Court Opinion

ID: 3146915
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:23:49.91392+00
Date Added: 2024-06-11T11:55:15.127705
License: Public Domain

THIRD DIVISION
                                                                                September 17, 2008

No. 1-08-0636

MICHAEL A. DOWNS,                                     )       Appeal from the Circuit Court
                                                      )       of Cook County, Illinois.
                       Plaintiff-Appellant,           )
                                                      )
v.                                                    )       No. 07 L 009891
                                                      )
ROSENTHAL COLLINS GROUP, L.L.C.,                      )       Honorable Dennis J. Burke,
                                                      )       Judge Presiding.
                       Defendant-Appellee.            )

       PRESIDING JUSTICE MURPHY delivered the opinion of the court:

       On September 19, 2007, plaintiff, Michael A. Downs, filed a complaint against

defendant, Rosenthal Collins Group, L.L.C., for breach of contract and declaratory judgment.

Plaintiff alleged that defendant breached its Operating Agreement by failing to indemnify

plaintiff for attorney fees incurred in his successful defense of claims of breach of fiduciary duty

and breach of contract brought by defendant in an earlier action. Defendant filed a motion to

dismiss pursuant to section 2-615 of the Illinois Code of Civil Procedure. 735 ILCS 5/2-615

(West 2004). The trial court granted defendant’s motion with prejudice, finding the

indemnification provision of the operating agreement did not give rise to indemnification for

attorney fees. For the following reasons, we affirm the findings of the trial court.
No. 1-08-0636

                                        I. BACKGROUND

       In 1997, plaintiff became chief executive officer and a member of defendant company.

As such, plaintiff was entitled to the rights and privileges of defendant’s operating agreement.

On February 3, 2004, defendant filed the underlying complaint asserting claims of breach of

fiduciary duty and breach of contract against plaintiff. Plaintiff asserted his own claims against

defendant, which in turn filed counterclaims. Plaintiff successfully moved to dismiss defendant’s

original claims and two counterclaims. One additional counterclaim was subject to plaintiff’s

motion for summary judgment at the time of the instant complaint.

       Defendant denied plaintiff’s request for indemnification for his defense of these claims

and counterclaim. On September 19, 2007, plaintiff filed the instant action, asserting breach of

contract claims and a declaratory action seeking a declaration he was entitled to indemnification

for his defense of these claims and the counterclaim. Plaintiff asserted that the operating

agreement provided for indemnification for the defense of claims arising out of activities

undertaken for defendant company.

       Sections 21.1 and 21.2 of the operating agreement constitute the sole liability and

indemnification provisions and state in full:

                “21.1 A Member shall not be liable, responsible or accountable, in

       damages or otherwise, to any other Member or to the Company for any act

       performed by the Member within the scope of the authority conferred hereunder

       by Unanimous Approval, except for fraud, gross negligence or an intentional

       breach of this Agreement.

                                                -2-
No. 1-08-0636

                21.2 The Company shall indemnify each Member for any act performed

       by such Member with respect to Company matters permitted by this Agreement

       and/or Majority Approval, but in no event for fraud, willful misconduct,

       negligence or an intentional breach of this Agreement.”

Plaintiff asserted that all actions underlying the complaint were taken with respect to company

matters. Furthermore, plaintiff claimed that as the claims were dismissed as factually and legally

without merit, he was entitled to indemnification for all sums expended in defense of the claims

pursuant to section 21.2.

       There was no dispute that plaintiff was a member of the company and entitled to the

protections of these sections of the operating agreement. However, defendant filed a section 2-

615 motion to dismiss arguing that plaintiff failed to sufficiently plead a cause of action.

Defendant argued that section 21.2 did not specifically provide for indemnification for attorney

fees and that plaintiff’s complaint was therefore insufficient at law.

       The trial court considered the parties’ briefs on the motion and entered an order granting

dismissal. The trial court noted that is well-settled in Illinois that indemnity contracts must be

strictly construed. McNiff v. Millard Maintenance Service Co., 303 Ill. App. 3d 1074, 1077

(1999). Furthermore, the trial court noted that Illinois cases have established that attorney fees

are only recoverable pursuant to an indemnity contract if such terms are specifically provided for

within the contract. Citing Nalivaika v. Murphy, 120 Ill. App. 3d 773, 777 (1983); Bartsch v.

Gordon N. Plumb, Inc., 138 Ill. App. 3d 188, 204 (1985).

       Strictly construing the express language of section 21.2 of the operating agreement, the

                                                 -3-
No. 1-08-0636

trial court found that it did not specifically allow for recovery of attorney fees. The trial court

found that McNiff, Nalivaika and Bartsch clearly require specific terms and addressed the issue

of the case. Therefore, the trial court opined that a review of plaintiff’s citations to persuasive

authority from foreign jurisdictions was unavailing. Viewing plaintiff’s allegations in a light

most favorable to plaintiff, the trial court concluded that no set of facts could be proven to

overcome the requirements of Illinois law. Plaintiff now appeals the trial court’s dismissal.

                                           II. ANALYSIS

       A motion to dismiss under section 2-615 of the Code of Civil Procedure challenges the

legal sufficiency of a complaint based on facial defects of the complaint. Borowiec v. Gateway

2000, Inc., 209 Ill. 2d 376, 413 (2004). We follow a de novo review of a trial court’s ruling on

the sufficiency of a motion to dismiss. Gallagher Corp. v. Russ, 309 Ill. App. 3d 192, 196

(1999). While we must view the allegations in the complaint in a light most favorable to the

plaintiff, we may affirm the decision to dismiss a case on any basis contained within the record.

Gallagher Corp., 309 Ill. App. 3d at 196.

       Plaintiff argues that the trial court erred in dismissing his complaint under section 2-615.

He contends that the broad indemnification provision of the operating agreement includes

attorney fees. Plaintiff asserts that the lack of any limit on the types of costs, fees or expenses

that may be indemnified, demonstrates that attorney fees were not intended to be excluded.

Alternatively, plaintiff asserts that the trial court improperly applied the rules of contract

interpretation and should have interpreted the ambiguity against defendant or allowed parol

evidence to properly discover the parties’ intent in forming the indemnification provisions.

                                                  -4-
No. 1-08-0636

        Plaintiff argues that the specific terms of section 21.2 merely exclude indemnification for

acts of fraud, willful misconduct, negligence or an intentional breach of the operating agreement.

Despite this clear limitation, plaintiff notes there is a lack of any limitation with respect to the

types of costs indemnified. Accordingly, plaintiff concludes that the parties’ intent to include

such expenses was clear and the trial court violated the cardinal rule of contract interpretation by

requiring specific language to grant indemnification for attorney fees.

        Plaintiff argues that the recent decisions in Buenz v. Frontline Transportation Co., 227
Ill. 2d 302 (2008), and Nicor Gas Co. v. Village of Wilmette, 379 Ill. App. 3d 925 (2008), support

his argument. Plaintiff contends that each case allowed for an indemnification obligation based

on general language in an indemnity contract. He concludes that these cases confirm that the trial

court erred in ignoring the persuasive authority of federal cases cited below that specific language

is not necessary to award attorney fees.

        While we agree with plaintiff’s conclusion that Buenz and Nicor Gas support the

assertion that indemnity agreements are to be analyzed like any contract and that broad language

may allow indemnification, we disagree that these cases require reversal of the trial court.

Neither of these cases involved the issue of attorney fees. Therefore neither support overcoming

the “American Rule” that requires specific statutory or contractual authority to receive an award

of attorney fees. Baksinski v. Northwestern University, 231 Ill. App. 3d 7, 12 (1992). This rule

extends to indemnification agreements as any other contract. Nalivaika, 120 Ill. App. 3d at 777.

        Both Buenz and Nicor Gas involved determinations that where language is clear and

unambiguous, the court must apply the common meaning to support the intent of the parties.

                                                  -5-
No. 1-08-0636

Each case involved the question of whether the very broad language “any and all claims” in an

agreement provided indemnification for an indemnitee’s own negligence. Buenz, 227 Ill. 2d at

308-319; Nicor Gas, 379 Ill. App. 3d at 931-32. The Buenz court reiterated that because each

indemnity clause depends upon its particular language and factual setting, attempts to analyze or

reconcile other cases serves no real purpose and an individual review is necessary. Buenz, 227
Ill. 2d at 310-311; Nicor Gas, 379 Ill. App. 3d at 931-32. In both of these cases, the reviewing

courts found that broad and general language, with no limiting language, could support a finding

of indemnification.

       In Buenz, our supreme court considered whether the language “any and all claims,

demands, actions, suits, proceedings, costs, expenses, damages, and liability, including without

limitation attorney’s fees . . .” included indemnification for one’s own negligence. Buenz, 227
Ill. 2d at 306. The Buenz court found that no statute limited indemnification from one’s own

negligence in the industry involved as existed in the construction and healthcare fields. Buenz,
227 Ill. 2d at 319. Furthermore, the indemnification provision did not contain language that

limited the type of claims indemnified. Rather it was specifically and clearly inclusive of all

claims to provide coverage for the indemnitee’s own negligence. Buenz, 227 Ill. 2d at 318-19.

       Nicor Gas followed Buenz and similarly found contract language expressed the parties’

intent to provide indemnification. The specific language considered by the court provided for

indemnification “from any and all judgments, damages, decrees, costs and expenses, including

attorneys’ fees . . .” Nicor Gas, 379 Ill. App. 3d at 931. Although the “any and all” verbiage was

“very broad,” the Nicor Gas court followed Buenz in finding it to be all inclusive without any

                                                -6-
No. 1-08-0636

limiting language or statutory scheme applicable to limit the scope of the agreement. Nicor Gas,
379 Ill. App. 3d at 933.

        Although only lightly touched on by the parties, the closest case to this case that this court

reviewed also supports the trial court’s conclusion. In McNiff, this court considered the question

of an attorney fee claim with respect to an indemnification agreement that required a contractor

“to protect, defend, indemnify and hold harmless . . .” the owner of a property. McNiff, 303 Ill.

App. 3d at 1076. Following the well-settled rule of strict construction of indemnity agreements,

the McNiff court seized on the use of the word “defend” to conclude that the provision of

attorneys or payment for a defense was required under the agreement. McNiff, 303 Ill. App. 3d at

1081. In this case, there is no such language in the operating agreement for this court to find the

parties’ intent to include attorney fees.

        The general rule of inclusion from broad indemnification language in Buenz and Nicor

Gas does not save plaintiff’s claim. The key factor distinguishing this case from Buenz and

Nicor Gas is the line of cases cited by the trial court and defendant. As the trial court noted, as in

any other contract, an indemnification agreement must be strictly construed with respect to

attorney fee awards. Plaintiff’s conclusion that the broad language of the operating agreement

must be read to include attorney fees does not comport with this well-settled rule of construction.

Accordingly, unlike Buenz and Nicor Gas there is a limitation that requires rejecting such a

broad interpretation as plaintiff claims is required.

        As noted by the fourth district of this court, while attorney fees can be a substantial

expense and important consideration when entering into an agreement, the well-settled bright line

                                                 -7-
No. 1-08-0636

rule on this issue provides certainty in the law and parties are on notice to include precise

language on attorney fees when negotiating a contract. Negro Nest LLC v. Mid-Northern

Management, 362 Ill. App. 3d 640, 649-51 (2005). That was not accomplished in this case and

the trial court properly applied the settled rules of contract interpretation with respect to attorney

fees. The instant indemnification provision is even broader than any of the provisions considered

in the cases above. The trial court properly determined that this was fatal for plaintiff’s claim

under Illinois law. Remand for presentation of parol evidence to determine the parties’ intent is

unnecessary as the language of the operating agreement would remain insufficient to provide for

attorney fees.

                                        III. CONCLUSION

       For the foregoing reasons, the finding of the trial court is affirmed.

       AFFIRMED.

       Theis and Quinn, JJ., concur.

                                                  -8-
             No. 1-08-0636

                                REPORTER OF DECISIONS – ILLINOIS APPELLATE COURT
Please Use
Following                                 (Front Sheet to be Attached to Each Case)
Form:
                       MICHAEL A. DOWNS,,
Comple te
TITLE
                                                                Plaintiff-Appellant,
of Case                v.

                       ROSENTHAL COLLINS GROUP, LLC.,

                                                                Defendant-Appellee.

Docket No.

COURT                                                          Nos. 1-08-0636
                                                         Appellate Court of Illinois
Opinion
                                                       First District, THIRD Division
Filed
                                                             September 17, 2008
                                                            (Give month, day and year)

JUSTICES
                              PRESIDING JUSTICE MURPHY delivered the opinion of the court:

                              Theis and Quinn, JJ.,                                                                  concur [s]

                                                                                                                     dissent[s]
APPEAL from
the Circuit Ct. of                       Lower Court and T rial Judge(s) in form indicated in the margin:
Cook County,
Chancery Div.                 The Honorable   Dennis J. Burke                                       , Judge Presiding.

                                    Indicate if attorney represents APPELLANTS or APPELLEE S and include
                                         attorneys of counsel. Indicate the word NONE if not represented.

                       Attorney for Plaintiff-Appellant:        Steven C. Florsheim, Daniel A. Shmikler, Michael G. Dickler
For                                                             Sperling & Slater, P.C.
APPELLANTS,
John Doe, of                                                    55 W. Monroe St., Suite 3200
Chicago.                                                        Chicago, IL 60603
                                                                Phone: (312) 641-3200
For
APPELLEES,
Smith and Smith
                       Attorneys for Defendant-Appellee:        Jeffrey Schulman
of Chicago,                                                     Wolin, Kelter & Rosen, Ltd.
Joseph Brown,                                                   55 W. Monroe Street, Suite 3600
(of Counsel)                                                    Chicago, IL 60603
                                                                Phone: (312) 424-0600
Also add
attorneys for
third-party
appellants or
appellees.

                                                                       -9-