United States District Court, Central District of Illinois, Peoria Division
March 26, 1993
SATINDER S. REKHI, PLAINTIFF,
WILDWOOD INDUSTRIES, INC., A FOREIGN CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Mihm, Chief Judge.
Pending before the Court is Defendant's Motion for Summary
Judgment (#13), Plaintiff's Motion for Summary Judgment (#8),
and Defendant's Motion to Strike (#12). For the reasons set
forth below, both Motions for Summary Judgment are DENIED.
Defendant's Motion to Strike is GRANTED.
The Court has jurisdiction pursuant to 28 U.S.C. § 1332.
Plaintiff is a resident of the State of New York; Defendant is
incorporated in Delaware and has its principal place of
business in Bloomington, Illinois. The amount in controversy
FACTUAL AND PROCEDURAL BACKGROUND
On August 15, 1986, Plaintiff Santinder S. Rekhi ("Rekhi")
entered into a written contract with Defendant Wildwood
Industries, Inc. ("Wildwood") for employment as Vice President
of Engineering for a term of five
years at an annual salary of $44,800.00 per year. A factual
dispute exists regarding the circumstances under which Rekhi's
employment ended with Wildwood in August of 1988. Wildwood
claims that Rekhi abruptly ended his own employment, thereby
violating his contract because (1) he did not provide Wildwood
with sixty days notice and (2) he did not finish his projects
before he left. Rekhi argues that he was fired. He relies on
the findings of the Department of Employment Services ("DES")
as proof that he was fired. See Plaintiff's exhibits attached
to Motion for Summary Judgment. The DES report was generated
after a hearing was held to determine whether Rekhi was
terminated for misconduct and therefore ineligible for
Although the admissibility of the DES evidence is an issue
in the Summary Judgment Motion, additional facts gleaned from
this report are the following. Rekhi was required to work
Monday through Friday and over the weekends when needed.
Apparently his boss asked him to work on a particular Sunday
when Rekhi had previously planned to host out-of-town guests
in conjunction with a religious holiday. According to the
report by DES, Wildwood "fired him" because of his
unwillingness to work on a Sunday. The Referee determined that
Rekhi was not fired for misconduct because his unwillingness
to work was "not unreasonable". Wildwood appealed the
Referee's November 3, 1988 decision, and the Board of Review
of DES affirmed that the Rekhi was not subject to a
disqualification of benefits under § 602(a) of the Illinois
Unemployment Insurance Act, Ill.Rev.Stat., ch. 48, ¶ 300 et
On December 12, 1988, Rekhi filed a claim with the State of
Illinois Department of Labor for $55,770.00 in bonus pay,
vacation pay, and severance pay to which he believed he was
entitled under his employment contract. On January 11, 1989,
the Department of Labor Wage Claims Division wrote a letter to
Wildwood Industries informing the company that a claim for
payment of wages or final compensation had been filed. The
letter instructed Wildwood to either send a check or money
order payable to Rekhi for the amount requested or send a
written explanation within ten days objecting to the request.
After Wildwood denied that it was indebted to Rekhi for
wages, a hearing was set on May 16, 1989. On May 23, 1989, the
Hearing Division of the Department of Labor found that the
Defendant was indebted to the Plaintiff in the sum of
$6,407.90 and issued a wage payment demand to Defendant for
that amount.*fn1 By letter, Wildwood was instructed to issue
a certified or cashier's check or money order made payable to
Rekhi for that amount within fifteen days or risk default
penalties and possible criminal violations pursuant to the
Illinois Wage Payment and Collection Act. Ill.Rev.Stat. ch.
48, ¶ 39m-1 et seq. (1987) ("the Act").
Wildwood appealed the Department of Labor's decision. On
September 13, 1989, the Chief Hearing Officer wrote to
Wildwood Industries denying Wildwood's request for a
rehearing. He stated that the record showed that Wildwood
received a full, fair, and complete hearing and the
determination of the Hearing Officer was supported by the
evidence presented. See Eleventh Circuit Court, McLean County,
Order entered July 12, 1990.
Rekhi filed his original Complaint in state court on March
9, 1989. On July 12, 1990, the trial court granted Defendant's
Motion to Dismiss Plaintiff's Complaint and determined that
the Complaint was barred under the doctrine of res judicata.
The trial court relied on Stafford v. Bowling, 85 Ill. App.3d 978,
41 Ill.Dec. 273, 407 N.E.2d 771 (1980) and found that the
Department of Labor has adjudicatory powers and is a competent
tribunal to hear and determine wage claims. Count I of
Plaintiff's Amended Complaint was dismissed with prejudice.
The Fourth District Appellate Court reversed the trial court
on September 30, 1991, 219 Ill.App.3d 312, 162 Ill.Dec. 375,
579 N.E.2d 1189, relying on the holding of Miller
v. J. M. Jones Co., 198 Ill. App.3d 151, 144 Ill.Dec. 461,
555 N.E.2d 820 (1990). The Court held that the Labor Department's
proceedings under the Illinois Wage Payment and Collection Act,
Ill.Rev.Stat. ch. 48, ¶ 39m-1 et seq. (1987), are not judicial
in nature and thus have no preclusive effect in subsequent
criminal or civil litigation. Accordingly, the Court reversed
the trial court in dismissing Count I of Plaintiff's Amended
Plaintiff then voluntarily dismissed the case in favor of a
forum in federal court. After the case was filed here,
Wildwood filed a Motion to Dismiss, or for a More Definite
Statement. Judge Kauffman issued a Recommendation which this
Court affirmed. The Motion to Dismiss was denied and the
Motion for a More Definite Statement on Count II was allowed.
The Order held that Count I and Count III were sufficiently
related for jurisdictional purposes. The Court also held that
Plaintiff had a right to sue for wages and penalties under the
Illinois Wage Act cited above.
Subsequently, both Plaintiff and Defendant filed Cross
Motions for Summary Judgment on Count I of Plaintiff's
Complaint which alleges that Wildwood breached its contract
with Rekhi by not paying Rekhi bonus pay, vacation pay, and
severance pay after the termination of his employment prior to
the end of the five year contract.
Plaintiff's Motion for Summary Judgment on Count I (# 8):
This Motion presents two issues:
(1) Does the DES determination preclude
consideration of Count I under the doctrine of
(2) Is the determination by DES admissible in
this proceeding in light of Ill.Rev.Stat. ch. 41,
¶ 640 § 1900?
The Court will address the second argument first because it
Rekhi argues that as a matter of law, Wildwood terminated
him and therefore, pursuant to ¶ 2, sentence 2, of the
Employment Contract*fn2, he is entitled to summary judgment on
Count I. Rekhi cites the DES referee's decision that he was not
discharged for misconduct:
Here the claimant was fired because he could not
work on a particular Sunday. Since that was
normally his day off and since he had a previous
commitment, his actions were not unreasonable.
See Plaintiff's Exhibit A. Rekhi contends that, at the time of
the hearing in 1989, § 1900 of the Illinois Unemployment
Insurance Act, Ill.Rev.Stat. ch. 48, ¶ 640, rendered
"information" from the DES proceedings, not the "decision" of
the DES Referee, inadmissible in subsequent lawsuits:
Information obtained from any individual or
employing unit pursuant to the administration of
this Act shall be confidential and shall not be
published or be open to public inspection, nor be
admissible in evidence in any action or
proceeding other than one arising out of the
provisions of this Act.
Rekhi relies upon Colvett v. L. Karp & Sons, Inc.,
211 Ill. App.3d 731, 570 N.E.2d 611
, 156 Ill.Dec. 135
1991), which held that § 1900 of the Illinois Unemployment
Insurance Act did not render decisions of DES confidential and
inadmissible in any other civil action:
We believe that the legislature intended the term
"information" to include all investigative
materials received from the parties during DES
proceedings. We also believe that a final DES
decision based on the evidence may be used in
other proceedings in order to defeat attempts to
relitigate such decisions.
156 Ill.Dec. at 137-38, 570 N.E.2d at 613-14.
However, on August 13, 1991, the Illinois Legislature
amended § 1900 of the Act to expressly prohibit the
admissibility of any finding, determination, decision, ruling,
or order issued pursuant to the Act. See Ill.Rev.Stat. ch. 48,
¶ 640, Sub.Pt.B. Wildwood argues that in this lawsuit, which
was filed on January 16, 1992, well after the effective date of
this amendment, all DES findings, reports, and information are
states that the exclusion of the DES evidence is supported by
Niven v. Siqueira, 109 Ill.2d 357, 94 Ill.Dec. 60,
487 N.E.2d 937 (1985), where the Illinois Supreme Court held:
A new law which affects only procedure generally
applies to litigation pending when the law takes
effect. [Citations omitted] The term "procedure"
in this context, has a much broader meaning than
solely pleading or practice . . . and generally can
be said to include rules of discovery, evidence,
and privilege (emphasis added).
487 N.E.2d at 941, 94 Ill.Dec. at 64. Therefore, Wildwood
requests that all evidence and references relating to the DES
proceeding be stricken.
Rekhi replies that, although the Amendment to the Act was
effective August 13, 1991, the DES hearing took place in 1989
when the 1989 version of § 1900 was in effect. He states that
this change in the law is not merely procedural, and even if it
were, the retroactive application of this Amendment to the DES
hearing would negatively impact his rights which vested with
the final judgment of the DES Board. Rekhi's reply brief fails
to specify what those vested rights are and how they are
The Court agrees with Defendant's argument and finds that
the express language of the 1991 version of § 1900 of the
Illinois Unemployment Act clearly applies to this case and
precludes Rekhi's references and exhibits regarding the DES
hearing as inadmissible. Defendant's Motion to Strike the DES
evidence is granted. Plaintiff's argument completely relies
upon the evidence now stricken. Therefore, the Court finds that
Plaintiff has failed to establish that he is entitled to
summary judgment as a matter of law. Plaintiff's Motion for
Summary Judgment is denied.
The parties also address the issue of whether a DES
determination has a res judicata effect in subsequent
litigation. The Court does not reach this issue because all
references to and reliance upon the DES determination is
stricken as inadmissible pursuant to the 1991 amendment to the
Illinois Unemployment Insurance Act (Ill.Rev.Stat. ch. 48, ¶
640, Subpart B). The revised provision logically eliminates the
possibility of a DES determination being considered in
subsequent litigation in any manner including its potential res
Defendant's Motion for Summary Judgment on Count I (# 13):
Wildwood argues that it is entitled to summary judgment on
Count I because of the res judicata effect of the Wage Payment
Demand issued by the Department of Labor Fair Labor — Wage
Claims Division. After a hearing on May 16, 1989, the Division
determined that Wildwood owed Rekhi $6,407.90. Wildwood points
to the fact that Rekhi's claim filed with the Illinois
Department of Labor was for $55,770.00 (presumably the total
amount which he believed he was due for severance pay, bonus
pay, and vacation pay combined). Wildwood argues that this
hearing constituted a full hearing on the merits and should be
given res judicata effect barring Count I in the current
action. See Stafford v. Bowling, 85 Ill.App.3d 978, 41 Ill.Dec.
273, 407 N.E.2d 771 (1st Dist. 1980).
Rekhi argues that Wildwood is unable to avoid the "law of
the case" which determined that a labor decision on a wage
claim is not entitled to preclusive effect. See Rekhi v.
Wildwood Enterprises, Inc., 219 Ill.App.3d 312, 162 Ill.Dec.
375, 579 N.E.2d 1189 (4th Dist. 1991). Relying on Miller v.
J.M. Jones Co., 198 Ill.App.3d 151, 144 Ill.Dec. 461,
555 N.E.2d 820 (4th Dist. 1990), the Fourth District Appellate
Court reversed the trial court and determined that the
administrative determination in the instant case was not
judicial in nature and therefore did not have a res judicata
effect. Rekhi argues that a federal court must not disregard
the judgment of an intermediate state appellate court in the
absence of persuasive data that the highest court of the state
would decide otherwise. Phelps v. Sherwood Medical
Industries, 836 F.2d 296, 306 (7th Cir. 1987).
Wildwood responds that the Rekhi decision should be accorded
little weight because it misinterpreted the holding of Miller
v. J.M. Jones Co. It argues that the Miller court conceded that
§ 14(b) of the Wage Payment and Collection Act "might indicate
the existence of a right of the [Illinois Department of Labor]
to make a binding determination." 555 N.E.2d at 822, 144
Ill.Dec. at 463. Nevertheless, the Miller court went on to hold
that the Department of Labor is without the power to make a
judicial determination. Wildwood criticizes the holding in
Miller for allegedly ignored the precedent set in Stafford v.
Bowling, 85 Ill. App.3d 978, 41 Ill.Dec. 273, 407 N.E.2d 771
(1st Dist. 1980). Wildwood contends that Stafford held that the
Department of Labor has a number of options available to it,
including the option of conducting a full-blown proceeding
which is judicial in nature, and argues that the wage payment
demand hearing at issue in this case was such a proceeding.
The Court agrees with Plaintiff and finds that it may not
ignore the law of the case. Wildwood has not presented
convincing evidence that the Illinois Supreme Court would
determine that the wage demand hearing did have a res judicata
effect on subsequent proceedings, particularly in light of the
holding in Miller, where the Fourth District found:
[a] reasonable interpretation of the Act requires
a finding that while certain penalties and
interest provisions may run from the Department's
initial determination of liability, actual
liability, if contested, must be determined by
the trial court.
Miller, 144 Ill.Dec. at 463, 555 N.E.2d at 822. The Court
specifically disagrees with Wildwood's characterization of the
holding in Stafford. Any comments made by the Stafford Court
regarding the nature of these hearings was dicta. That case
held that the Department of Labor's intervention on behalf of
an employee is discretionary under ch. 48, ¶ 39m-1, et seq.
Therefore, the Stafford decision does not diminish the weight
of the holding in Miller, supra, and the Court denies
Defendant's Motion for Summary Judgment.
The wage demand hearing conducted by the Illinois Department
of Labor does not have a res judicata effect on this proceeding
and therefore does not preclude Count I of Rekhi's Complaint.
The law of the case as created by the Appellate Court properly
relied on the holding in Miller and therefore would not be
likely to be reversed by the Illinois Supreme Court.
Defendant's Motion for Summary Judgment (# 13) is DENIED.
Pursuant to Ill.Rev.Stat. ch. 48, ¶ 640, Sub. Pt.B,
Defendant's Motion to Strike all references to the DES
proceeding contained in Plaintiff's Motion for Summary Judgment
is GRANTED. Therefore, Plaintiff's Motion for Summary Judgment
(# 8) is DENIED. The Clerk be directed to refer this back to
the Magistrate for further proceedings.