A law firm violated the Fair Debt Collection Practices Act by trying to collect on a personal guarantee of payment that a nursing home required a resident's relative to sign, in violation of the Medicaid Act. Carroll v. Butterfield Health Care, Inc. (N.D. Ill., No. 02-C-4903, Oct. 28, 2003).
On December 9, 2000, James R. McDonald was admitted to Meadowbrook Manor Bolingbrook, a nursing home operated by Butterfield Health Care, Inc. Mr. McDonald's son-in-law, David P. Carroll, accompanied him and was told by Meadowbrook that Mr. McDonald could not be admitted unless Mr. Carroll signed a personal guarantee of payment. On August 2, 2001, the law firm of Freedman, Anselmo, Lindberg & Rappe ("Freedman") filed a suit on behalf of Meadowbrook against Mr. Carroll to fulfill the terms of the guarantee. Freedman obtained a judgment in favor of Meadowbrook to enforce the agreement and Meadowbrook and Freedman garnished Mr. Carroll's wages. However, the judgment was later vacated, presumably because it was discovered that the Medicaid Act prohibits a nursing facility from requiring a financial guarantee as a condition of admission or continued stay. 42 U.S.C. §§ 1395i-3(c)(5)(A)(ii), 1396r(c)(5)(A)(ii).
Nevertheless, Freedman continued to garnish Mr. Carroll's wages. In response Mr. Carroll filed a lawsuit alleging that the personal guarantee Meadowbrook required him to sign was in violation of the Medicaid Act and that Freedman violated the Fair Debt Collection Practices Act (FDCPA) by trying to collect on the personal guarantee on behalf of Meadowbrook. Mr. Carroll further alleged that Meadowbrook violated the Illinois Consumer Fraud Act. Meadowbrook and Freedman moved to dismiss.
The United States District Court for the Northern District of Illinois refuses to dismiss Mr. Carroll's FDCPA cause of action against Freedman. The court notes that Freedman has filed more than 50 lawsuits on behalf of Meadowbrook when parties have defaulted on personal guarantees, and that in several of these lawsuits have been dismissed because the personal guarantee violates the Medicaid Act. "Therefore," the court writes, "Freedman violated the FDCPA by attempting to collect on an illegal guarantee."
However, the court dismisses Mr. Carroll's complaint alleging violation of the Illinois Consumer Fraud Act, concluding that because the Medicaid Act does not create a private right of action, Meadowbrook's violation of the Act did not violate public policy. The court does not rule on Mr. Carroll's request for injunctive relief because Meadowbrook has abandoned efforts to seek payment in conjunction with the personal guarantee, which in fact has been stricken from the facility's admission policy altogether.
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