Court Opinion

ID: 3001832
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:21:16.399721+00
Date Added: 2024-06-11T18:02:01.347557
License: Public Domain

NONPRECEDENTIAL DISPOSITION
                             To be cited only in accordance with
                                      Fed. R. App. P. 32.1

              United States Court of Appeals
                                   For the Seventh Circuit
                                   Chicago, Illinois 60604

                                    Submitted July 7, 2008*
                                      Decided July 7, 2008

                                            Before

                              RICHARD D. CUDAHY, Circuit Judge

                              MICHAEL S. KANNE, Circuit Judge

                              ILANA DIAMOND ROVNER, Circuit Judge

No. 07-4003

JOHN W. CAIN,                                        Appeal from the United States District
     Plaintiff-Appellant,                            Court for the Southern District of Illinois.

       v.                                            No. 07-cv-0451-MJR

RONALD E. OSMAN, et al.,                             Michael J. Reagan,
    Defendants-Appellees.                            Judge.

                                          ORDER

       In this lawsuit under the diversity jurisdiction, Missouri citizen John W. Cain claims
that southern-Illinois attorney Ronald Osman, two lawyers working for Osman, and
Osman’s law firm—all Illinois citizens—stole Cain’s proposal to bring a qui tam action
against a St. Louis-based insurance company. The district court dismissed Cain’s
complaint for failure to state a claim. We affirm that dismissal.

       *
        After an examination of the briefs and the record, we have concluded that oral
argument is unnecessary. Thus, the appeal is submitted on the briefs and the record. See
Fed. R. App. P. 34(a)(2).
No. 07-4003                                                                              Page 2

        We draw all inferences in the light most favorable to Cain. See Malone v. Nielson, 474
F.3d 934, 935 (7th Cir. 2007). In August 1998, Cain approached Osman about filing a qui tam
lawsuit against General American Life Insurance Company under the False Claims Act.
See 31 U.S.C. §§ 3729-33. Cain had been a podiatrist before losing his medical license. The
reason, according to the complaint, is that he was performing “excessive Medicare
surgeries,” though malpractice also seems to have played a part. See Cain v. State Bd. of
Podiatry, 834 S.W.2d 260, 261 (Mo. Ct. App. 1992); Cain v. Arkansas State Podiatry Examining
Bd., 628 S.W.2d 295, 296 (Ark. 1982). He told Osman that, in his role as a Medicare
provider, he had acquired information that would support a false-claims action against
General American. In two separate mailings, Cain sent the lawyer his personal files
totaling 400 typewritten pages plus exhibits; Harry Riggs, a former General American
employee, was mentioned in those files. On September 10, 1998, Osman wrote Cain in
response to his first mailing and told him that the law firm would “not be opening a file” or
“taking any action” on Cain’s behalf. Osman explained in his letter that, after reviewing
Cain’s materials, he did “not believe” that Cain had a “viable action under the False Claims
Act.” On September 18, Osman returned Cain’s second mailing and reiterated that his law
office would not be taking any action to assist Cain.

        Seven months later, however, Osman filed a qui tam action against General
American on behalf of relators Harry Riggs and Nancy Riggs. See United States ex rel. Riggs
v. Gen. Am. Life Ins. Co., No. 4:99-cv-00608-RWS (E.D. Mo. filed Apr. 16, 1999). The
government took over the litigation and settled it in June 2002 for more than $70 million.
Cain maintains that Osman purloined information from his files and used it to file Riggs,
thus cheating him out of millions. He sued Osman and the other defendants in the
Southern District of Illinois, claiming that they had committed the Illinois torts of fraud,
outrage, bad faith, and conspiracy. The district court granted the defendants’ motion to
dismiss the complaint for failure to state a claim. See FED. R. C IV. P. 12(b)(6). We review
that dismissal de novo. Malone, 474 F.3d at 935.

         The elements of common-law fraud in Illinois are “(1) a false statement of material
fact; (2) defendant’s knowledge that the statement was false; (3) defendant’s intent that the
statement induce plaintiff to act; (4) plaintiff’s reliance upon the truth of the statement; and
(5) plaintiff’s damages resulting from reliance on the statement.” Wernikoff v. Health Care
Serv. Corp., 877 N.E.2d 11, 16 (Ill. App. Ct. 2007). The federal rules impose a higher
pleading standard for fraud claims than typical notice pleading: “a party must state with
particularity the circumstances constituting fraud.” FED. R. C IV. P. 9(b); see United States
ex rel. Fowler v. Caremark RX, L.L.C., 496 F3d. 730, 740 (7th Cir. 2007). This requirement
means that a “complaint alleging fraud must provide the who, what, when, where and
how.” Id. (internal quotation marks and citations omitted).
No. 07-4003                                                                                Page 3

        Cain’s fraud claim falters on all five elements, but we can limit our discussion to the
first. Cain contends that his complaint alleges a statement of fact that is materially false:
Osman’s representation that he did not believe Cain had a “viable action under the False
Claims Act.” This statement, however, is a legal opinion, not a representation of fact. It
cannot support a fraud claim because, in “an action for fraud, the alleged misrepresentation
must be one of fact and not an expression of opinion.” People ex rel. Peters v. Murphy-Knight,
618 N.E.2d 459, 463 (Ill. App. Ct. 1993); see Equity Capital Corp. v. Kreider Transp. Serv., Inc.,
967 F.2d 249, 254 (7th Cir. 1992) (“Under Illinois law, ‘a representation is one of opinion
rather than fact if it only expresses the speaker’s belief, without certainty, as to the
existence of a fact.’” (quoting Marino v. United Bank of Ill., N.A., 484 N.E.2d 935, 937 (Ill.
App. Ct. 1985))). Thus, putting aside that Cain always was free to consult other lawyers
about his prospects for suing American General, Osman’s opinion that Cain did not have a
claim under the False Claims Act could not constitute a “false statement of material fact.”
Moreover, Osman’s successful representation of Harry Riggs—a former American General
employee turned whistle blower—does nothing to undermine the conclusion that Osman
was expressing a legal opinion to Cain. Cain, who attributes the loss of his license to
“excessive Medicare surgeries,” does not even suggest any similarity between the Riggs
litigation and the content of the files he disclosed to Osman—except that his files
documented his own contacts with Harry Riggs when submitting Medicare claims to
American General. That is not enough to satisfy his burden to plead the “who, what when,
where, and how” of a fraud scheme.

          Cain also claims that Osman’s actions constitute the tort of outrage. Outrage is a
common-law tort that “originated as a catchall to permit recovery when an existing tort
claim was unavailable, but in the narrow instances in which an actor’s conduct exceeded all
permissible bounds of a civilized society.” R ESTATEMENT (THIRD) OF T ORTS § 45 cmt. a
(Tentative Draft No. 5, 2007). In Illinois the tort of outrage is cited infrequently, and when
it is, it tends to be used synonymously with intentional infliction of emotional distress. See
Robertson v. Travelers Ins. Co., 448 N.E.2d 866, 868-69 (Ill. 1983); Feltmeier v. Feltmeier, 777
N.E.2d 1032, 1037-38 (Ill. App. Ct. 2002); Doe v. Chand, 781 N.E.2d 340, 345, 347 (Ill. App. Ct.
2002); Calcagno v. Personalcare Health Mgmt., Inc., 565 N.E.2d 1330, 1337 (Ill. App. Ct. 1991).
Under Illinois law, a plaintiff claiming intentional infliction of emotional distress must
prove that the defendant intentionally or recklessly engaged in “extreme and outrageous
conduct” that caused severe emotional distress. Sornberger v. City of Knoxville, Ill., 434 F.3d
1006, 1030 (7th Cir. 2006); see Lopez v. City of Chi., 464 F.3d 711, 720 (7th Cir. 2006). As with
the tort of outrage, extreme and outrageous conduct is conduct that “goes beyond all
bounds of decency and is considered intolerable in a civilized community.” Lopez, 464 F.3d
at 720 (internal quotation marks, brackets, and citation omitted).
No. 07-4003                                                                                Page 4

        The defendants’ alleged misdeed did not constitute “extreme and outrageous
conduct” under Illinois law. See Pugh v. Tribune Co., 521 F.3d 686, 699 (7th. Cir. 2008) (“[A]
plaintiff can plead himself out of court by alleging facts that show there is no viable
claim.”). The factual scenario that Cain essentially alleges—that in reviewing Cain’s files
Osman and his codefendants gleaned a qui tam theory and the name of a plaintiff to front
it—is unseemly if true but does not come close to describing conduct that goes “‘beyond all
possible bounds of decency.’” See Kleidon v. Rizza Chevrolet, Inc., 527 N.E.2d 374, 377 (Ill.
App. Ct. 1988) (quoting Restatement (Second) of Torts § 46, cmt. d (1965)). So the outrage
claim is doomed at the outset, but it’s also worth noting that Cain does not allege that the
conduct of the defendants actually caused him emotional distress, much less actionable
distress “so severe that no reasonable person could be expected to endure it.” See Lifton v.
Bd. of Educ. of City of Chi., 416 F.3d 571, 579 (7th Cir. 2005). Cain’s gripe is not that he
suffered emotionally or even that he lost money out of his own pocket; instead, he simply
contends that the defendants deprived him of the financial reward that, under the False
Claims Act, motivates qui tam plaintiffs to step forward and serve as “private attorneys
general.” See United States v. Bank of Farmington, 166 F.3d 853, 857-58 (7th Cir. 1999); United
States ex rel. Hall v. Tribal Dev. Corp., 49 F.3d 1208, 1213 (7th Cir. 1995).

        Finally, Cain’s claims of bad faith and conspiracy fare no better than his other
claims. “Bad faith” is a label that Illinois courts sometimes apply in actions sounding in tort
or contract, e.g., fraud, negligence, or breach of contract, but there is no independent tort of
“bad faith” in Illinois outside of certain insurance cases involving an insurer’s duty to act in
good faith in responding to settlement offers. See Great Lakes Dredge & Dock Co. v. City of
Chi., 260 F.3d 789, 797 (7th Cir. 2001); Twin City Fire Ins. Co. v. Country Mut. Ins. Co., 23 F.3d
1175, 1179-80 (7th Cir. 1994); Voyles v. Sandia Mortgage Corp., 751 N.E.2d 1126, 1131 (Ill.
2001); Cramer v. Ins. Exch. Agency, 675 N.E.2d 897, 903-04 (Ill. 1996). Moreover, although
Illinois does recognize a claim for civil conspiracy, there first must be an underlying tort,
which, in Cain’s situation, there is not. See Borsellino v. Goldman Sachs Group, Inc., 477 F.3d
502, 509 (7th Cir. 2007). Cain’s allegations perhaps suggest an ethical breach, see ILL. R.
PROF’L C ONDUCT 1.6(a), but “[t]he mere fact that an attorney may have violated
professional ethics does not, in and of itself, give rise to a cause of action for damages,”
Owens v. McDermott, Will & Emery, 736 N.E.2d 145, 157 (Ill. App. Ct. 2000); see Doe v. Roe,
681 N.E.2d 640, 649 (Ill. App. Ct. 1997).

       For the foregoing reasons, the judgment is AFFIRMED.