BHI CORP. v. Litgen Concrete Cutting

Decision Date24 March 2005
Docket NumberNo. 98073.,98073.
PartiesBHI CORPORATION et al., Appellants, v. LITGEN CONCRETE CUTTING & CORING COMPANY, Appellee.
CourtIllinois Supreme Court

Edward B. Ruff III, of Pretzel & Stouffer, Chrtd. (Robert Marc Chemers, Scott L. Howie, of counsel), Stephen T. Mikus, Terrence J. Madden, of Bryce, Downey, Murray, Jensen & Mikus, L.L.C., Chicago, for appellants.

Michael C. Jansz, of Herbolsheimer, Lannon, Henson, Duncan & Reagan, P.C., Ottawa (Michael T. Reagan, of counsel), William E. Spizzirri, Daniel J. Donnelly, of Kralovec & Marquard, Chicago, for appellee.

Justice FITZGERALD delivered the opinion of the court:

This case is before us for the third time. The discrete issue in this appeal is whether defendants who enter settlement agreements with plaintiffs in which they purchase assignments of plaintiffs' remaining claims against a nonsettling defendant may pursue these claims even though the settlement agreements and the assignments were not made in good faith. We agree with the appellate court that the settling defendants here may not pursue the assigned claims against the nonsettling defendant. We affirm.

BACKGROUND

In 1989, a building that housed art galleries and studios in Chicago's River North district was destroyed in a fire. Scores of gallery owners and artists filed separate complaints against the owners and managers of the building, as well as the general contractors and subcontractors hired to renovate it. The complaint alleged that the various defendants, including Litgen Concrete Cutting and Coring Company (Litgen), caused or contributed to the fire.

The plaintiffs eventually settled all of their claims against all of the defendants except Litgen.1 The settlement agreements charged that a Litgen employee caused the fire, but that Litgen "does not wish to cooperate with the Plaintiffs and Settling Defendants." The settling defendants agreed to pay the plaintiffs $4.5 million for the release of any claims arising from the fire: "This amount shall be paid to Plaintiffs on the condition that the trial Court [sic] grants the parties * * * a finding that the * * * settlement is made in good faith" pursuant to the Contribution Act. "This payment," the parties stated, "shall be paid irrespective of whether Litgen takes an appeal of the finding of good faith." The settling defendants also agreed to pay the plaintiffs an additional $4.5 million for the assignment of any claims they may have against Litgen arising from the fire. The plaintiffs promised that they had not already released their claims against Litgen, that they would not release these claims without the written consent of the settling defendants, and that they would "reasonably cooperate" with the settling defendants in the pursuit of the assigned claims against Litgen. The settling defendants, in turn, promised to reimburse the plaintiffs for the cost of their cooperation.

The circuit court of Cook County found these agreements to be in good faith pursuant to section 2(c) of the Contribution Act (see 740 ILCS 100/2(c) (West 1994)) and dismissed Litgen's contribution claims against the settling defendants pursuant to section 2(d) of the Act (see 740 ILCS 100/2(d) (West 1994)). The trial court allowed the plaintiffs to nonsuit their claims against Litgen.

Litgen appealed, arguing that the trial court erred in finding the agreements were made in good faith. While this appeal was pending, the settling defendants filed a complaint on the assigned claims against Litgen. Before the appellate court, the settling defendants filed a motion to dismiss Litgen's appeal, asserting that the new complaint rendered the trial court's good-faith finding nonfinal and unappealable, robbing the appellate court of jurisdiction. The appellate court agreed with the settling defendants and dismissed Litgen's appeal. See Dubina v. Mesirow Realty Development, Inc., 283 Ill.App.3d 36, 218 Ill.Dec. 551, 669 N.E.2d 694 (1996). We reversed and remanded to the appellate court. See Dubina v. Mesirow Realty Development, Inc., 178 Ill.2d 496, 227 Ill. Dec. 389, 687 N.E.2d 871 (1997).

On remand, the appellate court initially noted that the settling defendants characterized their procedural posture as plaintiffs on the assigned claims, rather than as tortfeasors jointly liable with Litgen on the original claims. Dubina v. Mesirow Realty Development, Inc., 308 Ill.App.3d 348, 355, 241 Ill.Dec. 681, 719 N.E.2d 1084 (1999). The appellate court then stated:

"The argument is not without a certain laissez-faire appeal. But the Contribution Act, embodying the will of the legislature and the public policy of Illinois, is not a laissez-faire statute. The Act departs from the common law and awards settling defendants an incentive to resolve the issue of their liability without litigation by shielding them from further exposure. Having taken advantage of the shield afforded by the Act, [settling] defendants now wish to buy the sword of the original plaintiff[s]." Dubina, 308 Ill.App.3d at 355, 241 Ill. Dec. 681, 719 N.E.2d 1084.

The appellate court observed that if the settling defendants could shed their roles as tortfeasors for the roles of unfettered plaintiffs, they could pursue a recovery otherwise prohibited by the Contribution Act. Dubina, 308 Ill.App.3d at 356, 241 Ill.Dec. 681, 719 N.E.2d 1084. The appellate court continued:

"[T]he settlement agreements here allow settling defendants to recoup their share of damages, perhaps make a profit, and yet be shielded from contribution under the Contribution Act. The result is antithetical to the Contribution Act, whether it is achieved by `assignment' or `contribution,' and whether the settling defendants are labeled `plaintiffs' or `joint tortfeasors.' The assignments allow the settling defendants to seek indirectly a reimbursement the Contribution Act prohibits and undermine the equitable sharing of damages." Dubina, 308 Ill. App.3d at 357, 241 Ill.Dec. 681, 719 N.E.2d 1084.

The appellate court held that the trial court erred in finding the agreements were in made good faith, reversed the dismissal of Litgen's contribution claims, and remanded to the trial court for further proceedings. Dubina, 308 Ill.App.3d at 358, 241 Ill.Dec. 681, 719 N.E.2d 1084.

We granted the settling defendants' petition for leave to appeal and affirmed. See Dubina v. Mesirow Realty Development, Inc., 197 Ill.2d 185, 258 Ill.Dec. 562, 756 N.E.2d 836 (2001). We noted that, though property damage claims generally are assignable in Illinois, the assignments here must be considered in the context of the settlement agreements. Dubina, 197 Ill.2d at 194, 258 Ill.Dec. 562, 756 N.E.2d 836. We concluded that the settlement agreements, and by extension the assignments, violated the terms of and policies behind the Act. First, the agreements and assignments violated section 2(c) of the Act because they deprived Litgen of its statutory right to a setoff. Dubina, 197 Ill.2d at 195, 258 Ill.Dec. 562, 756 N.E.2d 836. The settling defendants labeled half of the $9 million it gave to the plaintiffs as a payment for the assignments; if Litgen lost at trial, it would not receive credit for $4.5 million exchanged between its joint tortfeasors and the plaintiffs. Dubina, 197 Ill.2d at 195, 258 Ill.Dec. 562, 756 N.E.2d 836. Second, the agreements and assignments defeated the Act's goal of equitable apportionment of damages among joint tortfeasors. Dubina, 197 Ill.2d at 195-96, 258 Ill.Dec. 562, 756 N.E.2d 836. The settling defendants would recoup the settlement amount—$4.5 million—as well as any damages exceeding the $9 million it gave to the plaintiffs from Litgen if they succeeded on the assigned claims. Dubina, 197 Ill.2d at 196, 258 Ill.Dec. 562, 756 N.E.2d 836. Third, and finally:

"The settlement agreements and assignments also violate the Act because they allow the settling defendants to accomplish indirectly that which they could not do directly—recover contribution from Litgen. * * * [T]he Act prohibits a settling tortfeasor from recovering contribution from another tortfeasor whose liability is not extinguished by the settlement. [Citation.] Here, the plaintiffs assigned their causes of action to the settling defendants, thereby allowing the settling defendants, in the guise of plaintiffs, to indirectly recover contribution from Litgen. By incorporating an agreement to obtain an object forbidden by law, such agreements may be regarded as collusive." Dubina, 197 Ill.2d at 196,258 Ill.Dec. 562,756 N.E.2d 836, citing In re Guardianship of Babb, 162 Ill.2d 153, 172, 205 Ill.Dec. 78, 642 N.E.2d 1195 (1994).

Because the agreements and the assignments violated the Act, they did not satisfy the good-faith requirement of the Act. Dubina, 197 Ill.2d at 196, 258 Ill.Dec. 562, 756 N.E.2d 836.

On remand, the settling defendants again refiled their complaint on the assigned claims against Litgen. Litgen filed a motion to dismiss, arguing that the settling defendants could not pursue the assigned claims because the settlement agreement which contained the assignments was not made in good faith. The trial court granted Litgen's motion and dismissed the settling defendants' complaint. The settling defendants appealed.

The appellate court affirmed. 346 Ill. App.3d 300, 281 Ill.Dec. 742, 804 N.E.2d 707. The appellate court held that the trial court was compelled to dismiss the settling defendants' complaint because, pursuant to our second opinion in Dubina, the assignments were "unenforceable." 346 Ill.App.3d at 307, 281 Ill.Dec. 742, 804 N.E.2d 707. The appellate court explained that the settling defendants' strategy of pursuing the assigned claims would undermine the two policies behind the Act:

"The settling defendants initially attempted to use the Act to shield themselves from liability, but then, by the terms of the agreements, went outside the Act to pursue the nonsettling defendant, Litgen. Such a strategy clearly
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