FOURTH DIVISION January 20, 2011
No. 1-09-2440
MELISSA S. PIELET, Individually and on Behalf ) Appeal from the I.B.P Limited Partnership and TB Limited ) Circuit Court of Partnership, ) Cook County. ) Plaintiff, ) ) v. ) ) DENNIS J. HIFFMAN, E. THOMAS ) COLLINS, JR., RICHARD E. HULINA, and ) DANIEL G. ANDERSON, ) ) Defendants ) ) (John E. Shaffer, ) ) Third-Party Defendant; ) ) John F. Girsch, Edward Zifkin, Mark Munaretto, ) and Mark Wheeles, Individually and Derivatively ) on Behalf of TB Limited Partnership; and Mark ) Munaretto and William Skrzelowski, Individually ) and Derivatively on Behalf of I.B.P. Limited ) Partnership, ) ) Intervening Plaintiffs-Appellants; ) No. 01 CH 21984 ) Dennis J. Hiffman, John E. Shaffer, E. Thomas ) Honorables Collins, Jr., Daniel G. Anderson, and Richard E. ) David Donnersberger (December 8, Hulina, ) 2005 order) and ) Mary K. Rochford (August 13, 2009 Defendants-Appellees). ) order), ) Judges Presiding.
JUSTICE LAVIN delivered the judgment of the court, with opinion. Presiding Justice Gallagher and Justice Pucinski concurred in the judgment and opinion. 1-09-2440
OPINION
This appeal stems from real estate partnerships that were formed nearly two decades ago
to develop shopping centers in two suburbs largely financed through tax increment financing
(TIF) bonds. This matter was litigated in the Chancery Division of the Circuit Court of Cook
County for more than eight years and appellants-intervenors’ cause of action was dismissed in two
separate orders entered in 2005 and 2009, both times for a lack of standing. On appeal,
appellants contend that both counts of their complaint were improperly dismissed. For the
reasons discussed at length below, we reverse and remand.
I. BACKGROUND
The partnerships in question were formed by various persons who were employed in a
Chicago real estate development firm. Appellants, intervening plaintiffs (intervenors) below,1
were limited partners in two Illinois limited partnerships: I.B.P. Limited Partnership (IBP) and TB
Limited Partnership (TB), of which Dennis J. Hiffman, John E. Shaffer, E. Thomas Collins, Jr.,
Daniel G. Anderson, and Richard E. Hulina (defendants) were the general partners in one or both
of the partnerships. Defendants were principals in HSA Commercial Real Estate, Inc. (HSA), in
the early 1990's, with intervenors then being either employees or contractors of HSA.
The first involved partnership, IBP, was formed by defendants in January 1992 for the
1 The underlying litigation was initially commenced by Melissa S. Pielet, however, she later withdrew. Another individual, Keith Bank, assumed Pielet’s role as party plaintiff for a short time, but also withdrew. Appellants, consisting of Mark Munaretto, William Skrzelowski, John Girsch, Edward Zifkin, and Mark Wheeles, filed a motion to intervene which was granted, and thereby became the intervening-plaintiffs below.
2 1-09-2440
purpose of developing a shopping center in Bedford Park, Illinois. Various employees and
contractors of HSA were offered the opportunity to become limited partners of IBP in exchange
for a nominal capital contribution of $10 per 1% of ownership. Intervenors Mark Munaretto and
William Skrzelowski each became a 0.5% limited partner in this entity. The second partnership,
TB, was formed in May 1993 by Hiffman, Shaffer, Collins and Hulina, for the purposes of
acquiring and developing property in Broadview, Illinois. Again, employees and contractors were
offered the opportunity to buy into the partnership as limited partners for $10 per 1% of
ownership. In July 1993, intervenors John Girsch, Edward Zifkin, and Mark Wheeles each
became 0.5% limited partners, and Munaretto became a 0.75% limited partner.
Simply stated, the two projects undertaken by IBP and TB involved substantial real estate
redevelopment. The general partners planned to utilize TIF bonds issued by the respective
municipalities involved in the projects. TIF bonds are financial instruments issued by
municipalities to assist in the funding of redevelopment projects in designated areas. See 65 ILCS
5/11-74.4 et seq. (West 2008). The principal and interest on TIF bonds are paid from the increase
in real estate taxes, and sales taxes in certain cases, that is anticipated to occur from a successful
redevelopment project. IBP and TB entered into separate redevelopment agreements with the
Villages of Bedford Park and Broadview, and pursuant to the agreements, each village issued
senior lien TIF bonds (Senior Bonds) to the partnerships. Bedford Park issued $10.5 million in
Senior Bonds and Broadview issued $23 million, with William Blair & Company and Dain
Bosworth acting as the respective underwriters.
In addition to the Senior Bonds, the two villages agreed to issue TIF bonds subordinate to
3 1-09-2440
the Senior Bonds. Bedford Park issued “Developer Bonds” with a face value of $7 million and
Broadview issued “Junior Bonds” in the amount of $8 million. Because the Developer and Junior
Bonds were subordinate to the Senior Bonds, principal and interest would only be paid to the
holders in the event that the incremental tax revenues exceeded the amounts required to satisfy all
the principal and interest payments of the Senior Bonds. One of the general partners, E. Thomas
Collins, Jr., stated in a sworn affidavit and a deposition that it was discussed and understood
between the limited and general partners that the subordinate bonds would be taken by the general
partners due to the personal investments they had made in creating the projects. Intervenors, on
the other hand, deny being notified that the general partners would acquire the Junior or
Development Bonds for themselves and the partnership agreements themselves were silent on the
subject.
In any event, the Developer Bonds were issued in June 1992 to IBP, which were then
purchased by the general partners of IBP for $550,000, netting the partners $5,500 per
percentage point of interest. The purchase was disclosed to the limited partners in a June 11,
1992, letter, which also enclosed checks payable in appropriate amounts to each partner. The
purchase price was based on a draft valuation letter by Charles Freeburg of William Blair &
Company. In a separate transaction, the Junior Bonds were issued directly to the general partners
of TB around September 1994. The issuance was treated as a distribution against their
partnership capital accounts, which were reduced by the face amount of the Junior Bonds.
In the several years subsequent to the bond transactions, the redevelopment projects
eventually became successful, and as a result, tax revenues were generated in excess of the
4 1-09-2440
projects’ projections. Because of this, the Senior Bonds’ obligations were able to be fulfilled
(with cash distributions being made to all partners) and the Developer and Junior Bonds, in turn,
increased in value. The transactions revolving around the Developer and Junior Bonds, and other
certain events outlined below, would eventually serve as the basis of intervenors’ allegations of a
breach of fiduciary duty by defendants.
A. TB Partnership Events and Proceedings
In 1999, Broadview unexpectedly refinanced the Senior and Junior Bonds. New bonds
with lower interest rates were issued, and pursuant to the redemption provision of the original
Junior Bonds, Broadview paid defendants, as general partners of TB, $9 million in order to
redeem the bonds. Up to that point, the general partners of TB were paid approximately $4.35
million in interest payments as well. In 2001, Melissa S. Pielet, individually and derivatively on
behalf of IBP and TB, filed an action against the defendants, alleging that they breached their
fiduciary duties to the partnerships by transferring the subordinated bonds to themselves for their
own benefit. The parties subsequently engaged in discovery and motion practice for over a year.
During that time, Broadview Village Center (the shopping mall owned and developed by TB) lost
two large tenants. As a result, TB’s rental income fell short of its financial obligations and an
action to foreclose was initiated against TB’s mortgage.
To avoid foreclosure, TB developed a complex plan to recapitalize and restructure its
debts. A key component of the plan included plans to negotiate a contract with Wal-Mart where,
among other things, it would purchase from TB a vacant building in the Broadview Village Center
along with the underlying real estate. To implement the plan, however, it was determined that TB
5 1-09-2440
would require $5.5 million in cash, thus triggering a “capital call” under which the partners would
all contribute funds in proportionate share to meet the financial needs of the partnership. In this
particular agreement, the limited partners were not required to contribute, but it provided that any
partner who declined to contribute would forfeit his or her partnership interest. The capital call in
question was set to occur on September 30, 2003.
Around the same time, the general partners proposed to settle Pielet’s action by making a
$5.5 million loan to TB themselves in place of the capital call. In December 2003, Pielet
withdrew as a plaintiff from the action she initiated and Keith Bank, another limited partner, then
filed and was granted a motion for leave to intervene as party plaintiff. Shortly thereafter,
however, intervenors averred that Mr. Bank was not representing the partnerships in their best
interests. They then sought and obtained leave to intervene in this action in February 2004.
In March 2004, the circuit court ordered defendants to issue a notice of their proposed
settlement to all partners of TB. The notice explained that under the proposed settlement, the
capital call would be suspended and that no limited partner would forfeit an interest in TB by
failing to contribute a proportionate share. The obligation to contribute, however, would be
reinstated if the loan or settlement was terminated. Intervenors initiated proceedings objecting to
the proposed settlement and requested the circuit court to disapprove it. Fairness hearings were
conducted in May 2004 but before the circuit court could rule, defendants filed a notice
withdrawing the proposed settlement, explaining that Wal-Mart had terminated its contract and
would not be purchasing the building or real estate as anticipated, thwarting the original
refinancing strategy. The $5.5 million capital call was reinstated, and each partner was notified
6 1-09-2440
that he or she had 30 days, or until July 30, 2004, to elect whether to contribute a proportionate
share of the call pursuant to the agreement.
On the penultimate day before the effectiveness of the capital call, intervenors filed a
motion for a temporary restraining order (TRO), seeking to prevent defendants from foreclosing
their partnership interests in the event intervenors chose not contribute to the capital call. The
motion was denied after a lengthy and spirited argument in open court and intervenors were
specifically notified by the trial court that if they did not contribute their proportionate share of
the capital call, they “would be out of business.” Intervenors declined to contribute, which
ineluctably led to a motion to dismiss the claims relating to TB, namely count II of intervenors’
amended complaint, arguing that intervenors lacked standing to pursue their claims after forfeiting
their interests. The circuit court granted the motion to dismiss in a written order on March 24,
2005. Intervenors filed a “Corrected Amended Complaint,” which defendants again moved to
dismiss due to a lack of standing. The motion was granted on December 8, 2005, in one of the
written orders from which intervenors appeal.
B. IBP Partnership Events and Proceedings
The only intervenors who held interest in IBP were Skrzelowski and Munaretto. The IBP
partnership agreement provided that the partnership could repurchase the interest of any limited
partner who terminates his or her employment with the partnership or a related entity. Paragraph
17 of the IBP partnership agreement provides for a “Repurchase Option of the Partnership.” In
the event that a limited partner terminated his employment with “the Partnership or any entity in
which any Partner is affiliated,” the terminated partner “shall give written notice to the Partnership
7 1-09-2440
which shall state all details regarding such Repurchase Event.” The provision further provides
that if the terminated partner fails to give notice of repurchase, the partnership itself may give
such notice on behalf of the terminated partner “at any time thereafter.” At that point, the
partnership has the option to acquire the partnership interest of the terminated partner.
Munaretto and Skrzelowski left HSA in 1993 and 1994, respectively, but neither
individual ever issued a repurchase notice as called for in the agreement. After another dispositive
motion failed in the trial court, on April 17, 2009, IBP issued repurchase notices to Munaretto
and Skrzelowski pursuant to the authorization in the IBP partnership agreement. Included with
the notice was a repurchase agreement providing that their interests would be purchased by IBP
according to a valuation provision within the IBP partnership agreement, which essentially
provided that the difference between a limited partner’s initial investment and the amount of cash
distributions received is the repurchase value. Although Munaretto and Skrzelowski did not
execute and return their respective agreements, the IBP partnership agreement contained a power
of attorney provision allowing the general partners to execute such a document on their behalf.
On April 30, 2009, the agreements were accordingly executed by a general partner. After
Munaretto’s and Skrezlowski’s interests were repurchased, defendants filed a motion to dismiss
their claims for lack of standing. On August 13, 2009, the circuit court granted the motion in a
written order. Intervenors now timely appeal.
II. ANALYSIS
A. Dismissal of Count II (TB)
On appeal, intervenors first contend that the circuit court improperly dismissed count II of
8 1-09-2440
their amended complaint. More specifically, they argue that they sufficiently alleged individual
claims for restoration and thus count II should not have been dismissed for lack of standing.
Count II alleged a breach of fiduciary duty regarding TB, concerning the transaction of the Junior
Bonds to defendants. The circuit court’s written order stated that defendants sought to dismiss
count II because the intervenors failed to state an individual claim. Having found that the
intervenors were no longer members of the partnership involved in count II, the circuit court next
found they no longer had standing to bring claims on behalf of the partnership. The order also
noted that while plaintiffs “do now make a claim for restoration of their partnership interests, they
allege no facts of individual harm that would entitle them to such restoration.”
Defendants’ motion to dismiss was based upon sections 2-615 and 2-619 of the Code of
Civil Procedure (Code) (735 ILCS 5/2-615, 2-619 (West 2008)). A motion to dismiss under
section 2-615 admits all well-pleaded facts and attacks the legal sufficiency of the complaint. La
Salle National Bank v. City Suites, Inc., 325 Ill. App. 3d 780, 790 (2001). A motion to dismiss
under section 2-619, on the other hand, admits the legal sufficiency of the complaint but raises
defects, defenses, or other affirmative matters that appear on the face of the complaint or are
established by external submissions that act to defeat the claim. Krilich v. American National
Bank & Trust Co. of Chicago, 334 Ill. App. 3d 563, 569-70 (2002). We review an order granting
a motion to dismiss pursuant to section 2-615 or section 2-619 de novo. Illinois Non-Profit Risk
Management Ass’n v. Human Service Center of Southern Metro-East, 378 Ill. App. 3d 713, 719
(2008). Furthermore, when reviewing motions under either section 2-615 or 2-619, we accept all
well-pleaded facts in the complaint as true and draw all reasonable inferences from those facts in
9 1-09-2440
favor of the nonmoving party in order to determine whether a cause of action can be sustained.
Dopkeen v. Whitaker, 399 Ill. App. 3d 682, 684 (2010).
A partnership is a contractual relationship and as such, contract law applies and a
partnership is accordingly controlled by the terms of the agreement under which it is formed.
Fisher v. Parks, 248 Ill. App. 3d 666, 674-75 (1993). If the written agreement is unambiguous,
the court must construe the parties' intent from the writing itself as a matter of law and effectuate
its plain and ordinary meaning. Buenz v. Frontline Transportation Co., 227 Ill. 2d 302, 308
(2008). However, no language in an agreement, however clear and explicit, can reduce a
partner’s fiduciary duty. See 1515 North Wells, L.P. v. 1513 North Wells, L.L.C., 392 Ill. App.
3d 863, 874 (2009). The existence of a fiduciary relationship between all partners is
well-established, and each partner is bound to exercise the utmost good faith and honesty in all
matters relating to the partnership business. Winston & Strawn v. Nosal, 279 Ill. App. 3d 231,
239-40 (1996). Illinois has held that this fiduciary duty “prohibits all forms of secret dealings and
self-preference in any [partnership] matter” (Winston & Strawn, 279 Ill. App. 3d at 239-40; see
Bakalis v. Bressler, 1 Ill. 2d 72, 79 (1953); Labovitz v. Dolan, 189 Ill. App. 3d 403, 412 (1989)),
and also “requires each partner to fully disclose partnership business to other partners” (Winston
& Strawn, 279 Ill. App. 3d at 240 (citing Borys v. Rudd, 207 Ill. App. 3d 610, 620 (1990))).
We initially note that the circuit court ruled after intervenors’ emergency TRO motion that
the capital call issued by TB was “indeed authorized by the terms of the agreement” between the
partners. This finding is not disputed on appeal. Intervenors did not contribute their required
share of the capital call, and pursuant to the terms of TB’s partnership agreement, they forfeited
10 1-09-2440
any interest they had in the partnership. Subsequently, defendants filed a motion to dismiss for
lack of standing, which the circuit court granted.
Superficially, dismissal would appear proper based on the rules of standing because
generally, individuals cannot maintain a derivative action against a partnership if they have no
interest in the partnership. See Caparos v. Morton, 364 Ill. App. 3d 159, 167-68 (2006); Lower
v. Lanark Mutual Fire Insurance Co., 151 Ill. App. 3d 471, 473 (1986). Intervenors, however,
point to Labovitz v. Dolan, 189 Ill. App. 3d 403 (1989), in support of their argument that their
cause of action should not have been dismissed. In Labovitz, the plaintiffs were former limited
partners in a partnership with the defendant general partner who had sole management discretion
pursuant to the underlying partnership agreement. The partnership incurred significant tax
obligations but the general partner withheld cash distributions that would have covered plaintiffs’
associated pro rata share. Plaintiffs sold their partnership interests to the general partner at a
“bargain price” due to the economic burden but subsequently filed a complaint against the general
partner for breach of fiduciary duty. The plaintiffs’ complaint was dismissed by the circuit court,
which held that the general partner’s acts were within the broad discretion granted to him by the
partnership agreement. On appeal, this court reversed and remanded, holding that a general
partner’s broad discretion in the cash distributions of the partnership does not trump, but instead
exists concurrently with, the general partner’s fiduciary duty owed to the limited partners in
dealing with them and the assets of the partnership. Labovitz, 189 Ill. App. 3d at 412. Although
Labovitz is, in a sense, factually dissimilar, we nevertheless find it to be substantively instructive.
Here, intervenors’ complaint alleges that defendants breached their fiduciary duties by: (1)
11 1-09-2440
misappropriating the Junior Bonds; and (2) issuing a capital call that was only necessitated by
their alleged misappropriation. While we are not bound to accept the complaint’s conclusory
allegations, as noted above, we accept all well-pleaded facts in the complaint as true and will draw
all reasonable inferences from those facts in favor of the nonmoving party in order to determine
whether a cause of action can be sustained. Dopkeen, 399 Ill. App. 3d at 684. With this in mind,
a close examination of the complaint and record raises a number of concerns regarding the
defendants’ acts revolving around the transaction of the Junior Bonds. First, although Collins’
affidavit asserts that he and other general partners had somehow related to the intervenors that the
Junior Bonds would be only for the benefit of the general partners, it is telling that the TB
partnership agreement is completely silent on the issue. Second, the bond trustee for the Village
of Broadview was apparently directed to issue the Junior Bonds directly to the general partners.
This event is highly suspect given the language within the applicable redevelopment agreement
between TB and the Village of Broadview indicating that any Junior Bonds issued would be
delivered to and purchased by the “Developer,” which includes TB as a whole but not the general
partners as a discrete entity. Third, from the record and complaint it appears that at the time of
the Junior Bonds’ issuance, intervenors were unaware of the events surrounding the transaction of
the Junior Bonds. Finally, we note that in apparent consideration for the Junior Bonds, the capital
accounts of the general partners were reduced, however, the limited partners did not actually
receive any cash distributions as a result of the Junior Bond transaction. The defendants, on the
other hand, ultimately received over $13 million as a result of owning the Junior Bonds.
Fundamentally, we find the instant case to be analogous to Labovitz, where a general
12 1-09-2440
partner’s management discretion was used in breach of a fiduciary duty and created the loss of a
limited partner’s interest through economic coercion. We reiterate that while we offer no opinion
as to the merits of the underlying case, when we take intervenors’ well-plead facts as true and
draw the reasonable inferences therefrom, the allegation remains that the general partners,
through their management discretion and authority, obfuscated the personal taking of the Junior
Bonds originally designated as partnership assets, which resulted in a financial windfall to them of
over $13 million. The partnership then experienced a shortage of funds and the general partners
imposed a financial obligation upon the intervenors, resulting in their loss of interests in TB.
Permitting intervenors’ cause of action to be dismissed, and essentially validating their loss of
interest, by pointing to management discretion and authority without consideration of the
overarching principles of partnership fiduciary duties here would miss the forest for the trees. As
Labovitz discussed in detail, “partners owe each other the duty to exercise the highest degree of
honesty, fairness and good faith in their dealings with one another and in the handling of
partnership assets,” also noting that a greater duty rests upon the general partners. Labovitz, 189
Ill. App. 3d at 408-09. The record casts defendants’ actions into doubt and to allow dismissal
under these circumstances is contrary to the principles of partnership fiduciary duty established
above, and we hold that the trial court erred in dismissing count II.
B. Dismissal of Count I (IBP)
Intervenors next contend that the circuit court improperly dismissed count I of
their amended complaint. Count I of the amended complaint related to the Developer Bonds
which were purchased by the general partners from IBP. The circuit court dismissed count I in
13 1-09-2440
2009 because intervenors Munaretto and Skrzelowski lacked standing to maintain the action after
IBP repurchased their partnership interests pursuant to the partnership agreement. Because the
circuit court dismissed the count under section 2-619 of the Code, we review this issue de novo.
Illinois Non-Profit Risk Management Ass’n, 378 Ill. App. 3d at 719. On appeal, intervenors base
their arguments for reversal on waiver, laches, and general principles of inequity. As a threshold
matter, we observe that intervenors do not dispute that the repurchase of their interests were, as a
technical matter, properly executed pursuant to the IBP partnership agreement or that their claim
is a derivative action. Intervenors’ arguments regarding the repurchase option in the IBP
partnership agreement are based upon waiver, laches, and equity.
As a threshold matter, we must find that waiver and laches provide little help to
intervenors here. Waiver is the intentional relinquishment of a known right, and may be express
or implied. Midwest Builder Distributing, Inc. v. Lord & Essex, Inc., 383 Ill. App. 3d 645, 673
(2007). While implied waiver of a right can arise through conduct inconsistent with an intent to
enforce that right, the party seeking waiver carries the burden of “proving a clear, unequivocal,
and decisive act of its opponent manifesting an intention to waive its rights.” In re Nitz, 317 Ill.
App. 3d 119, 130 (2000). As gleaned from the record and confirmed during oral arguments
before this court, it is apparent that defendants were unaware of the repurchase option written
into their own contract until shortly before exercising it. Given that waiver requires the party to
be aware of the right, as it is an intentional relinquishment of a known right, we cannot say that
defendants here technically waived the right to exercise repurchase option clause.
Intervenors’ argument revolving around laches suffers from a different, but equally fatal,
14 1-09-2440
legal infirmity. Generally, laches is an equitable doctrine precluding litigants from asserting a
claim when prejudice occurs as a result of a litigant's unreasonable delay in raising that claim.
Madigan v. Yballe, 397 Ill. App. 3d 481, 493 (2009). The two fundamental elements of laches
are (1) a lack of due diligence by the party asserting the claim; and (2) prejudice to the opposing
party. Gersch v. Department of Professional Regulation, 308 Ill. App. 3d 649, 661 (1999). We
have held that laches is an affirmative defense, and as such, is simply unavailable to a party that is
not a defendant. Malatesta v. Mitsubishi Aircraft International, Inc., 275 Ill. App. 3d 370, 386
(1995); see Wolfram Partnership, Ltd. v. LaSalle National Bank, 328 Ill. App. 3d 207, 225 n.10
(2001) (noting that laches may be proper to bar a defendants’ counterclaim but not to prevent
defendants’ assertion of a forfeiture of a lease agreement through default). Although count I was
dismissed based on a lack of standing through defendants’ motion, defendants have not raised any
counterclaim to which intervenors are a defendant. Accordingly, we find the doctrine of laches to
be inapplicable here.
Intervenors lastly argue that it would be inequitable to allow defendants to exercise the
repurchase option. Given the specific circumstances of the instant case, we are persuaded that
they should prevail on this argument. Intervenors argue that a court of equity is duty-bound to
examine substance rather than the form of a transaction (Reese v. Melahn, 53 Ill. 2d 508, 513
(1973)), and the maxim that “equity considers that as done which ought to be done” (Cesena v.
Du Page County, 145 Ill. 2d 32, 38 (1991)). Along with these general principles, we reiterate
that the fiduciary duties discussed above relating to TB’s partners exist with equal strength here
among IBP’s partners as well. Furthermore, we have held that “ ‘[a] convenant of good faith and
15 1-09-2440
fair dealing is implicit in every contract as a matter of law.’ ” Horwitz v. Sonnenschein Nath and
Rosenthal, LLP, 399 Ill. App. 3d 965, 978 (2010) (quoting Franz v. Calaco Development Corp.,
352 Ill. App. 3d 1129, 1152 (2004)). A reason this convenant is implied is to protect the parties
such that no party takes advantage of another “in a way that could not have been contemplated at
the time the contract was drafted.” Gore v. Indiana Insurance Co., 376 Ill. App. 3d 282, 286
(2007). Disputes involving the exercise of good faith generally arise when one party is given
broad discretion in performing its obligations under the contract, and therefore “[t]he duty of
good faith and fair dealing is a limitation on the exercise of that discretion, requiring the party
vested with discretion to exercise it reasonably and with proper motive, not arbitrarily,
capriciously, or in a manner inconsistent with the parties' reasonable expectations.” Gore, 376 Ill.
App. 3d at 286.
According to a sworn declaration by John E. Shaffer, the purpose in offering partnership
interests to Munaretto and Skrzelowski was to motivate them as HSA employees. Should they
somehow sever their associations with HSA, Shaffer stated that there would be no relevance in
motivating them as an HSA employee and the repurchase clause within the IBP partnership
agreement served as the vehicle to buy back their interests. An examination of the underlying
proceedings, however, indicates that the exercise of the repurchase option could have been
effected when Munaretto and Skrzelowski left HSA in the early 1990's. Despite this, defendants
participated in the subsequent litigation for more than eight years. In 2009, after having a
different dispositive motion fail before the trial court, defendants appeared to adjust their strategy.
As stated during oral arguments before us, after a careful rereading of the IBP partnership
16 1-09-2440
agreement, defendants decided to exercise the repurchase option and shortly thereafter filed a
motion to dismiss intervenors’ claims for a lack of standing. The motivation behind the exercise
of that right was not to buy back interests of limited partners no longer associated with HSA, but
primarily to simply remove intervenors’ standing. Doing so is an exercise of discretion that was
utilized in a manner inconsistent with the parties’ reasonable expectations. While we
acknowledge that repurchase options may legitimately serve a variety of purposes, they cannot
operate to remove a party’s standing under circumstances like those in the case sub judice.
Accordingly, count I was improperly dismissed and we reverse.
For the foregoing reasons, we reverse the judgment of the circuit court of Cook County
and remand for further proceedings.
Reversed and remanded.
17 1-09-2440
REPORTER OF DECISIONS – ILLINOIS APPELLATE COURT (Front Sheet to be Attached to Each Case) Plea se Use Following MELISSA S. PIELET, Individually and on Behalf ) Form: I.B.P Limited Partnership and TB Limited ) Partnership, ) Complete ) TITLE of Case Plaintiff, ) ) v. ) ) DENNIS J. HIFFMAN, E. THOMAS ) COLLINS, JR., RICHARD E. HULINA, and ) DANIEL G. ANDERSON, ) ) Defendants ) ) (John E. Shaffer, ) ) Third-Party Defendant; ) ) John F. Girsch, Edward Zifkin, Mark Munaretto, ) and Mark Wheeles, Individually and Derivatively ) on Behalf of TB Limited Partnership; and Mark ) Munaretto and William Skrzelowski, Individually ) and Derivatively on Behalf of I.B.P. Limited ) Partnership, ) ) Intervening Plaintiffs-Appellants; ) ) Dennis J. Hiffman, John E. Shaffer, E. Thomas ) Collins, Jr., Daniel G. Anderson, and Richard E. ) Hulina, ) ) Defendants-Appellees). )
18 1-09-2440
Docket No. No. 1-09-2440 Appellate Court of Illinois COURT First District, FOURTH Division
January 20, 2011 Opinion (Give month, day and year) Filed
JUSTICES JUSTICE LAVIN delivered the judgment of the court, with opinion. Gallagher, P.J., and Pucinski, J., concurred. APPEAL Lower Court and Trial Judge(s) in form indicated in the margin: from the The Honorables David Donnersberger and Mary K. Rochford, Judges Presiding. Circuit Ct. of Cook County.
For Indicate if attorney represents APPELLANTS or APPELLEES and include APPELLANT attorneys of counsel. Indicate the word NONE if not represented. S, John Doe, of Attorneys for Intervening- Chicago. Plaintiffs/Appellants: For Edward T. Joyce APPELLEES, Robert D. Carroll Smith and Edward T. Joyce & Associates, P.C. Smith of 135 S. LaSalle St., Ste., 2200 Chicago, Chicago, IL 60603 Joseph Brown, (of Attorneys for Defendants/Appellees: Counsel)
Also add Bennett W. Lasko attorneys for Aruna B. Subramanian third-party DRINKER BIDDLE & REATH LLP appellants or 191 N. Wacker Dr., Suite 3700 appellees. Chicago, IL 60606 312.569-1000