Chicago Business Litigation Lawyer Blog

A private security company's agreement with a competitor does not foreclose insurance coverage in lawsuits filed against the first company alone, the First District Court of Appeal has ruled. Clarendon America Insurance Company v. B.G.K. Security Services, Inc., No. 1-07-2994 (Ill. 1st Dec. 19, 2008), arises out of a 2003 fire at a Cook County-owned building at 69 West Washington Street in Chicago. Twenty-two lawsuits resulted from the fire. Clarendon, which insures BGK, had filed for declaratory judgment that it had no duty to defend BGK in those suits.

Clarendon's argument focuses on language in its policy, specifying that the insured parties include "[a]ny organization you newly acquire or form, other than a partnership, joint venture or limited liability company..." It used that language to argue that coverage for BGK in the 22 fire lawsuits should be excluded, because BGK had entered into a joint venture with another security company, Aargus Security Systems, Inc. Both sides filed for summary judgment in the trial court, and the trial court sided with BGK. Clarendon appealed, arguing both the summary judgment language and that it should have been allowed to complete discovery because the record was unclear.

By contrast, BGK argued that Clarendon has a duty to defend because the lawsuits name BGK rather than the joint venture, and BGK is also the insured named by the insurance policy. The appeals court agreed. Pointing out that the joint venture is extrinsic evidence, the court reasoned that this evidence involves facts that could drastically change the underlying litigation (the fire lawsuits) by affecting BGK's liability. That would make it an impermissible consideration under Illinois caselaw, the court wrote, and thus, the trial court was right to exclude it.

In any case, the court added, the provision in question is ambiguous. Clarendon pointed to language saying that "no person or organization is an insured with respect to the conduct of any current or past... joint venture... that is not shown as a Named Insured..." Again, the court said, the Named Insured and the named defendant in the suits at issue are both BGK, and no suits named the joint venture. And because it had already concluded that considering extrinsic evidence is inappropriate at the declaratory judgment stage, the court also rejected Clarendon's argument that it should have been allowed to proceed with discovery to clarify BGK's status as a joint venture. It affirmed the trial court's decision on all counts.

The Chicago business and commercial law trial attorneys at DiTommaso-Lubin have substantial experience unraveling the complexities of insurance coverage disputes and other breach of contract litigation. From our offices in Chicago and Oak Brook, Illinois, we represent businesses and individuals with business-related disputes in Illinois as well as Indiana and Wisconsin. If you need to protect yourself and your business in legal proceedings and you’d like to learn more about how we can help, you can contact us to set up a confidential consultation.

In a proposed class-action insurance fraud lawsuit, the Illinois Third District Court of Appeal has ruled that a chiropractor may not sue a workers’ compensation insurer. In Martis v. Grinnell Mutual Reinsurance Company, No. 3-08-0004 (Ill. 3rd March 27, 2009), chiropractor Richard Martis sued Grinnell Mutual Reinsurance Company after Grinnell’s billing employees incorrectly paid Martis too little for treating an injured worker.

In February of 2006, Martis began treating an employee of Water Management Corp. of Illinois who had been injured on the job. He was to be paid by Water Management’s workers’ compensation policy, issued by Grinnell. When he submitted his bills to Grinnell, the insurer’s outside billing firm applied PPO discounts to those bills even though Martis did not have a PPO agreement with Grinnell. Thus, Grinnell underpaid Martis. He responded with a proposed class-action lawsuit encompassing all Illinois health care providers who had been underpaid by Grinnell in the same way, through incorrect PPO discounts.

The complaint by Martis alleged conspiracy, unjust enrichment, breach of contract and violations of the Illinois Consumer Fraud Act. The trial court granted Grinnell’s motion to dismiss the conspiracy and unjust enrichment counts. However, it certified the class of health-care providers as to the breach of contract claim. Grinnell appealed the denial of its motion to dismiss the breach of contract claim and the class certification to the Third District.

The appeals court reversed those decisions. In its opinion, the court said Martis is not a party to the contract between Grinnell and Water Management. Nor is he a third-party beneficiary to the contract, the court said -- the employee Martis treated is such a person, but Martis himself is not. Because this is an issue of first impression in Illinois, the court cited cases from states including Hawaii, Mississippi, Indiana and Texas in which state courts held that medical providers are not intended third-party beneficiaries. It also pointed to decisions in other states holding that medical providers are only incidental beneficiaries of auto insurance policies. And in federal cases, they wrote, courts have found that medical providers are intended beneficiaries only when the insurance policy requires direct payment to the medical provider.

From this, the court concluded that medical providers like Martis are third-party beneficiaries of workers’ compensation insurance policies only when the insurance policy specifically says so. It found that the policy did not, despite a clause saying Grinnell is liable to “any person entitled to benefits payable by this insurance.” The language does not identify third parties, the court wrote, and medical providers are not among those entitled to benefits under the Illinois Workers’ Compensation Act. Thus, Martis cannot enforce the contract and has no breach of contract claim. For the same reasons, the court next found, it was inappropriate of the trial court to certify a class action of other providers who are also not parties to the Grinnell contract. Thus, it reversed and remanded the trial court’s decisions.

Justice Mary McDade dissented from the ruling. She concurred that Martis is not a third-party beneficiary, as the majority found, but disagreed with its choice to reverse certification of a class action. Class actions must be based on a valid cause of action, she wrote -- but the analysis the majority used to decide whether there is a valid cause of action for breach of contract was wrong. McDade wrote that the issue is not whether Martis is a valid third-party beneficiary to the contract, but whether there was a breach of contract against Martis. And because Grinnell failed to pay Martis for services rendered, there was. The plaintiff’s breach of contract complaint does not rely on being a third-party beneficiary to Grinnell’s contract. Thus, McDade wrote, she would affirm.

The national consumer rights and class action law firm of DiTommaso-Lubin with offices in Chicago and Oak Brook, IL handles all types of consumer fraud and class-action litigation, including Illinois insurance bad faith lawsuits. If you have made an insurance claim, but the company refuses to pay some or all of the benefits it owes you under its own contract, you may be a victim of insurance bad faith. Our Chicago consumer rights and class action lawyers can help. To learn more about how you can protect your rights at a free consultation, please contact us through the Internet or call toll-free at 1-877-990-4990.

As Illinois consumer attorneys we were pleased to see that the Illinois Attorney General has a very informative website highlighting the protections provided by Illinois and Federal Law against abusive debt collection practices. You can link to the website here.

The Attorney General's website describes how the Fair Debt Collection Practices Act, the Illinois Collection Agency Act and the Illinois Consumer and Deceptive Business Practices Act can protect Illinois residents from debt collector abuse:

If you use credit cards, owe money on a loan or are paying off a home mortgage, you are a “debtor.” If you fall behind on your payments to these creditors, you may be contacted by a debt collector. You should know that the Federal Fair Debt Collection Practices Act, the Illinois Collection Agency Act and the Illinois Consumer Fraud and Deceptive Practices Act all provide protections guaranteeing that debt collectors treat you fairly. These laws do not, however, forgive any legitimate debt you owe. Personal, family and household debts are covered under the Federal Fair Debt Collection Act. This includes money owed for medical care, charge accounts or car purchases.

Debt Collectors
A debt collector is any person other than the creditor who regularly collects or attempts to collect debts that are owed to others and that resulted from consumer transactions. This includes attorneys who collect debts on a regular basis. A collector can contact you in person, by mail, telephone, telegram or e-mail. However, a collector may not contact you at unreasonable times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves. A debt collector may contact people other than you or your attorney to find out where you live or work, but may not tell anyone other than you or
your attorney that you owe money.

Once a debt collector has notified you by phone, he or she must, within five days, send you a written notice revealing the amount you owe, the name of the creditor to whom you owe money, and what to do if you dispute the debt. A debt collector may NOT:

• harass, oppress or abuse anyone (i.e., use threats, obscene or profane language, etc.);
• make false statements when collecting a debt (includes implying that you have committed a crime or saying you will be arrested or criminally prosecuted if the debt isn’t paid); or
• engage in unfair practices such as forcing you to accept collect calls or pay for telegrams or collect interest or fees in excess of the debt, unless authorized by the agreement creating the debt.

You can stop a debt collector from contacting you by writing a letter to the collection agency telling him or her to stop. Once the agency receives your letter, it may not contact you again except to notify you that some specific action will be taken.

Disputing a Debt
A debt collector may not contact you if, within 30 days after the collector’s first contact, you send the collector a letter stating that you do not owe the money. If, however, the collector sends you proof of the debt, such as a copy of the bill, the collector can resume collection activities.

Our consumer rights private law firm handles individual and class action unfair debt collection and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law 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 consumer rip-offs and unscrupulous or dishonest practices.

Our Naperville, Aurora, Waukegan, Joliet, Elgin, Highland Park, Northbrook, Wilmette, Wheaton, Oak Brook, and Chicago consumer lawyers provide assistance in fair debt collection, 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 protection lawyers who can assist in lemon law, unfair debt collection, junk fax, prerecorded telephone solicitations, 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.

A very informative brochure just published by the Federal Trade Commission contains the following very useful questions and answers regarding the Fair Debt Collection Practices Act:

What debts are covered? Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts. Who is a debt collector? A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis. How may a debt collector contact you? A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves. Can you stop a debt collector from contacting you? You can stop a debt collector from contacting you by writing a letter to the collection agency telling them to stop. Once the agency receives your letter, they may not contact you again except to say there will be no further contact or to notify you that the debt collector or creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor. May a debt collector contact anyone else about your debt? If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people, but only to find out where you live, what your phone number is, and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money. What must the debt collector tell you about the debt? Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money. May a debt collector continue to contact you if you believe you do not owe money? A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed. What types of debt collection practices are prohibited? Harassment. Debt collectors may not harass, oppress, or abuse anyone or any third parties they contact. For example, debt collectors may not: • use threats of violence or harm; • publish a list of consumers who refuse to pay their debts (except to a credit bureau); • use obscene or profane language; or • repeatedly use the telephone to annoy someone; False statements. Debt collectors may not use any false statements when collecting a debt. For example, debt collectors may not: • falsely imply that they are attorneys or government representatives; • falsely imply that you have committed a crime; • falsely represent that they operate or work for a credit bureau; • misrepresent the amount of your debt; • indicate that papers being sent to you are legal forms when they are not; or • indicate that papers being sent to you are not legal forms when they are. Debt collectors also may not state that: • you will be arrested if you do not pay your debt; • they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or • actions, such as a lawsuit, will be taken against you, which legally may not be taken, or which they do not intend to take. Debt collectors may not: • give false credit information about you to anyone, including a credit bureau; • send you anything that looks like an official document from a court or government agency when it is not; or • use a false name. Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not: • collect any amount greater than your debt, unless your state law permits such a charge; • deposit a post-dated check prematurely; • use deception to make you accept collect calls or pay for telegrams; • take or threaten to take your property unless this can be done legally; or • contact you by postcard. What control do you have over payment of debts? If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe. What can you do if you believe a debt collector violated the law? You have the right to sue a collector in a state or federal court within one year from the date from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1000. Court costs and attorneys fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collectors net worth, whichever is less.

Our consumer rights private law firm handles individual and class action unfair debt collection and other consumer fraud cases that government agencies and public interest law firms such as the FTC may not pursue. Class action lawsuits our law 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 consumer rip-offs and unscrupulous or dishonest practices.

Our Naperville, Aurora, Waukegan, Joliet, Elgin, Highland Park, Northbrook, Wilmette, Wheaton, Oak Brook, and Chicago consumer lawyers provide assistance in fair debt collection, 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 protection lawyers who can assist in lemon law, unfair debt collection, junk fax, prerecorded telephone solicitations, 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.

Our Chicago, Wheaton, Naperville and Waukegan, Illinois consumer fraud attorneys found the below video on 4 common types of consumer fraud to be informative.

Based in Chicago, Wilmette and Oak Brook, Ill., DiTommaso-Lubin handles informercial, stock broker, auto dealer and RV dealer fraud and other consumer fraud litigation for clients in Wheaton, Naperville,Waukegan, Evanston, Joliet, Aurora, Elgin, Lisle and in other parts of Illinois, the Midwest and throughout the United States. In addition to helping individuals and families, our Chicago class action attorneys have successfully handled numerous consumer rights class actions. If you believe you're a victim of fraud and misrepresentations or a deceptive business practice, please contact us as soon as possible to learn about your rights at a free consultation.

As Chicago Wheaton and Illinois autofraud and lemon law attorneys we took note of a report released earlier this year by the National Consumer Law Center ("NCLC") concludes that:

Buying a reliable, quality used car for a fair price is nearly impossible for America’s working families who often fall victim to unfair financing ploys, deceptive sales practices, exorbitant fees, and fraud.

A summary of the report is posted here.

John Val Alst who wrote the report testified before Congress that car dealers often engage in the following unfair practices according to a press release issued by NCLC:

• Selling cars in poor or dangerous condition that are presented to the consumer as sound and reliable; • Taking kickbacks from lenders to place families in higher interest loans than they actually qualify for; • Using deceptive and misleading sales practices, such as “yo-yo sales,” where the customer drives off the lot with a newly purchased car, only to be called back several days later and told financing could not be arranged for the original terms and the customer needs to sign new documents at worse terms; • Pushing products such as “window-etching” and other unnecessary services and add-on fees that only pump up a car’s cost and the dealer's profit; • Giving higher interest loans to minority car buyers than non-minority car buyers with similar credit worthiness; • Requiring excessive interest rates and long-term loans that ensure the customer will owe more than the vehicle is worth for years after the purchase.

Based in Chicago, Wilmette and Oak Brook, Ill., DiTommaso-Lubin handles auto dealer and motor home dealer fraud and other consumer fraud litigation for clients in Wheaton, Naperville,Waukegan, Joliet, Aurora, Elgin and in other parts of Illinois, the Midwest and throughout the United States. In addition to helping individuals and families, our Chicago class action attorneys have successfully handled numerous consumer rights class actions. If you believe you're a victim of fraud and misrepresentations by an auto dealer or other business, please contact us as soon as possible to learn about your rights at a free consultation.

In a breach of contract and Illinois Wage Payment Act case, the First District Court of Appeal has ruled that a company and its former executive must have a trial to determine whether it breached the executive’s employment contract. Covinsky v. Hannah Marine Corporation, No. 1-08-0695 (Ill. 1st. Feb. 17, 2009). At issue in the case is a severance clause in Jeffrey Covinsky’s employment contract with Hannah Marine Corp., for which he served as president, CEO and CFO from 1998 to 2006.

Covinsky’s contract specified that he was entitled to a “golden parachute” of 18 months’ salary if there is “...a change in the present ownership which results in the termination of the Employee's employment...” This agreement was executed in 2004, when Hannah Marine was jointly owned by three people, including Donald Hannah. Hannah sued the other shareholders in 2005 for financial mismanagement, and ended up buying out the other two shareholders. Covinsky told Hannah in 2005 that he assumed Hannah would want to let him go after the change; in 2006, Covinsky told Hannah he did not intend to resign and wanted to finish the contract, which was set to expire in 2006.

A month later, when the takeover was final, Hannah told Covinsky that he was terminated and that Hannah “accepted” Covinsky’s resignation. Covinsky protested that he never resigned, but was not paid the severance. He sued Hannah Marine and Donald Hannah for breach of the employment contract and violating the Illinois Wage Payment Act. Hannah countersued Covinsky for breach of fiduciary duty. The trial court granted summary judgment to Covinsky on both counts as to Hannah Marine, but dismissed the Wage Act claim against Hannah personally. It also dismissed the company’s counterclaim. Both sides appealed, resulting in the consolidated instant appeal.

On appeal, the First District narrowed the issue to the meaning of the word “termination” in the golden parachute clause, which says in part that Covinsky would be entitled to the severance pay if “a change in the present ownership... results in the termination of the Employee’s employment.” Hannah Marine argued that this means just a firing; Covinsky argued that it means either a firing or a resignation. The appeals court found that the dictionary definition could mean either kind of termination, but context makes it clear that the clause refers to an involuntary termination. In fact, the court wrote, to interpret the clause otherwise would “make[] no sense”:

If a paragraph 7(g) "termination" encompasses a voluntary resignation, the employee has no incentive to continue in his position and to make the transition to the new owner/management because he knows, if he resigns upon the transition, he will receive a substantial payout. He will be rewarded for not doing his job.

For that reason, the court said, the issue of whether Covinsky was fired or quit -- an issue the trial court had declined to address, believing the clause applied either way -- was dispositive of the case. This is a genuine issue of material fact that is inappropriate for summary judgment, the court wrote. Thus, the trial court’s breach of contract decision was reversed and remanded for further proceedings on the subject. For the same reasons, the appeals court also send the Wage Payment Act claims against both Hannah Marine and Donald Hannah back to trial -- the law would apply, it said, but only if Covinsky was fired. The judges noted that the trial court found that Hannah didn’t meet the definition of an employer, but nonetheless, it was free to revisit the issue on remand.

Finally, the court addressed Hannah’s appeal of the trial court’s decision to dismiss its breach of fiduciary duty claim against Covinsky. Like the trial court, the appeals court said Hannah failed to state a sufficient claim because the deal that formed the basis of its claim wasn’t necessarily a bad one.

DiTommaso-Lubin’s Chicago breach of contract litigation lawyers and business trial attorneys handle cases of alleged breach of employment contracts and all other types of business contracts, including franchise agreements, purchase and sale contracts, restrictive covenants and non-compete agreements. Our firm serves businesses and individuals acting as both plaintiffs and defendants. With offices in Oakbrook Terrace, near Oak Brook, Naperville, Wheaton, Ill., and Chicago, we help clients throughout Illinois, Wisconsin and Indiana. Our law firm and its Chicago commercial trial attorneys have handled a wide variety of business trials and litigation. To learn more about how we can help you, you can contact us online or call us at 1-877-990-4990.

A group of Chicago condo owners may proceed with a derivative lawsuit against their homeowners’ association’s Board of Directors, the First District Court of Appeal has ruled. In Davis v. Dyson, No. 1-07-2927 (Ill. 1st Dec. 19, 2008), twelve condo owners sued individuals formerly on the board of directors after the board members failed to detect embezzlement by an outside property manager. Furthermore, the homeowners alleged, the former board members failed to get enough insurance or get an attorney's advice on their duty to do so, resulting in losses and out-of-pocket costs of more than $800,000 after the embezzlement was detected.

The homeowner plaintiffs sued for breach of fiduciary duty under two counts -- one derivative claim on behalf of the association and one claim as individual homeowners whose property values were allegedly harmed by the directors' inaction. In response, board members argued that the homeowners lacked standing to sue in both claims -- for the individual claim, because the property value claim did not constitute a separate and distinct harm to the individual homeowners. For the derivative claim, the board members argued that only the board itself may bring a derivative action against third parties. The trial court agreed and dismissed both claims; the homeowners appealed.

In its analysis, the appeals court pointed out that shareholders have an undisputed right to sue their own boards of directors; the question was whether they may file a derivative claim against third parties (in this case, the former directors). The court concluded that they could, pointing out that the right to file a derivative suit puts homeowners into the association's shoes. This means that they are acting on behalf of the association, the opinion said, not usurping its undisputed right to sue third parties. The relevant section of the Illinois Condominium Property Act does not prevent derivative claims by homeowners, the court wrote, so it saw no reason to deviate from caselaw on derivative actions.

However, the individual claims by the homeowners, that their properties' values had declined because of the board's inaction, still failed, the court decided. It found that damage to property values can be separate and distinct even if it's the same kind of damage -- ownership is separate, and thus harm to ownership is separate. More persuasive to the court was the defendants' argument that the damage to the units' value was not direct damage, but an indirect result of damage done to the entire building by the embezzlement. Again relying on caselaw on derivative actions, the court pointed out that shareholders may not sue as individuals when the harm they allege is indirect and shared by all shareholders.

Finally, the court ruled that alleging violations of the Condo Act and the association's bylaws was sufficient to allege breach of fiduciary duty. It also dismissed the defendants' contention that allowing the suit would impermissibly interfere with directors' business judgment, because directors must exercise due care, and whether they did so is a question of fact that should be tried. Thus, the appeals court affirmed the dismissal of the individual claims but reversed the dismissal of the derivative claim and sent it back to the trial court.

With offices in Chicago and Oakbrook Terrace, Illinois, DiTommaso-Lubin represents shareholders, homeowners and others who need help asserting their rights after a board refuses to do so. Our Chicago and Naperville area real-estate trial attorneys handle many different types of real-estate litigation. We handle both individual consumer protection lawsuits and consumer class actions on behalf of clients throughout Illinois, as well as in partnership with firms in other states. If you would like to learn more, please contact us to set up a consultation.

One of the best websites to learn about consumer law issues Is the Illinois Attorney General's website. The site contains numerous links to useful consumer protection warnings and links to other top consumer websites. The Illinois Attorney General also provides forms for filing consumer fraud complaints with the Attorney General.

Our consumer rights private law firm handles individual and class action cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law 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 consumer rip-offs and unscrupulous or dishonest practices.

Our Naperville, Aurora, Waukegan, Joliet, Elgin, Highland Park, Northbrook, Wilmette, Wheaton, Oak Brook, and Chicago consumer lawyers 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 protection lawyers who can assist in lemon law, unfair debt collection, junk fax, prerecorded telephone solicitations, 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.

In a hard-fought Illinois consumer fraud lawsuit over deception by a condominium developer, the Second District Court of Appeal has upheld an award involving both nominal damages and punitive damages. In Kirkpatrick v. Strosberg, Nos. 2-06-0724 and 2-06-0731 (Ill. 2nd Aug. 8, 2008), four plaintiffs, led by John Kirkpatrick, sued a real estate developer over misrepresentations about the square footage and ceiling height of the luxury condominiums they purchased in Glen Ellyn, Ill.

Defendant Morningside Development Group is general partner of defendant Glen Astor Condominium Investors LP, a residential real estate developer. Defendant David Strosberg is Morningside’s president. Glen Astor entered into contracts with the plaintiffs for their purchase of luxury condos on the top floor of a development. Before purchasing the condos, the plaintiffs allege, they read sales materials promising nine-foot ceilings and specific amounts of square footage in the units. In three cases, floor plans specifying square footage were incorporated into their contracts. A rider to the contracts specified that dimensions are approximate and subject to adjustments due to the location of building components. During construction, the builder had to lower the ceilings by six inches because of the size of roof components. After buying the condos, the plaintiffs realized that both the square footage and the ceiling heights were smaller than promised.

At trial for the subsequent lawsuit, the court determined that the difference in square footage resulted from differences between how LeNoble and the plaintiffs’ own appraiser measured the square footage, but that LeNoble’s smaller measurements were appropriate and proper. Thus, the court struck down the square footage claims. Finally, it found for the plaintiffs on the breach of contract claims regarding the lowered ceiling. It found that there were actual damages, but that the plaintiffs’ expert appraiser had not given adequate information about damages. The breach of contract took place in 1997, the court said, but Philips gave a diminished value as of 2004 that was “nothing more than a guess without proper basis.” Thus, the court awarded nominal damages of $100 each on the breach of contract and Consumer Fraud Act claims regarding the ceilings. It also awarded $300,000 in punitive damages and $83,000 in attorney fees.

Both the plaintiffs and the defendants appealed, raising a total of 13 issues. The appeals court started with the square footage claims; the plaintiffs argued that the trial court was wrong to find against their common-law fraud and Consumer Fraud Act claims. The trial court heard conflicting evidence on how square footage was measured, and the appeals court saw no reason to question the trial court’s judgment in favor of LeNoble’s method. Thus, there was no false statement or deceptive act. Further, because of the contract rider specifying that dimensions were approximate, there was no breach of contract. Thus, it upheld the trial court’s decision on square footage.

The Second next considered the issue of damages for the lowered ceilings. The plaintiffs argued that the trial court should have used Phillips’ measurement of diminished value. In this case, the appeals court wrote, damages should be the difference between the actual sales price and the fair market value of the properties on the day of the breach. Philips offered an estimation of fair market value seven years after the breach, the court wrote, which the trial court found was speculative. This was not unreasonable or against the evidence, the appeals court wrote.

Meanwhile, the defendants argued that the trial court’s finding was wrong because the contracts didn’t specify a ceiling height. Nonetheless, the appeals court wrote, they used deceptive marketing materials to induce the plaintiffs to sign contracts, so the ruling on the breach of contract and Consumer Fraud Act claims stands. The defendants also argued that the contract rider barred the breach of contract claim as to the ceilings, as well as the square footage. The trial court found that this was an unreasonable alteration and not covered by the rider, the appeals court said, and it had no reason to think this was against the manifest weight of the evidence.

The defendants next argued that nominal damages were incorrect because the plaintiffs did not prove actual damages, an argument the Second District pointed out was expressly refuted by the trial court’s finding that damages had been proven. They also argued that punitive damages were incorrectly awarded because they were accompanied only by nominal damages. The appeals court looked to caselaw saying punitive damages supported by nominal damages are only appropriate under the Consumer Fraud Act when the defendant’s conduct is intentional. That was clearly established at trial, the court wrote, so the trial court did not abuse its discretion. It also ruled that the punitive damages award was not so grossly excessive as to be unconstitutional, noting that it passes all three tests set out by the U.S. Supreme Court in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).

Finally, the court considered the defendants’ challenge to both the rewarding and amount of attorney fees. The defendants argued that the plaintiffs were not entitled to the fees because they were not the “prevailing party,” but the appeals court disagreed, noting that plaintiffs were awarded damages. Furthermore, the trial court found that the defendants repeatedly acted in bad faith. And in order to overturn the amount of attorney fees, the appeals court wrote, it would have to find that the trial court did not use sufficient evidence to determine the fees. It saw no reason to so find, so it upheld the attorney fees decision along with all of the trial court’s other decisions.

The Chicago and Oak Brook, Ill., law firm of DiTommaso-Lubin concentrates in protecting the legal rights of consumers, real-estate, home and condomimium purchasers who have been misled or taken advantage of in financial and real-estate transactions. In addition to Chicago consumer fraud lawsuits over real estate contracts, our Illinois consumer fraud litigation attorneys handle lawsuits over real-estate fraud, billing fraud, fraud by auto dealers, deceptive advertising and many other common consumer pitfalls. Based in Illinois, our consumer fraud and real-estate and condomium fraud and breach of contract trial lawyers represent clients involving consumer frauds and real-estate disputes in the Chicago area including Wheaton, Naperville, Aurora, Rockford and Waikegan and in different parts of the United States. To set up a free, confidential consultation on your case, please contact us online or call us toll-free at 1-877-990-4990.