Till v. National General Accident & Health Insurance Co. , 2024 IL App (3d) 220479-U ( 2024 )

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as
precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
2024 IL App (3d) 220479-UOrder filed February 23, 2024
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
2024
CHARLES TILL, ) Appeal from the Circuit Court
) of the 18th Judicial Circuit,
Plaintiff-Appellant, ) Du Page County, Illinois.
)
v. ) Appeal No. 3-22-0479
) Circuit No. 22-LA-320
NATIONAL GENERAL ACCIDENT AND )
HEALTH INSURANCE COMPANY, ) The Honorable
) Angelo J. Kappas,
Defendant-Appellee. ) Judge, Presiding.
________________________________________________________________________
JUSTICE HETTEL delivered the judgment of the court.
Presiding Justice McDade and Justice Brennan concurred in the judgment.
____________________________________________________________________________
ORDER
¶1 Held: Trial court properly dismissed plaintiff’s claims for breach of contract and bad
faith against insurer based on res judicata where claims were based on same facts
as plaintiff’s previously filed federal claim against insurer, which district court
dismissed for failure to state a claim.
¶2 Plaintiff Charles Till filed a complaint against his medical insurer, defendant National
General Accident and Health Insurance Company, in federal court alleging that defendant violated
the Employment Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.
(2018)). Defendant filed a motion to dismiss, asserting lack of subject matter jurisdiction and
failure to state a claim. The district court dismissed plaintiff’s action for failure to state a claim.
Thereafter, plaintiff filed a complaint in Du Page County Circuit Court against defendant alleging
breach of contract and bad faith. Defendant filed a motion to dismiss asserting that plaintiff’s
complaint was barred by res judicata. The circuit court granted defendant’s motion and dismissed
plaintiff’s complaint on res judicata grounds. Plaintiff appeals that dismissal. We affirm.
¶3 BACKGROUND
¶4 On March 14, 2018, plaintiff went to the emergency room after losing consciousness.
According to plaintiff, emergency room medical staff did not perform any definitive examinations
or tests on him and did not provide him with a diagnosis. Plaintiff left the hospital the same day.
¶5 The next day, plaintiff purchased a short-term medical insurance policy from defendant,
effective March 16, 2018, to January 14, 2019. The policy had a “Pre-Existing Condition
Exclusion,” which stated: “Charges resulting directly or indirectly from a Pre-Existing Condition
are excluded from coverage hereunder.” The policy defined “Pre-Existing Condition” as “a
condition for which medical advice, diagnosis, care, or treatment (including receiving services and
supplies, consultations, diagnostic tests or prescriptive medicines) was recommended or received
within the 12 months immediately preceding the Effective Date.”
¶6 On March 17, 2018, plaintiff returned to the emergency room. At that time, medical staff
diagnosed plaintiff with a pulmonary embolism. Plaintiff received medical treatment for his
condition and remained in the hospital until March 21, 2018. Plaintiff sought coverage from
defendant for the medical expenses he incurred from March 17 to 21, 2018. Defendant denied
plaintiff coverage, asserting the pre-existing condition policy exclusion. Plaintiff filed an appeal
with defendant, which defendant denied. Plaintiff continued to appeal defendant’s decision, and
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on March 2, 2020, defendant notified plaintiff that his internal and external appeal review rights
had been exhausted.
¶7 On May 31, 2021, plaintiff filed an action against defendant in the United States District
Court for the Northern District of Illinois, Eastern Division. In the opening paragraph of his
complaint, plaintiff stated: “This is an action seeking redress for Defendant National General
Insurance Company’s unlawful denial of benefits to the Plaintiff in violation of the Employment
Retirement Income Security Act (“ERISA”) 29 U.S.C. § 1132(a)(3); and Illinois statutory and
common law theories of recovery.” The sole count of plaintiff’s complaint alleged “Denial of
Benefits in Violation of the Employment Retirement Income Security Act.”
¶8 Defendant filed an answer to the complaint admitting that “the Court has jurisdiction over
the subject matter of this Complaint.” Defendant later filed a motion to withdraw its answer, as
well as a motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6) (Fed. R.
Civ. P. 12 (eff. Dec. 1, 2009)), asserting lack of subject matter jurisdiction and failure to state a
claim.
¶9 On March 8, 2022, the federal district court issued its written memorandum opinion and
order. In the first paragraph of that order, the court stated:
“National General has moved to dismiss for lack of subject matter jurisdiction and failure
to state a claim. R. 16. The motion to dismiss for failure to state a claim is granted.” Till v.
National General Accident and Health Insurance Co., No. 21-C-1256, slip op. at 1 (March
8, 2022).
After discussing the facts alleged in plaintiff’s complaint, the court then turned to the issue of
subject matter jurisdiction, ruling that it had subject matter jurisdiction over plaintiff’s ERISA
claim. The court stated:
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“Till’s invocation of ERISA provides the court subject matter jurisdiction to decide
whether ERISA covers his policy. And a finding that Till’s policy is outside ERISA’s scope
does not thereby deprive the Court of subject matter jurisdiction; it simply means that Till’s
claim must be dismissed.” Id. at 3.
The district court then discussed the standards for sufficiently stating a claim:
“A complaint must provide ‘a short and plain statement of the claim showing that the
pleader is entitled to relief,’ [citation], sufficient to provide defendant with ‘fair notice’ of
the claim and the basis for it. [Citation.] This standard ‘demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation.’ [Citation.] While ‘detailed factual
allegations’ are not required, ‘labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.’ [Citation.] The complaint must ‘contain
sufficient factual matter accepted as true, to “state a claim to relief that is plausible on its
face.”’ [Citation.] ‘“A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.’” [Citation.] In applying this standard, the Court accepts all well-
pleaded facts as true and draws all reasonable inference in favor of the non-moving party.
[Citation.]” Id. at 4-5.
The district court then examined ERISA’s provisions and the allegations of plaintiff’s complaint
related to the insurance policy plaintiff purchased from defendant and determined that “Till’s
policy is not covered by ERISA.” Id. at 7. The district court concluded:
“Therefore, National General’s motion to dismiss [16] is granted, and Till’s claim is
dismissed. National General’s motion to withdraw its answer [15] is denied as moot.
Because Till’s ERISA claim is dismissed as a matter of law and not based on the
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plausibility of his allegations, repleading would be futile and the claim is dismissed with
prejudice. To the extent Till has brought a state law claim under the Court’s supplemental
jurisdiction, that claim is dismissed without prejudice.” Id. at 8.
¶ 10 On April 6, 2022, plaintiff filed a two-count complaint in Du Page County Circuit Court
against defendant. Count I alleged breach of contract, and count II alleged bad faith. Defendant
filed a motion to dismiss, pursuant to section 2-619 of the Code of Civil Procedure (Code) (735
ILCS 5/2-619 (West 2020)) asserting that plaintiff’s complaint was barred by res judicata because
of the federal court’s dismissal of plaintiff’s ERISA claim.
¶ 11 On August 11, 2022, the circuit court held a hearing on defendant’s motion to dismiss. At
that hearing, the circuit court found that all requirements of res judicata were met “given that these
set of operative facts have been adjudicated on the merits by the district court ruling on a failure
to state a claim, with plaintiff failing to assert state-law claims in the federal court action, even
when it could have ***.” The court entered an order granting defendant’s motion to dismiss and
dismissing plaintiff’s complaint “in its entirety with prejudice under res judicata.” Plaintiff filed a
motion to reconsider and vacate, which the circuit court denied.
¶ 12 ANALYSIS
¶ 13 A defendant can raise the defense of res judicata in a motion to dismiss pursuant to section
2-619 of the Code of Civil Procedure, 735 ILCS 5/2-619(a)(4) (West 2020). Altair Corp. v. Grand
Premier Trust and Investment, Inc., 318 Ill. App. 3d 57, 61 (2000). When ruling on such a motion,
the circuit court must accept all well-pleaded facts as true and view them in the light most favorable
to the nonmoving party. Id. We review de novo a circuit court’s dismissal of a complaint on res
judicata grounds. Id.5
¶ 14 “The doctrine of res judicata provides 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 doctrine bars not only what was actually decided in the original action but also whatever could
have been decided. Id. at 334-35. Three requirements must be satisfied for res judicata to apply:
(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.
Id. at 335. “The underlying policy of res judicata is to promote judicial economy by preventing
repetitive litigation and to protect a defendant from the harassment of relitigating essentially the
same claim.” Richter v. v. Prairie Farms Dairy, Inc., 2016 IL 119518, ¶ 21.
¶ 15 A final order or judgment is essential to res judicata. Id. ¶ 22. “To be ‘final,’ a judgment
or order must terminate the litigation and fix absolutely the parties’ rights, leaving only
enforcement of the judgment.” Id. ¶ 24. In determining whether a judgment or order is final, the
court should look to its substance rather than its form. Id.
¶ 16 Illinois Supreme Court Rule 273 provides: “Unless the order of dismissal or a statute of
this State otherwise specifies, an involuntary dismissal of an action, other than a dismissal for lack
of jurisdiction, for improper venue, or for failure to join an indispensable party, operates as an
adjudication upon the merits.” Ill. S. Ct. R. 273 (eff. Jan. 1, 1967). “Under Illinois law, therefore,
it is clear that the dismissal of a complaint for failure to state a claim is an adjudication on the
merits [citations], while the dismissal of a complaint for lack of subject matter jurisdiction is not
considered a decision on the merits of the complaint [citation].” River Park, Inc. v. City of
Highland Park, 184 Ill. 2d 290, 303 (1998).
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¶ 17 “The same is true under federal law.” Id. at 303-304. Pursuant to Federal Rule of Civil
Procedure 41(b), “any dismissal *** except one for lack of jurisdiction, improper venue, or failure
to join a party under Rule 19--operates as an adjudication on the merits.” Fed. R. Civ. P. 41(b) (eff.
Dec. 1, 2007). “A dismissal for lack of subject matter jurisdiction is not on the merits and
consequently will not bar a later suit.” Bunker Ramo Corp. v. United Business Forms, Inc., 713
F.2d 1272, 1277 (7th Cir. 1983). “A dismissal for failure to state a claim upon which relief can be
granted, however, is a dismissal on the merits and is res judicata.” Id.¶ 18 In determining whether there is an identity of causes of action for purposes of res judicata,
Illinois courts apply a transactional test. River Park, Inc., 184 Ill. 2d at 311. Under this test,
“separate claims will be considered the same cause of action for purposes of res judicata if they
arise from a single group of operative facts, regardless of whether they assert different theories of
relief.” Id. A plaintiff’s federal and state claims are the same cause of action for purposes of res
judicata if “they arise from the same core of operative facts.” See id. at 313.
¶ 19 Turning to the merits of this case, plaintiff argues that the first requirement of res judicata
was not satisfied because the federal district court dismissed his ERISA claim for lack of subject
matter jurisdiction. We disagree.
¶ 20 In the opening paragraph of its written memorandum opinion and order, the district court
noted that the bases of defendant’s motion to dismiss plaintiff’s complaint were lack of subject
matter jurisdiction and failure to state a claim. Till, No. 21-C-1256, slip op. at 1. However,
immediately thereafter, the court stated: “The motion to dismiss for failure to state a claim is
granted.” Id. The court then discussed subject matter jurisdiction and determined that it had subject
matter jurisdiction over plaintiff’s ERISA claim. Id. at 3. Thereafter, the court discussed the
standards for a complaint to sufficiently state a claim (id. at 4-5) and determined that plaintiff
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failed to state a claim for a violation of ERISA because plaintiff’s policy was “not covered by
ERISA” (id. at 7). Thus, the language of the district’s court opinion makes clear that its dismissal
of plaintiff’s complaint was not based on jurisdictional grounds but for failure to state a claim.
¶ 21 The plaintiff’s argument is refuted not only by the language of the district court but also
the court’s analysis. If the district court had found subject matter jurisdiction lacking, there would
have been no need to discuss the sufficiency of plaintiff’s allegations. In fact, without subject
matter jurisdiction, the court would have no power to do so. See Bunker Ramo Corp., 713 F.2d at
1279 (“Once a court expresses the view that it lacks jurisdiction, the court thereafter does not have
power to rule on any other matter.”). The district court’s analysis, therefore, indicates that
plaintiff’s failure to state a claim under ERISA was the sole basis for dismissal. Thus, the district
court’s dismissal was an adjudication on the merits. See River Park, Inc., 184 Ill. 2d at 303-04.
¶ 22 Plaintiff also argues that the second requirement of res judicata was not satisfied because
his federal ERISA claim and his state law claims for breach of contract and bad faith are not the
same. We disagree.
¶ 23 The factual allegations contained in plaintiff’s state and federal complaints parallel each
other. In both complaints, plaintiff alleged: (1) he purchased a policy of insurance, policy number
671272722, from defendant that provided coverage for his healthcare; (2) the policy was effective
from March 16, 2018 to January 14, 2019; (3) he performed all his obligations under the policy
and “fully paid all of the applicable premiums” to defendant; (4) on March 14, 2018, he “presented
to the emergency room”; (5) on that date, emergency room personnel “established no history” and
provided him with no diagnosis; (6) he “was not admitted to the hospital” on March 14, 2014, and
went home that day; (7) he “presented again to the emergency room on March 17, 2018”; (8) he
was first diagnosed with a pulmonary embolism on March 17, 2018; (9) he “remained in the
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hospital until he was released on March 21, 2018”; (10) his diagnosis came after the policy was
“in effect”; (11) “[d]efendant is denying benefits and refuses to pay for any of Plaintiff’s medical
bills on the basis that the policy does not cover pre-existing conditions;” (12) defendant’s denial
of benefits is wrongful and unlawful; (13) “[p]laintiff has exhausted all appeals with Defendant”;
and (14) “[a]s a result of Defendant’s actions, Plaintiff suffered severe damages, including but not
limited to the denial of benefits and the inability to pay outstanding medical bills and costs.” The
facts on which plaintiff bases his claim for relief under state law are virtually identical to the facts
on which his federal ERISA claim was based.
¶ 24 Plaintiff’s state law claims and federal ERISA claim arise from the same core of operative
facts. Like plaintiff’s ERISA action, plaintiff’s state law claims are based on defendant’s refusal
to pay his medical expenses from his March 17-21, 2018 hospitalization. Plaintiff’s state law
claims for breach of contract and bad faith brought after his ERISA action was dismissed were
merely a “substitution of labels.” See River Park, Inc., 184 Ill. 2d at 316. An identity of cause of
action exists between plaintiff’s state law claims and federal ERISA claim; therefore, the second
requirement of res judicata was satisfied. See Rein, 172 Ill. 2d at 335.
¶ 25 Plaintiff does not dispute that the third requirement for res judicata was met. The parties
in both the federal and state actions were identical. Accordingly, the three requirements for
application of the doctrine of res judicata were satisfied in this case. See id.¶ 26 Nevertheless, plaintiff contends that the doctrine of res judicata should not bar his state
claims because he could not have asserted them in federal court.
¶ 27 Federal district courts have exclusive jurisdiction over ERISA claims. 29 U.S.C.
§ 1132(e)(1) (2018). “[I]n any civil action of which the district courts have original jurisdiction,
the district courts shall have supplemental jurisdiction over all other claims that are so related to
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claims in the action within such original jurisdiction that they form part of the same case or
controversy ***.” 28 U.S.C. § 1367(a) (2018). A federal district court may decline to exercise
supplemental jurisdiction over pendent state claims after dismissing a federal claim. See id.§ 1367(c)(3); River Park, Inc., 184 Ill. 2d at 317-18.
¶ 28 “Illinois courts have held that, when a federal court declines to exercise supplemental
jurisdiction over state-law claims, res judicata will not apply to bar subsequent litigation of a state-
law claim in state court.” (Emphasis in original.) Hebert v. Cunningham, 2018 IL App (1st)
172135, ¶ 32 (citing Nowak v. St. Rita High School, 197 Ill. 2d 381, 393-94 (2001) and
Schandelmeier-Bartels v. Chicago Park District, 2015 IL App (1st) 133356, ¶¶ 28-31). However,
if the plaintiff files suit in federal court and does not include state claims that could have been
decided in that suit, the plaintiff is barred under the doctrine of res judicata from raising those
claims in state court following dismissal of the federal suit. River Park, Inc., 184 Ill. 2d at 318.
¶ 29 In River Park, Inc., our supreme court rejected the same argument plaintiff makes here:
that “the doctrine of res judicata should not bar their state claims because they could not have
asserted these claims in federal court.” Id. at 317. In that case, the plaintiffs filed a complaint in
federal court alleging that the defendant “was liable pursuant to 42 U.S.C. § 1983 (1994) for
depriving them of their property rights without due process of law in violation of the United States
Constitution.” 184 Ill. 2d at 297. The federal district court dismissed the plaintiff’s complaint. Id.
at 293. Thereafter, the plaintiffs filed state claims in state court against the same defendant, which
the circuit court dismissed based on res judicata. Id.¶ 30 On appeal, the plaintiffs argued that res judicata should not apply because even if they had
filed state claims in federal court, the district court would have dismissed those claims when it
dismissed their federal claim. Id. at 318. The supreme court disagreed, stating that because the
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plaintiffs did not file any state claims in federal court, “we do not know whether the district court
would have refused to exercise supplemental jurisdiction over these claims.” Id. Because the
plaintiffs’ state claims “ ‘could have been decided’ in their federal suit,” the supreme court held
that those claims were barred by res judicata when the district court dismissed plaintiff’s federal
suit. Id.¶ 31 The supreme court also rejected the plaintiffs’ argument that it was “unfair to bar their state
claims under the res judicata doctrine.” Id. at 318. The supreme court found no unfairness to the
plaintiffs because “they chose not to assert their state causes of action in their suit in federal court.”
Id. at 319. The supreme court explained:
‘The purpose of res judicata is to promote judicial economy by requiring parties to litigate,
in one case, all rights arising out of the same set of operative facts and also [to] prevent[ ]
the unjust burden that would result if a party could be forced to relitigate what is essentially
the same case.’ [Citation.] This purpose would be undermined if plaintiffs were permitted
to pursue their state claims after bringing the same cause of action against defendant in
federal court.” (Internal citations omitted.) Id.¶ 32 Under the fundamental principle of stare decisis, circuit and appellate courts are required
to apply supreme court precedent to the cases before them. Yakich v. Aulds, 2019 IL 123667, ¶ 13.
Thus, we are required to follow our supreme court’s decision in River Park, Inc.
¶ 33 Plaintiff, however, argues that River Park, Inc., is distinguishable and not controlling
because (1) plaintiff was prohibited from bringing state law claims in federal court due to ERISA
preemption, and (2) the district court stated that to the extent plaintiff raised a state law claim, it
would be dismissed without prejudice. We disagree.
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¶ 34 ERISA preempts any state law that relates to an employee benefit plan. See Pilot Life Ins.
Co. v. Dedeaux, 481 U.S. 41, 48-49 (1987). State law claims for breach of contract and bad faith
based on an insurance policy that qualifies as an employee benefit plan are, therefore, preempted
by ERISA. See Clark v. Hewitt Associates, LLC, 294 F. Supp.2d 946, 953 (N.D Ill. 2003).
However, despite preemption, a plaintiff can bring state law claims in federal court along with an
ERISA claim. See Simon v. Allstate Employee Group Medical Plan, 263 F.3d 656, 658 (7th Cir.
2001); Coleman v. Standard Life Insurance Co., 288 F. Supp. 2d 1116, 1117 (E.D. Cal. 2003);
Schultz v. Boesken Electric Co., 703 F. Supp. 656, 657 (S.D. Ohio 1988). The United States District
Court for the Eastern District of California explained why it is proper for a plaintiff to do so:
“In the ERISA context, in particular, there will often be good reason for
alternatively pleading state and federal claims. When there is some doubt over whether
ERISA is applicable under a given set of facts, especially where there is doubt about
whether a particular plan is in fact an ERISA plan, proceeding in any other way can be
hazardous for the plaintiff. If the plaintiff brings only state law claims and the court
determines there is an ERISA plan, the state law claims are preempted. But if the plaintiff
brings only an ERISA claim and the plan turns out not to be an ERISA plan, the plaintiff
is also out of luck.” (Emphasis in original.) Coleman, 288 F. Supp. 2d at 1120.
¶ 35 Here, plaintiff chose not to bring his state law claims along with his ERISA claim in district
court, the district court dismissed plaintiff’s ERISA claim, and plaintiff is now barred from
pursuing his state claims. See Simon, 263 F.3d at 658 (ruling the plaintiff’s state law claims were
barred by res judicata because the plaintiff could have raised them in his original suit claiming an
ERISA violation but failed to do so). Despite plaintiff’s contention to the contrary, he was not
prohibited from bringing his state claims in federal court. See id.; Coleman, 288 F. Supp. 2d at
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1120; Schultz, 703 F. Supp. at 657. Thus, we reject plaintiff’s attempt to distinguish River Park,
Inc. on that basis.
¶ 36 Finally, plaintiff argues that the result in this case should be different from River Park, Inc.
because here the district court stated: “To the extent Till has brought a state law claim under the
Court’s supplemental jurisdiction, that claim is dismissed without prejudice.”
¶ 37 Plaintiff stated in the introductory paragraph of his federal complaint that he was seeking
redress under ERISA “and Illinois statutory and common law theories of recovery.” However, the
sole count of plaintiff’s complaint alleged a violation of ERISA. Plaintiff failed to allege that
defendant violated any state laws. Because plaintiff did not bring any state law claims when he
filed his ERISA action in federal court, the district court’s statement that it would have dismissed
such claims without prejudice was meaningless and had no effect.
¶ 38 We find our supreme court’s decision in River Park, Inc. controlling. Based on supreme
court precedent, the trial court properly dismissed plaintiff’s complaint pursuant to the doctrine of
res judicata. See River Park, Inc., 184 Ill. 2d at 317-19.
¶ 39 CONCLUSION
¶ 40 The judgment of the circuit court of Du Page County is affirmed.
¶ 41 Affirmed.
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