Title: BHI Corp v. Litgen Concrete Cutting & Coring Co.
Citation: N/A
Docket Number: 98073
State: Illinois
Issuer: Illinois Supreme Court
Date: March 24, 2005

Docket No. 98073-Agenda 21-November 2004.
BHI CORPORATION et al., Appellants, v. LITGEN CONCRETE 							
CUTTING &amp; CORING COMPANY, Appellee.
Opinion filed March 24, 2005.
	JUSTICE FITZGERALD delivered the opinion of the court:
	This case is before us for the third time. The discrete issue in this
appeal is whether defendants who enter settlement agreements with
plaintiffs in which they purchase assignments of plaintiffs' remaining
claims against a nonsettling defendant may pursue these claims even
though the settlement agreements and the assignments were not made
in good faith. We agree with the appellate court that the settling
defendants here may not pursue the assigned claims against the
nonsettling defendant. We affirm.

BACKGROUND
	In 1989, a building that housed art galleries and studios in
Chicago's River North district was destroyed in a fire. Scores of
gallery owners and artists filed separate complaints against the owners
and managers of the building, as well as the general contractors and
subcontractors hired to renovate it. The complaint alleged that the
various defendants, including Litgen Concrete Cutting and Coring
Company (Litgen), caused or contributed to the fire.
	The plaintiffs eventually settled all of their claims against all of
the defendants except Litgen.(1) The settlement agreements charged that
a Litgen employee caused the fire, but that Litgen "does not wish to
cooperate with the Plaintiffs and Settling Defendants." The settling
defendants agreed to pay the plaintiffs $4.5 million for the release of
any claims arising from the fire: "This amount shall be paid to
Plaintiffs on the condition that the trial Court [sic] grants the parties
*** a finding that the *** settlement is made in good faith" pursuant
to the Contribution Act. "This payment," the parties stated, "shall be
paid irrespective of whether Litgen takes an appeal of the finding of
good faith." The settling defendants also agreed to pay the plaintiffs
an additional $4.5 million for the assignment of any claims they may
have against Litgen arising from the fire. The plaintiffs promised that
they had not already released their claims against Litgen, that they
would not release these claims without the written consent of the
settling defendants, and that they would "reasonably cooperate" with
the settling defendants in the pursuit of the assigned claims against
Litgen. The settling defendants, in turn, promised to reimburse the
plaintiffs for the cost of their cooperation.
	The circuit court of Cook County found these agreements to be
in good faith pursuant to section 2(c) of the Contribution Act (see 740
ILCS 100/2(c) (West 1994)) and dismissed Litgen's contribution
claims against the settling defendants pursuant to section 2(d) of the
Act (see 740 ILCS 100/2(d) (West 1994)). The trial court allowed the
plaintiffs to nonsuit their claims against Litgen.
	Litgen appealed, arguing that the trial court erred in finding the
agreements were made in good faith. While this appeal was pending,
the settling defendants filed a complaint on the assigned claims against
Litgen. Before the appellate court, the settling defendants filed a
motion to dismiss Litgen's appeal, asserting that the new complaint
rendered the trial court's good-faith finding nonfinal and unappealable,
robbing the appellate court of jurisdiction. The appellate court agreed
with the settling defendants and dismissed Litgen's appeal. See
Dubina v. Mesirow Realty Development, Inc., 283 Ill. App. 3d 36
(1996). We reversed and remanded to the appellate court. See Dubina
v. Mesirow Realty Development, Inc., 178 Ill. 2d 496 (1997).
	On remand, the appellate court initially noted that the settling
defendants characterized their procedural posture as plaintiffs on the
assigned claims, rather than as tortfeasors jointly liable with Litgen on
the original claims. Dubina v. Mesirow Realty Development, Inc., 308
Ill. App. 3d 348, 355 (1999). The appellate court then stated:
			"The argument is not without a certain laissez-faire
appeal. But the Contribution Act, embodying the will of the
legislature and the public policy of Illinois, is not a laissez-faire statute. The Act departs from the common law and
awards settling defendants an incentive to resolve the issue of
their liability without litigation by shielding them from further
exposure. Having taken advantage of the shield afforded by
the Act, [settling] defendants now wish to buy the sword of
the original plaintiff[s]." Dubina, 308 Ill. App. 3d at 355.
	The appellate court observed that if the settling defendants could
shed their roles as tortfeasors for the roles of unfettered plaintiffs, they
could pursue a recovery otherwise prohibited by the Contribution Act.
Dubina, 308 Ill. App. 3d at 356. The appellate court continued:
		"[T]he settlement agreements here allow settling defendants
to recoup their share of damages, perhaps make a profit, and
yet be shielded from contribution under the Contribution Act.
The result is antithetical to the Contribution Act, whether it
is achieved by 'assignment' or 'contribution,' and whether
the settling defendants are labeled 'plaintiffs' or 'joint
tortfeasors.' The assignments allow the settling defendants to
seek indirectly a reimbursement the Contribution Act
prohibits and undermine the equitable sharing of damages."
Dubina, 308 Ill. App. 3d at 357.
The appellate court held that the trial court erred in finding the
agreements were in made good faith, reversed the dismissal of
Litgen's contribution claims, and remanded to the trial court for
further proceedings. Dubina, 308 Ill. App. 3d at 358. 
	We granted the settling defendants' petition for leave to appeal
and affirmed. See Dubina v. Mesirow Realty Development, Inc., 197 Ill. 2d 185 (2001). We noted that, though property damage claims
generally are assignable in Illinois, the assignments here must be
considered in the context of the settlement agreements. Dubina, 197 Ill. 2d  at 194. We concluded that the settlement agreements, and by
extension the assignments, violated the terms of and policies behind
the Act. First, the agreements and assignments violated section 2(c)
of the Act because they deprived Litgen of its statutory right to a
setoff. Dubina, 197 Ill. 2d  at 195. The settling defendants labeled half
of the $9 million it gave to the plaintiffs as a payment for the
assignments; if Litgen lost at trial, it would not receive credit for $4.5
million exchanged between its joint tortfeasors and the plaintiffs.
Dubina, 197 Ill. 2d  at 195. Second, the agreements and assignments
defeated the Act's goal of equitable apportionment of damages among
joint tortfeasors. Dubina, 197 Ill. 2d  at 195-96. The settling
defendants would recoup the settlement amount-$4.5 million-as well
as any damages exceeding the $9 million it gave to the plaintiffs from
Litgen if they succeeded on the assigned claims. Dubina, 197 Ill. 2d 
at 196. Third, and finally:
			"The settlement agreements and assignments also violate
the Act because they allow the settling defendants to
accomplish indirectly that which they could not do
directly-recover contribution from Litgen. *** [T]he Act
prohibits a settling tortfeasor from recovering contribution
from another tortfeasor whose liability is not extinguished by
the settlement. [Citation.] Here, the plaintiffs assigned their
causes of action to the settling defendants, thereby allowing
the settling defendants, in the guise of plaintiffs, to indirectly
recover contribution from Litgen. By incorporating an
agreement to obtain an object forbidden by law, such
agreements may be regarded as collusive." Dubina, 197 Ill. 2d  at 196, citing In re Guardianship of Babb, 162 Ill. 2d 153,
172 (1994).
Because the agreements and the assignments violated the Act, they did
not satisfy the good-faith requirement of the Act. Dubina, 197 Ill. 2d 
at 196.
	On remand, the settling defendants again refiled their complaint
on the assigned claims against Litgen. Litgen filed a motion to dismiss,
arguing that the settling defendants could not pursue the assigned
claims because the settlement agreement which contained the
assignments was not made in good faith. The trial court granted
Litgen's motion and dismissed the settling defendants' complaint. The
settling defendants appealed.
	The appellate court affirmed. 346 Ill. App. 3d 300. The appellate
court held that the trial court was compelled to dismiss the settling
defendants' complaint because, pursuant to our second opinion in
Dubina, the assignments were "unenforceable." 346 Ill. App. 3d at
307. The appellate court explained that the settling defendants'
strategy of pursuing the assigned claims would undermine the two
policies behind the Act:
		"The settling defendants initially attempted to use the Act to
shield themselves from liability, but then, by the terms of the
agreements, went outside the Act to pursue the nonsettling
defendant, Litgen. Such a strategy clearly undermines the
purpose of the Act to attain equitable apportionment of
damages among tortfeasors. ***
			To circumvent the good-faith requirement of the Act, the
settling defendants here devised a fallback strategy to
abandon the protection of the Act, and then sue as assignees.
While the settling defendants take the position that nothing in
the Contribution Act prohibits an alternative strategy when a
good-faith settlement is denied, there can be no question that
their alternative strategy undermines the goal of the Act:
settlement as an alternative to litigation. *** To allow the
settling defendants to first seek the benefits of the Act, and,
if denied the benefits, to pursue an alternative course, insures
that the goal of the Act is thwarted, and all parties (including
the original plaintiffs) have nothing to look forward to but
another round of litigation." 346 Ill. App. 3d at 307.
	The appellate court observed that the settlement agreements
would have met the good-faith requirement if a portion of the
settlement amount had not been labeled a payment for the assignments
of the plaintiffs' claims. 346 Ill. App. 3d at 307. In strong language,
the appellate court concluded:
			"[T]he Contribution Act first has been used, then abused.
The public policy that encourages the peaceful settlement of
disputes as an alternative to litigation has been undermined.
There is no way to unpack this luggage and start all over
again without undermining the Act. As a matter of public
policy, an assignment such as the one in this case, born of a
settlement that was found to be not made in good faith, must
be held to be unenforceable." 346 Ill. App. 3d at 307-08.
	We granted the settling defendants' petition for leave to appeal.
177 Ill. 2d R. 315(a). On the law issues before us, our review
proceeds de novo. Hawes v. Luhr Brothers, Inc., 212 Ill. 2d 93, 98
(2004).

ANALYSIS
	The Contribution Act codified our opinion in Skinner v. Reed-Prentice Division Package Machinery Co., 70 Ill. 2d 1 (1977), and
created a right of contribution among joint tortfeasors. See 740 ILCS
100/2(a) (West 2002). A defendant who has paid more than its pro
rata share of damages to the plaintiff has a right of contribution from
its codefendants. See 740 ILCS 100/2(b) (West 2002). A good-faith
settlement discharges any contribution liability for settling defendants
(see 740 ILCS 100/2(d) (West 2002)) and it reduces the amount of
any recovery against nonsettling defendants (see 740 ILCS 100/2(c)
(West 2002)). A good-faith settlement, however, does not entitle
settling defendants to recover contribution from nonsettling
defendants. See 740 ILCS 100/2(e) (West 2002).
	The settling defendants acknowledge that our last opinion in this
case held that the settlement agreements were not made in good faith
because they were conditioned upon the plaintiffs' assignments. See
Dubina, 197 Ill. 2d  at 194 ("the assignments were a condition
precedent to the settlement agreements"). The settling defendants
argue, however, that our last opinion did not affect the legal validity
of the settlement agreements or the assignments that they contained.
They assert that "[t]he Contribution Act behaves as a carrot, not a
stick." According to the settling defendants, "At most, the absence of
good-faith findings made the [settling defendants'] claims against
Litgen potentially less valuable by exposing them to Litgen's
counterclaims for contribution. It did not eliminate the [settling
defendants'] right to assert those claims." In short, the settling
defendants insist that they simply wish to abandon the protection that
a good-faith settlement would provide under the Act and proceed on
the assigned claims against Litgen, subject to its contribution claims.
	The settling defendants describe the assigned claims as "garden
variety claims for property damage." That characterization, however,
ignores the history and context of those claims. As we noted in our
last opinion in this case, "we cannot look at the assignment of
plaintiffs' claims in a vacuum, but must consider the assignments in
conjunction with the settlement agreements." Dubina, 197 Ill. 2d  at
194. A more candid description of the claims here would be "property
damage claims bought for millions of dollars from the original
plaintiffs as part of a settlement agreement found not to be made in
good faith." The fact that the assignees were the settling defendants
may not, as they contend, alter the nature of the claims that were
assigned (see Collins Co. v. Carboline Co., 125 Ill. 2d 498, 512
(1988) ("Once made, an assignment puts the assignee into the shoes
of the assignor")), but it does affect our analysis of whether public
policy allows the settling defendants to prosecute them.
	As we have consistently stated, the Act furthers two policies:
promoting settlement and ensuring equitable apportionment of
damages. See Johnson v. United Airlines, 203 Ill. 2d 121, 133 (2003).
Specifically, the Act promotes settlement by providing that a
defendant who enters a good-faith settlement with the plaintiff is
discharged from any contribution liability to a nonsettling defendant.
Babb, 162 Ill. 2d  at 171, citing 740 ILCS 100/2(c), (d) (West 1992).
The Act ensures equitable apportionment of damages, mainly, by
creating a right of contribution among defendants. Babb, 162 Ill. 2d 
at 171, citing 740 ILCS 100/2(b) (West 1992). But it also ensures
equitable apportionment of damages "by providing that the amount
that the plaintiff recovers on a claim against any other nonsettling
tortfeasors will be reduced or set off by the amount stated in the
settlement agreement." Babb, 162 Ill. 2d  at 171, citing 740 ILCS
100/2(c) (West 1992). Further, the Act provides that a settling joint
tortfeasor may not recover contribution from a nonsettling joint
tortfeasor. See 740 ILCS 100/2(e) (West 2002). This rule, too, fosters
equitable apportionment because it prevents a settling defendant, who
decides how to value its liability, from obtaining contribution from a
nonsettling defendant, whose pro rata share of damages has not yet
been fixed by a fact finder. The settling defendants here play up their
purported willingness to forgo the protections that the Act offers to
joint tortfeasors who settle in good faith. They have no choice, after
the holding in our last opinion that the settlement agreements and
assignments together violated section 2(e) of the Act. See Dubina,
197 Ill. 2d  at 196.
	Section 2(e) provides, "A tortfeasor who settles with a claimant
pursuant to paragraph (c) is not entitled to recover contribution from
another tortfeasor whose liability is not extinguished by the
settlement." 740 ILCS 100/2(e) (West 2002). Here, Litgen's potential
liability was not snuffed, but rather kindled, by the settlement
agreements, so the settling defendants could resort to their "fallback
strategy" and pursue the assigned claims in the event that they could
not obtain a good-faith finding.(2) Looks are not deceiving. Whether the
recovery sought by the settling defendants is grounded upon the
Contribution Act or the assignments, it is still contribution from a
nonsettling tortfeasor. As the appellate court aptly stated, "the
assignments flowing from a bad settlement cannot sanitize the settling
defendants' attempt to collect contribution." 346 Ill. App. 3d at 306.
	An arrangement by which a settling defendant attempts to obtain
indirect contribution from a nonsettling defendant by an assignment of
claims violates the Contribution Act. We cannot allow the settling
defendants to contract an end run around section 2(e). Accordingly,
we hold that the settling defendants may not pursue the assigned
claims. See Alder v. Garcia, 324 F.2d 483, 485 (10th Cir. 1963);
DeJong v. B.F. Goodrich, Inc., 96 Mich. App. 36, 41, 292 N.W.2d 157, 160 (1980). Contrary to the settling defendants' contentions, this
holding does not subvert the Act by creating a limitation that the
legislature did not express. Rather, this opinion, like our opinion in
Babb, bolsters the Act and its policy of equitable apportionment.

CONCLUSION
	For the reasons that we have stated, we affirm the appellate
court's judgment.

Affirmed.

	JUSTICE FREEMAN, specially concurring:
	In Dubina v. Mesirow Realty Development, Inc., 197 Ill. 2d 185,
198 (2001) (Harrison, C.J., dissenting, joined by Freeman and
Kilbride, JJ.), the majority held that the agreements between the
plaintiffs and the settling defendants, violated the terms of the Joint
Tortfeasor Contribution Act (740 ILCS 100/2 (West 1994)), because
the agreements deprived Litgen, the nonsettling defendant, of its right
to a setoff. Under the agreements, the settling defendants paid $4.5
million to the plaintiffs in settlement of the plaintiffs' claims, and $4.5
million for the assignments of the plaintiffs' claim against the
nonsettling defendant. Thus, Litgen was only entitled to a setoff of
$4.5 million, although the plaintiffs had received $9 million. The
Dubina court also held that the agreements defeated the Act's
purpose of equitably distributing among all joint tortfeasors the burden
of compensating a plaintiff. The settling defendants stood to recoup
the $4.5 million denominated as payment for the assignments as well
as any damages exceeding $9 million. Thus, the settling defendants
could accomplish indirectly that which they could not do
directly-recover contribution from Litgen. The majority remanded the
cause for further proceedings.
	In dissent, Chief Justice Harrison noted that when a settling
tortfeasor can establish that the settlement was supported by
consideration, that is prima facie evidence of the settlement's good
faith. Once a preliminary showing of good faith is made, a
presumption arises that the settlement is valid, and the burden shifts
to the party challenging the settlement to show that it was not made
in good faith. Chief Justice Harrison opined that the trial court did not
abuse its discretion when it determined that the agreements were in
good faith. Further, Chief Justice Harrison maintained that the
agreements facilitated rather than impeded the settlement process, and
supported the policy of the Act. Chief Justice Harrison found no merit
to the contention that the assignments would apportion the burden of
damages among defendants inequitably. Lastly, Chief Justice Harrison
noted that any concern about the potential setoff was premature
because Litgen had not yet been found liable for damages at a trial.
Moreover, while the terms of the agreements allocated only half of the
total consideration paid to the settlement, the Act makes clear such
labels are not controlling. If the trial court ultimately determined that
the full $9 million should be attributed to the settlement, it could allow
the full $9 million as a setoff, notwithstanding the fact that the
agreements allocated only $4.5 million to the settlement.
	On remand, the settling defendants attempted to pursue the
claims that the plaintiffs had assigned to them. Litgen filed a motion
to dismiss, arguing that the settling defendants could not pursue the
assigned claims because the settlement agreements which contained
the assignments were not made in good faith. The trial court granted
the motion and dismissed the settling defendants' complaint. The
appellate court affirmed. This court granted leave to appeal, and now
affirms.
	In today's opinion, the majority holds that the settling defendants
may not pursue the assigned claim against Litgen. In doing so, the
majority rejects the settling defendants' argument that they want to
abandon the protection that a good-faith settlement provides under the
Act and proceed on the assigned claims against Litgen. The majority
states that whether the recovery sought by the settling defendants is
grounded upon the Act or the assignments, it is still contribution from
a nonsettling tortfeasor. The majority concludes that an arrangement
by which a settling defendant attempts to obtain indirect contribution
from a nonsettling defendant by an assignment of claims violates the
Act and is unenforceable. 
	The majority's reasoning is consistent with Dubina, 197 Ill. 2d 185. In Dubina the court specifically noted: "The settlement
agreements and assignments also violate the Act because they allow
the settling defendants to accomplish indirectly that which they could
not do directly-recover contribution from Litgen. *** [T]he Act
prohibits a settling tortfeasor from recovering contribution from
another tortfeasor whose liability is not extinguished by the
settlement." Dubina, 197 Ill. 2d  at 196. Dubina being settled law, I
must reluctantly join in the result reached by the majority. 
	The result reached by the majority, however, is troubling. In
Dubina the court held that the settlement agreements were not
entered into in good faith because the agreements conditioned
settlement upon assignments of the plaintiffs' claims. In today's
opinion, the majority holds that the assignments are unenforceable
because they flowed from the settlement agreements. The end result
is that Litgen, the nonsettling defendant whose employee may have
caused the fire, is relieved of liability for the moment. The original
plaintiffs dismissed their action against Litgen years ago. The plaintiffs
have no interest in the matter, having pocketed the $9 million from the
settling defendants. Thus, Litgen is no longer liable to the plaintiffs.
As the majority now holds, the assignments of the plaintiffs' claims are
unenforceable and the settling defendants cannot recover the $4.5
million paid for the assignments or any other monies from the
nonsettling defendant. To prevent the settling defendants from
recovering contribution from Litgen, the court may be allowing Litgen
to shed its liability for a fire started in all probability by its employee.
	Another aspect of the majority opinion is also troubling. It was
noted in Dubina, 197 Ill. 2d  at 188, that some of the assignees were
insurance companies and other nonparties. The majority opinion in the
present case does not seem to distinguish between the assignees who
were settling defendants and the assignees who were insurance
companies and other nonparties. Is it to be understood that the
assignments to the insurance companies and other nonparties are also
unenforceable? If so, on what grounds? The rationale for striking the
settlement agreements and the assignments is that the settling
defendants, being tortfeasors, should not be able to recover
contribution from another tortfeasor whose liability is not extinguished
by the settlement. Does this rationale hold for the insurance companies
and other nonparties? Clarification is needed.
	Although the result in the present case follows from Dubina, it
represents an anomaly in law and justice. As acknowledged by the
majority, the Contribution Act was intended to ensure equitable
apportionment of damages among tortfeasors. See slip op. at 7. The
result reached today is simply incompatible with the policy of
equitable apportionment of damages. It is an aberrance that challenges
the legislature to reconsider the matters at issue and make the
appropriate public policy determinations.



	JUSTICE KILBRIDE joins in this special concurrence.
1. Another defendant, Gelick Foran Associates, Inc., did not 
settle, but it later received summary judgment and plays no role in this appeal.
2. 
In a sense, the phrase "fallback strategy," coined by the settling defendants in 
their opening brief, is misleading. Certainly, they pressed the assigned claims 
after they did not obtain a good-faith finding, but it seems likely they would 
have pursued them even if they did obtain a good-faith finding.