm to work on his behalf. He sued the firm in May 2019 in Cook County Circuit Court, alleging breach of fiduciary duty.
In July 2020, Cook County Judge Diane Shelley dismissed the case, finding Scheinblum initiated his suit beyond the two-year statute of limitations.
On appeal, Scheinblum and his company pointed out they and three partners — Pittsfield Hotel Holdings, Pittsfield Development and Pittsfield Residential II — sued the city of Chicago in March 2017 in Chicago federal court over the rezoning, claiming it was an instance of improper spot zoning.
In October 2017 through discovery in the federal case, Scheinblum obtained a December 2015 email Casaccio sent Lynd advising Lynd on the downzoning. Plaintiffs contended they could not have known of their alleged injury at the hands of Schain Banks before seeing the email.
Having learned of the alleged harm in October 2017, plaintiffs said their suit in May 2019 slipped in under the deadline.
Schain Banks countered plaintiffs' federal suit against the city showed plaintiffs were at least aware they were injured when the ordinance passed in March 2016, and certainly by the time they launched the city suit in March 2017. In addition, Schain Banks said public records were available early on, which, if plaintiffs had inquired, would have revealed Lynd's involvement.
Justice Connors agreed with Schain Banks and the lower court decision.
"The record shows that plaintiffs knew of their injury and that it was wrongfully caused by March 2017, but they did not file their complaint until over two years later
in May 2019. Plaintiffs’ complaint demonstrates they knew they were injured in March 2016 when the downzoning ordinance was passed," Connors concluded.
The federal suit against the city of Chicago remains pending.
Skokie lawyer Charles A. Silverman has represented Scheinblum and Chicago Hotel Partners.
The Chicago office of New York City-based Wilson Elser Moskowitz Edelman & Dicker has defended Schain Banks.