1550 MP Road LLC v. Teamsters Local Union No. 700
2017 Ill. App. LEXIS 699
Ill. App. Ct.2017Background
- Plaintiff (1550 MP Road LLC) and Teamsters Local 726 entered an LPA in May 2008; Clair (Secretary‑Treasurer) signed though Local 726 did not follow its bylaws (member notice/vote, two officer signatures). Local 726 occupied the premises in Jan 2009.
- The International Brotherhood of Teamsters investigated Local 726 for financial mismanagement; an Independent Review Board recommended trusteeship. The International imposed trusteeship and later revoked Local 726’s charter, creating Local 700 (consolidating Local 726 and part of Local 714) and transferring members, records, assets, liabilities, and CBAs to Local 700.
- Local 700 (through trustee Coli) refused to honor the LPA; plaintiff sued for breach (successor liability), alternatively alleged fraudulent transfer under the Uniform Fraudulent Transfer Act (UFFTA) and tortious interference against Coli and others.
- Trial court found the LPA valid; held Local 700 liable under merger/mere‑continuation/fraud exceptions to successor nonliability; found fraudulent transfer of assets (including CBAs); found Coli liable for tortious interference; awarded ~ $2M plus fees. International and other officials were cleared.
- On appeal the court: affirmed enforceability of the LPA and successor‑liability judgment against Local 700; reversed the UFFTA judgments (no transfer by a debtor; value of CBAs not proved); reversed Coli’s tortious‑interference judgment (privileged conduct); affirmed the damages award based on an enforceable liquidated‑damages clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LPA is void ab initio for failure to comply with Property of Unincorporated Associations Act or Local 726 bylaws | LPA valid; defendants forfeited any statutory‑invalidity defense; even if not, contract should be enforced | Noncompliance with statutory/bylaw signatory and notice/vote requirements renders LPA void | LPA not void ab initio; Act is silent on remedy; public policy favors enforcement of otherwise lawful contracts |
| Whether Clair had authority to bind Local 726 | Clair acted as principal officer; plaintiff relied on his apparent authority; board later ratified | Clair lacked actual authority under bylaws (needed president + secretary‑treasurer signatures); plaintiff should have inquired | Clair lacked actual authority but had apparent authority; executive board ratified the LPA; Local 726 bound by LPA |
| Whether Local 700 is liable as successor for Local 726’s breach | Local 700 absorbed membership, assets, CBAs and functions; consolidation/merger and mere‑continuation exceptions apply | Labor unions lack traditional ‘owners’; continuity‑of‑ownership test inapplicable; no fraudulent purpose shown | Adopted multi‑factor framework (relationship, continuity, notice, public policy); found consolidation, substantial continuity, notice of liabilities, and public policy support successor liability—Local 700 liable |
| Whether CBAs/dues are transferable “assets” under the Fraudulent Transfer Act and whether a transfer occurred by a debtor | CBAs and future dues are valuable assets transferred to Local 700; transfer was designed to avoid LPA liability | CBAs are not transferable assets because members choose bargaining agent; International effectuated the dissolution/transfer, not Local 726 as debtor | No transfer by a debtor (International performed dissolution/transfer); uncertainty whether CBAs are transferable assets; plaintiff also failed to prove value of any CBAs—UFTA judgments reversed |
| Whether Coli is personally liable for tortious interference with LPA | Coli orchestrated dissolution and then refused to perform, intentionally inducing breach | Coli acted in official capacities (International trustee, JC25 president, Local 700 trustee) and was privileged to protect members’ interests | Coli’s actions were privileged fiduciary conduct in furtherance of his duties; tortious‑interference judgment reversed |
| Whether LPA’s liquidated‑damages clause (§14(B)(i)) is enforceable | Clause reasonably approximates landlord’s present value of unpaid rent; damages uncertain and difficult to prove; expert computed present value | Clause is an unenforceable penalty and duplicates actual damages; plaintiff’s actual damages would be ascertainable | Clause enforceable—present value of remaining rent is a valid liquidated‑damages measure; damages award affirmed |
Key Cases Cited
- K. Miller Constr. Co., Inc. v. McGinnis, 238 Ill. 2d 284 (2010) (statutory noncompliance does not automatically void a contract; analyze legislative intent and public policy)
- Vine St. Clinic v. HealthLink, Inc., 222 Ill. 2d 276 (2006) (courts reluctant to declare contracts void as against public policy)
- Vernon v. Schuster, 179 Ill. 2d 338 (1997) (rationale and scope of mere‑continuation successor liability explained)
- HPI Health Care Services, Inc. v. Mt. Vernon Hosp., Inc., 131 Ill. 2d 145 (1989) (elements of tortious interference and the privilege for corporate fiduciaries)
- Eychaner v. Gross, 202 Ill. 2d 228 (2002) (standard for manifest‑weight review of factual findings)
- In re Gen. Teamsters, Warehousemen & Helpers Union Local 890, 225 B.R. 719 (Bankr. N.D. Cal. 1998) (bankruptcy analysis casting doubt on the tradable/liquidation value of CBAs and future dues)