Kensington's Wine v. John Hart Fine Wine

• Decision Date: 19 May 2009
• Docket Number: No. 1-07-1505.,No. 1-07-2209.,1-07-1505.,1-07-2209.
• Citation: 909 N.E.2d 848,392 Ill. App. 3d 1
• Parties: KENSINGTON'S WINE AUCTIONEERS AND BROKERS, INC., an Illinois Corporation, Plaintiff-Appellant and Cross-Appellee, v. JOHN HART FINE WINE, LTD., an Illinois Corporation, a/k/a Hart Davis Hart Wine Company; John Hart, Individually; Paul Hart, Individually; Michael Davis, Individually; Ben Ferdinand, and Allan Frischman, Defendants-Appellees and Cross-Appellants. (Robert A. Eagan and George Pontikes, Appellants and Cross-Appellees).
• Court: United States Appellate Court of Illinois

909 N.E.2d 848

392 Ill. App. 3d 1

KENSINGTON'S WINE AUCTIONEERS AND BROKERS, INC., an Illinois Corporation, Plaintiff-Appellant and Cross-Appellee, v. JOHN HART FINE WINE, LTD., an Illinois Corporation, a/k/a Hart Davis Hart Wine Company; John Hart, Individually; Paul Hart, Individually; Michael Davis, Individually; Ben Ferdinand, and Allan Frischman, Defendants-Appellees and Cross-Appellants (Robert A. Eagan and George Pontikes, Appellants and Cross-Appellees).

No. 1-07-1505.

No. 1-07-2209.

Appellate Court of Illinois, First District, Second Division.

May 19, 2009.

George C. Pontikes, Robert A. Egan, Chicago, IL, for Appellant.

Richard G. Schoenstadt, Michael A. Moses, Zubin S. Kammula, Siegel Moses & Schoenstadt, P.C., Chicago, IL, for Appellees.

Justice SOUTH delivered the opinion of the court:

Plaintiff Kensington's Wine Auctioneers & Brokers, Inc. (Kensington), appeals from various orders which were entered by the circuit court in its action seeking injunctive relief under the Uniform Deceptive Trade Practices Act (Deceptive Practices Act) (815 ILCS 510/1 et seq. (West 2006)). The undisputed facts reveal the following.

Kensington and John Hart Fine Wine, Ltd. (JHFW), are Illinois corporations which both engage in the business of wine auctioning. In 2005, both companies conducted auctions without auctioneer's licenses, which is a violation of section 10-1 of the Illinois Auction License Act (Auction Act) (225 ILCS 407/10-1 (West 2006)). Accordingly, on October 21, 2005, the Illinois Department of Professional Regulation (Department) sent Kensington a cease-and-desist letter in which it ordered Kensington to stop conducting auctions until it received the necessary license to do so. Kensington complied with the Department's order and ceased its unlicensed auction activities. The Department also investigated JHFW. The Department did not order JHFW to cease its auction activities; rather, it ordered it to comply with the licensing provisions of the Auction Act and JHFW agreed to pay a $7,000 fine. This agreement was embodied in a consent order pursuant to the Auction Act. JHFW and its employees received licenses between July 31, 2006, and August 16, 2006. Shortly thereafter, on August 31, 2006, Kensington received its auction license.

On October 26, 2006, Kensington filed a complaint in the chancery division against JHFW, as well as John Hart, the chairman of JHFW, Paul Hart, the president of JHFW, Michael Davis, chief executive officer of JHFW, Ben Ferdinand, vice-president of JHFW, and Allan Frischman, vice-president and senior specialist for JHFW, seeking injunctive relief pursuant to the Auction Act. In its complaint, Kensington alleged that defendants entered into various consignment agreements when they were unlicensed and planned to sell the wine they obtained from those agreements in upcoming auctions. Kensington alleged that defendants' unlicensed activities violated section 10-1 of the Auction Act (225 ILCS 407/10-1 (West 2006)) and, accordingly, sought to enjoin them "from auctioning wines obtained from consignments, consummated prior to August 16, 2006 at any upcoming wine auction." Kensington also filed an emergency motion for entry of a temporary restraining order, preliminary injunction, and other relief, in which it sought to enjoin a wine auction that JHFW was scheduled to conduct on October 28, 2006.

The next day, defendants responded with a motion to dismiss Kensington's complaint, contending Kensington lacked standing to bring an action under the Auction Act because it only permits the "Commissioner, the Attorney General, the State's Attorney of any county in the State, or any other person [to] maintain an action in the name of the People of the State of Illinois and * * * apply for injunctive relief." 225 ILCS 407/20-5(d) (West 2006). Since Kensington initiated the action in its own name, defendants alleged it lacked standing to obtain an injunction under the Auction Act.

On October 27, 2006, the trial court dismissed Kensington's complaint and denied its emergency motion seeking a temporary restraining order, finding it had no standing to obtain the requested relief under the Auction Act and "failed to show the existence of any of the requisite elements for the entry of such relief." The trial court, however, granted Kensington leave to file an amended complaint.

Kensington responded by filing a motion for leave to take discovery and expedite discovery on November 9, 2006. Thereafter, it filed its first amended complaint on November 17, 2006. In its first amended complaint, Kensington alleged that from October 1, 2004, through July 31, 2006, defendants conducted auctions and entered into consignment contracts without an auction license in violation of section 10-1 of the Auction Act (225 ILCS 407/10-1 (West 2006)), and that defendants' unlicensed actions constituted a "deceptive practice" under the Deceptive Practices Act (815 ILCS 510/2 et seq. (West 2006)). Accordingly, Kensington sought both preliminary and permanent injunctive relief pursuant to section 3 of the Deceptive Practices Act (815 ILCS 510/3 (West 2006)) in order to prevent defendants from auctioning any wine which was obtained through the unlicensed consignment agreements.

Kensington also filed an emergency motion to "Set Motion for Preliminary Injunction For Hearing" in an attempt to enjoin defendants' next auction scheduled for December 1, 2006. A hearing on the motion was scheduled for November 22, 2006, which was the same date the parties were scheduled to conduct a hearing on Kensington's previously filed discovery motion.

Thereafter, on November 21, 2006, Kensington filed a petition to disqualify Michael Moses and his firm, Siegel, Moses & Schoenstadt, from representing defendants. In the petition, Kensington alleged that Moses established an attorney-client relationship with Steven Puccini, a business consultant to Kensington, prior to representing defendants. Kensington argued that Moses's continued representation of defendants constituted a violation of Rule 1.7 of the Illinois Rules of Professional Conduct (134 Ill.2d R. 1.7), which prohibits attorneys from laboring under a conflict of interest.

The following day, defendants filed a motion to dismiss Kensington's first amended complaint pursuant to section 2-619 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2006)). In its motion, defendants denied they entered into any consignment contracts while they were unlicensed, the proceeds of which were set to be sold at upcoming auctions. Defendants also contended that all issues pertaining to any of its unlicensed activities were already resolved by a consent order entered by the Department, and thus the Deceptive Practices Act did not apply. Specifically, they argued that section 4 of the Deceptive Practices Act (815 ILCS 510/4 (West 2006)), which exempts conduct in accordance with an order, rule, or statute administered by a state agency, barred Kensington's lawsuit. Moreover, defendants alleged that even if the Deceptive Practices Act did apply, the alleged misconduct occurred in the past, and accordingly, Kensington was not entitled to injunctive relief under the Deceptive Practices Act because it only allows for such relief if a party can show it will be damaged in the future.

Defendants supported their motion to dismiss with two affidavits. Paul Hart, president of JHFW, completed an affidavit in which he averred that the wine which defendants were planning to sell at the upcoming auction was not the product of agreements that had been entered into while defendants were unlicensed. Specifically, he averred: "my license was issued on July 31, 2006 and is current and valid. Moreover, all agreements between JHFW and consignors for the sale of their wine at the auction to be conducted on December 2, 2006 were entered into by me, on behalf of JHFW, after July 31, 2006." The second affidavit was completed by Mary Anne Benden, the Director of the Department, which oversees the licensing requirements of the Auction Act. In her affidavit, Benden averred that the Department addressed defendants' alleged unlicensed activities, and those allegations were resolved by a consent order as provided for by the Auction Act. Benden confirmed that the Department issued the requisite licenses to defendants, and they were authorized to conduct auctions in the State of Illinois. Moreover, Benden averred she reviewed Kensington's first amended complaint, and it was her opinion that "even if those allegations [were] true, such activities were subsumed in, and fully resolved by, the Consent Order which [the Department] negotiated with said parties and that as a result, therefore, said alleged activities do not present a valid reason for [the Department] to exercise its authority to enjoin future auction activities on the part of defendants."

On November 22, 2006, the date Kensington scheduled a hearing on its discovery and preliminary injunction motions, Kensington failed to appear before the trial court. Accordingly, the trial court struck the emergency motion seeking a preliminary injunction hearing as well as the motion for expedited discovery. Despite its failure to appear at the hearing, Kensington filed a complaint in the law division on that date, contending defendants' unlicensed activities violated the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2006)). In its complaint, Kensington referenced provisions of the Auction Act as well as the Deceptive Practices Act that served as the bases for its two prior complaints filed in the chancery division.

Kensington subsequently renewed its motions for a preliminary injunction and expedited discovery. However, the trial court determined that defendants' motion to dismiss was potentially dispositive of the litigation and would take precedence over Kensington's motions, including Kensington's motion...