Section 13-205 of the Illinois Code of Civil Procedure creates a general five-year limitations period for, among other things, “all civil actions not otherwise provided for.” 735 ILCS 5/13-205. This “catch-all” applies where another statute under which a civil suit is brought “does not provide for a statute of limitations” on its own. People ex rel. Ill. Dep't of Labor v. Tri State Tours, Inc., 342 Ill. App. 3d 842, 848 (1st Dist. 2003).
In Vizcarra v. LMR Home Healthcare, Inc., 2019 IL App (3d) 170713-U, the Appellate Court of Illinois, Third District, clarified that this catch-all limitations period did not apply to various remedies under the Illinois Business Corporation Act of 1983 (“BCA”). 805 ILCS 5/1.01 et seq.
The story of that case began when Eduardo and Lolita Ranchero (“the Rancheros”) approached Maria Vizcarra (“Vizcarra”) in early 2003 for her help in setting up a for-profit home healthcare agency. Vizcarra already owned her own home healthcare agency, and had several years’ experience in the industry. She agreed, and the three entrepreneurs executed a pre-organization subscription agreement by which each of them would pay $11,550 for a one-third ownership interest in the new company: LMR Home Healthcare, Inc. (“LMR”).
From May 2003 through September 2004, Vizcarra trained and instructed the Rancheros on how to operate LMR. On October 7, 2004, shortly after LMR received its Medicare certification, the Rancheros offered to buy Vizcarra’s shares in the company for $12,000. She declined.
Thereafter, neither the Rancheros nor LMR communicated with Vizcarra. When she sent formal requests to inspect LMR’s records − within her rights as a shareholder under the BCA − they were denied. Vizcarra’s attorney then requested a LMR’s balance sheet, profit and loss statements, and all corporate books and records pursuant to 805 ILC 5/7.75(b), (e) of the BCA. This request was also rebuffed.
Vizcarra filed her original complaint on July 8, 2011. Her second amended complaint was filed the following year. Both sought remedies under various sections of the BCA, including a court-ordered buyout of Vizcarra’s shares by LMR at fair market value. 805 ILCS 5/12.56(b)(11). The Rancheros argued that such a request was barred by Illinois’ general five-year statute of limitations, as no other applicable limitations period was present in the BCA. 735 ILCS 5/13-205. According to the Rancheros, this limitations period began to run when they offered to buy out Vizcarra on October 7, 2004, nearly seven years before Vizcarra filed her initial complaint.
The trial court disagreed, as did the appellate court, which called the Ranchero’s letter a “classic red herring.” ¶19. “The assumption that a limitation period for an action under section 12.56(b)(11) of the BCA began to run on the date that the majority shareholders tendered an offer to purchase the minority shareholders shares at a price unilaterally stated in the offer,” the appellate court held, “is contrary to the provisions of the BCA.” ¶17.
Per the BCA, the actual temporal constraints for seeking such relief are simply: (i) that the petitioner be a shareholder at the time the petition is filed; and (ii) that those in control have, are, or will act in a manner that is oppressive to the petitioning shareholder. 805 ILCS 5/12.56(a). The appellate court explained that this was “a normal reading of the BCA” which “clearly shows a legislative intent that a current shareholder may seek an order where there is past, current, or future oppression of his or her rights under the BCA.” ¶18. Therefore, the five-year general statute of limitations “had no impact on [Vizcarra’s] cause of action.” ¶19.
At Novack and Macey, we have extensive experience advising shareholders involved in closely held company disputes, as well as advising companies on how to avoid disputes in the first place. For more information about our services, please contact Matt Pagano at 312.419.6900 or email@example.com.