In re Bloom
| Decision Date | 25 November 2013 |
| Docket Number | No. 02-12-1083,02-12-1083 |
| Parties | In re MARRIAGE OF THOMAS S. BLOOM Petitioner-Appellee, and MICHELLE M. BLOOM, Respondent-Appellant. |
| Court | United States Appellate Court of Illinois |
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as
precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of Du Page County.
Honorable Robert A. Miller, Judge, Presiding.
¶ 2 Held: The trial court did not err in dismissing the fraud counts contained in respondent's petition for relief from judgment; however, dismissal of conscionability count was error; and respondent's claims that trial court should have permitted amendment of her petition or granted her motion to reconsider based on newly discovered evidence were moot as they pertained to conscionability and did not cure defects in her claims of fraud.
¶ 4 This cause comes to us following the trial court's denial of respondent's third amended petition to vacate the judgment dissolving her marriage to petitioner, Thomas S. Bloom. See 735ILCS 5/2-1401 (2008). Respondent's petition contains three counts-the first two allege fraud and the third alleges that the distribution of marital assets set forth in the judgment for dissolution of marriage is unconscionable. All counts relate to the valuation of Bloom Partners, Inc., an asset awarded to petitioner in the judgment. For the reasons that follow, we affirm in part, reverse in part, and remand.
¶ 6 The following is a summary of the pertinent allegations contained in respondent's petition. On March 18, 2005, petitioner created a business known as Bloom Partners, Inc., "which engaged primarily in the specialized area of stock surveillance." The business was created using marital funds and was a marital asset. Petitioner filed his initial divorce petition in October 2005 (the parties were married in 1986). He subsequently voluntarily dismissed this petition and refiled it in October 2006. In his financial disclosure statements tendered early in this litigation, petitioner stated that the business had no value. In November 2007, petitioner tendered a third disclosure statement in which he stated that Bloom Partners was worth $50,000.
¶ 7 Respondent retained Edward Morris of Clifton Gunderson LLP, "an expert business valuator," to ascertain the value of Bloom Partners. Morris was respondent's agent. Because of the specialized nature of Bloom Partners, "a significant portion of the information required in order to arrive at a fair and accurate valuation of the business[] could only have come from [petitioner]." Hence, petitioner was the "primary source of information" used by Morris. Morris opined that Bloom Partners was worth $1,193,000. This figure included a reduction in the value of the company by 70%, as Morris believed that this portion of its value represented personal goodwill attributable to petitioner. Petitioner deposed Morris on March 14, 2008.
¶ 8 Petitioner also hired a business valuator, Warren T. Jacobsen. Jacobsen completed his own valuation, which included speaking with petitioner and examining documents created by petitioner. Jacobsen concluded that the value of Bloom Partners was $183,000. Petitioner tendered to respondent's counsel a pretrial memorandum in January 2008, which stated that Bloom Partners was worth $183,000. Petitioner disclosed this figure in his fourth financial disclosure statement on or about March 31, 2008. Respondent deposed petitioner on April 3, 2008.
¶ 9 During pretrial discussions, Judge Equi (who presided over earlier portions of this litigation) "made recommendations as to the division of marital assets for settlement purposes and accepted the representations made by [respondent] that Bloom Partners was primarily composed of personal goodwill." Trial commenced on April 8, 2008. However, on April 15, 2008, the parties reached a settlement. Pursuant to the settlement, petitioner was awarded Bloom Partners. A judgment for dissolution of marriage was entered on April 17, 2008, which incorporated the marital settlement agreement (MSA).
¶ 10 As part of the settlement, the parties were required to exchange their federal tax returns by May 15 of each year. When respondent received petitioner's 2008 tax return, she noted that petitioner had sold Bloom Partners to NASDAQ for a sum exceeding $19,000,000. Respondent filed her initial petitioner to vacate the judgment for dissolution of marriage on September 14, 2009.
¶ 11 Her initial petition was dismissed without prejudice in January 2010. She filed an amended petition on January 28, 2010, which petitioner moved to dismiss in accordance with section 2-619 of the Civil Practice Law (735 ILCS 5/2-619 (West 2010)). Respondent alleges that in an affidavit supporting his motion to dismiss, petitioner, for the first time, admitted that he formed the intent to sell Bloom Partners prior to the entry of the judgment for dissolution of marriage and that he metwith representatives of the New York Stock Exchange (NYSE) to discuss a sale a few days after the judgment was entered. Respondent also alleges that she acted diligently by bringing this information to the trial court in the pleading at issue in this appeal (this pleading was entered pursuant to an agreed order).
¶ 12 Respondent's first count is titled, "Fraud-Inducing [respondent] to Relinquish Her Rights to Bloom Partners, Inc." In it, she alleges that petitioner had a "duty to truthfully disclose all material facts regarding the value of Bloom Partners." Knowledge of the details of the company's operations were exclusively the province of petitioner. Petitioner's duty allegedly arose from he and respondent being partners in the business and his obligations to truthfully disclose information to the trial court in his financial disclosure statements and testimony. Petitioner made several misrepresentations in an effort to cause respondent to relinquish her interest in Bloom Partners "for a small fraction of its true value," including (1) that petitioner had no intention of selling Bloom Partners, that he intended to continue to operate it as he always had, and that, accordingly, profits form the business would remain about the same; (2) the value of Bloom Partners was limited as it was largely based on his unique skills and involvement in the company; (3) the value of Bloom Partners was comprised mostly of petitioner's personal goodwill; (4) Bloom Partners was not scalable beyond 50 clients due to the nature of its business, which limited its value; (5) Bloom Partners was limited to 50 clients because petitioner could service no more than that; (6) Bloom Partners was limited to 50 clients because the business was heavily reliant on petitioner's individual expertise; (7) Bloom Partners had no or nominal value without petitioner; and (8) Bloom Partners' value was $183,000.
¶ 13 Further, respondent alleged, petitioner's fraudulent representations about scalability induced respondent and the business valuators to believe that the value of Bloom Partners would remain relatively constant. Petitioner's representations about scalability, operating capacity and potential growth of its client base were Morris's sole source of information about these considerations. It was understood by the parties and their representatives that Bloom Partners would continue to operate on its current scale for the foreseeable future. Contrary to petitioner's representations, Bloom Partners was scalable beyond 50 clients and its value was not significantly composed of petitioner's personal goodwill. After Bloom Partners was sold to NASDAQ, it "was able to offer an enhanced suite of stock intelligence services to approximately there [sic] thousand nine hundred (3,900) companies." Had Morris been informed that petitioner was seeking a buyer for Bloom Partners, the value of the company was not significantly apprised of petitioner's goodwill, and it was scalable well beyond 50 clients, he would have advised respondent to further investigate the value of the company.
¶ 14 Respondent further alleged that, as shown by his affidavit dated June 3, 2010, respondent formed the intent to sell Bloom Partners at a price far exceeding $183,000 prior to the entry of the judgment for dissolution of marriage. Petitioner did not disclose his intent to respondent. In this affidavit, respondent also admitted that he met with the NYSE and NASDAQ within days of inducing respondent to give up her interest in Bloom Partners. Less than three months after respondent relinquished her interest, petitioner received an offer from the NYSE to purchase Bloom Partners for $15,000,000. Within six months, petitioner sold the company to NASDAQ for $19,000,000. Between the time the judgment for dissolution of marriage was entered and the time Bloom Partners was sold, there were no significant changes in the company that would have materially impacted upon its value.
¶ 15 Respondent alleged that petitioner provided fraudulent information to respondent and the business valuators to cause them to undervalue Bloom Partners. Petitioner knew his statements were untrue and that respondent was relying upon them in determining whether to relinquish her interest in Bloom Partners. Respondent had no reason to believe petitioner's statements were false and justifiably relied on them. As a result, respondent contends she was fraudulently induced to give up her interest in Bloom Partners.
¶ 16 Respondent further alleged that these facts were not known at the time of the entry of the judgment for dissolution of marriage. Petitioner's misrepresentations influenced the recommendations made by the circuit court during negotiation of the MSA, and respondent relied upon these recommendations in making her decision. Respond...
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