Appellate Law

Permanent Disgorgement And Removal From Company Board Not Appealable Interlocutory Orders

By Steven R. Merican

Rick Santella fought with family members over control of Food Groupie, Inc., a closely held family corporation. Santella, and Mary and William Kolton were co-owners of the company. Santella sued the Koltons after they gave themselves bonuses and commissions, and stated their intention to close Food Groupie and to open a similar business in which Santella would not be involved.

Santella?s lawsuit asked for return of the bonus ($ 144,019) to Food Groupie, and removal of the Koltons as directors and officers of the company. After the trial court granted both of Santella?s requests, the Koltons appealed under Illinois Supreme Court Rule 307(a)(1) (interlocutory appeal allowed from a trial court order ?granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction.?)

Santella asked the First District Illinois Appellate Court to dismiss the appeal. He argued, and the appellate court agreed, that removing the Koltons as directors and officers did not require them to do anything, so those orders were not injunctions that could be appealed under Rule 307(a)(1).

But ordering the Koltons to return the money they took as commissions and bonuses was an injunction because the Koltons were required to do something ? give back the money. However, the analysis did not end there. The appellate court ruled that the ?give back? order was permanent, not interlocutory. And because Rule 307(a)(1) only governs interlocutory orders, the Koltons?s appeal had to be dismissed. The appellate court identified three reasons the order was permanent:

The court's order requiring defendants to pay $144,019 back to the corporation was a permanent order not subject to review under Rule 307(a)(1). The permanency of the order is evidenced by the fact that it altered the status quo, concluded the rights of the parties, and was not limited in duration.

So in the end, the Koltons?s entire interlocutory appeal was dismissed. The whole opinion, Santella v. Kolton, No. 1-08-1329, 1357, 1847 (7/31/09), is available here.

Full post as published by Illinois Appellate Lawyer Blog on November 09, 2009 (boomark / email).