Nestle USA v. Dunlap

NO. 4-05-0900 Filed: 6/1/06
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
NESTLE USA, INC., ) Appeal from
Plaintiff-Appellant, ) Circuit Court of
v. ) Morgan County
DONALD DUNLAP and THE INDUSTRIAL ) No. 04CH72
COMMISSION OF ILLINOIS, )
Defendants-Appellees, )
and ) Honorable
FREDERIC NESSLER and MICHAEL McDONALD, ) Richard T. Mitchell,
Defendants. ) Judge Presiding.
_________________________________________________________________
JUSTICE COOK delivered the opinion of the court:
Plaintiff, Nestle USA, Inc. (Nestle), brought an action
seeking declaratory relief from a ruling by arbitrator Ruth White
of the Illinois Workers' Compensation Commission (Commission)
(formerly the Illinois Industrial Commission) regarding rein-
statement of Donald Dunlap's workers' compensation claim.
Plaintiff also sought to enjoin the Commission from further
hearing Dunlap's claim. Plaintiff presented a motion for summary
judgment on the undisputed facts. The Attorney General of the
State of Illinois, acting as counsel for the Commission, pre-
sented a motion to dismiss the case. The trial court granted the
Commission's motion to dismiss. Nestle appeals. We affirm.
I. BACKGROUND
On January 13, 2000, Donald Dunlap filed a workers'
compensation claim with the Commission claiming he had a heart
attack on September 4, 1999, while employed by Nestle. When he
filed the claim, Dunlap's attorney was Frederic Nessler. Accord-
ing to the Commission's records, Nessler has been noted to be
Dunlap's counsel of record through 2004.
On November 15, 2000, attorney Michael McDonald wrote
to Nessler that Dunlap's wife asked him to pursue her husband's
claim and that McDonald would protect Nessler's fee on any
ultimate settlement or verdict.
On July 23, 2001, McDonald sent Nessler a "Stipulation
to Substitute Attorneys" form for Nessler to sign and return to
McDonald. Three days later, Nessler returned the signed
substitution-of-attorney form.
On October 1, 2002, Nessler wrote to Eugene Keefe,
Nestle's attorney, saying that he received a notice of a motion
and order concerning Dunlap's case. Nessler stated he no longer
represented Dunlap as of July 26, 2001, when a signed
substitution-of-attorney form was sent to McDonald. Also, on
October 1, 2002, Nessler sent the notice to McDonald and re-
quested a file-stamped copy of the approved substitution-of-
attorney form.
On May 20, 2003, a paralegal with Nessler's firm,
Lorrie Foor, sent McDonald a letter stating that in "December of
2001, we had a hearing regarding the unsigned Substitution of
Attorney" and requesting the signed and filed form. The letter
concluded that if the Nessler firm did not hear from McDonald
within 10 days, they would be setting the Dunlap case for hearing
again on July 19, 2003. Also on May 20, 2003, Foor sent a letter
to arbitrator Ruth White stating that Dunlap has retained McDon-
ald as counsel and a hearing was conducted in December 2002, to
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have the substitution entered. Foor asked that the matter be
continued because Nessler is still the attorney of record on the
docket but Nessler's firm is unaware of the status of the Dunlap
case.
On October 16, 2003, White issued an order dismissing
Dunlap's case for want of prosecution because the petitioner
failed to appear at a status call or trial date. Notices of
dismissal dated November 7, 2003, which were addressed to Nessler
and Keefe, stated that unless a petition to reinstate was filed
with the Commission within 60 days of receipt of the dismissal,
the case could not be reopened.
On February 3, 2004, Keefe faxed Nessler a copy of his
notice of dismissal dated November 7, 2003, and stated that
Nestle has closed the file on the Dunlap case as the Commission's
records indicate that the case was dismissed without reinstate-
ment.
On February 26, 2004, Nessler faxed the notice of
dismissal to McDonald.
On April 26, 2004, McDonald filed a petition to rein-
state Dunlap's case. In the motion to reinstate, McDonald stated
that he did not receive the October dismissal order until it was
faxed to him on February 26, 2004, by Nessler after Nessler
received the notice from Keefe on February 3, 2004. The motion
stated that Nessler withdrew as counsel on March 13, 2001, and
McDonald entered his appearance on that date. McDonald claims
that he had appeared before White in the matter. In Nestle's
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complaint for injunctive relief, Nestle acknowledged that "McDon-
ald has occasionally attended Industrial Commission status
hearings and otherwise claimed to represent *** Dunlap as coun-
sel," but that Nestle had always objected and pointed out that
McDonald failed to file an appearance of counsel or a substitu-
tion of counsel on Dunlap's behalf.
On September 8, 2004, White allowed McDonald to appear
as counsel for Dunlap and argue his motion to reinstate. White
reinstated the case after accepting McDonald's assurances, as an
officer of the court, that he, at some point in the past, filed a
substitution-of-counsel form despite the fact that the Commission
never showed him to be counsel of record.
On December 8, 2004, Nestle filed a complaint for
injunctive relief in the circuit court of Morgan County. In the
complaint, Nestle alleged that Nessler is Dunlap's counsel of
record, and he never filed a motion to reinstate within 60
working days from the date Nestle's attorney faxed a copy of the
dismissal to Nessler. In its first-amended complaint for declar-
atory judgment and permanent injunction, Nestle sought a declara-
tory judgment because the arbitrator and Commission "have inno-
cently refused to follow Illinois law in the claim below and are
now acting outside the powers granted to the Workers' Compensa-
tion Commission by our legislature to the irreparable detriment
of Plaintiff Nestle." Nestle claimed that if it is forced to
continue to defend a claim that was finally dismissed by rule of
law, Nestle's due-process and equal-protection rights under
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Illinois law would be violated. Nestle asked that the circuit
court permanently enjoin the Commission and White from further
adjudicating Dunlap's claim.
The Commission filed a motion to dismiss under sections
2-615 and 2-619(a)(1) and (a)(9) of the Code of Civil Procedure
(Code) (735 ILCS 5/2-615, 2-619(a)(1), (a)(9) (West 2004)). The
Commission alleged that the circuit court lacked jurisdiction
because Nestle had not exhausted its administrative remedies and
was improperly seeking judicial review of the arbitrator's
nonfinal decision through its declaratory-relief action. Dunlap,
through attorney Norbert Goetten, filed a motion to dismiss,
arguing that the complaint was premature because the Commission
had not entered a final order in the case. Nessler and McDonald
were dismissed as defendants and are no longer parties to this
matter. Nestle responded and filed a motion for summary judg-
ment.
On September 30, 2005, the circuit court granted the
Commission's motions to dismiss, finding that the court's juris-
diction under section 19(f) of the Workers' Compensation Act
(Act) (820 ILCS 305/19(f) (West 2004)) is limited to review of
final decisions.
This appeal followed.
II. ANALYSIS
First, Nestle filed a motion with this court to "Append
Abstract of Record," seeking leave to supplement the record with
the transcript of the September 8, 2004, hearing before White;
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White's decision granting Dunlap's motion to reinstate the case;
and a Commission "Stipulation to Substitute Attorney" form dated
March 13, 2001, and signed by Dunlap, Nessler, and McDonald. The
Commission responded that this court should not allow the motion
because the documents were not certified by the Commission in
accordance with section 14 of the Act (820 ILCS 305/14 (West
2004)) and because the documents were not part of the record in
the circuit court. Because the three documents' inclusion in the
record will not affect the outcome of this case, we see no harm
in granting the motion.
As to the merits of the appeal, the circuit court
dismissed Nestle's complaint after determining the court lacked
jurisdiction. The court never addressed the merits of the case.
Thus, the only issue before this court is whether the circuit
court correctly determined that it lacked jurisdiction. See
Kemp-Golden v. Department of Children & Family Services, 281 Ill.
App. 3d 869, 879, 667 N.E.2d 688, 695 (1996) (when the circuit
court dismissed the complaint based on lack of standing, this
court only reviewed the judgment granting the motion to dismiss
and refused to review the merits of the plaintiff's claim). We
review a circuit court's decision to grant motions to dismiss
under sections 2-615 and 2-619 of the Code (735 ILCS 5/2-615, 2-
619 (West 2004)) under the de novo standard. Morris v. Williams,
359 Ill. App. 3d 383, 386, 834 N.E.2d 622, 626 (2005).
Nestle argues that the trial court had either original
or concurrent jurisdiction to state the rights of the parties as
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the issue involved undisputed facts and questions of law regard-
ing the arbitrator's power to reinstate the claim. Nestle claims
it should not be required to follow the normal procedures for
appealing an arbitrator's decision in a workers' compensation
claim to the five-member appellate panel of the Commission.
According to Nestle, the arbitrator acted outside of her statu-
tory authority and, therefore, without jurisdiction when she
reinstated Dunlap's claim after more than 60 days had passed from
the date Dunlap's attorney of record received notice of the
dismissal.
The Commission urges that the Commission has exclusive
jurisdiction in this matter. According to the Commission,
Dunlap's claim against Nestle involves a determination of bene-
fits and "circuit courts have no original jurisdiction over
workers' compensation proceedings, wherein benefits are deter-
mined, under the Act" (Hartlein v. Illinois Power Co., 151 Ill.
2d 142, 158, 601 N.E.2d 720, 727 (1992)). Because the Commission
has exclusive jurisdiction, the court must apply the "exhaustion
of administrative remedies doctrine." Under the exhaustion
doctrine, a party claiming to be wronged by an administrative
action must first pursue all available administrative remedies
before seeking review in the courts. Illinois Health Maintenance
Organization Guaranty Ass'n v. Shapo, 357 Ill. App. 3d 122, 130,
826 N.E.2d 1135, 1142-43 (2005). Alternatively, the Commission
claims that even if the trial court had original or concurrent
jurisdiction, the court correctly deferred jurisdiction under the
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doctrine of primary jurisdiction as the Commission is better
suited to resolve the dispute than the court.
The Supreme Court of Illinois has determined that the
courts have no original jurisdiction in cases involving determi-
nation of workers' compensation benefits. Hartlein, 151 Ill. 2d
at 158, 601 N.E.2d at 727. In such compensation proceedings, the
court's role is appellate only. Gunnels v. Industrial Comm'n, 30
Ill. 2d 181, 185, 195 N.E.2d 609, 611 (1964). The supreme court
has also held, though, that the Commission's jurisdiction is
concurrent with the circuit court in some instances. See Segers
v. Industrial Comm'n, 191 Ill. 2d 421, 426-27, 732 N.E.2d 488,
492 (2000) (jurisdiction is concurrent when the issue involves a
widow's application for death benefits after her husband had
previously settled for a lump sum); Employers Mutual Cos. v.
Skilling, 163 Ill. 2d 284, 286-87, 644 N.E.2d 1163, 1165 (1994)
(jurisdiction is concurrent when the issue involves an insurance-
coverage issue connected to a workers' compensation claim).
We conclude that under these facts, the Commission had
exclusive jurisdiction and Nestle was required to exhaust all
administrative remedies before seeking judicial review.
The only arbitrator's decision on appeal is White's
decision to reinstate Dunlap's claim. As a result of White's
reinstating his claim, Dunlap may be entitled to benefits. While
the issue does not involve an arbitrator's traditional determina-
tion of benefits, exclusive jurisdiction should apply for two
main reasons. First, the arbitrator's decision resolved a
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factual dispute. Second, a jurisdictional determination should
not be dependent upon the merits of a claim.
First, Nestle urges that the Commission, as an adminis-
trative agency, only has the powers granted by the Illinois
legislature and White's reinstatement of Dunlap's claim was not
authorized by the legislature because the petition for reinstate-
ment came after 60 days from notice to Dunlap's counsel of
record. Nestle cites Business & Professional People for the
Public Interest v. Illinois Commerce Comm'n, 136 Ill. 2d 192, 555
N.E.2d 693 (1989), Segers, 191 Ill. 2d 421, 732 N.E.2d 488, and
Daniels v. Industrial Comm'n, 201 Ill. 2d 160, 775 N.E.2d 936
(2002), to support its contention that courts can render declara-
tions on interpretations of Illinois's administrative agencies'
procedures, powers, and rules based upon undisputed facts without
first exhausting administrative remedies. Nestle's argument and
the application of the three cases rest on the premise that the
trial court was presented with only undisputed facts. Despite
Nestle's assertion to the contrary, the arbitrator's decision
resolved a factual dispute.
Nestle claims that the facts are undisputed because
Nessler, not McDonald, was Dunlap's attorney at all relevant
times as he was listed as Dunlap's counsel of record at all
relevant times. White concluded, though, that McDonald had been
Dunlap's attorney since 2001 when he sent a substitution-of-
attorney form to the Commission office in Chicago. Based on her
belief that McDonald would not lie to her, White concluded that
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the Commission must have made an error that kept McDonald from
appearing as the attorney of record. While McDonald could not
produce any documentation proving that he ever filed the form,
Nestle produced documents that showed Nessler and others continu-
ally requested that McDonald file the appropriate forms. Nestle
claims that White's conclusion did not rest on a determination of
"disputed facts," but was a "hopeful and generous conclusion by a
forgiving hearing officer without a shred of evidence to support
it."
However Nestle chooses to characterize White's determi-
nation, this matter clearly arose over a factual dispute. Nestle
claims that McDonald never filed the substitution-of-attorney
form and that McDonald lied to White. McDonald claims he filed
the form and the Commission made an error. White chose to
believe McDonald despite the documents Nestle produced. White
made her decision based upon her familiarity with the specific
facts of the case and her observation of the parties. The
parties disagreed as to when the 60 days began to run based upon
a dispute over who should have received the notice of dismissal.
White resolved the factual dispute and applied the time limit
according to her determination.
According to the Act, whenever a disputed question of
law or fact exists, the Commission shall first designate an
arbitrator who shall investigate claims and hear evidence. 820
ILCS 305/19(a), (b) (West 2004). The arbitrator's decision may
then be reviewed by the Commission. 820 ILCS 305/19(b) (West
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2004). The Act provides for review of final Commission decisions
in the trial court. See 820 ILCS 305/19(f)(1) (2004) (proceeding
for review in trial court shall be commenced within 20 days of
the receipt of notice of the decision of the Commission); see
also Pace Bus Co. v. Industrial Comm'n, 337 Ill. App. 3d 1066,
1069, 787 N.E.2d 234, 237 (2003) (jurisdiction to review final
decision of the Commission is vested in the trial court). Nestle
should follow the procedures outlined in the Act before the
courts interfere.
Further, in concluding that the trial court had
original or concurrent jurisdiction, Nestle assumed its claim was
meritorious. In the trial court, Nestle essentially sought a
determination that the arbitrator acted outside of her statutory
power. Nestle then claimed that the court had jurisdiction
because the arbitrator acted outside her statutory power. Under
Nestle's theory, in order for the court to have jurisdiction, the
court first had to determine Nestle would succeed on the merits.
If Nestle's claim is meritorious, the trial court has jurisdic-
tion. Nestle agrees, though, that if its claim is not meritori-
ous and White acted within her statutory powers, the court does
not have jurisdiction. Further, had White ruled Dunlap's peti-
tion could not be reinstated, Dunlap's only recourse would have
been an appeal to the Commission. In that situation, Dunlap
could not have appealed to the courts because White's decision
was authorized by statute. Nestle, though, could appeal to the
court because White acted without statutory authority.
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Jurisdiction should not be determined by a ruling on
the merits. See Nelson v. Miller, 11 Ill. 2d 378, 391, 143
N.E.2d 673, 680 (1957) (rejecting the assumption that the trial
court lacks jurisdiction over a nonresident defendant who alleg-
edly committed a tortious act within the state unless all of the
elements that combine to spell ultimate liability in tort are
present); C&K Distributors, Inc. v. Hynes, 122 Ill. App. 3d 525,
529, 461 N.E.2d 560, 563 (1984) ("Jurisdiction is authority to
hear and decide a cause. [Citation.] It does not depend upon the
correctness of the decision made and is not lost because of an
erroneous decision"). Based on Nestle's theory, any litigant
could skip Commission review and seek judicial review by alleging
that the arbitrator's decision was not authorized by statute.
Trial courts would be forced to first determine if arbitrators'
decisions were wrong in order to determine if they had jurisdic-
tion.
Nestle should be required to exhaust all administrative
remedies before pursuing judicial review. The exhaustion doc-
trine applies when an administrative agency has exclusive juris-
diction to hear an action. Board of Education of Warren Township
High School District 121 v. Warren Township High School Federa-
tion of Teachers, Local 504, 128 Ill. 2d 155, 163, 538 N.E.2d
524, 528 (1989). Courts have recognized several exceptions to
the exhaustion doctrine, and Nestle invokes three exceptions.
First, Nestle claims that the case involves undisputed facts.
See Castaneda v. Illinois Human Rights Comm'n, 132 Ill. 2d 304,
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309, 547 N.E.2d 437, 439 (1989). Second, the issue involves
statutory interpretation that falls within the expertise of the
court because the arbitrator acted outside her statutory author-
ity in seeking to continue to adjudicate a case that was finally
dismissed. See Office of the Cook County State's Attorney v.
Illinois Local Labor Relations Board, 166 Ill. 2d 296, 306, 652
N.E.2d 301, 306 (1995). Third, Nestle will suffer irreparable
harm from further administrative remedies. See Illinois Bell
Telephone Co. v. Allphin, 60 Ill. 2d 350, 358, 326 N.E.2d 737,
742 (1975).
As stated above, the case involves disputed facts.
Further, the issue does not involve statutory interpretation.
The issue revolves around the arbitrator's factual determination.
Finally, Nestle claims it would suffer irreparable harm because
it would be forced to maintain reserves, retain evidence, relo-
cate witnesses, and defend a claim that was finally dismissed.
Once again, this argument assumes the merits of Nestle's claim by
assuming the case was finally dismissed. None of the exceptions
excuse Nestle from exhausting administrative remedies.
Nestle must first exhaust its administrative remedies
by appealing to the Commission before seeking judicial review.
This will give the Commission the chance to consider the argu-
ments of the parties and make its own factual determinations and
conclusions regarding the filing of the substitution of attorney
form. The Commission may not agree with the arbitrator. If the
Commission does agree with White, Nestle will have the opportu-
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nity to present its appeal of the Commission's final decision to
the trial court.
III. CONCLUSION
For the reasons stated, we affirm the trial court's dismissal.
Affirmed.
STEIGMANN and McCULLOUGH, JJ., concur.
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