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CAPITAL CITY FINANCIAL GROUP v. COUNTY OF COOK

June 2, 2004.

CAPITAL CITY FINANCIAL GROUP, an Indiana corporation, Plaintiff, V. COUNTY OF COOK, an Illinois corporation, Defendant


The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

OPINION AND ORDER

Plaintiff, Capital City Financial Group, Inc., filed a three-count Complaint against Defendant, the County of Cook. The Court granted Defendant's Motion for Summary Judgment as to counts alleging a breach of contract and account stated. Trial on the remaining count, alleging fraudulent misrepresentation, was by the Court without a jury.

The Court has considered the evidence, including the testimony of witnesses, exhibits, stipulations, the written arguments of counsel for the parties and the authority cited therein.

  Pursuant to Federal Rule of Civil Procedure 52, the Court hereby enters the following written Findings of Fact and Conclusions of Law, which are based upon consideration of all admissible evidence as well as the Court's determination of the credibility of the witnesses. To the extent that Findings of Fact, as stated, may be considered Conclusions of Law, they shall be deemed Conclusions of Law. Similarly, to the extent that matters expressed as Conclusions of Law may be considered Findings of Fact, they shall also be deemed Findings of Fact. FINDINGS OF FACT

  Plaintiff is an Indiana corporation, having its principal place of business in Indianapolis, Indiana. Plaintiff is a financing/funding company that provides financial services to various entities, including the "factoring" of such entities' accounts receivable. William Brooks is the general manager of Plaintiff, and he runs the business and is the person most knowledgeable about the corporation. The corporation had seven employees.

  Defendant is a body politic and corporation created under 55 ILCS 5/5-1001. At all times pertinent to this dispute, Defendant owned and operated Provident Hospital of Cook County. Provident is a small to medium sized hospital with 119 beds. The hospital is located at 500 East 51st Street in Chicago, Illinois. Provident provides medical facilities, personnel, and services to the general public for the care and treatment of physical and mental diseases.

  During the relevant period, Earl Bell was Provident's Associate Administrator of Finance, a position that is the functional equivalent of a Chief Financial Officer. Bell's responsibilities at Provident included the day-to-day supervision of Provident's financial operations. Bell reported directly to Provident's Chief Operating Officer.

  As Associate Administrator, Bell was responsible for the development, interpretation, coordination, and administration of the organization's policies on finance, accounting, budget, data processing, patient accounting, medical records, internal controls, and auditing. Bell was also responsible for the maintenance of records and procedures required to adequately safeguard the assets of Provident. Bell planned, organized, coordinated, and controlled the financial policies of Provident and controlled receipt of revenue, expenditure of funds, and conservation of Provident's assets. He reviewed, interpreted, analyzed, and communicated financial reports and data to management and Provident's board of trustees. As Associate Administrator, Bell, along with the Chief Operating Officer, had to ensure proper review and coordination of all contracta which directly affected Provident's interests.

  Third-party Defendant Mary A. Payne was the President of Swerbeh, Ltd. Around August 2000, Payne later acquired third-party Defendant JTD, Inc., which carried on the same business as Swerbeh. JTD is a temporary staffing agency which supplied goods and services to companies and hospitals. Plaintiff provided Payne with funding to purchase JTD.

  Defendant's purchasing ordinance in effect at all times relevant to this matter provides, in pertinent part, that:
The Board of Commissioners of Cook County shall have no power or authority to delegate to any committee or other person or persons the "power to act", when such "power to act" shall involve the letting of any contract or the expenditure of public money exceeding the sum of $10,000.00; and any action of said board, or of any committee thereof, or of any other person or persons shall be null and void. No money shall be appropriated or ordered paid by said County Commissioners beyond the sum of $10,000.00, unless such appropriation shall have been authorized by a vote of at least two-thirds of the members elected to the said county board. And no officer of Cook County, or other person shall incur any indebtedness on behalf of the county, unless first authorized by said Board of Commissioners.
Cook Co. Contr. & Purch. Ord., ch. 10, sec. 17. Thus, in order to secure services for an amount exceeding $10,000.00, Provident Hospital would have to ask the County Board for authority prior to entering into a contract. Once the County Board authorized Provident to secure services pursuant to a contract, the contract would have to go back to the County Board a second time for execution by the County's President, Purchasing Agent, and Comptroller. County Board approval is a matter of public record and is published on the fifth floor of the County building. County Board agendas and minutes are a matter of public record. No one at Provident, including Bell, had authority to authorize any payment over $250.00 to any vendor. All obligations relating to Provident in the year 2000 in excess of $250.00 required a County purchase order number.

  The head of a department, such as Bell, can institute the process of seeking County Board approval by writing a letter to the County Board asking the matter be placed on the Board meeting agenda. After the County Board has given authorization, the County Purchasing Agent advertises for bids. Then a County department, such as Provident, recommends the acceptance of a particular bid to the County Board. The Board then decides whether to approve the bid for contract and thereby create a County obligation.

  All County obligations in excess of $250.00 must have a purchase order number and a County 29A voucher form, which is the official vehicle to effectuate payment. Vendors billing the County must fill out the 29A voucher form referencing the purchase order number and may attach their own invoice forms to the County voucher form. Vendors then send the 29A voucher form to the County Comptroller's Office for payment.

  The Comptroller's Office checks the purchase order number on the 29A voucher form and checks whether the payment is for over or under $10,000.00 to determine if there are sufficient funds assigned to that purchase order number to make payment. If funds are not available, no payment is made.

  Bell's authority regarding approval of payment for goods or services for Provident was limited to department approval for further review by the Comptroller's Office. The largest amount of money to which Bell could bind the County in 2000 without County Board approval was $250.00. Bell, though, was an authorized signer of County 29A voucher forms. His signature on a 29A voucher form indicated departmental approval. After the County Board approved a contract that involved Provident, Bell also had the authority to represent to others that the County Board had in fact approved such a payment.

  Plaintiff is engaged in the business of factoring. Factoring is an unregulated business that involves the purchase of receivables from companies at a discounted value. The entity from which the account receivable is purchased is referred to as the "client." The entity which" owes the money reflected in the account receivable is the customer of the client and is referred to as the "account debtor."

  The purchase of accounts receivable is a multi-step process; and Plaintiff performs a customary practice and procedure before entering into a factoring transaction. First, the client prepares a client application that is followed by a client information sheet, which allows Plaintiff to obtain credit reports regarding the client. Plaintiff also requires the completion of a client interview sheet and requests certain basic information such as balance sheets, profit and loss statements, tax returns, personal financial statements, and samples of the client's invoices. Plaintiff then runs credit searches on the client, the account debtor, and obtains the personal credit record of the principals of the client, through online systems, such as Dun and Bradstreet and Lexis/Nexis. Plaintiff also requires that the client sign an Accounts Receivable Purchase and Security Agreement, which assigns the client's accounts receivable to Plaintiff.

  Plaintiff checks a Dun and Bradstreet report for each account debtor to determine if the company exists and checks the financial strength of each account debtor. This is important because the account debtor is ultimately the entity that is responsible for payment. After Plaintiff completes this due diligence procedure, Plaintiff notifies the account debtor of the assignment of the client's account. A notification form is sent by the client to the account debtor, using a document provided to the client by Plaintiff. Typically, the notification form is sent to the person at the account debtor who is responsible or knowledgeable enough to enforce the factoring agreement. By signing the notification form, the account debtor acknowledges the assignment of the accounts receivable to Plaintiff. Once Plaintiff receives the notification form, its practice is to contact the person who signed the notification to determine which person on behalf of the account debtor will verify that the work has been performed and the invoices are due and payable.

  Plaintiff creates a document, "Schedule A," each time it buys a set of invoices. Attached to each Schedule A is a document called "Purchases and Advances," which sets forth amounts involved in the factoring transaction. Schedule A, which contains the client's signature and concurrence that the matters attached thereto represent what Plaintiff is buying, constitutes a separate contract with its client each time Plaintiff purchases a particular invoice from a client. Plaintiff ...


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