Williams v. Merle Pharmacy Inc et al

Filing 99

OPINION & ORDER entered by Judge Joe Billy McDade on 8/28/2017. For the reasons stated above, Defendants' "Motion For Partial Summary Judgment (as to Counts VII, VIII and IX of the Plaintiff's Second Amended Complaint)" 80 and Motion to Strike 89 are DENIED. So Ordered. See full written Opinion and Order. (VH, ilcd)

E-FILED

Monday, 28 August, 2017 02:37:21 PM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION

RHONDA S. WILLIAMS,
Plaintiff,
v.
MERLE PHARMACY, INC., CENTRAL
ILLINOIS MEDICAL EQUIPMENT,
INC., AND WILLIAM M. MARTIN,
Defendants.

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Case No. 15-cv-1262

OPINION&ORDER
Before the Court is the Defendants’ “Motion For Partial Summary Judgment
(as to Counts VII, VIII and IX of the Plaintiff’s Second Amended Complaint)” (Doc.
80). In their motion, Defendants argue that summary judgment is appropriate on the
three retaliation based claims of the Second Amended Complaint (Doc. 36) because
the Plaintiff has no evidence that she complained to authorities that the Defendants
were specifically violating Medicare regulations before she was terminated. Also
before the Court is Defendants’ “Motion To Strike Exhibit 8 To The Plaintiff’s
Response To The Defendants’ Motion For Partial Summary Judgment” (Doc. 89). For
the reasons stated below, both motions are DENIED.
BACKGROUND
I.

Synopsis Of The Facts Giving Rise To The Claims At Issue
Plaintiff worked for Defendants in their pharmacy and medical equipment

supply businesses that operated out of the same location. One of her duties was to

deliver medications to customers. In the course of those duties, Plaintiff delivered
medications to Carol Hanover, an elderly woman. Plaintiff came to understand that
Hanover was being charged directly for medication instead of through insurance. She
suspected that Hanover had Medicare. She thought it was odd that an elderly
customer was being charged directly for medications so she began investigating why.
In April or May of 2014, a coworker confirmed to Plaintiff that Hanover did not have
Medicare Part D prescription drug coverage to even be billed by Merle. However,
Hanover apparently had Medicare coverage through a Blue Cross/Blue Shield
program for equipment and supplies being sold to her by CIME. There is no evidence
before the Court that Hanover’s Medicare coverage through a Blue Cross/Blue Shield
carried a prescription drug benefit. Between the end of June and early July, 2014,
Plaintiff contacted the office of the State’s Attorney to report the potential financial
exploitation of Hanover and seek guidance regarding how to report the situation so
that an investigation by the proper authorities would be conducted. On July 29, 2014,
she was terminated by Defendant Martin.
II.

History Of The Case
The Amended Complaint (Doc. 12) originally consisted of nine counts alleging

violations of the federal Fair Labor Standards Act, 29 U.S.C. § 207 et. seq. (the
“FLSA”) (Counts I and II), the Illinois Minimum Wage Law, 820 Ill. Comp. Stat. 105/1
et. seq. (the “IMWL”) (Counts III and IV), the Illinois Wage Payment and Collection
Act, 820 Ill. Comp. Stat. 115/1 et. seq. (the “IWPCA”) (Counts V and VI), Illinois
common law of retaliatory discharge (Count VII), the Illinois Whistleblower Act, 740
Ill. Comp. Stat. 174/1 et. seq. (the “IWA”) (Count VIII), and the Illinois Adult
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Protective Services Act (the “APSA”), 320 Ill. Comp. Stat. 20/1 et. seq. (Count IX).
Plaintiff initially pled insufficient facts to sustain Counts II, IV, V, VII and VIII (Doc.
21) and so the Court dismissed those Counts after the Defendants moved the Court
to do so. The various wage law claims are not relevant to the disposition of the
motions sub judice and will not be discussed further.
The Court found that Counts VII and VIII, the Illinois common law retaliatory
discharge claim and the Illinois Whistleblower Act claim respectively, were
insufficiently pled. As to Count VII, the common law retaliatory discharge claim, the
Court found that the Plaintiff had not pled facts that demonstrated it was plausible
that her discharge violated a clear mandate of public policy. As recognized by the
Seventh Circuit, to properly allege an Illinois claim of retaliatory discharge, one must
allege he has suffered an adverse employment action in retaliation for his activities,
and that the discharge violates a clear mandate of public policy. Belline v. K-Mart
Corp., 940 F.2d 184, 186 (7th Cir. 1991). In an attempt to cure the deficient pleading,
Plaintiff offered a Second Amended Complaint that contained several different
theories of liability for retaliatory discharge. (Doc. 36 at ¶¶70-72, 85). The Court
rejected each of them except one. (Doc. 35 at 10-12). Plaintiff alleged that the
Defendants violated Medicare regulations by failing to bill the Medicare insurance of
an elderly customer, Hanover, for her prescription medication. The Court concluded
that the violation of Medicare regulations was a sufficiently public interest to find
that discharging an employee for attempting to bring such regulatory violations to
light violated a clear mandate of public policy. (Doc. 35 at 12). The Defendants then
filed a motion to reconsider the Court’s grant of leave to file the amended complaint
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arguing that such a theory was still deficient because they had not in fact violated
Medicare regulations. (Doc. 37). The Court disagreed and noted that whether
Defendants had indeed violated Medicare regulations was not dispositive; instead
whether Plaintiff had a good faith belief that such regulations were being violated
was dispositive.
In her opposition brief to the Defendants’ motion for reconsideration, the
Plaintiff wrote that “[f]or purposes of retaliatory discharge, the statute relied upon
need not actually apply to the complained of situation; it need only demonstrate the
existence of the public policy regarding the subject.” (Doc. 40 at 6). The Court
interpreted that statement as the Plaintiff arguing that she need not have
complained about the violation of Medicare regulations or to have even been
concerned with the violation of such regulations at the time she was engaging in
protected activity. In other words, it appeared to the Court that Plaintiff was
contending that as long as she could fit her claim into a legally plausible theory after
the fact, it did not matter that she was not operating in accordance with that theory
before her termination. The Court disagreed with that contention.
Moreover, as the Medicare regulations allegations were newly pled, the Court
was puzzled by their previous omission from the Amended Complaint. When coupled
with the fact that the allegations surrounding Medicare regulations were noticeably
absent from the prior complaint and that such allegations rather easily sufficed to
state a plausible claim, the Court became skeptical and stated that “should it come
to light that Plaintiff did not actually specifically complain to authorities that
Defendants were violating Medicare regulations, the Court will not hesitate to
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dismiss these claims.” This was not so much a pronouncement of the law of retaliatory
discharge as it was a simple explanation that the Court would not tolerate pleading
untrue allegations simply to survive dismissal.
As to the IWA claim, Plaintiff restructured her claim completely. Initially, she
pled in the Amended Complaint that Defendants violated the IWA in either of two
ways: first, either by prohibiting the Plaintiff from disclosing Hanover’s financial
exploitation to an appropriate agency or second, by terminating the Plaintiff for
refusing to engage in illegal activity. (Doc. 12 at ¶¶ 76-77). The Court dismissed the
claim as pled because Plaintiff’s allegations did not support it; indeed, they belied her
claim. Plaintiff then refashioned her claim and alleged in the Second Amended
Complaint that the Defendants violated the IWA by terminating her for disclosing to
the State’s Attorney’s Office the potential unlawful conduct against Hanover, which
she alleged included the violation of Medicare regulations. (Doc. 36 at ¶¶ 85, 93).
Obviously, if the evidence shows Plaintiff had no actual concern about possible
Medicare violations when she reported the situation to the State’s Attorney’s Office,
then her pleadings were disingenuous and her claim should be dismissed.
Now the Defendants seek summary judgment on Counts VII (common law
retaliatory discharge), VIII (Illinois Whistleblowers’ Act), and IX (Adult Protective
Services Act), based on the Court’s single statement in its Order denying
reconsideration of it decision to allow Plaintiff to replead Counts VII and VIII that
“[s]hould it come to light that Plaintiff did not actually specifically complain to
authorities that Defendants were violating Medicare regulations, the Court will not
hesitate to dismiss these claims.” (Doc. 41 at 5).
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Defendants filed their “Motion For Partial Summary Judgment (as to Counts
VII, VIII and IX of the Plaintiff’s Second Amended Complaint)” (Doc. 80) on March 1,
2017. Because Defendants had already filed one unsuccessful motion for summary
judgment (Doc. 43), on March 2, 2017, the Court took Document 80 into consideration
in a Text order and specifically mentioned that the Defendants had until May 30,
2017—the close of discovery—to modify or update their motion (Doc. 80). The
Defendants chose not to do so.
On June 13, 2017, the Court entered a Text Order putting the parties on notice
that the Court had observed the Defendants failed to update or modify their motion
(Doc. 80) and the Court took that failure to mean Defendants were content to move
forward with their motion and accompanying papers as they then existed. On July 5,
2017, Plaintiff filed her response to Defendants’ Motion for Partial Summary
Judgment responding to Defendants’ argument. (Doc. 86). Then on July 19, 2017,
Defendants filed a reply brief. (Doc. 91). In the reply brief, Defendants presented new
arguments not included in their motion. Their argument went well beyond the issue
posed in the original motion—that Plaintiff failed to complain to authorities that the
Defendants were specifically violating Medicare regulations before she was
terminated—and instead delved into the reasonableness of and good faith basis for
Plaintiff’s suspicions and actions as they relate to the retaliatory discharge claim, the
IWA claim and APSA claim.
LEGAL STANDARDS
The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
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matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if “the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The movant may
demonstrate the absence of a genuine dispute of material fact by citing to admissible
evidence, or by showing that the non-movant cannot produce admissible evidence to
support a genuine dispute of material fact. Fed. R. Civ. P. 56(c)(1). Upon such a
showing by the movant, the non-movant may not simply rest on his or her allegations
in the complaint. “The nonmovant may not rest upon mere allegations in the
pleadings or upon conclusory statements in affidavits; it must go beyond the
pleadings and support its contentions with proper documentary evidence.” Warsco v.
Preferred Technical Grp., 258 F.3d 557, 563 (7th Cir. 2001) (internal quotations and
citation omitted); Fed. R. Civ. P. 56(c)(1). Typically, all inferences drawn from the
facts must be construed in favor of the non-movant, but the court is not required to
draw every conceivable inference from the record. Smith v. Hope School, 560 F.3d
694, 699 (7th Cir. 2009). At the summary judgment stage, however, the court may
not resolve issues of fact; disputed material facts must be left for resolution at trial.
Anderson, 477 U.S. at 249-50.
ANALYSIS
As an initial matter, the Court must rebuke the Defendants for failing to
include their arguments and supporting facts concerning the reasonableness of
Plaintiff’s reporting her suspicions in their opening brief and instead bringing these
new arguments and facts in their reply brief. It is universally known and accepted
that new arguments and new facts are not permitted in reply briefs, Developers Sur.
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& Indem. Co. v. Kipling Homes, L.L.C., No. 11 C 4457, 2013 WL 315960, at *3 (N.D.
Ill. Jan. 28, 2013) citing Gold v. Wolpert, 876 F.2d 1327, 1331 n. 6 (7th Cir. 1989). On
March 2, 2017, the Court clearly instructed the parties that the Defendants had until
May 30, 2017 to supplement or otherwise modify their summary judgment motion
and the Defendants did nothing. The Court has been unable to find an exception
recognized in this judicial circuit to the rule that reply briefs shall not contain new
arguments or new facts. For that reason, the Defendants’ arguments concerning the
reasonableness of and good faith basis for Plaintiff’s reporting of her suspicions are
deemed waived for purposes of adjudicating the motion for summary judgment.
Therefore, the Court will only address the issue put forth in the opening brief (Doc.
80), which was whether Defendants are entitled to summary judgment on the three
retaliation based claims of the Second Amended Complaint (Doc. 36) because the
Plaintiff has no evidence that she complained to authorities that the Defendants were
specifically violating Medicare regulations before she was terminated.
I.

The Adult Protective Service Act (“APSA”) claim
The APSA provides in relevant part that

No employer shall discharge, demote or suspend, or threaten to
discharge, demote or suspend, or in any manner discriminate against
any employee who makes any good faith oral or written report of
suspected abuse, neglect, or financial exploitation or who is or will be a
witness or testify in any investigation or proceeding concerning a report
of suspected abuse, neglect, or financial exploitation.
320 Ill. Comp. Stat. 20/4.1. The Court previously found that Plaintiff adequately pled
an APSA claim. (Doc. 21 at 18-20). When the Court made its statement about
Medicare violations, it was explaining why the Plaintiff’s reformulated Illinois
retaliatory discharge claim and IWA claim survived Rule 12(b)(6) dismissal
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standards. The Court had already found that as pled, Plaintiff’s allegations that she
reported financial exploitation to the State’s Attorney’s Office were sufficient for an
APSA claim. The Court’s comment concerning whether Plaintiff specifically
complained to authorities that Defendants were violating Medicare regulations did
not even implicate the APSA claim. Now the matter has advanced to the summary
judgment stage and so the Court must examine the purported evidentiary proof for
the claim.
It makes no sense conceptually for the Plaintiff to have had to specifically
mention Medicare regulations to the State’s Attorney’s Office in order to bring her
report of financial abuse within the purview of the APSA since nowhere in the above
quoted text does the Act mention Medicare regulations. As the Defendants concede,
there is evidence the Plaintiff reported what she believed to be “illegal financial
abuse” based upon conduct she believed to violate Medicare to the States’ Attorney’s
Office. That is all the APSA requires. Unfortunately, whether Plaintiff was operating
under a good faith basis is not before the Court. Therefore, the Motion for Partial
Summary Judgment (Doc. 80) is denied as to Count IX, the APSA claim.
II.

Common Law Retaliatory Discharge
A successful claim for retaliatory discharge for engaging in whistleblowing in

Illinois must have evidence to support three elements: “(1) that [the plaintiff] has
been discharged; (2) in retaliation for his or her activities; and (3) that the discharge
violates a clear mandate of public policy. Stebbings v. Univ. of Chicago, 726 N.E.2d
1136, 1140 (Ill. App. Ct. 1st Dist. 2000). It is agreed Plaintiff was discharged. There
is evidence that Plaintiff was terminated because she was voicing concerns to co9

workers that she suspected financial exploitation of an elderly customer was
occurring, that her employers were complicit in the exploitation, and that she was
going to report the same to authorities. The primary question, for purposes of this
motion then, is whether there is evidence that her discharge violated a clear mandate
of public policy.
Discharging someone for reporting the apparent violation of Medicare
regulations is a violation of a clear mandate of public policy. This is the only theory
of liability for the retaliatory discharge claim that the Court accepted as plausible.
(Doc. 35 at 12). Because retaliatory discharge claims are exceptions to the common
law rule of at-will employment, courts look at the intentions of the whistleblower to
ensure that such plaintiffs have an actual public concern when they engage in
protected activity. See Michael v. Precision Alliance Group, LLC, 952 N.E.2d 682, 688
(Ill. App. Ct. 5th Dist. 2011) (“Undoubtedly, the intent of the employee to blow the
whistle is vital to a claim of retaliatory discharge. As was stated in Palmateer, the
matter ‘must strike at the heart of a citizen’s social rights, duties, and responsibilities
before the tort will be allowed.””). So, to obtain summary judgment based upon what
was argued in their motion, the Defendants must show that the evidence establishes
Plaintiff was not actually concerned with the violation of Medicare regulations prior
to her termination. They have not made such a showing.
Plaintiff voiced specific concerns to Luke Stremlau, the manager of the
pharmacy, about the elderly customer’s Medicare D prescription drug coverage. (Doc.
86 at 19). That fact that she voiced these concerns about the purported failure of the
pharmacy to bill Hanover’s Medicare for her prescriptions to Stremlau establishes
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that she was actually concerned about potential violations of Medicare regulations
requiring Medicare recipients being offered negotiated prices on prescriptions.
Stremlau testified that in April or May of 2014, Plaintiff wanted to know from him
why the elderly customer’s Medicare insurance was not being billed for her
prescriptions. (Doc. 86-6 at 14). Stremlau testified he believed Plaintiff said that
“{Hanover’s] got Medicare A and B so she should have D”. (Doc. 86-6 at 14). That is
when he utilized some pharmacy software and showed the Plaintiff that there was no
current Medicare Part D coverage in the pharmacy’s records for Hanover. Plaintiff
did not reach out to the State’s Attorney’s Office until June or July of 2014. (Doc. 86
at 12, 86-9 at 5).
Thus, Plaintiff knew well before her communication to the State’s Attorney’s
Office that Merle had no Medicare Part D prescription drug coverage to even bill. But
this evidence only speaks to the reasonableness of the Plaintiff’s concerns, not to
whether she had an actual concern, which she clearly did. Because the Defendants
waived the reasonableness argument, the Court cannot hear it and it need not
entertain it any further for purposes of this motion for summary judgment.
The Motion for Partial Summary Judgment (Doc. 80) is denied as to Count
VII, the Illinois retaliatory discharge claim.
III.

Illinois Whistleblower Act Claim
The IWA provides in relevant part that an “employer may not retaliate against

an employee for disclosing information to a government or law enforcement agency,
where the employee has reasonable cause to believe that the information discloses a
violation of a State or federal law, rule, or regulation.” 740 Ill. Comp. Stat. 174/15(b).
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The statute explicitly calls for the whistleblower to disclose to a government or law
enforcement agency information that in turn “discloses a violation of a State or
federal law, rule, or regulation.” The Court has not found a single authority that
states for such a claim to be actionable, the plaintiff must identify the specific State
or federal law, rule, or regulation the plaintiff suspects is being violated.
However, for all the reasons given in the Order & Opinion dated February 26,
2016 (Doc. 35), the only plausible theory the Court has allowed to go forth for the IWA
claim was that Defendants violated Medicare regulations by failing to offer the
elderly customer—whom they knew to be a Medicare beneficiary—Medicare
negotiated prices on her medications, that such conduct violates the Medicare
regulations and that she was terminated for disclosing that information to the States’
Attorney’s Office, a governmental agency.
Defendants argue that Plaintiff cannot demonstrate that her suspicions were
reasonable. The reasonableness requirement under the IWA is very similar to the
common law retaliatory discharge claim. But as the Court has already explained
above, Plaintiff’s reasonableness was not argued in Defendants’ opening brief and
was therefore, deemed waived.
Plaintiff was asked at her deposition what she told the State’s Attorney’s
Office. Her response was:
I just explained a little bit of the situation that was going on, that it was
an elderly customer that had been told that her insurance would be
billed through the pharmacy and that in fact it hasn't been being billed
since I've been employed there. And that -- I'm sorry. I'm getting a
spasm. That she was concerned about her finances being taken over by
someone without her knowledge. As far as what I mean by that is that
her finances were being abused when she had insurance available to
cover her prescriptions.
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(Doc. 86-9 at 60). This is a vague answer but not so vague that it cannot be said that
such a response failed to disclose information that in turn would lead to the ultimate
discovery of Medicare regulation violations if such violations were in fact occurring.
Moreover, it has already been established that Plaintiff was actually concerned about
Hanover being a Medicare beneficiary but paying out of her pocket for prescriptions.
That is protected whistleblowing under the IWA and so the Motion for Partial
Summary Judgment (Doc. 80) is denied as to Count VIII, the IWA claim.
IV.

Motion To Strike
Exhibit 8 to “Plaintiff’s Response To The Defendants’ Motion For Partial

Summary Judgment” is a letter from Defendants’ counsel to Plaintiff’s counsel
settling some discovery issues. Plaintiff cites this letter as evidence that Stremlau
and Naples were “managing agents” of the corporate Defendants. Defendants’ counsel
did describe Stremlau and Naples as “managing agents” in the letter, but for the
purpose of explaining why it was sufficient to notice their depositions as opposed to
forcing Plaintiff to issue subpoenas for their deposition testimony. Defendants
contend the evidence should be stricken because it is not relevant and is being
mischaracterized by the Plaintiff for purposes of proving Defendants’ liability. Also,
they contend that any possible probative value of the exhibit is outweighed by the
dangers of unfair prejudice, confusion, misleading the jury, and wasting time.
It is well within the discretion of the court to strike purported evidence that
does not meet the standards of admissible evidence. See, e.g., Stinnett v. Iron Works
Gym/Exec. Health Spa, Inc., 301 F.3d 610, 613 (7th Cir. 2002). Evidence is generally
admissible so long as the evidence does not offend the United States Constitution, a
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federal statute, the federal rules of evidence or any other rules prescribed by the
United States Supreme Court. Fed. R. Evid. 402. Evidence is relevant when it has a
tendency to make any fact that is of consequence in determining an issue more or less
probable. Fed. R. Evid. 401.
The Court finds the issue of whether Naples and Stremlau are “managing
agents” of the Defendants to be of no consequence to this action. Plaintiff’s claim that
her discussions with and interrogations of Naples and Stremlau constituted internal
reports of misconduct is unsupported by the evidence presented. Plaintiff was clearly
in the process of figuring out whether anything illegal was actually occurring when
she interacted with Naples and Stremlau, not reporting a crystallized suspicion of
misconduct. (See, e.g., Docs. 86-9 at 28, 86-7 at 49). The evidence shows Plaintiff was
looking for confirmation of her suspicions and more evidence before actually making
a formal complaint to authorities. She even testified that she did not consider her
interactions with Naples and Stremlau to be reporting activity until well after this
lawsuit was initiated. (Doc. 86-9 at 20).
Furthermore, the designation of “managing agents” versus simple employees
has no significance. It is already established Naples and Stremlau stood in positions
relative to Martin such that a jury could believe Martin found out from them that
Plaintiff was gearing up to divulge her suspicions to authorities or in the case of the
State’s Attorney’s Office, had already done so. Thus, there is no question Naples and
Stremlau were employees of Defendants and maintained communication with
Defendant Martin, so their further designation as “managing agents” means nothing.

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This Court generally disfavors motions to strike, especially within the context
of summary judgment because they tend to be unnecessary and impede disposition of
the case. T.G. ex rel. T.G. v. Midland Sch. Dist. 7, 848 F. Supp. 2d 902, 909 (C.D. Ill.
2012); Sun v. Bd. of Trs. of Univ. of Ill., 429 F.Supp.2d 1002, 1030 (C.D. Ill. 2006))
(“best practice is to deny motions to strike related to a motion for summary
judgment”); see also Custom Vehicles, Inc. v. Forest River, Inc., 464 F.3d 725, 727 (7th
Cir. 2006). If a factual proposition is made and it is of no consequence to the action,
the Court will generally disregard it instead of striking it. That is what the Court will
do here. There is nothing per se improper with the exhibit; it simply is being used to
support a purported fact that is not of consequence to the action and so the Court will
disregard it. Therefore, the motion to strike (Doc. 89) is denied.
CONCLUSION
For the reasons stated above, Defendants’ “Motion For Partial Summary
Judgment (as to Counts VII, VIII and IX of the Plaintiff’s Second Amended
Complaint)” (Doc. 80) and Motion to Strike (Doc. 89) are DENIED.
So Ordered.
Entered this 28th day of August, 2017.

s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge

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