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MOLLFULLEDA v. AL PHILLIPS

July 15, 1994

WILLARD MOLLFULLEDA, Plaintiff,
v.
AL PHILLIPS, CHICAGO HEALTH CLUBS, INC., and BALLY'S HEALTH AND TENNIS CORPORATION, Defendants. CHICAGO HEALTH CLUBS, INC. and BALLY'S HEALTH AND TENNIS CORPORATION, Cross-Plaintiffs and Cross-Defendants, v. AL PHILLIPS, Cross-Defendant and Cross-Plaintiff.


NORDBERG


The opinion of the court was delivered by: JOHN A. NORDBERG

Before the Court are Defendant Bally's Motion to Reconsider parts of the Court's decision of April 21, 1994 and Defendant Phillips's "Motion for Leave to Add Cross-Claim for Breach of Contract". *fn1"

 A. Bally's Motion to Reconsider

 Bally requests that the Court reconsider that part of its decision deny the Bally Defendants Motion to Dismiss Count II of Defendant Phillips's Cross-Claim. And, Bally requests that the Court reconsider that part of the opinion permitting Count III of Phillips's Cross-Claim to stand. The Court now turns to these objections.

 1. Count II of Phillips's Cross-Claim

 In Count II of his Cross-Claim, Defendant Phillips seeks indemnification by Bally's pursuant to 805 ILCS 5/8.75 (Smith-Hurd 1993). That section states:

 
To the extent that a director, officer, employee or agent of a corporation has been successful, on the merits or otherwise, in the defense of an action, suit or proceeding . . . or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

 Id. The Court held, on April 21, that this section applied to a successful defense, by Phillips, of the instant action. In reaching that conclusion, the Court held that Phillips did not release an indemnification claim based on this section when he settled a previous action.

 In the settlement of the previous lawsuit between Phillips and Bally's, Phillips signed, on December 1, 1992, a Settlement Agreement and General Release in which he released Bally's, with some exceptions, of all claims against it. The Court previously held that Phillips's statutory indemnification claim fell within one of those exceptions. That exception states, in relevant part:

 
Any claims for contribution, indemnity, liability or the like arising out of any action brought by a third party . . . against either Bally or Phillips which arises out [of] alleged wrongful acts of the other; . . .

 (Settlement Agreement & General Release P 2.c.(4).) Bally's now contends that the Court erred in relying on this section because the Plaintiff's complaint makes no allegations of vicarious liability against Phillips for Bally's conduct. Bally's thus reads section 2.c.(4) to be limited to claims for vicarious liability. The Court disagrees.

 The plain language of section 2.c.(4) permits Phillips to sue for indemnity when his claim is one "arising out of any action brought by a third party" against Phillips "which arises out of alleged wrongful acts of" Bally's. Plaintiff's First Amended Complaint alleges that all of Phillips's actions were taken while he was an "agent, employee, and a representative" of Bally's, that all of his acts were performed within the scope of his employment, and that all of his conduct was for Bally's benefit and with its "express or implied approval, authority, direction, knowledge, consent and ratification." (First Am. Compl. PP 8-10.) The Plaintiff also alleges that Bally's was negligent in monitoring Phillips. While it remains to be resolved whether Bally's alleged negligence constitutes a "wrongful act" under section 2.c.(4), it cannot be disputed that Plaintiff has alleged that Phillips's acts were Bally's acts. And, because this lawsuit arose out of Phillips's acts, under Plaintiff's theory, it also arose out of Bally's acts.

 Bally's reading of section 2.c.(4) apparently places much of emphasis on the terms "of the other", proposing a reading of those terms to mean, vicarious liability only. The language of that section does not necessarily exclude, however, actions by third parties against Phillips when the actions of Phillips and Bally's are one in the same. Given the language of section 2.c.(4), Phillips may be justified in arguing that he did not waive claims for indemnification for acts he took which constitutes the acts of his employer. With respect to Count II, therefore, Bally's motion is denied.

 The Court's conclusion, however, does not change the fact that, under 805 ILCS 5/8.75, Phillips is entitled to indemnification only if he succeeds in his defense. Furthermore, if, on future motion, Bally's can demonstrate that section 2.c.(4) is ambiguous and worthy of a "vicarious ...


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