The Astounding Chutzpah of the Plaintiffs' Class Action Bar: Claims for Interest on Settlement Sums Soundly Rejected
December, 2003
Plaintiff in Adams v. American International Group, Inc., 791 N.E.2d 26 (Ill. App. 2003), leave to appeal denied, 2003 Ill. LEXIS 2128 (Ill. Oct. 7, 2003), a proclaimed “nationwide class action,” sought to recover interest on the proceeds of the settlement of an underlying injury action which had been directed against defendant’s insured. Count I was based upon the Illinois Interest Act (815 ILCS 205/2) which provides for interest after payment is due upon any instrument in writing; Count II sounded in implied contract/unjust enrichment.
The defendant had paid $250,000 in two equal installments in settlement of the underlying claim. The oral settlement agreement provided that payment was to be made in October and November, 2000. Neither that agreement nor the written release executed by the plaintiff made provision for the payment of interest. Also, the release said nothing about the date upon which payment was to be made. Plaintiff had mailed the executed release to defense counsel on October 27, 2000; defendant made payments on November 15, 2000 and on or about December 15, 2000.
The trial court had granted defendant’s motion to dismiss upon, inter alia, defendant’s argument that the release does not qualify as a written agreement within the purview of the statute. The “instrument of writing” provision of the statute incorporates two requirements into a claim for interest based on a written instrument. The written instrument must establish a debtor/creditor relationship; in other words, it must constitute an agreement to make payment. Further, the written instrument must contain a specific due date. The release given by the plaintiff in Adams does neither.
The point - a release is a unilateral document; it is not an agreement obligating defendant to make payment. It does not fix the indebtedness; it does not fix the time for payment. Although plaintiff asserted that payment was to have been made in October and November, that alleged obligation was fixed by the oral settlement agreement and not the release.
The Appellate Court explained that the release simply does not qualify as an “instrument of writing” within the purview of the Illinois Interest Act:
First, contrary to plaintiff’s contention, the release does not establish a debtor/creditor relationship because here the underlying obligation to pay the settlement proceeds does not arise by virtue of the release; rather, it arises by virtue of the October 13, 2000 oral settlement agreement. A review of the release shows that it does not impose an obligation on AIG or any other party to pay….
Second, even if we were to agree with plaintiff’s argument that a debtor/creditor relationship was established by the release, the release is still insufficient to support plaintiff’s claim for interest because it does not bear either a specific or an inherent date by which the indebtedness created comes due….
The Appellate Court also affirmed the trial court’s dismissal of plaintiff’s unjust enrichment claim. A contract will not be implied in law, as required to support the claim, where there is an express contract in existence. The oral settlement agreement constituted such an express contract.
Remarkably, the Appellate Court also lent its approbation to defendant’s alternative argument that the release executed by plaintiff served to release the claim for interest:
Plaintiff’s interest claim exists solely “by reason of” her negligence claim. Indeed, but for the negligence claim, there would be no settlement and no claim for interest. Moreover, the release indicates the intention of the parties to avoid future litigation. … we hold that the plaintiff’s claims are barred by the release and the Court properly dismissed with prejudice plaintiff’s complaint….
James T. Ferrini
jferrini@clausen.com
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