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In re Marriage of Murray

Court of Appeals of Illinois, Second District

June 11, 2014

In re MARRIAGE OF JESSICA A. MURRAY, Petitioner and Plaintiff-Appellee and Cross-Appellant, and JEFFREY C. MURRAY, Respondent (McHenry County Conservation District, Defendant-Appellant and Cross-Appellee

Appeal from the Circuit Court of McHenry County. No. 03-DV-1080. Honorable Gerald M. Zopp, Judge, Presiding.

SYLLABUS

In a marriage dissolution action where the payroll service used by respondent's employer failed to deduct child support payments on five occasions, the trial court's order imposing a capped penalty of $50,000 on respondent's employer, a county conservation district, for the five violations of section 35 of the Income Withholding for Support Act was reversed, notwithstanding the fact that petitioner was entitled to a penalty of $407,700 pursuant to the Act, since the conservation district paid petitioner the arrearage of $1,086.90 to remedy its failure to perform under the withholding order, section 2-102 of the Tort Immunity Act immunized the conservation district from " punitive or exemplary" damages, " notwithstanding any other provision of law," and local taxpayers would be punished by awarding petitioner more than the missed support.

PRESIDING JUSTICE BURKE delivered the judgment of the court, with opinion. Justices Zenoff and Schostok concurred in the judgment and opinion.

OPINION

BURKE, PRESIDING JUSTICE

Page 156

[¶1] As part of a marriage dissolution judgment, the trial court ordered respondent, Jeffrey C. Murray, to pay child support to petitioner, Jessica A. Murray. To facilitate the payments, the court ordered Jeffrey's employer, the McHenry County conservation district (Conservation District), to withhold and forward the payments from Jeffrey's paychecks pursuant to the Income Withholding for Support Act

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(Withholding Act) (750 ILCS 28/1 et seq . (West 2010)). The Conservation District's payroll vendor failed to process the child support payments for five of Jeffrey's paychecks. Jessica filed a complaint against the Conservation District, seeking a $1,086.90 arrearage as well as a statutory penalty that ultimately grew to $407,700. See 750 ILCS 28/35(a) (West 2010) ($100-per-day penalty for each violation).

[¶2] The Conservation District moved for dismissal, arguing that the statutory penalty is tantamount to a punitive award, which is barred by section 2-102 of the Local Governmental and Governmental Employees Tort Immunity Act (Tort Immunity Act) (745 ILCS 10/2-102 (West 2012)). The trial court denied the motion without comment.

[¶3] The Conservation District paid the arrearage to stop the accrual of the statutory penalty. Following a bench trial, the court entered judgment for Jessica on the statutory penalty claim, but capped the award at $50,000 based on a recent amendment to section 35 of the Withholding Act that limits such penalties to $10,000 per violation.

[¶4] The Conservation District appeals the penalty, arguing that (1) it is punitive, and therefore section 2-102 of the Tort Immunity Act confers immunity; (2) the evidence shows that the Conservation District did not " knowingly" fail to process the child support under section 35 of the Withholding Act, because the Conservation District did not learn of the nonpayment until Jessica filed suit; and (3) even if the Conservation District knowingly failed to correct the processing errors after Jessica filed suit, no penalty is owed, because such penalty was stayed by an order entered in a separate action that has since been dismissed. Jessica cross-appeals, arguing that the court erred in capping the penalty at $10,000 per violation. We hold that, although the Conservation District is subject to the requirements of section 35 of the Withholding Act, section 2-102 of the Tort Immunity Act confers immunity from the $100-per-day penalty because the penalty is " punitive." We reverse.

[¶5] I. BACKGROUND

[¶6] A. Child Support Processing Errors

[¶7] Although the matter proceeded to a bench trial, most of the facts are undisputed. On April 16, 2004, the trial court entered a judgment for dissolution of marriage and an order directing Jeffrey's employer to withhold a portion of his income for child support. At the time, Jeffrey was an employee of the Conservation District.

[¶8] In May 2004, the Conservation District received notice of the withholding order entered in the marriage dissolution case. The Conservation District was ordered to deduct $217.38 from each of Jeffrey's biweekly ( i.e., every other week) paychecks and pay that amount to the Illinois State Disbursement Unit (SDU), which would forward that amount to Jessica to satisfy Jeffrey's child support obligation. In 2004, the Conservation District outsourced its payroll functions to Advantage Payroll Services. Beginning on January 1, 2005, Ceridian replaced Advantage as the Conservation District's payroll vendor.

[¶9] The Conservation District provided each payroll vendor with information to be entered into the vendor's system. Each vendor then administered all payroll functions for the Conservation District, including preparing and electronically signing paychecks and calculating and deducting amounts from an employee's pay for taxes, union dues, health insurance premiums, child support, wage garnishments, and other

Page 158

obligations paid directly from the employee's paycheck.

[¶10] The Conservation District paid Jeffrey by direct deposit into his checking account. For more than three years, the child support payments were deducted from his paycheck, transferred to the SDU, and then directly deposited by the SDU into Jessica's checking account at McHenry State Bank.

[¶11] In five instances, however, Ceridian failed to process Jeffrey's child support payments. The errors corresponded with Jeffrey's paychecks on August 31, 2007, February 29, 2008, January 30, 2009, July 31, 2009, and December 30, 2009. Each time, the child support payment was paid by direct deposit into Jeffrey's account rather than to the SDU, and Jessica did not receive a payment. Each error occurred when three paychecks were issued within a month. During those months, Ceridian's system processed the child support payments for the first two pay periods but not the third.

[¶12] On January 1, 2010, Auto Data Processing (ADP) replaced Ceridian as the Conservation District's payroll vendor. ADP processed the first paychecks on January 15, 2010. The Conservation District audited the first payroll period, to confirm that ADP had handled the checks properly, and discovered that a child support payment had not been deducted from Jeffrey's paycheck. On January 21, 2010, the Conservation District sent a check to the SDU for the missed payment. The Conservation District was reimbursed from Jeffrey's next paycheck on January 29, 2010.

[¶13] B. Withholding Act

[¶14] On August 2, 2010, Jessica filed a complaint against the Conservation District in the marriage dissolution proceeding, seeking payment of $1,086.90 in past-due child support. Jessica also asserted a claim for a penalty under section 35 of the Withholding Act.[1] 750 ILCS 28/35 (West 2010). The Conservation District was served with a motion to add it as a necessary party in the dissolution proceeding, and the Conservation District filed an appearance.

[¶15] Section 35(a) of the Withholding Act sets forth the obligations of employers, like the Conservation District, that have been served with an income-withholding notice. The parties correctly agree that the Conservation District owed a duty to process Jeffrey's " income" under section 35. See 750 ILCS 28/15(d) (West 2010) (" 'Income' means any form of periodic payment to an individual, regardless of source, *** made by any person, private entity, federal or state government, any unit of local government, school district or any entity created by Public Act ***." ). The version of section 35(a) that was in effect when Jessica filed her claim states in relevant part as follows:

" It shall be the duty of any payor who has been served with an income withholding notice to deduct and pay over income as provided in this Section. The payor shall deduct the amount designated in the income withholding notice, *** beginning no later than the next

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payment of income which is payable or creditable to the obligor that occurs 14 days following the date the income withholding notice was mailed ***. *** The payor shall pay the amount withheld to the State Disbursement Unit within 7 business days after the date the amount would (but for the duty to withhold income) have been paid or credited to the obligor. If the payor knowingly fails to withhold the amount designated in the income withholding notice or to pay any amount withheld to the State Disbursement Unit within 7 business days after the date the amount would have been paid or credited to the obligor, then the payor shall pay a penalty of $100 for each day that the amount designated in the income withholding notice (whether or not withheld by the payor) is not paid to the State Disbursement Unit after the period of 7 business days has expired . The failure of a payor, on more than one occasion, to pay amounts withheld to the State Disbursement Unit within 7 business days after the date the amount would have been paid or credited to the obligor creates a presumption that the payor knowingly failed to pay over the amounts. This penalty may be ...

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