People v. Oakridge Healthcare Ctr., LLC

• Decision Date: 24 September 2020
• Docket Number: Docket No. 124753
• Citation: 2020 IL 124753,181 N.E.3d 184,450 Ill.Dec. 184
• Parties: The PEOPLE of the State of Illinois EX REL. The DEPARTMENT OF HUMAN RIGHTS, Appellee, v. OAKRIDGE HEALTHCARE CENTER, LLC, Appellant.
• Court: Illinois Supreme Court

2020 IL 124753

181 N.E.3d 184

450 Ill.Dec. 184

The PEOPLE of the State of Illinois EX REL. The DEPARTMENT OF HUMAN RIGHTS, Appellee,

v.OAKRIDGE HEALTHCARE CENTER, LLC, Appellant.

Docket No. 124753

Supreme Court of Illinois.

Opinion filed September 24, 2020

Richard Lee Stavins and Diana H. Psarras, of Robbins, Salomon & Patt, Ltd., of Chicago, for appellant.

Kwame Raoul, Attorney General, of Springfield (Jane Elinor Notz, Solicitor General, and Aaron T. Dozeman, Assistant Attorney General, of Chicago, of counsel), for appellee.

OPINION

JUSTICE KILBRIDE delivered the judgment of the court, with opinion.

¶ 1 In April 2014, a judgment was entered against Oakridge Nursing & Rehabilitation Center, LLC (Oakridge Rehab), for its discriminatory conduct against a former employee, in violation of the Illinois Human Rights Act (Act) ( 775 ILCS 5/1-101 et seq. (West 2010)). Oakridge Rehab had already gone out of business, however, having transferred the assets and operation of its nursing home facility to Oakridge Healthcare Center, LLC (Oakridge Healthcare), on January 1, 2012. Unable to enforce the judgment against Oakridge Rehab, the State instituted proceedings to enforce the Oakridge Rehab judgment against Oakridge Healthcare. Oakridge Healthcare successfully moved for summary judgment, alleging it could not be held liable for the judgment under Illinois's common-law rule. On appeal, a majority of the appellate court reversed and agreed to adopt the federal successor liability doctrine. We reverse that judgment and decline to adopt the federal successor liability doctrine in cases arising under the Act.

¶ 2 I. BACKGROUND

¶ 3 In February 2011, Jane Holloway filed a charge pursuant to the Act with the Illinois Department of Human Rights (Department), alleging age and disability discrimination that violated the Act at the long-term care facility where she was previously employed by Oakridge Rehab; Oakridge Rehab received notice of the charge that spring. On January 1, 2012, Oakridge Rehab; its landlord, Oakridge Nursing and Rehab Properties, LLC (Oakridge Properties); and a newly formed entity, Oakridge Healthcare, entered into a termination agreement ending the lease between Oakridge Rehab and Oakridge Properties and making Oakridge Healthcare the new lessee. On the same date, Oakridge Rehab transferred substantially all its corporate assets to Oakridge Healthcare pursuant to an "Operations Transfer Agreement" that also declared Oakridge Healthcare was not a successor or successor-in-interest to the transferor and that Oakridge Healthcare was neither liable for the transferor's obligations nor subject to any judgment for its liabilities. Oakridge Rehab then immediately ceased operations, and Oakridge Healthcare took over the nursing home under a new name. After concluding its investigation into Holloway's allegations, the Department filed a civil rights complaint on her behalf with the Illinois Human Rights Commission (Commission) in September 2012. The complaint sought relief against only Oakridge Rehab and included no claim asserting personal liability.

¶ 4 On September 17, 2013, an administrative law judge issued a recommendation that Holloway be awarded $30,880 in back pay, plus prejudgment interest. The Commission adopted the recommended order in April 2014 and granted a motion seeking to enforce the order against Oakridge Rehab, the sole respondent, a few months later. Oakridge Rehab, however, was involuntarily dissolved in November 2014. When Oakridge Rehab failed to satisfy Holloway's judgment, the State of Illinois filed a complaint in the circuit court of Cook County against both Oakridge Rehab and Oakridge Healthcare, its purported successor, to enforce compliance, but again no personal liability claim was made.

¶ 5 Oakridge Healthcare filed a motion for summary judgment, arguing that it could not be held liable for Oakridge Rehab's liabilities as a matter of law under the common-law doctrine of corporate successor nonliability when no exception to that general rule applied. After the State asserted its inability to respond in the absence of any discovery, discovery commenced.

¶ 6 The State deposed Helen Lacek, who was a member of Oakridge Rehab as well as its manager prior to the transfer of its operations to Oakridge Healthcare. Helen testified that Oakridge Rehab began experiencing dire financial trouble when the State of Illinois stopped making payments on invoices. Oakridge Rehab's financial problems quickly escalated until it was no longer able to pay its rent. In June 2011, Oakridge Rehab provided the required six-month notice to its landlord, Oakridge Properties, stating its intent to terminate the lease due to its financial difficulties. While several people visited Oakridge Rehab prior to its transfer to Oakridge Healthcare, none of them expressed any interest in taking over the facility operations.

¶ 7 The State also deposed Oakridge Properties manager Elisha Atkin (Eli), who founded Oakridge Healthcare in November or December 2011. Eli is a 50% member of Oakridge Healthcare, with the other 50% member being his sister-in-law. Eli is also involved as a member or manager in a number of other long-term care facilities or properties, along with several of his immediate and extended family members. One of those facilities is McAllister Properties, LLC, whose members are Eli's wife, his brother, Helen Lacek, and Ability Insurance; Eli manages that business. Helen and Eli were also two of the members of McAllister Nursing and Rehab Center, LLC (McAllister Rehab), another long-term care facility. Helen serves as the administrator of McAllister Rehab and has also been a nursing consultant at some of the other facilities connected to Eli, but she has not provided those services at Oakridge Healthcare.

¶ 8 Eli stated that negotiations about Oakridge Healthcare becoming the new lessee of the nursing home facility began in November 2011. Its new lease started on January 1, 2012, when the lease between Oakridge Properties and Oakridge Rehab ended. Oakridge Rehab did not notify Oakridge Healthcare of any pending claims filed by past or present employees prior to the transfer of the nursing home operation. In addition, Oakridge Healthcare did not look at any of Oakridge Rehab's liabilities prior to the transfer because it was not assuming any of them under the terms of the transfer agreement.

¶ 9 In its response to Oakridge Healthcare's motion for summary judgment, the State contended that the court should apply the federal doctrine of successor liability instead of the Illinois general nonliability rule in this case. The State argued that the federal doctrine should be applicable because this case involved employment discrimination and "Illinois courts look to standards applied to federal claims brought under federal employment discrimination laws in analyzing" cases alleging violations of the Act. 2019 IL App (1st) 170806, ¶ 20, 431 Ill.Dec. 727, 128 N.E.3d 397. Before it entered summary judgment in favor of Oakridge Healthcare, the trial court made several findings, concluding that (1) Oakridge Healthcare was not a successor in liability to Oakridge Rehab, (2) the State did not show that Oakridge Healthcare was a mere continuation of Oakridge Rehab, and (3) Illinois's long reliance on the common-law successor nonliability rule precluded adoption of the federal successor liability doctrine.

¶ 10 The State appealed, and the appellate court reversed, remanding the cause for further proceedings. A majority of the court found that "the State presented sufficient evidence for a reasonable trier of fact to find that the asset transfer was for the fraudulent purpose of escaping Holloway's judgment." 2019 IL App (1st) 170806, ¶ 42, 431 Ill.Dec. 727, 128 N.E.3d 397. The majority cited evidence that Holloway's discrimination charge was filed before the transfer and Oakridge Rehab transferred nearly all the corporation's assets to Oakridge Healthcare without an appraisal or payment, leaving it unable to pay Holloway's subsequent judgment. 2019 IL App (1st) 170806, ¶¶ 35-38, 431 Ill.Dec. 727, 128 N.E.3d 397. The appellate majority also held it could apply the federal successor liability doctrine to cases involving violations of the Act because this court "has not specifically addressed a successor corporation's liability for employment discrimination." 2019 IL App (1st) 170806, ¶ 51, 431 Ill.Dec. 727, 128 N.E.3d 397. Applying the version of the federal successor liability test from Equal Employment Opportunity Comm'n v. MacMillan Bloedel Containers, Inc. , 503 F.2d 1086 (6th Cir. 1974), later articulated in Musikiwamba v. ESSI, Inc. , 760 F.2d 740, 750-53 (7th Cir. 1985), the appellate majority found a number of relevant factors were met here. First, Oakridge Rehab and Helen Lacek knew about Holloway's claim before the assets transfer. Second, Oakridge was "unable to provide Holloway relief" due to its serious financial troubles. Third, Oakridge Healthcare continued to operate the facility as a nursing home after the asset transfer by "using the same workforce and at the same location," showing a continuity of business. For those reasons, the appellate court concluded that " Holloway's judgment may be imposed on Oakridge Healthcare as Oakridge [Rehab's] successor" under the federal doctrine. 2019 IL App (1st) 170806, ¶ 58, 431 Ill.Dec. 727, 128 N.E.3d 397.

¶ 11 Dissenting from the majority's reasoning, Justice Mason asserted that its reliance on the fraudulent transfer exception was improper because the record showed the State abandoned that claim when it made the "strategic decision" to "unequivocal[ly] disavow[ ]" any trial argument on it. 2019 IL App (1st) 170806, ¶ 74, 431 Ill.Dec. 727, 128 N.E.3d 397 (Mason, J., dissenting). Even if the merits of the argument were considered, the majority's conclusion was unsupported because the State offered "no evidence" that Oakridge Rehab's pretransfer financial problems were "contrived." In...