State v. Family Vision Care, LLC

• Decision Date: 19 November 2020
• Docket Number: Docket No. 124754
• Citation: 181 N.E.3d 790,450 Ill.Dec. 438,2020 IL 124754
• Parties: The STATE of Illinois EX REL. David P. LEIBOWITZ, Appellee v. FAMILY VISION CARE, LLC, et al., Appellants.
• Court: Illinois Supreme Court

2020 IL 124754

181 N.E.3d 790

450 Ill.Dec. 438

The STATE of Illinois EX REL. David P. LEIBOWITZ, Appellee

v.FAMILY VISION CARE, LLC, et al., Appellants.

Docket No. 124754

Supreme Court of Illinois.

Opinion filed November 19, 2020.

J. Christian Nemeth, Joshua T. Buchman, and Jennifer C. Aronoff, of McDermott Will & Emery, LLP, and Joel D. Bertocchi, of Akerman LLP, both of Chicago, and Paul W. Hughes, of McDermott Will & Emery LLP, of Washington, D.C., for appellants.

Matthew J. Piers, Charles D. Wysong, and Justin Tresnowski, of Hughes, Socol, Piers, Resnick & Dym, Ltd., of Chicago, for appellee.

Ross O. Silverman, Jonathan L. Marks, John W. Reale, and Matthew R. Ryan, of Katten Muchin Rosenman LLP, of Chicago, for amicus curiae Coalition Against Insurance Fraud.

David J. Chizewer, Roger A. Lewis, and Joseph L. Hoolihan, of Goldberg Kohn Ltd., of Chicago, and Claire M. Sylvia and Emily Stabile, of Phillips & Cohen LLP, of San Francisco, California, for amicus curiae Taxpayers Against Fraud Education Fund.

OPINION

JUSTICE MICHAEL J. BURKE delivered the judgment of the court, with opinion.

¶ 1 This appeal involves a claim brought under the Insurance Claims Fraud Prevention Act (Act) ( 740 ILCS 92/1 et seq. (West 2016)). The Act, which adopts nearly word for word a statute from California's Insurance Frauds Prevention Act (see Cal. Ins. Code § 1871.7 (West 2016) ), added civil penalties to existing criminal remedies for fraud against private insurance companies.

¶ 2 The Act contains an enforcement provision allowing a claim to be raised on the State's behalf by a private person, known as a relator, in a qui tam action. 740 ILCS 92/15 (West 2016). The State retains control over the litigation, but the Act entitles the relator to a portion of the proceeds or settlement if the lawsuit succeeds. Id. §§ 15, 20, 25.

¶ 3 A relator must be an "interested person" under the Act to file an action on the State's behalf, but the Act does not define that term. Id. § 15(a). Also, the Act is intended to remedy fraud against private insurers, where the only injury to the State is to its sovereignty, based on a violation of criminal law. This injury is different from the pecuniary injury addressed by the Illinois False Claims Act ( 740 ILCS 175/1 et seq. (West 2016)), which is a qui tam statute that confers standing on a relator to sue for fraud resulting in pecuniary injury to the State ( Scachitti v. UBS Financial Services , 215 Ill. 2d 484, 508, 294 Ill.Dec. 594, 831 N.E.2d 544 (2005) ).

¶ 4 The meaning of "interested person" and the nonpecuniary nature of the State's interest present two questions in this appeal regarding a relator's standing to sue under the Act: (1) whether a relator must have a personal claim, status, or right related to the qui tam action to qualify as an "interested person" and (2) whether a relator may bring a claim on behalf of the State for a violation of criminal law that results in injury to the State's sovereignty.

¶ 5 The issues arise in a qui tam action filed by the trustee of a bankruptcy estate of a whistleblower who was formerly employed by the allegedly defrauding party. The circuit court of Cook County determined that the trustee lacked standing to conduct the qui tam action and dismissed the one-count complaint under section 2-619(a)(9) of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-619(a)(9) (West 2016)).

¶ 6 The appellate court affirmed the judgment in part but reversed the dismissal and remanded the cause for further proceedings. The court held (1) a former employee-whistleblower with personal, nonpublic information of possible wrongdoing qualifies as an "interested person" under the Act and need not allege a personal claim, status, or right related to the proceedings and (2) the State need not suffer money damages to partially assign its claim to a relator under the Act. 2019 IL App (1st) 180697, ¶¶ 30, 37, 431 Ill.Dec. 752, 128 N.E.3d 422. We affirm the judgment of the appellate court.

¶ 7 I. BACKGROUND

¶ 8 As this appeal is based on the involuntary dismissal of the complaint under section 2-619(a)(9) of the Code ( 735 ILCS 5/2-619(a)(9) (West 2016)), we set forth and accept as true the well-pleaded facts alleged in the complaint as well as all reasonable inferences that arise from them. Patrick Engineering, Inc. v. City of Naperville , 2012 IL 113148, ¶ 31, 364 Ill.Dec. 40, 976 N.E.2d 318.

¶ 9 Defendant Family Vision Care, LLC (Family Vision Care), is an optometry practice in LaGrange, Illinois. Marie A. Cahill served as the office administrator from October 2012 through January 2016. She left her employment and filed for bankruptcy protection. A month later, she signed a separation agreement and general release that is not at issue in this appeal.

¶ 10 During her time with Family Vision Care, 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 that is not a party to this action.

¶ 11 VSP covers claims from optometrists only if they have "majority ownership and complete control" of their medical practices. VSP disburses payments only after a practice signs a provider agreement certifying itself as "fully controlled and majority-owned" by an optometrist.

¶ 12 At the time Cahill was submitting Family Vision Care's claims to VSP, the practice was in fact owned by defendant Surgery Partners, Inc. (Surgery Partners), a medical practice management company that runs a network of more than 150 surgery centers and other medical practices in 29 states. Surgery Partners is a publicly traded company, but it is majority owned by H.I.G. Private Equity, a global private equity firm. Surgery Partners acquired Family Vision Care through a merger with defendant NovaMed Management Service, LLC (NovaMed), a smaller medical practice management company that owned the practice.

¶ 13 Defendant Jennifer Gula, O.D. (Dr. Gula), is an optometrist who worked at Family Vision Care while Cahill submitted the claims to VSP. Dr. Gula was employed by Surgery Partners and has never had an ownership interest in the practice.

¶ 14 Cahill alleges defendants engaged in fraud by knowingly and falsely certifying Family Vision Care's eligibility for VSP insurance payments and accepting payments to which Family Vision Care was not entitled. Specifically, Dr. Gula allegedly signed the provider agreements falsely certifying to VSP that she owned Family Vision Care. And Frank Soppa, a Surgery Partners executive, allegedly instructed Cahill to tell VSP that Dr. Gula owned Family Vision Care. Cahill alleges that Surgery Partners and Dr. Gula were fully aware of VSP's optometrist-ownership requirement and that Surgery Partners' management nevertheless directed Cahill to falsify information about the ownership of the practice.

¶ 15 About a year after Cahill left Family Vision Care, David P. Leibowitz, the trustee of Cahill's bankruptcy estate (Estate), filed a one-count complaint alleging defendants committed insurance fraud by submitting false claims to VSP.¹ The complaint alleges the fraudulent scheme caused VSP to approve Family Vision Care as a VSP network provider and pay "millions of dollars" of insurance claims that Family Vision Care submitted on behalf of its patients. The complaint does not allege Cahill suffered any injury or loss.

¶ 16 The complaint seeks relief under section 5(b) of the Act, which creates a private cause of action against any person who violates any provision of the Act and the criminal code relating to insurance fraud. 740 ILCS 92/5(b) (West 2016). The complaint is based on defendants' alleged insurance fraud against VSP in violation of section 17-10.5 of the Criminal Code of 2012 (Criminal Code) 720 ILCS 5/17-10.5(a)(1) (West 2016). Section 17-10.5(a)(1) provides that a person commits insurance fraud

"when he or she knowingly obtains, attempts to obtain, or causes to be obtained, by deception, control over the property of an insurance company * * * by the making of a false claim or by causing a false claim to be made on any policy of insurance issued by an insurance company * * * intending to deprive an insurance company * * * permanently of the use and benefit of that property." Id.

¶ 17 In turn, section 5(b) of the Act provides that a person who violates section 17-10.5 of the Criminal Code

"shall be subject, in addition to any other penalties that may be prescribed by law, to a civil penalty of not less than $5,000 nor more than $10,000, plus an assessment of not more than 3 times the amount of each claim for compensation under a contract of insurance. The court shall have the power to grant other equitable relief, including temporary injunctive relief, as is necessary to prevent the transfer, concealment, or dissipation of illegal proceeds, or to protect the public. The penalty prescribed in this subsection shall be assessed for each fraudulent claim upon a person in which the defendant participated." 740 ILCS 92/5(b) (West 2016).

The complaint sought damages of three times the amount of the false insurance claims plus civil penalties of $5000 to $10,000 per false claim. See id.

¶ 18 A claim for these civil penalties may be brought by the state's attorney of the county in which the conduct occurred or by the attorney general. Id. § 10. But the Act also allows for the enforcement by private citizens by authorizing qui tam actions in the name of the State. Id. § 15. A qui tam action is brought under a statute authorizing an informant to bring a civil action to recover a penalty for the commission or omission of a certain act and providing that a part of the penalty be paid to the informer. Scachitti , 215 Ill. 2d at 494, 294 Ill.Dec. 594, 831 N.E.2d 544. The Estate filed the action under the qui tam enforcement provisions of section 15, which allows private citizens with undisclosed information about insurance fraud to sue on the State's behalf for civil penalties....