Eclipse Mfg. Co. v. U.S. Compliance Co.

• Citation: 886 N.E.2d 349,381 Ill.App.3d 127
• Decision Date: 30 November 2007
• Docket Number: No. 2-06-0825.,No. 2-06-0889.,2-06-0825.,2-06-0889.
• Parties: ECLIPSE MANUFACTURING COMPANY, an Illinois Corporation, Individually and on Behalf of Members of a Certified Class, as Assignee, Plaintiff and Third-Party Citation Petitioner-Appellee and Cross-Appellant, v. UNITED STATES COMPLIANCE COMPANY, d/b/a United States Compliance Corporation, a Minnesota Corporation, Defendant (Hartford Casualty Insurance Company, an Indiana Corporation, Third-Party Citation Respondent-Appellant and Cross-Appellee).
• Court: United States Appellate Court of Illinois

886 N.E.2d 349

381 Ill.App.3d 127

ECLIPSE MANUFACTURING COMPANY, an Illinois Corporation, Individually and on Behalf of Members of a Certified Class, as Assignee, Plaintiff and Third-Party Citation Petitioner-Appellee and Cross-Appellant, v. UNITED STATES COMPLIANCE COMPANY, d/b/a United States Compliance Corporation, a Minnesota Corporation, Defendant (Hartford Casualty Insurance Company, an Indiana Corporation, Third-Party Citation Respondent-Appellant and Cross-Appellee).

No. 2-06-0825.

No. 2-06-0889.

Appellate Court of Illinois, Second District.

November 30, 2007.

Petition for Rehearing Withdrawn March 14, 2008.

Daniel G. Litchfield, Patrick J. Sullivan, William J. Perry, Litchfield Cavo LLP, Chicago, for Appellant.

Brian J. Wanca, Steven A. Smith, Anderson & Wanca, Rolling Meadows, Phillip A. Bock, Robert M. Hatch, Diab & Bock, LLC, Chicago, for Eclipse Manufacturing Co.

Justice BYRNE delivered the opinion of the court:

Eclipse Manufacturing Company (Eclipse) filed a class action suit against United States Compliance Company (U.S. Compliance) in Lake County circuit court. The three-count complaint was based on the allegation that U.S. Compliance had faxed advertisements to Eclipse and other businesses without first obtaining their permission. U.S. Compliance had previously purchased commercial general liability insurance policies from Hartford Casualty Insurance Company (Hartford). U.S. Compliance asked Hartford to defend the suit and cover any liability under the policies. Hartford declined to defend U.S. Compliance and denied coverage without seeking a declaratory judgment regarding its obligations.

Eclipse settled its claims against U.S. Compliance for an assignment of the policies' limits, and the trial court entered a consent judgment against U.S. Compliance. Eclipse then filed a third-party citation against Hartford to discover assets and collect the policy proceeds on behalf of the class. In its defense, Hartford invoked policy defenses, and Eclipse responded that Hartford was estopped from relying on the policy defenses when it declined to defend U.S. Compliance in the underlying suit or file a declaratory judgment action. The trial court entered a final judgment finding that the insurance policies obligated Hartford to pay the settlement. The court further held that postjudgment interest for Eclipse would accrue from the date of the judgment against Hartford, not the earlier consent judgment against U.S. Compliance.

Hartford appeals, arguing that its policy defenses are not barred by estoppel and that the policies do not cover U.S. Compliance's conduct. Specifically, Hartford argues that (1) the laws of estoppel conflict between Minnesota and Illinois and the trial court should have applied Minnesota law rather than Illinois law; (2) under Minnesota law, Hartford's breach of its duty to defend the underlying suit does not bar Hartford from raising its policy defenses in the citation proceeding; (3) the Hartford policies do not provide coverage under Minnesota law; and (4) even if Illinois law applies, the policies do not provide coverage. Eclipse disputes these positions and also cross-appeals, arguing that the trial court erred by not including postjudgment interest accruing from the date of the consent judgment against U.S. Compliance.

We affirm the judgment, holding that (1) the Illinois law of estoppel applies to this case because the laws of Minnesota and Illinois do not conflict; (2) the principle of estoppel bars Hartford from raising its policy defenses; and (3) the trial court correctly awarded postjudgment interest accruing from the date of the judgment against Hartford rather than the earlier judgment against U.S. Compliance.

FACTS

On June 13, 2003, Eclipse filed the class action complaint against U.S. Compliance, which was served on July 28, 2003. The three-count complaint stated claims for violations of the federal Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227 et seq. (2000)), for common-law conversion, and for unfair practice in violation of the Illinois Consumer Fraud sand Deceptive Business Practices Act (Fraud Act) (815 ILCS 505/1 et seq. (West 2006)). The complaint was based on the central allegation that U.S. Compliance had sent "blast faxes," which are unsolicited advertisements sent via facsimile transmission. Eclipse alleged that the faxes caused actual damage to the recipients by using their equipment, paper, and toner without permission. Eclipse also alleged statutory damages of $500 for each violation under the TCPA. Discovery revealed that, between May 2002 and July 2002, U.S. Compliance caused approximately 90,000 fax advertisements to be sent to 15,000 persons from whom it had not obtained express permission or invitation.

Three days after being served with the complaint, U.S. Compliance served Hartford with a copy of the complaint and a demand for a defense based on its commercial general liability insurance policies. On August 19, 2003, Hartford responded with a letter denying a duty to defend the suit or cover any liability. Hartford denied coverage under the "property damage" provision of the policies, on the theory that the complaint did not allege an "accident." Hartford also denied coverage for "personal and advertising injury" under the policy, on the theory that the TCPA and Fraud Act violations are not within the policies' definition of a personal or advertising injury and the complaint did not allege any unintentional acts. U.S. Compliance sent Hartford another letter demanding coverage on August 25, 2003, and Hartford reiterated its denial.

On January 20, 2005, after approximately one year of negotiations, Eclipse and U.S. Compliance reached an agreement and moved for preliminary approval of the proposed class settlement. According to the parties to the settlement, U.S. Compliance faced exposure of $100 million and bankruptcy if it lost on the merits. Eclipse believed that, if the litigation continued, U.S. Compliance would likely file for bankruptcy protection, barring the class members from recovering anything from the liquidation. In light of these circumstances, U.S. Compliance assigned to the class its rights under the policies issued by Hartford. The parties agreed to settle the claims for $3,999,999.98, which was nearly the limit of the insurance policies.

Following a hearing involving Eclipse and U.S. Compliance, the trial court preliminarily approved the class action settlement. The court scheduled a final approval hearing, allowing for notification of the class members. On June 30, 2005, the trial court approved the class settlement, subject to submission and approval of a final written order, which was entered on July 12, 2005. The settlement provided that the judgment was to be collectible only against U.S. Compliance's insurers, including Hartford.

On August 23, 2005, Eclipse, as representative of the class, filed a third-party citation proceeding against Hartford to discover assets and collect on the U.S. Compliance policies. Hartford removed the citation proceeding to federal court, but the federal court remanded the cause to the circuit court of Lake County for lack of jurisdiction.

On January 19, 2006, Hartford filed a declaratory judgment action against Eclipse in Minnesota state court. Hartford subsequently argued in the circuit court of Lake County that the Minnesota action warranted a stay or dismissal of the Illinois action. Eventually, the Minnesota court dismissed the declaratory judgment action for lack of subject matter and personal jurisdiction, and the Illinois action resumed.

On July 25, 2006, the circuit court of Lake County heard argument and stated that it would rule in favor of Eclipse. The court directed the parties to prepare draft orders incorporating the court's comments, but Eclipse and Hartford could not agree on the language. They submitted proposed orders to the court on July 28, 2006. Although the court expressly stated that it had not yet entered a final order, Hartford filed what it calls a "protective" notice of appeal on August 22, 2006. We docketed the cause under No. 2-06-0825.

On August 25, 2006, the trial court entered a final judgment against Hartford. The court ordered Hartford to pay Eclipse, as representative of the class, $3,999,999.98, $120 in costs, and statutory postjudgment interest accruing from the July 25, 2006, ruling. Hartford filed a second notice of appeal on September 7, 2006, and Eclipse's cross-appeal followed. We docketed the second appeal under No. 2-06-0889 and consolidated it with No. 2-06-0825.

ANALYSIS

A. Jurisdiction

We first determine our jurisdiction over the consolidated appeals. "[A] reviewing court has a duty to consider sua sponte its jurisdiction and to dismiss an appeal if jurisdiction is wanting." In re Marriage of Link, 362 Ill.App.3d 191, 192, 298 Ill. Dec. 355, 839 N.E.2d 678 (2005). Without differentiating between the appeals, Hartford argues that "[j]urisdiction of the Illinois Appellate Court, Second District, is conferred by Illinois Supreme Court Rule 303(a) [Official Reports Advance Sheet No. 8 (April 11, 2007), R. 303(a), eff. May 1, 2007]." From Rule 303(a) we infer that Hartford also wishes to invoke Supreme Court Rule 301 (155 Ill.2d R. 301), which provides for appeal as a matter of right from final judgments. See Link, 362 Ill. App.3d at 192, 298 Ill.Dec. 355, 839 N.E.2d 678.

At the time Hartford filed its first notice of appeal on August 22, 2006, Rule 303(a)(1) provided that "the notice of appeal must be filed with the clerk of the circuit court within 30 days after the entry of the final judgment appealed from, or, if a timely post-trial motion directed against the judgment is filed, whether in a jury or a nonjury case, within 30 days after the entry of the order disposing of the last pending post-judgment motion." (Emphasis added.) 155 Ill.2d R. 303(a).

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