Title: Lutkauskas v. Ricker

State: illinois

Issuer: Illinois Supreme Court

Document:

Illinois Official Reports 
 
Supreme Court 
 
 
Lutkauskas v. Ricker, 2015 IL 117090 
 
 
 
Caption in Supreme 
Court: 
 
ANTHONY LUTKAUSKAS et al., Appellants, v. TIMOTHY 
RICKER et al., Appellees. 
 
 
 
Docket No. 
 
117090 
 
 
 
Filed 
Rehearing denied 
 
 
January 23, 2015 
March 23, 2015 
 
 
 
Held 
(Note: 
This 
syllabus 
constitutes no part of the 
opinion of the court but 
has been prepared by the 
Reporter of Decisions 
for the convenience of 
the reader.) 
 
 
A taxpayer derivative action was properly dismissed for pleadings 
failing to state facts adequate to justify any remedy where, although it 
was alleged that, for lack of a specific school board resolution, funds 
were improperly transferred from a school district’s working cash 
fund in violation of the School Code, there were no allegations that 
any money was stolen, converted, or otherwise spent on anything but 
legitimate school district expenses. 
 
 
 
 
 
Decision Under  
Review 
 
Appeal from the Appellate Court for the First District; heard in that 
court on appeal from the Circuit Court of Cook County, the Hon. Rita 
M. Novak and the Hon. LeRoy K. Martin, Jr., Judges, presiding. 
 
 
 
 
Judgment 
 
 
Affirmed. 
 
 
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Counsel on 
Appeal 
Clinton A. Krislov and John P. Orellana, of Krislov & Associates, 
Ltd., of Chicago, for appellants. 
 
Williams Montgomery & John Ltd., of Chicago (Thomas F. 
Falkenberg, Alyssa M. Reiter and Kirstin B. Ives, of counsel), for 
appellee Knutte & Associates, P.C. 
 
Justino D. Petrarca, Kevin B. Gordon and James A. Petrungaro, of 
Scariano, Himes and Petrarca, Chtrd., of Chicago, for appellees 
Robert Beckwith et al. 
 
Clausen Miller P.C., of Chicago (Melinda S. Kollross, Edward M. 
Kay, Paige M. Neel and Mark J. Sobczak, of counsel), for appellee 
Timothy Ricker. 
 
Wilson Elser Moskowitz Edelman & Dicker LLP, of Chicago 
(Melissa A. Murphy-Petros and Kimberly E. Blair, of counsel), for 
appellee Certain Underwriters at Lloyd’s London. 
 
 
 
Justices 
 
JUSTICE FREEMAN delivered the judgment of the court, with 
opinion. 
Chief Justice Garman and Justices Thomas, Kilbride, Karmeier, 
Burke, and Theis concurred in the judgment and opinion. 
 
 
 
 
 
OPINION 
 
¶ 1 
 
Plaintiffs, resident taxpayers of Lemont-Bromberek Combined School District 113A 
(School District), filed three taxpayer derivative actions on behalf of the School District. 
Plaintiffs sought relief against certain officers and employees of the School District and current 
and former members of its board of education (collectively, the District defendants), alleging2 
that they had improperly transferred money from the School District’s Working Cash Fund, in 
violation of article 20 of the School Code (105 ILCS 5/20-1 et seq. (West 2010)). Plaintiffs 
also sought recovery against the surety that issued the bond for the School District’s treasurer 
and against the accounting firm that performed audits of the School District’s finances during 
the relevant time period. The circuit court of Cook County dismissed all of plaintiffs’ claims, 
and the appellate court affirmed. 2013 IL App (1st) 121112. We allowed plaintiffs’ petition for 
leave to appeal (Ill. S. Ct. R. 315(a) (eff. July 1, 2013)). For the reasons that follow, we affirm 
the judgment of the appellate court. 
 
 
 
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¶ 2 
 
 
 
 
BACKGROUND 
¶ 3 
 
Article 20 of the School Code permits a school district to create and maintain a Working 
Cash Fund to meet expenditures for the school district’s purposes. 105 ILCS 5/20-1 (West 
2010). A Working Cash Fund is funded either through tax levies or by issuance of bonds and is 
designed to ensure that a school district has enough funds on hand to meet its financial 
obligations pending the deposit of tax receipts. 105 ILCS 5/20-2, 20-3, 20-4 (West 2010). 
Section 20-4 specifically authorizes the school board to use money in the Working Cash Fund 
“for any and all school purposes.” 105 ILCS 5/20-4 (West 2010). Section 20-5 authorizes the 
transfer of sums of money from the Working Cash Fund to other funds in accordance with a 
specified procedure that requires passage of a school board resolution directing the school 
treasurer to transfer “such sums as may be required for the purposes *** authorized.” 105 
ILCS 5/20-5 (West 2010). A Working Cash Fund may be either abated or abolished. 105 ILCS 
5/20-8, 20-10 (West 2010). Upon abolishment, the balance remaining in the Working Cash 
Fund is transferred to the Educational Fund and any monies owed the Working Cash Fund are 
to be paid into the Educational Fund. 105 ILCS 5/20-8 (West 2010). 
¶ 4 
 
Section 20-6 prescribes both criminal penalties and civil remedies for willful violations of 
the provisions of article 20. Section 20-6 provides: 
“Any member of the school board of any school district to which this Article is 
applicable, or any other person holding any office, trust, or employment under such 
school district who wilfully violates any of the provisions of this Article shall be guilty 
of a business offense and fined not exceeding $10,000, and shall forfeit his right to his 
office, trust or employment and shall be removed therefrom. Any such member or other 
person shall be liable for any sum that may be unlawfully diverted from the working 
cash fund or otherwise used, to be recovered by such school district or by any taxpayer 
in the name and for the benefit of such school district in an appropriate civil action; 
provided that the taxpayer shall file a bond for all costs and be liable for all costs taxed 
against the school district in such suit, and judgment shall be rendered accordingly. 
Nothing herein shall bar any other remedies.” 105 ILCS 5/20-6 (West 2010). 
¶ 5 
 
In this case, the School District maintained a Working Cash Fund pursuant to the terms of 
article 20. On December 2, 2009, the school board passed a resolution to partially abate the 
fund, and on April 28, 2010, the school board passed a resolution abolishing the Working Cash 
Fund. 
¶ 6 
 
On December 17, 2010, plaintiffs Laura Reigle, Duane Bradley, and Louis Emery filed a 
three-count complaint seeking monetary damages and other relief based on improper transfers 
from the School District’s Working Cash Fund. On that same date, plaintiff Janet Hughes, who 
was represented by the same counsel, filed a separate complaint that was virtually identical to 
that of Reigle, Bradley, and Emery. Both complaints were brought “for and on behalf of” the 
School District and named as defendants several current and former members of the School 
District’s board of education, as well as Timothy Ricker, the School District’s superintendent, 
and Robert Beckwith, the School District’s treasurer. In addition, both complaints sought 
recovery from Knutte & Associates, P.C. (Knutte), the accounting firm that performed 
financial audits for the School District from 2007 through 2010, and from Lloyd’s Illinois Inc. 
(Lloyd’s), the surety company that issued the bond securing the performance of Beckwith. The 
 
 
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two actions filed by Reigle, Bradley, Emery, and Hughes (the original plaintiffs) were 
consolidated. 
¶ 7 
 
Count I of the consolidated action asserted statutory violations against the District 
defendants and alleged that they had willfully violated sections 20-4 and 20-5 of the School 
Code by improperly transferring and spending money from the School District’s Working 
Cash Fund. In particular, plaintiffs claimed that the District defendants’ improper actions 
consisted of the following: failure to pass any resolutions authorizing the transfers, as required 
by section 20-5; failure to reimburse the Working Cash Fund upon receipt of tax revenues; 
expenditure of money in excess of “legal appropriation” and attempt to conceal such 
expenditures; and failure to document the improper transfers and expenditures. 
¶ 8 
 
As relief, count I requested (1) a declaration that the District defendants had forfeited their 
offices and employment with the School District, (2) a monetary judgment in an amount 
sufficient to “make the [School District] whole” and reimburse the funds that were “unlawfully 
diverted” from the Working Cash Fund, and (3) fines assessed pursuant to section 20-6. 
¶ 9 
 
Count II sought recovery from Lloyd’s and alleged that, as surety for Beckwith, it was 
liable for damages suffered by the School District as a result of Beckwith’s failure to faithfully 
discharge the duties of his office. Count II subsequently was voluntarily dismissed, with leave 
to replead against another Lloyd’s entity. 
¶ 10 
 
Count III was directed against Knutte and asserted that the accounting firm was liable 
under section 20-6 of the School Code for accountant negligence. This claim was predicated on 
allegations that, despite knowledge of the District defendants’ alleged statutory violations, 
Knutte issued “clean” audit reports of the School District’s financial statements for the years 
2007 through 2009, which concealed the District defendants’ illegal conduct and resulted in 
substantial losses to the School District. 
¶ 11 
 
The original complaints contained no allegations that any of the School District’s money 
had been stolen, converted, or otherwise spent on anything but legitimate School District 
expenses. 
¶ 12 
 
The District defendants filed a combined motion to dismiss pursuant to section 2-619.1 of 
the Code of Civil Procedure. 735 ILCS 5/2-619.1 (West 2010). With regard to count I, the 
District defendants sought dismissal under section 2-615 of the Code of Civil Procedure (735 
ILCS 5/2-615 (West 2010)) for failure to plead sufficient facts to support a violation of the 
School Code and based on the fact that they had been sued in their individual capacities. The 
District defendants also sought dismissal of count I under section 2-619 (735 ILCS 5/2-619 
(West 2010)) on the grounds that (1) plaintiffs lacked standing to sue under section 20-6 of the 
School Code, which was criminal in nature and did not authorize a private right of action 
absent a predicate criminal conviction, and (2) legislative immunity protected the District 
defendants from liability. In addition, the motion contended that certain of the named 
defendants should be dismissed because none of the factual allegations in the complaints were 
directed at those individuals. 
¶ 13 
 
Knutte filed a combined motion to dismiss count III, seeking dismissal under section 2-615 
for failure to allege facts sufficient to support a claim for accountant negligence. In particular, 
the motion asserted that Knutte did not owe the plaintiffs a duty of care and that Knutte had 
disclosed the information that plaintiffs alleged had been concealed. Knutte also sought 
 
 
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dismissal of count III under section 2-619 on the ground that plaintiffs lacked standing to sue 
under the Illinois Public Accounting Act (225 ILCS 450/30.1 (West 2010)). 
¶ 14 
 
On July 17, 2011, the circuit court granted the motions to dismiss filed by the District 
defendants and Knutte. With regard to the dismissal of count I, the court determined that 
section 20-6 included both criminal and civil actions, with certain remedies reserved for each 
type of action. The court found that section 20-6 authorizes only the State of Illinois to seek 
removal of a public employee from office or imposition of fines for Working Cash Fund 
violations. The court further found that taxpayers who bring suit under section 20-6 on behalf 
of a school district are entitled to seek only recovery of funds for the benefit of the school 
district. Therefore, plaintiffs, as private taxpayers, could not seek removal of any School 
District employee or official from office, nor did they have the right to request imposition of 
fines for School Code violations. In addition, the court held that plaintiffs had not pled 
sufficient facts to support a violation of the Working Cash Fund provisions of the School Code. 
In particular, the court cited plaintiffs’ failure to delineate the wrongful conduct alleged to have 
been committed by each of the 10 District defendants. Accordingly, the court ordered that 
count I be stricken with leave to replead. 
¶ 15 
 
With respect to Knutte’s motion to dismiss count III, the circuit court found that there was 
no basis for liability against the accounting firm. In reaching this conclusion, the court first 
noted that public accountants are not among the list of potential defendants identified in 
section 20-6 of the School Code. In addition, the court observed that there is no privity of 
contract between Knutte and the individual taxpayer plaintiffs who brought the derivative 
action. Consequently, the court dismissed count III with prejudice. At plaintiffs’ request, the 
circuit court entered a finding under Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010) 
that there was no just cause to delay appeal of the dismissal of count III. Plaintiffs did not 
appeal the judgment in favor of Knutte. 
¶ 16 
 
On August 29, 2011, the original plaintiffs filed an amended consolidated complaint, 
asserting two counts against the District defendants. Count I again asserted statutory violations 
and claimed that certain of the District defendants willfully violated sections 20-4 and 20-5 of 
the School Code by causing money to be diverted from the School District’s Working Cash 
Fund without the passage of a resolution or reimbursement. The amended complaint further 
alleged that certain of the District defendants attempted to conceal the allegedly improper 
spending from the Working Cash Fund by using money from other funds and by 
under-budgeting for the School District’s expenses. As relief, plaintiffs again requested a 
declaration that the District defendants had forfeited their offices and employment, imposition 
of fines pursuant to section 20-6 of the School Code, and entry of judgment against the District 
defendants “personally in an amount sufficient to make [the School District] whole and replace 
the public funds *** unlawfully diverted from the Working Cash Fund.” 
¶ 17 
 
The amended complaint also asserted in count IA that the District defendants breached 
their fiduciary duties to the School District. This claim was based on the same conduct 
underlying the statutory violations alleged in count I and sought the same relief. The amended 
complaint contains no allegation that any of the School District’s money was stolen, converted, 
or otherwise spent on anything other than legitimate School District expenses. 
 
 
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¶ 18 
 
Count II of the amended complaint was directed against Underwriters at Lloyd’s, London 
and restated the claim that the surety for Beckwith was liable for damages suffered by the 
School District as a result of Beckwith’s failure to faithfully discharge the duties of his office. 
¶ 19 
 
The amended complaint also included counts III and IV, which were directed against 
Knutte. Count III restated the claim for accountant negligence that had been dismissed with 
prejudice. Count IV asserted a taxpayer derivative action based on allegations similar to those 
underlying the accountant negligence claim. 
¶ 20 
 
Plaintiffs also filed a motion to reconsider the dismissal of count III with prejudice, in 
which they requested leave to file the amended claims against Knutte. The circuit court denied 
that motion and ordered that counts III and IV of the amended complaint be stricken. 
¶ 21 
 
On October 11, 2011, plaintiff Anthony Lutkauskas, who was represented by the same 
counsel as the original plaintiffs, filed a separate complaint against the District defendants, 
Lloyd’s, and Knutte. Lutkauskas’s claims against the District defendants and Lloyd’s were 
virtually identical to the claims asserted by the original plaintiffs in their amended complaint. 
In seeking recovery against Knutte, Lutkauskas’s complaint asserted claims for accountant 
negligence, professional malpractice, breach of fiduciary duty, and aiding and abetting illegal 
conduct by the District defendants. The action filed by Lutkauskas was consolidated with that 
of the original plaintiffs, and all of the defendants sought dismissal of the two pending 
complaints. 
¶ 22 
 
In response to the original plaintiffs’ amended complaint, the District defendants filed a 
combined motion to dismiss asserting several grounds for dismissal, which the circuit court 
ruled would also apply to Lutkauskas’s complaint. Of relevance here, the District defendants 
asserted that the plaintiffs’ claims should be dismissed under section 2-615 of the Code of Civil 
Procedure (735 ILCS 5/2-615 (West 2010)) for failure to plead a prima facie cause of action 
for violation of the School Code or for breach of fiduciary duty. In addition, the motion sought 
dismissal under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2010)) 
because common law legislative immunity and the Local Governmental and Governmental 
Employees Tort Immunity Act (Tort Immunity Act) (745 ILCS 10/2-201 (West 2010)) barred 
plaintiffs’ claims. 
¶ 23 
 
Lloyd’s sought dismissal of the claims against it because no recovery could be had on the 
bond, where Beckwith was not liable for failing to faithfully discharge the duties of his office. 
Knutte moved for dismissal of Lutkauskas’s claims against it on the ground that they were 
barred by the doctrine of res judicata. 
¶ 24 
 
The circuit court found that the complaints were deficient because they failed to allege 
sufficient facts to support a violation of the School Code and because the recovery sought by 
plaintiffs would constitute an impermissible “windfall.” The court further found that plaintiffs’ 
claims were barred by the Tort Immunity Act because the actions attributed to the District 
defendants were discretionary, not ministerial, in nature. Accordingly, the court dismissed the 
claims against the District defendants with prejudice and similarly dismissed the claims 
against Lloyd’s that were predicated on Beckwith’s alleged liability. In addition, the circuit 
court ordered that Lutkauskas’s claims against Knutte be stricken on the ground that they were 
barred by the doctrine of res judicata. 
¶ 25 
 
Plaintiffs appealed, and a divided panel of the appellate court affirmed, holding, inter alia, 
that plaintiffs could not recover against the District defendants based on the assertion that 
 
 
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money from the Working Cash Fund had been “unlawfully diverted.” 2013 IL App (1st) 
121112, ¶¶ 29-34. This conclusion was premised on the determination that an unlawful 
diversion occurs where money is used for a purpose that is not allowed by statute. Id. ¶¶ 30-32. 
The appellate court held that, because plaintiffs did not allege that money transferred from the 
Working Cash Fund was used for an improper purpose, plaintiffs could not show any loss to 
the School District as a result of defendants’ actions. Id. ¶ 32. The appellate court concluded 
that, absent such allegations, “plaintiffs do not otherwise have standing” to seek recovery, on 
behalf of the district, of money that was transferred from the Working Cash Fund without a 
board resolution. Id. ¶ 34. The appellate court further held that plaintiffs’ breach of fiduciary 
duty claims failed for a similar reason. Id. ¶ 35. The appellate court also affirmed the dismissal 
of the claims against Lloyd’s (id. ¶ 36) and the finding that Lutkauskas’s claims against Knutte 
were barred by res judicata (id. ¶¶ 39-49). 
¶ 26 
 
The dissenting justice expressed the opinion that, considering the dearth of precedent 
analyzing the relevant School Code provisions, plaintiffs should be allowed to amend their 
complaints and move forward with discovery. Id. ¶¶ 55, 79-81 (Pucinski, J., dissenting). This 
appeal followed. 
 
¶ 27 
 
 
 
 
ANALYSIS 
¶ 28 
 
 
 
I. Dismissal of the Claims Against the District Defendants and Lloyd’s 
¶ 29 
 
Plaintiffs first contend that the circuit court erred in dismissing their statutory violation and 
breach of fiduciary duty claims against the District defendants. The District defendants’ 
motions to dismiss were brought pursuant to section 2-619.1 of the Code of Civil Procedure, 
which allows a party to move for dismissal under both sections 2-615 and 2-619. 735 ILCS 
5/2-619.1 (West 2010). A section 2-615 motion to dismiss attacks the legal sufficiency of a 
complaint. Carr v. Koch, 2012 IL 113414, ¶ 27. A motion brought pursuant to section 2-619 
admits the sufficiency of the complaint, but asserts an affirmative defense or other matter that 
avoids or defeats that claim. Id. This court’s review of a dismissal under either section 2-615 or 
section 2-619 is de novo. Id. Also, because resolution of this issue involves statutory 
construction, our review is de novo. Nelson v. Kendall County, 2014 IL 116303, ¶ 22. 
¶ 30 
 
Plaintiffs argue that, based on the plain language of section 20-6, their claims against the 
District defendants adequately alleged violations of article 20 of the School Code and should 
not have been dismissed for insufficient pleading. Defendants respond by arguing that 
plaintiffs lack standing to sue derivatively on behalf of the School District because it is 
undisputed that the School District has not suffered any injury in fact. 
¶ 31 
 
In resolving this issue, we initially observe that, because a plaintiff can sustain a cause of 
action only where he or she has suffered some injury to a legal right, harm caused by the 
defendant’s conduct is an essential element of every cause of action. Williams v. Manchester, 
228 Ill. 2d 404, 426 (2008); Reuter v. MasterCard International, Inc., 397 Ill. App. 3d 915, 927 
(2010); 1A C.J.S. Actions § 59 (2005). As a consequence, an allegation that the plaintiff has 
suffered an injury resulting from the defendant’s action is both a pleading requirement (Reuter, 
397 Ill. App. 3d at 928; 71 C.J.S. Pleading § 116 (2005)) and a prerequisite of standing (Powell 
v. Dean Foods Co., 2012 IL 111714, ¶ 35). In this case, regardless of whether a failure to 
satisfy this requirement is characterized as a lack of standing or a pleading deficiency, the 
relevant question presented is whether section 20-6 obligated plaintiffs to assert that the money 
 
 
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transferred from the Working Cash Fund had been used for an improper purpose and resulted 
in an actual loss to the School District. 
¶ 32 
 
A taxpayer derivative suit is brought for the benefit of a governmental entity to enforce a 
cause of action belonging to that entity. Scachitti v. UBS Financial Services, 215 Ill. 2d 484, 
494 (2005). In such an action, the claimed loss is not personal to the taxpayer, but is the injury 
sustained by the governmental entity for whose benefit the action is brought. Id. In the absence 
of resultant damage, there can be no cause of action premised on the violation of a statute. 1A 
C.J.S. Actions § 59 (2005). 
¶ 33 
 
As noted above, plaintiffs’ claims that asserted statutory violations were brought pursuant 
to section 20-6 of the School Code and sought to impose personal liability on the District 
defendants for improper transfers from the Working Cash Fund. Section 20-6 of the School 
Code provides, in relevant part, as follows: 
“Any member of the school board of any school district to which this Article is 
applicable, or any other person holding any office, trust, or employment under such 
school district who wilfully violates any of the provisions of this Article *** shall be 
liable for any sum that may be unlawfully diverted from the working cash fund or 
otherwise used, to be recovered by such school district or by any taxpayer in the name 
and for the benefit of such school district in an appropriate civil action ***.” 105 ILCS 
5/20-6 (West 2010). 
¶ 34 
 
On appeal, plaintiffs contend that the phrase “unlawfully diverted” in section 20-6 refers to 
any sum that has been transferred from the Working Cash Fund without the passage of a board 
resolution and subsequent reimbursement, as required by sections 20-4 and 20-5. According to 
plaintiffs, the failure to follow the procedural mechanisms detailed in those sections renders a 
Working Cash Fund transfer unlawful and necessarily means that the transferred money has 
been “unlawfully diverted.” Plaintiffs argue that a civil action brought pursuant to section 20-6 
need not allege that the transferred money was used for an improper purpose. 
¶ 35 
 
In response, the District defendants argue that the dismissal of plaintiffs’ claims against 
them was proper in light of the fact that plaintiffs did not, and could not, allege that the 
transferred funds had been used for an improper purpose. According to the District defendants, 
the failure to comply with the procedural requirements for Working Cash Fund transfers is 
insufficient to allege a cause of action under section 20-6, unless the plaintiff has also alleged 
that the transferred money was used for an unauthorized purpose. Therefore, the narrow 
question presented here is whether the terms of section 20-6 require a plaintiff to allege that 
improperly transferred funds were used for an invalid purpose in order to plead a violation 
under that section. 
¶ 36 
 
Our primary objective in construing a statute is to ascertain and give effect to the intent of 
the legislature. Nelson, 2014 IL 116303, ¶ 23. The best evidence of legislative intent is the 
language of the statute itself, which must be given its plain, ordinary and popularly understood 
meaning. Id. Clear and unambiguous language will be enforced as written. Hines v. 
Department of Public Aid, 221 Ill. 2d 222, 230 (2006). In addition, a court may consider the 
reason for the law, the problems sought to be remedied, the purposes to be achieved, and the 
consequences of construing the statute one way or another. Chicago Teachers Union, Local 
No. 1 v. Board of Education of the City of Chicago, 2012 IL 112566, ¶ 15. Moreover, courts 
will presume that the legislature did not intend to enact a statute that leads to absurdity, 
 
 
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inconvenience, or injustice. Land v. Board of Education of the City of Chicago, 202 Ill. 2d 414, 
422 (2002). 
¶ 37 
 
According to the terms of section 20-6, the board members, officials, and employees of a 
school district who willfully violate the provisions of article 20 of the School Code “shall be 
liable for any sum that may be unlawfully diverted from the working cash fund.” 105 ILCS 
5/20-6 (West 2010). Although the phrase “unlawfully diverted” is not defined in the statute, 
this court’s long-standing precedent demonstrates that phrase has a settled meaning. As 
observed by the appellate court, we have consistently held that “unlawful diversion” of funds 
contemplates that such funds have been used for an improper purpose that is not authorized by 
statute. In Gates v. Sweitzer, 347 Ill. 353 (1932), we held that “[m]unicipal officers have no 
right to divert moneys from one fund to another and different fund for which it was not 
appropriated. But the word ‘divert’ is used in the sense of turning such fund permanently from 
its purpose or the final appropriation of it to some other use.” Id. at 359; see also Michaels v. 
Barrett, 355 Ill. 175, 185-86 (1934). Based on this reasoning, we held in People ex rel. Brenza 
v. Gilbert, 409 Ill. 29 (1951), that an improper diversion of funds occurred where funds were 
used for a different purpose than that allowed by statute. Id. at 37. We further noted, however, 
that a plaintiff who seeks to recover funds that have been “unlawfully diverted” must have 
suffered damage. Id. at 38 (stating that the objection to a tax was properly overruled “in view 
of the fact that [tax objector] is not and cannot be damaged”). We reached the same conclusion 
in People ex rel. Redfern v. Penn Central Co., 47 Ill. 2d 412 (1971). At issue in Redfern was 
the validity of the transfer of money from a school district’s education fund to the Illinois 
municipal retirement fund. Id. at 414. Relying on the cases cited above, we held that the 
transfer constituted an “unlawful diversion” because the statute did not authorize loans 
between the two funds. Id. at 416-18. Yet, we repeated our admonition in Gilbert that recovery 
should not be permitted unless the plaintiff has sustained an injury. See id. at 418 (citing 
Gilbert, 409 Ill. at 38 (holding that an objection to a tax levy should disclose that the taxpayer 
has been injured)). Accordingly, we stated, “we do not judge that [the] absence of authority to 
transfer, standing by itself, was sufficient to support the defendant’s objections to the tax levy.” 
Id. 
¶ 38 
 
Based on this precedent, we conclude that in order to seek recovery under section 20-6 for 
the unlawful diversion of funds, a plaintiff must allege that money improperly transferred from 
the Working Cash Fund was used for an improper purpose, resulting in an actual loss to the 
school district. As noted by both the appellate and circuit courts, the statutory construction 
advanced by plaintiffs would result in an impermissible “windfall” by forcing a school district 
official, employee or board member to reimburse the district for funds that were spent on 
legitimate district expenses. This result cannot be what the legislature intended. Although 
plaintiffs have requested that the District defendants be required to “make the [School District] 
whole,” there is no indication in plaintiffs’ complaints that the School District has sustained 
any actual loss. Consequently, the dismissal of the statutory violations asserted against the 
District defendants was proper. 
¶ 39 
 
Plaintiffs’ breach of fiduciary duty claims against the District defendants suffer from the 
same defect. Those claims were based on the same factual assertions underlying the statutory 
violations and also failed to allege that the funds transferred from the Working Cash Fund had 
been used for any purpose other than legitimate school district expenses. As a result, plaintiffs 
have not sufficiently claimed that the District defendants’ alleged breaches of their fiduciary 
 
 
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duties resulted in a loss suffered by the School District. See Bernstein & Grazian, P.C. v. 
Grazian & Volpe, P.C., 402 Ill. App. 3d 961, 976 (2010) (recognizing that a party seeking to 
recover for breach of fiduciary duty must establish the existence of a fiduciary duty, breach of 
that duty, and damages proximately caused by the breach). 
¶ 40 
 
Further, because plaintiffs cannot recover against defendant Beckwith, the treasurer of the 
school district, their claim against Lloyd’s, as surety of his conduct, was properly dismissed. 
See Village of Rosemont v. Lentin Lumber Co., 144 Ill. App. 3d 651, 668 (1986) (recognizing 
that if a principal and surety are sued jointly and the action against the principal fails, the surety 
is discharged). Accordingly, the appellate court correctly held that the claims against the 
District defendants and Lloyd’s were properly dismissed. 
 
¶ 41 
 
 
 
 
II. Dismissal of Lutkauskas’s Claims Against Knutte 
¶ 42 
 
 
 
 
A. Whether the Doctrine of Res Judicata Applies 
¶ 43 
 
We next address Lutkauskas’s argument that the circuit court erred in dismissing his claims 
against Knutte on the ground of res judicata. As noted above, our review of a dismissal under 
section 2-619 is de novo. DeLuna v. Burciaga, 223 Ill. 2d 49, 59 (2006). Also, the 
determination of whether a claim is barred under the doctrine of res judicata is a question of 
law, which we review de novo. Hayashi v. Illinois Department of Financial & Professional 
Regulation, 2014 IL 116023, ¶ 45; Arvia v. Madigan, 209 Ill. 2d 520, 526 (2004). 
¶ 44 
 
Res judicata is an equitable doctrine designed to prevent multiple lawsuits between the 
same parties where the facts and issues are the same. Murneigh v. Gainer, 177 Ill. 2d 287, 299 
(1997). Under the doctrine, a final judgment on the merits rendered by a court of competent 
jurisdiction operates to bar a subsequent suit between the same parties and involving the same 
cause of action. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 302 (1998); Rein v. 
David A. Noyes & Co., 172 Ill. 2d 325, 334-35 (1996). In addition to the matters that were 
actually decided in the first action, the bar also applies to those matters that could have been 
decided in the prior suit. River Park, Inc., 184 Ill. 2d at 302; La Salle National Bank v. County 
Board of School Trustees, 61 Ill. 2d 524, 529 (1975). Three requirements must be satisfied for 
res judicata to apply: (1) the rendition of a final judgment on the merits by a court of competent 
jurisdiction; (2) the existence of an identity of cause of action; and (3) identity of the parties or 
their privies. River Park, Inc., 184 Ill. 2d at 302; Downing v. Chicago Transit Authority, 162 
Ill. 2d 70, 73-74 (1994). 
¶ 45 
 
In this case, Lutkauskas seeks to challenge the existence of all three elements. With regard 
to the first requirement, Lutkauskas asserts that the dismissal of the original plaintiffs’ claims 
against Knutte did not constitute an adjudication on the merits because that ruling was based on 
a lack of standing. Yet, Lutkauskas did not raise this argument in the circuit court. Moreover, 
he specifically conceded in the appellate court that “a final judgment was rendered,” and that 
court’s opinion noted his agreement that the first element was satisfied. 2013 IL App (1st) 
121112. Accordingly, Lutkauskas has forfeited any argument that the dismissal with prejudice 
of the original plaintiffs’ claims against Knutte was not a final judgment on the merits, and we 
need not address it here. See Vine Street Clinic v. HealthLink, Inc., 222 Ill. 2d 276, 301 (2006) 
(recognizing that arguments not raised in either the circuit or appellate court are forfeited). 
¶ 46 
 
Lutkauskas next contends that the second prerequisite of res judicata has not been 
satisfied. Lutkauskas argues that there is no identity of cause of action because he asserted 
 
 
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additional claims against Knutte that were not included in the original plaintiffs’ complaints. 
This argument is without merit. 
¶ 47 
 
In River Park, this court adopted the transactional test to determine identity of causes of 
action. River Park, Inc., 184 Ill. 2d at 310-11. There, we held that “separate claims will be 
considered the same cause of action for purposes of res judicata if they arise from a single 
group of operative facts, regardless of whether they assert different theories of relief.” Id. at 
311. Under this principle, the dismissal of a single theory of recovery against a particular 
defendant operates as a final adjudication of all claims based on other theories of recovery that 
could have been brought as part of the initial action, as long as they arise from the same core of 
operative facts. Therefore, simply alleging a new theory of recovery is insufficient to assert a 
different cause of action, where multiple theories of recovery are predicated on the same core 
of operative facts. 
¶ 48 
 
In this case, Lutkauskas’s complaint included a count against Knutte for accountant 
negligence, as well as additional counts seeking recovery for professional malpractice, breach 
of fiduciary duty, and aiding and abetting illegal conduct. Although these counts were based on 
different theories of recovery, they were predicated on the same underlying facts that were 
alleged by the original plaintiffs—that Knutte issued “clean” audit reports for the years 2007 
through 2009, despite its knowledge of the District defendants’ alleged wrongdoing. 
Therefore, Lutkauskas’s additional claims against Knutte arose from the same core of 
operative facts that formed the basis for the original plaintiffs’ claims and could have been 
adjudicated in the prior action. The dismissal of the original plaintiffs’ claims with prejudice 
was a final resolution of the cause of action against Knutte. Id. Lutkauskas’s argument that 
res judicata does not apply because he has raised different theories of recovery fails because it 
is in direct conflict with the principles articulated in River Park. 
¶ 49 
 
Lutkauskas also claims that the third element of res judicata has not been met because 
there is no identity of parties or their privies. In making this argument, Lutkauskas points to the 
fact that he was not a party to the prior action, and he further asserts that he is not in privity 
with the original plaintiffs. We disagree that there is a lack of privity. 
¶ 50 
 
In considering whether res judicata applies, “[p]rivity is said to exist between parties who 
adequately represent the same legal interests.” (Internal quotation marks omitted.) People 
ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill. 2d 285, 296 (1992). For purposes 
of res judicata, “[i]t is the identity of interest that controls in determining privity, not the 
nominal identity of the parties.” Id. Moreover, adequate representation does not mandate that 
the litigant in the prior suit be successful. Id. at 297 (recognizing that rejection of the 
arguments advanced by a party to a previous action “cannot be evidence of inadequate 
representation”). 
¶ 51 
 
In this case, Lutkauskas did not bring suit in his own right to enforce a claim that was 
personal to him. Rather, he filed his action on behalf of the District, which was the real party in 
interest. As a consequence, his claims against Knutte were those of the District, as was true of 
the claim asserted in the earlier action. Also, though Lutkauskas asserted different theories of 
recovery, the conduct that formed the basis for his claims was the same as that underlying the 
original plaintiffs’ claims, and he sought the same relief. Accordingly, Lutkauskas was in 
privity with the original plaintiffs, and the final requirement of res judicata is satisfied. 
 
 
- 12 - 
 
¶ 52 
 
Lutkauskas further contends that the doctrine of res judicata cannot be applied in this case 
because it would result in a denial of due process. In support, he relies on three United States 
Supreme Court cases: Taylor v. Sturgell, 553 U.S. 880 (2008); South Central Bell Telephone 
Co. v. Alabama, 526 U.S. 160 (1999); and Richards v. Jefferson County, 517 U.S. 793 (1996). 
Yet, as the appellate court observed, these decisions do not govern the instant case. 2013 IL 
App (1st) 121112, ¶¶ 45-49. 
¶ 53 
 
In Taylor v. Sturgell, the Supreme Court considered whether an adverse judgment against a 
party seeking disclosure of documents under the Freedom of Information Act (FOIA) (5 
U.S.C. § 552 (2006)) would preclude a subsequent action by another person who sought the 
same documents. Taylor, 553 U.S. at 885. In resolving this question, the Supreme Court 
observed that the right to request records under the FOIA statute is granted to individual 
persons, not the public at large. Id. at 885, 903. The Court also observed that the doctrine of 
res judicata is subject to due process limitations, which serve to protect the rights of 
individuals who were not parties to a prior adjudication. Id. at 891, 901. Yet, the Court noted 
that there are several recognized exceptions to the general rule against nonparty preclusion, 
including where privity exists between the parties to the actions. Id. at 884, 893-95. In rejecting 
the doctrine of preclusion by “virtual representation,” the Supreme Court held that the question 
of whether a subsequent action is barred by a prior judgment must be decided according to the 
established grounds for nonparty preclusion. Id. at 904. 
¶ 54 
 
We find that Taylor is factually distinguishable because it did not involve successive 
taxpayer derivative actions, in which multiple plaintiffs filed identical actions to protect the 
same interests of a governmental entity. Rather, the two plaintiffs in Taylor brought suit to 
enforce their own individual rights to request disclosure of federal records, and any relief 
afforded under the FOIA statute would accrue to them personally. Id. at 885, 903. Here, the 
original plaintiffs and Lutkauskas brought suit in a representative capacity to protect the 
interests of the School District. In both actions, the School District was the real party in 
interest, and the relief sought would accrue to the School District, not the named plaintiffs. 
Because the interests of the School District were represented in both actions, the due process 
concerns that were recognized and pivotal to the result reached in Taylor are not implicated. 
¶ 55 
 
In Richards v. Jefferson County, 517 U.S. 793 (1996), the Supreme Court considered 
whether an action challenging the validity of an occupation tax was barred by a judgment 
upholding the validity of the tax in a previous suit brought by different taxpayers. Id. at 794-96. 
The Richards Court held that application of res judicata was inconsistent with the principles of 
due process because the plaintiffs in the original action “did not sue on behalf of a class; their 
pleadings did not purport to assert any claim against or on behalf of any nonparties; and the 
judgment they received did not purport to bind any *** taxpayers who were nonparties.” Id. at 
801. Based on these circumstances, the Court concluded that the second action by different 
taxpayers was not barred by the earlier judgment. Id. at 801-02. In reaching this conclusion, the 
Supreme Court particularly noted that the underlying right asserted by the plaintiff taxpayers 
was “personal in nature.” Id. at 802 n.6. Thus, the case presented was distinguishable from the 
type of case in which a taxpayer brings suit “to complain about an alleged misuse of public 
funds, [citations] or about other public action that has only an indirect impact on his interests, 
[citations].” Id. at 803. The Court also observed that res judicata may be applied where the 
party bringing a second action is in privity with a party to the earlier judgment. Id. at 798. 
 
 
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¶ 56 
 
In South Central Bell Telephone Co. v. Alabama, 526 U.S. 160 (1999), the Supreme Court 
again considered whether the doctrine of res judicata applied to bar a suit challenging a tax that 
had been upheld in prior litigation brought by different taxpayers. Id. at 167-68. Finding that 
the case presented was indistinguishable from Richards, the Court reiterated its primary 
holding in that decision and concluded that the earlier judgment did not have preclusive effect 
because the successive tax challenges involved different plaintiffs and different tax years; 
neither was a class action; and there was no claim of privity between the two sets of plaintiffs. 
Id. 
¶ 57 
 
Thus, Taylor, Richards, and South Central Bell establish that the requirements of due 
process prohibit the application of res judicata to bar an action by a different plaintiff, where 
the right sought to be enforced is personal in nature and none of the recognized grounds for 
nonparty preclusion apply. In this case, however, the original plaintiffs and Lutkauskas 
brought suit in a representative capacity on behalf of the School District. Lutkauskas’s claim 
was not personal in nature, and the interests of the School District that he sought to protect 
were identical to those advanced in the previous action by the original plaintiffs. As a 
consequence, the due process concerns underlying the decisions in Taylor, Richards, and 
South Central Bell are not at issue here, and those cases do not support Lutkauskas’s due 
process argument. For all of the foregoing reasons, we conclude that the doctrine of 
res judicata applies in this case, and Lutkauskas is precluded from pursuing his claims against 
Knutte. 
 
¶ 58 
 
 
 
 B. Whether Supreme Court Rule 304(a) Requires Amendment 
¶ 59 
 
As a final matter, we briefly dispose of Lutkauskas’s assertion that Supreme Court Rule 
304(a) (eff. Feb. 26, 2010) requires clarification and should be amended. According to 
Lutkauskas, the language of Rule 304(a) indicates that an appeal brought under its terms is 
permissive, and the wording of the rule should be changed to clearly reflect that the 
requirements of the rule are mandatory. This assertion is without merit. 
¶ 60 
 
As Lutkauskas acknowledges, Rule 304(a) provides as follows: 
“If multiple parties or multiple claims for relief are involved in an action, an appeal 
may be taken from a final judgment as to one or more but fewer than all of the parties or 
claims only if the trial court has made an express written finding that there is no just 
reason for delaying either enforcement or appeal or both. Such a finding may be made 
at the time of the entry of the judgment or thereafter on the court’s own motion or on 
motion of any party. The time for filing a notice of appeal shall be as provided in Rule 
303. In computing the time provided in Rule 303 for filing the notice of appeal, the 
entry of the required finding shall be treated as the date of the entry of final judgment. 
In the absence of such a finding, any judgment that adjudicates fewer than all the 
claims or the rights and liabilities of fewer than all the parties is not enforceable or 
appealable and is subject to revision at any time before the entry of a judgment 
adjudicating all the claims, rights, and liabilities of all the parties.” (Emphasis added.) 
Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). 
¶ 61 
 
The terms of Rule 304(a) explicitly state that the time for filing the appeal is governed by 
Rule 303 and that the entry of the required finding shall be treated as the date of the entry of 
final judgment. Id. Rule 303, in turn, specifically provides that a notice of appeal must be filed 
 
 
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within 30 days after the entry of the final judgment appealed from. Ill. S. Ct. R. 303(a) (eff. 
June 4, 2008). Pursuant to the clear and unambiguous language in these rules, an appeal that 
seeks to challenge a final judgment following a Rule 304(a) finding must be filed within 30 
days of the entry of that finding. No amendment or clarification is required. 
 
¶ 62 
 
 
 
 
CONCLUSION 
¶ 63 
 
For the reasons set forth above, we conclude that the appellate court correctly held that the 
dismissal of all of the plaintiffs’ claims against the District defendants and Lloyd’s was proper. 
We also find that the doctrine of res judicata precludes Lutkauskas from pursuing his claims 
against Knutte. Accordingly, we affirm the judgment of the appellate court. 
 
¶ 64 
 
Affirmed.