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

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

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

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

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

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

Image courtesy of Flickr by William Creswell (no changes).