The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Illinois Supreme Court Agrees to Decide Whether Party’s Own Apparent Neglect Can Lose Right to Set Aside Default

By Kirk Jenkins on Posted in Illinois

In the closing days of its September term, the Illinois Supreme Court agreed to decide a question relating to the operation of Section 2-1401 of the Code of Civil Procedure: under what circumstances is the apparent lack of diligence of the party itself sufficient to justify denying the motion? In Warren County Soil & Water Conservation District v. Walters, the Third District denied a motion to set aside on the grounds that the defendant had not demonstrated adequate diligence.

The plaintiff Soil and Water Conservation District filed suit against the defendants, charging that defendants had wrongfully removed approximately 54 trees, worth just over $17,000, from plaintiff’s property. The plaintiff purported to state claims of trespass, conversation, quantum meruit, negligence, and one for violation of the Wrongful Tree Cutting Act, 740 ILCS 185/0.01, which potentially triggers treble damages.

The defendants’ retained counsel did not either file an answer or appear for the case management conference. He was ordered by the Court to file an answer a month later, but failed to do so, so the plaintiff moved for a default judgment. The defense counsel was provided with a copy of the motion for entry of default, but counsel failed to respond or appear at the next hearing. In June 2011, the trial court granted default and entered judgment against the defendants.

A month later, the defendant’s counsel filed a motion to set aside the default, but failed to notice it for hearing. The plaintiff’s counsel noticed the motion for hearing and sent defense counsel notice. Counsel failed to appear for a scheduled case management conference, or for the motion hearing the following week. Accordingly, the trial court denied the motion to set aside the judgment, entering an order with findings. Ten months later, the plaintiff’s counsel filed a citation to discovery assets, and a week after that, the trial court entered an order removing the defendants’ counsel from the case and directing the defendants to retain replacement counsel. New counsel filed a second motion to set aside the judgment, attaching an affidavit from the client testifying that the client was unaware of the default or of former counsel’s negligence.

The trial court denied the second motion to set aside. The court held that defendants had established the existence of a meritorious defense and due diligence with respect to their replacement counsel, but had not demonstrated diligence prior to the entry of default.

The Appellate Court affirmed. A party was required to show three elements in order to be entitled to an order setting aside the judgment, the Court found: (1) a meritorious defense or claim; (2) due diligence in presenting it to the trial court; and (3) due diligence in filing the motion to set aside. The Appellate Court held that the defendant was not entitled to have the judgment set aside because it had not diligently followed the progress of the case and its former counsel’s efforts in the time between the initial complaint and the first default judgment and motion to set aside. Rather, the defendant “abandoned their own interest in the lawsuit and did not fulfill their duty to monitor the quality of [counsel’s] legal representation” during a nineteen month period.

Justice William E. Holdridge dissented. Although Justice Holdridge agreed with the majority that the defendant had failed to exercise due diligence in presenting its defenses to the trial court, he argued that the trial court erroneously believed it was without discretion to relax the requirement of due diligence in the interests of justice. Because Justice Holdridge believed that the defendants’ lost defenses appeared to have merit, he concluded that the trial court should have overlooked the defendants’ lack of diligence in pursuing the case and vacated the default.

We expect Warren County Soil & Water to be decided in six to eight months.

Image courtesy of Flickr by PlayingWithBrushes (no changes).

 

Illinois Supreme Court to Weigh Private Right of Action for Failure to Accurately Calculate Presentence Time-Served Credits

By Kirk Jenkins on Posted in Illinois

 

During its September term, the Illinois Supreme Court agreed to decide a novel question presented by a case arising from the Fifth District: does a prisoner have an implied right of action against the circuit clerk and county sheriff for failing to accurately calculate the credit he or she is due against a prison sentence for presentence incarceration? In Cowper v. Nyberg, the Fifth District held that the answer is yes.

The plaintiff in Cowper pled guilty to three felony counts in 2011. The court sentenced him to 27 months’ imprisonment. The judgment and sentence included a lengthy summary of the days the plaintiff had already spent in custody, for which he was to receive credit against his sentence. A month later, the plaintiff filed a motion to recalculate the credit. The State responded, saying that after investigation, it had calculated that the 275 days of credit in the original judgment was wrong. The court ordered the State to recalculate the credit, which it did, ultimately concluding that the plaintiff was entitled to an additional 191 days of credit.

But the plaintiff had already been released by the time the calculation errors were corrected.

The plaintiff filed suit against the Circuit Court clerk and the county sheriff, alleging that they had a duty under Section 5-4-1(e)(4) of the Corrections Code, 730 ILCS 5/5-4-1(e)(4), to correctly calculate the length of his credit. The plaintiff’s complaint alleged that because of the defendants’ negligence in calculating the credit, he served 137 days more than he should have. The defendants moved to dismiss, arguing that the Corrections Code doesn’t provide a private right of action, and the trial court dismissed.

The Fifth District reversed. The Code did not provide an express private right of action, the Court concluded. Therefore, it considered whether the Court should imply a cause of action in the statute. Whether or not a statute creates an implied cause of action generally depends on four factors: (1) the prospective plaintiff is a member of the class for whose benefit the legislation was enacted; (2) an implied cause of action is consistent with the underlying purpose of the legislation; (3) a plaintiff’s injury is one that the legislation was designed to prevent; and (4) an implied cause of action is necessary to provide an adequate remedy for violations of the legislation.

The defendants argued that plaintiff’s claim ran aground on the second factor. The purpose of the Corrections Code, the defendants argued, was to protect the public, not to secure inmates’ rights. The Fifth District disagreed: “The general purpose of the Code of Corrections is to rehabilitate the offender, if possible, and to restore him to useful citizenship.”

The Court next concluded that the Code placed a mandatory duty on the Sheriff and the Circuit Court Clerk to calculate and transmit the number of presentence days’ credit the inmate is entitled to. From this, the Court concluded that the plaintiff’s injury was one the legislation was designed to prevent. The defendants argued that no private right of action was needed, since the statute allows for a grievance procedure before an administrative review board, but the Court held that this was no remedy for the plaintiff, since the board could not modify a court-ordered sentence. Nor did the plaintiff’s alleged injury create the basis for a constitutional claim, since such claims are limited to a showing of deliberate indifference. The Court thus found that all four of the implied-right-of-action factors weighed in favor of recognizing such a claim for miscalculation of presentence credits.

We expect Cowper to be decided by the Supreme Court in six to eight months.

Image courtesy of Flickr by ForensicBones (no changes).

Illinois Supreme Court Agrees to Review Tobacco Verdict Again

By Kirk Jenkins on Posted in Illinois

 

Not infrequently, the law calls upon a court to decide what another court would do with a particular issue or case. In the closing days of its September term, the Illinois Supreme Court agreed to take up Price v. Philip Morris, Inc. in order to answer one of the more interesting dilemmas in that category of cases – just how far can a lower court go on a motion to set aside a judgment in trying to determine what the Illinois Supreme Court itself would have done in different circumstances?

The plaintiff filed a putative class action alleging that the defendant had violated by Illinois Consumer Fraud and Deceptive Business Practices Act – 815 ILCS 505/1 – by advertising cigarettes as “light” and “low tar.” In 2003, the court entered a judgment for plaintiffs in the startling amount of $10.1 billion. In 2005, the Illinois Supreme Court reversed that judgment, finding that the claim was barred by Section 10b(1) of the Act, which provides that the Act doesn’t apply to conduct “specifically authorized” by any federal regulatory body. The theory was that the Federal Trade Commission had specifically authorized the use of the terms “light” and “low tar” in various consent decrees entered into with other cigarette manufacturers.

In 2008 – two years after the Supreme Court’s judgment became final – the FTC filed an amicus brief in an unrelated case before the United States Supreme Court saying that it had never intended to specifically authorize the use of those terms. Shortly after that, the FTC issued a “rescission of guidance” revoking a 1966 document concerning representations manufacturers could make in advertising and packaging about tar and nicotine content.

Ten days after the rescission of guidance was issued, the plaintiffs in Price filed a petition for relief from judgment, seeking to overturn the judgment against them issued at the Illinois Supreme Court’s instruction. The trial court dismissed the petition on the grounds it was untimely, but the Fifth District Appellate Court reversed.

On remand, the trial court held that it was more likely than not, had the FTC’s new actions been available at the time of trial, that the defendant’s Section 10b(1) defense would have failed. The court then turned to the question of whether it was more likely true than not that the Illinois Supreme Court would have affirmed, had the Section 10b(1) defense been rejected. The court held that the Court would have reversed on other grounds, and denied the petition.

The Fifth District reversed once again. The court first affirmed the trial court’s determination that the plaintiffs had acted with sufficient diligence in uncovering the FTC’s new position on the issues. The defendant argued that the plaintiffs had made no attempt to involve the FTC in the litigation until their petition for rehearing in the Illinois Supreme Court, but the Appellate Court said it “defies logic” to conclude that due diligence requires that litigants in a state court proceeding seek the input of a federal agency.

The court then addressed the question of the proper scope of review on a motion to set aside. The court found that the trial court had erred by determining what the Supreme Court would have decided in the first appeal, if it had had the input from the FTC about the Section 10b(1) issue. Rather, once the trial court held that it was more likely than not that the Section 10b(1) defense would have failed with the FTC’s input, since no other issues were decided in the original appeal, the court should have granted the petition and reinstated the verdict, despite the Supreme Court’s reversal of the judgment.

Price is certain to be one of the most high-profile cases on the Supreme Court’s civil docket during the fall and winter. We expect a decision in six to eight months.

Image courtesy of Flickr by Fried Dough (no changes).

 

Illinois Supreme Court Agrees to Return to Pension Debates

By Kirk Jenkins on Posted in Illinois

 

In the closing days of its September term, the Illinois Supreme Court agreed to return once again to what surely must be the most controversial subject at the moment in all of Illinois’ civil law: public pensions. Matthews v. Chicago Transit Authority is a putative class action raising various challenges to recent reforms to the pension plans of the Chicago Transit Authority.

The complaint in Matthews sets forth two prospective classes of plaintiffs: CTA employees hired before September 2001 who retired before January 1, 2007, and employees hired prior to September 2001 who either retired in 2007 or later, or remain active employees. The complaint focuses on the fact that, after years of fully paid health care benefits for retired CTA employees, plaintiffs are now being asked to pay for a portion of their benefits, and are no longer entitled to the same level of health care coverage as active employees. The complaint purports to allege claims for breach of contract, violation of the state Constitution’s pension clause, and breach of fiduciary duty.

Before May 1980, the CTA contributed up to $40 per month for each retiree’s health care premium. At that time, an arbitration panel ordered the CTA Retirement Plan to increase its contribution to $60 per month through the end of 1980, and to $75 per month thereafter. Pursuant to changes made a few months later to the retirement plan agreement, both union and non-union retirees received health care benefits equivalent to full-time employees, and paid nothing towards their premiums.

In 2007, another arbitration panel directed that a Retiree Health Care Trust be established. The panel directed that retired employees should contribute up to 45% of the total amount expended under the Plan for their health care, and that the trustees have the discretion to increase or decrease contribution and benefit levels, depending on the financial health of the system. The panel also directed that current employees should contribute to their health care costs through a payroll tax equal to 3% of their compensation. Not long afterwards, amendments to the Pension Code became effective which provided that retirees could not be required to pay more than 45% of the total cost of their health care premiums.

The various Pension Plan defendants moved to dismiss the complaint on several grounds: (1) the entire complaint failed because the plan agreement provided that plaintiffs do not have a vested right in free lifetime health care benefits; (2) the pension clause of the state constitution doesn’t apply to health care benefits; (3) the CTA and the unions had the right to change retiree health care benefits; (4) plaintiffs were estopped from relying on statements outside of the retirement plan agreement; and (5) complying with 2008 amendments to the Pension Code could not be a breach of fiduciary duty. The CTA filed its own motion to dismiss, arguing that it was not a proper party, given that it had not had any responsibility for retiree’s health care costs since the 1980s.

The trial court dismissed with respect to the current employee plaintiffs on standing grounds. The court dismissed the remainder of the action for failure to state a claim, holding that the relevant union-management agreements did not expressly vest retired CTA employees with fully paid health care benefits, at least after December 31, 2003, particularly since the agreements had expressly reserved the right to modify retiree benefits in collective bargaining.

The Appellate Court affirmed in part and reversed in part. First, the Court agreed with the trial court’s finding that the current employees lacked standing to bring their claims, given that they were not seeking to vindicate any rights independent of the collective bargaining process. The Appellate Court also affirmed in part the trial court’s dismissal of all claims against the CTA, holding that although the CTA had no contractual or statutory obligation to pay retiree health care benefits, the CTA’s decision to continue the payments through 2009 raised a viable claim for promissory estoppel and declaratory judgment.

The Court turned next to the question of whether the retiree’s fully paid health care premiums were a vested right. Following the decision of the Third District in Marconi v. City of Joliet, the Court held that such rights were presumptively vested. Nothing in the various agreements overcame that presumption, and the Court held that the language relied upon by the trial court, reserving the right to vary retirees’ rights in future agreements, was not enough to overcome the presumption of vesting.

The Appellate Court next turned to the plaintiff’s constitutional challenge. The Appellate Court’s decision was filed prior to the Supreme Court’s recent decision in Kanerva v. Weems. Because Kanerva was then pending, the Court reversed the trial court’s dismissal of the constitutional claims so that the trial court could reconsider in light of the Supreme Court’s Kanerva decision. Given the Supreme Court’s strong endorsement in Kanerva of the proposition that health care benefits are protected by the pension clause, the plaintiffs would seem to have a strong claim under the public pension clause.

Finally, the Appellate Court turned to the trial court’s dismissal of the breach of fiduciary duty claim. The Court concluded that the plaintiffs had adequately alleged that the Health Trust Board owed fiduciary duties to the plaintiffs when exercising its discretion to set retirees’ health care premium contribution levels.

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

Image courtesy of Flickr by CTA Web (no changes).

 

Illinois Supreme Court Debates Scope of Court Authority Over Academic Investigations

By Kirk Jenkins on Posted in Illinois

 

During its September term, the Illinois Supreme Court debated the scope of courts’ authority to intervene in academic investigations at the University of Illinois in order to require University officials to follow their own rules for such proceedings. Our detailed summary of the facts and lower court opinion in Leetaru v. Board of Trustees of the University of Illinois is here.

The plaintiff filed suit in Circuit Court, seeking a preliminary and permanent injunction to halt the University’s investigation of his alleged research misconduct. Although nearly all claims against the State must be brought in the Court of Claims, the plaintiff argued that the trial court could proceed because he was seeking only prospective injunctive relief to control the defendants’ future conduct. The trial court granted the plaintiff’s motion to dismiss, holding that the plaintiff’s claim was subject to the Court of Claims Act, and the Circuit Court therefore lacked jurisdiction. The Appellate Court affirmed for two reasons: (1) the plaintiff’s request for an injunction was a “present claim” within the meaning of the Court of Claims Act; and (2) even if it was not, the plaintiff was arguing that the University’s conduct was wrongful, as opposed to entirely ultra vires.

Counsel for the plaintiff began the argument before the Supreme Court. According to counsel, the plaintiff was a graduate student at the University of Illinois and on a remarkable journey towards his degree when the University began its investigation. Plaintiff consulted the University’s policies and procedures governing research conduct and found that the process had three steps: assessment, inquiry and investigation, each with particular procedural guarantees. The University’s research officer is required to take custody of all the documentary evidence, and gives access to that evidence to the accused student, but in this case, that allegedly didn’t happen. Moreover, the plaintiff alleges that the University told the inquiry team not to interview the plaintiff about the allegations, even though the procedures manual says that the student should be interviewed. Counsel argued that the Court of Claims was an ineffective remedy because – although the Supreme Court has said nothing bars the Court of Claims from granting injunctions – the Court of Claims has repeatedly said it will not do so. Counsel argued that there is a clear exception to the Court of Claims Act carved out for solely prospective injunctive relief – an exception which the Supreme Court has noted at least three times.

Justice Burke asked whether counsel was arguing that an officer acts in excess of his or her authority whenever internal regulations aren’t followed. Counsel agreed that that was so, but Justice Burke then pointed out that Section 305-1 of the Court of Claims Act appears to bar suits against the University in Circuit Court. Counsel answered that plaintiff’s claim falls in none of the categories which must, pursuant to the Act, be brought in the Court of Claims. Justice Karmeier pointed out that the Court had said in 2005 that a state officer’s action in excess of his or her authority has the effect of stripping the officer of official status – meaning that the officer’s conduct was not that of the State. Counsel agreed that that was plaintiff’s theory.   Justice Karmeier noted that plaintiff conceded that the University had the authority to conduct its investigation, and asked whether plaintiff’s argument that an investigation in violation of the University’s written procedures amounted to conduct in excess of an officer’s authority was a legitimate distinction. Counsel commented that it could be a fine line in some cases, but this was not a close case. Counsel argued that the investigating officer’s authority was proscribed by the rules set forth in the University’s written policies. Justice Thomas asked counsel whether the plaintiff could file a claim for damages in the Court of Claims, and counsel conceded that such a claim was theoretically possible. Justice Thomas noted that plaintiff did have a remedy in the Court of Claims, just not the one he wants. Counsel responded that there is no real remedy in the Court of Claims, because that court won’t require the University to follow its own procedures. Chief Justice Garman asked where the line was between the University acting within its discretion and exceeding its authority. Counsel responded that while such a line might be difficult to find in some cases, this case was an easy call.

Counsel for the University began by arguing that management of the University’s academic affairs was among its core functions, and maintaining the integrity of those affairs is a matter of the highest importance. The plaintiff’s complaint, counsel argued, was an attempt to interfere with an authorized governmental function. Counsel argued that plaintiff’s position failed to distinguish between a government official acting in a wrongful manner, and one acting in excess of his or her authority. Merely carrying out an authorized function in a wrongful way is not enough to confer jurisdiction on the Circuit Court.   Justice Karmeier asked whether government officials should abide by their own procedures. Counsel responded that they should, but if they don’t, the claim goes to the Court of Claims. Justice Karmeier asked what relief would be available there, and counsel answered that plaintiff could seek damages for reputational harm, loss of employment opportunities, etc. Justice Karmeier pointed out that none of that would get the plaintiff his procedural rights. Counsel answered that plaintiff’s theory would support a claim for damages, but not injunctive relief.   Justice Karmeier suggested that plaintiff wasn’t trying to stop the investigation – he was insisting that it be done by the rules. Counsel answered that plaintiff has sought an injunction stopping the investigation. Chief Justice Garman asked what the line was between an exercise of discretion and exceeding one’s authority. Counsel answered that the University clearly had authority to investigate research misconduct.  Justice Karmeier asked whether it mattered how the University conducted the investigation, as long as they had the authority to undertake it. Counsel agreed it did matter, but said that was an issue for the Court of Claims.

Justice Karmeier asked how counsel would respond to the Supreme Court’s earlier comment that the government’s violations of the Constitution or laws of the state could be properly restrained by the courts. He suggested that the officers’ suit exception to sovereign immunity says that violating rules of procedure amounts to acting outside the scope of authority. Counsel again argued that simply alleging that an authorized investigation is being done in a wrongful matter doesn’t create jurisdiction. Justice Thomas asked how plaintiff could have filed for damages when he hadn’t been terminated yet. Counsel answered that typically, a complaint is filed and then stayed until an investigation is complete. Justice Thomas asked whether it was fair to say that the plaintiff couldn’t have gotten the relief he sought from the Court of Claims. Counsel responded that while it is likely that plaintiff would not have gotten an injunction from the Court of Claims, injunctions are not outside the court’s authority. Chief Justice Garman asked what the future consequences of endorsing the defendant’s theory might be. Counsel answered that case law would continue to move in the same direction, and that persons seeking to interfere with authorized government functions would have to proceed in the Court of Claims.

On rebuttal, Chief Justice Garman asked the plaintiff’s counsel the same question – what are the consequences of ruling for plaintiff? Counsel answered that there would be none – plaintiff wasn’t seeking to impose financial liability. Counsel argued that wrongfully apply the rules might be within a government official’s authority, but simply ignoring them isn’t. The case is about integrity, counsel argued. An award of damages would not remedy a prospective finding by the University that the plaintiff had violated its research integrity standards. Justice Karmeier asked whether plaintiff was seeking to stop the investigation, and counsel said he was not: plaintiff merely wanted a fair shot to get the information the charges were based on and mount a defense.

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

Image courtesy of Flickr by Kevin Dooley (no changes).

Illinois Supreme Court Holds Subcontractor Should Have Proceeded Against Project Bond

By Kirk Jenkins on Posted in Illinois

 

Last month, a divided Supreme Court held that a subcontractor on a public works program should have timely proceeded against the project bond, and had no remedy against the Village after the general contractor went bankrupt before paying the sub’s bill. In an opinion by Justice Theis, the Court held in Lake County Grading Company, LLC v. The Village of Antioch that the Village could not be held liable for third-party breach of contract for failure to obtain a project bond from the general contractor which included an explicit guarantee of payment. Our detailed summary of the facts and lower court opinions in Lake County is here. Our report on the oral argument is here.

Lake County arises from two construction projects in residential subdivisions in Antioch. The Village entered into contracts with a general contractor. Pursuant to the Public Construction Bond Act, 30 ILCS 550/1, the Village was required to obtain “a bond to the [Village] . . . Each such bond is deemed to contain the following provisions whether such provisions are inserted in such bond or not.” The Act then goes on to describe a payment guarantee. The general contractor provided four bonds to the Village. However, none contained express payment bond language.

The general contractor contracted with plaintiff to provide certain labor and materials. Before fully paying the plaintiff, the general contractor defaulted on its contract and declared bankruptcy. The plaintiff served notices of lien claims with respect to both projects in February 2008 – fourteen months after its last work on one subdivision and ten months after its last work on the other project.

Plaintiff ultimately filed suit against the Village. The two counts at issue in Lake County purported to state third-party breach of contract claims on the theory that the Village had failed to obtain payment bonds – as opposed to mere completion bonds – from the general contractor. On cross-motions for summary judgment, the trial court held that it could not read payment language into the bonds obtained by the general contractor. The trial court entered judgment for the subcontractor. The Appellate Court affirmed.

The Supreme Court reversed. The fundamental issue, the Court found, was whether or not the bonds filed by the general contractor were deficient within the meaning of Section 1 of the Bond Act. The Court held that the plain language of the Act required the public entity contracting for public works to mandate delivery of “a bond” – not a completion bond and a payment bond. That single bond was deemed to include a payment obligation within it whether such language was expressly set forth or not. The majority found that its interpretation of Section 1 effectuated two of the purposes of the Act – to protect subcontractors who would otherwise have no right of mechanics’ lien against a public entity, and to prevent public money from being at risk when general contractors fail to pay their subs. The Court pointed out that it would hardly be necessary for the statute to provide that a payment obligation was automatically deemed part of the bond if the public entity was required to obtain an actual payment bond. The Court noted that other state statutes required the procurement of separate payment and completion bonds, further supporting its conclusion that the legislature intended to require only one bond.

Since the bonds filed by the general contractor were automatically deemed to include payment language in them, the plaintiff’s remedy was to proceed within 180 days against one or more of the bonds. The plaintiff failed to do so, and had no remedy against the Village.

Justice Freeman dissented, joined by Justice Burke. According to Justice Freeman, the majority’s conclusion that Section 1 of the Bond Act mandated that both completion and payment were guaranteed by any bond obtained by a public entity was contrary to the plain language, the purpose and history of the statute. “I . . . agree that two, separate bonds are not required,” Justice Freeman wrote. “However, where a single bond is obtained, that bond must reflect that it secures two distinct obligation: completion . . . and payment for labor and materials . . .” Justice Freeman concluded that the “deemed to contain” language was not intended to impute a payment obligation into a completion bond, but merely to clarify ambiguous bond language. According to Justice Freeman, subcontractors should be permitted to sue public entities whenever they failed to obtain the mandatory bonds.

Image courtesy of Flickr by kalmyket (no changes).

Illinois Supreme Court Rejects Constitutional Challenge to Medical Licensing Amendments

By Kirk Jenkins on Posted in Illinois

 

Last month, a unanimous Illinois Supreme Court rejected assorted constitutional challenges to 2011 amendments to the Department of Professional Regulation Law governing medical licensing. In an opinion by Justice Burke, the Court affirmed the judgment of Division 1 of the First District Appellate Court in Hayashi v. The Illinois Department of Financial and Professional Regulation. Our detailed summary of the facts and lower court opinions is here. Our report on the oral argument is here.

On July 21, 2011, the Illinois General Assembly amended the Professional Regulation Law to provide that certain classifications of people should have their health care licenses permanently revoked without a hearing, including persons who had been convicted of criminal battery against a patient in the course of patient care or treatment and any criminal offense which required registration under the Sex Offender Registration Act. The Department duly issued notices to each of the plaintiffs, indicating that it would revoke their licenses pursuant to the Act because each had been convicted of one of the covered offenses. The plaintiffs filed separate actions seeking an injunction and a judicial declaration that the Act could constitutionally be applied only to convictions occurring after the effective date of the Act. The Circuit Court denied the plaintiffs’ motions for preliminary injunctions and granted the defendants’ motions to dismiss for failure to state a claim. The Appellate Court affirmed.

The Supreme Court affirmed as well. The Court began by holding that the plain language of the Act demonstrated that the legislature intended the Act to apply to convictions before its effective date. The plaintiffs argued that applying the Act to them would render it impermissibly retroactive in violation of their due process rights. The Court disagreed. The test of retroactivity is found in Landgraf v. USI Film Products – a statute is applied retroactively when it impairs rights a party possessed when he or she acted, increases a party’s liability for past conduct, or imposes new duties with respect to transactions already completed. Given that the automatic revocation provision of the Act solely cancelled the plaintiffs’ licenses going forward, the Court held that the Act was not being applied retroactively, even though its application is based on antecedent facts.

Next, the plaintiffs argued that the Act deprived them of a fundamental property right in violation of the due process clause. The Court agreed that a party’s medical license was a property right within the meaning of the clause, but not that the right involved was fundamental. Instead, legislation infringing on the right to pursue a profession is subject only to rational basis analysis. Applying that test, the Court held that the penalties in the Act bore a reasonable relationship to a legitimate state purpose – regulating the medical professions for the protection of the public.

Next, the plaintiffs argued that the Act impaired their vested right of repose to be free from additional discipline based on their past acts. At the time of the plaintiffs’ acts, the Medical Practice Act provided that any disciplinary action must be commenced within three years of the Department receiving notice of misconduct. The difficulty, the Court held, was that the time bar provisions the plaintiffs relied on simply didn’t apply to the automatic revocation provisions of the 2011 amendments.

The Court next addressed the plaintiffs’ facial due process challenge to the Act. The test for procedural due process claims under Illinois law closely parallels the Federal test – the Court considers: (1) the private interest implicated; (2) the risk of an erroneous deprivation, and the value of additional safeguards; and (3) the government’s interest, including the administrative burdens of additional safeguards. The Court held that given the plaintiffs’ right to file a written objection upon notice of mandatory revocation, the risk of erroneous deprivation was not great, while the burden of retrying the plaintiffs’ cases would be considerable.

Finally, the plaintiffs argued that the revocation was barred by res judicata, since their disciplinary cases had already been concluded. The Court rejected plaintiffs’ claim on the grounds that the original disciplinary action and the mandatory revocation proceeding were not the same action for res judicata purposes.

Image courtesy of Flickr by jasleen_kaur (no changes).

Illinois Supreme Court Adopts Measure of Malpractice Damages in Securities Cases

By Kirk Jenkins on Posted in Illinois

 

Last month, the Illinois Supreme Court handed down its unanimous decision in a case being closely watched by the local bar associations – Goldfine v. Barack, Ferrazzano, Kirschbaum & Perlman. Goldfine involved the issue of what damages are available, and how damages are calculated, in a claim for legal malpractice arising from an underlying claim pursuant to the Illinois Securities Law. Our detailed preview of the facts and underlying decisions in Goldfine is here. Our report on the oral argument is here.

The plaintiffs in Goldfine bought certain stock between 1987 and 1990. The company issuing the stock became bankrupt in 1991, rendering the stock worthless. That year, the plaintiffs retained the defendant law firm. At the time the plaintiffs hired the defendant firm, they had a viable claim for rescission of the stock purchases. But the defendants failed to serve a mandatory notice of rescission, and the claim was lost.

The plaintiffs sued the defendants in 1994. Two years after, the parties agreed that the malpractice claim would not be tried until the plaintiffs’ underlying case against the parties involved in the stock sale was tried or otherwise resolved. That finally happened eleven years later, in 2007, when plaintiffs’ remaining claims against the sellers were resolved for $3.2 million.

So back the parties went to the malpractice claim. According to Section 13 of the Illinois Securities Law, those harmed by a violation of the statute are entitled to damages amounting to “the full amount paid, together with interest from the date of payment for the securities sold.” The trial court awarded malpractice damages as follows: it proportionally deducted the $3.2 million settlement from each of the eleven stock purchases, then calculated interest from the date of each purchase to the date of the judgment.

Both parties appealed – the plaintiffs arguing that the trial court had erred in calculating the damages and the attorneys’ fees, and the defendants on the grounds that the fee-shifting and interest provisions of the Securities Law were punitive in nature and couldn’t be applied in a malpractice action. The Appellate Court reversed in part, finding that the Securities Law provided the proper measure of damages, but that there was no basis for deducting the amount of the settlement from the purchase price before calculating interest.

In an opinion by Justice Kilbride, a unanimous Supreme Court affirmed in part and reversed in part. The Court began by rejecting the defendants’ claim that the Securities Law amounted to punitive damages. The Law wasn’t being applied to the defendants, the Court found. The measure of damages was the sum the plaintiffs would have recovered but for the defendants’ negligence, and the Securities Law merely served as the measure of that sum. The defendants also argued that post-sale interest shouldn’t be applied against them, because the purpose of the statute was to promote rescission of questionable sales, and the attorneys had no ability to rescind the sale – thus, they were left to watch damages mount, with no way of stopping the accumulation. The Court pointed out that the defendants had chosen to postpone adjudication of the malpractice claim until the underlying securities suit was finished, as opposed to settling the case early on. The Court also rejected the defendants’ claim that the damages measure in the Securities Law amounted to punitive damages with respect to attorneys, noting that to be “punitive,” a damages measure must be calculated without regard to the plaintiffs’ actual damages.

The defendants had somewhat better luck, however, with their claim that the damages award violated due process guarantees. Although the overall measure passed due process scrutiny, the lower courts had erred, the Court held, by allowing interest to continue to mount after the 2007 settlement of the underlying action, since plaintiff’s damages thereby exceeded what they could have recovered in the underlying lawsuit. The Court concluded by affirming the Appellate Court’s holding that the $3.2 million settlement should have been deducted after calculating interest on the amount paid for the securities, rather than before, as the trial court had done.

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

Florida High Court to Decide Duties Owed by Public School Regarding Automated External Defibrillator

By Erin E. Dardis on Posted in Florida

On October 6, 2014, the Florida Supreme Court heard oral argument in a case involving whether a public school owes a duty to maintain, make available, and use an automated external defibrillator (AED) on a student athlete who collapses during a school-sanctioned athletic competition.  See Limones v. School Board of Lee County, No. SC13-932.  The Second District Court of Appeal held that the school board’s common law duty to prevent aggravation of a student’s injury did not include making an AED available and that the school board did not have a statutory duty to make an AED available to the student.  To view the Second District’s opinion, click here.

This case arises from the collapse of a high school athlete, Abel Limones, on the field during a soccer game.  When Abel stopped breathing and had no pulse, his coach and a nurse bystander performed CPR, but Abel was not resuscitated until emergency personnel arrived and used a defibrillator.  Abel suffered severe and permanent brain damage and his parents sued the school board, alleging that it was negligent in failing to maintain an AED on or near the soccer field, failing to make it available for use, or in failing to actually use an AED on Abel.  The trial court determined the school board did not have a duty to make available, diagnose the need for, or use an AED and that, even if it did, the school board was statutorily immune from the action.

On appeal, the Second District acknowledged that Florida courts generally recognize a school’s duty to adequately supervise its students, and this duty extends to athletic events and includes utilizing appropriate post-injury efforts to protect the injury against aggravation.  The issue in this case, however, was whether reasonably prudent post-injury efforts for Abel would have required making available, diagnosing the need for, or using an AED.  The Second District noted that while Florida courts have not addressed a school district’s duties in this context, the Fourth District in L.A. Fitness v. Mayer has concluded that a business owner does not have a common law duty to provide CPR or maintain or use an AED when a business invitee collapses while exercising at the owner’s facility.

In L.A. Fitness, a health club patron suffered cardiac arrest and collapsed during a workout.  An employee of the health club, who was certified in CPR, called 911, but did not perform CPR.  The health club did not have an AED on the premises.  The Fourth District noted that courts from other jurisdictions have uniformly refused to extend a business owner’s duty from calling for medical assistance within a reasonable amount of time to providing “medical care or medical rescue services,” which includes using an AED.  The Fourth District also looked for further guidance to a Connecticut case in which the court examined the American Red Cross and the American Heart Association’s Guidelines for First Aid.  See Pacello v. Wyndam Int’l., 41 Conn. L. Rptr. 193 (Conn. Super. Ct. 2006).  Based on the absence of CPR from those guidelines, the court concluded that CPR is something more than first aid – it requires training and re-certification.  Thus, while CPR is routine for emergency medical responders, “non-medical employees certified in CPR remain laymen and should have discretion in deciding when to utilize the procedure.”  The court applied this rationale to the maintenance and use of an AED as well.

The Second District found that L.A. Fitness and the cases cited by it did not support the finding of a common law duty on behalf of the school board to make available, diagnose the need for, or use an AED on Abel.    

Abel’s parents argued that the school board undertook a duty to safeguard Abel by acquiring an AED and training personnel in its use and that it failed to safeguard Abel by not using the AED.  The court held, however, that Abel’s parents failed to establish that the school board’s action in acquiring the AED and training personnel in its use compelled the school board to ensure that the AED would be used under these circumstances. 

Abel’s parents also argued that the school board’s duty stemmed from Florida Statutes Section 1006.165, which provides that a public school that is a member of the Florida High School Athletic Association must have an operational AED on school grounds.  This statute also provides that each school must ensure that all employees and volunteers who are reasonably expected to use the device obtain appropriate training.  The Second District noted that there were no reported cases citing Section 1006.165, but that its terms are very succinct and there is no question that the school board complied with the requirements. 

The court also looked to see whether a duty existed under Florida Statutes Sections 768.13 and 768.1325.  Section 768.13, known as the “Good Samaritan Act,” provides immunity from civil liability to any person “who gratuitously and in good faith renders emergency care or treatment” under certain circumstances in emergency situations outside a hospital or doctor’s office.  While this statute requires a person who undertakes a duty to render aid to do so reasonably, it does not set forth a duty to render aid.

Section 768.1325, known as the “Cardiac Arrest Survival Act,” provides immunity from civil liability for those who use or attempt to use an AED or for “any person who acquired the device and makes it available for use.”  Like Section 768.13, Section 768.1325 does not create a legal duty to render aid through the use of an AED.  Furthermore, because neither statute clearly set forth an intent to create a private cause of action, neither statute can be construed as establishing civil liability.

Finally, the Second District rejected the arguments of Abel’s parents that the school board is not entitled to immunity under 768.1325 because it is not a “person” as contemplated by the Cardiac Arrest Survival Act.

This article will be updated once the Florida Supreme Court decides the case.

 

 Image courtesy of Flickr by Faungg (no changes).

 

Florida High Court To Decide Whether State Insurer Is Immune From Statutory Bad Faith Claims

By on Posted in Florida

The Florida Supreme Court has accepted for review a First District decision holding that Florida’s state insurer of last resort, Citizens Property Insurance Corporation, is not immune from a statutory bad faith failure to settle claim.  See Citizens Prop. Ins. Corp. v. Perdido Sun Condo. Ass’n, No. SC14-185.  To view the First District’s opinion, click here.

After its insured property was damaged by a hurricane, Perdido Sun made a claim on its insurance policy with Citizens.  Perdido Sun was not satisfied with the amount of Citizens’ eventual payment on the claim and sued for breach of contract to recover additional money.  Perdido Sun won its breach of contract claim and then filed a second lawsuit against Citizens alleging statutory bad faith failure to settle under section 624.155(1)(b)1., Florida Statutes.  Citizens moved to dismiss, asserting its immunity from suit under section 627.351(6)(s)1., Florida Statutes.  The trial court granted the motion.

On appeal to the First District, Perdido Sun argued that the “willful tort” exception to the immunity provision applied to its bad faith action.  Citizen argued the exception must be strictly construed and because it does not specifically reference a cause of action under section 624.155, it does not apply.  The First District found that “failing to attempt in good faith to settle claims as provided by section 624.155, Florida Statutes” is a “willful tort.”  It therefore reversed the order dismissing the complaint with prejudice.

The First District certified conflict with the Fifth District’s decision in Citizen Property Insurance Corp. v. Garfinkel, 25 So. 3d 62 (Fla. 5th DCA 2009), and certified the following question of great public importance to the Florida Supreme Court:  “Whether the immunity of Citizens Property Insurance Corporation, as provided in section 627.351(6)(s), Florida Statutes, shields the Corporation from suit under the cause of action created by section 624.155(1)(b), Florida Statutes for not attempting in good faith to settle claims?”

The supreme court held oral argument on October 7, 2014.  This article will be updated once the Court decides the case.

 Image courtesy of Flickr by Ed Hart (no changes).

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