American Access Casualty Co. v. Alcauter
2017 IL App (1st) 160775
| Ill. App. Ct. | 2017Background
- AACC sued for a declaratory judgment seeking to deny coverage to its insured, Jose Alcauter, based on an insurance cooperation clause after Alcauter failed to appear at a mandatory arbitration that produced a $10,000 award to Kimberly Krebs.
- AACC’s theory was that Alcauter willfully refused to cooperate; AACC submitted evidence (letters, firm practice affidavit) asserting Alcauter had been notified and confirmed attendance by phone.
- At trial Krebs introduced certified criminal and IDOC records showing Alcauter was in custody (arrested April 16, 2013), undermining AACC’s willfulness theory; the trial court found AACC’s phone-call evidence fabricated and ruled coverage was owed.
- Krebs then moved for Rule 137 sanctions against AACC and its counsel James Newman, arguing they knew (or should have known) Alcauter was incarcerated and nonetheless proceeded to trial.
- The trial court found Newman received proof of incarceration by certified mail weeks before trial, did not reasonably investigate, did not inform the court, and nonetheless tried the case; it awarded sanctions of attorney fees and costs.
- The appellate court affirmed, concluding counsel failed to make a reasonable inquiry and to promptly inform the court once evidence disproved their claim, justifying Rule 137 sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 137 sanctions were appropriate for proceeding on a claim lacking factual support | Newman reasonably relied on opposing counsel and Panek; he was unaware of incarceration when signing summary judgment and did not knowingly file false pleadings | Newman had certified-mail receipt of incarceration evidence weeks before trial, failed to investigate or notify court, and proceeded to trial on a baseless claim | Sanctions affirmed: counsel failed to make reasonable inquiry and did not promptly inform court, violating Rule 137 |
| Whether an attorney must dismiss or notify court once a claim is shown to be unfounded | AACC: Rule 137 targets pleadings filed earlier; a later-discovered defect does not automatically require amendment or withdrawal | Rule 137 implicitly requires prompt dismissal or at least forthright notice to court/opposing counsel when a pleading is shown unfounded | Court: Attorney must promptly inform court/opposing counsel or seek time to investigate when new information undermines pleadings |
Key Cases Cited
- Lake Environmental, Inc. v. Arnold, 2015 IL 118110 (Ill. 2015) (Rule 137 requires prompt action when a claim is shown unfounded)
- Morris B. Chapman & Associates, Ltd. v. Kitzman, 193 Ill. 2d 560 (Ill. 2000) (trial court’s imposition of Rule 137 sanctions reviewed for abuse of discretion)
- Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460 (Ill. 1998) (Rule 137 is a penal rule and is strictly construed)
- Nissenson v. Bradley, 316 Ill. App. 3d 1035 (Ill. App. Ct. 2000) (attorney must forthrightly inform court when allegations lose factual support)
- Walsh v. Capital Engineering & Manufacturing Co., 312 Ill. App. 3d 910 (Ill. App. Ct. 2000) (failure to disclose an expert’s changed opinion warranted Rule 137 sanctions)
- Chicago Title & Trust Co. v. Anderson, 177 Ill. App. 3d 615 (Ill. App. Ct. 1988) (attorney’s duty to notify court and opposing counsel of known falsity or loss of factual support)