Court Opinion

ID: 3144461
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:03:18.219403+00
Date Added: 2024-06-11T11:55:01.381299
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                        Appellate Court

                   World Painting Co. v. Costigan, 2012 IL App (4th) 110869

Appellate Court            WORLD PAINTING COMPANY, LLC, Plaintiff-Appellee, v. JOSEPH
Caption                    COSTIGAN, in His Capacity as Director of Labor, State of Illinois; and
                           LISA MADIGAN, in Her Capacity as Illinois Attorney General,
                           Defendants-Appellants.
District & No.             Fourth District
                           Docket No. 4-11-0869

Argued                     February 7, 2012
Filed                      March 29, 2012

Held                       The preliminary injunction entered by the trial court barring the
(Note: This syllabus       Department of Labor from enforcing the Employee Classification Act
constitutes no part of     against plaintiff’s business based on claims that plaintiff had
the opinion of the court   misclassified some workers as nonemployees was vacated and the cause
but has been prepared      was remanded for further proceedings, notwithstanding plaintiff’s initial
by the Reporter of         contention that the Act violated its rights to due process, since plaintiff
Decisions for the          and the Department agreed to a constitutional plan under which the
convenience of the         Department would investigate plaintiff’s alleged violations without
reader.)
                           making any adjudicatory findings of liability, and under those
                           circumstances, plaintiff’s right to due process would not be implicated.

Decision Under             Appeal from the Circuit Court of Macon County, No. 11-CH-235; the
Review                     Hon. Thomas E. Griffith, Jr., Judge, presiding.

Judgment                   Vacated and remanded.
Counsel on                  Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
Appeal                      Solicitor General, and Mary E. Welsh (argued), Assistant Attorney
                            General, of counsel), for appellants.

                            Christopher M. Ellis and Timothy J. Tighe, Jr. (argued), both of Bolen
                            Robinson & Ellis, LLP, of Decatur, for appellee.

Panel                       JUSTICE COOK delivered the judgment of the court, with opinion.
                            Presiding Justice Turner and Justice Steigmann concurred in the
                            judgment and opinion.

                                              OPINION

¶1           In this action, plaintiff, World Painting Company, LLC, challenges the validity of the
        Employee Classification Act (Act) (820 ILCS 185/1 to 999 (West 2010)), arguing the Act
        violates due process. In September 2011, the trial court entered a preliminary injunction
        barring defendants, Director of Labor Joseph Costigan and Attorney General Lisa Madigan
        in their official capacities, from enforcing the Act against plaintiff pending the outcome of
        plaintiff’s claims for permanent injunctive and declaratory relief. The court’s judgment
        followed a hearing at which defendants conceded that the Fifth District Appellate Court’s
        decision in Bartlow v. Shannon, 399 Ill. App. 3d 560, 927 N.E.2d 88 (2010), was mandatory
        authority and supported plaintiff’s request for preliminary injunction.
¶2           Defendants appeal, arguing the trial court erred in granting the preliminary injunction as
        Bartlow was decided wrongly. Specifically, defendants contend that under an appropriate
        reading of the Act, inconsistent with the appellate court’s interpretation in Bartlow,
        plaintiff’s due process concerns were unfounded and its request for preliminary injunction
        should have been denied. At oral argument, plaintiff conceded that defendants’ proposed
        interpretation of the Act is reasonable and ensures plaintiff will receive due process. Plaintiff
        nevertheless argues that defendants’ proposed interpretation violates principles of the
        separation of powers.
¶3           We allow the parties’ agreed interpretation of the Act to control in this case and reject
        plaintiff’s separation-of-powers argument. Accordingly, as defendants’ proposal to bind
        themselves to their reading of the Act resolves plaintiff’s due-process claim, we vacate the
        trial court’s judgment granting the preliminary injunction and remand for further
        proceedings.

¶4                                       I. BACKGROUND
¶5          In May 2011, plaintiff, a contracting firm, received a letter from the Department of Labor
        (Department) informing plaintiff of its preliminary determination that plaintiff had accrued
        27 total days’ violations of the Act by misclassifying six workers as nonemployees on two

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       construction projects between October and December 2009. The letter indicated plaintiff
       faced $40,500 in possible civil penalties and invited plaintiff to submit exculpating evidence
       in writing for the Department’s consideration toward reaching a final determination.
¶6         Instead of responding to the Department’s request for additional information, in July
       2011, plaintiff filed its complaint alleging the Act is unconstitutional on its face. Specifically,
       plaintiff alleged the Act violates due process by failing to provide contractors who are
       suspected of violating the Act adequate notice and an opportunity to be heard prior to the
       imposition of penalties, including civil fines. Plaintiff’s complaint sought a permanent
       injunction barring defendants’ enforcement of the statute against plaintiff and declaratory
       relief. In August 2011, plaintiff filed a motion for preliminary injunction to prevent
       defendants from enforcing the Act against it during the pendency of the trial proceedings.
¶7         On August 25, 2011, the trial court held a hearing on plaintiff’s motion for preliminary
       injunction. Defendants conceded that Bartlow, a Fifth District decision, was mandatory
       authority before the court and that plaintiff was entitled to a preliminary injunction under that
       case. The court granted plaintiff’s motion, finding Bartlow was controlling.
¶8         This interlocutory appeal followed.

¶9                                           II. ANALYSIS
¶ 10        On appeal, defendants ask this court to disregard Bartlow and to rule plaintiff’s claim for
       preliminary injunction should not have been granted because plaintiff’s due-process claim
       is premature under an appropriate interpretation of the Act. At oral argument, plaintiff
       conceded defendants’ proposed interpretation was reasonable and would resolve the alleged
       due-process deficiencies. We allow the parties’ agreed reading of the Act, which we find
       otherwise constitutional, to control our disposition of this case. Because under their
       interpretation of the Act plaintiff is not entitled to a preliminary injunction, we vacate the
       trial court’s imposition of preliminary injunction and remand for further proceedings.
¶ 11        A preliminary injunction is an “extraordinary” remedy that “should be granted only in
       situations of extreme emergency or where serious harm would result if the preliminary
       injunction was not issued.” Clinton Landfill, Inc. v. Mahomet Valley Water Authority, 406
Ill. App. 3d 374, 378, 943 N.E.2d 725, 729 (2010). A preliminary injunction is warranted if
       (1) a clearly ascertained right requires protection, (2) irreparable injury will result in the
       absence of an injunction, (3) no adequate remedy at law is available, and (4) the moving
       party is likely to succeed on the merits of the case. Id. To obtain a preliminary injunction, the
       movant must raise a “fair question” that each of these elements is satisfied. Id.
¶ 12        In general, we review the trial court’s grant or denial of a preliminary injunction for an
       abuse of discretion, which occurs only when the ruling “is arbitrary, fanciful, or
       unreasonable, or when no reasonable person would adopt the court’s view.” (Internal
       quotation marks omitted.) Id. Purely legal questions arising in the preliminary-injunction
       analysis, however, are reviewed de novo. Id., 943 N.E.2d at 730. As this appeal concerns
       whether the Act is unconstitutional on its face when interpreted as defendants propose–a
       question of law–we apply the de novo standard of review.
¶ 13        In this case, plaintiff’s complaint alleged the Act violates due process. Specifically, in its

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       motion for preliminary injunction, plaintiff argued the Act on its face provides contractors
       insufficient notice and opportunity to be heard before the Department assesses penalties
       against them.
¶ 14        Under the constitutions of the United States and Illinois, the State may not “deprive any
       person of life, liberty, or property, without due process of law.” U.S. Const., amend. XIV;
       see also Ill. Const. 1970, art. I, § 2. “The core of due process is the right to notice and a
       meaningful opportunity to be heard”; no person may be deprived of a protected interest by
       an administrative adjudication of rights unless these safeguards are provided. Lachance v.
       Erickson, 522 U.S. 262, 266 (1998).
¶ 15        The converse of this proposition is also generally true: the constitutional guarantee of due
       process, along with its requirements of notice and an opportunity to be heard, is not even
       implicated by executive action that cannot result in an administrative adjudication of rights.
       For example, in Hannah v. Larche, 363 U.S. 420, 439 (1960), the Supreme Court considered
       whether the notice requirement of due process applied to proceedings before a federal
       commission investigating the possible violation of civil rights laws. The Court considered
       the commission’s statutory powers and responsibilities and concluded the commission’s
       “function is purely investigative and fact-finding. It does not adjudicate. It does not hold
       trials or determine anyone’s civil or criminal liability. It does not issue orders. *** It does
       not make determinations depriving anyone of his life, liberty, or property.” Id. at 441. Rather,
       the Court found, “[t]he only purpose of its existence is to find facts which may subsequently
       be used as the basis for legislative or executive action.” Id. The Court held due process did
       not require that persons whose conduct was under investigation by the commission must be
       apprised of the charges being investigated. Id. at 441-42. In so doing, the Court stated, “It is
       probably sufficient merely to indicate that the rights claimed by respondents are normally
       associated only with adjudicatory proceedings, and that since the Commission does not
       adjudicate, it need not be bound by adjudicatory procedures.” Id. at 442.
¶ 16        Subsequently, in Securities & Exchange Comm’n v. Jerry T. O’Brien, Inc., 467 U.S. 735,
       742 (1984), the Court remarked:
            “The opinion of the Court in Hannah *** leaves no doubt that *** the Due Process
            Clause of the Fifth Amendment *** is [not] offended when a federal administrative
            agency, without notifying a person under investigation, uses its subpoena power to gather
            evidence adverse to him. The Due Process Clause is not implicated under such
            circumstances because an administrative investigation adjudicates no legal rights ***.”
       In that case, the Court held due process was not violated by the Securities and Exchange
       Commission’s subpoena powers in investigating possible violations of securities laws. Id.
¶ 17        The following discussion of the Act and Bartlow provides further background relevant
       to our analysis. “The Act seeks to ensure that workers in the construction industry are offered
       protections under numerous labor laws, including minimum wage, overtime, workers’
       compensation, and unemployment insurance, and are not misclassified as independent
       contractors in order to avoid tax and labor law obligations.” Bartlow, 399 Ill. App. 3d at 563,
       927 N.E.2d at 92 (citing 820 ILCS 185/3 (West 2008)). It establishes a presumption that an
       individual who performs services for a construction contractor is an employee unless

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       specified criteria are met. 820 ILCS 185/10 (West 2008). A contractor’s failure to classify
       qualifying individuals as employees violates the Act. 820 ILCS 185/20 (West 2008).
¶ 18       The Department is charged with investigating possible violations of the Act. 820 ILCS
       185/25(a) (West 2008). The Act empowers the Department to inspect businesses and
       subpoena witnesses and documents in its investigations. 820 ILCS 185/25(a) (West 2008).
       Among other penalties for violations, the Act provides for civil fines calculated by reference
       to each day each individual is misclassified as a nonemployee. 820 ILCS 185/40 (West
       2008). “The civil penalties assessed by the Department as well as any other relief requested
       by the Department shall be recoverable in an action brought in the name of the people of the
       State of Illinois by the Attorney General.” 820 ILCS 185/25(b) (West 2008). Alternatively,
       “a person aggrieved by a violation” of the Act may collect the civil penalty in a private action
       in the circuit court. 820 ILCS 185/40 (West 2008).
¶ 19       Plaintiff’s case and the grant of preliminary injunction in this case were based on the
       Fifth District Appellate Court’s interpretation of the Act in Bartlow. In that case, the
       appellate court reversed the trial court’s denial of the plaintiffs’ motion for a temporary
       restraining order (TRO) barring enforcement of the Act pending the plaintiffs’ due-process
       challenge. Bartlow, 399 Ill. App. 3d at 574, 927 N.E.2d at 100. There, the plaintiffs received
       a notification that the Department had preliminarily determined the plaintiffs had violated
       the Act and were subject as a result to nearly $1.7 million in potential civil penalties. Id. at
       565, 927 N.E.2d at 94. As here, the letter indicated the plaintiffs could provide any written
       materials in their favor to the Department for its consideration. Id. Before the Department
       reached a final determination, the plaintiffs filed suit for an injunction against the
       enforcement of the Act and a declaration that the Act was unconstitutional on its face and
       later moved for a TRO and a preliminary injunction. Id. at 566, 927 N.E.2d at 94. The trial
       court denied their request for a TRO. Id. at 567, 927 N.E.2d at 95.
¶ 20       The Fifth District reversed the denial of the plaintiffs’ motion for a TRO. Id. at 574, 927
N.E.2d at 100. Under the appellate court’s interpretation of the Act, the Department enjoys
       powers to assess penalties and take other actions to remedy violations and prevent future
       violations. Id. at 564, 927 N.E.2d at 93. Initially, applying the two-part test established in
       Abbott Laboratories v. Gardner, 387 U.S. 136 (1967), the court rejected the defendants’
       argument that the plaintiffs’ claim was unripe. Bartlow, 399 Ill. App. 3d at 569, 927 N.E.2d
       at 96-97. Next, the court found the plaintiffs raised a “fair question” of the Act’s
       unconstitutionality “because the Act and the procedures promulgated pursuant to the Act do
       not appear to provide an accused with a meaningful opportunity to be heard.” Id. at 570, 927
       N.E.2d at 97. Specifically, the court concluded that procedures allowing for the submission
       of written evidence and an informal hearing were insufficient to ensure due process in light
       of the expansive adjudicative and remedial powers the Department enjoyed under the court’s
       interpretation of the Act. Id. at 571-72, 927 N.E.2d at 98-99. Toward that end, the court
       stated, “[I]t appears to us that the Act and its regulations may allow for the assessment of
       penalties and sanctions against an accused contractor without providing basic due process
       protections.” Id. at 571, 927 N.E.2d at 98. Finally, the appellate court concluded the plaintiffs
       showed that the enforcement of the Act against them would have resulted in irreparable harm
       and that they had no adequate remedy at law. Id. at 573-74, 927 N.E.2d at 100.

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¶ 21       Because this court had not issued any contrary opinion, the trial court in this case
       properly held Bartlow was controlling. See Schramer v. Tiger Athletic Ass’n, 351 Ill. App.
3d 1016, 1020, 815 N.E.2d 994, 996 (2004) (“Under the Illinois rule of stare decisis, a circuit
       court must follow the precedent of the appellate court of its district, if such precedent exists;
       if no such precedent exists, the circuit court must follow the precedent of other districts.”).
       Unlike the trial court, however, we are not bound to follow Bartlow. See id. at 1020, 815
       N.E.2d at 996-97.
¶ 22       In this case, defendants argue that, contrary to the Fifth District’s indications in Bartlow,
       the Act does not allow the Department to adjudicate a firm’s civil or criminal liability under
       the Act. Rather, according to defendants’ interpretation, the Department may only conduct
       a no-consequences investigation. Defendants liken the Department’s role to that of the police
       in a criminal investigation. The Department, according to defendants, may subpoena
       witnesses and documents and inspect businesses toward determining whether to recommend
       the commencement of an action for civil or criminal penalties in the trial court. If the
       Department found a violation, defendants’ interpretation would allow the Department to
       conduct informal negotiations with a firm toward settling on a penalty. However, if the firm
       were unwilling to negotiate, the Department’s sole recourse would be in “de novo” court
       proceedings in which the Department’s findings would be inadmissible. Defendants argue
       the Department’s investigation under the Act does not require due-process protections such
       as notice and an opportunity to be heard because the Department itself cannot adjudicate a
       firm’s rights or liabilities.
¶ 23       We note that plaintiff contends defendants’ interpretation of the Act raises separation-of-
       powers concerns. Plaintiff cites Millineum Maintenance Management, Inc. v. County of Lake,
       384 Ill. App. 3d 638, 652, 894 N.E.2d 845, 859-60 (2008), a Second District Appellate Court
       opinion illustrating the principle that a statute is unconstitutional if it allows the judiciary to
       “wholly reconsider[ ] an administrative decision without any deference to the original
       determination.” However, as the Department does not adjudicate a firm’s liability under the
       Act as perceived by the parties, separation of powers is not offended by the trial court’s role
       in adjudicating enforcement actions. That is, aside from the determination whether to
       prosecute claims in the court, there is no “original determination” as described in Millineum
       Maintenance for the judiciary to reconsider.
¶ 24       The parties have agreed to a constitutional plan for conducting their interaction as the
       Department investigates plaintiff’s possible violations of the Act. Under this plan, the
       Department is forbidden from making any adjudicatory findings of plaintiff’s liability. As
       such, due process is not implicated by the Department’s investigation in this case. Therefore,
       plaintiff is not entitled to a preliminary injunction as its claim that the Act is facially
       unconstitutional cannot succeed. We vacate the trial court’s order granting plaintiff a
       preliminary injunction and remand for further proceedings consistent with this opinion.

¶ 25                                   III. CONCLUSION
¶ 26       For the foregoing reasons, we vacate the trial court’s judgment granting plaintiff’s motion
       for a preliminary injunction and remand for further proceedings.

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¶ 27   Vacated and remanded.

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