C.O.A.L., Inc. v. Dana Hotel, LLC

2017 IL App (1st) 161048, 82 N.E.3d 1262, 2017 Ill. App. LEXIS 507

• Court: Appellate Court of Illinois
• Decided: August 4, 2017
• Docket: 1-16-1048
• Status: Unpublished

Opinion

2017 IL App (1st) 161048 No. 1-16-1048

Fifth Division August 4, 2017

______________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________

) C.O.A.L., INC., ) Appeal from the Circuit Court ) of Cook County. Plaintiff-Appellant, ) ) No. 13 L 7217 v. ) ) The Honorable DANA HOTEL, LLC, ) Eileen O’Neill Burke, ) Judge Presiding. Defendant-Appellee. ) ) ______________________________________________________________________________

PRESIDING JUSTICE GORDON delivered the judgment of the court, with opinion. Justices Hall and Lampkin concurred in the judgment and opinion.

OPINION

¶1 The instant appeal arises from the trial court’s section 2-615 dismissal of the complaint

filed by plaintiff C.O.A.L., Inc., regarding the termination of the restaurant manager-owner

relationship between plaintiff and defendant Dana Hotel, LLC. The trial court dismissed

count I of plaintiff’s complaint because it found that the agreement relied on by plaintiff had

been superseded by a later agreement and dismissed count III because it found that plaintiff’s

claims that defendant had breached its fiduciary duty had been released. Plaintiff appeals the

dismissal of both counts and, for the reasons that follow, we reverse. No. 1-16-1048

¶2 BACKGROUND

¶3 I. Complaint and Exhibits

¶4 A. Complaint

¶5 Plaintiff filed a complaint against defendant on June 21, 2013; the complaint was

amended twice, and it is the dismissal of the second amended complaint that is at issue on

appeal.

¶6 The complaint alleges that plaintiff is an Illinois corporation engaged in the restaurant

management business, and defendant is an Illinois limited liability company that operates the

Dana Hotel Chicago, a hotel located in Chicago. Together, plaintiff and defendant are the

two members of Argent Restaurant, LLC, an Illinois limited liability company formed to

operate the Argent restaurant at the hotel.

¶7 On October 19, 2011, plaintiff and defendant entered into a restaurant management

agreement (management agreement), a written contract for restaurant management services

for the restaurant. This management agreement was a five-year contract, with an effective

date of May 1, 2012, and a three-year optional renewal period. Under the terms of the

management agreement, plaintiff was to provide restaurant management services for the

restaurant in exchange for (1) a $100,000 annual management fee, payable in monthly

increments from the first date the restaurant was open and operating; (2) repayment of

plaintiff’s $154,000 capital investment, to be paid from the restaurant’s profits; and (3) 50%

of adjusted net operating income from the restaurant, over and above the amounts needed to

repay the parties’ invested capital in the project and the funding of an operating reserve fund.

Plaintiff’s duties in managing the restaurant included (1) the hiring and management of

employees, including a chef and general manager; (2) overseeing and ensuring the operation

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of an orderly, high-quality restaurant in accordance with industry standards; (3) provision of

an annual projected budget for the restaurant and operation within the approved budget; (4)

provision to defendant of marketing concepts for the restaurant and performance of public

relations duties; (5) recordkeeping of revenues and expenses; (6) creation of the restaurant’s

menu; (7) compliance with all laws pertaining to the operation of the restaurant; and (8)

timely submission of invoices for goods and services contracted by plaintiff in connection

with the management and operation of the restaurant, to be paid by defendant. The complaint

alleges that plaintiff complied with its duties under the management agreement.

¶8 Shortly after entering into the management agreement, the parties agreed to form Argent

Restaurant, LLC (LLC), which was formed on April 4, 2012, with plaintiff and defendant as

equal members. The parties agreed that plaintiff’s duties to the LLC would mirror its duties

as described in the management agreement, while defendant would handle the general

accounting for the restaurant and provide plaintiff with weekly profit and loss statements

based on the records gathered in defendant’s point-of-sale (POS) systems. 1 The parties also

agreed that defendant would establish a bank account or accounts in the name of the LLC so

that its accounts could be maintained separately from those of the hotel.

¶9 The complaint alleges that plaintiff made repeated demands for the account information

for the LLC’s account and was repeatedly denied access to that information by defendant and

further alleges that defendant never established a separate account for the LLC or the

restaurant and instead commingled funds derived from the restaurant with the hotel’s

accounts. The complaint alleges that the POS system for the restaurant was part of the same

1 “An electronic POS system streamlines retail operations by automating the transaction process and tracking important sales data. A basic system includes an electronic cash register and software to coordinate date collected from daily purchases.” Point of Sale—POS, Investopedia, http://www.investopedia.com/terms/p/point-of-sale.asp (last visited June 21, 2017). 3 No. 1-16-1048

system that defendant used in its other hotel operations, so all data from the restaurant POS

went directly to defendant, who was supposed to process the information and provide it in

weekly profit and loss statements to plaintiff so that plaintiff could comply with its duties to

create an accurate restaurant budget and keep records of the restaurant’s revenues and

expenses.

¶ 10 The complaint alleges that plaintiff began noticing mistakes on each of the weekly profit

and loss statements provided by defendant and repeatedly pointed out these mistakes to

defendant. Defendant consistently ignored the mistakes and eventually began certifying the

restaurant’s records for purposes of business accounting without seeking or obtaining

plaintiff’s approval. Plaintiff was also denied access to the restaurant’s books and records and

accounting information.

¶ 11 According to the complaint, the “mistake-laden” profit and loss statements that were

produced between April and December 2012 showed that the restaurant was suffering

consistent losses. When plaintiff made demands for its management fee, defendant informed

plaintiff that it could not pay the management fee while the restaurant continued to lose

money. The complaint alleges that the refusal to pay the management fee constituted a

breach of the management agreement, which did not condition payment of the management

fee on the restaurant’s profits or losses.

¶ 12 The complaint alleges that in December 2012, the parties began discussing the possibility

of a negotiated buyout by defendant of plaintiff’s interest in the LLC, as well as a negotiated

termination of the management agreement. “After much negotiation, Plaintiff and Defendant

agreed in principle to a so-called ‘Separation Agreement’ *** by which Defendant would

take sole ownership of [the LLC], and Plaintiff would cease to be the Restaurant’s Manager

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under the [management agreement], in exchange for payment of certain amounts to

Plaintiff.” The complaint alleges that plaintiff’s principals executed a copy of the separation

agreement on March 25, 2013, “on the understanding that certain conditions in the

[separation agreement] would be met by the Defendant before it became effective,” including

(1) defendant’s provision of profit and loss documentation and other records sufficient to

verify and agree upon the total capital invested by the parties in the restaurant (the necessary

records); (2) plaintiff’s provision of its total capital figure to be used in calculating the total

purchase price under the separation agreement, which would be based in significant part on

the records provided by defendant; (3) negotiation for settlement of all outstanding invoices

by plaintiff, to be paid by defendant; and (4) transfer of all operations from plaintiff to

defendant by April 30, 2013. The formula for establishing what plaintiff would be paid for a

buyout of its interest in the LLC and the cessation of restaurant operations was outlined in the

separation agreement and relied on accounting records to be provided by defendant, which

plaintiff had not yet received at the time of execution of the separation agreement.

¶ 13 The complaint alleges that, prior to April 2, 2013, and during the pendency of the

separation agreement negotiations, Sean Mulroney, on behalf of plaintiff, met with Gene

Kornota, on behalf of defendant, to discuss the separation agreement negotiations. During

this meeting, they discussed the terms of the separation agreement, and Mulroney indicated

that without the necessary documents, the parties would be unable to fix a price or carry out

the terms of the separation agreement. Kornota could not provide a timeline for when the

necessary records would be provided “and ultimately ended the conversation with a

statement that no matter what happened, he and his partners would ‘never pay [Plaintiff] a

dime.’ ”

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¶ 14 The complaint alleges that on March 27, 2013, plaintiff sent defendant an e-mail

renewing its request for access to the LLC’s books and records. According to the separation

agreement, the parties were to agree on a “Total Capital Invested” figure by March 28, 2013,

which was to be calculated after defendant’s provision of the necessary records, but plaintiff

was unable to verify or agree to the figure by that date because it had not been provided any

of the necessary records.

¶ 15 The complaint alleges that on April 2, 2013, defendant notified plaintiff that it was being

locked out of operations as the restaurant’s manager and advised plaintiff and the restaurant’s

staff members that they were no longer allowed to come onto the premises of the hotel or to

perform duties under the management agreement. Since that day, plaintiff has been unable to

enter the hotel’s premises or to perform its duties under the management agreement. On the

same day as it locked plaintiff out, defendant provided plaintiff with an executed version of

the separation agreement, signed by its principals, “claiming that the signed [separation

agreement] provided a valid and enforceable basis for terminating Plaintiff’s rights under the

[management agreement].”

¶ 16 The complaint contains three counts. Count I is for breach of the management agreement

and alleges that, at all times, the management agreement was a binding and enforceable

contract, requiring plaintiff to perform the duties described in the management agreement in

exchange for the payments described therein. Count I alleges that, “[a]t all times before April

2, 2013, Plaintiff performed its duties under the terms of the [management agreement].”

Count I further alleges that defendant’s act of locking plaintiff out from the hotel and

denying plaintiff the ability to perform its duties under the management agreement

constitutes a breach of the management agreement. Count I also alleges that despite

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plaintiff’s performance of its duties, defendant never paid plaintiff its management fee of

$100,000 per year and plaintiff was also never compensated for any portion of its initial

capital contribution. Count I also alleges that defendant’s de facto termination of the

management agreement on April 2, 2013, was without cause and that the management

agreement specifies that plaintiff is entitled to certain sums of money that plaintiff had not

received.

¶ 17 With respect to the separation agreement, count I alleges that “[o]n April 1, 2013, before

any of the conditions necessary to effect and validate the [separation agreement] had been

met by Defendant, and before Defendant’s unilateral termination of the [management

agreement], Plaintiff notified Defendant that it was cancelling the [separation agreement],

and that it intended to continue performing under the [management agreement’s] terms.”

Count I further alleges that “[t]he [separation agreement] was an executory agreement,

subject to several conditions of performance by Defendant that were not met” and that

“Plaintiff’s resignation as manager of the Restaurant was only to be effective under the

[separation agreement] at an unspecified future date, when all of the [separation agreement’s]

conditions had been met.” Count I alleges that “[b]ecause the [separation agreement’s]

conditions were not met prior to Plaintiff’s termination of the [separation agreement] on

April 1, 2013, the [separation agreement] has no legal effect, and does not serve to invalidate

the terms of the [management agreement].” Count I alleges that based on defendant’s failure

to pay the management fee and other amounts due under the management agreement,

plaintiff had sustained damages.

¶ 18 Count II is pleaded in the alternative and alleges a breach of the separation agreement.

Count II is not at issue on appeal.

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¶ 19 Count III was for breach of fiduciary duty and alleged that as comembers of the LLC,

plaintiff and defendant had fiduciary duties toward each other, “including the duties of

loyalty, care, and good faith and fair dealing and, specifically the duty of disclosure of

necessary information to members.” Count III alleges that based on defendant’s conduct in

refusing to allow plaintiff access to information, commingling accounts, and refusing to

correct its mistakes, defendant breached its fiduciary duties of loyalty, care, and good faith

and fair dealing towards plaintiff. Count III further alleges that, on information and belief,

defendant maintained two sets of accounting books, one of which reflected accurate

information and one of which contained purposefully-modified information that was shared

with defendant’s investors, and that defendant used funds belonging to the LLC to pay debts

owed by defendant. Count III alleges that plaintiff was damaged by defendant’s breaches in

that it was deprived of the opportunity to realize profits from the restaurant’s operations,

including payment of its management fees, repayment of its capital contribution, and the

ability to realize profits.

¶ 20 B. Management Agreement

¶ 21 Attached to the complaint was a copy of the management agreement, which was dated

October 19, 2011, and provided that plaintiff would be retained to manage the restaurant on

defendant’s premises and to provide public relations for the restaurant. The initial term of the

management agreement was for five years, with an option to renew for an additional three

years. Section 3 of the management agreement provided that “[plaintiff] shall receive a

management fee (the ‘Base Management Fee’) equal to $100,000.00 per fiscal year as a base

Management Fee from the operations of [the restaurant], payable in advance on the first day

of each month beginning on the first full month after the Launch of [the restaurant], during

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the Term, plus an incentive fee” as further described by the management agreement, which

included 50% of the adjusted net operating income.

¶ 22 Section 9 of the management agreement set forth the duties and responsibilities of

plaintiff as the manager. Section 9 provided that plaintiff would submit a proposed annual

budget to defendant, which defendant would approve at its discretion. Section 9 further

provided that plaintiff “shall maintain or compile and shall provide [defendant] with any and

all other information, accounts, reports or records related to the Restaurant as the [defendant]

may reasonably require” and “shall submit all invoices properly coded to [defendant] at the

end of every week.” Section 9 provided that defendant “shall cooperate with [plaintiff] with

respect to the items set forth in this Section ***. To the extent [defendant] fails to timely

provide any information needed to prepare such reports (for example, invoices received

directly by [defendant]), [plaintiff] shall not be required to perform.”

¶ 23 Section 14 of the management agreement pertained to default and termination by

defendant and provided that “[i]t shall be an event of default hereunder *** if any one or

more of the following events shall occur,” followed by a list of three events of default: (1)

“[t]he failure of [plaintiff] to perform, keep or fulfill any of its covenants, undertakings or

obligations set forth in this Agreement” if the failure was not cured within the time provided

by the management agreement; (2) “[plaintiff’s] (including its officers’, directors’,

members’, partners’ or shareholders’) dishonesty, breach of fiduciary duty, breach of duty of

loyalty or breach of duty to act in good faith, as determined by [defendant]; and (3) plaintiff’s

filing of a bankruptcy petition. Section 14 provided that “[t]his Agreement and the Term

hereof shall terminate upon the occurrence of an Event of Default. [Defendant] must give

[plaintiff] notice of such default in writing and [plaintiff] shall have 30 days from receipt of

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notice to cure.” Section 14 further provided that, if defendant elected to terminate the

management agreement without cause, “[defendant] shall pay [plaintiff] 50% of the Base

Management Fee for the remainder of the initial term of the Agreement.”

¶ 24 C. Separation Agreement

¶ 25 Also attached to the complaint was a copy of the separation agreement, which provided

that it “is made effective as of this 25th day of March, 2013,” and was executed by Sean

Mulroney and Julie Darling on behalf of plaintiff and by Gene Kornota and Anthony Klok on

behalf of defendant; the signature lines do not have dates written next to the signatures. The

recitals of the separation agreement provided:

“WHEREAS, [plaintiff] and [defendant] entered into a Restaurant Management

Agreement *** on October 19, 2011 for the redesign and management of the

restaurant located in the Dana Hotel;

WHEREAS, [plaintiff] and [defendant] are Members and Managers of Argent

Restaurant LLC, each party with a 50% interest;

WHEREAS, [plaintiff] has acted in the capacity of Manager of the restaurant,

Argent Restaurant and Raw Bar *** since May 1, 2012;

WHEREAS, [plaintiff] desires to resign as Manager and Member of Argent

[R]estaurant LLC and as manager of the Restaurant;

WHEREAS, [plaintiff] also desires [that defendant] redeem all of the Interest in

Argent Restaurant LLC held by [plaintiff], constituting a 50% Interest in Argent

Restaurant LLC;

WHEREAS, [defendant] desires to accept such resignations; and

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WHEREAS, [defendant] is willing to redeem [plaintiff’s] Interest, as partial

consideration for the releases and agreements set forth herein.

NOW, THEREFORE, in consideration of the foregoing promises, which are

hereby incorporated into the terms of this Agreement, and in exchange for the mutual

promises contained herein, and other good and valuable consideration, the receipt and

sufficiency of which is hereby acknowledged, the parties hereby agree as follows[.]”

¶ 26 Section 2.2 of the separation agreement was entitled “Purchase Price; Payment and

Transfer,” and provided in paragraph 2.2(a) that “[i]n consideration of the sale to [defendant]

by [plaintiff] of the Redeemed Interest and the other terms and conditions hereof, including

the release and restrictive covenants, [defendant shall] deliver to [plaintiff] a separation fee as

calculated by the formula set below (hereinafter the ‘Purchase Price’),” consisting of:

“Total Capital Invested to date $230,755.17. This total to be verified and agreed

to by the parties by March 28, 2013.

Less Capital Expenditure by [defendant] $77,500.00

Plus [plaintiff’s] Management Fee at time of separation

Less Cash Flow Shortfall Obligation of [plaintiff] at time of separation

Less all outstanding invoices and obligations for pre-opening expenses to be paid

as set forth in Paragraph 2.2(c) below.”

Paragraph 2.2(a) further provided that “Capital Shortfall or surplus through February 2013

shall be reviewed and commented on no later than 5 days after the receipt by [plaintiff] of all

documentation and accounting for Capital Shortfall or surplus. Capital Shortfall from March

1 thru the Date of Separation shall be agreed to by the Parties to the best of [plaintiff’s] and

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[defendant’s] abilities at the time of separation (but no later than April 20, 2013) and shall be

considered final.” Paragraph 2.2(a) also provided:

“The Purchase Price from the above calculation shall be paid to [plaintiff] upon

transfer of all operations to [defendant] and after the payment of all outstanding

invoices and obligations are made as directed by [plaintiff], or as otherwise provided

for in paragraph 2.2(c), verified and paid by [defendant] and not before the receipt of

all executed final waivers of lien from all such vendors, contractors and consultants

are received, and lawsuits (other than Motamen et al. v. Mulraney et al. No. 13 CH

02204) settled and withdrawn. In the event that [plaintiff] cannot reach an agreement

with either Simon Sez or Albazi Architects before the separation, [defendant] shall

hold back amounts sufficient to cover the invoices in full until such time as these

invoices can be successfully resolved, but no later than May 30, 2013, after this time

[defendant] shall use its best efforts to settle the claim, but not greater than the

amount listed in Exhibit A, attached hereto.”

¶ 27 Paragraph 2.2(c) provided that “[plaintiff] shall have the ability and the authority to

negotiate all outstanding invoices due from Capital Improvement and any other outstanding

invoices to an amount less than that demanded with the one exception of Stuever & Sons.

Any savings on outstanding invoices due shall inure to the benefit of [plaintiff] in the

calculation set forth in 2(a) above. [Plaintiff] shall receive releases from all such outstanding

invoices due but no later than fifteen days prior to separation. [Defendant] will then have a

period of 15 days to validate the waivers of lien and amounts due. In the event [plaintiff] has

not produced or arranged for such waivers by April 7, 2013 [defendant] may elect to pay any

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such obligations and deduce the amount from [plaintiff’s] Capital account for all invoices

other than those specifically referenced in paragraph 2(a) above.”

¶ 28 Article 3 was entitled “Resignation and Release” and provided, in full:

“3.1 Resignation. [Plaintiff] hereby resigns from its positions as a manager,

director or officer of the Argent Restaurant LLC, effective upon Separation of this

Agreement.

3.2 Claims, Demands and Causes of Action. As used in this Agreement, ‘claims,’

‘demands,’ and ‘causes of action’ include, but are not limited to, claims based on

contract, whether express or implied, fraud, stock fraud, defamation, wrongful

termination, estoppel, equity, tort, retaliation, intellectual property, personal injury,

spoliation of evidence, emotional distress, public policy, wage and hour law, statute

or common law, claims for severance pay, claims related to stock options and/or

fringe benefits, claims for attorneys’ fees, vacation pay, debts, accounts,

compensatory damages, punitive or exemplary damages, liquidated damages, and any

and all claims arising under any federal, state, or local statute, law or ordinance

prohibiting discrimination on account of race, color, sex, age, religion, sexual

orientation, disability or national origin, including but not limited to, the Age

Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 as

amended, the Americans with Disabilities Act, the Family and Medical Leave Act,

the Employee Retirement Income Security Act[,] the Illinois Human Rights Act[,]

and claims for compensatory damages, punitive damages, and/or liquidated

damages.”

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¶ 29 Article 4 concerned plaintiff’s representations and warranties and provided, in relevant

part, that plaintiff represented and warranted to defendant that:

“[Plaintiff] is a corporation duly organized, existing, and in good standing under the

laws of the State of Illinois, and its principals Julie Darling and Sean Mulroney have

full power, right and authority to execute, deliver and perform this Agreement and to

perform the transactions contemplated hereby. This Agreement when executed by

[plaintiff], Julie Darling and Sean Mulroney, will have been fully and validly

executed and delivered by them and will constitute legal, valid and binding

obligations of [plaintiff], enforceable in accordance with its terms. The execution of

this Agreement and the consummation of the transactions contemplated hereby have

been duly authorized by all necessary parties on behalf of [plaintiff]. The execution,

delivery and performance by [plaintiff] of this Agreement will not constitute or result

in a breach or default under, or conflict with, any order, ruling or regulation of any

court, tribunal or government agency, or any agreement or undertaking to which

[plaintiff] is a party of by which [plaintiff] is bound. The signatures on this

Agreement are genuine and the signatory has legal competence and authority to

execute the same.”

¶ 30 Similarly, article 5 contained defendant’s representations and warranties and provided:

“[Defendant] is a limited liability company duly organized, existing and in good

standing under the laws of the state of Illinois. [Defendant] has full power, right and

authority to execute, deliver and perform this Agreement and to perform the

transactions contemplated hereby. This Agreement when executed by [defendant] will

have been fully and validly executed and delivered by [defendant] and will constitute

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legal, valid and binding obligations of [defendant], enforceable in accordance with its

terms. The execution of this Agreement and the consummation of the transactions

contemplated hereby have been duly authorized by all necessary action on behalf of

[defendant]. The execution, delivery and performance by [defendant] of this

Agreement will not constitute a breach or default under, or conflict with any order,

ruling or regulation of any court, tribunal or governmental agency, or any agreement

or other undertaking, to which [defendant] is a party or by which [defendant] is

bound. The signatures on this Agreement are genuine and the signatory has legal

competence and authority to execute the same.”

¶ 31 Article 9 contained miscellaneous provisions, including section 9.7, which was entitled

“Captions” and provided that “[t]he Article, Section and paragraph captions herein are for

convenience of reference only, do not constitute part of this Agreement and shall not be

deemed to limit or otherwise affect any of the provisions hereof.” Additionally, section 9.9

was entitled “Entire Agreement; Assignment,” and provided:

“This Agreement (including any scheduled, exhibits or annexes hereto) (i) constitutes

the entire agreement, and supersedes all other prior agreements, understandings,

representations, and warranties, both written and oral, among the parties with respect

to the subject matter hereof; and (ii) shall not be assignable by operation of law or

otherwise and is not intended to create any obligations to, or rights in respect of, any

persons other than the parties hereto. Notwithstanding the foregoing, this Agreement

shall be binding upon and inure to the benefit of the parties hereto and their respective

permitted heirs, successors and assigns.”

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¶ 32 D. E-mails

¶ 33 Also attached to the complaint were two e-mails. The first was dated March 27, 2013,

and was sent by Sean Mulroney; the e-mail does not state who it was sent to, but the

complaint alleges that it was sent by Mulroney to Gene Kornota. The e-mail provides:

“In response to your text of yesterday I should point out that I have not requested

any documents that we are not permitted to see by law pursuant to the Illinois Limited

Liability Company Act. This is essentially a winding up of our partnership and a

review of the full year of accounting should be welcomed by both parties. We never

certified October and in our review of December we identified several overcharges to

Argent that occurred in every prior month. We have not been provided any

information to show whether or not our credits were correctly applied. Therefore, we

require the documentation I requested to close out the year.

Regarding the anxiety of the restaurant staff, it is driven by comments made by 2

of vertigo’s door staff to one of our managers as well as Lisa O’Leary’s discussion

with the kitchen. I am only suggesting that it will best serve all of us to make an

announcement as soon as possible in order to have a smooth transition. Despite the

fact that this relationship did not work out, we still have a sense of pride for the

product we deliver and in the staff that works for us.

It would be expedient to begin our review immediately. Enjoy your vacation with

your family.”

¶ 34 The second e-mail was dated April 1, 2013, and was sent by Mulroney; again, the e-mail

does not state who it was sent to, but the complaint alleges that it was sent by Mulroney to

Tony Klok. The e-mail provides:

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“I have provided the list of documents we need to review. In an effort to complete

this review quickly and in the spirit of our negotiated agreement we have retained an

accountant [to] review those documents.

I am also concerned about the Agreement. Since both you and Gene have not

been available for the last week or so, the deadlines set forth in the Agreement are no

longer feasible. Understand that this Agreement is supposed to be a way for both

parties to separate amicably.

In holding to the terms of the Restaurant Management Agreement, in order for

you not to renew that Agreement pursuant to Paragraph 2, you were required to

provide notice of non-renewal to us no later than 120 days prior to the expiration of

the term in the manner set forth in paragraph 22. That you did not do. Arguably we

now have an additional 5 year term. Additionally, you owe [plaintiff] the $100K

Management fee as set forth in Paragraph 3. Any Capital Shortfall can only be

addressed according to the terms and procedures as set forth in Paragraph 5,

addressing Additional Contributions. You have also not complied with these

provisions. Therefore, we can assert our continuing management status and demand

payment or we can settle this in the manner first proposed by Gene.

What would you like to do?”

¶ 35 II. Motion to Dismiss

¶ 36 On October 14, 2014, defendant filed a motion to dismiss counts I and III of the second

amended complaint pursuant to section 2-615 of the Code of Civil Procedure (Code) (735

ILCS 5/2-615 (West 2012)). With respect to count I, defendant argued that plaintiff could not

sue under the management agreement because the management agreement had been

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superseded by the separation agreement pursuant to the merger clause in section 9.9 of the

separation agreement. Defendant argued that the separation agreement became effective on

March 25, 2013, and that only plaintiff’s signature was needed in order for the separation

agreement to be binding. Defendant further argued that its furnishing of financial data was

not a condition precedent to either the formation of or plaintiff’s performance under the

separation agreement.

¶ 37 Defendant also argued that count III of the second amended complaint should be

dismissed because plaintiff had failed to plead sufficient facts to state a claim for breach of

fiduciary duty. Defendant further argued that count III should be dismissed because plaintiff

had released such a claim under the separation agreement.

¶ 38 In response, plaintiff claimed that the separation agreement was ineffective because

defendant had not signed it and defendant had not performed the conditions precedent to the

contract’s formation. Plaintiff also argued that defendant had repudiated the separation

agreement when Kornota informed Mulroney that defendant would never pay plaintiff and

when defendant locked plaintiff out of the restaurant. Plaintiff further argued that its claims

for breach of fiduciary duty had not been released because the separation agreement was not

a general release and did not specifically mention claims for breach of fiduciary duty.

¶ 39 III. Trial Court Ruling

¶ 40 On January 15, 2015, the trial court granted defendant’s motion to dismiss counts I and

III of the second amended complaint with prejudice. The court found:

“The [separation agreement] provides it was ‘made effective as of [the] 25th day

of March, 2013.’ [Citation.] Thus, the [separation agreement] appears effective based

upon the established date, along with [plaintiff’s] providing the Court with a fully

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executed copy of the same; the execution of which related back to the prior

established effective date. The [separation agreement] expressly provides that it

‘supersedes all other prior agreements, understanding[s], representations, and

warranties, both written and oral, among the parties with respect to the subject matter

[therein].’ [Citation.] Further, the parties acknowledged the receipt of ‘good and

valuable consideration’ in consideration for the mutual promises contained within the

[separation agreement], at the time of its effectiveness. [Citation.] Thus, per the

language of the [separation agreement] itself, it would appear that both [plaintiff] and

[defendant] were bound to its terms. With respect to the alleged conditions precedent,

which seem to form the substance of Section 2.2 of the [separation agreement],

[section 2.2] appears as obligations to be performed by [defendant] beyond the

execution and effective date of the [separation agreement] itself. In other words, such

conditions were not precedential to the effectiveness of the [separation agreement],

but obligations to be performed by [defendant] arising out of its entering into the

[separation agreement] itself. [Citation.] Whereas [plaintiff] seeks determination of its

purported cancellation of the [separation agreement] on [defendant’s] alleged

repudiation, for the purpose of reviving the [management agreement], it would appear

impossible as the [separation agreement] expressly replaced the [management

agreement], and [defendant’s] actions thereunder may constitute breach under the

[separation agreement], as opposed to repudiation given the [separation agreement’s]

effectiveness. Thus, as it appears the [separation agreement] became effective by

March 25, 2013, such constitutes the termination of the [management agreement], and

[plaintiff’s] waiver of [defendant’s] alleged breach thereunder.”

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¶ 41 With respect to the claim of breach of fiduciary duty, the court found that an action for

breach of fiduciary duty was equitable in nature. The court found that “[t]he [separation

agreement] expressly provides that [plaintiff] released [defendant] from all claims, which by

definition includes equitable actions. [Citation.] Thus, in accordance with established

precedent, and the plain language of the [separation agreement] itself, it would appear that

the parties envisioned the release of any claim related to breach of fiduciary duty.”

Accordingly, the trial court dismissed counts I and III of the second amended complaint,

leaving count II, for breach of the separation agreement, pending.

¶ 42 Plaintiff asked the court to make a Rule 304(a) (Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010))

finding to permit immediate appeal, but that motion was denied. Plaintiff also filed a motion

to reconsider, which was also denied. On March 14, 2016, plaintiff voluntarily dismissed

count II of its second amended complaint, and this appeal followed.

¶ 43 ANALYSIS

¶ 44 On appeal, plaintiff argues that the trial court erred in dismissing count I of the complaint

because the separation agreement was not effective. Plaintiff also argues that the trial court

erred in dismissing count III of the complaint because plaintiff did not release its claim for

breach of fiduciary duty. We consider each argument in turn.

¶ 45 I. Jurisdiction

¶ 46 As an initial matter, we must consider our jurisdiction over the instant appeal. Although

not discussed by either party, as an appellate court, we are required to consider our

jurisdiction, even if the parties do not raise the issue. A.M. Realty Western L.L.C. v. MSMC

Realty, L.L.C., 2016 IL App (1st) 151087, ¶ 67. The question of whether we have jurisdiction

over the instant appeal presents a question of law, which we review de novo. In re Marriage

20 No. 1-16-1048

of Demaret, 2012 IL App (1st) 111916, ¶ 25; In re Marriage of Gutman, 232 Ill. 2d 145, 150

(2008). De novo consideration means we perform the same analysis that a trial judge would

perform. Khan v. BDO Seidman, LLP, 408 Ill. App. 3d 564, 578 (2011).

¶ 47 In the case at bar, the trial court dismissed counts I and III of plaintiff’s complaint,

leaving count II pending; the trial court denied plaintiff’s request for Rule 304 language.

Plaintiff later voluntarily dismissed count II of the complaint without prejudice pursuant to

section 2-1009 of the Code (735 ILCS 5/2-1009 (West 2014)) and filed a notice of appeal.

The question, then, is whether the voluntary dismissal of a complaint without prejudice

constitutes an appealable order with respect to a plaintiff. As our supreme court’s guidance

on this question has changed over the years, we must carefully consider the current state of

the law as to our jurisdiction to consider such an appeal.

¶ 48 Section 2-1009(a) of the Code provides that “[t]he plaintiff may, at any time before trial

or hearing begins, *** dismiss his or her action or any part thereof as to any defendant,

without prejudice, by order filed in the cause.” 735 ILCS 5/2-1009(a) (West 2014). In 1984,

our supreme court found that the voluntary dismissal of a complaint is final and appealable as

to the defendants, because “[t]he defendants’ rights may have been prejudiced by the

plaintiff’s voluntary dismissal, but the defendants have no recourse unless they can appeal.”

Kahle v. John Deere Co., 104 Ill. 2d 302, 306 (1984). However, with respect to plaintiffs, the

supreme court held that “[t]his order cannot be appealed by the plaintiff since he requested

the order, and *** he is protected from prejudice by the statute of limitations which gives

him the absolute right to refile the case within one year of a voluntary dismissal without

prejudice.” Kahle, 104 Ill. 2d at 306.

21 No. 1-16-1048

¶ 49 In 1996, however, the supreme court was presented with a case in which the trial court

had granted a motion to dismiss several counts of the plaintiffs’ complaint and the plaintiffs

then voluntarily dismissed the remaining counts and appealed the dismissal of the counts that

had been involuntarily dismissed. 2 Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 329-30

(1996). After the appeal, the plaintiffs refiled a complaint alleging the same counts as in the

original complaint, and the supreme court was asked to determine, inter alia, whether the

voluntary dismissal of several counts of the original complaint barred the refiling of those

counts due to res judicata. Rein, 172 Ill. 2d at 336-37. The supreme court did not address the

propriety of the initial appeal or whether the appellate court in the first case had jurisdiction.

See Hudson v. City of Chicago, 228 Ill. 2d 462, 487-89 (2008) (Kilbride, J., dissenting).

¶ 50 The next year, in Dubina v. Mesirow Realty Development, Inc., 178 Ill. 2d 496, 503

(1997), in another case involving a voluntary dismissal, the supreme court stated:

“The voluntary dismissal terminated the action in its entirety. All pending claims

were dismissed. The order of voluntary dismissal, because it disposed of all matters

pending before the circuit court, rendered all orders which were final in nature, but

which were not previously appealable, immediately final and appealable. It is well

settled that final orders entered in a case become appealable following a voluntary

dismissal. [Citations.]”

In this discussion, the supreme court cited the Rein appellate court’s holding that it had

jurisdiction with approval (Dubina, 178 Ill. 2d at 503) and, later, specifically noted that the

Rein appellate court “determined that it had jurisdiction because the voluntary dismissal

2 We note that the appellate court in that case found that it had jurisdiction to consider the appeal because “the voluntary dismissal of the remaining counts left nothing pending before the trial court.” Rein v. David A. Noyes & Co., 230 Ill. App. 3d 12, 15 (1992). The appellate court did not discuss Kahle in its jurisdictional analysis. 22 No. 1-16-1048

terminated all claims pending in the circuit court” (Dubina, 178 Ill. 2d at 505). The Dubina

court did not distinguish between the situation in Rein, where it was the plaintiffs appealing,

from the situation present in Dubina, where it was the defendant appealing.

¶ 51 In 2008, the supreme court again discussed the relationship between a voluntary

dismissal and res judicata in Hudson, 228 Ill. 2d 462, a decision which heavily relied on the

analysis in Rein. Justice Kilbride filed a lengthy dissent, in which he argued that the supreme

court should take the opportunity “to limit or overrule Rein.” Hudson, 228 Ill. 2d at 484

(Kilbride, J., dissenting). The dissent argued that the appellate court in the first Rein case

“erroneously assumed that it had jurisdiction to hear the initial appeal when there was no

final and appealable judgment in the lawsuit.” Hudson, 228 Ill. 2d at 487 (Kilbride, J.,

dissenting). The dissent stated:

“Applying our supreme court rules to Rein I, there can be no question that the

plaintiffs’ voluntary dismissal of their common law claims did not convert the

involuntary dismissal of the rescission counts into a final and appealable order

because the plaintiffs had the option to refile their voluntarily dismissed claims under

section 2-1009(a) of the Code. *** Since a dismissal under section 2-1009(a) is

without prejudice, section 2-1009(a) protects a plaintiff’s right to refile the voluntarily

dismissed action.

Rein’s conclusion that the plaintiffs’ voluntary dismissal of their common law

claims made the involuntary dismissal of the rescission claims final and appealable is

in direct conflict with other decisions of this court. Prior to Rein, this court

consistently held that entry of a dismissal order cannot be considered final and

appealable by a plaintiff during the time when the refiling option is available under

23 No. 1-16-1048

section 13-217 because a plaintiff has an absolute right to refile the action under

section 13-217. [Citations.]” (Emphases in original.) Hudson, 228 Ill. 2d at 488-89

(Kilbride, J., dissenting).

¶ 52 The dissent noted that the Kahle court made clear that a plaintiff could not appeal from an

order voluntarily dismissing a claim without prejudice because the plaintiff had the right to

refile the case and stated that, “[t]hus, in Rein, this court incorrectly assumed that the

plaintiffs’ appeal in Rein I was proper.” Hudson, 228 Ill. 2d at 489 (Kilbride, J., dissenting).

The dissent argued that the incorrect assumption was further perpetuated in Dubina, where

the court held that the plaintiffs’ voluntary dismissal made all prior orders entered in the

action final and appealable. Hudson, 228 Ill. 2d at 490 (Kilbride, J., dissenting). The dissent

argued that the Dubina court should have relied on Kahle, not Rein, since Rein did not

consider the appealability of the issues, and further argued that the Dubina court relied on

cases that “were based on a misinterpretation of existing precedent and a misreading of

Kahle.” Hudson, 228 Ill. 2d at 490 (Kilbride, J., dissenting). The dissent thus argued that the

supreme court should clarify that a plaintiff’s voluntary dismissal was not the jurisdictional

basis for an appeal but that, instead, precedent “prohibits plaintiffs from taking an appeal

from a voluntary dismissal, but permits defendants to take an appeal from a plaintiff’s

voluntary dismissal upon a showing of prejudice.” Hudson, 228 Ill. 2d at 491 (Kilbride, J.,

dissenting).

¶ 53 The supreme court was most recently presented with a case involving a voluntary

dismissal in 2016, in Richter v. Prairie Farms Dairy, Inc., 2016 IL 119518, a case in which

the plaintiffs voluntarily dismissed their lawsuit and then later sought to refile it. In

considering the defendants’ claim-splitting argument, the supreme court relied on both Rein

24 No. 1-16-1048

and Hudson, stating “[a] voluntary dismissal pursuant to section 2-1009 terminates the entire

action and renders immediately appealable all final orders entered therein that were not

previously appealable.” Richter, 2016 IL 119518, ¶ 39. Thus, despite the Hudson dissent’s

urging, the current state of the law appears to be that a voluntary dismissal is appealable,

regardless of whether the appeal is filed by the plaintiff or the defendant.

¶ 54 In the case at bar, the trial court’s order granting the motion to dismiss was a final order.

Once plaintiff voluntarily dismissed the remaining count of the complaint, that order became

appealable. Accordingly, based on the current state of the law, we have jurisdiction to

consider the instant appeal.

¶ 55 II. Count I

¶ 56 We first consider plaintiff’s argument concerning the dismissal of count I of its

complaint. Both counts of the complaint were dismissed under section 2-615 of the Code. A

motion to dismiss under section 2-615 of the Code challenges the legal sufficiency of the

complaint by alleging defects on its face. Young v. Bryco Arms, 213 Ill. 2d 433, 440 (2004);

Wakulich v. Mraz, 203 Ill. 2d 223, 228 (2003). The critical inquiry is whether the allegations

in the complaint are sufficient to state a cause of action upon which relief may be granted.

Wakulich, 203 Ill. 2d at 228. In making this determination, all well-pleaded facts in the

complaint and all reasonable inferences that may be drawn from those facts are taken as true.

Young, 213 Ill. 2d at 441. In addition, we construe the allegations in the complaint in the light

most favorable to the plaintiff. Young, 213 Ill. 2d at 441. We review de novo an order

granting a section 2-615 motion to dismiss. Young, 213 Ill. 2d at 440; Wakulich, 203 Ill. 2d at

228. De novo consideration means we perform the same analysis that a trial judge would

perform. Khan v. BDO Seidman, LLP, 408 Ill. App. 3d 564, 578 (2011). We may affirm on

25 No. 1-16-1048

any basis appearing in the record, whether or not the trial court relied on that basis or its

reasoning was correct. Ray Dancer, Inc. v. DMC Corp., 230 Ill. App. 3d 40, 50 (1992).

¶ 57 On appeal, plaintiff argues that the trial court erred in dismissing count I of the

complaint, which was for breach of the management agreement, because the separation

agreement never became effective and, even if it had, it did not supersede plaintiff’s claims

under the management agreement.

¶ 58 “In construing a contract, the primary objective is to give effect to the intention of the

parties.” Thompson v. Gordon, 241 Ill. 2d 428, 441 (2011) (citing Gallagher v. Lenart, 226

Ill. 2d 208, 232 (2007)). The court will first look to the language of the contract itself to

determine the parties’ intent, and the contract must be construed as a whole, “viewing each

provision in light of the other provisions.” Thompson, 241 Ill. 2d at 441. “The parties’ intent

is not determined by viewing a clause or provision in isolation, or in looking at detached

portions of the contract.” Thompson, 241 Ill. 2d at 441. “If the words in the contract are clear

and unambiguous, they must be given their plain, ordinary and popular meaning.” Thompson,

241 Ill. 2d at 441 (citing Central Illinois Light Co. v. Home Insurance Co., 213 Ill. 2d 141,

153 (2004)). “A court will not interpret a contract in a manner that would nullify or render

provisions meaningless, or in a way that is contrary to the plain and obvious meaning of the

language used. [Citation.] Further, when parties agree to and insert language into a contract,

it is presumed that it was done purposefully, so that the language employed is to be given

effect. [Citation.]” Thompson, 241 Ill. 2d at 442. The interpretation of a contract involves a

question of law that we review de novo. Carr v. Gateway, Inc., 241 Ill. 2d 15, 20 (2011). As

noted, de novo consideration means we perform the same analysis that a trial judge would

perform. Khan, 408 Ill. App. 3d at 578.

26 No. 1-16-1048

¶ 59 In the case at bar, plaintiff first argues that the separation agreement never became

effective because defendant did not sign and deliver the separation agreement prior to

plaintiff’s April 1 withdrawal of its acceptance. We do not find this argument persuasive.

First, as the trial court noted, the separation agreement expressly provided that it “is made

effective as of this 25th day of March, 2013.” “ ‘[I]t is elementary that ordinarily a contract

speaks from the day of its date, regardless of when it was executed and delivered.’ ”

Janowiak v. Tiesi, 402 Ill. App. 3d 997, 1003 (2010) (quoting Monahan v. Fidelity Life

Insurance Co., 148 Ill. App. 171, 174 (1909), aff’d, 242 Ill. 488 (1909)); see also Asset

Recovery Contracting, LLC v. Walsh Construction Co. of Illinois, 2012 IL App (1st) 101226,

¶ 62. “[T]he date on the contract is ordinarily the effective date, and where the contract is

executed later, its contractual terms relate back and are effective from the date of the contract

if such coverage is clear from the face of the contract ***.” Asset Recovery Contracting,

2012 IL App (1st) 101226, ¶ 63. Thus, plaintiff’s argument that the trial court “ignor[ed]”

plaintiff’s allegation that the executed separation agreement was not delivered to plaintiff

until April 2 is without merit because, by its terms, the separation agreement was effective on

March 25, 2013, regardless of when it was executed.

¶ 60 Furthermore, article 5 of the separation agreement provided that “[t]his Agreement when

executed by [defendant] will have been fully and validly executed and delivered by

[defendant] and will constitute legal, valid and binding obligations of [defendant],

enforceable in accordance with its terms.” Thus, under the terms of the separation agreement,

delivery of the agreement occurred at the time of execution, not at the time that plaintiff

actually received the agreement, as plaintiff argues on appeal. Plaintiff’s complaint does not

allege when the separation agreement was executed by defendant. Accordingly, we cannot

27 No. 1-16-1048

accept its claim that it revoked its acceptance of the separation agreement prior to its

becoming effective.

¶ 61 Additionally, we find no error in the trial court’s conclusion that plaintiff was bound to

the terms of the separation agreement. In article 4 of the separation agreement, plaintiff

represented and warranted to defendant that “[t]his Agreement when executed by [plaintiff],

Julie Darling and Sean Mulroney, will have been fully and validly executed and delivered by

them and will constitute legal, valid and binding obligations of [plaintiff], enforceable in

accordance with its terms.” Thus, at the time that plaintiff executed the separation agreement,

it became bound by its terms. We also note that in its complaint, plaintiff alleges that the

parties negotiated and “agreed in principle” to the separation agreement prior to its execution.

“ ‘It is well settled that a party named in a contract may, by his acts and conduct, indicate his

assent to its terms and become bound by its provisions even though he has not signed it.’ ”

Asset Recovery Contracting, 2012 IL App (1st) 101226, ¶ 64 (quoting Landmark Properties,

Inc. v. Architects International-Chicago, 172 Ill. App. 3d 379, 383 (1988)). This allegation

undermines plaintiff’s argument on appeal that there was no enforceable contract.

¶ 62 However, the fact that the separation agreement was effective does not automatically

mean that plaintiff was not entitled to file suit for breach of the management agreement. The

trial court found that, pursuant to section 9.9, the separation agreement “expressly replaced

the [management agreement], and *** as it appears the [separation agreement] became

effective by March 25, 2013, such constitutes the termination of the [management

agreement], and [plaintiff’s] waiver of [defendant’s] alleged breach thereunder.” As noted,

section 9.9 was entitled “Entire Agreement; Assignment,” and provided, in relevant part:

28 No. 1-16-1048

“This Agreement (including any scheduled, exhibits or annexes hereto) (i) constitutes

the entire agreement, and supersedes all other prior agreements, understandings,

representations, and warranties, both written and oral, among the parties with respect

to the subject matter hereof ***.”

On appeal, plaintiff argues that this language does not support the trial court’s finding that

the entire management agreement was replaced by the separation agreement such that

plaintiff is unable to file suit for earlier breaches of the management agreement. We agree.

¶ 63 By its express terms, section 9.9 supersedes all prior agreements among the parties “with

respect to the subject matter hereof.” The separation agreement indicated that the purpose of

the agreement was for plaintiff to resign as manager of the restaurant and member of the

LLC, and for defendant to redeem plaintiff’s interest in the LLC. In other words, the subject

matter of the separation agreement was the transfer of plaintiff’s interest in the restaurant and

the LLC to defendant. By contrast, the management agreement was a more comprehensive

document, governing the operation of the restaurant and the parties’ duties thereunder. Of

course, once the separation agreement took effect, the provisions of the management

agreement would no longer be operative, as plaintiff would no longer be operating or

managing the restaurant. However, there is nothing in the separation agreement that indicates

that plaintiff would lose the ability to seek recourse for earlier breaches of the management

agreement. For instance, the complaint alleges that plaintiff was never paid its management

fee. Nothing in the separation agreement indicates that plaintiff has somehow lost its ability

to file suit for that breach, especially not a clause that simply states that the separation

agreement governs the transfer of the business between plaintiff and defendant. The

29 No. 1-16-1048

separation agreement was a new agreement that governed the parties going forward; it did

not release the parties’ prior obligations.

¶ 64 We also note that the merger clause in the separation agreement is drafted more narrowly

than the merger clause in Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457, 466

(1999), a case relied on by defendant. The merger clause there provided that the “ ‘[c]ontract

represents the entire and integrated agreement between the parties hereto and supersedes all

prior negotiations, representations, or agreements, either written or oral.’ ” Air Safety, 185 Ill.

2d at 460. By contrast, the merger clause in section 9.9 only provided that “[t]his Agreement

(including any scheduled, exhibits or annexes hereto) (i) constitutes the entire agreement, and

supersedes all other prior agreements, understandings, representations, and warranties, both

written and oral, among the parties with respect to the subject matter hereof ***.” (Emphasis

added.) Thus, the scope of the instant merger clause is more narrowly drawn. Had the parties

intended for the separation agreement to entirely replace the management agreement, they

could have easily drafted section 9.9 more broadly. Instead, the express terms of the merger

clause indicate that the separation agreement replaces only the portions of any prior

agreements related to the subject matter of the separation agreement, namely, the transfer of

plaintiff’s interest in the restaurant and the LLC to defendant. “[W]hen parties agree to and

insert language into a contract, it is presumed that it was done purposefully, so that the

language employed is to be given effect.” Thompson, 241 Ill. 2d at 442. Here, the parties

chose to insert language narrowing the scope of the merger clause, and we will not read the

separation agreement in such a way as to render that language meaningless. See Thompson,

241 Ill. 2d at 442 (“A court will not interpret a contract in a manner that would nullify or

render provisions meaningless, or in a way that is contrary to the plain and obvious meaning

30 No. 1-16-1048

of the language used.”). Accordingly, while the separation agreement became effective

March 25, 2013, it superseded only those portions of the management agreement related to

the subject of the termination of the management agreement. Plaintiff is still able to state a

claim for prior breaches of the management agreement unrelated to the management

agreement’s termination and, consequently, the trial court erred in dismissing count I of

plaintiff’s complaint.

¶ 65 III. Count III

¶ 66 Plaintiff also argues that the trial court erred in dismissing count III of its complaint, for

breach of fiduciary duty, based on its finding that plaintiff had released such claims under the

separation agreement. The trial court found that “[t]he [separation agreement] expressly

provides that [plaintiff] released [defendant] from all claims, which by definition includes

equitable actions. [Citation.] Thus, in accordance with established precedent, and the plain

language of the [separation agreement] itself, it would appear that the parties envisioned the

release of any claim related to breach of fiduciary duty.” However, we agree with plaintiff

that the trial court and defendants read provisions into the separation agreement that are

simply not present.

¶ 67 A release “ ‘is the abandonment of a claim to the person against whom the claim

exists.’ ” Thornwood, Inc. v. Jenner & Block, 344 Ill. App. 3d 15, 21 (2003) (quoting Hurd v.

Wildman, Harrold, Allen & Dixon, 303 Ill. App. 3d 84, 88 (1999)); Fuller Family Holdings,

LLC v. Northern Trust Co., 371 Ill. App. 3d 605, 614 (2007). It is a contract and is therefore

governed by contract law. Farm Credit Bank of St. Louis v. Whitlock, 144 Ill. 2d 440, 447

(1991) (citing Polo National Bank v. Lester, 183 Ill. App. 3d 411, 414 (1989)). “The rights of

the parties are limited to the terms expressed in the agreement.” International Insurance Co.

31 No. 1-16-1048

v. Sargent & Lundy, 242 Ill. App. 3d 614, 622 (1993) (citing Murphy v. S-M Delaware, Inc.,

95 Ill. App. 3d 562, 565 (1981)). “Where a release is clear and explicit, the court must

enforce it as written.” International Insurance Co., 242 Ill. App. 3d at 623 (citing

Continental Illinois National Bank & Trust Co. v. Sax, 199 Ill. App. 3d 685, 693 (1990)).

However, “ ‘[r]eleases are strictly construed against the benefitting party and must spell out

the intention of the parties with great particularity.’ ” Construction Systems, Inc. v.

FagelHaber, LLC, 2015 IL App (1st) 141700, ¶ 25 (quoting Fuller Family Holdings, 371 Ill.

App. 3d at 614).

¶ 68 In the case at bar, there is simply no release of any claims between the parties contained

in the separation agreement. The provisions pointed to by the trial court, and by defendant on

appeal, may reference releases, but they are not releases themselves, and such releases are

not actually inserted anywhere into the separation agreement itself. For instance, defendant

cites section 2.2 of the separation agreement, which provides in paragraph 2.2(a) that “[i]n

consideration of the sale to [defendant] by [plaintiff] of the Redeemed Interest and the other

terms and conditions hereof, including the release and restrictive covenants, [defendant shall]

deliver to [plaintiff] a separation fee as calculated by the formula set below (hereinafter the

‘Purchase Price’).” There is certainly a release referenced by the provision, but there can be

no argument that this provision itself constitutes a release. Similarly, the recitals section of

the separation agreement provides that “[defendant] is willing to redeem [plaintiff’s] Interest,

as partial consideration for the releases and agreements set forth herein.” Again, while this

recital clearly references “releases,” it is certainly not a release itself.

¶ 69 Defendant claims that the release itself is contained in section 3.2 of the separation

agreement. Article 3 was entitled “Resignation and Release” and provided, in full:

32 No. 1-16-1048

“3.1 Resignation. [Plaintiff] hereby resigns from its positions as a manager,

director or officer of the Argent Restaurant LLC, effective upon Separation of this

3.2 Claims, Demands and Causes of Action. As used in this Agreement, ‘claims,’

‘demands,’ and ‘causes of action’ include, but are not limited to, claims based on

contract, whether express or implied, fraud, stock fraud, defamation, wrongful

termination, estoppel, equity, tort, retaliation, intellectual property, personal injury,

spoliation of evidence, emotional distress, public policy, wage and hour law, statute

or common law, claims for severance pay, claims related to stock options and/or

fringe benefits, claims for attorneys’ fees, vacation pay, debts, accounts,

compensatory damages, punitive or exemplary damages, liquidated damages, and any

and all claims arising under any federal, state, or local statute, law or ordinance

prohibiting discrimination on account of race, color, sex, age, religion, sexual

orientation, disability or national origin, including but not limited to, the Age

Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 as

amended, the Americans with Disabilities Act, the Family and Medical Leave Act,

the Employee Retirement Income Security Act[,] the Illinois Human Rights Act[,]

and claims for compensatory damages, punitive damages, and/or liquidated

¶ 70 The fatal flaw to defendant’s argument is that section 3.2 is merely a definitional section.

It does nothing itself. This can be seen by the first part of the provision: “As used in this

Agreement, ‘claims,’ ‘demands,’ and ‘causes of action’ include, but are not limited to ***[.]”

The list of types of actions following that introductory phrase are merely items that are

33 No. 1-16-1048

included in the terms “claims,” “demands,” and “causes of action.” While the article is

entitled “Resignation and Release,” we cannot find that calling the article a “[r]elease”

transforms the contents of the article into a release. This is especially true where section 9.7

of the separation agreement, which was entitled “Captions,” instructs that “[t]he Article,

Section and paragraph captions herein are for convenience of reference only, do not

constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of

the provisions hereof.” See BMO Harris Bank National Ass’n v. LaRosa, 2017 IL App (1st)

161159, ¶ 21 (finding that “[w]e cannot ascribe intent through the title of the section” when

interpreting a statute).

¶ 71 Defendant argues that “[t]here is no question that the parties intended for the Separation

Agreement to release any claims that [plaintiff] could assert against [defendant] including

any claims for breach of fiduciary duty.” However, this assertion is not supported by any

language in the separation agreement itself. Defendant also does not explain how, in the

absence of express language, such a release should be interpreted. Releases can be general or

specific, and the scope of releases is a subject of frequent litigation. It is impossible to

interpret a release without any express language present.

¶ 72 “The rights of the parties are limited to the terms expressed in the agreement.”

International Insurance Co., 242 Ill. App. 3d at 622 (citing Murphy, 95 Ill. App. 3d at 565).

Here, there are simply no terms expressed in the agreement that operate to release any

claims. Furthermore, “ ‘[r]eleases are strictly construed against the benefitting party and must

spell out the intention of the parties with great particularity.’ ” Construction Systems, Inc.,

2015 IL App (1st) 141700, ¶ 25 (quoting Fuller Family Holdings, 371 Ill. App. 3d at 614).

We will not read a release into a contract where one is not expressly provided. See

34 No. 1-16-1048

Clarendon America Insurance Co. v. 69 West Washington Management, LLC, 374 Ill. App.

3d 580, 589 (2007) (“[W]e will not insert language into the agreement that [the parties] could

easily have included.”). Accordingly, the trial court erred in dismissing count III of plaintiff’s

claim on this basis.

¶ 73 However, since we may affirm the trial court’s dismissal on any basis in the record, we

must consider whether plaintiff stated a claim for breach of fiduciary duty. “To state a claim

for breach of fiduciary duty, a plaintiff must allege the existence of a fiduciary duty, a breach

of that duty, and damages proximately caused by the breach.” Covinsky v. Hannah Marine

Corp., 388 Ill. App. 3d 478, 489 (2009) (citing Jaffe Commercial Finance Co. v. Harris, 119

Ill. App. 3d 136, 143 (1983)). Plaintiff’s complaint alleges the existence of a fiduciary duty,

as the complaint alleges that plaintiff and defendant were co-members of the LLC. It is well-

established that members of a limited liability company owe fiduciary duties to other

members, including the duties of loyalty and care. See 805 ILCS 180/15-3 (West 2012).

Plaintiff’s complaint also alleges a breach of fiduciary duty, as it alleges that defendant

commingled funds between the LLC and defendant’s own accounts, diverted funds from the

LLC into defendant’s accounts, and refused to permit plaintiff access to the LLC’s books and

records. Finally, plaintiff’s complaint alleges damages proximately caused by the breach, as

it alleges that defendant’s breaches prevented plaintiff from realizing profit from the

restaurant’s operations, including payment of its management fee and repayment of its

capital contribution. Accordingly, plaintiff’s complaint stated a cause of action for breach of

fiduciary duty, and count III should not have been dismissed.

35 No. 1-16-1048

¶ 74 CONCLUSION

¶ 75 For the reasons set forth above, the trial court erred in dismissing counts I and III of

plaintiff’s second amended complaint under section 2-615 of the Code. The existence of the

separation agreement did not prevent plaintiff from filing suit for earlier breaches of the

management agreement, and the separation agreement did not contain a release of plaintiff’s

breach of fiduciary duty claims.

¶ 76 Reversed.