G.M. Sign, Inc. v. Schane
985 N.E.2d 685
Ill. App. Ct.2013Background
- TCPA class action against Schane; State Farm denied coverage under policy TCPA exclusion.
- Settlement approved with a $4.9 million judgment against Schane to be satisfied by State Farm.
- GM Sign filed a coverage action seeking declaration of coverage; court held State Farm had duty to defend/indemnify if settlement was reasonable.
- State Farm filed a 2-1401 petition to vacate/modify the class judgment; trial court dismissed for lack of due diligence.
- GM Sign argued no standing for nonparty insurer; issue on appeal whether State Farm had standing and whether diligence and meritorious defense requirements were met.
- Court concludes State Farm had standing and was diligent; remands for evidentiary hearing on meritorious defense
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to file 2-1401 petition | GM Sign: State Farm lacked standing as nonparty | State Farm: standing under Hurlbert exceptions | State Farm had standing to petition under 2-1401 |
| Diligence in original action | GM Sign: State Farm ignored defense option | State Farm: timely awareness and response inconsistent with estoppel | State Farm diligent in original action |
| Diligence in filing petition | GM Sign: petition filed after settlement undiscoverable facts | State Farm: timely after discovering facts in discovery | State Farm filed petition within a month of discovering supporting facts |
| Meritorious defense or claim | GM Sign: no meritorious defense | State Farm: potential meritorious defenses concerning class notice, adequacy, and settlement fairness | Issue to be resolved at evidentiary hearing; record insufficient to determine meritorious defense |
| Remand for evidentiary hearing | GM Sign: no need for further proceedings | State Farm: merits require evidentiary development | Remand for an evidentiary hearing on petition merits |
Key Cases Cited
- Hurlbert v. Brewer, 386 Ill. App. 3d 1096 (Ill. App. 2d Dist. 2008) (nonparties may have limited standing under 2-1401)
- In re Estate of Reilly, 68 Ill. App. 3d 906 (Ill. App. 1st Dist. 1979) (judgment attack by nonparty generally prohibited)
- Elmhurst National Bank v. Novak, 137 Ill. App. 3d 904 (Ill. App. 2d Dist. 1985) (2-1401 relief not available to nonparties absent exceptions)
- People ex rel. Village of Lake Bluff v. City of North Chicago, 224 Ill. App. 3d 866 (Ill. App. 2d Dist. 1992) (section 2-1401 not to reopen final judgment for nonparties)
- Frandsen v. Anderson, 108 Ill. App. 2d 194 (Ill. App. 2d Dist. 1969) (attorney not entitled to set aside judgment)
- Vincent v. Airoom, Inc., 226 Ill. 2d 209 (Ill. 2007) (2-1401 relief requires meritorious defense and timely diligence)