Holzer v. Motorola Lighting Inc.

THIRD DIVISION
March 31, 1998

No. 1-96-3944 & 1-97-0305 (consolidated)

WALTER HOLZER and PROLITE GESELLSHAFTFUR
LICHTTECHNIK MBH,

Plaintiffs-Appellants,

v.

MOTOROLA LIGHTING, INC.,

Defendant-Appellee.)
)
)
)
)
)
)
)
)
)APPEAL FROM THE
CIRCUIT COURT OF
COOK COUNTY

HONORABLE
DAVID G. LICHTENSTEIN,
JUDGE PRESIDING.


JUSTICE GORDON delivered the opinion of the court:

Plaintiffs Walter Holzer and Prolite Gesellshaftfur Lichttechnik mbh
("Prolite") appeal the circuit court's dismissal of their suit against
Motorola Lighting, Inc. ("MLI") for failure to name a necessary party.
Plaintiffs filed a four-count complaint against MLI in June 1996.
According to the complaint, Holzer, a German national, is an industrialist and
engineer with a number of inventions to his credit. In April 1990, he entered
into a partnership agreement with non-party Henri Courier DeMere ("DeMere"),
an engineer and inventor who had also developed technology, specifically in
the field of electronic devices. The purpose of the partnership was to
exploit and further develop certain of the technology the partners had
created.
Specifically, the partnership agreement (which was attached as an
exhibit to the Complaint) stated that each partner had developed and designed
ballast for "fluorescentic" lamps; ballast for "iod-metallic" lamps; ballast
for low voltage lamps; and high voltage transformers. The agreement
collectively referred to these devices as "Products." The agreement formed a
partnership "for the purpose of the worldwide exploitation of the Products,
the patents and other industrial property rights on the Products." The
agreement provided that the partnership "shall have the exclusive right to
exploit their patents and other industrial property rights relating to the
Products," and further that the partnership would be permitted to exploit any
new patents or industrial property rights either partner obtained or acquired
during the term of the agreement (which was to terminate on December 31, 2010,
unless both partners consented to an earlier termination). The agreement
provided that it was governed by Swiss law, and that any dispute arising
thereunder was to be settled by arbitration in Zurich, Switzerland. In May
1990 Holzer and DeMere formed Prolite, as a vehicle for the partnership's
development and licensing of the products.
The Complaint alleged that in May 1992, Holzer initiated arbitration
proceedings against DeMere in Zurich, as provided in the partnership
agreement, seeking a declaration of the validity and scope of the partnership
agreement and an injunction against DeMere disclosing or licensing to any
third parties the new technology and products which were the subject of the
partnership agreement. DeMere appeared and defended himself in the
proceedings. In May 1994, the arbitrator held that the partnership agreement
was valid, enforceable and in effect, and enjoined DeMere from "disclosing any
of the technology to, or concluding any agreements regarding the technology
with, any third parties without Holzer's consent and signature."[fn1]
The Complaint further alleges that during the course of the arbitration
proceedings, one of DeMere's witnesses revealed that DeMere had entered into
an agreement with defendant MLI while the arbitration proceeding was pending.
The arbitrator ordered DeMere to produce a copy of this agreement (the MLI
agreement) to Holzer. Once he did so, Holzer attempted to amend his
arbitration claim to seek relief specifically with respect to the MLI
agreement. His request was denied without prejudice because the additional
relief requested was outside the scope of the issues originally presented for
arbitration and DeMere refused to consent to the amendment.
The MLI agreement (attached as an exhibit to the Complaint) was dated
August 25, 1993. It purported to grant MLI an "exclusive world wide license
*** to make, use, have made, sell and otherwise transfer LICENSED PRODUCTS"
(capitalization as in original). The agreement defined "LICENSED PRODUCTS" as
"all products of every kind including *** power supplies and ballast systems
for gas discharge lamps where at least one valid and enforceable claim of an
existing patent issued to DE MERE covers the completed product where the
completed product is manufactured, used or sold by or on behalf of MLI or an
MLI sublicensee."
Part VII of the MLI agreement contained provisions regarding the
respective responsibilities of MLI and DeMere in the case of certain types of
litigation. In pertinent part (part VII B) it provided as follows:
"B. If any demand, suit or claim is made by a third party against
MLI or a sublicensee based on an alleged infringement of a patent
or other right as a result of the use of the rights granted
hereunder, the following shall apply:
(i) MLI shall have the right to defend the same, and DE MERE
shall have the right, at his own expense, after giving written
notice to MLI, to appoint his own attorney to cooperate in the
defense against such suit or claim.
(ii) If, as a result of any such demand, claim or suit, damages
are awarded against MLI or a sublicensee, or any amounts are
payable by MLI or its sublicensee as a result of any compromise
which MLI or its sublicensee may enter into, or MLI or its
sublicensee is required to pay royalties or damages to a third
party with respect to the practice or use of the know-how or
PATENT MATTER, the obligation of MLI or its sublicensee to pay to
DE MERE royalties shall be reduced by the amount of the royalty
payment and/or damages due to such third party.
(iii) If, as a result of any such demand, claim or suit, MLI or a
sublicensee pay attorneys fees for representation or consultation
to investigate or defend against any such demand, claim or suit,
the obligation of MLI or its sublicensee to pay to DE MERE
royalties shall be reduced by the amount of the attorney fees paid
by MLI or its sublicensees."
The Complaint alleges that DeMere entered into the MLI agreement without
the knowledge or consent of Holzer or Prolite. According to the Complaint, it
was "well-known [sic] within the lighting industry" that Holzer and DeMere had
formed a partnership to develop and market technology for power supplies and
ballasts for gas discharge lamps and that Prolite had the exclusive right to
license that technology to third parties. The Complaint asserts that MLI
and/or its affiliates and agents had specifically become aware of "the rights
of the Partnership and Prolite in and to the Products and the related
technology" as the result of several meetings between Holzer, DeMere and
agents of MLI. The Complaint also alleges that MLI had been aware of the
arbitration between DeMere and Holzer and the result thereof since as early as
June 1994, but had continued to "cooperate with [DeMere] in contravention of
the exclusive rights of Holzer and Prolite."
As noted, the Complaint was filed in June 1996. Count I sounded in
tortious interference with contractual rights. It alleged that Holzer and
Prolite had and continued to suffer financial damages as a result of MLI's
knowing interference with their exclusive rights to the technology which was
the subject of the partnership agreement, and sought compensatory and punitive
damages from MLI. Count II alleged Holzer and Prolite had suffered financial
damages from MLI's acquisition (from DeMere) of trade secrets of Holzer and
Prolite. It was filed with reference to the Illinois Trade Secrets Act (765
ILCS 1065/2 et seq. (West 1994)), and sought compensatory and exemplary
damages and attorneys' fees.
Counts III and IV were pled in the alternative to Counts I and II.
Count III sought a declaratory judgment that the MLI agreement was void and
unenforceable and MLI had no right, title and/or interest in and to the
"Products" or new technology, and requested that all compensation to be paid
to DeMere under the MLI agreement would be paid instead to Prolite and the
partnership. Count IV requested a permanent injunction against MLI "requiring
and prohibiting such acts as necessary to protect and enforce the rights"
which the partnership and Prolite would acquire if the court granted the
declaratory judgment sought in Count III.
In August 1996 MLI filed a motion to dismiss pursuant to section 2-615
of the Illinois Code of Civil Procedure (the Code) (735 ILCS 5/2-615 (West
1994)). It requested that the Complaint be dismissed with prejudice because
plaintiffs had failed to join DeMere, a necessary party, and because the
Complaint failed to state a claim upon which relief could be granted.
In October 1996, after briefing, the circuit court granted MLI's motion
to dismiss on the grounds that DeMere was an indispensable party "whom
plaintiffs concede cannot here by [sic] joined."[fn2] The court noted in its
written order that at oral argument on the motion plaintiffs' counsel had
stated that they could not locate DeMere for purposes of service of process,
and had suggested to the court
"that the defendant, whom they aver is in cahoots with the missing
party[,] may have better sources of information as to his
whereabouts and that the defendant can 'third party in' the
alleged malefactor. Alternatively they suggest they should be
allowed to amend to seek to bring in the party whom they have
suggested they have no right to sue in this forum. The problem
presented by these various approaches is that the plaintiffs, who
bear the burden in this proceeding--even at this stage--seek to
cast it on both defendants and on the court system of the people
of Illinois when an exercise of their own business judgment
provides them the forum in which they are required to proceed."
The record supplied to this Court does not contain a transcript or bystander's
report of the argument on the motion to dismiss.
Plaintiffs filed a motion later in October to reconsider the order of
dismissal and for leave to file a first amended complaint, naming DeMere as an
additional party. They argued primarily that even if DeMere was a necessary
party, they had not been given a reasonable opportunity to add him, as
required by section 2-407 of the Code (735 ILCS 5/2-407 (West 1994)). They
stated they had not and did not concede that DeMere could not be made a party
to the action, noting that although the arbitration provision of the
partnership agreement would be a "substantial additional complication" to the
case, it was not an absolute bar to joining DeMere, as (1) it was a
contractual right which DeMere could waive, (2) he could fail to appear and be
defaulted, and (3) even if he appeared and invoked the arbitration clause, the
remainder of the case against MLI could either proceed or be stayed pending
the outcome of the arbitration. They also asserted DeMere and MLI were joint
tortfeasors and they were entitled to proceed against either or both.
During argument on plaintiffs' motion to reconsider plaintiffs indicated
that the reason they were asking the trial court to reconsider its ruling,
rather than simply refiling, was concern about potential estoppel effect of
the language contained in the court's order to the effect that they had
"conceded" that DeMere could not be joined. The court noted that its source
of information for the proposition that plaintiffs could not join DeMere was
plaintiffs themselves. It admitted that if plaintiffs had not conceded that
they could not join DeMere its statement was "not only gratuitous," but
"wrong." However, if plaintiffs had so conceded in their filings, "it is a
concession that can be used against you[;] *** [MLI] has a right to rely on
the fact that you made that concession."
In November, 30 days after the circuit court's order dismissing the case
but before the court had ruled on the motion to reconsider, plaintiffs filed a
notice of appeal to this Court (No. 1-96-3944). In December, the court denied
plaintiffs' motion to reconsider on the grounds that their notice of appeal
had deprived it of jurisdiction, but allowed them leave to file their first
amended complaint "for supplementation of record purposes only" so it would be
available to the reviewing court. It also noted that it would have denied
plaintiffs' motion if it had jurisdiction, because its order was proper based
on the information the parties had given it when it made its ruling.
In January, less than 30 days after the circuit court's December order
denying the motion to reconsider, plaintiffs filed a second notice of appeal
(No. 1-97-305), appealing the order dismissing the Complaint and the order
denying the motion for reconsideration. This Court consolidated the two
appeals on plaintiffs' motion.
Plaintiffs raise three main issues before this Court. First, they argue
DeMere is not a necessary party, as his presence is not required to protect
his interests, the interests of MLI, nor to effect a complete adjudication of
the controversy. Second, they argue that the circuit court erred in
dismissing the Complaint even if DeMere is a necessary party. This issue has
several sub-arguments. Plaintiffs argue the court should have allowed them to
attempt to join DeMere before dismissing, citing section 2-407 of the Code
(735 ILCS 5/2-407 (West 1994)). Also, they argue that if DeMere is only
necessary in that his presence is required to enable the court to make a
complete determination of the controversy, joinder was discretionary, and
should not have been required in this case. Finally, they argue that in light
of the arbitration clause the court should either have required defendant to
join DeMere or itself entered an order naming DeMere a defendant if his
joinder was required. The third issue concerns the motion for
reconsideration; plaintiffs argue that the court erred in determining that it
lacked jurisdiction to hear the motion and in denying it in the alternative.
ANALYSIS
I. IS DeMERE A NECESSARY PARTY
The first issue, then, is whether DeMere is a necessary party to this
action. A necessary party has been defined as "'one who has a legal or
beneficial interest in the subject matter of the litigation and will be
affected by the action of the court.'" Society of Mount Carmel v. National
Ben Franklin Ins. Co. of Illinois, 268 Ill. App. 3d 655, 660, 643 N.E.2d 1280,
1284 (1994), quoting Zurich Insurance Co. v. Raymark Industries, Inc., 144
Ill. App. 3d 943, 946, 494 N.E.2d 630 (1986). For the most part, the caselaw
has analyzed the concept functionally, in terms of the reasons such parties
must be joined. There have been enumerated three reasons to consider a party
"necessary" such that a lawsuit ought not to proceed in his or her absence:
(1) to protect an interest which the absentee has in the subject matter of the
controversy which would be materially affected by a judgment entered in his
absence; (2) to protect the interests of those who are before the court; or
(3) to enable the court to make a complete determination of the controversy.
Safeco Insurance Co. of Illinois v. Treinis, 238 Ill. App. 3d 541, 546, 606 N.E.2d 379, 382 (1992), quoting Lain v. John Hancock Mutual Life Insurance
Co., 79 Ill. App. 3d 264, 268-69, 398 N.E.2d 278, 283 (1979); Society of Mount
Carmel, 268 Ill. App. 3d at 660, 643 N.E.2d at 1284, quoting Brumley v.
Touche, Ross & Co., 123 Ill. App. 3d 636, 644, 463 N.E.2d 195, 201 (1984).
MLI asserts DeMere is necessary in all three ways; plaintiffs assert he passes
none of the tests. For the reasons stated herein, we agree with plaintiffs
that DeMere is not necessary for either of the first two reasons, but find
that he is necessary in that his presence is required for the court to make a
complete determination of the controversy.
A. Protecting an interest of DeMere's--will DeMere be prejudiced
if the case proceeds without him?

The first category of necessary parties is comprised of those persons
with an interest in the subject matter of the litigation which could be
materially affected by a judgment entered in his absence. MLI argues, as it
argued at the circuit court level, that DeMere is necessary under this
definition because his "rights to the technology and MLI license agreement are
at stake." Plaintiffs reply that first, the fact that their claims against
MLI involve their contract with DeMere does not mean that his rights will be
adjudicated or adversely affected by the outcome of this case. Although they
admit that the injunctive and declaratory relief requested in Counts III and
IV of the complaint might impact him, they note that these counts are
expressly pleaded as alternatives to Counts I and II, which merely request
money damages. Plaintiffs also assert that DeMere's interests (1) would be
adequately represented by MLI and (2) have already been adjudicated in the
previous arbitration. Finally, they argue that DeMere cannot be prejudiced
because MLI must give him notice of this suit under the MLI agreement, and
Illinois law (735 ILCS 5/2-408 (West 1994)) allows him to intervene to protect
his interests.
MLI counters that it could take a position antagonistic to DeMere
(although it does not specify in what way), so its representation of his
interests will not necessarily be adequate. It also argues that DeMere's
rights in the MLI agreement were not adjudicated in the earlier arbitration
because the arbitrator refused to allow Holzer to amend his claim to seek
relief against DeMere based on the MLI agreement.
The first question is what interest of DeMere's could be compromised in
this litigation between plaintiffs and MLI. Plaintiffs are seeking money
damages from MLI for (1) MLI's tortious interference with DeMere's contractual
relations with Holzer and Prolite, and (2) MLI's misappropriation of trade
secrets of Holzer and Prolite. In the alternative, they seek a declaration
that the MLI agreement is void, that MLI has no rights to any of the products
or technology which is the subject of the partnership agreement, and that MLI
must pay to Prolite and the partnership all of the compensation it agreed to
pay DeMere under the MLI agreement.
MLI argues that the litigation could affect both DeMere's rights to the
technology he has developed and his rights under the MLI agreement. It states
that for plaintiffs to receive the relief they request the factfinder would
necessarily have to conclude that (1) DeMere breached the partnership
agreement by licensing technology to MLI, (2) DeMere had no right to enter
into the MLI agreement, and (3) that DeMere has no right to the royalties MLI
paid him under the license.
We may assume for purposes of analysis that MLI is correct in its
characterization of the elements of plaintiffs' claims. But MLI in no way
supports the implicit premise of its argument, that DeMere would be bound by
any of these findings. For him to be bound he would have to be in privity
with a party to the lawsuit. Zurich Insurance Co. v. Baxter International,
Inc., 173 Ill. 2d 235, 246, 670 N.E.2d 664, 669 (1996). Privity exists only
between parties who adequately represent the same legal interests.
Diversified Financial Systems, Inc. v. Boyd, 286 Ill. App. 3d 911, 916, 678 N.E.2d 308, 311 (1997). And the "doctrine of representation" provides an
exception to the rule requiring joinder of indispensable parties when the
absent party is so represented by others that his interest receives actual and
efficient protection. Schnuck Markets, Inc. v. Soffer, 213 Ill. App. 3d 957,
982, 572 N.E.2d 1169, 1187 (1991); Moore v. McDaniel, 48 Ill. App. 3d 152,
158, 362 N.E.2d 382, 388 (1977).[fn3] DeMere cannot be prejudiced by any
findings which are not binding on him, and his absence will be excused (under
the doctrine of representation) for any findings by which he will be bound.
See 4 R. Michael, Illinois Practice 29.2, at 27 (1989). Because DeMere will
not be prejudiced regardless of whether he is in privity with MLI, we need not
at this point, for purposes of resolving this issue, determine whether they
are in privity.[fn4]
We do not perceive--nor does MLI suggest--any potential prejudice to
DeMere other than as a result of a finding in this case binding him directly.
This case is not analogous to cases involving a limited fund, the depletion of
which might prejudice the absent party (compare Oglesby v. Springfield Marine
Bank, 385 Ill. 414, 52 N.E.2d 1000 (1944)), nor to cases in which a claimant
in an underlying tort action could be prejudiced by the outcome of an
insured's declaratory judgment action against his insurer (compare Society of
Mount Carmel, 268 Ill. App. 3d at 661, 643 N.E.2d at 1284).
MLI argues that the provision in Part VII B(i) of the MLI agreement that
DeMere may "appoint his own attorney to cooperate in the defense" shows that
the interests of MLI and DeMere may be antagonistic, and thus it cannot be
counted on to represent him adequately. We also note, in fairness, that Part
VII B(ii) of the agreement, which reduces the royalties MLI owes DeMere by any
damages, royalties or settlement of a claim, could reduce MLI's incentive to
fully litigate the issues in the case. However, we must reiterate that MLI's
only argument of potential harm to DeMere's interests is premised upon DeMere
being bound by the result in this case. He will be bound only if MLI
adequately represents his interests. Diversified Financial Systems, 286 Ill.
App. 3d at 916, 678 N.E.2d at 311. And the doctrine of representation
provides that a necessary party need not be joined if his interests are fully
and adequately represented. Accordingly, he need not be joined to protect his
interests.
Because we find DeMere's presence is not required for the protection of
his interests, we need not consider the fairly compelling contention that the
1994 arbitration award has already determined DeMere's rights.
B. Protecting a party before the court (MLI)--will MLI be
prejudiced by DeMere's absence?

MLI next states that DeMere's presence in this litigation is necessary
for its own protection, if not for DeMere's. It argues a verdict in this
lawsuit requiring it to pay plaintiffs the royalties owed to DeMere under the
MLI agreement in the future could subject it to multiple claims by different
parties to the same monies. MLI contends DeMere could bring suit against it
for breach of contract, should it cease payments to him, and could conceivably
win such a suit, as he would not be bound by the result here. MLI would also
be in a difficult situation if the trial court held the MLI agreement was
void, as plaintiffs have requested. MLI could no longer sell the products,
because it would no longer have any rights to the technology. On the other
hand, MLI argues, DeMere would not be bound by the result in this case, and
the contract would appear still to be valid as far as he is concerned; unless
and until a court determined otherwise, MLI would remain obligated to make
royalty payments thereunder. The possibility of exposing a defendant to
multiple or inconsistent obligations if he is later sued by the absent party
is a reason to deem that party necessary. 4 R. Michael, Illinois Practice
29.2, at 28. MLI could be subject to inconsistent verdicts in future
lawsuits if DeMere is not bound by the result in this case.
Plaintiffs argue that DeMere and MLI are in privity, however, and DeMere
would thus be collaterally estopped from bringing any action to enforce the
agreement against MLI if in this action it was determined that the agreement
was void. MLI suggests that this argument has been waived because plaintiffs
failed to raise it before the circuit court and also argues it (MLI) is not in
privity with DeMere.
Although plaintiffs did not argue privity per se in the circuit court,
they did argue that in the MLI agreement DeMere had ceded to MLI the right to
control lawsuits such as this one. This is, in essence, an argument of
privity. See Restatement (Second) of Judgments, 41(1)(b) (1982). As the
contractual provisions alone establish that MLI and DeMere were in privity, we
find the argument has not been waived.
The Restatement (Second) of Judgments provides that one way in which a
non-party to an action may be bound by the result therein is when he is
"represented" by a party. Diversified Financial Systems, 286 Ill. App. 3d at
916, 678 N.E.2d at 311, citing Restatement (Second) of Judgments, 41. A
person is represented by, inter alia, a party who has been "[i]nvested by the
[absent party] with authority to represent him in an action." Restatement
(Second) of Judgments, 41(1)(b). Part VII B(i) of the MLI agreement gives
MLI the "right" to defend "any demand, suit or claim" by a third party "based
on an alleged infringement of a patent or other right as a result of the use
of the rights granted" under the MLI agreement (emphasis added). By this
provision DeMere has granted MLI the right to control the defense of third-
party suits including the instant suit.
The conclusion that DeMere has invested MLI with authority to represent
him is strongly supported by the fact that the agreement allows DeMere to
"appoint his own attorney to cooperate in the defense." Clearly, DeMere would
be bound by the result if he exercised his right and appointed his own
attorney to participate in the case. It appears also that should he waive
that right, he would be allowing MLI to proceed on his behalf and should be
bound (presuming, of course, that MLI gives him sufficient notice to allow him
intelligently to exercise his option to intervene).
The Restatement also provides that one may be bound by the result in an
action to which one is not a party if one has "agreed to be bound by the
determination of issues in an action between others." Restatement (Second) of
Judgments, 40. Part VII B(ii) of the agreement provides that if MLI is
forced to pay damages or royalties or settles a claim, the royalties it would
otherwise owe to DeMere will be reduced by the amount of its payments. This
is in some sense an agreement to be bound; perhaps more accurately it
resembles an agreement to indemnify MLI. It goes further than the
Restatement, because DeMere has agreed his royalties may be reduced not only
by a damage award in a suit but even by a "compromise" (settlement). DeMere
has clearly put himself in MLI's hands with respect to the control of
litigation in cases such as the instant one.
We therefore conclude DeMere and MLI are in privity with respect to the
instant litigation. This means DeMere will be bound by the resolution of the
issues in this case. Accordingly, MLI does not face the prospect of multiple
or inconsistent obligations. Thus, although it initially appears that
DeMere's presence is necessary to protect MLI, this is in fact not the case.
C. Is DeMere's presence necessary to enable the court to make a
complete determination of the controversy?

So far, we have determined that DeMere is not a necessary party for
purposes of protecting his or MLI's interests, which are the first two tests
listed in Safeco Insurance. The final type of necessary party, under the
third test there enumerated, is one whose presence is required in order for
the court to completely resolve the controversy. DeMere is necessary under
this definition, because although he will be bound by the result obtained in
the action against MLI (see above), the action against MLI does not comprehend
all of the causes of action which may exist solely between plaintiffs and
DeMere, independent of MLI, nor does the MLI agreement require MLI to
represent DeMere in any cause brought against him directly.
However, as will be discussed more fully below, plaintiffs urge that a
party whose presence is necessary only to afford the court the opportunity to
completely resolve the controversy differs from one whose presence is
necessary to protect his or another's interests. They argue that joinder of
the former type of party is discretionary, rather than mandatory, and the
court should not have required DeMere's joinder in this case.
II. RAMIFICATION OF DeMERE'S ABSENCE
The next question, then, is what is the effect of our conclusion that
DeMere is a necessary party. Plaintiffs argue that even assuming the accuracy
of this result, the circuit court erred in dismissing the case, for several
reasons. First, they protest that they were not accorded a "reasonable
opportunity" (see 735 ILCS 5/2-407 (West 1994)) to join DeMere before the
action was dismissed. Second, they raise the argument noted above, that the
case should not have been dismissed merely for want of a party necessary only
in order to enable the court to make a complete determination of the
controversy. Finally, they argue in the alternative that the proper course
for the court would have been either to require MLI to implead DeMere or for
to itself enter an order adding him as a party.
A. Did the circuit court violate section 2-407 of the Code in
dismissing the case outright?

Section 2-407 of the Code provides that "[n]o action shall be dismissed
for misjoinder of parties, or dismissed for nonjoinder of necessary parties
without first affording reasonable opportunity to add them as parties." 735
ILCS 5/2-407 (West 1994). Plaintiffs' first argument thus has some weight.
However, it does not determine the case. As noted, the circuit court
dismissed the action because not only was DeMere a necessary party, but
plaintiffs had "conceded" that he could not be joined. If the court was
correct in this latter finding--if plaintiffs did, indeed, concede DeMere
could not be joined--the court did not err in failing to allow them to attempt
what they had conceded was impossible. There is no such thing as a reasonable
opportunity to attempt an impossible act.
1. Did plaintiffs concede they could not join DeMere?

In their motion to reconsider and on appeal to this Court, plaintiffs
assert that the circuit court misstated their position. They argue they never
said they could not join DeMere. Our review of the record indicates that the
circuit court was correct. As noted, the record does not contain a transcript
of the oral arguments on the motion to dismiss, during which the circuit court
found plaintiffs had represented to the court that they were unable to locate
DeMere for purposes of service of process.
However, plaintiffs' written response to the motion to dismiss is
contained in the record, and it is replete with statements that DeMere is
unjoinable because of the arbitration clause. Page 1 of the response
distinguishes the instant case from the "typical" necessary party case on the
basis that "although [DeMere] is undoubtedly subject to the court's long-arm
jurisdiction, plaintiffs cannot name him as a defendant because, pursuant to
the terms of the Partnership Agreement, any disputes between plaintiffs and
[DeMere] must be resolved through arbitration in Zurich, Switzerland"
(emphasis added). On page 2 plaintiffs observe that defendant "concedes" that
plaintiffs would be precluded from joining DeMere by the terms of the
partnership agreement. They go on to note that because they are "required to
arbitrate any disputes with [DeMere] in Zurich, Switzerland, and because
defendant cannot be compelled to join that arbitration, no forum exists in
which plaintiff could pursue claims against both [DeMere] and defendant"
(emphasis in original). Page 5 of the response counters MLI's argument that
DeMere's presence is necessary to protect its interests with the observation
that "[d]efendant has no arbitration agreement with [DeMere], and therefore is
not subject to the limitation that prevents plaintiffs from naming [DeMere]"
(emphasis added). Page 6 of the response argues that the court should not
dismiss on the basis that DeMere's presence is necessary for a complete
determination of the controversy because "[g]iven the absence of a forum in
which plaintiffs can sue both defendant and [DeMere], plaintiffs submit that
the 'desirability' of having [DeMere] as a party defendant must yield to
plaintiffs' right to have some forum in which it can pursue its claims against
defendant, ***" (Emphasis in original.)
Clearly, contrary to plaintiffs' argument, they admitted they could not
bring DeMere in as a party defendant. Indeed, plaintiffs went further than
this; they affirmatively premised several arguments on their inability to join
DeMere. In their brief to this Court, plaintiffs admit that in the circuit
court they
"urged that the contractual barrier to claims against DeMere
raised by the arbitration clause was relevant to determining first
whether or not DeMere is an indispensable party; and, if so,
whether requiring plaintiffs[] to assert claims against DeMere is
the proper way to make Demere a party, given defendant's own
ability to join DeMere as a party."
We must, therefore, consider whether plaintiffs should be permitted to
disavow that position, as they attempted to do in their motion to reconsider
and before this Court.
2. Should plaintiffs be bound by their position that
they could not join DeMere?

Although this issue might appear to involve judicial estoppel, it is in
actuality a question of waiver. Whether plaintiffs can join DeMere despite
the arbitration provision in the partnership agreement is a question of law,
not of fact, and judicial estoppel does not apply to opinions or legal
positions.[fn5] See Ceres Terminals, Inc. v. Chicago City Bank and Trust
Co., 259 Ill. App. 3d 836, 852, 635 N.E.2d 485, 496 (1994), and cases cited
therein. However, it is well-settled that one may not raise a legal theory
for the first time in a motion to reconsider (Continental Casualty Co. v.
Security Insurance Co. of Hartford, 279 Ill. App. 3d 815, 821, 665 N.E.2d 374,
377 (1996)) or on appeal (Haudrich v. Howmedica, Inc., 169 Ill. 2d 525, 662 N.E.2d 1248, 1253 (1996)). In the instant case plaintiffs did more than
simply fail to argue before the trial court that they could join DeMere
despite the arbitration clause; they argued the diametric opposite of that
position. This constitutes at the very least a waiver of the argument that
they can join him, and they are therefore precluded from raising their ability
to implead DeMere as a ground of error in the circuit court's decision.
Because plaintiffs are bound by their position that they cannot implead
DeMere, the circuit court did not abuse its discretion in failing to extend to
them the opportunity to do so.
B. If DeMere was necessary only in that his presence was required
to enable the court to make a complete determination of the case,
did the court act within its discretion in dismissing the action
because of his absence?

However, plaintiffs also argue that the court should not have dismissed
the case if DeMere was necessary only in that his presence was required to
enable the court to make a complete determination of the case. They argue
that joinder of parties fitting this description is discretionary under the
Code, citing Safeco Insurance, 238 Ill. App. 3d at 547, 606 N.E.2d at 382.
We agree that joinder of parties whose presence is not required to
protect their interests nor to protect the interests of a defendant, but only
for the court to completely resolve all issues in the case, is discretionary
rather than mandatory. This type of necessary party corresponds to the old
class of "necessary" parties in Federal practice, whereas the other two types
of necessary parties correspond to the old class of "indispensable" parties.
4 R. Michael, Illinois Practice 29.2, at 24, 33-34. As the Safeco Insurance
court observed, the Code treats differently parties whose presence is
necessary for a complete determination of the controversy and those whose
interests may be adversely affected by the decision:
"If a complete determination of a controversy cannot be had
without the presence of other parties, the court may direct them
to be brought in. If a person, not a party, has an interest or
title which the judgment may affect, the court, on application,
shall direct such person to be made a party." (Emphasis added)
735 ILCS 5/2-406(a) (West 1994).
It has been suggested that although it may be "desirable" to join all parties
needed to achieve a complete disposition of the controversy in the interests
of judicial economy, this preference "'should not operate to foreclose the
plaintiffs' right to a forum, at least where a better one is not clearly
available.'" Safeco Insurance, 238 Ill. App. 3d at 547, 606 N.E.2d at 382,
quoting 4 R. Michael, Illinois Practice 29.2, at 34-35. See also 4 R.
Michael, Illinois Practice 29.3, at 38. Previous cases have also recognized
that the rules requiring joinder may "bend" when it is "next to impossible to
join all the parties indispensable to the litigation." Sullivan v. Merchants
Property Insurance Co. of Indiana., 68 Ill. App. 3d 260, 263, 385 N.E.2d 897,
899 (1979); see also Bank of Homewood v. Chapman, 257 Ill. App. 3d 337, 347,
628 N.E.2d 974, 981 (1993).
We recognize the "general rule of equity that all persons must be made
parties to the suit who are legally or beneficially interested in the subject
matter of the litigation, and who will be affected by the judgment, so that
the court may dispose of the entire controversy." Feen v. Ray, 109 Ill. 2d 339, 344, 487 N.E.2d 619, 620 (1985), citing Oglesby, 385 Ill. at 422-23, 52 N.E.2d 1000 and Riley v. Webb, 272 Ill. 537, 538-39, 112 N.E. 340 (1916).
This is not inconsistent with joinder of parties whose presence is required
only for the court to completely resolve all issues in the case being
discretionary. Although Feen refers to disposition of the "entire
controversy," it speaks specifically of joinder of parties with legal or
beneficial interests in the subject matter of the litigation who "will be
affected by the judgment." Such parties are necessary under the first
definition discussed above, to protect their own interests.
Thus the circuit court could have allowed the litigation to proceed
despite DeMere's absence. The next question is whether it abused its
discretion in refusing to do so. We conclude the court did abuse its
discretion. Because of the existence of the arbitration clause between some
but not all of the parties, it might very well be impossible for the entire
case to be resolved at one time. The Illinois Arbitration Act provides that a
court "shall order the parties to proceed with arbitration" at the request of
any party who shows the existence of a valid written arbitration agreement.
710 ILCS 5/2(a) (West 1994). Further, "any action or proceeding involving an
issue subject to arbitration shall be stayed if an order for arbitration or an
application therefor has been made under this Section or, if the issue is
severable, the stay may be with respect thereto only." 710 ILCS 5/2(d) (West
1994). Under these two provisions, even if plaintiffs had found and served
DeMere, there would have been no way to conclude all of the issues in a single
proceeding once DeMere invoked his right to arbitration.[fn6]
MLI's suggestion that plaintiffs have an alternate forum in Switzerland
ignores the fact that it (MLI) is not bound to participate in any arbitration
between Holzer and DeMere, as it has no arbitration agreement with either of
them. Even if plaintiffs did arbitrate with DeMere in Switzerland, it is far
from clear that any result reached therein would have any effect on a
subsequent refiling of this suit against MLI.[fn7] It would appear that this
lawsuit would have to proceed exactly as it is now, unless of course the
statute of limitations has run in the interim. Judicial economy is not served
by the dismissal.
We conclude that the circuit court should have allowed the suit to
proceed despite DeMere's absence. Accordingly, we need not reach plaintiffs'
alternative arguments that the court should have either required MLI to
implead him as a third party or itself entered an order joining him.
III. MOTION FOR RECONSIDERATION
Since we have reversed, we need not consider whether the trial court was
correct in denying plaintiffs' motion for reconsideration. We note, however,
that the court did have jurisdiction to entertain the motion. Chand v.
Schlimme, 138 Ill. 2d 469, 478, 563 N.E.2d 441, 445 (1990), citing 155 Ill. 2d
R. 303(a). Also, we note in passing that although the court erred in its
conclusion regarding jurisdiction, it was within its discretion in rejecting
the arguments raised in the motion, for the reasons already set forth in this
opinion.
CONCLUSION
For the reasons above stated, the order of the circuit court dismissing
plaintiffs' complaint for failure to name a necessary party is reversed in
case no. 1-97-0305. The notice of appeal in case no. 1-96-3944, filed before
the motion to reconsider was disposed of, was of no effect (Chand, 138 Ill. 2d
at 478, 563 N.E.2d at 445), and we accordingly dismiss the appeal in case no.
1-96-3944. The cause is remanded to the circuit court of Cook County for
further proceedings consistent herewith.
Appeal No. 1-96-3944 is dismissed; appeal No. 1-97-0305 is reversed and
remanded.
LEAVITT, P.J. and CAHILL, J., concur.
[fn1] This representation of the outcome of the arbitration
proceedings is taken directly from plaintiffs' complaint. The final award was
not attached as an exhibit thereto.
[fn2] The court did not reach MLI's alternate argument, that the
Complaint failed to state a cause of action.
[fn3] We note MLI's argument that plaintiffs waived the argument that
MLI would adequately protect DeMere's interests because they never raised this
argument before the circuit court. We reject the waiver argument, as
plaintiffs did argue that the MLI agreement required MLI to conduct
litigation, including this case. MLI was thus put on notice of plaintiffs'
position that it would represent DeMere.
[fn4] In section I B 2, infra, we conclude DeMere and MLI are in
privity in the course of analyzing whether DeMere must be joined to protect
MLI.
[fn5] The representation that plaintiffs were unable to locate DeMere
in order to serve him is a statement of fact. Although plaintiffs represent
to this Court that they did not in fact so state, they have not presented this
Court with a record from which we may determine whether they did. Neither a
transcript nor a bystander's report (see 155 Ill. 2d R. 323(c)) of the hearing
on the motion to dismiss is included in the materials before us. The burden
is on the appellant to furnish a record to substantiate any claim of error in
earlier proceedings. Hotze v. Daleiden, 229 Ill. App. 3d 301, 305, 593 N.E.2d 564, 566 (1992). Accordingly, we will not overturn the circuit court's
determi-nation that they did make such a representation. However, an
assertion of this sort is susceptible to change over time. As the circuit
court noted at the hearing on the motion to reconsider, the fact that a party
could not be located yesterday does not mean he cannot be located today or
tomorrow. Thus this assertion as well is ill-suited for judicial estoppel.
See Timothy Christian Schools v. Village of Western Springs, 285 Ill. App. 3d
949, 956, 675 N.E.2d 168, 173 (1996).
[fn6] We recognize that a panel of this court recently affirmed a
circuit court's denial of a motion to compel arbitration on the bases that the
party opposing arbitration was not the plaintiff; there was a close
relationship between the parties and claims; and enforcing the arbitration
clause could potentially increase costs and inefficiencies. Board of Managers
of Courtyards at Woodlands Condominium Association v. IKO Manufacturing.,
Inc., 288 Ill. App. 3d 801, 806-7, 681 N.E.2d 102, 106 (1997). That case is
inapposite as in this case a plaintiff, rather than a defendant, has entered
into the arbitration agreement. We also note that our supreme court has
granted leave to appeal in that case. Board of Managers of Courtyards at
Woodlands Condominium Association v. IKO Manufacturing., Inc., 174 Ill. 2d 555, 686 N.E.2d 1158 (1997).
[fn7] We note that it is possible that the result in the arbitration
could work collateral estoppel on MLI if it were confirmed and reduced to
judgment, and DeMere and MLI were found to be in privity. See Horwitz,
Schakner & Associates, Inc. v. Schakner, 252 Ill. App. 3d 879, 885, 625 N.E.2d 670, 674 (1993).