Westwood Constr. Grp., Inc. v. Irus Prop., LLC

• Decision Date: 27 September 2016
• Docket Number: No. 1–14–2490.,1–14–2490.
• Citation: 407 Ill.Dec. 972,64 N.E.3d 771
• Parties: WESTWOOD CONSTRUCTION GROUP, INC.; Magenta Investment, LLC; and Benjamin Adebayo, Plaintiffs–Appellants and Cross–Appellees, v. IRUS PROPERTY, LLC, and Michael Sacks, Defendants–Appellees (Continuum Capital Funding, LLC; R & C Financial, Inc. ; and Rick Martin, Respondents in Discovery–Appellees and Cross–Appellants).
• Court: United States Appellate Court of Illinois

64 N.E.3d 771
407 Ill.Dec. 972

WESTWOOD CONSTRUCTION GROUP, INC.; Magenta Investment, LLC; and Benjamin Adebayo, Plaintiffs–Appellants and Cross–Appellees,
v.
IRUS PROPERTY, LLC, and Michael Sacks, Defendants–Appellees (Continuum Capital Funding, LLC; R & C Financial, Inc. ; and Rick Martin, Respondents in Discovery–Appellees and Cross–Appellants).

No. 1–14–2490.

Appellate Court of Illinois, First District, Second Division.

Sept. 27, 2016.

64 N.E.3d 773

Voelker Litigation Group, of Chicago (Daniel J. Voelker, of counsel), for appellants.

Law Offices of Ian B. Hoffenberg LLC, of Chicago (Ian B. Hoffenberg, of counsel), for appellee Continuum Capital Funding, LLC.

Schoenberg, Finkel, Newman & Rosenberg, of Chicago (Adam J. Glazer and Richard M. Goldwasser, of counsel), for appellees R&C Financial, Inc., and Rick Martin.

OPINION

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

407 Ill.Dec. 974

¶ 1 In 2013, plaintiffs filed this action against IRUS Property, LLC (IRUS); Michael Sacks; R & C Financial, Inc. (R & C); Rick Martin, and Continuum Capital Funding, LLC (Continuum), in federal court. After plaintiffs' withdrew the alleged federal claims, the federal district court dismissed the case for lack of subject matter jurisdiction. Thereafter, plaintiffs filed this action in the circuit court of Cook County against IRUS, Sacks, R & C, Martin and Continuum. The circuit court dismissed the complaint against all named defendants without prejudice and permitted plaintiffs leave to replead. In plaintiffs' amended complaint, R & C, Martin, and Continuum were not named as defendants but rather they were designated as respondents in discovery pursuant to section 2–402 of the Code of Civil Procedure (735 ILCS 5/2–402 (West 2012) ). R & C, Martin and Continuum filed motions to dismiss them as respondents in discovery and to impose sanctions on plaintiffs pursuant to Illinois Supreme Court Rule 137 (eff. July 1, 2013). The circuit court granted the motions to dismiss with prejudice and denied the motions for sanctions. Plaintiffs appeal the dismissal with prejudice of R & C, Martin and Continuum as respondents in discovery from the amended complaint and R & C, Martin and Continuum cross-appeal the denial of their motions for sanctions. For the following reasons, we affirm in part and reverse in part the judgment of the circuit court and remand for further proceedings.

¶ 2 BACKGROUND

¶ 3 On May 7, 2013, in the United States District Court for the Northern District of

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Illinois, plaintiffs, Westwood Construction Group, Inc. (Westwood); Magenta Investment, LLC (Magenta); and Benjamin Adebayo, filed suit for breach of contract and fraud against defendants IRUS, Sacks, R & C, Martin, and Continuum. Facing a motion to dismiss, plaintiffs withdrew five of the six counts pled and filed an amended complaint alleging state law claims only, resulting in a dismissal with prejudice for lack of federal subject matter jurisdiction.

¶ 4 On August 19, 2013, plaintiffs filed this action in the circuit court of Cook County repleading their claims against defendants IRUS, Sacks, Continuum, R & C, and Martin. R & C and Martin moved to dismiss the complaint. Separately, Continuum moved to dismiss the complaint or, alternatively, for judgment on the pleadings based on an affidavit by plaintiff Adebayo that was attached to the complaint. Continuum argued the Adebayo affidavit defeats plaintiffs' claims. The circuit court, sua sponte, struck plaintiffs' complaint without prejudice for failure to sufficiently plead the claims. The circuit court allowed plaintiffs to replead with the proviso that "no responsive pleadings will be required until the court reviews plaintiffs' amended pleading and determines a responsive pleading is in order."

¶ 5 On May 20, 2014, plaintiffs filed an amended complaint naming IRUS and Sacks as defendants and designated R & C, Martin and Continuum as respondents in discovery pursuant to section 2–402 of the Code of Civil Procedure (Code) (735 ILCS 5/2–402 (West 2012) ). Section 2–402 of the Code provides in pertinent part that a "plaintiff in any civil action may designate as respondents in discovery in his or her pleading those individuals or other entities, other than named defendants, believed by the plaintiff to have information essential to the determination of who should properly be named as additional defendants in the action." 735 ILCS 5/2–402 (West 2012).

¶ 6 On June 17, 2014, R & C, Martin and Continuum filed separate motions to be dismissed as respondents in discovery and for sanctions against plaintiffs' counsel pursuant to Illinois Supreme Court Rule 137 (eff. July 1, 2013). They argued that section 2–402 only provides procedures for a plaintiff to designate a person or entity as a respondent in discovery and later, upon motion, convert the respondent into a defendant and the plain language of section 2–402 does not permit a previously named defendant to be designated as a respondent in discovery in a subsequent amended complaint. They also argued that this designation was done in bad faith and Rule 137 sanctions should be imposed on plaintiffs.

¶ 7 In a written order, the circuit court dismissed Continuum, R & C and Martin as respondents in discovery with prejudice and denied their motions for sanctions. The court found section 2–402 does not allow a plaintiff to designate a person or entity as a respondent in discovery after having previously named them as a defendant in a prior complaint. The court stated that section 2–402 permits a respondent in discovery to later become a defendant and is silent on any other mechanism for redesignation; therefore, "[p]laintiffs contravene the purpose and thrust of the rule" by attempting to designate the previously dismissed defendants as respondents in discovery. Later, the court entered an order finding that R & C, Martin and Continuum "are dismissed with prejudice and there is no just reason for delaying enforcement or appeal." Plaintiffs timely filed this appeal from the circuit court's dismissal order and R & C, Martin and Continuum timely filed a cross-appeal from

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the order denying their motions for sanctions.

¶ 8 ANALYSIS

¶ 9 Westwood's Appeal

¶ 10 First, plaintiffs argue the trial court erred in dismissing R & C, Martin and Continuum as respondents in discovery on the basis that section 2–402 of the Code (735 ILCS 5/2–402 (West 2012) ) did not permit plaintiffs to designate a formerly named defendant as a respondent in discovery in a subsequent amended pleading. Because this issue involves the interpretation of a statute our review is de novo. Bettis v. Marsaglia, 2014 IL 117050 ¶ 12, 387 Ill.Dec. 659, 23 N.E.3d 351.

¶ 11 The Code provides that "[t]he party commencing the action shall be called the plaintiff. The adverse party shall be called the defendant." 735 ILCS 5/2–401(a) (West 2012). A party must state in the body of its pleading the name of all parties for and against whom relief is sought. 735 ILCS 5/2–401(c) (West 2012). The Code recognizes a third category: "individuals or other entities, other than named defendants" that may be designated by the plaintiff as respondents in discovery where the plaintiff believes they "have information essential to the determination of who should properly be named as additional defendants in the action." 735 ILCS 5/2–402 (West 2012). Section 2–402 of the Code provides in pertinent part that:

"The plaintiff in any civil action may designate as respondents in discovery in his or her pleading those individuals or other entities, other than the named defendants, believed by the plaintiff to have information essential to the determination of who should properly be named as additional defendants in the action.

Persons or entities so named as respondents in discovery shall be required to respond to discovery by the plaintiff in the same manner as are defendants and may, on motion of the plaintiff, be added as defendants if the evidence discloses the existence of probable cause for such action.

A person or entity named a respondent in discovery may upon his or her own motion be made a defendant in the action, in which case the provisions of this Section are no longer applicable to that person.

* * *

A person or entity named as a respondent in discovery in any civil action may be made a defendant in the same action at any time within 6 months after being named as a respondent in discovery, even though the time during which an action may otherwise be initiated against him or her may have expired during such 6 month period." 735 ILCS 5/2–402 (West 2012).

¶ 12 The primary goal in construing the language of a statute is to ascertain and give effect to its legislative intent. Blum v. Koster, 235 Ill.2d 21, 44, 335 Ill.Dec. 614, 919 N.E.2d 333 (2009). The plain language of a statute is the most reliable indication of legislative intent. DeLuna v. Burciaga, 223 Ill.2d 49, 59, 306 Ill.Dec. 136, 857 N.E.2d 229 (2006). "[W]hen the language of the statute is clear, it must be applied as written...