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FIFTH DIVISION

JUSTICE GREIMAN delivered the opinion of the court:

Plaintiff Health Cost Controls (HCC) filed a complaint against defendants Richard Sevilla and Edward M. Burnes, the attorney for Sevilla, in the circuit court of Cook County, seeking to recover reimbursement and repayment of medical benefits paid to Sevilla from the settlement that Sevilla obtained from a third-party tortfeasor as a result of an automobile accident. In turn, defendants Sevilla and Burnes filed a class action counterclaim, asserting that the common fund doctrine required a reduction for attorney fees and expenses from the amount HCC claimed for all liens on class member recoveries. On April 3, 1998, the trial court dismissed HCC's complaint for lack of subject matter jurisdiction and dismissed defendants' counterclaim.

Defendants now appeal the April 3, 1998, order and other trial court rulings, asserting that the trial court improperly (1) dismissed HCC's complaint; (2) dismissed defendants' counterclaim; (3) denied sanctions against HCC; (4) struck Burnes' affidavit; and (5) denied leave to amend defendants' original class certification motion.

We find that the trial court had subject matter jurisdiction over both HCC's complaint and defendants' counterclaim. Thus, we reverse the trial court's order of April 3, 1998, and remand the matter to the circuit court. In addition, we affirm the denial of sanctions against HCC, finding that the trial court did not abuse its discretion. Based on these holdings, we need not consider the other contested rulings by the trial court.

The underlying, undisputed facts, as alleged in HCC's complaint and acknowledged by defendants, are quite straightforward and typical of the body of reimbursement cases. Sevilla was covered under a health insurance policy issued by Continental Assurance Company (CNA) through his employer, Central Can Company. Sevilla was in a car accident, suffered personal injuries and retained private counsel (Burnes) to sue the people allegedly responsible for the accident. In turn, HCC, on behalf of the health insurer (CNA), sent a notice of lien to Burnes for the amount of money the insurer had paid for Sevilla's medical care. Sevilla and the alleged tortfeasor ultimately entered into a settlement agreement. Thereafter, HCC sought to obtain reimbursement from Sevilla, as expressly authorized in the reimbursement provision of the health insurance policy. The settling tortfeasor's insurance carrier issued a check for the amount of HCC's claimed lien and made the check payable to Sevilla, Burnes and HCC. HCC was given possession of the check.

After HCC had possession of the check, the dispute began. Sevilla and Burnes decided not to endorse the check, claiming that HCC was not entitled to the full amount of the check. Rather, the amount of recovery was subject to the common fund doctrine and, therefore, must be reduced by one-third for attorney fees incurred in obtaining the settlement.

On April 28, 1994, HCC filed its complaint in the circuit court of Cook County, seeking to require Sevilla and Burnes to endorse the check in satisfaction of HCC's lien. The complaint stated that HCC was appointed and authorized to administer and prosecute CNA's rights to reimbursement and subrogation under the policy. The reimbursement provision stated:

"In no event will the amount of reimbursement to Us [the insurer] exceed the lesser of:

1. The amount actually paid under the policy; or

2. The amount actually recovered from that part of the judgment or settlement in excess of the amount necessary to fully reimburse the Covered Person for out-of-pocket expenses incurred, including attorney fees."

In its complaint, HCC asked the circuit court to declare that HCC was entitled to the full amount CNA had paid for Sevilla's medical expenses ($2,483.71) and to enjoin defendants from refusing to execute the check.

In April 1995, defendants filed their answer and affirmative defenses. Defendants primarily disputed HCC's entitlement to the total amount of the check ($2,483.71). In their answer, defendants asserted "that the Plan is obligated to bear the expenses of Defendant Sevilla's attorneys incurred in obtaining a recovery for him." As an affirmative defense, defendants asserted that "[u]nder the equitable 'fund doctrine,' the Plan and HCC must bear the proportionate share of the costs and expenses incurred by Defendant Sevilla's attorneys in obtaining a recovery, and therefore the 'fund doctrine' bars all or part of the recovery sought in this action."

In their class action counterclaim, defendants named Health Cost Controls of Illinois, Inc., and Health Cost Controls of America, Inc. (hereinafter collectively referred to as HCC). Defendants alleged in pertinent part that, under the common fund doctrine, HCC and CNA are obligated to bear the fees and expenses Sevilla's attorney incurred in obtaining the subject recovery from the tortfeasor. HCC and CNA refused to acknowledge this obligation. Defendants further alleged that HCC still possessed the check for $2,483.71 and refused to afford Sevilla a credit of one-third ($817.90) for the attorney fees incurred by Sevilla. The common issue of law advanced in the class action counterclaim was the applicability of the fund doctrine to subrogation recoveries.

Sometime in 1995, HCC unsuccessfully attempted to remove its complaint to the federal district court claiming that defendants' counterclaim raised federal questions under the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C.