Agreed Settlement Order Not a Final Order Under Res Judicata Test – IL 1st Dist.

The Illinois First District recently provided a good synopsis of res judicata in Mass Realty, LLC v. Five Mile Capital, 2014 IL App (1st) 133871-U, a November 2014 unpublished opinion.

The case involves two lawsuits – a 2010 mortgage foreclosure case (the “2010 Case”) and a 2013 breach of contract and unjust enrichment case (the “2013 Case”) that both involve a dispute over commercial property.

In the 2010 Case, a lender filed a foreclosure suit and the defendant real estate broker – the plaintiff in the 2013 Case – counterclaimed to foreclose a broker’s lien it recorded for  securing a tenant for the property. The broker’s lien was never adjudicated in the 2010 Case.  

In the 2013 Case, the broker filed suit against current and former owners to recover its commission.  The 2013 Case defendants moved to dismiss the case on the basis of res judicata. The trial court agreed and the broker appealed.

Held: Reversed.  The 2013 Case isn’t precluded by the 2010 Case.

Reasons:

The court found that the 2013 Case was sufficiently different from the 2010 Case so that the broker could go forward with the 2013 Case.

Res judicata elements

– Res judicata is designed to prevent multiple olawsuits between the same parties where facts and issues are the same;

– Res judicata bars a subsequent action between the parties involving the same cause of action;

– The three elements of res judicata are (1) a final judgment on the merits, (2) an identity of parties; and (3) identity of cause of action.

– Where these three elements are satisfied, res judicata bars not only every matter actually litigated but every matter that might have been litigated in the first action;

A settlement agreement or other agreed order isn’t a final order for res judicata purposes;

– A judgment is final and “on the merits” where it determines the parties rights and liabilities based on the facts before the court

– Illinois uses the transactional test to determine whether causes of action are the same for res judicata purposes;

– Under the transactional test, separate claims are considered the same if they arise from a single group of operative facts; regardless of whether they assert different theories of relief.

(¶¶ 23-26)

The court ruled that a consent foreclosure in the 2010 Case wasn’t a final judgment on the merits.  The court likened a consent foreclosure to a settlement agreement – something that is not a final judgment. This is because a settlement agreement or agreed order is not a judicial determination of the parties rights, but is instead a recording or documenting of the parties’ agreement.

The court also found the “same cause of action” prong of res judicata absent.  In the 2013 Case, in contrast to the 2010 Case, the broker more definitively alleged a breach of the written commission contract and sought damages from the current and former property owner.

The broker’s 2010 Case counterclaim defensively pled the existence of his broker’s lien but didn’t name some of the defendants in the 2013 Case as those defendants didn’t yet have an interest in the property when the 2010 Case was pending.

Since the underlying facts, central allegations and some key defendants in the 2010 and 2013 Cases differed, the two cases were based on different operative facts and not the “same cause.”

Afterwords:

– When faced with a dismissal motion based on res judicata, respondent should underscore any differences between a prior and current lawsuit; including different parties, different underlying facts and distinct causes of action;

– By contrast, a party seeking dismissal based on the doctrine should focus on the sameness between two suits. It should highlight any common parties, property and factual allegations between the two cases.

 

 

 

Published by

PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.