APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE ALBERT GREEN, JUDGE PRESIDING.
Cousins, Jr., Murray, Gordon
The opinion of the court was delivered by: Cousins
JUSTICE COUSINS, JR. delivered the opinion of the court:
On February 6, 1991, following extensive litigation and negotiations between counsel for Cynthia Jefferson, Dennis Jefferson, and other class plaintiffs (Counterplaintiffs) and Security Pacific Financial Services, Inc., Community Bank of Greater Peoria, and Federal Home Loan Mortgage Corp. (Community Bank or Bank), the trial court entered an order approving a class settlement agreement entered into between the parties. The trial court found the agreement to be fair, reasonable, and adequate for the class. It also retained jurisdiction "of all matters relating to the interpretation, administration, effectuation and enforcement of" the settlement agreement.
The trial court approved the construction claim evaluator and the arbitrator. The parties agreed on a set of instructions for the construction claim evaluator, claim forms, and notices to be sent to the claimants. However, a dispute arose in which the Bank alleged that the construction claim evaluator was not following proper procedures. Counterplaintiffs claimed that the Bank was being uncooperative.
On June 23, 1992, counterplaintiffs filed a motion with the court to compel Community Bank's compliance with the settlement agreement. On June 26, 1992, the Bank petitioned the court toremove the construction claim evaluator and to issue a set of supplemental instructions.
On November 2, 1992, the trial court denied the Bank's motion to dismiss the claim evaluator, approved of and allowed use of the Bank's supplemental instructions, directed the construction claim evaluator to apply them, and denied counterplaintiff's motion to compel compliance with the settlement agreement. Counterplaintiffs appeal this order.
The issues presented for review are: (1) whether an arbitration provision contained in a settlement agreement designed to resolve individual claims vitiated the trial court's jurisdiction to hear and determine Community Bank's complaints concerning claim determinations of the claims evaluator, (2) whether the trial court deprived counterplaintiffs of due process with regard to notice and claim forms sent to counterplaintiff class members, (3) whether the trial court properly found the supplemental instructions to be consistent with the class settlement agreement, and (4) whether the trial court abused its discretion by refusing to hold a full evidentiary hearing.
Counterplaintiffs are homeowners who reside in Illinois and Missouri. During the 1980s, Community Bank, made six thousand loans to such people. The loans were originated primarily by a variety of home improvement contractors who presented Community Bank loan documentation to the homeowners.
Counterplaintiffs lodged claims against Community Bank and a number of financial institutions to which the Bank had sold loans asserting that the loans had been induced by unfair and deceptive practices, in violation of the Federal RICO statute, and that Community Bank illegally disclaimed responsibility for defective home improvement work.
Class plaintiff, Rosetta Heastie, filed the initial complaint in Federal court against Community Bank. Proceedings in the original Federal action are found in Heastie v. Community Bank of Greater Peoria (1988), 690 F. Supp. 716 (N.D. Ill.), later proceeding (1989), 125 F.R.D. 669 (N.D. Ill. 1990), summary judgment granted in part in (1989), 727 F.Supp. 1133 (N.D. Ill. 1990) and summary judgment granted in (1990), 727 F. Supp. 1140 (N.D. Ill.).
Community Bank and many loan transferees independently filed additional lawsuits in state court to enforce the loans against the class plaintiffs. In response, many of the class plaintiffs counterclaimed. The various state lawsuits were consolidated at the time of the settlement agreement.
Following extensive litigation and negotiations between counsel for counterplaintiffs and Community Bank, the parties entered into the aforementioned settlement agreement on August 21, 1990.
The trial court initially approved the settlement agreement and certified a settlement class. Notice was sent to the class and a hearing was held. The trial court gave final approval to the settlement agreement on February 6, 1991, in which it found that the notice to the class satisfied the requirements of sections 2-801 through 2-806 of the Illinois Code of Procedure and that the settlement agreement was "within a range that is fair, reasonable and adequate to the class." The court also deemed that it retained, among other things,
"jurisdiction of all matters relating to the interpretation, administration, effectuation and enforcement of this Settlement Agreement." (Emphasis added.)
Pursuant to Article III(E)(11) of the settlement agreement, the trial court approved John Tomassi (Tomassi or construction claim evaluator) to be the construction claim evaluator. Counterplaintiffs had earlier nominated him for this position.
Shortly thereafter, Tomassi began processing the construction claims. Approximately 820 class members submitted construction claim forms in varying degrees of completion: many were returned totally blank other than providing the minimal identification information.
Pertinent here is Article III(D):
"D. Requirements for Construction Benefits: In order to qualify for receipt of a construction claim benefit, each potentially eligible class member must satisfy, in the manner set forth below, the following eligibility requirements:
1. Membership in class: Be a member of the class as defined in Exhibit A.
2. Existence of defect: The work or equipment constructed or installed by the home improvement contractor must have been defective in workmanship and/or materials at the time of construction or installation. Defective or defect shall mean failure to conform to the home improvement contract, including any applicable warranties, applicable building code standards or recognized home improvement industry standards.
3. Complaint or present existence of defect: Within one year of the disbursement of the class member's loan, the class member must have complained, either orally or in writing, to Community, * * * about the construction defect, or the construction defect was the subject of documented inspectionby such an organization within the same time period. This eligibility requirement shall be waived if * * * (ii), from a viewing of the allegedly defective construction work or other physical evidence (such as photographs), it is obvious that such construction work was defective at the time it was performed or installed. These determinations shall be made by the Construction Claim Evaluator.
"the Evaluator must be satisfied that the work or equipment constructed or installed by the home improvement contractor was defective in workmanship and/or materials at the time of construction or installation or that there was a subsequent breach of warranties extending after the time of installation or construction. The Evaluator may base his determination on inspection, photographs, or other evidence submitted by the claimant." Article III(E)(6).
Article III(E)(9) of the settlement agreement provided that:
"from foregoing documents, information and materials, and from a viewing of the premises where deemed appropriate by the Evaluator, the Evaluator shall determine whether the eligibility requirements have been met and, if so, the amount of the construction benefit due the class member. Notice of the Evaluator's determination shall be given to the class member and Community."
In administering the construction claim procedure under the settlement agreement, Tomassi, after receiving a claim form from the putative class member, would initially review the form. If the returned claim form failed to provide threshold information necessary to determine whether the class member had a claim, or if so, whether the class member satisfied the eligibility requirements, Tomassi would send the class member a notice requesting the "missing" information and a form on which to provide the "missing" information. Upon receipt of the response to the Notice of Missing Information, Tomassi would then evaluate the material that had been submitted to him. He also conducted site visits and telephoned class members. Tomassi would then issue his determination on each "claim" and would send notice of same to counterplaintiffs and the Bank.
Community Bank did not agree with this procedure. *fn1 Tomassi agreed to stop processing claims until they had a meeting which was ...