Rule 103(b): Plaintiff’s Year-Long Delay In Serving Lawsuit Merits Dismissal For Lack of Diligence – IL 1st Dist.

Illinois Supreme Court Rule 103(b) requires a plaintiff to exercise diligence in serving a defendant.  The rule is based on the principle that litigation should have an end-date and not languish.  Rule 103(b) also heightens the probability that suits will be resolved when the underlying facts are fresh in the minds of the parties and witnesses and lessens the chance that trials will be tainted by stale evidence or faded memories.

Mular v. Ingram, 2015 IL App (1st) 142439 serves as a recent and harsh example of a plaintiff failing to actively find and sue a defendant.

The plaintiff was injured at the defendant’s home in July 2010 and sued in July 2012 – just before the two-year statute of limitations period for personal injuries ran.  735 ILCS 5/13-202 (two-year limitations period for personal injuries).  Over the next several months, the plaintiff issued multiple summonses to the wrong address.  The case was also dismissed for want of prosecution (DWPd) for several weeks before being reinstated by the plaintiff.  Almost three years from the occurrence and a full 1/2 year after the limitations period expired, plaintiff finally served the defendant.

The trial court dismissed the plaintiff’s suit with prejudice for lack of diligence in serving the defendant under SCR 103(b).

Holding: Affirmed

Rules/Reasons:

Rule 103(b) aims to protect a defendant from unnecessary delay in service of process.  The rule is designed to give a defendant a fair opportunity to investigate the nature of a plaintiff’s claims.  The rule doesn’t specify a specific amount of time for a defendant to be served and the trial court has wide discretion in considering a Rule 103(b) motion.

Once a defendant makes an initial showing that the plaintiff was not diligent in serving him, the burden shifts to the plaintiff to refute this.  The reasonable diligence standard is an objective one and the court does not consider whether the plaintiff intentionally delayed service.  While the defendant isn’t required to prove he was prejudiced by the delay, prejudice to the defendant is still a factor considered by the court.

Multiple factors guide the court’s analysis on a Rule 103(b) motion.  These include: (i) the length of time it took to serve the defendant; (ii) plaintiff’s efforts to obtain service; (iii) whether plaintiff knew of defendant’s whereabouts; (iv) whether the defendant’s whereabouts  could be easily obtained; (v) whether defendant was actually aware of the suit; (vi) whether the defendant was actually served; and (vii) any special circumstances that justify a service delay.

While the time period during which a case is voluntarily dismissed (non-suited) by a plaintiff is not calculated when assessing whether a plaintiff was reasonably diligent in obtaining service, the time where a case is involuntarily dismissed (such as a DWP) is included in the reasonable diligence calculus.

Where a plaintiff isn’t diligent but the defendant is still served before the statute of limitations period runs out, a Rule 103(b) motion can be granted without prejudice.  Where the defendant is served after the statute runs, the plaintiff’s case can be dismissed with prejudice.

(¶¶ 22-24).

Under these guideposts, the court found the plaintiff exhibited a lack of diligence.  She repeatedly put wrong addresses on multiple summonses when her own complaint correctly listed the defendant’s address.  The plaintiff also didn’t serve the defendant until nearly three years after the underlying incident and a year after the personal injury limitations period ran.  In addition, the plaintiff’s case was DWPd for over five weeks during the time preceding service on the defendant.

The plaintiff’s argument that the four-year statute of limitations for construction-related claims (735 ILCS 13-214) also failed.  The construction negligence statute only applies to activities related to the “design, planning, supervision, observation or management of a construction project.”  Defendant fit none of these categories; she was a landowner only.  With no complaint allegations that the defendant participated in the construction or design of a home, the plaintiff couldn’t rely on the four-year limitations period to sustain her claim.

Take-aways:

There’s no chronological litmus test for determining whether a plaintiff was reasonably diligent in getting service.  Where a defendant’s location is no mystery and several months elapse from suit to service, the plaintiff runs the risk of having his case dismissed.  This is especially true if the defendant isn’t served with the lawsuit until after the applicable statute of limitations expires.

The other lesson from the case is that the two-year, not the four-year, limitations period governs personal injury suits against landowners.  If the landowner defendant wasn’t involved in the construction or design of the accident site, he won’t be subject to the longer construction negligence limitations period.

“Never Ending”(?) Contract Still Definite Enough to Be Enforced – 7th Circuit

Burford v. Accounting Practice Sales, Inc. 2015 WL2261108 (7th Cir. 2015), deftly handles some tricky and recurring contract interpretation and enforcement issues that arise where a business agreement lacks a clear end date.

In the case, the plaintiff sued defendant for terminating a written year-to-year (and automatically renewing) contract for the plaintiff to market defendant’s accounting practice sales services in various states throughout the Southern U.S.  The agreement provided that the defendant could not terminate the contract “unless it is violated by [plaintiff].”  The district court found this language signaled an indefinite (and therefore, at-will) contract and granted summary judgment for the defendant.  The plaintiff appealed.

Held: Reversed.

Q: How Come?

A: Because in Illinois, indefinite contracts – contracts with no objective termination date – aren’t favored but can still be enforced in certain cases.  This is because parties should be free to order their business affairs as they see fit and unless there is fraud, duress or undue influence, a written contract should be enforced as written.

Parties can get around indefinite duration provisions by specifically spelling out grounds for termination of a contract.  A contract that lacks a fixed duration and that can only be cancelled for a specific event or “for cause” can be enforced and won’t be treated as an at-will contract (one that can be ended at any time for any reason) so long as the event or cause can be objectively gauged.

Here, the contract language negated its at-will character.  It could only be terminated if the plaintiff breached (“unless” he violated it).  Otherwise, the contract kept renewing every year.  The court found this termination provision specific enough to be enforceable by the plaintiff.  Since there was no evidence that the plaintiff breached the contract – defendant unilaterally ended the contract – summary judgment for the defendant was improper.

Policy concerns also supported the court’s decision.  It noted that if the defendant was allowed to freely terminate the contract like it did here, it would deprive the plaintiff of the economic basis of his bargain.  Meaning the plaintiff could spend a lot of time and money developing and marketing the defendant’s brand and then once terminated, he could be replaced by someone who could capitalize on all his work.

Conversely, the defendant would suffer if the plaintiff could escape the contract with impunity since the plaintiff could leverage the good will and relationships he fostered over a several-year period and take that good will to another company or use it himself and against the defendant.  The defendant was protected from this contingency by inserting a one-year non-compete and by allowing for “good cause” termination; defined as poor sales performance.

Since the parties contracted around the indefinite duration problem by allowing for termination only if the plaintiff violated the contract, it wasn’t an at-will contract.

Afterwords:

1/ The case gives a good illustration of the problems that arise where parties don’t specify when and in what situation a contract ends.  By taking some pains at the outset to make clear when a contract starts and ends, and establishing what constitutes a breach of “cause” for termination, the contract participants can likely avoid future litigation when one side decides to walk away;

2/  Substantively, the case amplifies that a contract lacking an objective termination date will be treated as at-will contract and can be terminated by any party at any time;

3/ If a contract can be terminated for a single specified reason, this will likely make the contract enforceable even though the contract lacks an objective termination date.