People ex rel. dep't of Human Rights v. Oakridge Nursing & Rehab Ctr.
| Decision Date | 11 March 2019 |
| Docket Number | No. 1-17-0806,1-17-0806 |
| Parties | The PEOPLE of the State of Illinois, EX REL. The DEPARTMENT OF HUMAN RIGHTS, Plaintiff-Appellant, v. OAKRIDGE NURSING & REHAB CENTER, a/k/a Oakridge Rehabilitation Center, and Oakridge Healthcare Center, LLC, Defendants (Oakridge Healthcare Center, LLC, Defendant-Appellee). |
| Court | United States Appellate Court of Illinois |
¶ 1 On February 7, 2011, Jane Holloway, an employee of Oakridge Convalescent Home (Convalescent), filed a charge of discrimination in violation of the Illinois Human Rights Act (Act) ( 775 ILCS 5/1-101 et seq. (West 2010) ) against Oakridge Nursing & Rehab Center, LLC (Oakridge Center), her employer and the managing company of Convalescent. Oakridge Center received notice of the charge in the spring of 2011 and thereafter transferred substantially all of its assets for no consideration to Oakridge Healthcare Center, LLC (Oakridge Healthcare). Oakridge Healthcare became the new manager of Convalescent. Holloway obtained an administrative judgment of $ 30,880. When Oakridge Center failed to satisfy the judgment, the State filed a complaint against Oakridge Healthcare, as the successor of Oakridge Center, to enforce compliance with Holloway's judgment. Oakridge Healthcare filed a motion for summary judgment, which the circuit court granted. The State appeals and argues that it presented sufficient evidence to create a material issue of fact that Oakridge Center transferred its assets for the fraudulent purpose of escaping Holloway's judgment. Furthermore, the State urges this court to look to federal common law, where successor liability is recognized as the default rule in employment discrimination cases. The State maintains that recognition of successor liability in employment discrimination cases aids victims to enforce judgments against employers involved in discriminatory practices who might otherwise escape liability.
¶ 4 Ms. Helen Lacek (Helen), managing member of Oakridge Center, met Mr. Elisha Atkin (Elisha), managing member of Oakridge Healthcare, while working at a nursing home in 1991. In 1993, Helen met Joel Atkin, Elisha's brother. In 1999, Helen and Elisha worked as managers for a different nursing home. In 2001, Helen became a member and the director of operations for another nursing home where she met Donna Atkin, Elisha's wife, and Jay Orlinsky, Elisha's brother-in-law. Thereafter, Helen and Elisha worked for a nursing home management company as director of operations and CEO respectively. In December of 2007, Helen, Donna, and Jay formed McAllister Nursing and Rehab, LLC (McAllister), a nursing home management company that operated a nursing home in a building that was owned by McAllister Nursing & Rehab Properties, LLC (McAllister Properties), comprised of members Joel and Donna and an insurance company. Elisha stated in his deposition that he was also a member of McAllister.
¶ 5 On May 1, 2008, Helen, and her husband, John Lacek, formed Oakridge Center and were the company's only members; Helen was the company's only managing member. On the same day, Elisha, Donna, Joel, and Jay formed Oakridge Nursing & Rehab Properties, LLC (Oakridge Properties), and Elisha, Donna, and Joel were the company's managing members.
¶ 7 On June 1, 2008, both Oakridge Center and Oakridge Properties executed separate agreements with Accera-Oakridge (Accera), a nursing home management company, for the management of Convalescent. Oakridge Center's agreement provided that Accera would transfer Convalescent's personal property to Oakridge Center, and Oakridge Center would become Convalescent's new management company. Oakridge Properties agreed to acquire the land and building where Convalescent was operated at 323 Oak Ridge Avenue, Hillside, Illinois. Oakridge Center and Oakridge Properties executed a lease for the continued operation of Convalescent by Oakridge Center at the same location. Oakridge Center employed 85 workers at Convalescent.
¶ 9 On February 7, 2011, Holloway, who was an employee at Convalescent, filed the charge of discrimination against Oakridge Center with the Department of Human Rights (Department) and alleged that Oakridge Center suspended her because of her age, 50, and terminated her because of her physical disabilities, in violation of section 2-102(A) of the Act. 775 ILCS 5/2-102(A) (West 2010). Helen stated in her deposition that she became aware of the charge "in spring 2011." On September 26, 2012, the Department filed a civil rights violation complaint on behalf of Holloway with the Illinois Human Rights Commission (Commission). When Oakridge Center failed to file an appearance with the Commission, a default order was entered against it on February 5, 2013. On September 17, 2013, the chief administrative law judge of the Commission recommended a judgment of $ 30,880 for lost back pay with prejudgment interest to be awarded to Holloway. On April 3, 2014, the Commission entered the administrative law judge's September 17, 2013, recommendation as its order. On July 16, 2014, the Commission ordered the Department to "commence an action in the name of the People of the State of Illinois praying for an issuance of an order directing the Respondent, [Oakridge Center], its agents, servants, successors and assigns" to comply with the Commission's April 3, 2014, judgment.
¶ 11 Helen stated in her deposition that in June 2011, Oakridge Center began to experience financial trouble because the state of Illinois stopped making its payments to Oakridge Center. Helen further stated that due to Oakridge Center's financial trouble, the company was no longer able to pay its rent to Oakridge Properties. Therefore, it provided Oakridge Properties with notice to terminate its lease. The lease required Oakridge Center to pay an early termination fee of $ 210,000, personally guaranteed by Helen, but Helen stated she could not answer whether the termination fee was paid because her husband "handled a lot of the financial stuff."
¶ 13 On December 5, 2011, Elisha formed Oakridge Healthcare with Yael Atkin, Elisha's sister-in-law and Joel's wife, as the company's only members, with Elisha as the sole managing member.
¶ 14 On January 1, 2012, Oakridge Center, Oakridge Properties, and Oakridge Healthcare entered into a "lease and option termination, cancellation and indemnity agreement" (termination agreement). The termination agreement concluded the lease between Oakridge Center and Oakridge Properties and assigned the lease to be between Oakridge Properties and Oakridge Healthcare. On the same day, the parties also executed an "operations transfer agreement" (transfer agreement) to transfer to Oakridge Healthcare all of Oakridge Center's (i) property, (ii) contracts, (iii) licenses, (iv) patient records, (v) patient trust funds, and (vi) supplies. Oakridge Center however retained all of its accounts receivable. In her deposition, Helen stated that Oakridge Center transferred "beds, the license, three days worth of perishable foods, seven days of frozen [food], stock meds, medical supplies, maybe a couple reams of paper." She further stated that Oakridge Center never appraised the transferred assets for value, and it never received any payment for them.
¶ 15 The transfer agreement also included a "no assumption of liabilities" section, which provided that Oakridge Healthcare (i) "is not, and shall not under any circumstances, be deemed or interpreted to be, a parent, subsidiary and/or and affiliate of Oakridge Center" and (ii) "is not assuming or purchasing and shall not be responsible or liable for any of [Oakridge Center's] liabilities."
¶ 16 Helen stated in her deposition that Oakridge Center's last day of operating Convalescent was January 1, 2012, which was the same day Oakridge Center transferred it assets to Oakridge Healthcare. At the time Oakridge Center was dissolved, it had zero assets. After shutting down the operation of Convalescent, Helen then worked for a hospice facility from January 2012 to February 2013. In August 2013, she returned to work as administrator at McAllister.
¶ 18 On September 22, 2015, the State filed a two count complaint and named as defendants, Oakridge Center and Oakridge Healthcare and requested that the court enter an order against the two companies and its "agents, servants, successors, and assigns" to comply with the Commission's April 3, 2014, judgment. Count I sought to enforce the judgment against Oakridge Center. Count II, titled "successor liability," sought similar relief, but it was asserted against Oakridge Healthcare. Under count II, the State asserted, in part, that (i) "[o]n information and belief, when [Oakridge Healthcare] began operating [Convalescent] it was aware of [c]omplainant's charge of employment discrimination with the Department," and (ii) "[b]ased on these facts, on information and belief, [Oakridge Healthcare] is a successor limited liability company of [d]efendant [Oakridge Center], and is therefore responsible for the liabilities of [Oakridge Center]."
¶ 19 On November 16, 2015, Oakridge Healthcare filed a motion for summary judgment on count II of the State's complaint predicated on section 2-1005(b) of the Code of Civil Procedure (Code). 735 ILCS 5/2-1005(b) (West 2014). Oakridge Healthcare argued that it was entitled to judgment as a matter of law because, under Illinois law regarding successor liability, a successor company is not liable for its predecessor's liabilities. Oakridge Healthcare also specifically addressed all four exceptions to the general rule of...
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