Court Opinion

ID: 9742387
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:12:47.21173+00
Date Added: 2024-06-11T12:07:18.742659
License: Public Domain

PRESIDING JUSTICE JIGANTI, dissenting: With apologies to the persevering reader who has endured moats, mountains and a hurricane, I must respectfully dissent from the majority opinion. I promise to be brief. This is an appeal from the allowance of a motion for summary judgment in favor of the plaintiffs, Thomas and Barbara Cummings, in the breach of contract action against McDonald’s. The majority opinion appears to be that of a trial court deciding a question of fact. Summary judgment is a question of law. Demos v. National Bank of Greece (1991), 209 Ill. App. 3d 655, 659-60, 567 N.E.2d 1083. The instant breach of contract action emanated from an underlying lawsuit by Central Ice Cream Company, an Illinois corporation, and against McDonald’s Corporation. A verdict was entered in favor of Central and against McDonald’s in the amount of $52 million. While Thomas and Barbara Cummings were officers and directors of Central and owned substantial stock, they were not parties themselves to, the lawsuit. Not being parties, they were, of course, not entitled to a portion of the judgment. Central, McDonald’s and the Cummingses signed a settlement agreement, also referred to in these proceedings as the contract. That agreement accomplished two things. First, by allocating $11.5 million to Central and $1.6 million to the attorneys, it settled the action between Central and McDonald’s. Second, the settlement agreement allocated $2.4 million to the Cummingses, not for any personal claim emanating from the litigation between Central and McDonald’s, but rather “to settle all potential litigation between them.” The settlement agreement was conditioned upon the approval of the bankruptcy court. The agreement provides that McDonald’s “will recommend approval of the Settlement Agreement without reservation.” It is this provision of the contract that the Cummingses claim, and the trial court found, was breached. The contract also provides that the trustee will petition the court for approval of the agreement “setting forth the complete terms hereof and seeking entry of an order acknowledging all such terms and the reasonableness thereof and finding that such terms are fair, equitable and to the benefit of the Bankrupt Estate.” The Cummingses contend that the contract was breached by the conduct of Fred Lane, a McDonald’s attorney, during the course of the hearings in the bankruptcy court by introducing evidence of the negotiations to reach the settlement. The significance of the negotiations is that they indicate to whom McDonald’s made an offer of settlement. The trial court found as a matter of law that the contract provision stating that McDonald’s was to recommend approval of the settlement without reservation was breached by the introduction of this evidence. The pertinent facts in the record relating to the settlement agreement are that McDonald’s initiated settlement discussions with trial counsel for Central, Gerry Spence. Spence stated that McDonald’s initially offered $11 million, which was rejected, and after additional negotiations the amount of $15.5 million was verbally agreed upon. At that time there was nothing mentioned about the Cummingses. Thomas Cummings was initially elated about the settlement, but later after conferring with his attorney, and then with a bankruptcy attorney, he was informed that after the creditors’ claim was satisfied he was “not going to see a penny” of the settlement. Cummings said that he would not sign the agreement either on behalf of Central or personally. According to Spence, Cummings stated that “[yjou’re asking me to give up — the possibility of giving up $15 million and a half and getting nothing. And then also giving up my own personal claims?” Spence had a “big fight” with Cummings over the matter because he had given “his word” to McDonald’s. Cummings asked if McDonald’s would agree to $5 million to be set out of the total settlement for his claims. Spence spoke to Donald P. Horwitz, a lawyer and an executive vice-president of McDonald’s, who had “an absolute uncontrolled fit” and rejected the notion of paying Cummings anything. McDonald’s threatened to take the matter directly to the bankruptcy court without the Cummingses’ participation or release. Spence testified that he told the McDonald’s representative: “Well, please, what difference does it make to you how this money is spent? We have got to take it to the bankruptcy judge. We will make a full disclosure to the bankruptcy court. How it [$15.5 million] is spent shouldn’t be any of McDonald’s business. What difference does it make to you? I made a deal for fifteen and a half million dollars. Now, you want to tell me how to spend it.” Horwitz, in an affidavit on the motion for summary judgment related that he told Spence: “McDonald’s was willing to pay a total of $15.5 million to Central in full satisfaction of the judgment in the Central Ice Cream litigation and it was up to the bankruptcy court to direct to whom the fund should be paid. I [Horwitz] said that as long as McDonald’s is not required to pay any more than $15.5 million in full settlement, of Central’s judgment and it receives appropriate releases from Central, McDonald’s would agree to an allocation to Mr. Cummings which was approved by the bankruptcy court only if the entire agreement reflecting the $11.5 million and the $4 million is presented to the bankruptcy court and the court is fully advised of all the settlement negotiations giving rise to the agreement, including that McDonald’s had been willing to pay the entire $15.5 million to Central and is still willing to make that payment.” Shelby Yastrow, an attorney for McDonald’s, by affidavit stated that he was a party to the conversation between Spence and Horwitz and essentially reiterated what Horwitz had stated. With these facts in the background and known only to the parties, the bankruptcy judge, Jack B. Schmetterer, at the beginning of the hearing, quoting from the case of Protective Committee for Independent Stockholders of T M T Trailer Ferry, Inc. v. Anderson (1968), 390 U.S. 414, 20 L. Ed. 2d 1, 88 S. Ct. 1157, stated that in order to determine whether a compromise was fair and equitable it needed all facts necessary to make an intelligent and objective opinion. In order to do so, he had to take a “quasi-inquisitorial role.” Even before the hearing started, one of the attorneys for the creditors suggested that he wanted to depose Theodore M. Becker, special litigation counsel for the trustee in the McDonald’s lawsuit, and also an attorney for Thomas Cummings. He specifically wanted to question Becker about the negotiation process. Becker was the first witness in the hearing before Judge Schmetterer and explained the settlement agreement; however, his explanation was at odds with settlement negotiations as related in the majority opinion and in this dissent. Becker stated that McDonald’s was “absolutely adamant” and insisted upon a personal release from Cummings throughout the settlement negotiations. He stated that McDonald’s was the one who allocated $11.5 million to Central and the $4 million to the Cummingses and their attorneys. The bankruptcy judge after only hearing Becker indicated that when the lawyers for the estate embarked upon settlement discussions, they were put in a conflict of interest situation with the estate. The alleged breach of contract occurred the following day before testimony began. McDonald’s attorney, Fred Lane, informed the court that the original settlement between McDonald’s and Spence called for McDonald’s to pay $15.5 million in settlement of the circuit court litigation; the only litigation pending at that time was between Central and McDonald’s. Lane related that McDonald’s informed plaintiffs’ counsel that the Cummingses’ execution of release was not a condition of the settlement and that the fund could be allocated on any basis that the plaintiffs wanted as long as the bankruptcy court approved, and as long as it does not cost McDonald’s any more money, and that they received a release from the trustee on behalf of Central. Patently, the parties had a duty to disclose settlement negotiations. The bankruptcy court was keenly aware of the fact that it had to determine the fairness of the settlement and needed all necessary facts to make that determination. It was presented a settlement agreement that settled a matter not only with the subject matter of the bankruptcy, Central, but also the agreement with the president of Central who at that time had no litigation pending. At the very hearing when only Central’s attorney, Becker, testified, the bankruptcy court determined that there was a conflict of interest between Becker and the bankrupt estate. The testimony of Becker at the hearing was contrary to the facts as testified to, not only by McDonald’s but also Spence, and are not contradicted anywhere in this motion for summary judgment. The information was relevant. Attorneys are officers of the court and must make a complete disclosure of relevant facts. (People v. Buckley (1987), 164 Ill. App. 3d 407, 413, 517 N.E.2d 1114.) Concisely, a contract cannot be breached by withholding relevant information from the court. Secondly, the agreement specifically provides that the bankruptcy court would be petitioned for approval and that the complete terms would be set forth and an evaluation made of the reasonableness of those terms by the bankruptcy court. All of the evidence before the court in this motion for summary judgment amplifies that provision in the contract. The attorneys were duty bound and contractually bound to inform the court of the negotiations and this contract was not breached by providing that information. In my estimation, the judgment of the trial court should be reversed.