In re Elena Hernandez , 2020 IL 124661 ( 2021 )

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Supreme Court Date: 2021.02.03
19:13:06 -06'00'
In re Hernandez, 2020 IL 124661Caption in Supreme In re ELENA HERNANDEZ.
Court:
Docket No. 124661
Filed January 24, 2020
Decision Under Certified question from the United States Court of Appeals for the
Review Seventh Circuit; heard in that court on appeal from the Unites States
District Court for the Northern District of Illinois, Chief Judge Andrea
R. Wood, the Hon. Diane S. Sykes, and the Hon. Michael Y. Scudder,
Judges, presiding.
Judgment Certified question answered.
Counsel on Richard D. Grossman, of Chicago, for appellant.
Appeal
Alan J. Mandel, of Alan J. Mandel, Ltd., of Skokie, and Allan A.
Ackerman, of Chicago, for appellees.
Kwame Raoul, Attorney General, of Springfield (Jane Elinor Notz,
Solicitor General, and Sarah A. Hunger and Mary C. Labrec, Assistant
State’s Attorneys, of Chicago, of counsel), amicus curiae.
Kari Beyer, Miriam Hallbauer, and David S. Yen, of LAF, of Chicago,
and James J. Haller, of National Association of Consumer Bankruptcy
Attorneys, amici curiae.
Justices JUSTICE KARMEIER delivered the judgment of the court, with
opinion.
Chief Justice Burke and Justices Thomas, Kilbride, Garman, Theis,
and Neville concurred in the judgment and opinion.
OPINION
¶1 The United States Court of Appeals for the Seventh Circuit has certified for instruction by
this court the following question of Illinois law: After the 2005 amendments to section 8 of the
Workers’ Compensation Act (Act) (820 ILCS 305/8 (West 2016)) and the enactment of section
8.2 of the Act (id. § 8.2), does section 21 of the Act (id. § 21) exempt the proceeds of a workers’
compensation settlement from the claims of medical-care providers who treated the illness or
injury associated with that settlement?
¶2 We accepted the Seventh Circuit’s invitation to consider this question pursuant to Illinois
Supreme Court Rule 20 (eff. Aug. 1, 1992). We subsequently granted leave to the People of
the State of Illinois and to the National Association of Consumer Bankruptcy Attorneys
(NACBA) and the Legal Assistance Foundation of Metropolitan Chicago (LAF) to file
amicus curiae briefs in support of the position taken by Elena Hernandez, the debtor whose
settlement proceeds are at issue. See Ill. S. Ct. R. 345 (eff. Sept. 20, 2010).
¶3 For the reasons that follow, we answer the question posed by the Seventh Circuit in the
affirmative. Under section 21 of the Act, the proceeds of a workers’ compensation settlement
are still exempt from the claims of medical-care providers who treated the illness or injury
associated with that settlement.
¶4 BACKGROUND
¶5 We take the facts as the Seventh Circuit has stated them in its certification ruling. See Zahn
v. North American Power & Gas, LLC, 2016 IL 120526, ¶ 3; Yang v. City of Chicago, 195 Ill.
2d 96, 98 (2001). Between 2009 and 2011, Elena Hernandez sustained on-the-job injuries and
received medical treatment from Ambulatory Surgical Care Facility, Marque Medicos
Fullerton LLC, and Medicos Pain and Surgical Specialists, S.C. In December 2016, she filed
a voluntary Chapter 7 bankruptcy petition in the Northern District of Illinois. In that petition,
Hernandez reported unsecured claims held by the three health care providers we have just
mentioned. She owed $28,709.60 to Ambulatory Surgical Care Facility, $58,901.20 to Marque
Medicos Fullerton LLC, and $50,161.26 to Medicos Pain and Surgical Specialists, S.C. She
reported minimal assets, listing $1300 in bank accounts, some inexpensive jewelry, and her
pending workers’ compensation claim, which she valued at $31,000.
¶6 Two days after filing her petition, Hernandez settled her workers’ compensation claim with
her employer. The settlement amount appears to have been $30,566.33. Hernandez entered
into the settlement without consulting the bankruptcy trustee. The reason she did not consult
the trustee is that she believed the full amount of the settlement was exempt under section 21
of the Act (820 ILCS 305/21 (West 2016)). That statute provides, in relevant part:
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“No payment, claim, award or decision under this Act shall be assignable or subject to
any lien, attachment or garnishment, or be held liable in any way for any lien, debt,
penalty or damages, except the beneficiary or beneficiaries of a deceased employee
who was a member or annuitant under Article 14 of the ‘Illinois Pension Code’ may
assign any benefits payable under this Act to the State Employees’ Retirement System.”
Id.¶7 The health care providers objected to this exemption on the grounds that certain
amendments made to the Act in 2005 empowered them to reach her settlement. They also urged
the court to disallow the exemption on grounds that the settlement was the product of fraud.
¶8 In April 2017 the bankruptcy court heard arguments on the question. During the hearing,
the judge focused on process-based concerns regarding Hernandez’s settlement—including her
failure to notify interested parties or the trustee—rather than the statutory arguments raised by
the parties. In the end, the judge summarily denied the exemption without a written opinion.
¶9 Hernandez appealed to the United States District Court for the Northern District of Illinois
pursuant to 28 U.S.C. § 158(a)(1) (2012). In re Hernandez, 17 CV 3230, WL 1469000 (N.D.
Ill. Mar. 26, 2018). The district court affirmed in an opinion focused exclusively on the
relationship between section 21 of the Act (820 ILCS 305/21 (West 2016)) and the 2005
amendments to that Act codified in sections 8 and 8.2 (see Pub. Act 93-721, § 70 (eff. Jan. 1,
2005); Pub. Act 94-277, § 10 (eff. July 20, 2005); Pub. Act 94-695, § 5 (eff. Nov. 16, 2005)).
In re Hernandez, WL 1469000.
¶ 10 Relying on In re McClure, 175 B.R. 21 (Bankr. N.D. Ill. 1994), the district court held that,
under section 21, workers’ compensation claims are exempt from a debtor’s bankruptcy estate
against general creditors. In re Hernandez, WL 1469000, at *2. It concluded, however, that the
2005 amendments “significantly altered” the Act as it pertains to health care providers, striking
a “balance” by limiting what providers can charge while allowing them to resume collection
efforts following a settlement. Id. at *3. Professing to read the Act as a “ ‘harmonious whole’ ”
and citing interpretive canons against surplusage and absurdity, the district court rejected
Hernandez’s argument that the 2005 amendments had no bearing on the exemption created by
section 21. Id. (quoting Food & Drug Administration v. Brown & Williamson Tobacco Corp.,
529 U.S. 120, 133 (2000)). In the district court’s view, those amendments now permit health
care providers to collect payment for their services from an injured employee once the
employee’s disputed claim has been resolved with the employer. According to the district
court, a contrary interpretation was unreasonable because it would undermine a key purpose
of the amended Act, namely, ensuring payment for care providers. Id.¶ 11 Hernandez’s motion to alter or amend the judgment was rejected following a hearing, and
she appealed to the United States Circuit Court for the Seventh Circuit. In re Hernandez, 918
F.3d 563 (7th Cir. 2019). Before the Seventh Circuit, the parties agreed that, historically,
section 21 of the Act created an exemption for workers’ compensation claims and awards under
Illinois law and that such claims and awards were therefore beyond the reach of creditors in
bankruptcy proceedings. Id. at 568. The point was not contested. Rather, as in the district court,
the dispute centered on whether the exemption remained in effect after the Act was amended
in 2005 with respect to collection efforts by a debtor’s health care providers. Id.
¶ 12 Noting that neither our court nor our appellate court has yet addressed the interplay
between section 21 of the Act and the 2005 amendments, the Seventh Circuit undertook its
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own examination of the language of those provisions in light of standard principles of statutory
construction and determined that there was support for both sides of the issue. Id. at 569-70. It
could find no clear path forward. Because of this uncertainty, because it believed the issue to
be one of vital public concern, and because resolution of the question is essential to correct
disposition of the case before it, the Seventh Circuit asked this court to answer the certified
question we set out at the beginning of the opinion. Id. at 570-71. As noted, we have accepted
that request. The federal proceedings have been stayed pending our ruling.
¶ 13 ANALYSIS
¶ 14 The exemption claimed by Hernandez and opposed by her health care providers arises in
the context of a federal bankruptcy proceeding. Section 522(b) of the Bankruptcy Code (11
U.S.C. § 522(b) (2012)) allows debtors such as Hernandez to exempt certain property from the
bankruptcy estate. While federal law contains provisions specifying what property may be
claimed as exempt (see id. § 522(d)), individual states may opt out of the federal exemption
scheme and establish their own. Illinois has exercised that option. See In re Marriage of
Logston, 103 Ill. 2d 266, 282 (1984); In re Clark v. Chicago Municipal Employees Credit
Union, 119 F.3d 540, 543 (7th Cir. 1997). Section 12-1201 of the Code of Civil Procedure
(735 ILCS 5/12-1201 (West 2016)) provides that residents of this state are “prohibited from
using federal exemptions provided in Section 522(d) of the Bankruptcy Code of 1978 (11
U.S.C. 522(d)), except as may otherwise be permitted under the laws of Illinois.” What this
means is that in federal bankruptcy proceedings, Illinois residents are restricted to exemptions
granted by Illinois law. In re Marriage of Logston, 103 Ill. 2d 266.
¶ 15 Under Illinois law, exempt property is any property that the legislature has identified and
declared to be free from liability to processes such as seizure and sale, or attachment, to satisfy
debts. Id. at 277. Numerous statutes enacted by the Illinois legislature recognize such
exemptions. Some are included in parts 9 and 10 of the Code of Civil Procedure (735 ILCS
5/12-901 to 12-1006 (West 2016)), which deal with homestead exemptions and exemptions
for personal property, and explicitly use the word “exemption.” Nothing in Illinois law,
however, limits allowable exemptions in bankruptcy cases to those contained in the Code of
Civil Procedure or those specifically labeled as “exempt.” As the bankruptcy courts sitting in
Illinois have correctly recognized, no specific wording is required, and the provision’s location
in the statute books is not dispositive. For purposes of determining whether property is exempt,
the critical inquiry is simply whether the provision unequivocally protects the identified
property against all forms of collection. See In re Thum, 329 B.R. 848, 853-54 (Bankr. C.D.
Ill. 2005); In re Allard, 196 B.R. 402, 410 (Bankr. N.D. Ill. 1996); In re McClure, 175 B.R. at
23-24.
¶ 16 Section 21 of the Act, the provision at issue in this case, meets this test. As noted earlier in
this opinion, it provides:
“No payment, claim, award or decision under this Act shall be assignable or subject to
any lien, attachment or garnishment, or be held liable in any way for any lien, debt,
penalty or damages, except the beneficiary or beneficiaries of a deceased employee
who was a member or annuitant under Article 14 of the ‘Illinois Pension Code’ may
assign any benefits payable under this Act to the State Employees’ Retirement System.”
820 ILCS 305/21 (West 2016).
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There is no ambiguity whatever in this provision. Under its express terms, any payment, award,
or decision under the Act is unequivocally free from liability to processes such as seizure and
sale, or attachment, to satisfy debts. This is a paradigm exemption under Illinois law. A version
of the statute has been in effect and has been so viewed for over a century. See, e.g., Weber v.
Ridgway, 212 Ill. App. 159, 162-63 (1918); Lasley v. Tazewell Coal Co., 223 Ill. App. 462,
463-64 (1921). 1 Illinois residents seeking relief through federal bankruptcy proceedings are
therefore entitled to invoke it.
¶ 17 We turn then to the question of whether the 2005 amendments to section 8 of the Act (820
ILCS 305/8 (West 2016)) and enactment of section 8.2 of the Act (id. § 8.2) altered this
exemption with respect to debts owed to health care providers. Resolution of this issue is a
matter of statutory construction. Proper interpretation of an Illinois statute presents a question
of Illinois law. This court is the final arbiter of such questions. Hampton v. Metropolitan Water
Reclamation District, 2016 IL 119861, ¶ 9.
¶ 18 The principles governing our interpretation of Illinois statutes are well established and
familiar. The cardinal rule of statutory construction, to which all other canons and rules are
subordinate, is to ascertain and give effect to the intent of the legislature. The best indicator of
that intent is the language used in the statute itself. That language must be given its plain and
ordinary meaning. Bayer v. Panduit Corp., 2016 IL 119553, ¶ 18. If the statutory language is
clear, it will be given effect without resort to other aids for construction. Courts are not at
liberty to depart from the plain language and meaning of a statute by reading into it exceptions,
limitations, or conditions the legislature did not express. Illinois State Treasurer v. Illinois
Workers’ Compensation Comm’n, 2015 IL 117418, ¶ 21.
¶ 19 In the case of section 21 of the Workers’ Compensation Act, the Illinois General Assembly
included one exception in the statute itself. By its terms, the law provides that the “beneficiary
or beneficiaries of a deceased employee who was a member or annuitant under Article 14 of
the ‘Illinois Pension Code’ may assign any benefits payable under this Act to the State
Employees’ Retirement System.” 820 ILCS 305/21 (West 2016). The General Assembly has
also created an exception to section 21’s exemption under section 15(d) of the Income
Withholding for Support Act (750 ILCS 28/15(d) (West 2016)). That provision, which applies
in the context of child support (Department of Healthcare & Family Services ex rel. Black v.
Bartholomew, 397 Ill. App. 3d 363, 367 (2009)), provides that “ ‘[i]ncome’ means any form
of periodic payment to an individual, regardless of source, including *** workers’
compensation” and that “[a]ny other [s]tate or local laws which limit or exempt income or the
amount or percent of income that can be withheld shall not apply.” 750 ILCS 28/15(d) (West
2016).
¶ 20 The foregoing provisions demonstrate that, when the General Assembly intended to create
an exception to the exemption established by section 21, it knew how to express that intention
in language so clear and explicit that it could not be misunderstood. No similarly explicit
exception for claims by health care providers appears in the Workers’ Compensation Act itself
or in any other Illinois statute. The absence of such language is strong evidence that the
legislature did not intend to confer on health care providers the exception to section 21’s
1
Appellate decisions prior to 1935 are not binding authority. Bryson v. News America Publications,
Inc., 174 Ill. 2d 77, 95 (1996). We cite these earlier decisions merely to illustrate the long-standing
nature of the principles under discussion here.
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exemption claimed by the Ambulatory Surgical Care Facility, Marque Medicos Fullerton LLC,
and Medicos Pain and Surgical Specialists, S.C., in this case. See 5510 Sheridan Road
Condominium Ass’n v. U.S. Bank, 2017 IL App (1st) 160279, ¶ 25.
¶ 21 The health care providers’ claim to an exception to section 21’s exemption rests exclusively
on the 2005 amendments to section 8 of the Act (820 ILCS 305/8 (West 2016)), which
addresses the amount of compensation due employees for accidental injury not resulting in
death, and the enactment of section 8.2 of the Act (id. § 8.2), which introduced fee schedules
limiting the amount providers could collect and employers would be obligated to pay for
procedures, treatments, or services covered under the Act. The health care providers do not
assert that anything within these provisions can be read as creating an express exception to
section 21’s exemption. Rather, they contend that an exception for claims by health care
providers is implicit in the 2005 statutory changes. The exception must be implied, in their
view, in order to insure that the fundamental purposes of the Act will not be thwarted, that
medical providers will be able to recover the payments they are due for services rendered, that
the reach of the scope of section 21 of the Act remains in harmony with modern realities, and
that the terms of the 2005 statutory changes are given their intended effect.
¶ 22 The repeal or amendment of statutes by implication is not favored. Had the legislature
intended to alter the clear and unambiguous provisions of section 21 by conferring on health
care providers a new exception to the exemption, it would have had to indicate a clear intent
to do so. People v. Johnson, 2019 IL 123318, ¶ 42. No such intent is manifest in the provisions
cited by the health care providers here. As we have just indicated, the 2005 amendments to
section 8 of the Act (820 ILCS 305/8 (West 2016)) addressed the amount of compensation due
employees for accidental injury not resulting in death, while the then-new section 8.2 (id. § 8.2)
introduced fee schedules limiting the amount providers could collect and employers would be
obligated to pay for procedures, treatments, or services covered under the Act. Neither topic,
on its face, bears directly on the question of whether the proceeds of a workers’ compensation
settlement received by an injured worker should be exempt from claims of medical-care
providers who treated the illness or injury associated with that settlement.
¶ 23 The only aspect of the 2005 amendments that relates to that issue at all is section 8.2(e-20)
(id. § 8.2(e-20)), which states:
“Upon a final award or judgment by an Arbitrator or the Commission, or a settlement
agreed to by the employer and the employee, a provider may resume any and all efforts
to collect payment from the employee for the services rendered to the employee and
the employee shall be responsible for payment of any outstanding bills for a procedure,
treatment, or service rendered by a provider as well as the interest awarded under
subsection (d) of this Section. In the case of a procedure, treatment, or service deemed
compensable, the provider shall not require a payment rate, excluding the interest
provisions under subsection (d), greater than the lesser of the actual charge or the
payment level set by the Commission in the fee schedule established in this Section.
Payment for services deemed not covered or not compensable under this Act is the
responsibility of the employee unless a provider and employee have agreed otherwise
in writing. Services not covered or not compensable under this Act are not subject to
the fee schedule in this Section.”
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It is true, as the health care providers point out, that this provision, by its terms, does now
permit health care providers to seek payment directly from an injured employee for outstanding
bills plus interest following entry of a final workers’ compensation award or judgment or after
a settlement agreement is reached between the employer and the employee. Significantly,
however, nothing in section 8.2(e-20) permits health care providers to look to the workers’
compensation award, judgment, or settlement itself as a source of payment. Pursuant to section
21, those sources remain beyond the providers’ reach. Any collection efforts must therefore be
directed instead on assets unrelated to the employee’s workers’ compensation claim. To hold
otherwise would place section 21 and section 8.2(e-20) in irreconcilable conflict. Unless we
were to read into section 21 a new exception the legislature itself did not express, there is no
way the two provisions could be harmonized.
¶ 24 In this regard, we find no merit to the health care providers’ contention that carving out an
exception to section 21’s exemption is necessary to effectuate the purposes behind the 2005
amendments to the Act. It is clear that those provisions, which establish fee schedules and
regulate various billing and collection practices, can operate as written without any
qualification at all to the express terms of section 21. To be sure, continuing to construe section
21 according to its plain and unambiguous language may make it more difficult for medical
providers to obtain full recovery of the amounts they are owed than would otherwise be the
case. Weighing such considerations, however, is the responsibility of the legislature, not the
courts. If the existing statutory scheme is susceptible to abuse at the expense of medical
providers, as the health care providers here charge, that is a matter they must take up with the
General Assembly. DeSmet v. County of Rock Island, 219 Ill. 2d 497, 510 (2006). We must
interpret and apply statutes in the manner in which they are written and cannot rewrite them to
make them consistent with our own idea of orderliness and public policy. Schultz v. Illinois
Farmers Insurance Co., 237 Ill. 2d 391, 406 (2010). That is particularly true with respect to
provisions such as section 21, which have been in effect for so long and applied so consistently.
¶ 25 Finally, we reject the health care providers’ request that we find that they have “a private
right of action to pursue claims for direct payments for their services if necessary” from an
employer’s workers’ compensation insurer and overrule various contrary decisions by the
appellate court. That request has no place in this proceeding. The matter is before us on a
certified question involving claims against a debtor in bankruptcy. Whether or not the medical
providers might subsequently be able to pursue a direct action against the insurance carrier for
the debtor’s employer is irrelevant to resolution of the bankruptcy proceeding and is not a topic
on which the Seventh Circuit needed or requested our view. Any opinion we expressed on the
matter would therefore be both advisory and gratuitous.
¶ 26 CONCLUSION
¶ 27 For the foregoing reasons, we answer the certified question in the affirmative.
Notwithstanding the 2005 amendments to section 8 of the Act (820 ILCS 305/8 (West 2016))
and the enactment of section 8.2 of the Act (id. § 8.2), section 21 of the Act (id. § 21) does
exempt the proceeds of a workers’ compensation settlement from the claims of medical-care
providers who treated the illness or injury associated with that settlement.
¶ 28 Certified question answered.
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