The Appellate Strategist

The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Illinois Supreme Court Affirms Order That ISP Must Identify Internet Commenter

Posted in Illinois

1681924558_4af276dedb_zMay a plaintiff adapt the procedure found in Illinois Supreme Court Rule 224 to get a court order requiring an internet service provider to identify the author of an anonymous internet comment? Earlier this month, a unanimous Illinois Supreme Court held that the answer was “yes.” Our detailed summary of the underlying facts and lower court decisions in Hadley v. Subscriber Doe is here. Our report on the oral argument is here.

Hadley began with an online newspaper article describing the plaintiff’s candidacy for the county board. At the end of the article, readers could post comments. An individual posted two allegedly defamatory comments about the plaintiff, identifying himself only by a screen name. In early 2012, the plaintiff filed a defamation claim against the newspaper’s parent company.

While the case was pending in federal court, the plaintiff issued a subpoena to the commenter’s internet service provider, seeking the identity of the person assigned the IP address where the comments originated. Counsel for the commenter entered an appearance seeking to quash the subpoena, but before the motion was ruled upon, the action was dismissed.

The following month, the plaintiff filed a state-court action against the commenter, alleging defamation per se, naming him as “Subscriber Doe” and referencing his screen name. Along with the complaint, the plaintiff issued a subpoena to the commenter’s ISP, once again demanding the subscriber’s identifying information. Counsel for the commenter entered an appearance to contest both the subpoena and jurisdiction. During the hearing on the motion, the circuit court suggested that the better procedure to discover the identity of the commenter would be Supreme Court Rule 224, which authorizes the filing of an independent lawsuit to discover the identity of an unknown person potentially liable to the plaintiff. Based upon the court’s suggestion, the plaintiff filed an amended complaint, restating the defamation claim and purporting to state a second claim against the ISP under Rule 224. After additional briefing, the court concluded that the plaintiff had stated a cause of action for defamation sufficient to withstand a motion to dismiss, and ordered disclosure of the commenter’s identity. The Appellate Court affirmed, with one Justice dissenting.

In an opinion by Justice Burke, the Supreme Court affirmed. The defendant first argued that the plaintiff’s original complaint merely named the commenter by his screen name – a fictitious name – and was therefore a nullity. Because the original complaint was a nullity, there was nothing for the amended complaint to relate back to, and plaintiff was outside the statute of limitations. The Court held that although Illinois does not recognize claims against unknown Doe defendants, this was not such a claim. The commenter was known, but by his screen name rather than his legal name. The plaintiff had sued the alias of a real person.

Next, the defendant argued that Rule 224 plainly contemplates a standalone action, meaning that the plaintiff’s purported amended complaint in fact commenced a brand-new action.  Accordingly, the original complaint had been abandoned and, once again, the statute of limitations had expired. The Supreme Court disagreed. Although the Court emphasized that Rule 224 should typically be utilized before suit begins, the plaintiff had proceeded as he did upon the trial court’s express instructions, and the defendant hadn’t been prejudiced by the unusual procedure.

Next, the Court agreed with the Appellate Court’s holding that the proper test for balancing First Amendment interests against the plaintiff’s right to redress was to assess whether the complaint against the unknown defendant was sufficient to withstand a motion to dismiss. The Court held that plaintiff’s claim was sufficient – the defendant’s words were not susceptible of a reasonable construction and were reasonably understood to be an assertion of fact rather than mere hyperbole. As a result, the Court held, that trial court had properly ordered disclosure of the defendant’s information.

Image courtesy of Flickr by Valerie Everett.

Illinois Supreme Court Debates Automatic Consent Clause of Driver’s License Statute

Posted in Illinois

14177200447_c384b8f4e9_zAccording to Section 11-501.6 of the Illinois Vehicle Code, any driver involved in a fatal motor vehicle accident consents as a matter of law to chemical testing. (625 ILCS 5/11-501.6.) If the driver refuses to permit the test, his or her driver’s license is automatically suspended by the Secretary of State. During its May term, the Illinois Supreme Court heard oral arguments in McElwain v. The Office of the Secretary of State, which challenges Section 11-501.6 as an unlawful search under the Fourth Amendment.

McElwain began when the plaintiff was involved in a fatal accident with a motorcycle. Although the plaintiff’s vehicle was inventoried, the plaintiff wasn’t asked to submit to chemical testing at the scene of the accident. After the inventory turned up what appeared to be marijuana in the car, the police spoke to the plaintiff again two days later and asked him to submit to chemical testing. He refused, and his license was suspended for 36 months. He filed a petition for administrative review, challenging the constitutionality of the statute. The Circuit Court sided with the plaintiff, striking down the statute.

Counsel from the Attorney General’s office began the argument, representing the Secretary of State.   Counsel argued that the case wasn’t properly analyzed under the Fourth Amendment’s special needs/exigent circumstances doctrine at all, but rather as a question of whether the condition – automatic consent – was an unconstitutional burden on the privilege of driving. The doctrine of unconstitutional conditions and the special needs exception to the Fourth Amendment are not coextensive, counsel argued; the conditions doctrine operates in civil law, which the special needs exception is a criminal doctrine. Counsel argued that if the plaintiff is correct and the implied consent statute can only be applied where a warrantless search would be permitted, then a host of U.S. Supreme Court cases were wrongly decided. Justice Thomas read a portion of the Court’s decision regarding the automatic consent statute from Fink v. Ryan, and asked counsel whether the Court hadn’t pretty clearly upheld the statute only because of the diminished expectation of privacy at accident scenes. If that were so, Justice Thomas wondered, didn’t the Court either have to read a time limit into the statute to preserve its constitutionality, or hold the statute unconstitutional as applied to the plaintiff? Counsel argued that Fink was a special needs exception case, not an unconstitutional conditions case. There was no question that a warrantless search wouldn’t be permitted under the circumstances in McElwain, counsel conceded. But that isn’t the issue. For a condition to be permissible, the two part test is whether there is a nexus between the condition and a legitimate state interest, and whether the burden on rights is roughly proportional to the government interest. The first part was certainly satisfied, according to counsel, by Government’s compelling interest in fighting drunk driving. Justice Thomas asked what the nexus was between automatic consent to a test remote in time from the accident and that interest. Counsel answered that that point went to the second issue, the question of proportionality. Even though the search was remote in time, the burden on the plaintiff’s rights was modest. Justice Burke asked how reliable a test for marijuana would have been two days later – would it have shown when the substance was used in relation to the accident? Counsel answered that if the plaintiff had consented, he certainly would have been free to argue that the testing wasn’t sufficiently persuasive to support a criminal charge, and indeed, perhaps it wouldn’t have been. But the applicable standard couldn’t be that unless the testing could convict the driver, the condition was invalid. The Chief Justice noted that the Vehicle Code limited testing to twelve hours even when a driver flees the scene, and asked why this should be different. Counsel answered that that provision is criminal in nature – refusal to allow a search is a Class 2 felony. Here, on the other hand, refusal is a regulatory matter, merely triggering loss of the driver’s license. Justice Thomas asked how the Court could separate the various provisions, since the consequences of refusing a search for all circumstances are set forth in the same statute. Did it even matter if the proposed testing violates the Fourth Amendment? Counsel answered that the State isn’t arguing that the Fourth Amendment is entirely irrelevant, but the issue is whether the State can attempt to incentivize conduct it can’t compel.

Counsel for the plaintiff followed. Counsel argued that the implied consent statutory scheme was constitutional if applied reasonably. However, there are certain circumstances when testing cannot be imposed. Counsel argued that the State had had two days to obtain a warrant for the chemical testing. The legislature can impose mandatory testing at an accident scene because of diminished expectations. According to counsel, the State’s analysis of unconditional conditions was expedient, using the doctrine as a sword to validate warrantless evidence gathering. The State avoided the issue of why the driver would have a reduced expectation of privacy two days after the accident, or why the test was supposedly minimally invasive. Counsel argued that the State had no need for the evidence at that point beyond the needs of ordinary law enforcement. Given the State’s repeated claim that reasonable cause existed for the search, why had the State not obtained a warrant? Counsel argued that no case had ever applied the unconstitutional conditions doctrine to ordinary evidence gathering. The statute couldn’t possibly authorize what amounted to a warrantless search for as long as it’s possible to gather evidence, according to counsel. Counsel argued that his client was affirmatively found not impaired at the scene of the accident, so there was no relationship between the search two days later and the State’s interest in fighting impaired driving. If the statute was effective under these circumstances, counsel concluded, then the State has an unlimited amount of time available for evidence gathering without a warrant.

Counsel for the State concluded, arguing that the plaintiff was continuing to conflate Fourth Amendment analysis and the unconstitutional conditions doctrine. The problem with the plaintiff’s argument, counsel argued, was that if the warrantless search doctrine applied on facts like this, most consent searches are invalid. The Supreme Court has said on numerous occasions, according to counsel, that government may condition benefits on allowing warrantless searches it couldn’t compel. Justice Kilbride asked whether the police could meaningfully be said to have a justified suspicion two days later when the officers at the scene said the plaintiff was not impaired. Counsel responded that after the accident, the police found marijuana in the car. So it wasn’t a suspicionless search. The question for a conditions analysis was whether the search was disproportionately intrusive, and the threat to plaintiff of losing his license was so onerous that it overbore his will. Chief Justice Garman asked whether, if the Court accepted the State’s argument, there was any limit on when a request for chemical testing could be made. Counsel said yes, but the standard would depend on the facts of a particular case. The standard would be different if alcohol rather than marijuana had been found in the car, counsel argued. Because the chemical testing would be likely to turn up evidence, counsel concluded, the testing was a proportional response, in view of the government’s compelling interest.

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

Image courtesy of Flickr by Greg Gjerdingen.

Illinois Supreme Court Debates Penalty for Nondisclosure in Bankruptcy

Posted in Illinois

2644353200_427a5c1127_zCan a personal injury claim be barred by judicial estoppel if you fail to disclose the unliquidated claim in your personal bankruptcy proceeding? That’s the issue posed by Seymour v. Collins, currently pending before the Illinois Supreme Court. Based upon the vigorous questioning of plaintiffs during oral argument last month, the Supreme Court appears inclined to hold that failure to disclose does not necessarily doom a tort claim. Our detailed summary of the facts and underlying court opinions in Seymour is here.

The plaintiffs filed for bankruptcy in April 2008. When the husband was injured on the job the next year, the plaintiffs moved to modify their Chapter 13 bankruptcy plan. A year later, the husband was injured when the ambulance in which he was being transported was involved in an accident. He filed a tort suit for the injuries he sustained.

The plaintiffs were granted a discharge in bankruptcy in July 2012. The defendants then moved for summary judgment in the tort suit, arguing that since the plaintiffs had never disclosed the tort claim in their bankruptcy proceeding, they were now judicially estopped from collecting on the claim. The trial court granted the motion, and the Appellate Court affirmed.

Counsel for the plaintiffs began the argument. Counsel emphasized that the plaintiffs had not willfully concealed their pending tort claim; indeed, they had an affidavit from the U.S. bankruptcy trustee, confirming that they didn’t need to take any action in the bankruptcy with regard to the lawsuit unless they collected over a certain threshold. Plaintiffs hadn’t received any benefit from the nondisclosure of their claim, counsel argued. Justice Karmeier noted that the plaintiffs were arguing for de novo review, but pointed out that the Supreme Court has indicated in the past that judicial estoppel is an equitable remedy, thus triggering abuse of discretion review. Counsel conceded that abuse of discretion might apply, but suggested that the unusual fact of the Trustee’s testimony should give rise to de novo review. Chief Justice Garman asked counsel whether he was saying that the Trustee told the plaintiffs they didn’t have to report their claim, and counsel answered that the Trustee had said no action was necessary unless the plaintiffs received more than $2,000. Justice Karmeier asked counsel whether the Trustee had specifically said there was no need to report the claim, or that plaintiffs weren’t obligated to report a financial event under $2,000. Did the Trustee’s advice trump the Bankruptcy Code? Counsel answered that the Trustee had said that the plaintiffs had no reporting obligation unless they received more than $2,000 from any source. Justice Karmeier asked whether the Trustee could waive the reporting requirement of the Bankruptcy Code, and whether any reliance by plaintiffs was reasonable? Counsel responded that at the very least, non-disclosure wasn’t grounds for dismissal of the personal injury suit. The husband was totally disabled, according to counsel, and would require treatment for the rest of his life. Justice Kilbride asked who filed the paperwork which didn’t include the required disclosure. Counsel answered that the plaintiffs’ bankruptcy counsel had filed. Justice Kilbride asked whether the plaintiffs’ bankruptcy counsel had advised them not to disclose the tort claim. Counsel answered that no one had ever advised the plaintiffs to disclose the claim. Counsel concluded by arguing that dismissal was a harsh and unjust result on the facts of the case.

Counsel for the first defendant followed and argued that estoppel was an equitable doctrine consigned to the discretion of the trial court. Justice Thomas asked whether receiving a benefit was an element of judicial estoppel – wasn’t it undisputed that the plaintiffs had received no benefit from their nondisclosure? Counsel answered that there was no way to know whether the disclosure would have made a difference, and in any event, the plaintiffs had received a discharge. Justice Thomas asked who had the burden of showing a benefit from the nondisclosure to the plaintiff? Counsel again stated that the plaintiffs had received a discharge without full disclosure – there was no way of knowing what would have happened if disclosure had been made. The plaintiffs had immediately reported the change when the husband was first injured at work, asking for their plan payments to be reduced. Some time later, according to counsel, the husband had returned to work, but the plaintiffs hadn’t reported that. Justice Theis asked if the discharge was in the record. Counsel answered that at minimum, an outline of its terms was in the record; the Court could take judicial notice of the actual filing. Justice Theis suggested that this was speculative, and shouldn’t the Court know what was happening in the bankruptcy? Counsel answered that the affidavits in the record adequately describe the bankruptcy. Justice Karmeier asked whether the defendant was basing estoppel on the failure to report the husband’s return to work, or failure to report the tort claim? Counsel said both. Justice Karmeier asked why failure to report returning to work should terminate the personal injury action. Counsel answered that the bankruptcy court functions based upon total disclosure. The plaintiffs had taken factually inconsistent positions in the two proceedings, and had received a benefit from doing so. Justice Thomas asked counsel whether there would be no estoppel if the Court concluded that the plaintiffs had received no benefit from non-disclosure, and counsel answered that the Court could infer a benefit to the plaintiff. Counsel conceded, in response to Justice Thomas’ question, that the defendants had the burden of showing clear and convincing evidence that the plaintiffs had received a benefit from nondisclosure. Counsel insisted that that benefit was the discharge. No one knew what would have happened if the tort suit had been disclosed. Justice Thomas asked whether there would still be a benefit to the plaintiffs if they had disclosed the claim and received a discharge anyway. Counsel answered that in that event, there would be no basis for estoppel, since the plaintiffs wouldn’t have taken inconsistent positions. Justice Karmeier pointed out that the case was decided on summary judgment – so why wasn’t review de novo? Counsel answered that judicial estoppel is a matter of discretion regardless of the procedural vehicle. Justice Freeman noted that the bankruptcy payment plan had been set up based on the plaintiffs’ reported income. When that income changed, did that effect the balance? Counsel pointed out that since a bankrupt can only be required to pay for five years, a change in payments effectively changes the balance. That was the benefit, counsel concluded – plaintiffs had paid less on their debts than they initially agreed to.

Counsel for the medical services defendant followed, arguing that although plaintiffs were insisting that both statements had to be under oath for estoppel to apply, in fact, courts had long ago discarded the oath requirement. The test was now based on intent – what does the plaintiff intend the court to accept. Besides, the plaintiffs had taken an oath to provide full disclosure in their bankruptcy. When their circumstances changed to their detriment, they disclosed that and sought a change in their payments. When circumstances changed to their advantage, counsel argued, they didn’t tell anyone. An ongoing duty of disclosure is a small price to pay for bankruptcy protection, counsel insisted.  Justice Kilbride told counsel he was having trouble understanding how the plaintiffs’ nondisclosure in the bankruptcy proceeding had made a difference which harmed the defendants in the tort suit. Counsel answered that the creditors had lost an opportunity to seek an upwards adjustment to bankruptcy payments. Justice Kilbride asked whether the Trustee had the authority to reopen the bankruptcy estate on grounds of nondisclosure. Counsel answered no, not after a year had passed. Justice Thomas asked again what facts were in the record showing a benefit to the plaintiffs from nondisclosure. Counsel responded that they had received a discharge for reduced payments.

In rebuttal, counsel for the plaintiffs argued that the plaintiffs had received no benefit in the tort action from their nondisclosure in the bankruptcy action. They disclosed everything in discovery; there was no attempt to evade their duties. Chief Justice Garman pointed out that their disclosure had been in the tort case, however – not the bankruptcy case.

We expect Seymour to be decided in four to five months.

Image courtesy of Flickr by Taber Andrew Bain.

Illinois Supreme Court to Evaluate Mechanic’s Lien in Connection With Cancelled Project

Posted in Illinois

4418145006_75edbc7617_zIn the closing days of its May term, the Illinois Supreme Court agreed to decide an important issue for the construction industry: can a mechanic’s lien be enforced in connection with a project which is cancelled before completion?

Christopher B. Burke Engineering, Ltd. v. Heritage Bank of Central Illinois arises from a contract between plaintiff and certain defendants to perform engineering work on a tract of land which the defendants intended to buy and develop as a residential subdivision. The case was initially dismissed on the grounds that the mechanic’s lien contained an inadequate legal description of the property. After that order was reversed, the plaintiff settled with one group of defendants, and another filed for bankruptcy.

The original owner of the property was deposed after remand, and testified that before she agreed to sell the property, the prospective buyers had told her that they were planning to employ the plaintiff to do engineering work on the property. One of the buyers was deposed and testified that he had engaged the plaintiff to prepare both a preliminary and final plat of the property. The plaintiff had also performed the “lot work” on one lot, and had performed engineering work regarding the planning of sewers and roads on the property. Ultimately, due to the state of the economy, the new owners decided to call off the project, and told the plaintiff to stop all work. Sometime later, the plaintiff filed a civil complaint seeking to foreclose on his mechanic’s lien. The trial court granted defendant’s motion for summary judgment on the grounds that the plaintiff had not improved the land.

The Third District affirmed the judgment of dismissal. The court held that plaintiff had only prepared a preliminary and final plat of the property. While the plaintiff’s work might have been required in order for the defendants to get financing and final approval to develop the land, the court held that the preparation of a final plat was not an improvement of the land sufficient to support a mechanic’s lien.

Justice Lytton dissented, arguing that the measure of a valid mechanic’s lien wasn’t whether the professional’s work had actually improved the property, but rather whether his or her services were provided for the purpose of improving the property – meaning that a professional has a lien in connection with services rendered on a cancelled project. Justice Lytton concluded that engineers and architects are entitled to a mechanic’s lien after preparing preliminary plats even if construction never begins on the property.

We expect Christopher B. Burke Engineering to be decided in eight to ten months.

Image courtesy of Flickr by Elliott Brown.

Illinois Supreme Court Agrees to Decide Strategic Judge Challenges

Posted in Illinois

8035396680_31ed820eb3_zIn the closing days of its May term, the Illinois Supreme Court agreed to decide a question with potential implications for virtually every civil case: does a trial court have discretion to consider whether a litigant trying to exercise their “one free challenge” of the judge had an opportunity to test the judge’s views in earlier litigation?

Bowman v. Ottney comes to the Court from the Fifth District Appellate Court. The plaintiff filed suit against the defendant for medical malpractice. After the judge made certain substantive rulings, the plaintiff voluntarily dismissed her action. Five months later, the plaintiff filed a new action, alleging virtually the same claims. Purely by coincidence, the second action was assigned to the same judge who had presided over the first action.

The plaintiff filed a motion for substitution of judge under Section 2-1001(a) of the Code of Civil Procedure. (735 ILCS 5/2-1001(a).) The defendant objected, arguing that the judge’s substantive rulings in the first case barred the challenge in the new case. The Circuit Court opted to certify a question to the Appellate Court under Supreme Court Rule 308, asking whether the court had discretion to consider the earlier action in evaluating the plaintiff’s motion.

To answer the question, the Appellate Court looked to the Supreme Court’s decision in In re Marriage of Kozloff, where (in somewhat different factual circumstances) the Supreme Court expressly condemned challenges following substantive rulings as creating the potential for abuse of the venue act.

The Court noted that the districts of the Appellate Court are split on whether an opportunity to “test the waters” is relevant to the right to challenge. The Fourth District has flatly held that the right to challenge is absolute. The Fifth District has never squarely decided whether courts have discretion to consider earlier litigation, but has condemned “judge-shopping.” Only the Third District has squarely decided that trial courts have discretion to consider all the circumstances surrounding the litigation in evaluating a challenge (Ramos v. Kewanee Hospital).

Ultimately, the Appellate Court opted to follow the Third District, read in light of the Supreme Court’s comments in Kozloff. The Court remanded the matter back to the trial court, answering the certified question by holding that trial courts have discretion to consider previous litigation in addressing a Section 2-1001 challenge.

We expect a decision in Bowman in eight to ten months.

Image courtesy of Flickr by Michael Coghlan.

Med Mal Cap Cannot Apply Retroactively, Says Florida High Court

Posted in Florida


(updates article posted on October 31, 2013)

 In Miles v. Weingrad, No. SC13-54, the Florida Supreme Court held that the medical malpractice cap on non-economic damages found in Chapter 766, Florida Statutes cannot be applied retroactively.  To read the opinion, please click here.

With respect to the underlying facts, Kimberly Ann Miles sought a second medical opinion from the defendant, Dr. Daniel Weingrad, after undergoing surgery to remove a cancerous tumor from her leg.  Dr. Weingrad recommended another surgery to ensure that the cancer had been excised. On January 31, 2003, Dr. Weingrad performed the surgery, but Miles experienced complications after the surgery and, ultimately, limited mobility.  Miles and her husband then sued Dr. Weingrad for her permanent injuries.

After a trial, the jury awarded plaintiffs $1.5 million in noneconomic damages:  $1.45 million for the patient’s pain and suffering and $50,000 for her husband’s consortium claim.  The trial court denied Dr. Weingrad’s motion to reduce the non-economic award to the statutory cap of $500,000.

On appeal, the Third District reversed the trial court’s judgment and the jury award of noneconomic damages.  See Weingrad v Miles, 29 So. 3d 406 (Fla. 3d DCA 2010).  First, the district court found that the statute at issue was substantive in nature and that the legislature expressed clear legislative intent for retroactive application.  On the third prong of the analysis—whether the plaintiff had vested right that was impaired—the district court found that they “had at most a ‘mere expectation’ or a prospect that they might recover damages of an indeterminate amount at an unspecified date in the future.”  The court based this conclusion on the fact that plaintiffs did not file their notice of intent or their complaint or obtain a judgment before the enactment of the statute.

On May 21, 2015, the Florida Supreme Court quashed the Third District’s retroactive application of the cap on noneconomic damages found in section 766.118, Florida Statutes.  The Florida Supreme Court clarified its precedent in regards to whether the retroactive application of section 766.118(2), Florida Statutes is constitutional. The Court stated that one has a vested right in the common law when a cause of action has accrued. Specifically in medical malpractice cases, the Court stated, a cause of action accrues at the time the malpractice incident occurs. Therefore, the Court concluded, because the plaintiff’s injury occurred in 2003, prior to the effective date of the amendment to section 766.118, Miles had a vested right that could not be infringed upon by retroactive application of the statute.

Justices Canady and Polston dissented based on jurisdictional grounds.  They did not believe that the decision accepted for review expressly and directly conflicts with Raphael v. Shecter, 18 So. 3d 1152 (Fla. 4th DCA 2009).

Given the Court’s decision last year in Estate of McCall v. United States, 134 So. 3d 894 (Fla. Mar. 13, 2014) (No. SC11-1148), the impact of this decision is not far-reaching.  In that case, the Court held that the med mal cap for noneconomic damages in section 766.118, Florida Statutes, violates the Equal Protection Clause of the Florida Constitution.  To read that decision, please click here.

Image Courtesy of Flickr by Medical Office Careers

Illinois Supreme Court Appears Skeptical of Requiring Reasons for Denying Sanctions

Posted in Illinois

4257631741_91930b8a5f_zSupreme Court Rule 137(d) provides that “where a sanction is imposed under this rule,” the trial court judge “shall set forth with specificity the reasons and basis of any sanction so imposed.” A majority of the Justices of the Illinois Supreme Court appeared skeptical during oral argument last month of the Fifth District’s holding in Lake Environmental, Inc. v. Arnold that an explanation of reasons must be included in a Rule 137 order whether or not sanctions are imposed. Our detailed summary of the facts and underlying court opinions in Lake Environmental is here.

Lake Environmental began when the Department commenced an emergency stop work proceeding after observing what it believed to be violations in an asbestos remediation project. Not long after, the Department began the process of revoking the plaintiff’s license based on the same alleged violations. After an order of administrative revocation was entered, the plaintiff filed a petition in Circuit Court seeking judicial review. The trial court overturned the order of revocation. When the Department declined to drop the revocation proceeding, the plaintiff filed a motion for sanctions under Supreme Court Rule 137. The court denied the motion without explanation, but the Appellate Court reversed because of the lack of an explanation.

Counsel for the Illinois Department of Public Health began the argument. Counsel argued that the plain language of Rule 137 doesn’t require an explanation of reasons when sanctions are denied. Counsel argued that there was no reason to require an explanation when sanctions are denied, which should be the usual result of such a motion. The Chief Justice asked whether a lack of reasoning in some evidence that the trial court’s discretion was abused. Counsel answered no: when sanctions are denied, the Appellate Court should review the trial court record for abuse of discretion. The plaintiff cited Rule 366 – which gives an Appellate Court broad powers to remand Circuit Court orders – rather than Rule 137, but the Appellate Court’s opinion never mentions Rule 366, counsel argued. Further, the plaintiff argued that the record was insufficient to allow for meaningful review, but counsel for the State argued that it already contained every conceivably relevant document. Justice Karmeier asked whether counsel believed that a requirement that reasons be stated would aid in review for abuse of discretion. Counsel said yes, but the rule doesn’t require it. The Department had concluded that even though the stop work proceedings and the license revocation were based upon the same alleged violations, res judicata didn’t apply because license revocation hadn’t been an issue in the first proceeding. The plaintiff had sought Rule 137 sanctions because the Department had refused to drop the revocation proceeding, but the proceeding had had legal and factual justification, counsel argued. Counsel argued that Rule 137 sanctions are a matter for the broad discretion of the trial courts, and the courts have discretion not to impose sanctions. The trial judge was in the best position to decide whether sanctions were warranted, counsel concluded, and two different trial judges had reviewed the record and concluded that they were not.

Counsel for the plaintiff began by arguing that the case wasn’t about the proper interpretation of Rule 137. Rather, the Appellate Court decided, in a case where the record revealed no basis for denying sanctions despite the State’s objectively unreasonable position, to remand for an explanation rather than reversing outright. Justice Thomas suggested that the Appellate Court’s opinion did seem to hold that reasoning was required under Rule 137 whether sanctions are granted or denied. Counsel argued that the Appellate Court’s holding doesn’t create a per se rule. Justice Thomas pointed out that the Supreme Court had taken up the case because of a split in the districts, but counsel argued that the conflict was illusory. Justice Thomas suggested that the Fifth District had chosen to take on that conflict, expressly choosing sides over the meaning of Rule 137. Counsel answered that previous cases had always involved records on appeal which made it clear what the basis was for denying sanctions, but here there was no apparent basis for the denial. Chief Justice Garman asked counsel what rule he was advocating. Counsel responded that the Court should merely say that under Rule 366, the Appellate Court had every right to remand for an explanation if it found the record insufficient for meaningful review of the trial court’s exercise of discretion. The Chief Justice asked whether the Court’s opinion should mention Rule 137, and counsel answered that the case didn’t involve the interpretation of Rule 137. Justice Karmeier asked counsel whether he was suggesting that the Supreme Court should review the record to assess the propriety of sanctions, and counsel answered that the record was inadequate for such a review. Justice Thomas suggested that Rule 137 was all over the Appellate Court’s opinion. Whether a statement of reasons would be helpful or not, the matter still comes back to the text of the Rule. Counsel disagreed. He argued again that the Appellate Court had reviewed earlier precedents and concluded that it was evident in each case why sanctions had been denied. Here, the record was not clear. The Department had lost the emergency stop work proceeding, counsel argued, because the state had dismissed an earlier case with prejudice, barring its new allegations. Once those allegations were invalidated, according to counsel, the Department could appeal the violations proceeding, or they could drop the license revocation proceeding. The one thing the Department couldn’t do, counsel argued, was not appeal the violations ruling, but still continue to attack the plaintiff”s license. Justice Thomas asked whether those facts were all in the record on the motion for sanctions. Counsel said yes. Justice Thomas asked whether the Department’s response to that line of argument was also in the record, and counsel agreed it was. Justice Thomas suggested that the only thing missing was the reasoning for the denial because it would be helpful. But if Rule 137 distinguishes between orders imposing and denying sanctions with respect to a requirement of reasons, isn’t that the end of it? Counsel answered that Rule 137 is a direction to the trial judge, not the Appellate Court. Rule 366 governs what the Appellate Court can and can’t do, and it provides that a remand is permissible if the record is insufficient to permit meaningful review.

Counsel for the Department concluded briefly, arguing that the State didn’t deny that Rule 366 would allow a remand in certain circumstances. But that’s not what happened here, according to counsel. The Appellate Court had not said anything about the completeness of the record, counsel argued; it wasn’t clear what was supposedly missing. The Rule 137 standard of an “objectively unreasonable” position was a matter for the trial court to decide, and the trial court had implicitly decided that the Department’s position didn’t satisfy that standard.

We expect Lake Environmental to be decided in three to four months.

Image courtesy of Flickr by William Creswell.

Illinois Supreme Court Debates Pick Offs of Class Reps Pre-Certification

Posted in Class Actions

2302650772_9132ed3868_zIs it possible for a defendant to moot a putative class action prior to class certification by tendering an offer of judgment for everything the named plaintiff could conceivably recover? The U.S. Supreme Court agreed to decide that question at the Federal level not long ago. The Illinois Supreme Court heard oral argument late last month in Ballard RN Center, Inc. v. Kohll’s Pharmacy and HomeCare, Inc., a decision posing that same question as a matter of state law. A detailed summary of the facts and underlying court decisions in Ballard is here.

The plaintiff alleged that he received an unsolicited fax advertisement from the defendant. The plaintiff allegedly had no prior relationship with the sender, had not given permission for such faxes to be sent, and the fax purportedly lacked the mandatory “opt out” notice. The complaint alleged that the fax was sent to plaintiff as part of a “blast fax” advertising campaign. The plaintiff purported to state one claim for violation of the Telephone Consumer Protection Act (“TCPA”), one for violation of the Illinois Consumer Fraud Act and one for conversion. On the same day the plaintiff filed its complaint, plaintiff filed a skeletal motion seeking certification of three classes and promising a memorandum of law “in due course.”

Defendant moved for partial summary judgment on the TCPA claim, alleging that on three different occasions, it had made an unconditional tender of all possible damages under the Act to the plaintiff, thus mooting the claim (notwithstanding the plaintiff’s skeletal motion for class certification). The trial court denied the motion, holding that a bare-bones motion for certification is enough to satisfy the standard of Barber v. American Airlines. The Appellate Court reversed, holding that a motion for class certification had to include sufficient factual allegations to bring the absent class members’ interests before the court in order to prevent a tender of judgment from entirely mooting the claim.

Counsel for the plaintiff began the argument. According to counsel, the fact that the defendant’s tender included only one of the three claims was dispositive – a partial tender of judgment didn’t moot anything. Defendant argues that its position is supported by the policy favoring settlement, counsel argued, but even if there is such a policy, tender as to only one of three claims does nothing to advance that interest. Plaintiff argued that the partial pick-off just amounted to manipulation of the plaintiff’s claims. Justice Thomas asked counsel why he had not sought a hearing or filed a memorandum of law on his motion for class certification for two years after filing. Counsel responded that discovery had been arduous, and there had been motions to dismiss in related cases. Once all that was completed, the plaintiff had filed an amended motion for class certification. Counsel argued that if his skeletal motion for class certification isn’t enough to satisfy Barber – if there must be evidence offered in support of certification – then defendants will always have the chance to moot class claims if they offer judgment within thirty days of the complaint being filed. If the Appellate Court is upheld, according to the plaintiff, class actions in cases seeking only modest damages are effectively dead in Illinois. Instead, plaintiff urged the Court to adopt the same standard as the Seventh Circuit, by which a bare-bones motion for certification is sufficient to block pick-off attempts. Plaintiff concluded by briefly addressing the propriety of the class certification order. The case had all the earmarks of a blast fax seeking new business, counsel argued, and the defendant had paid after the fact for 4,000 transmissions having been sent – obviating the need for any individual evidence that faxes had been received. Defendant had argued that class certification would lead to excessive damages, but plaintiff argued that the proper response, even if that were so, was to certify the class and reduce every class member’s recovery equally. Counsel suggested that since the class had already been notified, if the class were now decertified, most of the individual class members would pursue claims, and defendant wouldn’t avoid substantial damages anyway.

Counsel for the defendant followed. The plaintiff had received all the documents it said it needed for its certification motion by March, 2012, defendant argued – and yet the amended motion wasn’t filed until November, 2012. Justice Kilbride asked whether that eight month delay had involved motions to compel, but counsel said no. Counsel pointed out that plaintiffs were relying heavily on various Federal Circuit cases, but with the U.S. Supreme Court’s grant of certiorari in Gomez v. Campbell Ewald, all those cases were now under a cloud. Justice Thomas asked counsel about plaintiff’s argument that a party can’t tender as to one count only. Counsel responded that plaintiff had chosen to split their remedies, and there was no authority suggesting the the defendant can’t moot the statutory action. Counsel argued that allowing prompt payment to the named plaintiff wouldn’t harm the rights of other plaintiffs, who were still free to come forward, nor would it eviscerate class actions in Illinois (since most class claims are for more than a defendant will likely be willing to tender without a fight). If plaintiff’s position were adopted, defendant argued, then plaintiffs will file a shell motion for certification in every case. Justice Thomas asked whether there was a policy concern involved that defendants would game the system if pickoffs were allowed. Counsel answered perhaps, but the way to balance those concerns was to require some minimum threshold of evidence in the plaintiff’s motion. Justice Theis asked how the Court should fashion such a standard if it’s not in the statute. Counsel suggested that the Court could look to the standard for some minimum level of factual support under Rule 801. Justice Kilbride asked whether, if the Court decides the defendant’s tender didn’t moot the case, it needed to resolve the other issues. Counsel responded no, but if the case were reduced to the two other claims, it would likely be quickly settled. But what if the plaintiffs won on the mootness point, Justice Kilbride asked. Counsel responded that shell motions for certification would become routine, and Barber would be effectively a dead letter. Justice Kilbride asked if Barber covers a partial tender. Counsel said no, but this wasn’t a partial tender – the defendant made a full tender with respect to the TCPA.

Counsel for the plaintiff responded that the defendant was mistaken to argue that none of the cases cited in the briefs had involved a partial tender. Justice Thomas suggested that there was a bigger difference between the counts here than in the cases plaintiff relied upon. Counsel responded that the only difference was statutory damages under the Consumer Protection Act. There was no delay during discovery, counsel argued. The plaintiffs had to take discovery from third parties and had to retain an expert to analyze the defendant’s hard drive. The action was diligently prosecuted throughout, according to counsel. Counsel argued that the only thing required for a class certification motion to prevent mootness was good faith and some reasonable basis. Counsel concluded by arguing that he had heard no policy in favor of partial tender during the argument, and that a wrongdoer shouldn’t get to decide which claims proceed.

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

Image courtesy of Flickr by Joel Penner.

Florida High Court Holds That Oral Agreement to Split Lottery Winnings Falls Outside Statute of Frauds

Posted in Florida


(updates article posted on August 4, 2014)

On May 28, 2015, the Florida Supreme Court answered the following rephrased certified question in the negative:

Is a terminable-at-will agreement to pool lottery winnings unenforceable in the absence of an express agreement to continue the agreement for a period of time exceeding one year, when full performance of the agreement is possible within one year from the inception of the agreement?

See Browning v. Poirier, No. SC13-2416. To read the complete opinion, click here.

The facts giving rise to this dispute are fairly straightforward.  Howard Browning and Lynn Poirier lived together as a couple between 1991 and 2009.  In 1993, the couple orally agreed that they would split the winnings of any lottery tickets purchased by either of them while they remained in a relationship. In 2007, Poirier purchased a winning ticket and received $1 million dollars less taxes. Despite their agreement, Poirier refused to give Browning half of the proceeds. Browning in turn sued for breach of an oral contract and unjust enrichment, seeking half of Poirier’s winnings. Poirier moved for directed verdict on both causes of actions, claiming the statute of frauds as a defense. The trial court granted Poirier’s motion on both counts, entering final judgment in favor of Poirier.

On appeal, the Fifth District affirmed the trial court’s ruling that Poirier was entitled to a directed verdict on the breach of contract claim because the couple’s agreement was voided by the statute of frauds, but reversed the trial court’s ruling on the unjust enrichment claim. Citing the Florida Supreme Court case of Yates v. Ball, the district court explained that an oral contract with no specified date for performance is subject to the statute of frauds if it is clear that the parties intended for it to last longer than one year. The district court highlighted that Browning and Poirier’s lottery agreement was to extend until the couple’s relationship ended. The court stated that any suggestion that the couple had intended for their relationship—and thereby, the lottery agreement—to end within one year was evidenced by their intention for a long-term commitment.

Judges Torpy and Griffin dissented in part. They agreed with the majority that the directed verdict on the unjust enrichment count was error, but disagreed with the majority’s conclusion on the contract claim.  They believed that the majority ignored the plain language of the statute, stating that it only considers contracts which clearly cannot—as opposed to likely will not—be performed within one year.  To view the Fifth District’s opinion, click here.

In quashing the Fifth District’s decision, the Florida Supreme Court held that the oral agreement between Browning and Poirier fell outside the statute of frauds. Emphasizing the language in the statute of frauds, the Court stated that unenforceable oral contracts are only those which cannot be performed within the one year period. The Court noted that if Browning or Poirier purchased a winning lottery ticket and split the proceeds before the expiration of one year, the agreement would have been fully performed before the expiration of one year.  The Court also noted that there was nothing in the terms of the contract to demonstrate that it could not be performed within one year. The Court therefore held that because the oral agreement between Browning and Poirier could have possibly been performed within one year, it falls outside the statute of frauds.

Image courtesy of Flickr by Mark Ou.

U.S. Supreme Court to Decide Class Action “Trial by Formula”

Posted in Class Actions

5454790455_4b8afd2f08_zLast week, the U.S. Supreme Court granted a petition for certiorari in Tyson Foods, Inc. v. Bouaphakeo. Tyson Foods presents two issues with the potential to make the case enormously important for class action litigation: (1) May a class action be certified where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and (2) May a class action be certified where the class contains hundreds of members who were not injured and have no legal right to recover?

Tyson Foods is a wage-and-hour action brought by current and former “gang-time” employees at Tyson’s facility. Multiple times during each shift – when the shift began, before and after lunch, and at the conclusion of the shift – employees had to put on and take off various items of sanitary and protective clothing and equipment: so-called “donning and doffing time.” The plaintiff’s theory was that the defendant’s “K-code” system for paying employees for donning and doffing time systematically underestimated the time taken by the process, and therefore underpaid the employees. The employees filed claims under the Fair Labor Standards Act and the Iowa Wage Payment Collection Law. The district court certified the FLSA action as a collective action and the IWPCL action under Federal Rule 23 despite finding “some very big factual differences among hourly employees.”

Following the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, the defendant filed a motion to decertify the Rule 23 class. Plaintiffs opposed decertification, arguing that they could show liability with a time study by their expert, who had observed average donning/doffing time for a small sample of several hundred of the defendant’s employees. Plaintiffs’ expert conceded that his measurements included employees who performed different jobs and donned and doffed different equipment, and that the result was “a lot of variation.” He further admitted that he had allowed employees to “self-select” into his study; he hadn’t selected workers from a variety of jobs, or ensured that his sample had included the same proportion of knife-wielding and non-knife wielding employees as the defendant’s entire workforce. Nevertheless, the court denied the motion to decertify, and the case proceeded to trial. At the close of plaintiffs’ case, the defendant moved once again to decertify, or grant judgment as a matter of law, on the grounds that plaintiffs had not proved that all class members were injured. The court denied the motion, and ultimately a verdict for plaintiffs was returned.

A divided panel of the Eighth Circuit affirmed, holding that because the defendant had a specific company policy and the employees “used similar equipment,” the inference from the statistical study’s mean to the class was allowable. Judge Beam dissented, emphasizing the substantial factual differences among individual employees. The defendant’s petition for rehearing en banc was denied by a vote of six to five, with Judge Beam once again dissenting.

The Supreme Court’s decision in Tyson Foods – which we expect late in 2015 or early in 2016 – has the potential to significantly rein in abuse of the class action device. The Supreme Court originally condemned “trial by formula” four years ago in Dukes, pointing out that when plaintiffs’ entire liability case consists of a statistical study of the class, defendants are generally stripped of the opportunity to present individualized defenses – a clear violation of the Due Process Clause. But in the years since Dukes, the Circuits have varied in the degree to which they have restricted trial by formula. Tyson Foods also presents a separate issue which frequently arises in “trial by formula” cases – class definitions so expansively written as to include hundreds if not thousands of individuals who haven’t been injured, and therefore would have no right to bring a lawsuit of their own. The inclusion of such individuals, of course, both makes class certification seem more appropriate than it necessarily should be, and inflates the eventual settlement and/or judgment. A decision reversing the Eighth Circuit in Tyson Foods might go a long way to restoring balance and fairness to class action litigation.

Image courtesy of Flickr by Andrew Smith.