Illinois Association of Defense Trial Counsel Rochester, Illinois IDC Quarterly Volume 25, Number 1 (25.1.

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1 Illinois Association of Defense Trial Counsel Rochester, Illinois IDC Quarterly Volume 25, Number 1 ( ) Recent Decisions Stacy E. Crabtree Heyl, Royster, Voelker & Allen, P.C., Peoria Payment of Attorney s Fees on Behalf of Employees Remains Discretionary for Local Public Entities under the Tort Immunity Act Despite Collective Bargaining Agreement In Winston v. O Brien, Nos & , 2014 WL (7th Cir. Nov. 14, 2014), the plaintiff sought attorney s fees from the City of Chicago after succeeding in a civil rights case against one of its employees. The plaintiff claimed the defendant, a City of Chicago police officer, handcuffed him and then tasered and punched him repeatedly. Winston, 2014 WL , at *1. After a jury trial, the plaintiff was awarded $1 in compensatory damages and $7,500 in punitive damages. Id. Thereafter, the plaintiff sought $336,918 in attorney s fees, of which $187,467 was awarded because the district court found the requested hourly rate too high. Id. The plaintiff then filed a motion asking the court to order the city to pay the awarded ees or indemnify the defendant for the fees under Illinois s Local Governmental and Governmental Employees Employees Tort Immunity Act, 745 ILCS 10/9-102 (TIA) based on the city s collective bargaining agreement (CBA) with its police officers. Id. at *1. The district court ruled in favor of the plaintiff, ordering the city to pay the attorney s fees. Id. at *2. The city appealed. Id. During the pendency of the appeal, the district court ordered the city to pay additional attorney s fees in the amount of $90,777, which were incurred by the plaintiff after his first request for fees. Id. The court of appeals combined its review of both orders for attorney s fees. In a civil rights action, success against an individual government employee does not necessarily entitle the plaintiff to recover fees from the employee s governmental employer. Kentucky v. Graham, 473 U.S. 159, 168 (1985). But, the plaintiff may be entitled to such fees pursuant to a state indemnification statute. Winston, 2014 WL , at *2. The TIA provides: A local public entity is empowered and directed to pay any tort judgment or settlement for compensatory damages (and may pay any associated attorney s fees and costs) for which it or an employee while acting within the scope of his employment is liable in the manner provided in this Article. 745 ILCS 10/ Upon applying rules of statutory construction, the court noted the discretionary language of the TIA with respect to attorney s fees, i.e., may pay any associated attorney s fees, versus the obligatory language with respect to compensatory damages, i.e., directed to pay any tort judgment or settlement for compensatory damages. Winston, 2014 WL , at *3 (quoting 745 ILCS 10/9-102). As a result, the Page 1 of 5

2 court of appeals noted it was within the city s discretion whether to pay attorney s fees under the TIA. Id. at *3. Despite the discretionary language of the TIA, the plaintiff argued that the city made the choice in advance to pay for attorney s fees for its officers who are liable for damages. Id. at *4. Specifically, the CBA stated that so long as an officer is acting within his or her scope of employment and cooperated with the city s defense, the city shall be responsible for, hold officers harmless from and pay for damages or monies which may be adjudged, assessed, or otherwise levied against any officer cover[ed] by [the CBA]. Id. at *1. The plaintiff argued it was not asking the court to enforce the CBA, but rather to interpret the TIA in light of the CBA. Id. at *4. The court of appeals noted, however, that attorney s fees are not expressly included in the CBA. Id. at *4. The CBA only refers to damages or monies which, if given the broadest meaning possible, could include attorney s fees. Id. The broadest interpretation, however, could also include punitive damages, the indemnification for which is prohibited under Illinois law. Id. The plaintiff argued the city acknowledged the CBA included attorney s fees in a letter from the police commander, which said the city would pay fees in compliance with the TIA. Id. The city argued however, that the letter merely acknowledged that the city would abide by Illinois law. Id. In any event, by the plaintiff s own acknowledgement, he was seeking indemnification under the TIA, not the CBA. Id. The plaintiff failed to offer sufficient basis for the court to find the CBA or the police commander s letter modified the plain language of the TIA such that a city s decision to pay for attorney s fees would now become an obligation. Id. The CBA did not even mention the TIA. Id. Furthermore, the CBA includes a grievance procedure and to interpret the CBA and the letter to require indemnification would risk sidestepping the grievance procedure and arbitration, which has an important role in federal labor regulations. Id. In conclusion, the court of appeals held that the district court erred in ordering the city to indemnify the defendant for attorney s fees. Id. at *5. Dismissal of Claims Against Law School Under Consumer Fraud Act Upheld In Phillips v. DePaul Univ., 2014 IL App (1st) , the plaintiffs were licensed attorneys who graduated from the DePaul University College of Law between 2007 and 2011 and had difficulty finding legal employment that paid a salary sufficient to allow them to repay their student loans. Phillips, 2014 IL App (1st) , 1. In a class action lawsuit, the plaintiffs alleged a claim under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act), 815 ILCS 505/1-505/12, and further asserted claims of common law fraud and negligent misrepresentation. Id. The plaintiffs alleged the defendant published employment and salary statistics that deceptively overstated the percentages of recent graduates who had obtained full-time legal employment with salaries in excess of $70,000. Id. The plaintiffs further alleged that they relied upon those statistics when enrolling and remaining enrolled at DePaul. Id. Specifically, DePaul published statistics in 2006, 2008, and 2010 reporting employment information for the preceding year s graduating class. In 2006, DePaul published that 98% of its 2005 graduates were employed within nine months of graduation in the following areas: 57% in private practice; 21% in business; 12% in government; 4% in public interest; 3% as judicial clerks; and 2% in academia. Id. 9. DePaul also stated the mean starting salaries were $82,890 in private practice and $72,637 in business. Id. The statistics published in 2008 and 2010 were similar to 2006, varying no more than plus or minus 7% in any given category. Id The mean salaries published in 2008 were the same as those published in Page 2 of 5

3 2006. Id. In 2010 the mean salaries rose to $97,056 for those in private practice and $74,267 for those in business. Id. The plaintiffs claimed these statistics were incomplete, false and materially misleading because the percentage of employment within nine months of graduation included any type of employment, not just jobs that required or preferred a Juris Doctor (J.D.) degree, not just full-time positions, and included jobs the university provided to its own graduates while studying for the bar or otherwise looking for real jobs. Id. 12. With respect to calculating the mean salaries, DePaul only used salaries from those with full-time employment, which according to the plaintiffs resulted in mean salaries that were significantly distorted to show higher salaries than statistically warranted and, therefore, were inherently misleading. Id. 13. The amended complaint asserted that as a result of their reliance on the above statistics, the plaintiffs paid tens of thousands in tuition, some of which was paid for by tuition loans, and graduated with job prospects statistically less than they would have been had they graduated from a university with the employment numbers DePaul claimed to have. Id. 1. The plaintiffs alleged damages as follows: assuming DePaul inflated its employment statistics by X percent (X to be determined) then the advantage and value of the tuition paid by the plaintiffs to DePaul was reduced by X percent. Id. 16. As a result, the plaintiffs damages were X percent of the amount they paid to DePaul plus a statistically determinable amount of the lifetime income they would have been expected to earn after graduating from DePaul if DePaul s post-graduation employment statistics had been those that DePaul had represented... less the statistically determinable amount of the lifetime income they would now be expected to earn, having graduated from DePaul, based upon DePaul s true postgraduation employment statistics. Id. 17 (emphasis in original). DePaul filed a combined motion to dismiss, which the circuit court granted. Id. 1. The plaintiffs appealed. To state a claim under the [Consumer Fraud] Act, a complaint must set forth specific facts showing: (1) a deceptive act or practice by the defendant; (2) the defendant s intent that the plaintiff rely on the deception; (3) the deception occurred in the course of trade or commerce; and (4) the consumer fraud proximately caused the plaintiff s injury. Id. 29 (citing White v. DaimlerChrysler Corp., 368 Ill. App. 3d 278, 283 (1st Dist. 2006)). The plaintiff must suffer actual damages in an action under the Consumer Fraud Act. Id. In this case, the court found that the plaintiffs failed to allege a deceptive act or practice, failed to allege facts showing the consumer fraud proximately caused the plaintiffs injury, and failed to allege actual damages. I. Failure to Plead a Deceptive Act or Practice With respect to a deceptive act or practice, the complaint must state with particularity and specificity the deceptive [unfair] manner of defendant s acts or practices.... Phillips, 2014 IL App (1st) , 32 (quoting Demitro v. General Motors Acceptance Corp., 388 Ill. App. 3d 15, 20 (1st Dist. 2009)). Deceptive acts or practices include, without limitation, the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact * * * in the conduct of any trade or commerce. Id. 33 (quoting 815 ILCS 505/2 (1973)). The plaintiffs alleged the defendant committed deceptive acts or practices when failing to note the percentages of graduates in positions not requiring a J.D. degree or in part-time positions in relation to those employed within nine months of graduation, causing the plaintiffs to believe that the data reported related only Page 3 of 5

4 to full-time legal employment. Id. 39. The defendant never stated that the statistics reported only included those in full-time legal employment and otherwise never made any affirmative misrepresentations of the statistics. The appellate court found the plaintiffs interpretation of the general employment statistics reported by the defendant unreasonable as a matter of law. Id. The court pointed to other recent cases in New York with similar findings of unreasonableness with respect to law graduates interpretation of their respective law schools statistics. Id. 40 (citing, e.g., Gomez-Jimenez v. N. Y. Law Sch., 956 N.Y.S.2d 54, 59 (N.Y. App. Div. 2012)). As for the percentages of employment within specific areas, only the areas of private practice and judicial clerkships presumably require or prefer a J.D. degree. Phillips, 2014 IL App (1st) , 41. None of the other areas reported, namely business, governmental, academia, and public interest, expressly excluded employment as a non-attorney in the reporting. Id. In further support of finding no deceptive act or practice, the court of appeals acknowledged that it must consider all of the information available to the plaintiffs. Id. 43 (citing Bober v. Glaxo Wellcome PLC, 246 F.3d 934, (7th Cir. 2001)). In addition to the reported employment statistics at issue, the plaintiffs had information available to them provided by the American Bar Association (ABA) regarding the defendant s graduates employment statistics and the Official Guide to ABA-Approved Law Schools (ABA Guides), which expressly indicate those reported employment statistics include legal, non-legal, full-time and part-time jobs. Phillips, 2014 IL App (1st) , 43. Concerning the plaintiffs allegations related to the defendant s reporting of salaries for only those in full-time positions, the salaries were listed as averages, meaning that some of the graduates earned more than the average while others earned less than the average. Id. 46. No promises were made that the plaintiffs would earn at or above the salaries reported and furthermore, the ABA Guides expressly stated, [t]he highest-paying jobs were the exception rather than the rule. Id. In conclusion, the court of appeals found the plaintiffs did not plead a deceptive act or practice. Notably, because the court did not find the reported employment statistics to contain any incomplete, false, or misleading statements, the plaintiffs claims under common law fraud and negligent misrepresentation also failed. Id. 72, 88. II. Failure to Plead Proximate Causation In reaching the decision that the plaintiffs failed to allege proximate causation, the appellate court noted that a graduate s success in becoming employed and achieving a particular salary is dependent on a number of factors, including without limitation: the economy, the availability of legal jobs, his or her academic performance, practical experience, efforts in obtaining legal employment, geographic area in which employment is sought, whether he or she seeks employment in the public sector or private practice, and so on. Id. 52. Proximate cause has two requirements: (1) the cause in fact, i.e., the but for cause, and (2) the legal cause, i.e., that the injury was a foreseeable consequence of the misrepresentation. Id. 50. Due to the number of factors affecting job placement and salary, the court of appeals could not say that but for the employment information for the 2005, 2007, and 2009 classes at issue here that plaintiffs would have obtained their desired jobs/salaries even upon graduation from different law schools. Id. 54. Because of the same factors, the court of appeals could not say the plaintiffs disappointing post-graduate employment status was a foreseeable consequence of the plaintiffs decisions to attend DePaul in reliance on the reported employment statistics. Id. 55. As a result, the plaintiffs failed to plead proximate causation under the Consumer Fraud Act. Page 4 of 5

5 III. Failure to Plead Damages A plaintiff must suffer actual damages to bring a claim under the Consumer Fraud Act, and the claim must not be predicated on mere speculation, hypothesis, conjecture, or whim. Id. 57. The court noted the plaintiffs received exactly what they paid for, i.e., a J.D. degree. Id. 59. Additionally, the calculation methods suggested by the plaintiffs (X percent as the loss in value the tuition paid and the difference in expected lifetime earnings) were based on the defendant s generalized employment statistics consisting of averages from past classes. Id The statistics did not constitute any promise to the plaintiffs as to what they would actually receive, and as a result, the court did not see how the plaintiffs were actually damaged. Id Similar to Gomez-Jimenez, the court of appeals noted the calculation methods were speculative, especially given the number of factors that impact an attorney s lifetime earnings and the lack of any certainty in predicting the impact of the factors on any plaintiff. Id. 60, 65. The plaintiffs claims were ultimately dismissed with prejudice, which the plaintiffs also contended was error. Id. 90. Notably, the claims that were the subject of the appeal were raised in an amended complaint, which the plaintiffs did not ask leave of the court to file. Id. 91. The court of appeals upheld the dismissal with prejudice noting the absence of any absolute right to amend pleadings, and citing to Matanky Realty Grp., Inc. v. Katris, 367 Ill. App. 3d 839, 844 (1st Dist. 2006), which similarly upheld the dismissal of the plaintiff s complaint with prejudice, where no exercise of that discretion was requested because the record demonstrates that plaintiff never sought leave to amend its complaint. Phillips, 2014 IL App (1st) , 91 (quoting Matanky Realty, 367 Ill. App. 3d at 844). About the Author Stacy E. Crabtree is an associate in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. She represents businesses, not-forprofits, and governmental entities in commercial and tort litigation in state and federal court. She also assists clients with commercial transactions, corporate governance, and compliance issues. Ms. Crabtree received her J.D., summa cum laude, from Florida Coastal School of Law and B.A., summa cum laude, from Bradley University. About the IDC The Illinois Association Defense Trial Counsel (IDC) is the premier association of attorneys in Illinois who devote a substantial portion their practice to the representation of business, corporate, insurance, professional and other individual defendants in civil litigation. For more information on the IDC, visit us on the web at Statements or expression of opinions in this publication are those of the authors and not necessarily those of the association. IDC Quarterly, Volume 25, Number Illinois Association of Defense Trial Counsel. All Rights Reserved. Reproduction in whole or in part without permission is prohibited. Illinois Association of Defense Trial Counsel, PO Box 588, Rochester, IL , , , Page 5 of 5

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