United States District Court, N.D. Illinois, Eastern Division
EMIGRANT BANK FINE ART FINANCE, LLC and EMIGRANTA CORPORATION, Plaintiffs,
RIVER NORTH COLLECTIONS, LLC, ROGER L. WESTON, BOUGAINVILLEA CAPITAL, LLC, KATHLEEN M. CORONA, GREATBANC, INC., and LEVENFELD PEARLSTEIN, Defendants.
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE
Bank Fine Art Finance, LLC and Emigranta Corp. sued a number
of individuals and organizations in connection with a $5
million loan made to River North Collections, LLC and Roger
L. Weston. In count 7 of their third amended complaint, the
plaintiffs allege that the law firm Levenfeld Pearlstein
engaged in negligent misrepresentation by falsely telling
them that it represented River North and Weston. Levenfeld
has moved to dismiss count 7 for failure to state a claim.
reviewing the motion to dismiss, the Court "take[s] the
plaintiffs' factual allegations as true and give[s] them
the benefit of all reasonable inferences." Orgone
Capital III, LLC v. Daubenspeck, 912 F.3d 1039, 1044
(7th Cir. 2019). The Court may look beyond the face of the
complaint to "consider documents incorporated by
reference in the pleadings." Id.
Negligent misrepresentation claim
plaintiffs base their claim of negligent representation on an
October 2014 letter from Levenfeld to Emigrant Bank, which
plaintiffs attached to their third amended complaint, . In
the letter, Levenfeld offers opinions regarding the validity
and enforceability of certain loan and trust documents
related to Emigrant's loan to Weston and River North. The
alleged misrepresentation appears in the letter's first
sentence: "We have acted as general counsel to Weston
and River North . . . in connection with the loan . . .
secured by the Works." Letter from Levenfeld Pearlstein
to Emigrant Bank (Oct. 3, 2014), dkt. no. 163-5, at 1. The
plaintiffs allege that this statement was false because
Weston and River North "assert that they never retained
Levenfeld in connection with any contemplated line of credit
from Emigrant or the Loan, and that they never authorized
Levenfeld to perform any services in relation thereto."
Third Am. Compl., dkt. no. 163, ¶ 95.
argues that these allegations do not state a claim for
fraudulent misrepresentation. At the outset, the Court notes
that a significant portion of Levenfeld's motion appears
to concern ostensible misrepresentations entirely separate
from the one that the plaintiffs identify. For example,
Levenfeld argues that it offered no opinion about whether the
loan documents bore genuine signatures. But the relevant
question is whether Levenfeld engaged in fraudulent
misrepresentation by claiming that it had acted as general
counsel to Weston and River North. The Court will thus
consider Levenfeld's arguments to the extent that they
relate to this allegation.
first contends that the plaintiffs have not alleged a
negligent misrepresentation because the firm's statement
in the opinion letter-that it was acting as general counsel
to Weston and River North-is consistent with the allegation
that Weston and River North never authorized them to do so.
Setting aside whether it is in fact possible to "act as
general counsel" for someone without having his
permission to do so, the plaintiffs need not allege that the
terms of Levenfeld's statement were literally false.
Rather, Illinois law recognizes liability for tacit
misrepresentations based on the defendant's conduct.
See, e.g., Glazewski v. Coronet Ins. Co.,
108 Ill.2d 243, 250, 483 N.E.2d 1263, 1266 (1985) ("A
representation may be made by words, or by actions or other
conduct amounting to a statement of fact."). It is
reasonable to infer that by stating that it was acting as the
attorney for Weston and River North, Levenfeld implicitly
represented that it had been authorized to do so. Indeed, the
contrary interpretation- that it was acting without its
ostensible clients' authority-would make little sense in
the context of an opinion letter in which Levenfeld
summarized work it said it had undertaken for the benefit of
Weston and River North.
Levenfeld points to other statements in the letter setting
out its assumptions as evidence that it limited its duties to
the plaintiffs. For example, Levenfeld wrote that it assumed
for the purposes of its analysis that "[e]ach of the
parties to the Loan Documents . . . has duly and validly
executed and delivered each such instrument." Dkt. no.
163-5, at 2. Levenfeld contends that its statement that it
assumed (i.e., without independently investigating) that the
borrowers authorized the loan documents prevents it from
being liable for negligent misrepresentation. It relies on
Geaslen v. Berkson, Gorov & Levin, Ltd., 220
Ill.App.3d 600, 581 N.E.2d 138 (1991), in which the Illinois
Appellate Court noted that an attorney who issues an opinion
letter to a non-client owes a duty of care only with respect
"to the matters expressed in that letter."
Id. at 610, 581 N.E.2d at 145. But this principle
does not support dismissal of count 7 because the alleged
misrepresentation-that Levenfeld represented Weston and River
North-was clearly stated in the letter and not limited by
caveats or disclaimers. Whether Levenfeld may have limited
its liability with respect to other possible
misrepresentations is immaterial to the motion to dismiss.
also argues that the caveats in its opinion preclude the
plaintiffs from showing that they were harmed by the alleged
misrepresentation. But the question of whether the plaintiffs
will be able to prove that they justifiably relied on the
alleged misrepresentation would require the Court to compare
the plaintiffs' evidence to the language of these
disclaimers. See Cozzi Iron & Metal, Inc. v. U.S.
Office Equip., Inc., 250 F.3d 570, 574 (7th Cir. 2001)
(noting that to determine whether the plaintiff's
reliance was justified, "we must consider all of the
facts that [the plaintiff] knew, as well as those facts [it]
could have learned through the exercise of ordinary
prudence"). Because Levenfeld's argument depends on
the consideration of evidence outside the complaint that is
not yet before the Court, neither dismissal under Rule
12(b)(6) nor conversion to a motion for summary judgment is
permitted. See Thompson v. Cope, 900 F.3d 414, 425
(7th Cir. 2018) ("Treating a motion to dismiss as a
motion for summary judgment without giving the non-moving
party notice of the conversion and an opportunity to respond
with evidentiary material would pose a problem that could
require a remand.").
Statute of limitations
also argues that the plaintiffs' claim is barred under
the statute of limitations. The parties appear to agree that
the claim in count 7 is subject to a two-year limitations
period. See 735 Ill. Comp. Stat. 5/13-214.3(b).
Because the statute of limitations is an affirmative defense,
it can provide a basis for dismissal under Rule 12(b)(6) only
"if the complaint contains everything necessary to
establish that the claim is untimely." Collins v.
Village of Palatine, 875 F.3d 839, 842 (7th Cir. 2017).
contends that certain allegations in the complaint establish
that the plaintiffs knew or reasonably should have known that
they were injured and that their injury was wrongfully caused
as early as October 2016, more than two years before they
added their claim against Levenfeld. Specifically, it points
to the plaintiffs' allegations concerning an incident in
which their representative learned that Weston and River
North were unable to produce several items for inspection.
The plaintiffs allege that those items were unavailable
because they had been moved to another location in violation
of a term in the loan agreement. Levenfeld contends that this
incident put the plaintiffs on notice of a wrongful injury
and thus started the limitations period.
argument is unpersuasive. The allegations concerning the
events in 2016 do not conclusively establish that the
plaintiffs knew or should have known about Levenfeld's
alleged misrepresentation. Levenfeld cites Nolan v.
Johns-Manville Asbestos, 85 Ill.2d 161, 421 N.E.2d 864
(1981), in which the Illinois Supreme Court explained that
the limitations period begins to run "when a party knows
or reasonably should know both that an injury has occurred
and that it was wrongfully caused." Id. at 171,
421 N.E.2d at 868. But the events of October 2016 (as
described in the third amended complaint) do not establish
that the plaintiffs did know or should have known that
Levenfeld's claim that it represented Weston and River
North was false. The possibility that the plaintiffs knew
that they were wrongfully injured by the borrowers'
contractual breach does not constitute notice of wrongdoing
by Levenfeld. See Knox Coll. v. Celotex Corp., 88
Ill.2d 407, 416, 430 N.E.2d 976, 980-81 (1981) (explaining
that the limitations period begins running when "the
injured person becomes possessed of sufficient information
concerning his injury and its cause to put a
reasonable person on inquiry to determine whether actionable
conduct is involved" (emphasis added)). And whether the
information known to the plaintiffs was sufficient to start
the limitations period in 2016 is a question of fact that
cannot be resolved from the complaint's allegations
alone. See id.
it is not clear from the face of the complaint that the
fraudulent misrepresentation claim is time-barred, the Court
may not ...