ATC Healthcare Services, Inc. v. The Board of Education of the City of Chicago et al
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang on 9/30/2017: For the reasons stated in the Opinion, Defendants' motion to dismiss #71 is granted in part and denied in part. The motion to dismiss the Deceptive Trade Practices Act and the Consumer Fraud Act claims is granted, and this time the dismissals are with prejudice, because ATC has already amended the complaint. But the claim for tortious interference with economic advantage remains intact. The status hearing of 10/12/2017 remains as scheduled. The parties shall confer on a discovery schedule and file a joint Rule 26(f) report by 10/10/2017. At the least, Rule 26(a)(1) disclosures will be due by 10/23/2017, and the first round of written discovery requests shall be issued no later than that date. Emailed notice(Chang, Edmond)
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
ATC HEALTHCARE SERVICES, INC.,
RCM TECHNOLOGIES, INC. and
THE BOARD OF EDUCATION OF THE
CITY OF CHICAGO,
No. 15 C 08020
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
ATC Healthcare Services brought this suit against a competitor, RCM
Technologies, and the Board of Education of the City of Chicago (which runs the
Chicago Public Schools, so call them “CPS”). In the initial complaint, ATC alleged
violations of the Illinois Uniform Deceptive Trade Practices Act (UDTPA), 815 ILCS
510/2(a); the Illinois Consumer Fraud and Deceptive Business Practices Act (the
Consumer Fraud Act), 815 ILCS 505/2; intentional interference with prospective
economic advantage; breach of contract; and intentional interference with contract.1
R. 1, Compl.2 The claims arise from an alleged scheme by CPS and RCM to award
the nurse-staffing contract for Chicago Public Schools to RCM and then have RCM
Court has subject matter jurisdiction over this case under 28 U.S.C. § 1332.
The parties are completely diverse: ATC is a Georgia corporation, with its principal place of
business in New York; RCM Technologies is a New Jersey corporation, with its principal
place of business also there; and the Board of Education of the City of Chicago is a citizen of
Illinois. R. 26. The amount in controversy exceeds $75,000. R. 51, Am. Compl. ¶ 6.
2Citations to the Court's docket are labeled as “R.” followed by the docket number,
and the applicable page or paragraph number.
take over all of ATC’s nurses who were currently being used to staff the contract. Id.
In June 2016, this Court dismissed the claims against RCM and CPS without
prejudice. R. 47, 6/28/16 Opinion at 1. ATC has since filed an amended complaint
asserting just the UDTPA, Consumer Fraud Act, and economic advantage claims. R.
51, Am. Compl. CPS and RCM again filed a joint motion to dismiss all the claims. R.
71, Mot. to Dismiss Am. Compl. For the reasons discussed below, the motion is
granted in part and denied in part.
For the purposes of this motion, the Court accepts as true the allegations in
ATC’s amended complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007). ATC
Healthcare Services, Inc. is a healthcare staffing company who Chicago Public
Schools (CPS) had contracted with to provide in-school nurses for its students with
disabilities and special needs. R. 51, Am. Compl. ¶¶ 1, 8. ATC and CPS initially
entered the contract in 2006, and through a series of renewals, the contract was set
to continue through the 2015-16 school year. Id. ¶¶ 8-10. But CPS had the right to
terminate the contract at any time so long as it gave ATC notice. R. 51-1 Exh. 1,
2010 Contract at 17 (Section 10.3). The contract also provided CPS with significant
discretion in regulating the nursing services, Am. Compl. ¶ 11, assigning nurses to
students, and modifying those assignments, while ATC had to comply with all of
CPS’ requirements unless it had a legitimate business reason to not do so, 2010
Contract at 5 (Section 2.2).
The nurses who ultimately provided the services were employees of ATC—
contracted with and paid by ATC—not CPS. Am. Compl. ¶¶ 22-24. They provided a
range of critical services to CPS students with disabilities and special needs,
including “gastronomy tube feeding, tracheostomy care, ventilator care, medication
through a nebulizer or other routes, assistance with range of motion and movement,
the administration of medication, as well as urinary and bowel care.” Id. ¶ 19.
These nurses had unique skills and training, such as language fluencies, that
allowed them to work with ESL (English as a Second Language) and special needs
children in Chicago schools. Id. ¶¶ 20-21. The nurses were at-will employees of
ATC. Id. ¶ 24. But many of them had been with ATC for over two years, although
their contracts had to be renewed for each school year. Id. ¶ 28.
In November 2014, CPS decided to exercise its option to potentially terminate
the contract and solicited bids from about 10 staffing firms, including ATC and
Defendant RCM Technologies, for its outsourced nurse staffing needs. Am. Compl.
¶¶ 32-34. RCM claimed in its bid that it had “100 nurses ready” to staff the schools
and that it would use a “rigorous interview, screening and evaluation process” to
select nurses for assignments. Id. ¶ 39. But because continuity of care is so
important for the children, RCM represented that it usually attempts to “inherit” or
“take over” the nurses from the current provider, which it has historically done “on
an annual basis” “with considerable ease.” Id. ¶¶ 37-38.
ATC alleges that these representations were a lie intended to deceive the
public into believing that the bidding process was not a sham. Am. Compl. ¶ 105.
Out of one side of its figurative mouth, ATC alleges, CPS had privately assured
RCM that it was going to win the bid. Id. ¶ 48. At the same time, CPS acted as
though it intended to continue working with ATC. Id. ¶ 52. When ATC sent CPS
copies of its proposed 2015-2016 employment agreement, for example, a CPS official
replied, “Thanks … . This looks great.” Id. ¶ 53. CPS also asked ATC for a list of all
currently assigned nurses and which schools they were assigned to, and ATC
complied. Id. ¶ 54. During this time, CPS delayed its vote on the bid, causing ATC
to incur training and recruitment costs to staff nurses in accordance with its
existing contract, which it was still obligated to fulfill. Id. ¶¶ 46-52.
The first ATC heard that its contract was not going to be renewed was from a
phone call on June 16, 2015, eight days before the Board publicly voted to approve
RCM’s competing bid. Am. Compl. ¶ 56. CPS sent a letter stating the same the next
day. Id. CPS would not give ATC any reason why it had opted not to award ATC the
new contract despite ATC’s record of success, and according to ATC, never gave any
indication that it was going to help RCM take over ATC’s nurses to fulfill the 20152016 staffing needs. Id. ¶ 51. In fact, CPS still requested new nursing assignments
from ATC two days after it sent them the letter. Id. ¶ 58.
After CPS formally voted to accept RCM’s proposal on June 24, 2015, Am.
Compl. ¶ 63, CPS informed ATC that it would not need any of its nurses for the
remainder of the summer but did not terminate ATC’s contract. Id. ¶¶ 64, 78. CPS
also sent RCM the complete list of all of ATC’s nurses who were currently assigned
to the schools, including the nurses’ contact information. Id. ¶ 65. RCM did not have
a formal contract in place with CPS but nevertheless began “aggressively soliciting”
ATC’s nurses—in particular the ones who had worked at CPS for several years—
offering them exclusive positions at CPS. Id. ¶ 66-67. RCM told them it was taking
over their contracts, and CPS joined in, calling the nurses and the parents of the
students, telling them that the nurses would need to work for RCM in order to keep
their assignments. Id. ¶ 68.
The solicitations grew more urgent as the school year approached. Am.
Compl. ¶ 70. RCM implied that the nurses were already working for RCM by
stating that they only needed to “confirm” their previous assignments. Id. ¶ 71.
RCM also emailed the nurses—the email was marked “URGENT”—to tell them that
they needed to be fingerprinted (though ATC had already done that), id. ¶ 72, and
that they would receive referral bonuses for getting other nurses to sign up. Id.
¶ 76. ATC claims that this was a “ruse” to make the nurses think they were
obligated to start working for RCM even though they were still ATC employees. Id.
¶ 73. But CPS still told ATC that it was reserving its rights under the 2015-2016
contract, so ATC might still have to provide nurses to some schools. Id. ¶ 78. Only
two weeks before the start of the school year, on August 13, 2015, did CPS notify
ATC that it was cancelling the contract, id. ¶ 77, and meanwhile RCM was still
calling nurses to schedule them to assignments despite never hiring or screening
them. Id. ¶ 81. RCM even implied that the solicitations were approved by ATC. Id.
According to ATC, this led to problems on the first day of school. Am. Compl.
¶¶ 84-93. Scores of special needs children did not have nurses and were thus unable
to attend class. Id. ¶ 92. This led to numerous calls to ATC from parents and school
officials who, confused as to whether the nurses who were supposed to be assigned
to the children were employed by ATC or RCM, asked where the nurses were. Id. ¶
85-92. But ATC could only refer them to RCM and CPS, because ATC had no
authority to send nurses. Id. ¶ 94.
ATC alleges that all of these actions were part of an unfair and deceptive
scheme between RCM and CPS to allow RCM to take over ATC’s contract and
nurses. Am. Compl. ¶ 95. So ATC sued. The Court granted a motion to dismiss, but
allowed ATC to file an amended complaint. The amended complaint asserts claims
under the Illinois Uniform Deceptive Trade Practices Act (UDTPA), 815 ILCS
510/2(a); the Illinois Consumer Fraud and Deceptive Business Practices Act (the
Consumer Fraud Act), 815 ILCS 505/2; and for intentional interference with
prospective economic advantage. Am. Compl. RCM and CPS now jointly move to
dismiss the remaining claims under Rule 12(b)(6). R. 71, Mot. to Dismiss Am.
II. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need
only include “a short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give
the defendant fair notice of what the claim is and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The Seventh Circuit has
explained that this rule “reflects a liberal notice pleading regime, which is intended
to ‘focus litigation on the merits of a claim’ rather than on technicalities that might
keep plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009)
(quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of
Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[W]hen ruling on
a defendant’s motion to dismiss, a judge must accept as true all of the factual
allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007);
McGowan v. Hulick, 612 F.3d 636, 637 (7th Cir. 2010) (courts must accept all
factual allegations as true and draw all reasonable inferences in the plaintiff’s
favor). “[A] complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570). These allegations “must be enough
to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. And
the allegations that are entitled to the assumption of truth are those that are
factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 679; McCauley v. City
of Chicago, 671 F.3d 611, 616 (7th Cir. 2011).
A. Uniform Deceptive Trade Practices Act (Count 1)
(Against CPS and RCM)
ATC alleges that the attempted takeover of their nurses by CPS and RCM
violated five sections of the Illinois Uniform Deceptive Trade Practices Act
(UDTPA), 815 ILCS 510/2(a), Am. Compl. ¶ 98, the purpose of which is to “enjoin
… trade practices which confuse or deceive the consumer.” Popp v. Cash Station,
Inc., 613 N.E.2d 1150, 1156 (Ill. App. Ct. 1992) (emphasis added); see Menasha
Corp. v. News Am. Mktg. In-Store, Inc., 238 F. Supp. 2d 1024, 1035 (N.D. Ill. 2003).
The five sections which ATC alleges were violated state that “[a] person engages in
a deceptive trade practice when, in the course of his or her business, vocation, or
occupation, the person: …
(2) causes likelihood of confusion or of misunderstanding as to the source,
sponsorship, approval, or certification of goods and services;
(3) causes likelihood of confusion or of misunderstanding as to affiliation,
connection, or association with or certification by another;
(4) uses deceptive representations or designations of geographic origin in
connection with goods or services;
(5) represents that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities that they do not
have or that a person has a sponsorship, approval, status, affiliation, or
connection that he or she does not have; …
(12) engages in any other conduct which similarly creates a likelihood of
confusion or misunderstanding.”
815 ILCS 510/2(a); Am. Compl. ¶ 98. But ATC’s allegations fail to state a claim for
relief under the Act.
RCM and CPS argue that, because the UDTPA only provides for injunctive
relief, ATC must allege that it is likely to suffer harm in the future from the
deceptive conduct unless the court issues the injunction. R. 72, Def. Br. to Am.
Compl. at 9-10. Because ATC has not alleged any threat of future recruitment or
confusion (at this point in time) about which company provides the staffing services,
they argue, ATC has failed to state a claim. Id. In support, they rely on Int’l Star
Registry of Ill. v. ABC Radio Network, Inc. 451 F. Supp. 2d 982, 991 (N.D. Ill. 2006),
Murnik v. Kabo Chemicals, Inc., 1997 WL 567801, at *5 (N.D. Ill. Sept. 4, 1997),
Lawyers Title Ins. Corp. v. Dearborn Title Corp., 904 F. Supp. 818, 822 (N.D. Ill.
1995), and Smith v. Prime Cable of Chicago, 658 N.E.2d 1325, 1337 (Ill. App. Ct.
1995), all of which dismissed claims under the UDTPA for not alleging a likelihood
of future harm. Def. Br. to Am. Compl. at 9-10.
For its part, ATC does not respond to CPS and RCM’s argument, which is
enough to dismiss the claim by itself. Failure to respond to an argument in a motion
to dismiss permits an inference of acquiescence to the argument which acts as a
waiver. Cincinnati Ins. Co. v. E. Atl. Ins. Co., 260 F.3d 742, 747 (7th Cir. 2001)
(holding that failure to respond to an argued interpretation of a contract, even one
that was likely incorrect, constituted an acquiescence to that interpretation that
acted as a waiver); Cent. States, Se. & Sw. Areas Pension Fund v. Midwest Motor
Exp., Inc., 181 F.3d 799, 808 (7th Cir. 1999) (noting that “[a]rguments not developed
in any meaningful way are waived”); see Alioto v. Town of Lisbon, 2009 WL
3757005, at *5 (E.D. Wis. Nov. 6, 2009) (dismissing claim for not responding to the
defendants’ arguments from their motion to dismiss), aff’d, 651 F.3d 715 (7th Cir.
Even if ATC had not waived this argument, this Court would have held that
ATC failed to state claim because it did not allege any future harm. The likelihood
of future harm occurring absent an injunction is an element of liability on the claim,
not merely a separate element of damages. Glazewski v. Coronet Ins. Co., 483
N.E.2d 1263, 1267 (Ill. 1985) (dismissing claim for not stating a cause of action
under the UDTPA when the plaintiff did not allege they were “’likely to be damaged’
by the defendant’s conduct in the future”). ATC alleges only that CPS and RCM’s
actions caused lost revenue, lost productivity, and damage to the relationships with
its nurses. Am. Compl. ¶ 108. All of these losses occurred over two years ago, for the
2015-2016 school year. See Id. ¶ 80. ATC does not (of course) allege that they are
currently the staffing provider for CPS and that, absent an injunction, CPS and
RCM will continue to deceptively solicit nurses or cause revenue losses. Similarly,
the injunctive relief that ATC requests is only to prohibit RCM from contacting
ATC’s nurses in the future, stop CPS from giving out its nurses contact information,
and stop CPS and RCM from recruiting any of its nurses. Id. But because CPS and
RCM are not alleged to be likely to do that in the future, ATC fails to state a claim.
Accordingly, the UDTPA claim is dismissed as to both Defendants.3
the lack of allegations of a likelihood of future harm is dispositive on this
claim, the Court does not need to consider whether likelihood of confusion is the sort of
harm that is covered by the UDTPA.
B. Consumer Fraud Act (Count 2)
(Against RCM Only)
ATC next alleges that RCM’s efforts to take over its nurses violated the
Illinois Consumer Fraud and Deceptive Business Practices Act. 815 ILCS 505/2;
Compl. ¶¶ 109-22. The Court initially dismissed this claim for failing to sufficiently
plead a connection (or, in the words of various opinions, “nexus”) between the
wrongful acts alleged and consumer-protection concerns. 6/28/16 Opinion at 17. The
Amended Complaint does not correct this flaw.
The Consumer Fraud Act was primarily enacted to protect consumers,
borrowers, and business persons from unfair methods of competitions. Robinson v.
Toyota Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002). With that statutory
purpose in mind, generally speaking only consumers can bring claims under the
Act. Lefebvre Intergraphics, Inc. v. Sanden Mach. Ltd., 946 F. Supp. 1358, 1368
(N.D. Ill. 1996). But businesses can bring claims under the act in two specific
circumstances. Id. The first scenario—when a business is the end consumer of a
product–is not applicable here. Vulcan Golf, LLC v. Google Inc., 552 F.Supp.2d 752,
777 (N.D.Ill.2008). But the second situation–whether the challenged conduct
“involves trade practices addressed to the market generally or otherwise implicates
consumer protection concerns”—is potentially at issue. Downers Grove Volkswagen,
Inc. v. Wigglesworth Imports, Inc., 546 N.E.2d 33, 41 (Ill. App. Ct. 1989). To
implicate consumer protection concerns, there must be a connection between the
alleged misconduct and the wider marketplace, as well as a connection between the
requested relief and consumers generally. Brody v. Finch Univ. of Health Scis./The
Chicago Med. Sch., 698 N.E.2d 257, 269 (Ill. App. Ct. 1998). Although ATC again
attempts to make allegations to this effect, they still fall short.
First, ATC argues that the Act should be broadly construed to eradicate
deceptive and unfair business practices generally. R. 77, Pl. Resp. Br. for Am.
Compl. at 16. Because the practices engaged in by RCM and CPS were unfair, ATC
argues, the Act should cover them. Id. But this argument fails to address the
purpose of the statute, as interpreted by Illinois state courts: to protect consumers.
Web Commc'ns Grp., Inc. v. Gateway 2000, Inc., 889 F. Supp. 316, 323 (N.D. Ill.
1995) (citing cases). The Consumer Fraud Act is already more expansive and allows
for more remedies than common law fraud and breach of contract claims. Lake Cty.
Grading Co. of Libertyville v. Advance Mech. Contractors, Inc., 275 Ill. App. 3d 452,
459, 654 N.E.2d 1109, 1115-16 (1995). So a broad reading of the statute to cover any
unfair practice would expansively empower courts to author an unmoored betterbusiness code of competition. Requiring a connection between the requested relief
and consumers is thus important because it ensures that non-consumers do not
expand the Consumer Fraud Act beyond its intended purpose. See Lake Cty.
Grading, 275 Ill. App. 3d 452, 459, 654 N.E.2d 1109, 1115-16 (noting that courts
have consistently resisted attempts to bring breach of contract claims under the Act
by requiring that the alleged conduct implicate these concerns). ATC’s argument
that unfair conduct generally should state a cause of action—even when it does not
affect consumers—is thus not persuasive.
ATC next argues that RCM targeted deceptions at the families of CPS
students and that these families were affected by the deception. Pl. Resp. Br. for Am
Compl. at 17. But most of the statements made by RCM in the bidding process (ATC
lists tem in paragraph 39 of the Amended Complaint) are merely competitive
puffery, not actual statements of fact, and cannot constitute actionable deceptive
statements by themselves. The only arguably false or deceptive statement (and one
that was capable of being verified one way or the other) that was made during the
bidding process is that RCM had “100 nurses ready” to staff CPS schools as part of
its bid. Am. Compl. ¶ 39. ATC alleges that this statement was made to “the public
at large” because it was made to CPS. But ATC offers no support that a statement
made to a government entity in a bidding process qualifies as a statement made to
end users of the contracted-for services. So far as the Amended Complaint alleges,
RCM did not market the bid to parents and students, and the representation was
only public because the bidding process was public. The alleged misrepresentation
was directed at CPS, and throughout the complaint, ATC alleges that CPS was in
on the scheme. See, e.g., id. ¶ 44 (alleging that CPS and RCM officials were
planning to execute the takeover scheme). So even if the students are consumers for
purposes of the Consumer Fraud Act, they were not directly implicated by the
misconduct—that is, the alleged misrepresentation. And the relief requested—
ATC’s lost profits and ATC’s costs in losing nurses—also has zero connection to the
alleged adverse effects on the students.
To be sure, some cases have held that it is possible to state a valid claim in a
business-to-business suit involving a deceptive act that flowed downstream to
consumers. See YCB Int’l, Inc. v. UCF Trading Co., 2010 WL 4781871 (N.D. Ill. Nov.
10, 2010); Stickle Enterprises, Ltd. v. CPC Int’l, Inc., 1997 WL 767301 (N.D. Ill. Dec.
3, 1997). But those cases are different from this one. In YCB, the plaintiffdistributor was the direct recipient of the misrepresentation about the origin of ball
bearings. YCB Int’l, 2010 WL 4781871 at *1. Here, CPS played that role—the direct
recipient of the misrepresentation—not ATC. So the plaintiff in YCB was thus
harmed directly by the misrepresentation (the ball bearings were of inferior
quality), and that harm was passed on to consumers in the form of products that
misrepresentations about the use of contaminated grain pellets were again made
directly to the claimant, CPC (which brought a counterclaim after being sued), and
those misrepresentations would have directly harmed CPC by damaging its
reputation in the marketplace and also would have harmed consumers by
introducing contaminated feed into the market. Stickle, 1997 WL 767301 at *2, *4.
misrepresentation—is not the plaintiff and was not deceived or harmed by the
alleged misrepresentation. Again, it is true that a business’s actions, when akin to a
consumer’s actions, can help establish the necessary link to consumer harm and
trigger the Consumer Fraud Act. Brody v. Finch Univ. of Health Sciences, 698
N.E.2d 257, 269 (Ill. App. Ct. 1998). The injured distributors in YCB and Stickle
satisfied that standard. But here, ATC’s alleged suffering at the hands of RCM, and
the relief that ATC seeks (its own lost profits and costs), are dissimilar to the
distributors in those two cases. The Court thus grants RCM’s motion to dismiss
Count 2 for failing to have a sufficient connection to consumer protection concerns.4
C. Interference with Economic Advantage (Count 3)
(Against both RCM and CPS)
In Count 3, ATC alleges that RCM and CPS intentionally interfered with
ATC’s prospective economic advantage by soliciting its nurses to come work for
RCM. Am. Compl. ¶ 127. In the prior Opinion, the Court noted that ATC had
sufficiently pled the first two elements of this common law tort: (1) the plaintiff
must have a reasonable expectancy of a valid business relationship with a third
party; and (2) the defendant must know about it. 6/28/2016 Opinion at 19 (relying
on Fellhauer v. City of Geneva, 568 N.E.2d 870, 878 (1991), and Lynch Ford, Inc. v.
Ford Motor Co., Inc., 957 F. Supp. 142, 145–46 (N.D.Ill.1997)). But the Court
dismissed the claim for failing to plead the fourth element—the interference must
injure the plaintiff—because the plaintiff did not allege that any nurses actually left
their employment with ATC because of the solicitations. 6/28/2016 Opinion at 20
(citing Dowd & Dowd, Ltd. v. Gleason, 693 N.E.2d 358, 371 (Ill. 1998)). In the
It is worth noting that RCM argues that the students are the “beneficiaries
of the nursing services” rather than “consumer[s] of the staffing services.” RCM’s
Br. at 6 (emphasis omitted). Although the Court need not decide this issue because
the Consumer Fraud Act is not triggered, regardless of the students’ classification,
the Court was probably wrong to say, in the prior Opinion, that the students were
the actual consumers of the services. 6/28/16 Opinion at 17. The Consumer Fraud
Act defines consumers as those who “purchase or contract for the purchase of”
services. 815 ILCS 505/1(e). That would be CPS in this scenario, not the students
Amended Complaint, ATC has fixed this flaw by adding the allegation that dozens
of ATC employees actually terminated their employment with ATC. Am. Compl.
¶ 126. RCM and CPS now argue that ATC has failed to sufficiently allege damages
because it did not allege that they were not able to fill other contracts with other
clients due to the lost employees. Def. Br. to Am. Compl. at 15. But as this prior
Opinion explained, ATC only needs to plead that they lost their employment
relationship with their nurses to state a claim. 6/28/2016 Opinion at 20. Illinois
courts have held that maliciously inducing at-will employees to leave their
employment states a cause of action for the claim without discussing, at the
pleading stage, the downstream effects of damages. See ABC Trans Nat. Transp.,
Inc. v. Aeronautics Forwarders, Inc., 413 N.E.2d 1299, 1305–06 (Ill. App. Ct. 1980);
B. R. Paulsen & Co. v. Lee, 237 N.E.2d 793, 796 (Ill. App. Ct. 1968). No doubt
damages will be explored during discovery and probably contested as the case
progresses, but at this stage of the case, this element of the claim is sufficiently
RCM and CPS also contend that ATC has failed to allege that they have
intentionally interfered with the expectancy. Def. Br. to Am. Compl. at 15. They
claim that the term “actively recruited” is a conclusion and not a factual allegation.
Id. But this argument fails to take into account the rest of the allegations
throughout the Amended Complaint. For example, ATC specifically alleges that
both RCM and CPS made false representations to the nurses that their positions
were confirmed and that needed to contact RCM for scheduling purposes only. Am.
Compl. ¶¶ 71, 79. These are intentional acts which, when construed in the light
most favorable to ATC, state a plausible claim for tortious interference.
Finally, RMC and CPS argue that ATC has not overcome the competitor’s
privilege. Def. Br. to Am. Compl. at 15-18. But this does not take into account that
competitor’s privilege is an affirmative defense to tortious interference with business
advantage. Gen. Motors Corp. v. State Motor Vehicle Review Bd., 862 N.E.2d 209,
220 (Ill. 2007). It would be one thing if Illinois law placed on a plaintiff the burden
to plead a complaint in such a way as to defeat the competitor’s privilege. But the
Illinois Supreme Court classifies the competitor’s privilege as an affirmative
defense. Id. ATC is generally not required to plead around an affirmative defense to
survive a motion to dismiss. U.S. Gypsum Co. v. Indiana Gas Co., 350 F.3d 623, 626
(7th Cir. 2003); Serv. By Air, Inc. v. Phoenix Cartage & Air Freight, LLC, 78 F.
Supp. 3d 852, 868-69 (N.D. Ill. 2015). The case cited by CPS and RCM, Flexicorps,
Inc. v. Trend Technologies, Inc., is thus distinguishable, because it was decided on
summary judgment. 2002 WL 31018353, at *12 (N.D. Ill. Sept. 10, 2002). To be
sure, sometimes a meritorious affirmative defense can be so readily obvious on the
fact of the complaint that a Rule 12(b)(6) dismissal is allowed. Int’l Mktg., Ltd. v.
Archer-Daniels-Midland Co., Inc., 192 F.3d 724, 731 (7th Cir. 1999). But ATC has
not pled itself out of court in the Amended Complaint. In International Marketing,
the plaintiff (IML) included an allegation that the defendant falsely represented
that IML did not have a direct contact for supplying a commodity. Id. at 732. The
court noted that this allegation would have been sufficient to state a tortious
interference with prospective advantage claim even though it does not reference
spite or malice because the statement does not have a competitive motivation, but
IML made this allegation only in reference to its contract claims. Id. Here, ATC has
added the allegation that CPS concealed the scheme between it and RCM so that
ATC would continue to pay the expenses of training and vetting the nurses even
though both CPS and RCM intended to take over the nurses. Am. Compl. ¶ 45. It
remains to be seen whether those facts alone would be enough to survive the
summary judgment stage (as distinct from the plausibility standard applied at this
pleading stage), but for now the allegation does suggest more than mere competitive
motive to survive a dismissal motion. If true, then that conduct went beyond mere
competitive motive and instead plausibly represents an attempt to inflict extra costs
on ATC. The claim for interference with economic advantage survives the motion to
D. Illinois Tort Immunity Act
Finally, CPS argues that the Local Governmental and Governmental
Employees Tort Immunity Act, 745 ILCS 10/1-101 et seq., provides the Board with
immunity against the economic-advantage claim. In particular, CPS cites to four
sections of the Tort Immunity Act. But none of them apply, at least not to all the
allegations comprising the tortious interference claim. First, Section 2-106
immunizes only “oral” promises or misrepresentations. Some of the alleged
misrepresentations to ATC’s nurses were in writing, including via email. Am.
Compl. ¶ 72. As discovery progresses and a finite set of facts comprising the claim
becomes clear, it might very well be that the basis for CPS’s liability will be
narrowed (and jury instructions to that effect would be appropriate). But dismissal
of the claim is inappropriate because of the alleged written communications.
Second, Section 2-210 immunizes “negligent” misrepresentations, whether in
writing or made orally. But the allegations, which much be accepted as true,
plausibly set for an intentional interference with economic advantage, comprised of
intentional misrepresentations to ATC’s nurses. Again, CPS might well be entitled
to a jury instruction to ensure that the jury does not premise liability on negligence.
But this section does not help CPS dismiss the entirety of the claim.
Third, Section 2-107 immunizes local governments against libel or slander.
But that is not the surviving claim. Tortious interference with economic advantage
does not necessarily rely on libelous or slanderous statements, and indeed that is
not what ATC is alleging when it says that Defendants essentially tricked ATC’s
nurses into thinking that they had already become RCM employees. So this section
too does not defeat the claim.
Fourth and finally, Section 2-201 immunizes local governments against
claims premised on their employees’ policy determinations and exercises of
discretion. It would be one thing if the tortious interference claim sought to
challenge CPS’s decision to award the staffing contract to RCM. That decision
would be a prototypical policy determination and an exercise of discretion. But that
is not what ATC targets with the tortious interference claim. Instead, ATC seeks
relief for CPS’s alleged interference with ATC’s employment relationship with its
nurses, and those allegations are independent of the policy decision to terminate the
contract with ATC and award it to RCM. None of the immunities apply, at least not
entirely to defeat the tortious interference claim.
For the reasons discussed, the motion to dismiss the Deceptive Trade
Practices Act and the Consumer Fraud Act claims is granted, and this time the
dismissals are with prejudice, because ATC has already amended the complaint.
But the claim for tortious interference with economic advantage remains intact. The
status hearing of October 12, 2017, remains as scheduled. The parties shall confer
on a discovery schedule and file a joint Rule 26(f) report by October 10, 2017. At the
least, Rule 26(a)(1) disclosures will be due by October 23, 2017, and the first round
of written discovery requests shall be issued no later than that date.
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: September 30, 2017
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