The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Illinois Supreme Court Adopts Accelerated Schedule for Pension Law Appeal

By Kirk Jenkins on Posted in Illinois

The Illinois Supreme Court announced that the centerpiece of its civil docket for 2015, the State’s appeal from the Circuit Court’s order striking down public pension reform, will be heard on a “rocket docket” schedule. The State’s opening brief will be due January 12. The appellees’ brief is due February 16, and the State’s reply brief will be due February 27.  Oral argument will be heard during the March term, making it likely that a decision will be handed down before May 31.

For decades, while state employees have made their required contributions through payroll deductions, the State of Illinois has failed to adequately fund its five public pension systems. The result has been an enormous pension debt. Things turned especially ugly during the 2008-2009 recession, when unfunded liabilities and required state contributions escalated quickly while revenues to fund those contributions were plummeting. According to a definitive study of the problem, the five systems had around $84.21 billion in unfunded liabilities in 2012. The teachers system alone was $45.9 billion in the red.

On December 3, 2013, after years of acrimonious debate, the State finally adopted a comprehensive reform package. Through a combination of benefit cuts and funding guarantees, the bill was estimated to save the State around $160 billion over the next 30 years.

But there’s a problem – as readers of this blog will remember from Kanerva v. Weems, the Illinois Constitution has a pension protection clause (Art. XIII, Sec. 5):

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

In the weeks following Governor Quinn signing pension reform into law, five different lawsuits were filed challenging the constitutionality of the Act under the pension protection clause: Heaton v. Quinn (see here); Retired State Employees Association Retirees v. Quinn (see here); Illinois State Employees Association v. Board of Trustees of State Employees Retirement System of Illinois (see here); Harrison v. Quinn (see here); and State Universities Annuitants Association v. State Universities Retirement System (see here). All five suits were consolidated in Sangamon County Circuit Court.

The Act had at least five features which everyone concerned acknowledged amounted to a reduction in benefits: (1) changing the formula by which the 3% compounded automatic annual increases retirees were receiving would be calculated; (2) stopping the automatic annual increases on alternating years for newly retired employees; (3) changing the cap on pensionable salary of retirees; (4) raising the retirement age on a sliding scale depending on the employee’s age; and (5) changing the method for determining the effective rate of interest used to calculate pensions. The State argued that the Act was nevertheless constitutional because the legislature retained a sovereign or police power to act to avert a threatened financial disaster.

On November 21, 2014, the Sangamon County Circuit Court entered an order holding that the Act was unconstitutional on its face, and permanently enjoining enforcement. Illinois courts have repeatedly held, the Court found, that the pension protection clause has no exceptions. The Court found that the plain language of the clause said nothing about a retained sovereign or police power, and the courts could not add an exception that the voters hadn’t approved. Besides, the Court held, that Illinois courts had rejected several times before the notion that the State retained any power to diminish pensions.

The Court turned from there to the question of severability. The act provides that thirty-nine enumerated sections – including many of the provisions the Court struck down – were not severable, but that the Act was severable as a general proposition. The Court found that because the stricken parts of the act were important elements of a broad package imposing sweeping changes, nothing in the Act was several, meaning that the entire statute had to fall.

Since the Court struck down the statute, the appeal went straight to the Supreme Court. We’ll be writing often about the pension dispute as the pace of activity increases throughout the spring.

Image courtesy of Flickr by Alex Liivet (no changes).

Illinois Supreme Court Agrees to Decide Do Not Hire Dispute Between Teachers Union and Chicago Board of Education

By Kirk Jenkins on Posted in Illinois

 

In the closing days of its November term, the Illinois Supreme Court agreed to decide The Board of Education of the City of Chicago v. The Illinois Educational Labor Relations Board. Board of Education presents the following issue: did the Illinois Educational Labor Relations Board err in finding that the Chicago Board of Education was guilty of an unfair labor practice when it refused to arbitrate the Chicago Teachers Union’s grievances over the Board’s practice of placing “Do Not Hire” designations in the personnel filed of certain non-renewed probationary appointed teachers? Division FIve of the First District Appellate Court reversed the Board’s finding of an unfair labor practice, holding that the “Do Not Hire” notices were exempt from arbitration on the grounds that they fell within the Board’s managerial discretion.

The Union and the Board were parties to a Collective Bargaining Agreement from 2000 to 2012. The Board allegedly informed the Union in 2010 that it would begin placing a Do Not Hire designation in the files of probationary appointed teachers who had been nonrenewed twice, or given an unsatisfactory performance rating. The Union filed four grievances – three on behalf of individual nonrenewed teachers, and one on behalf of the entire class of nonrenewed teachers collectively – and demanded arbitration.

The Board refused to arbitrate, and the Union responded by filing an unfair labor practice charge. Following an investigation, the Executive Director of the Illinois Educational Labor Relations Board issued a complaint. The parties filed a stipulated record in lieu of a hearing, and in December 2012, the IELRB issued a written opinion and order finding that the Board of Education had violated Section 14(a)(1) of the Educational Labor Relations Act.

The Appellate Court reversed. A school district’s refusal to submit to binding arbitration under a Collective Bargaining Agreement is a violation of Section 14(a)(1) of the Act, which prohibits employers from “[interfering, restraining or coercing employees in the exercise of the rights guaranteed under this Act.” 115 ILCS 5/14(a)(1). However, refusal is considered an appropriate method to challenge the arbitrability of the issue. There are two grounds for challenging arbitrability: (1) there is no contractual agreement to arbitrate; or (2) the dispute is not arbitrable under Section 10(b) of the Act (115 ILCS 5/10(b)).

The court found that arbitration was part of the bargaining process, so a school district could not be required to arbitrate a matter that is excluded from the bargaining process. The first question involved in the analysis is whether an issue is one of wages, hours and terms and conditions of employment. If not, then the inquiry ends and the matter is not subject to bargaining. If so, then the Court next asks whether the matter is one of inherent managerial authority. If not, then the matter must be arbitrated. If so, then the court weighs the benefits of bargaining against the burden on the employer’s authority.

The Court concluded that the Do Not Hire designations ultimately went to hiring decisions, which are a matter of managerial discretion rather than wages, hours or terms and conditions of employment. Therefore, the matter was not subject to arbitration or bargaining. The Court found support for its conclusion in Section 10-22.4 of the Illinois School Code (105 ILCS 5/10-22.4), which provides that a district may dismiss a teacher whenever he or she “is not qualified to each, or whenever, in its opinion, the interests of the schools require it.” Since the grievances could not be arbitrated without conflicting with the Board’s statutory discretion under Section 10-22.4, the Court concluded that the matter was not arbitrable.

Presiding Justice Robert Gordon dissented. Although Justice Gordon agreed that the decision of whether the specific teachers at issue should be rehired was within the Board’s exclusive jurisdiction, he concluded that the issue of the Do Not Hire designations was separable from that question. Noting that the Collective Bargaining Agreement broadly defined a grievance as a “complaint involving a work situation,” he concluded that since the designations allegedly involved below-par work, the designations were an arbitrable matter.

We expect Board of Education to be decided in eight to ten months.

Image courtesy of Flickr by Stlan Rødven Elde (no changes).

Illinois Supreme Court Agrees to Decide Breadth of Condo Developer’s Tort Duties

By Kirk Jenkins on Posted in Illinois

 

In the closing days of its November term, the Illinois Supreme Court agreed to review a decision from Division 5 of the First District with potentially significant implications for developers: Henderson Square Condominium Association v. LAB Townhomes. Henderson Square poses several related questions about the marketing of condominium units and the breadth of a developer’s duties in the time between the units going on the market and the developer finally turning over control to an elected board of homeowners.

Henderson Square arose from a dispute over a new condominium development in Chicago. The plaintiffs sued various developers and certain individuals involved in the project. The complaint alleged that the defendant development companies entered into a contract with the City of Chicago to develop a mixed use project, including retail space, a parking structure, loft condominiums and townhouses. Prior to the completion of the project, a condominium association was established for the property pursuant to the Condominium Property Act. The individual defendants served as the initial managers of the project, and eventually turned over control to the first elected Board in 1996.

Plaintiffs claim that defendants began to market individual units in 1996, representing that the units would be habitable and free from defects. Plaintiffs further claimed that the defendant development companies sold the units through a form sales contract promising that the units would be constructed substantially in accordance with the plans and specifications. After the owners began to occupy the units, certain units began to experience water damage. The Board retained a restoration consultant to investigate. The consultant concluded that the workmanship in several areas of the project was very poor, and that the water problems would be very difficult, if not impossible, to remedy without substantial reconstruction of the units. A contractor hired to solve the problem confirmed the extent of the defects, as well as concluding that the defects couldn’t have been discovered without extensive testing and partial demolition of the units.

The plaintiffs sued for (1) breach of the implied warranty of habitability, (2) fraud, (3) negligence, (4) breach of Chicago Municipal Code Section 13-72-030, and (5) breach of fiduciary duty. The defendants filed a motion to dismiss counts I-III, arguing that the claims for breach of the implied warranty, fraud and negligence were time-barred. The trial court agreed and dismissed those claims with prejudice, also granting the plaintiffs leave to amend their remaining claims. The plaintiffs filed an amended complaint, re-pleading Counts I through III to preserve them for appeal, while adding additional facts with respect to Counts IV and V. Defendants filed a second motion to dismiss, arguing that Counts IV and V were both time-barred, and that Count IV – for breach of the Municipal Code – failed to state a claim. The trial court once again dismissed, holding that both counts were time-barred, and neither stated a claim.

The Appellate Court reversed.

The defendants argued that Counts IV and V were time-barred pursuant to Section 13-214 of the Code of Civil Procedure, 735 ILCS 5/13-214, which provides statutes of limitation and repose for real estate construction claims. The Appellate Court agreed, rejecting the plaintiffs’ argument that defendant’s liability was based not upon construction, but rather on breach of the duty to provide accurate information about the project. However, the Court further held that the fraud exception to the statutes applied, pursuant to which the statutes of limitation and repose do not apply to causes of action “arising out of fraudulent misrepresentations or to fraudulent concealment of causes of action.” 735 ILCS 5/13-214(e). The Court found that a dispute over defendants’ representations in marketing materials about insulation used in the project, combined with the defendants’ allegedly inadequate funding of reserves during the period they controlled the project, collectively amounted to a triable issue of fact regarding fraud.

The Court then turned to the question of whether plaintiffs had adequately stated causes of action under Counts IV and V. Count IV alleged violations of the Municipal Code through the making of allegedly false statements to prospective buyers regarding the project. The Court first rejected defendants’ claim that the Code did not provide a cause of action for damages. The Court held that the plaintiffs had adequately stated a claim, rejecting the trial court’s conclusion that the Code only covers statements about preexisting facts. The Court reversed with respect to Count V, breach of fiduciary duty, as well, rejecting the trial court’s conclusion that the defendants had no duty to adequately fund reserves during the period they controlled the board. Instead, the Court held that defendants had a duty to fund reserves sufficient to pay for all reasonably foreseeable repairs as of the time they turned over control. The Court rejected defendants’ argument that their duty to fund reserves was limited to the extent to which they still owned unsold units.

Justice Palmer specially concurred, emphasizing that it was only the broad language of the Municipal Code – which merely requires a false statement, rather than a false statement of fact – which led to the Court’s holding that plaintiffs had adequately pled a violation of the Municipal Code.

Image courtesy of Flickr by Maarten Heerlien (no changes).

The Whole Is the Sum of Its Parts: Illinois Supreme Court Upholds Service in Bettis

By Kirk Jenkins on Posted in Illinois

 

According to the Election Code, anyone wishing to get judicial review of a decision of an electoral board must “serve a copy of the petition upon the electoral board and other parties to the proceeding . . .”

But how do you do that – particularly when the electoral board has no permanent offices? That was the question facing the Illinois Supreme Court last month in Bettis v. Marsaglia. In an opinion by Justice Thomas for a six-Justice majority, the Court held that the petitioner had complied with the statute, vesting jurisdiction in the Circuit Court, by serving a copy of her petition on every member of the board. Our detailed summary of the underlying facts and lower court opinions in Bettis is here. Our report on the oral argument is here.

In November 2012, the school district adopted a resolution stating that it was going to issue two million dollars in working cash bonds. The petitioner filed a petition with the district, asking that the matter be referred to the voters. Two parties filed objections to the petition on various grounds, including that the sheets of the petition weren’t numbered or securely bound. The electoral board sustained the objections.

Petitioner filed a petition for judicial review. By certified mail, she served all three members of the electoral board, the counsel for the board, counsel for the objectors and the secretary for the district itself. The defendants moved to dismiss for lack of jurisdiction, arguing that the petitioner had failed to name and join the Board and its members. The court agreed and tossed the petition out of court. The Appellate Court affirmed on somewhat different grounds, concluding that the petitioner’s failure to serve the electoral board as an entity meant she hadn’t complied with the statute, and thus the lower court had never been vested with jurisdiction.

The Supreme Court reversed. The Court began with the question of mootness. Election petitions are good for one election only, and the election referred to in the petitioner’s petition had long since come and gone. Nevertheless, the Court held that two issues – whether the board must be served as an entity, and whether the board must be a named party to the review proceeding – qualified for review under the public interest exception to the mootness doctrine, which permits review of otherwise moot issues when the issue is of substantial public interest and likely to recur.

Turning to the statute, the Court commented that the issue was not one of strict versus substantial compliance. No one denied that strict compliance with the statute was necessary for jurisdiction to vest, but how did one strictly comply – how is “the board” served? After reviewing the split in the Appellate Court on the issue, the Court concluded that the statutory language was unclear and required construction.

The Court ultimately concluded that service on the individual members constituted service on the board for three reasons. First, requiring service on the board as an entity once the members have been served would be “entirely duplicative.” The Court observed that it would be hesitant to endorse a redundant requirement unless the statute plainly required it, and “we do not believe that it does.” Second, the Court cited Section 10-9(5) of the Code, 10ILCS 5/10-9(5), which defines the “board” as “the presiding officer of the school or community college district board . . . the secretary of the school or community college district board and the eligible elected school or community college board member who has the longest term of continuous service.” All those individuals had been served by the petitioner, the Court pointed out: “As petitioner states in her brief, she served everyone she could possibly think of to serve.”

Finally, the Court noted that ballot access is a “substantial right not lightly to be denied.” That consideration added extra weight, in the majority’s view, to its decision to choose an interpretation of the statute that simplified procedures.

The Court next turned to the defendants’ cross-appeal argument that the dismissal was proper because the petitioner failed to name the board as a party or attach a copy of the board’s decision to her petition. Although the districts of the Appellate Court are split on the question of whether the board must be named, the Court dealt with the issue in short order, holding that since the language of the Code didn’t require it, naming the board as a party to the review proceeding was unnecessary.

Justice Theis dissented. She argued that the language of the statute was perfectly clear, and the court had no right to add the word “members” to the statutory language requiring service on the “board.” Justice Theis pointed out that even in jurisdictions where the board has no permanent office, the Code requires that it meet either at the county courthouse or where the governing body of the school district meets. The petitioner could have served the electoral board at either place. Finally, Justice Theis disputed the majority’s view that allowing the petitioner to serve three individuals at their home addresses, rather than one entity at its meeting place, simplified procedure. Justice Theis concluded by inviting the legislature to amend the statute if the majority’s decision was not consistent with its intent.

Image courtesy of Flickr by Jasleen_Kaur (no changes).

Florida High Court Clarifies Harmless Error Standard in Civil Appeals

By on Posted in Florida

 

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This post updates the article posted on July 23, 2014. To view the earlier post, click here.

On November 13, 2014, the Florida Supreme Court answered the following certified question of great public importance in the negative: “In a civil appeal, shall error be held harmless where it is more likely than not that the error did not contribute to the judgment?”  See Special v. West Boca West Med. Ctr., No. SC11-2511.  To view the supreme court’s opinion click here.

The Estate of the Susan Special sued Dr. Ivo Baux, his related corporations, and West Boca Medical Center, Inc., alleging negligence in administering her anesthesia and in responding to her cardiopulmonary arrests during her cesarean delivery.  The defendants denied the allegations, claiming that her death was a result of amniotic fluid embolus, an allergic reaction caused by a mother’s blood mixing with amniotic fluid. Sitting en banc, the Fourth District held that the trial judge had abused his discretion by disallowing the estate’s cross-examination of a defense expert who testified as to the cause of death.  The main issue, therefore, was whether the denial of the cross-examination was harmless error.

The district court receded from the more stringent, outcome-determinative “but-for” test for harmless error.  Instead, the district court adopted a new standard, holding that error is harmless when the error more likely than not did not contribute to the judgment.  Applying this newly-adopted standard, the Fourth District affirmed the judgment below, concluding that it was more likely than not that disallowing the cross-examination of the defendant’s expert did not contribute to the jury’s verdict.  To view the Fourth District’s opinion, click here (reported at 79 So. 3d 755 (Fla. 4th DCA 2011)).

The supreme court disagreed with the district court and answered the certified question in the negative.  The supreme court adopted the harmless standard used in criminal cases stated in State v. DiGuilio, 491 So. 2d 1129 (Fla. 1986).  Adapted to the civil context, this harmless error test requires the beneficiary of the error to prove that the error complained of did not contribute to the verdict. Alternatively stated, the beneficiary of the error must prove that there is no reasonable possibility that the error complained of contributed to the verdict.  This standard focuses on the effect of the error on both the trier-of-fact and the result, rather than being result-oriented and focusing on the accuracy of the result or the weight of the evidence.

Applying this standard to the case, the Court concluded that “there is a reasonable possibility that certain errors by the trial court contributed to the verdict.”   It therefore reversed the judgment of the district court and remanded for a new trial.

Image courtesy of Flickr by Duncan Hull (no changes).

California Supreme Court Grants Review Over Scope of General and Specific Jurisdiction

By on Posted in Civil and Appellate Procedure

Following the restriction placed on general jurisdiction by the U.S. Supreme Court in Daimler AG v. Bauman (2014) ___ U.S. ___ [134 S.Ct. 746] (Daimler), the California Supreme Court will address the scope of general and specific jurisdiction. California is a target jurisdiction, and mass product cases often include more out-of-state plaintiffs than California residents. Bristol Myers v. Superior Court, is such a case, with Bristol Myers, itself a non-California resident, attempting to quash service by the non-California plaintiffs, who outnumbered California residents 575 to 84. The trial court found general jurisdiction over Bristol Myers based on its extensive California contacts. The Court of Appeal summarily denied Bristol Myers’ petition at the same time Daimler announced that general jurisdiction only applied where a corporation was “at home.” The California Supreme Court ordered further consideration of Bristol Myers, and, in light of Daimler, the Court of Appeal found no basis for general jurisdiction. The Court of Appeal opinion is here.

While not previously ruled on, the Court of Appeal then found specific jurisdiction over the non-resident claims. The court found that Bristol Myers had “purposefully directed” extensive sales activities at California, establishing “minimum contacts” regarding Plavix, the drug at issue. The court also found that the claims of the out-of-state plaintiffs were related to Bristol Myers’ activities in California, since they were the same claims regarding the same product as those brought by the California residents, for whom jurisdiction was conceded. The court cited various cases for the proposition that the critical focus was on the nexus between the defendant, the forum and the litigation, with the plaintiff’s residence only a secondary consideration. Ultimately, the test is whether the exercise of jurisdiction is reasonable and consistent with fair play and substantial justice, and the Court of Appeal found that it was.

Despite the apparent lack of a standing conflict among the courts of appeal, the California Supreme Court granted review on the issues of general and specific jurisdiction. Whether viewed as a relative burden on the limited resources of California courts, or from the concern of defendants trying to limit increasing forum-shopping opportunities by plaintiffs, this issue has significant consequences for mass tort litigation.

Image courtesy of Flicker by Teemu008 (no changes).

 

 

 

Illinois Supreme Court to Tackle Election Law and Sovereign Immunity on Thursday

By Kirk Jenkins on Posted in Illinois

The Illinois Supreme Court just announced that on Thursday morning, it will hand down decisions in two civil cases:

  • Bettis v. Marsaglia, No. 117050 – “Does 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 deprive the Circuit Court of jurisdiction over her administrative challenge?”
  • Leetaru v. The Board of Trustees of the University of Illinois, No. 117485 – “Does the Court of Claims have exclusive jurisdiction over a suit against the University of Illinois seeking an injunction requiring them to comply with their internal guidelines in connection with an academic investigation?”

Our detailed summary of the facts and lower court opinions in Bettis is here. Our report on the oral argument is here. Our preview of Leetaru is here. Our report on the oral argument in Leetaru is here.

As of Thursday morning, Bettis will have been on the advisement docket for 92 days, and Leetaru for 91 days. Year to date, the mean time from oral argument to decision for the Court’s unanimous civil decisions has been 97.1 days. The mean time from oral argument to decision for the Court’s non-unanimous civil decisions has been 214.2 days.

Image courtesy of Flickr by Anne Swoboda (no changes).

 

Illinois Supreme Court Agrees to Decide Whether Pension Board’s Disability Finding is Preclusive in Employee Benefits Act Proceedings

By Kirk Jenkins on Posted in Illinois

 

In the closing days of its November term, the Illinois Supreme Court agreed to decide whether a pension board’s finding that an officer is disabled for pension purposes is preclusive of the employer’s liability for health insurance premiums under the Public Safety Employees Act. In The Village of Vernon Hills v. Heelan, the Second District held that the answer was yes.

The defendant officer was injured in the line of duty in December 2009. During the year following the incident, the officer was paid his full salary by the village pursuant to the Public Employee Disability Act. He underwent one hip replacement in April 2010. His condition worsened, and the other hip was replaced in September 2010. He did not return to work after the second surgery. In August 2011, the Board of Trustees of the Police Pension Fund held that the officer qualified for a line-of-duty disability pension.

A month after the Board’s ruling, the village filed a complaint seeking a declaratory judgment that the officer was not entitled to health insurance benefits under the Public Safety Employees Act. In its complaint, the village alleged that the officer had not suffered a catastrophic injury in response to what he reasonably believed to be an emergency, as required by the Act. (820 ILCS 320/10.)

The village acknowledged the Supreme Court’s holding in Krohe v. City of Bloomington that a catastrophic injury under the Act was the same thing as in injury sufficient to result in a line-of-duty pension. The village argued that Krohe was factually distinguishable and wrongly decided. The officer counterclaimed seeking a declaratory judgment holding that the village was obligated to provide the health care premium benefits.

The officer filed a motion in limine to bar any testimony on the issue of whether he had suffered a catastrophic injury under the Act. The court granted the motion. Subsequently, the case proceeded to a bench trial. The village conceded Section 10(b) of the Act was satisfied. In light of the Court’s in limine order, the village made an offer of proof on the issue of catastrophic injury and emergency. The officer then moved for a directed finding on the village’s claim, which the court granted. The court subsequently found for the officer on his counterclaim as well.

After entry of judgment, the officer filed a motion for sanctions against the village under Supreme Court Rule 137, arguing that the village had brought its suit solely for purposes of harassment. The court denied the motion, finding that the village had brought its suit in good faith, arguing from the outset that it was seeking to change the law.

The Appellate Court affirmed, finding that Krohe controlled. Accordingly, the Board’s finding that the officer was injured in the line of duty and therefore entitled to a line-of-duty pension necessarily amounted to a finding that he sustained a catastrophic injury in responding to an emergency within the meaning of the Act.

The village argued that the issue was actually a matter of collateral estoppel, and since it wasn’t involved in the pension proceeding, the Board’s ruling was not preclusive. The Court rejected the village’s argument, concluding that the village was making a precluded collateral attack on the Board’s decision.

The officer cross-appealed from the trial court’s denial of his Rule 137 motion. The Appellate Court affirmed the trial court, noting that the village had made it clear from the outset that it was bringing a frontal challenge to Krohe in hopes of changing the law.

Justice McLaren dissented, arguing that the “findings of an administrative agency” could not be binding “on a trial court in a separate proceeding with different parties regarding matters that the administrative agency has no statutory authority to decide.”

We expect Village of Vernon Hills to be decided within eight to ten months.

Image courtesy of Flickr by Cyro A. Silva (no changes).

Illinois Supreme Court Agrees to Decide FutureGen Clean Coal Dispute

By Kirk Jenkins on Posted in Illinois

 

In the closing days of its November term, the Illinois Supreme Court agreed to decide an issue of potentially enormous consequence to a major Illinois utility, agreeing to review an order of the Illinois Commerce Commission requiring a major utility to enter into sourcing agreements with FutureGen 2.0, a non-profit corporation organized to create a coal-fueled near-zero emissions electric power plant. In Commonwealth Edison Co. v. Illinois Commerce Commission, Division 2 of the First District Appellate Court affirmed an order of the Commerce Commission.

In 1997, the Illinois legislature sought to restructure the electric industry in order to promote competition and customer choice in the supply of electricity by separating the sectors of electric generation and electricity delivery. Before an Alternative Retail Electric Supplier (“ARES”) can get a certificate of service authority from the Illinois Commerce Commission, it must demonstrate that it sources some of its electricity from clean coal facility. The petitioner utility is required to supply electricity to residential and small commercial customers within its service territory who have not chosen an ARES.

The Illinois Power Agency Act provides that the Illinois Power Agency Act is tasked with procuring electricity for the petitioner utilities. The Act further provides that by 2025, one quarter of the electricity used in the State shall be generated by cost-effective clean coal facilities. In late 2013, the Agency filed a proposed procurement plan with the Commission requiring the petitioner utilities to source electricity from FutureGen. The Commission concluded that requiring all seventy ARES to enter into sourcing agreements with FutureGen would represent an unwarranted administrative burden. Accordingly, the Commission ultimately entered an order requiring only the petitioner utilities to enter into the sourcing agreements in an amount sufficient to serve both their own eligible retail customers and the retail customers of the ARES.  The utilities would recover the additional costs through a competitively neutral charge added to ARES’ customers’ bills. The utilities sought administrative appeal of the Commission’s order.

On appeal, the petitioner utilities agreed that the Act permits the Illinois Power Agency to develop a procurement plan requiring the utilities to enter into sourcing agreements with a retrofitted clean coal facility. However, they argued that the Agency’s authority was limited to the utilities’ own customers; the Agency, they insisted, had no authority to compel them to acquire electricity for the ARES customers. The Court of Appeal disagreed, holding that since the Commission had the authority to compel both the utilities and ARES separately to enter into such agreements, it followed that the Commission had the power to compel the utilities to enter into such agreements on behalf of the ARES customers.

Next, two of the petitioners argued that the Commission’s order violated the dormant commerce clause, arguing that by requiring the utilities to enter into a sourcing agreement with FutureGen, the Commission had effectively excluded from consideration out-of-state clean electric sources. The petitioners also argued that seventy percent of the utility’s rate cap for clean coal electricity was devoted to FutureGen’s output, effectively excluding others from competing in the Illinois market. The Appellate Court disagreed, holding that because neither of the petitioners expressed any interest in producing clean coal electricity or were otherwise adversely impacted by the Commission’s order, they lacked standing to make their constitutional challenge.

Justice Pucinski dissented, finding that the order exceeded the Commission’s authority.

We expect Commonwealth Edison to be decided in eight to ten months.

Image courtesy of Flickr by epsos (no changes).

Illinois Supreme Court to Consider Discovery Privileges Applicable in Medical Malpractice

By Kirk Jenkins on Posted in Illinois

 

In the closing days of its November term, the Illinois Supreme Court agreed to decide an issue of potential importance to the medical malpractice bar: what kinds of documents are privileged from disclosure in a negligent credentialing claim in a medical malpractice case? The question arises in a decision from the Fifth District, Klaine v. Southern Illinois Hospital Services.

The plaintiffs sued the defendant doctor for medical malpractice. They added a claim against the defendant hospital, alleging that it was negligent in agreeing to give the doctor hospital credentials. The plaintiff demanded that the hospital produce various applications for staff privileges and attached documents in discovery. When the defendants refused, the plaintiffs filed a motion to compel. The Circuit Court subsequently examined the documents in camera. The court subsequently ruled that all of the documents were privileged aside from three specific groups, designed Group Exhibits B, F and J. In order to facilitate an immediate appeal under Supreme Court Rule 304(b), the defendants declined to comply with the court’s order and requested entry of a “friendly contempt.” The circuit court agreed and entered the contempt, fining the defendant $1.

The Fifth District affirmed the Circuit Court’s order in most respects. Group Exhibit F was a set of three applications for staff privileges, dated in 2009, 2010 and 2011. The Appellate Court rejected defendant’s claim that the 2011 application was irrelevant, since it dated after the allegedly negligent treatment of the plaintiff. The defendant argued that all three applications were privileged pursuant to the Data Collection Act, 410 ILCS 517/15(h), which prohibits “[a]ny redisclosure of credentials data contrary to this Section.” Citing the Medical Studies Act, the court held that when the legislature wishes to establish a new discovery privilege, it does not explicitly. The court declined to follow the First District’s decision in TTX Co. v. Whitley, where the Court held that a similar bar on production in the Illinois Income Tax Act privileged certain documents from discovery because it didn’t contain an exception for disclosure in judicial proceedings.

In the alternative, the defendant argued that even if Group Exhibit F wasn’t fully privileged, all references to findings in a report prepared about the defendant doctor by a medical consulting company must be redacted pursuant to the Medical Studies Act, 735 ILCS 5/8-2102. The consultants were retained by the hospital to conduct external peer reviews of its physicians. The court agreed that the data was privileged as being directly related to the hospital’s internal quality control process.

Next, the defendant argued that certain data contained in the defendant doctor’s applications for staff privileges was privileged pursuant to the Health Care Quality Improvement Act, 42 USC § 1137. The Act creates the NPDB, to which medical malpractice insurance carriers, boards of medical examiners and health care entities are required to report information regarding claims, disciplinary actions and other adverse information regarding a healthcare professional. The Act includes a sweeping confidentiality provision, but also provides that nothing in the Act should be construed as preventing disclosure by any person authorized under State law to do so (42 USC § 1137(b).] The Court held that this language eliminated any privilege, and the defendant was required to produce the information.

Next, the defendant argued that various pieces of information in the files relating to the treatment of other patients was non-discoverable pursuant to HIPAA, the Health Insurance Portability and Accountability Act (42 USC § 1320(d).) The Court disagreed on two grounds: first, much of the information did not involve individually identifiable health information, and second, the Act contained explicit provisions regarding disclosure in judicial proceedings. The Court also rejected the defendant’s argument that the defendant doctor’s assessment of his own physical condition was subject to the physician-patient privilege, holding that no independent physician’s assessment was involved.

Finally, the defendant argued that documents in Group Exhibit F containing a list of procedures performed by the defendant doctor over a four year period were privileged pursuant to the Medical Studies Act, 735 ILCS 5/8-2102. The Court acknowledged that any information generated by a hospital committee involved in internal quality control during the process of peer review would be privileged under the Act. However, the Court held that the defendant hospital had not provided sufficient information in its supporting affidavits to mandate a finding of privilege. According to the Court, the record did not enable it to rule out the possibility that the histories of procedures performed by the doctor weren’t kept in the ordinary course of the defendant hospital’s business.

Although the Court affirmed the lower court’s findings in nearly all respects, the Court nevertheless held that the defendant hospital’s refusal to produce was made in good faith, and not in contempt of the lower court’s authority. Accordingly, the Court vacated the finding of contempt.

We expect Klaine to be decided in eight to ten months.

Image courtesy of Flickr by Jasleen_Kaur (no changes).

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