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12/11/97 STEPHEN MALLINGA v. HARVEY FAMILY MEDICAL

December 11, 1997

STEPHEN MALLINGA, PLAINTIFF-APPELLANT,
v.
HARVEY FAMILY MEDICAL CENTER, SOUTH SHORE MEDICAL GROUP, TERROLD B. BUTLER, LAVERNE A. CURRIE AND LOWELL M. ZOLLAR, AND CHICAGO HMO, LTD., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Ellis Reid, Judge Presiding.

Rehearing Denied January 13, 1998. Released for Publication January 22, 1998.

The Honorable Justice South delivered the opinion of the court. Hoffman, P.j., and Hourihane, J., concur.

The opinion of the court was delivered by: South

The Honorable Justice SOUTH delivered the opinion of the court:

Plaintiff filed a complaint against defendants, Harvey Family Medical Center, South Shore Medical Group, Terrold B. Butler, Laverne A. Currie, Lowell M. Zollar and Chicago HMO, Ltd., alleging that defendants greatly diminished corporate assets resulting in great personal gain to themselves and to the detriment of plaintiff, and that defendants failed to provide compensation to plaintiff for medical services he rendered to health maintenance organization patients. Harvey Family Medical Center and Chicago HMO, Ltd., were voluntarily dismissed from the litigation. On October 27, 1993, the remaining defendants moved to strike counts I and II of the complaint. The court entered an order dismissing count I of the complaint with prejudice and count II without prejudice with leave for plaintiff to file an amended count II.

On November 3, 1993, plaintiff filed an amended complaint. Defendants filed a motion to strike and dismiss plaintiff's amended complaint, and the court granted defendants' motion with prejudice on December 14, 1993. Plaintiff filed a motion to reconsider and for leave to file a second amended complaint on January 13, 1994. On March 29, 1994, the court denied plaintiff's motion for leave to file a second amended complaint but granted plaintiff leave to file a third amended complaint.

Plaintiff filed a third amended complaint on April 4, 1994, and the cause proceeded to trial, after which the court entered judgment in favor of plaintiff for $18,613. Thereafter, plaintiff filed a motion to reconsider alleging that the judgment was substantially lower than the damages proven. On March 12, 1996, the circuit court denied plaintiff's motion to reconsider the judgment. This appeal followed. We affirm as modified.

In 1983, managed health care and health maintenance organizations (HMOs) were in their initial stages. In order to provide adequate care to their subscribers, HMOs would only contract with organizations that could provide a group of doctors that offered a full range of primary care services and to whom the HMO would issue one monthly check.

In order to procure such contracts, on June 16, 1983, plaintiff and the three individual defendant doctors formed a corporation called the South Shore HMO Management Group, Inc. (SS HMO). Each of them was a 25% shareholder of SS HMO. The articles of incorporation stated the original purpose of SS HMO as follows:

"The South Shore HMO Management Group, Inc. is a management group organized and incorporated to assist in the coordination and administration of non-medical activities for health maintenance organizations."

Shortly after the formation of SS HMO and procuring a contract with Chicago HMO, the doctors each formed a primary care unit (PCU). Dr. Zollar's and Dr. Butler's PCUs each offered pediatric care, Dr. Currie's and plaintiff's PCUs offered adult care, and plaintiff offered obstetrical/gynecological (OB/GYNE) care. Each PCU maintained a separate and independent medical practice with a separate lease, legal status, expenses, malpractice insurance, medical supplies, medical equipment and the like.

SS HMO was a medical management and administrative entity that maintained a separate and independent office from the PCUs. SS HMO had a separate lease, expenses, personnel and office equipment. Its office contained no medical equipment or examination rooms but was equipped solely to serve the PCUs.

In 1984, as a result of a telephone conversation Dr. Zollar had with the Illinois Secretary of State's office, the name of SS HMO was changed to South Shore Medical Group, P.C., an Illinois corporation (SSMG), and the purpose of the corporation was amended, in relevant part, as follows:

"To practice the profession of medicine, rendering that type of professional services and services ancillary thereto. All shareholders, directors and officers must be licensed to practice the ...


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