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Dubina v. Mesirow Realty Development

July 26, 2001


The opinion of the court was delivered by: Justice Thomas


Docket No. 88623-Agenda 19-September 2000.

At issue in this case is whether settlement of a tort action for property damage can meet the good-faith requirement of the Joint Tortfeasor Contribution Act (the Act) (740 ILCS 100/2(c) (West 1994)) when the plaintiffs, as a condition of their settlement agreement, assign their causes of action to a group of the settling defendants. The circuit court of Cook County answered this question in the affirmative and concluded that the settlement reached by the parties was in good faith. The appellate court reversed. 308 Ill. App. 3d 348. We granted the settling defendants' petition for leave to appeal. 177 Ill. 2d R. 315. For the reasons that follow, we affirm the judgment of the appellate court.

The dispute which gave rise to this appeal arose from a fire in April of 1989, which destroyed a building that housed several Chicago art galleries. The fire occurred while the building was undergoing extensive renovation. Numerous works of art were destroyed.

In the wake of the fire, owners of the art galleries who leased space in the building, artists who exhibited work in the galleries, and their insurers, brought a total of 35 separate actions containing the damage claims of 112 separate plaintiffs, in the circuit court of Cook County, to recover for property loss. Most of the actions named as defendants the owners and managers of the building, the general contractors hired to do the renovation work, and their subcontractors. The parties to this appeal include the building owner, Mesirow Realty Development (Mesirow); the general contractor, CCL of Chicago, Inc. (CCL); and the subcontractors, Creative Construction, Ltd. (Creative), Economy Mechanical Industries, Inc. (EMI), K&S Automatic Sprinklers (K&S), and Litgen Concrete Cutting and Coring Company, Inc. (Litgen).

As we noted when this case previously was before us (Dubina v. Mesirow Realty Development, Inc., 178 Ill. 2d 496, 499 (1997) (Dubina I)), plaintiffs' complaints alleged, in general, that the various defendants had been negligent in either causing the fire or contributing to the spread of the fire. Defendants filed answers denying liability. Defendants also filed third-party claims for contribution against one another.

Eventually, plaintiffs' actions were consolidated for discovery and trial. Prior to trial, all of the plaintiffs settled with all of the defendants except two: Litgen and Gelick Foran Associates, Inc. (Gelick Foran). Gelick Foran subsequently obtained summary judgment in its favor and is not involved in this appeal.

The settling defendants entered into 29 separate agreements with plaintiffs. Each agreement required plaintiffs to assign their claims against Litgen and Gelick Foran to certain of the settling defendants. Some also named as additional assignees several insurance companies and other nonparties. See 308 Ill. App. 3d at 350-51.

The particular assignees varied from agreement to agreement. In each case, however, the assignees included settling defendants. Under the terms of the agreements, the settling defendants agreed to pay plaintiffs a particular amount in settlement and a separate but equal amount in exchange for the assignment of plaintiffs' causes of action against Litgen and Gelick Foran. The total amount paid for settlement was approximately $4.5 million. An equal amount was paid for the assignments. Pursuant to the agreements, plaintiffs agreed to cooperate with the assignees in the assignees' litigation against Litgen and Gelick Foran, and the assignees agreed to reimburse plaintiffs for the cost of that cooperation.

Over the course of a series of hearings in June and July of 1994, the circuit court found that each of the 29 settlement agreements had been made in good faith within the meaning of section 2(c) of the Act (740 ILCS 100/2(c) (West 1994)). The circuit court found no evidence of collusion or fraudulent conduct, and characterized Litgen's position as "drag[ging] their feet and obstruct[ing] the process." The circuit court noted Litgen's objection to the settling defendants' motion for a good-faith finding, but stated that Litgen's position would not promote compromise or settlement. The trial court also concluded that Litgen was in the same position it would have been in even if there had been no assignment of claims.

The circuit court thereupon entered orders dismissing plaintiffs' claims against the settling defendants and dismissing all of the defendants' contribution claims against one another, including the contribution claims asserted by Litgen. Only plaintiffs' actions against Litgen and Gelick Foran remained.

The settling defendants subsequently substituted their attorneys for plaintiffs' attorneys, and moved for voluntary dismissal of plaintiffs' claims against Litgen and Gelick Foran. Their motion was granted on July 28, 1994. Litgen then appealed, contending that the circuit court should not have found the settlement agreements to have been made in good faith and should not have dismissed its contribution claims.

While Litgen's appeal was pending, the settling defendants, who had taken plaintiffs' claims by assignment, refiled those claims against Litgen in the circuit court. The appellate court thereupon dismissed Litgen's appeal in this case for lack of jurisdiction (Dubina v. Mesirow Realty Development, Inc., 283 Ill. App. 3d 36 (1996)). This court subsequently concluded that the appellate court did have jurisdiction and should not have dismissed Litgen's appeal. We therefore reversed and remanded the cause to the appellate court for further proceedings. Dubina I, 178 Ill. 2d 496.

On remand, Litgen again argued that the circuit court had abused its discretion when it found the settlement agreements had been made in good faith. As grounds for this contention, Litgen asserted that the agreements violated the Act by allowing the settling defendants to seek indirectly a remedy they could not seek directly, namely, contribution. In addition, Litgen claimed that the portion of the settlement funds designated for assignments deprived Litgen of a setoff in that amount. Litgen further claimed that the assignments contravened the public policy behind the Act, which is to encourage settlement and the equitable sharing of damages.

The appellate court agreed with Litgen and reversed the circuit court's finding that the settlement agreements had been made in good faith. Guided by this court's decision in In re Guardianship of Babb, 162 Ill. 2d 153 (1994), the appellate court found the settlement agreements to be antithetical to the Act. 308 Ill. App. 3d at 357. The appellate court concluded that the circuit court had erred in finding the settlements agreements to be in compliance with the Act's good-faith requirement, and also had erred in dismissing Litgen's claims for contribution. 308 Ill. App. 3d at 358.

The settling defendants now appeal the appellate court's decision. Appellate briefs have been filed on behalf of Mesirow, K&S, EMI, and CCL, Creative and Fireman's Fund Insurance Company (hereinafter "the CCL defendants"). The arguments of the settling defendants fall into two general categories: first, that the appellate court erred in relying on Babb because this case is distinguishable from Babb; and second, that even ...

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