Harper v. Health Care Service Corp.

2023 IL App (1st) 220078Opinion filed: May 4, 2023
FIRST DISTRICT
FOURTH DIVISION
No. 1-22-0078
KATHLEEN HARPER, as a Taxpayer of the City of ) Appeal from the
Chicago, an Illinois Municipal Corporation, and as a ) Circuit Court of
Taxpayer of Cook County Illinois, an Entity of Local ) Cook County
Government, and Suing Derivatively on Behalf of the City )
of Chicago and Cook County )
)
Plaintiff-Appellant, )
)
v. ) No. 18 L 010842
)
HEALTH CARE SERVICE CORPORATION, and )
THE CITY OF CHICAGO ) Honorable
) Patrick J. Sherlock,
Defendants-Appellees, ) Judge, presiding.
)
JUSTICE ROCHFORD delivered the judgment of the court, with opinion.
Presiding Justice Lampkin and Justice Martin concurred in the judgment and opinion.
OPINION
¶1 Plaintiff, Kathleen Harper, brought a taxpayer derivative suit on behalf of the City of
Chicago (City) and Cook County, against defendant, Health Care Service Corporation (HCSC),
which administers the City’s employee health care program. Plaintiff sought the return of taxpayer
funds that the City used to pay HCSC, and she asserted various theories of recovery pursuant to
section 8-10-10 of the Illinois Municipal Code (65 ILCS 5/8-10-10 (West 2020)), section 2-92-
050 of the Chicago Municipal Code (Chicago Municipal Code § 2-92-050 (amended July 19,
2000)), article VIII of the Illinois Constitution (Ill. Const. 1970, art. VIII), section 2.5 of the
Freedom of Information Act (FOIA) (5 ILCS 140/2.5 (West 2020)), and section 22.2(f) of the
No. 1-22-0078
Medical Practice Act of 1987 (Medical Practice Act) (225 ILCS 60/22.2(f) (West 2020)). Plaintiff
amended her complaint multiple times, culminating in the fourth amended complaint containing
eight counts. The circuit court dismissed all eight counts of the fourth amended complaint pursuant
to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2020)) and, additionally,
dismissed counts VI and VIII pursuant to section 2-619 (735 ILCS 5/2-619 (West 2020)). Plaintiff
appeals the dismissal of her fourth amended complaint as well as the court’s prior order denying
her motion for partial summary judgment with respect to counts I and II of her third amended
complaint. We affirm.
¶2 Certain pertinent facts regarding the administration of the City’s employee health care plan
(the Plan) are undisputed and/or of public record and are subject to judicial notice although not
pleaded. See Kopnick v. JL Woode Management Co., 2017 IL App (1st) 152054, ¶ 26; Smyth v.
Kaspar American State Bank, 6 Ill. App. 2d 64, 76 (1955). Specifically, the Chicago City Council
(City Council) passed a resolution in 1986 establishing the procedure for the mayor to exercise
authority over the Plan, including its administration. The first step was for the mayor to approve
of each company providing hospital and medical insurance coverage for City employees. The
second step was for the mayor and the corporation counsel to approve of the policy provisions and
rates.
¶3 In 1989, the mayor issued an executive order establishing a benefits committee to review
and evaluate proposals for Plan administration services and advise the mayor thereon.
¶4 In 1994, the benefits committee recommended that HCSC, an Illinois mutual insurance
company, be retained as the Plan administrator. The mayor approved the selection of HCSC. The
City and HCSC negotiated the terms and conditions by which HCSC would administer the Plan,
and the City Council passed an appropriations ordinance allocating funding for administration of
-2-
No. 1-22-0078
the Plan. HCSC warranted that it was “ready, willing and able to perform the [administration
services] as of the effective date of [the 1994 agreement].” The term of the 1994 agreement was
stated as January 1, 1994, through December 31, 2006, with the possibility of a one-year extension,
and it contained a provision requiring HCSC to continue to administer the Plan after the
termination of the agreement until those services could be transitioned to another provider. HCSC
began administering the Plan on January 1, 1994. The mayor did not actually sign the 1994
agreement until November 2006, but the parties treated the agreement as if it related back to its
effective date of January 1, 1994. See Janowiak v. Tiesi, 402 Ill. App. 3d 997, 1003 (2010) (“Such
relation back *** contravenes no principle of law and is determined by the intent of the parties as
deduced from the instrument itself.” (Internal quotation marks omitted.)).
¶5 After the expiration of the 1994 agreement, HCSC continued to administer the Plan
pursuant to the contractual provision requiring it to do so until a new administrator was in place.
¶6 In 2008, the City Council again passed an appropriations ordinance allocating funding for
administration of the Plan, the mayor again approved the selection of HCSC as Plan administrator,
and the City and HCSC entered into an agreement for HCSC to administer the Plan beginning
January 1, 2008. The term of the 2008 agreement was from January 1, 2008, to December 31,
2016, with the possibility of a two-year extension, and it also contained the provision requiring
HCSC to continue to administer the Plan after the termination of the agreement until those services
could be transitioned to another provider. The mayor signed the 2008 agreement no earlier than
January 1, 2014, but the parties treated the agreement as if it related back to its effective date of
January 1, 2008.
¶7 Plaintiff filed her taxpayer derivative suit on October 5, 2018, purportedly acting as a
taxpayer on behalf of the City whose taxes were used to pay HCSC for its administration of the
-3-
No. 1-22-0078
Plan. In her original complaint, she alleged that as Plan administrator, HCSC contracted with
health care providers for discounted rates on providers’ services but then fraudulently billed the
City at the full, undiscounted rates.
¶8 Plaintiff subsequently filed a second amended complaint, adding a claim for breach of
fiduciary duty.
¶9 In March 2019, plaintiff filed her third amended complaint against HCSC, alleging claims
for fraud, breach of fiduciary duty, fraudulent misrepresentation, negligent misrepresentation,
constructive fraud, breach of contract, and equitable accounting. This complaint also named Cook
County as a nominal plaintiff and real party in interest and the City as a nominal defendant. HCSC
moved to dismiss. Following briefing on the motion, plaintiff voluntarily dismissed Cook County
as a real party in interest. The circuit court then dismissed plaintiff’s claims against HCSC for
breach of fiduciary duty and constructive fraud, allowing plaintiff’s other claims to proceed.
¶ 10 After the completion of written discovery, plaintiff moved for partial summary judgment
on counts I and II of the third amended complaint on the theory that the 2008 agreement was void
under section 8-10-10 of the Illinois Municipal Code (65 ILCS 5/8-10-10 (West 2018)) and section
2-92-050 of the Chicago Municipal Code (Chicago Municipal Code § 2-92-050 (amended July 19,
2000)) because it was signed by the mayor years after its effective date. Plaintiff argued that
because HCSC had no valid contract with the City from 2008 to 2014, it must return all taxpayer
funds it received from the City for those years. The circuit court denied plaintiff’s motion for
partial summary judgment, concluding that “[t]his theory is nowhere to be found in the operative
complaint.” The circuit court further concluded that even if that theory had been properly pleaded,
plaintiff still was not entitled to summary judgment because neither section 8-10-10 of the Illinois
-4-
No. 1-22-0078
Municipal Code nor section 2-92-050 of the Chicago Municipal Code applied to the 2008
agreement.
¶ 11 Plaintiff then filed her fourth amended taxpayer derivative action on September 2, 2021,
against HCSC. Count I was brought pursuant to sections 8-10-10 and 8-10-21 of the Illinois
Municipal Code. Section 8-10-10 states:
“Every contract involving amounts in excess of $10,000 shall be signed by the mayor or
his duly designated agent, by the comptroller and by the purchasing agent, respectively, of
such municipality.” 65 ILCS 5/8-10-10 (West 2020).
¶ 12 Section 8-10-21 states:
“Any purchase order or contract executed in violation of this Division 10 shall be null and
void as to the municipality and if public funds shall have been expended thereupon the
amount thereof may be recovered in the name of the municipality in an appropriate action
instituted therefor.” Id. § 8-10-21.
¶ 13 Plaintiff alleged that the 1994 and 2008 agreements between HCSC and the City involved
amounts in excess of $10,000 and that each of those agreements are null and void under sections
8-10-10 and 8-10-21 of the Illinois Municipal Code because they were not timely signed by the
mayor, comptroller, and purchasing agent prior to or on their effective dates. Plaintiff further
alleged that HCSC “currently fails to have a valid contract for the provision of its services signed
by the mayor, the comptroller, and purchasing agent from December 31, 2018, until the present
day.” Plaintiff sought the return of all taxpayer funds paid to HCSC by the City.
¶ 14 Count II was brought pursuant to section 2-92-050 of the Chicago Municipal Code, which
states:
-5-
No. 1-22-0078
“No contract shall be binding upon the city, nor shall any work contracted for be
commenced, or any materials or supplies be delivered thereunder, until the contract, in the
requisite number of copies, has been duly executed.” Chicago Municipal Code § 2-92-050
(amended July 19, 2000).
¶ 15 Plaintiff alleged that the mayor, comptroller, and purchasing agent’s failure to timely sign
the 1994 and 2008 agreements prior to or on their effective dates, as required by section 8-10-10
of the Illinois Municipal Code, means that neither agreement was properly executed and therefore
was not binding on the City under section 2-92-050 of the Chicago Municipal Code. Plaintiff also
alleged the absence of any signed, duly executed agreement between HCSC and the City from
December 31, 2018, to the present day. Accordingly, plaintiff sought recovery of all taxpayer funds
paid to HCSC by the City.
¶ 16 Count III alleged that HCSC has negotiated contracts with health care providers pursuant
to which the providers share or split their professional fees, styled as a rebate, with HCSC in
exchange for being included in HCSC’s network of providers. At the end of each year, HCSC
performs a “true-up,” through which a portion of the rebates that HCSC receives from health care
providers are shared with the City. Plaintiff alleged that HCSC’s sharing of fees/rebates with health
care providers and passing a portion of those rebates onto the City is illegal under the Medical
Practice Act, which states:
“[A] licensee under this Act may not divide, share or split a professional service fee with,
or otherwise directly or indirectly pay a percentage of the licensee’s professional service
fees, revenues or profits to anyone for: (i) the marketing or management of the licensee’s
practice, (ii) including the licensee or the licensee’s practice on any preferred provider list,
(iii) allowing the licensee to participate in any network of health care providers,
-6-
No. 1-22-0078
(iv) negotiating fees, charges or terms of service or payment on behalf of the licensee, or
(v) including the licensee in a program whereby patients or beneficiaries are provided an
incentive to use the services of the licensee.” 225 ILCS 60/22.2(f) (West 2020).
¶ 17 Count IV sought a declaratory judgment that “HCSC’s sharing of rebates with medical
providers and passing those rebates onto the City is unlawful pursuant to the Medical Practice Act
of 1987.”
¶ 18 Count V alleged that HCSC was unjustly enriched “by being paid taxpayer funds while its
agreements with the City were void pursuant to Illinois law” and sought the return of all such
funds.
¶ 19 Count VI alleged that HCSC violated the FOIA by requiring the City to maintain the
confidentiality of the 1994 and 2008 agreements, thereby rendering those agreements illegal. The
City’s payment of taxpayer funds to HCSC pursuant to the illegal agreements is in contravention
of section 1(b) of article VIII of the Illinois Constitution, which states: “The State, units of local
government and school districts shall incur obligations for payment or make payments from public
funds only as authorized by law or ordinance.” Ill. Const. 1970, art. VIII, § 1(b). Plaintiff sought
the return of all taxpayer funds paid by the City to HCSC, as well as a judgment requiring HCSC
to publicly disclose the 1994 and 2008 agreements.
¶ 20 Count VII alleged that the 1994 and 2008 agreements were void ab initio for all the reasons
stated in counts I through VI.
¶ 21 Count VIII alleged that the 1994 and 2008 agreements violated the so-called “prior
appropriations doctrine.” Plaintiff pleaded that the amount to be paid a vendor of the City must be
specific and identify the vendor and the annual costs of the services provided, and those costs must
receive prior appropriations on an annual basis prior to the expenditure of any funds. Where
-7-
No. 1-22-0078
amounts are paid to a vendor under a contract without a valid appropriation, “the contract is void
and any funds paid to that vendor must be returned to the City.” Plaintiff further pleaded that the
City and HCSC never complied with the prior appropriations doctrine “in that the actual yearly
fees taken by HCSC to administer the City’s health plan were never fully disclosed and approved
prior to the providing of services.” Accordingly, plaintiff sought the return of any taxpayer monies
paid to HCSC for administration of the Plan under the 1994 and 2008 agreements.
¶ 22 HCSC filed a section 2-619.1 (735 ILCS 5/2-619.1 (West 2020)) motion to dismiss
plaintiff’s fourth amended complaint pursuant to sections 2-615 and 2-619 of the Code of Civil
Procedure. With respect to the section 2-615 motion, HCSC argued that each of the eight counts
failed to state a cause of action.
¶ 23 The section 2-619 motion was targeted at only counts VI and VIII, which had alleged that
the City failed to properly authorize the payment of taxpayer funds to HCSC for the administration
of the Plan. HCSC argued that the City appropriated the funds in its annual budget ordinances and
in support HCSC attached the City’s answer to plaintiff’s interrogatories, which stated:
“[T]he City appropriates monies to certain funds from which the City compensates HCSC
under the [1994 and 2008 agreements]. These funds include 0029, 0042, 0043, 0052, and
0056. The City’s annual appropriations ordinances identify City appropriations to these
funds.”
¶ 24 The circuit court dismissed all eight counts pursuant to section 2-615 and, additionally,
dismissed counts VI and VIII pursuant to section 2-619. Plaintiff appeals.
¶ 25 First we address the dismissal of all eight counts of plaintiff’s fourth amended complaint
pursuant to section 2-615. A section 2-615 motion challenges the legal sufficiency of the complaint
based on defects apparent on its face. Ledeaux v. Motorola, Inc., 2018 IL App (1st) 161345, ¶ 14.
-8-
No. 1-22-0078
The court accepts as true all well-pleaded facts, as well as any reasonable inferences flowing from
those facts. Id. Conclusions of law and conclusory factual allegations unsupported by specific facts
are not deemed admitted. Village of South Elgin v. Waste Management of Illinois, Inc., 348 Ill.
App. 3d 929, 930-31 (2004).
¶ 26 The critical inquiry is whether the allegations of the complaint, considered in the light most
favorable to plaintiff, are sufficient to state a cause of action upon which relief can be granted.
Board of Directors of Bloomfield Club Recreation Ass’n v. The Hoffman Group, Inc., 186 Ill. 2d
419, 424 (1999). A court should not dismiss a cause of action under section 2-615 unless the
pleadings clearly show that no set of facts can be proven that would entitle plaintiff to recover. Id.In ruling on a section 2-615 motion, the court considers only those facts apparent from the face of
the pleadings, matters subject to judicial notice, and judicial admissions in the record. Reynolds v.
Jimmy John’s Enterprises, LLC, 2013 IL App (4th) 120139, ¶ 25. Our review of a dismissal is
de novo. Id.¶ 27 Plaintiff contends that the circuit court erred by dismissing count I of her fourth amended
complaint, which alleged that the mayor, comptroller, and purchasing agent’s delay in signing the
1994 and 2008 agreements until years after their effective dates violated section 8-10-10 of the
Illinois Municipal Code, rendering each of those agreements null and void under section 8-10-21.
Plaintiff requests the return of all taxpayer monies that the City paid to HCSC under the void 1994
and 2008 agreements. Defendants counter that, as a home rule entity, the City was authorized to
determine its own methods for making and performing its agreements with HCSC, including
signing the agreements after their effective dates and giving them retrospective effect, as well as
providing for HCSC’s continuation of its administration of the Plan after termination of the
-9-
No. 1-22-0078
agreements. The City was not required to comply with section 8-10-10 of the Illinois Municipal
Code.
¶ 28 Section 6(a) of article VII of the Illinois Constitution contains the general grant of home
rule power, providing in relevant part: “Except as limited by this Section, a home rule unit may
exercise any power and perform any function pertaining to its government and affairs ***.” Ill.
Const. 1970, art. VII, § 6(a). An exercise of power pertains to the home rule unit’s government
and affairs when it relates to problems that are local in nature, rather than state or national. DMS
Pharmaceutical Group v. County of Cook, 345 Ill. App. 3d 430, 439-40 (2003). Section 6(a) was
drafted with the intention of giving home rule units the broadest possible powers under the
constitution. City of Chicago v. StubHub, Inc., 2011 IL 111127, ¶ 18. Additionally, section 6(m)
states that “[p]owers and functions of home rule units shall be construed liberally.” Ill. Const.
1970, art. VII, § 6(m).
¶ 29 The powers of home rule units are not boundless; under the Illinois Constitution, the
legislature retains the authority to restrict the exercise of virtually all home rule powers. American
Health Care Providers, Inc. v. County of Cook, 265 Ill. App. 3d 919, 927 (1994). Section 6(h)
states that the General Assembly may “provide specifically by law for the exclusive exercise by
the State of any power or function of a home rule unit.” Ill. Const. 1970, art. VII, § 6(h). Section
6(i) states: “Home rule units may exercise and perform concurrently with the State any power or
function of a home rule unit to the extent that the General Assembly by law does not specifically
limit the concurrent exercise or specifically declare the State’s exercise to be exclusive.” Id. § 6(i).
The General Assembly has codified these principles in section 7 of the Statute of Statutes (5 ILCS
70/7 (West 2020)), which states:
-10-
No. 1-22-0078
“No law enacted after January 12, 1977, denies or limits any power or function of a home
rule unit, pursuant to paragraphs (g), (h), (i), (j), or (k) of Section 6 of Article VII of the
Illinois Constitution, unless there is specific language limiting or denying the power or
function and the language specifically sets forth in what manner and to what extent it is a
limitation on or denial of the power or function of a home rule unit.”
¶ 30 In the instant case, the City has a population in excess of 25,000 and therefore is a home
rule unit under the Illinois Constitution. See Ill. Const. 1970, art. VII, § 6(a) (defining home rule
units as municipalities with populations in excess of 25,000); Messina v. City of Chicago, 145 Ill.
App. 3d 549, 552 (1986). The City’s power to contract with HCSC to administer the Plan is within
its home rule authority. See American Health Care Providers, 265 Ill. App. 3d at 926 (“the method
by which a home rule unit procures its contracts is a matter pertaining to its government and
affairs” and thus falls within the general grant of home rule power as set forth in section 6(a) of
article VII). Plaintiff has not pleaded that the General Assembly passed any legislation specifically
limiting the City’s ability to contract for and administer health care coverage for its employees.
Absent any such express statutory limitation or preemption, the City was free to exercise its home
rule authority in that regard without being bound by the requirements of section 8-10-10 of the
Illinois Municipal Code, including signing the contracts after their effective dates and giving them
retrospective effect and providing for HCSC’s continuation of services in between contracts.
Accordingly, count I of plaintiff’s fourth amended complaint failed to state a cause of action for
the recovery of public funds under the Illinois Municipal Code.
¶ 31 Plaintiff argues, though, that under section 7 of the Statute on Statutes, the requirement that
a statute must expressly limit or deny home rule authority in order to restrict the City’s exercise of
home rule powers only applies to legislation passed “after January 12, 1977” (5 ILCS 70/7 (West
-11-
No. 1-22-0078
2020)), and that the City must comply with any legislation passed prior thereto. Section 8-10-10
of the Illinois Municipal Code was passed in 1961, and therefore plaintiff contends that the City
must comply with its requirements when contracting for the administration of the Plan. Plaintiff’s
argument fails, as our supreme court has repeatedly held that a home rule unit’s exercise of its
power supersedes any conflicting pre-1970-Constitution legislation (Sommer v. Village of
Glenview, 79 Ill. 2d 383, 392 (1980) (and cases cited therein)), which includes section 8-10-10 of
the Illinois Municipal Code.
¶ 32 Plaintiff also argues that under section 6 of article VII of the Illinois Constitution, the City’s
exercise of its home rule powers in this instance is conditioned on its passage of an ordinance
overriding section 8-10-10 of the Illinois Municipal Code. Plaintiff argues that the City failed to
so exercise its home rule authority by passing the requisite ordinance, meaning that section 8-10-
10 of the Illinois Municipal Code remained in effect when the City executed the 1994 and 2008
agreements with HCSC for the administration of the Plan. Plaintiff contends that the City’s failure
to comply with section 8-10-10 of the Illinois Municipal Code voids the 1994 and 2008 agreements
with HCSC and necessitates the return of all taxpayer monies paid by the City to HCSC.
¶ 33 Plaintiff’s argument is without merit. When interpreting the 1970 Constitution, we
ascertain the plain and ordinary meaning of the relevant constitutional provisions in the
constitutional contexts in which they appear. Cook v. Illinois State Board of Elections, 2016 IL
App (4th) 160160, ¶ 18. We read the constitutional provisions according to the most natural and
obvious meaning of the language to avoid eliminating or extending its operation. Id. We may not
add requirements or impose limitations inconsistent with the provision’s plain meaning. Id.¶ 34 On its plain terms, section 6 of article VII does not condition the exercise of home rule
authority on the passage of an ordinance, and we decline to add such a requirement to the
-12-
No. 1-22-0078
constitutional provision. Our holding is in line with the weight of relevant authority. See Sommer,
79 Ill. 2d at 392-93 (exercise of home rule authority did not require the adoption of an ordinance);
Beneficial Development Corp. v. City of Highland Park, 161 Ill. 2d 321, 330 (1994) (a municipality
“need not enact an ordinance to execute its home rule power”); Station Place Townhouse
Condominium Ass’n v. Village of Glenview, 2022 IL App (1st) 211131, ¶ 39 (“A municipality is
not required to enact an ordinance in order to execute its home rule powers.”).
¶ 35 The cases cited by plaintiff, City of Belleville v. Illinois Fraternal Order of Police Labor
Council, 312 Ill. App. 3d 561 (2000), and Nielsen-Massey Vanillas, Inc. v. City of Waukegan, 276
Ill. App. 3d 146 (1995), are factually inapposite. In City of Belleville and Nielsen-Massey, the
respective plaintiffs sought to bind the cities to contracts never formally approved by them. See
Belleville, 312 Ill. App. 3d at 562 (plaintiff attempted to bind the City of Belleville to an addendum
to a police-employee collective bargaining agreement signed by the outgoing mayor after he was
defeated for reelection, which he neglected to submit to the city council and for which no
appropriation of funds was passed); Nielsen-Massey, 276 Ill. App. 3d at 149-50 (plaintiff attempted
to bind the City of Waukegan to a loan agreement made by the director of economic development,
who had no such authority to agree to the loan). In both cases, the respective cities disavowed the
contracts and never performed them. The appellate court held in each case that in the absence of
the passage of an ordinance binding the cities to the contracts, they were null and void. Belleville,
312 Ill. App. 3d at 566; Nielsen-Massey, 276 Ill. App. 3d at 152-53.
¶ 36 In the present case, by contrast, the 1994 and 2008 agreements underwent the City’s formal
review process and both parties operated under them. Specifically, the City Council passed a
resolution in 1986 authorizing the mayor to approve the City health care plan. The mayor issued
an executive order establishing a benefits management office and benefits committee within the
-13-
No. 1-22-0078
Department of Finance to review and evaluate proposals for Plan administration services. The
benefits committee evaluated several providers and recommended HCSC as the Plan
administrator. The mayor approved of the recommendation, and the City entered into a contractual
relationship with HCSC and each side performed its duties under the respective 1994 and 2008
agreements. The City Council has passed annual ordinances appropriating funds and authorizing
payments to HCSC to continue the City’s group coverage. On these facts, there is no similarity
between the present case and Belleville and Nielsen-Massey.
¶ 37 Next, plaintiff contends that the circuit court erred by dismissing count II of her fourth
amended complaint under section 2-92-050 of the Chicago Municipal Code, which states that no
contract is binding on the City unless it has been “duly executed.” Chicago Municipal Code § 2-
92-050 (amended July 19, 2000). Count II alleged that the 1994 and 2008 agreements were not
duly executed under section 8-10-10 of the Illinois Municipal Code as they were not timely signed
by the mayor, comptroller, and purchasing agent prior to or on their effective dates, and, as such,
that they are not binding on the City under section 2-92-050.
¶ 38 Plaintiff’s argument is without merit because it is premised on the proposition that the City
was bound to follow section 8-10-10 of the Illinois Municipal Code when executing the 1994 and
2008 agreements and that its failure to do so nullifies those agreements under section 2-92-050.
However, as we discussed earlier in this opinion, plaintiff did not adequately plead the applicability
of section 8-10-10 of the Illinois Municipal Code to a home rule unit such as the City here. As a
home rule unit, the City was not required to follow section 8-10-10 of the Illinois Municipal Code
in this instance where it passed its own resolution and established its own procedures for executing
the 1994 and 2008 agreements, including signing the respective agreements after their effective
dates and giving them retrospective effect. The City “duly executed” the agreements pursuant to
-14-
No. 1-22-0078
the procedures it established in accordance with its home rule authority, and therefore plaintiff
failed to state a cause of action for a violation of section 2-92-050.
¶ 39 Next, plaintiff argues that the circuit court erred by dismissing counts III and IV of her
fourth amended complaint, which alleged that HCSC’s negotiation of reduced fees from its third-
party medical providers violated the Medical Practice Act. The Medical Practice Act prohibits
“licensees,” i.e., physicians, from sharing or splitting their professional fees with HCSC in
exchange for being included in HCSC’s network of providers.
¶ 40 A party has standing to bring a taxpayer derivative action only to redress an injury or harm
to the City. Scachitti v. UBS Financial Services, 215 Ill. 2d 484, 500 (2005). Far from redressing
any injury to the City, the successful prosecution of counts III and IV of plaintiff’s taxpayer
derivative action would harm the City by preventing HCSC from negotiating reduced fees from
its medical providers and then passing on some or all of those savings to the City. Accordingly,
we affirm the dismissal of counts III and IV for lack of standing. See Mercado v. S&C Electric
Co., 2023 IL App (1st) 220020, ¶ 25 (we may affirm the circuit court’s ruling on any basis in the
record, regardless of the court’s reasoning).
¶ 41 Even if plaintiff had standing to bring her cause of action, we would affirm the dismissal
because plaintiff has failed to specifically plead that the providers with whom HCSC negotiates
contracts are licensees subject to the Medical Practice Act. In fact, some of the providers about
which plaintiff complains are pharmacists, who are licensed under the Pharmacy Practice Act (225
ILCS 85/1 et seq. (West 2020)) and not the Medical Practice Act. Plaintiff’s failure to adequately
plead the licensure requirement necessitates dismissal of her cause of action.
¶ 42 Next, plaintiff contends that the circuit court erred by dismissing count V of her fourth
amended complaint, which alleged that HCSC was unjustly enriched by being paid taxpayer funds
-15-
No. 1-22-0078
while its 1994 and 2008 agreements with the City were void under sections 8-10-10 and 8-10-21
of the Illinois Municipal Code. As we have discussed, plaintiff failed to adequately plead that the
1994 and 2008 agreements were subject to the requirements of sections 8-10-10 and 8-10-21 of
the Illinois Municipal Code. Instead, those agreements were proper exercises of the City’s home
rule authority and, as such, were valid and enforceable contracts. Unjust enrichment is based on
an implied contract and does not apply where, as here, express contracts governed the relationship
of the parties. Gagnon v. Schickel, 2012 IL App (1st) 120645, ¶ 25. Accordingly, count V failed
to state a cause of action.
¶ 43 Next, plaintiff contends that the circuit court erred by dismissing count VI of her fourth
amended complaint. Count VI pleaded that the 1994 and 2008 agreements are public records that
were not made available for inspection as required by section 2.5 of the FOIA, which “implements”
section 1(c) of article VIII of the Illinois Constitution. Section 2.5 of the FOIA states: “All records
relating to the obligation, receipt, and use of public funds of the State, units of local government,
and school districts are public records subject to inspection and copying by the public.” 5 ILCS
140/2.5 (West 2020).
¶ 44 Count VI further alleged that HCSC’s failure to make the agreements available for public
inspection under the FOIA renders them unauthorized by law and invalidates the City’s payment
of taxpayer funds to HCSC under section 1(b) of article VIII of the Illinois Constitution. Section
1(b) states, “The State, units of local government and school districts shall incur obligations for
payment or make payments from public funds only as authorized by law or ordinance.” Ill. Const.
1970, art. VIII, § 1(b).
¶ 45 Plaintiff’s argument is premised on the allegation that HCSC is subject to the FOIA and
that its failure to comply with the FOIA’s disclosure requirements renders the 1994 and 2008
-16-
No. 1-22-0078
agreements to be “unauthorized.” However, a suit for the failure to disclose public records may
only be made against a “public body.” See Better Government Ass’n v. Illinois High School Ass’n,
2017 IL 121124, ¶ 23. The FOIA defines “public body” as:
“all legislative, executive, administrative, or advisory bodies of the State, state universities
and colleges, counties, townships, cities, villages, incorporated towns, school districts and
all other municipal corporations, boards, bureaus, committees, or commissions of this
State, any subsidiary bodies of any of the foregoing including but not limited to committees
and subcommittees thereof, and a School Finance Authority created under Article 1E of
the School Code.” 5 ILCS 140/2 (West 2020).
¶ 46 As a mutual insurance company, HCSC is not a “public body” subject to the FOIA.
¶ 47 Also, a formal request for public records is a prerequisite to bringing a suit under the FOIA.
See id. § 3(b); Ballew v. Chicago Police Department, 2022 IL App (1st) 210715, ¶ 17. Plaintiff
does not allege that she ever made a request for public records and thus her claim, premised as it
is on a violation of the FOIA, fails to state a cause of action.
¶ 48 Next, plaintiff argues that the circuit court erred by dismissing count VIII, 1 which alleged
that HCSC and the City failed to comply with the so-called “prior appropriations doctrine.”
Specifically, plaintiff pleaded that the prior appropriations doctrine was violated by the City’s
failure to identify HCSC, as well as the annual cost of HCSC’s services, in its annual
appropriations ordinances and by its failure to fully disclose and approve HCSC’s fees before
HCSC began performing under the 1994 and 2008 agreements.
1
Plaintiff makes no argument that the circuit court erred by dismissing count VII and accordingly
has forfeited any review thereof. Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020).
-17-
No. 1-22-0078
¶ 49 Plaintiff cited no statutory provisions or constitutional law in support of her invocation of
the prior appropriations doctrine in count VIII and thus she failed to reasonably inform defendants
of the nature of the claim that they were called upon to meet. Accordingly, dismissal under section
2-615 was appropriate. See Winfrey v. Chicago Park District, 274 Ill. App. 3d 939, 943 (1995).
¶ 50 For the first time on appeal, plaintiff invokes section 1(b) of article VIII of the Illinois
Constitution (Ill. Const. 1970, art. VIII, § 1(b)) and section 8-1-7 of the Illinois Municipal Code
(65 ILCS 5/8-1-7 (West 2020)) in support of her claim that defendants violated the prior
appropriations doctrine. Section 1(b) of article VIII requires that units of local government shall
make payments from public funds “only as authorized by law.” Ill. Const. 1970, art. VIII, § 1(b).
Section 8-1-7 of the Illinois Municipal Code provides that a municipality shall incur no expense
unless “an appropriation has been previously made concerning” that expense. 65 ILCS 5/8-1-7(a)
(West 2020). Plaintiff’s fourth amended complaint references section 1(b) of article VIII only in
passing in a single paragraph in count VI, unrelated to any invocation of the prior appropriations
doctrine, and it never cites or references section 8-1-7 of the Illinois Municipal Code. As plaintiff’s
fourth amended complaint did not allege her theory that defendants violated the prior
appropriations doctrine by failing to comply with section 1(b) of article VIII of the Illinois
Constitution and with section 8-1-7 of the Illinois Municipal Code, she forfeited review thereof.
See Keefe-Shea Joint Venture v. City of Evanston, 332 Ill. App. 3d 163, 170 (2002) (a party forfeits
review of a theory not contained in the complaint).
¶ 51 Further, as discussed earlier in this opinion, the City’s power to contract with HCSC to
administer the Plan is within its home rule authority. Plaintiff has not pleaded that the General
Assembly passed any legislation specifically limiting the City’s ability to contract for and
administer health care coverage for its employees. Absent any such express statutory limitation or
-18-
No. 1-22-0078
preemption, the City was free to exercise its home rule authority in that regard without being bound
by the requirements of section 8-1-7 of the Illinois Municipal Code. See City of Burbank v. Illinois
State Labor Relations Board, 185 Ill. App. 3d 997, 1004-05 (1989). Thus, plaintiff’s argument that
she stated a claim under section 8-1-7 fails as a matter of law, and we affirm the dismissal of count
VIII under section 2-615.
¶ 52 In the alternative, even if count VIII had stated a cause of action for violation of the prior
appropriations doctrine, we would affirm the circuit court’s dismissal of it under section 2-619. A
section 2-619 motion asserts affirmative matter outside the complaint that defeats the cause of
action. Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 361 (2009). Once defendant satisfies its
burden of going forward on the section 2-619 motion by presenting affirmative matter in support
thereof, the burden shifts to plaintiff, who must show that the affirmative defense is unfounded or
requires resolution of an essential element of material fact. Epstein v. Chicago Board of Education,
178 Ill. 2d 370, 383 (1997). Plaintiff may establish this by presenting “ ‘affidavits or other proof.’ ”
Id. (quoting 735 ILCS 5/2-619(c) (West 1992)).
¶ 53 In its section 2-619 motion, HCSC argued that contrary to plaintiff’s allegations in count
VIII, all payments that the City made to HCSC were authorized in its annual budget as part of its
appropriation for employee health care. In support, HCSC attached the City’s answer to plaintiff’s
interrogatories, in which the City explained how its annual appropriations ordinances appropriate
monies to specific funds that are used to pay HCSC for its administration of the Plan. As HCSC
satisfied its initial burden of going forward on the section 2-619 motion to dismiss, the burden then
shifted to plaintiff to present affidavits or other proof showing that the affirmative defense was
unfounded or required the resolution of an essential element of material fact. Plaintiff failed to
-19-
No. 1-22-0078
present any such evidence. Accordingly, we affirm the circuit court’s section 2-619 dismissal of
count VIII.
¶ 54 Next, plaintiff argues that the circuit court erred by denying her motion for partial summary
judgment on counts I and II of her third amended complaint. Defendants argue that we lack
jurisdiction to consider this issue because the denial of a summary judgment motion generally is
not final and appealable. See In re Estate of Funk, 221 Ill. 2d 30, 85 (2006). Defendants also argue
that plaintiff abandoned any claim of error by filing the fourth amended complaint and failing to
renew the summary judgment motion. See Tunca v. Painter, 2012 IL App (1st) 093384, ¶ 29 (a
party who files an amended pleading forfeits any objections to the circuit court’s ruling on prior
complaints). Plaintiff counters that in Clark v. Children’s Memorial Hospital, 2011 IL 108656,
¶¶ 117-20, our supreme court found that it had jurisdiction to consider the denial of defendant’s
motion for summary judgment on the first amended complaint, where the subsequent dismissal
order of the third amended complaint was final and appealable and no trial or hearing had been
conducted.
¶ 55 Given that the procedural posture of the instant case is similar to Clark, we agree with
plaintiff that the denial of the summary judgment motion may be reviewed on appeal. However,
the arguments plaintiff makes for reversal of the summary judgment order are the same as the ones
she makes for reversal of the dismissal order. For the reasons already discussed, we reject
plaintiff’s arguments and affirm the denial of the summary judgment motion.
¶ 56 For all the foregoing reasons, we affirm the circuit court. As a result of our disposition of
this case, we need not address defendants’ other arguments on appeal.
¶ 57 Affirmed.
-20-
No. 1-22-0078
Harper v. Health Care Service Corp., 2023 IL App (1st) 220078Decision Under Review: Appeal from the Circuit Court of Cook County, No. 18-L-010842;
the Hon. Patrick J. Sherlock, Judge, presiding.
Attorneys Stephen W. Heil, of Cray Huber Horstman Heil & VanAusdal
for LLC, of Chicago, and Iana A. Vladimirova and Scott Helfand, of
Appellant: Husch Blackwell LLP, of Madison, Wisconsin, for appellant.
Attorneys Steven F. Molo, Megan Cunniff Church, and Pamela I. Yaacoub,
for of MoloLamken LLP, of Chicago, for appellee Health Care
Appellee: Service Corporation.
Celia Meza, Corporation Counsel, of Chicago (Myriam Zreczny
Kasper, Suzanne Loose, Alexandra Weiss, and Tara D. Kennedy,
Assistant Corporation Counsel, of counsel), for other appellee.
-21-