Judicial Rulings

Break for Blue Cross

A deal between Blue Cross and hospitals gives Blue Cross a rebate of hospitals' profits over 5 percent of actual costs. The Illinois Supreme Court decided January 24 that the agreement is neither restraint of trade nor fraud under Illinois statutes as claimed in a class action lawsuit brought by other insurers who do not have such an agreement.

The court observed that "basically the plaintiffs' only complaint is that they were not afforded the same pricing terms as Blue Cross.'' According to the court, apparent ambiguities ill the Illinois Antitrust Act (see Illinois Revised Statutes 1985, ch. 38, sec. 60-1 et seq.) are clarified by reference to the federal Sherman Act (see 15 U.S.C. sec. 1 (1976)) on which it is patterned and which does not prohibit price discrimination.

The court also dismissed the claim that the agreement constitutes fraud under the Illinois Consumer Fraud Act (see Ill. Rev. Stat. 1985, ch. 121 1/2, sec. 261 et seq.), which specifies that it should be interpreted in the light of the federal Consumer Fraud Act (see 15 U.S.C. sec. 45(a)(l) (1988)). The court said, "The language of the Act shows that its reach was to be limited to conduct that defrauds consumers or others." Here it was the plaintiffs rather than consumers who were injured by the agreement, which has been in effect since 1952 and is a matter of public record.

Justice Daniel P. Ward wrote the opinion in Laughlin v Evanston Hospital (Docket No. 66431). Justice Horace L. Calvo did not participate, while Justice William G. Clark wrote a special concurrence. He felt that the relevant acts on both restraint of trade and fraud require that each case be judged on its merits, a broader analysis than that of the majority.

Catching forged checks

The Illinois Supreme Court ducked a chance to be the first state supreme court to render a decision on banks' responsibilities to screen for forged checks. The court filed its decision February 18 in a case that had attracted nationwide attention from the banking industry now dependent on automated check-sorting.

The bank in this case used automated equipment to sort out checks over $1,000 for manual verification of signatures. It did not examine those for lesser amounts. Both circuit and appellate courts held that this practice did not constitute the ordinary care required of banks by the Commercial Code (see Ill. Rev. Stat. 1985, ch. 26, sec. 4-406(3)). They held that there was no issue of material fact to be determined and declared summary judgment for the plaintiff.

The Supreme Court disagreed, ruling that the question of whether the bank's procedures constitute ordinary care needed to be tried. The case was remanded to the circuit court.

Chief Justice Thomas J. Moran wrote for the majority in Wilder Binding Co. v Oak Park Trust & Savings Bank (Docket No. 67709). Justice Horace L. Calvo (joined by Justice William G. Clark) dissented. Calvo said, "Automatic preclusion from review of 93 % of all checks processed based solely on the amount of the check does not present a genuine issue as to any material fact." He suggested that "every check crossing defendant's threshold should be subject to some probability of examination."

Good faith: subjective, but ...

"The term 'good faith' appears repeatedly in theU.C.C. [Uniform Commercial Code]. . . . Just what the term means, however, remains somewhat of a mystery. Its meaning, moreover, may change, depending upon the context in which it is used." The Illinois Supreme Court thus pointed out a flaw in the statute, but its decision of February 16 did little to clarify the matter.

In this case a bank sought payment from guarantors of a note several months before the due date under a clause in the note permitting it to do so "if it [the bank] deems itself insecure." The defendants claimed that the bank did not act in good faith since the value of their property was more than enough to cover the amount of the note, and the code provides that such acceleration must rest on the good faith belief of the lender (see Ill. Rev. Stat. 1987, ch. 26, sec. 1-208.).

The court said, "We construe this to mean that section 1-208 permits a creditor to accelerate a debt pursuant to an insecurity clause if that creditor has an honest belief, based on whatever information it has, that the ability of a debtor to repay the debt has in some way become impaired." It noted that one court has termed this "the pure heart and empty head test," and tried to define the degree of objectivity that must enter what it considered a basically subjective judgment.

About the only rule the court established here was that "a creditor acts in good faith when exercising an acceleration clause so long as it acts honestly, irrespective of whether the 'reasonable creditor' would have accelerated under the same circumstances." The court did a bit of wrist-slapping: "Inconsistency and lack of clarity may unfortunately be the inevitable consequence of a statute that was subject to extreme lobbying efforts and was the result of political compromise. Reform, however, will have to come from the legislature, not this court."

The decision in Watseka First National Bank v Ruda (Docket No. 68075) was unanimous, with the opinion by Justice Howard C. Ryan.

Abduction law constitutional

The Illinois Supreme Court found constitutional language in the Criminal Code that says a person commits child abduction when he or she "attempts to lure a child under the age of 16 into a motor vehicle ... for other than a lawful purpose" (see Ill. Rev. Stat. 1987, ch. 38, see. 10-5(b)(10)). The decision was filed February 16.

The defendant on five consecutive days allegedly drove his car slowly past a 12-year-old schoolgirl and on one occasion told her to "come on." The indictment does not specify any unlawful purpose.

The defendant claimed that the failure of the Criminal Code to define an unlawful purpose means that it could encompass misdemeanors and even municipal regulations. The court rejected this and seemed to agree with other interpretations when it said, "Courts in other States have construed similar language as involving violations of criminal laws."

The court also held that the statute does not violate guarantees of free speech. It said, "It is unquestioned that the State has a substantial interest in the protection of its children, and may validly proscribe the luring or attempted luring of children into motor vehicles for criminal purposes, although that attempt may involve speech."

Justice Howard C. Ryan wrote the opinion in People v Williams (Docket No. 68487).

At last a new code for lawyers

The present Code of Professional Responsibility that controls the conduct of lawyers, in effect since June 1980, will be replaced by the new Illinois Rules of Professional Conduct. The Illinois Supreme Court released the new code on February 8 and ordered its adoption effective August 1.

In 1983 the American Bar Association adopted Model Rules of Professional Conduct (ABA Model Rules). After lawyers' organizations urged their adoption in Illinois the Supreme Court appointed a special committee of lawyers to draft a new code. This was delivered to the court in April 1987 and released for comment in June 1987. The court has been working on the final version "as it had time."

The new code adapts the ABA Model Rules to the conditions imposed by Illinois statutes. Noteworthy is the omission of ABA Model Rule 6.1 on pro bono public service. The preamble to the new Illinois code urges such service but notes the difficulty of incorporating it in a disciplinary standard.

F. Mark Siebert

April 1990/Illinois Issues/29