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FOURTH DIVISION
JUNE 26, 2003

1-02-1365

JUSTICE HARTMAN delivered the opinion of the court:

Plaintiff, John Prodromos, filed a four count first amendedcomplaint against defendants, Everen Securities, Inc. (Everen),Principal Financial Securities, Inc. (Principal), Daniel Westrope,and Dennis Klaeser, alleging breach of fiduciary duty and fraud inconnection with defendants' alleged usurpation of plaintiff'sproposed purchase of Home Federal Savings Bank (Home Bank). Thecircuit court granted summary judgment in favor of defendants oncount I (breach of fiduciary duty) and counts II and IV (fraud) ofthe first amended complaint, from which plaintiff appeals.

Principal was a securities brokerage firm that had both aretail sales and an investment banking branch. In January 1998,Principal merged with Everen. Westrope was employed by Everen asan investment banker from June 1995 until February 1998. Plaintiffwas a retail brokerage client of Everen.

Prior to January 1998, plaintiff wanted to acquire and takeover operation of Home Bank, which plan he communicated to StevenGolber, his retail broker at Everen. Golber set up a January 1998meeting with plaintiff and Westrope, at which plaintiff explainedhis ideas regarding Home Bank. Westrope agreed to callinstitutional shareholders of Home Bank stock to see if they wouldvote their proxies in favor of plaintiff. Westrope did not knowabout Home Bank prior to this meeting. In February 1998, Westropeleft Everen and began working at State Financial ServicesCorporation (State Financial). In June 1998, State Financialacquired Home Bank and Westrope was named regional president of thenewly acquired bank. In June 1998, Everen was engaged by StateFinancial to write the fairness opinion on Home Bank.

Based on these facts, plaintiff filed his first amendedcomplaint. Count I alleged breach of fiduciary duty againstWestrope and Everen. Count II alleged fraud against Westrope andcount IV alleged that Everen was vicariously liable for thatfraud.⁽²⁾

Golber testified by deposition that, at plaintiff's request,he provided plaintiff with public information regarding Home Bankin 1997. He bought Home Bank stock in order to secure the bank'sannual reports and other financial information. Golber also helpedplaintiff purchase Home Bank stock. Plaintiff explained his ideasabout acquiring and taking over operation of Home Bank. Golber setup the January 1998 meeting with plaintiff and Westrope at whichplaintiff explained his ideas regarding Home Bank. Westropesuggested contacting institutional shareholders to see if theywould vote their proxies in favor of plaintiff and agreed to makethose phone calls. No engagement letter was signed at the meetingand there was no discussion of fees. Golber called Janus Funds,one of the institutional investors, and was told that they had soldtheir position in Home Bank.

After learning that Westrope had left Everen, Golber set up ameeting in early March 1998 with plaintiff and Klaeser, aninvestment banker at Everen. At the meeting, plaintiff explainedhis ideas regarding Home Bank. Klaeser told plaintiff that Everencould not help him because Everen did not do hostile takeovers.

In June 1998, Golber learned that State Financial had acquiredHome Bank. Golber contacted Robert Ollech who told him that theState Financial/Home Bank deal was Westrope's deal. Golber calledplaintiff and informed him of the State Financial/Home Bank dealand Ollech's comments regarding Westrope. Golber admitted that hedid not do any investigation into what role, if any, Westrope orEveren played in the State Financial/Home Bank deal.

Plaintiff testified by deposition that he discussed his HomeBank idea with Golber in late 1997 or January 1998. At the January1998 meeting with Golber and Westrope, Westrope agreed to contactinstitutional investors to see whether they would back their votingpower for plaintiff and whether anyone would want to buy stock inHome Bank because of new management. There was no discussion of aformal engagement letter at the meeting. According to plaintiff,Westrope said that the fees would depend on what he had to do. Westrope indicated that Everen might want to invest in the deal. Plaintiff stated that there was never a more specific discussion offees because "we never got to the point of what they were going todo." Plaintiff contacted Westrope several times following themeeting, but never discussed an engagement letter or fees. Westrope informed plaintiff that one mutual fund already had soldits Home Bank stock and that he had contacted two others and waswaiting for responses.

In March 1998, Golber informed plaintiff that Westrope hadleft Everen. Plaintiff met with Golber and Klaeser. During thatmeeting, plaintiff told Klaeser that they needed enough votes toget two people on the board of Home Bank, whether it took buyingstock or mutual fund backing. According to plaintiff, Klaeser was"extremely rude" and said we do not do anything like this. Afterthis meeting, plaintiff contacted Dean Witter and Merrill Lynch inNew York. Both requested that he come to New York to present hisidea. Plaintiff refused. Plaintiff met with George Moser, whoowned three banks, regarding his desire to take over operation ofHome Bank. Moser testified by deposition that plaintiff had puttogether an investor group to acquire Home Bank and asked if hewanted to participate. Moser agreed to participate, but the amountof his investment was never formalized.

At some point after the March 1998 meeting, plaintiffcontacted Banco Popular regarding the Home Bank deal, but halteddiscussions when Banco Popular requested more specific information. After learning of the State Financial/Home Bank deal, plaintiffdiscussed his ideas regarding Home Bank with Saul Binder at SuccessBank. According to plaintiff, Binder offered him 2.5% of theacquisition price as a commission if Success Bank acquired HomeBank. Binder sent a letter to plaintiff expressing Success Bank'sinterest in the Home Bank deal. Plaintiff presented that letter toHome Bank. Plaintiff received a letter from Home Bank indicatingthat they were not interested in the Success Bank deal.

Plaintiff testified by deposition that he had no informationthat Everen provided investment banking service to State Financialin its takeover of Home Bank. Plaintiff further stated that he hadno factual basis for his allegation that Westrope used plaintiff'sconfidential information to get a position at State Financial.

Daniel Westrope testified by deposition that he met withplaintiff and Golber in January 1998. At the meeting, plaintiffdiscussed his ideas regarding Home Bank. Prior to the meeting,Westrope did not know about Home Bank and he did no research on itfollowing the meeting. Westrope offered to call institutionalshareholders of Home Bank as an accommodation to a client of thefirm. Westrope's intention in making the calls was to try to putdissatisfied shareholders in touch with plaintiff. Westrope madesome calls, but received no responses.

While at Everen, State Financial was one of Westrope'sclients. Westrope's responsibilities included identifyingpotential acquisition candidates for State Financial. Westropestated that he had been in discussions with State Financialregarding a job since December 1997. He left Everen and joinedState Financial in February 1998. Westrope stated that he neveridentified Home Bank to State Financial as a potential merger oracquisition candidate. The first time he discussed Home Bank withanyone at State Financial was when he was called to a meeting withMichael Falbo and Steven Hovde in March 1998, where Hovde presentedHome Bank as a potential merger or acquisition candidate.

Dennis Klaeser testified by deposition that he told plaintiffin March 1998 that he was surprised Westrope had agreed to make thetelephone calls for plaintiff because Everen did not get involvedwith hostile takeovers. He stated that he and Everen were engagedin early June 1998 to prepare a fairness opinion on Home Bank forState Financial. Everen was paid $250,000 to prepare the fairnessopinion. Klaeser further indicated that if Westrope had beenengaged by a client, he "absolutely would have known."

Michael Falbo, President and CEO of State Financial, testifiedby deposition that when Westrope was working at Everen he wouldlook for potential acquisitions for State Financial. Westrope didnot, however, suggest Home Bank as a possible acquisitioncandidate. Falbo learned about Home Bank from Steven Hovde inMarch 1998. According to Falbo, State Financial engaged an outsidefirm to do a fairness opinion on Home Bank after a definitiveagreement had been reached with Home Bank.

Steven Hovde, executive vice president of Hovde Financial,testified by deposition that Hovde Financial acts as an investmentbanker in the sale of banks. In September 1997, Hovde Financialwas retained by Home Bank to facilitate a merger or sale of thebank. At that time Hovde created a list of about 20 potentialbuyers which did not include State Financial. Hovde stated that heidentified State Financial as a second tier potential buyer forHome Bank in 1997 or 1998. He presented the Home Bank acquisitionopportunity to State Financial at a meeting in March 1998.

Defendants successfully moved for summary judgment on countsI (fiduciary duty), II (fraud) and IV (vicarious liability forfraud) of the amended complaint. With regard to count I, thecircuit court found there was no genuine issue of fact regardingthe existence of a fiduciary relationship. "Without any evidenceof the creation of a fiduciary relationship, there can be no actionfor breach thereof, and so summary judgment in favor of Westropeand Everen is entered." With regard to counts II and IV the courtfound that there was no evidence that Westrope's alleged fraudulentconduct was a proximate cause of plaintiff's damages.

Summary judgment will be granted when the pleadings,depositions, exhibits, and affidavits on file reveal no genuineissue as to any material fact and establish that the moving partyis entitled to judgment as a matter of law. 735 ILCS 5/2-1005(West 2000); Outboard Marine Corp. v. Liberty Mutual Insurance Co.,154 Ill. 2d 90, 607 N.E.2d 1204 (1992) (Outboard Marine). Allevidence must be construed in the light most favorable to thenonmoving party and most strictly against the moving party. Gatlinv. Ruder, 137 Ill. 2d 284, 560 N.E.2d 586 (1990). Plaintiff neednot prove his case at the summary judgment stage, but must identifysome facts that arguably would entitle him to judgment. Reese v.Forsythe Mergers Group, Inc., 288 Ill. App. 3d 972, 682 N.E.2d 208(1997). Appellate review of orders granting summary judgment is denovo. Outboard Marine, 154 Ill. 2d at 101.

Plaintiff first contends that the circuit court erred ingranting summary judgment in favor of defendants on count I. Specifically, plaintiff argues that a principal-agent relationshipexisted between Westrope and plaintiff and a fiduciary relationshiparose therefrom as a matter of law. See Stathis v. Geldermann,Inc., 295 Ill. App. 3d 844, 692 N.E.2d 798 (1998) (Stathis)("[w]hen a principal/agent relationship is present, a fiduciaryrelationship arises as a matter of law.") Therefore, defendantsowed plaintiff the duty to be honest and loyal in representingplaintiff's interests, and were prohibited from acquiring personalinterests adverse to plaintiff, or from dealing independently ofplaintiff for their own personal gain. Stathis, 295 Ill. App. 3dat 860. See also Restatement (Second) of Agency