Peregrine Financial Group, Inc. v. TradeMaven, L.L.C.

Citations: 909 N.E.2d 837; 391 Ill. App. 3d 309; 330 Ill. Dec. 815; 2009 Ill. App. LEXIS 260Docket: 1-08-1111

Court: Appellate Court of Illinois; May 6, 2009; Illinois; State Appellate Court

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Peregrine Financial Group (Peregrine) sued TradeMaven L.L.C. (TradeMaven) and its principals, Jeffrey Ganis and Douglas Zalesky, in the Cook County circuit court, alleging breach of contract, breach of warranty, indemnification, and tortious interference with prospective business advantage. The claims arose from a prior patent infringement lawsuit initiated by Trading Technologies, Inc. (Trading Technologies) against Peregrine and TradeMaven, which was resolved through separate settlement agreements between the parties and a consent judgment.

Peregrine's licensing agreement with TradeMaven included warranties that the licensed software did not infringe on any third-party rights and an indemnification clause obligating TradeMaven to cover any related claims, including legal fees. Despite receiving assurances from a TradeMaven officer regarding indemnification during the patent litigation, Peregrine did not assert any indemnification claims at that time. Following TradeMaven's settlement with Trading Technologies, which included an admission of infringement, Peregrine expressed disappointment and reiterated TradeMaven's indemnification obligations in communications with TradeMaven's counsel.

The circuit court granted TradeMaven partial summary judgment on the indemnification claim based on res judicata. Peregrine's subsequent motion for reconsideration was denied, leading to this appeal. The appellate court affirmed the circuit court's judgment, upholding the decision regarding the indemnification claim.

There is a dispute regarding the terms of TradeMaven's amended settlement agreement with Trading Technologies and Peregrine. TradeMaven claims it agreed to pay an additional $50,000 to Trading Technologies for a general release in favor of Peregrine, while Peregrine denies requesting this additional payment and asserts it does not affect TradeMaven's indemnification obligations. A consent judgment, entered by the federal district court on March 23, 2006, stated that each party would bear its own costs and attorney fees. On May 23, 2006, Peregrine's counsel communicated TradeMaven's indemnification responsibility, citing $416,081.22 in expenses from litigation with Trading Technologies. TradeMaven failed to indemnify Peregrine, leading to Peregrine filing a four-count complaint against TradeMaven in Cook County Circuit Court for breach of warranty, indemnification, breach of contract, and tortious interference. After the court dismissed the breach of warranty claim, TradeMaven asserted res judicata and collateral estoppel as defenses against the indemnification claim. TradeMaven sought partial summary judgment, arguing that the consent judgment precluded the indemnification claim. The court denied summary judgment based on collateral estoppel but granted it on res judicata grounds, finding that all elements for res judicata were met. Peregrine's motion to reconsider was denied, prompting an appeal. Appellate review of the summary judgment is de novo, and summary judgment is appropriate when there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. If some issues remain contentious, the court will specify those for further proceedings.

In ruling on a summary judgment motion, courts must interpret the relevant documents against the moving party and favor the opposing party. A triable issue exists if material facts are contested or if undisputed facts allow for differing reasonable inferences. Summary judgment is a significant legal action and should only be granted when the moving party's position is unequivocal. If the defendant is the moving party, they must establish their factual position on the affirmative defense presented. Once this burden is met, the opposing party must provide supporting affidavits or referenced depositions that contradict the established facts. While they are not required to prove their case, they must present a factual basis that could justify a judgment in their favor.

The matter at hand involves the defendant's summary judgment motion based on res judicata. Peregrine argues that TradeMaven did not sufficiently prove all elements of res judicata. The court recognizes that federal law governs this issue due to prior litigation in federal court. Res judicata prevents parties from relitigating issues that were or could have been raised in a prior action, requiring: (1) identity of parties, (2) identity of causes of action, and (3) a final judgment on the merits. Both parties agree on the identity of parties and that the consent judgment qualifies as a final judgment. The key issue is whether there is an identity of causes of action, particularly concerning whether Peregrine could have raised an indemnification claim against TradeMaven in the earlier patent litigation. The trial judge indicated that such identity exists if the claim arises from the same core of operative facts as the previous case.

Two claims can be considered res judicata if they share the same or nearly identical factual allegations. Plaintiffs assert they did not file for indemnification in the previous lawsuit, arguing that their current claim is not identical. However, it is noted that Plaintiffs could have included their indemnification claim in the earlier action, leading the Court to grant the Defendant’s motion. Peregrine argues that the ability to assert a claim in prior litigation is separate from assessing whether there is an identity of causes of action relevant to res judicata. 

For res judicata, identity of causes exists if the claims arise from the same core of operative facts, as established in prior case law. Peregrine contends that the patent litigation's focus on patent infringement differs from the current case's contractual indemnification claim, suggesting no identity of causes. However, both claims stem from a licensing agreement between Peregrine and TradeMaven, linking the patent infringement claim to the indemnification obligation. 

Peregrine also claims there was no prior claim against TradeMaven for indemnification in the patent case, citing Colonial Penn Life Insurance Co. v. Hallmark Insurance Administrators, Inc. to support their position regarding res judicata. In Colonial Penn, the court found that a subsequent lawsuit could be barred by res judicata if it arises from the same transactional background as a prior case.

The court of appeals determined that Colonial Penn's claims did not share the same factual basis as Peregrine's claims against TradeMaven. Colonial Penn did not assert in its initial case that Hallmark defaulted on the loan or that it had made payments on the guaranty, thus preventing it from seeking reimbursement at that time. In contrast, Peregrine’s licensing agreement with TradeMaven was directly relevant to the patent infringement case, including the indemnification provision. Peregrine had sought assurances from TradeMaven regarding indemnification for costs incurred during the patent litigation, indicating awareness of its rights. Unlike Colonial Penn, where the reimbursement claim arose post-judgment, Peregrine's indemnification claim could have been pursued during the patent litigation, as costs and attorney fees had already been incurred.

Peregrine argued that its indemnification claim had not accrued yet, citing Guzman v. C.R. Epperson Construction, which states that such claims do not accrue until a judgment is entered or a settlement occurs. However, the court distinguished Guzman based on the applicability of federal versus Illinois law and the nature of the claims; Peregrine and TradeMaven were co-defendants with an express contract of indemnity, not involved in a third-party action as in Guzman. Additionally, Peregrine referenced Travelers Casualty, which involved indemnity but did not alter the court's findings regarding the applicability of Guzman to its situation.

Travelers sued James and Barbara Bowman for breach of indemnity agreements. Carlson was dismissed from the case, and the Bowmans sought dismissal under section 2-619(a)(5) of the Illinois Code of Civil Procedure, claiming Travelers' action was barred by a four-year statute of limitations for construction-related claims. Travelers argued for a 10-year statute of limitations for written contracts. The Illinois Supreme Court sided with Travelers, stating the applicable limitations period is determined by the nature of the plaintiff's injury. The court ruled that the 10-year period applied since Travelers' claim involved failure to fulfill obligations under a written agreement, requiring action within 10 years of the Bowmans’ refusal to pay on demand.

Peregrine, referencing the Travelers case, claimed its indemnity action against TradeMaven did not accrue until TradeMaven rejected a 2006 demand for indemnification. However, the indemnity agreement in Travelers stipulated that payment was due upon demand, a condition not present in the agreement between Peregrine and TradeMaven. Therefore, Travelers is distinguishable, as Peregrine's claim does not hinge on a demand-triggered obligation.

Peregrine also cited Curtis v. A. Garcia y Cia, Ltda. to argue that judgments on principal liability claims do not bar indemnity actions. However, the facts in Curtis differ significantly, as it involved unresolved issues of negligence, whereas the present case has settled liability issues from prior patent litigation. Thus, Curtis does not support Peregrine’s claim.

In Threshermen's Mutual Insurance Co. v. Wallingford Mutual Insurance Co., a plaintiff sued multiple parties over injuries from a collapsing lawn chair, leading to a stipulated judgment that dismissed all claims. The distributor's excess insurance carrier sought indemnification from the chair manufacturer's insurer, claiming a breach of the vendor's endorsement during the state court action. The Seventh Circuit ruled that the indemnification claim was barred by res judicata, as the issues could have been raised in the initial case. The court emphasized that Threshermen's had communicated its concerns to the primary insurer during the state litigation and could have litigated its claims. 

Similarly, in the current case involving Peregrine, claims for attorney fees and costs stemmed from litigation and a settlement agreement with Trading Technologies. Peregrine was aware of its indemnification claims, which were related to the same circumstances as the earlier patent litigation. Although Peregrine argued for equitable relief from res judicata based on TradeMaven's assurances to indemnify, the court upheld the res judicata defense, citing the need for finality in litigation. The court found an identity of causes of action between the two cases, affirming the trial court's decision to grant summary judgment on the res judicata grounds. Peregrine's challenge regarding collateral estoppel was not addressed due to this ruling.

Peregrine contends that the circuit court erred by denying its motion for reconsideration. The court's decision on such motions is discretionary and can only be overturned for abuse of discretion, as established in *Landeros v. Equity Property, Development*. A motion for reconsideration aims to highlight newly discovered evidence, legal changes, or errors in the previous application of the law, referenced in *O'Connor v. County of Cook*. Peregrine's motion argued that the trial court misapplied the law by granting summary judgment based on the res judicata claim, asserting it could not have brought an indemnification claim in prior patent litigation due to TradeMaven’s lack of default. To support this, Peregrine submitted an affidavit from its president, indicating uncertainty regarding the scope of claims against them at the time of litigation commencement and reliance on TradeMaven’s assurances for indemnification. The trial court dismissed this affidavit as the information was available during the summary judgment hearing, and it emphasized that late-submitted evidence undermines efficiency in civil proceedings. Hence, the trial court did not abuse its discretion in denying the reconsideration motion. The circuit court's decision is affirmed.