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FIFTH DIVISION
JUNE 28, 2002

PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:

In appeal number 1-01-0851, plaintiffs Raymond G. Scachitti, Patrick J. Houlihan andRobert F. Rifkin (Scachitti plaintiffs), residents and taxpayers of the City of Chicago (City), fileda lawsuit on behalf of the City against defendants Prudential Securities, Inc. (Prudential), EverenSecurities, Inc. (Everen)⁽¹⁾, Deloitte & Touche (Deloitte), and Altschuler, Melvoin, and Glasser,L.L.P. (Altschuler), alleging that all of these defendants breached a fiduciary duty and breached acontract. The Scachitti plaintiffs' complaint also seeks recovery of allegedly fraudulentlyobtained public funds from Prudential and Everen, pursuant to Article XX of the Illinois Code ofCivil Procedure (735 ILCS 5/20-101 et seq. (West 1998)) (Code). The Scachitti Complaintfurther accuses Prudential and Everen of committing common-law fraud, and Deloitte andAltschuler of malpractice. The Scachitti plaintiffs appeal orders of the circuit court of CookCounty dismissing the claim of breach of fiduciary duty for failing to state a claim pursuant tosection 2-615 of the Code (735 ILCS 5/2-615 (West 1998)), and dismissing the remaining claimsas time-barred, pursuant to section 2-619 of the Code (735 ILCS 5/2-619(a)(5) (West 1998)).

In appeal number 1-01-2111, plaintiff Adriana DiPaolo, a resident and taxpayer of theCounty of DuPage (County), filed a lawsuit on behalf of the County, making substantially similarclaims against William Blair & Co., L.L.C. (Blair) and Jerry L. Lacy. DiPaolo appeals orders ofthe circuit court of Cook County with respect to Blair, dismissing the claim of breach of fiduciaryduty for failing to state a claim, dismissing the Article XX and common-law fraud claims as notalleging the type of injury that those claims could redress, that all of the claims against Blair weretime-barred, and finding no just reason to delay enforcement or appeal of the dismissal as toBlair.⁽²⁾ The cases were consolidated on appeal. As a convenience, this opinion refers to Everen,Prudential and Blair collectively as the Underwriter defendants, and to Deloitte and Altschulercollectively as the Accountant defendants.

The record on appeal discloses that both complaints were filed in the trial court on April3, 2000, and assigned to different judges. Both complaints generally allege that in order tofinance public projects, such as roads, schools, hospitals, bridges and the like, local governmentsborrow money by issuing bonds to investors. Plaintiffs also alleged that, to assist localgovernments in such efforts, federal law generally exempts interest on such bonds from federalincome taxation.

Plaintiffs alleged that the City and County were victims of a practice sometimes called"yield-burning" by underwriters and accountants who handled various aspects of advance-refunding transactions in 1992 and 1993. Plaintiffs' complaints discuss the mechanics ofadvance-refunding transactions and "yield-burning" at some length. An advance-refundingtransaction can result in substantial debt-service savings to issuers in a declining interest-rateenvironment. Such transactions may be used where the original local governmental bondspaying a high rate of interest cannot be redeemed prior to a specified "call" date in the future.

In an advance-refunding transaction, new local governmental bonds are issued and theproceeds are used to purchase open market securities which are similar or identical to the originalbonds in terms of the interest, principal and call date. The open market securities, generally U.S.Treasury obligations, are held in an irrevocable escrow account. This account, also called adefeasance escrow, must be fully invested throughout the defeasance period and used only to paythe interest, principal and redemption premium, if any, on the original refunded bonds.

Plaintiffs allege that federal law does not permit a local governmental issuer to profitfrom the investment of the proceeds of tax-exempt bonds. Accordingly, plaintiffs allege, federallaw restricts the overall yield that local governments can earn on securities placed in a defeasanceescrow. If a municipal issuer invests the defeasance escrow in securities that earn a higher yieldthan that paid to the holders of the advance-refunding bonds, a positive arbitrage would becreated; profits from such arbitrage would be required to be paid to the U.S. Treasury at the riskof losing the tax-exempt status of the advance-refunding bonds.

Generally, a municipal issuer must certify that the yield restriction was materiallysatisfied, along with a statement of the factual basis for the certification. Plaintiffs allege that foradvance-refunding bonds, the investment rate of the proceeds cannot exceed the borrowing rateby more than one thousandth of a percentage point. A municipal issuer may satisfy the yieldrestriction by investing in special State and Local Government Series Bonds (SLGS) from theU.S. Treasury at or below the restricted rate. Alternatively, a municipal issuer may invest in aportfolio comprised of higher yielding open-market securities and zero-interest SLGS thatproduces a yield at or below the restricted rate.

"Yield burning" may occur where a securities dealer overcharges an issuer for bonds. Because a bond's yield rate moves inversely to the price of the principal, an overcharge decreasesthe effective yield of the instrument. This practice, colloquially known as "burning" the yield,may also enhance the profits of firms that construct such portfolios for municipal issuers. However, it seems undisputed that U.S. Treasury regulations require defeasance escrowinvestments to be priced at fair market value, in order to prevent arbitrage.

The Scachitti Complaint alleged that in March 1992, the City issued a $ 48,070,000advance-refunding bond series ("1992 City Refunding Bonds") to retire an outstanding 1987bond issue, on which the City was obligated to pay a higher interest rate than on the 1992 rates. However, the 1987 issue could not be redeemed until January of 1997, so the proceeds from thesale of the 1992 City Refunding Bonds were used to purchase U.S. Treasury Bonds to be held ina defeasance escrow account, which would be used to pay principal and interest, and to redeemthe 1987 bonds in 1997.

The Scachitti Complaint avers that Everen served as the lead underwriter for the 1992City Refunding Bonds. Everen was allegedly hired by negotiation, rather than by competitivebidding. Everen allegedly sold the City U.S. Treasury Bonds that were held in a defeasanceescrow. The Scachitti Complaint further alleged that Everen provided various advisory servicesto the City that rendered Everen an investment adviser to the City, and that a confidentialrelationship existed between the two, in which the City placed trust and reliance in Everen.

The Scachitti Complaint also alleged that the City retained Deloitte to verify themathematical accuracy of Everen's yield computations. Plaintiffs allege that Deloitte shouldhave verified the yields according to the fair market value of the escrow securities, and by failingto do so, understated the true yield of the escrow securities, thereby creating a positive arbitrage. The Scachitti Complaint alleges that this knowing oversight permitted Everen to conceal anexcessive markup on the bonds and burn the yield by $221,697.06.

Similarly, the Scachitti Complaint alleges that in March 1993, the City issued a$232,880,000 advance-refunding bond series ("1993 City Refunding Bonds") to retire prioroutstanding issues. In this transaction, Prudential served as the lead underwriter and is alleged tobe in a fiduciary relationship with the City. Like Deloitte, the accounting firm of Altschuler wasretained to verify the mathematical accuracy of Prudential's yield computations. The ScachittiComplaint avers that Altschuler should have used the fair market value of the securities inverifying the yield computations, and by knowingly failing to do so, allowed Prudential toconceal $516,554.63 in yield-burned markups.

The DiPaolo Complaint alleges that in April 1993, the County issued a $161,590,000advance-refunding bond series ("1993 County Refunding Bonds") to retire prior outstandingissues from 1987 and 1991. In this transaction, Blair served as the lead underwriter and isalleged to be in a fiduciary relationship with the County. Lacy was retained to verify themathematical accuracy of Blair's yield computations. The DiPaolo Complaint claims that Lacyshould have used the fair market value of the securities in verifying the yield computations, andby knowingly failing to do so, allowed Blair to conceal at least $707,747 in yield-burnedmarkups.

In both cases, the defendants filed combined motions to dismiss pursuant to section 2-619.1 of the Code (735 ILCS 5/2-619.1 (West 2000)). The arguments raised by the defendantswere substantially similar in a number of respects. The motions argued that the Underwriterdefendants did not have a fiduciary relationship with the City or the County; the complaintsfailed to identify the terms of the contracts allegedly breached; and that the City and the Countysuffered no damages. The motions also argued that the claims against the Underwriterdefendants were barred by a five-year statute of repose found in section 13(D) of the IllinoisSecurities Act (815 ILCS 5/13(D) (West 1992)), and that the claims against the Accountantdefendants were barred by the five-year statute of repose for actions brought against publicaccountants (735 ILCS 5/13-214.2(b) (West 1992)).

In addition, Prudential argued that the Scachitti Complaint's claims against it were barredby a settlement agreement in United States ex rel. Lissack v. Prudential Securities, Inc., 95 Civ.1363, a suit brought pursuant to the federal False Claims Act in the Federal District Court for theSouthern District of New York, involving a number of municipal advance-refunding transactionsacross the country, including the 1993 City Refunding Bonds. The settlement agreementprovided in part that the Internal Revenue Service (IRS) would consider the U.S. TreasuryObligations sold in the transactions listed therein to have been sold at fair market value.

The plaintiffs responded to the various motions to dismiss, arguing in part that thestatutes of limitations and repose could not be asserted against the City or County in theperformance of public acts under the doctrine of nullum tempus occurrit regi ("time does not runagainst the king"). The plaintiffs also argued that if a statute of limitations was applicable, theArticle XX claims would be governed by section 13-205 of the Code (735 ILCS 5/13-205 (West2000)) and the time for brining them would be tolled due to fraudulent concealment; thecomplaints properly pleaded that the City and County suffered damages; and that the breach ofcontract and fiduciary duty claims were properly pleaded. In addition, the Scachitti plaintiffsargued that the City's interests were not represented in the settlement of the federal lawsuit.

On September 26, 2000, the trial court dismissed the DiPaolo Complaint's claim ofbreach of fiduciary duty for failure to state a claim. The trial court's order also dismissed theDiPaolo Complaint's Article XX and common-law fraud claims on the ground that they did notallege the type of injury these claims could redress; the order granted DiPaolo leave to replead asto these later claims. The transcript of proceedings shows that the trial court also ruled that thenullum tempus doctrine did not insulate the DiPaolo complaint against a statute of limitations,which the trial court determined to be section 13-205 of the Code.

On January 31, 2001, the trial court issued a memorandum and opinion as to the ScachittiComplaint. The order states that the trial court had previously ruled during hearings on themotions to dismiss that: the nullum tempus doctrine did not apply to the claims at issue; the five-year statute of repose found in section 13(D) of the Illinois Securities Act could not be tolled byallegations of fraudulent concealment; that the motion to dismiss claims of breach of fiduciaryduty for failure to state a claim was granted as to all defendants; and Accountant defendants'motions to dismiss based on the five-year statute of repose for actions brought against publicaccountants was granted. The order then discussed section 13(D) of the Illinois Securities Act,concluding that it applied to and barred the Article XX and breach of contract claims.

On May 10, 2001, after DiPaolo amended her complaint, the trial court entered an orderruling that the claims against Blair were barred by section 13(D) of the Illinois Securities Act,and finding no just reason to delay enforcement or appeal of the dismissal as to Blair. Theplaintiffs filed Notices of Appeal to this court, which consolidated the cases for appeal.

The issue on appeal in both cases is whether the trial court erred in dismissing plaintiffs'complaints. The complaints were dismissed pursuant to section 2-619 of the Illinois Code ofCivil Procedure, which provides a means of obtaining summary disposition of issues of law oreasily proved issues of fact. Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112,115, 619 N.E.2d 732, 735 (1993). Section 2-619(a)(5) provides that an action may dismissedwhere it "was not commenced within the time authorized by law." 735 ILCS 5/2-619(a)(5)(West 2000). A section 2-619 motion to dismiss admits the legal sufficiency of the plaintiffs'cause of action, much as a section 2-615 motion to dismiss admits a complaint's well-pleadedfacts. See Kedzie, 156 Ill. 2d at 115, 619 N.E.2d at 735. Section 2-619 dismissals are reviewedde novo. Owens v. McDermott, Will & Emery, 316 Ill. App .3d 340, 344, 736 N.E.2d 145, 150(2000).

Plaintiffs initially contend that the trial courts erred in ruling that the nullum tempusdoctrine did not apply to these cases. The plaintiffs argue that the nullum tempus doctrineexempts the State from the operation of a statute of limitations, unless by its terms the statuteexpressly includes the State, county, municipality, or other governmental agency. Clare v. Bell,378 Ill. 128, 130-31, 37 N.E.2d 812, 814 (1941). Historically, the nullum tempus doctrineemerged from concepts of sovereign power and prerogative; following the abolition of sovereignimmunity in the Illinois Constitution of 1970, the doctrine is supported by policy judgments thatthe public should not suffer as a result of the negligence of its officers and agents in failing topromptly assert causes of action which belong to the public. See Board of Education v.A, C & S, Inc., 131 Ill. 2d 428, 472, 546 N.E.2d 580, 600-01 (1989); City of Shelbyville v.Shelbyville Restorium, Inc., 96 Ill. 2d 457, 461, 451 N.E.2d 874, 876 (1983).

The test is whether the right that plaintiff governmental unit seeks to assert "is in fact aright belonging to the general public or whether it belongs only to the government or to somesmall and distinct subsection of the public at large." Shelbyville, 96 Ill. 2d at 462, 451 N.E.2d at876-77; see, e.g., Winakor v. Annunzio, 409 Ill. 236, 249, 99 N.E.2d 191 (1951) (belated changeof variable contribution rate by Department of Labor permitted because it was in aid of the publicpurpose of relieving unemployment); Clare, 378 Ill. at 130-32, 37 N.E.2d at 814 (action to collectpenalties on delinquent property taxes allowed to proceed because the right to collect them was"public"); People ex rel. City of Chicago v. Commercial Union Fire Insurance Co., 322 Ill. 326,332-22, 153 N.E. 488, 491 (1926) (action to impose city license fee on a foreign fire insurancecompany held "public" because the proceeds would benefit city's fire department); Greenwood v.Town of LaSalle, 137 Ill. 225, 229, 26 N.E. 1089, 1090 (1891) (municipality's right to collectlocal property taxes ruled "public" because the "taxes may be levied for purposes in which thepublic, generally, are directly interested, such as 'constructing or repairing roads, bridges orcauseways' within the town"). Specifically, our supreme court has focused on "the effects of theinterest on the public, the governmental entities [sic] obligation to act on behalf of the public andthe extent to which public funds must be expended." A, C & S, Inc., 131 Ill. 2d at 476, 546N.E.2d at 602.

In this case, defendants rely heavily on Champaign County Forest Preserve Dist. v. King,291 Ill. App. 3d 197, 683 N.E.2d 980 (1997), which affirmed the dismissal of a claim by theChampaign County Forest Preserve District (District) seeking to recover alleged overcharges forinsurance premiums totaling $140,000. The King court concluded that the purchase of liabilityinsurance had no effect on the public at large, as it did not make the public safer, or reduce thelikelihood of injury on the District's property. King, 291 Ill. App. 3d at 201, 683 N.E.2d at 983. The King court noted that the District was legally required to indemnify and protect its commissioners and employees against various claims and suits, but was not legally required to purchaseinsurance, which was only one of several alternatives the District could have chosen as protectionagainst claims and suits. King, 291 Ill. App. 3d at 201-02, 683 N.E.2d at 983. The court thenstated that the fact that public funds were used to purchase insurance does not necessarily renderit a public act; otherwise, any use of public funds would always be considered a public act. King,291 Ill. App. 3d at 202, 683 N.E.2d at 983.

The transactions at issue in the cases on appeal do not involve the purchase of liabilityinsurance. Thus, King seems no more or less useful in deciding these cases than the cases whichKing cites, e.g., Shelbyville and A, C & S, Inc. Accordingly, this court will apply the principlesannounced by our supreme court to the transactions here without giving undue weight to King.

The question of who would benefit by the government's action and who would lose by itsinaction is of "paramount importance" in our analysis. Shelbyville, 96 Ill. 2d at 462, 451 N.E.2dat 877. The defendants characterize plaintiffs' acts as "the forays of the City and the County intothe markets to buy U.S. Treasury securities ***." However, in A, C & S, Inc., our supreme courtrejected the argument "that in determining whether a governmental entity is pursuing a publicinterest, review should be made of the nature of the transaction and not the consequences flowingfrom the transaction." A, C & S, Inc., 131 Ill. 2d at 475, 546 N.E.2d at 602.

Plaintiffs argue that the advance-refunding transactions should be deemed a public actbecause the City and County ordinances authorizing these transactions generally state that theyare being undertaken for a public purpose and in the public interest. In Shelbyville, the courtstated that it did not "find any logic in allowing the designation of the city's action as 'public' or'private' to be controlled by the origin of the city's rights in a private contract or local ordinance***." Shelbyville, 96 Ill. 2d at 465-66, 451 N.E.2d at 878. The A, C & S, Inc. court performedits own analysis of the issue, but also found support for its ruling that a public right was involvedin the state Asbestos Abatement Act. A, C & S, Inc., 131 Ill. 2d at 475, 546 N.E.2d at 602.

Plaintiffs argue that in this case, "the underlying activities being financed - providing ajail, a courthouse, and a storm water system - are all important public functions ***." Defendants have not disputed this, but respond that examining the public purposes for which theplaintiffs originally issued the bonds is a diversion from the question of whether the advance-refunding transactions benefit the public. Defendants argue that the public already received thebenefit of the underlying activities in the original bond issue, and that King takes great pains toemphasize that a benefit to overall public finances is insufficient to establish a public right.

None of the parties has cited case law specifically addressing the question of whetherbenefit of the underlying activities in the original bond issue should be considered whenanalyzing whether the advance-refunding of those bonds benefits the public. Our supreme courthas stated that "[t]he issuance of refunding and funding bonds does not create additionalindebtedness, but merely evidences existing debts." Kocsis v. Chicago Park Dist., 362 Ill. 24, 35,198 N.E. 847, 853 (1935); see also People ex rel. City of Rock Island v. Rudgren, 378 Ill. 408,413, 38 N.E.2d 723, 726 (1941) (power to issue refunding bonds is implied in statute authorizingissuance of bonds to construct a bridge). In these cases, the transactions were designed tosubstitute lower-interest debt for the original high-interest debt financing public projects. Accordingly, the advance-refunding transactions should not be considered separately from theoriginal bonds and, by extension, the purpose for which they were issued.

Contrary to defendants' argument, King does not emphasize that a benefit to publicfinances does not create a public act. The King court did state that "the fact that public fundswere used to purchase insurance does not necessarily render it a public act." King, 291 Ill. App.3d at 202, 683 N.E.2d at 983. However, the King court stated this in analyzing the third factorextracted from Shelbyville, not the first factor. It cannot be doubted that the third "prong ofShelbyville must be given a realistic application." A, C & S, Inc., 131 Ill. 2d at 476, 546 N.E.2dat 602. However, defendants have cited no authority stating that the analysis of the third prongmay be imported into the analysis of the first prong.

The King court did consider, as a separate matter, whether the District asserted a publicright in filing a lawsuit against defendants for excessive insurance premiums. King, 291 Ill. App.3d at 202-04, 683 N.E.2d at 984-85. The King court concluded that such a suit did not assert apublic right, despite the alleged loss of tax revenue, as the expenditure of funds did not serve apublic purpose, such as increasing public safety. King, 291 Ill. App. 3d at 203-04, 683 N.E.2d at984-85. The King court thus distinguished A, C & S, Inc., as involving not only a loss of taxrevenue, but a threat to public health. King, 291 Ill. App. 3d at 203, 683 N.E.2d at 984.

As noted above, Illinois law treats refunding bonds, and the power to issue such bonds, asrelated to the original debt, and the power to incur said debt. Moreover, the Illinois Constitutionof 1970 recognizes that certain powers are generally considered essential to government, i.e., toregulate for public welfare, to license, to tax and to incur debt. See Ampersand, Inc. v. Finley, 61Ill. 2d 537, 539-40, 338 N.E.2d 15, 17 (1975) (and authorities cited therein). A review of nullumtempus cases shows that our supreme court generally holds that nullum tempus may be invokedby a local government when the suit relates to these essential powers of government. The policepower was implicated in A, C & S, Inc., Shelbyville and Winakor; the taxing power wasimplicated in Greenwood and Clare; the licensing and taxing powers were implicated inCommercial Union Fire Insurance Co. This case involves the essential power to incur debt.

Furthermore, as long ago as the 19th Century, our supreme court stated in Greenwoodthat it "entertained no doubt" that a municipality's right to collect a property tax was a publicright because the "taxes may be levied for purposes in which the public, generally, are directlyinterested, such as 'constructing or repairing roads, bridges or causeways' within the town." Greenwood, 137 Ill. at 228-9, 26 N.E. at 1089-90 (emphasis added). Our supreme court did notrequire the local government to show that sums so collected would be applied to those purposes. This case is stronger than Greenwood, as the alleged overcharges relate to debts already incurred,and defendants have not disputed that the original debts were incurred for the benefit of thegeneral public.

Defendants also cite People for the Use of the Town of New Trier v. Hale, 320 Ill. App.645, 52 N.E.2d 308 (1943), in which a relator sued Hale and various sureties on bonds given byhim as town collector of the Town of New Trier, alleging that Hale retained commissions oncollections as compensation in excess of that permitted by statute. This court held that the rightsin controversy concerned the Town of New Trier only, not the public at large. Hale, 320 Ill. App.At 652, 52 N.E.2d at 311. Defendants cite Hale as rejecting a claim that a local government caninvoke nullum tempus to redress the skimming of public monies.

Defendants' reliance on Hale does not account for our supreme court's decision inA, C & S, Inc., which rejected a similar argument based on Brown v. Trustees of Schools, 224Ill. 184, 187-188, 79 N.E. 579, 580 (1906), one of the primary cases cited in Hale. A, C & S,Inc., 131 Ill. 2d at 474-75, 546 N.E.2d at 602. The A, C & S, Inc. court did so in part becausemultiple claims were involved. The consolidated cases here show that, unlike Hale or King, weare not confronted with an isolated claim. The A, C & S, Inc. court's rejection of this sort ofargument was also based in part on the magnitude of the cost to be borne by the plaintiffs, whichfor the reasons discussed below, also favors the plaintiffs in this appeal.

The conclusion that a public right or act is implicated in these cases also finds support instate statutory law. The Local Government Debt Reform Act specifically authorized advance-refunding of the sort at issue in these cases. Ill. Rev. Stat. 1990, ch. 17,