EarthMed, LLC v. Berlin

2024 IL App (1st) 232211-U

• Court: Appellate Court of Illinois
• Decided: June 13, 2024
• Docket: 1-23-2211
• Status: Unpublished

Opinion

2024 IL App (1st) 232211-U Order filed: June 13, 2024

FIRST DISTRICT FOURTH DIVISION

No. 1-23-2211

NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT ______________________________________________________________________________

EARTHMED, LLC, ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County ) v. ) ) No. 2021 L 011104 ) EDWARD BERLIN and BERLIN, ) STRICKER & ASSOCIATES, LTD., ) Honorable ) Ronald F. Bartkowicz, Defendants-Appellees. ) Judge, presiding. ______________________________________________________________________________

PRESIDING JUSTICE ROCHFORD delivered the judgment of the court. Justices Hoffman and Martin concurred in the judgment.

ORDER

¶1 Held: The circuit court dismissed plaintiff’s complaint as untimely under the two-year statute of limitations and five-year statute of repose set forth in section 13-214.2 of the Code of Civil Procedure. We reversed and remanded because there was a question of fact as to whether those limitations and repose periods applied to the facts of this case.

¶2 On December 15, 2022, plaintiff, EarthMed, LLC, brought a complaint for negligence and

negligent misrepresentation against defendants, Edward Berlin (Berlin) and the accounting firm of

Berlin, Stricker and Associates, Ltd. (BSA) related to their alleged failure to process payroll No. 1-23-2211

accurately and correctly for plaintiff. The circuit court dismissed the complaint pursuant to section

2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2022)), finding that it was

untimely under the two-year statute of limitations and five-year statute of repose set forth at section

13-214.2 of the Code (Id. § 13-214.2). Section 13-214.2 applies to actions alleging the negligent

performance of professional services by persons registered or licensed under the Illinois Public

Accounting Act (225 ILCS 450/0.01 (West 2022)). Plaintiff filed a motion to reconsider, which

the court denied. On appeal, plaintiff argues for reversal of the order denying its motion to

reconsider the dismissal order because there is a question of fact as to whether defendants are

registered or licensed under the Illinois Public Accounting Act and, thus, whether section 13-

214.2’s limitations and repose periods are applicable here. We reverse the denial of the motion to

reconsider and remand for further proceedings.

¶3 The following recitation of facts is taken from plaintiff’s complaint.

¶4 Plaintiff is a limited liability company operating two cannabis dispensaries in Illinois.

Plaintiff is owned by Gus Koukoutsakis and Michael Perez. BSA is an accounting firm offering

bookkeeping and other financial services, such as payroll processing, which includes calculating

employee total wage earnings and overtime payments, withholding deductions, preparing W2s and

delivering payments. Berlin is an owner of BSA.

¶5 Perez and Koukoutsakis were introduced to Berlin in 2010. Berlin represented that he was

knowledgeable about state and federal requirements regarding the calculation of employee wages,

payroll taxes, and deductions and that his company, BSA, utilized a proprietary software to process

payroll correctly and accurately. In 2015, Perez and Koukoutsakis hired BSA (by and through

Berlin) to provide payroll services for plaintiff using their proprietary software.

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¶6 Perez and Koukoutsakis asked Berlin whether plaintiff was required to pay overtime to its

employees. Berlin informed them that because plaintiff employed less than 20 persons, it was

“exempt from overtime requirements.” Perez followed up by sending Berlin an email asking how

to pay overtime. Berlin responded that “it was at [plaintiff’s] discretion as to how to pay overtime

wages.” In reliance on these statements, plaintiff paid overtime at the employees’ straight hourly

rate for all hours worked.

¶7 On December 11, 2019, a former employee of plaintiff filed a class action complaint in

federal court alleging plaintiff’s method of making overtime payments had violated several state

and federal statutes from February 1, 2016, onwards. Plaintiff did not know about the overtime-

payment requirements set forth in those statutes until served with the class action lawsuit. Plaintiff

filed its appearance in the class action matter on February 19, 2020.

¶8 In November 2021, plaintiff entered into a settlement agreement to resolve the class action

lawsuit, whereby plaintiff agreed to pay all past-due overtime payments, plus penalties and

attorney fees in the total amount of $614,449.84. The federal district judge entered final approval

of the settlement agreement on June 22, 2022.

¶9 In count I of its complaint, plaintiff alleged that defendants negligently breached their duty

of care by failing to correctly and accurately process payroll for plaintiff’s employees entitled to

overtime pay. In count II, plaintiff alleged that Berlin made several negligent misrepresentations

that induced plaintiff to make overtime payments that were not in accordance with state and federal

statutes. Plaintiff sought damages in the amount of $614,449.84, which it paid to settle the federal

class action lawsuit brought as a result of its failure to make the requisite statutory overtime

payments.

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¶ 10 Defendants brought a section 2-619 motion to dismiss, arguing that plaintiff’s complaint

was barred by the two-year statute of limitations set forth in section 13-214.2(a). Section 13-

214.2(a) states:

“(a) Actions based upon tort, contract or otherwise against any person, partnership

or corporation registered pursuant to the Illinois Public Accounting Act, as amended, or

any of its employees, partners, members, officers or shareholders, for an act or omission in

the performance of professional services shall be commenced within 2 years from the time

the person bringing an action knew or should reasonably have known of such act or

omission.” 735 ILCS 5/13-214.2(a) (West 2022).

¶ 11 Defendants argued that at some point between December 11, 2019 (when the class action

suit was filed) and February 19, 2020 (when plaintiff filed its appearance in the class action suit),

plaintiff knew, or reasonably should have known, of defendants’ negligent processing of the

payroll for its employees who were owed overtime wages. Such knowledge occurred nearly three

years before the commencement of plaintiff’s action on December 15, 2022. Thus, plaintiff’s

complaint fell outside the applicable two-year limitations period.

¶ 12 Defendants further argued that plaintiff’s complaint was barred by the five-year statute of

repose set forth in section 13-214.2(b), which states:

“In no event shall such action be brought more than 5 years after the date on which occurred

the act or omission alleged in such action to have been the cause of the injury to the person bringing

such action against a public accountant.” Id. § 13-214.2(b).

¶ 13 Defendants contended that the act causing the injury occurred in November 2015 when

they began improperly processing payroll for plaintiff’s employees owed overtime wages, thereby

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triggering the repose period that expired five years later in November 2020. Plaintiff’s complaint,

filed in December 2022, fell outside the repose period.

¶ 14 Plaintiff filed a response to the motion to dismiss, arguing that the limitations and repose

periods set forth in section 13-214.2 only apply to actions for the negligent performance of

professional services brought against public accountants registered or licensed pursuant to the

Illinois Public Accounting Act. The Illinois Public Accounting Act, in turn, requires that such

registration or licenses be issued by the Illinois Department of Financial and Professional

Regulation (IDFPR). See 225 ILCS 450/0.03 (West 2022). Plaintiff contended that neither

defendant was registered or licensed with the IDFPR and, as such, that section 13-214.2’s

limitations and repose periods were inapplicable to plaintiff’s complaint brought against them. In

support, plaintiff attached a printout of the IDFPR website’s “search for license” tool, showing all

licensed certified public accountants (CPAs) in Illinois with the last name Berlin. Neither Edward

Berlin nor BSA were listed as licensed accountants.

¶ 15 Defendants filed a reply in support of the dismissal motion and attached the affidavit of

Ronald Stricker, who attested that he and Berlin were partners in the accounting firm of BSA, and

that the firm was properly registered pursuant to the Illinois Public Accounting Act. As such,

defendants argued that section 13-214.2’s two-year limitations period and five-year repose period

applied to plaintiff’s complaint.

¶ 16 On April 28, 2023, the circuit court granted defendants’ motion to dismiss, finding that

section 13-214.2’s limitations and repose periods applied here and that plaintiff’s complaint was

not timely filed.

¶ 17 Plaintiff filed a motion to reconsider, arguing that newly discovered evidence confirmed

that there are no records of any licenses or registrations held by Berlin or BSA under the Illinois -5- No. 1-23-2211

Public Accounting Act and therefore that section 13-214.2’s limitations and repose periods are

inapplicable here. In support, plaintiff attached the IDFPR’s new written response to plaintiff’s

Freedom of Information Act (FOIA) request, 1 which sought copies of all records of any

applications submitted by, and records of any registrations or licenses held by, Berlin or BSA

under the Illinois Public Accounting Act. The IDFPR responded: “The request regarding Mr.

Berlin and Berlin, Stricker and Assoc. is denied. After a reasonable search the Department was

unable to locate responsive records.”

¶ 18 The circuit court denied plaintiff’s motion to reconsider. Plaintiff appeals, arguing that the

circuit court should have granted its motion to reconsider the dismissal order because a question

of fact exists as to whether defendants are registered or licensed accountants and, thus, whether

section 13-214.2’s limitations and repose periods are applicable here.

¶ 19 A section 2-619 motion to dismiss admits the legal sufficiency of the complaint and raises

defects, defenses, or other affirmative matters appearing on the face of the complaint or established

by external submissions that act to defeat the claim. Burns v. Department of Insurance, 2013 IL

App (1st) 122449, ¶ 9. When ruling on a section 2-619 motion to dismiss, the circuit court may

consider pleadings, depositions, affidavits and other forms of competent evidence (Id.; Lavite v.

Dunstan, 2016 IL App (5th) 150401, ¶ 37). The court should grant the section 2-619 dismissal

motion if, after construing the documents supporting the motion in the light most favorable to the

opponent, it finds no disputed issues of fact and concludes that the affirmative matter completely

1 Defendants make no argument that the IDFPR’s response to the FOIA request was not newly discovered or that it

should not have been considered by the circuit court. -6- No. 1-23-2211

negates plaintiff’s cause of action or refutes critical conclusions of law or conclusions of material,

unsupported fact. Turner v. 1212 S. Michigan Partnership, 355 Ill. App. 3d 885, 892 (2005).

¶ 20 The treatment of a section 2-619 motion differs depending on whether a jury demand has

been filed. Id., 355 Ill. App. 3d 885, 892 (2005). Where a jury demand has been filed, a dispute of

material fact must be left to the jury. Id. In the absence of a jury demand, the court may determine

disputed factual issues by conducting an evidentiary hearing. In re Marriage of Vaughn, 403 Ill.

App. 3d 830, 836 (2010); 735 ILCS 5/2-619(c) (West 2022). Where the court grants a section 2-

619 motion to dismiss following an evidentiary hearing, we review whether the court’s factual

findings are against the manifest weight of the evidence and we review questions of law de novo.

Offord v. Fitness Intern, L.L.C., 2015 IL App (1st) 150879, ¶ 15.

¶ 21 In the instant case, the record on appeal is unclear as to whether a jury trial was demanded.

The record is clear, though, that the court dismissed the complaint without holding an evidentiary

hearing. Where, as here, the court dismisses the complaint without holding an evidentiary hearing,

our duty is to determine whether a genuine issue of material fact exists precluding the dismissal

or, in the absence of such an issue of material fact, whether dismissal is proper as a matter of law.

Vaughn, 403 Ill. App. 3d at 836. Our review is de novo. Burns, 2013 IL App (1st) 122449, ¶ 9.

¶ 22 The purpose of a motion to reconsider is to bring to the circuit court’s attention newly

discovered evidence, changes in the law, or errors in the court’s previous application of the law.

Peregrine Financial Group, Inc. v. TradeMaven L.L.C., 391 Ill. App. 3d 309, 320 (2009). When

reviewing an order disposing of a motion to reconsider based on the court’s alleged misapplication

of existing law, the standard of review is de novo. Graves v. Cook County Republican Party, 2020

IL App (1st) 181516, ¶ 36. When reviewing an order disposing of a motion to reconsider based on

new evidence, our standard of review is abuse of discretion. Id. As the motion to reconsider in the -7- No. 1-23-2211

present case was based on new evidence (the IDFPR’s response to the FOIA request) indicating

that section 13-214.2’s limitations and repose periods were inapplicable here, we review the denial

of the motion for an abuse of discretion.

¶ 23 We begin our analysis by examining section 13-214.2. Our primary goal in construing a

statute is to ascertain and effectuate the legislative intent. Evanston Insurance Co. v. Riseborough,

2014 IL 114271, ¶ 15. The most reliable indicator of legislative intent is the plain language of the

statute itself, which must be given its plain and ordinary meaning. Id. Here, the plain language of

section 13-214.2(a) reveals that the limitations and repose periods set forth therein apply to

complaints for the negligent performance of professional services by persons and partnerships

“registered pursuant to the Illinois Public Accounting Act.” 735 ILCS 5/13-214.2 (West 2022). To

be a registered accountant under the Illinois Public Accounting Act, one must “hold[] a license or

registration issued by the [IDFPR].” 225 ILCS 450/0.03 (West 2022).

¶ 24 The relevant issue here is whether defendants were registered or licensed pursuant to the

Illinois Public Accounting Act (i.e., whether they held a registration or license issued by the

IDFPR) such that the limitations and repose periods set forth in section 13-214.2 applied to

plaintiff’s complaint against them. Defendants point to the affidavit filed by Ronald Stricker, who

attested that BSA was an accounting firm properly registered pursuant to the Illinois Public

Accounting Act and that Berlin was a member and partner thereof. By contrast, plaintiff points to

the printout of the IDFPR website’s “search for a license tool” attached to its response to the

motion to dismiss, indicating that neither Berlin nor BSA was listed as licensed accountants.

Plaintiff also points to the IDFPR’s response to its FOIA request, attached to the motion to

reconsider, indicating that the IDFPR was unable to locate any records that either Berlin or BSA

was registered or licensed. -8- No. 1-23-2211

¶ 25 This conflicting evidence between Stricker’s affidavit on the one hand, and the IDFPR

website printout and response to the FOIA request on the other, raises a question of fact as to

whether defendants were registered or licensed with the IDFPR under the Illinois Public

Accounting Act as required in order for the limitations and repose periods set forth in section 13-

214.2 to be applicable to plaintiff’s complaint against them. Given this question of fact, the circuit

court erred in granting the section 2-619 dismissal and it abused its discretion when it denied

plaintiff’s motion to reconsider.

¶ 26 For all the foregoing reasons, we reverse the order denying plaintiff’s motion to reconsider

the dismissal order and remand for further proceedings. If a jury trial has been demanded in this

case, defendants may raise the statutes of limitation and repose as affirmative defenses. If no jury

trial has been demanded, the court may decide the dismissal motion after conducting an evidentiary

hearing under section 2-619(c).

¶ 27 As a result of our disposition of this case, we need not address the other arguments on

appeal.

¶ 28 Reversed and remanded.

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