Court Opinion

ID: 4291847
Source: CourtListenerOpinion
Date Created: 2018-07-05 22:07:45.583916+00
Date Added: 2024-06-11T09:22:39.575015
License: Public Domain

2018 IL App (3d) 170296

                                  Order filed July 5, 2018
     ____________________________________________________________________________

                                                  IN THE

                                   APPELLATE COURT OF ILLINOIS

                                            THIRD DISTRICT

                                                   2018

     ADVANCED PHYSICIANS, S.C.,             )     Appeal from the Circuit Court
                                            )     of the 12th Judicial Circuit,
           Plaintiff-Appellee,              )     Will County, Illinois.
                                            )
           v.                               )     Appeal No. 3-17-0296
                                            )     Circuit Nos. 09-CH-5679, 10-CH­
     PROVENA GLENWOOD MEDICAL               )     2054, and 10-CH-3108
     IMAGING, and FUTURE DIAGNOSTICS        )
     GROUP, LLC,                            )     The Honorable
                                            )     Raymond E. Rossi,
           Defendants-Appellants.           )     Judge, presiding.
                                            )
     ____________________________________________________________________________

           JUSTICE McDADE delivered the judgment of the court, with opinion. 

           Justice Schmidt concurred in the judgment and opinion. 

           Justice Wright dissented, with opinion. 

     ____________________________________________________________________________

                                                OPINION

¶1          The plaintiff, Advanced Physicians, S.C., sought to maintain a qui tam action against the

     defendants, Provena Glenwood Medical Imaging (Provena) and Future Diagnostics Group, LLC

     (FDG). After extensive motion practice, the circuit court denied the defendants’ motions,

     culminating in an interlocutory appeal under Illinois Supreme Court Rule 308 (eff. Jan. 1, 2015).

     Four certified questions are presented in this appeal, including a question regarding whether the

     circuit court had subject matter jurisdiction and a question regarding whether Advanced
     Physicians constitutes an “interested” person for purposes of being able to maintain the qui tam

     action. We answer the first and second questions in the negative.

¶2                                                    FACTS

¶3          On February 7, 2006, John Donaldson filed a qui tam action under seal in the Cook

     County circuit court, alleging that certain magnetic resonance imaging (MRI) facilities engaged

     in a fraudulent kickback scheme regarding MRI services. The complaint alleged that the MRI

     facilities entered into lease agreements with physicians who would refer their patients to the MRI

     facilities for MRI services but then, despite not providing any services for their patients, the

     physicians would bill the insurance companies at excessive rates for the MRI services and then

     split the proceeds with the MRI facilities. Count I of the complaint alleged a violation of the

     Insurance Claims Fraud Prevention Act (Act) (740 ILCS 92/1 et seq. (West 2006)). Count II

     alleged violations of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1

     et seq. (West 2006)).

¶4          On January 17, 2007, the Cook County circuit court unsealed the contents of the court

     file in Donaldson’s qui tam action. Also on that date, the Attorney General’s office issued a press

     release stating that it had decided to join the case. News of the lawsuit received media coverage

     in the Chicago area. Two years later, on January 14, 2009, the Attorney General announced that

     it had settled the case for $1.2 million. Attorney General Madigan Settles MRI Kickback Case for

     $1.2 Million, Ill. Att’y Gen. (Jan. 14, 2009),

     http://www.illinoisattorneygeneral.gov/pressroom/2009_01/20090114.html.

¶5          On May 22, 2007, chiropractors and siblings Dana and Richard Vallandigham filed a

     civil complaint in the Cook County circuit court against numerous MRI facilities, including

     defendants Provena and FDG, based on the alleged kickback scheme and claiming that the MRI­

                                                        2

     service business that they wholly owned, Advanced Physicians, S.C., was harmed by the scheme.

     Count I alleged violations of the Illinois Antitrust Act (740 ILCS 10/1 et seq. (West 2006)).

     Count II alleged civil conspiracy. Count III alleged violations of the Consumer Fraud and

     Deceptive Business Practices Act. Count IV was a qui tam claim alleging violations of the Act.

     All of these counts were based on allegations that the MRI facilities conspired to monopolize the

     MRI-service market in the Chicago area. In part, the complaint alleged that when the

     Vallandighams began marketing their MRI services to local physicians in 2005, some of these

     physicians stated that they had contractual relationships with the MRI providers and would not

     send their MRI business to the open market. The Vallandighams also alleged that they were told

     details about these “sham” lease agreements, in which “the referring physicians and clinics ***

     would pay or reimburse a flat fee of around $450.00 for an MRI scan while the referring

     physicians and clinics were billing the patient or their third party payor for these services at a

     much higher rate.” This was allegedly done to “make it appear that the Referrers were leasing

     space at the Defendant MRI Facilities when, in fact, the physicians did not attend to their

     patients’ MRI scans or perform any services at the MRI facilities.”

¶6          On October 17, 2008, the Attorney General, who had decided to intervene in the qui tam

     claim, filed a motion to dismiss the Vallandighams as interested persons with prejudice and to

     voluntarily dismiss count IV of the 2007 Vallandigham complaint. The motion stated that the

     Vallandighams were not contesting their dismissal from count IV of the complaint, but that they

     intended to proceed with the first three counts. Further, the motion alleged:

                            “8.     The State was independently investigating this

                    matter before the Vallandighams filed their complaint, and will

                    continue to investigate as the State deems appropriate.

                                                       3

                              9.      In addition, the State’s broad, state-wide

                       investigation of schemes complained of by the Vallandighams was

                       previously disclosed through prior litigation, news media, and an

                       Attorney General press release.

                              10.     The Vallandighams do not qualify as original

                       sources because they have not provided any direct and independent

                       knowledge of the information on which the allegations are based.

                       The Vallandighams have not demonstrated that they had firsthand

                       knowledge of the alleged fraud and that they obtained this

                       knowledge through their own labor unmediated by anything else.”

¶7            On October 27, 2008, the Cook County circuit court entered an order granting the

       Attorney General’s motion to dismiss. The court specifically found that (1) “[t]he allegations in

       this complaint were previously publicly disclosed through previously filed litigation, media

       reports, and an Attorney General press release” and (2) “[t]he Vallandighams are not original

       sources of the information on which this action is based, within the meaning of Section 30(b) of

       [the Act (740 ILCS 92/30(b) (West 2006))].” The court’s order (1) dismissed the Vallandighams

       as interested persons with prejudice, (2) granted the voluntary dismissal of count IV of the 2007

       complaint without prejudice and allowed the State to refile as it saw fit, and (3) permitted the

       2007 Vallandigham complaint to proceed on counts I-III because the State was not a party to

       those counts.

¶ 8	          On July 17, 2009, the Vallandighams filed another complaint in the Cook County circuit

       court against Provena that contained essentially the same allegations as counts I-III of the 2007

       complaint; i.e., violations of the Antitrust Act, civil conspiracy, and violations of the Consumer

                                                         4

       Fraud and Deceptive Business Practices Act and the Medical Practice Act of 1987 (225 ILCS

       60/1 (West 2006)). The parties agreed to transfer the case to Will County.

¶9            On March 22, 2010, the Vallandighams filed their first amended complaint, which

       included counts I-III from the 2009 complaint, but also reintroduced the same qui tam claim that

       was included in the 2007 complaint—i.e., count IV, from which the Vallandighams had been

       dismissed with prejudice and that had been voluntarily dismissed by the Attorney General.

¶ 10          Provena filed a motion to dismiss the 2010 first amended complaint. Regarding counts I­

       III, the circuit court granted the motion to dismiss without prejudice. The court denied the

       motion regarding count IV.

¶ 11          On July 15, 2010, a second amended complaint was filed with the Will County circuit

       court. However, the complaint was filed by Advanced Physicians—the business wholly owned

       by the Vallandighams—rather than by the Vallandighams themselves. The second amended

       complaint included the same four counts that appeared in the 2010 first amended complaint.

¶ 12          Provena filed a motion to dismiss the 2010 second amended complaint. The circuit court

       consolidated the case (Will County circuit court case number 09-CH-5679) with another action

       the Vallandighams had filed against defendant FDG (Will County circuit court case number 10­

       CH-2054). The court then denied Provena’s motion to dismiss and a motion to dismiss that had

       been filed by FDG.

¶ 13          Subsequently, Advanced Physicians filed a third amended complaint on May 5, 2011,

       which added over 80 physicians and physician groups as defendants. Later, Advanced Physicians

       voluntarily dismissed counts I-III of its third amended complaint, but it proceeded on count IV.

                                                        5

¶ 14           There is nothing in the record to indicate that the Vallandighams complied with the

       various requirements of the Act at the time that they realleged count IV. 1 The only indication

       that the Attorney General was ever contacted about the claim is that Advanced Physicians asserts

       that it “provided a comprehensive report on the status” of its claim to the Attorney General on

       August 11, 2014—five years after the complaint in which it was substituted as plaintiff was filed.

       This “comprehensive report” consisted of a letter from counsel for Advanced Physicians to the

       Attorney General’s office. The purpose of the lengthy letter can be seen in its second paragraph:

                       “The fundamental issue before the Court is whether Advanced

                       Physicians can proceed with its [Insurance Claims Fraud

                       Prevention Act] claim in Will County when, upon motion of the

                       Illinois Attorney General’s office, a similar claim was dismissed in

                       Cook County in 2009. For the reasons set forth below, we believe

                       it can, particularly if the Illinois Attorney General agrees that

                       Advanced Physicians is the ‘original source’ of the alleged scheme

                       as to these specific defendants—a position that, admittedly, would

                       be contrary to that taken by the Attorney General in 2009, but

                       which we believe is fully supported by the facts.”

¶ 15           Motions to dismiss and for summary judgment were filed regarding the third amended

       complaint. In part, Provena had argued that the Attorney General’s dismissal of the

       Vallandigham qui tam action deprived the court of subject matter jurisdiction over the Advanced

       Physicians action—because Advanced Physicians was wholly owned and operated by the

               1
                See, e.g., 740 ILCS 92/15(b) (West 2010) (requiring, in part, that “[a] copy of the complaint and
       a written disclosure of substantially all material evidence and information the person possesses shall be
       served on the State’s Attorney and Attorney General”).
                                                           6

       Vallandighams, it was likewise not an original source of the information provided to the

       Attorney General. Those motions were denied.

¶ 16          In April 2017, the circuit court allowed Provena’s motion to file an interlocutory appeal

       and certified the following four questions:

                             (1) “The legal issue of whether the Illinois Attorney

                      General’s Motion to Dismiss the Vallandighams as interested

                      persons with prejudice dated October 17, 2008, combined with the

                      Order which granted the Motion, deprived all subsequent courts of

                      subject matter jurisdiction pursuant to [the Act].”

                             (2) “The legal issue of whether Advanced Physicians, S.C.

                      satisfies the definition of an interested person as defined by Section

                      15 of the [Act] given that Richard and Dana Vallandigham were

                      the qui tam plaintiffs who filed the action and served a copy of the

                      complaint on the State’s Attorney and Attorney General.”

                             (3) “The legal issue of whether a discount provided by

                      PGMI pursuant to an MRI lease with a physician constitutes

                      ‘remuneration’ as defined by Section 5 of the [Act].”

                             (4) “The legal issue of whether the plaintiff must establish

                      fair market value for the medical service in question in the event

                      Illinois courts find that a discount may satisfy the definition of

                      ‘remuneration’ as defined by the [Act].”

       We also note that the only defendants that appealed were Provena and FDG.

                                                        7

¶ 17                                                ANALYSIS

¶ 18           The first question certified for this appeal is “[t]he legal issue of whether the Illinois

       Attorney General’s Motion to Dismiss the Vallandighams as interested persons with prejudice

       dated October 17, 2008, combined with the Order which granted the Motion, deprived all

       subsequent courts of subject matter jurisdiction pursuant to [the Act].”

¶ 19           Subject matter jurisdiction “refers to the power of a court to hear and determine cases of

       the general class to which the proceeding in question belongs.” Belleville Toyota, Inc. v. Toyota

       Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 334 (2002). “With the exception of the circuit court’s

       power to review administrative action, which is conferred by statute, a circuit court’s subject

       matter jurisdiction is conferred entirely by our state constitution.” Id.

¶ 20           A circuit court’s subject matter jurisdiction extends to all “justiciable matters.” Ill. Const.

       1970, art. VI, § 9. “Thus, in order to invoke the subject matter jurisdiction of the circuit court, a

       plaintiff’s case, as framed by the complaint or petition, must present a justiciable matter.”

       Belleville Toyota, 199 Ill. 2d at 334.

¶ 21           “Generally, a ‘justiciable matter’ is a controversy appropriate for review by the court, in

       that it is definite and concrete, as opposed to hypothetical or moot, touching upon the legal

       relations of parties having adverse legal interests.” Id. at 335. Notably, the legislature can create

       a justiciable matter “by enacting legislation that creates rights and duties that have no counterpart

       at common law or in equity.” Id. It is important to note, however, that when the legislature

       creates a new justiciable matter, the legislature does not confer subject matter jurisdiction on the

       circuit court. Id. Thus, what may appear in the enacted legislation to be conditions precedent to

       the circuit court’s exercise of subject matter jurisdiction are in fact not jurisdictional

       prerequisites. See In re M.W., 232 Ill. 2d 408, 425-26 (2009); see also Belleville Toyota, 199 Ill.
8

       2d at 340. For example, a four-year statute of limitations for bringing certain actions under the

       Motor Vehicle Franchise Act (815 ILCS 710/1 et seq. (West 2000)) did not constitute a

       jurisdictional prerequisite; rather, it provided “an affirmative defense that the defendant might

       plead as a bar to liability.” M.W., 232 Ill. 2d at 425 (citing Belleville Toyota, 199 Ill. 2d at 344­

       45).

¶ 22          The Act is a whistleblower law that provides “interested” persons, including insurers,

       with the ability to bring civil actions on behalf of the State for insurance fraud, including

       kickback schemes. See 740 ILCS 92/5(a), 15(a) (West 2006). Actions brought by an “interested”

       person under the Act are qui tam actions. 2 See Black’s Law Dictionary 1251 (6th ed. 1990)

       (defining a qui tam action as “an action brought by an informer, under a statute which establishes

       a penalty for the commission or omission of a certain act, and provides that the same shall be

       recoverable in a civil action, part of the penalty to go to any person who will bring such action

       and the remainder to the state or some other institution”). The State is the real party in interest in

       qui tam actions. See 740 ILCS 92/20 (West 2014); Scachitti v. UBS Financial Services, 215 Ill.
2d 484, 515 (2005); State ex rel. Saporta v. Mortgage Electronic Registration Systems, Inc.,

       2016 IL App (3d) 150336, ¶ 18. “[Q]ui tam plaintiffs, acting as statutorily designated agents for

       the state, may proceed only with the consent of the Attorney General, and remain completely

       subordinate to the Attorney General at all times.” Scachitti, 215 Ill. 2d at 515; see also 740 ILCS

       92/15 (West 2014).

¶ 23          The limitations written into section 15 of the Act, such as the “interested” persons

       requirement, are not jurisdictional prerequisites and therefore do not impact the circuit court’s

       subject matter jurisdiction. See Belleville Toyota, 199 Ill. 2d at 340; M.W., 232 Ill. 2d at 425.

              2
               For a history of the development of qui tam actions, see Vermont Agency of Natural Resources v.
       United States ex rel. Stevens, 529 U.S. 765, 774-78 (2000).
                                                          9

       Thus, the circuit court in this case has subject matter jurisdiction to hear qui tam claims brought

       under the Act such as count IV of Advanced Physicians’ amended complaint. The 2008 Cook

       County circuit court finding that the Vallandighams were not “interested” persons under the Act

       in no way impacts the Will County circuit court’s subject matter jurisdiction in this case.

       Accordingly, we answer the first certified question in the negative.

¶ 24          The second question certified for this appeal is “[t]he legal issue of whether Advanced

       Physicians, S.C. satisfies the definition of an interested person as defined by Section 15 of the

       [Act] given that Richard and Dana Vallandigham were the qui tam plaintiffs who filed the action

       and served a copy of the complaint on the State’s Attorney and Attorney General.”

¶ 25          In essence, this is a question of res judicata, which means that “a final judgment on the

       merits rendered by a court of competent jurisdiction bars any subsequent actions between the

       same parties or their privies on the same cause of action.” Rein v. David A. Noyes & Co., 172 Ill.
2d 325, 334 (1996). The res judicata bar “extends not only to what was actually decided in the

       original action, but also to matters which could have been decided in that suit.” Id. at 334-35.

¶ 26          The three elements of res judicata are “(1) a final judgment on the merits has been

       rendered by a court of competent jurisdiction; (2) an identity of cause of action exists; and (3) the

       parties or their privies are identical in both actions.” Hudson v. City of Chicago, 228 Ill. 2d 462,

       467 (2008).

¶ 27          There is no question that the first two elements of res judicata have been met. An order

       allowing a voluntary dismissal constitutes a final judgment. See Kahle v. John Deere Co., 104
Ill. 2d 302, 305-07 (1984). In addition, the dismissal with prejudice of a party from a claim is a

       final and appealable order if it either also disposes of all remaining claims and parties or includes

       an appropriate finding by the circuit court under Illinois Supreme Court Rule 304(a) (eff. Jan. 1,

                                                        10 

       2006). State ex rel. Beeler, Schad & Diamond, P.C. v. Target Corp., 367 Ill. App. 3d 860, 864

       (2006). Furthermore, it is undisputed that the claim brought in count IV by Advanced Physicians

       is the same claim brought by the Vallandighams in 2007.

¶ 28          Thus, the remaining question is whether the parties or their privies are identical.

       Regarding the defendants, the only two that appealed were Provena and FDG. 3 Both of these

       defendants were named in the Vallandighams’ 2007 complaint. Therefore, the only question is

       whether the plaintiffs are the same.

¶ 29          For res judicata purposes, courts have routinely found privity between officers of

       corporations and the corporations themselves. See, e.g., National Union Fire Insurance Co. of

       Pittsburgh, PA v. DiMucci, 2015 IL App (1st) 122725, ¶ 32; Marine Midland Bank v. Slyman,

       995 F.2d 362, 365 (2d Cir. 1993). We see no reason to reach a different conclusion in the present

       case. Even though the Attorney General did not allege in its motion to dismiss the

       Vallandighams from the 2007 case that they were not “interested” persons, the Cook County

       circuit court nevertheless found that they in fact were not “interested” persons for purposes of the

       Act and dismissed them with prejudice. The Vallandighams did not challenge that finding.

       Subsequently, although the record is not entirely clear on how or why it came about, the

       Vallandighams decided to reraise the claim pursuant to the Act against Provena and FDG in Will

       County, despite the fact that this was the exact claim they brought in Cook County in 2007—

       which the Attorney General voluntarily dismissed after the Vallandighams were dismissed with

       prejudice as parties. Then, and again the record is not entirely clear on how it happened, the

       Vallandighams suddenly disappeared as the named plaintiffs and were substituted by their

       wholly owned corporation, Advanced Physicians. For res judicata purposes, there is no

              3
               There is no indication from the record what occurred regarding the additional defendants named
       in Advanced Physicians’ third amended complaint.
                                                        11 

       difference between the Vallandighams and Advanced Physicians. We further note that arriving at

       this conclusion does not require a factual finding regarding the corporate structure of Advanced

       Physicians, as the dissent alleges. There is no dispute that the Vallandighams wholly own

       Advanced Physicians; they pled as much throughout the proceedings below.

¶ 30          Because the Vallandighams were found not to constitute “interested” persons under the

       Act, the same conclusion must be drawn regarding Advanced Physicians in this case.

       Accordingly, we answer the second certified question in the negative.

¶ 31          Our rulings on the first two certified questions obviate the need to address and answer the

       third and fourth certified questions.

¶ 32                                            CONCLUSION

¶ 33          We answer the first and second questions certified by the circuit court of Will County in

       the negative; our answer to the second question obviates the need to address the remaining two

       certified questions.

¶ 34          Certified questions answered.

¶ 35          JUSTICE WRIGHT, dissenting:

¶ 36          In Rozsavolgyi v. City of Aurora, 2017 IL 121048, our supreme court provides very

       instructive guidance concerning interlocutory appeals. I note that Rozsavolgyi was issued by our

       supreme court after we allowed the interlocutory appeal in this case.

¶ 37          However, in this recent decision, our supreme court carefully reminds litigants and

       reviewing courts that Rule 308 interlocutory appeals are not favored. Rozsavolgyi, 2017 IL
121048, ¶ 22. I believe this language is worth repeating. Rule 308 appeals are not favored. I

       welcome this clarification from our supreme court that permits our court to reexamine a decision

       to allow an interlocutory appeal. Upon reconsideration in this case, I would vacate our order

                                                       12 

       allowing the interlocutory appeal on two grounds. First, I conclude that the trial court’s decision

       was correct. Second, after digesting Rozsavolgyi, I would exercise the option to reconsider my

       decision to allow the Rule 308 petition.

¶ 38           My separate offering is not intended to be critical of this panel’s decision to allow the

       Rule 308 petition on August 4, 2017. I also recognize that my respected colleagues do not share

       my view that our decision to allow the Rule 308 petition should be reconsidered in the first place.

¶ 39           Upon reconsideration, I would vacate our order allowing leave to appeal on the first

       certified question for the reasons set forth below. A permissive interlocutory appeal under Rule

       308 should not take place unless it involves a question of law. However, not all questions of law

       meet the requirements necessary for a Rule 308 appeal. This question of law must involve an

       issue where there is a substantial ground for a difference of opinion and an immediate ruling will

       materially advance the ultimate termination of the litigation. See Ill. S. Ct. R. 308 (eff. Jan. 1,

       2015). Each certified question now before this court has been labeled as a request for guidance

       on a “legal issue.” Nonetheless, calling the issue in each question a “legal issue” does not make it

       so.

¶ 40           Now, in hindsight, I do not believe the first certified question meets the Rule 308

       requirement that there was a substantial difference of opinion on the scope of the trial court’s

       statutory subject matter jurisdiction. There is little debate that the trial court had subject matter

       jurisdiction in this matter. As the majority notes above, “The limitations written into section 15

       of the Act, such as the ‘interested’ persons requirement, are not jurisdictional prerequisites and

       therefore do not impact the circuit court’s subject matter jurisdiction. See Belleville Toyota, 199
Ill. 2d at 340; M.W., 232 Ill. 2d at 425.” Supra ¶ 23. If the first certified question may be

       answered by the majority with a reference to existing and longstanding appellate case law, I

                                                         13 

       respectfully observe that the first certified question does not involve an issue for which there are

       substantial grounds for a difference of opinion. See Rozsavolgyi, 2017 IL 121048, ¶ 32.

¶ 41            The second certified question involves questions of fact regarding whether this

       corporation and the officers of this corporation are the same person. Privity cannot be determined

       without considering the facts pertaining to the structure of Advanced Physicians when the entity

       was granted corporate status. If the answer to the second certified question depends on the

       underlying facts, the second certified question is improper for consideration under Rule 308.

       Rozsavolgyi, 2017 IL 121048, ¶ 21 (citing In re Estate of Luccio, 2012 IL App (1st) 121153,

       ¶ 32).

¶ 42            Similarly, the third certified question requires our court to determine whether Provena’s

       discount constitutes remuneration as defined by section 5 of the Act. The answer to the third

       certified question cannot be reached without reviewing the MRI lease to determine the structure

       of the discount. Again, our supreme court has instructed our court to act as a “gatekeeper” by

       closely guarding against improper interlocutory appeals. Rozsavolgyi, 2017 IL 121048, ¶ 23.

¶ 43            Finally, the fourth certified question seeks guidance on the burden of proof to establish

       fair market value. The language of the fourth question indicates the answer to this certified

       question is necessary “in the event Illinois courts find that a discount may satisfy the definition of

       ‘remuneration’ as defined by the [Act].” (Emphasis added.) Consequently, I conclude that we

       would not materially advance the ultimate termination of the litigation because the question

       involves a contingency that may not take place.

¶ 44            Based on guidance from the decision in Rozsavolgyi, I would vacate our order granting

       leave to appeal on all four certified questions and remand the matter to the trial court. As stated

       above, I would affirm the trial court’s decision.

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