1550 MP Rd. LLC v. Teamsters Local Union No. 700
| Citation | 2017 IL App (1st) 153300,91 N.E.3d 444 |
| Decision Date | 13 November 2017 |
| Docket Number | No. 1–15–3300,1–15–3300 |
| Parties | 1550 MP ROAD LLC, Plaintiff–Appellee, v. TEAMSTERS LOCAL UNION NO. 700; International Brotherhood of Teamsters; Joint Council 25 of the International Brotherhood of Teamsters; Randy Cammack; John Coli; Patrick W. Flynn ; Fred Gegare; James T. Glimco; Michael Haffner; Ken Hall; Terrence J. Hancock; Carroll E. Haynes; James P. Hoffa; C. Thomas Keegel; Brian Meidel; Frederick P. Potter, Jr.; Brian Rainville; Fred Simpson ; Thomas Stiede; and George Tedeskchi, Defendants–Appellants. |
| Court | United States Appellate Court of Illinois |
Richard J. Prendergast, Ltd. (Richard J. Prendergast, Michael T. Layden, Dierdre A. Close, and Brian C. Prendergast, of counsel), and Jacobs, Burns, Orlove & Hernandez (Sherrie E. Voyles and Brandon Anderson, of counsel), both of Chicago, for appellants.
Law Office of Richard K. Hellerman, P.C., of Chicago (Richard K. Hellerman, of counsel), for appellee.
¶ 2 In May 2008, plaintiff 1550 MP Road LLC entered into a lease and purchase agreement (LPA) with Teamsters Local Union No. 726 (Local 726), an unincorporated association. The LPA was executed by Thomas Clair, the Secretary–Treasurer and principal officer of Local 726. Local 726's executive board was aware of the negotiation of the LPA, its scope, and the reasons for entering into it. After the LPA was executed, the board passed a resolution approving the LPA. Local 726, however, executed the agreement without complying with its bylaws, which called for Local 726's members to be notified and vote to authorize the agreement. Local 726 took possession of the premises in January 2009.
¶ 3 In February 2008, while the LPA was being negotiated, the International Brotherhood of Teamsters (International) initiated an investigation of its affiliate, Local 726. The International requested that John Coli, an International vice president, a member of the International's General Executive Board, a member of Joint Council 25 of the International Brotherhood of Teamsters (JC25), and president of Teamsters Local Union No. 727 (Local 727), investigate the financial condition of Local 726. Approximately two weeks after the LPA's execution, Coli, who had been given a copy of the LPA during his investigation, wrote to the International with assurances that cost-cutting measures were being implemented to improve Local 726's financial condition. Coli did not mention the LPA in his letter.
¶ 4 The International's Independent Review Board was conducting its own investigation of Local 726.1 In June 2009, it issued a report recommending that Local 726 be placed into trusteeship. James P. Hoffa, the International's president, imposed an emergency trusteeship over Local 726 and appointed Becky Strzechowski as trustee with full control over the business activities of the local. Strzechowski viewed the LPA as a financial drain on Local 726. Strzechowski met with plaintiff to discuss modification of the LPA, but the parties failed to reach an agreement. In September 2009, the International voted to continue Local 726's trusteeship.
¶ 5 The International's General Executive Board met in December 2009. Coli proposed dissolving Local 726 and Teamsters Local Union No. 714 (Local 714) (which was also under trusteeship) and transferring the membership, assets, and liabilities of the two locals to a newly-chartered local, Teamsters Local Union No. 700 (Local 700). After dissolution of the two locals, new Local 700 would consist of essentially all of Local 726's members and the public sector members of Local 714. Shortly thereafter, the International's General Executive Board, including Coli, voted to revoke the charters of Local 726 and Local 714 and charter a new public employee union, Local 700, to establish a single local that would better represent their interests. Coli was appointed Local 700's trustee. The International advised Coli that "initially, [Local 700] will be structured as a consolidation of former [Local 714] and [Local 726]." The International transferred all of Local 726's membership, books, documents, property, and funds to Local 700. According to a 2009 audit, total assets of $47,883 and total liabilities of $123,299 were transferred to Local 700.
¶ 6 Local 726 was dissolved on December 31, 2009. On January 1, 2010, Local 700 occupied the space formerly occupied by Local 726 in the subject premises. Although the plaintiff and Strzechowski had engaged in negotiations to modify the LPA prior to Local 726's dissolution, Coli, Local 700's trustee, rejected any liability under the agreement signed by Local 726. Coli was adamant that "he would do nothing for [plaintiff]" that would result in Local 700 remaining in the premises or performing under the LPA. Local 700 advised plaintiff that it had taken possession of the premises and offered to create a month-to-month tenancy. Local 700 tendered a rent check, but plaintiff did not cash or deposit the check. Plaintiff and Local 700 continued to negotiate through April 2010 but failed to reach any agreement. At the end of April 2010, Coli moved Local 700's business operations to another building owned by Local 727's pension fund.
¶ 7 Plaintiff sued for breach of contract and sought damages specified in the LPA. In count I, plaintiff claimed that Local 700 was liable for the breach of the LPA under a theory of corporate successor liability because Local 726 merged into Local 700 and that Local 700 was a mere continuation of Local 726. In the alternative, plaintiff claimed in counts II and III that Local 700 was liable to plaintiff because Local 726's transfer of its assets, including its collective bargaining agreements (CBAs), to Local 700 was a fraudulent transfer under sections 5(a) and 6(a) of the Uniform Fraudulent Transfer Act (Fraudulent Transfer Act) ( 740 ILCS 160/5(a), 6(a) (West 2014)). In the remaining counts, plaintiff claimed that Coli, the International, JC25, and certain individual Teamster officials were liable for tortious interference with the LPA, with count VIII directed at Coli.
¶ 8 Following a bench trial, the circuit court found that (1) the LPA was valid and enforceable; (2) Local 700 was liable for Local 726's breach of the LPA under the merger, mere continuation, and fraud exceptions to the theory of successor corporate nonliability; (3) Local 700 was liable for Local 726's breach of the LPA because Local 726's transfer of its assets, including its CBAs, was a fraudulent transfer under the Fraudulent Transfer Act; and (4) Coli was personally liable for tortious interference with the LPA. Judgment was entered in favor of the International, JC25, and the remaining Teamsters officials. The circuit court granted plaintiff nearly $2 million in damages and over $320,000 in attorney fees and costs.
¶ 9 On appeal, defendants2 argue that (1) the LPA is void ab initio and cannot be enforced because it was not executed in conformity with either Local 726's bylaws or the Property of Unincorporated Associations Act (Act) ( 765 ILCS 115/0.01 et seq. (West 2010)), (2) if the LPA is not void ab initio , then it is invalid and unenforceable because Clair lacked apparent authority to enter into the agreement, (3) the circuit court erroneously imposed corporate successor liability against Local 700, (4) a CBA is not a transferable asset for the purposes of the Fraudulent Transfer Act, (5) Coli is not liable for tortious interference with the LPA, and (6) the LPA contains an unenforceable liquidated damages provision.
¶ 10 We find that the LPA was an enforceable contract. Local 726's failure to comply with its bylaws or with the Act did not render the LPA void ab initio . Furthermore, Clair acted with apparent authority when executing the LPA, and Local 726's executive board ratified the LPA. We further find that Local 700 was liable for breach of the LPA based on corporate successor liability principles. We therefore affirm the circuit court's judgment finding that Local 700 was liable to plaintiff for Local 726's breach of the LPA. We reverse the circuit court's Fraudulent Transfer Act judgments in favor of plaintiff because there was no transfer of an asset by a debtor within the meaning of the Fraudulent Transfer Act, and even if there was, plaintiff failed to prove the actual value of the CBAs at issue here. We reverse the circuit court's judgment against Coli for tortious interference with a contract because, as a member of the International's General Executive Board and as Local 700's trustee, Coli's conduct was privileged. Finally, we affirm the circuit court's damages award in favor of plaintiff because the LPA contained an enforceable liquidated damages provision.
¶ 14 First, we address defendants' argument that the LPA is void ab initio and cannot be enforced because it was not executed in conformity with the Act or with Local 726's bylaws. Defendants contend that because the union's members never voted to authorize the LPA, and because the LPA was not signed by the requisite number of union officers, Local 726 could not enter into the LPA. Defendants rely primarily on Alliance Property Management, Ltd. v. Forest Villa of Countryside Condominium Ass'n , 2015 IL App (1st) 150169, 400 Ill.Dec. 177, 47 N.E.3d 1142, to argue that "a contract is void ab initio where one of the parties exceeded its authority to enter into the subject agreement." In the circuit court, defendants raised an affirmative defense challenging the enforceability of the LPA by asserting that it was entered into without the membership's approval but did not specifically plead a violation of the Act as an affirmative defense. Defendants raised an argument that the LPA did not comply with the Act for the first time in their posttrial motion.
¶ 15 On...
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