Tag: 2-619

Italian Lawsuit Filed Against Auto Repair Giant Dooms Later Illinois Lawsuit Under ‘Same Parties/Same Cause’ Rule

Where two lawsuits are pending simultaneously and involve the same parties and issues, the later filed case is generally subject to dismissal.  Illinois Code Section 2-619(a)(3) allows for dismissal where “there is another action pending between the same parties for the same cause.”

Midas Intern. Corp. v. Mesa, S.p.A., 2013 IL App (1st) 122048, while dated, gives a useful summary of the same-cause dismissal guideposts in the context of an international franchise dispute.

Midas, the well-known car repair company entered into a written contract with Mesa, an Italian car repairer, to license Midas’s business “System” and related trademarks.  In exchange for licensing Midas’s business model and marks, Mesa paid a multi-million dollar license fee and made monthly royalty payments.  The contract had a mandatory arbitration clause and a separate license agreement incorporated into it that fixed Milan, Italy or Chicago, Illinois as the venues for license agreement litigation.

Mesa sued Midas in an Italian court claiming Midas violated the license agreement by not making capital investments in some of Mesa’s projects.  A month or so later, Midas sued Mesa in Illinois state court for breach of contract and a declaratory judgment that Midas was in compliance with the license agreement and was owed royalties.  The trial court dismissed Midas’ suit based on the pending Italian lawsuit filed by Mesa.  Midas appealed.

Held: Affirmed.

Reasons:

The case turned on whether Mesa’s lawsuit stemmed from the same cause as Midas’s Illinois action.  Dismissal of an action under Code Section 2-619(a)(3) is a “procedural tool designed to avoid duplicative litigation.”  Under this section, actions involve the same cause when the relief sought in two cases rest on substantially the same set of facts.  The test is whether the two actions stem from the same underlying transaction or occurrence; not whether the pled causes of action or legal theories in the two cases are the same or different.

Two cases don’t have to be identical for Section 2-619(a)(3) to apply.  All that’s required is the cases feature a “substantial similarity of issues.”  (¶ 13)

If the same cause and same party requirements are met, the Court can still refuse dismissal if the prejudice to the party whose case is dismissed outweighs the policy against duplicative litigation.  In assessing prejudice caused by dismissal, the court considers issues of comity, prevention of multiplicity of lawsuits, vexation, harassment, likelihood of obtaining complete relief in the foreign forum, and the res judicata effect of a foreign judgment in the local forum (here, Illinois).

Courts also look to which case was filed first; although order of case filing isn’t by itself a dispositive factor.

Rejecting Midas’ argument that the Italian lawsuit was separated in time and topics from the Illinois lawsuit, the Court noted that Mesa’s lawsuit objective was to preemptively defend against Midas’s royalty claims.  Midas Illinois lawsuit, filed only weeks after Mesa’s action, sought damages under a breach of contract theory – that Mesa breached the license agreement by not paying royalties.

Since the outcome in the Mesa (Italian) case will determine the Midas (Illinois) case, the Court found the Illinois case was barred because Mesa’s action involved the same parties and same cause: both cases originated from the same license agreement.

The Court also found that Midas wouldn’t be prejudiced due to the dismissal of the Illinois action. Midas has the resources to file a counterclaim in the Italy case and the license agreement provides that either Milan or Chicago are possible lawsuit venues.  Since Illinois and Italy each had similar interests in and a connection to the dispute (the royalty payments were sent from Italy and received in Illinois), the trial court had discretion to dismiss Midas’ Illinois lawsuit. (¶ 25).

Afterwords:

1/ This case lays out the different factors a court considers when determining whether to dismiss an action under the same cause/same parties Code section;

2/ The timing of the filing of two lawsuits along with each forum’s connection to the dispute are key factors considered by the court when deciding whether avoiding redundancy in litigation trumps a party’s right to have its case heard on the merits.

Motions to Dismiss Where The Same Parties Are (Already) Litigating In Another Forum

In Hergan v. Pawlan Law, LLC (2013 IL App 1st) 113812-U, the First District applies the “same parties, same cause” motion to dismiss rule.

The plaintiff sued defendant and her lawyer based on fraudulent statements made in connection with various loan transactions stemming from a realty investment contract. There were some four (4) other lawsuits pending at the time plaintiff sued.  The Court granted the defendants’ 2-619(a)(3) motion based on the multiple pending cases involving the litigants.

Illinois Code Section 2-619(a)(3) governs dismissal of a complaint where there is “another action pending between the same parties for the same cause.” 735 ILCS 5/2-619(a)(3).  This section is a procedural device aimed at avoiding duplicative litigation. It applies where there is a pending case involving the same parties for the same cause.

The “same parties” requirement doesn’t require that the parties be identical; all that’s required is that the litigants’ interests be sufficiently similar. The 2-619(a)(3) movant demonstrate by clear and convincing evidence that the two (or more) actions stem from the same underlying transaction and involve parties whose interests are substantially aligned. ¶¶ 26-27.

The test is whether the different actions stem from the same underlying transaction; not whether the specific legal theories or causes of action are the same. So, if in the prior case, the complaint sounds in breach of contract and in the later filed case, the complaint seeks rescission, the second case can still be dismissed if it derives from the same underlying facts.

Once the movant establishes that the same parties and same cause are involved in two (or more) separate suits, the Court examines four factors: (1) comity (giving respect to another forum’s decisions); (2) preventing multiplicity, vexation and harassment; (3) the likelihood of obtaining complete relief in another forum; and (4) the res judicata effect of a foreign judgment on the local forum.

The Court doesn’t have to weigh all four factors; just the one(s) applicable to a given case.  Here, the only factor that applied was the “multiplicity” one. Clearly, the five pending suits involved the same parties and the same transaction: the loans and investment contract. As a result, there was clear multiplicity among the various actions involving the parties. The other factors didn’t apply because all five suits were pending in the same forum – the Cook County Circuit Court. ¶¶ 29, 33-36.

Afterwords:

Hergan provides a cogent summary of the elements that a 2-619(a)(3) movant must establish when trying to dismiss an action based on a pending suit involving the same parties and same cause;

The case demonstrates that where multiple suits are filed involving common litigants, principles of judicial economy and efficiency will weigh in favor of dismissing repetitive actions and instead consolidating them into already pending cases.