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Dent-A-Med, Inc. v. Lifetime Smiles

December 29, 2008

DENT-A-MED, INC., D/B/A HC PROCESSING CENTER, PLAINTIFF,
v.
LIFETIME SMILES, P.C., FORMERLY KNOWN AS WHITE OAK HON. HARRY D. LEINENWEBER DENTAL, P.C., AN ILLINOIS CORPORATION; DW MANAGEMENT COMPANY, FORMERLY KNOWN AS LIFETIME SMILES, INC., AN ILLINOIS CORPORATION; FRED S. WEINER, DAISY WEINER, JOY A. TEXTER, AND SUSAN YANOWSKY, DEFENDANTS.



The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court

MEMORANDUM OPINION AND ORDER

Presently before the Court is a Motion for Summary Judgment filed by Defendants Daisy Weiner (hereinafter, "Ms. Weiner"), Lifetime Smiles P.C. (hereinafter, "Lifetime Smiles"), and DW Management Company (hereinafter, "DW Management") (collectively, the "Defendants"), with regards to all remaining counts brought against them by Plaintiff Dent-A-Med, Inc. (hereinafter, "Dent-AMed") in its Third Amended Complaint. The Motion argues that the Court should apply the doctrine of collateral estoppel based on the judgment in a corollary bankruptcy case, In re Fred Weiner (Dent-A-Med, Inc. v. Fred S. Weiner), No. 06 A 688, 2008 WL 2699914 (Bkrtcy.N.D.Ill., July 3, 2008). Specifically, Defendants seek a Summary Judgment ruling on the claims for common law fraud (Count I) and statutory fraud under the Illinois Consumer Fraud and Deceptive Practices Act (the "ICFDPA") (Count II), brought against all three Defendants (Ms. Weiner on an alter ego theory). Defendants also move for Summary Judgment on the claims for breach of contract (Count III) and conversion (Count IV), brought against all three Defendants (Ms. Weiner individually). For the reasons stated herein, the Motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

A. Facts

Dent-A-Med is a company that provides financing to patients undergoing dental procedures. Defendant Fred Weiner ("Dr. Weiner") practiced dentistry under the corporate entity, White Oak Dental, P.C. ("White Oak"), which changed names to Lifetime Smiles, P.C. in 2003. Dr. Weiner was the sole shareholder and director of this entity. Lifetime Smiles, Inc., which changed names to DW Management, was the entity responsible for the management operations of White Oak. Ms. Weiner was the sole shareholder and director of this entity.

On December 20, 2002, Dent-A-Med and White Oak (doing business as Lifetime Smiles) entered into a Provider Agreement.

See Defs.' Ex. A. Ms. Weiner signed the Provider Agreement on behalf of Lifetime Smiles. In the Provider Agreement (the "Agreement"), Lifetime Smiles agreed to submit charge slips to Dent-A-Med for payment for dental goods and services. On its face, the Agreement does not indicate a prohibition against the practice of billing before goods or services are provided ("pre-billing"), and the Court is aware of no written policy prohibiting pre-billing prior to January 2004.

In the course of its business relationship with Dent-A-Med, Lifetime Smiles pre-billed some services. As evidenced by a telephone call between Ms. Weiner and a Dent-A-Med employee, Dent-A-Med knew that Lifetime Smiles submitted charge-slips for pre-billed goods and/or services, and it accepted the practice of pre-billing. On January 6, 2004, Dent-A-Med informed Lifetime Smiles that it would no longer accept pre-billing.

On July 21, 2004, Dent-A-Med filed suit against Lifetime Smiles, DW Management, Ms. Weiner, Dr. Weiner, and other individual defendants, alleging common law and statutory fraud, breach of contract, and conversion. The fraud claims in the Third Amended Complaint are based on the allegation that Defendants submitted charge slips for work not completed, work done improperly, and/or work performed by non-licensed employees. The contractual claim alleges that Defendants are obligated to reimburse Dent-A-Med for funds not paid by and/or credited to patients by Dent-A-Med pursuant to the Provider Agreement.

B. Dent-A-Med, Inc. v. Fred S. Weiner

In October 2005, Dr. Weiner filed a voluntary Chapter 7 bankruptcy case. Dent-A-Med then filed an adversary complaint against Dr. Weiner pursuant to 11 U.S.C. § 523(a)(2)(A), which provides that a Chapter 7 Discharge does not discharge an individual debtor from any debt obtained by "false pretenses, a false representation, or actual fraud." In re Fred Weiner, 2008 WL 2699914 at *5. The case was tried on September 26 and 27, 2007, and April 17, 2008, before Judge Pamela S. Hollis, who entered judgment in favor of Dr. Weiner on July 3, 2008. Id.

In her Opinion, Judge Hollis held that "Dent-A-Med failed to establish fraud or misrepresentation perpetrated specifically against it by Weiner" under 11 U.S.C. § 523(a)(2)(A). Id. at *2. According to Judge Hollis, Dent-A-Med "essentially alleg[ed] the same facts" as those in this case, namely that "Weiner billed for partially complete work and Weiner's work was negligently or improperly performed by unlicensed employees of Weiner's companies." Id. Judge Hollis determined that pre-billing was "a routine practice" known to Dent-A-Med and that Dent-A-Med failed to establish that it prohibited pre-billing during the relevant time period. Id. at *5. Dent-A-Med also failed to show evidence of charge slips for work completed improperly. Id. at *7. Judge Hollis concluded that "the debt at issue was not caused by fraud perpetuated by Weiner" but instead "arose out of the routinely accepted pre-billing practice between Lifetime Smiles and Dent-AMed in their course of business under the Provider Agreement." Id. Finally, because Dent-A-Med failed to establish fraud, Judge Hollis found it "unnecessary to even consider" alter ego allegations against Dr. Weiner. Id. at *2, *7. She noted, however, that Dent-A-Med "may have a right to reimbursement" under a breach of contract claim, but she could "not transform total potential contract damages into total fraud damages." Id. at *2, *5 (noting that the Provider Agreement preamble is vague).

C. Current Motion for Summary Judgment

Defendants now contend that the doctrine of collateral estoppel entitles Ms. Weiner, Lifetime Smiles, and DW Management to summary judgment. Defendants argue that, in the bankruptcy proceeding, Dent-A-Med litigated identical facts to those alleged in this action, and that Judge Hollis' findings of facts were essential to her final judgment in favor of Dr. Weiner. With respect to Counts I and II, Defendants claim that Dent-A-Med is precluded from alleging that Defendants committed fraud by submitting charge slips for pre-billed work or work done improperly. With respect to Counts III and IV, Defendants argue that Dent-A-Med is precluded ...


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