IN THE APPELLATE COURT OF ILLINOIS THIRD DISTRICT A.D., 1998
Appeal from the Circuit Court for the 18th Judicial Circuit DuPage County, Illinois No. 95--L--97 Honorable C. Stanley Austin Judge, Presiding
The opinion of the court was delivered by: Justice Lytton delivered the opinion of the court:
After filing a complaint that alleged defendants provided defective roofing supplies and repair services, plaintiffs agreed to dismiss their claims against defendant Tamko Roofing Products, Inc. and settled their claims with the remaining defendants. Pursuant to Supreme Court Rule 137 (134 Ill. 2d R. 137), Tamko filed a motion for sanctions against plaintiffs' counsel, Lehrer, Flaherty & Canavan P.C. (LF&C). The trial judge awarded sanctions in the amount of $5000. LF&C appeals. We reverse.
Supreme Court Rule 137 permits a court to impose sanctions against a party or attorney who improperly files a pleading with the court. 134 Ill. 2d R. 137. Rule 137 states:
"The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good-faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. * * * If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, may impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of reasonable expenses incurred because of the filing of the pleading, motion or other paper, including a reasonable attorney fee." 134 Ill. 2d R. 137.
The determination of whether to impose sanctions generally rests within the sound discretion of the trial court, whose decision is entitled to great weight and will not be disturbed on review absent an abuse of discretion. In re Estate of Wernick, 127 Ill. 2d 61, 77-78, 535 N.E.2d 876, 883 (1989); Bennett & Kahnweiler, Inc. v. American National Bank and Trust Co., 256 Ill. App. 3d 1002, 1007, 628 N.E.2d 426, 430 (1993). In this case, the Judge who imposed sanctions neither presided over any aspect of the case while Tamko was a defendant, nor conducted an evidentiary hearing on the motion for sanctions; thus, no deference need be given to the trial court. When a trial Judge bases his decision solely on the same "cold" record that is before the court of review, it is difficult to see why any deference should be afforded to that decision. See North Shore Sign Co. v. Signature Design Group, Inc., 237 Ill. App. 3d 782, 790, 604 N.E.2d 1157, 1163 (1992) ("the predicate to such deference is that the circuit court make explicit factual findings upon which a court of review may make an informed and reasoned decision"). Nevertheless, we find that the imposition of sanctions was erroneous under the abuse of discretion standard.
The pertinent chronology in this case can be summarized as follows. On May 4, 1995, LF&C filed a complaint on behalf of plaintiffs alleging breach of contract, negligence, common law fraud, breach of express warranty, breach of implied warranty, and violations of the Illinois Consumer Fraud and Deceptive Practices Act (815 ILCS 505/1 et. seq. (West 1994). The case was assigned to Judge Robert Lucas.
Defendant Tamko filed a motion to dismiss pursuant to section 2-- 615 of the Illinois Code of Civil Procedure (735 ILCS 5/2--615 (West 1994)). Tamko then agreed to an order that continued its motion and granted plaintiff leave to file an amended complaint. On September 19, the parties appeared in court, plaintiffs were granted additional time to file their amended complaint, and Tamko's motion to dismiss was "stricken by agreement."
On October 19, plaintiffs filed their amended complaint, alleging breach of written warranty, breach of implied warranty, negligence, common law fraud, and violations of the Illinois Consumer Fraud and Deceptive Practices Act (815 ILCS 505/1 et. seq. (West 1994). Defendant Tamko was not included in the negligence count. Tamko filed its answer to amended complaint. In addition to denying many of plaintiffs' allegations, Tamko raised three affirmative defenses: (1) plaintiff's suit was not timely under the terms of Tamko's written limited warranty, (2) Tamko's warranty excluded recovery for consequential and incidental damages, and (3) plaintiffs failed to give reasonable notice pursuant to section 2--607 of the Uniform Commercial Code (810 ILCS 5/2--607 (West 1994)). Another defendant, Suzann Davis, filed a combined motion to dismiss (735 ILCS 5/2--619.1 (West 1994)) and motion for summary judgment (735 ILCS 5/2--1005 (West 1994)). Pursuant to section 2--619 (735 ILCS 5/2--619 (West 1994), defendant Keith Tilden filed a motion to dismiss counts I and II.
Plaintiffs then filed a motion to strike Tamko's affirmative defenses, claiming that the limitations within the warranty were proscribed by federal law. On April 1, the motion to strike Tamko's affirmative defenses was denied; plaintiffs were granted leave to file answers to the affirmative defenses. Tilden's section 2--619 motion was granted in part and denied in part; Davis' combined motion was granted; and plaintiffs were granted leave to file a second amended complaint.
On May 1, plaintiffs filed their second amended complaint, alleging breach of written warranty, breach of implied warranty, negligence, common law fraud, and violations of the Illinois Consumer Fraud and Deceptive Practices Act (815 ILCS 505/1 et seq. (West 1994)). Tamko was named as a defendant only in the two warranty counts.
Two days later, citing "irreconcilable differences" with plaintiffs, LF&C filed motion to withdraw as counsel, which was granted. On May 28, Attorney William F. Haley was granted leave to appear as counsel for plaintiff. Tamko was granted leave to file an answer to second amended complaint. Also, pursuant to Supreme Court Rule 219 (134 Ill. 2d R. 219), Tamko filed a motion to dismiss the case for plaintiffs' failure to adequately respond to defense interrogatories. A hearing was set for a June 25 hearing on Tamko's motion to dismiss. At the hearing, plaintiff stipulated to the dismissal of Tamko as defendant, with prejudice, and agreed to pay Tamko's costs in the amount of $98. In December, pursuant to a settlement agreement, plaintiffs and remaining defendants stipulated to a settlement and dismissal of case.
Three weeks later, Tamko filed a motion for sanctions against LF&C. In January, 1997, for the first time, Judge C. Stanley Austin presided over case, and a hearing on the motion for sanctions was continued. At the subsequent hearing, Judge Austin imposed sanctions against LF&C in the amount of $5000. The Judge found (a) LF&C filed the initial complaint "based upon the lack of what I would consider an appropriate investigation," and (b) "two complaints were dismissed, and ultimately a third one was filed, still leaving this defendant in without any additional discovery being done."
The imposition of sanctions is not to be based on a subjective after-the-fact analysis or hindsight. Washington v. Allstate Insurance Co., 175 Ill. App. 3d 574, 580, 529 N.E.2d 1086, 1090 (1988). Rather, the proper standard for evaluating a party's conduct under Rule 137 is one of reasonableness under the circumstances existing at the time of the filing. Bennett & Kahnweiler, 256 Ill. App. 3d at 1007, 628 N.E.2d at 430. Applying this standard, we ...