Chicago Business Litigation Lawyer Blog

In a long-running consumer privacy violation case, the Seventh U.S. Circuit Court of Appeals has denied damages to a group of homeowners whose mortgage company sold their information to telemarketers. In Mirfasihi v. Fleet Mortgage , No. 07-3402 (7th Cir. Dec. 30, 2008), Fleet Mortgage Company sold information on 1.6 million clients to telemarketers, without those clients' permission. Two nationwide classes were certified: a class of people who bought products from the telemarketers (who used deceptive practices in their sales) and a class of people who merely had their information shared. This appeal comes from the latter group, some of whose members objected to a proposed settlement that gave them no damages.

In its analysis, written by Judge Posner, the court started by agreeing with the appellants that their claims may have some value under state consumer protection laws, despite the trial court's conclusion that they did not. Many state statutes allow statutory damages even when no actual harm is present. However, the majority wrote, the information-sharing class had no claim in a class action -- only in individual actions. And no individual plaintiff has demonstrated a willingness to sue for the "modest statutory damages" available under state laws, despite eight years of litigation and two prior appeals to the Seventh Circuit, the judge wrote.

The court turned next to the objectors' claims under the federal Fair Credit Reporting Act (FCRA), which allows statutory damages of $100 to $1,000 per willful violation, even if no actual harm resulted from the violations. This claim also failed, because class members had not brought it up until their second round in trial court. Furthermore, the majority wrote, the FCRA claim is frivolous because Fleet is not a consumer reporting agency, as the law requires; agencies that merely pass on information about debts owed to it are not covered by the law. And under the FCRA, a report on transactions only between the customer and the agency making the report is specifically excluded from the definition of a "consumer report."

Thus, the court concluded, the claims of the information-sharing class actually are worthless, although defendants are still free to settle if they believe doing so is in their best interests. The opinion then goes on to strongly criticize the worth of the claim itself, the prolonged litigation, the objectors' request for attorney fees and the class action system in general. The decision of the trial court to award nothing to the objectors was affirmed.

The Chicago and Wheaton, Ill., law firm of DiTommaso-Lubin works often with the FCRA, as part of our privacy violations and consumer protection practice. We have handled FCRA "firm offer of credit" cases in our home state of Illinois and states around the country, in tandem with local counsel. If you think you may be a victim of improper and illegal credit reporting violations and you’d like to know more about your options, please contact us today to speak with an experienced consumer protection attorney.

New York Attorney General Andrew Cuomo entered into a 50 million dollar settlement with health insurance carriers for alleged deceptive setting of "usual, customary and reasonable and rates" for out of net work health care providers through use of a conflicted rating agency owned by an insurance company. A news story on the settlement is below:

Our private law firm is investigating alleged deceptive use by health insurance companies of bogus low ball out of net work rates to avoid paying for needed health care and is considering filing consumer fraud class actions on behalf of victims of this practice.

Class action lawsuits our firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. DiTommaso-Lubin is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers' rights are protected from corporate misdeeds.

Our Naperville, Waukegan, Aurora, Wheaton, Oak Brook, and Chicago consumer attorneys provide assistance in consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases we have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Chicago area consumer lawyers here who can assist in health insurance fraud, unfair debt collection, junk fax and other consumer, consumer fraud or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

The United States Supreme Court will soon decide whether the federal government is always considered a party to False Claims Act lawsuits. The court heard oral arguments in United States ex rel. Eisenstein v. City of New York, No. 08-660, on April 21. At issue is the timeline to appeal a case’s dismissal. The Federal Rules of Appellate Procedure give private parties, including those acting as relators under the law, 30 days to file a notice of appeal, but it extends that deadline to 60 days for cases in which the federal government is a party. The court will decide which deadline applies to False Claims Act cases, in which private parties bring lawsuits on behalf of the government.

The False Claims Act allows federal prosecutors or individuals to “blow the whistle” on fraud against a federal agency. The individuals are called relators. Because relators are typically insiders who work for or with the fraudulent organization, they first file their claims under a seal that hides the complaint from public view. The Justice Department receives a copy of that complaint, however, and may choose to step in. If it does not, the relator is free to continue the suit on behalf of the United States government. If the claim is successful, the relator is eligible to collect 15% to 25% of the judgment, but most of it goes to the federal government. Thus, the plaintiff is in a sense both the relator and the government.

That unusual situation set the stage for a Second Circuit Court of Appeals decision in 2008, rebuffing the claim of a relator who it said appealed the dismissal of his case too late. In United States ex rel. Eisenstein v. City of New York, 540 F.3d 94 (2d Cir. 2008), Irwin Eisenstein and four city employees sued the City of New York for assessing a fee on its nonresident employees that was equivalent to municipal income taxes on city residents. Among other claims, they asserted that this violated the False Claims Act because it reduced their taxable income and deprived the federal government of tax revenue. The Justice Department declined to intervene.

The complaint was dismissed, and Eisenstein appealed to the Second Circuit 54 days later. The city moved to dismiss on the grounds that Eisenstein’s appeal was not timely under the 30-day time limit for claims in which the government is not a party. After ordering briefing from both sides and from the United States as amicus curiae, the Second Circuit agreed. If the government declines to intervene, it pointed out, it typically does not receive case documents, may not participate without moving to intervene and is not liable for fees and costs incurred by the relator. Thus, even though it is the real party in interest to the case, the government is not a party under the Federal Rules of Civil Procedure, the Second Circuit decided.

This exacerbated a split in the federal circuit courts. Our own Seventh Circuit, along with the Fifth, Ninth and Third Circuits, has concluded that the sixty-day rule does apply for appeals in qui tam cases. Until Eisenstein, only the Tenth Circuit applied the shorter deadline. The

Supreme Court granted certiorari in January and heard oral arguments April 21. According to SCOTUSBlog, the justices heard a lot of arguments interpreting the language of the Federal Rules of Civil Procedure, but seemed more concerned about the possible consequences of shortening the deadline in circuits where the longer one was caselaw.

Based in Oak Brook, Ill. and Chicago, the consumer rights firm DiTommaso-Lubin is proud to represent whistleblowers who expose serious wrongdoing and fraud against government agencies. Our Chicago and Naperville False Claims Act, whistlebolower and qui tam attorneys stand ready to represent people around the United States who report fraudulent and dishonest practices against the federal government and its personnel. We also handle qui tam and whistleblower lawsuits at the state and local levels, including claims under the Illinois Whistleblower Reward and Protection Act and the Chicago False Claims Act. If you believe you have a whistleblower claim and you would like to learn more about how we can help, please contact DiTommaso-Lubin today for a free, confidential consultation.

DiTommaso-Lubin has an active practice in franchise litigation, especially representing franchisee in disputes with franchisors they believe have not been completely honest. Because we work in this area, our Chicago franchise litigation attorneys were pleased to see a cover story on just that situation in the March/April 2009 issue of Mother Jones magazine. The article discusses allegations of “franchise fraud” -- the practice by franchisors of cheating the franchisees they sign up by failing to disclose important information, writing onerous financial requirements into contracts and adding after-the-fact legal requirements franchisees didn’t agree to and can’t refuse without being sued.

The article focuses on the Coffee Beanery, a chain of cafes, and one Maryland couple’s experience when they started a Coffee Beanery franchise in Annapolis. At their initial meeting with the franchisor, Coffee Beanery vice president Kevin Shaw allegedly told them they could clear $125,000 a year in the right location. Not only did this allegedly violate a federal law that forbids franchisors from predicting future earnings, but it wasn’t quite true -- the magazine said 40 franchises had already failed at the time. Another 60 have since died.

But a bigger problem was the expense of the equipment that the Coffee Beanery said they were contractually obligated to accept. The franchisor allegedly sent them expensive equipment that didn’t work, was unnecessary or wasn’t appropriate for their business. It also allegedly demanded that they abide by contractual obligations they didn’t remember signing up for, such as a gift card program. All of this cost tens or even hundreds of thousands of dollars -- and refusing would have opened them up to a lawsuit.

The couple sank $90,000 of their own money plus a $300,000 loan from the federal Small Business Administration into their Annapolis franchise -- but it wasn’t enough. Before the store had even opened, they had to take out a $40,000 home equity loan to keep going. Sick of the abuse, they sued -- only to discover that they had signed up for mandatory binding arbitration whose costs they had to pay for themselves. Worse, the arbitrator, who the franchisor had the right to select, according to the article had a personal relationship with the attorney for the Coffee Beanery. Not surprisingly, she ruled in favor of the company and socked the couple with another $187,452 in costs for the arbitration. Many of these costs were allegedly inflated, such as $926 for the Coffee Beanery’s lawyers’ drive to the arbitration.

The couple is now bankrupt and unemployed, according to the article -- but against all odds, they may yet get a fair trial. They appealed the arbitrator’s decision first to federal trial court and then to the Sixth U.S. Circuit Court of Appeals, which overturned the arbitration award. Meanwhile, regulators in both Maryland and Illinois have stepped in and ordered the Coffee Beanery to release franchisees in those states from their contracts, citing allegedly illegal misrepresentations by the company.

Similar questions and allegations have been raised about other franchises, including Quizno’s, which is accused in a class-action lawsuit of pocketing $75 million from franchisees who never actually opened stores. These actions give rise to alleged breaches of individual contracts, but more importantly, they are alleged breaches of the Federal Trade Commission Act and FTC rules that require franchisors to fully disclose certain information and to notify franchisees of contract changes at least seven days before a signing. As Illinois franchise litigation lawyers, we vigorously protect these rights on behalf of our franchisee clients, in individual actions or class actions.

DiTommaso-Lubin is a business litigation law firm with offices in Chicago, and Oak Brook, Ill. We represent clients in the Midwest and throughout the United States in all types of business disputes, including disputes with a franchisor that you believe lied or breached its own contract. Our experience includes individual actions as well as actions on behalf of multiple franchisees who have the same problems. To set up a confidential consultation with our experienced Chicago business litigation attorneys, please contact us as soon as possible.

A recent Illinois appeals court ruling caught the eyes of our Naperville business litigation attorneys. On December 22, the Illinois First District Court of Appeal ruled that a trial court was correct in finding no breach of contract between an individual and an investment firm. CFC Investment v. McLean, No. 1-08-0161 (Ill. 1st Dec. 22, 2008). Defendant Daniel McLean was a real estate developer and investor doing business through a group of companies the appeals court collectively called River East. Plaintiff CFC Investments was an investor in River East.

CFC offered to sell its interest in 2001, and part owner Craig Duchossois, through phone calls and written negotiations with McLean, agreed on a price of $16.7 million. McLean wrote in a signed letter that he was "willing to arrange for the purchase of your interest in River East" and that after CFC's written agreement, he would "commence to secure the capital." Duchossois signed to signal his acceptance and sent it back in September of 2001. McLean then wrote a letter specifying that River East needed 90 days to complete the buyout. However, no action was taken until March of 2002, when Duchossois wrote to demand that McLean finish the deal. He received no response. In early April of 2003, River East investors sold their interests to Mitsui Sumitomo Insurance Company. CFC's share of the proceeds was $2.5 million.

In 2004, CFC sued McLean for breach of contract. The trial turned partially on the issue of whether McLean had offered to buy the shares himself, as Duchossois believed, or merely find investors to do it, as McLean contended. The trial court barred evidence favorable to CFC several times, rejected a proposed jury instruction from the company and answered a question from the jury over CFC's objections. CFC appealed of all these decisions.

In its decision, the appeals court first found that the trial court was right to admit parol evidence (evidence outside a written contract), because it helped the jury determine whether the written materials the two men exchanged was in fact a contract. The letters, the court wrote, did not show that the men meant them to be a complete contract. It then examined the court's decision to exclude McLean's deposition statement that it was possible that somebody could interpret his letter as a promise to personally buy CFC's shares. Because the statement was speculation, the court found, the trial judge was right to exclude it from evidence.

The court next turned to the trial court's decision to exclude evidence of McLean's alleged mismanagement of River East after the date of the alleged breach of contract. CFC wished to use this to show that McLean offered to buy CFC out to cover up his mismanagement. However, the appeals court said, McLean clearly did not have much of an interest in purchasing the shares, since he did not, and in fact allowed CFC to audit River East's financial records. The issue would be confusing and distracting, they wrote, so the trial court was right to exclude this evidence as well.

The appeals court also took up two issues of jury-judge interaction. CFC challenged the judge's rejection of a jury instruction it proposed. The appeals court dismissed this as not an abuse of the trial judge's discretion and therefore not reversible, pointing out that no evidence presented at trial supported the proposed instruction. CFC's next appeal was an objection to the answer the judge gave to a question from the jury: Did CFC have to prove that McLean as an individual offered to buy the shares? The judge said yes, and the appeals court found that answer proper, since CFC sued McLean individually and presented no evidence that he was working on behalf of someone else.

Finally, the appeals court rejected the argument that the judgment as a whole was against the manifest weight of the evidence. Pointing out that "this was a close case," it nonetheless declined to second-guess the jury. Thus, the First District affirmed the decision.

The Chicago business and commercial litigation lawyers at DiTommaso-Lubin handle all types of breach of contract litigation, including disputes over whether a contract exists. From our offices in Oak Brook, Illinois and Chicago, we represent public, private and closely held businesses of all sizes. If you have a contract dispute and you'd like to discuss your options with an experienced business attorney, we would like to help. Contact us online for a confidential consultation.

In a breach of implied contract lawsuit, a Wisconsin auto dealership must have a new trial because the original trial judge misconstrued Wisconsin law on quantum meruit and unjust enrichment, the Seventh U.S. Circuit Court of Appeals ruled. Lindquist Ford, Inc. v. Middleton Motors, Inc., Nos. 08-1067 & 08-1689 (7th Cir. February 25, 2009).

Middleton Motors, a Ford dealership near Madison, Wis., was a struggling business when it asked the more successful Lindquist Ford of Iowa for financial and management help. In their initial negotiations in 2003, they agreed that Lindquist’s manager, Craig Miller, would manage both dealerships and be compensated by Middleton with a percentage of the profits once he made the dealership profitable again. No deal was struck at that time, but nonetheless, Miller started managing Middleton.

In subsequent months, negotiations ran aground when Lindquist repeatedly did not offer a cash infusion, proposed as an investment in the business, that Middleton wanted. During this time, Middleton repeated several times that Miller’s compensation would be a percentage of Middleton’s profits when the dealership was profitable again. About a year into this situation, Middleton fired Miller, frustrated that the dealership was still unprofitable and no deal had been reached on a cash infusion. Two months after the firing, Miller sent Middleton a letter demanding a salary for 2003, and half of profits for the next two years. Middleton disagreed that it owed Miller anything.

Lindquist and Miller sued for breach of contract, promissory estoppel, quantum meruit and unjust enrichment. The trial court granted summary judgment on the first two counts, but held a bench trial on the latter two. At trial, it excluded a large amount of evidence about the dealerships’ negotiations, the percentage-based compensation to Miller and the risk to Middleton, because it believed that the only important issues were damages and whether Lindquist could prove that there was a quasi-contract by showing a mutual agreement through words and actions. It found for Lindquist and Miller. Middleton appealed.

On appeal, the Seventh Circuit found that the trial judge had profoundly misinterpreted Wisconsin law on quantum meruit and unjust enrichment, possibly because the laws are confusingly phrased. Both concepts are quasi-contractural theories, the judges wrote, but quantum meruit is a contract implied by law and unjust enrichment requires no finding of any features of a contract. This contradicted the trial judge’s heavy reliance on Theuerkauf v. Sutton, 306 N.W.2d 651, 658 (Wis. 1981), which was a contract implied by fact case that mentioned quantum meruit only in passing. Applying a test from Theuerkauf, they wrote, was inappropriate to decide quantum meruit claims and excluded large amounts of evidence that was necessary to determine whether there was a contract implied by law. Thus, a new trial was necessary.

The Seventh also ordered a new trial on the unjust enrichment claim, but not because the trial court had misconstrued that principle. Rather, they wrote, it’s not clear that this case meets the third element of an unjust enrichment test in Wisconsin: that it would be inequitable for Middleton to retain the benefits of Miller’s work without paying him. Again, the judges wrote, a substantial amount of evidence on this question was excluded by the trial court, making it necessary to retry the claim. If the trial court determines on remand that Miller did not reasonably expect to be paid unless he made Middleton profitable, and that he could not after a fair attempt, the Seventh ordered the trial court to enter judgment for Middleton.

Based in Chicago and Oakbrook Terrace, Ill., near Wheaton and Naperville DiTommaso-Lubin represents clients in Illinois and throughout the Midwest in complex business litigation matters, including federal and Illinois breach of contract lawsuits. Our Chicago breach of contract lawyers represent parties to all kinds of contracts, including contracts implied by law or by fact. If you need help from an experienced business litigation attorney and you’d like to learn more about how we can help, please contact us by email or call 1-877-990-4990 to set up a confidential consultation.