Paul v. Gerald Adelman & Assoc.

Docket No. 100383.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
_______________________
PROMILA DAMAN PAUL, as Trustee for the S. Daman Paul,
M.D., and P. Daman Paul, M.D., Ltd. Pension Plan and Trust,
Appellee, v.
GERALD ADELMAN & ASSOCIATES, LTD., et al.,
Appellants.
Opinion filed October 19, 2006.
JUSTICE FITZGERALD delivered the judgment of the
court, with opinion.
Justices Kilbride, Garman, and Karmeier concurred in the
judgment and opinion.
Chief Justice Thomas and Justices Freeman and Burke
took no part in the decision.
OPINION
Plaintiff, Promila Daman Paul, as trustee for the S. Daman
Paul, M.D., and P. Daman Paul, M.D., Ltd. Pension Plan and
Trust (the joint pension plan), filed two petitions in the circuit
court of Cook County seeking relief from judgment pursuant to
section 2B1401 of the Code of Civil Procedure (735 ILCS
5/2B1401 (West 2002)). Plaintiff sought to vacate two orders
dismissing her causes of action for want of prosecution (DWP)
against several defendants who provided administrative,
actuarial, insurance, and other services to the joint pension
plan. The circuit court granted plaintiff=s petitions, thus
reinstating her cases, and consolidated the cases for further
action. Defendants appealed. The appellate court affirmed.
Nos. 1B04B0189, 1B04B0214 cons. (unpublished order under
Supreme Court Rule 23).
We allowed defendants= petition for leave to appeal. See
177 Ill. 2d R. 315; 155 Ill. 2d R. 304(b)(3). For the reasons
discussed below, we affirm in part and vacate in part the
judgment of the appellate court, and remand the matter to the
circuit court for further proceedings.
BACKGROUND
In 1971, plaintiff, a physician, married Shashi Daman Paul,
also a physician. The couple operated their medical practice as
an Illinois corporation known as S. Daman Paul, M.D., and P.
Daman Paul, M.D., Ltd. In 1977, the corporation adopted the
joint pension plan, under which plaintiff and Shashi were the
plan trustees. At some point prior to 1991, plaintiff and Shashi
moved to Indiana. In January 1991, plaintiff initiated divorce
proceedings in Jasper County, Indiana.
On January 18, 1995, while the divorce action was pending,
plaintiff, as a trustee of the joint pension plan, filed a multicount
complaint in the circuit court of Cook County against
defendants, Gerald Adelman & Associates, Ltd. (Adelman),
and Federal Kemper Life Assurance Company (Kemper) (the
Adelman case). According to the complaint, the joint pension
plan engaged Adelman, an Illinois insurance agency, to provide
services with regard to the life insurance assets of the plan,
including a $1 million Kemper policy on the life of Shashi. The
complaint alleged that in January 1990, March 1991, and June
1991, Shashi directed Adelman to obtain the maximum cash
loans possible on the Kemper policy. The loans, which totaled
almost $140,000, were allegedly made for Shashi=s own benefit
without plaintiff=s knowledge or consent. Plaintiff claimed that
Shashi forged her signature on loan request forms; Adelman
falsely witnessed the forged signature; and Kemper failed to
verify plaintiff=s signature before making the loans. The
complaint further alleged that the $1 million Kemper policy was
fraudulently transferred from the joint pension plan to Shashi=s
own pension planBthe S. Daman Paul, M.D., P.C. Pension Plan
and Trust. Plaintiff sought damages for breach of contract,
breach of fiduciary duty, fraud, negligence, conversion, and
violations of the Consumer Fraud and Deceptive Business
Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq.
(West 1994)).
Kemper attempted to have the Adelman case removed to
federal court. On April 19, 1995, the district court for the
Northern District of Illinois remanded the cause to the circuit
court of Cook County. After remand, Kemper filed, among
other pleadings, a counterclaim against Adelman and a third-
party action against Shashi.
On May 22, 1995, plaintiff, in her capacity as a trustee of
the joint pension plan, filed a second complaint in the circuit
court of Cook County, this one against defendants Gary R.
Mann, Gary R. Mann & Associates, Inc. (collectively, Mann),
and Engler, Zoghlin, Mann, Ltd. (EZM) (the Mann case). The
complaint identified EZM as an Illinois pension actuarial firm
that was retained in 1977 to provide services in connection with
the creation and administration of the joint pension plan. Gary
R. Mann was named as the individual at EZM principally
responsible for plan administration. Gary R. Mann &
Associates, Inc., was the successor firm to EZM.
According to the allegations of the complaint, in early 1991,
Shashi began an independent medical practice in Indiana,
incorporated under the name S. Daman Paul, M.D., P.C., and
retained the services of EZM to create and administer a
pension plan for his practice, purportedly to be funded with
assets from the joint pension plan. The complaint alleged that
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EZM and Mann prepared certain corporate resolutions, which
Shashi executed, that changed the name of the joint pension
plan to the S. Daman Paul, M.D., P.C. Pension Plan and Trust,
and removed plaintiff as a trustee of the joint pension plan,
thus enabling Shashi to transfer assets from the joint pension
plan to his individual pension plan. Plaintiff sought damages for
breach of contract, breach of fiduciary duty, fraud, negligence,
conversion, and violations of the Consumer Fraud Act.
In January 1996, plaintiff filed a petition for personal
bankruptcy in the United States Bankruptcy Court for the
Northern District of Indiana. The Adelman and Mann cases
became part of the bankruptcy estate under the control of the
trustee in bankruptcy. Although plaintiff initially represented
herself in the bankruptcy court, in June 1997, she retained
attorney Thomas Rosenwein, who had represented plaintiff in
the Adelman and Mann cases. Rosenwein represented plaintiff
in the bankruptcy court until mid-May 2001, when she could no
longer afford legal fees.
In light of the ongoing bankruptcy proceedings, on February
18, 1998, the Cook County circuit court placed the Adelman
case on the court=s bankruptcy calender. Similarly, on April 16,
1998, the circuit court placed the Mann case on the bankruptcy
calender.
A printout of the circuit court activity on the Adelman case
indicates that three years after the case was placed on the
bankruptcy calender, the case was set on the court=s October
10, 2001, status call. At that call, the circuit court removed the
Adelman case from the bankruptcy calendar, renumbered the
case, and because no one appeared for plaintiff, entered a
DWP order. The following day, the circuit court entered a DWP
order as to the Mann case. Although a printout of the circuit
court activity in the Mann case does not appear in the record,
presumably the Mann case was also set on the court=s status
call. At the time the DWP orders were entered, plaintiff was no
longer represented by counsel.
On March 28, 2003, 15 months after the Cook County
circuit court dismissed plaintiff=s cases, the United States
bankruptcy court entered an order stating that the Adelman
case and the Mann case Aare properly claimed as exempt and
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are no longer property of [the] Debtor=s estate@ and,
accordingly, are Aabandoned back to the Debtor.@
Six months later, on September 29, 2003, plaintiff filed a
section 2B1401 petition seeking to vacate the circuit court=s
DWP order as to the Adelman case. The plaintiff followed with
a section 2B1401 petition as to the Mann case on October 8,
2003. Plaintiff supported her petitions with her own affidavit, as
well as the affidavit of attorney Rosenwein, who prepared the
section 2B1401 petitions.
According to the petitions and affidavits, the trustee in
bankruptcy would not agree to allow plaintiff to proceed with
the Adelman and Mann cases, nor would the trustee himself
pursue the litigation on behalf of the bankruptcy estate. When
the trustee finally abandoned the Adelman and Mann cases
back to plaintiff and the court entered an order to that effect on
March 28, 2003, plaintiff immediately contacted Rosenwein
and provided him a copy of the order. In early April 2003,
Rosenwein checked the court files in Cook County and learned
for the first time that both cases had been dismissed 18
months earlier. Plaintiff and Rosenwein averred that neither
had received notice that the cases had been dismissed.
Rosenwein also averred that, at the time plaintiff contacted
him about pursuing the Adelman and Mann cases again,
plaintiff=s files were being held by the Peterson & Ross
Dissolution CommitteeBthe entity formed to wind up the affairs
of Peterson & Ross which was dissolved in February 2003.
Rosenwein=s affidavit explained that he had joined Peterson &
Ross in April 2000, where he continued to represent plaintiff in
the bankruptcy court until she was unable to afford legal fees.
Rosenwein=s affidavit also states that he left Peterson & Ross
in January 2003 and joined another firm, but plaintiff=s files
remained with Peterson & Ross because plaintiff had incurred
a large debt for legal services. According to Rosenwein, after
extensive discussion and negotiation, the Peterson & Ross
Dissolution Committee finally agreed, in a document dated
August 31, 2003, to release plaintiff=s files.
Plaintiff maintained that she could not pursue the cases in
her own right until receipt of the March 28, 2003, order of the
bankruptcy court releasing the causes of action back to her,
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and until she had reached an agreement on August 31, 2003,
with the Peterson & Ross Dissolution Committee to release her
files. She thus maintained that she exercised due diligence in
prosecuting her claims and in filing her section 2B1401
petitions.
Plaintiff also maintained that she had a meritorious claim
against defendants as evinced, in part, by an Illinois
Department of Insurance investigation into the activities of
defendant Gerald Adelman in connection with the loans Shashi
made against the joint pension plan assets. As a result of the
investigation, the department requested Adelman to pay a civil
forfeiture.
In response to plaintiff=s section 2B1401 petitions,
defendants argued that plaintiff=s failure to monitor her cases
and learn of the dismissal orders until 18 months after the
orders were entered does not justify reinstatement of her
cases. Defendants also argued that plaintiff failed to establish
due diligence in pursuing relief under section 2B1401 where the
undisputed facts establish that she waited six months after
learning the cases had been dismissed before filing her
petitions. Certain defendants also argued that plaintiff failed to
establish the existence of a meritorious claim; plaintiff had no
damages because she had already received half of the
pension plan assets pursuant to the order of the Indiana
divorce court; plaintiff lacked standing; and plaintiff=s claims
were preempted by the federal Employee Retirement Income
Security Act of 1974 (ERISA) (29 U.S.C. '1001 et seq. (2000)).
After argument, but without an evidentiary hearing, the
circuit court granted plaintiff=s petitions, stating: AWhile I very
seldom give [section 2B]1401 petitions, I don=t think I=ve ever
given one, in this case I find that based on all the
circumstances that there was due diligence and, therefore, the
motion to vacate the DWP is going to be granted.@ The circuit
court consolidated the Adelman and Mann cases, and
reinstated Kemper=s counterclaim against Adelman and
Kemper=s third-party action against Shashi.
Defendants appealed, arguing that the circuit court abused
its discretion in granting plaintiff=s petitions. The appellate
court, in a consolidated appeal, rejected defendants=
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arguments and affirmed the judgment of the circuit court
vacating the dismissal orders. Nos. 1B04B0189, 1B04B0214
cons. (unpublished order under Supreme Court Rule 23). This
appeal followed.
ANALYSIS
I
Section 2B1401 of the Code of Civil Procedure (735 ILCS
5/2B1401 (West 2002)) establishes a comprehensive
procedure by which final orders and judgments may be
vacated or modified more than 30 days after their entry. People
v. Pinkonsly, 207 Ill. 2d 555, 562 (2003); S.C. Vaughan Oil Co.
v. Caldwell, Troutt & Alexander, 181 Ill. 2d 489, 496 (1998).
Although a section 2B1401 petition is ordinarily used to bring
facts to the attention of the trial court which, if known at the
time of judgment, would have precluded its entry (People v.
Haynes, 192 Ill. 2d 437, 464 (2000)), a section 2B1401 petition
may also be used to challenge a purportedly defective
judgment for legal reasons (People v. Lawton, 212 Ill. 2d 285,
297 (2004)).
A proceeding under section 2B1401 is initiated by the filing
of a petition Asupported by affidavit or other appropriate
showing as to matters not of record.@ 735 ILCS 5/2B1401(b)
(West 2002). Generally, the petition must set forth allegations
supporting the existence of a meritorious claim or defense; due
diligence in presenting the claim or defense to the circuit court
in the original action; and due diligence in filing the section
2B1401 petition. People v. Coleman, 206 Ill. 2d 261, 289
(2002); S.C. Vaughan Oil, 181 Ill. 2d at 496. With limited
exception not relevant here, the petition Amust be filed not later
than 2 years after the entry of the order or judgment.@ 735 ILCS
5/2B1401(c) (West 2002). AThe quantum of proof necessary to
sustain a section 2B1401 petition is a preponderance of the
evidence.@ Smith v. Airoom, 114 Ill. 2d 209, 221 (1986).
AOne of the guiding principles *** in the administration of
section 2B1401 relief is that the petition invokes the equitable
powers of the circuit court ***.@ Airoom, 114 Ill. 2d at 225. The
power to set aside a judgment, and thus allow a litigant to have
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his or her day in court, A >is based upon substantial principles of
right and wrong and is to be exercised for the prevention of
injury and [for the] furtherance of justice.= @ Airoom, 114 Ill. 2d
at 225 (quoting Diner=s Club, Inc. v. Gronwald, 43 Ill. App. 3d
164, 168 (1976), and Spencer v. American United Cab Ass=n,
59 Ill. App. 2d 165, 172 (1965)); see also Lawton, 212 Ill. 2d at
298 (ARelief should be granted under section 2B1401 when
necessary to achieve justice@). Accordingly, A[w]hether a
section 2B1401 petition should be granted lies within the sound
discretion of the circuit court, depending upon the facts and
equities presented.@ Airoom, 114 Ill. 2d at 221; see also
George F. Mueller & Sons, Inc. v. Ostrowski, 19 Ill. App. 3d
973, 977 (1974) (Athe court may exercise its discretion in any
manner dictated by the equities of the cause@).
As acknowledged and applied in a long line of cases from
this court, the disposition of a petition seeking relief from
judgment under section 2B1401 (or its statutory predecessors)
will be disturbed on review only if the trial court abused its
discretion. E.g., Pinkonsly, 207 Ill. 2d at 562; Coleman, 206 Ill.
2d at 289; People v. Sanchez, 131 Ill. 2d 417, 420 (1989);
Kaput v. Hoey, 124 Ill. 2d 370, 378 (1988); Airoom, 114 Ill. 2d
at 221; Diacou v. Palos State Bank, 65 Ill. 2d 304, 313 (1976);
Elfman v. Evanston Bus Co., 27 Ill. 2d 609, 610 (1963). The
appellate court in the present case applied this standard. Nos.
1B04B0189, 1B04B0214 cons. (unpublished order under
Supreme Court Rule 23).
Defendants argue, however, that where the underlying facts
relevant to the circuit court=s ruling on the section 2B1401
petition are not in dispute, and no credibility determinations are
at issue, the court=s ruling should be reviewed de novo. See D.
Simko, Updating the Standard of Review for Petitions to
Vacate Final Judgments, 86 Ill. B.J. 34 (1998). As plaintiff
notes, defendants failed to make this argument in the appellate
court. In fact, the Adelman and Kemper defendants expressly
identified the relevant standard of review as abuse of
discretion, citing this court=s decision in Klein v. La Salle
National Bank, 155 Ill. 2d 201, 206 (1993) (AOn appeal from a
disposition on a petition for section 2B1401 relief, the standard
applied by reviewing courts is whether the trial judge abused
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his discretion,@ citing Airoom, 114 Ill. 2d at 221). The Mann
defendants also expressly identified the standard of review as
abuse of discretion, citing Kulhavy v. Burlington Northern Santa
Fe R.R., 337 Ill. App. 3d 510, 516 (2003) (Adecision whether to
grant or deny a section 2B1401 petition is within the sound
discretion of the circuit court and will not be reversed absent an
abuse of that discretion,@ citing Airoom, 114 Ill. 2d at 221).
Plaintiff argues that defendants are estopped, pursuant to
the invited-error doctrine, from now changing their position and
claiming error by the appellate court. See In re Detention of
Swope, 213 Ill. 2d 210, 217 (2004) (ASimply stated, a party
cannot complain of error which that party induced the court to
make or to which that party consented@). Defendants counter
that their change in position was prompted by this court=s
opinion in Ford Motor Credit Co. v. Sperry, 214 Ill. 2d 371
(2005). According to defendants, Sperry applied a de novo
standard of review to the trial court=s grant of section 2B1401
relief. Defendants argue that because Sperry was filed 22 days
after the appellate court decision in this case, they did not have
the option of requesting rehearing under the Sperry standard of
review. See 155 Ill. 2d R. 367(a) (Apetition for rehearing may be
filed within 21 days after the filing of the judgment@ in the
reviewing court). Defendants contend that clarification of the
standard is thus warranted.
Although we agree with plaintiff that the invited-error
doctrine precludes defendants from taking a position in this
court contrary to the position they took in the appellate court, to
the extent defendants= change in position rests on our opinion
in Sperry, we will consider defendants= argument that de novo
review applies to this case.
Sperry involved a suit by Ford Motor Credit Company (Ford
Credit) for the alleged breach of a motor vehicle lease by the
defendant. The defendant filed a counterclaim alleging, inter
alia, that Ford Credit violated the Consumer Fraud Act. The
trial court directed a verdict against the defendant on his
consumer fraud claim. Ford Credit later filed a petition for
statutory attorney fees. See 815 ILCS 505/10a(c) (West 2000).
The trial court awarded fees of over $31,000.
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Twenty-one months later, the defendant filed a petition
under section 2B1401(f) (735 ILCS 5/2B1401(f) (West 2000)),
seeking to vacate the fee award. The defendant asserted that
the fees were improper because the law firms representing
Ford Credit were not registered as professional service
corporations pursuant to Supreme Court Rule 721(c) (166 Ill.
2d R. 721(c)). Based on the violation of Rule 721, the trial court
found the order for attorney fees was void ab initio and vacated
the order. The appellate court affirmed (Ford Motor Credit
Corp. v. Sperry, 344 Ill. App. 3d 1068 (2003)), and Ford Credit
appealed to this court.
We identified the issue and the applicable standard of
review as follows:
AAt issue in this appeal is whether a law firm=s failure to
register as a professional service corporation with this
court, pursuant to the requirement set forth in our Rule
721(c), renders the legal services provided by that law
firm the unauthorized practice of law, nullifies the
proceedings in which the firm participated, and causes
the resulting judgments of such proceedings to be void.
Our review of this issue is de novo.@ Sperry, 214 Ill. 2d
at 378-79.
The Sperry opinion did not signal a departure from the abuse-
of-discretion standard Illinois courts have historically applied on
review of the disposition of a section 2B1401 petition. The
propriety of the grant of section 2B1401 relief in Sperry was
dependent on the legal effect of a violation of one of this court=s
own rules. In addition, the rule at issueBRule 721Brelates to the
practice of law in this stateBan area which this court has the
inherent authority to regulate. Sperry, 214 Ill. 2d at 382-83.
Moreover, the petition filed in Sperry sought relief from a void
judgment pursuant to section 2B1401(f), to which Athe general
rules pertaining to petitions filed under section 2B1401Bthat
they must be brought within two years of the order of judgment,
that the petitioner must allege a meritorious defense to the
original action, and that the petitioner must show that the
petition was brought with due diligenceBdo not apply.@ Sperry,
214 Ill. 2d at 379. Thus, the trial court in Sperry was not called
upon to weigh the equities of granting or denying relief. Rather,
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once the trial court decided the purely legal issue of the effect
of the law firms= violations of Rule 721 against the firms, the
court=s grant of relief to petitioner Sperry followed as a matter
of course because the attorney fee order was deemed void.
Sperry thus stands for the proposition that where the
success of a section 2B1401(f) petition is dependent entirely on
the interpretation of one of this court=s rules, that legal issue
will be reviewed de novo. Sperry does not call into question or
otherwise inject uncertainty into what is a well-settled principle:
a section 2B1401 ruling ordinarily will be reviewed for an abuse
of discretion.
Although abuse-of-discretion review is the most deferential
standard of review available (People v. Coleman, 183 Ill. 2d
366, 387 (1998)), we reject defendants= argument that it affords
no meaningful review and amounts to Arubberstamping@ the
lower courts= rulings. In reviewing discretionary rulings by the
trial court, an appeals court A >must look to the criteria on which
the trial court should rely to determine if the trial court abused
its discretion.= @ People v. Ortega, 209 Ill. 2d 354, 360 (2004),
quoting Boatmen=s National Bank of Belleville v. Martin, 155 Ill.
2d 305, 314 (1993). A[A] trial court abuses its discretion if it fails
to apply the proper criteria when it weighs the facts,@ and a
reviewing court Amust consider both the legal adequacy of [the]
way the trial court reached its result as well as whether the
result is within the bounds of reason.@ Ortega, 209 Ill. 2d at
360. Such review is not mere rubberstamping.
With these principles in mind, we consider the issues raised
in this appeal.
II
Defendants first argue that the circuit court erred in granting
plaintiff relief because plaintiff did not demonstrate due
diligence in presenting her section 2B1401 petitions.
Defendants note that plaintiff filed her petitions six months after
learning of the dismissals. Citing European Tanspa, Inc. v.
Shrader, 242 Ill. App. 3d 103 (1993), Cooper v. United
Development Co., 122 Ill. App. 3d 850 (1984), and Elmwood
Ford Motors, Inc. v. Mardegan, 42 Ill. App. 2d 342 (1963),
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defendants maintain that a six-month delay cannot constitute
due diligence as a matter of law. We disagree.
No bright-line rule exists for judging whether a petitioner
has acted diligently. Rather, due diligence is judged by the
reasonableness of the petitioner=s conduct under all of the
circumstances. See Airoom, 114 Ill. 2d at 222. Thus, a six-
month delay in requesting section 2B1401 relief does not, ipso
facto, demonstrate a fatal lack of diligence. The appellate court
opinions on which defendants rely do not persuade us
otherwise. Indeed, in each case cited by defendants, the
appellate court considered not simply the length of the delay in
filing the petition for relief from judgment, but also the
circumstances attendant to such delay.
In European Tanspa, the appellate court observed that the
defendants had actual notice of the default judgment the same
day it was entered, but did not attempt to vacate the judgment
at that time, instead electing to A >see what comes about.= @
European Tanspa, 242 Ill. App 3d at 108. The court further
observed that although the defendants appeared at a hearing
more than 60 days later on the plaintiff=s petition for a rule to
show cause, the defendants did nothing for another 40 days
when they finally filed their motion to vacate. The appellate
court reversed the grant of section 2B1401 relief, concluding
that the A >defendants= dilemma is the result of their own
negligence and attitude of nonresponse.= @ European Tanspa,
242 Ill. App. 3d at 108, quoting Hogan & Farwell, Inc. v. Meitz,
45 Ill. App. 3d 216, 222 (1976).
In Cooper, the plaintiffs= petition was filed over three months
after they became aware of the order dismissing their
complaint. Although the appellate court noted that delays of
two to three months Ahave been regarded by Illinois courts as
constituting such a lack of due diligence as to justify denial of
the requested post-judgment relief@ (Cooper, 122 Ill. App. 3d at
856-57), the appellate court ultimately looked to the Atotality of
facts@ before it (Cooper, 122 Ill. App. 3d at 857). Significantly,
the plaintiffs conceded that they were not precluded from
discovering the existence of the dismissal order sooner or filing
their petition sooner. In light of what it termed the plaintiffs=
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Aprocrastinative conduct,@ the appellate court affirmed the
denial of relief. Cooper, 122 Ill. App. 3d at 856.
Finally, in Elmwood Ford, the appellate court observed that
the defendant could have acted promptly and filed his petition
within 30 days of the default judgment or shortly thereafter.
Instead, he waited an additional 17 days. The opinion makes
no mention of any excuseBreasonable or otherwiseBoffered by
the defendant for the delay. Based on this record, the appellate
court concluded, AThis does not sound like due diligence,@ and
affirmed the circuit court=s denial of relief. Elmwood Ford, 42 Ill.
App. 2d at 344.
Contrary to defendants= argument, European Tanspa,
Cooper, and Elmwood Ford do not establish a temporal cutoff
for judging due diligence. Instead, these opinions reinforce two
principles: first, that a petitioner seeking relief from judgment
must do so expeditiously; and second, that the due-diligence
inquiry is, in the end, case specific. As we stated in Airoom, in
judging the reasonableness of a petitioner=s excuse for not
acting sooner, Aall of the circumstances attendant upon entry of
the judgment must be considered, including the conduct of the
litigants and their attorneys.@ Airoom, 114 Ill. 2d at 222.
Considering the circumstances in the present case, we
agree with the appellate court that Athe record does not
demonstrate an abuse of discretion by the trial court in
concluding that plaintiff exercised due diligence *** in filing her
petitions.@ Nos. 1B04B0189, 1B04B0214 cons. (unpublished
order under Supreme Court Rule 23). According to the
unrefuted affidavits filed in support of plaintiff=s petitions,
plaintiff contacted her attorney Aimmediately@ after the
bankruptcy court issued the order releasing the Adelman and
Mann cases. Plaintiff=s attorney promptly checked the court
files and learned that the cases had been dismissed. Counsel
then contacted the Peterson & Ross Dissolution Committee to
seek release of plaintiff=s files. That process was completed
with the entry of a written agreement five months later, at which
time the files were released. Five weeks later, plaintiff filed her
petitions and supporting documents in the circuit court. The
circumstances here stand in contrast to those in European
Tanspa, where the petitioners exhibited an attitude of
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nonresponse, or those in Cooper, where the petitioners=
procrastinative conduct was conceded, or those in Elmwood
Ford, where the petitioner apparently offered no explanation for
the delay in filing his petition.
Defendants contend, however, that nearly all of the
supporting documents appended to plaintiff=s section 2B1401
petitions were available in publicly accessible court files and
that plaintiff could have filed her petitions immediately after
learning of the dismissal orders, instead of waiting several
months for the release of her files.
The supporting documents appended to plaintiff=s petitions
included plaintiff=s affidavit and counsel=s affidavit; the
underlying complaints filed in Cook County; the Cook County
circuit court orders placing the cases on the bankruptcy
calender; an order from the federal district court for the
Northern District of Illinois remanding the Adelman case to the
Cook County circuit court; an order from the United States
Bankruptcy Court for the Northern District of Indiana
abandoning the cases back to plaintiff; and a letter from the
Illinois Department of Insurance addressed to plaintiff.
Although plaintiff might have been able to cull the court files in
Illinois and Indiana and file her petitions sooner, we do not view
plaintiff=s decision to pursue release of her files before seeking
section 2B1401 relief as tantamount to a lack of due diligence.
As plaintiff notes, two documents which she needed in
order to defend her petitions were not available in the court
files, namely, a letter from plaintiff=s counsel to the bankruptcy
court and a letter from plaintiff=s counsel to opposing counsel in
the Mann litigation. Specifically, Adelman claimed, in response
to plaintiff=s section 2B1401 petition, that after the trustee in
bankruptcy withdrew his objection to plaintiff proceeding with
her lawsuits in January 2001, plaintiff failed to submit to the
bankruptcy court a proposed order to that effect for more than
two years. Adelman thus argued that plaintiff failed to exercise
due diligence in prosecuting her claims. Plaintiff was able to
refute Adelman=s claim by producing a letter from plaintiff=s
counsel, retrieved from the Peterson & Ross files, clearly
indicating that a draft order had been sent to the bankruptcy
court in April 2001.
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In addition, the Mann defendants claimed, in response to
plaintiff=s section 2B1401 petition, that plaintiff obstructed the
resolution of that litigation by refusing to respond to discovery
requests. Plaintiff, however, was able to produce a letter from
the Peterson & Ross file tending to refute this claim. The letter,
addressed to Mann=s counsel, indicates that the parties had
discussions concerning the course of discovery and that
plaintiff was seeking to defer further discovery pending
resolution of defendants= motion to dismiss.
The record thus demonstrates that plaintiff was faced with
the difficult choice of either filing her section 2B1401 petitions
sooner, but leaving herself vulnerable to a charge that she
failed to pursue the underlying claims with due diligence, or
filing the petitions later, after release of the files, but leaving
herself open to a charge that she failed to pursue section
2B1401 relief as expeditiously as she could have. Bearing in
mind that a section 2B1401 petition calls upon the equitable
powers of the court (Airoom, 114 Ill. 2d at 221), we are
disinclined to penalize plaintiff for choosing the latter option.
We cannot fault plaintiff or her counsel for seeking to review
the history of the litigation prior to filing her petitions and having
at their disposal all that would be necessary to support and
defend the petitions. Accordingly, we reject defendants=
argument that plaintiff failed to exercise due diligence in the
filing of her section 2B1401 petitions.
III
Defendants next argue that the circuit court erred in
granting plaintiff relief because plaintiff did not demonstrate
due diligence in prosecuting the Adelman and Mann cases
prior to filing for personal bankruptcy. Plaintiff filed her
bankruptcy petition one year after she filed the Adelman case,
and eight months after she filed the Mann case. Defendants
assert that during this time plaintiff did not depose defendants,
Shashi Paul, or any other fact witness, did not conduct expert
discovery, and did not file any dispositive motions.
Although defendants correctly identify those things that
plaintiff did not do, defendants overlook those things that
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plaintiff did do to advance the litigation. A month after filing the
Adelman complaint, plaintiff filed her first set of interrogatories
and request for production of documents. Shortly thereafter,
plaintiff successfully blocked Kemper=s attempt to remove the
case to the federal district court. Plaintiff also answered
Adelman=s interrogatories, Kemper=s interrogatories, and
Kemper=s request for production of documents. In response to
Kemper=s motion to dismiss certain counts, plaintiff sought and
obtained leave to amend the complaint. With respect to the
Mann litigation, directly after defendants filed their appearance,
plaintiff filed her first request for production of documents.
Plaintiff also responded to Mann=s section 2B619 and section
2B615 motions to dismiss. Those motions were never fully
litigated, due to plaintiff=s bankruptcy. Based on this record, we
are in agreement with the courts below that plaintiff exercised
the requisite due diligence in prosecuting her claims prior to
filing for protection under the bankruptcy laws.
Defendants also argue that plaintiff failed to exercise due
diligence in prosecuting her claims after the cases were placed
on the bankruptcy calendar in the circuit court. Defendants
contend that plaintiff had an obligation to follow the progress of
her cases and that she failed to do so, as evidenced by the
undisputed fact that plaintiff first learned of the dismissal orders
18 months after they were entered. Defendants also contend
that plaintiff=s lack of diligence is demonstrated by the fact that
plaintiff failed to secure an order from the bankruptcy court
allowing her to proceed with the Adelman and Mann cases for
more than two years after the trustee in bankruptcy consented.
Defendants argue that Aplaintiff and her counsel did not merely
neglect the Illinois cases,@ Athey affirmatively ignored them,@
and that reinstatement is not justified under these
circumstances.
We agree with defendants that a party must follow the
progress of her case, and that a section 2B1401 petition will not
relieve a party of the consequences of her or her attorney=s
neglect of a matter. Kaput, 124 Ill. 2d at 383. We disagree,
however, that plaintiff=s failure to check the status of her cases
in Cook County, after they had been placed on the bankruptcy
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calendar, amounts to neglect of her cases and a lack of due
diligence.
As the record indicates, the Adelman and Mann cases were
part of the estate in bankruptcy and under the control of the
trustee in bankruptcy. Defendants do not dispute that plaintiff
was without authority to prosecute her claims in Cook County
without the trustee=s approval. Once the cases were placed on
the Cook County circuit court=s bankruptcy calendar, plaintiff
could reasonably assume that no activity could or would occur
in that court. Thus, plaintiff, who was without counsel in the
Adelman and Mann cases at the time the DWP orders were
entered, had no reason to believe that a check of the Cook
County court docket was necessary. In addition, plaintiff=s
unrefuted affidavits filed in support of her section 2B1401
petitions indicate that she repeatedly asked the trustee in
bankruptcy either to pursue the Adelman and Mann cases or
allow her to do so. When the bankruptcy court entered its order
abandoning the cases back to plaintiff, she promptly contacted
her former counsel who, shortly thereafter, took steps to obtain
her files and reinstate the cases. Such conduct is not indicative
of a lack of due diligence.
The fact that the bankruptcy court entered its order
abandoning the cases back to plaintiff two years after the
trustee in bankruptcy consented is also not indicative of a lack
of due diligence. As discussed above, plaintiff submitted a
proposed order to the bankruptcy court in April 2001, six
months prior to the DWP orders. In plaintiff=s unrefuted affidavit
(appended to her reply brief in support of her section 2B1401
petition in the Adelman case), plaintiff avers that she requested
the bankruptcy court to enter the proposed order at various
status conferences to no avail. Defendants do not identify what
more plaintiff, who was not represented by counsel at that time,
could have done to expedite the matter. Under these
circumstances, we agree with the appellate and trial courts that
plaintiff exercised due diligence.
IV
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Defendants next argue that the trial court erred in granting
section 2B1401 relief because plaintiff failed to establish a
meritorious claim. They maintain that plaintiff=s petitions
contained only conclusory allegations and that plaintiff did not
and cannot establish standing to sue defendants, the existence
of damages, the existence of a contract with the Mann
defendants, the existence of a fiduciary duty with the Mann
defendants, or an exception to federal preemption under
ERISA. Defendants= argument misses the mark.
We note that defendants made similar arguments in their
motions to dismiss filed in the original actions. The dismissal
motions were never decided, however, because the cases
were placed on the bankruptcy calendar. Although defendants
raised these issues in the course of the section 2B1401
proceeding, the trial court did not address these issues in its
ruling, implicitly adopted the plaintiff=s argument that these
issues should be decided if and when the cases are reinstated.
We find no error in the trial court=s ruling.
Issues of standing, damages, preemption, and the like all
concern the merits of the Adelman and Mann cases. In ruling
on plaintiff=s section 2B1401 petitions, however, it was not the
trial court=s responsibility to determine the merits of the
underlying causes of action. See Reuben H. Donnelley Corp. v.
Thomas, 79 Ill. App. 3d 726, 731 (1979). The central facts
which plaintiff was required to plead and prove in connection
with her petitions are not those facts which would establish her
entitlement to damages in the underlying actions, but those
facts which would establish her entitlement to have the DWP
orders vacated. See Smith v. Cole, 256 Ill. App. 3d 806, 810
(1993); Manning v. Meier, 114 Ill. App. 3d 835, 840 (1983);
Yorke v. Stineway Drug Co., 110 Ill. App. 3d 1009, 1014
(1982), overruled on other grounds by S.C. Vaughan Oil, 181
Ill. 2d at 511; Windmon v. Banks, 31 Ill. App. 3d 870, 874
(1975); Smith v. Pappas, 112 Ill. App. 2d 129, 133 (1969).
Plaintiff=s petitions and supporting documents, which outlined
the history of the litigation, her efforts to advance the cases,
the delays attributable to the trustee in bankruptcy, the difficulty
in obtaining her litigation files, and related matters adequately
established her entitlement to vacatur of the DWP orders.
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Unlike the trial court, the appellate curt chose to address
two of the foregoing issuesBfederal preemption and
damagesBrejecting defendants= arguments. Nos. 1B04B0189,
1B04B0214 cons. (unpublished order under supreme Court
Rule 23). As discussed above, however, these issues were not
germane to the section 2B1401 proceeding and should not
have been addressed by the appellate court, notwithstanding
defendants= continued efforts to have these issues decided
prior to any reinstatement.
Moreover, the issues of federal preemption and plaintiff=s
ability to establish damages both devolve into fact questions
more appropriate for resolution in the trial court. The
preemption issue, as argued by defendants, turns on whether
plaintiff and her former husband were the only pension plan
participants. The damages issue, as argued by defendants,
turns on whether plaintiff received everything to which she
would otherwise be entitled when the marital estate, including
the pension plan, was divided during the divorce proceedings.
The trial court is the place for such fact-finding to occur.
For these reasons, we vacate that portion of the appellate
court order addressing federal preemption and damages.
Defendants, should they choose, may raise these issues on
remand.
CONCLUSION
We affirm the appellate court=s judgment affirming the
circuit court=s order granting plaintiff=s section 2B1401 petitions
and reinstating the Adelman and Mann cases; vacate that
portion of the appellate court order addressing defendants=
preemption argument and damages argument; and remand to
the circuit court for further proceedings.
Affirmed in part and vacated in part;
cause remanded.
CHIEF JUSTICE THOMAS and JUSTICES FREEMAN and
BURKE took no part in the consideration or decision of this
case.
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