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CE Design Ltd. v. HealthCraft Products, Inc.

Court of Appeals of Illinois, First District, Second Division

May 2, 2017

CE DESIGN LTD., Individually and on Behalf of the Certified Class, as Assignees, Plaintiff, Citation Petitioner, and Counter Citation Respondent-Appellant and Cross-Appellee,
HEALTHCRAFT PRODUCTS, INC., Defendant, ING INSURANCE COMPANY OF ONTARIO, Citation Respondent and Counter Citation Petitioner-Appellee and Cross-Appellant.

         Appeal from the Circuit Court of Cook County No. 03 CH 18105 Honorable Rodolfo Garcia, Judge Presiding.

          JUSTICE PIERCE delivered the judgment of the court, with opinion. Presiding Justice Hyman and Justice Neville concurred in the judgment and opinion.



         ¶ 1 Plaintiff CE Design Ltd. (CE Design), individually and on behalf of the certified class, appeals from an order of the circuit court in a collection case denying CE Design's motion for turnover and its citation to discover assets. CE Design argues the court erred in recognizing the judgment of a Canadian court finding it had jurisdiction over CE Design and that ING Insurance Company of Ontario (ING) had no duty to defend or indemnify against a judgment held by CE Design against its insured, HealthCraft Products, Inc. (HealthCraft). ING obtained a judgment against CE Design in the Canadian proceeding for fees and costs. The circuit court denied enforcement of the Canadian judgment against CE Design finding it unenforceable because it did not comport with Illinois and United States standards of due process. ING cross-appeals. For the following reasons, we affirm the circuit court's dismissal of CE Design's motion for turnover and citation to discover assets against ING and we reverse the circuit court's dismissal of ING's citation to discover assets against CE Design.

         ¶ 2 BACKGROUND

         ¶ 3 CE Design was a company based in Rolling Meadows before it ceased operations in 2010. HealthCraft, a Canadian company with its principal place of business in Ontario, is in the business of supplying home health equipment. ING is a Canadian insurance company licensed in Ontario. ING issued a comprehensive general liability insurance policy to HealthCraft for the relevant time period.

         ¶ 4 On October 29, 2003, CE Design filed a class action complaint in Cook County against HealthCraft alleging that CE Design received unsolicited fax transmissions from HealthCraft on August 12, 2003. HealthCraft was served with the complaint in its Ontario office on December 11, 2003, and tendered its defense to ING on December 23, 2003. ING acknowledged receipt of the tender of defense on January 5, 2004, but stated that it was investigating the claim and it was reserving its rights pending an investigation. HealthCraft retained its own defense counsel and moved to dismiss CE Design's complaint. While the motion to dismiss was pending, HealthCraft and CE Design entered settlement discussions, with the settlement preliminarily approved by the circuit court on December 22, 2004. The settlement provided for a consent judgment against HealthCraft for $543, 500 and the assignment of all of HealthCraft's rights under the ING policy to CE Design; CE Design released HealthCraft from any further liability, agreed not to execute on any of HealthCraft's assets, and would only seek recovery from the ING policy. Neither CE Design nor HealthCraft gave notice of the settlement discussions to ING. ING first received notice that the parties were discussing a settlement agreement on May 13, 2005. Final approval of the settlement agreement and judgment against HealthCraft occurred on June 27, 2006. ING became aware of the terms of the settlement agreement when it received a copy of the circuit court's dismissal order.

         ¶ 5 On May 17, 2005, while the matter was still pending in the circuit court of Cook County, ING filed a declaratory judgment action against HealthCraft in the Ontario Superior Court of Justice. ING alleged that the policy did not cover the claims raised in CE Design's lawsuit against HealthCraft.

         ¶ 6 On July 27, 2006, CE Design initiated third party citation proceedings against ING seeking to enforce the judgment in Cook County. CE served ING in Ontario with its citation to discover assets on July 29, 2006.

         ¶ 7 Sometime thereafter, ING brought a motion to amend its application in the Ontario court to add CE Design as a party respondent and to amend its prayer for relief to seek an order that it was not required to defend or indemnify CE Design or HealthCraft. On October 19, 2006, the Ontario court ordered that CE Design be added as a party respondent to the Ontario action and ordered that CE Design be served with the amended application that was filed on the same day. CE Design was served on November 7, 2006.

         ¶ 8 On November 30, 2006, CE Design through counsel in Ontario, filed a motion to strike ING's amended application contesting the Ontario court's jurisdiction over CE Design and on forum non conveniens grounds. ING filed a motion opposing CE Design's motion on December 15, 2006.

         ¶ 9 On December 29, 2006, ING moved to stay the action pending in Cook County due to the action pending in Ontario. CE Design opposed the motion arguing that it was not subject to the Ontario court's jurisdiction because it had never done business in Ontario. On February 21, 2007, the circuit court granted ING's motion to stay the proceeding pending the outcome of CE Design's motion to dismiss pending in Ontario reasoning that the coverage issues were first joined in Ontario and therefore the Ontario court was best suited to decide the coverage issues.

         ¶ 10 On March 8, 2007, the Ontario court denied CE Design's motion to dismiss ruling that Canadian law applied to the contract between ING and HealthCraft, and the Ontario court had jurisdiction because there was a real and substantial connection with the province of Ontario. The Ontario court further held that CE Design was standing in the shoes of HealthCraft as its assignee, and because HealthCraft is an Ontario company and the contract was entered into in Ontario, Ontario was the convenient forum.

         ¶ 11 On June 30, 2009, the Ontario court decided the merits of the coverage issues and found that ING had no duty to defend HealthCraft and had no duty to indemnify either HealthCraft or CE Design with respect to the judgment obtained by CE Design. The court reasoned that CE Design's claims fell outside of the policy coverage and that HealthCraft breached its duty to cooperate and advise ING. The Canadian court further found that CE Design's claims were barred by the Canadian Insurance Act and ...

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