The Appellate Strategist

The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Illinois Supreme Court Agrees to Decide Property Dispute Between Former Same-Sex Domestic Partners

Posted in Illinois

8460794157_f1b5d57432_zIn Hewitt v. Hewitt in 1979, the Illinois Supreme Court decided that for public policy reasons, Illinois courts cannot decide property disputes between unmarried couples. In the closing days of the March term, the Court agreed to decide whether or not Hewitt remains good law in the context of same-sex domestic partner relationships.

According to the complaint in Blumenthal v. Brewer, the parties became domestic partners in 1981 or 1982 while they were graduate students. One partner attained a law degree, the other a medical degree. The couple had three children, and subsequently allocated work and family responsibilities to care for their children. In 2002, they went through the procedures to cross-adopt their three children. In 2003, the couple registered as domestic partners.

The parties’ relationship ended in 2008. In a separate action, the parties resolved issues of custody, child support and responsibility for certain child expenses. The plaintiff – a physician – filed suit seeking to partition the home she owned with her former domestic partner. The defendant, who was by then a judge, counterclaimed for various remedies, including for a constructive trust over the residence and the physician party’s net earnings. The plaintiff successfully argued that Illinois law doesn’t recognize property claims between unmarried domestic partners, citing Hewitt.

On appeal, the defendant argued that Hewitt was no longer good law because the legislative policies underlying that decision either no longer existed or had been modified substantially. In the years since Hewitt, the legislature has repealed the criminal prohibition on nonmarital cohabilitation, prohibited differential treatment of marital and nonmarital children, adopted no-fault divorce and established civil unions (Illinois adopted same-sex marriage after the parties’ relationship terminated). The plaintiff responded that Hewitt was based not on Illinois’ former hostility to claims by unmarried cohabitants, but rather on Illinois’ refusal to recognize common-law marriage – a public policy which was still in place.

The Appellate Court agreed that Hewitt was based, at least to some degree, on the state’s refusal to recognize common law marriage. But Blumenthal was not an attempt to retroactively create a marriage, the Court concluded. The Court emphasized that Illinois law has changed dramatically in the 35 years since Hewitt. Courts across the country are increasingly inclined to enforce agreements between former cohabitants, the court pointed out, citing the landmark California case of Marvin v. Marvin as the beginning of the trend.

Besides, the Court noted, Hewitt might have unintended consequences. Although the Hewitt line of authority was purportedly intended to encourage marriage, in fact, if a more financially well-off partner could turn aside any claim from an unmarried cohabitant, he or she had a significant incentive not to marry. The Court further commented that Hewitt appeared to be based to a significant degree on the legislature’s then-recent decision to reject no-fault divorce, which the Court interpreted as a decision to prevent marriage from becoming a civil contract terminable at will.

Ultimately, the Court concluded that Illinois law no longer disfavors either the parties’ 26-year cohabitation or the property claims at issue between them. The defendant was merely seeking to assert cross claims for relief that is available to anyone else. The Court held that the trial court’s refusal to let her do so was error.

We expect Blumenthal to be decided in eight to ten months.

Image courtesy of Flickr by Alexandre Dulaunoy.

Illinois Supreme Court to Decide If State’s Union Contract Conditioned on Appropriations

Posted in Illinois

5526726905_66ccfbaf3b_zIn the closing days of the March term, the Illinois Supreme Court agreed to wade yet again into the contentious and politicized area of public employee wages and benefits. State of Illinois v. American Federation of State, County, and Municipal Employees, Council 31 poses the question of whether pay raises promised in the State’s contracts with its employee unions are conditional on the Legislature actually appropriating the necessary funds.

In 2008, the State agreed to a four-year collective bargaining agreement with AFSCME, which represents most state employees. The CBA provided for small twice-yearly wage increases in 2009, 2010 and 2011. But with the State mired in budget woes, AFSCME agreed to defer the mandated wage increases in 2009 and 2010.

In early 2011, then-Governor Quinn proposed a budget which included sufficient appropriations to fund the required raises for that year, but the legislature rejected parts of the budget. When the budget was finally approved, the State’s Central Management Services determined that there was insufficient money in it to finance the agreed increases for employees at 14 agencies. Those employees’ wages were frozen at 2011 levels, while employees at all other state agencies began receiving the increases.

AFSCME sought arbitration of the dispute. The union argued that the State was required to pay the mandated increases, but the State argued that it owed no duty to pay any employees unless and until the legislature appropriated sufficient funds – which had not happened. The arbitrator entered his award, finding that the State’s position would have required him to add language to the arbitration agreement – which he lacked the power to do. The arbitrator ordered the increases paid.

The State filed a complaint in Circuit Court seeking to vacate the award, together with an emergency motion for stay. The trial court granted the stay. In the weeks that followed, the legislature made supplemental appropriations, and several agencies experienced enough attrition to pay the increases to remaining employees, but employees in six agencies remained without the mandated increases.

The trial court held that an overriding public policy made the CBA and the subsequent agreements invalid unless the legislature appropriated the necessary funds. Following a hearing, the judge determined that the affected agencies had the funds to pay partial increases. Both the State and AFSCME appealed. Following the trial court decision, the State reached an agreement with the union to pay the partial increases due under the trial court’s decision. The State’s negotiators agreed to withdraw its appeal, but the Attorney General refused to do so. Nevertheless, AFSCME members ratified the agreement, and the increases were paid.

The Appellate Court (First District, Division 2) reversed in an opinion by Justice Neville. The Court began by summarily rejecting the notion that the State’s payments under the trial court order had mooted the appeal. The Court also briefly noted that no party had questioned its power to decide the case, even though the Justices’ staffers were members of AFSCME subject to the CBA at issue. In any event, the Court concluded that the rule of necessity authorized the Court to proceed.

The Court began by addressing the State’s argument that the arbitrator had improperly declined to disregard the language of the CBA and other union agreements on public policy grounds. The Court rejected the State’s argument, finding that the arbitrator’s authority was drawn from the agreement between the parties, and if the agreement did not expressly give him the power to consider public policy, he had no power to do so.

The State pointed to language in the CBA providing that the “provisions of this contract cannot supersede law.” Given that Section 21 of the Public Labor Relations Act provided that “employers” may negotiate multi-year collective bargaining agreements “subject to the appropriation power of the employer.” According to the State, this meant that all CBAs were by definition conditional on appropriations.

The Appellate Court disagreed. The problem, the Court found, was that the State overlooked the Act’s definition of “employer,” which expressly excluded the General Assembly.

The State next made a related argument, claiming that public policy forbade the State from negotiating any binding contracts which required the payment of funds the legislature hadn’t appropriated yet. There were two fatal flaws in that argument, the Court concluded. First of all, it ran squarely into the constitutional contract clause, which provides that “no . . . law impairing the obligation of contracts . . . shall be passed.” Second, it conflicted with the language of the Act, which expressly authorized multi-year contracts.

The Court quoted at length from a 1992 decision of the Iowa Supreme Court, AFSCME/Iowa Council 61 v. State, which the Court said involved an identical argument that the State owed its employees nothing under a CBA until appropriations were made. But the Iowa Supreme Court concluded that it would be doing the state no favors if it accepted the argument: “To do so would seriously impair its ability to function. The government must finance its affairs, must contract for buildings, highways, and a myriad of other public improvements and services. It would lead to untenable results if a government, after having contracted for needed things, did not have to pay for them.”

At bottom, the Court concluded, the State’s argument meant that notwithstanding the language of the contract clause, the legislature had a right to impair any contract involving the state at any time. Such an argument was untenable, the Court found. If the State wanted to make its promises to pay contingent on appropriations, it would have to include express language in the contract saying so.

The Court held that the arbitrator’s final award drew its essence from the State’s agreements with the union and didn’t offend public policy. Accordingly, the trial court erred by modifying the award in part.

We expect AFSCME to be decided in eight to ten months.

Image courtesy of Flickr by Donkey Hotey.

136 Means 136: Ballot Signature Requirement Requires Strict Compliance

Posted in Illinois

2422783237_d22ae31c33_oBallot access statutes nearly always require that prospective candidates present a given number of valid voters’ signatures in order to qualify for the ballot. In Illinois, nomination for offices below the statewide level requires signatures from not less than 5% nor more than 8% of the registered voters who participated in the last preceding regular election.

So what happens if the prospective candidate falls a bit short? Is substantial compliance enough?

Late in the March term, the Illinois Supreme Court answered this question in Jackson-Hicks v. The East St. Louis Board of Election Commissioners: “No.”

Candidates in the election for Mayor of East St. Louis run on a nonpartisan basis. In order to be listed on the ballot, candidates are required to present 136 valid signatures. On their face, the incumbent mayor’s petitions contained 171 signatures. Another candidate for mayor challenged the incumbent’s petitions, arguing that he didn’t have enough valid signatures to qualify. During a hearing on the challenge, an attorney for the Election Board presented evidence that at least 48 of the mayor’s signatures were invalid, leaving him with no more than 123 valid signatures.

In its written decision, the Election Board concluded that the mayor had only 123 valid signatures. Nevertheless, the Board found that the mayor had substantially complied with the statute, and ordered that his name be included on the ballot. The Circuit Court affirmed that finding, as did the Appellate Court. In an opinion by Justice Karmeier following accelerated review (without oral argument), the Supreme Court unanimously reversed.

Since the primary had passed by the time the Court issued its decision, the Mayor argued that the case was moot. The Court disagreed, pointing out that there were only three candidates, making a primary unnecessary. Given that the challenger’s goal was to prevent the mayor’s name from appearing on the ballot, the Court was still able to offer the plaintiff full relief, meaning that the case was not moot.

The Mayor argued that the ballot access provisions of the Election Code were merely directory rather than mandatory. But the Court noted that the requirements of the Election Code were typically mandatory – and the statutes governing nomination papers were certainly no exception.

The Mayor argued that his nomination papers contained enough valid signatures to serve the underlying purpose of the law – to demonstrate that a candidate has initiative and at least a minimal appeal to the voters. The Court disagreed, writing that the “Mayor’s position is unprecedented, unworkable and contrary to law.” To hold that substantial compliance satisfies the statute “would require us to disregard the clear, unambiguous and mandatory language of the statute and graft onto it exceptions and limitations the legislature did not express.”

The Court acknowledged that a few cases from the Appellate Court had held that substantial compliance was enough when the candidate complied with the basic requirements of the Code in a technically deficient manner (such as including a single nonconforming page in a petition or filing a statement of economic interest in the wrong county). But the mayor hadn’t met the basic requirements of the Code at all, according to the Court: “Here, the candidate failed to meet a threshold requirement completely.”

Ultimately, the Court viewed the Mayor’s position as completely unworkable. If substantial compliance was good enough, “there would be no way to insure consistency from one electoral jurisdiction to another, from one election to another, or even from one race to another . . . Will 90% of the statutory minimum turn out to be enough? 75%? Less than that? Candidates will be left to speculate.”

The bottom line was simple, the Court said. The mandatory minimum signatures requirement was mandatory and had to be followed. Otherwise, the candidate doesn’t qualify for the ballot. The Court remanded to the Circuit Court with instructions to enter judgment requiring that the Mayor’s name be removed from the ballot, and that any votes cast in his favor before the ballot was corrected be disregarded.

Image courtesy of Flickr by Seattle Municipal Archives.

Join Us on April 29 for “The California Supreme Court: What To Expect in 2015”

Posted in California

6700320793_a147d7d7b8_zOn Wednesday, April 29th at 11:00 AM Pacific/2:00 PM Eastern, Sedgwick’s Appellate Task Force will present its first webinar of 2015, “The California Supreme Court: What to Expect in 2015.”  We’ll preview our group’s analytical data library on the Court’s 600+ civil decisions since 2000, and take a look at the highlights of the Court’s civil docket:

  • Which Court of Appeal districts are reversed most and least often; what areas of the law the Court draws its civil docket from; whether the Court more often grants review of defense or plaintiff’s wins from the Courts of Appeal in each area of the law; reversal rates for each type of case; and which Justices tend to vote together in the most closely contested cases;
  • Will California continue to be a welcoming host to out-of state plaintiffs in complex product cases?
  • Will potential asbestos liability continue to expand 12 years after the last U.S. mine closed?
  • Who is the prevailing party when a defendant pays plaintiff for a dismissal?

For CLE details and to register for the webinar, click here .

Image courtesy of Flickr by OmiB91.

Illinois Supreme Court Holds Doctrine of Equitable Adoption Doesn’t Apply to Parentage Proceedings

Posted in Illinois

9112385886_6649902db9_zTwo years ago, the Illinois Supreme Court recognized the doctrine of equitable adoption in the context of an estate proceeding. In In re Parentage of Scarlet Z.-D., the Court was presented with the question of whether the doctrine should be extended to a parentage proceeding. In late March, the Court handed down its unanimous decision: No.

The two parties to Scarlett began living together in 1999, and became engaged not long after. In 2003, the mother – a native of Slovakia – met a child during a visit home. The mother and her fiancée decided that the mother would adopt the child (the father had no right to do so since was neither a Slovakian national nor married to the mother). The adoption was finalized under Slovakian law in 2004.

The adult parties never married; nor was the child’s Slovakian adoption domesticated in Illinois. In the summer of 2008, the adult parties’ relationship ended; the mother moved out of the couple’s house, taking the child with her. Not long after, the putative father filed a six-count petition, seeking physical custody of the child, or in the alternative, primary custody with reasonable visitation for the mother; an equitable division of child support; breach of an oral agreement to be equal parents to the child; promissory estoppel, and breach of a contract implied in fact and law. After a bench trial, the trial court concluded that the putative father lacked standing and denied relief on the first two counts.

The Appellate Court initially affirmed. On petition for leave to appeal, the Supreme Court directed the Appellate Court to reconsider in light of the Court’s recent recognition of the doctrine of equitable adoption. On reconsideration, the Appellate Court concluded that the putative father might be able to make out a case for standing under the doctrine of equitable adoption. The Supreme Court granted a second petition for leave to appeal.

On appeal, the putative father argued that the mother should be equitably estopped from challenging his standing. Equitable estoppel involves balancing of several factors: (1) the other party knowingly misrepresented or concealed material facts; (2) the party claiming estoppel didn’t know the representations were untrue when they were heard and acted upon; (3) the other party intended that the representations be acted upon by the party claiming estoppel or by the general public; (4) the party claiming estoppel reasonably relied upon the misrepresentations in good faith to his or her detriment; and (5) the party claiming estoppel has been prejudiced by his or her reliance. The Supreme Court held that the putative father’s claim failed because there was no allegation that the mother had ever suggested that he was the child’s biological or adoptive father, and any promises about future intentions were not actionable. Therefore, the mother’s ultimate termination of the putative father’s relationship with the child was not inconsistent with any factual representation.

The putative father also argued that he could remedy his lack of statutory standing pursuant to various functional parent theories. After thoroughly reviewing the state of the law with respect to such equitable theories, the Court concluded that the putative father’s argument must fail because Illinois does not recognize any functional parent theories.

Finally, the Court turned to the question of whether the putative father could get standing based on the equitable adoption doctrine. The Court pointed out that equitable adoption had been adopted by the Court only in the limited context of facilitating an inheritance from a father who apparently intended to finalize an adoption and had never finalized the proceeding. The Court concluded that there was no basis for expanding the doctrine to a parentage and custody dispute.

The Court concluded its opinion by rejecting the putative father’s common law contract claims, concluding that all of the father’s claims were, at bottom, attempts to end-run his lack of statutory standing to pursue a parentage finding and custody determination.

Image courtesy of Flickr by LukeMN.

Illinois Supreme Court Holds Captive Insurance Agents Owe Limited Tort Duty to Clients

Posted in Illinois

2957925933_85ed92d9cc_zSection 2-2201 of the Code of Civil Procedure provides that “[a]n insurance producer . . . shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured.” (735 ILCS 5/2-2201).

For many years, Illinois insurance law has distinguished between insurance “brokers” – independent actors who act as a middleman between the insured and the insurer to procure insurance – and “agents” – who sell the insurance of a particular company exclusively. Insurance “brokers” owe their insureds a fiduciary duty. Insurance “agents” don’t. So who’s an insurance “producer” within the meaning of Section 2-2201? That’s the question posed by Skaperdas v. Country Casualty Insurance Company, which the Illinois Supreme Court handed down in the final days of the March term. Our detailed summary of the facts and underlying court decisions in Skaperdas is here. Our report on the oral argument is here.

The underlying insurer issued an automobile insurance policy to the plaintiff. Plaintiff’s fiancée was involved in an accident while driving one of his vehicles. The insurer agreed to cover the loss on the condition that the plaintiff would add his fiancée as an additional insured. Although the plaintiff apparently met with his captive insurance agent, the change wasn’t made – the driver was identified as “female” on the new policy, but the plaintiff’s fiancée wasn’t an additional insured.

Not long after, the fiancee’s minor son was injured in an accident. When the driver’s policy didn’t fully cover the son’s damages, the plaintiff filed a claim for underinsured motorist coverage. The insurer denied the claim on the grounds that neither the fiancée nor her son was a named insured. The plaintiff sued the insurer and his agent for negligence, reformation of contract, a declaration of insurance coverage and respondeat superior. The Circuit Court granted the defendants’ motion to dismiss the negligence and respondeat claims, but the Appellate Court reversed.

In a unanimous opinion by Justice Kilbride, the Supreme Court affirmed. The Court turned first to Black’s Law Dictionary, concluding that an “insurance producer” could be plausibly understood as both an agent and a broker. The defendants argued that defining an “insurance producer” as meaning either an agent or a broker rendered the later provisions of the statute regarding fiduciary claims surplusage, but the Court disagreed, concluding that the statute effectively limited fiduciary claims regardless of whether captive agents were defined as “insurance producers.”

The Court placed considerable weight on the definition of “insurance producer” found in the Insurance Code: “a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance.” (215 ILCS 5/500-10.) Even though Section 5/500-10 wasn’t adopted until five years after the statute at issue, the Court concluded that the legislature’s decision not to differentiate between “brokers” and “agents” in defining “insurance producer” should be given “substantial weight.” Nobody suggested that there was a difference between brokers and agents in the legislative debate either.

Ultimately, the Court held that Section 2-201 imposed a limited duty on insurance agents as well as brokers. An agent was not required to find the best possible coverage for his or her insured – even if that coverage was with another company – the Court said. If need be, the agent could fulfill his or her duty by telling the insured to seek coverage elsewhere. Nor was a non-specific request to “make sure I’m covered” sufficient to trigger the defendant’s duty of care. But reading Section 5/500-10 together with Section 2-201, the Court concluded that when faced with a specific request for coverage, even a captive insurance agent had a duty of due care in connection with the request. Therefore, the Court affirmed the Appellate Court’s reversal with respect to the agent. The Court also affirmed the court’s reversal with respect to the insurer, holding that respondeat superior was sufficient to potentially find the insurer liable.

Image courtesy of Flickr by Chris Yarzab.

Florida Supreme Court Overturns Directed Verdict for Defendant in Negligent Security Case

Posted in Florida

188348337_7af825ea03_zOn February 12, 2015, the Florida Supreme Court quashed the Fourth District Court of Appeal’s decision in Sanders v. ERP Operating Limited Partnership, 96 So.3d 929 (Fla. 4th DCA 2012) and held that evidence of lapses in security raised a fact issue for the jury as to whether those failures allowed assailants to more easily gain access to the decedents’ apartments, thus facilitating their murders. The Court reviewed the case based on certified conflict with one of its prior decisions and with a decision of the Third District Court of Appeal.

To read the opinion, here.

In late 2004, two young adults moved into an apartment complex marketed as a “gated community” with a gated front entrance. A year after they moved in, the tenants were shot to death by unknown assailants inside their apartment. While there was no sign of forced entry, cash and other valuables were stolen from the apartment. The plaintiff, as personal representative of the decedents’ estates, sued the property owner alleging that its negligence was the proximate cause of the deaths.

During the trial, evidence revealed that the defendant had a manual providing that a notice to residents was recommended when a “significant crime” occurred on the property, especially a violent crime or forced-entry burglary. No notices were sent to the residents regarding twenty criminal incidents occurring in the three years before the murders. Moreover, there were two criminal incidents where the gate had been broken and perpetrators followed the residents onto the premises. One of these incidents resulted in an armed robbery and the other resulted in an assault. The entrance gate was broken for approximately two months before the murders.

The defendant’s expert, a security consultant, testified that the murders were not foreseeable, as none of the crimes that occurred on the premises in the three years before the murders were violent. The expert opined that the security measures on the premises were more than reasonable and met or exceeded the industry standard for complexes in the location. He further testified that there was no sign of forced entry and that he believed that the door was opened to the person that committed the murders.

The plaintiff’s expert, a criminology expert, testified that most of the crimes at the complex in the three years before the murders were opportunistic in nature and that the murders occurred in the course of a home invasion, an opportunistic crime. He also testified that the defendant’s personnel training video addressed the importance of repairs to mechanical failures, yet the front gate of the apartment complex had been broken for months before the murders. The training video also discussed the need to minimize crime “through awareness.”
The defendant moved for a directed verdict, arguing that the plaintiff had not established proximate cause. The trial court denied the motion. The jury found the defendant 40% comparatively negligent and awarded damages of $4.5 million dollars, apportioned to various survivors of the decedents. The defendant moved for a new trial and the judgment notwithstanding the verdict, which the trial court denied.

On appeal, the Fourth District reversed the ruling on the defendant’s motion for directed verdict, stating that “without proof of how the assailants gained entry into the apartment, [the plaintiff] simply could not prove causation.” The Florida Supreme Court accepted jurisdiction to determine whether the Fourth District erred in vacating the jury verdict and entering a directed verdict in the defendant’s favor.

The Court began its analysis by stating that whether or not proximate causation exists is a question of fact, involving an inquiry into whether the defendant’s breach of duty foreseeably and substantially contributed to the plaintiff’s injuries. The Court reiterated plaintiffs alleging negligence must meet “the more likely than not standard of causation.” Moreover, in order for a court to remove the case from the trier of fact and grant a directed verdict, there must be only one reasonable inference from the plaintiff’s evidence. An appellate court reviewing the grant of a directed verdict must view the evidence and all inferences of fact in the light most favorable to the non-moving party, and can affirm a directed verdict only where no proper view of the evidence could sustain a verdict in favor of the non-moving party.

The Court found that the plaintiff in the instant case raised a reasonable inference that the defendant’s breach of duty (i.e., the inoperable gate), may have contributed to the incident. Despite the defendant’s argument, and the Fourth District’s apparent conclusion, that the decedents opened the door for their assailants, this is something which should have properly been considered by a jury in a comparative negligence analysis and is not the basis for a directed verdict.

Because the plaintiff presented evidence that could support a finding that the defendant more likely than not substantially contributed to the murders in this case, the Court quashed the Fourth District’s decision granting a directed verdict to the defendant.

Justice Polston wrote a dissenting opinion in which he stated that the Court did not have jurisdiction to review the case.

Image courtesy of Flickr by Stan Wiechers.

Illinois Supreme Court Declines to Recognize Self-Critical Analysis Privilege

Posted in Illinois

5646757752_5a4ea2ea2d_zThe self-critical analysis privilege – the notion that organizations should be able to take a candid look at their own procedures and performance without fear of being forced to disclose the results in discovery – has been lurking around the periphery of civil litigation for forty-four years, since Bredice v. Doctors Hospital, Inc. in 1970. In that time, the privilege has spawned a lot of commentary without being unequivocally adopted in too many jurisdictions.

In the closing days of the March term, the Illinois Supreme Court declined an invitation to recognize the privilege in Harris v. One Hope United, Inc. Our summary of the underlying facts and lower court opinions is here. Our report on the oral argument is here.

Harris began when the Illinois Department of Children and Family Services received a complaint about alleged neglect of a seven-month old child. DCFS assigned the matter to the defendants to monitor the child and her family. DCFS ordered that the child live with her aunt for a time, but ultimately, the child was returned to her mother. Not long after, the child was drowned when her mother left her unattended while bathing her.

The Cook County Public Guardian, acting as administrator of the child’s estate, sued the defendant for wrongful death, alleging that the child should not have been returned to her mother. During discovery, the executive director of the defendant disclosed that the defendant maintained a continuous quality review department to assess the quality of the defendant’s care, identify “gaps in service delivery” and evaluate whether outcomes were successful or not. The plaintiff moved to compel production of the program report, but the defendant refused, invoking the self-critical analysis privilege. The circuit court granted the motion to compel and – on appeal from an order of friendly contempt – the Appellate Court affirmed.

In an opinion by Justice Karmeier, a unanimous Court affirmed. According to the Ninth Circuit, “if such a privilege exists,” the privilege has four elements: (1) the information must result from a self-critical analysis; (2) the public must have a strong interest in preserving the free flow of the type of information sought; (3) the information must be of a type whose free flow would be curtailed if discovery were allowed; and (4) the document was prepared in expectation of confidentiality, and has in fact been kept confidential.

The Court found that recognition of a new common-law privilege involved a decision that a privilege promotes sufficiently important interests to outweigh the need for probative evidence. That was a judgment best left in nearly all cases to the legislature, the Court said. Even in the extremely rare occasions where it might be justified for the Court to act on its own, previous legislative enactments should be carefully considered.

That inquiry was decisive here, the Court found. The defendant relied upon the Medical Studies Act (735 ILCS 5/8-2101) in arguing for recognition of the privilege, but in fact, the Act cut the other way. Given the structure of the Act, the legislature could easily have recognized a self-critical analysis privilege – but it chose not to do so. Nor did the Child Death Review Act (20 ILCS 515/5(3)), also relied upon by the defendant, support finding a privilege. That Act prioritized full and complete disclosure of the circumstances of any child death case, and that interest counseled against recognizing a privilege. Taken together, the Court held that the two Acts were persuasive evidence that the legislature preferred not to recognize a self-critical analysis privilege under such circumstances. Accordingly, the Court affirmed the judgments of the Circuit and Appellate Courts ordering disclosure. The Court also affirmed the Appellate Court’s decision to vacate the contempt finding against the defendant on the grounds that the defendant had acted in good faith.

Image courtesy of Flickr by Woody Hibbard.

Illinois Supreme Court Holds Accountant is Holder of Privilege, No Testamentary Exception

Posted in Illinois

3997723224_8c9acd37af_o(1)Late in the March term, the Illinois Supreme Court handed down its opinion in Brunton v. Kruger, an opinion with potentially significant implications for Illinois accountants. Brunton posed three related questions about the statutory accountant’s privilege (225 ILCS 450/27): who holds it – the accountant or the client; is there an exception for will contests; and how can it be waived? Our detailed summary of the facts and lower court holdings in Brunton is here. Our report on the oral argument is here.

Brunton began when an elderly couple consulted an accounting firm for assistance in estate planning. Ultimately, trust documents and two “pour-over” wills were produced. The underlying action is a will contest brought by the couple’s daughter, who is not a beneficiary of the trusts, against one of their sons, who serves as trustee, and the other son. Both the daughter and the two Estates issued subpoenas to the accountants, seeking production of their file. The accountant provided the information to the Estates, but refused to provide it to the daughter, invoking the accountant’s privilege. The circuit court initially agreed that the estate planning documents were privileged. The daughter then issued deposition subpoenas, again seeking the estate planning documents. The accountants moved to quash the subpoena, but this time, the court held that the privilege had been waived by producing the materials to the Estates.

The Appellate Court affirmed on different grounds, holding that the client, not the accountant, is the holder of the privilege, and the privilege is subject to the same testamentary exception as applies to the attorney-client privilege, making the estate planning documents producible in the will contest.

In an opinion by Chief Justice Garman, the Supreme Court affirmed the Appellate Court, but on substantially different grounds. The court began with the daughter’s argument that the privilege is limited to acts of the accountant in his or her confidential capacity as a licensed or registered CPA. (225 ILCS 450/8.05(a).) The court disagreed, noting that the plain language of the statute provides that accountancy activities “includ[e]” the enumerated acts, such as auditing financial statements – language which suggests that the list is not exhaustive.

The Court then turned to the question of who held the privilege. The defendant argued that it had been settled for many years that the accountant holds the privilege, but the Supreme Court disagreed, finding that the issue was one of first impression. The Court concluded that because Section 27 states that the accountant “shall not be required by any court” to divulge privileged information, the statute unambiguously confers the privilege on the accountant rather than the client. Nevertheless, the Court made it clear that if the client is still living, the client retains the right to voluntarily produce information which would be subject to the privilege in the accountant’s hands.

The Court next turned to the issue of whether the privilege is subject to a testamentary exception. The Court began by noting that the language of the statute itself includes only one exception, for investigations undertaken pursuant to the CPA Act. The Court acknowledged the argument urged by the Estates (and accepted by the Appellate Court) that the search for truth justifies a testamentary exception, but ultimately concluded that carving out such an exception was a job for the legislature, since the privilege was statutory in nature.

The Court finally turned to the question of how the privilege can be waived, and whether the accountants had waived it by producing the materials to the Estates. But first, the Court made an important point about the nature of appellate preservation.

The accountant argued before the Supreme Court that disclosure to the Estates didn’t constitute waiver because the Estates had a common interest with the accountant. The daughter argued that the accountant had forfeited the argument by not raising it at the Circuit Court. The Supreme Court disagreed, pointing out that the accountant had disputed waiver at every stop in the litigation. Not making that argument in terms of common interest didn’t matter: “We require parties to preserve issues or claims for appeal; we do not require them to limit their arguments here to the same arguments that were made below.”

The problem with the accountants’ argument, the Court wrote, was that they misinterpreted the nature of the common interest doctrine. The common interest doctrine wasn’t intended to protect the privilege or defeat a claim of waiver; rather, it was intended to defeat a claim of privilege where the parties on both sides of a lawsuit had a common interest in the materials. Therefore, the doctrine actually favored disclosure to the daughter in these circumstances, since both sides had the same interest in the contents of the accountants’ papers.

Ultimately, the issue was simple, the Court concluded. The accountant had produced the documents to one side in the litigation and was declining to produce to the other side with the same interest. True, the accountant had produced in response to a subpoena, but the accountant “does not assert that the disclosure was involuntary,” according to the Court. Therefore, the initial disclosure waived the privilege, and the documents were properly ordered produced.

Image courtesy of Flickr by Jane.

Illinois Supreme Court Declines to Apply Environmental Injunction Statute Retroactively

Posted in Illinois

5128837221_6c3bac5401_z(1)In July 2004, the Illinois legislature amended the state Environmental Protection Act to authorize the Attorney General to seek “an injunction, prohibitory or mandatory, to restrain violations . . . or to require such other actions as may be necessary to address violations of this Act.” The following year, the Supreme Court held in People ex rel. Ryan v. Agpro, Inc. that the pre-amendment version of the statute permitted only prohibitory injunctions restraining future violations.

So did the 2004 amendment apply retroactively to authorize courts to order cleanups of violations from before its effective date? The Illinois Supreme Court unanimously answered that question earlier this month with its opinion in People ex rel. Madigan v. J.T. Einoder, Inc.: No. Our detailed summary of the facts and lower court holdings in Einoder is here. Our report on the oral argument is here.

The property at issue in Einoder was purchased by the husband defendant in 1993 and placed in a land trust. The property was developed into a construction and demolition resource recovery facility and landfill using leased equipment and operators provided by a closely held corporation, 90% owned by the wife defendant. The site began accepting general construction and demolition debris and clean construction and demolition debris in 1995. In the years that followed, the site was inspected various times, and on multiple occasions, violation citations were issued by the state Environmental Protection Agency.

The Attorney General filed a seven-count complaint in 2000. Five years later, the State filed an amended complaint, adding the individual defendants as parties. A bench trial followed, and the court entered judgment for the State, imposing fines against the corporate and individual defendants. In addition to the fines, the State requested a mandatory injunction requiring the removal of the defendant’s above-grade waste pile, which was at that point a 90-foot grass-covered hill composed of 99.99% clean construction and demolition debris. The trial court granted the injunction. A majority of the Appellate Court affirmed, with one dissenter arguing that the 2004 amendments would not be applied retroactively to authorize a mandatory injunction.

In an opinion by Justice Burke, a unanimous Illinois Supreme Court reversed the Appellate Court with respect to the injunction issue. The Court noted that Illinois follows the approach set forth by the United States Supreme Court in Landgraf v. USI Film Products in determining whether an amended statute can be applied retroactively. The first step of Landgraf is simple: if the legislature has indicated that the amendment is intended to apply retroactively, absent a due process bar, that intent is given effect. If the legislature hasn’t expressed a view, then in the second step of the analysis, the court determines whether applying the amendment in the case at bar would amount to a retroactive application. An application is retroactive if it would impair rights a party possessed when she acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.

In Illinois, the Court observed, Landgraf analysis is made considerably simpler by Section 4 of the Statute on Statutes (5 ILCS 70/4). Section 4 provides a simple black-letter rule: procedural changes apply retroactively, substantive changes don’t.

Nothing in the 2004 amendments themselves gave any indication as to whether the legislature intended a retroactive application or not. So the Court passed to the second step of the analysis: was authorizing mandatory injunctions substantive or procedural? That was an easy one, the Court found – the threat of a mandatory injunction imposed a substantial new liability on the defendants’ past conduct. Therefore, it was a substantive change in the law and could not be applied retroactively pursuant to Section 4 of the Statute on Statutes.

The Court concluded by briefly affirming the Appellate Court as to the wife defendant’s personal liability, noting that the defendant had personally signed numerous contracts authorizing dumping even after she was aware that the landfill had been cited for violating the Act, and after participating in discussions about violation notices.

Image courtesy of Flickr by Elliott Brown.