State of Illinois v. City of Chicago

2021 IL App (1st) 191675-U

• Court: Appellate Court of Illinois
• Decided: March 31, 2021
• Docket: 1-19-1675
• Status: Unpublished

Opinion

2021 IL App (1st) 191675-U

FOURTH DIVISION March 31, 2021

No. 1-19-1675

NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT ______________________________________________________________________________

) STATE OF ILLINOIS ex rel. JOHN THULIS, JAMES ) Appeal from the WEBB ) Circuit Court of ) Cook County Relators-Appellants, ) ) v. ) ) CITY OF CHICAGO, ) No. 18 L 12455 ) Defendant, ) ) and ) ) Honorable KWAME RAOUL, ATTORNEY GENERAL OF THE ) James E. Snyder, STATE OF ILLINOIS, ) Judge Presiding. ) Appellee. ) ______________________________________________________________________________

JUSTICE REYES delivered the judgment of the court. Justice Lampkin concurred in the judgment. Presiding Justice Gordon dissented.

ORDER

¶1 Held: Affirming the judgment of the circuit court of Cook County granting the State’s motion to dismiss a qui tam action filed by relators under the False Claims Act against the City of Chicago relating to purported violations of Illinois unclaimed property law. 1-19-1675

¶2 The Illinois False Claims Act (Act) (740 ILCS 175/1 et seq. (West 2018)) – formerly

known as the Whistleblower Reward and Protection Act – permits private parties known as

“relators” to file qui tam actions on behalf of the State of Illinois (the State) against the alleged

perpetrators of fraud against the State and to share in the recovered proceeds in successful

actions. In the instant case, relators John Thulis and James Webb filed a qui tam action under the

Act on behalf of the State in the circuit court of Cook County against defendant City of Chicago

(the City). The complaint alleged that the City violated the Act based on its noncompliance with

the Revised Uniform Unclaimed Property Act (Revised Unclaimed Property Act) (765 ILCS

1026/15-101 et seq. (West 2018)) due to its failure to report or turn over to the State more than

22,000 uncashed checks with a total value in excess of $11 million.1 The State, through the

Attorney General, filed a motion to dismiss the relators’ complaint pursuant to the State’s

prosecutorial discretion provided in the Act (740 ILCS 175/4(c)(2)(A) (West 2018)). In the

instant appeal, the relators challenge the circuit court order granting the State’s motion to dismiss

and denying the relators’ motion for leave to file an amended complaint. As discussed below,

we affirm.

¶3 BACKGROUND

¶4 The single-count complaint, filed in camera and under seal in accordance with the Act

(740 ILCS 175/4(b)(2) (West 2018)) on November 15, 2018, provided as follows. Pursuant to a

Freedom of Information Act (FOIA) request from relators’ counsel, the City produced a list of

uncashed checks issued by the City between mid-1988 and mid-2018. A total of 22,231

uncashed checks were listed, representing an aggregate unpaid balance of $11,403,473.81. The

1 The complaint alleged that the purported violations occurred for decades. The Act and the Illinois unclaimed property statutes have changed during such period. Since the changes do not affect the specific analysis herein, we refer to the 2018 versions of the statutes, for clarity and consistency purposes. -2- 1-19-1675

list, which was attached as an exhibit to the complaint, included a check for $12.73 issued to

relator John Thulis in 2017 and a check for $330 issued to relator James Webb in 2014.

¶5 According to the complaint, uncashed checks are presumed “abandoned” three years after

issuance under the Revised Unclaimed Property Act. Upon abandonment, the City is obligated

to report the uncashed checks and turn over the funds to the State treasurer. The State then holds

these amounts (and other “lost funds”) until they are claimed by the owners or their heirs.

¶6 The complaint herein was based on section 3(a)(1)(G) of the Act, which provides that a

person who “knowingly makes, uses, or causes to be made or used, a false record or statement

material to an obligation to pay or transmit money or property to the State, or knowingly

conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit

money or property to the State” is liable to the State (740 ILCS 175/3(a)(1)(G) (West 2018)).

The relators alleged that the City’s failure to comply with the reporting and turnover

requirements deprived the State of the “float,” i.e., interest-free use of the money, and deprived

the rightful owners of the opportunity to search for and obtain the funds using the State

treasurer’s website (https://icash.illinoistreasurer.gov). The relief requested in the complaint

included: (a) an order directing the City to cease and desist from violating the Act and to report

and turn over the sums as required by the Revised Unclaimed Property Act; (b) judgment for the

City for the amount of the State’s damages, with trebled damage, and a judgment of up to

$11,000 for each violation as civil penalties (see 740 ILCS 175/3(a)(1) (West 2018)); and (c) an

“appropriate Relator award from the recovery” and the award of attorney fees and costs for the

prosecution of the action (see 740 ILCS 175/4(d) (West 2018)).

¶7 The Act provides that the State may elect to intervene and proceed with the action within

60 days after its receipt of the complaint and related materials (740 ILCS 175/4(b)(2) (West

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2018)). Pursuant to section 4(b)(3) of the Act (740 ILCS 175/4(b)(3) (West 2018)), the State

was granted a 180-day extension in the instant case “for good cause shown” to review the

relators’ allegations and make an intervention determination. The court also extended the seal of

the record in this action.

¶8 On July 1, 2019, the State filed a motion to dismiss the relators’ complaint pursuant to

section 4(c)(2)(A) of the Act (740 ILCS 175/4(c)(2)(A) (West 2018)), which provides: “The

State may dismiss the action notwithstanding the objections of the person initiating the action if

the person has been notified by the State of the filing of the motion and the court has provided

the person with an opportunity for a hearing on the motion.” The State asserted that the Act

gives the State broad discretion to dismiss false claims cases. Citing State ex rel. Beeler, Schad

and Diamond, P.C. v. Burlington Coat Factory Warehouse Corporation, 369 Ill. App. 3d 507,

517 (2006) (Burlington Coat Factory), the State argued that a court may deny its motion to

dismiss only in the most extraordinary circumstances, such as “glaring evidence of fraud or bad

faith by the state.” According to the State, even a relator’s right to a hearing on the

government’s dismissal is simply a formal opportunity for the relator to convince the

government not to end the case, rather than an inquiry into the merits.

¶9 In its motion to dismiss, the State represented that it had determined that the complaint

did not set forth a viable cause of action under the Act for several reasons. First, the State

asserted that the action was precluded by the “public disclosure bar” under section 4(e)(4)(A) of

the Act (740 ILCS 175/4(e)(4)(A) (West 2018)) as the complaint made “identical allegations”

which were publicly disclosed in an article written by Maurice Possley – Chicago, State Seek

Deal Over Unclaimed Money – and published in the Chicago Tribune on August 11, 2008

(https://chicagotribune.com/news/ct-xpm-2008-08-11-0808100295-story.html). According to

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the State, the complaint did not contain any new material or information, thus, the relators did

not provide “vital facts not in the public domain.” The State also maintained that the

requirement to remit unclaimed property was not “material” for purposes of a false claims action,

given the State’s knowledge of the City’s noncompliance and subsequent nonenforcement. The

State further asserted that its knowledge of the City’s noncompliance with the law – combined

with its effort to address the matter through negotiation – negates the fraudulent intent element of

the Act. Finally, the State argued that the relators’ allegations need not be address through the

Act since the State treasurer has his own statutory powers to enforce the Revised Unclaimed

Property Act (765 ILCS 1026/15-1002, 15-1011, 15-1201 (West 2018)).

¶ 10 In a response in opposition to the motion to dismiss, the relators relied, in part, on an

unpublished federal district court case from the Southern District of Illinois, United States ex rel.

CIMZNHCA, LLC v. UCB, Inc., 2019 WL 1598109 (S.D. Ill. Apr. 15, 2019), reconsideration

denied, 2019 WL 2409576 (S.D. Ill. June 7, 2019), which addressed the False Claims Act (31

U.S.C. § 3729 et seq.), a federal law similar to the Illinois Act. The CIMZNHCA court applied a

two-step analysis for testing the government’s justification for dismissal as set forth in United

States ex rel. Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139, 1145 (9th Cir.

1998) (Sequoia): (1) identification of a valid government purpose; and (2) a rational relation

between dismissal and accomplishment of the purpose. Under Sequoia, if the government

satisfies the two-part test, the burden shifts to the relator to demonstrate that the dismissal is

fraudulent, illegal, or arbitrary and capricious. Id.

¶ 11 The relators herein argued that the State’s motion amounted to an arbitrary and capricious

dismissal contrary to law as the Attorney General’s office had decided to “indulge the City’s

intentional violation of the law,” which harmed the State by “conscripting the float for the City”

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and “unconsciously” harmed the parties who should have been alerted to the existence of the

owed amounts. The relators further contend that the State’s arguments that the claims were “not

material” ignored the size and scope of the “abuse” being tolerated. As to the State’s “public

disclosure bar” argument, the relators noted that the Chicago Tribune article was published

almost twelve years ago and that the article suggested that the City’s practice of non-compliance

with the Illinois unclaimed property law would be corrected. The relators also asserted that they

were “original sources” to their own claim and that they provided new information, i.e., that the

City’s practice had either been continued or renewed.

¶ 12 In addition to the foregoing opposition to the State’s motion to dismiss, the relators

sought leave to file a first amended complaint, which included claims under the Revised

Unclaimed Property Act, the Interest Act (815 ILCS 205/0.01 et seq (West 2018)), and the

Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2018)).

In the proposed amended complaint, the relators also sought class certification as to the three

additional counts (counts II, III, and IV).

¶ 13 The State filed a reply asserting that the Attorney General’s broad discretion to dismiss

claims over a relator’s objection is settled law, and even if the circuit court adopted the broader

Sequoia standard, the relators’ claims should be dismissed as the State has provided “good faith

reasons for dismissal.” The State reiterated that: (a) the relators were not an original source and

they did not provide genuinely new material or information to overcome the public disclosure

bar, and (b) the State’s knowledge that the City does not remit unclaimed property – and that the

State treasurer has not enforced unclaimed property laws against the City – negates the

“materiality” and “fraudulent intent” elements of the Act.

¶ 14 On August 15, 2019, the circuit court granted the State’s motion to dismiss and denied

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the relators’ motion for leave to file a first amended complaint. The order provided that the

dismissal motion was granted pursuant to section 4(c)(2)(A) of the Act. The court subsequently

granted the relators’ unopposed motion to lift the seal. The relators filed the instant appeal.

¶ 15 On August 24, 2020, the relators filed a motion with this court for leave to cite additional

authority, i.e., the Seventh Circuit Court of Appeals decision in United States ex rel.

CIMZNHCA, LLC v. UCB, Inc., 970 F.3d 835 (7th Cir. 2020), which reversed the decision of the

district court (discussed above). The Seventh Circuit in CIMZNHCA rejected the district court’s

application of the burden-shifting test under Sequoia and instead found that the “correct answer”

regarding the role of a court in reviewing the government’s motion to dismiss “lies much nearer”

to Swift v. United States, 318 F.3d 250, 253 (D.C. Cir. 2003), which held that the federal False

Claims Act gives the government unfettered discretion to dismiss. Since the government

proposed to terminate the lawsuit, in part, as the conduct challenged therein was not only

“probably lawful” but also was beneficial to the public, the Seventh Circuit directed the district

court to dismiss the claims with prejudice as to the relator and without prejudice as to the

government. (CIMZNHCA, 970 F.3d at 854). According to the relators herein, the actions of the

City and the State in the instant case are “neither ‘probably lawful’ nor ‘beneficial’ to the payees

or the public.” The Attorney General did not oppose the relators’ motion to cite, instead

primarily argued that “no federal court’s interpretation of the federal False Claims Act is binding

authority on this court or requires departure from its prior authority interpreting the Illinois” Act,

including Burlington Coat Factory (discussed above). We granted the relators’ motion to cite

the Seventh Circuit decision in CIMZNHCA.

¶ 16 ANALYSIS

¶ 17 Although the relators advance multiple arguments on appeal, their primary contention is

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that the Sequoia standard applies, which requires the State to establish that its exercise of

dismissal authority is rationally related to a legitimate government purpose (which the State

purportedly did not do), and if the State satisfies that requirement, the burden then shifts to the

relators to demonstrate that dismissal is fraudulent, illegal, or arbitrary and capricious (which the

relators purportedly have done). The relators request that this court reverse the dismissal, to

grant leave to amend the complaint, and to direct this case to proceed. The Attorney General

responds that this court should affirm the dismissal as an exercise of the State’s “virtually

unfettered discretion” to do so under the Act. According to the Attorney General, such

discretion is reviewable only for glaring evidence of fraud or bad faith. As to the denial of the

relators’ motion for leave to file an amended complaint, the Attorney General contends that the

circuit court properly exercised its discretion to require the pursuit of any private causes of action

based on personal injuries – i.e., claims not raised on the State’s behalf – in a separate lawsuit.

¶ 18 The Act is modeled after the federal False Claims Act and is an antifraud statute. State ex

rel. Beeler Schad and Diamond, P.C. v. Ritz Camera Centers, Inc., 377 Ill. App. 3d 990, 996

(2007). Under the Act, an action may be commenced by the Attorney General (740 ILCS

175/4(a) (West 2018)) or a private person may bring a qui tam action “for the person and for the

State.” 740 ILCS 175/4(b) (West 2018). See State ex rel. Schad, Diamond & Shedden, P.C. v.

My Pillow, Inc., 2018 IL 122487, ¶ 4. Although qui tam plaintiffs may “conduct” litigation on

the State’s behalf subject to significant restrictions in the Act, the Attorney General retains

authority to “control” the litigation at every stage of the proceedings. Scachitti v. UBS Financial

Services, 215 Ill. 2d 484, 510 (2005). See also Lyons v. Ryan, 201 Ill. 2d 529, 541 (2002)

(noting that the legislature may add to the Attorney General’s powers but cannot reduce the

Attorney General’s common law authority in directing the legal affairs of the State). As

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observed by our supreme court, the plain language of the Act provides that the Attorney General

“in all circumstances effectively maintains control over the litigation, consonant with the

Attorney General’s constitutional role as the chief legal officer of the state.” Scachitti, 215 Ill.

2d at 513. “Rather than usurping the constitutional power of the Attorney General, the qui tam

provisions of the Act support the Attorney General’s law enforcement duties.” Id.

¶ 19 As noted above, the parties dispute the applicable standard to be applied by a court in

considering the State’s motion to dismiss a relator’s qui tam complaint. The relators herein

contend that the two-step analysis for testing the justification for dismissal articulated by the

Ninth Circuit in Sequoia applies: (1) identification of a valid government purpose; and (2) a

rational relation between dismissal and accomplishment of that purpose. Sequoia, 151 F.3d at

1145. If the government satisfies the two-part test, the burden then shifts to the relator to

demonstrate that dismissal is fraudulent, illegal, or arbitrary and capricious. Id. The relators also

contend that the guidelines for dismissal of federal False Claims Act qui tam actions articulated

by the United States Department of Justice in 2018 – known as the Granston Memo 2 – have not

been met in the instant case.

¶ 20 We are unpersuaded by the relators’ contentions. While Illinois courts have relied on the

interpretation of the federal False Claims Act by federal courts for guidance in construing the

Illinois Act (People ex rel. Schad, Diamond and Shedden, P.C. v. QVC, Inc., 2015 IL App (1st)

132999, ¶ 30), federal decisions are not binding on this court in the absence of a decision by the

United States Supreme Court. Mekertichian v. Mercedes-Benz U.S.A., L.L.C., 347 Ill. App. 3d

2 The non-exhaustive list of factors included in the Granston Memo that the United States Department of Justice can use as a basis for dismissal include: (1) curbing meritless qui tam actions; (2) preventing parasitic or opportunistic qui tam actions; (3) preventing interference with agency policies and programs; (4) controlling litigation brought on behalf of the United States; (5) safeguarding classified information and national security interests; (6) preserving government resources; and (7) addressing egregious procedural errors. -9- 1-19-1675

828, 835 (2004). More importantly, this court expressly rejected the Sequoia test in Burlington

Coat Factory: “If we interpret section 4(c)(2)(A) to require judicial review of the Attorney

General’s decision to dismiss an action, whether through application of the [Sequoia] test or any

other ‘checks and balances’ approach, we give the court veto power over the state’s decision to

dismiss, essentially usurping the Attorney General’s power to direct the legal affairs of the state

and putting that power in the hands of the court.” Burlington Coat Factory, 369 Ill. App. 3d at

516-17. The Burlington Coat Factory court further stated: “We hesitate to say that the court’s

role in a section 4(c)(2)(A) hearing is solely to ‘rubber-stamp’ the state’s decision to dismiss a

qui tam action over the relator’s objections. However, the presumption is that the state is acting

in good faith and, barring glaring evidence of fraud or bad faith by the state, it is the state’s

prerogative to decide which case to pursue, not the court’s.” Id. at 517.

¶ 21 The burden of presenting glaring evidence of fraud or bad faith by the State in dismissing

the qui tam action is on the relators. Id.; QVC, 2015 IL App (1st) 132999, ¶¶ 21, 35. As the

appellants herein, the relators have the burden of presenting a sufficiently complete record of the

circuit court proceedings, and any doubts arising from the incompleteness of the record will be

resolved against them. Foutch v. O’Bryant, 99 Ill. 2d 389, 391-92 (1984). On the record

presented, we cannot conclude that the circuit court erred in granting the State’s motion to

dismiss.

¶ 22 We initially observe that the record does not include any transcript or other report of

proceedings of any circuit court hearing on the State’s motion to dismiss. Although the relators

contend that no hearing was held, the record suggests that the relators did not request a hearing.

Under section 4(c)(2)(A) of the Act, the State may dismiss a qui tam action notwithstanding the

objections of the relator if the relator has been notified of the filing of the motion to dismiss and

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the court has provided the relator with “an opportunity for a hearing on the motion.” 740 ILCS

175/4(c)(2)(A) (West 2018). “ ‘An opportunity for a hearing,’ however, requires that relators

avail themselves of the ‘opportunity.’ ” United States and State of Delaware, ex rel. Chang v.

Children’s Advocacy Center of Delaware, 938 F.3d 384, 387-88 (3d Cir. 2019) (addressing the

federal False Claims Act and the Delaware False Claims Act). In other words, no hearing is

required where none is requested. See id. We further observe that the relators’ counsel attended

a hearing on its unopposed motion to lift the seal after the entry of the dismissal order. There is,

however, no indication in the record that the relators challenged the alleged failure of the circuit

court to conduct a hearing on the State’s dismissal motion by filing a motion for reconsideration

or otherwise.

¶ 23 We further note that the arguments advanced and evidence presented in the relators’

written filings with the circuit court do not suggest any glaring evidence of fraud or bad faith by

the State in dismissing the qui tam action. At its core, the relators’ argument is relatively simple,

i.e., the fact that the State has chosen to not pursue the City for its purported violations of the

unclaimed property laws through the relators’ qui tam action is indicative of its bad conduct.

The Attorney General’s alleged inaction, however, is not the type of “glaring evidence of fraud

or bad faith” (Burlington Coat Factory, 369 Ill. App. 3d at 517) that would warrant a deprivation

of its prosecutorial discretion as the chief legal officer of our state (Scachitti, 215 Ill. 2d at 513).

The circuit court was not required to “second guess the state’s decision to dismiss by conducting

an inquiry into the state’s motivations.” Burlington Coat Factory, 369 Ill. App. 3d at 517.

¶ 24 In any event, we question whether the alleged violations by the City are even appropriate

for a qui tam action. Our supreme court has consistently recognized that in a qui tam action

under the False Claims Act, there is “no cognizable injury in fact suffered by the relator.” State

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ex rel. Leibowitz v. Family Vision Care, LLC, 2020 IL 124754, ¶ 63, citing Scachitti, 215 Ill. 2d

at 508. See also Burlington Coat Factory, 369 Ill. App. 3d at 513 (stating that “a relator has

suffered no direct injury as a result of false claims under the Act” and “[o]nly the State has been

injured by the false claims and is the real party in interest”). In the instant case, the underlying

property interests belong to the relators and the thousands of other payees on the uncashed

checks at issue.

¶ 25 For the foregoing reasons, we affirm the circuit court’s grant of the State’s motion to

dismiss the complaint. See Scachitti, 215 Ill. 2d at 515 (noting that “qui tam plaintiffs, acting as

statutorily designated agents for the state, may proceed only with the consent of the Attorney

General, and remain completely subordinate to the Attorney General at all times”).

¶ 26 The relators also challenge the circuit court’s denial of its motion to amend the complaint

to add multiple counts. A ruling on a motion to amend is reviewed for an abuse of discretion.

City of Chicago v. City of Kankakee, 2019 IL 122878, ¶ 20. In their proposed amended

complaint, the relators included claims under the Revised Unclaimed Property Act, the Interest

Act (815 ILCS 205/0.01 et seq (West 2018)), and the Consumer Fraud and Deceptive Business

Practices Act (815 ILCS 505/1 et seq. (West 2018)) and sought class certification. We find that

there was no abuse of discretion where those claims – brought directly on behalf of the payees of

the uncashed checks – were fundamentally different from the qui tam action ostensibly brought

on behalf of the State. We further note that the relators’ counsel stated during oral argument

before this court that these additional claims are currently the subject of separate pending

litigation.

¶ 27 CONCLUSION

¶ 28 For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed in

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its entirety.

¶ 29 Affirmed.

¶ 30 PRESIDING JUSTICE GORDON, dissenting:

¶ 31 The relators in the case at bar claim that the City of Chicago (City) has failed to report or

turn over to the State of Illinois more than 22,000 uncashed checks totaling more than $11

million. As a result, the relators sued the City in a qui tam whistleblower case for a violation of

the Revised Uniform Unclaimed Property Act (765 ILCS 1026/1 et seq. (West 2018)). The State

moved to dismiss, and the trial court granted the dismissal, and on appeal, the majority basically

finds that the State has an unlimited authority to dismiss such cases regardless of its basis or

reasoning. The majority bases its decision on section 4(c)(2)(A) of the Illinois False Claims Act

(the Act) (740 ILCS 175/4(c)(2)(A) (West 2018)), which states: “The State may dismiss the

action notwithstanding the objections of the person initiating the action if the person has been

notified by the State of the filing of the motion and the court has provided the person with an

opportunity for a hearing on the motion.”

¶ 32 The federal False Claims Act (31 U.S.C. § 3729 et seq.) and the Illinois False Claims Act

have similar provisions. The Illinois Act closely mirrors the federal version, and as a result, I

find the federal court’s analysis in the Ninth Circuit to be instructive. In United States ex rel.

Sequoia Orange Co. v. Baird-Neece Packing Corp., 151 F.3d 1139 (9th Cir. 1998), the Ninth

Circuit found that the government must make a “proper showing” (United States ex rel. Sequoia

Orange Co., 151 F.3d at 1144) to demonstrate a “ ‘valid government purpose’ ” for dismissal

(United States ex rel. Sequoia Orange Co., 151 F.3d at 1145 (quoting United States ex rel.

Sequoia Orange Co. v. Sunland Packing House Co., 912 F.Supp. 1325, 1341 (E.D. Cal. 1995)),

not a decision that is “arbitrary and capricious” (United States ex rel. Sequoia Orange Co., 151

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F.3d at 1144). The trial court imposed that standard despite conceding that the dismissal section

of the federal act mirrors the state section.

¶ 33 The legislative history of the federal act, including its 1986 amendments, support the

Ninth Circuit’s conclusions that there must be a proper showing for a dismissal and that the

government should not drop a false claims case without legitimate governmental reasons. S. Rep.

No. 99-345, at 25-26 (1986). As noted, Illinois’ Act clearly mirrors the federal version, and I

support the Ninth Circuit’s decision. At a time in our country’s history where many citizens have

lost faith in the way that government does business at the local, state, and federal level,

transparency is needed to regain citizens’ confidence.

¶ 34 In the case at bar, the State contends that it has “virtually unfettered discretion” to dismiss

under the Act, and that such discretion is reviewable only for glaring evidence of fraud or bad

faith. Here, the State provided no evidence of valid reasons to allow the City to continue in not

complying with the Act, and the trial court held no evidentiary hearing to make any findings. I

realize that the relators made no request for a hearing, but I believe that findings are required and

that the court should conduct such a hearing whether the parties request it or not.

¶ 35 In paragraph 23 of its decision, the majority notes that the arguments advanced and

evidence presented in the relators’ written findings with the circuit court do not suggest any

glaring evidence of fraud or bad faith by the State in dismissing the qui tam action. I do not find

this argument persuasive. I conclude that, at a minimum, the conduct of the State shows glaring

evidence of bad faith when no reasons are given by the State for allowing the City to continue its

alleged wrongful conduct.

¶ 36 The State cites State ex rel. Beeler, Schad and Diamond, P.C. v. Burlington Coat Factory

Warehouse Corporation, 369 Ill. App. 3d 507 (2006) (Burlington Coat Factory), as its authority

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in support of its motion to dismiss. In the Burlington Coat Factory case, the relator alleged that

Burlington Direct, an internet sales company incorporated in New Jersey with retail stores in

Illinois, violated the Whistleblower Reward and Protection Act (740 ILCS 175/1 et seq. (West

2002)) when it failed to collect and remit use tax to the state of Illinois on its internet sales to

customers in Illinois. Burlington Coat Factory, 369 Ill. App. 3d at 509. The appellate court in

Burlington Coat Factory found that the State’s discretion to dismiss is not subject to the Sequoia

Orange “checks and balances” test, but that the State’s discretion to dismiss is not entirely

unfettered. Burlington Coat Factory, 369 Ill. App. 3d at 512. The appellate court in the

Burlington Coat Factory case found that neither fraud nor bad faith was alleged. Burlington Coat

Factory, 369 Ill. App. 3d at 517. In the case at bar, there are allegations of bad faith in the

relators’ response to the motion to dismiss, which distinguishes the Burlington Coat Factory case

from the case at bar. In their allegations of bad faith by the State, I find that the Sequoia Orange

factors are triggered, and the parties must be given a hearing to allow the trial court to make a

determination of whether there is or there is not bad faith by the State in dismissing the action.

As a result, I must respectfully dissent, and I would reverse the granting of the motion to dismiss

and require the trial court to have a hearing to make its findings, and I would allow the amended

complaint to proceed.

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