State v. Family Vision Care, LLC

• Decision Date: 12 March 2019
• Docket Number: No. 1-18-0697,1-18-0697
• Citation: 431 Ill.Dec. 752,2019 IL App (1st) 180697,128 N.E.3d 422
• Parties: The STATE of Illinois EX REL. David P. LEIBOWITZ, as Trustee of the Bankruptcy Estate of Marie A. Cahill, Plaintiff-Appellant, v. FAMILY VISION CARE, LLC, NovaMed Management Service, LLC, Surgery Partners, Inc., and Jennifer Gula, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

2019 IL App (1st) 180697
128 N.E.3d 422
431 Ill.Dec. 752

The STATE of Illinois EX REL. David P. LEIBOWITZ, as Trustee of the Bankruptcy Estate of Marie A. Cahill, Plaintiff-Appellant,
v.
FAMILY VISION CARE, LLC, NovaMed Management Service, LLC, Surgery Partners, Inc., and Jennifer Gula, Defendants-Appellees.

No. 1-18-0697

Appellate Court of Illinois, First District, Second Division.

Opinion filed March 12, 2019

Matthew J. Piers, Jose J. Behar, and Charles D. Wysong, of Hughes, Socol, Piers, Resnick & Dym, Ltd., of Chicago, for appellant.

J. Christian Nemeth, Joshua T. Buchman, and Jennifer Aronoff, of McDermott Will & Emery LLP, of Chicago, for appellees.

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

431 Ill.Dec. 756

¶ 1 We are asked to decide two interrelated questions under the Insurance Claims Fraud Protection Act (Act) ( 740 ILCS 92/1 et seq. (West 2016) ): (i) whether the State can assign to a third party an injury to its sovereignty and (ii) whether the third party can derive standing from that injury absent monetary damages to the State? Both questions present an issue of first expression.

¶ 2 The trial court found the plaintiff, trustee for the bankruptcy estate of Marie Cahill, lacked standing because the State only suffered an injury to its sovereignty, not a pecuniary loss, and the State cannot assign an injury to its sovereignty to a private citizen. The court also found the plaintiff was not an "interested person" under the Act, as Cahill did not suffer an injury related to the claim and did not allege how determination of the controversy would affect a claim or right personal to her.

¶ 3 We differ with the trial court's standing analysis. Under the plain language of the Act and its purpose in combating insurance fraud, the State need not have suffered monetary damages to confer standing on a relator. Moreover, in the qui tam context, a whistleblower employee like Cahill, who has personal, nonpublic information of possible wrongdoing, is an "interested person" under the statute and need not have a personal injury to have standing.

¶ 4 We agree with the trial court that dismissal was not warranted by the separation agreement or for failure to state a claim. Thus, we affirm in part, reverse in part, and remand for further proceedings.

¶ 5 Background

¶ 6 Family Vision Care, LLC, is an optometrist practice in LaGrange, Illinois. NovaMed Management Service, LLC, a medical practice management company, purchased Family Vision Care, LLC, and merged with Surgery Partners, Inc. (Surgery Partners), a publicly traded company. Dr. Jennifer Gula is an optometrist at Family Vision Care, LLC, with no ownership interest in the practice. (Defendants will be referred to as "Family Vision Care.")

¶ 7 Cahill worked for Family Vision Care from October 2012 through January 2016. As an office administrator, Cahill handled insurance billing practices. According to Cahill, about 90% of Family Vision Care's revenue came from claims it submitted to Vision Service Plan (VSP), a vision care health insurance company. VSP only covers claims from optometrists who have "majority ownership and complete control" of their medical practices. A practice must sign a provider agreement certifying itself as optometrist owned and controlled before VSP will make any insurance payments. Cahill alleges Family Vision Care engaged in fraud by knowingly and falsely certifying their eligibility for VSP insurance payments and accepting

431 Ill.Dec. 757

128 N.E.3d 427

payments to which they were not entitled. Specifically, Cahill alleges, in part, that Dr. Gula signed the provider agreements falsely certifying to VSP that she owned Family Vision Care. Cahill also alleges Frank Soppa, a Surgery Partners executive, instructed her to tell VSP that Dr. Gula owned Family Vision Care.

¶ 8 In February 2016, after Cahill left Family Vision Care, she signed a separation agreement and general release "fully and unconditionally" releasing and discharging her employer from liability, claims, and causes of action "arising * * * out of or in connection with Employee's employment or separation from employment with Employer, and all claims for any act or failure to act that occurred up to the time that Employee signs this Agreement."

¶ 9 Cahill filed for bankruptcy in January 2016. More than a year later, the trustee of the bankruptcy estate (Estate) filed a one-count complaint against Family Vision Care alleging violation of section 5 of the Act (id. § 5) for fraudulently submitting false claims to VSP, which is not a party. (The complaint was filed under the caption "State of Illinois ex rel. Bankruptcy Estate of Marie A. Cahill," but federal law provides that it is the trustee who may prosecute an action on behalf of the bankruptcy estate. 11 U.S.C. § 323(b) (2012). The record indicates that David P. Leibowitz is the bankruptcy estate's trustee.) Section 15(a) of the Act is a qui tam enforcement provision, allowing private whistleblowers with undisclosed information about insurance fraud to sue for civil penalties. Id. § 15(a). The Estate's complaint asserts the State is the real party in interest and Cahill is an "interested person" under section 15(a), giving the Estate standing to sue on behalf of her and the State. The State declined to intervene.

¶ 10 Family Vision Care filed a combined motion to dismiss under section 2-619.1 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-619.1 (West 2016) ), arguing (i) under section 2-615 (id. § 2-615), the Estate's complaint fails to allege a violation of the Act with sufficient particularity; (ii) under section 2-619(a)(6) (id. § 2-619(a)(6) ), Cahill's severance agreement releasing "any and all claims" against Family Vision Care warranted dismissal; and (iii) under section 2-619(a)(9) (id. § 2-619(a)(9) ), the Estate lacked standing as not a directly injured "interested person" and that only VSP could bring a qui tam claim under the Act. Family Vision Care further asserted that, although the State would have standing to enforce its laws, it cannot assign its standing to a private citizen.

¶ 11 The trial court denied Family Vision Care's section 2-615 motion finding Cahill alleged fraudulent conduct with sufficient specificity. The court also denied Family Vision Care's request for dismissal under section 2-619(a)(6) based on the separation agreement, finding questions of fact exist as to whether Cahill could have released the bankruptcy estate's claim, as well as whether Cahill's claim falls under the release. As to standing, the trial court dismissed the complaint, finding the Estate failed to allege or explain how it has standing to bring a claim under the Act. Specifically, the court observed that unlike the False Claims Act ( 740 ILCS 175/4(b)(1) (West 2016) ), which states that "A person may bring a civil action" for violation of the statute, the Act states that the relator must be an "interested person." (Emphases added.) 740 ILCS 92/15 (West 2016). Noting that the Act does not define "interested person," the court decided, after supplemental briefing, that a claimant must hold some legal interest in the cause of action. The court concluded that the Estate had not demonstrated Cahill suffered

128 N.E.3d 428

431 Ill.Dec. 758

an injury related to the claim or how determination of the controversy would affect "a personal claim, status, or right." Thus, the Estate lacked standing.

¶ 12 Further, the trial court stated that even if the Estate could bring a qui tam action, the Estate did not allege an "injury in fact" the State could assign to it. Referencing the False Claims Act, the trial court stated that it addresses allegations of fraudulently obtained public funds and actual monetary damages suffered by the State. Conversely, the State's only injury from a purported Act violation is to its sovereignty, not to its treasury, and the State could not assign that injury to a private citizen.

¶ 13 The Estate moved for, and the court granted, dismissal with prejudice and entered a final judgment.

¶ 14 Analysis

¶ 15 The Estate contends the trial court erred in finding it did not have standing under the Act because (i) the State suffered an "injury in fact" to its sovereignty based on violation of its laws and could assign its standing to the Estate and (ii) the Estate is an "interested person" under the section 15(a). Family Vision Care asks us to affirm the findings that the State has not suffered an assignable injury in fact and that the Estate is not an "interested person" as Cahill was not personally injured. Alternatively, Family Vision Care argues that if we disagree with the findings regarding standing, we should affirm the dismissal under either section 2-615, as the Estate failed to plead fraud with particularity, or section 2-619(a)(6), as the separation agreement bars the claim.

¶ 16 The Act

¶ 17 The Act, which the Illinois General Assembly adopted in 2001, added civil penalties to existing criminal remedies for fraud against private insurance companies. Relevant to this case, subsection 5(b) creates a private cause of action against any entity that violates...