                                       2013 IL App (1st) 121112

                                                                              FOURTH DIVISION
                                                                              September 30, 2013

No. 1-12-1112

ANTHONY LUTKAUSKAS, TAXPAYER FOR AND                              )   Appeal from the
ON BEHALF OF LEMONT-BROMBEREK COMBINED                            )   Circuit Court of
SCHOOL DISTRICT 113A,                                             )   Cook County
                                                                  )
                Plaintiff-Appellant,                              )
                                                                  )
      v.                                                          )
                                                                  )   No. 11 CH 35191
DR. TIMOTHY RICKER, ROBERT BECKWITH, JOHN                         )
WOOD, DR. MARY GRICUS, LISA WRIGHT, KEVIN                         )
DOHERTY, DAVID LEAHY, GWEN O’MALLEY, SUE                          )
MURPHY, AL ALBRECHT, UNDERWRITERS AT                              )
LLOYD’S, LONDON, KNUTTE ASSOCIATES P.C.                           )   Honorable
AND OTHER PERSONS WHOSE NAMES ARE NOT                             )   LeRoy K. Martin, Jr.,
YET KNOWN,                                                        )   Judge Presiding.
                                                                  )
                Defendants-Appellees.                             )
                                                                  )
                                                                  )
                                                                  )
LAURA REIGLE, DUANE BRADLEY, LOUIS EMERY,                         )   Appeal from the
AND JANET HUGHES, TAXPAYERS FOR AND ON                            )   Circuit Court of
BEHALF OF LEMONT BROMBEREK COMBINED                               )   Cook County
SCHOOL DISTRICT 113A,                                             )
                                                                  )
                Plaintiffs-Appellants,                            )
                                                                  )   Nos. 10 CH 53428 and 10
      v.                                                          )   CH 53429
                                                                  )
DR. TIMOTHY RICKER, ROBERT BECKWITH, JOHN                         )
WOOD, DR. MARY GRICUS, LISA WRIGHT, KEVIN                         )   Honorable
DOHERTY, DAVID LEAHY, GWEN O’MALLEY, SUE                          )   LeRoy K. Martin, Jr.,
MURPHY, AL ALBRECHT, UNDERWRITERS AT                              )   Judge Presiding.
LLOYD’S, LONDON, KNUTTE ASSOCIATES P.C.                           )
AND OTHER PERSONS WHOSE NAMES ARE NOT                             )
YET KNOWN,                                                        )

                Defendants-Appellees.
No. 1-12-1112
       JUSTICE EPSTEIN delivered the judgment of the court, with opinion.
       Justice Fitzgerald Smith concurred in the judgment and opinion.
       Justice Pucinski's dissent to be filed later.

                                            OPINION

¶1     In this consolidated appeal, five taxpayer plaintiffs, acting on behalf of the Lemont

Bromberek Combined School District 113A, seek reversal of the circuit court’s dismissal of their

claims brought against two school district employees, seven school board members, the district’s

accounting firm, and the district’s surety. Plaintiffs alleged that the district employees and board

members violated section 20-5 of the School Code (105 ILCS 5/20-5 (West 2010)) when they

engaged in or permitted a pattern of spending money from the district’s working cash fund

without a school board resolution approving the transfer of funds from the working cash fund.

For the reasons that follow, we affirm.

                                      ¶ 2 BACKGROUND

                                 ¶ 3 Article 20 of the School Code

¶4     Plaintiffs’ complaints center on a violation of article 20 of the School Code, which

authorizes certain school districts to create working cash funds. See 105 ILCS 5/20-1 (West

2010). The working cash fund allows a district to “have in its treasury at all time sufficient

money to meet demands thereon for expenditures for corporate purposes” before the district

receives taxes designated for those purposes. Id. In other words, “the purpose of the working

cash fund is to provide a reserve upon which school districts may draw in anticipation of tax

collections.” In re Application of Walgenbach, 104 Ill. 2d 121, 125 (1984). To fund the working

cash fund, the district “may incur an indebtedness and issue bonds as evidence thereof” (105



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No. 1-12-1112
ILCS 5/20-2 (West 2010)) or may levy taxes (105 ILCS 5/20-3 (West 2010)). Money from the

working cash fund “may be used by the school board for any and all school purposes and may be

transferred in whole or in part to the general funds or both of the school district and disbursed

therefrom in anticipation of the collection of taxes lawfully levied for any or all purposes.” 105

ILCS 5/20-4 (West 2010). When the district receives taxes as anticipated, “the fund shall

immediately be reimbursed therefrom until the full amount so transferred has been retransferred

to the fund.” Id. Under Section 20-5 of the School Code, the board must pass a resolution

directing the transfer of monies from the working cash fund:

               “Moneys in the working cash fund shall be transferred from the working

       cash fund to another fund of the district only upon the authority of the school

       board which shall from time to time by separate resolution direct the school

       treasurer to make transfers of such sums as may be required for the purposes

       herein authorized.” 105 ILCS 5/20-5 (West 2010).

Section 20-5 sets forth specific information to be contained within the resolution (e.g., “the taxes

in anticipation of which [a] transfer is to be made and from which the working cash fund is to be

reimbursed”). See id.

¶5     Section 20-10 allows a school district to abate the working cash fund at any time, by

adoption of a resolution, and “direct the transfer at any time of moneys in that fund to any fund or

funds of the district most in need of the money.” 105 ILCS 5/20-10 (West 2010). Similarly,

section 20-8 allows a district to abolish its working cash fund, by adoption of a resolution, and

“direct the transfer of any balance in such fund to the educational fund at the close of the then



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No. 1-12-1112
current school year.” 105 ILCS 5/20-8 (West 2010).

                                 ¶ 6 Original Taxpayer Complaints

¶7      On December 17, 2010, four taxpayer plaintiffs filed two separate, but nearly identical,

lawsuits, which were subsequently consolidated into one action. Hughes brought the first

complaint and Reigle, Bradley, and Emery brought the second. The lawsuits named as

defendants the district superintendent, the district treasurer, and seven school board members

(collectively, the district defendants) in their individual capacities.

¶8      Plaintiffs alleged that the district defendants violated section 20-5 of the School Code,

when they repeatedly transferred (or allowed the transfer of) money from the district’s working

cash fund without board resolution. Plaintiffs alleged that between 2007 and 2010, the district

spent in excess of the amounts allocated to a number of individual funds that provide capital for

the district’s annual activities. To make up for shortfalls in these funds, the district drew money

from the working cash fund. Plaintiffs further alleged that the district defendants never

reimbursed the working cash fund, and instead the school board passed resolutions to abate and

abolish the working cash fund. On December 2, 2009, members of the board passed a resolution

to partially abate the working cashing fund in the amount of $4,849,442, leaving a remainder of

$643,500. On April 28, 2010, the board approved a resolution to abolish the working cash fund,

with the money to be permanently transferred to the education fund.

¶9      Plaintiffs sought relief under section 20-6 of the School Code, which provides:

        “Any member of the school board of any school district to which this Article is

        applicable, or any other person holding any office, trust, or employment under



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No. 1-12-1112
       such school district who wilfully violates any of the provisions of this Article

       shall be guilty of a business offense and fined not exceeding $10,000, and shall

       forfeit his right to his office, trust or employment and shall be removed therefrom.

       Any such member or other person shall be liable for any sum that may be

       unlawfully diverted from the working cash fund or otherwise used, to be

       recovered by such school district or by any taxpayer in the name and for the

       benefit of such school district in an appropriate civil action; provided that the

       taxpayer shall file a bond for all costs and be liable for all costs taxed against the

       school district in such suit, and judgment shall be rendered accordingly. Nothing

       herein shall bar any other remedies.” 105 ILCS 5/20-6 (West 2010).

Under the authority of section 20-6, plaintiffs sought an order declaring the district defendants

forfeit their offices and employment with the district, assessing a $10,000 statutory fine against

each of the district defendants, and entering judgment against the defendants personally for “an

amount sufficient to make [the district] whole and replace the public funds shown by the

evidence to have been unlawfully diverted” from the working cash fund.

¶ 10   Along with these claims, plaintiffs brought a single count for “accountant negligence”

against the district’s former accountant, Knutte and Associates, alleging that Knutte issued clean

audit reports, but knew or should have known of the district defendants’ transfer of funds in

violation of the School Code. Plaintiffs also brought claims against an entity affiliated with

Certain Underwriters at Lloyd’s London (Underwriters), the surety that bonded the school

treasurer. Plaintiffs alleged that the surety was obligated to pay damages caused to the district by



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No. 1-12-1112
the treasurer’s “failure to faithfully discharge the duties of his office according to law.”

¶ 11   On July 27, 2011, the circuit court struck the claims against the district defendants with

leave to replead. Judge Novak ruled that plaintiffs did not have standing to seek criminal

penalties prescribed in section 20-6, and as to any civil recovery, the court ruled that the

allegations were insufficient to allege a violation of section 20-5. The court dismissed the claims

against Knutte with prejudice, finding that plaintiffs did not have standing to bring the claim.

Pursuant to Illinois Supreme Court Rule 304(a) (eff. Jan. 1, 2006), the court ruled that there was

no just cause to delay appeal of the claim against Knutte. The surety was apparently not properly

named as a defendant, and plaintiffs later voluntarily dismissed their complaints against the

improperly named entity.

        ¶ 12 The First Amended Consolidated Complaint and the Lutkauskas Complaint

¶ 13   On August 29, 2011, plaintiffs filed a first amended consolidated complaint, again

alleging that the district defendants violated article 20 of the School Code, but adding a breach of

fiduciary duty claim against the district defendants. Plaintiffs restated their claims against the

properly named entity for the surety, Underwriters at Lloyds. On October 11, 2011, a fifth

taxpayer plaintiff, Lutkauskas, filed his complaint, which was later consolidated with the other

two taxpayer complaints. The Lutkauskas complaint was identical to the first amended

consolidated complaint of the other plaintiffs, but added new claims against Knutte for

accounting malpractice, negligence, breach of fiduciary duty, and aiding the district defendants in

violating the School Code.

¶ 14   Both the amended consolidated complaint and the Lutkauskas complaint provided



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No. 1-12-1112
additional detail regarding the alleged illegal transfer of funds. Specifically, plaintiffs alleged

“[i]t appears that the District monies, though specifically appropriated to specific funds/purposes,

were held in a commingled account. Thus, when money was spent beyond the legal

appropriation for a particular fund, it actually drained or diverted the Working Cash Fund,

without the appropriate Board Action and documentation for such dispersions.” The complaint

also cited email correspondence among the district defendants purporting to show that they were

aware that the working cash funds were being used between 2007 and 2010, without board

resolutions approving any transfers.

¶ 15   On March 15, 2012, the district defendants and Underwriters at Lloyd’s moved to dismiss

plaintiffs’ first amended consolidated complaint and the Lutkauskas complaint. Knutte filed a

motion to dismiss the Lutkauskas complaint. The trial court granted these motions. While the

defendants asserted various bases on which to dismiss the complaints, Judge Martin ruled that

plaintiffs’ complaint failed to state a claim and the district defendants had legislative immunity.

Judge Martin also stated that plaintiffs were “basically arguing a windfall” and that “nothing in

the complaint *** would tell the reader that money was used for some purpose other than for

school purposes.” As a result, the court ruled that Underwriters at Lloyd’s had no liability as

surety and dismissed the complaints against it. With respect to Knutte, the circuit court

dismissed Lutkauskas’s claims with prejudice on the basis of res judicata. Plaintiffs appealed.

                                          ¶ 16 ANALYSIS

¶ 17   Defendants moved to dismiss under sections 2-619 and 2-615 of the Code of Civil

Procedure (735 ILCS 5/2-615, 2-619 (West 2010)). A motion to dismiss under section 2-615 of



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No. 1-12-1112
the Code (735 ILCS 5/2-615 (West 2010)) challenges the legal sufficiency of the complaint.

Wakulich v. Mraz, 203 Ill. 2d 223, 228 (2003). Section 2-619 of the Code of Civil Procedure

allows dismissal where, in pertinent part, plaintiff does not have standing to bring an action. 735

ILCS 5/2-619(2) (West 2010).

¶ 18    We review the circuit court’s dismissal of plaintiffs’ complaints de novo. Feltmeier v.

Feltmeier, 207 Ill. 2d 263, 266 (2003). This court may affirm the circuit court’s dismissal for

any reason appearing in the record. See Gunthorp v. Golan, 184 Ill. 2d 432, 438 (1998) (the trial

court may be affirmed on any basis in the record without regard to whether the trial court relied

upon that ground or whether the trial court’s rationale was correct); Geick v. Kay, 236 Ill. App.

3d 868, 873 (1992) (although the trial court’s order did not specify whether the counts were

being dismissed under section 2-615 or section 2-619, the reviewing court may affirm a correct

decision for any reason appearing in the record, regardless of the basis relied upon by the trial

court); Mitsias v. I-Flow Corp., 2011 IL App (1st) 101126, ¶ 47 (appellate court has jurisdiction

to consider issue not reached by circuit court on motion to dismiss, where issue was properly

raised in the circuit court but court granted motion to dismiss on another basis).

¶ 19    On appeal, defendants raise a host of arguments in support of affirming the district court’s

dismissal of the taxpayers’ complaints. Defendant Timothy Ricker filed a brief on his own

behalf, arguing that: (1) plaintiffs are not entitled to any relief because the district did not suffer

any monetary damages and any recovery would constitute an unjust windfall; (2) the breach of

fiduciary duty claims fail because plaintiffs have not alleged damages; (3) plaintiffs lack standing

to seek criminal penalties prescribed in section 20-6; (4) legislative immunity bars any claim



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No. 1-12-1112
against Ricker; (5) plaintiffs failed to plead a cause of action under section 20-6 or for breach of

fiduciary duty; (6) claims in the Lutkauskas complaint are time-barred; (7) plaintiffs lack

standing to bring the instant case because they never demanded the district bring the action itself;

and (8) plaintiffs’ complaints were properly dismissed because they fail to name an indispensable

party. The remaining district defendants raise many of the same arguments, but also argue that

(1) claims against certain district defendants should be dismissed because none of the allegations

in the complaint as to the working cash fund transfers were directed at these individuals; and (2)

the claims should be dismissed against the school district defendants in their individual

capacities. Defendant Knutte asserts that the trial court properly dismissed all counts against it

by Lutkauskas based on the doctrine of res judicata. Finally, defendant Underwriters at Lloyd’s

raises several arguments as to why it has no obligation to pay under the treasurer bond, assuming

that any of the allegations against defendant Beckwith are not dismissed for other reasons.

                           ¶ 20 Claims Against the District Defendants

¶ 21   Among the various arguments raised in support of dismissal by the district defendants, we

need only address two narrow issues relating to the remedies sought by the taxpayer plaintiffs

against the district defendants.

¶ 22   In their complaints, plaintiffs first ask the court to fine each of the defendants and order

their removal from office under the first sentence of section 20-6:

       “Any member of the school board of any school district to which this Article is

       applicable, or any other person holding any office, trust, or employment under

       such school district who wilfully violates any of the provisions of this Article



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No. 1-12-1112
       shall be guilty of a business offense and fined not exceeding $10,000, and shall

       forfeit his right to his office, trust or employment and shall be removed

       therefrom.” 105 ILCS 5/20-6 (West 2010).

The district defendants argue that the forfeiture of office and fines prescribed in the first sentence

of section 20-6 are penalties only the State of Illinois can impose. In its July 27, 2011 ruling

dismissing Reigle’s and Hughes’ original complaints, the circuit court agreed. Judge Novak held

that only an appropriate government actor, not taxpayer plaintiffs, would have standing to pursue

these remedies under the statute. The Lutkauskas complaint, which postdated the July 27, 2011

dismissal decision, also sought forfeiture and fines from defendants. In dismissing the

Lutkauskas complaint, Judge Martin agreed with Judge Novak’s ruling, stating that the School

Code “contemplate[s] the State’s Attorney or the [Attorney General’s] office really being the

entity to bring a cause of action and look for penalties or removal from office.”

¶ 23   When considering the proper construction of section 20-6, we strive to “ascertain and

give effect to the legislature’s intent.” See, e.g., Citizens Opposing Pollution v. ExxonMobil

Coal U.S.A., 2012 IL 111286, ¶ 23 (citing In re Donald A.G., 221 Ill. 2d 234, 246 (2006)). “The

best indication of this intent remains the language of the statute itself, which must be given its

plain and ordinary meaning.” Id. We presume that the legislature did not intend absurdity,

inconvenience, or injustice. Id.

¶ 24   In this case, we agree with the circuit court that the first sentence of section 20-6 sets

forth criminal penalties. The first sentence of section 20-6 speaks to a party “guilty of a business

offense.” 105 ILCS 5/20-6 (West 2010). The term “business offense” is specifically defined in



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No. 1-12-1112
the Unified Code of Corrections. See 730 ILCS 5/5-1-2 (West 2008) (“ ‘Business Offense’

means a petty offense for which the fine is in excess of $1,000.”). Our supreme court has

described the specific penalties imposed in section 20-6 (a “fine” and “forfeit[ure]” of the “right

to office”) as criminal in nature. See In re Walgenbach, 104 Ill. 2d 121, 125 (1984) (stating that

section 20-6 “provides for criminal sanctions against any member of a school board who wilfully

violates the provisions of article 20”). And we have recognized that the General Assembly may

seek to enforce compliance with a statute by specifying that a violation constitutes a “business

offense,” which we described as a “criminal penalty.” See Parra v. Tarasco, Inc., 230 Ill. App.

3d 819, 823 (1992) (noting that Illinois Choke-Saving Methods Act imposed a “criminal

penalty,” where it provided that anyone violating it “is guilty of a business offense and shall be

fined $500” ).

¶ 25    In response, plaintiffs claim that they “are asking for—and entitled to—forfeiture of

office by the District 113A Defendants still holding office (not Ricker, who resigned as

Superintendent) and monetary penalties, notably that will go to the District, not Plaintiffs.”

Beyond this mere assertion, however, plaintiffs provide no authority for why they, as private

taxpayers acting on behalf of the school district, have the power to impose criminal penalties for

what is a criminal violation. Nor do plaintiffs provide any authority for the proposition that

statutory penalties for a “business offense” can be awarded as a remedy in a civil action.

Accordingly, we agree with the circuit court that plaintiffs did not have standing to seek

forfeiture of office or to impose fines in a civil suit.

¶ 26    While the first sentence of section 20-6 speaks to criminal violations, the second sentence



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No. 1-12-1112
of section 20-6 references “an appropriate civil action” brought by the district or “by any

taxpayer in the name and for the benefit of such school district.” Private taxpayers may bring

suit on behalf of the district to recover “any sum that may be unlawfully diverted from the

working cash fund or otherwise used.” 105 ILCS 5/20-6 (West 2010).

¶ 27   Plaintiffs seek to recover “an amount sufficient to make District 113A whole and replace

the public funds shown by the evidence to have been unlawfully diverted from the Working Cash

Fund.” The complaint alleges that at times between 2007 and 2010, the district drew money out

of the working cash fund in order to cover shortfalls in other funds. Later in 2009 the board

formally approved the fund’s abatement, with all money being transferred to some other funds

(the complaint does not specify which funds). In 2010, the board formally approved the fund’s

abolishment, with the remaining money being transferred to the education fund.

¶ 28   The district defendants argue that there are no allegations that they used the funds at issue

“for anything other than legitimate District expenses.” According to defendants, allowing the

taxpayer plaintiffs to recover from defendants in this circumstance “would result in a windfall to

the District by reimbursing it for money it never lost.” Judge Martin agreed, stating that

plaintiffs were “basically arguing a windfall” and that “nothing in the complaint *** would tell

the reader that money was used for some purpose other than for school purposes.” Plaintiffs

argue that because section 20-5 plainly forbids interfund transfers without board resolution, any

money transferred without board resolution should be considered a “sum *** unlawfully diverted

from the working cash fund” recoverable by the taxpayer plaintiffs on behalf of the district. 105

ILCS 5/20-6 (West 2010). According to plaintiffs, defendants are personally liable for



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No. 1-12-1112
$5,492,942.1

¶ 29   The parties’ dispute about the proper remedy reflects an underlying disagreement about

whether the monies at issue were “unlawfully diverted.” The School Code does not define

“unlawful diversion” or “diversion,” and we may consult a dictionary to ascertain the plain and

ordinary meaning of those terms. Gaffney v. Board of Trustees of the Orland Fire Protection

District, 2012 IL 110012, ¶ 60. Moreover, “words and phrases having well-defined meanings in

the common law are interpreted to have the same meanings when used in statutes dealing with

the same or similar subject matter as that with which they were associated at common law.”

Scott v. Dreis & Krump Manufacturing Co., 26 Ill. App. 3d 971, 983, 326 N.E.2d 74 (1975);

People v. Bailey, 375 Ill. App. 3d 1055, 1061 (2007). We look to the common law meaning of

terms even in statutes dealing with new or different subject matter, to the extent that they appear

fitting and absent evidence indicating a contrary meaning. Advincula v. United Blood Services,

176 Ill. 2d 1, 17 (1996).

¶ 30   At the time section 20-6’s predecessor statute (Ill. Rev. Stat. 1934, ch. 122, ¶¶ 327.31,

327.38) was enacted, Black’s Law Dictionary defined “diversion” as “[a] turning aside or altering

the natural course of a thing,” with the term being “chiefly applied to the unauthorized changing

the course of a water course to the prejudice of a lower proprietor, or to unauthorized or illegal

use of corporate funds.” Black’s Law Dictionary 600 (3d ed. 1933). In a line of cases


       1
          Plaintiffs actually claim that defendants could be liable for as much as $12 million, but
that figure is only used in the complaint with reference to plaintiffs’ allegations that Knutte
issued improper audits: “The effect of these audits was that the illegal misspending,
overspending and illegal transfers described above were concealed, resulting in losses to the
district of more than $12 million.”

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No. 1-12-1112
considering interfund loans, our supreme court has repeatedly defined the “diversion” of funds or

the “unlawful diversion” funds as use for some improper purpose or some purpose specifically

prohibited by statute. As relevant to the issue here, the court explained, “Municipal officers have

no right to divert moneys from one fund to another and different fund for which it was not

appropriated. But the word ‘divert’ is used in the sense of turning such fund permanently from

its purpose or the final appropriation of it to some other use.” Gates v. Sweitzer, 347 Ill. 353, 359

(1932); see also Michaels v. Barrett, 355 Ill. 175, 185-86 (1934) (rejecting argument that statute

providing for use of part of motor fuel tax to pay interest and principal on emergency relief bonds

is an “unlawful diversion” of portion of privilege tax allotted to counties for road purposes,

where collected taxes become public money and may be applied to whatever purpose legislature

determines).

¶ 31   Building from Gates and similar cases, our supreme court has found an improper

diversion of funds where funds are used for a different purpose than allowed by statute. In

People ex rel. Brenza v. Gilbert, 409 Ill. 29 (1951), for example, the court considered a

temporary transfer of funds from a working cash fund for corporation purposes to the county

highway fund. The court distinguished those cases finding no “diversion” of funds when monies

were loaned from one fund to another: “The present case is different from [those cases] in that

there is at least an implied prohibition against using the working cash fund for anything except

the purpose of financing the corporate fund of the county.” Brenza, 409 Ill. 2d at 37. Similarly,

in People ex rel. Redfern v. Penn Central Co., 47 Ill. 2d 412 (1971), the court considered

whether the transfer from the education to the Illinois municipal retirement fund amounted to “an



                                                 14
No. 1-12-1112
unlawful diversion of monies from one fund to another.” Redfern, 47 Ill. 2d at 416. The court

found that the transfer did amount to an unlawful diversion, where the statute at issue did not

allow for “loans between the educational fund and the Illinois municipal retirement fund.” Id. at

418.

¶ 32   In accord with these cases considering the “unlawful diversion” of funds, we conclude

that the plaintiffs cannot recover a monetary award from the defendants, for they have not alleged

that the money transferred from the working cash fund was put towards some improper purpose

forbidden by the statute. Plaintiffs do not allege that defendants violated the School Code by

spending monies from the working cash fund on something other than legitimate school

expenses. See 105 ILCS 5/20-4 (West 2010) (“Moneys in the fund may be used by the school

board for any and all school purposes and may be transferred in whole or in part to the general

funds or both of the school district and disbursed therefrom in anticipation of the collection of

taxes lawfully levied for any or all purposes ***.”). Rather, plaintiffs allege that the board did

not pass any resolution as to the transfer of funds (at least until the board passed resolutions to

abate and then abolish the fund, thereby permanently transferring the working cash funds). We

acknowledge that article 20 also contemplates that money is to be temporarily loaned for tax

anticipation purposes, and the working cash fund is to be reimbursed when those taxes are

collected. Plaintiffs alleged that defendants were using working cash funds to cover shortfalls

due to deficit spending, without ever reimbursing the working cash fund. But here, the school

board effected a permanent transfer of the money by passing resolutions to abate and abolish the

working cash fund. While plaintiffs contend that the resolutions to abate and then abolish the



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No. 1-12-1112
working cash fund were simply made to “cover up” earlier transfers, they do not allege that the

resolutions were improper. Where plaintiffs do not allege that the funds were spent for an

improper purpose, and where the defendants have effected a permanent transfer of working cash

funds as allowed by article 20, plaintiffs cannot show any loss to the district as a result of

defendants’ alleged actions.

¶ 33   Although plaintiffs offer no authority for their proposed interpretation of the statute, they

suggest that the legislature must have meant to allow recovery in a civil suit under these

circumstances to ensure compliance with the statute. Plaintiffs contend that district officials

“could evade any accountability for their illegal conduct regarding the Working Cash Fund by,

even after the fact, simply abolishing the fund.” Our holding is not so broad. We conclude only

that plaintiffs here cannot seek to recover personally from district officials under the civil

recovery provision of section 20-6. If defendants did willfully violate section 20-5, a party with

standing could seek to impose the serious criminal penalties prescribed in section 20-6. Indeed,

the statute provides for criminal penalties for willful violations of “any of the provisions of this

Article” and then separately provides for a civil suit to recover funds “unlawfully diverted.” As

defendants acknowledge, “the statute contains a means to enforce, where appropriate, willful

violations of Article 20 where no actual damages result.”

¶ 34   Accordingly, we affirm the circuit court’s dismissal of plaintiffs’ complaints under

section 2-619. Under section 20-6, the taxpayer plaintiffs do not have standing to seek the

criminal penalties of forfeiture of office or fines. Section 20-6 also does not authorize a civil suit

to recover vast sums of money personally from district defendants for the alleged violation of



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No. 1-12-1112
section 20-5, where there are no allegations that monies from the working cash fund on

something other than legitimate school expenses. Without those allegations, plaintiffs do not

otherwise have standing to recover, on behalf of the district, money transferred without board

resolution, notwithstanding the alleged violation of section 20-5.

¶ 35   Plaintiffs’ breach of fiduciary duty count fails for a similar reason. Like the alleged

section 20-5 violation, the breach of fiduciary duty claim rests on the district defendants’ failure

to pass a board resolution to approve the withdrawal of money from the working cash fund. As

with the School Code violation, plaintiffs seek to recover “an amount sufficient to make [the

district] whole and replace the public funds shown by the evidence to have been unlawfully

diverted form the Working Cash Fund.” As explained above, however, plaintiffs fail to allege

any loss to the district resulting from the district defendants’ failure to obtain approval for fund

transfers. Plaintiffs have thus failed to allege any damages to support their claim for breach of

fiduciary duty. See Bernstein & Grazian, P.C. v. Grazian & Volpe, P.C., 402 Ill. App. 3d 961,

976 (2010) (To prevail on a claim for breach of fiduciary duty, plaintiff must show the existence

of a fiduciary duty, the breach of that duty, and damages proximately caused by the breach.).

¶ 36   Plaintiffs respond that the complaint describes the “deleterious effects of overspending

and damages caused to the district.” Specifically, plaintiffs point to the complaints’ allegations

that “spending beyond appropriation in one year produces negative balances in cash accounts,

which carry over to the next year. Further expenditures beyond appropriations in the years

following dig an even deeper fiscal deceit upon the taxpayers, and others, that keeps growing,

until the District simply runs out of cash, as it appears to be nearing.” On appeal, however,



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No. 1-12-1112
plaintiffs make clear that there is no cause of action based on this alleged budget deficit

spending; according to plaintiffs, those allegations only “provide context” for the causes of

action. Moreover, as noted above, plaintiffs specifically seek to recover those funds that have

been transferred without board approval. We therefore affirm the circuit court’s dismissal of the

breach of fiduciary duty claim. As both counts against the district defendants were properly

dismissed, we also affirm the district court’s dismissal of any claims against Underwriters for

Lloyds.

                              ¶ 37 Lutkauskas’s Claims Against Knutte

¶ 38      The only remaining claims for consideration are Lutkauskas’s claims against Knutte. The

circuit court dismissed Lutkauskas’s claims on the basis of res judicata, finding that the final

judgment in favor of Knutte in the previous taxpayer suit barred Lutkauskas’s claims. On appeal,

Lutkauskas challenges this ruling and also argues that “[d]ue process considerations were not

given appropriate deference” when the circuit court dismissed his claims against Knutte.

¶ 39      The doctrine of res judicata provides that “a final judgment on the merits rendered by a

court of competent jurisdiction bars any subsequent actions between the same parties or their

privies on the same cause of action.” Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 334 (1996).

“Res judicata bars not only what was actually decided in the first action but also whatever could

have been decided.” Hudson v. City of Chicago, 228 Ill. 2d 462, 467 (2008). The doctrine

applies if three requirements are met: (1) a final judgment on the merits has been rendered by a

court of competent jurisdiction; (2) the parties or their privies are identical in both actions; and

(3) an identity of cause of action exists. Id. A determination of whether a claim is barred under


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No. 1-12-1112
the doctrine of res judicata is a question of law, which is subject to de novo review. Arvia v.

Madigan, 209 Ill. 2d 520, 526 (2004).

¶ 40   Lutkauskas and Knutte agree that the first requirement for res judicata is met: where the

circuit court dismissed plaintiffs’ complaints against Knutte with prejudice on July 27, 2011,

there was a final judgment on the merits. As to the second requirement, Lutkauskas argues that

because “he was not a party in the previous lawsuit and his claims were brought as a separate

taxpayer acting in his individual capacity,” the parties were not identical or were not in privity.

¶ 41   At the outset, we emphasize that Lutkauskas was not “acting in his individual capacity.”

Lutkausas’s complaint leaves no doubt on that point: the complaint is brought “as a taxpayer

derivative action in the name and for the benefit of the School Board District 113A.” A

“taxpayer derivative action,” by contrast, is “brought by a taxpayer on behalf of a local

governmental unit to enforce a cause of action belonging to the local governmental unit.”

Scachitti v. UBS Financial Services, 215 Ill. 2d 484, 494 (2005). The claimed injury in such an

action “is not personal to the taxpayers, but rather impacts the governmental entity on whose

behalf the action is brought.’ [Citation.]” Id.

¶ 42   We have rejected these same arguments in Nelson v. Chicago Park District, 408 Ill. App.

3d 53 (2011), a taxpayer action.2 In Nelson, three individual Chicago taxpayers and a community

organization sued the Latin School, the Chicago Park District, and others, seeking a declaratory



       2
         Unlike a taxpayer derivative action, a “taxpayer action” is a suit brought by private
persons “on behalf of themselves and as representatives of a class of taxpayers similarly situated
within a taxing district or area.” (Emphasis added and internal quotation marks omitted.)
Scachitti v. UBS Financial Services, 215 Ill. 2d 484, 493 (2005).

                                                  19
No. 1-12-1112
judgment as to an agreement between the Chicago Park District and the Latin School regarding

funding and construction of a soccer field. The parties settled, and the suit was dismissed with

prejudice. Three different taxpayers later filed suit against the same defendants, challenging

aspects of the settlement. This court affirmed the dismissal of the suit on the basis of res

judicata. We held that “[a]lthough the Latin II plaintiffs were not parties to the Latin I lawsuit,

as Chicago taxpayers, they were in privity with the individual Latin I plaintiffs, who were also

Chicago taxpayers.” Id. at 61. This court explained that “the relevant inquiry is whether the

interests of the Latin II plaintiffs were adequately represented in Latin I.” Id. On that question,

we concluded that “the interests of the Latin II plaintiffs were the same as those represented in

Latin I because the overriding concern in both cases was an unlawful transfer of public property

to a private party.” Id. at 62.

¶ 43    As in Nelson, Lutkauskas and the other taxpayer plaintiffs here were in privity. The

plaintiffs represent the same legal interests, even more so than in Nelson, where the Latin II

plaintiffs were challenging the settlement reached in Latin I and where plaintiffs were acting as

taxpayers acting for themselves and on behalf of a class. In this case, all plaintiffs filed taxpayer

actions “in the name and for the benefit of” the district under the authority of section 20-6 of the

School Code. Moreover, Lutkauskas and his fellow taxpayers sought recovery from the district

defendants on identical grounds, and all their claims against Knutte related to Knutte’s

complicity in the district defendants’ alleged violation of the School Code. We agree with the

circuit court that there is an identify of plaintiffs among their taxpayer suits.

¶ 44    As to the third requirement, Lutkauskas somewhat confusingly suggests that it was not


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No. 1-12-1112
met, because he “alleged several new claims against Knutte” and these claims “sufficiently differ

from those of the preceding consolidated [c]omplaint.” Lutkauskas does not further explain his

position or cite any authority. As Knutte points out, “separate claims will be considered the same

cause of action for purposes of res judicata if they arise from a single group of operative facts,

regardless of whether they assert different theories of relief.” River Park, Inc. v. City of

Highland Park, 184 Ill. 2d 290, 311 (1998); Cooney v. Rossiter, 2012 IL 113227, ¶ 21. Put

another way, “assertions of different kinds or theories of relief arising out of a single group of

operative facts constitute but a single cause of action.” Cooney, 2012 IL 113227, ¶ 22 (quoting

Torcasso v. Standard Outdoor Sales, Inc., 157 Ill. 2d 484, 490-91 (1993)). Here, the factual

allegations relating to Knutte in all three complaints are parallel: each suit alleges that Knutte

improperly issued clean audit opinions that failed to disclose the district defendants’ alleged

misappropriations and thereby concealed the district’s losses. Lutkauskas offers no argument to

the contrary,3 and we thus conclude that an identify of cause of action exists. As a result, we

affirm the court’s dismissal of Lutkauskas’s claims against Knutte.

¶ 45   Lutkauskas finally argues that his due process rights were violated when the circuit court

denied him a fair opportunity to litigate “his own claims.” In Hansberry v. Lee, 311 U.S. 32

(1940), the United States Supreme Court held that it would violate the due process clause of the

fourteenth amendment to bind litigants to a judgment rendered in an earlier litigation to which



       3
          In fact, Lutkauskas apparently concedes the third res judicata requirement in his reply
brief, though his position again is not set forth with clarity. The reply brief states, without further
elaboration: “As to the third requirement, Plaintiff Lutkauskas submits that identity of cause of
action may be similar with respect to the core operative facts.”

                                                  21
No. 1-12-1112
they were not parties and in which they were not adequately represented. Yet the court has held

that states “are generally free to develop their own rules for protecting against the relitigation of

common issues or the piecemeal resolution of disputes.” Richards v. Jefferson County, 517 U.S.

793, 797 (1996). More specifically, in cases “in which the taxpayer is using that status to entitle

him to complain about an alleged misuse of public funds,” the court reasoned that “the States

have wide latitude to establish procedures not only to limit the number of judicial proceedings

that may be entertained but also to determine whether to accord a taxpayer any standing at all.”

Id. at 803.

¶ 46    Lutkausas principally relies on three United States Supreme Court cases to support his

due process argument. In Richards v. Jefferson County, 517 U.S. 793 (1996), three county

taxpayers and the director of finance for the city of Birmingham had sued the county challenging

the validity of an occupation tax. The tax was upheld in that case (the original suit), and two

classes of taxpayers later sought declaratory judgment challenging the constitutionality of the tax.

The United States Supreme Court held that the judgment in the original suit did not have res

judicata effect, reasoning that plaintiffs “did not sue on behalf of a class; their pleadings did not

purport to assert any claim against or on behalf of any nonparties; and the judgment they received

did not purport to bind any *** taxpayers who were nonparties.” Id. at 801. The Richards Court

distinguished the case before it from a case (similar to the one here) where “the taxpayer is using

that status to entitle him to complain about an alleged misuse of public funds *** or about other

public action that has only an indirect impact on his interest.” Id. at 803.

¶ 47    In South Central Bell Telephone Co. v. Alabama, 526 U.S. 160 (1999), the Court


                                                  22
No. 1-12-1112
confronted similar facts. There, South Central Bell Telephone Company filed a suit challenging

an Alabama tax. Prior to South Central Bell’s suit, four foreign corporations had challenged the

same Alabama tax and lost. The Court held that the earlier judgment against the foreign

corporations did not have a res judicata effect on the South Central Bell suit. Relying on

Richards, the Court explained that the two relevant cases involved different plaintiffs and

different tax years; that neither was a class action; and that no party claimed there was privity or

some other special relationship between the two sets of plaintiffs.

¶ 48   In Taylor v. Sturgell, 553 U.S. 880 (2008), two individuals, Herrick and Taylor, each

brought separate claims under the Freedom of Information Act, seeking the same public records.

Addressing a question of federal common law, the Supreme Court rejected the doctrine of

preclusion by “virtual representation,” holding that the prior judgment against Herrick did not bar

Taylor from maintaining his lawsuit because Herrick had not adequately represented Taylor in

the prior suit. Taylor, 553 U.S. at 885.

¶ 49   While Lutkauskas again characterizes himself as an “individual taxpayer” or an

“individual plaintiff” bringing “his own claims,” we reiterate that he brought his claims on behalf

of the district. That critical fact, repeatedly ignored by Lutkauskas on appeal, renders inapposite

the cases he relies on to support his due process argument. Unlike all of those cases, here

Lutkauskas and his fellow taxpayers were representing the interests of the district. They sought

recovery from the district defendants on the same grounds, and all their claims against Knutte

related to Knutte’s concealment of the district defendants’ alleged violation of the School Code.

We find no merit to Lutkauskas’s due process argument.


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No. 1-12-1112
                                       ¶ 50 CONCLUSION

¶ 51   For the foregoing reasons, we affirm the circuit court’s dismissal of plaintiffs’

complaints.

¶ 52   Affirmed.

¶ 53   JUSTICE PUCINSKI's dissent to be filed later.




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