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Appellate Court Date: 2017.01.11
10:01:05 -06'00'
Nelson v. Padgitt, 2016 IL App (1st) 160571
Appellate Court DWIGHT NELSON, Plaintiff-Appellant, v. DONALD LEE
Caption PADGITT and PADGITT, PADGITT, & PEPPEY, LTD.,
Defendants-Appellees.
District & No. First District, Second Division
Docket No. 1-16-0571
Filed November 1, 2016
Decision Under Appeal from the Circuit Court of Cook County, No. 16-L-6855; the
Review Hon. Margaret Ann Brennan, Judge, presiding.
Judgment Affirmed.
Counsel on William P. Suriano, of Law Offices of William P. Suriano, of
Appeal Riverside, for appellant.
Thomas B. Underwood, Michael D. Sanders, and Richard J. VanSwol,
all of Purcell & Wardrope, Chtrd., of Chicago, for appellees.
Panel PRESIDING JUSTICE HYMAN delivered the judgment of the court,
with opinion.
Justices Neville and Mason concurred in the judgment and opinion.
OPINION
¶1 After losing a breach of contract lawsuit against his former employer, plaintiff Dwight
Nelson sued his lawyers for malpractice. Nelson alleged that his lawyer and his law firm had
negligently represented him when negotiating an employment agreement with the employer.
Because the trial court did not err in holding that Nelson’s suit was filed outside the two-year
statute of limitations, we affirm. Nelson’s claim of malpractice against his lawyer is
“inseparable” from his claims against his employer, and his legal malpractice claim accrued at
least by the time he filed his suit against the employer because by then it was “plainly obvious”
that he had been injured as a result of legal malpractice.
¶2 BACKGROUND
¶3 In 2011, Dwight Nelson decided to leave his branding and packaging design business,
HBN Brandesign, and join another company, Launch Creative Marketing, while bringing his
HBN clients to Launch. Nelson hired Donald Lee Padgitt and Padgitt, Padgitt, & Peppey, Ltd.,
to represent him in negotiating an employment agreement with Launch. Nelson signed the
agreement on June 6, 2011.
¶4 Six months later, on January 19, 2012, Launch terminated Nelson’s employment. The
letter informing Nelson of his firing specified that under the employment agreement, Launch
could terminate Nelson for cause if the revenue collected from Nelson’s old clients totaled less
than $250,000 over the first six months of employment.
¶5 On October 31, 2012, Nelson sued Launch and one of its employees for breach of contract
and fraud. In the complaint, Nelson alleged that Launch breached the obligations of good faith
and fair dealing by failing to define Nelson’s job description and to support his work and
unnecessarily reducing and delaying the billing of the clients Nelson had brought to Launch.
Had Launch not done so, Nelson alleged, he would have met the $250,000 target during his
first six months of employment and not been fired for cause. Nelson attached to the complaint
a copy of the employment agreement and the January 19 letter terminating his employment.
¶6 On December 4, 2014, the trial court granted summary judgment in Launch’s favor. In a
written decision, the trial court pointed out that Nelson was “a successful businessman, and
was represented by competent counsel throughout the negotiation of his employment
agreement.” The trial court attributed the outcome to “Nelson’s failure to properly negotiate on
his own behalf,” which gave Launch much discretion under the employment agreement. In
sum, “Nelson was in a position at the bargaining table to ensure none of these complications
arose by better protecting his interests through negotiation.”
¶7 On July 7, 2015, Nelson sued Padgitt and his firm for legal malpractice. Nelson alleged he
hired Padgitt based on Padgitt’s experience in transactional matters and told Padgitt his goal of
securing a steady income for the next few years and eventually retiring. Padgitt negotiated the
employment agreement with Launch, and Nelson signed it on Padgitt’s recommendation. But
Nelson alleged Padgitt neglected to tell him that (1) the agreement did not provide steady
income past six months, (2) Launch could fire Nelson after six months if the revenue from his
customers fell short of the specified target, (3) Launch had the ability to insure that Nelson
would not meet his target, (4) Launch had broad discretion in billing and defining Nelson’s job
description, or (5) the agreement lacked a specific start date. Nelson alleged that any
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reasonable attorney would have negotiated an agreement that would have better protected
Nelson. Finally, Nelson alleged that he had suffered damages, including future benefits from
employment with Launch, the value of the customers he brought to Launch, the cost of settling
his suit with Launch, and the cost of suing Launch. He estimated these damages exceeded
$100,000.
¶8 On February 10, 2016, the trial court dismissed Nelson’s complaint with prejudice for the
reason that the two-year statute of limitations for legal malpractice barred his claims. (The trial
court did not consider extra-record evidence submitted by Padgitt, and neither will we.)
¶9 STANDARD OF REVIEW
¶ 10 We review a trial court’s dismissal of a complaint based on the statute of limitations
de novo. Carlson v. Fish, 2015 IL App (1st) 140526, ¶ 22.
¶ 11 ANALYSIS
¶ 12 An action for legal malpractice must be filed within two years from the time the plaintiff
“knew or reasonably should have known of the injury for which damages are sought.” 735
ILCS 5/13-214.3(b) (West 2012). Actual knowledge is not necessary to trigger the limitations
period, nor does the plaintiff need knowledge of a specific defendant’s negligent conduct or
knowledge of the existence of a malpractice claim. SK Partners I, LP v. Metro Consultants,
Inc., 408 Ill. App. 3d 127, 130 (2011). Instead, the limitations period begins when the plaintiff
has a reasonable belief that the injury was caused by the lawyer’s wrongful conduct and the
plaintiff, therefore, has an obligation to inquire further. Dancor International, Ltd. v.
Friedman, Goldberg & Mintz, 288 Ill. App. 3d 666, 673 (1997).
¶ 13 To be considered injured, a legal client must suffer a loss for which he or she may seek
monetary damages. Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka,
Ltd., 216 Ill. 2d 294, 306 (2005). Generally, that loss will not occur until the plaintiff has
suffered an adverse judgment, settlement, or dismissal of the underlying action caused by the
attorney’s alleged negligence. Lucey v. Law Offices of Pretzel & Stouffer, Chartered, 301 Ill.
App. 3d 349, 356 (1998). If the damages are as yet “speculative,” then the cause of action has
not yet accrued and the malpractice suit is premature. Id. at 353.
¶ 14 But, “speculative” in this context means “only if [the damages’] existence itself is
uncertain, not if the amount is uncertain or yet to be fully determined.” Northern Illinois
Emergency Physicians, 216 Ill. 2d at 307. Further, a malpractice claim can accrue before an
adverse judgment if it is “plainly obvious *** that he [or she] has been injured as the result of
professional negligence or where an attorney’s neglect is a direct cause of the legal expense
incurred by the plaintiff.” (Internal quotation marks omitted.) Estate of Bass v. Katten, 375 Ill.
App. 3d 62, 70 (2007) (quoting Lucey, 301 Ill. App. 3d at 355, 358).
¶ 15 On January 19, 2012, Nelson was fired and informed in writing that his termination was
under the employment agreement negotiated for him by Padgitt. Even if Nelson had not read
the employment agreement before signing it (which would have been an odd action, given his
experience in business), Nelson should have realized at that point that the employment
agreement was not drafted in his best interests. Nelson suffered an economic injury on his
firing because the agreement also stipulated a loss of salary and commission on termination for
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cause. But Nelson did not file his legal malpractice claim until July 7, 2015, well after the
two-year limitations period had run.
¶ 16 If Nelson did not know of his injury on January 19, 2012, he certainly should have known
of it by October 31, 2012, when, with the assistance of a new attorney, he filed suit against
Launch based on the termination and the text of the agreement. Even if we assume that the
limitations period did not begin to run until October 31, it had still expired before he filed his
legal malpractice claim.
¶ 17 Two past cases inform our analysis. In Janousek v. Katten Muchin Rosenman LLP, 2015 IL
App (1st) 142989, Janousek alleged that his former business partners fired him and then froze
him out of future opportunities. Id. ¶ 3. Janousek sued his former partners and then, three years
later, sued his former attorneys at Katten, alleging that those attorneys had actually assisted his
ex-colleagues in harming Janousek’s business prospects. Id. ¶ 6. We held that Janousek waited
too long to sue the Katten attorneys because he knew that he had been injured, “even though he
may not yet have known that [Katten]’s representation was partly responsible and that their
conduct gave rise to a cause of action.” Id. ¶ 21. Janousek’s claim that his partners had
defrauded him “cannot be separated” from the claim that Katten had failed to protect him from
that fraud. Id. Like Janousek, Nelson knew he had been injured when he was fired and was
informed that he was being terminated under the employment agreement. Even if Nelson did
not yet know that Padgitt had been negligent in negotiating his employment agreement, he was
on notice of the problem and had a duty to inquire further (by examining that agreement, the
language of which made plain that it did not provide Nelson with the type of protection he
asserts he asked Padgitt to ensure). Castello v. Kalis, 352 Ill. App. 3d 736, 745 (2004). That
inquiry would have shown the intertwining of his financial loss with Padgitt’s work on the
employment agreement. See also Blue Water Partners, Inc. v. Mason, 2012 IL App (1st)
102165, ¶ 67 (plaintiffs knew that former attorneys had committed malpractice in helping
plaintiffs’ former partners incorporate competing company when plaintiffs signed release
against former partners; limitations period for legal malpractice claim began to run at that point
because claims were inseparable).
¶ 18 Nelson characterizes Janousek as different than his case because the Katten attorneys were
alleged to have actually aided Janousek’s opponents, while there is no evidence that Padgitt
acted in league with Launch. But there is nothing in Janousek to indicate that its holding is
limited to its facts. Malpractice does not require bad faith on the part of the attorney.
¶ 19 In Carlson, 2015 IL App (1st) 140526, Carlson settled a dispute with his former business
partners through a mediation while represented by attorneys. He later decided that the
settlement was inadequate and his partners had defrauded him. Id. ¶¶ 8-9. But he waited more
than two years to sue his former attorneys, and this court upheld the trial court’s dismissal on
statute of limitations grounds. Id. ¶ 41. Similarly to Janousek, even if Carlson did not yet know
that his attorneys were partly responsible for his injury, he knew that he had been injured. Id.
¶ 39. “Carlson’s identification of one wrongful cause of his injuries initiates his limitations
period as to all other causes, particularly when, as here, he claims his partners engaged in fraud
and the defendants failed to protect him from fraud, those claims are inseparable.” Id.
¶ 20 Again, Nelson knew in 2012 that he had been injured by his former colleagues at Launch,
and he knew that the employment agreement negotiated by Padgitt was partly responsible for
his inability to protect himself from the alleged wrongdoings. Like Carlson, his claim of
malpractice against Padgitt is “inseparable” from his claims against Launch.
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¶ 21 Nelson attempts to distinguish Carlson by arguing that Carlson’s damages were “fixed,”
while his were dependent on the outcome of his suit against Launch and thus he could not file
his malpractice suit until after that suit concluded. If Nelson’s damages were only
“speculative,” then the limitations period would not have begun until after his employment suit
was completed. Lucey, 301 Ill. App. 3d at 353. But, as noted, damages are “speculative” only if
their existence is uncertain, not their amount. Northern Illinois Emergency Physicians, 216 Ill.
2d at 307. Damages do not have to be “fixed” in a precise amount to start the limitations period,
and Nelson knew that he had suffered economic loss from his firing well before his suit against
Launch ended. This makes his case different from Lucey, where “actionable damages were a
mere potentiality” until there was an adverse judgment. 301 Ill. App. 3d at 359.
¶ 22 A legal malpractice claim can accrue before an adverse judgment if it is “plainly obvious”
that a plaintiff has been injured as a result of professional negligence. Lucey, 301 Ill. App. 3d at
358. In 2012, Nelson (a sophisticated businessperson eventually assisted by a new attorney)
knew that his economic loss from the firing stemmed directly from Launch’s reliance on the
employment agreement, which had been negotiated by Padgitt and plainly did not include the
economic protections that Nelson allegedly had instructed Padgitt to include. He did not need
the trial court’s adverse judgment to know that he had been harmed by Padgitt. See Dancor
International, 288 Ill. App. 3d at 674-75 (where plaintiff filed federal criminal complaint
against employee for embezzlement, plaintiff also had sufficient information to file
malpractice suit against accountant who had failed to detect employee’s wrongdoing). This
distinguishes his case still further from Lucey, where Lucey was the defendant in the suit
underlying his legal malpractice claim. 301 Ill. App. 3d at 352. Lucey had a much stronger
argument that he did not know of his former attorneys’ bad advice until after the adverse
judgment because he was not the one to pursue legal action. Id.
¶ 23 Finally, a legal malpractice claim can accrue before an adverse judgment “where an
attorney’s neglect is a direct cause of the legal expense incurred by the plaintiff.” Estate of
Bass, 375 Ill. App. 3d at 70. Nelson could have (and should have) known that the text of the
employment agreement, for which Padgitt was partly responsible, directly caused his legal
expenses in litigating against Launch. Cf. Warnock v. Karm Winand & Patterson, 376 Ill. App.
3d 364, 369-70 (2007) (where plaintiffs could not have known that letter agreements for real
estate sale drafted by attorney were faulty until trial court granted defendants’ motion for
summary judgment, limitations period did not begin to run until adverse judgment entered);
York Woods Community Ass’n v. O’Brien, 353 Ill. App. 3d 293, 299 (2004) (when attorney
fees were incurred, it was not yet clear that fees were due to malpractice, so “damages
remained speculative, and no cause of action had accrued”). This is not a case where the
connection between the financial loss and the attorney’s negligence is faint or too complex for
a layman to grasp.
¶ 24 Nelson’s strongest argument emphasizes the policy underlying the “prematurity
doctrine”—that if we enforce the limitations period too strictly, plaintiffs will respond by filing
their legal malpractice suits long before any underlying litigation has finished and this will
clog the dockets with malpractice suits that must be repeatedly stayed or dismissed without
prejudice before they can be fully litigated. See Romano v. Morrisroe, 326 Ill. App. 3d 26, 32
(2001) (discussing impact of premature malpractice litigation). We recognize these sound
policy concerns and that some decisions have been more lenient with plaintiffs in response to
these concerns. Lucey, 301 Ill. App. 3d at 357 (prematurity doctrine should be applied for
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judicial economy and preservation of attorney-client relationship). But the legislature chose to
write a statute of limitations into the Code of Civil Procedure, and while a balancing act, our
ruling is consistent with the legislature’s wishes.
¶ 25 Affirmed.
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