Court of Appeals of Illinois, First District, Fifth Division
DANIEL J. RITACCA, Plaintiff-Appellant,
JOHN GIRARDI and JARED MARCUCCI, Defendants-Appellees.
Appeal from the Circuit Court of Cook County, Illinois. No. 05 M2 2650 Honorable Thaddeus Machnik, Judge Presiding.
JUSTICE TAYLOR delivered the judgment of the court, with opinion. Justices McBride and Howse concurred in the judgment and opinion.
¶ 1 In this breach of contract action, plaintiff Daniel Ritacca appeals from the trial court's grant of summary judgment for defendants John Girardi and Jared Marcucci on grounds that the contract between the parties was illegal and therefore unenforceable.
¶ 2 In 2000, plaintiff and the defendants established a medical services company known as the Laser Care Institute. Plaintiff and Girardi were licensed physicians, while Marcucci was a nonphysician. Their business arrangement was governed by a physician services agreement (PSA). In 2003, the parties entered into a settlement agreement that dissolved the Laser Care Institute and resolved all claims between them. In particular, it assigned liability between them for various outstanding loans associated with laser equipment that had been used by the business. When defendants defaulted on their loans, the lender brought suit against the plaintiff as well as the defendants. Plaintiff settled with the lender for the sum of $65, 000. Plaintiff then brought the instant suit against defendants, seeking damages for breach of the settlement agreement.
¶ 3 The trial court found that the PSA violated the Illinois Medical Practice Act of 1987 (225 ILCS 60/1 et seq. (West 2010)), which prohibits fee-splitting between physicians and non-physicians. It held that this illegality rendered both the PSA and the resulting settlement agreement void and unenforceable, and it granted summary judgment for defendants. For the reasons that follow, we reverse the judgment of the trial court.
¶ 4 I. BACKGROUND
¶ 5 Plaintiff's third amended complaint, which frames the issues in this appeal, alleges the following. In July 2000, plaintiff, Marcucci, and Girardi "entered into a partnership" in order to perform Lasik surgical procedures and laser hair removal. On August 30, 2000, the parties signed the PSA, a copy of which is attached to the complaint. That agreement provides, in relevant part:
"THIS AGREEMENT ('Agreement') is made and entered into this 30th day of August 2000 by and between Daniel J. Ritacca, M.D., John T. Girardi, M.D., and Jared J.
Marcucci with regard to the Laser Care Institute ('Corporation').
The organization of the Laser Care Institute will be an equal partnership between Daniel J. Ritacca, M.D., John T. Girardi, M.D., and Jared J. Marcucci. Each partner will maintain ownership of 33 1/3% of the Corporation."
According to plaintiff's complaint, the Laser Care Institute purchased various pieces of medical equipment, and the purchases were financed through loans from CitiCorp Vendor Finance, Inc. (CitiCorp).
¶ 6 The complaint further states that in 2003, the parties dissolved the Laser Care Institute. At that time, the loans to CitiCorp had not yet been fully repaid. Accordingly, on July 23, 2003, the parties entered into a settlement agreement for purposes of distributing the medical equipment and the loans associated with the purchase of that equipment. In particular, the agreement provided that Girardi would take possession of a hair removal laser known as a Vasculight HR and be responsible for repaying or refinancing the associated loan, while Marcucci would take possession of a Vasculight SR and be responsible for repaying or refinancing the associated loan.
¶ 7 However, according to the complaint, Girardi and Marcucci failed to repay or refinance the loans as stated in the settlement agreement. On February 28, 2006, CitiCorp filed a lawsuit against plaintiff, Girardi, and Marcucci, seeking to recover unpaid balances for the Vasculight HR and Vasculight SR. Plaintiff settled CitiCorp's claim for nonpayment for the sum of $65, 000. Plaintiff then filed the instant lawsuit against Girardi and Marcucci.
¶ 8 The complaint seeks relief in three counts. Count I, which alleged that defendants breached the PSA, was later voluntarily withdrawn by plaintiff and is not at issue on appeal.Counts II and III seek damages for breach of the settlement agreement against Girardi and Marcucci, respectively.
¶ 9 On August 12, 2010, Marcucci moved for summary judgment. In that motion, Marcucci argued that the PSA was illegal and unenforceable because it violated section 22.2 of the Medical Practice Act, which prohibits physicians from splitting fees with nonphysicians. 225 ILCS 60/22.2(a) (West 2010) ("A licensee under this Act may not directly or indirectly divide, share or split any professional fee or other form of compensation for professional services with anyone in exchange for a referral or otherwise ."). Marcucci further argued that this illegality extended to the settlement agreement, the expressly stated purpose of which was to wrap up the affairs of the illegal business arrangement between the parties.
¶ 10 In support of his contention that the business arrangement created by the PSA was illegal and unenforceable, Marcucci attached a copy of the articles of incorporation for the "Laser Care Institute, S.C., " filed with the Secretary of State on July 24, 2000. A rider attached to the articles of incorporation states: "All officers, directors, and shareholders of the Corporation shall at all times be licensed pursuant to the Medical Practice Act. No person who is not licensed shall have any part in the ownership, management, or control of the corporation."
¶ 11 On January 10, 2011, Girardi filed a motion for summary judgment which largely echoed the legal arguments raised by Marcucci, namely, that the fee-splitting arrangement in the PSA violated the Medical Practice Act and therefore rendered both the PSA and the settlement agreement void and unenforceable.
¶ 12 On May 4, 2011, the trial court granted defendants' motion for summary judgment. In its judgment order, the court explained its reasoning as follows:
"Clearly, the Physician Services Agreement expressly contravenes the Medical Practices [sic] Act and violates public policy. Correlatively, the Settlement Agreement, which arose from the Physician Services Agreement, is void and unenforceable. Counts II and III of the complaint are both premised on a statutorily prohibited, fee splitting arrangement. The Settlement Agreement flows from an illegal partnership, seeking payment for equipment ...