County purchasing ordinance and the facts, the County cannot be held liable. Judgment is

entered in favor of Defendant and against Plaintiff.

Dated: Z 2p0f¢ Wau

JOH W. DARRAH
neal States District Judge

19


the attention of Mary A. Payne on October 13, 2000. Plaintiff funded the initial payment to JTD
for the 32-019 invoice through a re-factoring agreement with Capital Resource Funding, after
Plaintiff sent Capital Resource Funding information and attachments in a September 13, 2000
letter.

The first time the County Board met after the date of October 6, 2000 for JTD Invoice
No. 32-019 was October 17, 2000. The County Board agenda and minutes for the
October 17, 2000 meeting reflect no polling of the County Board of Commissioners for approval
of payment on JTD Invoice No. 32-019.

JTD’s representation in Invoice Nos. 32-018 and 32-019 were false. There was no
contract between Defendant and either JTD or Plaintiff for those services, and no County
purchase order number was assigned for the services represented in JTD Invoice Nos. 32-018 and
32-019. JTD did not provide services at Provident between July 31, 2000 and October 6, 2000,
as claimed in Invoice Nos. 32-018 and 32-019. The individuals listed whose names appear on
the backup materials for Invoice Nos. 32-018 and 32-019 did not work at Provident during the
relevant period. The large number of employees listed on the backup materials could not have
been physically accommodated at Provident because of the facility’s size.

Plaintiff did not provide Bell with the backup materials nor confirmed with Bell whether
he had received the backup materials from JTD for those invoices. The invoice verification
forms for Invoice Nos. 32-018 and 32-019 also did not, on their face, require verification that
individual employees worked a certain number of hours. Unlike some prior invoice verification
forms, these invoice verification forms only listed the total amounts Plaintiff was owed and did

not individually list each employee that worked during a specific time frame.

13


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


although County Board approval, agendas, and minutes reflecting the approval of contracts and
appropriations are matters of public record. Moreover, Plaintiff did not request a copy of the
purported contract, failed to contact Defendant’s Purchasing Agent or Comptroller, or consult
any public records to determine whether the County Board had approved a contract for the
invoices at issue.

Plaintiff's prior history in factoring Swerbeh and JTD accounts with Provident differed in
several material respects from the factored invoices at issue here, which sought a far greater
amount of money than the invoices Plaintiff previously factored. Prior invoices all fell well
under the $10,000.00 County Ordinance limit.

The invoices at issue also involved many more employees than the invoices Plaintiff
previously factored; and more employees were purportedly involved than a hospital of
Provident’s size could accommodate. Moreover, Plaintiff never received checks from Provident
Hospital for its prior factoring transactions as purportedly anticipated here; instead, Plaintiff was
only paid by Defendant, Cook County.

Plaintiff's prior factoring dealings differed regarding the invoices at issue in other
material respects. Plaintiff customarily sought payment for Payne’s Swerbeh invoices for a
period covering one to two weeks; here, that period was three to four weeks. Plaintiff also failed
to provide Bell with backup materials for Invoice Nos. 32-018 and 32-019, nor did Plaintiff
confirm with Bell that he received backup materials from JTD for Invoice Nos. 32-018 and 32-
019, as was customary. Instead, Plaintiff only sent Bell the invoice verification forms that listed

the total amounts due and not the hours each individual employee worked. The invoices never

17



application form because JTD had changed ownership. Payne signed a Personal Financial
Statement on August 15, 2000, listing her social security number as 363-96-0763. Later, on
September 11, 2000, Payne signed a Personal Guaranty.

In August 2000, Plaintiff was told that JTD had a contract to provide services at
Provident. However, there was no contract between JTD and Provident other than the 1999 JTD
contract.

On August 28, 2000, Payne sent a facsimile letter to Bell at Provident informing Bell that
JTD had entered into an arrangement with Plaintiff whereby JTD’s accounts receivable were to
be assigned and processed through Plaintiff. Bell’s signature appears on that letter, which
indicates the letter was faxed from Provident on September 1, 2000. Payne also indicated to
Plaintiff that Bell was the contact person at Provident.

Consistent with Plaintiff's practice and procedure, one of Plaintiffs employees,

Oretha Thompkins, talked with the designated contact person, Bell. Bell told Thompkins that he
was going to be the person who would perform the invoice verifications. Although Plaintiff did
not usually deal with a high source, such as a CFO, Payne had told Brooks that Bell was helpful
in expediting payments in the past and that Bell would be helpful in making sure Plaintiff was
paid for this particular contract.

However, in August and September 2000, Plaintiff did not request a copy of the alleged
contract between JTD and Defendant for the services reflected in JTD Invoice Nos. 32-018 and
32-019; nor did Plaintiff know any contract terms between JTD and Defendant. Plaintiff also
failed to contact Defendant’s Purchasing Agent or the Defendant’s Comptroller in August and

September 2000; nor did Plaintiff check any public records to determine whether the County



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 obtains verification from the account debtor and considers the verification signature
protection that the invoice will be paid.

In the typical situation, Plaintiff makes an initial payment to the client for the purchase of
the account receivable, based on a discounted amount of the invoice, and designates the
remainder as reserves. Once the account debtor pays the invoice, by sending Plaintiff the full
payment, Plaintiff returns a portion of the reserves to the client based upon how quickly the

account debtor pays and the graduated percentages as set out on a Schedule B to the Accounts



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.



contained a purchase order number nor was a County 29A voucher form issued, as required and
used on the past transactions.

Plaintiff obtained a Dun and Bradstreet report which clearly stated that Cook County, and
not Provident itself, paid Provident’s bills. Typically, Plaintiff obtained these reports before
notifying the account debtor of the assignment of the client’s account; but, here, Plaintiff
obtained these reports after notifying Provident of the assignment of the account. A Dun and
Bradstreet report on JTD indicated a federal tax lien had been placed on JTD. This report was
obtained only after Plaintiff advanced significant funding to JTD for the invoices at issue.
Previously, Plaintiff customarily requested a new client’s tax returns when performing a due
diligence investigation. Plaintiff did not obtain a Dun and Bradstreet report regarding Payne in
connection with her JTD application until after funding had been advanced to JTD on Invoice
No. 32-018. Customarily, this report was obtained during Plaintiff's due diligence process and
not, as here, after Plaintiff had already advanced funds.

The social security number Payne listed on the forms she provided Plaintiff for her
previous Swerbeh transactions differed from the social security number she listed on the forms
she provided Plaintiff for her JTD transactions. Payne also signed her name as “Mary Hackney
Payne” on the forms she provided Plaintiff for the Swerbeh transactions, but she signed her name
as Mary A. Payne on the forms she provided Plaintiff for the JTD transactions.

Based on the above, Plaintiff’s purported reliance on Bell’s representations was far from
justified; and Plaintiff failed to sustain its burden of proof in this regard. Plaintiff was required
to exercise ordinary prudence to determine that a County obligation which supported Plaintiff's

intended factoring actually existed. In this case, no such obligation existed. Based on the

18


Bell was the person at Provident who signed a May 20, 1998 Cook County 29A voucher
form indicating department approval for payment to “Swerbeh, Ltd. c/o Capital City Financial
Group.” This voucher was the first time Plaintiff had ever seen Bell’s signature.

A signed invoice verification was not enough to receive payment from Defendant; a Cook
County purchase order number, a 29A voucher form, and a contract number were all required to
obtain payment from Defendant. Cook County purchase order number 840336 was assigned for
the purchase of Swerbeh services provided to Provident. The 29A voucher form with Bell’s
signature contained this purchase order number. Thus, when Swerbeh work was verified at
Provident in 1998, the work had been authorized, as evidenced by the presence of the purchase
order number. Thereafter, Defendant issued a check for the amount approved on the 29A
voucher, $9,000.00.

In 1998, the Comptroller’s Office issued Cook County checks for payments to Swerbeh
for ten individual obligations, each under $10,000.00; and mailed payments for those obligations
to Plaintiff. Moreover, Plaintiff's factoring of Swerbeh invoices for services to any hospital,
including Provident, never exceeded $10,000.00. It took Defendant County of Cook
approximately sixty to eighty days to pay Plaintiff for factored Swerbeh accounts in 1998.
Plaintiff has never been paid with a check that was issued by Provident.

On August 4, 1999, the Cook County Board of Commissioners awarded Contract No. 99-
54-647 to JTD for temporary clerical support services for Provident. JTD and Plaintiff did not
enter into any accounts receivable purchase agreements for this contract.

On August 15, 2000, Payne, on behalf of JTD, applied to Plaintiff for funding. Although

Plaintiff had done business with JTD before, Plaintiff required Payne to complete another



Minute Ord

\

orm (06/97)

United States District Court, Northern District of Illinois

Date/time received in
“central Clerk’s Office

Name of Assigned Judge John W. Darrah Sitting Judge if Other
or Magistrate Judge . than Assigned Judge
CASE NUMBER 01 C 564 DATE 6/2/2004
CASE Capital City Finance Group vs. County of Cook
TITLE
[in the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
ql) o Filed motion of [ use listing in “Motion” box above.]
(2) Qo Brief in support of motion due
(3) Qa Answer brief to motion due. . Reply to answer brief due.
(4) i) Ruling/Hearing on set for _at
(5) im Status hearing[held/continued to] [set for/re-set for] on set for at
(6) a Pretrial conference[held/continued to] [set for/re-set for] on set for at
{7) im Trial[set for/re-set for] on at
(8) oO [Bench/Jury trial] [Hearing] held/continued to at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to)
OFRCP4(m) OLocal Rule 41.1 CFRCP41(a)(1) 1 FRCP41(a)(2).
a0) [Other docket entry] For the reasons stated in the Court’s memorandum opinion and order,
judgment is entered in favor of the defendant and against plaintiff. Enter Memorandum Opinion and
Order.
adb {For further detail see order attached to the original minute order.]
No notices required, advised in open court.
No notices required. number of notices
Notices mailed by judge’s staff. JUR ge 2004
Notified counsel by telephone, date docketed
ov | Docketing to mail notices.
a | Mail Ao 450 form. yao NA
ligt
Copy to judge/magistrate judge.
date mailed notice
courtroom
MF deputy’s
initials

railing deputy initials



Under certain extreme circumstances, the County Board Commissioners can be polled to
vote on matters between County Board meetings. Under those circumstances, the polled matters
are reflected on the agenda and in the minutes of the following meeting, The first time the
County Board met after the date of August 30, 2000 for JTD Invoice No. 32-018 was September
7, 2000. The County Board agenda and minutes for the September 7, 2000 meeting reflect no
polling of the County Board Commissioners for approval of payment of JTD Invoice No. 32-018.

Also on September 1, 2000, Plaintiff obtained a Dun and Bradstreet report on Provident,
the account debtor. This report indicated that Cook County paid Provident’s bills, and it paid
Provident’s bills between 30 and 120 days.

On or about September 5, 2000, Plaintiff received a copy of Plaintiff's invoice
verification form No. 32-018 signed by Bell. The total amount due on this invoice and the total
amounts of accounts receivable purchased by Plaintiff for this invoice was $ 173,256.20. Plaintiff
advanced to JTD $121,279.34, based on a 70% factor rate applied to the invoice amount. Of this
amount, $34,651.24 was deducted by Plaintiff at Payne’s direction and applied to preexisting
debt from Swerbeh on behalf of JTD. Plaintiff then wire-transferred to Swerbeh, on behalf of
JTD, the remaining $86,608.10. The information on Invoice No. 32-018 was fictitious.

On September 18, 2000, Plaintiff obtained a Dun and Bradstreet report on Payne. The
social security number Plaintiff used to obtain this report was 353-46-2705. This number was
the same social security number Payne provided on her 1997 Swerbeh application with Plaintiff,
not the social security number Payne used on her 2000 JTD personal financial statement provided

to Plaintiff. Payne also signed the relevant forms with the name Mary A. Payne, not Mary

11


Board had approved a contract for the services on JTD’s project at Provident. Nowhere in the
Agenda or Post-Board Action Agenda for the year 2000 Cook County Board meetings is there
any indication that the County Board approved payment of JTD Invoices 32-018 or 32-019.
Nowhere in the minutes for the County Board meetings held between July 1, 2000 and
December 1, 2000, is there any mention of any payment whatsoever approved for Capital City
Financial Group of JTD with respect to any goods or services.

On or around August 30, 2000, JTD and Payne sent Plaintiff a complete Schedule A that
included Invoice No. 32-018, prepared by JTD, together with backup materials for Invoice No.
32-018 that indicated JTD supplied Provident with employees. These backup materials showed
the employees by name and hours worked during the weeks ending August 6, 2000 to
August 27, 2000, and were prepared by JTD. These backup materials also showed that JTD
supplied Provident with approximately 66 workers per week, who worked an aggregate total of
2,190 to 2,298 hours per week.

When Plaintiff received these backup materials, it added up the employee hours on the
backup materials to ensure the totals matched the week-ending totals on the invoice. Plaintiff
then used the information on JTD’s invoice to prepare the invoice verification document. On or
about September 1, 2000, Plaintiff faxed to Bell an invoice verification form for Invoice No. 32-
018 that purports to represent services provided by JTD at Provident during the weeks ending
August 6, 2000 to August 27, 2000, for a total amount of $173,256.20. This invoice verification
form states, “The following invoices from JTD, Inc. are approved for payment without offsets,

discounts, defense, counterclaims, or abatements.”

10


Receivable Purchase and Security Agreement. Generally, Plaintiff retains one to five percent of
this margin.

On October 6, 1997, Plaintiff entered into an Accounts Receivable Purchase and Security
Agreement with Swerbeh. Brooks signed the Agreement on behalf of Plaintiff; and “Mary
Hackney Payne,” as Treasurer, and Anthony Payne, as President, signed on behalf of Swerbeh.
Payne provided Plaintiff with an Application to Enter into a Purchase and Security Agreement
with Plaintiff. This agreement was dated October 2, 1997; and she listed her social security
number as 353-46-2705.

In March through June 1998, Plaintiff was involved in factoring transactions dealing with
Provident’s medical records department on behalf of Swerbeh; whereby, Plaintiff followed its
invoice verification process with Provident for Swerbeh invoices.

Plaintiff required that Provident employees check Plaintiff's time sheets with Provident’s
records to check that the Swerbeh employees actually worked. These verification forms were
signed by Provident employees other than Bell because, usually, Plaintiff did not deal with CFOs.

In five of Plaintiff and Swerbeh’s factored transactions with Provident, a Provident
employee signed Plaintiff's invoice verification forms that provided the names, hours, and
amounts approved for payment to persons that provided services to Provident. Work that
Swerbeh performed at Provident in 1998 was invoiced either every week or every other week,
and no more than eight Swerbeh employees were ever listed on any of Plaintiff's invoice

verification forms.



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.


Plaintiff further failed to determine whether there were any County purchase order
numbers assigned to JTD Invoice Nos. 32-018 and 32-019, nor did a purchase order appear on
these invoices. Nor was a County 29 A voucher form for Invoice Nos. 32-018 and 32-019 ever
seen by Plaintiff. There were no contracts between Defendant and JTD for services during the
year 2000.

Defendant’s Comptroller’s Office refused to make payments on Invoices 32-018 and 32-
019. The total face value of JTD Invoice Nos. 32-018 and 32-019 is $433,543.70. In total,
Plaintiff actually paid JTD $303,480.59, with $87,708.75 of this amount applied to a preexisting
debt JTD and Swerbeh owed Plaintiff.

On November 8, 2000, invoice verification form No. 32-020 in the amount of
$287,383.00 for purported JTD services provided to Provident from October 2 to
November 6, 2000, signed by Bell was faxed to Plaintiff. Plaintiff did not advance any funds on
this invoice.

A Dun and Bradstreet report on JTD, obtained by Plaintiff on December 13, 2000,
indicated that JTD had a federal tax lien of $53,533.00 as of February 2, 2000.

CONCLUSIONS OF LAW

The issue is whether Defendant is liable for misrepresentations to Plaintiff based on the
conduct of Earl Bell, the former Chief Financial Officer of Provident Hospital, which is owned
and operated by Defendant.

To prove a claim for fraudulent misrepresentation under Illinois law, Plaintiff must
establish that: (1) Defendant made a statement; (2) the statement in question was of a material

nature; (3) the statement in question was untrue; (4) Plaintiff relied upon the statement in

14


DECISION

Plaintiff could not justifiably rely on Bell’s authority to bind the County to the purported
contracts; such authority clearly does not exist because the language of the County Purchasing
Ordinance expressly negated such authority and specifically requires approval by Defendant’s
County Board. Rather, the issue is whether Plaintiff justifiably relied on Bell’s representations
that Defendant’s County Board had actually approved the purported contracts between Provident
and JTD. Plaintiff argues in the affirmative and points to: (1) Bell’s position and duties as CFO
at Provident; (2) Bell’s signature on the invoice verification forms for Invoice Nos. 32-018 and
32-019; (3) Bell’s authority to sign county voucher forms indicating departmental approval;

(4) Plaintiff's prior dealings in factoring invoices of Swerbeh and JTD at Provident; (5) the
invoice verification forms, with their accompanying cautionary language; and (6) Plaintiff's
customary practices and procedures.

However, the facts fall far short of proving Plaintiff's reliance was justifiable, even by a
preponderance of the evidence, much less the applicable standard of proof by clear and
convincing evidence. Plaintiffs purported reliance on Bell’s representation, particularly when
viewed in light of the facts of which Plaintiff had actual knowledge or might have discovered
through the exercise of ordinary diligence, cannot be said to be justifiable.

Unlike the prior successful factoring transactions between Plaintiff and Defendant, no
purchase order number was assigned for the invoices presented; and Plaintiff did not see a
County 29A voucher form for these invoices.

There was no publication of any minutes of County Board meetings disclosing that the

Defendant County Board authorized or executed a contract with respect to the invoices at issue,

16


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
Sist 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


THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DOCKETED
CAPITAL CITY FINANCIAL GROUP, ) JUN 3 - 2004
an Indiana corporation, )
)
Plaintiff, )
) Case No. 01 C 564
ve )
) Honorable John W. Darrah
COUNTY OF COOK, an Illinois )
corporation, ) IN 9
LUN 3 ~ sayy
Defendant. )

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.

JOS


Hackney Payne as she signed on the October 1997 Accounts Receivable Purchase and Security
Agreement with Swerbeh entered into with Plaintiff.

On October 12, 2000, JTD and Payne sent Plaintiff a completed “Schedule A” that
included Invoice No. 32-019 prepared by JTD, together with backup materials for Invoice
No. 32-019 indicating that JTD supplied Provident with employees. These backup materials
showed the employees by name and hours worked during the weeks ending September 3 to
October 1, 2000, and were prepared by JTD. These backup materials also claimed that JTD
supplied Provident with approximately 74 workers per week, who worked an aggregate total of
2,791 to 2,874 hours per week.

When Plaintiff received these backup materials, Plaintiff prepared the invoice verification
document. On October 12, 2000, Plaintiff faxed to Bell at Provident the invoice verification
form for Invoice No. 32-019.

On October 12, 2000, Plaintiff received a Signed invoice verification for Invoice
No. 32-019, dated October 12, 2000, signed by Bell. The total amount due on Invoice
No. 32-019 and the amount of accounts receivable purchased by Plaintiff was $260,287.50.
Plaintiff advanced to JTD $182,201.25, based on a 70% factor rate applied to the invoice
amount. At Payne’s direction, $52,057.50 was deducted by Plaintiff and applied to a preexisting
debt owed by Swerbeh to Plaintiff.

On October 12, 2000, Denise Brooks then forwarded Plaintiffs October 12, 2000 invoice
verification form for Invoice No. 32-019 with Bell’s signature to Plaintiff's general manager,
William Brooks. After receiving Plaintiff's invoice verification form for Invoice No. 32-019,

Plaintiff issued its check number 4914 to “Swerbeh/JTD” for $130,143.75 and sent the check to

12


question to its detriment; (5) the statement in question was made for the purpose of inducing
reliance; and (6) the statement in question was known by the person to be untrue or was made in
culpable ignorance of its truth or falsity. Bensdorf & Johnson, Inc. v. N. Telecom Ltd., 58 F.
Supp. 2d 874, 881 (N.D. Ill. 1999) (citing Doherty v. Kahn, 682 N.E.2d 163, 167 (Ill. App. Ct.
1997)). Plaintiff's reliance on Bell’s statements must also be justified; “‘i.e., [it] must have had a
right to rely.” Soules v. Gen. Motors Corp., 402 N.E.2d 599, 601 (1980) (Soules).

“Justifiable reliance must be shown by clear and convincing evidence.” Teamsters Local
282 Pension Trust Fund v. Angelos, 839 F.2d 366, 370 (7th Cir. 1988) (citing Nat’l Republic
Bank v. Nat’l Homes Constr. Corp., 381 N.E.2d 15, 21 (1978)). In determining whether
Plaintiff's reliance was justifiable, the representation in question must be viewed in light of all
the facts which Plaintiff had actual knowledge, as well as those facts it might have discovered
through the exercise of ordinary diligence. Soules, 402 N.E.2d at 601 (citing Schmidt v.
Landfield, 20 Ill. 2d 89, 94 (1960)).

The Cook County Purchasing Ordinance at issue in this case prohibits a finding of
justifiable reliance based solely on representations made by a person unauthorized to commit
Cook County financially for services or goods that exceed $10,000.00, unless the County Board
of Commissioners first authorizes that transaction. See D.S.A. Finance Corp. vy. County of Cook,

801 N.E.2d 1075, 1081-83 (2003) (DSA Finance).

15