Borsellino v. Putnam
2011 IL App (1st) 102242
Ill. App. Ct.2011Background
- Consolidated appeals arise from a fraud dispute tied to a prior derivative action involving CTA and related entities.
- 1998 derivative suit claimed CTA assets were diverted to Archipelago and CTA resources misused; settlement released claims for $250,000.
- 1998 settlement included a mutual release and assignment of CTA interests; Borsellino signed on behalf of IMA and individually.
- 2000 and 2004 suits alleged fraud in the negotiation/formation of the settlement and sought damages.
- Trial court awarded $10.78 million; posttrial proceedings adjusted damages and prejudgment interest.
- Court of Appeal held that the settlement release barred the fraud claims and reversed the judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Borsellino had standing to sue for fraud in the framing of the settlement. | Borsellino has a cognizable personal stake through the release. | Standing rests on CTA's interests; Borsellino lacks personal injury. | Borsellino had standing. |
| Whether the release bars the fraud claim. | Releases can be rescinded for fraud in inducement; or ratified claims may be allowed. | Release bars claims arising from or related to the settled dispute. | Release barred the fraud claim. |
| Whether the claim is barred by res judicata. | Independent of release, the fraud claim should proceed. | Res judicata applies after release analysis. | Not reached; release controlling. |
| Whether Illinois law recognizes a fraud-in-the-inducement claim to invalidate a release. | Fraud in inducement renders release voidable; alternatively ratifiable. | Release can be enforced despite fraud. | Court acknowledged fraud-in-inducement theories but applied release-bar as dispositive. |
Key Cases Cited
- Thornwood, Inc. v. Jenner & Block, 344 Ill. App. 3d 15 (2003) (release interpretation and rescission/ratification considerations under Illinois law)
- Golden v. McDermott, Will & Emery, 299 Ill. App. 3d 982 (1998) (ratification of releases after fraud; severance agreements)
- Hurd v. Wildman, Harrold, Allen & Dixon, 303 Ill. App. 3d 84 (1999) (release enforcement and ratification by conduct)
- Tower Investors, LLC v. 111 East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019 (2007) (fraud in contract renders contract voidable; ratification possible)
- Spirit of Excellence, Ltd. v. Intercargo Insurance Co., 334 Ill. App. 3d 136 (2002) (standing concerns where damages belong to third-party creditor)