Court Opinion

ID: 9518513
Source: CourtListenerOpinion
Date Created: 2023-08-07 00:54:52.610013+00
Date Added: 2024-06-11T12:29:22.820053
License: Public Domain

JUSTICE THEIS, dissenting in part: I respectfully disagree with the majority’s opinion affirming summary judgment for Enterprise. First, I do not believe that Enterprise produced sufficient evidence to establish as a matter of law that Salmerón fraudulently induced it to sign the release. Additionally, Enterprise cannot maintain its claim that Salmerón breached her fiduciary duty. Therefore, I dissent. Summary judgment is a drastic means of disposing of litigation and should not be granted unless the movant’s right to judgment is clear and free from doubt. Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 43 (2004). In determining whether summary judgment is appropriate, we must construe the evidence strictly against the movant and liberally in favor of the nonmoving party. Adams, 211 Ill. 2d at 43. First, Enterprise contended that it was entitled to summary judgment on its claim for fraud in the inducement. Fraud in the inducement of a contract is a defect which renders a contract voidable at the election of the innocent party. Tower Investors, LLC v. 111 East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1030 (2007). In order for a misrepresentation to constitute fraud that would permit a court to set aside a contract, the party seeking to do so must establish that there was “ ‘ “a representation in the form *** of a material fact, made for the purpose of inducing a party to act; it must be false and known by the party making it to be false, or not actually believed by him, on reasonable grounds, to be true; and the party to whom it is made must be ignorant of its falsity, must reasonably believe it to be true, must act thereon to his damage, and in so acting must rely on the truth of the statement.” ’ ” Tower Investors, 371 Ill. App. 3d at 1030-31, quoting James v. Lifeline Mobile Medics, 341 Ill. App. 3d 451, 456 (2003), quoting Wilkinson v. Appleton, 28 Ill. 2d 184, 187 (1963). The defendant’s knowledge of the falsity of the statement, or his deliberate concealment with the intent to deceive, is an essential element of a common law fraud claim. Fox v. Heimann, 375 Ill. App. 3d 35, 47 (2007). The plaintiff must prove such fraud claims by clear and convincing evidence. Fox, 375 Ill. App. 3d at 47. Enterprise contended that Salmerón falsely represented that she would release all claims against Enterprise, while knowing that she intended to file the qui tarn action against it. Enterprise submitted Tornatore’s affidavit in support, in which he stated that Salmerón agreed to release Enterprise and Tornatore from “any and all actions *** of whatsoever nature, growing out of or related in any way to any and all known and unknown[,] foreseen and unforeseen damages or consequences relating to her employment,” which language is taken directly from the release. Implicit in Enterprise’s argument is the premise that the release bars the filing of a qui tarn lawsuit. To evaluate that claim, we must examine the scope of the release. A release is a contract whereby a party relinquishes a claim to the person against whom the claim exists. Farmers Automobile Insurance Ass’n v. Kraemer, 367 Ill. App. 3d 1071, 1073 (2006). Accordingly, a release is subject to the rules governing the construction of contracts. Fuller Family Holdings, LLC v. Northern Trust Co., 371 Ill. App. 3d 605, 614 (2007). Construction of a release is a question of law. Fuller Family Holdings, 371 Ill. App. 3d at 614. The intention of the parties controls the scope and effect of a release, and this intent is discerned from the express language of the release as well as the circumstances of its execution. Fuller Family Holdings, 371 Ill. App. 3d at 614; Kraemer, 367 Ill. App. 3d at 1074. The release must spell out the intention of the parties with great particularity and must be strictly construed against the benefitting party. Fuller Family Holdings, 371 Ill. App. 3d at 614. Where the terms of a release are clear and explicit, the court must enforce them as written. Fuller Family Holdings, 371 Ill. App. 3d at 614. However, the release will not be construed to include claims not within the contemplation of the parties at the time the agreement was executed. Kraemer, 367 Ill. App. 3d at 1074. Where a release contains words of general release in addition to recitals of specific claims, the words of general release are limited to the particular claim to which reference is made. Carona v. Illinois Central Gulf R.R. Co., 203 Ill. App. 3d 947, 951 (1990); Fuller Family Holdings, 371 Ill. App. 3d at 614. That is, we must give effect to a more specific clause and qualify or reject a more general clause as the specific clause makes necessary. American Federation of State, County & Municipal Employees v. State Labor Relations Board, 274 Ill. App. 3d 327, 337 (1995); Kraemer, 367 Ill. App. 3d at 1073 (“general words [of release] are limited to things or persons of the same kind or class as those which are particularly mentioned”). In any event, no language of a release, “no matter how all-encompassing,” will prevent a reviewing court from inquiring into the circumstances surrounding the execution of the release to ascertain whether it accurately reflected the parties’ intention. Kraemer, 367 Ill. App. 3d at 1074, citing Carlile v. Snap-on Tools, 271 Ill. App. 3d 833, 838 (1995). In this case, the majority focuses on the following language in the release: “The parties hereby fully and forever discharge and release each other *** from any and all actions [and] *** claims *** relating in any way to events occurring prior to and including the date of execution of the Agreement *** growing out of or related in any way *** to all known and unknown *** damages or consequences relating to [Salmeron’s] employment [by Enterprise].” The majority tacitly concludes, with no analysis, that the qui tarn claim was sufficiently “related to [Salmeron’s] employment” to be barred by the release. However, the release continues: “[W]ithout in any way limiting the generality of the foregoing language, Salmeron’s release shall include any claims for relief or causes of action under Title VII of the Civil Rights Act of 1964 ***; the Family and Medical Leave Act of 1993 [FMLA] ***; the Americans with Disabilities Act [ADA] ***; the Rehabilitation Act of 1973 ***; the Civil Rights Enforcement Statutes ***; the Age Discrimination in Employment Act [ADEA] ***; the Older Workers Benefit Protection Act ***; the Fair Labor Standards Act of 1938 ***; the National Labor Relations Act [NLRA] ***; the Illinois Human Rights Act ***; and any other federal, state, or local statute *** dealing in any respect with discrimination in employment, and in addition, from any claims *** brought on the basis of wrongful discharge, breach of an oral or written agreement or contract, misrepresentation, defamation, interference with contract, intentional or negligent infliction of emotional distress ***, or sexual harassment.” The release also states that it was intended to resolve “the issues between the parties *** concerning Salmeron’s employment with [Enterprise] and resolving all claims and/or potential claims *** for sexual harassment and discrimination as more fully set forth in Salmeron’s complaint filed in Rhonda Salmerón v. Enterprise Recovery System, Inc. and Sam Tornatore, case number 03 C 3332.” Applying the aforementioned principles of contract construction, I do not believe that the parties intended to include the qui tarn claim within the scope of this release and, therefore, Salmerón was not barred from filing her qui tarn claim. Although the release purports to bar “any and all actions *** of whatsoever nature, growing out of or *** relating to her employment,” such broad language, “no matter how all-encompassing,” cannot bar claims that were not within the contemplation of the parties at the time the release was drafted. See Kraemer, 367 Ill. App. 3d at 1074; Carlile, 271 Ill. App. 3d at 838. This broad language must be circumscribed by the specific causes of action enumerated in the release. See American Federation of State, County & Municipal Employees, 274 Ill. App. 3d at 337. Those causes of action — including actions under Title VII, FMLA, ADA, ADEA, civil rights enforcement statutes, the Illinois Human Rights Act, and actions “dealing in any respect with discrimination in employment” under the common law — concern the type of harassment and employment discrimination claims that were the subject matter of Salmeron’s then-pending sexual harassment lawsuit that gave rise to this release. See Carona, 203 Ill. App. 3d at 951. The release specifically prohibits Salmerón from bringing such harassment and employment discrimination causes of action, which is consistent with the parties’ stated intention that the release resolved “all claims and/or potential claims *** for sexual harassment and discrimination as more fully set forth in Rhonda Salmeron v. Enterprise Recovery System, Inc. and Sam Tornatore, case number 03 C 3332.” Although Salmerón apparently learned of the activities underlying her qui tarn claim while she was employed at Enterprise, that claim cannot be said to be “related to her employment” in the context of the release as the parties originally intended. As discussed, the release seeks waiver of any statutory or common law harassment or employment discrimination claims Salmerón may have. The qui tarn claim derives from Enterprise’s alleged violation of the federal False Claims Act, which imposes civil liability on those who knowingly defraud the federal government by presenting and receiving payment for false or fraudulent claims. 31 U.S.C. §3729(a)(l) (2006); see also Rockwell International Corp. v. United States, 549 U.S. 457, 463, 167 L. Ed. 2d 190, 200, 127 S. Ct. 1397, 1403 (2007). The nature of the qui tarn claim is unrelated to employment discrimination and harassment and cannot be construed to come within the scope of the release. See Fuller Family Holdings, 371 Ill. App. 3d at 615. Therefore, because Salmerón was not prohibited from bringing the qui tarn claim under the terms of the release, she could not have made the misrepresentation asserted by Enterprise in this case. Salmerón’s admissions do indeed establish that she was gathering documentation in support of the qui tarn claim before she signed the release and that she “did not intend to release the [qui tarn] claim.” However, those admissions are not inconsistent with the language of the release, in which the parties only intended for Salmerón to relinquish any pending and future harassment or employment discrimination claims against Enterprise and Tornatore. Thus, Salmerón could reasonably have believed that she could pursue her qui tarn without violating the terms of the release and did not knowingly make the claimed false statement. See Tower Investors, 371 Ill. App. 3d at 1030-31. Therefore, I believe that Enterprise has failed to meet its burden to establish by clear and convincing evidence that Salmerón fraudulently induced it to enter into the release and summary judgment was inappropriate. See Fox, 375 Ill. App. 3d at 47; Tower Investors, 371 Ill. App. 3d at 1030-31. In addition, I do not believe that Enterprise is entitled to summary judgment on its breach of fiduciary duty claim. To prevail on a breach of fiduciary duty claim, a plaintiff must establish: (1) a fiduciary duty on the part of the defendant; (2) the defendant’s breach of that duty; (3) an injury; and (4) proximate cause between the breach and the injury. Alpha School Bus Co. v. Wagner, 391 Ill. App. 3d 722, 747 (2009). I do not believe that Enterprise has established Salmerón’s fiduciary duty, nor has it demonstrated that it suffered any injury. In its complaint, Enterprise alleged that Salmerón was “an employee and/or corporate officer” of Enterprise and, as such, she owed Enterprise a fiduciary duty of loyalty. However, it has not demonstrated that Salmerón violated any duty of loyalty as an employee or that she owed Enterprise a fiduciary duty as an officer of the corporation. Employees and corporate officers are held to different standards with respect to their fiduciary duties to a corporation. Cooper Linse Hallman Capital Management, Inc. v. Hallman, 368 Ill. App. 3d 353, 357 (2006). An employee’s duty to a company generally resembles a principal-agency relationship. Corroon & Black of Illinois, Inc. v. Magner, 145 Ill. App. 3d 151, 160 (1986). An employee’s duty of loyalty most frequently arises in the context of the employee’s duty to not compete with the employer while still employed by it. See, e.g., Hallman, 368 Ill. App. 3d at 357; Wagner, 391 Ill. App. 3d at 747. In such cases, an employee may plan, form, and outfit a rival company in the same industry as the employer while employed, so long as he does not engage in competition until after his resignation. Hallman, 368 Ill. App. 3d at 356-57. The present case does not involve Salmeron’s establishment of a rival company; Enterprise has not alleged or presented any evidence of Salmeron’s prohibited competition. Rather, Enterprise has erroneously asserted that Salmeron’s breach of fiduciary duty arose in her capacity as an employee. Therefore, Salmeron’s duty of loyalty as an employee cannot be the basis of her liability here. On the other hand, corporate officers owe a heightened fiduciary duty of loyalty to their corporate employer not to: (1) actively exploit their positions within the corporation for their own personal benefit; or (2) hinder the ability of the corporation to continue the business for which it was developed. Hallman, 368 Ill. App. 3d at 358. Here, Enterprise contended that Salmerón breached her duty by: (1) allegedly using Enterprise’s corporate assets in the form of its confidential and proprietary documents for her own benefit by submitting them in support of her qui tarn claim, in which she would stand to collect part of the monetary judgment, if successful; and (2) failing to inform Tornatore or any other corporate officer of her suspicion that Enterprise was submitting false claims, which allegedly hindered Enterprise from continuing its business of performing collection activities for the United States Department of Education. Thus, Enterprise intended to allege that Salmerón violated her fiduciary duty as an officer of the company. Although Enterprise seeks to impose this heightened fiduciary duty upon Salmerón, it has failed to demonstrate that that standard applies in this case. It has long been held that the directors and officers of a corporation are those entrusted with the management of corporate property for the benefit of the shareholders. Price v. State, 79 Ill. App. 3d 143, 149 (1979). The burden of pleading and proving the existence of the fiduciary relationship lies with the party seeking to establish it. Citicorp Savings of Illinois v. Rucker, 295 Ill. App. 3d 801, 809 (1998). In its motion for summary judgment, Enterprise admitted that Salmerón was “technically not an officer or director of [Enterprise]” but, rather, was a general manager. Nevertheless, it claimed that Comedy Cottage, Inc. v. Berk, 145 Ill. App. 3d 355, 360-61 (1986), imposes the same heightened fiduciary duty owed by directors and officers upon a general manager of a corporation. However, Enterprise’s reliance on Comedy Cottage is entirely misplaced. The defendant in that case was vice president of the corporation as well as the general manager. The holding in that case concerned a corporate officer’s liability for breaching his fiduciary duty — after resigning his corporate post but retaining a managerial position — when the offending transaction began during his tenure as a corporate officer. Comedy Cottage, 145 Ill. App. 3d at 360. The court made clear that the defendant learned of certain ongoing contract negotiations because of his “confidential position” as vice president. He then “used the knowledge gained as a result of his position [as vice president]” to enter into an agreement in violation of his fiduciary duty to the corporation. Comedy Cottage, 145 Ill. App. 3d at 360-61. In this case, there is no allegation that Salmerón ever served as a corporate director or officer, and Comedy Cottage does not independently expand the corporate duty of loyalty to general managers. Notwithstanding Enterprise’s admission that Salmerón was not a corporate officer or director, the evidence presented by Enterprise fails to establish that Salmeron’s duties came within the scope of those performed by corporate officers. Corporate officers are elected by the board of directors and “perform such duties in the management of the property and affairs of the corporation as may be provided in the bylaws, or as may be determined by resolution of the board of directors.” 805 ILCS 5/8.50 (West 2006). Enterprise did not submit a copy of the bylaws or any other evidence that would establish the duties of a corporate officer. It merely alleged that Salmeron’s duties included maintaining industry-specific computer software, training employees in the use of the software, and supervising employees responsible for collecting revenue. By Enterprise’s own description, Salmeron’s duties were limited to management of computer software and those employees who used it. It makes no assertion, and likewise offers no proof, that Salmerón was responsible in any way to the shareholders for the management of the property of the corporation as a whole. Salmeron’s duties, as enumerated by Enterprise, are insufficient to classify her as a corporate director or officer. See Price, 79 Ill. App. 3d at 149; Rucker, 295 Ill. App. 3d at 809. Thus, there is no basis upon which to impose the fiduciary duty of loyalty owed by corporate officers and directors upon Salmerón. Even if Enterprise could establish that Salmerón breached a fiduciary duty of loyalty of whatever degree, it did not demonstrate that it suffered any injury resulting from the breach. Enterprise claimed that Salmerón misappropriated its corporate assets, in the form of documents, for her personal benefit because she would receive a portion of any judgment awarded in the qui tam lawsuit in which the documents were used. However, Enterprise failed to allege how it was thereby harmed. The False Claims Act claim filed by Salmerón was dismissed and Enterprise was not ordered to pay any judgment. Nor did Enterprise seek to recover the de minimus value of the documents themselves. Additionally, Enterprise claimed that because Salmerón failed to inform Tornatore of the suspected fraud, it was hindered from continuing its business of performing collection activities for the United States Department of Education. However, it produced no evidence demonstrating that it lost its contract with the Department of Education, or any other client, or that it was otherwise prevented from continuing its collection business. Therefore, Enterprise has not established that it suffered any injury as a result of Salmeron’s alleged breach of fiduciary duty. For all of the foregoing reasons, I would reverse the circuit court’s judgment and remand for further proceedings.