Court of Appeals of Illinois, First District, Second Division
WESTWOOD CONSTRUCTION GROUP, INC.; MAGENTA INVESTMENT, LLC; and BENJAMIN ADEBAYO, Plaintiffs-Appellants and Cross-Appellees,
IRUS PROPERTY, LLC, and MICHAEL SACKS, Defendants-Appellees Continuum Capital Funding, LLC; R&C Financial, Inc.; and Rick Martin, Respondents in Discovery-Appellees and Cross-Appellants.
from the Circuit Court of Cook County No. 13 L 9287,
Honorable Eileen O'Neill Burke, Judge Presiding.
JUSTICE delivered the judgment of the court, with opinion.
Justice Simon concurred in the judgment and opinion.
1 In 2013, plaintiffs filed this action against IRUS
Property, LLC (IRUS); Michael Sacks; R&C Financial, Inc.
(R&C); Rick Martin, and Continuum Capital Funding, LLC
(Continuum), in federal court. After plaintiffs' withdrew
the alleged federal claims, the federal district court
dismissed the case for lack of subject matter jurisdiction.
Thereafter, plaintiffs filed this action in the circuit court
of Cook County against IRUS, Sacks, R&C, Martin and
Continuum. The circuit court dismissed the complaint against
all named defendants without prejudice and permitted
plaintiffs leave to replead. In plaintiffs' amended
complaint, R&C, Martin, and Continuum were not named as
defendants but rather they were designated as respondents in
discovery pursuant to section 2-402 of the Code of Civil
Procedure (735 ILCS 5/2-402 (West 2012)). R&C, Martin and
Continuum filed motions to dismiss them as respondents in
discovery and to impose sanctions on plaintiffs pursuant to
Illinois Supreme Court Rule 137 (eff. July 1, 2013). The
circuit court granted the motions to dismiss with prejudice
and denied the motions for sanctions. Plaintiffs appeal the
dismissal with prejudice of R&C, Martin and Continuum as
respondents in discovery from the amended complaint and
R&C, Martin and Continuum cross-appeal the denial of
their motions for sanctions. For the following reasons, we
affirm in part and reverse in part the judgment of the
circuit court and remand for further proceedings.
3 On May 7, 2013, in the United States District Court for the
Northern District of Illinois, plaintiffs, Westwood
Construction Group, Inc. (Westwood); Magenta Investment, LLC
(Magenta); and Benjamin Adebayo, filed suit for breach of
contract and fraud against defendants IRUS, Sacks, R&C,
Martin, and Continuum. Facing a motion to dismiss, plaintiffs
withdrew five of the six counts pled and filed an amended
complaint alleging state law claims only, resulting in a
dismissal with prejudice for lack of federal subject matter
4 On August 19, 2013, plaintiffs filed this action in the
circuit court of Cook County repleading their claims against
defendants IRUS, Sacks, Continuum, R&C, and Martin.
R&C and Martin moved to dismiss the complaint.
Separately, Continuum moved to dismiss the complaint or,
alternatively, for judgment on the pleadings based on an
affidavit by plaintiff Adebayo that was attached to the
complaint. Continuum argued the Adebayo affidavit defeats
plaintiffs' claims. The circuit court, sua
sponte, struck plaintiffs' complaint without
prejudice for failure to sufficiently plead the claims. The
circuit court allowed plaintiffs to replead with the proviso
that "no responsive pleadings will be required until the
court reviews plaintiffs' amended pleading and determines
a responsive pleading is in order."
5 On May 20, 2014, plaintiffs filed an amended complaint
naming IRUS and Sacks as defendants and designated R&C,
Martin and Continuum as respondents in discovery pursuant to
section 2-402 of the Code of Civil Procedure (Code) (735 ILCS
5/2-402 (West 2012)). Section 2-402 of the Code provides in
pertinent part that a "plaintiff in any civil action may
designate as respondents in discovery in his or her pleading
those individuals or other entities, other than named
defendants, believed by the plaintiff to have information
essential to the determination of who should properly be
named as additional defendants in the action." 735 ILCS
5/2-402 (West 2012).
6 On June 17, 2014, R&C, Martin and Continuum filed
separate motions to be dismissed as respondents in discovery
and for sanctions against plaintiffs' counsel pursuant to
Illinois Supreme Court Rule 137 (eff. July 1, 2013). They
argued that section 2-402 only provides procedures for a
plaintiff to designate a person or entity as a respondent in
discovery and later, upon motion, convert the respondent into
a defendant and the plain language of section 2-402 does not
permit a previously named defendant to be designated as a
respondent in discovery in a subsequent amended complaint.
They also argued that this designation was done in bad faith
and Rule 137 sanctions should be imposed on plaintiffs.
7 In a written order, the circuit court dismissed Continuum,
R&C and Martin as respondents in discovery with prejudice
and denied their motions for sanctions. The court found
section 2-402 does not allow a plaintiff to designate a
person or entity as a respondent in discovery after having
previously named them as a defendant in a prior complaint.
The court stated that section 2-402 permits a respondent in
discovery to later become a defendant and is silent on any
other mechanism for redesignation; therefore,
"[p]laintiffs contravene the purpose and thrust of the
rule" by attempting to designate the previously
dismissed defendants as respondents in discovery. Later, the
court entered an order finding that R&C, Martin and
Continuum "are dismissed with prejudice and there is no
just reason for delaying enforcement or appeal."
Plaintiffs timely filed this appeal from the circuit
court's dismissal order and R&C, Martin and Continuum
timely filed a cross-appeal from the order denying their
motions for sanctions.
9 Westwood's Appeal
10 First, plaintiffs argue the trial court erred in
dismissing R&C, Martin and Continuum as respondents in
discovery on the basis that section 2-402 of the Code (735
ILCS 5/2-402 (West 2012)) did not permit plaintiffs to
designate a formerly named defendant as a respondent in
discovery in a subsequent amended pleading. Because this
issue involves the interpretation of a statute our review is
de novo. Bettis v. Marsaglia, 2014 IL
117050 ¶ 12.
11 The Code provides that "[t]he party commencing the
action shall be called the plaintiff. The adverse party shall
be called the defendant." 735 ILCS 5/2- 401(a) (West
2012). A party must state in the body of its pleading the
name of all parties for and against whom relief is sought.
735 ILCS 5/2-401(c) (West 2012). The Code recognizes a third
category: "individuals or other entities, other than
named defendants" that may be designated by the
plaintiff as respondents in discovery where the plaintiff
believes they "have information essential to the
determination of who should properly be named as additional
defendants in the action." 735 ILCS 5/2-402 (West 2012).
Section 2-402 of the Code provides in pertinent part that:
"The plaintiff in any civil action may designate as
respondents in discovery in his or her pleading those
individuals or other entities, other than the named
defendants, believed by the plaintiff to have information
essential to the determination of who should ...