Chicago Business Litigation Lawyer Blog

We here at DiTommaso-Lubin often represent our clients in federal court, and our practice includes handling wage and hour disputes so we keep an eye on such cases filed in Illinois. In re AON Corp. is the consolidation of a New York case with an action filed in Illinois District Court to certify a wage and hour class action pursuant to Federal Rule of Civil Procedure 23(a). Plaintiffs allege violations of the Illinois Minimum Wage Law (IMWL) and Fair Labor Standards Act (FLSA) for unpaid overtime. In its opinion, the Court discussed whether the purported class met the four standards required for certification as set forth in FRCP 23(a). The Court analyzed the numerosity of class members, commonality of the issues between class members, typicality of the class representatives, and adequacy of representation proffered by the named Plaintiffs and their attorneys.

The Plaintiffs in this case are former employees of Defendant AON who worked as Associate Specialists, Client Specialists, and Senior Client Specialists in the Client Services Units and Policy Maintenance Units located at AON's facilities in Illinois and New York. Plaintiffs argue that AON improperly classified the purported class members as administrative employees, thereby violating the IMWL and the FLSA and entitling them to overtime compensation.

The Court found that the Illinois Plaintiffs satisfied the Rule 23(a) numerosity requirement because there were 515 members of the proposed class and joinder of that many actions would be impracticable. The commonality requirement was met because there is a common question of law as to whether the class members were properly classified as administrative workers. The Rule 23(a) typicality requirement was met because all of the claims arise out of the same act of classification and assert the same violation of the law. The adequacy requirement of Rule 23(a) was met because the named Illinois Plaintiffs suffered the same injury as the class and have pursued the case for over 2 years. Additionally, Plaintiffs' counsel has the requisite resources and experience in both class action and wage & hour litigation to adequately protect the interests of the class. Finally, the Court found that the requirements of Rule 23(b)(3) were met despite the fact that the class members have different clients and peripheral duties. The Court concluded that the class members' essential job functions were similar enough that the central legal issue regarding classification of each class member as an administrative employee under the IMWL predominated and that a class action was a superior method of resolving the case.

To conditionally certify a class under 216(b), Plaintiffs must make a modest factual showing to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law. Secondly, after all or a significant portion of discovery is completed, the Court must perform a stricter examination of whether the class members are similarly situated. The Plaintiffs sought to apply the first stage of 216(b) analysis, while the Defendant asked the Court to perform the second stage inquiry. The Court held that the second stage analysis was improper due to a relative lack of discovery in the case thus far. A second stage 216(b) analysis would prejudice the New York Plaintiffs by failing to give them adequate opportunity to present a more complete evidentiary picture. Additionally, performing the second phase analysis was premature because potential plaintiffs had not yet received notice and the opportunity to opt into the suit.

The Court conditionally certified the class because there was uniformity between the class representative and the class members due to: the similar type of work they performed, the uniform Defendant-produced processes used to perform their jobs, and the common legal issue of misclassification.

In Re AON Corp. provides guidance for future wage and hour litigants by explaining the requirements for class certification under the Federal Rules of Civil Procedure. This case also provides clarification regarding class certification under the Federal Labor Standards Act. Plaintiffs who seek to certify a class must have some evidence for conditional certification, but also should be mindful that they must acquire more substantial evidence through discovery to fully certify the class under the FLSA.

Continue reading " Class Certification Under Federal Rule of Civil Procedure Rule 23(a) " »

DiTommaso-Lubin's Chicago business trial lawyers have more than two and half decades of experience helping business clients on unraveling complex business fraud and breach of fiduciary duty cases. Our Chicago business law attorneys work with skilled forensic accountants and certified fraud examiners to help recover monies missappropriated from our clients. Our Chicago business, commercial, and class-action litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and sucessfully as possible, helping business clients protect their investements and get back to business as usual. From offices in Oak Brook, near Wheaton and Naperville, our Chicago business lawyers serve clients throughout Illinois and the Midwest.

If you’re facing a business or class-action lawsuit, or the possibility of one, and you’d like to discuss how the experienced Illinois business dispute attorneys at DiTommaso-Lubin can help, we would like to hear from you. To set up a consultation with one of our Chicago and Woodstock business trial attorneys and class action and consumer trial lawyers, please call us toll-free at 1-877-990-4990 or contact us through the Internet.

The Wall Street Journal reports that Hilton settled a corporate espionage suit brought against it by Starwood.

Hilton hired two former Starwood executives who allegedly stole over 100,000 documents belonging to Starwook outlining many of Starwood's key marketing plans and ideas for liefstyle chains such as W. Hilton settled the case for an unspecified cash payment along with an agreement banning it from starting a luxury lifestyle chain for two years.

The article concludes that by settling now, Hilton avoids having to deal with the ban on developing a lifestyle luxury hotel chain once the economy heats up again:

Hilton's delay in developing a lifestyle hotel came at a convenient time given that new hotel construction is at its lowest level in years. In the future, the two-year delay could become a problem as the industry emerges from the recession, industry observers said Wednesday. It could leave a hole in Hilton's marketing to young-minded travelers seeking a high dollar hotel option.

To readthe full article click here.

Our Chicago non-compete agreement and trade secret theft lawyers have defended high level executives in cases with similar claims to the Hilton case. We have also prosecuted and defended many trade secret theft and covenant not to compete cases. A case in which our firm defended a former Motorola executive was covered in Crain's Chicago business. You can view that article by clicking here.

DiTommaso-Lubin handles trade secret theft lawsuits and litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business attorneys have substantial experience in trade secret, restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommas-Lubin a Chicago business law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Based in Oakbrook Terrace and downtown Chicago, our Schaumburg noncompete clause lawyers take cases from Wheaton, Naperville and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact us through the Internet or call toll-free at 1-877-990-4990 today.

In a case that presented questions very interesting to our Chicago arbitration and mediation attorneys, the Fourth District Court of Appeal has ruled that standing to arbitrate is not an issue that should itself be submitted to arbitration. In Equistar Chemicals, LP v. Hartford Steam Boiler Inspection and Insurance Company of Connecticut, No. 4-07-0478 (Ill. 4th 2008), Hartford, an insurance company, sought to hold Equistar responsible for damage to a turbine generator owned by Hartford’s insured, Trigen-Cinergy Solutions of Tuscola. Trigen had signed a contract with Equistar that included an arbitration clause, and Hartford filed a demand for arbitration of its claim as a subrogee of Trigen. In court, Equistar moved to stay arbitration until Hartford’s standing to invoke arbitration could be determined. That court denied the stay, saying standing should be determined by arbitrators.

Equistar has an ethanol plant in Tuscola, Ill. It hired Trigen to provide energy, water and wastewater treatment at the plant, and their contract included an arbitration agreement. Later, an Equistar employee allegedly acted negligently with a circuit breaker, causing an electrical arc that damaged a turbine generator belonging to Trigen. Hartford, as the insurer to Trigen, paid $853,442 to repair the damage, then filed a demand for arbitration with the American Arbitration Association. It requested the $853,442 in damages from Equistar, by virtue of its subrogee relationship with Trigen. Equistar responded by objecting in Illinois trial court to Hartford’s standing, the jurisdiction of arbitrators and the arbitrability of the claim. It later filed a motion to stay arbitration until, among other things, standing could be determined. The trial court denied that motion, concluding that Hartford had standing as a subrogee, but that standing can be determined in arbitration.

Equistar filed this interlocutory appeal, arguing that the Illinois Uniform Arbitration Act requires the court, not private arbitrators, to decide questions of standing. It quoted at length from the Act: “...if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised[.] ... On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. That issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party.” Under this language, the Fourth said it’s clear that the Act requires courts to make the initial determination of whether parties have agreed to arbitrate. In this case, it added, there was no reason to delay things by sending the question to arbitration, since arbitrators would have no special skill in determining whether Hartford had standing to invoke arbitration.

In determining otherwise, the trial court had relied on language in the parties’ arbitration agreement saying “the decision of the arbitrators (including the decision that the dispute is arbitrable) shall be final and binding upon the parties[.]” The trial court had written that this language leads logically to the conclusion that arbitrators make determinations of arbitrability and the courts shall have no role. The Fourth disagreed, writing instead that this language only clarifies how much authority arbitrators should have; it does not expand their authority. Parties are free to give arbitrators that authority, the court wrote, but they can and should explicitly say so.

The Fourth next looked at the issue of Hartford’s standing as a subrogee -- an issue of first impression in Illinois. Equistar argued that Hartford, as Trigen’s subrogee, cannot compel arbitration because it was not a party to the arbitration agreement. Their agreement did not explicitly include subrogees, assignees or other third parties, and in fact explicitly said the parties did not have the right to incur obligations to third parties on behalf of the other, or commit the other party to a contract. Hartford countered that its right to arbitration comes through subrogation law, not the contract, making this language irrelevant. Illinois caselaw in Ervin v. Nokia, Inc., 349 Ill. App. 3d 508, 512, 812 N.E.2d 534, 539 (2004) defines contract-based theories that can bind a nonsignatory to an arbitration agreement, but subrogation is not among them. Two cases from other states have come to different conclusions on the issue, the court noted. And Illinois subrogation law puts the subrogee (in this case, Hartford) directly into the shoes of the subroger (Trigen).

Ultimately, the Fourth decided that Hartford should have the same rights and obligations as Trigen. That means Hartford does not merely have a right to arbitrate, the court wrote -- it is required to do so under Trigen’s contract. Thus, it upheld the trial court’s decision to deny the motion to stay arbitration. This meant affirming the decision as a whole, even though it noted that it disagreed with the trial court that arbitrators should determine standing.

Continue reading " Fourth District Rules Standing to Sue Is Not an Arbitrable Issue, but Denies Stay of Arbitration " »

The Kentucky Supreme Court rejected a contractual ban on class actions by Insignt in a case regarding a mass shut down of consumer internet services

The Court held a class action “is often the only economically viable legal procedure” to address a large volume of very small claims, the court said in an opinion issued Thursday. For that reason, it said, a ban on class actions like the one in Insight’s contract “may effectively shield a company from liability for unlawful activity.” In the Insight case, consumers were seeking refunds on $40 bills and absent a class action that would not able to retain a lawyer to act as a private Attorney General to vindicate their rights and those of the other victims.

The Court provided this example:

The potential that an absolute ban on class action litigation may produce an improper exculpatory result is demonstrated by way of a simple example. Suppose XYZ Company inadvertently or intentionally overbilled each of its one million customers by one dollar during a particular month. As a result, it gained possession of one million dollars to which it is not entitled, and which instead belongs to its customer base. Suppose, in addition, that the company acted unethically (or incorrectly believed it had a valid defense) and refused to return the overcharges. Economic realities dictate that none of the one million overbilled customers would bring an individual claim seeking the recovery of his dollar. The time, effort, and expense involved to recover a dollar simply would not be worthwhile. Thus, while the economic loss to each individual customer would be negligible, the lack of an economically viable means to bring the company into court would effectively exculpate the company from liability, allowing it to reap unjustly a substantial economic windfall. We agree with the Appellants that the only economically viable means for customers to bring a company into court, as plaintiffs, under these circumstances is by class action litigation.

Public Justice, a national public-interest legal organization presented arguments for Insight customers in the case. “This decision makes it possible for consumers who are cheated out of small sums to fight that injustice,” Public Justice attorney Paul Bland said in a statement. Bland heads Public Justice's class action protection project and has been instrumental in fighting for consumer rights in important cases across the country.

You can read the opinion of the Kentucky Supreme Court by clicking here.

Our lawyers have achieved consumer victories in class actions like the Insight case where consumers who had suffered small injuries received full refunds. In a case against Hilton for including a non-tax charge in the tax line item, we won at trial and each consumer victim who could be located received a check for 98% of their damages with all attorneys fees and court costs paid by Hilton as required by the Illinois Consumer Fraud and Deceptive Business Practices Act.

Our Gurnee, Illinois consumer rights private law firm handles individual and class action predatory lending, unfair debt collection, lemon law 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. The Chicago consumer rights attorneys at DiTommaso-Lubin are 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 Glenview and Deerfield consumer attorneys 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 our Chicago consumer lawyers 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 Waukegan consumer protection attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

Our Illinois alternative dispute resolution lawyers noted an opinion from the Fifth District Court of Appeal reversing a trial court that declined to compel arbitration. In Hollingshead v. A. G. Edwards & Sons, Inc., No. 1-09-0067 (Ill. 5th Jan. 22, 2009), the court ruled there simply was not enough evidence to support the trial court’s decision to deny to compel arbitration. The case pits Carol Hollingshead, independent administrator of the estate of Selma Elliott, against Elliott’s investment company and Leonard Suess, an investment advisor there and Elliott’s son-in-law. Hollingshead sued the defendants for various causes of action related to financial mismanagement, but defendants moved to compel arbitration under several contracts related to the investment accounts. The trial court denied this motion without an explanation or an evidentiary hearing.

Elliott passed away in 2003 at the age of 101. During her lifetime, she had an account at A.G. Edwards, managed by Suess. Her power of attorney was granted to her daughter, Judy Suess, at the time of her death, so that Judy Suess could manage Elliott’s affairs. Those affairs included 11,000 shares of stock in the pharmaceutical company Merck, which had a value of $985,000 in 2001. Around 1994, defendants used that value to open up a margin account and buy other stock. Unfortunately, the value of her portfolio dropped significantly and the defendants began selling off the Merck stock to cover margin calls. Plaintiff claims this triggered tax liabilities that could easily have been avoided if the sale had happened after Elliott’s death. She sued them for breach of fiduciary duty, breach of contract and negligence.

However, Elliott had signed three contracts with Edwards before her death and Judy Suess as power of attorney had signed another, and all of them had an arbitration agreement. Defendants moved to dismiss the case and compel arbitration on this basis. The trial court heard arguments that did not get into the record on appeal, then denied the motion without comment. Defendants filed an interlocutory appeal. They argued that the contracts are the only evidence in the record and clearly apply to the lawsuit. The plaintiff argued in response that the arbitration agreements are substantively and procedurally unconscionable and the product of undue influence, all of which make them unenforceable. Defendants responded that this is a question for an arbitrator to decide.

The Fifth started with this last issue. It did not agree. Under caselaw, arbitrability is an issue for the courts unless the parties have specifically agreed otherwise, it wrote. The plaintiff is not challenging the validity of the contracts as a whole -- indeed, she is relying on them in the breach of contract count.

Next, the court examined the plaintiffs’ arguments to invalidate the arbitration agreements. Under the Federal Arbitration Act, arbitration agreements are enforceable except “on such grounds that exist at law or in equity for the revocation of any contract.” This includes the plaintiff’s claims of unconscionability and undue influence. However, the court found that generally, there was no support in the record for the plaintiff’s arguments. To support the claims of unconscionability, the plaintiff made allegations in her complaint about Elliott’s age and the relationship between her and the Suesses, but did not provide any evidence, the court said. Nor do the allegations in the complaint, even if taken as true, support those defenses, it added. Under caselaw, advanced age is not enough in itself to show that a person is incapable of signing contracts, the court noted, and there is nothing per se procedurally unconscionable about having a relative for a broker.

Similarly, the Fifth found no evidence in the record to support the undue influence claim, aside from unsubstantiated claims about the familial relationship between Elliott and the Suesses. The plaintiff also made claims for substantive unconscionability, saying the $1,575 cost of arbitration is too high and the forum is biased. Again, the Fifth found, these claims are not supported by sufficient evidence in the record. It also dismissed a claim that waiving judicial review is inherently unconscionable, noting that this is directly contradicted by the FAA. For those reasons, the Fifth found that the trial court should not have declined to compel arbitration without an evidentiary hearing. It reversed that decision and remanded it to the trial court for further proceedings -- including an evidentiary hearing, the Fifth said, if the plaintiff requests one.

Continue reading " Fifth District Reverses Decision to Deny Arbitration Clause in Fiduciary Duty Case " »

A fine balance exists between consumer laws which the goverment believes protect consumers from scams and interfering with the free market and access to justice. Credit repair organizations which take money in advance can perform a valuable service to help consumers get refinancing but many unscrupulous credit repair outfits simply charge a large fee in advance and then deliver little or no service. Federal law and many state laws forbid credit repair outfits to take money in advance but exempt lawyers. Our firm has prosecuted and defended class actions and Attorney General actions involving credit repair outfits who take money in advance.

Due to so many credit repair scams in that state for mortgage foreclosure modification services California passed a law forbidding lawyers for taking money in advance for foreclosure services, the New York Times reports.

The article states:

“Consumers just don’t know what is going on,” said Walter Hackett, a former banker who is now a lawyer for a nonprofit service in Riverside. “They get a piece of paper saying they are going to lose their homes and they freak out.” The problem for lawyers is that even a simple modification, in which the loan is restructured so the borrower can afford the monthly payments, is a marathon, putting off their payday for months if not years. If the bank refuses to come to terms, the client may file for bankruptcy. Then the lawyer will never be paid. Alice M. Graham, a lawyer in Marina del Rey, said a homeowner in default recently tried to hire her. When Ms. Graham declined, the despairing owner begged her in vain to accept payments under the table. “The banks have all the lawyers they want, and the consumers are helpless,” Ms. Graham said.

To read the full article click here.

Our Chicago business litigation lawyers have defended credit repair organizations in defending class actions and Attorney General actions brought against credit repair organizations who accept money in advance for such services.

DiTommaso-Lubin is a full-service litigation and business law firm based in the Chicagoland area that focuses on handling all of the legal issues confronting businesses in today's world. We represent plaintiffs and defendants, LLC's and corporations, and we have experience representing clients in matters ranging from shareholder disputes to breach of contract claims. Our Chicago business attorneys have more than twenty-five years of experience in business litigation and have won favorable verdicts in "bet the business" lawsuits. DiTommaso-Lubin has Chicago and Schaumburg business litigation lawyers who can identify and understand the legal issues in a dispute, no matter how complex they may be. We will use our resources and knowledge to formulate a plan of action that will help further your interests, resolve your problems, and get you back to growing your business. If your business is being sued or you are seeking preventative legal advice, call DiTommaso-Lubin now. For a consultation, call 1-877-990-4990 or send us an email through our website.

Supreme Court Case Tests Bans On Class-Action Suits November 09, 2010 ... class action could bring potentially millions of dollars for all those consumers improperly charged. But the cell phone contract barred class actions
By Nina Totenberg

Our Oak Park, Illinois consumer rights private law firm handles individual and class action predatory lending, unfair debt collection, lemon law 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. The Chicago consumer rights attorneys at DiTommaso-Lubin are 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 Skokie and Lake Forest consumer attorneys 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 our Chicago consumer lawyers 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 Lombard consumer protection attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

USA Today reports that companies in order to save money in this economic downturn are treating employees as "independent contractors" in name even though the employer is controlling all aspects of their employment in order to skirt federal and state wage and overtime laws and to avoid paying withholdings. If an employer controls all aspects of a worker's terms of employment it cannot legally call them indepedent contractors and avoid the requirments of wage laws.

The article reports that this practice is growing and that lawsuits and government actions to prevent it are also on the rise. The article states:

Companies are increasingly using contractors to meet peaks in demand and complete short-term projects. The trend intensified in the recession as firms cut staff. The portion of contingent workers in the labor force is up to about 10% from 8% five years ago, Asin says.

Using these contingent workers cuts labor costs about 30%, Labor says, as employers avoid paying unemployment taxes, workers' compensation, health care and other benefits.

About 62% of employers said at least some of their workers are misclassified, according to a September survey by SIA. Labor estimates misclassification cut federal revenue by $3.4 billion in 2010. The practice is common in construction, trucking and home health care.

The question of whether workers should be labeled employees or contractors largely hinges on whether employers control their activities. A report last week by the National Employment Law Project concluded port trucking firms misclassify most of their workers.

To read this article in full click here.

Continue reading " USA Today Reports: "States, feds crack down on firms using 'contract workers'" " »

Elizabeth Warren the head of the new Federal Consumer Protection Agency sat down with Michelle Singletary the Washington Post to explain the first goal of the new agency. Warren told Singletary the the Ageny's first initiative would be to ensure that banks and finance companies compete on an even playing field on the interest rates and other terms they offer consumers rather than hiding those terms in a thicket of legalese. If pricing for financial products is clearly disclosed then more consumers will know what they are purchasing and will not get caught unawares by a teaser loan rate that suddently spikes making it impossible for them to pay their mortage or credit card bills. This will also encourage that banks and finance companies begin to compete more on pricing.

The article states:

But right now, Warren says her focus is on helping consumers understand how much they are paying for debt on everything from credit cards to mortgages. At a recent conference held by the Consumer Federation of America, Warren said the bureau's initial goal isn't to impose a series of "thou-shalt-not rules." Instead, she said that first on the agenda is providing consumers with better and shorter credit disclosures. Although this goal may sound so simple, it has the potential to greatly reduce the financial burden for people, because they don't fully comprehend how much their debt is really going to cost them. "There are a lot of financial institutions that make their money by keeping products confusing so the price isn't clear until it's way too late," Warren told me. "They make money by concealing risk, which means that people can't compare the products head to head."

You can read the full Washington Post article by clicking here.

Our Waukegan and Chicago, Illinois consumer rights private law firm handles individual and class action predatory lending, unfair debt collection, lemon law 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. The Chicago consumer lawyers at DiTommaso-Lubin are 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 Wheaton, Warrenville and Joliet consumer attorneys 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 our Chicago consumer lawyers 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 Evanston consumer protection attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

Our Oak Brook, Ill. shareholder dispute attorneys and Chicago business law lawyers took note of a recent appeals court decision in a heavily disputed case involving a family business. In Santella v. Kolton and Food Groupie Inc., Nos. 1-08-1329, 08-1357 & 08-1847 consolidated (Ill. 1st July 31, 2009), Rick Santella accused his sister, Mary Kolton, and her husband William of undermining the family’s business to enrich themselves once they became majority shareholders. The business is Food Groupie, Inc., which markets and sells use of anthropomorphic food characters and educational products that promote healthy eating. According to Santella, the intellectual property is the collective work of the family.

When Food Groupie was originally formed in 1987, Santella held a 35% interest; Mary and William Kolton held 25% each; and a non-party, their brother Ron Santella, held 15%. All four were named directors. In 1988, the plaintiff bought Ron Santella’s interest, giving him a 50% interest in the corporation to match the Koltons’ combined 50%. Shortly afterward, plaintiff transferred 1% of his interest to Mary Kolton, with the understanding that William Kolton would transfer his 25% to Mary, giving her a majority 51% interest with the idea that Food Groupie would be more successful if it was known as a woman-owned company. In exchange for this transfer, Santella claims, the parties executed an agreement that company decisions would be made only by a unanimous vote.

The business ran without incident until 2002. During that time, Santella claims Food Groupie made a profit each year between 1992 and 2001 and the three shareholders always unanimously approved compensation. But in 2002, Santella alleges that the Koltons called a shareholders’ meeting without him or Ron Santella, and gave themselves salary increases, bonuses and 401(k) contributions. This cost Food Groupie a total of 45% of gross company sales, despite a profit that year of only $15,000. The alleged ruse was repeated in 2003 and 2004. As a result, Santella claims, he was paid only one dividend of $1,470 during that time, rather than the $28,808 he believes he was entitled to as a 49% shareholder.

When he confronted his sister about this in 2003, he says she froze him out of the business decisions, changed the locks on the office and was interested only in buying him out. He further claims she usurped Food Groupie’s intellectual property by trademarking characters in her own name, and inappropriately licensed the company’s intellectual property without his consent. Finally, he claims the Koltons held a secret shareholder meeting in 2004 at which they voted to replace him with William’s brother, Anthony Kolton. He sued the Koltons, individually and as a shareholder derivative claim, for breach of the shareholder agreement, breach of fiduciary duty, usurpation of corporate opportunities and violations of the Illinois Business Corporations Act.

In 2005, that lawsuit resulted in the court’s appointment of John Ashendon as custodian of Food Groupie. In 2008, Santella filed an emergency motion to stop what he claimed was his sister’s plan to liquidate the company and move its misappropriated intellectual property to a similar business called Healthypalooza. He also alleged that the couple had continued to pay themselves inappropriately high salaries and commissions, and use the company’s profits for their personal legal defense. He sought to remove the Koltons as officers and enjoin them from using the company’s assets or competing with it, among other things. The court eventually found for Santella on some issues, removing the Koltons and ordering them to return the $144,019 in commissions they had been paid in 2005, 2005 and 2007. It said the court would appoint new officers and directors. It did not say any of these remedies were interlocutory or time limited.

The Koltons filed an interlocutory appeal in 2008, but failed to move to stay the repayment order or actually repay the $144,019. The trial court found them in contempt and ordered them to pay a fine for every day they were late. They eventually paid back the $144,019, but not the roughly $20,000 or so in fines.

On appeal, the Koltons argued that the relief granted to Santella was not supported by sufficient evidence or proof. Specifically, they argued that the Business Corporations Act requires a plaintiff like Santella to prove his claims of improper conduct before the court may order return of the allegedly improper bonuses or their removal as corporate officers. For that reason, they said, the court orders must be reversed. Santella made several arguments against the appeal, most notably that the appeals court lacked subject matter jurisdiction over the non-financial claims. The defendants filed their appeal pursuant to Rule 307(a)(1), which applies to appeals concerning injunctions, and Santella argued that the trial court’s orders removing and replacing directors and officers were not injunctions.

The First agreed with this, saying it lacked subject matter jurisdiction over those orders because they were not direct orders to the Koltons “to do a particular thing, or to refrain from doing a particular thing.” In fact, it took the analysis a step further and examined whether it had jurisdiction over the repayment order. That order was an injunction, the First wrote, but it also must be interlocutory to fall under Rule 307(a)(1). If it was a permanent order, it was outside the scope of the rule. The appeals court found that it was a permanent order, because it did not preserve the status quo. In fact, the court noted, the trial judge had specifically said so when she made her contempt ruling. The trial court had also made conclusions about the rights of the parties and had not time-limited the order. For those reasons, the First found that it also lacked subject matter jurisdiction over the repayment order, and dismissed the appeal entirely. The opinion noted that appellants may still seek a finding from the trial court under Rule 304(a).

Continue reading " Court Orders Managing Disputed Family Business Not Appealable as Injunctions, First District Rules " »

Any business owner should keep abreast of laws and court rulings that can affect the way they conduct their operation and interact with employees. The law constantly evolves, and that is why our lawyers are vigilant in tracking changes that affect our clients. Citadel Investment Group v Teza Technologies is one such ruling that provides clarity regarding noncompetition agreements between employees and employers.

In this case, Defendants Malyshev and Kohlmeier worked for Plaintiff Citadel Investment Group until February of 2009, when they resigned. When Malyshev and Kohlmeier were initially hired by Citadel, they each signed a nondisclosure agreement and an employment agreement containing a noncompetition clause. The noncompetition clauses contained language giving Citadel the discretion to set the length of the restrictive period at zero, three, six, or nine months. Citadel elected for a nine month restricted period for both Malyshev and Kohlmeier upon their resignation.

Malyshev and Kohlmeier formed Defendant Teza Technologies two months after leaving Plaintiff Citadel in April of 2009. When Citadel discovered the existence of Teza and its status as an entity performing similar high frequency trading in July of 2009, the present legal proceedings began. Plaintiffs initially sought a preliminary injunction against Defendants based upon the noncompetition agreements signed by Malyshev and Kohlmeier. This injunction was granted in October 2009 for relief through November of 2009. The trial court made its decision based upon the agreed upon nine month period contained in the noncompete and calculated the time from February of 2009 when Malyshev and Kohlmeier resigned.

Citadel appealed the decision, and asked the appellate court to grant the injunction for nine months from October until July of 2010. Citadel argued that they had not received the benefit of the restricted period prior to the preliminary injunction being entered, and the Court should adjust the start date of the restricted period accordingly. The Court did not find the Plaintiff's argument persuasive and denied the appeal because the plain language of the agreements signed by Malyshev and Kohlmeier contained no provision allowing for an extension of time or modification of the commencement date. Thus, the restrictive covenant properly ended in November as was required by the agreement signed by both parties.

Citadel Investment Group v. Teza Technologies serves as a warning to business owners who utilize noncompetition agreements and a potential boon to employees who sign them. Whether you are a business already in a dispute over a noncompetition agreement or a former employee seeking employment with a new company in the same field, you should contact a Chicago business litigation attorney to be apprised of your rights.

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As Chicago corporate dispute lawyers, we were interested to see a ruling in a dispute between former law partners. In Bernstein and Grazian, P.C. v. Grazian and Volpe, P.C., No. 1-09-0149 (Ill. 1st June 25, 2010), both firms, and the individual partners, accused each other of breach of contract and breach of fiduciary duty in a dispute about how to allocate payment on cases that were pending during the breakup of their first firm. At trial, the trial court found no breach of any duty. It also found that quantum meruit was the correct standard to apply and awarded Bernstein 10 percent of attorney fees generated from those cases by Grazian and Volpe. Both Bernstein and Grazian appealed this ruling, and the First District Court of Appeal made no changes except to vacate the 10 percent fees awarded to Bernstein.

Isadore Bernstein hired John Grazian in the 1990s as an independent contractor to Bernstein’s law practice. They eventually formed the law firm of Bernstein & Grazian, P.C., which focused its practice on personal injury and workers’ compensation cases. Bernstein was president and 70 percent owner, who provided the office, cases and money; Grazian was a salaried employee and vice president. They later hired Richard Volpe as an employee to handle workers’ compensation cases. In January of 2003, they agreed to change the firm’s structure and compensation scheme. The agreement said the three would split the office overhead equally. Bernstein and Volpe were to split expenses of workers’ compensation cases equally and split the fees equally. Similarly, Bernstein and Grazian were to equally split expenses and fees for personal injury cases.

In 2005, Grazian and Volpe decided to leave and form their own firm. The three attorneys agreed that Grazian & Volpe would take over Bernstein & Grazian’s open cases, but they disagreed on how they were to split the fees. Bernstein testified that he was promised 50 percent of the coming fees, but Grazian testified that he offered, and Bernstein accepted, only one-third of the fees. They also disagreed about whether they intended to file forms to substitute attorneys in the open cases before there was a formal separation and exit agreement. Bernstein and his firm sued Grazian, Volpe and their firm, alleging breach of contract and breach of fiduciary duty and demanding an accounting; defendants filed a counterclaim for breach of fiduciary duty.

At a bench trial, the court dismissed every claim but breach of contract. It found that the agreement to dissolve the firm was the controlling contract. But since that document was silent on compensation, the court found that Bernstein should receive compensation under quantum meruit -- that is, he should be paid according to the value of his actual services. Noting that it was difficult to determine this from the record, the trial court nonetheless awarded Bernstein 10 percent of the fees. Bernstein and Grazian appealed. Volpe is not a party to the appeal. Because Bernstein died during the pendency of the case, his estate was the appellant.

The appeals court started by dismissing Bernstein’s entire appeal for lack of jurisdiction. Bernstein filed in trial court to dismiss his appeal about two months after filing it. This was granted. About six weeks later, he moved in the appeals court to vacate that dismissal and reinstate the appeal, saying his attorney had made a mistake. This was granted as well. But according to the First, it had no authority to grant that motion, because an order dismissing an appeal is final under Physicians Insurance Exchange v. Jennings, 316 Ill. App. 3d 443, 456 (2000) and Rickard v. Pozdal, 31 Ill. App. 3d 542 (1975). Thus, Bernstein’s entire appeal was dismissed.

On cross-appeal, Grazian argued that the trial court was improper in finding no breach of fiduciary duty by Bernstein. Bernstein had formed a separate law firm in 2004, after the revenue-splitting agreement but before Grazian & Volpe was formed. Isadore M. Bernstein & Associates P.C. (IMB) existed to refer medical malpractice claims to other attorneys. Bernstein bought television advertisement time for both firms, but claimed he paid for the IMB commercial himself. Grazian claimed he had never been told about IMB and its advertisements. The commercials resulted in many new inquiries for both firms, but Bernstein claimed he did not spend a lot of extra time or firm resources on IMB-related work. Grazian disagreed, testifying that this cost the firm resources but did not generate income for him or Volpe, and caused Bernstein’s fee income to drop dramatically. This was the basis for the breach of fiduciary duty claim.

The First did not accept Grazian’s argument. The standard for overturning the trial court was “the manifest weight of the evidence,” it noted -- and much of the evidence is unclear because Bernstein and Grazian had sharply conflicting accounts of this situation. What evidence there is does not lead to a conclusion that Bernstein clearly breached his fiduciary duty, the court said. Thus, it could not find that the trial court’s finding on fiduciary duty was against the manifest weight of the evidence.

Grazian had more luck with his argument that while quantum meruit was proper, it should have led to an award of nothing rather than of 10 percent of the attorney fees, because Bernstein provided no evidence required for recovery. Under caselaw including Hayes Mechanical, Inc. v. First Industrial, L.P., 351 Ill. App. 3d 1, 9 (2004), the burden is on Bernstein to show that he provided services of reasonable value to the defendants, and at least some evidence to prove that value. The First found that Bernstein had never provided any such evidence; testimony at trial showed that he did not do several major duties of an attorney, such as going to court, on those cases. In fact, he admitted that his fee generation dropped sharply. Having done “something” is not enough by itself to support a quantum meruit award, the First wrote. Therefore, it vacated the trial court’s 10 percent award to Bernstein.

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Our Illinois legal malpractice attorneys were interested to see a recent decision allowing corporate litigants to assign their claims to former shareholders after a merger. Learning Curve International, Inc. v. Seyfarth Shaw LLP, No. 1-08-0985 (Ill. 1st June 18, 2009). In the underlying case, PlayWood Toys sued Learning Curve International for misappropriation of trade secrets. During that litigation, Learning Curve merged with RC2 Brands. Learning Curve settled that litigation, but then sued its attorneys in the matter and their law firms for legal malpractice. This claim gave rise to the dispute over assignment of claims.

Attorneys Dean A. Dickie and Roger L. Price represented Learning Curve in the PlayWood litigation, which began in 1995. Both attorneys were at the law firm of D’Ancona & Pflaum at the time, but due to personnel moves and mergers, Dickie was at Dykema Gossett and Price was at Seyfarth Shaw during the instant case. In April of 1998, PlayWood offered to settle its trade secrets claim for $350,000; Learning Curve counteroffered $225,000. There was no deal. A jury verdict reached in 2000 held Learning Curve liable for misappropriating the trade secret, but the judge granted a post-trial motion from Learning Curve for judgment notwithstanding the verdict, saying PlayWood had not proven the information at issue was a trade secret. PlayWood appealed to the Seventh Circuit.

While the appeal was pending, Learning Curve merged with RC2. As part of the merger, it agreed to indemnify RC2 from liability related to the PlayWood litigation. Learning Curve remained a separate corporation for tax purposes, but without separate operations. Five months later, the Seventh Circuit ruled, making Learning Curve liable for $6 million in compensatory damages and requiring a new trial on exemplary damages. Rather than face trial, RC2 settled with PlayWood for nearly $12 million, which came from an escrow account set aside for this purpose. RC2 and Learning Curve then agreed in writing to pursue a legal malpractice claim against the attorneys in the original case. This agreement gave former Learning Curve shareholders 90% of any proceeds, but explicitly said nothing in the agreement should be interpreted as an assignment of the claim or its proceeds.

RC2 and Learning Curve then sued Dickie, Price and all of their current and former law firms for malpractice, claiming they negligently failed to advise Learning Curve to settle for $350,000 and negligently failed to explain that they could be liable for millions, including exemplary damages. They sought the cost of the $12 million settlement and all attorney fees paid after the $350,000 settlement offer. The defendants moved for summary judgment on several grounds, saying the claim was not timely; Illinois law does not allow legal malpractice claims to be assigned; and that Learning Curve had not suffered the alleged damages because RC2 paid the settlement. The trial court granted summary judgment on the assignment of claim grounds and ruled that Learning Curve had no right to sue for any costs incurred after the merger. Learning Curve appealed.

The First District started with the issue of the alleged assignment of the claim. Illinois law generally forbids assigning legal malpractice claims, it wrote, and it looks at intent when judging whether a claim has been assigned. That means the disclaimer in the agreement between RC2 and former Learning Curve shareholders was not relevant. However, Illinois and foreign courts have allowed assignment of a malpractice claim in certain circumstances where many interests have passed from one party to another, including, in other states, as part of the transfer of assets in a merger. Because many assets are being transferred in this case, the court wrote, assigning the malpractice claim does not violate public policy. It reversed the trial court’s judgment on that count.

It also rejected the defendants’ argument that the two-year statute of limitations for legal malpractice in Illinois barred plaintiffs’ claim. The defendants argued that the clock started running after the bills came for the original trial in 200, in which Learning Curve was found liable. However, the court wrote, the judge in that trial granted judgment notwithstanding the verdict, leaving Learning Curve liable only for its attorney fees. It was not obvious then that the defendants’ advice was bad. Instead, the First District wrote, the clock started running on this claim after the Seventh Circuit’s verdict. Because this claim was filed within the two-year period from that date, the court wrote, it is not time-barred.

Learning Curve’s luck ran out when the First District considered whether it had any damages from the alleged malpractice. The trial court found that it did not because RC2 paid all post-merger costs, including the judgment from the Seventh Circuit and attorney fees, and reimbursed itself from the escrow account. The appeals court agreed, saying those payments did not affect Learning Curve’s assets. Furthermore, an indemnity clause in the merger agreement eliminated Learning Curve’s losses from those sources. However, the appeals court did say that Learning Curve’s former shareholders, who actually suffered the alleged loss, should substitute as the real parties in interest on the post-merger parts of the claim, writing that “if the defendants committed malpractice, the merger of the corporate client should not cause the claim to vanish.” Thus, the case was reversed and remanded to trial court.

Continue reading " Summary Judgment Inappropriate in Dispute Over Assignment of Legal Malpractice Claim " »