MAXWELL MANOR INC v. STATE OF ILLINOIS (2013)

OPINION

This cause coming on to be heard on Respondent's Motion to Dismiss Claimant's Second Verified Complaint. Oral argument having been heard and the Court being fully advised in the premises:

I. BACKGROUND AND PROCEDURAL HISTORY

On January 19, 2001, Claimant filed a Complaint against the State of Illinois pursuant to section 22 of the Illinois Court of Claims Act. Claimant alleges that it is owed monies for services it rendered in accordance with the Medicaid Provider Agreement. Claimant further alleges the Illinois Department of Public Aid n/k/a the Illinois Department of Healthcare and Family Services (“HFS”) has refused and continues to refuse to pay Maxwell Manor for the services it rendered.

Claimant previously operated a nursing home that served patients that were recipients of medical programs administered by HFS. Claimant had a Medicaid Provider Agreement with HFS, and provided services to various Medicaid recipients from March 1990 through October 16, 1998. Claimant's claim seeks compensation from HFS in the amount of at least $4,095,431.88.

On February 26, 2003, Respondent filed a Motion to Dismiss on the basis that Claimant's Complaint was deficient in pleading the elements required by the Court of Claims rules and for failure to comply with the applicable statute of limitations.

On April 26, 2005, the Court granted Respondent's Motion to Dismiss on the grounds that Claimant's Complaint plead only general allegations and did not meet the requirements of specific allegation pleading. The Court did not rule on the statute of limitations issue and granted Claimant leave to file an Amended Complaint.

On May 26, 2005, Claimant timely filed a Verified Amended Complaint. However, on October 4, 2005, Claimant sought leave from the Court to file a Second Amended Verified Complaint on the basis that there were a number of typographical and other errors in its initial Amended Complaint. Claimant also alleged that it wished to attach new documents which supported its claim.

On June 8, 2009, Claimant was granted leave to file its Second Amended Verified Complaint. Respondent filed a Motion to Dismiss the Second Amended Verified Complaint.

II. APPLICABLE LAW AND LIMITATION PERIODS

A. Court of Claims Act 705 ILCS 505/22 (b)

Under the Court of Claims Act, 705 ILCS 505/22 (b), medical vendors such as Claimant have one year from the accrual of their cause of action within which to file their claim with the Court of Claims, or the claim will be time barred. Section 22 of the Court of Claims Act states in part that: “every claim cognizable by the Court and not otherwise sooner barred by law shall be forever barred from prosecution therein unless it is filed with the Clerk of the Court within the time set forth as follows:

(b) All claims cognizable against the State by vendors of goods or services under “The Illinois Public Aid Code”, approved April 11 1967, as amended, must file within one year after the accrual of the cause of action, as provided in section 11-13 of that Code. 750 ILCS 505/22.

B. Public Aid Code 305 ILCS 5/11-13

The Public Aid Code, 305 ILCS 5/11-13, provides the methodology by which the accrual dates of causes of action for such medical vendor claims are determined. Section 11-13 of the Illinois Public Aid Code states in part that:

Vendors seeking to enforce obligations of a governmental unit or the Illinois Department for goods or services (1) furnished to or in behalf of recipients and (2) subject to a vendor payment as defined in Section 2-5, shall commence their actions in the appropriate Circuit Court or the Court of Claims, as the case may require, within one year next after the cause of action accrued.

A cause of action accrues within the meaning of this section upon the following date:

(1) If the vendor can prove that he submitted a bill for the service rendered to the Illinois Department or a governmental unit within 12 months of the date the service was rendered, then (a) upon the date the Illinois Department or a governmental unit mails to the vendor information that it is paying a bill in part or is refusing to pay a bill in whole or in part, or (b) upon the date one year following the date the vendor submitted such bill if the * Illinois Department or a governmental unit fails to mail to the vendor such payment information within one year following the date the vendor submitted the bill;

or

(2) If the vendor cannot prove that he submitted a bill for the service rendered within 12 months of the date the service was rendered, then upon the date 12 months following the date the vendor rendered the service to the recipient.

305 ILCS 5/11-13.

ANALYSIS

A. Any claim for services rendered by Claimant prior to January 1, 1998 is unquestionably time barred.

Under 705 ILCS 505/22 and 305 ILCS 5/11-13 medical vendors such as Claimant have a maximum of three years from the date of service within which to file a claim with the Court of Claims. Claimant's claim covers the time period from March 1990 through October 16, 1998, and Claimant filed its claim with the Court of Claims on January 19, 2001. For any claim for services rendered prior to January 1,1998, Claimant's latest possible accrual of its last cause of action under 305 ILCS 5/11-13 would have been December 31, 1999. Therefore, since Claimant filed its Court of Claims action on January 19, 2001, any claim for services rendered prior to January 1, 1998 is barred by the limitation periods set forth in 705 ILCS 505/22 and 305 ILCS 5/11-13.

B. As a claim made by a nursing home, any claim for services rendered by Claimant from January 1, 1998 through October 16, 1998 would have accrued under 305 ILCS 5/11-13 (2) no later than one year from the last date of service (i.e. October 16,1999), and is therefore time barred.

Claimant operated a nursing home, therefore any claim for services rendered by Claimant from January L 1998 through October 16, 1998 would have accrued under 305 ILCS 5/11-13 (2) no later than one year from the last date of service (i.e. October 16, 1999), and is therefore time barred.

Since July 1,1992, nursing homes such as Claimant are paid by HFS through a unique paperless billing process. The Court of Claims in Cahokia Nursing and Rehabilitation Center, et al. v. State, 59 Ill.Ct.Cl. 278, 280-282 (2006), provides a detailed outline of this payment process, Id. Generally, nursing homes do not submit bills to HFS in order to seek payment for their services. Id. Rather, after a given service month has ended, HFS will send to the nursing home a document entitled a Prepayment Report. Id. The Prepayment Report is an estimate of what HFS believes is owed to the nursing home for a given month of service. Id. After receipt of the Prepayment Report, the nursing home has a right to review it and submit any necessary adjustments to HFS, which then will make its payment for that month of service. Id. If the nursing home chooses to make no adjustments to the Prepayment Report, then HFS will just make its payment based on the original Prepayment Report. Id.

In another matter, which is applicable to the case at bar, Jamestown Management Corp. et al. v. State, 59 Ill.Ct.Cl. 240 (2006), the claimants were nursing homes seeking compensation from HFS for services rendered to Medicaid recipients in their facilities. The case was decided on the issue of limitation periods set forth in 705 ILCS 505/22 and 305 ILCS 5/11-13. Id. The Court rejected the claimants' argument that the accrual of their cause of action was determined by 305 ILCS 5/11-13 (1) and the date of the HFS Remittance Advice [which contains specific claim information and accompanies payment]. Id. Rather, given the unique system for the payment of nursing homes, the Court in Jamestown Management Corp. applied 305 ILCS 5/11-13 (2) to determine the accrual date of the claimants' causes of action. Id.

Based on the Court's ruling in Jamestown Management Corp., Claimant's causes of action should be governed by 305 ILCS 5/11-13 (2) (i.e. one year from the month of service at issue). Therefore, according to 305 ILCS 5/11-13 (2), Claimant's claim for services rendered from January 1, 1998 through October 16, 1998 would have accrued no later than October 16, 1999. Pursuant to 705 ILCS 505/22 Claimant had until October 16, 2000 to file its claim for these services. However, Claimant did not file its claim with the Court of Claims until January 19, 2001.

C. Monies due Claimant and set off by Respondent

Pursuant to Claimant's Exhibit A, #13 to the Verified Amended Complaint, HFS intercepted two payments due to Claimant, to wit: $12,361.31 (Warrant #AA8868643) and $165,304.65 (AA8483464). Respondent's departmental report filed with the Court on April 27, 2001 acknowledges that two payments in the amount of $12,361.31 and $165,304.65 were due and owing to Claimant, but were subsequently intercepted by HFS. Respondent's departmental report further indicates that a payment of $2,967.38 was sent by HFS to the subsequent owner of Claimant's facility. Therefore, based upon Respondent's departmental report Claimant is due $174,698.58.

Respondent has filed with the Court information that on July 20, 2005, a final administrative decision was issued by HFS holding that Claimant owed HFS $1,167,624.27. On December 3, 2007, this final administrative decision was upheld by the Circuit Court of Cook County, and a judgment in the amount of $1,167,624.27 was entered against Claimant. On April 30, 2009, that judgment of $1,167,624.27 was affirmed by the Appellate Court of Illinois (1st Dist.) in Maxwell Manor, Inc. v. Illinois Department of Healthcare and Family Services et al, Case no. 1-07-3568.

Based upon Respondent's departmental report, Claimant is due an award in this case of $174,698.58. The Court of Claims Act provides, however, that awards made by the Court are subject to the right of set-off. See 705 ILCS 505/26. Therefore, Claimant's award of $174,698.58 should be applied to HFS' judgment against Claimant in the amount of $1,167,624.27. The amount due of $174,698.58 is thereby extinguished, and no actual award is due to Claimant.

CONCLUSION

Claimant alleges that is it is owed monies for services it rendered in accordance with the Medicaid Provider Agreement. Claimant further alleges that the Illinois Department of Public Aid n/k/a the Illinois Department of Healthcare and Family Services (“HFS”) has refused and continues to refuse to pay Maxwell Manor for the services it rendered. However, any claim for services rendered prior to January 1,1998 is unquestionably barred by the limitation periods set forth in 705 ILCS 505/22 and 305 ILCS 5/11-13. In addition, Claimant was a nursing home, therefore any claim for services rendered by Claimant from January 1, 1998 through October 16, 1998 would have accrued under 305 ILCS 5/11-13 (2) no later than one year from the last date of service (i.e. October 16, 1999), and is therefore time barred. Finally, Claimant had a judgment entered against them in the amount of $1,167,624.27 in favor of HFS. Therefore the amount of $174,698.58 that HFS' departmental report acknowledges is due to Claimant should be applied and set-off against that judgment of $ 1,167,624.27.

IT IS THEREFORE ORDERED that Respondent's motion be, and the same is, hereby granted, and Claimant's Second Amended Verified Complaint herein is dismissed with prejudice.

DISSENT

KUBASIAK, J.

With respect to the claims for services rendered prior to January 19, 1998, I agree with the majority that such claims should be barred under 705 ILCS 505/22 and 305 ILCS 5/11-13(1)(b). However, with respect to the majority's application of 305 ILCS 5/11-13(2) to the claims for services rendered after January 19, 1998, 1 respectfully disagree. The corrections to the C-13 vouchers should have been treated as bills, and thus the Court should have applied section 5/11-13(1) to the claims for services rendered after January 19, 1998. Claimant relied on the affirmative statements of the State in a notice stating that corrections to the C-13 vouchers would be treated as bills. Thus, section 5/11-13(1) should be invoked, preventing the Respondent from claiming no bills were submitted and unfairly prejudicing the Claimant.

I. This case is a contract claim, which is within our jurisdiction.

This Court has appropriate jurisdiction to enforce a contract. While it is true that this Court lacks the power to hear cases sounding purely in equity, that does not mean the Court may not apply equitable estoppel in order to enforce a contract. Here, the Court should apply equitable estoppel to prevent Respondent from stating that the bill was not submitted. The majority incorrectly applied section 11-13(2), finding that no bill was submitted and ignored the affirmative statements made by Respondent that the corrections to the C-13 vouchers would be treated as such.

The United States Supreme Court has been hesitant to create a rule stating that equitable estoppel may not be applied against the government. United States v. Locke, 471 U.S. 84, 112, 105 S. Ct. 1785, 1802, 85 L. Ed. 2d 64 (1985). In United States v. Locke, the Court stated: “our previous decisions would not necessarily bar application of the doctrine of equitable estoppel.” Id.

While this Court may not grant equitable remedies, that does not mean this Court lacks general jurisdiction to adjudicate “equitable” causes of action. In fact, such causes of action lie squarely within our jurisdictional grant. As this Court's Judge Epstein has noted, the limitation on our equitable jurisdiction is not absolute, rather it is simply that this Court's “focus necessarily is those equitable claims that can give rise to damages and declaratory judgments, i.e., where this Court can grant some form of relief …. [including] promissory and equitable estoppel.” Garimella v. Board of Trustees of the University of Illinois, 50 Ill.Ct.Cl. 350, 365-66 (1996) (Epstein, J. Concurring).

Section 8 of the Court of Claims Act grants this Court exclusive jurisdiction “[t]o hear and determine …”:

(a) All claims against the State founded upon any law of the State of Illinois, or upon any regulation there under ….

(b) All claims against the State founded upon any contract entered into with the State of Illinois.

…

(d) All claims against the State for damages in cases sounding in tort, if a like cause of action would lie against a private person or corporation in a civil suit…

705 ILCS 505/8 (emphasis added). Section 8 goes on to include a list of jurisdictional exclusions. See, e.g. 705 ILCS 505/8(a) (excluding from our jurisdiction claims arising under the Workers' Compensation Act and the Workers' Occupational Disease Act among other exclusions). As Judge Epstein has noted, section 8 includes no exclusion of equitable claims, and we must take that omission to be intentional. Garimella, 50 Ill.Ct.Cl. at 366 (Epstein, J. Concurring).

Further, this Court has tort jurisdiction limited expressly to “damages.” 705 ILCS 505/8(d). If our underlying jurisdiction already excluded equity claims, that limitation would be superfluous. Beyond the facial reading of the current Court of Claims Act, Judge Epstein has conducted an exhaustive survey of its predecessors, dating back to the 1877 Statute, all of which show “affirmatively that equitable claims and defenses were contemplated and included in the jurisdiction of this Court from the outset.” Garimella, 50 Ill.Ct.Cl. at 369 (Epstein, J. Concurring).

In the instant case, Claimant's complaint sounds in contract, an area over which this Court has jurisdiction. 705 ILCS 505/8(b). Estoppel in this case is raised to preclude Respondent from invoking the statute of limitations, rather than to replace Claimant's contract claim. Thus, we can apply the doctrine of estoppel to address Respondent's statute of limitations argument. Correctional Medical, Services., Inc. v. State, 58 Ill.Ct.Cl. 190, 199 (2006) (Noting that this is a “fine” distinction, but an important one). While estoppel against the State is disfavored in Illinois, it is not precluded. Correctional Medical Services, Inc., 58 Ill.Ct.Cl. at 199; Mickey v. Illinois Central Railroad Co., 35 ILL.2d 470 (1966).

II. The fact that the State in the notice said that the C-13 vouchers would be treated like bills, is enough to establish that the State should be estopped from applying 5/11-13(2).

Respondent should be estopped on equitable grounds from invoking the statute of limitations in this case. In implementing the C-13 voucher system, a “unique paperless billing process,” Respondent eliminated the possibility of filing formal bills, thus nullifying the application of section 11-13(1), which would allow Claimant's claim to accrue on the date that Respondent finally refused to pay the amount billed by Claimant.

The Respondent's position places form over substance in the application of section 11-13(2). Claimant identifies a July 24, 1996 public notice issued to all long-term care providers entitled “Time Limit for Bill Submittal.” In that notice, Respondent acknowledges that it no longer receives “bills,” but that corrections to the C-13 voucher prepayment amounts are considered claims for payment and must be submitted to Respondent within 12 months of the date of service. This notice effectively told Claimant that they should not bill the State but that the C-13 vouchers would be treated as bills. The fact that Respondent in the notice said they would be treated as bills is enough that the Respondent should be estopped from applying the (particular) relied upon statute of limitations. Therefore, section 11-13 (1)(a) should apply. This would result in the claim accruing when Respondent refused to pay the disputed claim on March 10, 2000.

III. This case is distinguishable from Jamestown.

The majority bases its decision on the holding in Jamestown Management Corp. et. al v. State, 59 Ill.Ct.Cl. 240 (2006). In that case, the Court rejected an argument by the claimant that corrections of prepayment amounts should constitute formal bills and trigger section 11-13(1). Id. at 244. The Court rejected that argument, stating that the claimant bore the burden of proving that it had submitted a formal bill and could not meet its burden. Id.

The Jamestown claimant also argued, as Claimant does in the instant case, that even if section 11-13(2) applied, the statute of limitations should have been deemed to begin to run when the respondent issued its denial of the claimant's dispute. Id. at 243. The Court, however, stated that it had no authority to make such a ruling, because the claimant's argument was ““one of equity and fairness.” Id. The Court went on to explain that “the Court of Claims does not have equitable jurisdiction” and could not change when the statute of limitations begins to run. Id. at 244. The Court ultimately determined that the claimant had relied upon the respondent's “inactions or lateness in reviewing or paying a bill,” that the “[claimant's reliance was misplaced,” and that the statute of limitations could not be tolled for that reliance. Id.

This case is distinguishable from Jamestown in that here, the Claimant's argument is based on the affirmative statements made by the State. In contrast, the claimants in Jamestown argued purely out of equity and fairness. The Court rejected their argument that because the claimants were directed by IDPA not to submit a bill, equity and fairness demand the application of section 11-13(1). Id. at 242. In contrast, here the Claimant does not argue simply that it was directed not to submit a bill, but that Respondent made an affirmative statement that the corrections to the C-13 vouchers would be treated as bills. The claimants in Jamestown did not argue that such an affirmative position was made by the State.

IV. Conclusion

I respectfully disagree with the majority's holding for the Respondents motion to dismiss.

SPRAGUE, J.