Advanced Physicians, S.C. v. Provena Glenwood Medical Imaging , 431 Ill. Dec. 13 ( 2018 )

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.
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¶ 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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