The opinion of the court was delivered by: Justice Miller
Docket No. 88116-Agenda 14-March 2000.
The plaintiff, Du Page Forklift Service, Inc., brought the present action in the circuit court of Cook County to recover damages from the defendant, Material Handling Services, Inc., for its alleged tortious interference with contractual and business relations. The circuit judge dismissed two of the three counts of the plaintiff's complaint, concluding that they were barred by collateral estoppel. The appellate court reversed, holding that the plaintiff was not precluded from bringing the claims. We allowed the defendant's petition for leave to appeal (177 Ill. 2d R. 315(a)), and we now reverse the judgment of the appellate court and affirm the judgment of the circuit court.
Du Page Forklift Service, Inc. (Du Page Forklift), is an Illinois corporation that sells and services forklifts. In 1982, Du Page Forklift entered into a sales and service agreement with Machinery Distribution, Inc. (MDI), a Texas-based corporation that supplies forklifts. Under the agreement, Du Page Forklift was to sell and service Mitsubishi forklifts and related products in what was termed an "area of primary responsibility" that consisted of Du Page County and, later, also of Kane County. In 1992, MDI assigned its rights and responsibilities under the agreement to Mitsubishi Caterpillar Forklift America, Inc. (MCFA), also a Texas-based forklift supplier. In 1994, MCFA terminated its agreement with the plaintiff and entered into a distribution, sales, and services agreement with one of Du Page Forklift's competitors, Material Handling Services, Inc. (MHS), for MHS to sell and service Mitsubishi products in Du Page and Kane counties.
In December 1994, the plaintiff filed suit against both MCFA and MDI in federal court in the Northern District of Illinois. Count I of the plaintiff's four-count complaint alleged breach of contract, contending that the defendants violated an alleged exclusivity provision in the agreement by appointing MHS to the same territory served by Du Page Forklift. Count II of the federal complaint asserted that the plaintiff was a franchisee under an Illinois statute, the Franchise Disclosure Act of 1987 (815 ILCS 705/1 through 44 (West 1996)), and alleged that MCFA violated the Act by terminating its agreement with Du Page Forklift without good cause. Count III of the complaint alleged tortious interference with the plaintiff's business expectancy, and count IV sought a declaratory judgment that Du Page Forklift owed no money to MCFA. MCFA filed its own suit against Du Page Forklift, alleging that Du Page Forklift owed MCFA a total of about $250,000 on a promissory note and for trucks and other equipment Du Page Forklift had received from MCFA. The federal court consolidated the two actions.
MCFA filed a motion to dismiss Du Page Forklift's action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, arguing that the plaintiff failed to state any claims on which relief could be granted. In March 1995, the district court granted in part and denied in part MCFA's motion. The district court dismissed count II, which alleged a violation of the Franchise Disclosure Act of 1987. The court found that the plaintiff failed to sufficiently allege that it was a franchisee within the meaning of the Act. The court dismissed count IV, which sought a declaratory judgment that Du Page Forklift did not owe any money to MCFA. The court also dismissed a portion of count I, not relevant here, but denied the motion with respect to the remainder of that count, the breach of contract claim based on an exclusivity agreement, and denied the motion to dismiss count III, alleging tortious interference. The court's March 1995 order did not specify whether the dismissals were with or without prejudice.
In September 1995, Du Page Forklift filed a motion seeking leave to amend its complaint in the federal action. The proposed amended complaint would have repleaded the dismissed counts, preserved the two remaining counts, and added two new ones; the new counts alleged fraud and a violation of another Illinois statute, the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 through 12 (West 1996)) The district judge denied Du Page Forklift's motion to amend as untimely. The plaintiff later asked the court to amend its March 1995 order to provide that the dismissals were without prejudice. The court denied that motion as well. In denying that request, the district judge took note of the plaintiff's concern that dismissal with prejudice would effectively preclude it from relitigating the same claims in another forum. The court further observed that the plaintiff was free to pursue in another forum the fraud claims it had attempted to raise in the amended complaint.
MCFA filed two motions for summary judgment, with one addressed to Du Page Forklift's action and the other involving its own. In January 1996, the federal court granted MCFA's motion for summary judgment on the counts that remained in Du Page Forklift's suit: count I, alleging breach of a purported exclusivity clause in the contract between Du Page Forklift and MCFA, and on parts of count III, alleging tortious interference with Du Page Forklift's business expectancy. With respect to count I, the district court concluded that the agreement between Du Page Forklift and MCFA did not create a grant of exclusivity. The district court also granted in part MCFA's motion for summary judgment regarding MCFA's separate action, seeking recovery on the promissory note and for other claims. Du Page Forklift and MCFA settled the federal lawsuits in June 1996, when they entered into a stipulation to dismiss both actions with prejudice. The amount of the settlement agreement was not disclosed.
The plaintiff commenced the present action in April 1997 by filing a three-count complaint against MHS in the circuit court of Cook County. Count I of the complaint alleged that MHS tortiously induced MCFA to breach the purported exclusivity provision in Du Page Forklift's contract with MCFA. Count II alleged that MHS tortiously induced MCFA to terminate the contract, in violation of the Franchise Disclosure Act of 1987 (815 ILCS 705/1 through 44 (West 1996)). Count III, which is not at issue in this appeal, alleged tortious interference with the plaintiff's customers.
In September 1997, MHS moved for summary judgment on counts I and II, contending that the doctrine of collateral estoppel barred relitigation of those claims in state court because they were substantially the same as the claims determined in counts I and II of the plaintiff's earlier federal action. The circuit judge agreed with MHS and granted the defendant summary judgment on counts I and II. The trial judge characterized the prior determinations as involving mixed questions of law and fact, and the judge thus found it unnecessary to follow precedent cited by the plaintiff that refused to give collateral estoppel effect to determinations of law. The judge also provided an alternative ground for her ruling with respect to count II, the franchise claim: the judge concluded that the Franchise Disclosure Act does not allow a private right of action against a third party for inducing a violation of the statute. The judge entered a finding under Supreme Court Rule 304(a) permitting the plaintiff to take an immediate appeal from the disposition of counts I and II (155 Ill. 2d R. 304(a)); proceedings on the remaining count, count III, alleging tortious interference with the plaintiff's customers, were stayed pending the appeal.
The appellate court reversed, holding that the circuit court erred in granting MHS summary judgment on counts I and II. The appellate court reasoned that the earlier determinations in the federal action involved issues of law rather than of fact, and the appellate court believed that collateral estoppel may not be applied to determinations of law. The court also found that the matter raised in count II of the present complaint was not resolved in the earlier federal action and therefore was not barred by collateral estoppel in any event. No. 1-98-0783 (unpublished order under Supreme Court Rule 23). We allowed the defendant's petition for leave to appeal (177 Ill. 2d R. 315(a)), and we now reverse the judgment of the appellate court.
Collateral estoppel is an equitable doctrine. When properly applied, collateral estoppel, also referred to as issue preclusion, promotes fairness and judicial economy by preventing the relitigation of issues that have already been resolved in earlier actions. Kessinger v. Grefco, Inc., 173 Ill. 2d 447, 460 (1996). When invoked in subsequent litigation by parties who were not involved in the earlier proceedings, collateral estoppel precludes a plaintiff from relitigating issues by switching adversaries, and it thus provides the plaintiff with an incentive to join all defendants in the first action. In re Owens, 125 Ill. 2d 390, 398 (1988). Collateral estoppel may be applied when the issue decided in the prior adjudication is identical with the one presented in the current action, there was a final judgment on the merits in the prior adjudication, and the party against whom estoppel is asserted was a party to, or in privity with a party to, the prior adjudication. Illinois State Chamber of Commerce v. Pollution Control Board, 78 Ill. 2d 1, 7 (1979).
The appellate court held that the circuit court erred in granting MHS's motion for summary judgment on counts I and II. The appellate court found that the issues resolved in the earlier federal action were ones of law, and the court believed that collateral estoppel may apply only to determinations of fact, and not to those of law. The plaintiff urges us to adopt this rationale. In support of its position, the plaintiff cites other appellate court decisions that similarly appear to limit application of collateral estoppel to factual determinations. See Nokomis Quarry Co. v. Department of Revenue, 295 Ill. App. 3d 264, 267 (1998); City of Chicago v. Chicago Fiber Optic Corp., 287 Ill. 3d 566, 576 (1997); Wright v. Chicago Municipal Employees Credit Union, 265 Ill. App. 3d 1110, 1115 (1994); Oberman v. Byrne, 112 Ill. App. 3d 155, 160 (1983).
The defendant argues that collateral estoppel should apply equally to questions of law and findings of fact and asserts that no reason exists for distinguishing between the two for purposes of applying the doctrine. The defendant points to decisions by the United States Supreme Court and the Illinois appellate court, and to other authorities, as well, that have stated that collateral estoppel may apply both to determinations of law and to determinations of fact. See Montana v. United States, 440 U.S. 147, 153, 59 L. Ed. 2d 210, 217, 99 S. Ct. 970, 973 (1979); Herriford v. Boyles, 193 Ill. App. 3d 947, 954 (1990); Morris v. Union Oil Co., 96 Ill. App. 3d 148, 153 (1981); see also Rekhi v. Wildwood Industries, Inc., 61 F.3d 1313, 1317 (7th Cir. 1995) (noting split among Illinois appellate court decisions on subject and predicting that this court would follow general rule and apply collateral estoppel equally to rulings of law and findings of fact). Thus, the United States Supreme Court has explained, "Under the judicially developed doctrine of collateral estoppel, once a court has decided ...