Scattered Corp. v. Midwest Clearing Corp.

FIFTH DIVISION
September 18, 1998

No. 1-97-1973

SCATTERED CORPORATION, ) Appeal from
) the Circuit Court
Plaintiff-Appellant, ) of Cook County.
)
v. ) No. 93-L-10216
)
MIDWEST CLEARING CORPORATION, ) Honorable
) Sheldon Gardner,
Defendant-Appellee. ) Judge Presiding.

JUSTICE THEIS delivered the opinion of the court:

Appellant, Scattered Corporation (Scattered), appeals from the
circuit court's order entered pursuant to Supreme Court Rule 219(e)
(166 Ill. 2d R. 219(e)), awarding the Midwest Clearing Corporation
$135,756.11 as reimbursement for the reasonable expenses incurred in
defending a lawsuit brought by Scattered after Scattered chose to
voluntarily dismiss the suit, without prejudice, pursuant to section
2-1009(a) of the Illinois Code of Civil Procedure. 735 ILCS 5/2-
1009(a) (West 1996). Scattered also appeals from the circuit court's
denial of its oral motions to stay the judgment, to withdraw its
voluntary dismissal, and to file a third-amended complaint. For the
reasons that follow, we reverse.
On August 23, 1993, Scattered filed suit against the Midwest
Clearing Corporation (the MCC) alleging conversion and breach of
contract. Trial was first scheduled for April 16, 1996. On April 4,
1996, the MCC filed a motion to disqualify Scattered's counsel. The
court granted the motion and rescheduled the trial date to July 8,
1996. On June 20, 1996, the court entered an order granting
Scattered's motion to vacate the July 8, 1996, trial date and entering
and continuing the date for amended pretrial materials.
Status of the case was continued until December 17, 1996, at
which time the court entered two orders, one setting the final
pretrial conference and one setting the trial date. The court order
setting the pretrial conference indicated: (1) all discovery was
closed except for two pending expert depositions; (2) the parties were
to identify to each other all anticipated witnesses, documents,
exhibits, and motions in limine by February 14, 1997; (3) the parties
were to exchange objections and stipulations to pretrial materials and
provide copies to the court by February 28, 1997; and (4) the final
pretrial conference was scheduled for March 20, 1997. The court's
second order set the trial date for March 31, 1997, with trial to be
concluded no later than April 18, 1997.
On January 10, 1997, Scattered filed a motion to voluntarily
dismiss the case, without prejudice. 735 ILCS 5/2-1009(a) (West
1996). The MCC responded by filing a petition for reimbursement of
its reasonable expenses pursuant to Supreme Court Rule 219(e). 166
Ill. 2d R. 219(e) (amended June 1, 1995, eff. January 1, 1996). On
January 30, 1997, the circuit court set a briefing schedule on the
applicability of Supreme Court Rule 219(e) and struck the substantive
pretrial and trial dates.
The MCC's petition in support of its Rule 219(e) request
documented $145,756.11 in expenses, comprised of discovery expenses,
opinion witness expenses, reproduction costs, computer research, court
fees, travel expenses, telephone and facsimile charges, and delivery
and postage charges incurred by the MCC's two law firms. Scattered
filed a memorandum in opposition to the MCC's Rule 219(e) petition
arguing that, as a matter of law, Rule 219(e) only concerned voluntary
dismissals seeking to avoid discovery obligations.
On April 23, 1997, the circuit court began a hearing on
Scattered's motion to voluntarily dismiss and the MCC's petition for
Rule 219(e) expenses. Before the court, Scattered claimed it owed
nothing more than the appearance costs due under section 2-1009 of the
Illinois Code of Civil Procedure. 735 ILCS 5/2-1009 (West 1996). The
circuit court entered an order continuing Scattered's motion for
voluntary dismissal, granting the MCC's petition for Rule 219(e)
expenses subject to a finding of reasonableness, and entitling
Scattered to review the MCC's supporting records to the requested
expenses. The court reserved ruling on the necessity for further
discovery and continued the hearing until May 16, 1997.
On May 16, 1997, the court reconvened the hearing. After framing
the issues and conducting an evidentiary hearing considering each
category of expenses, the supporting documentation, and the objections
thereto, the court awarded the MCC $135,756.11 as reasonable expenses.
Scattered then made an oral motion for a continuance to decide whether
to withdraw its voluntary dismissal, which the court refused.
Scattered next asked for a continuance to amend its complaint, which
the court also denied. The circuit court then entered a written final
judgment and order requiring Scattered to pay to the MCC $135,756.11
as reasonable expenses incurred by the MCC in defending the action as
a condition of the court granting Scattered's motion to voluntarily
dismiss without prejudice. The written order also denied Scattered's
oral motions to stay the judgment, to withdraw its dismissal, and to
amend its complaint.
On appeal, the parties contend that interpretation of Supreme
Court Rule 219(e) in this case presents two issues. First, may a "set
trial date" constitute a "discovery deadline, order, or applicable
rule" for purposes of assessing expenses pursuant to Rule 219(e) when
a suit is voluntarily dismissed? And, second, does Rule 219(e)
require the circuit court to make a preliminary finding that the
plaintiff's voluntary dismissal was sought to "avoid compliance" with
a "discovery deadline, order, or applicable rule"? Because
interpretation of Supreme Court Rule 219(e) involves a question of
law, our review of the circuit court's interpretation is de novo.
Advincula v. United Blood Services, 176 Ill. 2d 1, 12, 678 N.E.2d 1009, 1015 (1996).
Supreme Court Rule 219 is entitled "Consequences of Refusal to
Comply with Rules or Order Relating to Discovery or Pretrial
Conferences." 134 Ill. 2d R. 219. Paragraph (e) of Rule 219,
entitled "Voluntary Dismissals and Prior Litigation," provides:
"A party shall not be permitted to avoid
compliance with discovery deadlines, orders or
applicable rules by voluntarily dismissing a
lawsuit. In establishing discovery deadlines and
ruling on permissible discovery and testimony, the
court shall consider discovery undertaken (or the
absence of same), any misconduct, and orders
entered in prior litigation involving a party. The
court may, in addition to the assessment of costs,
require the party voluntarily dismissing a claim to
pay an opposing party or parties reasonable
expenses incurred in defending the action including
but not limited to discovery expenses, opinion
witness fees, reproduction costs, travel expenses,
postage, and phone charges." 166 Ill. 2d R. 219(e)
(amended June 1, 1995, eff. January 1, 1996).
On appeal, Scattered contends that Rule 219(e) is confined to
discovery deadlines, discovery orders, and discovery rules and
requires an initial finding of misconduct by the trial court before
expenses may be imposed. In contrast, the MCC argues that Rule 219(e)
does not confine the imposition of expenses solely to orders and rules
relating to discovery and, further, the circuit court need not enter a
threshold finding of misconduct before imposing such expenses.
Because this appeal may be resolved by addressing the issue of whether
the circuit court must make a preliminary finding of misconduct before
imposing expenses pursuant to Rule 219(e), we need not decide whether,
in any given case, a set trial date could constitute a discovery
deadline, order, or applicable rule for purposes of imposing expenses
for an effected voluntary dismissal pursuant to Rule 219(e).[fn1]
Thus, we turn to the threshold issue. Scattered argues that Rule
219(e) requires the circuit court to make a preliminary finding of
misconduct before it can impose expenses for a plaintiff's voluntary
dismissal which "avoid[s] compliance" with particular "discovery
deadlines, orders or applicable rules." In contrast, the MCC argues
that the third sentence of the rule indicates the circuit court's
unlimited discretion in assessing such expenses. Thus, according to
the MCC, a preliminary finding of misconduct is not required and the
court may impose expenses to compensate for the inconvenience to the
opposing party any time a plaintiff voluntarily dismisses the suit.
Interpretation of supreme court rules requires application of the
same principles used to construe statutes enacted by the legislature.
In re Estate of Rennick, 181 Ill. 2d 395, 404, 692 N.E.2d 1150, 1155
(1998), citing 134 Ill. 2d R. 2, Committee Comments. Thus, the court
should first look to the plain language of the rule and consider the
rule in its logical context. Collins v. Board of Trustees of the
Firemen's Annuity & Benefit Fund, 155 Ill. 2d 103, 111, 610 N.E.2d 1250, 1253 (1993); 2A N. Singer, Sutherland on Statutory Construction
46.05, at 103 (5th ed. 1992). If the rule is then ambiguous, the
court may consider other sources, including the Committee Comments, to
ascertain the purpose of the rule. Wright v. Desate, Inc., 292 Ill.
App. 3d 952, 954, 686 N.E.2d 1199, 1201 (1997).
The parties are correct that the "avoid compliance" wording of
Rule 219(e) is susceptible to reasonably divergent interpretations.
By definition, a voluntary dismissal necessarily "avoids" all further
litigation obligations. We thus turn to the Committee Comments, which
provide:
"Paragraph (e) addresses the use of voluntary
dismissals to avoid compliance with discovery rules
or deadlines, or to avoid the consequences of
discovery failures, or orders barring witnesses or
evidence. This paragraph does not change existing
law regarding the right of a party to seek or
obtain a voluntary dismissal. However, this
paragraph does clearly dictate that when a case is
refiled, the court shall consider the prior
litigation in determining what discovery will be
permitted, and what witnesses and evidence may be
barred. The consequences of noncompliance with
discovery deadlines, rules or orders cannot be
eliminated by taking a voluntary dismissal.
Paragraph (e) further authorizes the court to
require the party taking the dismissal to pay the
out-of-pocket expenses actually incurred by the
adverse party or parties. This rule reverses the
holdings in In re Air Crash Disaster at Sioux City,
Iowa, on July 19, 1989, 259 Ill. App. 3d 231, 631 N.E.2d 1302 (1st Dist. 1994), and Galowich v. Beech
Aircraft Corp., 209 Ill. App. 3d 128, 568 N.E.2d 46
(1st Dist. 1991). Paragraph (e) does not provide
for the payment of attorney fees when an action is
voluntarily dismissed." 166 Ill. 2d R. 219(e),
Committee Comments, at cxiv.
Of particular resonance in the Committee Comments is the
statement, "The consequences of noncompliance with discovery
deadlines, rules or orders cannot be eliminated by taking a voluntary
dismissal." 166 Ill. 2d R. 219(e), Committee Comments, at cxiv. We
believe the committee's emphasis on "noncompliance" indicates that the
voluntary dismissal must involve some disobedience on the plaintiff's
part. This interpretation is further supported by the Committee
Comment reference to In re Air Crash Disaster at Sioux City, Iowa, on
July 19, 1989, demonstrating the committee's concern with perceived
abuses of the discovery system.[fn2]
In In re Air Crash Disaster, the circuit court allowed the
plaintiffs in a consolidated 23-case mass tort litigation to
voluntarily dismiss despite the court's determination that the motion
was filed to avoid discovery deadlines and cut-offs when trial was
scheduled for four months later. In re Air Crash Disaster at Sioux
City, Iowa, on July 19, 1989, 259 Ill. App. 3d at 233-34, 631 N.E.2d
at 1305. In affirming in part, the appellate court determined that
the circuit court had no tools with which to prevent such abuse of the
discovery system because "discovery abuse has not been identified by
the legislature or supreme court as a basis for eliminating or
restricting the right to nonsuit." In re Air Crash Disaster at Sioux
City, Iowa, on July 19, 1989, 259 Ill. App. 3d at 235, 631 N.E.2d at
1306.
Based upon the language of Rule 219(e) and illumination from the
Committee Comments, we find that Rule 219(e)'s reference to voluntary
dismissals taken to "avoid compliance" with "discovery deadlines,
orders, or applicable rules" (166 Ill. 2d R. 219(e)) requires the
circuit court to make a preliminary finding of misconduct, analogous
to the "unreasonable noncompliance" standard invoked in Rule 219(c)
cases (166 Ill. 2d R. 219(c)), before imposing expenses pursuant to
Rule 219(e). See Shimanovsky v. General Motors Corp., 181 Ill. 2d 112, 120-21, 692 N.E.2d 286, 289-90 (1998). To determine whether the
noncompliance is unreasonable, the standard is whether the conduct of
the noncomplying party shows a deliberate, contumacious or unwarranted
disregard for the court's authority. Blott v. Hanson, 283 Ill. App.
3d 656, 662, 670 N.E.2d 345, 349 (1996).
This construction of Rule 219(e) is consistent with the language
and spirit of the authority vested in the circuit court pursuant to
Supreme Court Rule 219 generally and Rule 219(c) in particular.
Sander v. Dow Chemical Co., 166 Ill. 2d 48, 64, 651 N.E.2d 1071, 1079
(1995). We note the concern with perceived abuses of the discovery
system evidenced in cases decided under Rule 219(c). Sander, 166 Ill. 2d at 64, 651 N.E.2d at 1079. While the continuum of sanctioned
conduct under Rule 219(c) ranges from unexplained failure to comply
with discovery (Kellett v. Roberts, 276 Ill. App. 3d 164, 175, 658 N.E.2d 496, 505 (1995)) to repeated and deliberate, contumacious
disregard of the court's authority (Sander, 166 Ill. 2d at 68, 651
N.E.2d at 1081), we believe the purposes behind Rule 219(c) and Rule
219(e) are similar.
Consequently, Rule 219(e) does not act as a bar to a plaintiff's
statutory right to a voluntary dismissal. 735 ILCS 5/2-1009(a) (West
1996); Wright v. Desate, Inc., 292 Ill. App. 3d 952, 954, 686 N.E.2d 1199, 1201 (1997). Rule 219(e) does, however, curtail a plaintiff's
use of the voluntary dismissal as a dilatory tactic. We believe that
Rule 219(e) targets those strategic and tactical litigation decisions
which, having crossed the line of vigorous advocacy, become decisions
aimed no longer at besting the opposing party but rather at
undermining the integrity of the judicial system.
This interpretation of Rule 219(e) as a tool for the circuit
court to combat perceived abuses of the discovery system is grounded
in prior decisions of our supreme court. "The trial judge must
consider the importance of maintaining the integrity of our court
system. It is this integrity that equips the trial judge with the
authority to protect competing interests." Sander, 166 Ill. 2d at 68,
651 N.E.2d at 1081. Likewise, as Justice Underwood noted in his
dissent to the Galowich I opinion:
"Given the questions regarding abuses of
discovery and the possible unfairness of a
voluntary dismissal and refiling prompted by a
desire to avoid trial, I would implement what seems
to me the clear purpose of section 52 of the Civil
Practice Act and our Rule 208(d) by holding the
trial judge vested with discretion to tax as costs
such of the deposition fees and charges as, in the
exercise of sound discretion, he deems appropriate,
irrespective of whether those depositions were used
at trial. Wisely exercised, that authority can be
an effective remedy for such problems as may exist
in this area." Galowich I, 92 Ill. 2d at 170-71,
441 N.E.2d at 324 (Underwood, J., dissenting,
joined by Ryan, C.J., and Ward, J.).
Finally, in this light, the expenses authorized under Rule 219(e)
serve not as a sanction per se, but rather as a deterrent to the
dilatory and manipulative use of a plaintiff's voluntary dismissal.
This prophylactic intent is consistent with the purpose behind Rule
219(c) in encouraging compliance with the entire discovery process.
Sander, 166 Ill. 2d at 68, 651 N.E.2d at 1081.
In the case before us, the circuit court made no finding of
misconduct or unreasonable noncompliance with any court order. The
court further noted there had been no "allegation of dishonesty or bad
conductment [sic]." In fact, the court opined that the plaintiff's
voluntary dismissal was strategically posited: "I'm sure that you
decided to dismiss very simply because it was a good strategic
position." Moreover, the MCC has presented no evidentiary basis to
support the notion that Scattered's voluntary dismissal, standing
alone, constituted "unreasonable noncompliance" with the set trial
date. While the MCC spends a great portion of its appellate brief
detailing the contumacious activities of Scattered in the circuit
court, those factual allegations are not properly introduced for the
first time on appeal. As evident from the disposition of this case,
it is the province of the circuit court to make such factual
determinations.
Accordingly, presented only with the chronology of scheduled
events, we observe that on December 17, 1996, the circuit court
established a pretrial schedule requiring pretrial submissions in
February 1997 and setting the trial date for March 31, 1997. On
January 10, 1997, Scattered filed its motion to voluntarily dismiss.
While the circuit court determined that this type of voluntary
dismissal was contemplated by Rule 219(e), the court did not find that
the dismissal itself, which necessarily avoided trial, evidenced
unreasonable noncompliance with any discovery deadline, order or
applicable rule by the plaintiff.
Because we find that the circuit court's imposition of expenses
was erroneous in this case, we decline to reach the auxiliary issues
regarding the court's denial of Scattered's oral motions to stay the
judgment, withdraw its voluntary dismissal, and to amend the
complaint. Moreover, Scattered concedes it filed a new suit against
the MCC and the Chicago Stock Exchange on September 26, 1997. Thus,
the propriety of the circuit court's denial of Scattered's oral
requests has been rendered moot. Berlin v. Sarah Bush Lincoln Health
Center, 179 Ill. 2d 1, 8, 688 N.E.2d 106, 109 (1997).
Reversed.
HOFFMAN and HOURIHANE, JJ., concur.
[fn1] We recognize the competing purposes of the discovery
rules in effecting discovery (Sander v. Dow Chemical Co., 166 Ill. 2d 48, 68, 651 N.E.2d 1071, 1081 (1995)) with that of a plaintiff's
virtually unfettered statutory right to voluntarily dismiss the case
"any time before trial or hearing begins." 735 ILCS 5/2-1009(a) (West
1996); Gibellina v. Handley, 127 Ill. 2d 122, 136, 535 N.E.2d 858, 866
(1989). We also note the softening of the distinctions between
discovery, pretrial procedure, and the beginning of trial for purposes
of the circuit court's discretionary case management authority. See
Sander, 166 Ill. 2d at 64, 651 N.E.2d at 1079; Shimanovsky v. General
Motors Corp., 181 Ill. 2d 112, 692 N.E.2d 286 (1998); American Society
of Lubrication Engineers v. Roetheli, 249 Ill. App. 3d 1038, 621 N.E.2d 30 (1993). See also In re Marriage of Ward, 282 Ill. App. 3d
423, 430, 668 N.E.2d 149, 154 (1996) (decision to grant a motion for
continuance pursuant to Supreme Court Rule 231 (134 Ill. 2d R. 231)
lies within the discretion of the circuit court).
[fn2] We note the parties' unified suggestion that the
Committee Comments may erroneously refer to Galowich v. Beech Aircraft
Corp., 209 Ill. App. 3d 128, 568 N.E.2d 46 (1991) (Galowich II),
rather than Galowich v. Beech Aircraft Corp., 92 Ill. 2d 157, 441 N.E.2d 318 (1982) (Galowich I). In Galowich I, the Illinois Supreme
Court held that Supreme Court Rule 208(d), which governs the
imposition of deposition costs on the opposing party, did not allow
such costs to be taxed unless those depositions were necessary for
trial. In Galowich II, the appellate court considered, inter alia,
what constituted "necessary use at trial" for purposes of complying
with the dictates of Galowich I. While we tend to agree that Galowich
II is merely an extension of the Galowich I holding, we note the
ambiguity in the Committee Comment reference to Galowich II and
decline to speculate as to the meaning.