Stefanski v. The City of Chicago , 2015 IL App (1st) 132844 ( 2015 )

Illinois Official Reports
Appellate Court
Stefanski v. City of Chicago, 2015 IL App (1st) 132844
Appellate Court NELLI STEFANSKI, Individually and on Behalf of All Others
Caption Similarly Situated, Plaintiff and Counterdefendant-Appellee, v. THE
CITY OF CHICAGO, a Municipal Corporation, Defendant and
Counterplaintiff-Appellant.
District & No. First District, Sixth Division
Docket No. 1-13-2844
Filed February 27, 2015
Rehearing denied March 27, 2015
Held In a class action against defendant city seeking declaratory relief and
(Note: This syllabus damages for unjust enrichment for plaintiff and the beneficiaries of the
constitutes no part of the city’s medical insurance plan who had received medical services paid
opinion of the court but by the city’s self-funded insurance plan for personal injuries caused by
has been prepared by the third-party tortfeasors, employed the services of an attorney to collect
Reporter of Decisions damages from such tortfeasors and received recoveries from such
for the convenience of tortfeasors that were reduced due to the city’s refusal to reduce its
the reader.) subrogation claim to account for its share of the attorney fees incurred
in violation of the common fund doctrine, the named plaintiff had no
right to rely on the common fund doctrine to support her claims for
relief against the defendant, since she had not stated an actionable
claim, class certification was improper, and the trial court’s order
certifying the class had to be vacated.
Decision Under Appeal from the Circuit Court of Cook County, No. 09-CH-29238; the
Review Hon. LeRoy K. Martin, Jr., Judge, presiding.
Judgment Reversed and vacated.
Counsel on Stephen R. Patton, Corporation Counsel, of Chicago (Benna Ruth
Appeal Solomon, Myriam Zreczny Kasper, and Suzanne M. Loose, Assistant
Corporation Counsel, of counsel), for appellant.
Krislov & Associates, of Chicago (Clinton A. Krislov and Michael R.
Karnuth, of counsel), for appellee.
Panel JUSTICE ROCHFORD delivered the judgment of the court, with
opinion.
Justice Lampkin concurred in the judgment and opinion.
Justice Hall dissented, with opinion.
OPINION
¶1 Plaintiff and counterdefendant-appellee, Nellie Stefanski, individually and on behalf of
all others similarly situated, brought the instant class action lawsuit against defendant and
counterplaintiff-appellant, the City of Chicago (the City), a municipal corporation. Plaintiff
sought declaratory relief and damages for unjust enrichment on behalf of herself and a
putative class of current and former beneficiaries of the City’s medical insurance plan who
had: (1) received medical services paid by the City’s self-funded insurance plan for personal
injuries caused by third-party tortfeasors; (2) employed the services of an attorney to collect
damages from such tortfeasors; and (3) received recoveries from such tortfeasors that were
reduced due to the City’s improper refusal to reduce its subrogation claim to account for its
share of the attorney fees incurred by plaintiff, in violation of the so-called “common fund
doctrine.”
¶2 The circuit court ultimately concluded that the common fund doctrine applied to the
claims raised in this suit, certified a class of such plaintiffs, granted summary judgment in
favor of that class, and denied the City’s cross-motion for summary judgment. We thereafter
granted the City’s petition for leave to appeal from the circuit court’s order granting
certification of this class action lawsuit, pursuant to Illinois Supreme Court Rule 306(a)(8)
(eff. Feb. 16, 2011). Because the named plaintiff cannot maintain a cause of action under the
common fund doctrine, we reverse.
¶3 I. BACKGROUND
¶4 Because we reverse the circuit court’s ruling that the common fund doctrine applies to the
claims of the named plaintiff, and because our conclusion on that issue is dispositive, only
those facts necessary to resolve this issue will be recited.
¶5 On August 19, 2009, plaintiff filed the instant lawsuit against the City. Therein, plaintiff
generally alleged that: (1) on or about May 17, 2007, she was employed by the City and
covered by the City of Chicago Medical Care Plan (Plan) when she was injured in an
automobile collision caused by a third-party tortfeasor; (2) she received medical services in
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connection with this collision, which were paid for in full or in part by the Plan; (3) plaintiff
retained an attorney, who obtained an $18,000 settlement from the third-party tortfeasor as
compensation for plaintiff’s personal injuries; (4) pursuant to her contingent-fee agreement
with her attorney, plaintiff was obligated to pay her attorney one-third of that total amount
for legal services; (5) the City’s attorneys, without participating in the recovery of the
settlement, nevertheless asserted a claim against plaintiff’s recovery pursuant to subrogation
and reimbursement language contained in the Plan’s documentation; (6) the City ultimately
claimed a $3,824 lien on plaintiff’s recovery, representing the full amount the City had paid
for plaintiff’s medical services; (7) the City’s attorney initially refused a request by plaintiff’s
attorney to reduce its claim by one-third–pursuant to the common fund doctrine–in order to
account for the City’s proportionate share of the legal fees incurred by plaintiff in obtaining
the $18,000 settlement; (8) the City ultimately agreed to partially reduce its claim to $2,900,
in order to settle the dispute over the common fund issue; and (9) “under protest,” plaintiff’s
attorney arranged for $2,900 to be paid to the City by the third-party tortfeasor in May of
2009.
¶6 The complaint further alleged that the City’s refusal to reduce its subrogation and
reimbursement claim to account for its share of the plaintiff’s attorney fees violated the
common fund doctrine and caused plaintiff damages. Plaintiff’s complaint, therefore, sought
both a declaration that the City’s actions had violated the common fund doctrine (count I)
and recovery for the City’s resulting unjust enrichment (count II). In addition, plaintiff
sought to pursue this lawsuit as a class action and to serve as the class representative on
behalf of a class comprised of all others similarly situated. Specifically, she sought to
represent a class of: “All current or former participants in the City of Chicago Medical Care
Plan against whom a purported subrogation or reimbursement lien has been asserted without
a pro rata reduction pursuant to Illinois’ common fund doctrine, during the period from May
1998 to the present.” A motion for class certification was filed along with plaintiff’s
complaint.
¶7 On November 6, 2009, the City filed a combined motion to dismiss plaintiff’s complaint
pursuant to sections 2-615, 2-619, and 2-619.1 of the Code of Civil Procedure (Code) (735
ILCS 5/2-615, 2-619, 2-619.1 (West 2008)). Therein, the City contended that the complaint
should be dismissed because: (1) as a plan participant and not the attorney of such a plan
participant, plaintiff was not the proper party to bring a claim under the common fund
doctrine; (2) plaintiff’s claims were barred by language in the Plan’s documentation
providing that “[t]he Plan shall not be responsible for any litigation related expenses or
attorney fees incurred by or on behalf of a Covered Person in connection with an Injury
Claim unless the Plan shall have specifically agreed in writing to pay such expenses or fees”;
and (3) plaintiff paid the City $2,900 in response to the City’s settlement offer, thus barring
her claims under the voluntary payment doctrine and the doctrine of accord and satisfaction.
The circuit court denied the City’s motion on February 8, 2010.
¶8 The City thereafter filed its answer, affirmative defenses, and a counterclaim against
plaintiff, in which it raised–inter alia–the same arguments raised in its motion to dismiss.
The parties thereafter filed briefs addressing the merits of plaintiff’s motion for class
certification and cross-motions for summary judgment. Exhibits attached to these various
filings established that plaintiff’s attorney had been paid a full one-third contingent fee with
respect to the total $18,000 personal injury recovery obtained on behalf of plaintiff.
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¶9 On August 26, 2013, the circuit court entered a written order granting plaintiff’s motion
for class certification and certifying a class comprised of: “All current and former
participants in the City of Chicago Medical Care Plan who retained counsel and who have
obtained a recovery against which a subrogation or reimbursement lien has been asserted
without a pro rata reduction pursuant to Illinois’ common fund doctrine, during the period
from August 19, 1999 to the present.” In that order, the circuit court also granted summary
judgment in favor of plaintiff and the class on counts I and II of the complaint, and denied
the City’s motion for summary judgment.
¶ 10 The City thereafter filed a petition for leave to appeal from the circuit court’s order
granting certification of this class action lawsuit, pursuant to Illinois Supreme Court
Rule 306(a)(8) (eff. Feb. 16, 2011). We granted that petition on January 13, 2014.
¶ 11 II. ANALYSIS
¶ 12 On appeal, the City raises a host of challenges to the circuit court’s order granting
plaintiff’s motion for class certification. These include the City’s assertions that: (1) plaintiff
was not the proper party to bring a claim under the common fund doctrine; (2) plaintiff’s
individual claims were barred under the voluntary payment doctrine and the doctrine of
accord and satisfaction; (3) the statutory prerequisites for maintaining a class action were not
met in this case; and (4) the circuit court improperly relied upon a 10-year–rather than a
5-year–statute of limitations in defining the scope of the certified class. As noted above, we
find the City’s initial argument to be dispositive.
¶ 13 A. Legal Framework and Standard of Review
¶ 14 Class certification is governed by section 2-801 of the Code. 735 ILCS 5/2-801 (West
2012). That section generally provides that “an action may proceed as a class action only if
the circuit court finds: (1) the class is so numerous that joinder of all members is impractical;
(2) there are questions of fact or law common to the class, and those common questions
predominate over any questions affecting only individual members; (3) the representative
parties will fairly and adequately protect the interest of the class; and (4) the class action is an
appropriate method for the fair and efficient adjudication of the controversy. Decisions
regarding class certification are within the discretion of the trial court and will not be
disturbed on appeal unless the trial court abused its discretion or applied impermissible legal
criteria.” Smith v. Illinois Central R.R. Co., 223 Ill. 2d 441, 447 (2006); 735 ILCS 5/2-801
(West 2012).
¶ 15 “However, there is no need to determine whether these prerequisites are met if, as a
threshold matter, the record establishes that the plaintiff has not stated an actionable claim.”
Uesco Industries, Inc. v. Poolman of Wisconsin, Inc., 2013 IL App (1st) 112566, ¶ 47. Put in
terms of the above framework, “[c]lass certification is not proper when the putative class
representative cannot adequately represent the class sought to be certified,” and “[a]
representative cannot adequately represent a class when the representative does not state a
valid cause of action.” De Bouse v. Bayer AG, 235 Ill. 2d 544, 560 (2009). Where it is
determined on appeal that the named plaintiff in a class action lawsuit is not an appropriate
representative of the putative class, the order of the circuit court certifying the class must be
vacated. Id. See also Griffith v. Wilmette Harbor Ass’n, 378 Ill. App. 3d 173, 184 (2007) (“In
the context of a class action, if a purported representative plaintiff for a class action cannot
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maintain his individual claim against the defendant because of lack of standing or otherwise,
then the class action claim cannot be maintained.”).
¶ 16 B. Discussion
¶ 17 The common fund doctrine provides the basis for both plaintiff’s own claim and the
claims of the putative class members. However, we reject plaintiff’s reliance upon the
common fund doctrine because–as explained below–it is an equitable, quasi-contractual right
to attorney fees recognized when there is otherwise no relevant, express contract in place. In
contrast, here the express language contained in the Plan documentation provides that the
City was not to be responsible for any attorney fees incurred by or on behalf of plaintiff with
respect to her lawsuit.
¶ 18 As our supreme court has summarized:
“The common fund doctrine is an exception to the general American rule that,
absent a statutory provision or an agreement between the parties, each party to
litigation bears its own attorney fees and may not recover those fees from an
adversary. [Citation.] The doctrine provides that ‘ “a litigant or a lawyer who recovers
a common fund for the benefit of persons other than himself or his client is entitled to
a reasonable attorney’s fee from the fund as a whole.” ’ [Citation.] Underlying the
doctrine is the equitable concept that the beneficiaries of a fund will be unjustly
enriched by the attorney’s services unless they contribute to the costs of the litigation.
[Citations.] Courts have applied the common fund doctrine in numerous types of civil
litigation, including insurance subrogation claims, class actions, and wrongful-death
cases involving an intervenor. [Citations.]” Wendling v. Southern Illinois Hospital
Services, 242 Ill. 2d 261, 265 (2011).
Plaintiff contends this doctrine supports her claims, as it was only through her efforts that the
City was reimbursed for the payments it made on her behalf, and the City, therefore, had an
obligation under the common fund doctrine to pay for its proportionate share of the attorney
fees incurred in realizing that reimbursement.
¶ 19 However, our supreme court has made it clear that the common fund doctrine is a
“quasi-contractual right to payment of fees for services” that rests upon “equitable
considerations of quantum meruit and the prevention of unjust enrichment.” Scholtens v.
Schneider, 173 Ill. 2d 375, 390 (1996). A “contract implied in law, or a quasi-contract, is one
in which no actual agreement exists between the parties but a duty is imposed to prevent
unjustness.” C. Szabo Contracting, Inc. v. Lorig Constuction Co., 2014 IL App (2d) 131328,
¶ 24. For that reason, a remedy based on a quasi-contract “is not available when an express
contract exists concerning the same subject matter.” Id. ¶ 25. Here there is an express
contractual agreement between plaintiff and the City that governs their rights and obligations.
Indeed, it is pursuant to that express agreement that plaintiff’s medical bills were paid and the
City was, therefore, entitled to assert a subrogation claim on plaintiff’s recovery in the first
instance.
¶ 20 The Plan’s documentation provides that if it provided benefits on plaintiff’s behalf for
personal injuries, it was subrogated to “all present and future rights of recovery” that plaintiff
might have arising out of her personal injuries. The Plan was entitled to assert a subrogation
lien to protect that right and was entitled to full reimbursement for any benefits it paid on
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plaintiff’s behalf. The Plan documentation further provided that “[t]he Plan shall not be
responsible for any litigation related expenses or attorney fees incurred by or on behalf of a
Covered Person in connection with an Injury Claim unless the Plan shall have specifically
agreed in writing to pay such expenses or fees.”
¶ 21 In light of this contractual language, we conclude that plaintiff is not entitled to rely upon
the common fund doctrine to support her claims. Again, that doctrine is an equitable,
quasi-contractual right, and such rights are applicable when there is no express contract in
place. Here, the Plan documentation provides that the City was not to be responsible for the
payment of any attorney fees incurred by or on behalf of plaintiff with respect to her lawsuit,
and it would be contrary to the equitable underpinnings of the common fund doctrine to
apply it to such a situation. See Industrial Lift Truck Service Corp. v. Mitsubishi
International Corp., 104 Ill. App. 3d 357, 362 (1982) (“Plaintiff’s attempt here to bring a
quasi-contract action is nothing more than an attempt to unilaterally amend the agreement in
a manner prohibited by the agreement. In such circumstances, the benefit received by
defendant can hardly be considered unjust.”).
¶ 22 Despite this conclusion, we note that the parties have argued extensively regarding the
implications of a trio of decisions from our supreme court. See Baier v. State Farm Insurance
Co., 66 Ill. 2d 119 (1977); Scholtens, 173 Ill. 2d 375; Bishop v. Burgard, 198 Ill. 2d 495
(2002).
¶ 23 In Baier, our supreme court considered the legal basis for a putative class action. Baier,
66 Ill. 2d at 122. The named plaintiff was an attorney who sought to recover a fee for his
services from his client’s insurer, where the attorney had obtained a $12,000 settlement from
a tortfeasor that had caused personal injuries to his client. Id. Of that amount, $1,000 was
paid to the insurer in full satisfaction of the insurer’s subrogation claim to recover for
medical expenses it had paid on the client’s behalf. Id. at 122-23. The attorney was paid a fee
of only one-third of the plaintiff’s net $11,000 recovery, and the suit was brought on behalf
of the attorney and all other attorneys similarly situated to recover for their services in
creating a common fund benefiting the insurer. Id.
¶ 24 Our supreme court recognized the attorney’s right to rely upon the common fund doctrine
in this factual context, after noting a number of other jurisdictions had come to a similar
conclusion and recognizing the “equitable concept that an attorney who performs services in
creating a fund should in equity and good conscience be allowed compensation out of the
whole fund from all those who seek to benefit from it.” (Emphasis added.) Id. at 124. In so
ruling, our supreme court rejected the insurer’s argument that the application of the common
fund doctrine would violate its subrogation agreement with the client, one that required the
insurer to be reimbursed in full. Id. at 126. Reasoning that the client had already fully
reimbursed the insurer for the medical expenses it had paid on the client’s behalf, our
supreme court noted that “[a]ny recovery by [the attorney] from [the insurer] would not
violate the contract between [the insured] and [the insurer].” Id.
¶ 25 In Scholtens, the plaintiff was an electrician covered by a union insurance plan when he
was injured in an automobile collision caused by third-party tortfeasors. Scholtens, 173 Ill. 2d
377. The trustee administrators of plaintiff’s insurance plan paid over $40,000 in medical
bills and disability benefits on behalf of the plaintiff, and the trustees thereafter claimed a
subrogation lien for the full amount of those payments pursuant to subrogation clauses
contained in the plan’s documentation and a separate agreement signed by the plaintiff. Id.
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When the plaintiff obtained a $100,000 settlement of the plaintiff’s personal injury lawsuit,
the plaintiff’s attorney filed a petition to adjudicate the trustees’ lien in that suit, contending
that it should be reduced in light of the common fund doctrine. Id. at 377-78. The circuit
court agreed and reduced the trustees’ lien. Id. at 379. The question our supreme court
addressed was whether application of the common fund doctrine in that case was preempted
by the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1144
(1982)), which governed the plaintiff’s insurance plan. Our supreme court concluded that it
was not. Scholtens, 173 Ill. 2d at 377-79.
¶ 26 In reaching that conclusion, the court noted that the plaintiff “specifically acknowledges
the Trustees’ right to subrogation under both the benefit plan and the subrogation agreement.
He does not seek to modify or avoid his obligation to reimburse the plan for benefits paid to
him and does not question the right of the Trustees to collect under the subrogation clause.”
Id. at 389. Rather, our supreme court reasoned:
“The claim for attorney fees at issue here did not arise out of that contractual
agreement or any separate subrogation agreement executed between the Trustees and
[the plaintiff]. Rather, the claim for attorney fees arises independently of both the
benefit plan and the subrogation agreement. Here, the attorney who represented [the
plaintiff] in his tort action, and who negotiated the settlement and obtained the
proceeds from which the plan’s subrogation lien will be paid, simply invoked his
quasi-contractual right to payment of fees for services rendered in recovering the
plan’s subrogation lien. The quasi-contractual obligation he seeks to impose upon the
Trustees arises independently of the benefit plan, resting instead upon equitable
considerations of quantum meruit and the prevention of unjust enrichment.
Accordingly, applying the common fund doctrine under the circumstances of this case
does not alter the relationship or agreements formulated among the principal ERISA
entities (e.g., the employer, the plan fiduciaries, and the participants). It affects the
relations between one of those entities (i.e., the Trustees) and an outside party. In
effect, the attorney who performed legal services that ultimately led to the recovery of
the plan’s subrogation lien instituted a separate and distinct action against the
Trustees for unpaid fees. The action, in substance if not in form, is wholly
independent of and unrelated to the underlying benefit plan.” Id. at 390.
¶ 27 As such, our supreme court concluded that the plaintiff’s attorney could rely on the
common fund doctrine with regard to the trustee’s subrogation claim, noting that “[w]here an
attorney performs legal services on the plan’s behalf, however, the plan has a legal obligation
to pay that attorney a reasonable fee for those services. It may not simply accept the fruits of
an attorney’s labor without paying a reasonable fee for the legal services rendered.” Id. at
395. Our supreme court stressed again, however, that “the quasi-contractual obligation to pay
fees in this case arises wholly independently of, and is unrelated to, both the subrogation
clause in the ERISA plan and the contractual subrogation agreement that [the plaintiff]
signed after the accident. The common fund doctrine is invoked by someone who is not a
party to the contractual agreement between the plan and its beneficiaries to recover an unpaid
debt, namely, a reasonable fee in quantum meruit for legal services rendered to the plan and
its Trustees.” Id. at 391.
¶ 28 In Bishop, our supreme court again addressed the relationship between ERISA, the
common fund doctrine, a subrogation lien claimed by an insurer against a plaintiff’s personal
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injury settlement, and a petition to adjudicate that lien filed by plaintiff’s attorney. Bishop,
198 Ill. 2d at 496. Indeed, the only significant factual difference between Scholtens and
Bishop was that the agreement between the insurer and the plaintiff in Bishop specifically
indicated that the insurer would not be responsible for the plaintiff’s attorney fees. Id. at
502-03.
¶ 29 Nevertheless, our supreme court again concluded that ERISA did not preempt the
application of the common fund doctrine to the petition to adjudicate the insurer’s lien filed
by the plaintiff’s attorney. Id. at 503-04. The court specifically affirmed its prior reasoning in
Scholtens, reiterating that “the quasi-contractual right to payment of fees for services
rendered belongs to the attorney who rendered the services and does not affect the
contractual relationship between the plan participant and the plan.” Id. at 504. As such, the
court concluded that the provisions regarding the plaintiff’s responsibility for her own
attorney fees “cannot govern the relationship between the plan and an independent entity, the
attorney whose efforts created the common fund.” Id. at 502-03.
¶ 30 In so ruling, our supreme court reiterated that, in subrogation situations such as those
presented in Scholtens and Bishop, “a claim under the common fund doctrine is an
independent action, based upon the attorney’s rights.” (Emphases in original.) Id. at 506. The
court further noted that “[f]ollowing Scholtens, the appellate court has repeatedly concluded
that an action to recover fees under the common fund doctrine is an independent action
invoking the attorney’s right to the payment of fees for services rendered.” Id. at 504-05
(citing Hillenbrand v. Meyer Medical Group, S.C., 308 Ill. App. 3d 381, 389 (1999), Health
Cost Controls v. Sevilla, 307 Ill. App. 3d 582, 590 (1999), and LeFevre, Zeman, Oldfield &
Schwarm Law Group, Ltd. v. Wal-Mart Stores, Inc., 302 Ill. App. 3d 1059, 1068 (1999)).
¶ 31 We find it evident that plaintiff cannot rely upon these decisions to support application of
the common fund doctrine to her own claims in this case. As an initial matter, we note that
plaintiff repeatedly stressed at oral argument that our supreme court recognized the right of
both a litigant and a lawyer to assert a claim under the common fund doctrine. See Scholtens,
173 Ill. 2d at 385 (recognizing that both “ ‘a litigant or a lawyer who recovers a common
fund for the benefit of persons other than himself or his client is entitled to a reasonable
attorney’s fee from the fund as a whole’ ” (quoting Boeing Co. v. Van Gemert, 444 U.S. 472,
478 (1980))). We have no quibble with this as a general proposition of law, and indeed, the
above-quoted language appears in the context of a general, prefatory discussion about the
“nature of that doctrine.” Scholtens, 173 Ill. 2d at 384. But the fact that the “common fund
doctrine is a common law rule of general application” (id. at 385) does not mean that it is
properly applicable in every instance by either a litigant or a lawyer. Nor do the above
decisions support plaintiff’s attempt to apply the doctrine to her own claims in this specific
instance, where there is an express contractual agreement between plaintiff and the City that
governs their rights and obligations.
¶ 32 Indeed, none of these decisions involved the situation presented here, i.e., an insured
attempting to recover directly from her insurer in a separate lawsuit asserting a violation of
the common fund doctrine in the context of a contractual subrogation claim. As such, in none
of these cases did our supreme court recognize a litigant’s individual right to claim
application of the common fund doctrine to reduce a contractual subrogation lien claimed by
that litigant’s insurer. Rather, our supreme court recognized the right of such a litigant’s
attorney to rely upon the common fund doctrine in the context of such subrogation claims,
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and only when the exercise of such a right could accurately be described as an independent
action by and on behalf of such an attorney.
¶ 33 Thus, in Baier, our supreme court recognized the right of an insured litigant’s attorney to
rely upon the common fund doctrine in a class action brought on behalf of other such
attorneys, but only after recognizing the “equitable concept that an attorney who performs
services in creating a fund should in equity and good conscience be allowed compensation
out of the whole fund from all those who seek to benefit from it.” (Emphasis added.) Baier,
66 Ill. 2d at 124. In Scholtens, while our supreme court concluded that the common fund
doctrine could be applied to reduce an insurer’s subrogation claim against a recovery
obtained in a suit brought on behalf of an insured plaintiff, it did so only after recognizing
that “[i]n effect, the attorney who performed legal services that ultimately led to the recovery
of the plan’s subrogation lien instituted a separate and distinct action against the [insurer] for
unpaid fees. The action, in substance if not in form, is wholly independent of and unrelated to
the underlying benefit plan.” Scholtens, 173 Ill. 2d at 390. More specifically, the court
concluded that in such circumstances “[t]he common fund doctrine is invoked by someone
who is not a party to the contractual agreement between the plan and its beneficiaries to
recover an unpaid debt, namely, a reasonable fee in quantum meruit for legal services
rendered.” Id. at 391. And in Bishop, our supreme court again concluded that the application
of the common fund doctrine under such circumstances was permissible–even in the face of
contractual language indicating that the insurer would not be responsible for the plaintiff’s
attorney fees–only after it reiterated that, in subrogation situations such as those presented in
Scholtens and Bishop, “a claim under the common fund doctrine is an independent action,
based upon the attorney’s rights.” (Emphases in original.) Bishop, 198 Ill. 2d at 506.
¶ 34 Again, here plaintiff attempts to assert her own right as a litigant and plan participant to
rely upon the common fund doctrine to reduce the City’s contractual subrogation claim
against the recovery her attorney obtained in her personal injury lawsuit. We find nothing in
the above-discussed authority that supports her effort to do so, where that authority so clearly
recognized only the right of an insured litigant’s attorney–one not a party to the contract
between the insurer and its insured–to rely on the common fund doctrine in such
circumstances.
¶ 35 In fact, the above decisions recognizing an attorney’s independent right to apply the
common fund doctrine in the context of subrogation claims–described as being “in substance
if not in form” an independent action–each relied in significant part on the fact that
application of the doctrine would not alter the underlying contractual rights and obligations
of the insurer and the insured. Baier, 66 Ill. 2d at 126 (recognizing that any recovery by
attorney from insurer “would not violate the contract” between insured and insurer);
Scholtens, 173 Ill. 2d at 390 (“applying the common fund doctrine under the circumstances
of this case does not alter the relationship or agreements formulated among the principal
ERISA entities (e.g., the employer, the plan fiduciaries, and the participants)”); Bishop, 198
Ill. 2d at 504 (allowing plaintiff’s attorney to independently rely upon the common fund
doctrine “does not affect the contractual relationship between the plan participant and the
plan”). The reason for this is clear in light of the above discussion regarding the
inapplicability of equitable, quasi-contractual claims in the face of express contractual
agreements governing the relationship of adverse parties.
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¶ 36 Moreover, even if we overlooked this reason why plaintiff’s contractual agreement with
the City precludes her from relying on the “quasi-contractual right” embodied in the common
fund doctrine, there is yet another obstacle. “The prevention of unjustness is the fundamental
aspect of the doctrine of quasi-contracts.” Hayes Mechanical, Inc. v. First Industrial, L.P.,
351 Ill. App. 3d 1, 8 (2004). Therefore, “even when a person has received a benefit from
another, he is liable for payment ‘ “only if the circumstances of its receipt or retention are
such that, as between the two persons, it is unjust for him to retain it. The mere fact that a
person benefits another is not of itself sufficient to require the other to make restitution
therefor.” ’ [Citation.]” Id. at 9.
¶ 37 We, therefore, reject plaintiff’s contention that it would be “unjust” for the City to retain
the “benefit” it received due to plaintiff’s recovery from the third-party tortfeasor–i.e.,
complete recovery of its subrogation claim without contributing to plaintiff’s attorney
fees–where the explicit contractual agreement between plaintiff and the City called for just
such a result. Rather, the “justness” of this result was succinctly explained in Administrative
Committee of the Wal-Mart Stores, Inc. Associates’ Health & Welfare Plan v. Varco, 338
F.3d 680, 692 (7th Cir. 2003), where the court reasoned:
“[M]ost covered persons–if given an option–would readily give up a ‘common
fund-type’ reduction in exchange for having their medical expenses paid up-front in
third-party liability situations instead of refusing the benefits (and therefore not
having to reimburse the plan) and paying their medical expenses out of their
settlement. *** In this case, plan participants have traded the possibility of having the
Plan participate in attorney’s fees for the guarantee that medical bills will be paid
immediately.”
That very trade-off has occurred in this case as well, precluding plaintiff from relying upon
the common fund doctrine to recover for any purported unjust enrichment on the part of the
City. See also US Airways, Inc. v. McCutchen, 569 U.S. ___, ___, 133 S. Ct. 1537, 1548
(2013) (recognizing that under federal common law, “if a contract abrogates the
common-fund doctrine, the insurer is not unjustly enriched by claiming the benefit of its
bargain”).
¶ 38 Nor are we persuaded that two cases cited by plaintiff mandate a different conclusion.
Plaintiff first cites to Health Cost Controls v. Sevilla, 365 Ill. App. 3d 795 (2006), as an
instance where this court recognized an insured’s right to rely upon the common fund
doctrine with respect to a putative class action seeking to recover for an insurer’s repeated
refusal to reduce its subrogation claims in conformity with the doctrine. Id. at 797. However,
in that case the court did not specifically rule that such a class of such plaintiffs would
necessarily be proper. Rather, the appellate court merely found: (1) that such a class “may be
allowable”; (2) the circuit court had improperly denied certification of such a class, not on
the merits after an exercise of the court’s discretion, but arbitrarily and so as to expedite the
appeals process and accommodate the circuit court judge’s retirement; and (3) the matter
should, therefore, be remanded for a proper determination of whether certification of such a
class would in fact be proper. Id. at 809-11.
¶ 39 In reaching this conclusion, the court appears to have assumed–without any detailed
analysis–that the common fund doctrine would apply to the independent claims of a class of
insured litigants as opposed to a class of such insured litigant’s attorneys. In light of the
unique factual circumstances presented in Sevilla, the limited nature of both the analysis of
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the common fund doctrine and the final holding in that case, and our own extensive
discussion above, we reject plaintiff’s contention that Sevilla provides any significant support
for the propriety of her common-fund-based claims against the City.
¶ 40 Second, plaintiff cites to Smith v. Marzolf, 81 Ill. App. 3d 59 (1980), as another instance
where an insured litigant was permitted to rely upon the common fund doctrine in seeking to
recover for his insurer’s refusal to reduce its subrogation claim on the insured litigant’s
personal injury recovery. Id. at 61. However, the court in Marzolf did no such thing.
¶ 41 First, the issue in that case was once again not the one presented here, i.e., an independent
action brought on behalf of an insured to address past wrongdoing on the part of an insurer.
Rather, it involved the propriety of a petition to adjudicate and reduce an insurer’s
subrogation lien in light of the common fund doctrine, brought in the context of the insured
litigant’s personal injury action itself. Id.
¶ 42 Moreover, the court in Marzolf did not rely upon the common fund doctrine in granting
the requested relief. The court specifically recognized such an insured litigant “ ‘is unable to
rely upon the “fund doctrine” because its application in Illinois has been confined only to
attorneys and not plaintiffs who have not been fully compensated for their services and
expenses in creating the fund.’ ” (Emphasis omitted.) Id. at 64 (quoting Lemmer v. Karp, 56
Ill. App. 3d 190, 192 (1977)). Nevertheless, the court went on to conclude that the plaintiff
was entitled to be reimbursed for his insurer’s proportionate share of attorney fees under a
separate theory of “equitable apportionment,” after noting that “ ‘[t]his limited interpretation
of the “fund doctrine” does not preclude this court from applying the same equitable
considerations contained therein to eliminate inequitable constraints upon the rights of the
plaintiff.’ ” Id. (quoting Lemmer, 56 Ill. App. 3d at 192).
¶ 43 We fail to see how the Marzolf decision supports plaintiff’s efforts to apply the common
fund doctrine here, where that case involved a different factual situation and so clearly
indicated the common fund doctrine was not even applied in that case. Indeed, we find this
decision to be of little value to plaintiff for a number of other reasons, including: (1) it was
decided prior to the decisions in Scholtens and Bishop; which clearly determined that a claim
under the common fund doctrine in such a subrogation situation is effectively an independent
action based upon an attorney’s rights; and (2) in assessing the equities of that situation, the
court in Marzolf was apparently not faced–as we are here–with contractual language
providing that the insurer would not be responsible for its insured’s attorney fees.
¶ 44 Moreover, we are unaware of any other decision applying the separate “equitable
apportionment” concept expressed therein under these circumstances. Even more
importantly, plaintiff never asked the circuit court or this court to do so. In the circuit court,
plaintiff’s own claims specifically sought only to apply the common fund doctrine itself. And
the class certified by the circuit court specifically sought only to recover for the City’s failure
to reduce its subrogation liens “pursuant to Illinois’ common fund doctrine.” It is that
certified class, and not one certified to seek recovery under a theory of “equitable
apportionment,” that we review here. Cruz v. Unilock Chicago, Inc., 383 Ill. App. 3d 752,
761 (2008) (recognizing that the scope of appellate review of class certification decisions is
limited to an assessment of the trial court’s exercise of discretion, and that “the appellate
court cannot indulge in an independent, de novo evaluation of the facts alleged and the facts
of record to justify class certification”). And on appeal, plaintiff merely contends that
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Marzolf supports application of the common fund doctrine itself to the claims of an insured
litigation, which it clearly does not.
¶ 45 Finally, we reject plaintiff’s contention that “even assuming that it was the attorneys’
claim to begin with, the client who has already paid his counsel steps in the shoes of and
takes over that counsel’s priority common fund claim, ahead of the plan’s asserted
reimbursement lien.” Plaintiff cites only to Marzolf as support for this novel and otherwise
unsupported contention. However, Marzolf never addressed this issue, and we, therefore,
reject plaintiff’s reliance upon that decision to support this argument.
¶ 46 More fundamentally, we reject plaintiff’s contention that, by paying her attorney’s full
one-third fee, she has essentially been assigned her attorney’s common fund claim against the
City. A claim under the common fund doctrine is not a claim at law, but one in equity. For all
the reasons expressed above, we conclude that equity does not support plaintiff’s attempt to
recover under that doctrine.
¶ 47 Indeed, this argument presumes–and the record clearly reflects–that plaintiff’s attorney
was in fact paid a full one-third fee on the total $18,000 recovery plaintiff obtained from the
tortfeasor. As we have noted above, the common fund doctrine is a “quasi-contractual right”
that rests upon “equitable considerations of quantum meruit and the prevention of unjust
enrichment.” Scholtens, 173 Ill. 2d at 390; see also Weydert Homes, Inc. v. Kammes, 395 Ill.
App. 3d 512, 522 (2009) (“Quantum meruit is used as an equitable remedy to provide
restitution for unjust enrichment ***.”). “To state a claim for unjust enrichment, ‘a plaintiff
must allege that the defendant has unjustly retained a benefit to the plaintiff’s detriment, and
that defendant’s retention of the benefit violates the fundamental principles of justice, equity,
and good conscience.’ [Citation.]” Gagnon v. Schickel, 2012 IL App (1st) 120645, ¶ 25.
While it is perhaps arguable that–vis-à-vis plaintiff’s attorney–the City has unjustly retained
the benefit of his labor, it cannot be argued that this benefit was retained to the detriment of
plaintiff’s attorney where the attorney has already been fully compensated. See also
Scholtens, 173 Ill. 2d at 391 (recognizing that the common fund doctrine is invoked “to
recover an unpaid debt” (emphasis added)). As such, here there is simply no valid common
fund claim for plaintiff to take over from her attorney.
¶ 48 In sum, we conclude that the named plaintiff in this action has no right to rely upon the
common fund doctrine to support her claims for declaratory relief and unjust enrichment
against the City. As such, she has not stated an actionable claim, class certification was
improper, and the order of the circuit court certifying the class in this case must be vacated.
Uesco Industries, Inc., 2013 IL App (1st) 112566, ¶ 47; De Bouse, 235 Ill. 2d at 560.
¶ 49 III. CONCLUSION
¶ 50 For the foregoing reasons, we reverse and vacate the judgment of the circuit court
granting plaintiff’s motion for class certification.
¶ 51 Reversed and vacated.
¶ 52 JUSTICE HALL, dissenting.
¶ 53 I respectfully dissent. Contrary to the majority’s holding, I believe the circuit court
properly ruled in favor of the plaintiff. The majority argues that the following language
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contained in the City of Chicago Medical Care Plan (Plan) negates application of the
common fund doctrine: “The Plan shall not be responsible for any litigation related expenses
or attorney fees incurred by or on behalf of a Covered Person in connection with an Injury
Claim unless the Plan shall have specifically agreed in writing to pay such expenses or fees.”
The majority contends that application of the common fund doctrine would contradict the
terms of the above-quoted language. I disagree.
¶ 54 “The common-fund doctrine long predates *** employer-sponsored health plans. Most
applications have nothing to do with health insurance in general, or employer-sponsored
plans in particular.” Blackburn v. Sundstrand Corp., 115 F.3d 493, 495 (7th Cir. 1997). “The
obligation to pay fees under the common fund doctrine, which is quasi-contractual, is
independent of any insurance contract or subrogation agreement and is ‘resting instead upon
equitable considerations of quantum meruit and the prevention of unjust enrichment.’ ”
Wajnberg v. Wunglueck, 2011 IL App (2d) 110190, ¶ 26 (quoting Scholtens v. Schneider,
173 Ill. 2d 375, 390 (1996)); see also Baier v. State Farm Insurance Co., 66 Ill. 2d 119,
122-26 (1977) (rejecting subrogee-insurer’s argument that application of the common fund
doctrine would violate the subrogation contract between itself and the insured).
¶ 55 The majority suggests that since the common fund doctrine is a remedy based on a
quasi-contract, this remedy “is not available when an express contract exists concerning the
same subject matter.” C. Szabo Contracting, Inc. v. Lorig Construction Co., 2014 IL App
(2d) 131328, ¶ 25. The majority’s reliance on C. Szabo Contracting, Inc. is misguided
because that case involved a sub-subcontractor seeking to pursue quasi-contractual relief
against a general contractor for pipe-jacking work it completed. In C. Szabo Contracting,
Inc., the benefit conferred was not attributable to legal services provided, but rather to the
pipe-jacking work performed by the sub-subcontractor. Moreover, the obligation to pay fees
under the common fund doctrine, which is quasi-contractual, arises by operation of law
rather than by an express contractual agreement. See, e.g., Fleissner v. Fitzgerald, 403 Ill.
App. 3d 355, 361 (2010) (“A quasi-contract, or contract implied in law, exists independent of
any agreement or consent of the parties and is imposed in law to provide justice for the
plaintiff.”).
¶ 56 The majority also contends that the plaintiff cannot assert her own right, as a litigant and
plan participant, to rely upon the common fund doctrine in the context of subrogation claims.
Again I must disagree.
¶ 57 Our courts have determined that when a settlement fund has been created by the efforts
and representation of a plaintiff’s attorney and the plaintiff brings an action against its
subrogee-insurer who benefitted from the representation but did not contribute to the costs of
that representation, the court may apply the same equitable considerations underlying the
common fund doctrine to require the insurer to share pro rata in the fees and costs incurred
by the plaintiff in securing the settlement fund out of which the reimbursement was required.
See Lemmer v. Karp, 56 Ill. App. 3d 190, 192-94 (1977). Plaintiff initiated and prosecuted
proceedings against a third-party tortfeasor which resulted in a settlement fund out of which
the City is entitled to reimbursement for medical expenses advanced under the terms of the
Plan. The City benefitted from the efforts of plaintiff’s attorney but did not contribute to the
costs of that representation. As a result, the equitable considerations underlying the common
fund doctrine entitle the plaintiff to be credited for a pro rata share of attorney fees she
incurred in securing the settlement fund out of which the City is to be reimbursed.
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