Pepper Construction Company v. Palmolive Tower Condominiums, LLC
2016 IL App (1st) 142754
| Ill. App. Ct. | 2016Background
- Pepper (general contractor) and Bourbon (subcontractor) worked on an interior build‑out for Palmolive Tower. Disputes led Pepper to arbitrate claims against Palmolive; several subcontractors (including Bourbon) participated as pass‑through claimants under a Joint Interest and Liquidating Agreement (JILA).
- The arbitration panel treated subcontractors as not separate parties, allowed their counsel to assist Pepper as cocounsel, and awarded Pepper substantial damages (including listed pass‑through amounts for Bourbon) while noting it lacked jurisdiction to resolve disputes among Pepper and subcontractors (including allocation of backcharges).
- The arbitration award (confirmed in Cook County) and a later global settlement between Pepper and Palmolive left only Pepper v. Bourbon disputes for the circuit court: Bourbon sued Pepper for >$3M; Pepper counterclaimed for backcharges (~$55k) and sought recovery related to a ~$450k shower‑floor judgment awarded against Pepper in arbitration.
- At summary judgment, the trial court barred Bourbon from asserting that Pepper caused damages that Bourbon had earlier attributed to Palmolive (applying judicial estoppel), but declined to find res judicata or collateral estoppel barred Bourbon’s claims; other issues (e.g., enforceability of the JILA) were left for later.
- At bench trial the court granted Bourbon a directed verdict on Pepper’s shower‑floor claim (finding Pepper failed to prove it actually paid the ~$450k judgment or suffered measurable loss) but awarded Pepper $36,312 in backcharges. Both parties’ fee petitions were denied; both parties appealed.
Issues
| Issue | Plaintiff's Argument (Bourbon) | Defendant's Argument (Pepper) | Held |
|---|---|---|---|
| Applicability of judicial estoppel | Judicial estoppel should apply to Pepper (it presented Bourbon’s pass‑through numbers in arbitration) and not to Bourbon | Bourbon is estopped from now blaming Pepper for damages it attributed to Palmolive in arbitration | Reversed: trial court erred to the extent it applied judicial estoppel to bar Bourbon; judicial estoppel does not apply to the legal‑conclusion issue of who is liable and the record was unclear about factual inconsistency |
| Res judicata / collateral estoppel bar to Bourbon’s contract claim | Arbitration and judgment resolved the same claims; Bourbon was in privity with Pepper at arbitration | Arbitration didn’t adjudicate Bourbon’s contractual dispute with Pepper; subcontract issues were not before panel | Affirmed (res judicata rejected; collateral estoppel rejected): Bourbon’s breach claim arises from different operative facts and Bourbon lacked adversarial control in arbitration |
| Effect of Pepper’s Requests to Admit (Rule 216) re: pass‑through numbers and backcharges | Pepper made judicial admissions that Bourbon was owed $3,185,234 and that Pepper already deducted $55,031 backcharges, so trial evidence to the contrary should be excluded | Responses were at most evidentiary/admissions of what Pepper claimed in arbitration; explanation and extrinsic evidence permitted | Affirmed in part: the challenged responses were evidentiary (or ambiguous) admissions; trial court did not err admitting explanatory evidence; requests did not conclusively bind Pepper |
| Directed verdict on shower‑floor damages | Pepper suffered loss because the shower‑floor judgment reduced its arbitration recovery/settlement with Palmolive | Pepper failed to show it actually paid the ~$450k judgment or otherwise suffered measurable, non‑speculative loss | Affirmed: directed verdict for Bourbon; Pepper did not prove actual injury tied to payment of the shower‑floor judgment |
Key Cases Cited
- People v. Jones, 223 Ill. 2d 569 (2006) (judicial estoppel applies to factual, not merely legal, inconsistencies)
- Cirro Wrecking Co. v. Roppolo, 153 Ill. 2d 6 (1992) (coparty/control inquiry for collateral estoppel among codefendants)
- Nowak v. St. Rita High School, 197 Ill. 2d 381 (2001) (res judicata transactional test and elements)
- Peregrine Financial Group, Inc. v. Martinez, 305 Ill. App. 3d 571 (1999) (arbitration awards generally have res judicata/collateral estoppel effect)
- Paschen Contractors, Inc. v. City of Kankakee, 353 Ill. App. 3d 628 (2004) (recognition of contractor pass‑through claims under Illinois law)
- Watson Lumber Co. v. Guennewig, 79 Ill. App. 2d 377 (1967) (contractor/customer price reduction where there is less than full performance)