Midas Int'l Corp. v. MESA, S.p.A.

• Decision Date: 27 March 2013
• Docket Number: Docket No. 1–12–2048.
• Citation: 988 N.E.2d 679,2013 IL App (1st) 122048,370 Ill.Dec. 481
• Parties: MIDAS INTERNATIONAL CORPORATION, Plaintiff–Appellant, v. MESA, S.p.A., Defendant–Appellee.
• Court: United States Appellate Court of Illinois

2013 IL App (1st) 122048

988 N.E.2d 679

370 Ill.Dec. 481

MIDAS INTERNATIONAL CORPORATION, Plaintiff–Appellant,

v.MESA, S.p.A., Defendant–Appellee.

Docket No. 1–12–2048.

Appellate Court of Illinois, First District, Third Division.

March 27, 2013.

Kirkland & Ellis LLP, of Chicago (John F. Hartmann, Bradley H. Weidenhammer, and Debra K. Lefler, of counsel), for appellant.

Jenner & Block LLP, of Chicago (Craig C. Martin and Paul B. Rietema, of counsel), for appellee.

OPINION

Justice STERBA delivered the judgment of the court, with opinion.

[370 Ill.Dec. 483]¶ 1 Plaintiff-appellant Midas International Corporation appeals from an order of the circuit court granting defendant-appellee Mesa, S.p.A's motion to dismiss its breach of contract action pursuant to section 2–619(a)(3) of the Code of Civil Procedure (Code) (735 ILCS 5/2–619(a)(3) (West 2010)), on the basis that the same cause of action is pending between the same parties in Milan, Italy. On appeal, Midas maintains that the court erred in its dismissal because the Milan action was not for the same cause as the Chicago action, as each arose out of a different contract; or, alternatively, that considerations of comity and the need to prevent multiplicity and harassment favored proceeding with the Chicago action. For the reasons that follow, we affirm.

¶ 2 BACKGROUND

¶ 3 This case arises out of two contracts executed in October 1998 between Midas and Magneti Marelli, S.p.A. (Marelli),¹ both of which are in the business of automotive repair and service. The agreement for strategic alliance (ASA) provides that the parties will cooperate to develop the “Midas System” in specified countries throughout Europe as well as Brazil for a period of 15 years. The “Midas System” is defined as “Midas's unique system for the establishment, management and operation of automotive specialty shops.” Specifically, Midas agreed to use its “proprietary know-how” to provide support and give advice to Marelli in the areas of marketing, operations management, shop development, and real estate selection, among others. The ASA specifies that disputes arising thereunder will be resolved by way of arbitration in Geneva, Switzerland, under the UNCITRAL arbitration rules in accordance with Swiss law.

¶ 4 Attached as annex C to the ASA is the license agreement, also signed in October 1998. The license agreement grants Marelli the right to use and authorize others to use both the “Midas System” as well as “Licensed Marks” ² in the territory specified in the ASA. The scope of the licenses is limited to activities taken in connection with the performance of services in the automotive repair and service industry. In exchange for the use of the “Midas System” and “Licensed Marks,” Marelli agreed to pay Midas an initial license fee of $16,000,000, as well as monthly royalties based on the gross revenue of all retail shops in the specified territory that are using Midas's intellectual property. Enforcement of the license agreement is governed by United States law, and the proper forums for resolving disputes thereunder are Chicago, Illinois, or Milan, Italy.

¶ 5 In 2009, Mesa initiated an arbitration before a Swiss tribunal on the grounds that Midas breached the ASA when it failed to make investments in projects dedicated to the needs of the Midas business in Europe. Mesa asked the arbitral tribunal to declare that it was entitled to terminate both the ASA and the license agreement and receive monetary relief. The arbitral tribunal found that it had no authority to rule on claims arising from the license agreement. The tribunal reasoned that although the license agreement may have an “economic link” to the ASA, because each agreement contained separate and distinct forum selection clauses, the tribunal was incompetent to decide any dispute regarding the license agreement. As such, the tribunal dismissed Mesa's claim that it was entitled to terminate the license agreement without examining its merits.

¶ 6 Ultimately, in March 2011, the tribunal found that the ASA imposed on Midas a duty to cooperate for the development of the “Midas System,” which Midas breached. The tribunal awarded damages to Mesa, but these damages did not include a refund of royalty payments made under the license agreement.

¶ 7 Nine months after this award was issued, on December 29, 2011, Mesa filed suit against Midas in Milan, Italy, alleging that Midas was continuing to breach its cooperation obligations in the face of the findings of the arbitral tribunal (hereinafter Milan action). The Milan action begins by alleging that the ASA and the license agreement are interrelated and, therefore, a breach under the ASA “shall be construed” as a breach under the license agreement. Mesa goes on to specifically allege that Midas, as licensor, “has the obligation to develop and improve the Midas System for the duration of the Licence Agreement.” Because it believed that Midas had breached this obligation, Mesa suspended 80% of its royalty payments under the license agreement beginning on December 30, 2011. According to Mesa, this represented the price of the “Midas System” which “as a matter of fact” was never actually provided to Mesa. In its complaint, Mesa seeks a declaration that this suspension of payments is lawful.

¶ 8 Approximately one month after the Milan action was filed, Midas filed the instant suit against Mesa in the circuit court of Cook County (hereinafter Chicago action). Midas's complaint, which contains a count alleging breach of contract and a count seeking declaratory judgment, alleges that it performed all conditions precedent to trigger Mesa's obligation to make royalty payments in full. Accordingly, Midas alleges that Mesa has no basis in law or fact to refuse to pay 80% of the monthly royalty payments due under the license agreement.

¶ 9 Shortly after the Chicago action was filed, Mesa made a motion to stay or dismiss under section 2–619(a)(3) of the Code (735 ILCS 5/2–619(a)(3) (West 2010)), arguing that the Milan action and the Chicago action involved both the same cause and the same parties. After hearing arguments on the motion, the circuit court issued a written order dismissing Midas's complaint without prejudice. The court found that the license agreement was inextricably intertwined with the ASA and held:

“On the face of both Italian and Illinois complaints, each party alleges breach of the License Agreement. * * * The past actions between Midas and Mesa, and the duties and obligations under the License Agreement are at issue in both cases. * * * Because the pending Italian action was filed first, and constitutes the same cause as this current action, the motion to stay or dismiss should be granted.”

In reaching this conclusion, the court also considered principles of comity, prevention of multiplicity, and which court could provide complete relief, and found that on balance, these factors favored dismissal. Further, the court determined that Midas would not suffer any prejudice if the case was dismissed because it could bring a counterclaim in Italy to obtain relief.

¶ 10 Midas timely filed this appeal.

¶ 11 ANALYSIS

¶ 12 Section 2–619(a)(3) of the Illinois Code of Civil Procedure allows for dismissal where “there is another action pending between the same parties for the same cause.” 735 ILCS 5/2–619(a)(3) (West 2010). Dismissal under section 2–619(a)(3) is a procedural tool used to avoid duplicative litigation. Kapoor v. Fujisawa Pharmaceutical Co., 298 Ill.App.3d 780, 785, 232 Ill.Dec. 910, 699 N.E.2d 1095 (1998). To that end, the statute should be construed liberally. Schnitzer v. O'Connor, 274 Ill.App.3d 314, 318, 210 Ill.Dec. 630, 653 N.E.2d 825 (1995). We will not reverse a trial court's decision on a motion to dismiss pursuant to this section absent an abuse of discretion. Hastings Mutual Insurance Co. v. Ultimate Backyard, LLC, 2012 IL App (1st) 101751, ¶ 22, 358 Ill.Dec. 585, 965 N.E.2d 656.

¶ 13 In the instant case, no one disputes that the parties in both the Milan and Chicago actions are the same. Instead, Midas argues that the circuit court abused its discretion in finding the suits were for the same cause. Actions involve the same cause where the relief requested rests on substantially the same set of facts. Village of Mapleton v. Cathy's Tap, Inc., 313 Ill.App.3d 264, 266, 246 Ill.Dec. 203, 729 N.E.2d 854 (2000). “The crucial inquiry is whether the two actions arise out of the same transaction or occurrence, not whether the legal theory, issues, burden of proof or relief sought materially differs between the two actions.” Id. In other words, the purpose of the two actions need not be identical; it is enough that there is a substantial similarity of issues between them. Overnite Transportation Co. v. International Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America, 332 Ill.App.3d 69, 76, 265 Ill.Dec. 664, 773 N.E.2d 26 (2002).

¶ 14 We begin our analysis by comparing the allegations of both causes of action. Turning first to the Milan action, Mesa alleges that it is entitled to reduce the royalty payments mandated by the license agreement because Midas failed to comply with its obligation to cooperate in the development and improvement of the “Midas System,” one of the licensed products. The Chicago action, on the other hand, alleges that Midas did in fact comply with its contractual obligations, and it was Mesa that breached the license agreement when it unilaterally decided to reduce its royalty payments. On their face, these allegations appear to be mirror images of each other: Midas seeks a finding that Mesa breached the license agreement when it failed to make full royalty payments, while Mesa contends it was entitled to remit reduced royalty payments because Midas shirked its own obligations under the license agreement.

¶ 15 However, Midas argues that notwithstanding the multiple references to breach of the license agreement in the Milan action,...