Joyce v. DLA Piper Rudnick Gray Cary LLP

• Court: Appellate Court of Illinois
• Decided: May 7, 2008
• Docket: 1-07-1966 Rel
• Status: Published

Opinion

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 1-07-1966

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)

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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