Prospect Development, LLC v. Kreger

2016 IL App (1st) 150433, 55 N.E.3d 64
CourtAppellate Court of Illinois
DecidedMay 23, 2016
Docket1-15-0433
StatusUnpublished
Cited by7 cases

This text of 2016 IL App (1st) 150433 (Prospect Development, LLC v. Kreger) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Prospect Development, LLC v. Kreger, 2016 IL App (1st) 150433, 55 N.E.3d 64 (Ill. Ct. App. 2016).

Opinion

2016 IL App (1st) 150433

FIRST DIVISION May 23, 2016

No. 1-15-0433

PROSPECT DEVELOPMENT, LLC, a ) Appeal from the Delaware Limited Liability Company; ) Circuit Court of PROSPECT DEVELOPMENT CORPORATION, ) Cook County an Illinois Corporation; and JOHN G. WILSON, ) ) Plaintiffs-Appellants, ) ) No. 12 L 8239 v. ) ) DONALD KREGER and SCHIFF HARDIN, ) an Illinois Limited Liability Company, ) Honorable ) John P. Callahan, Defendants-Appellees. ) Judge Presiding.

JUSTICE HARRIS delivered the judgment of the court, with opinion. Presiding Justice Cunningham and Justice Connors concurred in the judgment and opinion.

OPINION

¶1 Plaintiffs brought this legal malpractice suit against defendant attorney and the law firm

that employed him. Prior to this lawsuit, plaintiff had previously filed a breach of contract action

against the city of Prospect Heights, Illinois, stemming from the collapse of a deal to develop a

sports arena for the city. The defendant attorney in this action was general counsel for the city

until the arena deal collapsed in 2004. In the previous lawsuit, the plaintiffs were successful in

proving their claim for breach of contract but were denied recovery based on the doctrine of

unclean hands. The court in the breach of contract action found plaintiffs' undisclosed loans to

defendant attorney barred recovery on the breach of contract action. Plaintiffs then instituted this

action against defendant attorney and his former firm for legal malpractice. No. 1-15-0433

¶2 In their complaint, plaintiffs alleged each time a loan was made from 1997-2001, they

inquired as to the propriety of the loans and whether they should be disclosed. Plaintiffs alleged

each time they inquired, defendant attorney gave them negligent advice. Plaintiffs further

alleged that the malpractice was concealed from them until the adverse ruling was handed down

in the prior case. After motion practice, the circuit court dismissed plaintiffs' complaint after

finding that in denying recovery in other case, the previous court made a factual determination

that in January 2005 the plaintiffs had knowledge the loan advice they last received in October

2001 may not have been proper. The court ruled such a determination barred relitigation of the

issue in this case. Because over two years remained before the statute of repose ran when

plaintiffs obtained this knowledge in 2005, the circuit court found the suit barred by plaintiffs'

failure to file within this period. Plaintiffs timely appealed the dismissal.

¶3 On appeal, plaintiffs argue that the statute of repose was tolled until the prior court issued

its ruling denying them recovery. They argue that prior court's decision does not bar them from

litigating when they had notice of the alleged negligent advice in this action.

¶4 For the reasons stated below, we affirm the order of the circuit court dismissing the

second amended complaint with prejudice.

¶5 JURISDICTION

¶6 In November 2013, defendants moved to dismiss plaintiffs' second amended complaint

based on section 2-619(a)(5) of the Code of Civil Procedure (735 ILCS 5/2-619(a)(5) (West

2012)), alleging the cause of action was barred by the six-year statute of repose. The circuit

court originally denied defendants' motion to dismiss. On June 26, 2014, defendants moved for

reconsideration. On October 20, 2014, the circuit court granted defendants' motion to reconsider

and dismissed plaintiffs' second amended complaint. On November 19, 2014, plaintiffs moved

-2- No. 1-15-0433

for reconsideration of the court's dismissal order. The plaintiffs' motion was denied on January

14, 2015. Plaintiffs filed their notice of appeal on February 11, 2015. Accordingly, this court

has jurisdiction over this matter pursuant to article VI, section 6 of the Illinois Constitution, and

Illinois Supreme Court Rules 301 and 303. Ill. Const. 1970, art. VI, § 6; Ill. S. Ct. R. 301 (eff.

Feb. 1, 1994); R. 303 (eff. May 30, 2008).

¶7 BACKGROUND

¶8 This case has a long factual history and many of the events that gave rise to this action

are recounted in Prospect Development, LLC v. City of Prospect Heights, 2012 IL App (1st)

103759-U. Accordingly, we recite only those facts necessary for the disposition of this appeal.

¶9 Attorney Donald J. Kreger (Kreger) was a partner in the Chicago office of Schiff Hardin

LLP, and between 1977 and 2003 acted as general counsel for the city of Prospect Heights,

Illinois. Kreger had a close relationship with plaintiff-appellee John Wilson (Wilson), whom he

had met when their sons were on the same hockey team. In early 1994, the city of Prospect

Heights hired Wilson as a consultant to conduct a feasibility study into constructing and

operating a sports arena in the city. In June 1997, Prospect Development Corporation executed a

redevelopment agreement to proceed with the project. Needless to say, the sports arena was

never built and by 2004 the deal was dead. In January 2005, Wilson and his companies filed suit

against the city for breach of contract. Wilson and his companies sought to recover over $20

million alleged to be owed to them under the contract with the city. Important to both this action

and the previous action, Wilson and his companies pled the following in the original breach of

contract complaint:

"25. In addition, during this time, Kreger, one of the City's Agents, approached

Developer's principal Wilson on multiple occasions to 'request' a $100,000 loan in

-3- No. 1-15-0433

connection with a personal financial problem. In light of the close role that City's

Agents had played in the Arena Project, Wilson granted such a loan in excess of

$100,000 for fear that its refusal would adversely affect the Developer's ability to

complete the Arena Project."

¶ 10 The city construed this as an admission that Wilson and his companies knew the loans

were inappropriate. Thus, in addition to the counterclaims brought by Prospect Heights, it also

raised an affirmative defense of unclean hands. At trial, the circuit court heard testimony that

beginning in December 1996 and lasting until October 2001, Wilson loaned over $150,000 to

Kreger. These loans were never disclosed to the city.

¶ 11 After a bench trial, the circuit court issued its ruling on July 23, 2010. Judge Preston

ruled in favor of Wilson and his companies on their breach of contract claim but denied them any

recovery based on the doctrine of unclean hands. Judge Preston found Wilson engaged in "bad

faith" and "clear misconduct" when he failed to disclose the secret financial relationship he had

with Kreger. Specifically pointing to paragraph 25 of the original complaint, the court stated

"Plaintiff, through its principal, Mr. Wilson, obviously knew that the 'friendship loans' provided

to Mr. Kreger may have presented a conflict of interest or may have been viewed as

inappropriate." Based on this, the court found that "Mr. Wilson admittedly felt that these loans

might have been necessary if he wanted his company to complete the Arena Project." This

decision was affirmed by this court on appeal. See Prospect Development, LLC v. City of

Prospect Heights, 2012 IL App (1st) 103759-U (affirming the trial court's unclean hands ruling).

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2016 IL App (1st) 150433, 55 N.E.3d 64, Counsel Stack Legal Research, https://law.counselstack.com/opinion/prospect-development-llc-v-kreger-illappct-2016.