Shortened ‘Arb Award’ Rejection Deadline Upheld Against Constitutional Attack – IL Appeals Court

The First District appeals court recently nixed a plaintiff’s constitutional challenge to a local rule’s arbitration rejection deadline.  The opinion’s upshot is clear: when a supreme court rule conflicts with a statute, the rule wins.

The plaintiff in McBreen v. Mercedes-Benz, USA, LLC  argued her equal protection and due process rights were violated when a trial court denied her attempt to tardily reject an arbitration award. The case was decided by a single arbitrator under the auspices of the Cook County Law Division Mandatory Arbitration Program (MAP), a two-year pilot program that sends commercial cases with damage claims between $50,000 and $75,00 to mandatory arbitration.

Among other things, the Law Division MAP provides for hearings before a single arbitrator and requires a losing party to reject the award within seven business days. Cook County Cir. Ct. R. 25.1, 25.5, 25.11.

After an arbitrator found for defendants, the plaintiff didn’t reject the award until 30 days later – 23 days too late. The trial court then granted defendant’s motion to dismiss plaintiff’s case and denied plaintiff’s motion to void the arbitration award or extend the rejection deadline.  The trial court entered judgment on the arbitration award for defendant.

Plaintiff argued on appeal that Rule 25’s compressed rejection period violated her constitutional rights since it conflicted with the  30-day rejection deadline for Municipal Department arbitrations. (The Cook County Municipal Department hears personal injury cases and breach of contract suits where the damage claim is $30,000 or less.)   The plaintiff also claimed the Law Division MAP was unconstitutional since it clashed with the “panel of three” arbitrators rule prevailing in Municipal Department arbitrations.

Affirming the trial court, the Court first considered whether the Illinois Supreme Court had power to establish the Law Division MAP program with its seven-day rejection rule.

The Law Division MAP rejection period conflicts with Cook County’s Municipal Department arbitration scheme – which has a 30-day rejection rule.  (The Municipal arbitration rules, codified in Supreme Court Rules 86-95, were legislatively implemented via Code Sections 2-1001A and 1003A which, respectively, authorize the establishment of an arbitration program where a panel of three arbitrators hears cases involving less than $50,000 in damages. Rule 93(a) contains the 30-day rejection cut-off.)

The First District noted that while the Law Division MAP’s seven-day rejection period clashes with the Municipal Department’s 30-day period, Illinois courts through the decades consistently recognize the Illinois Supreme Court’s constitutional authority to make rules governing practice and procedure in the lower courts and that where a supreme court rule conflicts with a statute on a judicial procedure matter, the rule wins.

The court also notes the Illinois legislature echoed this inherent power for the Supreme Court to establish court rules in Code Section 1-104(a).  In the end, the Court found that In view of the Illinois Supreme Court’s expansive power in the area of pleadings, practice and procedure, the Law Division MAP’s abbreviated rejection period trumped any conflicting, longer rejection period found in other statutes or rules.  (¶¶ 17-18, 22-23).

The Court also rejected plaintiff’s equal protection argument – that the Law Division MAP program infringed the rights of Municipal court participants by shortening the rejection time span from 30 to seven days.  While allowing that Law Division and Municipal litigants in the arbitration setting share the same objective of taking part in a less-costly alternative to litigation, the Court found the two Programs “qualitatively different:” the Law Division MAP is geared to those seeking damages of between $50,000 and $75,000 while the Municipal plaintiff’s damages are capped at $30,000.

According to the Court, the different damage ceilings involved in Law Division and Municipal cases meant that plaintiffs in the two court systems aren’t similarly situated under the Equal Protection clause. (¶¶ 34-35).

Plaintiff’s final argument, that the Law Division MAP’s seven-day rejection period violated her due process rights also failed.  Due process requires an opportunity to be heard at a meaningful time and in a meaningful matter.

The plaintiff argued that the Law Division MAP’s seven-day rejection cut-off failed to give her a meaningful opportunity to challenge the award.   The Court thought otherwise.  It noted that statutes are presumed constitutional and someone challenging a statute’s constitutionality bears a heavy burden.  It then cited to multiple cases across a wide strata of facts which have upheld time limits of less than 30 days.

Afterwords:

McBreen offers a thorough, triangulated analysis of what happens when a Supreme Court Rule, a county’s local court rule and legislative enactments all speak to the same issue and appear to contradict each other.  The case solidifies the proposition that the Supreme Court’s primacy in the realm of lower court procedure and pleading extends to mandatory arbitration regimes, too.  While the case is silent on what constitutes a sufficient basis to extend the Law Division MAP’s seven-day rejection deadline, McBreen makes clear that a constitutional challenge will likely ring hollow.

 

Collecting Your Cook County (IL) Judgment: A Primer

8390885150_7973d44ed1_bBlood From A Turnip (www.flickr.com)(visited 3.9.16)

735 ILCS 5/2-1402 and Supreme Court Rule 277 govern post-judgment or supplementary proceedings in Illinois. 735 ILCS 5/12-101 through 12-183 provide additional post-judgment specifics like the mechanics of levying on a debtor’s property, the seven-year period to enforce a judgment (12-108), the lien on debtor’s real estate and personal property, enforcement in other counties, etc.

The Citation to Discover Assets

The first step is to issue a Citation to Discover Assets and Citation Notice.  The Citation and Notice of Citation are pre-printed fillable forms found on the Cook County website.

On the form, I list the name of the creditor (my client), the debtor (the person we got a judgment against), the date and amount of judgment and address of debtor.  I attach a copy of the underlying judgment and include a Rider to the Citation asking for documents relating to the debtor’s assets.

In the Rider, I usually ask for State and Federal tax returns for the past 2-3 years, a years’ worth of bank statements, six most recent paystubs, title papers to cars and real estate, and a signed statement of personal and real assets.  I may also request documents pertaining to any stocks, bonds, securities, furnishings or electronic equipment.  The larger the judgment, the more painstaking I am in my Citation Rider requests.

Section 2-1402(b-1) now requires a creditor to include an Income and Asset Form with the Citation. The debtor is supposed to fill out and bring it to the Citation hearing.  A sample Income and Asset Form is included in the statutory text.

To “issue” the Citation, I take it to the 6th floor (Muni cases) or 8th floor (Law Division) pay $80 (usually) and get it certified by the Clerk.  I am then given the “return date” which is the day it is set for hearing.

The Citation hearing will be in Room 1401 of the Daley Center (if judgment is less than $30K) or Room 2503 if the judgment is over $30K (or for judgments entered in Law Division cases).  Chancery money judgment citations are scheduled before the Chancery judge.

Serving the Citation

Once the Citation is issued, I either place it with the Sheriff or a Special Process Server (SPS).  A citation can be served in the first instance by a process server (unlike a complaint and summons – which must first be placed with the county sheriff).  I’ve found that an SPS is usually more persistent and able to track down evasive debtors with better success than the county sheriff. For this reason, I almost always serve a Citation through an SPS.

But with a corporate debtor that usually has a registered agent, I will usually serve through the sheriff (since there is less chance of dodging service).

The Citation Examination

The examination often takes place in the glamorous Daley Center hallway!  Sometimes, the judge will allow you to do the exam in a jury room.  I’ve also agreed to conduct examinations at my office or opposing counsel’s office.  However, to avoid the stonewalling debtor situation, I usually prefer to do the examination at the courthouse so I can ask the judge to intervene if necessary.

On the Citation return date, if the debtor shows up, he is sworn in by the Clerk and I conduct the examination.  I ask myself: “If this person owed me money, and I really wanted it, what would I ask this person?”  Simple as that.

I first ask if the debtor brought the requested Rider documents – such as their  tax returns, bank records, motor vehicle title, pay stubs, etc.  More often than not, the debtor brings  nothing and I have to continue the hearing for another date.  Even if the debtor shows up empty-handed, I still conduct the examination but in the continuance order, I specify which documents the debtor must produce within 7 or 14 days.  I then continue the citation hearing for 3-4 weeks.  I also reserve the right to re-examine the debtor if the documents he produces raises additional questions.

If the debtor or his/her counsel is uncooperative, threatening  or verbally abusive during the citation exam (I’ve experienced all three), I stop the exam and simply say “I’m going to have the case called”.  Usually, that results in some cooperation.  If not, and the debtor persists in not cooperating (giving “I don’t know” answers to every question) I let the judge scold the debtor for being obstructionist. In my experience, collection judges have little tolerance for a debtor that is not taking the citation proceeding seriously.

At the examination, three key questions I focus on before I look through the debtors’ documents are: (1) is he/she employed?; (2) Does he/she have bank accounts?; and (3) does the debtor own real estate?

(1) Employment: If the debtor answers yes to Item 1 (debtor has job) – I issue a wage deduction against the debtor’s employer.  You can have 15% of debtors’ gross, pre-tax wages under Illinois law under the Wage Deduction statute: 735 ILCS 5/12-801 et seq.

(2) Bank Account: If debtor has a bank account, I find out where and immediately issue and send a third-party citation to the bank’s Keeper of Records and serve it by certified mail.

Once the debtor’s bank receives the third-party citation, the bank must freeze the debtor’s account until further order of court.  I usually wait 2-3 days to send the debtor notice of the third-party citation.  Otherwise, if the debtor catches wind of the third-party citation, he/she can race to the bank, empty his/her accounts and you will get nothing (and NOT like it).

(2)(a) The Third-Party Citation

I have found a third-party citation to be a very  powerful enforcement tool.  People don’t like it when they can’t withdraw money from their account (individual) or make payroll (corporate debtor).

But, more often than not, the debtor’s bank account has little or no money in it.

Illinois law also has a $4,000 catch-all exemption: a debtor can declare up to $4,000 in his account as exempt (this is good information for someone representing a judgment debtor).

Example: debtor’s bank answers the third-party citation that the debtor has $4,050 in his/her checking account.  The debtor could declare $4,000 exempt and you (the creditor) would only get a paltry $50.  The burden is clearly on the debtor to claim this exemption.

The third-party citation will have a separate “return date”.  I try to schedule both the underlying “first party” citation (the one against the debtor) and third-party citation (against the debtor’s bank, e.g.) on the same day.

If the bank (or other third party respondent) files an answer stating that the debtor does have funds on deposit, I request a Turnover Order.  This is a court order which requires the bank/third-party to remit funds to the creditor’s counsel.

Once the turnover order issues, I send it to the bank/third-party with a letter saying “enclosed please find a copy of today’s order requiring you to turn over the sum of $____ within 7 days.  Please remit to the undersigned and make your check payable to_____”.  If the bank fails to pay (a rarity), I move to vacate the dismissal of the third-party citation and request that a conditional judgment enter against the bank. This almost always gets the bank’s attention since it doesn’t want to deal with a money judgment against it.

(3) Real Estate

If the debtor owns real estate, I record a Memorandum of Judgment against the property.

The Memorandum of Judgment must be signed by the judge that entered the underlying judgment (not the 1401 judge).  So, if a Muni judge entered it (on the 11th floor), you must have that judge sign the Memorandum.  If you forget at the time of judgment, simply file a motion requesting the judge to sign the Memorandum.

I attach a legal description to the Memorandum of Judgment along with the real estate PIN number.  Then, I record the Memorandum in the Recorder of Deeds.  For a Chicago-land debtor, I record in the Cook County Recorder of Deeds.  This puts a cloud on the debtor’s title.  The lien will interfere with the debtor’s attempts to refinance or sell his property.

If there is equity in the real estate, I can file suit to foreclose the lien and force a sale of debtor’s property.  But, before I do this, I run a title search – or at least check Cook County Assessor’s and Recorder of Deeds site to determine any prior recorded liens on the property.

A prior mortgage or other lien will trump my judgment lien and can make foreclosing the lien ( forcing a sale of the property) cost-prohibitive.

If the debtor answers that he has non-exempt personal property (e.g. car, jewelry, furniture, etc)., I explore whether the client wants to levy on the property.  Usually, it involves placing documents with the Sheriff and posting a bond.  This is where 735 ILCS 5/12-101-183 comes into play.  Levying on personalty can be time-consuming and expensive.

Other exemptions a debtor can assert in citation/supplementary proceedings are found at Section 2-1402(b)(1) and include unemployment benefits, Social Security benefits, worker’s comp benefits, $2,400 in car, $15,000 in home, $4,000 catch-all exemption among others.

Conclusion

There are many more details and nuances to collecting on a judgment.  But the above steps are a good starting point for a collection attorney trying to enforce a judgment for his client.  I can tell you this: when you are able to recover monies in citation proceedings through dogged efforts, clients are very appreciative which is very gratifying.