Sharply Divided Supreme Court Declines to Establish a Bright-Line Rule on Non-Lawyers Representing Corporations in Administrative Actions

2804456706_72b8c649d2_zA non-lawyer with no apparent formal connection to a corporation is the sole representative of the corporation at an administrative proceeding. When the decision comes down, it’s never properly served on the corporation. Is the non-lawyer’s participation imputed to the corporation, meaning that the corporation had notice of the adminstrative proceeding and it’s now final and binding? Two weeks ago, a sharply divided Illinois Supreme Court held in Stone Street Partners, LLC v. The City of Chicago Department of Administrative Hearings that the answer was no. Our detailed report of the underlying facts and lower court rulings is here. Our report on the oral argument is here.

The plaintiff in Stone Street is the owner of property in the City of Chicago. In March 2009, the City recorded a judgment against the property for $1,050 in fines and costs for building code violations. The judgment had been entered ten years earlier.

Although much of the record from the 1999 action has been destroyed, what little remained failed to establish that anyone affiliated with the plaintiff had been contemporaneously notified of the matter. A “communication transmittal form” noting the purported building code violations listed the wrong property owner. The notices were mailed to an entirely different entity which was neither an agent or representative of the plaintiff. Copies were sent to “Stone Street Partners,” but the notices were sent to the wrong address and carried the wrong name.

Nevertheless, a non-lawyer entered a written appearance in the 1999 administrative proceeding. He left blank the section of the appearance form where he was asked to state under oath that he was the owner, lessee, attorney or authorized agent of the owner of the property. As best anyone could tell, the individual who appeared had no connection with the property or the owner – he was the private caretaker for one of the members of the plaintiff entity. However, because that member had diminished mental capacity due to a stroke, he could not have given the caretaker authority to represent the plaintiff.

After the plaintiff learned of the 1999 judgment in 2009, its counsel wrote to the City, demanding that the judgment be released and its title to the property be cleared. When that didn’t happen, the plaintiff sought relief with the Department of Administrative Hearings, asking that the judgment be set aside since the caretaker could not possibly have validly represented the corporation without being guilty of unauthorized practice of law. The Department denied the request, holding that it lacked jurisdiction to set aside the 1999 judgment. So the plaintiff filed a complaint for administrative relief, asking that the 1999 judgment be set aside. The City moved to dismiss. The court granted dismissal with respect to three claims, but affirmed the Department’s decision that it lacked jurisdiction over the 1999 judgment on the remaining claim. The Court of Appeal reversed in part, relying heavily on its view that the plaintiff could not have waived its objection to proper notice because the caretaker who appeared on its behalf was not a lawyer.

In an opinion for a narrow 4-3 majority by Chief Justice Karmeier, the Supreme Court affirmed. The majority agreed that the caretaker’s status was central to the question of whether the plaintiff could now challenge the 1999 judgment. Absent a holding that the caretaker’s presence was imputed to the plaintiff, there was no possible basis for concluding that the company had ever received notice. But that issue didn’t depend on whether or not the caretaker was a lawyer, since if he had no authority, either actual or potential, to represent the corporation, it didn’t matter whether or not he was an attorney. Where there’s no authority, even an attorney’s acts are a nullity against the party.

And in fact, there was no possible basis for finding that the caretaker had authority to appear. He didn’t own the subject property, he wasn’t the lessee, he wasn’t a lawyer, and he neither worked for nor represented the plaintiff company.   Finally, nothing the company had done or failed to do arguably gave him apparent authority to appear. Given that, the caretaker’s participation was not imputed to the corporation. Since the 1999 notice was neither served on the corporation’s registered agent nor sent to its principal place of business, the corporation was never served with the notice as a matter of law, and the Department failed to acquire personal jurisdiction over the plaintiff corporation. Since the 1999 judgment was void ab initio, it could be collaterally attacked at any time. Accordingly, the plaintiff was entitled to go forward with its claims to quiet title.

Justice Freeman dissented, joined by Justices Burke and Theis. According to the dissenters, the record was inadequate to conclusively establish that the plaintiff had never waived its jurisdictional challenge. The dissenters pointed out that there had been an additional hearing a month before the one where the caretaker appeared, and that the surviving order indicated that someone had appeared on the plaintiff’s behalf. The dissenters argued that there was no basis for concluding that no waiver of jurisdiction had happened at that hearing. Finally, the dissenters concluded that the Court should have addressed the unauthorized practice of law issue and held that appearing at an administrative hearing on behalf of a corporation did not constitute the practice of law.

Image courtesy of Flickr by Chris Brown (no changes).

Illinois Supreme Court Holds Dated Business Letter Not Sufficient to Trigger Deadline for Administrative Appeal

10808798956_a1b032c395_zThe Illinois Administrative Review Law provides that a complaint for judicial review of an administrative decision must be filed within 35 days from the date that a copy of the decision to be reviewed was served upon an aggrieved party. In Grimm v. Calica, the Illinois Supreme Court held that the date in the heading of a business letter was not sufficient to constitute service for purposes of the statute. Our detailed summary of the underlying facts and lower court rulings is here.

Grimm began in 2012 when the Department of Children and Family Services investigated and indicated a finding of child abuse against the plaintiff. The plaintiff, a teacher, argued that the finding was incorrect and requested that it be expunged. In 2013, an administrative law judge conducted a hearing on the request, ultimately recommending that the plaintiff’s request be denied. The Department adopted the ALJ’s decision.

The Department announced its decision in a letter to the attorney who had represented the plaintiff at the hearing. There was no affidavit of service included with the letter, or even any unsworn representation as to whether it had been mailed on the day the letter was dated, or later.

The plaintiff filed her complaint for administrative review thirty-six days after the date of the letter. The Department moved to dismiss the complaint, alleging that it was untimely. The plaintiff countered that the statute required service on her, not on her attorney, and that the date on the business letter was not sufficient notice of service to satisfy due process. The trial court denied the motion to dismiss and reversed the decision on the merits.

The Department appealed the finding of timeliness. The Appellate Court affirmed the trial court, holding that the date on the business letter stated only the date of the letter, not necessarily the date of mailing. In an opinion by Justice Theis, the Supreme Court affirmed.

Before the Supreme Court, the Department argued that the plaintiff’s due process challenge failed because due process neither required that judicial review be available at all, or imposed any requirements on the Department about telling the plaintiff of the option, or the timing for exercising it. True, the Court said, but due process does require that the agency decision provide clear notice to affected parties. The majority applied the due process balancing test provided by the U.S. Supreme Court in Mathews v. Eldridge: (1) the magnitude of the private interest at stake; (2) the risk of an erroneous deprivation of that interest and the probable value of additional safeguards; and (3) the potential burden on the government from additional procedures.

The private interest at stake was considerable, according to the majority – the plaintiff’s prospects for future employment as a teacher. Similarly, the risk of an erroneous deprivation was real. The majority agreed with the Appellate Court’s view that there was something counterintuitive about the notion that – if the date on the letter triggered the 35-day clock – notice was deemed given before it was received. Finally, the burden on the Department of making the situation perfectly clear by expressly stating the date of mailing was insignificant.

Justice Thomas dissented, joined by Chief Justice Karmeier. The dissenters argued that because judicial review of administrative decisions is not required by the due process clause, it follows that parties need not be told of the thirty-five day time limit to file their complaint, or how the thirty-five days is calculated. According to the dissenters, even if it was true that the date on the letter was the date of the decision rather than the date of mailing, there was a rebuttable presumption in the law that the date on an agency decision is the mailing date, and plaintiff offered nothing to challenge that presumption. The dissenters further noted that the plaintiff never testified that she was confused as to the correct service date – instead, it appeared that the one-day delay in filing was actually the result of plaintiff being unable to find a lawyer.

Ironically, the take-away from holdings like Grimm is limited as a practical matter. Lawyers should always default to initiating appellate proceedings at the earliest arguable deadline, since in many cases the untimely filing of the initiating document – a notice of appeal, petition for review, or administrative review complaint – can’t be fixed.

Image courtesy of Flickr by Mick Taylor (no changes).

Illinois Supreme Court Agrees to Hear Challenge to Civil Forfeiture

2253638192_1587a734ca_zCivil forfeitures have been controversial for a number of years. The underlying idea – that a person can be said to have forfeited his or her rights in a particular item of property by using it to commit a crime – is difficult to challenge, but some observers believe that the remedy has been abused in some jurisdictions. Indeed, the Washington Post claimed that some police departments had seized property owned by persons who had not even been charged with a crime. At the end of its January term, the Illinois Supreme Court agreed to take on this contentious issue, allowing a petition for leave to appeal in The People ex rel. Hartrich v. 2010 Harley-Davidson, a case from the Fifth District.

2010 Harley-Davidson began in 2014. The claimant was the sole owner of a Harley-Davidson motorcycle valued at $35,000. At the time, the claimant’s husband had had his driver’s license revoked due to a conviction for driving under the influence. The husband suggested to his wife that they go for a ride on the motorcycle. With the wife driving, the couple drove to an establishment twelve blocks from their home. During the evening, the wife drank nothing, but by the time they left just after midnight, the husband was allegedly intoxicated.

The husband nevertheless insisted on driving the motorcycle home. He jumped on the bike and told his wife she could either ride with him or walk home. She relented, but during the short drive home, the couple was stopped by a police officer. The husband was given a breath test, which indicated that his blood alcohol concentration was above the legal limit. The husband ultimately pled guilty to a charge of aggravated DUI in return for dismissal of a charge of driving on a revoked license.

The State’s Attorney filed an action seeking forfeiture of the motorcycle, even though it was solely owned by the wife. In his complaint, the State’s Attorney alleged that the motorcycle was used with the knowledge and consent of the owner in the commission of a crime – aggravated DUI. After an evidentiary hearing, the trial court entered an order forfeiting the motorcycle to the State. The wife filed a motion for reconsideration, arguing both that there was insufficient evidence that she had consented to her husband’s use and that the forfeiture violated the Eighth Amendment ban on excessive fines.

The Appellate Court rejected the wife’s insufficient evidence challenge, concluding that the fact that the wife had ridden home as a passenger was sufficient to support a reasonable inference that she had consented to her husband’s driving. Although the wife testified that she joined her husband on the bike because no woman would want to walk twelve blocks home after midnight, the Appellate Court concluded that the trial court was not required to believe her testimony.

The Court then turned to the Eighth Amendment challenge. A forfeiture violates the excessive fines clause if it is grossly disproportionate to the gravity of the offense. The courts administer this test by considering three factors: (1) the inherent gravity of the offense compared with the harshness of the penalty; (2) whether the property was an integral part of the commission of the crime; and (3) whether the criminal activity involving the property was extensive in terms of time and/or spatial use.

The Appellate Court held that although the husband’s offense was serious, the wife’s conduct – at most, a consenting passenger (and disputing even that much) – was less serious. In comparison, the forfeiture of a $35,000 motorcycle of which she was sole owner was particularly harsh. The parties agreed that the motorcycle was obviously an integral part of the commission of the crime of aggravated DUI, but the Court concluded that the third factor weighed at least somewhat against forfeiture given that the drive had only been approximately twelve blocks. In light of its weighing of these factors, the Appellate Court held that the forfeiture of the wife’s motorcycle constituted an excessive fine under the Eighth Amendment.

We expect 2010 Harley Davidson to be decided by next winter.

Image courtesy of Flickr by Valerie Everett (no changes).

Illinois Supreme Court Holds Railroad May Argue Third Parties Exclusively Responsible for Employee Injuries

15187909154_3d65087d0e_zIn order to recover damages under the Federal Employers’ Liability Act, an employee of a railroad must show that the railroad operated in interstate commerce, that the plaintiff was injured in the scope of his or her duties, and that the injury resulted “in whole or in part” from the employer’s negligence. What this means, the U.S. Supreme Court has held, is that if the railroad is responsible for the injury even slightly, the railroad is entirely liable. As a result, evidence which purports to show joint tortfeasors which would routinely be introduced in other tort cases never comes in in railroad cases.

But can the railroad try to prove that a third party was solely responsible for the employee’s injury? Last month, the Illinois Supreme Court unanimously held in Wardwell v. Union Pacific Railroad Company that the answer is “yes.”

Plaintiff was riding in a van owned by his railroad employer and driven by an agent of the railroad. The van was rear-ended by a vehicle driven by a third party, and the plaintiff suffered disabling injuries. Plaintiff filed a FELA suit, alleging that his vehicle had negligently cut in front of the third party, causing the accident at least in part. At trial, the driver of the plaintiff’s vehicle testified that she activated her turn signal, checked her side mirror, and then made a lane change. The van was hit twenty seconds later. The third party driver testified at trial that she was intoxicated at the time of the collision, was arrested at the scene, and that she had not seen the van – she either “fell asleep or was blacked out” prior to the collision. Further evidence suggested that the third party was traveling ten to fifteen miles per hour over the speed limit.

The jury returned a verdict for the railroad. The plaintiff moved for a new trial, arguing that the defendant had been allowed to argue that the third party was the sole cause of the accident, and that the “sole cause defense” was not permitted in a FELA action. The trial court denied the motion, but the Appellate Court reversed.

The Supreme Court reversed the Appellate Court. The problem with the Appellate Court’s holding, the Court said, was that in order to determine whether the railroad was even to a smallest degree responsible for an accident, the jury would have to consider all the evidence – including the possibility that a third party was entirely responsible. Keeping the jury from considering the third party’s negligence would render the circumstances incomprehensible and all but eviscerate the FELA standard of liability. The Court noted that its holding was consistent with the holdings of several other courts, including the U.S. Supreme Court, that no recovery is possible under FELA where the plaintiff is completely responsible for his or her own injury.

Justice Kilbride filed a special concurrence, arguing that the standard federal instruction for causation under FELA, which emphasizes the scope of the potential liability of the defendant, should be given in Illinois.

Image courtesy of Flickr by Tony Webster (no changes).

 

Illinois Supreme Court Agrees to Clarify What a “Riding Trail” is For Purposes of the Tort Immunity Act

14992097864_7082cb73f8_zAccording to Section 3-107(b) of the Local Governmental and Governmental Employees Tort Immunity Act, no public entity or public employee is “liable for an injury caused by a condition of . . . [a]ny hiking, riding, fishing or hunting trail.” 745 ILCS 10/3-107(b). The purpose of the statute is to encourage public entities to maintain such facilities in more-or-less their natural state.

But what is a “riding trail” under the Act? The Illinois Supreme Court agreed to decide that question in late January, allowing a petition for leave to appeal in Corbett v. County of Lake, a decision from the Second District.

Corbett began in 2013 when plaintiff, who was part of a group of cyclists riding a path within Highland Park, was thrown from her bicycle and seriously injured. Plaintiff alleges that the defendants were on notice of the poor condition of the path prior to the accident – weeds and other vegetation were growing through the asphalt, making portions of the path broken, bumpy and elevated.

The City raised Section 3-107(b) as an affirmative defense in its answer, and subsequently moved for summary judgment, arguing that the path where plaintiff was injured was a “riding trail” under the Act. The plaintiff opposed the motion, arguing that the stretch of path where she was injured runs through a developed area of the park, not through a forest or a mountainous region. There are allegedly commercial buildings on both sides of the path, and many businesses have cyclone fences abutting the path. Finally, Commonwealth Edison allegedly owns several utility poles along the path.

The trial court granted both defendants summary judgment. The court held that the County was immune under Section 3-106 of the Act (745 ILCS 10/3-106), which requires proof of willful and wanton conduct to impose liability on a public entity for injury caused by conditions on public property used for recreational purposes, and that the City was immune under Section 3-107(b). The plaintiffs didn’t appeal the ruling as to the County defendant, but did appeal with respect to the City.

The Appellate Court reversed. Reviewing the limited earlier caselaw construing the term “riding trail,” the Court concluded that a path need not be totally unimproved in order to qualify as a riding trail – many if not most trails have been modified at least slightly in order to make them accessible to the public. However, the Court held that the plain meaning of the term “trail” was a “marked path through a forest or mountainous region.” That restrictive definition necessarily meant that the path in Corbett was not a “riding trail” under the statute. Although some development near the path did not per se mean that the path was not a “riding trail,” when industrial and residential development surrounded a path, by definition it could not be a “riding trail.” Since the Act was not applicable to the claims against the City, the Appellate Court reversed.

We expect Corbett to be decided by next winter.

Image courtesy of Flickr by Eli Christman (no changes).

Illinois Supreme Court Agrees to Decide Whether Third Party Buyer is Liable for Delinquent Assessments to Mortgagee’s Subsidiary

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According to Section 9(g)(4) of the Illinois Condominium Property Act, any purchaser of a condominium unit who acquires a property either at a foreclosure sale or by post-foreclosure purchase from the mortgagee must pay the last six months’ worth of delinquent assessments on the unit. 765 ILCS 605/9(g)(4).

So where the wholly-owned subsidiary of the original mortgagee buys the property at the foreclosure sale and subsequently sells to a third party, is that subsidiary a “mortgagee” under the statute, triggering the duty to pay back assessments? That’s the question which the Illinois Supreme Court agreed to decide in the final days of the January term, allowing a petition for leave to appeal in Wing Street of Arlington Heights Condominium Association v. Kiss the Chef Holdings, LLC, a decision from Divison Three of the First District.

Wing Street began in 2010, when the condominium association filed an action to recover past-due assessments. The following year, the bank filed an action to foreclose the mortgage on the property. At the foreclosure sale, a wholly-owned subsidiary of the bank bought the property. The subsidiary paid the current assessments on the unit from January 2012 until it was sold on March 29, 2013. Neither the subsidiary nor the third-party buyer requested or obtained a paid assessment letter from the condominium association before the sale.

Nine months after the property was sold, the condo association sued the third party buyer, alleging under the Condominium Property Act that because the subsidiary was a “mortgagee” within the meaning of Section 9(g)(4), the new owner had an obligation to pay six months’ worth of back assessments. The trial court originally found for the subsidiary after a bench trial, but subsequently granted reconsideration and concluded that the subsidiary wasn’t a “mortgagee” for purposes of the statute after all.

The Appellate Court unanimously reversed. Citing the Supreme Court’s decision in 1010 Lake Shore Association v. Deutsche Bank National Trust Company, the Court concluded that the legislature’s intent in enacting Section 9(g)(4) was to provide that condo associations would at least be able to recover a portion of the prior owner’s unpaid assessments when the unit is sold. The Appellate Court concluded that the subsidiary was a “mortgagee” within the meaning of the Condominium Property Act, citing to the Illinois Mortgage Foreclosure Law. Because the third-party buyer failed to pay the past six months of unpaid assessments upon its purchase of the property, a lien for that amount arose, which the subsidiary was free to foreclose via a direct action against the buyer.

We expect Wing Street to be decided by next winter.

Image courtesy of Flickr by John Picken Photo (no changes).

Illinois Supreme Court Holds City Not Required to Arbitrate Termination of Police Officer

iy7405 police station signThe Illinois Supreme Court has long held that when parties enter into a broad arbitration agreement but it’s unclear whether the specific subject of a dispute is covered, the question of arbitrability is initially decided by the arbitrator, not a court.  But that rule is subject to a big caveat: the right to arbitrate can be waived where the party voluntarily participates in proceedings inconsistent with arbitration.  In the closing days of the January term, the Court unanimously held that a police officer had waived any right he might otherwise have had to arbitrate his termination, affirming the Appellate Court in Village of Bartonville v. LopezOur detailed report on the underlying facts and lower court holdings in Village of Bartonville is here.

The defendant in Village of Bartonville was a police officer for the plaintiff from 2012 through 2014.  At all relevant times, there was a collective bargaining agreement in place between the defendant labor union and the Village which provided for a grievance procedure.  In a separate article, the CBA addressed discipline, providing that discipline should be progressive and corrective, and that no officer could be disciplined without just cause.

The village police chief signed a complaint for termination against the defendant officer in August 2014, accusing him of violating certain procedures and field training directives during and after a traffic stop.  The complaint was filed with the board of fire and police commissioners.  Counsel for the Board agreed with counsel for the officer (who also represented the union) that a hearing on the complaint would be set for October 3.

Just prior to the hearing, the officer filed a declaratory judgment action in Circuit Court, seeking a judgment that the Board had lost jurisdiction over the complaint by failing to have a complaint within thirty days of filing.  A few months later, the court granted summary judgment to the defendants in that action, holding that the delay in the hearing had been at the officer’s request, and the Appellate Court affirmed.

At the outset of the October 3 hearing, counsel for the officer stated that the officer was participating in the hearing without waiving his challenge to jurisdiction or his right to grieve any suspension or termination that might be imposed.  During the hearing, defense counsel cross-examined witnesses and made a closing argument (during which once again counsel stated that he was not waiving the challenge to jurisdiction or the right to file a grievance).   At the conclusion of the hearing, the Board discharged the officer.  The officer did not seek review of that decision pursuant to the Administrative Review Law.

Instead, the officer filed a grievance over his termination.  The plaintiff responded by filing a declaratory judgment action of their own, seeking a judgment that the termination was not an arbitrable matter.  The defendants argued that the officer was attempting to get improper collateral review of the Board’s administrative decision firing him.  The court ultimately granted plaintiff’s motion for summary judgment, holding that there was no provision in the parties’ CBA consigning discipline and termination to the grievance arbitration procedure.  The Appellate Court reversed, applying the rule above – since the contract was unclear about whether arbitration of discipline was intended, the decision on arbitrability should be made in the first instance by an arbitrator.

In an opinion by Justice Thomas, the Supreme Court unanimously reversed.  On appeal, the defendants argued that the only question was whether the CBA expressly excluded discipline and termination from arbitration.  If it did not, pursuant to long-standing precedent, the question of arbitrability was turned over to an arbitrator.

The problem with that view, the Supreme Court found, was the officer’s substantive participation in the Board hearing.  The Court noted that during the hearing, although counsel had purported to reserve the right to file a grievance, the officer never challenged the Board’s jurisdiction on the grounds that the matter was subject to grievance arbitration (the officer’s jurisdictional challenge went solely to the delay in the hearing), nor did he ask the Board to stay the proceedings pending his filing of a grievance, or ask a court to enjoin the Board from proceeding.

The defendants argued that the Municipal Code authorized them to pursue both the hearing and arbitration in tandem.  But that could not be, the Court held; that would imply that an arbitrator could potentially overrule the Board, or even a court, in the parallel proceedings.  Since the defendants had permitted the Board’s decision to become final without an appeal, that decision now barred any resort to the grievance procedure by res judicata, given that the Board’s proceedings (in which the officer testified, and his counsel presented evidence, cross-examined witnesses and made a closing argument) were judicial in nature.

Holding that by fully participating in the hearing and allowing the Board’s decision to become final the officer had acted in a manner inconsistent with any right he might have had to arbitrate, the Court reversed the Appellate Court.

Image courtesy of Flickr by Mark Goebel (no changes).

Illinois Supreme Court Backs School Board in Open Meetings Act Dispute With Attorney General

4601492261_599b55ef54_zAt a closed session of the school board, six of the seven members sign a separation agreement with the outgoing school superintendent, but don’t date it.  Several weeks later, the Board holds a public meeting.  The agenda posted on the website states that the Board will approve “a resolution regarding the separation agreement and release” between the superintendent and the Board.  Visitors to the site could follow links to the proposed resolution and to the separation agreement itself, which contained the dated signature of the superintendent and the undated signatures of the board members.

Has the Board violated the Open Meetings Act by taking “final” action in a non-public session?  In late January, the Supreme Court unanimously held that the answer was “no” in an opinion by Justice Garman in The Board of Education of Springfield School District No. 186 v. The Attorney General of Illinois.  Our detailed summary of the underlying facts and lower court holdings is here.

Board of Education began in late 2012, when the Board and the former superintendent reached agreement on terms of separation.  Following the closed meeting at which the agreement was signed, a request was filed with the Public Access Counselor in the Attorney General’s office for a determination of whether the Board had violated the Public Meetings Act.

While that request was pending, the Board’s public meeting took place.  During that meeting, the Board president called the agenda item, the Board discussed the matter, and then approved the agreement by a six to one vote.  Two weeks later, the Attorney General issued a binding opinion finding that the Board had violated the Open Meetings Act four times, including by signing the agreement in the February closed meeting, and by failing during the public meeting to “adequately inform the public of the nature of the matter under consideration or the business being conducted.”  The Board sought administrative review, and the Circuit Court reversed the Attorney General’s conclusion that “final action” in terms of the Act had taken place at the February meeting.  The court remanded the matter back to the Attorney General, who issued a second binding opinion finding that the Board’s posting of the agreement on its website was not a “public recital during an open meeting” sufficient to satisfy the Act.  The Circuit Court again reversed the Attorney General, finding that the posting of the agenda had adequately informed the public, and the Appellate Court affirmed.

The Court agreed with the Attorney General that the Act requires two separate actions from a public entity – the posting of the agenda and a “public recital” of the nature of the action being taken.  However, the “recital” didn’t mean that the public entity was required to explain to any members of the public who were present precisely what was being done and why.  Rather, all that was needed is for the entity to disclose “the essence of the matter under consideration, its character, or its identity.”  The public entity was free to voluntarily disclose in its “recital” the key terms of the agreement, but was not required to do so.  The Court held that because the board president described “the general nature of the matter under consideration” and “specific detail sufficient to identify the particular transaction,” nothing more was required.

The Court then turned its attention to the issue of the February closed meeting.  The Court noted that nothing in the statute barred taking a preliminary vote during a closed meeting.  The fact that the members signed the agreement in the closed meeting was “immaterial,” since until there was a public vote, there by definition could be no final action.

Image courtesy of Flickr by Leo-Seta (no changes).

Florida Supreme Court Rejects Daubert, But Daubert Lives to Fight Another Day

On February 16, 2017, the Florida Supreme Court declined to adopt the Daubert standard for the admissibility of expert evidence into the Florida Evidence Code to the extent it is procedural in nature.  See In re Amends. to the Fla. Evid. Code, No. SC16-181, 2017 WL 633770 (Fla. Feb. 16, 2017).  To read the full opinion, please go here.  The decision was supported by the plaintiffs’ bar, who believed that the Frye “general acceptance” standard worked and argued that the more complicated Daubert standard would burden the state courts and negatively impact most clients by requiring courts to hold costly mini-trials to determine whether to admit an expert’s testimony.  The Court did not find that the Daubert standard is procedural or that it is unconstitutional.  It left that fight for another day when it is presented with “a proper case or controversy.”

Frye & Daubert

Effective July 1, 2013, the Florida Legislature adopted the Daubert standard for the admissibility of expert evidence, replacing the Frye standard.  See Ch. 2013-107, Laws of Fla. §§ 1, 2 (amending sections 90.702 and 90.704 of the Florida Statutes).  The Frye standard, which was adopted in Florida in 1952, admits expert testimony if the expert’s testimony is based on a scientific principle or discovery that is “sufficiently established to have gained general acceptance in the particular field in which it belongs.”  The Frye standard only applies to expert testimony that involves “new or novel scientific evidence,” and does not apply to “pure opinion” or an expert’s reasoning or conclusion.  For example, if an expert uses scientific literature as a tool in helping form an opinion, then the court can and will scrutinize that opinion under Frye, but if the expert chooses to give an expert opinion without any basis in scientific literature at all, then his opinion is not subjected to the Frye test and is likely admissible.  See Kenneth W. Waterway & Robert C. Weill, A Plea for Legislative Reform:  The Adoption of Daubert to Ensure the Reliability of Exert Evidence in Florida Courts, 36 Nova L. Rev. 1, 11 (2011).

The Daubert standard, which has been applied by federal courts since 1993, applies to all expert testimony and admits expert testimony when it is both reliable and relevant.  See § 90.702, Fla. Stat. (admitting expert testimony when it is “based upon sufficient facts or data,” “the product of reliable principles and methods,” and the expert “has applied the principles and methods reliably to the facts of the case”).

The Majority Opinion

In its opinion, the Florida Supreme Court declined to adopt the Daubert amendment into the Florida Evidence Code to the extent it is procedural, citing “grave constitutional concerns”  such as undermining the right to a jury trial and denying access to the courts.  The procedural – substantive distinction is grounded on a separation-of-powers issue:  the Florida Constitution grants to the Court the exclusive power to create rules of court procedure; this exclusive power does not extend to rules of procedure that are substantive, which are the province of the Florida legislature.

The Court did not find that the amendment was procedural or substantive and did not conclude that the amendment was unconstitutional.   Because a rules case is not the proper forum for addressing the constitutionality of a statute or proposed rule, the Court deferred these issues until it is has a “proper case or controversy” before it.

The Dissenting Opinion

Justice Polston dissented in which Justice Canady concurred.  Highlighting that 36 states have rejected Frye in favor of Daubert, Justice Polston asked and answered two questions:  “Has the entire federal court system for the last 23 years as well as 36 states denied parties’ right to a jury trial and access to courts?  Do only Florida and a few other states have a constitutionally sound standard for the admissibility of expert testimony?  Of course not.”  He also noted that he knew of no reported decisions that have held that the Daubert standard violates the constitutional guarantees of a jury trial and access to the courts.  To the contrary, he cited cases holding that the Daubert standard does not violate the constitution.  In the end, he found the majority’s “grave constitutional concerns” over the Daubert standard to be unfounded and thought that the Court should adopt the Daubert standard.

What Now?

The Court’s opinion leaves the door open as to whether the Daubert amendment is procedural or substantive and also whether it is unconstitutional.  Until a case reaches the supreme court that tees up these issues, Florida attorneys will battle these issues in the trial courts.  Because Florida courts have not established a bright-line test to resolve the procedural-substantive question, the law is a morass of conflicting definitions and principles.   For example, at times the Florida Supreme Court even has held that a provision can be both “substantive” and “procedural.”  Because of the uncertainty in the law, every case may not be a battleground for these issues; attorneys likely will raise these issues when it makes sense from legal, strategic and cost perspectives.  The following flow chart demonstrates the interaction of these issues:

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Of course, inherent in some of these issues are additional issues.  For example, the Daubert amendment became effective on July 1, 2013.  Parties also may choose to litigate whether the amendment applies retroactively to causes of action that accrued before the effective date.

As for pending cases in the trial courts, parties who have had their experts’ opinions stricken under the Daubert standard, may now try to seek reconsideration of that ruling arguing that the Frye standard should apply.  As for cases pending on appeal where there is an issue involving the exclusion of an expert’s opinion based on Daubert, the appellate courts may remand the issue back to the trial court in light of this material change in the law.

Illinois Supreme Court Strikes Down Chicago Tax as Applied to Out-of-City Car Rentals

1189995100_c09609e7a5The City of Chicago levies a tax on the lease or rental of personal property within the City or the privilege of using personal property leased elsewhere in the City. In 2011, the City’s director of the department of revenue issued Ruling 11, which provided that the City Department of Revenue would hold suburban car rental agencies within three miles of the city limits responsible for paying the tax with respect to many of their customers. On January 20, the Supreme Court unanimously held in Hertz Corporation v. City of Chicago that Ruling 11 was unconstitutional under the home rule provision of the Illinois Constitution.

Chicago’s personal property lease transaction tax ordinance provides that the lease or rental of the property is deemed to take place at the location where the lessee takes possession of the property. Property rented outside of the City is exempt from the tax if it is primarily used – more than 50% – outside the City. Ruling 11 provides that absent written proof to the contrary, the Department would assume that any Chicago resident (as proven by their driver’s license) renting a vehicle at a suburban location would be using the vehicle 50% or more inside the City. As for non-Chicago residents, Ruling 11 suggested the inclusion of a check-box on the rental form by which the renter would disclose whether or not he or she planned to use the vehicle more than 50% inside the City. If the box was checked “yes,” the tax would apply.

The plaintiffs filed separate suits against the City challenging Rule 11 on various federal and state constitutional grounds. The Circuit Court granted the plaintiffs’ motion for summary judgment, holding that Ruling 11 was an improper attempt to project the taxing power of the City extraterritorially.  The Appellate Court reversed, holding that Ruling 11 was taxing use inside the City, not rentals outside the City, and therefore wasn’t being applied extraterritorially even with respect to rentals occurring in the suburban locations.

In an opinion by Justice Garman, the Supreme Court unanimously reversed the Appellate Court. The Court began with the home rule provision of the Illinois Constitution, Article VII, Section 6(a). The Court has previously held under Section 6(a) that home rule units may not extend their home rule powers beyond their geographic borders unless specifically authorized to do so by the General Assembly. The plaintiffs argued that Ruling 11 operated extraterritorially in two ways: (1) it taxed rental transactions occurring beyond City borders; and (2) it taxed the entire value of the rental based on a trigger of only 50% use inside the City.

The Court pointed out that the City was relying on a number of due process cases to defend the tax ordinance, but cited no authority equating due process with the city’s home rule authority. The question in Hertz was not whether the customers’ due process rights had been violated; it was whether the City had exceeded its home rule authority by requiring the plaintiffs to collect the tax from certain of its customers. The City relied on cases where the tax was levied on sales of tangible personal property within the boundaries of the taxing jurisdiction. According to the Court, the City was trying to expand these cases, arguing that the City could reach conclusions outside of the City simply because the plaintiffs were doing business inside the City.

The lessee’s statement that he or she planned to use the vehicle inside Chicago wasn’t enough, the Court found. “A statement of one’s intent is evidence only of present intent, not of actual use.” At the time of the transaction, “the use of the leased vehicle has not taken place and may never take place within Chicago’s borders.” The City was trying to tax the use of rental vehicles in Chicago, but was in fact taxing the stated intent to use the vehicles inside the City at some future time. “Absent an actual connection to Chicago, the City’s tax under Ruling 11 amounts to a tax on transactions that take place wholly outside Chicago’s borders,” according to the Court, and the tax therefore violated the home rule article of the constitution.

Image courtesy of Flickr by Jonathan Brodsky (no changes).

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