the Chancery Division of the Circuit Court of Cook County. That lawsuit was subsequently removed to this court, and ITEC amended its complaint to name the various hotels. Pursuant to a report and recommendation by Magistrate Judge Pallmeyer, the hotels replaced their individual telecommunications systems, and permitted ITEC to remove its equipment. In September, 1993, ITEC informed defendants, and later confirmed in its submissions to this court, that it would not be proceeding on Counts I through IV of its complaint. Accordingly, the only live count remaining is Count V (breach of contract).
B. Midway Motor Lodge-Elk Grove
Like the defendant hotels in the present lawsuit, Midway Motor Lodge-Elk Grove ("Elk Grove") had a contract with ITEC, whereby ITEC provided Elk-Grove with telephone service. Unlike the other hotels, however, Elk Grove filed for Chapter 11 bankruptcy protection in April, 1992, and is therefore not a party to this action. Because the developments in the bankruptcy proceedings directly impact our consideration of the current summary judgment motion, we will relate them in some detail.
ITEC filed its Notice of Claim in the United States Bankruptcy Court for the Eastern District of Wisconsin, where the Elk Grove bankruptcy was pending, on March 1, 1993. Two weeks later, the debtor-in-possession filed and served its objections to ITEC's claim. On March 31, 1993, the court held a pretrial conference, in which it scheduled a hearing for April 29, 1993. The day before the hearing, Elk Grove requested that the bankruptcy court abstain from estimating ITEC's claim and allow this Court to resolve ITEC's claims against the other Midway hotels. ITEC objected, asserting that it lacked information about Elk Grove's partners' ability to satisfy ITEC's claims, and thus could not rely upon them to do so. The bankruptcy court denied the motion and proceeded with the scheduled hearing.
The court proceedings consisted of both a § 502(c) estimation hearing and a trial on Elk Grove's objections to ITEC's claim.
The proceedings began on April 29, 1993, and concluded on April 30, 1993. In its findings of fact and conclusions of law issued from the bench, the court concluded that ITEC had breached its contract. Specifically, it found that ITEC failed to update the telephone systems and provide state of the art equipment, misled Elk Grove on the "0" commissions, breached with respect to its billing procedures, and was guilty of bad faith with respect to a number of issues. In addition, the court found that ITEC failed to cure any of its defaults, which the court considered to be a material breach. Finally the bankruptcy court concluded that there was no significant default by Elk Grove. Accordingly, the court both estimated and allowed ITEC's claim as follows: a general unsecured prepetition nonpriority claim in the amount of $ 2,956.81 and a postpetition administrative claim in the amount of $ 2,272.97.
The bankruptcy court's ruling was appealed to the United States District Court for the Eastern District of Wisconsin, and that appeal is currently pending.
A. Counts I-IV
ITEC informed this court that it no longer intends to proceed on Counts I-IV. Defendants' summary judgment motion with respect to those counts is therefore moot, and accordingly, is denied.
B. Count V (Breach of Contract)
Defendants first assert that ITEC has failed to state a claim against the management companies, and that they should therefore be dismissed. It is undisputed that the managements companies, Hummert Management Group, Inc. and Midway Hospitality Corporation, had no contracts with ITEC; rather, all of the contracts at issue were entered into between ITEC and the individual hotels. Accordingly, any breach of contract claim, at least to the extent it is directed against Hummert and Midway, must rest upon some other ground than the existence of a contract between ITEC and the management companies.
ITEC asserts that each management company and the hotels that it represents are actually a "single enterprise" under NLRB v. Deena Artware, Inc., 361 U.S. 398, 4 L. Ed. 2d 400, 80 S. Ct. 441 (1960). In support, they argue that the principal officers of the management companies are also part owners of the defendant hotels, and that Midway itself is a part owner of one of the hotels. They further assert that "Hummert and Midway have represented themselves to ITEC as the entities responsible for operations of the hotels which are the subjects of the agreements, and have initiated virtually all of the correspondence to ITEC relating to the agreements . . . ." Finally, they note that William Krause, one of Midway's officers, was the individual who instructed the hotels to disconnect ITEC's maintenance modems, such that ITEC was unable to access its equipment from off-site.
We first observe that the "single enterprise" doctrine cited by ITEC is a test employed by the National Labor Relations Board, and its application has therefore been limited to the labor relations arena. See Esmark, Inc. v. NLRB, 887 F.2d 739, 753 (7th Cir. 1989). ITEC provides no other authority, and thus no relevant authority, for holding the management companies liable for the alleged contract breaches of the defendant hotels. This failure alone is sufficient reason for rejecting ITEC's arguments.
Furthermore, ITEC's failure in this regard is likely due to the absence of any authority, under any theory, for retaining the management companies as parties in this action. Under Illinois law, "jilt is a well-established principle that a corporation is separate and distinct as a legal entity from its shareholders, directors and officers, and, generally, from other corporations with which it may be affiliated." Main Bank of Chicago v. Baker, 86 Ill. 2d 188, 427 N.E.2d 94, 101, 56 Ill. Dec. 14 (Ill. 1981). As a result, "before the separate corporate identity of one corporation will be disregarded and treated as the alter ego of another, it must be shown that it is so controlled and its affairs so conducted that it is a mere instrumentality of another, and it must further appear that observance of the fiction of separate existence would, under the circumstances, sanction a fraud or promote injustice." Main Bank of Chicago, 427 N.E.2d at 101 (emphasis added). ITEC has not even approached such a showing here, and it would therefore be wholly inappropriate to pierce the management companies' corporate veils.
Rather, the facts asserted by ITEC simply demonstrate that the management companies were essentially acting as agents for the hotels, which was, of course, their intended role. It is well established that, where the principal (the hotels) is disclosed, as is the case here, the agent is not liable for the principal's alleged breach of contract. See Restatement (Second) of Agency § 320 (1957). Accordingly, there is no basis for including the management companies as a party in this suit. We therefore grant the defendants' motion to dismiss Hummert Management Group, Inc. and Midway Hospitality Corporation.
Defendants also argue that, based upon the outcome of the Elk Grove bankruptcy trial, ITEC is collaterally estopped from denying that it breached the contracts with the hotels or from denying that its breach excused the hotels from further performance. They therefore seek summary judgment on those issues.
Four elements must be met before collateral estoppel will apply:
1) the issue sought to be precluded must be the same as that involved in the prior action, 2) the issue must have been actually litigated, 3) the determination of the issue must have been essential to the final judgment, and 4) the party against whom estoppel is invoked must be fully represented in the prior action.
Klingman v. Levinson, 831 F.2d 1292, 1295 (7th Cir. 1987) (citations omitted).
Defendants assert that the proceedings in the bankruptcy court meet the above test, and argue that ITEC is therefore estopped from challenging the bankruptcy court's rulings in this action. It is clear that bankruptcy court rulings which fall within the above parameters have preclusive effect. See, e.g., Klingman, 831 F.2d at 1296. Furthermore, the fact that such a ruling is on appeal does not alter this result. See Cohen v. Bucci, 103 Bankr. 927 (N.D. Ill. 1989), aff'd, 905 F.2d 1111 (7th Cir. 1990). Finally, collateral estoppel is appropriate even where the party asserting estoppel was not a party in the previous action, as long as party to be estopped was a party in that action. See Blonder-Tongue Lab., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 349-50, 91 S. Ct. 1434, 28 L. Ed. 2d 788 (1971).
ITEC does not challenge the above statements of law, but instead asserts that the bankruptcy trial at issue here does not meet the test for collateral estoppel. Specifically, ITEC suggests that the bankruptcy court's rulings should not have preclusive effect because they were part of an estimation hearing, and "the estimation of claims in bankruptcy does not establish a binding legal determination of the ultimate validity of a claim nor a binding determination of any issues." In re Bicoastal Corp., 122 Bankr. 771, 775 (Bankr. M.D. Fla. 1990). While we do not take issue with ITEC's assertion regarding the preclusive effect of estimation hearings, it is clear that the proceedings in the bankruptcy court were much more than that. In fact, the bankruptcy judge consolidated the estimation hearing and the actual trial on the merits of Elk Grove's objections to and the allowability of ITEC's claim. As a result, it is readily apparent that the trial on the objections constituted "actual litigation" of the issues raised therein.
ITEC also asserts, however, that even the trial on the objections was insufficient to satisfy the requirements for collateral estoppel. Among other things, ITEC asserts that it was unable to complete all of the discovery it wished to take, given the accelerated time frame, and that the bankruptcy judge strictly limited the amount of time allowed for the trial, and thus the number of witnesses that ITEC could call. ITEC therefore argues that it did not have a full and fair opportunity to litigate the merits of its claim. We first observe that, "in determining whether an issue has been litigated in an earlier case, a full trial on the merits in the earlier action is not an absolute prerequisite." La Preferida, Inc. v. Cerveceria Modelo, S.A. de C.V., 914 F.2d 900 (7th Cir. 1990). As the Seventh Circuit has stated:
The requirement of collateral estoppel that the issue be "actually litigated" does not require that the issue be thoroughly litigated. . . . This requirement is generally satisfied if the parties to the original action disputed the issue and the trier of fact resolved it.