Richter v. Prairie Farms Dairy, Inc.

• Decision Date: 04 June 2015
• Docket Number: No. 4–14–0613.,4–14–0613.
• Citation: 34 N.E.3d 617
• Parties: Michael RICHTER and Denise Richter, d/b/a Rich–Lane Farms, Plaintiffs–Appellants, v. PRAIRIE FARMS DAIRY, INC., Defendant–Appellee, and The Board of Directors of Prairie Farms Dairy, Inc., and Edward Mullins, Defendants.
• Court: United States Appellate Court of Illinois

34 N.E.3d 617

Michael RICHTER and Denise Richter, d/b/a Rich–Lane Farms, Plaintiffs–Appellants

v. PRAIRIE FARMS DAIRY, INC., Defendant–AppelleeandThe Board of Directors of Prairie Farms Dairy, Inc., and Edward Mullins, Defendants.

No. 4–14–0613.

Appellate Court of Illinois, Fourth District.

June 4, 2015.

Todd W. Sivia and Paul A. Marks (argued), both of Sivia Law, Edwardsville, for appellants.

Donald K. Shoemaker (argued) and Andrew J. Tessman, both of Greensfelder, Hemker & Gale, P.C., Swansea, for appellee.

OPINION

Presiding Justice POPE delivered the judgment of the court, with opinion.

¶ 1 In October 2006, plaintiffs, Michael and Denise Richter, doing business as Rich–Lane Farms, filed suit against defendant, Prairie Farms Dairy, Inc., in Madison County case No. 06–L–892 (Richter I ). Count I of plaintiffs' complaint alleged shareholder remedies under section 12.56 of the Business Corporation Act of 1983 (805 ILCS 5/12.56 (West 2006) ), count II alleged violations under section 10a of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/10a (West 2004) ), and count III alleged common-law fraud. In September 2007, the circuit court granted defendant's motion to dismiss counts II and III for failure to state a claim.

¶ 2 On September 7, 2012, the circuit court allowed plaintiffs' motion to voluntarily dismiss the suit pursuant to section 2–1009 of the Code of Civil Procedure (Code) (735 ILCS 5/2–1009 (West 2012) ). On September 6, 2013, within one year of the voluntary dismissal, plaintiffs refiled their action in Madison County case No. 13–L–1522 (Richter II ), adding Prairie Farms board of directors and Edward Mullins as named defendants. When we refer to “defendant,” we mean Prairie Farms Dairy, Inc., as the record does not reflect service on the board of directors or Mullins. The refiled complaint contained four counts: shareholder remedies, misrepresentation, common-law fraud, and breach of fiduciary duty. In December 2013, the court granted defendant's motion to transfer venue to Macoupin County under Macoupin County case No. 14–L–4. In June 2014, the court granted defendant's motion to dismiss the refiled action on grounds it was barred by res judicata and the statute of limitations.

¶ 3 Plaintiffs appeal, arguing their refiled complaint is not barred by res judicata or the statute of limitations. We agree, and we reverse and remand for further proceedings.

¶ 4 I. BACKGROUND

¶ 5 The following facts are taken from the parties' pleadings, orders of record, and docket entries contained in the record on appeal. Defendant is a cooperative organized under the Agricultural Co–Operative Act (Ill.Rev.Stat.1971, ch. 32, ¶¶ 440 to 473 (now 805 ILCS 315/1 to 33 (West 2012))) and is in the business of producing and supplying dairy products. Plaintiffs are partners engaged in the business of dairy farming. In August 1980, the parties entered into a “Milk Marketing Agreement,” whereby plaintiffs agreed to provide defendant with whole milk and defendant agreed to market and sell the milk. Plaintiffs also purchased, in the amount of $15, shares of common stock issued by defendant and became members of its cooperative.

¶ 6 In a letter dated October 6, 2005, defendant notified plaintiffs it was terminating the Milk Marketing Agreement as well as plaintiffs' membership in the cooperative. The letter explained plaintiffs “were no longer marketing milk as an active producer of Prairie Farms, as set forth in the By–Laws, at the end of the fiscal year ending 9/30/05.” Defendant tendered $15 to plaintiffs to redeem the shares of common stock, but plaintiffs have rejected the payment.

¶ 7 A. Plaintiffs' Original Lawsuit—Richter I

¶ 8 In October 2006, plaintiffs filed a three-count complaint, seeking recovery for damages they sustained as a result of defendant's decision to terminate the Milk Marketing Agreement and plaintiffs' membership in the cooperative. Count I alleged defendant acted in an illegal or oppressive manner and sought shareholder remedies under the Business Corporation Act of 1983 (805 ILCS 5/12.56 (West 2006) ). Counts II and III of the complaint asserted claims for violations of the Consumer Fraud Act and common-law fraud, respectively, based on defendant's concealment, suppression, or omission of its interpretation of section 8 of the Milk Marketing Agreement.

¶ 9 Defendant moved to dismiss all three counts pursuant to section 2–615 of the Code (735 ILCS 5/2–615 (West 2006) ), asserting plaintiffs failed to state a claim upon which relief may be granted. On September 26, 2007, Madison County circuit judge Daniel Stack ruled on defendant's motion in a written order:

“Defendant's Motion to Dismiss as to Counts I, II, and III are heard and argued.

Defendant's motion as to Count I is denied.

Defendant's Motion to Dismiss as to Counts II and III are granted.

Plaintiff[s] given leave to file amended complaint within 30 days.

Defendant given leave to file response to amended complaint within 30 days after plaintiff's filing of the same.

Defendant to answer Count I within 30 day of todays order.”

On October 24, 2007, plaintiffs sought an extension of time to file an amended complaint. On November 28, 2007, the circuit court granted plaintiffs an extension of 120 days; however, plaintiffs never filed an amended complaint. Instead, plaintiffs chose to proceed on their sole remaining claim for shareholder remedies.

¶ 10 In June 2008, the case was reassigned to Madison County circuit judge David Hylla.

¶ 11 In June 2011, the circuit court entered an order allowing plaintiffs' attorney to withdraw. The court stayed discovery deadlines and granted plaintiffs a continuance to find a new attorney. In November 2011, Todd Sivia entered an appearance on plaintiffs' behalf. Beginning in February 2012, counsel for plaintiffs sought extensions of time to disclose additional experts and comply with outstanding discovery requests. The court entered an order on July 13, 2012, granting plaintiffs 30 days to disclose additional experts. On August 13, 2012, plaintiffs filed a motion for an extension of two weeks to disclose expert witnesses.

¶ 12 On September 7, 2012, Judge Hylla denied plaintiffs' request for a continuance.

After the circuit court denied plaintiffs' request for a continuance, plaintiffs moved to voluntarily dismiss their cause of action, without prejudice, pursuant to section 2–1009 of the Code (735 ILCS 5/2–1009 (West 2012) ). Judge Hylla granted plaintiffs' motion in a written order entered at the September 7, 2012, hearing.

¶ 13 B. Plaintiffs' Second Lawsuit—Richter II

¶ 14 On September 6, 2013, plaintiffs refiled their action under section 13–217 of the Code (735 ILCS 5/13–217 (West 2012) ). The refiled complaint consisted of four counts and sought shareholder remedies based on the illegal or oppressive acts as set forth in count I of the previous complaint and common-law fraud as alleged in count III of the prior complaint. Additionally, the refiled complaint raised two new claims for misrepresentation and breach of fiduciary duty.

¶ 15 In December 2013, Madison County circuit court judge A.A. Matoesian granted defendant's motion to transfer venue to Macoupin County.

¶ 16 In February 2014, defendant filed a combined motion to dismiss Richter II pursuant to section 2–619.1 of the Code (735 ILCS 5/2–619.1 (West 2012) ) (allowing combined motions under section 2–615 (735 ILCS 5/2–615 (West 2012) ) and section 2–619 (735 ILCS 5/2–619 (West 2012) )). In the section 2–619(a)(4) portion of its motion, defendant claimed the dismissal of plaintiffs' fraud claims in Richter I constituted a final adjudication on the merits and res judicata barred not only matters raised in the first action, but also matters that could have been determined in the original action. Defendant also moved to dismiss under section 2–619(a)(5), arguing plaintiffs' claims for misrepresentation, fraud, and breach of fiduciary duty were barred by the five-year statute of limitations (735 ILCS 5/13–205 (West 2004) ). In the section 2–615 portion of its motion, defendant sought dismissal of the refiled complaint for failure to state a cause of action. In defendant's May 21, 2014, reply in support of its motion to dismiss, defendant contended the refiled action was barred by the doctrine of laches.

¶ 17 On June 2, 2014, following a hearing on the motion to dismiss, Macoupin County circuit judge Patrick J. Londrigan granted defendant's motion to dismiss by way of docket entry:

“Cause called for hearing. Mr. Marks present for plaintiff. Mr. Shoemaker present for defendant. Defendant's Motions to Dismiss argued. Case Authority reviewed. Prior Madison County case reviewed including all docket entries. The Court grants the defendant's Motion to Dismiss pursuant to 2–619(4) and 2–619(5). In addition, Mr. Edward Mullins is dismissed as a party defendant. Case dismissed; cause stricken. The Court finds no reason to delay the appeal in this matter. Clerk is directed to send a copy of this docket entry to attorneys of record.”

No written order, transcript, or bystander's report of the hearing is contained in the record on appeal.

¶ 18 This appeal followed.

¶ 19 II. ANALYSIS

¶ 20 Plaintiffs argue the circuit court erred in dismissing their refiled complaint on the ground of res judicata because the order dismissing the fraud counts in Richter I was not a final judgment. Plaintiffs further argue the court erred in dismissing their refiled complaint as time-barred because it was a timely refiled new cause of action pursuant to section 13–217 of the Code (735 ILCS 5/13–217 (West 2012) ).

¶ 21 A. Res Judicata

¶ 22 The first issue in this case is whether the dismissal of plaintiffs' fraud claims and subsequent voluntary dismissal of their shareholder-remedies claim in Richter I barred the refiling of their lawsuit in Richter II under the doctrine of res judicata. We review a section 2–619 dismissal de novo. Citizens Opposing Pollution v. ExxonMobil Coal U.S.A....