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Lozman v. Putnam

February 28, 2002

FANE LOZMAN, INDIVIDUALLY, AND BLUE WATER PARTNERS, INC., AN ILLINOIS CORPORATION, PLAINTIFFS-APPELLANTS,
v.
GERALD D. PUTNAM, INDIVIDUALLY, TERRA NOVA TRADING, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, STUART TOWNSEND, INDIVIDUALLY, MARRGWEN TOWNSEND, INDIVIDUALLY, TOWNSEND ANALYTICS, LTD., AN ILLINOIS CORPORATION, CHICAGO TRADING & ARBITRAGE, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, ARCHIPELAGO, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, AND ARCHIPELAGO HOLDINGS, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Justice Hartman

Released for publication and amended April 18, 2002.

FANE LOZMAN, INDIVIDUALLY, AND BLUE WATER PARTNERS, INC., AN ILLINOIS CORPORATION, PLAINTIFFS-APPELLANTS,
v.
GERALD D. PUTNAM, INDIVIDUALLY, TERRA NOVA TRADING, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, STUART TOWNSEND, INDIVIDUALLY, MARRGWEN TOWNSEND, INDIVIDUALLY, TOWNSEND ANALYTICS, LTD., AN ILLINOIS CORPORATION, CHICAGO TRADING & ARBITRAGE, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, ARCHIPELAGO, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, AND ARCHIPELAGO HOLDINGS, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, DEFENDANTS-APPELLEES.

The opinion of the court was delivered by: Justice Hartman

PUBLISHED

Appeal from the Circuit Court of Cook County. Honorable Dorothy K. Kinnaird, Judge Presiding.

 Plaintiffs Fane Lozman and Blue Water Partners, Inc. (Blue Water) appeal the circuit court's denial of their motion to vacate a stay of discovery and the grant of a section 2-615 (735 ILCS 5/2-615 (West 2000) (section 2-615)) motion to dismiss brought by defendants Archipelago, L.L.C. and Archipelago Holdings, L.L.C. (collectively, Archipelago). Plaintiffs assert they pled sufficient facts in the dismissed counts of their complaint to state a cause of action against Archipelago and that the court committed reversible error by denying their motion to vacate the stay of discovery. The issues raised on appeal include whether (1) the court erred by granting Archipelago's section 2-615 motion to dismiss; and (2) the court abused its discretion by denying plaintiffs' motion to vacate the stay of discovery.

On August 9, 1999, plaintiffs filed their initial complaint for damages and injunctive, declaratory and other equitable relief, alleging, inter alia, usurpation of corporate opportunity and breach of joint venture. Certain defendants, including Gerald D. Putnam, Terra Nova Trading, L.L.C. (Terra Nova), Stuart Townsend and Marrgwen Townsend (collectively, the Townsends), Townsend Analytics, Ltd. (Townsend Analytics) and Chicago Trading & Arbitrage, L.L.C. (CTA), moved to dismiss plaintiffs' complaint pursuant to sections 2-615 and 2-619 (735 ILCS 5/2-619 (West 2000) (section 2-619)) of the Code of Civil Procedure (735 ILCS 5/1-101 et seq. (West 2000) (Code)). Archipelago, in a separate motion, moved to dismiss plaintiffs' action under sections 2-613 (735 ILCS 5/2-613 (West 2000) (section 2-613)) and 2-615 of the Code. Also, certain defendants and Archipelago separately moved for a protective order staying discovery. The circuit court granted defendants' motions to dismiss, stayed discovery as to all defendants and granted plaintiffs leave to file an amended complaint.

On December 6, 1999, plaintiffs filed their 22-count, revised amended complaint (hereinafter "amended complaint") *fn1 1 and, shortly thereafter, moved to vacate the stay of discovery. Pertinent to the instant appeal, in count XIV, plaintiffs sought recission, cancellation and reformation of a partial release signed by Lozman and Putnam on October 9, 1995, which released Putnam and Terra Nova from liability, but not Archipelago. Plaintiffs alleged that the partial release was procured by means of constructive fraud and breach of fiduciary duty. Plaintiffs pled that such a partial release between fiduciaries is presumed to be fraudulent. In addition to that presumption, according to plaintiffs, Putnam procured the partial release by not disclosing breaches of fiduciary duties which arose out of his status as an officer of Blue Water and joint venture partner of Lozman. Plaintiffs asserted that as a direct and proximate result of defendants' nondisclosure of material facts and Putnam's receipt of money in his fiduciary capacities that he failed to disclose, Lozman's signature on the partial release and his writing of the word "void" on the April 17, 1995 agreement regarding futures and futures options commissions should be rescinded and cancelled. Certain defendants and Archipelago each moved to dismiss plaintiffs' amended complaint pursuant to sections 2-615 and 2-619 of the Code.

After lengthy argument on the motions, the circuit court made the following oral findings as to: (1) counts I and II, plaintiffs pled sufficient facts to survive the motions to dismiss, noting that plaintiffs alleged more than mere usurpation of suggested ideas; (2) counts III and IV, for similar reasons as to the first two counts, enough facts were pled to survive the motions to dismiss; (3) counts V and VI, dismissed with prejudice; (4) counts VII and VIII, dismissed with prejudice; (5) counts IX and X, dismissed with prejudice because Archipelago did not exist at the time plaintiffs terminated their relationship with Putnam, the Townsends, Townsend Analytics and Terra Nova; (6) counts XI and XII, Archipelago and CTA were dismissed with prejudice because plaintiffs failed to plead facts demonstrating that they were part of any joint venture, but the court denied the motion as to the remaining defendants; (7) count XIII, dismissed with prejudice; (8) count XIV, sufficient facts were pled to allow the recission count to remain, specifically noting that plaintiffs alleged the release was fraudulently obtained; (9) counts XV and XVI, dismissed with prejudice because plaintiffs lacked standing under the statute; (10) count XVII, dismissed with prejudice because plaintiffs lacked standing under the statute; (11) count XVIII and XIX, denied because plaintiffs have pled various facts showing agreements that the parties entered into from which they have yet to receive revenues; (12) count XX, denied because plaintiffs pled sufficient facts illustrating agreements between the parties to transfer ownership; (13) count XXI, all defendants were dismissed with prejudice because an independent cause of action for breach of duty did not exist; and (14) count XXII, Archipelago and CTA were dismissed because Illinois case law supported Archipelago's contention that a corporation cannot conspire with its own agents, but denied the motion as to the remaining defendants.

On March 24, 2000, the circuit court entered a written order granting Archipelago's section 2-615 motion to dismiss counts IX-XII, XVII and XXI-XXII with prejudice, thereby rendering unnecessary consideration of Archipelago's section 2-619 motion. The order also stated that "[t]he dismissal of the Archipelago defendants with prejudice is a final and appealable order pursuant to Supreme Court Rule 304(a)." In addition, on April 19, 2000, the court ordered that the March 24, 2000 order be amended, nunc pro tunc, to read, "[t]he dismissal of the Archipelago defendants with prejudice is a final and appealable order pursuant to Supreme Court Rule 304(a). No just reason exists for delaying either enforcement or appeal or both."

The court also denied plaintiffs' motion to vacate the stay of discovery. Plaintiffs filed a timely notice of appeal.

Plaintiff's amended notice of appeal specifies, among other things, that appeal is taken from the March 24, 2000 order granting defendants' section 2-615 motion to dismiss counts IX through XII, XVII, XXI and XXII, with the appeal being based upon the circuit court's Rule 304(a) finding. Notwithstanding that finding, analysis reveals that the appeal is final only as to counts XI-XII, XVII, XXI and XXII, as shown in the discussion under Part I of this opinion, but not as to counts IX and X, as shown under Part II of this opinion. Separate treatment and result is justified under the principles of judicial economy and efficient administration of justice.

I.

In counts XI and XII of their complaint, plaintiffs sought relief against all defendants for breach of joint venture, which is defined as an association of two or more persons to carry out a single enterprise for profit. Fitchie v. Yurko, 212 Ill. App. 3d 216, 226, 570 N.E.2d 892 (1991). Here, the facts did not show that plaintiffs and Archipelago were associated to carry out a single enterprise for profit, nor did plaintiffs plead facts ...


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