The First District appeals court recently examined the collateral attack doctrine – which immunizes a court’s judgment from challenge in a separate judicial proceeding – in a case flowing from failed settlement talks.
The defendants in Tielke v. Auto Owners Insurance Company, 2019 IL App(1st) 181756, four years after a 2013 personal injury suit was filed, made an eve-of-trial verbal offer to settle for $700,000.
The plaintiff’s counsel verbally accepted the offer the next day before trial started. Defendants’ counsel responded by saying “offer withdrawn.”
After plaintiff’s motion to enforce the settlement offer was denied by the personal injury case trial judge, the case proceeded to trial. Plaintiff was awarded less than half of the withdrawn $700,000 offer. The trial judge told the plaintiff’s counsel he should file a breach of contract action at a later date.
A few weeks later, plaintiff did just that: it filed a separate breach of contract action to recover the difference between the withdrawn offer and the personal injury case judgment (about $400,000). The theory was that defendant breached an enforceable agreement to settle the personal injury suit.
The trial court dismissed the breach of contract action on defendant’s Section 2-619 motion. The basis for the motion was that the breach of contract suit was an improper collateral attack on an order (the one denying the motion to enforce settlement) entered in the 2013 personal injury suit.
Affirming, the First District held that under the collateral attack doctrine, a court’s final judgment can only be attacked through direct appeal or a post-judgment motion to reconsider or to vacate the judgment. 735 ILCS 5/2-1203, 2-1301, 2-1401, etc.
The collateral attack rule bars later lawsuits that would effectively modify a former adjudication in another lawsuit. Both final and interlocutory (non-final) orders are immune from collateral attack. [¶31]
The appeals court found that by filing a separate breach of contract action, the plaintiff was trying to end-run the order denying her motion to enforce the settlement agreement in the 2013 personal injury suit. Plaintiff failed to either move to reconsider the denial of her motion to enforce the settlement (which she could have done under Code Section 2-1203) or file a notice of appeal (pursuant to Rule 303).
By failing to file a motion to vacate the personal injury case court’s order denying the settlement motion or to appeal from the order, plaintiff failed to preserve the issue (whether the motion to enforce was properly denied) for review. This precluded a later challenge to the order in subsequent litigation.
The court also rejected plaintiff’s argument premised on the personal injury case judge’s erroneous advice: that the plaintiff should proceed with the trial and later file a breach of contract action. The appeals court cited Illinois Supreme Court precedent that held “a party should not be excused from following rules intended to preserve issues for review by relying on a trial court’s erroneous belief.” [¶ 43], citing to Bonhomme v. St. James, 2012 IL 112393, 26 (2012).
Afterwords:
Tielke illustrates in sharp relief how crucial it is for litigants to properly preserve issues for review and to exhaust all avenues to challenge a trial court’s order. Here, the plaintiff should have either moved to reconsider the personal injury judge’s denial of the motion to enforce the oral settlement agreement or directly appealed the order. In the same case.
Instead, by following the trial court’s flawed advice and filing a subsequent lawsuit, the plaintiff’s claim was barred by the collateral attack doctrine.