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.
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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
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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.
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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.
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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
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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
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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.
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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.
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