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Mcdonald's Corp. v. Levine

OPINION FILED JULY 26, 1982.

MCDONALD'S CORPORATION ET AL., PLAINTIFFS-APPELLANTS,

v.

WILLIAM S. LEVINE ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Du Page County; the Hon. Helen C. Kinney, Judge, presiding.

JUSTICE LINDBERG DELIVERED THE OPINION OF THE COURT:

JUSTICE LINDBERG delivered the the opinion of the court:

This is an appeal from the dismissal by the circuit court of Du Page County of a six-count complaint brought by McDonald's Corporation (McDonald's) and two of its employees, Noel Kaplan and Dean Canterbury. Plaintiffs sought damages from William S. Levine, Gene Himmelstein, and Stephen Haberkorn, McDonald's franchisees in Arizona and their Illinois attorney, W. Yale Matheson for violation of the Illinois eavesdropping act (Ill. Rev. Stat. 1977, ch. 38, par. 14-1 et seq.).

Plaintiffs allege they discovered the eavesdropping and theft of documents from McDonald's corporate offices in March 1978 when, during discovery being conducted in a proceeding before the Federal District Court for the District of Arizona, tape recordings and documents were produced. The Arizona action, William S. Levine et al. v. McDonald's Corporation, et al., filed in August 1977, alleged that McDonald's and 27 other defendants violated the Sherman Antitrust Act, Arizona antitrust laws, and certain trademarks and breached various contractual obligations. Matheson, an Illinois attorney, was one of the attorneys representing plaintiffs in the Arizona action.

The instant complaint alleges that the surreptitious recording of telephone conversations and meetings in violation of the Illinois eavesdropping act occurred in 1976 and 1977. These conversations were among 21 surreptitiously recorded conversations of McDonald's employees which were made by defendants in Illinois, California, and Arizona during the period of August 1973 to February 1978. Among the conversations recorded was a meeting held in August 1976 attended by Kaplan, Canterbury, Levine, and Haberkorn, a telephone conversation between Kaplan and Himmelstein in November 1976, a telephone call between Kaplan and Haberkorn in February 1977, and a March 1977 telephone conversation between Kaplan and Haberkorn. The complaint alleges that on each occasion the recording was made secretly by defendants without the knowledge or consent of Kaplan, Canterbury, or McDonald's. In each instance the surreptitious recordings were given to Matheson for his use and publication.

The photocopied documents comprising 386 separate documents constituted a total of 1,088 separate pages. McDonald's alleges that one-half of the documents were physically stolen from the offices of McDonald's. McDonald's alleges that the other half were obtained by covert photocopying of the originals which were located in McDonald's offices and that the originals were then returned to their place in the files. The documents which were allegedly stolen and secretly photocopied were maintained by McDonald's in locked file cabinets which, in most cases, were located in secure areas and private offices. Only authorized personnel were permitted access to the documents.

McDonald's maintains that the stolen documents deal with the corporate business, finances and business relationships, and communications between officers, employees, and attorneys of McDonald's. Of the 1,088 allegedly stolen documents only 168 pages have any relationship to the instant defendants or to their franchises, and the balance would appear to have no relation to the instant defendants.

In its six-count complaint the plaintiffs alleged the following: Count I alleges that defendants violated the Illinois eavesdropping act (Ill. Rev. Stat. 1977, ch. 38, par. 14-1 et seq.), which prohibits the use of any eavesdropping device to hear or record any conversation unless done with the consent of all parties to the conversation. Specifically, Levine, Haberkorn and Himmelstein, each a McDonald's franchisee operating in Arizona are accused of surreptitiously tape recording the plaintiffs' meeting and telephone conversations by using concealed tape recorders and telephone devices. After the tape recordings were made, the defendants Levine, Haberkorn and Himmelstein turned them over to Matheson, an Illinois attorney, for his use and publication. The plaintiffs did not discover the existence of the tape recordings and transcripts until early 1978.

Count II alleges that the defendant Matheson violated the eavesdropping act in that he used and divulged the information contained in the tape recordings and transcripts of the recordings when he knew or should have known that the tapes and transcripts were obtained by illegal eavesdropping. The plaintiffs allege the defendants fraudulently concealed their activities of making the recordings and using the contents and they seek compensatory damages, injunctive relief prohibiting further eavesdropping and punitive damages, all as provided for under the eavesdropping act.

Count III alleges that the defendants Levine, Haberkorn and Himmelstein, conspired to steal and did steal from the offices of McDonald's numerous privileged, secret and confidential documents. The court further alleges that in furtherance of the conspiracy these three defendants conspired with Matheson to turn the stolen documents and copies therof over to Matheson for his use and publication. The plaintiffs allege the defendants agreed and conspired with each other to fraudulently conceal from McDonald's the fact that they stole and copied the documents. In count IV therefore defendants are charged with receiving, possessing and using the documents stolen from McDonald's when they knew or should have known the documents were stolen. Counts III and IV seek compensatory damages and punitive damages.

Count VI alleges that the theft and use of privileged communications between McDonald's and its attorneys violated McDonald's attorney-client privilege. No appeal is taken from that portion of the circuit court's order dismissing count V of the complaint alleging a violation of McDonald's right to privacy.

The issues before us are: (1) whether counts I and II alleging violatlions of the Illinois eavesdropping act are barred by the running of the statute of limitations found in sections 13 and 14 of the Limitations Act (Ill. Rev. Stat. 1977, ch. 83, par. 14 and 15) and if not, whether a violation occurred of the eavesdropping act (Ill. Rev. Stat. 1977, ch. 38, par. 14-1 et seq.); (2) whether the circuit court erred in dismissing counts I and II which were the claims of Noel Kaplan and Dean Canterbury, on the basis that as employees of McDonald's they are not real parties in interest in and action pursuant to a violation of the eavesdropping statute; (3) whether the court erred in dismissing counts III and IV on the ground that they are compulsory counterclaims under the Federal Rules of Civil Procedure; (4) whether the court erred in ruling that the count VI allegations of tortious interference with the attorney-client privilege failed to state a cause of action; and (5) as to defendant Matheson, whether the court's dismissal of counts II, III, IV, and VI may be sustained on the ground that an attorney has immunity for using or divulging illegally obtained materials in the course of representation of his client in litigation. We affirm the order of the circuit court of Du Page County dismissing counts II, III, IV, and VI, and reverse and remand as to count I.

COUNTS I AND II: LIMITATIONS ISSUE

Defendants argue that the claims in counts I and II alleging violations of the eavesdropping act (Ill. Rev. Stat. 1977, ch. 38, par. 14-1 et seq.) were barred by section 13 of the Limitations Act, which provides that actions for slander and libel or for publication of matter which leads to invasion of privacy must be commenced within one year. (Ill. Rev. Stat. 1977, ch. 83, par. 14.) Defendants contended in their motion that since the last recorded telephone conversation in Illinois known to plaintiffs occurred in March 1977, the complaint should have been filed no later than March 1978. Plaintiffs maintain that the five-year limitation of sections 15 and 22 are the appropriate limitations for the causes of action alleged in counts I and II. Ill. Rev. Stat. 1977, ch. 83, pars. 16 and 23.

• 1 Defendants argue that the one-year limitation of section 13 of the Limitations Act applies because it has been determined that eavesdropping activities can constitute a form of invasion of the right of privacy known as "intrusion upon seclusion." (See Restatement (Second) of Torts sec. 652B, Comment b (1965).) Defendants conclude that section 13 applies to counts I and II because these counts allege an intrusion upon seclusion which is rooted in section 13. Defendants' argument is misplaced since section 13 only applies to actions for slander or libel arising out of a publication of matters violating the right of privacy. (Winrod v. Time, Inc. (1948), 334 Ill. App. 59, 78 N.E.2d 708.) Counts I and II did not allege libel, slander, or publication of private matters and therefore section 13 does not apply.

Alternatively, defendants contend that the two-year statute of limitations of section 14 of the Limitations Act applies. (Ill. Rev. Stat. 1977, ch. 83, par. 15.) Section 14 provides in relevant part:

"Actions for * * * a statutory penalty * * * shall be commenced within two years next after the action accrue[s] * * *." (Emphasis added.) Ill. Rev. Stat. 1977, ch. 83, par. 15.

The circuit court interpreted the Illinois eavesdropping act as constituting a statutory penalty governed by section 14. The court arrived at this conclusion even though it recognized that the eavesdropping act is "more accurately described as a statutory cause of action and not a statutory penalty." The difficulty the circuit court had in reaching its decision to bar counts I and II is apparent from the order itself. After holding that section 14 applies, the court concluded that the provisions of the eavesdropping act are vague stating:

"I have just considered that the usual civil remedies of injunction and actual and punitive damages do not squarely fit the general concept of a `penalty' and that Section 14-6 of the Eavesdropping Act may be more accurately described as creating a statutory cause of action rather than a statutory penalty."

Thus, the circuit court recognized that the eavesdropping act was actually a statutory cause of action rather than a statutory penalty. The difficulty the court experienced in counts I and II within the provisions of the two-year limitations of section 14 is explicitly revealed by the court's criticism of the ambiguity of the eavesdropping act:

"The fault lies in the vagueness of Section 14-6 in failing to provide a limitation."

• 2, 3 A statute is a statutory penalty if it imposes automatic liability for a violation of its terms and the amount of liability is predetermined by the act and imposed without actual damages suffered by the plaintiff. (Hoffman v. Clark (1977), 69 Ill.2d 402, 429.) A statute is remedial when it gives rise to a cause of action to recover compensation suffered by the injured person. (Schaefer v. H.B. Green Transportation Line, Inc. (7th Cir. 1956), 232 F.2d 415, 418.) In M.H. Vestal Co. v. Robertson (1917), 277 Ill. 425, our supreme court held that a statute is remedial and not penal where it imposes liability only when actual damage results from a violation. In such a case, liability is contingent upon damage being proven by ...


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