Suit to Enjoin Corporate Dissolution and Suit for Fraud are “Same Cause” for Purpose of 2-619(a)(3) Dismissal

by Uri Abt

The Illinois Code of Civil Procedure provides a mechanism for the circuit court to dismiss an action where there is “another action pending between the same parties for the same cause.”  735 ILCS 5/2-619(a)(3).  In Schacht v. Lome, 2016 IL App (1st) 141931, the appellate court considered whether the defendant’s prior suit to enjoin dissolution of the parties’ medical services corporation was the “same cause” as the plaintiffs’ subsequent suit against the defendant for fraud.  Focusing on the similarities between the second suit and facts alleged in a motion to dismiss the first suit, the appellate court held that the two suits presented the “same cause” and affirmed dismissal of the second suit. 

Lome, Schacht, and Vaselopulos were the three shareholders of a medical services corporation.  Schacht and Vaselopulos voted to dissolve the corporation and Lome filed a suit to enjoin them.  Temporary relief was denied, articles of dissolution were filed, and the wind-up began, but Lome continued pursuing his suit in order to “void” the dissolution.  As part of the wind-up, Lome accepted distribution of his portion of the corporate assets.  Schacht and Vaselopulos then filed a motion to dismiss.  They argued that Lome ratified the dissolution by accepting distribution of the corporate assets.  They also filed a separate suit accusing Lome of fraud.  In their new suit (the subject of the appeal), Vaselopulos and Schacht (hereinafter “plaintiffs”) argued that they distributed assets to Lome (hereinafter “defendant”) in reliance on his false representation that he accepted the dissolution, and that they were damaged to the extent of their continuing legal fees in the first action.  Defendant moved to dismiss the second suit pursuant to 2-619(a)(3).  The motion was granted and plaintiffs’ appealed.    

The appellate court first noted that after the moving party establishes the two threshold requirements of 2-619(a)(3)—i.e., that the two suits involve the “same parties” and present the “same cause”—the circuit court can still, at its discretion, deny the motion after weighing certain factors.  But since the parties focused their arguments solely on the threshold issue of whether the two suits presented the “same cause,” the appellate court did not consider whether the circuit court abused its discretion. 

Turning to the meaning of “same cause,” the appellate court restated the inquiry as “whether the relief requested relies on substantially the same facts.”  Id. at ¶ 36.  The court reasoned that both suits arose “from defendant’s challenge to the dissolution of the corporation” and that the conduct raised in plaintiffs’ motion to dismiss the first suit (defendant’s acceptance of money from the corporation after its dissolution) was the same conduct at issue in the subsequent fraud case.  Plaintiffs argued that the two suits did not present the “same cause” because the overlapping allegations were only brought into the first suit by way of a motion to dismiss.  The appellate court rejected the argument stating: “one of the primary bases for seeking dismissal was the argument that defendant ratified the dissolution by accepting the benefits of the dissolution.  The facts underlying the two actions are identical.”  Id. at ¶ 39.  Dismissal was affirmed.