Lard v. AM/FM Ohio, Inc.

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State: Illinois

Court: 1st District Appellate

Docket No: 1-06-3336 & 1-07-1450 Cons. Rel

Case Date: 01/16/2009

Preview:FIFTH DIVISION January 16, 2009

Nos. 1-06-3336 & 1-07-1450 consolidated

PATRICIA LARD, Special Administrator of the Estate of Charles Lard, Deceased, et al., Plaintiffs, v. AM/FM OHIO, INC., and CLEAR CHANNEL BROADCASTING, INC., Defendants-Appellants (Heroes Sports Bar and Grill, d/b/a The Epitome, f/k/a LaMirage All Night Studio, Ltd., n/k/a The Clique; Dwain Kyles; Calvin Hollins; Lesly Benodin; and Lesly Motors, Inc.; Defendants-Appellees; Envy Productions and Entertainment Co., Inc., a/k/a Envy Productions; Marco Flores; Team One Security; Onesti Entertainment Corp.; Raphael Dellot; The City of Chicago; Vaughn Woods; and Ira Navarro; Defendants).

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Appeal from the Circuit Court of Cook County

Honorable Kathy M. Flanagan, Judge Presiding.

MODIFIED UPON DENIAL OF PETITION FOR REHEARING JUSTICE O'MARA FROSSARD delivered the opinion of the court: Over the objection of defendants-appellants AM/FM Ohio, Inc., and Clear Channel Broadcasting, Inc. (collectively, Clear Channel), the trial court ruled that the settlement

1-06-3336 & 1-07-1450 consolidated agreements entered into between the plaintiffs and certain defendants were made in good faith within the meaning of the Joint Tortfeasor Contribution Act (Contribution Act) (740 ILCS 100/0.01 et seq. (West 2006)). The settling defendants-appellees are Dwain Kyles, Calvin Hollins, Lesly Benodin, Lesly Motors, Inc., and Heroes Sports Bar & Grill, d/b/a The Epitome, f/k/a LaMirage All Night Studio, Ltd., n/k/a The Clique (Epitome) (collectively, the settling defendants). The trial court's rulings extinguished Clear Channel's contribution claims against the settling defendants in an action involving 22 wrongful death claims and more than 70 remaining personal injury claims. Clear Channel appeals, arguing that the trial court misapplied the law by not requiring the settling defendants to obtain releases or covenants from the plaintiffs and allocate the settlement proceeds among the plaintiffs. Clear Channel also contends the trial court's good-faith finding was an abuse of discretion. Specifically, Clear Channel complains that the settlement amounts were disproportionate to the settling defendants' culpability, discovery concerning the settling defendants' culpability was not allowed, and there was circumstantial evidence of collusion and wrongful conduct. For the reasons that follow, we affirm the judgment of the trial court. BACKGROUND On February 17, 2003, security personnel attempted to quell a disturbance by spraying mace or pepper spray in the overcrowded E2 nightclub, which was located on the second floor above the Epitome restaurant at 2347 South Michigan Avenue in Chicago. When patrons attempted to flee the nightclub, a pileup resulted in the stairwell. Numerous patrons were injured

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1-06-3336 & 1-07-1450 consolidated and 21 were killed. Various plaintiffs filed wrongful death claims and personal injury actions against multiple defendants, including Epitome, its owner Kyles, and its manager Hollins; the building owner Lesly Motors, Inc. (Lesley Motors), and its president and sole shareholder Lesly Benodin; Clear Channel, the owner of a radio station that had aired promotions of Epitome's events; disc jockey Vaughan Woods; dance party promoters Marco Flores and Envy Productions & Entertainment Co., Inc.; Team One Security and its owners Raphael Pellot and Ira Navarro; Onesti Entertainment Corp.; and the City of Chicago (City). Eventually, the trial court consolidated those lawsuits and approved the plaintiffs' two master complaints for bodily injury and wrongful death (master complaints litigation). Generally, plaintiffs alleged that defendants locked, obstructed and blocked exit doors; failed to provide adequate security; failed to provide adequate and accessible exits; allowed an excessive number of people to enter the nightclub, which was structurally unsafe, unsound and posed a hazard; and allowed the nightclub to operate in violation of the City building code. Later, the consolidated lawsuits were amended to add a count against Epitome under the Illinois Dramshop Act (235 ILCS 5/6-21 (West 2002)), alleging that it served alcoholic liquor to patrons, causing their intoxication and involvement in the disturbance that prompted the security guards to use mace or pepper spray. All defendants either filed counterclaims or cross-claims for contribution against one another, or were deemed to have filed such claims pursuant to the trial court's order dated February 17, 2005.

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1-06-3336 & 1-07-1450 consolidated Meanwhile, the Cook County State's Attorney indicted Kyles, Hollins, Flores, and another individual in September 2003 for involuntary manslaughter arising from the nightclub incident. In anticipation that other defendants in the master complaints litigation would be indicted, the trial court in the master complaints litigation stayed discovery directed at Kyles, Hollins, Flores and Benodin to protect their fifth amendment rights against self-incrimination. Discovery established that, in 1976, Benodin incorporated Lesly Motors, which operated as an auto dealership until about 1999. Lesly Motors owned and leased the building in question to Kyles, Hollins, and their corporations, who operated the restaurant and nightclub. A written lease was executed in 1987 between Lesly Motors as the lessor and Kyles, Hollins, and their corporations as the lessees. They executed a second lease in 1989 for a 10-year period. In 1999, the lease was extended again for a 10-year term, and it was in effect at the time of the February 2003 incident. The 1999 lease listed Benodin, under his home address, as the lessor and Hollins and his corporation LaMirage, d/b/a The Clique, as the lessees. According to the lease, the lessees were obligated to maintain the premises and ensure that the premises complied with all laws, rules, regulations and codes. The lessor had no obligation to make repairs. The lessor had limited rights to enter the property after giving proper notice. For example, the lessor could enter to show the property to prospective purchasers and to ascertain the condition of the premises and whether the lessees were performing their obligations under the lease. The lessor could enter the premises to make any repairs the lessees failed to make, but only after the lessees failed to cure the default after 10 days' notice. The lessor also had the right to enter the premises without

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1-06-3336 & 1-07-1450 consolidated notice in case of an emergency. The lessees made their rent checks payable to Lesly Motors, and those checks were deposited into Lesly Motors' bank account. Lesly Motors paid the real estate taxes for the property. In 2001, Lesly Motors and the lessees entered a written agreement to resolve a rent dispute. That agreement identified Lesly Motors as the landlord under the 1999 lease for the property. In 2002, the City filed a complaint in the circuit court of Cook County alleging code violations related to the building. The complaint was filed against all defendants that owned, maintained, operated, collected rents for, or had an interest in the building. The City served its complaint on Lesley Motors by serving Benodin at his residence. Lesly Motors appeared in the case, and LaMirage was impleaded later as a defendant. The City did not sue Benodin in any individual capacity. On July 19, 2002, the court ordered that the second floor of the building could not be occupied. In October 2002, Lesly Motors and Epitome entered a purchase and sale agreement for the property, which acknowledged the City's pending building code violation lawsuit. Epitome agreed that after the sale was consummated, Epitome would be substituted for Lesly Motors as the sole defendant in the lawsuit, would pay and be solely responsible for any damages, court costs, fines and penalties related to the lawsuit, and would hold Lesly Motors free and harmless therefrom. In April 2003, Lesly Motors filed its answer and affirmative defenses in the building code litigation. Lesly Motors admitted that it owned the building but had leased the property and did not maintain the property or operate the business on the premises. Lesly Motors asserted that it 5

1-06-3336 & 1-07-1450 consolidated could not remedy the code violations during the period that LaMirage was in possession of the property. Furthermore, Lesly Motors asserted that after LaMirage failed to remedy the code violations, Lesly Motors attempted to comply with the code. Specifically, On January 29, 2003, Benodin, as the president of Lesly Motors, and a civil engineer secured access to the building's second floor. Furthermore, Lesly Motors paid the outstanding balance owed to LaMirage's structural engineer and employed him to complete his engineering studies with the assistance of Lesly Motors' civil engineer. The structural engineer's remediation plans, which were delivered to Lesly Motors on February 24, 2003, indicated that the work would take about six weeks to complete once the City issued permits. While the master complaints litigation was pending, defendants Epitome, Kyles and Hollins filed for bankruptcy. The bankruptcy court modified the automatic stay in their cases to permit plaintiffs to continue their litigation against Epitome, Kyles and Hollins in order to determine their liability and secure a judgment that would be collectible only to the extent of those defendants' insurance coverage. In 2005, the bankruptcy court discharged all claims against Kyles and Hollins. In 2006, the bankruptcy trustee found that Epitome had no assets. At the time of the February 2003 E2 nightclub incident, Illinois Casualty Company (ICC) had issued Epitome a business owner's policy and a liquor liability policy, each with a $1 million liability limit. Kyles, Hollins and Benodin all claimed coverage under the ICC policies for the master complaints litigation. ICC defended Epitome, Kyles, Hollins, and Benodin under a reservation of rights and also filed a declaratory judgment action against them and others, denying coverage based upon allegations of fraud in the application for the policies. Specifically, ICC claimed the defendants' stated business purpose was to use the second floor as a banquet 6

1-06-3336 & 1-07-1450 consolidated hall, not as an area to hold dance events and sell and serve alcohol. ICC also sought a declaratory judgment finding no coverage under the liquor liability policy for the dramshop claims. Furthermore, State Farm Insurance (State Farm) had issued Benodin a homeowner's policy with a $2 million limit and a personal umbrella policy with a $1 million limit. When Benodin tendered this Epitome litigation to State Farm for coverage, State Farm denied the tender. In addition, Capital Insurance Company (CIC) had issued Lesly Motors a liability insurance policy with a $1 million limit. In February 2006, plaintiffs agreed to settle their claims against Epitome, Kyles, Hollins, and Benodin for $1.5 million, which would be funded by the ICC $1 million business owner's policy and half of the $1 million liquor liability policy. The other half of the $1 million liquor liability policy was being used to settle the dramshop claims. In addition, Benodin would assign his rights in his personal State Farm $2 million insurance policies, despite coverage being denied for this loss. Moreover, Benodin would make a separate assignment, individually, as a putative insured separate and apart from the liability policy covering Lesly Motors. The settlement provided that all the insurance proceeds from Epitome, Kyles, Hollins, and Benodin

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