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Downs v. Rosenthal

Court of Appeals of Illinois, First District, Sixth Division

September 27, 2013

MICHAEL A. DOWNS, Plaintiff-Appellant,
v.
LESLIE ROSENTHAL; J. ROBERT COLLINS; DREADNOUGHT PARTNERS, L.L.C.; and KNOT, L.L.C., Defendants-Appellees (Rosenthal Collins Group, L.L.C., Defendant).

Appeal from the Circuit Court of Cook County No. 04 CH 1129 The Honorable LeRoy K. Martin, Jr., Judge Presiding.

JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Presiding Justice Rochford and Justice Hall concurred in the judgment and opinion.

OPINION

LAMPKIN, JUSTICE.

¶ 1 Plaintiff, Michael A. Downs, appeals the circuit court's order barring him from recovering damages from the individual, nonappealing defendants, Leslie Rosenthal (Rosenthal), J. Robert Collins (Collins), Dreadnought Partners, L.L.C. (Dreadnought), and Knot, L.L.C. (Knot) of the underlying order. Plaintiff contends that this court's opinion reversing the circuit court's original order in favor of plaintiff was limited to the appealing defendant, Rosenthal Collins Group, L.L.C. (RCG), and does not extend to the individual, nonappealing defendants. Instead, plaintiff contends that, because the individual, nonappealing defendants chose not to file an appeal of the circuit court's original final judgment, the order is res judicata and no court had jurisdiction to overturn the order as to them. Based on the following, we affirm.

¶ 2 FACTS

¶ 3 This case appears before us a second time. See Downs v. Rosenthal Collins Group, L.L.C., 2011 IL App (1st) 090970. RCG was a limited liability company (L.L.C.) that hired plaintiff in August of 1997 and terminated plaintiff on January 5, 2004. Collins and Rosenthal were the majority owners of RCG. According to plaintiff, Collins transferred his ownership interest in RCG to Knot in 2003, and Collins owned the controlling interest in Knot. Similarly, Rosenthal transferred his ownership interest in RCG to Dreadnought in 2003, and Rosenthal owned the controlling interest in Dreadnought.

¶ 4 In his third amended complaint, plaintiff asserted five counts all essentially alleging that he had an ownership interest in his former company and was entitled to the resulting profits of the company. Specifically, in count I, plaintiff requested a declaratory judgment that he maintained an ownership interest in RCG and an injunction for an accounting and to "partition his interest from that of defendants Collins, Rosenthal, Knot, and Dreadnought; and/or [require] defendants RCG, Collins, Rosenthal, Knot, and Dreadnought to accord Downs all rights commensurate with his ownership interest including his share of profits." In count II, plaintiff alleged the individual defendants, as majority owners, breached their fiduciary duty owed to plaintiff. In count III, plaintiff alleged RCG breached his employment agreement by failing to make severance payments. In count IV, plaintiff alleged, in the alternative to counts I and II, that RCG breached his employment agreement regarding his 2.5% equity interest. In count V, plaintiff alleged, in the alternative to counts I and II, that RCG breached an oral contract under which plaintiff was to receive an additional 4% equity interest.

¶ 5 On February 6, 2009, the circuit court found that plaintiff held a 2.5% ownership interest in RCG despite not having paid the requisite "book value" for those shares as provided in his employment contract and ordered that he be paid the resulting profit/loss distributions since his termination from the company in 2004. Specifically, during its oral ruling, the circuit court stated:

"I think Mr. Downs is owed two and a half percent of whatever distributions were made for Rosenthal and Collins from January of 2004 to the present.
[T]oday's order shall direct the defendants to convey to Mr. Downs, two and a half percent ownership in the company. They are to pay him two and a half percent of the distributions that were made between January '04 and today, minus the $125, 000 that Mr. Downs owes to them for the acquisition of those shares.
So I think [plaintiff's] damages are whatever Rosenthal and Collins owes him from distributions that were made between January of 2004 and February 6th, 2009. Those are his damages, and he's owed those shares. So at this point, he owns them. Pursuant to my order, he owns those shares. And your client is directed to execute whatever documents are needed or necessary so that a proof of ownership is evidently shown."

On March 20, 2009, the circuit court entered a written order, finding:

"Plaintiff Michael Downs owns a 2.5% equity ownership in defendant RCG (the Rosenthal Collins Group LLC). Downs shall be put in the same position regarding his interest in RCG and distributions there from that he would have held had his 2.5% equity interest in RCG been recognized from January 1, 2004 through the present; the defendants are ordered to pay the foregoing amounts, minus $125, 000 . RCG shall issue the appropriate tax schedule(s) to Downs in conjunction with this payment, providing the same tax treatment to Downs' distributions and allocations as was given to those of Defendants Rosenthal and Collins during the same time period."

RCG and plaintiff both appealed the decision.

¶ 6 While the appeal was pending, plaintiff and RCG entered into an escrow agreement under which RCG deposited $5 million in an escrow account to serve as an appeal bond for the "monetary portion" of the March 20, 2009, order. On May 29, 2009, the circuit court entered an order confirming the escrow agreement and stating that "[d]uring the pendency of the Appeal of this Court's March 20, 2009 Order, neither Downs nor the Defendants shall encumber (outside the ordinary course of business), transfer or otherwise dispose of the 2.5% equity interest in RCG which is the subject of the March 20, 2009 Order and RCG's Appeal of that order on April 16, 2009." In addition, the court's May 29, 2009, order stayed the enforcement of the March 20, 2009, order pending appeal.

¶ 7 On July 14, 2009, the circuit court granted plaintiff's motion allowing for prejudgment interest on his withheld severance pay, his withheld distributions through 2007, and his profit distributions from January 1, 2008, through March 20, 2009.

¶ 8 On May 21, 2010, plaintiff filed citations to discover the assets of the four nonappealing defendants. In response, defendants filed motions to quash the citations. On June 11, 2010, despite acknowledging the "general principal [sic] that if a party fails to take an appeal, once the appeal rights have passed one has a right to collect, pursue collections of the judgment pursuant to citation proceedings, " the circuit court entered an order quashing plaintiff's citations to discover the assets of the individual defendants, finding the May 29, 2009, stay order stayed enforcement of the March 20, 2009, order as to the individual defendants. In so ruling, the circuit court relied on the conduct of plaintiff in terms of waiting 14 months after entry of the March 20, 2009, order and 13 months after the appeal rights would have lapsed to seek citation proceedings, and the language of the escrow agreement ...


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