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U.S. NURSING CORP. v. ST. JOSEPH MED. CTR.

January 26, 1994

U.S. NURSING CORPORATION, a corporation, Plaintiff,
v.
SAINT JOSEPH MEDICAL CENTER, a corporation, Defendant.



The opinion of the court was delivered by: MARVIN E. ASPEN

 MARVIN E. ASPEN, District Judge:

 This breach of contract action arises from an agreement by plaintiff U.S. Nursing Corporation ("U.S. Nursing") to supply nurses to defendant Saint Joseph Medical Center ("Saint Joseph") during a nurses' strike at the hospital. Presently before us is defendant's motion for summary judgment. For the following reasons, we grant the motion.

 I. Factual Background

 On January 8, 1993, in response to a threatened strike by its own nurses, Saint Joseph entered into a contract with U.S. Nursing, a nurse staffing agency, for a supply of nursing personnel. Under the agreement, either party could terminate the contract upon seven days written notice. However, if the hospital failed to give the requisite notice, it was to pay for seven days of scheduled work. *fn1"

 Under the Illinois Nurse Agency Licensing Act (the "Act"), all nurse agencies must be licensed in order to supply nurses to health providers. 225 ILCS 510/1 et seq. Despite this statute, U.S. Nursing did not have a license to operate a nurse agency in Illinois when it entered into the contract with Saint Joseph. *fn2" However, immediately following the beginning of the contract on January 18, 1993, U.S. Nursing applied to the Illinois Department of Labor ("Department") for a license.

 On January 28 or 29, 1993, the Department notified U.S. Nursing that a hearing had been scheduled on the Department's proposed denial of the agency's application. In addition, the notice apprised U.S. Nursing that operating without a license violated the Act, informed the agency that it faced possible fines of up to $ 1,500 and advised the agency to cease and desist immediately.

 Shortly thereafter, on February 2, 1993, the Department sent a notice to Saint Joseph informing the hospital that U.S. Nursing was operating without a license in violation of the Nurse Agency Licensing Act. The Department went on to warn the hospital that the Act further prohibits health care providers from using the services of an unlicensed agency. Finally, the notice advised Saint Joseph "to immediately cease and desist from using the services of the U.S. Nursing Corporation." Def. Brief at Exh. 9. That same day, the hospital called U.S. Nursing and told the agency that it was terminating the contract effective 6:59 a.m. February 4, 1993. *fn3"

 Although Saint Joseph paid U.S. Nursing for all services rendered through February 4, 1993, it did not honor the guarantee provisions set forth in the contract to ensure seven days of payment in the event that the hospital terminated the agreement without seven days notice. As a result, U.S. Nursing filed the instant action to recover on the guarantees and to collect costs related to transporting nurses to Saint Joseph's Joliet facility.

 III. Discussion

 Saint Joseph moves for summary judgment on this action primarily on the basis that the contract itself was illegal and therefore unenforceable. Neither party disputes that the Act requires nursing agencies to be licensed, nor does U.S. Nursing challenge the fact that it was not licensed at the time it entered into the contract with Saint Joseph. However, the parties disagree about whether U.S. Nursing's failure to comply with the Act renders the contract unenforceable.

 From an early date, Illinois courts have held that they will not enforce contracts that require parties to violate the law. See, e.g., Henderson v. Palmer, 71 Ill. 579 (1874). Although Illinois has not adopted it, the Restatement of Contracts 2d, ยง 181 essentially captures the state's approach to contracts entered into in violation of licensing statutes. See, e.g., Tovar v. Paxton Community Memorial Hospital, 29 Ill. App. 3d 218, 330 N.E.2d 247 (1975) (in refusing to enforce a contract with an unlicensed physician, court noted that licensing statute had regulatory, rather than revenue-raising, purpose). Section 181 reads as follows:

 
If a party is prohibited from doing an act because of his failure to comply with a licensing, registration or similar requirement, a promise in consideration of his doing that act or of his promise to ...

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