                           ILLINOIS OFFICIAL REPORTS
                                        Appellate Court




              In re Illinois Bell Telephone Link-Up II & Late Charge Litigation,
                                    2013 IL App (1st) 113349




Appellate Court            In re ILLINOIS BELL TELEPHONE LINK-UP II AND LATE CHARGE
Caption                    LITIGATION.



District & No.             First District, Third Division
                           Docket No. 1-11-3349


Filed                      June 28, 2013
Rehearing denied           July 25, 2013


Held                       In a class action arising from a claim that defendant telephone company
(Note: This syllabus       assessed late charges on bills mailed without a dated postmark, the trial
constitutes no part of     court properly denied the class’s motion for summary judgment and
the opinion of the court   disgorgement of the late fees collected following the settlement of the
but has been prepared      case based on defendant’s alleged breach of the agreement by failing to
by the Reporter of         provide a dated mark on billing envelopes, since class counsel failed to
Decisions for the          show that disgorgement was warranted by the alleged breach, especially
convenience of the         when some customers paid late for reasons unrelated to the absence of a
reader.)
                           dated mark on the envelope and counsel simply demanded all the late fees
                           collected, and no finding was made that the alleged breach was illegal or
                           that defendant was unjustly enriched.


Decision Under             Appeal from the Circuit Court of Cook County, No. 05-CH-13088; the
Review                     Hon. Stuart E. Palmer, Judge, presiding.
Judgment                   Affirmed.


Counsel on                 Krislov & Associates, Ltd., of Chicago (Clinton A. Krislov and Eli Korer,
Appeal                     of counsel), for appellant.

                           Mayer Brown LLP, of Chicago (John E. Muench and Demetrios G.
                           Metropoulos, of counsel), for appellee.


Panel                      JUSTICE PIERCE delivered the judgment of the court, with opinion.
                           Justices Sterba and Hyman concurred in the judgment and opinion.



                                             OPINION

¶1          Class counsel appeals the ruling of the circuit court denying the class’s motion for
        summary judgment and the second amended motion to enforce the settlement agreement. On
        October 24, 2011, the circuit court granted defendant’s motion to terminate the proceedings.
        The notice of appeal was timely filed on November 23, 2011. Appellant filed a motion to
        consolidate this appeal with Cahnman v. SBC Illinois, No. 1-11-3350, on June 5, 2012. This
        court denied the motion to consolidate on June 21, 2012; however, the court agreed to
        consider the cases as related. Plaintiff then filed a motion to reconsider that decision, which
        was subsequently denied on July 3, 2012. After oral argument this court permitted
        supplemental briefing on the issue of whether disgorgement is an appropriate remedy under
        the facts of this case.
¶2          Class counsel argues on appeal: (1) that the circuit court erred in denying class counsel’s
        motion for summary judgment and requested order to refund late fees collected during the
        period defendant was in breach of the settlement agreement; and (2) the circuit court erred
        when it ruled that evidence was required to show the improper billing procedures (no
        postmark on the envelope) induced class members to pay the bills late and thereby incur
        damages and late fees before granting the motion and awarding damages.

¶3                                      BACKGROUND
¶4          This matter has a long procedural history. In 1991, a class action suit was filed against
        defendant Illinois Bell (now AT&T) in the circuit court of Cook County for damages arising
        from its assessment of late payment charges on consumer bills which were mailed without
        a dated postmark (the Morrison Litigation). Generally, bills were payable within 21 days of
        mailing. The class maintained it could not determine the due date without a postmarked
        envelope that showed the mailing date as required by law. Allegedly defendant sent bills to
        customers without postmarks and at times set due dates earlier than 21 days from the time

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     the bill was placed in the mail. As a result, the class alleged that customers were then
     improperly charged late fees prior to the actual date the charge legally accrued.
¶5       The class also filed a complaint with the Illinois Commerce Commission (ICC). Krislov
     v. AT&T Illinois, No. 06-0421. The circuit court stayed the class action proceedings while
     the ICC complaint was pending. Prior to trial before the ICC, the class action litigation
     settled. The circuit court approved the settlement agreement on March 4, 1994, and retained
     jurisdiction to enforce the agreement.
¶6       The settlement agreement recited historical facts and claims, including, that the class
     claimed AT&T violated the law in assessing late fees. AT&T “denied all liability.” The
     settlement agreement provides that AT&T would place the dated mark on the billing
     envelope “for so long as the applicable statutes and/or regulations have not been changed,
     or a waiver granted, to eliminate the requirement of bill dating on customer bills or bill
     envelopes.” The agreement does not address the circumstances necessary for the assessment
     of a late payment fee. The terms of the settlement agreement required defendant to place a
     date mark on each bill’s envelope indicating the actual date of mailing as long as any
     applicable regulations or statutes so required. The agreement also provided that the members
     of the class were enjoined from bringing any future claim based on a lack of dated postmarks
     on the envelopes. Class counsel was permitted the right to monitor AT&T’s implementation
     of the settlement. The settlement agreement did not provide for damages or other relief
     resulting from a breach of the agreement by either party. The class elected to settle instead
     of “pursuing their individual damage claims.”
¶7       In July 2005, class counsel discovered that defendant changed its bill dating procedures.
     Specifically, class counsel asserts that beginning in 2002 defendant no longer dated the
     outside of the envelope with the mailing date. Rather, AT&T printed a string of
     unidentifiable numbers on the bill itself. These numbers were visible in the envelope’s
     window; however, what the number represented was only understood by defendant. Class
     counsel asserts that it addressed the matter with a representative of AT&T who contended
     that this new practice was in conformance with the settlement agreement. Class counsel
     asserts that this changed dating process was improper resulting in improper assessment of
     late fees from July 1, 2002 to February 2010.1
¶8       Class counsel then filed a motion to enforce the 1994 settlement agreement in the circuit
     court. Class counsel alleged that the printed string of numbers on the bill insert, rather than
     on the envelope, was a violation of section 735.160 of title 83 of the Illinois the
     Administrative Code (83 Ill. Adm. Code 735.160(a), (d), amended at 8 Ill. Reg. 5161 (eff.
     Apr. 13, 1984)) and a breach of the settlement agreement. Class counsel requested that the
     settlement agreement be enforced; an accounting for all late charges collected since the
     change in AT&T’s postmark procedure; and other relief, including an award of costs and


             1
              Until March 1, 2010, section 735.160(a) required that the due date of a bill “may not be less
     than 21 days after the postmark, if mailed.” The section was amended to eliminate the postmark
     requirement effective March 1, 2010. 83 Ill. Adm. Code 735.160 (2010). As such class counsel is
     not seeking recovery of fees assessed after March 1, 2010.

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       fees. According to class counsel, AT&T unlawfully collected late fee charges in the amount
       of $126,068,865 during the relevant period. After limited discovery, on May 9, 2006, the
       circuit court denied the motion to enforce the settlement agreement. The circuit court found
       that the settlement agreement only required a dated mark, not specifically a postmark, and
       therefore no breach occurred. An appeal of the May 9, 2006 order followed.
¶9          On May 1, 2008, this court reversed the circuit court’s May 9, 2006 order denying the
       motion to enforce the settlement agreement. In re Illinois Bell Telephone Link-Up II & Late
       Charge Litigation, No. 1-06-1675 (May 1, 2008) (unpublished order under Supreme Court
       Rule 23). We found that paragraph 34 of the settlement agreement refers to a dated mark and
       not specifically a postmark; however, the agreement required that Bell (now AT&T) place
       the mark on each customer bill envelope. We further found, that by placing the mark only
       on the bill itself, a dated mark was not placed on the envelope as required. Therefore, we
       found there was a breach of the settlement agreement and reversed the circuit court and
       remanded to the circuit court for further proceedings.
¶ 10        While the May 9, 2006 order was on appeal, class counsel filed a complaint with the ICC
       alleging AT&T’s violation of section 735.160 due to its failure to place a postmark on the
       billing envelopes. In discovery, class counsel asserts he developed evidence to show that the
       change in AT&T’s postmark policy was not inadvertent, but rather it was a conscious and
       willful violation done with the intent to save money and allegedly to promote efficiency in
       the billing process. The ICC dismissed the complaint on July 11, 2007. The ICC found that,
       while it had subject matter jurisdiction over the claim, class counsel could not bring the claim
       before the ICC because the claim was barred under the terms of the 1994 settlement
       agreement. Krislov appealed the ICC’s dismissal order.
¶ 11        On September 18, 2008, this court affirmed the ICC’s July 11, 2007 ruling, finding: (1)
       that the settlement agreement barred the new claims raised by Krislov regarding AT&T’s
       purported violation of section 735.160; and (2) the ICC did not divest itself of jurisdiction
       over such claims if brought by non-class members or by the ICC. “Thus, we agree with the
       ICC that the settlement agreement clearly contemplated and encompassed future claims of
       this sort. Indeed, it seems likely that [class counsel] would not have filed the aforementioned
       related actions in the circuit court if this was not the case.” Krislov v. Illinois Commerce
       Comm’n, No.1-07-2860 (Sept. 18, 2008) (unpublished order under Supreme Court Rule 23).
¶ 12        Upon remand of the instant lawsuit, on February 18, 2010, class counsel moved for
       summary judgment, arguing that no question of fact existed as to whether AT&T materially
       breached the 1994 agreement and that AT&T intentionally violated the postmark requirement
       in collecting late fees contrary to section 735.160 of title 83 of the Illinois Administrative
       Code. 83 Ill. Adm. Code 735.160(a), (d), amended at 8 Ill. Reg. 5161 (eff. Apr. 13, 1984).
       Class counsel requested an order refunding the “unlawfully-imposed late charges” as a result
       of the mailings, interest on late charges paid and an order requiring AT&T to comply with
       the 1994 settlement agreement.
¶ 13        On March 24, 2010, the circuit court denied plaintiff’s motion for summary judgment
       finding “that the undisputed facts as alleged and proven herein do not show that Plaintiffs
       are entitled to a judgment as a matter of law.” At this time, an issue was raised in the circuit


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       court as to whether AT&T’s placement of the mark on the bill and visible in the envelope’s
       window (as opposed to being placed on the exterior of the envelope) caused any customer
       to incur a late fee charge and, if so, what damages were sought by class counsel.
¶ 14        Class counsel then filed a motion to enter judgment pursuant to the May 1, 2008 order
       of this court in the Morrison Litigation and to set a damages discovery timetable. In re
       Illinois Bell Telephone Link-Up II & Late Charge Litigation, No. 1-06-1675 (May 1, 2008)
       (unpublished order under Supreme Court Rule 23). The circuit court entered an order on
       January 11, 2011, granting partial summary judgment finding “as alleged in the motion Bell’s
       actions constitute a breach of the 1994 Settlement Agreement.”
¶ 15        Subsequently, class counsel filed a second amended motion to enforce the settlement
       agreement. In the motion, class counsel requested the settlement agreement be enforced to
       require AT&T to place a dated postmark on the bill envelopes and account for all late
       charges collected. The class also requested discovery on any violations, a release of class
       members from their obligations under the settlement agreement and imposition of a
       constructive trust on the late charge revenue, including the amounts collected since July 1,
       2002. AT&T’s response included a request for the entry of judgment terminating the
       proceedings on the basis that class counsel failed to present any evidence of causation or
       damages. On October 24, 2011, the circuit court entered an order denying the second
       amended motion to enforce the settlement agreement and granted AT&T’s motion to
       terminate the litigation.
¶ 16        Plaintiff contends that the circuit court erred in denying class counsel’s motion for
       summary judgment and denial of the requested order to refund all late payment charges due
       to the failure to establish damages proximately caused by the breach. Defendant contends
       that should this court reverse the ruling on the issue of proximate cause, there are two
       alternative bases to uphold the denial of plaintiff’s motion for summary judgment. First,
       defendant argues that class counsel’s demand for disgorgement of the late payment charges
       was not properly before the circuit court since disgorgement is a matter within the exclusive
       jurisdiction of the ICC; and, second, the refund is barred by defendant’s filed tariffs.

¶ 17                                         ANALYSIS
¶ 18       Based on the foregoing, at the point where the circuit court entered the orders now under
       appeal, the legal and factual situation was essentially as follows: class counsel filed a lawsuit
       claiming statutory and administrative violations which resulted in AT&T illegally collecting
       late fees that should be refunded to the class. Concurrently, class counsel filed claims before
       the ICC asserting essentially the same misconduct and seeking the same relief. Before the
       ICC matter went to trial, the parties settled and memorialized the settlement by agreeing,
       inter alia, that AT&T admitted no liability, it would place a dated mark on the billing
       envelope and would continue to do so for so long as the rules, tariffs and statutes so required.
       Class counsel was authorized to monitor compliance with the settlement agreement. Class
       counsel and all class members agreed to be enjoined from bringing any future claim based
       on the lack of a dated mark on the envelope in the future. Several years after the settlement
       was judicially approved, AT&T changed its marking procedures, causing class counsel to


                                                 -5-
       seek relief from the ICC and the circuit court. The ICC denied relief because the settlement
       agreement barred the claim and this court affirmed that ruling. Class counsel also sought
       relief in the circuit court, which dismissed the action finding no breach of the settlement
       agreement had occurred. That ruling was reversed on appeal and remanded for further
       proceedings. On remand, the law of the case having established that there was a breach of
       the settlement agreement, summary judgment was granted in favor of class counsel finding
       AT&T in breach of the agreement. No class member or group of class members sought
       damages or presented a claim. The issue to be resolved was the relief, if any, that was
       warranted.
¶ 19        Class counsel concedes this is an action to enforce a settlement agreement and that these
       agreements are construed and enforced under principles of contract law. Solar v. Weinberg,
       274 Ill. App. 3d 726, 731 (1995); K4 Enterprises, Inc. v. Grater, Inc., 394 Ill. App. 3d 307,
       313 (2009). The basic theory of damages in a breach of contract action requires that a
       plaintiff “establish an actual loss or measurable damages resulting from the breach in order
       to recover.” Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100, 149
       (2005). The proper measure of damages for a breach of contract is the amount of money
       necessary to place the plaintiff in a position as if the contract had been performed. InsureOne
       Independent Insurance Agency, LLC v. Hallberg, 2012 IL App (1st) 092385, ¶ 82. However,
       the claimant should not be placed in a better position, providing a windfall recovery. Walker
       v. Ridgeview Construction Co., 316 Ill. App. 3d 592, 596 (2000). Damages which
       “ ‘naturally and generally result from a breach are recoverable.’ ” Hallberg, 2012 IL App
       (1st) 092385, ¶ 89 (quoting Midland Hotel Corp. v. Reuben H. Donnelley Corp., 118 Ill. 2d
       306, 318 (1987)). Damages which are not the proximate cause of the breach are not allowed.
       Feldstein v. Guinan, 148 Ill. App. 3d 610, 613 (1986). Damages are an essential element of
       a breach of contract action and a claimant’s failure to prove damages entitles the defendant
       to judgment as a matter of law. Walker, 316 Ill. App. 3d at 596; see Prevendar v. Thonn, 166
       Ill. App. 3d 30, 36 (1988).
¶ 20        However, class counsel takes issue with whether evidence that establishes a causal
       relationship between the breach of the agreement and damages to a class member or the class
       is required. He argues that complete forfeiture or disgorgement of all late fees collected is
       the proper relief and evidence of a causal relationship is not required.
¶ 21        During one of the many hearings on class counsel’s motion for summary judgment, there
       was a discussion as to the basis of the requested damages.
                “THE COURT: What are the damages that result from the settlement agreement.
            How were your clients damaged, not how they were enriched.
                ***
                In a contract action, we’re not going to look at what [AT&T] reaped. We’re going to
            look at what your clients lost. It’s a very different equation.
                                                  ***
                MR. KRISLOV [Class Counsel]: My answer is: They were damaged to the extent
            that they paid late fees that [AT&T] was not entitled because they had not complied with
            either the mailing, the regulations or the dated–placing a dated mark readable by the

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           customer showing the actual date of the mailing.”
¶ 22           At a subsequent hearing, class counsel reiterated his position,
               “MR. KRISLOV: [The court’s] basis is that we have to show that they didn’t pay
           their bills and incurred a late charge, paid their bills late because of the absence of the
           date. That’s not what we’re saying.
               What we’re saying, Your Honor, is that the phone company was not entitled to collect
           these charges because they didn’t fulfill the requirements that would entitle them to
           charge a late charge, which is to put a dated mark on the outside of the envelope so that
           it was confirmed. We’re not suggest–we’re not saying that people paid their bills late
           because they didn’t have a date on the outside. There was a due date that they–that the
           phone company put in.”
¶ 23       A claimant must “prove its damages to a reasonable degree of certainty, and accordingly
       the evidence it presents must not be remote, speculative, or uncertain.” Doornbos Heating
       & Air Conditioning, Inc. v. Schlenker, 403 Ill. App. 3d 468, 485 (2010). The evidence
       submitted only needs to “show a basis for computation of damages with a fair degree of
       probability.” La Salle National Trust, N.A. v. Board of Directors of the 1100 Lake Shore
       Drive Condominium, 287 Ill. App. 3d 449, 457 (1997); see also Gill v. Foster, 157 Ill. 2d
       304, 311-13 (1993) (“In proving damages, the burden is on the plaintiff to establish a
       reasonable basis for computing damages.”); C-B Realty & Trading Corp. v. Chicago & North
       Western Ry. Co., 289 Ill. App. 3d 892, 901 (1997) (“Plaintiffs have the duty to establish that
       they sustained damages as well as a reasonable basis for computing those damages.”).
¶ 24       Throughout the trial court proceedings, the trial court and the parties focused on the issue
       of proof of damages. The judge specifically inquired whether proof of proximately caused
       damages due to the breach was forthcoming. When asked whether customers paid the late
       fees because of AT&T’s failure to place a postmark on the billing envelope, class counsel
       responded that he did not have to show that the customers paid the bills late because there
       was no postmark on the envelope. Further, class counsel agreed that there are many reasons
       customers may have paid late and incurred the late fee charges other than because of the lack
       of a dated mark on the envelope. Class counsel argued that AT&T was not permitted to
       assess late fees in any instance where a postmark did not appear on the exterior of the billing
       envelope and, therefore, every late payment must be refunded regardless of the reason for the
       late payment. The circuit court rejected this argument, denied class counsel’s motion for
       summary judgment and granted AT&T’s motion to terminate the proceedings on this basis.
¶ 25       A motion for summary judgment is a drastic means of disposing of litigation and is
       granted only when “ ‘the pleadings, depositions, and admissions on file, together with the
       affidavits, if any, show that there is no genuine issue as to any material fact and that the
       moving party is entitled to a judgment as a matter of law.’ ” Axen v. Ockerlund Construction
       Co., 281 Ill. App. 3d 224, 229 (1996) (quoting Purtill v. Hess, 111 Ill. 2d 229, 240 (1986)).
       The movant bears the initial burden of production in a motion for summary judgment.
       Williams v. Covenant Medical Center, 316 Ill. App. 3d 682, 689 (2000). We review the trial
       court’s entry of summary judgment de novo. Golden Rule Insurance Co. v. Schwartz, 203 Ill.
       2d 456, 462 (2003).


                                                 -7-
¶ 26        Class counsel re-asserts arguments regarding AT&T’s conduct and its alleged intentional
       and willful breach of the settlement agreement. Those arguments were thoroughly addressed
       in our previous opinion. In re Illinois Bell Telephone Link-Up II & Late Charge Litigation,
       No. 1-06-1675 (May 1, 2008) (unpublished order under Supreme Court Rule 23). We
       previously found AT&T breached the settlement agreement and we need not revisit this issue
       again.
¶ 27        Class counsel places great emphasis on the contention that, because the mailing
       procedure was in violation of the Illinois Administrative Code, defendant had no authority
       to collect any late fees and disgorgement is the proper remedy. We need not address that
       issue because the legality of the imposition of the late fees was never determined before the
       ICC, the circuit court or in the settlement agreement. AT&T denied any liability and the class
       chose settlement rather than litigation of that issue. The class did not simply terminate the
       litigation. It agreed to forego future litigation relating to the legality of assessing late fees
       where the billing envelope might arguably be in violation of the code or relevant statutes.
       Lastly, nothing in the settlement agreement addressed the authority or lack of authority of the
       utility to assess late fees. This further supports our conclusion that disgorgement as a remedy
       for breach of this settlement agreement is not warranted.
¶ 28        Class counsel is requesting a full refund for all late payment charges, regardless of
       whether the reason the late payment fee was assessed was due to AT&T’s failure to properly
       date mark the envelope or for other reasons entirely. Class counsel was given ample
       opportunity to provide the circuit court with evidence showing proximate cause between
       AT&T’s breach of its agreement and any losses incurred by the class. Instead, regardless of
       any link between the breach and actual losses due to the breach, class counsel requested
       disgorgement of all late fees collected. We find that class counsel failed to maintain his
       burden to show damages proximately caused by the breach to warrant the requested relief.
       The lack of this required nexus is fatal, and as such, the circuit court did not err in denying
       plaintiff’s motion for summary judgment on the issue of damages and in granting AT&T’s
       motion to terminate the proceedings.
¶ 29        The trial court was correct in rejecting class counsel’s all-or-nothing position on the
       remedy for this breach of contract. Class counsel had the duty to establish damages and to
       present evidence of a reasonable basis for computing those damages. The purpose of
       awarding contract damages is to compensate the injured party. Restatement (Second) of
       Contracts § 355 cmt. a, at 154 (1981). Late fees were paid by utility customers when AT&T
       was not in breach of the settlement agreement and, indisputably, late fees were also paid
       during the period the utility was in breach of the agreement. Obviously, and admittedly, some
       customers did not timely pay their bills for reasons not connected with or related to the
       existence of a dated mark on the billing envelope. Whether defendant was unjustly enriched
       is left to guess, speculation and conjecture. Disgorgement would result in a windfall to those
       customers, for example, that intentionally chose to pay late regardless of the absence of a
       date mark on the envelope and irrespective of whether they were class members. Whether
       an economic study of the late payments would reveal a reasonable basis upon which to
       conclude whether all or a part of the late payments were related to the lack of a date mark on
       the billing envelopes is unknown because class counsel did not proffer any basis to calculate

                                                 -8-
       damages relying instead on a demand for disgorgement. The experienced trial judge did not
       have a reasonable basis to invoke an equitable remedy and order disgorgement where no
       judicial or administrative finding had been entered that the acts constituting a breach of the
       settlement agreement were illegal or that defendant was unjustly enriched. There is no legal
       basis to depart from established contract law under the facts presented in this case.
¶ 30       In affirming the rulings of the circuit court we need not reach the additional bases
       advanced by defendant that the requested damages constitute reparations over which the ICC
       has exclusive jurisdiction or that the demand for forfeiture of the late fees is barred by
       AT&T’s filed tariffs.

¶ 31                                    CONCLUSION
¶ 32      For the foregoing reasons, we affirm the circuit court’s order denying class counsel’s
       motion for summary judgment and order for a refund and the court’s granting of AT&T’s
       motion to terminate the proceedings.

¶ 33      Affirmed.




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