Shrock v. Ungaretti & Harris Ltd.
| Decision Date | 25 September 2019 |
| Docket Number | No. 1-18-1698,1-18-1698 |
| Citation | 437 Ill.Dec. 59,2019 IL App (1st) 181698,143 N.E.3d 904 |
| Parties | Edward SHROCK and Baby Supermall, LLC, Plaintiffs-Appellants, v. UNGARETTI & HARRIS LTD., Nixon Peabody LLP, John Ruskusky, and Stanton B. Miller, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
John Xydakis, of Chicago, for appellants.
Michael T. Trucco and Brian E. Martin, of Stamos & Trucco LLP, of Chicago, for appellees.
¶ 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.
¶ 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, 436 Ill.Dec. 869, 143 N.E.3d 698. 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, 2 Ill.Dec. 572, 357 N.E.2d 792 (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.
¶ 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.
¶ 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.
¶ 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.
¶ 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 plaintiff's 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.’ "
¶ 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:
¶ 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
¶ 24 The filing quoted the court: Shrock wrote that "[t]he Court didn't buy Ruskusky's claims."
¶ 25 Shrock thus requested "an Order of default against Meier and a Rule to Show Cause against him and Ruskusky." In his prayer for relief, Shrock asked, among other things, that the court "sanction[ ] Meier, Ruskusky, and Ungaretti & Harris."
¶ 27 On March 5, 2014, the jury found that Meier willfully and wantonly violated his fiduciary duties to Shrock and assessed over $10 million in punitive damages.
¶ 29 On March 12, 2014, Shrock filed a motion again claiming a violation of the injunction. As in his August 2013 filing, Shrock claimed that, post-injunction, Meier (1) used BSM's line of credit for a $788,000 loan to buy a house; (2) paid his wife and son $682,921 and 667,485, respectively, that he deceptively mislabeled as "bonuses"; and (3) paid himself $4,047,636 above his $350,000 salary. He reiterated that he had provided evidence to prove, contrary to Ruskusky's assertions, that Meier and his family had actually been receiving money from BSM, not merely "accruing" it. This filing, again, quoted defendant Ruskusky's assurances to the court that Meier was not violating the injunction, a claim that the court did not accept.
¶ 31 Just over two weeks after the jury verdict against him, on March 20, 2014, Meier filed for bankruptcy. In connection with Meier's bankruptcy petition, an examiner investigated Meier's assets. According to Shrock, the investigation "revealed [that] Meier violated the May 18, 2010 injunction barring any further ‘profit sharing’ to himself or his family."
¶ 32 In July 2014, the bankruptcy court lifted the automatic stay to allow Shrock to pursue his judgment against Meier for breach of fiduciary of duty and violating the injunction. Once the bankruptcy stay was lifted, the circuit court entered judgment against Meier on the jury's verdict for $11,164,500. According to Shrock, the bankruptcy court later determined that that debt was non-dischargeable, because Meier was guilty of fraud and breach of fiduciary duty.
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