Seville Staffing v. State of Illinois

ORDER

BIRNBAUM, CJ.

THIS MATTER is before the Court on Respondent's Motion to Dismiss pursuant to Section 2-615 and Section 2-619 of the Code of Civil Procedure 735 ILCS 5/2-615.

NATURE OF THE CLAIM

The Claimant entered into a Master Staffing Contract with The Illinois Department of Central Management Services from September 29, 2011 through September 28, 2015. Multiple state agencies utilized the Staffing contract, including the Illinois Department of Public Health, the Illinois Mathematics and Science Academy, the Illinois State Police, the Historic Preservation Agency, the Illinois Department of Human Services, the Department of Revenue, and the Emergency Management Agency.

The Claimant alleges that multiple invoices have been submitted to the Respondent Agencies and that the invoices have not been paid. The Claimant has filed, or intends to file, lapsed appropriation claims in this Court for the amount of the unpaid invoices. To be precise, Claimant alleges that Respondent has not paid Claimant for all of the work completed under Contract No. CMS2570910, reflected in dozens of invoices, dating from 2013, 2014, 2015 and 2016. Claimant has currently pending claims in the amount of approximately $600,000.00, which have been presented to this Court in the form of Claimant's previously filed lapsed appropriation claims.

On or about August 2015, when Respondent ceased making payments to Claimant for Contract No. CMS2570910, and when Claimant sent Respondent a letter notifying it that Claimant would no longer be able to perform on State contracts funded by the General Fund, BMO Harris placed Claimant in its “Special Asset Management Unit,” conducted an audit, and paid down Claimant's credit line with the payments Claimant received from the Vendor Assistance Payment Program (VAP). At that point, Claimant alleges, it had no working capital, and was forced to give several contracts away to a minority-owned firm outside the state. Meanwhile, Claimant accuses the State of the following ongoing State procurement operations during the budget impasse, continuing advertising for the Business Enterprise Program and VAP funding to State vendors. Claimant is seeking damages for loss of business value, damages from actual or constructive fraud, and punitive damages.

CLAIMS ARISING FROM ALLEGED VIOLATIONS OF CLAIMANT'S RIGHTS [*146] 1. Actual or Constructive Fraud by the State’s Acts.

The thrust of Claimant's arguments for actual or constructive fraud is that the State’s continuous and ongoing advertising for BEP small business vendors, and the State’s and VAP’s previous and ongoing advertising for the VAP as a way for BEP vendors to get paid constitutes a public “statement” and “advertisement” pursuant to 815 ILCS 505/1(a) and 815 ILCS 505/1(f). Claimant argues that these public “statements” and “advertisements” are inaccurate and untrue in that Respondent knew or should have known that Claimant would, at most, be paid for 90% of the value of its work, through a third party and through mechanisms not stated clearly or completely, and only for selected invoices and time periods.

Claimant alleges the Respondent's ongoing advertising for BEP and small business vendors is also untrue because the State knew or should have known that Claimant would not be paid in a timely manner or at all, and would instead “assist in funding the State’s disastrous impasse by involuntarily loaning funds.” In sum, Claimant avers, the State: 1) Advertised that Claimant had access to payments for its work from the VAP procedure, while knowing that this process results in limited or no payments, 2) Failed to pay Claimant for part or all of its services, and, 3) Required by contract and statute that Claimant's sole remedy is through this Court, “well knowing that this process results in no payments.” In this manner, Claimant alleges Respondent has violated the Consumer Fraud and Deceptive Business Practices Act, 30 ILCS 505.

2. Criminal Acts Analogous to State Behavior.

Claimant includes in its Complaint that if Respondent were a “person,” they could be prosecuted under the following sections of the Illinois Criminal Code: 720 ILCS 5/16-1, Theft of Property; and 720 ILCS 5/16-3, Theft of Property, Labor or Services of Another.

3. The State’s Contractual and Constitutional Violations.

Claimant states that, in general, Respondent, as Claimant's employer, must comply with the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq., and the Fair Labor Standards Act, 29 USC Section 201 et seq., and that Respondent violated its own contract with Claimant (Contract No. CMS2570910) because although payment was subject to availability of funds, those funds were to be withheld only in the context of continuing performance, not refusal to pay for services already delivered and accepted.

In refusing to pay, the State has interfered with Claimant's contractual rights under Article I, Section 16 of the Illinois State Constitution, and that provision’s counterpart in the U.S. Constitution (U.S. Const., art. I, Section 10, cl. 1), as well as Claimant's equal protection rights under Article IV, Section 2 of the U.S. Constitution, for Claimant's previous payments to hundreds of employees who were performing work for the State for which Claimant has not been compensated.

Claimant states that if Respondent is paying some, but not other, State vendors, it could constitute preference for one vendor over another in violation of Claimant's equal protection rights.

[*147] 4. The State’s Unjust Enrichment and Conversion of Claimant's Assets.

Claimant alleges that: 1) Claimant has a right to its payment; 2) The State is holding these payments wrongfully in its control; and 3) Claimant has made demand for possession of such funds by submitting the proper documentation to the appropriate State agencies, and by filing lapsed appropriation claims in this Court.

Because the state has unjustly retained the amounts due to Claimant, it has committed unjust enrichment.

5. Claimant's Loss of Business Value.

Claimant included a copy of its June 2015 financial statement sealed for in camera inspection by this Court. The statement purportedly shows that Claimant was on track to record a one million dollar gain in positive net income, similar to the previous year. In depriving Claimant of its funds, the State has caused Claimant to be valued at zero or less, to be ineligible for bank credit at commercial rates, and to experience a fatal lack of working capital. With insufficient working capital, Claimant was forced to give away lucrative contracts for no consideration. Its options for regaining its financial footing were dramatically restricted, and it has had to pursue “low cash” means of pursuing new business.

LEGAL STANDARD

A Section 2-619 motion to dismiss admits all well-pleaded facts in the complaint together with all reasonable inferences that can be drawn from those facts in the plaintiff’s favor, but raises other defects or defenses that bar the claims. Redwood v. Lierman, 331 Ill. App. 3d 1073, 1076, 772 N.E.2d 803, 808 (4th Dist. 2002); 735 ILCS 5/2-619. The Court must also consider whether the defendant presents facts constituting an affirmative defense defeating the plaintiff’s claims. Prodromos v. Poulos, 202 Ill. App. 3d 1024, 1028, 560 N.E.2d 942, 946 (1st Dist. 1990).

A Section 2-615 motion to dismiss challenges the legal sufficiency of the complaint. Napleton v. Village of Hinsdale, 229 Ill. 2d 296, 305, 891 N.E.2d 839, 845 (2008); Zahl v. Krupa, 365 Ill. App. 3d 653, 657, 850 N.E.2d 304, 309 (2nd Dist. 2006). The question presented is whether the allegations of the complaint, when viewed in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief can be granted. Borowiec v. Gateway 2000, Inc., 209 Ill. 2d 376, 382, 808 N.E.2d 957, 961 (2004).

ANALYSIS

We will analyze Claimant's claims in the order in which they are summarized above. First, the claim of Fraud and Deceptive Advertising. When interpreting the meaning of the provisions of the Act, we are bound to ascertain and give effect to the true intent of the legislature. See People ex rel. Director of Corrections v. Booth, 215 Ill. 2d 416, 423, 294 Ill. Dec. 157, 830 N.E.2d 569 (2005). While the Claimant offers various theories as to why the legislature intended to include the State of Illinois in its definition of “Person” when it enacted section 5 of the Act, it is well established that the best evidence of legislative intent is the [*148] language in the statute itself. See Illinois State Treasurer v. Illinois Worker’s Compensation Commission, 30 N.E.3d 288, 295 (2015). That language must be given its plain and ordinary meaning. Id. If the statutory language is clear, courts must not read into it exceptions, limitations, or conditions that the legislature did not express. Solich v. George & Anna Portes Cancer Prevention Center of Chicago, Inc., 158 Ill. 2d 76, 83 196 Ill. Dec. 655, 630 N.E.2d 820 (1994).

We agree with Respondent that the legislative intent of 815 ILCS 505/1 et seq. is very clear by the language. If the legislature intended to include the State in its definition of “Person,” it would have done so. For this Court to hold that the State is included in the definition of “Person” because it is a “legal entity” would create ambiguity in the statute where none exists. “Legal entity” is specifically listed in 820 ILCS 505/5; the State is not. We therefore dismiss the allegations of fraud made under the Consumer Fraud and Deceptive Business Practices Act pursuant to Section 2-615 of the Code of Civil Procedure 735 ILCS 5/2-615.

Next, while Claimant urges this Court to consider the Illinois Criminal Code when analyzing the actions of the State, Claimant has pleaded no claim under this law; and, as Claimant makes clear, the Illinois Criminal Code does not apply to the State.

With respect to Contract No. CMS2570910, we agree with Respondent that there was no breach of contract: the terms of payment clearly state that payments to Claimant for services rendered were subject to available State funds. Moreover, Respondent had a generous termination provision that allowed it to terminate its obligations under the contract for any reason whatsoever. There is no dispute that Claimant provided Respondent Agencies with temporary and day labor services, and that Claimant pursued payment of unpaid invoices in the form of lapsed appropriation cases filed with this Court. However, based on the explicit terms of the contract, the State’s non-payment and subsequent handling of Claimant's unpaid invoices through the VAP does not amount to a breach of that contract between Respondent and Claimant.

Moreover, this Court lacks jurisdiction over constitutional claims. Smart v. State, 48 Ill. Ct. Cl. 38, 43-44 (1995). Therefore, we dismiss Claimant’s allegations of violations of the Illinois and U.S. Constitution pursuant to Section 2-619 of the Code of Civil Procedure 735 ILCS 5/2-619.

Similarly, this Court lacks jurisdiction over Claimant’s unjust enrichment claim. Wulf v. State, 51 Ill. Ct. Cl. 383, 389 (1999). We agree with Respondent that Claimant has not pled facts sufficient enough to make a claim for conversion. It has not identified with specificity what money Respondent allegedly converted. Moreover, the essence of conversion is not the acquisition of property by the wrongdoer, but wrongfully depriving a person of the property he or she is entitled to possess. An act of conversion consists of an act in derogation of the plaintiff’s possessory rights. We have already established that Respondent's withholding and then stopping payments owed to Claimant under its contract was not wrongful.

Finally, the Claimant has the burden of proving his damages and absent such proof, no award may be entered. Harris v. State, 41 Ill. Ct. Cl. 184 (1989). We dismiss Claimant's claim for loss of business value pursuant to Section 2-615 because it is far too speculative. Claimant's June 2015 financial statement is an estimate of the profits that Claimant might have retained that [*149] year. Moreover, Claimant has not plead with specificity which contracts it had to relinquish to another minority-owned business out of state, or that after 2015, Claimant's business value was decimated.

For all of these reasons, IT IS HEREBY ORDERED that Respondent's Motion to Dismiss is GRANTED.