Hillenbrand v. Meyer Medical Group, SC, 1-98-4433.

• Decision Date: 21 October 1999
• Docket Number: No. 1-98-4433.,1-98-4433.
• Citation: 241 Ill.Dec. 832,720 N.E.2d 287,308 Ill. App.3d 381
• Parties: Carmen HILLENBRAND and James Uzzell, Plaintiffs-Appellants, v. MEYER MEDICAL GROUP, S.C., and Health Cost Controls of Illinois, Inc., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

720 N.E.2d 287

308 Ill. App.3d 381

241 Ill.Dec. 832

Carmen HILLENBRAND and James Uzzell, Plaintiffs-Appellants, v. MEYER MEDICAL GROUP, S.C., and Health Cost Controls of Illinois, Inc., Defendants-Appellees.

No. 1-98-4433.

Appellate Court of Illinois, First District, Fourth Division.

October 21, 1999.

Rehearing Denied November 19, 1999.

Edelman & Combs, Chicago (Daniel A. Feldman, James O. Latturner & Tara L. Goodwin, of counsel), for Appellants.

Belofsky & Belofsky, Chicago (David A. Belofsky, Douglas M. Belofsky & Lance R. Minor, of counsel), for Health Cost Controls.

Winston & Strawn, Chicago (Kimball R. Anderson & E. King Poor, of counsel), for Meyer Medical Group.

Presiding Justice HOFFMAN delivered the opinion of the court:

The plaintiffs, Carmen Hillenbrand and James Uzzell, appeal the trial court's entry of summary judgment in favor of the defendants, Meyer Medical Group, S.C., (n/k/a Chicago Health System, Inc.) (Meyer) and Health Cost Controls of Illinois, Inc. (HCC). For the reasons which follow, we reverse and remand for further proceedings.

The facts giving rise to the instant litigation are simple. Hillenbrand, as a federal employee, received comprehensive health care benefits under the Federal Employees Health Benefits Act (FEHBA) (5 U.S.C. § 8901 et seq. (1994)). The United States Office of Personnel and Management, responsible for administering the benefits, contracted with Chicago HMO (n/k/a United Healthcare of Illinois, Inc.) to provide the benefits in question. Chicago HMO, in turn, contracted with certain medical groups, including Meyer, to render the medical services to the plan beneficiaries.

In February 1991, Hillenbrand was injured in an accident and received medical services from Meyer. In February 1992, Meyer sent Hillenbrand a notice of a physician's lien in the amount of $1,779.64, the value of the medical services it provided to her. In April 1992, Meyer's agent, HCC, sent Uzzell, an attorney Hillenbrand had retained in connection with the accident in which she was injured, notice of a physician's lien in the same amount. The lien asserted that Meyer was entitled to "complete reimbursement of those benefits [which Meyer provided] out of any settlement or judgment received". In July 1992, Uzzell negotiated a $6,744 settlement of Hillenbrand's tort claim arising from her accident. The settling party issued two checks, one in the amount of $4,964.36 payable to Hillenbrand and Uzzell, and a second in the amount of $1,779.64 made payable to Hillenbrand, Uzzell, and HCC. Hillenbrand and Uzzell did not endorse the latter check and, instead, instituted this action.

The second amended complaint filed in this case by Hillenbrand and Uzzell against Chicago HMO, Meyer, and HCC purports to be a four-count class action. Counts I, III, and IV asserted causes of action for unjust enrichment, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1998)), and common law fraud, respectively. Each of these counts was based on the theory that Meyer was not authorized to assert a physician's lien against Hillenbrand's settlement. Count II of the complaint asserted a cause of action for unjust enrichment based on the refusal of Meyer and HCC to pay a proportionate share of the attorney fees Hillenbrand had incurred in negotiating the settlement. The second amended complaint alleged that it was brought on behalf of two classes. Hillenbrand purportedly represented the first class, which consisted of "all persons (a) to whom the defendants have provided or will in the future provide medical services, (b) as a result of injuries inflicted under circumstances where the patient has a claim against a third party, (c) which claim was or will be resolved at any time beginning five years next before the bringing of this action." The second class, purportedly represented by Uzzell, consisted of all attorneys representing members of the first class in connection with their tort claims against third parties.

On August 2, 1993, Meyer and HCC filed a joint motion to dismiss the second amended complaint pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1998)). Chicago HMO filed a separate section 2-615 motion on October 4, 1993. On June 1, 1994, the trial court granted Chicago HMO's motion to dismiss on the basis that it had not filed a lien against or sought to recover any portion of Hillenbrand's settlement and had not assigned any rights to do so, but the court denied the motion filed by Meyer and HCC. On October 28, 1994, the plaintiffs filed a motion for class certification. Thereafter, Meyer and HCC each filed a motion for summary judgment and a memorandum in opposition to the motion for class certification. On June 14, 1995, the trial court entered an order stating that it would rule on the defendants' motions for summary judgment prior to ruling on the plaintiffs' motion for certification. The trial court subsequently granted summary judgment in favor of Meyer and HCC, finding that the plaintiffs' claims were preempted under section 8902(m)(1) of FEHBA (5 U.S.C. § 8902(m)(1) (1996)). The plaintiffs appealed, and this court reversed the trial court's entry of summary judgment and remanded the case for further proceedings. Specifically, we found that the trial court's consideration of the preemption issue was premature because there was a question of fact as to whether the service agreement between Meyer and Chicago HMO authorized Meyer to assert a physician's lien against Hillenbrand's settlement. Hillenbrand v. Meyer Medical Group, S.C., 288 Ill.App.3d 871, 224 Ill.Dec. 540, 682 N.E.2d 101 (1997).

Following remand to the trial court, Chicago HMO and Meyer amended their service agreement, clarifying that the agreement did in fact give Meyer the right of reimbursement from third-party recoveries. Meyer then moved for summary judgment as to counts I, III, and IV of the second amended complaint. On February 24, 1998, a "stipulated dismissal" of those counts was entered. This left remaining only count II, which alleged that Meyer and HCC would be unjustly enriched if they were not required to pay a proportionate share of the attorney fees Hillenbrand incurred in negotiating the settlement.

On August 24, 1998, Meyer sent the plaintiffs' counsel a letter offering to:

"resolve this case as to the existing plaintiffs by giving Mr. Uzzell the relief he seeks; namely, one-third of the amount that should be reimbursed to [Meyer] under the plan ($1,779.64), that is, $593.21 ($1,779.64/3 = $593.21), plus reasonable interest."

The plaintiffs did not respond to the tender of payment. On September 4, 1998, Meyer filed a motion for summary judgment arguing that: (1) as a result of Meyer's tender of payment, the plaintiffs' remaining claim was moot, leaving them without standing to represent the purported class; and (2) equitable principles prevented the plaintiffs, who initially contested Meyer's right to recover any amount from Hillenbrand's settlement, from collecting fees from Meyer. HCC adopted Meyer's motion, and filed a separate motion for entry of judgment on the ground that the claim pled in count II of the plaintiffs' second amended complaint was preempted under FEHBA.

On November 13, 1998, the trial court entered a written order granting summary judgment in favor of both defendants without specifying its basis for doing so. It is from this order that the plaintiffs have appealed.

The claim for relief set out in count II of the plaintiffs' second amended complaint is premised upon an application of the common fund doctrine. Under this doctrine, an attorney who creates or preserves a common fund held for the benefit of persons other than his client is entitled to a reasonable fee payable out of the corpus of the fund. Country Mutual Insurance Co. v. Birner, 293 Ill.App.3d 452, 456, 228 Ill.Dec. 161, 688 N.E.2d 859 (1997). The doctrine is based upon the equitable theories of quantum meruit and unjust enrichment (Ryan v. City of Chicago, 274 Ill.App.3d 913, 921-22, 211 Ill.Dec. 21, 654 N.E.2d 483 (1995)), and is frequently applied to funds recovered for the benefit of subrogees (Village of Clarendon Hills v. Mulder, 278 Ill.App.3d 727, 732-33, 215 Ill.Dec. 424, 663 N.E.2d 435 (1996)).

Since the trial court did not favor us with the basis for its grant of summary judgment, we will analyze each of the grounds asserted by the defendants, and we apply a de novo standard of review. See Majca v. Beekil, 183 Ill.2d 407, 416, 233 Ill.Dec. 810, 701 N.E.2d 1084 (1998).

Relying primarily upon the holding in United States v. Tobias, 935 F.2d 666 (4th Cir.1991), the defendants assert that the plaintiffs are not entitled to collect fees from the fund created as a result of the settlement of Hillenbrand's tort claim because they opposed the defendants' right to subrogation. The court in Tobias explained that: "A party may not recover and try to monopolize a fund, but then, failing in the attempt, declare it a `common fund' and obtain his expenses from those whose rightful share of the fund he sought to appropriate." Tobias, 935 F.2d at 668. Adopting this reasoning, the defendants argue that the plaintiffs should not be able to recover fees from the fund because, by filing the instant action, they sought to deny the defendants their rightful share of the fund. Although we have no quarrel with the holding in Tobias, we find the defendants' reliance thereon to be misplaced under the circumstances of this case. First, unlike the facts in Tobias, the defendants were not represented by their own attorneys in any litigation which led to recovery of the fund. See Tobias, 935 F.2d at 668. It was only Uzzell in his representation of Hillenbrand that created the fund from which Meyer's subrogation claim will be satisfied.

Second, although the Tobias court stated that the parties' adversity was a sufficient basis upon which to deny an award...