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Board of Trustees of Community College v. LLP

May 05, 1998

BOARD OF TRUSTEES OF COMMUNITY COLLEGE, DISTRICT NO. 508, COUNTY OF COOK, PLAINTIFF,
v.
COOPERS AND LYBRAND LLP, DEFENDANT. ARTHUR ANDERSEN LLP, DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT; RONALD GIDWITZ, TERRY E. NEWMAN, JAMES A. DYSON, THERESA FRAGA, EDWARD W. CZADOWSKI, FERDINAND W. HARGRETT, RALPH G. MOORE, MICHAEL G. MAYO, ROBERT M. WEISSBOURD, ROBERT C. ROGERS, MICHAEL WAGNER AND GARY G. LONQUIST, THIRD-PARTY DEFENDANTS-APPELLEES.



APPEAL FROM THE CIRCUIT COURT COOK COUNTY. No. 95 L 9862 THE HONORABLE DAVID G. LICHTENSTEIN JUDGE PRESIDING.

The opinion of the court was delivered by: Justice Cousins

Third-party plaintiff-appellant Arthur Anderson LLP appeals from the lower court's dismissal of its third-party complaint for contribution against third-party defendants-appellees who are the individual officers and/or members of the Board of Trustees of Community College District No. 508, County of Cook, State of Illinois, commonly known as the City Colleges of Chicago (City Colleges) and employees of the City Colleges. On appeal, Arthur Anderson contends that the trial court erred in dismissing its third-party complaint pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 1992)) because: (1) its claims were not barred by the Illinois Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/1-101 et seq. (West 1992)); (2) the third-party defendants are liable for the same injury as that for which the City Colleges seeks recovery from Arthur Anderson; and (3) the third-party defendants are not identical to the plaintiff.

BACKGROUND

On June 13, 1995, the Board of Trustees of Community College District No. 508 (the Board) filed a complaint against its former auditors, Arthur Anderson LLP (Arthur Anderson) and Coopers & Lybrand LLP (Coopers & Lybrand), alleging professional malpractice, negligent misrepresentation and breach of contract. The Board alleged that the auditors failed to detect and/or report that the City Colleges' treasurer was engaged in illegal, inappropriate and highly risky trading practices and that the treasurer's actions violated Illinois law and the Board's investment policy. The Board further alleged that, had the auditors reported such violations to the Board, subsequent losses in excess of $50 million would have been avoided.

Coopers & Lybrand answered the Board's complaint and asserted affirmative defenses. On November 30, 1995, Arthur Andersen answered and denied the allegations of the complaint and pled counterclaims against individual members of the Board for contribution, breach of fiduciary duty and breach of misrepresentation. On January 10, 1997, Arthur Andersen filed its second amended third-party complaint seeking contribution under the Illinois Joint Tortfeasor Contribution Act (740 ILCS 100/2(a) (West 1992)) from current board members, Ronald Gidwitz, Terry E, Newman, James A, Dyson, Theresa Fraga, Edward W. Czadowski, Ferdinand W. Hargrett, and Ralph G. Moore; former board members Michael N. Mayo and Robert M. Weissbourd; current City Colleges employees Robert C. Rogers, Michael Wagner and Gary C. Lonquist; and former City Colleges employee Leonard Sippel. In count I of its second amended third-party complaint, Arthur Andersen alleged that the third-party defendants were reckless and negligent in supervising the investment activities of the City Colleges' former treasurer. In count II, Arthur Andersen alleged that third-party defendants Rogers and Sippel failed to determine whether the City Colleges' investment portfolio complied with its investment policy and applicable Illinois laws. Arthur Andersen also alleged, in the alternative, that the Board failed to exercise reasonable care in making its own independent determinations as to whether the City Colleges' investments complied with its investment policy and applicable laws. In count III, Arthur Andersen alleged common law fraud against third-party defendants Wagner and Lonquist.

On February 5, 1997, the third-party defendants filed a combined motion to strike and dismiss counts I, II and III of Arthur Andersen's second amended third-party complaint pursuant to section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615 (West 1992))(the Code), and to dismiss counts I and II pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1992)). On June 18, 1997, Arthur Andersen was given leave to withdraw count III of its complaint.

After a hearing on the motions, the trial court mailed to the parties a written order dated June 18, 1997, granting the third-party defendants' motion to dismiss Arthur Andersen's third-party claims for contribution pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 1992)). In its order the trial court stated in pertinent part:

"Plaintiff may not seek contribution from these third-party defendants, for at least three separate reasons:

1) The so-called `third party defendants' are not third parties at all. `They' are the plaintiff. The Board acts through its officers and employees.

2) For a contribution claim to lie the joint tortfeasors must be liable for the `same injury'. Here, the injury complained of by the plaintiff is the failure of Andersen to detect and to bring to the attention of the Board that State investment statutes were being violated. This injury would exist even if the violation of the State investment statute had caused the Board to earn money. *** Andersen's negligence and wanton and wilful conduct claims ignore the question of injury and instead focus on the question of damages. This is insufficient to state a contribution claim.

[Citation.]

3) Notwithstanding a lot of confusing language in Illinois case law about the contribution act [sic] applying in cases where statutory or judicial immunities would defeat a direct action against a party from whom contribution is sought, [citations], public policy considerations require a different result when officials act on behalf of the public, as is here the case with officers and employees of the community colleges system. [Citations.]"

Arthur Andersen now appeals from the trial court's order ...


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