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02/05/88 Jeanne Hopf Et Al., v. Topcorp

February 5, 1988

JEANNE HOPF ET AL., PLAINTIFFS-APPELLANTS

v.

TOPCORP, INC., ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION

527 N.E.2d 1, 170 Ill. App. 3d 85, 122 Ill. Dec. 629 1988.IL.140

Appeal from the Circuit Court of Cook County; the Hon. Robert L. Sklodowski, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE LORENZ delivered the opinion of the court. MURRAY, J., concurs. JUSTICE PINCHAM, Dissenting.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LORENZ

This is an interlocutory appeal, pursuant to Supreme Court Rule 307 (107 Ill. 2d R. 307) from an order which denied plaintiffs request for a mandatory injunction. The action was brought to compel two Illinois for-profit corporations to comply with the provisions of the Illinois Open Meetings Act and the Illinois Freedom of Information Act. (Ill. Rev. Stat. 1985, ch. 102, par. 41 et seq.; Ill. Rev. Stat. 1985, ch. 116, par. 201 et seq. (the Acts).) On appeal plaintiffs contend that defendants have failed to meet their burden in demonstrating that they are not subject to the provisions of the Acts.

The following facts are pertinent to our Disposition. Plaintiffs' motion for a preliminary injunction arose in their action seeking mandamus, declaratory, and injunctive relief to make meetings and documents open to the public pursuant to the Acts. The plaintiffs are citizens, residents, and taxpayers of Evanston, Illinois. The defendants are Topcorp, Inc. (Topcorp), and Research Park, Inc. , for-profit corporations organized pursuant to a statement of understanding dated February 5, 1986, between the City of Evanston (City) and Northwestern University to develop a research park on 22 acres of downtown Evanston property owned principally by the City and Northwestern. RPI is a wholly owned subsidiary of Topcorp.

The plan for the research park originated with Northwestern University, located in Evanston. The purpose of the research park is to offer companies a laboratory and other facilities for basic industrial research. Specifically, according to the statement of understanding, Topcorp and RPI were created to: (1) enhance the tax base of the City; (2) provide jobs for City residents; and (3) encourage new business development. On January 13, 1986, the Evanston city council authorized the City's participation in the development by passing a motion to adopt the statement. In February 1986, after three years of negotiations, the City and Northwestern entered into their statement of understanding.

The negotiation process was exhaustive. Discussions were held between the City and the University in 1982 and again in 1983. In 1982, the City had adopted a 20-year, mixed-use office development plan for downtown Evanston entitled "Downtown II." As part of this redevelopment plan, the City established a plan to pay for public improvements in streets, sewers, and other elements of the infrastructure in the area targeted for redevelopment. In December 1983, Northwestern University offered its land within the Downtown II area for a research park as a joint venture with the City. Northwestern's Basic Industry Research Laboratory , which has since been constructed on Northwestern University's property, was to be the anchor building of the development.

Pursuant to the terms of the statement of understanding, Topcorp and RPI were incorporated as for-profit corporations on June 17, 1986, under the Business Corporation Act of 1983 (Ill. Rev. Stat. 1985, ch. 32, par. 1.01 et seq.). Topcorp was created primarily to purchase the land within the area designated as the research park and make it available for development. Topcorp has 200 shares of capital stock outstanding: 100 shares of class A and 100 shares of class B. The City owns all of the class A shares and Northwestern University owns all of the class B shares. Neither class may sell its shares without the consent of the other. There is no cumulative voting right for the election of directors and each class is entitled to elect three directors to Topcorp's six-member board of directors. The three City-designated Topcorp directors are the Evanston mayor, an alderman, and the City manager.

RPI was created to serve as the operating entity that is responsible for developing the park by negotiating for the sale or lease of the land to developers or users of the property. In addition, RPI has the task of promoting interest in the park, marketing it to prospective tenants, making management and maintenance arrangements, securing site development plans, and otherwise overseeing its operation. RPI issued 100 shares of common stock, all of which is owned by Topcorp. There is no cumulative voting for directors. The RPI board initially consists of 14, and thereafter up to 19, directors. The City and Northwestern University each designated seven initial directors. The City directors are appointed by the mayor with the consent of the city council.

The executive director of RPI is Ronald L. Kysiak, a private citizen whose salary is paid by Evanston Inventure, an entity made up of and funded largely by private local businesses and by a contribution from the City. The directors, who were appointed by the City, are an alderman, who is also chairman of the City's economic development committee, a member of the City's economic development committee, and a former mayor of the City. RPI currently has a staff of seven full- and part-time employees, on loan from Northwestern University. The budget is prepared by this staff. RPI has full control over its employees and retains the right to dismiss them or to hire additional employees. RPI's employees are not paid by Evanston; they are not subject to State regulations regarding public employees; and they are not eligible for State retirement or insurance benefits.

While it is true that the operation of the research park has not been subject to public meetings, its formation was a result of city council approval following a public meeting. The statement of understanding was publicly debated, voted on, and approved by the Evanston city council by a vote of 13 to 5. It was an open meeting in which nearly 50 private citizens spoke with regard to the project. In addition, in March of 1986 a resolution was passed by the city council, at a duly held public meeting, setting forth the criteria for exercising the City's right to elect half of the directors of the Topcorp and RPI boards. Pursuant to that resolution, the mayor, the City manager, and an alderman were to be elected to the Topcorp board. However, the members of the RPI board elected by the City were not limited to public officials.

In October 1986, Topcorp entered into a written agreement with Northwestern University and the City of Evanston to purchase, over time, the various parcels of land that will comprise the research park. This contract was submitted to the Evanston city council for its approval at an open meeting and was then signed. In this agreement, Topcorp agreed to pay the seller, which would be Northwestern University or the City of Evanston, the greater of the parcel's cost to the seller or its appraised value. The agreement further provided that the portion of the research park area that is currently owned by individuals or entities other than Northwestern University or Evanston will be acquired by Evanston either through purchase, eminent domain, or otherwise, and then sold to Topcorp.

While it is anticipated that the private sector will provide the majority of the funding for the actual development of the research park, the initial plans estimate public expenditures of almost $24 million. The testimony adduced below established that current projections indicate that the private sector will contribute $6 toward development for every $1 of public funding. Under the statement of understanding, the City of Evanston and Northwestern University are to equally absorb the operating costs incurred by Topcorp and RPI. In fiscal 1986, Evanston expended $50,000 for such expenses. RPI submitted a $500,000 operating budget to the City for fiscal 1987 and Evanston appropriated its $250,000 share after public debate and approval by the city council.

In February 1987, plaintiff Hopf had made a demand on Joel Asprooth, Evanston city manager and board member of Topcorp, for copies of the minutes of both Topcorp and RPI meetings. Plaintiff received no response to her demand. At a city council meeting on March 9, 1987, an alderman requested that Topcorp and RPI make available to the public minutes of their board meetings. There was never a response to that request. On March 12, 1987, plaintiff made written demands of both Topcorp and RPI for minutes and other documents of the board, committee meetings and other corporate documents. In a letter dated March 17, 1987, RPI refused to comply with these requests.

On April 24, 1987, plaintiffs filed this suit seeking to have Topcorp and RPI declared public bodies subject to the Open Meetings Act and Freedom of Information Act. On plaintiffs' motion for a mandatory preliminary injunction, the circuit court held a hearing and heard the testimony we have summarized. On June 3, 1987, the court denied plaintiffs' motion. On July 6, 1987, plaintiffs filed this interlocutory appeal.

Opinion

As plaintiffs concede, in reviewing a case on a preliminary injunction, we must decide whether the trial court abused its discretion in granting or denying the injunction. (Wilton Mortuary, Inc. v. Woolsey-Wilton Funeral Home, Ltd. (1986), 140 Ill. App. 3d 1074, 489 N.E.2d 319.) Plaintiffs are not entitled to injunctive relief unless they establish by a preponderance of the evidence the following four elements:

"(1) [The] existence of a protectable right, (2) irreparable harm should the injunction not be forthcoming, (3) no adequate remedy at law, and (4) a likelihood of success on the merits." Lindsey v. Board of Education (1984), 127 Ill. App. 3d 413, 418-19, 468 N.E.2d 1019.

With regard to the first element, as listed above, if defendants are found to be a public entity there is no question that plaintiffs have a protectible right. (See People ex rel. Hopf v. Barger (1975), 30 Ill. App. 3d 525, 332 N.E.2d 649.) In addition, it is not just the meetings of defendants that would be subject to the Open Meetings Act. Deliberations would be subject to the provisions of the Acts as well. (People ex rel. Difanis v. Barr (1980), 83 Ill. 2d 191, 414 N.E.2d 731.) As such, plaintiffs clearly have established a protectible right, if defendants are found to be a public entity, insofar as meeting the first element of successful injunction.

With regard to the second element, it is true that if Topcorp is ultimately found to be subject to the Open Meetings Act, the violation thereof is both irreparable and continuing. Additionally, there is no dispute from defendants that the plaintiffs have met their burden with regard to the third element.

The crux of our inquiry lies within the fourth element -- a likelihood of success on the merits. The Illinois Open Meetings Act requires only that public business be conducted publicly. (People ex rel. Difanis v. Barr (1980), 83 Ill. 2d 191, 414 N.E.2d 731.) The purpose of the Act is to "provide disclosure of information about government affairs and its representatives' official acts." (Carrigan v. Harkrader (1986), 146 Ill. App. 3d 535, 496 N.E.2d 1213.) Thus, the question presented is whether Topcorp is, in essence, a public entity performing a public function.

The Illinois Open Meetings Act defines a "public body" to include:

"all legislative, executive, administrative or advisory bodies of the state, counties, townships, cities, villages, incorporated towns, school districts and all other municipal corporations, boards, bureaus, committees or commissions of this State, and any subsidiary bodies of any of the foregoing including but not limited to committees and subcommittees which are supported in whole or in part by tax revenue, or which expend tax revenue, except the General Assembly and committees or commissions thereof." (Emphasis added.) (Ill. Rev. Stat. 1985, ch. 102, par. 41.02.)

The Illinois Freedom of Information Act contains a substantially identical definition of a "public body." See Ill. Rev. Stat. 1985, ch. 116, par. 202(a).

Plaintiff does not claim specifically that defendants Topcorp and RPI constitute legislative, executive, administrative, or advisory bodies of State or local government. Therefore, the relevant consideration is whether the two corporations are "subsidiary bodies" of the City of Evanston as that term is used in both Acts.

The considerations pertinent to the determination of whether an entity is a "subsidiary body" are contained in Rockford Newspapers, Inc. v. Northern Illinois Council on Alcoholism & Drug Dependence (1978), 64 Ill. App. 3d 94, 380 N.E.2d 1192, a case which all parties agree is controlling. The Rockford court found that the legal nature of an entity and the independence of the board of directors and employees of the entity from direct governmental control are extremely significant factors in determining whether an entity constitutes a "subsidiary body." The amount of public funds is also to be considered. However, a large percentage of public funding alone will not create a "subsidiary body"; the court may consider the nature of the financial interest. Finally, the court must look to the degree of government control and the nature of the functions performed by the entity. While general supervision does not transform the supervised company into a subsidiary of the government, substantial, day-to-day supervision might indicate otherwise. Rockford, 64 Ill. App. 3d at 96, 380 N.E.2d at 1193.

Plaintiffs argue that Topcorp is public in nature under the Rockford standards. Specifically, plaintiffs note that the statement of understanding between Evanston and Northwestern University provides for the corporation's creation, establishing its public and private functions, setting up a structure for stock ownership and control by the City. Further, the public membership on defendant's corporations' boards and the public responsibilities of those public members are mandated by a city council resolution. For these reasons, plaintiffs suggest that Topcorp is subject to the Open Meetings Act.

On the other hand, defendants note that both Topcorp and RPI were organized as for-profit corporations, and their respective shareholders intend and hope that the corporations will make a profit. Further, the corporations were designed to implement the proprietary -- as opposed to governmental -- aspects of the development plan. In addition, defendants assert that plaintiffs' contentions regarding the supposed purposes of the corporations confuse the functions of the corporations with motives of one of the two corporate shareholders. While Evanston decided to invest in the corporations because the research park was expected to increase the tax base, create new jobs and encourage business development, its motivation as a shareholder cannot be used to convert the proprietary functions of the corporations into public, governmental functions.

In reviewing the preliminary evidence before it with respect to the factors set out in Rockford, the trial court specifically determined that the formal legal nature of Topcorp and RPI is that they are privately incorporated. The court also determined that the respective corporations' boards and employees are independent of direct governmental control. Further, Evanston's investment in the corporations and Northwestern University's decision to invest therein did not create those privately incorporated entities. The court determined that the principal function of Topcorp was to purchase land from Evanston and Northwestern. RPI's principal function was to oversee the private development of the real estate. While the court below made no specific findings regarding the amount of public funding, the record discloses that it is projected that the private sector will provide the majority of the funding for the actual development of the research park.

As to the degree of governmental control exercised, the trial court found that Evanston's supervision is general in nature, as is Northwestern University's. Specifically, the supervision is intended only to protect the investments made and to see that the venture becomes self-sustaining. The record supports the above determinations. Based on its considerations, the trial court denied the motion for a preliminary injunction. We see no reason to disturb that determination.

Ordinarily, a preliminary injunction serves the purpose of preserving the status quo until the trial court can consider the case on the merits (Hill v. Village of Pawnee (1973), 16 Ill. App. 3d 208, 305 N.E.2d 740); however, granting the injunctive relief sought in this case would alter the status quo. As previously stated, a preliminary injunction is an extraordinary remedy and should be granted with the utmost care. (G. A. Carney, Ltd. v. Brzeczek (1983), 117 Ill. App. 3d 478, 453 N.E.2d 756.) Thus, an order granting or denying a preliminary injunction will not be reversed unless the appellant can show that the entry of the order constituted an abuse of the lower court's discretion. (Lonergan v. Crucible Steel Co. of America (1967), 37 Ill. 2d 599, 229 N.E.2d 536.) While we are prohibited from suggesting the outcome of the ongoing declaratory action below (Lindsey v. Board of Education (1984), 127 Ill. App. 3d 413, 468 N.E.2d 1019), the matter before us is a review of an order denying a motion for preliminary injunction and plaintiffs ...


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