Prodromos v. Everen Securities, Inc.

• Decision Date: 20 March 2009
• Docket Number: No. 1-06-3685.,1-06-3685.
• Citation: 389 Ill. App. 3d 157,906 N.E.2d 599
• Parties: John PRODROMOS, Plaintiff-Appellant, v. EVEREN SECURITIES, INC., a Delaware Corporation, Principal Financial Securities, a dissolved Delaware Corporation, and Daniel L. Westrope, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

906 N.E.2d 599

389 Ill. App. 3d 157

John PRODROMOS, Plaintiff-Appellant, v. EVEREN SECURITIES, INC., a Delaware Corporation, Principal Financial Securities, a dissolved Delaware Corporation, and Daniel L. Westrope, Defendants-Appellees.

No. 1-06-3685.

Appellate Court of Illinois, First District, Sixth Division.

March 20, 2009.

George B. Collins, Christopher Bargione; Collins, Bargione & Vuckovich; Chicago, IL, for Appellant.

Edward D. Shapiro, John H. Ward, Joanne A. Sarasin; Much Shelist Deneberg Ament & Rubenstein, PC; Chicago, IL, for Everen Securities, Inc. and Principal Financial Securities.

Steven M. Malina; Morgan Lewis & Bockius LLP; Chicago, IL, for Daniel L. Westrope.

Presiding Justice O'MALLEY delivered the opinion of the court:

Plaintiff John Prodromos filed a complaint against defendants Everen Securities, Inc. (Everen), Principal Financial Securities (Principal), Daniel Westrope, and Dennis Klaeser,¹ alleging, inter alia, breach of fiduciary duty and constructive fraud related to plaintiff's attempted acquisition of Home Federal Savings Bank (Home Federal).² Following the trial court's partial granting of summary judgment in favor of defendants, plaintiff appealed, and this court reversed the judgment of the trial court and remanded the cause for further proceedings. See Prodromos v. Everen Securities, Inc., 341 Ill. App.3d 718, 275 Ill.Dec. 671, 793 N.E.2d 151 (2003) (Prodromos I). On remand, and following the close of plaintiff's case in chief, the trial court granted defendants' motion for a directed finding pursuant to section 2-1110 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1110 (West 2006)). Plaintiff again appeals, this time contending that the trial court erred in (1) granting defendants' motion without requiring that they show that the transaction at issue was "fair and equitable"; and (2) striking his jury demand. We affirm.

BACKGROUND

Plaintiff was the former president and chief executive officer (CEO) of Howard Savings Bank (Howard Savings) in Glenview, Illinois. Plaintiff was also a shareholder of Home Federal. Principal was a securities brokerage and investment banking firm that was dissolved and merged into Everen, another securities brokerage and investment banking firm, in January 1998. Plaintiff had been a long-time client of "Principal / Everen." Westrope was an investment banker with Everen from June 1995 until February 1998.

According to plaintiff's first amended complaint, prior to January 1998, plaintiff sought to acquire a controlling stake in Home Federal based on information he had developed. Plaintiff asked his retail broker at Everen, Steven Golber, to refer him to someone at Everen who could help him with his acquisition plan.

On January 23, 1998, Golber introduced plaintiff to Westrope, and plaintiff explained his plan to him. Westrope agreed to contact the institutional shareholders of Home Federal to see if they would vote their proxies in favor of plaintiff.

On February 27, 1998, Westrope left Everen and began working at State Financial Services Corporation (State Financial). In early March 1998, plaintiff met with Klaeser, Westrope's replacement at Everen, and Klaeser informed plaintiff that Everen would not represent him in his attempt to purchase Home Federal. On June 2, 1998, State Financial publicly announced its intent to merge with Home Federal, and Westrope was named the president and CEO of the newly acquired bank.

Following discovery, the trial court granted defendants' motion for summary judgment in part. On appeal, however, this court found that the facts "at least raise a question of fact regarding whether or not a principal-agent relationship existed between Westrope and plaintiff." Prodromos I, 341 Ill.App.3d at 725, 275 Ill. Dec. 671, 793 N.E.2d 151. In addition, we noted that plaintiff had to show that defendants' actions were the proximate cause of his injuries, "`even in instances of intentional torts where fiduciaries are involved.'" Prodromos I, 341 Ill.App.3d at 727, 275 Ill.Dec. 671, 793 N.E.2d 151, quoting Martin v. Heinold Commodities, Inc., 163 Ill.2d 33, 59, 205 Ill.Dec. 443, 643 N.E.2d 734 (1994). As with the issue of whether a principal-agent relationship existed, we also found that "[w]hat constitutes reasonable action with regard to pursuing [the] acquisition of Home [Federal] and a reasonable period of time for plaintiff to take such action are questions to be determined by the trier of fact." Prodromos I, 341 Ill.App.3d at 728, 275 Ill.Dec. 671, 793 N.E.2d 151. We reversed the judgment of the trial court and remanded the matter for further proceedings. Prodromos I, 341 Ill.App.3d at 728, 275 Ill. Dec. 671, 793 N.E.2d 151.

On January 18, 2006, and following remand, the trial court entered an order granting defendants' motion to strike plaintiff's jury demand. The trial court held that, because the right to a jury trial under the Illinois Constitution applies only to causes of action where the right to a jury trial existed at the time the constitution was adopted, and because a breach of fiduciary duty was an equitable claim tried without a jury at the time the constitution was adopted, plaintiff did not have a right to a jury trial for his breach of fiduciary duty claim. The trial court further held that plaintiff's claim for constructive fraud is a breach of a legal or equitable duty arising out of a fiduciary relationship and is therefore also inappropriate for trial by jury.³ The trial court then heard opening statements, and plaintiff began his case in chief.

Plaintiff testified that he had been the president of Howard Savings, which had been started by his father, from 1974 to 1991, at which time he became the chairman until 1994. Plaintiff admitted that he had been fined $15,000 by the Federal Deposit Insurance Corporation (FDIC) for overcharging a personal loan. Plaintiff, however, stated that he was never removed from banking, nor was he prohibited by state or federal regulators from holding any office in a bank. Plaintiff also admitted that he left the bank because his sister fired him in November 1994.

Plaintiff then testified that, in 1997, he found out that Home Federal had gone public (i.e., had become a publicly traded company). Plaintiff described that when a bank goes public, it is either "a great buying opportunity or they just did this to raise capital to protect them because they were losing money." Plaintiff then asked Golber, who had been his stockbroker at Everen for approximately 15 years, to obtain information on Home Federal without plaintiff having to "expose [his] name." Plaintiff stated that he eventually purchased over 20,000 shares totaling nearly $250,000 by the end of 1997.

After visiting Home Federal's branch locations and speaking with the president and chairman of Home Federal, plaintiff sought to purchase Home Federal. Plaintiff admitted that he had never purchased or sold a bank in his experience, so he asked Golber to refer him to someone at Everen who could help him. Golber suggested that plaintiff meet with Westrope. Plaintiff noted that, prior to meeting with Westrope, he contacted several people, including Larry Capriotti, Jack Hargrove, and Nicholas Gouletas. Plaintiff said that those people were "extremely anxious" about giving him money to purchase Home Federal.

On January 28, 1998, plaintiff met with Golber, who then introduced him to Westrope. Plaintiff said that Westrope told plaintiff that he knew "absolutely nothing" about Home Federal. Plaintiff then told Westrope that he wanted to buy Home Federal, and asked how Westrope could help him do that. Westrope informed plaintiff that there were three mutual funds that owned over 25% of Home Federal's stock, and if those mutual funds would support plaintiff's plan, that would result in less money that plaintiff would have to raise. Plaintiff also stated that Westrope could not provide him with an estimate of the fees plaintiff would have to pay because Westrope did not know how much work Everen would have to do. Westrope asked plaintiff for Howard Savings's audited financial statements and, according to plaintiff, Westrope stated that he would contact the mutual funds to determine whether they would support plaintiff's plan. Plaintiff stated that Westrope never told him during the meeting that he was going to leave Everen, that State Financial had hired him, or that he was obligated to disclose any information on potential acquisitions to State Financial. Plaintiff insisted that if Westrope had indicated any of these things, plaintiff would not have continued speaking to him. Plaintiff also agreed that he informed Westrope and Golber that the information he was providing him was confidential and he had no reason to believe his information would not be held confidentially.

On February 5, 1998, plaintiff provided the audited financial statements to Golber to give to Westrope and admitted that he indicated on a cover sheet with the financials that he had retired from Howard Savings, instead of stating that he had been fired, because "that was the common phrase that was used * * * for the public," and that he "didn't think it was that bad saying that." Later that day, plaintiff spoke with Westrope, who indicated that he received the information and that he was waiting for responses from the mutual funds he had contacted. Plaintiff, however, testified that he subsequently had problems reaching Westrope, and initially Golber only knew that Westrope had left Everen. At plaintiff's request, Golber set up a meeting with Westrope's replacement, Dennis Klaeser. At that meeting, plaintiff stated that he was "basically * * * thrown out of there," because Klaeser told plaintiff that Everen wanted nothing to do with his plan.

Plaintiff then contacted Jack Hargrove looking for more investors, and Hargrove suggested they meet with George Moser, who owned a bank in Hoffman Estates, Illinois. According to plaintiff, Moser...