Westmeyer v. Flynn

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Westmeyer v. Flynn

State: Illinois

Court: 1st District Appellate

Docket No: 1-07-2946 Rel

Case Date: 05/20/2008

Preview:SECOND DIVISION Date Filed: May 20, 2008 No. 1-07-2946 DORIE WESTMEYER, ) ) Plaintiff-Appellant, ) ) v. ) ) BRIAN FLYNN, PATRICK M. DALEIDEN, ) JOHN L. DEARLOVE, TERRAGLYPH ) INTERACTIVE, L.P., VICTOR CASINI, as ) Trustee of The 62524 Trust, and ) KEITH SKIBICKI, ) ) Defendants-Appellees ) ) (David Daleiden, ) ) Respondent in Discovery).) Appeal from the Circuit Court of Cook County. No. 04 CH 009299

Honorable Bernetta Bush, Judge Presiding.

JUSTICE HALL delivered the opinion of the court: The plaintiff, Dorie Westmeyer, appeals from an order of the circuit court of Cook County dismissing her complaint seeking to hold defendants Brian Flynn, Patrick M. Daleiden, John L. Dearlove, Terraglyph Interactive, L.P. (Terraglyph), Victor Casini, as trustee of the 62524 Trust, and Keith Skibicki personally liable for a judgment she received against the corporate defendants. On appeal, the plaintiff contends that the

circuit court erred in dismissing her complaint on res judicata grounds. We reverse and remand for further proceeding. The

The following facts are taken from the pleadings.

plaintiff was employed by iMatchNetwork, LLC (iMatchNetwork), a Delaware limited liability company, as its chief marketing

No. 1-07-2946 officer. In addition to their ownership interests, Messrs.

Flynn, Dearlove and Daleiden comprised the board of directors of iMatchNetwork. Defendant TerraGlyph also held an ownership

interest in iMatchNetwork. On April 4, 2003, the plaintiff filed an amended five-count complaint against TerraGlyph, iMatchNetwork and Messrs. Daleiden and Dearlove.1 On January 8, 2004, the plaintiff obtained a According

default judgment against TerraGlyph and iMatchNetwork.

to the order, judgment for the plaintiff and against those two defendants was entered on count I, a claim under the Wage and Collection Act (the Wage Act) (820 ILCS 115/1 et seq. (West 2002)), of the amended complaint and count II (breach of contract) and in the amount of $108,064.58. On June 10, 2004, the plaintiff filed a verified complaint against the defendants in this case. In count I, the plaintiff

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The plaintiff's original complaint The

was filed on March 13, 2001.

circuit court granted Mr. Daleiden's and Mr. Dearlove's motions for summary judgment.
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No. 1-07-2946 sought to pierce the corporate veil, alleging that iMatchNetwork was undercapitalized and that the members failed to observe the formalities of a legitimate company, operated it as the alter ego of its members and operated it so as to perpetrate a fraud on its creditors, including the plaintiff. Count II alleged that the

defendants violated the Uniform Fraudulent Transfer Act (740 ILCS 160/1 et seq. (West 2002)) in that they transferred the assets of iMatchNetwork to themselves, causing iMatchNetwork to become insolvent and preventing the plaintiff from recovering monies owed to her. The plaintiff requested that the court void the

sale or transfer of assets in an amount necessary to satisfy the plaintiff's judgment, injunctive relief against the further disposition of the assets transferred and the imposition of a constructive trust upon any of the assets the defendants received from iMatchNetwork. The defendants filed separate motions to dismiss pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2004)). They argued that the plaintiff's complaint was

barred by res judicata and barred by a prior judgment and that another action was pending between the parties. 5/2-619(a)(3), (a)(4), (a)(9) (West 2004). See 735 ILCS

Except for Mr.

Dearlove's motion, the defendants' motions to dismiss were

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No. 1-07-2946 granted.2 On September 16, 2005, the circuit court denied Mr. Dearlove's motion to dismiss. On December 14, 2005, the court

granted the plaintiff's oral motion to dismiss voluntarily Mr. Dearlove. The plaintiff filed her notice of appeal.3

ANALYSIS The parties address two grounds raised in the circuit court for the dismissal of the complaint: res judicata and other affirmative matter, i.e., the inapplicability of the doctrine of

piercing the corporate veil to a limited liability company. I. Standard of Review

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No order disposing of count III of the complaint naming

David Daleiden a respondent in discovery could be located. However, respondents in discovery are not parties to the action in which they are so named. Shanklin v. Hutzler, 277 Ill. App.

3d 94, 100, 660 N.E.2d 103 (1995).
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Initially, we dismissed this appeal for lack of

jurisdiction because there was no order dismissing Terraglyph. Westmeyer v. Flynn, No. 1-06-0082 (2007) (unpublished order under Supreme Court Rule 23). After the plaintiff remedied the

jurisdictional defect, we granted her motion to consider the case on the original briefs, record and the oral arguments. 4

No. 1-07-2946 "Appellate review of a dismissal under section 2-619 is de novo." Nosbaum v. Martini, 312 Ill. App. 3d 108, 114, 726 N.E.2d "An appeal from such a dismissal is similar to one Nosbaum, 312 Ill. App.

84 (2000).

following the grant of summary judgment." 3d at 114.

"'The appellate court must consider whether the

existence of a genuine issue of material fact should have precluded the dismissal or, absent such an issue of fact, whether dismissal is proper as a matter of law.'" Nosbaum, 312 Ill. App.

3d at 114, quoting Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116-17, 619 N.E.2d 732 (1993). "In a section 2-619 motion, all well-pleaded allegations in support of the claim are taken as true and all reasonable inferences are drawn in the plaintiff's favor." Ill. App. 3d at 113. Nosbaum, 312

"Under section 2-619 a motion to dismiss

should be granted if, after construing the pleadings and supporting documents in the light most favorable to the nonmoving party, the trial court finds that no set of facts can be proved upon which relief could be granted." Owens v. McDermott, Will &

Emery, 316 Ill. App. 3d 340, 344, 736 N.E.2d 145 (2000). II. Res Judicata

The plaintiff contends that the circuit court erred when it dismissed her complaint pursuant to section 2-619(a)(4). section provides in pertinent part as follows: That

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No. 1-07-2946 "(4) That the cause of action if barred by a prior judgment." 735 ILCS 5/2-619(a)(4) (West 2004).

"Res judicata precludes subsequent litigation between the same parties on a claim after a court renders final judgment on a matter." Cload v. West, 328 Ill. App. 3d 946, 949, 767 N.E.2d "In order to invoke this defense, the following

486 (2002).

elements must be shown: (1) that a court of competent jurisdiction rendered a final judgment on the merits; (2) that there is an identity of the parties or their privies; and (3) that there is an identity of cause of action." App. 3d at 949-50. Cload, 328 Ill.

"Res judicata bars not only those issues that

were actually litigated in a prior suit; it bars those that could have been raised as well." Cload, 328 Ill. App. 3d at 950.

However, "the doctrine of res judicata need not be applied where fundamental fairness so requires." Weisman v. Schiller, Ducanto

& Fleck, 314 Ill. App. 3d 577, 581, 733 N.E.2d 818 (2000). In order to determine if the causes of action are the same, the court applies the transactional test. See River Park, Inc.

v. City of Highland Park, 184 Ill. 2d 290, 313, 703 N.E.2d 883 (1998). "Under this test, claims are part of the same cause of

action if they arise from the same transaction or series of connected transactions." Cload, 328 Ill. App. 3d at 950.

"Subsequent claims may be barred if they originate from a single

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No. 1-07-2946 group of operative facts." Cload, 328 Ill. App. 3d at 950.

"This proposition applies regardless of whether the claims assert different theories of relief or are based on evidence that does not substantially overlap, as long as they arise from the same transaction. Cload, 328 Ill. App. 3d at 950.

The defendants maintain that the causes of action in the plaintiff's original complaint and her present complaint are identical because each complaint sought to hold iMatchNetwork, via its members, liable for the claims related to the plaintiff's employment. However, the plaintiff's original complaint alleged

that iMatchNetwork had breached its contract to her and violated the Wage Act by failing to pay her salary and benefits. The

complaint also alleged that the plaintiff left her previous employment to take the job with iMatchNetwork based on the misrepresentations made to her by the individual defendants, Messrs. Dearlove and Daleiden. In contrast, in the present

complaint, the plaintiff is attempting to collect the judgment she obtained against iMatchNetwork. In Miner v. Fashion Enterprises, Inc., 342 Ill. App. 3d 405, 794 N.E.2d 902 (2003), the plaintiff was awarded a default judgment against Karen Lynn, Ltd. During supplementary

proceedings, the plaintiff discovered the corporation had insufficient assets. The plaintiff then instituted a suit

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No. 1-07-2946 against defendant Fashion Enterprises, Inc., and individual defendants alleging that they were liable for the judgment on the basis that Karen Lynn, Ltd., had been formed to defraud creditors, had no assets and the corporate formalities were not observed. The circuit court granted the defendants' motion to This court rejected the

dismiss on res judicata grounds.

argument that the plaintiff was limited to supplementary proceedings to collect on the judgment. Relying on Peetoom v.

Swanson, 334 Ill. App. 3d 523, 778 N.E.2d 291 (2002), and Pyshos v. Heart-Land Development Co., 258 Ill. App. 3d 618, 630 N.E.2d 1054 (1994), this court held that "a judgment creditor may choose to file a new action to pierce the corporate veil of a judgment debtor in order to hold individual shareholders and directors liable for a judgment against the corporation." App. 3d at 415. As in Miner, the plaintiff seeks to pierce the corporate veil of iMatchNetwork and collect her judgment from the defendant owners and directors. distinguish Miner. The defendants make no effort to Miner, 342 Ill.

We agree with the plaintiff that her

complaint to collect the default judgment from the defendants is not barred by res judicata. III. Piercing the Corporate Veil

The plaintiff invoked the doctrine of piercing the corporate

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No. 1-07-2946 veil in order to hold the defendants liable for the judgment she received against iMatchNetwork. The defendants maintain that the

doctrine of piercing the corporate veil does not apply to iMatchNetwork because it is a limited liability company (or LLC). A. Application of Corporate Veil Piercing to LLCs

iMatchNetwork is a Delaware limited liability company. "Efforts to pierce the corporate veil are governed by the law of the state of incorporation." Retzler v. Pratt & Whitney Co., 309 Therefore,

Ill. App. 3d 906, 917, 723 N.E.2d 345 (1999). Delaware law applies to this issue.

Delaware's Limited Liability Company Act provides in pertinent part as follows: "(a) Except as otherwise provided by this chapter, the debts, obligations and liabilities of a limited liability company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the limited liability company, and no member or manager of a limited liability company shall be obligated personally for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of the limited liability company. (b) Notwithstanding the provisions of subsection (a) of this section, under a limited liability company agreement

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No. 1-07-2946 or under another agreement, a member or manager may agree to be obligated personally for any or all of the debts, obligations and liabilities of the limited liability company." Del. Code Ann. tit. 6,

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