Illinois Supreme Court Agrees to Decide Complex Landfill Dispute

Can the Illinois state courts order mandatory cleanups of older landfills? The Illinois Supreme Court agreed to decide that issue late last month, allowing a petition for leave to appeal in People ex rel. Madigan v. J. T. Einoder, Inc.

Einoder involves a husband and wife and two corporations which they control. The landfill site was held in a land trust for the benefit of one of the corporate defendants, which was wholly owned by the husband. The other corporate defendant - owned 90% by the wife and 10% by the husband - leased equipment and operators to the first corporation for use at the site.

In 1995, two years after the site was purchased, the state Environmental Protection Agency received anonymous reports of open dumping there. An inspector visited and issued a citation for dumping without a permit. Additional citations were issued in 1996 and 1997. The Agency conducted a multi-hour inspection in 1998, and subsequently, another citation was issued for alleged dumping and disposal of waste without a permit.

The Agency initially threatened suit in 1998, but agreed to dig test pits first to determine the content of material at the site. After sporadic inspections in 1999 and 2000 revealed an increasing amount of "clean" construction and demolition debris ("CCDD") above the grade of the surrounding land, the Attorney General filed suit in 2000, alleging open dumping, unpermitted waste disposal operations, development and operation of a solid waste management site without a permit, and various other violations.

Following a bench trial, the Circuit Court found for the State on all counts relating to waste disposal and operation of a waste disposal site without a permit, but directed a verdict for the defendants on various more minor charges. The court then proceeded to the remedies portion of the bifurcated trial, and ultimately issued a permanent injunction requiring the defendants to remove the above-grade waste pile and undertake groundwater testing. The court also imposed substantial fines against both corporations and both individuals.

The Appellate Court affirmed the trial court. The court began by rejecting the defendants' claim that the trial court lacked jurisdiction over the agency's complaint because the agency had not properly notified the defendants of its intent to sue the individuals in their individual capacities. The court found that the notice requirements were not jurisdictional, and given the extensive contact between the agency and the defendants leading up to the suit, the defendants could not show prejudice.

The Circuit Court's finding that defendants had operated a waste disposal site without a permit depended on a finding that defendants' CCDD didn't constitute "waste." The statute provided that CCDD was exempt from permit requirements (to the degree Federal law didn't provide differently) only when "used as fill materials below grade." The defendants attempted to avoid this language by pointing to three excerpts of testimony, but the Appellate Court concluded that two statements had been taken out of context, and the third snippet of testimony from the bench trial was contrary not only to the plain language of the statute, but even to the remainder of that witness' testimony. The defendants challenged the finding of personal liability against the wife, but the Appellate Court found sufficient evidence to support the court's finding that the wife had been involved in the operations.

The court then turned to what is likely to be the central issue before the Supreme Court: the availability of mandatory injunctive relief. The parties agreed that the pre-2004 form of the Environmental Protection Act didn't authorize such relief, while the post-2004 form of the Act did authorize it. So the question was whether the 2004 amendments applied retroactively - a simple question of statutory construction. Although Section 42(e) of the Act, the provision directly at issue, didn't indicate a temporal reach, the Court concluded that several other clauses of the 2004 Act suggested that the legislature intended the statute to apply retroactively: the Act was intended to "restore, protect and enhance" Illinois' environment, and to require that "adverse effects" be mediated by "those who cause them." In so holding, the court followed the decision of the Second District in State Oil Co. v. People.

The Court concluded by upholding the fines assessed against the corporate and individual defendants. Sufficient evidence supported the view that the defendants had derived economic benefit from their violations, the Court found, and the defendants' continued operations for five years after receiving their initial violation notices suggested that severe penalties were needed. Justice Mary Anne Mason dissented solely from the portion of the opinion holding that the 2004 Act applied retroactively.

We expect Einoder to be decided in six to eight months.

Image courtesy of Flickr by Ell Brown.

Illinois Supreme Court to Decide If Innocent Insured Doctrine Applies to Renewal Application

The concept behind the innocent insured doctrine is simple: where there are multiple insureds on an insurance policy, a breach by one does not necessarily eliminate coverage for those not personally involved in the breach. But what if the breach occurs in conjunction with a renewal application? That's the question the Illinois Supreme Court agreed to decide late last month in Illinois State Bar Association Mutual Insurance Co. v. Law Office of Tuzzolino & Terpinas.

The case began when a former client filed a malpractice suit against one of the partners. The attorney persuaded the former client to drop the suit and instead retain the attorney to sue the attorney who handled a related bankruptcy. That suit was dismissed, however. When the client discovered the dismissal, the attorney made an offer to settle the malpractice claim, but the offer was rejected.

Not long after, the same partner filed a renewal form with the firm's malpractice insurance carrier. In response to a question on the form, "[h]as any member of the firm become aware of a past or present circumstance[s] which may give rise to a claim that has not been reported," the attorney answered "no." The attorney signed the form, but the second partner was not required to do so.

A month after completion of the renewal form, the second partner received a lien letter from the attorney hired to represent the first partner in the impending malpractice claims. The second partner forwarded the information to the insurer. He alleges that this was the first time he was aware of any potential claims arising out of his partner's representation of the client.

The insurer filed suit seeking rescission of the policy with respect to both partners and the firm, arguing that the first partner's failure to disclose the potential claim voided the policy ab initio. The second partner counterclaimed for a declaratory judgment that he was covered by the policy in connection with the client's suit.

The plaintiff moved for summary judgment on all counts against all defendants.   The trial court granted the motion, finding that the insurance contract was indivisible, and could not be rescinded with respect to one partner only. The court accordingly held that the insurer had no obligation to defend the firm or the innocent partner. The innocent partner and the firm appealed.

The Appellate Court reversed.

The attorney argued that the innocent insured clause contained in the policy preserved coverage. The court pointed out, however, that the attorney was ignoring the distinction between a misrepresentation during the life of the policy and one in the application process. Therefore, the question was not whether the language of the policy covered the innocent partner, but rather whether the common law innocent insured doctrine permitted the policy to remain in place as to him.

The common law innocent insured doctrine applies when two or more insureds maintain a policy and one commits an act that would normally void the policy but a "reasonable person would not understand that the wrongdoing of [the] coinsured would prevent recovery." The doctrine is often applied, for example, where one of multiple owners sets fire to a property without his or her co-owner's knowledge.

The Appellate Court rejected the insurer's claim that the first partner's misrepresentation rendered the policy void ab initio. In fact, the Court held, the policy was voidable, not void. For that reason, the Court chose to follow Economy Fire & Casualty Co. v. WarrenIn Warren, a husband and wife co-owned a house destroyed by fire. The couple settled their claim with their homeowner's policy insurer. When it became known that the wife has set the fire, the insurer tried to rescind the settlement agreement on grounds of fraud. The Court applied the innocent insured doctrine to hold that the husband - who claimed to have no knowledge of his wife's actions - was entitled to retain half of the settlement.

The Court further held that Section 154 of the Insurance Code (215 ILCS 5/154) - which provides that no misrepresentation or false warranty in an insurance application can defeat coverage unless material or made with an intent to deceive - supported application of the common law innocent insured doctrine.

Finally, the Court held that public policy favored application of the doctrine, since allowing rescission would mean that the innocent party had no coverage not only in connection with the plaintiff's claim, but in connection with any claim during the policy period.

We expect Tuzzolino & Terpinas to be decided in six to eight months.

Image courtesy of Flickr by Alan Cleaver.

Illinois Supreme Court to Decide Whether Self-Critical Analysis Privilege Exists in Illinois

We continue our previews of the civil cases accepted for review in the closing days of the Illinois Supreme Court’s March term with Harris v. One Hope United, Inc. In Harris, the First District declined to recognize the existence of a self-critical analysis privilege in Illinois, calling the recognition of new common law privileges “a matter best left to the legislature.”

The self-critical analysis privilege is a relatively recent innovation in the common law, as privileges go. The privilege seems to have been first recognized by the federal district court in Washington, D.C. in a 1970 medical malpractice case, Bredice v. Doctors Hospital, Inc. Since that time, a few jurisdictions have adopted narrow versions of the privilege. As a general rule, courts require proponents of the privilege to prove at least three elements: (1) the information sought comes from a critical self-analysis undertaken by the party seeking protection; (2) the public has a strong interest in preserving the free flow of the type of information sought; and (3) the information must be of the type whose flow would be curtailed if discovery were allowed. Some courts have added a fourth element: the document was prepared with the expectation that it be kept confidential, and it has in fact been kept confidential.

The principal defendant in Harris is a private contractor which works with the state Department of Children and Family Services providing services to troubled families. DCFS received a complaint in late 2009 alleging neglect and/or abuse of a small child. The DCFS assigned the matter to the defendant, which commenced an investigation. Two months later, the child was hospitalized, and upon release, was sent to live with her aunt. The child was soon returned to her mother, however, and not long after, was accidentally drowned when her mother left her unattended.

The plaintiff – the Public Guardian of Cook County - filed a wrongful death suit against the defendant and various others. The plaintiff alleged that the defendant was negligent in permitting the child to be returned to her mother, given the mother’s history and failure to complete parenting classes.

During a deposition, the executive director of the defendant testified that the defendant maintains a “continuous quality review department” which investigates cases and prepares reports. The reports evaluate the quality of the defendant’s services, identify “gaps in service delivery” and assess outcomes. The defendant refused to produce the report, the plaintiff moved to compel production, and the defendant opposed, citing the self-critical analysis privilege.

The trial court found that the privilege did not apply. At defendant’s request, the trial court held defendant in “friendly contempt” and fined defendant $1 per day pending production of the report. The defendant then appealed the contempt order.

The Appellate Court began by observing that nothing in the Illinois Rules of Evidence suggests the existence of a self-critical analysis privilege. Nor do any court rules support such a privilege claim. The court observed that what case law there was in Illinois on self-critical analysis had consistently refused to recognize the privilege.

The defendant argued that the privilege arises from the “intersect[ion]” of statute, public policy, discovery rules and evidence. Recognizing the privilege would further the purposes of legislation like the Child Death Review Team Act (20 ILCS 515/1), defendant suggested, but the Court concluded that the Act actually favors disclosure of the circumstances of an accidental death in hopes of preventing future tragedies. Defendant pointed out that the Medical Studies Act (735 ILCS 5/8-2101) specifically allows withholding of internal quality control documents by hospitals, but the Court declined to apply the Act by analogy to the defendant’s situation.

Although the court affirmed the order compelling production of the report, it recognized that the defendant had shown “no disdain” for the trial court, and had merely refused to comply “in good faith to secure appellate interpretation of this rather novel issue.” Accordingly, the court vacated the contempt finding.

Given the stakes, we should see multiple amicus curiae briefs before the Supreme Court. The case is likely to be argued in the fall, with a decision near the end of the year.

Image courtesy of Flickr by j3net.

Illinois Supreme Court to Clarify Mailing Standards for Notice of Appeal

The Illinois Supreme Court has decided a number of cases in recent years involving choices between form and substance or strict and substantial compliance. In most (but not all) cases, a majority of the Justices have sided with substantial compliance and proceeded to the merits. The Court took one more such case as the March term wound down. Huber v. American Accounting Association, a decision from the Fourth District, poses a question of considerable interest to appellate lawyers: what proof of timely filing is required when a notice of appeal is mailed before the due date, but not received by the clerk until after?

The defendant association incorporated in 1935. In 1996, the State dissolved the Association for failure to file an annual report. Six years later, the Association incorporated again, but the new entity appears to have been a shell; the Association deposited all dues paid by members into the 1935 Association's account, and no assets were merged. In June 2011, the Association sought to voluntarily dissolve the 2002 entity and reinstate the 1935 entity. Both requests were granted.

Two months later, the plaintiff petitioned to dissolve the 1935 entity and vacate the dissolution of the 2002 entity, and then to judicially dissolve the 2002 Association for misconduct. The Association moved to dismiss, arguing (1) that there was no jurisdiction over the long-dissolved 2002 entity; (2) the plaintiff had no standing, having never been a member of the 2002 Association; (3) plaintiff was not entitled to any relief against the 1935 Association, having alleged no misconduct by the earlier entity; and (4) plaintiff failed to make the necessary showings for a preliminary injunction. The trial court granted the motion to dismiss.

The plaintiff appealed, but the defendant raised a preliminary issue: whether the plaintiff had timely filed a Notice of Appeal sufficient to give the Appellate Court jurisdiction over the appeal.

The judgment in Huber was filed on March 6. Rule 303(a) provides that a notice of appeal has to be filed within 30 days of the entry of the judgment or final order appealed from.

But Illinois also has a mailbox rule of sorts. According to Rule 373:

If received after the due date, the time of mailing, or the time of delivery to a third-party commercial carrier for delivery to the clerk within three business days, shall be deemed the time of filing. Proof of mailing or delivery to a third-party commercial carrier shall be as provided in Rule 12(b)(3).

Rule 12(b)(3) provides that proof of service consists of a “certificate of the attorney, or affidavit of a person other than the attorney, who deposited the document in the mail or delivered the document to a third-party commercial carrier, stating the time and place of mailing or delivery, the complete address which appeared on the envelope or package, and the fact that proper postage or the delivery charge was prepaid.”

The clerk received the plaintiff’s Notice of Appeal on April 9, thirty-four days after judgment. The envelope in which the NOA arrived clearly showed a postmark date of April 3 – twenty-seven days after entry of judgment, three days before the deadline.

What the NOA didn’t have, however, was either of the required proofs from Rule 12(b)(3) – an attorney’s certificate or a non-attorney affidavit.

So: is a NOA clearly mailed before the deadline nevertheless untimely because it didn’t prove mailing in the proper way?

The Appellate Court districts are split on the issue. The Second District held in People v. Hansen that a clearly legible postmark was good enough, notwithstanding the lack of an appropriate proof of service. The First (People v. Tlatenchi) and Fourth (People v. Smith and People v. Blalock)Districts have held that an attorney certificate or affidavit is necessary in every case.

The Huber Court sided with the Fourth District, following Blalock. Because the plaintiff didn't comply with Rule 12(b)(3), the limited mailbox rule in Rule 373 didn’t apply. "[P]roof of a postmarked envelope contained within the record does not correct this defect," the Court wrote, "nor does it serve as a substitute for the omitted affidavit." The plaintiff's notice of appeal was accordingly untimely, and the appeal was dismissed.

We expect a decision in Huber in eight to twelve months.

Image courtesy of Flickr by WallyGrom.

Waiting for Iskanian, Part 4: Friends of the Defendant

 As we await Thursday's oral argument before the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, our series of preview posts continues. This time in Part 4, we take a look at the seven amicus curiae briefs filed in support of the defendant. To read all the briefs in Iskanian, check out the National Chamber Litigation Center’s page on the case here.

Not surprisingly given the recent cases, reading the defense amici is a much different experience than reviewing the briefs filed in support of the plaintiff. The plaintiff-side briefs tend to be somewhat defensive in tone, focused on limiting Discover Bank and Concepcion, differentiating Gentry or suggesting reasons why perhaps the ultimate decision in Iskanian could wind up much ado about little (a Supreme Court decision founded on waiver). The defense amici, on the other hand, are by and large on the offensive, trying to broaden the battlefield and bring as much previous law as possible into question in the wake of Concepcion.

We begin with the brief of the Pacific Legal Foundation. The PLF's Free Enterprise project "defends the freedom of contract, including the right of parties to agree by contract to the process for resolving disputes that might arise between them." While other parts of Gentry might survive, the passages setting "categorical, per se requirements specific to arbitration clauses" necessarily had to fall in the wake of Concepcion, the PLF argues. Indeed, Armendariz itself was on "particularly shaky ground" according to the PLF. Nor was Gentry a mere distant cousin of the departed rule of Discover Bank, amicus argued: "Iskanian's effort to distance Gentry from Discover Bank could succeed only with the exercise of willful blindness." The PLF challenged the United Policyholders’ assertion that arbitration clauses were occasionally upheld between Gentry and Concepcion, writing that its Westlaw search had revealed eight decisions during those years striking arbitration clauses against only one where a clause survived. The California courts have "express[ed] their distrust and disapproval of arbitration" in a series of cases since 1984, the PLF writes, "only to have the United States Supreme Court step in to reverse." The time has come for California courts "to make their peace with the Supremacy Clause."

Amicus the Association of Corporate Counsel focused its brief on the practical effects of decisions giving effect to the FAA's national policy in favor of arbitration. In-house counsel use arbitration as a "basic tool to resolve disputes" quickly and inexpensively, amicus argued. Empirical studies confirm the efficiencies of arbitration. According to one study, arbitrations tend to close about 33 percent faster than litigation in employment discrimination cases; another study found that arbitration cases wrap up twice as fast as litigation. Yet another study of employment cases - this time excluding discrimination cases from the database - concluded that arbitration cases ended three times as fast as courtroom litigation. Studies reflect similarly enormous savings in fees and costs expended by litigants. Reversal would "severely burden in-house counsel and their companies," amicus wrote. At minimum, it would likely be necessary to review contracts applying in California. Worse yet, other jurisdictions might be tempted to follow suit in looking for ways around the imperative of the FAA.

Amici The National Retail Federation and Rent-A-Center, Inc. took aim at the central issue in Iskanian – the fate of Gentry in the wake of Concepcion. Concepcion’s commands are “clear and far-reaching,” the NRF amici write. Gentry cannot be reconciled with Concepcion for several reasons. First, Gentry repeatedly invokes Discover Bank. Second, as other amici have pointed out, the Gentry rule necessarily involves imposing class arbitration on a party which never agreed to it, directly contrary to Concepcion. The NRF amici end their brief by reviewing the ultimate fate at the U.S. Supreme Court of recent cases in which state courts relied on public policy to refuse to enforce arbitration clauses: in each case, the state court's decision was reversed.

Amici the California Chamber of Commerce and the Civil Justice Association of California make similar arguments that Gentry cannot survive Concepcion. According to amici, post-Concepcion decisions from the Supreme Court and the Ninth Circuit such as CompuCredit Corp. v. Greenwood, Marmet Health Care Center, Inc. v. Brown, Kilgore v. KeyBank, N.A. and Coneff v. AT&T Corp. confirm that Concepcion is meant to be read broadly.

Amicus the Employers Group is “the nation’s oldest and largest human resources management association, representing nearly 5,000 companies.” The Employers Group challenges one of the central premises argued by the plaintiff and several plaintiff’s amici – the notion that PAGA is a public-benefit statute. “Civil penalties paid by an employer under the PAGA do not inure to the benefit of the public,” amicus writes; at most, they benefit other aggrieved parties. In that sense, Iskanian’s situation was similar to Kilgore v. KeyBank, N.A., where the Ninth Circuit declined to apply California’s Broughton/Cruz rule – which holds that claims for broad injunctive relief benefiting the general public cannot be arbitrated – on the grounds that the relief sought there did not benefit the general public. (And in case you’re wondering, a number of courts have held in the last few years that Concepcion dooms Broughton/Cruz too.)

According to amicus, the theme plaintiff and his amici return to again and again – that Discover Bank was about unconscionability while Gentry was about unwaivable statutory rights – is a “distinction without a difference,” since both derive from the same public policy rationale. Not only can Gentry not survive, amicus concludes – Iskanian would be a good opportunity for the Court to revisit Armendariz and Ralphs Grocery too.

Finally, the Employers Group offers an interesting response to the plaintiff’s-side argument that PAGA suits must by definition be representative actions. By taking that position, amicus argues, the plaintiff is restricting the scope and flexibility of the statute, since if the plaintiff were correct, the Labor Commissioner cannot seek PAGA penalties on behalf of a single employee.

Amici the Retail Litigation Center, Inc. and the California Retailers Association offer details on the progeny of California’s major arbitration decisions. Armendariz, for example, has spawned 25 published Court of Appeal opinions, at least 6 published opinions from the Ninth Circuit and many more unpublished Court of Appeal opinions and trial court orders. Even after Concepcion, several California courts have refused to enforce arbitration clauses; amici point to cases such as Ajamian v. CantoC02E, L.P., where the Court of Appeal “dismissed Concepcion in a footnote,” and Franco v. Arakelian Enterprises, Inc., where the court asserted that Gentry remained viable because most wage-and-hour claims involve too little money to justify the expense of arbitration. (Not surprisingly in the wake of Italian Colors, the California Supreme Court has issued a grant-and-hold in Franco, awaiting Iskanian.)

Amici turn then to the plaintiff’s “effective vindication” theory. The notion that “unwaivable rights” are enough to overcome the FAA was rejected more than twenty years ago in Gilmer v. Interstate/Johnson Lane Corp. Amici point out that the construction advocated by the plaintiff’s side necessarily creates two separate proceedings out of a single dispute – wage and hour claims in arbitration, and the purportedly non-arbitrable PAGA claims in court. The amici conclude by arguing that the United States Supreme Court has repeatedly rejected the notion – still heard today – that arbitration is somehow an inferior forum for certain types of claims.

Amicus the California New Car Dealers Association points out that while the United States Supreme Court has occasionally discussed “effective vindication” – always in dicta – in relation to federal statutory rights, it has never actually refused to enforce an arbitration clause based upon the “effective vindication” theory. Amicus argues that it was the California Supreme Court in Broughton that applied the theory with respect to state-law rights, disregarding the theoretical basis for it – the need to reconcile conflicting Congressional mandates. Broughton led straight to Armendariz,and then to Discover Bank, Gentry and the original decision in Sonic-Calabasas. Each of these decisions drew dissents arguing that the Court was straying further from the FAA and the U.S. Supreme Court’s guidance, with Justice Chin writing in Broughton, Cruz and Sonic-Calabasas, and Justice Baxter writing in Gentry. According to the amicus, the dissenters have now been vindicated by Concepcion, which rejected the public policy rationale which lies at the foundation of both Discover Bank and Gentry. The New Car Dealers’ brief concludes by pointing out that due process-based protections in the text of the FAA requiring that parties be granted notice and an opportunity to present relevant and material evidence and argument before neutral arbitrators obviate any need for states to superimpose additional limits on arbitration in pursuit of their own public policies.

Join us back here soon for the conclusion of our five part series: Waiting for Iskanian, Part 5: The Parties’ Briefs.

Image courtesy of Flickr by J. Saper.

Waiting for Iskanian, Part 3 - Friends of the Plaintiff

As we await Thursday's oral argument before the California Supreme Court in Iskanian v. CLS Transportation of Los Angeles, in Part 3 of our series of posts, we'll take a look at the amici curiae supporting plaintiffs. To read all the briefs in Iskanian, both merits and amici, check out the National Chamber Litigation Center’s page on the case here.

The California Rural Legal Assistance Foundation describes itself as a "non-profit legal services provider that represents low income families in rural California and engages in regulatory and legislative advocacy to promote the interests of low wage workers." The CRLAF’s brief argues that the FAA compels enforcement of arbitration clauses only insofar as they relate to claims arising from the employment contract itself. While Iskanian has asserted a number of different causes of action arising from his employment, the CRLAF argues, his claim under the Private Attorney General Act is not one of them. The PAGA claim is the result of a delegation by the State of California of its sovereign power to enforce the Labor Code and collect civil penalties for violations.  Since the FAA is limited to claims arising under the contract, PAGA claims cannot be forced into arbitration. Besides, Civil Code § 3513 specifically bars waiver of laws established for a public reason.

The argument under Section 3513 is interesting, but it seems to me ultimately doesn't hold water. Substantive rights are (in at least some cases) unwaivable. For example, it’s unlikely that a court would enforce an employment contract calling for payment of less than the minimum wage. But there's a material difference between such a substantive claim for relief and a right to sue. Of course a right to sue is waivable: one waives it by not suing. Why, then, shouldn't an employee be free to trade away for value that which he or she can surrender for nothing?

The Sandquist amicus brief was sponsored by the named plaintiff in a pending class action under the Fair Employment and Housing Act, as well as a group of nonprofit public interest associations -- the AARP, which advocates primarily for older workers and senior citizens; Equal Rights Advocates, which is "dedicated to protecting and expanding economic justice and equal opportunities for women and girls"; and the Impact Fund, which funds, trains and acts as co-counsel to public interest litigators.

The Sandquist brief focuses on the impact of authorizing class waivers on FEHA enforcement. Class waivers would mean "not only that plaintiffs . . . will be unable to vindicate their own FEHA rights, but also that they cannot fulfill the role entrusted to them under the statute" of acting as private attorneys general, amici argue.

The plaintiffs' amicus briefs were filed several months before Italian Colors squarely took on the effective vindication theory, so understandably, many place significant emphasis on Mitsubishi and what other support arguably existed for the theory. The Sandquist amici quote Judge Richard Posner's comment in Carnegie v. Household Int'l, Inc.: "The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30." According to the Sandquist group, the effective vindication theory sweeps even more broadly than merely outlawing straightforward waivers of substantive statutory rights. To be permissible, "arbitration must be structured in a manner that enables the parties to 'effectively' vindicate their statutory rights." Far from being workarounds from the pro-arbitration mandate of the FAA, Armendariz and Gentry were examples of the California Supreme Court "following the U.S. Supreme Court's lead," the Sandquist amici argue.

There's less than meets the eye to Concepcion, the Sandquist amici insistBecause the arbitration provisions in Concepcion were "highly favorable to consumers," the agreement probably would have been enforceable under the effective vindication theory. After all, the amici argue, the question presented in Concepcion specifically acknowledged that class arbitration was not necessary to effective vindication there.

Nor were Discover Bank and Gentry closely related, the brief continues. First, Discover Bank is about unconscionability; Gentry is about effective vindication. Second, Discover Bank adopted a blanket rule barring class waivers in consumer cases, while Gentry requires a fact-specific balancing test.

Like the Sandquist amici, the Consumer Attorneys of California focuses on trying to limit Concepcion and Discover Bank and preserve Gentry. Discover Bank, the CAOC argues, created a categorical ban on class action waivers in consumer contracts, while Gentry revolved around procedural unconscionability. Moreover, Gentry involved a challenge to an entire agreement to arbitrate, where Concepcion only addressed a class arbitration waiver clause. The mere fact that Concepcion eliminated the Discover Bank rule does not mean that "generally applicable state law unconscionability defenses" are preempted "across the board." Rather, the Supreme Court was intending to mandate a "case-by-case approach" to unconscionability and other state-law defenses. The California unconscionability doctrine "has numerous variables giving rise to near infinite variations . . . that were neither discussed nor mentioned in Concepcion," the CAOC claims; accordingly, "Concepcion is limited to the facts in that one case."

The United Policyholders amicus brief addresses a different topic: the Court of Appeal's finding that the defendants in Iskanian hadn't waived any right to arbitrate. UP argues that whether or not an arbitration clause has been waived is an issue of California law, regardless of whether the contract falls within the purview of the FAA (this raises the interesting question of whether a state's waiver law could be preempted by the FAA if it were interpreted in such a way as to become an obstacle to the accomplishment of Congress' purposes). The Court of Appeal erred at the outset, UP argues, by declining to find waiver based on "futility," since California doesn't recognize futility as a defense to waiver. Indeed, even if federal law applied to the waiver question, the UP argues, the Court of Appeal got it wrong, since Federal waiver law allegedly limits futility to situations where a new case has created a right which didn’t exist previously. Since certain courts had enforced arbitration clauses before Concepcion, the defendants' motion to compel arbitration in Iskanian wouldn't have been futile. A separate amicus brief filed by the California Association of Public Insurance Adjusters raises similar arguments.

Finally, the Service Employees International Union and the California Employment Lawyers Association filed a brief in support of the plaintiff. The SEIU/CELA brief focuses on yet another aspect of the case: the D.R. Horton decision and the supposed conflict between a class waiver in employment law and the National Labor Relations Act. According to the amici, the proposition that "the filing and pursuit of employment claims on a joint, class, representative, or other concerted action basis constitutes protected 'concerted' activity under federal labor law" is "unassailable." (We'll see about that once we reach the respondent's brief.) Citing D.R. Horton, they argue that the right to engage in collective action must include "collective legal action" - presumably regardless of what agreements individual employees enter into. The "CLS Policy/Agreement by its express terms prohibits its employees from engaging in concerted legal action," the amici write. "That prohibition violates federal labor law. End of story." Concepcion was distinguishable, the amici write, because "[n]o federal statutory rights were at issue." 

Even if a conflict existed between the FAA's preference for arbitration and the purported right to engage in concerted legal activity, the amici argue, the FAA would have to give way since "the Section 7 right is far more central to national labor policy than any preference for 'streamlined' arbitration is to the FAA."

Of course, the legal landscape has continued to develop since the SEIU/CELA brief was filed. First, the Supreme Court handed down Italian Colors, where "federal statutory rights" were squarely at issue, and most recently, the Fifth Circuit reversed the NLRB's decision in D.R. Horton.

Join us back here shortly for Waiting for Iskanian, Part 4: Friends of the Defendant.

Image courtesy of Flickr by Steve Slater.

Illinois Supreme Court Defines "Good Samaritan" in Medical Malpractice Case

 

Nearly every state has some variation on a "Good Samaritan" law. In Illinois, the statute says that any licensed medical professional "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." 745 ILCS 49/25.

So what does "without fee" mean? The patient didn't get a bill -- or the doctor wasn't paid at all?

The Illinois Supreme Court answered that interesting question on Thursday morning, unanimously holding in Home Star Bank and Financial Services v. Emergency Care and Health Organization, Ltd. that an emergency room physician who responded to a Code Blue emergency elsewhere in the hospital was not entitled to immunity under the Illinois Good Samaritan Act.

Home Star began nearly thirteen years ago, when a patient was admitted first to the hospital emergency room, and later transferred to the intensive care unit. Three days after he was admitted, the patient began having labored breathing and trouble swallowing. A "Code Blue" was called in the early morning hours, and the defendant physician, who was working in the emergency room at the time, responded and attempted to intubate the patient. The patient suffered severe and permanent brain injuries, and the plaintiffs sued the physician and his employer physicians group for malpractice.

The physician moved for summary judgment, arguing that the Good Samaritan law applied, since the patient was not billed for the physician's services. The plaintiff opposed summary judgment, arguing that whether or not the patient was billed, the doctor didn't respond to the Code Blue as a volunteer - he was doing his job.

The evidence was all over the place. According to the independent contractor agreement between the doctor and the physicians group, he "may render service to any patient" in "dire emergencies," when no emergency room patient required immediate assistance. The hospital's "Clinical Operations" policy stated that ER physicians "respond[ ] to all Code Blues in the hospital." The nursing supervisor testified that in her experience, the emergency room physician typically responded to Code Blues at night. The defendant physician agreed that the ER physician on duty "would be expected to respond to a Code Blue." The CEO of the physicians group, on the other hand, testified that responding to Code Blues was not "an inherent prescribed part of [the physician's] work," and that he would respond "in the matter a good samaritan would respond to that dire emergency." The nurse anesthetist who assisted at the patient's Code Blue testified that in her experience, the emergency room physician was "usually there first" at nighttime Code Blues. The patient's laryngologist testified that his understanding was that an in-house ER physician would respond to Code Blues. The CEO of the hospital testified that it had been hospital policy for many years that the ER physician would respond to Code Blues, but that she didn't believe there was anything specific about it in the hospital's agreement with the defendant physicians group.

The trial court granted summary judgment on the grounds that the patient had never been billed for the physician's services. The Appellate Court reversed, finding after a review of the legislative history and relevant cases that the statute was not intended to immunize doctors who responded to a scene because they were paid to do so.

In an opinion by Justice Robert R. Thomas, the Supreme Court unanimously affirmed the Appellate Court.

The Court began by reviewing the history of Illinois' Good Samaritan law and its predecessors. The law had originally been enacted in 1965, and was quite narrow in scope, applying only to medical professionals providing emergency care without fee "at the scene of a motor vehicle accident or in case of nuclear attack." In 1969, the legislature broadened the statute to include any accident by striking the words "motor vehicle." Four years later, the legislature struck all reference to accidents and nuclear attacks and added a limitation that for immunity to apply, the medical professional couldn't have had "prior notice of the illness or injury." In 1998, the legislature struck the "prior notice" limitation.

The Supreme Court has never construed the statute, but the Appellate Court has addressed it several times. Early cases tended to hold that a physician could claim immunity as long as the patient wasn't charged. In these early cases, the courts tended not to look into reasons why the patient wasn't charged. In Estate of Heanue v. Edgcomb, for the first time the Appellate Court held that immunity applied only when a decision not to bill was made in good faith (the court believed that the phrase "good faith" in the statute modified both "provides emergency care" and "without fee").

The same year as Heanue, the federal district court addressed the statute in Henslee v. Provena Hospitals. Henslee was a diversity case, so it required the district court to make an Erie prediction of how the Supreme Court would address the matter. The court concluded that the Illinois courts had strayed far from the legislature's intent in enacting the statute. "Without fee" was sufficiently ambiguous, the court found, to encompass either situations where the patient didn't get billed or the doctor didn't get paid. The court ultimately opted for a broader definition of the term "without fee" for several reasons: denying paid physicians immunity was more consistent with the legislature's intent of encouraging volunteerism, was more consistent with modern medical billing practices, and finally, that excluding paid physicians prevented defendants from engineering immunity by simply deciding not to send the patient a bill.

But four years later, another federal district court addressed the issue in Rodas v. SwedishAmerican Health System Corp. and squarely disagreed with Henslee. Then, just to make things even more confusing, the Seventh Circuit reversed the district court's judgment in Rodas.

The Court sided with the district court in Henslee. "Without fee" was sufficiently ambiguous to encompass either meaning, the Court found -- "didn't bill" or "wasn't paid."

So the court turned to various aids to construction. Dictionary definitions of the term "good samaritan" suggested that a doctor had to be a volunteer, but weren't conclusive.        

But the legislative history seemed clear. The statute itself said that the law was intended to protect citizens "who volunteer their time and talents to help others." The court quoted a state Senator's comment that the Act was intended to protect medical professionals acting "on the spot, not in his doctor's office or in the hospital on the operating table." A state representative stated that the law was intended to encourage "good samaritans to do the right thing on the streets of Illinois." Another stated that the law "only covers services that are rendered without compensation." The court also cited with approval to a California decision, Colby v. Schwartz, where the court found that physicians responding to emergencies at a hospital because they served on the hospital's emergency call surgical panel were not protected by California's good samaritan law. Such physicians did not need the protection of the law, the court found, since they were acting within the scope of their jobs.

The closing pages of Home Star showed yet again that questions at oral argument often the Court's reflect serious concerns -- and may well be coming from the author of the opinion. During the oral argument, Justice Thomas asked whether the defendant's construction of the statute, where immunity turned on whether or not the patient was billed, might result in the poor having less access to the tort system: the wealthy would always get billed, but the poor often would not - thus triggering immunity - because the hospital or physicians group had no hope of payment. Justice Thomas' opinion raises the same point again as public policy grounds for rejecting the defendant's narrow construction of "without fee."

In the end, the Court concluded that a broad construction of "without fee" best effectuated the legislature's intent of extending immunity to true volunteers, but no further. Accordingly, the Court affirmed the Appellate Court's judgment denying statutory immunity to the defendants.

Image courtesy of Flickr by Ewan Munro.

 

Illinois Supreme Court Hands Down Significant Decision on Effect of Personal Jurisdiction Waiver

Maintaining and asserting objections to personal jurisdiction has been one of the more difficult issues in the law of most jurisdictions for years. Thursday morning, the Illinois Supreme Court clarified an issue of jurisdictional law which has divided the Appellate Courts with its unanimous decision in BAC Home Loans Servicing, LP v. Mitchell.

In Illinois, preserving objections to the court's jurisdiction over your person is governed by Section 2-301 of the Code of Civil Procedure, 735 ILCS 5/2-301. The statute says that if you want to challenge personal jurisdiction, before doing anything else (other than a motion for extension of time to answer), you have to file "a motion to dismiss the entire proceeding or any cause of action involving in the proceeding" or "a motion to quash service of process." If the party messes it up:

That party waives all objections to the court's jurisdiction over the party's person.

So here's the issue: what does "all" mean? Are orders entered before the defendant appeared now validated, or does the waiver only operate as to future orders?

The Supreme Court held that the waiver is prospective only.

The plaintiff filed a complaint in foreclosure in 2009. According to the special process server's affidavit, the summons and complaint was served by substituted service by leaving it with defendant's daughter at the residence. The suit continued, and in the summer of 2010, the court entered an order of default and a judgment of foreclosure and sale. A judicial sale was held in September 2010, and the court entered an order confirming the sale in September 2011.

In October 2011, the defendant finally appeared, moving to vacate the order confirming the sale. The defendant said she'd never been served with the complaint. Later, she withdrew that motion and moved to quash the order of sale, or in the alternative, for relief from the judgment under Section 2-1401 of the Code of Civil Procedure. Once again, the motion was based squarely on faulty service.

Opposing the motion, the plaintiff once again attached the affidavit of service, claiming that the summons and complaint had been left with the defendant's daughter.   One problem, the defendant responded: she didn't have a daughter and didn't know anybody by the name listed in the affidavit of service.

The circuit court refused to quash the sale. On appeal, the plaintiff acknowledged that the service was faulty, but argued that the defendant had validated the sale by filing a motion to vacate the sale, rather than one to dismiss the action or quash service, as required by Section 5/2-301. The Appellate Court agreed and affirmed.

In an opinion by Justice Kilbride, the Supreme Court reversed.

The Supreme Court had dealt with the waiver issue once before. In In re Marriage of Verdung, the court held that submission to the jurisdiction of the court operates prospectively only. An appearance is "not to be considered as giving the court original jurisdiction to enter the judgment," the Court held; "doing so deprives the defendant of his day in court."

But Verdung had been decided under an earlier version of Section 2-301. At the time, the statute had merely provided that anything other than a motion to dismiss or quash was "a general appearance." The legislature added the language providing that "all" objections to jurisdiction were waived in 2000. The plaintiff argued that the amendment had effectively overruled Verdung.

As recently as 2010, the Fifth District had held that the amendment merely codified the prospective-only rule of Verdung. The language of the statute wasn't definitive one way or the other, the Court found.  Since the statute was ambiguous, the Court turned to the legislative history. The Court quoted a prominent state Senator as describing the 2000 amendment as "a cleanup. It is designed to prevent an unknowing waiver." The Court observed that there was no indication in the record that the legislature intended to overturn then-existing law in 2000, and interpreting the amendment to change the law would mean that the 2000 amendment - intended to help parties avoid unknowing waiver - actually had the effect of making the law more harsh. Therefore, the Court reaffirmed Verdung and held that when a party fails to preserve personal jurisdiction objections in either of the ways set forth in Section 2-301, the waiver operates prospectively only.

Since that necessarily meant that the orders entered before the defendant's appearance were entered without personal jurisdiction, the Court vacated them all, reversing the judgment.

The Court concluded with an unusual step: an invitation to the legislature to get involved. The legislature had amended Section 2-301 in 2000 in order to make preserving personal jurisdiction objections easier. The defendant had waived her personal jurisdiction objections despite being represented by counsel. If that were possible, "it is almost certain that pro se defendants will have difficulty in preserving their objections to personal jurisdiction under the amended section 2-301(a)."

It will be interesting to see whether the legislature responds to the unanimous invitation of the Illinois Supreme Court to try again with Section 2-301.

Image courtesy of Flickr by umjanedoan.

Illinois Supreme Court Holds Custody Evaluator's Fees Not Court Costs Under Dismissal Statutes

On Thursday, the Illinois Supreme Court handed down its decision in In re Marriage of Tiballi, answering a question of potential importance to domestic relations practitioners: are the fees of a court-appointed psychologist "costs" which must be fully paid when one party decides to drop a custody dispute? A unanimous court found that the answer was "no."

Tiballi began when the parties divorced in 2005. The judgment of dissolution awarded the parties joint legal custody of their daughter, but placed residential custody with the mother. In 2010, the father petitioned for modification of custody, asking that he be named residential custodian. In the petition, the father alleged that the mother had been verbally and physically abusive towards the daughter, who had expressed a desire to live with the father. In her response, the mother demanded sanctions under Supreme Court Rule 137, alleging that the father had charged her with abuse knowing that the allegations were false.

Shortly thereafter, a guardian ad litem was appointed on the father's motion. Several months after that, the court appointed a psychologist to act as custody evaluator pursuant to Section 604(b) of the Marriage Act. In the order of appointment, the court ordered that the parties split the cost of the evaluation "without prejudice to ultimate allocation."

After a six month investigation, the evaluator filed his report. The evaluator concluded that there was no evidence of the alleged abuse. He further concluded that it would be in the child's best interest for the father's parenting time to be increased.

Not long after the report was filed, the mother filed a motion to dismiss the petition to modify custody. The motion stated that counsel for the father had advised counsel for the mother that he was dropping the petition. The motion was granted.

A month later, the father filed a motion to vacate, arguing that the order dismissing the action did not conform with the parties' agreement. The court amended the order of dismissal to specify that dismissal was without prejudice.

The mother then filed a petition for costs, seeking to have both the costs of the evaluator and the guardian ad litem's fees entirely assessed against the father. The trial court granted the motion in part, granting recovery of the evaluator's fees, but not the guardian's fees. The Appellate Court affirmed.

In an opinion by Justice Robert R. Thomas, the Supreme Court reversed.

Because both the trial and the Appellate Court had viewed the mother's motion as a "voluntary" dismissal, the case had turned on Section 2-1009(a) of the Code of Civil Procedure, 735 ILCS 5/2-1009(a), which provides that a matter may be voluntarily dismissed upon payment of "costs." However, the Court agreed with the dissenter from the Appellate Court that it was difficult to see how a motion by a litigation opponent could be a "voluntary" dismissal, even if it supposedly was triggered by the father's decision not to proceed.   Instead, the Court concluded that the dismissal was more in the nature of one for want of prosecution. The distinction made no difference in Tiballi though, since the failure-to-prosecute statute required assessment of "costs" too.

So the Court arrived at the central question: were the evaluator's fees "court costs"? Citing the narrow definition of court costs adopted in Vicencio v. Lincoln-Way Builders, Inc.: "charges or fees taxed by the court, such as filing fees, jury fees, courthouse fees and reporter fees," the Court held that they were not. For one thing, court fees are nearly always set by statute, and for another, court fees are paid to the court, where the evaluator's fees are paid directly to the evaluator.

Besides, the Marriage Act specifically spoke to the fees of the evaluator, providing that the court should allocate the fees "between the parties based upon the financial ability of each party and any other criteria the court considers appropriate." 750 ILCS 5/604(b). The allocation provision of Section 604(b) was determinative, the Court found.

The Court accordingly held that a party dismissing his or her custody petition "for non-abusive reasons" was not required to bear the full cost of any court-appointed custody evaluators. The Court remanded the matter to the Circuit Court for allocation of the evaluator's fees under Section 604(b).

Image courtesy of Flickr by Clyde Robinson.

Illinois Supreme Court Reaffirms Forcible Entry Remedy, Reversing in Spanish Court Two Condominium

One of the two most anxiously awaited cases on the Illinois Supreme Court’s civil docket was handed down this morning, and it was a big win for Illinois condominium associations: a sharply divided Court reversed the controversial decision of the Appellate Court’s Second District in Spanish Court Two Condominium Association v. Carlson. Our detailed summary of the facts and underlying court decisions in Spanish Court is here. Our report on the oral argument is here. (If you’re wondering, the other major pending decision is  Kanerva v. Weems, which relates to public employee pensions).

Illinois is apparently unique among the states in allowing condominium boards to file actions under the state Forcible Entry Act. In contrast to landlords’ actions against renters, a judgment against a condo owner under the Act doesn’t transfer title to the unit. The board gains a bare right to possession, along with the right to rent the unit if they choose to do so and apply the proceeds to the owner’s unpaid assessments.

Spanish Court Two began in early 2010 when the plaintiff association sued the defendant under the Forcible Entry Act. The plaintiff alleged that the defendant had failed to pay monthly assessments for the past six months. 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 “by joinder, counterclaim or otherwise.”  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 and remanded for partial reinstatement of the defendant’s affirmative defenses.

In an opinion for a four-Justice majority by Justice Mary Jane Theis, the Supreme Court reversed the Appellate Court. Although historically, the “distinctive purpose” of forcible entry proceedings has been to regain possession of the property, that purpose has expanded slightly in Illinois. Courts are permitted to enter judgments for unpaid rent in actions against tenants, and when condominiums were added to the statute, the legislature decided to permit money judgments for unpaid assessments. Nevertheless, the majority wrote, the issue of what was and was not “germane” remained closely tied to the central issue: possession.

The plaintiff’s action had been brought solely on the grounds that the defendant had failed to pay assessments. Therefore, the court found, whether or not she actually owed those assessments was clearly germane to the question of whether possession should be handed over to the condo board. But that wasn’t the end of the matter. The core issue was whether the defendant’s defense – that the board’s alleged failure to perform its duty to maintain the common areas excused the defendant’s duty to pay assessments – was legally sound.

The Appellate Court had reached its result by analogizing the relationship between the condominium board and a resident to the one between a landlord and a tenant. Here, the Supreme Court majority parted company with the Appellate Court. The relationship between landlord and tenant is primarily contractual, the Court wrote. The relationship between board and owner, on the other hand, is almost entirely a creature of the Condominium Act, which flatly provides that “it shall be the duty of each unit owner . . . to pay his proportionate share of the common expenses.” 765 ILCS 605/9. That duty exists independent of the governing documents of any particular association. The statute says nothing even suggesting that the duty to pay is contingent on the board’s performance of its duty to repair and maintain the common elements. An owner’s duties can’t be assigned, delegated, transferred, surrendered or avoided, and the Board may foreclose if the owner fails to pay.

The majority concluded:

These provisions, when read together, demonstrate that a unit owner’s liability for unpaid assessments is not contingent on the association’s performance . . . a unit owner’s claim that its obligation to pay assessments was nullified by the association’s failure to repair and maintain the common elements is contrary to the Condominium Act and is not a viable defense.

Besides, the majority concluded, allowing such disputes into the unique proceeding for forcible entry would transform what the legislature intended to be a speedy and relatively inexpensive remedy into a lengthy and expensive mess by injecting “a myriad of fact-based inquiries.” Not only would the court have to assess the adequacy of a board’s repair efforts, it would have to determine whether any unmade repairs were “material” – whatever that might mean in this context – and whether any breaches were a partial or complete defense to payment.

Allowing each condominium owner to set him- or herself up as an independent judge of the Board’s performance by withholding payments threatened the “financial stability” of Illinois condominium associations, the majority wrote. The condominium form of ownership is dependent on the timely compliance of all owners with assessments, and without it, the association may be faced with a choice between default on its obligations or curtailing services.

Justice Charles E. Freeman dissented, joined by Justices Anne M. Burke and Thomas L. Kilbride. The dissenters argued that the relationship between condominium board and owner was governed both by statute and contract, making the analogy to landlord-tenant law drawn by the Second District a better fit. The dissenters argued that the conflict with the Condominium Act relied upon by the majority was an illusion; the Act didn’t say anything at all about the situation where a board failed to repair and maintain common elements. Nor was the argument that allowing the defense would make forcible entry proceedings lengthy, expensive and unduly complex persuasive – as the dissenters pointed out, a landlord’s breach of duty is a germane defense in a forcible entry action against a tenant, and such proceedings still got adjudicated. Allowing the defense by an owner shouldn’t make much difference one way or the other.

The dissenters dismissed the potential threat to the financial stability of Illinois condominium associations from allowing a nullification defense. Only material breaches would have any effect on the obligation to pay, the dissenters pointed out. Moreover, withholding payment put the owner at “utmost peril” – the threat of eviction – and was therefore a powerful incentive to pay up. While condominium ownership only works if all owners cooperate, the dissenters argued that it also only works where the association board fulfills its obligations. The dissent concludes by inviting the legislature to get involved in the dispute by clarifying what defenses are and are not germane in the unique summary proceeding for forcible entry.

Image courtesy of Flickr by Toshihiro Oimatsu.

Spanish Court Two Condominium and Three Other Civil Opinions on Thursday

The Illinois Supreme Court has announced that it expects to file opinions in four civil cases on Thursday morning, March 20. Among the new opinions will be one of the two most anxiously awaited cases on the court’s advisement docket – Spanish Court Two Condominium Association. The cases, with their issues presented and links to our earlier reports on each, are:

  • Spanish Court Two Condominium Association v. Carlson, No. 115342 -- May a condominium owner refuse to pay monthly and/or special assessments, in whole or in part, on the grounds that the condominium board failed to maintain and repair the common elements of the condominium property? Our detailed summary of the facts and underlying court decisions in Spanish Court is here. Our report on the oral argument is hereSpanish Court Two Condominium will have been under submission for 184 days when it comes down on Thursday.
     
  • Home Star Bank & Financial Services v. Emergency Care & Health Organization, Ltd., No. 115526 -- Does a physician paid by his physician group to provide emergency care in a hospital qualify for immunity under the Good Samaritan Act when he responds to a Code Blue in another part of the hospital? Our detailed summary of the facts and underlying court decisions in Home Star Bank is here. Our report on the oral argument is hereHome Star will have been under submission for 57 days when it comes down.  
     
  • BAC Home Loans Servicing, LP v. Mitchell, No. 116311 -- Does waiver of a personal jurisdiction objection operate retrospectively, validating everything that has gone before, or only prospectively? Our detailed summary of the facts and underlying court decisions in BAC Home Loans is here. Our report on the oral argument is hereBAC Home Loans will have been under submission for 56 days was it comes down.
     
  • In re Marriage of Tiballi, No. 116319 -- When a parent voluntarily dismisses a petition to change custody, can he or she be hit with the fees of a court-appointed child psychologist as costs? Our detailed summary of the facts and underlying court decisions in Tiballi is here. Our report on the oral argument is hereTiballi will have been under submission for 56 days when it comes down.

In 2013, the Court handed down its unanimous civil decisions an average of 103.7 days after oral argument. Cases in which the Court was divided were handed down an average of 185.8 days after argument.

Image courtesy of Flickr by joenevill.

What's Pending on the Illinois Supreme Court's Advisement Docket?

As we near the opening of the March docket, it's time to take a look at the civil cases that are argued and pending for decision before the Illinois Supreme Court. The Court is quite up-to-date on its docket at the moment, with only seven civil cases pending - five from the January argument docket, and the two giants of the docket, Spanish Court and Kanerva, which were argued in 2013. In 2013, unanimous decisions came down an average of 103.7 days after oral argument, while cases with dissenters took much longer - 185.8 days after argument. The pending cases are:

  • Spanish Court Two Condominium Association v. Carlson, No. 115342 -- May a condominium owner refuse to pay monthly and/or special assessments, in whole or in part, on the grounds that the condominium board failed to maintain and repair the common elements of the condominium property? Our detailed summary of the facts and underlying court decisions in Spanish Court is here. Our report on the oral argument is hereSpanish Court has been pending for 165 days.
     
  • Kanerva v. Weems, No. 115811 -- Do the 2012 amendments to the State Employee Insurance Act, 5 ILCS 375/1, violate (1) the Pension Protection Clause, Ill. Const. Art. XIII, Section 5; (2) the Contracts Impairment Clause, Ill. Const. Art. I, Section 16; (3) separation of powers; or (4) the State Lawsuit Immunity Act, 745 ILCS 5/1? Our detailed summary of the facts and underlying court decisions in Kanerva is here. Our report on the oral argument is hereKanerva has been pending for 164 days.
     
  • Home Star Bank & Financial Services v. Emergency Care & Health Organization, Ltd., No. 115526 -- Does a physician paid by his physician group to provide emergency care in a hospital qualify for immunity under the Good Samaritan Act when he responds to a Code Blue in another part of the hospital? Our detailed summary of the facts and underlying court decisions in Home Star Bank is here. Our report on the oral argument is hereHome Star has been pending for 38 days.  
     
  • People ex rel. Madigan v. Burge, Nos. 115635 & 115645 -- May the Attorney General challenge the actions of the Police Pension Board through a separate lawsuit in the Circuit Court, or are the Board's actions subject to review only by routine administrative review? Our detailed summary of the facts and underlying court decisions in Burge is here. Our report on the oral argument is hereBurge has been pending for 38 days.
     
  • Nelson v. County of Kendall, No. 116303 -- Is the office of the State's Attorney a "public body" subject to the state Freedom of Information Act? Our detailed summary of the facts and underlying court decisions in Nelson is here. Our report on the oral argument is hereNelson has been pending for 37 days.
     
  • BAC Home Loans Servicing, LP v. Mitchell, No. 116311 -- Does waiver of a personal jurisdiction objection operate retrospectively, validating everything that has gone before, or only prospectively? Our detailed summary of the facts and underlying court decisions in BAC Home Loans is here. Our report on the oral argument is hereBAC Home Loans has been pending for 37 days.
     
  • In re Marriage of Tiballi, No. 116319 -- When a parent voluntarily dismisses a petition to change custody, can he or she be hit with the fees of a court-appointed child psychologist as costs? Our detailed summary of the facts and underlying court decisions in Tiballi is here. Our report on the oral argument is hereTiballi has been pending for 37 days.

Illinois Supreme Court's March Docket Announced

The Illinois Supreme Court has published its docket for the March term in Chicago. The civil cases on the Court's docket include:

Tuesday, March 18, 2014 - 9:30 a.m.

  • The Estate of Perry C. Powell v. John C. Wunsch, No. 115997 & 116009 -- Does the lawyer who brings a wrongful death action owe a duty of care to the next of kin, or only to the estate? Our detailed summary of the facts and underlying court decisions is here.
     
  • WISAM 1, Inc. v. Illinois Liquor Control Commission, No. 116173 -- (1) Was the plaintiff denied due process when the liquor control commissioner admitted transcripts into evidence and immediately granted the City's motion for a directed finding that plaintiff had violated Section 3-28 of the ordinances of the city of Peoria, justifying summary revocation of the plaintiff's liquor license? (2) Were the transcripts inadmissible, and without them, was there sufficient evidence to support the finding that the plaintiff had violated Section 3-28? Our detailed summary of the facts and underlying court decisions is here.

Wednesday, March 19, 2014 - 9:30 a.m.

  • In re Marriage of Turk, No. 116730 -- When a parent voluntarily dismisses a petition to change custody, can he or she be hit with the fees of a court-appointed child psychologist as costs? Our detailed summary of the facts and underlying court decisions is here.

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Could an Insurer's Dec Action Waive the Right to Participate in Settlement in Illinois?

[This post appeared earlier on the Sedgwick Insurance Law Blog.]

An insurer offers its insured a defense under a reservation of rights and files a complaint seeking a declaratory judgment determining coverage. This is not an uncommon sequence of events, either in Illinois or anywhere else. But does the insured then have the right to settle the case on its own, without the insurer’s consent?

Until recently, the answer under Illinois law has been clear: No. But in a decision published in the last days of January, the Appellate Court for the Fourth District cast doubt on that conclusion.

Standard Mutual Insurance Company v. Lay was one of the Illinois Supreme Court’s major decisions of last year. Our coverage of the decision is here. Our report on the oral argument before the Supreme Court is here.

The defendant was a small real estate agency in Girard, Illinois. The defendant hired a fax broadcaster to send a “blast fax” advertising a particular listing to thousands of fax machines. The broadcaster claimed that each potential recipient had consented to receiving the faxes, and the defendant trusted the broadcaster’s word. The problem was apparently it wasn’t true.

Enter the Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227. The statute imposes a penalty of $500 for each unsolicited fax sent, which is trebled for willful violations. So the defendant was hit with a putative class action complaint, alleging willful violations of the TCPA, conversion and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2.

The defendant tendered to its insurer, which accepted under a reservation of rights. The insurer offered the defendant a defense (while noting its potential coverage defenses and the arguable conflict of interest). The defendant signed the waiver of the conflict proferred by the insurer and accepted the attorney.

In mid-July 2009, the putative class action was removed to Federal court. Not long after, the owner of the defendant real estate agency died, and his widow received letters of office. In late October, at the widow’s behest, a new lawyer wrote to the lawyer hired by the insurer, explaining in great detail the conflict between the insurer and the insured (which the insured had waived) and asking the lawyer to withdraw. The lawyer hired by the insurer never withdrew, but a few weeks later, the new attorney and the insured signed a settlement agreement.

In 2010, the settlement agreement was filed and ultimately approved. It provided for a payment of $1,739,000: $500 per fax for each and every one of alleged 3,478 recipients. Given that a finding of willful conduct – the necessary prerequisite to trebling – would have vitiated insurance coverage, this “settlement” amounted to the insured voluntarily paying 100 cents on the dollar on the case. In return, the class representative agreed not to execute on any of the defendant’s assets, and seek to recover solely from the insurer (the covenant not to execute remained valid whether or not the insurer’s policy was adjudicated to cover the policy).

In mid-2011, the trial court granted the insurer summary judgment in the declaratory judgment action, finding that TCPA damages were in the nature of punitive damages and thus uninsurable. The Supreme Court allowed a petition for leave to appeal and reversed on that point. The Court remanded back to the Fourth District for consideration of the remaining issues – including whether the insured had breached the policy by settling without the insurer’s consent.

The Fourth District originally issued its opinion reversing the Circuit Court in late November 2013, but later granted a motion for publication. The published opinion appeared January 25, 2013.

The court found that all three policies at issue covered the defendant’s “settlement.” One expressly related to the real estate business. The two remaining policies related to rental premises or vacant lots owned by the insured, but neither included “designated premises” limitations.

The insurer argued that the settlement was excluded from coverage by the professional services exclusion, but the Appellate Court disagreed. The real estate agency was not a professional advertiser, the court pointed out. The court specifically held that the TCPA damages were covered by both the property damage coverage and the advertising injury coverage.

But the most important part of the ruling came in two paragraphs on the final page of the opinion. The court noted that where an insurer had provided an attorney pursuant to a reservation of rights, noting the potential conflict of interest, “the insured is entitled to assume control of the defense.” At that point, the court held, the insurer lost the right to prevent the insured from unilaterally settling: “When an insurer surrenders control of the defense, it also surrenders its right to control the settlement of the action and to rely on a policy provision requiring consent to settle.” The court cited Myoda Computer Center v. American Family Mutual Insurance Co. in support of its holding. The insured’s liability was “clear,” the court commented, the settlement amount “was supported by simple math,” and “[a]bsent the settlement, the result would have been the same.” Therefore, the court held, the insurer was liable for the full amount.

The insurer has petitioned the Supreme Court for leave to appeal the case once again. A copy of the insurer’s petition is here. There, the insurer pointed out the grave implications of the Appellate Court’s holding approving of the insured’s behavior: “The Appellate Court’s decision sanctions an insured rolling over on its insurer anytime a defending insurer reserves its rights and files a declaratory judgment action.” The Appellate Court had simply gotten the law wrong, the insurer argues. Myoda involved an entirely different situation, where the insurer had allowed the insured to choose its own counsel from the outset, merely reimbursing costs. The insurer had been told of a prospective settlement and flatly refused to participate – something which never happened in Standard Mutual. The insurer argued that pursuant to long-settled Illinois law, absent a breach of the duty to defend, an insurer has every right to insist on the right to approve of and participate in settlement.

The insurer offers this powerful argument for the potential for abuse of TCPA litigation inherent in the Fourth District’s decision:

[T]arget a defendant, ensure that it carries insurance coverage, offer the defendant a deal where it can walk away unscathed and in the process obviate the need for any proof that offending faxes were ever received, and cash in on the defendant’s insurance policies. This game of ‘gotcha’ prejudices insurers which seek to honor their obligations while at the same time exercising their right to walk into court and seek a judicial declaration of their coverage.

The Fourth District’s holding on remand in Standard Mutual is a significant potential threat to insurers operating in Illinois. The insurer in Standard Mutual appears to have done everything right pursuant to a policy which expressly barred settlement without its consent: it provided (and paid for) counsel, carefully noted and reserved its coverage defenses and explained the potential conflict of interest, and offered the insured the opportunity to waive the conflict – which it did. The insurer then exercised its clear right to seek a judicial determination of coverage. As a result, the insurer was held liable for a 100-cents-on-the-dollar “settlement” entered into unilaterally by the insured.

The Supreme Court should allow this new petition for leave to appeal in Standard Mutual Insurance Co. v. Lay and hold that insurers do not authorize collusive settlements by their insured simply by virtue of proceeding pursuant to their rights under the policy.

Illinois Supreme Court Debates Jurisdiction Over Pension Dispute

The Illinois Supreme Court seemed conflicted during an extremely active oral argument in late January in the high-profile pension case People ex rel. Madigan v. Burge. Burge poses the following issue: can the Attorney General challenge the actions of the Police Pension Board by simply filing suit in the Circuit Court, as opposed to pursuing administrative review in the Appellate Court? Based upon the argument, it appears that whether or not the Court sides with the Attorney General will depend upon whether the Court finds a limiting principle in the Attorney General's broad claim of standing. Our detailed summary of the facts and lower court holdings in Burge is here. The video of the argument is here.

Burge arises from a notorious case a few years ago. A Chicago police officer was widely believed to have sanctioned and participated in the abuse and torture of arrestees in order to extract confessions. The officer was convicted of two counts of obstruction of justice and one of perjury and sentenced to 54 months in prison.

Section 5-227 of the Pension Code says that pension benefits can't be paid to anyone "convicted of any felony related to or arising out of or in connection with his service as a policeman." The Board of Trustees of the Retirement Board of the Policemen's Annuity and Benefit Fund held an evidentiary hearing to determine whether the statute barred further pension payments to the imprisoned officer. At the conclusion of the hearing, the Board split 4-4: the four city-appointed trustees voting to terminate, the four trustees elected by the police officer participants in the pension fund voting to continue payments. Without a majority of the Board voting to discontinue, the motion to discontinue payments failed.

Rather than seeking administrative review of the decision, the Attorney General sued the Board, seeking an injunction to halt the payments. The Attorney General cited section 1-115(b) of the Pension Code, arguing that the statute authorized the Attorney General to seek an injunction to halt any practice which violates the Pension Code. The Pension Board and the officer both moved to dismiss, and the Circuit Court granted the motion. The First District, Division Six of the Appellate Court reversed.

Counsel for the officer argued that the Attorney General was using the statute to collaterally attack a decision by the Board which was subject only to administrative review. Counsel argued that the legislature granted original and exclusive jurisdiction to the Board to make all decisions regarding benefits. Police officers are entitled to expect that the Board and their elected representatives make all decisions regarding their pensions, counsel argued. Because the statute limits judicial review, officers should expect that the Board's decisions are not subject to collateral attack. Justice Burke asked whether Section 1-115(b) was meant to address situations where the Board was acting ultra vires. Counsel said yes. Justice Burke pointed out that the legislature had in fact provided an opportunity to challenge the Board. Counsel argued that such actions were permitted only when the Board's conduct was outside the Code. Justice Burke asked if that wasn't what the Attorney General was alleging. Counsel answered no, and that the Attorney General's claim that the Board's action violated the Code made no sense. Section 1-115(b) creates a private right of action, counsel argued, but it's limited to violations of the Code. Justice Kilbride suggested that that was what the Attorney General was alleging. Counsel answered that the issue was what was the purported violation of the Code. Justice Kilbride pointed out that the Attorney General was arguing that the court had concurrent jurisdiction. So why didn't the AG's right to file apply here? Counsel once again argued that there was no Code violation for the Attorney General to pursue. Justice Burke suggested that the Board has authority to discontinue pension benefits. Counsel responded that Section 1-115(b) doesn't give the Circuit Court authority over that issue. Justice Burke asked whether that was what was decided here, whether the pension should be discontinued. Counsel answered that the Board had clearly acted within its authority. Justice Burke asked what the Attorney General alleged as the Code violation. Counsel answered that the Appellate Court had found that the tie vote was the violation because the Court recognized that the Attorney General hadn't alleged any violation. Justice Thomas asked whether, once the 4-4 vote had occurred, anyone had sought administrative review. Counsel answered that nobody had sought to intervene in the underlying case.

Counsel for the Board followed. The issue was whether the Attorney General has the right to initiate a civil proceeding to challenge a discretionary decision of an administrative agency, counsel argued. The Administrative Review law contains language specifically barring all other kinds of review where the statute applied.  Because the Board had the burden of proof, when four members voted against stopping payments, the motion failed. Chief Justice Garman asked whether there was a method to challenge an erroneous interpretation of state law by the Board - the annuitant wouldn't challenge it, and the Board wouldn't because they made the mistake. Counsel answered that a void act could be challenged any place at any time. Chief Justice Garman wondered whether the statute applied to a mistaken act. Counsel responded that the Attorney General might not like the Board's action, the newspapers didn't like it, but an unpopular decision isn't necessarily a void one. The Chief Justice wondered whether an act had to be ultra vires to authorize an action by the AG. Counsel responded that what was necessary was something beyond the authority given the Board by the legislature.

Once counsel for the Attorney General took the podium, Justice Thomas began by asking what "act or practice" the Attorney General was challenging. Counsel argued that the AG wasn't seeking review of the Board's decision. Justice Thomas wondered whether, if the AG's action was permissible, either the AG or any individual could challenge any Board decision. Counsel responded that the statute was based on years of experience with ERISA. The critical distinction, counsel argued, was between appellate and original jurisdiction. The Circuit Courts have original jurisdiction to decide the ultimate merits - whether an act or practice violates the Code. Justice Burke asked whether, if the Circuit Court could hear this action, anyone could go directly to the Circuit, bypassing administrative review. Counsel responded that a claimant seeking benefits could not obtain them through Section 1-115(b). Justice Burke asked what violation of the Code the Attorney General was alleging. Counsel responded that the violation was payment of benefits barred by Section 2-227 of the Pension Code. Justice Burke responded that those benefits were paid fifteen years before - the Board merely refused to stop benefits. Counsel answered that once the felony conviction was entered, the language of the statute was clear - further payments were barred. Characterizing the action as one for administrative review was misdirection.  Justice Burke asked whether the Pension Board had the authority to decide whether benefits should continue, or the Court did. Counsel responded that the Board and the court had concurrent jurisdiction over the issue. Justice Burke asked whether the Attorney General had the authority to intervene at the Pension Board. Counsel answered yes, but the statute creates a separate vehicle to go straight to the Circuit Court. Justice Burke asked whether the Attorney General had ever gone to court before. Counsel answered no, but this was an important first case for the courts to declare that the Code means what it says. When counsel again argued that the Attorney General had the right to file a separate action, Chief Justice Garman suggested that the Attorney General's action seemed arguably like waiting till the Board acted, and when the AG didn't like it, she sought to end-run the process. Counsel answered that this was inherent in concurrent jurisdiction. The Chief Justice asked whether the Attorney General could have intervened at the Board. Counsel answered that the AG didn't have the resources to monitor thousands of pension cases and intervene at the Board whenever a barred payment was made. The Chief Justice asked whether the Attorney General was acting as the Appellate Court to overrule the Board. Counsel responded that the AG had standing to seek an adjudication by the Court as to whether there had been a violation. Counsel argued that the suit could have been brought the day after the officer's convictions. Justice Theis asked what the Attorney General's case would look like - was she asking the Court to decide whether these felonies arose out of the officer's service? Counsel said yes, and Justice Theis suggested that the AG was relitigating the issue determined by the Board. Counsel responded that the Attorney General's complaint wasn't a disagreement with the Board, but rather arguing that paying the pension violated the Code. Justice Burke asked what new evidence would be presented on remand. Counsel answered that the Attorney General wasn't a party below. The right to intervene and then seek administrative review doesn't preclude concurrent review. Justice Theis asked whether anyone had standing to seek administrative review of the Board's 4-4 decision -- the Board members who lost? The City? Counsel answered that no one had standing to appeal. The statutory mechanism showed the wisdom of the legislature, counsel argued; there was a non-adversarial process with public money at stake, and nobody available to seek review unless the Attorney General could file a separate action. Justice Theis suggested that at least one case from the Fifth District suggested that the City might have had arguable standing to appeal. Counsel answered that the Attorney General doesn't agree with the decision cited by Justice Theis, which conflicted with the Supreme Court's precedent, up to and including Roxana School DistrictJustice Theis asked whether there was case law saying that members of the Board couldn't bring administrative review.   Counsel answered that he hadn't seen a situation where a board member had standing to object to a decision of his or her own agency. Chief Justice Garman asked whether the Attorney General could bring an action based on any error of the Board. Counsel responded that he could imagine incorrect decisions that wouldn't violate the Code.

Counsel for the officer began his rebuttal by arguing that the statutory bar on benefits doesn't automatically apply after a conviction. The legislature gave exclusive jurisdiction to the Pension Board over that decision, and authorized limited review pursuant to the Administrative Review law. Counsel concluded by arguing that if a payment was the Code violation, either the Attorney General or anyone else could challenge a Board action in court at any time.

Counsel for the Board pointed out that the thirty-five day filing deadline under the Administrative Review law is jurisdictional. In contrast, Section 1-115(b) has no time limit. So if the Attorney General is correct, there could be challenges to administrative actions years after a board decision. Justice Karmeier asked whether the Attorney General could have intervened before the Board. Counsel answered that the Attorney General could have spoken at the Board. Justice Karmeier asked whether that would give the AG standing to appeal, and counsel said yes. Justice Thomas posed a hypothetical - assume that the Attorney General had no right to intervene. If so, who would challenge a Board error in favor of an annuitant? Counsel answered that the Attorney General could challenge the failure to allow intervention. Justice Burke asked whether the appeal would be over denial of intervention, or the merits of the decision not to stop benefits. Counsel answered that the AG could challenge the denial of intervention, and if she prevailed, the Board would make an appropriate ruling. Justice Karmeier suggested that if the Board denied intervention, the Attorney General would have to file a separate action, since the AG would not be a party with standing to seek review. Counsel argued that the Attorney General could challenge denial of intervention. Justice Thomas again asked whether, if there was no intervention possible and the annuitant prevailed, anyone would or could seek review. Counsel answered that an erroneous decision was different from a void decision which could be challenged in the Circuit Court.

We expect Madigan to be decided within four to six months.

Illinois Supreme Court Upholds Employee Classification Act

Yesterday in Bartlow v. Costigan, a unanimous Illinois Supreme Court took a pass, for the most part, on deciding constitutional challenges to provisions of the Employee Classification Act which were amended by the legislature while the appeal was pending. The Court rejected a void-for-vagueness challenge to the section of the statute which was unchanged. Our detailed summary of the facts and underlying court decisions in Bartlow is here. Our report on the oral argument is here. Watch a video of the argument here.

The state legislature concluded that construction contractors were evading various protections extended to workers under the state labor laws, including minimum wage, overtime, workers' comp and unemployment insurance, by improperly classifying their employees as independent contractors. In 2008, the Department of Labor received a complaint that the plaintiff was misclassifying employees as independent contractors. The Department sent the plaintiffs a notice of investigation and request for documents. The plaintiff provided several hundred documents, and in early 2010, the Department issued a "preliminary determination" that ten individuals had been misclassified. The Department calculated a potential penalty of nearly $1.7 million.

Only a few weeks later, the Department sent the plaintiff a notice of a second investigation, requesting more information. The plaintiff responded by filing suit, challenging the constitutionality of the Act (due process, special legislation, equal protection and bill of attainder) and seeking declaratory and injunctive relief. The circuit court denied plaintiff's request for a temporary restraining order, but on interlocutory appeal, the Appellate Court reversed. On remand, the circuit court entered an order granting defendants' motion for summary judgment, rejecting each of the plaintiffs' constitutional challenges. The Appellate Court affirmed.

In an opinion by Justice Kilbride, a unanimous Supreme Court vacated in part and affirmed in part. The statute had been substantively amended while the appeal was pending, the Court noted. The Department was now required to provide notice and conduct formal administrative hearings within the meaning of the Administrative Review Law - it was the lack of such procedures that formed the core of plaintiff's constitutional challenge. Following oral argument, the court directed the parties to file supplemental briefing on whether the amended statute applied to their case. The plaintiffs argued that it did not, but the Court disagreed. The case had not proceeded to any final determination of a violation of the Act, and no penalties had been assessed, the Court pointed out. Therefore, the Department's ability to enforce the Act depended on following the procedural steps set out in the Act. Since the new, amended statute applied to plaintiffs' case, the court held that the bulk of plaintiffs' constitutional challenges were moot. Because the Court concluded that it was unable to pass one way or the other on the plaintiffs' constitutional challenges to the superseded parts of the Act, the court vacated that portion of the Appellate Court's opinion.

But Section 10, which set forth the statutory exemptions, had not been significantly amended. Therefore, plaintiffs' challenge to Section 10 was not moot. Section 10(b) sets forth factual criteria which, if a particular individual qualifies, exempt that individual from the Act. In section 10(c), the Act deems "legitimate" and exempt from the Act any sole proprietorship or partnership satisfying certain criteria. The court held that the provisions of Section 10 "provide[d] a person of ordinary intelligence a reasonable opportunity to understand what conduct the Act prohibits," and therefore rejected the plaintiffs' void-for-vagueness challenge. In rejecting the plaintiffs' constitutional challenge, the Court noted that the plaintiffs' strenuous claims that their subcontractors satisfied the elements of Section 10 implicitly amounted to a concession that plaintiffs understood what Section 10 meant. The Court held that plaintiffs' remaining constitutional claims were forfeited for failure to adequately brief them before the Court.

Argument Report: Illinois Supreme Court Debates the Scope of the Good Samaritan Act

Our reports on the oral arguments of the recent term of the Illinois Supreme Court continue with Home Star Bank & Financial Services v. Emergency Care & Health Organization, Ltd. Home Star poses the question of whether physicians who are paid by their physician groups to work in a hospital emergency room can qualify for tort immunity under the Good Samaritan Act. Our detailed summary of the facts and lower court decisions in Home Star is here. Check out the video of the Home Star argument here.

The defendant physician was employed in the emergency room of a hospital.   He responded to a "Code Blue" for a patient being cared for on another floor, 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, 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" be liable for negligence "except willful or wanton misconduct." The plaintiffs pointed out that the defendant was compensated on an hourly basis for his services, but the Circuit Court granted summary judgment, noting that neither the patient nor his insurer had ever been billed. The Appellate Court reversed, holding that a physician was outside the scope of the Act if he or she was paid by anyone for the services provided.

Counsel for the physician began by arguing that reversal was justified based upon the plain language of the Act, and on Estate of Heanue - which the Appellate Court had declined to follow - and its progeny. Counsel argued that the statute provided an express exemption for "emergency care," and it was undisputed that the defendant was engaged in providing emergency care. Justice Theis pointed out that Section 2 of the Act suggests that the legislative purpose was to protect volunteers. Counsel responded that that language was in what several holdings described as the preamble. Justice Theis asked what Section 2 was labeled in the statute itself, and counsel agreed that it was described as the legislative purpose. Chief Justice Garman asked whether the defendant was a volunteer when he rendered the services at issue. Counsel responded no; he was an emergency room doctor being compensated by his physician group. Nevertheless, counsel argued that "volunteer" was not the important concept. The question was whether or not the defendant had provided services to the plaintiff without a fee. Estate of Heanue was on all fours, counsel argued - the patient had not paid any fee, and that was that. Justice Thomas pointed out that defendant believed the issue was whether the patient had been billed, not whether the physician was compensated. Why was this the better interpretation? Counsel argued that it was instructive to look at other parts of the statute, which deliberately chose between the words "without fee" and "without compensation" for different situations. The correct interpretation of the statute depended on the words used and the context, counsel argued. Justice Thomas asked whether the defendant was free to ignore Code Blues from outside the emergency room. Counsel answered that if the defendant was busy in the emergency room, he had no contractual duty to respond. Counsel argued that the statute had once said that the existence of a preexisting duty between the doctor and patient was critical, but the legislature had deliberately removed that language. Justice Theis asked whether counsel was arguing that a preexisting relationship between the doctor and patient was irrelevant to the application of the Act. Counsel answered that a preexisting duty was relevant to the issue of whether the defendant had sent the patient a bill, and why he had not (if no bill was sent). Here, no bill was sent because the defendant's physician group never billed for responding to Code Blues outside of the emergency room. Justice Burke asked whether that was because defendant would be compensated anyway, but counsel answered that it made no difference for defendant's compensation whether he attended one Code or many, or attended one patient or many in the ER. Chief Justice Garman asked whether the matter finally came down to good faith. Counsel agreed that it did; the Act applies if the defendant is a physician, the care was on an emergency basis, and the physician had a good faith basis for not billing the patient. The Chief Justice asked whether, if exactly the same events had happened in the ER, the outcome would be the same. Counsel answered that it came down to whether the patient was billed. Justice Thomas pointed out that some have argued that defendant's construction of the statute meant that the poor often would have no right of action, while the wealthy would have a claim, since hospitals would often not send a bill because they had no hope of payment. Counsel argued that this was a theoretical argument which had not been an issue in the eight years since Heanue.

Counsel for the plaintiff argued that the legislature had never intended to immunize doctors working inside a hospital, and certainly not ones who were not volunteers. Justice Karmeier asked whether the doctor was "paid for services" within the meaning of the statute merely because he had a contract. Counsel agreed. Justice Karmeier asked counsel whether the defendant could disregard a Code Blue. Counsel responded that defendant had admitted that where he had no higher priority in the ER, responding to a Code was part of his job. Justice Karmeier asked whether the result would be different if the defendant's contract expressly carved out responding to codes. Counsel responded that if it had not been part of defendant's job to respond to the Code Blue, that would probably change things. Justice Karmeier posited a doctor paid to travel among hospitals treating patients who encounters and treats a patient on the street while between locations. Counsel answered that he didn't know what the proper result was, but it was a different factual situation. Justice Karmeier asked whether plaintiff maintained that the defendant could not be a Good Samaritan because he was paid, or whether the scope of his duties was what mattered. Counsel answered that both were true. Counsel closed by describing a situation where a defendant had decided not to bill a patient because of a bad result, and under defendant's formulation of the statute, defendant would be immunized - this was the most absurd result imaginable, counsel argued.

In rebuttal, counsel for the defendant argued that plaintiff's position meant that the Legislature didn't know the difference between "without fee" and "without compensation." The legislature didn't use the different terms randomly, counsel argued; "without fee" was used in emergency care given without prior notice of the need, where "without compensation" described situations of broader immunity (like free clinics). Justice Thomas suggested that certain sections of the Act appeared to use "without fee" and "without compensation" interchangeably. Counsel argued that the defendant would be compensated for his time regardless of whether he attended the Code Blue or not. Justice Thomas suggested a hypothetical - an emergency occurred in the hallway outside of an ER, and the physician happened to roll the patient into the ER to use some sort of apparatus. Would the Act apply? Counsel answered that if care took place in the ER, the defendant's physician group would bill the patient, and the Act wouldn't apply. Counsel concluded by arguing that if the Act was intended only to apply to "volunteers," it would be far shorter. The legislature had chosen its terms carefully throughout. The Court may disagree with the public policy choices the legislature had made, counsel argued, but those choices were for the legislature to make.

We expect Home Star Bank to be decided in the next four to six months.

Illinois Supreme Court Handing Down Bartlow and Evanston Insurance on Friday Morning

The Illinois Supreme Court has announced that it will file opinions in two civil cases on Friday morning at 10 a.m. The cases and issues presented are:

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 underlying facts and lower court opinions is here.

Bartlow v. Costigan, No. 115152 -- Are the administrative fines imposed by the Illinois Department of Labor under the Employee Classification Act unconstitutional? Our detailed summary of the underlying facts and lower court opinions is here. Our report on the oral argument is here.

Evanston was argued May 16 of last year, meaning that the case has been under submission 281 days. Bartlow was argued September 17, and has been under submission for 157 days. Last year, the median days under submission for non-unanimous decisions was 185.79 days, and for unanimous decisions, 103.7 days.

What the Pension Reform Decision in Arizona May Mean for Illinois

Today the Arizona Supreme Court has handed down its much-anticipated decision in Fields v. The Elected Officials’ Retirement Plan. In Fields, the Court unanimously struck down a pension reform package enacted by the legislature in 2011, finding that the statute violated the Pension Clause of the Arizona Constitution. The decision will be much debated in Illinois, where the legislature’s 2013 pension reform package is now the subject of at least three different lawsuits.

Arizona is one of a small number of states which expressly protects public pensions as a matter of state constitutional law:

Membership in a public retirement system is a contractual relationship . . . and public retirement system benefits shall not be diminished or impaired.

The Arizona legislature established the Elected Officials’ Retirement Plan in 1985. The Plan is funded by employer and employee contributions and investment proceeds, as well as certain court fees. When the Plan was first created, post-retirement benefit increases were awarded ad hoc – there was no automatic formula. In 1990, the legislature enacted ARS 38-818, creating a statutory mechanism for calculating automatic yearly benefit increases. Section 38-818 isn’t a cost-of-living formula, strictly speaking – benefit increases are based upon how well the Plan’s investments did the previous year, subject to a yearly cap.

Section 38-818 provided that retirees were “entitled to receive a permanent increase in the base benefit” each year, as calculated by the formula. But the statute had a sunset provision set for 1994. When 1994 rolled around, the legislature allowed the increase formula to lapse, but in 1996, the legislature amended the statute by striking the sunset clause entirely. The legislature reduced the cap on yearly increases in 1996, but restored the cap to its original 4% per year in 1998. Later that year, the voters adopted the Arizona Pension Clause.

Beginning in 2000, the Arizona Plan’s funding ratio (assets divided by liabilities) started to decline. In the ten years that followed, the funding ratio dropped from 141.7% to 66.7%. Nevertheless, the statute provided retirees with a 4% benefit increase each year through 2011.

In 2011, the Arizona legislature adopted pension reform. The statute did two things.

First, the statute substantially changed the Plan’s reserve fund. Until 2011, in a year when there was money left over from investment returns after retirees were paid the maximum increase, the excess was placed in the reserve fund to finance increases in years where investments didn’t do well enough to fund additional benefits. The 2011 statute prohibited the transfer of $31 million in excess earnings to the reserve fund. As a result, retirees received only a 2.47% increase in 2011, and none at all in 2012 and 2013.

Second, the 2011 statute changed the formula for calculating future yearly increases, beginning in July 2013. The minimum rate of return necessary to trigger any increase was raised from 9% to 10.5%, and future increases were tied to the Plan’s funding ratio.

The plaintiffs filed a putative class complaint, alleging that the pension reform package violated the state Pension Clause. When the trial court agreed, the Arizona Supreme Court agreed to hear an appeal immediately, bypassing the Court of Appeals.

The Supreme Court affirmed the trial court. The question, the Court wrote, was whether the formula established by Section 38-818 for calculating yearly increases was itself a “benefit” within the meaning of the Pension Clause. The plaintiffs argued that it was, but the State and the Plan argued that retirees had only the right to receive benefits in an amount determined by the most recent formula, whatever it might be.

The Court found that the history of the state pension statutes settled the question of what the voters had in mind when they adopted the Pension Clause. Eight years before the Clause was approved, the legislature had enacted the original version of Section 38-818 providing that retirees were “entitled to receive [a] permanent benefit increase in their base benefit.” When the legislature struck the sunset provision, that phrase in quotes was left: retirees were “entitled” to receive a yearly increase, apparently in perpetuity, and that’s how the statute still read when the Pension Clause was adopted. Given that, the Court unanimously concluded that voters would have regarded the formula for calculating yearly increases as falling within the scope of the “benefits” protected by the constitution.

The Court pointed out that its holding was consistent with its earlier cases. In Yeazell v. Copins, the Court had held that an employee was entitled to have his or her pension calculated pursuant to the pension formula which existed when the employee was hired, not pursuant to any less favorable formula which might be adopted after the employee was on the job. The Court also noted that courts in New York and Illinois – two states with similar pension clauses – had likewise held that benefit formulas were constitutionally protected once a public employee was hired.

Given that the increase formula was a pension “benefit,” this only left the question of whether the 2011 amendments diminished or impaired those benefits. The Court had little trouble concluding that they had. First, by preventing the transfer of excess funds to the reserve fund, the statute had reduced 2011 benefit increases and eliminated 2012 and 2013 hikes. Second, by changing the formula for calculating future increases, the statute ensured that increases after 2013 would be significantly smaller, if indeed retirees received increases at all.

As I noted at the outset, pension reform was adopted in Illinois in 2013. The Illinois Pension Clause is virtually indistinguishable from the Arizona Clause:

Membership in any pension or retirement system of the State, any unit of local government or school district, or agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

Evidence that the Illinois Constitutional Convention intended to protect formulas for calculating benefit increases from diminishment is quite strong, and the Illinois courts have so held, almost without exception. Nearly all of the arguments raised in the Arizona case have been debated in recent years in Illinois as the legislature wrestled with pension reform. Given the striking similarities in the law of the two states, the unanimous decision of the Arizona Supreme Court may cast a long shadow as litigation in Illinois moves forward.

Illinois Supreme Court to Decide Scope of State Whistleblower Act

Our previews of the newest additions to the Illinois Supreme Court's civil docket conclude with State of Illinois ex rel. Pusateri v. The Peoples Gas Light and Coke CompanyAn unpublished decision from the Fourth Division of the First District, Pusateri involves two major issues relating to the scope of the state Whistleblower Act: (1) does a plaintiff state a claim under the Act by alleging that the defendant included falsified information in a utility rate case; and (2) did a 2009 safety audit before the Illinois Commerce Commission publicly disclose the alleged fraud, requiring plaintiff to prove he was the original source of the information in order to establish jurisdiction.

Plaintiff filed a sealed complaint under the Whistleblower Reward and Protection Act in 2009. In the spring of 2011, the state notified the court that it was declining to intervene in the proceedings. The court ordered the plaintiff to conduct the action on the state’s behalf, unsealed the complaint and ordered service on the defendant.

Before launching into the facts of Pusateri, we should spend a moment with Section 3 of the Act – the part that’s at issue in Pusateri – since “whistleblower” is something of a misnomer. Section 3 is more in the nature of a classic common-law qui tam action: a private citizen sues on behalf of the government, alleging that somebody gave the government a fraudulent bill or claim for payment. In the vast majority of cases, this involves straightforward allegations of fraud by the government’s vendors – an allegation that a bill for goods or services provided to the government was somehow based on fraud. The penalties written into the statute are stiff – a civil penalty and treble damages.

Pusateri involves something quite different, however – a utility’s rate case before the Illinois Commerce Commission. The defendant is required to file a written report with the ICC whenever it takes more than an hour to respond to a report of a gas leak. The plaintiff was a former management-level employee of the defendant. He alleged that following his promotion to management, he was ordered to falsify the ICC reports, changing response times exceeding an hour to something less than an hour. The court noted that the complaint was short on details, including nothing about how many members of management supposedly participated in the alleged practice; whether every report was allegedly altered or only some were; whether it was allegedly done routinely or only when the utility was getting lots of reports; or whether there was some sort of threshold that triggered alteration – such as changing every report from an incident where the response time exceeded two hours.

Anyhow, the plaintiff alleged that the defendant turned over these response time reports to the ICC as part of a rate case, arguing that its safety record was one basis for granting the requested rate increase. The rate increase was granted, and utility bills were subsequently sent to the State and others using the new higher rates. And that’s where the qui tam claim arose, according to the plaintiff – the utility bills to the State were the supposedly fraudulent claim for payment.

The defendant moved to dismiss on two grounds: (1) failure to state a claim – purportedly false support for a rate case didn’t transform the subsequent utility bills into a false claim sufficient to support a Whistleblower Act claim; and (2) the plaintiff’s allegations had been publicly disclosed before filing, and the plaintiff wasn’t the original source of the information, meaning that the trial court didn’t have jurisdiction. The trial court dismissed on the first grounds, holding that plaintiff’s theory didn’t state a claim.

The defendant’s principal argument on appeal was that safety records aren’t one of the factors set out in the Administrative Code for the ICC to consider in rate cases, so there was no causative connection between the alleged fraud and the defendant’s bills. In reversing the trial court, the First District held that while true, that didn’t change the fact that the defendant had submitted the data, and the ICC had considered it as part of the case – nothing in the Administrative Code suggested that the enumerated factors were an exclusive list. Given that the case arose on a motion to dismiss – meaning that the plaintiff’s allegations had to be assumed true on review – that was enough to state a claim under the Whistleblower Act.

The defendant’s alternative argument was based on Section 4(e) of the Act, 740 ILCS 175/4(e). According to that section, no court has jurisdiction over a Whistleblower Act claim based on publicly disclosed information unless it’s brought by either the Attorney General, or by the private individual who was the original source of the information. The “original source” is defined as the person with “direct and independent knowledge of the information” who voluntarily provided the information to the State before suing.

The defendant argued that the ICC had conducted a safety audit, including its gas leak response time reports, in February 2009.  This constituted a public disclosure of the alleged fraud, the defendant argued, and since the plaintiff was not the original source of the allegations, he was allegedly out of luck.

The Appellate Court disagreed. According to the Court, the ICC had found the defendant’s reports inadequate to explain slow response times, and that the Commission had requested additional reports, leading to the defendant instituting a new reporting system. But the alleged falsification of the reports was another matter entirely, the Court concluded – nothing in the audit suggested that the ICC was aware of those allegations. Since the allegations had never been publicly disclosed, there was no need to consider whether or not the plaintiff was the original source. Justice Stuart E. Palmer dissented, arguing that allegedly false information in a rate case didn’t make the ensuing utility bills into a false claim within the meaning of the Whistleblower Act.

We expect Pusateri to be decided in approximately eight months.

Illinois Supreme Court to Decide Whether Insurance Agents Owe a Duty of Care

Our previews of the civil cases which the Illinois Supreme Court agreed to review in the closing days of the January term continue with Skaperdas v. Country Casualty Insurance Company, a decision from the Fourth District. Skaperdas poses a question of considerable potential importance to the insurance industry: does an insurance agent owe customers a duty of care in obtaining insurance?

Skaperdas arises from a bicycle accident. In early February 2008, plaintiff's girlfriend was in an accident driving one of his vehicles. The plaintiff's insurer covered the loss on the condition that the insurer would henceforth list the girlfriend as an additional driver on the policy. Shortly thereafter, the plaintiff allegedly had a conversation with his insurance agent, telling the agent to add both the girlfriend and her son to the policy. Effective February 2009, the plaintiff purchased a policy. The policy listed only the plaintiff as a named insured, but on the declarations page identified the driver as a "female, 30-64."

A few months later, the girlfriend's son was seriously injured in a bicycle accident. Plaintiff and his girlfriend settled for the negligent driver's policy limits, but then made a claim for underinsured motorist benefits under the plaintiff's February 2009 policy. The defendant denied the claim on the grounds that neither the girlfriend nor her son were named insureds on the policy.

Plaintiff sued the defendants, alleging negligence against the insurance agent in obtaining the required policy, and seeking a declaration of insurance coverage with respect to the insurer. The defendants moved to dismiss, with the agent arguing that since he was an "agent," not a "broker," he owed the plaintiffs no duty of care in obtaining the requested insurance. The trial court granted both motions to dismiss.

The case turned on the proper interpretation of 735 ILCS 5/2-2201(a) of the Insurance Placement Liability Act:

An insurance producer, registered firm, and limited insurance representative shall exercise ordinary care and skill in renewing, procuring, binding, or placing the coverage requested by the insured or proposed insured.

The question was whether an "agent" was an "insurance producer." The Fourth District had first addressed the question in 2006 in Country Mutual Insurance Co. v. CarrIn Carr, the court had held that an insurance "producer" is defined by the Insurance Code as "a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance." 215 ILCS 5/500-10. The court held that there was no basis for distinguishing between agents and brokers under the statute, so agents owed the same duty brokers did.

Carr had been vacated by the Supreme Court in order to facilitate the parties' settlement. But that didn't mean that the Supreme Court disagreed with the holding, the Skaperdas court pointed out. The Fourth District held that its views hadn't changed in the seven years since Carr, reaffirming its construction of Section 2-2201. Finding that the agent/broker distinction was irrelevant for purposes of liability, the Appellate Court reversed.

We expect Skaperdas to be decided in six to eight months. 

Illinois Supreme Court to Decide Whether Improper Venue in an Administrative Review Case Deprives the Circuit Court of Jurisdiction

Our previews of the new review grants from the Illinois Supreme Court’s January term continue with Slepicka v. State of Illinois, a case from the Fourth District of the Appellate Court. Slepicka poses a question of general importance for administrative law: what’s the proper venue for a petition for administrative review?

The plaintiff in Slepicka resides in a nursing home located in Cook County. In January 2012, the defendant served plaintiff with a notice of involuntary transfer or discharge on grounds of nonpayment. Plaintiff exercised her right to demand a hearing from the Department of Public Health. An administrative law judge from the Department held both a prehearing conference and an administrative hearing at the nursing home. Several months later, the ALJ issued a written decision recommending approval of the transfer/discharge. The assistant director of the Department confirmed the ALJ’s decision. The plaintiff filed a complaint seeking administrative review, but filed it in Sangamon County – where Department is – rather than in Cook County. The defendant moved to dismiss or in the alternative to transfer the matter to Cook County. The Circuit Court denied the motion, but ultimately upheld the Department’s decision. The Fourth District reversed.

The Administrative Review Law applies to any agency whose enabling Act expressly adopts the Law. The Nursing Home Care Act clearly does so, so decisions such as the one at issue in Slepicka are reviewed pursuant to the Administrative Review Law. The Illinois courts have long held that in order for a court to obtain subject matter jurisdiction over an agency action, the procedures set forth in the Administrative Review Law must be strictly followed.

So it sounds on the face of it as if filing in the wrong venue might deprive the court of jurisdiction. The problem is, that theory runs smack into Sections 2-104(a) and 2-106(b) of the Code of Civil Procedure, which expressly say that “no action” can be dismissed for improper venue when there’s a proper one available. The Fourth District held that because the Administrative Review Law doesn’t expressly state that improper venue is a fatal defect – where the Code of Civil Procedure expressly says it isn’t – the CCP prevails, and improper venue is grounds for transfer, not dismissal.

So was the venue in Slepicka improper? The statute says that a petition for judicial review may be filed in any of three places: (1) where “any part of the hearing or proceeding culminating in the decision of the administrative agency” was held; (2) where any part of the subject matter involved is situated; or (3) where any part of the transaction which gave rise to the proceedings is located. 735 ILCS 5/3-104.

The plaintiff argued that Sangamon County was a proper venue under (1) – the decision being reviewed came from the Assistant Director, and the Assistant Director’s decision had been issued from Springfield. The problem with that, the Appellate Court held, was that the statute didn’t say venue lies where the final decision is issued. It says venue lies where “any part of the hearing or proceeding culminating in the decision” was held. The only hearings in the case – the prehearing conference and the administrative hearing itself – were in Cook County. So the only permissible venue was Cook County. Accordingly, the Fourth District reversed and remanded with instructions that the matter be transferred to Cook County.

We expect Slepicka to be decided in six to eight months.

The Perils of Incomplete Service

Our previews of the newest additions to the Illinois Supreme Court’s civil docket continue with Bettis v. Marsaglia, an election law case from the Fourth District. Bettis poses the question of whether a plaintiff’s failure to name the Electoral Board as a party defendant and separately serve the Board with her petition for review in the Circuit Court deprives the Circuit Court of jurisdiction.

The plaintiff in Bettis tried to put a proposition on the ballot regarding the School District’s issuance of certain working cash bonds. Objections were filed, alleging that the plaintiff’s petitions were unnumbered and improperly bound. The Electoral Board sustained the objections, and the plaintiff sought to file a petition for judicial review in the Circuit Court.

The plaintiff’s petition named only two individuals – the objectors – as parties. Although the certificate of service reflected service on all members of the Electoral Board, it didn’t reflect separate service on the Board as an entity. The defendants moved to dismiss, arguing that these two defects deprived the Circuit Court of subject matter jurisdiction. The Circuit Court agreed and tossed the case.

On appeal, the defendants argued that since the election the plaintiff was aiming for had already come and gone, the appeal was moot. The Appellate Court agreed that the appeal was technically moot, but opted to decide it anyway under the public interest exception, concluding that the appeal presented issues of public concern which had divided the Appellate Court and which were likely to recur. Therefore, the court addressed the merits.

The subject matter jurisdiction issues depended on the proper construction of Section 10-10.1(a) of the Election Code (10 ILCS 5/10-10.1(a)). According to the statute, a party seeking judicial review of a decision of the Electoral Board must “file a petition with the clerk of the court” located in the “county in which the hearing of the electoral board was held.” In addition, the party must “serve a copy of the petition upon the electoral board and other parties to the proceeding by registered or certified mail within 5 days after service.”

The Court rejected defendants’ claim that the plaintiff’s failure to name the Board and its members as defendants was fatal to the Circuit Court’s jurisdiction. The statute said nothing at all about the caption on the petition, the Court pointed out. In doing so, the Court distinguished Russ v. Hoffman and Bill v. Education Officers Electoral Board of Community Consolidated School District No. 181, both of which involved not only a faulty caption, but also failure to serve the individual Board members.

The defendants’ second argument – that the plaintiff’s failure to separately serve the Board was fatal – met with more success, however. The districts of the Appellate Court have split on the question of whether the Board must be separately served, or whether service on the Board members was sufficient, the Court noted. The Fourth District opted to follow the First District, holding that the statute unambiguously required service on the Board, not just its members, and that failure to effect such service deprived the Circuit Court of jurisdiction.

To date, the decisions holding that the requirements of Section 10-10.1(a) are jurisdictional come from the Appellate Court. It will be interesting to see whether or not that view is challenged at the Supreme Court, or the debate focuses exclusively on the question of whether service on Board members is sufficient. In any event, we expect Bettis to be decided in six to eight months.

Illinois Supreme Court Debates Whether State FOIA Applies to State's Attorney's Offices

Based upon the oral argument during the recently-concluded January term, it is not clear what the Illinois Supreme Court is likely to decide in Nelson v. The Office of the Kendall County State's Attorney. Nelson raises a deceptively simple issue: are the States' Attorneys' offices subject to the state Freedom of Information Act? Our detailed summary of the facts and lower court decisions in Nelson is here. The video of the argument is available here.

The plaintiff filed separate complaints against the County and the office of the State's Attorney, seeking injunctions requiring disclosure of certain emails which he had demanded in FOIA requests. Both actions were dismissed; according to the Circuit Court, the County couldn't be required to turn over the State's Attorney's records, and the State's Attorney wasn't subject to FOIA in the first place.

Here's how Illinois' FOIA works. Every "public body" is required to make public records available on request for inspection, subject to numerous exceptions. If the person asking gets turned down, he or she can go to the Attorney General's office, or sue in circuit court. A decision from the AG's Public Access Counselor goes straight to the Appellate Court for review as a final administrative decision. The Circuit Court, on the other hand, reviews the matter de novo. A "public body" is defined as "all legislative, executive, administrative or advisory bodies" of the state. Therefore, "judicial bodies" are not subject to the Act.

In affirming the Circuit Court, the Second District made it clear it wasn't deciding whether the State's Attorney was in fact part of the judicial branch of government. Rather, it was merely deciding whether the State's Attorney was subject to FOIA. The answer to that was no, the Court held, largely based on the fact that the state constitution creates the office in the judicial article. The court cited the State's Attorneys Appellate Prosecutor Act, 725 ILCS 210/3, for the proposition that the legislature intends the term "judicial body" to mean something broader than "judicial power."

Before the Supreme Court, counsel for the plaintiff argued that the issue at hand was simply whether the State's Attorney was subject to the FOIA. The State's Attorney was a member of the Executive Branch, counsel argued. Justice Thomas asked whether the Appellate Court had based its analysis on the proposition that the State's Attorney office is judicial, or something different. Counsel answered that the Court had held that inclusion of the office in the judicial article of the constitution was determinative. Justice Thomas asked whether it was more of a public policy analysis, as opposed to a finding about the legislature's intent. Counsel responded that the Appellate Court had first looked at the constitution, and then at the State's Attorneys Appellate Prosecutor's Act. Justice Theis noted that the Appellate Prosecutors' Act described the office as a "judicial agency of state government," and asked counsel what that meant. Counsel responded that the statute didn't mean much for the meaning of an FOIA passed 27 years earlier. Justice Theis asked why the legislature would have chosen such language given the cases holding that the State's Attorney is an executive branch agency. Counsel responded that if the legislature had intended to decide the scope of FOIA, it would have said that the State's Attorney is not subject to FOIA. Counsel also noted the Open Meetings Act, which provides that information gathered by a State's Attorney in investigating a possible violation is not subject to FOIA. Why would the legislature have included such a provision if the State's Attorney's office were exempt from FOIA, counsel asked. Chief Justice Garman asked whether the statue was ambiguous. Counsel  argued that the State's Attorney's office was unambiguously included in the statute. The Chief Justice asked whether it was appropriate to consider whether the emails at issue related to court proceedings. Counsel answered that the statutory exemptions addressed the relevance of that. Justice Karmeier asked whether counsel was suggesting that the matter be resolved on the basis of public policy, or whether it was just a question of whether the State's Attorney is or is not part of the judiciary. Counsel answered that policy has to play a part as the statute is analyzed. Justice Thomas suggested that the Appellate Court's decision had been based on policy - essentially, a holding that the court would not extend FOIA to State's Attorneys unless the legislature made it clear that State's Attorneys were covered. Counsel agreed that that was certainly the inference. Justice Thomas noted that counsel saw the policy argument going the other way. Counsel answered that if the Court doesn't overturn the Appellate Court's holding, the result would be a State's Attorney's office immune to public scrutiny.

Counsel for the State's Attorney's office began by arguing that the placement of the State's Attorney in the judicial article of the state constitution was dispositive. Justice Thomas asked whether that was so even in light of the Court's case law holding that the State's Attorney's office is executive in nature. Counsel answered that the State's Attorney certainly performed executive functions, but the nature of the office's functions was not the test. Counsel argued that the Judicial Inquiry Board, for example, was executive in its functions, but the Attorney General had nevertheless opined that the Board was exempt from FOIA because of its placement in the constitution. Justice Theis pointed out that previous decisions of the Appellate Court had suggested that the FOIA was ambiguous. Counsel responded that the statute used the term "judicial body" rather than "judiciary," and argued again that the placement of the State's Attorney's office in the judicial article of the constitution was dispositive. Justice Theis pointed out that counsel argued that the court shouldn't go beyond the four corners of the statute, but counsel nevertheless wanted the court to look to the constitution. For purposes of understanding what a judicial body is, counsel answered, the court should look beyond the statute. Justice Theis asked whether the court should look at the legislative history. Counsel responded that the opinion of a single representative should not carry much weight. Justice Burke asked whether FOIA should be applied liberally in favor of disclosure. Counsel answered that the prior question was whether the statute applied in the first place -- for example, while there might be instances in which there are public policy arguments for disclosure of judiciary records, it made no difference since the judiciary simply isn't subject to the FOIA. Justice Thomas asked, since the statute applies to all executive, legislative, and so on, what the court should do with its cases saying the State's Attorney's office is executive. Counsel answered that "executive branch," "executive body" and "executive function" all meant different things. Because of how the legislature defined a "public body," it was not a conflict to say that State's Attorney's offices were judicial bodies serving almost exclusively executive functions. It was up to the legislature, counsel argued, to change that. Chief Justice Garman asked whether the court needed to consider what if any judicial role the State's Attorney played. Counsel again argued that the office's placement in the constitution was dispositive.

Counsel for the County briefly followed, arguing for a rule that public bodies need not disclose records they are not the primary source for. Counsel argued that the statute was clear, and what was needed was a strong statement from the court to deter unnecessary litigation.

In rebuttal, counsel for the plaintiff argued that the State's Attorney's placement in the judicial article of the constitution was only a matter of salaries and selection; it added nothing to the argument. Counsel argued that there are statutes addressing the concerns raised by the County.

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

Illinois Supreme Court to Address Distraction Exception to Open-and-Obvious Peril Rule

We begin our previews of the civil cases which the Illinois Supreme Court agreed to review at the conclusion of its January term with Bruns v. The City of Centralia, Illinois. Bruns - which arises from the Fifth District - offers the Court an opportunity to discuss the breadth of the so-called "distraction" exception to the rule that no one is liable for open-and-obvious perils.

On a clear day in the late winter of 2012, the eighty-year-old plaintiff in Bruns approached her Eye Clinic for a scheduled appointment. She tripped over a raised section of sidewalk that was part of the path used to access the front entrance to the Clinic, severely injuring her shoulder and arm.

The raised portion of the sidewalk where plaintiff fell had been well known. Over time, the root system of a large tree near the sidewalk had caused a portion of the sidewalk to crack and heave, ultimately raising the cracked sidewalk about three inches above the adjacent slabs. The Clinic had reported the situation to the city (which owned the sidewalk), even offering to have the tree removed at its own expense. But the City's tree committee had refused permission for the tree to be removed on grounds of its historic significance.

The plaintiff was being treated for various issues, including blurry and reduced vision. She was aware of the sidewalk defect from previous visits to the Clinic. Nevertheless, at the time of the accident, her attention was focused on the Clinic steps and entrance, not the sidewalk.

The trial court concluded that the sidewalk defect was open and obvious, and defendant accordingly owed plaintiff no duty of care. The court held that the "distraction exception" to the open-and-obvious didn't apply under the circumstances -- given that the City neither created, nor contributed to or was otherwise responsible for the distraction of the Clinic door and steps -- and entered summary judgment in favor of the City.

The Appellate Court reversed. Both sides agreed, the Court wrote, that the peril of the sidewalk was open and obvious as a matter of law. However, the open-and-obvious rule was subject to a "distraction" exception. "The exception applied when there is reason to expect that a plaintiff's attention may be distracted from the open and obvious condition to the extent that he or she will forget the hazard that has already been discovered," the court wrote. Under such circumstances, a property owner's duty is reinstated.

The issue in applying the distraction exception was not who created the distraction, the Court found, but rather the likelihood that an individual's attention would be distracted by it. "It is certainly reasonable," the Court held, "to foresee that an elderly patron of an eye clinic might have his or her attention focused on the pathway forward to the door and steps of the clinic as opposed to the path immediately underfoot." It was "not necessary," the Court wrote, "for a defendant to foresee the precise nature of the distraction." The City had knowledge of the condition of the sidewalk, and other options -- aside from the removal of the tree - existed for mitigating the peril, such as routing the sidewalk around the tree. Accordingly, the Court found, the burden on the City was not significant. Taking all this into account, there was sufficient grounds to conclude that the City had a duty of care, and the negligence claim should have been sent to the jury, the Court held.

Given the Supreme Court's recent cases, it is not especially surprising that the Court would allow the petition for leave to appeal in Bruns. The Court has debated the breadth of the open-and-obvious rule, and occasionally the distraction exception, in recent cases, most recently in Moore v. Chicago Park District. Expect the defendant in Bruns to argue that the distraction exception should either be tightly limited -- perhaps to distractions caused by the defendant - -or abolished entirely. In any case, the defendant is likely to argue that if the mere existence of a set of steps and a door constitutes a "distraction" sufficient to send a case to the jury, then there effectively is nothing left of the open-and-obvious rule under Illinois law. Appellate Strategist will be carefully following the progress of Bruns in the coming months.

We expect Bruns to be decided in six to eight months.

Argument Report: Does Voluntarily Dismissing a Custody Petition Mean You Get Hit With The Psychologist's Fees?

In our detailed summary of the underlying facts and lower court opinions in In re Marriage of Tiballi, we wrote that the question presented was whether a parent who voluntarily dismisses a custody petition can be hit with the full amount of the fees of a court-appointed child psychologist. Based upon the lively oral argument before the Illinois Supreme Court in the January term, it appears that the Court may hold that the prerequisite for that issue is missing because Tiballi doesn't involve a voluntary dismissal. All told, the court asked the parties 57 questions in slightly less than 40 minutes.

The parties divorced in 2005. In 2010, the father petitioned for a change in their child's residential custodian. The court appointed a psychologist, as authorized by the Illinois Marriage and Dissolution of Marriage Act, to submit a recommendation on custody. Not long after, the mother moved to dismiss, claiming that the father had decided he didn't want to proceed. After an order of dismissal was entered, the mother moved to amend the order to permit her to seek an award of costs. She then filed a petition for an award of slightly less than $5,000 -- her share of the psychologist's costs (the original order of appointment had provided that the fees would be split). The trial court granted the petition. The Second District affirmed, holding that the psychologist's fees qualified as "costs" under 735 ILCS 5/2-1009, which provides that a plaintiff may voluntarily dismiss an action "upon payment of costs." The court found that the fees were analogous to court costs because the court retained the expert, not the parties, and the psychologist's fees were not subject to negotiation by the parties. Justice Kathryn E. Zenoff dismissed, concluding that the case hadn't been "voluntarily dismissed" in the first place, so Section 1009 was irrelevant.

Counsel for the father began by arguing that the issue was whether costs of an expert can be taxed upon voluntary dismissal. Justice Theis asked how this case could be characterized as a voluntary dismissal. Counsel responded that once the psychologist's report was completed, counsel for the father had told counsel for the mother that he would voluntarily dismiss. Justice Theis asked whether the exchange was in the record, and counsel answered that the order assessing costs was entered pursuant to Section 1009, the voluntary dismissal statute. Justice Theis asked whether it was a voluntary dismissal where a motion to dismiss was filed, the court entered it, and the plaintiff later objected to the dismissal. Counsel answered that both parties agreed that the case involved a voluntary dismissal. Justice Thomas asked whether, in fact, the court had the authority -- and indeed, the responsibility, to allocate fees. Yes, counsel answered, but that's not what the trial court did here. Justice Thomas asked whether the cause should be remanded for the court to consider allocation of the psychologist's fees pursuant to the standards set forth in Section 604(b) of the Marriage and Dissolution of Marriage Act. Counsel answered that the court's action had foreclosed the parties' right to a hearing under Section 604(b) determining reasonableness and allocation of the fees. Justice Thomas asked whether the father was okay with a remand for allocation under Section 604(b). Counsel answered yes, that the trial court's action had greatly expanded taxable costs to a voluntarily dismissing litigants. Counsel argued that there were three bases for reversal: (1) the ruling was directly contrary to Illinois law; (2) the ruling was a strong deterrent for litigants to voluntarily dismiss; and (3) there were too many distinctions between routine costs and these fees to lump them together as taxable to a voluntarily dismissing litigant. Justice Freeman asked what the distinction was between court costs and litigation costs. Counsel responded that the Second District's opinion laid out several: court costs are fixed and mandatory; litigation costs are not imposed by court. No judgment or court order is needed to impose court costs. Justice Freeman asked how the fact that the psychologist's report was never used factored in. Counsel responded that the fees were analogous to a Supreme Court case distinguished by the Appellate Court below, Galowich v. Beech Aircraft Corp., which permitted the recovery of only a limited share of expenses for depositions necessarily used at trial. Justice Kilbride asked how the evaluation came about. Counsel responded that a guardian ad litem was appointed, and the guardian suggested a 604(b) custody evaluation. The court then appointed the examiner on its own motion. Justice Kilbride asked whether it mattered that the court had decided to make the appointment, rather than a litigant requesting the appointment. Counsel responded that by definition the examiner is appointed by the court. Justice Theis pointed out that it was several steps down the road to dismissal that the parties first spoke in terms of voluntary dismissal. Counsel argued that the father's only recourse, once the examiner's report came back, was to voluntarily dismiss, since it was clear he would not prevail. Justice Theis pointed out that the father didn't file a motion to voluntarily dismiss. Counsel responded that the motion to dismiss from the mother had been the result of the telephone conversation in which counsel for the father made it clear he was dropping the petition. Chief Justice Garman noted that in her experience, a litigant wishing to voluntarily dismiss brings a motion reciting that the party had already tendered payment of costs to the other side. Counsel responded that the father didn't know what the costs were until the mother brought her motion, so he had no chance to tender costs. The Chief asked whether the mother brought up the matter of the psychologist's fees or the court did. Counsel answered that the mother had brought a motion for reimbursement of costs under Section 2-1009, the voluntary dismissal statute. The mother did not ask for a Section 604(b) hearing on allocation and reasonableness. Justice Burke suggested that this case was different from deposition fees under Galowich. Counsel answered that certainly there was a distinction between deposition fees and this examiner's fees, but Galowich offered guidance. Justice Theis pointed out that Section 604(b) says that the court may seek the advice of professionals relating to custody. Counsel answered that further down, the statute provides for a hearing on reasonableness and allocation of fees. Justice Theis asked whether, when the court began considering fees under the voluntary dismissal statute, counsel had objected and demanded a Section 604(b) hearing. Counsel responded that trial counsel had done so.

Before counsel for the mother began, Justice Thomas asked why the court shouldn't remand for allocation under Section 604(b). Counsel answered that the case posed an important issue, and was a good vehicle to resolve the issue. Justice Thomas asked how the court could allow a determination under Section 2-1009 to stand if it found there was no voluntary dismissal in the first place. He noted that the guardian had recommended a custody evaluation. Counsel answered that the guardian had advised the court that the custody issues were unlikely to be resolved without an evaluation. Justice Thomas noted that the original order of appointment had provided that costs should be shared without prejudice to ultimate allocation. But then, dismissal had been entered less than twenty-four hours after a motion was filed, without objection by either side. So why should the court not reverse and remand for a Section 604(b) allocation? Counsel responded that the parties had a trial date, and that counsel for the father had informed her that he wasn't going to trial. She had been authorized to let the court know immediately. Justice Theis asked whether any of that was in the record. Counsel responded that it was in the briefs. Justice Theis pointed out that the order of dismissal had been entered in response to the mother's motion, and asked how one party could "voluntarily" dismiss another's action. Counsel responded that she had moved in order to take the case out of limbo. The father had sought to modify or vacate the order of dismissal so that he could be heard. The court had entertained that motion, and the result was to modify the dismissal to be without prejudice. At that point, the parties had started to talk in terms of voluntary dismissal, and the mother had become entitled to costs under Section 2-1009. Justice Karmeier pointed out that the matter didn't belong under Section 2-1009 if the court found that it wasn't a voluntary dismissal. Counsel responded that it was a voluntary dismissal. Justice Karmeier suggested that the words "without prejudice" didn't make it voluntary, and the parties' concern seemed to be just with whether or not dismissal was with prejudice. Counsel responded that the idea of with or without prejudice means little in custody law, where a court always looks to the best interests of the child. Justice Thomas noted that counsel had said the mother would prevail in an allocation, but the issue was too important not to answer now. Was the issue whether psychologist's fees could be allocated in a nonsuit? Counsel agreed it was. Then didn't counsel see the problem if the court didn't think it was a nonsuit? Counsel responded that both sides had presented the matter as a voluntary nonsuit below. Justice Thomas suggested that the court had an obligation to send the case back if the costs were decided under the wrong statute. Counsel argued that the case presented an important issue for counsel in the area. Justice Burke asked whether the lower court's ruling would open up a lot of items to be called costs and taxed to a dismissing plaintiff. Counsel disagreed, arguing that the amount involved here was non-negotiable. Justice Burke asked how the psychologist's fees were distinguished from guardian ad litem fees. Counsel responded that in her view, the guardian's fees should have been awarded as well.

We expect Tiballi to be decided in 3-4 months.

Argument Report: Does Waiver of Personal Jurisdiction Apply to Orders Entered Before Service?

In the recently concluded January term of the Illinois Supreme Court, the court heard arguments in five civil cases. Our reports begin with BAC Home Loans Servicing, LP v. Mitchell. In BAC, an apparently skeptical Court heard arguments on whether a party's waiver of his or her objection to personal jurisdiction could be limited to events happening after the waiver, as opposed to validating the entire history of a case, including events happening before the new party appeared. Our detailed summary of the facts and underlying court rulings in BAC is here.  The video of the oral argument is here.

The plaintiff filed its complaint in foreclosure in late 2009. Plaintiff's motion for judgment of default was granted in 2010, and a judicial sale was held in September 2010. The plaintiff moved for an order approving the sale, which was granted in September 2011.

On October 23, 2011, the defendant finally appeared, moving to vacate approval of the sale, claiming to have never been served. That motion was withdrawn. Defendant moved to quash the approval order, or in the alternative, for relief under 735 ILCS 5/2-1401 and 735 ILCS 5/15-1508. In April 2012, the plaintiff opposed, claiming to have completed substitute service on the defendant's daughter.

Only one problem, according to the defendant: she didn't have a daughter. No matter, the Circuit Court held: the defendant had waived her objections to jurisdiction by filing her initial motion to vacate the previous year.

On appeal, the plaintiff argued that defendant's first motion had waived any and all challenges to jurisdiction by failing to move to dismiss the action or quash service. Thus, plaintiff claimed, the defendant had failed to comply with the requirements of Section 2-301(a) of the Code of Civil Procedure or Section 15-1505.6 of the Mortgage Foreclosure Act for challenging personal jurisdiction Defendant responded that even if she had made a waiver - which she denied - it was only prospective and could not justify the foreclosure order already entered. The Appellate Court disagreed, holding that certain amendments to the Code of Civil Procedure enacted in 2000 had provided that "all objections to the court's jurisdiction over the party's person" were waived by an appearance. The defendant's waiver of personal jurisdiction therefore operated both prospectively and retroactively, the court held.

Counsel for the defendant opened the argument at the Supreme Court. According to counsel, the case presented two questions: (1) did the defendant waive any objections to the court's personal jurisdiction; and (2) if so, how broadly did the waiver operate? It was uncontested, counsel argued, that plaintiff had never properly achieved service.  Chief Justice Garman asked whether the issue of waiver had been raised by the defendant's PLA. Counsel responded that it was, arguing that the defendant's initial motion had only been withdrawn because the trial court had directed that it be. Justice Theis asked whether the court's direction to withdraw the motion was in the record, and counsel responded that it was not. Justice Thomas asked whether it was time for In re Marriage of Verdung, heavily relied on by defendant, to be reexamined in light of subsequent amendments to Section 2-301 of the Code of Civil Procedure and Section 1505 of the Mortgage Foreclosure Law? Counsel answered that Verdung remained good law. Justice Thomas asked whether the amendments to both statutes removed the prospective limitation on waivers of personal jurisdiction. Counsel responded that they did not, and argued that it would violate due process to hold that submission to jurisdiction subjected the defendant to all prior orders. Justice Freeman asked whether due process rights could be forfeited. Counsel answered no, particularly when the defendant had done nothing wrong. Justice Burke asked whether there was any evidence that Section 2-1301 motions should apply waivers both prospectively and retroactively. Counsel responded that the real purpose of the amendments to the statute was simply to eliminate the distinction between general and special appearances. Justice Thomas pointed out that three years had passed from the default to approval of the foreclosure sale, and asked whether holding that waiver was only prospective would reset the clock in the litigation. Counsel challenged whether proceeds had in fact taken three years. Even if it had, the amount of time passing was irrelevant, counsel argued. Service was mandatory. Plaintiff did not even claim that defendant had ever been validly served. Chief Justice Garman noted that defendant had made a general appearance, and counsel answered that the defendant had simultaneously moved to vacate on grounds of lack of jurisdiction. The Chief Justice asked counsel whether the defendant had then moved to quash the order for possession of the deed. Counsel responded that defendant had never done anything but attack personal jurisdiction. Counsel urged the Court to clear the pending conflict of authority by reaffirming Verdung.

Counsel for the plaintiff began by arguing that the sole issue was the proper interpretation of the clear language of 735 ILCS 5/2-301(a)(5): "If the objecting party files a responsive pleading or motion . . . prior to the filing of a motion in compliance with subsection (a), that party waives all objections to the court's jurisdiction over the party's person." Verdung is twenty-five years old, counsel argued, and has been clearly overruled by subsequent statutes eliminating any limitation on the breadth of the waiver of personal jurisdiction. Justice Theis asked whether counsel was arguing that defendant's having filed a motion to vacate in her first appearance doomed the defendant's argument. Counsel responded that the issue of whether defendant had waived objections to personal jurisdiction was not properly before the court. Justice Theis asked counsel to comment on the fact that the defendant had raised her objections to personal jurisdiction over and over. Counsel responded that defendant had not asked that service be quashed in any of four post-judgment motions. Justice Burke asked counsel how the legislature had indicated that waiver was both prospective and retroactive. Counsel responded that the statute provided for waiver of "all" objections. Justice Burke asked counsel whether the global waiver created any due process concerns. Counsel responded that Section 2-301 had taken care of those concerns by providing a clear road map of what a defendant needed to do to object to jurisdiction, while still honoring finality.

On rebuttal, counsel for the defendant argued that everyone knows litigants sometimes enter appearances without ever actually being served. If the Court affirmed, such litigants would be required to examine the entire history of the litigation or risk being stuck with burdensome orders entered before the litigant appeared. Justice Kilbride asked counsel the basis for defendant's first motion. Counsel answered that defendant's original motion was based on a single argument: faulty service.   Justice Burke asked whether defendant was a pro se at the time, and counsel answered no. Justice Thomas asked whether defendant's motions varied from the steps required by the statutory amendments. Counsel responded that Section 2-1401 specifically permitted a motion to vacate orders entered without jurisdiction. Justice Thomas noted that Section 2-1401 was for new actions, but counsel argued that it covered defendant's post-judgment motions. Justice Thomas asked whether Section 2-1401 required service on the plaintiff. Counsel responded that plaintiff had waived service. Justice Kilbride concluded by asking what the practical difference was between the steps defendant actually took and a motion to quash. Counsel responded "absolutely none."

We BAC Home Loans to be decided in four to six months.

What We Can Learn From Illinois' Kilbride Court

Note: The following post was originally posted on Law360.com on October 31, 2013.

On Friday, Oct. 25, Chief Justice Thomas L. Kilbride ended a three-year term as chief justice of the Illinois Supreme Court, resuming his seat as an associate justice. The following Monday marked the installation of new Chief Justice Rita B. Garman, the 119th chief justice in the state's history and the second woman to hold the post.

Chief Justice Kilbride amassed a record of important achievements outside the courtroom during his tenure. Early in his term, the court announced the end of printed official reporters in Illinois, eliminating an enormous expense for bound volumes and substituting a public domain citation system.

In early 2012, the chief justice spearheaded a pilot program for electronic filing of documents in the Illinois Supreme Court. Later that year, the chief announced new statewide standards for e-filing in civil cases in the state's trial courts. When fully phased in, electronic filing promises to save Illinois taxpayers millions — Cook County spent nearly $16 million on storage of paper documents in 2011 alone.

When the chief justice took office, Illinois was one of only 14 states where cameras in courtrooms were either barred outright or allowed under such restrictive terms that they were hardly used. In January 2012, Chief Justice Kilbride announced a pilot program allowing circuit courts to apply for permission to allow news cameras and electronic news recording.

The court also pioneered additional steps to help the disadvantaged navigate the justice system, amending the Code of Judicial Conduct to permit judges to assist self-represented litigants in being fairly heard and creating a model-language access plan for courts across the state designed to allow litigants and witnesses with limited English proficiency to be fully engaged in the judicial process.

The Kilbride court began in October 2010, when Chief Justice Kilbride succeeded Chief Justice Thomas R. Fitzgerald, and Justice Mary Jane Theis joined the court, taking the retiring chief justice’s seat. The court decided 104 civil cases (disregarding attorney discipline, juvenile and commitment matters). Eighty-five of these cases were appeals from final judgments and orders fully resolving an entire suit or a discrete claim within a larger suit.

The court decided 26 tort cases, 15 cases predominantly involving civil-procedure issues, nine in domestic relations, eight in employment law, seven in constitutional law and six each in government and tax law. Interestingly, given the amount of attention arbitration has gotten in recent years in state supreme courts around the country implementing the United States Supreme Court’s AT&T Mobility v. Concepcion decision, the Illinois Supreme Court has decided only two arbitration cases since October 2010.

Not surprisingly, a dissent before the appellate court helps in getting review; 30.6 percent of the court’s cases during the Kilbride era had a dissenter at the appellate court. A divided appellate court will often mean a divided supreme court — 40.5 percent of the Kilbride court’s nonunanimous decisions had drawn a dissent at the appellate court.

This court has been somewhat more contentious than other recent Illinois Supreme Courts, particularly over the past two years. After deciding 76.3 percent of its cases unanimously in 2011, the court has decided just over half that way in 2012 (53.8 percent) and 2013 (54.2 percent). During its three-year term, the Kilbride court decided 62.5 percent of its civil cases unanimously. It would be easy to write off the year-to-year changes as being explained by accidents of the court’s docket, but that explanation only goes so far; after all, unlike the appellate courts, the Supreme Court chooses its own cases.

Unanimity rates have typically been higher earlier in the past decade than they were under the Kilbride court. With the exception of 2006 under Chief Justice Robert R. Thomas, the court has decided more than 70 percent of its civil cases unanimously in most years. Overall, 75.3 percent of civil cases were decided unanimously under Chief Justice Fitzgerald (2008-2010), 72.3 percent under Chief Justice Thomas (2005-2008) and 72.1 percent under Chief Justice McMorrow (2002-2005).

To give a bit of context, only 37.5 percent of the 7,183 cases resolved by the United States Supreme Court between 1946 and 2009 were decided unanimously. Just over 22 percent of civil cases drew either two or three dissenters during the Kilbride era — comparable to the Fitzgerald court (19.4 percent) but somewhat more than the Thomas (13.4 percent) or McMorrow courts (14.7 percent).

Reversal rates are perhaps the most frequently cited statistic for appellate courts of last resort. During the past decade, the reversal rate at the United States Supreme Court for decisions of the Ninth Circuit has become something of a political football. So how have the appellate courts fared before the Kilbride court?

The Kilbride court reversed 61.8 percent of the civil judgments it reviewed — slightly lower than the Fitzgerald Court (67.5 percent) but more than either the Thomas (50.7 percent) or the McMorrow Courts (56.5 percent). Nearly half of the Kilbride court’s civil docket — 48.1 percent — came from Chicago’s First District Appellate Court. Four of the six divisions of the First District were reversed more than 60 percent of the time.

Reversal rates elsewhere in the state are, for the most part, similar. Sixty-three percent of civil cases from the Second District, the northernmost district in the state, have been reversed. Moving southwards, 60 percent of the Third District’s decisions have been reversed. Eighty percent of civil decisions from the Fifth District — the southernmost district in the state and considered by some to be inclined to pro-plaintiff decisions — have been reversed.

The one exception to this trend is the Fourth District, which is centered in the state capital Springfield and produces many cases involving the government. Only 41.7 percent of the Fourth District’s decisions have been reversed.

To better understand each district’s standing with the court, let’s take a look at the average number of votes to affirm the decisions of each district. Five of the six divisions of the First District have fared relatively poorly; decisions from Divisions Four, Five and Six have earned an average of fewer than three votes before the Supreme Court, and decisions from Divisions One and Two have averaged fewer than two. Other districts have done better; decisions from the Third District receive an average of 3.1 votes and those from the Fourth District 3.67.

Second only to reversal rates in most analysis of appellate courts comes speculation about voting blocs and “swing votes.” Given the number of unanimous opinions, merely calculating the percentage of cases in which each justice votes with the majority tells us relatively little; six of the seven justices have voted with the court in 90 percent or more of civil cases (Chief Justice Kilbride is the lone exception, voting with the majority in “only” 78.8 percent of civil cases).

But when we limit our sample to nonunanimous decisions, interesting patterns begin to emerge. New Chief Justice Garman and Justices Burke, Thomas and Theis have each voted with the majority in at least 80 percent of nonunanimous cases. Excluding cases involving only one dissenter reveals that Chief Justice Garman and Justice Theis have been in the majority in at least three-quarters of the 23 cases in which either two or three justices have dissented (78.3 percent and 77.3 percent, respectively).

Most often in the minority of closely divided courts are Justice Charles E. Freeman, who votes with the majority in such cases 65.2 percent of the time, and Chief Justice Kilbride, who does so in exactly half of all two- and three-dissenter civil cases. Not surprisingly, these two justices are also the court’s most frequent dissenters in civil cases, with Justice Freeman filing 10 complete or partial dissents and Chief Justice Kilbride filing 14.

The other justices dissent much less often, with Justice Thomas filing six, Chief Justice Garman five, Justice Burke four and Justices Karmeier and Theis three apiece. Justices Thomas and Burke spoke for the court most frequently during the Kilbride era, with Justice Thomas filing 18 majority opinions and Justice Burke 17.

To further study the Kilbride court’s dynamics, we turn to the justice-by-justice agreement rates: In what percentage of civil cases did each possible pair of justices vote the same way? The data reveals a central group consisting of Chief Justice Garman and Justices Thomas and Karmeier — not coincidentally, the three Republicans on the court — with Justices Burke and Theis serving as swing votes.

Across the entire database of civil decisions, Chief Justice Garman agreed with Justice Thomas in 94.1 percent of all cases and Justice Karmeier in 88.2 percent. Justices Thomas and Karmeier agreed in 91.9 percent of all civil cases.

Turning to our proposed swing voters, Justice Burke agreed with Chief Justice Garman, Justice Thomas and Justice Karmeier 86.4 percent, 86.0 percent and 87.1 percent of the time, respectively. Justice Theis agreed with the three justices in 90.9 percent (Chief Justice Garman), 88.5 percent (Justice Thomas) and 87.6 percent (Justice Karmeier) of all civil cases.

We turn next to agreement rates in nonunanimous decisions. The new chief justice voted with Justice Thomas in 83.8 percent of all nonunanimous cases and with Justice Karmeier 70 percent of the time. Justices Thomas and Karmeier vote together in 78.4 percent of all nonunanimous civil cases.

Justice Burke voted with Chief Justice Garman in 65 percent of all nonunanimous civil cases, with Justice Thomas in 62.2 percent and with Justice Karmeier in 67.5 percent of nonunanimous civil cases. As for Justice Theis, she voted with Chief Justice Garman in 74.4 percent of nonunanimous civil cases, with Justice Thomas in 68.6 percent and with Justice Karmeier in 68.4 percent.

The court’s more liberal wing is somewhat less cohesive. Justice Burke agrees with Justice Freeman in 85 percent of all nonunanimous cases, but has voted with outgoing Chief Justice Kilbride in only 28.2 percent of such cases. Justice Freeman and Chief Justice Kilbride agreed in only 30.8 percent of all nonunanimous civil cases. Although other pairings score closer to the more conservative members — Justices Burke and Theis agreed in 65.8 percent of all civil nonunanimous decisions, and Justices Freeman and Theis agreed at exactly the same rate, 65.8 percent — in a court divided 4-3 between a moderate and a more liberal wing, a switch of even one vote from one wing to the other can change the result.

The Kilbride court’s 26 six tort cases — the single biggest block of cases on its civil docket — tend to confirm our conclusions. The reversal rate for these cases is almost the same as for the docket as a whole — 61.5 percent.

However, when one divides the data into plaintiff- and defense-oriented appellate court decisions, we learn that the court reversed 72.2 percent of all plaintiff-oriented tort decisions and only 28.6 percent of all defense-oriented ones. The unanimity rate was somewhat less for the tort docket than for the remainder of the court’s caseload — 53.8 percent of the Kilbride court’s tort cases were decided unanimously.

Agreement rates in tort cases are consistent with our results for the rest of the court’s docket. Although the sample of nonunanimous tort decisions is quite small — 12 cases in three years — Chief Justice Garman and Justice Thomas agreed 81.8 percent of the time. The new Chief Justice voted with Justice Karmeier 83.3 percent of the time. Justices Thomas and Karmeier voted together 90.9 percent of the time. Justice Burke agreed with Chief Justice Garman in 75 percent of the nonunanimous tort cases, with Justice Thomas in 100 percent and with Justice Karmeier 83.3 percent of the time. Justice Theis’ agreement rates with Chief Justice Garman, Justice Thomas and Justice Karmeier were similar (75 percent, 81.8 percent and 91.7 percent, respectively).

On the other hand, Justice Burke agreed with Chief Justice Kilbride in only 25 percent of nonunanimous tort cases. Justice Freeman and Chief Justice Kilbride agreed in only 16.7 percent of such cases. Justices Freeman and Theis agreed 50 percent of the time.

With a working moderate majority and no change in the court's personnel, it seems unlikely that the installation of Chief Justice Garman will have a significant impact on the ideological leanings of the court's decisions. For now, the lesson remains the same: In difficult cases, defense counsel wishing to assemble a majority should begin with the chief justice and Justices Thomas and Karmeier, with either Justice Burke or Justice Theis as a deciding fourth vote.

Illinois Supreme Court Holds Five-Year Statute Applies to Fraud Claims Against Architects

On Friday afternoon, in an opinion by Justice Robert R. Thomas, a unanimous Illinois Supreme Court held that fraud-based claims against architects are subject to a five-year statute of limitations. In Gillespie Community Unit School District No. 7 v. Wight & Company, the Court rejected the plaintiff school district's argument that such claims were subject to no statute of limitations at all. Our detailed summary of the facts and lower court decisions in Gillespie is here. Our report on the oral argument is here. You can watch the video of the argument here.

Gillespie arose from the plaintiff's construction of a new elementary school. In 1998, the plaintiff entered into a contract with the defendant to perform certain services prior to actually designing and building the new school. Everyone knew that the area had been extensively mined during the first half of the twentieth century, so one of those preliminary services was assessing the likelihood that the ground under a new building site might subside as a result of a long-ago underground coal mining operation.

The defendant retained an engineering firm. In early 1999, the engineers sent the defendant a letter recording various subsidence events and concluding that although "[n]o one can predict" subsidence, it could be "intuitively concluded" that there was a "relatively high risk of subsidence" in the area where the school district was considering building. The engineers followed up with a Foundation Engineering Report a month later which commented that there had been incidents of subsidence in the area, but didn't include the conclusion that there was a "relatively high risk of subsidence" at the proposed building site. The defendant forwarded the report to the plaintiff, but not the earlier letter.

The school district decided to go ahead, and retained the defendant as architect. The parties' agreement provided that the statute of limitations on any actions arising out of the project should begin running on the date of substantial completion for acts or omissions before that date, or the date of issuance of the final certificate of payment for later acts. The completed school was occupied in 2002. In early 2009, a coal mine subsided beneath the building, causing extensive damage. The building was condemned.

The school district sued the defendant, among others, alleging professional negligence, breach of implied warranty and - pursuant to an amended complaint - fraudulent misrepresentation by concealment of a material fact: the 1999 engineer's letter. The defendant architects moved to dismiss, arguing that all claims were time-barred, but the motion was denied. But they repeated the same arguments in a later motion for summary judgment, and this time, the motion was granted. The Appellate Court affirmed.

The plaintiff chose to bring only one issue before the Supreme Court: its challenge to the Appellate Court's holding that its fraudulent misrepresentation claim was subject to a five-year statute of limitations.

Before the Supreme Court, the case revolved around two statutes. First, we have 735 ILCS 5/13-214, the general statute of limitations and repose governing claims arising from construction projects. Section 13-214 provides that nearly all such claims are subject to a four-year statute of limitations and a ten-year statute of repose. But in subsection (e), the statute says:

The limitations of this Section shall not apply to causes of action arising out of fraudulent misrepresentations or to fraudulent concealment of causes of action.

Then we have the catch-all statute, 735 ILCS 5/13-205, which provides that "all civil actions not otherwise provided for" are subject to a five-year statute.

The Supreme Court had held long ago in Rozny v. Marnul that Section 5/13-205 applied to actions for fraud and deceit, as well as tortious misrepresentation. But the plaintiff argued that Rozny was before Section 5/13-214 was enacted.  The plaintiff's theory was that the words "shall not apply" in Section 5/13-214(e) meant that claims for fraudulent misrepresentation and fraudulent concealment were subject to no statute of limitations at all, meaning that section 5/13-205 didn't apply any more. The Appellate Court disagreed, and on Friday morning, so did the Supreme Court.

The problem, the Court said, was the words "the limitations of this Section" in subsection (e). "This section" was section 5/13-214 - meaning that the four year statute of limitations and the ten-year statute of repose didn't apply. It didn't mean that no statute at all applied. Because section 5/13-214 didn't apply to the plaintiff's fraudulent concealment claim, section 5/13-205 did, and the claim was barred under Rozny.

The Court pointed out that the legislature was well aware, when it wanted to provide that no statute of limitations applied to an action, of how to accomplish that, citing criminal statutes providing that certain claims may be brought "at any time." But section 5/13-214 contained no such language.

Perhaps the most interesting part of the Gillespie decision is the final two pages. The Court emphasized the fact that the plaintiff was not challenging the application of the accrual clause in the parties' contract to its fraudulent concealment claim, although it had challenged accrual before the trial court. Thus, the Court said, it was "expressing no opinion concerning the extent to which accrual provisions" such as the one found in the contract "may or may not be enforceable with regard to fraud-based claims."

Illinois Supreme Court to Hear Arguments in Five Civil Cases This Week

The civil portion of the Illinois Supreme Court’s argument docket for the January term begins tomorrow morning at 9:30 a.m. in the Court’s temporary courtroom on the 18th floor of the Michael A. Bilandic Building, 160 N. LaSalle Street, Chicago. The cases, with questions presented, are:

Call Wednesday, January 22, 2014:

  • Home Star Bank and Financial Services v. Emergency Care and Health Organization, No. 115526 – Does the Good Samaritan Act, 745 ILCS 49/25, immunize a physician from liability for alleged negligence when he is paid by a physician group to provide emergency services to patients in a hospital? For more details and a link to the Appellate Court opinion, see here.
     
  • People ex rel. Madigan v. Burge, Nos. 115635, 115645 -- May the Attorney General challenge the actions of the Police Pension Board through a separate lawsuit in the Circuit Court, or are the Board's actions subject to review only by routine administrative review? For more details and a link to the Appellate Court opinion, see here.

Call Thursday, January 23, 2014:

  • Nelson v. County of Kendall, No. 116303 – Is the office of the State's Attorney a "public body" subject to the state Freedom of Information Act? For more details, see here, and for a link to the Appellate Court opinion, see here.
     
  • BAC Home Loans Servicing, LP v. Mitchell, No. 116311 – Does waiver of a personal jurisdiction objection operate retrospectively, validating everything that has gone before, or only prospectively? For more details and a link to the Appellate Court opinion, see here.
     
  • In re Marriage of Tiballi, No. 116319 -- When a parent voluntarily dismisses a petition to change custody, can he or she be hit with the fees of a court-appointed child psychologist as costs? For more details, see here, and for a link to the Appellate Court opinion, see here.

Illinois Supreme Court Holds Temporarily Relocated Union Pipefitter Not Entitled to Workers' Comp

This morning, a six-justice majority of the Illinois Supreme Court has reversed the Fourth District of the Appellate Court, holding in The Venture-Newberg-Perini, Stone & Webster v. The Illinois Workers’ Compensation Commission that temporarily relocating for a distant job did not transform an employee’s commute into part of his or her employment for purposes of eligibility for workers’ compensation.

The claimant in Venture-Newberg was a pipefitter residing in Springfield. Over the two years preceding the accident, the claimant had worked short-term jobs for the plaintiff on four different occasions at three different plants. In March 2006, the plaintiff found itself unable to fill the available positions at a plant in Cordova, Illinois from locally based union workers, and posted the job at other union halls, including the claimant’s hall in Springfield. Claimant bid for and was awarded the position, which involved working 12 hours a day, seven days a week in Cordova – 200 miles from Springfield.

As a result, the claimant arranged for short-term lodging within an hour’s drive of the plant. On the second day of work, the claimant was seriously injured commuting to work when the pickup truck in which he was riding skidded on a patch of ice.

The general rule in workers’ compensation law is that injuries occurring while the employee is commuting to or from work do not arise out of and in the course of employment and are therefore not compensable. While there are limited exceptions, the arbitrator decided that none of them applied, and denied the claimant’s application for workers’ compensation benefits. The Workers’ Compensation Commission reversed, finding that the claimant’s course or method of travel was determined by the demands and exigencies of his job. The Circuit Court reversed the Commission on administrative review. The Appellate Court then reversed the Circuit Court, holding that the claimant qualified as a “traveling employee,” and his injuries were sustained in the course of his employment.

In an opinion by Chief Justice Rita B. Garman, the Court reversed the Appellate Court. A “traveling employee,” the Court wrote, was one “whose duties require[d] them to travel away from their employer’s premises.” Injuries arising from three types of acts by a traveling employee were compensable: (1) acts the employer instructs the employee to perform; (2) acts which the employee has a common law or statutory duty to perform; and (3) acts which the employee might be reasonably expected to perform incident to his or her assigned duties. The claimant argued that the third category applied to his commute from his temporary housing.

The majority disagreed. The claimant was neither a permanent employee of the plaintiff, nor even working for the company on a long-term exclusive basis. Nothing required him to travel out of his union’s territory to accept the job. The claimant was hired to work at the Cordova location, not directed by the employer to travel away from his ordinary work site to another location. The employer didn’t assist the claimant with his housing plans, nor did it reimburse him for travel expenses. For all these reasons, the majority concluded that the claimant was not a “traveling employee.” The majority also pointed to what it perceived as an anomalous result of the claimant’s argument – that employees hired from more distant union halls would be covered by workers’ compensation for their commutes, while employees living nearby would not.

The majority rejected the Appellate Court’s conclusion that the claimant’s lodging was decided by the demands and exigencies of his job as well. His decision to stay close to the work site was a personal one, the majority found. He had not been required to take the job, and was not required by the company to relocate. Nor was there any evidence in the record that the company had required him to be within an hour of the plant at all times, or even suggested it.

Justice Thomas L. Kilbride dissented. The record was conflicting on whether or not the company expected or required the claimant to stay nearby, Justice Kilbride wrote. Therefore, under the manifest weight of the evidence standard, the Commission’s decision should have been upheld. Justice Kilbride pointed out that the plaintiff employer was not located in Cordova – it was based in Wilmington, Illinois. Therefore, “[t]here can be no question” that the claimant “had to travel away from his employer’s premises.” Further, the plaintiff and the plant owner had agreed to hire from outside the local area – union tradesmen who would necessarily be required to temporarily relocate for the job. “By definition” that made the claimant a traveling employee, Justice Kilbride wrote. Since the claimant’s conduct in commuting from his temporary housing to the plant was entirely reasonable, his injuries arose during the course of his employment, making them compensable.

Illinois Supreme Court Sides With Pension Fund in Firefighters' Dispute

In the final announced opinion day of 2013, the Supreme Court has filed its opinion in Hooker v. The Retirement Board of the Firemen’s Annuity and Benefit Fund of Chicago, holding that the plaintiffs – widows of two deceased firefighters – are not entitled to the inclusion of “duty availability pay” in their survivors’ annuities. Our detailed summary of the facts and underlying opinions in Hooker is here. Our report on the oral argument is here.

Following the deaths of their husbands, plaintiffs were granted widow’s pensions by the defendant. Plaintiffs filed a complaint in Cook County Circuit Court, arguing that they were entitled to the annuity awarded to the widow of a firefighter who died in the line of duty. Relying upon intervening new authority from the Appellate Court, the Circuit Court entered an agreed order upholding the plaintiffs’ position. The Board awarded the annuities retroactive to the date of the new authority – 2004. Plaintiffs then amended their complaint to raise three claims: (1) they were entitled to the annuity retroactive to the date of their husbands’ deaths, (2) class certification of all widows similarly situated, and (3) when their annuities were calculated, “duty availability pay” – DAP – should have been included, even though the decedents never received it.

The Circuit Court permitted the amendment, but stayed proceedings while the dispute over the starting date for the annuities was resolved. In 2007, the court directed the Board to pay the annuities retroactive to the date of the decedents’ deaths. The Board appealed and the appellate court affirmed. Following that, the Circuit Court dismissed Count I of the plaintiffs’ amended complaint as moot. Since plaintiffs no longer had an individual claim, the Court dismissed Count II, the putative class claim, as well. As for Count III, the Circuit Court denied the plaintiffs’ motion for summary judgment and granted the Board’s cross-motion, holding that the plaintiffs were not entitled to have DAP included in calculating their annuities. The Appellate Court reversed.

In an opinion by Justice Anne M. Burke, the Supreme Court reversed the Appellate Court. Hooker turns on harmonizing two sections of the Pension Code. First, we have Section 6-140, which describes the annuities plaintiffs were entitled to receive:

The annuity for the widow of a fireman whose death results from the performance of an act or acts of duty shall be an amount equal to 50% of the current annual salary attached to the classified position to which the fireman was certified at the time of his death and 75% thereof after December 31, 1972.

Note the words “current annual salary.” What this means is that the survivors’ annuity is not necessarily tied to the salary the firefighter was actually receiving at any time during his or her career.

Next, we have Section 6-111(i) of the Code, a 2004 amendment by the legislature defining the term “salary” to include DAP (which had been created in the early 1990s as part of a collective bargaining agreement):

[T]he salary of a fireman, as calculated for any purpose under this Article, shall include any duty availability pay received by the fireman . . . and references in this Article to the salary attached to or appropriated for the permanent assigned position or classified career service rank, grade, or position of the fireman shall be deemed to include that duty availability pay.

The plaintiffs argued that by virtue of the term “deemed” in the final clause of Section 6-111(i), DAP must be included in salary calculations regardless of whether or not the firefighter ever received it. But according to the majority, the correct interpretation of the clause was that the final reference to “that duty availability pay” was a reference back to “any duty availability pay received by the fireman.” Therefore, if the firefighter never received DAP, it was excluded from “salary” for purposes of the annuity. By concluding that the final clause clarified that “salary” should always include DAP, the majority concluded that the Appellate Court had improperly added the words “even if it was not received by the fireman” to the statute. (As for the italics I’ve added to Section 6-111(i) – we’ll get to that in a minute in discussing the dissent).

The majority concluded that any other result would lead to anomalous results.  “Salary” would always be paid “so long as there are firefighters,” the majority wrote. But at least in theory, DAP could be eliminated whenever the parties negotiated a new collective bargaining agreement. Therefore, if DAP was included in the calculation, the possibility existed that survivors would be receiving annuities based on DAP, even though their partners never received it, while current firefighters would not be receiving DAP at all.

Justice Mary Jane Theis dissented, joined by Justice Thomas L. Kilbride. Justice Theis concluded that the “current annual salary” under Section 6-140 for calculating annuities “was flexible, increasing with the changes in [firefighters’] salaries as provided for under the applicable budget appropriations.” Justice Theis then turned to Section 6-111(i), the Pension Code’s definition of “salary.” Justice Theis argued that the words “as calculated for any purpose under this Article” were the crucial passage of Section 6-111(i), noting that the majority “inexplicably omits this critical language” from its quotation of the statute. According to the dissent, the majority’s conclusion that the plaintiffs’ annuity was based only on categories of pay actually received by their decedents effectively read this clause out of Section 6-111(i), as well as rendering the reference to “current annual salary” in Section 6-140 meaningless.

Three New Civil Decisions Coming From Illinois Supreme Court Tomorrow Morning

The Illinois Supreme Court has announced that it expects to file opinions tomorrow morning at 10:00 a.m. Central time in three civil cases. They are:

Hooker v. Retirement Board of the Firemen’s Annuity and Benefit Fund of Chicago, No. 114811 – Do survivors' pensions under the state Pension Act increase when the salary for decedent's position increases, regardless of whether the decedent ever actually received that salary? Our detailed summary of the facts and underlying opinions in Hooker is here. Our report on the oral argument is here.

American Access Casualty Co. v. Reyes, No. 115601 – Is a clause of an automobile insurance policy excluding all liability coverage for the sole named insured and titleholder on the insured vehicle void as against public policy? See also here.

The Venture-Newberg Perini Stone and Webster v. Illinois Workers’ Compensation Commission, No. 115728 – When is a union pipefitter who accepts a short-term job too far from home to commute a “traveling employee” entitled to workers’ compensation benefits for injuries received while traveling to work? Our detailed summary of the facts and underlying opinions in Venture-Newberg is here. Our report on the oral argument is here.

The marquee case on tomorrow’s list is Hooker. As the first government pension case to be handed down since the Illinois General Assembly enacted pension reform, court watchers will be reading the opinion closely for any hints about the Court’s views on that future battle.

Tomorrow will be 99 days since the oral argument in Hooker, and 92 since the arguments in American Access Casualty and Venture-Newberg. This year to date, the mean time between argument and decision in cases decided unanimously is 119.62 days. The mean time between argument and decision for non-unanimous cases is 210.73 days.

Illinois Supreme Court to Decide Whether Courts Can Award Child Support From Custodial to Non-Custodial Parents

Our previews of the newly allowed petitions for leave to appeal from the closing days of the November term continue with In re Marriage of Turk, which poses a potentially ground-breaking question of domestic relations law: can a court order a custodial parent to pay child support to the non-custodial parent?

The mother in Turk filed for divorce in 2004. Not long after, she filed petitions for maintenance and child support, together with financial data and estimated “children’s expenses.” In mid-2005, the trial court entered judgment of dissolution, incorporating the parties’ settlement and joint parenting agreement. Pursuant to the agreement, the father agreed to pay maintenance and support for 42 months. At the end of that period, any further child support would be calculated pursuant to the Illinois Marriage and Dissolution of Marriage Act. The court further ordered that the father would be responsible for providing medical insurance for the children, with the parents jointly sharing any non-covered medical expenses.

Beginning a few months before the end of the 42-month period, the parties made a series of motions and petitions, including emergency petitions to terminate or restrict visitation. An independent custody evaluator was appointed pursuant to the Act, 750 ILCS 5/604(b). Finally in 2011, the father petitioned to have his child support obligations terminated and sought child support from the mother on the grounds that he was now custodial parent for both children. The mother opposed the petitions.

The trial court entered an order granting in part and denying in part the father’s motion to terminate child support. The court found that the parties shared approximately equal parenting time with respect to the younger child, and that while the father earned a significant salary, the mother’s income and assets were minimal. Based on these findings, the court ordered the father to pay child support to the mother, as well as making the father solely responsible for any medical and dental expenses not covered by insurance.

Division Five of the First District of the Appellate Court reversed, albeit on limited grounds. The Appellate Court began by considering whether the Marriage and Dissolution of Marriage Act, 750 ILCS 5/505, gave a trial court discretion to award child support from a custodial to the non-custodial parent. Pointing to varying terms in the statute for the party ordered to pay support, as well as language referring to support orders directed at "either or both parents," the Court held that the language of the statute was not conclusive either way. The Court found that earlier Illinois precedent fell on both sides of the question, with Shoff v. Shoff holding that a custodial parent could not be ordered to pay support, and In re Marriage of Cesaretti holding that the custodial parent could be ordered to pay. The Court found that other jurisdictions had taken a range of approaches to the problem too. The Court concluded that the best interests of the children favored a flexible approach to child support orders. In view of each of these conclusions, the Court held that the trial court had discretion to order payments of child support by the custodial parent given the particular circumstances in the case at hand -- nearly equal parenting time, and a large disparity in resources between the parents.

The father also argued that the trial court abused its discretion in ordering him to pay child support and non-covered medical expenses. The Appellate Court found that under the circumstances, the trial court had not abused its discretion by ordering the father to pay support, but the court nevertheless reversed the award for recalculation. The court held that the trial court had assessed the parties' liability without up-to-date information regarding the parties' child care expenses after the switch in custody. The Appellate Court directed the trial court to consider updated expense data, as well as to "clearly explain the basis for any support awarded."

We expect Turk to be decided in the fall or winter of 2014.

Illinois Supreme Court to Review Timing of Government Appeal From Administrative Orders

In the closing days of the recently concluded November term, the Illinois Supreme Court allowed petitions for leave to appeal from three new civil cases. Our first-look previews of those cases begin today with People ex rel. Madigan v. Illinois Commerce Commission. Madigan is an interesting grant for the Court. On the face of the Appellate Court’s order, it would appear to be a relatively simple question of filing deadlines and appellate jurisdiction. Whether or not the Court will travel beyond those issues to the utility rate-making question below remains to be seen.

Madigan arises from a decision of the Illinois Commerce Commission, the administrative entity which supervises utilities in Illinois, to allow the respondent water company to impose a 1.25% reconciliation surcharge on its customers. The Commission also declined to require the utility to adopt a unit sewer rate for low-volume customers. The Attorney General attempted to appeal both aspects of the Commission’s decision.

And that is where the Attorney General ran into problems. Illinois Supreme Court Rule 335 provides that an appellant must file a petition for review from a final administrative decision within thirty days of an appealable final order in order to vest the Appellate Court with jurisdiction. The Public Utilities Act – 220 ILCS 5/10-201(a) -- provides for a thirty-five day filing deadline for petitions for review, but the Fifth District Appellate Court struck down section 10-201 twenty-seven years ago in Consumers Gas Co. v. Illinois Commerce Commission.

The Commission issued its order in Madigan on July 31, 2012, and denied the Attorney General’s petition for rehearing on September 11, 2012. The Attorney General didn’t file a notice of appeal and petition for review until October 16, 2012 – thirty-five days after the order had become final and appealable. So the Appellate Court held that the petition was untimely and dismissed the appeal for lack of jurisdiction.

Before closing, the Appellate Court issued a stern warning for careless practitioners. Like most appellate rules, the Illinois Supreme Court Rules, which govern appellate practice throughout the state, require a number of different elements in an Opening Brief, including an explanation of the reviewing court’s jurisdiction. According to the Appellate Court in Madigan, none of the three parties before it had complied with that requirement: “the parties’ failure to identify or even address the threshold issue of jurisdiction has resulted in the unnecessary expenditure of a significant amount of judicial resources while resolving this case, which could have been easily avoided had the parties complied with the clear mandate of Rule 341(h)(4)(ii).”

We expect Madigan to be decided in the late spring or early fall of 2014.

Illinois Supreme Court Debates Limitations and Repose for Architects and Contractors

November was a relatively light month for the Illinois Supreme Court on the civil docket, with only one civil case on for argument. Today, we report on the oral argument in Gillespie Community Unit School Dist. No. 7 v. Wight & Co. In Gillespie, most of the Justices seemed somewhat skeptical of plaintiff's claim that no statute of limitations governed its fraud-based claims against an architecture firm arising from a school construction project.

Gillespie begins in 1998, when the school district decided it needed a new elementary school. The problem was that the district encompassed an area of Macoupin County that was coal mined more or less continuously from the early 1900s into the 1950s. So everyone was concerned about the possibility of ground subsidence resulting from the underground mines.

The plaintiff entered into an agreement with the defendant to perform various services in connection with the building project. One was to determine just how much mining had been done in the area – and more importantly, where – and assess the likelihood that subsidence might wind up seriously damaging the school if it was built. The defendant hired an engineering firm to take on the mining and subsidence issues.

The building was completed in the fall of 2002. In the spring of 2009, a coal mine subsided beneath the building, causing extensive damage; the building was subsequently condemned, a total loss. When the plaintiff school district sued the defendant architects, the defendant moved for summary judgment on grounds that the action was time barred. The Circuit Court agreed, and the Fourth District affirmed.

Gillespie turns on the intersection of two statutes. First, we have 735 ILCS 5/13-214, a comprehensive statute of limitations and repose for actions arising from the “design, planning, supervision, observation or management of construction, or construction of an improvement to real property.” Section 13-214 provides that any such action must be brought within 4 years of “the time the person bringing an action . . . knew or should reasonably have known of such act or omission,” as well as providing a 10 year statute of repose. But, the statute provides in subsection (e) that the “limitations of this Section shall not apply to causes of action arising out of fraudulent misrepresentations or to fraudulent concealment of causes of action.”

And from there, we turn to 735 ILCS 5/13-205, which provides that “actions or unwritten contracts . . . or to recover damages for an injury done to property . . . and all civil actions not otherwise provided for, shall be commenced within 5 years next after the cause of action accrued.”

By the time Gillespie reached the Supreme Court, the only issue left revolved around the plaintiff’s claim for fraudulent misrepresentation of concealed facts. The fraud claim arose from an engineer’s report which the defendant might – or might not – have received from the subcontractor predicting a “relatively high risk of subsidence” in the construction area, and then failed to pass along to the school. It seems the fraud-based claim wouldn’t fall under 735 ILCS 5/13-214; it would be excluded by Section 214(e). So does that mean it falls under Section 205 as a “civil action[ ] not otherwise provided for”? The appellant school district said no, since the five year statute would have been fatal to its claim. The defendant said yes.

The plaintiff school district began the arguments, insisting that the case presented a “clear and narrow” question of statutory construction. After counsel described the initial engineer’s report which the defendant might or might not have received from the engineers (it was actually produced by the subcontractor, not by the defendant), counsel referred to a second, subsequent report. Justice Theis asked what the second report said, and counsel explained that the second report disclosed that the proposed site had been mined, but concluded that it was difficult to estimate what the chances of subsidence were. Justice Thomas asked counsel whether the plaintiff’s position was that although section 214(e) exempted fraud claims from the general statute of limitation and repose for construction, section 205 was not triggered, meaning that there was no statute of limitations at all for such claims? Counsel agreed that it was. Justice Thomas asked whether counsel was aware of any causes of action, with the exception of a limited number of criminal charges, that carried no limitations? Counsel argued that the legislature had made the determination that there should be no statute of limitation with respect to fraud-based claims arising from construction. Justice Thomas asked whether the words in subsection 214(e) “of this section” have any meaning. Counsel responded that the language showed that such claims were not subject to section 205 as actions “not otherwise provided for.” They were provided for by the statute, and then exempted. Chief Justice Garman asked counsel why the legislature would give special treatment to construction-based fraud claims over other types of fraud claims? Counsel argued that the legislature was aware of cases providing that contract provisions accelerating statutes of limitations were enforceable, and the statutory scheme was its response. Justice Thomas suggested that fraud actions are “not otherwise provided for” once they are carved out of subsection 214(e). Counsel responded that although section 205 might have applied before section 214 was adopted in 1979, but that changed when the legislature adopted a comprehensive scheme for managing actions arising from construction projects. Counsel argued that his construction – the view that the legislature’s scheme “provided for” fraud claims, making section 205 inapplicable – was logical, while the alternative was not. Justice Thomas asked why it was illogical that the legislature would provide for an extra year for claims sounding in fraud, and counsel responded that there was no reason for the extra year. Counsel claimed that the defendant’s construction would also lead to unfair results by letting wrongdoers enter into construction contracts, intending fraud, knowing that they will be absolved from liability in five years. Justice Freeman asked counsel to address his argument that defendants would have laches available, even in the absence of a statute of limitations. Counsel responded that where a hypothetical plaintiff sat on its rights and triggered real prejudice to the defendant’s ability to defend itself, laches would be a viable defense, but that the defense had not raised the defense here. Counsel concluded by pointing out that under the construction of the statute adopted by the Circuit Court and affirmed by the Appellate Court, the plaintiff’s action had been barred before it was discovered, even though it had been filed five months after the incident.

Counsel for the defendant began by addressing the second report. Counsel argued that its only obligation was to share information with the Capital Development Board, and there was no allegation that the defendant had failed to do that. The second report had concluded that the risk of subsidence was unquantifiable due to multiple unknown variables. Counsel argued that the court was being asked to hold that in 1979, when the legislature provided a comprehensive system of limitations and repose for construction-related claims, it intended to remove the pre-existing statute of limitations for claims sounding in fraud. Counsel claimed that there were two reasons for applying section 205 and its five-year statute to fraud-based actions: first, actions sounding in fraud were not subject to any statute of repose, and second, as the Supreme Court held in Rozny v. Marnul in 1969, “civil actions not otherwise provided for” encompassed actions for fraud and deceit. Justice Burke pointed out that Rozny predated Section 214 by ten years, but counsel responded that Rozny had set the stage for the new statute. Chief Justice Garman concluded by asking whether the case included any public policy considerations, and counsel argued that there were not, beyond the general principle that the heavily negotiated contract between the parties – which specifically provided when causes of action arising out of the project accrued – should be enforced.

In rebuttal, counsel for the plaintiff argued that it was undisputed at the trial court that if the school district had had the first engineering report, it would have proceeded differently. Counsel insisted that the interpretation of the statute suggested by the defendant was inconsistent with its language.

We expect Gillespie to be decided in approximately three to four months.

Illinois Supreme Court Narrowly Construes Exemption from Prevailing Wage Act

In its sixth and final unanimous civil decision of the morning, the Illinois Supreme Court adopted a narrow construction of the exemption for public utilities provided under the Prevailing Wage Act. Reversing a decision of the Fourth District in The People of the State of Illinois ex rel. Illinois Department of Labor v. E.R.H. Enterprises, Inc., the Court held that a contractor who is largely responsible for the water facility and infrastructure in the Village of Bement (and various other towns around Illinois) is not an exempt “public utility” under the Act. Our detailed summary of the facts and lower court rulings in E.R.H. Enterprises is here. Our report on the oral argument is here.

The defendant has a five-year contract with the Village to perform certain duties in connection with the Village water system. Although the contract recognizes that the Village is responsible for the maintenance and operation of the facility and infrastructure, it states that the defendant “has agreed to fulfill all requirements set forth under the applicable laws and regulations for the operation of such facility.” For example, the defendant maintains the storm and sanitary sewer system, as well as repairing smaller water main breaks. The Village is responsible for “repairs of a greater magnitude” to the system, as well as the “maintenance, repair, upkeep and expense” of its water tower. The Village purchases parts and materials for water taps, but the defendant installs them. The defendant maintains fire hydrants, but the Village is responsible for replacing them when necessary.

In 2008, the Department of Labor sent a subpoena to the defendant’s attorney, seeking certain employment records related to the defendant’s repair of water main leaks on the Village’s behalf. The subpoena stated that the Department was attempting to determine whether the defendant was in compliance with the Prevailing Wage Act. Several months later, the Department filed its complaint seeking an order enforcing the subpoena. The defendant answered the complaint, taking the position that it was a “public utility company” under the Act, and therefore exempt from the requirement to pay prevailing wages. The circuit court entered an order in August 2010 holding that the defendant was not a public utility and the subpoena was therefore enforceable. In response to the defendant’s motion for reconsideration, the court entered an amended order in February 2011. The defendant moved once again for reconsideration, and the circuit court responded with a lengthy memorandum, addressing the defendant’s objections and further explaining its conclusions. The Appellate Court reversed, finding that the defendant was indeed a public utility and therefore exempt from the Act.

In an opinion by Justice Lloyd A. Karmeier, the Supreme Court reversed the Appellate Court. The Court began by noting a curious point: that there was no good evidence as to exactly why “public utilities” had been exempted from the Prevailing Wage Act in the first place. The Court noted that since the Act offers no definition of a public utility, the Appellate Court had imported the definition found in the Utilities Act. But the broad definition in that statute had a very specific purpose – to designate “a wide range of persons and entities” that would be subject to the regulatory jurisdiction of the Illinois Commerce Commission. Since it wasn’t clear why the exemption from the Prevailing Wage Act had been enacted, it was equally unclear whether it was appropriate to borrow the definition in the Utilities Act in construing its breadth.

Instead, the Court turned to Black’s Law Dictionary. The Court found Black’s definition of a “public utility” significant for two reasons: first, it specified that “most” utilities are subject to government regulation, and second, the Dictionary states that typically, the “utility” owns the facilities providing the public service. Neither of these conditions applied to the defendant, the Court found.

The Court noted that whatever the reason, public utilities had been exempt from the Prevailing Wage Act ever since it was enacted. In the original version of the Act, the exemption applied to work “done directly by any public utility company pursuant to order of the commerce commission or other public authority.” The italicized language had been removed in 1961, and the Court speculated that perhaps the legislature had concluded that any work done by a public utility, whether pursuant to a direct order by the commerce commission, would eventually be scrutinized by regulators as a result of a rate case.

The Court adopted the totality of the factors listed by the circuit court to conclude that the defendant is a contractor, not a public utility: (1) the Village retained ownership of the water facility and infrastructure; (2) the Village had been recognized by the Illinois Environmental Protection Agency for its compliance with the Fluoridation Act; (3) the Village has not contracted all of its responsibilities to the defendant; (4) the defendant does not directly charge the public for its services; and (5) the defendant is not directly regulated by any government agency. Since the public utility exemption did not apply, the Court held that the circuit court had properly enforced the subpoena.

Illinois Supreme Court: Withholding Notice Invalid Without Strict Compliance With Statute

This morning, a unanimous Illinois Supreme Court handed down its opinion in Schultz v. Performance Lighting, Inc. Schultz presented a question relating to domestic relations and child support cases: is a notice to withhold salary under the Income Withholding for Support Act invalid if it substantially – but not strictly – complies with the requirements of the Act? In an opinion by Justice Robert R. Thomas, the Court held that strict compliance was required for the notice to be effective.

The plaintiff and her former husband divorced in 2009. An order was entered requiring the ex-husband to pay $600 every two weeks in child support. The plaintiff served a notice to withhold income on the former husband’s employer as well as the ex-husband’s attorney, but the notice failed to comply with the Act in two respects: it included neither the ex-husband’s Social Security number nor the date on which the obligation terminated (plaintiff’s service only on the ex-husband’s attorney was insufficient as well).

The ex-husband left the defendant’s employ seven months after the notice to withhold was filed. Nevertheless, the plaintiff waited another eighteen months – almost exactly two years after the notice to withhold was filed – to sue the defendant. Plaintiff alleged that defendant had knowingly failed to pay the State Disbursement Unit the support due and sought an award of the statutory penalty of $100 per day for each day the payments were delinquent. The defendant moved to dismiss, arguing that the omissions from the plaintiff’s notice to withhold rendered the notice ineffective. The circuit court agreed and granted the motion, and the Appellate Court affirmed.

The Supreme Court affirmed as well. A requirement of strict compliance was clear on the face of the statute, the Court found. The Act provided that 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 . . . and (11) contain the signature of the obligee . . . except that the failure to contain the signature of the obligee . . . shall not affect the validity of the income withholding notice.” The Court drew two conclusions from this language. First, the use of the word “shall” generally indicates a mandatory duty. Second, the legislature’s provision that omitting the obligee’s signature is not a fatal defect necessarily implied that omitting the other requirements was fatal.

The immunity clause of the Act further supported the Court’s view, the Court found. Section 35(c) of the Act provides that a payor who complies with a withholding notice “that is regular on its face” is immune from liability for its conduct. Since a notice which is missing some of the required information was not, in the Court’s view, “regular on its face,” what is the recipient of such a notice to do, if errors don’t render the notice invalid? If a faulty notice is binding, then the employer must choose between disregarding it and incurring the statutory penalty, or complying with it and risking liability to the ex-spouse (or any other aggrieved party). Such a patently unjust result was to be avoided, the Court concluded.

Although the proper interpretation of the Act was clear, the Court commented that it found the conduct of both sides in the dispute troubling. The defendant had apparently received the notice to withhold and never bothered to simply telephone the plaintiff’s attorney and make it clear that it regarded the notice as invalid (although the Court conceded that the statute as it existed at the time imposed no duty to do so). Nor did the plaintiff follow up on the matter when it became clear that the defendant wasn’t paying, instead “wait[ing] silently for nearly two years before filing the instant complaint.”

The Court concluded by noting that the statute has been significantly reformed since the events at issue. Effective in 2012, an obligee is required to notify the employer in writing when a payment is not received. The employer is then required to either explain its non-payment or make the payment with interest within a limited time. If the employer fails to do that, the statutory penalties – which are now capped – begin to accrue. The Court found that it was unnecessary to determine whether the 2012 amendments applied retroactively since the plaintiff had never given the employer written notice of its non-receipt of the payments, the essential prerequisite to triggering penalties.

Illinois Supreme Court Limits Foreclosure Challenges Once Motion to Confirm Filed

This morning, the Illinois Supreme Court filed its opinion in Wells Fargo Bank, N.A. v. McCluskey, holding that once a motion to confirm a judicial sale in a foreclosure action has been filed, the generous grounds set forth in the Code of Civil Procedure for setting aside a default no longer apply, and the Foreclosure Act governs. Our detailed summary of the facts and lower court opinions in Wells Fargo is here.

Plaintiff initiated foreclosure proceedings pursuant to the Foreclosure Law on defendant’s residential mortgage in 2010. The defendant was served with process, but failed to appear. Three months after the complaint was filed, the circuit court entered the defendant’s default and a judgment of foreclosure. The defendant finally appeared seven months later, on the date set for the judicial sale, moving to stay the sale and vacate the default. The plaintiff agreed to put off the sale for 75 days to give defendant time to try to negotiate a loan modification agreement. When those negotiations were unsuccessful, the judicial sale went forward, with the plaintiff buying the property. Two weeks after that, the defendant moved once again to set aside the default. Defendant’s second motion was made pursuant to Section 2-1301(e) of the Code of Civil Procedure, and purported to set forth various asserted defenses to foreclosure. The circuit court denied the motion to vacate, holding that the defendant had waived any objections to the default by withdrawing her original motion to vacate in return for a delay in the sale. The court confirmed the sale, and the defendant appealed.  The Appellate Court reversed, holding that a foreclosure defendant could get a foreclosure judgment vacated pursuant to the general provisions of Section 2-1301 merely by showing a compelling excuse for her lack of diligence and some potentially meritorious defense.

In an opinion by Justice Mary Jane Theis, the Supreme Court unanimously reversed. The case turned on the relationship between the general provisions of Section 2-1301, which applied to civil actions in general, and the specific provisions of Section 15-1508(b) of the Foreclosure Law, which provided that a defendant may oppose an order confirming a foreclosure sale only on certain enumerated grounds, including lack of proper notice, unconscionable sale terms and a fraudulently conducted sale.

Once a motion to confirm a judicial sale has been filed, the balance of interests between the parties has shifted, the Court noted. Although Section 15-1508(b) permitted a court to refuse to confirm a sale because “justice was not done,” that power did not extend to protecting a defendant against his or her own negligence in failing to timely appear and defend the suit. Allowing the borrower to unravel everything at the eleventh hour – long after receiving notice and “ample statutory opportunity to respond to the allegations” would be “inconsistent with the need to establish stability” in the process, the Court held. Besides, the Foreclosure Law expressly provided time limitations for the right of redemption and reinstatement – time limitations which would be rendered relatively meaningless if the defendant was allowed to take advantage of Section 2-1301. Therefore, the Court held that until a motion to confirm the sale is filed, a defendant could proceed under Section 2-1301. But once the motion is filed, the more restrictive provisions of Section 15-1508(b) of the Foreclosure Law kick in.

Since the defendant’s Section 2-1301 was filed before the motion to confirm the sale was, the Court held that the defendant could proceed under the looser standard. Nevertheless, the Court held that the defendant’s motion to vacate was properly denied. Defendant was properly served and had notice of the default, judgment of foreclosure and sale. Still, the defendant waited ten months to appear and raise her purported defenses. The defendant’s lack of diligence was not excusable, the Court found, and confirmation of the sale was correctly entered.

Illinois Supreme Court Restricts Appeals of Pollution Control Device Certifications

In yet another unanimous decision handed down this morning, the Illinois Supreme Court has streamlined procedures to certify pollution control facilities by barring certain third party appeals. Our detailed summary of the facts and lower court opinion in The Board of Education of Roxana Community School District No. 1 v. The Pollution Control Board is here. Our report on the oral argument is here.

Board of Education arises from twenty-eight separate applications to the Illinois Environmental Protection Agency to have certain systems, methods, devices and facilities created in conjunction with major renovations to a Madison County oil refinery certified as “pollution control facilities” entitled to special treatment under the Property Tax Code. 35 ILCS 200/11-5, 11-15, 11-20. In August 2011, the  IEPA recommended to the Pollution Control Board that it approve two of the requests, and the Board did so. The plaintiff Board of Educationthen filed petitions to intervene in the two proceedings where applications had been granted. The Pollution Control Board denied intervention. The Board of Education then filed petitions to intervene in the remaining twenty-six cases. The Pollution Control Board refused to reconsider the first two rulings, denied the Board of Education’s petitions to intervene in the remaining cases, and granted the remaining petitions for certification. The Board of Education appealed the Board’s decision directly to the Appellate Court pursuant to Section 41 of the Illinois Environmental Protection Act. 415 ILCS 5/41.

The Appellate Court dismissed the appeal, holding that appeals from the Pollution Control Board’s decision were governed by Section 11-60 of the Property Tax Code (35 ILCS 200/11-60), rather than Section 41 of the IEPA. Section 11-60 specifically provides for appeals to the circuit court from decisions relating to pollution control certificates, and restricts standing to appeal to applicants for, or aggrieved holders of, pollution control facility certificates. Section 11-60 governed for two reasons, the Appellate Court found: (1) upholding the Board of Education’s theory would mean that simultaneous appeals could be taken to the Appellate Court and the circuit court by different parties; and (2) the specific trumps the general as a matter of statutory construction.

In an opinion by Justice Lloyd A. Karmeier, the Court affirmed, although for somewhat different reasons than those invoked by the Appellate Court. It was not necessary to resolve a conflict between the IEPA and the Property Tax Code, the Court held; the Board of Education had no standing to appeal even under the IEPA. Section 41 of the IEPA granted standing to appeal to any “party to a Board hearing, any person who filed a complaint on which a hearing was denied, and person who has been denied a variance or permit under [the] Act, any party adversely affected by a final order or determination of the Board, and any person who participated in the public comment process . . .” The Board of Education was “adversely affected” by the orders, but it wasn’t a party, the Court held – its petitions to intervene had all been denied. Nor was it a “person who filed a complaint on which a hearing was denied” – petitions to intervene didn’t amount to “complaints.” The Court also viewed the possibility of simultaneous dual track appeals, by applicants in the circuit court and by objectors in the Appellate Court, as a sufficiently absurd proposition to reject the Board of Education’s interpretation of the IEPA. Besides, the Court pointed out, the Board of Education had no right to intervene to begin with. Certification proceedings involved highly technical determinations, and there was no provision in the statute for anybody other than the entity seeking certification and the state regulators to be involved. The Court conceded that “legitimate concerns” might arise from restricting participation in that fashion, but commented that this was a matter for the General Assembly, not the Court.

Illinois Supreme Court Limits Insurance Guaranty Fund's Liability in Dram Shop Act Cases

This morning, a unanimous Illinois Supreme Court handed the Illinois Insurance Guaranty Fund a win, reversing the Appellate Court’s decision in Rogers v. Imeri. Rogers posed the question of how the Fund’s offset for prior settlements is calculated – and therefore, what is the Fund’s maximum possible liability – in a Dramshop Act case. Our detailed summary of the facts and lower court opinions in Rogers is here. Our report on the oral argument is here.

Rogers arises from a drunk driving accident which resulted in the death of the plaintiffs’ 18-year old son. The plaintiffs received settlements totaling a bit over $106,000 from the driver’s insurer, and from their own insurer pursuant to their underinsured driver coverage. They then sued the owner of the bar where the second driver was drinking pursuant to the Dramshop Act.

The Insurance Guaranty Fund is a nonprofit entity created by statute. Its function is to step in whenever an insurer declares bankruptcy and is unable to satisfy its policy obligations, protecting both policy-holders and third party claimants under the policies. Under Section 537.2 of the Insurance Code, the Fund is “obligated to the extent of the covered claims.” Section 546 of the Code provides that the “Fund’s obligation under Section 537.2 shall be reduced by the amount recovered or recoverable, whichever is greater, under such other insurance policy.” Under the Dramshop Act, 235 ILCS 5/6-21, liability is capped at $130,338.51.

Rogers involves reconciling the Insurance Code and the Dramshop Act. Everyone agreed that the Fund was entitled to an offset for the $106,000 in settlements. But was the offset deducted from the jury verdict – likely considerably more than $130,338.51 – with the resulting figure reduced to the cap? If so, the Fund’s liability was likely to be equal to the total liability cap. Or was the offset deducted from the cap initially, meaning that the Fund’s maximum exposure was about $24,000? The Appellate Court had held that the deduction should be taken from the jury verdict.

In an opinion by Justice Mary Jane Theis, the Supreme Court reversed. A “covered claim” for purposes of the Insurance Code was the maximum amount for which the insured could be liable, the Court wrote. Therefore, the Fund’s maximum liability was $130,338.51, the Dramshop Act cap. The clause of the Dramshop Act requiring that the jury determine damages without reference to the cap – the basis for the plaintiffs’ argument that the offset should be deducted from the jury’s verdict – was entirely irrelevant, the Court held. Under the Insurance Code, the Fund’s liability could not be increased by a jury verdict, it could only be decreased by the availability of other insurance. Therefore, the offset should be deducted from the Dramshop Act cap, making the Fund’s maximum liability in the case about $24,000.

Illinois Supreme Court Adopts Totality of Circumstances Test for Sales Tax Situs

This morning, the Illinois Supreme Court handed down its highly anticipated decision in Hartney Fuel Oil Co. v. Hamer. Hartney Fuel Oil raises an important question of Illinois business and tax law: how does one determine which local jurisdiction is entitled to collect sales tax on a transaction? Our detailed summary of the facts and lower court decisions is here. Our report on the oral argument is here.

The taxpayer in Hartney Fuel Oil is a retailer of fuel oil. The taxpayer’s home office throughout the relevant years was in Forest View, which is part of Cook County – a high-tax jurisdiction. From the Forest View office, the company set fuel prices, cultivated customer relationships and handled billing and accounting.

But for many years, the taxpayer has maintained a separate location as its sales office. No one at the sales office was directly employed by the company; it contracted with another company to borrow the services of a clerk. The sales office was moved from time to time over the years, ultimately winding up in Mark, Illinois, which is located in comparatively low-tax Putnam County (indeed, both Mark and Putnam County gave the taxpayer a partial rebate of taxes payable on its sales).

Both short-term and long-term contracts were closed by the taxpayer in the Mark office. Daily orders would be directed by telephone to the sales office. Anyone who called Forest View instead would be told to call the Mark office. The clerk in Mark was armed with a list of customers pre-approved for credit purchases, and had the authority to accept (or reject) an order on the spot, binding the taxpayer. Long-term contracts were sent by customers to Mark, and if the president of the company had not yet signed, he would travel to Mark to do so.

The Department of Revenue audited the taxpayer’s sales activities from 2005 through mid-2007, ultimately concluding that sales tax liability had been triggered in Forest View, not Mark. The Department presented the taxpayer with a bill for over $23 million. The taxpayer paid under protest and sued for a refund. Both the circuit court and the Appellate Court sided with the taxpayer, holding that the location where orders were accepted conclusively established the situs of sales tax liability.

The Court began by addressing the three statutes at issue: the Home Rule County Retailers’ Occupation Tax Law, the Home Rule Municipal Retailers’ Occupation Tax Act, and the Regional Transportation Authority Act. All three statutes authorized a tax “upon all persons engaged in the business of selling tangible personal property” at retail within the jurisdiction. The Court pointed out that it had long ago defined the Retailers’ Occupation Tax act as a tax on the occupation of retail selling, not one on the sale itself. Where the occupation – as opposed to the sale – took place depended on “the composite of many activities extending from the preparation for, and the obtaining of, orders for goods to the final consummation of the sale by the passing of title and payment of the purchase price.” Therefore, simply placing a clerk in a low-tax jurisdiction to accept orders, while keeping the remainder of one’s business pursuits in another county, was not sufficient to transfer tax liability under the statute, which depended on a fact-intensive, totality of the circumstances test. This made sense, the Court pointed out, since the purpose of local sales taxes is to reduce at least somewhat the tax burden on real property by transferring part of that burden to retail businesses in proportion to their use of local governmental services.

But that wasn’t the end of the inquiry, the Court found. Next, it turned to the Department’s regulation implementing the sales tax statutes – 86 Illinois Administrative Code 220.115.

The Department pointed to Section 220.115(b) of the regulation, arguing that by providing that “enough of the selling activity must occur within the home rule county to justify concluding that the seller is engaged in business” within that county, the regulation had adopted the totality-of-the-circumstances test imposed by the statute. The taxpayer, on the other hand, pointed to subsection (c) of the statute: “the seller’s acceptance of the purchase order . . . is the most important single factor in the occupation of selling. If the purchaser order is accepted at the seller’s place of business within the county or by someone who is working out of the place of business . . . or if a purchase order that is an acceptance of the seller’s complete and unconditional offer to sell is received by the seller’s place of business within the home rule county or by someone working out of that place of business, the seller incurs Home Rule County Retailers’ Occupation Tax liability in that home rule county.” The Department responded that construing subsection (c) as conclusively setting the sales tax situs as the place of acceptance rendered subsection (b) meaningless.

The Court concluded that neither side was entirely right. Instead, the Court concluded that subsection (b) described a threshold inquiry: was enough going on in a particular jurisdiction to qualify as the business of selling for purposes of the sales tax? Subsection (c) dealt with a slightly different question: when multiple jurisdictions met the threshold test, which jurisdiction prevails? So applying that construction to the facts at hand, the regulations seemed to fix sales tax liability in Mark. But since a regulation can’t narrow or broaden the scope of taxation under a statute approved by the legislature, the Court struck down the regulation.

But that didn’t mean that the taxpayer owed the tax bill. According to the Taxpayers’ Bill of Rights Act, the Department must return to the taxpayer taxes and penalties assessed on the basis of erroneous written information or advance the taxpayer receives from the Department. 20 ILCS 2520/4(c).  Although moving the sales office to Mark wasn’t good enough to change the tax situs strictly as a matter of the statutes, the taxpayer had acted in accordance with the Department’s erroneous regulations. So the taxpayer was entitled to a refund of the taxes and penalties.

So where does all this leave us? First and foremost, the Department of Revenue now faces the complex job of rewriting the sales tax regulations. Since the statutes have been definitively interpreted to tax the occupation of selling, not a particular sale – a question decided by the totality of the circumstances – avoiding a high-tax jurisdiction is likely to require far more extensive changes than simply opening a rental office with a telephone. So although the taxpayer ultimately won the refund in Hartney Fuel Oil, the decision qualifies as a win for Cook County. 

Illinois Supreme Court to Hand Down Decisions in Six Civil Cases Tomorrow Morning

The Illinois Supreme Court has announced that it will hand down decisions tomorrow morning in six civil cases argued during the September term of the Court (exactly half the docket from that term). The cases are:

  • People ex rel. The Department of Labor v. E.R.H. Enterprises, No. 115106 - How is a “public utility” defined for purposes of the exception to the Prevailing Wage Act set forth in 820 ILCS 130/2? Our detailed summary of the facts and lower court rulings in E.R.H. Enterprises is here. Our report on the oral argument is here.
  • Hartney Fuel Oil Company v. Board of Trustees of the Village of Forest View, Nos. 115130 et al. – When a business' operations span multiple counties, where does a retail sale tax place for purposes of the local portion of the state sales tax? Our detailed summary of the facts and lower court rulings in Hartney Fuel Oil is here. Our report on the oral argument is here.
  • Wells Fargo Bank, N.A. v. McCluskey, No. 115469 – (1) May a motion pursuant to Section 2-1301(e) of the Code of Civil Procedure to vacate a default in a foreclosure suit be made after the sheriff’s sale has already occurred? (2) Did defendant waive her right to make a renewed motion to set aside the default by withdrawing her first motion in return for agreement to temporarily postpone the sale? Our detailed summary of the facts and lower court rulings in Wells Fargo is here.
  • The Board of Education of Roxana Community Unit School District No. 1 v. The Pollution Control Board, No. 115473 – May a party challenging the certification of a system as a pollution control facility appeal directly to the Appellate Court pursuant to the Environmental Protection Act, 415 ILCS 5/41(a), after its challenge is rejected by the Illinois Pollution Control Board? Our detailed summary of the facts and lower court rulings in Board of Education is here. Our report on the oral argument is here.
  • Schultz v. Performance Lighting, Inc., No. 115738 – Must a withholding notice under the Illinois Income Withholding for Support Act strictly comply with the statutory requirements in order to be effective, or is substantial compliance sufficient? Our detailed summary of the facts and lower court rulings in Schultz is here. Our report on the oral argument is here.
  • Rogers v. Imeri, No. 115860 – How is the maximum possible liability exposure of the Illinois Insurance Guaranty Fund calculated in a tort case where the recovery cap under the Dramshop Act applies and other defendants have settled? Our detailed summary of the facts and lower court rulings in Rogers is here. Our report on the oral argument is here.

So far this year, the median time elapsed between oral argument and decision for the Court’s unanimous civil decisions has been 94 days. For non-unanimous decisions, the median time is 149 days. Tomorrow will mark 71 (E.R.H. Enterprises and Hartney Fuel Oil), 65 (Wells Fargo and Board of Education) and 64 (Schultz and Rogers) days since the oral arguments in the six cases above.

Illinois Supreme Court to Decide Whether Interest and Fees are Available on Legal Malpractice Claim

Our previews of the latest additions to the Illinois Supreme Court’s civil docket continue with Goldfine v. Barack, Ferrazzano, Kirschbaum and Perlman, a case from the First District Appellate Court. Goldfine poses a number of questions about malpractice actions arising from lawsuits under the Illinois Securities Law, most prominently: are interest and attorneys’ fees available as damages?

The plaintiffs made twelve separate purchases between 1987 and 1990 of a certain company’s stock from a broker who was also a close personal friend. In the spring of 1991, the company filed for bankruptcy and the stock became worthless. The plaintiff retained the defendant law firm to identify possible claims, negotiate a settlement and – if no settlement was possible – preserve the claims until plaintiffs could find a contingency-fee lawyer to bring the suit.

Plaintiffs’ theory was that at the time they retained the defendant firm, they had a viable claim against the defendants for rescission under the Illinois Securities Law. The problem was, to bring such a claim, the purchaser has to serve a notice of rescission within six months of learning of his or her right to the remedy. The defendants did not do so. Thus, when plaintiffs hired new counsel in 1992 who filed the Securities Law claim, it was dismissed as time-barred. The plaintiffs filed their malpractice claims two years later. The plaintiffs’ merits claim arising from the stock purchases themselves was settled in 2007 for $3.2 million.

The malpractice claim proceeded to a bench trial. Ultimately, the court held that the final eleven stock purchases had violated the Illinois Securities Law. The trial court awarded damages based on the following formula – total price paid, minus the $3.2 million settlement, plus 10% interest, beginning on each stock purchase on the day it was made. After further arguments and motion practice, the court awarded attorneys’ fees and costs, calculating the fee at 40% of the award. Plaintiffs appealed, challenging both the calculation of damages and the attorneys’ fees award; defendants cross-appealed, contending that the fee-shifting and interest awards were punitive and therefore impermissible in a legal malpractice action, and that the plaintiffs had failed to prove they would have prevailed on their securities claim.

The Appellate Court affirmed in part and reversed in part. The damages issues turn on the interpretation of section 13(A) of the Securities Law, 815 ILCS 5/13(A). The majority chose to follow the decision in Kugler v. Southmark Realty Partners III, which held that interest should be calculated on the full amount paid for the stock, rather than offsetting the payment with any settlements first. The Court held that there was no basis in the statute for the trial court’s decision to reduce the value of each stock purchase by a proportionate share of the ultimate settlement before calculating interest. Therefore, the judgment was reversed with respect to this element of compensatory damages.

The Court then turned to the issue of punitive damages. According to Section 2-1115 of the Code of Civil Procedure, 735 ILCS 5/2-1115, punitive damages are not available in an action for medical or legal malpractice. According to the majority, the statutory interest, fees and costs award did not amount to punitive damages. There was no provision in the Securities Law for a punitive damages award, the Court pointed out; interest, fees and costs were all elements intended to fully compensate the plaintiffs. Nevertheless, the Court declined to assume that the trial court would have found a 40% contingent fee to be reasonable with respect to the recalculated – and much larger – damages award, so the Court remanded the attorneys’ fees award for reconsideration.

Finally, the Appellate Court addressed defendants’ cross-appeal. The majority held that the trial court’s conclusion that plaintiff had reasonably relied on the securities representative’s representations was not against the manifest weight of the evidence. The court also rejected defendants’ argument that the plaintiffs had merely sought the reduced settlement value of their claim as damages, rather than the full value of the claim.

Justice Robert E. Gordon dissented in part, arguing that the Securities Law does not allow interest to be charged against the portion of the securities purchase price which the plaintiffs had already recovered.

We expect Goldfine to be decided in six to eight months.

Illinois Supreme Court to Decide Whether Waiver of Personal Jurisdiction Operates Retroactively

Our previews of the latest additions to the Illinois Supreme Court's civil docket continue with BAC Home Loans Servicing, LP v. Mitchell. BAC Home Loans presents the following question: does waiver of a personal jurisdiction objection operate retroactively, validating everything which has already happened in the proceeding, or only prospectively?

The plaintiff in BAC filed a complaint of foreclosure in late 2009. In April 2010, the defendant having neither answered the complaint nor moved for relief, the plaintiff filed a motion for an order of default. Two months later, the plaintiff filed a second motion for order of default, as well as a motion for a judgment of foreclosure and sale and for the appointment of a selling officer. A few days after that, all the plaintiffs' pending motions were granted. A judicial sale was held in September 2010. The plaintiff moved for an order approving the sale in August 2011. The motion was granted a month later.

On October 23, 2011, counsel for defendant entered an appearance and filed a motion to vacate approval of the sale, stating that "[t]o the best of her knowledge," defendant had never been served, had never received notice of the motion for default, had been told by plaintiff that her loan modification had been completed and approved, and had never received notice of the approval order. That motion was withdrawn a few weeks later. Next, the defendant filed a "motion to quash" the approval order, or in the alternative, for relief under 735 ILCS 5/2-1401 and 735 ILCS 5/15-1508. That motion was "stricken without prejudice" in early December 2011, but was re-filed the next day.

In April 2012, the plaintiff responded to the motion to quash, attaching an affidavit of service claiming that the defendant had been served by substitute service on her daughter, whom the affidavit named. The defendant responded to plaintiff's opposition with an affidavit of her own, stating that she had no daughter and knew no one by the name stated in the affidavit of service. The Circuit Court entered an order denying the plaintiff's motion to quash on the grounds that she had voluntarily submitted to the court's jurisdiction by filing her initial motion to vacate in October 2011.

On appeal, the defendant argued that the Appellate Court lacked jurisdiction to hear the appeal. Defendant had filed her initial motion to vacate within thirty days of the judgment of foreclosure and sale, but she then withdrew the motion. Each of defendant's motions that followed were filed more than thirty days after the entry of the final and appealable judgment, so none had extended the window to appeal from the judgment, according to defendant. The Appellate Court disagreed, noting that the defendant's third post-judgment motion had sought alternative relief under Section 2-1401 of the Code of Civil Procedure, thus triggering appellate jurisdiction under Supreme Court Rule 304(b)(3). The 2-1401 motion was not untimely because it challenged the underlying order as void, meaning that no time limit applied. Therefore, the Appellate Court proceeded to the merits.

On appeal, plaintiff did not contest that service on the defendant's "daughter" was improper. Nevertheless, plaintiff insisted that by failing to challenge personal jurisdiction with her first post-judgment motion, defendant had waived any challenge to the court's jurisdiction (the defendant' s first motion had denied service, but merely asked that the order approving the sale be vacated, rather than that the entire proceeding be dismissed or service of process quashed). Thus, the defendant failed to comply with the requirements of Section 2-301(a) of the Code of Civil Procedure or Section 15-1505.6 of the Illinois Mortgage Foreclosure Law for challenging personal jurisdiction, waiving her challenge.

Defendant responded that even if her first post-judgment motion waived the question of jurisdiction, it did so only prospectively, validating only steps the court might take after the defendant's appearance; it could not retroactively validate earlier orders and judgments. The defendant cited C.T.A.S.S.&U. Federal Credit Union v. Johnson, which held that a waiver of jurisdiction operates only prospectively. The Appellate Court disagreed, holding that certain amendments to the Code of Civil Procedure enacted in 2000 had provided that "all objections to the court's jurisdiction over the party's person" were waived by an appearance. The Court followed Eastern Savings Bank, FSB v. Flores, holding that plaintiff's waiver operated both prospectively and retroactively, thus validating the court's orders and judgment.

We expect BAC to be decided within six to eight months.

Illinois Supreme Court to Decide Whether Child Psychologist's Fees Taxable as Costs in Custody Battle

Our previews of the latest additions to the Illinois Supreme Court's civil docket continue with In re Marriage of Tiballi. Tiballi poses the following issue: when a parent voluntarily dismisses a petition to change custody, can he or she be hit with the fees of a court-appointed child psychologist as costs?

The parties in Tiballi divorced in 2005. Five years later, the father petitioned for a change in their child's residential custodian. The court appointed a psychologist to speak to the parents and the child, as authorized by the Illinois Marriage and Dissolution of Marriage Act; the psychologist ultimately submitted a report recommending that the child stay with its mother. Not long after, the mother filed a motion to dismiss, claiming that the father had decided not to proceed with his petition. The court's order originally said nothing about costs, but later, the wife successfully moved to amend the order to permit her to seek an award of costs. She then filed a petition for an award of slightly less than $5,000, representing her share of the psychologist's costs. The trial court granted the petition.

The Second District affirmed. The case turned on the interpretation of Section 2-1009(a) of the Code of Civil Procedure, which permits a plaintiff to voluntarily dismiss an action "upon payment of costs." (735 ILCS 5/2-1009). The court distinguished "costs" from "litigation expenses" -- the difference being that court costs are mandatory and nonnegotiable, the price of having your case heard. The fees of a psychologist in a custody proceeding were not within the control of the parties, the court found; whether or not to retain him or her was up to the court, and the parties had no say in negotiating the psychologist's fees. Thus, the court found that the psychologist's fees were analogous to court costs. The court distinguished an earlier Supreme Court case, Galowich v. Beech Aircraft Corp., which permitted the recovery of only a limited share of expenses for depositions necessarily used at trial, distinguishing deposition expenses, a tool for trial preparation, from the trial court's decision as to whether or not to retain a psychologist to advise it.

Justice Kathryn E. Zenoff dissented. The majority had erred at the outset, Justice Zenoff argued -- the wife had moved to have the custody challenge dismissed, and how could a litigation opponent "voluntarily dismiss" her adversary's proceeding? So Section 2-1009(a) had nothing to do with the issue. But even if it were a voluntary dismissal, Justice Zenoff rejected equating the psychologist's fees with costs for a long list of reasons: (1) court costs are paid directly to the clerk of the court; (2) no judgment or court order is required to incur liability for court costs; (3) court costs are fixed and -- unlike the psychologist's fees - not subject to review for reasonableness; (4) court costs are not subject to allocation between parties based on ability to pay; (5) court costs are incurred regardless of the type of litigation involved; and (6) court costs have nothing to do with specific merits-based or policy-based issues. Since, in Justice Zenoff's view, the psychologist's fees were not "costs," the judgment should have been reversed.

We expect Tiballi to be decided within six to eight months.

Illinois Supreme Court to Hear Due Process Challenge to Liquor License Revocation

Our previews of the latest additions to the Illinois Supreme Court's civil docket continue with WISAM 1, d/b/a Sheridan Liquors v. Illinois Liquor Control Commission, an unpublished decision from the Third District Appellate Court. WISAM involves a due process challenge to the revocation of the plaintiff's liquor license.

First, a bit of background. Federal law requires that any time a financial institution is involved in any way in a deposit, withdrawal, exchange of currency or other payment or transfer involving more than $10,000, a "currency transaction report" must be filed. Deliberately arranging your transactions to keep under the $10,000 limit -- a process called "structuring" or "smurfing" -- is a serious criminal offense.

Section 3-28 of the ordinances of the city of Peoria provides that no "officer, associate, member, representative, agent or employee" of a liquor licensee shall violate any ordinance of the city or law of the state or of the United States "in or about the licensed premises."

The plaintiff in WISAM received a notice of hearing re revocation of its liquor license, alleging that the plaintiff had violated Section 3-28. At the hearing, the City's attorney introduced a copy of a federal indictment of one of the plaintiff's managers, along with copies of the transcripts from his federal criminal trial. According to the indictment, the manager had engaged in structuring, making significant withdrawals below $10,000 in connection with the plaintiff's check-cashing business. The plaintiff objected to admission of the transcripts on hearsay grounds, but not to the stipulation or indictment.

After opening statements (and before the plaintiff had introduced any evidence), the city's attorney moved for a directed finding, which was granted on the grounds that the manager's activities amounted to a violation of Section 3-28. The plaintiff was allowed to make an offer of proof to make a record for appeal, and showed that the money had been handled as it was because the plaintiff's insurance coverage was limited to $10,000 cash on hand. During the penalty phase, the plaintiff's president reaffirmed this point, testifying that the cash transactions were handled as they were for insurance reasons and safety. The Local Liquor Control Commission revoked the plaintiff's license. The Illinois Liquor Control Commission affirmed, holding that the finding of a violation of Section 3-28 was supported by substantial evidence, and the plaintiff was not denied due process. The plaintiff then appealed to the Third District.

On appeal, the plaintiff raised two arguments: (1) the plaintiff was denied due process when the liquor control commissioner admitted the transcripts into evidence and immediately granted the City's motion for a directed finding; and (2) the transcripts were hearsay, and absent the transcripts there was insufficient evidence to support the finding of a violation of Section 3-28.

Although the Appellate Court took a dim view of the procedure below -- cutting off any defense at all by the plaintiff to immediately enter a directed finding -- the Court found no prejudice arising from the due process violation. The court pointed to the testimony of plaintiff's president, who conceded that the plaintiff deliberately kept its withdrawals below $10,000 because of its insurance limits. The court concluded that the Commission had permissibly concluded that the true purpose behind the pattern of the plaintiff's transactions was as set forth in the indictment and stipulation. Concluding that there was sufficient evidence to support the finding of a violation of Section 3-28, the Court affirmed.

Justice Mary McDade dissented, pointing out that nothing in the indictment alleged that the manager had carried out the charged transactions "in or about the licensed premises," as required to find a violation of Section 3-28. Therefore, the indictment had no probative value. Nor was the testimony of the plaintiff's president sufficient to support the revocation; his testimony that the transactions were kept below $10,000 for insurance reasons was corroborated by insurance documents. Therefore, Justice McDade argued, it was necessary to determine whether the transcripts were inadmissible hearsay. Given that there was no showing that the convicted manager was unavailable at the time of the hearing, Justice McDade concluded that the transcripts were indeed hearsay, and the Commission’s finding should therefore have been reversed.

We expect WISAM to be decided within six to eight months.

Illinois Supreme Court to Decide Whether FOIA Covers State's Attorney's Office

Our previews of the latest additions to the Illinois Supreme Court’s civil docket continue this morning with Nelson v. The Office of the Kendall County State’s Attorney, a case from the Second District Appellate Court. Nelson is the second case on last term’s civil grants list relating to the state Freedom of Information Act. The case presents the issue of whether the office of the State’s Attorney is a “public body” subject to FOIA.

The plaintiff filed separate actions against Kendall County and the office of the Kendall County State’s Attorney, seeking injunctions requiring the defendants to turn over emails that he contended were responsive to records requests he had submitted to both entities. Both actions were dismissed, with the Circuit Court holding that the County could not be compelled to turn over the State’s Attorney’s records, and the State’s Attorney wasn’t a “public body” within the meaning of FOIA. The plaintiff only challenged the second of those holdings on appeal.

The Illinois FOIA requires every “public body” to make public records available for inspection on request (subject to many exceptions). A requestor who gets turned down has a choice of either putting the matter before the Attorney General’s public access counselor or filing an action in circuit court. A decision from the public access counselor may be reviewed by the appellate courts in the same way as a final administrative decision. The circuit court, on the other hand, considers the applicability of FOIA de novo and may order the public body to turn over the records.

A “public body” is defined as “all legislative, executive, administrative or advisory bodies” of the state. You’ll note what’s missing from that definition: any mention of “judicial” bodies. In Copley Press, Inc. v. Administrative Office of the Courts, the Appellate Court held that FOIA meant what it said – and didn’t say – and that accordingly, judicial entities were not subject to the Act.

The Second District was very careful to circumscribe the issue before it. It was not deciding whether or not the State’s Attorney was in fact a member of the judicial branch of government, the court insisted. Rather, the court was deciding the narrower question of whether or not the State’s Attorney was subject to FOIA. The decisive factor in answering that question, the court held, was the structure of the state constitution. Every constitution in the state’s history that has provided for State’s Attorneys at all has created the office in the judicial article of the constitution, the court pointed out. The court also noted that in another context, the legislature has described the State’s Attorneys Appellate Prosecutor as “a judicial agency of state government.” 725 ILCS 210/3. From this, the court concluded that the term “judicial” is broader than the term “judicial power,” which is limited to the courts themselves. Under the circumstances, the court declined to infer that the legislature intended to extend FOIA to State’s Attorneys’ offices and affirmed the judgments of dismissal.

Before the Appellate Court, the plaintiff attempted without success to broaden the scope of the debate by arguing that the issue presented turns not on a mere issue of statutory construction, but on the more fundamental question of the nature of the State’s Attorney’s office. In support of that argument, the plaintiff pointed to several separation-of-powers cases and even to the Separation of Powers clause of the state constitution. Now that the plaintiff’s petition for leave to appeal has been allowed by the Supreme Court, it will be interesting to see whether the case is ultimately decided on this broader grounds, or the Court sticks with the narrower question framed by the Appellate Court.

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

Illinois Supreme Court to Decide If Municipal Red Light Camera Ordinances are Constitutional

Our previews of the latest additions to the civil docket of the Illinois Supreme Court continue today with Keating v. City of ChicagoKeating presents an issue bound to catch the attention of motorists in Illinois’ larger cities: are municipal red-light ordinances constitutional?

Chicago has had a red light ordinance since July 2003. The ordinances work on a simple idea. Rather than relying on patrol officers happening to catch red light violators in the act, automated cameras are set up at busy intersections, fitted with sensors to detect vehicles in the intersection. When the cameras detect a violation, the registered owner of the vehicle is sent copies of the photos and instructions as to how to contest liability or pay the fine.

By 2006, questions had arisen as to whether red light ordinances were legal. As a result, the state legislature passed an enabling act, specifically authorizing red light camera programs in Cook, DuPage, Kane, Lake, Madison, McHenry, St. Clair and Will County.

Most of the plaintiffs in Keating are registered vehicle owners who received red light violation citations from the City of Chicago. Plaintiffs paid their fines, although at least some of them contested liability. They then filed suit alleging that (1) the City lacked home rule authority to enact the red light ordinance; and (2) the 2006 enabling act was unconstitutional special legislation. The plaintiffs sought a declaratory judgment striking down the ordinance, an injunction stopping the City’s collection of fines and an order requiring restitution to all past violators. The Circuit Court granted the City’s motion to dismiss, holding that two plaintiffs lacked standing, that the enabling act was not special legislation, and that the voluntary payment doctrine barred all claims anyway since the plaintiffs had paid their fines.

On appeal, the plaintiffs raised four related arguments: (1) the enabling act is unconstitutional; (2) the City’s red light camera ordinance was void from its inception and the enabling act did not and could not legalize it; (3) the ordinance remained void since the City never reenacted it following the enabling act; and (4) the voluntary payment doctrine did not apply to bar their claims.

The First District began by affirming dismissal for lack of standing with respect to two plaintiffs. One had received citations in other jurisdictions, and alleged that she reasonably feared receiving more in Chicago. The other had not received a citation, but alleged that she had paid half the fine assessed against her husband.

Plaintiffs’ challenge to the ordinance itself was based on the proposition that the ordinance exceeded the home rule authority of the City of Chicago. Prior to 1970, the balance of power in Illinois was weighted heavily towards the state and away from local governments. The constitution adopted that year significantly changed that relationship, shifting considerable powers to so-called “home rule units.” Now, such local governments may do anything that the legislature has not expressly barred.

Local governments are permitted to adopt ordinances relating to traffic issues generally, so long as nothing in the ordinances is inconsistent with the state Vehicle Code. One of the few exceptions to this general idea is that home rule authorities may not enact anything governing “the movement of vehicles.” The Code provides that automated devices “for the purpose of recording [a vehicle’s] speed” are the exclusive province of the State. 625 ILCS 5/11-208.6(c). On the other hand, Section 11-208.2 of the Code permits local authorities to adopt ordinances “regulating traffic by means of police officers or traffic control signals.” (625 ILCS 5/11-208.) Because red light ordinances have been previously construed as not relating to “the movement of vehicles,” the court held that adoption of the ordinance was within the City’s home rule authority, and the enabling act was therefore unnecessary.

The court then turned to the plaintiffs’ claim that the 2006 enabling act was unconstitutional special legislation. The court pointed out that a legislative act applicable only to particular parts of the state could survive a special legislation challenge only where it was based upon a rational distinction between the affected areas and the rest of the state. Here, although the statute doesn’t specifically explain why only eight counties were authorized to enact red light ordinances, the legislative history of the 2006 act does: because red light cameras cost between ninety and one hundred thousand dollars apiece, the authority was granted only to the most populous counties with the most traffic. Given that rational basis, the statute was not unconstitutional special legislation.

Finally, the court turned to the voluntary payment doctrine. The doctrine has deep roots in the common law: anyone who voluntarily pays a debt claimed by another as a matter of right, with knowledge of the facts which allegedly negate that claim of right, cannot later challenge the creditor’s claim to payment. The doctrine does not ordinarily apply when payment is made under duress. After reviewing the law on duress in detail, the court concluded that because accused violators were subject to significant penalties for non-payment, including collection proceedings with possible liability for attorneys’ fees and immobilization of their vehicles, the plaintiffs had paid under duress and the voluntary payment doctrine did not bar their claims. However, because the plaintiffs’ complaints failed to state a claim on the merits, the Appellate Court affirmed the judgments.

We expect Keating to be decided in the next six to eight months.

Illinois Supreme Court to Decide Constitutional Challenge to Medical Licensing Law

Our previews of the newest additions to the civil docket of the Illinois Supreme Court continues this morning with Consiglio v. Department of Financial and Professional Regulation. Consiglio involves a lengthy list of constitutional challenges to amendments the legislature enacted in 2011 to the Department of Professional Regulation Act (20 ILCS 2105/2105-165). According to the new statute, a health care worker’s license is automatically revoked without a hearing when the individual: (1) is convicted of a criminal act automatically requiring registration as a sex offender; (2) is convicted of a criminal battery against any patient committed in the course of care or treatment; (3) has been convicted of a forcible felony; or (4) is required as part of a criminal sentence to register  as a sex offender.

The plaintiffs are three general physicians and one chiropractic physician. Subsequent to being licensed, each was convicted of a battery or abuse against a patient in the course of care or treatment. They filed separate actions in Cook County, seeking a judicial declaration that the Act applied only prospectively to convictions after its effective date and injunctive relief barring revocation of their licenses for convictions occurring before the effective date.   All four complaints were dismissed for failure to state a claim.

On appeal, the plaintiffs argued that the statute: (1) offended substantive and procedural due process; (2) constituted double jeopardy; (3) violated the ex post facto clause; (4) offended the separation of powers clause by abridging the Department’s discretion and the judiciary’s power of review; (5) violated the contracts clause; (6) violated the proportionate penalties clause; (7) was barred by res judicata flowing from previous orders of the Department; and (8) unfairly deprived them of vested limitations and repose defenses.

One by one, Division One of the First District rejected the plaintiffs’ challenges. First, the court found that the plaintiffs conflated two separate issues – whether the Act applied to convictions predating its enactment (which it clearly did) and whether the Act applied retroactively in the constitutional sense (which the court concluded it did not).

The court rejected the plaintiffs’ due process claims. Although the plaintiffs’ licenses were obviously a property interest, since the Act’s remedies only applied upon conviction, the risk of erroneous deprivation was low. On the other hand, the governmental interest at stake was quite high. The court pointed out that the plaintiffs had a post-deprivation challenge available to them – a written appeal disputing the existence of the triggering conviction. Additional procedures would merely add burden without giving much offsetting benefit, the court found.

The court rejected plaintiffs’ double jeopardy argument, finding that the Act did not impose punishment in the constitutional sense. The revocation of a privilege was not generally considered punishment, the court pointed out. The court commented that if the immediate threat to patients were the only purpose, it might agree that the statutory remedy was excessive, but the Act served a further important purpose of protecting public health and maintaining the honesty and integrity of the medical profession. As such, the Act constituted a civil penalty without punitive effect.  The plaintiffs’ ex post facto and proportionate penalties challenges failed as well because the Act was not punitive.

The Appellate Court dismissed the plaintiffs’ separation of powers arguments too. The plaintiffs argued that because the Act provided that no hearing was necessary, the statute interfered with judicial review. The court disagreed, pointing out that no hearing was required for due process. Nor did the statute constitute an attempt to legislatively overturn the Department’s previous decisions regarding plaintiffs’ licenses, since the legislature always retains the right to change the law. The court found that the statute passed muster under the contracts clause because the remedies set forth in the Act were reasonable and necessary to serve an important public purpose. The court rejected the plaintiffs’ res judicata challenge, holding that even assuming that Department orders qualified for res judicata effect, the legislature was free to alter the underlying statute at any time.

Finally, the court rejected the plaintiffs’ argument that they had been unfairly deprived of vested statute of limitations defenses pursuant to 225 ILCS 60/22(A) of the Act. The court found as a matter of statutory construction that the statute of limitations applied only to violations of the Medical Practice Act. The legislature intended that no statute of limitations should apply to actions for automatic revocation.

We expect Consiglio to be decided in six to eight months.

Illinois Supreme Court to Decide If Wrongful Death Plaintiff's Lawyer Owes Duty to Next of Kin

Our previews of the newest additions to the Illinois Supreme Court's civil docket continue with Estate of Powell v. John C. Wunsch, P.C., a case from the Third Division of the First District which poses this question: does the lawyer who brings a wrongful death action owe a duty of care to the next of kin, or only to the estate?

The plaintiff in Estate of Powell was adjudicated disabled by the circuit court in 1997. His parents were appointed to serve as co-guardians of his person, but not as guardians of his estate. The plaintiff's father died two years later, and his mother retained the defendants to bring a wrongful death action. Nearly two years later, the mother successfully petitioned to have herself appointed as special administratrix of the father's estate. The petition named the mother, the plaintiff and his sister as the father's next of kin.

In January 2005, the mother petitioned for approval of an initial settlement for $15,000 with certain defendants. The circuit court approved the settlement, with each of the three next of kin receiving $5,000. The remainder of the defendants settled in November of that year for $350,000. The second settlement was approved, with the mother and the plaintiff splitting the funds (the sister had waived her rights to any of the second settlement proceeds).

Three years later, the plaintiff's sister became concerned about the plaintiff's well-being. Believing that their mother was no longer capable of caring for the plaintiff, she petitioned to have the mother removed as guardian, or in the alternative, for an order appointing the sister as co-guardian. The petition also claimed that the plaintiff's half of the settlement funds were deposited in a joint bank account, and were not being expended towards his care. In the summer of 2009, the probate court entered orders removing the mother, making the sister plenary guardian of the plaintiff's person, and appointing the public guardian as guardian of the plaintiff's estate.

The public guardian filed Estate of Powell, a malpractice claim against the lawyers who handled the wrongful death claim. The theory was that the lawyers had breached a duty to the plaintiff by failing to ensure that his share of the two settlements was distributed through the probate court pursuant to section 2.1 of the Wrongful Death Act (740 ILCS 180/2.1), and accordingly plaintiff had lost access to those funds. The defendants successfully moved to dismiss on the grounds that they owed the plaintiff no duty, since he was not their client.

The Appellate Court reversed in part. A duty of care, the Court wrote, could arise in two situations: (1) the plaintiff had an attorney-client relationship with the defendants; or (2) he was an intended beneficiary of such a relationship. The Court concluded that the Wrongful Death Act established that all next of kin are the intended beneficiaries of a wrongful death action, which is brought "for the exclusive benefit of the surviving spouse and next of kin of such a deceased person." 740 ILCS 180/2. The Act requires that the action be brought in the name of the decedent's personal representative, but the courts have recognized for many years that the claims are in fact those of the individual beneficiaries - here, the plaintiff, his sister and mother. Accordingly, the defendants owed the plaintiff a duty of care.

The Court turned next to the proximate cause element of the cause of action. The court noted that the Probate Act requires that a guardian be appointed, and funds be distributed under the Court's supervision, for any settlement in excess of $5,000. The first settlement did not exceed $5,000, so the Probate Act didn't apply, and the plaintiff's cause of action failed. But the second settlement did exceed the statutory threshold. Therefore, the Court held, that complaint sufficiently pled three negligent omissions with respect to the second of the two wrongful death settlements: (1) failing to petition the probate court to appoint a guardian of the plaintiff's estate to receive his share; (2) failing to notify the court that the plaintiff's mother was receiving control of his share without probate authority; and (3) failing to protect the plaintiff's interest when they knew he would be unable to do so himself.

We expect Estate of Powell to be decided in the next six to eight months.

Illinois Supreme Court Agrees to Consider Flexible Utility Rate-Making Technique

Our previews of the newest additions to the Illinois Supreme Court's civil docket continue with People ex rel. Madigan v. Illinois Commerce CommissionMadigan poses a question involving the jurisdiction of the Illinois Commerce Commission, which is responsible for regulating public utilities operating in the state: are volume-balancing-adjustment ("VBA") riders to approved rate schedules for natural gas permissible?

Here's why the issue is important to public utilities and their customers. Utility rate-making relies to a considerable degree on forecasting the future: what are loads likely to be, what the weather should be like, population changes as people move in and out of the service area, energy efficiency, the effect of rising (or falling) gas prices on demand; all kinds of factors go into the mix. Inevitably, those forecasts are going to turn out to be incorrect. But the Commerce Commission approves a certain level of reasonable revenue for the utility, and when the assumptions that go into that calculus turn out to be off, things start to go wrong. At the micro level, for one example, it's possible that customers might wind up "overpaying" when weather is colder than normal, and "underpaying" when weather is warmer than normal. At the macro level, utilities can miss their approved revenue recovery targets and wind up having to pursue more rate cases. VBA riders make both of those effects less likely by adjusting rates either up or down depending on whether the utility would otherwise overrecover or underrecover its target revenue. It does this by giving customers a credit when revenues are higher than expected, and applying a surcharge when revenues are lower than expected.

Nationwide, we have quite a bit of experience with various kinds of revenue decoupling; more than half the states either have some form of it or are considering it, and California first adopted it thirty-five years ago. Revenue decoupling offers a number of benefits, as recognized by the ICC, including reduced volatility in utility revenues and customers' bills, greater equity because decoupling is based on actual revenues rather than estimates, and encouraging conservation measures by removing the direct link between increased sales and increased revenues.

A group of utilities asked the Commission to approve VBAs in 2007. After an evidentiary hearing, the Commission authorized Rider VBA as a four-year pilot program in 2008. The Attorney General appealed the Commission's decision, but while that appeal was still pending, the Commission approved Rider VBA on a permanent basis in January 2012 (over the Attorney General's objections).

Madigan is the appeal by the Attorney General and the Citizens' Utility Board from that ruling. Before the Second District Appellate Court, the parties' disputes began with the most fundamental issue of all: the standard of review. In Illinois (as in most states), the actions of the Commission are in almost every case given deferential review by the courts. The AG and the CUB argued that the deferential standard shouldn't apply since the Commission had "departed from past practice" and made an error of law. The court disagreed, holding that the Commission's findings of fact were presumptively true and its orders presumed reasonable on appeal.

The appellants challenged the Rider VBA on two grounds: (1) it was impermissible retroactive ratemaking; and (2) it violated the prohibition against single-issue ratemaking. Retroactive ratemaking is what it sounds like: providing refunds to customers when rates are too high and imposing surcharges when they're too low. Single-issue ratemaking occurs when a rate is set based on a change to only one component of costs without considering whether changes to other costs might have offset the increase.

The Appellate Court held that the Rider VBA was not retroactive ratemaking. The VBA was not a modification enacted to correct an "error" -- a determination that rates were too high or too low. VBA is a ratemaking methodology designed to ensure that the utilities maintain the approved level of revenue taking into account actual experience (as opposed to forecasts) with demand. As such, the VBA is not retroactive ratemaking, the Court found.

Nor did the Rider VBA amount to single-issue ratemaking, the Court concluded. In so holding, the Court distinguished its earlier decision in Commonwealth Edison Co. v. Illinois Commerce Commission, where the Court had held that riders are permissible only based on a showing of exceptional circumstances. ComEd had arisen in the context of traditional ratemaking, the Court found; revenue decoupling was a different approach. The Rider VBA didn't provide for recovery of any specific cost, nor did it isolate any particular cost. Far from causing rates to fluctuate based on a single strand of the revenue requirement, as the appellants argued, revenue decoupling eliminated the link between sales and revenue, according to the Court. "We conclude that the revenue decoupling mechanism known as Rider VBA was approved by the Commission to guarantee that the Utilities recoup the costs for the infrastructure in which they prudently invested," the Court wrote, "not to ensure profits but to satisfy the distribution needs of their customers." For that reason, the Court affirmed the Commission's order approving the Rider VBA.

We expect Madigan to be decided in the next six to eight months.

Illinois Supreme Court to Decide If FOIA Requires Equal Treatment of Citizens and Media

Our previews of the newest additions to the Illinois Supreme Court's docket continue with Garlick v. Madigan, a unpublished decision from Division One of the First District which poses this interesting question: is a government entity required to treat a private citizen and a media outlet the same for purposes of requests under the state Freedom of Information Act?

More than two years ago, the plaintiff in Garlick sent the defendant a FOIA request, asking for data relating to the operations of the Attorney General's Public Access Coordinator (PAC) - an official tasked with overseeing the rest of the state government's compliance with FOIA. The plaintiff's request said he wasn't interested in the names of the requesting parties, but did say that he wanted the information in a specific electronic format. The AG declined to generate the information in the requested format, but agreed to turn over an existing report.

A month later, the Chicago Tribune asked for data on the AG's PAC. In the Tribune's online story, the data was available for direct download. The data included the identities of the requesting parties - the information the plaintiff had said he wasn't interested in.

The plaintiff contacted the AG, asking for an explanation of the redactions. The Attorney General responded that in the case of the Trib, the office had concluded that the public interest outweighed the value of keeping the requestors' identities private.   The plaintiff then wrote the PAC, demanding the information again, with no redactions. The AG wrote back, stating that its earlier response hadn't violated the Act. The plaintiff filed another FOIA request, demanding all the AG's correspondence with the Trib. The information was turned over, and disclosed that the AG had worked with the Trib to provide the information in the paper's preferred format. So the plaintiff sued, seeking the unredacted information, civil penalties and costs. The trial court dismissed.

On appeal, the plaintiff raised four arguments. The Appellate Court rejected each one.

First, the plaintiff argued that the AG's failure to provide the information in the preferred format was itself a FOIA violation. The Appellate Court disagreed, holding that a public entity is entitled to provide information in the form in which it exists in the office's records. Next, the plaintiff argued that treating the Tribune differently violated FOIA, and that permitting less disclosure to a private actor harmed the public policy interests that animated FOIA. The Appellate Court disagreed, holding that the parties were not similarly situated for equal protection purposes, and that the treatment of the Trib was entirely irrelevant to the issue of whether or not the AG had violated FOIA in its interaction with the plaintiff. Finally, the Court rejected the plaintiff's argument that the AG's redactions from the record had violated FOIA, pointing out that the plaintiff had expressly stated in the request that he didn't care about redactions.

We expect Garlick to be decided in six to eight months.

Illinois Supreme Court to Decide Who Pays When the General Contractor Goes Bust

Today, as we await the start of the Court’s November term, we begin our first look previews at the most recent additions to the Court’s civil docket. First up is Lake County Grading Company, LLC v. The Village of Antioch, a case out of the Second District which poses a potentially important question for cash-strapped local governments: when the general contractor on a public improvement goes bankrupt, who pays the subcontractors?

The general contractor in Lake County signed two agreements to make public improvements in two residential subdivisions. The GC hired the plaintiff as a subcontractor to perform grading work. There’s no dispute that the subcontractor performed all the work in compliance with the contract, but was never paid in full.

The contract (not to mention the Public Construction Bond Act) required that the GC provide surety bonds based on the cost of the improvements, which the GC did. The problem was that the bonds which the GC obtained and the defendant accepted were performance bonds only. They didn’t guarantee payment to the subs, even though the Public Construction Bond Act specifically requires it. Before the job was completed, the GC stopped work and ultimately declared bankruptcy.

The sub delayed sending out lien notices because it wanted to protect its working relationship with the GC. Ultimately – more than 180 days after last performing work (I’ll explain why that’s important momentarily) – it filed notices of lien claims on the work. Plaintiff then filed a five-count complaint against the defendant village. Three of the counts were dismissed – two for lien claims for public funds and one for unjust enrichment. Lake County turns on the remaining two claims, for third party beneficiary breach of contract, based on the defendant’s failure to require a bond from the GC guaranteeing payment, not just performance. The trial court granted summary judgment for the plaintiff.

On appeal, the defendant argued that the sub wasn’t entitled to payment from anybody. The argument went like this: the Bond Act incorporated a payment guarantee into the performance bond provided by the GC, which the sub should have sued on, but since the sub had waited more than 180 days from its last work to begin proceedings, it was out of luck.

The Second District affirmed judgment for the subcontractor. The fatal flaw in the defendant’s argument, the Court held, was that it implicitly assumed that the sub’s only remedy was via the Bond Act. Not so, the Court noted – section 2 of the Bond Act expressly states that the remedies under the Act are cumulative of any other remedies available in statutory, regulatory or common law. The sub’s argument was that it was a third-party beneficiary of the construction contract between the bankrupt GC and the defendant.

Third party beneficiary status in Illinois turns on whether the language of the contract reflects an intent to directly benefit the individual. The language must expressly identify the third party by name, or at least describe the class to which it belongs. The Court held that the provision in the general contract empowering the GC to hire subcontractors was sufficient to qualify. Given that the payment bond requirement of Section 1 of the Bond Act is automatically read into the construction contract as a matter of law, the Court held that the defendant had breached the contract when it failed to require a payment bond from the general contractor. Since the sub wasn’t suing on the bond, the statute of limitations contained in the Bond Act didn’t apply.   Any other ruling, the Court found, would essentially shift the burden of ensuring that the GC obtained a payment bond from the government entity itself to the insurer who wrote the bond. The Court declined to follow Shaw Industries, Inc. v. Community College District No. 515, a 2000 case from the Second Division of the First District which had refused to allow a subcontractor to sue as a third-party beneficiary under a construction contract in order to get around the statute of limitations in the Bond Act.

We expect Lake County to be decided by the Court within six to eight months.

Illinois Supreme Court Holds Guaranty Fund's Indemnity Payments Not Limited By Statutory Cap

In Illinois (as in every other state), when an insurance company becomes insolvent and an order of liquidation is entered, the Illinois Insurance Guaranty Fund steps in and pays claims that the insolvent carrier could not pay. The Fund’s liability is capped at $300,000, but that cap isn’t applicable to “workers compensation claims.” Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund presented an interesting variation on that rule. What happens when the insolvent carrier is the excess insurer, and the Fund’s liability is for contractual indemnity to the employer, rather than making direct payments to the injured employee? On Friday morning, a divided Illinois Supreme Court held that the result was the same – the claim was still one for workers’ compensation, and the statutory cap didn’t apply.

In Skokie Castings, the employer had chosen to partially self-insure against its workers compensation exposure, carrying excess coverage only in case of major losses. According to the excess policy, the insurer was obligated to indemnify the employer for any sums paid above a $200,000 threshold.

One of the employer’s employees was seriously injured in 1985; she was ultimately declared permanently disabled by the Commission and awarded lifetime workers’ comp benefits. The employer paid up to the $200,000 self-insured threshold, at which point the insurer began paying under the policy. It did so until it became insolvent, went into receivership and was liquidated. The Fund then took over, but once it had paid about $250,000 on the claim, it notified the employer that it believed that the liability was subject to the $300,000 statutory cap set on Fund obligations by Section 537.2 of the Illinois Insurance Code (215 ILCS 5/537.2).

When the Fund reached the $300,000 cap and refused to make further payments, the employer filed suit, seeking a declaratory judgment that the statutory cap was inapplicable and that the Fund had improperly terminated payments. The Circuit Court entered summary judgment in the employer’s favor, finding that the Fund’s liability to the employer was a “workers’ compensation claim,” making the cap inapplicable. The Appellate Court affirmed.

The Supreme Court agreed. Writing for a five-Justice majority, Justice Lloyd A. Karmeier found that it was “indisputable” that the covered claims at issue “arose out of and were within the coverage of policies which had been purchased to help insure” the employer “against liability for workers’ compensation awards.” The claim at issue was therefore a “workers’ compensation claim” under the statute, and was exempt from the statutory cap.

The Fund had argued on appeal that a “workers’ compensation claim” was limited to a claim for benefits brought directly by an injured employee. The Court disagreed. A workers’ compensation claim did not arise under an insurance policy, the Court pointed out, but rather under the Workers’ Compensation Act; it was made to the Workers’ Compensation Commission, not the employer or the employer’s insurer. Since the Fund’s obligations only extended to covered claims arising under insurance policies issued by insolvent insurers, the term “workers compensation claim” in the statute could not refer to claims for benefits directly made by workers. Nor did it matter, the majority found, that the policy at issue was for excess only, or that the excess carrier might be reimbursing the employer, rather than paying the employee.

The majority was unconcerned that potentially unlimited liability in similar situations might “place an undue burden on the Fund’s resources.” The majority pointed out that an insurer’s maximum assessment for any given year was subject to a 2% cap. If the Fund’s obligations for a given year could not be satisfied out of the total funds available through assessments, payment was simply delayed until enough money became available.

Chief Justice Kilbride dissented. The Chief Justice agreed with the majority’s initial steps: the case involved two distinct claims, the employee’s statutory claim for benefits filed with the Commission, and the employer’s contract-based claim, first against its excess carrier, and later against the Fund. Only the latter could possibly be a “covered claim” within the meaning of the statute. Therefore, the issue was the nature of that contractual claim by the employer against the Fund.

That claim, the Chief Justice found, was clearly one for indemnity only. The policy required that the employer submit a periodic statement to the excess insurer showing payments actually made by the employer, and the insurer would then reimburse the employer for those payments. The excess insurer never took on the obligation to pay the employee’s workers’ compensation claim, so the Fund didn’t have that obligation either. Therefore, the “covered claim” at issue wasn’t a workers’ compensation claim, and the statutory cap applied.

The Chief Justice disputed the majority’s view that any burden on the Fund was unimportant as well.   First, the Chief predicted that the majority’s holding would likely increase demand for cheaper excess-only workers’ compensation coverage, placing a greater potential burden on the Fund’s resources. Second, the Fund would be required to increase annual assessments, a cost increase which would be passed along to insureds in the form of higher premiums. Once the Fund’s obligations reached the 2% limit on annual assessments, payments on policy obligations would have to be stretched out (a fact the majority acknowledged). But if the Fund’s payments were “workers’ compensation,” such delays were contrary to the legislative purpose of securing prompt compensation for workers’ injuries, the Chief Justice noted.

Justice Robert R. Thomas filed a separate dissent. According to Justice Thomas, the purpose of exempting workers compensation claims from the statutory cap for Fund obligations was to ensure that injured workers receive all of the benefits to which they are entitled. “I simply cannot see how that public policy purpose is implicated in this case,” Justice Thomas wrote. Like the Chief Justice, Justice Thomas concluded that the key point in resolving the case was that the excess carrier’s liability – inherited by the Fund – was one to indemnify the employer, not to directly pay the employee. If the employer simply stopped making the payments, it would have no claim against the insolvent insurer or the Fund, since the policy was limited to payments actually made.

Illinois Supreme Court Strikes Down Amendment to Illinois Public Labor Relations Act

As I mentioned earlier this week in discussing Performance Marketing, the Illinois Supreme Court has been a somewhat cool audience over the past ten years for constitutional claims. That’s why it was mildly surprising late last week to see the Court strike down two statutes in a single morning. The first, of course, was Performance Marketing, in which the Click-Through Act fell to a challenge under the Supremacy Clause. The second was The Board of Education of Peoria School District No. 150 v. Peoria Federation of Support Staff, in which a six-Justice majority, led by Justice Lloyd A. Karmeier, voided the 2010 amendments to the Illinois Public Labor Relations Act (“IPLRA”). Our detailed summary of the facts and lower court rulings is here. Our report on the oral argument is here.

The defendant union had been first certified to represent the 26 full-time and part-time security officers employed by the plaintiff in 1989 by the Illinois Educational Labor Relations Board (“IELRB”), which administers the Illinois Educational Labor Relations Act (“IELRA”). But then came the 2010 amendments to the IPLRA, which removed “peace officers” employed by a “school district” in “its own police department in existence on the effective date of this amendatory Act” from the IELRA and placed them within the IPLRA. Why does it matter? Under the IELRA, the officers would have the right to strike. Under the IPLRA, the Board would not have the right to impose its final offer unilaterally, and labor disputes would go directly to interest arbitration. Since the officers’ union was so small – too small to have that much leverage in a strike – the union purportedly wanted interest arbitration rather than a right to strike.

But here’s the problem: on the day the 2010 amendments became effective, only one school district in Illinois employed its own police officers – the plaintiff. And since the statute appeared to open and close the affected class all on a single day, it seemed that the plaintiff was the only entity which would ever be subject to the Act. And the Illinois Constitution bans “special legislation” any time a “general law is or can be made applicable.”

The plaintiff school district sued the officers’ union, the IELRB and the Labor Relations Board (“ILRB”), which administers the IPLRA, seeking declarations that (1) the 2010 amendments were unconstitutional special legislation; and (2) the IELRA governed any labor disputes with the union, not the IPLRA. The Circuit Court granted the motion to dismiss filed by the two defendant Boards, holding that the amendments were not unconstitutional. The Appellate Court unanimously reversed, holding that the plaintiffs had made out a sufficient case that the amendments were unconstitutional to withstand a motion to dismiss (but not going the rest of the way and actually voiding the amendments).

The Supreme Court unanimously affirmed the Appellate Court and voided the 2010 amendments. The fatal problem, the Court held, was that even though there was nothing unique about the statute’s description of entities subject to its provisions – a school district employing its own security officers – the statute nevertheless closed the affected class on the date it became effective. School districts might opt to employ their own security officers in the future, and it was irrational not to extend the benefits of interest arbitration to them, the Court found. Since a “general law” could have been enacted, the 2010 amendments were necessarily void.

Chief Justice Kilbride added a short special concurrence, emphasizing that nothing about the Court’s opinion should be read as relaxing the Court’s holdings in a line of earlier authorities that the two boards have exclusive jurisdiction to hear disputes within their respective statutory schemes, subject to review only at the Appellate Court, not in the trial courts.

Illinois Supreme Court Bars Action Against Deceased Defendant

On Friday morning, the Illinois Supreme Court pointed out a trap for the unwary in an unexpected place - what happens if a complaint is filed, but unbeknownst to the plaintiff, the defendant had died several months earlier? In Relf v. Shatayeva, Justice Lloyd A. Karmeier, writing for a six-Justice majority, reversed the Appellate Court's judgment and held that the action was barred by plaintiff's failure to substitute the decedent's personal representative before the expiration of the statutory period. Our detailed discussion of the underlying facts and lower court rulings is here. Our report on the oral argument is here.

In February 2010 - just before the expiration of the two-year statute of limitations - the plaintiff sued the defendant for injuries sustained in an automobile accident. One problem -- the defendant had died twenty-two months earlier - an event which was published in the Chicago Tribune. Not surprisingly, the sheriff failed to effectuate service on the decedent. The plaintiff had a special process server appointed, who quickly informed the plaintiff that the defendant was no longer living.

The plaintiff took no immediate action in response to this news. Seven days later, the circuit court dismissed the action for lack of diligence in attempting to effectuate service. The plaintiff then waited five months before ultimately asking the trial court to take notice of the decedent's death, reinstate the action, appoint a "special administrator" -- the plaintiff's counsel's secretary -- to defend the case, and grant plaintiff leave to file an amended complaint. In support of the motion, plaintiff alleged that she had not been aware of the defendant's passing until informed of it by the special process server, and she was unaware of any personal representative having been appointed for the estate. In fact, the decedent's son had been granted letters of office as administrator of the estate long before -- only five months after decedent passed away. Nevertheless, the court granted each of plaintiff's motions.

The special administrator moved to dismiss the action for failure to serve the complaint until the statute of limitations had run. The motion was denied, but after the plaintiff amended her complaint, defendant moved to dismiss the action as untimely. The defendant argued that although the action was filed just within the two year statute of limitations, it had been directed against the decedent, not his representative; that filing was void. As for the subsequent amendment naming the special administrator, the defendant argued that plaintiff had failed to comply with the requirements of Section 13-209 of the Code of Civil Procedure governing how to proceed against a deceased defendant.

Section 13-209 provides three options for such cases. If an estate had been opened and a personal representative appointed -- subsection (a) of 13-209 -- the plaintiff had six months after the decedent's death to sue the personal representative. Then there was subsection (b) -- if no petition had been filed for letters of office for a personal representative, the court could appoint a special representative after notice to the party's heirs and legatees and without opening an estate. Finally, there was subsection (c) -- if the plaintiff was unaware of the decedent's passing, he or she could proceed against the personal representative so long as four conditions were satisfied: (1) the plaintiff substituted the personal representative with reasonable diligence; (2) the plaintiff served the personal representative with reasonable diligence; (3) if process is served more than six months after letters of office were issued, the estate's liability is limited to any insurance coverage; and (4) plaintiff's amended complaint was filed within 2 years of the end of the statute of limitations.

The circuit court granted defendant's motion to dismiss. The Appellate Court reversed and remanded, holding that subsection (c), not (b), governed since plaintiff was unaware of the decedent's death when the action was filed.

The Supreme Court majority reversed the judgment and reinstated the order of dismissal. The majority held that because the defendant had died by the time the initial complaint was filed, the plaintiff's original complaint had not tolled the statute of limitations; thus, section 13-209 was implicated. Subsections (a) and (b) were out, since the plaintiff clearly wasn't aware of the defendant's death when the action was filed. So subsection (c) governed.

The majority pointed out that although why the plaintiff had been unaware of the defendant's death was unclear, it didn't matter; the mere fact that the plaintiff didn't know was enough. So the only remaining question was whether plaintiff's counsel's secretary was his "personal representative." The majority held that she was not. The majority concluded that where petitions for letter of office have been filed, the resulting representative was consistently referred to in the statutes as either the "representative" or "personal representative" of the decedent. Plaintiff argued that "personal representatives" and "special representatives" were interchangeable, but the majority held that plaintiff's theory was incompatible with section 13-209, which limited "special representatives" to individuals as to whom no petition for letters of office had been filed.

Therefore, under the plain language of the statute, plaintiff was obligated to substitute in the decedent's personal representative immediately upon learning of his death. Since she did not, the action was barred. Plaintiff argued that the defendant had not been prejudiced by the appointment of a special administrator, but the majority pointed out that it was impossible to know that, since neither the representative, heirs or legatees had ever been informed of the litigation. The majority pointed out that there was one final problem with the defendant's appointment: under Section 27-5 of the Probate Act, a special administrator could not be appointed based upon the recommendation of any person adverse to the special administrator. Since the special administrator had been appointed based upon the recommendation of the plaintiff's counsel, she was by definition improperly appointed.

Chief Justice Thomas L. Kilbride dissented. The Chief Justice agreed with the majority that subsection (c) of section 13-209 was applicable. However, the Chief Justice argued that plaintiff had moved diligently to substitute a representative and to serve her. Plaintiff's mistake in misnaming the appointed representative a "special representative" rather than a "personal representative" shouldn't be fatal to the action, the Chief Justice argued. Finally, the Chief Justice concluded that the decedent's estate had not been prejudiced by the plaintiff's conduct.

Illinois Supreme Court Holds Internet Sales Tax Preempted by Federal Statute

On Friday morning, the Illinois Supreme Court handed down its opinion in one of its most high-profile pending cases. The Court held in Performance Marketing Association, Inc. v. Hamer that the federal Internet Tax Freedom Act (ITFA) preempted the Illinois "Click-Through" Act, also known as the "Amazon tax" – becoming (according to lone dissenter Justice Lloyd A. Karmeier) the first court of review in the country to do so. Our detailed summary of the underlying facts and Circuit Court holding in Performance Marketing is here. Our report on the oral argument is here.

Here's how the Amazon tax works: many smaller websites display links allowing visitors to click and be taken directly to the website of a national retailer to buy books, music, or almost anything else. Typically, the small website owner is paid a commission according to how many visitors reach the national retailer’s website through his or her site. The business is called “performance marketing” – it happens in catalogs, magazines, newspapers, television and radio too, but these days, internet is the most high-profile form. Illinois’ Act imposes no new taxes; rather, it defines any out-of-state merchant with a contractual relationship with an Illinois-based performance marketer as an Illinois merchant, obligated to collect use taxes on online sales, as long as the performance marketer’s link generates $10,000 a year in sales.

After the Illinois statute was enacted, the Performance Marketing Association filed suit in Cook County Circuit Court.  The PMA alleged that the Act violated the dormant Commerce Clause by burdening interstate commerce and attempting to regulate commerce without a substantial nexus to the state. The PMA further claimed that the statute was preempted by the ITFA, which bars state statutes for a limiting time from singling out electronic commerce for special burdens. The Circuit Court granted PMA’s motion for summary judgment, holding that the statute was both a Commerce Clause violation and preempted. The appeal was directly to the Supreme Court.

Normally, one would have expected the plaintiff to have an uphill battle before the Court; over the past decade, the Illinois Supreme Court has been at least moderately hostile to constitutional claims (for any readers who aren’t lawyers – statutory preemption is technically a constitutional claim, since the reason a Federal statute trumps a state statute under the right conditions is the Federal Supremacy Clause). But it didn’t turn out that way; the Supreme Court affirmed the judgment, with Justice Anne M. Burke writing for the six-Justice majority.

The ITFA defines as a prohibited discriminatory tax any tax which impacts electronic merchants differently than similarly situated merchants in non-electronic goods, the Court noted. The plaintiff claimed that the Act was preempted because it was aimed solely at online performance marketers; there were no similar burdens placed on print or broadcast performance marketers. The defendant countered that Illinois law already placed comparable burdens on offline performance marketing, citing 35 ILCS 105/2(3), the definition section of the Use Tax Act.

The Court disagreed. Section 2(3) applies to performance marketers using advertising “which is disseminated primarily to consumers located in this State and only secondarily to bordering jurisdictions.” No burdens were placed on performance marketers whose ads were disseminated in Illinois as part of national or international distribution. But online performance marketers – whose ads are by definition visible worldwide – were required to collect use tax if they entered into contracts with Illinois-based advertisers. Thus, the Act had a differential impact on electronic commerce.

The defendant pointed to section 150.80(c)(2) of title 86 of the Administrative Code (86 Ill. Adm. Code 150.801(c)(2)), which requires out-of-state retailers with a relationship with an in-state representative soliciting or taking orders to collect use tax. Online performance marketing, defendant argued, is not pure advertising, but rather “active” solicitation of orders. Thus, the Act merely placed electronic performance marketers on the same basis as offline marketers. But once again, the Court disagreed. The online advertiser didn’t receive or transmit customer orders, process payments, deliver purchased products or provide customer services, the Court pointed out. Nor did it know the identity of internet users who click on the link, and after the user passes through the link to the retailer’s website, the referring advertiser has no further connection to the user. The Court concluded that this was not solicitation within the meaning of the regulation.

Ultimately, the matter was simple, the majority found. An electronic performance marketer with $10,000 in sales through the link was burdened, but a similarly situated print advertiser with the same volume of sales was not. Therefore, the Illinois Act was preempted by the ITFA. For that reason, the majority declined to address the Commerce Clause challenge.

Justice Lloyd A. Karmeier dissented. The Illinois Act was hardly unique, Justice Karmeier pointed out; Illinois’ statute was merely the local version of a bill enacted in at least half a dozen other states and modeled on a New York statute (which has recently been upheld against an ITFA challenge). Justice Karmeier had two procedural objections to the majority’s opinion. First, he pointed out that the case was before the Court under Supreme Court Rule 302 because the lower court had invalidated a statute; had preemption been the sole basis for the lower court’s ruling, the appeal would have been to the Appellate Court. Because the majority resolved the case on preemption grounds, declining to address the Commerce Clause challenge, Justice Karmeier argued that the opinion ultimately accomplished little. The Federal Act will expire, barring renewal, next November 1st. Since a preemption ruling merely suspends the operation of a law, rather than voiding it for all time, if the Federal Act is allowed to expire, the Illinois Act will immediately spring back to life, and the Commerce Clause challenge will begin all over again. Justice Karmeier argued that the Court should have addressed the constitutional challenge and held that because the Act only burdened businesses with a substantial nexus to Illinois, it was valid pursuant to the Commerce Clause. Justice Karmeier also concluded that the Act avoided preemption, arguing that it merely made it clear that the same obligation to collect use taxes imposed on offline entities with a substantial nexus to Illinois applied to similarly situated internet businesses.

Illinois Supreme Court Holds Board Can't Declare Enhanced Pension Forfeited

Although the question presented in Prazen v. Shoop was limited to the field of public pensions, the case presented interesting aspects of fiduciary law and statutory construction as well. The question in Prazen was whether the Illinois Municipal Retirement Fund – a board with fiduciary duties under the Pension Code – had the authority to declare a portion of the plaintiff’s pension, his “early retirement incentives” (ERI), forfeited on the grounds that the corporation he created to take over his position was a mere “guise” for evading the return-to-work provisions of the statute. In an opinion by Justice Robert R. Thomas for a five-Justice majority, the Illinois Supreme Court held Friday morning that the Fund board had no such authority. Our detailed summary of the underlying facts and administrative and lower court rulings in Prazen is here. Our report on the oral argument is here.

Three years before his retirement, plaintiff – superintendent of the city’s electric department – formed a business in partnership with the then-mayor of his city to redevelop real estate. He intended to perform the necessary electrical upgrades and modifications through his as-yet-unincorporated business, Electrical Consultants, Inc. (“ECL”).

Two weeks before plaintiff’s 1998 retirement from the electric department, he incorporated ECL. A few days later – and still ten days before his retirement – ECL entered into a contract with the City. The contract provided that on January 1, 1999 – the day after plaintiff’s retirement – ECL would take over management and supervision of the electric department. The agreement was signed by plaintiff’s business partner, the Mayor, on behalf of the city. The agreement provided that the annual fee to ECL would be around $7,000 more than plaintiff’s final salary at the time of his retirement. The initial three-year contract was extended by one-year riders eight times following its initial execution.

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 . . .”

Plaintiff repeatedly sought assurances from the Illinois Municipal Retirement Fund Board that his contract with the city didn’t imperil any part of his pension. His first letter was dated more than two months before ECL was incorporated and he retired. In that letter, an IMRF representative allegedly told him that he could contract with the city as an independent contractor, or the city could contract with a corporation like ECL, even though ECL employed the plaintiff. Four years later, the IMRF Board supposedly told plaintiff’s attorney that everything in the 1998 letter still applied. In late 2002, an IMRF representative allegedly said that a retiree receiving ERI benefits could work for a corporation contracting with the city as long as the corporation wasn’t just a guise to avoid the pension regulations. The representative suggested that if ECL worked for some member of the public rather than just the city, everything should be fine.

But in late 2010 – about eighteen months after plaintiff had finally terminated ECL’s contract with the city and completely retired – the IMRF suddenly changed its mind, informing plaintiff that his contract with the city had violated Section 7.141.1(g) after all. The IMRF benefit review committee confirmed the decision, holding that ECL was a “guise” to evade the return-to-work provisions of the statute and ordering the plaintiff to repay his ERI benefits. The IMRF Board of Trustees affirmed the committee determination, pointing to several facts, including the timing of ECL’s creation and dissolution, the timing of the agreement with the city, the de minimis nature of the work ECL did for anyone other than the city, the fact that plaintiff, his wife and daughter were the only employees of ECL, and the fact that plaintiff was the only employee qualified to do what the contract required. The Circuit Court affirmed. But the Appellate Court (Fourth District) reversed, holding that the Board of Trustees had no authority to forfeit plaintiff’s ERI benefits on such a basis.

The Supreme Court agreed with the Appellate Court. Before the Court, the Board argued that “employment with” and “personal services contract with” in Section 7.141(g) were ambiguous – even though the Board never held that plaintiff had run afoul of either of these limitations. The Supreme Court majority found both terms sufficiently clear. The majority concluded that plaintiff had not accepted employment with the city following his retirement, since he was an employee of ERI. The Court also found that the contract was not a personal services contract, since it was between two corporations, and did not identify any individual as being material to its performance. The Court also pointed out that even though only plaintiff was qualified to perform the necessary services among ERI employees, nothing in the contract required that plaintiff be the one carrying out ERI’s functions. In the alternative, the Board argued that its general authority to make “administrative decisions on participation and coverage” under the Fund was a sufficient basis for its decision, but the majority found that the Board’s power could not be stretched so far as to permit the Board to create a third, unenumerated grounds for forfeiture which the legislature had never mentioned. Since the Court found no evidence that the legislature intended to bar arrangements such as the one plaintiff entered into with the city, the plaintiff’s contractual relationship could not be grounds for forfeiture.

Justice Charles E. Freeman dissented, with Justice Anne B. Burke joining. Justice Freeman summed up his position succinctly: “[U]nder the majority’s decision the Board, a fiduciary, had no authority to perform its fiduciary function.” Justice Freeman pointed out that the city had paid ECL slightly over one million dollars during the life of the contract, while the plaintiff continued to receive his enhanced ERI pension. “[T]he Board determined that plaintiff committed a fraud against the IMRF,” Justice Freeman wrote. Given that the Board had fiduciary responsibilities under 40 ILCS 5/1-109 of the Pension Code, the Board necessarily had the authority to respond appropriately under such circumstances, Justice Freeman concluded.

The Questions Log With One Term Left in 2013

With only one term left in 2013, it's time to take another look at the Illinois Supreme Court questions log.

In its first four terms, the Court has heard argument in twenty-eight civil cases. Questioning continues to vary widely from case to case, from a low of eight questions in DeHart v. DeHart and Russell v. SNFA to highs of 49 in Board of Education of Peoria School Dist. No. 150 v. Peoria Federation of Support Staff and 35 in Performance Marketing Association v. Hamer (which is due to be decided tomorrow). So far, the distinction for the heaviest single session belongs to the appellant in Performance Marketing, who fielded 26 questions in opening statement. After having become progressively more active in each term until the summer break this year, the Court fell back to its second lowest figure this year in terms of average questions-per-argument during the September term.

As of the end of the September term, here's how the questions log stands. The numbers in parentheses show how many times that Justice has been the first questioner during each phase of the arguments.

Justices

Burke

Garman

Freeman

Kilbride

Thomas

Karmeier

Theis

Appellant

43(3)

44(5)

49(9)

19

84(10)

38(1)

43(3)

Appellee

32(3)

38(3)

10(1)

16(1)

71(11)

36(6)

32(1)

Rebuttal

1(1)

3(2)

5(3)

2

28(6)

10(3)

21(3)

Total

76 (7)

85 (10)

64 (13)

37 (1)

183 (27)

84 (10)

96 (7)

Argument Report: Illinois Supreme Court Debates Status of Water Facility Contractor

When does an independent contractor become a public utility? That's the question the Illinois Supreme Court debated during the September term in People ex rel. Department of Labor v. E.R.H. Enterprises, Inc. Based upon the heavy questioning of both sides, the Justices of the Court appear to be conflicted.

The Labor Department issued defendants a subpoena for product of certain employment records in 2008. The subpoena stated that the Department was investigating whether the defendant's repair work on certain water mains for the Village of Bement had been done in compliance with the Prevailing Wage Act. Several months later, the Department filed a complaint seeking to have defendant held in civil contempt for failing to comply with the subpoena. The defendant defended on the grounds that it was a public utility and therefore exempt from the Prevailing Wage Act.   The trial court twice rejected the company's position, holding that defendant was not a public utility. However, the Appellate Court reversed, holding that defendant satisfied the definition of a public utility from the Public Utilities Act, which it imported into the Prevailing Wage Act.

Counsel for the Illinois Department of Labor began by sketching the factual background of the case. Justice Freeman asked whether defendant was obligated to provide water services to the residents. Counsel responded that defendant was obligated to assist the village in providing water services. Justice Freeman asked whether that would indicate that defendant was operating the facility for public use. Counsel responded that it would not pursuant to the Court's own precedent in Mississippi River Fuel Corp. v. Illinois Commerce Commission, where the Court defined public use as occurring where the company held itself out as the one providing the service. Defendant can walk away from its contract with the village in five years, counsel argued; a public utility can't do that. Counsel argued that under Public Utilities Code Section 3-105, if a facility is municipally owned, it could not be a public utility, even if it was operated by a lessee or agent.   Part of the purpose of the Public Utilities Act is to get records and reports from the company, counsel argued. One doesn't have that need when a municipality like the village owned the facility. Justice Burke asked whether defendant provided water to every resident, and counsel responded that the Department would say that the defendant helps the village do so. Justice Garman stated that the Prevailing Wage Act doesn't apply to public utilities, and counsel confirmed that. Justice Garman pointed out that the Act doesn't expressly incorporate the definition of a "utility" from the Public Utilities Act, and wondered why the Court should do so. Counsel argued that the legislature had adopted the Prevailing Wage Act in 1941 against a backdrop of the Public Utilities Act, which was enacted years earlier. Justice Burke asked whether the Court should look to the conduct of the parties - wasn't the welfare of the entire community dependent on the conduct of the defendant in providing the water? Surely the village was intimately involved, working hand-in-hand with the defendant, then? Counsel conceded that there was a significant public benefit from the services defendant provides. The statute requires more, however; under Mississippi River Fuel Co., the company has to be holding itself out to the public as the entity providing the service. Justice Karmeier suggested that if the Court didn't look to the Public Utilities Act, why shouldn't it look to Black's Law Dictionary for the definition of a utility, as the Appellate Court did? Counsel responded that the statutory exception which excluded a government-owned facility was a long-standing one, forming the law of the period which the legislature would have legislated against. It makes sense, counsel argued, to exclude public utilities if rates were subject to regulation by the Illinois Commerce Commission because otherwise, two agencies would be pulling in opposite direction. Here, the defendant is not regulated by the ICC. Justice Karmeier asked whether, if the village was doing exactly what the defendant was doing, the village would be subject to the statute. Counsel responded that government entities are never subject to the statute. Justice Karmeier clarified that counsel meant government entities were exempt whether they were technically public utilities or not, and counsel explained that government had once been classified as regulated utilities, but the Court struck that statute down in the early 1960s.

Counsel for the defendant began by pointing out that his client operates water and sewer systems for twenty different municipalities. Justice Thomas asked why the public utilities exception to the Prevailing Wage Act would be meant to apply to one who provides services not to the public, but to municipalities. Counsel responded that Bement was a small village; there was nobody else to operate the plant. The defendant didn't assist the village in providing service; the defendant itself provides the service. If they don't, service just doesn't happen. Counsel argued that if the Prevailing Wage Act is applied to companies like the defendant, older, smaller cities may not be able to pay their contractors to run their systems anymore. Justice Karmeier wondered why Section 3-105(b) doesn't take the defendant out of the definition of a public utility. Counsel responded that to accept the Department's argument, one must shift from talking about companies in subsection (a) to talking about pipes, a plant and a delivery system in subsection (b). Justice Thomas asked whether the concept of the defendant being a public utility is based on the job it's performing at a particular time -- if the defendant walks away in five years at the end of its contract, is it no longer a public utility? Is the defendant a public utility for one facility and not another? Counsel responded that the defendant's relationships tend to be long term; its business relationship with the village was lasted approximately twenty-six years. Justice Thomas asked whether the defendant is barred from work that would clearly not be that of a public utility. Counsel responded that defendant was not; from time to time, it did public works, and it bid and paid prevailing wages when it did. Justice Thomas proposed a hypothetical: what about a company that spent 90% of its time doing public works and ten percent as a public utility - was it still a public utility? Counsel said yes; the status went with what the defendant's expertise and primary function is.  Justice Thomas asked if the defendant were filling out an application and it asked are you a public utility, would the company say "sometimes"? Counsel suggested that the defendant would say "primarily." Justice Garman asked whether, if the system was operated entirely by the village, it would qualify as a public utility. Counsel repeated that in that case, the system would be exempt from the Prevailing Wage Act pursuant to the Court's former decisions.

In rebuttal, counsel for the Department argued that if the village owned the system, it would not be a public utility. The legislature made the decision to apply a different rule on these facts in order to protect the defendant's workers, counsel argued. Justice Garman asked whether the issue was one of statutory interpretation, and equitable considerations didn't inform the decision. Counsel responded that it was primarily a statutory question, and the policy issues had already been taken into account by the legislature. The fact that the Illinois Commerce Commission had no contact with the defendant and didn't regulate it was significant, counsel argued.

 

Argument Report: Illinois Supreme Court Debates Chicago Firefighters' Pensions

Although Kanerva v. Weems was the marquee case on public pensions for the September term of the Illinois Supreme Court, it wasn't the only such case on the docket. But if the oral argument is any indication, the retirees in Hooker v. Retirement Fund of the Firemen's Annuity and Benefit Fund of Chicago seem poised to prevail, unlike the plaintiffs in Kanerva. Hooker poses a simple question: in a defined benefit pension plan for Chicago firefighters' survivors, is the survivor's pension set for all time according to the salary the firefighter was receiving at the time of his or her death?

Hooker involves two decedents: one died in 1998, the other two years later. Both decedents' widows were awarded the widow's minimum annuity. Both women filed complaints and won judgments awarding line of duty benefits. In 2004, the General Assembly amended the Pension Act to require an award of Duty Availability Pay (DAP) for some pension and annuity calculations. Both widows amended their administrative complaints, arguing that they should have been awarded DAP in the calculation of their pensions - even though neither firefighter had ever received DAP in his salary. Plaintiffs sought leave to bring the DAP claim as a class action.

On remand after the line-of-duty issues had been settled, the Board declined to include DAP in its pension calculation for either survivor. The Circuit Court granted the Board summary judgment on administrative review, refusing to certify a class. The Appellate Court reversed the Circuit Court, holding that under Section 6-140 of the Pension Code, 40 ILCS 5/6-140(a), the amount of a widow's annuity depends on the current annual salary attached to the decedent's position, whether or not the firefighter ever actually received that salary. Accordingly, the Board was required to include DAP in the pension calculation. The Appellate Court reversed the denial of the motion to certify a class as well.

The Supreme Court seemed openly skeptical of the Board's position on appeal. Counsel for the Board began, arguing that the case involved a straightforward issue of statutory interpretation. The Board interpreted the plain language of the 2004 legislative amendments to the code to impose two mandatory requirements for enhanced annuity payments for DAP. First, the husband must have actually received DAP. Second, the corresponding employee contribution must have been paid to the Fund. The decedents in Hooker neither earned nor made contributions on DAP. Justice Thomas asked whether, if the Court ruled for the widows, the Court would then contribute the DAP amounts. Counsel responded that the contributions were actually due from the annuitants, not the City. Further, the City believed that its own contribution obligations were capped by the statute. Justice Thomas asked whether inclusion of DAP benefits had ever been discussed in negotiating the collective bargaining agreement. Counsel responded that all parties had known that DAP was not pensionable. Justice Theis asked whether DAP was pensionable for a firefighter today who received it in his or her salary. Counsel said it was. Justice Theis pointed out that counsel had not addressed Kozak v. Retirement Board of Firemen’s Annuity & Benefit Fund, 95 Ill. 2d 211 (1983). Thirty years ago, Justice Theis said, the Court had held that "current annual salary" in Section 6140 meant the salary of a currently employed firefighter, not the salary at the time of death. At that time, the Court held that the widow's annuity was not tied to the firefighter's salary at the time of death. Counsel responded that the Kozak court had been clear that permitting unfunded benefits was anathema to a defined benefit plan. Justice Theis asked counsel whether he was advocating the overruling of Kozak. Counsel answered that Kozak was law, and that was why the distinction between DAP and salary was so critical. Justice Theis asked why the statute said any references to salary shall be deemed to include DAP - surely that language seems to indicate that the legislature was talking about Section 6140. Counsel argued that the legislative intent was that DAP could now be included to exempt rank employees as pensionable, and that the legislature did not intend to exempt Section 6140 widows from the requirement that any DAP for which the employee contribution was not paid should not be included in the pension calculation. Justice Theis suggested that the statutory language referred to survivors "caught in the middle" when DAP became pensionable after a ten-year period when survivors were receiving DAP pursuant to a collective bargaining agreement, but it wasn't pensionable. Counsel argued that Justice Theis interpreted the statute too narrowly, disregarding subsection (i). Justice Thomas asked about the clause talking about the current annual salary attached to the position to which the fireman was certified at the time of his death - was that of any import? Counsel responded that the language simply set the salary schedule. If survivors are getting benefits, they must be paid for - otherwise, the Fund will go broke. Justice Theis suggested that Kozak had rejected many of the same arguments thirty years ago. Justice Burke asked counsel how he would explain the language "received by the fireman" in the statute. Counsel answered that survivors' benefits are derivative of the fireman - the firefighter must receive the DAP pay in order for it to be included. Justice Freeman asked whether the decision regarding class certification had been preserved for review. Counsel answered that it was not before the court, with the exception that if the two putative class representatives weren't entitled to the benefits, they certainly weren't adequate class representatives.

The Court had far fewer questions for counsel for the claimants. Justice Thomas asked whether the claimants' argument was, at least in part, that the contributions which had not been made should have been made? Counsel responded that in fact, the Board had asked the City to start paying this year. Justice Thomas pointed out that the City took the position that its liability is capped. Counsel agreed, but pointed out that the issue had never been extensively litigated. Justice Thomas asked what counsel's response was to the argument that unfunded benefits equal insolvency. Counsel responded that the Fund certainly did need more money, and that various entities were seeking ways to solve the problem. Counsel concluded by briefly addressing his cross-appeal regarding abatement upon the death of one of the claimants. Justice Theis pointed out that the claimants already had the same issue involved in the cross-appeal pending in the First District Appellate Court.

In rebuttal, counsel for the Board again addressed the potential conflict with Kozak. Counsel argued that surely it wasn't that law that Section 6140 survivors who got the enhanced pension would not be required to make contributions, but others must. Justice Theis pointed out that counsel made an argument that DAP was not really a pension; it was in the nature of workers comp. Counsel responded that there was no support for that; it wasn't a distinction that made a difference. Justice Theis pointed out that one was taxable, one was not. Counsel responded that he didn't believe the two were treated differently. Counsel concluded by urging the court to reject the cross-appeal.

We expect Hooker to be decided within two to four months.

Illinois Supreme Court Reaffirms Disgorgement of Advance Payment Retainers Under the Dissolution of Marriage Act

This morning, a unanimous Illinois Supreme Court strongly reaffirmed the "leveling the playing field" rules of the Marriage and Dissolution of Marriage Act in In re Marriage of EarlywineThe Act provides that a court can order disgorgement of one party's attorneys fees in order to enable the other party to pay his or her attorney. A unanimous Court held that courts were free to order disgorgement of an advance payment retainer paid by one party to his or her atttorney in order to facilitate an interim attorneys' fees award to the other party.

The ex-husband filed a petition for dissolution of marriage in August 2010. Not long after, the ex-wife filed a petition for an award of interim attorney's fees, asking that the Court order disgorgement of fees previously paid to the ex-husband's attorney in order to finance the award. In response, ex-husband showed that his parents had paid his legal bills; the money had not come from marital assets. Both parties claimed to be unable to pay their attorneys themselves. Following a hearing, the trial court ordered disgorgement by the ex-husband of a portion of the fees paid by his parents. The ex-husband sought reconsideration, attaching an a copy of his agreement with his counsel providing that counsel would be paid via an advance payment retainer, which would become the attorney's property immediately upon payment. The agreement identified the "special purpose" for the advance payment retainer as avoiding the possibility of a fee allocation order requiring that funds be returned to the client's ex-wife. The ex-husband filed an affidavit stating that his mother, her fiancé, his father and his father's wife had paid all of the attorney's fees on his behalf. The trial court denied reconsideration.

The trial court entered an order of "friendly contempt" in order to enable the ex-husband's attorney to seek appellate review of the disgorgement order. On appeal, the Appellate Court affirmed the order of disgorgement, but the Court vacated the contempt finding on the grounds that the petitioner had refused to comply with the disgorgement order in good faith in order to seek review of unresolved questions of law.

The Supreme Court unanimously affirmed. The appellant attorney argued that the advance payment retainer was not subject to disgorgement because it became his property upon payment. The appellant argued that the "leveling the playing field" rules of the Marriage Act, pursuant to which the two parties are to be put on approximately equal footing as far as legal representation, make it difficult for a client to secure legal representation. Therefore, parties should be able to use an advance payment retainer to shelter attorneys fees from the opposite party.

The Court found that the legislature had enacted Section 501(c-1) of the Act - the leveling the playing field rules - in order to equalize litigation resources where it was shown that one party could pay and the other could not. Prior to the amendments, the Court wrote, divorce cases frequently involved attempts by one party to block access by the other side to litigation funds. Holding that advance payment retainers were effective to shield funds from such orders, the Court found, would "strip the statute of its power." If the Court were to accept counsel's argument, an economically advantaged spouse could "stockpil[e] funds in an advance payment retainer held by his or her attorney." The Court held that nothing in the statute distinguished between marital and nonmarital property, so it made no difference that the advance payment retainer was allegedly financed by the ex-husband's family, as opposed to by his own funds. Finally, the Court rejected the petitioner's argument that the disgorgement order violated his First Amendment right of access to the courts and right to retain counsel, finding that counsel lacked standing to make the argument.

Argument Report: Who Gets to Appeal Certification as a Pollution Control Facility?

A major taxpayer files 28 separate applications seeking certification of various systems, methods, devices and facilities as "pollution control facilities" within the meaning of the Property Tax Code. If the applications are granted, around $1.2 billion will allegedly disappear from the School Board's tax base. When the Pollution Control Board denies the School Board's motions for leave to intervene in the certification proceeding, does the School Board have standing to appeal? That's the question in The Board of Education of Roxana Community Unit School District No. 1 v. The Pollution Control Board, et al. Board of Education, which was argued a few weeks ago at the Illinois Supreme Court. Our detailed summary of the underlying facts and lower court decisions is here. Our report on the oral argument is here.

In October 2010, the taxpayer submitted 28 separate applications to the Illinois Environmental Protection Agency for certification of certain improvements as pollution control facilities. In August 2011, the EPA 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 reconsideration and denied the petitioner's motions to intervene in the remaining 26 requests for certification.

The School Board appealed to the Appellate Court pursuant to the Environmental Protection Act, 415 ILCS 5/41(a). The Board pointed to the Property Tax Code 35, ILCS 200/11-60, claiming that only applicants had standing to appeal -- not challengers. The Appellate Court dismissed the appeal for lack of jurisdiction, citing Citizens Against the Randolph Landfill (CARL) v. The Pollution Control Board for the proposition that only limited review at the Circuit Court was possible. Justice Thomas R. Appleton dissented, arguing that the School Board had standing to appeal under Section 41(a) of the Environmental Protection Act.

Counsel for the School Board began by explaining that an owner received preferential property tax treatment if it installs equipment whose primary purpose is controlling pollution from its own operations. Counsel argued that by denying intervention, the Pollution Control Board had ensured that its interpretation of the primary purpose test would go unreviewed. The Pollution Control Board had wiped $1.2 billion off the local assessment rolls within two weeks' time with no notice to the local taxing body, counsel argued; nothing in the Property Tax Code precluded intervention. Justice Thomas asked counsel if the Court agreed with him whether it should remand to the Appellate Court for resolution of all substantive issues. Counsel responded that all substantive issues were effectively before the Court. Justice Thomas pointed out that the Court took the case for the jurisdictional issue, and wondered whether the Court had a sufficient record to decide more. Counsel responded that the Court had all issues properly before it: (1) whether the Board was precluded from granting intervention; (2) the Appellate Court's jurisdiction to review the Board's decision on intervention; and (3) the Board's application of the primary purpose test. Justice Thomas asked what statutory provision applied on jurisdiction; when counsel answered Section 41(a) of the Environmental Protection Act, he pointed out that opposing counsel would argue that Section 11-60 of the Property Tax Code was more specific. Chief Justice Kilbride asked counsel why the EPA was now challenging jurisdiction on appeal. Counsel responded that the real parties in interest in cases of this type are the local taxing bodies, but the EPA doesn't want local entities weighing in such questions. Justice Thomas asked counsel why the EPA would want to keep taxing authorities out of such cases, and counsel answered that perhaps the EPA was placating the companies on such issues in order to build capital for larger enforcement actions.

Counsel for the state entities was asked by Justice Karmeier whether potential intervenors had any right of appeal. Counsel responded that intervenors had no statutory right of appeal. Justice Thomas asked what the Court should do with cases in which the Pollution Control Board had pointed disappointed litigants to the Appellate Court for appeal, rather than the Circuit Court. Counsel conceded that the Pollution Control Board had included pro forma language in a number of orders saying that if the litigants didn't like the answer, they should go to the Appellate Court, but argued that this didn't trump the specific holding that attempted intervenors didn't have any right of appeal under the Property Tax Code. Counsel argued that if taxing bodies were unhappy with that rule, their remedy was with the Legislature. Responding to a comment by counsel for the School Board, counsel argued that if the Court disagreed with respect to the Pollution Control Board's jurisdiction, the appropriate remedy was remand; it wasn't appropriate to address all the merits issues for the first time at the Supreme Court.

Counsel for the taxpayer pointed out that the Pollution Control Board certification was supposed to be a summary proceeding. When the Legislature intended taxing bodies to be a party to certification proceedings, it said so, counsel said. Counsel argued that the taxpayer's tax levy had increased from $9 million to $36 million between 2010 and 2011. Counsel concluded by arguing that the treatment of pollution control facilities by the Pollution Control Board was not unique within Illinois law, or in comparison to neighboring states.

Counsel for the School Board argued in rebuttal that the certification procedure involved a two page application, not a detailed analysis of the suitability of certification. Counsel argued that when the Pollution Control Board denied intervention under Citizens Against the Randolph Landfill, it had said it had never seen so many applications for pollution control certification filed by a single applicant in only six months. According to counsel, the Pollution Control Board said that the School Board had presented a compelling case that it was singularly affected by the certification process, and that it was unlikely that any other Board had faced a similarly grave depletion of its tax base. Counsel claimed that the Pollution Control Board had stated that if it were a legislative body creating a certification process de novo, the School Board's policy arguments might prevail, and if the Pollution Control Board had the power of an equity court, the School Board's policy arguments might prevail. Counsel argued that there was no basis for sending the case back to the Appellate Court: the Pollution Control Board had made it clear that it would grant intervention if it believed that it had the power to do so.

We expect Board of Education to be decided within two to four months.

Argument Report: Where Does a Sale Take Place for Sales Tax Purposes?

Where does a sale take place for purposes of the local portion of the state sales tax? For lots of localized businesses, it's a straightforward question. But what about businesses that operate in multiple counties -- particularly where some portion of the sales function is separated from the rest of the day to day business? That's the question presented in Hartney Fuel Oil Co. v. Hamer, which was argued during the September term at the Illinois Supreme Court. It's a potentially high-stakes question: the simpler it is to move a sales tax locus, the more incentive there will be to do so. Our detailed description of the underlying facts and lower court holdings is here. Our preview of the oral argument is here.

The plaintiff in Hartney resells fuel oil to railroads, trucking companies, gas stations and other fuel distributors. In 1995, it moved its sales operation out of Forest View in Cook County. By 2003, the sales operation had landed in Mark, in Putnam County.

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.

The Department of Revenue audited the plaintiff (not for the first time) for the period of 2005 through mid-2007. The auditors ultimately concluded that all sales occurred in Forest View rather than Mark, and the plaintiff got a bill for $23.1 million in past-due taxes. The plaintiff paid under protest and sued; the board of commissioners of Putnam County and the board of trustees from Mark joined the suit, seeking the local share of the sales taxes. The Circuit Court found for the plaintiffs. The Third District affirmed, adopting a bright-line test: where acceptance of the order occurs, sales tax liability is fixed.

Counsel for the intervenor governments led off the argument. Counsel argued that the Appellate Court erred for at least three reasons: (1) the regulations which the Appellate Court construed are incompatible with the bright-line, acceptance-is-all rule; (2) the Appellate Court's rule is also incompatible with the statute; and (3) even if mere acceptance, without more, is sufficient to fix the tax locus, on the facts before the court, the sham doctrine barred the conclusion that sales occurred in Mark. Counsel argued that the purchase order test can be easily manipulated by retailers to locate taxes in the most advantageous place. The regulations don't say that the place of acceptance is the only relevant factor, counsel argued; they merely say that it's the most important factor. Justice Garman asked whether the regulations list other factors, and counsel conceded that they did not. Justice Garman asked whether that was significant, but counsel said no. The regulations stated that in order to locate the sales tax liability, enough of the business activity must occur within the taxing jurisdiction to conclude that the seller is engaged in the business of selling with respect to that sale. Counsel argued that nobody reviewing the record could possibly say that anything was going on in Mark -- the acceptance of the sales was a sham. Justice Burke asked whether the test was different for an out-of-state seller as opposed to one that was in-state, but doing business in another county. Counsel argued that there was no single factor controlling. Justice Burke asked whether acceptance occurred by sending a fax to the Mark office, or whether acceptance involved something else. Counsel argued that the taxpayer's Mark office was nothing but a place to receive faxes and a mail box. The arrangement, counsel insisted, was nothing but a subterfuge to avoid the tax. Justice Thomas asked whether the court needed to agree that the acceptance was a sham for the appellant to win, and counsel said no. Justice Garman asked whether the employee running the Mark office had the authority to bind the plaintiff, and counsel said she did.

Counsel for the state appellants argued next. Justice Burke asked whether the state was challenging the view that acceptance had happened in Mark for purposes of the appeal. Counsel responded that the state was not challenging the factual finding, but was challenging the notion that acceptance alone was enough to fix the tax locus. Justice Thomas asked whether it was of any consequence that the Department's audit manual concluded that the place of acceptance controls for sales tax liability. Counsel responded that the manual deals with possible issues that might arise in a summary fashion, and recommends using statutes and regulations to illuminate disputes when necessary. The manual was by no means dispositive, counsel noted. Justice Garman asked whether the Appellate Court should have given deference to the Department's interpretation of the statutes and regulations. Counsel responded that if the Department's interpretation of its own regulations was reasonable, it should be deferred to; but the question was really one of law, and if the Department got it wrong, the Court would doubtless say so. Justice Garman 1pointed out that counsel was nonetheless inviting the court to ignore the audit manual, and asked him to reconcile that with any request for deference. Counsel explained that the manual is not law; rather, the manual as a whole invites auditors to rely on facts when appropriate to deviate from the manual's advice. Further, counsel argued, internal guidance from the Department couldn't change the courts' years-long construction of the term "in the business of selling." Counsel concluded by accusing the plaintiff of having taken guidance intended for good faith, bona fide retailersand taken it out of context as a way to avoid taxes. The proper standard, counsel argued, was that the sales tax locus happened where the most important selling activities took place, regardless of where acceptance was.

Counsel for the taxpayer began by emphasizing that there is nothing wrong with structuring business affairs to reduce the tax incidence on the company's customers. The taxpayer here did so in full view of the Department, counsel argued; it had hidden nothing and was embarrassed by nothing. Justice Garman asked whether the plaintiff was bound if the Mark employee accepted an offer which she shouldn't have. Counsel agreed the taxpayer was bound. Justice Thomas argued that the taxpayer had arguably received the benefits of Cook County services, and was now trying to minimize taxes. What would stop other Cook County businesses from doing the same thing? Counsel responded by arguing that the concern that Cook County's finances would collapse absent reversal was overblown; the regulations which were the basis for the court's holding had been in place for years. Justice Thomas pointed out that this would be the first major Supreme Court decision on the issue. Counsel answered that if anyone concluded that the acceptance-only rule wouldn't work, the Legislature should either change the regulation or the statute.   Justice Thomas asked whether the taxpayer relied to some extent on the concept of estoppel. Counsel agreed that it did, but argued that the Court could find for the taxpayer without reaching the issue.   The factual issue of where the acceptance was settled the question, counsel argued, and that should be the end of the matter under the regulations. Counsel concluded by arguing that his client and other taxpayers are entitled to rely on the Department's view, expressed again and again over the years, that the place of acceptance of the order is conclusive for the locus of the tax.

Leading off rebuttal, counsel for the State returned to the issue of how the State could simultaneously ask for deference and yet disavow its own audit manual. Counsel explained that while regulations go through notice and comment, manuals don't. Justice Burke asked whether the Department conceded that there was acceptance in Marks. Counsel agreed that the Department was not challenging that finding, but rather was challenging the legal significance of those established facts. Counsel disputed the taxpayer's citation to Private Letter Rulings in recent years finding that the place of acceptance, without more, fixes the locus of sales taxes. Counsel argued that the PLRs are hypothetical scenarios, not precedents citable, let alone enforceable, against the state.

We expect Hartney Fuel Oil to be decided in the next two to four months.

Illinois Supreme Court to File Opinion in Earlywine on Thursday Morning

Yesterday afternoon, the Illinois Supreme Court posted notice that it expects to issue opinions in three cases on Thursday morning at 10:00 a.m., including one civil case, In re Marriage of Earlywine. Earlywine presents an interesting issue at the intersection between the law of attorneys’ fees and domestic relations:

  • In re Marriage of Earlywine, 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 summary of the facts and lower court opinions in Earlywine is here. Our report on the oral argument is here.

Argument Report: Illinois Supreme Court Actively Questions Both Sides in Controversial Condo Case

When the Appellate Court's decision came down, the Chicago Tribune called it a "ground-breaking decision that "has stunned the condominium community nationwide." So will the Illinois Supreme Court overturn the Second District's controversial decision in Spanish Court Two Condominium Association v. Carlson? Based on the oral argument last week, it's difficult to be certain; several members of the Court seemed at least somewhat conflicted, and the Court heavily questioned both sides. Our detailed summary of the facts and lower court decisions in Spanish Court is here. Our preview of the oral argument is here.

The defendant in Spanish Court stopped paying her monthly assessments for her condominium association in August 2009. She stopped paying special assessments around the same time. So the plaintiff condo board sued her for possession of the unit and the unpaid assessments. The defendant filed an answer, affirmative defenses and a counterclaim. Her defenses and counterclaim made virtually the same allegations - she'd stopped paying the assessments because the Board of the condo association had quit fixing the common areas, per the maintain-and-repair covenant in the condo articles.   Specifically, the plaintiff had supposedly stopped fixing the roof - thus the leaking into the plaintiff's unit - and certain brickwork above her unit.   The Circuit Court struck the defenses and counterclaim, holding that they were not "germane" to the plaintiff's action under the Forcible Entry and Detainer Act. The Appellate Court reversed in part, holding that although defendant's counterclaim had to be severed, her defenses were germane, analogizing the claim to permissible defenses by renters under the Forcible Entry Act.

Counsel for the condo board began the argument by pointing out that the Second District had conceded that it was placing itself in a "small minority" by its decision. Condominiums survive through assessments, counsel argued, and without them all the residents' investments are imperiled. Counsel predicted chaos in the condominium industry absent reversal. Justice Burke asked what remedy a condominium owner had if the board failed to meet its responsibilities, and counsel responded that the owner could sue the board members. Justice Garman asked which affirmative defenses were "germane," and counsel responded that all defenses which went to ability to pay or flaws in the underlying agreement were. Justice Thomas asked whether counsel's argument was primarily based on public policy, and counsel responded that the relevant policies were embedded in the Illinois Condominium Property Act. Counsel argued that the important issue was whether the Forcible Entry and Detainer Act would continue to be a summary proceeding designed to decide possession quickly or not. Justice Freeman asked whether it was important to get all possible claims before the courts as soon as possible, and counsel pointed out that a party always had an injunction action available if time was of the essence. Justice Freeman suggested that the alternative remedy would take significantly longer, and counsel responded that courts sometimes recognize the need for expedition, and there are tools available to achieve it. Justice Thomas suggested that the Appellate Court had apparently limited the permissible defenses to flaws which made the unit uninhabitable. Counsel responded that there had been no showing that the unit was uninhabitable. Counsel should bring the claim as one for breach-of-fiduciary-duty in a separate case, counsel argued. Justice Thomas pointed out that in fact, the Appellate Court had held that the counterclaim wasn't germane because it only sought damages, not possession. Counsel responded that the allegations were exactly the same in the counterclaim and defenses with the exception of the final paragraph seeking a remedy. Justice Karmeier observed that the Forcible Entry and Detainer Act gave counsel a powerful remedy, and asked whether the individual would have the right to present defenses if the suit was a simple one for damages. Counsel responded that if any action was outside the Affordable Care Act, then the defendants could bring any defense they chose to bring.

Counsel for the resident argued that public policy adequately answered the question presented. Justice Thomas asked whether there was a difference between a landlord/tenant relationship and the relationship between the Board and the condo residents. When counsel responded that the Board-resident relationship was solely contractual, Justice Thomas asked whether the contract was between the owner and all other owners. When counsel agreed it was not, Justice Thomas asked whether the owners' interests all rose or fell together. Counsel reiterated that the contractual relationship itself was bilateral, between the association and the owner. Justice Garman pointed out that an owner could participate in management, but counsel argued that his client was helpless to affect repairs to the common elements that might affect her unit, particularly after being shut out of the process. Justice Burke asked whether the purpose of assessments was defeated by allowing the defenses, since the owners collectively use those funds to maintain the common elements. Counsel suggested that the problem was with the particular board, not the law. He argued that if residents are not allowed to raise these issues in a Forcible Entry and Detainer Act suit, the only alternative was a two to four year court battle. When counsel stated that the leak problem had begun in 2007, Justice Thomas asked why the defendant hadn't sued then. Counsel responded that the resident had attempted to resolve the matter informally, but had been unable to do so. There was no public policy reason, counsel argued, why this situation should be treated any differently than any other contractual relationship: if a party breached, it was not entitled to enforcement. Justice Thomas asked whether the resident's position was limited to purported breaches which make the unit uninhabitable. Counsel responded that the Appellate Court had not limited the holding that much; any material breach could be raised as a defense to the action, just the same as any other contract. Justice Thomas asked whether, if the Appellate Court had tossed the defenses but severed and preserved the counterclaim, the possession action would have been stayed while the counterclaim was tried. Counsel responded that the resident would have been forced to pay while pursuing her remedy.  Justice Thomas wondered whether it was practical to slow down Forcible Entry actions with such issues, given the number of such actions there are. Counsel responded that the only issue would be breach of contract, and the proof should take no more than a day or two. Besides, if the Association obtained a finding of no breach in the Forcible Detainer Act lawsuit in connection with the resident's defenses, the separate counterclaim would be cut off, thus saving judicial resources. Counsel concluded by arguing that the Appellate Court's holding promotes performance and mutuality, and is consistent with the general Illinois law of contract.

Counsel for the Board argued in rebuttal that both the declaration and articles, and indeed, the Forcible Entry and Detainer Act remedy itself were designed for the benefit of all owners. Counsel repeated the point that the resident's proposed result would amount to withholding the funds needed for necessary repairs and other aspects of the Association's operations. Counsel argued that there was no incentive for board members not to make repairs, since they were owners too, and thus investors in the building. Counsel argued that the Forcible Entry and Detainer claim didn't divest fee simple ownership from the owner, merely possession. In closing, counsel argued that even a meritorious defense couldn't be permitted to imperil the functioning of the entire Association.

We expect a decision in Spanish Court within two to four months.

Illinois Supreme Court To Consider FOIA, Due Process, Custody Hearings and Red Light Camera Ordinances as First Chicago Term Ends

On Wednesday morning, the Illinois Supreme Court allowed petitions for review in a long list of new civil cases, setting up interesting battles in the coming months over public works projects, the state Freedom of Information Act, an assortment of constitutional issues and the City of Chicago’s Red Light Camera Ordinance. We will begin our detailed previews of each case in a few days, after our reports on the September civil oral arguments conclude. The cases and issues presented are:

  • Lake County Grading Company, LLC v. The Village of Antioch, No. 115805 – Issue Presented: Did the Public Construction Bond Act govern the claim of the plaintiff subcontractor for breach of contract against the defendant village on a third party beneficiary theory?
     
  • Garlick v. Madigan, No. 115909 – Issue Presented: May the Attorney General decline, in response to a private individual’s request for information pursuant to the Illinois Freedom of Information Act, to provide the information in a specific electronic and tabulated format, when a newspaper’s request that information be provided in a specific format was accommodated?
     
  • The Estate of Perry C. Powell v. John C. Wunsch, P.C., Nos. 115997 & 116009 – Issues Presented: (1) Did the plaintiffs state a cause of action for negligence arising from the defendants’ allegedly negligent failure to seek supervision of a wrongful death settlement by the probate court when the Wrongful Death Act only requires such supervision for settlements over $5,000? (2) Did the plaintiffs state a cause of action for negligence with respect to the defendants’ allegedly negligent failure to seek the appointment of a guardian for plaintiff in order to protect his interest in the settlement?
     
  • People ex rel. Madigan v. Illinois Commerce Commission, No. 116005 – Issue Presented: Did the Illinois Commerce Commission’s approval of a volume-balancing adjustment rider rate design violate the rules against retroactive rulemaking or single-issue rulemaking?
     
  • Consiglio v. The Department of Financial and Professional Regulation, Nos. 116023, 116163, 116190 – Issue Presented: Do the Health Care Worker Self-Referral Act’s provisions allowing permanent summary revocation of health care workers’ licenses following certain criminal convictions deprive the plaintiffs of substantive due process, violate the double jeopardy and ex post facto clauses and offend separation of powers?
     
  • Keating v. City of Chicago, No. 116054 – Issues Presented: (1) Is the red light camera ordinance enacted by the City of Chicago invalid on the grounds that it is in excess of the City’s home rule authority? (2) Was the state enabling act authorizing red light camera ordinances in certain counties unconstitutional special or local legislation?
     
  • WISAM 1, Inc. v. Illinois Liquor Control Commission, No. 116173 – Issues Presented: (1) Did the process by which the Illinois Liquor Control Commissioner revoked the plaintiff’s liquor license constitute a deprivation of due process? (2) Was the Liquor Commission’s finding that the licensee violated Section 3-28 of the ordinances of the City of Peoria – the grounds for revocation – against the manifest weight of the evidence?
     
  • Nelson v. The County of Kendall, No. 116303 – Issue Presented: Is the State’s Attorney’s Office a “public body” subject to the Illinois Freedom of Information Act?
     
  • BAC Home Loans Servicing, LP v. Mitchell, No. 116311 – Issue Presented: Did the defendant in a foreclosure case waive objections to personal jurisdiction by failing to raise those objections in compliance with Section 2-301 of the Code of Civil Procedure and Section 15-1505.6 of the Illinois Mortgage Foreclosure Law?
     
  • In re Marriage of Tiballi, No. 116319 – Issue Presented: May the fees of a psychologist appointed by the court in a child custody dispute pursuant to the Illinois Marriage and Dissolution of Marriage Act be taxed as costs upon petitioner’s voluntary dismissal of his petition to modify custody?
     
  • Goldfine v. Barack, Ferrazzano, Kirschbaum and Perlman, No. 116362 – Issues Presented: (1) Did the plaintiffs state a claim for a violation of the Illinois Securities Law and for legal malpractice arising out of the defendant’s purported failure to preserve plaintiffs’ cause of action for a securities violation? (2) If so, how are mandatory statutory damages calculated under the Securities Law?

Argument Report: Illinois Supreme Court Debates the "Traveling Employee" Exception

Last week, the Illinois Supreme Court seemed poised to reject an expansive interpretation of the "traveling employee" exception to the "going and coming" rule, which holds that employees injured during their commute to work are not entitled to workers' compensation benefits for their injuries. The argument was in Venture-Newberg Perini Stone & Webster v. Illinois Workers' Compensation Commission. Our detailed summary of the underlying facts and Commission and Appellate Court decision is here. Our preview of the argument is here.

The employer in Venture-Newberg was a contractor hired to do maintenance and repair work at a nuclear plant in Cordova, Illinois. The union local for Cordova was unable to fill all the available jobs, so the openings were posted in other union halls, including the claimant's union hall in Springfield. The claimant bid on the job and was hired. But Cordova is 200 miles from Springfield; the claimant concluded that commuting was impractical, and besides, he would be unable to be available for on-call emergencies, as he believed the employer wanted. So he found lodging about thirty miles from Cordova for the few weeks' duration of the job. The claimant was injured one morning traveling from his lodging to the plant. The Commission found that the course or method of travel was determined by the exigencies of the job rather than the personal preference, and that the claimant was essentially traveling on business, satisfying the "traveling employee" exception to the "going and coming" rule. The Circuit Court reversed, but the Appellate Court reversed the trial court.

Counsel for the employer began the argument. He argued that the claimant was not entitled to coverage for a long list of reasons: (1) he had no exclusive or continuous relationship with the company; (2) he was hired through union referrals for a series of short engagements; (3) the claimant couldn't accept the job if positions were available in his local's territory, and he was not required to accept work outside the area; (4) the employer hired the claimant through union referrals; (5) the claimant chose to live where he did, rather than being required to by the employer; (6) the employer did not pay for the claimant's travel or lodging, or make his lodging arrangements; (7) the claimant was not definitively hired until he passed background checks and drug testing; (8) the claimant was not on call when he was injured; and (9) the claimant was hired for employment at only one location and paid only from clock-in to clock-out. The facts and circumstances didn't fit any other traveling employee case, counsel argued. Justice Theis asked whether it changed the analysis that the employer had had to recruit outside its area. Counsel argued that "recruit" was a loaded term, and that the claimant hadn't been recruited more than any other local member. Justice Garman asked whether the "traveling employee" determination was a finding of fact entitled to the Court's deference, and counsel responded that in fact, it was a finding of law -- the facts were undisputed. Justice Burke pointed out that the employer had premises in Wilmington, and the Cordova plant was a job site. Counsel responded that the claimant wasn't hired in Wilmington, so the plant was irrelevant. Reviewing the traveling employee cases, counsel pointed out that the claimant had never had to travel away from a single location. Chief Justice Kilbride asked whether it was important that the claimant had been employed by the employer four different times for brief stints. Counsel argued that he was not a "traveling employee" at any location.

Counsel for the appellee argued that the Appellate Court decision did not expand the traveling employee exception. Counsel pointed out that the decision was based on two exceptions, both of which focus on the demands of the claimant's employment, not the instructions of the employer. Justice Burke suggested that both require employer control of travel, but counsel disagreed, arguing that if instructions were the crucial issue, employers would avoid the exception simply by never directing temporary employees where to live. Justice Garman asked what the difference was between the claimant and other employees coming and going to work. Counsel argued that traveling out of town was inherently different, carrying a different level of risk. Justice Garman asked whether that meant anybody who travels to work is a traveling employee, and counsel responded that it depended on the facts and circumstances. Justice Thomas asked whether a traveling employee wasn't traditionally one traveling away from an employer's premises. Counsel responded that the Cordova plant was not the employer's premises. Justice Karmeier asked whether counsel's argument meant that when a contractor hired short-term employees to work at a job site, whether in construction or anything else, they were all traveling employees. Counsel responded that it depended on the particular facts - whether the exigencies of the assignment required travel. Justice Freeman asked whether the parties' disagreement was on facts or permissible inferences, and counsel responded that there were disputes of fact. Justice Karmeier asked whether it was fair to say that there was no dispute that the employer hadn't required the claimant to stay anyplace in particular. Counsel responded that while the employer hadn't directly directed the claimant where to stay, he had testified that it was his understanding that the employer preferred its employees to be nearby. Chief Justice Kilbride asked whether the record suggested that employees were expected to be reasonably close so as to respond to on-call emergencies. Counsel agreed that the record reflected that.

On rebuttal, counsel argued that the claimant was not on call the morning of the accident, nor was there any emergency. The Commission's decision was unreasonable, counsel argued, and an unjustified expansion of the traveling employee exception.

We expect Venture-Newberg to be decided in two to four months.

Argument Report: Are Statutory Penalties Under the Employee Classification Act Constitutional?

Bartlow v. Costigan involves a constitutional challenge: can the Department of Labor return administrative fines against construction contractors under the Employee Classification Act without mandatory evidentiary hearings? During oral argument last week, the Illinois Supreme Court seemed skeptical. Our detailed summary of the underlying facts and lower court decisions is here. Our preview of the argument is here.

The plaintiffs received a notice of investigation and request for documents from the Department in the fall of 2008. In early 2010, the Department notified the plaintiffs that they had preliminarily found multiple violations of the Act, and stating that the possible fine was $1.683 million. When the plaintiffs received a second notice of investigation two weeks later, they filed a facial constitutional challenge to the Act. The trial court entered summary judgment for the Department. The Appellate Court affirmed, accepting the Department's characterization of its powers as purely investigatory, and its administrative fines as "no consequence" penalties (meaning that the target could ignore a violation notice without anything bad happening, at least right away).

Counsel for the contractor began by sketching the background facts, arguing that the Department's second complaint could have subjected the plaintiff to criminal penalties. Justice Thomas asked whether the recently enacted House Bill 2649 had replaced the statutory scheme at issue, and when it became effective. Counsel responded that the bill took effective on January 1, 2014. Justice Thomas asked whether the bill was enacted to correct procedural issues in the Act; counsel responded that not all of her client's constitutional issues had been addressed. Justice Thomas asked whether, if the Court finds that the statute applies retroactively, the Department's decision is a nullity. Counsel responded that the contractor did not concede that the newly enacted procedures even could be applied to it on remand. Justice Theis asked counsel about the contractor's vagueness challenge, and counsel responded that the contractor thought it was complying with the statute. Justice Theis noted that the contractor called the statute unambiguous in its brief, and wondered how the statute could nevertheless be vague. Counsel responded that although constitutional vagueness usually indicated two viable constructions of a statute, in this case, there was really only one. Counsel noted the argument that the purpose of the statute is to prevent employers from denying benefits to workers by improperly classifying them, and argued that the contractor had not done so. Justice Freeman asked the contractor if its equal protection/special legislation challenge had been properly preserved in its brief, and counsel answered that it had.

Counsel for the Department began by emphasizing that the Department adjudicates nothing, and that to get a penalty assessed, it must go to the Circuit Court. Justice Thomas pointed out that the Department could issue a cease-and-desist order and civil penalties, and counsel responded that "assessing" penalties didn't mean "imposing" them. Justice Thomas asked counsel whether she would agree that there was a lack of procedure involved in how the Department reached the point of bringing court proceedings. Counsel disagreed, pointing out that there were provisions for an informal hearing and submission of documents; the constitution doesn't require any hearing unless the party was being deprived of property. Justice Thomas suggested that the Appellate Court's characterization of Department penalties as "no consequence" significantly rewrote the statute. Counsel responded that the Department had no way of collecting penalties absent Circuit Court action, and might not even seek court action in the face of an unwitting violation. Justice Thomas asked whether there was a due process problem if the Department was "judge and jury" so long as they stopped short of execution. Counsel argued again that there was no due process violation absent a deprivation of property. Justice Thomas asked what the impact was if the new procedures in the statute apply retroactively. Counsel argued that there was no barrier to simply sending the plaintiffs a hearing notice and starting the newly enacted statutory process. Justice Karmeier commented that the Department could apparently debar a contractor from state contracts for multiple violations, and asked whether such action required a Circuit Court order. Counsel responded that debarment required a court finding of multiple violations. Justice Thomas asked whether there was any significance to the fact that Section 25 of the Act is called "enforcement," and counsel responded that chapter titles are given no significance in statutory construction; within the body of the statute, it explains that enforcement requires Attorney General action. Counsel concluded by briefly addressing the contractor's equal protection challenge, arguing that the contractor had waived strict scrutiny, and the statute easily passed rational basis analysis.

On rebuttal, Justice Freeman asked counsel for the contractor whether, if the Court couldn't find the contractor's position on equal protection in the briefs, the matter was waived. Counsel argued that the issue had been addressed. Counsel continued that since the new statute required action on a timeline, including a complaint 120 days after notice of a violation, if the statute applied retroactively, the contractor could not be pursued again. Counsel suggested that the Court could strike the statute as-applied, rather than facially, and Chief Justice Kilbride suggested that the Court was limited to the challenges parties actually bring. Counsel responded that as-applied issues had arisen from the Department's newly minted interpretation of the statute.

We expect Bartlow to be decided in two to four months.

Argument Report: Does the Income Withholding for Support Act Require Strict Compliance?

Our reports on the oral arguments from the September term of the Illinois Supreme Court continue with last week's argument in Schultz v. Performance Lighting, Inc. Our detailed summary of the underlying facts and lower court rulings in Schultz is here. Our preview of the oral argument is here

The plaintiff obtained a divorce in 2009 and was awarded $600 every two weeks in child support. The plaintiff's attorney served what purported to be a notice under the Income Withholding for Support Act. However, the notice didn't contain the ex-husband's Social Security number or the termination date for the support obligation. The ex-husband's employer didn't withhold under the notice, so the ex-wife sued the employer under the Act, seeking the statutory $100 per day penalty. The trial court dismissed the plaintiff's complaint, holding that strict compliance with the statute was necessary for a notice to be valid, and the Second District affirmed.

Counsel for the plaintiff argued that a mistake in a withholding notice is nearly always merely an error, but a recipient's failure to pay is nearly always purposeful. Justice Thomas asked whether the language of the statute suggested that the legislature didn't intend to penalize employers served with a faulty notice. Counsel noted that while penalties for non-payment can be harsh, the legislature has capped the total penalty. Nevertheless, counsel argued that the legislature certainly didn't intend that an omission or error in the notice not affecting the ability to pay would entirely excuse the duty to pay. Justice Thomas asked if plaintiff's position was that the errors in the notice was de minimis, and counsel argued that invalidating the notice was exalting form over substance. Justice Thomas pointed out that one of the errors in plaintiff's purported notice was the lack of a social security number. Justice Thomas asked whether plaintiff's argument was that the employer has the employee's social security number, making the omission unimportant. Counsel agreed that the omission didn't affect the employer's ability to pay. Justice Thomas posited the hypothetical of a large employer with two employees with the same name receiving a notice with no social security number. Counsel pointed out that social security numbers aren't mandatory anymore according to the statute. Justice Burke asked whether it should make a difference that the plaintiff's attorney, rather than the plaintiff herself, sent the notice, and counsel argued that the standard was the same. Justice Garman asked whether the penalty should be strictly construed in favor of the employer, and counsel responded that given that the penalty was civil, certain errors weren't fundamental. Counsel argued that payment of child support was nearly sacrosanct in Illinois law; the recipient of a notice has a duty to either abide by the notice, ask the sender for clarification, or file a declaratory judgment action. Chief Justice Kilbride asked whether the recipient of the notice had failed entirely to withhold, or had withheld the sums and simply not turned the money over. Counsel responded that the answer was not in the record.

Counsel for the defendant argued that it was undisputed that the purported notice didn't comply with the Act. Justice Karmeier asked counsel whether he agreed that because of recent statutory changes, the Social Security number was no longer crucial. Counsel responded that he did not, pointing out that there was no risk that Social Security numbers would inadvertently become part of a public court file. Justice Burke asked why employers should be permitted to disregard a notice, and whether they had a duty to obtain missing information. Counsel argued that even if the employer had the ex-husband's Social Security number, it could not have determined the missing termination date for the support obligation. Justice Garman asked whether the Court should be concerned that the purpose of the statute was to promote prompt payment, but requiring strict compliance might have the opposite effect. Counsel responded that the statute has now been amended, but even before the amendment, there was nothing keeping plaintiffs from correcting an error and filing a second notice. Therefore, a perverse effect was unlikely. Counsel pointed out that the statute provided specifically that omitting a signature didn't affect the validity of the notice, thus implying that other omissions did affect validity. Counsel argued that rules of statutory construction support the view that the statute should be strictly construed, as do subsequent amendments which have softened the impact of the statute. Chief Justice Kilbride pointed out that Federal regulations during the relevant period didn't allow employers to dispute a notice, and wondered what the authority was for the proposition that an employer could disregard the notice. Counsel responded that the defendant was not prosecuting an affirmative claim.

On rebuttal, Justice Thomas asked whether the missing child support was ever paid. Counsel responded that it was, but the record did not reveal whether or not the defendant had withheld the required sums and not turned the money over.  Counsel disputed the defendant's claim that the employer had a defense based on faulty service of the notice. Counsel argued that the exception for missing signatures was intended to differentiate the statute from other statutes for which signatures are mandatory, not to distinguish missing signatures from other flaws in the notice. Counsel agreed that requiring strict compliance would promote non-compliance with the statute.

We expect Schultz to be decided in two to four months.

Argument Report: Illinois Supreme Court Hears Dramshop Act Case

With the Illinois Supreme Court asking somewhat fewer questions than it generally does, it was unclear how the Court might decide Rogers v. Imeri, the Dramshop Act case the Court heard last week.  Our detailed summary of the underlying facts and lower court decisions in Rogers is here. Our preview of the argument is here.

Rogers arises from the death of the plaintiff's son in a drunk driving accident. The plaintiffs sued the bar which allegedly served the driver, alleging claims under the Dramshop Act. The plaintiffs received $106,550 from the driver's liability insurance policy and their own policy. While the matter was pending, the defendant's Dramshop liability insurer was declared insolvent, and the Illinois Insurance Guaranty Fund substituted in.

The parties agreed that the Fund was entitled to a $106,550 offset for settlements. So - was the offset deducted from the Dramshop Act cap, or from the jury's verdict, with the sum capped at the statutory maximum? The question turns on a conflict between the statutory liability cap of the Dramshop Act -- $130,338.51 -- and the language of the Guaranty Fund Act. The Fifth District held that the offset was taken from the jury's verdict - the same procedure which applies when the Fund is not involved in a case.

Counsel for the Guaranty Fund began by arguing that the issue presented was the import of the following language from the Act, 215 ILCS 5/546: “The Fund’s obligation . . . shall be reduced by the amount recovered or recoverable, whichever is greater” from other insurance.  Counsel pointed out that after the Fifth District’s decision in Rogers had come down, the First District, Division Five had decided the same question the opposite way in Guzman v. 7513 West Madison Street, Inc. Counsel argued that the Fifth District’s decision is contrary to the plain language of the Guaranty Fund Act, essentially directing that the trial court take a sum the Fund doesn’t owe (because of the Dramshop Act liability cap), and reducing it by another sum the Fund doesn’t owe (the setoff), to arrive at a number which would be exactly the same as if the Fund wasn’t involved in a case at all – meaning that Section 546 was given no effect. Justice Freeman asked counsel to reconcile his position with the express purpose of the statute to protect policyholders and third parties. Counsel responded that that was doubtless an aspirational goal of the statute. However, he argued that the Fund’s theory ensured that the purpose of the Dramshop Act is satisfied – the plaintiff recovers the full statutory liability cap, for the most part from the wrongdoer, with the Fund providing the rest. The Fund is protected as well by being given the reduction mandated in Section 546. Justice Freeman’s question was the only one counsel received in his initial remarks.

Counsel for the plaintiffs began with a discussion of the underlying facts. He argued that the case had nearly been settled when the Guaranty Fund substituted in. Counsel argued that Section 546 never mentions the Dramshop Act, which provides that a jury finds a victim’s damages without reference to the statutory cap. Justice Garman asked whether the issue was one of statutory construction or public policy, and counsel responded that it was largely statutory construction. Justice Theis asked what the “Fund’s obligation” under Section 546. Counsel responded that the term is never defined, and argued once again that the Fund’s position would vitiate the victim’s right to have the jury determine damages. Justice Karmeier asked counsel to respond to the Fund’s argument that the “Fund’s obligation” was capped by the Dramshop Act limit. Counsel argued that the Fund’s position was unsupported. Justice Karmeier asked whether the issue hinged on how the Court defines the “Fund’s obligation,” and counsel responded that the Fund’s obligation is determined through trial and the jury’s verdict. Counsel concluded by arguing that the Fund’s position would make trial a virtual formality, since the plaintiff could never get the full benefit of a verdict significantly above the statutory cap.

In rebuttal, counsel for the Fund argued that it was the Dramshop Act, not the Guaranty Fund Act, which capped the plaintiff’s damages. The plaintiff’s position, counsel argued, meant that the Guaranty Fund Act has no effect. Justice Thomas asked whether the Dramshop Act cap would always be the maximum exposure for the Fund, and the Fund would get the benefit of the setoff for other insurance recoveries regardless. Counsel argued that while this was true, applying the setoffs to a jury verdict which was well above the cap denied the Fund any benefit at all from Section 546.

We expect Rogers to be decided in two to four months.

First Thoughts: Live-(Nearly)-Blogging the Oral Argument in Kanerva

This morning, a seemingly skeptical Illinois Supreme Court appeared ready to side with the State in a dispute over 2012 amendments to the State Employee Group Insurance Act. Several Justices peppered the two attorneys splitting argument time for the plaintiffs with sixteen questions during their opening, many of which echoed various points made in the Circuit Court’s opinion tossing the case out of court. In comparison, counsel for the State was treated gently, receiving only five questions in all, four of them from Justice Thomas.

Counsel for the plaintiffs began by emphasizing the fact that the Pension Protection Clause doesn’t actually use the word “pension” in describing what is protected – it says “benefits.” (See the post immediately below this one for the full text of the clause.) Counsel argued that the word “benefits” has a plain and unambiguous meaning in the context of employment, as demonstrated by the fact that one regularly sees signs and advertisements speaking of jobs “with benefits” – with no further explanation of what is meant. The ordinary understanding of the term clearly includes health insurance, counsel argued. Counsel pointed out that the voters who approved the state constitution chose to protect “benefits,” not just “pensions,” and that the title of the clause is “Pension and Retirement Rights” – if the clause is limited to pensions, then the word “retirement” means nothing. Justice Freeman asked counsel whether the case was one of first impression in that it related to something which was not clearly part of a pension, and if so, whether the Court should consider that it might be expanding the scope of the Clause. Counsel reiterated that the Clause used the broader term “benefits,” not just pensions. Justice Burke asked counsel whether there was any difference between the “pension system” and the “retirement system.” Counsel responded that as a practical matter, the answer was no. Justice Burke then asked whether health insurance premiums paid on a retiree’s behalf were income. Counsel disputed the idea that the protection of the Clause is limited to forms of income, pointing out yet again that the drafters deliberately used a broad and generally understood term – “benefits.” Justice Garman pointed out that the Clause actually protects “benefits of membership” in the system, not just “benefits,” and asked counsel whether the point had any significance? Counsel responded that all “benefits” flowed to the retiree through the system, so the distinction in language had no practical impact. Justice Karmeier asked whether, under the plaintiffs’ theory, a retiree would be locked into a particular level of benefits if benefits were increased? Counsel responded that in the current political climate, he couldn’t imagine that happening, but the answer was no. Justice Garman asked whether, on counsel’s theory, the state could reduce retirees to bare-bones health insurance so long as the premiums cost the retirees nothing. Counsel responded that a definitive answer would have to await another case, but that a substantial cut in the value of the insurance likely would violate the Clause.

Co-counsel for the plaintiffs concluded the opening argument by challenging the Circuit Court’s finding that the class members lacked standing to sue the State on their union’s collective bargaining agreement in Circuit Court. He argued that third party beneficiaries of a collective bargaining agreement were permitted to sue as “parties” to the agreement under the limited exception authorizing such suits. Counsel set out the plaintiffs’ secondary constitutional argument, which is based on the proposition that the 1998 pension bill providing that 20-year retirees would receive their health care insurance free created contractual rights which were impaired in violation of the Contracts Clause of the state constitution by the 2012 amendments. Justice Freeman pointed out that the retirees’ benefit books said that the state could change the terms at any time, and asked counsel how such an equivocal representation could amount to a contractual promise. Counsel pointed out that the benefit books didn’t say that the state reserved the right to change premiums, as opposed to adjusting the exact parameters of what was and was not covered.

Counsel for the State began by emphasizing the strong presumption in the law that legislation doesn’t create enforceable contract rights, given that a contrary view would hamper the legislature’s ability to respond to changing conditions. Counsel argued that nothing in the any of the relevant acts met the high bar necessary to create contract rights.

Justice Thomas noted that retirees’ mandatory premium contributions are quite low now, but wondered whether the State’s position, if it were successful, would allow the state to drive retirees’ contributions much higher, or even abolish the health care insurance benefit for retirees entirely. Counsel responded that there were significant political constraints to stop that from happening, but there was no constitutional barrier to such a development. Justice Thomas asked whether state employees who took early retirement in reliance on the package of promised benefits had any recourse in the State’s view. Counsel responded that nothing in the early retirement statute promised that benefits would stay at their current level forever, and repeated that retirees would have no constitutional cause of action. Justice Thomas asked whether the State believed that the Hawaii decision heavily relied on by the plaintiffs, which found health care benefits protected by a similar pension clause, was simply wrong, and counsel for the State said yes. Counsel argued that the Pension Clause had to be understood in the context of its history, and the Clause arose from a desire to make it clear that all public pension systems are in the nature of voluntary contractual relationships, not a mandatory part of employment. Counsel closed by arguing that there was no special significance to the use of the word “benefits” in the Pension Protection Clause, and disputed that the 2012 amendments rose to the level of a constitutional “impairment” of a contract.

In rebuttal, counsel for the plaintiffs challenged the State’s claim that history of the retirees’ health care system has been one of constant change. Justice Thomas’ question was important, counsel argued; if the State prevailed, there would be nothing to stop the State from shifting far more of the cost of the health care system to retirees, essentially wiping out their pensions in the process. Counsel closed by arguing that the State would contend that the 2012 statute is a complete defense to any claim for breach of contract, and surely that amounted to a constitutional “impairment.”

As I’ve observed before, Kanerva is playing out in the shadow of pension battles yet to come. If the argument this morning is any indication of the Court’s inclination, it seems unlikely that the Supreme Court is about to take the kind of hard-line view of the Pension Clause that would significantly hamper the political branches in grappling with Illinois’ public pension liabilities.

Illinois Supreme Court to Debate Whether Public Retiree Health Benefits Protected By Pension Clause

Tomorrow morning, the Illinois Supreme Court will hear oral arguments in what may prove to be a precursor of larger battles yet to come in the next few years - an all-out battle over whatever public pension reform package the legislature adopts. Tomorrow, the case at hand is Kanerva v. Weems, which presents the question of whether guaranteed premium-free health care for public retirees with twenty years or more service is protected by the guarantee of the Illinois Constitution that public pensions cannot be disturbed? Our detailed summary of the facts and Circuit Court decision in Kanerva is here.

The State Employee Group Insurance Act has been amended several times during its life. Originally, the SEIGA provided that the state paid the entire cost of the insurance. In 1991, the Act was amended to provide for limited employee contributions.  In 1995, the legislature eliminated the cap on those contributions. Two years later, the legislature provided for a graduated premium payment, topping out at 20 years, when the state took over 100% of the payments.

All that changed in 2012, when the legislature amended the SEIGA to direct the Director of the Department of Central Management Services to allocate the cost of health insurance premiums between the State and its retirees. The statute provided that the Director could base his or her calculations on the actual cost of the services, adjusted for various factors.

The plaintiffs sued, alleging that the 2012 amendments rendered the SEIGA system unconstitutional on its face. Principally at issue is the Illinois Pension Protection Clause:

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.

In addition to the Pension Protection Clause, the plaintiffs invoked the Impairment of Contracts clause and separation of powers (a void delegation of legislative authority), as well as suing for breach of contract.

Tomorrow the defendants are likely to argue that a "pension" is commonly understood as an annuity - a fixed sum paid from protected funds which is set at the time of retirement based on factors like the retiree's final pay and years of service. The defendants will likely argue that if that much is true, the Supreme Court should follow the lower courts by holding that the health insurance premiums - which by definition change every year as costs and medical technology change - can't be "pensions."  The plaintiffs, on the other hand, are likely to argue that the entire package of benefits guaranteed to retirees are a form of earned compensation, and accordingly, the medical benefits are, broadly speaking, a "pension." The plaintiffs will likely argue, contrary to the holding of the Circuit Court (the appeal in Kanerva went straight from the Circuit Court to the Supreme Court because of the great importance of the issues presented), that the courts have jurisdiction over the contracts claim as a violation of the state's collective bargaining problems.

We expect an opinion in Kanerva within the next two to four months.

I'll have more to say about Kanerva tomorrow afternoon once I've returned from the argument at the Bilandic Building in Chicago. I look forward to meeting readers of Appellate Strategist who attend the Court's final session of its first Chicago term.

Illinois Supreme Court to Debate Dramshop Act Recovery Cap

Tomorrow morning, the Illinois Supreme Court will hear oral arguments in Rogers v. Imeri. Rogers poses the question when the Dramshop Act recovery cap applies and other defendants have settled, how is the maximum exposure of the Illinois Insurance Guaranty Fund calculated? Our detailed summary of the facts and lower court opinions in Rogers is here.

Rogers arose from the tragic death of the plaintiffs' son in a drunk driving accident.   The plaintiffs settled with the driver of the vehicle as well as receiving a settlement under their own policy. The plaintiffs sued the establishment which allegedly served the driver, but the defendant's dramshop liability insurance carrier became insolvent while the lawsuit was pending. So the Illinois Insurance Guaranty Fund stepped in.

And that's where the dispute started. The Fund filed a motion seeking summary adjudication of the maximum exposure of the Fund. But how was the deduction calculated - subtract the settlements from the Dramshop Act cap? Or let the jury return a verdict against the defendant -- which was highly likely to be well in excess of the $130,000 statutory cap -- deduct the settlements from that much higher figure, and then reduce the recovery to the statutory cap? If the court picked the first alternative, the maximum exposure was likely to be relatively small, given that the recoveries to date had been $106,550 (making the Fund's maximum exposure about $24,000). But if the court picked the second alternative, the recovery would likely be the statutory cap, or something very close to it.

The result would have been relatively straightforward is the Guaranty Fund hadn't been involved; the routine calculation would be the second alternative - let the jury award what it wants, deduct the settlements and then cap the recovery. But the defendant in Rogers argued that a different result was required because the Fund was involved. The Circuit Court disagreed, and the Appellate Court affirmed.

Before the Supreme Court, the defendant is likely to argue that the Fund occupies a special position in Illinois law. It is not merely another insurer, but rather a recovery of last resort; such a rule is necessary, the defendant will likely argue, to protect the viability of the Fund. A claimant is required to exhaust "all coverage" before turning to the Fund for recovery, and unlike private insurers, the Fund's obligation must be reduced by the full policy limits, regardless of whether the plaintiff settles for less or does not pursue a claim.

On the other hand, the plaintiffs are likely to argue the policy implications of the defendant's preferred result. If the statutory cap is applied before any deductions for settlements, it is entirely possible that the establishment will be liable for little or nothing; the plaintiffs are likely to argue that this result is directly contrary to the Dramshop Act.

We expect a decision in Rogers within the next two to four months.

Illinois Supreme Court to Debate Strict vs. Substantial Compliance With Withholding Orders

Tomorrow morning, the Illinois Supreme Court will hear oral arguments in Schultz v. Performance Lighting, Inc., which poses an important question for domestic relations law: must a Withholding Notice under the Income Withholding for Support Act strictly comply with the requirements of the statute in order to be valid, or is substantial compliance enough? Our detailed summary of the facts and lower court opinions in Schultz is here.

The plaintiff in Schultz was awarded $600 every two weeks in child support upon her divorce. She served a notice to withhold income for support on the defendant, her ex-husband’s employer at the time. The defendant made no payments to the State Disbursement Unit on the ex-husband’s account. Ultimately, the plaintiff sued the defendant, alleging that the defendant had breached a statutory duty to pay, triggering a statutory $100 per day penalty. The Circuit Court found that the plaintiff’s notice didn’t include either the ex-husband’s social security number or the termination date of the obligation. The Court held that strict compliance with the statute was required and dismissed the complaint. The Appellate Court affirmed.

The argument in Schultz is likely to turn on conflicting interpretations of Section 20(c) of the Act. According to the Act, the notice “shall . . . include the Social Security number of the obligor,” it shall “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 it shall “contain the signature of the obligor or the printed name and telephone number of the authorized representative of the public office.” 750 ILCS 28/20(c).

“Shall” is typically interpreted as being mandatory, but that doesn’t answer our question; there are cases holding that “shall” doesn’t necessarily require strict compliance. As the Appellate Court noted, there is a line of authority holding that where “shall” is coupled with a penalty or consequence of some kind, substantial compliance is required. The Appellate Court relied on the fact that non-compliance with a withholding notice triggers a per-day fine for the employer, but the plaintiff will likely point out that this doesn’t really help the analysis. A consequence for the receiver of the notice (i.e., “do this or the target gets penalized”) doesn’t support the same inference that a consequence for the maker of the notice (i.e., “do this or you get penalized”) does.

The defendant is likely to argue the same negative inference relied on by the Appellate Court: because the legislature found it appropriate to provide in the statute that omitting the signature of the obligor or the printed name and telephone number of the authorized representative of the public office doesn’t affect the validity of the notice, it follows that omitting other required data does affect the validity of the notice. The plaintiff is likely to respond by arguing that all the necessary information was either expressly included, could have been easily inferred, or could have been determined by contacting her attorney, whose contact information was included on the notice. It will be interesting to see what the Court ultimately does with Schultz; on the one hand, the Kilbride Court has shown a pragmatic streak in a number of cases, finding for substance over form, but on the other hand, in their most recent strict-vs.-substantial-compliance case, State Bank of Cherry v. CGB Enterprises, Inc., strict compliance won.

We expect Schultz to be decided in the next two to four months.

Illinois Supreme Court to Debate Limits on Workers' Comp "Traveling Employee" Exception

The Illinois Supreme Court’s first term in Chicago ends tomorrow morning with a busy docket of five civil arguments: Venture-Newberg Perini Stone and Webster v. Illinois Workers’ Compensation Commission; Schultz v. Performance Lighting, Inc.; Kanerva v. Weems; Rogers v. Imeri and American Access Casualty Co. v. Reyes. In Venture-Newberg, the Court will resolve a potentially important question for workers’ compensation law: is a short-term worker hired from a far-away union hall and staying in nearby temporary housing analogous for purposes of workers’ compensation to an employee traveling on the employer’s business? Our detailed summary of the facts and lower court opinions in Venture-Newberg is here.

A contractor was hired to perform maintenance and repair work at a nuclear plant more than 200 miles from Springfield. Because the nearby union local couldn’t fill all the jobs, openings were posted elsewhere, including at a Springfield hall. The claimant was hired, but he decided it was impractical to compute 200 miles back and forth each morning and night for the few weeks the job would last. So he found lodging about thirty miles from Cordova. He was injured early on the second day of the job while traveling from his lodging to the plant.

As a general rule, commuting injuries aren’t compensable under the Workers’ Compensation Act. The arbitrator originally decided that this case fell squarely under that rule and recommended that the claim be denied.

But the Commission reversed. Two exceptions to the general rule applied, according to the Commission. First, the Commission found that the claimant hadn’t been living where he was by his own choice; his “course or method of travel” was determined by the exigencies of the job. Second, the employee was a “traveling employee” – essentially, he was engaged in business travel. The Sangamon County Circuit Court reversed the Commission, setting aside the decision awarding benefits. The majority of the Appellate Court reversed the Circuit Court, once again reinstating the award over a dissent by Justice Hudson, with Justice Turner joining.

The employer may focus during the argument tomorrow on the testimony of the claimant and a fellow employee during the hearing. The claimant acknowledged that the employer hadn’t told him to find lodging nearby, or where to live, or what route to take into the plant, and he hadn’t been called in early on the day of the accident. A fellow employee conceded that the employer had never requested that employees find lodging nearby, but pointed out that working a 12-hour shift and then driving a 200-mile one-way commute wasn’t too practical, even for a job that would only last a few weeks. The employer may also echo Justice Hudson’s dissent, arguing that treating workers in the claimant’s position in the same way as workers traveling on business might create considerable exposure and uncertainty – would every employee hired from far away at a big job like the nuclear plant be a “traveling employee” for his or her daily commute? And if so, how far away was far enough? The Commission, on the other hand, is likely to argue the facts as well, echoing the Appellate Court’s conclusion that the employer had to not only know that short-term workers from far-off union halls would be staying somewhere nearby, but to desire that outcome.

We expect a decision in Venture-Newberg within two to four months.

Illinois Supreme Court to Debate Appeals from a Pollution Control Facility Certification Order

Tomorrow morning in Chicago, the Illinois Supreme Court will hear oral argument in The Board of Education of Roxana Community Unit School District No. 1 v. The Pollution Control Board, which presents an important question of Illinois environmental law - who can appeal from a pollution control facility certification, and where is the appeal taken? Our detailed explanation of the underlying facts and lower court rulings in Roxana is here.

The respondent in Roxana submitted twenty-eight applications for certification of certain systems, methods, devices and facilities as pollution control facilities within the meaning of the Property Tax Code. The petitioner filed petitions for leave to intervene in all twenty-eight proceedings. The stakes for the petitioner were high - if certification were granted, the Illinois Department of Revenue would supplant the District as the taxing authority. The Illinois Pollution Control Board denied intervention and granted certification. The petitioner/intervenor appealed, but the Appellate Court dismissed the appeal for lack of jurisdiction.

The oral argument in Roxana is likely to turn on a conflict between two statutes. The petitioner is likely to emphasize Section 41(a) of the Environmental Protection Act:

Any party to a Board hearing, any person who filed a complaint on which a hearing was denied, any person who has been denied a variance or permit under this Act, any party adversely affected by a final order or determination of the Board, and any person who participated in the public comment process . . . may obtain judicial review, by filing a petition for review within 35 days . . . under the provisions of the Administrative Review Law . . . 415 ILCS 5/41(a).

On the other hand, the respondent is likely to emphasize Section 11-60 of the Property Tax Code:

Any applicant or holder aggrieved by the issuance, refusal to issue, denial, revocation, modification or restriction of a pollution control certificate or a low sulfur dioxide emission coal fueled device certificate may appeal the finding and order of the Pollution Control Board, under the Administrative Review Law . . . 35 ILCS 200/11-60.

The respondent will likely echo the views of the Appellate Court, arguing that Section 41(a) is limited to appeals originating in the Circuit Courts under the Administrative Review Law, not appeals originating in the Appellate Court, and that allowing a direct appeal to the Appellate Court by an intervenor would render Section 11-60 meaningless. On the other hand, the petitioner will likely argue that Section 11-60, as the narrower statute, should operate as an exception to Section 41(a), with applicants and holders being required to seek judicial review in the Circuit Courts under Section 11-60, while all others are permitted to go straight to the Appellate Court under Section 41(a). The petitioner is likely to cite the concerns of the dissenter at the Appellate Court, who argued that the statutes should not be interpreted to deny any form of review to a local governmental entity which would lose a substantial portion of its tax base through certification.

We expect Roxana to be decided in the next two to three months.

Illinois Supreme Court to Debate Controversial Condominium Decision

Tomorrow morning in Chicago, the Illinois Supreme Court will hear oral argument in a high-profile appeal from the Second District, Spanish Court Two Condominium Association v. Carlson. Our detailed summary of the underlying facts and lower court holdings in Spanish Court is here.

Spanish Court arises from a special statutory proceeding – the Forcible Entry and Detainer Act.  The plaintiff Association sued the defendant condominium owner in early 2010 under the Act, arguing that she had stopped paying both monthly and special assessments. The Association sought possession of the defendant’s unit and a monetary award. The defendant filed affirmative defenses and a counterclaim. She admitted not having paid the assessments, but denied that they were owed. Instead, she alleged that her unit had sustained water damage as a result of the Association’s breach of their duty to maintain and repair common areas of the development – specifically, the roof and certain brickwork above her unit. The defenses and counterclaim alleged first, that the Association was estopped from seeking the assessments by its breach of the duty to maintain and repair, and second, that any judgment against the defendant should be reduced by the cost of repairing the damage to the unit.

The Circuit Court granted the plaintiff’s motion to strike the defenses and counterclaim, but the Appellate Court reversed in part. Analogizing the duty to pay assessments to Illinois law on the duty to pay rent (which also falls under the Forcible Entry and Detainer Act), the Court held that the duty to pay was not absolute. Rather, it was given in exchange for the duty to maintain and repair. If the Association breaches the duty to maintain and repair, the Court held, then the resident is permitted to suspend performance with respect to paying assessments. The Court cautioned that relatively minor problems, such as “overgrown bushes and unrepaired sidewalk cracks” would “rarely” constitute material breaches, but found that the alleged failures here were arguably material.

Before the Supreme Court, the Association seems likely to argue that since assessments are the only means available to a board to carry out its duty to maintain and repair, allowing each individual resident to suspend payments will have the perverse result of making it less likely that common areas will be kept in good repair. The Association may also argue, as it did on rehearing, that allowing such a remedy invites chaos by making each individual resident his or her own judge of the adequacy of the repair of the common areas. The Association is likely to suggest a “parade of horribles,” with residents unhappy over assessments suspending payments, and boards having to spend time and legal fees in order to get possession of units and payment of past-due assessments. The Association is also likely to emphasize the special character of the Forcible Entry and Detainer Act proceeding, which is supposed to provide a quick and relatively inexpensive way to settle the question of possession. The defendant is likely to argue that the Appellate Court correctly drew an analogy to landlord-tenant law and contend that there is no basis for treating the two areas differently. The defendant may also argue the now-or-never aspect of the problem by suggesting that if the resident is not permitted to raise these types of issues before losing possession of the unit, it will be too late.

Spanish Court has attracted considerable attention nationwide, according to the Chicago Tribune, so the Court’s ultimate decision will be closely watched. We expect a decision in two to four months.

Illinois Supreme Court to Debate Constitutionality of Labor Department Fines

Tomorrow morning in Chicago, the Illinois Supreme Court will hear oral argument in Bartlow v. Costigan. Bartlow isa facial constitutional challenge to the system of administrative fines administered by the Illinois Department of Labor in connection with allegedly misclassifying workers as independent contractors rather than employees for purposes of minimum wage, overtime, workers’ compensation and unemployment insurance. Our detailed summary of the facts and underlying court decisions in Bartlow is here.

The plaintiffs in Bartlow operate a roofing business which installs siding, windows, seamless gutters and roofs. In September 2008, the Labor Department sent the plaintiffs a “notice of investigation and request for documents,” stating that the department was investigating whether several individuals working with the plaintiffs had been misclassified. Eighteen months later, the Department sent the plaintiffs a “Notice of Preliminary Investigative Findings,” stating that a preliminary determination had been made that the plaintiffs had misclassified ten subcontractors. The notice said that the plaintiffs might be assessed a fine of $1.68 million, requested a response, and promised “a written decision informing the parties of the final determination in the matter.” When the plaintiffs were notified of a second investigation less than a month later, they sued the Department, seeking a declaratory judgment and injunctive relief, arguing that the Employee Classification Act and assorted regulations promulgated under it violated a variety of state and Federal constitutional provisions – largely on the grounds that it deprived persons of property without an opportunity for hearing. The plaintiffs lost at the trial court, and the Fifth District – with some apparent reluctance – affirmed.

The Appellate Court concluded that the Department functions solely as an investigator in connection with the Act, and accepted the Department’s view that a contractor could disregard a notice of a fine without suffering any consequences. The plaintiffs are likely to challenge that conclusion tomorrow by emphasizing the breadth and gravity of the steps available to the Department: a cease and desist order, orders to pay lost wages, salary and/or benefits, possible debarment from state contracts, and an administrative fine – here, for a considerable sum. The plaintiffs will likely argue that a party suffers a tangible deprivation when it receives a notice of such a fine from the Department, whether or not consequences can immediately flow from failing to pay. The plaintiffs also seem likely to point out the wide sweep of businesses which come under the classification of “construction” under the Act, and to emphasize the uncertainty that can be created by a Department finding.

The Department, on the other hand, is likely to argue that points which succeeded at the Appellate Court. The Department will heavily emphasize that the plaintiffs are making a facial constitutional challenge, the most difficult challenge to win: if there are any circumstances in which the statute is constitutional, the Department must prevail. The Department is also likely to point out that its finding of a violation is not considered a “final administrative determination” within the meaning of the Administrative Review Law; any finding of the Department has to be enforced through a complaint in court, where the Department has the burden of proof and its administrative findings are inadmissible. The Department will likely also point out the opportunities a contractor is given to respond in the course of an investigation, including a chance to present written information and (at the option of the Department), a fact-finding conference which the contractor’s lawyer is permitted to attend.

Bartlow should be decided within the next two to four months.

It's Official: Justice Rita B. Garman is Next Chief Justice

As expected, the Illinois Supreme Court has just announced that Justice Rita B. Garman will become Chief Justice on October 26, 2013. The incoming Chief Justice’s term will run until October 25, 2016. Justice Garman was appointed to the Supreme Court on February 1, 2001, and elected to the Court on November 5, 2002. Her official Court biography is here.

For those unfamiliar with Illinois practice, in contrast to (for example) the United States Supreme Court, our constitution provides that the Justices themselves elect one of their number to serve a single three-year term as Chief. Thus, although his tenure as Chief Justice will soon conclude, Chief Justice Thomas L. Kilbride will continue his service on the Court. Chief Justice Kilbride’s official Court biography is here.

Illinois Supreme Court Debates the Locus of Sales Tax Liability

Our previews of the Illinois Supreme Court's September docket continue with Hartney Fuel Oil Co. v. Hamer, which will be argued this morning in Chicago.

Our detailed summary of the facts and lower court rulings in Hartney Oil is here. The plaintiff in Hartney resells fuel oil to railroads, trucking companies, gas stations and other fuel distributors. About 1985, the plaintiff moved its sales operations out of Forest View, in high-tax Cook County, to Elmhurst in DuPage County. Plaintiff moved the office several additional times in the years that followed.

In 2003, plaintiff moved its sales operation to Mark in Putnam County. The company contracted with a local painting contractor to provide office space and personnel. The agreement provided that personnel of the contractor would receive, accept and process fuel purchase orders from customers.

Plaintiffs' sales were of two types: daily purchase orders and long-term purchase orders. With respect to daily orders, sales personnel in Mark typically accepted the order on the spot. Occasionally, sales personnel rejected the order in accordance with credit lists they had been provided with in advance. Accordingly, in most cases, no one from the principal office in Forest View was involved with a sale until the invoice was sent out. Long-term orders were signed by the customer and returned to the Mark office; if already signed by the plaintiff's president, the order was final at that time. Otherwise, the president of the plaintiff company travelled to Mark to sign the order.

The Department had audited the plaintiff multiple times. In the first part of 1998, an initial audit had concluded that sales occurred in Du Page County, resulting in a multi-million dollar tax levy. Later that year, the plaintiff moved its sales office to La Salle County. A further audit covering the period 1998-2001 concluded that sales occurred in La Salle County at the sales office. In the summer of 2003, yet another audit was opened. According to the Appellate Court, nobody from the Revenue Department visited the Mark office or spoke to anyone employed there during the audit, and as the audit was wrapping up, the Department destroyed the files from its previous audit investigations of the company.

The plaintiff paid the tax under protest, and then sued to recover. The plaintiff was joined by Putnam County and the trustees of the Village of Mark. The Circuit Court found for the plaintiffs, and the Appellate Court affirmed.

Look for the oral argument in Hartney Oil to focus on a debate about the language of the administrative regulations. Several different sections of the Administrative Code contain the same language:

Without attempting to anticipate every kind of fact situation that may arise in this connection, it is the Department’s opinion, in general, that the seller’s acceptance of the purchase order or other contracting action in the making of the sales contract is the most important single factor in the occupation of selling. If the purchase order is accepted at the seller’s place of business within the county or by someone who is working out of that place of business and who does not conduct the business of selling elsewhere within the meaning of subsections (g) and (h) of this Section, or if a purchase order that is an acceptance of the seller’s complete and unconditional offer to sell is received by the seller’s place of business within the home rule county or by someone working out of that place of business, the seller incurs Home Rule County Retailers’ Occupation Tax liability in that home rule county if the sale is at retail and the purchaser receives the physical possession of the property in Illinois.

The Department of Revenue will fix on the first sentence. The statement that place of acceptance is "the most important single factor" arguably means that it isn't the only factor. But then again, there's the second sentence of the paragraph, which arguably says that if the place of acceptance is at the seller's place of business, sales tax liability is fixed at that location. So which is it? The Appellate Court held that the place of acceptance was decisive. Since acceptance of both short-term and long-term purchase orders took place in Mark, according to the Court, that presumption necessarily meant that sales-tax liability was imposed in Mark. Justice Robert L. Carter dissented, arguing that the regulations imposed a totality of the circumstances test, not a bright-line place-of-acceptance one.

Because of the amount of sales tax revenue potentially at stake in the Court's holding, Hartney Oil is one of the "big Three" of the term, alongside Kanerva and Spanish Two Court Condominium. If the Court holds that simply moving a sales office is insufficient to shift sales tax liability to a less high-tax jurisdiction, such strategic transfers are likely to be far more expensive, and therefore far less common. On the other hand, if the Court holds that the plaintiff's Mark sales office was sufficient to redirect sales tax liability in Hartney Oil, such transfers may become more common.

We expect a decision in Hartney Oil in two to three months.

A Preview of the Illinois Supreme Court's September Term: Yesterday on WILL-580 AM "Focus"

Yesterday morning, I had the pleasure of joining host Jim Meadows on WILL-AM Radio 580’s hour-long discussion show “Focus” for a preview of the Illinois Supreme Court’s September term. Joining us for the discussion was Steve Beckett, a founding partner at Beckett and Webber, P.C. in Urbana and a lecturer at the University of Illinois College of Law. In a wide-ranging discussion, we talked about our experiences arguing cases before the Illinois Supreme Court, speculated about how the Court might evolve as Chief Justice Kilbride’s term as Chief comes to an end and (apparently) Justice Rita B. Garman takes over, and reviewed the possible implications for the law and the lives of Illinois citizens of several criminal and civil cases on the Court’s docket for this month.

You can learn more about yesterday's show and listen to the mp3 recording of the broadcast here

Illinois Supreme Court to Debate Exemptions From Prevailing Wage Act

Our previews of the oral arguments on the Illinois Supreme Court’s September docket continue with People ex rel. Department of Labor v. E. R. H. Enterprises, Inc. [pdf].

E.R.H. began in 2008 when the Labor Department issued the company a subpoena for production of certain employment records. The subpoena stated that the Department was investigating whether the defendant’s repair work on certain water mains for the Village of Bement had been done in compliance with the Prevailing Wage Act. Seven months after the subpoena was served, the Department filed a complaint seeking a finding of civil contempt against the defendant for failing to comply with the subpoena. The defendant appeared and answered, arguing that it was a public utility and therefore exempt from the Prevailing Wage Act. The trial court requested that each side brief the dispute. The defendant submitted a 2004 agreement with the Village detailing the defendant’s ongoing responsibilities in connection with the Village’s potable water facility and water infrastructure.

On August 25, 2010, the trial court entered an order finding that the defendant was not a public utility, and the subpoena was therefore enforceable. Defendant moved to reconsider, and the trial court entered an amended order in February 2011, reiterating its finding. The court cited seven facts in support of its determination that the defendant was not a utility: (1) the Village owned the potable water facility and infrastructure; (2) the Village was recognized for the fluoridation of the Village’s water; (3) the Village contracted out some, but not all, of its responsibilities to the defendant; (4) the Village had the duty to serve the public and treat all persons alike; (5) defendant was simply an outside contractor assisting the Village; (6) defendant did not charge the public directly; and (7) defendant was not regulated by the Illinois Commerce Commission or any other state agency. The defendant once again sought reconsideration, which was denied, and the appeal followed.

The appeal turns on the interpretation of Section 2 of the Prevailing Wage Act, which applies to “all fixed works constructed by any public body, other than work done directly by any public utility company.” 820 ILCS 130/2. The Prevailing Wage Act does not define a “public utility.” Before the Appellate Court, the defendant argued that it is a “public utility” within the meaning of Section 3-105 of the Public Utilities Act, since it is a private corporation that operates the water and sewer systems of the Village for the public use of its citizens. The Appellate Court agreed that it was reasonable to import the definition from the Public Utilities Act in construing the Prevailing Wage Act. The Court found that its conclusion was further bolstered by the common dictionary definition of a public utility. Although the defendant neither owned the physical infrastructure, nor was it the entity directly billing the public for services, the Court found that neither was a prerequisite for the defendant to be a “public utility.” Since the defendant was a public utility in the Appellate Court’s view, the Prevailing Wage Act didn’t apply to its activities, making the subpoena unenforceable. The Court accordingly reversed.

We expect a decision in E.R.H. Enterprises within the next three to four months.

Illinois Supreme Court to Debate Pensions for Firefighters' Spouses

Our previews of the oral arguments on the Illinois Supreme Court’s September docket begin with Hooker v. Retirement Fund of the Firemen’s Annuity and Benefit Fund of Chicago, which is set for argument tomorrow morning, September 11.

Our detailed summary of the facts and lower court rulings in Hooker is hereHooker involves two surviving spouses of firefighters who died in 1998 and 2000, respectively. Both were awarded the widow’s minimum annuity under 40 ILCS 5/6-141.1. In 2004, the General Assembly amended the Pension Act to require an award of Duty Availability Pay (DAP) in certain pension calculations. The widows amended their administrative complaints, arguing they should have been awarded line-of-duty benefits retroactively to the date of the decedents’ deaths, and DAP should have been included in the pension calculations. They sought leave to present the DAP issue as a class action.

Addressing the line-of-duty issues first, the Circuit Court reversed the Retirement Board and ordered an award of line-of-duty benefits. The Board again refused to include DAP in its benefit calculation on remand, pointing out that neither decedent had received DAP during his lifetime. The Circuit Court refused to certify the class and granted the Board summary judgment, but the Appellate Court reversed.

Look for the Hooker argument to play out as a debate between alternative views of two clauses of the Pension Code. The problem here is that Pension Code doesn’t adopt a single philosophy as to how to calculate firefighter’s pensions. Some provisions provide that calculations are based on what the firefighter received during his or her lifetime. Others base the calculations on what the approved salary for the firefighter’s last position is today, even if the firefighter never received that salary.

Section 6-111 of the Pension Code seems to reflect the first view: “the salary of a fireman, as calculated for any purpose under this Article, shall include any duty availability pay received by the fireman . . .”

But then there’s Section 6-140 to contend with: “The annuity for the widow of a fireman whose death results from the performance of an act or acts of duty shall be an amount equal to 50% of the current annual salary attached to the classified position to which the fireman was certified at the time of his death and 75% thereof after December 31, 1972.”

The Board will likely argue that the language of Section 6-111 of the Code is clear, and provides that if a particular firefighter never received DAP, the survivor’s pension cannot include it either. The plaintiffs may respond that this oversells the clarity of Section 6-111. The statute says that DAP received by the firefighter is included, but it doesn’t say that only DAP actually received during the firefighter’s lifetime is included. Had the legislature intended that result, the argument might go, it would have said so. And this leads to the conclusion reached by the Appellate Court: under 6-111, if a calculation requires the analyst to plug in the firefighter’s salary, only DAP actually received is included. In the calculation required by section 6-140, this is the first half of the equation. But then, the current salary attached to the decedent’s last position is plugged into the annuity calculation. All DAP would be included in that portion of the calculation, whether or not the decedent ever received it.

Which answer the Supreme Court chooses may make a significant difference. The Board had argued that no class could be certified, arguing that the need to calculate each survivor’s benefits outweighed any common questions. The Appellate Court reversed the lower court, ordering certification of a class of more than one hundred survivors who were purportedly denied DAP calculations in their survivors’ annuities.

Illinois Supreme Court Announces Upcoming Dates for New Opinions and PLA Orders

The Illinois Supreme Court has announced the dates on which it expects to issue opinions as well as issuing other dispositive orders during the first two months of its temporary stay at the Michael A. Bilandic Building in Chicago. The Court expects to issue opinions on Thursday September 12; Thursday September 19; Thursday October 3 and Friday, October 18. The Court will issue orders on petition for rehearing on Monday, September 23, and orders on pending petitions for leave to appeal on Wednesday September 25.

The Court will convene tomorrow at 9:30 a.m. to begin its heavy schedule of oral arguments with three criminal cases.

Monday on WILL-AM Radio: An Hour Long Discussion of the Illinois Supreme Court and its Upcoming Term

On Monday September 8th from 10 to 11 A.M. Central, I’ll have the pleasure of joining host Jim Meadows on WILL-AM Radio 580’s hour-long discussion show “Focus.” We’ll be discussing the important cases on the Illinois Supreme Court’s upcoming September docket, both civil and criminal, as well as discussing the careers of the Justices themselves. Also joining the discussion will be Steve Beckett, a founding partner at Beckett and Webber, P.C. in Urbana and a lecturer at the University of Illinois College of Law.

Read more about Monday’s show here. Click the “Listen” tab on the Focus web page to listen to the discussion by streaming audio.

Illinois Supreme Court Announces Busy Argument Docket for September in Civil Cases

This morning, the Illinois Supreme Court announced a busy oral argument docket of twelve civil cases for the September term, the Court's first term of its potentially year-long stay in Chicago. The cases are:

Wednesday, September 11

  • Hooker v. Retirement Board of the Firemen's Annuity and Benefit Fund of Chicago, No. 114811 -- Issues Presented: Do survivors' pensions under the state Pension Act increase when the salary for decedent's position increases, regardless of whether the decedent ever actually received that salary? Our detailed summary of the facts and lower court decisions is here.
     
  • Hartney Fuel Oil Co. v. Board of Trustees of the Village of Forest View, No. 115130 -- Issue Presented: When a business' operations span multiple counties, where does a retail sale tax place for purposes of the local portion of the state sales tax? Our detailed summary of the facts and lower court decisions is here.

Tuesday, September 17

  • Bartlow v. Costigan, No. 115152 -- Issue Presented: Are the administrative fines imposed by the Illinois Department of Labor under the Employee Classification Act unconstitutional? Our detailed summary of the facts and lower court decisions is here.
     
  • Gillespie Community Unit School District No. 7 v. Wight & Co., No. 115330 -- Issues Presented: Is a "statute of repose" incorporated into a contract between defendants, an architectural firm, and the plaintiffs enforceable to bar the action? Our detailed summary of the facts and lower court decisions is here.
     
  • Spanish Court Two Condominium Association v. Carlson, No. 115342 -- Issue Presented: May a condominium owner refuse to pay monthly and/or special assessments, in whole or in part, on the grounds that the condominium board failed to maintain and repair the common elements of the condominium property? Our detailed summary of the facts and lower court decisions is here.
     
  • Wells Fargo Bank, N.A. v. McCluskey, No. 115469 -- Issues Presented: (1) May a motion pursuant to Section 2-1301(e) of the Code of Civil Procedure to vacate a default in a foreclosure suit be made after the sheriff’s sale has already occurred? (2) Did defendant waive her right to make a renewed motion to set aside the default by withdrawing her first motion in return for agreement to temporarily postpone the sale? Our detailed summary of the facts and lower court decisions is here.
     
  • The Board of Education of Roxana Community Unit School District No. 1 v. The Pollution Control Board, No. 115473 -- Issue Presented: May a party challenging the certification of a system as a pollution control facility appeal directly to the Appellate Court pursuant to the Environmental Protection Act, 415 ILCS 5/41(a), after its challenge is rejected by the Illinois Pollution Control Board? Our detailed summary of the facts and lower court decisions is here.

Wednesday, September 18

  • American Access Casualty Co. v. Reyes, No. 115401 -- Issue Presented: Is a clause of an automobile insurance policy excluding all liability coverage for the sole named insured and titleholder on the insured vehicle void as against public policy?
     
  • The Venable-Newberg Perini Stone and Webster v. Illinois Workers' Compensation Commission, No. 115728 -- Issue Presented: Was a union member who traveled to reach a distant job site a "traveling employee" pursuant to workers' compensation law such that an injury occurring while traveling to work in the morning was compensable? Our detailed summary of the facts and lower court decisions is here.
     
  • Schultz v. Performance Lightning, Inc., No. 115738 -- Issue Presented: Does the Income Withholding for Support Act require strict compliance, so that any error or omission in a notice to withhold income in connection with court-ordered support payments is fatal, or is substantial compliance enough? Our detailed summary of the facts and lower court decisions is here.
     
  • Kanerva v. Weems, No. 115811 -- Issues Presented: Do the 2012 amendments to the State Employee Insurance Act, 5 ILCS 375/1, violate (1) the Pension Protection Clause, Ill. Const. Art. XIII, Section 5; (2) the Contracts Impairment Clause, Ill. Const. Art. I, Section 16; (3) separation of powers; or (4) the State Lawsuit Immunity Act, 745 ILCS 5/1? Our detailed summary of the facts and Circuit Court decision is here.
     
  • Rogers v. Imeri, No. 115860 -- Issue Presented: 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? Our detailed summary of the facts and lower court decisions is here.

Illinois Supreme Court Extends Mailbox Rule to Judicial Review of Workers' Comp Commission

Last week, in a case which had attracted nationwide interest in the workers' compensation bar, a divided Illinois Supreme Court extended the mailbox rule to the process of initiating judicial review of decisions of the Workers' Compensation Commission. Justice Robert R. Thomas wrote the opinion for the five-Justice majority in Gruszeczka v. The Illinois Workers' Compensation Commission, with Justice Charles E. Freeman dissenting for himself and Justice Anne M. Burke. Our detailed preview of the facts and lower court opinions in Gruszeczka is here. Our report on the oral argument is here. Watch the video of the oral argument here.

The claimant in Gruszeczka filed a claim for benefits in connection with an injury he allegedly suffered on the job in 2004. The arbitrator denied the claim, and the Commission unanimously affirmed.

In Illinois, judicial review of a decision of the Workers' Compensation Commission is initiated 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 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). Counsel for the worker allegedly mailed the request and counsel affidavit fourteen days after receiving notice. But for whatever reason, it wasn't received in the court clerk's office until twenty-four days after notice. So -- which act "commenced" the proceeding -- mailing or receipt? A divided six-Justice panel of the Workers' Compensation Commission Division of the Appellate Court found that the Circuit Court had no jurisdiction over the administrative appeal, holding that since the issue was governed by a statute rather than a court rule, the courts had no authority to extend the mailbox rule to "commencing" judicial review.

The Supreme Court reversed. The court began by acknowledging that the usual presumption of jurisdiction in the Circuit Courts isn't available in workers' comp -- there, the steps set forth in the statutory had to be strictly adhered to in order to vest the Circuit Court with jurisdiction over the appeal. However, unlike the Appellate Court, the Supreme Court majority found the word "commence" in the statute ambiguous. The next step after the plain language, of course, is the legislative history. There was nothing in the legislative history suggesting an intent to apply the mailbox rule; but then again, there was nothing suggesting an intent to disallow it either.

So the Court turned to the earliest decisions applying the mailbox rule and contrasted them with cases refusing to apply the rule. The court concluded that the cases were explained by a simple distinction: when an act began an entirely new proceeding, the mailbox rule never applied. When it merely continued a proceeding, the mailbox rule did apply. That rule resolved the problem at hand: judicial review of a workers' compensation decision was clearly the continuation of an ongoing proceeding, not the beginning of a new one. So - particularly given that there was no issue of lack of notice of the claim, given that it had already passed through the arbitrator and the Commission -- there was no reason the mailbox rule couldn't apply, just as it did at the first step (appeal of the arbitrator's decision to the Commission) and third step (appeal from the Circuit Court to the Appellate Court) of the process. The fact that a statute governed the issue made no difference; the majority observed that courts had made no distinction between statutes and rules in determining when the rule did and didn't apply. The majority conceded that the legislature had not expressly imposed the mailbox rule in Section 19(f)(1), but observed that the legislature hadn't disallowed its application either.

The problem with the majority's analysis, Justice Freeman wrote, was that it entirely rested on cases which did not concern the Workers' Compensation Act. Although there were no cases under the Act directly on point, Justice Freeman discussed several cases applying the former requirement that a party exhibit proof of payment of the probable cost of the record within twenty days of receiving notice in order to vest the Circuit Court with jurisdiction over the appeal. Given that the courts had dismissed several appeals where this step was not timely completed, Justice Freeman concluded that judicial review of a Commission decision is commenced when the request for issuance of summons and  attorney's affidavit is actually received and file-stamped by the clerk, and that the mailbox rule should therefore not apply.

Illinois Supreme Court to Decide Constitutional Challenge to Parental Notice of Abortion Act on Thursday

The Illinois Supreme Court has announced that on Thursday morning, it will hand down its decision in Hope Clinic for Women v. Adams. Hope Clinic is a challenge to the constitutionality of the Illinois Parental Notice of Abortion Act. Because the challenge in Hope Clinic was brought solely under the Illinois constitution, the case raises interesting issues of the degree to which the state constitutional rights of privacy and gender equality are coextensive with, or perhaps broader than, Federal constitutional rights. Our detailed discussion and analysis of the facts and lower court rulings in Hope Clinic is here. Our report on the oral argument is here, and the video of the oral argument is here.

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Illinois Supreme Court: The Questions Log Halfway Through 2013

With the Illinois Supreme Court halfway through its oral argument schedule for 2013 – three dockets down, three to go, beginning with September in Chicago – it’s time to take another look at the questions log.

In the first three terms, the Court has heard argument in 16 civil cases. Questioning has varied widely from case to case, from lows in the January term of 8 each in DeHart v. DeHart and Russell v. SNFA to highs in the May term of 40 in Relf v. Shatayeva and 51 in Board of Education of Peoria School Dist. No. 150 v. Peoria Federation of Support Staff. Interestingly, the Court seems to be becoming more active with each passing term, averaging 14.6 questions per argument in January, 21.5 in March and 34 questions per argument in May. Nine of the sixteen cases are decided, but there’s little indication so far of a convincing correlation between how active a Justice is during the questioning and whether that Justice will wind up writing an opinion on the case. So far, in only three of the nine cases has the most active questioner written the majority opinion. In none of the remaining six decided cases has the most active Justice written a special concurrence or dissent. In the first sixteen cases of the year, five of the seven Justices have ranked as the most active questioner on the Court in at least one case.

Halfway through 2013, here’s how the question log stands.  The numbers in parentheses show how many times that Justice has been the first questioner during each phase of the arguments.

 

Burke

Garman

Freeman

Kilbride

Thomas

Karmeier

Theis

Appellant

20 (1)

23 (4)

30 (5)

11

52 (5)

25 (1)

25 (2)

Appellee

23 (2)

19 (2)

8 (1)

10 (1)

26 (5)

19 (2)

29 (1)

Rebuttal

0

2 (1)

1 (1)

1

20 (3)

10 (3)

17 (1)

Total

43 (3)

44 (7)

39 (7)

22 (1)

98 (13)

54 (6)

71 (4)

Illinois Supreme Court Extends Harris Tort Immunity to Privately Owned Ambulances

Late last week, the Illinois Supreme Court handed down its opinion in Wilkins v. Williams, holding that the state Emergency Medical Services Act makes the private owner and driver of an ambulance immune from tort liability for any motor vehicle accident occurring while they are rendering services. Our detailed summary of Wilkins, including the lower court rulings, is here. Our report on the oral argument is here.

Wilkins was a sequel to Harris v. Thompson, which the Court handed down last June. In Harris, the Court held that government entities and public employees operating emergency vehicles were immune from liability for motor vehicle accidents pursuant to the Local Governmental and Governmental Employees Tort Immunity Act. The Act provides that public entities and their employees cannot 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.” In so holding, the Court held that the Tort Immunity Act trumped language in the Vehicle Code imposing “the duty of driving with due regard for the safety of all persons” on drivers of emergency vehicles.

Wilkins involves nearly identical facts: an ambulance on a non-emergency run collides with another vehicle, injuring the driver. But in Wilkins, the ambulance was privately owned, so instead of the Tort Immunity Act, we’re looking at a nearly identical provision in the Emergency Medical Services Act: no person 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). The trial court in Wilkins tossed the case on summary judgment based on the EMS Act, but the Appellate Court reversed, finding that the EMS Act applied only to negligence claims by patients, rather than by third-parties.

The same six Justices who comprised the Harris majority reversed the Appellate Court, finding that the EMS Act immunized the defendants. In an opinion by Justice Robert R. Thomas, the Court rejected the Appellate Court’s view that the EMS Act immunity did not extend to alleged negligence involving third parties. Although the statute doesn’t specifically mention injuries to third parties, it speaks in broad terms – “shall not be civilly liable” – without limitation. Since the legislature didn’t carve out third party drivers of other vehicles from the statute, the courts lacked any power to do so, the Court found. Indeed, any such construction would result in an absurdity, the Court noted: an unrelated third party could recover for simple negligence, while the patient actually being treated (or transported) in the ambulance would be limited to recovery for willful and wanton misconduct.

Once that was settled, the case became a straightforward application of Harris. Just as the Court had found no conflict in Harris between the Tort Immunity Act and the Vehicle Code, the Wilkins Court found none between the EMS Act and the Vehicle Code. The Vehicle Code imposed a duty of care. Without such a duty, any potential negligence claim would have been stopped in its tracks. Only after finding a duty does the analysis proceed to the separate question of whether any immunities apply, and the EMS Act kicks in. Since the EMS Act applied to the defendants, the negligence suit was barred.

Just as he had earlier in Harris, Chief Justice Thomas L. Kilbride dissented. The Chief Justice argued that there was a “clear conflict” between the EMS Act and the Vehicle Code, and as the more specific statute, the Vehicle Code should prevail.

Are Union Members Who Travel to Reach a Distant Job Site "Traveling Employees" Under Workers Comp?

In the final days of the May term, the Illinois Supreme Court allowed petitions for leave to appeal in five new civil cases. Our preview of the new cases concludes with Venture-Newberg Perini Stone & Webster v. Illinois Workers’ Compensation Commission. Venture-Newberg poses the following question: when is a union pipefitter who accepts a short-term job too far from home to commute a “traveling employee” entitled to workers’ compensation benefits for injuries received while traveling to work?

The employer in Venture-Newberg is a contractor hired to perform maintenance and repair work at a nuclear plant in Cordova, Illinois, more than 200 miles from Springfield. The union local for the Cordova region was unable to fill all the available jobs, so the openings were posted in other union halls, including the union local in Springfield where the claimant was a member. The claimant bid on the job and was hired; he found lodging about thirty miles from Cordova for the duration of the job, which was only scheduled to be a few weeks. The claimant was injured early on the second day of work while traveling from his lodging to the plant.

The general rule in workers’ compensation law is that injuries occurring while the employee is commuting to or from work do not arise out of and in the course of employment and are therefore not compensable. The arbitrator initially concluded that none of the exceptions to that rule applied and recommended that the claim be denied, but the Workers’ Compensation Commission reversed.

The Commission found that two exceptions to the general rule were applicable. First, the Commission held that the claimant was injured in the course of employment because the course or method of travel was determined by the exigencies of the claimant's job rather than the claimant’s personal preference about where to live. Second, the Commission found that the claimant was a traveling employee: “one who is required to travel away from his employer’s premises in order to perform his job.” On administrative review, the Sangamon County Circuit Court rejected the Commission’s conclusions and set aside the decision.

During the hearing, the claimant had testified that his understanding was that the employer generally preferred that employees be within an hour of the job site so that they could respond to emergencies requiring them to report early or stay late. He acknowledged that the employer had dictated neither the specific place where he should stay or the route he should take to the plant, and that he was not called into work early on the day of the accident. A fellow employee testified that although the employer had never requested that employees reside near the job site, it would be difficult to work a 12-hour shift and be available for emergencies after driving 200 miles each way.

The Appellate Court concluded that the claimant was a traveling employee for two reasons: (1) he was assigned to work at a nuclear power plant 200 miles from his home; and (2) the premises were not those of his employer. Further, the Court found that the claimant's conduct in finding overnight lodging should have been reasonably anticipated by his employer, given that the claimant was recruited to work more than 200 miles from his home. For these reasons, the claimant's commuting injury arose out of and in the course of his employment, according to the Court.

Justice Hudson dissented, joined by Justice Turner. The dissenters noted that under the majority's rationale, "everyone hired at the Cordova plant on a temporary basis, even individuals residing in close proximity to the plant, would arguably became a traveling employee." The dissenters argued that the traveling employee exception was inapplicable since the employee had not worked for the employer for an extended period of time. The dissenters argued that when a temporary employee is assigned to work at only one location for a limited time, the work site becomes the employer's premises for purposes of the traveling employee exception. Finally, the dissenting justices argued that the exigency exception was inapplicable, since the employer exercised insufficient control over the employee's lodging and method of transportation to work.

Illinois Supreme Court to Review Jurisdiction of Circuit Courts Over Pension Disputes

In the closing days of its May term, the Illinois Supreme Court allowed petitions for leave to appeal in five new civil cases. Our previews of those cases continue with People ex rel. Madigan v. Burge, a case which poses a jurisdictional question of potentially great importance: may the Attorney General challenge the actions of the Police Pension Board through a separate lawsuit in the Circuit Court, or are the Board’s actions subject to review only by routine administrative review?

Burge arises from a notorious case a few years ago involving a retired Chicago police officer. The officer was widely believed to have sanctioned and participated in the abuse and torture of arrestees in order to extract confessions. In 2010, the officer was convicted of two counts of obstruction of justice and one of perjury. The civil case arose from allegations that in responding to civil discovery, the officer had lied about his knowledge of abuse and torture of arrestees. The officer was sentenced to 54 months in prison.

Section 5-227 of the Pension Code provides that pension benefits may not be paid to anyone “convicted of any felony relating to or arising out of or in connection with his service as a policeman.”  The Board of Trustees of the Retirement Board of the Policemen’s Annuity and Benefit Fund held an evidentiary hearing to determine whether Section 5-227 barred any further pension payments to the imprisoned officer. At the conclusion of the hearing, the Board split 4-4 on whether to terminate payments to the officer: the four city-appointed trustees voting to terminate, the four trustees elected by the police officer participants in the pension fund voting to continue payments. The Pension Board concluded that a tie vote meant that benefits would continue, and issued a decision so holding.

Rather than seeking administrative review of the decision, the Attorney General sued the Board, seeking an injunction to halt the payments pursuant to section 5-227. The Attorney General cited section 1-115(b) of the Pension Code, which authorizes the Attorney General to sue to enjoin any practice which violates the Code, as giving standing for her suit. Both the Pension Board and the officer himself moved to dismiss the complaint, and the Circuit Court granted the motion.

The Appellate Court (First District, Sixth Division) reversed. The Court pointed out that the jurisdiction of the Circuit Courts was derived from the Illinois constitution, and as a result, could be limited or ousted only by express statutory language. Section 5-189 of the Pension Code provides that the Board has exclusive original jurisdiction over all matters “relating to or affecting the fund, including . . . all claims for annuities, pensions, benefits or refunds.” However, the Court noted, the statute said nothing about depriving the courts of jurisdiction over Section 5-227 suits by the Attorney General. Accordingly, the Circuit Court had jurisdiction to consider the Attorney General’s dec action.

The majority went on to briefly discuss the merits of the Pension Board’s decision. The Court noted that according to Section 5-182 of the Pension Code, no benefits could be paid out except on a majority vote of the Board. Since continuing the officer’s benefits had only received four of eight votes – obviously not a majority – the Board should have stopped the payments, according to the majority.

Justice Rodolfo Garcia specially concurred. Although Justice Garcia agreed with the principal conclusion of the majority opinion – that the Circuit Court had authority to hear the Attorney General’s declaratory judgment action – he found the suggestion that the Pension Code was violated by continuing payments following the 4-4 vote untenable. The only possible basis for the Attorney General’s claim, Justice Garcia argued, was the proposition that the officer’s felony conviction had in fact arisen from or in connection with his police service, making section 5-227 applicable.

To E-File or Not? Misfiled Notice of Appeal Not Necessarily Fatal, Illinois Supreme Court Rules

Like most states, Illinois is in the early stages of transitioning to an e-filing system in its state courts. With new rules come new problems for litigators: does this case qualify for e-filing? Is e-filing of this document mandatory, permissive, or barred?

Last week, a divided Illinois Supreme Court handed down its first major decision on the perils of e-filing. In an opinion by Justice Mary Jane Theis, the Court held 4-3 that erroneously e-filing a notice of appeal in a case that didn’t qualify for e-filing in the first place was not sufficient to deprive the Appellate Court of jurisdiction over the appeal. Our detailed summary of the facts and lower court opinions in VC&M, Ltd. v. Andrews is here. Our report on the oral argument is here.

VC&M began with a real estate dispute. In the midst of a divorce, the defendants signed a contract with the plaintiff to list their residence for sale. Plaintiff found a buyer who made an offer for the house. The defendants rejected the offer, declined to make a counter offer, and not long after, took the house off the market, with the wife allegedly saying she would buy out the husband and continue living there. Not long after the listing agreement expired, the Circuit Court entered a judgment of divorce incorporating a property settlement. The settlement valued the marital home at $5 more than the rejected offer.

So the disappointed real estate agent sued for the lost commission. The defendants moved to dismiss, and the Circuit Court granted the motion.

And that’s where the trouble started. Thirty days after dismissal, the plaintiff e-filed a motion for reconsideration. Thirty days after that motion was denied, the plaintiff e-filed a notice of appeal.

But the thing was, although the case appeared to be technically eligible, the plaintiff had never taken any of the steps required by the local court rules to qualify the case for e-filing. So did the misfiled motion for reconsideration toll the time for filing the notice of appeal? And did the misfiled notice of appeal accomplish anything at all? The Second District of Appellate Court answered both questions with a resounding “no,” dismissing the appeal.

The Supreme Court reversed. Neither the defendants nor the Appellate Court had pointed out any authority holding that non-compliance with a rule governing how a filing is delivered to the court rose to the level of a jurisdictional defect, the Court held. In fact, the Court concluded, what little authority exists points to the opposite conclusion, citing Ragan v. Columbia Mutual Insurance Co., Besic v. Lattof Chevrolet, Inc. and Cedzidlo v. Marriott International. Since the motion for reconsideration was merely defective, rather than a complete nullity, the motion tolled the plaintiff’s time to appeal. This was particularly true given that the defendants had not pointed to any prejudice arising from the plaintiff’s rules violation.

Nor was the e-filing of plaintiff’s notice of appeal fatal, the Court held. Plaintiff had argued that the rule’s language barring e-filing of “appellate . . . documents” didn’t apply to a notice of appeal, since the notice is filed in the trial court, but the majority disagreed. Nevertheless, particularly since during the transitional period, the clerk was maintaining a parallel paper file of all filed pleadings, the misfiled notice of appeal was sufficient to confer jurisdiction on the Appellate Court.

Justice Robert R. Thomas dissented from the Court’s “conclusion and analysis,” joined by Chief Justice Thomas L. Kilbride and Justice Lloyd A. Karmeier. The misfiled pleadings were a nullity, Justice Thomas concluded, ineffective for any purpose. Moreover, the dissenters argued, the presence or absence of prejudice had never been regarded as sufficient to excuse a jurisdictional defect. “Under the majority’s analysis, parties may now disregard local court rules” and “improperly file a document electronically,” and be subject to no consequences other than sanctions, Justice Thomas wrote.

No Punitive Damages Awards by Human Rights Commission, Illinois Supreme Court Rules

Late last week, in a unanimous opinion by Justice Rita Garman, the Illinois Supreme Court held that the Cook County Commission on Human Rights lacks any authority to award punitive damages. Our detailed summary of the facts and administrative and lower court rulings in Crittenden v. Cook County Commission on Human Rights is here. Our report on the oral argument is here.

Crittenden arises from a sexual harassment claim filed with the Cook County Commission on Human Rights by a bartender working at a Cook County bar. After a contentious hearing, a hearing officer recommended that the employee receive an award of lost wages, compensatory and punitive damages. The Commission adopted the hearing officer’s proposed order. The Circuit Court denied certiorari, affirming the administrative decision on liability and compensatory and punitive damages. The Appellate Court (First District, Sixth Division) affirmed the Commission on liability and compensatory damages, but reversed on punitive damages. According to the Appellate Court, it made no difference whether the challenged conduct merited an award of punitive damages, since the Commission lacked the authority to award them in the first place. In so holding, the Appellate Court refused to follow Page v. City of Chicago, in which Division One of the First District had held that the Chicago Human Rights Ordinance does permit awards of punitive damages by the Commission.

The Supreme Court affirmed the First District. Although the Commission argued that it had the power to award punitive damages pursuant to Cook County’s broad home rule authority, the Supreme Court disagreed. As an administrative agency, the Commission had no inherent power: its powers were limited to those granted to it by the legislature, and any actions it takes must be authorized by statute. According to the Human Rights Ordinance, the Commission may grant a wide range of forms of relief, including cease and desist orders, awards of damages and costs and fees, and orders to rehire. The Commission pointed out that the list of permissible forms of relief wasn’t exclusive, but the Court held that that made no difference. As an administrative agency, the Commission was without common law authority, and therefore couldn’t award punitive damages without express language saying so. The Court pointed out that a number of different state statutes expressly authorized administrative agencies to award punitive damages, and finding such authority merely by implication was inconsistent with the view that punitive damages are not favored in the law. Rejecting Page, the Court declined to find that policy considerations required implying the power to award punitive damages, specifically pointing again to the disfavored status of punitive damages in the law, as well as to the risks involved in assessing punitive damages when the defendant is merely vicariously liable for the actions of an employee. Finding no basis for deviating from the established rule that administrative agencies have only the power they are expressly given, the Court held that the Cook County Commission on Human Rights lacks any power to award punitive damages.

Does The Income Withholding for Support Act Require Strict Compliance?

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.

Illinois Not Liable for Elected Officials' Attorney Fees for Intentional, Willful or Wanton Misconduct

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.

Argument Report: Early Retirement Incentives for Municipal Pensions

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.

Illinois Supreme Court to Decide Interplay Between Dram Shop Act and Insurance Guaranty Fund Act

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.

Liquidated Damages For Junk Faxes Are Insurable in Illinois

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. LayThe 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.

Argument Report: Illinois Supreme Court Debates Facial Challenge to Illinois' Click-Through Act

On the final argument day of the May term, the Illinois Supreme Court appeared troubled by the limitations of the record in Performance Marketing Association, Inc. v. Hamer. PMA involves the question of whether Illinois' "Click-Through" Tax Act -- which imposes a duty to collect sales taxes under certain circumstances on out-of-state retailers -- facially violates either the Commerce Clause or the Supremacy Clause of the U.S. Constitution. Our detailed preview of the facts and lower court holding in PMA is here. The video and audio of the argument is available here.

PMA arises from an amendment to the Illinois Use Tax Act in which the Illinois Legislature attempted to capture the millions in sales taxes it purportedly loses due to internet purchases by Illinois residents from out-of-state retailers.  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 Cook County Circuit Court struck down the Click-Through Act on two grounds, finding that it violated the commerce clause for lack of a specific nexus to Illinois, as well as being preempted by the Internet Tax Freedom Act. The Circuit Court's summary judgment order went directly to the Supreme Court for review.

Counsel for the state began by arguing that the statute is facially constitutional. Justice Thomas asked whether, if the Court found that the Act was preempted, it would still have to reach the commerce clause holding. Counsel responded that since preemption is a constitutional holding, the doctrine of constitutional avoidance wouldn't come into play. Justice Thomas pointed out that a bill is currently pending in Congress which is directly relevant to the issues. Counsel responded that while the pending statute might moot some of the case, it might not moot all issues. "Substantial nexus" -- the constitutional standard -- wasn't a tough standard to meet, counsel argued. The presence of in-state representatives soliciting sales on a merchant's behalf has been enough to trigger tax liability for at least half a century. Justice Theis pointed out that the statute uses the word "referral," and surely that's what the Court should be looking at and interpreting. Counsel agreed, saying that the statute anticipates the presence of an instate agent who is actively trying to maximize sales. Justice Theis asked counsel to describe the relationship between the out-of-state retailer, the referring site and the customer. Counsel responded that an in-state website solicits sales for an out-of-state retailer, offering coupons or discounts to customers. Justice Theis asked where the coupons come from, and counsel responded that the relationship essentially amounts to the in-state referring site offering to share its commission on the sale with the in-state customer. Justice Theis asked what the stipulated facts suggested that these referring websites do: how does the Court know what the universe of websites involved are. Counsel responded that this illustrates the problem with a facial challenge; there are many types of relationships, and all must be non-taxable for a facial challenge to succeed. Justice Burke asked whether, if a customer goes to a typical in-state site, the site buys the product from the retailer on her behalf, or the customer buys it herself? Counsel responded that the customer goes directly to the out-of-state retailer's site; if the retailer has an Illinois presence, it pays use tax, if it doesn't, it doesn't. Justice Theis again asked counsel to explain what the in-state referrers do so that the Court could determine whether it constitutes a nexus. Counsel pointed the Court to a newspaper article in the stipulated facts, which explains that most Illinois-based referral agents make money from commissions and advertising. Justice Thomas asked whether a finding that the Act is constitutional would eliminate the need for the use tax line on the Illinois income tax form. Counsel responded that it wouldn't necessarily. Turning to the Internet Tax Freedom Act, Justice Thomas suggested that Congress intended to put a moratorium on state use taxes on internet purchases while it sorted out the situation. Counsel disagreed, arguing that if Congress had wanted to bar such taxes, it would have simply done so. In fact, Congress merely barred taxes which discriminate against internet purchases as compared to brick-and-mortar-merchant purchases. Justice Freeman asked counsel whether a mere link on a website constituted solicitation, if the in-state referrer takes no further action seeking to stimulate sales. Counsel responded that perhaps not; the statute assumes more than that. Chief Justice Kilbride asked what the factual activity was that created a substantial taxable nexus with Illinois. Counsel responded that it was the contract with the in-state referrer, and the passing of a customer through the link to the out-of-state retailer's site.

Counsel for PMA began by arguing that the Court should find preemption and avoid the Commerce Clause issue entirely in order to wait for Congress to provide a uniform nationwide standard. Justice Burke asked whether it was necessary for the Circuit Court to resolve the Commerce Clause issue after finding preemption. Agreeing with counsel for the state, counsel responded that both were constitutional issues, so the doctrine of constitutional avoidance wouldn't counsel avoiding one or the other. Counsel then explained that under the statute, only four criteria are necessary to make a taxable event: a referral contract, a web link, commissions, and receipts of $10,000 per year by the in-state entity. Whether or not some referring sites do more, the only question before the Court was whether this is enough. No court has so found, according to counsel. Justice Theis asked whether the case merely posed the narrow statutory interpretation question of what is meant by a referral. Counsel responded that the parties did not disagree about what a referral is. Justice Theis suggested an example: a customer sees a picture, clicks on it, and is taken to an out-of-state website to make a purchase. Was that all that was needed, meaning that coupons, promotional codes, sharing commissions and benefits for the consumer were irrelevant? Counsel responded that if an in-state referrer met the four criteria of the statute, nothing more was required. Some companies may do more, but such activities are irrelevant under the statute: only the four criteria matter. Justice Theis pointed out that a "referral" under the statute could mean many things under the statute for purposes of a facial challenge. Counsel responded that a "referral" was merely a click on a link - nothing else mattered. Continuing, counsel pointed out that the Internet Tax Freedom Act provides that internet transactions can't be treated differently than physical transactions. Justice Thomas pointed out that the state was arguing that there was no discrimination against electronic transactions here. Counsel responded that he didn't know what facts such a conclusion could be based on. Counsel concluded his argument by explaining that PMA represents intermediaries in the click-through relationship: the in-state referral agent. Its members will not be taxed if the statute is upheld; they are merely the innocent victims, thousands of which have had their referral contracts cancelled by out-of-state retailers. The issue would be better left to Congress to resolve, according to counsel.

In rebuttal, Justice Thomas asked counsel for the state how the statute qualified as non-discriminatory. Counsel argued that print-based performance marketing might create a taxable event too. If there are entities which the statute could constitutionally apply to, counsel concluded, then a facial challenge must fail. Since the referral relationships effectively created an in-state sales force for out-of-state retailers, that should be enough to trigger taxation.

Lifetime Lump Sum Workers' Comp Settlement Fully Allocable for Child Support

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 WolfeIn 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.

Argument Report: Illinois Supreme Court Debates School Security Officers' Right to Strike

On the final argument day of the May term, the Illinois Supreme heard 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. Board of Education involves 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 proper state administrative board to take jurisdiction over an unfair labor practice claim. Our detailed preview of the facts and lower court holding in Board of Education is here. The video and audio of the argument is available here.

According to the complaint, the plaintiff is the only school district in Illinois which employs its own security officers. When the latest union contract expired in mid-2010, disputes arose over the timing of the negotiations and over the state law which governed discussions.

The Public Labor Relations Act regulates labor relations between most public-sector employees and their employers. School districts and their employees are (for the most part) governed by the Educational Labor Relations Act. In 2010, the legislature amended the PLRB to bring "a school district in the employment of peace officers in its own police department in existence on the effective date of this amendatory act" back within the coverage of the Act. Because the class opened and closed on a single day, the 2010 amendment allegedly applies to one and only one school district -- Peoria. This potentially makes a considerable difference, since security personnel, peace officers and firefighters subject to the PLRA are prohibited from striking. Employees subject to the ELRA are, on the other hand, generally allowed to strike.

The plaintiff school district filed a two-count complaint, seeking declarations that (1) the 2010 amendment to the PLRA was unconstitutional special legislation; and (2) its negotiations with the security officers' union was governed by the ELRA. The Circuit Court dismissed for failure to state a claim, but the Appellate Court reversed. According to the Appellate Court, the 2010 amendment lacked a rational basis because the class of school districts subject to the amendment opened and closed on a single day. The Court further held that the plaintiff's second claim was analogous to a challenge to the board's jurisdiction, and therefore exempt from the requirement to exhaust administrative remedies.

Counsel for the administrative boards led off the argument. Justice Karmeier asked counsel whether the determination of whether the security officers were subject to the PLRA should be made by the Labor Relations Board, making the Appellate Court's remand to the Circuit Court for that determination improper. Counsel agreed that it should. Justice Karmeier asked whether the Boards' contention was that the constitutional challenge should be made before the Boards. Counsel responded that if the employees were not covered by the Act, the Appellate Court would not need to address constitutionality. Justice Karmeier asked whether the issue of constitutionality was properly before the Court, and if the 2010 amendment was unconstitutional, was the case concluded. Counsel responded that since there is no determination of what the employees at issue do, the issue of constitutionality might not be necessary for anyone to reach. The issues of what the employees do, what their job is, what their employment circumstances are, and applying those findings to the Act fall squarely within the Boards' expertise. Justice Karmeier asked counsel whether the Boards were asking that the case be sent back for administrative determination, and once that's done, the case could go to court for a finding of constitutionality. Counsel answered that the Circuit Court should not be determining whether the security officers were public employees. Justice Thomas pointed out that the School District seemed to be urging the Court to use its supervisory authority to decide the constitutional issue, whereas if the Court send the matter back for fact-finding, it wouldn't be deciding anything. Counsel agreed that instead of going through an orderly procedure, the case had arrived in an unusual procedural setting. Chief Justice Kilbride pointed out that since the Appellate Court hadn't actually reached the constitutional question, the issue wasn't squarely before the Court, and counsel agreed.

Counsel for the union followed, and encouraged the Court to act on the question of constitutionality. Justice Karmeier asked whether the fact that the legislature had made it impossible for any other school district to ever fall within the class created by the amendment created a constitutional concern. Counsel responded that it did not pursuant to Elementary School District No. 159 v. Schiller.

Counsel for the School District argued that the main issue before the Court was whether the 2010 amendment was special legislation. Justice Freeman commented that the question of whether the potentially effected employees were peace officers seemed to be fact based, falling within the expertise of the Labor Relations Board. Counsel responded that there was no genuine dispute as to whether the employees were peace officers. Chief Justice Kilbride asked counsel whether he was arguing that the School District had no authority to hire the officers. Counsel responded that the issue wasn't authority, but rather that the employees weren't police officers under the Act, meaning that jurisdiction moved to the Educational Labor Relations Board. Justice Karmeier asked whether counsel was arguing that the School District lacked authority to handle police officers, and therefore the employees couldn't be police officers by definition, making the issue not a genuine dispute of fact. Counsel agreed that the matter was a legal issue. Justice Theis asked what select group was relevant to the constitutional question. Counsel responded that the relevant group was peace officers employed by a school district on the effective date of the act. Justice Theis asked whether the relevant group was the police officers of the district, and counsel answered that the relevant group was the school district. Justice Theis asked how the legislation favored the school district. Counsel responded that it was because the security officers couldn't strike. Justice Theis asked how that favored the district. Counsel answered that it favored the district because other districts would have to endure a strike of their security officers, creating an issue of public safety. Justice Theis suggested that there wouldn't be a problem where the legislature found that arbitration and the right to strike were equivalent, but counsel answered that they weren't. Justice Theis asked how one got around the problem that the legislature had said they are equivalent; counsel answered that the legislature hadn't, the Attorney General had found they were. Justice Burke asked whether the union benefited by being subject to the Labor Relations Board rather that the Educational Labor Relations Board, and counsel responded that they did, since arbitration favors a smaller group. Justice Freeman pointed out again that the legislature had found that arbitration was comparable to the right to strike, and wondered how the Court could override that determination. Counsel responded that the legislature had made no such determination, and that the Act was special legislation. Justice Theis suggested that 5 ILCS 315/2 included such a determination. Counsel argued that the legislature had found the determinations alternatives, not equivalent.

Counsel for the Boards began rebuttal arguments. Justice Karmeier pointed out that if the Court either upheld the Act, or refused to address the issue, opposing counsel argued that the question of whether the employees were police officers was one of law. Counsel responded that there was no factual record of what the officers did.

Counsel for the union concluded the argument. Justice Thomas asked whether any case law held that a statute could be unconstitutional special legislation because it conferred a benefit that the plaintiff didn't want. Counsel responded that there was none, so far as he was aware. Justice Garman asked what the significance was of the legislation closing the class the day it was passed - if the legislature had public interests at heart, what would justify that statute? Counsel responded that there was nothing in the statute indicating that the legislature intended to close the class on that date.

Argument Report: What Happens When The Plaintiff Sues a Defendant Who Has Died?

On the first argument day of the May term, the Justices of the Illinois Supreme Court actively questioned both sides in the first civil case on the docket, Relf v. Shateyeva. Relf involves an unusual question: is a complaint against a deceased defendant barred if the plaintiff doesn't name the defendant's personal representative? Our detailed preview of the facts and lower court holding in Relf is here. The video and audio of the argument is available here.

The plaintiff sued the defendant for injuries received in an automobile accident. The problem was, the defendant had died long before the complaint was filed (only three months after the accident). Relf involves a conflict between subsections (b) and (c) of 735 ILCS 5/13-209.

Subsection (b) provides that "if a person against whom an action may be brought dies before the expiration of the time limited for the commencement thereof, and the cause of action survives, and is not otherwise barred," the plaintiff may sue the defendant's personal representative within six months after the decedent's death, or "if no petition has been filed for letters of office for the deceased's estate," the court may appoint a special representative following notice to the decedent's heirs or legatees.

Subsection (c), on the other hand, provides that "if a party commences an action against a deceased person whose death is unknown to the party . . . the action may be commenced against the deceased person's personal representative" if, among other things, the plaintiff moves with reasonable diligence to substitute and serve the personal representative. If process is served more than 6 months after the issuance of letters of office, "liability of the estate is limited as to recovery to the extent the estate is protected by liability insurance."

When the plaintiff discovered the defendant had passed away, her counsel asked that a special administrator be appointed -- who turned out to be a legal assistant in plaintiff's counsel's office -- and for leave to amend her complaint to name the special administrator as defendant. The defendant responded by moving to dismiss on the grounds that the plaintiff hadn't named the decedent's personal representative, making the complaint void; the Circuit Court granted the motion, holding that the complaint was barred by Section 13-209(b). The Appellate Court (First District, Second Division) reversed, holding that since the plaintiff was unaware of the defendant's death when she filed, the action was governed by Section 13-209(c), not subsection (b).

Counsel for the defendant opened the argument. Justice Freeman asked counsel how subsections (b) and (c) of the statute should be read together. Counsel responded that subsection (b) applied when the defendant's death was known prior to filing, and (c) applied when the plaintiff was unaware that the defendant had died. Nevertheless, counsel argued, the two subsections should not be read entirely separately. Justice Burke asked counsel what the applicable procedure was to allow a plaintiff to have a personal representative appointed. Counsel responded that the Appellate Court hadn't addressed that issue. She contrasted the decision with the Third District's decision in Keller v. WalkerThere, the Appellate Court held that the statute should be read as a whole, and subsection (b) was instructive as to how a personal representative should be appointed in connection with subsection (c). Justice Garman asked counsel whether she thought the six month filing deadline in subsection (b) had any import for the case; counsel responded that subsection (b) was relevant only with respect to properly appointing a personal representative. Counsel pointed out that the decedent had had an open and active probate estate at the time the suit was filed, and there was no reason given in the record why the estate had not been located and the administrator appointed to defend the case. Justice Karmeier asked whether there is any import to the difference in language about personal representatives between the two subsections. Counsel responded by pointing out that the statute uses different terms: a "personal representative" is the deceased's appointed representative, while a "special representative" is someone not associated with the defendant. The distinction in the language is purposeful, defendant argued. Justice Theis asked what the prejudice is from naming a special representative rather than a personal representative, since if the case returned to the trial court, the only asset at risk (because of the passage of time) would be the estate's insurance policy. Counsel responded that lack of notice of the suit was the prejudice. Justice Theis asked whether the lack of notice was a jurisdictional question. Counsel again argued that the deceased's heirs have a right to know about the suit, and pointed out that the plaintiff had never asked for leave to name the personal representative who was administering the estate. Justice Karmeier noted that under the circumstances, the case fell under subsection (c). Counsel agreed that plaintiff was not aware that the defendant was deceased when she filed suit, but subsection (b) was nevertheless relevant for identifying who the suit should be filed against. Indeed, the plaintiff seemed to agree, according to the defendant, since the plaintiff's motion at the trial court for leave to appoint a special administrator stated (incorrectly) that there was no probate estate. Justice Theis asked counsel whether she thought there was something objectionable about the legal assistant to plaintiff's counsel being named special administrator. Counsel conceded that some cases have allowed the practice, but suggested that there was something inherently wrong about it with an open probate estate.

Justice Karmeier began the argument of counsel for the plaintiff by asking whether there is any difference between a personal representative and a special representative. Counsel responded that Black's Law Dictionary defines "personal representative" as including a special representative. Justice Karmeier suggested that subsection (c) covered the situation, and if so, the plaintiff would be covered by serving the personal representative of the probate estate. So why appoint a special representative? Counsel responded that plaintiff was unable to locate the estate on the Cook County computer system, so a special administrator was chosen. Justice Karmeier asked counsel whether he was suggesting that a personal representative and a special representative were the same thing; counsel said that Black's Law Dictionary supported that view. If the legislature had wanted subsections (b) and (c) read together, it would have said so. The statute defines three categories, plaintiff argued: deceased plaintiffs in subsection (a), a defendant who plaintiff knows is dead in subsection (b), and a defendant who plaintiff does not know is dead in (c). Justice Garman asked why, if plaintiff discovers an open estate after appointing a special administrator, he or she shouldn't be required to serve the personal representative of the estate? Counsel responded that nothing in the statute required it. The defendant could have moved to substitute the personal representative at any time, but chose instead to move to dismiss. Justice Karmeier asked at what point the defendants had the opportunity to substitute given that they didn't know about the lawsuit until after a special representative was appointed. Counsel responded that plaintiffs served the special administrator, who tendered the complaint to the insurance company, who they appeared in the case. The insurer could have then substituted in the personal representative at any time.  Counsel argued once again that subsections (b) and (c) should be read separately, but Justice Garman pointed out that statutes were traditionally read as a whole to achieve consistency. Counsel responded that subsection (b) involved a class of litigants not present in this case. Justice Theis asked what difference it made whether the assets of the estate were at risk. Counsel responded that when the assets of the estate are at risk, notice becomes important, but the present case was well past that point.  Justice Karmeier asked whether, if the plaintiff had found the personal representative and appointed a special representative anyway, would that matter? Counsel responded that it wouldn't have made a difference. Justice Karmeier asked whether plaintiff's view was that she could appoint a special representative and simply bypass the personal representative. Counsel responded that a personal representative included a special representative. Subsection (c) is silent as to whether a party can have a special representative appointed when a personal representative was in place. Justice Karmeier asked how counsel explained away subsection (b)(2), which provides that a special representative may be appointed when no petition for letters of office has been filed. Counsel again argued that subsection (b) (2) applies to a different class of litigants. The legislature was specific in subsection (b) because the estate's assets were at risk. The legislature was silent, counsel argued, in subsection (c) because the estate was not at risk.

As the rebuttal argument began, Justice Thomas asked counsel to respond to plaintiff's comment that there would be no action absent the estate's insurance coverage. Counsel responded that it made no difference: the family and administrator nevertheless had the right to know about the suit. Justice Thomas mentioned the comment of plaintiff's counsel that defendant had made no attempt to substitute the personal representative; counsel asked why it should be the defendant's duty to do so. Justice Theis noted defendant's view that the estate's heirs have a right to know of the suit; even if that is so, why is the failure to name the personal representative a bar to the suit? Counsel responded that under the statute, when the personal representative is not named, the claim is barred. Justice Thomas asked whether the family might not say they didn't want to be substituted in as parties. Counsel responded that that was the family's choice. Justice Thomas pointed out that even if plaintiff had moved to amend, that might not have ended the matter - defendants might have insisted on proceeding with the motion to dismiss. Justice Thomas suggested that the question was ultimately of little consequence whether the Supreme Court agreed with the trial court or the Appellate Court. Counsel once again cited Keller v. Walker, and commented that although the point was a technicality, that wasn't dispositive. Justice Karmeier asked what happens if the Court agreed with the defendant - is the lawsuit over? Counsel said yes, because the plaintiff never asked to amend. Both the legislature and the Probate Act use "personal representative" and "special representative" in different senses, counsel argued. A mere lack of exposure to the estate's assets doesn't mean there is no prejudice to the defendant.

Illinois Supreme Court: A First Look at the Questions Log for 2013

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)

Argument Before Illinois Supreme Court in Performance Marketing Continued to Morning of May 22nd

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 22nd.

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.

Are "Click-Through" Internet Marketing Tax Laws Constitutional?

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.

Divided Supreme Court Upholds Chicago Condo Association Ordinance

Yesterday, the Illinois Supreme Court filed its long-awaited opinion in Palm v. 2800 Lake Shore Drive Condominium AssociationAlthough 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."

Illinois Supreme Court to Hear Five Civil Cases In May

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.

The Kilbride Court After Two Years: A Pragmatic and Collegial Team

(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. 

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Illinois Supreme Court to Decide Condominium Dispute on Thursday

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?

Illinois Supreme Court Intervenes in Politically Charged State Pension Battle

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.

Why Russell v. SNFA Matters

On Thursday morning, the Illinois Supreme Court filed its decision in Russell v. SNFAWe 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.

 

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The Illinois Supreme Court 2012: The Year in Review

(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.

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How Is an Appeal from the Certification of a Pollution Control Facility Brought?

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.

Is an Emergency Room Physician Protected From Liability By the Good Samaritan Act?

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.

How Late Can a Default on a Foreclosure Suit Be Vacated?

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.

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Illinois Supreme Court Declines to Decide the Question Presented in Boyar

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.

Illinois Supreme Court to File Opinion in Boyar on Thursday Morning

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.

Illinois Supreme Court Debates the Insurability of TCPA Federal Junk Fax Penalties

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.

Argument Report: When You're Hit By an Ambulance on a Non-Emergency Trip

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.

Argument Report: How Should a Workers' Compensation Settlement Be Handled in Calculating Child Support?

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.

Argument Report: The Constitutional Implications of Advance Payment Retainers and Divorce Claw-Back

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.

Illinois Supreme Court Holds Will's Language Can Suggest Lack of Capacity, and Adopts Cause of Action for Equitable Adoption

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.

Illinois Supreme Court Adopts Restrictive View of the Authority of Chicago Inspector General

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.

Argument Report: Illinois Supreme Court Considers Whether Cook County Commission on Human Rights Can Award Punitive Damages

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.

Illinois Supreme Court Will File Two New Civil Opinions on Thursday Morning

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.

A Busy Day of Civil Arguments at the Illinois Supreme Court

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