Donahue v. Demma

2021 IL App (1st) 201279-U

• Court: Appellate Court of Illinois
• Decided: December 23, 2021
• Docket: 1-20-1279
• Status: Unpublished

Opinion

2021 IL App (1st) 201279-U

FIFTH DIVISION December 23, 2021

No. 1-20-1279

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).

IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT

MARK DONAHUE, ) Appeal from the Circuit Court of ) Cook County. Plaintiff-Appellant, ) ) v. ) No. 14 CH 8174 ) ANTHONY DEMMA, MAUREEN DEMMA, ) DOUGLAS KOMEN, JAMES BRICKER, GREEN ) GREASE ENVIRONMENTAL, INC., an Illinois ) corporation, and GREEN GREASE ) ENVIRONMENTAL SERVICES, LLC, an Illinois ) limited liability company, ) Honorable ) Anna Helen Demacopoulos, Defendants-Appellees. ) Judge Presiding.

PRESIDING JUSTICE DELORT delivered the judgment of the court. Justices Cunningham and Connors concurred in the judgment.

ORDER

¶1 Held: The circuit court properly dismissed plaintiff’s amended complaint alleging direct claims of statutory corporate oppression and waste, breach of contract, aiding and abetting, and breach of fiduciary duty, and derivative claims of breach of fiduciary duty and aiding and abetting. Plaintiff failed to present a sufficiently complete record to allow this court to review whether the circuit court abused its discretion when it denied plaintiff’s motion to compel. Affirmed. 1-20-1279

¶2 Plaintiff Mark Donahue sought money damages resulting from an alleged breach of

contract and business relationship involving defendants, Anthony Demma, Maureen Demma,

Douglas Komen, James Bricker, Green Grease Environmental, Inc. (GGE, Inc.), and Green Grease

Environmental Services, LLC (GGE, LLC) (collectively, defendants). The circuit court granted

defendants’ motions to dismiss under sections 2-615 and 2-619(a)(9) of the Illinois Code of Civil

Procedure (Code) (735 ILCS 5/2-615, 2-619(a)(9) (West 2016)). He appeals this ruling and the

court’s order denying his motion to compel the production of documents from defendants. We

affirm.

¶3 BACKGROUND

¶4 On May 13, 2014, Donahue filed a verified complaint for injunctive and other relief against

defendants alleging, among other things, statutory oppression of a shareholder under section

12.56(a)(3) of the Illinois Business Corporation Act of 1983 (Act) (805 ILCS 5/12.56(a)(3) (West

2016)), corporate waste under section 12.56(a)(4) of the Act, breach of contract, breach of

fiduciary duty, and aiding and abetting.

¶5 The complaint was eventually amended, and the amended complaint is the operative

version for purposes of this appeal. The amended complaint alleged a complex mosaic of facts, set

forth in paragraphs 5 through 20 of this order, which we take as true for the purposes of this appeal.

See, e.g., Khan v. Deutsche Bank AG, 2012 IL 112219, ¶ 18. According to the amended complaint,

in late 2011, Anthony Demma approached Donahue about forming a business to obtain used

cooking oil from restaurants and institutions, recycle it, and sell it as a source of clean energy. The

two men had been high school classmates. Anthony obtained the idea from Bricker, another high

school acquaintance, who owned a similar business in Pennsylvania. Anthony “suggested that he

would finance the business if Donahue would take on all other responsibilities to get the company

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started.” Anthony told him that if he “invested his time and effort in starting up the business at a

‘survival level’ salary, Donahue would receive an equity interest in the business as part of his

compensation.”

¶6 Donahue “expressed interest in the project,” and he worked with Anthony and Bricker to

organize the business to initially serve the Chicago metropolitan area. Anthony “also promised

Bricker an equity stake in the new company in exchange for Bricker’s assistance in getting GGE

off the ground. Bricker provided a business model, consulting and [a] software package called

‘Greasr.’ ”

¶7 In early 2012, Anthony “advised Donahue and Bricker that [Anthony] would retain 51%

control of the company, but that 49% would be available for equity ownership by Bricker, Donahue

and others.” Anthony asked Donahue to select a name for the new business and Donahue selected

“Green Grease Environmental.”

¶8 On January 6, 2012, GGE was incorporated as an Illinois corporation. Donahue alleged,

on information and belief, that GGE, Inc. contemporaneously filed an election to be treated as an

“S” corporation with the Internal Revenue Service. In March 2012, Anthony told Donahue that

they would meet with GGE, Inc.’s attorney to discuss a lease, contracts, regulatory requirements,

and the equity structure of the company. Anthony warned him that “formalizing the equity

structure of the company ‘could be cost prohibitive.’ ”

¶9 Donahue alleged that “[i]n lieu of a formal agreement documenting equity ownership for

GGE, [Anthony], who is not a lawyer, sent Donahue and Bricker an email on April 10, 2012,”

proposing the equity structure of the company. A copy of the email delineating GGE, Inc.’s equity

structure is attached to the complaint. It states, in pertinent part:

“Green Grease Environmental is organized to have two share classes.

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Class A: Ownership, voting, tax and liquidation class. 100% owned by Maureen

Demma

Class B: Dividend share class (Inclusive of mergers, buy-outs and IPO)

B Class: Initial Equity Ownership (4/1/2012)

Maureen M Demma 51%

Anthony M Demma 44%

Mark Donahue 1%

James Donahue 1%

John P Mack 1%

Mike Demma 1%

James Bricker 1%

-Equity is to be awarded to the above owners (from Anthony Demma[’]s initial

allotment on the 1st day of January of each year based on previous year[’]s internal

goals.

-In the event that more equity is to be issued (current owners diluted), Maureen

Demma will retain voting control of the company. This may come in the form of a

“B class” or other means yet to be decided.

***

-Transferability: Should any recipient of class B shares wish to transfer them to

another party. The company will have right of first refusal to purchase them back.

The price will be determined as a pro rata of book value. If the transferring party

wishes to object to the valuation, they will bear 50% of the cost of an outside

valuation of shares. Selection of outside valuation will be mutually agreed upon.

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-Each employee (excluding all Demmas) will have the following potential equity

accumulation.

Mark Donahue (total possible 24%)

1/1/2013: Possible allocation of 4%

1/1/2014: Possible allocation of 5%

1/1/2015: Possible allocation of 5%

1/1/2016: Possible allocation of 5%

1/1/2017: Possible allocation of 4%.”

¶ 10 Donahue accepted Anthony’s proposal of equity ownership as partial compensation for

services by proceeding to start up GGE, Inc.’s business. Beginning in January 2012 and continuing

through February 2014, Donahue was GGE, Inc.’s sole full-time employee. Donahue worked 60

to 70 hours per week, on average, during this period. Anthony did not render any significant

services to GGE, Inc., beyond maintaining the company’s checkbook. Anthony was physically

present at GGE, Inc. only twice during a period of two years.

¶ 11 Anthony financed GGE, Inc. through capital contributions of approximately $330,000.

Donahue maintained every aspect of the company’s operations, including finding a location for

the plant, obtaining equipment, researching regulatory requirements, researching competition,

preparing the company’s website and all marketing material, setting up the company’s sales

database and generating a list of leads, as well as organizing the company’s offices, accounts, and

equipment. In addition, Donahue negotiated the company’s contracts.

¶ 12 As a result of Donahue’s efforts, GGE, Inc. was a fully functional used oil recycler by the

end of 2012. Donahue continued to perform all responsibilities relating to permits and licensing,

bookkeeping, regulatory compliance, insurance, maintenance, cleaning, ordering, transport of

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material, sales, and all technology issues, among other tasks. Accordingly, GGE, Inc. became a

profitable business by the end of 2013 and was poised to triple its income in 2014. Anthony

projected the company would have 1,200 accounts by the end of 2015, which would yield a gross

income of $1.2 million.

¶ 13 As of January 1, 2013, Donahue earned 4% equity pursuant to the April 10, 2012 email

authored by Anthony. He also claimed that he earned an additional 5% equity as of January 1,

2014 under Anthony’s equity proposal structure. Donahue alleged that “[a]s of January 1, 2014,

[he] held a 10% equity interest in GGE.”

¶ 14 Also in 2013, Anthony advised Donahue that his trading income had declined and that he

was unable to make any further capital contributions to the business. Anthony knew Komen from

the trading business and Komen had expressed interest in investing in GGE, Inc. Anthony and

Donahue were interested in additional investment to hire more employees and expand GGE, Inc.’s

business. Komen and Anthony agreed that Komen would provide an additional cash investment to

GGE, Inc. Komen and Anthony agreed to form a new limited liability company to take over and

expand GGE, Inc.’s business.

¶ 15 On January 13, 2014, Komen sent Donahue a compensation proposal on behalf of the

successor company, which is attached to the complaint as an exhibit. 1 The email stated, “we need

you on the ground working the sales to build it so we have something for you to manage and

direct.” In describing the position of “Executive Director of Sales,” the email stated that the duties

included: (1) “Continues doing sales”; (2) “Manages Sales People – sets goals/monitors the

process”; (3) “Sales Strategy – where we are selling/what territories/what zones (building

1 The attached email to Donahue is from “Green Grease Chicago,” and does not include a signature. It is unclear from the record who authored this email. 6 1-20-1279

density)”; and (4) “ETC.” The email proposed initial equity at 10% with a three-year forfeiture

clause of 1/3 per year, identifying forfeiture events as quitting and termination for cause, “[b]ut

not for just missing goals alone.” (Emphasis in original.) The email listed vesting dates of June -- 30, 2014, June 30, 2015, and June 30, 2016. The proposal included compensation of $52,000 plus

commission and discretionary bonus. Finally, the email stated as to the 10% equity, “[p]ractically

speaking – you won’t see any cash for the PM – there won’t be any distributions for a couple of

years because it’s all being plowed back into the business for growth.” The email stated that, in

the short term, “more PM isn’t putting any more money in your pocket, long term the 10% PM

will get you what you want.” The email also stated:

“-Options/More equity To Be Discussed (wants clarity what this looks like) (does

not want undefined risk) (wants current equity, higher salary, equity going forward)

when we achieve that mass and you are into an executive position.

- what’s down the road = ideally more satellites/more locations/more opportunities

to invest and be owners in those as well (we didn’t get into this [to] do just 1 in the

first place)

- the goal is that 10% PM should provide you with a steady retirement 6 figure

income stream.” (Emphasis in original.)

¶ 16 The next day, Komen sent another email to Donahue entitled, “Employee Equity Incentive

Agreement To be executed after new LLC is formed[,] funded and closed.” The email, also

attached to the complaint as an exhibit, stated:

“10% PM Vested Immediately—

24 months forfeiture over [three] 8 month increments. Forfeiture occurs by either

Donahue [l]eaving the company or being terminated.

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IE Aug 31[,] 2014 3.33% of PM not-forfeitable

April 31[,] 2015 6.67% of PM not-forfeitable

December 31[,] 2015 10% of PM not-forfeitable

Donahue will sign the general employment agreement that everyone else will sign.

Further:

If on or before Jan 1[,] 2016 Donahue is promoted into an Executive Position, 10%

more PM will be granted and vested immediately with a 4 year forfeiture clause

under the same outline and provisions as the prior one.

Ie [sic] 4 years 1/4 per annum.” (Emphasis in original.)

¶ 17 Donahue told Anthony and Komen that he would accept the base salary, commissions, and

equity allocation, but not the forfeiture provisions. Anthony and Komen agreed and indicated that

they would have the company’s attorney draft a written agreement for Donahue to sign after he

returned from vacation on January 23.

¶ 18 Also on January 14, 2014, GGE, LLC was formed and registered with the Illinois Secretary

of State. Donahue was not informed of the particulars of the transaction, but believed that GGE,

LLC, in substance, succeeded to GGE, Inc.’s business rights, obligations, assets, and liabilities.

¶ 19 Donahue was ordered to take a vacation between January 15 and January 22, 2014 before

returning to oversee sales in the expanding business. Upon his return to the company’s office, he

met with Anthony and Komen to sign a written agreement. On January 24, 2014, Anthony and

Komen informed him that there would be no written agreement between him and GGE, LLC.

Komen advised him that defendants did not want to enter into a written contract because it would

“ ‘open us up’ ” to a lawsuit from Donahue. Komen further told Donahue that he would have no

equity interest in the new company and that his equity in GGE, Inc. had “ ‘no value,’ ” but if

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Donahue performed well, Komen and Anthony “ ‘might’ ” award him some unspecified equity in

the new company at some point in the future. Further, Komen told Donahue that his survival level

salary would be reduced by 30%. Donahue protested that the terms were not what they had agreed

to prior to his vacation. Komen crossed his arms and told Donohue to “ ‘[t]ake it or leave it.’ ”

¶ 20 In light of the breach of terms to the oral agreement made prior to his vacation, the material

reduction of his salary, and the renunciation of his equity ownership, Donahue was effectively

terminated from GGE, Inc. and precluded from earning additional equity as compensation for his

start up efforts. On February 25, 2014, Donahue’s attorneys sought to inspect the books and records

of GGE, Inc. Shortly thereafter, GGE, Inc.’s attorney responded to the request for information by

denying Donahue was ever a shareholder of GGE, Inc.

¶ 21 Donahue had filed an initial verified complaint pleading similar facts. Defendants moved

to dismiss the complaint pursuant to sections 2-606, 2-615, and 2-619 of the Code. 735 ILCS 5/2-

606, 2-615, 2-619 (West 2014).

¶ 22 On November 5, 2014, the circuit court denied defendants’ motion to dismiss. Donahue

then filed a motion to compel on October 15, 2015.

¶ 23 On November 25, 2015, GGE, Inc. filed for Chapter 11 bankruptcy in the United States

Bankruptcy Court for the Northern District of Illinois. 2 The bankruptcy petition listed Donahue as

2 In their response brief, defendants claim that the bankruptcy petition included a sworn statement of financial affairs of GGE, Inc., which stated that, from November 26, 2013 to November 25, 2015, there had been no transfer of the company’s assets to GGE, LLC. Notably, in this statement, “Part 13,” entitled, “Details About the Debtor’s Business or Connections to Any Business,” asks to “[l]ist any business for which the debtor was an owner, partner, member, or otherwise a person in control within 6 years before filing this case.” Defendants responded, “[n]one.” Defendants also responded “no” to whether, “[w]ithin 1 year before the filing of this case, did the debtor have officers, directors, managing members, general partners, members in control of the debtor or shareholders in control of the debtor who no longer hold these positions?” GGE, LLC is not mentioned in the sworn statement. 9 1-20-1279

a GGE, Inc. equity security holder, but described his equity as “not vested” and stated that he had

0% of securities to Maureen’s 100% interest. Donahue is also listed as one of the creditors in the

petition. Maureen signed the Statement of Financial Affairs for Non-Individuals Filing for

bankruptcy under penalty of perjury on behalf of GGE, Inc.

¶ 24 On January 5, 2016, the circuit court entered an order staying the case pending bankruptcy

proceedings. On February 16, 2016, GGE, Inc. filed a notice of removal of the case to the federal

bankruptcy court pursuant to 28 U.S.C. § 1452 and Fed. R. Bankr. P. 9027(c).

¶ 25 On June 13, 2016, Donahue filed a sworn creditor claim in the bankruptcy proceedings.

The claim form requests “Information About the Claim as of the Date the Case was Filed.” The

form contains a section asking, “[h]ow much is the claim?” Donahue responded “$0.00.” As to the

basis of the claim, he stated “[e]quity owed from starting and running Green Grease for over two

years.”

¶ 26 On September 28, 2016, the bankruptcy court entered an order approving GGE, Inc.’s

disclosure statement and confirming the company’s plan of reorganization. The plan provided for

no class of priority claims, five classes of secured claims, two classes of unsecured claims, and

one class of equity holders. As to the class of equity holders, listed as “Class 8 – The equity

interests of members of the L.L.C.,” the court approved that “[t]he equity interests of any and all

members of [GGE, Inc.] shall not be retained,” and that Anthony “shall receive the entire equity

interest in [GGE, Inc.] through a credit of no less than $50,000 against his Class 1 claim.” Although

Anthony acquired the entire equity interest in the reorganized GGE, Inc. in exchange for a credit

bid of $50,000 against his secured claim, under section 8.03 of the confirmation plan, it was subject

to higher or better offers. Indeed, GGE, Inc. was required to conduct an auction for the sale of

equity in the reorganized company at the confirmation hearing, wherein “the offeror shall

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constitute the new Interest Holder(s) in the Reorganized Debtor [GGE, Inc.].” Section 8.05 of the

confirmation plan stated that GGE, Inc. “has no pending objections to claims.” Section 9.16 stated

that “[t]he Plan sets forth the entire agreement and undertakings relating to the subject matter

thereof and supersedes all prior discussions and documents.” Finally, section 9.17 of the plan stated

that “[t]o the extent the Confirmation Order or the Plan is inconsistent with the Disclosure

Statement or any agreement entered into between the Debtor and any third party, unless otherwise

expressly provided in the Plan or the Confirmation Order, the Plan controls over the Disclosure

Statement and any such agreement, and the Confirmation Order *** shall be construed together

and consistent with the terms of the Plan.”

¶ 27 In short, Donahue filed no objection to the confirmation plan and never contested

Maureen’s claim of 100% equity ownership. The bankruptcy court then confirmed the information

in the disclosure statement by entering the order confirming GGE, Inc.’s reorganization plan. The

record contains no evidence that Donahue attempted to make an offer for equity in the reorganized

company in the context of the bankruptcy court proceedings.

¶ 28 On September 1, 2017, Donahue filed a motion in the bankruptcy court to amend his

complaint and remove the case back to the circuit court of Cook County. He proposed to amend

his complaint to (1) eliminate claims against GGE, Inc.; (2) add additional claims against the

individual defendants not impacting GGE, Inc.; and (3) acknowledge that any recovery Donahue

obtains nominally on behalf of GGE, Inc. against the individual defendants would be distributed

through GGE, Inc.’s bankruptcy plan. At the hearing on the motion, the bankruptcy court did not

raise the issue of whether Donahue had a Class 8 claim against GGE, Inc., only stating that “I can

see why you might not want to dismiss [your state claims], for fear of putting yourself in a situation

where you’ve lost your claims that might be derivative.” The bankruptcy court entered an order on

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September 12, 2015, granting Donahue leave to file an amended complaint and remanding the

proceedings back to the circuit court of Cook County.

¶ 29 On November 14, 2017, Donahue filed his amended verified complaint, pleading

essentially the same facts as the initial complaint. In addition, he alleged that Anthony and Komen

breached obligations that otherwise targeted his equity interest in GGE, Inc. Donahue requested

that any award in his favor and against defendants “should be ordered paid by defendants directly

to [him] because defendants should not benefit from their own misconduct by sharing in the award

derivatively, and because they would otherwise control their own payment [since] they seized

control of the company.”

¶ 30 Count I of the amended complaint alleges direct claims of statutory oppression and

corporate waste against Anthony and Komen, asserting that Donahue was squeezed out of both

GGE businesses.

¶ 31 Count II of the amended complaint alleges breach of contract claims against Anthony. This

count is pled in the alternative, if the court does not find Donahue acquired an ownership interest

in GGE, LLC. In support of this claim, Donahue alleged that, “[i]n late 2011 and early 2012,

Donahue and [Anthony] discussed Donahue’s acquisition of a minority interest in GGE, Inc. and

GGE, LLC.” Anthony offered escalating amounts of equity interest for each year, totaling 24%.

Donahue “accepted the proposal and proceeded to devote all his time and energy into starting up

and running GGE, Inc,” and “satisfactorily performed all his obligations under the agreement.”

¶ 32 In count III, Donahue asserts breach of fiduciary duty against Anthony, claiming that

Anthony owed him and GGE, Inc. a “statutory and common law fiduciary duty of loyalty *** to

refrain from acting in a reckless or intentionally harmful manner, refraining from engaging in

grossly negligent or reckless conduct, or intentional misconduct in GGE, Inc.’s business.”

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Donahue alleged that he is entitled to bring a direct as well as derivative claim because defendants

caused him individual harm, and otherwise knowingly targeted his interest in GGE, Inc., including

the exclusion of his managerial, membership, and financial rights, reducing his share of a buyout,

and otherwise eliminating his employment position. He further alleged that he had been personally

harmed more significantly than any other member because he suffered expulsion from the

company, loss of the value of his equity interest, and loss of use of profits and funds of the

company. The count alleges that Anthony personally reaped the benefits of Donahue’s interests in

connection with the formation of GGE, LLC.

¶ 33 Count IV seeks recovery from Anthony for a breach of fiduciary duty to manage GGE, Inc.

fairly and in good faith, per the reasonable expectations of the shareholders, without oppression,

and without wasting assets under sections 12.56(a)(3), (a)(4), and 12.56(d) of the Act. It alleges

that Anthony breached the Act by targeting Donahue’s employment and equity interests, steering

GGE, Inc.’s assets and opportunities elsewhere, and otherwise eliminating any possibility of

Donahue’s benefitting from his investment.

¶ 34 Count V alleges a direct claim of aiding and abetting against Komen, claiming that Komen

had knowledge of: (1) Anthony’s fiduciary obligations toward Donahue; (2) Anthony’s agreement

with Donahue to allot equity interest in GGE, Inc. to Donahue; and (3) Anthony’s intentions to

steer GGE, Inc. assets, profits, accounts, and opportunities elsewhere, including to GGE, LLC.

The count further alleges that Komen personally benefitted by usurping his interests in GGE, Inc.

without accounting or paying for the same, and that Komen’s aiding and abetting was carried out

in a willful and intentional manner, in reckless disregard to his rights.

¶ 35 Count VI alleges a derivative claim against Anthony for a breach of fiduciary duty.

Donahue claims that, under section 7.80 of the Act, as a former shareholder, he may bring a

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derivative claim and that he retains standing “when the defendants eliminated [a] shareholder’s

interest as a means to oppress that shareholder and to target that shareholder’s standing to bring a

derivative claim.”

¶ 36 Count VII is a derivative claim against Komen for aiding and abetting. This count seeks

punitive damages, derivative damages, and disgorgement of all compensation and benefits

Anthony and Komen received while breaching their fiduciary duties.

¶ 37 On November 30, 2017, Anthony and Maureen Demma (collectively, the Demma

defendants), filed a motion to dismiss pursuant to Code sections 2-606, 2-615, and 2-619.

Generally speaking, the motion argued that the bankruptcy confirmation plan barred Donahue’s

claims in several ways. They noted that Donahue’s attorney participated in the bankruptcy

proceedings throughout and attended several of the hearings and the meeting of the creditors of

GGE, Inc. Donahue filed a claim in the bankruptcy case, but did not vote on the confirmation plan,

nor did he object to the approval of the disclosure statement or confirmation plan. Instead, he filed

his amended complaint to collaterally attack the Demma defendants and Komen.

¶ 38 In the section 2-615 portion of their motion, the Demma defendants primarily argued that

much of the amended complaint was premised upon an event that never occurred, namely, the

transfer of GGE, Inc. assets to GGE, LLC. They asserted that GGE, LLC never operated and that

all the assets of GGE, Inc., other than those foreclosed upon by Anthony as a secured lender to

GGE, Inc. and subsequently leased back after the confirmation plan was entered, remain assets of

GGE, Inc. The Demma defendants attached an exhibit to their motion, showing that GGE, LLC

was involuntarily dissolved on July 10, 2015. The statement of financial affairs included as part of

the bankruptcy petition filing indicated no transfer of assets from GGE, Inc. to GGE, LLC during

the period in question. The Demma defendants argued that, although Donahue claimed an illegal

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transfer of assets, he did not plead facts which reasonably support this inference and his assumption

is contradicted by the bankruptcy court filings, subject to judicial notice. The Demma defendants

also noted that the bankruptcy court’s order confirming the plan extinguished any and all prior

equity interests in GGE, Inc. and replaced them with a new equity interested vested in Anthony.

¶ 39 The Demma defendants also argued in the section 2-615 portion of their motion that the

amended complaint was insufficiently pled because it failed to establish damages, asserting that

Donahue’s claim of equity was extinguished following confirmation of the bankruptcy plan. In

addition, they contended Donahue failed to sufficiently plead consideration in his breach of

contract claim. The amended complaint merely alleged that, after Anthony authored the work

proposal and Donahue accepted it, he proceeded to “devote all his time and energy in starting up

and running GGE, Inc.” The Demma defendants contend that this action was consideration to

GGE, Inc. and not to Anthony. Without consideration from Donahue to Anthony, the Demma

defendants claimed that the parties did not enter into an enforceable contract, requiring dismissal

of the amended complaint.

¶ 40 Finally, the Demma defendants argued in the section 2-615 portion of the motion that

Donahue’s derivative claims were extinguished by operation of law once the bankruptcy court

confirmed the plan. Citing 11 U.S.C. § 541(a)(1), they contended that any derivative actions as of

the commencement of the bankruptcy case became part of the GGE, Inc. bankruptcy estate,

including “ ‘all equitable interests of the debtor [GGE, Inc.] in property.’ ” Although derivative

actions were pursuable during the pendency of the bankruptcy proceedings, Donahue took no

action before confirmation. Under 11 U.S.C. § 1141(b), the confirmation order vested “ ‘all of the

property of the estate in the debtor,’ ” which takes the property “ ‘free and clear of all claims and

interests of creditors, equity security holders, and of general partners in the debtor,’ ” pursuant to

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11 U.S.C. § 1141(c). In short, the Demma defendants argued that Donahue made no objection in

the bankruptcy court and that court extinguished the derivative rights which he now seeks to assert.

¶ 41 In the section 2-606 portion of the motion, the Demma defendants argued that Donahue

premised his equity interest claim based on an alleged written proposal authored by Anthony on

April 10, 2012, which was not attached as a written instrument to the amended complaint.

¶ 42 In the section 2-619 portion of the motion, the Demma defendants argued that the amended

complaint was barred by certain affirmative defenses. First, they argued that Donahue lacked

standing to bring the derivative claims, again, because the bankruptcy court extinguished any

interest he had when it confirmed the plan, which provided that Anthony would purchase the equity

in the reorganized company through a new value contribution. Anthony’s purchase was subject to

higher and better offers through an auction, but no one made an offer. The Demma defendants

argued that Donahue had ample opportunity to protect his alleged interest and acquire the entire

company, but failed to submit a bid. Nor did he object to the confirmation plan. Instead, he filed a

claim in the GGE, Inc. bankruptcy proceedings for $0.00. Further, the confirmation plan became

unappealable 180 days after entry of the order, a deadline which had passed on March 27, 2017

under 11 U.S.C. § 1144. They also argued that, even if the bankruptcy court had not extinguished

his equity interest, he was barred from maintaining his derivative claims because of his conflict of

interest with other shareholders.

¶ 43 Finally, the Demma defendants argued in the section 2-619 portion of the motion that the

amended complaint was barred by the statute of frauds. 735 ILCS 5/2-619(a)(7) (West 2016).

Noting that Donahue did not attach a written agreement to the amended complaint, the motion

argued that any such agreement was required to be in writing because it could not be performed

within one year. The alleged “offer” was made by early 2012 and proposed a stock grant on January

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1, 2013, with “ ‘additional interests to be earned as of January 1 of each calendar year thereafter,

up to a total of 24%.’ ” Thus, the agreement was subject to the statute of frauds and unenforceable.

¶ 44 On December 4, 2017, Komen also filed a combined motion to dismiss pursuant to Code

section 2-619.1. Komen argued that counts I, V, and VII of the amended complaint should be

dismissed because they were barred by the statute of frauds. Although labeled as a cause for

dismissal under section 2-615 in his motion, this actually is a basis for dismissal under section 2-

619(a)(7) of the Code. 735 ILCS 5/2-619(a)(7) (West 2016) (providing for involuntary dismissal

based on the defense that “the claim asserted is unenforceable under the provisions of the Statute

of Frauds”). Komen contended that Donahue did not attach any written agreement demonstrating

his claim for equity ownership of GGE, Inc. The informal equity ownership accrual as alleged was

impossible to perform fully within one year and, therefore, violated the statute of frauds. Komen

also contended that Donahue’s alleged derivative claims were extinguished in bankruptcy. In

addition, Komen argued that Donahue lacked recoverable damages since any equity he might have

claimed has been extinguished.

¶ 45 Further, Komen argued that he could not have aided and abetted a breach of fiduciary duty

allegedly committed by Anthony because he was unaware of Donahue’s claim of equity in GGE,

Inc. An aiding and abetting claim requires the defendant to be regularly aware of his role as part

of the overall tortious activity and must knowingly and substantially assist the principal in the

violation. Komen contended he was unaware of any fiduciary or other relationship between

Donahue and GGE, Inc. Komen also argued that he neither had any ownership in nor an officer’s

position with GGE, Inc. and, therefore, had no ability to deny Donahue’s ownership of any equity

in GGE, Inc. Komen attached an affidavit to his motion, attesting to his involvement in the

formation of GGE, LLC and his lack of knowledge of Donohue’s claim of equity in GGE, Inc. We

17 1-20-1279

omit further description of the affidavit, in light of our ultimate disposition of Donohue’s claims

against Komen.

¶ 46 On March 13, 2019, Donahue filed an amended motion to compel documents from

defendants’ joint privilege log. After briefing, the circuit court denied his motion to compel on

December 20, 2019. After reviewing the documents in camera, the court found that Donahue was

not a member of GGE, Inc.’s control group and that the disclosures to Komen and his attorney did

not waive attorney-client privilege.

¶ 47 On August 31, 2020, the circuit court heard argument on the various defendants’ motions

to dismiss and ordered dismissal of the amended verified complaint with prejudice. The court

dismissed counts I through IV under Code section 2-615 and counts V through VII under both

Code sections 2-615 and 2-619(a)(9) “for the reasons stated in open court.”

¶ 48 On September 29, 2020, Donahue moved to reconsider the dismissal order. The circuit

court denied the motion on October 14, 2020, explaining its reasoning in open court but without

issuing an explanatory opinion. He filed a notice of appeal on November 23, 2020, noting therein

that he sought relief from the court orders entered on December 20, 2019, August 31, 2020, and

October 30, 2020.3

¶ 49 On December 7, 2020, Donahue requested preparation of the record on appeal by the clerk

of the circuit court of Cook County. The circuit court entered an agreed order on December 16,

2020 to unseal pleadings for purposes of finalizing the record on appeal.

¶ 50 On December 21, 2020, Donahue filed a motion in the circuit court to approve a

bystander’s report. The proposed bystander’s report contained a description of the proceedings

3 It appears Donahue meant to appeal the October 14, 2020 order denying his motion to reconsider and that the date is a scrivener’s error. 18 1-20-1279

drafted by Donahue’s counsel. Defendants objected to the proposed bystander’s report, arguing,

among other things, that it was “confusing and vague as to what actually transpired before the

Court on the dates at issue and, thus, would be a confusing, vague, and potentially misleading

record of the Court’s proceedings.”

¶ 51 On February 2, 2021, the circuit court approved, over defendants’ objection, its own

bystander’s report. The supplemental record does not include the actual court order allowing the

bystander’s report. It is only referenced in a February 3, 2021 email from the clerk of the circuit

court, stating that the order was signed and file stamped, and that the circuit court judge “initialed

the version of the bystander report she approves.” The email also stated that the circuit court

“considers this order as entered,” but “may not appear in the common law record for a few days.”

The bystander’s report, signed by the circuit court judge and dated February 2, 2021, is the only

material in the record which explains the circuit court’s reasoning. It states as follows:

“On August 31, 2020, the Court heard argument on the defendants’ motions

to dismiss. *** During the hearing, the Court noted that the Bankruptcy Court had

already held that Maureen Demma, not Anthony Demma, was the sole owner of

[GGE, Inc.]. The Court asked Donahue’s counsel if she had any evidence showing

that Anthony Demma, a non-owner, had the authority to issue shares of [GGE,

Inc.]. Counsel responded that she did not have any additional evidence at that time,

outside of what was in the pleading and motion to dismiss response. The Court

dismissed Count I of Donahue’s first amended complaint with prejudice holding

that Donahue could not plead an oppression claim per 805 ILCS 5/12.56(a)(3)

against someone who had no authority to issue shares. The court found that Count

I of the complaint must be dismissed with prejudice because the complaint failed

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to identify anything other than an alleged oral agreement for the issuance of shares

between Donahue and [Anthony] (who did not have authority to issue shares), and

counsel for Donahue made representations that she was not aware of any other facts

that would cure the defects the Court found in the complaint. The Court added that,

if Donahue was suing on an employment contract with the entity, then the entity

needed to be a party to the lawsuit, and [GGE, Inc.’s] Bankruptcy had precluded

that claim. The Court also added that it considered Donahue’s breach of contract

count an employment issue that should have been brought as a wage claim in

Bankruptcy Court against [GGE, Inc.]. The Court dismissed Count II of Donahue’s

first amended complaint with prejudice for the same reasons articulated for

dismissing Count I. In addition, the Court ruled that the oral contract Donahue

alleged violated the statute of frauds. The Court also dismissed Counts III and IV

of Donahue’s first amended complaint for the same reasons as Count I, adding that

the defendants did not owe a fiduciary duty to Donahue. The Court dismissed Count

V of Donahue’s first amended complaint holding that the Demma Defendants did

not owe a fiduciary duty to Donahue. The Court based this finding on the preclusive

impact of [GGE, Inc.’s] bankruptcy submissions and the bankruptcy court’s

findings. The Court dismissed Count VI and VII of Donahue’s first amended

complaint holding that he lacked standing to bring [or] maintain derivative claims

on behalf of the company.”

¶ 52 On March 3, 2021, Donahue filed a motion for a supplemental record in the circuit court,

requesting an order requiring inclusion of the bystander’s report in the record on appeal. The circuit

court granted the motion over defendant Komen’s objection.

20 1-20-1279

¶ 53 On March 29, 2021, Donahue moved for leave to file a supplemental record containing the

court’s bystander’s report in this court. This court granted the motion on April 7, 2021, without

objection from defendants.

¶ 54 ANALYSIS

¶ 55 On appeal, Donahue argues the circuit court erred by granting the motions to dismiss. In

particular, he challenges the court’s holding that the bankruptcy confirmation plan barred his direct

and derivative claims. In addition, he contends that the court erred by denying his motion to compel

the production of GGE, Inc.’s allegedly privileged documents.

¶ 56 Proper Filing of the Record on Appeal

¶ 57 Before addressing the merits in this case, we first consider defendants’ argument that this

appeal should be dismissed in its entirety because of Donahue’s failure to timely file the

bystander’s report.

¶ 58 The defendants’ point is technically correct. Under Supreme Court Rule 323 (Ill. S. Ct. R.

323 (eff. July 1, 2017)), the bystander’s report was due February 15, 2021, but it was not filed until

April 7, 2021. However, we note that this court already allowed the filing of the supplemental

record, without objection by defendants. Therefore, the point is forfeited. Even if we were to strike

the bystander’s report, the lack of a bystander’s report does not impede our review. “An appellant’s

failure to provide a report of proceedings will not bar this court’s review where, as here, the issue

involves a question of law. In re Marriage of Hildebrand, 166 Ill. App. 3d 795, 800 (1988). Indeed,

“failure to present a report of proceedings does not per se require dismissal of the present appeal;

21 1-20-1279

it merely requires affirmance of those issues which depend for resolution of facts not in the record.”

Rosenblatt v. Michigan Avenue National Bank, 70 Ill. App. 3d 1039, 1042 (1979). 4

¶ 59 Standard of Review

¶ 60 Section 2-619.1 of the Code permits a defendant to file a combined motion to dismiss

pursuant to sections 2-615 and 2-619 of that Code. 735 ILCS 5/2-619.1 (West 2016). “A section

2-615 motion to dismiss [citation] challenges the legal sufficiency of a complaint based on defects

apparent on its face.” Marshall v. Burger King Corp., 222 Ill. 2d 422, 429 (2006). “In reviewing

the sufficiency of a complaint, we accept as true all well-pleaded facts and all reasonable inferences

that may be drawn from those facts,” and we “construe the allegations in the complaint in the light

most favorable to the plaintiff.” Id. (citing Ferguson v. City of Chicago, 213 Ill. 2d 94, 96-97

(2004)). Illinois is a fact-pleading jurisdiction, and a plaintiff must allege facts sufficient to bring

a claim within a legally recognized cause of action. Id. at 429-30. However, “a cause of action

should not be dismissed pursuant to section 2-615 unless it is clearly apparent that no set of facts

can be proved that would entitle the plaintiff to recovery.” Id. at 429. We review an order granting

or denying a section 2-615 motion de novo. Id.

¶ 61 We also review denial of a section 2-619 motion to dismiss de novo. DeLuna v. Burciaga,

223 Ill. 2d 49, 59 (2006). Section 2-619(a)(9) allows dismissal if “the claim asserted against

4 Nonetheless, we also note that Donahue failed to comply with Illinois Supreme Court Rule 341(h)(6) in that the statement of facts in his opening brief cites to the appendix instead of to the record on appeal, as required by the rule. See Ill. S. Ct. R. 341(h)(6) (eff. May 25, 2018). In addition, he provided inaccurate citations to the record for the factual propositions he stated. We caution that the rules of procedure for appellate briefs are rules, not mere suggestions, and it is within our discretion to strike a brief and dismiss an appeal for failure to comply with the rules. See Parkway Bank & Trust Co. v. Korzen, 2013 IL App (1st) 130380, ¶ 10. However, when, as here, a brief is adequate in most respects and the deficiencies do not hinder our ability to review the issues at hand, we will not strike it. See Spangenberg v. Verner, 321 Ill. App. 3d 429, 432 (2001) (declining to strike a brief when it complied with the rules in other ways and none of the violations were so flagrant as to hinder or preclude review). 22 1-20-1279

defendant is barred by other affirmative matter.” 735 ILCS 5/2-619(a)(9) (West 2016). When

ruling on a motion to dismiss under section 2-619, a court must accept all well-pleaded facts in the

complaint as true and draw all reasonable inferences from those facts in favor of the nonmoving

party. Coghlan v. Beck, 2013 IL App (1st) 120891, ¶ 24. As a result, a court should not grant a

motion to dismiss unless it is clearly apparent that no set of facts can be proved that would entitle

the plaintiff to recovery. Id.

¶ 62 In this case, although we have the benefit of reviewing the circuit court’s reasoning for

granting defendants’ motions to dismiss in the bystander’s report, we review the judgment, not the

reasoning, of the circuit court and may affirm on any basis in the record. Leonardi v. Loyola

University of Chicago, 168 Ill. 2d 83, 97 (1995); Guinn v. Hoskins Chevrolet, 361 Ill. App. 3d 575,

586 (2005). We now turn to the merits of this case.

¶ 63 Count I – Direct Claim of Statutory Oppression Against Anthony and Komen

¶ 64 Because it is dispositive, we will first address whether Donahue properly pled a cause of

action for statutory oppression and corporate waste under sections 12.56(a)(3) and (a)(4) of the

Act. The critical inquiry in count I is whether the allegations of the complaint, when construed in

a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief

may be granted. Bogenberger v. Pi Kappa Alpha Corp., 2018 IL 120951, ¶ 23. When making this

determination, all well-pleaded facts in the complaint must be taken as true, however, our supreme

court has emphasized that a plaintiff is required to allege sufficient facts “to bring a claim within

a legally recognized cause of action.” Marshall, 222 Ill. 2d at 429-30.

¶ 65 The pertinent sections of 12.56 of the Act provide:

“(a) In an action by a shareholder in a corporation that has no shares listed on a

national securities exchange or regularly traded in a market maintained by one or

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more members of a national or affiliated securities association, the Circuit Court

may order one or more of the remedies listed in subsection (b) if it is established

that:

(3) The directors or those in control of the corporation have acted, are

acting, or will act in a manner that is illegal, oppressive, or fraudulent with respect

to the petitioning shareholder whether in his or her capacity as a shareholder,

director, or officer; or

(4) The corporation assets are being misapplied or wasted.” 805 ILCS

5/12.56(a)(3), (4) (West 2016).

¶ 66 Thus, to state a claim for corporate oppression and waste under sections 12.56(a)(3) and

(a)(4), Donahue was required to allege that: (1) he was a shareholder of GGE, Inc.; (2) the directors

or those in control of the corporation acted in a manner that was illegal, oppressive, or fraudulent

with respect to him; and (3) the directors or those in control of the corporation misapplied or wasted

corporate assets. Count I alleges that Anthony and Komen squeezed him out of both GGE

businesses. It alleged that his employment was terminated, no meeting of shareholders was called,

and he had been “kept in the dark regarding the disposition of GGE, Inc.’s assets.” It also asserted

that he was “denied the ability to inspect books and records of GGE, Inc.,” had not received any

accounting, and had been told that his interest in GGE, Inc. had been rendered worthless. It alleged

that Anthony and Komen “acted in a manner which is illegal, oppressive, and fraudulent” under

section 12.56(a)(3) and that they also “misapplied or wasted GGE, Inc.’s assets, value, profits and

business opportunities” under section 12.56(a)(4).

24 1-20-1279

¶ 67 Section 2.10 of the Act provides that corporations are required to file articles of

incorporation delineating, among other things, a corporate name, the purpose for which the

corporation is organized, the address of the business, and the number of shares of each class the

corporation is authorized to issue. 805 ILCS 5/2.10 (West 2016). As to shares, this section provides

that the articles of incorporation also must include:

“(6) the number and class of shares which the corporation proposes to issue without

further report to the Secretary of State, and the consideration to be received, less

expenses, including commissions, paid or incurred in connection with the issuance

of shares, by the corporation therefor. If shares of more than one class are to be

issues, the consideration of shares of each class shall be separately stated; and

(7) if the shares are divided into classes, the designation of each class and a

statement of the designations, preferences, qualifications, limitations, restrictions,

and special or relative rights with respect to the shares of each class.” Id.

¶ 68 In addition, the articles of incorporation “may” set forth, among other things, “the names

and addresses of the individuals who are to serve as the initial directors,” as well as provisions

“defining, limiting, and regulating the rights, powers and duties of the corporation, its officers,

directors and shareholders.” 805 ILCS 5/2.10 (West 2016).

¶ 69 Section 1.80 of the Act defines a “shareholder” as “one who is a holder of record of shares

in a corporation.” 805 ILCS 5/1.80 (West 2016). The amended complaint describes GGE, Inc. as

an Illinois corporation, and that GGE, Inc. “contemporaneously filed an election to be treated as

an ‘S’ corporation with the Internal Revenue Service.” The amended complaint also describes

Maureen as “reportedly a shareholder” in GGE, Inc., but holding the shares “in name only,” on

behalf of her husband, Anthony. The articles of incorporation apparently are not of record. Perhaps

25 1-20-1279

they could have helped this court understand the corporate structure of GGE, Inc. and, most

importantly for purposes of this case, who had authority to issue shares and whether shares were

issued to anyone other than Maureen.

¶ 70 Instead, Donahue claims in count I that he was a GGE, Inc. shareholder only based on the

April 10, 2012 email proposal authored by Anthony. The amended complaint does not plead that

Anthony held a position in the corporation that authorized him to distribute shares. It does not

plead that Maureen, as the 100% owner of the company as stated in the same email, authorized the

distribution of the Class B dividend class of shares to Donahue or authorized Anthony to distribute

the shares. Instead, the count states: “[i]n lieu of a formal agreement documenting equity

ownership for GGE, Inc., [Anthony], who is not a lawyer, sent Donahue and Bricker an email”

that “proposed” equity ownership in GGE, Inc. and that he “accepted [Anthony’s] proposal of

equity ownership as partial compensation of services by proceeding to start up GGE, Inc.’s

business.” There is no record evidence demonstrating Donahue’s “acceptance” of the terms

provided in the email. And nowhere does the April 10, 2012 email state that Donahue was to be

awarded equity as partial compensation for services. Instead, the email simply states that “[e]quity

is to be awarded to the above owners *** on the 1st day of January of each year based on previous

year[’]s internal goals,” with no explanation of what those goals were or who was required to

achieve them.

¶ 71 Further, the email was not attached to the amended verified complaint as evidence of a

claim founded upon a written instrument, as required by Code section 2-606. 735 ILCS 5/2-606

(West 2016) (“If a claim *** is founded upon a written instrument, a copy thereof, or of so much

of the same is relevant, must be attached to the pleading as an exhibit or recited therein, unless the

pleader attaches to his *** pleading an affidavit stating facts showing that the instrument is not

26 1-20-1279

accessible to him or her”). Failure to comply with section 2-606 is a valid basis for dismissal. See

Sherman v. Ryan, 392 Ill. App. 3d 712, 733 (2009); Popp v. Cash Station, Inc., 244 Ill. App. 3d

87, 100 (1992). Moreover, “[t]he Act requires that a shareholder agreement be ‘in writing.’ ” Elleby

v. Forest Alarm Service, Inc., 2020 IL App. (1st) 191597, ¶ 47 (quoting 805 ILCS 5/7.71(a) (West

2018)).

¶ 72 Donahue therefore failed to allege sufficient facts to show that he was a shareholder in

GGE, Inc. – he simply pled a legal conclusion that he received the initial 1% equity and earned

additional equity each year as a result of his performance. His claim is entirely premised upon an

email authored by a person who may or may not have had the authority to distribute shares, which

email was not attached to his complaint. The record is also devoid of any stock certificate or any

paper evidence demonstrating Donahue was a shareholder in GGE, Inc. A plaintiff is required to

“ ‘plead facts, not conclusions.’ ” Elleby, 2020 IL App (1st) 191597, ¶ 39 (quoting Valiquet v.

First Federal Savings & Loan Ass’n of Chicago, 87 Ill. App. 3d 195, 200 (1979)). The amended

complaint also does not allege an obligation by Anthony to deliver specific equity to Donahue,

any specific length of time for Donahue’s employment, or any conditions which must be satisfied

before he could earn more equity or his employment could be terminated. Nor does it allege any

agreement that GGE, Inc.’s business or affairs would be managed in any particular fashion or

provide for a buy-out of Donohue’s alleged equity in the company. The count also does not allege

that he was guaranteed that his equity interest in the company would ever have any value or how

value could be added over time.

¶ 73 In short, Donahue summarily pled that he was a shareholder in GGE, Inc. without pleading

sufficient facts supporting that conclusion. Our de novo review also has not revealed sufficient

evidentiary support of Donahue’s assertion that he was a shareholder in GGE, Inc. Therefore, as

27 1-20-1279

he did not plead sufficient facts establishing himself as a shareholder, he cannot maintain a cause

of action claiming a statutory violation of corporate oppression and waste under sections

12.56(a)(3) and (a)(4) of the Act. The circuit court properly dismissed count I of the amended

complaint under section 2-615 of the Code.

¶ 74 Even if count I appropriately stated a cause of action under the Act, it was still properly

dismissed pursuant to section 2-619 of the Code because it was barred by the bankruptcy judgment

confirming the reorganization plan. The most plausible factual scenario here, based on the record,

is that Maureen held control of the corporation as sole shareholder. The statement of financial

affairs filed in the bankruptcy court listed Maureen as GGE Inc.’s sole owner and shareholder.

While GGE Inc.’s bankruptcy case proceeded, Donahue was represented by counsel, filed a sworn

creditor claim, and participated in the proceedings. However, Donahue never objected during the

bankruptcy proceedings to Maureen’s status as the sole shareholder or challenged the distribution

of equity in the time period preceding GGE Inc.’s Chapter 11 bankruptcy filing. He also never

objected to GGE Inc.’s disclosure statement and proposed plan of reorganization. When the

bankruptcy court entered an order approving GGE’s disclosure statement and confirming the

reorganization plan on September 28, 2016, it effectively bound the terms of the reorganization

plan under section 1141 of the bankruptcy code, which states:

“Except as provided in subsections (d)(2) and (d)(3) of this section [which are

inapplicable in this case], the provisions of a confirmed plan bind the debtor, any

entity issuing securities under the plan, any entity acquiring property under the plan,

and any creditor, equity security holder, or general partner is impaired under the

plan and whether or not such creditor, equity security holder, or general partner has

accepted the plan.” (Emphasis added.) 11 U.S.C. § 1141.

28 1-20-1279

¶ 75 The confirmation plan also extinguished “[t]he equity interests of any and all members” of

GGE, Inc. Donahue never bid on the equity thereafter even though the confirmation plan required

a “new value auction,” which allowed “for the purchase of equity” in the reorganized GGE, Inc.

¶ 76 Donahue argues that his direct claims against Anthony and Komen in counts I and II are

similar to the claims alleged in Cabrera v. First National Bank of Wheaton, 324 Ill. App. 3d 85

(2001), in which the plaintiff debtors brought a lender-liability action against the defendant lender,

arising from the lender’s decision to set off $430,000 from the debtors’ account and apply those

funds to the outstanding balance owed by the debtors prior to the debtors’ filing of a bankruptcy

petition. The circuit court held that res judicata precluded the plaintiffs from asserting their claim

to recover the set off and the appellate court affirmed, holding “[i]f [the plaintiffs] believed that

[the defendant] had breached the agreement under which it claimed a right to payment, it should

have contested the claim during the bankruptcy proceeding.” (Emphasis added.) Cabrera, 324 Ill.

App. 3d at 98. Therefore, Cabrera does not support the validity of the amended complaint.

¶ 77 Furthermore, Donahue repeatedly argues that section 524(e) of the bankruptcy code “does

not operate to relieve non-debtors of their liabilities,” quoting Gillman v. Continental Airlines, 203

F.3d 203, 211 (3d Cir. 2000). However, the court in Gillman stated that the bankruptcy court

“never specifically addressed the release and permanent injunction of Plaintiffs’ claims,” and

therefore, the order confirming the debtors’ plan of reorganization, releasing and permanently

enjoining the plaintiffs’ claims was not accompanied by any findings that the release was fair to

the plaintiffs and necessary to the debtors’ reorganization plan. Id. at 214. In any event, Donahue

failed to properly plead his claim regardless of the application of 11 U.S.C. § 524(e). Whether the

non-debtors are relieved of their liabilities is merely secondary if he cannot properly plead the

claim from which he seeks relief.

29 1-20-1279

¶ 78 In this case, Donahue is bound by the bankruptcy court’s order confirming the

reorganization plan under 11 U.S.C. § 1141, which confirmed Maureen as the sole shareholder of

GGE, Inc. before the company filed its Chapter 11 bankruptcy and extinguished the equity interests

of any and all members upon its emergence from bankruptcy. We affirm the dismissal of count I

of Donahue’s amended verified complaint on this basis as well.

¶ 79 Count II – Breach of Contract Claim Against Anthony

¶ 80 Donahue next argues that the circuit court erred when it dismissed his breach of contract

claim because it was untimely under the statute of frauds. In his opening brief, he stated that he

“bases his claim for breach of contract on an oral agreement entered into late 2011,” and “not the

April 10, 2012 email.” He continues, “[t]he April 2012 email merely evidences the prior promise

to increase [his] equity shares.” He contends that he provided consideration for the contract by

working for GGE, Inc. on a survival salary. He argues Anthony agreed to provide him equity in

GGE, Inc. if he agreed to work at a survival salary.

¶ 81 The amended complaint states that Count II is “submitted in the alternative, in the event

and to the extent Donahue is found not to have acquired an ownership interest in GGE, LLC.” The

next paragraph of the complaint states that “[i]n late 2011 and early 2012, Donahue and [Anthony]

discussed Donahue’s acquisition of a minority interest in GGE, Inc. and GGE, LLC.” Notably, and

contrary to the argument in Donahue’s brief, the complaint also alleges that Komen’s participation

and the formation of GGE, LLC did not occur until sometime in 2013. Nevertheless, Donahue also

pled in count II that Anthony offered him “an immediate one percent interest in the company with

an additional 4% to be earned as of January 1, 2013.” Donahue next pled that Anthony “further

offered Donahue additional interests to be earned as of January 1 of each calendar year thereafter,

30 1-20-1279

up to a total of 24%.” The complaint then stated that Donahue “accepted the proposal and

proceeded to devote all his time and energy in starting up and running GGE, Inc.”

¶ 82 To state a cause of action for breach of contract, a plaintiff must allege facts establishing

that the parties exchanged an offer, an acceptance, and consideration. Academy Chicago

Publishers v. Cheever, 144 Ill. 2d 24, 29 (1991). In addition, the plaintiff must allege definite and

certain terms of the contract, the plaintiff’s performance of all required contractual conditions, the

defendant’s breach of the terms of the contract, and damages resulting from the breach. Barille v.

Sears Roebuck & Co., 289 Ill. App. 3d 171, 175 (1997). Our supreme court has held that “in order

for a valid contract to be formed, an ‘offer must be so definite as to its material terms or require

such definite terms in the acceptance that the promises and performances to be rendered by each

party are reasonably certain.’ ” Cheever, 144 Ill. 2d at 29 (quoting 1 Williston on Contracts §§ 38-

48 (3d ed. 1957) and 1 Corbin on Contracts, §§ 95-100 (1963)). “The terms must be clear, certain,

and free from ambiguity and doubt.” Morey v. Hoffman, 12 Ill. 2d 125, 130 (1957). Further,

“[a]lthough the parties may have had and manifested the intent to make a contract, if the content

of their agreement is unduly certain and indefinite no contract is formed.” Cheever, 144 Ill. 2d at

29 (citing 1 Williston § 37 and 1 Corbin § 95).

¶ 83 In this case, Donahue has alleged the formation of an oral contract, but the allegations he

has set forth in the amended complaint lack the definite and essential terms required for the

formation of an enforceable contract. A contract “ ‘is sufficiently definite and certain to be

enforceable if the court is enabled from the terms and provisions thereof, under proper rules of

construction and applicable principles of equity, to ascertain what the parties have agreed to do.’ ”

Id. (quoting Morey, 12 Ill. 2d at 131).

31 1-20-1279

¶ 84 Here, Donahue has pled more conclusions than facts. Numerous terms and conditions of

the alleged oral agreement remain undefined and, thus, unpled. For example, count II lacks any

terms of consideration. Paragraphs 82 through 84 of the amended complaint stated the alleged

offers of increased equity interest from Anthony, but provided no terms whatsoever regarding the

consideration for those terms. Paragraph 85 simply concluded Donahue “accepted the proposal

and proceeded to devote all his time and energy in starting up and running GGE, Inc.,” while

providing absolutely no detail about the conditions of employment and the goals necessary for an

increase in equity interest as Donahue alleged. These omissions raise many questions: When did

the alleged contract commence? What terms were involved to start up and run GGE, Inc., as

Donahue alleges? What was the beginning date of employment and did his employment expire at

a certain date, or was it indefinite? Did Donahue receive a salary and for what amount? What was

the value of the alleged equity? How would the equity be structured? None of these details were

pled in the amended complaint. Moreover, Count II fails to allege Donahue’s performance of all

required contractual conditions, Anthony’s breach of the undefined terms of the contract, and

damages resulting from the breach. Barille, 289 Ill. App. 3d at 175.

¶ 85 In this case, the essential terms are so uncertain and, more significantly, not pled in the

amended complaint, that there is no basis for deciding whether the agreement has been kept or

broken. “It is not the role of the court to rewrite the contract and spell out essential elements not

included therein.” Cheever, 144 Ill. 2d at 31. Because Count II provides no sufficient factual basis

for contract formation under Illinois law, the breach of contract claim fails.

¶ 86 Even if Count II had properly set forth facts describing definite and certain terms of oral

contract formation, breach, and damages, it was properly dismissed because of the operation of the

32 1-20-1279

statute of frauds under section 80 of the Illinois Frauds Act (740 ILCS 80/1 (West 2016)). The

statute provides:

“No action shall be brought *** upon any agreement that is not to be performed

within the space of one year from the making thereof, unless the promise or

agreement upon which action shall be brought, or some memorandum or note

thereof, shall be in writing, and signed by the party to be charged therewith, or some

other person thereunto by him lawfully authorized.” Id.

¶ 87 In short, the statute of frauds requires a writing with an authorized signature for specified

agreements that, by their terms, cannot be performed within one year of their making. Id.; see also

Barnes v. Michalski, 399 Ill. App. 3d 254, 271 (2010). In Barnes, the court stated that the test for

application of the statute of frauds is “whether the contract was capable of being performed within

one year after its formation, not whether the parties contemplated that it would be performed within

that time.” 399 Ill. App. 3d at 271 (citing Robinson v. BDO Seidman, LLP, 367 Ill. App. 3d 366,

370 (2006)).

¶ 88 In this case, paragraph 83 of the amended complaint alleged that Anthony offered Donahue

an immediate one percent interest in the company (although no date of commencement is pled),

with an additional 4% to be earned as of January 1, 2013. Paragraph 84 stated that Anthony “further

offered Donahue additional interests to be earned as of January 1 of each calendar year thereafter,

up to a total of 24%.” (Emphasis added.) Accordingly, as pled, the alleged terms of the oral

agreement could not be performed within one year. Further, as the terms to achieve full

performance of the oral agreement were not pled in the amended complaint, Donahue cannot claim

defendants are estopped from relying on the statute of frauds as an affirmative defense to contract

formation. See, e.g., American College of Surgeons v. Lumbermens Mutual Casualty Co., 142 Ill.

33 1-20-1279

App. 3d 680, 698-99 (1986) (“The rationale of the full performance doctrine is that when one

party, in reasonable reliance on the contract, performs all of its obligations, it would be unfair to

allow the other party to accept the benefits under the contract but to avoid its reciprocal obligations

by asserting the Statute of Frauds.”); Meyer v. Logue, 100 Ill. App. 3d 1039, 1043-44 (1981)

(same). As the alleged agreement between the parties was not in writing, it violated the statute of

frauds. 740 ILCS 80/1 (2016). We affirm the circuit court’s judgment to dismiss the amended

complaint on this basis.

¶ 89 Counts III through VII – Remaining Direct and Derivative Claims

¶ 90 Before we can address the merits of Donahue’s remaining claims in counts III through VII,

we must first determine whether Donahue has standing to allege direct and derivative claims. He

argues that an equity owner like himself may bring both direct and derivative claims if the

gravamen of the claim involves injuries not unique to all the shareholders and if, as here,

defendants allegedly targeted his equity interests. He cites Levy v. Markal, 268 Ill. App. 3d 355

(1994) and Zokoych v. Spalding, 36 Ill. App. 3d 654 (1976) in support of this claim. The plaintiffs

in Levy and Zokoych were shareholders attempting to bring individual and derivative actions for

breaches of fiduciary duties.

¶ 91 “In Illinois, a shareholder may bring a derivative action and an individual claim at the same

time if he has suffered a different injury from his fellow shareholders.” Levy, 268 Ill. App. 3d at

371. “Thus, ‘where the wrongful acts are not only against the corporation but are also violations

of a duty *** owed directly by the wrongdoer to the stockholders,’ a stockholder may sue both

derivatively and individually to obtain redress for these wrongs.” Id. (quoting Zokoych, 36 Ill. App.

3d at 663).

34 1-20-1279

¶ 92 Standing requires that a party have a real interest in the action brought and in its outcome.

In re Estate of Wellman, 174 Ill. 2d 335, 344 (1996). The issue of standing is not as a procedural

technicality, but rather as an aspect or component of justiciability. Bridgestone/Firestone, Inc. v.

Aldridge, 179 Ill. 2d 141, 147 (1997) (citing Wellman, 174 Ill. 2d at 344). “The essence of the

inquiry regarding standing is whether the litigant, either in an individual or representative capacity,

is entitled to have the court decide the merits of a dispute or a particular issue.” Wellman, 174 Ill.

2d at 345.

¶ 93 We previously explained that Donahue failed to properly plead sufficient facts

demonstrating that he was a shareholder in GGE, Inc. The record is devoid of evidence supporting

Donahue’s allegation that he was a shareholder, with the exception of the insufficient April 10,

2012 email in which Anthony, without proper authority or authorization, delineated a proposal for

the equity structure of GGE, Inc. In any event, following the bankruptcy court’s confirmation of

GGE, Inc.’s reorganization plan, to which Donahue never objected as a participant of the

bankruptcy proceedings, any equity interest Donahue allegedly might have held was extinguished.

Accordingly, he has not pled sufficient facts establishing himself as a shareholder, and thus lacks

standing to bring both individual and derivative claims on behalf of GGE, Inc.

¶ 94 Even if Donahue sufficiently pled facts demonstrating he was a shareholder in GGE, Inc.,

as to his individual claims against Anthony and Komen, “ ‘[a] shareholder of a corporation does

not acquire standing to maintain an action in his or her own right, as a shareholder, when the

alleged injury is inflicted upon the corporation and the only injury to the shareholder is the indirect

harm which consists of [sic] the diminution in value of his or her corporate shares resulting from

the impairment of corporate assets.’ ” Hamilton v. Conley, 356 Ill. App. 3d 1048, 1054 (2005)

(quoting 13 Ill. L. & Prac. Corporations § 159, at 400 (2000)).

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¶ 95 Donahue lacked standing to allege the direct and derivative claims asserted in counts III

through VII. We therefore affirm the circuit court’s order dismissing counts III through VII of the

amended complaint, pursuant to section 2-619 of the Code.

¶ 96 Denial of Motion to Compel

¶ 97 Finally, Donahue argues the circuit court erred by denying his motion to compel production

of corporate records and communications with Leonard Komen, who Donahue alleges acted as

counsel for GGE, LLC. He contends there was no reasonable expectation of confidentiality to

support defendants’ claim of attorney-client privilege and that he was entitled to review the

documents as chief operating officer and a shareholder of GGE, Inc. He also contends that if a

party discloses to a third-party a confidential communication, then the communication is no longer

protected by the attorney-client privilege. He points to Komen’s affidavit, in which Komen attested

that after receiving the ownership structure of GGE, Inc. from Anthony, Komen contacted GGE,

Inc.’s attorney and accountant, both of whom confirmed that no employees of GGE, Inc. owned

any of the corporation’s shares. Among other things, Donahue seeks the right to question the

truthfulness of Komen’s affidavit and argues that he is entitled to documents communicated while

he served as one of GGE, Inc.’s officers.

¶ 98 Defendants respond that the circuit court’s dismissal of the entire complaint rendered the

motion to compel moot. They argue that Donahue failed to present a proper record to allow this

court to determine whether the circuit court erred in finding documents subject to the attorney-

client privilege. Finally, defendants contend that the assertion of the attorney-client privilege was

well-founded because Donahue merely made unproven allegations that he fell within the corporate

control group and that those allegations were insufficient to overcome the privilege. Defendants

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contend that Donahue was not within the control group, which was later confirmed by the circuit

court’s in camera review.

¶ 99 As the movant below and now, as the appellant, Donahue had the burden to provide this

court with a complete record to review the circuit court’s ruling, particularly as to whether the

circuit court acted within its discretion by denying the motion to compel. None of the documents

reviewed by the circuit court are included in the record for this court’s review, which counsel for

Donohue confirmed during oral argument before this court. Without an adequate record preserving

the claimed error, we must presume the circuit court had a sufficient factual basis for its holding

and that its order conforms with the law. Webster v. Hartman, 195 Ill. 2d 426, 432 (2001); Foutch

v. O’Bryant, 99 Ill. 2d 389, 392 (1984). “Any doubts which may arise from the incompleteness of

the record will be resolved against the appellant.” Foutch, 99 Ill. 2d at 392.

¶ 100 Accordingly, we cannot review this claimed error to determine whether the circuit court

abused its discretion when it granted defendants’ motion to compel. We therefore affirm the circuit

court’s decision to deny the motion to compel. Further, we note that our affirmance of the circuit

court’s decision to grant defendants’ motions to dismiss renders Donohue’s motion to compel as

moot.

¶ 101 CONCLUSION

¶ 102 Having found that the circuit court correctly dismissed all counts of the amended complaint

with prejudice and did not abuse its discretion in denying the motion to compel, we affirm the

judgment of the circuit court of Cook County.

¶ 103 Affirmed.