June 30, 2008

No Abuse Of Discretion In Finding Law Firm Waived Right To Arbitration

Jeffrey Woods and three associated parties had a dispute with the Patterson Law firm. The law firm claimed Woods et al. owed $47,000 for legal fees; Woods claimed the law firm committed legal malpractice. The law firm sued for the fees, but voluntarily dismissed its case. Woods then sued for malpractice.

In the malpractice case, the law firm raised an affirmative defense that its agreement with Woods required arbitration of “[a]ny controversy, dispute or claim arising out of or relating to our fees, charges, performance of legal services …” But the firm also made two motions to dismiss the case, filed a demand for a bill of particulars, served interrogatories on plaintiff, and issued a subpoena for documents to a third-party.

After all that, the firm asked the court to compel arbitration of the dispute. The trial court ruled that the law firm waived its right to compel arbitration because it participated so heavily in Woods’s lawsuit. The law firm appealed the denial of its attempt to compel the arbitration.

The appeal was pursuant to Illinois Supreme Court Rule 307(a), which permits interlocutory appeals as of right from an order granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction. The First District Illinois Appellate Court ruled that “a motion to compel arbitration is analogous to a motion for injunctive relief," and that the standard of review is “abuse of discretion.”

The appeal evoked three separate opinions from the three-judge panel. Two of the opinions agreed with the trial court so the waiver ruling was affirmed. One judge dissented.

The primary opinion discussed some of the policy considerations involved in waiver of a claim to arbitrate: “Illinois courts disfavor a finding of waiver … However, the right to compel arbitration of a dispute can be waived as with any other contractual right … Illinois courts will find waiver of a party's right to compel arbitration when a party's conduct is inconsistent with an arbitration clause, thus indicating an abandonment of the right to arbitration … Additionally, a party waives its right to arbitrate by submitting arbitrable issues to a court for decision … Illinois courts also consider the delay in a party's assertion of its right to arbitrate and any prejudice the delay caused the plaintiff …”

This opinion stated that overlooking waiver might result in heavier costs for the parties to resolve the dispute; parties would be motivated to take discovery in the lawsuit, to which they might not be entitled in the arbitration, then demand arbitration. All of that would defeat an important purpose of arbitration – saving the costs of litigation.

The dissent saw the more important policy as encouraging arbitration. The dissent also was concerned that “the plaintiffs are trying to slip out of their contractual duty to arbitrate. We should not let it happen. I believe the trial court abused its discretion when it denied the defendants' motion to compel arbitration.”

Read the whole opinion, Woods v. Patterson Law Firm, No. 1-08-0066 (3/31/08), by clicking here. (The Public Law Library; free account required.)

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June 29, 2008

Motion To Strike Summary Judgment Affidavit Reviewed De Novo

As representative of Stanley Collins’s estate, Lisa Collins sued St. Paul Mercury Insurance for underinsured motorist coverage of the auto accident that killed Stanley. Lisa appealed after the trial court ruled that St. Paul did not owe insurance coverage and awarded the company summary judgment.

Among other things, Lisa complained that her affidavit supporting her opposition to summary judgment should not have been stricken. The First District Illinois Appellate Court identified the proper standard of review as de novo. “When a trial court rules on a motion to strike an affidavit in conjunction with a motion for summary judgment, the appellate court reviews that ruling de novo.”

In this case, the appellate court ruled it was proper to strike the affidavit because it “failed to comply with the requirements of [Illinois Supreme Court Rule 191] in that it contained unsupported assertions, opinions, and conclusions regarding plaintiff's ‘expectations’ about the St. Paul policy's coverage.” Read the whole case, Collins v. St. Paul Mercury Insurance Co., No. 1-06-36-1 (3/25/08), by clicking here.

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June 26, 2008

Retroactive Application Of Illinois Supreme Court Rule Amendment Saves Insurer’s Appeal

Eclipse Manufacturing apparently was annoyed by receiving unsolicited faxes from United States Compliance. So Eclipse filed a class action case against Compliance. Compliance demanded a defense and indemnification from its insurer, Hartford Insurance. Hartford declined to defend and denied coverage.

Compliance settled with Eclipse, and gave Eclipse an assignment of the Hartford insurance policy benefit. Eclipse proceeded on a third party citation to collect the Hartford policy limits. The trial court ruled that the Hartford insurance policy covered Eclipse’s claim against Compliance, and ordered Hartford to pay the settlement.

The trial court stated its intention to rule for Eclipse in July 2006, and directed Eclipse and Hartford to draft an order based on the court’s comments. But Eclipse and Hartford could not agree on language for the order. Just before 30 days from when the trial court stated it would rule for Eclipse, but before a written order was entered, Hartford filed its notice of appeal.

Hartford filed its appeal under Illinois Supreme Court Rule 303(a)(1). The rule required an appeal to be filed within 30 days of a final judgment. But the trial court’s statement that it intended to rule for Eclipse was not a final judgment. So Hartford’s notice of appeal was premature, and did not invoke appellate jurisdiction.

But while Hartford’s appeal was pending, Rule 303(a)(1) was amended. The amendment allowed “[a] notice of appeal filed after the court announces a decision, but before the entry of the judgment or order, … [to be] treated as filed on the date of and after the entry of the judgment or order.” So Hartford’s jurisdictional problem would be fixed if the amendment could be applied retroactively to Hartford’s appeal.

That’s exactly what the Second District Illinois Appellate Court did. “In the interest of consistency,” the court relied on its decision in In re Marriage of Duggan, 376 Ill.App.3d 725 (2007), which ruled that a similar amendment should be applied retroactively. Take a look at our report of the Duggan case here, here, and
here. And get the court’s entire opinion in Eclipse Manufacturing v. United States Compliance, Nos. 2-06-0825, 2-06-0889 (11/30/07), by clicking here.

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June 24, 2008

Appeal Of Expired Commitment Order Not Moot

Kevin S. disputed an involuntary commitment order against him that placed him in the Chester Mental Health Center. The commitment order was entered in November 2006, and was good for 180 days. But the case was before the Fifth District Illinois Appellate Court well after the 180 days expired. So appellate jurisdiction the first question the court addressed. Was the case moot because the commitment order had expired, and the appellate court no longer could give Kevin S. the relief he requested? If so, the appellate court would be without jurisdiction to rule on Kevin’s appeal.

The court ruled that the case fell into an exception to the mootness doctrine, and stated that it did have jurisdiction. “Generally, a court will not consider moot questions or render advisory decisions … Questions raised in an appeal that are capable of repetition, yet might evade review because of the short duration of the order, fall under the exception of the mootness doctrine … Given that respondent [Kevin S] has a long history of civil commitment and that it is likely that the circumstances present here may reoccur without the opportunity for a resolution before the case is rendered moot by the expiration of the order, we will address respondent's contentions.”

Read the whole case, In re Kevin S., No. 5-06-0677 (4/2/08), by clicking here.

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June 18, 2008

Lack of Hearing Transcripts Makes For Insufficient Record To Reverse Good Faith Of Settlement

A building owned by the Jesuit church collapsed during demolition of the building next door. The church’s insurer paid the church’s insurance claim, and they both sued a number of the contractors involved in the demolition. When the church and the insurer settled with most of the defendants, the non-settling defendants contested the good faith of the settlement.

The trial court ruled that the settlement was made in good faith, thus extinguishing the non-settling defendants’ claims for contribution against the settlors. The non-settlors then appealed the good faith finding. A number of hearings on the motion for good faith finding were held in the trial court, but transcripts of those hearings were not a part of the appellate record.

The First District Illinois Appellate Court affirmed the good faith finding. The appellate ruling was made in part because the non-settlors failed to provide a record sufficient to find an abuse of discretion. Here is the appellate court’s rationale:

… [A] reviewing court’s starting point is the view voiced by the trial court … In the case at bar, we have no idea what view of the trial court voiced because the appellate record is missing numerous transcripts where the trial court may have voiced its view. At least half a dozen hearings took place concerning the good-faith motion prior to the trial court’s ruling … Instead of providing the transcripts in the record, appellants chose to spend several pages of their brief arguing to this court what the missing transcripts might have “possibly” said. This type of speculation has been explicitly forbidden by our supreme court.

So the lesson is: Get a court reporter and include the hearing transcript in the record. Read the whole case, The Chicago Province of the Society of Jesus v. Clark and Dickens, No. 1-07-0960, 1-07-1003 ( 6/9/08), by clicking here.

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June 12, 2008

Children’s Claim For Constructive Trust Gets De Novo Review

After his ex-wife died, Edward Trevino got into a dispute with his children over the disposition of a $100,000 life insurance benefit. Edward was the beneficiary on the policy. But his children pointed to a marital settlement agreement that stated they were to be beneficiaries of any “death benefits.”

The children’s guardian asked for a constructive trust over the life insurance benefit. After the trial court imposed a constructive trust, Edward appealed that order.

The first issue was the standard of review. The Second District Illinois Appellate Court distinguished between review of imposition of a constructive trust and of a marital settlement agreement. “At the outset, we note that, even though the order Edward challenges is one imposing the equitable remedy of a constructive trust … our review is de novo. Typically, the imposition of a constructive trust is a matter for the discretion of the trial court … Here, however, the issue is not whether the trial court abused its discretion in imposing a constructive trust, but whether the marital settlement agreement provided a legal basis for the trial court’s order. Edward has asked us to review only the trial court’s interpretation of the agreement. Our review of a court’s interpretation of a marital settlement agreement is de novo.”

The appellate court ruled that “death benefits,” as used in the marital settlement agreement, included the life insurance benefit, and affirmed the imposition of a constructive trust. Read the whole case, In re Estate of Trevino, No. 2007-0503 (4/7/08), by clicking here.

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June 8, 2008

Pretrial Objections To Parol Evidence Not Enough To Save Issue For Appeal

This case involves a dispute over the sale of land. Wheeler-Dealer asked the court to reform or rescind of the deed. Defendant Roger Christ won after a bench trial. Wheeler-Dealer appealed the verdict.

One of Wheeler-Dealer’s arguments to the First District Illinois Appellate Court was that parol evidence improperly was admitted at the trial. Wheeler-Dealer claimed that it objected to “the admission of any oral statements going to the intent of the parties at the time that they entered into the real estate contract and that it again objected to such evidence in its brief filed with the circuit court prior to the commencement of trial.”

Not good enough, according to the appellate court. The court ruled that the pretrial objections did not save the issue for appeal. “Timeliness requires that an objection be made when the evidence is offered at trial … Although a party may have objected to the evidence at some pre-trial stage in the proceedings or unsuccessfully moved to bar the evidence prior to trial, it must still renew its objection at the time that the evidence is offered … Failure to renew the objection when the evidence is offered at trial results in a waiver of any challenge to the circuit court's consideration of that evidence.”

The lesson bears repeating. To assure an evidentiary objection is preserved for appeal, no matter how many pre-trial objections were made, you should object to it at trial. Otherwise you risk waiving the objection in the appellate court.

Get the whole case, Wheeler-Dealer, Ltd. v. Christ, No. 1-07-0970 (3/4/08), by clicking here.

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June 4, 2008

Seventh Circuit Holds Rule 60(b) Reconsideration Motion Not A Substitute For Appeal

Leo Stoller sued Pure Fishing Incorporated for trademark infringement. Eventually, the federal district court defaulted Stoller and awarded Pure Fishing costs and fees on one of its counterclaims. When Stoller appealed, Pure Fishing moved to require him to post an appeal bond. The trial court granted Pure Fishing’s motion. But instead of filing a bond, Stoller filed another appeal.

The Seventh Circuit Court of Appeals took the second appeal to be a motion to suspend enforcement of the order requiring an appeal bond, then denied the motion. The appellate court also dismissed the first appeal for failure to prosecute “because Stoller failed to pay the bond or file an appellate brief.”

Stoller’s next move was a Rule 60(b) (Relief from Judgments) motion in the trial court. His arguments, though, “rehashed the merits of his underlying lawsuit and complained about various orders that had been entered against him in that lawsuit.” After that motion was denied, Stoller appealed again.

The Seventh Circuit affirmed the denial of Stoller’s Rule 60(b) motion. The court ruled that Stoller could not use a Rule 60(b) motion as a substitute for the appeal that had been dismissed. “The district court’s order here was decidedly not an abuse of its discretion, because all of the arguments in Stoller’s Rule 60(b) motion could have been addressed by this court in the underlying appeal that was dismissed for failure to prosecute. A Rule 60(b) motion is not a substitute for appeal, and thus Stoller’s attempt to use it as such was appropriately rejected.”

Read the whole case, Stoller v. Pure Fishing Inc., No. 07-1936 (5/29/08), by clicking here.

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June 1, 2008

Failure To Proffer Proposed Amended Pleading Forfeits Right To Appeal

Members of an insurance pool were sued for failure to pay extraordinary assessments. The pool members in turn brought a third-party complaint against a number of parties alleging breach of contract and numerous torts. The trial court dismissed a significant part of the third-party complaint with prejudice and without leave to file an amended pleading.

The Fourth District Illinois Appellate Court refused to rule on the members’ argument that they were entitled to amend their third-party complaint. The court ruled that the members’ failure to proffer the amended third-party complaint to the trial court resulted in forfeiture of the question. “The pool members did not include a proposed amended complaint with supporting facts in the trial court. The failure to do so ‘significantly diminishes our ability to determine whether the proposed amendment’ would provide them with a viable theory against RMA and Murray [third party defendants] … The failure to tender the proposed amendment forfeits review of the trial court's decision.”

So the lesson is: to assure there is a complete record for appeal, always proffer your proposed amended pleading to the trial court. Failing to do so may be a forfeiture of an argument on appeal that you improperly were not allowed leave to amend.

You can read the whole case, Illinois Non-Profit Risk Management Assn. v. Human Service Center of Southern Metro-East, No. 4-07-0472 (1/9/08), by clicking here.

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