2013 I LApp (1st) 121112 FOU RTH DIVI SI ON September 30, 2013 No. 1-12-1112 ANTHO NY LUTKAU SKAS, TAXPAYER FOR AND ON B EHAL F OF L EMONT-B ROMBEREK COMB I NED SCHOOLDI STRI CT 113A,

Plaintiff-Appellant,

v. DR. TI MOTHY RI CKER, ROBERT B ECKWI TH, JOHN WOOD, DR. MARY GRI CUS, L I SA WR I GHT, KEV I N DOHERTY, D AVI D L EAHY, G WEN O’MAL L EY, SUE MURPHY, ALAL BRECHT, UN DERWR I TERS AT L L OYD’ S, L ONDON , KNUTTE ASSOCI ATES P.C. AND OT HER PERS ONS WHOSE NAMES ARE NOT YET KNO WN,

Def endants-A

ppellees.

L AURA REI GL E, DUAN E BRAD L EY, L OUI S EMERY, AND JANET HUGH ES, TAXPAYERS FOR AND O N BEH AL F OF L EMONT B ROMBEREK COMB I NED SCHOOLDI STRI CT 113A,

Plaintiffs-Appellants,

v. DR. TI MOTHY RI CKER, ROBERT B ECKWI TH, JOHN WOOD, DR. MARY GRI CUS, L I SA WR I GHT, KEV I N DOHERTY, D AVI D L EAHY, G WEN O’MAL L EY, SUE MURPHY, ALAL BRECHT, UN DERWR I TERS AT L L OYD’ S, L ONDON , KNUTTE ASSOCI ATES P.C. AND OT HER PERS ONS WHOSE NAMES ARE NOT YET KNO WN,

Def endants-A

ppellees. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Appea l from the Circuit Court of Cook County

No. 11 CH 35191

Honora ble L eRoy K. Martin, Jr., J udg e Presiding

.

Appea l from the Circuit Court of Cook County

Nos. 10 CH 53428 and 10 CH 53429

Honora ble L eRoy K. Martin, Jr., J udg e Presiding

.No. 1-12-1112

J USTI CE EPS TEI

N deliver ed the judg ment of the c ourt, with opinion. J ustice F itz g era ld Smi th concur red in the judg ment and opinion. J ustice Pucinski's dissent to be f iled later. OP INION ¶ 1 In this consolidated appea l, five taxpay er pla intiffs, actingon behalf of the L emont Br ombere k Combined School District 113A, seek re versa l of the circ uit court’s dismissal of their claims broug ht ag ainst two school district employ ees, se ven school boa rd member s, the district’s

acc ounting f

irm, and the district’s sure ty . Plaintiffs alleg ed that the district employ ees a nd board members violated se ction 20-5 of the School Code ( 105 I L CS 5/ 20-5 (West 2010)) when they eng ag ed in or pe rmitted a patter n of spendingmoney

from the district’s wor

king c ash fund without a school board r esolution approvingthe transf er of funds from the w orkingcash f und. For the re asons that follow, we aff irm. ¶ 2 B ACKGROUND ¶ 3 Article 20 of the School Code ¶ 4 Plaintiffs’ complaints cente r on a violation of a rticle 20 of the School Code, which authorizes cer

tain school districts to create workingcash f unds. See 105 I L CS 5/ 20-1 (West 2010). The w orkingcash f und allows a district to “have in its treasury at all time sufficie nt money to meet demands the reon f or expenditures for

corpor ate pur

poses” be fore the district

rec eives taxes desig nated f or those purpose s. Id. In other wor ds, “the purpose of the wor king cash f und is to provide a re serve upon which school districts may drawin anticipation of tax collections.” In re Application of W algenbach , 104 I ll. 2d 121, 125 (1984). To fund the w orking cash f und, the district “may

incur a n indebtedness a

nd issue bonds as evidenc e ther eof” (105

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I L CS 5/ 20-2 (West 2010)) or may levy taxes (105 I L CS 5/ 20-3 (West 2010)). Mone y from the workingcash f

und “may be used by

the school boar d for a

ny and all school purpose s and may be transfe rre d in whole or in par t to the ge nera l funds or both of the sc hool district and disbursed there from in anticipation of the collection of tax es lawf ully levied for

any or all purpose s.” 105 I L CS 5/ 20-4 (West 2010). When the district re ceive s tax es as a nticipated, “the fund shall immediately

be re imbursed there from until the full amount so transfe rre d has bee n retra nsfer red to the fund.” Id. Under

Section 20-5 of the School Code, the board must pass a r esolution direc ting the tr ansfe r of monies fr om the workingcash f und: “Money s in the workingcash f und shall be transf

err ed fr om the working cash f und to another f

und of the district only

upon the authority

of the school board which shall from time to time by separ ate r esolution direct the sc hool trea surer to make tra

nsfer s of such sums as may be re quired for

the purposes here in authorized.” 105 I L CS 5/ 20-5 (West 2010). Section 20-5 sets for

th specific inf

ormation to be conta ined within the resolution ( e.g. , “the taxes in anticipation of which [a] transfer is to be made a

nd from which the workingcash f und is to be reimburse d”). See id. ¶ 5 Section 20-10 allows a sc hool district to abate the wor king c ash fund at any

time, by adoption of a r esolution, and “dire ct the tra nsfer at any time of money s in that fund to any fund or funds of the district most in need of the money .” 105 I L CS 5/ 20-10 (West 2010). Similarly , section 20-8 a llows a district to abolish its workingcash f und, by adoption of a r esolution, and “dire ct the tra

nsfer of any balanc e in such fund to the e ducational f und at the close of the then

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curr ent school y ear .” 105 I L CS 5/ 20-8 (West 2010). ¶ 6 Orig inal Taxpay er Complaints ¶ 7 On Dec ember

17, 2010, four taxpay er pla intiffs filed two sepa rate , but near ly

identical, lawsuits, which wer e subseque ntly consolidated into one a ction. Hug hes brought the first complaint and Reig le, B radle y , and Emer y broug ht the second. The lawsuits named as defe ndants the district superintende nt, the district treasur er, a nd seven sc hool board membe rs (collec tively , the district defe ndants) in their individual ca pacities. ¶ 8 Plaintiffs alleg ed that the district def endants violated se ction 20-5 of the School Code, when they

repe atedly

transfe rre d (or a llowed the tra nsfer of) money

from the district’s wor

king cash f und without board re solution. P laintiffs alleg ed that betwe en 2007 and 2010, the district spent in excess of the amounts allocated to a number of individual funds that provide c apital for the district’s annua l activities. To make up f or shortfa lls in t hese f

unds, the district drew mone y from the wor

king c ash fund. Plaintiffs fur ther a lleg ed that the district def endants ne ver reimburse d the workingcash f und, and instead the school board pa ssed re solutions t o abate and abolish the workingcash f und. On Dec ember

2, 2009, members of

the boar d passed a

resolution to partially

abate the workingcashingfund in the amount of $4,849,442, lea ving a rema inder of $643,500. On April 28, 2010, the boa rd appr oved a r esolution to abolish the workingcash f und, with the money

to be per manently transfe rre d to the educa

tion fund. ¶ 9 Plaintiffs sought re lief under section 20-6 of

the School Code, which provide s: “Any member of

the school boar d of any

school district to which this Article is applicable , or any

other pe rson holding a

ny office , trust, or employ

ment under

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such school district who wilfully violates any

of the provisions of this Article shall be guilty

of a business of

fense and fine d not exceeding$10,000, and shall forf eit his right to his offic e, trust or e mploy ment and shall be r emoved ther efr om. Any such member

or other pe rson shall be liable f or any sum that may

be unlawfully

diverted f

rom the working

cash f und or otherw ise used, to be

rec overe d by

such school district or by any taxpay er in the na

me and f or the benef it of such school district in an appr opriate c ivil action; provided that the taxpay er sha ll file a bond for all costs and be liable for a ll costs tax ed ag ainst the school district in such suit, and judgme nt shall be rende red a ccor dingly . Nothing here in shall bar any

other re medies.” 105 I L CS 5/ 20-6 (West 2010). Under the authority

of sec tion 20-6, plaintiffs soug ht an orde r dec laringthe district defe ndants forf eit their off

ices a nd employ

ment with the district, assessing a $10,000 statutory fine a g ainst

eac h of the district def

endants, a nd enter ing judg ment ag ainst the defe ndants persona lly for “ an amount sufficie nt to make [the district] whole and r eplac e the public f unds shown by

the evidenc e to have been unla wfully diverted” from the wor

king c ash fund. ¶ 10 Along with these cla ims, plainti ffs brought a sing le count for “ac countant neg lige nce” ag ainst the district’s forme r ac countant, Knutte a nd Associates, a lleg ing tha t Knutte issued clea

n audit repor

ts, but knew or should have known of the district de fenda nts’ transfe r of f

unds in violation of the School Code. Plaintiffs also broug ht claims ag ainst an entity aff iliated with Certain Unde rwriter s at L loy d’s L ondon (Unde rwriter s), the sure ty that bonded the sc hool trea surer . Plaintiffs alleg ed that the sure ty was oblig ated to pay

damag es ca

used to the district by

5No. 1-12-1112

the trea surer ’s “f

ailure to fa ithfully

discharg e the duties of his off ice a ccor ding to law .” ¶ 11 On J uly

27, 2011, the circ uit court struck the c laims ag ainst the district defe ndants with leave to replea d. J udg e Nova k ruled that plaintiffs did not have standing to seek c riminal penalties pre scribed in se ction 20-6, and a s to any civil rec overy , the cour

t ruled that the alleg ations were insufficient to alleg e a violation of se ction 20-5. The c ourt dismissed the claims ag ainst Knutte with prejudice , finding that plaintiffs did not have standingto bring the claim. Pursuant to I llinois Supreme Court Rule 304(a ) (e ff. Jan. 1, 2006), the cour t ruled that there was no just cause to dela

y appea l of the cla im ag ainst Knutte. The sure ty was a ppare ntly not properly named a s a def

endant, a nd plaintiffs later voluntar ily dismiss ed their c omplaints ag ainst the improperly

named e ntity

. ¶ 12 The F irst Amended Consolidated Complaint and the L utkauskas Complaint ¶ 13 On August 29, 2011, plaintiffs filed a fir st amended c onsolidated complaint, ag ain alleg ing that the district defe ndants violated ar ticle 20 of the School Code, but addinga bre ach of fiduciar y duty claim ag ainst the district defe ndants. Plaintiffs restated the ir claims ag ainst the proper ly named e ntity

for the sur ety , Under

writers at L loy ds. On Octobe r 11, 2011, a f ifth taxpay er pla intiff, Lutkauskas, filed his complaint, which w as later consolidated with the other two taxpay er c omplaints. The Lutkauskas complaint wa s identical to the first ame nded consolidated c omplaint of the other plaintiffs, but a dded new claims ag ainst Knutte for

acc ounting malpr actice , neg lige nce, br eac h of fiducia ry duty , and aidingthe district defe ndants in violating the School Code. ¶ 14 Both the a

mended c onsolidated complaint and the L utkauskas complaint provide d

6No. 1-12-1112

additional detail re g ardingthe alleg ed illeg al transf er of funds. Specific ally , plaintiffs alleg ed “[i] t appea

rs that the District monies, thoug h specific ally appropr iated to spec ific funds/purpose s,

wer e held in a c ommingled a ccount. Thus, whe n money was spent be yond the leg al appropr iation for a pa

rticular f und, it actually

draine d or diverte d the Working Cash F und, without the appropriate B oard A ction and docume ntation for such disper sions.” The c omplaint also cited e mail corre spondence amongthe district defe ndants purportingto show that they wer e

awa re that the workingcash f unds were beingused betwe en 2007 and 2010, w ithout board resolutions approvingany transfe rs. ¶ 15 On Marc h 15, 2012, the district defe ndants and Unde rwriter s at L loy d’s moved to dismiss plaintiffs’ first amended c onsolidated complaint and the L utkauskas complaint. Knutte f iled a motion to di smiss t he L

utkauskas complaint. The trial court grante d these motions. Whi le the defe ndants asser

ted var ious bases on which to dismiss the complaints, J udg e Mar tin ruled that plaintiffs’ complaint fa iled to state a c laim and the district def endants ha d leg islative immuni ty

. J udg e Mar

tin also stated that plaintiffs wer e “ba sically arguing a windfall” a

nd that “nothing in the complaint *** would tell the re ader that money

was used f

or some purpose other than f or school purposes.” As a re sult, the court ruled that Underwriters at L loy d’s had no liability as surety and dismissed the complaints ag ainst it. W ith respec t to Knutte, the circ uit court dismiss ed L

utkauskas’s c laims with prejudice on the ba sis of res judicata . Plaintiffs appea led. ¶ 16 ANA L YSI S ¶ 17 Def

endants moved to dismiss under sec tions 2-619 and 2-615 of the Code of Civil Procedur e (735 I L CS 5/ 2-615, 2-619 ( West 2010)). A motion to dism iss under sec tion 2-615 of

7No. 1-12-1112

the Code (735 I L CS 5/ 2-615 (West 2010)) c halleng es the leg al suffic iency of the c omplaint. W akulich v. M

raz , 203 I ll. 2d 223, 228 (2003). Section 2-619 of the Code of Civil P roce dure allows dismissal where, in pe rtinent part, plaintiff doe s not have standingto bring an ac tion. 735 I L CS 5/ 2-619(2) (West 2010). ¶ 18 We reviewthe circ uit court’s dismissal of plaintiffs’ complaints de novo

. Feltmeie r v. Feltmeie r , 207 I ll. 2d 263, 266 (2003). This court may aff irm the circ uit court’s dismissal for any rea son appea

ringin the rec ord. See Gunthorp v. Golan , 184 I ll. 2d 432, 438 (1998) (the tria l court may be af firmed on a

ny basis in the rec ord without reg ard to whe ther the tria l court re lied upon that g round or whe ther the tria l court’s rationale was c orre ct); Geick v. Kay , 236 I ll. App. 3d 868, 873 (1992) ( althoug h the trial cour t’s order did not specify

whether the counts we re beingdismiss ed under

section 2-615 or

section 2-619, the r eviewingcourt may aff irm a cor rec t decision for

any rea son appea

ringin the rec ord, re g ardle ss of the basis re lied upon by the trial court); Mitsias v. I-Flow Corp. , 2011 I LApp (1st) 101126, ¶ 47 ( appellate court ha s jurisdiction to consider issue not re ache d by circ uit court on motion to di smiss, where issue wa s proper ly raised in the c ircuit court but cour t gr anted motion to dismi ss on another ba sis). ¶ 19 On appe al, def

endants ra ise a host of a

rguments in support of aff irming the district court’s dismiss al of the tax pay ers’ complaints. Defe ndant Timothy Ricker f iled a brie f on his own behalf , arguing that: (1) plaintiffs ar e not entitled to any relief beca use the district did not suffer any monetary damag es and a

ny rec overy would constitute an unjust windfall; (2) the br eac h of fiduciar y duty claims fail bec ause pla intiffs have not a lleg ed dama g es; (3) pla intiffs lack standing to seek c riminal penalties pre scribed in se ction 20-6; (4) le g islative immuni ty bars a ny claim

8No. 1-12-1112

ag ainst Ricker; (5) plaintiffs failed to plea d a ca use of a ction under se ction 20-6 or f or bre ach of fiduciar y duty ; (6) cla ims in t he L

utkauskas complaint ar e time-ba rre d; (7) plaintiffs lac k standing to bringthe instant case beca use they never demande d the district bringthe ac tion its elf; and (8) plaintiffs’ complaints we re pr operly dismiss ed bec ause the y

fail to name a

n indispensable party . The re maining district de fenda nts raise many

of the same arguments, but also argue that (1) c laims ag ainst cer

tain district defe ndants should be dismissed beca use none of

the alleg ations in the complaint as to the workingcash f und transfe rs wer e dire cted at these individuals; and (2) the claims should be dismissed ag ainst the school district defe ndants in their individual capa cities. Def

endant Knutte a sserts that the trial c ourt proper ly dismiss ed all counts a g ainst it by Lutkauskas base d on the doctrine of res judicata . Finally , defe ndant Under writers at L loy d’s raises se vera l arguments as to why it has no obligation to pay under the trea surer

bond, assuming that any of the a lleg ations ag ainst defe ndant B eckw ith are not dismissed for other rea sons. ¶ 20 Claims Ag ainst the District Def endants ¶ 21 Among the var ious arguments raised in support of dismissal by the district defe ndants, we need only addre ss two narrow

issues relating

to the reme dies soug ht by the taxpay er pla intiffs ag ainst the district defe ndants. ¶ 22 In their complaints, plaintiffs first ask the court to fine e ach of the def endants a nd order their re moval from off

ice unde r the fir st sentence of sec tion 20-6: “Any member of

the school boar d of any

school district to which this Article is applicable , or any

other pe rson holding a

ny office , trust, or employ

ment under such school district who wilfully violates any

of the provisions of this Article

9No. 1-12-1112

shall be guilty

of a business of

fense and fine d not exceeding$10,000, and shall forf eit his right to his offic e, trust or e mploy ment and shall be r emoved there from.” 105 I L CS 5/ 20-6 (West 2010). The district def

endants a rgue that the f

orfe iture of of

fice and fine s presc ribed in the fir st sentence of sec tion 20-6 are penalties only the State of I llinois can impose. I n its J uly 27, 2011 ruling dismiss ing Re igle ’s and Hughes’ or igina l complaints, the circuit cour t ag ree d. J udg e Novak held that only an appr opriate g overnme nt actor, not taxpay er pla intiffs, would have standing to pursue these re medies under

the statute. The L

utkauskas complaint, which postdated the Jul y 27, 2011 dismiss al dec ision, also sought for feiture and fine s from def endants. In dismiss ing the Lutkauskas complaint, Judge Ma rtin ag ree d with J udg e Novak’s ruling , stating that the School Code “c ontemplate[s] the State’s Attorne y or the [Attorney

Gene ral’s] office rea lly

beingthe entity to bring a ca

use of a ction and look for pe nalties or re moval from off ice.” ¶ 23 When consideringthe prope r construc tion of section 20-6, we strive to “asc erta in and g ive ef fec t to the leg islature’s intent.” See , e.g. , Citi zens Opposing Pollution v. ExxonM obil Coal U.S.A. , 2012 I L111286, ¶ 23 (c iting In re Donald A.G

. , 221 I ll. 2d 234, 246 (2006)). “ The best indication of this intent remains the languag e of the statute itself, which must be g iven its plain and ordina

ry meaning .” Id. We presume that the le g islature did not intend absurdity , inconvenienc e, or injustice. Id. ¶ 24 In this case, we ag ree with the circ uit court that the first sente nce of section 20-6 se ts forth cr iminal penalties. The f irst sentence of sec tion 20-6 speaks to a pa rty “guilty of a business offe nse.” 105 I L CS 5/ 20-6 (West 2010). The term “business of fense ” is specif

ically define d in

10No. 1-12-1112

the Unified Code of

Correc tions. S ee 730 I L CS 5/ 5-1-2 ( West 2008) (“ ‘B usiness Offe nse’

means a petty offe nse for

which the f

ine is in ex cess of

$1,000.”). O ur supre me cour t has descr ibed the spec ific pena lties imposed in section 20-6 (a “ fine” and “f orfe it[ ure]” of the “rig ht to office ”) a s criminal in nature . See In re W algenbach , 104 I ll. 2d 121, 125 (1984) (statingthat section 20-6 “ provides for criminal sanc tions ag ainst any member of

a school boa

rd who wilfully violates the provisions of ar ticle 20”) . And we ha

ve re cog nized that the Gener al Assembly may seek to e nforc e complianc e with a statute by specify ing tha t a violation constitutes a “business offe nse,” which we de scribed a s a “c riminal penalty .” See Parra v. Tarasco, Inc. , 230 I ll. App. 3d 819, 823 (1992) ( noting that I llinois Choke-SavingMethods Act imposed a “ criminal penalty ,” whe re it provided that any one violating it “is guilty of a business of

fense and shall be fined $500” ). ¶ 25 In response , plaintiffs claim that they “ar e asking

for—a nd entitled to—forfe iture of office by the District 113A De fenda nts stil l holding off

ice ( not Ricker, who r esig ned as Superintendent) a

nd monetary

penalties, notably

that will go to the District, not Plaintiffs.” Be y ond this mere asse rtion, howeve r, plaintiffs provide no authority for why they , as private taxpay ers a cting on behalf of the school district, have the power to impose criminal penalties for what is a c riminal violation. Nor do plaintiffs provide a ny authority for the pr oposition t hat statutory penalties for

a “busine ss offense ” ca

n be aw arde d as a r emedy in a civil action. Acc ording ly , we a g ree with the circ uit court that plaintiffs did not have standingto seek forf eiture of office or to impose fines in a c ivil sui t. ¶ 26 Whil e the f

irst sentence of sec tion 20-6 speaks to cr iminal violations , the sec ond sentenc e

11No. 1-12-1112

of sec tion 20-6 ref

ere nces “ an appr opriate c ivil action” broug ht by the district or “by

any taxpay er in the na

me and f or the be nefit of suc h school district.” Private taxpay ers may bring suit on behalf of the district to recove r “a ny sum that may

be unlawf

ully diverted f

rom the workingcash f

und or otherw ise used.” 105 I L CS 5/ 20-6 (West 2010). ¶ 27 Plaintiffs seek to re cover “an a mount sufficient to make D istrict 113A whole and r eplac e the public funds shown by the evidenc e to have been unla wfully diverted f

rom the Working Ca sh Fund.” The c omplaint alleg es that at times betwe en 2007 and 2010, the district drew mone y out of the wor

king c ash fund in orde r to cove r shortfa lls in ot her f unds. L ater

in 2009 the board formally approve d the fund’s a

batement, with all money beingtransfe rre d to some other funds (the c omplaint does not specify which funds) . In 2010, the boar d formally approve d the fund’s abolishment, with the remainingmoney beingtransfe rre d to the education fund. ¶ 28 The district def

endants a rgue that ther e ar e no alleg ations that they used the funds at issue “for any thing other

than leg itimate District expenses.” Acc ordingto defe ndants, allowingthe taxpay er pla intiffs to recove r fr om defe ndants in this circumstance “would re sult in a windfall to the District by

reimbursingit for money it never lost.” Judge Martin agree d, stating that plaintiffs wer e “ba sically arguing a windfall” a

nd that “nothing in the complaint *** would tell the re ader that money

was used f

or some purpose other than f or school purpose s.” Plaintiffs argue that bec ause se ction 20-5 plainly forbids interf

und transfe rs without board re solution, any money transfe rre d without board re solution shoul d be conside red a “sum *** unlawfully

diverted from the wor

king c ash fund” rec overa

ble by the taxpay er pla intiffs on behalf of the district. 105 I L CS 5/ 20-6 (West 2010). Ac cordingto plaintiffs, defe ndants are persona lly liable for

12No. 1-12-1112

$5,492,942. 1 ¶ 29 The pa

rties’ dispute about the pr oper r emedy ref lects an unde rlying disa g ree ment about whether the monies at issue we re “ unlawfully diverted.” The School Code does not de fine “unlawf ul diversion” or “ diversion,” a nd we may

consult a dictionary

to asce rtain the plain a

nd ordinary meaningof those ter

ms. Gaffney v . Board of Trust ees of the O rland Fire Protection District , 2012 I L110012, ¶ 60. More over, “ words and phr ases having w ell-def ined meaning s in the common law a

re inter prete d to have the sa

me meaning s when used in statutes de aling with the same or

simil ar subjec t matter as that with which the y wer e assoc iated at c ommon law.” Scott v. Dre is & Krump Manufacturing Co. , 26 I ll. App. 3d 971, 983, 326 N.E.2d 74 (1975); People v. B ailey , 375 I ll. App. 3d 1055, 1061 (2007). We look to the common law mea ning of terms eve n in statutes dealingwith new or diff ere nt subject matter, to the e x tent that they appea r fitting a nd absent e vidence indicating a contr ary meaning

. Advincula v . United Blood Servic es , 176 I ll. 2d 1, 17 (1996). ¶ 30 At the time section 20-6’ s prede cessor statute (I ll. Rev. St at. 1934, ch. 122, ¶ ¶ 327.31, 327.38) wa s enac ted, B lack’ s L aw Dic tionary define d “diver sion” as “[a] turning a side or alter ing the natura l course of

a thing ,” with the ter

m being “chie fly

applied to the unauthor ized chang ing the cour se of a

water course to the prejudice of a lowe r propr ietor, or to unauthor ized or illega l use of c orporate funds.” B lack’ s L aw Dic tionary 600 (3d ed. 1933) . In a line of c ases Plaintiffs actually

claim that def

endants c ould be liable for as much a s $12 mill ion, but 1 that fig ure is only

used in the complaint with ref ere nce to plaintiffs’ alleg ations that Knutte issued improper a

udits: “The ef

fec t of these a

udits was that the illeg al misspending, overspe nding a

nd illega l transfe rs desc ribed a bove we re c oncea led, re sulting in losses to the district of more than $12 million.” 13No. 1-12-1112

consideringinterfund loans, our supreme c ourt has re peate dly define d the “diver sion” of funds or the “unlaw ful diversion” f unds as use for

some improper pur

pose or some pur

pose spec ifically prohibited by

statute. As re levant to the issue her e, the c ourt explained, “Municipal off icer s have no rig ht to divert money s from one f und to another a

nd differ ent fund for

which it was not appropr iated. B ut the word ‘dive rt’ is used in the sense of turningsuch fund pe rmane ntly from its purpose or the f

inal appropr iation of it to some other use.” Gates v. Sweitzer , 347 I ll. 353, 359 (1932); see a lso Michae ls v. Barrett , 355 I ll. 175, 185-86 (1934) (r ejec ting a rgument that statute providing for use of par

t of motor fuel tax to pay

interest and pr incipal on emer g ency relief bonds is an “unlaw ful diversion” of portion of privileg e tax allotted to counties for roa d purposes, wher e collec ted taxes become public mone y and may be applied to whatever

purpose leg islature deter mines). ¶ 31 Buildingfrom Gates and similar ca ses, our supre me cour t has found an imprope r diversion of funds where funds ar e used f or a diff ere nt purpose than a llowed by statute. In People e x rel. Bre nza v. Gilbert , 409 I ll. 29 (1951), for e x ample, the c ourt consider ed a temporar y transfe r of f

unds from a w orkingcash f und for c orporation purposes to the county highw ay fund. The c ourt distinguished those c ases f inding no “ diversion” of

funds when monies

wer e loane d from one f

und to another: “ The pre sent ca se is differ ent from [those case s] i n that there is at least an implied prohibition ag ainst using the w orkingcash f und for a ny thing e x cept the purpose of

financ ing the corpor ate f und of the c ounty .” Brenza , 409 I ll. 2d at 37. Sim ilarly , in People e

x rel. Re dfern v. Pe nn Central Co. , 47 I ll. 2d 412 (1971), the cour t considere d whether the transf

er f rom the educ ation to the I llinois municipal retire ment fund amounted to “ an

14No. 1-12-1112

unlawful diver sion of monies from one f und to another.” Redfern , 47 I ll. 2d at 416. The cour t found that the tra

nsfer did amount to an unlawful diver sion, where the statute at issue did not allow for “ loans betwe en the e ducational f und and the I llinois municipal retire ment fund.” Id. at 418. ¶ 32 In acc ord with these c ases c onsideringthe “unlaw ful diversion” of funds, we c onclude that the plaintiffs ca

nnot rec over a

monetary awa rd fr om the defe ndants, for the y have not a lleg ed that the money

transfe rre d from the wor king c ash fund wa s put towards some improper purpose forbidden by

the statute. Plaintiffs do not alleg e that def endants violated the School Code by spendingmonies from the wor king c ash fund on somethingother than le g itimate school expenses. See 105 I L CS 5/ 20-4 (West 2010) (“ Money s in the fund may be used by

the school board f or any and all school purpose s and may be tra nsfer red in whole or in part to the g ener al funds or both of the sc hool district and disbursed there from in anticipation of the collection of taxes lawfully

levied for

any or all purpose s ***.”). Rathe r, plaintiffs alleg e that the boa rd did not pass any

resolution as to the transf er of funds (at least until the board passe d resolutions to abate and then a

bolish the fund, there by

perma nently transfe rringthe workingcash f unds). We acknow ledg e that ar

ticle 20 also conte mplates that money is to be temporarilyloaned f or tax anticipation purposes, a

nd the workingcash f

und is to be reimbursed when those taxes are collecte d. Plaintiffs alleg ed that def endants we re usingworkingcash f unds to cover shor

tfalls due to def icit spending , without ever r eimbursingthe workingcash f und. But he re, the school board e ffe cted a

perma nent transf

er of the money

by passing resolutions to abate a nd abolish the workingcash f

und. Whil e plaintiffs c ontend that the re solutions t o abate and then a bolish the

15No. 1-12-1112

workingcash f

und wer e simply

made to “c over up” ear lier transf ers, they do not alleg e that the resolutions were improper. Where plaintiffs do not alleg e that the f unds were spent for a

n improper pur

pose, and where the def

endants have ef

fec ted a pe rmane nt transfe r of wor king c ash funds as a llowed by

article 20, plaintiffs ca

nnot show any

loss to the dist rict as a

result of defe ndants’ alleg ed ac tions. ¶ 33 Although pla intiffs offe r no authority for their proposed inter

pretation of the statute, they sug g est that the leg islature must have me ant to allow re cover y in a civil suit under these circ umstances to ensur e complianc e with the statute. Plaintiffs contend that district officials “could e vade a

ny acc ountability

for their illega l conduct re g arding the Working Cash F und by , even a fter the fac t, simpl y abolishing the fund.” O ur holding is not so broad. We conclude only that plaintiffs here cannot se ek to re cover persona lly

from district offic ials under the c ivil

rec overy provision of section 20-6. I f def endants did willfully

violate sec tion 20-5, a par ty with standing could see k to impose the serious cr iminal penalties presc ribed in sec tion 20-6. Indeed, the statute provides f

or cr iminal penalties for w illful viol ations of “a ny of the provisions of this Article” and then se parately provides for

a civil suit to recove r funds “ unlawfully diverted.” As defe ndants ac knowledg e, “the statute contains a me ans to enfor ce, where appropr iate, willful violations of Article 20 whe re no a ctual dama g es re sult.” ¶ 34 Acc ording ly , we a ffirm the c ircuit court’ s dismis sal of plaintiffs’ c omplaints under section 2-619. Unde r sec tion 20-6, the taxpay er pla intiffs do not have standingto seek the criminal pena lties of forf

eiture of office or fines. Sec tion 20-6 also does not authorize a c ivil sui t to rec over va st sums of money persona lly

from district def

endants for

the alleg ed violation of

16No. 1-12-1112

section 20-5, whe re the re a re no a lleg ations that monies from the wor king c ash fund on something othe r than leg itimate school expenses. Wi thout those alleg ations, plaintiffs do not otherwise ha

ve standingto rec over, on be half of the district, money transfe rre d without board resolution, notwithstanding the a lleg ed violation of sec tion 20-5. ¶ 35 Plaintiffs’ brea ch of f iduciary duty count fa ils for a similar re ason. L ike the alleg ed section 20-5 violation, the bre ach of fiduciar y duty claim re sts on the district defenda nts’ failure to pass a boar d resolution to approve the withdraw al of money from the wor

king c ash fund. As with the School Code violation, plainti ffs see k to rec over “ an amount suff icient to make [the district] whole and r eplac e the public f unds shown by

the evidenc e to have been unla wfully diverted f orm the Working Ca sh Fund.” As explained above, how ever , plaintiffs fail to alleg e any loss to the dist rict re sulting fr om the district defe ndants’ fa ilure to obtain approva l for fund transfe rs. Plaintiffs have thus fa iled to alleg e any damag es to support their cla im for bre ach of fiduciar y duty . See Bernstein &Grazian, P.C. v. Grazian &Volpe, P.C. , 402 I ll. App. 3d 961, 976 (2010) ( To preva il on a claim for br eac h of fiducia ry duty , plaintiff must show the exis tence of a f iduciary duty , the bre ach of

that duty , and dama g es proximately cause d by

the bre ach.)

. ¶ 36 Plaintiffs respond that the c omplaint describes the “dele terious ef fec ts of overspe nding and dama g es ca

used to the district.” Spec ifically , plaintiffs point to the complaints’ alleg ations that “spendingbeyond appropr iation in one y ear produce s neg ative bala

nces in c ash ac counts, which ca rry over to the ne x t y ear . Fur ther e x penditures be y ond appropr iations in the y ear s following dig a

n even de eper

fiscal de ceit upon the taxpay ers, a nd others, that kee ps g rowing , until the District sim ply

runs out of ca sh, as it appea rs to be nea

ring .” On a

ppeal, howe ver,

17No. 1-12-1112

plaintiffs make c lear

that there is no cause of

action base d on this alleg ed budg et def icit spending ; acc ordingto plaintiffs, those alleg ations only “provide context” for the c auses of action. More over, a s noted above , plaintiffs specif ically seek to re cover

those funds that have been tr ansfe rre d without board appr oval. We there fore aff irm the circ uit court’s dismissal of the brea ch of f

iduciary duty claim. As both counts ag ainst the district defe ndants wer e prope rly dismiss ed, we also aff

irm the district court’s dismissal of any claims ag ainst Underwriters for L loy ds. ¶ 37 L utkauskas’s Claims Ag ainst Knutte ¶ 38 The only

rema ining c laims for consider ation are Lutkauskas’s c laims ag ainst Knutte. The circ uit court dismissed Lutkauskas’s c laims on the basis of res judicata , finding that the final judgme nt in favor of

Knutte in the pre vious tax pay er suit bar red L utkauskas’s c laims. On appea l, Lutkauskas cha lleng es this ruling a nd also argues that “[d]ue process c onsiderations we re not g iven appr opriate de fer ence ” whe n the circ uit court dismissed his claims aga inst Knutte. ¶ 39 The doc trine of res judicata provides that “a final judg ment on the merits re ndere d by a court of c ompetent jurisdiction bars any subsequent ac tions between the same pa rties or their privies on the same cause of ac tion.” Rein v. D avid A. Noyes &Co. , 172 I ll. 2d 325, 334 (1996).

“Res judicata bars not only what wa s actua lly

decide d in the first ac tion but also whatever could have be en dec ided.” Hudson v. City of Chicago , 228 I ll. 2d 462, 467 (2008). The doc trine applies if thre e re quirements ar e met: (1) a final judg ment on the merits has be en re ndere d by a court of c ompetent jurisdiction; (2) the par ties or their privies a

re ide ntical in both actions; and (3) a n identity of ca use of a ction exis ts. Id. A deter mination of whether

a cla im is barred unde r

18No. 1-12-1112

the doctrine of res judicata is a question of law, which is subject to de novo revie w. Arvia v. Madigan , 209 I ll. 2d 520, 526 (2004). ¶ 40 Lutkauskas and K nutte ag ree that the first re quirement for res judicata is met: where the circ uit court dismissed plaintiffs’ complaints ag ainst Knutte with prejudice on J uly 27, 2011, there was a

final judg ment on the merits. As to the sec ond require ment, Lutkauskas ar gues that beca use “he was not a pa

rty in the previous lawsuit and his cla ims were br oug ht as a sepa rate taxpay er a cting in his indi vidual capa city ,” the pa rties wer e not identical or wer e not in privity

. ¶ 41 At the outset, we e mphasize that Lutkauskas wa s not “ac ting in his individual capa city .” Lutkausas’s c omplaint leaves no doubt on that point: the complaint is broug ht “as a taxpay er derivative action in the name and for the bene fit of the School B oard D istrict 113A.” A “taxpay er de rivative a ction,” by contra st, is “brought by

a taxpay er on be half of a local g overnme ntal unit to enforce a ca use of a ction belong ing to the loc al g overnme ntal unit.” Scachitti v. UBS Financ ial Service s , 215 I ll. 2d 484, 494 (2005). The c laimed injury in such an action “is not per sonal to the taxpay ers, but rather impac ts the g overnme ntal entity on whose behalf the ac tion is brought.’ [Citation.] ” Id. ¶ 42 We have r ejec ted these same ar g uments in Nelson v. Chicago Park District , 408 I ll. App. 3d 53 (2011), a

taxpay er a ction. In Nelson , three individual Chi cag o taxpay ers a nd a community 2 org anization sued the L atin School, the Chicag o Park District, and othe rs, see king a decla ratory

Unlike a taxpay er de rivative a ction, a “tax payer a ction” is a suit broug ht by private 2 persons “ on behalf of themselve s and as r epre sentatives of a class of tax pay ers similarly situated within a taxi ng district or are a.” ( Emphasis added a nd internal quotation marks omitted.) Scachitti v. UBS Financ ial Service s , 215 I ll. 2d 484, 493 (2005).

19No. 1-12-1112

judgme nt as to an agree ment betwee n the Chicag o Park District and the L atin School reg arding fundingand construc tion of a socc er f ield. The pa

rties settled, and the suit was dismiss ed with prejudice . Three differ ent taxpay ers late r filed suit ag ainst the same de fenda nts, challeng ing aspec ts of the settlement. This court a ffirme d the dismissal of the suit on the basis of res judicata . We held that “[a]lt houg h the Latin II plaintiffs wer e not par ties to the Latin I lawsuit, as Chicag o taxpay ers, they wer e in privity

with the individual Latin I plaintiffs, who we re a lso Chicag o taxpay ers.” Id. at 61. This court e x plained that “the rele vant inquiry is whether the interests of the Latin II plaintiffs wer e ade quately repr esente d in Latin I

.” Id. On that question,

we c oncluded that “ the intere sts of the Latin II plaintiffs wer e the same as those r epre sented in Latin I beca

use the ove rridingconce rn in both case s was an unla wful transf

er of public proper

ty to a private party .” Id. at 62. ¶ 43 As in Nelson , Lutkauskas and the other taxpay er pla intiffs here wer e in privity . The plaintiffs repr esent the sa me leg al intere sts, even more so than in Nelson , wher e the Latin II plaintiffs wer e cha lleng ing the settlement rea ched in Latin I and whe re pla intiffs were actingas taxpay ers a cting for themse lves and on be half of a class. I n this case, a ll plaintiffs filed taxpay er actions “in the na

me and f or the be nefit of” the district under the authority of sec tion 20-6 of the School Code. Moreove r, L utkauskas and his fe llow tax pay ers soug ht rec overy from the district defe ndants on identical g rounds, and a ll their claims ag ainst Knutte related to Knutte’s complicity

in the district defe ndants’ alleg ed violation of the School Code. We agree with the circ uit court that there is an identify of plaintiffs among

their taxpay er suits. ¶ 44 As to the third require ment, L utkauskas somewhat confusing ly sug g ests that it was not

20No. 1-12-1112

met, beca use he “ alleg ed seve ral ne w claims ag ainst Knutte” a nd these c laims “sufficie ntly differ from those of the prec edingconsolidated [c]ompl aint.” L utkauskas does not fur

ther e x plain his position or cite any

authority . As Knutte points out, “separ ate c laims will be considere d the same

cause of ac tion for purposes of res judicata if they arise f rom a sing le g roup of ope rative f acts, reg ardle ss of whethe r they asser t differ ent theorie s of re lief.” River Park , Inc. v . City of Highland Park , 184 I ll. 2d 290, 311 (1998); Cooney v . Rossiter , 2012 I L113227, ¶ 21. Put another way , “asse rtions of diffe rent kinds or theor ies of re lief ar ising out of a single g roup of operative fac ts constitute but a single c ause of action.” Cooney , 2012 I L113227, ¶ 22 (quoting Torcasso v. Standard Outdoor Sales, Inc. , 157 I ll. 2d 484, 490-91 (1993)). H ere , the fa ctual alleg ations relatingto Knutte in all three c omplaints are pa rallel: ea ch suit alleg es that Knutte improperly

issued clea

n audit opinions that failed to disclose the district def endants’ a lleg ed misappropriations and ther eby conce aled the district’ s losses. Lutkauskas off ers no a rgument to the contra ry , and we thus conclude that an identify of ca use of a ction exis ts. As a re sult, we 3 aff irm the court’ s dismis sal of L utkauskas’s c laims ag ainst Knutte. ¶ 45 Lutkauskas fina lly argues that his due proc ess rig hts were violated when the circ uit court denied him a f

air opportunity

to liti g ate “ his own claims.” In Hansberry v . Lee , 311 U.S. 32 (1940), the United States Supreme Court held that it would violate the due pr ocess c lause of the fourtee nth amendment to bind litigants to a judg ment rende red in a n ear lier litigation to which

In fac t, Lutkauskas appa

rently conce des the third res judicata require ment in his reply 3 brief, thoug h his positi on ag ain is not set forth with clar ity . The re ply brief states, without further elabor ation: “As to the third re quirement, Plaintiff L utkauskas submits that identity of ca use of action may

be similar with respe ct to the cor e oper ative fa cts.” 21No. 1-12-1112

they wer e not par

ties and in which they

wer e not ade quately

repr esente d. Yet the c ourt has held that states “a

re g ener ally

fre e to deve lop their own rules f or protec ting a g ainst the relitig ation of common issues or the piec emea l resolution of disputes.” Richards v. J efferson County , 517 U.S. 793, 797 (1996). More specific ally , in case s “in which the tax pay er is usingthat status to entitle him to complain about an alleg ed misuse of public funds,” the cour t rea soned that “the States have w ide latitude to establish proce dures not only to limi t the number of judicia l proce eding s that may be ente rtained but a lso to determine whe ther to ac cord a taxpay er a

ny standing at all.” Id. at 803. ¶ 46 Lutkausas princ ipally relies on thre e United States Supreme Court case s to support his due proc ess ar g ument. In Richards v. J efferson County , 517 U.S. 793 (1996), thre e county taxpay ers a

nd the direc tor of fina

nce f or the c ity of B irmingha

m had sued the c ounty

challeng ing the validity

of an oc cupation tax. The tax was upheld in that case (the orig inal suit), and two classes of taxpay ers late r sought declar atory judgme nt challeng ing the constitutionalit y of the tax. The United States Supre me Court held that the judg ment in the orig inal suit did nothave res judicata eff

ect, r easoningthat plaintiffs “did not sue on beha lf of a c lass; their pleading s did not purport to asser

t any claim ag ainst or on beha lf of any nonparties; and the judgme nt they rec eived did not purport to bind any *** taxpay ers who w ere nonparties.” Id. at 801. The Richards Court distinguished the c ase be fore it from a ca se (similar to the one he re) wher e “the taxpay er is using that status to entitle him t o complain about an a lleg ed misuse of public funds *** or about other public action that has only an indirec t impact on his interest.” Id. at 803. ¶ 47 In South Central Bell T elephoneCo. v. Alabama , 526 U.S. 160 (1999), the Court

22No. 1-12-1112

confr onted similar fac ts. There , South C entra l Be ll Telephone Company filed a suit cha lleng ing an Alaba ma tax. P rior to South Central Be ll’s suit, four fore ign c orporations had challeng ed the same Ala bama tax and lost. The Court held that the ea rlier judg ment ag ainst the fore ign corpor ations did not have a res judicata eff ect on the South Central Bell suit. Relying on Richards , the Court explained that the two rele vant ca ses involved diffe rent plaintiffs a nd differ ent tax y ear s; that neither wa s a cla ss action; and that no par ty claimed ther e wa s privity or some other spe cial re lationship between the two sets of plaintiffs. ¶ 48 In Taylor v. Sturgell , 553 U.S. 880 (2008), two individuals, Herrick and Ta ylor, ea ch broug ht separate claims under the Fr eedom of

Information Ac t, seekingthe same public r ecor ds. Addre ssing a

question of fe dera l common law, the Supreme Court rejec ted the doctr ine of prec lusion by

“virtual re prese ntation,” holding that the prior judg ment ag ainst Herr ick did not bar Taylor from maintaininghis lawsuit because Her rick ha d not adequa

tely repr esente d Taylor in the prior suit. Taylor , 553 U.S. at 885. ¶ 49 Whil e L

utkauskas ag ain cha

rac terizes himself as an “ individual tax pay er” or an “individual plaintiff” br inging“his own cla ims,” we re iterate that he brought his claims on behalf of the district. That c ritical fa ct, re peate dly ignor ed by

L utkauskas on appe al, re nders inapposite the ca ses he r elies on to support his due proc ess ar g ument. Unlike all of those c ases, he re Lutkauskas and his fe llow tax pay ers we re r epre senting the intere sts of the district. They soug ht

rec overy from the district def

endants on the same g rounds, and a ll their claims ag ainst Knutte related to Knutte’s conc ealment of the district defe ndants’ alleg ed violation of the School Code. We find no merit to Lutkauskas’s due proce ss arg ument.

23No. 1-12-1112 ¶ 50 CONCLUSI ON

¶ 51 For

the fore g oing r easons, we aff irm the circ uit court’s dismissal of plaintiffs’ complaints. ¶ 52 Affir

med. ¶ 53 J USTI CE PUCI

NSKI ' s dissent to be filed later

.

24