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George Ennenga, Individually and As Father v. Byron E. Starns

April 17, 2012


Appeals from the United States District Court for the Northern District of Illinois, Western Division. No. 06 C 50117-Frederick J. Kapala, Judge.

The opinion of the court was delivered by: Sykes, Circuit Judge."


Before RIPPLE, EVANS*fn1 , and SYKES,Circuit Judges.

This case involves claims of legal malpractice and breach of fiduciary duty stemming from a dispute about an inheritance. Not normally the subject of federal litigation, the case is in federal court based on the parties' diverse citizenship. Tom and Ida Lou Ennenga lived in rural northern Illinois and had three children-Constance (known as "Connie"), Lucie, and George-and an estate valued at $3 or $4 million. Connie and Lucie each had three children; George had one child, a daughter named India. In 2000 Tom and Ida Lou revised their estate plan with the assistance of Woodruff Burt, their Illinois lawyer, and Lowell Stortz, a Minnesota attorney and law partner of Connie's husband, Byron Starns. The revised estate plan contained a trust agreement that treated George Ennenga less favorably than his sisters and India less favorably than her cousins.

The Ennengas died within a month of each other in 2004. Their estate was probated without challenge in Illinois state court, although George and India sued to stop the sale of the family homestead to a third party. They abandoned that claim and eventually brought this suit in federal court against the three attorneys-Starns, Stortz, and Burt-and their law firms. They alleged legal malpractice and breach of fiduciary duty based on a conflict-of-interest theory; a later version of the complaint alleged that the attorneys had not drafted the estate plan as Tom and Ida Lou intended.

The district court rejected the conflict-of-interest argument and dismissed most of the claims as untimely or barred by res judicata. India's minor status tolled the statute of limitations, however, so her legal malpractice claim survived the motion to dismiss. The defendants moved for summary judgment, arguing that India's damages are speculative and might not materialize at all, and that she lacks factual support for her claim that the estate plan failed to carry out Tom and Ida Lou's intent. The court agreed with the first argument and dismissed India's claim as premature, later amending the judgment to reflect that the dismissal was without prejudice. George and India appealed. The defendants cross-appealed, asking that India's malpractice claim be dismissed with prejudice.

We affirm and grant relief on the cross-appeal. This case presents a tangle of procedural and substantive issues. Simplifying, we hold as follows: (1) although the district court dismissed India's claim without preju-dice, we have appellate jurisdiction because the court is clearly done with the case; (2) the district court properly chose Illinois's statute of limitations over Minnesota's; (3) the court properly rejected George's waiver and equitable-tolling arguments, applied the relevant statute of limitations, and correctly dismissed his legal malpractice claims as untimely; and (4) the court properly dismissed the fiduciary-duty claims as barred by res judicata. As for India's legal malpractice claim, we affirm on a ground raised below but not reached by the district court: There is no evidence to support India's contention that her grandparents intended her to receive more than the estate-plan documents provide. Accordingly, that claim was properly dismissed, but it should have been dismissed with prejudice.

I. Background

Tom and Ida Lou Ennenga lived in Freeport, Illinois, and had an estate worth between $3 and $4 million. Their daughters, Connie and Lucie, each have three children; their son, George, has one child-his daughter, India. Connie's husband, Byron Starns, is a lawyer; when the Ennengas decided to revise their estate plan in the spring of 2000, they turned first to their son-in-law. Starns referred them to Lowell Stortz, one of his partners at the Minneapolis law firm of Leonard, Street and Deinard, P.A. After an initial meeting in April 2000, the Ennengas retained Stortz. They asked him to work with their Illinois lawyer Woodruff Burt of the Freeport firm of Schmelzle & Kroeger. (Burt later moved to the firm of Snow, Hunter, Whiton & Fishburn, which was briefly a defendant in this case.)

On May 5, 2000, Stortz sent Burt a letter relaying the Ennengas' request and describing his understanding of how they wanted their estate plan revised. Stortz asked Burt to carefully review the terms with the Ennengas. Burt and Stortz spoke on the phone on May 18, and later that day Burt sent Stortz a letter covering the most important terms of the revised plan. Burt asked Stortz to reconfirm the details with the Ennengas. He did so, and on May 20 Tom Ennenga sent a letter to Stortz confirming that the couple's intent was as Burt described in his May 18 letter. He said: "We have reviewed the W.A. Burt letter to you. We believe it outlines our intentions quite clearly." Stortz then proceeded to draft the new estate plan in accordance with these instructions. He sent a proposed draft, along with a detailed cover letter explaining the plan's structure, to the Ennengas and Burt on July 13.

As relevant here, and simplifying somewhat, a revocable trust agreement divided the Ennengas' estate into thirds-one third for each of their children, Connie, Lucie, and George. From the beginning the Ennengas told Stortz they were concerned about George's money-management skills and wanted to control his access to the funds in his trust. To that end, the estate plan limited George's access to his share of the estate proceeds by means of a spendthrift trust. As such, George could not control the assets in his trust or access the principal except as specified in the trust agreement. The Ennengas did not, however, have the same concerns about their daughters. The trust agreement gave Connie and Lucie unlimited access to their trust funds.

The estate plan also contained directions for the distribution of any trust-fund assets that remained upon the death of the primary beneficiaries. When George dies, the remainder of his trust will be divided into equal shares among all seven of the Ennengas' living grandchildren, including his daughter India, in a per capita distribution. In contrast, when Connie and Lucie die, the remainders of their trusts-provided they do not designate otherwise in their wills-will be divided among their own children in a per stirpes distribution.

The Ennengas signed the estate-plan documents on August 9, 2000. Almost two years later, on April 25, 2002, Tom asked Burt to videotape him discussing his estate plan. On the videotape Tom stated that the beneficiaries of his estate were George in a spendthrift trust, Connie's three children, and Lucie's three children. Inexplicably, Tom did not say anything about Connie, Lucie, or India. Burt later testified that this omission was an oversight because he did not prompt Tom to talk about these heirs on the videotape.

Ida Lou died on May 19, 2004, and Tom died a month later on June 20. Four days after Tom's death, the Ennengas' estate entered probate in Stephenson County, Illinois. George and India did not contest the will and trust documents. Instead they waited about a year and then sued Starns and Burt in Illinois state court to prevent the sale of the family home, alleging that George was promised an option to buy it. The home was sold to a third party, George and India abandoned the suit, and a judgment was entered dismissing their case.

In June 2006 George and India brought this suit in federal court alleging state-law claims for legal mal-practice and breach of fiduciary duty against Starns,*fn2 Stortz, Burt, and their law firms. All of the claims were initially premised on a conflict-of-interest theory based on the law-partner relationship between Stortz, who was primarily responsible for drafting the estate-plan documents, and Starns, the husband of one of the estate beneficiaries. The defendants moved to dismiss for failure to state a claim. The district court granted the motion, holding that under either Illinois's or Minnesota's Rules of Professional Conduct, the representation was not prohibited. See ILL. RULES OF PROF'L CONDUCT R. 1.8(c);


The court granted leave to amend, and George and India filed an amended complaint asserting a claim for legal malpractice based on allegations that the defendants failed to effectuate the Ennengas' testamentary intent. Essentially, they claimed that the lawyers negli-gently drafted the trust agreement. They also asserted a claim for breach of fiduciary duty against Starns and a related "aiding and abetting" claim against Burt and his law firm. These claims were based on allegations that Starns, as trustee of the estate, wrongfully sold the family home without giving George the option to purchase it, and that Burt and his law firm were complicit in Starns's actions.

The defendants again moved to dismiss for failure to state a claim, this time arguing that George's legal mal- practice claim was untimely, and George and India's breach-of-fiduciary-duty and aiding-and-abetting claims were barred by res judicata. George and India responded in part by arguing that under Rule 12(g)(2) of the Federal Rules of Civil Procedure, these defenses were waived because they were not raised in the first motion to dismiss. The district court rejected this argument and dis-missed George's legal malpractice claim as untimely and the fiduciary-duty claims as barred by res judicata. India's minor status tolled the statute of limitations, however, so her legal malpractice claim moved forward.

The case proceeded to the summary-judgment stage. Burt's law firm-Snow, Hunter, Whiton & Fishburn- moved for summary judgment, arguing that India's claim against it must be dismissed because Burt did not join the firm until well after the relevant estate-plan documents were drafted. The court agreed and granted summary judgment dismissing the firm from the case.*fn3 The remaining defendants also moved for summary judgment, arguing that India's claim failed on the merits or at the very least was premature because her damages were uncertain and might not ever arise. The court granted summary judgment on the latter ground. In short, the court held that if India dies before her father and aunts, and has no children, or if her father and aunts deplete their trust funds before they die, India will receive nothing regardless of the alleged malprac- tice. In other words, until India can take from the Ennengas' estate, any damages are speculative. At India's request the court amended the judgment to clarify that her legal malpractice claim was dismissed without prejudice.

George and India appealed from the following orders: (1) the district court's order dismissing with prejudice all but India's malpractice claim; (2) the order granting summary judgment for Starns, Stortz, their law firm, and Burt on India's malpractice claim; and (3) the final order amending the judgment to clarify that the dismissal of India's malpractice claim was without prejudice. The defendants filed a cross-appeal seeking review of the last two orders, arguing that India's malpractice claim should have been dismissed with prejudice.

II. Discussion

A. Appellate Jurisdiction

Because the district court dismissed India's legal malpractice claim without prejudice, we begin by addressing appellate jurisdiction. See Mostly Memories, Inc. v. For Your Ease Only, Inc., 526 F.3d 1093, 1097 (7th Cir. 2008) ("A court of appeals has an obligation to examine its jurisdiction sua sponte, even if the parties fail to raise a jurisdictional issue." (quotation marks omitted)). "Normally, a dismissal without prejudice is not a final order for purposes of appellate jurisdiction under 28 U.S.C. § 1291." Doss v. Clearwater Title Co., 551 F.3d 634, 639 (7th Cir. 2008) (quotation marks omitted). There is a recognized exception, however, when the district court makes it clear that it is "finished with th[e] case once and for all." Id.; see also Mostly Memories, 526 F.3d at 1097; Hill v. Potter, 352 F.3d 1142, 1144-45 (7th Cir. 2003).

In its summary-judgment order dismissing India's malpractice claim, the court said it was "closing" the case. The judge explained that the question of India's damages may be uncertain for quite some time-essentially, until her father and aunts die. The judge later amended the judgment to specify that the dismissal was without prejudice. This order, too, said the case was "closed" and gives no indication that the judge expects or would entertain an amended complaint. It's clear ...

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