Cook County Record

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Melrose Park could use TIF property tax money to pay class action firm Edelson in Westlake Hospital court fight

Lawsuits

By Jonathan Bilyk | May 24, 2019

Westlakehospital

Edelson P.C., a prominent Chicago plaintiffs’ law firm which has made its name and many millions of dollars litigating class action lawsuits, has signed on to help the village of Melrose Park fight the attempt by owners of Westlake Hospital to close the health care facility.

And, should they succeed, the lawyers for the Edelson firm would be slated to claim a substantial cut of the property taxes paid by the hospital.

For the past few months, Melrose Park’s village government has been embroiled in a protracted court fight over the fate of the hospital.


Ari Scharg | Edelson P.C.

Melrose Park filed suit in Cook County Circuit Court in March to block Pipeline Health from closing Westlake.

In its lawsuit, Melrose Park asserted Pipeline violated Illinois law governing hospital operations when it moved to close the hospital shortly after acquiring it along with other suburban hospitals in January.

Melrose Park asserts the hospital is essential to public health in the region, and particularly for poor and low income residents. The village claims Pipeline promised to keep the hospital open and functioning at prior service levels.

Pipeline, however, has asserted the hospital is losing $15 million a year, and the hospital’s services can be absorbed by other hospitals in the region.

To aid the village in its legal fight with Pipeline, the village in February hired the Edelson firm.

Melrose Park spokesman Andrew Mack said the village’s regular attorney, Michael Del Galdo, of the Berwyn-based Del Galdo Law Group, determined regular municipal lawyers, such as those working for the Del Galdo firm, were “not set up to handle litigation like this.”

“This is not their expertise,” Mack said, of the Del Galdo lawyers.

Mack said village officials believed it was essential to wage the court fight because Westlake Hospital provides “vital services” to the community and also serves as a “huge economic driver” for the village, generating taxes, jobs and other economic activity.

According to documents spelling out the relationship between the village and the firm, the Edelson firm would be paid 15 percent of the “tax increment” generated by the hospital for three years, beginning in February 2020. The document, a retention letter sent by the Edelson firm to Del Galdo was acquired from the village by The Cook Record under the Freedom of Information Act.

The retention letter said Edelson was working on contingency, and would not be paid at all if the village loses its lawsuit.

The letter said Edelson also would be scheduled to receive 20 percent of any money Melrose Park receives from any judgment or settlement with Pipeline.

The village also agreed to reimburse the Edelson firm for its litigation-related costs in the matter, if the village’s lawsuit succeeds.

Since 2010, Westlake Hospital’s properties have been designated by the village as a tax increment financing (TIF) district, legally known as the Chicago/Superior TIF. The hospital is not tax exempt.

The TIF designation means the village, under state law, can claim all property taxes paid by the hospital above a base level frozen at the time the district was created. The amount above the frozen base level is known as the “increment.” State law allows the village to funnel the increment dollars into a special TIF fund. According to the Melrose Park ordinance establishing that TIF district, those dollars were to be used to help the hospital make improvements to its property and maintain profitability.

The village spokesman did not answer questions about the TIF money, or how much the village expects to pay the Edelson firm as a result of the arrangement.

The letter also does not estimate an amount Edelson expects to be paid.

Lawyer Ari Scharg, who has served as a lead attorney from the Edelson firm in the Westlake litigation, did not reply to questions emailed by The Cook County Record.

However, according to a report posted on the website of the Cook County Clerk, the village received about $1.42 million in increment from the Chicago/Superior TIF in 2017, the most recent year for which such information was published. That amount had increased 1.84 percent from 2016, the clerk’s TIF report said.

Should the Edelson firm claim 15 percent of that increment, they would be slated to receive about $212,000 per year, or more than $637,000 over three years.

In all, the report said the Chicago/Superior TIF district generated $8.62 million in TIF revenue from 2010-2017.

The retention letter said the village and Edelson believe attorney fees paid out of the TIF fund in the matter would be allowed under state TIF law, because the village’s lawsuit “promotes the health, safety, morals and welfare of the residents” of Melrose Park, and the payment of the fees from the increment “is a valid Redevelopment Project Cost” under the Tax Increment Allocation Redevelopment Act.

The lawsuit against Pipeline is a bit unusual for the Edelson firm, which typically litigates class actions over such issues as privacy and technology. Edelson has reaped millions of dollars in fees from a variety of such prominent lawsuits. 

The firm, for instance, served as class counsel in a lawsuit against Caribbean Cruise Line and others, securing a $76 million settlement over marketing calls made to cell phones. Attorneys in that case, which also included other firms, could be paid more than $15 million in fees.

The firm has also secured big settlements in class actions against Nationstar Mortgage and Walgreens, over calls and messages to cell phones.

Edelson has also sued a range of businesses, including Facebook, Grubhub, Groupon and many others for a range of alleged privacy and telecommunications law violations.

The firm also led class actions against the NCAA over athlete concussions.

In more recent days, the Edelson firm has partnered with local governments in Illinois on large lawsuits. The firm is representing Cook County in actions against Uber over a data breach and Facebook over assertions the social media giant enabled Cambridge Analytica to harvest user data to benefit the campaign of President Donald Trump.

Presently, Edelson is representing Melrose Park and a number of other Illinois cities and villages in legal actions against the makers and distributors of so-called opioid painkiller medications. All of those actions were filed before Edelson joined Melrose Park’s fight against Pipeline over Westlake Hospital.

In that fight, the village is party to two parallel lawsuits – the original action filed against Pipeline in March and an additional lawsuit, now led by Cook County State’s Attorney Kim Foxx, against the Illinois Health Facilities Services and Review Board.

The state board had unanimously approved Pipeline’s request to close the purportedly money-losing hospital. However, Melrose Park and Foxx secured a judge’s order stopping Pipeline from closing Westlake amid a legaly challenge to the state Health Facilities board's decision.

That order remains in place, the hospital remains open and the cases remain pending in Cook County Circuit Court.

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Organizations in this Story

Edelson, PCDel Galdo Law Group LLCVillage of Melrose ParkCook County State's Attorney's OfficePipeline Health Systems