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SECOND DIVISION
JUNE 29, 2001

In 1988, plaintiffs-appellants, Ernest Loberg, HarrietLoberg, and Sharon Menely, individually and on behalf of theclass certified in September 1995, filed suit against EquitecFinancial Group (Equitec Financial) and Equitec Fund A (EquitecA) seeking to rescind their purchases of Equitec A limitedpartnership interests on behalf of 41 Illinois residents whopurchased the limited partnership interests in 1985 and 1986 fromtwo unlicensed brokers. In 1989 Hallwood Realty Corporation(Hallwood) purchased the general partnership interests of 11Equitec real estate limited partnerships.

In June 1990 Hallwood Realty Corporation issued a proxystatement that solicited the consent of the limited partners of11 Equitec real estate limited partnerships sponsored by EquitecFinancial to exchange or "roll-up" their limited partnershipinterests in their respective real estate limited partnershipsfor newly issued units of limited partnership interests inHallwood Realty Partners, L.P. (HRP). This solicitation led tothe litigation known as the Equitec Roll-up Litigation (Roll-uplitigation), filed in California, in which the plaintiffs allegedthat HRP, Equitec, and other defendants violated federal andstate laws in conducting the 1990 proxy solicitation. In July1994 plaintiffs amended their complaint in the Illinoislitigation to add Hallwood Income Real Estate Investors A(Hallwood A) and HRP as defendants/successors-in-interest. TheRoll-up litigation was settled in 1994.

On February 1, 2000, the trial court in the Illinoislitigation granted summary judgment in favor of Hallwood A andHRP based upon the judgment and release by plaintiffs in theCalifornia Roll-up litigation.

The central issue in this case is whether the plaintiffs'claims in their Illinois class action litigation were released bythe California judgment and release in the Roll-up litigation. We answer in the affirmative.

BACKGROUND

In 1988, plaintiffs filed suit against Equitec Financial andEquitec A seeking to rescind their purchases of Equitec A limitedpartnership interests purchased from unlicenced brokers KennethBoula and Dean Gordon. The general partner of Equitec A wasEquitec Financial. Plaintiffs' suit against Equitec Financialand Equitec A was one of several class action suits filed due topurchases of securities from the same unregistered brokers. These suits were later consolidated under Hess v. I.R.E. RealEstate Income Fund, Ltd., 255 Ill. App. 3d 790, 629 N.E.2d 520(1993).

In June 1990 Hallwood Realty Corporation issued a proxystatement that solicited the consent of the limited partners of11 Equitec real estate limited partnerships sponsored by EquitecFinancial to exchange or "roll-up" their limited partnershipinterests in their respective real estate limited partnershipsfor newly issued units of limited partnership interests in HRP. This solicitation led the Equitec Roll-up litigation. Theplaintiffs in the Roll-up litigation alleged that HRP, Equitecand other defendants violated federal and state law in conductingthe 1990 proxy solicitation.

In August 1991 a class was certified and a court-orderednotice of pendency of class action (Notice) was sent to classmembers in the Roll-up litigation. That Notice was addressed to: "ALL PERSONS WHO HELD INTERESTS AS OF APRIL 30, 1990, IN ANY OFTHE FOLLOWING EQUITEC-SPONSORED REAL ESTATE LIMITED PARTNERSHIPSAND EXCHANGED THOSE INTERESTS FOR LIMITED PARTNERSHIP INTERESTSIN HALLWOOD REALTY PARTNERS, L.P., AS A RESULT OF THE CLOSING OFTHE SUBJECT EXCHANGE TRANSACTION ON NOVEMBER 1, 1990." Thosepersons constituted the class for the pending action. Thejudgment, whether favorable or not, would apply to the classmembers' claims and would be binding upon them and thedefendants. The Notice further stated, "[i]f you wish to beincluded in the Plaintiff Class, you do not need to take anyaction." However, in order to be excluded from the class, a class member was required to send a request along with otherpertinent information to a California post-office box bySeptember 28, 1991. Plaintiffs in the instant case did notrequest exclusion.

The Roll-up litigation was settled in 1994. The notice ofthe proposed settlement, which was dated August 15, 1994, wasaddressed to: "ALL PERSONS WHOSE INTEREST IN EQUITEC REAL ESTATELIMITED PARTNERSHIPS WERE EXCHANGED FOR SECURITIES ISSUED BYHALLWOOD REALTY PARTNERS, L.P. ALL PERSONS WHO, ON APRIL 11,1994, OWNED A BENEFICIAL INTEREST IN HALLWOOD REALTY PARTNERS,L.P. ('HRP UNITHOLDERS')." The notice of proposed settlementalso provided the following definition of "settled claims":

"'Settled Claims' means any and all claims, causes ofaction, suits, demands or requests for relief, known orunknown, that are or were asserted or could have beenasserted in the Actions and each and every complaint filedin the Actions, Plaintiffs' Statement of Issues To Be Triedand all amendments thereto, or claims which are otherwisereferred to or described in any of the letters, pleadings,briefs, expert reports, trial testimony or depositiontestimony ***, and all such claims which could have beenasserted by the Settling Plaintiffs in any other action orproceeding against the Settling Defendants which arises orrelates to the subject matter of these Actions or anymatters, transactions, occurrences or omissions referred toin the pleadings, motions, discovery, trial or other papersand proceedings in any of these Actions, including but notlimited to, claims relating to fees paid to Hallwood Groupor its affiliates by HRP, claims for violations of thefederal securities laws, state securities laws, *** andactions arising under state statutory or common law *** upthrough the entry of the District Court's Notice Order."

The notice of proposed settlement also provided that any classmember could be heard at the settlement hearing and could objectto or express his or her views regarding the proposed settlement. Plaintiffs did not object to the proposed settlement. Thesubsequent release that plaintiffs signed included the definitionof "Settled Claims" found in the notice of proposed settlement.

In 1994, plaintiffs also sought to amend their complaint inthe pending Illinois class action litigation to add Hallwood,alleging that the defendants were responsible as successors-in-interest for the prior conduct of Equitec and Equitec Fund A. The motion to amend was allowed. In answering plaintiffs'amended complaint, the Hallwood defendants asserted both thatplaintiffs had already released their claims against the Hallwooddefendants in connection with the recent settlement of the Roll-up litigation and that plaintiffs' claims were barred by thedoctrine of laches.

In September 1995, plaintiffs' motions to consolidate and becertified as a class in the Illinois litigation were granted. Also in 1995, plaintiffs moved for summary judgment in theIllinois litigation against Hallwood A and HRP. The motionagainst Hallwood A and HRP was denied because there wereremaining factual issues as to liability and defendants'assertion of laches as an affirmative defense.

In May 1999, the Hallwood defendants filed a motion forsummary judgment for the Illinois class action suit, assertingthat plaintiffs released their claims in the instant case in thesettlement of the Equitec Roll-up action and plaintiffs' claimswere barred by the doctrine of laches. In October 1999,plaintiffs filed a motion in opposition to defendants' motion forsummary judgment. The trial judge heard oral argument on theissues raised in the defendants' motion for summary judgment onJanuary 26, 2000. In an order dated February 1, 2000, the trialcourt granted defendants' motion for summary judgment. The orderprovided:

"[I]t must be pointed out that the order entered by theFederal Court in the Roll-up Litigation approving thesettlement and releases, specifically found that the membersof the class had been afforded due process.

* * *

*** [T]he release that class plaintiffs signed in theEquitec Roll-up Litigation clearly encompasses the claimsand causes of actions in the case at bar. I have heard noarguments that convince me that the Release should not beenforced. *** They agreed to release Equitec and Hallwoodfrom all claims referred to in the pleadings (here, the saleof Real Estate Trusts) and more specifically, agreed torelease all claims for violations of state security laws,for money damages, rescission, or actions arising understate statutory or common law. For this promise, classplaintiffs received one million dollars. A bargain is abargain. *** They never objected when they had anopportunity to do so. They cannot maintain this actionagainst the Hallwood defendants.

Because of this ruling, I am not required to address theLaches [sic] question."

The trial judge also held that defendants' contention that theclass plaintiffs' agreed to release every claim that arises fromthe Roll-up litigation was incorrect.

On January 5, 2000, plaintiffs sought leave to assert anadditional count against HRP. Plaintiffs' motion alleged thatHallwood A and HRP knew or should have known that Hallwood Awould likely incur debts beyond its ability to pay as they camedue. Moreover, the motion alleged that the transfer ofpartnership assets to Hallwood Realty Partners was done tohinder, delay, or defraud the class. The trial court deniedplaintiffs' motion to amend on February 7, 2000.

The plaintiffs are appealing the orders entered on February1, 2000, and February 7, 2000, which, respectively: (1) grantedsummary judgment in favor of defendants-appellees Hallwood IncomeReal Estate Investors A and Hallwood Realty Partners, Inc., basedupon a release given in an unrelated class action in California;and (2) denied plaintiffs-appellants leave to file a fraudulent-transfer amendment to the class action complaint. We affirm.

ANALYSIS

The standard of review on appeal from a grant of summaryjudgment is de novo. Outboard Marine Corp. v. Liberty MutualInsurance Co., 154 Ill. 2d 90, 102, 607 N.E.2d 1204 (1992). Summary judgment is appropriate where the pleadings, depositions,and admissions on file, together with affidavits, if any, showthat there is no genuine issue as to any material fact and thatthe moving party is entitled to judgment as a matter of law. Purtill v. Hess, 111 Ill. 2d 229, 240-44, 489 N.E.2d 867 (1986).

The plaintiffs contend that the trial court erred ingranting summary judgment in favor of the defendants based uponthe judgment and release in the Roll-up litigation because theRoll-up representative could only settle Roll-up claims. Thedefendants respond that the claims in the instant case are barredbecause they were included in the settlement agreement andrelease in the Roll-up litigation. The trial court found thatplaintiffs' claims in the Illinois litigation were barred becausethe claims were released in the Roll-up litigation, and itgranted summary judgment in favor of the defendants. Based uponour analysis, which follows, we affirm the trial court's decisiongranting summary judgment in favor of the defendants.

A release is a contract whereby a party abandons a claim tothe person against whom the claim exists. InternationalInsurance Co. v. Sargent & Lundy, 242 Ill. App. 3d 614, 622, 609N.E.2d 862 (1993). Accordingly, the interpretation of a releaseis governed by contract law. Farm Credit Bank v. Whitlock, 144Ill. 2d 440, 447, 581 N.E.2d 664 (1991). Thus, the rights of theparties are limited to the terms expressed in the agreement and arelease will not be construed to release claims not within thecontemplation of the parties. International Insurance Co., 242Ill. App. 3d at 622-23. The intention of the parties controlsthe scope and effect of the release, and this intent is discernedfrom the release's express language as well as the circumstancessurrounding the agreement. Carlile v. Snap-on Tools, 271 Ill.App. 3d 833, 838, 648 N.E.2d 317, 321 (1995). Where the terms ofthe release are clear and explicit, the court must enforce therelease as written. International Insurance Co., 242 Ill. App.3d at 623.

First, we note that the plaintiffs here did not opt out ofthe Roll-up settlement agreement, although they could have, andthe record does not indicate that the plaintiffs ever raised anobjection to the breadth and generality of the release. It isclear from the language of the release that the intention of theparties was to discharge the settling defendants of claims"including but not limited to *** claims for violations of thefederal securities laws, state securities laws, *** [and]rescission."

In plaintiffs' motion in opposition to the defendants'motion for summary judgment, plaintiffs assert that the 1991class action notice did not mention the 1988 lawsuit, andtherefore, the plaintiffs did not have reason to believe thatthey had to opt out of the Roll-up litigation to preserve theirright to maintain their state securities laws claims. In classactions, due process requires that members of the plaintiff classhave an opportunity to be heard and to participate in thelitigation, an opportunity to opt out of the litigation, andadequate representation of absent class members' interests. Security Pacific Financial Services v. Jefferson, 259 Ill. App.3d 914, 921, 632 N.E.2d 299 (1994).

Plaintiffs assert that "the requirement of adequaterepresentation prevents class representatives from releasingclaims they do not have." Plaintiffs rely on National SuperSpuds, Inc. v. New York Mercantile Exchange, 660 F.2d 9 (2d Cir.1981). In National Super Spuds, the issue was whether the trialcourt erred in approving a proposed settlement that barred allmembers of the class who had not opted out from bringing anyclaim based on liquidated contracts, and barred members of theclass from bringing any other claims they might be able to assertagainst defendants, including claims based on unliquidatedcontracts. The Second Circuit reversed the district court'sapproval of the settlement, reasoning that the final settlementagreement expanded the scope of the claims to be released withoutgiving proper notice to the class members. In National SuperSpuds, the notice sent to class members referred only to claimsbased on liquidated contracts and gave no indication that theaction would concern any other claims. National Super Spuds, 660F.2d at 17.

National Super Spuds is inapposite. In National SuperSpuds, the court held, "[H]aving received authority to representclass members solely with respect to liquidated contracts,plaintiffs had no power to release claims based on othercontracts." National Super Spuds, 660 F.2d at 18. The instantcase does not involve a difference between claims based onliquidated contracts and claims based on other contracts. In theinstant case, the same (Equitec A) securities are involved in theRoll-up litigation and the Illinois class action litigation. Additionally and importantly, plaintiffs in National Super Spudsactually objected in the settling case to the scope of thereleases and never signed them. National Super Spuds, 660 F.2dat 14. In contrast, plaintiffs in the instant case personallychose to execute the releases in exchange for a portion of thesettlement funds. Also, in the instant case plaintiffs do notchallenge the propriety of certifying the class in the EquitableRoll-Up Litigation. Moreover, unlike National Super Spuds, thenotice of proposed settlement in the instant case specificallyset forth the exact and broad scope of the releases to beprovided.

Plaintiffs also argue that there is no connection betweenthe events that gave rise to the Roll-up litigation and theevents that gave rise to this lawsuit. However, both classaction law suits involve the same (Equitec A) securities. Bothclass action suits refer to the purchase of those Equitec Asecurities during the 1980s. The settlement agreement in theRoll-up litigation expressly released claims relating to statesecurities, rescission, and matters referred to in the pleadings.

The fourth amended complaint specifically provides a descriptionof Equitec's involvement in real estate investment programs inwhich investors were furnished with a prospectus and signed alimited partnership agreement prepared by Equitec. Based uponthe statement provided in the release and the events listed inthe pleadings, the Roll-up release clearly precludes the Illinoisclass action litigation at issue here.

Plaintiffs also contend that the right to opt out,guaranteed by due process, prevented the Roll-up settlement fromencompassing their claims. Plaintiffs further assert that dueprocess requires notice that describes the action and theplaintiffs' rights in the litigation, and provides plaintiffs,once they are informed of their rights, an opportunity to opt outof the litigation. In opposition, the defendants rely onMatsushita Electric Industrial Co. v. Epstein, 516 U.S. 367, 134L. Ed. 2d 6, 116 S. Ct. 873 (1996), and contend that Matsushitasupports their contention that plaintiffs in the Roll-uplitigation could, consistent with due process, release theirIllinois securities law claims. In our view, Matsushita supportsthe defendants' contention.

In Matsushita, a class action was filed in the DelawareCourt of Chancery against MCA, Inc., and its directors for breachof fiduciary duty and waste of corporate assets and Matsushitawas added as a defendant for allegedly conspiring with MCA'sdirectors to violate Delaware law. Matsushita, 516 U.S. at 370,134 L. Ed. 2d at 15, 116 S. Ct. at 876. The Delaware suit wasbased on state law claims, and while it was pending, a federalsuit was filed in California, again naming Matsushita as adefendant. The district court declined to certify the class,entered summary judgment for Matsushita, and dismissed the case. The federal plaintiffs appealed to the Ninth Circuit Court ofAppeals. After the federal plaintiffs filed their notice ofappeal, but before the Ninth Circuit issued its decision, theDelaware suit negotiated a settlement. A notice of the proposedsettlement was sent to class members and published in a nationalnewspaper. That notice informed the class members of their rightto request exclusion from the settlement class and to appear andpresent argument at a settlement hearing. Matsushita, 516 U.S.at 371, 134 L. Ed. 2d at 15, 116 S. Ct. at 876. Respondents, whowere members of both the state and federal plaintiff classes, didnot opt out of the settlement class and did not appear at thehearing to contest the settlement or representation of the class. Matsushita, 516 U.S. at 372, 134 L. Ed. 2d at 16, 116 S. Ct. at877.

Matsushita invoked the Delaware judgment as a bar to theNinth Circuit appeal. Matsushita, 516 U.S. at 372, 134 L. Ed. 2dat 16, 116 S. Ct. at 877. The Ninth Circuit rejected thatargument. Matsushita, 516 U.S. at 372, 134 L. Ed. 2d at 16, 116S. Ct. at 877. The United States Supreme Court reversed,reasoning that the federal claims were "clearly within the scopeof the release in the judgment, since the judgment specificallyrefers to lawsuit." Matsushita, 516 U.S. at 378, 134 L. Ed. 2dat 20, 116 S. Ct. at 880. In Matsushita, the United StatesSupreme Court reasoned that if the class action plaintiffs wishedto preserve their right to litigate exclusively federal claims infederal court, they should have either opted out of thesettlement class or objected to the release of any exclusivelyfederal claims. Matsushita, 516 U.S. at 385, 134 L. Ed. 2d at24, 116 S. Ct. at 883. Further, the Court reasoned that asshareholders of MCA's common stock, the respondents were part ofthe state plaintiff class and since they did not opt out, theywere therefore bound by the judgment. Matsushita, 516 U.S. at379, 134 L. Ed. 2d at 21, 116 S. Ct. at 880. Significantly, theCourt held that even if the claim could not have been raised inthe court that rendered the settlement judgment, the settlementjudgment barred subsequent pursuit of that claim in federal courtbecause the claims were within the scope of the release. Matsushita, 516 U.S. at 377-78, 134 L. Ed. 2d at 19, 116 S. Ct.at 879-80.

Similarly, in the instant case, plaintiffs could have eitheropted out of the settlement class or objected to the release ofthe state securities laws claims if they wished to preserveabsolutely their right to litigate exclusively Illinoissecurities claims.

Thompson v. Edward D. Jones & Co., 992 F.2d 187 (8th Cir.1993), is also instructive. In Thompson, the issue before theEighth Circuit was whether the appellant's claims in a SouthDakota action regarding certain investments were barred by thefinal judgment and dismissal in a class action filed in thefederal court of Arkansas. Thompson, 992 F.2d at 188. TheEighth Circuit answered in the affirmative. Thompson, 992 F.2dat 188. In Thompson, the appellant asserted that the scope ofthe Arkansas settlement did not cover her South Dakota claimsbecause her suitability claims were inherently individual innature and could not have been brought in the class actionwithout destroying the commonality, typicality, and adequacy ofrepresentation requirements of Rule 23(a) of the Federal Rules ofCivil Procedure. Thompson, 992 F.2d at 190. The Thompson courtreasoned that it could not ignore the "broad language" of thenotice and the final judgment of dismissal which barredcommencing any action related to the limited partnershipsinvestments, including those which an individual class member mayhave had, but knowingly chose to relinquish by remaining a memberof the class. Thompson, 992 F.2d at 190. The court also heldthat the appellant in Thompson had sufficient notice of the termsof the proposed settlement and adequate opportunity to opt out ofthe class. Thompson, 992 F.2d at 191.

Another instructive case is In re VMS Securities Litigation,145 F.R.D. 458 (N.D. Ill. 1992). In VMS, a securities brokermoved for enforcement of a securities fraud settlement agreementagainst three class members, to partially vacate an arbitrationaward in favor of two class members, and to enjoin furtherprosecution of released claims in arbitration proceedings. VMS,145 F.R.D. at 459. The final settlement judgment included arelease of all asserted or potential class or individual claimsrelated to the purchase of VMS securities and expressly enjoinedall parties from asserting any released claim. Similar to theinstant case, a clause in the release in VMS included a releaseof all federal claims, class claims, and claims under state orcommon law that had been or might have been asserted in thelitigation or any other court or forum in connection with anyfacts or occurrences involving the funds. VMS, 145 F.R.D. at463. The court in VMS held that plaintiff expressly released anyclaim or potential claim relating to any facts or transactionsassociated with the subject funds' securities. VMS, 145 F.R.D.at 462. The court also held that the other appellants'arbitration claims arising from their investment in one of thefunds in the VMS class action were "plainly encompassed by thesettlement release clause embodied in the final judgment" and,therefore, could not be litigated further. VMS, 145 F.R.D. at463. Similar to VMS, we hold that the claims in the Illinoislitigation involving the state securities laws were plainlyencompassed by the settlement release clause embodied in thefinal judgment entered in the Roll-up litigation and are,therefore, barred.

Plaintiffs' next contention is that "the order denyingplaintiffs leave to amend their complaint to add a fraudulentconveyance claim against HRP should be vacated because it wasbased on the Court's erroneous summary judgment order." Defendants respond that the trial court's order denyingplaintiffs' leave to file a fraudulent-transfer claim is notproperly before this court because that ruling did not constitutea final order.

Plaintiffs filed a notice of motion for leave to file anadditional count on December 30, 1999. The trial court granteddefendants' motion for summary judgment on February 1, 2000. OnFebruary 7, 2000, the trial court entered an order providing:"(1) that there is no just reason to delay the appeal orenforcement of the order of February 1, 2000; [and] (2) thatplaintiffs' motion to add a fraudulent transfer amendment toclass action complaint is denied." Because we affirm the trialcourt's grant of defendants' motion for summary judgment, we donot reach the contentions of the parties on this issue.

Finally, the defendants contend that the doctrine of lachesbars the instant suit. Specifically, defendants assert that theplaintiffs' unreasonable delay in holding defendants secondarilyliable for Equitec's wrongful conduct has prejudiced them. Again, because we affirm the trial court's ruling relative to thesummary judgment, we do not reach the laches issue.

For the foregoing reasons, the trial court's grant ofdefendants' motion for summary judgment is affirmed.

Affirmed.

CAHILL, P.J., and GORDON, J., concur.