The Illinois Supreme Court has ruled a suburban nursing home operator can't be forced to pony up back pay owed to a worker in a discrimination lawsuit against the home's prior owner, as the high court ruled the prior owner didn't transfer ownership to avoid paying the judgment in the lawsuit filed on behalf of the worker.
Justice Thomas Kilbride wrote the Sept. 24 decision, with concurrence from Justices Rita Garman, Lloyd Karmeier, Michael Burke, Mary Jane Theis and Chief Justice Anne Burke. Justice P. Scott Neville Jr. did not take part.
The ruling favored Oakridge Healthcare Center in a discrimination suit filed by the State of Illinois.
Jane Holloway lodged a complaint in 2011 with the Illinois Department of Human Rights, alleging her former employer, Oakridge Nursing and Rehabilitation Center, discriminated against her because of her age and disability.
In January 2012, Oakridge Rehab ceased operations, because the state was falling behind on Medicaid payments, court documents said. As a consequence, Oakridge Rehab transferred its assets to Oakridge Healthcare, without exchanging money. However, the employees and location remained the same under the new corporation.
In September 2012, the Department of Human Rights filed a complaint, seeking back pay on Holloway's behalf, with the Illinois Human Rights Commission. The complaint named Oakridge Rehab, not Oakridge Healthcare. In 2014, Oakridge Rehab, which no longer existed, was ordered to pay $30,880. Payment was not forthcoming, so the state took action against both entities in Cook County Circuit Court to force payment.
Circuit Judge Franklin Valderrama found Oakridge Healthcare was not a continuation of Oakridge Rehab, and so was not obliged to pay. A divided Illinois First District Appellate Court then reversed the lower court decision in 2019, saying the asset transfer between the entities was for the "fraudulent purpose" of skirting payment to Holloway.
On appeal, the state high court found no evidence of fraudulent activity.
"It cannot legitimately be said that Oakridge Rehab was 'threatened with suit' at the time that the transfer occurred. The Department’s investigation was underway, and at that point neither party could reasonably foresee the outcome of that investigation," Kilbride said, quoting from the Illinois Fraud Act.
Kilbride added: "It is, in fact, difficult to imagine when the mere transfer of substantially all corporate assets, standing alone, would be sufficient to justify an inference of fraud in fact. Here, Oakridge transferred assets, other than real property, that were needed to care for the facility’s residents. Transferring those assets allowed for the continuous care of the residents and is not, by itself, a sufficient justification to infer fraud in fact."
In other words, according to Kilbride, "The transfer allowed Oakridge Rehab to stop the bleeding that was rapidly draining the company’s financial lifeblood."
Kilbride noted the facts no money changed hands and no appraisal was done, makes no difference to his finding.
"While no monetary consideration was exchanged in the transfer, Oakridge Rehab obtained a distinct benefit: it was no longer liable for the operation’s escalating expenses and retained its accounts receivable, including the Medicaid sums due from the State," Kilbride said.
Regarding the lack of an appraisal, Kilbride pointed out Oakridge Rehab leased its building. Further, in Kilbride's view, given the financial stress and limited sale opportunities for Oakridge Rehab, the absence of an appraisal doesn't suggest intent to defraud.
Kilbride summed up his understanding of Oakridge Rehab's decision to shut down.
"If it had not transferred virtually all remaining assets to Oakridge Healthcare at that point, it would have had to close, forcing the elderly and disabled residents in its care to find other accommodations or risk becoming homeless. Those circumstances do not support the conclusion that Oakridge Rehab was motivated to transfer its assets by an intent to evade its financial obligations to Holloway," Kilbride observed.
Oakridge Healthcare was represented by Robbins, Salomon & Patt, of Chicago.
The state was represented by the office of Illinois Attorney General Kwame Raoul.