The Appellate Strategist

Does The Income Withholding for Support Act Require Strict Compliance?

Kirk Jenkins — Thu, 06 Jun 2013 14:03:05 -0800

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

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

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

The income withholding notice shall:

* * *

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

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

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

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

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

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

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

Illinois Not Liable for Elected Officials' Attorney Fees for Intentional, Willful or Wanton Misconduct

Kirk Jenkins — Mon, 03 Jun 2013 18:44:27 -0800

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

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

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

Here's the operative language from the statute:

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

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

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

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

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

Argument Report: Early Retirement Incentives for Municipal Pensions

Kirk Jenkins — Mon, 03 Jun 2013 18:40:18 -0800

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

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

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

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

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

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

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

Prazen will likely be decided in the fall.

Illinois Supreme Court to Decide Interplay Between Dram Shop Act and Insurance Guaranty Fund Act

Kirk Jenkins — Mon, 03 Jun 2013 18:34:49 -0800

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

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

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

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

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

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

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

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

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

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

Liquidated Damages For Junk Faxes Are Insurable in Illinois

Kirk Jenkins — Mon, 03 Jun 2013 17:56:55 -0800

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

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

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

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

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

Lifetime Lump Sum Workers' Comp Settlement Fully Allocable for Child Support

Kirk Jenkins — Mon, 27 May 2013 19:30:34 -0800

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

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

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

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

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

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

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

Illinois Supreme Court: A First Look at the Questions Log for 2013

Kirk Jenkins — Wed, 15 May 2013 10:40:36 -0800

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

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

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

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

The California Supreme Court Confirms the Power of Local Governments to Regulate Medical Marijuana

Michael Walsh — Mon, 13 May 2013 15:09:23 -0800

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

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

Argument Before Illinois Supreme Court in Performance Marketing Continued to Morning of May 22nd

Kirk Jenkins — Thu, 09 May 2013 10:10:50 -0800

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

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

Are "Click-Through" Internet Marketing Tax Laws Constitutional?

Kirk Jenkins — Wed, 01 May 2013 09:11:53 -0800

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

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

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

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

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

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

We expect PMA to be decided in the fall.

Divided Supreme Court Upholds Chicago Condo Association Ordinance

Kirk Jenkins — Fri, 26 Apr 2013 19:15:54 -0800

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

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

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

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

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

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

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

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

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

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

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

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

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

Illinois Supreme Court to Hear Five Civil Cases In May

Kirk Jenkins — Thu, 25 Apr 2013 10:12:09 -0800

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

Wednesday, May 15:

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

Thursday, May 16:

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

Wednesday, May 22:

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

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

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

The Kilbride Court After Two Years: A Pragmatic and Collegial Team

Kirk Jenkins — Thu, 25 Apr 2013 09:12:21 -0800

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In reviewing these sixteen cases, a few substantive patterns emerge. Chief Justice Kilbride took a more plaintiff-friendly position in four closely divided tort cases (Simpkins v. CSX Transportation, Doe-3 v. McLean Co., Kaufman v. Schroeder and Moore v. Chicago Park District), and Justice Garman did so in three, while Justices Burke, Thomas, Karmeier and Theis took the more plaintiff-friendly position in only one of the four cases. Chief Justice Kilbride and Justice Theis both adopted more employee-friendly positions in Chicago Teachers Union v. Board of Education and Speed District 802 v. Warning, and both found standing for opposition groups’ challenge to an environmental delisting petition in Sierra Club v. Illinois Pollution Control Board. The Court took a moderately relaxed attitude in two civil procedure “substance over form” cases in 2012, with Justices Burke, Freeman and Theis expressing willingness to forgive certain procedural defects under defined circumstances in both Downtown Disposal Services v. The City of Chicago and Santiago v. E.W. Bliss Co.

The Court clearly makes an effort to distribute its work evenly. To date, Justice Thomas has written fourteen opinions for the Kilbride Court, Justice Freeman 13, Justices Burke, Garman and Theis 12 each, and Justice Karmeier 11. Not surprisingly, Chief Justice Kilbride and Justice Freeman write most frequently in dissent, with the Chief Justice producing eight civil dissents and Justice Freeman seven. The other Justices write in dissent much less often, with Justice Garman penning four, Justices Karmeier and Theis three each, Justice Burke two and Justice Thomas only one.

When we turn to non-unanimous decisions, the outline of our proposed voting block once again emerges. Justice Burke, one of our swing voters, has written the majority decision in 6 of the non-unanimous civil decisions. Justices Garman and Karmeier have written five and four apiece, respectively. Justice Burke's decisions in non-unanimous cases garner fewer average votes -- 4.8 for Justice Burke to 6.4 for Justice Garman and 5.3 for Justice Karmeier – the result of Justice Burke having written the majority opinion is half of the Court’s 4-3 cases (Justices Garman and Karmeier, on the other hand, have written for the Court in six of the ten two-dissenter cases).

To further study the Kilbride Court's dynamics, we turn to the Justice-by-Justice agreement rates: in what percentage of civil cases where both Justices participated did they vote the same way? Over the past two years, Justice Thomas and Garman have agreed in 96.1% of all civil cases. Justices Thomas and Karmeier have agreed 93.3% of the time, and Justices Garman and Karmeier have voted together 91.0% of the time.

Justice Burke has agreed with Justice Thomas in 89.6% of the Court's civil decisions. She has voted with Justice Garman 87.5% of the time, and with Justice Karmeier 89.7%. Justice Theis, our other proposed "swing" voter for close civil cases, is just behind Justice Burke: 88.9% agreement with Justice Thomas, 89.3% agreement with Justice Garman and 89.0% agreement with Justice Karmeier. Justices Theis and Burke agree 86.7% of the time.

Not surprisingly given the data we considered above, Chief Justice Kilbride's agreement statistics are somewhat lower. The Chief agrees with Justices Burke, Garman, Freeman, Thomas and Karmeier around three quarters of the time (73.3%, 78.7%, 72.6%, 80.8% and 75.7%, to be precise), and with Justice Theis only slightly more often - an 84.3% agreement rate.

The Court's divisions stand out more clearly when we limit our sample to non-unanimous civil decisions. Once again, the core Justices are relatively tightly bunched. Justice Thomas agrees with Justice Garman in 87.5% of such cases, and with Justice Karmeier in 79.2%. Justices Garman and Karmeier agree in 73.1% of the Court's non-unanimous civil cases.

The agreement rates for Justice Burke and Justice Theis seem to reflect the path to a winning majority in close cases. Justice Burke agrees with Justice Thomas 66.7% of the time, and with Justice Karmeier 69.2% of the time in non-unanimous cases. Justice Theis' agreement rates with our core voters in closer cases are almost identical: Justice Thomas, 63.6%; Justice Garman 66.7%, and Justice Karmeier 66.7%. However, Justices Burke and Theis themselves often diverge, showing an agreement rate of only 58.3% in non-unanimous cases.

Once again, agreement rates for Chief Justice Kilbride and Justice Freeman are much lower. The Chief agrees with Justices Garman and Thomas in only two of every five non-unanimous cases (38.5% and 41.7%, respectively), and with three of the remaining Justices significantly less often. The lone exception is Justice Theis, who has agreed with the Chief Justice in 54.2% of non-unanimous cases. Although Justice Freeman seldom votes with the Chief Justice in such cases -- 23.1% agreement - he votes with Justices Garman, Thomas, Karmeier and Theis between forty and fifty-four percent of the time.

Our analysis of the dynamics of the Kilbride Court just past its second anniversary suggests several tentative lessons for counsel: (1) if you prevailed at the Appellate Court, the odds your decision will be reversed are roughly two in three (unless you're coming from the Fourth District); (2) the Court's ultimate decision is quite likely to be unanimous; and (3) if the decision is not unanimous, the Justices most likely to be in the majority are Justices Thomas, Garman, Karmeier and either Burke or Theis.

Genesis Healthcare v. Symczyk: Nearly as Many Questions as Answers

Kirk Jenkins — Tue, 23 Apr 2013 12:45:12 -0800

When the petition for certiorari in Genesis Healthcare Corp. v. Symczyk was granted, it appeared that the Supreme Court was poised to resolve a clear split in the Circuits about the permissibility of “pick off” moves, at minimum for actions under the Fair Labor Standards Act if not, at least by inference, under Rule 23 as well. The Court granted cert on the following question: “Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff’s claims.”

But when the decision came down early last week, observers were left debating exactly how much the Court had decided, and what the path forward in the lower courts was likely to be.

The FLSA sets federal minimum wage, maximum hour and overtime guarantees which cannot be modified by contract. Although Congress barred traditional Rule 23 class actions under the FLSA in 1947, Congress has provided instead for an FLSA “collective action”: the plaintiff sues on behalf of “all persons similarly situated,” and interested employees must opt-in, rather than opting out.

Symczyk, a registered nurse, filed a collective action FLSA complaint alleging that her employer had deducted meal break times from her paycheck whether or not she had an uninterrupted break. Along with its answer, the defendant served the plaintiff with an offer of judgment under Federal Rule 68, offering the plaintiff all the unpaid wages she was seeking, plus “such reasonable attorneys’ fees, costs, and expenses” as the Court might set. Plaintiff never responded to the offer, and when the time limit ran out, the defendant moved to dismiss on grounds of mootness, the plaintiff having been offered full relief. The district court granted the motion, but the Third Circuit reversed. According to the Third Circuit, even if the individual plaintiff’s claim was mooted by the offer of judgment, the eventual certification of a collective action would relate back to the day the complaint was filed.

In an opinion by Justice Thomas (with the Chief Justice and Justices Scalia, Kennedy and Alito joining), the Supreme Court reversed the Third Circuit. The case was not an appropriate vehicle for resolving the mature split in the Circuits on the issue of whether a collective action plaintiff can be “picked off” by a Rule 68 offer, the majority found. Both the District Court and the Third Circuit had held that Symczyk’s own claim was mooted by the unaccepted offer, and Symczyk had failed to file a cross-petition for certiorari on the point. The plaintiff having waived the point, the majority assumed for purposes of the case – without deciding – that a Rule 68 offer of judgment, whether it’s accepted or not, moots the individual plaintiff’s claim.

Once the majority disposed of that issue, it had little difficulty disposing of the remainder of the case. As we discussed in our detailed preview of Symczyk here, the plaintiffs’ principal argument on appeal was that two 1980 Supreme Court decisions, Deposit Guar. Nat'l Bank of Jackson v. Roper and United States Parole Comm'n v. Geraghty, should be extended from Rule 23 class actions to FLSA collective actions. Roper and Geraghty had both held that under certain circumstances, the mooting of a class representative’s claim does not necessarily moot the action, but the Symczyk majority held that both were distinguishable.

The Roper-Geraghty line of cases, the majority held, turned on the independent legal status of a Rule 23 class once it has been certified. Absent employees who might – or might not – choose to opt in to an FLSA collective action, in contrast, had no such status. The representative plaintiff’s mere interest in continuing with a collective action despite the offer of judgment is not sufficient to overcome mootness. The majority acknowledged that mooting out the current plaintiff’s claim would have the effect of blocking unjoined employees from vindicating any claims they might have in the present suit, but pointed out that there was nothing keeping them from suing on their own.

Justice Kagan dissented, joined by Justices Ginsburg, Breyer and Sotomayor. The dissenters argued that the majority opinion was based on a fallacy: that the unaccepted Rule 68 offer had, in fact, mooted the individual plaintiff’s claim. Given that, in the dissenters’ view, “an unaccepted offer of judgment cannot moot a case,” the remainder of the majority’s decision answered a question that never should have arisen in the first place. Nevertheless, the dissenters made it clear that they disagreed with the majority’s resolution of that issue, arguing that the named plaintiff’s right to represent unjoined employees was just as much a cognizable stake in the action for an FLSA case as the right to represent a Rule 23 class was.

So where does all this leave the law? To be sure, Symczyk has laid to rest the notion that FLSA collective actions are merely Rule 23 class actions under a different name. Given the explosive increase in FLSA filings in recent years, this is important progress. The battle going forward seems certain to be joined on the issue which the majority declined to settle – whether a defendant can moot out an individual plaintiff’s claim by serving a Rule 68 offer of judgment. There seems to be something constitutionally dubious (to put it mildly) about the notion that litigation can or should continue without plaintiffs’ counsel having a named plaintiff with a concrete financial stake in the matter to represent. Nevertheless, whether or not a Rule 68 offer of judgment will moot a representative action will likely depend, at least in the short run, on the Circuit in which a case is pending, with each side of the Circuit split adhering to its own prior precedents until such time as the Supreme Court is ready to take up the issue again.

Illinois Supreme Court to Decide Condominium Dispute on Thursday

Kirk Jenkins — Mon, 22 Apr 2013 14:30:00 -0800

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

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

Illinois Supreme Court Intervenes in Politically Charged State Pension Battle

Kirk Jenkins — Mon, 22 Apr 2013 11:51:14 -0800

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

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

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

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

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

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

Why Russell v. SNFA Matters

Kirk Jenkins — Sat, 20 Apr 2013 13:12:06 -0800

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

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

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

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

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

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

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

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

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

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

Justice Rita Garman filed a lengthy dissent. Jurisdiction was clearly absent, Justice Garman insisted, whether measured under Asahi and Nicastro, or the Illinois Supreme Court's earlier decision in Wiles v. Morita Iron Works Co., which the majority had relied upon.

Besides, Justice Garman wrote, the majority had partially mischaracterized Justice Breyer's concurring opinion in Nicastro. There was nothing suggesting that Justice Breyer's reference to the O'Connor test was merely illustrative; it seemed to be an endorsement. And if it was, given that Justice Alito had signed on to the Breyer concurrence, there were six Justices who had endorsed the O'Connor "stream of commerce plus something more" theory from Asahi.

And there was no "something more" here, according to Justice Garman. There was no evidence that SNFA knew that Agusta helicopters were in Illinois, and without that, an assertion of jurisdiction would abandon the long-settled requirement that a defendant have some connection to the forum. "The majority's holding," Justice Garman wrote, "would subject defendant to jurisdiction in any state in which Agusta sold helicopters containing defendant's products, whether or not defendant was actually aware its products were being marketed or sold in such a state, thereby essentially causing defendant's 'amenability to suit [to] travel with the chattel.'"

Nor was Justice Garman persuaded by SNFA's business relationship with Hamilton Sunstrand. None of the approximately one million dollars in products which had been purchased by Hamilton over a span of years had been shipped into Illinois; all had been sent to San Diego.

In Justice Garman's view, the majority opinion was a major threat to manufacturers whose customers ultimately sold products into Illinois:

Under the majority holding, a foreign defendant can now be haled into court in Illinois for even the most fleeting and inconsequential business contact with this state. Indeed, defendant is now subject to Illinois jurisdiction even though it had never actually sold a single item to an Illinois consumer.

Foreign manufacturers - not only those based outside the U.S., but even manufacturers in other states - should take Justice Garman's concerns to heart for several reasons.

First, Russell takes a quite liberal view of the Nicastro approach to personal jurisdiction over foreign manufacturers. The plurality in Nicastro sought to reconcile the "stream of commerce" standard from World-Wide Volkswagen with the more general principles of jurisdiction. World-Wide Volkswagen was simply a restatement of the more general notion that a manufacturer may be subject to jurisdiction where it purposefully seeks to serve the forum market, the plurality wrote. "The principal inquiry in cases of this sort is whether the defendant's activities manifest an intention to submit to the power of a sovereign." According to the plurality, "jurisdiction is in the first instance a question of authority rather than fairness."

As Justice Garman observes in Russell, Justice Breyer does not reject Justice O'Connor's "stream of commerce plus something more" theory from Asahi; he seems to endorse it. There is no language of limitation in Justice Breyer's application of the theory. But Justice Breyer clearly views the plurality's opinion in Nicastro as tightening jurisdiction even further than the O'Connor theory, and it is this he intends to reject: "The plurality seems to state strict rules that limit jurisdiction where a defendant does not 'inten[d] to submit to the power of a sovereign' and cannot 'be said to have targeted the forum.' But what do those standards mean when a company targets the world by selling products from its Web site? . . . I do not agree with the plurality's seemingly strict no-jurisdiction rule." But after Russell, any notion that at minimum Justice O'Connor's view states the law is gone, at least in Illinois courts. Now, there is a real risk that jurisdiction might not only follow the chattel, but the end-user product manufactured from the chattel as well.

The second point is a related one. Regardless of how close the relationship between the defendant and the helicopter manufacturer in Russell was, the notion of a more-or-less customized component for an end-user product is far from unique in the economy as a whole. But that doesn't mean the component manufacturer and its customer are financially joined at the hip; if manufacturer's price rises, the customer will send its specs off to a different manufacturer (indeed, counsel conceded at oral argument in Russell that several other companies also made high-performance ball bearings). If the customer goes elsewhere (or goes under), the manufacturer will replace the customer. All this is basic economics straight out of industrial organization textbooks. But in the wake of Russell, anyone who manufactures components which are arguably built to the customer's specifications must wonder if a court will construe its customers' sales as the manufacturer's own for purposes of minimum contacts.

The third point of concern post-Russell flows from the majority's construction of the "arising out of" element of specific jurisdiction. Traditionally, the "arising out of" limitation has been thought to relate to the forum's territorial jurisdiction -- if you act in a state, the forum has the power to adjudicate the consequences flowing from your act. But the standard is "flexible," the majority in Russell found, holding that decedent's accident involving custom-made helicopter bearings "arose out of" the sale of custom-made fixed-wing aircraft bearings to an entirely different customer. This seems to be a liberal construction of the element indeed. Post-Russell, it may be that lower courts will interpret the Court's opinion to mean that future accidents "arise out of" virtually any sale of any product in a defendant's entire catalogue, so long as the sale happened in the jurisdiction.

The Illinois Supreme Court 2012: The Year in Review

Kirk Jenkins — Fri, 19 Apr 2013 12:30:06 -0800

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Narrowing Government Liability. In three cases, the Court set narrow standards for holding the government and its employees liable in tort. Moore v. Chicago Park District was a survival and wrongful death action arising from a decedent’s fall in the snow-and-ice covered parking lot of a city-owned recreational facility. The state Tort Immunity Act bars liability “based on the existence of a condition of any public property” available for recreational use, but the decedent had actually fallen over a pile of snow moved by a city plow. So was the decedent injured by a “condition” of the property at all, as opposed to allegedly negligent plowing? The Court answered “no,” finding that the Act immunized the government from liability for falls on snow and ice, even when government employees had plowed the property.

Patrick Engineering v. The City of Naperville arose from cost overruns on a stormwater management system. The plaintiff alleged that it undertook additional work outside the contract based on the city’s representations; various city employees supposedly knew about the additional work, but never directed the plaintiff to stop. The Supreme Court unanimously held that a municipality could not be equitably estopped based only on the apparent authority of its officials; express authority (and reasonable reliance on words or conduct) were necessary for liability.

Harris v. Thompson arose from a collision between the plaintiffs’ vehicle and an ambulance owned by a public hospital district. Harris involved a perceived conflict between the Tort Immunity Act, which states that absent willful and wanton conduct, neither local public entities nor their employees are “liable for an injury caused by the negligent operation” of an emergency vehicle responding to an emergency call, and the Vehicle Code, which imposes on the drivers of emergency vehicles a “duty of driving with due regard” for the safety of others. The Supreme Court held that in fact, the statutes were not in conflict. While the Vehicle Code extended certain privileges to drivers of emergency vehicles, the Tort Immunity Act bestowed immunity from liability on government employees and entities whether or not a duty of care was present.

Promoting Predictability for Illinois Business. Late in the year, the Court handed Illinois business two important victories, turning back arguments which would have substantially hamstrung ordinary business operations.

Pielet v. Pielet involved claims under a breached consultancy contract. By the time of the suit, the corporation which had signed the contract had been dissolved for several years; a successor had declared bankruptcy and stopped paying on the contract.

Whether or not the dissolved corporation could be liable turned on the meaning of the Business Corporation Act, which permits suits against dissolved corporations for five years “for any right or claim existing, or any liability incurred” before they were dissolved. Had the Court agreed with the plaintiff that mere contract rights without a breach were a “right or claim existing,” it would have become substantially more difficult to fully and finally wind up any corporation in Illinois. Under such a standard, winding up a corporation would have required not merely worrying about accrued claims, but accounting for potential long-tail liabilities from every active contract the corporation has which might be breached by a successor sometime after dissolution. Ultimately all seven Justices agreed that a “right or claim existing” was limited to a claim which accrued before the dissolution of the corporation.

The Court took an equally pragmatic approach in Center Partners, Ltd. v. Growth Head, GP, a case arising from the purchase of a large company by a group of corporations, partnerships and trusts. During the negotiations, the buyers had disclosed to each other some of their attorneys’ advice on the deal, shared certain documents and permitted their attorneys to confer about potential legal issues. The buyers were sued by limited partners in one of the target company’s assets, and the plaintiffs successfully argued that the buyers’ disclosure of privileged materials to each other triggered a general subject matter waiver of documents relating to the sale.

Declining to follow a number of Federal decisions in other parts of the country broadly applying waiver, the Supreme Court unanimously reversed, holding that unless the information is later abused to gain a tactical advantage in litigation, non-judicial disclosures should not result in a general subject matter waiver. The Court’s recognition of the policy interests at stake is particularly to be applauded; the Court pointed out that a broad waiver would have made negotiations for the sale of business and products with intellectual property aspects far more difficult, impeding communication between buyers and sellers, and likely leading to more litigation.

2013 promises to be another active year for high-stakes business litigation at the Court. The year begins in two weeks with Russell v. SNFA, the Court's first opportunity to apply the United States Supreme Court's Nicastro decision limiting U.S. courts’ jurisdiction over foreign-based companies.

How Is an Appeal from the Certification of a Pollution Control Facility Brought?

Kirk Jenkins — Sun, 07 Apr 2013 21:37:32 -0800

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

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

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

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

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

Is an Emergency Room Physician Protected From Liability By the Good Samaritan Act?

Kirk Jenkins — Sun, 07 Apr 2013 21:32:54 -0800

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

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

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

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

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