People ex rel. Lindblom v. Sears Brands, LLC
105 N.E.3d 934
Ill. App. Ct.2018Background
- Relators Richard and Ralph Lindblom (owners of a competing appliance retailer) sued on behalf of the State under the Illinois False Claims Act, alleging big-box retailers (including Best Buy) misclassified retail sales plus installation of dishwashers and over‑the‑range microwaves as construction contracts to avoid collecting/remitting sales tax.
- Relators provided information to the Illinois Department of Revenue (Department); the Department issued a compliance alert clarifying when sales with installation are taxable retail sales.
- The Department initiated a confidential audit of Best Buy (July 1, 2012–Dec 31, 2013) and issued a notice of proposed liability; Best Buy requested review by the Department’s Informal Conference Board (Board), which provides a non‑adversarial, informal review of proposed audit adjustments.
- Relators amended their qui tam complaint to add Best Buy while the audit and Board review were pending; Best Buy later received a final Notice of Tax Liability and then filed a Protest Monies Act action contesting it.
- Best Buy moved to dismiss relators’ complaint under the False Claims Act’s government action bar (740 ILCS 175/4(e)(3)), arguing the audit/Board review (and later Protest Monies Act filing) meant the State was already a party to an administrative civil money penalty proceeding; the trial court agreed and dismissed Best Buy. The appellate court reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Department audit plus Board informal review constituted an "administrative civil money penalty proceeding" under the False Claims Act government action bar | The audit and Board review were non‑adversarial investigatory steps and therefore did not qualify as an administrative civil money penalty proceeding | The audit and Board review (and later Protest Monies Act suit as part of a continuous process) were part of an administrative civil money penalty proceeding that bars the qui tam action | The audit and Board informal review were investigatory/precursors, not adversarial proceedings; the government action bar did not apply at the time relators added Best Buy as a defendant. |
| Whether the government action bar should apply because the State later became a party via the Notice of Tax Liability and Protest Monies Act filing | Relators argued the bar requires an existing adversarial civil or administrative proceeding when the qui tam is brought/expanded; future or potential proceedings do not trigger the bar | Best Buy argued the bar should cover the entire continuous administrative process beginning with the audit | The court read the statute’s present‑tense language literally: only existing civil suits or administrative civil money penalty proceedings in which the State is already a party trigger the bar; possible future proceedings do not. |
| Whether the qui tam suit was "parasitic" because it relied on information from the audit/Board | Relators argued reliance on audit materials does not itself make the suit parasitic if no adversarial proceeding was pending | Best Buy claimed the qui tam merely duplicated the State’s administrative efforts and conferred no additional benefit | Court declined to address parasitism on the merits because the government action bar did not apply; parasitism argument was moot to jurisdictional dismissal. |
| Whether dismissal under section 2‑619(a)(9) was proper | Relators argued dismissal was improper because the statutory bar did not apply | Best Buy asserted jurisdictional dismissal was required by the government action bar | Court held dismissal under section 2‑619(a)(9) was error because the bar did not apply; reversed and remanded. |
Key Cases Cited
- Kean v. Wal‑Mart Stores, Inc., 235 Ill. 2d 351 (Ill. 2009) (discussing operation of the Retailers’ Occupation Tax Act and sales tax basics)
- Irwin Industrial Tool Co. v. Department of Revenue, 238 Ill. 2d 332 (Ill. 2010) (use tax and complementary relationship to sales tax)
- Burlington Coat Factory Warehouse Corp. v. Department of Revenue, 369 Ill. App. 3d 507 (Ill. App. Ct. 2006) (describing relator intervention/qui tam mechanics under Illinois False Claims Act)
- Shell Oil Co. v. Department of Revenue, 95 Ill. 2d 541 (Ill. 1983) (taxpayer remedies and administrative protest rights under Illinois tax law)
- Schultz v. Illinois Farmers Ins. Co., 237 Ill. 2d 391 (Ill. 2010) (statutory construction principle: courts may not add provisions beyond statute’s plain language)