Maza v. Oil-Dri Corp. of America

2023 IL App (1st) 220645-USIXTH DIVISION
March 24, 2023
No. 1-22-0645
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
MICHAEL P. MAZZA, LLC, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) Cook County.
)
v. ) No. 2020 CH 05008
)
OIL-DRI CORPORATION OF AMERICA, ) Honorable
) David B. Atkins,
Defendant-Appellant. ) Judge Presiding.
PRESIDING JUSTICE MIKVA delivered the judgment of the court.
Justices C.A. Walker and Tailor concurred in the judgment.
ORDER
¶1 Held: Judgment on the pleadings in law firm’s favor is affirmed where (1) the firm’s
former client was collaterally estopped from relitigating the enforceability of a
dispute resolution provision, (2) the dispute resolution provision encompassed
disputes over the scope of the provision, and (3) the circuit court made no error in
compelling the parties to jointly select a mediator where a good faith effort to do
so had not yet been attempted.
¶2 Plaintiff Michael P. Mazza, LLC (Mazza), a law firm, filed a one-count declaratory
judgment action against its former client, Oil-Dri Corporation of America (Oil-Dri), seeking to
enforce the alternative dispute resolution (ADR) provision of its legal fee agreement. Oil-Dri
No. 1-22-0645
moved to dismiss the case, arguing that the ADR provision in its agreement with Mazza was
indefinite, unenforceable, and impossible to perform. The circuit court denied the motion,
concluding that the language of the ADR provision was sufficiently definite to be enforceable.
Mazza then filed a motion for judgment on the pleadings, which the circuit court granted in favor
of Mazza. Oil-Dri now appeals. For the reasons set forth in this order, we affirm.
¶3 I. BACKGROUND
¶4 Mazza is an Illinois-based law firm and Oil-Dri is a Chicago-based manufacturing
corporation. For several years, Mazza provided patent-related legal services to Oil-Dri. The
relationship between the parties was structured according to two separate fee agreements. The first
agreement, signed by the parties on November 20, 2014 (2014 Agreement), was for legal services
related to the licensing and enforcement of U.S. Patent No. 5,975,019 (the ‘019 patent). The second
agreement, signed on September 23, 2016 (2016 Agreement), was for legal services related to the
licensing and enforcement of a separate category of “lightweight” patents held by Oil-Dri.
¶5 The termination clause of the 2016 Agreement read as follows:
“If we withdraw or you terminate our representation and if substantial progress has been
made toward resolution of any matter in a way that is financially beneficial to you at the
time of our withdrawal or if any litigation reaches an advanced state, we shall negotiate in
good faith for a payment to us commensurate with the services rendered, taking into
account our normal hourly fees for that matter and the payment that would have been due
under paragraphs 1-4.”
Paragraphs 1-4 of the 2016 Agreement, in turn, established a partial contingency fee arrangement
between the parties whereby Mazza would bill Oil-Dri at a discounted hourly rate for “all
litigation-related activity concerning the [lightweight] Patents,” in exchange for the right to a fixed
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percentage of any recovery from any “licenses, negotiations, settlements, sales, assignments,
transfers, or judgment that involve the Patents.” Pursuant to this partial contingency formula,
Mazza was entitled to 25% of the first $25 million in recoveries, plus 5% of any additional
recoveries.
¶6 Both the 2014 Agreement and the 2016 Agreement contained the following provision
regarding dispute resolution:
“This Agreement shall be construed under the laws of the State of Illinois and any disputes
concerning the Agreement, our fees or that relate in any way to our representation of you,
including any claims relating to our billings or for breach of fiduciary duty, professional
negligence or malpractice or other disputes over our representation, shall be resolved in
Chicago, Illinois through a summary procedure involving limited discovery in which we
will jointly appoint a qualified mediator who specializes in such matters to promptly
resolve any disputes through private mediation, whose decision shall be final and binding
upon the parties ***. Because this procedure of dispute resolution involves a waiver of
your rights and ours, we jointly acknowledge that this alternative procedure for dispute
resolution waives our respective rights to seek relief through litigation or to have a trial by
jury or to conduct full discovery or to appeal, or to otherwise exercise rights available in
litigation, rather than through private mediation. It is, therefore, important that this matter
be carefully discussed with independent counsel and only after that review has been
completed can we jointly agree to this alternative dispute-resolution procedure. In the event
agreement cannot be reached on a suitable mediator, we shall jointly seek the assistance of
the Illinois Bar Association for the selection of a suitable person.”
¶7 In April 2019, Oil-Dri terminated its relationship with Mazza.
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¶8 The following year, in June 2020, Mazza learned that Oil-Dri had entered into a
confidential licensing deal involving its lightweight patents (the subject of its 2016 Agreement),
pursuant to which Oil-Dri stood to receive a $13 million payment.
¶9 Upon learning about this transaction, Mazza sent a demand letter to Oil-Dri invoking the
language from the termination provision of the 2016 Agreement, which specified that should Oil-
Dri terminate its relationship with Mazza, Mazza would still be entitled to remuneration for any
matter on which it had made substantial progress toward resolution that was “financially
beneficial” to Oil-Dri “at the time of [the firm’s] withdrawal or if any litigation reache[d] an
advanced state.” Mazza claimed in its letter that it had laid the groundwork for Oil-Dri’s
confidential licensing deal and that the parties would not have been able to reach their agreement
without the firm’s involvement. Accordingly, it sought remuneration from Oil-Dri, in accordance
with the partial contingency formula laid out in paragraphs 1-4 of the 2016 Agreement, in the
amount of $3.25 million (25% of the $13 million payment). The letter gave Oil-Dri seven days to
respond.
¶ 10 Oil-Dri responded to the letter through its counsel, characterizing the request for $3.25
million as not being made in good faith and requesting that Mazza provide more specific
information to aid Oil-Dri’s analysis “of whether and to what extent compensation [was]
warranted.” Specifically, Oil-Dri asked for an itemization of the services Mazza had performed on
the lightweight patents after June 2017, when an infringement case involving one of those patents
had been dismissed. According to Oil-Dri, that infringement case, which was “resolved at an early
stage in a manner decidedly unfavorable to Oil-Dri,” was the only legal work Mazza had performed
in relation to the lightweight patents and it had already paid Mazza in full for its services related
to that litigation. Following the dismissal of that infringement action in 2017, Oil-Dri claimed,
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Mazza had “conducted no work related to the Lightweight Patents.” In addition to the itemization
of services, Oil-Dri also asked Mazza for “any work product provided to Oil-Dri in connection
with those post-June 2017 services” and a more substantive explanation for why, given the
circumstances, it thought it was entitled to $3.25 million.
¶ 11 Mazza responded the next day stating that it could not provide the information Oil-Dri
requested without more specific details about the company’s confidential licensing deal. The
correspondence gradually became more heated in a series of subsequent exchanges and, on July 8,
2020, Mazza contacted Judicial Arbitration and Mediation Services, Inc. (JAMS) to inquire about
the availability of specific mediators. Oil-Dri responded that, given Mazza’s failure to provide
basic information on why it believed it was entitled to additional compensation, any discussion of
mediation was premature.
¶ 12 On July 17, 2020, Mazza filed in the circuit court the declaratory action that is before us
now, seeking an order requiring Oil-Dri to jointly select a mediator and enter into binding
mediation to settle the fee dispute. Mazza alleged that during its engagement with Oil-Dri, the firm
had spent more than 1,650 hours enhancing the value of the patents involved in the $13 million
deal.
¶ 13 On August 25, 2020, Oil-Dri moved to dismiss the suit, contending that the ADR provision
Mazza sought to enforce was unenforceable because the binding mediation procedure it called for
was “a contradiction in terms and contrary to Illinois cases and dispute resolution statutes.” Oil-
Dri also highlighted language in the agreement which specified that in the event the parties failed
to agree upon a mediator, they were to engage the “Illinois Bar Association,” an organization
which Oil-Dri noted did not exist. “Simply put,” Oil-Dri asserted, “the dispute resolution provision
contains indefinite and impossible material terms, so it cannot be enforced.” In the alternative, Oil-
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Dri argued that even if the ADR provision was enforceable, Mazza’s complaint nonetheless
merited dismissal because the firm failed to negotiate in good faith, or establish that it had made
substantial progress on the relevant patents prior to termination, both of which were “conditions
precedent” for entering any sort of dispute resolution process.
¶ 14 On August 31, 2020, a few days after filing its motion to dismiss Mazza’s declaratory
judgment action, Oil-Dri filed a separate lawsuit against Mazza in the circuit court (Case No. 2020
L 9327), alleging legal malpractice for services performed under the parties’ 2014 Agreement. The
gist of Oil-Dri’s allegations in that case was that Mazza had mishandled an infringement lawsuit
against Nestle Purina involving Patent ‘019. While Oil-Dri ultimately obtained a $3 million jury
verdict in that case, it argued that the result was “not a victory in any sense,” as its expert had
testified that it was owed reasonable royalties exceeding $73 million. Over the course of the Patent
‘019 litigation, which Oil-Dri characterizes as “disastrous,” it paid Mazza over $5 million dollars.
¶ 15 On December 9, 2020, Mazza moved to dismiss Oil-Dri’s malpractice suit, arguing that,
like the fee dispute, this dispute over its performance in the Patent ‘019 litigation was also subject
to binding mediation.
¶ 16 The circuit court in the malpractice suit agreed with Mazza that the ADR provision was
enforceable as to Oil-Dri’s malpractice claim, and, on March 19, 2021, it entered an order granting
Mazza’s motion to dismiss and request to compel ADR. In an order denying Oil-Dri’s motion to
reconsider, the court reiterated its prior finding that the binding mediation clause was “sufficiently
definite” and that it “clearly mandate[d] a decision by the mediator on the merits of [Oil-Dri’s]
claims.” Oil-Dri did not appeal but instead complied with the court’s order and entered ADR
proceedings to resolve its malpractice claims against Mazza. Meanwhile, the declaratory action at
issue here remained unresolved and pending.
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¶ 17 On October 13, 2022, the judge presiding over this case—Mazza’s declaratory suit—
denied Oil-Dri’s motion to dismiss, rejecting Oil-Dri’s argument that the ADR provision was
ambiguous and unenforceable as to the parties’ fee dispute. It explained that it was “not persuaded
that a reference to the ‘Illinois Bar Association’ to choose a mediator in the absence of agreement
introduced an ambiguity, as any reader could reasonably infer it refers to the Illinois State Bar
Association.” The court concluded that the language in the provision was “sufficiently definite to
evidence the parties’ agreement to submit the matter to the alternative dispute resolution
procedures it outline[d], and it [was] not unenforceable on those grounds.”
¶ 18 Given this result, Mazza moved for judgment on the pleadings. In its motion, Mazza
referenced the result reached in the malpractice suit—where a different court had found the ADR
provision enforceable—and asserted that because Oil-Dri did not appeal that ruling, it was
collaterally estopped from relitigating the enforceability of the provision. Oil-Dri filed its
opposition to Mazza’s motion for judgment on the pleadings and its own cross-motion for
summary judgment on March 22, 2022.
¶ 19 On April 8, 2022, the circuit court granted Mazza’s motion for judgment on the pleadings
and denied Oil-Dri’s cross-motion for summary judgment. The court reiterated the conclusion
reached in its prior ruling denying Oil-Dri’s motion to dismiss that the “binding mediation
language in the Agreement [was] sufficiently definite and certain,” such that “it was not
unenforceable as a matter of law.” The circuit court also rejected Oil-Dri’s argument in the
alternative about Mazza’s purported failure to satisfy conditions precedent, explaining that
whether Mazza had negotiated in good faith or had made “substantial progress” on the relevant
patents prior to termination were both issues that were “clearly themselves subject to [ADR].” The
court explained that it “need only find the claims raised are within the scope of a valid agreement
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to submit the matter to [ADR]; any disputes on the scope or details thereof must then be decided
within those procedures.” Finally, the circuit court noted that it did not need to reach the collateral
estoppel argument raised by Mazza, as it had resolved the issues presented on the merits.
¶ 20 This appeal followed.
¶ 21 II. JURISDICTION
¶ 22 The circuit court issued its order granting Mazza’s motion for judgment on the pleadings
on April 8, 2022. Oil-Dri timely filed its notice of appeal on May 6, 2022. We have jurisdiction
over this appeal pursuant to Illinois Supreme Court Rules 301 (eff. Feb. 1, 1994) and 303 (eff. July
1, 2017), governing appeals from final judgments in civil cases.
¶ 23 III. ANALYSIS
¶ 24 On appeal, Oil-Dri makes several arguments challenging the circuit court’s rulings denying
its motion to dismiss and granting Mazza’s motion for judgment on the pleadings. First, it insists
that the ADR provision cited by Mazza is unenforceable because the “binding mediation”
procedure it elaborates is contrary to Illinois law and because the bar association that the parties
were required to seek assistance from under the terms of the agreement was defunct. Next, it
reasserts its arguments in the alternative that even if the ADR provision is valid, it is not applicable
here because Mazza failed to satisfy the “conditions precedent” of conferring in good faith or
establishing that “substantial progress” had been made on the relevant patents at the time of
termination. Finally, Oil-Dri argues that the circuit court’s order forcing the parties to jointly select
a mediator was contrary to the terms of their agreement. We address each argument in turn.
¶ 25 When reviewing a ruling on a motion to dismiss, or an order granting judgment on the
pleadings, we may affirm on any basis found in the record. See Lofthouse v. Suburban Trust and
Savings Bank of Oak Park, 185 Ill. App. 3d 889, 892 (1989); Invenergy Nelson LLC v. Rock Falls
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Township High School District No. 301, 2020 IL App (2d) 190374, ¶ 14. In both cases, our review
is de novo. See id.; Core Construction Services of Illinois, Inc. v. Zurich American Insurance Co.,
2019 IL App (4th) 180411, ¶ 24.
¶ 26 A. The Enforceability of the ADR Provision
¶ 27 In our view, whether the ADR provision is enforceable is an issue that was already resolved
in Mazza’s favor in Oil-Dri’s malpractice suit. As Oil-Dri was already awarded a full and fair
opportunity to challenge the enforceability of the ADR provision in that forum, we hold that in the
interests of fairness and judicial economy, it is collaterally estopped from continuing to challenge
the validity of that provision here.
¶ 28 Collateral estoppel, also referred to as issue preclusion, is an equitable doctrine that
precludes a party from relitigating an issue decided in a prior proceeding. Herzog v. Lexington
Township, 167 Ill. 2d 288, 294 (1995). When properly applied, the doctrine serves to “promote
fairness and judicial economy by preventing the relitigation of issues that have already been
resolved in earlier actions.” Du Page Forklift Service, Inc. v. Material Handling Services, Inc.,
195 Ill. 2d 71, 77 (2001). There are three basic threshold requirements for collateral estoppel:
“(1) the issue decided in the prior adjudication is identical to the one presented in the current suit;
(2) a final judgment on the merits was entered in the prior adjudication; and (3) the party against
whom estoppel is asserted was a party to or was in privity with a party to the prior adjudication.”
Ford Motor Credit Co. v. Cornfield, 395 Ill. App. 3d 896, 910 (2009).
¶ 29 Here, the second and third requirements are not in dispute, but Oil-Dri contests the first—
the existence of a common and controlling issue. Oil-Dri’s position is that the malpractice suit
“decided a very narrow issue: whether Oil-Dri’s legal malpractice claim arising under the 2014
Agreement was subject to the parties’ mediation clause.” The instant case, in contrast, involves
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different issues and presents different facts for the court to consider. Specifically, Oil-Dri writes,
“Mazza’s purported unpaid fee claims arise under a separate contract and are subject to separate
conditions precedent than the claim at issue in the prior litigation,” which involved “a legal
malpractice claim against Mazza for his negligence related to a federal jury trial.” We disagree.
¶ 30 Oil-Dri cannot avoid the application of collateral estoppel merely by pointing out that the
malpractice suit arose under the 2014 Agreement while the fee dispute arose under the 2016
Agreement. Even if these two cases did arise under different agreements, collateral estoppel still
applies because the two cases turn on the same issue: the enforceability of an identical dispute
resolution provision. We were confronted by a similar fact pattern in Service Systems Corp. v. Van
Bortel, 174 Ill. App. 3d 412 (1988).
¶ 31 In Service Systems Corp., an employer sued several former employees in the circuit court
seeking to enforce a non-compete provision from the employees’ former contract with the
employer. Id. at 416. Prior to the employer’s lawsuit in the circuit court, however, the employer
had been a defendant in a federal lawsuit filed by a different former employee, who sought a
declaratory judgment that the same non-compete provision was void and unenforceable. Id. at 417.
The federal court agreed with the plaintiff and held that the employer’s noncompete provision was
unenforceable. Id. In light of the result reached in the federal case, we found that the employer was
collaterally estopped from relitigating the issue of the validity of the noncompete provision even
though the two cases involved different employment contracts. Id. at 418. The same result is
warranted here. As Oil-Dri was awarded a full and fair opportunity to challenge the enforceability
of the ADR provision in the malpractice suit, and it did not appeal the circuit court’s order finding
that the provision was enforceable, it is precluded from continuing to argue that the provision is
unenforceable. See Gray v. Lacke, 885 F.2d 399, 406 (7th Cir. 1989) (“The policy underlying
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collateral estoppel is that a party is entitled to only one fair opportunity to litigate an issue.”).
¶ 32 Oil-Dri argues that the reasoning from Service Systems Corp. does not apply here because
in that case, the court did not have to consider “whether new claims, arising from different contract
terms and defenses, were subject to collateral estoppel.” But this misses the point. The applicability
of collateral estoppel does not turn on whether two causes of action involve precisely the same
facts or claims. Rather, collateral estoppel applies where “a party participates in two separate and
consecutive cases arising out of different causes of action and some controlling factor or question
material to the determination of both cases has been adjudicated by a court of competent
jurisdiction against the party in the former suit.” Hayes v. State Teacher Certification Board, 359
Ill. App. 3d 1153, 1162 (2005). Here, although the two cases involve different contracts and
different causes of action, the “controlling factor” in both is the enforceability of the identical
dispute resolution provision and the validity of the “binding mediation” procedure it elaborates.
¶ 33 Due to the result reached in the malpractice case, Oil-Dri is estopped from continuing to
litigate the validity of the dispute resolution provision in the instant case.
¶ 34 B. Satisfaction of “Conditions Precedent”
¶ 35 Oil-Dri next argues that even if the ADR provision is valid and enforceable, it does not
apply as to Mazza’s claim for fees because Mazza failed to establish the “conditions precedent” to
qualify for ADR. We reject this argument.
¶ 36 The language of the ADR provision is quite broad. It mandates binding mediation between
the parties for “any disputes concerning the Agreement, our fees or that relate in any way to our
representation of you, including any claims relating to our billings or for breach of fiduciary duty,
professional negligence or malpractice or other disputes over our representation.” (Emphasis
added). Based on this language, the only requisite “condition precedent” for either party invoking
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the ADR provision is the existence of any dispute concerning the 2016 Agreement, including
disputes over the scope of the ADR provision itself and whether a party qualifies for it.
¶ 37 We agree with the circuit court that whether Mazza engaged in good faith negotiation or
made “substantial progress” on the patents involved in Oil-Dri’s $13 million deal prior to its
termination are both issues that are “clearly themselves subject to [ADR].”
¶ 38 C. Jointly Selecting a Mediator
¶ 39 Oil-Dri’s final argument is that the circuit court erred in granting Mazza’s judgment on the
pleadings because “[w]here, as here, the agreement states that the parties must ‘jointly’ appoint a
mediator, and the parties cannot agree on a mediator, and there is no express ‘method of
appointment of arbitrators’ outlined in the agreement, Illinois law compels the court to terminate
the arbitration agreement.” The problem with this argument is the presupposition that “the parties
cannot agree on a mediator.” We see no reason to treat Oil-Dri’s assertion as a foregone conclusion.
As the circuit court explained below, when it rejected this same argument,
“[Oil-Dri] has at this time made no apparent effort, let alone a good faith effort, to engage
with the procedures of the ADR Provision, and the court cannot decline to enforce it based
on [Oil-Dri’s] mere speculation that the parties will be unable to agree upon a mediator
***. [Oil-Dri] may be able to raise such a claim for termination of the Agreement after a
genuine, good faith attempt to engage with its procedures, but it is not a basis for judgment
now.”
We agree.
¶ 40 Up to this point, Oil-Dri has had little incentive to try to work with Mazza to select a
mutually agreeable mediator, as its efforts were focused entirely on arguing that the ADR provision
mandating that procedure was void and unenforceable. Now that the circuit court has found that
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ADR provision to be enforceable, a ruling which we affirm, the terrain has shifted. It would be
premature for us to conclude that the parties cannot come to an agreement on a suitable mediator
when they have yet to make a good faith effort to do so. We therefore reject Oil-Dri’s argument
that the circuit court erred when it refused to terminate the agreement based on the fact that the
parties could not agree on a mediator.
¶ 41 IV. CONCLUSION
¶ 42 For the foregoing reasons, we affirm the circuit court order granting Mazza’s motion for
judgment on the pleadings and denying Oil-Dri’s cross-motion for summary judgment.
¶ 43 Affirmed.
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