Retirement Plan for Chicago Transit Authority Employees v. Chicago Transit Authority ( 2020 )

Digitally signed by
Reporter of
Decisions
Reason: I attest to
Illinois Official Reports the accuracy and
integrity of this
document
Appellate Court Date: 2020.11.09
12:04:00 -06'00'
Retirement Plan for Chicago Transit Authority Employees v. Chicago Transit
Authority, 2020 IL App (1st) 182510Appellate Court RETIREMENT PLAN FOR CHICAGO TRANSIT AUTHORITY
Caption EMPLOYEES, Plaintiff-Appellant, v. THE CHICAGO TRANSIT
AUTHORITY, Defendant-Appellee.
District & No. First District, First Division
No. 1-18-2510
Filed March 31, 2020
Decision Under Appeal from the Circuit Court of Cook County, No. 13-CH-14414; the
Review Hon. David B. Atkins, Judge, presiding.
Judgment Affirmed.
Counsel on James L. Kopecky and Daryl M. Schumacher, of Kopecky
Appeal Schumacher Rosenburg LLC, of Chicago, for appellant.
Karen G. Seimetz, Corporation Counsel (Stephen L. Wood and Irina
Y. Dmitrieva, Assistant Corporation Counsel, of counsel), and John
Kennedy and Allison Czerniak, of Taft Stettinius & Hollister LLP,
both of Chicago, for appellee.
Panel JUSTICE HYMAN delivered the judgment of the court, with opinion.
Presiding Justice Griffin and Justice Walker concurred in the judgment
and opinion.
OPINION
¶1 This dispute involves prescription drug rebates. The Retirement Plan for Chicago Transit
Authority Employees (RP), a pension fund, manages retirement benefits, including health care
and prescription drug benefits, for Chicago Transit Authority (CTA) retirees and their
dependents. RP and the CTA agreed that RP would pay the CTA for the “actual cost” of
retirees’ prescription drugs. RP contends the CTA breached that agreement by retaining rebates
the CTA received from its prescription drug provider, Caremark. RP asserts the rebates
depended on the number of prescription drugs purchased and seeks the rebates associated with
its retirees’ prescription drug purchases. RP brought claims for an accounting, breach of
contract, breach of the Illinois Pension Code, and breach of fiduciary duty.
¶2 The trial court granted partial summary judgment to the CTA, finding the breach of contract
claims barred by the statute of limitations and the voluntary payment doctrine. After a bench
trial, the trial court ruled in favor of the CTA on the remaining counts, finding RP failed to
present clear and convincing evidence it had a fiduciary relationship with the CTA. RP
contends the trial court erred in (i) determining when the statute of limitations actually began,
(ii) applying the voluntary payment doctrine to its breach of contract claims, and (iii) finding
RP and the CTA did not have a fiduciary relationship.
¶3 We affirm. The trial court properly granted summary judgment on RP’s contract claims
based on the statute of limitations and its finding that the parties did not have a fiduciary
relationship was not against the manifest weight of the evidence. Under the discovery rule, the
statute of limitations began to run when RP learned it had not been credited for the rebates;
claims accrued more than five years before RP filed its complaint (June 13, 2013) are barred.
Further, RP failed to show that the CTA was acting as its agent in negotiating with Caremark
or had sufficient dominance over it to create a fiduciary relationship.
¶4 BACKGROUND
¶5 In 1949, a Retirement Plan Agreement (Agreement) between the CTA and various labor
unions formed RP to manage retired employees’ retirement benefits, including health care
benefits. (A separate agreement between the CTA and the unions covers current employees’
health care benefits.) Staffed by 13 to 15 employees (many on leave from the CTA), The
Retirement Allowance Committee (RAC) administered RP. It consists of 10 members—5
appointed by the CTA and 5 by the CTA employee’s union. John Kallianis, a CTA employee,
has served as RP’s executive director since 2000. Kallianis supervised all RP’s “routine matters
in connection with the administration,” including managing staff, reviewing and paying
invoices, setting the agenda, and preparing materials for the monthly RAC meetings.
¶6 Under the Agreement, the CTA provided health care, including prescription drugs, to CTA
retirees and their dependents. The CTA administered the retiree health benefit, which involved
organizing the open enrollment process, providing customer service and claims management
services, and contracting with prescription drug suppliers, like Walgreens and Caremark.
-2-
¶7 Before 2003, the CTA used a “balance billing” system, invoicing RP monthly for the
estimated costs of retirees’ health care. A 2002 audit revealed a $42 million shortfall for the
health costs retirees incurred the previous seven years, and RP reimbursed the CTA the full
amount. To avoid another shortfall, RP and the CTA agreed that the CTA would invoice RP
for retirees’ “actual” cost of health care, including prescription drugs. Though not formalized
in writing, this change in the CTA’s billing method was noted in the minutes of the RAC’s
January 22, 2003, meeting. The CTA used this billing method from February 2003 until mid-
2009.
¶8 In 2003, the CTA, in coordination with six other local government agencies, including the
City of Chicago, the Chicago Park District, and the Chicago Housing Authority, accepted bids
for a new pharmacy benefits manager. The coalition selected Caremark, and each agency
negotiated its own contract. RP did not participate in the bidding process or the contract
negotiations. Also, RP was not a party to the CTA’s contract with Caremark.
¶9 The availability of rebates for prescription drugs emerged as an important factor in
selecting Caremark. Under the contract, Caremark agreed to issue rebates to the CTA under
certain conditions. The amount of the rebates depended on the price, volume, and method of
dispensing drugs, as well as the way the CTA designed its prescription drug plan. If the CTA
met the requirements, it qualified for higher, “three-tier structure” rebates; otherwise, it
received a lower rebate under a different “two-tier” structure. Caremark agreed “to issue all
rebates and other amounts due and owning the Client.” The contract also provided that “for
purposes of the Federal Anti-Kickback Statute, these client credits “shall constitute and shall
be treated as discounts against the price of drugs within the meaning of 42 U.S.C. 1320a
7b(b)(3)(A).”
¶ 10 Three years later, in November 2006, an RAC member asked Kallianis a question, and
Kallianis sent an e-mail to the CTA’s benefits manager, Larry Wall, inquiring if the CTA was
paying RP a share of the prescription drug rebates it received from Caremark. Wall told
Kallianis he would get back to him with information about the rebates. On February 8, 2007,
Kallianis sent a follow-up to Wall stating, “I had initially asked you about Caremark rebates
available to the Retirement Plan last November. *** At that time, you had indicated that there
were rebates available from Caremark and that you were still trying to figure out how the
rebates would be credited to the Plan.” Kallianis also asked Wall to provide “a written
description of how the Caremark rebate program works, what rebates the Retirement Plan is
entitled to, and when we will receive our portion of the rebate.”
¶ 11 In 2008, the Illinois legislature replaced the RAC with the Retirement Healthcare Trust. In
July 2009, this trust took over responsibility for providing health care benefits to retirees and
their beneficiaries. During the transition, RP retained a firm to audit its health care and
prescription drug payments. The auditors inquired about how the Caremark rebate program
worked. Wall responded by letter on August 25, 2009, stating that “historically, CTA has not
provided any portion of [the prescription drug] rebates to the Plan and the Plan has never
requested any portion of the rebates.”
¶ 12 After receiving a copy of Wall’s letter, Kallianis wrote Wall on August 28, 2009, asking
him “to immediately provide the data on all rebates the CTA had received on prescription drugs
related to the retiree prescriptions going back to January 2003.” He further stated, “I am
assuming that the Trustees will want to pursue reimbursement for the amount of prescription
drug rebates that have been received by the CTA related to retiree prescriptions.”
-3-
¶ 13 Wall wrote back on October 23, 2009, informing Kallianis that an estimated 69% of
prescription drugs covered by Caremark’s contract with the CTA had been provided to retirees,
and that, since 2004, Caremark had paid the CTA about $7.3 million in rebates attributable to
retirees’ prescription drugs. Wall further stated that if RP claimed a share of the Caremark
rebates, the CTA would seek recovery of “administrative costs” from RP. Wall stated the CTA
had not previously asked RP for reimbursement because the rebates partially offset its
administrative costs.
¶ 14 Believing it was entitled to a portion of the Caremark rebates, RP filed its initial complaint
against the CTA on June 10, 2013. In its second amended complaint, RP asserted claims for
(i) an accounting (count I), (ii) breach of express contract, (iii) breach of implied contract in
fact (pled in the alternative to count II), (iv) unjust enrichment (count IV) (pled in the
alternative to counts II and III), (v) prohibited transaction in violation of the Illinois Pension
Code (40 ILCS 5/1-110(a)(4), (b)(1) (West 2012)) (counts V and VI), and (vi) breach of
fiduciary duty (count VII).
¶ 15 The CTA asserted several affirmative defenses, including the statute of limitations. The
CTA counterclaimed to recover administrative costs it incurred in handling the health care
claims for retirees and their dependents under theories of unjust enrichment and
quantum meruit.
¶ 16 Summary Judgment
¶ 17 The CTA moved for summary judgment on all counts. After a hearing, the trial court held
that all RP’s claims that accrued more than five years before filing its complaint, that is, before
June 13, 2008, were barred. Applying the discovery rule, the court found that RP knew or
should have known that rebates had been credited toward its remittances and, at the latest,
should have known as of February 8, 2007, the date Kallianis e-mailed Wall about the rebates.
“[T]hat is the moment where Kallianis had sufficient information that would allow him to
inquire as to whether the Retirement Plan had sustained an actionable injury.”
¶ 18 The court also granted summary judgment based on the voluntary payment doctrine for
RP’s claims of breach of express contract, breach of contract implied in fact, and unjust
enrichment. The court held that after learning of the existence of the rebates on or before
February 8, 2007, “the Retirement Plan continued to pay [the CTA’s] invoices in full [and]
continued to authorize payment of each health care invoice received by the Retirement Plan
from [the] CTA.” The court rejected RP’s argument that the payments were a mistake of fact
or that a genuine issue of material fact existed as to whether the voluntary payment doctrine
applied. Kallianis had testified at his deposition that he believed the CTA would remit part of
the rebates to RP but could not recall anyone from the CTA telling him RP would be credited.
The court found Kallianis’s “expectation” of future reimbursement did not constitute a mistake
of fact sufficient to avoid application of the voluntary payment doctrine.
¶ 19 The court denied the CTA’s motion for summary judgment on RP’s allegations of
prohibited transaction in violation of the Illinois Pension Code and breach of fiduciary duty,
finding a material issue of fact existed as to whether the relationship between the CTA and RP
was fiduciary in nature and, therefore, whether the CTA owed RP a fiduciary duty.
-4-
¶ 20 The Trial
¶ 21 A four day bench trial proceeded on the remaining claims—accounting, prohibited
transactions under the Pension Code, and breach of fiduciary duty—all of which rested on
whether RP showed, by clear and convincing evidence, that it had a fiduciary relationship with
the CTA.
¶ 22 Kallianis, testifying about his duties as executive director, stated that he manages 13 to 15
employees and RP has an operating budget of about $5 million. RP hired an independent
investment advisor to manage its $1.7 billion in assets and a law firm to handle legal matters.
Kallianis has a Master of Business Administration (MBA) in finance, worked as an assistant
commissioner for two city of Chicago departments, and served as chief of staff to the CTA
president. Kallianis was on leave from the CTA, did not report to anyone at the CTA, and his
sole loyalty belonged to RP. He would have reported attempts by the CTA to interfere with his
duties to RAC.
¶ 23 Kallianis acknowledged RP was not a party to either the negotiations or contract with
Caremark, and RP had no legal obligations under the contract. Kallianis believed the rebates
were a discount on the drugs and should have been remitted to RP to reduce “the actual costs”
of prescription drug coverage the CTA charged RP. Not until October 2009 did Wall tell him
the rebates offset administrative costs.
¶ 24 RP also presented a CTA auditor who performed the audit that uncovered the $42 million
shortfall in 2003. He testified that if he had known that the CTA was receiving rebates, he
would have deducted them from the amount RP paid to the CTA.
¶ 25 Larry Wall, former CTA benefits manager, testified that the rebates constitute an asset of
the CTA, as part of the contract they had negotiated with Caremark to lower the cost of
administering the health care program. He denied telling Kallianis the rebates would be
credited to RP, saying he had no authority to make that decision and would never have said
that.
¶ 26 A former CTA chief financial officer testified that rebates are an industry norm and, in his
experience, rebates do not get passed on to pension funds. A former CTA comptroller testified
that the amount of the rebate was not directly correlated to the number of prescription drugs
purchased. Caremark used multiple factors in its formula for calculating rebates. She opined
that RP had no entitlement to the rebates because rates lowered the CTA’s administrative costs
and functioned as a key factor in obtaining more favorable prescription drug rates than RP
could have otherwise obtained.
¶ 27 After trial, the court entered judgment against RP on the complaint and against the CTA
on its counterclaims. The court ruled that RP failed to show by clear and convincing evidence
a fiduciary relationship with the CTA, a requirement to prove its claims. Also, RP was a
sophisticated entity headed by an independent executive director whose sole loyalty was to RP
and “was staffed by over a dozen experienced individuals and capable of handling its own
business (a significant factor on the presence of a fiduciary relationship).”
¶ 28 The court noted that several CTA employees testified that the rebates offset the CTA’s
administrative costs in managing the program for its employees and retirees. “This
understanding was further supported by testimony that the CTA only asserted its claim for such
administrative costs after the Plan asserted its claim for the rebates.” The court referred to
Kallianis’s testimony that he believed the rebates should go to RP as a discount on the actual
-5-
cost of drugs but found that “his unilateral expectation is not compelling evidence of a fiduciary
relationship, nor does it show that Rebates were ever a Plan asset.”
¶ 29 The court also concluded that the mechanics of the Caremark contract supported the CTA’s
interpretation. Namely, the contract stated that the rebates would go to the CTA not RP, the
rebates were paid quarterly while the actual cost invoices were billed monthly, and the rebates
were calculated based on the total number of CTA employees (active and retired) and not on
retirees’ purchases only. “These facets of the Caremark contract suggest that the Rebates were
a general contracting incentive to the CTA, not a direct discount on the price of drugs.”
Moreover, RP had not been involved in negotiating or administering the contract and only
acted as a third party with a separate relationship to the CTA. “The only trust the Plan
apparently placed in the CTA was that of all contractually bound parties: to properly carry out
its end of the business (in this case regularly billing for the costs of the CTA retirees’
prescription drugs).”
¶ 30 RP appealed from the trial court’s summary judgment order on its breach of contract and
unjust enrichment claims and its judgment for the CTA on the remaining claims. The CTA did
not appeal the court’s judgment on its counterclaims.
¶ 31 ANALYSIS
¶ 32 Standard of Review
¶ 33 We review a trial court’s grant of summary judgment de novo. Argonaut Midwest
Insurance Co. v. Morales, 2014 IL App (1st) 130745, ¶ 14. For summary judgment, the movant
must show that no triable issue of material fact exists, and entitlement to judgment as a matter
of law. 735 ILCS 5/2-1005(c) (West 2018). Genuine issues of material fact involve disputed
material facts or, if undisputed, that reasonable persons might draw different inferences from
those facts. Id.¶ 34 Unless against the manifest weight of the evidence, a trial court’s judgment after a bench
trial will be affirmed. Northwestern Memorial Hospital v. Sharif, 2014 IL App (1st) 133008,
¶ 25. “[A]gainst the manifest weight of the evidence” means that, based on the record, the
judgment is arbitrary, unreasonable, not based on evidence, or the opposite conclusion is
apparent. Munson v. Rinke, 395 Ill. App. 3d 789, 795 (2009). “[W]e may affirm the judgment
of the trial court on any basis in the record, regardless of whether the trial court relied upon
that basis or whether the trial court’s reasoning was correct.” Alpha School Bus Co. v. Wagner,
391 Ill. App. 3d 722, 734 (2009). We may not overturn a judgment because we disagree with
it or that, as the trier of fact, we might have arrived at a different result. Eychaner v. Gross,
202 Ill. 2d 228, 271 (2002).
¶ 35 Breach of Contract and Unjust Enrichment Claims
¶ 36 RP brought two claims for breach of contract and one claim of unjust enrichment. Those
claims depended on RP’s contention that by withholding rebates, the CTA breached its
agreement to bill RP for the “actual” cost of prescription drugs. As a preliminary matter, the
CTA contends that, at trial, the court rejected the premise of those claims, finding RP failed to
prove the rebates were a discount on the price of drugs. The CTA asserts this finding defeats
RP’s claims for breach of contract and unjust enrichment and, thus, we need not consider
whether the court erred in granting summary judgment on these three claims. We disagree.
-6-
¶ 37 The trial court said the facts “suggest” the rebates were a “general contracting incentive to
the CTA, not a direct discount on the price of drugs.” It did not make a finding of fact. Thus,
we will address whether the trial court erred in granting summary judgment on those claims
under the statute of limitations and the voluntary payment doctrine.
¶ 38 Statute of Limitations
¶ 39 The parties agree that all of RP’s claims must come within a five-year statute of limitations
but disagree about when the statute of limitations began.
¶ 40 An action for breach of contract accrues when the breach of the contractual duty or
obligation occurs, not when the party sustains damages. Hermitage Corp. v. Contractors
Adjustment Co., 166 Ill. 2d 72, 77 (1995). “Where a money obligation is payable in
installments, a separate cause of action accrues on, and the statute of limitations begins to run
against, each installment as it becomes due.” In re Marriage of Kramer, 253 Ill. App. 3d 923,
928 (1993) (citing Light v. Light, 12 Ill. 2d 502, 506 (1957), and Thread & Gage Co. v.
Kucinski, 116 Ill. App. 3d 178, 184 (1983) (“separate cause of action arises on each installment
and the statute of limitations begins to run against each installment as it becomes due”)).
¶ 41 The discovery rule provides an equitable exception that tolls the statute of limitations until
the plaintiff discovers, or has reason to discover, the cause of action. Knox College v. Celotex
Corp., 88 Ill. 2d 407 (1981). The plaintiff must then inquire further to determine whether an
actionable wrong was committed. Hermitage Corp., 166 Ill. 2d at 86 (citing Nolan v. v. Johns-
Manville Asbestos, 85 Ill. 2d 161, 170-71 (1981)). “ ‘In that way, an injured person is not held
to a standard of knowing the inherently unknowable [citation], yet once it reasonably appears
that an injury was wrongfully caused, the party may not slumber on his rights.’ ” Id. (quoting
Nolan, 85 Ill. 2d at 170-71).
¶ 42 RP concedes it knew about the rebates as of February 8, 2007, when Kallianis inquired
about them in an e-mail to Wall. RP asserts, however, that in addressing when the statute of
limitations began, the trial court improperly framed the question as when RP knew the rebates
were not being credited—February 8, 2007—when it should have looked to the date RP knew
the rebates were not going to be credited—August 2009. That’s when Wall informed Kallianis
that the CTA would not remit any portion of the rebates to RP and would offset administrative
costs if RP sought a share of the rebates. RP contends that because of the trial court’s improper
framing, it implicitly found the contract breached when the CTA received a rebate check and
failed to remit any portion of it to RP.
¶ 43 Alternatively, RP contends that because the Retirement Plan Agreement does not mention
the Caremark rebates (which did not exist at the time of the Agreement), a question of fact
persists as to what the parties would have agreed to had they known about the rebates. Pel-Aire
Builders, Inc. v. Jimenez, 30 Ill. App. 3d 270, 274 (1975) (holding, when contract silent as to
time of performance, law implies reasonable time, which presents question of fact). RP states
that this question also raises a question of fact as to when the agreement was breached, which
made summary judgment improper.
¶ 44 We disagree. The parties agreed that RP would pay the CTA the “actual” costs of retirees’
prescription drugs. If, as RP contends, the amount of the rebates directly relates to the amount
of retirees’ prescription drug purchases, then the purported breach of contract occurred when
the CTA received a rebate check and failed to credit RP. At that time, the CTA was charging
RP for more than the actual costs of prescription drugs. Under the discovery rule, the statute
-7-
of limitations began when Wall confirmed the existence of the rebates in an e-mail to Kallianis
on February 8, 2007.
¶ 45 Kallianis acknowledged he knew by February 2007 that the CTA received rebates and had
not credited them to RP. Further inquiries to determine whether an actionable wrong was
committed rests with RP alone. Hermitage Corp., 166 Ill. 2d at 86. RP did not make further
inquiries until August 2009, however, when, in response to a letter sent to RP’s auditor,
Kallianis asked Wall for information about the rebates and informed him RP would likely seek
reimbursement.
¶ 46 We disagree with RP that the statute of limitation should not have started running until it
knew the rebates were not going to be credited rather than when they were not being credited.
This conflicts with the stated purpose of the parties’ decision to switch billing methods—to
ensure that RP paid the actual cost of prescription drugs and avoid another later reconciliation,
as occurred when RP owed the CTA $42 million. Moreover, this argument relies on what
Kallianis believed was going to happen. But the record fails to support RP’s assertion that
Kallianis’ belief was reasonable. Wall denied ever telling Kallianis that the CTA would credit
RP for the rebate amounts; Kallianis testified at his deposition that he could not recall anyone
telling him RP would be credited. Kallianis’ subjective belief about a later reconciliation does
not toll the statute of limitations.
¶ 47 We affirm the trial court’s finding that the statute of limitations commenced on February
8, 2007, when Kallianis learned that RP was not receiving rebates.
¶ 48 Because the statute of limitations applies to RP’s contract claims, we need not address
whether those claims would be barred by the voluntary payment doctrine.
¶ 49 Fiduciary Relationship
¶ 50 RP contends the trial court’s finding that the CTA and RP did not have a fiduciary
relationship was against the manifest weight of the evidence and should be reversed and
remanded for a trial on the merits.
¶ 51 As a preliminary matter, the CTA contends RP has violated Illinois Supreme Court Rule
341(h)(7) (eff. May 25, 2018) and waived this argument by failing to cite evidence in the record
to support its assertion of a fiduciary relationship. Rule 341(h)(7) requires the appellant’s brief
to support its argument with citation of the authorities and the pages of the record. Reviewing
courts may dismiss an appeal or waive arguments where the appellant’s brief fails to comply
with supreme court rules on briefing. Lozman v. Putnam, 379 Ill. App. 3d 807, 823 (2008);
Epstein v. Galuska, 362 Ill. App. 3d 36, 42 (2005). But, Rule 341 admonishes the parties and
does not limit this court’s jurisdiction. RP’s brief is not so deficient as to prevent our review,
and so we proceed.
¶ 52 RP contends it had a fiduciary relationship with the CTA because (i) the CTA was acting
as RP’s agent in negotiating the contract with Caremark and (ii) RP relied on the CTA in
administering the prescription drug program for its retirees and beneficiaries. RP argues the
CTA breached that duty by (i) negotiating terms of the Caremark contract that allowed the
CTA to keep all the rebates or (ii) failing to give RP its proportionate share of the rebates.
Neither argument persuades us.
-8-
¶ 53 Agency
¶ 54 An agency involves “ ‘a consensual, fiduciary relationship between two legal entities’ ”
whereby “ ‘the principal has the right to control the conduct of the agent, and the agent has the
power to effect the legal relations of the principal.’ ” State Security Insurance Co. v. Frank B.
Hall & Co., 258 Ill. App. 3d 588, 595 (1994) (quoting Gunther v. Commonwealth Edison Co.,
126 Ill. App. 3d 595, 598 (1984)). Once an agency relationship has been established, a fiduciary
relationship arises as a matter of law. Id. The usual tests of agency ask whether the principal
has authority to control the method or manner of accomplishing a task by the agent, and
whether the agent has authority to subject the principal to liability. Wargel v. First National
Bank of Harrisburg, 121 Ill. App. 3d 730, 736 (1984).
¶ 55 The facts do not support RP’s argument that the CTA acted as its agent in negotiating the
Caremark contract. As the trial court stated and RP acknowledges, RP played no role in the
procurement or negotiation of the Caremark contract and had no authority “to control the
method or manner” in which the CTA came to an agreement with Caremark. Nor was RP
legally bound by the contract’s terms; RP was not liable under the contract to Caremark or any
other third party, and, under the contract, the CTA had no authority to make RP liable. RP did
not place any trust in the CTA to negotiate on its behalf, particularly regarding the rebates,
which several witnesses testified were meant to offset administrative costs. In short, the indicia
of an agency relationship in the CTA’s contract with Caremark do not exist.
¶ 56 Thus, the trial court’s finding that the parties did not have a fiduciary relationship because
the CTA was not acting as RP’s agent in negotiating the Caremark contract was not against the
manifest weight of the evidence.
¶ 57 The Parties’ Relationship
¶ 58 The record also does not support a finding that the relationship between RP and the CTA
was fiduciary in nature. To determine whether a fiduciary relationship exists, courts look at
several factors including (i) the degree of kinship between the parties, (ii) the disparity in
business experience between the parties, and (iii) the extent to which the servient party
entrusted the handling of its business to the dominant party and placed its trust and confidence
in it. Ransom v. A.B. Dick Co., 289 Ill. App. 3d 663, 673 (1997). “Generally, where parties
capable of handling their business affairs deal with each other at arm’s length, and there is no
evidence that the alleged fiduciary agreed to exercise its judgment on behalf of the alleged
servient party, no fiduciary relationship will be deemed to exist.” State Security, 258 Ill. App.
3d at 597-98 (citing De Witt County Public Building Comm’n v. County of De Witt, 128 Ill.
App. 3d 11, 26 (1984)).
¶ 59 Merely because the parties have engaged in business transactions or have a contractual
relationship does not initiate a fiduciary relationship. Id. at 597. Nor does one party trusting
another party. Lagen v. Balcor Co., 274 Ill. App. 3d 11, 21 (1995). Rather, “[t]he essence of a
fiduciary relationship is that one party is dominated by the other. *** Indeed, in the absence
of dominance and influence there is no fiduciary relationship regardless of the level of trust
between the parties.” Id.¶ 60 The evidence shows, as the trial court found, RP to be a sophisticated entity headed by an
independent, experienced executive director. Kallianis has an MBA in finance and extensive
experience working for the City of Chicago and the CTA. Despite continuing to work for the
CTA, his sole loyalty was to RP, and RP did not rely on the CTA to handle its business. RP
-9-
had a staff of over a dozen “experienced individuals” overseen by the RAC, which met monthly
and voted on whether to approve payment of the CTA invoices after review by Kallianis and
another employee. Further, RP hired an investment advisor to manage its $1.7 billion in assets,
retained an auditing firm to conduct audits of its expenses and finances, and hired an
independent outside counsel, who attended the monthly RAC meetings.
¶ 61 RP relied on the CTA’s contract with Caremark, as that was how retirees got their
prescription drugs. But, absent dominance or control by one party, reliance alone does not
create a fiduciary relationship. For instance, in Benson v. Stafford, 407 Ill. App. 3d 902 (2010),
the plaintiff and defendants entered into a joint venture, and the plaintiffs relied on defendants
to negotiate a sale of interests in the joint venture to a bank. When plaintiffs were unhappy
with the sale, they sued defendant claiming defendant acted as their agent in negotiating with
the bank and breached his fiduciary duty. Id. at 906-10. In support of their claim, the plaintiffs
argued that defendant had a “very substantially superior” level of business experience, which,
when combined with defendant’s promise to negotiate for them, led the plaintiffs to trust
defendant and placed defendant in a position of superiority and control. Id. at 913.
¶ 62 The trial court granted summary judgment to the defendant. The appellate court affirmed,
finding the facts did not support the plaintiffs’ contention that they trusted the defendant to
negotiate for them, noting that they hired legal counsel to advise them about the deal. Id. at
914. Moreover, even if the plaintiffs provided enough evidence to show they trusted the
defendant, that was not enough to form a fiduciary relationship. Id. “ ‘[N]ormal trust between
friends or businesses, plus a slightly dominant business position, do not operate to turn a
formal, contractual relationship into a confidential or fiduciary relationship.’ ” (Internal
quotation marks omitted.) Id. (quoting Gary-Wheaton Bank v. Burt, 104 Ill. App. 3d 767, 774
(1982)).
¶ 63 The “essence” of a fiduciary relationship is dominance of one party by the other, and the
court found the plaintiffs could not prove dominance by the defendants based on their
comparative levels of experience. Id.¶ 64 Similarly, RP trusted the CTA to enter a contract that would permit RP to provide
prescription drug benefits to CTA retirees. That trust did not give rise to a relationship fiduciary
in nature. The parties merely had a contractual relationship; nothing in the record demonstrates
the CTA dominated RP. Rather, RP was a separate entity, managed itself, and established its
own decision-making structure. Thus, the trial court’s finding no fiduciary relationship
between RP and the CTA was not against the manifest weight of the evidence.
¶ 65 Affirmed.
- 10 -