Rodrigue v. Olin Employees Credit Union

• Decision Date: 19 April 2005
• Docket Number: No. 03-2607.,No. 03-2470.,03-2470.,03-2607.
• Citation: 406 F.3d 434
• Parties: Dr. Linda A. RODRIGUE, Plaintiff-Appellee, Cross-Appellant, v. OLIN EMPLOYEES CREDIT UNION, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

406 F.3d 434

Dr. Linda A. RODRIGUE, Plaintiff-Appellee, Cross-Appellant, v. OLIN EMPLOYEES CREDIT UNION, Defendant-Appellant, Cross-Appellee.

No. 03-2470.

No. 03-2607.

United States Court of Appeals, Seventh Circuit.

Argued September 21, 2004.

Decided April 19, 2005.

Mary A. Lindsey (Argued), Evans & Dixon, St. Louis, MO, for Plaintiff-Appellee, Cross-Appellant.

Nancy G. Lischer (Argued), Hinshaw & Culbertson, Chicago, IL, Gary W. Bomkamp, Roberts, Perryman, Bomkamp & Meives, St. Louis, MO, for Defendant-Appellant, Cross-Appellee.

Carter H. Klein, Jenner & Block, Chicago, IL, for Amicus Curiae.

Before MANION, ROVNER, and WOOD, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

Beginning in 1992, an employee of Linda A. Rodrigue, M.D., stole some 269 reimbursement checks issued to the doctor by her patients' insurers, fraudulently endorsed the checks over to herself, and presented them to her credit union, Olin Employees Credit Union ("Olin"). Olin accepted the checks. Rodrigue finally discovered the embezzlement in 1999 and filed a diversity suit against Olin for conversion the following year. Following a bench trial, the district court concluded that the conversion of all 269 checks amounted to a single or continuous injury under Illinois law that did not terminate until the last of the checks was negotiated in 1999; consequently, the three-year statute of limitations on Rodrigue's cause of action for conversion did not begin to run until that time, and Rodrigue's suit against Olin was timely as to all of the stolen checks. The court further concluded that Olin had failed to observe ordinary commercial standards in accepting the fraudulently endorsed checks and that the credit union was therefore liable for the conversion of the checks. Upon considering the relative fault of Rodrigue and Olin for the conversion, the court assigned 10 percent of the responsibility to Rodrigue and 90 percent to Olin. After adjusting the total damages to reflect Rodrigue's share of responsibility for the loss, the court entered judgment in the amount of $334,864.96 in favor of Rodrigue. Olin has appealed, contending that a cause of action for conversion accrued, and the statute of limitations began to run, each time a stolen check was negotiated, so that Rodrigue was barred from suing on any check cashed or deposited more than three years before she filed suit in 2000. Olin also contends that the district court clearly erred in assigning it 90 percent of the responsibility for the loss. Rodrigue cross-appeals, challenging the district court's decision to apportion 10 percent of the blame for the loss to her. We agree with Olin that the conversion of the checks did not amount to a single or continuous injury under Illinois law and that the statute of limitations for conversion began to run with the negotiation of each check; Rodrigue's suit was therefore untimely as to any check negotiated more than three years before she filed suit. We conclude that the district court committed no clear error in its allocation of comparative fault as between Olin and Rodrigue, however.

I.

Dr. Rodrigue is an obstetrician-gynecologist who has operated a private practice under the name of North County Women's Health Care Services, P.C., in Florissant, Missouri since August 1989. The Christian Hospital System sponsored Dr. Rodrigue when she went into private practice, providing her with start-up and relocation assistance and a practice consultant who helped draft and publish an employee manual. In November 1990, after Rodrigue missed an event to which she had been invited due to an employee's mishandling of the office mail, she revised the employee manual to prohibit anyone in the office from opening the mail other than the doctor herself.

Rodrigue hired Carol Wiltshire on May 1990. Although initially hired to work as a medical receptionist and secretary, over the nine years Wiltshire worked for Dr. Rodrigue, she held a variety of positions of increasing responsibility and authority within the office. By 1993, Wiltshire was a billing specialist and later an office supervisor. At the time of Wiltshire's termination in December 1999, she was working as office manager.

In her position as billing specialist, Wiltshire was responsible for understanding insurance requirements and was the only person in the office trained in the Doctor's Office Management System ("DOMS") when Rodrigue converted to the computerized billing system in 1992. Even Rodrigue did not seek training in the DOMS software, which was used to manage accounts by tracking charges, payments, and adjustments. Adjustments entered in the DOMS system, interchangeably referred to as "write-offs" in the record, were supposed to reflect the portions of Rodrigue's charges that insurance providers disallowed and thus would not pay. From 1992 until her termination in 1999, Wiltshire was solely responsible for entering charges, adjustments, payments and closing out monthly statements for patient charges using the DOMS software. After learning how to use the software, Wiltshire began stealing checks from various insurance providers payable to Rodrigue from the doctor's mail.

The DOMS software was designed to help doctors detect employee theft by keeping track of all deleted charges and preventing all approved payments and adjustments from being removed or deleted. These features would prevent someone from posting a payment to an account, then deleting the payment from the system and keeping the money. Nonetheless, Wiltshire used her knowledge of the DOMS software to "zero out" patients' accounts to indicate that the accounts had been settled when, in fact, Wiltshire had stolen the insurance reimbursement checks sent to Rodrigue's office. To bypass the security features of the DOMS software, Wiltshire would enter a negative adjustment to the system equal to the charge, thus making the account balance zero. Because Rodrigue only reviewed DOMS-generated reports reflecting her accounts receivable, she did not notice the large number of adjustments that Wiltshire was entering into the system to cover her embezzlement.

During the course of her employment at Dr. Rodrigue's office, Wiltshire stole 269 checks, totaling $372,572.18, written by insurance providers to Dr. Rodrigue. After manipulating the DOMS billing system to make it appear as though no funds were stolen, Wiltshire would forge Dr. Rodrigue's endorsement on the insurance checks, direct that they be paid to herself, and deposit or cash them at Olin's Godfrey, Illinois branch, where Rodrigue and her husband maintained a joint account.

Olin's tellers testified at trial that presentment of checks made payable to a third party was not unusual; however, as a matter of unwritten policy, Olin required tellers to obtain a supervisor's approval before accepting third-party checks. When Wiltshire first attempted to deposit a third-party check at Olin in 1992, the teller sought approval from Sarah Woodman, a supervisor who had been working for Olin since 1987. Woodman asked Wiltshire about the check, and Wiltshire told her that she worked as a midwife for Rodrigue and that the doctor compensated her for her services by signing over to her insurance reimbursement checks. Woodman refused to take the check without some form of authorization from Rodrigue. Wiltshire later provided Woodman with a forged letter of authorization purporting to be from Rodrigue, and Woodman accepted the third-party check. Although this was the first time that Woodman had seen payments for services made through a third-party check, she did not think it was suspicious but "curious." Woodman sent the original forged authorization letter to Olin's main office but did not keep a copy of the letter on file at the local branch. At the time of trial, Olin could not locate the letter.

In early 1993, Wiltshire presented one of the checks to Olin teller Karrie Stahl, who again sought approval from Woodman. Woodman told Stahl that there was an authorization note from Rodrigue on file and instructed Stahl to accept the check but to ask for a notarized letter of authorization from Rodrigue for future checks. Stahl testified that Wiltshire later produced a notarized letter on Rodrigue's letterhead and that she compared the signature on the letterhead with that on the third-party check. Yet again, the letter was a forgery; Rodrigue never authorized Wiltshire to cash or deposit checks made payable to her. Although Stahl found it "odd" that Wiltshire was paid in this manner, the notarized letter and the details Wiltshire provided about the births in which she (purportedly) had assisted supported her story. The original notarized letter was sent to Olin's main office, and a copy was kept in a folder by Woodman's desk; however, Olin was unable to produce either the notarized letter or the copy at the time of trial.

At some point, Woodman tried to telephone Rodrigue in order to verify that Wiltshire had the doctor's permission to cash or deposit the third-party checks. Woodman was unable to reach Rodrigue and did not attempt to call her again, satisfied that Olin had received "the correct written documentation."

Rodrigue's practice began suffering from financial difficulties around 1994 or 1995, and Rodrigue had to borrow money and moonlight at the hospital in order to make ends meet. In 1992 and 1993, insurance companies had reimbursed Rodrigue for approximately 80 to 90 percent of what she billed, but in the following years reimbursement rates dropped steadily—or so it appeared. Between 1991 and 1999, Rodrigue used three different accounting firms, which prepared monthly and later quarterly summaries of Rodrigue's business activities based on bank statements, payroll deposits, and other information that Rodrigue provided. When Rodrigue began to believe that no matter how hard she worked she could not pay her bills, she consulted her accountants to see how she could make her...