The Appellate Strategist

The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Skeptical Illinois Supreme Court Debates Former Shareholders’ Standing to Bring Derivative Claims

Posted in Illinois

8581598506_ef3d866be1_zHearing oral argument in Stevens v. McGuireWoods LLP in the final days of its May term, the Illinois Supreme Court appeared skeptical of the Appellate Court’s holding reviving former shareholders’ professional negligence claim against the defendant for loss of certain derivative claims. Our detailed summary of the underlying facts and lower courts holdings in Stevens Is here.

The plaintiffs in Stevens are former minority shareholders of a corporation. They hired a law firm to bring various claims against the corporation’s managers as well as the majority shareholder for misappropriation of trademarks and other intellectual property. The plaintiffs successfully moved to disqualify another law firm from representing the managers in the ongoing litigation.

In the summer of 2008, the trial court dismissed all claims against the managers, and three of nine claims against the owner. The plaintiffs retained new counsel, and filed two rounds of amended complaints. The second amended complaint purported to state claims “individually and on behalf of” the corporation against the disqualified law firm. The trial court granted the law firm’s motion to dismiss, holding that all claims were time barred. The court then addressed the merits of the claims, holding that the plaintiffs could not bring five of their claims against the firm in an individual capacity, and that plaintiffs had failed to adequately allege derivative standing with respect to several claims. In late 2011, the plaintiffs sued their own counsel for failing to sue the disqualified law firm in a timely manner. The trial court granted the defendants’ motion for summary judgment. The Appellate Court affirmed in part, but reversed with respect to the defendant’s failure to timely raise the derivative claims.

Counsel for the defendant began the argument. He argued that summary judgment was proper because the plaintiffs are seeking damages they never suffered. The Appellate Court’s decision effectively creates a new cause of action for a direct claim by former shareholders for loss of a company’s derivative claims. But under Illinois law, counsel argued, only current shareholders have a cause of action for derivative claims. Plaintiffs could have sued derivatively had they not sold their interests in the company, or the company could have sued itself, or the current shareholders could have sued. But one thing is certain, counsel argued – former shareholders cannot sue directly. Justice Thomas noted that counsel had spent much of his brief arguing a lack of compensable damages, but do the plaintiffs have a standing problem as well? Counsel responded that the defendant has called that a damages problem, but they’re two sides of the same coin. The plaintiffs have not been injured, counsel argued, and they have no standing. The only case the plaintiffs have cited is an 1897 decision, Brown v. DeYoung, but that’s a direct action case. There, counsel argued, the company had disclaimed any right of recovery. Without an injury to the plaintiffs, there cannot be liability. Counsel commented that the plaintiffs say they’re entitled to an indirect benefit in the price of their shares if the underlying claim had succeeded – but that’s not actionable. The plaintiffs’ claim fails, counsel argued, because the plaintiffs would be put in a dramatically better position that they ever would have been had they succeeded in the underlying case, since they never could have recovered anything in the underlying case.

Counsel for the plaintiffs followed. Counsel argued that although the defendant was hired to represent the plaintiffs, and told the plaintiffs they had individual and fiduciary claims, they failed to join the disqualified law firm. The defendant’s position was hypocritical, counsel argued. Justice Thomas asked if the defendant had brought the law firm claim in a timely manner and recovered damages, how much of that judgment would the plaintiffs have received – isn’t the answer zero? Counsel answered that in similar circumstances in Brown v. DeYoung, the Court said that the individuals should benefit, because giving the recovery to the entity would benefit the wrongdoer. That case predicted what was to come, counsel argued. According to Rule 7.01(d) of the American Law Institute’s Principles of Corporate Governance, in a closely held corporation, the court may in its discretion treat a derivative action as a direct action, and exempt it from restrictions on derivative litigation, as long as no third party interests are compromised. Justice Thomas noted that the plaintiffs had no ownership interest in the corporation. Counsel answered that the claims had arisen before the plaintiffs sold their interests. Justice Thomas said now the plaintiffs have no interest in the company, what possible interest do they have in determining whether the defendant properly handled derivative claims that belong exclusively to the corporation? Counsel responded that that is the point of Rule 7.01(d). The defendant represented the plaintiffs, not the company, counsel said. Counsel argued that defendants were arguing that their breach of fiduciary duty should have no consequences. Chief Justice Garman asked what specific damages the plaintiffs are claiming. Counsel responded that the plaintiffs were seeking the fees they paid the defendant, and would articulate a damages theory when the case goes to trial. Chief Justice Garman asked whether the plaintiffs would have damages if they still owned an interest in the company. Counsel answered that whether or not the plaintiffs have an interest in the company is a red herring. The claims arose before the plaintiffs sold their interests. That’s no impediment to proving the case. The Chief Justice asked whether the claims are derivative. Counsel said that’s the point of Rule 7.01(d). The cases cited by the defendant don’t trump the Supreme Court’s statement in 1897 in Brown v. DeYoung. In Brown, the Court treated the misappropriated money as a fund through which dividends should be declared. The plaintiffs would get a proportionate share of that fund. Justice Theis asked whether the suit within a suit was derivative or individual. Counsel answered that the plaintiffs seek to present derivative claims, and then a claim under Brown and Rule 7.01(d) for a share of the proceeds. Justice Theis pointed out that Brown is not a derivative action – so why is it relevant? Counsel answered that plaintiffs cited Brown in the context of actions by shareholders, and whether direct recovery is appropriate. Justice Thomas said that counsel says it’s a derivative suit, but the plaintiffs don’t have an ownership stake in the company – so what possible standing do the plaintiffs have? Counsel responded that the question is whether the plaintiffs could recover under Brown and Rule 7.01(d). Justice Thomas asked if the plaintiffs have no interest in the company, how do they have standing to raise that claim? Counsel answered that the trial would be based on whether the plaintiffs owned an interest in 2006-2007, when the claim arose, which they did.

Counsel for the defendant concluded with rebuttal, arguing that the plaintiffs have never before raised the notion of being entitled to recover fees. Fees are awarded when they are incurred as a natural and probable consequence of the conduct at issue, but here, counsel argued, the issue is waived. The only issue here is whether the plaintiffs can recover damages as individuals for the loss of a derivative claim, and the law is clear that they can’t. Brown is a direct action case, counsel argued, and not consistent with Illinois law. Nor is the Principles of Corporate Governance consistent with Illinois law; the legislature addressed that same point in the LCC Act and rejected the ALI’s view: the LLC Act says that the proceeds are remitted to the company. Justice Kilbride asked counsel how he characterized the rule in Brown. Counsel said that Brown doesn’t involve a parallel situation. There, the individual shareholders sued the majority shareholders. The court said that the company had disclaimed any right to the proceeds. The legislature could have adopted the ALI’s position from the Principles in the LLC Act, but it didn’t. Justice Thomas asked counsel to address the plaintiff’s argument that standing was not an issue, since the plaintiffs had an ownership interest at the time the claim arose. Counsel responded that that’s not Illinois law. The relevant question is whether the plaintiff is a shareholder on the day the claims are brought. By selling the shares after the claims arose, they relinquished the ability to bring a derivative claim. Besides, counsel argued, any value the claim might have had would be incorporated into the price of the shares. That’s the holding of Small v. Sussman, counsel argued.

We expect Stevens to be decided in three to four months.

Image courtesy of Flickr by H. Michael Miley.

Illinois Supreme Court Debates Liability Ceiling for Self-Insured Rental Car Companies

Posted in Illinois

5487020006_3b0b20805c_zDuring its May term, the Illinois Supreme Court heard oral argument in Nelson v. Artley, which poses a question of considerable importance to the rental car industry: can a self-insured rental company be held liable without limitation for its customers’ accidents if the customer defaults? Our detailed summary of the underlying facts and lower court holdings in Nelson is here.

Nelson arises from a default judgment for $600,000 against the renter-driver of one of the defendant’s cars. The plaintiff began “citation” proceedings against the rental company in hopes of collecting the entire judgment.

The rental company argued that its maximum liability was $100,000, and that since it had already paid the other two injured parties $75,000, it owed the plaintiff $25,000 at most. The plaintiff filed a petition for a turnover order, alleging that the rental company had represented in its certificate of self-insurance that it retained a risk of loss for third-party liability claims of up to $2 million per occurrence. The rental company argued that Federal law preempted any possible liability over $100,000. The Circuit Court granted the plaintiff’s position, but limited the total amount to $25,000. The Appellate Court reversed.

Counsel for the rental company began, arguing that the case involves construing the Vehicle Code. The statute requires rental companies to file proof of security with the Secretary of State demonstrating that it can compensate injured parties where drivers are either uninsured or underinsured. The statute sets forth three ways in which this can be done – by filing: (1) a liability insurance policy; (2) a surety bond; or (3) a certificate of self-insurance issued by the Director of the Department of Insurance. The defendant has always proceeded through self-insurance, believing that the statute requires self-insurers to pay the same limit an insurer would be required to pay. The Fourth District so held ten years ago in Fellhauer v. Alhorn, and the defendant’s contract reflects that understanding. But the First District rejected Felhauer, holding that a self-insurer must pay the entirety of the judgment. Counsel argued that nothing in the statute supports that; at best, the statute is ambiguous by silence, but the only reasonable construction is that a self-insurer’s obligation is the same as an insurer. Justice Karmeier asked what the limit on a bond would be, and counsel answered $100,000. Justice Karmeier commented that a single individual could collect $100,000 from a bond-holder, but $50,000 from an agency with an insurance policy. Counsel responded that a bond can’t be written that way – it must be written for a single amount. Justice Karmeier suggested that the legislature had recognized that people would be treated differently depending on the situation. Counsel responded that that’s only true of one claimant cases – here, there are multiple claimants. In such cases, the amount available under insurance and bonds would be the same. Justice Karmeier asked whether it has any relevance that the Illinois Administrative Code provides that proof of financial responsibility may be given by a certificate of self-insurance. Counsel answered that it was only relevant to show that that’s one way to satisfy the obligation under Chapter 9 of the Vehicle Code. There is no claim of direct liability involved, counsel pointed out. The only issue was the company’s duty to provide some protection for the injured party. Justice Burke asked whether the defendant assumed financial responsibility for third party claims up to $2 million by listing that amount in the self-insured application. Counsel responded no, the application related to claims of direct liability. Justice Burke asked whether the defendant could have limited its liability in the rental agreement. Counsel responded that the defendant did so – the agreement says that the company’s financial responsibility is limited to the levels set forth in the applicable financial responsibility laws. Justice Thomas asked whether the bond limit was set at $100,000 in case another claimant comes forward. Counsel answered no, there’s simply a mechanical requirement that the bond be written for an amount certain. There was no conceivable reason why self-insurance would trigger unlimited exposure, counsel argued. Moreover, unlimited liability on a rental car company runs afoul of the federal Graves amendment, which was enacted shortly after Felhauer. The statute preempts any state statute imposing vicarious liability on a rental car company for a driver’s tort. Justice Karmeier asked whether the Graves amendment barred any liability whatsoever, and counsel responded that there are exceptions for direct negligence and financial responsibility statutes.

Counsel for the plaintiff followed, arguing that the statute was clear and unambiguous. Liability can only be limited by the rental agreement, counsel argued. The defendant’s agreement referred to state law limits, but there are no state law limits. Justice Kilbride asked if the statute doesn’t impose unlimited liability, what does it mean? Counsel responded that even if the statute wasn’t interpreted by its clear meaning – imposing no limit at all – it was confusing and should be construed against the drafter. Chief Justice Garman asked why the legislature would want victims to get access to better coverage depending on the rental company involved? Counsel answered that the legislature intended to protect the public, and gave rental companies the choice of how to approach the issue. The Chief Justice again asked whether a victim would be better off being hit by an uninsured driver of one of the defendant’s cars than a customer of a rental car company which carried insurance. Counsel answered that the result depends on the form of coverage used by the rental company. Nothing in the statute precludes the company from buying more than the minimum. The Chief Justice asked counsel to assume that everyone involved carried minimum coverage – the victim would be better off to get hit by a car owned by a self-insurer. Counsel answered that there were several reasons why the legislature would prefer that rental companies get insurance. Justice Thomas asked whether counsel’s position would make the option of self-insurance useless – why would a rental company ever self-insure if the potential liability was limitless? Counsel disagreed, saying that companies would continue to self-insure based on a cost-benefit analysis. Justice Thomas wondered why companies would take that step and risk unlimited, unknowable vicarious liability. Counsel answered that the company could insure for the excess. Justice Thomas asked why the legislature would add the option of self-insurance if it would create unlimited liability. Counsel answered that there was not enough in the record to know the economic consequences. It may be that most judgments will be low enough that self-insurance would be a viable option. Justice Karmeier asked whether the statute was focused on rental car companies or protecting injured parties. Counsel said that the law was intended to protect the public. Justice Karmeier noted that Felhauer quoted from a New Jersey Supreme Court case equating insurance and self-insurance, suggesting that limits should be the same. Counsel answered that the legislature could have included a liability limitation, but it didn’t. The plain language of the statute provides no limitation. The interests of the driving public far outweigh the defendant’s interests, counsel argued. Counsel concluded by arguing that the defendant’s position violates both Illinois law and public policy. The Vehicle Code imposes financial responsibility, and the defendant chose to comply with the statute through self-insurance.

In rebuttal, counsel for the defendant argued that there was no conceivable rational basis for the difference in results proposed by the plaintiff. Counsel argued that all the cases he cited regarding the Graves amendment involved financial responsibility statutes, and nothing in the defendant’s state filing assumed any kind of liability.

We expect Nelson to be decided in four to six months.

Image courtesy of Flickr by Sludge G.

Florida Supreme Court to Determine Whether Property Owners Can Sue for Damages Under Florida’s Harris Act When No Law Has Been Enacted That Applies Directly to the Owners’ Property

Posted in Florida

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On May 22, 2015, the Florida Supreme Court accepted review of a First District en banc decision that certified that following as a question of great public importance:

May a property owner maintain an action pursuant to the [Bert J. Harris, Jr., Private Property Rights Protection Act] if that owner has not had a law, regulation, or ordinance directly applied to the owner’s property which restricts or limits the use of the property?

See Smith v. City of Jacksonville, No. SC15-534. The Bert J. Harris, Jr., Private Property Rights Protection Act or “Harris Act” as it is commonly known provides relief or compensation to property owners when a new law “may inordinately burden, restrict, or limit private property rights without amounting to a taking” under the state or federal constitution. See § 70.001, Fla. Stat. (2012) (emphasis added). The Act filled a void in Florida law because, prior to its enactment, there was no means for an owner to receive compensation for the adverse financial effects of government regulation of land without satisfying the constitutional standards for a “taking,” namely physical invasion or the loss of all economically viable use. To view the First District’s slip opinion, click here.  See also City of Jacksonville v. Smith, 159 So. 3d 888 (Fla. 1st DCA Feb. 26, 2015).

In May 2005, R. Lee Smith and Christy Smith purchased undeveloped river front property next to a similar lot owned by the City of Jacksonville. Both lots were zoned “residential low density.” A deed restriction limited use of the City’s lot to the leisure and recreation of Duval County employees. In October 2005, the City cancelled this deed restriction and rezoned the property to construct a fire station. After construction was completed, the station included a two-story, 13,000 square foot building, which housed multiple fire and rescue vehicles, and a 265 foot dock with berths for two large fireboats and a Florida Marine Patrol boat. The Smiths sued for damages under the Harris Act claiming that the City’s construction and operation of a fire station next to their property “inordinately burdened” their property because it effectively made their property unmarketable as a luxury home site and diminished its value by $470,000.

After a bench trial, the trial court determined that the Smiths were left with an inordinate burden on their property “as to its viability for [luxury home] use.” The court rejected the City’s argument that the Act did not apply because the City had not taken any action directly against the property. The court directed that a jury be impaneled to determine the amount of the loss in the property’s value. The City appealed.

The First District reversed the trial court’s decision. The First District found that, based on language in the Act and an opinion of the Attorney General, there must be a direct regulatory restriction applied to plaintiffs’ property to maintain a Harris action. It found that the trial court’s interpretation of the Act “would create a cataclysmic change in the law of regulatory takings which common sense dictates the Legislature would not have intended without directly and specifically providing for it.” The First District also certified the above question for the Florida Supreme Court to answer.

Image Courtesy of Flickr by Vinnyman1

Illinois Supreme Court Debates Preclusive Effect of Pension Board Findings on Liability for Health Insurance Premiums

Posted in Illinois

18971557206_90024ebd64_zA pension board finds that a police officer is entitled to a line-of-duty disability pension. Is the board’s finding conclusive on the issue of whether the officer suffered a “catastrophic injury” so as to be entitled to health care premiums under the Public Safety Employee Benefits Act? The Illinois Supreme Court debated that question in the closing days of its May term, hearing oral arguments in The Village of Vernon Hills v. Heelan. Our detailed summary of the facts and lower court holdings in Vernon Hills is here.

Vernon Hills began when the defendant officer was injured in the line of duty in December 2009. In August 2011, the Board of Trustees of the Police Pension Fund held that the officer qualified for a line-of-duty disability pension. A month later, the village filed a complaint seeking a declaratory judgment that the officer was not entitled to health insurance benefits under the Public Safety Employees Act on the grounds that the officer had not suffered a catastrophic injury in response to what he reasonably believed to be an emergency.

The village acknowledged the Supreme Court’s holding in Krohe v. City of Bloomington that a catastrophic injury under the Act was the same thing as an injury sufficient to result in a line-of-duty pension, but argued that Krohe was factually distinguishable and wrongly decided. The court granted the officer’s motion in limine to bar any testimony on the issue of whether he had suffered a catastrophic injury under the Act, relying upon Krohe. At the conclusion of a bench trial, the court granted a directed finding against the village and found for the officer on his counterclaim. The Appellate Court affirmed, agreeing that Krohe controlled.

Counsel for the village began the argument, arguing that the case calls upon the court to decide whether a municipality should have a voice in determining whether a public safety official has suffered a catastrophic injury. Justice Freeman asked whether the village had sought leave to intervene at the Pension Board. Counsel conceded that the village could have requested intervention, but the Second District’s decision in Richter v. Village of Oak Brook hadn’t been decided at that point. Accordingly, at the time of the board hearing, no Appellate Court had ever held that a municipality could be bound by a decision of the pension board to which it wasn’t a party. Further, counsel said, intervention wasn’t a right – the matter was up to the sole discretion of the pension board. Justice Burke pointed out that the village was at the hearing. Counsel explained that there is only one room big enough for the hearing in the village, and that the Village had attended the hearing to observe. Justice Thomas asked whether the Court could get where the Village wants to go without overruling Krohe. Counsel responded that indeed the Court could; the Village was asking the Court to look at the definition of “catastrophic” injury. Justice Thomas pointed out that the Court has said that when the highest court has construed the statute, the Court’s holding is as much a part of the statute as if it were written in the text. Given that, isn’t Krohe a part of the statute which the legislature hasn’t disturbed? Counsel responded that Krohe was distinguishable, given that the legislature was referring to a singular injury. Justice Thomas suggested that the defendant wanted to relitigate the line-of-duty aspect of the case. There wasn’t any question that the plaintiff had suffered a line of duty disability, was there? Counsel agreed that there was not. Justice Thomas asked what would be litigated in a second action, since the defendant wasn’t questioning that the officer’s injury was in the line of duty. Counsel responded that the remand would address whether the plaintiff’s surgery was required by a job-related injury, or was the result of some preexisting or unrelated condition. Justice Thomas suggested again that either the Court would have to overrule Krohe, or find that the plaintiff’s injury wasn’t in the line of duty – what else was there? Counsel answered that the Court could distinguish Krohe because in that case, there was no dispute as to the nature or extent of the injury. Justice Burke suggested that she had a problem with that – the City was present at the hearing, and if there was a problem with the evidence, it could have been dealt with there. So how was that not a waiver? Counsel again pointed out that Richter hadn’t been decided when the board hearing occurred. Justice Burke asked whether the Village had ever intervened in a pension board matter. Counsel answered no. The First and Second Districts have gone in very different ways on this issue – the Second expanding Krohe while the First has held that collateral estoppel can’t apply. Justice Thomas pointed out that the Court hasn’t said in Krohe that catastrophic injury is synonymous with the type of injury which might qualify somebody for a line of duty disability. Rather, the Court said it was synonymous with receiving a line of duty disability. So if the case was remanded, wouldn’t the second hearing be an immediate motion for summary judgment finding that the plaintiff had received a line of duty disability? Counsel answered that Krohe said that the term catastrophic injury is synonymous with the line of duty disability. Justice Thomas asked whether the Pension Board’s decision resulted in a line of duty disability pension. Counsel answered that one was awarded on a less than complete record. The Chief Justice asked whether counsel was suggesting that there were persons who were not catastrophically injured who were nevertheless entitled to a line of duty pension. Counsel answered that there are people who have received a line of duty pension based on less than the most severe injuries. Given the Second District’s line of authority, there are different standards for officers performing the same job. But that issue shouldn’t depend on where the officer lives. Justice Kilbride asked whether the rules of the Pension Board permit questions from Board members. Counsel answered that they did, and there were a handful of questions in the plaintiff’s hearing. Justice Kilbride pointed out that the Village had two appointees on the Board – did they ask any questions? Counsel responded that perhaps one question had come from a village appointee, but the rest had been from police officer appointees. Justice Kilbride asked what the final vote was, and counsel conceded that it was unanimous.

Counsel for the disabled police officer argued next. He told the Court that there was one dissent from the Board’s decision – the president, who is not a village appointee. Justice Freeman asked whether making a distinction in the operative rules between local government employees governed by the Pension Board and those who are not created an absurd result. Counsel said no, and suggested that the Village’s position amounted to asking the Court to take over a legislative function. The legislature had not provided a single, unified system to govern all employees. The legislature has amended the relevant statutes since Krohe in 2003. The same amici had appeared in Vernon Hills that had participated in earlier challenges to the Krohe rule. But counsel suggested that if parties don’t like the rule, their remedy is with the legislature, not the court. Chief Justice Garman asked whether it was true that the village had no chance to litigate, but counsel answered that was not so. The Village was present at the hearing, and the court reporter noted the presence of the Village administrator and Village attorney. Counsel for the officer said that he had noted in his argument to the pension board that the Village hadn’t sought leave to intervene. Justice Theis asked whether the issue of intervention was part of the case. Counsel answered that intervention by the employer makes for a much longer and more difficult case, but that’s not the Court’s concern. The Village had waived their opportunity to intervene, but certainly the Court could encourage similarly situated employers to do so in the future. Counsel noted that the Village claimed to have never had the opportunity to make its points regarding disability, but pointed out that the Village had paid the officer benefits under the Public Employees Disability Act for a year.

Even after the Board’s decision, the Village could have appeared within thirty days to seek rehearing and intervention, counsel suggested. The Village had filed a declaratory judgment action within the same thirty-five days they had to seek administrative review of the Board’s decision. The Village could have sought intervention, reconsideration or administrative review. They chose this route instead. Justice Karmeier asked whether the Village could have sought administrative review if they’d sought leave to intervene and been denied. Counsel said yes. Counsel closed by arguing that the hearing had involved questioning of the police officer and the doctor, and review of 400-plus pages of exhibits. Ultimately, the Village’s position was just one more attack on Krohe, counsel argued. The Village was seeking permission to participate in the process, but could have done so long ago.

Counsel for the village concluded with rebuttal, arguing that the appellee’s brief was directed for the most part to how extensive a remand hearing would be. But expense is never a justification for skirting due process. Counsel argued that the Village wasn’t asking for the Court to circumvent the legislature by crafting a uniform system; all that was necessary was for the Court to rule that a public employer could not be bound by a pension board decision to which it wasn’t a party. Reversal would merely put all police officers and municipal entities on an equal footing, according to counsel. The issue wasn’t whether municipalities approved of Krohe, counsel argued; the problem was what the Appellate Court had done with Krohe. According to counsel, the Second District has taken Krohe two or three steps beyond what anyone intended. Counsel for the appellee claimed that the Village should have intervened in the proceeding, but there had been only three such proceedings in the past. The Village was permitted to intervene in one, but in another, the pension board denied intervention. Counsel argued that as long as pension boards have discretion to either grant or deny intervention, the only certain avenue available to protect the Village’s due process rights was a declaratory judgment action. If the Appellate Court’s decision was not reversed, counsel argued, the Village would be forced to move for leave to intervene in each and every pension board hearing, and then try to obtain administrative review – but it was unclear whether the village’s financial interest was sufficient to give it standing to seek administrative review. Counsel argued that the circuit court was a better forum for the complex issues involved than a pension board. Nor were the Village’s PEDA payments to the officer an admission of liability, counsel said. Any public employee injured at work is eligible for those benefits.

We expect Village of Vernon Hills to be decided in three to five months.

Image courtesy of Flickr by Dave Conner.

Post No. 500: What I Learned From Seeing 233 Illinois Supreme Court Oral Arguments

Posted in Illinois

2693161493_191153491d_zAbout a week ago, I noticed that I was fast approaching my 500th post on Appellate Strategist. The occasion seemed to call for something different, so I started pondering what I might want to write about.

As it turns out, this comes at a time of transition over at Appellate Strategist‘s sister blog, the Illinois Supreme Court Review. This morning, we’re announcing the beginning of the second phase of our empirical study of the Illinois Supreme Court’s decision making – a data analytic deep dive into the Court’s oral arguments in civil cases between January 1, 2008 and December 31, 2014.

For purposes of developing this addition to our empirical database on the Court’s work, over the past two years I reviewed the videotapes of every oral argument at the Court in a civil case from 2008 through 2014, charting the patterns of the Justices’ questions. So today for Post No. 500, a top fifteen list of do’s and don’ts derived from the past seven years’ worth of oral arguments at the Court.

  1. May It Please the Court. Yes, you have to start your argument with these words. In 233 oral arguments, the total number of advocates I can recall not beginning this way – zero. That’s not a streak you want to be the first lawyer to break, particularly since some appellate judges and justices have suggested that it’s mildly disconcerting when a lawyer doesn’t follow the tradition. Besides, there’s a lot to be said for a tradition that connects our profession back to its common law foundations. Bryan Garner points out that the phrase appears in Ben Jonson’s The Poetaster in 1601 and Volpone in 1606, but there’s also something very close to the traditional phrase in the courtroom scene at Act IV, Scene 1 of Merchant of Venice, which was written three to five years before The Poetaster. I suspect that Antonio’s “Ready, so please your grace” in Merchant is probably a clue to the origins of the phrase as a gesture of respect from the days when the king or a local duke presided over the Court. By the end of the sixteenth century, the phrase was obviously so common that Jonson and Shakespeare – neither one an attorney – knew to include it in a courtroom scene.
  1. Introduce Yourself, and the Identify the Party you Represent. The second thing you say, right after “May it Please the Court.” A lot of people forget to do it, and you don’t need to have your momentum broken in the first moments of your argument by such an unforced error.
  1. Check Out the Accoustics. If you’re not familiar with the Supreme Court’s courtroom, go for the beginning of the Call of the Docket your case is on – if not the day before. While sitting in the gallery, practice identifying the Justice speaking and where on the bench he or she is located with your eyes closed. Taking a moment to identify the questioner is an embarrassment you don’t need (and it’s happened quite a number of times in the past seven years).
  1. No Visual Aids. There’s some disagreement about this one among commentators on oral argument, but I say no easels with charts, blown-up photographs or maps in the appellate courts ever. Patent cases may be an exception, but I think visual aids are reminiscent of jury closing arguments – not the impression you want to give in an appellate court.
  1. Stay behind the microphone. The Court records the oral arguments for good reason, so stay behind the microphone. No wandering around during your argument, whether to move closer to a Justice asking a question, to retrieve a file or any other reason.
  1. Answer questions immediately, and that includes the hypotheticals. Your sole function at oral argument is to answer the Court’s questions. When you get a question, answer it immediately. As John W. Davis, the greatest appellate advocate of the twentieth century, said in 1940: “If you value your argumentative life do not evade or shuffle or postpone, no matter how embarrassing the question may be or how much it interrupts the thread of your argument.” And I’ve heard lawyers try all kinds of things to dodge a hypothetical. You can’t. A large part of your preparation should be pondering every possible hypothetical the Court could pose during oral argument, and you’re there to assist the Court in working through the implications of every possible decision.
  1. Be confident, but not casual. You want to give the impression that you’re comfortable in what you’re doing, but that doesn’t mean casual, which is the opposite of professional. I’ve heard counsel in both Illinois and California refer to the state Supreme Court as “you guys,” and that’s just wrong on so many levels. At every moment, you should be striving for confident, respectful and deferential.
  1. Don’t read it. If you have to read your entire argument, you’ll have a fair amount of company – it happens frequently at the Court. But avoid it if you possibly can – counsel who don’t are far more impressive than those who do. And remember, in some appellate courts, reading the argument is a very big no-no.
  1. Walking to the lectern – not empty-handed, but that doesn’t mean the whole file. Many appellate lawyers speak with reverence and awe of appellate advocates who deliver entire arguments without so much as a single page of notes. I’m not one of those who recommend the practice. While giving an impression of confidence is good, over-confidence is not. But that doesn’t mean you should take the entire case file to the lectern either – it gives the impression of being ill-prepared.
  1. Avoid noting that a member of the panel wrote an opinion you’re relying on. At best, it comes off sounding like flattery. As Chief Justice John Roberts wrote of his experiences as a member of the U.S. Supreme Court bar, “Most advocates there have found that it is not a worthwhile expenditure of their time to debate with the authors about what their opinions mean.”
  1. Avoid telling the Court it’s your first time. Twenty minutes goes by far more quickly than you think it will. Avoid any expression that simply fills time without moving your case forward.
  1. Avoid personalizing your argument. Using subjective expressions like “I think” and “I believe” in your argument makes it sound as if your position is merely a matter of opinion.
  1. Never say “I wasn’t counsel below.” If you’re asked about an unfortunate detail of the litigation below – or far worse, a detail you can’t remember in the pressure of the moment – don’t try the “I wasn’t counsel below” dodge. It doesn’t matter, and a number of appellate judges and justices have publicly said that they find it annoying.
  1. No humor ever. Using humor in an oral argument has been compared to juggling hand grenades – never a wise move. You’re there to assist the Court, not to entertain them.
  1. Put your points in bullets up front. Within sixty seconds of beginning, tell the panel, in one sentence per point, all the reasons you’re going to discuss why they should affirm or reverse. Because if the bench is hot enough, those may be the only clear sixty seconds you get.

Image courtesy of Flickr by Bayasaa.

Illinois Supreme Court Debates Dimensions of Privilege for Medical Credentialing Documents

Posted in Illinois

5645540917_eb79c1e0af_zIn the closing days of its May term, the Illinois Supreme Court heard oral arguments in Klaine v. Southern Illinois Hospital Services, which poses an issue of potential importance to the medical malpractice bar: are applications for medical privileges discoverable in a negligent credentialing claim in a medical malpractice case? Our detailed summary of the underlying facts and lower court opinions in Klaine is here.

Klaine began when the plaintiffs sued the defendant doctor for medical malpractice, and the defendant hospital for being negligent in giving the doctor hospital credentials. The plaintiffs demanded that the hospital produce various applications for staff privileges. When the defendants refused, the plaintiffs moved to compel. After examining the documents in camera, the Circuit Court ordered production of three specific groups of documents. In order to facilitate an immediate appeal, the defendants declined to comply and requested entry of a “friendly contempt.” The Fifth District affirmed the order requiring production in most respects.

Counsel for the hospital began the argument, explaining that only the defendant doctor’s application for privileges was still at issue. Counsel explained that the Credentials Data Collection Act, 410 ILCS 517/15(h), created a standardized form that all hospitals are required to use in credentialing doctors. The statute also provides that the application materials are confidential. Chief Justice Garman asked whether counsel was asking that a privilege be inferred, since the statute didn’t expressly create one. Counsel answered that if the Court looks at the language, the intent of the legislature, and construes the Act in pari materia with the Medical Studies Act, then it does create a privilege. The regulations create confidentiality. The Chief Justice asked whether counsel agreed that confidentiality and discoverability were separate concepts. Counsel said that in a general sense, and in terms of things like the Freedom of Information Act, that’s so. But where the legislature has provided a process through which the hospital must collect certain data with the understanding of confidentiality, counsel disagreed with the Chief Justice. In this context, confidentiality means privilege. Justice Thomas asked whether it was immaterial that the Medical Studies Act, 735 ILCS 5/8-2102, provided broader protection from disclosure. Counsel disagreed with the proposition that the Act provides broader protection. It provides that materials used by a credentials committee are confidential. Counsel argued that there is a multiple step process involved in credentialing a doctor, and the legislature has created similar privileges at every step. Justice Burke asked whether the exception to the rule of nondisclosure means that a hospital is allowed to disclose information. Counsel answered that the legislature has recognized an exception for credentialing and recredentialing, but only for challenges to the granting or denying of privileges by the doctor. It doesn’t cover third party litigants. Justice Burke asked whether a finding of discoverability would chill the free exchange of information. Counsel answered that the Data Collection Act and the Medical Studies Act must be construed in pari materia. Both are essential parts of the process, working together to ensure that unqualified persons aren’t either given or continued credentials. Justice Thomas asked whether counsel was relying on the Illinois Administrative Code. Counsel responded that two statutes about the same thing must be construed together to produce a harmonious whole. Justice Thomas asked again whether the defendant relied upon the Administrative Code. Counsel answered that the Code offered further support to the argument. Justice Thomas pointed out that the Administrative Code only refers to confidentiality. Counsel answered that the Administrative Code references the Code of Civil Procedure, which discusses confidentiality, discoverability and admissibility. The Appellate Court had created inconsistency and discord between the two Acts, counsel argued. Both are part of the credentialing process. The application was part of that, and the regulations say it is to be given the same protection as set forth in the Medical Studies Act.

Counsel for the plaintiff followed, arguing that the hospital was actually trying to torpedo the tort of negligent credentialing. Counsel argued that the Medical Studies Act uses three distinct terms – confidentiality, inadmissibility and non-discoverability. Only one of those three terms is used in the Data Collection Act. Parties can’t get information protected by the Medical Studies Act because it’s necessary to protect the peer review process. But the same concerns aren’t implicated in the Data Collection Act, counsel argued, since it comes earlier in the process. The only way one can make a claim for negligent credentialing is with the records that the hospital had at the time of making the credentialing decision. Justice Kilbride asked how confidentiality plays out under the statute if the plaintiff’s position is upheld. Counsel answered that everything remains confidential. The presumption is for confidentiality. But that’s separate from admissibility and discoverability. The Medical Studies Act looks back at the tort, so that requiring disclosure would be akin to disclosing subsequent remedial measures. But the Data Collection Act is about an earlier step in the process, before the tort has ever happened. Counsel insisted that the Appellate Court had read the statutes in concert – the Court said that the Medical Studies Act uses three distinct concepts, and that must mean something. Counsel argued that the hospital certainly is asking the Court to infer a privilege. Justice Theis noted that the plaintiffs didn’t participate in the litigation at the Appellate Court. Counsel agreed. Justice Theis pointed out that the issue of attorney-client privilege hadn’t arisen until late in the process. The Appellate Court had found that the issue was forfeited, and then went ahead and discussed the issue anyway. There wasn’t much litigation about it, Justice Theis suggested. Counsel said that the plaintiff hadn’t participated because the plaintiff doesn’t know what the withheld documents are. The first time that the doctor-patient privilege, relied upon by the hospital to support redaction of certain material, had been raised was here. Justice Theis asked whether counsel meant the Supreme Court. Counsel responded that the issue of the Data Collection Act had been argued below, but the secondary argument that certain materials were covered by the doctor-patient privilege had been raised for the first time in the petition for leave to appeal.

Concluding, counsel for the hospital explained that the Appellate Court had found a relevance argument forfeited. All other arguments had been presented and heard at both levels of the courts. But nonetheless, waiver is a restriction on the parties, not the Court, so the Court may rule on that basis that details of care and treatment given unrelated patients be redacted. Counsel agreed that the Appellate Court had considered both Acts, but it failed to consider both with the principle of in pari materia in mind. One can’t separate out the steps of the credentialing process, counsel argued. All these documents are steps in the credentialing process, and all should have the same protection. Before the Data Collection Act, the credentials application was considered non-privileged. So if the legislature approved of a rule that such material was discoverable, there was no reason for the Act. Counsel argued that a negligent credentialing claim could still be asserted with evidence recovered from outside the peer review process. And if the plaintiffs wanted an exception for claims like this, they were free to take that up with the legislature. A holding that the credentialing materials were discoverable would render the language that they’re confidential meaningless.

We expect Klaine to be decided in three to four months.

Image courtesy of Flickr by Quinn Dombrowski.

Illinois Supreme Court Debates Whether a Zoo is a “Local Public Entity”

Posted in Illinois

5565772613_2c9ed52654_zAccording to the Local Governmental and Governmental Employees Tort Immunity Act (745 ILCS 10/1-101), the statute of limitations for personal injury actions against “local public entities” is one year. So is a Zoo a “local public entity”? That’s the question the Illinois Supreme Court debated during its May term, hearing oral argument in O’Toole v. The Chicago Zoological Society. Our detailed report of the facts and lower court holdings in O’Toole is here.

O’Toole arises from a slip-and-fall at the Zoo. The defendant moved to dismiss on the grounds that the complaint, which was filed nearly two years after the accident, was untimely. The Circuit Court granted the motion to dismiss, but the Appellate Court reversed.

Counsel for the Zoo led off the argument, arguing that the Appellate Court had misapplied the Supreme Court’s test in Carroll v. Paddock by concluding that the Zoo was not conducting public business. The first element of the appropriate test is whether the entity is benefiting the entire community without limitation. The Zoo clearly meets that element; it is required to offer free public access, a mandate private corporations don’t have. Also, the Zoo is tightly enmeshed with the government through operational control. Counsel argued that the Appellate Court had failed to appreciate that a not-for-profit corporation such as the Zoo has no owners, governmental or otherwise. With respect to a non-profit, the ownership prong of Carroll must be based on public ownership of the property critical to the not-for-profit purpose for which the corporation was organized. Justice Thomas asked whether the case was about a balancing between factors the plaintiff points out and the Zoo’s. Counsel answered that the test was a totality of circumstances. The relevant factors clearly meet the ownership prong of Carroll, counsel argued. The Forest Preserve District owns all the land on which the Zoo is built, and has since 1923. It also owns all the property and collections. A tax levy specifically intended by law to meet the needs of the Zoo finances the operation. Justice Theis asked whether the record reflects the percentage of taxpayer funding. Counsel said the percentage was fifty percent or a bit less, but the level wasn’t important. The issue is whether the Zoo is organized for the purpose of doing public business. The Zoo exists today, counsel explained, because of a 1923 law, and the expenditure of tax funds for its establishment, operation and maintenance. The Zoo is required to submit an itemized budget to the Forest Preserve District. The Zoo’s books are open to inspection by an auditor. The Forest Preserve District has access to the grounds, building and enclosures, and the Zoo cannot sell or mortgage animals or property without the District’s written consent. Justice Freeman asked whether there was any significance to the fact that the Zoo has claimed to be outside the freedom of information act. Counsel responded that the Act applies to public bodies, but the Tort Immunity Act is much broader, applying to a non-profit entity which conducts public business. So it is entirely consistent to be both outside the freedom of information act and inside the Tort Immunity Act. Justice Burke asked what other institutions would be affected by a decision that the Zoo is within or outside the Immunity Act. Counsel suggested the Art Institute, the Field Museum, the Chicago Botanical Gardens and the Museum in the Parks – there are a number of similar relationships. Counsel argued that each of the elements of an entity conducting public business were satisfied – the Zoo is organized to benefit the entire community without limitation; it is tightly enmeshed with the government through the government’s ownership of property and funding; and the government has direct operational control over fiscal matters. Counsel argued that the test could be resolved through Carroll. The test only needed to be refined by recognizing that ownership of land, funds, facilities and the personal property essential to the non-pecuniary purposes for which the entity is organized amounted to the same thing as ownership of a corporation when one is dealing with a non-profit. Justice Freeman asked counsel if he was inviting the Court to overrule Carroll v. Paddock. Counsel answered that the defendant is asking the Court to apply Carroll properly. The Zoo is simply saying that “ownership” of a non-profit is a meaningless concept. Justice Freeman asked whether the legislature should amend the Tort Immunity Act. Counsel answered that the legislature always had that option, but it has seen fit not to. The case presents unique facts not found in Carroll, counsel argued. The Zoo has universal public access without cost, and funding through a special tax. No other case has ever addressed such a fact pattern.

Counsel for the plaintiff followed, arguing that the Zoo was not a local public entity. Counsel argued that the Court could not get to where the Zoo wanted to go without overruling Carroll. The statute says that not-for-profits must be conducting public business, but zoos aren’t a traditional government function, counsel argued. Counsel conceded that the Forest Preserve District owns the property and structures, but the relationship amounted to landlord-tenant, not government control. Justice Burke asked whether the Forest Preserve asked the Zoo to run the property, or the Zoo asked the Forest Preserve. Counsel responded that they were started at about the same time. The legislature wanted an independent entity to run the Zoo on forest preserve land, but the Zoo is a private corporation. Justice Burke pointed out that the public pays, through the Forest Preserve, for the entity to run the Zoo. Counsel answered that although courts have said that 65% ownership isn’t enough, the public ownership of the Zoo was less than 50%. Justice Freeman noted that the Forest Preserve District is represented on the Zoo’s governing board and approves the annual budget. Counsel conceded that the contract says that the Forest Preserve has the right to look at the budget. There was no evidence in the record that the Forest Preserve District has ever done anything to contest anything the Zoo wants to do. Justice Theis asked where the facts were coming from – what facts did the Court need to look at? Counsel answered that the only operative facts in the record were the requests to admit and the contract between the Zoo and the Forest Preserve. The Chief Justice asked whether it mattered what a not-for-profit is doing in applying the standards. Counsel answered that it’s really important. That’s the Carroll test – whether the entity is engaged in a traditional governmental function. Operating a Zoo isn’t a traditional governmental function. Chief Justice Garman asked what about running a museum? Counsel said that’s why the legislature specifically included museums in the list of the local public entities in the Tort Immunity Act – it’s not a traditional function of government, and thus wouldn’t fall under the statute unless enumerated. Justice Burke asked whether the Zoo has a responsibility of providing free admission days for the public. Counsel said yes, and Justice Burke asked who had mandated that. Counsel explained that according to the statute authorizing Forest Preserve Districts to have zoos on their property, the Zoo must be open to the public one day a week. Justice Kilbride asked whether the zoos could remain closed otherwise. Counsel responded that Zoo management can determines rules and requirements for people entering the property. Clearly the government isn’t exercising any control over this property, counsel argued.

In rebuttal, counsel for the Zoo argued that the Tort Immunity Act has abolished the concept of a government function. The test under Carroll is conducting public business, not what is and isn’t a traditional government function. To qualify, the entity must be owned, operated or controlled by local government, and must benefit the entire community without limitation. The statute doesn’t specifically mention museums; it mentions museum districts, and that’s different. The Zoo is asking the Court to apply Carroll, counsel argued, not to overrule it. The Zoo is open year round for organized groups of school children, because it has an educational function. Justice Theis asked if the Forest Preserve District has ever vetoed any action of the Zoo. Counsel answered that the District has the right to veto budget items, although the record doesn’t show how often that has occurred. Justice Kilbride asked whether that right only applied to public funds. Counsel said yes. The Zoo was also barred from selling animals, and parking receipts were allocated to the upkeep of the animals. This was not a mere landlord-tenant relationship, counsel argued. Operational control – the money, the visitors, the oversight and representation on governing bodies – are all reserved to the Forest Preserve District.

We expect O’Toole to be decided in four to six months.

Image courtesy of Flickr by Eric Kilby.

Illinois Supreme Court Appears Skeptical of Claim School District Exempt from Zoning

Posted in Illinois

16497127793_0e93b0b7cd_zDuring its May term, the Illinois Supreme Court heard oral argument in Gurba v. Community High School District No. 155, a decision from the Second District which poses the question: are school districts subject to local zoning? Based upon the questioning patterns in oral argument, the Court appeared skeptical of the school district’s claim. Our detailed summary of the facts and lower court opinions in Gurba is here.

Gurba began when the defendant school district replaced the bleachers at the high school football field. The City issued a stop-work order against the School Board and the plaintiffs sued, seeking to privately enforce various zoning and stormwater ordinances. The parties filed cross-motions for summary judgment, and the trial court found for the plaintiffs, determining that the school district was indeed subject to the local zoning ordinances. The Appellate Court affirmed.

Counsel for the school board began the argument, arguing that the Appellate Court had erred by departing from a line of authority settling the power of the General Assembly over school districts. The Appellate Court had come up with its own definition of public education, counsel argued. As a constitutional matter, public education was committed to the General Assembly, and it was beyond the province of the courts to determine what public education should look like. Nevertheless, the Second District had decided for itself what was and was not public education, and had applied their definition narrowly throughout. Justice Freeman asked whether the Court’s decision in Board of Education of School District No. 150 v. City of Peoria was dispositive. When counsel said yes, Justice Freeman asked whether the issue was if health and safety ordinances are enforceable against school districts. Counsel responded that the City of Peoria court had reserved that issue, but all the analysis behind the decision was dispositive. Justice Burke asked how local zoning laws are similar to the tax laws in City of Peoria. Counsel answered that they are actually more oppressive. Justice Burke asked whether there is a conflict between the zoning laws and the School Code. Counsel said that whether or not there’s a direct conflict, the point is this. It is up to the General Assembly to delegate jurisdiction over schools’ buildings and grounds. But the legislature didn’t delegate authority to municipalities to enforce zoning. Justice Thomas suggested that if the Court agrees with the defendant, schools can just ignore local zoning and storm water management regulations. Counsel answered that the nature of the property being used drives the results. The school district is immune from any regulation not authorized by the General Assembly. Justice Thomas noted that the bleachers at issue are double the size of the structure they replaced – could a twenty-story building be built if it was for school purposes? Counsel said yes, if the school district could convince the superintendent to approve it. The Chief Justice asked whether a school could decide to start raising livestock in the middle of a town if they had an animal sciences class, and counsel said yes, if the regional superintendent approves. Counsel pointed out that there’s an agricultural high school on the south side of Chicago. Justice Thomas asked whether the home rule cases affected counsel’s argument. Counsel answered that matters committed to the General Assembly fall outside home rule. Nevertheless, applying the usual home rule test led to the conclusion that the zoning rules didn’t apply. Justice Theis pointed out that the General Assembly had given school boards the authority to affirmatively seek zoning changes – that seemed to suggest a relationship between the school board and zoning laws. Counsel answered that that was a power to petition the zoning board, not a duty. The City’s position would undo that provision and make the relationship with the zoning boards into a duty. Justice Theis suggested that school boards aren’t beyond the zoning laws, since the Code appeared to have in mind that school boards would sometimes seek zoning changes. Counsel explained various ways in which the power could be used, including with respect to property not being used for school purposes and as a condition of granting permission to encroach on a right of way. But whether or not the municipalities could unilaterally impose zoning over the school board’s objection was another issue.

Counsel for the regional superintendent followed, arguing that the Second District’s decision left her client with no indication of how to handle these matters. Justice Burke asked whether the City was notified of the bleachers before construction. Counsel answered that the right to notice required an affirmative step from the city. Once the City tells the superintendent that it’s interested in the construction project, the superintendent must notify the jurisdiction of all actions. Justice Burke asked whether the school board had a reciprocal duty to notify the City of projects without awaiting an expression of interest. Counsel answered that the School Code doesn’t impose a duty to inform the City in the first instance. The first duty is imposed by the School Code on the City, not the school board. Justice Burke asked whether the City had given any indication of interest. Counsel said no.

Counsel for the City followed, arguing that while the General Assembly has plenary power over schools, the Constitution had not released school districts from complying with the School Code or “any other laws.” Those include zoning. The School Code expressly authorizes school boards to seek relief from those laws through the standard zoning process. The state Life Safety Code and review by the superintendent don’t supplant zoning, counsel argued. The Chief Justice asked whether affirming might involve a risk that parochial concerns might interfere with state control over education. Counsel said no, the kinds of issues which arise in land use disputes are not the sort of policies dictated by the General Assembly. The zoning process looks at land use from a perspective of adverse impact to outside properties – that’s not an issue accounted for in the School Code. Counsel argued that home rule was an unnecessary distraction – the case could be resolved by looking at the statutes and division of authority between schools and municipalities. But if the analysis reached the Stub Hub home rule factors, counsel argued, the case was clearly right decided. The problem is local, counsel argued; the essential character of zoning is local. The General Assembly could have placed zoning on a statewide level, but it didn’t. Counsel argued that education can’t flaunt its importance by poking every neighbor in the eye.

Counsel for the local landowners was next, and argued that the question presented was whether an adjacent landowner could be totally denied due process. If the issue truly was one of first impression, counsel argued, why hadn’t the school district brought a declaratory judgment action? Why hadn’t they given the property owners an opportunity to act?

Counsel for the school district concluded in rebuttal, arguing that there was a timely process which the City could have invoked if it had chosen to. The landowners’ rights weren’t being decided in the litigation, counsel argued. Anyway, the landowners’ objections were intensely local, and that is why the State couldn’t allow municipalities to regulate state-wide concerns over education. Ultimately it is up to the General Assembly to decide whether schools must comply with zoning, and they haven’t done so. Justice Kilbride asked whether there was any provision in the School Code saying zoning doesn’t apply. Counsel said no, but that’s not the issue. The state school board and the School and Life and Safety Codes govern school construction, subject to the superintendent’s approval. Justice Thomas asked whether the superintendent was taking the position that as long as all the parts of the application are in line, the superintendent is required to approve the application. Counsel answered yes. Justice Thomas suggested that counsel seemed to indicate that that process is a protection to the homeowners – where was the protection? Counsel explained that the issues of size and setback are addressed in the Health Life Safety Code. The Code says that the permissible height and size of the bleachers is unlimited. The Superintendent is also required to consider the location of the project in relation to the neighboring property. If the City had participated in the process, they could have said that the bleachers were much too close to the other property lines.

We expect Gurba to be decided in three to four months.

Image courtesy of Flickr by D. J. Bustos.

Florida High Court to Decide Two Cases Involving Arbitration Agreements

Posted in Florida

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Two cases are currently pending in the Florida Supreme Court regarding whether the arbitration agreements at issue in the cases are enforceable.

Hernandez v. Crespo (No. SC15-67)

In this case, the Court must decide whether an arbitration agreement violates the public policy pronounced by the Florida Legislature in the Medical Malpractice Act, chapter 766, Florida Statutes (2012), when the agreement fails to adopt the necessary statutory provisions.  To conclude that the arbitration agreement at issue violated public policy, the Fifth District in its opinion relied on the Supreme Court’s decision in Franks v. Bowers, 116 So. 3d 140 (Fla. 2013), which states:  “Because the Legislature explicitly found that the MMA was necessary to lower the costs of medical care in this State, we find that any contract that seeks to enjoy the benefits of the arbitration provisions under the statutory scheme must necessarily adopt all of its provisions.”  The Fifth District reversed the order of the trial court compelling binding arbitration per the arbitration agreement at issue, and certified conflict with Santiago v. Baker, 135 So.3d 569 (Fla. 2d DCA 2014).

The parties have finished their briefing and the Florida Supreme Court will decide the case without oral argument.

Mendez v. Hampton Court Nursing Center, LLC (No. SC14-1349)

In this case, the Court must decide whether a nursing home resident is bound by an arbitration clause in a nursing home agreement when the agreement was signed by the resident’s son as the resident’s representative.  The Third District found that the resident was bound by the arbitration clause.  To view the Third District’s opinion, click here.

The facts are as follows.  The day Juan Mendez, Sr. was admitted to a nursing home, a doctor determined that he lacked the capacity to give informed consent or make medical decisions for himself.  Consequently, Mr. Mendez’s son, who was not acting under a power of attorney, signed the nursing home agreement as his father’s representative.

Mr. Mendez remained at the nursing home for more than four years, until his death.  During his stay, one of his eyes had to be removed due to an infection.  The resident’s son brought a suit against the facility on behalf of this father. The facility moved to compel arbitration under the nursing home agreement. The son asserted that the arbitration clause was not binding on his father, who was not a party to the agreement.  The trial court compelled arbitration and an appeal followed.

The Third District affirmed the trial court’s decision.  It first noted that arbitration is a favored means of dispute resolution and arbitration provisions are generally favored by the courts. It also noted that arbitration clauses are binding on third-party beneficiaries, even when the third-party beneficiary did not sign the contract.

The Third District therefore found that Mr. Mendez was not merely an incidental beneficiary of the agreement; he was the intended and actual third-party beneficiary. As a third-party beneficiary to the agreement, he was bound by the arbitration provision.

The Third District also noted that other district courts have held that nursing home residents who are non-signatories to care agreements are not bound by the arbitration provisions in those agreements.  The Third District disagreed with the reasoning in these decisions.  It declared that whether a third-party beneficiary is bound by an arbitration provision does not depend on whether the signatory signs only as the “financially responsible” party or has the authority to agree to arbitration, but depends on whether the resident accepted the benefits of the agreement.

This article will be updated once the Florida Supreme Court decides these cases.

Image courtesy of Flickr by NobMouse

Florida Supreme Court Considers Agency Review Requirements for Involuntary Admission of Developmentally Disabled Individuals to Residential Services

Posted in Florida

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On May 14, 2015, the Florida Supreme Court answered the following two questions in the negative, which were certified to it by the Eleventh Circuit Court of Appeals:

  1. Does “support plan” review under Fla. Stat. § 393.0651 require the Agency for Persons with Disabilities to consider the propriety of a continued involuntary admission to residential services order entered under Fla. Stat. § 393.11?
  2. Is the Agency for Persons with Disabilities required, pursuant to Fla. Stat. § 393.0651 and/or Fla. Stat. § 393.11, to petition the circuit court for the release from an involuntary admission order in cases where the APD determines that the circumstances that led to the initial admission order have changed?

See J.R. v. Palmer, No SC13-2416. The supreme court declined to answer the third certified question. To view the 11th Circuit’s opinion, click here.  To read the supreme court’s opinion, click here.

In 2004, J.R., a 48 year-old man with an IQ of 56, was involuntary admitted to residential services administered by the Agency for Persons with Disabilities, a part of the Department of Children and Family Services, after he was charged with sexual battery and found incompetent to stand trial.  Upon his admission, J.R. was given a support plan.

In 2011, J.R. sued Michael Hansen, the Director of APD, challenging the constitutionality of the statutes regulating his involuntarily admission.  J.R. contended that Chapter 393, Florida Statutes violated his due process rights because it does not provide for periodic review of an involuntary admitted resident’s continued confinement by a decision-maker who has the authority to release the resident. The dispute centered around the constitutionality of sections 393.11 and 393.0651, Florida Statutes.  Section 393.11 governs the involuntary admission of developmentally disabled individuals to residential services.  Section 393.0651 governs support plan review for clients enrolled in the Agency services.  A client may challenge his or her support plan in an administrative proceeding, but the presiding hearing officer has no authority to change the involuntary admission order.

The Florida Supreme Court answered the first and second certified question in the negative. The Court answered the first question in the negative because support plan review under section 393.0651 does not require the Agency to consider whether an involuntary admission order entered under section 393.11 continues to be appropriate.  Section 393.0651 provides a comprehensive scheme regarding annual support plan review for Agency clients, but nothing within the text of the statute can be construed to include consideration of the elements that must be established for involuntary commitment.

The second question was answered in the negative because the Agency is not required, under either section 393.0651 or section 393.11, to petition the circuit court for a person’s release from an involuntary admission order in cases where the Agency determines that the circumstances that led to the initial admission order have changed.

The Court declined to answer the third certified question because it asked the Court to interpret federal law. Specifically, the third certified question asked the Court to analyze Chapter 393 in light of federal constitutional case law and effectively resolve J.R.’s underlying federal constitutional claim.

Justices Pariente and Canady dissented.

Image Courtesy of Flickr by Matt Spence