2021 IL App (1st) 201279-U
FIFTH DIVISION
December 23, 2021
No. 1-20-1279
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent
by any party except in the limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
MARK DONAHUE, ) Appeal from the Circuit Court of
) Cook County.
Plaintiff-Appellant, )
)
v. ) No. 14 CH 8174
)
ANTHONY DEMMA, MAUREEN DEMMA, )
DOUGLAS KOMEN, JAMES BRICKER, GREEN )
GREASE ENVIRONMENTAL, INC., an Illinois )
corporation, and GREEN GREASE )
ENVIRONMENTAL SERVICES, LLC, an Illinois )
limited liability company, ) Honorable
) Anna Helen Demacopoulos,
Defendants-Appellees. ) Judge Presiding.
PRESIDING JUSTICE DELORT delivered the judgment of the court.
Justices Cunningham and Connors concurred in the judgment.
ORDER
¶1 Held: The circuit court properly dismissed plaintiff’s amended complaint alleging direct
claims of statutory corporate oppression and waste, breach of contract, aiding and abetting,
and breach of fiduciary duty, and derivative claims of breach of fiduciary duty and aiding
and abetting. Plaintiff failed to present a sufficiently complete record to allow this court to
review whether the circuit court abused its discretion when it denied plaintiff’s motion to
compel. Affirmed.
1-20-1279
¶2 Plaintiff Mark Donahue sought money damages resulting from an alleged breach of
contract and business relationship involving defendants, Anthony Demma, Maureen Demma,
Douglas Komen, James Bricker, Green Grease Environmental, Inc. (GGE, Inc.), and Green Grease
Environmental Services, LLC (GGE, LLC) (collectively, defendants). The circuit court granted
defendants’ motions to dismiss under sections 2-615 and 2-619(a)(9) of the Illinois Code of Civil
Procedure (Code) (735 ILCS 5/2-615, 2-619(a)(9) (West 2016)). He appeals this ruling and the
court’s order denying his motion to compel the production of documents from defendants. We
affirm.
¶3 BACKGROUND
¶4 On May 13, 2014, Donahue filed a verified complaint for injunctive and other relief against
defendants alleging, among other things, statutory oppression of a shareholder under section
12.56(a)(3) of the Illinois Business Corporation Act of 1983 (Act) (805 ILCS 5/12.56(a)(3) (West
2016)), corporate waste under section 12.56(a)(4) of the Act, breach of contract, breach of
fiduciary duty, and aiding and abetting.
¶5 The complaint was eventually amended, and the amended complaint is the operative
version for purposes of this appeal. The amended complaint alleged a complex mosaic of facts, set
forth in paragraphs 5 through 20 of this order, which we take as true for the purposes of this appeal.
See, e.g., Khan v. Deutsche Bank AG, 2012 IL 112219, ¶ 18. According to the amended complaint,
in late 2011, Anthony Demma approached Donahue about forming a business to obtain used
cooking oil from restaurants and institutions, recycle it, and sell it as a source of clean energy. The
two men had been high school classmates. Anthony obtained the idea from Bricker, another high
school acquaintance, who owned a similar business in Pennsylvania. Anthony “suggested that he
would finance the business if Donahue would take on all other responsibilities to get the company
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started.” Anthony told him that if he “invested his time and effort in starting up the business at a
‘survival level’ salary, Donahue would receive an equity interest in the business as part of his
compensation.”
¶6 Donahue “expressed interest in the project,” and he worked with Anthony and Bricker to
organize the business to initially serve the Chicago metropolitan area. Anthony “also promised
Bricker an equity stake in the new company in exchange for Bricker’s assistance in getting GGE
off the ground. Bricker provided a business model, consulting and [a] software package called
‘Greasr.’ ”
¶7 In early 2012, Anthony “advised Donahue and Bricker that [Anthony] would retain 51%
control of the company, but that 49% would be available for equity ownership by Bricker, Donahue
and others.” Anthony asked Donahue to select a name for the new business and Donahue selected
“Green Grease Environmental.”
¶8 On January 6, 2012, GGE was incorporated as an Illinois corporation. Donahue alleged,
on information and belief, that GGE, Inc. contemporaneously filed an election to be treated as an
“S” corporation with the Internal Revenue Service. In March 2012, Anthony told Donahue that
they would meet with GGE, Inc.’s attorney to discuss a lease, contracts, regulatory requirements,
and the equity structure of the company. Anthony warned him that “formalizing the equity
structure of the company ‘could be cost prohibitive.’ ”
¶9 Donahue alleged that “[i]n lieu of a formal agreement documenting equity ownership for
GGE, [Anthony], who is not a lawyer, sent Donahue and Bricker an email on April 10, 2012,”
proposing the equity structure of the company. A copy of the email delineating GGE, Inc.’s equity
structure is attached to the complaint. It states, in pertinent part:
“Green Grease Environmental is organized to have two share classes.
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Class A: Ownership, voting, tax and liquidation class. 100% owned by Maureen
Demma
Class B: Dividend share class (Inclusive of mergers, buy-outs and IPO)
B Class: Initial Equity Ownership (4/1/2012)
Maureen M Demma 51%
Anthony M Demma 44%
Mark Donahue 1%
James Donahue 1%
John P Mack 1%
Mike Demma 1%
James Bricker 1%
-Equity is to be awarded to the above owners (from Anthony Demma[’]s initial
allotment on the 1st day of January of each year based on previous year[’]s internal
goals.
-In the event that more equity is to be issued (current owners diluted), Maureen
Demma will retain voting control of the company. This may come in the form of a
“B class” or other means yet to be decided.
***
-Transferability: Should any recipient of class B shares wish to transfer them to
another party. The company will have right of first refusal to purchase them back.
The price will be determined as a pro rata of book value. If the transferring party
wishes to object to the valuation, they will bear 50% of the cost of an outside
valuation of shares. Selection of outside valuation will be mutually agreed upon.
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-Each employee (excluding all Demmas) will have the following potential equity
accumulation.
Mark Donahue (total possible 24%)
1/1/2013: Possible allocation of 4%
1/1/2014: Possible allocation of 5%
1/1/2015: Possible allocation of 5%
1/1/2016: Possible allocation of 5%
1/1/2017: Possible allocation of 4%.”
¶ 10 Donahue accepted Anthony’s proposal of equity ownership as partial compensation for
services by proceeding to start up GGE, Inc.’s business. Beginning in January 2012 and continuing
through February 2014, Donahue was GGE, Inc.’s sole full-time employee. Donahue worked 60
to 70 hours per week, on average, during this period. Anthony did not render any significant
services to GGE, Inc., beyond maintaining the company’s checkbook. Anthony was physically
present at GGE, Inc. only twice during a period of two years.
¶ 11 Anthony financed GGE, Inc. through capital contributions of approximately $330,000.
Donahue maintained every aspect of the company’s operations, including finding a location for
the plant, obtaining equipment, researching regulatory requirements, researching competition,
preparing the company’s website and all marketing material, setting up the company’s sales
database and generating a list of leads, as well as organizing the company’s offices, accounts, and
equipment. In addition, Donahue negotiated the company’s contracts.
¶ 12 As a result of Donahue’s efforts, GGE, Inc. was a fully functional used oil recycler by the
end of 2012. Donahue continued to perform all responsibilities relating to permits and licensing,
bookkeeping, regulatory compliance, insurance, maintenance, cleaning, ordering, transport of
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material, sales, and all technology issues, among other tasks. Accordingly, GGE, Inc. became a
profitable business by the end of 2013 and was poised to triple its income in 2014. Anthony
projected the company would have 1,200 accounts by the end of 2015, which would yield a gross
income of $1.2 million.
¶ 13 As of January 1, 2013, Donahue earned 4% equity pursuant to the April 10, 2012 email
authored by Anthony. He also claimed that he earned an additional 5% equity as of January 1,
2014 under Anthony’s equity proposal structure. Donahue alleged that “[a]s of January 1, 2014,
[he] held a 10% equity interest in GGE.”
¶ 14 Also in 2013, Anthony advised Donahue that his trading income had declined and that he
was unable to make any further capital contributions to the business. Anthony knew Komen from
the trading business and Komen had expressed interest in investing in GGE, Inc. Anthony and
Donahue were interested in additional investment to hire more employees and expand GGE, Inc.’s
business. Komen and Anthony agreed that Komen would provide an additional cash investment to
GGE, Inc. Komen and Anthony agreed to form a new limited liability company to take over and
expand GGE, Inc.’s business.
¶ 15 On January 13, 2014, Komen sent Donahue a compensation proposal on behalf of the
successor company, which is attached to the complaint as an exhibit. 1 The email stated, “we need
you on the ground working the sales to build it so we have something for you to manage and
direct.” In describing the position of “Executive Director of Sales,” the email stated that the duties
included: (1) “Continues doing sales”; (2) “Manages Sales People – sets goals/monitors the
process”; (3) “Sales Strategy – where we are selling/what territories/what zones (building
1
The attached email to Donahue is from “Green Grease Chicago,” and does not include a
signature. It is unclear from the record who authored this email.
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density)”; and (4) “ETC.” The email proposed initial equity at 10% with a three-year forfeiture
clause of 1/3 per year, identifying forfeiture events as quitting and termination for cause, “[b]ut
not for just missing goals alone.” (Emphasis in original.) The email listed vesting dates of June
--
30, 2014, June 30, 2015, and June 30, 2016. The proposal included compensation of $52,000 plus
commission and discretionary bonus. Finally, the email stated as to the 10% equity, “[p]ractically
speaking – you won’t see any cash for the PM – there won’t be any distributions for a couple of
years because it’s all being plowed back into the business for growth.” The email stated that, in
the short term, “more PM isn’t putting any more money in your pocket, long term the 10% PM
will get you what you want.” The email also stated:
“-Options/More equity To Be Discussed (wants clarity what this looks like) (does
not want undefined risk) (wants current equity, higher salary, equity going forward)
when we achieve that mass and you are into an executive position.
- what’s down the road = ideally more satellites/more locations/more opportunities
to invest and be owners in those as well (we didn’t get into this [to] do just 1 in the
first place)
- the goal is that 10% PM should provide you with a steady retirement 6 figure
income stream.” (Emphasis in original.)
¶ 16 The next day, Komen sent another email to Donahue entitled, “Employee Equity Incentive
Agreement To be executed after new LLC is formed[,] funded and closed.” The email, also
attached to the complaint as an exhibit, stated:
“10% PM Vested Immediately—
24 months forfeiture over [three] 8 month increments. Forfeiture occurs by either
Donahue [l]eaving the company or being terminated.
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IE Aug 31[,] 2014 3.33% of PM not-forfeitable
April 31[,] 2015 6.67% of PM not-forfeitable
December 31[,] 2015 10% of PM not-forfeitable
Donahue will sign the general employment agreement that everyone else will sign.
Further:
If on or before Jan 1[,] 2016 Donahue is promoted into an Executive Position, 10%
more PM will be granted and vested immediately with a 4 year forfeiture clause
under the same outline and provisions as the prior one.
Ie [sic] 4 years 1/4 per annum.” (Emphasis in original.)
¶ 17 Donahue told Anthony and Komen that he would accept the base salary, commissions, and
equity allocation, but not the forfeiture provisions. Anthony and Komen agreed and indicated that
they would have the company’s attorney draft a written agreement for Donahue to sign after he
returned from vacation on January 23.
¶ 18 Also on January 14, 2014, GGE, LLC was formed and registered with the Illinois Secretary
of State. Donahue was not informed of the particulars of the transaction, but believed that GGE,
LLC, in substance, succeeded to GGE, Inc.’s business rights, obligations, assets, and liabilities.
¶ 19 Donahue was ordered to take a vacation between January 15 and January 22, 2014 before
returning to oversee sales in the expanding business. Upon his return to the company’s office, he
met with Anthony and Komen to sign a written agreement. On January 24, 2014, Anthony and
Komen informed him that there would be no written agreement between him and GGE, LLC.
Komen advised him that defendants did not want to enter into a written contract because it would
“ ‘open us up’ ” to a lawsuit from Donahue. Komen further told Donahue that he would have no
equity interest in the new company and that his equity in GGE, Inc. had “ ‘no value,’ ” but if
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Donahue performed well, Komen and Anthony “ ‘might’ ” award him some unspecified equity in
the new company at some point in the future. Further, Komen told Donahue that his survival level
salary would be reduced by 30%. Donahue protested that the terms were not what they had agreed
to prior to his vacation. Komen crossed his arms and told Donohue to “ ‘[t]ake it or leave it.’ ”
¶ 20 In light of the breach of terms to the oral agreement made prior to his vacation, the material
reduction of his salary, and the renunciation of his equity ownership, Donahue was effectively
terminated from GGE, Inc. and precluded from earning additional equity as compensation for his
start up efforts. On February 25, 2014, Donahue’s attorneys sought to inspect the books and records
of GGE, Inc. Shortly thereafter, GGE, Inc.’s attorney responded to the request for information by
denying Donahue was ever a shareholder of GGE, Inc.
¶ 21 Donahue had filed an initial verified complaint pleading similar facts. Defendants moved
to dismiss the complaint pursuant to sections 2-606, 2-615, and 2-619 of the Code. 735 ILCS 5/2-
606, 2-615, 2-619 (West 2014).
¶ 22 On November 5, 2014, the circuit court denied defendants’ motion to dismiss. Donahue
then filed a motion to compel on October 15, 2015.
¶ 23 On November 25, 2015, GGE, Inc. filed for Chapter 11 bankruptcy in the United States
Bankruptcy Court for the Northern District of Illinois. 2 The bankruptcy petition listed Donahue as
2
In their response brief, defendants claim that the bankruptcy petition included a sworn
statement of financial affairs of GGE, Inc., which stated that, from November 26, 2013 to
November 25, 2015, there had been no transfer of the company’s assets to GGE, LLC. Notably, in
this statement, “Part 13,” entitled, “Details About the Debtor’s Business or Connections to Any
Business,” asks to “[l]ist any business for which the debtor was an owner, partner, member, or
otherwise a person in control within 6 years before filing this case.” Defendants responded,
“[n]one.” Defendants also responded “no” to whether, “[w]ithin 1 year before the filing of this
case, did the debtor have officers, directors, managing members, general partners, members in
control of the debtor or shareholders in control of the debtor who no longer hold these positions?”
GGE, LLC is not mentioned in the sworn statement.
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a GGE, Inc. equity security holder, but described his equity as “not vested” and stated that he had
0% of securities to Maureen’s 100% interest. Donahue is also listed as one of the creditors in the
petition. Maureen signed the Statement of Financial Affairs for Non-Individuals Filing for
bankruptcy under penalty of perjury on behalf of GGE, Inc.
¶ 24 On January 5, 2016, the circuit court entered an order staying the case pending bankruptcy
proceedings. On February 16, 2016, GGE, Inc. filed a notice of removal of the case to the federal
bankruptcy court pursuant to 28 U.S.C. § 1452 and Fed. R. Bankr. P. 9027(c).
¶ 25 On June 13, 2016, Donahue filed a sworn creditor claim in the bankruptcy proceedings.
The claim form requests “Information About the Claim as of the Date the Case was Filed.” The
form contains a section asking, “[h]ow much is the claim?” Donahue responded “$0.00.” As to the
basis of the claim, he stated “[e]quity owed from starting and running Green Grease for over two
years.”
¶ 26 On September 28, 2016, the bankruptcy court entered an order approving GGE, Inc.’s
disclosure statement and confirming the company’s plan of reorganization. The plan provided for
no class of priority claims, five classes of secured claims, two classes of unsecured claims, and
one class of equity holders. As to the class of equity holders, listed as “Class 8 – The equity
interests of members of the L.L.C.,” the court approved that “[t]he equity interests of any and all
members of [GGE, Inc.] shall not be retained,” and that Anthony “shall receive the entire equity
interest in [GGE, Inc.] through a credit of no less than $50,000 against his Class 1 claim.” Although
Anthony acquired the entire equity interest in the reorganized GGE, Inc. in exchange for a credit
bid of $50,000 against his secured claim, under section 8.03 of the confirmation plan, it was subject
to higher or better offers. Indeed, GGE, Inc. was required to conduct an auction for the sale of
equity in the reorganized company at the confirmation hearing, wherein “the offeror shall
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constitute the new Interest Holder(s) in the Reorganized Debtor [GGE, Inc.].” Section 8.05 of the
confirmation plan stated that GGE, Inc. “has no pending objections to claims.” Section 9.16 stated
that “[t]he Plan sets forth the entire agreement and undertakings relating to the subject matter
thereof and supersedes all prior discussions and documents.” Finally, section 9.17 of the plan stated
that “[t]o the extent the Confirmation Order or the Plan is inconsistent with the Disclosure
Statement or any agreement entered into between the Debtor and any third party, unless otherwise
expressly provided in the Plan or the Confirmation Order, the Plan controls over the Disclosure
Statement and any such agreement, and the Confirmation Order *** shall be construed together
and consistent with the terms of the Plan.”
¶ 27 In short, Donahue filed no objection to the confirmation plan and never contested
Maureen’s claim of 100% equity ownership. The bankruptcy court then confirmed the information
in the disclosure statement by entering the order confirming GGE, Inc.’s reorganization plan. The
record contains no evidence that Donahue attempted to make an offer for equity in the reorganized
company in the context of the bankruptcy court proceedings.
¶ 28 On September 1, 2017, Donahue filed a motion in the bankruptcy court to amend his
complaint and remove the case back to the circuit court of Cook County. He proposed to amend
his complaint to (1) eliminate claims against GGE, Inc.; (2) add additional claims against the
individual defendants not impacting GGE, Inc.; and (3) acknowledge that any recovery Donahue
obtains nominally on behalf of GGE, Inc. against the individual defendants would be distributed
through GGE, Inc.’s bankruptcy plan. At the hearing on the motion, the bankruptcy court did not
raise the issue of whether Donahue had a Class 8 claim against GGE, Inc., only stating that “I can
see why you might not want to dismiss [your state claims], for fear of putting yourself in a situation
where you’ve lost your claims that might be derivative.” The bankruptcy court entered an order on
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September 12, 2015, granting Donahue leave to file an amended complaint and remanding the
proceedings back to the circuit court of Cook County.
¶ 29 On November 14, 2017, Donahue filed his amended verified complaint, pleading
essentially the same facts as the initial complaint. In addition, he alleged that Anthony and Komen
breached obligations that otherwise targeted his equity interest in GGE, Inc. Donahue requested
that any award in his favor and against defendants “should be ordered paid by defendants directly
to [him] because defendants should not benefit from their own misconduct by sharing in the award
derivatively, and because they would otherwise control their own payment [since] they seized
control of the company.”
¶ 30 Count I of the amended complaint alleges direct claims of statutory oppression and
corporate waste against Anthony and Komen, asserting that Donahue was squeezed out of both
GGE businesses.
¶ 31 Count II of the amended complaint alleges breach of contract claims against Anthony. This
count is pled in the alternative, if the court does not find Donahue acquired an ownership interest
in GGE, LLC. In support of this claim, Donahue alleged that, “[i]n late 2011 and early 2012,
Donahue and [Anthony] discussed Donahue’s acquisition of a minority interest in GGE, Inc. and
GGE, LLC.” Anthony offered escalating amounts of equity interest for each year, totaling 24%.
Donahue “accepted the proposal and proceeded to devote all his time and energy into starting up
and running GGE, Inc,” and “satisfactorily performed all his obligations under the agreement.”
¶ 32 In count III, Donahue asserts breach of fiduciary duty against Anthony, claiming that
Anthony owed him and GGE, Inc. a “statutory and common law fiduciary duty of loyalty *** to
refrain from acting in a reckless or intentionally harmful manner, refraining from engaging in
grossly negligent or reckless conduct, or intentional misconduct in GGE, Inc.’s business.”
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Donahue alleged that he is entitled to bring a direct as well as derivative claim because defendants
caused him individual harm, and otherwise knowingly targeted his interest in GGE, Inc., including
the exclusion of his managerial, membership, and financial rights, reducing his share of a buyout,
and otherwise eliminating his employment position. He further alleged that he had been personally
harmed more significantly than any other member because he suffered expulsion from the
company, loss of the value of his equity interest, and loss of use of profits and funds of the
company. The count alleges that Anthony personally reaped the benefits of Donahue’s interests in
connection with the formation of GGE, LLC.
¶ 33 Count IV seeks recovery from Anthony for a breach of fiduciary duty to manage GGE, Inc.
fairly and in good faith, per the reasonable expectations of the shareholders, without oppression,
and without wasting assets under sections 12.56(a)(3), (a)(4), and 12.56(d) of the Act. It alleges
that Anthony breached the Act by targeting Donahue’s employment and equity interests, steering
GGE, Inc.’s assets and opportunities elsewhere, and otherwise eliminating any possibility of
Donahue’s benefitting from his investment.
¶ 34 Count V alleges a direct claim of aiding and abetting against Komen, claiming that Komen
had knowledge of: (1) Anthony’s fiduciary obligations toward Donahue; (2) Anthony’s agreement
with Donahue to allot equity interest in GGE, Inc. to Donahue; and (3) Anthony’s intentions to
steer GGE, Inc. assets, profits, accounts, and opportunities elsewhere, including to GGE, LLC.
The count further alleges that Komen personally benefitted by usurping his interests in GGE, Inc.
without accounting or paying for the same, and that Komen’s aiding and abetting was carried out
in a willful and intentional manner, in reckless disregard to his rights.
¶ 35 Count VI alleges a derivative claim against Anthony for a breach of fiduciary duty.
Donahue claims that, under section 7.80 of the Act, as a former shareholder, he may bring a
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derivative claim and that he retains standing “when the defendants eliminated [a] shareholder’s
interest as a means to oppress that shareholder and to target that shareholder’s standing to bring a
derivative claim.”
¶ 36 Count VII is a derivative claim against Komen for aiding and abetting. This count seeks
punitive damages, derivative damages, and disgorgement of all compensation and benefits
Anthony and Komen received while breaching their fiduciary duties.
¶ 37 On November 30, 2017, Anthony and Maureen Demma (collectively, the Demma
defendants), filed a motion to dismiss pursuant to Code sections 2-606, 2-615, and 2-619.
Generally speaking, the motion argued that the bankruptcy confirmation plan barred Donahue’s
claims in several ways. They noted that Donahue’s attorney participated in the bankruptcy
proceedings throughout and attended several of the hearings and the meeting of the creditors of
GGE, Inc. Donahue filed a claim in the bankruptcy case, but did not vote on the confirmation plan,
nor did he object to the approval of the disclosure statement or confirmation plan. Instead, he filed
his amended complaint to collaterally attack the Demma defendants and Komen.
¶ 38 In the section 2-615 portion of their motion, the Demma defendants primarily argued that
much of the amended complaint was premised upon an event that never occurred, namely, the
transfer of GGE, Inc. assets to GGE, LLC. They asserted that GGE, LLC never operated and that
all the assets of GGE, Inc., other than those foreclosed upon by Anthony as a secured lender to
GGE, Inc. and subsequently leased back after the confirmation plan was entered, remain assets of
GGE, Inc. The Demma defendants attached an exhibit to their motion, showing that GGE, LLC
was involuntarily dissolved on July 10, 2015. The statement of financial affairs included as part of
the bankruptcy petition filing indicated no transfer of assets from GGE, Inc. to GGE, LLC during
the period in question. The Demma defendants argued that, although Donahue claimed an illegal
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transfer of assets, he did not plead facts which reasonably support this inference and his assumption
is contradicted by the bankruptcy court filings, subject to judicial notice. The Demma defendants
also noted that the bankruptcy court’s order confirming the plan extinguished any and all prior
equity interests in GGE, Inc. and replaced them with a new equity interested vested in Anthony.
¶ 39 The Demma defendants also argued in the section 2-615 portion of their motion that the
amended complaint was insufficiently pled because it failed to establish damages, asserting that
Donahue’s claim of equity was extinguished following confirmation of the bankruptcy plan. In
addition, they contended Donahue failed to sufficiently plead consideration in his breach of
contract claim. The amended complaint merely alleged that, after Anthony authored the work
proposal and Donahue accepted it, he proceeded to “devote all his time and energy in starting up
and running GGE, Inc.” The Demma defendants contend that this action was consideration to
GGE, Inc. and not to Anthony. Without consideration from Donahue to Anthony, the Demma
defendants claimed that the parties did not enter into an enforceable contract, requiring dismissal
of the amended complaint.
¶ 40 Finally, the Demma defendants argued in the section 2-615 portion of the motion that
Donahue’s derivative claims were extinguished by operation of law once the bankruptcy court
confirmed the plan. Citing 11 U.S.C. § 541(a)(1), they contended that any derivative actions as of
the commencement of the bankruptcy case became part of the GGE, Inc. bankruptcy estate,
including “ ‘all equitable interests of the debtor [GGE, Inc.] in property.’ ” Although derivative
actions were pursuable during the pendency of the bankruptcy proceedings, Donahue took no
action before confirmation. Under 11 U.S.C. § 1141(b), the confirmation order vested “ ‘all of the
property of the estate in the debtor,’ ” which takes the property “ ‘free and clear of all claims and
interests of creditors, equity security holders, and of general partners in the debtor,’ ” pursuant to
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11 U.S.C. § 1141(c). In short, the Demma defendants argued that Donahue made no objection in
the bankruptcy court and that court extinguished the derivative rights which he now seeks to assert.
¶ 41 In the section 2-606 portion of the motion, the Demma defendants argued that Donahue
premised his equity interest claim based on an alleged written proposal authored by Anthony on
April 10, 2012, which was not attached as a written instrument to the amended complaint.
¶ 42 In the section 2-619 portion of the motion, the Demma defendants argued that the amended
complaint was barred by certain affirmative defenses. First, they argued that Donahue lacked
standing to bring the derivative claims, again, because the bankruptcy court extinguished any
interest he had when it confirmed the plan, which provided that Anthony would purchase the equity
in the reorganized company through a new value contribution. Anthony’s purchase was subject to
higher and better offers through an auction, but no one made an offer. The Demma defendants
argued that Donahue had ample opportunity to protect his alleged interest and acquire the entire
company, but failed to submit a bid. Nor did he object to the confirmation plan. Instead, he filed a
claim in the GGE, Inc. bankruptcy proceedings for $0.00. Further, the confirmation plan became
unappealable 180 days after entry of the order, a deadline which had passed on March 27, 2017
under 11 U.S.C. § 1144. They also argued that, even if the bankruptcy court had not extinguished
his equity interest, he was barred from maintaining his derivative claims because of his conflict of
interest with other shareholders.
¶ 43 Finally, the Demma defendants argued in the section 2-619 portion of the motion that the
amended complaint was barred by the statute of frauds. 735 ILCS 5/2-619(a)(7) (West 2016).
Noting that Donahue did not attach a written agreement to the amended complaint, the motion
argued that any such agreement was required to be in writing because it could not be performed
within one year. The alleged “offer” was made by early 2012 and proposed a stock grant on January
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1, 2013, with “ ‘additional interests to be earned as of January 1 of each calendar year thereafter,
up to a total of 24%.’ ” Thus, the agreement was subject to the statute of frauds and unenforceable.
¶ 44 On December 4, 2017, Komen also filed a combined motion to dismiss pursuant to Code
section 2-619.1. Komen argued that counts I, V, and VII of the amended complaint should be
dismissed because they were barred by the statute of frauds. Although labeled as a cause for
dismissal under section 2-615 in his motion, this actually is a basis for dismissal under section 2-
619(a)(7) of the Code. 735 ILCS 5/2-619(a)(7) (West 2016) (providing for involuntary dismissal
based on the defense that “the claim asserted is unenforceable under the provisions of the Statute
of Frauds”). Komen contended that Donahue did not attach any written agreement demonstrating
his claim for equity ownership of GGE, Inc. The informal equity ownership accrual as alleged was
impossible to perform fully within one year and, therefore, violated the statute of frauds. Komen
also contended that Donahue’s alleged derivative claims were extinguished in bankruptcy. In
addition, Komen argued that Donahue lacked recoverable damages since any equity he might have
claimed has been extinguished.
¶ 45 Further, Komen argued that he could not have aided and abetted a breach of fiduciary duty
allegedly committed by Anthony because he was unaware of Donahue’s claim of equity in GGE,
Inc. An aiding and abetting claim requires the defendant to be regularly aware of his role as part
of the overall tortious activity and must knowingly and substantially assist the principal in the
violation. Komen contended he was unaware of any fiduciary or other relationship between
Donahue and GGE, Inc. Komen also argued that he neither had any ownership in nor an officer’s
position with GGE, Inc. and, therefore, had no ability to deny Donahue’s ownership of any equity
in GGE, Inc. Komen attached an affidavit to his motion, attesting to his involvement in the
formation of GGE, LLC and his lack of knowledge of Donohue’s claim of equity in GGE, Inc. We
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omit further description of the affidavit, in light of our ultimate disposition of Donohue’s claims
against Komen.
¶ 46 On March 13, 2019, Donahue filed an amended motion to compel documents from
defendants’ joint privilege log. After briefing, the circuit court denied his motion to compel on
December 20, 2019. After reviewing the documents in camera, the court found that Donahue was
not a member of GGE, Inc.’s control group and that the disclosures to Komen and his attorney did
not waive attorney-client privilege.
¶ 47 On August 31, 2020, the circuit court heard argument on the various defendants’ motions
to dismiss and ordered dismissal of the amended verified complaint with prejudice. The court
dismissed counts I through IV under Code section 2-615 and counts V through VII under both
Code sections 2-615 and 2-619(a)(9) “for the reasons stated in open court.”
¶ 48 On September 29, 2020, Donahue moved to reconsider the dismissal order. The circuit
court denied the motion on October 14, 2020, explaining its reasoning in open court but without
issuing an explanatory opinion. He filed a notice of appeal on November 23, 2020, noting therein
that he sought relief from the court orders entered on December 20, 2019, August 31, 2020, and
October 30, 2020.3
¶ 49 On December 7, 2020, Donahue requested preparation of the record on appeal by the clerk
of the circuit court of Cook County. The circuit court entered an agreed order on December 16,
2020 to unseal pleadings for purposes of finalizing the record on appeal.
¶ 50 On December 21, 2020, Donahue filed a motion in the circuit court to approve a
bystander’s report. The proposed bystander’s report contained a description of the proceedings
3
It appears Donahue meant to appeal the October 14, 2020 order denying his motion to
reconsider and that the date is a scrivener’s error.
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drafted by Donahue’s counsel. Defendants objected to the proposed bystander’s report, arguing,
among other things, that it was “confusing and vague as to what actually transpired before the
Court on the dates at issue and, thus, would be a confusing, vague, and potentially misleading
record of the Court’s proceedings.”
¶ 51 On February 2, 2021, the circuit court approved, over defendants’ objection, its own
bystander’s report. The supplemental record does not include the actual court order allowing the
bystander’s report. It is only referenced in a February 3, 2021 email from the clerk of the circuit
court, stating that the order was signed and file stamped, and that the circuit court judge “initialed
the version of the bystander report she approves.” The email also stated that the circuit court
“considers this order as entered,” but “may not appear in the common law record for a few days.”
The bystander’s report, signed by the circuit court judge and dated February 2, 2021, is the only
material in the record which explains the circuit court’s reasoning. It states as follows:
“On August 31, 2020, the Court heard argument on the defendants’ motions
to dismiss. *** During the hearing, the Court noted that the Bankruptcy Court had
already held that Maureen Demma, not Anthony Demma, was the sole owner of
[GGE, Inc.]. The Court asked Donahue’s counsel if she had any evidence showing
that Anthony Demma, a non-owner, had the authority to issue shares of [GGE,
Inc.]. Counsel responded that she did not have any additional evidence at that time,
outside of what was in the pleading and motion to dismiss response. The Court
dismissed Count I of Donahue’s first amended complaint with prejudice holding
that Donahue could not plead an oppression claim per 805 ILCS 5/12.56(a)(3)
against someone who had no authority to issue shares. The court found that Count
I of the complaint must be dismissed with prejudice because the complaint failed
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to identify anything other than an alleged oral agreement for the issuance of shares
between Donahue and [Anthony] (who did not have authority to issue shares), and
counsel for Donahue made representations that she was not aware of any other facts
that would cure the defects the Court found in the complaint. The Court added that,
if Donahue was suing on an employment contract with the entity, then the entity
needed to be a party to the lawsuit, and [GGE, Inc.’s] Bankruptcy had precluded
that claim. The Court also added that it considered Donahue’s breach of contract
count an employment issue that should have been brought as a wage claim in
Bankruptcy Court against [GGE, Inc.]. The Court dismissed Count II of Donahue’s
first amended complaint with prejudice for the same reasons articulated for
dismissing Count I. In addition, the Court ruled that the oral contract Donahue
alleged violated the statute of frauds. The Court also dismissed Counts III and IV
of Donahue’s first amended complaint for the same reasons as Count I, adding that
the defendants did not owe a fiduciary duty to Donahue. The Court dismissed Count
V of Donahue’s first amended complaint holding that the Demma Defendants did
not owe a fiduciary duty to Donahue. The Court based this finding on the preclusive
impact of [GGE, Inc.’s] bankruptcy submissions and the bankruptcy court’s
findings. The Court dismissed Count VI and VII of Donahue’s first amended
complaint holding that he lacked standing to bring [or] maintain derivative claims
on behalf of the company.”
¶ 52 On March 3, 2021, Donahue filed a motion for a supplemental record in the circuit court,
requesting an order requiring inclusion of the bystander’s report in the record on appeal. The circuit
court granted the motion over defendant Komen’s objection.
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¶ 53 On March 29, 2021, Donahue moved for leave to file a supplemental record containing the
court’s bystander’s report in this court. This court granted the motion on April 7, 2021, without
objection from defendants.
¶ 54 ANALYSIS
¶ 55 On appeal, Donahue argues the circuit court erred by granting the motions to dismiss. In
particular, he challenges the court’s holding that the bankruptcy confirmation plan barred his direct
and derivative claims. In addition, he contends that the court erred by denying his motion to compel
the production of GGE, Inc.’s allegedly privileged documents.
¶ 56 Proper Filing of the Record on Appeal
¶ 57 Before addressing the merits in this case, we first consider defendants’ argument that this
appeal should be dismissed in its entirety because of Donahue’s failure to timely file the
bystander’s report.
¶ 58 The defendants’ point is technically correct. Under Supreme Court Rule 323 (Ill. S. Ct. R.
323 (eff. July 1, 2017)), the bystander’s report was due February 15, 2021, but it was not filed until
April 7, 2021. However, we note that this court already allowed the filing of the supplemental
record, without objection by defendants. Therefore, the point is forfeited. Even if we were to strike
the bystander’s report, the lack of a bystander’s report does not impede our review. “An appellant’s
failure to provide a report of proceedings will not bar this court’s review where, as here, the issue
involves a question of law. In re Marriage of Hildebrand, 166 Ill. App. 3d 795, 800 (1988). Indeed,
“failure to present a report of proceedings does not per se require dismissal of the present appeal;
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it merely requires affirmance of those issues which depend for resolution of facts not in the record.”
Rosenblatt v. Michigan Avenue National Bank, 70 Ill. App. 3d 1039, 1042 (1979). 4
¶ 59 Standard of Review
¶ 60 Section 2-619.1 of the Code permits a defendant to file a combined motion to dismiss
pursuant to sections 2-615 and 2-619 of that Code. 735 ILCS 5/2-619.1 (West 2016). “A section
2-615 motion to dismiss [citation] challenges the legal sufficiency of a complaint based on defects
apparent on its face.” Marshall v. Burger King Corp., 222 Ill. 2d 422, 429 (2006). “In reviewing
the sufficiency of a complaint, we accept as true all well-pleaded facts and all reasonable inferences
that may be drawn from those facts,” and we “construe the allegations in the complaint in the light
most favorable to the plaintiff.” Id. (citing Ferguson v. City of Chicago, 213 Ill. 2d 94, 96-97
(2004)). Illinois is a fact-pleading jurisdiction, and a plaintiff must allege facts sufficient to bring
a claim within a legally recognized cause of action. Id. at 429-30. However, “a cause of action
should not be dismissed pursuant to section 2-615 unless it is clearly apparent that no set of facts
can be proved that would entitle the plaintiff to recovery.” Id. at 429. We review an order granting
or denying a section 2-615 motion de novo. Id.
¶ 61 We also review denial of a section 2-619 motion to dismiss de novo. DeLuna v. Burciaga,
223 Ill. 2d 49, 59 (2006). Section 2-619(a)(9) allows dismissal if “the claim asserted against
4
Nonetheless, we also note that Donahue failed to comply with Illinois Supreme Court Rule
341(h)(6) in that the statement of facts in his opening brief cites to the appendix instead of to the
record on appeal, as required by the rule. See Ill. S. Ct. R. 341(h)(6) (eff. May 25, 2018). In
addition, he provided inaccurate citations to the record for the factual propositions he stated. We
caution that the rules of procedure for appellate briefs are rules, not mere suggestions, and it is
within our discretion to strike a brief and dismiss an appeal for failure to comply with the rules.
See Parkway Bank & Trust Co. v. Korzen, 2013 IL App (1st) 130380, ¶ 10. However, when, as
here, a brief is adequate in most respects and the deficiencies do not hinder our ability to review
the issues at hand, we will not strike it. See Spangenberg v. Verner, 321 Ill. App. 3d 429, 432
(2001) (declining to strike a brief when it complied with the rules in other ways and none of the
violations were so flagrant as to hinder or preclude review).
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defendant is barred by other affirmative matter.” 735 ILCS 5/2-619(a)(9) (West 2016). When
ruling on a motion to dismiss under section 2-619, a court must accept all well-pleaded facts in the
complaint as true and draw all reasonable inferences from those facts in favor of the nonmoving
party. Coghlan v. Beck, 2013 IL App (1st) 120891, ¶ 24. As a result, a court should not grant a
motion to dismiss unless it is clearly apparent that no set of facts can be proved that would entitle
the plaintiff to recovery. Id.
¶ 62 In this case, although we have the benefit of reviewing the circuit court’s reasoning for
granting defendants’ motions to dismiss in the bystander’s report, we review the judgment, not the
reasoning, of the circuit court and may affirm on any basis in the record. Leonardi v. Loyola
University of Chicago, 168 Ill. 2d 83, 97 (1995); Guinn v. Hoskins Chevrolet, 361 Ill. App. 3d 575,
586 (2005). We now turn to the merits of this case.
¶ 63 Count I – Direct Claim of Statutory Oppression Against Anthony and Komen
¶ 64 Because it is dispositive, we will first address whether Donahue properly pled a cause of
action for statutory oppression and corporate waste under sections 12.56(a)(3) and (a)(4) of the
Act. The critical inquiry in count I is whether the allegations of the complaint, when construed in
a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief
may be granted. Bogenberger v. Pi Kappa Alpha Corp., 2018 IL 120951, ¶ 23. When making this
determination, all well-pleaded facts in the complaint must be taken as true, however, our supreme
court has emphasized that a plaintiff is required to allege sufficient facts “to bring a claim within
a legally recognized cause of action.” Marshall, 222 Ill. 2d at 429-30.
¶ 65 The pertinent sections of 12.56 of the Act provide:
“(a) In an action by a shareholder in a corporation that has no shares listed on a
national securities exchange or regularly traded in a market maintained by one or
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more members of a national or affiliated securities association, the Circuit Court
may order one or more of the remedies listed in subsection (b) if it is established
that:
***
(3) The directors or those in control of the corporation have acted, are
acting, or will act in a manner that is illegal, oppressive, or fraudulent with respect
to the petitioning shareholder whether in his or her capacity as a shareholder,
director, or officer; or
(4) The corporation assets are being misapplied or wasted.” 805 ILCS
5/12.56(a)(3), (4) (West 2016).
¶ 66 Thus, to state a claim for corporate oppression and waste under sections 12.56(a)(3) and
(a)(4), Donahue was required to allege that: (1) he was a shareholder of GGE, Inc.; (2) the directors
or those in control of the corporation acted in a manner that was illegal, oppressive, or fraudulent
with respect to him; and (3) the directors or those in control of the corporation misapplied or wasted
corporate assets. Count I alleges that Anthony and Komen squeezed him out of both GGE
businesses. It alleged that his employment was terminated, no meeting of shareholders was called,
and he had been “kept in the dark regarding the disposition of GGE, Inc.’s assets.” It also asserted
that he was “denied the ability to inspect books and records of GGE, Inc.,” had not received any
accounting, and had been told that his interest in GGE, Inc. had been rendered worthless. It alleged
that Anthony and Komen “acted in a manner which is illegal, oppressive, and fraudulent” under
section 12.56(a)(3) and that they also “misapplied or wasted GGE, Inc.’s assets, value, profits and
business opportunities” under section 12.56(a)(4).
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¶ 67 Section 2.10 of the Act provides that corporations are required to file articles of
incorporation delineating, among other things, a corporate name, the purpose for which the
corporation is organized, the address of the business, and the number of shares of each class the
corporation is authorized to issue. 805 ILCS 5/2.10 (West 2016). As to shares, this section provides
that the articles of incorporation also must include:
“(6) the number and class of shares which the corporation proposes to issue without
further report to the Secretary of State, and the consideration to be received, less
expenses, including commissions, paid or incurred in connection with the issuance
of shares, by the corporation therefor. If shares of more than one class are to be
issues, the consideration of shares of each class shall be separately stated; and
(7) if the shares are divided into classes, the designation of each class and a
statement of the designations, preferences, qualifications, limitations, restrictions,
and special or relative rights with respect to the shares of each class.” Id.
¶ 68 In addition, the articles of incorporation “may” set forth, among other things, “the names
and addresses of the individuals who are to serve as the initial directors,” as well as provisions
“defining, limiting, and regulating the rights, powers and duties of the corporation, its officers,
directors and shareholders.” 805 ILCS 5/2.10 (West 2016).
¶ 69 Section 1.80 of the Act defines a “shareholder” as “one who is a holder of record of shares
in a corporation.” 805 ILCS 5/1.80 (West 2016). The amended complaint describes GGE, Inc. as
an Illinois corporation, and that GGE, Inc. “contemporaneously filed an election to be treated as
an ‘S’ corporation with the Internal Revenue Service.” The amended complaint also describes
Maureen as “reportedly a shareholder” in GGE, Inc., but holding the shares “in name only,” on
behalf of her husband, Anthony. The articles of incorporation apparently are not of record. Perhaps
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they could have helped this court understand the corporate structure of GGE, Inc. and, most
importantly for purposes of this case, who had authority to issue shares and whether shares were
issued to anyone other than Maureen.
¶ 70 Instead, Donahue claims in count I that he was a GGE, Inc. shareholder only based on the
April 10, 2012 email proposal authored by Anthony. The amended complaint does not plead that
Anthony held a position in the corporation that authorized him to distribute shares. It does not
plead that Maureen, as the 100% owner of the company as stated in the same email, authorized the
distribution of the Class B dividend class of shares to Donahue or authorized Anthony to distribute
the shares. Instead, the count states: “[i]n lieu of a formal agreement documenting equity
ownership for GGE, Inc., [Anthony], who is not a lawyer, sent Donahue and Bricker an email”
that “proposed” equity ownership in GGE, Inc. and that he “accepted [Anthony’s] proposal of
equity ownership as partial compensation of services by proceeding to start up GGE, Inc.’s
business.” There is no record evidence demonstrating Donahue’s “acceptance” of the terms
provided in the email. And nowhere does the April 10, 2012 email state that Donahue was to be
awarded equity as partial compensation for services. Instead, the email simply states that “[e]quity
is to be awarded to the above owners *** on the 1st day of January of each year based on previous
year[’]s internal goals,” with no explanation of what those goals were or who was required to
achieve them.
¶ 71 Further, the email was not attached to the amended verified complaint as evidence of a
claim founded upon a written instrument, as required by Code section 2-606. 735 ILCS 5/2-606
(West 2016) (“If a claim *** is founded upon a written instrument, a copy thereof, or of so much
of the same is relevant, must be attached to the pleading as an exhibit or recited therein, unless the
pleader attaches to his *** pleading an affidavit stating facts showing that the instrument is not
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accessible to him or her”). Failure to comply with section 2-606 is a valid basis for dismissal. See
Sherman v. Ryan, 392 Ill. App. 3d 712, 733 (2009); Popp v. Cash Station, Inc., 244 Ill. App. 3d
87, 100 (1992). Moreover, “[t]he Act requires that a shareholder agreement be ‘in writing.’ ” Elleby
v. Forest Alarm Service, Inc., 2020 IL App. (1st) 191597, ¶ 47 (quoting 805 ILCS 5/7.71(a) (West
2018)).
¶ 72 Donahue therefore failed to allege sufficient facts to show that he was a shareholder in
GGE, Inc. – he simply pled a legal conclusion that he received the initial 1% equity and earned
additional equity each year as a result of his performance. His claim is entirely premised upon an
email authored by a person who may or may not have had the authority to distribute shares, which
email was not attached to his complaint. The record is also devoid of any stock certificate or any
paper evidence demonstrating Donahue was a shareholder in GGE, Inc. A plaintiff is required to
“ ‘plead facts, not conclusions.’ ” Elleby, 2020 IL App (1st) 191597, ¶ 39 (quoting Valiquet v.
First Federal Savings & Loan Ass’n of Chicago, 87 Ill. App. 3d 195, 200 (1979)). The amended
complaint also does not allege an obligation by Anthony to deliver specific equity to Donahue,
any specific length of time for Donahue’s employment, or any conditions which must be satisfied
before he could earn more equity or his employment could be terminated. Nor does it allege any
agreement that GGE, Inc.’s business or affairs would be managed in any particular fashion or
provide for a buy-out of Donohue’s alleged equity in the company. The count also does not allege
that he was guaranteed that his equity interest in the company would ever have any value or how
value could be added over time.
¶ 73 In short, Donahue summarily pled that he was a shareholder in GGE, Inc. without pleading
sufficient facts supporting that conclusion. Our de novo review also has not revealed sufficient
evidentiary support of Donahue’s assertion that he was a shareholder in GGE, Inc. Therefore, as
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he did not plead sufficient facts establishing himself as a shareholder, he cannot maintain a cause
of action claiming a statutory violation of corporate oppression and waste under sections
12.56(a)(3) and (a)(4) of the Act. The circuit court properly dismissed count I of the amended
complaint under section 2-615 of the Code.
¶ 74 Even if count I appropriately stated a cause of action under the Act, it was still properly
dismissed pursuant to section 2-619 of the Code because it was barred by the bankruptcy judgment
confirming the reorganization plan. The most plausible factual scenario here, based on the record,
is that Maureen held control of the corporation as sole shareholder. The statement of financial
affairs filed in the bankruptcy court listed Maureen as GGE Inc.’s sole owner and shareholder.
While GGE Inc.’s bankruptcy case proceeded, Donahue was represented by counsel, filed a sworn
creditor claim, and participated in the proceedings. However, Donahue never objected during the
bankruptcy proceedings to Maureen’s status as the sole shareholder or challenged the distribution
of equity in the time period preceding GGE Inc.’s Chapter 11 bankruptcy filing. He also never
objected to GGE Inc.’s disclosure statement and proposed plan of reorganization. When the
bankruptcy court entered an order approving GGE’s disclosure statement and confirming the
reorganization plan on September 28, 2016, it effectively bound the terms of the reorganization
plan under section 1141 of the bankruptcy code, which states:
“Except as provided in subsections (d)(2) and (d)(3) of this section [which are
inapplicable in this case], the provisions of a confirmed plan bind the debtor, any
entity issuing securities under the plan, any entity acquiring property under the plan,
and any creditor, equity security holder, or general partner is impaired under the
plan and whether or not such creditor, equity security holder, or general partner has
accepted the plan.” (Emphasis added.) 11 U.S.C. § 1141.
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¶ 75 The confirmation plan also extinguished “[t]he equity interests of any and all members” of
GGE, Inc. Donahue never bid on the equity thereafter even though the confirmation plan required
a “new value auction,” which allowed “for the purchase of equity” in the reorganized GGE, Inc.
¶ 76 Donahue argues that his direct claims against Anthony and Komen in counts I and II are
similar to the claims alleged in Cabrera v. First National Bank of Wheaton, 324 Ill. App. 3d 85
(2001), in which the plaintiff debtors brought a lender-liability action against the defendant lender,
arising from the lender’s decision to set off $430,000 from the debtors’ account and apply those
funds to the outstanding balance owed by the debtors prior to the debtors’ filing of a bankruptcy
petition. The circuit court held that res judicata precluded the plaintiffs from asserting their claim
to recover the set off and the appellate court affirmed, holding “[i]f [the plaintiffs] believed that
[the defendant] had breached the agreement under which it claimed a right to payment, it should
have contested the claim during the bankruptcy proceeding.” (Emphasis added.) Cabrera, 324 Ill.
App. 3d at 98. Therefore, Cabrera does not support the validity of the amended complaint.
¶ 77 Furthermore, Donahue repeatedly argues that section 524(e) of the bankruptcy code “does
not operate to relieve non-debtors of their liabilities,” quoting Gillman v. Continental Airlines, 203
F.3d 203, 211 (3d Cir. 2000). However, the court in Gillman stated that the bankruptcy court
“never specifically addressed the release and permanent injunction of Plaintiffs’ claims,” and
therefore, the order confirming the debtors’ plan of reorganization, releasing and permanently
enjoining the plaintiffs’ claims was not accompanied by any findings that the release was fair to
the plaintiffs and necessary to the debtors’ reorganization plan. Id. at 214. In any event, Donahue
failed to properly plead his claim regardless of the application of 11 U.S.C. § 524(e). Whether the
non-debtors are relieved of their liabilities is merely secondary if he cannot properly plead the
claim from which he seeks relief.
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¶ 78 In this case, Donahue is bound by the bankruptcy court’s order confirming the
reorganization plan under 11 U.S.C. § 1141, which confirmed Maureen as the sole shareholder of
GGE, Inc. before the company filed its Chapter 11 bankruptcy and extinguished the equity interests
of any and all members upon its emergence from bankruptcy. We affirm the dismissal of count I
of Donahue’s amended verified complaint on this basis as well.
¶ 79 Count II – Breach of Contract Claim Against Anthony
¶ 80 Donahue next argues that the circuit court erred when it dismissed his breach of contract
claim because it was untimely under the statute of frauds. In his opening brief, he stated that he
“bases his claim for breach of contract on an oral agreement entered into late 2011,” and “not the
April 10, 2012 email.” He continues, “[t]he April 2012 email merely evidences the prior promise
to increase [his] equity shares.” He contends that he provided consideration for the contract by
working for GGE, Inc. on a survival salary. He argues Anthony agreed to provide him equity in
GGE, Inc. if he agreed to work at a survival salary.
¶ 81 The amended complaint states that Count II is “submitted in the alternative, in the event
and to the extent Donahue is found not to have acquired an ownership interest in GGE, LLC.” The
next paragraph of the complaint states that “[i]n late 2011 and early 2012, Donahue and [Anthony]
discussed Donahue’s acquisition of a minority interest in GGE, Inc. and GGE, LLC.” Notably, and
contrary to the argument in Donahue’s brief, the complaint also alleges that Komen’s participation
and the formation of GGE, LLC did not occur until sometime in 2013. Nevertheless, Donahue also
pled in count II that Anthony offered him “an immediate one percent interest in the company with
an additional 4% to be earned as of January 1, 2013.” Donahue next pled that Anthony “further
offered Donahue additional interests to be earned as of January 1 of each calendar year thereafter,
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up to a total of 24%.” The complaint then stated that Donahue “accepted the proposal and
proceeded to devote all his time and energy in starting up and running GGE, Inc.”
¶ 82 To state a cause of action for breach of contract, a plaintiff must allege facts establishing
that the parties exchanged an offer, an acceptance, and consideration. Academy Chicago
Publishers v. Cheever, 144 Ill. 2d 24, 29 (1991). In addition, the plaintiff must allege definite and
certain terms of the contract, the plaintiff’s performance of all required contractual conditions, the
defendant’s breach of the terms of the contract, and damages resulting from the breach. Barille v.
Sears Roebuck & Co., 289 Ill. App. 3d 171, 175 (1997). Our supreme court has held that “in order
for a valid contract to be formed, an ‘offer must be so definite as to its material terms or require
such definite terms in the acceptance that the promises and performances to be rendered by each
party are reasonably certain.’ ” Cheever, 144 Ill. 2d at 29 (quoting 1 Williston on Contracts §§ 38-
48 (3d ed. 1957) and 1 Corbin on Contracts, §§ 95-100 (1963)). “The terms must be clear, certain,
and free from ambiguity and doubt.” Morey v. Hoffman, 12 Ill. 2d 125, 130 (1957). Further,
“[a]lthough the parties may have had and manifested the intent to make a contract, if the content
of their agreement is unduly certain and indefinite no contract is formed.” Cheever, 144 Ill. 2d at
29 (citing 1 Williston § 37 and 1 Corbin § 95).
¶ 83 In this case, Donahue has alleged the formation of an oral contract, but the allegations he
has set forth in the amended complaint lack the definite and essential terms required for the
formation of an enforceable contract. A contract “ ‘is sufficiently definite and certain to be
enforceable if the court is enabled from the terms and provisions thereof, under proper rules of
construction and applicable principles of equity, to ascertain what the parties have agreed to do.’ ”
Id. (quoting Morey, 12 Ill. 2d at 131).
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¶ 84 Here, Donahue has pled more conclusions than facts. Numerous terms and conditions of
the alleged oral agreement remain undefined and, thus, unpled. For example, count II lacks any
terms of consideration. Paragraphs 82 through 84 of the amended complaint stated the alleged
offers of increased equity interest from Anthony, but provided no terms whatsoever regarding the
consideration for those terms. Paragraph 85 simply concluded Donahue “accepted the proposal
and proceeded to devote all his time and energy in starting up and running GGE, Inc.,” while
providing absolutely no detail about the conditions of employment and the goals necessary for an
increase in equity interest as Donahue alleged. These omissions raise many questions: When did
the alleged contract commence? What terms were involved to start up and run GGE, Inc., as
Donahue alleges? What was the beginning date of employment and did his employment expire at
a certain date, or was it indefinite? Did Donahue receive a salary and for what amount? What was
the value of the alleged equity? How would the equity be structured? None of these details were
pled in the amended complaint. Moreover, Count II fails to allege Donahue’s performance of all
required contractual conditions, Anthony’s breach of the undefined terms of the contract, and
damages resulting from the breach. Barille, 289 Ill. App. 3d at 175.
¶ 85 In this case, the essential terms are so uncertain and, more significantly, not pled in the
amended complaint, that there is no basis for deciding whether the agreement has been kept or
broken. “It is not the role of the court to rewrite the contract and spell out essential elements not
included therein.” Cheever, 144 Ill. 2d at 31. Because Count II provides no sufficient factual basis
for contract formation under Illinois law, the breach of contract claim fails.
¶ 86 Even if Count II had properly set forth facts describing definite and certain terms of oral
contract formation, breach, and damages, it was properly dismissed because of the operation of the
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statute of frauds under section 80 of the Illinois Frauds Act (740 ILCS 80/1 (West 2016)). The
statute provides:
“No action shall be brought *** upon any agreement that is not to be performed
within the space of one year from the making thereof, unless the promise or
agreement upon which action shall be brought, or some memorandum or note
thereof, shall be in writing, and signed by the party to be charged therewith, or some
other person thereunto by him lawfully authorized.” Id.
¶ 87 In short, the statute of frauds requires a writing with an authorized signature for specified
agreements that, by their terms, cannot be performed within one year of their making. Id.; see also
Barnes v. Michalski, 399 Ill. App. 3d 254, 271 (2010). In Barnes, the court stated that the test for
application of the statute of frauds is “whether the contract was capable of being performed within
one year after its formation, not whether the parties contemplated that it would be performed within
that time.” 399 Ill. App. 3d at 271 (citing Robinson v. BDO Seidman, LLP, 367 Ill. App. 3d 366,
370 (2006)).
¶ 88 In this case, paragraph 83 of the amended complaint alleged that Anthony offered Donahue
an immediate one percent interest in the company (although no date of commencement is pled),
with an additional 4% to be earned as of January 1, 2013. Paragraph 84 stated that Anthony “further
offered Donahue additional interests to be earned as of January 1 of each calendar year thereafter,
up to a total of 24%.” (Emphasis added.) Accordingly, as pled, the alleged terms of the oral
agreement could not be performed within one year. Further, as the terms to achieve full
performance of the oral agreement were not pled in the amended complaint, Donahue cannot claim
defendants are estopped from relying on the statute of frauds as an affirmative defense to contract
formation. See, e.g., American College of Surgeons v. Lumbermens Mutual Casualty Co., 142 Ill.
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App. 3d 680, 698-99 (1986) (“The rationale of the full performance doctrine is that when one
party, in reasonable reliance on the contract, performs all of its obligations, it would be unfair to
allow the other party to accept the benefits under the contract but to avoid its reciprocal obligations
by asserting the Statute of Frauds.”); Meyer v. Logue, 100 Ill. App. 3d 1039, 1043-44 (1981)
(same). As the alleged agreement between the parties was not in writing, it violated the statute of
frauds. 740 ILCS 80/1 (2016). We affirm the circuit court’s judgment to dismiss the amended
complaint on this basis.
¶ 89 Counts III through VII – Remaining Direct and Derivative Claims
¶ 90 Before we can address the merits of Donahue’s remaining claims in counts III through VII,
we must first determine whether Donahue has standing to allege direct and derivative claims. He
argues that an equity owner like himself may bring both direct and derivative claims if the
gravamen of the claim involves injuries not unique to all the shareholders and if, as here,
defendants allegedly targeted his equity interests. He cites Levy v. Markal, 268 Ill. App. 3d 355
(1994) and Zokoych v. Spalding, 36 Ill. App. 3d 654 (1976) in support of this claim. The plaintiffs
in Levy and Zokoych were shareholders attempting to bring individual and derivative actions for
breaches of fiduciary duties.
¶ 91 “In Illinois, a shareholder may bring a derivative action and an individual claim at the same
time if he has suffered a different injury from his fellow shareholders.” Levy, 268 Ill. App. 3d at
371. “Thus, ‘where the wrongful acts are not only against the corporation but are also violations
of a duty *** owed directly by the wrongdoer to the stockholders,’ a stockholder may sue both
derivatively and individually to obtain redress for these wrongs.” Id. (quoting Zokoych, 36 Ill. App.
3d at 663).
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¶ 92 Standing requires that a party have a real interest in the action brought and in its outcome.
In re Estate of Wellman, 174 Ill. 2d 335, 344 (1996). The issue of standing is not as a procedural
technicality, but rather as an aspect or component of justiciability. Bridgestone/Firestone, Inc. v.
Aldridge, 179 Ill. 2d 141, 147 (1997) (citing Wellman, 174 Ill. 2d at 344). “The essence of the
inquiry regarding standing is whether the litigant, either in an individual or representative capacity,
is entitled to have the court decide the merits of a dispute or a particular issue.” Wellman, 174 Ill.
2d at 345.
¶ 93 We previously explained that Donahue failed to properly plead sufficient facts
demonstrating that he was a shareholder in GGE, Inc. The record is devoid of evidence supporting
Donahue’s allegation that he was a shareholder, with the exception of the insufficient April 10,
2012 email in which Anthony, without proper authority or authorization, delineated a proposal for
the equity structure of GGE, Inc. In any event, following the bankruptcy court’s confirmation of
GGE, Inc.’s reorganization plan, to which Donahue never objected as a participant of the
bankruptcy proceedings, any equity interest Donahue allegedly might have held was extinguished.
Accordingly, he has not pled sufficient facts establishing himself as a shareholder, and thus lacks
standing to bring both individual and derivative claims on behalf of GGE, Inc.
¶ 94 Even if Donahue sufficiently pled facts demonstrating he was a shareholder in GGE, Inc.,
as to his individual claims against Anthony and Komen, “ ‘[a] shareholder of a corporation does
not acquire standing to maintain an action in his or her own right, as a shareholder, when the
alleged injury is inflicted upon the corporation and the only injury to the shareholder is the indirect
harm which consists of [sic] the diminution in value of his or her corporate shares resulting from
the impairment of corporate assets.’ ” Hamilton v. Conley, 356 Ill. App. 3d 1048, 1054 (2005)
(quoting 13 Ill. L. & Prac. Corporations § 159, at 400 (2000)).
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¶ 95 Donahue lacked standing to allege the direct and derivative claims asserted in counts III
through VII. We therefore affirm the circuit court’s order dismissing counts III through VII of the
amended complaint, pursuant to section 2-619 of the Code.
¶ 96 Denial of Motion to Compel
¶ 97 Finally, Donahue argues the circuit court erred by denying his motion to compel production
of corporate records and communications with Leonard Komen, who Donahue alleges acted as
counsel for GGE, LLC. He contends there was no reasonable expectation of confidentiality to
support defendants’ claim of attorney-client privilege and that he was entitled to review the
documents as chief operating officer and a shareholder of GGE, Inc. He also contends that if a
party discloses to a third-party a confidential communication, then the communication is no longer
protected by the attorney-client privilege. He points to Komen’s affidavit, in which Komen attested
that after receiving the ownership structure of GGE, Inc. from Anthony, Komen contacted GGE,
Inc.’s attorney and accountant, both of whom confirmed that no employees of GGE, Inc. owned
any of the corporation’s shares. Among other things, Donahue seeks the right to question the
truthfulness of Komen’s affidavit and argues that he is entitled to documents communicated while
he served as one of GGE, Inc.’s officers.
¶ 98 Defendants respond that the circuit court’s dismissal of the entire complaint rendered the
motion to compel moot. They argue that Donahue failed to present a proper record to allow this
court to determine whether the circuit court erred in finding documents subject to the attorney-
client privilege. Finally, defendants contend that the assertion of the attorney-client privilege was
well-founded because Donahue merely made unproven allegations that he fell within the corporate
control group and that those allegations were insufficient to overcome the privilege. Defendants
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contend that Donahue was not within the control group, which was later confirmed by the circuit
court’s in camera review.
¶ 99 As the movant below and now, as the appellant, Donahue had the burden to provide this
court with a complete record to review the circuit court’s ruling, particularly as to whether the
circuit court acted within its discretion by denying the motion to compel. None of the documents
reviewed by the circuit court are included in the record for this court’s review, which counsel for
Donohue confirmed during oral argument before this court. Without an adequate record preserving
the claimed error, we must presume the circuit court had a sufficient factual basis for its holding
and that its order conforms with the law. Webster v. Hartman, 195 Ill. 2d 426, 432 (2001); Foutch
v. O’Bryant, 99 Ill. 2d 389, 392 (1984). “Any doubts which may arise from the incompleteness of
the record will be resolved against the appellant.” Foutch, 99 Ill. 2d at 392.
¶ 100 Accordingly, we cannot review this claimed error to determine whether the circuit court
abused its discretion when it granted defendants’ motion to compel. We therefore affirm the circuit
court’s decision to deny the motion to compel. Further, we note that our affirmance of the circuit
court’s decision to grant defendants’ motions to dismiss renders Donohue’s motion to compel as
moot.
¶ 101 CONCLUSION
¶ 102 Having found that the circuit court correctly dismissed all counts of the amended complaint
with prejudice and did not abuse its discretion in denying the motion to compel, we affirm the
judgment of the circuit court of Cook County.
¶ 103 Affirmed.
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Donahue v. Demma
Court: Appellate Court of Illinois
Date filed: 2021-12-23
Citations: 2021 IL App (1st) 201279-U
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