Zielke v. Wagner

No. 2--96-1248

_________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
_________________________________________________________________

KAREN ZIELKE, Adm'r of the ) Appeal from the Circuit Court
Estate of Kristine Hooper, as ) of Lake County.
Assignee of James Speciale, )
Indiv. and d/b/a Tony and )
Jim's Place, )
)
Plaintiff, )
)
v. ) No. 95--L--662
)
HOWARD WAGNER and KETTNER )
AGENCY, INC., )
)
Defendants and Third-Party )
Plaintiffs-Appellants )
)
(Coopers And Lybrand L.L.P., )
and Coopers And Lines, d/b/a )
Coopers And Lybrand, Chartered )
Accountants, Defendants and ) Honorable
Third-Party Defendants- ) Bernard E. Drew, Jr.,
Appellees). ) Judge, Presiding.
_________________________________________________________________

JUSTICE THOMAS delivered the opinion of the court:
The defendants and third-party plaintiffs, Howard Wagner and
Kettner Agency, Inc. (collectively, the broker defendants or
brokers), appeal from an order dismissing with prejudice their
third-party complaint against the third-party defendants, Coopers
& Lybrand L.L.P. (hereinafter Coopers) and Coopers & Lines, d/b/a
Coopers & Lybrand, Chartered Accountants (hereinafter Lines)
(collectively, the accountant defendants). On appeal, the broker
defendants contend that the trial court abused its discretion in
subjecting to a protective order a settlement agreement entered
into between the plaintiff, Karen Zielke, and the accountant
defendants. The broker defendants further contend that the trial
court erred in finding that their motion to strike Lines' special
and limited appearance was moot. We affirm.
The record reveals that Kristine Hooper died as a result of a
fire that destroyed the apartment that she occupied as a tenant of
James Speciale. Hooper's apartment was above a tavern known as
Tony and Jim's Place, also owned by Speciale. Zielke, as
administrator of the estate of Kristine Hooper, filed a wrongful
death action against Speciale in the circuit court of Lake County.
Speciale then filed for bankruptcy in federal court. In the
bankruptcy proceeding, Speciale filed a claim against the broker
defendants alleging that they negligently placed fire and extended
coverage insurance with Financial Services Insurance, Ltd. (FSIL),
an entity which became insolvent.
Thereafter, Zielke settled her claim in bankruptcy with
Speciale and took an assignment from him of all of his claims
against the defendants. Speciale's bankruptcy claim was
subsequently transferred to the circuit court of Lake County where
Zielke presented a motion, as assignee of the claim, to substitute
herself as the only plaintiff in the action. Zielke was then
granted leave to file a second amended complaint suing the broker
defendants, alleging breach of contract and negligence in
connection with placing coverage with FSIL and for procuring
unreasonably low amounts of insurance. The broker defendants filed
a third-party complaint against "Coopers and Lybrand, an
international accounting firm" and served summons on Coopers, a
Chicago branch. The plaintiff had also sued both Lines and
Coopers. Coopers then filed a motion to dismiss, contending that
the accounting in question was performed by Lines, a Bermuda firm
which is a separate legal entity independent from Coopers. The
brokers then filed a first amended third-party complaint against
Lines. Lines then filed a special and limited appearance
contesting the court's jurisdiction.
The broker defendants served a request to admit facts and
genuineness of documents on both Lines and Coopers. Lines obtained
an extension of time to April 15, 1996, to respond to the brokers'
motion.
In August 1996, the plaintiff agreed to settle her claims
against the accountant defendants. On August 19, 1996, the
plaintiff and Coopers filed a joint motion pursuant to the Joint
Tortfeasor Contribution Act (740 ILCS 100/0.01 et seq. (West
1994)), seeking a finding that the settlement was fair, reasonable,
and made in good faith, along with an order dismissing with
prejudice all claims against the accountant defendants. Lines did
not sign the settlement agreement but was made a third-party
beneficiary to it. Coopers also filed a motion for a protective
order and for leave to file the settlement under seal alleging that
the settlement contains sensitive and confidential information
including the basis upon which the settlement is being
consummated.
On August 28, 1996, the trial court entered an order setting
a briefing schedule on the request for a good-faith finding and
directing the movants to provide a copy of their settlement
agreement to the broker defendants but restricting their
dissemination of any of the information in the agreement solely to
their counsel and their insurer.
Thereafter, the brokers filed objections to the motion for a
good-faith finding and dismissal, along with objections to the
motion for a protective order. The brokers also filed a motion to
strike Lines' special and limited appearance on the basis that its
activities in the case constituted a waiver of its special and
limited appearance.
Following a hearing on October 9, 1996, the trial court found
that the settlement agreement was fair, reasonable, and had been
made in good faith. The court dismissed with prejudice all claims
against the accountant defendants, including those raised in the
third-party complaint filed by the broker defendants. The court
also barred all contribution claims against the defendants, but
noted that the amount paid pursuant to the settlement agreement
would be a setoff against any judgment the plaintiff might obtain
against the brokers. The trial court further ruled that the
protective order remain in force until further order of the court.
Finally, the court concluded that the brokers' motion to strike
Lines' special and limited appearance was moot given the good-faith
finding and the order barring contribution claims against the
accountant defendants.
On appeal, the brokers argue that the trial court abused its
discretion in restricting the dissemination of the information in
the accountant defendants' settlement agreement. They contend that
the protective order amounted to an unconstitutional prior
restraint upon speech in violation of the first amendment to the
United States Constitution (U.S. Const., amend. I). They also
claim that the protective order unfairly precludes them from using
Illinois Pattern Jury Instructions, Civil, Nos. B45.03 and 600.14
(Illinois Pattern Jury Instructions, Civil, Nos. B45.03, 600.14 (3d
ed. 1995)), which relate to percentage of comparative negligence.
Where a protective order is challenged on appeal as an
unconstitutional "prior restraint," the trial court's decision on
the matter will not be disturbed on review absent an abuse of
discretion such that the court acted arbitrarily without the
employment of conscientious judgment and ignored recognized
principles of law so that substantial prejudice resulted. In re
J.S., 267 Ill. App. 3d 145, 148 (1994). Constitutional questions
not presented to the trial court may not be raised for the first
time on appeal. E.J. McKernan Co. v. Gregory, 252 Ill. App. 3d
514, 534 (1993).
In the instant case, the brokers failed to make any argument
before the trial court that the protective order violated their
first amendment rights. Thus, they failed to afford the trial
court any opportunity to employ its discretion. Accordingly, we
find that the broker defendants waived the argument. Furthermore,
we would reject the brokers' argument on the merits even if they
had not waived it. The brokers are unable to articulate any
prejudice that they may have suffered by the imposition of the
protective order. The law on prior restraints cited by the brokers
is inapplicable. The cases they rely upon involve protective
orders restricting dissemination of information relating to the
substance of the claims at issue in the case. In contrast, the
settlement agreement in the present case, which has been provided
to this court under seal, contains nothing that would provide any
support for the broker defendants' defense at trial. In that
regard, we note that the brokers' defense is that the accountants
are responsible for any damages suffered by the plaintiff because
the accountants failed to audit properly FSIL's financial
statements, thereby misleading the brokers as to FSIL's financial
condition and leading them to place Speciale's coverage with FSIL.
However, the settlement makes no admissions with respect to the
liabilities of the various parties in relation to the accountants'
actions in conducting the FSIL audit. The only item of possible
interest is the amount of the settlement, but no prejudice will be
suffered by the brokers since they will be entitled to a setoff in
that amount against any judgment obtained by the plaintiff, and it
is axiomatic that the settlement would not be admissible at trial
on the question of the accountant defendants' liability or
comparative fault. Barkei v. Delnor Hospital, 176 Ill. App. 3d
681, 694 (1988).
We also reject the brokers' claim that the protective order
effectively precludes them from raising certain jury instructions.
The broker defendants correctly note that the order prevents them
from mentioning the amount of the settlement or even mentioning the
fact of a settlement. These are matters that would not be
admissible at trial regardless of the protective order. See
Barkei, 176 Ill. App. 3d at 694. Moreover, we note that the
brokers are not precluded from mentioning any negligent conduct on
the part of the accountants in the case. The brokers have simply
failed to explain how the protective order would preclude them from
utilizing any jury instructions. Additionally, we note that their
argument is premature since there has not even been a trial in the
matter where the brokers have actually attempted to utilize the
instructions.
Since we find that the trial court did not abuse its
discretion in imposing the protective order and the broker
defendants have not raised any argument on appeal attacking the
trial court's dismissal of the third-party claims against the
accountants, we find that the issue of whether Lines waived its
special and limited appearance is moot.
For the foregoing reasons, the judgment of the circuit court
of Lake County is affirmed.
Affirmed.
RATHJE, J., concurs.
JUSTICE COLWELL, specially concurring:
I concur with the judgment of the majority in that the broker
defendants waived their argument concerning the protective order
because they failed to bring it before the trial court. Further,
I agree with the majority's decision that the trial court did not
abuse its discretion in restricting the broker defendants from
disseminating the information in the agreement. In writing,
however, I point out that had the trial court granted the
accountant defendants' request to file the agreement under seal,
the right of access would have attached to the agreement.
The United States Supreme Court has recognized a general
common-law right of access to public records and documents,
including judicial records. Nixon v. Warner Communications, Inc.,
435 U.S. 589, 597, 55 L. Ed. 2d 570, 579, 98 S. Ct. 1306, 1312
(1978). This right creates a presumption that court files should
be open to the public for inspection and copying. United States v.
Corbitt, 879 F.2d 224, 228 (7th Cir. 1989).
A court, however, has the inherent power to control its
records, and the right to inspect public records is not absolute.
In re Marriage of Johnson, 232 Ill. App. 3d 1068, 1072 (1992).
Nevertheless, although a court may restrict access to judicial
records, a court does not have the inherent power to control its
files and to impound any part of a file in a particular case.
Deere & Co. v. Finley, 103 Ill. App. 3d 774, 776 (1981). Instead,
when determining whether to restrict access to judicial records, a
court must balance the parties' reasons for restriction with those
interests supporting access. Johnson, 232 Ill. App. 3d at 1072.
To overcome the presumption of access, a party seeking to
restrict access of records bears the burden of establishing a
compelling interest why access should be restricted and that the
protective order is drafted " 'in the manner least restrictive of
the public's interest.' " Johnson, 232 Ill. App. 3d at 1072-73,
quoting Shenandoah Publishing House, Inc. v. Fanning, 235 Va. 253,
259, 368 S.E.2d 253, 256 (1988).
In Johnson, the parties entered a settlement agreement
regarding a personal injury case while they were getting divorced.
A condition of the settlement was that its terms remain
confidential. Accordingly, although the terms of the settlement
were recited to the court, the actual settlement document did not
become part of the record. Johnson, 232 Ill. App. 3d at 1069.
A few months later, the parties presented a settlement to the
court regarding the distribution of the settlement proceeds from
the personal injury case. The settlement included a term that all
documents in the entire file be sealed. The parties then requested
the court to impound the file, and the court entered the order.
Johnson, 232 Ill. App. 3d at 1070.
After the trial court entered its order, a newspaper requested
access to all the materials impounded by the court's order. After
arguments, the court declined to grant the newspaper access,
explaining that the impoundment " 'was an essential part of the
settlement.' " Johnson, 232 Ill. App. 3d at 1070. The newspaper
appealed the trial court's decision.
The Johnson court reversed the trial court's impoundment
orders. The court stated that the right of access attaches to any
documents filed with the court. Accordingly, since the written
settlement agreement concerning the dissolution became part of the
court record, the right of access attached to that document.
Then, the Johnson court explained that the personal injury
settlement never was attached to the record. Therefore, the right
of access did not extend to the personal injury written settlement,
although the transcript of the hearing at which its terms were
recited was subject to the right, because the transcript had been
made part of the record. Johnson, 232 Ill. App. 3d at 1074.
Similarly, in this case the settlement agreement has not been
filed with the trial court. Accordingly, the right of access has
not attached to the agreement. If, however, the settlement had
been filed, then only a compelling reason, accompanied by specific
factual findings, could justify keeping it from public view. See
Johnson, 232 Ill. App. 3d at 1075.
Contrary to the parties' belief, their "desire and agreement
that the court records were to be sealed falls far short of
outweighing the public's rights of access to the files." Johnson,
232 Ill. App. 3d at 1075; see also Fidelity Financial Services,
Inc. v. Hicks, 267 Ill. App. 3d 887, 893 (1994) (mere desire for
secrecy cannot suffice as a compelling interest).
Moreover, the parties' explanation that the material contained
in the agreement is "confidential" is not a compelling interest
that could overcome the presumption of access to judicial files.
Instead, the only documents that possibly could overcome such a
presumption are those that are privileged and potentially seriously
damaging or embarrassing. Cf. Johnson, 232 Ill. App. 3d at 1076
(Steigmann, J., specially concurring).
It is this writer's belief that complete access to the type of
information sought to be protected in this case encourages
confidence in the court system. Nondisclosure creates a perception
of favored status before the court by the party--or parties--
seeking the order. To allow parties to seal documents based solely
on their agreement that the documents are "confidential" undermines
our judicial system and is directly contrary to the common-law
right of access to public records. Therefore, it is my view that
trial courts should view a protective order as an extremely serious
issue, and I write to encourage the trial court to grant protective
orders only under the most compelling circumstances.