Appeal from the Circuit Court of Cook County; the Hon. Richard
L. Curry, Judge, presiding.
PRESIDING JUSTICE BUCKLEY DELIVERED THE OPINION OF THE COURT:
Rehearing denied July 31, 1984.
Plaintiff Raymond Dayan *fn1 appeals from two separate orders entered by the trial court — one awarding $1,842,905.38 in attorney fees and expenses to defendant McDonald's Corporation pursuant to section 2-611 of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 2-611) and another awarding the defendant corporation $30,891.55 in costs. These fees and costs were taxed against plaintiff in connection with plaintiff's suit to enjoin McDonald's from terminating his restaurant franchise in Paris, France. After a lengthy trial, the circuit court denied Dayan's request for a permanent injunction and dissolved an existing preliminary injunction, holding Dayan's Paris operations breached the franchise agreement by failing to adhere to McDonald's quality, service, and cleanliness standards (QSC). Subsequently, the trial court entered orders taxing costs, fees and expenses against plaintiff, which resulted in the filing of two separate appeals. These appeals have been consolidated for review in the present case. A separate opinion has been issued in connection with plaintiff's appeal from the trial court's judgment denying the requested injunctive relief. (Dayan v. McDonald's Corp. (1984), 125 Ill. App.3d 972.) In affirming the trial court's judgment with respect to plaintiff's petition for a permanent injunction, we reviewed the history, background, and much of the evidence produced during 65 days of trial and will not repeat that analysis here.
Plaintiff raises the following issues for review: (1) whether the circuit court erroneously awarded fees and expenses pursuant to section 2-611, finding certain allegations of plaintiff's amended petition untrue and made without reasonable cause; (2) whether the trial court erroneously included certain items in its calculation of the section 2-611 award; (3) whether the circuit court erroneously retained jurisdiction to supplement the award of fees and expenses for amounts expended by McDonald's in defense of the appeals before this court; and (4) whether the trial court erred in allowing witness and trial interpreter fees as costs.
Section 2-611, formerly section 41 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 41), permits the taxing of attorney fees and reasonable expenses against a party that pleads untrue statements without reasonable cause, providing in relevant part:
"Allegations and denials, made without reasonable cause and found to be untrue, shall subject the party pleading them to the payment of reasonable expenses, actually incurred by the other party by reason of the untrue pleading, together with a reasonable attorney's fee, to be summarily taxed by the court upon motion made within 30 days of the judgment or dismissal." (Ill. Rev. Stat. 1981, ch. 110, par. 2-611.)
The assessment of attorney fees against a litigant for making false allegations without reasonable cause represents an important and longstanding exception to the general rule that a prevailing party is not ordinarily entitled to recover his litigation expenses. Similar provisions have been part of the statutory law of this State since 1933. However, prior to 1961 the failure of our courts> to apply these sanctions was almost complete. See, e.g., Adams v. Silfen (1951), 342 Ill. App. 415, 96 N.E.2d 628; Palmer v. Gillarde (1941), 312 Ill. App. 230, 38 N.E.2d 352.
The seminal case of Ready v. Ready (1961), 33 Ill. App.2d 145, 178 N.E.2d 650, marked a turning point in the willingness of Illinois appellate courts> to uphold awards of attorney fees and expenses when taxed against a party pleading false statements without reasonable cause. In Ready, the court scrutinized an award of attorney fees against a plaintiff made pursuant to section 41 of the Civil Practice Act (Ill. Rev. Stat. 1959, ch. 110, par. 41). The case was not tried to verdict but was disposed of on defendant's motion to dismiss. On appeal, the plaintiff argued that section 41 should be strictly construed and that since there was no trial an award of attorney fees was improper. The court rejected this argument, specifically holding that any judicial examination of the issues between the parties, whether they be of law or fact, was sufficient to support a section 41 award where the pleadings were later found to be untrue and not filed in good faith. (Ready v. Ready (1961), 33 Ill. App.2d 145, 159-61.) The court further articulated the policy underlying section 41, noting:
"Section 41 is an attempt of the legislative to penalize the litigant who pleads frivolous or false matters or brings a suit without any basis in law and thereby puts the burden upon his opponent to expend money for an attorney to make a defense against an untenable suit. The failure of the courts> to apply the sanction provided in this section of the Practice Act has been frequently criticized by writers in the various law reviews." (33 Ill. App.2d 145, 161-62.)
The court went on to state:
"One of the purposes of section 41 is to prevent litigants being subjected to harassment by the bringing of actions against them which in their nature are vexatious, based upon false statements, or brought without any legal foundation. If the court should hold that such suits could be brought one after the other and if the plaintiff dismissed his suit or suffered an involuntary non-suit before trial the sanction of section 41 would not apply, it would nullify the purpose of the statute." 33 Ill. App.2d 145, 162.
Subsequent cases have frequently quoted the above passages, reiterating and enlarging the holdings in Ready. Thus, many cases have stressed the penal nature of section 41 and the requirement that the application of this section be limited to cases falling strictly within its terms. (Johnson v. La Grange State Bank (1978), 73 Ill.2d 342, 383 N.E.2d 185; Schnack v. Crumley (1982), 103 Ill. App.3d 1000, 431 N.E.2d 1364.) Other cases have noted the remedial aspects of section 41 stated in Ready of protecting a litigant from baseless lawsuits. (Thomas v. Thomas (1974), 23 Ill. App.3d 936, 321 N.E.2d 159; Grandys v. Spring Soft Water Conditioning Co. (1968), 101 Ill. App.2d 225, 242 N.E.2d 454.) It has also been held that section 41 sanctions are appropriate even though the case has been disposed of on motion (Pole Realty Co. v. Sorrells (1981), 84 Ill.2d 178, 417 N.E.2d 1297 (motion to dismiss); Sarelas v. Law Bulletin Publishing Co. (1969), 115 Ill. App.2d 205, 253 N.E.2d 168 (motion for summary judgment)), that the burden is on the movant to show he is entitled to recover under section 41 (Thorsen v. City of Chicago (1979), 74 Ill. App.3d 98, 392 N.E.2d 716), that a separate hearing is dictated where one is necessary to determine whether the section 41 requirements have been met (Grover v. Commonwealth Plaza Condominium Association (1979), 76 Ill. App.3d 500, 394 N.E.2d 1273), and that the allowance of fees and expenses under section 41 is a matter entrusted to the sound discretion of the trial court, whose determination will not ordinarily be disturbed on review (People v. Frieder (1980), 90 Ill. App.3d 116, 413 N.E.2d 432).
A relatively recent amendment to section 41 has further liberalized its application. Prior to 1976, section 41 permitted the assessment of fees and expenses against a party that made allegations or denials "without reasonable cause and not in good faith, and found to be untrue." (Emphasis added.) (Ill. Rev. Stat. 1975, ch. 110, par. 41.) Effective September 1976, the legislature amended the statute, eliminating the requirement that the movant prove the allegations were "not in good faith." (Ill. Rev. Stat. 1977, ch. 110, par. 41.) Subsequent appellate opinions have acknowledged that this deletion reduces the burden on the movant by eliminating the pre-1976 requirement of demonstrating bad faith. (People ex rel. Reliford v. Roberts (1983), 112 Ill. App.3d 351, 445 N.E.2d 482; People v. Frieder (1980), 90 Ill. App.3d 116, 413 N.E.2d 432.) Section 2-611 sanctions are now proper where the moving party demonstrates that his opponent has abused the right of free access to the courts> by pleading untrue statements of fact which he knew or reasonably should have known were untrue. Third Establishment, Inc. v. 1931 North Park Apartments (1981), 93 Ill. App.3d 234, 417 N.E.2d 167.
Applying these principles to the case at bar, we must first determine whether the threshold requirements of section 2-611 have been met. Dayan alleged in both his original and amended verified pleadings that at all times he was in compliance with McDonald's standards of quality, service, and cleanliness which he was contractually obligated to observe under the master licensing agreement. Paragraph 11 of his amended verified petition states:
"At all times, petitioners have complied with the spirit and intent of the agreement and performed the promises in the agreement. Petitioners have complied with all reasonable requests made by McDonald's with respect to the operation of the restaurants consistent with availability in France of equipment, parts and foodstuffs, the laws and regulations of the Republic of France, and customs and tastes of the French public. Petitioners have promptly acted and continue to act promptly to comply with any and all reasonable requests, to change or improve operations, made by defendant. At no time have petitioners been in breach of the master license agreement."
Dayan further alleged in both his original and amended verified pleadings that McDonald's issued the default and termination notices in bad faith for the purpose of wrongfully depriving him of his franchise. Paragraph 14 of his amended verified petition states:
"The notice of default and notice of termination of the master license agreement and refusal to issue further operating licenses were wrongful acts of McDonald's, done by McDonald's in order to wrongfully deprive petitioners of their franchise; in breach of the contractual obligations of McDonald's, including the implied covenants to act in good faith and deal fairly with petitioners."
These allegations created the central issues upon which the case was tried.
The trial court found that the allegations of contract compliance and McDonald's bad faith were untrue and made without reasonable cause. The court stated in its memorandum opinion that "Dayan knew [the allegations] to be false and yet he presented them in a verified pleading." It found that Dayan asserted facts "known to be untrue * * * both at the pleading and the testimony stages" and that plaintiff's case was entirely predicated upon the untrue allegations of compliance and McDonald's bad faith.
The sheer magnitude of the QSC violations revealed at trial clearly demonstrated the falsity of plaintiff's allegations and militates against a finding that these pleadings were made with reasonable cause. The trial court found that Dayan's Paris restaurants were in flagrant violation of McDonald's QSC standards and that Dayan's testimony of compliance was false and calculated to mislead the court. This finding was well supported by the extensive testimony of many witnesses who were present at the various inspections of these restaurants, by laboratory tests of samples taken from the restaurants showing dangerously high bacterial counts, and by 1,072 photographs taken during the restaurant inspections which were admitted into evidence at trial. The size, quality, and character of these QSC violations and the indescribable unsanitary conditions of these restaurants revealed by the evidence of record conclusively demonstrated Dayan's complete disregard of McDonald's QSC standards.
The testimony of plaintiff's witnesses of nearly constant cleaning and servicing for all restaurant areas was obviously false and totally rebutted by defendant's evidence. For example, Dayan's witnesses testified that the toilets were "constantly disinfected" and cleaned every 15 to 20 minutes throughout the day. However, photographic evidence clearly showed urine and excrement covering bathroom floors, toilets and bowls. The walls were littered and covered with accumulations and crusts of dirt and grime.
Dayan's employees testified that crews worked "all night long" cleaning the restaurants and that "refrigerators were emptied, cleaned, and reordered again and filled again." They also claimed that every morning the refrigerators were again cleaned. Photographs revealed that the interiors and exteriors of refrigerators, cold storage areas, and freezers were incredibly filthy, greasy, and smeared with sauces and food. Food products, including moldy sauce, exposed chicken, lettuce and onions, were placed on and under rusty refrigerator shelving. Refrigerator fans, drains, and coils were blackened with dried food, chicken blood and grease residue.
Dayan's employees also testified that food storage areas were cleaned each night and inspected daily by a supervisor and that only minor problems existed "here and there." Again, photographs and testimony established the falsity of this testimony. The walls and ceilings of the food storage area were damp, stained and covered with mold. Mold covered boxes of food products. Exposed crates of lettuce were stacked directly on an open, filthy trash bucket filled with garbage. Open containers of marinated chicken were on filthy pallets next to cleaning fluid. Raw food products were stacked directly on dirty, wet floors. Dogs were kept in some storerooms and dog urine and excrement were found next to stored food. Rat poison was found spilled beside an "oozing" carton of McDonald's sauce.
These examples are illustrative of many others found throughout the 9,800 pages of trial transcript and support the trial court's finding that plaintiff presented false evidence in support of pleadings he knew were false. As the trial court properly surmised, ...