THIRD DIVISION
MAY 7, 2008
No. 1-07-1966
EDWARD T. JOYCE, Individually and on Behalf of ) Appeal from the
Similarly-Situated Stockholders of 21st Century ) Circuit Court of
Telecom Group, Inc., ) Cook County.
)
Plaintiff-Appellant and Cross-Appellee, )
)
v. ) No. 06 L 9189
)
DLA PIPER RUDNICK GRAY CARY LLP, as )
Successor in Interest to Piper Marbury )
Rudnick and Wolfe LLP, ) The Honorable
) Robert L. Cepero,
Defendant-Appellee and Cross-Appellant. ) Judge Presiding.
JUSTICE GREIMAN delivered the opinion of the court:
Plaintiff Edward Joyce, individually and on behalf of similarly situated stockholders of
21st Century Telecom Group, Inc. (21st Century), appeals from the trial court’s order dismissing
his amended legal malpractice complaint in favor of defendant DLA Piper Rudnick Gray Cary
LLP pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West
2006). In addition, defendant cross-appeals the trial court’s order denying its motion to dismiss
the original complaint pursuant to section 2-619 of the Code (735 ILCS 5/2-619 (West 2006))
based on the timeliness of that complaint in relation to a tolling agreement entered into by the
parties.
According to plaintiff’s complaint, the underlying action arose in December 1999 and
resulted from a drafting error caused by defendant in a merger agreement between 21st Century
and RCN. More specifically, 21st Century and RCN agreed to effectuate their merger on a
"stock for stock basis,” whereby the 21st Century stockholders would receive shares of RCN
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common stock. The merging parties further agreed that 10% of the RCN common stock would
be withheld for one year from the effective date of the merger as indemnification security and
the stock remaining at the end of that period would be distributed to 21st Century stockholders.
The 10% holdback was to be valued based on the price per share of stock at the end of the
indemnity period; however, the agreement, which was executed by defendant, incorrectly
reflected that the stock was to be valued based on the price per share of the stock on the date the
merger agreement was executed. As a result of the error and the fact that the price per share
dropped significantly during the one year indemnification period, RCN distributed over 5 million
fewer shares to the 21st Century stockholders than required pursuant to the agreed valuation
terms, amounting to a loss of more than $19 million.1 The merger agreement specifically named
plaintiff as "Shareholder Representative.”
Plaintiff subsequently took action on behalf of himself and the 21st Century shareholders
to recover the money lost due to defendant’s drafting error. In that effort, plaintiff and Larry
Ashby, an attorney representing the former 21st Century stockholders with respect to potential
claims against RCN, contacted defendant; however, plaintiff and Ashby offered to withhold
defendant’s name from their forthcoming suit against RCN if defendant agreed to enter a tolling
agreement with respect to the statute of limitations. Then, on December 5, 2001, plaintiff and
1
Because the price per share of RCN stock had dramatically fallen during the indemnity
period, the total amount of shares that should have been issued out of the 10% holdback was far
greater than the amount of shares issued at the higher price per share pursuant to the valuation
error in the merger agreement.
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defendant entered a tolling agreement related to potential claims arising out of the 1999 merger
agreement between 21st Century and RCN, providing, in relevant part:
"1. The running of any statute of limitations applicable to any of the Potential
Claims, whether arising under state or federal law, including any defense based upon the
doctrine of laches or any similar defense based upon the lapse of time (collectively, the
'Statute of Limitations Defenses’) is hereby tolled until such time as a lawsuit asserting
any one or more of the Potential Claims against [defendant] is filed so long as such
lawsuit is filed on behalf of one or more of the Potential Claimants, on or before
December 31, 2002, and the Shareholder Representative delivers written notice to the
undersigned representative of [defendant] of the filing of such lawsuit within three (3)
business days after it is filed;
2. Without limiting the generality of any of the foregoing, [defendant] hereby
waive[s] and agree[s] not to assert or attempt to avail [itself] of any Statute of Limitations
Defenses based in whole or in part upon the passage of time occurring after the date of
this Agreement in response to any lawsuit asserting any of the Potential Claims, provided
such lawsuit is filed on behalf of one or more of the Potential Claimants, on or before
December 31, 2002, and the Shareholder Representative delivers written notice to the
undersigned representative of [defendant] of the filing of such lawsuit within three (3)
business days after it is filed;
3. Except to the extent provided herein, this Agreement is without prejudice to
the respective rights, claims and defenses of the parties hereto; and notwithstanding
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anything to the contrary contained herein, it is specifically understood and agreed that
any Statute of Limitations Defense or Defenses which [defendant] may have as of the
date of this Agreement is preserved, and shall not be affected in any manner whatsoever
by this Agreement, and may be asserted by [defendant] in response to or against any one
or more of the Potential Claims;”
Thereafter, the parties agreed to amend the tolling agreement four times, altering only the
date on which plaintiff was required to file suit against defendant. Accordingly, only paragraphs
1 and 2 were amended and with each amendment only the date was changed. On July 21, 2005,
the parties entered the fifth and final amendment to the tolling agreement:
"1. Paragraph 1 of the Fourth Amendment is hereby superseded so that Paragraph 1 of
the Tolling Agreement shall be replaced in its entirety by the following:
1. The running of any statute of limitations applicable to any of the
Potential Claims, whether arising under state or federal law, including any
defense based upon the doctrine of laches or any similar defense based upon the
lapse of time (collectively, the 'Statute of Limitations Defenses’) is hereby tolled
until such time as a lawsuit asserting any one or more of the Potential Claims
against [defendant] is filed so long as such lawsuit is filed on behalf of one or
more of the Potential Claimants, on or before August 31, 2005, and the
Shareholder Representative delivers written notice to the undersigned
representative of [defendant] of the filing of such lawsuit within three (3) business
days after it is filed;
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2. Paragraph 2 of the Fourth Amendment is hereby superseded so that Paragraph 2 of the
Tolling Agreement shall be replaced in its entirety by the following:
2. Without limiting the generality of any of the foregoing, [defendant]
hereby waive[s] and agree[s] not to assert or attempt to avail [itself] of any Statute
of Limitations Defenses based in whole or in part upon the passage of time
occurring after the date of this Agreement in response to any lawsuit asserting any
of the Potential Claims, provided such lawsuit is filed on behalf of one or more of
the Potential Claimants, on or before August 31, 2005, and the Shareholder
Representative delivers written notice to the undersigned representative of
[defendant] of the filing of such lawsuit within three (3) business days after it is
filed.”
Morever, the final amendment provided that "[i]n all other respects, the Tolling Agreement, the
First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment
shall remain in full force and effect.”
Plaintiff filed the underlying legal malpractice suit on August 30, 2006, nearly one year
after the expiration of the tolling agreement, on behalf of himself and the putative class of 21st
Century shareholders, alleging that defendant "owed the 21st Century Shareholders a duty of
care arising from its attorney-client relationship with 21st Century, the purpose of which was to
benefit the 21st Century Shareholders by advocating for and protecting their interests.” Plaintiff
further alleged that defendant breached its duty by failing to draft the merger agreement in
accordance with the terms agreed to by 21st Century and RCN. In response to plaintiff’s
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complaint, defendant filed a motion to dismiss pursuant to section 2-619.1 of the Code based
upon plaintiff’s lack of standing to assert the claim where plaintiff was not defendant’s client and
plaintiff’s failure to timely file the action. On January 3, 2007, the trial court granted
defendant’s motion to dismiss pursuant to section 2-615 of the Code, but granted plaintiff leave
to amend his complaint. The court then denied defendant’s motion to dismiss pursuant to section
2-619 of the Code, finding that plaintiff’s complaint was timely based upon the parties’ tolling
agreement.
Plaintiff subsequently filed an amended complaint, arguing that defendant "owed the 21st
Century Shareholders a duty of care arising from its attorney-client relationship with them and
21st Century, the direct, intended and primary purpose of which was to collectively benefit the
21st Century Shareholders by advocating and protecting their interest.” Plaintiff claimed that
defendant "breached the duty of care it owed to the 21st Century Shareholders in failing to draft
the Agreement in accordance with the terms negotiated by [defendant] and 21st Century on their
behalf and RCN.” To support his allegation, plaintiff alleged that he and his business associate
retained defendant "to represent, primarily, the interests of the 21st Century Shareholders in the
[merger] negotiations” and further averred that, throughout that representation, defendant "acted
at the direction of and on behalf of both 21st Century and its shareholders for the intended and
primary benefit of the 21st Century Shareholders.” In response, defendant filed a motion to
dismiss plaintiff’s amended complaint on the basis that plaintiff again failed to state a cause of
action for legal malpractice. Defendant additionally filed a motion to reconsider or clarify the
trial court’s January 3, 2007, order finding plaintiff’s complaint timely.
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On May 8, 2007, a hearing was held on the pleadings and the trial court ultimately
granted defendant’s motion to dismiss, finding that plaintiff had not stated and could not state a
claim for legal malpractice against defendant. Consequently, the trial court determined that
defendant’s motion to reconsider its January 3, 2007, order was moot. The trial court
subsequently denied plaintiff’s motion to reconsider its ruling. This timely appeal and cross-
appeal followed.
We first address defendant’s contention that the trial court erred in denying its section 2-
619 motion to dismiss on the basis that plaintiff’s complaint was timely. In particular, defendant
argues that, according to the terms of the parties’ tolling agreement, plaintiff was barred from
filing his complaint because he did not file it within the allotted time frame. In other words,
because plaintiff failed to satisfy the agreement’s condition precedent, the statute of limitations
and the statute of repose were not tolled and therefore barred the filing of the complaint.
Although admitting that he did not file the underlying complaint within the fifth amendment’s
allotted time frame, plaintiff responds that his complaint was timely because each amendment
agreed to by the parties created a new contract, thereby waiving the conditions precedent for the
prior amendments and tolling the passage of time. Therefore, according to plaintiff, defendant
could only assert the statute of limitations defenses based on the passage of time after the parties
entered the fifth amendment. Consequently, plaintiff essentially argues that defendant’s
interpretation is equivalent to an accelerated statute of limitations period. We disagree.
A motion to dismiss, pursuant to section 2-619 of the Code, admits the legal sufficiency
of the pleading, but asserts an affirmative defense or other matter that avoids or defeats the
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plaintiff’s complaint. DeLuna v. Burciaga, 223 Ill. 2d 49, 59 (2006). Because a section 2-619
motion to dismiss presents a question of law, we review this contention de novo. DeLuna, 223
Ill. 2d at 59.
We review the parties’ tolling agreement in accordance with well-established contract
principles. Joyce v. Mastri, 371 Ill. App. 3d 64, 74 (2007). The primary goal of contract
interpretation is to give effect to the parties’ intent by interpreting the contract as a whole and
applying the plain and ordinary meaning to unambiguous terms. Joyce, 371 Ill. App. 3d at 74.
We note that language in a contract is not rendered ambiguous simply because the parties
disagree. Lavelle v. Dominick’s Finer Foods, Inc., 227 Ill. App. 3d 764, 768 (1992). Moreover,
a contract modified by the parties creates a "new single contract consisting of so many of the
terms of the prior contract as the parties have not agreed to change, in addition to the new terms
on which they have agreed.” Schwinder v. Austin Bank of Chicago, 348 Ill. App. 3d 461, 469
(2004).
Plaintiff filed his initial complaint on August 30, 2006, alleging legal malpractice related
to the December 1999 merger agreement. The parties entered the original tolling agreement on
December 5, 2001, and amended it four times thereafter. The fifth and final amendment was
entered on July 21, 2005, and extended the agreement until August 31, 2005. Paragraph 1 of the
tolling agreement expressly provided that "the running of the statute of limitations applicable”
for any timeliness defenses was "hereby tolled until such time as a lawsuit asserting any one or
more of the Potential Claims against [defendant] is filed so long as such lawsuit is filed *** on
or before” the agreed date in the original agreement and the amendments thereafter. Paragraph 2
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of the agreement further provided that "[defendant] hereby waive[s] and agree[s] not to assert or
avail [itself] of any Statute of Limitations Defenses based in whole or in part upon the passage of
time occurring after the date of this Agreement in response to any lawsuit asserting any of the
Potential Claims, provided such lawsuit is filed *** on or before” the agreed date in the original
agreement and the amendments thereafter. Moreover, Paragraph 3 of the agreement, which
appeared in the original tolling agreement and was never amended, provided that "[e]xcept to the
extent provided herein, *** it is specifically understood and agreed that any Statute of
Limitations Defense or Defenses which [defendant] may have as of the date of this Agreement is
preserved.”
The clear, unequivocal language of paragraphs 1 and 2 of the fifth amendment
demonstrate that defendant agreed to waive its potential timeliness defenses if plaintiff complied
with the condition precedent and filed its complaint by the agreed date, namely, August 31,
2005. Consequently, because plaintiff failed to comply with the condition precedent,
defendant’s potential timeliness defenses were not waived. Moreover, reading the phrase "date
of this Agreement” in relation to the whole agreement demonstrates that the phrase, which was
repeated throughout the contract and not merely within the amended paragraphs, refers to
December 5, 2001. See Joyce, 371 Ill. App. 3d at 74. Our conclusion is further supported by
paragraph 3, which expressly preserved defendant’s right to assert the timeliness defenses if
plaintiff failed to file his complaint by the agreed date. Accordingly, plaintiff’s complaint was
not timely. See 735 ILCS 5/13-214.3(b), (c) (West 2006) (statutes of limitation and repose for
legal malpractice actions). Indeed, to accept plaintiff’s argument would require this court to
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allow plaintiff the benefits of the first four amendments without fulfilling the requirement of
filing suit by the specified dates imposed by any of the amendments.
We are not persuaded by plaintiff’s argument that each amendment created a separate,
new contract rescinding the prior agreement; rather, each amendment merely modified those
terms that differed from the prior agreement, yet did not alter the force and effect of the
unaltered terms. See Schwinder, 348 Ill. App. 3d at 469. The modified term, namely, the
requisite date for the condition precedent, was the only term altered in each amendment;
therefore, the fifth amendment incorporated all prior amendments and the original agreement to
the extent that the terms were the same and modified the requisite filing date for purposes of
tolling. Notably, the fifth and final amendment demonstrates the parties’ intent to that end,
where the amendment expressly provides that paragraphs 1 and 2 superceded and replaced
paragraphs 1 and 2 of the fourth amendment; however, "[i]n all other respects, the Tolling
Agreement, the First Amendment, the Second Amendment, the Third Amendment and the
Fourth Amendment shall remain in full force and effect.” Consequently, plaintiff’s argument
that our interpretation would render the five amendments unenforceable for want of
consideration lacks merit.
We further respectfully disagree with the trial court’s determination that such an
interpretation of the agreement is tantamount to a "due on sale” clause. Absent the agreement,
plaintiff was required to comply with the applicable statutes of limitations and repose (see 735
ILCS 5/13-214.3 (West 2006)); however, because of the agreement, plaintiff had the benefit of
pursuing his alleged claims against RCN and then the ability to pursue a timely claim against
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defendant by August 31, 2005, nearly four years after the natural passing of the statute of
limitations.
We need not address plaintiff’s contention that the trial court erred in dismissing his
amended complaint where he stated a cause of action for legal malpractice because it is
unnecessary to the disposition of this appeal. Moreover, this court may affirm the trial court’s
judgment on any basis available in the record. American Service Insurance Co. v. Pasalka, 363
Ill. App. 3d 385, 389-90 (2006).
Accordingly, we affirm the judgment of the circuit court dismissing plaintiff’s complaint.
Affirmed.
QUINN, P.J., and CUNNINGHAM, J. concur.
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