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Shrock v. Ungaretti & Harris Ltd.

Court of Appeals of Illinois, First District, Third Division

September 25, 2019

EDWARD SHROCK and BABY SUPERMALL, LLC, Plaintiffs-Appellants,

          Appeal from the Circuit Court of Cook County. No. 16 L 11404 Honorable Patricia O. Sheahan, Judge Presiding.

          John Xydakis, of Chicago, for appellants.

          Michael T. Trucco and Brian E. Martin, of Stamos & Trucco LLP, of Chicago, for appellees.

          PRESIDING JUSTICE ELLIS delivered the judgment of the court, with opinion. Presiding Justice Fitzgerald Smith and Justice Howse concurred in the judgment and opinion.



         ¶ 1 In November 2016, plaintiffs, Edward Shrock and Baby Supermall, LLC (BSM), sued the law firms Ungaretti & Harris Ltd. (Ungaretti) and Nixon Peabody LLP (Nixon Peabody) (with whom Ungaretti merged) and two of their attorneys, John Ruskusky and Stanton B. Miller. The crux of Shrock's complaint was that defendants aided and abetted one of their clients, Robert Meier, in violating an injunction that Shrock obtained against Meier. The circuit court dismissed Shrock's lawsuit, among other reasons, as time-barred under the two-year statute of limitations applicable to actions against attorneys for conduct arising from their rendition of professional services. We affirm.

         ¶ 2 BACKGROUND

         ¶ 3 We draw our facts from two sources. First, the allegations of the second amended complaint, which we take as true at the pleading stage. See Goral v. Dart, 2019 IL App. (1st) 181646, ¶ 6. We also judicially notice various filings in the underlying cases that prompted this lawsuit, as well as pleadings in this lawsuit. See People v. Davis, 65 Ill.2d 157, 164 (1976).

         ¶ 4 Because of the issue involved, it is necessary to specifically detail several acts that took place and the dates on which they occurred.

         ¶ 5 I. Actions Leading Up to Shrock's Lawsuit Against Meier

         ¶ 6 Plaintiff BSM, an Internet retailer of baby products, is an Illinois limited liability company that was formed in October 2003. BSM is a manager-managed limited liability company with a single manager, Robert Meier, and three members: Meier, plaintiff Shrock, and Baby Supermall, Inc., a corporation of which Shrock was president.

         ¶ 7 Among its many provisions, BSM's operating agreement granted extraordinarily broad powers to its manager, Meier. Specifically, section 6.1.2 of the agreement gave Meier

"full, exclusive, and complete discretion, power, and authority, subject in all cases to the other provisions of this Agreement and the requirements of applicable law, to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated, and to make all decisions affecting such business and affairs."

         ¶ 8 Eventually, Meier came to own 87.5% of BSM, and Shrock owned the remaining 12.5% stake in BSM. According to Shrock, at some point, Meier offered to buy Shrock's 12.5% share, but Shrock was unwilling to sell.

         ¶ 9 As Shrock tells it, a campaign of retribution ensued: First, Meier reduced Shrock's salary from $75, 000 to $40, 000. Then Meier increased his own salary, from $150, 000 to $300, 000. And to boot, Meier refused to let Shrock participate in any corporate decision-making.

         ¶ 10 More problematically, and more pertinent to this case, Meier created a series of agreements that he referred to as "profit sharing" agreements. Under these agreements, BSM, acting through Meier, in his capacity as BSM's manager, and Meier, acting in his individual capacity, agreed that BSM would pay Meier a higher percentage of its profits in exchange for Meier's agreement to defer his salary and guarantee BSM's debts and expenses. According to Shrock, the purpose of these so-called "profit sharing" agreements was to zero-out BSM's balance sheet to ensure that BSM had no profits.

         ¶ 11 BSM then hired Meier's wife and stepson and paid them 20% and 10% of BSM's profits, respectively-actions that Shrock alleged violated Illinois law and the operating agreement.

         ¶ 12 II. The 2009 Lawsuit: Shrock Sues Meier for Breach of Fiduciary Duty

         ¶ 13 In 2009, Shrock sued Meier for breach of fiduciary duty in the circuit court of Cook County (the 2009 Lawsuit). Defendants Ruskusky and Stanton, attorneys at defendant Ungaretti, represented Meier.

         ¶ 14 A. The 2010 Injunction Against Meier

         ¶ 15 On May 18, 2010, after finding a likelihood that Meier had breached his fiduciary duty to Shrock, the circuit court entered an injunction against Meier. Relevant here, the order did two things: (1) it barred Meier from making any further payments to himself, his wife, or his son under the guise of "profit sharing, " and (2) it limited Meier from paying himself, his wife, or his son salaries in excess of $350, 000, $120, 000, and $110, 000, respectively.

         ¶ 16 About 10 months later, Shrock filed a second motion for an injunction to enjoin Meier from paying himself "profit sharing, " after Meier allegedly drew down BSM's line of credit by $700, 000 to purchase a house. On March 24, 2011, attorneys with Ungaretti responded to that motion by telling the circuit court there was "no basis for an injunction based upon plaintiffs latest baseless allegations."

         ¶ 17 Then, in May 2012, Shrock filed a motion for a receiver, in which he alleged that Meier "may be" violating the injunction. In response, Meier (through Ruskusky) denied that allegation and insisted that Meier had not taken any profit sharing since the injunction was entered.

         ¶ 18 In August 2012, Shrock filed a petition for rule to show cause against Meier, alleging that he was again violating the injunction. In response, Meier (through Ruskusky) argued that Meier was merely " 'accruing' " money, not actually paying it out.

         ¶ 19 In May 2013, Shrock brought another petition for rule to show cause against Meier. In response, Ruskusky told the court, " 'I assure you that Mr. Meier has fully complied with all court orders.' "

         ¶ 20 In June 2013, Meier filed a motion to modify the injunction. Meier included an affidavit drafted by Ruskusky, in which Meier swore that he had not made any payments under the profit-sharing plans since the injunction went into effect. Instead, he claimed that amounts owed to Meier, his wife, and his son by virtue of the profit-sharing agreements had merely " 'accrued.' "

         ¶ 21 B. Shrock's August 2, 2013, Filing

         ¶ 22 On August 2, 2013, Shrock filed an opposition to Meier's request to modify the injunction. In it, Shrock again argued that Meier had repeatedly violated the injunction by "just reclassify[ing] the profit sharing as 'bonuses, ' 'loans, ' and alike." Shrock quoted statements made by Meier's attorney, defendant Ruskusky, to the court: " 'I assure you, ' Ruskusky responded, 'Mr. Meier has fully complied with all Court Orders.' All Mr. Meier did was 'accrue the amounts, ' Ruskusky went on, let 'Shrock produce documents to back up his claims.' "

         ¶ 23 Shrock did provide backup, he wrote in this filing, via W-2s from Meier, his wife, and stepson, along with other financial data on which Shrock's expert relied to "verify [that] Meier and [his wife and stepson] pocketed the money." In the face of that evidence, Shrock's filing claimed, defendant Ruskusky "reversed his stance. Yes, Meier did pay out these amounts, Ruskusky admitted, but ...

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