Chicago Province of the Society of Jesus v. Clark and Dickens, L.L.C.

Citation: 383 Ill. App. 3d 435Docket: 1-07-0960, 1-07-1003 cons. Rel

Court: Appellate Court of Illinois; June 9, 2008; Illinois; State Appellate Court

Original Court Document: View Document

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The case involves the Chicago Province of the Society of Jesus (plaintiff) and First Nonprofit Insurance Company (plaintiff), who owned a building in Lincoln Park, Chicago, which collapsed after the demolition of an adjacent building owned by Clark and Dickens, L.L.C. (C&D). First Nonprofit paid the Jesuits approximately $2 million for their insurance claim related to the collapse. The plaintiffs subsequently filed suit against twelve defendants, including property owners and contractors involved in the demolition. Six defendants reached a settlement with the plaintiffs, prompting a joint request for a trial court finding that the settlement was in good faith. This was opposed by three nonsettling defendants: Pioneer Concrete Raising Services, Inc., Quality Excavation, Inc., and West Suburban Concrete Company, who appealed a trial court order from February 26, 2007, affirming the good faith of the settlement. The background includes a contractual indemnity agreement between C&D, New Chicago Partners, L.L.C. (NCP), and the Jesuits for damages related to the demolition. The settling defendants included C&D, NCP, and several contractors associated with the demolition and construction project. The court's ruling affirmed the trial court's finding as to the good faith of the settlement.

Appellees assert that three subcontractors—Pioneer, Quality, and West Suburban—are primarily responsible for the structural failure of the Jesuit building. They claim that Pioneer improperly installed micropiles meant to protect the building, Quality's dead man system installation deteriorated lateral and subadjacent support, and West Suburban excavated near the foundation. Two other defendants, Robert L. Miller Associates and Foundation Engineering, did not object to a settlement and are excluded from the appeal. Defendant Chatain Co. was dismissed from the case without prejudice. 

During the demolition of a nearby building, it was discovered that its foundation wall was bonded to the Jesuit building's wall. NCP informed the Jesuits about this on January 13, 2003, advising against removing the bonded wall and suggesting underpinning instead. Following this, additional subcontractors were hired for stabilization work. By late April 2003, the Jesuit building experienced significant structural damage and partial collapse, leading to its demolition on April 27, 2003, as ordered by the City of Chicago. An investigation by engineer Ian Chin indicated that the collapse was caused by excavation activities from the adjacent construction. 

Plaintiff Jesuits filed suit on April 26, 2004, with an amended complaint on February 10, 2006, alleging breach of indemnity agreements, violations of the Adjacent Landowner’s Excavation Protection Act, negligence, and violations of municipal codes, seeking uninsured damages of $1,086,073 and ongoing attorney fees. Plaintiff First Nonprofit filed suit on September 9, 2004, adding Chatain as a defendant, but it was dismissed later. First Nonprofit's amended complaint sought damages for violations of the same acts and codes, totaling nearly $3 million, including the reimbursement of $1,826,275 previously paid to the Jesuits.

On June 27, 2006, plaintiffs submitted a motion to inform the court about the status of settlement negotiations and to establish a discovery schedule. They reported that all parties had engaged a mediator to facilitate a global settlement. The trial court's order from that date mandated: completion of written discovery by July 25, 2006; filing of counterclaims by July 10, 2006; submission of a motion for a good-faith finding by July 7, 2006; and scheduling a case management conference for July 26, 2006. Subsequently, in July 2006, plaintiffs and six settling defendants signed a settlement agreement, resolving claims related to the Jesuit building's demolition in exchange for $1,185,000, which included $100,000 allocated for attorney fees.

On July 14, 2006, both parties requested the court to declare the settlement agreement was made in good faith. Although there is no transcript from the July 26 case management conference, both sides confirmed a hearing occurred. Pioneer, one of the appellants, indicated that they required answers to written discovery to respond to the good-faith motion. The trial court's written order from July 26 required all parties to complete outstanding discovery by August 9, 2006, and set deadlines for responses and replies regarding objections to the settlement.

On September 21, 2006, appellant Quality sought an extension to object to the settlement, which the trial court granted, allowing an additional 21 days until October 12, 2006. Shortly after, on September 27, 2006, Pioneer filed an “Emergency Motion to Compel Outstanding Written Discovery,” indicating the need for discovery to respond to the good-faith motion. The trial court approved this motion on September 28, issued an order establishing new discovery deadlines, vacated the previous briefing schedule, and scheduled a status hearing for October 16, 2006.

On October 16, 2006, a status hearing occurred, though no transcript is available. The trial court issued an order directing specific discovery responses and requiring appellants to file objections by November 20, 2006. The appellants objected, arguing the settlement agreement did not adequately distribute the settlement amount between the plaintiffs or their causes of action. On December 11, 2006, appellees replied to these objections. Subsequently, on January 18, 2007, the trial court ordered the settling parties to propose an apportionment of the settlement proceeds, with no transcript from this session available; both parties claimed differing views on whether a hearing took place.

Appellees submitted a proposed apportionment on January 29, 2007, to which appellants responded on February 7, 2007. A surreply was filed by appellees on February 20, 2007. The trial court granted the good-faith motion on February 26, 2007, without oral argument. The ruling followed acknowledgment of prior hearings on the matter, with the court determining that the settlement agreement was made in good faith, thus dismissing claims against the settling defendants with prejudice. No objections were raised regarding the absence of oral argument.

Although the February 26 order did not conclude the litigation for all parties, the trial court later issued a finding under Supreme Court Rule 304(a) to allow for an appeal. The appeal focuses on the trial court's good-faith finding, governed by the Illinois Joint Tortfeasor Contribution Act, which discharges a tortfeasor from contribution liability upon a good-faith settlement. The appellate standard of review mandates that a trial court's good-faith determination can only be overturned for abuse of discretion, defined as a decision no reasonable person would make.

The appellate record is incomplete, lacking critical transcripts from several hearings related to the trial court’s good-faith motion ruling on February 26, 2007. Hearings occurred on multiple dates prior to this ruling, yet appellants chose to speculate in their brief about the missing transcripts instead of including them. The Illinois Supreme Court has established that a reviewing court cannot speculate on trial court proceedings that are not part of the appellate record. Appellants argued that the absence of transcripts suggested they contained no substantive arguments, but the February 26 transcript indicates that attorneys did not provide arguments that day, implying that prior hearings may have included relevant discussions. Additionally, appellants claimed that appellees should have supplemented the record if the transcripts were significant, which the Illinois Supreme Court has ruled is not the appellees' responsibility; the duty lies solely with the appellants to present a complete record. Due to the appellants' failure to do so, speculation about potential errors is not permitted, although the court will still review the substantive arguments presented. 

In matters of good-faith settlement determination, the initial burden of proof rests on the settling parties to demonstrate good faith, which requires a legally valid and reasonable settlement agreement aligned with the goals of the Contribution Act: encouraging settlements and ensuring equitable damage apportionment among tortfeasors. Reasonableness may necessitate factual evidence beyond the agreement itself. Once the settling parties establish a preliminary showing of good faith, the burden shifts to opposing parties to prove the absence of good faith by a preponderance of the evidence.

"Good-faith" is not explicitly defined in the Contribution Act, but the supreme court has established that a settlement is not considered in "good-faith" if there is wrongful conduct, collusion, or fraud, or if it contradicts the Act's goals. Determining good-faith requires an assessment of the "totality of the circumstances" rather than a rigid formula. In the current case, appellants argue that the trial court erred in finding good-faith, asserting two main points: first, that the settling parties did not meet their initial burden to demonstrate good-faith; and second, that even if they did, the appellants proved a lack of good-faith by a preponderance of the evidence.

Appellants contend that the trial court lacked sufficient information to assess the parties' culpability and challenge the settlement solely based on the Act's goal of equitable apportionment, without any claims of wrongful conduct or fraud. A preliminary showing of good-faith is a minimal requirement, and once established, the burden shifts to the opposing parties to disprove it by a higher standard. The trial court is not obligated to hold an evidentiary hearing or determine relative liabilities prior to making a good-faith determination.

In a referenced case (Johnson), the supreme court upheld a trial court's finding of good-faith based on minimal representations from both parties regarding the likelihood of success and potential liability. In contrast, in Cianci v. Safeco Insurance Co., the court found a lack of sufficient information when essential pleadings were missing. In the current case, the trial court had adequate information, including a valid settlement agreement, allocation charts, pleadings, memoranda, counsel representations regarding culpability, absence of wrongful conduct allegations, and discovery requested by the appellants.

After the settling parties made a preliminary showing of good-faith, the burden shifted to the appellants to demonstrate a lack of good-faith by a preponderance of the evidence. On appeal, appellants argue against good-faith based on the settlement amount being less than half of the claimed damages and the settling defendants' contractual obligation to indemnify the plaintiff for specific damages.

Plaintiffs claimed total damages of approximately $2.9 million, but the settlements with six defendants totaled $1,185,000, representing only 40.4% of the claimed damages. This leaves potential liability of $1,727,348, or 59.6%, for five remaining defendants, which include three appellants and two non-objecting, non-settling defendants (Robert L. Miller Associates and Foundation Engineering, Inc.). The court notes that releasing about half of the defendants for less than half of the damages does not inherently indicate a lack of good faith in the settlements. 

The appellants argue that the settlement amounts do not reflect the relative culpability of the defendants. However, the appellees contend that the appellants are the most culpable due to their specific roles in the project, including the installation of flawed safety systems. The appellants have not provided any justification for their claim of lesser culpability, merely asserting that their roles were "minor" without elaborating. 

To challenge the settlement's validity based on "nominal consideration," appellants reference the case of Stickler v. American Augers, Inc., where a settlement was deemed not in good faith due to undisputed liability of over a million dollars being settled for less than $300,000. The court distinguishes Stickler from the current case, noting that the settling defendants' liabilities and comparative fault are not yet fixed and will require a trial to determine.

Appellants argue that the settlement was not in good faith because the settling defendants, C&D and NCP, were contractually liable for all damages to the Jesuit building. They compare this case to Stickler, where a settlement for a small portion of an undisputed statutory liability was deemed not in good faith. C&D and NCP had signed an indemnification agreement with the Jesuits prior to the incident, agreeing to indemnify them for all liabilities related to demolition and construction. However, this agreement included two exclusions: actions where the Jesuits were actively responsible and actions where the Jesuits were made whole as an additional insured under the agreement. Furthermore, C&D and NCP were required to ensure that major contractors had a minimum liability coverage of $5 million and to name the Jesuits as additional insureds. Consequently, the indemnification liability of C&D and NCP was less certain than the statutory liability in Stickler. Ultimately, the trial court's finding of good faith in the settlement was upheld, affirming that there was no abuse of discretion in its judgment.