Court Opinion

ID: 3146329
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:15:06.85604+00
Date Added: 2024-06-11T12:12:49.668367
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                         Appellate Court

                      G.M. Sign, Inc. v. Schane, 2013 IL App (2d) 120434

Appellate Court            G.M. SIGN, INC., Individually and as the Representative of a Certified
Caption                    Class, Plaintiff-Appellee, v. MICHAEL SCHANE, Defendant (State
                           Farm Fire and Casualty Company, Nonparty In Interest-Appellant).

District & No.             Second District
                           Docket No. 2-12-0434

Filed                      March 1, 2013

Held                       Although defendant’s insurer disclaimed any coverage in the underlying
(Note: This syllabus       action against its insured under the Telephone Consumer Protection Act,
constitutes no part of     the insurer had standing to file a petition under section 2-1401 of the
the opinion of the court   Code of Civil Procedure to vacate the subsequent judgment incorporating
but has been prepared      the underlying parties’ settlement, including a provision that the judgment
by the Reporter of         would be satisfied by the insurer, even though the insurer was not a party,
Decisions for the          since the insurer acted diligently, it only learned of the settlement after a
convenience of the         coverage complaint was filed, and its petition raised potential meritorious
reader.)
                           claims; therefore, the dismissal of the petition was reversed and the cause
                           was remanded for an evidentiary hearing.

Decision Under             Appeal from the Circuit Court of Lake County, No. 10-CH-4480; the
Review                     Hon. Mitchell L. Hoffman, Judge, presiding.

Judgment                   Reversed and remanded, with directions.
Counsel on                 Michael C. Borders and Rosa M. Tumialan, both of Dykema Gossett
Appeal                     PLLC, of Chicago, for appellant.

                           Brian J. Wanca, David M. Oppenheim, and Jeffrey A. Berman, all of
                           Anderson & Wanca, of Rolling Meadows, and Phillip A. Bock, of Bock
                           & Hatch, LLC, of Chicago, for appellee.

Panel                      PRESIDING JUSTICE BURKE delivered the judgment of the court, with
                           opinion.
                           Justices McLaren and Hudson concurred in the judgment and opinion.

                                             OPINION

¶1          The underlying lawsuit in this appeal is a class action that plaintiff, G.M. Sign, Inc.,
        individually and as the representative of a certified class, brought against defendant, Michael
        Schane, asserting claims under the federal Telephone Consumer Protection Act (TCPA) (47
        U.S.C. § 227 et seq. (2000)), common-law conversion, and violations of the Illinois
        Consumer Fraud and Deceptive Business Practices Act (Fraud Act) (815 ILCS 505/1 et seq.
        (West 2010)). Schane’s insurer, State Farm Fire & Casualty Company, disclaimed any
        insurance coverage obligation. On December 16, 2010, the circuit court of Lake County
        entered its final approval of a settlement agreement and a judgment against Schane for $4.9
        million, to be collected solely from State Farm. On February 24, 2011, G.M. Sign filed a
        separate declaratory judgment action against State Farm (coverage action) (case No. 11-MR-
        315). On November 29, 2011, the trial court in the coverage action found that State Farm had
        a duty to defend and indemnify the judgment entered against Schane in the class action suit,
        provided that the settlement was reasonable. Thereafter, on December 30, 2011, State Farm
        filed a petition to vacate or modify the class action judgment, under section 2-1401 of the
        Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2010)). The trial court dismissed
        the petition, finding a lack of due diligence based on State Farm’s decision not to accept the
        defense tender.
¶2          State Farm appeals that decision, contending that State Farm was diligent in the original
        action and in bringing the petition and that the trial court applied an incorrect standard to
        assess whether State Farm was diligent. State Farm further contends that the petition raised
        a meritorious defense. G.M. Sign questions whether State Farm had standing to file the
        section 2-1401 petition and thus whether this court has jurisdiction to address this appeal. We
        find that State Farm had standing to bring the section 2-1401 petition and that State Farm
        was diligent in the original action and in bringing the petition. Accordingly, we reverse the
        judgment of the trial court and remand the cause for an evidentiary hearing as to whether the
        petition raised a meritorious defense.

                                                 -2-
¶3                                           FACTS
¶4        G.M. Sign filed a three-count class action complaint on August 12, 2010. The complaint
     was directed against Academy Engraving Company and Schane. It alleged that Schane, an
     officer and director of Academy Engraving, sent mass, unsolicited, facsimile advertisements
     to G.M. Sign and at least 39 other recipients on September 6, 2007, without permission. The
     complaint alleged violations of the TCPA, common-law conversion, and violations of the
     Fraud Act. A motion for class certification accompanied the complaint. Academy Engraving
     was later dismissed as a defendant.
¶5        Schane promptly tendered the complaint to State Farm for insurance coverage. By letter
     dated September 10, 2010, State Farm disclaimed any coverage obligation to Schane in
     connection with this action. Schane filed an appearance and answer to the complaint on
     September 30, 2010.
¶6        G.M. Sign filed a motion for preliminary approval of a settlement agreement on October
     5, 2010. The motion attached several exhibits, including the settlement agreement, which
     was signed by Schane on October 1, 2010. Under the terms of the agreement, Schane agreed
     to entry of a judgment against him in the amount of $4.9 million to be collected solely from
     his insurer. The settlement was preliminarily approved on October 7, 2010. A fairness
     hearing was set for December 16, 2010.
¶7        G.M. Sign filed affidavits showing notice to the class. G.M. Sign filed a motion for leave
     to file a corrected motion for preliminary approval of the settlement on November 12, 2010.
     The motion was intended to correct the original motion’s reference to a stipulated judgment
     in the amount of $3.9 million instead of $4.9 million. G.M. Sign also filed a motion for leave
     to file an amended class action complaint on November 12, 2010, the purpose of which was
     to “plead into possible insurance coverage available under Schane’s insurance policies.”
¶8        The proposed amended class action complaint asserted largely the same preliminary
     allegations as the original complaint. Count I, the TCPA count, remained the same. The
     common-law conversion and Fraud Act counts were changed. Count II, the conversion count,
     no longer incorporated all of the original allegations and instead selectively incorporated only
     those allegations that made no express reference to the TCPA. Count III, the Fraud Act
     count, also incorporated only those allegations that made no reference to the TCPA. The
     amended class action complaint was based on the same faxes allegedly sent by Schane on
     September 6, 2007. The motions were presented and granted on November 18, 2010, with
     no objection. On December 16, 2010, following a hearing held to determine whether the
     settlement should be approved as fair, reasonable, and adequate, the trial court entered its
     final approval of the settlement. The order included a judgment against Schane for $4.9
     million, to be satisfied by State Farm.
¶9        Thereafter, on February 8, 2011, G.M. Sign filed a citation to discover assets, directed
     to State Farm. There is no indication in the record that State Farm was served with the
     citation. On February 24, 2011, G.M. Sign filed the coverage action against State Farm,
     seeking a declaration that insurance coverage existed for the claims asserted against Schane
     in the amended class action suit. State Farm asserted that no coverage existed for the TCPA
     claims and averred that the settlement was not reasonable.

                                               -3-
¶ 10        By order dated November 29, 2011, the trial court in the coverage action granted, in part,
       G.M. Sign’s motion for judgment on the pleadings, finding that State Farm had the duty to
       defend and indemnify Schane in the class action suit. The trial court reserved the question
       of the reasonableness of the settlement, to be addressed in further proceedings.
¶ 11        On December 29, 2011, State Farm filed a section 2-1401 petition to vacate or modify
       the trial court’s December 16, 2010, judgment, alleging that G.M. Sign was inadequate as
       the class representative, the notice provided to the class was inadequate, and the settlement
       terms were unfair to the absent class members. State Farm explained that it was not a party
       to the original action because it denied Schane’s defense tender, based on a TCPA exclusion
       in Schane’s business policy, a fact communicated to both Schane and counsel for G.M. Sign.
       State Farm further explained that it was diligent in pursuing relief under section 2-1401
       because it was bringing the petition within one month of receiving and reviewing discovery
       responses that uncovered the facts supporting the petition. State Farm argued that, although
       a nonparty, it had standing to file the petition under the holding in Hurlbert v. Brewer, 386
       Ill. App. 3d 1096, 1103-04 (2008).
¶ 12        As to the substantive argument, State Farm maintained that G.M. Sign was an inadequate
       class representative because it was not a member of the class certified by the trial court. G.M.
       Sign alleged in both the original and amended complaints that it received an unsolicited fax
       on September 6, 2007. However, the period certified by the trial court, as proposed by G.M.
       Sign, began on September 7, 2007. State Farm also questioned whether G.M. Sign’s TCPA
       claims were time barred.
¶ 13        As to notice, State Farm questioned the efficacy of sending notice to fax numbers in
       October 2010 without verifying that the current owners of those numbers also owned them
       from September 2007 through June 18, 2008. State Farm observed that it was possible to
       identify all putative class members and send direct mail notice to them. State Farm also
       questioned the accuracy of the notice, to the extent that it permitted recovery in excess of the
       statutory maximum, and the need for a cy pres provision, except to maximize fees for class
       counsel, given the identifiability of the class members.
¶ 14        G.M. Sign argued that State Farm’s petition was procedurally improper because State
       Farm was a nonparty and lacked the right to intervene. G.M. Sign further argued that State
       Farm failed to establish meritorious defenses because none of the “laundry list” of issues
       raised would have prevented entry of the judgment. However, G.M. Sign did not challenge
       State Farm’s diligence in bringing the petition. Schane did not file a response and is not a
       party to this appeal.
¶ 15        In its response, State Farm refuted G.M. Sign’s contention that it lacked standing or was
       required to intervene to pursue section 2-1401 relief. State Farm emphasized that its petition
       was not a continuation of the dispute being litigated in the pending coverage action. Rather,
       it was intended to address defects brought to light based on discovery responses related to
       the execution and final approval of the settlement agreement.
¶ 16        At the hearing on State Farm’s petition, held on March 8, 2012, the trial court questioned
       State Farm’s diligence. The court questioned how State Farm could establish diligence when
       it chose not to participate in the class action litigation despite being aware of it.

                                                 -4-
¶ 17        State Farm responded with the following explanation. The original complaint was
       tendered to State Farm in August 2010 and contained three counts that all supported TCPA
       violations, coverage for which was excluded under the insurance policy and denied by State
       Farm on that basis. The amended complaint was filed on November 18, 2010, after the
       settlement was executed, and it purported to plead around the policy’s TCPA exclusion. The
       trial court granted final approval on December 16, 2010, and then the coverage action was
       filed by G.M. Sign. State Farm asserted that it first learned of the settlement by virtue of the
       coverage action, which was based on the amended complaint, to which G.M. Sign attached
       only the December 16 final approval order, not the settlement agreement itself.1 State Farm
       was served with the amended complaint in or around March 2011. The legal question on the
       application and construction of the TCPA exclusion was ruled on in August 2011, at which
       time attention turned to discovery on the reasonableness of the settlement. State Farm
       asserted that only in the course of reviewing recently served answers to discovery did State
       Farm learn of the facts that supported its section 2-1401 petition.
¶ 18        The trial court again questioned whether State Farm had the opportunity to participate
       in the litigation from its inception:
                “THE COURT: But you had the opportunity to participate in this litigation from the
            start. You made a decision not to because you didn’t think you owed your insured any
            coverage, but you also knew that a coverage dispute was a possibility. So how does that
            amount to you being diligent in presenting issues to this Court in this lawsuit?”
¶ 19        Counsel for State Farm questioned whether the trial court was applying an estoppel
       analysis rather than one of due diligence:
                “MS. TUMIALAN [State Farm’s attorney]: Well, I think those are two different
            issues, Judge. One involves estoppel against [the insurer] for not doing what it’s
            supposed to under Illinois law and Judge Hall found that–
                THE COURT: I’m not asking about estoppel, I’m asking about your due diligence
            in presenting these issues to this Court.
                MS. TUMIALAN: Well, the due diligence is, Judge, once we have the discovery on
            the reasonableness of the settlement, which is the only issue left in the [coverage] action,
            reviewing all these documents we noticed because we received those documents in
            November of 2011 and we filed our petition within a month.”
¶ 20        The trial court questioned State Farm’s motive in filing the petition. The argument then
       turned to the substantive points of the petition. The court found important the fact that there
       was an address that could be tied to each fax number.
¶ 21        The court pondered whether it was empowered to do anything other than vacate the
       December 16 order, as State Farm suggested. State Farm responded that the court was sitting
       in equity and could fashion the proper relief, which included modifying the order to provide

               1
               Counsel for G.M. Sign conceded during oral argument that the settlement had been
       preliminarily approved but G.M. Sign did not include the settlement agreement when it tendered the
       amended complaint to State Farm.

                                                  -5-
       for more appropriate and acceptable class notice.
¶ 22        G.M. Sign countered that State Farm’s petition was defective because State Farm failed
       to serve G.M. Sign. The trial court found that G.M. Sign forfeited the issue for failing to raise
       it. G.M. Sign next argued that State Farm was attempting to relitigate the underlying suit and
       that State Farm had sufficient notice of the suit and chose not to respond.
¶ 23        As to the list of fax recipients, G.M. Sign explained that, after notice was sent, G.M. Sign
       asked for a copy of that list from the third party that sold it to Schane. The third party did not
       have the list Schane purchased but agreed to reconstruct it by running a search using the
       same terms in its 2010 database. Notice was then faxed to the numbers on the reconstructed
       list. The trial court questioned why addresses were not compiled before fax notices were sent.
       G.M. Sign stated that direct mail notice was not required. G.M. Sign added that a new
       mailing with a claim form could be sent to the class if the coverage action were resolved in
       its favor.
¶ 24        Regarding its adequacy as class representative, G.M. Sign admitted making a
       “typographical error” when counsel drafted the settlement agreement but it insisted that it
       was nevertheless part of the class.
¶ 25        State Farm explained that direct mail notice to the identifiable members of the putative
       class was not sent in October 2010 because G.M. Sign was in a hurry to consummate the
       settlement before State Farm filed a declaratory action. State Farm also addressed the trial
       court’s concern that vacating the judgment would leave Schane at the mercy of a defense
       attorney interested in defeating coverage. State Farm explained that, if any defense were
       needed, State Farm would not be able to control it due to the reservation of rights in the
       TCPA exclusion. Schane’s attorney of choice would remain his attorney. State Farm also
       reminded the court that it could preserve the settlement by modifying it along the lines
       suggested in State Farm’s petition.
¶ 26        The trial court observed that State Farm seemed to be arguing on its own behalf and not
       on behalf of absent class members. The trial court further observed that “some of the
       suggestions that have been made regarding how the settlement could have been structured
       differently are probably worthy of consideration. If State Farm had wanted to participate in
       this action, it had every opportunity to do so.” The trial court found that State Farm was not
       diligent in pursuing relief. The court stated:
                 “So the threshold issue here, before I get into anything else, is whether–is whether
            a 2-14–the prerequisites for a 2-1401 have been met, one of which is that you had to have
            been diligent in presenting these issues to the trial court prior to the judgment being
            entered. Clearly that is not the case here. State Farm was aware of the litigation and made
            a conscious decision not to participate. There is no stretch of the imagination where that
            equals due diligence presenting the issue to the trial court. It made a conscious decision.
            I understand that maybe the claims changed and maybe that changed their view of the
            coverage issue, but I think Counsel for Plaintiffs here is correct, State Farm should have
            reasonably anticipated that the claims could have changed during the course of the
            litigation and still they made a conscious decision not to participate. This is simply
            coming in with 20/20 hindsight and wanting to redo everything when you have had a

                                                  -6-
          chance to participate to begin with.
              So I don’t think there is any basis for granting the 2-1401 because there is no showing
          of due diligence by State Farm.”
¶ 27      A corresponding order dismissing State Farm’s petition was also entered on March 8,
       2012. This timely appeal followed.

¶ 28                                          ANALYSIS
¶ 29                                            Standing
¶ 30       We first address G.M. Sign’s contention that State Farm had no standing to bring its
       section 2-1401 petition, because State Farm was not named as a party to the class action suit
       and never applied to intervene in that action. G.M. Sign argues that “State Farm cannot
       execute an end-run around the requirements for appellate jurisdiction by ignoring that
       requirement, improperly titling its Motion as one brought under Section 2-1401 of the Code
       of Civil Procedure and then invoking [Illinois Supreme Court] Rule 304(b)(3).” We disagree.
¶ 31       In Hurlbert, the plaintiffs, administrators of a patient’s estate, brought an action against
       the defendant, a dentist, arising out of the patient’s death following the extraction of multiple
       teeth. The trial court entered a stipulated judgment in favor of the plaintiffs with the further
       stipulation that the plaintiffs would look solely to the defendant’s insurance company for
       satisfaction. Hurlbert, 386 Ill. App. 3d at 1098. The plaintiffs and the defendant later filed
       a joint section 2-1401 petition to amend the judgment, seeking to increase the amount,
       because of mutual mistake as to the amount of available insurance coverage. The petition
       was granted. Id. at 1099. The insurance company then filed a section 2-1401 petition to
       vacate the amended judgment, asserting that the mutual mistake was an insufficient basis for
       amending the judgment and that the defendant had been informed of his policy limits before
       the initial judgment was entered. Id. The plaintiffs filed a motion to dismiss asserting that the
       insurance company lacked standing to file its petition to vacate, because it was no longer a
       party to the case and did not file a petition to intervene. Id. The trial court granted the
       plaintiffs’ motion to dismiss the petition to vacate. Id. at 1099-1100.
¶ 32       The insurance company argued on appeal that it had standing to file the petition as a
       nonparty because it would be injured by the increased judgment amount and would derive
       a benefit from the amended judgment being vacated. Id. at 1102. The appellate court first
       determined that the insurer was not a party and then recited “a few narrow exceptions”
       allowing a nonparty to seek relief under section 2-1401, those being if the person is privy to
       the record, is injured by the judgment and will derive a benefit from its reversal, or is
       competent to release error. Id. State Farm argues that Hurlbert is indistinguishable from the
       present case.
¶ 33       G.M. Sign asserts that Hurlbert departs from the general rule that, “if the court had
       jurisdiction of the parties and the subject matter[,] the judgment could not be attacked by one
       not a party to the proceedings.” In re Estate of Reilly, 68 Ill. App. 3d 906, 909 (1979). In
       Reilly, the trial court dismissed a petition to have a conservator appointed for an alleged
       incompetent. The petitioner’s attorney filed a section 2-1401 petition to vacate the judgment
       in order to recover expenses and attorney fees he unintentionally did not seek prior to the

                                                 -7-
       dismissal. Id. at 908. The appellate court affirmed the trial court’s dismissal of the attorney’s
       section 2-1401 petition, on the ground that the attorney was a nonparty to the original
       proceedings and lacked standing to vacate the judgment. Id. at 908-09. In Elmhurst National
       Bank v. Novak, 137 Ill. App. 3d 904, 906 (1985), this court held that Reilly was dispositive
       where a nonparty bank sought to vacate a judgment to recover a refund of interest from the
       county collector. “Under the authority of [Reilly], Du Page Bank clearly was not entitled to
       relief under section 2-1401 ***. Du Page Bank was not a party to the original proceedings,
       nor did it seek to intervene during the pendency of that action.” Id. at 906-07. Citing
       Elmhurst National Bank, this court stated in People ex rel. Village of Lake Bluff v. City of
       North Chicago, 224 Ill. App. 3d 866, 874 (1992), “section 2-1401 (previously section 72)
       was never intended to permit a person not a party to an action to intervene after final
       judgment and reopen the suit so as to permit a new claim to be filed.” In Frandsen v.
       Anderson, 108 Ill. App. 2d 194, 201-02 (1969), this court held that an attorney sued by his
       client for malpractice had no standing to set aside the original judgment against his client.
¶ 34       Section 2-1401 is the current embodiment of the ancient common-law writ of error
       coram nobis, which was used to bring to the attention of the court matters of fact that would
       have prevented entry of the judgment had the true facts been known when the judgment was
       entered. Id. at 200-01. Relief was available (and is currently available under section 2-1401)
       to a party or privy to the record, one injured by the judgment and who would derive benefit
       from its reversal, or one who was competent to release error. Id. at 201. Hurlbert recognized
       the categories of nonparties to whom relief was available but stated that they were narrow
       exceptions to the rule that only parties could seek relief. Hurlbert, 386 Ill. App. 3d at 1102.
       Therefore, even if only as exceptions, nonparties under certain conditions have always had
       standing to vacate judgments. State Farm maintains that it has standing under the principle
       that it was injured by the judgment and would benefit from its reversal.
¶ 35       Here, like the insurer in Hurlbert, State Farm was named in the consent judgment. State
       Farm, as the only entity from which the judgment could be satisfied, is the only entity injured
       by the judgment. Accordingly, we hold that State Farm had standing to petition under section
       2-1401 to vacate or modify the judgment.
¶ 36       G.M. Sign contends that, because State Farm wrongfully refused to defend and refrained
       from petitioning to intervene prior to judgment in the class action, State Farm cannot contest
       the issues decided in that action. Whether State Farm was required to intervene before the
       consent judgment was entered is not a question pertaining to standing and therefore it does
       not require our consideration.

¶ 37                                        Due Diligence
¶ 38       The trial court determined that State Farm was not diligent in presenting its defense in
       the original action, because State Farm denied coverage to Schane in the class action, it was
       at all times on notice of the action, and it simply chose not to participate. State Farm
       contends that the trial court’s ruling was based on an improper focus on State Farm’s refusal
       of the tender of defense in the class action rather than on when State Farm became aware of
       the facts prompting its decision to file the petition. We agree.

                                                 -8-
¶ 39        A petitioner is entitled to relief under section 2-1401 of the Code when he sets forth
       specific factual allegations supporting each of the following elements: (1) the existence of
       a meritorious defense or claim; (2) due diligence in presenting the defense or claim to the
       trial court in the original action; and (3) due diligence in filing the petition for relief. Smith
       v. Airoom, Inc., 114 Ill. 2d 209, 220-21 (1986). In the present case, the trial court, sua sponte
       and without an evidentiary hearing, determined that State Farm lacked due diligence in
       defending the underlying action. Because this ruling amounts to a dismissal for failure to
       state a claim, or summary judgment, it is reviewed de novo. See People v. Vincent, 226 Ill.
       2d 1, 14-15 (2007).
¶ 40        Two types of due diligence must be shown: (1) due diligence with respect to the original
       action; and (2) due diligence with respect to the section 2-1401 petition itself. People v.
       Davis, 2012 IL App (4th) 110305, ¶ 19 (citing S.C. Vaughan Oil Co. v. Caldwell, Troutt &
       Alexander, 181 Ill. 2d 489, 496 (1998)). First, the petitioner must show that its failure to
       discover new facts prior to the entry of the judgment was the result of an excusable mistake
       and not a product of negligence. To meet this requirement, the petitioner must demonstrate
       that “ ‘under the circumstances he acted reasonably, and not negligently.’ ” Id. (quoting
       Airoom, 114 Ill. 2d at 222). The second due diligence requirement involves showing that the
       petition itself was filed in a timely manner. A petitioner must file the petition without undue
       delay after becoming aware of the factual basis for the petition. Id. ¶ 20.
¶ 41        Here, the trial court specifically found a lack of due diligence in presenting the defense
       or claim in the original action. However, the trial court did not focus on when State Farm
       became aware of the facts prompting its decision to file the section 2-1401 petition. State
       Farm had refused the tender of defense by relying on the explicit TCPA exclusion in
       Schane’s insurance policy. G.M. Sign filed an amended complaint, which potentially brought
       the claims within the insurance policy. However, the amended complaint was filed after a
       settlement had been reached. Furthermore, when State Farm received the amended
       complaint, G.M. Sign did not attach a copy of the settlement agreement. Given these facts,
       there was no lack of diligence in State Farm’s failure to defend under a reservation of rights,
       where a settlement already had been reached. Therefore, there could be no finding of a lack
       of due diligence in the original proceedings.
¶ 42        Furthermore, as to due diligence with respect to filing the petition, State Farm claimed
       in its petition that it learned of the settlement when it was served with the coverage complaint
       that alleged that G.M. Sign’s suit against Schane was settled via a stipulated judgment.
       However, State Farm did not learn of the facts illustrating how the settlement was executed
       and approved until it delved into discovery in the coverage action in November 2011. At that
       time, State Farm first learned the details surrounding the execution of the settlement, i.e.,
       “class counsel’s desire to expedite the process to be able to file a declaratory action before
       State Farm did, the error in the class period that excluded the named class plaintiff[,] and the
       fact that the notice sent may not have reached class members who received a 2007 fax from
       Schane which liability Schane sought to discharge by the settlement.” State Farm filed the
       petition within 30 days of discovering the facts on which the petition was based. We find that
       these undisputed facts establish diligence in filing the petition.

                                                  -9-
¶ 43                                        Meritorious Claim
¶ 44       Having established that State Farm was diligent with respect to the original action and
       that the petition was filed without undue delay, State Farm maintains that the record was
       sufficiently developed to entitle it to the relief sought. Our supreme court clarified the law
       pertaining to section 2-1401 petitions in Vincent. The party seeking relief from a judgment
       must plead and prove (1) that he had “a defense or claim that would have precluded entry of
       the judgment in the original action” and (2) that he acted with “diligence in both discovering
       the defense or claim and presenting the petition.” Vincent, 226 Ill. 2d at 7-8. The party
       opposing the section 2-1401 petition may move to dismiss it as insufficient at law, or the
       party may dispute the factual assertions of the petition. Id. at 8-9. Where the parties dispute
       a material issue of fact, the trial court should hold an evidentiary hearing before ruling on the
       petition. Id. at 9; LVNV Funding, LLC v. Trice, 2011 IL App (1st) 092773, ¶ 8.
¶ 45       In this case, State Farm’s section 2-1401 petition raised potential meritorious claims
       regarding the adequacy of the class representative, the adequacy of the notice, and the
       fairness of the settlement terms to the absent class members. Although the court heard
       argument, it never held an evidentiary hearing or issued a ruling on these substantive issues.
       Instead, the court applied an incorrect standard to assess whether State Farm was diligent in
       the original action. Without an evidentiary hearing, the record is not sufficiently developed
       to enable this court to grant State Farm the relief it seeks. See Vincent, 226 Ill. 2d at 7-8
       (“Relief under section 2-1401 is predicated upon proof, by a preponderance of evidence, of
       a defense or claim that would have precluded entry of the judgment in the original action and
       diligence in both discovering the defense or claim and presenting the petition.”).
       Accordingly, we must remand to the trial court for an evidentiary hearing on the merits of
       the petition.

¶ 46                                    CONCLUSION
¶ 47      For the preceding reasons, we reverse the decision of the circuit court of Lake County and
       remand the cause.

¶ 48       Reversed and remanded, with directions.

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