Khan v. Seidman, LLP
977 N.E.2d 1236
Ill. App. Ct.2012Background
- Two consolidated actions against BDO Seidman, LLP and Michael Collins arising from allegedly flawed tax shelters advised to Khan and related entities.
- The trial court stayed proceedings pending Grant Thornton’s Supreme Court appeal and arbitration on contract claims.
- Khan I held arbitration covered only breach-of-contract claims; investment and tax-advice claims were excluded.
- Khan II addressed statutes of limitations/repose for Deutsche Bank and Grant Thornton; it held the “actual harm” accrual depended on IRS assessments or settlements.
- The appellate court modified the stay to last only for the duration of Grant Thornton’s Supreme Court appeal, and not for the arbitration period.
- BDO defendants’ argument centered on arbitration scope; plaintiffs contended broader stay was needed due to overlapping issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of stay pending Grant Thornton’s appeal | Grant Thornton appeal affects the case substantially | Stay should cover broader proceedings | Stay affirmed for Grant Thornton appeal duration |
| Arbitration scope for breach-of-contract claims | Breaches arise from investment/tax advice | Contract excludes investment/tax advice; breaches are outside arbitration | Breaches may be nonarbitrable; arbitration clause narrowed by merger clause |
| Subject-matter jurisdiction of interlocutory appeal | Rule 307(a)(1) supports appeal of stay | Order is discovery/administrative | Jurisdiction proper; stay appeal allowed |
| Effect of merger clause on arbitration scope | Invest/tax advice fall within contract | Merger clause excludes those services from performance | Investment/tax advice outside arbitration; remains tort/other claims |
Key Cases Cited
- Shaw v. Citizens State Bank of Shipman, 185 Ill. App. 3d 79 (1989) (stay orders and Wiseman doctrine applied to avoid conflicting judgments in related actions)
- Wiseman v. Law Research, Inc., 133 Ill. App. 2d 790 (1971) (stay of related proceedings to avoid inconsistent outcomes)
- Minor v. City of Chicago, 127 Ill. 2d 260 (1989) (stay is an injunctive remedy; discovery orders not interlocutory appeals unless stay involved)
- Valente v. Maida, 24 Ill. App. 2d 144 (1960) (discussion of appealability of injunctions/stays)
- Disciplined Investment Advisors, Inc. v. Schweihs, 272 Ill. App. 3d 681 (1995) (discussed appealability of stays in complex proceedings)
- Landis v. North American Co., 299 U.S. 248 (1936) (federal-law governs stays pending independent proceedings)