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Custer v. Cerro Flow Products, Inc.

Court of Appeals of Illinois, Fifth District

April 18, 2018

MARTHA CUSTER, et al., Plaintiffs-Appellees,
CERRO FLOW PRODUCTS, INC.; PHARMACIA CORPORATION, n/k/a Pharmacia LLC; PHARMACIA & UPJOHN COMPANY LLC; SOLUTIA, INC.; MONSANTO COMPANY; PFIZER, INC.; MONSANTO AG PRODUCTS LLC, n/k/a Monsanto Company; and EASTMAN CHEMICAL COMPANY, Defendants (Cerro Flow Products, Inc., Defendant-Appellant; Pharmacia Corporation; Pharmacia & Upjohn Company LLC; Solutia, Inc.; Monsanto Company; Pfizer, Inc.; Monsanto Ag Products LLC; and Eastman Chemical Company, Defendants-Appellees).

          Appeal from the Circuit Court of St. Clair County. No. 09-L-295295, 09-L-309, 09-L-334, 09-L-342, 09-L-404, 09-L-445, 09-L-494, 09-L-508, 09-L-527, 09-L-546, 09-L-558, 09-L-571, 09-L-657, 09-L-659, 09-L-665, 09-L-666, 09-L-669, 09-L-670, 09-L-671, 09-L-672, 14-L-353, 14-L-354, 14-L-357, 14-L-358, 14-L-359, 14-L-363, 14-L-364, 14-L-365, 14-L-366, 14-L-367, 14-L-368, 14-L-369, 14-L-370, 14-L-371, 14-L-372, 14-L-373, 14-L-374, 14-L-375, 14-L-376, 14-L-377, 14-L-378, 14-L-379, 14-L-380, 14-L-381, 14-L-382, 14-L-383, 14-L-384, 14-L-385, 14-L-386, 14-L-387, 14-L-388, 14-L-389, 14-L-390, 14-L-391, 14-L-392, 14-L-393, 14-L-394, 14-L-395, 14-L-396, 14-L-397, 14-L-398, 14-L-399, 14-L-400, 14-L-401, 14-L-402, 14-L-403, 14-L-404, 14-L-405, 14-L-406, 14-L-407, 14-L-408, 14-L-409, 14-L-410, 14-L-411, 14-L-412, 14-L-413, 14-L-414, 14-L-415, 14-L-416, 14-L-417, 14-L-418, 14-L-419, 14-L-420, 14-L-421, 14-L-422, 14-L-423, 14-L-424, 14-L-425, 14-L-426, 14-L-427, 14-L-428, 14-L-429, 14-L-430, 14-L-431, 14-L-432, 14-L-433, 14-L-434, 14-L-435, 14-L-436, 14-L-437, 14-L-438, 14-L-439, 14-L-440, 14-L-441, 14-L-442, 14-L-443, 14-L-444, 14-L-445, 14-L-446, 14-L-447, 14-L-448, 14-L-449, 14-L-450, 14-L-451, 14-L-452, 14-L-453, 14-L-455, 14-L-456, 14-L-458, 14-L-459, 14-L-460, 14-L-461, 14-L-462, 14-L-463, 14-L-464, 14-L-465, 14-L-466, 14-L-467, 14-L-468, 14-L-480, 14-L-567 [*] Honorable Vincent J. Lopinot, Judge, presiding Honorable Andrew J. Gleeson, Judge, presiding.

          Attorneys for Appellant Stephen L. Agin, Mark A. Kircher, Quarles & Brady, LLP, Lindsey T. Millman, E. King Poor IV, Anthony P. Steinike, Quarles & Brady, LLP, Thomas R. Ysursa, Becker, Hoerner, Thompson & Ysursa.

          Attorneys Clyde L. Kuehn, (attorney for Martha Custer, for et al.); Appellees Bruce N. Cook, Bernard J. Ysursa, Cook, Ysursa, Bartholomew, Brauer & Shevlin, Ltd., Charles R. Hobbs II, Patricia L. Silva, Lathrop & Gage, LLP, Robert J. Sprague, (attorneys for Eastman Chemical Co.;Monsanto AG Products LLC; Monsanto Co.; Pfizer, Inc.; Pharmacia & Upjohn Co. LLC; Pharmacia Corp.; Solutia, Inc.)

          JUSTICE CATES delivered the judgment of the court, with opinion. [**]Justices Chapman and Moore concurred in the judgment and opinion.



         ¶ 1 Defendant, Cerro Flow Products, Inc. (Cerro), appeals from orders of the circuit court finding that an aggregate settlement agreement between 11, 546 plaintiffs and defendants- Pharmacia Corporation, now known as Pharmacia LLC; Pharmacia & Upjohn Company LLC; Solutia, Inc.; Monsanto Company; Monsanto AG Products LLC, now known as Monsanto Company; and Eastman Chemical Company (collectively referred to as "Monsanto defendants")-was made in "good faith, " within the meaning of the Joint Tortfeasor Contribution Act (Contribution Act) (740 ILCS 100/0.01 et seq. (West 2014)). For the following reasons, we vacate the good-faith orders and remand this cause for further proceedings consistent with this opinion.

         ¶ 2 I. BACKGROUND

         ¶ 3 This appeal concerns 131 mass tort cases, filed on behalf of 11, 546 plaintiffs, who alleged that they suffered personal injuries and property damage resulting from exposure to hazardous substances and contaminants emitted from three "release sites" in or near the village of Sauget, Illinois. The release sites were identified as (1) a 90-acre landfill site (Sauget landfill), (2) a 314-acre plant operated by one or more of the Monsanto defendants (Monsanto facility), and (3) a parcel of property abutting the Monsanto facility that was owned and operated by Cerro (Cerro facility).

         ¶ 4 The 2009 Cases

         ¶ 5 The litigation began in June 2009, with the filing of 20 cases (collectively referred to as "the 2009 cases") against the Monsanto defendants and Cerro. In most of the cases, there were between 70 and 99 individual plaintiffs joined in a single complaint. A total of 1022 individuals were named as plaintiffs in the 2009 cases.

         ¶ 6 The plaintiffs brought personal injury and property damage claims against the Monsanto defendants and Cerro for allegedly releasing polychlorinated biphenyls (PCBs), dioxins, furans, and other hazardous substances into the environment. More specifically, the plaintiffs alleged that the Monsanto defendants produced, stored, and disposed of PCBs at the Sauget landfill and the Monsanto facility, resulting in the release of the hazardous substances into the environment. The plaintiffs further alleged that Cerro, as part of its recycling operations, scrapped PCB transformers and drained manufacturing waste and PCB oil into a creek, which ran through the Cerro facility, resulting in the release of large quantities of hazardous substances into the environment. The plaintiffs asserted that the hazardous substances were released through emissions, spillage, incomplete incineration of PCBs, improper burning of contaminated waste, improper discharge into surface waters and wastewater systems, and improper disposal. They claimed that the release of these substances created health risks, and contaminated real property, including nearby streams and groundwater, within a two-mile radius of one or more of the release sites ("the affected areas"). The plaintiffs claimed that hazardous substances had been released into the affected areas for more than 70 years and that the defendants actively concealed the health risks and property contamination caused by the release of these substances.

         ¶ 7 The personal injury claims were based on theories of negligence, strict liability/ultrahazardous activity, nuisance, and battery. The plaintiffs alleged they suffered one or more of the following diseases or conditions: diabetes, hypertension, depression, sinusitis, anemia, endometriosis, fibroid tumors, anxiety, gout, heart disorder, arthritis, hysterectomy, diverticulitis, ovarian cysts, thyroid problems, noncancerous tumors, hypercholesterolemia, upper respiratory infection, heart disease, urinary tract infection, asthma, leukemia, chronic bronchitis, congestive heart failure, emphysema, osteoporosis, stomach disease/disorder, pancytopenia, thrombocytopenia, bone diseases, leucopenia, myelodysplasia, migraines, and various forms of cancer.

         ¶ 8 The property damage claims were based on theories of negligence, nuisance, and trespass. The plaintiffs alleged that they suffered injury and damage in the form of "cost to remediate" their real property and "diminution in value" of the real property.

         ¶ 9 On August 3, 2010, the parties informed the trial court that they had entered into a tolling agreement, effective June 18, 2010, which provided for a stay of all nondiscovery issues while they attempted to mediate the contested issues. Pursuant to that agreement, the court ordered a stay of the proceedings. Over the next three years, the parties engaged in mediation. The mediation between the plaintiffs and Monsanto defendants was apparently successful, concluding in November 2014, with a tentative agreement (hereinafter the Settlement Agreement) to settle not only the 2009 cases but also the claims of thousands of other individuals who had not yet filed lawsuits, based upon injuries arising from the same environmental exposure. Cerro was not a party to the proposed settlement, and its mediation efforts with the plaintiffs ended without an agreement.

         ¶ 10 The 2014 Cases

         ¶ 11 On or about June 3, 2014, an additional 111 cases (the 2014 cases), naming more than 10, 000 new plaintiffs, were filed against Cerro. Because of the pending Settlement Agreement, the Monsanto defendants were not sued. The allegations in the 2014 cases were similar to those brought against Cerro in the 2009 cases. The plaintiffs alleged that Cerro released hazardous substances into the environment at the Cerro release site and that, as a direct and proximate result of environmental exposure to those hazardous substances, the plaintiffs suffered injuries "in the form and manner described in Exhibit A." Exhibit A, attached to the complaint, is a table that contains columns with the following headings: "ID, " "Name, " Minimum Number of Years, " "Cancer, " and "Other Conditions." Rows beneath each column contain a unique identification number for each plaintiff, the plaintiff's name, a number indicating the minimum years of alleged exposure, and an "X" marked in the column for either "Cancer" or "Other Conditions."

         ¶ 12 On June 23, 2014, Cerro filed a motion to lift the stay order in the 2009 cases because its mediation efforts with the plaintiffs had been unsuccessful. On July 8, 2014, the trial court issued an initial case management order covering the 2009 cases and the 2014 cases. As part of that order, the court lifted the stay as to the claims made against Cerro in the 2009 cases. The court also permitted the plaintiffs and Cerro to resume discovery and trial preparations for the 2009 cases and the 2014 cases.

         ¶ 13 The Qualified Settlement Fund

         ¶ 14 On August 6, 2015, the plaintiffs in the 2009 cases filed a motion to establish a "Qualified Settlement Fund" and to appoint Lexco Consulting LLC as the administrator of the fund. In the motion, the plaintiffs indicated they had reached a confidential settlement with the Monsanto defendants and thereby resolved the claims of over 11, 000 individuals. They unequivocally stated that this was not a motion for a finding of good faith or a request for an order approving the settlement. The plaintiffs asserted that under the terms of the November 14, 2014, Settlement Agreement, the Monsanto defendants would soon make their first settlement payment. They noted that the exact amount of compensation that each individual would receive had not yet been determined and the exact distribution of settlement funds for compensation, and for subrogation or reimbursement, could not yet be finalized. The plaintiffs asserted that no settlement proceeds would be "set apart" for a particular settling plaintiff or claimant or "otherwise made available so that he or she may draw upon or otherwise control said settlement proceeds, " until such time that a distribution of the settlement proceeds for each settling plaintiff or claimant could be identified.

         ¶ 15 The plaintiffs represented that the Qualified Settlement Fund satisfied pertinent federal regulations and requested a court order finding "that the account and the settlement payment arrangements meet the criteria for a Qualified Settlement Account" under section 468B of the Internal Revenue Code (26 U.S.C. § 468B (2012)) and the corresponding Treasury Regulation (Treas. Reg. § 1.468B-1(c) (2012)). The plaintiffs claimed that the establishment of a Qualified Settlement Fund was beneficial because it would "introduce a degree of breathing space after settlement because the money temporarily parked in the Qualified Settlement Fund is not yet 'constructively received' by any Settling Plaintiff or Claimant, as set forth in Treas. Reg. §1.451-2(a) (26 C.F.R. §1.451-2(a))." The plaintiffs acknowledged that a Qualified Settlement Fund would allow the Monsanto defendants to take a tax deduction for qualified payments to the fund and that the tax benefit could occur before the payment amounts were determined for the individual plaintiffs and claimants.

         ¶ 16 The plaintiffs indicated that in accordance with the provisions of the Settlement Agreement, the Qualified Settlement Fund account would be held in a trust, governed by a trust agreement (Trust Agreement), with plaintiffs' counsel serving as trustees (Trustees). The Trustees would select a fund administrator (Fund Administrator), to whom the Trustees were "empowered to delegate certain functions required to fully comply with the Settlement Agreement or effectuate the purposes of the Trust." The Fund Administrator would also be authorized to distribute all attorney fees and litigation expenses to plaintiffs' counsel. It was noted that plaintiffs' counsel would not be paid a separate fee to serve as Trustees. The plaintiffs requested that the circuit court approve Lexco Consulting LLC (Lexco), an entity located in Birmingham, Alabama, as the Fund Administrator. The plaintiffs represented that Lexco "submits personally to the jurisdiction of the court." Lexco, however, did not provide an affidavit or other document affirming that it would submit to the jurisdiction of the circuit court of St. Clair County. The plaintiffs added, "So long as the Fund Administrator substantially and without negligence complies with the applicable terms of the Settlement Agreement, Trust Agreement, or instructions issued by Trustees regarding distribution and allocating the settlement funds or any applicable Court Order, the Fund Administrator shall be indemnified and held harmless by the Fund." The plaintiffs vowed that after all settlement money had been allocated, the Trustees, with the assistance of the Fund Administrator, would "jointly prepare an accounting detailing all distributions from the Qualified Settlement Fund, " and that this accounting would "be available to the Court upon request." The plaintiffs asserted that if the court entered an order establishing the Qualified Settlement Fund, the court would retain jurisdiction over the fund.

         ¶ 17 On August 6, 2015, the trial court entered an order in the 2009 cases, granting the motion to establish the Qualified Settlement Fund. This order was entered on the same day that the motion was filed, and there is no indication that a hearing was held that day. The court approved Lexco as the Fund Administrator "pursuant to the terms, conditions and restrictions" set forth in the plaintiffs' motion. The court authorized the Fund Administrator "to conduct any and all activities assigned to it by the Trustees which are necessary to administer the Fund" as described in the plaintiffs' motion. The court directed that "the Trustees, with assistance of the Fund Administrator, shall jointly prepare an accounting" detailing all distributions from the Qualified Settlement Fund. The court stated that it "shall retain continuing jurisdiction over the Fund pursuant to Treas. Reg. §1.468B-1(c)(1) and over the Trustees and Fund Administrator."

         ¶ 18 The "Good Faith" Proceedings

         ¶ 19 On March 4, 2016, the plaintiffs in the 2009 cases filed motions requesting that the trial court find that their settlement with the Monsanto defendants was made in good faith, as defined in the Contribution Act, and order the dismissal of those claims with prejudice. In support, the plaintiffs asserted that they "each received certain moneys, and acknowledge receipt of said moneys, and may in the future receive additional moneys, as provided in the settlement agreement." The plaintiffs also asked the court to enter an order discharging any potential liability of the settling defendants to other tortfeasors and barring any and all contribution claims that have been asserted, or could have been asserted, by or against the settling defendants. Finally, the plaintiffs sought an order directing that the Settlement Agreement and each release (hereinafter the Release) be filed under seal. The plaintiffs' motion was set for a hearing on March 29, 2016.

         ¶ 20 On March 22, 2016, Cerro filed a motion to continue the good-faith hearing. Cerro argued that on March 21, 2016, it received 1003 pages of settlement documents covering over 11, 000 plaintiffs and that it needed time to prepare for a hearing involving a "complicated, " "voluminous" settlement. The Monsanto defendants filed a response in opposition to Cerro's motion for a continuance, arguing that "contrary to Cerro's implications, the 'terms' of the settlement agreement could be found in 34 pages of the settlement agreement" and that Cerro participated in mediation and was well aware of the "settlement concept." The Monsanto defendants further argued that the plaintiffs received "money consideration" from the settling defendants and "therefore the agreement is presumed to be in good faith."

         ¶ 21 On March 29, 2016, the parties appeared in court for the hearing on plaintiffs' good-faith motions and Cerro's request for a continuance. Two circuit court judges, Judge Andrew Gleeson and Judge Vincent Lopinot, were assigned to these cases, and they jointly presided over the good-faith hearing.

         ¶ 22 During the hearing, Cerro argued for a continuance, asserting that it had not been given adequate notice of the hearing date and that it had not had sufficient time to review the settlement documents in order to consider its position on the motion for a finding of good faith. Cerro noted that it did not receive the settlement documents until the afternoon of March 21, 2016, and that it was not provided with the individual copies of the Release signed by the plaintiffs. Cerro argued that one of the issues before the court was whether the settlement was "consistent with the purposes of the Contribution Act, which deals with equitable apportionment." Cerro stated that it was not prepared to address that issue without basic information about the settlement. Cerro also argued against a finding of good faith, noting that without the settlement information, such a finding was premature.

         ¶ 23 Plaintiffs' counsel objected to the continuance, arguing, "[n]o set of facts are going to change between now and whenever they want this heard." Counsel also argued that good-faith settlements are normally done "routinely." Counsel for the Monsanto defendants also opposed the continuance, arguing that there is a presumption that settlements are made in good faith. Counsel noted that the Monsanto defendants had paid more than $10 million into a settlement fund, that money had been distributed to the parties by the Fund Administrator, and that the settling defendants have more than 10, 000 copies of the Release signed by individual plaintiffs. He indicated that the copies of the Release could be shown to the court, or to Cerro, "should they be so inclined." Counsel advised the court that an initial amount of money had been distributed equally to all of the plaintiffs and that a fund would be set up "based on testing, disease, and- closeness to the plant that will be distributed blind from Monsanto by an administrator selected by these two mediators who have participated." He argued that there had been "an awful lot of work" by plaintiffs' counsel and, "where money has changed hands, there is a presumption that the settlement is valid." Plaintiffs' counsel then added, "Judge Baricevic *** is the one who approved the payoff of roughly ten million dollars, I don't know, six months ago or four months or whenever it was, and there was no opposition at that time."

         ¶ 24 In response, Cerro's counsel pointed out that Judge Baricevic had entered an order establishing a Qualified Settlement Fund. Counsel recalled that the plaintiffs, in their motion to establish the Qualified Settlement Fund, specifically stated they were not requesting a finding of good faith, or an order approving the settlement. Counsel argued that "to somehow insinuate" that the settlement has been approved is "just not accurate." He noted that Cerro was not presently asserting that the Settlement Agreement was a bad-faith settlement, because it simply did not know. He stated that Cerro was "looking more at equitable apportionment" because "we don't even know what the individual claimants are getting right now."

         ¶ 25 At this point in the proceedings, the judges conferred off the record. Judge Gleeson then announced the ruling from the bench:

"Obviously an interesting, complex case. The Court looks at good-faith findings and good-faith settlements and looks at those in terms of judicial economy. In this particular case-and with that there is a presumption that settlements are in good faith.
Having been involved in this case, both Judge Lopinot and I recognize that this settlement concept has been readily known to the parties for quite some time.
Cerro has participated in the litigation, has participated in the mediation in this particular case. There are no allegations before This Court of any collusion or fraud.
Litigation-our whole judicial system in a sense is premised on the fact that we want to promote settlement before the parties, settlements that, perhaps, are negotiated at arms' length; that each party has a give and take such that it's a value that they can both live with, maybe, perhaps, not the happiness [sic] about but one that's formulated in this particular instance between the parties and between the mediation that took place.
There is a substantial amount of money that's been extended in this settlement. It seems to This Court that it's consistent with the Contribution Act. It seems that it enforces the concept that we want to promote settlement, particularly in complex, extensive, sensitive litigation such as this.
Both Judge Lopinot and I believe that this settlement is in good faith; that the parties have had a reasonable time to contemplate what the settlement meant to each side. As such, we're denying the motion for continuance with respect to this particular matter. We find that this settlement is a-is one that's in the best interest of the parties. We find that it's one that serves judicial economy, and we find that it's in good faith. That will be the order of This Court."

         ¶ 26 Following the court's ruling, Cerro asked, and was allowed, to make a record of its position on good faith. Cerro argued that a decision on good faith was premature because the court does not know "whose [sic] getting what." Counsel observed that there were no provisions in the Settlement Agreement explaining "how the distribution is to be done." Counsel acknowledged that the court had discretion in deciding whether to allow an evidentiary hearing on a good-faith motion and pointed out that there was precedent for evidentiary hearings in cases ...

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