The Appellate Strategist : Appellate Lawyers & Attorneys for Updates on Trial Consultations, Amicus Briefs & Punitive Damage Awards

Our preview of newly petitions for leave to appeal allowed by the Illinois Supreme Court in the closing days of the just-ended May term continues with Schultz v. Performance Lighting, Inc., a decision from the Second District.

The plaintiff in Schultz obtained a divorce in 2009. She was awarded $600 every two weeks in child support from her ex-husband. At the time, the ex-husband was working for the defendant in Schultz.

In Illinois, the Income Withholding for Support Act was enacted in order to provide custodial parents with a method to more easily collect court-ordered support payments from their former spouses. The plaintiff served a notice to withhold income for support on the defendant, personally serving the ex-husband’s attorney at the same time. Section 35 of the Act places a duty on a payor, once served with a notice, to pay over the ordered portion of the obligor’s income to the State Disbursement Unit. According to the Act:

The income withholding notice shall:

* * *

(9) include the Social Security number of the obligor; and

(10) include the date that withholding for current support terminates, which shall be the date of termination of the current support obligation set forth in the order for support; and

(11) contain the signature of the obligor or the printed name and telephone number of the authorized representative of the public office, except that the failure to contain the signature of the obligor or the [identifying information for the public office] shall not affect the validity of the income withholding notice. 750 ILCS 28/20(c)

The plaintiff’s notice contained neither the ex-husband’s Social Security number, nor the termination date for the support obligation. So: does the statute require strict compliance, such that the notice’s shortcomings should be fatal, or is substantial compliance enough?

The defendant made no payments to the State Disbursement Unit on the ex-husband’s account. Subsequently, the defendant sued her ex-husband’s employer, alleging that the defendant had breached a statutory duty to pay, triggering a statutory $100 per day penalty. The trial court held that strict compliance was required by the statute and dismissed the plaintiff’s complaint.

The Second District affirmed. Two reasons compelled a finding that strict compliance was required by the statute, according to the Court. First, the Court relied upon a line of authority holding that when a statute uses the word “shall,” and imposes a penalty or consequence for non-compliance, the duty imposed is mandatory and strict compliance is required. Although there was no penalty for failure to include the missing information in the notice, the Court noted that knowing non-compliance with a valid notice to withhold triggered an automatic penalty. Second, the Court invoked expressio unius est exclusio alterius, the ancient legal maxim teaching that an enumerated list is presumptively exclusive. Here, the statute’s statement that non-compliance with the signature requirement doesn’t invalidate the notice implies that non-compliance with the other requirements does invalidate the notice.

Schultz will likely be decided in the first half of 2014.

• Print
• Comments
• Trackbacks
• Share Link

Does the State of Illinois have to pay elected officials' attorney fees when the underlying complaint alleges that the official committed "intentional, willful or wanton misconduct"? Earlier this month, a unanimous Illinois Supreme Court held in McFatridge v. Madigan that the answer was "no." Our detailed report on the facts and underlying court opinions in McFatridge is here. Our report on the oral argument in McFatridge is here.

The plaintiff in McFatridge is the former State's Attorney in Edgar County. In 1987, he successfully prosecuted two individuals for murder. Many years later, the defendants' habeas petitions were granted; they were not retried. So they sued a number of people involved in the prosecution, including the plaintiff.

In 2005, 2009 and again in 2010, the plaintiff asked the Attorney General for representation in the civil case pursuant to the terms of the Illinois State Employee Indemnification Act. Each time, his request was denied.

Here's the operative language from the statute:

(a) In the event that any civil proceeding is commenced against any State employee arising out of any act or omission occurring within the scope of the employee's State employment, the Attorney General shall, upon timely and appropriate notice to him by such employee, appear on behalf of such employee and defend the action . . .

(b) In the event that the Attorney General determines that so appearing and defending an employee an employee either (1) involves an actual or potential conflict of interest, or (2) that the act or omission which gave rise to the claim . . . was intentional, willful or wanton misconduct, the Attorney General shall decline in writing to appear or defend . . .

In the event that the defendant in the proceeding is an elected State official . . . the elected State official may retain his or her attorney, provided that said attorney shall be reasonably acceptable to the Attorney General. In such case the State shall pay the elected State official's court's costs, litigation expenses, and attorneys' fees . . .

So does the statute create two separate classes -- unelected officials, who can be turned down for intentional, willful or wanton misconduct, and elected officials, for whom the duty to pay fees is mandatory? Or does the final paragraph mean something different? That's the question the Court was confronting. The lower courts disagreed: the Circuit Court dismissed, but the Appellate Court (Fourth District) reversed.

In a unanimous opinion by Justice Anne Burke, the Supreme Court reversed the Fourth District. The Appellate Court had applied a canon of construction to hold that since the second paragraph of the statute described a more specific subgroup - elected officials - the intent must have been to carve out an exception from the earlier, larger group - employees who can be turned down under certain circumstances. The problem with that analysis, the Supreme Court held, was that the paragraphs didn't relate to the same subject - the first paragraph related to the circumstances in which the Attorney General would defend employees, and the second conferred on elected officials the right to hire their own attorneys. Therefore, the rule of construction didn't apply. The language in the first paragraph referring to "employees" clearly included elected officials, the Court found, so the "intentional, willful or wanton" exception applied to elected officials. Besides, the Court pointed out, subsection 2(c) of the statute, immediately following the language about elected officials, imposed a duty to represent and indemnify with respect to judges "without regard to the theory of recovery employed by the plaintiff," demonstrating that the legislature knew how to carve individuals out if they chose to do so. But there was simply no general exemption in the statute for elected officials. Therefore, the Attorney General correctly exercised her discretion to refuse to represent the plaintiff.

• Print
• Comments
• Trackbacks
• Share Link

On the final argument day of the May term, the Illinois Supreme Court heard argument in Prazen v. Shoop, one of a brace of public employee pension cases currently on the Court's docket. Our detailed preview of the facts and lower court holdings in Prazen is here. The video and audio of the argument is available here.

Prazen relates to an Early Retirement Incentive (ERI) plan adopted by a city pursuant to section 7-141.1 of the Pension Code. The plaintiff took early retirement from his position as superintendant of the city electric department, purchasing five years "age-enhancement credit" pursuant to the ERI to do so. Less than two weeks before his retirement became effective, the plaintiff incorporated a business which he has run as an unincorporated entity for some time - Electrical Consultants, Ltd. Three days after it was incorporated, ECL entered into a management and supervision agreement for the operation of the city's electric department, effective the day after his retirement. ECL continued to manage and supervise the city's electric department for an additional ten years.

But here’s the problem: under Section 7-141(g) of the Pension Code, any pensioner who receives age enhancement credit and later "accepts employment with or enters into a personal services contract" with an employer subject to the Code forfeits the increase in his or her pension. In 2010, the Illinois Municipal Retirement Fund (“IMRF”) concluded that the plaintiff had violated Section 7-141(g), not because he had "accept[ed] employment with" or "enter[ed] into a personal services contract" with his former employer, but because his corporation was a "guise" to evade the statute. The Fourth District of the Appellate Court reversed, holding that the Board of Trustees of the IMRF had the power to find one of the two factual determinations under the statute -- "employment with" or "personal services contract" and that's it.

Prazen was an active argument, with both sides facing relatively heavy questioning. It was evident that the Justices were troubled by both sides’ positions – both by the Board’s invocation of a power which was not exactly self-evident on the face of the Pension Code, and by the implications of approving what seemed to be an arguably dubious method for avoiding the language of the statute on the part of the pensioner. As a result, it’s quite difficult to predict how the Court is likely to rule; few if any Justices suggested a definite leaning.

Justice Freeman began the argument by asking counsel for the IMRF which provision of the statute was violated - "employment with" or "personal services contract." When counsel argued that the statute was vague, and that the Board had found plaintiff's arrangement was a "guise" to end-run the statute, Justice Freeman asked counsel whether the Board had the power to make such a determination. Counsel responded that the Board believed it did. Justice Thomas asked whether the Court would have to find the statute ambiguous in order to adopt the IMRF's position, and counsel argued that the statute was ambiguous: "personal services contract" is not defined in the Pension Code, and although "employee" is, "employment with" is not a defined term either. Justice Garman repeated Justice Freeman's earlier question, asking where in the statute the Board gets the authority to find violation-by-"guise." Counsel responded that the power flowed from the Board's general authority to make determinations on participation and coverage in order to carry out the intention of the Fund. The Board had looked to the legislative intent behind the statute, and concluded that if the legislature's desire that local governments be able to bring in younger, less expensive employees (or eliminate positions entirely) and reduce payroll was to be possible, the plaintiff's incorporation device could not satisfy the statute. Justice Burke asked counsel whether the Board’s finding of a “guise” rendered Section 141(g) of the Pension Code superfluous. Counsel agreed that the Appellate Court had found that, but counsel disagreed, arguing that the section has to be construed as a whole. Looking at the facts, it seemed clear, counsel argued, that the corporation had been created to evade the return to work provisions of the statute. Justice Thomas asked counsel to comment on the fact that the pensioner’s attorney had contacted the IMRF for guidance three times. Counsel pointed out that the final letter from the Board had suggested that the corporation could not simply be a guise for evading the regulations.   Justice Thomas asked counsel to respond to the argument that the statute’s plain language says what it says, and if personal corporations are to be barred, it should be amended. Counsel responded that the statute is vague and ambiguous, allowing room for the Board’s interpretation. Justice Garman asked whether there was specific legislative intent supporting the Board’s position, and counsel responded that it seemed clear from the preamble of the statute that the legislature wanted local governmental employers to have the flexibility to shed payroll through the incentive. Justice Karmeier asked whether the Board’s finding could be reversed simply because it had failed to make either of the mandated statutory findings, and counsel again responded that the Board had authority to make its findings under its general authority to administer the pension statutes.

Counsel for the pensioner began by emphasizing that the Section 141(g) permits two findings as a basis for forfeiture of the enhancement – either “employed with” or a personal services contract – and the Board had made neither. The first issue, counsel argued, was whether the IMRF had the equitable power to disregard the pensioner’s corporation. In response to a question from Justice Freeman, counsel argued that Section 17-200, the general grant of power relied upon by the Board, was just that – a general grant of power – which was trumped by the specifics in the rest of the Pension Code. Justice Freeman asked whether the crux of the case was the intent of the legislature. Counsel said no, the crux of the case was whether the Board had any power to disregard its limited authority under the statute to instead make a more general finding to justify a major forfeiture. Justice Thomas asked whether an opinion of the Court affirming the Appellate Court’s finding in favor of the pensioner would stand for the proposition that the statute could be evaded simply be self-incorporating and returning to work. Counsel responded by emphasizing that the pensioner’s corporation was not a sham; he had met every conceivable corporate formality. Justice Burke asked whether counsel would concede that the pensioner himself was the only person associated with the corporation who could perform the services called for by the contract, and counsel responded that there was nothing keeping him from hiring contractors. Justice Thomas repeated his question of whether an opinion affirming the Appellate Court would amount to an endorsement of the incorporate-and-go-back-to-work approach. Counsel responded that perhaps the statute, as written, created a political or factual absurdity, but that the flaw in the statute couldn’t be summarily remedied through judicial fiat on the back of a single pensioner. Where, counsel wondered, does one draw the line with the IMRF creating powers not expressly given? Chief Justice Kilbride pointed out that the case came before the Court under the Illinois Administrative Review Act, and asked what counsel’s argument was for the proposition that the facts the Board relied on were against the manifest weight of the evidence. Counsel responded that there was no evidence that his client had returned to the same job; in fact, he had not. If the goal was to eliminate the superintendant’s position, mission accomplished, counsel argued. He also pointed out that under the personal services contract, the city could now terminate his client with three days’ notice. In response to a question from Justice Thomas, counsel reviewed the factual circumstances of the three letters from the pensioner’s attorney to the Board. He argued that the Board’s action amounted to piercing the corporate veil, something that no court could possibly do on the record in the case. Counsel finished by again insisting that any problem with the statute had to be solved legislatively.

In a brief rebuttal, counsel for the Board argued that if the intent of the legislature is obvious from the words used, the Board had ample power to effectuate that intent. Counsel argued that the claim that the Board was piercing the corporate veil was a red herring; the Board was holding the pensioner responsible for his own acts, not for the acts of his corporation.

Prazen will likely be decided in the fall.

• Print
• Comments
• Trackbacks
• Share Link

In the final days of the Illinois Supreme Court's recently concluded May term, the Court allowed petitions for leave to appeal in five new civil cases. Today, we begin our detailed previews of those cases, discussing the underlying facts and lower court holdings.

First up is Rogers v. Imeri from the Fifth District. The plaintiffs' son was killed in a drunk driving accident. The plaintiffs sued the bar which allegedly served the drunk driver, alleging claims under the Dramshop Act, 235 ILCS 5/6-21. The plaintiffs received $26,550 from the driver's liability insurance policy and an additional $80,000 from their own policy.

While the matter was pending, the defendant's dramshop liability insurer was declared insolvent and liquidated; as a result, the Illinois Insurance Guaranty Fund took over the defense of the litigation.

The defendant filed a motion for summary adjudication of liability arguing the following theory: maximum liability under the Dramshop Act was $130,338.51. The plaintiffs had already received $106,550. Therefore, since the Insurance Guaranty Fund was entitled to a setoff for insurance payments from other sources, the plaintiffs' maximum possible recovery was the difference between those two sums.

The Circuit Court denied the motion, but agreed to certify a question: in a case involving the Insurance Guaranty Fund, if the jury returns a verdict in excess of the statutory maximum, is the setoff for other recoveries made from the verdict, or from the statutory maximum recovery under the Dramshop Act?

The answer depends on construing two different statutes simultaneously. The Dramshop Act provides that a jury should determine damages without worrying about the statutory limit.

On the other hand, under the Insurance Guaranty Fund Act, a claimant must "exhaust all coverage provided by any other insurance policy . . . if the claim under such policy arises from the same facts, injury, or loss that gave rise to the covered claim against the Fund." 215 ILCS 5/546(a). "[T]he Fund's obligation" is reduced by the amount recovered.

As the Fifth District observed, the answer to the certified question was likely to make a significant difference when the case was ultimately tried. Given that the deceased son of the plaintiffs was only eighteen when he was killed, it seemed likely that a verdict would be in excess of the statutory cap.

The defendant's problem, according to the Fifth Defendant, was that nothing in the Insurance Guaranty Fund Act altered the way that damages are calculated in the routine case where the Fund is not involved. Therefore, the Court held, the reduction for "other insurance" recoveries in the Insurance Guaranty Fund Act should be applied to the jury's verdict, and then reduced to the statutory maximum.

Rogers will likely be decided sometime in the first half of 2014.

• Print
• Comments
• Trackbacks
• Share Link

The Federal Telephone Consumer Protection Act provides that it's unlawful to send unsolicited advertisements to a fax machine. 47 USC 227(b)(1)(C). The statute creates a private right of action, with damages equal to actual losses or $500 per fax, whichever is greater. If the violation is willful and knowing, then it's $1,500 per fax.

So are TCPA statutory penalties insurable under Illinois law? Earlier this month, the Illinois Supreme Court handed down its unanimous decision in Standard Mutual Insurance Co. v. Lay. The answer, the Court held in an opinion by Justice Charles E. Freeman, was "yes." Our detailed summary of the facts and lower court decisions in Lay is here. Our report on the oral argument is here.

The defendant in Lay hired a "fax broadcaster" who sent a "blast fax" advertisement to 3,478 fax machines. The problem was, allegedly few if any of the targets had given permission to receive advertisements by fax. So the defendant got hit with a TCPA lawsuit seeking $1,500 for each of the faxes sent. The defendant tendered the complaint to its insurer, who agreed to defend under a reservation of rights; but the defendant then filed a declaratory judgment action, seeking a finding of no coverage on the grounds that the statutory penalty was akin to punitive damages, and therefore uninsurable. The Circuit Court granted the insurer's motion for summary judgment and the Appellate Court affirmed.

The Court quickly disposed of a preliminary issue, rejecting the insured's claim that the insurer was estopped from raising any policy defenses. The insured's reservation of rights letter specifically referred to coverage defenses, including an "extensive list" of the possible candidates, and described a possible conflict of interest. The insured wasn't prejudiced by the representation of the attorney chosen by the insurer. Therefore, there could be no estoppel.

Turning to the coverage question, the Court described the problem of junk faxes which the Congress intended to address in passing the TCPA. The statute is "clearly within the class of remedial statutes which are designed to grant remedies for the protection of rights, introduce regulation conducive to the public good, or cure public evils," the Court found. In other words, the penalty wasn't intended to punish senders of junk faxes; it was intended to stop the practice entirely. The penalty had the additional purpose of giving private plaintiffs an incentive to sue under the statute, the Court noted. The Court specifically acknowledged that in finding that the TCPA penalty was remedial and thus insurable, it was widening the split in the lower courts on the question. So don't be surprised if this issue winds up before the U.S. Supreme Court in the next three to five years.

• Print
• Comments
• Trackbacks
• Share Link

How is a worker's lump-sum settlement for a disabling injury -- a payment meant to compensate for lost income for the remainder of the worker's expected working life -- treated for purposes of calculating the non-custodial parent's child support obligation?  On Thursday, the Illinois Supreme Court unanimously held in In re Marriage of Mayfield that such payments are presumptively treated like any other form of income; the non-custodial parent's guideline support obligation is 20% of the total settlement. Our detailed summary of the facts and lower court rulings in Mayfield is here.  Our report on the oral argument is here.

The parties married in 1995. After having two children, they divorced in 2003. At the time, the father was ordered to pay weekly child support. One year later, he sought a modification in his obligation, alleging that he'd been laid off. The mother responded with a petition for a rule to show cause, arguing that the father was in arrears. The mother's petition was granted, and the father's obligation was increased. Two additional motions to modify were filed in 2009 and 2011 -- the first by the father, the second by the mother. During a hearing on the 2011 petition, the father admitted he had received a lump sum workers compensation settlement four years earlier, following a disabling injury. The settlement had come to nearly $240,000 after deducting fees and expenses, but between 2007 and 2011, the father had spent most of the money.

Section 505(a) of the Illinois Marriage and Dissolution of Marriage Act provides that the benchmark calculation for support of one child is 20% of the supporting party's net income. The guidelines apply unless the Court finds that a deviation is appropriate in the best interests of the child, determined in light of several enumerated statutory factors, such as the resources and needs of the noncustodial parent, and the standard of living the child would have had if the marriage had continued. If the court varies from the guidelines, it must state the guidelines amount and provide a reason for the variance.

Before the Circuit and Appellate Courts, the father argued that applying the guidelines would be patently unfair under the circumstances in Mayfield. The settlement was intended to represent lost income for the remainder of his expected working life, he pointed out, but the minor child had only a few years left before attaining her majority. Both courts disagreed, holding that the guidelines calculation should apply to the full amount.

In a unanimous opinion by Justice Mary Jane Theis, the Supreme Court affirmed. The father relied primarily upon In re Marriage of Wolfe. In Wolfe, the court had held that directing payment of 20% of a lump-sum settlement constituted a deviation from the guidelines where the settlement represented far more years of lost wages than the minor daughter had until attaining her majority. Since the Circuit Court didn't explain the deviation, such an order was by definition an abuse of discretion. But the Supreme Court held that Wolfe turned the Dissolution Act on its head, treating the Circuit Court's refusal to deviate as itself being a deviation. Wolfe was wrongly decided, the Court held, and it was overruled.

In the end, the Court found, the case was determined by a simple application of the statute. The father was seeking a deviation from the guidelines. He hadn't presented evidence supporting any of the statutory factors supporting a deviation. Therefore, none was permitted.

Ultimately, the Mayfield opinion doesn't mean that a lifetime lump-sum settlement can never lead to a deviation from the guidelines. Rather, it means that such a settlement doesn't by definition trigger a deviation. Such settlements are treated like any other form of income -- the trial court's discretion to deviation from the statutory 20% guideline is governed by the statutory factors.

• Print
• Comments
• Trackbacks
• Share Link

As I’ve written elsewhere, the Illinois Supreme Court tends to be what appellate attorneys call a “hot bench,” with questions potentially coming from any or all of the Justices in any given argument. With the May term having begun this morning with the argument in Relf v. Shatayeva, let’s take an early look at the question patterns for the first two terms of 2013.

In January and March, the Court heard argument in a total of eleven civil cases (only nine appellees made appearances however, slightly skewing the numbers). Not surprisingly, the level of questioning from the Justices varies widely from case to case – from a high of 34 questions in Mayfield v. Mayfield and 27 in VC&M v. Andrews, to lows of 8 each in DeHart v. DeHart and Russell v. SNFA. The same is true of individual Justices: each Justice has been active in some cases and less so in others. With only two of the eleven cases decided so far, it’s too early to attempt to draw even tentative conclusions about question patterns and decisions, but – again not surprisingly – the two cases already handed down are the ones that drew the fewest questions from the Court: DeHart and Russell.

Before presenting the data, one caution: as most appellate court watchers around the country know, counting questions in an oral argument is a somewhat subjective process. For example, when a Justice begins a question, counsel interposes a few words, and the Justice then continues or clarifies the point, is that one question or two? For that reason, another analyst’s numbers might vary slightly from those below, but the patterns should be the same. The chart below lists total questions to each party from each Justice in civil cases in the January and March terms. The numbers in parentheses show the number of times each Justice asked the first question of counsel.

Justices	Burke	Garman	Freeman	Kilbride	Thomas	Karmeier	Theis
Appellant	12 (1)	17 (2)	19 (3)	4	35 (4)	12	12 (2)
Appellee	11 (1)	14 (2)	1	7 (1)	17 (4)	2	10 (1)
Rebuttal	0	1 (1)	0	0	10	6 (2)	11 (1)
Total	23 (2)	32 (5)	20 (3)	11 (1)	62 (8)	20 (2)	33 (4)

• Print
• Comments
• Trackbacks
• Share Link

Few issues have sparked so much debate in so many local governments then how to regulate the medical marijuana industry. Proponents have filed numerous challenges to various attempts by cities and counties, but now the legal, if not the political issue, has been resolved. In the lead case – City of Riverside v. Inland Empire Patient’s Health & Wellness Center, Inc. – the unanimous Supreme Court has confirmed the power of local authorities to regulate, and even ban, facilities that distribute medical marijuana. The Court noted that the Compassionate Use Act of 1996 and the Medical Marijuana Program simply “removed certain state law obstacles from the ability of qualified patients to obtain and use marijuana for legitimate medical purposes.” This is not a mandate that such facilities must be allowed, nor an attempt by state government to dominate the field, and therefore these state laws do not preempt the constitutional right of cities and counties to exercise their police powers to regulate such facilities, or even ban them. As such, the City of Riverside ordinance which declares all marijuana dispensaries as a banned public nuisance, and which also bars any use which violates federal or state law, is valid. This limited view of these state laws as being “incremental steps” to increase access to medical marijuana, rather than signaling a more expansive reform, is wholly consistent with the Court’s previous ruling in Ross v. RagingWire Telecommunications, Inc. (2008) 42 Cal.4th 920, in which the Court held that the medical marijuana laws did not protect a medical user from being discharged after failing a drug test.

As a result of this ruling, local debates will not necessarily be limited to how to best implement medical marijuana dispensaries. Now, medical marijuana proponents may have to defend the policy of allowing such dispensaries at all, city by city, county by county. However, establishing the power of local authorities to act goes a long way to allowing some resolution to take place. For example, an attempt by Los Angeles to regulate dispensaries in 2010 drew 66 lawsuits and a court injunction, with many of the suits challenging the city’s authority to act. (See, Los Angeles Times, 5/10/13.) Los Angeles was so shell shocked by this debate that it now has three separate measures on the ballot for the upcoming election, each proposing a different set of regulation and taxation policies for dispensaries, in the hopes that the public picks one with sufficient support to at least put some policy in place. However, now that the right to act has been confirmed, perhaps even Los Angeles will be able to reach a decision.
 

• Print
• Comments
• Trackbacks
• Share Link

An update on last week’s post on Performance Marketing Association, Inc. v. Hamer: with the posting of the Court’s docket book for the May term, we learned that the oral argument in Performance Marketing has been continued from May 16 to the 9:00 a.m. sitting on Wednesday, May 22^nd.

Although it is virtually certain to go unmentioned, the oral argument in Performance Marketing will take place against the backdrop of U.S. Senate approval of the Marketplace Fairness Act of 2013, which would grant states the authority to require online and catalog retailers to collect sales taxes on sales to in-state buyers, so long as the states have simplified their sales tax laws in one of several ways, and the online merchant has gross annual receipts from nationwide online sales in excess of $1 million. According to news reports, the prospects for passage of the MFA in the House are uncertain.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the oral arguments at the Illinois Supreme Court during the May term concludes with Performance Marketing Association, Inc. v. Hamer. PMA will be heard by the Court during the 9:00 a.m. session on Thursday, May 16.

PMA arises from an amendment to the Illinois Use Tax Act known as the “Click-Through” Act or the “Amazon tax.” Here’s how it works: everyone has seen third-party advertisements on high-traffic websites, inviting visitors to click on the ad to get more information about a product or special deal. Typically, the third-party advertiser pays the owner of the website based on the number of people who “click through” and buy something. And that’s the nexus that the “Click-Through” Act is based on – any website that has one or more contracts with such advertisers who are “located in Illinois” is defined as a “retailer maintaining a place a business in this State.” And that means that as long as the website realizes $10,000 a year in gross receipts from “click-through” commissions, the site has to charge users for state sales taxes.

The Performance Marketing Association is a nonprofit trade association incorporated in Delaware. It’s the largest trade association in the country representing the “performance marketing” industry – businesses who use marketing methods similar to the internet “click-through” ad. Performance marketing has become relatively commonplace; according to the complaint, there are over 200,000 online publishers nationwide, and over 5,000 advertisers using or supporting performance marketing arrangements.

After the Illinois statute was passed, the PMA filed suit in Cook County Circuit Court.  In the complaint, PMA alleges that many internet-based businesses have responded to the Act by simply cancelling all contracts with Illinois publishers. As a result, the plaintiff alleges that Illinois-based publishers have lost millions, and many will go out of business. According to PMA, the “Click-Through” Act violates the dormant Commerce Clause by burdening interstate commerce and attempting to regulate non-Illinois commerce, as well as violating the federal Internet Tax Freedom Act, which bans all state taxes which target electronic commerce for special burdens. The complaint sought a declaratory judgment enjoining enforcement of the Act, as well as an award of costs and fees.

On May 7, 2012, the Circuit Court granted PMA’s motion for summary judgment, finding that (1) the Act failed the “substantial nexus” requirement for permissible regulations of interstate commerce, and therefore violated the Commerce Clause; and (2) because the Act burdened electronic commerce, it was preempted by the Internet Tax Freedom Act. Because the order struck down a statute on constitutional grounds, the State’s appeal bypassed the Appellate Court and went directly to the Supreme Court.

Not surprisingly, PMA has attracted considerable notice, including an amicus brief from the Multistate Tax Commission, the administrative agency for the Multistate Tax Compact. According to the Commission’s brief, the Act cannot be facially unconstitutional because it does not, by its terms, discriminate against interstate commerce. Nor does the Act violate the Internet Tax Freedom Act, according to the Commission, since the Act’s expanded definition of retailers subject to sales tax includes vendors who use any type of in-state representatives soliciting business on a commission basis, rather than singling out electronic publishing for special burdens.

We expect PMA to be decided in the fall.

• Print
• Comments
• Trackbacks
• Share Link

Yesterday, the Illinois Supreme Court filed its long-awaited opinion in Palm v. 2800 Lake Shore Drive Condominium Association. Although on its face, Palm relates only to the enforceability of a Chicago city ordinance on document requests to condominium associations, if the dissenters on the Court are correct, it may have long-lasting impact on the Court’s construction of home rule authority.

Palm began in 1999, when the plaintiff sent the then-current condo association board a demand for production of documents, claiming they were necessary for him to investigate possible wrongdoing in several different areas. When the plaintiff’s request was denied, he sued.

The problem in Palm was simple: which law governed, the Chicago ordinance, which gave residents a nearly unrestricted right to demand production of documents, or state law, which limited the scope of such requests and gave associations more time to respond?

After a string of motions (and three separate dismissals without prejudice), the Circuit Court held that the Chicago ordinance was a valid exercise of the City’s home rule authority. The court granted in part the plaintiff’s motion for summary judgment and ordered production of the documents plaintiff was seeking. The plaintiff then petitioned for an award of attorney fees. Although plaintiff acknowledged that he had paid his attorney $200 per hour, he submitted an expert affidavit stating that $300 was well within the market range. The court awarded the fees, approving the $300 rate, and certified the matter for immediate appeal. The Appellate Court affirmed.

In an opinion for the Court by Chief Justice Kilbride, the Supreme Court affirmed. “Home rule is based on the assumption that municipalities should be allowed to address problems with solutions tailored to their local needs,” the Chief Justice wrote. Although the General Assembly may preempt the exercise of home rule authority, it must do so expressly; the home rule clauses of the state constitution are intended to “eliminate or at least reduce to a bare minimum” instances of preemption by “judicial interpretation of unexpressed legislative intention.”

Home rule ordinances are evaluated according to a two-step test, the majority held. First, the court determines whether the disputed ordinance pertains to local government and affairs.   If so, the court then determines whether the General Assembly has preempted local power in the area. If it has not, the home rule jurisdiction may act in the area, even if the General Assembly has also legislated on the same issue.

Both sides agreed that the state statutes (the General Not For Profit Corporation Act and the Condominium Property Act) and the city ordinance at issue in Palm were completely irreconcilable. In the defendant’s view, that was enough to doom the ordinance as a permissible exercise of home rule authority, but the Court disagreed. Even though it was impossible to comply with both the state and city statutes, since the General Assembly had not expressly preempted home rule authority as part of the statutes, the city ordinance governed, and the plaintiff had a right to the documents he sought.

The majority then turned to the lower court’s attorney fees award. According to the city ordinance, plaintiff was entitled to recover “his reasonable attorney fees.” Construing the phrase as referring to whatever the local market rate was, the Court held that the plaintiff could legitimately recover an award of $300 per hour, despite having paid his attorney only $200 per hour. The Court rejected defendant’s argument that this was an unjustified windfall, pointing to testimony that the plaintiff would receive reimbursement only for his actual payments, and the attorney would retain the rest.

Justice Thomas filed a special concurrence in order to directly respond to the dissent. He began by sharply disputing the dissent’s conclusion that the city ordinance was invalid because it didn’t relate to the City’s local government and affairs, pointing out that not only hadn’t the defendant raised the argument, it had criticized the City of Chicago (which had intervened below to defend its ordinance) for even mentioning it. Even though the issue was not properly before the Court, Justice Thomas argued that the ordinance was well within the scope of home rule power. “[T]he dissent’s arguments,” he wrote, “show that, without a doubt, the dissenting justices are simply not comfortable with the system of home rule established by the Illinois Constitution.” As for the dissent’s objections to requiring the General Assembly to recite “magic words” before the Court would find local law preempted, Justice Thomas argued that the requirement came from the constitution, the Court’s own precedents, and the General Assembly itself. “If the legislature wants this to be an area of exclusive state control,” Justice Thomas concluded, “then the legislature can make it such with a single sentence.”

Justice Charles Freeman filed a lengthy dissent, with Justice Anne Burke joining. According to the dissenters, the decision “marks an unnecessary departure from settled law in two important areas – home rule jurisprudence and condominium law.”

Even though the defendant hadn’t challenged the ordinance on the grounds that it didn’t pertain to local government and affairs, the dissenters argued that the Court must address the issue, and it was in fact dispositive. The test, they wrote, for determining “whether a particular problem is of statewide rather than local dimension” involved considering “the nature and extent of the problem, the units of government which have the most vital interest in its solution, and the role traditionally played by local and statewide authorities in dealing with it.”

The legislative debates surrounding the Condominium Property Act made it clear, the dissenters argued, that the General Assembly considered the issue of demands for documents served on condominium associations to be a statewide problem requiring a statewide, uniform solution.  Since the City ordinance at issue did not pertain to local government and affairs, it exceeded the scope of permissible home rule and was unenforceable. And even if the City ordinance were enforceable, Justices Freeman and Burke disagreed with the majority’s ruling with respect to attorney fees too. Since the ordinance authorized the homeowner’s recovery of “his reasonable attorney fees,” the dissenters concluded that it merely authorized recovery of what the homeowner had paid, and no more.

The dissent closes with a call for legislative intervention: "Given the importance of balancing the rights of individual condominium owners against the right of association members as a whole, I urge the General Assembly to take action in this area."

• Print
• Comments
• Trackbacks
• Share Link

On Tuesday, the Illinois Supreme Court announced its oral argument calendar for the May term, and it includes arguments in five civil cases. The cases, with the questions presented in each, are:

Wednesday, May 15:

• Relf v. Shatayeva, No. 114925 - Where a plaintiff files suit, unaware that defendant had died more than six months earlier, may the plaintiff substitute the defendant's personal representative, or is the action barred? Our detailed summary of the facts and Appellate Court opinion in Relf is here.

Thursday, May 16:

• Evanston Insurance Co. v. Riseborough, No. 114271 - Does the statute of repose for actions against attorneys “arising out of an act or omission in the performance of professional services” apply only to actions for professional negligence brought by a former client of the attorney? Our detailed summary of the facts and Appellate Court opinion in Evanston Insurance is here.

Wednesday, May 22:

• The Board of Education of Peoria School Dist. No. 150 v. The Peoria Federation of Support Staff, Security/Policemen’s Benevolent and Protective Association Unit No. 114, No. 114853 -- (1) Are the 2010 amendments to the Public Labor Relations Act unconstitutional special legislation? (2) Are plaintiff's negotiations with its security officers governed by the Education Labor Relations Act or the Public Labor Relations Act? Our detailed summary of the facts and Appellate Court opinion in The Board of Education is here.
   
• Prazen v. Shoop, No. 115035 – Did the Board of Trustees of the Illinois Municipal Retirement Fund exceed its powers by ordering the plaintiff's age enhancement and creditable services pension enhancements forfeited when the company he owned entered into a services contract with his former employer? Our detailed summary of the facts and Appellate Court opinion in Prazen is here.

The final case on the Court’s civil docket for this term is Performance Marketing Association, Inc. v. Hamer, No. 114496, a direct appeal from the Cook County Circuit Court of that Court’s order granting summary judgment and striking down the state internet “click-through” tax law as a violation of the Commerce Clause. We’ll have much more to say about Performance Marketing in our preview of the argument tomorrow.

Each of the Court’s sessions will begin at 9:00 a.m.

• Print
• Comments
• Trackbacks
• Share Link

(Note: The following post was originally published on Law360.com on January 24, 2013.)

Reviewing the videotape of every civil oral argument at the Illinois Supreme Court, as I do for my firm's blog The Appellate Strategist, you can't help but be impressed by the collegiality of the Illinois Supreme Court. At many courts of last resort, counsel is never entirely sure whether some of the more pointed questions are intended for counsel him- or herself, or instead directed at one of the other justices, either as an attempt to persuade or to challenge. None of that is evident watching the Illinois Supreme Court's arguments.

To be sure, the Court is nearly always a "hot bench," as appellate lawyers say; questions can come from any, and sometimes from all directions. But the Court's questions always show a deep grasp of the record and a concern not merely for the implications of the legal rule at issue for future cases, but for doing justice in the case before the Court. And in the Court's opinions, the occasional sharply worded dissent stands out all the more for how unusual it is in the Court's jurisprudence.

The Kilbride Court began in Illinois a little more than two years ago, when Chief Justice Thomas L. Kilbride succeeded Chief Justice Thomas R. Fitzgerald, and Justice Mary Jane Theis joined the Court, taking the retiring Chief Justice's seat. In the twenty-six months since, the Court has decided eighty civil cases (disregarding attorney disciplinary and juvenile matters).

In reviewing those cases, one statistic leaps out, confirming the impression of a highly unified court: 67.5% of the Court's civil decisions have been unanimous. Significant dissent is rare: 12.5% of the Court's decisions have had one dissenter, 12.5% have had two, and only 7.5% have involved a 4-3 split. But this overall measurement masks trends in the Court's terms; for 2012, only 56.4% of the Court's decisions have been unanimous. Before the Court decided nine of its last twelve civil cases of 2012 unanimously, the Court had decided only 48.1% of its 2012 civil cases without dissent. During that same uncharacteristically contentious period, 37.0% of the Court's decisions featured two or three dissenters.

Perhaps the most frequently cited statistic among U.S. Supreme Court watchers is the reversal rates for the Federal Circuits. Indeed, those statistics have become something of a political football, with some Senators arguing that the Ninth Circuit's reversal rate suggests an ideological conflict between the Ninth Circuit and the Supreme Court. So what are the reversal rates in Illinois?

The overall numbers are not surprising. Most appellate lawyers know that appellate courts of last resort typically do not review lower courts' decisions in order to affirm. The Illinois Supreme Court is no different; over the past two years, the Court has reversed in 66.2% of its civil cases.

But trends emerge when we consider the individual districts. Nearly half of the Kilbride Court's civil docket -- 43.8% -- has come from Chicago's First District. The First hasn't fared well; five of the six Divisions have a reversal rate of 60% or more, topping out with an 85.7% reversal rate in the Division Two. The First District has had a particularly rough 2012, with a 76.5% reversal rate. The Fifth District, which includes Madison and St. Clair Counties, both sharply criticized as pro-plaintiff environments for tort cases in recent years by the American Tort Reform Foundation, has seen 80% of its civil decisions reversed by the Supreme Court. Two other Districts are similar: two thirds of the decisions reviewed from the Second and Third Districts have been reversed.

But the anomaly comes from the Fourth District, which centers on the state capital of Springfield. The Court has heard eight civil cases from the Fourth District, four involving government parties. In six of those eight cases (including three government wins) the Supreme Court has affirmed: an impressive 75% affirmance rate.

To learn more about the Justices' inclinations, we calculate the average votes gained by each Appellate Court's opinions before the Supreme Court. The First and Second Divisions of the First Districts have fared badly, with their opinions gathering an average of only 1.4 votes - including seven unanimous reversals (usually regarded as the ultimate indignity except at the Kilbride court, which has reversed unanimously in 43.8% of its civil cases). The Fifth and Sixth Divisions of the First District have done significantly better, with their opinions gaining an average of 3.5 and 2.1 votes, respectively, although the Fifth Division’s figure is skewed – its four cases have seen two unanimous affirmances and two unanimous reversals. The Fourth District, with its 75% affirmance rate, gets an average of 3.4 votes per decision.

Discerning swing votes in a Court so often in complete agreement is difficult, but interesting patterns do emerge. Justice Robert R. Thomas, for example, has voted with the majority in 94.8% of all the Kilbride Court's civil cases. Justices Rita B. Garman and Anne M. Burke are on the winning side nearly as often, voting with the majority 93.8% of the time. Justices Lloyd A. Karmeier and Mary Jane Theis are right behind, voting with the majority 93.6% and 93.3% of the time. Only Chief Justice Kilbride lags behind, voting with the majority "just" 80.0% of the time.

When we limit the sample to non-unanimous cases, our conclusions are further confirmed. Justice Thomas has voted with the majority in 83.3% of all non-unanimous civil decisions. Justices Garman, Burke and Karmeier have voted with the majority in an identical 80.8% of all cases. Close behind is Justice Theis, with 79.2% agreement with the majority. Most often finding themselves in the minority of divided Courts are Justice Charles E. Freeman, who votes with the majority in only 63.0% of all non-unanimous civil cases, and Chief Justice Kilbride, who does so only 42.3% of the time.

Justice Thomas' influence shows up again when we analyze the composition of the Court's occasional closely divided decisions. To date, the Kilbride Court has handed down sixteen decisions with two or three Justices dissenting. Justice Karmeier has voted with the majority in 12 of those 16 decisions – 75%. Justices Thomas, Garman, Burke have voted with the majority 68.8% of the time, and Justice Theis in 62.5% of the cases. On the other hand, Chief Justice Kilbride and Justice Freeman have joined the majority in only 50% of those closely divided decisions. This data suggests the outline of a voting block on the Court, with a solid core of Justices Thomas, Garman and Karmeier, with Justice Burke and Justice Theis serving as the swing votes in close cases.

Join me below the jump for more data on the Court's voting patterns. 

Continue Reading...

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court just announced that on Thursday morning, it will file its opinion in Palm v. 2800 Lake Shore Drive Condominium Association, a dispute over an owner’s right to compel the production of documents by his condominium association. Read the opinion of the Appellate Court for the First Appellate District (Division Five) here. Our summary of the Appellate Court opinion is here. The question presented in Palm is:

• Are the provisions of the Chicago Condominium Ordinance giving the right to compel production of documents, and authorizing interim awards of attorneys' fees, preempted by purportedly conflicting state law?

• Print
• Comments
• Trackbacks
• Share Link

Earlier this month, the Illinois Supreme Court accepted a rare direct appeal, agreeing to wade into the politically charged battle over state employee pension rights. The Court ordered the consolidated appeals in Kanerva v. Weems transferred from the Appellate Court directly to the Supreme Court.

Kanerva is a consolidated case arising from four putative class actions originally filed in Sangamon, Madison and Randolph counties. All four class complaints challenge 2012 amendments to the State Employee Group Insurance Act, which instruct the Director of the Department of Central Management Services to allocate the cost of health insurance premiums between the State and its employee-retirees. The Director of CMS is directed to make that determination based on the actual cost of medical services adjusted for age, sex and geographic and demographic characteristics. 5 ILCS 375/10(a). The 2012 amendments to the Act were passed in response to Illinois' ongoing budget crisis.

The putative class representatives bring various challenges to the 2012 amendments. All argue that the amendments violate the Pension Protection Clause of the Illinois constitution, which provides that "Membership in any pension or retirement system of the State, and unit of local government or school district, or any agency thereof, shall be an enforceable contract relationship, the benefits of which shall not be diminished or impaired." Illinois Constitution, Article XIII, Section 5. Two plaintiffs argue that the law violates Article I, Section 16 of the state Constitution: "No . . . law impairing the obligations of contracts . . . shall be passed." One alleges that the statute is an unconstitutional delegation of legislative authority to the Director of CMS. One seeks an award of money damages, and three of the four seek to enjoin enforcement of the 2012 amendments.

The Sangamon County Circuit Court allowed defendants' motions to dismiss all four complaints. With respect to the Pension Protection Clause, the court held that since health benefits are not actuarially predictable (in contrast to pension benefits, which are akin to an annuity), they are not analogous to pension benefits, and not covered by the clause. The Court rejected the challenges under the Contracts Impairment Clause, holding that since it was foreseeable that the terms and conditions of the group insurance plans would change yearly, no enforceable contractual rights were vested in retirees.

The court rejected the separation of powers challenge, holding that the statute had a clear legislative purpose, identified the persons covered, provided the means for the agency to meet the purpose of the statute, and appropriately limited the agency's discretion. Finally, the Court dismissed the claims of one class plaintiff who sought damages, holding that such claims must be brought first in the state Court of Claims.

The Supreme Court seems likely to hear arguments in Kanerva before the end of 2013. A decision should be handed down three to six months after the oral argument.

• Print
• Comments
• Trackbacks
• Share Link

On Thursday morning, the Illinois Supreme Court filed its decision in Russell v. SNFA. We were watching Russell closely here at Appellate Strategist because it was the Court's first opportunity to apply the United States Supreme Court's decision in J. McIntyre Machinery, Ltd. v. Nicastro. In Nicastro, a plurality of the high court held that merely placing a product into the stream of commerce with the expectation that it would ultimately reach the forum state was not enough to trigger personal jurisdiction over the manufacturer. Our report on the Russell argument is here.

Russell arose from a helicopter crash in Illinois. The decedent's estate sued, alleging that one of the helicopter's tail rotor drive-shaft bearings had failed, fracturing the drive shaft, making the tail rotor inoperable, and leading to the crash. SNFA made the custom bearings.

The helicopter that crashed was built in Italy by Agusta, an Italian company that was unrelated to SNFA. The helicopter had been sold multiple times during its life, as aircraft often are -- first to a German company, then to Metro Aviation in Louisiana, and finally to Air Angels in Cook County Illinois. None of these companies had anything to do with SNFA either. Metro -- the Louisiana company - had replaced several of the bearings with SFNA replacement parts, but they didn't get them directly from SNFA. The replacements were sold by SNFA to Agusta in Italy, sold again to Agusta's American subsidiary, and then to Metro in Louisiana. Indeed, although SNFA did have three U.S.-based customers for its aerospace bearings, it sold no helicopter bearings in the U.S. at all.

The trial court held it had no personal jurisdiction over SNFA, noting that SNFA's only apparent contact with Illinois had been a single visit to an entirely different customer for an entirely different product. The Appellate Court reversed, holding that SNFA knew that Agusta sold its helicopters in the United States, and since SNFA's bearings were custom made, Agusta's U.S. subsidiary essentially was SNFA's American distributor. The Illinois Supreme Court tossed the case back in the Appellate Court's lap when Nicastro came down, but not long after, the Appellate Court reversed again, holding that Nicastro made the Court even more certain it was right.

On Thursday morning, a 5-1 majority of the Supreme Court affirmed in an opinion by Chief Justice Kilbride. Although the majority agreed that Illinois lacked general jurisdiction over SNFA - meaning that it could have adjudicated any claim against the company, regardless of whether it was related to Illinois or not - the state did have specific jurisdiction, the majority found. Specific jurisdiction, the majority noted, "requires a showing that the defendant purposefully directed its activities at the forum state and the cause of action arose out of or relates to the defendant's contacts with the forum state."

Much of the decision in Russell turns on the Court's construction of recent personal jurisdiction cases from the United States Supreme Court. According to the Court, the high court had held in World-Wide Volkswagen Corp. v. Woodson that a manufacturer may be subjected to liability where it delivers a product into the stream of commerce with the expectation that the product would be purchased in the forum state. On the other hand, in Asahi Metal Indus. Co., Ltd. v. Superior Court, the court had divided between Justice O'Connor's plurality, holding that jurisdiction required not only delivery into the "stream of commerce" but something more - an affirmative act seeking to reach and serve the forum market - and Justice Brennan's concurrence, arguing that merely placing a product into the stream of commerce with the expectation that it would reach the forum was enough. According to the majority in Russell, Nicastro had clarified the situation almost not at all. Although the plurality had certainly endorsed Justice O'Connor's view, Justice Breyer's concurrence, the majority insisted, had refused to adopt Justice O'Connor's Asahi opinion, resting on the stream-of-commerce theory from World Wide Volkswagen. So the majority concluded it couldn't adopt either the Brennan or the O'Connor theory of personal jurisdiction - and it didn't have to, since SNFA lost under either theory.

The sole market for the custom-made ball bearings SNFA made for Agusta, according to the majority, was Agusta's helicopters. Since SNFA had no U.S. customers for the bearings themselves, its only way of reaching the U.S. market was through Agusta's sales of helicopters containingthe bearings. This was sufficient to qualify under Justice Brennan's theory.

And there was "something more" sufficient to satisfy Justice O'Connor, according to the Court. SNFA had had an ongoing relationship since 1997 with Hamilton Sunstrand in Rockford, Illinois.  SNFA had never sold Hamilton Sunstrand so much as a single one of the helicopter ball bearings it made for Agusta; it sold Hamilton an entirely different product - bearings for fixed-wing aircraft and airplanes. In fact, SNFA had sold Hamilton nearly a million dollars worth of these bearings, and the record contained "hundreds" of invoices listing Rockford, Illinois as the purchasing location (and San Diego, California as the delivery location).

SNFA argued that even if the Hamilton Sunstrand relationship "counted" for purposes of jurisdiction, since the plaintiff's claim was specific rather than general jurisdiction, the claim still had to arise out of the contacts for jurisdiction to attach - and it clearly didn't. Not so, the majority held; the standard was "lenient or flexible." There was no basis for distinguishing between varieties of bearings, and besides, all conflicts in the evidence were construed in favor of the plaintiff at this point. So bottom line, SNFA's sales through Agusta were enough to find specific jurisdiction in Illinois.

Join me below the fold for a review of Justice Garman's dissent, and some initial thoughts on what it all means.

 

Continue Reading...

• Print
• Comments
• Trackbacks
• Share Link

(Note: The following post was originally published on Law360.com on January 15, 2013.  On Thursday, April 18, the Court's decision in Russell v. SNFA, which is referred to in the final sentence of the post, was handed down.  Join us back here this weekend for a detailed analysis of Russell and its possible implications for the future of Illinois business.)

During 2012, the Illinois Supreme Court filed seventy-one written opinions, thirty-nine in civil cases. Although the total opinion output was down somewhat from recent years, this represents the Court's highest number of civil decisions since 2009.

All in all, 2012 was a reasonably good year at the Court for the business defense bar. With a few notable exceptions we'll review below, the Court turned back attempts to expand the scope of several torts and strengthened trial courts' power to control abusive practices. The Court gave expansive interpretations to government immunities and rejected an attempt to create long-tail liabilities for dissolved corporations. The Court also gave important protection to the attorney-client privilege in the context of routine business negotiations.

Narrowly Defining Torts. Choate v. Indiana Harbor Belt Railroad Co. arose from an injury to a twelve-year old boy who tried to jump aboard a slow-moving freight train. Illinois landowners have long been subject to a limited duty to minor trespassers. In determining whether a duty exists, the courts have applied a four-factor test, including whether children are incapable of appreciating the risk involved.

The Supreme Court's opinion finding no duty in Choate is important for several reasons. First, the Court brought Illinois in line with a number of jurisdictions around the country, holding that a moving train is an open and obvious danger to children. Second, the Court held that the test was an objective one for the court, not for the jury, thereby making similar cases subject to summary disposition. Third, the Court recognized that the burden to defendants of avoiding such accidents is often tremendous.

Illinois courts have narrowly defined any duty to preserve evidence, usually insisting on two things: special circumstances and foreseeability. In Martin v. Keeley & Sons, the Court rejected an attempt to turn that limited duty into a significant burden on business. Martin involved personal injuries which occurred when an I-beam collapsed at a construction site. The day after the accident - long before the plaintiffs sued the manufacturer - the plaintiff's employer ordered the beam destroyed. One by one, the Court rejected propositions which would have created satellite litigation in a host of personal injury cases. Mere possession does not mandate preservation. Nor did defendant's status as plaintiff's employer create a duty. Nor did the likelihood of plaintiffs' injuries ending in litigation against someone mandate a duty.

Bonhomme v. St. James arose from a fraudulent Internet-based relationship which the defendant allegedly maintained with the plaintiff for nearly two years while posing as a man. The complaint alleged a single claim for fraudulent misrepresentation. As the Court pointed out, the tort of fraudulent misrepresentation has its roots in common law deceit, a narrow tort limited to business and financial transactions. The Court properly refused to expand the tort to the parties' "purely personal" relationship, thus avoiding a potential avalanche of lawsuits arising from the normal rough-and-tumble of daily life.

Nevertheless, there were missteps this year. The Court's most troubling decision was Doe-3 v. McLean Co. Unit Dist. No. 5. Doe-3 arises from a teacher's sexual abuse of two children. The claims at issue were not against the plaintiff children’s school, but rather against the teacher's previous employer - principally that the defendants had negligently completed a verification of employment form, failing to disclose the teacher's disciplinary suspensions during the school year. The majority held that these allegations adequately stated a duty of care.

Justice Lloyd Karmeier filed a compelling dissent, joined by Justice Mary Jane Theis. The dissenters criticized the weakest point of the majority's opinion, questioning how it could be reasonably foreseeable that anyone would rely on a routine verification of employment form as the sole indicator of a potential teacher's character and conduct. The dissenters pointed out that the amorphous duty conjured up by the majority all but moots a long-standing line of authority holding that there is no private right of action for failure to report under the state's Abused and Neglected Child Reporting Act. The Court characterized the majority's theory as a duty to report misconduct by inference - a duty to report facts which might (or might not) lead the defendant to uncover misconduct.

The potential for mischief in Simpkins v. CSX Transportation depends on further litigation. The plaintiff alleged that she had contracted mesothelioma from inhaling asbestos brought home on her former husband's person and work clothes. As Justice Charles Freeman pointed out in dissent, the first medical studies of bystander asbestos exposure were published in 1965. Given that plaintiff's former husband left the defendant's employ in 1964, that should have been the end of the matter, with no foreseeability found as a matter of law - the conclusion courts in several other jurisdictions have reached. Unfortunately, a majority of the Court remanded the case to allow the plaintiff to attempt to plead sufficient facts to support the complaint's conclusory allegation that harm to plaintiff was somehow foreseeable.

Strengthening Tools for Fighting Abuse. The Court also strengthened two important tools for trial courts to control procedural abuse in 2012. Fennell v. Illinois Central Railroad Co. involved allegations that the plaintiff had been exposed to asbestos during nearly four decades of employment. The case had virtually no connection to Illinois at all; the plaintiff was from Mississippi, he worked in Mississippi and nearby states, and the plaintiff's treating physicians and family lived in and near Mississippi too.

The Supreme Court would have created significant problems for defense counsel if it had affirmed the trial and Appellate Courts and declined to dismiss. But not only did the Court reverse, the majority made several important points. "Decent judicial administration cannot tolerate forum shopping" as a legitimate reason for keeping litigation where it clearly doesn't belong, the Court wrote. Indeed, combating forum shopping is one of the concerns animating forum non conveniens law. The majority also insisted that trial courts should evaluate all of the public and private factors found in the caselaw in every case - including the often overlooked issue of the practicality of a possible jury view of the premises (whether one seems likely or not).

Mashal v. City of Chicago posed another important question: when does the trial court lose the power to decertify a class? Under Illinois law, the answer is once the court has made a decision on the merits. Mashal was a good example of why the phrase "decision on the merits" should be narrowly defined -- the only common question in the case had been litigated and decided relatively early on, obviating any need to proceed as a class.

Mashal could have easily resulted in a circular ruling: the plaintiffs argued that the order adjudicating the common question was itself a "decision on the merits," ending the power to decertify. Had the Court accepted that argument, courts might have been stuck with class adjudication in some cases long after the justification had ended. But the Court unanimously affirmed the Appellate Court, holding that a "decision on the merits" occurred quite late in the litigation process, when a "complete determination of liability" is made.

Continue Reading...

• Print
• Comments
• Trackbacks
• Share Link

In the final days of the March term of the Illinois Supreme Court, the Court allowed a petition for leave to appeal in The Board of Education of Roxana Community Unit School District No. 1. v. The Pollution Control Board, et al. Board of Education poses the question: can the challenger to a petition for certification of a system as a pollution control facility appeal directly to the Appellate Court after losing at the Illinois Pollution Control Board?

In October 2010, the respondent submitted 28 separate applications to the Illinois Environmental Protection Agency, seeking certification of various systems, methods, devices and facilities as "pollution control facilities" as defined by the Property Tax Code. If the applications were granted, the Department of Revenue would supplant Madison County as the taxing authority. In August 2011, the Illinois Environmental Protection Agency recommended approval of two of the requests. The following month, the Pollution Control Board accepted the recommendations and certified the two systems. The petitioner School Board moved for reconsideration, and a few weeks later, the Agency recommended approval of the remaining requests for certification. The Pollution Control Board denied the motion for reconsideration, and denied the petitioner's motions to intervene in the remaining 26 requests for certification. The petitioner appealed the Pollution Control Board's decisions directly to the Appellate Court.

On appeal, the petitioner contended that the Appellate Court had jurisdiction over the appeal pursuant to the Environmental Protection Act, 415 ILCS 5/41(a).   The Board contended that appellate review was possible only under the Property Tax Code, 35 ILCS 200/11-60, which limited appeal rights to applicants, not challengers.

The Appellate Court dismissed the appeal for lack of jurisdiction. Reaffirming Citizen Against the Randolph Landfill (CARL) v. The Pollution Control Board, the Court held that review must begin at the Circuit Court, rather than reaching the Appellate Court in the first instance. Allowing a party adversely affected by a final order of the Board to directly appeal the matter to the Appellate Court would render Section 11-60 of the Property Tax Code - providing only limited appeal rights -- meaningless, the Court held.

Justice Thomas R. Appleton dissented, arguing that the Environmental Protection Act, 415 ILCS 5/41(a) gave the right to appeal to anyone "who filed a complaint on which a hearing was denied." The Appellate Court should "avoid attributing to the legislature an intent to deny judicial review to a local governmental entity when the Board's allegedly unjustified certification of a facility as a pollution-control facility deprives the local governmental entity of a substantial portion of its tax base," Justice Appleton argued.

• Print
• Comments
• Trackbacks
• Share Link

In the final days of the March term, the Illinois Supreme Court granted review in Home Star Bank & Financial Services v. Emergency Care & Health Organization, Ltd., which poses the question of whether physicians qualify for immunity under the Good Samaritan Act when they were paid by their physician groups to provide emergency care in a hospital.

The defendant physician was employed in the emergency department of the hospital. He responded to a "Code Blue" for the patient, who was being cared for on another floor. The defendant attempted to intubate the patient, but complications ensued, and the patient suffered permanent brain injury.

The guardians of the patient filed suit against the physician and his group, alleging negligence. The defendant moved for summary judgment, arguing that the physician and his employer were immune from liability under the Good Samaritan Act, 745 ILCS 49/25, which provides that any physician "who, in good faith, provides emergency care without fee to a person, shall not, as a result of his or her acts or omissions, except willful or wanton misconduct on the part of the person, in providing the care, be liable for civil damages." In response, plaintiffs argued that the defendant was not a volunteer since he was compensated on an hourly basis for his services. The Circuit Court granted summary judgment, finding that the defendant's employer had never billed either the patient or his insurer for the defendant's services.

The Appellate Court reversed. The court declined to follow Estate of Heanue, where the Appellate Court held that a physician who had not billed specifically for emergency care services hadn't charged a fee within the meaning of the Good Samaritan Act, even if the physician had received some economic benefit from providing services. A physician could not be a volunteer if he or she was paid by anyone for the services provided, the Court held. The defendant was not voluntarily present at the hospital; he was paid by his physician group. "The Good Samaritan Act was meant to protect volunteers," the Court wrote. "It was never meant to be a shelter for practicing physicians who, acting in the scope of their employment, receive payment for their emergency services."

We expect Home Star Bank to be decided in the winter or spring of 2013-2014.

• Print
• Comments
• Trackbacks
• Share Link

In the closing days of the March term, the Illinois Supreme Court allowed a petition for leave to appeal in Wells Fargo Bank, N.A. v. McCluskey, a decision from the Second District reversing an order refusing to vacate a default judgment in a foreclosure suit. McCluskey presents the issue of whether a Section 2-1301(e) motion seeking to set aside the default can be granted after the sheriff's sale has occurred.

After the defendant failed to make several monthly payments on her mortgage, the plaintiff filed an action of foreclosure. The defendant defaulted. On the day set for the sale, the defendant filed a motion for an emergency stay, seeking to vacate the default and halt the sheriff's sale. The parties ultimately settled on an agreed order pursuant to which the defendant withdrew her motion, and the plaintiff agreed to postpone the sale for 75 days in order to allow the parties time to renegotiate the loan.

On the new date, the property sold to the plaintiff, who moved to confirm the sale. The defendant moved again to vacate the default, arguing that the plaintiff's supporting affidavit was insufficient, and that plaintiff lacked standing to sue. The trial court confirmed the sale, holding that the defendant had withdrawn her earlier motion to stay in return for postponement of the sale, implicitly agreeing that the sale could go forward on the postponed date absent an agreement, and she could not now rescind her agreement. The defendant appealed the order denying the motion to vacate.

The plaintiff argued before the Appellate Court that her renewed motion was timely. She denied that she had waived the right to seek a further delay. Citing Mortgage Electronic Registration Systems, Inc. v. Barnes, the defendant responded that any motion to vacate brought after the sheriff's sale was irreconcilable with Section 15-1508(b) of the Foreclosure Law regulating orders confirming foreclosure sales.

The Appellate Court rejected defendant's argument and reversed the order denying plaintiff's motion to vacate. Reaffirming its earlier decision in Merchants Bank v. Roberts, the Court held that in the "rare case" in which the defendant could present both a compelling excuse for his or her lack of diligence and a meritorious defense to the foreclosure action after the judicial sale has occurred, the trial court may vacate a default under Section 2-1301(e).

Having found that the defendant's motion was timely made, the Court then turned to the merits. The Court held that the parties' agreed order made no reference to the defendant giving up any right to bring a section Section 2-1301(e) motion. Nor did the Court find any basis for an implied waiver of the right to bring a second motion. Although a Section 2-1301(e) order is reviewed for abuse of discretion, the Court found that denying the motion based on waiver was a refusal to exercise discretion, and therefore by definition an abuse of discretion.

McCluskey should be decided by the Supreme Court in the winter or spring of 2013-2014.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court granted leave to appeal in In re Estate of Boyar to decide whether the doctrine of election applies to trusts, and, if it does, to delineate any exceptions to the doctrine. But when the Court's opinion was filed on Thursday morning, Boyar turned out to be something of a letdown: in a 6-1 opinion by Justice Lloyd A. Karmeier, the Court declined to decide either issue. Our detailed summary of the facts and lower court rulings in Boyar is here. Our report on the oral argument is here.

The decedent set up a trust to distribute his property after his death. Although the trust was amended several times, until 2010, the beneficiaries retained the right to remove the trustee. But then, in the sixth and final amendment, the power to fire the trustee was withdrawn and a new trustee - the defendant in Boyar -- was appointed.

Following the decedent's death, petitioner - one of the decedent's children - filed a challenge to the sixth amendment, arguing lack of capacity. A few weeks later, the trustee was granted a citation to recover assets belonging to the trust - at least some of which the plaintiff acknowledged that he had received. On the trustee's motion, the Circuit Court dismissed, citing the doctrine of election, and the Appellate Court affirmed.

The Supreme Court reversed. The problem was that the answer to the questions presented didn't matter:

Properly understood, the doctrine of election is triggered in the context of wills only when there are two different benefits to which a person is entitled, the testator did not intend the beneficiary to take both benefits, and allowing the beneficiary to claim both would be inequitable to others having claims upon the same property or fund.

Merely accepting property under the instrument you were challenging had never triggered the doctrine of election, the majority held. Since there weren't two alternative bequests involved, the doctrine of election couldn't apply, and there was no basis for blocking the petitioner's challenge. Interestingly, the problems with the record - what appellate judges call a case not being "a good vehicle" for deciding an issue -- had not been noticed at the Circuit Court, the Appellate Court, or even in oral argument before the Supreme Court.

Justice Anne M. Burke dissented, objecting to the Court's refusal to decide the questions presented. "[M]y concern," Justice Burke wrote, is that "this court, on occasion, loses sight of its role in the judicial system and, in issuing opinions that avoid addressing the legal question at issue, functions more like an appellate court." Declining to decide the issue presented, and "trying to limit our decision to the narrowest factual grounds, is both illogical and undermines the role this court plays in the judicial system," Justice Burke wrote.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court has announced that on Thursday morning, it will file its opinion in In re Estate of Boyar. Boyar presents the issue of whether the doctrine of election - which teaches that a party may not accept benefits under an instrument and later challenge that instrument's validity - applies to trusts. Our detailed summary of the facts and lower court holdings in Boyar is here. Our report on the oral argument is here.

• Print
• Comments
• Trackbacks
• Share Link

In addition to the more typical criminal issues, the oral arguments scheduled for April 3 and 4 in L.A. will also address when to compel arbitration, foreclosure sales and hospital peer review.

On the April 3, the court has two arbitration cases scheduled. The Supreme Court will take a second look at Sonic-Calabasas A, Inc., having previously held that contractual arbitration of a wage claim could not be compelled until after the preliminary non-binding hearing and decision by the Labor Commissioner addressing the same claim. However, the U.S. Supreme Court has since vacated that judgment and ordered further consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S.__, which upheld contractual arbitration under the FAA even when the arbitration provision was found unconscionable by state law because it barred class arbitration.

Also in an employment context, the court will address in City of Los Angeles whether grievances over imposed furloughs are subject to contractual arbitration, or whether that would be an improper transfer of the city’s discretionary salary-setting and budget-making powers.

On the next day, the court addresses two other issues, foreclosure sales and peer review. The trustee in Biancalana made an error in processing the beneficiary’s “credit bid” during foreclosure proceedings, and thereby announced a required opening bid only a tenth of the intended value. Since it had not yet issued the deed of trust to the highest bidder at the foreclosure sale when the error was discovered, can the trustee set aside the foreclosure sale?

In El-Attar, the Court will address whether the executive committee of the hospital medical staff can delegate to the hospital governing board its authority to designate a peer review panel, and if the review process needs to be restarted if it has already done so.

Look for opinions in each of these cases by July 2013, as the court typically issued opinions within 90 days of the case being submitted.
 

• Print
• Comments
• Trackbacks
• Share Link

Earlier this month, on the final day of arguments for the March term, the Illinois Supreme Court heard oral argument in Standard Mutual Insurance Co. v. Lay. Lay presents the question of whether the penalty imposed by Federal law for sending unsolicited junk faxes is uninsurable as a matter of Illinois public policy. Our detailed preview of the facts and lower court opinions in Lay is here. The video and audio of the argument is available here.

The Federal Telephone Consumer Protection Act provides that it is unlawful to send unsolicited advertisements to a fax machine. The TCPA creates a strict liability private right of action, with damages equal to actual monetary loss to the plaintiff or $500 per fax, whichever is greater. The penalty is trebled if the violation is willful or knowing. In Lay, the defendant real estate agency hired a "fax broadcaster," allegedly based on its assurances that only persons who had agreed to receive advertisements would get its blast fax. This proved to be false, and the resulting class complaint sought trebled penalties of $1,500 for each of 3,478 faxes purportedly sent. The defendant real estate agency ultimately settled the class action for more than $1.7 million.

Meanwhile, the insurer had filed a declaratory judgment action, seeking a declaration of no coverage. Following the settlement of the underlying action, the class representative became actively involved in the dec action. The insurer and the class representative filed cross motions for summary judgment, and the Circuit Court held that the insurer had no duty to defend or indemnify. The Appellate Court affirmed, holding that TCPA penalties could not be insured as a matter of public policy in Illinois, since they were in the nature of punitive damages.

Counsel for the appellant, the class representative in the underlying action, began his presentation by arguing that the Appellate Court had framed the issue incorrectly, and had therefore never reached the heart of the issue. A proper reading of Beaver v. Country Mutual Insurance Co., counsel argued, is not that the existence of coverage depends on the nature of damages or penalties. Rather, the question of coverage turns, counsel argued, on the nature of the insured's alleged conduct. Thus, the statement that punitive damages are not insurable actually derives from the proposition that the kind of conduct for which punitive damages are imposed is not insurable. Justice Thomas pointed out that in the same section of the TCPA which provides for the penalty, Congress provided for treble damages for willful and wanton conduct. He asked whether that impacted the question of whether the TCPA penalty was punitive. Counsel responded that willful and wanton conduct was an example of the sort of bad conduct which could not be insured. Because the appropriate question, according to counsel, was the nature of the conduct rather than the nature of the penalty, analysis should turn to Illinois law of punitive damages and the TCPA to see when punitive damages and penalties are applied. The insured's conduct didn't come close to the kind of conduct which triggers a finding of no coverage under the Beaver rule, counsel insisted. Justice Thomas asked counsel to comment on the appellee's allegations of collusion between defendants and plaintiffs' class action attorneys, and its concern that allowing coverage would mean that insurers are often left "holding the bag." Counsel responded that there was no indication of such a thing in the record, and the appellee's concerns were mere argument. Justice Garman asked counsel whether he was urging a point by point, "conduct by conduct" analysis to determine whether conduct is insurable as a matter of public policy, and counsel agreed that he was. Justice Freeman asked counsel whether he relied on Valley Forge Insurance Co. v. Swiderski Electronics, and if so, for what proposition? Counsel responded that Swiderski decided that TCPA damages are potentially covered under an advertising injury policy, which according to counsel is what was involved in the case at hand. Justice Freeman asked whether Swiderski was a duty to defend, not a duty to indemnify case like Lay, and counsel agree that it was. Counsel concluded by asking the Court to reverse the Court of Appeal, and invited the Justices to consider defining the nature of conduct which triggers the rule of non-insurability.

As counsel for the insurer began his presentation, Justice Thomas asked whether, if the Court agreed that the penalties were potentially insurable, there were any issues left for the Appellate Court on remand? Counsel responded that the Court could either decide the additional issues itself, or remand to the Appellate Court. Counsel argued that there was a pending question of possible breaches by the insured of the policy. The insurer defended under a reservation of rights letter. Approximately four months after the case was filed, the attorney retained by the insurer had been fired by the insured, and a month or two after that, the insured had agreed to a $1.739 million settlement with a covenant not to execute against any of the insured's assets.   Calling the settlement a "roll-over," in a case the insurer was still defending, counsel suggested that there were questions of a breach of the cooperation clause and a voluntary payment undertaken.  Justice Thomas repeated the question asked of appellant's counsel earlier, asking what impact the reference in the statute to treble damages for willful and wanton conduct had on the analysis. Counsel responded that the first half of the statute provided for either actual damages or $500, "whichever is more," but in practice, $500 would always be far more than actual damages from a single junk fax. Justice Burke asked counsel how that damages clause could be simultaneously remedial and punitive? Counsel responded that penal punishments are intended to deter both the defendant and others from similar conduct, and that was the purpose of the TCPA penalties. Chief Justice Kilbride asked whether the insurer knew about and objected to the insured's settlement. Counsel responded that the insurer had not been aware of the settlement. Justice Burke asked whether, if there is a duty to defend a TCPA claim under Swiderski, that necessarily means there is a potential duty to indemnify - and that the Appellate Court decision therefore conflicts with Swiderski. Counsel responded that Swiderski had dealt with the duty to defend, whereas only the duty to indemnify was at issue here. Justice Garman asked what difference it makes for the analysis whether the conduct at issue is that of an agent - here, the "fax broadcaster." Counsel responded that the fax broadcaster was not the agent of the insured, and even if it was, the statute places liability on the insured as the "sender."

In rebuttal, counsel for the class representative argued that the liability involved in the case below was certainly vicarious, flowing through an agent, and that as such, it should be insurable. Counsel claimed that the insured had the right to settle under the circumstances, and insisted that the insurer had known about the settlement.

We expect Lay to be decided by the Supreme Court in the fall.

• Print
• Comments
• Trackbacks
• Share Link

Last week, the Illinois Supreme Court heard oral argument in Wilkins v. Williams. Wilkins is a sequel of sorts to Harris v. Thompson, in which the Court considered the statutory immunity of a publicly owned ambulance involved in an accident. Wilkins poses the flip-side question: what if the ambulance is owned by a private, for-profit company? Our detailed preview of the facts and lower court opinions in Wilkins is here. The video and audio of the argument is available here.

In Wilkins, a privately owned ambulance transporting a patient on a non-emergency run struck another vehicle, injuring the driver. According to the Emergency Medical Services (EMS) Act, no “person, agency or governmental body certified, licensed or authorized pursuant to this Act” who “provides emergency or non-emergency medical services” can be “civilly liable as a result of their acts or omissions in providing such services unless such acts or omissions . . . constitute willful and wanton misconduct.” 210 ILCS 50/3.150(a). So does the EMS Act extend to non-emergency transport of patients? The Court held in Abruzzo v. City of Park Ridge only a few years ago that the statute impliedly covered transportation of patients. But even if it does apply to transportation of patients, does the immunity extend to injured third parties, as opposed to patients being treated by EMS workers?

Counsel for the defendants began by arguing that the initial question faced by the Court is whether EMS immunity applies; defendants' position is that it does. Justice Freeman asked whether the immunity provision distinguishes between patients and injured third parties. Counsel agreed that it does not. Justice Freeman asked whether the language is ambiguous, and counsel responded that it was not. Justice Thomas asked what the Court should do with the willful and wanton exception to the statute - should the plaintiffs be allowed to replead their complaint? Counsel responded that the facts would not support a willful and wanton allegation. Justice Thomas pointed out that the case had been resolved by summary judgment at the trial court level, and asked whether plaintiffs would have reason to ask for leave to replead. Counsel responded that the court had addressed the nature of the allegations and concluded that summary judgment was justified. Justice Thomas repeated that the trial court dismissed the action on immunity, and wondered again whether the plaintiff could have sought leave to replead a willful and wanton theory. Counsel responded that plaintiff had not done so. Justice Burke asked whether the Court would have to read a limitation into the immunity statute to hold that it doesn't apply; counsel answered that the Court would have to rewrite the statute to find no immunity. Counsel closed by arguing that restricting liability to willful and wanton conduct would not essentially abrogate the Motor Vehicle Code, as plaintiff claimed.

Counsel for the plaintiff began by emphasizing the requirement of the Motor Vehicle Code that all drivers drive with ordinary care. Justice Thomas asked counsel where in the EMS Act the Court should find a distinction between ambulances with and without flashing lights (i.e., on emergency or non-emergency runs). Counsel responded that the distinction was found in the cases rather than the statute. Justice Thomas commented that based on the statute, it's somewhat of an artificial distinction. Counsel responded that the applicable rule is that an ambulance must operate according to the rules of the road when not on an emergency run. Justice Burke asked why the ambulance would be on the road without a patient, and counsel answered that there was a variety of reasons, including commuting or carrying an organ donation. Justice Garman asked what the statute means when it says "in the normal course of their duties." Counsel responded that the duty at issue is the one owned to the patient; the EMS Act applies only to professional liability claims by patients. Justice Garman asked whether, if a patient is injured during transport, the patient has a cause of action. Counsel responded that the patient had no claim against the ambulance driver, but might have a claim against the other driver. Justice Garman asked whether that meant that the immunity wasn't in fact limited to professional negligence. Counsel answered that in certain scenarios, transporting a patient is life-saving, and "services" can include driving. Justice Thomas asked whether a willful and wanton exception was a consistent interpretation of the Act - it didn't leave the roads in chaos, but merely raised the burden of proof. Counsel repeated that the legislature had limited professional liability claims against EMS workers to willful and wanton conduct, but extending that rule to motor vehicle accidents was inconsistent with a variety of statutes, including the Financial Responsibility law requiring privately owned ambulances to carry insurance. Justice Thomas asked where the case rested since plaintiff didn't seek to replead. Counsel responded that there were sufficient facts to go back and replead.

In rebuttal, counsel for the defendant stated that to accept the plaintiff's position, the Court must overrule Abruzzo. No case or statute limits the immunity to professional negligence, counsel argued, and many cases have applied immunity outside the realm of professional negligence.

The Court will likely decide Wilkins in the next three to six months.

• Print
• Comments
• Trackbacks
• Share Link

Last week, the Illinois Supreme Court heard oral argument in Mayfield v. Mayfield, which presents several issues regarding the proper handling of lump sum workers' compensation payments for purposes of calculating a party's child support obligation. Given that most of the Justices seemed skeptical of the appellant's position, it seems likely that the Court will not significantly alter current law on these issues. Our detailed preview of the facts and lower court opinions in Mayfield is here. The video and audio of the argument is available here.

The parties in Mayfield were divorced in 2003, and the husband was ordered to pay child support. In the years that followed, as the children’s living arrangements changed, the child support obligation was adjusted multiple times. Finally in 2011, the wife petitioned to modify child support. At the hearing on the wife’s petition, the husband disclosed that he had received a $300,000 lump-sum workers’ compensation settlement the year before. Following In re Marriage of Dodds, which held that workers’ compensation payments are income for purposes of child support, the Circuit Court ordered the husband to pay 20% of the settlement to his ex-wife, and to continue paying child support. The Appellate Court affirmed, holding that such a settlement payment was certainly "income" within the meaning of the Illinois Marriage and Dissolution of Marriage Act, and that the 20% base multiplier should be applied to the entire amount of the workers compensation award.

Counsel for the husband began by arguing that husband didn't contest that the settlement was income, but rather believed that the lower courts had erred in their application of the 20% base multiplier. Counsel argued that it was important to make it clear to lower courts that they had discretion in this area, which should be applied with attention to the factors relevant to making a fair division. Among these factors, counsel argued, were the nature and extent of the parent's injury, and its impact on the injured worker, as well as the relevant economic positions of the parties. Justice Thomas pointed out that far from living on the settlement, the husband had in fact made various other expenditures, including remodeling his house and buying a motorcycle. Counsel responded that while such issues were perhaps relevant, the husband was facing returning to work because he had been unable to establish disability. Justice Garman asked whether the husband had had his child support obligation lowered because of his injury, and counsel agreed he had. Should that be taken into account in the allocation, the Justice asked? Counsel responded that the entirety of the circumstances were relevant. Justice Freeman asked whether the husband's settlement would have been bigger if paid in monthly installments, and if so, should the 20% base multiplier be applied to that figure, rather than the lump sum. Counsel responded that he had suggested that the 20% multiplier should be applied to that monthly amount at trial. Justice Theis clarified that counsel was now agreeing that the settlement amount was income, and merely challenging the allocation, and then asked whether the allocation had been challenged at the trial court. Counsel responded that he had, and that 20% of the monthly sum would be significantly less. Justice Theis asked counsel what he wanted the Court to do: provide a checklist of factors for the exercise of discretion? Counsel suggested again that the nature and extent of the injury, whether the party was likely to work again and the age of the child were all relevant issues. Justice Theis asked counsel what the error in the Appellate Court decision was. Counsel responded that the lower courts had believed they had no discretion to vary from the 20% base multiplier.

Counsel for the former wife began by arguing that neither the statute nor Dodds made the 20% multiplier mandatory. Rather, the court must merely explain why if it chooses to deviate. Counsel argued that the husband had never argued for a deviation below, and that nothing in the trial court's opinion suggested that the judge believed he had no discretion to deviate from the multiplier. Justice Garman asked whether it factored into the issue that the settlement was for the rest of the husband's life. Counsel responded that in fact, it was for the rest of the husband's working life; it had been set up that way to allow him to seek Social Security disability. Justice Garman asked counsel whether the issue of deviating from the multiplier had been raised in the trial court. Counsel responded that the husband had merely admitted that he received the award, and disclosed how much was left, never mentioning deviation.

On rebuttal, counsel for the husband argued that he had sought deviations from the multiplier at least twice. Justice Theis asked whether the matter had been raised at the Appellate Court, and counsel responded yes. Justice Theis asked where in the trial court's order the court had said he lacked discretion, and counsel responded that the court had felt compelled to follow Dodds. Justice Theis pointed out that neither the trial court order nor the Appellate Court opinion had actually said that. Justice Thomas asked counsel whether he wanted a ruling that there must be an exercise of discretion, reviewing all the factors, even when the Appellate Court apparently believed that the trial court had acted properly. Counsel argued that the Court should remand to the trial court with instructions that the trial court should exercise its discretion to find a proper allocation.

The Court will likely decide Mayfield in the next three to six months.

• Print
• Comments
• Trackbacks
• Share Link

Earlier this week, the Illinois Supreme Court heard oral arguments in Earlywine v. Earlywine. In a fascinating, albeit one-sided argument (there was no appearance for the appellee), the Justices actively debated a wide variety of issues, including the "leveling the playing field" policy in the disgorgement provisions of the Illinois Marriage and Dissolution of Marriage Act ("IDMA"), advance payment attorney retainers, and a host of United States Supreme Court decisions which may (or may not) impact whether or not disgorgement orders are constitutionally permissible under such circumstances. Although I won't hazard a prediction since there was no opportunity to see the Court's reaction to an argument for appellee, the Court was highly engaged in the proceedings, asking (by my count) nineteen questions of counsel in only seventeen minutes. Our detailed preview of the facts and lower court opinions in Earlywine is here. The video and audio of the argument is available here.

Earlywine began when the husband agreed to pay his attorney an advance payment retainer financed by his mother, her fiancé, his father and his father's wife. The wife's attorney petitioned for an award of $5,000 in interim attorney's fees pursuant to 750 ILCS 5/501(c-1), the Illinois Marriage and Dissolution of Marriage Act. The wife's attorney asked the court, if necessary, to order the husband's attorney to disgorge amounts already paid to him. The Circuit Court granted the motion. The husband's attorney moved to reconsider, arguing that as an advance payment retainer, the funds had become his property at the moment of payment. The Circuit Court denied reconsideration. The Appellate Court affirmed the order of disgorgement, holding that counsel's advance payment retainer would frustrate the "leveling the playing field" policy of IDMA.

At oral argument before the Supreme Court, counsel for the appellant characterized the case as a conflict between IDMA and Dowling v. Chicago Options Associates, Inc., in which the Supreme Court recognized advance payment retainers. Justice Burke asked counsel whether the result would be different if the husband had paid the retainer himself. Counsel responded that the Dowling rule that advance payment retainers are not subject to turnover orders would still apply; if a spouse paid fees from marital funds, the opposing spouse might have a claim for dissipation. Justice Burke asked whether the advance payment retainer was for the advantage of the client or the attorney. Counsel responded that it was intended to protect the attorney-client relationship, which is both a personal and property right, for the benefit of the client. Justice Garman asked counsel whether IDMA reflected a policy of parity between the parties. Counsel agreed it was, but argued that there was another policy at issue. Parties had a right of constitutional import to retain counsel to petition government.   Counsel argued that under Arizona Free Enterprise Club v. Bennett, leveling contending parties' playing field is not a legitimate interest under strict scrutiny review.  Justice Thomas returned to Justice Burke's question, pointing out that when a third party pays a retainer which is not subject to disgorgement, that gives one party the ability to retain an attorney when they might otherwise not be able to. Counsel responded that the issues in Arizona Free Enterprise were similar - payments from third parties to a political candidate triggered equalizing payments to his or her opponent.

Justice Thomas asked counsel what would happen when the advance payment retainer was taken from marital funds - under appellant's rule, one side would have an attorney, but the other spouse wouldn't. Counsel responded that under Arizona Free Enterprise, NAACP v. Button, United Mine Workers of America v. Illinois State Bar Association and Arizona v. Davis, the state was not permitted to burden the right to retain counsel for purposes of speech. Justice Thomas again pointed out the statutory purpose of IDMA - creating parity between the parties, and counsel responded that that was the exact conflict at issue in Arizona Free Enterprise. Chief Justice Kilbride pointed out that under Rule 1.15(c) of the Rules of Professional Conduct, an advance payment retainer must have a stated special purpose, whereas the retainer agreement at issue seemed to be intended solely to defeat the leveling the playing field rule. Counsel responded that the agreement was not about defeating the leveling the playing field rule, but rather about obtaining representation, since no counsel would take a case where the fee was certain to be clawed back pursuant to a disgorgement order. Justice Garman asked whether counsel was arguing that an advance payment retainer immune from disgorgement was constitutionally required. Counsel responded that the simple use of an advance payment retainer under Rule 1.15(c) avoided the constitutional problem.

Earlywine should be decided within three to six months.

• Print
• Comments
• Trackbacks
• Share Link

A testator has held a younger man out for nearly sixty years as being his son. When the testator drafts a will stating that he has no children, is that statement a sufficient basis to plead a will challenge based on lack of testamentary capacity? On Thursday, a unanimous Supreme Court, in an opinion by Justice Robert R. Thomas, held in DeHart v. DeHart that the answer was “yes.” The Court made further news for wills-and-estates practitioners, adopting into Illinois law the cause of action for “equitable adoption.” Our detailed preview of the facts and lower court opinions in DeHart is here. Our report on the oral argument is here.

The decedent testator had told members of the community that the plaintiff was his son for fully six decades. When he made his funeral arrangements, he listed the plaintiff as his son, and listed the plaintiff’s children and grandchildren as his grandchildren and great-grandchildren. He provided the plaintiff with a birth certificate listing the testator as his father. Only when the plaintiff requested an original birth certificate in 2000, he discovered that the testator was not his biological father. He confronted the testator, who explained that he had married the plaintiff’s mother when plaintiff was two years old. The plaintiff’s natural father had married his mother after she became pregnant, but had subsequently abandoned them, and had not been seen or heard from since. The testator explained that he had hired an attorney to complete a legal adoption of the plaintiff, and he and the plaintiff’s mother had agreed to keep the details of the situation secret. For several years after plaintiff’s discovery, the testator continued to represent the plaintiff as his son, and treat him that way, allegedly making a will naming the plaintiff and his children as beneficiaries.

Things only began to change in 2005, when the 83-year old testator met the fifty-four year old defendant. In the months that followed their marriage, the defendant acquired a power of attorney, and the testator allegedly made her joint tenant on assets worth millions. In the final months before the contested will was drawn up, the defendant allegedly made misrepresentations to the testator about the plaintiff, telling the testator that the plaintiff was not his son, and ultimately began preventing the plaintiff’s cards and letters from reaching the testator. In December 2006, the testator made a new will stating that he had no children.

The testator died three months later. When defendant filed the will, plaintiff filed his complaint, alleging lack of testamentary capacity, undue influence, fraudulent inducement, intentional interference with testamentary expectancy, a contract to adopt the plaintiff and an equitable adoption. The plaintiff sought to depose the attorney who prepared the December 2006 will. On defendant’s motion, the circuit court dismissed the complaint and denied plaintiff’s motion to compel the attorney’s deposition. The appellate court reversed with respect to dismissal of all six counts as well as the refusal to compel the attorney’s deposition.

The Supreme Court affirmed the Appellate Court in all respects. With respect to the lack of testamentary capacity claim, the Court found that the complaint adequately alleged that the plaintiff was the natural object of the testator’s bounty. In addition, because the plaintiff’s statement in the will that he had no children was “completely inconsistent with his life history and prior declarations,” it was sufficient to state a claim. On the second count, the Court agreed that the plaintiff had adequately alleged a presumption of undue influence (which is ultimately decided at trial, at or after the close of plaintiff’s case). The Court noted that the defendant’s power of attorney created a general fiduciary relationship, and the fact that the testator began putting assets amassed over an 84-year period into joint tenancies shortly after the marriage sufficiently suggested undue influence. Although the Court noted that the plaintiff’s tort claims against the defendant would of course fail if his will contest succeeded, the Court held that he had adequately alleged fraudulent inducement and intentional interference with testamentary expectancy, and any dismissal of those claims at the pleading stage would be premature.

The Court held that plaintiff had successfully pled a contract to adopt between the testator and the plaintiff’s mother, supported by plaintiff’s allegations that the testator had hired an attorney to finalize the adoption. The Court found that given that the natural father had permanently abandoned the plaintiff three years after his birth, it was unnecessary for the natural father to be a party to the adoption contract.

Noting that the cause of action had been to some degree foreshadowed by earlier Illinois cases, the Court formally adopted the cause of action for equitable adoption. Following the 2004 California case Estate of Ford v. Ford, the Court declined to require proof of the elements of a contract to adopt in order to plead an equitable adoption. A claim for equitable adoption under Illinois law, the Court found, will require clear and convincing proof of the circumstances of a persistent parent-child relationship, together with “’some direct expression, on the decedent’s part, of an intent to adopt the claimant.”

The Court concluded by affirming the Appellate Court’s decision that plaintiff should have been permitted to depose the attorney who drafted the challenged will. The Court pointed out that attorney-client privilege does not survive the decedent’s death when the attorney prepares and witnesses the decedent’s will, since the decedent would presumably waive the privilege under such circumstances if he or she were still alive in hopes of having his or her true intent carried out. All that was necessary in order to trigger the application of the rule was a prima facie showing that the plaintiff was an heir or next of kin, or a beneficiary of a previous will, in order to establish a right to the attorney’s deposition.

• Print
• Comments
• Trackbacks
• Share Link

In a unanimous opinion reversing in part Division Six of the First District, the Illinois Supreme Court has held in Ferguson v. Patton [pdf] that the Inspector General for the City of Chicago lacks the authority to retain private counsel to enforce his or her subpoenas in court. Instead, the Inspector General is required to rely on the support of the city’s Corporation Counsel or, if the Corporation Counsel has a conflict of interest, upon the support of the Mayor. Our detailed preview of the facts and lower court opinions in Ferguson is here. Our report on the oral argument is here.

Ferguson arose from an apparent award to a former City employee of a sole-source contract without going through the normal competitive process. Opening an investigation, the Inspector General made a written request to the City’s Law Department to produce its files relating to the awarding of the contract. The Law Department made a partial product, withholding certain documents based on asserted work-product and attorney-client privilege. When the Law Department declined the Inspector General’s informal request that it drop its privilege claims, the Inspector General sent the Corporation Counsel, the head of the Law Department, a formal subpoena for the documents. When the Corporation Counsel declined to comply with the subpoena, the Inspector General retained private counsel and filed suit.

The Circuit Court granted the Corporation Counsel’s motion to dismiss, finding that the Inspector General lacked the authority to hire counsel, and the documents were indeed privileged from disclosure. The Appellate Court reversed in part, holding that the Inspector General had authority to sue, and the power to hire private counsel could be reasonably inferred from that power.

In an opinion by Justice Lloyd A. Karmeier, the Supreme Court reversed. The City had taken the position that the Inspector General lacked the authority to sue, since he was merely part of the City of Chicago, meaning that his suit amounted to the city suing itself – an intra-agency spat that belonged in the political branches. The Supreme Court dismissed the argument, noting that the question of the Inspector General’s power was a routine matter of statutory construction. Since the Municipal Code provides that the Inspector General “shall take no action to enforce [his or her] subpoena” for seven days, it necessarily followed that the Inspector General could enforce the subpoena after that short wait was over.

At that point, however, the Inspector General’s case ran aground. Although the Inspector General could appear as a party to an enforcement action, the Municipal Code assigned the power to represent the City, its officers, board and departments in “all actions, suits and proceedings” to the Corporation Counsel – the very entity that the Inspector General was pursuing. The Court recognized that the Corporation Counsel had a conflict of interest when he or she was the target of the subpoena, and could hardly be expected to voluntarily sue him- or herself. Since the conflict was so “patent,” the Inspector General was not even required to ask the Corporation Counsel to do so. But that didn’t mean that the Inspector General was home free, the Court found. The Municipal Code reposed ultimate power to enforce City ordinances and discipline non-civil service officers who violate their duties in the Mayor. So the final decision about whether the Inspector General could sue the Corporation Counsel to enforce the subpoena should have been made by the Mayor. The Court acknowledged the Inspector General’s claim that any such holding significantly weakened the power of his office. But “that is a matter for the City . . . to remedy,” the Court found.

• Print
• Comments
• Trackbacks
• Share Link

On Tuesday morning, the Illinois Supreme Court gave little concrete indication of how it will likely rule during oral argument on Crittenden v. Cook County Commission on Human Rights[pdf]. Counsel for the Commission and the plaintiff both appeared and argued, but there was no appearance for the appellees. Our detailed summary of the facts and the Commission and lower court rulings is here. The video of the Supreme Court argument is here.

Crittenden arises out of a sexual harassment claim brought by a former bartender at a Cook County bar. The bartender filed a complaint with the Cook County Commission on Human Rights with respect to her supervisor. The hearing officer recommended an award of lost wages, compensatory and punitive damages, and the Cook County Commission on Human Right adopted the hearing officer’s recommended order. The Circuit Court denied the defendants’ petition for a writ of certiorari to review the administrative decision, effectively affirming the decision. The Appellate Court (First District, Sixth Division) affirmed with respect to a variety of evidentiary challenges, but reversed the Commission’s award of punitive damages, holding that the Cook County Human Rights Ordinance didn’t authorize such an award. The Court declined to follow an earlier decision of Division One of the First District, Page v. City of Chicago, where the Court had held that the Chicago Human Rights Ordinance does permit an award of punitive damages for acts of sexual harassment and discrimination.

Counsel for the Commission began the arguments. Counsel observed that the Appellate Court’s holding was a surprise for two reasons: the earlier decision in Page, and because the facts in the record warranted punitive damages. Counsel argued that three reasons supported a finding that the ordinance authorized punitive damages: (1) the list of enforcement remedies in the ordinance is expressly made non-exclusive; (2) the language of the ordinance is otherwise very broad; and (3) the ordinance gives the Commission the authority to file with the Department of Professional Regulation whenever a licensed real estate broker violates the ordinance, suggesting an intent to facilitate punitive measures. Justice Freeman asked whether the issue was could the ordinance permissibly authorize the Commission to award punitive damages; or was the issue whether the ordinance did in fact authorize an award? Counsel responded that the question was whether the ordinance did authorize an award, and that the power to authorize such an award was clear, given the home rule statutes. Justice Thomas asked whether the ordinance could simply be changed if the Supreme Court found that it did not, as currently written, authorize punitive damages; counsel agreed that it could, but argued that it was important to vindicate the Commission’s implied powers. Counsel also pointed out that the ordinance had not been changed following Page, suggesting an intent to acquiesce in the result. Justice Karmeier noted that the ordinance speaks of fines and asked counsel why it would not have expressly authorized punitive damages. Counsel argued that the list was not exclusive. Justice Theis asked whether the language in the ordinance authorizing the hearing officer to recommend such relief “as is appropriate to make the complainant whole” didn’t suggest that only compensatory damages were permitted. Counsel argued that in fact it was a grant of discretion to the Commission. Justice Garman asked whether the fact that punitive damages are not favored in the law should make the Court reluctant to read implied authority to award them. Counsel responded that the Court had previously found some torts were sufficiently serious to warrant such awards. Justice Freeman asked whether, if the ordinance authorized an award, the case should be remanded for a determination of whether the defendants’ conduct was willful and wanton. Counsel conceded that although the hearing officer had not used those precise words, the officer had found a wanton disregard for the complainant’s rights, which was sufficient.

Counsel for the complainant briefly concluded the argument. He argued that the facts at issue – which included both verbal degradation and physical accosting – met several of the prerequisites for punitive damages. Justice Theis asked whether punitive damages were requested from the hearing officer, and counsel stated that they were. Justice Freeman asked whether the conduct of the employer and the bar patron allegedly involved in the conduct should be separated for determining whether the conduct was willful and wanton, and counsel responded that the challenged conduct of the two individuals could not be disentangled on the record.  Counsel concluded by stressing that despite the alleged outrageousness of the defendants’ conduct, the punitive damages award was modest.

We expect the Court to decide Crittenden within four months.

• Print
• Comments
• Trackbacks
• Share Link

This afternoon, the Illinois Supreme Court announced that it will file two opinions in civil cases on 9:00 a.m. on Thursday morning. The upcoming opinions are:

• Ferguson v. Patton, Case No. 112488 - (1) Does Section 2-56-040 of the Chicago Municipal Code authorize the Inspector General of the City of Chicago to hire private counsel to enforce subpoenas? (2) May the Inspector General sue the Corporation Counsel of Chicago to enforce subpoenas? Our detailed preview of the facts and lower court opinions in Ferguson is here. Our report on the oral argument is here.
   
• DeHart v. DeHart, Case No. 114137 - (1) Did plaintiff adequately allege lack of testamentary capacity based on decedent's statement in his probated will that he had no children? (2) Did plaintiff sufficiently allege undue influence on the part of defendant, who held decedent's power of attorney? (3) Could plaintiff state a viable claim for fraudulent inducement while his will contest was still pending? (4) Did plaintiff adequately allege an oral contract to adopt? (5) Shall Illinois recognize the theory of equitable adoption, and if so, did plaintiff adequately allege such a theory? Our detailed preview of the facts and lower court opinions in DeHart is here. Our report on the oral argument is here.

• Print
• Comments
• Trackbacks
• Share Link

Tomorrow will be a busy day for the Illinois Supreme Court's civil docket, with five cases being argued, beginning at 9:00 a.m. They are:

• Wilkins v. Williams, Case No. 114310 - (1) Does the immunity conferred by the Emergency Medical Services Act, 210 ILCS 50/3.150(a), extend to the non-emergency transport of patients? (2) Does the statute bar suits in connection with injuries sustained by third parties not directly treated by the EMS workers? Our detailed preview of the facts and lower court opinions in Wilkins is here.
   
• Standard Mutual Insurance Co. v. Lay, Case No. 114617 - Is the Federal statutory penalty imposed pursuant to the Federal Telephone Consumer Protection Act for sending unsolicited advertisements to a fax machine in the nature of punitive damages, and therefore uninsurable as a matter of Illinois law? Our detailed preview of the facts and lower court opinions in Standard Mutual Insurance is here.
   
• Mayfield v. Mayfield, Case No. 114655 - (1) Is a lump-sum workers’ compensation settlement “net income” within the meaning of Section 505(a)(3) of the Illinois Marriage and Dissolution of Marriage Act; and (2) If so, is the 20% rule-of-thumb set forth in Section 505(a) of the Act for calculating the per-child support obligation applicable to the entire settlement? Our detailed preview of the facts and lower court opinions in Mayfield is here.
   
• Earlywine v. Earlywine, Case No. 114779 - Is an advance payment retainer to a spouse's retained attorney in divorce proceedings the attorney's property at the moment of payment, and therefore not subject to disgorgement for an award of interim attorney's fees pursuant to 750 ILCS 5/501(c-1), the Illinois Marriage and Dissolution of Marriage Act? Our detailed preview of the facts and lower court opinions in Earlywine is here.
   
• Crittenden v. Cook County Commission on Human Rights, Case No. 114876 - May the Cook County Commission on Human Rights award punitive damages? Our detailed preview of the facts and lower court opinions in Crittenden is here.

• Print
• Comments
• Trackbacks
• Share Link

In Riverisland Cold Storage, Inc., v. Fresno-Madera Prod. Credit Ass., S190581, the unanimous California Supreme Court recently overturned the widely criticized Pendergrass rule, thus restoring the full breadth of the fraud exception to the parol evidence rule. In 1935, the Court limited the fraud exception to the parole evidence rule - holding that evidence of a promise that was “directly at variance with the promise of the writing” was inadmissible.  (See, Pendergrass (1935) 4 Cal.2d 258, 263.)  This allowed defendants to demur to promissory fraud claims by citing the contract terms, or at least obtain summary judgment. This rule had put California in a minority of one, as it departed from the majority rule, the Restatement, and most treatises. Indeed, Riverisland concluded that Pendergrass is unsupported by the controlling statute (C.C.P. §1856), was contrary to then existing California law, has been widely criticized ever since (resulting in convoluted attempts to distinguish it), and can be used to shelter fraud (begging the question of how the Pendergrass rule managed to survive for nearly 80 years).

While there has been some hand wringing by potential defendants over losing the Pendergrass rule, and it will certainly be more difficult to resolve promissory fraud claims by demurrer or summary judgment, all is not lost. Consider:

1. California now follows the majority rule, so most of the country has already adapted to this holding.
2. Plaintiffs still have to meet the more demanding pleadings requirements for any fraud claim, and Riverisland confirms that the intent element of promissory fraud entails more than proof of an unkept promise or mere failure of performance.
3. In Rosenthal, 14 Cal.4th 394, the Court held that the negligent failure to read a contract precludes a finding that it is void for fraud, although the threshold for this showing might be lower for equitable relief.
4. Promissory fraud requires justifiable reliance on the defendant’s oral misrepresentation, which ties back into plaintiff’s negligent failure to read the contract.

The Supreme Court in Riverisland refused to decide whether the borrowers justifiably relied on the lender’s oral promises not to execute on the promissory notes for at least a year, notwithstanding the contract terms allowing prompt execution, given the borrowers’ failure to read the contract. So, how to balance these considerations remains an open question. While procedures to fend off such claims are often already in place, California businesses should proactively tighten up their practices and procedures to lessen the potential exposure that Riverisland represents, rather than wait for the courts to address these issues. In particular, the parties should customarily document that no oral promises were relied on in entering into the agreement.  In addition to fending off claims based on an oral promise, such documentation will presumably support an argument that the plaintiff was negligent in failing to read the contract. 
 

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court took an unexpected turn in its second civil decision of Friday morning, using State Bank of Cherry v. CGB Enterprises, Inc. [pdf] as a vehicle to clarify the standard which Illinois state courts should use to decide Federal law issues. In an opinion written by Justice Rita B. Garman, the Court affirmed the Third District's holding that the Food Security Act of 1985 requires strict compliance with statutory requirements in crop financing instruments. Our pre-argument preview of State Bank of Cherry is here. Our report on the oral argument is here.

State Bank of Cherry started with an Illinois farmer executing a note in plaintiff's favor, using certain crops as security. He then sells the crop to the defendant, a grain elevator. The plaintiff sent the Notice of Security Interest, citing the Food Security Act, to the defendant, but the defendant paid the farmer, not the plaintiff. So the plaintiff sued.

The defendant moved to dismiss, citing Farm Credit Midsouth, PCA v. Farm Fresh Catfish Co. to argue that strict compliance was mandatory under the Food Security Act. Since the plaintiff's Notice omitted the required statement of the county where the crops were located, the buyer took free of the security interest. The plaintiff responded by arguing that the Illinois Commercial Code governed, and cited First National Bank v. Effingham-Clay Service Co. for the proposition that substantial compliance was good enough. The trial court concluded that the Illinois Appellate Court decision governed and granted the plaintiff's motion for judgment on the pleadings. A divided panel of the Appellate Court reversed, holding that the state Commercial Code was preempted by the Food Security Act.

The Supreme Court unanimously affirmed. The Court had little trouble dismissing First National Bank; the case was decided ten years before Farm Fresh and Federal law governed the case. The Court then turned to the question of how Illinois courts should resolve questions of Federal law when there were Federal decisions on point. For years, the Court noted, Illinois courts had considered Federal circuit decisions persuasive but not binding, absent a decision from the United States Supreme Court. On the other hand, the Court pointed out, where federal courts are not split, maintaining a uniform body of law is an important value. The Court concluded that while the Court is bound only by decisions of the United States Supreme Court, the Court would "give considerable weight" (the emphasis is the court's) to a uniform federal interpretation of an issue. The Court distinguished two cases cited by plaintiff and concluded that Farm Fresh was the only Federal case on the question of substantial compliance in "direct notice" cases -- where the security instrument is delivered directly to the buyer, rather than being filed in a central repository.

So should the Illinois courts routinely follow a uniform Federal construction of Federal law? Well, not where the uniform line of cases is "wrongly decided." This doesn't mean that the court can follow its own inclinations; if that were the rule, the value of uniformity would be lost. Rather, uniform Federal lines of authority should be applied by state court to Federal law questions unless the decisions are outside "logic" and "reason." Where Federal courts are split - then the Illinois courts can follow their own judgment.

Following that lengthy foundation, the ultimate issue in State Bank of Cherry was quickly resolved. The strict construction analysis in Farm Fresh was sound, the Supreme Court found, and matched the Illinois Supreme Court's own law on statutory construction. So the Court followed Farm Fresh, holding that strict compliance with the Federal statute was essential for a buyer to take crops subject to a security interest. Since the plaintiff's notice omitted the mandatory designation of county, the Notice was ineffective and the plaintiff's case failed.

Justice Charles E. Freeman specially concurred. Justice Freeman opined that the majority's decision, "as I understand it," merely reaffirmed long-standing Illinois law on the treatment of Federal cases on an issue of Federal law. Justice Freeman wrote separately to object to the Court's "complicated and needless discussion of the concept of uniformity." The concept had no place in the opinion in Justice Freeman's view. Farm Fresh was not a "uniform and uncontradicted" view of Federal law -- a single opinion could not be "uniform and uncontradicted" with itself. "[A] single on-point decision, even if uncontradicted, does not constitute a 'uniform' body of precedent."

• Print
• Comments
• Trackbacks
• Share Link

On Friday morning, the Illinois Supreme Court delivered a strong reminder of the importance of arbitration proceedings in labor disputes.  The Court unanimously reaffirmed the highly deferential standard applied to judicial review of an arbitrator’s decision in an opinion by Justice Anne M. Burke in Griggsville-Perry Community Unit School District No. 4. v. Illinois Educational Labor Relations Board. Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.

Griggsville-Perry arose from a school board's firing of a noncertified paraprofessional who worked in an elementary school library. In 2007, her school principal approached the employee and told her that the school board had received complaints about her performance. The principal began keeping a notebook of events relating to the employee's performance.  The principal spoke with the employee about her performance twice more during 2007, noting both discussions in the notebook (which was not, however, included in the employee's file).  The following year the principal recommended that the school board fire the employee. The superintendent of the district notified the employee that she would be fired at an upcoming meeting. The superintendent and principal met with the employee and her union representative twice, and items from her file were produced to her. The employee and her union representative appeared before the school board and the employee testified, but the board decided to fire her anyway.

The union filed a grievance, and after a hearing, the arbitrator ordered the employee reinstated. When the board refused, the union filed an unfair labor practice charge. The arbitrator once again ordered reinstatement, and the Illinois Educational Labor Relations Board affirmed. The Appellate Court reversed the Board, finding that the employee had received all the due process she was entitled to under the labor contract.  The Court held that the arbitrator had "applied his own brand of industrial justice" by "reading a just-cause standard into the agreement" without support either in the integrated contract or the drafting history.

Although the Supreme Court seemed conflicted about the case during oral argument, in the end the Court had no trouble reversing. The arbitrator's decision turned on his interpretation of section 2.6 of the parties' collective-bargaining agreement, which provided that employees must be "give[n] reasonable prior written notice of the reasons" for a disciplinary meeting. The court held that the arbitrator's decision was subject to highly deferential review based on this amorphous standard: "[the arbitrator's] award is legitimate only so long as it draws its essence from the collective bargaining agreement." The court summarily concluded that "the arbitrator's determination that the District had violated section 2.6 was clearly rooted in an interpretation of the contract." Accordingly, the court concluded that the Appellate Court "erred in reviewing and rejecting" the arbitrator's decision.

In the alternative, the District argued that even if section 2.6 of the union contract required some sort of due process, any violations were harmless since the plaintiff was an at-will employee. The court rejected the District's argument. The court acknowledged that the parties had considered and rejected a standard of dismissal for just cause, but concluded that the arbitrator was nevertheless free to conclude that employees had limited protection from being terminated as a result of an arbitrary proceeding.

• Print
• Comments
• Trackbacks
• Share Link

This afternoon, the Illinois Supreme Court announced that it expects to file opinions in two civil cases at 9:00 a.m. on Friday, February 22. They are:

• Griggsville-Perry Community Unit School District No. 4 v. Illinois Educational Labor Relations Board, No. 113721 et seq. – May an arbitrator apply “industrial common law” to find to find that a terminated employee had a right to a statement of specific acts or omissions allegedly justifying termination where the union contract at issue barred the arbitrator from modifying, nullifying, ignoring or adding to the terms of the contract? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.

• State Bank of Cherry v. CGB Enterprises, Inc., No. 113836 -- (1) Does the Federal Food Security Act of 1985, 7 U.S.C. § 1631(e), preempt the state UCC for purposes of security interests on crops? (2) If so, does the Act require strict or substantial compliance in order to effectively attach a security interest when crops are sold? Our pre-argument preview is here. Our report on the oral argument is here. 

With Griggsville-Perry and State Bank of Cherry both coming from the Court’s November term, the Court’s announcement leaves three cases still pending from the September Call of the Docket: In re Estate of Boyar, which poses the question of whether the doctrine of election should be recognized with respect to trusts (for our preview, see here, and for our report on the oral argument, see here); Ferguson v. Patton, which involves the powers of the Inspector General of the City of Chicago (preview here, and  report on the oral argument here); and The Hope Clinic for Women v. Adams, which involves a constitutional challenge to the Illinois Parental Notice of Abortion Act (preview here, and report on the oral argument here).

• Print
• Comments
• Trackbacks
• Share Link

In Gillespie Community Unit School District No. 7 v. Wight & Co., the fourth and final new civil case added to its docket at the close of the January term, the Illinois Supreme Court will address an important issue for Illinois' architects and construction contractors: the enforcement of contractually-agreed statutes of limitations.

The school district in Gillespie decided to build a new elementary school in 1998. The plaintiff entered into an agreement with the defendant to perform various services preliminary to the designing and construction of the new school building. Among the services the architects agreed to perform was investigating the extent of mining in the building site area, and assessing the risk that mining subsidence might imperil the structural stability of the new school. The architects in turn hired an engineering firm to assess the mining issues.

Once the preliminary work was completed, the school district entered into a further contract with the architectural firm and its contractor. That contract defined the "agreement" between the parties as including the earlier agreement which led to the mine analysis. The final contract further provided that the statute of limitations for any and all possible causes of action between the parties would begin to run not later that the substantial completion of the acts at issue, or at minimum, the date on which the defendant architect's services were completed.

The building was completed in the fall of 2002, and the school district took possession. In the early spring of 2009, a coal mine subsided beneath the building, causing extensive damage. A few weeks later, the building was declared a total loss. The school district sued the architects, alleging professional negligence, breach of implied warranty and fraudulent misrepresentation. The architects moved for summary judgment, alleging that the action was clearly time-barred. The Circuit Court agreed and dismissed.

The Fourth District affirmed. The school district argued that the accrual provision of what the parties called the "Standard Agreement" had not become part of the Pre-Referendum Service Agreement, but the Appellate Court disagreed, pointing out that the Standard Agreement defined several documents - including the Pre-Referendum Service Agreement - to constitute the "agreement." The school district argued that the accrual provision applied only to claims between the architect and its contractor, but the Appellate Court disagreed, finding that the defendants had defined the limits of their own liability, in part, by the completion of the contractor's work. The school district argued that "substantial completion" had never occurred given the alleged shortcomings of the mining analysis work, but the Appellate Court disagreed again, finding that the mining work was done under the Pre-Referendum Service Agreement, and the accrual provision, including the "substantial completion" language, was found in the Standard Agreement; one had nothing to do with the other. Finally, the Court rejected the district's claim that no statute of limitations at all applied to its claim for fraudulent misrepresentation. The Court pointed out that such claims were expressly exempted from 735 ILCS 5/13-214, the statute that provides limitations on claims arising from the design, planning, supervision, observation or management of construction. Therefore, by default the five-year catch-all statute of 735 ILCS 5/13-205 applied.

Gillespie should be decided in late 2013.

• Print
• Comments
• Trackbacks
• Share Link

At least three different government entities are allowed by Illinois law to impose the local portion of the state's sales taxes: home rule counties; home rule municipalities; and regional transit authorities. But what happens when a business' operations span multiple counties -- where does the sale take place for tax purposes? This question can make a difference in the many millions of dollars when a particular business has operations in both high- and low-tax counties. The Illinois Supreme Court will resolve the issue in Hartney Fuel Oil Co. v. Hamer, which it agreed to hear in the final days of its January term.

The plaintiff in Hartney resells fuel oil to railroads, trucking companies, gas stations and other fuel distributors. In 1995, the plaintiff moved its sales operation out of its corporate headquarters in Forest View (which is in Cook County). By 2003, the sales operation had landed in Mark (which is in Putnam County). The corporate headquarters remained in Forest View until 2008, when the corporate and accounting staff was also moved to Mark.

The plaintiff had two kinds of sales during the relevant period. First, there were daily purchase orders. The customer was informed by fax or email of the next day's price, and responded to the sales office: what it needed, how much, where and when. The sales agent in Mark accepted the order and made the arrangements. Second, there were long-term purchase orders. A fully executed contract was mailed from the Mark sales office to the customer. Originals were stored in Mark, with copies to the customer as well as the plaintiff's accounting department in Forest View.

Once the Mark sales office opened in August 2003, the plaintiff reported that all sales happened in Mark. The Department of Revenue audited the plaintiff for the period of 2005 through mid-2007; the auditors ultimately concluded that all sales occurred in Forest View -- in Cook County -- rather than Mark, and the plaintiff got a $23.1 million tax bill. The plaintiff paid under protest and sued.  The board of commissioners of Putnam County and board of trustees from Mark got into the act too, suing the Department on the grounds that they were entitled to the local share of the sales taxes. The Circuit Court found for the plaintiffs, concluding by preponderance of the evidence that both daily and long-term orders were accepted in Mark, not Forest View.

Despite the lengthy lead-in, the issue in Hartney is ultimately fairly simple: is the location of the sale determined by the totality of the circumstances, or does the sale occur where the order is accepted? The Third District affirmed the Circuit Court, adopting what it described as a "bright-line test": where acceptance of the order occurs, sales tax liability is fixed. In doing so, the Court refused to follow a twenty-four year old case from the Fourth District, Chemed Corp. v. State, which had adopted the totality of the circumstances test. The majority then turned to the trial court's factual findings, holding that the Circuit Court's conclusion that all sales occurred in Mark was not contrary to the manifest weight of the evidence. Justice Robert L. Carter dissented from the panel's holding, concluding that the state regulations imposed a totality of the circumstances test for determining where a particular sale took place for tax purposes.

Hartney should be decided in late 2013.

• Print
• Comments
• Trackbacks
• Share Link

May a condominium owner refuse to pay monthly and/or special assessments, in whole or in part, on the grounds that the condominium board had failed to maintain and repair the common elements of the condominium property? In the vast majority of jurisdictions around the country, the answer is simple: No. Last summer, in what the Chicago Tribune called a “ground-breaking decision” that “has stunned the condominium community nationwide,” the Appellate Court for the Second District answered the question “sometimes.” Yesterday, the Illinois Supreme Court agreed to review the decision, granting leave to appeal in Spanish Court Two Condominium Association v. Carlson [pdf].

The plaintiff in Spanish Court Two sued the defendant in early 2010 under the Forcible Entry Act. Plaintiff alleged that the defendant had stopped paying monthly assessments in August 2009. Plaintiff allegedly hadn’t paid special assessments either. The plaintiff sought possession of the defendant’s unit and a monetary award.

The defendant filed a combined answer, affirmative defenses and counterclaim. She admitted that she had stopped paying the assessments, but denied that they were owed; according to the defendant, the plaintiff’s failure to repair damage to the roof and certain brickwork directly above her unit had led to water damage to the unit itself. The defendant also alleged that the plaintiff had failed to make certain repairs inside the unit. Based on these factual allegations, defendant pled two affirmative defenses: (1) that the plaintiff was estopped from seeking the assessments because of its breach of the duty to maintain and repair; and (2) that the cost of repairing the damage to her unit should be deducted from any award of the past-due assessments. Defendant’s counterclaim was based on the same allegations.

Section 9-106 of the Forcible Entry Act, 735 ILCS 5/9-106, provides that matters which are “not germane to the distinctive purpose of the proceedings” may not be raised by a defendant. The plaintiff moved to strike the defendant’s defenses and counterclaim, citing Section 9-106, the Circuit Court granted the motion, and the defendant appealed.

The Appellate Court reversed, holding that the defendant’s defenses were potentially viable. The Court reached this conclusion by analogizing the duty to pay assessments to the obligation to pay rent: Illinois law permitted renters to defend a claim for unpaid rent by alleging that the landlord had breached the duty to maintain and repair, and by analogy, condominium owners should be permitted to raise the same defense with respect to non-payment of assessments. Plaintiff sharply challenged this conclusion, arguing that under the Condominium Act, the right of the board to collect assessments is absolute. 735 ILCS 605/18.4(d). However, the Court disagreed. Rather, the Court concluded that the Condominium Declaration and Bylaws should be seen as contracts where the parties exchanged promises: a promise to pay assessments in return for a promise to maintain and repair.  The Court cautioned that relatively minor problems, such as “overgrown bushes and unrepaired sidewalk cracks” might “rarely” constitute material breaches, but otherwise seemed to suggest no limitations to the defense. Continuing its analogy between renters and condominium owners, the Court then affirmed the severance of the defendant’s counterclaim from the Forcible Entry Act action, noting that only counterclaims for overpaid rent were considered germane in such actions involving renters.

In its petition for rehearing, the plaintiff predicted significant adverse effects from the Court’s decision, a concern echoed in the Chicago Tribune’s article on the case. Plaintiff argued that establishing a right to withhold assessments – a condominium board’s only source of income – would make it even less likely that common areas would be repaired, but the Court observed that the same concern could be applied to multiunit rentals, where the defense was established. In response to plaintiff’s prediction of “a crippling of condominium associations” as a result of the Court’s decision, the Court observed: “we question how well a condominium association is currently functioning if one of its unit owners suffers such neglect as defendant has alleged.”

Spanish Court Two is certain to be a spirited battle at the Supreme Court, with multiple amicus applications from entities within Illinois and perhaps outside the state as well. The Supreme Court will likely decide the case in late 2013. 

• Print
• Comments
• Trackbacks
• Share Link

Yesterday, the Illinois Supreme Court granted leave to appeal in four new civil cases. We begin our previews of these newest additions to the court’s docket with Bartlow v. Costigan [pdf], which raises a variety of constitutional challenges to the powers of the Illinois Department of Labor under the Employee Classification Act, 820 ILCS 185/1 et seq.

The state legislature enacted the Act because it suspected that construction contractors were evading various protections extended to workers under the state labor laws by improperly classifying their employees as independent contractors. An investigation begins under the Act when an interested party files a complaint (or the Department may file a complaint itself). If the Department finds cause for an investigation, it has discretion to use any method or combination of methods it chooses. Possible methods include sending a written notice to the contractor explaining the charges and giving an opportunity to present any information in writing bearing on the issues.  Before making a final decision, the Department may – but it not required to – convene a fact-finding conference, either in person or by telephone.

If the Department finds a violation, it has various options open to it: (1) issuing a cease and desist order; (2) attempting to collect wages, salary and/or benefits lost to employees by reason of the violation; or (3) assess civil penalties. The contractor may seek an “informal conference” with the Director of the Department and/or his or her chief legal counsel, but if the contractor fails to pay penalties or comply with the remedies specified in a notice of violation within 30 calendar days, the Department may turn the matter over to the Attorney General for enforcement. Even more severe penalties are possible for a second violation within five years of the first.

The plaintiffs in Bartlow received a notice of investigation and request for documents from the Department in the fall of 2008. The plaintiffs produced the materials, and a conciliator working for the Department interviewed various individuals; finally, in early 2010, the Department sent the plaintiffs notice of having preliminarily found multiple violations of the Act. A fine was set at $1.683 million. When the plaintiffs received a second notice of investigation two weeks later, they filed suit, arguing that the Act and the supporting regulations were unconstitutional on a variety of grounds: due process, special legislation, equal prohibition and bills of attainder. On cross-motions for summary judgment, the Circuit Court rejected each of the plaintiffs’ constitutional challenges.

The Fifth District of the Appellate Court affirmed. First, the plaintiffs argued that the Department was essentially exercising adjudicatory powers without being required to grant a hearing. The Department, on the other hand, claimed that its powers are purely investigatory: it has no authority to enforce any finding of violation itself, and any circuit court proceeding is de novo, with the Department having the burden of proving a violation. The Department characterized its “fines” as amounting to an offer to settle outside of court: the contractor was free to ignore the “fine” without consequence, unless and until the Department went to Court and established the violation anew. Although the Appellate Court expressed its skepticism about the Department’s argument, the Fifth Circuit held that it was compelled by the canon that statutes are held constitutional wherever reasonably possible to adopt the Department’s interpretation of its powers and reject the due process challenge.

The Appellate Court had considerably less difficulty rejecting the plaintiffs’ other constitutional challenges. The Court held that the statute gave sufficient guidance as to who could legitimately qualify as an independent contractor to allow parties to conform their conduct, and accordingly, the statute was not void for vagueness, and/or an unconstitutional delegation of legislative power. The Court rejected the plaintiffs’ equal protection and special legislation claims, applying rational basis review to find that the state had a legitimate interest in revenue lost for various employee-protection programs through misclassification, and that the legislature could have reasonably concluded that workers in the construction industry were most urgently in need of immediate protection through the statute.

The Supreme Court will likely decide Bartlow in late 2013.

• Print
• Comments
• Trackbacks
• Share Link

In J. McIntyre Machinery, Ltd. v. Nicastro, a plurality of the United States Supreme Court held that merely placing a product into the stream of commerce with the expectation that it would wind up in the forum state was not enough to justify the exercise of personal jurisdiction over the manufacturer. Russell v. SNFA is the Illinois Supreme Court's first opportunity to apply Nicastro. Our preview of Russell is here. Watch the video of the oral argument here.

Russell arose from a 2003 helicopter crash in Illinois. The decedent's estate sued, alleging that one of the helicopter's tail rotor drive-shaft bearings had failed, fracturing the drive shaft, making the tail rotor inoperable, and leading to the crash.

The helicopter was built in Italy by Agusta, an Italian company that wasn't related to SNFA. It passed to a German company, then to Metro Aviation, a Louisiana-based company, and finally to Air Angels, the decedent's employer, which was based in Cook County. The Louisiana company had replaced several of the bearings with replacements manufactured by SNFA. The replacements were custom-made in France, sold to Agusta in Italy, sold again to Agusta Aerospace Corporation in America, and then to Metro Aviation in Louisiana. SNFA had three American customers for its aerospace bearings, but none for its helicopter bearings.

Confused yet? Well, that's the point. The trial court tossed the case for lack of jurisdiction on the grounds that SNFA's only contact with Illinois had been a single visit to an entirely different customer. The Appellate Court reversed, relying on Asahi Metal Industry Co. v. Superior Court; the defendant knew that Agusta sold its helicopter throughout the United States, and that it had an American subsidiary - since SNFA's ball bearings were custom-made, Agusta's distributors essentially were SNFA's American distribution arm.

The Supreme Court initially bounced the case back to the Appellate Court, directing the court to reconsider its decision in light of Nicastro. A few days before Christmas 2011, the Appellate Court reaffirmed its decision, holding that Nicastro made the panel even more certain that it was right.

The Appellate Court found jurisdiction under both subsection (a) -- "the commission of a tortious act within this State" and subsection (c) -- a catchall provision -- of 735 ILCS 5/2-209, the long arm statute. SNFA knew that Agusta helicopters were sold throughout the US, the Court noted. Essentially imputing Agusta's conduct to SNFA, the Court held that Agusta's five helicopters sold in Illinois during the relevant period were enough to subject SNFA to minimum contacts:

By custom-making parts for a helicopter manufacturer, defendant made itself dependent on the marketing and distribution network of the manufacturer.

Counsel for the defendant opened his argument by emphasizing his client's complete lack of a corporate, virtual or physical presence in Illinois. SNFA has no, and never has had any, U.S. customers for its helicopter bearings, counsel argued. Justice Theis pointed out that Nicastro was a plurality decision, with a four-Justice decision announcing the judgment. She asked counsel where Federal law stood in the wake of Justice Breyer's concurrence. Counsel responded that the majority of the Court had certainly rejected the New Jersey Supreme Court's standard that placing products into the stream of commerce subjected the manufacturer to jurisdiction everywhere the product might go. Instead, a majority of the Court had held that "something more" was necessary - a state-specific design or advertising, etc. Justice Burke asked whether there was some suggestion in the record of Illinois contacts between SNFA and Hamilton Sunstrand. Counsel pointed out that Hamilton Sunstrand involved sales in San Diego of aerospace bearings, not helicopter bearings. Counsel detailed the distinction for the Court between general and specific jurisdiction. Justice Freeman asked why the Court shouldn't follow Rockwell International Corp. v. Costruzioni Aeronautiche Giovanni Agusta, S.p.A., the case heavily relied upon by the lower court and cited with approval by the Supreme Court in Asahi. Counsel responded that Rockwell was not on point; it was a thirty year old decision which time has passed by. In fact, when Rockwell was decided, even Asahi was five years in the future. Justice Freeman followed up, asking whether the facts of international commerce had changed to a degree that the law should change. Counsel responded that the law had already changed in ways not supportive of a finding of personal jurisdiction.  The law had changed not only to reflect differences in international commerce, but also to reflect a requirement of some knowledge of a particular jurisdiction. The constant lodestar of the law in this area, counsel argued, was the requirement of purposeful availment. Ultimately, Rockwell didn't govern because both Asahi and Nicastro required knowledge of the specific jurisdiction.

Counsel for the plaintiff began his argument by arguing that Nicastro lacked a majority for either its judgment or reasoning, and thus, the law still stood at World Wide Volkswagen. Justice Garman asked what the defendant had done to satisfy the "something more" of Justice Breyer's concurrence in Nicastro. Counsel responded that he was not persuaded that Justice Breyer objected to the stream of commerce theory found in World Wide Volkswagen. Justice Breyer was troubled by the Nicastro facts - one product, simply one machine, being the basis of jurisdiction in New Jersey. Justice Freeman asked what the so-called "substantial" connection between SNFA and Illinois was. Counsel responded that many of defendant's facts were inconsistent with the record; for example Hamilton Sunstrand was not in fact a California corporation. SNFA had signed two purchase agreements with Hamilton Sunstrand in Rockford, Illinois, and two contracts which specifically said that Illinois law applied. Justice Garman asked whether the products sold by SNFA to Illinois entities were the same ones that failed here. Counsel responded that the distinction was irrelevant -- SNFA sold ball bearings all over the United States and in Illinois. SNFA is a worldwide operation, counsel insisted, which has heavily penetrated the market in the United States, and worked hard in Illinois to cultivate their contacts. Counsel once again suggested that Nicastro really hadn't produced much of a rule at all. Chief Justice Kilbride asked how many entities made what counsel had described as "high end ball bearings," and counsel answered that SNFA had fewer than ten competitors worldwide.

In rebuttal, counsel for the defendant suggested that plaintiff had melded general and special jurisdiction in a way that the Supreme Court's Goodyear decision specifically barred. In fact, the concepts are distinct. Counsel read several passages to the Court from Justice Breyer's concurrence in Nicastro, arguing that Justice Breyer required an interrelationship between contacts and cause which was absent on this record. Ultimately, Justice Breyer couldn't reconcile the rule of the New Jersey Supreme Court with the standard of minimum contacts and purposeful availment. Counsel pointed out that the plaintiff's argument that SNFA knew that its product was being sold throughout the United States necessarily required imputing the Agusta distribution network to SNFA. Neither a national distribution network nor "permeating the U.S. market" was enough to justify jurisdiction. From there, counsel moved to analyzing Justice Ginsburg's dissent in Nicastro; arguing that in fact, the Nicastro Court might well have been unanimous in finding no jurisdiction in SNFA -- at minimum, that Court would have had six votes for "no jurisdiction."

SNFA should be decided in the next three to five months.

• Print
• Comments
• Trackbacks
• Share Link

If a state elected official is sued for his or her official actions, may the Attorney General refuse to defend the official based solely on the allegations of the complaint? That's the question the Supreme Court debated earlier this month during the oral argument in McFatridge v. Madigan. Our detailed preview of McFatridge, discussing the facts and lower court rulings in detail, is here.  Watch the video of the oral argument here.

The plaintiff was the elected State's Attorney of Edgar County. Years after he successfully prosecuted two defendants for murder, the Federal district court granted both defendants' habeas petitions. The defendants sued a number of different government officials, including police officers and the defendant, alleging that they had hidden exculpatory evidence.

Plaintiff asked the Attorney General for representation repeatedly, but the Attorney General refused plaintiff's requests in 2005, 2009 and again in 2010. The plaintiff filed a petition for writ of mandamus, but the petition was denied.

McFatridge is governed by the State Employee Indemnification Act. The parties argue about how to reconcile three different provisions. According to 5 ILCS 350/2(a), if "any civil proceeding is commenced against any State employee" arising out of any act or omission within the scope of the defendant's employment, the Attorney General "shall" defend the action. The first paragraph of 5 ILCS 350/2(b) provides that the Attorney General may decline to defend the action where it "involves an actual or potential conflict of interest" or the act or omission at issue was either not within the scope of the defendant's employment, or "was intentional, willful or wanton misconduct." According to the second subparagraph of subsection (b), the state "shall pay" elected officials' court costs, litigation expenses and attorneys' fees, to the extent approved by the Attorney General as reasonable.

The Appellate Court reversed the Circuit Court, holding that the "shall pay" language of the second paragraph of subsection 2(b) denied the Attorney General any discretion about whether or not to pay any elected official's legal fees.

Justice Freeman asked counsel for the Attorney General whether the arguments raised in his briefs were different from those raised in his petition for leave to appeal - weren't such arguments forfeited? Counsel responded that the State's arguments had been the same from start to finish; the issue of the Attorney General's discretion to make the decision as to whether or not to cover the official's expenses ran throughout the case. Counsel argued that the plain language of the statute should end the inquiry. Counsel stated that his anecdotal understanding was that the Attorney General had seldom denied funding for a defense before. He argued that the plaintiff's reading of the Indemnification Act would necessarily eliminate the bar to paying for conduct outside the scope of employment, surely taking the statute outside the credible scope of the legislature's intent. Justice Freeman asked whether Tully v. Edgar controlled, but counsel for the Attorney General suggested that nothing about Tully was applicable to the case at hand. Counsel argued that the Attorney General was arguing for a facial construction of the statute which avoided reading the Act in a way which ran afoul of constitutional prohibitions on spending state money on private interests. Justice Garman asked whether the various subsections' use of the phrase "in the event that" suggested that the subsections were meant to be alternatives. Counsel responded that it did not; nothing in the successive subsections suggested that what went before was being overridden. Justice Garman asked whether the Attorney General treated allegations alone as being sufficient to forbid taking over a defense; counsel responded that the statutory term was that the Attorney General should "determine" the issue, meaning that the Attorney General had unfettered discretion.

Counsel for the plaintiff began by arguing that the Attorney General's claims of a statutory screening process were an after-the-fact cobbled-together justification. Every civil rights claim alleges constitutional violations, counsel pointed out, and the Attorney General had nevertheless denied a defense based on mere allegations. Justice Thomas asked whether any deficiency in the screening process was excused by the promise of post-trial reimbursement; counsel responded that given the financial strain to state officials of having to finance a multi-year defense themselves, after-the-fact reimbursement in no way cured the problem. Justice Karmeier asked whether it was within the purview of the Court to decide whether the Attorney General's screening was adequate on the facts. Counsel responded that the Court could consider the lack of criterion for any such screening in the statute; if screening had actually been intended by the legislature, the process would have been set out in detail.

Counsel challenged the State's claim that the Attorney General couldn't use public funds to defend willful and wanton misconduct, pointing out that the Attorney General had defended police officers who were accused of actively covering up exculpatory information. The Attorney General later settled the case on behalf of the police, using more public funds. Justice Thomas asked whether counsel was saying that the State was estopped from denying a defense. Counsel answered that the matter should be resolved based on the plain language of the statute, but in the alternative, estoppel applied. Justice Theis asked what effect the language of subsection (b), allowing the Attorney General to approve counsel and fees, had; counsel responded that the State's failure to fund a defense had been a serious problem for the plaintiff. The plaintiff had been entirely without financing for more than two years. Chief Justice Kilbride asked what the basis had been for insurers to negate coverage in declaratory judgment actions, and counsel responded that it had been the definition of the insured, rather than a strict coverage decision. Justice Karmeier suggested that subparagraph (b) of the statute appeared to cross-reference subparagraph (a), but counsel argued that the statute treated elected officials differently as a result of concerns about the effect of partisan politics, authorizing refusal to defend for non-elected, but not elected officials. Counsel argued that if the legislature had intended that the Attorney General be able to refuse coverage based on mere allegations, it could have easily said so in the second paragraph of subsection 2(b) - the only language which expressly and exclusively dealt with elected officials.

In rebuttal, counsel for the state argued that the allegations against the plaintiff were in several respects more serious than those against the police officers. Counsel argued that the speculation that a concern over partisan politics animated the statute was contrary to the Court's settled precedent, which provided that courts could not presume the bad faith of elected officials. And if the statute was constructed to insulate the decision about whether to take over an elected official's defense from partisan politics, why was the Attorney General expressly authorized to approve the official's attorney and fees?

McFatridge should be decided within three to six months.

• Print
• Comments
• Trackbacks
• Share Link

The mailbox rule applies to filing an appeal from an arbitrator to the Workers Compensation Commission. Norris v. Industrial Commission. And it applies to filing an appeal from the Circuit Court's order on administrative review to the Appellate Court. Harrisburg-Raleigh Airport Authority v. Dept. of Revenue. So does it apply to the intermediate step - initiating an administrative review proceeding of the Commission's decision at the Circuit Court? Based on the oral argument last week before the Illinois Supreme Court in Gruszeczka v. The Illinois Workers' Compensation Commission, it appears that the Court will likely extend the mailbox rule to cover this intermediate step. Our preview of Gruszeczka is here. Watch the video of the oral argument here.

The claimant in Gruszeczka filed an application for adjustment of claim with the Commission, seeking workers' comp benefits in connection with an injury he allegedly sustained on the job in 2004. The arbitrator denied the claim, and the Commission affirmed.

Judicial review of a Commission decision is begun in Illinois by filing a request for issuance of summons and an attorney's affidavit of payment for the record with the Circuit Court clerk. The proceeding must be "commenced" within 20 days of receipt of notice of the decision. 820 ILCS 305/19(f)(1). The claimant's request and affidavit were mailed fourteen days after counsel received the decision, but file stamped by the clerk twenty-four days after receipt. So the filing was timely if the mailbox rule applied, and not if it didn't. The Circuit Court denied a motion to dismiss, but affirmed the Commission on the merits; the Workers' Compensation Commission Division of the Appellate Court reversed in part, finding that the filing was untimely and the Circuit Court therefore lacked jurisdiction.

Counsel for the claimant began by pointing out that the statute neither defines "commenced" nor says that documents have to be in the hands of the clerk on the twentieth day. Counsel argued that the courts had already applied the mailbox rule to the first step in the process - the appeal from arbitrator to Commission - and the last - from Circuit Court to Appellate Court, and it made no sense for the intermediate step to be handled differently. Justice Thomas noted that the Circuit Court action was technically a new case, but asked whether counsel argued it was akin to an appeal. Counsel responded that he didn't think it was a new case; the statute calls it a petition for review, and the standard of review is manifest weight of the evidence. Justice Thomas pointed out that the Circuit Court proceeding had a separate case number, and asked once again whether counsel's argument hinged on that not being a new action. Counsel responded that the new number was inconsequential: the case had already had five numbers in its progress to the Supreme Court. Counsel then argued that a reversal would be a matter of limited impact, not opening the floodgates to further loosening of filing standards, but Justice Karmeier wondered whether a reversal might necessarily impact other administrative review actions. Counsel conceded that it might. When Justice Karmeier asked whether the result might be different if review were initiated by a "complaint," rather than a request for issuance of summons. Counsel answered that the proceeding was an appeal regardless of what the pleading was called. Counsel insisted that having a "doughnut hole" with no mailbox rule in the middle of the progression from arbitrator to Appellate Court was irrational. Justice Karmeier asked counsel whether it was important how the Court characterized the Circuit Court decision in its opinion; counsel responded that calling the proceeding a "new action" was semantics. Justice Burke asked whether the Court should overrule Norris if it affirmed; counsel responded that an affirmance would necessarily call the previous cases into question. Only by reversing and applying the same rule to every step does everything make sense. Counsel concluded by arguing that both sides would benefit by applying the mailbox rule and giving counsel the full twenty days to prepare an appeal, given the number of steps which must be taken in a short time to initiate Circuit Court review.

Chief Justice Kilbride asked counsel for the employer to comment on opposing counsel's argument that reversal might benefit employers in future cases. Counsel agreed that a decision one way or the other would benefit both sides, but counsel said it was clear to him that the initiating documents must be in the Circuit clerk's hands in 20 days. Justice Garman asked why the legislature would be so strict in this limited instance when the mailbox rule applies in other instances. Counsel answered that there was nothing in the legislative history one way or the other, and speculated that perhaps the legislature wanted to discourage review filings at the Circuit Court. Justice Burke asked counsel whether the Circuit Court proceeding wasn't in substance an appeal from the Commission. Counsel responded that although in common parlance it might be so characterized, it was not technically an appeal. Counsel argued that an affirmance would not have to call earlier caselaw into question, and insisted that refusing to apply the mailbox rule gave parties certainty: that way, counsel could check with the clerk on the twenty-first day and know whether the case was over. Justice Thomas pointed out that the same argument could be made against application of the mailbox rule in every case. Counsel agreed that was so, but repeated his claim that refusing to apply the mailbox rule was simple and had the virtue of certainty.

In rebuttal, counsel for the employee asked again why the legislature would want to make the intermediate step in the process the hardest of all. Only one possible resolution, counsel insisted, would make sense and give workers' compensation practice predictability: reversal of the Appellate Court's decision and application of the mailbox rule to initiating the administrative review proceeding.

• Print
• Comments
• Trackbacks
• Share Link

A relatively quiet Illinois Supreme Court gave little indication of its leanings last week during oral argument in DeHart v. DeHart. Our preview of DeHart is here.

DeHart is a will contest. According to the complaint, the decedent had held plaintiff out for some sixty years as his son. This continued until 2000, when the plaintiff requested a certified copy of his birth certificate in connection with a passport application. The certified copy listed an entirely different person as the plaintiff's natural father. The decedent told the plaintiff that he had "secretly" adopted the plaintiff two years after his birth. In the years that followed, the decedent continued to hold out the plaintiff as his son. But in the final years of his life, the decedent married the defendant. Only a year later, he signed a will stating that he had no children and never mentioning the plaintiff. Three months later, the decedent died. The plaintiff challenged the will for lack of testamentary capacity, undue influence, and a claim for "equitable adoption." The Circuit Court dismissed, but the Appellate Court reversed. The Appellate Court held that the plaintiff could go forward on his lack of capacity claim based solely on the will's statement that decedent had no children, and became the first Illinois court to adopt the theory of equitable adoption.

Counsel for the defendant began with the issue of equitable adoption, heavily emphasizing what he saw as the policy reasons not to adopt the cause of action. Counsel pointed out that equitable adoption has always required pleading a contract to adopt, and since no such contract had been pled, the Court could reject the plaintiff's claim without ever reaching the issue of whether Illinois recognized the cause of action. Turning to the issue of the will contest, counsel argued that the representations of the witnesses to the will that the decedent appeared to be of sound mind had become a judicial admission on the plaintiff's part when the plaintiff attached the will to his complaint without impeaching the witnesses' views. Justice Thomas wondered how a will contest could ever proceed if such representations were conclusive. Counsel argued that the plaintiff was obligated to somehow impeach the witnesses through affirmative factual allegations. Justice Thomas suggested that the Court was required to accept the plaintiff's mere allegations of unsoundness on a 2-615 motion to dismiss. Counsel responded that the plaintiff's conclusory allegations weren't enough without supporting facts. The only basis for a finding of unsoundness was the statement in the will, and yet the complaint also alleged that the plaintiff and decedent had a loving relationship at the time the will was signed; according to counsel, since the complaint was internally contradictory, the complaint failed as a matter of law to allege lack of capacity. Turning to undue influence, counsel argued that the complaint was deficient for lack of specific factual allegations suggesting that the decedent's free will had been overcome.

Counsel for the plaintiff began his argument by showing the Court that plaintiff had actually had two birth certificates: one that he had used for most of his life, showing decedent's name as father, and the second certified certificate which had only come to light in 2000. Counsel argued that there had been a concerted effort to create plaintiff's first birth certificate, and even the decedent's obituary -- after the will was signed -- had said that the decedent had a son, grandson and great-grandchildren. Justice Burke asked whether, when there is a legal adoption, the birth certificate reflecting the name of the birth mother was destroyed. Counsel responded that he had learned in depositions that it was forwarded to Springfield. Justice Theis pointed out that the Court's earlier cases had referred to contracts to adopt, and asked what the elements of the contract were in this case. Counsel responded that under the unique circumstances - the social attitude towards unwed pregnancy at the time of plaintiff's birth - keeping the adoption a secret was sufficient consideration. The case presented unique circumstances, counsel argued; there was no need to establish a sweeping rule to govern a broad spectrum of cases.

On rebuttal, counsel for the defendant insisted that the law was clear in many jurisdictions that there could be no equitable adoption without an underlying contract. Plaintiff had never alleged that secrecy was the consideration for any agreement to adopt, according to counsel. Counsel closed by returning to the issue of public policy, arguing that it was very important that the Court not upset settled expectations by abruptly holding that merely "holding out" someone was sufficient to establish equitable adoption. Counsel predicted that adopting the plaintiff's theory would open up a Pandora's Box of problems as further cases tried to push the boundaries of the new claim.

DeHart should be decided within three to five months.

• Print
• Comments
• Trackbacks
• Share Link

Based upon questioning during last week's oral argument, the Illinois Supreme Court seemed unlikely to forgive plaintiff's counsel for filing a notice of appeal electronically in apparent violation of the Circuit Court's local rules. Our preview of VC&M, Ltd. v. Andrews is here.

VC&M arises from a real estate dispute. The defendants, a husband and wife, signed a contract with the plaintiff to list their residence for sale. Plaintiff found a buyer, who put in a bid for less than the asking price. The wife made what she described in emails as an "offer" to buy out her soon-to-be ex-husband for $5 more than the third party's offer; the wife said if the third party raised, she would too. Ultimately the defendants rejected the third party's offer, making no counter offer. The defendants signed a deed and held what they called a "closing" to finalize the sale of the husband's interest in the house to the wife. A few months after the listing agreement expired, the Circuit Court entered a judgment of divorce incorporating a property settlement which included as a line item real estate commissions due and owing. The agreement valued the marital home at $5 more than the rejected offer.

When the plaintiff sued for breach of contract, the defendant successfully moved to dismiss. The plaintiff e-filed a motion for reconsideration which was denied, and the plaintiff then e-filed a notice of appeal. The Second District held that because the case hadn't been properly designated for e-filing, the e-filed motion for reconsideration was ineffective. Since the motion for reconsideration was ineffective, the notice of appeal was untimely. And even if the notice of appeal had been timely, since the local rules barred e-filing "appellate" documents, the filing was void anyway, meaning that the Appellate Court lacked jurisdiction over the appeal.

The Court peppered the appellant's counsel with more than a dozen questions during his initial presentation. Justice Garman asked counsel whether he contested that his e-filings violated the court's local rules. Counsel responded that the local rules defined neither filings intended to enforce the judgment -- one class of filings which couldn't be e-filed -- nor "appellate" filings, so it was far from clear that his motion for reconsideration and notice of appeal were improperly filed. Counsel emphasized that the Supreme Court's authorization of e-filing didn't contain any such prohibitions as those found in the local rules. Justice Thomas asked whether the initial complaint had to be e-filed to make a case eligible for e-filing, and counsel responded that no such prohibition was found in the Supreme Court's authorization either. According to counsel, since a notice of appeal is not filed in the Appellate Court, it is not an appellate document; and since his motion to reconsider was not an attempt to enforce the judgment, neither of his filings violated the local rules. Counsel argued that the Circuit Court's authority in relation to e-filing was limited to complying with the mandates of the Supreme Court; any additional burdens placed on litigants were impermissible. Justice Thomas asked counsel whether the "burden" he was complaining of wasn't the burden of following the local rules, but once again, counsel argued that the Circuit Court's limitations on e-filing were beyond the Supreme Court's mandate. Justice Thomas suggested that the Supreme Court's earlier precedent seemed to require a showing of good cause to excuse a violation of the local rules. Counsel pointed out that the clerk had accepted the response for filing, giving him no chance to correct any deficiency. Justice Garman asked counsel whether the defendant had raised any objection to his e-filing the motion to reconsider, and counsel conceded that he had mentioned it in passing. In light of that, Justice Garman responded, why had counsel e-filed the notice of appeal? Counsel responded that his e-filing was appropriate. Justice Burke asked whether the clerk had accepted and docketed other e-filed notices of appeal, and counsel responded that he had heard anecdotally that the clerk had done so routinely. Counsel emphasized that the defendant had suffered no prejudice from the e-filing. Justice Garman asked counsel whether his position encouraged attorneys to violate local rules, and counsel responded that in fact, the local rules had been changed since the events at issue to authorizing e-filing notices of appeal.

The Court had almost no questions for the defendant. Counsel explained to the Court that at the hearing on plaintiff's motion for reconsideration, he had deliberately offered no arguments at all in order to avoid reinvesting the court with jurisdiction. Counsel argued that there was nothing ambiguous about the rules, and counsel had failed to follow them. Justice Garman asked whether there was any prejudice to defendant, and counsel said there was -- jurisdiction is the building block of everything that happens in court. Justice Theis wondered why the defective filing rose to the level of a jurisdictional issue, and counsel responded that it was because of the timing of the filing. Justice Theis raised the issue of prejudice again, pointing out that both the court and defendant had the paper filing. Counsel responded that the prejudice arose from subordinating the rights of a party whose lawyer followed the rules to those of a party whose lawyer didn't. Counsel insisted that plaintiff hadn't articulated a single viable reason why he didn't follow the rule. When a rule is wrong or unwise, counsel seeks to change it, not disregard it.

On rebuttal, plaintiff pointed out that the local rule didn't specifically say that "notices of appeal" couldn't be e-filed. Justice Karmeier pointed out that the local rule referred to "notices" and asked what the rule referred to if not notices of appeal. Counsel responded that the rule was unclear. Justice Karmeier asked whether the local rules made all e-filings improper where counsel failed to qualify a case for e-filing at the outset, regardless of the notice of appeal issue, and counsel again responded that the e-filing limitation was not a mandate of the Supreme Court. Counsel pointed out that the revised local rule retained the ban on "appellate" documents, but specifically allowed e-filing of notices of appeal, so apparently the Circuit Court saw a distinction between the two. Justice Thomas suggested that rules were of no consequence if a party could defend the violation by arguing lack of prejudice. Counsel responded that if the clerk had promptly rejected the filing, he would have had an opportunity to rectify the problem. Justice Thomas asked whether that was counsel's answer to the need for good cause to justify the local rules violation, and counsel agreed. Justice Thomas suggested that "good cause" referred to the initial rules violation, not what came later (the failure to reject the filing and give an opportunity for cure). Counsel responded that the rule was unduly vague and inconsistent with the court's mandate.

VC&M should be decided within three to five months.

• Print
• Comments
• Trackbacks
• Share Link

Can a homeowners' association private security officer stop and briefly detain a resident who is exceeding the speed limit set for the association's privately owned roads by the Board of Directors? Can the association enforce a small fine against the homeowner for his alleged violation? On Friday morning, a unanimous Illinois Supreme Court answered "yes" to both these questions in Poris v. Lake Holiday Property Owners Association, reversing in most respects a decision of the Third District of the Appellate Court. Our in-depth review of the facts and lower court rulings in Poris is here.  Our pre-argument preview is here.  Our report on the oral argument is here.

The defendant homeowners association was organized in 1965 in La Salle County. The Association Board of Directors voted to establish a 25 miles per hour speed limit on all private roads owned by the Association, with escalating fines to members depending on how fast the member was going. An accused violator has a right to a due process hearing before the citation committee, with the committee's decision being appealable to the Board of Directors itself. To enforce the Association's rules, an Association Security Department was established. The Security Department's vehicles were equipped with oscillating lights, audio/video recording equipment and radar units. The security officers' powers were limited. They didn't enforce the Illinois Vehicle Code, they merely handed out citations for violations of the Association rules. When they stopped a vehicle which was driven by a member of the public -- not a resident or a resident's guest -- they had no authority to issue anything; they merely warned the driver that he or she was on private property, and was violating the Association speed limit.

The plaintiff was clocked by radar traveling 34 miles per hour - a potential $50 fine. A security officer activated his oscillating lights and pulled the plaintiff over. The security officer directed the plaintiff to stay in his car, and took the plaintiff's license back to his own vehicle.  A few minutes later, the officer returned to the plaintiff's car, told him he was being recorded and was being issued a citation for speeding in violation of the Association's rules.

A few months later, plaintiff sued the Association, the Board of Directors and the Chief of Security, seeking a declaratory judgment that the Security Department's practices were illegal. Plaintiff also alleged false imprisonment. The trial court granted summary judgment and tossed the case out of court, but the Appellate Court reversed in several respects.

The Appellate Court analyzed the legality of the stop under 725 ILCS 5/107-3 as an attempted arrest by a private citizen. Holding that the Association's rules weren't an "offense" under the statute, the Court held that the stop was illegal. The Court also held that the Association wasn't a "security company" under Illinois law, making the Security Department's use of amber oscillating lights on its vehicles illegal. Finally, given its conclusion that the officer lacked probable cause to believe the plaintiff had committed an "offense," the Court held that the plaintiff had established the elements of false imprisonment.

The Supreme Court reversed each of the Appellate Court's holdings in plaintiff's favor. Writing for the Court, Justice Robert R. Thomas held that the Appellate Court had gone astray at the outset by analyzing the officer's actions as those of a private citizen. Officers only stopped and detained vehicles on private property for violation of Association rules - not the Vehicle Code - and only issued citations to members. Given the long-established rule that Illinois courts don't interfere with private associations' enforcement of their internal rules absent mistake, fraud, collusion or arbitrariness, the Appellate Court was wrong to interfere with the internal affairs of the Association, according to the Court.

The Court rejected plaintiff's theory that the Association was illegally exercising police powers. The General Not for Profit Corporation Act (805 ILCS 105/103.10(r)) granted the Association "all powers necessary and convenient" to accomplish its purposes. Besides, the Court pointed out, the Vehicle Code (625 ILCS 5/11-209.1) allows certain property-owning private associations to file a written request with local authorities to enforce the Vehicle Code on their private streets. The statute specifically said that filing such a request - which the plaintiff association had - did not prevent the private authority from adopting additional regulations governing its property, so long as they didn't conflict with the law.

According to 625 ILCS 5/2-215(b)(13), private vehicles may not carry amber oscillating, rotating or flashing lights. Only security companies, alarm responders and "control agencies" are exempted. The Appellate Court had held that the Association wasn't a security company according to the dictionary definition, but the Supreme Court pointed out that the Association fit comfortably within the definition of "company" from Black's Law Dictionary. Concluding that the statute was ambiguous, the Court turned to legislative debates about the statute, and concluded that entities like the homeowners' association security department were intended to qualify as "security companies," and thus the oscillating lights were legal.  Finally, the Court found that because the security officer had probable cause to believe that the plaintiff had committed a violation of Association rules, plaintiff's claim for false imprisonment was barred.

• Print
• Comments
• Trackbacks
• Share Link

Friday morning, a unanimous Illinois Supreme Court held that in most cases, a tort claim for intentional interference with testamentary expectancy is not subject to the six-month statute of limitations on will contests. Reversing Division Three of the First District, the Court held in Bjork v. O'Meara that so long as the plaintiff isn't passing up a concrete, non-speculative claim on the estate, a tort claim against the beneficiary who allegedly interfered can be brought within five years. Our in-depth review of the facts and lower court rulings in Bjork is here. Our pre-argument preview is here. Our report on the oral argument is here.

Bjork began in the spring of 2005, when the elderly decedent allegedly told the plaintiff that he owned two bank accounts: his checking account, worth about $800,000, and a second account which was not used for expenses and contained about $500,000. Plaintiff alleged that the decedent told her he wanted to name her the pay-on-death beneficiary of the account. The decedent's personal banker confirmed this to plaintiff twice, and later that year, sent her a Power of Attorney for the account, listing the plaintiff as the beneficiary. A few weeks later, the decedent signed a power of attorney in favor of the defendant, revoking all power previously given to plaintiff; two months after that, he executed a will containing a residuary clause leaving everything to the defendant and his wife. For the next few years, the plaintiff and the decedent stayed in touch. The decedent ultimately died in early 2009.

The plaintiff appeared in the decedent's estate proceeding, filing a petition for a citation to the trust company for recovery of property, asserting that she was the rightful owner of the bank account, and a petition for a citation for discovery of information. The trust company produced documents, but when the plaintiff petitioned for leave to depose the decedent's personal banker, the petition was denied. The plaintiff filed a motion to reconsider and clarify, and the Circuit Court held that it lacked the authority to order the deposition. With that, plaintiff's claim on the decedent's assets became entirely speculative. The estate was closed in the spring of 2010. When plaintiff filed a separate tort claim against the defendant six months later for intentional interference with testamentary expectancy, but the claim was dismissed as untimely under 755 ILCS 5/8-1, which provides that any petition "to contest the validity of the will" must be filed within six months of the will's admission to probate.

Writing for the Court, Justice Charles E. Freeman pointed out that a claim for intentional interference with testamentary expectancy was not a challenge to the validity of a will; it was a personal action against the individual tortfeasor. No one disputed that the plaintiff had filed her claim well within the five years allowed under 735 ILCS 5/13-205 for actions to recover possession of personal property or damages for its detention or conversion.

The Supreme Court had dealt with the collision between tort claims over expectancies and traditional will contests twice before. In Robinson v. First State Bank of Monticello, the Court held that the tort claim was not permitted when a will contest was possible and would have provided the claimant with adequate relief. Later in Estate of Ellis, the Court distinguished Robinson on the ground that the plaintiff in Ellis didn't know about its claim against the estate, which flowed from an earlier will, so it had no way to file a will contest.

Based on Robinson and Ellis, the defendant argued that since the plaintiff not only knew about the probate proceeding, she intervened in it, her tort claim was barred. But mere knowledge wasn't enough, the Court held; once the probate court erroneously refused to order the deposition of the decedent's personal banker, the plaintiff was left with no evidence to support a claim against the estate. Since the plaintiff didn't have the summary citation procedure available to her as the legislature intended, the tort action could go forward. Plaintiff's action simply didn't implicate the concerns about the finality of estate proceedings which motivated Robinson and Ellis, the Court found. The plaintiff wasn't contesting the will or making any claim against the decedent or the estate; she was seeking money damages from a third party.

• Print
• Comments
• Trackbacks
• Share Link

With 2012 over and the January term of the Illinois Supreme Court in full swing, it’s time to look back, both on the highlights of 2012 and the first two years of Chief Justice Kilbride’s Court. For my review of the Court’s major civil decisions of 2012 – a mostly encouraging year before the Court for the defense bar – visit Law 360’s site (subscription required) here. For my statistical look at the first two years of the Kilbride Court, including District-by-District Appellate Court reversal rates and my analysis of the Justices’ voting patterns, see here, also on the Law 360 site.

• Print
• Comments
• Trackbacks
• Share Link

This afternoon, the Illinois Supreme Court announced that it will file two new civil opinions on Friday morning:

• Poris v. Lake Holiday Property Owners Association, No. 113907 – (1) May a property association authorize private security officers to stop and detain persons on its property for speeding on association-owned roads? (2) May such an association place oscillating amber lights on vehicles used by its security department? (3) Where plaintiff was ordered by a security officer to remain in his vehicle while a citation for speeding on association-owned roads was prepared, did the plaintiff adequately plead the elements of false imprisonment? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.
   
• Bjork v. O’Meara, No. 114044 – Does the six-month statute of limitations in the Probate Code, 755 ILCS 5/8-1, apply to a separate tort action for interference with testamentary expectancy which -- if successful -- would have the practical effect of invalidating the will? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.

• Print
• Comments
• Trackbacks
• Share Link

One more note on National Gas Pipeline Co. v. Justiss is appropriate. The Texas Supreme Court held that the landowners had failed to present admissible evidence that the permanent nuisance caused by the defendant had diminished the value of their property. Normally, the loss of such a “no-evidence” point leads to the appellate court reversing the judgment and rendering judgment for the defendant. The Texas Supreme Court, however, did not render judgment. It remanded the case for a new trial, reasoning that the prior jurisprudence may have misled the landowners into believing that their damages evidence was sufficient.

Thus, instead of being tossed out of court, plaintiffs were provided a second opportunity—with a roadmap opinion from the Supreme Court--indicating how their damages should be proved up. While the landowners may have preferred a recovery under the first verdict, the chance for a “do‑over” provided an important consolation prize.

This result raises questions for appellate advocates. Should the appellee be prepared to argue for a remand as a fall-back position? This is psychologically difficult. The party has already won the trial and obtained the judgment. Arguing for a remand in the event the appellate court believes the case should be reversed may seem unduly passive or negative. Nevertheless, if the case appears reasonably close and the appellant’s position seeks to change existing law, clarify a substantial ambiguity in the law, or resolve a conflict existing in the lower courts, appellees should consider mentioning remand as an alternative case resolution.

By the same token, appellants seeking a rendition of judgment should consider whether the appellate court may consider a remand and, if so, present arguments to preempt such a remedy. The appellant might wish to emphasize that the underlying law was clear and the appellee was warned in advance that its evidence would be insufficient. Appellants might also point out that the age of the case or the situations of the parties make remand for new trial an unsatisfactory remedy.

• Print
• Comments
• Trackbacks
• Share Link

Implicitly marking the 20th anniversary of its seminal decision in Knight v. Jewett, which established the doctrine of primary assumption of the risk, the California Supreme Court confirmed both the continuing vitality and breadth of that decision in Nalwa v. Cedar Fair (2012), S195031. In Knight, a plurality of the Supreme Court held that a player in a touch football game had no duty to prevent injuries resulting from the inherent risk of playing this contact sport. In Nalwa, the Court confirmed 6-1 that this doctrine remains the law in California and also that it extends to the operator of bumper cars at an amusement park, and the inherent risks of, well, bumping. In both cases, the Court held that the only duty of operators, sponsors and fellow participants engaged in a recreational activity with inherent risks was not to increase those risks.

Guided by the facts in Knight, and its companion case Ford (which applied this doctrine to noncompetitive waterskiing), the most common application of primary assumption of the risk has involved physical sports, although the courts have sometimes used a broad definition of "sport," including: downhill skiing (Cheong – colliding skiers), baseball (Avila – injury from an inside pitch), motorcycle “off-roading” (Distefano – colliding motorcycles), golf (Shin – getting hit by an errant ball), sport fishing (Mosca – getting hit with a someone else’s fishing line ), rock climbing (Regents – falling to death after anchors gave way), river rafting (Ferrari – rider struck her head on the raft frame), and even a noncompetitive group bicycle ride (Moser – colliding bicycles), and a group motorcycle ride toy drive (Amezcua – against the organizers, after a 3rd party collided with a motorcycle). This doctrine also extends to the training and instruction of athletic activities, so that coaches and trainers have a duty not to increase the inherent risks of training for and learning a given sport (e.g., Kahn – addressing a coach’s instructions to dive into a shallow pool). Sports spectators also assume the risk of being in the vicinity (e.g., Nemarnik – hockey fan hit by a puck).

However, the language in Knight and Ford is broader than just sports or athletics, and more generally addresses recreational activities, repeatedly referring to the inherent risk in "the activity or sport" at issue. Following suit, a recent lower court decision abandoned any pretense that an activity had to be considered a sport and applied primary assumption of the risk to an injury resulting from participation in the closing fire ritual at the annual Burning Man festival, an event which was not, in any way, a sport. In Beninati, the plaintiff tripped and fell into the remains of a substantial bon fire, having deliberately walked through the remaining embers. In essence, the court found that if you play with fire you may well get burned, and no one else has a duty to prevent this.

In Nalwa, the Supreme Court clarified the scope of primary assumption of the risk as it applies to recreational activities, consistent with Knight and Ford, whether or not the activity might constitute a sport, such as bumper cars. As clarified, the doctrine applies to 1) recreational activities, 2) that involve an inherent risk of injury, 3) to voluntary participants, 4) where the risk cannot be eliminated without altering the fundamental nature of the activity, 5) and in which the participants are actively engaged. The last point was the basis on which Nalwa distinguished bumper cars from roller coasters. Once engaged, bumper cars are individually controlled by each driver, much like players in a sport, and this is an inherent part of the activity. In contrast, participants are only passively engaged in roller coasters, having surrendered all control over the carriage to the operator, who is therefore held to the duty of a common carrier for hire (as held in Gomez). Finally, this doctrine is not barred by the existence of regulations governing the recreational activity, including safety regulations, although such regulations could establish negligence per se, or set the bar on what risks are considered inherent.
 

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court has announced its anticipated filing dates for January and February. Opinions are expected on Friday, January 25; Thursday, February 7; and Friday, February 22. Decisions on petitions for rehearing are expected on Monday, January 28^th and decisions on petitions for leave to appeal are expected on Wednesday, January 30.

The Court made substantial progress in December with handing down decisions on cases heard during its September term. The remaining cases awaiting decisions from that term are:

Call of the Docket for September 19

• In re Estate of Boyar, No. 113655 – (1) Is the doctrine of election recognized with respect to trusts? (2) If so, should the doctrine be applied when the property accepted was allegedly nominal in value? For our preview of the case, see here. For our report on the oral argument, see here. 

Call of the Docket for September 20

• Ferguson v. Patton, No. 112488 -- (1) Does Section 2-56-040 of the Chicago Municipal Code authorize the Inspector General of the City of Chicago to hire private counsel to enforce subpoenas? (2) May the Inspector General sue the Corporation Counsel of Chicago to enforce subpoenas? For our preview of the case, see here. For our report on the oral argument, see here.
   
• The Hope Clinic for Women v. Adams, No. 112673 et seq. -- Did the trial court properly dismiss an action challenging the constitutionality of the Illinois Parental Notice of Abortion Act, brought solely under state law, on the grounds that the plaintiffs' equal protection and due process claims were barred by collateral estoppel, and the plaintiffs' privacy claim was barred because Federal privacy law would require dismissal, and state privacy protections were interpreted in lockstep with Federal law? For our preview of the case, see here. For our report on the oral argument, see here.

Turning to the November term, the Court has five civil cases which might be decided in either January or February. They are:

Call of the Docket for November 15

• Griggsville-Perry Community Unit School District No. 4 v. Illinois Educational Labor Relations Board, No. 113721 et seq. – May an arbitrator apply “industrial common law” to find to find that a terminated employee had a right to a statement of specific acts or omissions allegedly justifying termination where the union contract at issue barred the arbitrator from modifying, nullifying, ignoring or adding to the terms of the contract? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.

Call of the Docket for November 20

• State Bank of Cherry v. CGB Enterprises, Inc., No. 113836 -- (1) Does the Federal Food Security Act of 1985, 7 U.S.C. § 1631(e), preempt the state UCC for purposes of security interests on crops? (2) If so, does the Act require strict or substantial compliance in order to effectively attach a security interest when crops are sold? Our pre-argument preview is here. Our report on the oral argument is here.
   
• Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund, No. 113873 -- Was a self-insuring employer's claim for reimbursement for workers compensation benefits paid a claim for workers compensation exempt from the Fund's $300,000 liability cap under 215 ILCS 5/537.2? (2) Was a self-insuring employer an "insurer" under the Act, meaning that it was obligated to continue paying benefits until it became insolvent, rather than seeking reimbursement from the Fund? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.
   
• Poris v. Lake Holiday Property Owners Association, No. 113907 – (1) May a property association authorize private security officers to stop and detain persons on its property for speeding on association-owned roads? (2) May such an association place oscillating amber lights on vehicles used by its security department? (3) Where plaintiff was ordered by a security officer to remain in his vehicle while a citation for speeding on association-owned roads was prepared, did the plaintiff adequately plead the elements of false imprisonment? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.
   
• Bjork v. O’Meara, No. 114044 – Does the six-month statute of limitations in the Probate Code, 755 ILCS 5/8-1, apply to a separate tort action for interference with testamentary expectancy which -- if successful -- would have the practical effect of invalidating the will? Our in-depth review of the facts and lower court rulings is here. Our pre-argument preview is here. Our report on the oral argument is here.

• Print
• Comments
• Trackbacks
• Share Link

The Texas Supreme Court’s opinion in Natural Gas Pipeline Company of America v. Justiss highlights a subtle but important point regarding the way appellate courts treat undisputed facts. The case concerned claims by neighboring landowners that a natural gas plant created offensive odors, thus constituting a permanent nuisance. The statute of limitations for permanent nuisance is two years. It was undisputed that the defendant began receiving odor complaints well before two years prior to suit. Nevertheless, the jury selected a date for the accrual of the cause of action that was within the limitations period.

The defendant contended on appeal that the undisputed evidence of prior complaints conclusively demonstrated that any cause of action for permanent nuisance accrued beyond the limitations period. The Supreme Court, however, disagreed. While the jury was not free to disregard the fact that some complaints had been made, it was not forced to draw the conclusion that a cause of action existed at that time. The jury could have determined that the earlier complaints were from hypersensitive persons and that a reasonable person would not have been offended by the odors until less than two years prior to suit. This possible conclusion was bolstered by evidence that the odor conditions had worsened over time.

The Justiss case highlights the need to distinguish between facts concerning discrete events (a complaint occurring on a particular date) and factual conclusions (a reasonable person would have had cause to complain on a particular date). Only when an undisputed fact can lead to a simple valid conclusion is it “conclusive” in a legal sense. In arguing the effect of undisputed facts, the advocate must take the next step and show how only one conclusion may be drawn from it.

• Print
• Comments
• Trackbacks
• Share Link

Texas has long adhered to the “Property Owner Rule,” permitting property owners to testify as to the value of their property. Recent cases have emphasized that the testimony must relate to market value, rather than intrinsic or other value.

In Natural Gas Pipeline Co. of America v. Justiss, the Texas Supreme Court clarified that the Property Owner Rule only serves to relieve the property owner of the need to retain a qualified expert. In effect, each owner is deemed a qualified expert as to his or her own property. Critically, however, all other requirements of admissibility of opinion testimony remain in effect. The property owner must show that the testimony is grounded in the facts of the market and is not speculative or conclusory.

The Supreme Court held that the property owners before it—who were bringing a permanent nuisance suit against a malodorous gas plant—did not adequately explain the factual basis of their testimony regarding reduction in value. Rather than render judgment for the defendant, the Supreme Court remanded the action to the trial court, explaining that its prior case may have misled the property owners into believing their testimony was sufficient.

Many Texas practitioners have assumed that the valuation testimony of a property owner is per se admissible. The Justiss case provides a pointed reminder that even a property owner must show some kind of appropriate methodology to testify about the value of property.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the civil cases to be heard by the Illinois Supreme Court during the upcoming January term concludes with Gruszeczka v. The Illinois Workers' Compensation Commission [pdf]. Gruszeczka poses an important question: does the mailbox rule apply to initiating judicial review of decisions of the Workers' Compensation Commission?

The claimant in Gruszeczka filed an application for adjustment of claim with the Commission, seeking workers' comp benefits in connection with an injury he allegedly sustained on the job in 2004. The arbitrator denied the claim, and the Commission unanimously affirmed. The claimant's attorney received a copy of the Commission's decision on April 20, 2009.

The claimant sought judicial review, which is initiated in Illinois workers' comp practice by filing a request for the issuance of summons and an attorney's affidavit of payment of the probable cost of the record with the Circuit Court clerk. The claimant's request and affidavit were file stamped by the clerk on May 14, 2009 -- twenty-four days after receiving the decision.

The employer moved to dismiss, arguing that the action was filed more than 20 days after counsel received the decision. The claimant responded with an affidavit of his attorney's office clerk, who testified that she had mailed the request and counsel affidavit on May 4, fourteen days after receiving the decision. The Circuit Court denied the motion to dismiss, but affirmed the Commission's decision on the merits.

A divided six-Justice panel of the Workers' Compensation Commission Division of the Appellate Court reversed in part, finding that the Circuit Court lacked jurisdiction over the administrative appeal. The governing provision of the Act provides that a proceeding for judicial review must be "commenced" within 20 days of receipt of notice of the decision. 820 ILCS 305/19(f)(1). The Court acknowledged that the Supreme Court had applied the mailbox rule to the filing of a notice of appeal from the circuit court to the Appellate Court in Harrisburg-Raleigh Airport Authority v. Dept. of Revenue. However, the majority read Harrisburg-Raleigh as a material change -- rather than a construction -- of a judicial rule. But the jurisdiction of the Circuit Court wasn't governed by judicial rule, it was governed by a statute -- one that the Court had no authority to modify in order to align it with the drift of modern practice. The legislature "certainly knows how to provide" for application of the mailbox rule when it chose to do so, the majority wrote, and the legislature had not done so in Section 19(f)(1).

Justice Bruce D. Stewart dissented. Justice Stewart pointed out that the mailbox rule applied to the final step in a workers' comp appeal -- the filing of a notice of appeal from the Circuit to the Appellate Court -- under Harrisburg-Raleigh, and to appeals from the arbitrator to the Commission under Norris v. Industrial Commission. According to Justice Stewart, the majority's attempt to distinguish Harrisburg-Raleigh was unavailing because the distinction between a statute and Court rule was without a difference, since Court rules are interpreted in Illinois pursuant to the same standards that govern statutes.

Justice William E. Holdridge -- the author of Norris -- both joined in Justice Stewart's dissent and filed his own separate dissent. Justice Holdridge concluded that how an action was "commenced" within the meaning of Section 19(f)(1) was ambiguous, and the term should have been interpreted consistently with the mailbox rule set forth in Harrisburg-Raleigh and Norris, as well as other contexts.

Gruszeczka will be argued during the 9:00 a.m. session of the Court on Thursday, January 24th.

• Print
• Comments
• Trackbacks
• Share Link

We continue our previews of the civil cases scheduled for oral argument during the Illinois Supreme Court's January term with VC&M, Ltd. v. Andrews.

VC&M arises from a real estate dispute. The defendants were in the process of getting a divorce. They signed a contract with the plaintiff to list their residence. Plaintiff found a buyer, who put in a bid for less than the asking price. Defendants rejected the offer and declined to make a counter offer. Not long after, the wife allegedly informed one of the realtors that the defendants weren’t selling the home after all; the wife would buy out the husband’s interest and continue living there.   A few months after the listing agreement expired, the Circuit Court entered a judgment of divorce with respect to the defendants which incorporated a property settlement. The settlement agreement valued the marital home at $5 more than the rejected offer from the prospective buyer. 

The plaintiff then sued the defendants for breach of contract and account stated. The defendants moved to dismiss the complaint for failure to state a claim, and the Court dismissed.

But VC&M isn’t about real estate or contract law. Rather, it’s about a major issue facing Illinois courts, like cash-strapped judiciary systems around the country: e-filing of pleadings. Courts are turning to e-filing in part in order to eliminate the enormous costs of storing paper pleadings. For example, according to Chief Justice Thomas L. Kilbride, Cook County spent nearly $16 million in 2011 just for storage of Circuit Court documents. The Supreme Court announced statewide e-filing standards for trial courts in October 2012, and five counties have been approved to operate pilot projects.

One of those five counties is DuPage, where VC&M arose. Thirty days after the complaint was dismissed, the plaintiff e-filed a motion for reconsideration. The motion was denied the following month, and thirty days after the denial, the plaintiff e-filed a notice of appeal.

The case was technically eligible to be designated as an e-filing case, but the plaintiff hadn’t taken any of the steps necessary to designate it as an e-filing case before e-filing the all-important motion for reconsideration and notice of appeal. Neither the complaint, amended complaint or answer had been e-filed, and the parties hadn’t stipulated to e-filing. And the Local Rules appeared to bar e-filing appellate documents outright.

The Second District of the Appellate Court dismissed plaintiffs’ appeal for lack of jurisdiction, holding that plaintiffs’ failure to comply with the Local Rules regulating e-filing was fatal. First, since the case had not been appropriately designated an e-filing case, the e-filed motion for reconsideration – although technically timely – was ineffective. Since there was no timely filed motion for reconsideration, the Notice of Appeal was untimely. And since the Notice of Appeal couldn’t properly be e-filed at all, it would have been ineffective even if it had been technically timely.

VC&M will be an interesting opportunity for the Supreme Court, if it chooses, to give further guidance to the bar and the lower courts about the rules governing e-filing of pleadings. The Supreme Court will hear argument during the 9:00 a.m. session on Thursday, January 24.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court has posted its docket for the impending January term, and the Court will hear argument in five civil cases.

The civil portion of the Court’s docket begins during the 9:00 a.m. session on Wednesday, January 16 with McFatridge v. Madigan. McFatridge, which we previewed here,involves a dispute between a former State’s Attorney and the State over liability for the plaintiff’s attorneys fees incurred when he was sued for malicious prosecution. The question turns on the interpretation of the Illinois State Employee Indemnification Act. 5 ILCS 350/2(b)

Russell v. SNFA, which will be argued during the 9:00 a.m. session on Wednesday, January 23, raises questions of general and specific jurisdiction over a French-based manufacturer of custom-made aerospace bearings and helicopter tail-rotor bearings. Our preview of Russell is here. Russell presents the Supreme Court with its first opportunity to squarely apply J. McIntyre Machinery, Ltd. v. Nicastro, the United States Supreme Court’s landmark 2011 decision on the limits to jurisdiction over foreign-based manufacturers.

DeHart v. DeHart, which we previewed here, presents interesting issues of both wills & estates law and adoption law. The plaintiff’s challenge to the testamentary capacity is based upon the decedent’s statement in his will that he had no children. Was that sufficient grounds to take the challenge before a jury? The case also involves issues of when a jury may permissibly infer the existence of an enforceable contract to adopt, and whether Illinois should recognize the theory of adoption by equitable estoppel.

We’ll post our previews of the Court’s remaining two civil cases, VC&M, Ltd. v. Andrews and Gruszeczka v. Illinois Workers’ Compensation Commission, both of which will be argued during the 9:00 a.m. session on Thursday, January 24^th, shortly.

• Print
• Comments
• Trackbacks
• Share Link

Under Illinois law, courts may under certain circumstances enter a judgment of dissolution in a divorce case and wait until later, as part of a bifurcated proceeding, to enter a property distribution judgment. The problem with that is that sometimes the parties' sense of urgency to get the proceeding over with dims once the marriage has been dissolved. Even worse, if a business (or the economy) is either growing or contracting quickly, one party or another may assume he or she will do better in the property distribution by waiting.

So in such cases, as of what date should courts value the marital property -- the date of dissolution, or the date of the trial on the property issues? On Friday morning, a divided Illinois Supreme Court held in In re Marriage of Mathis [pdf] that property is valued on the date of the grounds trial. Our detailed summary of the facts and lower court holdings in Mathis is here. Our report on the oral argument is here.

In Mathis, the husband filed for divorce in November 2000; the judgment of dissolution was entered four months later. But then, a long series of delays followed, and the trial court ultimately set a valuation date for the marital property of December 31, 2010 -- nearly ten years after the judgment of dissolution. On the husband's motion, the trial court certified a question for interlocutory appeal: when there is a "lengthy delay" in a bifurcated divorce between the dissolution trial and the ancillary issues trial, what date governs valuation? The Appellate Court held that the date of trial for the ancillary issues governs.

With Justice Mary Jane Theis writing for a four-Justice majority, the Supreme Court reversed. As we've noted in our earlier posts, the statute isn't much help. According to Section 503(f) of the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/503(f), in a bifurcated dissolution period, the valuation date is "the date of trial or some other date as close to the date of trial as is practicable." But it doesn't say which "trial" is intended when there are two as part of a bifurcated proceeding.

The majority found it significant that since Section 503(f) was enacted, a "long and consistent line of cases" have held that the relevant valuation date is the date of dissolution. The legislature has amended the statute at least ten times during the twenty years it's been on the books -- presumably with knowledge of this line of authority -- and has never changed the relevant language. The majority pointed to other provisions of the statute as well, including the language of section 503(b)(1) providing that property acquired by either spouse "after the marriage and before a judgment of dissolution" was presumptively marital property.

The majority also worried that setting the valuation date as the date of the ancillary proceedings created perverse incentives, giving parties a reason to allow the proceedings to drift, hoping that the property would change in value. On the other hand, setting the valuation date as the date of dissolution encouraged the parties to "stop litigating" and "discourages gamesmanship." Therefore, the date of valuation should be the date of dissolution, even in bifurcated divorce proceedings.

The majority acknowledged that although bifurcated proceedings were justified in some cases, courts should be reluctant to allow bifurcation:

[T]he systematic interests in achieving finality, promoting judicial economy, and avoiding piecemeal litigation will typically militate in favor resolving all ancillary issues before entering a judgment of dissolution . . . we encourage the parties and their attorneys, as well as future litigants and their counsel, to remain mindful of the pitfalls associated with bifurcation.

Justice Rita B. Garman dissented, joined by Chief Justice Thomas L. Kilbride and Justice Robert R. Thomas. The dissenters concluded that "the parties marital and nonmarital property should be valued as of the date of the trial on that issue or on a date as near as practicable to that date."

The dissenters analyzed the line of cases relied upon by the majority, arguing that several were decided before Section 503(f) was adopted in 1993, and the remainder were distinguishable. The rule "has never been applied," the dissenters argued, in circumstances where a significant change in value of the marital asset had occurred between dissolution and the ancillary proceedings.

After analyzing the structure of the statute, the dissenters concluded that Section 503 did not speak to situations where bifurcation was the result of the agreement of the parties, or was granted upon motion by one party and a finding of appropriate circumstances. That "gap in the legislative scheme" should be resolved by valuing property under such circumstances as of the date of the ancillary proceedings distributing the parties' marital property. If the property either increased or decreased significantly in value as the result of the efforts of one party between the dissolution and the ancillary proceedings, that would be taken into account in distributing the property.

• Print
• Comments
• Trackbacks
• Share Link

May a lifelong resident of Mississippi who alleges that he was exposed to asbestos and assorted other allegedly toxic agents while working out of the defendant's Jackson Mississippi facility nevertheless sue for his alleged injuries in Illinois, even though numerous potential witnesses lived in Mississippi and plaintiff alleged no exposure here? On Friday morning, the Illinois Supreme Court answered "No," reversing the Appellate Court in Fennell v. Illinois Central Railroad Co. [pdf] with instructions that the case be dismissed. Our detailed description of the underlying facts and lower court rulings appears here. Our report on the oral argument is here.

The plaintiff in Fennell worked for the defendant railroad for thirty-seven years. He alleged that during that time, he was exposed to asbestos, diesel exhaust, sand, environmental tobacco smoke and toxic dusts, fumes and gases. Illinois wasn't the plaintiff's first choice of forum: he initially filed a putative class action in Pike County, Mississippi. That action was dismissed without prejudice, but rather than refiling in Mississippi, the plaintiff opted to file the action anew in St. Clair County, Illinois. The defendant moved to dismiss based on interstate forum non conveniens, arguing that the action belonged in Mississippi. The Circuit Court denied the motion to dismiss. The defendant appealed, but a divided panel of the Appellate Court affirmed.

In an opinion by Justice Charles E. Freeman, the Supreme Court reversed, remanding the action with instructions that the Circuit Court should dismiss. The Court held that in resolving forum non conveniens motions, Illinois courts apply the public-and-private-factors analytical framework derived from Gulf Oil Corp. v. Gilbert. The court does not balance the factors against one another; rather, the court determines whether the total circumstances of the case strongly favor dismissal (in interstate cases) or transfer (in intrastate cases). The Supreme Court cautioned lower courts to include all of the relevant public and private factors in analyzing such motions.

Although the Court acknowledged that a plaintiff's choice of forum is typically entitled to deference, the Court strongly condemned forum shopping:

Decent judicial administration cannot tolerate forum shopping as a persuasive or even legitimate reason for burdening communities with litigation that arose elsewhere and should, in all justice be tried there.

Accordingly, when the plaintiff doesn't reside in the chosen forum and the action didn't arise there, the plaintiff's choice of forum is entitled to less deference. This principle applied in Fennell, since the plaintiff was a Mississippian who alleged no exposure in Illinois, and had not even originally filed here.

Turning to the Gulf Oil factors, the Court found that the relative ease of access to testimonial, documentary and other evidence weighed heavily in favor of dismissal, since many witnesses resided in Mississippi and almost none lived in Illinois. The Court rejected the plaintiff's argument that the residency of witnesses should be accorded little weight since some might not testify, finding that requiring extensive investigation to determine which witnesses are important before bringing a forum non conveniens motion would defeat the purpose of the motion to quickly terminate improperly filed actions. Many documents were apparently located in the Illinois offices of the defendant's counsel, but the Court found that the physical location of documents, records and photographs was a less significant factor in the modern world of internet, email, fax, copying machines and worldwide delivery services.

The majority also criticized the lower court for disregarding the possibility of the jury viewing the relevant premises. The Court pointed out that this factor is not concerned with whether or not a jury view would be necessary, but whether it would convenient if it turned out to be appropriate. Since plaintiff had never worked in Illinois, the Court concluded that this factor weighed in favor of dismissal as well.

After concluding that the private interest factors weighed heavily in favor of dismissal, the Court turned to the public interest factors. Although the Court placed no weight on the relative congestion of the relevant Illinois and Mississippi court systems, the Court found that other factors weighed heavily towards dismissal. For example, the case had already imposed significant burdens on the Illinois judiciary despite the state having virtually no connection to the dispute. The Court flatly rejected the plaintiff's contention that the defendant's doing business in Illinois alone, without more, was sufficient to give Illinois an interest in the litigation. Because both the private and public factors weighed heavily in favor of dismissal, the Court held that the action should be dismissed.

Chief Justice Thomas L. Kilbride dissented.  According to the Chief Justice, since defendant's offices were more or less equidistant from Mississippi and Illinois, the convenience of the parties didn't weigh towards dismissal. Many potential witnesses lived in Mississippi, but it was unclear how many would actually testify, the Chief Justice wrote. The plaintiff's expert witness lived in Chicago, and key defense witnesses were once again equidistant from the two competing forums. Like the Appellate Court, the Chief Justice concluded that it would be more convenient to present documents currently located in Illinois at trial in Illinois that transporting them to Mississippi. The Chief Justice dismissed the significance of a jury view of the premises, writing that it seemed quite unlikely that any premises would still be in the same condition as when the plaintiff worked in them. As for the public interest factors, the Chief Justice wrote that the controversy was not particularly localized, and that Illinois had a sufficient interest in toxic exposures in transportation to justify trial in Illinois. The Chief Justice concluded that the factors were "fairly evenly balanced," so dismissal was not appropriate.

 

• Print
• Comments
• Trackbacks
• Share Link

Under Illinois law, a judgment of foreclosure does not end a mortgage foreclosure case; it remains modifiable by the trial court and is strictly interlocutory. After such a judgment is entered, the property is sold once periods for reinstatement and redemption have expired. The person who conducted the sale then reports to the court and, upon motion, the court holds a hearing to confirm the sale, at which  the defendant may challenge the sale (albeit on limited grounds). Only after the sale is confirmed and final judgment is entered may the purchaser obtain a deed.

So at what point in this process may a property owner appeal? That was the question posed in EMC Mortgage Corp. v. Kemp [pdf]. Yesterday, the Illinois Supreme Court held that an appeal lies only from the final judgment confirming the sale, affirming the Appellate Court in a 6-1 decision by Justice Charles E. Freeman. Click here for our detailed history of the facts and underlying holdings in Kemp, and here for our report on the oral argument.

The plaintiff in Kemp originally filed its foreclosure complaint in the summer of 2006. After a complex set of challenges from the defendant, a judgment of foreclosure was finally entered in June 2009, and a judicial sale scheduled. After unsuccessfully moving for reconsideration, the defendant filed for bankruptcy. When the bankruptcy stay was lifted, the defendant challenged plaintiff's standing, pointing out that the plaintiff appeared to have acquired its interest in the mortgage well after filing the action. The Circuit Court refused to vacate the judgment of foreclosure, but stayed the foreclosure sale for a time. The Court also added Rule 304(a) language to the order, finding that an immediate appeal was appropriate. The defendant moved for reconsideration of the refusal to vacate. The Circuit Court denied this motion as well, although it once again added Rule 304(a) language to its order. The defendant appealed, seeking review of the Court's order denying her motion to vacate and her subsequent motion for reconsideration.

Before the Appellate Court, the plaintiff argued that Rule 304 language could only make an order which was otherwise appealable final, and the judgment of foreclosure wasn't appealable. The defendant argued that since her initial motion was one to vacate under Section 2-1401 of the Code of Civil Procedure, 735 ILCS 5/2-1401, she didn't need the Rule 304 language in the first place -- the order was already appealable. The Appellate Court held that a Section 2-1401 motion was improper when the underlying order wasn't final - which the judgment of foreclosure wasn't - dismissed the appeal for lack of jurisdiction.

The Supreme Court affirmed. The defendant's appeal suffered from a series of problems, the Court found. First, since there was no underlying final order or judgment, the Appellate Court was right - relief under Section 2-1401 wasn't available. Second, although a judgment of foreclosure was final, it wasn't appealable without Section 304(a) language -- and although the defendant had sought and obtained such language for the Section 2-1401 order and the order denying reconsideration of that order, she had not gotten such language on the judgment of foreclosure itself. Third, neither the denial of the improper motion to vacate nor the denial of the motion for reconsideration were final or appealable in themselves. The mere addition of Rule 304(a) language didn't fix the problem, the Court held, because such language could only make an otherwise final order appealable.

The defendant argued that she was attacking void judgments and orders, which may be done at any time. The Court rejected defendant's argument, holding that the doctrine of void orders could not confer appellate jurisdiction where it was otherwise absent.

Justice Lloyd A. Karmeier dissented. Justice Karmeier concluded that the aim of defendant's procedurally flawed motion to vacate the judgment of foreclosure, and her subsequent motion to reconsider the denial of her motion to vacate, was clear - a frontal attack on the foreclosure itself. Therefore, Justice Karmeier argued, the orders at issue could be properly treated as motions to reconsider the judgment of foreclosure. Since Illinois courts have long held that Rule 304(a) language appended to orders on motions for reconsideration suffices to make the underlying judgment or order appealable, the Rule 304(a) language on the defendant's two orders was sufficient to make the judgment of foreclosure itself appealable.

Justice Karmeier closed by pointing out that the majority's opinion might ultimately accomplish nothing beyond expending the time and resources of the parties. When the action returned to the Circuit Court, the defendant was free to file a proper motion to reconsider the judgment of foreclosure. Having done so twice before, the Circuit Court would presumably append Rule 304(a) language to the order denying the motion for reconsideration. Once that was done, the procedural issues on which the majority's opinion turned were eliminated, and the same issues would once again rise to the Appellate Court. Even if the majority were unwilling to muddy the settled rules of appellate review by treating the defendant's motions as ones for reconsideration, Justice Karmeier suggested yet another road open to the Court to reach what he regarded as a just result while saving time and resources: simply vacate the Appellate Court's Rule 23 order dismissing the action and order the Court, as an exercise of the Supreme Court's supervisory authority, to consider the appeal on the merits.

• Print
• Comments
• Trackbacks
• Share Link

Cooney v. Rossiter presented two questions: (1) was the plaintiffs' individual action barred by the dismissal of an earlier putative class action; and (2) is a court-appointed psychological evaluator in a child custody proceeding entitled to absolute immunity from suit by one of the parents in the action. This morning, the Illinois Supreme Court affirmed the Appellate Court with respect to res judicata, but declined to decide the broader absolute immunity issue.

Cooney arose from a contentious divorce. Plaintiff Deborah was awarded custody of her two children.  In 2001, plaintiff's ex-husband filed for a change of custody.  She sought appointment of a psychological evaluator in order to provide recommendations about the best interests of her children.  The trial court appointed defendant, pursuant to Section 5/605 of the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/605). The defendant concluded that plaintiff Deborah and her parents (the co-plaintiffs) suffered from Munchausen's by Proxy Syndrome and parental alienation syndrome. The defendant accordingly opined that Deborah's treatment of the child Christopher was child abuse.  According to the plaintiffs, the defendant deliberately made false statements to an investigator from the Illinois Department of Children and Family Services, resulting in a finding by the DCFS against plaintiff Deborah for child abuse.

The plaintiffs filed a federal class action civil rights suit against the defendant and 11 other defendants who had played a role in the child custody proceedings. The district court dismissed and the Seventh Circuit affirmed.  Cooney v. Rossiter, 583 F.3d 967 (7th Cir. 2009).  So the plaintiffs sued the defendant in state court, alleging intentional infliction of emotional distress and false statements.  The state court dismissed based on absolute immunity and res judicata. The Appellate Court affirmed, holding that res judicata barred the plaintiffs' new suit. In the alternative, the Court found that the defendant was entitled to absolute immunity, relying upon the Seventh Circuit's decision in the earlier class action.

In an opinion by Chief Justice Thomas L. Kilbride, a unanimous Supreme Court affirmed, finding that all three requirements for application of res judicata were satisfied.

The first factor was satisfied when the federal court entered a final judgment on the plaintiffs' 1983 action.

The plaintiffs argued that the second factor - an identical cause of action - was not satisfied because the federal civil rights claim and the common law claim for intentional infliction were not the same. The Court pointed out that Illinois follows a "transactional test" for this factor -- two actions were the "same cause of action" whenever they arose from a single group of operative facts, which plaintiffs' Federal and state law claims certainly did. Plaintiffs argued that their intentional infliction of emotional distress claim could not have been brought as part of the class action, but the Court found that plaintiffs could have brought individual claims as part of the 1983 class action. The Court concluded that it would have made no difference even if the Federal court had refused to hear such an individual claim, since the plaintiffs had created the problem by filing an initial Federal class complaint.

The Court further found that the third res judicata factor, identity of parties, was met, since all of the plaintiffs were either parties to the Federal action, or privies to parties. Having found that res judicata justified dismissal of the plaintiffs' state court action, the Court vacated the Appellate Court's discussion of the absolute immunity issue as unnecessary to the result.

This last step brought a special concurrence from Justice Anne M. Burke, joined by Justice Charles E. Freeman and Justice Mary Jane Theis. Justice Burke argued that the issue of absolute immunity, not the "fact-specific" issue of res judicata, was the reason why the Court allowed the petition for leave to appeal. Because that issue was one of public importance, Justices Burke, Freeman and Theis concluded that the Court should have resolved it.

• Print
• Comments
• Trackbacks
• Share Link

Special Counsel Hall R. Marston recently published an article in the California Daily Journal on Sargon Enterprises v. USC (pdf), a new California Supreme Court opinion setting out Daubert-like standards for admissibility of expert testimony.  Anticipating interest in the article, the paper’s editorial staff arranged a video interview (subscribers only) for Hall to address the practical aspects of how Sargon is likely to impact a typical state court trial.  For more on Hall's insights on the Sargon opinion, see here.

• Print
• Comments
• Trackbacks
• Share Link

This morning, the Illinois Supreme Court announced that it will issue four more civil opinions on Friday morning to close out 2012. The upcoming decisions deal with issues as diverse as res judicata and absolute immunity, foreclosure judgments and appealability, domestic relations property settlements and forum non conveniens in tort actions. The four cases are:

• Cooney v. Rossiter, No. 113227 – (1) Was the plaintiffs' action barred pursuant to res judicata by the earlier Federal action, even though the earlier Federal action was a class, rather than an individual claim? (2) Did a court-appointed psychological evaluator in a custody hearing have absolute immunity from suit for alleged misconduct in connection with his opinions? For our preview of the case, see here. For our report on the oral argument, see here.
   
• EMC Mortgage Corp. v. Kemp, No. 113419 – (1) Is a judgment of foreclosure final and appealable, or must an appeal await a final order approving the sale and distributing the proceeds? (2) Is an order of foreclosure immediately appealable when standing is challenged on the grounds that the order is void? For our preview of the case, see here. For our report on the oral argument, see here.
   
• Mathis v. Mathis, No. 113496 – In a bifurcated dissolution proceeding, when a grounds judgment has been entered, and when there is a lengthy delay between the date of entry of the grounds judgment and the hearing on ancillary issues, is the appropriate date for valuation of marital property the date of dissolution or a date as close as practicable to the date of trial of the ancillary issues? For our preview of the case, see here. For our report on the oral argument, see here.

• Fennell v. Illinois Central Railroad Co., No. 113812 – Did the trial court err by denying defendant's motion for dismissal pursuant to forum non conveniens of an asbestos injury claim brought by a non-resident of Illinois? For our preview of the case, see here. For our report on the oral argument, see here.

Our reviews of the final four civil decisions of the year will begin Friday afternoon. In the meantime, happy holidays to all.

• Print
• Comments
• Trackbacks
• Share Link

Our previews of the new civil cases granted review at the end of the Illinois Supreme Court’s November term conclude with Crittenden v. Cook County Commission on Human Rights [pdf]. Crittenden involves a question of administrative law which, depending on the breadth of the Court’s ultimate decision, could have broad implications: when can an administrative board award punitive damages?

Crittenden arises out of a sexual harassment claim. A bartender working at a Cook County bar filed a police report against her supervisor, resulting in a criminal trial at which he was acquitted. Shortly thereafter, the alleged victim filed a complaint with the Cook County Commission on Human Rights, alleging that her supervisor’s alleged conduct violated the Cook County Human Rights Ordinance. After a contentious hearing on the complaint, a hearing officer recommended that the employee receive an award of lost wages, compensatory and punitive damages. The Commission adopted the hearing officer’s recommended order.   The supervisor and the bar filed a petition for writ of certiorari with the Circuit Court, seeking administrative review of the Commission’s decision. The Court denied the writ, affirming the Commission’s decision on liability and compensatory and punitive damages.

The Appellate Court (First District, Sixth Division) affirmed the Commission in most respects. The appellants – the supervisor and the bar – argued that the Commission’s determination that the complainant was more credible that the appellants’ witnesses was against the manifest weight of the evidence. The Appellate Court rejected the argument, concluding that the appellants were essentially asking the Court to reweigh the evidence and substitute its assessment of credibility on a cold record for that of the hearing officer and Commission. The Appellate Court also found no reason to disturb the decision of the hearing officer, confirmed by the Commission, to allow the complainant to contradict her complaint with respect to the date of the principal events at issue.

The appellants also claimed that the hearing officer and Commission had erred by considering hearsay – testimony that the employee’s son had accompanied her to the bar the day after the principal events and damaged the bar in a fit of anger. The Appellate Court disagreed, pointing out that the rules of evidence didn’t apply to Commission proceedings, and any error in considering the expressive acts of the son was harmless anyway. The Court also concluded that there was sufficient evidence in the record to support the award of compensatory damages, and that the appellants hadn’t proven that the plaintiff failed to mitigate her damages.

The Court reversed the Commission’s award of punitive damages, however. According to the Court, in an action based on a statutory violation, punitive damages may be awarded either because the statute authorizes them, or the facts of the case support common law punitive damages. The Court concluded that the Cook County Human Rights Ordinance doesn’t authorize punitive damages awards, either expressly or by fair implication. Although the Ordinance states that the enumerated penalties are not an exhaustive list, the Court observed that each of the enumerated penalties is compensatory in nature, rather than a windfall like punitive damages. The Court also thought it was significant that the power to award punitive damages was expressly given in other ordinances, suggesting that if such a power had been intended, the Ordinance would say so.

The Appellate Court acknowledged that Division One of the First District had come to the opposite conclusion in Page v. City of Chicago, holding that the Chicago Human Rights Ordinance does permit an award of punitive damages for acts of sexual harassment and discrimination, but the Court declined to follow Page, noting among other things that the Page Court had failed to adequately address the limited powers of administrative agencies.

Finally, the Court refused to permit a common law award of punitive damages. As an administrative agency, the Commission had no common law authority, the Court held. Moreover, even if the Commission did have such authority, the Court pointed out that the Commission had made no findings that the supervisor’s alleged actions were committed with malice, or any of the other grounds which justify a common law award of punitive damages.

We expect the Supreme Court to decide Crittenden within four to six months.

• Print
• Comments
• Trackbacks
• Share Link

Our previews of the new civil cases granted review at the end of the Illinois Supreme Court’s November term continue with The Board of Education of Peoria School District No. 150 v. The Peoria Federation of Support Staff, Security/Policemen’s Benevolent and Protective Association No. 114 [pdf]. Board of Education poses two questions: the constitutionality of a recent amendment to the Illinois Public Labor Relations Act relating to certain public employees’ right to strike, and the identity of the proper state administrative board to take jurisdiction over an unfair labor practice claim.

According to the complaint, the plaintiff is the only school district in Illinois which employs its own security officers (as opposed to securing its schools by coordinating with local police departments). The plaintiff’s officers have been represented by various iterations of a union since 1989. When the latest union contract expired in mid-2010, two disputes arose: one fight over the timing of the negotiations, and another over what state law governed the parties’ discussions.

The Public Labor Relations Act regulates labor relations between most public-sector employees and their employers. School districts and their employees are specifically excluded from the coverage of the Act – they fall, as a general matter, under the Educational Labor Relations Act. But by virtue of a 2010 amendment to the Public Labor Relations Act, “a school district in the employment of peace officers in its own police department in existence on the effective date of this amendatory Act of the 96^th General Assembly” is brought back within the coverage of the Act.

Note two things about the language of this “exception to the exception” : first, it only affects the plaintiff in Board of Education – the only school district in the state which employs its own security officers. And second, as written it can never affect anyone else – the class is closed on the effective date of the 2010 amendment. This potentially matters a great deal, since public employees who are subject to the Public Labor Relations Act and are employed as security personnel, peace officers, or firefighters are prohibited from striking – they are required to accept interest arbitration instead.   Employees subject to the Educational Labor Relations Act are, as a general matter, allowed to strike.

The plaintiff filed a two-count complaint, seeking (1) a declaration that the 2010 amendment to the Public Labor Relations Act was unconstitutional special legislation; and (2) that its negotiations with its security officers were governed by the Education Labor Relations Act, rather than the Public Labor Relations Act. The Circuit Court dismissed the complaint for failure to state a claim, but the Appellate Court reversed.

The Illinois Constitution prohibits “special legislation” – meaning statutes which discriminate in favor of a select group on an arbitrary basis. The distinction made by the Public Labor Relations Act between security officers employed by schools and those employed by others wasn’t the problem, the Appellate Court held. The problem was the language of the statute closing the class as of the effective date of the statute. Absent that clause, the distinction might have a rational basis: for example, ensuring that police officers, no matter who employed them, could not strike. But a statutory provision which applied to only one school district and could never apply to anyone else had no apparent rational basis, in the Court’s view. Therefore, the plaintiff’s constitutional challenge to the Public Labor Relations Act was sufficiently viable to go forward.

With respect to the plaintiff’s second claim, seeking a declaration as to whether its dispute fell under the jurisdiction of the state board administering the Education Labor Relations Act or the separate board administering the Public Labor Relations Act, the state boards argued that the plaintiff’s claim failed for failure to exhaust administrative remedies. The Appellate Court rejected the argument, concluding that the plaintiff’s claim was analogous to a challenge to the board’s jurisdiction, and thus exempt from the exhaustion requirement.

We expect the Supreme Court to decide Board of Education within four to six months.

• Print
• Comments
• Trackbacks
• Share Link

Our previews of the new civil cases granted review at the end of the Illinois Supreme Court’s November term continue with Hooker v. Retirement Fund of the Firemen's Annuity and Benefit Fund of Chicago, [pdf]. Hooker poses the question of whether the pensions for firefighter's survivors should be set for all time pursuant to the salary the firefighter was receiving at the time of his or her death.

Decedent #1 suffered a stroke while responding to a fire in 1985, and was awarded a duty disability benefit. After he died in 1998, his widow was awarded the widow's minimum annuity pursuant to the Pension Code. 40 ILCS 5/6-141.1. Decedent #2 was injured in 1988 while working for the fire department. He died in 2000, and his widow was awarded the widow's minimum annuity as well. Both women filed complaints for administrative review and won judgments requiring awards of line of duty benefits.

In 2004, the General Assembly amended the Pension Act to require an award of Duty Availability Pay (DAP) in salaries for some pension and annuity calculations. The widows amended their administrative complaints, arguing that (1) they should have been awarded line-of-duty benefits retroactively to the date of the decedents' deaths; and (2) they should have been awarded DAP in their pension calculations. Plaintiffs sought leave to bring the DAP claim as a class action, presenting a list of 100 widows who they alleged had the right to such benefits.

The Circuit Court permitted the plaintiffs' amendment, but stayed the class claims until the line-of-duty benefits claims were resolved. The Court reversed the Board, ordering an award of line-of-duty benefits retroactive to the date of death; the Appellate Court affirmed. On remand, the Board again refused to include DAP in its benefit calculation. The Circuit Court denied the motion to certify a class and granted the Board's motion for summary judgment.

The Appellate Court reversed. The Court held that under Section 6-140 of the Pension Code, 40 ILCS 5/6-140(a), the amount of a widow's annuity depended on the current annual salary attached to the decedent's position, whether or not the firefighter ever actually received that salary. Thus, the widow's annuity increased whenever the decedent's pay grade was increased. Accordingly, the Appellate Court held that the Board was required to include DAP in the salary calculation governing the plaintiffs' pensions.

The Appellate Court reversed the Circuit Court's denial of the motion to certify a class as well, holding that all of the factors governing certification were satisfied. Despite the limited powers of the Board, the Court held that a class complaint was a "rule[ ], regulation[ ], standard[ ], or statement[ ] of policy" within the meaning of the Appellate Court's decision in Board of Education of the City of Chicago v. Board of Trustees of the Public Schools Teachers' Pension & Retirement Fund, rather than a "decision, order or determination of any agency rendered in a particular case," and therefore, a class complaint was not outside the Board's powers pursuant to the Administrative Review Law.

The Court should decide Hooker within four to six months.

• Print
• Comments
• Trackbacks
• Share Link

Section 2-802(a) of the Illinois Code of Civil Procedure provides that an order certifying a class action “may be conditional and may be amended before a decision on the merits.” 735 ILCS 5/2-802(a).

But what’s a “decision on the merits”? In its third unanimous decision of the day, the Illinois Supreme Court answered that question this morning, giving an appropriately broad construction to trial courts’ power to decertify. The Court affirmed the decision of the First District, Sixth Division in Mashal v. The City of Chicago [pdf]. Our preview of Mashal, discussing the facts and lower court rulings, is here. For our report on the oral argument before the Supreme Court, click here.

Mashal involves allegations that the City of Chicago made a practice of issuing “fly-by” traffic tickets – tickets served by mail, rather than being handed to the driver or placed on the vehicle – to taxi drivers. Plaintiff filed a putative class action in 2000, arguing that the practice violated both the Chicago Municipal Code and the state Vehicle Code. A class was certified in 2002.

Two substantive orders followed. In 2005, the Circuit Court granted plaintiff partial summary judgment finding that fly-bys are indeed illegal. The order did not address whether the City in fact had a practice of issuing fly-bys, or whether fly-bys had been issued to any particular class member. At the same time, the court denied the City’s motion for summary judgment, rejecting a number of affirmative defenses. The following year, the trial court granted the City partial summary judgment, finding that all claims which accrued before September 13, 1995 were time-barred.

In 2008, the Circuit Court granted the City’s motion to decertify the class, holding that in the wake of the 2005 order holding that fly-bys were illegal, common questions no longer predominated. In that order, the court stated that the City was entitled to a trial for each and every one of perhaps as many as 16,000 tickets, given the City’s insistence that it had never issued a “true” fly-by – in every case, either service had been frustrated by the driver, or the wind or some other agency (sometimes the driver) had removed the ticket from the vehicle.

After the Circuit Court denied a motion to certify questions for interlocutory appeal, the Supreme Court intervened with a supervisory order directing the Circuit Court to certify four issues: what was a decision on the merits, and did any of the three substantive orders – partial summary judgment for plaintiff, denial of summary judgment for the City, or the statute of limitations order – qualify as one, thus terminating the court’s power to decertify?

With respect to the foundational question, the Supreme Court relied on Federal law under Rule 23 to affirm the Appellate Court:

A ‘decision on the merits’ is a complete determination of liability on a claim based on the facts disclosed by the evidence, and which establishes a right to recover in at least one class member, but which is something short of a final judgment.

The Court found that its definition was consistent with the purposes and policies underlying the class action provisions of the Code. The authority to decertify exists, the Court wrote, because “it may be beneficial to the orderly administration of justice” to decertify “if clearly changed circumstances or more complete discovery warrant it.” Giving Circuit Courts “the flexibility to revisit certification – before liability is determined – best serves the objectives of the class certification provisions.”

The Court next applied its definition to the orders at issue. The Circuit Court’s partial summary judgment finding that fly-bys were illegal was not a “decision on the merits”; the order neither determined that the City was liable to anyone, nor that the City in fact had a practice of issuing such tickets. Nor was the denial of the City’s initial motion for partial summary judgment, rejecting the City’s affirmative defenses, a “decision on the merits,” since it didn’t foreclose the City from defending each individual claim on the merits, one by one. Finally, citing Downing v. Chicago Transit Authority, the Court held that motions dismissing claims on statute of limitations grounds cannot by definition be a “decision on the merits” for purposes of the statute.

• Print
• Comments
• Trackbacks
• Share Link

In its second opinion of the day on the doctrine of res judicata, a unanimous Illinois Supreme Court has affirmed the First District, Fifth Division’s decision in Hernandez v. Pritikin [pdf]. A detailed discussion of the underlying facts and the rulings of the Circuit Court and Appellate Court appears in our pre-argument preview here. Our argument report – in which we predicted affirmance – is here.

The plaintiff in Hernandez developed physical problems in the early 1990s, and was ultimately diagnosed with Parkinson’s disease. The defendants represented plaintiff from early 1999 to late 2002, and pursued a workers’ compensation claim on his behalf. In 2004, now represented by a new law firm, plaintiff sued various companies allegedly involved in the manufacture and sale of various chemicals which he claimed had contributed to his disease. When that action was dismissed as time barred, plaintiff sued the defendants for malpractice.

The plaintiff’s original complaint alleged that defendants had failed to advise him of claims against persons or entities other than his employer, failed to file such claims and/or failed to advise him to hire other counsel to pursue such claims. Defendants moved to dismiss, arguing that the statute of limitations had run on the products claim before they were hired.

At the hearing on the motion to dismiss, the trial judge suggested that the statute of limitations had begun running on the products claim by 1995 at the latest, years before defendant was hired. But – and this is the important part – when the written order was issued, it merely said that the motion to dismiss was “granted,” and plaintiff had 30 days to amend. There was no mention of “with prejudice,” nor any suggestion that the plaintiff was now barred from pursuing any particular facts.

The amended complaint restated all the allegations of negligence relating to failure to advise/file the products action, but added further allegations that the defendants should have advised the plaintiff to sue his first law firm, who had represented the plaintiff on his Social Security disability claim. Plaintiff also added factual allegations apparently intended to justify application of the discovery rule to lengthen the statute of limitations on the products claim.

Defendants moved to dismiss again, arguing that if the statute had started running on the products claim by 1995 at the latest, then it followed that any claim against the first attorneys was barred by the time the defendants were hired. At the hearing on the motion, the judge said “I’m not reconsidering [the first judge’s] ruling. That’s not on the table.” But once again, the written order was more cryptic: “Defendant’s Motion to Dismiss the Amended Complaint is denied.” Again, nothing was said about any particular set of factual allegations being in the case or out of it. Later, with defendants’ motion for summary judgment pending, the plaintiffs voluntarily dismissed. When the plaintiff subsequently refiled the action, the Circuit Court dismissed it on res judicata grounds.

The Appellate Court reversed, holding that both actions raised a single claim: for legal negligence. The successive allegations, first for failure to advise about the products claims, and later, for failure to sue the first law firm, were merely differing facts in support of that claim, in the Court’s view. Accordingly, the order dismissing the allegations centered on the products claims did not finally resolve a “claim” for res judicata purposes.

In an opinion by Justice Lloyd A. Karmeier, the Court affirmed the Appellate Court on different grounds. Although the original trial judge had expressed a view about when the statute of limitations began running on the products claim based on the facts then before him, the critical fact was what the written order actually said – and didn’t say. The defendant had the right to amend. There was no suggestion that further allegations on the products claims were barred. Therefore, it necessarily followed that the order finally decided nothing, and res judicata couldn’t apply.

The second hearing, in which the judge commented that the first judge’s ruling was not up for reconsideration, was “even less definitive,” the Court found. The court’s statement was “intended to direct and control the discussion in the course of an ongoing hearing,” the Supreme Court concluded. Besides, the written order merely said “denied.” Nothing was decided, and no facts or theories were removed from the case.

Hernandez is a timely reminder of one of the most important ways to maximize the chances of success on appeal: protecting the record. In the words of the Court: “where the nature of the ruling may be determinative . . . a movant has the responsibility to obtain a definitive ruling.”

• Print
• Comments
• Trackbacks
• Share Link

The basic rule of res judicata is easy enough to state: a final judgment on the merits by a court with jurisdiction bars any further actions by the parties or their privies on the same claim. But what judgments (or orders) are “final”? And what’s a “claim”? The Illinois Supreme Court delved into those important questions this morning, unanimously reversing the Second District’s decision in Wilson v. Edward Hospital [pdf].

Wilson arose when one of the plaintiffs – then a minor – suffered a brain injury during a routine operation for a broken leg. The plaintiff and his mother sued the doctors involved and the defendant hospital, alleging that the hospital was liable as the principal of the doctors. The hospital moved for summary judgment, which was granted in part: the Circuit Court held that the doctors were not the actual agents of the hospital, but that a question of fact existed as to apparent agency. But then, the plaintiffs voluntarily dismissed their complaint.

The plaintiffs were back a year later, refiling their claims and once again alleging apparent agency. The hospital moved to dismiss on res judicata grounds, arguing that the “final judgment” on the actual agency “claim” barred the new action. The Circuit Court denied the hospital’s motion to dismiss, but certified the question of whether actual and apparent agency were separate claims for purposes of res judicata and the rule against claim splitting. The Appellate Court answered that they were, and the new action was therefore barred. Judge Seminara-Schostok specially concurred in the Appellate Court’s holding, but urged the Supreme Court to grant leave to appeal in order to reconsider the application of res judicata and the rule against claim splitting to voluntarily dismissed actions.

In an opinion by Justice Rita B. Garman, the Supreme Court reversed. Rather than addressing the issue of whether the doctrine of res judicata applies at all to voluntarily dismissals, the Court ruled more narrowly, finding that the traditional elements of res judicata were not present.

The Court began with the issue of whether or not a “final” judgment had been entered in the first action, a necessary prerequisite to res judicata. The Court held that because actual agency and apparent agency were not separate claims, no final judgment had been entered, overruling Williams v. Ingalls Memorial Hospital, a year-old decision of the Appellate Court which had reached the opposite result on similar facts. A single cause of action can give rise to several different theories of recovery, the Court emphasized. The Court cited with approval to the definition of a “claim” found in Black’s Law Dictionary: “[t]he aggregate of operative facts giving rise to a right enforceable by a court.” Accordingly, the plaintiffs in Wilson had a single cause of action against the hospital for negligence, and the Circuit Court’s initial order had merely eliminated certain legal conclusions pled in support of that claim, rather than wiping out an entire claim.

• Print
• Comments
• Trackbacks
• Share Link

Our previews of the new civil cases granted review at the end of the Illinois Supreme Court’s November term continue with Prazen v. Shoop [pdf], a dispute about the politically charged issue of public employee pensions.

Prazen relates to an Early Retirement Incentive (ERI) plan adopted by a city pursuant to section 7-141.1 of the Pension Code. At the end of 1998, the plaintiff retired from his position as superintendant of the city electric department, purchasing five years “age-enhancement credit” pursuant to the ERI to do so. Less than two weeks before his retirement became effective, the plaintiff incorporated a business which he had run as an unincorporated entity for some time – Electrical Consultants, Ltd.

Three days after it was incorporated, ECL and the city entered into a management and supervision agreement for the operation of the city’s electric department, effective one day after plaintiff’s retirement. Pursuant to the agreement, ECL agreed to provide a full time person to perform its duties with the electric department. The agreement was extended a number of times, until ECL finally terminated it in early 2009. ECL was voluntarily dissolved several months later. Throughout the life of the company, ECL employed no more than three people: plaintiff, his wife and their daughter.

The potential problem here is Section 7-141.1(g) of the Pension Code:

An annuitant who has received any age enhancement or creditable service under this Section and thereafter accepts employment with or enters into a personal services contract with an employer under this Article thereby forfeits that age enhancement and creditable service . . .

In the years immediately following his 1998 retirement, the plaintiff sought assurances on three occasions from the Illinois Municipal Retirement Fund that his contract with the city didn’t imperil his pension. In 1998, an IMRF representative allegedly told the plaintiff’s lawyer that a former employee could contract with an IMRF employer as an independent contractor (which is what the contract between the City and the plaintiff’s ECL corporation was). In early 2002, IMRF representatives confirmed that everything said in 1998 still applied. In late 2002, an IMRF representative confirmed that an “early out” employee could work for a corporation – even one he owned – doing work for his former employer, so long as the corporation wasn’t merely a guise to evade the statute.

Nevertheless, in 2010, IMRF staff informed the plaintiff that his continued relationship with the city had run afoul of Section 7-141.1(g) of the Pension Code after all. The plaintiff appealed the decision to the IMRF benefit review committee. Concluding that the IMRF had the power to “make administrative decisions concerning participation and coverage and to carry out the intent of the Fund,” the committee determined that the plaintiff’s corporation was a “guise” to evade the return-to-work provisions of the statute and ordered the plaintiff to repay the portion of his pension annuity attributable to his early retirement incentive. The IMRF Board of Trustees later affirmed the staff determination and adopted the committee’s conclusions as its own. The Circuit Court affirmed.

The Appellate Court (Fourth District) reversed. The Court held the Board of Trustees had the power to order return of benefits in only two circumstances: when an employee had accepted “employment with” or entered into a “personal services contract with” his former employer. The Board made neither determination here. If the Board were permitted to expand its general power to make “administrative decisions on participation and coverage” into authority to order return of benefits under additional circumstances not specified by the statute, then Section 7.141.1(g) would be rendered superfluous, the Court found. The Board’s finding that the plaintiff’s corporation was a “guise” for evading the statute amounted to an equitable determination to pierce the corporate veil, according to the Appellate Court. If the legislature wanted to grant such power to the Board, it would have said so, in the Court’s view.

• Print
• Comments
• Trackbacks
• Share Link

Our previews of the civil cases granted review at the end of the November term by the Illinois Supreme Court continue with Relf v. Shatayeva [pdf]. Relf involves a simple question: what happens if you sue somebody who's died?

The plaintiff filed a personal injury complaint against the defendant, alleging that he had negligently operated a motor vehicle, leading to her injuries. Some months after the complaint was filed, the plaintiff learned that the defendant had died only three months after the accident, long before the complaint was filed. Plaintiff filed a motion to spread defendant's death of record, and for leave to appoint a special administrator. The motion was granted, and the plaintiff filed an amended complaint, naming the special administrator as the defendant.

Ultimately, the defendant moved to dismiss on the grounds that the action hadn't named the decedent's personal representative, and hadn't been filed within six months of decedent's death. Accordingly, the defendant argued, the complaint was void pursuant to 735 ILCS 5/13-209(b).

After a hearing, the Circuit Court granted the motion to dismiss.

The Appellate Court (First District, Second Division) reversed. On appeal, the defendant argued that subsection (b) was applicable, since an estate had, in fact, been opened. Nevertheless, the Court held that the action was governed not by Section 13-209(b), but by Section 13-209(c):

If a party commences an action against a deceased person whose death is unknown to the party before the expiration of the time limited for the commencement thereof, and the cause of action survives, and is not otherwise barred, the action may be commenced against the deceased person's personal representative if all of the following terms and conditions are met:

(1) after learning of the death, the party proceeds with reasonable diligence to move the court for leave to file an amended complaint, substituting the personal representative as defendant

(2) the party proceeds with reasonable diligence to serve process upon the personal representative.

The court held that the legislature enacted subsection (c) specifically to address situations where a plaintiff is unaware, at the time of filing, that the defendant is dead. Because the plaintiff had properly proceeded under subsection (c), dismissal was erroneous. Subsection (b) did not apply because it did not contemplate that the plaintiff was unaware of the defendant's death.

Relf will likely be decided within the next four to six months.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court has announced that on Thursday morning, it will file opinions in three new civil cases. They are:

• Mashal v. The City of Chicago, No. 112341 – (1) What is a 'decision on the merits' under 735 ILCS 5/2-802 that would preclude the entry of a class decertification order? (2) Whether, in a class action case challenging defendants' practice of issuing parking or standing violations to taxicab drivers and others by mail and without any personal service on the driver or placement of the citation on the offending vehicle, a prior Judge's ruling that the defendants' 'practice of sending a second notice of a parking or standing violation prior to an initial notice being either hand delivered to the driver of the vehicle or affixed to the vehicle is violative of the plain language of the statute and the ordinances' constitutes a decision on the merits under section 2-802 of the Code such that a subsequent judge presiding in the case lacks the authority to decertify the class? (3) Whether, in a class action case challenging defendants' practice of issuing parking or standing violations to taxicab drivers and others by mail and without any personal service on the driver or placement of the citation on the offending vehicle, a prior Judge's ruling that denied the defendants' motion for partial summary judgment on the application of their affirmative defenses of failure to exhaust administrative remedies, res judicata, the collateral attack doctrine, and the voluntary payment doctrine constitutes a decision on the merits under section 2-802 such that a subsequent Judge presiding in the case lacks the authority to decertify the class? (4) Whether, in a class action case challenging defendants' practice of issuing parking or standing violations to taxicab drivers and others by mail and without any personal service on the driver or placement of the citation on the offending vehicle, a Judge's ruling that granted in part the defendants' motion for summary judgment on the application of the statute of limitations constitutes a decision on the merits under section 2-802 such that a subsequent Judge presiding in the case lacks the authority to decertify the class. For our preview of the case, see here. For our report on the oral argument, see here.
   
• Wilson v. Edward Hospital, No. 112898 – Are actual agency and apparent agency separate claims for purposes of the res judicata doctrine and the prohibition against claim-splitting set forth by the Supreme Court in Hudson v. City of Chicago, 228 Ill.2d 462 (2008) and Rein v. David A. Noyes & Co., 172 Ill.2d 325 (1996), so that summary judgment entered on the actual agency claims in plaintiffs’ initial suit bars plaintiffs’ apparent agency claims in a refiled suit, even in the face of a ruling that there is a question of fact as to the apparent agency claims?

• Hernandez v. Bernstein, No. 113054 -- (1) Is an action for legal malpractice based on one factual theory one claim for purposes of res judicata, or two? (2) Does a plaintiff's voluntary dismissal of the remainder of his claim render the trial court's order dismissing one of plaintiff's factual theories final for purposes of res judicata? For our preview of the case, see here. For our report on the oral argument, see here.

• Print
• Comments
• Trackbacks
• Share Link

In the closing days of the Illinois Supreme Court's November term, the Court allowed petitions for leave to appeal in six civil cases. Our previews of the new grants begin with In re Marriage of Earlywine [pdf]. Although Earlywine arises from a divorce, it presents an interesting intersection of domestic relations law and attorney retainers.

In conjunction with divorce proceedings, the husband entered into an attorney-client agreement with his attorney, agreeing to pay an advance payment retainer. An affidavit from the husband's mother explained that she, her fiancé, the husband's father and the husband's father's wife financed the retainer. During the dissolution proceedings, the evidence showed that the husband was working only sporadically and the wife was unemployed.

The wife's attorney filed a petition for an award of $5,000 in interim attorney's fees pursuant to 750 ILCS 5/501(c-1), the Illinois Marriage and Dissolution of Marriage Act. The attorney asked the court, if necessary, to order the husband's attorney to disgorge amounts already paid to him.

The Circuit Court granted the motion, finding that the wife was unable to pay her attorney's fees, and an interim award was appropriate. The husband's attorney moved to reconsider, attaching a copy of the attorney-client agreement and arguing that, as an advance payment retainer, the funds had become his property at the moment of payment, and therefore were not subject to disgorgement.

The Circuit Court denied reconsideration, holding that the public policy in favor of placing the parties to a divorce in substantial parity overrode any considerations about the nature of the retainer. Counsel refused to pay, asking that he be held in friendly contempt to facilitate an appeal.

The Second District of the Appellate Court affirmed. The Court began by distinguishing a true, classic or general retainer -- which is intended to ensure the attorney's availability for a specific matter, or during a specific period -- from a security retainer. A true retainer becomes the attorney's property immediately, while a security retainer continues to be the client's property until it is earned.

Ultimately, however, the Court held that the distinction didn't make a difference. Advance payment retainers -- a form of true retainer -- are to be used sparingly, and only to accomplish a specific purpose that some other form of retainer would frustrate. Permitting an advance payment retainer to defeat a claim for interim fees would frustrate the primary purpose of section 501(c-1), which is to ensure that the parties are in substantial financial parity during the divorce proceedings, the Court held.

Besides, the Appellate Court found, Section 501(c-1) specifically listed "retainers . . . previously paid" as a source for disgorgement. Given that the Legislature didn't choose to distinguish between the types of retainers, the terms of the statute should be given their broadest possible construction. The Court acknowledged in closing that the husband had borrowed the money to finance the retainer from his own family, but held that this fact should not change the result.

Earlywine will likely be decided within four to six months.

• Print
• Comments
• Trackbacks
• Share Link

As we wrote in our preview of Rodriquez v. Department of Financial and Professional Regulation, private attorney general statutes are not uncommon in the law. Such statutes provide that if a private plaintiff provides, by his or her suit, what the legislature regards as a public service, the plaintiff gets his or her attorney's fees back.

But do you have to bring your fees claim with -- or at minimum, just after -- your initial lawsuit? With respect to one such statute, Section 10-55(c) of the Illinois Administrative Procedure Act, the Illinois Supreme Court held last week that the answer was "yes," unanimously reversing the Appellate Court.

Rodriquez began when the Department of Financial and Professional Regulation opened an investigation of the plaintiff, filing a complaint under section 22 of the Medical Practice Act. The administrative action was stayed while the plaintiff pursued various challenges. First, the plaintiff unsuccessfully sought an order compelling issuance of deposition subpoenas. The following year, the plaintiff challenged the administrative rule governing hearsay in the Department's administrative hearings.

The Circuit Court initially granted summary judgment, striking down the rule. But the Department filed a motion for relief from the judgment, and the Circuit Court vacated its own order. On appeal, the Appellate Court reversed, reinstating the original order striking down the rule. More than a year later, the plaintiff filed a petition for an award of attorney's fees under Section 10-55(c) (5 ILCS 100/10-55(c)):

In any case in which a party has any administrative rule invalidated by a court for any reason . . . the court shall award the party bringing the action the reasonable expenses of the litigation, including reasonable attorney's fees.

The Circuit Court entered summary judgment against the plaintiff, holding that the attorney's fees action was barred by res judicata. The Appellate Court reversed, holding that the right to attorney's fees was a separate action, and that the right to fees only ripened after the initial action ended.

In an opinion by Justice Rita B. Garman, the Supreme Court reversed. The Court held that the words "the court" in the statute referred to the court which invalidated the administrative rule at issue. Therefore, the Court reasoned, a plaintiff must bring a fees claim before the court which heard the rule challenge while it still maintained jurisdiction over the action.

The plaintiff argued that there was no express time limit in the statute, and the Court was not free to import one. But the Court found that in fact the plain language of the statute did include a time limitation -- the requirement that an action for fees be brought before the court which heard the original substantive action. The parties disputed exactly when the underlying administrative rule had been overturned -- at the time of the original order, or when the Appellate Court reversed the Circuit Court's order reconsidering its original order -- but the Supreme Court held that it didn't matter: the Circuit Court had lost jurisdiction over the case by the time the plaintiff filed his fees request pursuant to either date.

The Court quickly disposed of two further alternative arguments made by the plaintiff, holding that a fees claim could be brought either with the original rules challenge, or immediately after the rule was struck down, and that a fees claim was not a "collateral" matter over which the court retained jurisdiction indefinitely.

Of course, every statute has to be interpreted in light of its own particular language, case law and legislative history. But the lesson from Rodriquez seems fairly clear: a fees claim which is delayed for any significant period after the original action may well be time-barred.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois state educational funding statute survived a constitutional challenge last week when the Illinois Supreme Court, in a unanimous opinion by Justice Robert R. Thomas, affirmed an Appellate Court decision dismissing Carr v. Koch for lack of standing. Our pre-argument preview of Carr, which includes a detailed description of the facts and lower court rulings, is here. Our report on the oral argument is here.

The Illinois School Code conditions state aid on a sliding scale, depending on whether the local school district can raise relatively little, nearly all, or more than all of the basic “Foundation Level” of funding calculated by the state. The plaintiffs, property owners in three school districts scattered around the state, challenged the statute under the equal protection clause of the Illinois constitution. The plaintiffs’ theory was that the state statute, in combination with the Illinois Learning Standards promulgated by the Illinois State Board of Education, had a coercive effect on school districts with lower property values, causing them to tax their property owners more heavily than districts with higher property values. The Illinois Supreme Court had already upheld the state system a number of years earlier in Committee for Educational Rights v. Edgar, but the plaintiffs argued that in the years since Edgar, the local school districts had lost control over core education functions as a result of the Illinois Learning Standards. The Circuit Court dismissed, finding that Edgar nevertheless still controlled, and in the alternative, that the plaintiffs lacked standing, since tax rates were a matter of local decision-making not traceable to the state officials named in the suit. The Appellate Court affirmed, agreeing that the taxpayer plaintiffs lacked standing and pointing out that if the court indeed struck down the statute, the court’s decree not only wouldn’t give the plaintiffs the relief they wanted (lower taxes); it would probably lead to higher tax rates.

The Supreme Court affirmed. The School Code was not a taxing statute, the Court pointed out; it simply determined the level of state aid. School districts were not required to impose the tax rate presumed by the statute, and there was no penalty if they didn’t.   With respect to the plaintiffs’ theory that the Illinois Learning Standards tended to coerce poorer school districts into increasing taxes, the Court pointed out that nowhere in the state statutes is general state aid tied to the performance of a district’s students with respect to the ILS. Because the plaintiffs’ alleged injury was not a direct result of the School Code’s funding provisions, or fairly traceable to any of the defendants’ actions in connection with the statute, the plaintiffs lacked standing to proceed.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the civil oral arguments of the Illinois Supreme Court's November term conclude with Poris v. Lake Holiday Property Owners Association.  Our pre-argument preview of Poris is here.  You can watch the oral argument here.

The plaintiff owns property in the Lake Holiday Development, and is a member of the defendant Association. The defendant Board of Directors has adopted various rules and regulations for the governance of its property, including speed limits. The Board has hired private security officers to enforce the speed limits, bought vehicles and equipped the vehicles with oscillating and flashing lights, radar units and audio and video recording equipment. The Board's security officers were empowered to issue citations to homeowners for violations of the rules.

The plaintiff was stopped by a security officer for speeding on Association property. He sued the Association, every member of its Board, the chief of security and the officer who stopped him, seeking a declaration that the practices of the Association's security department -- including its recording of officers' stops and its use of radar guns -- were illegal. The plaintiff also pled claims for false imprisonment, willful and wanton conduct, breach of fiduciary duty, nuisance and an accounting. The Circuit Court granted summary judgment on all counts; but the Appellate Court reversed in part, reinstating the plaintiff's challenges to the security officers' stop-and-detain and to the security department's use of oscillating lights on its vehicles, as well as plaintiff's false imprisonment claim.

Before the Supreme Court, counsel for the homeowners' association argued that the subject roads were private, and the fundamental issue at bar was one of self-governance of a private association. Justice Thomas asked whether LaSalle County police officers patrolled the private roads. Counsel responded that they did, but the enabling ordinance didn't prohibit the Lake Holiday security officers from doing so too. In response to a follow-up question from Justice Thomas, counsel explained that LaSalle officers could issue speeding citations in the development, but this was unusual, since the officers were aware of the development's security.  Justice Thomas asked whether Lake Holiday Security could issue citations to non-members, and counsel responded that if the non-members were guests of members, the member would be responsible for the citation. Justice Thomas asked whether the general public used the development's private roads, and counsel responded that very few members of the public did. Justice Garman asked whether the Association's power to enact rules was unlimited. Counsel responded that the Association could not enact rules that were violative of due process, fraudulent or arbitrary. Justice Burke asked whether Lake Holiday Security could conduct field sobriety tests and issue citations for driving while intoxicated. Counsel said no, since driving under the influence is a violation of the state code, not the Lake Holiday rules. Justice Thomas asked whether the homeowners' association security was analogous to private university police or mall security. Counsel answered that it was; in the wake of the Appellate Court's decision, private organizations around the state didn't know what they could and could not do to enforce their rules. Justice Freeman asked whether DUIs or accidents involving fatalities on Lake Holiday property were reported to the Secretary of State so that licenses could be suspended or revoked. Counsel answered that the LaSalle County sheriff would police such situations. In response to a question from Justice Theis, counsel confirmed that Association citations didn't affect driving privileges; they were issued to enforce members' private contract rights. Justice Freeman asked whether there were any consequences for members who sped repeatedly on the property, given that citations were not reported to the Secretary of State. Counsel responded that Lake Holiday Security could speak to the LaSalle County Sheriff.

Plaintiff responded that in fact, drivers from outside the development regularly passed through the "private" streets. Justice Thomas asked plaintiff how plaintiff was detained, and he responded that he had been pulled over, and his license taken. Justice Theis asked whether plaintiff had a right to be heard on the citation. Plaintiff responded that the Citation Committee had sent him to the Board of Directors - the entity which heard his appeal, which he was suing. Justice Garman asked plaintiff whether the security officer had pulled a gun on him during the stop; plaintiff responded that he had been ordered back into his vehicle and had decided to remain there, defusing the situation. Justice Thomas asked plaintiff whether he was cross-appealing the dismissal of his claims for unlawful use of radar and recording equipment. Plaintiff responded that the claims were illustrative of the Security Department's attempts to act like a police department. Justice Thomas asked plaintiff whether the citation amounted to little more than a warning, since it didn't go to the Secretary of State - don't residents want some sort of constraint on people driving through the area at high speed? Plaintiff responded that the Board had a variety of options, including the LaSalle County Sheriff, speed bumps and speed cameras.

On rebuttal, Justice Thomas asked counsel for the homeowners' association what happened when an officer stopped someone who was neither a resident nor a guest of a resident. Counsel responded that officers warned the driver that he was in violation of Association rules and trespassing. When counsel  analogized the plaintiff's false imprisonment claim to alleging false imprisonment where a development requested drivers' licenses at the access gate, Justice Freeman responded that drivers had a choice of whether to enter under such circumstances -- plaintiff had no such choice. Counsel argued that the plaintiff had agreed to the rules of the association. Justice Freeman pointed out that the relevant rules had been adopted after the plaintiff acquired his property, but counsel for the homeowners' association argued that the plaintiff could have fought the rule, run for the association board, or left. Justice Burke asked whether the association's officers were licensed to carry weapons. Counsel responded that officers could carry weapons for which they had certification, but were specifically barred from carrying guns.

We expect a decision in Poris in two to four months.

• Print
• Comments
• Trackbacks
• Share Link

 

In Toftoy v. Rosenwinkel [pdf], the 2nd District of the Illinois Appellate Court held that Illinois' "Right to Farm Act," 740 ILCS 70/1, didn't bar the plaintiff's nuisance suit against the defendants and their cattle farm. Today -- as we predicted in our pre-argument preview here -- the Illinois Supreme Court unanimously reversed in an opinion by Justice Burke [pdf].

The defendants in Toftoy started a cattle farm in March 1992. The farmhouse across the street had been occupied by a tenant since 1985, but the tenant had left four months earlier, and the house was vacant.

The plaintiffs acquired part of the plot across the street by family gift in 1998. Plaintiffs began construction of a new farmhouse, which they finally occupied in 2004. In August 2007, plaintiffs sued the defendants, alleging that the flies attracted by the defendants' cattle farm made the farm a nuisance. The defendants moved to dismiss, citing the Right to Farm Act, but the Circuit Court denied the motion. A divided panel of the Second District affirmed, holding that to satisfy the statute and bar the action, a "changed condition" had to be the reason that the farm was now a nuisance.

The Supreme Court's opinion begins by considering Section 3 of the Right to Farm Act, which the Court wrote was "intended to reduce the cost of farming and help prevent the loss of farmland":

No farm or any of its appurtenances shall be or become a private or public nuisance because of any changed conditions in the surrounding area occurring after the farm has been in operation for more than one year, when such farm was not a nuisance at the time it began operation.

As we wrote in our pre-argument preview, the Act codifies the common law concept we're all familiar with from law school of "coming to the nuisance." The Court agreed, noting that under the doctrine, the fact that a plaintiff acquired or improved land after the nuisance generating activity began affected whether or not the plaintiff could sue.

According to the Court, the plaintiffs contended that they had not "come to the nuisance" because the property across the street from the defendants had always been a farmhouse. But the statutory term "nuisance" was broader than that, the Court held; the change in ownership was the "changed condition" which had given rise to the action. Since the plaintiffs had not acquired their property rights until 1998 -- six years after the defendants' cattle farm began operation -- the action was plainly barred by the Right to Farm Act, and the Appellate Court and the Circuit Court were reversed.

 

• Print
• Comments
• Trackbacks
• Share Link

This morning, a unanimous Illinois Supreme Court has held that the doctrine of subject matter waiver of attorney-client and work product privileges does not apply in the vast majority of cases to disclosures made outside the context of litigation. For our pre-argument preview of Center Partners, Ltd. v. Growth Head GP, LLC [pdf], see here. For our report on the oral argument, see here.

Defendants – a group of corporations, partnerships and trusts – purchased the assets of a Dutch company, Rodamco. Among those assets was Urban, an Illinois limited partnership which owned high-end retail shopping centers all over the United States. The same day they entered into the purchase agreement, the defendants entered into a side agreement among themselves, governing how much each would pay in the acquisition, and who would get what from Rodamco’s assets.

During the negotiations leading up to the Rodamco purchase, the various defendants disclosed to each other some of their attorneys’ advice on the transaction. They also shared certain documents with one another concerning the legal and financial terms of the transaction, and permitted their individual attorneys to discuss their legal concerns and conclusions with each another.

The plaintiffs – limited partners in Urban – sued the three defendant groups for breach of fiduciary and contractual duties in connection with the acquisition. The Circuit Court granted an initial motion to compel in 2008, requiring the defendants to produce certain privileged documents which had been shared among themselves. About eighteen months later, the plaintiffs moved to compel again, seeking over 1,500 documents – virtually all remaining privileged materials relating to the acquisition. The Circuit Court applied the subject matter waiver doctrine and granted the motion to compel, and the Appellate Court affirmed.

In an opinion by Justice Garman, the Supreme Court unanimously reversed. Writing that the question of whether subject matter waiver applied outside litigation was one of first impression in Illinois, the Court began by sketching the doctrinal basis both for the privilege and for waiver. Specifically, the Court pointed out that subject matter waiver has generally been justified as a matter of “sword and shield” – a party should not be permitted to gain a litigation advantage by disclosing carefully selected bits of legal advice, while hiding “the rest of the story” from his adversary (and the court). From there, the Court carefully reviewed the relatively limited number of cases from around the country considering the matter, contrasting two decisions which refused to apply subject matter waiver outside of litigation, In re Von Bulow and In re Keeper of Records [pdf], with various Federal decisions broadly applying waiver. Ultimately, the Court endorsed Von Bulow and Keeper of Records, providing a bright line rule: “subject matter waiver does not apply to disclosures made in an extrajudicial context when those disclosures are not thereafter used by the client to gain a tactical advantage in litigation.” This was so, the Court found, for three principal reasons: (1) the purpose of the subject matter waiver doctrine is more closely applicable to litigation; (2) the cases limiting waiver are “more thorough and persuasive” than the opposing line of authority; and (3) an opposite rule would provide perverse incentives by causing parties to leave attorneys out of commercial negotiations where their advice is badly needed for fear of later waiver.

In the concluding pages of the opinion, the Court addressed the plaintiffs’ argument that the defendants had, in fact, used partial disclosure for an unfair advantage in the litigation with the limited partners. The Court disagreed, pointing out that several of the instances cited by the plaintiffs had occurred after the Circuit Court had erroneously ruled that the privilege had been waived anyway, and in another deposition, the witness had not testified to the actual content and basis of the legal advice.

Center Partners is an important opinion for Illinois business. As both the amici and the Court itself pointed out, applying subject matter waiver to everyday business negotiations would have been a serious impediment to Illinois business and its lawyers, discouraging candor and free and open discussion. Through today’s opinion and yesterday’s adoption of Illinois Rule of Evidence 502, the Court has provided a significant measure of certainty: sweeping waivers should not be applied in Illinois unless disclosures are made before a court or governmental office or agency. But that certainty comes with an important caveat for those doing business in other states: as the Center Partners opinion shows, this is a matter on which the law varies around the country. So proceed cautiously.

• Print
• Comments
• Trackbacks
• Share Link

Today, the Illinois Supreme Court adopted Rule 502 of the Illinois Rules of Evidence, governing the circumstances in which disclosure of protected materials in a legal proceeding, or before a state or federal office or agency, affects a more general waiver of the attorney-client or work product privilege.

The new state Rule 502 tracks Federal Rule 502 almost word for word: (1) when disclosure happens in a state proceeding, or before a state office or agency, the scope of waiver is decided case-by-case; (2) when disclosure is inadvertent, a general waiver may be avoided by quick and reasonable mitigating steps; and (3) disclosure in a Federal proceeding, another state's proceeding, or before a Federal or other state's proceeding is waiver only if it would not qualify as waiver under either Illinois law or the law of the jurisdiction where the disclosure happened.

But here's the interesting part. The new Rule 502 became an issue in Center Partners, Ltd. v. Growth Head GP, LLC, which will settle the breadth of waiver in a non-litigation case where business partners shared their attorneys' advice with each other while negotiating a business deal. Center Partners will be released tomorrow morning. Perhaps the adoption of Rule 502 today suggests how the Court will rule in Center Partners tomorrow.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the civil oral arguments of the Illinois Supreme Court's November term continue with Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund. Our pre-argument preview of Skokie Castings is here. Watch the oral argument here.

Skokie Castings begins with a worker's on-the-job injury. The worker's employer was self-insured with respect to workers' compensation insurance, but held an excess policy. The employer paid the retention on the worker's award, at which point the excess insurer started paying.

But then the excess insurer went into receivership. The Illinois Insurance Guaranty Fund took over when the excess insurer stopped, paying until its total outlays reached $300,000. At that point, the Fund stopped paying, arguing that its payments on the file were subject to the $300K payment ceiling under 215 ILCS 5/537.2. The plaintiff, the successor-in-interest to the worker's employer, sued the Fund, seeking a declaratory judgment that the Fund was not entitled to stop paying, and owed the employer for all obligations over $300,000.

Based on the Supreme Court's questions, it seems fairly likely that the Court will affirm the Appellate Court's holding that the Fund is liable without limit. Counsel for the Fund began by arguing that the case turned on what were "workers compensation claims" under the Insurance Guaranty Fund Act. Certainly the injured employee's claim was a workers' comp claim; but the case turned on what the employer's claim for reimbursement was. Justice Thomas asked whether counsel's position was that the New Mexico Supreme Court erred in In re Delinquency Proceedings Against Mission Insurance Co., the case principally relied upon by the Appellate Court -- or was Mission Insurance distinguishable? Counsel responded that the case was distinguishable. In Mission Insurance, the issue was whether reinsurance was covered at all, a point not in controversy in Skokie Castings. Chief Justice Kilbride asked whether the worker's employer or the worker herself received the Fund's payments. Counsel answered that the record was silent on the matter, but the Fund's understanding was that its payments had ultimately gone to the worker. Justice Burke asked why it was fair to impose the remaining liability on a self-insuring employer; counsel responded that the Self-Insurers Advisory Board took over liability once a self-insuring employer was no longer able to respond. Justice Burke asked whether the Board responded only for self-insurers without an excess policy, but counsel answered that he believed that a bankrupt excess insurer would trigger the Board's liability. Justice Thomas asked whether the fact that the Fund had stopped paying, and the employer had then paid the employee for a time, suggested that the underlying claim was for workers comp. Counsel responded that the employer was certainly paying a workers comp claim, but reimbursement by the Fund to the employer was not such a claim. Justice Karmeier asked whether, if the employer had neither primary nor excess insurance, it could have a claim for reimbursement against the Fund, and counsel responded that under such circumstances, the employer's sole remedy was the Self-Insurers Advisory Board. Chief Justice Kilbride asked why the employer's claim wasn't a "covered claim" under the statute. Counsel responded that the issue wasn't whether it was a "covered claim" -- it was. The question was whether or not it was a workers comp claim within the meaning of the statute.

The plaintiff employer opened by arguing that the mechanism of payment - direct payment to the employee or reimbursement - wasn't relevant since the legislature hadn't made it relevant. Justice Theis asked counsel to respond to the Fund's claim that the employer's only remedy was the Self-Insured Advisory Board. Counsel responded that the Board was a merely theoretical possibility if the employer had gone bankrupt - which it hadn't here. Justice Burke wondered whether reversing might encourage Illinois employers not to carry excess insurance, if making that choice could subject the employer to unlimited liability. Counsel responded that excess insurance was still probably the best risk management tool available to an employer. Justice Thomas asked whether the employer's declaratory judgment action, seeking a declaration that the Fund was liable for the employee's claim, was analogous to an insurer's dec action challenging its duty to pay for a tort claim -- surely no one would ever call that a personal injury claim? Counsel responded that there was no coverage issue here, as in a personal injury dec action. Justice Thomas pressed his question: wasn't a personal injury dec action about who was going to pay, just like this case? Counsel responded that the Fund shouldn't benefit by cutting off owed benefits. Justice Karmeier asked whether, rather than being self-insured, an employer could buy primary insurance with a high deductible? Counsel responded that there was likely no distinction in effect between primary insurance with a high deductible and an excess policy.

On rebuttal, Justice Thomas asked counsel for the Fund whether the plaintiff had a public policy argument -- equal to the Fund's argument that it was a source of funds of last resort -- that workers comp awards should be paid without limit? Counsel agreed that this was public policy, but argued that the issue was who should bear the financial burden of the award. Following up on earlier questions, counsel argued that the employer could have bought a primary policy, but premiums would have been higher, and it chose not to take that option. Justice Burke pointed out that the argument necessarily meant that if the excess insurer hadn't gone bankrupt, the employer would be paying forever, despite opting for the lower-cost policy. Counsel repeated that if the employer had paid for a primary policy, the case wouldn't be before the Court. Justice Karmeier asked what the difference was for the Fund's purposes between a primary insurer with a high deductible and an excess carrier; counsel responded that since insurers pay in proportion to premiums, both categories pay into the Fund, but primary carriers pay more.

Skokie Castings should be decided in the next two to four months.

• Print
• Comments
• Trackbacks
• Share Link

This morning, the Illinois Supreme Court announced that it has allowed petitions for leave to appeal in six new civil cases. They are:

• Earlywine v. Earlywine, No. 114779 -- a case on the construction of the Marriage and Dissolution of Marriage Act arising from the Second District.
   
• Hooker v. Retirement Board of the Firemen’s Annuity and Benefit Fund of Chicago, No. 114811 – a case on the proper calculation of annuities under the Pension Act for firefighters’ widows arising from the First District, Division Three.
   
• The Board of Education of Peoria School District No. 150 v. The Peoria Federation of Support Staff, Security/Policemen’s Benevolent and Protective Association Unit No. 114, No. 114853 – a case involving the constitutionality of an amendment to the Illinois Public Labor Relations Act arising from the Fourth District.
   
• Crittenden v. Cook County Commission on Human Rights, Nos. 114876 and 114911 – an administrative appeal from the decision of the Cook County Commission on Human Rights with respect to a claim for sexual harassment in violation of the Cook County Human Rights Ordinance, arising from the Sixth Division of the First District.
   
• Relf v. Shatayeva, No. 114925 – a case involving the dismissal of a personal injury action under Section 2-619 of the Code of Civil Procedure where, unbeknownst to the plaintiff, the defendant had died before the original complaint was filed. Relf arises from the First District, Second Division.
   
• Prazen v. Shoop, No. 115035 – a case involving the return-to-work restrictions of the Illinois Pension Code and their impact on early retirement incentives for municipal employees. Prazen arises from the Fourth District.

As we noted yesterday, the Court has announced that it expects to file four new civil opinions tomorrow morning. Once we’ve completed our analysis of those opinions, we’ll begin our detailed previews of the Court’s six new civil grants.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the civil oral arguments of the Illinois Supreme Court's November term continue with Bjork v. O'Meara. Our pre-argument preview of Bjork is here. Watch the oral argument here.

Before his death, decedent begins taking steps to transfer a bank account to the plaintiff. He dies before the process is completed. The plaintiff intervenes in the will contest, but discovery shows that the bank account was never transferred, and the plaintiff loses her challenge. Later the plaintiff files a suit against the executor for tortious interference with testamentary capacity. Is the suit barred by the six-month statute of limitations on will contests?

That's the question in Bjork. Before the Circuit Court, the plaintiff insisted that she was stating a tort claim against the executor, not challenging the will. The Circuit Court dismissed anyway. The Appellate Court affirmed, holding that although the plaintiff couldn't have received complete relief in a will contest, she could have filed her claim in Probate Court in conjunction with the will proceeding.

Based upon the oral argument, the Supreme Court may reverse. The plaintiff began by making it clear that before the decedent's death, he had begun the process of transferring the bank account. Justice Garman asked whether the plaintiff had tried to prove interference with testamentary capacity in the Probate Court, or just that the account was not in the estate. Counsel responded that at the time of filing her petition to return property, plaintiff had believed that the transfer of the bank account was complete, only discovering otherwise in discovery. Justice Freeman asked whether plaintiff's allegations of fraud or undue influence would invalidate the will. Counsel responded that such allegations could invalidate the will in other cases, but the plaintiff's claim had nothing to do with the will. Justice Burke asked whether plaintiff had standing in the Probate Court after her petition was denied, and counsel responded that she did not, listing a variety of distinctions between a will contest and a suit at law for tortious interference. Justice Theis confirmed that the Probate Court had granted the executor's motion to dismiss the plaintiff, and asked whether at that point, there was nowhere for plaintiff to go but appeal. Counsel agreed that his client's only remaining choices at that point were appeal or filing the separate lawsuit. Justice Burke asked whether the plaintiff was merely seeking a personal judgment against the executor, and counsel confirmed this: plaintiff was seeking nothing from the estate. Counsel argued that affirmance of the Appellate Court's opinion would essentially allow a fiduciary to wash fraud through the Probate Act.

Counsel for the defendant faced a hotter bench than had the plaintiff. Justice Burke asked how a will contest could have worked for the plaintiff, since she had no standing. Counsel responded that plaintiff did, in fact, had standing as an interested party under the will -- plaintiff's petition for return of property from the estate was clearly an attack on the will. Justice Thomas pointed to the conflict we discussed in our pre-argument preview between Robinson v. First State Bank of Monticello and In re Estate of Ellis, asking counsel about the Ellis court's comment that Robinson was limited to situations where the plaintiff had deliberately chosen not to prosecute an available challenge in Probate Court. Counsel argued that the plaintiff had, in fact, appeared in Probate Court, so the Ellis situation didn't apply. Justice Thomas followed up, asking whether the plaintiff had had the opportunity to contest the will but had chosen not to do so.  Counsel responded that the defendant believed that the Probate Court's holding that the plaintiff lacked standing to proceed was wrong. Justice Theis asked what relief plaintiff could have gotten in Probate Court. Counsel responded that plaintiff could have filed her tortious interference claim in that Court. Justice Burke pointed out that a tortious interference claim was brought against an individual, not the estate, and wondered why such a claim didn't fall outside the Probate Act. Counsel responded that the claim was still within the jurisdiction of the Probate Court. Justice Theis sought to clarify the series of events at the Probate Court -- when did the Probate Court find that it lacked jurisdiction? Counsel responded that the court had so held on the plaintiff's motion for reconsideration after her petition was denied. Chief Justice Kilbride asked counsel whether a claim for tortious interference was directed against the estate. Counsel responded that once the Probate Court acquired jurisdiction, it had jurisdiction over all related claims, whether they were, strictly speaking, directly against the estate or not. Justice Thomas asked counsel whether he could cite authority for the proposition that plaintiff had to pursue an appeal after being dismissed at the Probate Court, and counsel cited Robinson and Ellis. Justice Garman asked whether the plaintiff could have filed a complaint in the Law Department while probate was still pending. Counsel responded that no, plaintiff was required to pursue the action in Probate Court, including through an appeal.

When the plaintiff returned to the lectern for rebuttal, the Chief Justice asked counsel what he had filed in probate. Counsel responded that he had filed a petition to return property, and later a citation to discover information. When discovery showed that the transfer of the bank account had not been completed, counsel tried to depose a bank employee; but the Probate Court had denied permission, and the tort claim followed.

Bjork should be decided in the next three to six months.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court has announced that on Thursday morning, it will file opinions in four civil cases heard during its September term. They are:

• Center Partners, Ltd. v. Growth Head GP, LLC, No. 113107 et seq. – (1) Does the doctrine of subject matter waiver for the attorney-client privilege extend from litigation to business negotiations? (2) Can documents shared among partners in a business negotiation be protected by the work product privilege? For our preview of the case, see here. For our report on the oral argument, see here.
   
• Carr v. Koch, No. 113414 – Do plaintiffs have standing to challenge the Illinois education funding system as a violation of the equal protection clause of the Illinois constitution? For our preview of the case, see here. For our report on the oral argument, see here. 

• Toftoy v. Rosenwinkel, No. 113569 – Does the Farm Nuisance Act, 740 ILCS 70/1, bar a nuisance suit where defendants started a cattle operation on property across from an unoccupied farmhouse, and several years later, plaintiffs demolished the farmhouse and constructed a new family home? For our preview of the case, see here. For our report on the oral argument, see here.
   
• Rodriquez v. The Department of Financial and Professional Regulation, No. 113706 – Where an action for attorneys fees under 5 ILCS 100/10-55(c) is not brought simultaneously with a challenge to an administrative rule, is a subsequent action for fees barred as res judicata? For our preview of the case, see here. For our report on the oral argument, see here.

• Print
• Comments
• Trackbacks
• Share Link

On December 4, 2012, the California Supreme Court is scheduled to hold oral arguments in Los Angeles on six matters, five of which are civil matters addressing a variety of business and commercial issues. Presumably these matters will all be submitted at the close of argument, so (barring any order to vacate the submission) the final decisions in these cases will be due by March 4, 2013.  Please note that the substantive briefs for these cases have not yet been posted, but a link to those briefs will be added to the update of pending California Supreme Court cases on this blog.

• Is a Contemporaneous Factual Misrepresentation of Contract Terms Admissible Under the Parol Evidence Rule? 

In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (S190581) the Supreme Court will address whether the fraud exception to the parol evidence rule permits evidence of a contemporaneous factual misrepresentation as to the terms contained in a written agreement at the time of execution, or whether such evidence is inadmissible under Bank of America National Trust & Savings Association v. Pendergrass (1935) 4 Cal.2d 258, 263, as “a promise directly at variance with the promise of the writing.”  For more details, see the B & P 17200/Class Actions/Commercial update page.

• To What Degree Can the Reach of a §17200 Action Be Extended by the Continuing Violation Doctrine, the Accrual Doctrine or the Delayed Discovery Rule?

The scope of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) will be addressed in Aryeh v. Canon Business Solutions, Inc. (S184929), in which the Supreme Court will address to what degree, if any, an such an action can be expanded by the following doctrines: (1) the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period;  (2) the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action; or, (3) the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff’s position has actual or constructive knowledge of facts giving rise to a claim.  For more details, see the B & P 17200/Class Actions/Commercial update page.

• Can a Corporation Correct Its Suspended Status and Salvage an Appeal Initiated While Suspended? 

In Bourhis v. Lord (S199887 and S199889, consolidated) the Supreme Court accepted review after the Court of Appeal denied a motion to dismiss the appeal before the principle briefing, to address the following issue: If a corporation’s corporate status is suspended due to nonpayment of taxes at the time it files a notice of appeal, can the appeal proceed if the corporation thereafter revives its status even if it does not do so until the time for filing the notice of appeal has expired?  For more details, see the B & P 17200/Class Actions/Commercial update page.

• Which State Law Controls Whether a Dissolved Corporation Lacks the Capacity To Be Sued?

The Supreme Court will also contribute to the body of choice of law opinions in Greb v. Diamond International (S183365) in the context of whether a California plaintiff alleging personal injuries from asbestos can pursue a claim against a dissolved Delaware corporation when the complaint was filed more than three years after the dissolution of the corporation.  Does California Corporations Code § 2010 or Delaware General Corporation Law § 278 control? For more details, see the Civil Procedure/Evidence/Discovery update page.

• Is an Employer Entitled to a Jury Instruction on Mixed Motives for Firing an At-Will Employee?

In Harris v. City of Santa Monica (S181004) the Supreme Court will also address whether the “mixed-motive” defense apply to employment discrimination claims under the Fair Employment and Housing Act, (Gov. Code, § 12900 et seq.).  For more details, see the Employment – Other update page.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the civil oral arguments of the Illinois Supreme Court's November term continue with State Bank of Cherry v. CGB Enterprises, Inc. Our pre-argument preview of State Bank of Cherry is here.  Watch the oral argument here.

State Bank arises from a farmer's note to the plaintiff bank, using certain crops as security. After the farmer sold the crop to a grain elevator, the bank sent the grain elevator a Notice of Security Interest, citing the Food Security Act, 7 U.S.C. § 1631(e). When the grain elevator paid the farmer rather than the bank, the bank sued.

The defendant moved to dismiss, pointing out that the plaintiff bank's Notice of Security Interest omitted one mandatory disclosure -- the county in which the crops were located. The Circuit Court denied the motion to dismiss, but a divided panel of the Appellate Court reversed, holding that the state Commercial Code (which required substantial compliance only) was preempted by the Food Security Act. The Food Security Act required strict compliance, the Appellate Court held, and the plaintiff's Notice of Security Interest was therefore ineffective.

Based upon the oral argument, it appears relatively likely that the Supreme Court will affirm. Counsel for the plaintiff began by pointing out that omitting the exact location of the crops had no effect on anything, since the crops were brought to the defendant grain elevator. Justice Burke asked whether, since the Food Security Act created limited exceptions to the general rule that good faith purchasers take free of any security interest, the Court should require strict compliance. Counsel responded that the plaintiff had substantially complied with the requirements of the Act, and that strict compliance would elevate form over substance. Counsel pointed out that the defendant grain elevator had issued two drafts for the subject crops, the first including the name of the bank as a co-payee, before issuing a second to the farmer alone. Justice Garman asked counsel if Congress intended that substantial compliance should be sufficient, why didn't it say so? Justice Garman followed up by asking whether Congress had acted to overrule the holding in Farm Credit Midsouth, PCA v. Farm Fresh Catfish Co., the Eighth Circuit case on strict compliance relied upon by the Appellate Court. Counsel conceded that Congress had not yet acted to overrule the decision. Justice Thomas pointed out that Congress had failed to challenge Farm Fresh despite having made several amendments to the Food Security Act in the intervening years, and counsel conceded that that was so.

Counsel for the defendant grain elevator challenged the plaintiff's argument that the statute was merely intended to facilitate interstate commerce; rather, counsel argued, the principal purpose of the Act was to protect the buyers of farm products and make the requirements applicable to farm security interests uniform throughout the country. Justice Garman asked whether it made any difference that the defendant had known about the bank, and initially issued a check to both the bank and the farmer.   Counsel responded that the Act clearly stated that the notice requirements are not waived by actual notice. Justice Freeman asked why the name of the county in which the crops were found was so important -- what could possibly go wrong if the county name was missing? Counsel responded that whatever Congress' reason for requiring the name of the county, the form used by the bank for its security interest contained a blank for the county - which was not filled in. Justice Karmeier pointed out that the bank's form contained a box under the county blank stating that, when the box is checked, products are covered "wherever located" -- does that mean that once the box is checked, notice is sufficient statewide?   Counsel responded that the form was the lender's, not one that flowed directly from the statute. Justice Burke pointed out that the law was hardly uniform if everyone was permitted to make up their own form. Counsel responded that strict compliance applied to the categories of information that had to be reported, not the form in which disclosure was made. Both Justices Garman and Thomas asked what the logical reason was for requiring strict compliance for direct notice - given to the buyer -- but accepting substantial compliance for central notice. Counsel responded that central notice is intended merely to put buyers on inquiry notice, where direct notice is intended to give buyers every fact necessary under the statute.

During rebuttal, Justice Freeman asked a two part question: would a ruling for the plaintiff bank spawn a lot of litigation, and what should be the test for determining substantiality? Counsel responded that logic and equity dictated that if the buyer had all the information it needed to identify the protected crops, that should be enough, and follow-on litigation should not concern the Court.

The Court will likely file an opinion in State Bank in four to six months.

• Print
• Comments
• Trackbacks
• Share Link

With the November term in full swing and the holidays rapidly approaching, the Illinois Supreme Court has announced that the Court expects to file opinions on three remaining days in 2012: November 29, December 13 and December 28.

The Court’s civil docket is largely up to date, accounting for the usual time between argument and opinion. Every civil case on the January and March argument dockets has been decided. One remains from the May term, and we will likely see that opinion soon: 

• Wilson v. Edward Hospital, No. 112898 – Are actual agency and apparent agency separate claims for purposes of the res judicata doctrine and the prohibition against claim-splitting set forth by the Supreme Court in Hudson v. City of Chicago, 228 Ill.2d 462 (2008) and Rein v. David A. Noyes & Co., 172 Ill.2d 325 (1996), so that summary judgment entered on the actual agency claims in plaintiffs’ initial suit bars plaintiffs’ apparent agency claims in a refiled suit, even in the face of a ruling that there is a question of fact as to the apparent agency claims?

As readers of The Appellate Strategist will recall, the Court’s September term was especially heavy in civil arguments, with thirteen cases being argued, presenting a number of challenging issues. Based on the Court’s experience in recent years, we would expect between three and six cases from the September term to be handed down in December.  The cases are:

Call of the Docket for September 13:

• Hernandez v. Bernstein, No. 113054 -- (1) Is an action for legal malpractice based on one factual theory one claim for purposes of res judicata, or two? (2) Does a plaintiff's voluntary dismissal of the remainder of his claim render the trial court's order dismissing one of plaintiff's factual theories final for purposes of res judicata? For our preview of the case, see here. For our report on the oral argument, see here.

Call of the Docket for September 18:

• Center Partners, Ltd. v. Growth Head GP, LLC, No. 113107 et seq. – (1) Does the doctrine of subject matter waiver for the attorney-client privilege extend from litigation to business negotiations? (2) Can documents shared among partners in a business negotiation be protected by the work product privilege? For our preview of the case, see here. For our report on the oral argument, see here.
   
• Cooney v. Rossiter, No. 113227 – (1) Was the plaintiffs' action barred pursuant to res judicata by the earlier Federal action, even though the earlier Federal action was a class, rather than an individual claim? (2) Did a court-appointed psychological evaluator in a custody hearing have absolute immunity from suit for alleged misconduct in connection with his opinions? For our preview of the case, see here. For our report on the oral argument, see here.
   
• Carr v. Koch, No. 113414 – Do plaintiffs have standing to challenge the Illinois education funding system as a violation of the equal protection clause of the Illinois constitution? For our preview of the case, see here. For our report on the oral argument, see here.
   
• EMC Mortgage Corp. v. Kemp, No. 113419 – (1) Is a judgment of foreclosure final and appealable, or must an appeal await a final order approving the sale and distributing the proceeds? (2) Is an order of foreclosure immediately appealable when standing is challenged on the grounds that the order is void? For our preview of the case, see here. For our report on the oral argument, see here.
   
• Mathis v. Mathis, No. 113496 – In a bifurcated dissolution proceeding, when a grounds judgment has been entered, and when there is a lengthy delay between the date of entry of the grounds judgment and the hearing on ancillary issues, is the appropriate date for valuation of marital property the date of dissolution or a date as close as practicable to the date of trial of the ancillary issues? For our preview of the case, see here. For our report on the oral argument, see here.

Join us after the jump for the remaining cases.

Continue Reading...

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the November term oral arguments at the Illinois Supreme Court begin with Griggsville Perry Community Unit School District No. 4 v. Illinois Educational Labor Relations Board. Our preview of Griggsville is here.

Griggsville-Perry arose from the firing of a noncertified paraprofessional who worked in an elementary school library. After a number of complaints about her performance, the superintendant of the school district notified the employee that she would be fired at an upcoming meeting. The employee and her union representative appeared before the board and the employee testified, but the board fired her. The union filed a grievance, and the arbitrator ordered the employee reinstated, finding that she was entitled to a statement of the specific acts and omissions that the board alleged justified her discharge. The Appellate Court reversed, noting that the collective bargaining agreement said nothing about limiting discharge to just, good or proper cause. The Court found that the arbitrator's decision was without support in either past practice of the parties or the interpretation of similar contract language in other cases.

Judging from the active questioning of both sides, the Justices of Supreme Court seem conflicted about Griggsville. Counsel for the Educational Labor Relations Board began by emphasizing the deferential standard of review - the Board reviews the decision of the arbitrator, and the Court then reviews the Board's decision for clear error. Justice Burke asked counsel whether the parties' agreement to arbitrate necessarily implies dismissal only for just cause. Counsel responded that the agreement implies a lesser standard of arbitrary and capricious. Justice Theis asked counsel how the court should define just cause, arbitrary and capricious, and exactly what the difference was. Counsel responded that "just cause" requires a "fit" between the alleged act and the penalty of dismissal. An "arbitrary and capricious" standard, on the other hand, required mere reasoned support for the penalty, rather than a close fit. Justice Theis followed up, asking whether there was a standard in between the two. Counsel responded that the intermediate standard was progressive discipline.

Counsel for the Board argued that the Board's decision could not be reversed based on a finding that the arbitrator had misinterpreted the collective bargaining agreement; if the decision was derived from the essence of the contract, the decision had to be affirmed. Justice Garman asked whether the "essence of the contract" included elements merely implied in the contract, and counsel responded that there was a "common law of the shop" which the parties knew would be used to fill in gaps in the contract. Justice Theis asked counsel to point out where the arbitrary and capricious standard was to be found in the agreement. Counsel argued that the standard was inherent in the contractual grievance procedure. Justice Theis pressed counsel, challenging the basis for his claim; counsel responded that industrial common law supported his view, but pointed out that whether or not the arbitrator correctly interpreted industrial common law was not a matter subject to judicial review. Justice Garman asked counsel whether it made a difference that the Board and the Union could not reach an agreement on a just cause standard. Counsel responded that the arbitrator could not apply at will or "just cause," because the parties couldn't reach agreement on either standard. Therefore, the applicable standard must be arbitrary and capricious. Justice Theis commented that the arbitrator had looked at both at will and just cause, and settled somewhere in the middle -- but it wasn't entirely clear what "the middle" standard meant. Counsel argued that arbitrary and capricious was not an intermediate standard, but was in fact a low bar.

Counsel for the school board attempted to refocus the discussion, arguing that the case was not about contract interpretation. Justice Thomas suggested that there was "nothing earth-shattering" about the arbitrator's award, but counsel disagreed. The arbitrator's award was contrary to what the parties had negotiated, counsel insisted; requiring a reasoned evidentiary hearing whenever employees are given a mere opportunity to be heard would represent a significant change in the law, particularly since it wasn't clear what the arbitrator's view of just cause would be in any particular case. Counsel reviewed the parties' contract negotiations in detail: first, the union had proposed progressive discipline. The board had responded with a proposal for "manifest weight of the evidence," with a right to notice and hearing. Ultimately, the parties had agreed to waive their competing proposals: leaving matters at "employment at will." Counsel argued that the union had squarely rejected an "arbitrary and capricious" standard, barring the arbitrator from imposing one. Justice Thomas asked counsel what was wrong with the Board's view that the arbitrator had merely found that the contract contained an implicit requirement that notice and hearing be meaningful. Counsel responded that the arbitrator's decision was merely just cause by another name, giving the union what it had rejected in negotiations. Justice Burke noted that a line of Federal cases holds that an agreement to arbitrate employment disputes necessarily implies just case, and asked counsel what an arbitrator was to do if employment was at will and there was no standard of review. Counsel responded that the arbitrator should confirm that an employee had received notice and union representation, and no more. Justice Theis asked whether the arbitrator's decision didn't amount to saying that there must be some kind of standard for an employee's meeting not to be meaningless? Counsel responded that the problem was that the arbitrator had failed to take into account the fact that the standard at issue had been rejected at the collective bargaining table. Justice Karmeier pointed out that the relevant provision of the collective bargaining agreement actually referred to a right to a "meeting," not a "hearing," and asked counsel whether the distinction made a difference. Counsel agreed that the agreement did not use the word "hearing" to describe the employee's rights.

In rebuttal, counsel argued that the case was not ultimately about the employee's rights under section 2.6 of the collective bargaining. Rather, according to counsel, the dispute revolved around the employee's right under section 2.1 to review materials in his or her personnel file and attach dissenting or explanatory material. According to counsel, the arbitrator had reversed the board's decision because the employee was terminated based on notes about her job performance which the employee had not seen, which the board reviewed in executive session. Justice Theis asked whether counsel's argument was ultimately procedural rather than substantive, and counsel answered that the arbitrator had never in fact reached the issue of whether just cause had been proven.

The Court should file its opinion in Griggsville within three to six months.

• Print
• Comments
• Trackbacks
• Share Link

We conclude our previews of the civil cases on the Illinois Supreme Court's November term oral argument docket with Bjork v. O'Meara, a case about traps for the unwary in challenges to the disposition of a decedent's property. We previewed Bjork just after review was granted here.

Here's the problem the Court faces in Bjork. Every state agrees that there is a strong public interest in distributing property pursuant to an estate as quickly as possible. But does that principle apply only to "frontal attack" will contests? What about tort claims for interference with a testamentary expectancy?

The decedent in Bjork passed away in early 2009. Plaintiff filed petitions for issuance of citations to discover information and recover property, arguing that assets in a bank account belonged to her, not the estate. The petitions were granted, and plaintiff received discovery. Next, the plaintiff filed a petition for leave to depose a bank officer, but that was denied. Subsequently, the estate was wound up and closed.

Six months after the estate closed -- twenty months after the decedent's death -- the plaintiff sued the executor of the estate for tortious interference with testamentary expectancy, alleging that she should have received the bank account and charging the executor with fraud, undue influence, misrepresentation, and assorted other wrongdoing. The executor moved to dismiss, arguing that the action was barred by the six month statute of limitations in the Probate Act on will challenges. (755 ILCS 5/8-1) The plaintiff responded that she was stating a tort claim, not challenging the will, but the Circuit Court dismissed.

Like many cases which reach the Supreme Court, Bjork will play out in the boundary between two earlier cases. In Robinson v. First State Bank of Monticello, the Supreme Court held that when an estate is closed, the will has been established as valid. If a tort claim is based on the proposition that the will is not valid, then it must be filed within the six month statute of limitations, or the claim is barred, regardless of how it's pled. On the other hand, there was In re Estate of Ellis, where the Court had held a tort claim was not barred, since the plaintiff hospital had not been aware of its interest in a previous will until long after the final will was probated.  Further, the Court noted that the plaintiff could not have recovered lifetime gifts to the defendant -- sought in the tort suit -- through a will contest.

Ultimately, the Appellate Court in Bjork affirmed the Circuit Court's dismissal. The Court agreed that the plaintiff could not have received complete relief in a will contest, since she had no claim in intestacy to the bank account at issue. Nevertheless, the Court held that since plaintiff's tort action challenged the property disposition in the will, it should have been filed in conjunction with the estate proceeding, within the six month state of limitations.

Bjork will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

 

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the civil cases on the Illinois Supreme Court's November oral argument docket continues with Poris v. Lake Holiday Property Owners Association [pdf], a case which poses a number of interesting questions about the limits on the authority of private security forces. Our initial look at Poris, just after review was granted, is here.

The defendant homeowners association is governed by a board of directors. Prior to the events at issue, the board had established a security department for the development, bought vehicles for the department, fitted the vehicles with oscillating and flashing lights, radar units and audio/video recording equipment. The board adopted a speed limit of 25 mph for all the association's road, applying escalating fines for violations: $50 for a first offense between 1-10 mph over, $100 for exceeding the limit by 11-15 mph, and $200 for a first offense going sixteen or more mph over the limit.

When the plaintiff was pulled over, he was allegedly traveling at 34 mph. Plaintiff got out of his car, but the security officer told him to return to it; he then approached the vehicle and took the plaintiff's Association membership card and drivers license. The officer then returned to his security vehicle and wrote a citation. When he again approached the plaintiff's car, four and a half minutes later, he told plaintiff that he was being recorded. The officer identified himself as Association security, and the plaintiff allegedly said the officer had no authority to detain him. The officer responded "I am not detaining you."

The plaintiff sued the association, its entire board of directors, the chief of security and the officer involved in his stop. Among other things, the plaintiff sought a declaratory judgment that the practices and procedures of the Association security department were unlawful, as well as seeking damages for false imprisonment. The Circuit Court granted the defendants' motion for summary judgment on all fourteen counts, but the Appellate Court reversed in part.

First, the Court addressed the security officers' authority to stop and detain. Private security guards have no more authority than private citizens, the Court found. Thus, a security guard may only detain a citizen if he or she has reasonable grounds to believe that an offense is being committed. 725 ILCS 5/107-3. The Court held that since the speed limits were Association rules rather than statutes, the plaintiff's alleged speeding was not an "offense." Therefore, the security officers had no authority to stop and detain for speeding.

Next, the Court turned to the security officers' use of amber oscillating lights on their vehicles. According to the Illinois Vehicle Code, such lights may be used only on certain types of vehicles, including security companies, alarm responders and control agencies. The Court held that the Association was not a "security company," so the use of amber oscillating lights on the vehicles was likewise unlawful.

The security officers' use of video and audio equipment was not a violation of the Illinois eavesdropping statute, the Court found. The Criminal Code provides that taping is unlawful unless all parties to a conversation consent. 720 ILCS 5/14-2(a)(1). Consent can be implicit as well as explicit. The Court concluded that when plaintiff was told that the conversation was being taped but continued talking anyway, he gave implicit consent to the taping. Nor was the security department barred from using radar to measure speed, since the applicable provision of the Vehicle Code, 625 ILCS 5/11-612, merely regulates the use of radar to enforce the law, as opposed to Association rules.

Finally, the Court turned to the plaintiff's claim for false imprisonment. Given that the plaintiff was directed by an individual wearing a uniform, a badge and a duty belt to wait in his car (without his license), the Court found that plaintiff's liberty was restrained. Since violation of the Association's rules is not an "offense" justifying restraint, the plaintiff was entitled to summary judgment on his claim for false imprisonment.

Poris will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the civil cases on the Illinois Supreme Court's November oral argument docket continues with Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund. Our initial look at Skokie Castings, just after review was granted, is here.

Skokie Castings arises from a severe workplace injury which permanently disabled the employee. At the time, the employer was a qualified self-insurer. After the Illinois Industrial Commission confirmed that the employee was totally disabled, the employer paid up to its retention amount. At that point, the employer's excess carrier took over. But then the excess carrier went broke and was placed in receivership.

Like most states, Illinois has a system in place to protect injured workers when a workers comp insurer goes bankrupt. As part of the price of doing business in Illinois, all insurers contribute to the Illinois Insurance Guaranty Fund. When a company begins the liquidation process, its obligations are taken over by the Fund. According to the Insurance Code (215 ILCS 5/537.2), "such obligations shall not . . . exceed $300,000, except that this limitation shall not apply to any workers' compensation claims."

So was the employer's claim against the Fund a "workers' compensation claim"? The Fund thought not; they paid up to the $300,000 ceiling and then stopped.

The employer filed a declaratory judgment action, seeking a declaration that the Fund had improperly stopped paying, and the $300,000 ceiling didn't apply. The parties filed cross-motions for summary judgment; the trial court granted plaintiff's motion, holding that the claim, despite being filed by the self-insured employer, was a "workers compensation claim" within the meaning of the statute.

The Appellate Court affirmed. The Court found that several sections of the Insurance Code noted that the Fund was intended to protect not only claimants but policyholders as well. Following a New Mexico decision rendered under a similar statutory structure, In re Delinquency Proceedings Against Mission Insurance Co., the Court held that if the legislature had intended to exclude claims by self-insured employers whose excess carriers had gone bankrupt, it would have done so. Since the statute contained no such language, the reasonable inference was that the legislature intended that such claims should fall within "workers compensation claims," and thus be exempt from the payment ceiling.

Skokie Castings will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

• Print
• Comments
• Trackbacks
• Share Link

For many out-of-staters, the first image that comes to mind when they hear "Illinois" is downtown Chicago. Chicago's one of the world's great cities, but the fact is, much of Illinois is rural. The state's 76,000 farms cover more than 28 million acres -- nearly 80% of the total land area of the state. It's estimated that the farming sector of the Illinois economy produces on the order of $9 billion annually. So the Illinois Supreme Court is no stranger to cases impacting the farm community. An important example will be argued this month during the Court's new term: State Bank of Cherry v. CGB Enterprises, Inc. 

State Bank starts with an Illinois farmer executing a note in the plaintiff's favor, using certain crops as security. He then sells the crop to the defendant, a grain elevator. The plaintiff sent the defendant a Notice of Security Interest, citing the federal Food Security Act, 7 U.S.C. § 1631(e). The plaintiff sued the defendant ultimately because the defendant paid the farmer, not the plaintiff bank.

The defendant moved to dismiss. The Food Security Act, the defendant pointed out, required that a Notice of Security Interest include "a description of the farm products subject to the security interest created by the debtor, including . . . the name of each county or parish in which the farm products or produced or located." The plaintiff's notice left the location of the crops blank. Citing an Eighth Circuit case, Farm Credit Midsouth, PCA v. Farm Fresh Catfish Co., the defendant argued that strict compliance was mandatory under the Food Security Act, so the plaintiff was out of luck.

The plaintiff had two responses. First, the plaintiff pointed out that the farmer had delivered the crops to the defendant at the defendant's grain elevator, so what difference did it make where they'd come from? Second, the plaintiff argued that the matter was governed by the Illinois Commercial Code, specifically sections 810 ILCS 5/9-320(f) and 9-320.1. Those provisions were pretty much identical to the federal Food Security Act, but under First National Bank v. Effingham-Clay Service Co., substantial compliance with the notice requirements was close enough. The trial court concluded that it was governed by the First National Bank, an Illinois state court decision, and granted the plaintiff's motion for judgment on the pleadings, enforcing the security interest.

A divided panel of the Appellate Court reversed. First, the Court held that the state Commercial Code was preempted by the Food Security Act, making First National Bank irrelevant. The Court noted that it wasn't bound by the Eighth Circuit's decision in Farm Fresh Catfish, but found that the opinion was consistent with other Federal cases on whether substantial compliance was enough under the Food Security Act. The Court noted that although the Act specifically provided that minor errors in Notices given under a central filing system were excused, it contained no such provision for Notices given directly to holders of secured crops. It followed that the Congress intended to require strict compliance.

State Bank of Cherry will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

• Print
• Comments
• Trackbacks
• Share Link

We begin our previews of the civil cases on the Illinois Supreme Court's November term oral argument docket with Griggsville-Perry Community Unit School District No. 4. v. Illinois Educational Labor Relations Board [pdf]. Our first look at Griggsville-Perry, just after review was granted, is here.

Griggsville-Perry arose from the Board's firing of a noncertified paraprofessional who worked in an elementary school library. In 2007, her school principal approached the employee and told her that the school board had received complaints about her performance. The principal began keeping a notebook of events relating to the employee's performance. The following year -- after a number of incidents involving the employee in 2007 -- the principal recommended that the school board fire the employee. The superintendent of the district notified the employee that she would be fired at an upcoming meeting. The superintendent and principal met with the employee and her union representative twice, and items from her file were produced to her. The employee and her union representative appeared before the school board and the employee testified, but the board decided to fire her.

The union filed a grievance, and after a hearing, the arbitrator ordered the employee reinstated. When the board refused, the union filed an unfair labor practice charge. The arbitrator once again ordered reinstatement, and the Illinois Educational Labor Relations Board affirmed.

The Appellate Court reversed. The Court noted that the underlying labor agreement said nothing about personnel begin subject to termination only for just, good or proper cause. Although the contract provided for arbitration, it also stated that the arbitrator could not modify, nullify, ignore or add to the provisions of the agreement. Finally, the agreement included an integration clause. In view of these provisions, the Court criticized the arbitrator's insistence that the Board provide "a statement of the specific acts or omissions -- time, place, participants, and utterances -- that it alleges justify her discharge." The arbitrator "has applied his own brand of industrial justice," the Court found, "by reading a just-cause standard into the agreement."

The Court noted the arbitrator's claim that he was free to interpret the contract by applying "industrial common law," but found that the arbitrator's decision had no support in either past practice of the parties or the interpretation of similar contract language in other cases. The arbitrator's decision that the procedure given the employee was somehow deficient was "clearly erroneous," the Court found: she was given repeated warnings, attempts were made to help her, she was given reasonable prior written notice of the reasons for her dismissal, and she was allowed to testify at the hearing.

Before the Supreme Court, amicus the Illinois Association of School Boards and Illinois Association of School Administrators were equally critical of the arbitrator, arguing that he had conjured a requirement for a "full and fair hearing" out of nothing more than a contractual provision that an employee should be given notice if he or she is required to appear.   "If there ever were a decision that smelled like a five-week old unrefrigerated dead fish," amicus wrote, "it is this arbitrator's decision."

Griggsville-Perry will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Thursday, November 15.

• Print
• Comments
• Trackbacks
• Share Link

This afternoon, the Illinois Supreme Court announced its docket for the November term [pdf]. Join us back here over the weekend as we begin our previews of the five civil cases the Court has scheduled for argument next month:

• Griggsville-Perry Community Unit School v. The Illinois Educational Labor Relations Board (argument November 15th);
   
• State Bank of Cherry v. CGB Enterprises (argument November 20th);
   
• Skokie Castings, Inc. v. Illinois Guaranty Fund (argument November 20th);
   
• Poris v. Lake Holiday Property Owners Association (argument November 20th); and
   
• Bjork v. O'Meara (argument November 20th).

• Print
• Comments
• Trackbacks
• Share Link

This morning, a sharply divided Illinois Supreme Court held that a pleading signed by a non-lawyer is not automatically null and void. The decision was in Downtown Disposal Services, Inc. v. The City of Chicago.

We previewed the decision yesterday evening, here. The plaintiff was cited four times for violating City ordinances relating to dumpsters. When the plaintiff failed to appear, the Department of Administrative Hearings entered default judgments. The plaintiff sought to vacate the defaults, but the hearing officer denied plaintiff's motion, inviting the plaintiff to appeal.

Filing an appeal seeking administrative review in Chicago merely involves filling out a pre-printed form. Not long after the adverse hearing decision, the president of the plaintiff corporation filed four pro se complaints challenging the hearing decision. The City moved to dismiss, arguing that Illinois law held that any pleading signed by a non-lawyer such as the president was per se null and void. The trial court reluctantly granted the motion. The Appellate Court reversed, holding that the a non-lawyer's complaint was not necessarily void on its face.

In a four-Justice majority opinion written by Justice Anne M. Burke, the Court affirmed the Appellate Court.

The Court had no trouble finding that the president of the plaintiff corporation had engaged in the unauthorized practice of law. The simplicity of the complaint form was irrelevant to the unauthorized practice question, the Court found; legal knowledge and judgment was required to advise the plaintiff as to whether it should appeal in the first place, and that was enough.

The Court noted that other jurisdictions had split on the question of whether non-lawyers' pleadings were automatically void. Some jurisdictions, including the Illinois Appellate Court, have held that a non-lawyer's signature is an incurable defect, and the pleading is void. Other courts have treated the defect as curable, allowing litigants a reasonable time to find a lawyer and amend their complaint.

Following the Seventh Circuit's decision in In re IFC Credit Corp., the Court found that: (1) a lay person's signature on a pleading did not deprive the court of subject matter jurisdiction; and (2) the consequences of the nullity rule would typically be severe, since the statute of limitations might run while the non-lawyer's complaint was pending, and even if it didn't, refiling the action could be expensive.

"We hold there is no automatic nullity rule," the majority held. The Court directed lower courts to consider four factors in evaluating a motion to dismiss: (1) did the nonattorney know that his or her conduct amounted to unauthorized practice; (2) did the corporation moved diligently to correct the problem; (3) was the nonattorney's participation minimal; and (4) did the opposing party suffer prejudice.

Applying its newly-minted test, the majority directed the lower court to reinstate the plaintiff's complaint. The nonattorney's participation was minimal, the majority found; the City suffered no real prejudice, and far from protecting the client, applying the nullity rule would harm the client.

Justice Lloyd A. Karmeier wrote a lengthy and spirited dissent, joined by Chief Justice Thomas L. Kilbride and Justice Robert R. Thomas. The dissenters began with a frontal attack on the majority's holding:

Today, for the first time, the Supreme Court of Illinois has sanctioned the unauthorized practice of law by refusing to follow the nullity rule.

The dissenters argued that the majority had effectively overruled "an unbroken line of precedent dating back before the Civil War" with its holding. Point by point, the dissenters disputed the majority's reading of the various federal and state cases it cited in support of its invalidation of the nullity rule. The rule was " not a novel or unsettled question in Illinois," the dissenters wrote. Even if the majority's conclusion that the dismissal should be discretionary, the dissenters argued, the majority should have remanded the action for the trial court to apply its multi-factor test in the first instance.

The dissenters disputed the majority's application of its newly minted test as well. It was far from clear, they wrote, that the president of the plaintiff corporation was unaware that his signing of the administrative complaints was the unauthorized practice of law, and ignorance of the law was not a defense anyway. The corporation had not acted promptly to rectify the problem with its complaints, the dissenters pointed out, waiting six months to file appearances through an attorney, and another five to seek leave to amend its complaints. Besides, the dissenters argued, the plaintiff had been cited multiple times years earlier, and had still not paid its fines, suggesting that the plaintiff was unworthy of sympathy. Whether or not the nullity rule might be harsh in some cases, the dissenters concluded that it certainly was not in Downtown Disposal.

• Print
• Comments
• Trackbacks
• Share Link

Tomorrow morning, the Illinois Supreme Court will file its opinion in Downtown Disposal Services, Inc. v. The City of Chicago [pdf]. Tonight we'll preview the case. Tomorrow we'll bring you our summary and analysis of the Court's opinion.

Downtown Disposal began when the City Department of Transportation issued the company four administrative violation notices in connection with City ordinances relating to dumpsters. When the company failed to appear for any of the scheduled hearings before the Department of Administrative Hearings, default judgments were entered. At a later hearing on the company's motion to set aside the defaults, the Administrative Law Officer told that company's president that "you" have a right to appeal the decision. Shortly thereafter, the president did so, signing and filing four fill-in-the-blank pro se complaints for administrative review.

But there was a problem: the president of the company wasn't an attorney. The City noticed the problem when the company moved for leave to file amended complaints signed by counsel. Did the president's signature invalidate the plaintiff's complaints for administrative review? The City moved to dismiss the company's complaints, arguing that since a corporation couldn't represent itself, the president's signatures rendered the proceeding void per se.

The company opposed the motion to dismiss, arguing that the nullity rule was not, in fact, per se. Filling in a fill-in-the-blank form hardly constituted rendering legal advice or doing anything requiring legal skill, the company argued. Besides, dismissal would violate the company's due process rights given that the preprinted form didn't say anything about an attorney's signature being required, and it was patently unfair to inform the company of its right to appeal without mentioning the attorney requirement.

And besides, the company added in a subsequent motion for summary judgment, as long as we're casting aspersions on the pleadings here, the City's complaints weren't signed by a lawyer either, so the administrative proceeding had been void from the beginning.

The trial court reluctantly granted the City's motion to dismiss, commenting that the law appeared to require that pleadings signed by a non-lawyer were automatically void, requiring dismissal. The court further held that the issue of the City's apparent incapacity to bring its complaint in the first place was a separate matter which required resolution in the administrative hearing (had there been one).

The Appellate Court unanimously reversed.

The Court began by clearing away the underbrush, rejecting several of the company's preliminary arguments. The City hadn't waived its argument by failing to point out that the president had represented the company before the Department of Administrative Hearings, since the company failed to identify any act the president took before the agency which amounted to unauthorized practice of law. Nor did the trial court consider new evidence in finding that the president was not a lawyer, in violation of the Administrative Review Law, 735 ILCS 5/3-110. The statute applied to a merits determination, and the court never made one. There was no basis for questioning the trial court's finding that filling in the blanks in a simple form complaint was the unauthorized practice of law, the court held.

The crux of the problem, the court found, was whether the rule that a pleading signed by a non-attorney was void required automatic or discretionary dismissal. The court recognized conflicting pronouncements on both sides of the question, but ultimately followed Applebaum v. Rush University Medical Center, where the Supreme Court held that dismissal was permitted rather than required, and only then when dismissal fulfilled the purposes of the rule, protecting the public and the integrity of the court system, and where no alternative remedy is possible.

Having decided that dismissal was not mandatory, the court ordered remand. The record suggested that the trial court likely would not have dismissed had it understood that it had discretion about the penalty, and the court concluded that the company had not acted unreasonably in believing that the president could sign the administrative review complaints. Furthermore, given that the City hadn't complained about the matter until the motions for leave to amend were filed, the court found itself unable to perceive any prejudice from the signatures on the administrative complaints. Accordingly, the court instructed the trial court to allow leave to amend.

The Supreme Court's decision in Downtown Disposal will be filed at 10:00 a.m. tomorrow morning. Join us back here for review and analysis.

• Print
• Comments
• Trackbacks
• Share Link

According to the Illinois Business Corporation Act, the dissolution of a corporation “shall not take away nor impair any civil remedy available” to or against the corporation, its directors or shareholders “for any right or claim existing, or any liability incurred, prior to such dissolution” as long as the lawsuit is filed within five years after dissolution. 805 ILCS 5/12.80.

But what does “right or claim existing” mean? What if the claim doesn’t accrue until after the demise of the corporation? The Illinois Supreme Court faced that question last week in Pielet v. Pielet. [pdf].

Pielet potentially posed a significant threat to Illinois business. The idea that dissolving corporations might face years of potential long-tail liability, based on conduct which occurred after the corporation’s demise, would have made winding down any corporation’s affairs considerably more difficult. In the end, the Supreme Court declined to permit such claims, holding that only claims which had actually accrued on the date of corporate dissolution were subject to the Business Corporation Act’s five-year survival statute.

Pielet arose from a generational transition at a family business. The plaintiff’s husband retired, selling the business to his sons. The sons gave their father a consulting contract, which would survive the father’s death and benefit their mother. Two years after the sale, one brother bought out the other. A series of complex corporate transactions followed, as the remaining brother moved to combine the business with a new partner from outside the family: (1) he sold an undivided one-half interest in the company to PBS One, Inc., the new partner’s business, and PBS agreed to assume half Pielet’s liabilities (including the consulting contract); (2) they formed a limited partnership, PBSIM, LP; and (3) both sides contributed their ½ interests in Pielet to PBSIM, LP. A few years later, PBS One sold its half interest in the partnership to National Material, LP, which the outside partner also owned, and PBS dissolved (National Material assumed PBS’ obligations). PBSIM, LP changed its name to Midwest Metallics in 1993, but continued to issue checks under the consulting agreement until 1998. The following year, Midwest Metallics declared bankruptcy, and the checks stopped.

The mother and father sued everyone concerned. Three counts of their complaint are relevant to our discussion here: breach of contract against National Material and NM Holding, Inc., the general partner of National Material; breach of contract against the same two entities as a “mere continuation” of PBS One; and breach of contract against PBS One – which had been dissolved for nearly five years. The parties filed cross-motions for summary judgment. The trial court granted the mother (the father by this time having died) summary judgment on all three claims, and both sides appealed. The Appellate Court reversed, saying that although the breach of contract claim against PBS was subject to the Business Corporation Act’s survival provision – despite not having accrued until after PBS’ dissolution – there were genuine issues of material fact regarding whether there had been a novation amongst all the corporate transactions. Then, for the sake of judicial economy, the court found that National Material and NM Holding would be liable if PBS was, since National Material was PBS’ successor, and NM Holding was the general partner of National Material.

Writing for a five-Justice majority of the Supreme Court, Justice Lloyd A. Karmeier affirmed in part and reversed in part. The Court rejected the plaintiff’s argument that the plaintiff's contract rights were a “claim or right” within the meaning of the Business Corporation Act sufficient to make the survival provision applicable. Following In re Johns-Manville Asbestosis Cases, 516 F.Supp. 375 (N.D. Ill. 1981), the Court held that since the consulting contract had not been breached until years after PBS’ dissolution, the breach of contract claim against PBS necessarily failed, whether there had been a novation or not.

On the other hand, the question of whether a novation had occurred was central to determining whether or not National Material and NM Holding could be held liable. Finding that there was a considerable material dispute as to that question, the Court affirmed the denial of summary judgment.

The remainder of Pielet – and the dissenters’ only disagreement with the majority – turned on an interesting but seldom touched-on area of appellate law: what constitutes an impermissible advisory opinion. National Material and NM Holding had sought and been granted leave to appeal to the Supreme Court despite having won at the Appellate Court. Why? Because they argued that the Appellate Court’s comments that National Material was a “mere continuation” of PBS were an improper advisory opinion. The majority of the Court agreed, holding that once the Appellate Court had found a triable issue on novation, there was no need to go further.

Writing for herself and Justice Charles E. Freeman, Justice Anne E. Burke disputed the majority's view. Justice Burke pointed out that National Material and NM Holding had also argued that they should have been granted summary judgment.   That necessarily involved proving either that there was a novation extinguishing liability, or that they were entitled to judgment on the merits. Therefore, in the view of Justices Burke and Freeman, the Appellate Court had to consider the status of National Material and NM Holding, and setting aside that portion of the opinion was erroneous.

• Print
• Comments
• Trackbacks
• Share Link

It's not often that you see a trial end in verdicts for both plaintiff and defendant, with both sides receiving awards of not only compensatory but punitive damages against the other. The Illinois Supreme Court heard such a case today. A 6-1 majority led by Justice Mary Jane Theis affirmed in part and reversed in part a judgment arising out of a complex employment dispute in Lawlor v. North American Corp. of Illinois.

Plaintiff was a commission-based salesperson for defendant. Just short of seven years after starting work for the defendant, the plaintiff resigned and went to work for a competitor who also sold corporate-branded promotional items. The defendant suspected that the plaintiff had violated her noncompetition agreement with the defendant, so the company instructed its lawyer to investigate. The company lawyer retained a private investigation firm which had worked for the company before.

The president of the investigation firm testified that he had conducted previous noncompetition investigations for the defendant, and that the defendant wanted him to obtain the plaintiff's telephone records. For his part, the defendant company's designated liaison with the private investigators testified that he relied on the lawyer and the investigator to perform the investigation and did not instruct them on what to do or not to do. He received several faxes from the investigator containing hundreds of phone numbers during the investigation, but he never asked how the phone records had been obtained.

Plaintiff was recruited to join her new company by a former employee of the defendant. In the final months before she resigned from the defendant's employ, she spoke several times to an outside consultant hired by a customer to negotiate its business with defendant. The consultant testified by declaration that the plaintiff had encouraged him to delay awarding his business until the plaintiff moved to her new employer, but at trial, the consultant disavowed his own declaration. Only a month into her new job, the plaintiff sent her new boss a letter discussing her sales history while working for the defendant; the letter disclosed the defendant company's typical profit margin.

The plaintiff sued the defendant for outstanding commissions; not long after, upon learning of the defendant's investigation, she added a claim for intrusion upon seclusion. The defendant countersued for breach of the fiduciary duty of loyalty and for excess commission draw payments. At the conclusion of the trial, the jury returned a verdict for plaintiff on the intrusion claim, awarding $65,000 in compensatory damages and $1.75 million in punitive damages. The court subsequently entered judgment for defendant on its breach of fiduciary duty claim, awarding the defendant $78,781 in compensatory damages and $551,467 in punitives. On posttrial motions, the court reduced the plaintiff's punitive damages award to $650,000. The Appellate Court affirmed the plaintiff's judgment on the intrusion claim and reinstated the plaintiff's original $1.75 million award of punitive damages. The Court also reversed the Circuit Court's judgment in defendant's favor on the breach of fiduciary duty claim. The Supreme Court affirmed in part and reversed in part.

Much of the Court's opinion seems fact-specific and unlikely to have a dramatic influence on Illinois law going forward. The Court found that adequate evidence supported the judgment that the private investigators were an agent of the defendant for purposes of vicarious liability. The Court further held that although the defendant had apparently obtained the plaintiff's phone records on multiple occasions, the defendant's conduct nevertheless ranked low on all the common law criteria of gravity. Moreover, the Court held, the justification for a heavy award of punitive damages was "sharply diminished" where liability was vicarious. The court also affirmed the vacatur of the award for the defendant on the counterclaim, finding that there was no evidence that the plaintiff had breached her common law duty of loyalty.

One aspect of the decision, however, carries with it a potential impact for future litigation: in affirming the judgment in plaintiff's favor in connection with the defendant's investigation of her phone records, the Court adopted the tort of intrusion upon seclusion as a valid cause of action in Illinois. The Court endorsed the standard set forth in Section 652B of the Restatement(Second) of Torts for the new cause of action, holding that an intrusion upon the private affairs and concerns of another would be actionable "if the intrusion would be highly offensive to a reasonable person." How dramatic an effect on Illinois law this new cause of action has will have to await subsequent lawsuits by other parties.

Chief Justice Thomas L. Kilbride dissented in part. Although the Chief Justice agreed that the plaintiff's judgment on her intrusion claim should be affirmed and the defendant's judgment for breach of fiduciary duty reversed, the Chief concluded that the majority had been insufficiently deferential to the lower court's findings with respect to the plaintiff's claim for punitive damages. Chief Justice Kilbride wrote that he would have affirmed the Circuit Court's remittitur of the punitive damages award to $650,000.

• Print
• Comments
• Trackbacks
• Share Link

Can an insurance policy be rendered unenforceable by Illinois public policy because of a conflict with another state's law?

This morning, in an opinion by Justice Lloyd A. Karmeier for a 6-1 majority, the Illinois Supreme Court held that the answer was "no."

Country Preferred Insurance Co. v. Whitehead arose from an accident in Wisconsin between the insured and an uninsured driver. That fact matters because the insured's uninsured motorist coverage provided that the insured had two years to file an action against the insurer under the coverage - a natural enough time limit, since the statute of limitations for filing an uninsured motorist claim under Illinois law is two years. But the state of Wisconsin allows uninsured motorist claims to be filed for three years after an accident.

The insured had her accident in the summer of 2007. She contacted her insurer almost immediately, and the parties had a number of communications over the next two years. But the insured never "commenced" a "suit, action or arbitration," as required by her policy. More than two years after the accident, the insurer finally filed an action for declaratory relief, seeking a finding of no coverage. The insured counterclaimed, arguing that since the policy filing deadline was a year shorter than the Wisconsin statute of limitations, the two-year policy deadline deadline was an unenforceable attempt to defeat the intent and the purpose of the Illinois Uninsured Motorist statute, 215 ILCS 5/143a.

The insured filed a motion to compel arbitration pursuant to her policy. The Circuit Court denied the motion, noting that Illinois courts had repeatedly held that the two-year policy filing deadline did not violate public policy. On interlocutory appeal, the Appellate Court reversed, holding that Illinois public policy required that an injured party be placed in the same position he or she would have been if the driver had struck someone carrying insurance. This meant -- since the insured would have had three years to file after her accident in Wisconsin -- that the policy filing deadline was void as against public policy.

The Supreme Court reversed. "[W]e see no reason why Wisconsin's policy determinations should control the result in this case," the majority wrote. Nor did the court see any reason why the period for seeking arbitration must mirror the statute of limitations applicable to a suit against the tortfeasor. The insured was legally competent and of age, the Court found, and had failed to explain why she could not have initiated arbitration during the two years following the accident. Given that, the two-year policy statute of limitations did not violate public policy and was fully enforceable to bar the plaintiff's suit.

Chief Justice Thomas L. Kilbride dissented, arguing that since the insured would have had three years to file if she had collided with an insured driver while in Wisconsin, the public policy underlying the Uninsured Motorist statute required that the policy filing deadline be invalidated.

• Print
• Comments
• Trackbacks
• Share Link

Illinois courts have consistently refused to impose a general duty to preserve evidence. The Supreme Court has set forth a two-factor test for courts to apply in making the occasional exception to this rule: (1) “relationship” – an agreement, contract, statute, special circumstance or voluntary undertaking is such that a duty should be imposed; and (2) “foreseeability” – a reasonable person in defendant’s position would have foreseen that the particular evidence would be material to a potential lawsuit. This morning, the Illinois Supreme Court turned back an attempt to expand that two-factor test to so great a degree as to virtually impose a general duty to preserve evidence.

The case was Martin v. Keeley & Sons, Inc. Plaintiffs were working on the reconstruction of a bridge. Suddenly, the concrete I-beam supporting the plaintiffs collapsed, and the plaintiffs fell to the creek below and were injured. Immediately following the accident, the Illinois Department of Transportation and the Occupational Safety and Health Administration inspected the site. The day after the accident, the I-beam – still laying in the creek where it fell – was destroyed on the instructions of the plaintiffs’ employer, defendant Keeley.

In the weeks that followed, plaintiffs sued the manufacturer of the I-beam and the designer of the bearing assembly that supported the beam, alleging products liability claims. They also sued Keeley for negligent spoliation of evidence, and the other two defendants counter-claimed against Keeley on the same grounds. The Circuit Court dismissed all the claims against Keeley on summary judgment, but the Appellate Court reversed, finding that a reasonable person in Keeley’s position would have anticipated that the beam was material to a potential civil action.

By a 6-1 vote, the Supreme Court reversed the Appellate Court and affirmed the Circuit Court’s finding of no duty to preserve. According to the majority opinion by Justice Anne M. Burke, the defendant had not voluntarily undertaken to preserve the beam; the beam was not moved from the place where it fell before it was destroyed, and the defendant never attempted to make any tests on it.

Until today, Illinois courts have never specifically defined what sort of “special circumstances” might create a duty to preserve, so the majority considered the matter at some length. The Court rejected the view that mere possession or control of the evidence creates a duty, or that the defendant’s status as plaintiffs’ employer made a difference.  Nor did the Court find any reason to impose a duty to preserve evidence simply on the grounds that the defendant was likely to wind up in litigation as a result of the accident.

Chief Justice Thomas L. Kilbride dissented, concluding that “special circumstances” had indeed been established. The Chief Justice found that given that the plaintiffs were hospitalized at the time the I-beam was destroyed, and the likelihood that litigation would follow, refusing to recognize a duty to preserve might give potential litigants the perverse incentive to destroy evidence before litigation in order to circumvent discovery or escape liability altogether.

• Print
• Comments
• Trackbacks
• Share Link

In the first of six opinions issued in civil cases this morning, the Illinois Supreme Court held that publicly-owned recreational facilities have broad immunity from liability to users who fall on snow or ice.

The question arose in Moore v. Chicago Park District. Plaintiffs’ decedent was leaving a facility owned by the Chicago Park District after attending a senior water aerobics class. Three inches of snow had fallen two days earlier, and the Park District had plowed the parking lot and shoveled and salted the sidewalk; but as a result, a small pile of snow had collected at the edge of the lot. Decedent fell, breaking her leg. She developed complications during surgery to repair the leg, sustaining brain damage, and subsequently died. Her Special Administrator sued the Park District, stating one claim each under the Survival Act and the Wrongful Death Act.

The Park District moved for summary judgment, alleging it was immune from liability pursuant to Section 3-106 of the Local Governmental and Governmental Employees Tort Immunity Act, 745 ILCS 10/3-106. The Circuit Court initially denied the motion, but then decided to certify two questions relating to the breadth of Section 3-106 immunity. The Appellate Court affirmed, holding that no immunity was available because the decedent had been injured as a result of the Park District’s negligent snow plowing activities, not the condition of the property. A five-Justice majority of the Supreme Court reversed.

Section 3-106 of the Tort Immunity Act provides that “Neither a local public entity nor a public employee is liable for an injury where the liability is based on the existence of a condition of any public property intended or permitted to be used for recreational purposes,” barring willful and wanton conduct.

Writing for a five-Justice majority, Justice Lloyd A. Karmeier began by considering whether it mattered that the snow was an “unnatural” accumulation – meaning that the five-inch high pile of snow on which the decedent slipped was where it was as a result of the Park District’s plowing, as opposed to having fallen there. The Court noted that Section 3-105 of the Tort Immunity Act made an express distinction between natural accumulations (absolute immunity) and unnatural ones (qualified immunity). Since Section 3-106 made no such distinction, the natural/unnatural issue must not matter to the scope of immunity.

Once that initial issue was disposed of, it was obvious that plaintiff’s suit was doomed. Snow and ice was a condition of property, not an activity conducted on the property, the Court found. The Court rejected the idea that the decedent was injured by the activities of the employees operating the snow plow, as opposed to the snow itself. Nor did it matter whether the snow or ice was “affixed” to the property, the Court held, overruling Stein v. Chicago Park District. The majority also noted that its holding was in harmony with the statute’s purpose of encouraging the maintenance and development of public recreational areas.

Chief Justice Thomas L. Kilbride and Justice Charles E. Freeman dissented, arguing that plaintiff’s decedent had clearly been injured as a result of a negligently conducted activity – defendant’s snow-plowing – rather than a “condition” of the property.

• Print
• Comments
• Trackbacks
• Share Link

The Illinois Supreme Court has announced that tomorrow morning, October 18, it will file opinions in six civil cases:

• No. 112064 - Pielet v. Pielet -- (1) Was plaintiff's cause of action for breach of a long-term consulting agreement viable against corporation under the Survival Statute, 805 ILCS 5/12.80, even though the agreement was not breached until five years after dissolution of the corporation? (2) Was the defendant relieved of its obligations under the contract pursuant to the doctrine of novation? See Contract Law.
   
• No. 112219 et al. -- Khan v. BDO Seidman, LLP -- (1) Were the investment bank defendants the fiduciaries of their clients, as a matter of law and fact, with respect to their recommendations regarding certain "investment strategies" alleged to hold tax benefits? (2) Did the plaintiffs' claims accrue prior to the entry of IRS assessments against them with respect to the disputed investments? (3) Does the clause of 735 ILCS 5/13-214.2(b), the statute of repose relating to tax professionals, providing for the last date on which a claim for professional negligence may be brought when an IRS tax assessment has been entered lengthen the statutory period of repose? See Civil Procedure.
   
• No. 112530 - Lawlor v. North American Corporation of Illinois -- (1) Were private investigators the agents of defendant for purposes of applying respondeat superior? (2) Did the Circuit Court abuse its discretion by partially remitting an award of $1.75 million in punitive damages? (3) Was the Circuit Court's finding of a breach of the duty of loyalty contrary to the weight of the evidence? See Tort Law.
   
• No. 112788 - Moore v. Chicago Park District -- Does an unnatural accumulation of snow and ice constitute the 'existence of a condition of any public property' as this expression is used in Section 3-106 of the Tort Immunity Act? See Tort Law.
   
• No. 113270 - Martin v. Keeley & Sons, Inc. ­-- Where the I-beam on a bridge the plaintiffs were constructing collapsed and fell, did the plaintiffs state a triable issue of fact on (1) the "relationship" prong of duty to preserve evidence, and (2) the "foreseeability" prong of the duty, meaning that a reasonable person would have foreseen that the beam was material to a potential civil action? See Tort Law.
   
• No. 113365 - County Preferred Insurance Co. v. Whitehead -- Is the provision of an Illinois automobile insurance policy imposing a two-year statute of limitations on uninsured motorists claims invalid as against public policy with respect to an accident which occurred in Wisconsin, where the statute of limitations for uninsured motorist claims is three years? See Insurance Law.

Join us back here tomorrow as we begin our summaries and analysis of all the new civil opinions.

• Print
• Comments
• Trackbacks
• Share Link

With the Illinois Supreme Court between terms, coverage in the news and on the blogs has been relatively light over the past two weeks.

Christopher Wills of the Associated Press reported on the Court's decision in Karbin v. Karbin, authorizing the guardians of disabled adults to file divorce petitions with the approval of the Court. Our post on the Karbin decision is here. According to the story, Equip for Equality praised the ruling as a "major change" in Illinois law. Wills' story appeared in the Columbus, Indiana Republic, the Dubuque Telegraph-Herald, the St. Louis Post-Dispatch, and the Chicago Tribune. Appelman & Associates LLC reported on the decision at the Illinois Criminal and Civil Defense Blog.

The Court also appointed John B. Simon, a partner at Jenner & Block, to replace Michael Murphy as a Justice of the Illinois Appellate Court for the First District. The story was reported at the Sacramento, California Bee; by Steven R. Strahler at Crain's Chicago Business, at the Columbus, Indiana Republic, the State Journal Register, Illinois Lawyer Now, the Bloomington Pantagraph, the St. Louis Post-Dispatch and the Belleville News-Democrat.

Finally, the Adjunct Law Prof Blog reported on Doe-3 v. McLean County Unit Dist. No. 5, where the Court held that a former employer had a tort duty to accurately certify a teacher's employment record upon his departure. Our report on Doe is here. 

• Print
• Comments
• Trackbacks
• Share Link

The California Supreme Court has unanimously voted to accept review in the matter of Valdez v. W.C.A.B. (Warehouse Demo Services) in order to address the following issue: Does Labor Code § 4616.6 exclude from evidence reports of a treating physician obtained by an applicant outside of his or her employer’s Medical Provider Network ?   Two en banc decisions by the Worker’s Compensation Appeals Board answered this question in the affirmative, but those decisions were overturned by the Court of Appeal.  The issue has been a great concern to California employers, many of whom employ such networks to provide reasonable medical care at controllable costs.  As a result, 19 amicus letters were filed urging the Supreme Court to reverse the Court of Appeal, representing most of California’s counties, cities, and school districts in additional to numerous other public and privates entities, particularly self-insured employers who often rely on MPNs.

• Print
• Comments
• Trackbacks
• Share Link

In Illinois, an action against a lawyer "arising out of an act or omission in the performance of professional services" can't be brought more than 6 years after the act or omission occurred. 735 ILC 5/13-214.3.

But does the statute apply if the plaintiff is someone other than the client? The Illinois Supreme Court will soon answer that question in Evanston Insurance Co. v. Riseborough, the final new civil case added to the docket during the September term.

Evanston arises from an injury on a warehouse construction site. The defendants represented the general contractor. The general contractor's primary insurer filed a declaratory judgment action seeking a finding of no coverage, and each of the sub-contractors' insurers joined. Ultimately, all of the insurers joined in what's called a "Fund and Fight" Settlement -- essentially, the claimants are paid and the parties contributing to the settlement litigate policy and coverage defenses against each other. The defendants signed the Fund and Fight on behalf of the general contractor.

But the "Fund and Fight" settlement rapidly unraveled. First, the plaintiff insurer alleged that the general contractor's insurer had to exhaust its coverage before the plaintiff owed a dime. In response, the general contractor itself filed an affidavit stating that the defendant lawyers didn't have authority from their client to settle in the first place. The plaintiff insurer and the general contractor's insurer settled with each other, but then the general contractor's insurer went into liquidation, and their check bounced.

So the plaintiff insurer sued the defendants, the general contractor's lawyers, alleging that they didn't have authority to settle. The plaintiff purported to state claims for breach of the implied warranty of authority, fraudulent misrepresentation and negligent misrepresentation. The defendants moved to dismiss, arguing that the complaint was barred by the 6-year statute of repose under 735 ILCS 5/13-214.3. The trial court agreed and tossed the case out.

In several cases over the past two decades, courts in Illinois have narrowly interpreted Section 214.3, drawing a distinction between actions for professional negligence and third-party actions for other types of torts alleging breach of different duties. For example, in Bova v. U.S. Bank, N.A., the Federal district court refused to bar an action against defendants based on violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. In Ganci v. Blauvelt, the defendant filed a third-party complaint against his deceased mother's attorney, alleging that the attorney shared culpability for the injuries sustained by the plaintiff children. Following Bova and Ganci, the Evanston Court reversed the Circuit Court, holding that the plaintiff's complaint sounded in negligent misrepresentation, not professional negligence, and was therefore not barred by the statute of repose.

We expect Evanston to be decided in the first half of next year.

• Print
• Comments
• Trackbacks
• Share Link

In the final days of its September term, the Illinois Supreme Court allowed a petition for review in Standard Mutual Insurance Co. v. Lay. [pdf] In Lay, the Court will decide whether the Federal statutory penalty for sending junk faxes is in the nature of punitive damages, and thus uninsurable under Illinois law.

The defendant in Lay is a small real estate agency. According to the complaint, the defendant hired a “fax broadcaster” in connection with advertising a particular property listing. “Fax broadcasters” offer a “blast fax” service, sending advertisements to thousands of fax machines cheaply.

According to the Federal Telephone Consumer Protection Act, it is unlawful to send unsolicited advertisements to a fax machine, whether by use of a fax machine, computer or any other device. 47 USC 227(b)(1)(C).  The TCPA creates a strict liability private right of action, with damages equal to actual monetary loss to the plaintiff or $500 per fax, whichever is greater. The penalty is trebled if the violation is willful or knowing.

The fax broadcaster in Lay allegedly represented to the defendant that only persons who had agreed to receive advertisements would get its blast fax. Allegedly this was not so. So not long after the defendant’s blast fax was sent, the underlying action was filed, seeking a trebled penalty of $1,500 for each of the 3,478 faxes purportedly sent.

The defendant tendered its defense to its insurer, which accepted under a reservation of rights. Ultimately, the defendant agreed to settle the underlying action, with the plaintiff class representative agreeing not to execute against the defendant’s assets, with the exception of its insurance policy.

Meanwhile, the insurer had filed a declaratory judgment action, seeking a declaration that the insured’s liability was not covered under the policy. Following the settlement of the underlying action, the class representative became actively involved in the dec action, and the insurer and the class representative filed cross motions for summary judgment. The Circuit Court granted the insurer’s motion, finding no duty to defend or indemnify.

The Appellate Court affirmed. After clearing away a preliminary issue, finding that the insurer’s reservation of rights letter had adequately disclosed the nature of its conflicts with the insured, the Court turned to the TCPA. The class representative argued that the damages from the TCPA action were covered under both the advertising injury and property damage provisions of the policies. The Appellate Court disagreed.

The purpose of the TCPA, according to the Court, is to deter sending of unwanted fax transmissions. The $500-per-fax penalty, the Court pointed out, is far in excess of any damages suffered by the recipient, which are limited to paper, toner and annoyance. If construed as compensatory damages, the penalty is clearly a windfall.

Illinois courts have written that the purposes of punitive damages are (1) retribution against a defendant; (2) deterrence of future wrongs by the defendant; and (3) general deterrence of others. The final two purposes apply equally to the TCPA penalty, the Court found. The Court conceded that at least some other jurisdictions have held that the TCPA is remedial rather than penal in nature, but declined to follow those decisions, pointing out that allowing defendants to get insurance coverage for the penalty would frustrate the purpose of deterring violations. The Court held that TCPA statutory damages are in the nature of punitive damages, and therefore uninsurable as a matter of law in Illinois.

The Supreme Court will likely decide Lay sometime in the first half of next year.

• Print
• Comments
• Trackbacks
• Share Link

This morning, the Illinois Supreme Court filed its unanimous opinion in Karbin v. Karbin. In an opinion by Justice Charles E. Freeman, the Court overruled its twenty-six year old decision in In re Marriage of Drews and held that the plenary guardian of a disabled adult may file a divorce petition on the ward’s behalf.

Following a 1997 car accident, appellee wife suffered brain damage and became totally disabled. Her husband was initially appointed plenary guardian of her person and estate, but he was ultimately forced to relinquish the position due to the onset of Parkinson’s disease. After the guardianship transfer, the wife left Illinois to live with her new guardian. A few years later, the husband filed a petition for divorce, and the wife subsequently filed a verified counterpetition. Some time after that, the husband moved for voluntary dismissal of his own petition, alleging that he had never wanted the divorce, and filed only upon the request of the wife’s guardian. He then successfully moved to dismiss the wife’s petition, arguing that under In re Marriage of Drews, the wife’s guardian had no standing to initiate a divorce petition on her behalf. The Appellate Court affirmed based upon Drews, with Justice Cahill dissenting.

The Supreme Court began its analysis with the decision in Drews. There, the Court had noted a strong “majority rule” holding that absent statutory authorization, a guardian could not institute a divorce proceeding. The Drews Court then analyzed the relevant provisions of the Probate Act, finding no express authorization in either. Reading all of the relevant provisions together, the Court concluded that the Probate Act confers only limited standing on the guardian in connection with matters directly related to the ward’s estate.

The Supreme Court found, however, that beginning only a few years after Drews, it had abandoned its strict construction of the Probate Act and the powers of the guardian. In both In re Estate of Longeway and In re Estate of Greenspan, the Court found expansive implied authority for guardians conferred in the Act. In In re Marriage of Burgess, the Court authorized a guardian to continue a divorce action began before the ward became disabled (although a guardian could still not initiate a divorce), noting the “broad” description of the guardian’s powers found in the Act.

The Court then turned to the history of the old majority rule, concluding that it was founded on the idea that divorce was a uniquely personal matter, often involving religious and moral precepts, and courts had accordingly been reluctant to let another speak for an incompetent adult. Given the State’s enactment of no-fault divorce, however, the Court concluded that divorce was no more uniquely personal a decision than a host of other decisions indisputably entrusted to a guardian. Further, the Court noted, denying an incompetent adult any avenue to seek divorce risked putting the ward “at the mercy of a competent spouse,” a situation incompatible with the policy of the State towards disabled persons. Accordingly, the Court unanimously overruled Drews. As an additional safeguard for disabled adults, the Court held that before filing a divorce petition, guardians must prove by clear and convincing evidence to the satisfaction of the Circuit Court that such a filing was in the best interest of the ward.

• Print
• Comments
• Trackbacks
• Share Link

Workers’ compensation payments are excluded from income for purposes of federal income taxes. But are they “income” for purposes of calculating a party’s child support obligation? At the close of its September term, the Illinois Supreme Court announced it would resolve this question in Mayfield v. Mayfield.

Mayfield presents two questions: (1) is a lump-sum workers’ compensation settlement “net income” within the meaning of Section 505(a)(3) of the Illinois Marriage and Dissolution of Marriage Act; and (2) if so, is the 20% rule-of-thumb set forth in Section 505(a) of the Act for calculating the per-child support obligation applicable to the entire settlement?

The parties in Mayfield were divorced in 2003, and the husband was ordered to pay child support. In the years that followed, as the children’s living arrangements changed, the child support obligation was adjusted multiple times. Finally in 2011, the wife petitioned to modify child support because the couple’s eldest child – who had been living with the husband – had reached the age of majority. At the hearing on the wife’s petition, the husband disclosed that he had received a $300,000 lump-sum workers’ compensation settlement the year before. The husband conceded that he had not notified his former wife of this development. Following In re Marriage of Dodds, which held that workers’ compensation payments are income for purposes of child support, the Circuit Court ordered the husband to pay 20% of the settlement to his ex-wife, and to continue paying child support.

The Appellate Court affirmed. Section 505 of the Illinois Marriage and Dissolution of Marriage Act provides that the benchmark calculation for support of one child is 20% of the supporting party’s net income. But the Act does not define “income.” The Appellate Court pointed out that the Workers’ Compensation Act provides that compensation awards are computed on the basis of the “average weekly wage” of the employee. Since workers compensation payments replace lost wages, “it is only logical that it is a type of ‘income’” under the Dissolution Act, the Court held. The Court noted that a number of states have expressly included workers compensation awards in their definitions of income for purposes of child support.

Turning to the second issue, the husband argued that the Circuit Court had erred by applying the 20% base multiplier to the entire amount of the workers compensation award, which was intended to replace wages for the remainder of his working life – well beyond the age of majority of the couple’s minor child. The Appellate Court disagreed, pointing out that if a parent obtained a similar lump sum through an employment bonus or an investment, the entire amount would be includable as ordinary income.

Mayfield should be argued and decided by the Court in the next four to eight months.

• Print
• Comments
• Trackbacks
• Share Link

The authority of changing venue based on a party’s concern about not receiving a fair trial because of a biased or prejudiced jury pool can be found in section 47.101, Florida Statutes—not  Florida Rule of Civil Procedure 1.060.

Procedural Requirements. The statute requires that a motion to change venue contain a verified statement of facts, be supported by affidavits of at least two “reputable” citizens of the county in which the case was filed, and be filed within 10 days after the action is “at issue,” unless good cause is shown.

A case is “at issue” 20 days after service of the last pleading or once all motions directed to that last pleading are decided. See Fla. R. Civ. P. Rule 1.440. Pleading as used in this rule connotes those finite number of pleadings recognized by the Florida Rules of Civil Procedure (complaint, answer, counterclaim, etc.). See Fla. R. Civ. P. 1.100(a). Some courts have strictly construed these requirements, denying a motion outright for non-compliance.

Standards. The statute contains two bases for changing venue: (1) “Because the adverse party has an undue influence over the minds of the inhabitants of the county”; or (2) “Because movant is so odious to the inhabitants of the county that he or she could not receive a fair trial.” The Florida Supreme Court has announced a succinct test for determining whether a change of venue is proper:

Whether the general state of mind of the inhabitants of the community is so infected by knowledge of the incident and accompanying prejudice, bias, and pre-conceived opinions that jurors could not possibly put these matters out of their minds and try the case solely on the evidence presented in the courtroom.

Rolling v. State, 695 So. 2d 278, 285 (Fla. 1997) (quoting McCaskill v. State, 344 So. 2d 1276, 1278 (Fla. 1977)).

Once a defendant raises the partiality of the venire, the trial court must look at two prongs: (1) the extent and nature of any pretrial publicity; and (2) the difficulty encountered in actually selecting a jury.

On the first prong, courts should consider 5 factors for determining the effect of pretrial publicity on the knowledge and impartiality of the prospective jurors:

(1) the length of time that has passed from the incident to the trial and when within that time the publicity occurred;
(2) whether the publicity consisted of straight, factual news stories or inflammatory stories;
(3) whether the publicity favored the non-movant’s case or version of events;
(4) the size of the community in question; and
(5) whether the defendant exhausted all of his peremptory challenges.

Florida courts have placed great emphasis on the second factor above. “Publicity, in and of itself, is not sufficient grounds for change of venue. The publicity must be hostile publicity.”

The second prong of the analysis requires the trial court to examine the extent of difficulty in actually selecting an impartial jury at voir dire. If voir dire shows that it is impossible to select jurors who will decide the case based on the evidence, rather than the jurors’ extrinsic knowledge, then a change of venue is required. The ability to seat an impartial jury in a high-profile case may be demonstrated by either a lack of extrinsic knowledge among members of the venire or, assuming such knowledge, a lack of partiality.

On this point, the supreme court has encouraged trial courts “to attempt to impanel a jury before ruling on a change of venue.” This provides trial courts an opportunity to determine through voir dire whether it is actually possible to find individuals who have not been seriously infected by the publicity. If the trial court finds such individuals, a jury is selected. Where the voir dire fails to produce these individuals, the trial court must grant the motion for change of venue.

The supreme court has, on numerous occasions, emphasized that to be qualified, jurors need not be totally ignorant of the facts of the case, nor do they need to be free from any preconceived notion. In fact, knowledge of the incidence because of its notoriety is not, in and of itself, a ground for a change of venue. Rather, the issue may turn on the nature and extent of the pretrial information the juror has acquired and an analysis as to whether a juror “can lay aside his impression or opinion” based upon any pretrial information and “render a verdict based on the evidence presented in court.”

Appellate Standard of Review. A motion for change of venue is addressed to the trial court’s discretion and will not be overturned on appeal absent a “palpable abuse of discretion” or a “grossly improvident” exercise of discretion. The determination is usually one of fact which the presiding judge, who has knowledge of all the circumstances of the case, is in a much better position to pass on that the appellate court. Because of this heightened standard of review, most of the cases in Florida have affirmed the trial court’s denial of a motion for change of venue.
 

• Print
• Comments
• Trackbacks
• Share Link

During its May term, the Illinois Supreme Court decided Harris v. Thompson, which posed the question of whether a public entity or employee could be held liable for negligent operation of an ambulance. At the close of its September term, the Court allowed a petition for review in Wilkins v. Williams. Wilkins poses the inevitable follow-up question to Harris: but what if the ambulance is operated by a private company’s employee?

Since Harris may give us clues to the Court’s initial thoughts on Wilkins, let’s start there. (For our preview of Harris, click here, and for our report on the opinion, here.)  Harris reached the Court as a perceived conflict between two statutes. On the one hand, the Local Governmental and Governmental Employees Tort Immunity Act provided that public entities and employees could not be “liable for an injury caused by the negligent operation of a motor vehicle or firefighting or rescue equipment, when responding to an emergency call, including transportation of a person to a medical facility.” On the other hand, the Vehicle Code says that although the driver of an emergency vehicle has certain privileges, he or she still has “the duty of driving with due regard for the safety of all persons.” The Appellate Court had held that the Vehicle Code trumped the Tort Immunity Act, making the driver and employer potentially liable.

But the Supreme Court held that there was no conflict. According to the six-Justice majority, the Vehicle Code extended certain privileges and imposed certain duties. The Tort Immunity Act addressed a different question: whether or not there was a duty involved, was the suit barred? The Court held that it was. Chief Justice Thomas L. Kilbride dissented, arguing that there was an “obvious and undeniable conflict” between the statutes, and the Vehicle Code should have prevailed.

Wilkins involves virtually identical facts: an ambulance transporting a patient on a non-emergency run strikes another vehicle, injuring the driver. Is the driver of the ambulance and her employer liable?  But in Wilkins, the ambulance was privately owned. So rather than the Tort Immunity Act, we have the Emergency Medical Services (EMS) Act to deal with.

Nonetheless, the two statutes seem similar in scope. According to the EMS Act, no “person, agency or governmental body certified, licensed or authorized pursuant to this Act” who “provides emergency or non-emergency medical services” can be “civilly liable as a result of their acts or omissions in providing such services unless such acts or omissions . . . constitute willful and wanton misconduct.” 210 ILCS 50/3.150(a).

So, two questions: (1) Does the EMS Act extend to non-emergency transport of patients? (2) Does the statute extend to injuries sustained by third parties not directly treated by EMS workers?

The first issue may not detain the Supreme Court long. Although the Legislature removed a reference to “transporting a patient” from the EMS Act in an earlier amendment, as the Appellate Court pointed out, the Supreme Court held in Abruzzo v. City of Park Ridge that the statute still impliedly covered transportation of patients. It seems unlikely that the Court will disturb Abruzzo only four years after it was decided.

The second issue is likely to be the focus of the Court’s attention. The Appellate Court concluded that the EMS Act was ambiguous with respect to whether it negated any duty to third party motorists. The Court then turned to Section 11-205 of the Vehicle Code – exactly the same provision that led the Appellate Court astray in Harris – and held that in order to give effect to both provisions, the EMS Act had to be construed as not negating the independent duty to third party motorists imposed on ambulance drivers and every other motorist. The defendants in Wilkins cited the Court to the Tort Immunity Act, but the Court held that the Tort Immunity Act “evidences the legislature clear intent to immunize public entities and employees” – an intent missing in the EMS Act.

Wilkins should be interesting to watch play out at the Supreme Court. Can the plaintiffs persuade at least four members of the Court – necessarily including at least three members of the six-Justice Harris majority -- that there is a meaningful difference between the Tort Immunity Act and the EMS Act? We should find out in between four and eight months.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term conclude with Hope Clinic for Women v. Adams. In Hope Clinic, the Court confronts the question of whether the Illinois constitution offers greater protection to privacy and gender equality interests than the Federal constitution. To watch the video of the argument, click here.

Our in-depth summary of the facts and lower court rulings appears here. According to the Illinois Parental Notice of Abortion Act, a physician must disclose to a parent, grandparent, step-parent living in the household or legal guardian that his or her minor or incompetent child is seeking an abortion. Plaintiffs brought a litany of challenges under the state Constitution, including due process, equal protection, privacy and gender equality.   The Circuit Court dismissed on the grounds that all four of these state guarantees are interpreted in lockstep with Federal constitutional law, and because the plaintiffs' claim would fail under Federal law, it must necessarily fail under state law. The Appellate Court reversed, finding that Illinois' privacy and gender equality rights were not interpreted identically to Federal constitutional law.

The Court was surprisingly quiet during the Hope Clinic argument, giving few clues as to what it might decide. The argument began with the cross-appeal relating to whether the State's Attorneys of Tazewell and Effingham County should have been allowed to intervene. Neither counsel for the State's Attorneys nor the State's counsel received any questions. Chief Justice Kilbride asked counsel for Hope Clinic what came next if the intervenors prevailed -- would the case return to the trial court for further hearings? Counsel responded that the case would return for the development of an additional factual record.

Even in the principal appeal, counsel for the state received no questions. Counsel argued that the essential first step of the plaintiff's action was that the state Constitution granted rights more broad than those included in the Federal constitution. However, nothing in state law supported such a conclusion, according to counsel. Counsel argued that the statute easily satisfied rational basis review for equal protection purposes. The state gender equality provision was limited to discrimination between genders, counsel claimed, which would not apply in the case at bar.

The plaintiff responded that the Supreme Court had never evaluated a parental notification statute pursuant to the Equal Protection Clause, so the issue of whether the state constitution was construed in lockstep with Federal law was not determinative. Justice Thomas asked whether the plaintiff was asking the Court to sit as a super legislature and assess the new studies released since the most recent relevant cases. Counsel responded that the Court should remand the matter in order to give the plaintiff an opportunity to put on its evidence, permitting the Circuit Court to determine whether the burden imposed by the statute was justified. Justice Garman asked whether plaintiff's evidence had been presented to the legislature. Counsel responded that it had not. Justice Thomas questioned counsel's challenge to Family Life League v. Department of Public Aid, 112 Ill.2d 449, asking whether plaintiff's position was that the case had been decided without any consideration of the purpose and legislative history of the privacy clause of the state constitution. Counsel responded that at the time the privacy clause was enacted, the drafters made it clear that their intent was to provide greater protection than the Federal constitution. Justice Thomas noted that at the time the Illinois Constitution was approved, abortion was illegal, and pointed out that Elmer Gertz, the chair of the Convention's committee on the Bill of Rights, had publicly stated that the privacy clause had nothing to do with abortion. Counsel responded that in fact, the legality of abortion had been unclear at the time, and it was clear that the delegates wanted a constitution which evolved over time. Justice Thomas pressed further, repeating his question about Delegate Gertz' views; counsel once again responded that the Convention had intended to allow for further development of their constitution. Justice Thomas asked whether, assuming arguendo that the Supreme Court had recognized a state right to abortion, that right was coextensive with the Federal right. Counsel responded that the state constitutional right to privacy was not interpreted in lockstep with the Federal right. In his rebuttal argument, counsel for the state insisted that the state Supreme Court had made it clear in its earlier cases that any protected right involved was no greater in scope than the Federal right. Counsel concluded by arguing that any remand to the Circuit Court for fact finding was incompatible with rational basis review.

 

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Ferguson v. Patton. Ferguson involves a potentially important issue for the growing field of government ethics law: can the ethics officer sue another official of the same government entity to enforce his or her subpoenas? To watch the video of the argument, click here.

Our in-depth summary of the facts and lower court rulings appears here. In Ferguson, the Inspector General of the City of Chicago opened an investigation of how a former City employee had been awarded a sole-source contract, in apparent violation of city rules. He sent a document request to the Corporation Counsel, but the law department claimed attorney-client and work product privileges as to several. So the IG sent the Corporation Counsel a subpoena. The Corporation Counsel objected, the IG responded, and the Corporation Counsel refused to comply.

So the IG sued the Corporation Counsel. The Circuit Court dismissed, but the Appellate Court reversed.

The case presents two questions: (1) can the IG hire a private lawyer when City ordinances provide that the Corporation Counsel is the sole lawyer for the city? and (2) can the Corporation Counsel assert privilege against the IG?

Before the Supreme Court, the City made the interesting decision to take a hard-line view; the Court seemed highly skeptical. Counsel argued that the City was a single entity; an appointed official of the City could not bypass the elected senior executive officer -- the Mayor -- to sue another appointed official. The dispute at bar, counsel insisted, was internal to the municipal corporation. Justice Theis referred counsel to the IG's ordinance, providing that the IG "shall take no action" to enforce his or her subpoena for seven days. The ordinance seemed to recognize some relationship between the IG and the Corporation Counsel, according to Justice Theis. Counsel answered that the ordinance required that the IG spend seven days trying to work out disputes, but said nothing about what happened next. Justice Theis asked what would happen after seven days. What would happen if the IG subpoenaed an officer of the Water Department, and he or she refused to cooperate? Counsel answered that no court would have jurisdiction over a lawsuit to enforce the subpoena, but the IG would have other options, such as seeking disciplinary action against an uncooperative target. In any case, even the Corporation Counsel could not sue another officer of the City, even to enforce an IG subpoena. Justice Thomas wondered whether it was problematic to ask the IG to go to the mayor if he or she was investigating the mayor's awarding of a contract. Counsel responded that the complaint didn't allege any involvement by the mayor. Nevertheless, the IG had options available short of suing. Justice Thomas followed up, pressing counsel to admit that there was something problematic about asking the mayor to enforce a subpoena in an investigation of the mayor's conduct. Counsel answered that the IG had options available if the mayor refused to cooperate, including sharing the investigation with outside law enforcement.

Counsel for the IG led off by arguing that a municipality could confer independent power to sue on whoever it wants, and in fact, in the IG ordinance, the City has conferred such power. Counsel found significance in the City's admission that the IG could acquire power to sue by referendum, since that must mean that there is nothing inherently disqualifying about suing another officer of the same municipal entity. After all, if the IG is forbidden from moving to enforce his or her subpoena for seven days, it must necessarily follow that the IG may enforce after that time; otherwise, why is the time limit necessary? Counsel also pointed out that according to a settled rule of construction, a specific provision -- here, the IG ordinance -- prevailed over general ordinances such as the Corporation Counsel's general authority. Counsel concluded by dealing with the cross-appeal on privilege, arguing that the duty to cooperate and disclose material to the IG eliminates any expectation of confidentiality necessary for the existence of the privilege. The Court had no questions at all for the IG (never a good sign for counsel for the appellant).

The City began its rebuttal by pointing out that the IG cited not a single case of one officer of a municipal entity suing another. Justice Karmeier asked whether the City could authorize capacity to sue by ordinance. Once again, the City took a hard-line view, arguing that a voter referendum would be necessary to bestow separate corporate status on the IG, thus authorizing a separate suit.

Turning to the cross-appeal, counsel argued that the privilege is critical to government work. Government officials seek legal advice nearly every day, and according to counsel, it makes no sense that the City Council would have wanted to abrogate the privilege in the IG ordinance. Justice Garman asked whether it made any difference what the purpose of the IG office was. Counsel responded that the IG was an internal watchdog. He or she has many tools at hand if a party refuses to cooperate with a subpoena, including going public with an investigation. Justice Garman asked whether a department head or other officer could shield documents from disclosure by conferring with Corporation Counsel. Counsel answered that given that the Corporation Counsel is an attorney governed by the Rules of Professional Conduct, the Corporation Counsel would be required to act to protect the City if an officer confessed wrongdoing.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Mashal v. City of Chicago. Mashal presents an issue of potentially enormous importance to class action practice in the Illinois state courts: when does the Circuit Court lose the power to decertify the class under Section 2-802 of the Code of Civil Procedure? To watch the video of the argument, click here.

For a detailed discussion of the facts and rulings below in Mashal, click here. The case arises from the City of Chicago's practice of issuing "fly-by" traffic citations to taxi drivers -- citations which were received by mail, rather than being personally served or placed on the vehicle. The City conceded that it issued such citations occasionally, principally when drivers either fled or became aggressive; the plaintiffs alleged that the practice was far more widespread than that. A class was certified in 2002. In 2005, partial summary judgment was entered, finding that the practice was illegal. The following year, the City obtained its own partial summary judgment, eliminating claims before 1995 on statute of limitations grounds.

According to Section 2-802, a court may amend a class certification order at any time "before a decision on the merits." The statute doesn't define what "decision on the merits" means. In 2007, the City decided to find out, moving to decertify the Mashal class on the grounds that the partial summary judgment on the legality of the practice eliminated the only common issue. The Circuit Court granted the motion to decertify, and the case rose to the Appellate Court on various certified questions. The Appellate Court held that "decision on the merits" meant something similar to the types of judgments and orders given res judicata effect -- a complete resolution of the liability claim.

Counsel for the plaintiffs argued that the need for individualized determinations didn't mean that a "decision on the merits" hadn't yet occurred, since every class action involves such determinations. Justice Thomas asked counsel to address the City's argument that the partial summary judgments were a decision on the merits. Counsel responded that if a decision resolving nothing more than the legality of the practice involved in the case became a vehicle for decertification, that exception would swallow the class action statute. Such a rule was antithetical to the underlying reason for class actions: that litigating the claims one by one was impractical. Justice Theis asked whether the Circuit Court's decision rejecting the City's affirmative defenses was a decision on the merits, and counsel responded that that order could have been appealed if Rule 304(a) language had been granted.   Justice Theis then suggested that "decision on the merits" and "final judgment" arguably sounded like the same thing, and asked counsel to explain his distinction. Counsel responded that a final judgment was a complete resolution of a claim, granting relief. A decision on the merits didn't need to be final; the order concluding that issuance of fly-by tickets violates the law was enough. Justice Thomas asked counsel whether counsel was saying that every order resolving affirmative defenses was a "decision on the merits," or only the defenses resolved in the particular order at issue. Counsel responded that the particular defenses involved in the court's order made the decision one on the merits.

Counsel for the defendant responded that the reason for setting the cutoff for decertification at the decision on the merits was to keep the option open until all possibly common issues have been decided. Justice Garman asked whether some determination of liability to a class member or members was required. Counsel responded "yes", and in the case at bar, such a determination was impossible given the need to determine whether each class member had received a "fly-by" citation. Justice Burke pointed out that the City had admitted to issuing such citations; counsel responded that the City had admitted the practice as a general matter, but the taxi driver class members had not linked themselves to the limited group who received such citations. Justice Thomas asked counsel to address plaintiffs' argument that there was no rebuttal to the proposition that the class members had received fly-by citations. Counsel answered that such affidavits were not admissible, and in fact there were many reasons to question the class members' credibility. Counsel argued that deposition testimony was needed to determine the credibility of all class members. Justice Garman wondered why issues like credibility and individual liability weren't part of ancillary proceedings. Counsel responded that under the circumstances presented, liability would have to be determined class member by class member, and this was the time to conclude, once and for all, whether class prerequisites were met.

On rebuttal, Justice Karmeier asked counsel for the plaintiffs to respond to the City's argument that plaintiffs' reading of the statute would eliminate courts' ability to reevaluate whether common issues continued to predominate. Counsel answered that it was necessary to set a cut-off point. Although not all summary judgments would bar decertification, this one -- holding that defendant's conduct was unlawful -- would. Justice Thomas asked how the Court should take into account the fact that individual plaintiffs would have to proceed with small liability cases, given that the rule announced by the Court would be used even outside the class action context. Counsel responded that the Court's ruling would be limited in impact -- even res judicata involved subtle differences that might limit the scope of the Court's decision. At any rate, counsel argued that this consideration should not affect the Court, since the legislature could step in and change any rule it didn't approve of.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Fennell v. Illinois Central Railroad Co. Fennell presents the issue of whether a case with no apparent connection to Illinois, filed here after an initial lawsuit was thrown out of plaintiff's first choice forum (and home state), could remain in Illinois. To watch the video of the argument, click here.

The facts and holding of the decision in Fennell are summarized here. Plaintiff alleges exposure to asbestos, diesel exhaust, sand, environmental tobacco smoke and toxic dusts, fumes and gases during his thirty-seven year employment with the defendant railroad. Plaintiff filed a putative class action in Mississippi in 2002, but the action was dismissed without prejudice on the motion of the defendant in 2006. So plaintiff sued in St. Clair, Illinois.

The defendant moved to dismiss under forum non conveniens: the plaintiff was a lifelong resident of Mississippi; he wasn't injured in Illinois; and perhaps thirteen potential witnesses, including plaintiff's family, co-workers and treating physicians, lived in Mississippi. The defendant cited the need to call its risk mitigation manager for occupational disease claims as well. He lived in Memphis, and testified that he would find it easier to come to Copiah Co., Mississippi (the alternative forum) than to St. Clair County. The plaintiff responded that defendant was represented by regional counsel in St. Clair County, evidence was located in St. Clair, and he wanted to call two defense representatives, one in Illinois and one in Memphis. The Circuit Court denied the motion to dismiss, and the Appellate Court affirmed.

Counsel for the defendant argued that documents are less important than they would otherwise be, under the circumstances, because of the ease of moving documents from one place to another. As for witnesses, counsel argued that only two witnesses lived in Illinois, while thirteen were in Mississippi, beyond the reach of the court in the event that trial occurred in Illinois. Depositions are not a substitute for live testimony, counsel argued; without the ability to call live witnesses, the defendant would be unable to quickly adapt to unexpected trial testimony. Justice Burke asked whether the defendants had business operations in Illinois, and whether that fact should have any bearing on the ultimate result. Counsel responded that the mere fact that a corporation did business in a state could never be sufficient without more to defeat a forum non conveniens motion.

Counsel for the appellee emphasized that a defendant must show exceptional circumstances in order to justify overruling the plaintiff's choice of forum. The suit had been filed in Illinois for several reasons, according to the plaintiff-- the plaintiff needed access to fragile documents located in Illinois, and the documents were located in the defendant's counsel's office, down the street from the St. Clair County courthouse. Justice Garman asked whether any part of plaintiff's alleged exposure had happened in St. Clair County, and counsel answered no. Plaintiffs' counsel argued that defendants had substantially changed their story in hopes of winning their forum non conveniens motion. Justice Garman suggested that it was hardly surprising that defendant would be uncertain of which witnesses would be called early in the case, when a forum non conveniens motion was filed. Counsel responded that the case had been in Mississippi for four years, discovery had been done and depositions taken, and defendant had substantially delayed filing its motion after re-filing in Illinois Counsel argued that the initial filing in Mississippi was not relevant, and the defendants needed, at most, two witnesses from Mississippi -- the plaintiff's treating physicians. According to counsel, the defendant had failed to meet the burden of justifying dismissal, and if the Court reversed, the Court was saying that defendants didn't have to. Chief Justice Kilbride asked whether the dismissal in Mississippi had been instigated by the defendant, and whether anything in the order of dismissal had contemplated re-filing in Illinois. Counsel responded that although the order didn't mention Illinois, it certainly contemplated re-filing somewhere.

 

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Rodriquez v. Department of Financial and Professional Regulation. To watch the video, click here.

The facts and holding below are set forth in detail in our preview of the argument. Here's the question - when you get an administrative rule struck down, do you have to bring your claim for attorneys fees under Section 10-55(c) of the Illinois Administrative Procedure Act, 5 ILCS 100/10-55(c), in the same action as your challenge to the rule, or can it wait? In Rodriquez, the trial court held that the plaintiff was required to bring the fees claim as part of his challenge to the administrative rule; but the Appellate Court reversed, holding that the legislature had not imposed a time limit on the Section 10-55(c) action for fees.

Counsel for the State argued that the plain language of the statute makes it clear that the legislature was talking about a fees request brought as part of a single action. According to counsel, no one had ever tried to extend the statute to multiple actions. Justice Garman asked whether, if the Appellate Court strikes down a rule, the Appellate Court awards attorneys fees. Counsel responded that the court striking the rule should hear the motion for fees. The challenger should plead the claim for fees in the complaint, or he (or she) can plead the claim for thirty days after the final order striking the administrative rule. Counsel for the State pointed out that if the plaintiff's position prevailed, the State would be looking at long-tail liability for fees, given the plaintiff's apparent position that a fees request remained viable forever. Justice Burke asked whether that wasn't what the Appellate Court had found -- that the legislature had not intended to impose a time limit? Counsel responded that the language of the statute should be limited to a single action -- the case in which the administrative order was struck down. Justice Garman asked whether the State's argument was that the fees claim was a separate cause of action or a separate claim. Counsel responded that it was a separate claim, but not a separate cause of action. Chief Justice Kilbride asked whether, if the case had wound up in a final administrative action, the individual could couple a claim for fees with a complaint seeking judicial review of the final administrative action. Counsel for the State answered that that was a plausible scenario, and he thought that was what the legislature intended to happen, as opposed to declaratory judgment actions brought before the administrative rule fell. Justice Theis asked counsel to respond to the Appellate Court's reliance on Town of Libertyville v. Bank of Waukegan. Counsel for the State responded that in Libertyville, the Court retained jurisdiction to consider an award of fees in a single action. He concluded by summarizing his position: (1) the statute controls; and (2) res judicata bars the plaintiff's action.

When the plaintiff began, Justice Garman asked whether counsel could name any other examples of a cause of action with no statute of limitations. Counsel responded that the claim for fees might have a statute of limitations -- the five-year catch-all statute that might apply. Justice Theis asked whether plaintiff argued that the fees request was a claim or a cause of action. Counsel responded that the request was a cause of action. Then why shouldn't it be handled pursuant to our usual rule, Justice Theis asked -- all claims must be brought before final judgment, and if they're not, there's a res judicata bar? Counsel responded that the claim did not accrue until the rule was invalidated. Justice Theis followed up by asking when the claim accrued; counsel responded that the claim had accrued twice, once when the trial court invalidated the order, and again when the Appellate Court reinstated the court's original order and struck down the rule. Justice Thomas asked whether there was an opportunity in the second Rodriquez action to bring the attorneys fees claim. Counsel responded that there was not, since the action was not ripe until the rule had been struck down.

Counsel for the State concluded, arguing that the statute plainly intended for the fees claim to be part of a claim, not a separate cause of action. Counsel emphasized once again the various terms in the statute which appeared to refer to a single, unitary lawsuit.

 

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with In re Estate of Boyar.

Can you accept money from your parents' will and then challenge it in court? No; that's settled in nearly every state.

But, as counsel for the trustee in Boyar told the Court, living trusts have become a commonplace substitute for wills; that way, the decedent's "estate" can be distributed without probate. Does the doctrine of election apply to trusts?

Our preview of the argument, summarizing the facts and holding below, is here. Years before his death, the decedent set up a trust. Through several trust amendments, one provision was unchanged: the beneficiaries could remove the trustee by majority vote. Then, just before his death, the decedent amended the Trust one final time -- the Sixth Amendment -- revoking the power to remove and appointing a new trustee. The petitioner challenged the Sixth Amendment, arguing that decedent lacked the mental capacity to execute it. When the petitioner acknowledged that he had received personal property belonging to the trust as a partial distribution of his interest, the trustee moved to dismiss the challenge, citing the doctrine of election: a party may not accept benefits under an instrument and then challenge it. The Circuit Court dismissed and the Appellate Court affirmed.

Justice Garman noted that the petitioner's case presented two questions: (1) does the doctrine of election apply to trusts; and (2) if it does, did the trial court abuse its discretion in applying the doctrine here. Counsel responded that the issue was whether the doctrine of election should be applied to an entirely severable codicil to the trust. Justice Karmeier asked whether, if the petitioner were challenging the distribution, he would still argue that the doctrine of election did not apply. Counsel conceded that he was not arguing that the doctrine would never apply to any trust at any time; the question depended on the facts and circumstances. Justice Garman asked whether petitioner knew the facts of the Sixth Amendment when he accepted the distribution, and whether it made a difference. Counsel responded that one of the factors in applying the doctrine of election is whether a party knew the facts; a doctrine based on equity should be applied without hard-line, black-letter rules, with a grasp of the particular facts. Justice Karmeier asked whether it made any difference to petitioner's argument whether the petitioner knew of the terms of the Sixth Amendment when he accepted the property. Counsel answered that petitioner did not and could not have known that the items of personal property he accepted were owned by the Trust, and that the doctrine of election has never been applied to a severable amendment to a trust anyway.

When the counsel for the trustee began, Justice Karmeier asked whether it made a difference if a trust was changeable during the lifetime of the settlor. Counsel responded that a beneficiary could accept gifts during the life of the settlor, but not after. Justice Garman asked whether the petitioner knew of the facts involved in the challenge; counsel alleged that the petitioner had learned of the trustee's identity and the terms of the Sixth Amendment by a direct conversation and two letters. Justice Thomas asked why there was a conflict between accepting benefits from the trust and challenging a provision that had nothing to do with the distribution. Counsel answered that the petitioner had waived his severability claim, and argued that far from being severable, the Sixth Amendment was a critical component of an integrated document. Justice Theis noted the Appellate Court's comment that the petitioner could file a petition to remove the trustee, and wondered why the doctrine of election did not bar that remedy as well. Counsel responded that a removal petition would have to rest upon alleged misconduct in the administration of the trust. Justice Karmeier echoed Justice Thomas' earlier question, wondering what was inconsistent about accepting a distribution and challenging a severable trustee provision; counsel responded that the petitioner should be barred from challenging any provision of the instrument. Justice Karmeier wondered whether the court should look to the underlying reason for the doctrine -- preventing parties from taking inconsistent positions -- but counsel again insisted that the Sixth Amendment was part of a single integrated document.

In rebuttal, counsel for the petitioner conceded that the petitioner was aware of the existence of the trustee before accepting the distribution, but again insisted that the petitioner was unaware of the specifics, or of what property the trust owned. Justice Garman wondered whether it was essential to the petitioner's argument that he was challenging a severable provision; moments later, Justice Karmeier asked whether petitioner's argument would be the same if the separate amendment dealt with distribution. Counsel responded that in his view, each case had to be evaluated on its individual circumstances. Responding to Justice Karmeier's question, counsel agreed that he was not seeking a bright line rule that challenging a separate amendment to the trust could never be subject to the doctrine of election.

 

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Toftoy v. Rosenwinkel.

Toftoy is an interesting case because it presents a textbook example of a clash between two classic forms of legal analysis. Professor Ward Farnsworth discusses the distinction at length in his classic book The Legal Analyst: the conflict between ex post and ex ante reasoning.

As Professor Farnsworth explains, ex post reasoning looks backward, asking what remedy is appropriate in connection with a completed incident. Ex ante reasoning – a form of analysis lawyers have in common with economists – analyzes what effects will result moving forward from any remedy proposed for the incident. The classic conflict between ex post and ex ante -- again, borrowing Professor Farnsworth's examples -- is whether or not to pay ransom to a hostage taker. Ex post reasoning might argue that a hostage taker should be paid ransom to save the victim's life; ex ante reasoning rejects paying ransom because it will encourage future hostage takers.

Which brings us to Toftoy and Illinois' "Right to Farm Law" - the Farm Nuisance Act, 740 ILCS 70/1. Our summary of the facts and holding below is here. The statute provides that no farm can become a private or public nuisance "because of any changed conditions in the surrounding area" so long as the farm has been in operation for a year.

Defendants bought farmland in a rural area. Across the street was a large plot containing a farm house; a tenant lived there when defendants took possession of their plot, but by the time they started a cattle operation a year later, the farm house was empty, and so it remained for years after. In 1997, plaintiffs demolished the old farmhouse; seven years later, the plaintiffs completed a new house on what was by then a small subdivided plot and moved in. Plaintiffs sued the defendants in 2007, alleging that their cattle operation was a nuisance because it was causing massive fly infestations.

Ex post versus ex ante. The plaintiffs tell a compelling story of the disruptions to their lives caused by the flies. Ex post, one might think that some remedy would be appropriate. But the argument ex ante is the same argument which has compelled many states around the country to enact Right to Farm laws in the first place: when new residential areas impinge on farm land, allowing the residents to sue the farmers in nuisance at minimum discourages investment in farming, and can wind up driving farmers out of business entirely.

The defendants moved for summary judgment, arguing that the Farm Nuisance Suit barred the suit. The trial court denied the motion, entered a declaratory judgment for plaintiffs, and the Appellate Court affirmed.

Counsel for the cattle farmers led off the arguments. Justice Thomas asked whether the case hinged on how broadly the Court interpreted the statute. Counsel responded that the broad interpretation was correct, but the defendants should prevail under either interpretation. Justice Karmeier asked whether it made a difference that there was a residence across the street when the cattle ranch began operations -- albeit a vacant one -- but counsel responded that plaintiffs were not using the property as a residence when the cattle operation began. Justice Garman asked whether the changed condition for purposes of the statute was the change in ownership, or the demolishing of the old house, or both. Counsel responded that both events amounted to a changed condition. Justice Burke asked whether the result would have been different if the former farmhouse on the property had been remodeled rather than torn down. Counsel responded that there had been no use of the property for more than a year at the time the defendants began their operation. Counsel asked the Court to remand for application of the Farm Nuisance Act and the assessment of statutory fees and costs.

Counsel for the plaintiffs pointed out that the property across the street had contained a farmhouse for nearly a century, and was still a farmhouse today. Justice Thomas posed a hypothetical: what if the plaintiffs had lived in the property for one year a century ago, and then the property had been left vacant. If the defendants began a cattle operation and the plaintiffs subsequently returned, would that be a changed condition? Counsel responded that a causal connection was necessary between the changed condition and the nuisance; if the property merely progressed from one house to another, that prerequisite was not satisfied. Counsel argued that if occupancy alone was a changed condition, owners would have to worry about losing a tenant. Justice Theis asked whether the change in title or the subdivision of the property factored in; counsel responded that the property had always been a residence. Justice Garman asked whether it would make a difference if the house across the street was vacant, and counsel responded "no." Justice Thomas stated that he was having trouble with the occupancy issue. He pointed out that no one had been in the house when defendants began the cattle operation -- why wasn't the change in condition for purposes of the statute the fact that the house was now occupied? Counsel answered that the standard proposed was a slippery slope, suggesting a hypothetical of a strip mall which became vacant for a couple of years in a recession, and then couldn't be used again because a cattle operation began across from it.

Justice Karmeier asked whether somebody who wants to start a cattle operation was required to research the property across the street to determine whether it had ever been a private residence, or else face the risk of a nuisance suit. Counsel responded that no research was necessary, since there was somebody living in the home when defendants took possession. Justice Garman wondered whether it would make any difference if the house was dilapidated or in good condition. Counsel insisted that his clients the plaintiffs were farmers as well; the property was their family farm, and the residence was a farm house. Justice Thomas suggested that plaintiffs seemed to be arguing that "condition" meant "use" for purposes of the statute; if that was so, since the legislature didn't actually say "use," shouldn't that incline the Court to a broad construction of the statute? Counsel responded that the statute should be interpreted based upon the statutory command that the nuisance occurred "because" of the changed condition.

Counsel for the defendants ended his rebuttal with another appeal to an ex ante result, arguing that an affirmance would commit the farming industry in Illinois to long-term historical uses of the property surrounding their farm properties.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Mathis v. Mathis. Mathis presents a question which frequently arises in divorce proceedings: when a significant period passes between the divorce and the property settlement, what is the date on which the property is valued? For the first time in the term, the Court's questioning seemed fairly evenly split between the parties, leaving the result very much up in the air.

Click here for the underlying facts and lower court holdings in Mathis. The husband filed for divorce in 2000, and the judgment of dissolution was entered a few months later. The hearing on the property issues began in April 2004, but years of delays followed. Ultimately, the court set a valuation date of December 31, 2010 - nearly ten years after the judgment of dissolution. On the husband's motion, the trial court certified a question for interlocutory appeal: when there is a lengthy delay between the judgment of dissolution and the hearing on ancillary issues, what is the appropriate property valuation date? The question turns on the meaning of Section 503(f) of the Illinois Marriage and Dissolution of Marriage Act, which provides that the valuation date is "the date of trial" or "as close to the date of trial as practicable."

Counsel for the petitioner pointed out that before the current version of Section 503(f) was adopted, settled law held that the valuation date was the date of the dissolution judgment. She argued that the current version of the statute was both patently and latently ambiguous, and the Court should resolve the issue by construing the statute identically to its predecessor. Justice Thomas noted that the statute speaks only to property issues and not to divorce grounds, and wondered whether that made it more likely that the "date of trial" referred to a trial on ancillary matters. Counsel pointed out that the statute referred to four different sorts of proceedings, involving multiple different trial dates, leaving the statute as a whole ambiguous. Justice Garman asked how the petitioner's proposed rule would work if the value of a business decreased between the dissolution and the property settlement, if the valuation date was the date of the dissolution. Counsel for the petitioner responded that the party owning the business would have to either make up the difference or prove the loss of value was not his or her fault.

Counsel for the respondent echoed Justice Thomas' question, arguing that since Section 503(f) appeared in a section entirely relating to property, the logical interpretation was that the statute's reference to the date of trial meant the property hearing. Justice Theis asked whether, if the Court chose the date of dissolution for the date on which property was valued, that might encourage parties to expedite the property settlement and get on with their lives, in contrast to the long-running dispute in this case. Counsel responded that such a rule can cause unjust results in some cases, and there are tools in the statute for courts to deal with gamesmanship. Justice Karmeier commented that the case seemed to come down to a policy question: whether the Court should take into account what might encourage early resolution of property issues, as opposed to a rule which might encourage certainty. Justice Theis once again noted that there seemed to have been no urgency on anyone's part to resolve the property issues and move on. Counsel responded by describing the discovery and evidentiary disputes which had helped extend the dispute for so many years.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with EMC Mortgage Corp. v. Kemp. Kemp presents the question of when a home foreclosure may be appealed.

The facts and lower court opinions in Kemp are described in detail here. Based upon the Court's questions, it seems reasonably likely that the Court will affirm the Appellate Court and require the plaintiff to pursue her objections to the foreclosure after the order confirming the sale is entered.

Plaintiff filed its foreclosure complaint six years ago. The defendant responded by denying the plaintiff's standing, first in an answer, and later in a counterclaim. Finally, nearly three years after the action was filed, the trial court entered a judgment of foreclosure. After reconsideration was denied, the defendant filed for bankruptcy. Over a year after the judgment was entered, the defendant mounted a new attack on the sale, filing a motion under Section 2-1401 of the Code of Civil Procedure alleging that the plaintiff was trying to foreclose a mortgage it didn't own at the time of filing. The trial court refused to overturn the sale, but authorized an interlocutory appeal under Supreme Court Rule 304. The defendant moved for reconsideration, the trial court denied the motion, but once again, the court included Rule 304 language in its order.

Section 2-1401 petitions lie only to challenge final orders. Rule 304 language isn't a magic wand of appealability for purely interlocutory orders; it confers appellate jurisdiction over an order which finally disposes of less than all claims, or less than all parties. So the question in Kemp was -- was there a final order under all this civil procedure? If not, none of it mattered.

Counsel for the defendant began his argument by emphasizing the importance and novelty of the underlying issues, should the Court find appealability. Justice Garman asked counsel whether the issue of standing can be forfeited; counsel responded that the defendant was arguing that the order of foreclosure was void, meaning that it could be challenged at any time. Justice Theis pointed out that defendant had filed a Section 2-1401 petition, so where was the final order? Counsel responded that Section 2-1401 petitions were also proper to attack void orders, and pointed out that the trial court had expressly agreed to add Rule 304 language to the order of foreclosure. Justice Theis noted that while Rule 304(b) expressly authorizes an appeal from a true Section 2-1401 petition, the trial court had authorized Rule 304(a) interlocutory appeal language. Counsel responded that this was the dilemma; it was often too late to present meritorious defenses if a defendant awaited an order confirming the sale. In response to a follow-up question from Justice Theis as to whether the court could have modified the order of foreclosure, counsel argued that once defendant's motion to reconsider was denied, the order of foreclosure became final. At that point, given the Section 2-1401 petition, appellate jurisdiction existed.

Justice Freeman asked what would prevent defendant from appealing after entry of the final order confirming the sale; counsel cited to judicial economy, again arguing that such final orders were often too late to challenge foreclosures. Justice Thomas asked how lack of standing could make an order void if standing could be waived, and counsel pointed out that the defendant had asserted lack of standing from start to finish of the litigation.

Justice Theis asked counsel for the plaintiff how it could be true that there were cases holding that a judgment of foreclosure can be appealed if Rule 304(a) language is included in the judgment; counsel responded that occasionally, there are foreclosures involving multiple parties or multiple claims which could become appealable with 304(a) language. Chief Justice Kilbride asked whether foreclosure and the confirmation of sale involve separate judgments, but counsel responded that he had never seen the final order called a judgment. Justice Theis asked whether counsel had ever seen Rule 304 language added to a judgment of foreclosure; counsel answered that in Cook County, such language was very difficult to obtain in foreclosures. Following up on a question to the defendant by Justice Freeman, counsel concluded by arguing that the plaintiff had established its standing to sue from the outset of the suit by attaching a copy of the underlying promissory note with a blank endorsement. Such an endorsement turns the note into bearer paper under the U.C.C., meaning that the plaintiff had standing to enforce the note, even if it didn't technically own the note.

 

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Carr v. Koch. In Carr, the taxpayer plaintiffs are challenging Circuit Court and Appellate Court decisions that they lacked standing to challenge the state's education funding statute; but based on the Court's questioning, it appears unlikely that their suit will be revived.

Click here for our summary of the facts and lower court ruling in Carr. Plaintiffs are two taxpayers, one in a northern Illinois school district, one in a southern district. Plaintiffs allege that the state's financing system effectively requires school districts with lower property values to tax their property owners more heavily than other districts with higher property values do. As we noted in our argument preview, the plaintiffs faced two problems: the Supreme Court had earlier upheld the very same statute in Edgar, and the state authorities -- the defendants in the action -- weren't the ones who set the plaintiffs' tax rates. The trial court dismissed, and the Appellate Court affirmed.

Although the Appellate Court had denied standing on the grounds that none of the state's actions or omissions had caused plaintiffs' tax rates, counsel for the plaintiffs disagreed before the Supreme Court, arguing that the state funding system was a but-for cause of the local taxing authorities' tax rate decisions. Justice Thomas asked how counsel defined plaintiffs' injury, and counsel responded that plaintiffs were taxed more heavily to reach the "Foundation Level" of education funding. Justice Thomas followed up, asking counsel whether his position was that this injury was a direct result of the statute, or didn't have to be in order to have standing. Counsel answered that the statute was a direct cause of the injury. Justice Burke asked counsel whether a penalty was imposed if a particular school district failed to meet the Foundation Level of funding; counsel argued that the threat of sanctions from the state was inherently coercive. Justice Thomas asked whether state funding was tied directly to state learning standards. When counsel answered "no," Justice Thomas asked how counsel addressed the argument that plaintiffs' injury was too attenuated to confer standing. Counsel responded that the injury was unequal taxing treatment.

Counsel for the Attorney General faced relatively few questions from the Court. Justice Karmeier asked whether a school district would face a penalty if it set an extremely low tax rate. Counsel responded that the State assumed a 3% tax rate, but took no action if a local authority failed to match that rate. Counsel for the State challenged the plaintiffs' claim of injury, pointing out that the State could only take over a local school district once it had ranked below statewide learning standards for eight straight years. In the meantime, the state took various steps which were to the advantage of both students and taxpayers, casting doubt on a claim of injury.

The Court had no further questions during plaintiffs' rebuttal. Counsel responded to the Attorney General's argument by insisting that the degree to which local control had been superseded -- the central question in determining whether Edgar barred the plaintiffs' claim -- was an issue of fact for the jury to determine.

• Print
• Comments
• Trackbacks
• Share Link

Our reports on the oral arguments of the Illinois Supreme Court's September term continue with Cooney v. Rossiter, a case about the breadth of immunity for court-appointed psychologists in child custody cases. Based on the questions at argument, the Court appeared to be searching for alternatives short of limiting the scope of such experts' immunity.

The facts and lower court ruling in Cooney are described in detail in our argument preview. In 2001, plaintiff's ex-husband filed for a change of custody. The psychological evaluator appointed to opine on the best interests of the children concluded that plaintiff ex-wife and her parents (the co-plaintiffs) suffered from Munchausen's by Proxy Syndrome, and concluded that their treatment of one child amounted to child abuse. After custody was granted to plaintiff's ex-husband, plaintiffs filed a federal class action against the defendant. The action was dismissed and the dismissal affirmed, so the plaintiffs sued in state court.  The state court dismissed based on absolute immunity and res judicata, and the Appellate Court affirmed.

Counsel for the plaintiffs argued that in order to deter deliberate misconduct by psychological evaluators, the proper rule was qualified immunity for investigation and out-of-court evaluation, and absolute immunity for in-court testimony. Justice Karmeier asked whether it was possible to raise issues such as the evaluator's unfairness and bias prior to his or her appointment. Counsel responded that his client did not know the facts until it was too late. Justice Thomas asked whether plaintiffs' charges were the subject of cross-examination at trial, and counsel responded that the trial judge relied solely on defendant's report. Justice Thomas pressed his question, asking whether requiring parties to address issues of bias and misconduct in the custody litigation would make it possible to preserve absolute immunity. Counsel answered again that defendant had not been present on the day of the hearing, and the plaintiff had received his report only that day.

Counsel argued that court-appointed evaluators would still have adequate protection if qualified immunity was instituted -- a plaintiff would still be required to plead intentional misconduct or fraud, and the trial judge would act as the gatekeeper, screening out frivolous complaints. Justice Burke asked whether plaintiff had her own expert, pointing out that there must have been adequate time between defendant's appointment and his report; counsel responded that there was no reason to anticipate anything negative in defendant's report.

During appellee's argument, Justice Karmeier asked whether it would make any difference to the Court's analysis that defendant's opinion came in via a written report rather than live testimony and cross examination. Counsel answered no; cross examination can be requested, and a party may insist on his or her objection if it is denied. Justice Freeman pointed out that none of that helps if the judge denies cross-examination, but counsel responded that this could be the subject of further litigation, post-trial motions, or an appeal. After Justice Burke noted that the trial judge – like the plaintiff -- had only seen the defendant's report the morning of the hearing, Justice Freeman continued to press, asking counsel whether the trial judge's refusal to allow live testimony in the custody action could rise to the level of an abuse of discretion. Justice Thomas asked counsel to address the plaintiffs' argument that qualified immunity was sufficient protection; counsel responded by pointing out that qualified immunity doesn't bar suits at the outset as absolute immunity does, and may not even prevent a jury trial.

The Court's search for alternative resolutions continued in plaintiffs' rebuttal argument. Justice Karmeier asked whether plaintiffs' concern about bad faith evaluators couldn't be addressed by discouraging trial judges from admitting written reports in preference to live testimony.  Justice Thomas speculated that a professional licensure action might be an available remedy against a bad-faith evaluation.

Join us back here later today for our report on the argument in Carr v. Koch.

• Print
• Comments
• Trackbacks
• Share Link

A casual viewer might be forgiven after watching the oral argument last week in Center Partners, Ltd. v. Growth Head GP, LLC for being uncertain exactly what the law of Illinois was regarding the applicability of subject matter waiver to disclosures of attorney-client communications outside litigation. In a nearly hour-long debate, opposing counsel presented diametrically opposed visions. According to plaintiffs, the matter was simple: you either want secrecy or you don’t, and applying subject matter waiver outside litigation was hardly a big deal. Defendants, backed by a number of high-powered amici, argued that plaintiffs were seeking an unprecedented and dangerous extension of waiver which would divorce the doctrine from its rationale. Although predicting what an appellate court is likely to do from its questions is always a dicey business, judging from several Justices’ questions, the Court may be preparing to side with the plaintiffs.

Click here for our preview of the argument in Center Partners. The defendants bought the assets of a company which (through a series of corporate relationships too complex to review here) owned a number of shopping centers. The same day, they entered into a side deal dividing up control of the target’s assets among themselves. Everything was going fine until the plaintiffs – limited partners in the shopping center company – sued them for breach of fiduciary and contractual duties.

The problem was that the three defendants had shared attorney-client communications among themselves during the negotiations for the asset purchase. First, plaintiffs filed a motion to compel production of all of the shared communications: granted. But then, plaintiffs filed a second motion, seeking all communications regarding the same subject as the shared communications, arguing that the disclosures had worked a general subject matter waiver. The second motion was granted too, and following a “friendly contempt” order (to make the dispute appealable), the Appellate Court affirmed.

So: does subject matter waiver apply outside the context of litigation? And if so, how broad is the waiver?

The defendants argued that the Appellate Court had erred in both respects: subject matter waiver shouldn’t have been applied at all, and even if it had, the Appellate Court had applied far too broad a waiver. In response to a question from Justice Burke, counsel stated that no litigation had been ongoing at the time of the disclosures, and none had been anticipated (a view counsel for the plaintiffs disputed later). When counsel argued that waivers are applied in order to prevent the privilege from interfering with a court’s truth-seeking function, Justice Garman wondered whether that rationale might equally support a broad application of the waiver rule.

Justice Thomas asked counsel whether, even if parties are permitted to share attorney-client communications with some people while preserving the privilege, at some point the dissemination of a communication has simply gone too far? Counsel acknowledged that although the common interest privilege had not been claimed, the scope of the waiver should have been limited to the shared communications themselves. Justice Karmeier asked counsel whether it mattered for his position why attorney-client communications had been shared, and counsel responded that it did not.

During plaintiffs’ argument, several Justices continued to wonder whether the basis on which subject matter waiver rested could be logically limited to litigation only. Historically, general waivers have been imposed because otherwise a party can use protected communications as a sword, letting out only what the party wants to, and a shield – hiding additional communications which might give context to, or even contradict, the disclosed material. Justice Theis asked whether there was some suggestion in the record below of similarly misleading partial disclosures. Justice Thomas echoed the point, arguing that absent a subject matter waiver, a party would be free to selectively disclose what it chose in a negotiation, knowing that it would be available for later litigation, while keeping the rest of the story protected. In response to a question from Justice Garman, counsel argued that defendants were relying on attorney advice in the underlying dispute. Justice Burke asked why the waiver had to sweep so broadly, but counsel disputed the assertion of defendants’ counsel that the defendants had not expected litigation at the time of the disclosures.

In rebuttal, counsel for the defendants denied that defendants were relying on attorney advice below. In response to Justice Thomas’ concern that refusing to apply subject matter waiver to business negotiations might lead to an unfair partial waiver, counsel argued that the initial disclosure itself should be excluded on hearsay and relevance grounds, making a general waiver to place the initial disclosure in context unnecessary.

We expect Center Partners to be decided within the next two to four months.

• Print
• Comments
• Trackbacks
• Share Link

With this post, we begin our reports on the oral arguments for the Illinois Supreme Court's September term. In Hernandez v. Bernstein, the first civil case of the term, the Court seems likely to hold that plaintiff's two successive complaints were alternative versions of a single claim, meaning that plaintiff's voluntary dismissal without prejudice of the claim did not preclude the subsequent re-filing of the action.

The facts and lower court ruling in Hernandez are set forth in detail in our argument preview. The plaintiffs sued their former attorneys for failing to advise them of a third party products liability claim related to a workers' compensation claim. The products claim was dismissed as time barred, so the plaintiffs amended to allege that the defendants should have advised them to sue their former lawyers. Not long before trial, with a motion for summary judgment pending, the plaintiffs voluntarily dismissed their claim without prejudice. So when the plaintiffs re-filed, was their action barred by res judicata?

Defendants' counsel argued that the "single theory of recovery" analysis applied by the Appellate Court did not fit the circumstances. Rather, the first complaint involved a products liability claim which was wiped out by the trial court, and a new claim for professional negligence was pleaded. Justice Thomas asked counsel what was wrong with the plaintiffs' argument that the case was all a single claim: the law firm's negligence in not informing the plaintiffs of all potential causes of action arising from the injury? Counsel responded that the issue turned on the definition of a claim. The first action involved a set of operative facts that caused injury to the claimant. Later, a different set of operative facts arose -- failure to advise. Justice Thomas followed up by asking what was wrong with the proposition that the initial court order merely adjudicated certain facts in support of the claim -- a claim plaintiffs were given leave to amend? Counsel argued that the initial court order had finally adjudicated a separate products liability claim.

Justices Karmeier, Thomas and Theis each separately pressed counsel on whether the initial order of dismissal without prejudice was final and appealable, even though it expressly stated that dismissal was without prejudice. Counsel responded that the order was final with respect to the products claim, although it only became appealable upon plaintiffs' voluntary dismissal.

Co-counsel for defendants addressed the plaintiffs' alternative argument that res judicata was inapplicable because the plaintiffs had expressly reserved the right to file a new action, arguing that plaintiffs had forfeited the issue by failing to raise it in the trial court. Justice Thomas asked whether, given that plaintiffs were appellees in the Supreme Court, they had a right to affirmance on any theory supported by the record, but counsel pointed out that plaintiffs had been appellants at the Appellate Court.

Plaintiffs' counsel drew few questions. Justice Burke asked how the defendants could have advised plaintiffs of their purported claim for manganese exposure when their relationship with defendants ended before they discovered the claim? Counsel responded that if defendants had sent plaintiff to a physician, the claim might have been discovered earlier. In rebuttal, defendants' counsel again argued that the initial dismissal was a final order which became appealable -- and thus preclusive for res judicata purposes -- when plaintiffs voluntarily dismissed their claims.

Join us back here later today for a recap of the argument in Center Partners, Ltd. v. Growth Head GP, LLC, a case about whether subject matter waiver of attorney-client communications extends beyond litigation to business transactions.

• Print
• Comments
• Trackbacks
• Share Link

One of the quirky pleasures of every first-year law student's property class is the amount of time taken up studying rules which were settled around the time that the Tudors were on the British throne -- sometimes even earlier.

On Thursday, the Illinois Supreme Court brought back one of the classics, a rule first propounded in the common law at least a half a millennium ago -- "spendthrift trusts are void against current and future creditors." The rule against spendthrift trusts has been the law in Illinois for nearly a century and a half, and remains the law in most states.

Rush University Medical Center v. Sessions arises from a Trust established in 1994. The settlor placed around $19 million in property in the trust, and named himself lifetime beneficiary. The trustees were authorized to make distributions to him of both income and principal, and the settlor retained absolute power to appoint or remove trustees, and to veto any discretionary actions. Finally, the trust had a spendthrift provision -- no trust assets could go to creditors of the settlor or his estate.

The following year, the settlor made an irrevocable pledge of $1.5 million to the plaintiff, expressly for the construction of a new residence for the president of the University. He executed codicils to his will providing that any unpaid balance on the pledge should be paid on his death. In reliance on the pledge, the University built the residence and named it after the settlor. The settlor was present at the dedication, cut a ceremonial ribbon, and a plaque was placed bearing the settlor's name.

Ten years later -- with the pledge still unpaid -- the settlor was diagnosed with lung cancer. The settlor executed a new will revoking all previous wills and codicils and making no provision for payment of the pledge. Just before his death, he created a second revocable trust, transferring additional assets into it, and he then made additional gifts, further reducing his estate. When the plaintiff filed a claim in probate to enforce the pledge, the estate was found to include less than $100,000.

So the plaintiff sued the trustees of the trust. Count III of the plaintiff's claim, the only aspect of the case at issue before the Supreme Court, invoked the common law rule that a spendthrift trust is void against existing or future creditors. Although the Circuit Court agreed, entering summary judgment for the plaintiff, the Appellate Court reversed, finding that the Fraudulent Transfer Act, 740 ILCS 160/5, supplanted the common law rule by providing specific mechanisms for proving that a transfer by a debtor was fraudulent.

The Supreme Court unanimously reversed. Illinois has a heavy presumption against overturning the common law, the Court noted. Legislative intent to override the common law was not to be lightly found; the legislature's intentions must be plainly and clearly stated, and cannot be inferred from ambiguous or questionable language. Implied repeal of the common law is disfavored, and can be found only in the face of irreconcilable repugnancy between the statute and the common law. Where the common law is more broad than the statute, there is a presumption that the statute merely supplements the common law; and remedies by statute are presumed to be cumulative only.

Turning to the statute, the Court found no indication of an intent to overturn the common law; indeed, to the contrary: Section 11 of the Act, 740 ILCS 160/11, stated that the common law was not to be displaced but by express provisions of the Act.

Nonetheless, the defendant trustees argued that Section 5(a) of the Act, which sets out a statutory cause of action for fraudulent transfer, was necessarily irreconcilable with the common law rule, which conclusively presumed all transfers under certain circumstances to be fraudulent.

Not so for a variety of reasons, the Court concluded. Where the statute was intended for the general protection of unsecured creditors from unfair reductions in the debtor's estate, the common law rule applied whether or not the transfer was technically a fraudulent conveyance, and whether or not there was any intention to defraud creditors. The rule and statute did not entirely overlap; each operated in spheres where the other did not. Although the Appellate Court found that the plaintiff's claim must fail for lack of an allegation of intent to defraud, the Supreme Court noted that the common law rule on spendthrift trusts had coexisted with a rule against fraudulent conveyances for almost the whole of its half-millennium life span.

The trustees argued that the common law rule applied only to assets actually distributed to the settlor before his or her death, as opposed to the remaining assets, but the Court found no conceptual difference between the two. The Court also rejected the trustees' argument that the plaintiff had not become a creditor of the settlor until his death, concluding that the common law rule applied whether or not the claimant was a creditor during the settlor's lifetime, and whether or not the claim accrued during the settlor's life.

• Print
• Comments
• Trackbacks
• Share Link

At least in theory, the days are long gone in most jurisdictions when courts were openly hostile to arbitration. Nevertheless, petitions to arbitrate are a frequent battleground between plaintiffs and defendants. On Thursday, a unanimous Illinois Supreme Court offered important guidance for determining such petitions, filing its decision in Carter v. SSC Odin Operating Co.

Carter arises from the decedent's nursing home care. The first count of plaintiff's complaint is a survival claim alleging that decedent's personal injuries were caused by violations of the Nursing Home Care Act, 210 ILCS 45/1-101. In the second count, plaintiff purported to state a claim for wrongful death.

The defendant filed a motion to compel arbitration, citing identical arbitration agreements signed during decedent's successive stays in the defendant's nursing home -- the first signed by plaintiff as decedent's "legal representative." According to the arbitration agreements, the parties agreed to binding arbitration of any controversy with more than $200,000 at issue. The parties also agreed that defendant would pay the arbitrators' fees, as well as up to $5,000 of attorneys fees and costs incurred by the decedent, regardless of who prevailed in the arbitration. Finally, the parties agreed that the decedent could choose the location of any arbitration. The trial court denied the motion to compel arbitration in all respects.

A divided Appellate Court affirmed. The majority emphasized the different circumstances faced by the defendant and the decedent: almost any claim that the decedent might have against the defendant was likely to be for more than $200,000, thus triggering the arbitration clause, while the chances that the defendant would have a $200,000+ claim against the decedent seemed slim. Given that the arbitration clause was unlikely to be triggered against the defendant, the majority concluded that it was invalid for lack of mutuality of obligation. The Court held that the wrongful death claim was non-arbitrable because plaintiff had not signed the arbitration agreement in her personal capacity.

The Supreme Court unanimously reversed with respect to the survival claim. The concept of mutuality of obligation, the Court noted, is closely tied to consideration. Whether or not any potential claim by defendant was likely to ever be subject to arbitration was not dispositive; the question was whether the defendant had suffered any detriment in return for plaintiff's promise to arbitrate. The answer was yes -- the defendant agreed to pay the arbitrator's fees, as well as a portion of the decedent's attorney fees and costs, win or lose. Since the agreement was supported by consideration, the Court held that the survival claim had to be arbitrated.

Turning to the second count, the defendant argued that wrongful death is expressly described as an asset of the decedent's estate by Section 2.1 of the Wrongful Death Act. As such, according to the defendant, the decedent necessarily had the right to control the forum or manner in which the claim could be brought.

The Supreme Court disagreed, pointing out that the proceeds of the wrongful death claim do not pass through the estate pursuant to the Probate Act. Further, the Court noted that a wrongful death claim does not abate on the death of a beneficiary; the plaintiff essentially brings the action as a trustee for all the next of kin. The Court concluded that the legislature did not intend that the wrongful death claim should be a true asset of the decedent. Instead, the legislature's intent was merely to facilitate the filing and prosecution of the claim.

The defendant also pointed the Court to decisions in several states holding that because a wrongful death action is derivative of the decedent's personal injury claim, the decedent's promise to arbitrate necessarily governs both. The Supreme Court declined to follow these cases, holding that the generally derivative nature of the claim could not justify disregarding fundamental principles of contract law: since the plaintiff was not a party to the arbitration agreement in her personal capacity, she could not be bound by it.

• Print
• Comments
• Trackbacks
• Share Link

The doctrine of equitable estoppel bars a party from denying a fact, or opposing a claim, based on that party's previous statements or conduct. As a general rule, depending on the circumstances, it can be based on either actual authority, meaning that the speaker or actor had authority to bind the defendant, or apparent authority: the speaker/actor seemed, based on her conduct or statements, to have authority.

So can a municipality be estopped based on the apparent authority of its employees?

On Thursday, the Illinois Supreme Court gave a definitive answer: "No."

Patrick Engineering v. City of Naperville arose from a contract related to a stormwater management system. The plaintiff agreed to provide a "Stormwater Asset Management and GIS Information System." The agreement provided a specific mechanism for dealing with change orders and cost overruns. If a representative of the City verbally requested additional services, the plaintiff was required to confirm the request in writing. The plaintiff would then have authority to proceed if the City authorized the work in writing.

But once the work began, things didn't work that way. The plaintiff alleged that various emails had been sent, purportedly authorizing additional work. In 2007 and 2008, the plaintiff sent five invoices to the City, totaling within $10 of the entire project cost, but exceeding the proposed cost in every project area but one. The City made a partial payment, but ultimately declined to pay plaintiff's invoices in full, and the plaintiff sued.

Plaintiff alleged that the City had required additional plans and categories of plans, provided improperly catalogued plans, and changed the size of one of the project areas. The plaintiff did not allege that any City official had authorized additional services in writing.

The plaintiff's complaint was dismissed without prejudice, as were the three amended complaints which followed. By the Third Amended Complaint, the crux of the case had become whether equitable estoppel could be applied against the City. In its order dismissing the Third Amended Complaint, the Circuit Court concluded that plaintiff's claim largely revolved around cost overruns for the original scope of work, and that plaintiff had not alleged that any of the employees with whom it had dealt had authority to bypass the provisions of the contract.

The Appellate Court reversed, finding that the plaintiff's allegations -- that it had dealt with individuals who appeared to have been designated to manage the project, based on their titles and conduct -- were sufficient to make out a claim for equitable estoppel.

The Supreme Court unanimously reversed. Equitable estoppel is particularly disfavored where the public revenue is at stake, the Court held. A plaintiff seeking to establish equitable estoppel against a municipality must plead specific facts showing (1) an affirmative act by the municipality, or by an official with express authority, and (2) reasonable reliance that induces the plaintiff to detrimentally change position.

The Court held that the plaintiff's allegations about the titles and statements of the City's employees fell far short of establishing express authority to informally approve changes to the contract. Nor could the plaintiff allege reasonable reliance: even taking the plaintiff's allegations at face value, the plaintiff made no allegation that anyone had ever specified exactly how much new work was being authorized.

The take-away from Patrick Engineering is clear. In Illinois, the best way to ensure that a government contractor will get paid for cost overruns and changes in the scope of work is to make sure that the contract provides detailed procedures for such circumstances, and to follow them. Failing that, plaintiffs should make sure to confirm the duties and authority of the government employees they deal with.

• Print
• Comments
• Trackbacks
• Share Link

For generations, Illinois has recognized the general principle that a landowner owes no duty of reasonable care to trespassers. This duty is subject to a number of exceptions; one pertains to children. Since Kahn v. James Burton Co., Illinois has applied a three-step test to determining whether a duty is owed to a child trespasser: (1) the landowner knew or should have known that children habitually frequent the property; (2) a defective structure or dangerous condition was present; (3) the defective structure or dangerous condition was likely to injure children because they are incapable, based on age and maturity, of appreciating the risk; and (4) the expense and inconvenience of remedying the situation was slight compared to the risk.

The biggest question arising from this test is the third factor: which dangers are open and obvious, and who decides -- the jury or the court? This past Thursday, the Illinois Supreme Court provided important guidance on these questions, handing down a unanimous decision in Choate v. Indiana Harbor Belt Railroad Co.

One day in the summer of 2003, plaintiff and five friends -- two boys, three girls -- met in the parking lot of an apartment building. The defendants' railroad tracks ran adjacent to the lot. Only certain segments of a mile-long corridor passing along the parking lot were fenced, but a posted sign warned "Danger, No Trespassing."

A freight train approached, moving about ten miles per hour. The three boys approached the right of way, and plaintiff and another boy decided to jump onto the train. The plaintiff's friend tried and failed. The plaintiff failed on his first two attempts. On his third, he fell from the train, which severed part of his foot. Ultimately, the plaintiff's leg was amputated below the knee.

The plaintiff sued the defendant railroad, among others, alleging that the defendant failed to adequately fence the area, to take adequate steps to prevent minor children from approaching the trains, to post warning signs or to monitor the area.

The defendants moved for summary judgment, arguing that the dangers of a moving freight train are open and obvious to children of the plaintiff's age, and that based on his deposition testimony, the plaintiff did, in fact, appreciate the danger. The Circuit Court initially granted the motion, but then changed its mind, concluding that obviousness was a question of fact for the jury. After the jury returned a multi-million dollar verdict for plaintiff, the defendants renewed their arguments in a motion for JNOV. The Appellate Court affirmed, holding that the danger from a moving train was not so obvious that a child of plaintiff's age could be expected to appreciate it as a matter of law.

Choate received substantial attention before the Court, drawing amicus briefs from the Illinois Trial Lawyers Association for the plaintiff, and a joint amicus brief by the Association of American Railroads, the Chicago Transit Authority and the Northeast Illinois Regional Commuter Railroad Corporation for the defendants.

The Supreme Court reversed. The cornerstone of liability, according to the Court, was the foreseeability of harm. In this sense, Illinois law tracked Section 339 of the Restatement (Second) of Torts. As the Appellate Court had noted, early decisions both from the Illinois Appellate Court and from jurisdictions around the country had held that a moving train was an open and obvious danger for children, but the Appellate Court cited La Salle National Bank v. City of Chicago and Engel v. Chicago & North Western Transportation Co., both of which refused to extend the open and obvious doctrine to moving trains, as grounds for refusing to follow those authorities.

The Supreme Court overruled La Salle and Engel: "[W]e now explicitly recognize as a matter of law that a moving train is an obvious danger [such] that any child allowed at large should realize the risk of coming within the area made dangerous by it."

The Court noted conflicting testimony from the plaintiff about whether or not he appreciated the danger, but emphasized that the appropriate test was an objective one for the court to apply, not a subjective one for the jury: the issue was what a landowner could reasonably expect a child to foresee.

In closing, the Court briefly addressed the final factor of the test for duty, whether the burden of adding additional fencing was slight compared to the risk. The Court rejected any notion that the burden was slight, since if a landowner had a duty to fence at the location of an accident, it necessarily had to fence everywhere.

 

• Print
• Comments
• Trackbacks
• Share Link

Resolution of child custody issues -- and particularly, the issue of removing the children from the jurisdiction -- is often one of the most contentious points in a divorce proceeding. On Thursday, the Illinois Supreme Court handed down a decision in In re Marriage of Coulter which should make it easier for parties to resolve such issues between themselves, without court intervention.

When the parties divorced, they entered into a Joint Parenting Agreement (JPA), which the Circuit Court incorporated into the judgment of dissolution. The parties agreed to joint custody, with wife having primary residential custody. The JPA provided that wife could not remove the children to California, as she was contemplating, for two years. For twelve months after that, if wife gave notice of her intent to remove the children to California, husband could seek mediation; if the mediation failed, wife could remove the children, but husband retained the right to seek a court order determining a parenting schedule. (In case you're wondering, the JPA applied only to moving to California -- any other destination, and the usual provisions of the Illinois Marriage and Dissolution of Marriage Act, requiring court approval, apply.)

Five days before the end of the second year, the wife's attorney gave the husband's attorney notice of her intent to relocate to California. The husband neither responded nor requested mediation. Instead, two months before expiration of the three year limit, he filed an emergency petition seeking an injunction against the removal, and arguing that a hearing should be held to determine the children's best interest. Husband argues that material circumstances had changed, and sought sole custody. For her part, the wife filed a petition for leave to remove. The Circuit Court denied the injunction, but the husband appealed. The Appellate Court reversed, applying the traditional four-factor test to determine that the husband might prevail, and noting that an injunction would "preserve the status quo."

After the reversal, the Circuit Court ordered wife to bring the children back to Illinois, but then the Supreme Court stepped in, staying the Circuit Court's order.

Ultimately, Coulter is about reconciling two provisions of the Marriage and Dissolution of Marriage Act. According to Section 609(a), children can be removed from Illinois only with leave of court.  On the other hand, Section 502 of the Act provides that an agreement between the parents may be incorporated into the judgment of dissolution, and enforced as a court order.

So if parties incorporate an agreement to allow removal of children into their divorce settlement, and the settlement is incorporated into the court's judgment -- is that the necessary permission to remove, without the need for a best-interests-of-the-children hearing?

The Supreme Court held that the answer was "yes," reversing the Appellate Court. By incorporating the JPA, the Circuit Court had accepted the parties' agreement for removal, so the wife was free to remove the children; no motion for leave to remove was necessary. There was no need to separately determine the best interests of the children, in the Court's view, since the JPA reflected an agreement between the divorcing spouses that removal was in the children's best interests under certain settled circumstances.

The Court noted that its holding was supported by the strong public policy of Illinois to allow parties to resolve as many agreements as possible by agreement. Custody agreements are complex things, the Court observed; remove one thread -- the parties' agreement to allow removal -- and there's no telling what you might unravel. Failing to enforce the parties' agreement would potentially undermine Section 502 of the Act as an expression of public policy.

But the husband was not without a remedy if he felt circumstances had changed, the Court noted in closing; he was free to pursue his still pending petition to modify the terms of custody.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court concludes with Hope Clinic for Women v. Adams [pdf]. Although Hope Clinic arises from a constitutional challenge to Illinois’ Parental Notice of Abortion Act, the issues before the Court have little to do with abortion law. Instead, the case raises broad issues about the interpretation of the Bill of Rights of the Illinois state constitution. Depending on how the Court resolves the case, Hope Clinic may affect a whole range of different areas of constitutional litigation.

According to the Parental Notice of Abortion Act, a physician must disclose to a parent, grandparent, step-parent living in the household or legal guardian that his or her minor or incompetent child is seeking an abortion. No notice is required if a pregnant minor seeks medical assistance but chooses to continue her pregnancy, nor is notice required if the minor has, or ever has had, a husband. Plaintiffs challenged the Act on a host of grounds, solely under the Illinois Constitution, including due process, equal protection, privacy and gender equality. The Circuit Court dismissed after concluding that all four of these state constitutional rights were interpreted in lockstep with Federal constitutional law. Accordingly, the due process and equal protection claims were barred by earlier Federal litigation, Zbaraz v. Hartigan. The privacy and gender equality claims failed because they would fail under Federal law.

The Appellate Court reversed. The Court acknowledged that Illinois’ due process and equal protection clauses are similar to their Federal counterparts, but nevertheless concluded that the Circuit Court had missed the forest for the trees: the claim in Federal court was not identical to the one being made in state court. Accordingly, collateral estoppel could not apply simply as a matter of civil procedure law.

As for the privacy and gender equality claims, the Court found guidance in People v. Caballes, the leading authority from the Supreme Court on coordinating state constitutional rights with Federal ones. There, the Court first described a “limited lockstep” approach for state provisions which are substantively identical to Federal ones: the court first looks to federal law, and only if federal law provides no relief does the court turn to state law to determine whether a state departure is warranted based on some specific criterion. But for express provisions of the state constitution with no analogous Federal provision, the Court rejected any kind of lockstep, holding that the state constitution must be interpreted without reference to Federal law.

Although Federal courts do recognize a “penumbral” right to privacy, the Appellate Court followed Caballes in holding that limited lockstep did not apply to Illinois’ right to privacy. Similarly, the Court held that because the Federal constitution included no gender equality guarantee, the Illinois provision had to be interpreted without reference to Federal law. Citing the Supreme Court’s decision in People v. Ellis, the Court held that gender-based distinctions were a suspect classification under Illinois law, necessitating strict scrutiny. Since the Circuit Court had declined to apply strict scrutiny in rejecting the gender equality claim, the Court remanded for reconsideration under that standard.

Presiding Justice Rodolfo Garcia added an interesting special concurrence. First, he concluded that the Zbaraz case was irrelevant, since the limited lockstep constitutional doctrine did not apply to decisions of Federal trial and intermediate courts. Justice Garcia also questioned the majority’s conclusion that Caballes necessarily meant that the limited lockstep doctrine was inapplicable to the state constitutional right to privacy.

Hope Clinic will be argued at the 9:00 am session of the Court tomorrow -- Thursday, September 20, 2012.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Ferguson v. Georges [pdf], a case which might prove to have important implications for Illinois political ethics law.

Ferguson is an in-house dispute between the Inspector General of Chicago and the Corporation Counsel for the city. The Inspector General is charged with investigating the performance of governmental officers, employees, functions and programs in order to detect and prevent misconduct, inefficiency and waste. According to the Municipal Code, the IG has power to investigate "all elected and appointed officers of the city government" and "all employees of the city government" except for members of the city council. His powers extend to all contractors and subcontractors of the city, the city's business contractors, and persons seeking certification of eligibility for participation in any city program. The IG may issue subpoenas to compel the attendance of witnesses and production of documents, although "for seven days after receipt of a timely objection to a subpoena," he "shall take no action to enforce the subpoena or to initiate prosecution of the person to whom the subpoena is directed." The Corporation Counsel, on the other hand, is the city's lawyer, conducting all the city's legal business.  She is required to "protect the rights and interests of the city in all actions, suits and proceedings brought by or against it or any city officer, board or department," and is responsible for defending "any member, officer or employee of the board of health, police department or fire department" who is sued for damages based on his or her official duties.

The IG opened an investigation of how a former City employee had been awarded a sole-source contract, in apparent violation of city rules. He sent a routine request to the Corporation Counsel, seeking production of documents. The law department provided some, but asserted the attorney-client and work product privileges as to others.

So the IG subpoenaed the documents. The Corporation Counsel objected, the IG responded, and the Corporation Counsel defied the subpoena. So the IG sued the city's Corporation Counsel. The trial court dismissed on two grounds: (1) the Corporation Counsel was the sole lawyer for the city, and the IG didn't have the authority to hire a private lawyer; and (2) the Corporation Counsel could assert attorney-client privilege to refuse to produce documents to the IG.

On appeal, the Corporation Counsel argued that one entity of the same government couldn't sue another: it amounted to the City suing itself. Nice try, said the Appellate Court; although parties within the same board or agency had been prevented from suing each other in the past -- the Corporation Counsel pointed to a case involving members of a Board of Fire and Police Commissioners -- the courts had heard cases before involving separate agencies of the same municipal corporation.

Whether the IG could sue, particularly through a private lawyer, presented a somewhat more difficult question. The Municipal Code was at least somewhat obscure; it stated that the IG "shall take no action to enforce the subpoena" for seven days, but never really came right out and said that the IG had the power after seven days. The Corporation Counsel argued that as lawyer for the city, she herself would have to bring an enforcement action, but the Court didn't buy it, concluding that that argument would necessarily mean that the IG could never investigate the Corporation Counsel herself. Ultimately, the Court concluded that if the IG was to be expected to carry out the duties assigned him by the Municipal Code, the power to issue subpoenas must necessarily include the power to enforce them, by hiring a private attorney if need be.

Of course, all of these capacity and standing issues are largely prelude to the central issue in the case -- can a political entity's lawyer assert attorney-client privilege in order to shield documents from the ethics officer? Who exactly "owns" the privilege? Might the Municipal Code provisions giving the ethics officer sweeping investigative authority be construed as a waiver of sorts? On appeal, the parties asked for opposite bright-line rules: the IG argued that there was no privilege where he was concerned, and the Corporation Counsel argued that all communications between city lawyers and governmental entities were privileged. The Appellate Court rejected both positions, although it didn't offer a detailed explanation of why. Instead, it sent the case back to the trial court for an in camera examination of the documents. It will be interesting to see how much interest this issue draws from the Supreme Court in oral argument.

Ferguson will be argued at the 9:00 am session of the Court tomorrow -- Thursday, September 20, 2012. Join us back here later today for a preview of the argument in The Hope Clinic for Women v. Adams.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Mashal v. City of Chicago [pdf], a case which presents interesting questions about the scope of Circuit Courts’ power to decertify a class.

Mashal involves the City of Chicago’s practice of issuing what were called “fly-by” traffic citations to taxi drivers – citations which were received by mail, rather than being personally served or placed on the offending vehicle. Plaintiff filed a putative class action seeking to outlaw the practice in 2000, and a class certification order was entered two years later. In 2005, the parties filed cross-motions for summary judgment: the plaintiff seeking an order finding that “fly by” citations violated the Vehicle Code and the Municipal Code, and the City seeking an order dismissing the plaintiff’s claims for failure to exhaust administrative remedies, among other things. The plaintiff’s motion for partial summary judgment was granted and the City’s motion was denied. The following year, the City successfully moved for partial summary judgment, lopping off all claims accruing before 1995 on statute of limitations grounds.

In 2007, the City moved to decertify the class, arguing that with resolution of the issue regarding whether “fly bys” were illegal, there were no common issues left in the case. The Circuit Court granted the motion to decertify.

Section 2-802 of the Illinois Code of Civil Procedure provides that a court may certify a class, may make the certification order conditional, and may amend the order at any time “before a decision on the merits.” 735 ILCS 5/2-802. But since the statute nowhere defines “decision on the merits,” we’re left with the potentially high-stakes question: when does the Court lose the power to decertify? After their class was decertified, the plaintiff sought an order authorizing an interlocutory appeal. The Circuit Court refused, but then the Illinois Supreme Court intervened, granting a supervisory order directing the Circuit Court to certify and the Appellate Court to decide questions about the scope of Section 2-802.

The dispute broke down along predictable lines. The plaintiffs sought an expansive definition, similar to the one used to bar motions to disqualify a judge: if the Court has granted or denied a motion that impacts the rights and duties of the parties at all, a “decision on the merits” has been made, and the power to decertify is lost. The defendants took the opposite tack, arguing that a “decision on the merits” should be interpreted in a way more akin to res judicata law – a complete resolution of plaintiff’s liability claim.

The Appellate Court sided with the defendants, concluding that since res judicata law and potential class decertification serve similar purposes, they should be defined in a similar way. The Court concluded that prohibiting decertification only after a complete determination of liability served the purposes of certification while promoting efficiency and economy of litigation. The Court then held that since the Circuit Court’s order finding “fly-by” citations unlawful did not entirely dispose of the liability issues – the trial court expressly reserved the issue of the number of “fly-by” tickets issued during the relevant period – the decertification order was permissible. The plaintiff responded that the denial of defendant’s summary judgment motion regarding its affirmative defenses had fully determined liability, but the Court held that the order had merely struck blanket defenses; the City remained free to defend the claims one by one.

Mashal should be an interesting argument. If the Supreme Court concludes that any decision impacting the merits at all ends the power to decertify, the cost of litigation is likely to rise, because defendants will have no way of disposing of cases which no longer satisfy the prerequisites for class actions. We expect a decision in Mashal in the next two to three months.

Mashal will be argued at the 9:00 am session of the Court on Thursday, September 20, 2012. Join us back here tomorrow for a preview of the argument in Ferguson v. Georges.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Fennell v. Illinois Central Railroad Company [pdf], a case which may clarify the standards limiting the ability of a plaintiff - or sometimes, a plaintiff's counsel -- to shop for what he or she perceives to be a friendly forum.

Fennell is an action for personal injuries allegedly received as a result of exposure to asbestos, diesel exhaust, sand, environmental tobacco smoke, and toxic dusts, fumes and gases during plaintiff's thirty-seven year employment with the defendant railroad. Plaintiff filed a putative class action suit in 2002 in Pike County, Mississippi. After the Mississippi court dismissed the action without prejudice, plaintiff re-filed in St. Clair County, Illinois pursuant to the Federal Employers' Liability Act ("FELA") and the Locomotive Boiler Inspection Act.

The defendant moved to dismiss based upon forum non conveniens. On the surface, it would seem that the defendant had a point: (1) the plaintiff was a lifelong resident of Mississippi who worked out of the defendant's Jackson, Mississippi facility; (2) the plaintiff did not claim to have received any kind of injury in Illinois, let alone in St. Clair County; and (3) numerous potential witnesses lived in Mississippi, including thirteen potential witnesses identified by the plaintiff. The defendant also pointed to the affidavit of its risk mitigation manager for occupational disease claims, who testified that he and several other company representatives lived in or near Memphis, and would find it substantially more convenient to travel to Copiah Co., Mississippi for trial than to St. Clair Co., Illinois.

The plaintiff responded that defendant was represented by a St. Clair County law firm which served as a regional counsel, representing the defendant in cases in Illinois, Mississippi, Louisiana and Tennessee. As a result -- at least according to the plaintiff -- defense counsel had amassed considerable evidence which was now located in counsel's office, in St. Clair County. Plaintiff also pointed to two defense representatives he intended to call, one of whom lived in Illinois and the other in Memphis, as well as an expert witness who resided in Chicago. The Circuit Court denied the motion to dismiss, and the defendant appealed.

The Appellate Court affirmed. The defendant did not plan to call anyone from Mississippi for the trial, the Court concluded, and Memphis -- the home of several of the defendant's representatives -- was an equally long drive, regardless of whether one was headed for Copiah County or St. Clair County. The Court acknowledged that several individuals in the case resided in Mississippi, but pointed out that the defendant could not get a change of forum based on the plaintiff's potential inconvenience. The Court also emphasized the plaintiff's allegation that documentary evidence was sitting in defense counsel's office in St. Clair County.

Leave to appeal was likely granted in Fennell to resolve a conflict with the recent decision in Laverty v. CSX Transportation, Inc. -- a decision rendered by the same District of the Appellate Court that decided Fennell (Illinois has no intra-District stare decisis, so Laverty did not automatically govern Fennell. Like Fennell, Laverty was a FELA case. Like Fennell, Laverty involved no clear connection to Illinois -- the plaintiff was a resident of Texas who resided in Michigan and Ohio while working for the defendant railroad. Like Fennell, none of the purported injury occurred in Illinois in Laverty. The Appellate Court ultimately refused to follow Laverty on the grounds that there, none of the potential witnesses lived in Illinois. Justice Thomas Welch dissented, arguing that a controversy between a non-Illinois plaintiff and a non-Illinois defendant about alleged injuries which occurred outside of Illinois had no business being tried in an Illinois court.

Fennellwill be argued at the 9:30 am session of the Court on Wednesday, September 19, 2012. Join us back here tomorrow for a preview of the argument in Mashal v. City of Chicago.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Rodriquez v. Department of Financial and Professional Regulation [pdf]. Rodriquez is the third case on the Court’s docket this month that turns on res judicata, following Hernandez v. Bernstein and Cooney v. Rossiter.

A great many statutes allow successful plaintiffs to collect attorneys fees on the theory that they've conferred a benefit on the general public -- they're called "private attorney general" statutes.

But do you have to couple your fees request with your challenge? Or is your request unripe until you've won?

The defendant filed disciplinary charges against the plaintiff under the Medical Practice Act of 1987. The parties agreed to stay the proceedings while the plaintiff pursued two circuit court actions seeking to clarify the discovery and evidence rules applicable to such administrative disciplinary hearings.

First, plaintiff filed suit seeking deposition subpoenas. He lost, and the Appellate Court affirmed. But the second time around, he had better luck; plaintiff challenged one of the Department's rules for contested cases in administrative hearings on the grounds that it conflicted with the enabling statute. The trial court agreed, as did the Appellate Court.

Not long after, following a settlement meeting, the Department issued a letter concluding that no violation of the Medical Practice Act had occurred, and closing its file without prejudice. The Department refused to dismiss its case with prejudice pursuant to "long-standing practice."

Six months later, the plaintiff sued the Department again, arguing under Section 1-55(c) of the Illinois Administrative Procedure Act, 5 ILCS 100/10-55(c) that he was entitled to attorneys fees incurred in getting the administrative rule struck down. But the trial court tossed the plaintiff's case out, holding that he should have brought his fees claim in the original action challenging the rule, and his claim was now barred by res judicata.

The Appellate Court reversed. Section 1-55(c) contained no time limit or specific filing requirement, the Court pointed out; if the legislature had wanted to require that a fees claim be bundled with the underlying challenge, it would have said so. Allowing collateral litigation would have little impact on judicial efficiency, according to the Court, and the plaintiff had little choice anyway: his claim for fees didn't accrue until he won his underlying challenge.

Rodriquez will be argued at the 9:30 am session of the Court on Wednesday, September 19, 2012. Join us back here tomorrow for a preview of the argument in Fennell v. Illinois Central Railroad Company.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with In re Estate of Boyar [pdf].

So you’ve decided there was something not quite right about a parent’s will. Can you take the money and then file a will challenge? The answer nearly everywhere is thoroughly settled: No.

But what if Dad had a trust instead of a will?

That’s the question raised by Boyar. Years prior to his death, the decedent set up a trust; his operative will simply said to distribute all the property through the trust. The trust was amended several times over the years, but until 2010, one provision remained constant: the beneficiaries could remove the trustee by majority vote. Then in the sixth and final amendment, this power was withdrawn and a new trustee appointed.

Only three weeks after the trustee was appointed, the decedent died. In September 2010, petitioner, one of the decedent’s five children, filed a challenge to the sixth amendment, arguing (among other things) that the decedent had lacked the mental capacity to execute it because of progressive dementia. Six weeks later, the trustee sought a citation to discover and recover assets belonging to the trust, alleging that in May and July 2010, petitioner had removed items of personal property belonging to the trust from the decedent's home. The citation was granted, and in response, plaintiff acknowledged receipt of certain items "as a partial distribution of [his] interest from the [trust]." The trustee then moved to dismiss petitioner's challenge to the trust, citing the doctrine of election, which teaches that a party may not accept benefits under an instrument and subsequently challenge its validity. The Circuit Court agreed and dismissed.

Before the Appellate Court, petitioner argued that the doctrine of election is recognized in Illinois only with respect to wills, and should not be extended to trusts. The Court disagreed, observing that Illinois as a general rule applies the same rules to interpreting both wills and trusts, and that trusts have proliferated in recent years as a preferred method of passing assets to one's heirs. The Court cited the decisions of appellate courts in several other states, each of which have extended the doctrine of election from wills to trusts.

Petitioner argued that the doctrine of election should not bar his particular claim because the property he accepted was "nominal" in value. The Appellate Court disagreed, pointing out that the Illinois courts had rejected the same argument with respect to wills.

Next, petitioner argued that the doctrine of election was inapplicable where the party accepting benefits lacked full knowledge of the facts. However, the Appellate Court pointed out that petitioner's letters about his father's alleged dementia -- the basis of his challenge -- were signed before his challenge was filed. Nor was the second recognized exception - where a provision of the trust was contrary to law or public policy -- applicable. The Court acknowledged a third exception to the doctrine, where a party timely tenders accepted benefits back to the estate and the estate is not prejudiced, but the Court pointed out that while most courts applying the exception had required a re-tender before the challenge was filed, petitioner had not tendered the personal property back to the trust until his challenge to the trust had been dismissed.

Boyar will be argued at the 9:30 am session of the Court on Wednesday, September 19, 2012. Join us back here tomorrow for a preview of the argument in Rodriquez v. The Department of Financial and Professional Regulation.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Toftoy v. Rosenwinkel [pdf].

We all learned about it in law school, and few of us have probably thought of the phrase since: “coming to a nuisance.” The notion is basically this: if you’re the last to move in, you’re stuck with your neighbors. You can’t file a nuisance suit if you knew what you were getting into.

Which brings us to a relatively common legislative manifestation of this old warhorse of a property law principle: “Right to Farm Laws.” The Illinois version is the Farm Nuisance Suit Act, 740 ILCS 70/1. According to Section 3 of the Act, no farm can be, or become, a private or public nuisance “because of any changed conditions in the surrounding area” as long as the farm has been in operation for a year.   The only exception to this blanket immunity is where the nuisance results from the negligent or improper operation of the farm.

Toftoy arises from a cattle farming operation. Defendants bought farmland in a rural area in 1991. The land had historically been used as a cattle operation, and the following year, the defendants opened their own cattle farm on the property. Three years earlier, plaintiffs had started using the barn and fenced lots on the property across the street to board horses. In 1997 – five years after the defendants started their cattle operation – plaintiffs demolished the old farmhouse which had stood vacant since 1992 and began building a new residence; they finally completed construction and moved into the house in 2004. In 2007, plaintiffs sued the defendants, alleging that the flies coming from their farm constituted a nuisance.

The defendants moved for summary judgment, arguing that Section 3 of the Farm Nuisance Suit Act clearly barred the suit. But the trial court denied the motion, holding that the changed conditions on the plaintiffs’ property across the street hadn’t caused the nuisance. After a bench trial, the court entered a declaratory judgment for plaintiffs and an injunction requiring various steps, supposedly to mitigate the fly problem.

On appeal, the defendants argued that contrary to the trial court’s ruling, there were “changed conditions” all over the place: (1) when they started their farm, the land across the street had been unoccupied; (2) the land across the street had originally been zoned for agricultural use, but was now being used for a private residence; (3) when defendants started their farm, the land across the street was a 200 acre plot; now plaintiffs held a 1.83 acre plot. According to the defendants, if their property was a nuisance at all, it was because the plaintiffs had moved into a farming area across from a working cattle farm and built a single-family residence on a small plot. And the defendants were there first.

The Appellate Court affirmed. Just any “changed condition” wasn’t good enough, the Court found; the condition must literally be the reason the farm was now a nuisance. Nothing the plaintiffs (or the previous landowner) had done had caused the nuisance, according to the Court, so the Illinois “Right to Farm” Act didn’t bar the suit. Justice Susan F. Hutchinson filed a detailed dissent, arguing that the Act clearly barred the suit. She concluded that the statute was clearly meant to be interpreted to give broad protection to Illinois farmers. Although there needed to be some nexus between the “changed condition” and the purported nuisance, Justice Hutchinson concluded that the necessary nexus was clearly present: the reason for the suit was that the plaintiffs had built a residence on a small plot in what had once been a large parcel of farmland. Justice Hutchinson worried about the future of Illinois’ farmers if the majority decision stood: “The future implications of the majority’s decision will leave farms with no defenses against baseless nuisance suits.”

In view of the dissent, and the Supreme Court’s allowance of the petition for leave to appeal on what the Appellate Court called an issue of first impression, don’t be surprised if the Supreme Court reverses. But if they don’t, an effort in the Illinois legislature to amend the statute seems likely.

Toftoy will be argued at the 9:30 am session of the Court on Wednesday, September 19, 2012. Join us back here tomorrow for a preview of the argument in In re Estate of Boyar.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with In re Marriage of Mathis [pdf].

Often in divorce proceedings there is a need to bifurcate: to enter a judgment of dissolution before the property settlement. But on the other hand, after the dissolution -- the literal divorce -- has been entered, often the parties' sense of urgency dims.

So if a significant period passes between the dissolution and the hearing on property matters, when is the property valued? For divorces which were pending when the Great Recession hit, this question can make a significant difference.

That's the issue presented in Mathis. The husband filed for divorce in November 2000. Judgment of dissolution was entered four months later. After several delays, the trial court commenced hearing on the property issues in April 2004. After several further continuances, in February 2006 the trial court finally set a valuation date, but then nothing further happened until May 2010. After yet more delays, the trial court set a new valuation date of December 31, 2010 -- nearly ten years after the judgment of dissolution. On husband's motion, the trial court certified a question for interlocutory appeal: when there is a lengthy delay between dissolution and the hearing on ancillary issues, is the appropriate valuation date the date of dissolution or a date close to the hearing on the property issues?

The statute isn't much help. According to Section 503(f) of the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/503(f), in a bifurcated dissolution period, the valuation date is "the date of trial or some other date as close to the date of trial as is practicable."

On appeal, the former husband argued that the Court's interpretation produced a windfall to the former spouse by allowing him or her to capture the fruits of the other party's postdissolution efforts. But the Appellate Court noted that when a party's efforts increased the value of the property, those efforts would be taken into account; when the party ignored the property, the party's failure to maintain would count against them too. Understandably given the recent history of property values, the Court was most concerned with the effect of a decline, pointing out that if the Court distributed property based on earlier, higher values, it was essentially distributing assets which no longer exist, resulting in an unenforceable order.

Justice Thomas R. Appleton specially concurred with the result. Although Justice Appleton agreed with the majority's result and reasoning, he worried that the Court's decision might cause some trial courts to refuse to enter a quick "grounds only" dissolution judgment, even where the circumstances of the parties clearly required it.

Mathis will be argued at the 9:00 am session of the Court on Tuesday, September 18, 2012. Join us back here tomorrow for a preview of the argument in Toftoy v. Rosenwinkel.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with EMC Mortgage Corp. v. Kemp [pdf].

Kemp involves a tangled procedural history, but ultimately, a reasonably simple question: when can you appeal from an order for the foreclosure sale of a home?

Plaintiff filed its foreclosure complaint in the summer of 2006. The defendant responded by challenging the plaintiff's capacity to sue as the legal holder of the mortgage, first in an answer, and later in a counterclaim. In response to the counterclaim, the plaintiff filed an affidavit from an assistant vice president saying that the original lender had assigned the loan to the plaintiff on December 29, 2006.

The defendant filed a slander of title counterclaim, which the trial court dismissed. Ultimately, in June 2009, the trial court finally entered a judgment of foreclosure. But after reconsideration was denied, the defendant filed for bankruptcy. The bankruptcy court ultimately lifted the stay, and several more battles ensued. In October 2010, the defendant offered a new attack on the plaintiff's standing, pointing out that although the bankruptcy order lifting the stay on the sheriff's sale listed "EMC Mortgage Corporation/Chase Home Finance LLC" as the relevant party, none of the orders before that had said anything about Chase as the successor to EMC. The trial court denied the defendant's motion to overturn the sale entirely, but granted language under Supreme Court Rule 304, which permits the immediate appeal of final judgments involving less than all parties when there is no just reason for delay. The court noted that while there seemed to be some question of plaintiff's standing, there was also grounds for disquiet about the timing of defendant's objection. Not long after, the defendant filed a motion for reconsideration, pointing out that plaintiff appeared to have acquired the mortgage several months after filing its complaint. The trial court denied reconsideration, but once again included Rule 304 language.

Before the Appellate Court, the defendant argued that nobody can sue to foreclose a mortgage he doesn't own. The plaintiffs responded that the Appellate Court had no jurisdiction to resolve anything; Rule 304 only made orders which were otherwise final appealable, and foreclosures couldn't be appealed until the sheriff's sale has happened. The defendant replied that since she was appealing from denial of an Emergency Motion to Vacate Judgment under Section 2-1401 of the Code of Civil Procedure, 735 ILCS 5/2-1401, she didn't need the Rule 304 language in the first place -- the order was already appealable. The problem was, according to the Appellate Court, that a Section 2-1401 motion assumed an underlying final order. If the underlying order wasn't final -- and the order of foreclosure wasn't -- then defendant labeling her motion a Section 2-1401 motion didn't make it one, and the result wasn't final or appealable.

Kemp will be argued at the 9:00 am session of the Court on Tuesday, September 18, 2012. Join us back here later today for a preview of the argument in In re Marriage of Mathis.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Carr v. Koch [pdf].

Plaintiffs have challenged states' school financing systems on constitutional grounds for nearly two generations now. The state Supreme Courts of Montana, New Jersey, Kentucky and Texas all struck down their state systems, while other challenges failed, such as San Antonio School District v. Rodriguez before the United States Supreme Court.

This month, the Supreme Court wades into the second challenge to Illinois' system in Carr. The named plaintiffs in Carr are taxpayers -- one in Homewood-Flossmoor, one in Cairo. They claim that the state's financing system in effect requires school districts with lower property values to impose property taxes at a higher rate than those imposed on similarly situated taxpayers in other areas of the state.

For each school district in the state, the state sets a "Foundation Level," and then estimates what percentage of that level each district could achieve, based on local funds, with no state money at all. State aid is set on a sliding scale, depending on whether the local district can raise relatively little, nearly all, or more than all of the basic "Foundation Level."

The plaintiffs had two problems heading in. First, the Illinois Supreme Court has already upheld the state financing system once, in Committee for Educational Rights v. Edgar. There, the Court held that disparities in local funding were rationally related to the legitimate interest of maintaining local control over education. Second problem: as I mentioned above, the plaintiffs were taxpayers, not students. And the property tax assessment rates were set by the local authorities, who weren't defendants in the action.

The trial court held that both of these problems were fatal to the plaintiffs: Edgar governed, and the taxpayer plaintiffs didn't have standing anyway, since school districts were free to impose any tax rates they wanted (and in fact, Cairo's School District property tax was more than double the one in Homewood-Flossmoor). The Appellate Court affirmed, pointing out that striking down the state system would likely lead to even higher tax rates on the plaintiffs to make up for the loss of state funds. As for Edgar, the plaintiffs argued that the state had moved away from local control by imposing state student performance standards, but the Appellate Court pointed out that the plaintiffs didn't allege that students in their districts had failed to meet those standards.

Carr will be argued at the 9:00 am session of the Court on Tuesday, September 18, 2012. Join us back here later today for a preview of the argument in EMC Mortgage Corp. v. Kemp.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term of the Illinois Supreme Court continues with Cooney v. Rossiter [pdf].

Cooney occurs at the intersection of res judicata and class action work: if a putative class action goes down in flames on the merits before class certification, is the putative class representative's individual claim barred too?

Plaintiff Deborah was awarded custody of her two children in her divorce. In 2001, plaintiff's ex-husband filed for a change of custody. She sought appointment of a psychological evaluator in order to provide recommendations about the best interests of her children. The trial court appointed defendant, pursuant to Section 5/605 of the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/605). The defendant concluded that plaintiff Deborah and her parents (the co-plaintiffs) suffered from Munchausen's by Proxy Syndrome, and opined that their treatment of the child Christopher was child abuse. The plaintiffs allege that the trial court granted the ex-husband's petition for a change of custody based on the defendant's report, which the defendant allegedly intended to injure the plaintiffs. According to the plaintiffs, the defendant deliberately made false statements to an investigator from the Illinois Department of Children and Family Services, and as a result, the DCFS entered a finding against plaintiff Deborah for child abuse.

The plaintiffs filed a federal class action civil rights suit against the defendant. The district court dismissed, holding that the defendants were absolutely immune from liability, and the Seventh Circuit affirmed. Cooney v. Rossiter, 583 F.3d 967 (7th Cir. 2009). So the plaintiffs sued the defendant in state court.  The state court dismissed based on absolute immunity and res judicata.

The Appellate Court affirmed, holding that res judicata barred the plaintiffs' new suit. Despite the addition of plaintiff's son as a party plaintiff, the first suit was unquestionably a final judgment on the merits. The Federal 1983 suit and the plaintiffs' state court claim for intentional infliction of emotional distress "arose from the same set of operative facts." And although plaintiff Deborah's parents and son were not parties to the Federal action, they were privies to plaintiff Deborah.

So far, so easy. But does it matter that the Federal action was a putative class action? According to plaintiffs, Benton v. Smith requires a categorical answer that res judicata does not apply to individual actions following the failure of a class action. The Appellate Court disagreed, distinguishing Benton's facts and denying that it had adopted such a blanket rule.

In the alternative, the Appellate Court held that the defendant was entitled to absolute immunity. Relying upon the Seventh Circuit's decision in the earlier class action, the Appellate Court found that a Court-appointed psychologist acted under the Court's direction, and was therefore entitled to the same protection from suit by disappointed litigants as the judge herself was: "court-appointed evaluators must be accorded absolute immunity so as to allow them to fulfill their obligations without worry of harassment and intimidation from dissatisfied parents."

Cooney will be argued at the 9:00 am session of the Court on Tuesday, September 18, 2012. Join us back here later today for a preview of the argument in Carr v. Koch.

• Print
• Comments
• Trackbacks
• Share Link

Our preview of the September term continues with Center Partners, Ltd. v. Growth Head GP, LLC [pdf].

Center Partners involves a dispute over the purchase of a property company. Defendants – a maze of corporations, partnerships and trusts we’ll call Westfield, Rouse and Simon – negotiated the purchase of the assets of Rodamco North America. Rodamco owned Head Acquisition, the general partner of Urban Shopping Centers. The same day the purchase agreement was signed, Westfield, Rouse and Simon entered into a separate agreement deciding who would get what among Rodamco’s assets, and the purchase each would pay, as well as entering into yet another agreement allocating Urban’s mall interests among themselves.

During the negotiations to buy Rodamco, Westfield, Rouse and Urban frequently shared with one another their individual attorneys’ legal advice as they attempted to work through the issues and structure the necessary agreements. But the trouble started later, when the plaintiffs – the minority limited partners of Urban – sued Westfield, Rouse and Simon for breach of fiduciary and contractual duties in connection with the acquisition.

In October 2008, the plaintiffs filed a motion to compel seeking production of all communications disclosed between Westfield, Rouse and Urban during the negotiations. The motion was granted on the grounds that the privilege had been waived. Eighteen months later, the plaintiffs filed a second motion, seeking all attorney-client communications in the possession of any defendant relating to the same subjects covered by the earlier documents, whether shared among the partners or not, arguing that the disclosure of some communications had worked a general subject-matter waiver. When the trial court granted that motion too, Westfield sought and received a “friendly contempt” order, and off to the Appellate Court the whole dispute went.

Illinois has recognized subject matter waiver in privilege law for nearly a century, but the defendants argued that such waivers were limited to litigation. They shared their attorneys’ advice in the course of a business negotiation. The Appellate Court disagreed: “[W]e find no reason to distinguish between a waiver occurring during the course of litigation or during a business negotiation.” In the alternative, the defendants argued that the waiver found by the trial court – which extended to 279 documents in all – was severely overbroad, but the Appellate Court held that the defendants had failed to specifically show which documents might still be protected.

Not surprisingly, the defendants have attracted heavyweight amicus support before the Supreme Court. The first brief, cosigned by the Illinois State Bar Association, the Association of Corporate Counsel and the Association of Corporate Counsel Chicago Chapter, argues that unless the Appellate Court’s decision is overturned, “Attorneys will have a difficult, if not impossible task of instructing clients about the risk of waiver.” The Bar Association points out that the Appellate Court’s decision is contrary to the letter and spirit of a number of different provisions of the Rules of Professional Conduct and their supporting commentary. For example, Comment 5 to Rule 1.6 recognizes that a lawyer may be impliedly authorized to make a disclosure that facilitates a satisfactory conclusion to a matter. Rule 1.6(b) permits limited disclosure in certain additional specified circumstances, such as where necessary to enable the affected persons to prevent or mitigate reasonably certain harm. Rule 2.3, entitled “Evaluation for Use by Third Persons,” specifically permits a lawyer to provide an evaluation of a matter for the use of someone other than the client, to the extent consistent with the representation – a rule which is arguably mooted by the Appellate Court’s decision. Finally, the decision is inconsistent with Federal Rule of Evidence 502, mirrored in Illinois’ Proposed Rule 502 – both of which limit subject matter waiver to court or agency litigation.

In a second amicus brief, the International Association of Defense Counsel and the Illinois Association of Defense Trial Counsel argue that the Appellate Court’s decision threatens the attorney-client relationship in a variety of circumstances beyond real estate negotiations, including settlement discussions, grand jury investigations, compliance with SEC filing requirements and patent disputes. This second group of amici urge the Court to squarely limit the doctrine of subject matter waiver to litigation alone, arguing that the rationale for the waiver – blocking one from using limited disclosure as a sword, while shielding related materials – is not applicable in most business transactional situations. If the Court is unwilling to limit the waiver, amici argue, the Court should adopt clear guidance for the lower courts to apply in determining the scope of the waiver.

Center Partners will be argued at the 9:00 am session of the Court on Tuesday, September 18, 2012. Join us back here tomorrow for a preview of the argument in Cooney v. Rossiter. 

• Print
• Comments
• Trackbacks
• Share Link

Late last month, the California Supreme Court raised the stakes for defense counsel negotiating settlements in multiple defendant cases, abolishing the common-law “release rule” in Leung v. Verdugo Hills Hospital [pdf]. Leung has gotten a good bit of attention in the news and the blogs, including stories in The Wall Street Journal, Findlaw, Plaintiff Magazine [pdf] and Law360.  

According to the “release rule,” a plaintiff’s settlement and release of one joint tortfeasor releases all nonsettling tortfeasors from any liability for the plaintiff’s economic damages. The traditional rationale for the rule has been that since defendant can receive only one compensation for the joint wrong, and each joint tortfeasor is responsible for the entire liability, any payment must necessarily satisfy the claim.

California law has developed two “work-arounds,” one statutory and one judge-made.

In 1957, the legislature enacted C.C.P. Section 877, which establishes a system of “good faith settlements.” Where the trial court determines the settlement to be in good faith – meaning in the reasonable ballpark of the settling defendant’s liability, taking into account that the defendant should pay less in settlement than after trial – the settlement reduces joint tortfeasors’ potential liability, but does not automatically release them. Once a good faith determination is made, nonsettling defendants are barred from later suing the settling defendant for contribution on the grounds that the settling defendant paid too little.

The judge-made work-around was even simpler: courts held that as long as the settlement agreement was phrased as a “covenant not to sue” rather than a “release” (a distinction the courts ultimately admitted was largely without a difference), non-settling joint tortfeasors would not be released.

Leung involved an infant who sustained severe brain damage from kernicterus, a condition in which excessive bilirubin builds up in a newborn’s body and migrates to the brain. Before trial, the plaintiffs settled with the pediatrician for $1 million – his policy limits. The pediatrician agreed to participate in the trial, and in return, the plaintiffs gave him a release. The pediatrician’s petition for a good faith determination under Section 877 was denied, but the parties went ahead with the settlement anyway. At trial, the jury returned a verdict against both the pediatrician and the hospital, awarding over $95 million in future medical expenses and lost future earnings. The trial court entered judgment against the hospital for 95% of all economic damages – the share of liability for the pediatrician and hospital – subject only to the $1 million settlement as a setoff. On appeal, the Court of Appeal applied the release rule and reversed the judgment with respect to economic damages, holding that the release of the pediatrician released the hospital as a matter of law.

The Supreme Court reversed the Court of Appeal: “In light of the unjust and inequitable results the common law release rule can bring about, as shown in this case, we hold that the rule is no longer to be followed in California." After considering various alternatives for a new rule, the Court held that a settlement by a joint tortfeasor, absent a finding of good faith, operates as a setoff against the ultimate judgment, but that the nonsettling tortfeasors retain the right to pursue the settling defendant for contribution.

What all this means as a practical matter is that Section 877 good faith hearings will likely be harder-fought than ever. Settling defendants will litigate the matter aggressively, since a good faith determination cuts off future satellite lawsuits for contribution. Counsel for settling defendants should give careful consideration to including in the settlement agreement a provision allowing the parties to abrogate the settlement if a good faith determination is denied. Nonsettling defendants will have every incentive to scrutinize the settlement carefully and challenge anything not in the Section 877 “ballpark.”

 

• Print
• Comments
• Trackbacks
• Share Link

Yesterday, the Illinois Supreme Court posted its docket for the upcoming September term [pdf]. Today, we begin a series of previews of civil cases scheduled to be argued this term, starting with the first civil argument on the docket: Hernandez v. Bernstein.

In 2005, the plaintiffs sued the defendants, his former attorneys, alleging that they negligently failed to advise him to sue other potentially liable parties in connection with his workers’ compensation claim. The defendants moved to dismiss, pointing out that the underlying claims the plaintiffs were relying on had been time-barred before the defendants began representing the plaintiffs. The trial court agreed and dismissed without prejudice. But the plaintiffs amended, alleging that the defendants should have advised them to sue the firm that represented plaintiffs while the underlying claims were still viable. The trial court refused to dismiss, but in April 2009, the plaintiffs voluntarily dismissed the lawsuit without prejudice.

Five months later, the plaintiffs were back, filing a one-count complaint against plaintiffs, alleging both that defendants should have advised them to sue their former lawyers, and the underlying time-barred claims. The trial court dismissed the suit as res judicata, and the plaintiffs appealed.

Hernandez revolves around two principal issues. Were the allegations arising from the underlying injury, on the one hand, and the allegations arising from the failure to sue the former lawyers, on the other, one claim or two? And even though the plaintiffs dismissed the first suit without prejudice, did that make the trial court’s dismissal final for res judicata purposes?

The distinction between a “claim” and a “theory” can occasionally be a somewhat slippery one, particularly for young lawyers and law students. The issue seems to be attracting some interest on the Court at the moment; in another case likely to be argued later in the year, Wilson v. Edward Hospital, the Court will consider whether actual and apparent agency are separate claims for res judicata purposes.

Before the Appellate Court, the defendants insisted that the case involved two separate “claims” – negligence in failing to sue the additional parties potentially responsible for the underlying injuries, and negligence in failing to sue the original lawyers. If true, this would have rendered the earlier order disposing of the allegations regarding other tortfeasors “final” for purposes of res judicata. But the Appellate Court disagreed, holding that only one “claim” was brought – legal negligence – and the dismissal order had merely allowed the plaintiffs to plead additional facts.

So if the earlier dismissal wasn’t final when it was entered, did it become final when the plaintiffs voluntarily dismissed the first suit? This question involves a debate between two of the Court’s earlier cases, Hudson v. City of Chicago, 228 Ill.2d 462 (2008) and Rein v. David A. Noyes & Co., 172 Ill.2d 325, 334 (1996).  Both Hudson and Rein hold that a voluntary dismissal can, under certain circumstances, have res judicata effect, and both will be central once again later in the year in Wilson. In Hernandez, the Appellate Court distinguished both Hudson and Rein, reading the earlier cases as relating to the effect of a dismissal on otherwise final earlier orders.

Hernandez will be argued at the 9:00 session of the Court on Thursday, September 13, 2012, and will likely be decided within two to four months.

Join us back here tomorrow for a preview of the argument in Center Partners, Ltd. v. Growth Head GP, LLC.

• Print
• Comments
• Trackbacks
• Share Link

As of September 1, 2012, service by e-mail of pleadings and other court documents is mandatory in Florida state court civil cases.Every pleading subsequent to the initial pleading and every other document filed in any court proceeding must be served on each party in accordance with these new rules, which are summarized below. The decision implementing these changes can be found here [pdf].

1. Designation of Email Addresses – At the outset of any new action, or by Sept. 1, 2012 for any pending action, all parties must file a designation of a primary email address, and up to two secondary email addresses (this can be other attorneys on the file, secretaries, paralegals, etc.), for service of all court documents. See Fla. R. Jud. Admin. 2.516(b)(1)(A).
    
2. Signature Block – ALL signature blocks should now also contain the attorney’s primary email address. See Fla. R. Jud. Admin. 2.516(b)(1)(A).
    
3. Signing Court Documents – Documents served on other parties by email may be signed electronically (with an “/s/”). However, the original document filed with the clerk must still be physically signed by the attorney. See Fla. R. Jud. Admin. 2.516(b)(1)(E)(iii).
    
4. Time Computation – Although service is complete upon sending the email, the rule specifically provides that for purposes of time computation, email service shall be treated as service by U.S. Mail. This provides the additional 5 days for service when computing deadlines. It appears that the only way to cut off the 5-day addition is to additionally serve by hand delivery or fax. See Fla. R. Jud. Admin. 2.516(b)(1)(D)(iii).
    
5. Filing – The Florida Supreme Court has also issued a new rule regarding e-filing, but this does not take effect until April 2013. For now, filing shall be as usual, but the e-service rule requires that filing be made either before service or immediately thereafter. See Fla. R. Jud. Admin. 2.516(d).
    
6. Return Error Message – If you receive a server response that the email was not delivered, you must immediately send another copy by email, or by U.S. Mail, fax or hand delivery. See Fla. R. Jud. Admin. 2.516(b)(1)(D)(ii).
    
7. Unusual Number of Parties – The rule provides an exception for cases with an unusually large number of parties. In such actions, the court may modify the service requirements of this rule on motion or on its own initiative in such a manner as may be found to be “just and reasonable.” See Fla. R. Jud. Admin. 2.516(c).
    
8. Non-Compliance – If an attorney does not file a designation of email addresses for service, service may still be made by email at the email address on record for that attorney with the Florida Bar. The Florida Bar has released a guide suggesting that if a party fails to serve documents by email after September 1, 2012, good practice should be to call the attorney and direct them to the new rule. 
    
9. E-Mail Format – The rule contains strict guidelines for the format of the email in which the document is served: Subject Line – The email subject must begin with: “SERVICE OF COURT DOCUMENT CASE NO. xx-xxxxx.” All caps are required. To: all primary and secondary emails as designated by each attorney of record. Body of Email – The body of the email must contain: 1) the court in which the case in pending; 2) the case number; 3) the name of each initial party on each side of the case; 4) the title of each document being served (more than one may be served in one email); and 5) the sender’s name and telephone number.
    
10. Attachments – The document being served must be attached in PDF format. The email and the attachment combined may NOT exceed 5 MB. Where the document exceeds 5 MB, it must be split up into separate files smaller than 5 MB, and sent in multiple emails, labeled sequentially in the subject line. The subject line of the string of emails should look like this: Subject: SERVICE OF COURT DOCUMENT CASE NO: xx-xxxxx (1 of 4)

• Print
• Comments
• Trackbacks
• Share Link

With the September term approaching and two new civil decisions being filed, coverage of the Illinois Supreme Court has picked up recently in the news and on the blogs.

At the Madison St. Clair Record, Bethany Krajelis had this story about competing amicus briefs filed with the Court in Fennell v. Illinois Central Railroad Co., an asbestos personal injury case involving issues of forum non conveniens. Briefs were filed by the Illinois Trial Lawyers Association and the Illinois Association of Defense Trial Counsel.

The Court’s ruling in Doe v. White, a case involving school administrators’ tort duties in connection with a teacher sexual abuse case, garnered considerable coverage. The Associated Press discussed the likely importance of the case in a wire report the day before the decision was released, with the story being picked up as far away as The Sacramento Bee. The following day, Christopher Wills of The AP reported on the decision, which he described as having “echoes of the Penn State scandal.” Wills’ report appeared in The Republic of Columbus, Indiana, The DeKalb Daily Chronicle, The St. Louis Post Dispatch, Quad-City Times, The Bloomington Pantagraph, The Muscatine Journal, Dubuque Telegraph-Herald, and The San Francisco Chronicle. Mark Walsh reported on the Doe decision at Education Week, noting that the underlying events had been the subject of an earlier suit against the defendants under Federal Title IX. Mary Schenk of the Champaign-Urbana News Gazette, Kurt Erickson of The Southern Illinoisan and Rich Egger at Tri-States Public Radio filed reports on White as well.

• Print
• Comments
• Trackbacks
• Share Link

In its other opinion this morning, the Illinois Supreme Court handed down its decision in Santiago v. E. W. Bliss Co. [pdf]

Santiago is a products liability case (see here for our preview of the opinion). Plaintiff Rogasciano Santiago allegedly entered the United States illegally in 1993, coming to Chicago. After working at two jobs under his true name, he invented an alias, "Juan Ortiz." For the next several years, whenever plaintiff used the Ortiz name, he claimed a false birth date. Plaintiff obtained a state-issued identification card as Ortiz, but he ultimately threw it out; eventually, he became a lawful resident alien. Nevertheless, plaintiff continued to use both identities, creating separate work, medical and financial histories for both. When plaintiff filed his lawsuit, he sued using the name he was known by at the workplace where he was injured -- Ortiz. When he finally admitted a year after filing suit that he was not Ortiz, but Santiago, the Circuit Court denied defendants' motion to dismiss, but certified a two part question: (1) did the trial court have to dismiss as a sanction for deliberately filing a complaint using a fictitious name; and (2) if not, could the plaintiff's second amended complaint, providing his real name, be dismissed as time barred on the grounds that it could not relate back to earlier complaints, which were null and void because they failed to identify plaintiff by his lawful name?

As in Doe v. White, a divided Court issued multiple opinions. Leading a four-Justice majority, Chief Justice Thomas L. Kilbride affirmed the Appellate Court in part and reversed in part. Relying upon its own opinion in Sander v. Dow Chemical Co. and the 11th Circuit's opinion in Zocaras v. Castro, the Court held that the trial court could dismiss as a sanction, but only after making strict findings: that there was a clear record of willful conduct, and that lesser sanctions were inadequate to remedy the harm to the judiciary system and the opposing party's interests. The Supreme Court majority vacated the trial court's order refusing to dismiss and remanded for application of its two-part test.

The majority reversed the Appellate Court's determination that the Second Amended Complaint was time-barred. The Court found that pursuant to the relevant statute, 735 ILCS 5/2-616(b), only two factors were needed for relation back to apply: (1) the original complaint was timely filed; and (2) the cause of action asserted in the amended complaint arose out of the same transaction or occurrence. Since the statute did not suggest that a complaint filed under a fictitious name was null and void per se, the Court held that there was no reason the relation back doctrine should not apply.

Justice Lloyd A. Karmeier specially concurred, mostly to address Justice Robert R. Thomas' dissent. Justice Karmeier argued that the common law cited by the dissent for the proposition that a complaint citing a fictitious name referred to fictitious parties, rather than "generally known as" names. Instead, Justice Karmeier concluded that plaintiff's misfiling might fall within the ambit of 735 ILCS 5/2-401, which permits amendment to correct misnomer. According to Justice Karmeier, "misnomer" means "nothing more than that a party is styled in other than his or her own name."

Justice Anne M. Burke specially concurred as well. According to Justice Burke, even if the common law had once treated complaints filed under a fictitious name as null and void, 735 ILCS 5/2-401(e) had abrogated that standard by permitting such filings with leave of court.

Justice Robert R. Thomas dissented, joined by Justice Rita B. Garman. Justice Thomas concluded that the plaintiff's Second Amended Complaint was clearly time-barred, making an answer to the first part of the certified question unnecessary.

According to Justice Thomas, the common law clearly regards complaints filed under a fictitious name as null and void, and since Section 401(e) does not validate such complaints when filed without permission, the common law rule must necessarily remain in effect. Since the original complaint was null and void, there was nothing for the Second Amended Complaint to relate back to, and the amended complaint was time-barred. Justice Thomas noted Justice Karmeier's argument that the common law rule applies only to entirely fictitious parties, rather than real parties using fictitious names, but argued that the cases made no such distinction. Policy supported barring the complaint as well, Justice Thomas concluded: "deliberately bringing suit under a false or fictitious name without leave of court constitutes a fraud upon the court in my opinion." Finally, the dissent squarely rejected Justice Karmeier's definition of "misnomer," arguing that the term meant "mistake," and thus, the right of amendment was unavailable to plaintiff.

• Print
• Comments
• Trackbacks
• Share Link

This morning, the Illinois Supreme Court handed down its decision in Doe v. White [pdf].

Doe arises from a teacher sexual abuse case. As explained in detail here, a grade school teacher was disciplined for sexual misconduct by his then-employer, the McLean County School District. Rather than reporting the matter to state authorities, McLean purportedly took a variety of steps to “pass” the teacher to another school district – Urbana – including negotiating a severance agreement which concealed the teacher’s misconduct, creating a falsely positive letter of recommendation and providing a materially false verification of employment form to Urbana. When the teacher abused students at Urbana, the victims and their parents sued the McLean School District and several administrators.

In a majority opinion written by Justice Anne M. Burke, a fractured court affirmed the Appellate Court’s finding that the defendants owed the injured students a tort duty, despite rejecting several grounds cited below. According to the majority, plaintiffs nowhere alleged any affirmative duty to warn Urbana of the teacher’s conduct. Nor did the plaintiffs adequately allege that defendants had a duty to report the teacher’s conduct to state authorities. The majority rejected the Appellate Court’s finding that a false letter of recommendation created a duty as a voluntary undertaking, noting that although the operative complaint alleged that the letter had been created, it never alleged that it had been sent.

Nevertheless, the Court held that a tort duty arose from the McLean administrators’ provision to Urbana of a verification of employment form stating that the teacher had worked for McLean for an entire school year. In fact, the teacher had been suspended twice during the year, and had left McLean before the end of the school year.

Applying the traditional multi-factor test for analyzing the existence of a tort duty, the Court held that it was reasonably foreseeable that the plaintiffs’ injuries would result from defendants’ misrepresentations. Nor was the likelihood of plaintiffs’ injuries remote, since a truthful disclosure of the teacher’s suspensions would likely have been a “red flag” warning Urbana to investigate further. Finally, imposing a duty to complete employment forms with reasonable care did not create an unreasonable burden, nor would any adverse consequences flow from imposing such a burden, according to the Court.

The majority addressed the remaining issues briefly. The public duty rule was inapplicable to the complaint, the Court held, because the plaintiffs neither alleged that the defendants had failed to protect them, or had any affirmative duty to do so. Finally, the majority concluded that the Tort Immunity Act did not immunize defendants’ allegedly willful and wanton conduct.

Doe drew a number of additional opinions. Justice Charles E. Freeman wrote a special concurrence. He emphasized his view that the duty created by the majority opinion was not one to affirmatively inform, but rather a duty to take reasonable care not to present inaccurate information about an individual who might pose a threat to third parties. Justice Freeman further commented that the majority should have taken Doe as a vehicle to finally decide whether the public duty rule remains a viable defense in Illinois, rather than merely concluding that it was inapplicable to the facts.

Justice Rita Garman filed an opinion concurring in part and dissenting in part. Although Justice Garman agreed that a tort duty existed, she concluded that the majority’s discussion of the Tort Immunity Act was at best premature. After a lengthy discussion of the relevant law, Justice Garman concluded that there were potentially viable arguments on which the Tort Immunity Act would apply.

Finally, Justice Lloyd A. Karmeier dissented, with Justice Mary Jane Theis joining. Noting that precedent had long held that there was no private right of action for failure to report under the Abused and Neglected Child Reporting Act, Justice Karmeier characterized the majority’s holding as fashioning a duty to report misconduct by inference – a duty to report facts which would lead the recipient of the report to find the truth. In view of the apparent conflict between the cases interpreting the Act and the majority’s holding, Justice Karmeier criticized the majority for not discussing the Reporting Act. Turning to the majority’s analysis of duty, Justice Karmeier concluded that no duty could arise since it was neither reasonable nor foreseeable that Urbana would rely on the form as the “sole indicator of [the teacher’s] character and his conduct prior to the time he was hired.” Justice Karmeier also concluded that plaintiffs’ injuries were not sufficiently likely to justify imposing a duty.

According to Justice Karmeier, the public duty rule was squarely implicated by the allegations, given plaintiffs’ allegation that defendants breached a duty to protect them. As a result, he argued that the Court should have decided whether the rule remained viable in Illinois. Finally, like Justice Garman, Justice Karmeier disputed the majority’s conclusions that the Tort Immunity Act could not immunize the defendants’ conduct.

• Print
• Comments
• Trackbacks
• Share Link

 

Of course, stage names are commonplace in Hollywood. Pen names are relatively common among authors as well.

But can you sue under a pen name? Well – only for a very good reason. Nearly all states have a “fictitious names” statute. In Illinois, the statute is 735 ILCS 5/2-401, and it says that unless a party name is a “misnomer” – an honest mistake – you can only sue under a fictitious name if you file a motion and demonstrate good cause.

So what happens if you skip the motion and sue under a false name? That’s the issue the Illinois Supreme Court will address tomorrow morning in Santiago v. E. W. Bliss Company [pdf].

The plaintiff in Santiago was allegedly injured working with a punch press. In May 2008, he sued a number of defendants who had manufactured the components of the machine. In the complaint, the plaintiff was identified as "Juan Ortiz." Six months later, he filed a First Amended Complaint, again naming the plaintiff as Juan Ortiz. On at least three occasions, plaintiff signed verifications for interrogatory responses as Juan Ortiz.

But the problem was, plaintiff wasn't Juan Ortiz. In May 2009 -- a full year after filing suit -- plaintiff was deposed, and conceded that his name was Rogasciano Santiago. The plaintiff testified that he had held several jobs under each name. He used a false birth date as Juan Ortiz and had a state-issued ID card in that name. On the other hand, he had a driving permit as Rogasciano Santiago.

In the weeks following the deposition, Santiago moved for leave of court to file a Second Amended Complaint; the proposed SAC was identical to his First Amended Complaint, but for substituting his real name. Plaintiff's motion was granted in September 2009.

Defendant moved to dismiss on a variety of grounds, alleging that the original complaint was a fraud on the court, or that the original complaint was null and void, and thus the plaintiff's Second Amended Complaint -- filed after the expiration of the statute of limitations -- was time-barred. The court denied the motion, but certified the question of whether (1) under the circumstances, the plaintiff's complaint had to be dismissed with prejudice as a sanction; or (2) whether the complaint could not relate back to the initial filing, and thus was time-barred.

The Appellate Court wrote that the effect of intentionally filing suit under a false name was a question of first impression.

One by one, the Court reviewed every possible grounds for sanctioning plaintiff. First, sanctions could not be justified as contempt. Plaintiff had not failed to comply with an order and the court's order contained no purge condition, so civil contempt was out. Nor was criminal contempt possible, since the mere fact of intentionally filing under a false name did not subvert the court's authority or the administration of justice.

The sanctions could be justified under Supreme Court Rule 137, the Court found. Rule 137 is essentially *Illinois' Rule 11 -- the attorney's signature on a pleading constitutes a warranty that the pleading is well founded in fact and law. The Court held that sanctions could be justified under Rule 137, and remanded for determination of whether the plaintiff's attorney knew his real name. The plaintiff's conduct violated Section 2-401 of the Code of Civil Procedure as well, the