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Stefanski v. City of Chicago

Court of Appeals of Illinois, First District, Sixth Division

February 27, 2015

NELLI STEFANSKI, Individually and on Behalf of All Others Similarly Situated, Plaintiff and Counterdefendant-Appellee,
v.
THE CITY OF CHICAGO, a Municipal Corporation, Defendant and Counterplaintiff-Appellant

Page 968

Appeal from the Circuit Court of Cook County. No. 09 CH 29238. Honorable LeRoy K. Martin, Jr., Judge Presiding.

SYLLABUS

In a class action against defendant city seeking declaratory relief and damages for unjust enrichment for plaintiff and the beneficiaries of the city's medical insurance plan who had received medical services paid by the city's self-funded insurance plan for personal injuries caused by third-party tortfeasors, employed the services of an attorney to collect damages from such tortfeasors and received recoveries from such tortfeasors that were reduced due to the city's refusal to reduce its subrogation claim to account for its share of the attorney fees incurred in violation of the common fund doctrine, the named plaintiff had no right to rely on the common fund doctrine to support her claims for relief against the defendant, since she had not stated an actionable claim, class certification was improper, and the trial court's order certifying the class had to be vacated.

For Defendant-Appellant: Benna Ruth Solomon, Myriam Zreczny Kasper, Suzanne M. Loose, of counsel, Corporation Counsel of the City of Chicago, Chicago, Illinois.

For Plaintiff-Appellee: Clinton A. Krislov, Michael R. Karnuth, of counsel, Krislov & Associates, Chicago, Illinois.

JUSTICE ROCHFORD delivered the judgment of the court, with opinion. Justice Lampkin concurred in the judgment and opinion. Justice Hall dissented, with opinion.

OPINION

ROCHFORD, JUSTICE.

Page 969

[¶1] Plaintiff and counterdefendant-appellee, Nellie Stefanski, individually and on behalf of all others similarly situated, brought the instant class action lawsuit against defendant and counterplaintiff-appellant, the City of Chicago (the City) a municipal corporation. Plaintiff sought declaratory relief and damages for unjust enrichment on behalf of herself and a putative class of current and former beneficiaries of the City's medical insurance plan who had: (1) received medical services paid by the City's self-funded insurance plan for personal injuries caused by third-party tortfeasors; (2) employed the services of an attorney to collect damages from such tortfeasors; and (3) received recoveries from such tortfeasors that were reduced due to the City's improper refusal to reduce its subrogation claim to account for its share of the attorney fees incurred by plaintiff, in violation of the so-called " common fund doctrine."

[¶2] The circuit court ultimately concluded that the common fund doctrine applied to the claims raised in this suit, certified a class of such plaintiffs, granted summary judgment in favor of that class, and denied the City's cross-motion for summary judgment. We thereafter granted the City's petition for leave to appeal from the circuit court's order granting certification of this class action lawsuit, pursuant to Illinois Supreme Court Rule 306(a)(8) (eff. Feb. 16, 2011). Because the named plaintiff cannot maintain a cause of action under the common fund doctrine, we reverse.

[¶3] I. BACKGROUND

[¶4] Because we reverse the circuit court's ruling that the common fund doctrine applies to the claims of the named plaintiff, and because our conclusion on that issue is dispositive, only those facts necessary to resolve this issue will be recited.

[¶5] On August 19, 2009, plaintiff filed the instant lawsuit against the City. Therein, plaintiff generally alleged that: (1) on or about May 17, 2007, she was employed by the City, and covered by the City of Chicago Medical Care Plan (Plan) when she was injured in an automobile collision caused by a third-party tortfeasor; (2) she received medical services in connection with this collision, which were paid for in full or in part by the Plan; (3) plaintiff retained an attorney, who obtained an $18,000 settlement from the third-party tortfeasor as compensation for plaintiff's personal injuries; (4) pursuant to her contingent-fee

Page 970

agreement with her attorney, plaintiff was obligated to pay her attorney one-third of that total amount for legal services; (5) the City's attorneys, without participating in the recovery of the settlement, nevertheless asserted a claim against plaintiff's recovery pursuant to subrogation and reimbursement language contained in the Plan's documentation; (6) the City ultimately claimed a $3,824 lien on plaintiff's recovery, representing the full amount the City had paid for plaintiff's medical services; (7) the City's attorney initially refused a request by plaintiff's attorney to reduce its claim by one-third--pursuant to the common fund doctrine--in order to account for the City's proportionate share of the legal fees incurred by plaintiff in obtaining the $18,000 settlement; (8) the City ultimately agreed to partially reduce its claim to $2,900, in order to settle the dispute over the common fund issue; and (9) " under protest," plaintiff's attorney arranged for $2,900 to be paid to the City by the third-party tortfeasor in May of 2009.

[¶6] The complaint further alleged that the City's refusal to reduce its subrogation and reimbursement claim to account for its share of the plaintiff's attorney fees violated the common fund doctrine and caused plaintiff damages. Plaintiff's complaint, therefore, sought both a declaration that the City's actions had violated the common fund doctrine (count I), and recovery for the City's resulting unjust enrichment (count II). In addition, plaintiff sought to pursue this lawsuit as a class action, and to serve as the class representative on behalf of a class comprised of all others similarly situated. Specifically, she sought to represent a class of: " All current or former participants in the City of Chicago Medical Care Plan against whom a purported subrogation or reimbursement lien has been asserted without a pro rata reduction pursuant to Illinois' common fund doctrine, during the period from May 1998 to the present." A motion for class certification was filed along with plaintiff's complaint.

[¶7] On November 6, 2009, the City filed a combined motion to dismiss plaintiff's complaint pursuant to sections 2-615, 2-619, and 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615, 2-619, 2-619.1 (West 2008)). Therein, the City contended that the complaint should be dismissed because: (1) as a plan participant and not the attorney of such a plan participant, plaintiff was not the proper party to bring a claim under the common fund doctrine; (2) plaintiff's claims were barred by language in the Plan's documentation providing that " [t]he Plan shall not be responsible for any litigation related expenses or attorney fees incurred by or on behalf of a Covered Person in connection with an Injury Claim unless the Plan shall have specifically agreed in writing to pay such expenses or fees; " and (3) plaintiff paid the City $2,900 in response to the City's settlement offer, thus barring her claims under the voluntary payment doctrine and the doctrine of accord and satisfaction. The circuit court denied the City's motion on February 8, 2010.

[¶8] The City thereafter filed its answer, affirmative defenses, and a counterclaim against plaintiff, in which it raised-- inter alia --the same arguments raised in its motion to dismiss. The parties thereafter filed briefs addressing the merits of plaintiff's motion for class certification and cross-motions for summary judgment. Exhibits attached to these various filings established that plaintiff's attorney had been paid a full one-third contingent fee with respect to the total $18,000 personal injury recovery obtained on behalf of plaintiff.

[¶9] On August 26, 2013, the circuit court entered a written order granting plaintiff's motion for class certification and certifying

Page 971

a class comprised of: " All current and former participants in the City of Chicago Medical Care Plan who retained counsel and who have obtained a recovery against which a subrogation or reimbursement lien has been asserted without a pro rata reduction pursuant to Illinois' common fund doctrine, during the period from August 19, 1999 to the present." In that order, the circuit court also granted summary judgment in favor of plaintiff and the class on counts I and II of the complaint, and denied the City's motion for summary judgment.

[¶10] The City thereafter filed a petition for leave to appeal from the circuit court's order granting certification of this class action lawsuit, pursuant to Illinois Supreme Court Rule 306(a)(8) (eff. Feb. 16, 2011). We granted that petition on January 13, 2014.

[¶11] II. ANALYSIS

[¶12] On appeal, the City raises a host of challenges to the circuit court's order granting plaintiff's motion for class certification. These include the City's assertions that: (1) plaintiff was not the proper party to bring a claim under the common fund doctrine; (2) plaintiff's individual claims were barred under the voluntary payment doctrine and the doctrine of accord and satisfaction; (3) the statutory prerequisites for maintaining a class action were not met in this case; and (4) the circuit court improperly relied upon a 10-year--rather than a 5-year--statute of limitations in defining the scope of the certified class. As noted above, we find the City's initial argument to be dispositive.

[¶13] A. Legal Framework and Standard of Review

[¶14] Class certification is governed by section 2-801 of the Code. 735 ILCS 5/2-801 (West 2012). That section generally provides that " an action may proceed as a class action only if the circuit court finds: (1) the class is so numerous that joinder of all members is impractical; (2) there are questions of fact or law common to the class, and those common questions predominate over any questions affecting only individual members; (3) the representative parties will fairly and adequately protect the interest of the class; and (4) the class action is an appropriate method for the fair and efficient adjudication of the controversy. Decisions regarding class certification are within the discretion of the trial court and will not be disturbed on appeal unless the trial court abused its discretion or applied impermissible legal criteria." Smith v. Illinois Central R.R. Co., 223 Ill.2d 441, 447, 860 N.E.2d 332, 307 Ill.Dec. 678 (2006); 735 ILCS 5/2-801 (West 2012).

[¶15] " However, there is no need to determine whether these prerequisites are met if, as a threshold matter, the record establishes that the plaintiff has not stated an actionable claim." Uesco Indus. v. Poolman of Wis., Inc., 2013 IL App. (1st) 112566, ¶ 47, 993 N.E.2d 97, 373 Ill.Dec. 97. Put in terms of the above framework, " [c]lass certification is not proper when the putative class representative cannot adequately represent the class sought to be certified," and " [a] representative cannot adequately represent a class when the representative does not state a valid cause of action." De Bouse v. Bayer AG, 235 Ill.2d 544, 560, 922 N.E.2d 309, 337 Ill.Dec. 186 (2009). Where it is determined on appeal that the named plaintiff in a class action lawsuit is not an appropriate representative of the putative class, the order of the circuit court certifying the class must be vacated. I ...


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