ATC Healthcare Services brought this suit against a competitor, RCM Technologies, and the Board of Education of the City of Chicago (which runs the Chicago Public Schools, so call them "CPS"). In the initial complaint, ATC alleged violations of the Illinois Uniform Deceptive Trade Practices Act (UDTPA), 815 ILCS 510/2(a) ; the Illinois Consumer Fraud and Deceptive Business Practices Act (the Consumer Fraud Act), 815 ILCS 505/2 ; intentional interference with prospective economic advantage; breach of contract; and intentional interference with contract.
I. Background
For the purposes of this motion, the Court accepts as true the allegations in ATC's amended complaint. Erickson v. Pardus ,
The nurses who ultimately provided the services were employees of ATC- contracted with and paid by ATC-not CPS. Am. Compl. ¶¶ 22-24. They provided a range of critical services to CPS students with disabilities and special needs, including "gastronomy tube feeding, tracheostomy care, ventilator care, medication through a nebulizer or other routes, assistance with range of motion and movement, the administration of medication, as well as urinary and bowel care." Id. ¶ 19. These nurses had unique skills and training, such as language fluencies, that allowed them to work with ESL (English as a Second Language) and special needs children in Chicago schools. Id. ¶¶ 20-21. The nurses were at-will employees of ATC. Id. ¶ 24. But many of them had been with ATC for over two years, although their contracts had to be renewed for each school year. Id. ¶ 28.
In November 2014, CPS decided to exercise its option to potentially terminate the contract and solicited bids from about 10 staffing firms, including ATC and Defendant RCM Technologies, for its outsourced nurse staffing needs. Am. Compl. ¶¶ 32-34. RCM claimed in its bid that it had "100 nurses ready" to staff the schools and that it would use a "rigorous interview, screening and evaluation process" to select nurses for assignments. Id. ¶ 39. But because continuity of care is so important for the children, RCM represented that it usually attempts to "inherit" or "take over" the nurses from the current provider, which it has historically done "on an annual basis" "with considerable ease." Id. ¶¶ 37-38.
ATC alleges that these representations were a lie intended to deceive the public into believing that the bidding process was not a sham. Am. Compl. ¶ 105. Out of one side of its figurative mouth, ATC alleges, CPS had privately assured RCM that it was going to win the bid. Id. ¶ 48. At the same time, CPS acted as though it intended to continue working with ATC. Id. ¶ 52. When ATC sent CPS copies of its proposed 2015-2016 employment agreement, for example, a CPS official replied, "Thanks ....This looks great." Id. ¶ 53. CPS also asked ATC for a list of all currently assigned nurses and which schools they were assigned to, and ATC complied. Id. ¶ 54. During this time, CPS delayed its vote on the bid, causing ATC to incur training and recruitment costs to staff nurses in accordance with its existing contract, which it was still obligated to fulfill. Id. ¶¶ 46-52.
The first ATC heard that its contract was not going to be renewed was from a phone call on June 16, 2015, eight days before the Board publicly voted to approve RCM's competing bid. Am. Compl. ¶ 56. CPS sent a letter stating the same the next day. Id. CPS would not give ATC any reason why it had opted not to award ATC the new contract despite ATC's record of success, and according to ATC, never gave any indication that it was going to help RCM take over ATC's nurses to fulfill the 2015-2016 staffing needs. Id. ¶ 51. In fact, CPS still requested new nursing assignments from ATC two days after it sent them the letter. Id. ¶ 58.
After CPS formally voted to accept RCM's proposal on June 24, 2015, Am. Compl. ¶ 63, CPS informed ATC that it would not need any of its nurses for the remainder of the summer but did not terminate ATC's contract. Id. ¶¶ 64, 78. CPS also sent RCM the complete list of all of ATC's nurses who were currently assigned to the schools, including the nurses' contact information. Id. ¶ 65. RCM did not have a formal contract in place with CPS but nevertheless began "aggressively soliciting"
The solicitations grew more urgent as the school year approached. Am. Compl. ¶ 70. RCM implied that the nurses were already working for RCM by stating that they only needed to "confirm" their previous assignments. Id. ¶ 71. RCM also emailed the nurses-the email was marked "URGENT"-to tell them that they needed to be fingerprinted (though ATC had already done that), id. ¶ 72, and that they would receive referral bonuses for getting other nurses to sign up. Id. ¶ 76. ATC claims that this was a "ruse" to make the nurses think they were obligated to start working for RCM even though they were still ATC employees. Id. ¶ 73. But CPS still told ATC that it was reserving its rights under the 2015-2016 contract, so ATC might still have to provide nurses to some schools. Id. ¶ 78. Only two weeks before the start of the school year, on August 13, 2015, did CPS notify ATC that it was cancelling the contract, id. ¶ 77, and meanwhile RCM was still calling nurses to schedule them to assignments despite never hiring or screening them. Id. ¶ 81. RCM even implied that the solicitations were approved by ATC. Id. ¶ 82.
According to ATC, this led to problems on the first day of school. Am. Compl. ¶¶ 84-93. Scores of special needs children did not have nurses and were thus unable to attend class. Id. ¶ 92. This led to numerous calls to ATC from parents and school officials who, confused as to whether the nurses who were supposed to be assigned to the children were employed by ATC or RCM, asked where the nurses were. Id. ¶ 85-92. But ATC could only refer them to RCM and CPS, because ATC had no authority to send nurses. Id. ¶ 94.
ATC alleges that all of these actions were part of an unfair and deceptive scheme between RCM and CPS to allow RCM to take over ATC's contract and nurses. Am. Compl. ¶ 95. So ATC sued. The Court granted a motion to dismiss, but allowed ATC to file an amended complaint. The amended complaint asserts claims under the Illinois Uniform Deceptive Trade Practices Act (UDTPA), 815 ILCS 510/2(a) ; the Illinois Consumer Fraud and Deceptive Business Practices Act (the Consumer Fraud Act), 815 ILCS 505/2 ; and for intentional interference with prospective economic advantage. Am. Compl. RCM and CPS now jointly move to dismiss the remaining claims under Rule 12(b)(6). R. 71, Mot. to Dismiss Am. Compl.
II. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This short and plain statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly ,
"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted."
III. Analysis
A. Uniform Deceptive Trade Practices Act (Count 1)
(Against CPS and RCM)
ATC alleges that the attempted takeover of their nurses by CPS and RCM violated five sections of the Illinois Uniform Deceptive Trade Practices Act (UDTPA), 815 ILCS 510/2(a), Am. Compl. ¶ 98, the purpose of which is to "enjoin [ ] ... trade practices which confuse or deceive the consumer." Popp v. Cash Station, Inc. ,
(2) causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods and services;
(3) causes likelihood of confusion or of misunderstanding as to affiliation, connection, or association with or certification by another;
(4) uses deceptive representations or designations of geographic origin in connection with goods or services;
(5) represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that he or she does not have; ...
(12) engages in any other conduct which similarly creates a likelihood of confusion or misunderstanding."
815 ILCS 510/2(a) ; Am. Compl. ¶ 98. But ATC's allegations fail to state a claim for relief under the Act.
RCM and CPS argue that, because the UDTPA only provides for injunctive relief, ATC must allege that it is likely to suffer harm in the future from the deceptive conduct unless the court issues the injunction. R. 72, Def. Br. to Am. Compl. at 9-10. Because ATC has not alleged any threat of future recruitment or confusion (at this point in time) about which company provides the staffing services, they argue, ATC has failed to state a claim.
For its part, ATC does not respond to CPS and RCM's argument, which is enough to dismiss the claim by itself. Failure to respond to an argument in a motion to dismiss permits an inference of acquiescence to the argument which acts as a waiver. Cincinnati Ins. Co. v. E. Atl. Ins. Co. ,
Even if ATC had not waived this argument, this Court would have held that ATC failed to state claim because it did not allege any future harm. The likelihood of future harm occurring absent an injunction is an element of liability on the claim, not merely a separate element of damages. Glazewski v. Coronet Ins. Co. ,
B. Consumer Fraud Act (Count 2)
(Against RCM Only)
ATC next alleges that RCM's efforts to take over its nurses violated the Illinois Consumer Fraud and Deceptive Business Practices Act. 815 ILCS 505/2 ; Compl. ¶¶ 109-22. The Court initially dismissed this claim for failing to sufficiently plead a connection (or, in the words of various opinions, "nexus") between the wrongful acts alleged and consumer-protection concerns. 6/28/16 Opinion at 17. The Amended Complaint does not correct this flaw.
The Consumer Fraud Act was primarily enacted to protect consumers, borrowers, and business persons from unfair methods of competitions. Robinson v. Toyota Motor Credit Corp. ,
First, ATC argues that the Act should be broadly construed to eradicate deceptive and unfair business practices generally. R. 77, Pl. Resp. Br. for Am. Compl. at 16. Because the practices engaged in by RCM and CPS were unfair, ATC argues, the Act should cover them.
ATC next argues that RCM targeted deceptions at the families of CPS students and that these families were affected by the deception. Pl. Resp. Br. for Am Compl. at 17. But most of the statements made by RCM in the bidding process (ATC lists tem in paragraph 39 of the Amended Complaint) are merely competitive puffery, not actual statements of fact , and cannot constitute actionable deceptive statements by themselves. The only arguably false or deceptive statement (and one that was capable of being verified one way or the other) that was made during the bidding process is that RCM had "100 nurses ready" to staff CPS schools as part of its bid. Am. Compl. ¶ 39. ATC alleges that this statement was made to "the public at large" because it was made to CPS. But ATC offers no support that a statement made to a government entity in a bidding process qualifies as a statement made to end users of the contracted-for services. So far as the Amended Complaint alleges, RCM did not market the bid to parents and students, and the representation was only public because the bidding process was public. The alleged misrepresentation was directed at CPS , and throughout the complaint, ATC alleges that CPS was in on the scheme. See, e.g. , id. ¶ 44 (alleging that CPS and RCM officials were planning to
To be sure, some cases have held that it is possible to state a valid claim in a business-to-business suit involving a deceptive act that flowed downstream to consumers. See YCB Int'l, Inc. v. UCF Trading Co. ,
C. Interference with Economic Advantage (Count 3)
(Against both RCM and CPS)
In Count 3, ATC alleges that RCM and CPS intentionally interfered with ATC's prospective economic advantage by soliciting its nurses to come work for RCM. Am. Compl. ¶ 127. In the prior Opinion, the Court noted that ATC had sufficiently pled the first two elements of this common law tort: (1) the plaintiff must have a reasonable expectancy of a valid business relationship with a third party; and (2) the defendant must know about it. 6/28/2016 Opinion at 19 (relying on Fellhauer v. City of Geneva ,
RCM and CPS also contend that ATC has failed to allege that they have intentionally interfered with the expectancy. Def. Br. to Am. Compl. at 15. They claim that the term "actively recruited" is a conclusion and not a factual allegation.
Finally, RMC and CPS argue that ATC has not overcome the competitor's privilege. Def. Br. to Am. Compl. at 15-18. But this does not take into account that competitor's privilege is an affirmative defense to tortious interference with business advantage. Gen. Motors Corp. v. State Motor Vehicle Review Bd. ,
D. Illinois Tort Immunity Act
Finally, CPS argues that the Local Governmental and Governmental Employees Tort Immunity Act, 745 ILCS 10/1-101 et seq. , provides the Board with immunity against the economic-advantage claim. In particular, CPS cites to four sections of the Tort Immunity Act. But none of them apply, at least not to all the allegations comprising the tortious interference claim. First, Section 2-106 immunizes only "oral" promises or misrepresentations. Some of the alleged misrepresentations to ATC's nurses were in writing, including via email. Am. Compl. ¶ 72. As discovery progresses and a finite set of facts comprising the claim becomes clear, it might very well be that the basis for CPS's liability will be narrowed (and jury instructions to that effect would be appropriate). But dismissal of the claim is inappropriate because of the alleged written communications.
Second, Section 2-210 immunizes "negligent" misrepresentations, whether in writing or made orally. But the allegations, which much be accepted as true, plausibly set for an intentional interference with economic advantage, comprised of intentional misrepresentations to ATC's nurses. Again, CPS might well be entitled to a jury instruction to ensure that the jury does not premise liability on negligence. But this section does not help CPS dismiss the entirety of the claim.
Third, Section 2-107 immunizes local governments against libel or slander. But that is not the surviving claim. Tortious interference with economic advantage does not necessarily rely on libelous or slanderous statements, and indeed that is not what ATC is alleging when it says that Defendants essentially tricked ATC's nurses into thinking that they had already become RCM employees. So this section too does not defeat the claim.
Fourth and finally, Section 2-201 immunizes local governments against claims premised on their employees' policy determinations and exercises of discretion. It would be one thing if the tortious interference claim sought to challenge CPS's decision to award the staffing contract to RCM. That decision would be a prototypical policy determination and an exercise of discretion. But that is not what ATC targets with the tortious interference claim. Instead, ATC seeks relief for CPS's alleged interference with ATC's employment relationship with its nurses, and those allegations are independent of the policy decision to terminate the contract with ATC and award it to RCM. None of the immunities
IV. Conclusion
For the reasons discussed, the motion to dismiss the Deceptive Trade Practices Act and the Consumer Fraud Act claims is granted, and this time the dismissals are with prejudice, because ATC has already amended the complaint. But the claim for tortious interference with economic advantage remains intact. The status hearing of October 12, 2017, remains as scheduled. The parties shall confer on a discovery schedule and file a joint Rule 26(f) report by October 10, 2017. At the least, Rule 26(a)(1) disclosures will be due by October 23, 2017, and the first round of written discovery requests shall be issued no later than that date.
Notes
The Court has subject matter jurisdiction over this case under
Citations to the Court's docket are labeled as "R." followed by the docket number, and the applicable page or paragraph number.
Because the lack of allegations of a likelihood of future harm is dispositive on this claim, the Court does not need to consider whether likelihood of confusion is the sort of harm that is covered by the UDTPA.
It is worth noting that RCM argues that the students are the "beneficiaries of the nursing services" rather than "consumer[s] of the staffing services." RCM's Br. at 6 (emphasis omitted). Although the Court need not decide this issue because the Consumer Fraud Act is not triggered, regardless of the students' classification, the Court was probably wrong to say, in the prior Opinion, that the students were the actual consumers of the services. 6/28/16 Opinion at 17. The Consumer Fraud Act defines consumers as those who "purchase[ ] or contract[ ] for the purchase of" services. 815 ILCS 505/1(e). That would be CPS in this scenario, not the students themselves.