Enter. Recovery Sys. Inc v. Salmeron

• Decision Date: 04 May 2010
• Docket Number: No. 1-08-2936.,1-08-2936.
• Citation: 401 Ill.App.3d 65,927 N.E.2d 852,340 Ill.Dec. 113
• Parties: ENTERPRISE RECOVERY SYSTEMS, INC., Plaintiff-Appellee,v.Rhonda SALMERON, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

401 Ill.App.3d 65

927 N.E.2d 852

340 Ill.Dec. 113

ENTERPRISE RECOVERY SYSTEMS, INC., Plaintiff-Appellee,v.Rhonda SALMERON, Defendant-Appellant.

No. 1-08-2936.

Appellate Court of Illinois First District, Second Division.

March 31, 2010.

Rehearing Denied May 4, 2010.

COPYRIGHT MATERIAL OMITTED

The Moran Law Group, Chicago (John Thomas Moran, Jr., of counsel) and Despres, Schwartz & Geoghegan, Ltd., Chicago (Jorge Sanchez, of counsel), for Appellant.

Connelly, Roberts & McGivney, LLC, Chicago (Matthew P. Connelly and Garrett C. Carter, of counsel), for Appellee.

Presiding Justice CUNNINGHAM delivered the opinion of the court:

The defendant, Rhonda Salmeron (Salmeron), appeals from the entry of summary judgment for the plaintiff, Enterprise Recovery Systems, Incorporated (Enterprise), by the circuit court of Cook County. The circuit court awarded Enterprise $150,000 plus unspecified costs in Enterprise's lawsuit against Salmeron for fraud in the inducement and breach of her duty of loyalty to Enterprise, her former employer. On appeal, Salmeron asserts that the circuit court erred when, as a sanction for the repeated contumacious behavior of one of her lawyers, the court barred Salmeron from presenting any evidence supporting her defense or her counterclaim. Salmeron also contends that Enterprise's pleadings did not establish the elements for fraud in the inducement, and did not establish that Salmeron owed or breached a duty of loyalty to Enterprise. Finally, Salmeron contends that the circuit court erred in failing to grant her postjudgment “emergency motion” to vacate the judgment against her and dismiss the lawsuit, based on Salmeron's alleged immunity under section 15 of the Citizen Participation Act (735 ILCS 110/15 (West 2008)). We affirm the judgment of the circuit court of Cook County.

BACKGROUND

Salmeron was Enterprise's general manager and director of operations from July 12, 1998 until she was fired on July 31, 2002. Enterprise is in the business of the recovery and resolution of delinquent student loans. Enterprise also provides third-party service on loan accounts for the United States Department of Education (Department of Education). After Salmeron was fired by Enterprise, she sued Enterprise and its president, Sam Tornatore, for sexual harassment. In March of 2004, the parties settled the dispute, with Salmeron signing a general release of claims against Enterprise and Tornatore in return for the payment to her of $300,000.

The release stated in pertinent part that in consideration of the $300,000 payment, Salmeron forever discharged and released Enterprise from:

“all actions [and] * * * claims * * * relating in any way to events occurring prior to and including the date of execution of the Agreement * * * growing out of or related in any way * * * to all known and unknown * * * damages or consequences relating to [Salmeron's] employment [ by enterPrise ].” (emPHASis added.)

The money was paid to Salmeron in installments and the final payment was made on April 15, 2005.

Less than four months after that final payment was made, Salmeron brought a qui tam¹ lawsuit in federal court against Enterprise on behalf of the federal government and herself. Qui tam lawsuits typically allege that an individual or entity has defrauded the government. They are brought by a private individual on behalf of the government, although the government may choose to intervene in the action and carry the litigation forward in lieu of the individual plaintiff. In that event, the individual plaintiff is entitled to a share of any funds recovered from the wrongdoer by the government. Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 768-70, 120 S.Ct. 1858, 1860-62, 146 L.Ed.2d 836, 842-44 (2000). In paragraph one of her qui tam lawsuit, Salmeron alleged that damages and penalties assessed against Enterprise, by her estimate, would amount to over $8 million. Salmeron's complaint alleged that Enterprise had submitted false statements, false claims, and false records to the Department of Education in violation of the False Claims Amendments Act of 1986 ( 31 U.S.C. §§ 3729 through 3732 (2000)). Salmeron's complaint also stated that during her employment with Enterprise, she discovered some of these allegedly wrongful acts by Enterprise employees, although she never notified anyone at Enterprise about the wrongdoing during her employment. Salmeron subsequently added several other corporations and one individual as defendants in the qui tam lawsuit.

The qui tam lawsuit was initially dismissed because of the contumacious and dilatory conduct of one of Salmeron's lawyers, who, over a period of three years, continually failed to meet discovery deadlines and filing deadlines, and failed to appear at scheduled status conferences. The federal district court dismissed the lawsuit because of this behavior, but then reinstated the lawsuit with the admonishment to the lawyer in question that any further misbehavior would have severe consequences. The same lawyer was later revealed to have leaked, to a Web site specializing in publishing leaked documents, a confidential agreement entered into by Enterprise and two of the other defendant corporations in the pending qui tam lawsuit. The lawyer leaked this document in direct breach of a confidentiality agreement with the three corporations that were parties to the agreement. The federal district court then dismissed Salmeron's qui tam lawsuit with prejudice, ascribing the lawyer's behavior to Salmeron. That dismissal was upheld on appeal on the same basis. Salmeron v. Enterprise Recovery Systems, Inc., 579 F.3d 787 (7th Cir.2009). In its opinion, the United States Court of Appeals for the Seventh Circuit also rejected Salmeron's claim that the dismissal would harm the interests of the federal government. The federal court of appeals noted that the federal government chose not to intervene in the qui tam lawsuit, despite its statutory right to do so. Salmeron, 579 F.3d at 797-98. It is noteworthy that the federal government regularly intervenes in meritorious qui tam lawsuits.

In the qui tam lawsuit, Enterprise had filed a cross-claim against Salmeron for fraud in the inducement and breach of fiduciary duty. It also asserted an affirmative defense based on the release signed by Salmeron when she settled her sexual harassment lawsuit against Enterprise and Tornatore. The federal district court found that this defense was not “a predicate for dismissal” of Salmeron's lawsuit. However, two additional events occurred. First, at the federal district court's suggestion, Enterprise withdrew its cross-claim against Salmeron and instead filed this lawsuit in the circuit court of Cook County, making the same allegations against Salmeron as previously made in the federal case. Second, Salmeron's qui tam lawsuit was dismissed with prejudice. ²

The instant lawsuit now on appeal before us was filed by Enterprise on July 20, 2006. In the lawsuit, Enterprise alleged that Salmeron had committed fraud in the inducement against Enterprise and had breached her duty of loyalty to Enterprise. Enterprise alleged that Salmeron committed fraud by signing a general release of liability while knowing that she had uncovered evidence which purportedly showed that Enterprise had defrauded the Department of Education and which she planned to use as one basis for filing a qui tam lawsuit against Enterprise in federal court. Enterprise alleged that Salmeron had breached a duty of loyalty which she owed to Enterprise by failing to disclose to Enterprise the evidence of fraud that some Enterprise employees had defrauded the Department of Education.

Salmeron filed a five-count counterclaim against Enterprise in the circuit court lawsuit. But during the course of pretrial activities in the lawsuit, Salmeron was sanctioned because of contumacious behavior by her trial lawyer. This is the same lawyer who represented Salmeron in the qui tam lawsuit, in which his misconduct also resulted in sanctions against Salmeron. The lawyer and his law firm represented Salmeron in the circuit court lawsuit filed against her by Enterprise and, initially, on appeal before this court. ³ It was the behavior of this lawyer, as the case progressed in the circuit court of Cook County which prompted the trial court to bar Salmeron from presenting any evidence in support of her defense or her counterclaim. That lawyer repeatedly failed to answer Enterprise's discovery requests, including requests for admission, even when ordered to do so by the trial court. The lawyer also failed to appear at several hearings scheduled by the trial court. As a consequence of these cumulative actions in violation of the court's orders, and pursuant to Supreme Court Rule 219 (134 Ill.2d R. 219), the trial court barred Salmeron from presenting any evidence in support of her defense or her counterclaim. Enterprise then moved for summary judgment on both counts of its complaint. Enterprise's motion for summary judgment was supported by an affidavit of Enterprise's president, Sam Tornatore. In his affidavit, Tornatore stated that in the qui tam lawsuit, Salmeron had produced Enterprise company log reports purporting to document her claim that certain employees of Enterprise were engaged in a pattern or practice of falsifying billing to the Department of Education by claiming telephone calls and skip trace activities which had not occurred. Tornatore's affidavit stated that these log reports were the property of Enterprise and must have been stolen by Salmeron while she was employed by Enterprise. Copies of the reports were attached as exhibits to Enterprise's motion for summary judgment. Tornatore also stated that by failing to alert him to these alleged activities by Enterprise employees, Salmeron deprived Enterprise of the opportunity to stop the alleged improper activities. Tornatore further asserted that in making the full...