Court Again Affirms Inquiry Notice Standard

Novack and Macey LLP

Novack and Macey LLP

The First District Appellate Court concluded that Plaintiffs, Brian Scheinblum and Chicago Hotel Partners, LLC (“CHP”), did not timely file their legal malpractice complaint against the law firm of Schain Banks Kenny & Schwartz, Ltd.’s (“Schain Banks”).  Brian Scheinblum, et al., v. Schain Banks Kenny & Schwartz, LTD, 2021 IL App (1st) 200798. 

According to Plaintiffs, they retained Schain Banks in 2015 to file a complaint for declaratory judgment and specific enforcement of a contract related to developing a hotel on certain floors of a building located at 55 East Washington Street in Chicago (the “Pittsfield Building”).  Schain Banks helped Plaintiffs’ successfully settle the dispute.  At the same time, without Plaintiffs’ knowledge, Schain Banks was advising another party on how to stop the development of a hotel at the Pittsfield Building.  Subsequently, the City of Chicago passed a downzoning ordinance related to the Pittsfield Building on March 16, 2016 that killed Plaintiffs’ plan to open a hotel causing them a “tremendous financial loss.”  Id. at ¶ 7.

In granting Schain Banks’ motion to dismiss, the Court held that Plaintiffs should have known they were injured when the City passed the downzoning ordinance.  On appeal, Plaintiffs argued that they had “no way of knowing” they should have investigated their own attorneys’ involvement in the passage of the ordinance.  Id. at ¶ 21.  Plaintiffs alleged that they only became aware of Schain Banks’ involvement after it sued the City, and obtained a 2015 Schain Banks’ email providing legal advice on how to rezone the building, through discovery in October 2017.  The Court disagreed.  The Court concluded, “Because plaintiffs developed a reasonable belief that the downzoning was caused by wrongful conduct, they had an obligation to inquire further on that issue.”  Id. at ¶ 19.  The court stressed that it was not necessary for Plaintiffs to know that their lawyers were involved in wrongdoing; they needed only know that there was wrongdoing by somebody in order for them to be required to inquire whether their lawyers were involved.

Brian Scheinblum, et al., v. Schain Banks Kenny & Schwartz, Ltd., 2021 IL App (1st) 200798

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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