Berkin v. Orland Park Plaza Bank

Citations: 191 Ill. App. 3d 1056; 548 N.E.2d 534; 139 Ill. Dec. 149; 1989 Ill. App. LEXIS 1808Docket: No. 1—88—2685

Court: Appellate Court of Illinois; December 5, 1989; Illinois; State Appellate Court

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Plaintiffs appealed a December 18, 1987, court order granting the defendant Bank's motion for sanctions under Illinois Code of Civil Procedure section 2—611 and a September 15, 1988, order that dismissed their attorneys and imposed $4,533.60 in fees and costs solely on the plaintiffs. The plaintiffs argued that the sanctions motion was untimely and that the fee award was improperly levied. The lawsuit, filed on December 10, 1984, included George E. Burzloff and Eileen Burzloff as plaintiffs, who had been deceased for over a year at the time of filing, unbeknownst to the Bank. The Bank moved to dismiss the complaint on November 8, 1985, citing failure to state a cause of action. After two amendments to the complaint, the Bank continued to respond with dismissal motions. On January 8, 1987, the circuit court allowed the plaintiffs to voluntarily dismiss the Bank as a defendant, after which the Bank filed for sanctions on February 6, 1987, within 30 days of its dismissal. The Bank claimed the plaintiffs and their attorneys had submitted successive meritless complaints and argued that the voluntary dismissal indicated bad faith and harassment. In their response, the plaintiffs cited several reasons for the dismissal, including the removal of one defendant from jurisdiction and the deaths of key plaintiffs, which prevented the perpetuation of their testimonies.

The Bank's investigation revealed that George Burzloff died on November 26, 1982, and Eileen Burzloff died on May 23, 1983, prior to the original complaint's filing. In a reply on June 2, 1987, the Bank informed the court of this information, citing it as a basis for sanctions under section 2—611. During a December 18, 1987 hearing, the circuit court determined that while the plaintiffs' failure to state a cause of action was not a valid reason for sanctions, false statements regarding the Burzloffs' presence in Cook County violated the statute. Consequently, the court granted the Bank's motion for sanctions against the plaintiffs and their attorneys, Klein and Petrulis. 

Despite this ruling, the court later awarded the Bank fees for investigating the deaths and pursuing the sanctions motion, as well as for motions to dismiss due to insufficiency of the complaint. On September 15, 1988, the court denied the plaintiffs' motion to reconsider and imposed $4,533.60 in sanctions against all plaintiffs, but dismissed attorney Klein based on a precedent that the amended section 2—611 could not be applied retroactively to attorneys. Attorney Petrulis was dismissed from the sanctions motion because he did not draft the problematic complaints. 

The court had previously allowed the substitution of Eileen Burzloff's heir, Alan H. Sibigtroth, as a party plaintiff, leading to confusion over which plaintiffs were included in the sanctions. Former section 2—611 allows for sanctions against parties only, whereas the amended version allows for sanctions against both parties and their attorneys. The plaintiffs contended that the Bank's allegations regarding untrue pleadings due to the Burzloffs' deaths were untimely and thus the circuit court lacked jurisdiction to impose sanctions on that basis.

Plaintiffs reference Szymkowski v. Szymkowski, where the court established a strict 30-day filing limit for sanctions under section 41 of the Civil Practice Act, now section 2-611, emphasizing its penal nature. In Szymkowski, sanctions were sought beyond this limit, while in the current case, the Bank filed for sanctions within the required timeframe. Plaintiffs argue the Bank's request for sanctions related to the Burzloffs' deaths was untimely because it was raised after the 30-day period. However, the court determined that fairness warranted allowing the Bank to introduce this new basis for sanctions since the plaintiffs first mentioned the deaths in their response, misleadingly suggesting the deaths occurred during litigation. The court sympathized with the Bank due to the plaintiffs' disingenuous presentation of facts.

Additionally, plaintiffs contest the circuit court's award of $4,533.60 to the Bank for fees related to section 2-615 motions and sanctions, citing La Salle National Bank v. Kissane, which held that fees cannot be awarded solely based on insufficient pleadings. Despite this precedent, the court awarded fees directly tied to the motions. The court's discretion in awarding sanctions under section 2-611 is generally upheld unless clearly abused, with a focus on costs directly related to sanctionable actions. The court concluded it cannot impose penalties disproportionate to the expenses incurred due to untrue pleadings. The Bank argued, referencing Dayan v. McDonald’s Corp., that plaintiffs’ counsel should bear the costs of defending against multiple pleadings, asserting that the lack of Burzloff testimony undermined the case. However, Dayan represents an exception to the typical rule regarding such liability.

The plaintiff, Dayan, sued McDonald’s Corporation to prevent the termination of his restaurant franchise, claiming compliance with McDonald’s quality standards. However, the circuit court found this statement false and awarded McDonald’s nearly $2 million for defense costs under section 2—611, a ruling the appellate court upheld, emphasizing that the false allegations were central to the baseless lawsuit. In a related case involving the Burzloffs against a Bank, it was determined that their inclusion did not change the nature of the lawsuit, and any fees related to investigating their deaths were justly awarded to the Bank. The circuit court also assessed section 2—611 penalties against "all plaintiffs," raising questions about whether individual culpability was considered and if penalties were appropriate for deceased plaintiffs. Attorney Klein claimed to have consulted with all plaintiffs except the Burzloffs and relied on another attorney's assurance regarding their viability as clients. Although Klein attempted to locate the Burzloffs, the Bank efficiently discovered their death certificates, demonstrating Klein's lack of thoroughness. The circuit court, limited by precedent, imposed sanctions on all plaintiffs, excluding the attorney from the final order despite the attorney's responsibility for the offending pleadings, as clarified by the ruling in Prevendar v. Thonn, which stated that section 2—611 does not retroactively apply to attorneys.

The court at the time of the order was not aware of a recent decision, Ignarski v. Heublein, which asserted that amendments to section 2—611 should not be applied retroactively. Even if the circuit court had correctly applied the amended statute, sanctioning the plaintiffs would have been improper, as the decision to sanction should not be arbitrary or merely expedient. Unlike in Washington v. Allstate Insurance Co., where sanctions against plaintiffs were upheld due to reliance on their attorney for facts, in this case, the attorney failed to communicate with clients who were deceased. The trial court concluded that the attorney made no effort to verify client status, which would have been straightforward.

The remaining plaintiffs had no connection to the Burzloffs other than being victims of the same scheme, and the Bank's attorney acknowledged that holding the plaintiffs accountable for the attorney's misconduct would be unfair. Sanctions under former section 2—611 require proof that the pleadings contained false statements made without reasonable cause, with the burden of proof on the party seeking relief. Previous cases illustrate that without evidence showing a plaintiff's unreasonable belief in the legitimacy of their claims, sanctions may be reversed.

In this case, there was no evidence that the plaintiffs knew or should have known about the Burzloffs' deceased status at the lawsuit's initiation. The mere joining of unrelated individuals as parties does not make them liable for an attorney's actions. Additionally, the plaintiffs argued that they were denied due process when the court failed to hold a hearing to determine individual culpability. Given the absence of evidence linking the plaintiffs to the sanctionable conduct, levying penalties against them would be manifestly unfair, violating due process as protected by the Fourteenth Amendment.

The excerpt references several legal cases addressing the constitutionality of statutes that allow for ex parte proceedings, such as Fuentes v. Shevin and Bell v. Burson, both of which were deemed unconstitutional. In Illinois, whether a hearing is necessary on a section 2—611 petition is case-dependent. If the court can ascertain a statutory violation from the existing pleadings or evidence, a hearing may not be needed. This principle is supported by St. Paul Federal Savings and Loan Association v. Avant and Lepucki v. Van Wormer, which emphasize that due process in Rule 11 proceedings varies based on the situation's specifics. In the present case, the existing record did not support sanctions against the plaintiffs; rather, it indicated that the plaintiffs' counsel was solely responsible for any untrue pleadings. Thus, the trial court was not required to conduct a hearing on sanctions beyond the one already held. Consequently, the circuit court's order was reversed. Additionally, while the revised section 2—611 does not specify a 30-day limit, the second district has ruled that the 30-day limit from section 2—1203 of the Code of Civil Procedure applies to section 2—611 motions, establishing a uniform filing timeline across all statute versions.