Kay v. Frerichs , 2021 IL App (1st) 192271 ( 2021 )

2021 IL App (1st) 192271FIFTH DIVISION
MAY 28, 2021
No. 1-19-2271
MELISSA KAY, on Behalf of Herself and ) Appeal from the
a Class of All Others Similarly Situated, ) Circuit Court of
) Cook County.
Plaintiff-Appellant, )
) No. 18 CH 2119
v. )
)
MICHAEL W. FRERICHS, in His Official ) Honorable
Capacity as Illinois State Treasurer, ) Pamela McLean
) Meyerson,
Defendant-Appellee. ) Judge Presiding.
JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion.
Presiding Justice Delort and Justice Hoffman concurred in the judgment and opinion.
OPINION
¶1 The plaintiff-appellant, Melissa Kay, filed a putative class action complaint in the circuit
court of Cook County against Michael Frerichs, in his official capacity as Treasurer of the State of
Illinois, alleging that he was administering the Illinois College Savings Pool in an illegal manner.
The circuit court granted the Treasurer’s motion for summary determination and held that
sovereign immunity barred Ms. Kay from seeking any recovery against the Treasurer other than
prospective injunctive relief. The circuit court also denied Ms. Kay leave to amend her complaint.
Ms. Kay now appeals those rulings. For the following reasons, we affirm the judgment of the
circuit court of Cook County.
¶2 BACKGROUND
¶3 We begin with a brief summary of legislative history relevant to this matter. In 1996,
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Congress authorized the states to establish “qualified tuition plans,” commonly known as 529
plans, that allow individuals to make contributions to tax-free investment accounts in order to pay
for higher education. See 26 U.S.C. § 529 (2018). In 2000, the Illinois General Assembly passed
section 16.5 of the State Treasurer Act (Act) Pub. Act 91-607, § 5 (eff. Jan. 1, 2000) (adding 15
ILCS 505/16.5). Under section 16.5(b) of the Act, the Treasurer has the authority to establish and
administer college savings programs, in which he “may receive, hold, and invest moneys paid into
the Pool and perform such other actions as are necessary to ensure that the Pool operates as a
qualified tuition program.” 15 ILCS 505/16.5(b) (West 2018).
¶4 Pursuant to that statutory authority, the Treasurer’s office established two college savings
programs, which comprise the College Savings Pool (Pool): Bright Start and Bright Directions.
Bright Start is sold directly to, and managed by, participants; Bright Directions is sold to, and
managed by, investment advisors. Both Bright Start and Bright Directions are trusts with the
Treasurer serving as trustee, as the trust deeds name Illinois’s currently elected treasurer as the
trustee.
¶5 On February 16, 2018, Ms. Kay filed a putative class action complaint against the
Treasurer, explaining that she has been a participant in the Bright Start plan since 2013. 1 The
complaint alleged that the Treasurer improperly managed the Pool. The complaint contained five
counts: alleging breach of fiduciary duty (count I); alleging a constructive trust (count II); seeking
an accounting (count III); alleging unjust enrichment (count IV); and a mandamus action (count
V). Specifically, the complaint alleged that the Treasurer illegally charged fees against the Pool’s
assets rather than its earnings, illegally retained excess administrative fees that should have been
1
The complaint further explained that “[d]ue to recent changes in the *** Pool, [Ms.] Kay is
currently a participant [in the Pool] through the Bright Directions plan.”
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returned to the participants, and illegally charged all administrative fees against fewer than all
investment funds, allowing some funds to incur no fees while others incur more than their share.
Ms. Kay averred that, therefore, the Treasurer had violated section 16.5 of the Act and financially
harmed the participants of the Bright Start and Bright Direction programs. For relief, Ms. Kay
sought:
“A. An order requiring an accounting of the income and expenses related to
the State Administrative Fee and Program Management Fee;
B. An order requiring the Treasurer to return to the participants, based on
their respective contributions, the State Administrative Fees and Program
Management Fees collected in excess of actual expenses;
C. An award of damages incurred as a result of the Treasurer illegally
withholding excess State Administrative Fees and Program Management Fees,
including any earnings that should have accrued on those excess amounts;
D. An order requiring the Treasurer to account for penalties collected;
E. An order requiring the Treasurer to return to the participants, based on
their respective payments of the State Administrative Fees, penalties collected in
excess of actual expenses as required by the Act;
F. An injunction requiring the Treasurer to include the amount collected as
penalties as income for determining the excess State Administrative Fees collected
as required by the Act;
G. An injunction requiring the Treasurer to return penalties collected to the
participants as required by the Act;
H. An injunction requiring the Treasurer to take Program Management and
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State Administrative Fees from earnings only as required by the Act, the
regulations, and the Declarations of Trust;
I. An injunction requiring the Treasurer to assess [the] State Administrative
Fee on all accounts and investment types as required by the Act;
J. An injunction requiring the Treasurer to not assess the State
Administrative Fee or Program Management Fee in any month where earnings
would not cover those fees as required by the Act; and
K. All other relief, including attorney’s fees and costs, to which Plaintiff
and the Class may be entitled.”
¶6 On July 6, 2018, the Treasurer filed a motion for summary determination of a major issue.
His motion asked the trial court to rule that sovereign immunity limited Ms. Kay’s recovery to
only prospective injunctive relief. He accordingly requested the trial court to strike paragraphs A-
G and K of the complaint’s request for relief.
¶7 In response, Ms. Kay argued that sovereign immunity was inapplicable to this case because
she was not seeking damages from state funds. She also filed a cross-motion for summary
determination of a major issue, asking the trial court to find that the Treasurer violated section 16.5
of the Act.
¶8 On October 25, 2018, Ms. Kay filed a motion for leave to amend her complaint. Her motion
explained that her proposed amended complaint would name the Treasurer in “both his official
and individual capacities,” which was “relevant to the sovereign immunity issue.” The trial court
denied her motion, noting that the Treasurer’s duty at issue in the case is a duty that he owes “only
because of his [S]tate employment.” The trial court further stated: “It’s unlike a duty to drive
carefully or to practice medicine without negligence or to practice law without the negligence. So
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my holding is that the source of duty is [the Treasurer’s] state employment and the proposed
amendment would not cure the defect.”
¶9 The trial court then ordered the parties to brief the issues in their motions for summary
determination. On June 24, 2019, just days before oral argument was scheduled, the Illinois
Governor signed into law some amendments to section 16.5 of the Act established by the Illinois
General Assembly (the 2019 amendments). The 2019 amendments revised section 16.5 of the Act
to clarify, inter alia, that the Treasurer “may collect fees” (Pub. Act 101-26, § 5 (eff. June 21,
2019) (amending 15 ILCS 505/16.5(c))), and added a clause stating that “[a]dministrative fees,
costs, and expenses, including investment fees and expenses, shall be paid from the assets of the
*** Pool” (id. (amending 15 ILCS 505/16.5(e))). The amendment also deleted language stating
that the Treasurer’s regulations shall provide for the administration expenses to be paid from the
Pool’s earnings and for the excess to be credited to participants’ accounts monthly. See id.(amending 15 ILCS 505/16.5(n)). The trial court ordered the parties to submit supplemental
briefing on the impact of the 2019 amendments.
¶ 10 On October 7, 2019, following a hearing on the issues, the trial court entered an order
granting the Treasurer’s motion for summary determination, holding that sovereign immunity
barred Ms. Kay from seeking any recovery other than prospective injunctive relief. In its written
order granting the motion, the trial court cited Illinois State Treasurer v. Illinois Workers’
Compensation Comm’n, 2013 IL App (1st) 120549WC, and noted that the dispositive question is
whether a judgment rendered in the case could operate to control the actions of the State or subject
it to liability. The trial court explained that it was therefore required to analyze the nature of Trust
668, a “non-appropriated special trust fund” in which the Treasurer deposits administrative fees
collected from the Pool; Trust 668 pays for the Pool’s operation expenses and also serves as a
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reserve fund. The trial court rejected Ms. Kay’s argument that the funds in Trust 668 are not state
funds because they include fees from the Pool’s participants’ accounts that have never been part
of the state’s general revenue fund. The trial court stated:
“The Court finds that the funds in Trust 668 are, in fact, state funds. Trust
668 was not set up for the purpose of paying claims such as those brought in this
case. Moreover, a judgment rendered in this case could operate to control the
actions of the [S]tate. The Act does not require the Treasurer to set up an account
such as Trust 668. In his discretion, the Treasurer set up Trust 668 to receive the
administrative fees the Treasurer charged and collected from the Pool. The Act
requires the Treasurer to ‘use his or her best efforts to keep these fees as low as
possible and consistent with administration of high quality competitive college
savings programs.’ 15 ILCS 505/16.5(e). This gives the Treasurer broad discretion
to decide what expenses to pay, when, and how, in order to meet the goals expressed
in the Act.
***
A large out-of-the-ordinary withdrawal from Trust 668, such as a judgment
in this case, would impact the Pool’s financial strategy and could send it scrambling
to cover other expenses. Plainly, this could operate to control the actions of the
State, as it interferes with the State’s discretion to decide the appropriate level of
reserves in accord with fiscally responsible practices.”
¶ 11 Further, the trial court held that mandamus was not available in this case, contrary to Ms.
Kay’s assertion, because “the Treasurer’s alleged infractions in this case do not involve violation
of a clear duty to perform a non-discretionary act.”
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¶ 12 In the same order, the trial court also denied Ms. Kay’s cross-motion for summary
determination, which sought a determination that the Treasurer violated section 16.5 of the Act. In
denying her motion, the trial court stated:
“Given the [c]ourt’s ruling on the Treasurer’s motion, the issue on [Ms.
Kay]’s cross-motion is significantly narrowed. Because of sovereign immunity,
[Ms. Kay] cannot recover damages for any past violations. She can only seek an
order enjoining the Treasurer from future violations.
Under these circumstances, the parties’ briefs with respect to the [2019]
amendments to the Act are largely moot. Most of their arguments focused on
whether or not the [2019] amendments to the Act should apply retroactively. [Ms.
Kay] concedes that requests to enjoin the Treasurer from taking actions in the future
are ‘obviously’ governed by the Act as amended. * * * [Ms. Kay] does not contend
that the Treasurer’s alleged practices violate the Act as it now stands. Therefore,
[Ms. Kay]’s cross-motion is denied.”
¶ 13 On November 6, 2019, upon the Treasurer’s oral motion for a final judgment, the trial court
entered a final judgment dismissing the complaint entirely since Ms. Kay conceded that her
remaining claims were moot under the amended Act. The trial court accordingly dismissed the
case with prejudice, “disposing of all matters.” This appeal followed.
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¶ 14 ANALYSIS
¶ 15 We note that we have jurisdiction to consider this matter, as Ms. Kay filed a timely notice
of appeal. See Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); R. 303 (eff. July 1, 2017). 2
¶ 16 Ms. Kay presents the following issues on appeal: (1) whether the trial court erred in
granting the Treasurer’s motion for summary determination and ruling that sovereign immunity
barred Ms. Kay from any recovery other than prospective injunctive relief and that mandamus is
inapplicable; and (2) whether the trial court erred in denying Ms. Kay leave to amend her
complaint. Both parties also ask us to decide whether the 2019 amendments to the Act apply
retroactively, an issue that was briefed before the trial court but not ruled upon. 3
¶ 17 Ms. Kay first argues that the trial court erred when it granted the Treasurer’s motion for
summary determination and held that sovereign immunity barred relief other than prospective
injunctive relief. She claims that sovereign immunity cannot apply here because the funds in Trust
668 are not state funds. Rather, she asserts that the funds in Trust 668 are “private money illegally
taken from participants and held in a segregated account” from the general revenue fund, so any
judgment satisfied in this case would not involve “a single dollar of state funds.” She also argues
that, regardless of sovereign immunity, she had a valid mandamus action to compel the Treasurer
to return fees to participants. She asks us to reverse the trial court’s order granting the Treasurer’s
motion for summary determination.
2
Ms. Kay filed an original notice of appeal following the trial court’s order on October 7, 2019,
granting the Treasurer’s motion for summary determination and denying her cross-motion. The notice of
appeal also challenged the October 25, 2018, order, which denied Ms. Kay’s motion for leave to amend her
complaint. Following the trial court’s final judgment on November 7, 2019, dismissing the entire case, Ms.
Kay filed an amended notice of appeal to encompass the November 7, 2019, judgment.
3
Ms. Kay does not challenge the trial court’s order denying her cross-motion for summary
determination nor the trial court’s final judgment on November 7, 2019, dismissing the case entirely.
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¶ 18 Section 2-1005(d) of the Code of Civil Procedure (Code) allows a party to seek a summary
determination of “ ‘one or more, but less than all, of the major issues in the case, [if] the court
finds that there is no genuine issue of material fact as to that issue or those issues.’ ” Fifth Third
Bank, N.A. v. Rosen, 2011 IL App (1st) 093533, ¶ 21 (quoting 735 ILCS 5/2-1005(d) (West 2008)).
We review a summary determination ruling de novo. Id.
¶ 19 The Treasurer’s motion for summary determination was based on sovereign immunity. The
doctrine of sovereign immunity precludes a citizen from suing the State or its departments without
the State’s consent. Jackson v. Alverez, 358 Ill. App. 3d 555, 559 (2005). The doctrine protects the
State from interference in its performance of the functions of government and preserves its control
over state coffers. Illinois Collaboration on Youth v. Dimas, 2017 IL App (1st) 162471, ¶ 30. When
the Illinois Constitution was amended in 1970, it abolished the application of sovereign immunity
as it was then configured, “[e]xcept as the General Assembly may provide by law.” (Internal
quotation marks omitted.) Id. ¶ 28; Ill. Const. 1970, art. XIII, § 4. In response, the General
Assembly enacted the State Lawsuit Immunity Act (745 ILCS 5/0.01 to 1.5 (West 2018)).
Consequently, the Court of Claims Act (705 ILCS 505/1 et seq. (West 2018)) creates a forum for
all claims against the State of Illinois, with some limited exceptions. 705 ILCS 505/8(a) (West
2018); Parmar v. Madigan, 2018 IL 122265, ¶ 20.
¶ 20 In this case, Ms. Kay filed her complaint against the Treasurer in his official capacity. A
lawsuit against a state official in his or her official capacity is a suit against the official’s office,
which is no different than a lawsuit against the State. Parmar, 2018 IL 122265, ¶ 21. However, it
is well established that “the determination of whether an action is one against the State depends
upon the issues involved and the relief sought and not simply the formal identification of the
parties.” Id. ¶ 22. For example, where a plaintiff alleges that a state officer’s conduct violates
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statutory or constitutional law or is in excess of his or her authority, such conduct strips the officer
of his or her official status, and so the principles of sovereign immunity would not be offended.
Id.
¶ 21 Although Ms. Kay claims that the Treasurer acted outside of his authority, her allegations
concern the Treasurer’s administration of the Pool’s finances, which is within his statutory duty
and to be performed pursuant to his official capacity. See Brandon v. Bonell, 368 Ill. App. 3d 492,
506-07 (2006) (an action resulting from a state employee’s breach of a duty imposed solely by a
statute pertaining only to state employees is protected by sovereign immunity). Indeed, the
Treasurer is the only person with the authority to administer the funds at issue. These are the
precise circumstances for which the sovereign immunity doctrine is designed.
¶ 22 Moreover, the monetary relief sought by Ms. Kay further establishes that sovereign
immunity applies to this case. As the trial court noted, any damages awarded in this matter would
be taken from Trust 668, which would control how the Treasurer manages the remaining funds
and, in turn, control the actions of the State. See Currie v. Lao, 148 Ill. 2d 151, 158 (1992)
(sovereign immunity applies in an action brought nominally against a state employee in his
individual capacity where a judgment for the plaintiff could operate to control the actions of the
State or subject it to liability). And since Ms. Kay now concedes that the 2019 legislative
amendments regarding the Pool make any prospective injunctive relief moot, there is no possible
relief.
¶ 23 Ms. Kay nonetheless argues that a mandamus action provides her a path for relief around
sovereign immunity and that the trial court could and should have used a mandamus action to
compel the Treasurer to return “illegally collected” fees to participants. However, a mandamus
action is an extraordinary remedy and is improper if it substitutes the court’s discretion or judgment
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for that of the official. Cordrey v. Prisoner Review Board, 2014 IL 117155, ¶ 18. As the trial court
noted, since the Pool is managed within the Treasurer’s discretion, imposing a mandamus order
would not be appropriate. Not to mention, the issuance of a mandamus order is only available
when there is no other adequate remedy. Id. Here, Ms. Kay could pursue her claim in the Court of
Claims. Indeed, it should be noted that she should have brought her claim in the Court of Claims
in the first place. See 705 ILCS 505/8(a) (West 2018) (the Illinois Court of Claims “shall have
exclusive jurisdiction to hear and determine *** [a]ll claims against the State”).
¶ 24 In sum, no genuine issue of material fact exists as to whether Ms. Kay is barred from
seeking monetary damages by the doctrine of sovereign immunity. Accordingly, the trial court
properly granted summary determination on that issue.
¶ 25 Next, Ms. Kay argues that the trial court erred when it denied her leave to amend her
complaint. She claims that she should have been allowed to file her proposed amended complaint,
which named the Treasurer in his individual capacity. Specifically, Ms. Kay argues that her
amended complaint clarified that the Treasurer is the trustee of Trust 668 and breached his
fiduciary duties, rendering sovereign immunity inapplicable, and so the trial court should have
granted her leave to file an amended complaint naming the Treasurer in his individual capacity.
¶ 26 Section 2-616(a) of the Code provides that amendments to complaints may be allowed at
any time before judgment, on just and reasonable terms. 735 ILCS 5/2-616(a) (West 2018). The
decision to allow an amendment to a pleading rests within the sound discretion of the trial court,
and absent an abuse of discretion, we will not disturb the trial court’s decision. Mandel v.
Hernandez, 404 Ill. App. 3d 701, 705 (2010). A trial court abuses its discretion when no reasonable
person would take the view adopted by the trial court. Steele v. Provena Hospitals, 2013 IL App
(3d) 110374, ¶ 93. In order to determine whether the trial court abused its discretion in denying a
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party leave to file an amended pleading, “we consider the following factors: ‘(1) whether the
proposed amendment will cure the defective pleading; (2) whether the proposed amendment would
surprise or prejudice the opposing party; (3) whether the proposed amendment was timely filed;
and (4) whether the moving party had previous opportunities to amend.’ ” CIMCO
Communications, Inc. v. National Fire Insurance Co. of Hartford, 407 Ill. App. 3d 32, 38 (2011)
(quoting Board of Directors of Bloomfield Club Recreation Ass’n v. The Hoffman Group, Inc., 186
Ill. 2d 419, 432 (1999)).
¶ 27 As it is the only one in dispute, we confine our analysis to the first factor, which is whether
the proposed amended complaint would cure the defective pleading. Regardless of how Ms. Kay
frames her claims against the Treasurer, they all directly relate to his management of the Pool,
which arises from his position in his official capacity as Illinois State Treasurer and is therefore
within the scope of his official duties. Accordingly, her allegations that the Treasurer mismanaged
the Pool’s funds are clearly allegations that relate directly to his responsibilities as Treasurer and
have nothing to do with his individual capacity. See Alencastro v. Sheahan, 297 Ill. App. 3d 478,
485 (1998) (a plaintiff may bring a lawsuit against the officer in his or her individual capacity only
if the alleged acts are illegal, unconstitutional, or outside the officer’s authority). There is no
conceivable way in which Ms. Kay could allege that the Treasurer’s actions as described in her
complaint relate to his individual capacity. Consequently, Ms. Kay’s proposed amended complaint
would not have cured her original defective pleading, such that sovereign immunity would no
longer apply. Therefore, under those circumstances, it cannot be said that the trial court abused its
discretion in denying Ms. Kay leave to file her amended complaint. See Butler v. BRG Sports,
LLC, 2019 IL App (1st) 180362, ¶ 72 (because the amendment that plaintiffs envision would not
have cured the fatal flaw in the plaintiffs’ pleadings, the trial court did not abuse its discretion
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when it denied plaintiffs the opportunity to amend). Thus, we affirm the trial court’s order denying
Ms. Kay leave to file an amended complaint.
¶ 28 Finally, both parties ask us to decide whether the 2019 amendments to section 16.5 of the
Act apply retroactively. This issue was briefed before the trial court but not ruled upon, as the trial
court found the issue to be moot based on its sovereign immunity ruling. It is well established that
reviewing courts will not decide moot or abstract questions and will not review cases merely to
establish precedent. Greater Pleasant Valley Church in Christ v. Pappas, 2012 IL App (1st)
111853, ¶ 43; GlidePath Development LLC v. Illinois Commerce Comm’n, 2019 IL App (1st)
180893, ¶ 27.
¶ 29 CONCLUSION
¶ 30 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 31 Affirmed.
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No. 1-19-2271
Cite as: Kay v. Frerichs, 2021 IL App (1st) 192271Decision Under Review: Appeal from the Circuit Court of Cook County, No. 18-CH-
2119; the Hon. Pamela McLean Meyerson, Judge, presiding.
Attorneys Matthew Hurst and Matthew Heffner, of Heffner Hurst, of
for Chicago, for appellant.
Appellant:
Attorneys Kwame Raoul, Attorney General, of Chicago (Jane Elinor Notz,
for Solicitor General, and Carson R. Griffis, Assistant Attorney
Appellee: General, of counsel), for appellee.
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