Court Opinion

ID: 3148451
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:49:22.078941+00
Date Added: 2024-06-11T11:55:23.113068
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                         Appellate Court

             Midas International Corp. v. Mesa, S.p.A., 2013 IL App (1st) 122048

Appellate Court            MIDAS INTERNATIONAL CORPORATION, Plaintiff-Appellant, v.
Caption                    MESA, S.p.A., Defendant-Appellee.

District & No.             First District, Third Division
                           Docket No. 1-12-2048

Filed                      March 27, 2013

Held                       In an action arising from a dispute over contracts under which an Illinois
(Note: This syllabus       automobile specialty business agreed to cooperate with a similar Italian
constitutes no part of     business in developing the Illinois company’s “Midas System” in other
the opinion of the court   countries, the trial court properly dismissed the Illinois company’s breach
but has been prepared      of contract action filed in Illinois on the ground that the same cause of
by the Reporter of         action was pending between the same parties in Italy, since the Italian
Decisions for the          company filed its action first, the parties agreed that disputes could be
convenience of the         resolved in either Italy or Illinois, the trial court did not err in concluding
reader.)
                           that the Illinois company would not be prejudiced by bringing its action
                           as a counterclaim in Italy, and the connection to Illinois was not so strong
                           that dismissing the Illinois action would be unreasonable.

Decision Under             Appeal from the Circuit Court of Cook County, No. 12-L-1380; the Hon.
Review                     John C. Griffin, Judge, presiding.

Judgment                   Affirmed.
Counsel on                  Kirkland & Ellis LLP, of Chicago (John F. Hartmann, Bradley H.
Appeal                      Weidenhammer, and Debra K. Lefler, of counsel), for appellant.

                            Jenner & Block LLP, of Chicago (Craig C. Martin and Paul B. Rietema,
                            of counsel), for appellee.

Panel                       JUSTICE STERBA delivered the judgment of the court, with opinion.
                            Presiding Justice Neville and Justice Pierce concurred in the judgment
                            and opinion.

                                              OPINION

¶1          Plaintiff-appellant Midas International Corporation appeals from an order of the circuit
        court granting defendant-appellee Mesa, S.p.A.’s motion to dismiss its breach of contract
        action pursuant to section 2-619(a)(3) of the Code of Civil Procedure (Code) (735 ILCS 5/2-
        619(a)(3) (West 2010)), on the basis that the same cause of action is pending between the
        same parties in Milan, Italy. On appeal, Midas maintains that the court erred in its dismissal
        because the Milan action was not for the same cause as the Chicago action, as each arose out
        of a different contract; or, alternatively, that considerations of comity and the need to prevent
        multiplicity and harassment favored proceeding with the Chicago action. For the reasons that
        follow, we affirm.

¶2                                          BACKGROUND
¶3          This case arises out of two contracts executed in October 1998 between Midas and
        Magneti Marelli, S.p.A. (Marelli),1 both of which are in the business of automotive repair
        and service. The agreement for strategic alliance (ASA) provides that the parties will
        cooperate to develop the “Midas System” in specified countries throughout Europe as well
        as Brazil for a period of 15 years. The “Midas System” is defined as “Midas’s unique system
        for the establishment, management and operation of automotive specialty shops.”
        Specifically, Midas agreed to use its “proprietary know-how” to provide support and give
        advice to Marelli in the areas of marketing, operations management, shop development, and
        real estate selection, among others. The ASA specifies that disputes arising thereunder will
        be resolved by way of arbitration in Geneva, Switzerland, under the UNCITRAL arbitration
        rules in accordance with Swiss law.
¶4          Attached as annex C to the ASA is the license agreement, also signed in October 1998.

                1
                 In 2001, Marelli assigned its rights under these agreements to Magneti Marelli Services
        S.p.A., which subsequently changed its name to Mesa, S.p.A.

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     The license agreement grants Marelli the right to use and authorize others to use both the
     “Midas System” as well as “Licensed Marks”2 in the territory specified in the ASA. The
     scope of the licenses is limited to activities taken in connection with the performance of
     services in the automotive repair and service industry. In exchange for the use of the “Midas
     System” and “Licensed Marks,” Marelli agreed to pay Midas an initial license fee of
     $16,000,000, as well as monthly royalties based on the gross revenue of all retail shops in
     the specified territory that are using Midas’s intellectual property. Enforcement of the license
     agreement is governed by United States law, and the proper forums for resolving disputes
     thereunder are Chicago, Illinois, or Milan, Italy.
¶5       In 2009, Mesa initiated an arbitration before a Swiss tribunal on the grounds that Midas
     breached the ASA when it failed to make investments in projects dedicated to the needs of
     the Midas business in Europe. Mesa asked the arbitral tribunal to declare that it was entitled
     to terminate both the ASA and the license agreement and receive monetary relief. The
     arbitral tribunal found that it had no authority to rule on claims arising from the license
     agreement. The tribunal reasoned that although the license agreement may have an
     “economic link” to the ASA, because each agreement contained separate and distinct forum
     selection clauses, the tribunal was incompetent to decide any dispute regarding the license
     agreement. As such, the tribunal dismissed Mesa’s claim that it was entitled to terminate the
     license agreement without examining its merits.
¶6       Ultimately, in March 2011, the tribunal found that the ASA imposed on Midas a duty to
     cooperate for the development of the “Midas System,” which Midas breached. The tribunal
     awarded damages to Mesa, but these damages did not include a refund of royalty payments
     made under the license agreement.
¶7       Nine months after this award was issued, on December 29, 2011, Mesa filed suit against
     Midas in Milan, Italy, alleging that Midas was continuing to breach its cooperation
     obligations in the face of the findings of the arbitral tribunal (hereinafter Milan action). The
     Milan action begins by alleging that the ASA and the license agreement are interrelated and,
     therefore, a breach under the ASA “shall be construed” as a breach under the license
     agreement. Mesa goes on to specifically allege that Midas, as licensor, “has the obligation
     to develop and improve the Midas System for the duration of the Licence Agreement.”
     Because it believed that Midas had breached this obligation, Mesa suspended 80% of its
     royalty payments under the license agreement beginning on December 30, 2011. According
     to Mesa, this represented the price of the “Midas System” which “as a matter of fact” was
     never actually provided to Mesa. In its complaint, Mesa seeks a declaration that this
     suspension of payments is lawful.
¶8       Approximately one month after the Milan action was filed, Midas filed the instant suit
     against Mesa in the circuit court of Cook County (hereinafter Chicago action). Midas’s
     complaint, which contains a count alleging breach of contract and a count seeking
     declaratory judgment, alleges that it performed all conditions precedent to trigger Mesa’s

             2
              Licensed Marks are “all presently registered trademarks and service marks, together with
     any trademarks or service marks which may be registered by Midas in the future, in the Territory.”

                                                -3-
       obligation to make royalty payments in full. Accordingly, Midas alleges that Mesa has no
       basis in law or fact to refuse to pay 80% of the monthly royalty payments due under the
       license agreement.
¶9         Shortly after the Chicago action was filed, Mesa made a motion to stay or dismiss under
       section 2-619(a)(3) of the Code (735 ILCS 5/2-619(a)(3) (West 2010)), arguing that the
       Milan action and the Chicago action involved both the same cause and the same parties.
       After hearing arguments on the motion, the circuit court issued a written order dismissing
       Midas’s complaint without prejudice. The court found that the license agreement was
       inextricably intertwined with the ASA and held:
               “On the face of both Italian and Illinois complaints, each party alleges breach of the
           License Agreement. *** The past actions between Midas and Mesa, and the duties and
           obligations under the License Agreement are at issue in both cases. *** Because the
           pending Italian action was filed first, and constitutes the same cause as this current
           action, the motion to stay or dismiss should be granted.”
       In reaching this conclusion, the court also considered principles of comity, prevention of
       multiplicity, and which court could provide complete relief, and found that on balance, these
       factors favored dismissal. Further, the court determined that Midas would not suffer any
       prejudice if the case was dismissed because it could bring a counterclaim in Italy to obtain
       relief.
¶ 10       Midas timely filed this appeal.

¶ 11                                          ANALYSIS
¶ 12        Section 2-619(a)(3) of the Illinois Code of Civil Procedure allows for dismissal where
       “there is another action pending between the same parties for the same cause.” 735 ILCS 5/2-
       619(a)(3) (West 2010). Dismissal under section 2-619(a)(3) is a procedural tool used to avoid
       duplicative litigation. Kapoor v. Fujisawa Pharmaceutical Co., 298 Ill. App. 3d 780, 785
       (1998). To that end, the statute should be construed liberally. Schnitzer v. O’Connor, 274 Ill.
       App. 3d 314, 318 (1995). We will not reverse a trial court’s decision on a motion to dismiss
       pursuant to this section absent an abuse of discretion. Hastings Mutual Insurance Co. v.
       Ultimate Backyard, LLC, 2012 IL App (1st) 101751, ¶ 22.
¶ 13        In the instant case, no one disputes that the parties in both the Milan and Chicago actions
       are the same. Instead, Midas argues that the circuit court abused its discretion in finding the
       suits were for the same cause. Actions involve the same cause where the relief requested rests
       on substantially the same set of facts. Village of Mapleton v. Cathy’s Tap, Inc., 313 Ill. App.
3d 264, 266 (2000). “The crucial inquiry is whether the two actions arise out of the same
       transaction or occurrence, not whether the legal theory, issues, burden of proof or relief
       sought materially differs between the two actions.” Id. In other words, the purpose of the two
       actions need not be identical; it is enough that there is a substantial similarity of issues
       between them. Overnite Transportation Co. v. International Brotherhood of Teamsters,
       Chauffeurs, Warehousemen & Helpers of America, 332 Ill. App. 3d 69, 76 (2002).
¶ 14        We begin our analysis by comparing the allegations of both causes of action. Turning
       first to the Milan action, Mesa alleges that it is entitled to reduce the royalty payments

                                                 -4-
       mandated by the license agreement because Midas failed to comply with its obligation to
       cooperate in the development and improvement of the “Midas System,” one of the licensed
       products. The Chicago action, on the other hand, alleges that Midas did in fact comply with
       its contractual obligations, and it was Mesa that breached the license agreement when it
       unilaterally decided to reduce its royalty payments. On their face, these allegations appear
       to be mirror images of each other: Midas seeks a finding that Mesa breached the license
       agreement when it failed to make full royalty payments, while Mesa contends it was entitled
       to remit reduced royalty payments because Midas shirked its own obligations under the
       license agreement.
¶ 15        However, Midas argues that notwithstanding the multiple references to breach of the
       license agreement in the Milan action, Mesa’s claims in fact arise under the ASA. In support,
       Midas directs us to the language of the license agreement, which reads in pertinent part:
            “Midas International Corporation (‘Midas’) for, and in consideration of, the promises and
            covenants herein contained, hereby grants to Magneti Marelli, S.p.A. (‘Licensee’) the
            exclusive right, license and privilege (the ‘License’) to use and authorize others to use
            the Midas System and the Licensed Marks ***.”
       According to Midas, this agreement imposes on it only the obligation to grant Mesa the right
       to use the “Midas System.” Because the license agreement makes no explicit reference to a
       duty to cooperate and develop that system, Midas asks us to conclude that Mesa’s claims
       cannot possibly arise under it. We decline to do so.
¶ 16        Our task under section 2-619(a)(3) is not to go behind the face of the complaint and
       consider the merits, or lack thereof, of a party’s allegations. Instead, we will take all well-
       pled allegations as true. In re Chicago Flood Litigation, 176 Ill. 2d 179, 184 (1997) (motions
       to dismiss under section 2-619 admit all well-pled allegations in the complaint and
       reasonable inferences to be drawn therefrom). Here, the Milan action is premised on Mesa’s
       allegation that the license agreement and the ASA are related. This is not a mere conclusory
       allegation, but is in fact supported by language from both agreements. First, the ASA
       explicitly states that the conditions of the license agreement “are of the essence” to the ASA.
       Further, several terms, including “Midas System” appear in both agreements. Specifically,
       the ASA explains what is meant by “Midas System”–Midas’s “famous trademarks, valuable
       goodwill and know-how”–and the license agreement, annexed to the ASA, grants Mesa the
       right to use that system. The thrust of Mesa’s argument is that because of Midas’s alleged
       failure to cooperate in developing the system, Mesa has not been provided with a “Midas
       System” at all, and therefore, Midas has breached the license agreement. It may very well be
       that the Italian court will reject Mesa’s interpretation of the license agreement and conclude
       that Midas’s duty to assist in developing an operable “Midas System” is independent of
       Mesa’s duty to pay royalties for the use of the system. However, this is not a conclusion we
       can draw in ruling on a motion to dismiss.
¶ 17        Irrespective of whether both complaints arise under the license agreement, Midas also
       contends that because the allegations of each action are temporally distinct and require proof
       of different facts, they cannot stem from the same cause. Specifically, Midas argues that the
       Milan action is premised on Midas’s alleged breach of duty to cooperate, which occurred

                                                -5-
       months before Mesa’s failure to pay the full amount of royalties, the conduct giving rise to
       the Chicago action.
¶ 18        Illinois Central Gulf R.R. Co. v. Goad, 168 Ill. App. 3d 541 (1988), is instructive on this
       issue. There, the defendant filed suit in federal court pursuant to the Federal Employers’
       Liability Act (FELA) after he sustained injuries while employed by the plaintiff. Goad, 168
Ill. App. 3d at 542. The parties had previously reached a verbal settlement in which the
       defendant agreed to release the plaintiff from liability in exchange for monetary
       compensation, but the defendant declined to sign the written agreement. Id. Subsequently,
       the plaintiff filed a complaint in state court seeking a declaration that the verbal agreement
       was binding. Id. at 542-43. The circuit court granted the defendant’s motion to dismiss this
       declaratory judgment action pursuant to section 2-619(a)(3), but on appeal, the plaintiff
       argued the federal and state complaints were not “for the same cause” because the former
       was a FELA action, while the latter alleged breach of contract. Id. at 543-44. We rejected the
       plaintiff’s argument and declined to read section 2-619(a)(3) so restrictively. Id. Though both
       actions stemmed from different facts, the sole purpose of the state action was to create a
       defense to the action pending in federal court. Id. We reasoned that whatever the outcome
       of the state action, the prevailing party would necessarily use that result in the federal action.
       Id. It was this relationship between the cases that prompted us to affirm the judgment of the
       trial court. See id.
¶ 19        The same relationship exists in the case sub judice. The purpose of the Milan action is
       to preemptively defend against any claim that Mesa breached its duty to make monthly
       royalty payments, which is what Midas alleges in its Chicago action. Further, the prevailing
       party in the Chicago action will almost certainly use the result in the Milan action. If the
       circuit court found Mesa owed the full amount of royalties and was not entitled to a
       reduction, then Midas would use that determination against Mesa before the Italian court.
       Conversely, if the court found in favor of Mesa, then Midas would have no defense to the
       Milan action. Accordingly, just as the court in Goad, we hold that common sense points to
       the conclusion the two cases arise from the same cause. Id. at 545; see also Cathy’s Tap, 313
Ill. App. 3d at 267 (similarly analyzing Goad and concluding that where two cases are
       premised on resolution of a single question, they are for the same cause).
¶ 20        Philips Electronics, N.V. v. New Hampshire Insurance Co., 295 Ill. App. 3d 895 (1998),
       relied on by Midas, does not compel a different result. There, the court found that actions
       were not “for the same cause” where one involved coverage under an insurance policy and
       another concerned the insurer’s breach of fiduciary duty to the insured. Philips Electronics,
295 Ill. App. 3d at 906. In Philips, not only did the two actions stem from two different sets
       of facts separated in time, but the two actions were wholly independent from each other, in
       that there was no indication the result in one case would impact the result in the other. Id. at
       906-07. In contrast, here the outcome in one action will determine the outcome of the other
       action. As such, this case is more closely analogous to Goad and Cathy’s Tap, and we agree
       with the circuit court that the Milan and Chicago actions are for the same cause.
¶ 21        A finding that the same cause and same party requirements of section 2-619(a)(3) are met
       does not mandate dismissal, however. The circuit court must then weigh prejudice to the
       non-movant if the motion is granted against the policy of avoiding duplicative litigation to

                                                  -6-
       determine whether both suits should proceed. Performance Network Solutions, Inc. v.
       Cyberklix US, Inc., 2012 IL App (1st) 110137, ¶¶ 33, 36. This should involve consideration
       of the following factors: “comity; the prevention of multiplicity, vexation, and harassment;
       the likelihood of obtaining complete relief in the foreign jurisdiction; and the res judicata
       effect of a foreign judgment in the local forum.” Combined Insurance Co. of America v.
       Certain Underwriters at Lloyd’s, London, 356 Ill. App. 3d 749, 754 (2005) (citing Kellerman
       v. MCI Telecommunications Corp., 112 Ill. 2d 428, 447-48 (1986)). Importantly, courts are
       not required to consider each Kellerman factor (Kapoor, 298 Ill. App. 3d at 789), nor is the
       list all inclusive; a trial court may consider other factors which bear on exercising its
       discretion (Kaden v. Pucinski, 263 Ill. App. 3d 611, 617 (1994) (citing Natural Gas Pipeline
       Co. of America v. Phillips Petroleum Co., 163 Ill. App. 3d 136, 144 (1987))).
¶ 22        Because Midas relies heavily on A.E. Staley Manufacturing Co. v. Swift & Co., 84 Ill. 2d
245 (1980), in arguing the circuit court misapplied these factors, it is helpful to begin by
       outlining the unique procedural posture of that case. In Staley, the circuit court dismissed an
       in-state action in favor of a foreign action because the court erroneously believed it had no
       discretion to allow the in-state action to proceed. Staley, 84 Ill. 2d at 249, 253. The lower
       court therefore did not consider any of the factors outlined above. Id. at 253. The supreme
       court reversed after conducting a de novo analysis of the factors outlined in Kellerman. Id.
       at 253-57. In the instant case, however, the circuit court recognized that dismissal of the
       Chicago action was within its discretion and did in fact analyze the relevant factors.
       Therefore, in contrast to Staley, we review for an abuse of discretion. See Doutt v. Ford
       Motor Co., 276 Ill. App. 3d 785, 789 (1995) (distinguishing Staley on similar grounds).
       Importantly, this is the most deferential standard of review, with the exception of no review
       at all. Combined Insurance, 356 Ill. App. 3d at 758 (Quinn, J., dissenting) (quoting People
       v. Coleman, 183 Ill. 2d 366, 387 (1998)). As such, our role is not to substitute our judgment
       for that of the trial court or determine whether the court acted wisely. Schoon v. Hill, 207 Ill.
       App. 3d 601, 609 (1990). Instead, we will reverse only if the lower court’s ruling is
       “arbitrary, fanciful, or unreasonable, or where no reasonable person would take the same
       view.” Favia v. Ford Motor Co., 381 Ill. App. 3d 809, 815 (2008). It is with these principles
       in mind that we evaluate the circuit court’s decision to dismiss the Chicago action.
¶ 23        Initially, Midas argues that the court erred when it considered that the Milan action was
       first filed. Specifically, Midas challenges the accuracy of the court’s statement that “[g]iving
       deference to the first case filed is an important factor when determining a § 2-619(a)(3)
       motion.” While our supreme court has pointed out that the time of filing is not determinative
       (Staley, 84 Ill. 2d at 252), the court did not suggest this factor merited no consideration
       whatsoever. Indeed, as Mesa aptly notes, long after the decision in Staley, courts of review
       have regularly referred to the time of filing in evaluating motions under section 2-619(a)(3).
       See, e.g., Whittmanhart, Inc. v. CA, Inc., 402 Ill. App. 3d 848, 854 (2010); In re Estate of
       Hoch, 382 Ill. App. 3d 866, 870 (2008). Therefore, we cannot hold the circuit court abused
       its discretion in taking into account the order of filing in making its decision, particularly
       when there is no indication it viewed this factor as determinative. See Skipper Marine
       Electronics, Inc. v. Cybernet Marine Products, 200 Ill. App. 3d 692, 697 (1990) (finding no
       abuse of discretion where trial court weighed time of filing in conjunction with other factors).

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¶ 24        Alternatively, Midas suggests that in the event we find the circuit court’s consideration
       of the time of filing was not improper, it, rather than Mesa, filed first. In support of this
       argument, Midas offers an affidavit of Italian lawyer Frencesco Laderchi, who avers that a
       case does not commence before an Italian court until service is completed. Though Mesa
       filed its complaint in December 2011 and Midas did not file until February 2012, Midas was
       not served with Mesa’s complaint until February 28, 2012, two weeks after Midas served
       Mesa with the complaint in the Chicago action. It is sufficient to note that for purpose of
       determining which case was filed first under Illinois law, it is the time of filing, and not the
       time of service, that is determinative. See Skipper, 200 Ill. App. 3d at 696. Therefore, the
       circuit court correctly determined that Mesa filed first.
¶ 25        Next, Midas challenges the circuit court’s findings with regard to the prejudice Midas
       would face if it is forced to litigate in Milan, as well as the connection this case has with
       Illinois. Turning first to the issue of prejudice, the circuit court determined that Midas would
       not suffer prejudice from dismissal of its action, notwithstanding that it may have to file a
       counterclaim to obtain relief in Italy. To be sure, in Staley, one of the bases for the supreme
       court’s reversal of the trial court’s decision to grant the motion to dismiss was that dismissal
       would require the non-moving party to seek relief by way of counterclaim in a foreign court.
       Staley, 84 Ill. 2d at 254. However, denial of a motion to dismiss is not required as a matter
       of course whenever the non-moving party may need to proceed by way of counterclaim to
       obtain relief. See Skipper, 200 Ill. App. 3d at 697-98 (declining to read Staley as prohibiting
       dismissal under these circumstances); see also Natural Gas Pipeline, 163 Ill. App. 3d at 146
       (same). This is particularly true here, where we are not faced with a party who, upon
       dismissal, would be unexpectedly forced to seek relief in a foreign jurisdiction as in Staley
       or Combined Insurance. To the contrary, Midas was well aware it could be subject to suit in
       Milan, as the license agreement explicitly provides that either Chicago or Milan is a potential
       forum for dispute resolution. As a result, we hold that it was not error for the circuit court to
       conclude that Midas would not suffer prejudice from bringing its cause of action as a
       counterclaim in Milan.
¶ 26        Nor do we agree that the connection of this case with Illinois is so substantial that it was
       unreasonable for the circuit court to dismiss the Chicago action after considering principles
       of comity and the need to prevent multiplicity of litigation, vexation and harassment. Comity
       refers to the practice of deferring to the laws and interests of a foreign jurisdiction out of
       respect, good will and cooperation. Performance Network Solutions, 2012 IL App (1st)
110137, ¶ 34; see also In re Marriage of Kosmond, 357 Ill. App. 3d 972, 978 (2005). While
       the Italian court in the instant case is not applying its own laws (disputes under the license
       agreement are governed by United States law), Italy nevertheless has an interest in this
       litigation. Mesa is an Italian corporation, Italy is one of the countries in which the licensed
       product that is the subject of the dispute–the “Midas System”–is used, and royalty payments
       issue from Italy. Of course, Illinois has an interest as well; it is where Midas is headquartered
       and also where the royalty payments are received. The circuit court considered the respective
       interests of both forums and found them comparable. We agree. Illinois’s connection to the
       litigation is not so strong as to necessarily outweigh the need to avoid a multiplicity of
       litigation. See Continental Casualty Co. v. Radio Materials Corp., 366 Ill. App. 3d 345, 349

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       (2006) (where insurance coverage action concerned policies issued by Illinois insurers to
       Illinois insured by Illinois broker, no abuse of discretion for circuit court to conclude that
       dismissal was proper notwithstanding connection with Illinois). Likewise, dismissing the
       action would also mitigate concerns of vexation and harassment as the parties would not
       have to put on the same case in two separate forums.
¶ 27        On balance, we cannot say the circuit court abused its discretion where it considered
       relevant factors and weighed the prejudice to Midas before ultimately granting Mesa’s
       motion to dismiss the Chicago action.

¶ 28                                    CONCLUSION
¶ 29      For the reasons stated, we affirm the circuit court’s order granting Mesa’s motion to
       dismiss pursuant to section 2-619(a)(3).

¶ 30      Affirmed.

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