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THIRD DIVISION
August 6, 2003

Res Judicata is a Latin phrase meaning "a thing adjudicated." Black's Law Dictionary1312 (7th ed. 1999). That is what we have in this case.

Scott Mann filed suit against Campania Management Company, Inc. (Campania), seekingto recover amounts due to him under a settlement agreement to which Campania was a party. Campania, in turn, brought malpractice claims against Rooks, Pitts & Poust (Rooks Pitts) andFrank Rowland (Rowland), who were responsible for drafting the settlement agreement thatexposed Campania to liability.

Rooks Pitts and Rowland filed section 2-619 motions to dismiss the claims against them,contending the doctrines of res judicata and collateral estoppel barred the actions and thatCampania had ratified the settlement agreement. The trial court granted the motions to dismiss.

On appeal, Campania urges us to reverse the decision of the trial court. Campaniacontends the doctrines of res judicata and collateral estoppel do not apply here and it did notratify the settlement agreement. Because we find the claims raised by Campania were barred bythe doctrine of res judicata, we do not reach the issues of collateral estoppel or whether Campaniaratified the settlement. We affirm the judgment of the trial court.

BACKGROUND

According to the pleadings and exhibits filed in this case, Scott Mann suffered injuries as aresult of the condition of a wheelchair sold and maintained by Metropolitan RehabilitationServices, Inc. (Metropolitan). Mann filed suit against Metropolitan and the manufacturer of thewheelchair. Scott Mann v. Quickie Designs, Inc., No. 94 L 13344 (Mann).

Metropolitan was insured by Credit General Insurance Company (CGI). Campania, theclaims manager for CGI, retained Rooks Pitts to represent Metropolitan. Frank Rowland, apartner at Rooks Pitts, handled the case.

In August 1999, Mann settled with Metropolitan. Rowland and Rooks Pitts drafted thesettlement agreement and included Campania as a party to the settlement. Mann agreed to releaseMetropolitan and its insurers, who were undisclosed in the agreement. In return, Campaniawould pay Mann $175,000 and purchase an annuity that would provide payments of $50,000annually for seven consecutive years beginning in 2000.

Campania made the initial payment of $175,000 and a second payment of $50,000 toMann. According to Campania, the money for the payments came from CGI.

Although the record is not clear as to precisely when, it appears that after these two initialpayments were made, CGI filed for bankruptcy. No further payments were made to Mann, andCampania did not purchase the annuity as required under the agreement. Campania also failed topay several invoices issued by Rooks Pitts for its work on Mann.

I. THE FEDERAL FEES CASE

Rooks Pitts filed a suit against Campania in the Circuit Court of Cook County contendingCampania owed it attorney fees for work Rooks Pitts had performed in Mann. This case wasremoved to the United States District Court for the Northern District of Illinois.

On January 31, 2001, Campania filed a motion for leave to file a counterclaim. In theproposed counterclaim, made part of this record by stipulation, Campania raised two countsagainst Rooks Pitts: one for breach of agency contract and one for negligence. In the breach ofagency count, Campania contended Rooks Pitts exceeded its authority when it drafted thesettlement agreement naming Campania as a party, thereby exposing Campania to liability. In thenegligence count, Campania contended Rooks Pitts should have learned that CGI was the realclient and should not have named Campania in the settlement agreement. In its response to thismotion, Rooks Pitts contended, among other things, the motion should be denied becauseCampania could raise these claims in this state court action.

The district court denied the motion, stating "Defendant's duplicative motion for leave tofile a new counterclaim after discovery has closed *** is denied." The court subsequently enteredjudgment in favor of Rooks Pitts for fees. The Seventh Circuit Court of Appeals affirmed thisdecision, addressing specifically the trial court's decision to deny Campania's motion for leave tofile the counterclaim. Campania Management Co. v. Rooks Pitts & Poust, 290 F.3d 843 (7thCir. 2002).

II. THE FEDERAL MALPRACTICE CASE

On June 15, 2000, Campania filed suit against Rooks Pitts and Rowland in the CircuitCourt of Cook County, contending the attorneys committed malpractice in the handling of Mannby, among other things, failing to have the products claim dismissed, failing to file an indemnityclaim against the manufacturer, and failing to prepare for the possibility that the manufacturerwould settle with Mann. Campania alleged it ultimately had to pay $500,000 to settle Mannwhere, "but for the attorney defendants' negligence, it should have paid nothing." This case wasalso removed to the United States District Court for the Northern District of Illinois.

Campania filed a motion to voluntarily dismiss the federal court suit without prejudice. The court's January 31, 2001, order stated, "Plaintiff's motion to voluntarily dismiss *** isgranted in part. This case is dismissed with prejudice as to the named defendants." (Emphasisadded.) Campania tried, unsuccessfully, to have the district court either modify its order to grantdismissal without prejudice or, in the alternative, reinstate the case.

III. THE PRESENT CASE

On January 24, 2001, Mann filed this suit in the Circuit Court of Cook County againstRowland and Campania to recover the remaining payments due under the settlement agreement. According to Mann's complaint, Campania and Rowland were responsible for the unpaid portionof the settlement agreement.

In March, Campania filed a counterclaim against Rowland and a third-party complaintagainst Rooks Pitts. In each, Campania brought three identical counts. In Count I, a breach ofagency contract claim, Campania contended Rowland and Rooks Pitts exceeded the authoritygiven to them when they added Campania as a party to the settlement agreement. Count IIalleged Rowland and Rooks Pitts were negligent for adding Campania instead of the real client,CGI, to the settlement agreement. These two counts were the same as the claims raised inCampania's proposed counterclaim in the federal fees case. Count III alleged Rooks Pitts andRowland were negligent in various other aspects of the defense of Metropolitan in Mann,including failure to have the products case against Metropolitan dismissed, failure to file anindemnity claim against the manufacturer, and failure to prepare for the possibility that themanufacturer would settle with Mann. According to Campania, but for this negligence it wouldnot have had to pay $500,000 to Mann. Count III is nearly identical to the claim raised byCampania in the federal malpractice action.

In April 2001, Rowland and Rooks Pitts filed 2-619 motions to dismiss Campania's claimsagainst them contained in the counterclaim and the third party complaint. The trial court grantedthe motions.⁽¹⁾

DECISION

We review de novo a trial court's dismissal of an action under section 2-619 of the IllinoisCode of Civil Procedure, 735 ILCS 5/2-619 (West 2002). Nowak v. St. Rita High School, 197Ill. 2d 381, 389, 757 N.E.2d 471 (2001).

I. JUDICIAL ESTOPPEL

Initially, Campania contends Rooks Pitts should be barred from raising the doctrine of resjudicata in this case because the firm argued to the contrary in the federal fees case. Specifically,Campania says that in its response to Campania's motion for leave to file the counterclaims,Rooks Pitts made the following statements:

"There is no need to complicate these proceedings with a claim that more logically should,and will be, litigated in another case.

***

The discovery Campania wants on its proposed counterclaims can be done just as well inthe state court proceeding."

We disagree with Campania.

The doctrine of judicial estoppel prevents a party from asserting inconsistent positions inseparate proceedings to receive favorable judgments in each. Ceres Terminals, Inc. v. ChicagoCity Land & Trust Co., 259 Ill. App. 3d 836, 850, 635 N.E.2d 485 (1994). In Ceres Terminal,Inc., we noted Illinois courts have generally recognized the following five elements as necessaryto the application of judicial estoppel:

"(1) the two positions must be taken by the same party; (2) the positions must be taken injudicial proceedings; (3) the positions must be given under oath; (4) the party must havesuccessfully maintained the first position, and received some benefit thereby; and (5) thetwo positions must be 'totally inconsistent.'" Ceres Terminals, Inc., 259 Ill. App. 3d at 851(internal quotations omitted).

Here, nothing in the record shows Rooks Pitts received any benefit from the statements itmade in its response. The language employed by the district court in its order suggests themotion was denied because it was filed after discovery had closed. Nothing in the court's ordersuggested its decision was based on Rooks Pitts' assertions. Because Campania cannot show allthe elements listed in Ceres Terminals, Inc., Rooks Pitts is not barred from raising the doctrine ofres judicata here.

II. RES JUDICATA

"[A] final judgment on the merits rendered by a court of competent jurisdiction acts as abar to a subsequent suit between the parties involving the same cause of action" under thedoctrine of res judicata. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 302, 703N.E.2d 883 (1998). Res judicata promotes judicial economy by requiring parties to litigate in onecase all claims arising out of the same group of operative facts. Nowak, 197 Ill. 2d at 393. Thedoctrine applies to not only what was decided in the first actions, but also "those matters thatcould have been decided in that suit." River Park, Inc., 184 Ill. 2d at 302.The following requirements must be met for the doctrine of res judicata to apply: (1) acourt of competent jurisdiction rendered a final judgment on the merits; (2) there is an identity ofcause of action; and (3) there is an identity of parties or their privies. Nowak, 197 Ill. 2d at 390;River Park, Inc., 184 Ill. 2d at 302.

Here, the parties do not dispute the existence of identity of parties in the various suits atissue. We limit our discussion to the remaining two elements.

A. Final Judgment on the Merits

The first question we must address is whether there was a final adjudication on the meritsin the federal court. According to Rooks Pitts and Rowland, there were two final adjudicationson the merits that bar Campania's claims. First, they say, the district court's dismissal of thefederal malpractice case with prejudice satisfies this prerequisite. Second, the district court'srefusal to allow Campania to file a counterclaim in the federal fees case coupled with the districtcourt's ultimate ruling in favor of Rooks Pitts served as a final adjudication on the merits. Weconclude both the dismissal of the federal malpractice case with prejudice and the judgment in thefederal fees case served as adjudications on the merits.

1. The Federal Malpractice Case

Rowland and Rooks Pitts contend that despite the fact the court's order was in response toCampania's motion to voluntarily dismiss the action, the court's order dismissing the case withprejudice was, in effect, an involuntary dismissal. This, they say, renders the dismissal a finaladjudication on the merits under Illinois Supreme Court Rule 273. 134 Ill. 2d R. 273; see alsoDeLuna v. Treister, 185 Ill. 2d 565, 708 N.E.2d 340 (1999).

Illinois Supreme Court Rule 273 states:

"Unless the order of dismissal or a statute of this State otherwise specifies, an involuntarydismissal of an action, other than a dismissal for lack of jurisdiction, for improper venue,or for failure to join an indispensable party, operates as an adjudication on the merits." 134 Ill. 2d R. 273.

The court in DeLuna v. Treister explained that under this rule, the inclusion of "withprejudice" in an order dismissing a case is not dispositive of whether the dismissal is anadjudication on the merits for purposes of applying the doctrine of res judicata. DeLuna, 185 Ill.2d at 576. Rather, the rule "is triggered by an involuntary dismissal for a reason other than thosespecifically excepted." DeLuna, 185 Ill. 2d at 576.

Rule 273 and DeLuna provide no guidance in this instance. The federal malpractice casewas not involuntarily dismissed. The case was dismissed with prejudice pursuant to Campania'smotion to voluntarily dismiss the case. Knodle v. Jeffrey, 189 Ill. App. 3d 877, 545 N.E.2d 1017(1989), is instructive here.

In Knodle, one of the issues before the court was whether a voluntary dismissal in aseparate federal action served to bar the action before it under the doctrine of res judicata. In thefederal action, the parties stipulated to the voluntary dismissal of the case with prejudice. Theparty that sought to avoid the application of res judicata suggested the stipulation for voluntarydismissal with prejudice was agreed to in error.

The court said the voluntary dismissal with prejudice should be treated as a final judgmenton the merits for purposes of applying the doctrine of res judicata. Knodle, 189 Ill. App. 3d at885-86. With respect to the party's contention the stipulation to the voluntary dismissal withprejudice was made in error, the court said it was irrelevant to a determination of whether thejudgment of dismissal operated as a bar to the state action. Knodle, 189 Ill. App. 3d at 886. Thecourt said the proper recourse for such a contention would have been a direct attack on thedismissal order in the district court or by appeal in the federal court, "not [a collateral attack], in asubsequent State court suit." Knodle, 189 Ill. App. 3d at 886.

Knodle's analysis was based in part on the principle that a State court order dismissing asuit with prejudice is considered a final judgment on the merits for purposes of applying resjudicata. Knodle, 189 Ill. App. 3d at 885. Although, as evidenced in Rule 273 and noted inDeLuna, this general principle no longer applies to involuntary dismissals, we have found no law,nor has Campania cited any, rendering this principle inapplicable to voluntary dismissals withprejudice. We follow Knodle in this case.

Campania filed a motion in the district court to voluntarily dismiss its malpractice casewithout prejudice. The court granted the motion, but with prejudice. That dismissal withprejudice is an adjudication on the merits for purposes of the application of the doctrine of resjudicata. That the district court did not provide precisely the relief Campania sought in its motionis an issue Campania more properly should have addressed in the federal court of appeals.

2. The Federal Fees Case

Rooks Pitts and Rowland also contend the district court's judgment in the federal fees casecoupled with the denial of Campania's motion for leave to file the counterclaims served as a finaladjudication on the merits. Rooks Pitts and Rowland rely on Peregrine Financial Group, Inc. v.Ambuehl, 309 Ill. App. 3d 101, 722 N.E.2d 723 (1999). Campania does not directly address thiscontention.

In Peregrine Financial Group, Inc., the plaintiff, a commodities broker, filed a previouscase against defendants alleging breach of agreements and fraud. One week before the trial, thedefendants sought leave to, among other things, file counterclaims against the plaintiff allegingbreach of contract, misrepresentation and fraud. The trial court denied the motion because ofuntimeliness. The case proceeded to trial, and the court entered judgment in favor of the plaintiffon the contract actions. In the meantime, the defendants had initiated arbitration raising claimsidentical to those in the proposed counterclaim.

The plaintiff brought this suit in the chancery court, contending the defendants should bebarred by the doctrine of res judicata from relitigating in the arbitration action those matters thatcould have been raised in the original action. The chancery court ultimately concluded thedefendants were barred by res judicata and collateral estoppel from relitigating those issuesdetermined in the original action.

On appeal, we were required to determine whether, among other things, res judicatabarred the actions brought by the defendants in arbitration. The final judgment on the merits, weconcluded, was the trial court's judgment in the plaintiff's original suit. Peregrine Financial Group,Inc., 309 Ill. App. 3d at 109. We did not consider the denial of the motion for leave to file thecounterclaim in determining whether an adjudication on the merits existed. Rather, we consideredthe counterclaims in discussing whether identity of cause of action existed. Peregrine FinancialGroup, Inc., 309 Ill. App. 3d at 109.

Here, the final adjudication on the merits was the district court's final judgment in the feescase. As in Peregrine Financial Group, Inc., we reserve our discussion of the counterclaims untilwe address the identity of causes of action between the claims filed here and those raised in thecounterclaims.

B. Identity of Causes of Action

In River Park, Inc., the Supreme Court adopted the "transactional" test for determiningwhether causes of action are the same for purposes of res judicata. River Park, Inc., 184 Ill. 2d at310. Under this approach, "the assertion of different kinds or theories of relief still constitutes asingle cause of action if a single group of operative facts give[s] rise to the assertion of relief." River Park, Inc., 184 Ill. 2d at 307. In further defining the transactional test, the Supreme Courtquoted section 24 of the Restatement (Second) of Judgments:

" '(1) When a valid and final judgment rendered in an action extinguishes the plaintiff'sclaim pursuant to the rules of merger or bar ***, the claim extinguished includes all rightsof the plaintiff to remedies against the defendant with respect to all or any part of thetransaction, or series of connected transactions, out of which the action arose.

(2) What factual grouping constitutes a 'transaction', and what groupings constitute a'series', are to be determined pragmatically, giving weight to such considerations aswhether the facts are related in time, space, origin, or motivation, whether they form aconvenient trial unit, and whether their treatment as a unit conforms to the parties'expectations or business understanding or usage." River Park, Inc., 184 Ill. 2d at 311-12,quoting Restatement (Second) of Judgments