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Docket No. 98073-Agenda 21-November 2004.
BHI CORPORATION et al., Appellants, v. LITGEN CONCRETE
CUTTING & CORING COMPANY, Appellee.

Opinion filed March 24, 2005.

JUSTICE FITZGERALD delivered the opinion of the court:

This case is before us for the third time. The discrete issue in thisappeal is whether defendants who enter settlement agreements withplaintiffs in which they purchase assignments of plaintiffs' remainingclaims against a nonsettling defendant may pursue these claims eventhough the settlement agreements and the assignments were not madein good faith. We agree with the appellate court that the settlingdefendants here may not pursue the assigned claims against thenonsettling defendant. We affirm.

BACKGROUND

In 1989, a building that housed art galleries and studios inChicago's River North district was destroyed in a fire. Scores ofgallery owners and artists filed separate complaints against the ownersand managers of the building, as well as the general contractors andsubcontractors hired to renovate it. The complaint alleged that thevarious defendants, including Litgen Concrete Cutting and CoringCompany (Litgen), caused or contributed to the fire.

The plaintiffs eventually settled all of their claims against all ofthe defendants except Litgen.⁽¹⁾ The settlement agreements charged thata Litgen employee caused the fire, but that Litgen "does not wish tocooperate with the Plaintiffs and Settling Defendants." The settlingdefendants agreed to pay the plaintiffs $4.5 million for the release ofany claims arising from the fire: "This amount shall be paid toPlaintiffs on the condition that the trial Court [sic] grants the parties*** a finding that the *** settlement is made in good faith" pursuantto the Contribution Act. "This payment," the parties stated, "shall bepaid irrespective of whether Litgen takes an appeal of the finding ofgood faith." The settling defendants also agreed to pay the plaintiffsan additional $4.5 million for the assignment of any claims they mayhave against Litgen arising from the fire. The plaintiffs promised thatthey had not already released their claims against Litgen, that theywould not release these claims without the written consent of thesettling defendants, and that they would "reasonably cooperate" withthe settling defendants in the pursuit of the assigned claims againstLitgen. The settling defendants, in turn, promised to reimburse theplaintiffs for the cost of their cooperation.

The circuit court of Cook County found these agreements to bein good faith pursuant to section 2(c) of the Contribution Act (see 740ILCS 100/2(c) (West 1994)) and dismissed Litgen's contributionclaims against the settling defendants pursuant to section 2(d) of theAct (see 740 ILCS 100/2(d) (West 1994)). The trial court allowed theplaintiffs to nonsuit their claims against Litgen.

Litgen appealed, arguing that the trial court erred in finding theagreements were made in good faith. While this appeal was pending,the settling defendants filed a complaint on the assigned claims againstLitgen. Before the appellate court, the settling defendants filed amotion to dismiss Litgen's appeal, asserting that the new complaintrendered the trial court's good-faith finding nonfinal and unappealable,robbing the appellate court of jurisdiction. The appellate court agreedwith the settling defendants and dismissed Litgen's appeal. SeeDubina v. Mesirow Realty Development, Inc., 283 Ill. App. 3d 36(1996). We reversed and remanded to the appellate court. See Dubinav. Mesirow Realty Development, Inc., 178 Ill. 2d 496 (1997).

On remand, the appellate court initially noted that the settlingdefendants characterized their procedural posture as plaintiffs on theassigned claims, rather than as tortfeasors jointly liable with Litgen onthe original claims. Dubina v. Mesirow Realty Development, Inc., 308Ill. App. 3d 348, 355 (1999). The appellate court then stated:

"The argument is not without a certain laissez-faireappeal. But the Contribution Act, embodying the will of thelegislature and the public policy of Illinois, is not a laissez-faire statute. The Act departs from the common law andawards settling defendants an incentive to resolve the issue oftheir liability without litigation by shielding them from furtherexposure. Having taken advantage of the shield afforded bythe Act, [settling] defendants now wish to buy the sword ofthe original plaintiff[s]." Dubina, 308 Ill. App. 3d at 355.

The appellate court observed that if the settling defendants couldshed their roles as tortfeasors for the roles of unfettered plaintiffs, theycould pursue a recovery otherwise prohibited by the Contribution Act.Dubina, 308 Ill. App. 3d at 356. The appellate court continued:

"[T]he settlement agreements here allow settling defendantsto recoup their share of damages, perhaps make a profit, andyet be shielded from contribution under the Contribution Act.The result is antithetical to the Contribution Act, whether itis achieved by 'assignment' or 'contribution,' and whetherthe settling defendants are labeled 'plaintiffs' or 'jointtortfeasors.' The assignments allow the settling defendants toseek indirectly a reimbursement the Contribution Actprohibits and undermine the equitable sharing of damages."Dubina, 308 Ill. App. 3d at 357.

The appellate court held that the trial court erred in finding theagreements were in made good faith, reversed the dismissal ofLitgen's contribution claims, and remanded to the trial court forfurther proceedings. Dubina, 308 Ill. App. 3d at 358.

We granted the settling defendants' petition for leave to appealand affirmed. See Dubina v. Mesirow Realty Development, Inc., 197Ill. 2d 185 (2001). We noted that, though property damage claimsgenerally are assignable in Illinois, the assignments here must beconsidered in the context of the settlement agreements. Dubina, 197Ill. 2d at 194. We concluded that the settlement agreements, and byextension the assignments, violated the terms of and policies behindthe Act. First, the agreements and assignments violated section 2(c)of the Act because they deprived Litgen of its statutory right to asetoff. Dubina, 197 Ill. 2d at 195. The settling defendants labeled halfof the $9 million it gave to the plaintiffs as a payment for theassignments; if Litgen lost at trial, it would not receive credit for $4.5million exchanged between its joint tortfeasors and the plaintiffs.Dubina, 197 Ill. 2d at 195. Second, the agreements and assignmentsdefeated the Act's goal of equitable apportionment of damages amongjoint tortfeasors. Dubina, 197 Ill. 2d at 195-96. The settlingdefendants would recoup the settlement amount-$4.5 million-as wellas any damages exceeding the $9 million it gave to the plaintiffs fromLitgen if they succeeded on the assigned claims. Dubina, 197 Ill. 2dat 196. Third, and finally:

"The settlement agreements and assignments also violatethe Act because they allow the settling defendants toaccomplish indirectly that which they could not dodirectly-recover contribution from Litgen. *** [T]he Actprohibits a settling tortfeasor from recovering contributionfrom another tortfeasor whose liability is not extinguished bythe settlement. [Citation.] Here, the plaintiffs assigned theircauses of action to the settling defendants, thereby allowingthe settling defendants, in the guise of plaintiffs, to indirectlyrecover contribution from Litgen. By incorporating anagreement to obtain an object forbidden by law, suchagreements may be regarded as collusive." Dubina, 197 Ill.2d at 196, citing In re Guardianship of Babb, 162 Ill. 2d 153,172 (1994).

Because the agreements and the assignments violated the Act, they didnot satisfy the good-faith requirement of the Act. Dubina, 197 Ill. 2dat 196.

On remand, the settling defendants again refiled their complainton the assigned claims against Litgen. Litgen filed a motion to dismiss,arguing that the settling defendants could not pursue the assignedclaims because the settlement agreement which contained theassignments was not made in good faith. The trial court grantedLitgen's motion and dismissed the settling defendants' complaint. Thesettling defendants appealed.

The appellate court affirmed. 346 Ill. App. 3d 300. The appellatecourt held that the trial court was compelled to dismiss the settlingdefendants' complaint because, pursuant to our second opinion inDubina, the assignments were "unenforceable." 346 Ill. App. 3d at307. The appellate court explained that the settling defendants'strategy of pursuing the assigned claims would undermine the twopolicies behind the Act:

"The settling defendants initially attempted to use the Act toshield themselves from liability, but then, by the terms of theagreements, went outside the Act to pursue the nonsettlingdefendant, Litgen. Such a strategy clearly undermines thepurpose of the Act to attain equitable apportionment ofdamages among tortfeasors. ***

To circumvent the good-faith requirement of the Act, thesettling defendants here devised a fallback strategy toabandon the protection of the Act, and then sue as assignees.While the settling defendants take the position that nothing inthe Contribution Act prohibits an alternative strategy when agood-faith settlement is denied, there can be no question thattheir alternative strategy undermines the goal of the Act:settlement as an alternative to litigation. *** To allow thesettling defendants to first seek the benefits of the Act, and,if denied the benefits, to pursue an alternative course, insuresthat the goal of the Act is thwarted, and all parties (includingthe original plaintiffs) have nothing to look forward to butanother round of litigation." 346 Ill. App. 3d at 307.

The appellate court observed that the settlement agreementswould have met the good-faith requirement if a portion of thesettlement amount had not been labeled a payment for the assignmentsof the plaintiffs' claims. 346 Ill. App. 3d at 307. In strong language,the appellate court concluded:

"[T]he Contribution Act first has been used, then abused.The public policy that encourages the peaceful settlement ofdisputes as an alternative to litigation has been undermined.There is no way to unpack this luggage and start all overagain without undermining the Act. As a matter of publicpolicy, an assignment such as the one in this case, born of asettlement that was found to be not made in good faith, mustbe held to be unenforceable." 346 Ill. App. 3d at 307-08.

We granted the settling defendants' petition for leave to appeal.177 Ill. 2d R. 315(a). On the law issues before us, our reviewproceeds de novo. Hawes v. Luhr Brothers, Inc., 212 Ill. 2d 93, 98(2004).

ANALYSIS

The Contribution Act codified our opinion in Skinner v. Reed-Prentice Division Package Machinery Co., 70 Ill. 2d 1 (1977), andcreated a right of contribution among joint tortfeasors. See 740 ILCS100/2(a) (West 2002). A defendant who has paid more than its prorata share of damages to the plaintiff has a right of contribution fromits codefendants. See 740 ILCS 100/2(b) (West 2002). A good-faithsettlement discharges any contribution liability for settling defendants(see 740 ILCS 100/2(d) (West 2002)) and it reduces the amount ofany recovery against nonsettling defendants (see 740 ILCS 100/2(c)(West 2002)). A good-faith settlement, however, does not entitlesettling defendants to recover contribution from nonsettlingdefendants. See 740 ILCS 100/2(e) (West 2002).

The settling defendants acknowledge that our last opinion in thiscase held that the settlement agreements were not made in good faithbecause they were conditioned upon the plaintiffs' assignments. SeeDubina, 197 Ill. 2d at 194 ("the assignments were a conditionprecedent to the settlement agreements"). The settling defendantsargue, however, that our last opinion did not affect the legal validityof the settlement agreements or the assignments that they contained.They assert that "[t]he Contribution Act behaves as a carrot, not astick." According to the settling defendants, "At most, the absence ofgood-faith findings made the [settling defendants'] claims againstLitgen potentially less valuable by exposing them to Litgen'scounterclaims for contribution. It did not eliminate the [settlingdefendants'] right to assert those claims." In short, the settlingdefendants insist that they simply wish to abandon the protection thata good-faith settlement would provide under the Act and proceed onthe assigned claims against Litgen, subject to its contribution claims.

The settling defendants describe the assigned claims as "gardenvariety claims for property damage." That characterization, however,ignores the history and context of those claims. As we noted in ourlast opinion in this case, "we cannot look at the assignment ofplaintiffs' claims in a vacuum, but must consider the assignments inconjunction with the settlement agreements." Dubina, 197 Ill. 2d at194. A more candid description of the claims here would be "propertydamage claims bought for millions of dollars from the originalplaintiffs as part of a settlement agreement found not to be made ingood faith." The fact that the assignees were the settling defendantsmay not, as they contend, alter the nature of the claims that wereassigned (see Collins Co. v. Carboline Co., 125 Ill. 2d 498, 512(1988) ("Once made, an assignment puts the assignee into the shoesof the assignor")), but it does affect our analysis of whether publicpolicy allows the settling defendants to prosecute them.

As we have consistently stated, the Act furthers two policies:promoting settlement and ensuring equitable apportionment ofdamages. See Johnson v. United Airlines, 203 Ill. 2d 121, 133 (2003).Specifically, the Act promotes settlement by providing that adefendant who enters a good-faith settlement with the plaintiff isdischarged from any contribution liability to a nonsettling defendant.Babb, 162 Ill. 2d at 171, citing 740 ILCS 100/2(c), (d) (West 1992).The Act ensures equitable apportionment of damages, mainly, bycreating a right of contribution among defendants. Babb, 162 Ill. 2dat 171, citing 740 ILCS 100/2(b) (West 1992). But it also ensuresequitable apportionment of damages "by providing that the amountthat the plaintiff recovers on a claim against any other nonsettlingtortfeasors will be reduced or set off by the amount stated in thesettlement agreement." Babb, 162 Ill. 2d at 171, citing 740 ILCS100/2(c) (West 1992). Further, the Act provides that a settling jointtortfeasor may not recover contribution from a nonsettling jointtortfeasor. See 740 ILCS 100/2(e) (West 2002). This rule, too, fostersequitable apportionment because it prevents a settling defendant, whodecides how to value its liability, from obtaining contribution from anonsettling defendant, whose pro rata share of damages has not yetbeen fixed by a fact finder. The settling defendants here play up theirpurported willingness to forgo the protections that the Act offers tojoint tortfeasors who settle in good faith. They have no choice, afterthe holding in our last opinion that the settlement agreements andassignments together violated section 2(e) of the Act. See Dubina,197 Ill. 2d at 196.

Section 2(e) provides, "A tortfeasor who settles with a claimantpursuant to paragraph (c) is not entitled to recover contribution fromanother tortfeasor whose liability is not extinguished by thesettlement." 740 ILCS 100/2(e) (West 2002). Here, Litgen's potentialliability was not snuffed, but rather kindled, by the settlementagreements, so the settling defendants could resort to their "fallbackstrategy" and pursue the assigned claims in the event that they couldnot obtain a good-faith finding.⁽²⁾ Looks are not deceiving. Whether therecovery sought by the settling defendants is grounded upon theContribution Act or the assignments, it is still contribution from anonsettling tortfeasor. As the appellate court aptly stated, "theassignments flowing from a bad settlement cannot sanitize the settlingdefendants' attempt to collect contribution." 346 Ill. App. 3d at 306.

An arrangement by which a settling defendant attempts to obtainindirect contribution from a nonsettling defendant by an assignment ofclaims violates the Contribution Act. We cannot allow the settlingdefendants to contract an end run around section 2(e). Accordingly,we hold that the settling defendants may not pursue the assignedclaims. See Alder v. Garcia, 324 F.2d 483, 485 (10th Cir. 1963);DeJong v. B.F. Goodrich, Inc., 96 Mich. App. 36, 41, 292 N.W.2d157, 160 (1980). Contrary to the settling defendants' contentions, thisholding does not subvert the Act by creating a limitation that thelegislature did not express. Rather, this opinion, like our opinion inBabb, bolsters the Act and its policy of equitable apportionment.

CONCLUSION

For the reasons that we have stated, we affirm the appellatecourt's judgment.

Affirmed.

JUSTICE FREEMAN, specially concurring:

In Dubina v. Mesirow Realty Development, Inc., 197 Ill. 2d 185,198 (2001) (Harrison, C.J., dissenting, joined by Freeman andKilbride, JJ.), the majority held that the agreements between theplaintiffs and the settling defendants, violated the terms of the JointTortfeasor Contribution Act (740 ILCS 100/2 (West 1994)), becausethe agreements deprived Litgen, the nonsettling defendant, of its rightto a setoff. Under the agreements, the settling defendants paid $4.5million to the plaintiffs in settlement of the plaintiffs' claims, and $4.5million for the assignments of the plaintiffs' claim against thenonsettling defendant. Thus, Litgen was only entitled to a setoff of$4.5 million, although the plaintiffs had received $9 million. TheDubina court also held that the agreements defeated the Act'spurpose of equitably distributing among all joint tortfeasors the burdenof compensating a plaintiff. The settling defendants stood to recoupthe $4.5 million denominated as payment for the assignments as wellas any damages exceeding $9 million. Thus, the settling defendantscould accomplish indirectly that which they could not dodirectly-recover contribution from Litgen. The majority remanded thecause for further proceedings.

In dissent, Chief Justice Harrison noted that when a settlingtortfeasor can establish that the settlement was supported byconsideration, that is prima facie evidence of the settlement's goodfaith. Once a preliminary showing of good faith is made, apresumption arises that the settlement is valid, and the burden shiftsto the party challenging the settlement to show that it was not madein good faith. Chief Justice Harrison opined that the trial court did notabuse its discretion when it determined that the agreements were ingood faith. Further, Chief Justice Harrison maintained that theagreements facilitated rather than impeded the settlement process, andsupported the policy of the Act. Chief Justice Harrison found no meritto the contention that the assignments would apportion the burden ofdamages among defendants inequitably. Lastly, Chief Justice Harrisonnoted that any concern about the potential setoff was prematurebecause Litgen had not yet been found liable for damages at a trial.Moreover, while the terms of the agreements allocated only half of thetotal consideration paid to the settlement, the Act makes clear suchlabels are not controlling. If the trial court ultimately determined thatthe full $9 million should be attributed to the settlement, it could allowthe full $9 million as a setoff, notwithstanding the fact that theagreements allocated only $4.5 million to the settlement.

On remand, the settling defendants attempted to pursue theclaims that the plaintiffs had assigned to them. Litgen filed a motionto dismiss, arguing that the settling defendants could not pursue theassigned claims because the settlement agreements which containedthe assignments were not made in good faith. The trial court grantedthe motion and dismissed the settling defendants' complaint. Theappellate court affirmed. This court granted leave to appeal, and nowaffirms.

In today's opinion, the majority holds that the settling defendantsmay not pursue the assigned claim against Litgen. In doing so, themajority rejects the settling defendants' argument that they want toabandon the protection that a good-faith settlement provides under theAct and proceed on the assigned claims against Litgen. The majoritystates that whether the recovery sought by the settling defendants isgrounded upon the Act or the assignments, it is still contribution froma nonsettling tortfeasor. The majority concludes that an arrangementby which a settling defendant attempts to obtain indirect contributionfrom a nonsettling defendant by an assignment of claims violates theAct and is unenforceable.

The majority's reasoning is consistent with Dubina, 197 Ill. 2d185. In Dubina the court specifically noted: "The settlementagreements and assignments also violate the Act because they allowthe settling defendants to accomplish indirectly that which they couldnot do directly-recover contribution from Litgen. *** [T]he Actprohibits a settling tortfeasor from recovering contribution fromanother tortfeasor whose liability is not extinguished by thesettlement." Dubina, 197 Ill. 2d at 196. Dubina being settled law, Imust reluctantly join in the result reached by the majority.

The result reached by the majority, however, is troubling. InDubina the court held that the settlement agreements were notentered into in good faith because the agreements conditionedsettlement upon assignments of the plaintiffs' claims. In today'sopinion, the majority holds that the assignments are unenforceablebecause they flowed from the settlement agreements. The end resultis that Litgen, the nonsettling defendant whose employee may havecaused the fire, is relieved of liability for the moment. The originalplaintiffs dismissed their action against Litgen years ago. The plaintiffshave no interest in the matter, having pocketed the $9 million from thesettling defendants. Thus, Litgen is no longer liable to the plaintiffs.As the majority now holds, the assignments of the plaintiffs' claims areunenforceable and the settling defendants cannot recover the $4.5million paid for the assignments or any other monies from thenonsettling defendant. To prevent the settling defendants fromrecovering contribution from Litgen, the court may be allowing Litgento shed its liability for a fire started in all probability by its employee.

Another aspect of the majority opinion is also troubling. It wasnoted in Dubina, 197 Ill. 2d at 188, that some of the assignees wereinsurance companies and other nonparties. The majority opinion in thepresent case does not seem to distinguish between the assignees whowere settling defendants and the assignees who were insurancecompanies and other nonparties. Is it to be understood that theassignments to the insurance companies and other nonparties are alsounenforceable? If so, on what grounds? The rationale for striking thesettlement agreements and the assignments is that the settlingdefendants, being tortfeasors, should not be able to recovercontribution from another tortfeasor whose liability is not extinguishedby the settlement. Does this rationale hold for the insurance companiesand other nonparties? Clarification is needed.

Although the result in the present case follows from Dubina, itrepresents an anomaly in law and justice. As acknowledged by themajority, the Contribution Act was intended to ensure equitableapportionment of damages among tortfeasors. See slip op. at 7. Theresult reached today is simply incompatible with the policy ofequitable apportionment of damages. It is an aberrance that challengesthe legislature to reconsider the matters at issue and make theappropriate public policy determinations.

JUSTICE KILBRIDE joins in this special concurrence.

1. Another defendant, Gelick Foran Associates, Inc., did not settle, but it later received summary judgment and plays no role in this appeal.

2. In a sense, the phrase