March 29, 2009

Stay Of Insurance Declaratory Judgment Action Is Like An Injunction And Invokes Interlocutory Appellate Jurisdiction

WW Westwood Center sued Canel & Associates for legal malpractice. Canel tendered the defense of the lawsuit to it malpractice insurer, TIG Insurance Company. The tender inspired cross-claims by TIG and Canel for a declaratory judgment – TIG asked for a ruling that it did not have to defend or indemnify Canel; Canel asserted just the opposite.

TIG brought Westwood into the lawsuit, and proceeded to serve discovery on Westwood. Westwood responded by asking the trial court to stay the declaratory judgment lawsuits pending a determination of its malpractice case against Canel.

Canel opposed Westwood’s request for a stay. Because TIG was not paying Canel’s defense costs in the malpractice case, Canel wanted the trial court to rule quickly (and in Canel’s favor) in the declaratory judgment case.

But the trial court granted Westwood’s request for the stay of the declaratory judgment actions. Not wanting to wait until final resolution of all the cases, Canel immediately appealed the order granting the stay. The initial question for the First District Illinois Appellate Court was whether it had jurisdiction to hear the appeal.

Canel appealed under Illinois Supreme Court Rule 307(a), which allows interlocutory (immediate) appeals from orders in connection with injunctions. So the question was whether staying the declaratory judgment actions was enough like an injunction order to invoke the appellate court’s jurisdiction.

The appellate court ruled that it did have jurisdiction because the “substance of the order, which prohibited the parties from proceeding with litigation …of TIG’s declaratory judgment action against Canel Associates, was, in effect, injunctive in nature so as to render it reviewable under Rule 307(a)(1).”

The appellate court also affirmed the stay. Read the whole case, TIG Insurance v. Canel, No. 1-08-1251 (3/24/09), by clicking here.

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March 22, 2009

Non-Intervening Account Holders May Appeal Receiver’s Plan To Distribute Assets

In response to a complaint by the Securities and Exchange Commission, the federal district court froze the assets of Enterprise Trust. The SEC claimed that Enterprise deliberately mishandled and lost millions of dollars that it held for investors. The district court appointed a receiver for Enterprise, who devised a plan to distribute the remaining assets to the account holders. The plan called for custodial account holders to receive a bigger percentage of their accounts than managed account holders.

Although they were not named parties in the lawsuit, and had not intervened, three of the managed account holders appealed to the Seventh Circuit Court of Appeals. They wanted a ruling that distributions to all Enterprise account holders should be treated equally. The appeal raised the propriety of appellate jurisdiction because, in a previous case, the court ruled that “investors affected by a receiver's plan of distribution can't appeal without intervening and becoming formal parties to the litigation …”

But this time the court ruled that appellate jurisdiction existed. The appellate court overruled its earlier decision, and concluded that a party whose rights were foreclosed by the receiver’s actions may appeal, even if the party has not officially intervened in the lawsuit. Here’s what the Seventh Circuit said:

People whose money was under management at Enterprise Trust Co., like creditors of a debtor in bankruptcy, must accept the distribution that the court believes appropriate. As with an in rem proceeding (where a court divvies up stakes in a fixed asset), they can't file another suit seeking more from the pool of assets administered in the receivership (or the bankruptcy) … [Allowing those investors to appeal the receiver’s plan] eliminates a conflict among the circuits − for other courts permit investors to appeal in receivership proceedings without intervening …
The district court, and thus the receiver’s plan, ultimately was affirmed. Read the whole case, Securities and Exchange Commission v. Enterprise Trust Co., Nos. 08-3798, 08-3852 (3/18/09), by clicking here.

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March 21, 2009

Seventh Circuit Has Jurisdiction Over Goldblatt’s Bankruptcy Remand

LaSalle Bank, the principal creditor in the Goldblatt’s Bargain Stores bankruptcy, claimed Great American Group committed fraud when it purchased inventory from Goldblatt’s stores that were closing. LaSalle had a security interest in the inventory, and was obliged to reimburse Great American for overpayment of the estimated inventory value. The bankruptcy judge agreed that Great American committed fraud, but ruled that LaSalle had not been damaged by the fraud. The bankruptcy court ruled that LaSalle had to reimburse Great American more than $1 million for the inventory.

LaSalle appealed to the district court. The district court reversed the bankruptcy court because “fraud vitiated the contract and thus excused LaSalle Bank from any obligation to perform.” The district court also remanded the case back to the bankruptcy court “for further proceedings consistent with” its order.

Great American then appealed to the Seventh Circuit Court of Appeals. The first issue was whether the appellate court had jurisdiction to hear the appeal. The sticking point was the district court’s remand to the bankruptcy court, which usually would render the district court’s ruling non-appealable. But the Seventh Circuit Appellate Court took Great American’s appeal because the remand was perfunctory and there was nothing left for the bankruptcy court to do.

[A]s far as we can tell, nothing has actually been remanded in this case. The bankruptcy judge entered a money judgment, which the district judge reversed; there is nothing more for the bankruptcy judge to do. The “remand” in the district judge's opinion seems to have been an inapt entry from a word processor's store of standard phrases. This dispute is over; the decision is final, and we have jurisdiction.

In the end, the Seventh Circuit Appellate Court reversed the district court and reinstated Great American’s judgment. Read the whole case, Leibowitz v. Great American Group, No. 07-3693 (3/18/09), by clicking here.

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March 17, 2009

Due Process Violation In Contempt Proceeding Not Moot

Taren Coupland neglected to appear for her trial, so in her absence she was found guilty of possession of drug paraphernalia. A few days later, Taren was sentenced to 24 months of court supervision. Taren also was required to have a drug/alcohol assessment within 30 days, and to complete a remedial program within six months.

A status hearing was set for about a month later, but Taren neglected that hearing, too. When she did appear for a hearing some 90 days later, Taren told the court she had not completed the drug/alcohol assessment. The trial court ruled that Taren was in contempt of court and that she was to be jailed until she completed the evaluation. Taren could purge the contempt order by completing the drug/alcohol evaluation.

Taren asked the court to reconsider the contempt ruling. She argued that the contempt hearing, coming without notice, was a violation of her due process rights. But by the time the trial court heard her request for reconsideration, Taren had completed the evaluation and was not in custody. The trial court thus denied her request for reconsideration because, the court said, it was moot.

Taren appealed. The State argued that the appeal was moot for the same reasons the trial court found the reconsideration request to be moot. But the Third District Illinois Appellate Court disagreed. Even though the actual controversy was moot, the court took the case because it fell into the “public interest exception” to the mootness doctrine. Here is what the appellate court stated:

Even though an issue is moot at the time of the appeal, some reviewing courts will exercise their jurisdiction to controversies under the public interest exception to the mootness doctrine. This public interest exception applies when the issue is public in nature, requires authoritative guidance from the reviewing court, and is likely to recur …

"Public nature" questions include issues affecting a large number of the general public or issues of public importance … First, the issue at hand involves the enforcement of a criminal sentencing order of supervision in Warren County. Potentially, the court may be called upon to enforce similar conditions in other court orders affecting offenders in a multitude of cases. Second, contempt proceedings invoke a potential contemnor's due process rights requiring authoritative intervention to guide future proceedings to enforce the circuit court orders in Warren *453 County … Third, the likelihood of recurrence is great and is not limited to the complaining party in this appeal. The public interest exception considers potential recurrences to any person … We conclude the requirements of the public interest exception exist, and accordingly, we shall decide defendant's appeal.

In the end, the appellate court ruled that Taren’s due process rights had been violated. Get the whole case, People v. Coupland, No. 3-07-0338 (12/20/08), by clicking here.

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March 10, 2009

Post-Trial Motion Necessary To Preserve Appeal Issue In Directed Verdict Case

Karen Gillespie, as administrator of Kenyudra Gillespie’s estate, sued the University of Chicago Hospitals and a number of doctors for medical malpractice. Karen settled with or dismissed all of the defendants except Dr. Glynis Vashi. The case went to trial, and after Karen put in her evidence, the trial court granted a directed verdict for Dr. Vashi.

Karen appealed. She claimed she was deprived of a fair trial because the trial court refused to admit certain evidence, including “an affidavit by Dr. Vashi, the hospital's rules and regulations, plaintiff's expert's testimony that Dr. Vashi was Kenyudra's ‘attending physician,’ and plaintiff's expert's testimony regarding the Joint Commission on Accreditation of Hospitals' rules and regulations.”

Dr. Vashi claimed that Karen waived the argument for appeal because she did not file a post-trial motion contesting the trial court’s evidentiary rulings. Karen argued that she didn’t have to because the case was resolved on Vashi’s motion for a directed verdict, so it never went to a jury.

Generally, in a jury case, a party has to make a post-trial motion to the trial court to preserve an issue for trial. But when the case is tried without a jury, a post-trial motion is not necessary to preserve an issue for appeal.

In this case, the First District Illinois Appellate Court ruled that Karen had to make the post-trial motion to properly preserve the evidence disputes for appeal. Here’s what the appellate court said:

Plaintiff [Karen] also argues that because the case ended with a directed verdict rather than a jury verdict, no posttrial motion was necessary to preserve the evidentiary issues for appeal.

Plaintiff neither cites to any case law to support her assertions nor did our research reveal any. We conclude that because plaintiff did not file a posttrial motion, her claims of evidentiary errors are waived on appeal.

The appellate court did not state whether Vashi had authority for her side of the proposition. Nor did the court state why its decision was the better rule. So even though the case never made it to the jury, Karen was held to the waiver rule for a jury case.

Read the whole case, Gillespie v. University of Chicago Hospitals, No. 1-07-1962 (12/31/08), by clicking here.

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March 9, 2009

Default Order Not Final And Appealable

In this multi-count business dispute, Fidelity National Title Insurance sued a number of parties. The trial court granted summary judgment to defendants on all but one count of the complaint. A breach of contract claim still remained against Old Intercounty.

About three weeks later, the trial court ruled that Old Intercounty was in default on that contract claim. But the court did not enter a default judgment at that time. Nor did the court issue language under Illinois Supreme Court Rule 304(a) that would have permitted an appeal before a final judgment as to all issues against all parties. At Fidelity’s request, the trial court issued Rule 304(a) language as to the summary judgments a week and a half later.

Fidelity National appealed the summary judgments within 30 days of the time the trial court issued Rule 304(a) language. But Fidelity’s Notice of Appeal was filed more than 30 days after the trial court granted the summary judgments.

The defendants asked the appellate court to dismiss Fidelity’s appeal. They argued that the appellate court did not have jurisdiction to decide the case because Fidelity did not appeal within 30 days of the summary judgments.

The First District Illinois Appellate Court disagreed. The appellate court ruled that Fidelity’s 30-day window began when the trial court issued its 304(a) language, not when the summary judgments were entered. Here’s what the court said:

In this case, the circuit court's order granting summary judgment in favor of defendants did not dispose of the entire controversy between the parties because it left outstanding the breach of contract claim against Old Intercounty. Although the court subsequently declared Old Intercounty in default, it did not enter a default judgment. An order of default is not a final judgment or an interlocutory order appealable as of right because it does not dispose of the case and determine the rights of the parties … Rather, an order of default is simply an interlocutory order that precludes the defaulting party from making any additional defenses to liability but in itself determines no rights or remedies … It is the entry of a default judgment, which the court did not enter in this case, that terminates the litigation and decides the dispute.

Therefore, in this case, without the entry of a judgment against Old Intercounty disposing of count IX of the complaint, all previous orders, including the order granting summary judgment, were interlocutory and could not be appealed without a finding by the court, pursuant to Rule 304(a), that there was no just reason to delay appeal. 210 Ill.2d R. 304(a). … Fidelity's notice of appeal was filed on July 5, 2006, within 30 days of the court's Rule 304(a) finding, and was therefore timely and properly invoked the jurisdiction of this court. According, we have jurisdiction to consider Fidelity's appeal.

Read the whole opinion, Fidelity National Title Ins. Co. v. Westhaven Properties Partnership, No. 1-06-1895 (10/26/07) (only recently posted), by clicking here.

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