Dubina v. Mesirow Realty Development

• Citation: 241 Ill.Dec. 681,719 N.E.2d 1084,308 Ill. App.3d 348
• Decision Date: 22 September 1999
• Docket Number: No. 1-94-3118.,1-94-3118.
• Parties: Michael DUBINA et al., Plaintiffs, v. MESIROW REALTY DEVELOPMENT, INC.; Mesirow Realty Management, Inc.; American National Bank & Trust Co. of Chicago; Superior Street Redevelopment Limited Partnership; CCL of Chicago, Inc.; Creative Construction, Ltd.; K&S Automatic Sprinklers, Inc.; and Economy Mechanical Industries, Inc.; Defendants and Counterdefendants and Plaintiffs' Assignees-Appellees (Superior Atrium Partnership; Mesirow Real Estate Investment, Inc.; Mesirow Property Funding Group III; 341 Redevelopment Limited Partnership; Fireman's Fund Insurance Companies; International Insurance Company; and Westchester Insurance Company; Plaintiffs' Assignees-Appellees; Litgen Concrete Cutting and Coring Company, Defendant and Counterplaintiff-Appellant).
• Court: United States Appellate Court of Illinois

719 N.E.2d 1084

308 Ill. App.3d 348

241 Ill.Dec. 681

Michael DUBINA et al., Plaintiffs, v. MESIROW REALTY DEVELOPMENT, INC.; Mesirow Realty Management, Inc.; American National Bank & Trust Co. of Chicago; Superior Street Redevelopment Limited Partnership; CCL of Chicago, Inc.; Creative Construction, Ltd.; K&S Automatic Sprinklers, Inc.; and Economy Mechanical Industries, Inc.; Defendants and Counterdefendants and Plaintiffs' Assignees-Appellees (Superior Atrium Partnership; Mesirow Real Estate Investment, Inc.; Mesirow Property Funding Group III; 341 Redevelopment Limited Partnership; Fireman's Fund Insurance Companies; International Insurance Company; and Westchester Insurance Company; Plaintiffs' Assignees-Appellees; Litgen Concrete Cutting and Coring Company, Defendant and Counterplaintiff-Appellant).

No. 1-94-3118.

Appellate Court of Illinois, First District, Third Division.

September 22, 1999.

Rehearings Denied October 21, 1999.

November 16, 1999.

Herbolsheimer, Lannon, Henson, Duncan and Reagan, P.C., Ottawa, Michael T. Reagan, Kralovec, Marquard, Doyle & Gibbons, Chtd., Chicago (Nancy J. Arnold, John C. Doyle, William E. Spizzirri and Daniel J. Donnelly, of counsel), for Appellant.

Pretzel & Stouffer, Chtd., Chicago (Robert Marc Chemers, Edward B. Ruff III and Mark D. Roth, of counsel), for Appellees Mesirow Realty Development, Inc., Mesirow Realty Management, Inc.; American National Bank & Trust Co. of Chicago; Superior Street Redevelopment Limited Partnership; CCL of Chicago, Inc.; Creative Construction, Ltd.; and Fireman's Fund Insurance Co.

Stephen A. Rehfeldt and James M. Roche of Wylie, Mulherin, Rehfeldt & Varchetto, P.C., Wheaton, for Appellee K&S Automatic Sprinklers, Inc.

Sandra Young and Wayne A. Bolgla of Purcell & Wardrobe, Chtd., Chicago, for Appellee Economy Mechanical Industries, Inc.

Justice CAHILL delivered the opinion of the court:

We are asked to decide whether the settlement of a property damage law suit can pass the good-faith test under the Contribution Act (the Act) (740 ILCS 100/2(c) (West 1996)) when the plaintiff, as a condition of the settlement agreement, assigns his cause of action to the defendant. We conclude that this kind of settlement undermines the policy of the Act and reverse.

In an earlier review of this case, we dismissed the appeal of defendant Litgen Concrete Cutting and Coring Company (Litgen) for lack of jurisdiction. See Dubina v. Mesirow Realty Development, Inc., 283 Ill.App.3d 36, 218 Ill.Dec. 551, 669 N.E.2d 694 (1996). Our supreme court reversed, holding that the filing of a new action after a voluntary dismissal did not deprive the appellate court of jurisdiction to review good-faith findings of settlement agreements arising out of the earlier action. The supreme court then remanded this case to this court for consideration of the merits. Dubina v. Mesirow Realty Development, Inc., 178 Ill.2d 496, 227 Ill. Dec. 389, 687 N.E.2d 871 (1997). We now do so.

Over 30 plaintiffs sued defendants for property damage caused by a fire on April 15, 1989, in a building that housed several art galleries. Plaintiffs are, variously, the owners of the art galleries who leased space in the building, artists who exhibited work in the galleries, and their insurers. Defendants are owners and managers of the building, general contractors hired for renovation, and their subcontractors.

Plaintiffs over time settled with all defendants except Litgen and Gelick Foran Associates, Inc. (Gelick). The settlement agreements included assignments to certain settling defendants and their insurers of plaintiffs' causes of action against defendant Litgen.

The record shows that the settling defendants, as well as their insurers and several nonparties, created a settlement fund of $16 million. As part of the fund agreement, the settling defendants waived all causes of action against each other except for those that were not settled. The settlement fund agreement reads in part:

"All Defendants and Insurers retain the power to veto any proposed settlement offer to any individual claimant. All settlement offers under this Agreement must be made with the unanimous agreement of all Defendants and Insurers. * * * A good faith finding by the court is required on each settling claim.

* * *

Settlement with any claimant will require that claimant [to] * * * assign any rights the claimant may have against Litgen Concrete Cutting & Coring Co. and Gelick Foran to the parties hereto, other than Economy and National Union. Economy Mechanical Industries, Inc. and National Union Fire Insurance Company of Pittsburgh, PA expressly waive any rights they may have to any such assignments." (Emphasis added.)

The fund agreement also directed the following distribution of any recovery from Litgen: 20% to Westchester Insurance Company, and 80% to Mesirow, CCL-Creative and Fireman's Fund Insurance Companies.

The settling defendants subsequently entered into 29 separate settlement agreements with plaintiffs. Each agreement included an amount to be paid in settlement and an equal amount to be paid in exchange for an assignment of each plaintiff's cause of action against Litgen and Gelick. As a result, the settling defendants paid almost $9 million to plaintiffs, half of which was designated as payment for the assignments. The list of assignees varied from agreement to agreement. The defendants named as assignees under the agreements were American National Bank and Trust, Superior Street Redevelopment Limited Partnership, Mesirow Realty Development, Mesirow Realty Management, CCL of Chicago, and Creative Construction, Ltd. Several insurance companies and other nonparties—who Litgen alleges are "related to the Mesirow group of defendants"—were also named as assignees in some agreements. Plaintiffs agreed to continue their suits against Litgen until the assignees executed a substitution of attorneys. Plaintiffs also agreed to cooperate with the assignees in their suit against Litgen, and the assignees agreed to reimburse plaintiffs for the cost of plaintiffs' cooperation.

Over the course of three separate hearings, the trial court found that each settlement agreement had been made in good faith as required under the Act (740 ILCS 100/2(c) (West 1996)). The court then dismissed plaintiffs' claims against the settling defendants, as well as the settling defendants' claims against Litgen. The court also dismissed all the defendants' actions for contribution, including Litgen's actions against the settling defendants. Only plaintiffs' suits against Litgen and Gelick remained. The settling defendants substituted their attorneys for plaintiffs' attorneys and moved for voluntary dismissal of the suits against Litgen and Gelick. On July 28, 1994, the trial court granted plaintiffs' motion for a voluntary dismissal. This appeal followed.

Defendant Litgen maintains that the trial court erred in finding that the settlement agreements were made in good faith. Litgen's argument is threefold: (1) that the agreements violate the Contribution Act by allowing settling defendants to seek indirectly a remedy they could not seek directly—contribution; (2) that the designation of some settlement money for the assignments deprives Litgen of a setoff of those amounts; and (3) that the agreements contravene the policy of the Act: to encourage settlement and the equitable sharing of damages.

The Contribution Act codifies and expands upon our supreme court's holding in Skinner v. Reed-Prentice Division Package Machinery Co., 70 Ill.2d 1, 15 Ill.Dec. 829, 374 N.E.2d 437 (1977). Skinner created a right of contribution for joint tortfeasors who satisfy a claim in excess of their pro rata share of liability. Skinner, 70 Ill.2d at 12-14, 15 Ill.Dec. 829, 374 N.E.2d 437. The subsequently enacted Contribution Act provides:

"(c) When a release or covenant not to sue or not to enforce judgment is given in good faith to one or more persons liable in tort arising out of the same injury or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms so provide but it reduces the recovery on any claim against the others to the extent of any amount stated in the release or the covenant, or in the amount of the consideration actually paid for it, whichever is greater.

(d) The tortfeasor who settles with a claimant pursuant to paragraph (c) is discharged from all liability for any contribution to any other tortfeasor.

(e) A tortfeasor who settles with a claimant pursuant to paragraph (c) is not entitled to recover contribution from another tortfeasor whose liability is not extinguished by the settlement." 740 ILCS 100/2(c), (d), (e) (West 1996).

A joint tortfeasor's right to settle is limited only by the requirement that the settlement be made "in good faith." 740 ILCS 100/2(c) (West 1992). Whether a settlement has been made in good faith is a matter within the discretion of the trial court, and we will not reverse that finding absent an abuse of discretion. In re Guardianship of Babb, 162 Ill.2d 153, 162, 205 Ill.Dec. 78, 642 N.E.2d 1195 (1994). To decide whether a settlement has been made in good faith, the trial court must consider all the circumstances surrounding the settlement, keeping in mind "the strong public policy favoring the peaceful settlement of claims * * * [while allowing] trial courts to be on guard for any type of evidence of collusion, unfair dealing or wrongful conduct by the settling parties." Babb, 162 Ill.2d at 162, 205 Ill.Dec. 78, 642 N.E.2d 1195, citing Ballweg v. City of Springfield, 114 Ill.2d 107, 122-23, 102 Ill. Dec. 360, 499 N.E.2d 1373 (1986), and Blagg v. Illinois F.W.D. Truck & Equipment Co., 143 Ill.2d 188, 157 Ill.Dec. 456, 572 N.E.2d 920 (1991). "An agreement that conflicts with the terms of and/or the policies underlying the Contribution Act does not satisfy the good-faith requirement and cannot discharge the settling...