Chicago Business Litigation Lawyer Blog

Every business has employees, and as business litigators, the attorneys at DiTommaso-Lubin pride ourselves on being knowledgeable about all the areas of law that affect our clients, including employment laws. Our Orland Park business attorneys recently discovered a case that has an impact on companies who utilize employment non-competition agreements with their employees.

Reliable Fire Equipment Company v. Arredondo pits an employer against two former employees, Defendants Arredondo and Garcia, who worked as fire alarm system salesmen for Plaintiff. Each Defendant signed an employment agreement where Defendant's would allegedly earn commissions of varying percentages of the gross profits on items or systems sold. After working for Plaintiff for several years, Defendants created Defendant High Rise Security Systems, LLC., which was allegedly a competitor to Plaintiff's business. Plaintiff eventually became aware that Defendants were starting an alleged competitor company, and asked Defendants if in fact they had created a fire alarm business. Defendant Arredondo allegedly denied that he was starting such a business, and resigned shortly afterward, with Defendant Garcia tendering his resignation two weeks after Arredondo.

Plaintiff then filed suit alleging breach of the duty of fidelity and loyalty, conspiracy to compete against Plaintiff and misappropriation of confidential information, tortious interference of prospective economic advantage, breach of the employment agreements, and unjust enrichment. The trial court held that the employment agreements were unenforceable because of unreasonable geographic and solicitation restrictions and the fact that language of the agreements was unclear. A trial on the issues unrelated to the employment agreement ensued, and Defendants successfully moved for a directed verdict because there was insufficient evidence that Defendants competed with Plaintiffs prior to Arredondo's resignation.

Plaintiff then appealed the trial court's ruling that the employment agreements in question were unenforceable and the directed jury verdict. The Appellate Court affirmed the trial court's directed verdict, stating that the lower court had properly weighed the evidence in finding a total lack of competent evidence. The Court then analyzed the restrictive covenants under the legitimate business interest test and found that the geographic restrictions were not reasonable and therefore the trial court did not err in ruling that the restrictive covenants were unenforceable.

Reliable Fire Equipment Company v. Arredondo illustrates why it is so important for business owners to keep an eye on their employees, and serves as a warning for companies wanting to sue former employees based upon non-competition agreements. Furthermore, the case shows that courts frown upon the use of vague language in such agreements, and it is always in your best interests to keep the terms of employment agreements reasonable.

Continue reading "Business Owners Beware, Make Sure Your Employment Agreements are Clearly Written and Reasonable" »

DiTommaso-Lubin represents clients all over the Chicago-land area, and because Chicago is a growing metropolis, land comes at a premium. This means that there is constant property development going on all over our fair city, and with that development comes unique legal problems. Water Tower Realty Company v. Fordham is a case that was decided in the Appellate Court of Illinois, First District, Third Division that addresses some of the problems that arise when companies perform construction in close proximity to neighboring businesses.

In Water Tower Realty Company v. Fordham, Defendant Fordham constructed a building on a parcel of land in Chicago, and prior to its construction, Defendant agreed to indemnify Plaintiff Water Tower for losses suffered due to the erection of the edifice. Five years after the building was finished, Plaintiff filed suit alleging that during construction Defendant had “so used its property as to make it impossible to lease” an adjacent property. Plaintiff claimed that it had lost over $75,000 in rental business as a result and that Defendant had refused to indemnify Plaintiff for this loss. Plaintiff filed for a dismissal of the action, and the trial court dismissed the claims because they were barred by the applicable statute of limitations as set forth in 735 ILCS 2-619(a)(5). Defendant then appealed the trial court's dismissal.

The Appellate Court analyzed whether the trial court was correct in applying the four year statutory period or whether a ten year period was appropriate. The Court found that the nature of the injury was determinative in making such a decision, with the four year term applying if the injury was due to a construction-related activity, and the ten year term applying if the harm was caused by a breach of contract. In reversing the lower court's dismissal, the Appellate Court concluded that the appropriate statute of limitations was the ten year term because the Plaintiff's injury was caused by Defendant's failure to honor the indemnity agreement. The Court went on to hold that the agreement's indemnity provisions applied to both first party and third party claims, and that it contained no language that could hold Defendant's agents personally liable for Plaintiff's damages.

Continue reading "Appellate Court Applies 10 Year Statute of Limitations in Construction Indemnity Case" »

DiTommaso-Lubin represents clients from many industries who operate all kinds of businesses, including both franchisors and franchisees. Our Aurora business attorneys came across an appellate decision from the Fourth District here in Illinois that involves a dispute that arose out of a franchise agreement between a heavy-duty truck manufacturer and a truck dealer.

Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp. is a disagreement that came about after the two parties entered into a sales and service agreement where Plaintiff Crossroads had the right to purchase Sterling Trucks and vehicle parts from Defendants and Defendants “reserved the right to discontinue at any time the manufacture or sale” of their parts or change the design or specs of any products without prior notice to Plaintiff. Several years after entering the agreement, Defendants allegedly announced that they were discontinuing the production of Sterling trucks and that Detroit Diesel Corporation (the truck's engine manufacturer) would cease accepting orders as well. Defendant sent written notice of these decisions to Plaintiffs. Defendants decided to discontinue manufacture of the Sterling vehicles allegedly because they were duplicative of other vehicles manufactured by Sterling's parent company.

In response to this notice, Plaintiff filed suit alleging violations of the Motor Vehicle Franchise Act, fraud, and tortious interference with contract. Defendants filed a motion to dismiss on all counts, which was granted in part by the trial court because Defendants' discontinuance and re-branding of the Sterling brand constituted good cause for terminating the contract. Plaintiff then filed an interlocutory appeal for the trial court's partial dismissal.

The Appellate Court affirmed the trial court's dismissal of the violations of sections 4(d)(1) of the Franchise Act because Plaintiffs failed to allege specific facts supporting each element of violation under the Act and instead merely made conclusory allegations for each violation. The Court also found that the allegations under section 9 of the Act were improperly plead, as Plaintiff's allegations contained only conclusions without the specific facts required by the Act. The Court then upheld the lower court's ruling as to the allegations under section 9.5 of the Act because the sales and service agreement remained in effect and had not been terminated. Next the Court found the dismissal of the fraud claims to be proper because Plaintiff failed to allege a misrepresentation of a present fact and dismissed the claims under section 4(b) of the act because Defendant's conduct was neither arbitrary nor in bad faith. Finally, the Court did not address the alleged 4(d)(6) violations due to a lack of subject-matter jurisdiction, as such violations are within the purview of the Review Board under section 12(d) of the Act.

Continue reading "Illinois Appellate Court Dismisses Lawsuit Between Truck Manufacturer and Franchisee" »

Workers' compensation insurance is a necessary part of doing business for many companies, so the attorneys at DiTommaso-Lubin are always on the lookout for emerging legal issues in that area. Our Naperville business attorneys recently discovered a decision rendered by the Appellate Court of Illinois that is significant for current and potential clients who have workers' compensation insurance agreements that contain an arbitration clause.

All-American Roofing, Inc. v. Zurich American Insurance Company pits Plaintiff All-American Roofing against its Defendant insurer, Zurich American in a lawsuit that arose from alleged unpaid deductibles and retrospective insurance premiums. The five-year insurance agreement was based upon retrospectively rated premiums that required Plaintiff to reimburse Defendant after the end of a policy year for claims that arose during that year. After the fourth year, the policy exchanged the retrospectively rated premiums for a larger deductible. The dispute began when Defendant summoned Plaintiff to arbitration regarding the aforementioned unpaid sums pursuant to a mandatory arbitration clause contained within the parties' agreement. In response to the arbitration summons, All-American Roofing filed for declaratory judgment along with claims for breach of contract, fraud, and related causes of action. Plaintiff requested that the trial court declare that the mandatory arbitration clause was unenforceable and sought damages for their other claims. The trial court stayed the arbitration, dismissed most of Plaintiffs claims through summary judgment and ordered the parties to arbitrate the remaining issues. Plaintiff then appealed the trial court's rulings regarding the arbitration clause, contract, and fraud claims.

On appeal, Plaintiff argued that the arbitration clause was added to their policy after the first year of coverage and that the clause constituted a material alteration to the policy's coverage. Furthermore, Plaintiff argued that the Illinois Insurance Code required Defendant to give notice that it was not renewing the original coverage. Because Defendant failed to give such notice, the arbitration clause did not legally take effect. The Appellate Court disagreed, stating that the addition of an arbitration clause did not constitute a change in coverage, and cited the plain language of the statute for their reasoning. The Court went on to hold that the agreements and subsequent addenda to it for the first two years were valid because the parties lawfully entered into the agreements and there was sufficient consideration on both sides. The Court also upheld the trial courts granting of Defendant's motion for summary judgment on Plaintiff's fraud claim because there was not sufficient evidence in the record of fraud nor had Plaintiffs identified any material issue regarding Defendant's alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The Court held that the arbitration clause was not operative for the final two year of the agreement because Plaintiffs never signed the amended policy documents for those years. The Appellate Court reversed the trial court on this issue because they disagreed with the trial court's ruling that Plaintiff's payment and acceptance of coverage signified acceptance of the new terms.

All-American Roofing, Inc. v. Zurich American Insurance Company provides a valuable lesson to business owners who utilize arbitration clauses in their contracts. Namely, this case tells us to read the fine print in any contract before signing it, as you may be getting more (or less, depending on your point of view) than you originally bargained for.

Continue reading "Appellate Court Rules that Adding an Arbitration Clause to an Insurance Agreement Does Not Constitute a Change in Coverage under Illinois Law" »

Earlier this year, the Appellate Court of Illinois handed down an opinion that has implications for businesses with leased premises. Our Aurora business attorneys found Bright Horizons Children's Centers LLC v. Riverway Midwest LLC, which is a dispute regarding a commercial lease that was initially filed in Cook County.

Bright Horizons is a company that operates day care facilities across the state of Illinois. The company entered into a ten year commercial lease agreement with Riverway for a property in Rosemont, Illinois. The lease agreement contained restrictive language allowed for the building to only be used for a child-care center. The agreement also contained a relocation provision which gave Riverway the right to relocate Bright Horizons, upon 180 day written notice, to a different property of equal quantity and quality to the original premises. The dispute between these two parties arose when Riverway sought to invoke the relocation clause less than one year into the lease.

Riverway attempted to exercise the relocation provision on three occasions. The first attempt was unsuccessful because the alternative premises allegedly presented to Bright Horizons did not meet the requirements of the lease agreement. Bright Horizons accepted the second space offered by Riverway, but Riverway withdrew their notice before renovating the new facilities to meet the requirements of the lease. Riverway then proposed a third relocation premises, and allegedly informed Bright Horizons that if they were unable to agree on an alternative space, Riverway would terminate the lease in 180 days from the date of the notice. This third property allegedly ran afoul of state licensing standards for child care facilities and the Illinois Administrative Code. Bright Horizons informed Riverway that the third property did not meet Illinois' licensing standards and could not be legally used as a child care facility. In response, Riverway informed Bright Horizons that they were in default of the lease and that Bright Horizons could cure their default by relocating to the third alternative premises.

Bright Horizons then filed for declaratory judgment requesting that the trial court find: 1) that they were not in breach of the lease, 2) that Riverway could not terminate the lease, and 3) that Riverway had failed to properly exercise the relocation clause of the lease agreement. Bright Horizons then filed for summary judgment on these issues, which was granted by the trial court. Riverway then appealed the trial court's ruling. On appeal the Appellate Court agreed with the trial court's grant of summary judgment in favor of Bright Horizons. In so ruling, the Court held that the lease allowed for one permitted use of the premises and required that Bright Horizons comply with all laws and regulations, including the state child-care licensing standards. The Court held that Bright Horizons' relocation to the proffered space would violate state regulations and cause Bright Horizons to be in breach of the lease due to their inability to operate a child-care. As such, the Court affirmed the ruling of the trial court granting summary judgment in favor of Bright Horizons.

Continue reading "llinois Appellate Court Rules that a Relocation Provision in a Commercial Lease Must Abide by State Regulations" »

For many business owners, they operate their companies with the hopes that they will continue to be successful ventures long after they are gone. However, both low level and senior personnel eventually move on, and businesses may have obligations to their surviving family members. DiTommaso-Lubin is familiar with such agreements, and often times companies may not wish to honor those obligations after employees are no longer working for the company. Pielet v. Pielet is one case discovered by our Crystal Lake business litigation lawyers that addresses that very issue.

In Pielet v. Pielet, Arthur Pielet allegedly entered into a consulting agreement with Defendants that provided him lifelong monthly payments in exchange for his consulting services for Defendants scrap metal business, and should he pass on, those payments were to continue and be paid to his wife until her death. Arthur Pielet eventually died, and Defendants then allegedly ceased making payments to his widow, who filed suit alleging a breach of contract and successor liability among other causes of action. Plaintiff successfully filed a motion for summary judgment, and Defendants appealed the trial court's decision.

On appeal, Plaintiff argued that Defendant PBS One, a successor in interest to Pielet Corp. (the company who was originally obligated under the consulting agreement), was liable under the agreement because they had entered into a purchase and assignment agreement with Pielet Corp. In response, PBS One argued that a novation had occurred whereby Pielet LP had substituted for Pielet Corp. in the consulting agreement, which absolved PBS One of liability. PBS One supported their claims with deposition testimony that, in the absence of providing a defense, at least raised an issue of material fact as to the existence of the novation. Additionally, PBS One argued that because the company had dissolved four years prior to the cessation of payments (and the accrual of Plaintiff's claims), the applicable Illinois Survival Statute prevented Plaintiff's claim.

The Appellate Court began with its analysis of the Survival Statute, and found that the statute applies to “rights”, “liabilities”, and “causes of action.” Because the case at bar concerned Plaintiff's “right” to payment and Defendants' “liability” to pay, and Plaintiff raised her claim to payment within the five-year period allowed under the statute, her claim was allowed under the law. The Court went on to discuss Defendant's second argument regarding the existence of a novation that would place liability elsewhere. The Court did not make a finding of a novation, but the facts indicated that a novation could be inferred at two different points in time. Thus, the Court concluded that a triable fact question existed as to whether a novation occurred, and if there was a novation, at what point in time did it occur. In so holding, the Court reversed the trial court's grant of summary judgment on all of the appealed causes of action, and remanded the case.

Continue reading "Appellate Court Overturns Grant of Summary Judgment in Successor Liability Case" »

There are hundreds of new cases filed in Illinois courts every day, and many of those cases involve business disputes. At DiTommaso-Lubin, we pride ourselves on staying on top of new court filings so that we know of changes in the law as they happen. Our Waukegan business attorneys just found a decision rendered by the Appellate Court of Illinois that provides some useful information for our business clients.

Zahl v. Krupa is a dispute between investors in a fund allegedly run by a company and the directors of that company. Plaintiffs alleged that they were approached by Defendant Krupa, President of Jones & Brown Company, Inc., who solicited money to be invested in a fund only available to the officers and directors (and their family members) of the company. There were two agreements allegedly written on company letterhead that set out the terms of the investments, whereupon Plaintiffs would invest between $100,000 and $160,000 each and receive an 11.1% return guaranteed by Jones & Brown. Plaintiffs each allegedly signed an agreement with Defendant Krupa and gave him the funds requested. There was no other written documentation regarding the investments or the agreements. Plaintiffs allegedly never got the return on their investment nor did they get their money back.

Plaintiffs then filed suit against Krupa, the other officers of Jones & Brown, and the directors of the business. Plaintiffs sued for breach of contract, fraud, and negligent hiring, supervision, and retention. The breach of contract and fraud causes of action were reliant upon the alleged assertion that Defendant Krupa, in soliciting Plaintiffs, was acting as an agent or apparent agent of Jones & Brown. The remaining causes of action sought to hold Defendants liable for Defendant Krupa's deception because they knew or should have known that he was untrustworthy.

Through discovery, the depositions of several parties allegedly showed that Defendant Krupa never had actual authority to enter into the investment agreements because the directors neither signed nor authorize the agreements. Testimony also revealed that the investment agreements were allegedly outside the scope of Jones & Brown's normal business as a construction company, which showed that Krupa did not have apparent authority. As a result of these facts, Defendants successfully moved for summary judgment on the breach of contract claim based upon lack of actual and apparent authority. In moving for summary judgment on the fraud claim, Defendants cited Illinois case law holding that directors cannot be held personally liable for fraud unless they personally participated in perpetrating the fraud. As the directors did not sign the agreements or participate in their creation, the court granted summary judgment. Finally, Defendants successfully moved for summary judgment on the negligence claims because they did not know that Krupa had the potential for fraud.

Plaintiffs then appealed the trial court's ruling against them, and the Appellate Court conducted a de novo review of Defendants' motion for summary judgment. The Court agreed with the trial court's findings and held that Defendants were not negligent with respect to Krupa and did not know about his dealings with Plaintiffs. The Court went on to say that there was no reason for Defendants to suspect Krupa of wrongdoing.

In reviewing Zahl v. Krupa, the case serves as a reminder for business investors to carefully examine any investment opportunities and accompanying paperwork to ensure the legitimacy of the investment. Additionally, business owners and directors should keep an eye on their officers and employees to ensure that they do not find themselves defending a lawsuit for their employees' allegedly objectionable actions.

Continue reading "Directors Are Not Liable for the Torts of Employees Unless Personally Involved, but Should Still Keep a Close Watch Over What Corporate Officers are Doing" »

When starting a new business venture, choosing the right partners is one of the most important decisions any company owner will make. Unfortunately, not all partnerships work out, and in some instances that is due to the dishonest machinations of fellow owners. Our Elgin business attorneys recently discovered one such case where one business partner was allegedly defrauded by two other owners in a transaction to jointly purchase and operate a gas station in Tinley Park.

Hassan v. Yusuf pits Plaintiff, a man who thought he was investing in the purchase of a gas station, against his two business partners who were also involved in the deal. Defendants solicited an investment of $120,000 from Plaintiff, equal to their own contributions, to purchase the gas station in question, but allegedly failed to inform Plaintiff that he was only purchasing one-third of the business, and had no claim to the real-estate upon which the station was built. After Plaintiff entered into an oral agreement to purchase the station with Defendants and run the day-to-day operations of the business, Defendants acquired title to the property and conveyed that title to a corporation solely owned by Defendants. The business was profitable at first, but eventually began operating at a loss. Defendants then demanded Plaintiff invest more money in the venture to cover these losses, but Plaintiff had no additional funds to invest, and requested an accounting of the business's financial records and documentation showing his ownership and portion of the losses. Defendants failed to provide said documentation, and Plaintiff ceased working at the station and eventually filed suit.

The Circuit Court of Cook County found that Defendants had defrauded Plaintiff through their misrepresentations regarding the purchase of the business and accompanying real estate. In its judgment, the trial court granted Plaintiff rescission of the contract and damages for the total amount of money he invested in the business. After the trial verdict, Defendants appealed the finding of fraud on the basis that there was not clear and convincing evidence of a misrepresentation that Plaintiff would be an owner of the real estate under their agreement.

The Appellate Court upheld the Circuit Court's decision, finding the record sufficient to support a finding that Defendants misrepresented to the Plaintiff that he was purchasing a one-third interest in the station and accompanying real estate, even though they had no intention of actually doing so. Furthermore, there was clear evidence of a fiduciary relationship between the parties, which gave rise to a claim for fraud by omission when Defendants failed to make explicit to Plaintiff that he was not acquiring an interest in the land. The Court went on to state Plaintiff's reliance upon Defendants' misrepresentations were justifiable, and upheld the trial court's decision to rescind the contract, but reduced the damages award in an amount equal to Plaintiff's share of the profits from the station. The Court did so because giving Plaintiff his share of the profits would be inconsistent with the remedy of rescission, which is supposed to place a party in the same position they would be in had the contract never occurred.

Continue reading "Appellate Court of Illinois Upholds Circuit Court's Rescission of Oral Agreement to Jointly Purchase a Gas Station due to Fraudulent Misrepresentation" »

Most businesses require loans to normalize their income stream and ensure that they have the cash necessary to operate. Some business owners enter into guaranty contracts to get the capital that they need, and in the process become personally liable for the debt of their company. In such instances, disputes often arise when the other party attempts to enforce the guaranty contract to collect on the debt. DiTommaso-Lubin has been involved with contract disputes of all kinds, and our Elgin guaranty contract attorneys recently uncovered a case that illustrates why it is important to draft such contracts carefully and enforce them in a timely manner.

In Riley Acquisitions Inc. v. Drexler, Defendant and her husband initially entered into a guaranty contract and promissory note with a third party to get credit for the two companies owned by the couple. Eventually, the marriage dissolved, and each spouse took control of one of the companies. Defendant's company dissolved shortly thereafter, and Defendant then sent a letter to the third party revoking her personal guaranty. Her ex-husband eventually filed for bankruptcy – discharging his liability under the guaranty in the process, and leaving Defendant as the only guarantor on the loan. The third-party who owned the debt eventually sold and assigned its interest to Plaintiff, who filed suit to collect on the loan. Defendant asserted affirmative defenses that her obligation under the note terminated after her company (the principal on the note) dissolved and that Plaintiff’s claims were barred under the applicable ten-year statute of limitations. Defendant won a directed verdict on the basis of her discharge and statute of limitations defenses, and Plaintiff appealed.

The Appellate Court found that because Defendant’s company dissolved, its obligation on the note terminated five years later under the applicable portion of the Illinois Business Corporation Act of 1983. This effectively terminated Defendant’s liability as well because the guaranty contract did not expressly provide that liability would continue in such a situation. Thus, because Plaintiff filed suit nine years after the dissolution of Defendant's company, the Court upheld the trial court’s verdict on discharge grounds and did not address the statute of limitations issue.

Continue reading "Appellate Court of Illinois Upholds Discharge of Guaranty Contract on Discharge Grounds " »

After hiring someone, businesses expect not only that their new employee will perform his job adequately, but also that he will do no harm to the company or its ability to do business. Employers know that their expectations are not always met by those employees, which is why the use of employment contracts with non-compete clauses are quite common these days. Our Chicago restrictive covenant attorneys just discovered a recent court decision that details a dispute between an employer and an ex-employee regarding one such employment agreement.

In Zep Inc. v. First Aid Corp., Plaintiff Zep employed the individual Defendants as sales representatives for its industrial cleaning products business pursuant to an employment agreement that contained non-disclosure, non-solicitation, and non-compete provisions. During their employment, Defendants had access to Plaintiff's customer lists, supplier lists, pricing information, and other proprietary information. Eventually, a competitor, Defendant First Aid, hired the other named Defendants away from Plaintiff and subsequently solicited Plaintiffs clients and other employees.

As a result, Plaintiff filed suit for breach of contract, trade secret misappropriation under the Illinois Trade Secrets Act (ITSA), and tortious interference with contract. Plaintiff contends that First Aid induced the other Defendants to breach the employment agreements they signed with Plaintiff and that the other Defendants used and disclosed Plaintiffs trade secrets. In response, Defendants filed motions to dismiss the claims, which were granted as to three of the individual defendants due to a lack of personal jurisdiction. The Court found that because three of the individual Defendants were residents of Michigan and Ohio, Plaintiff is located in Georgia, and the employment agreements were signed outside of Illinois, they did not have the requisite minimum contacts to give an Illinois court jurisdiction over the matter. Furthermore, Plaintiff had not alleged that any of Defendants' actions were aimed at Illinois, and neither had their actions caused harm to Plaintiff in Illinois, so specific personal jurisdiction was also improper. The Court denied the remaining motions to dismiss – finding that the non-compete provisions were enforceable because the geographic limitations were reasonable and the non-solicitation clause was limited in scope to Plaintiff's competitors for a span of one year. Plaintiff's allegations were also found to be sufficient to support a claim under the ITSA because it had identified a list of confidential information and trade secrets in its pleadings.

Continue reading "Northern District of Illinois Grants Motion to Dismiss in Trade Secrets Case Due to Lack of Personal Jurisdiction" »

Trade secrets are the lifeblood of many companies these days, and protecting those secrets is always of the utmost importance. Through our years of experience advising and representing companies, we here at DiTommaso-Lubin know how to maintain the security of your trade-secret portfolio and prosecute those who attempt to misappropriate any of your trade secrets. Because employees with trade-secret knowledge come and go with such frequency these days, our Des Plaines trade-secret attorneys wanted to share a recent court decision that illustrates the perils companies face due to departing employees.

In Mintel International Group LTD v. Neergheen, Plaintiff Mintel initially employed Defendant in its London-based marketing department, and upon his hiring, Defendant signed an employment contract that included non-compete and confidentiality restrictive covenants. Defendant was then transferred to Plaintiff's Chicago office where he signed a second employment contract containing non-compete and confidentiality clauses similar to those in the first agreement. This second contract also contained a clause prohibiting the solicitation of Plaintiff's employees and customers – all of the clauses were in effect for one year after the cessation his employment with Plaintiff. Defendant eventually left the employ of Plaintiff and began working for a competitor company in a different product area in order to comply with his non-compete. Plaintiff failed to ask Defendant to return the laptop given to him by the company during his exit interview, and also failed to ask him about proprietary information he had emailed to himself prior to his departure – despite knowing that he had taken possession of the information before he left.

Eventually, Plaintiff filed suit against Defendant alleging violations of the Computer Fraud and Abuse Act (CFAA), the Illinois Trade Secrets Act (ITSA), and breach of the non-disclosure, non-compete, and non-solicitation provisions in his employment contract with Defendant. Plaintiff sought injunctive relief and money damages. After a bench trial, the Court found that Defendant had not violated the CFAA because he had only emailed copies of Plaintiff's files to a private email address, which did not satisfy the damage requirement of the statute. The Court next held that, while the copied files qualified as trade secrets, Defendant did not violate the ITSA because there was no proof that he had or would use the information in his position at a competing company. Finally, the Court found that the restrictive covenants were not invalid as a matter of law, and enjoined Defendant from: ever using any of Plaintiff's proprietary info, contacting any of Plaintiff's customers for nine months, or working for his new employer in the same area as he had with Plaintiff for a period of six months.

Continue reading "Northern District of Illinois Federal Court Grants Injunction in Misappropriation of Trade Secrets Case" »

The above video provides an excellent overview of Illinois non-compete contract law.

Our Chicago non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. 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 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 lawyers have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommas-Lubin a Chicago business law firm represent 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 Naperville, Wheaton, Vernon Hills, 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.

DiTommaso-Lubin has successfully litigated many business disputes, and in our many years of experience we have found that contract claims are among the most contentious conflicts. Because so many of our clients deal with breach of contract issues, our Elmhurst business attorneys are always mindful of new court decisions issued in this area of the law. In fact, our lawyers just discovered one such case, Jumpfly Inc. v. Torling, in the US District Court for the Northern District of Illinois.

Jumpfly Inc. v. Torling pits a Plaintiff employer against two former employees who allegedly violated the non-compete agreements signed when they were hired by Plaintiff. Plaintiff contends that Defendant Torling started a competing pay-per-click internet advertising side-business while in Defendant's employ, and upon discovering its employee's side-business, fired him and sent a cease and desist letter demanding that he stop violating the non-compete. The parties eventually negotiated a settlement allowing Torling to continue his business, but the agreement prohibited him from soliciting any of Plaintiff's employees. Torling allegedly solicited Defendant Burke -- who was working for Plaintiff at the time under a similar non-compete agreement -- and got him to quit his position with Plaintiff to work for Defendant Torling.

Plaintiff then filed suit against the two individuals and the new company (Windy City) that they worked for -- alleging rescission of a settlement agreement, breach of contract, violations of the Lanham Act and Illinois Deceptive Trade Practices Act, and intentional interference with contract based upon non-compete agreements between the parties. Plaintiff's requested the Court to enjoin Defendants' competitive business conduct and for monetary damages. In response, Defendants filed a motion to strike Plaintiff's request for injunctive relief and filed a motion to dismiss under 12(b)(6).

The Court granted the motion to strike as to the breach of contract claim because the two year term of the non-compete agreement had already expired and an injunction would result in an unreasonable restraint of trade. The Court also noted that Plaintiff's seven-month delay -- after discovery of the illicit conduct -- in asking for an injunction also weighed in favor of Defendants. The Court denied the motion to strike as to the statutory claims, however, because injunctive relief is provided by both laws which rendered the motion premature.

Next, the Court granted Defendants' motion to dismiss the breach of contract and intentional interference with contract claims due to pleading insufficient facts that Defendant Windy City induced either of the individual Defendants to breach their contracts with Plaintiff. In dismissing Plaintiffs conspiracy to interfere with contract, the Court applied the Intracorporate Conspiracy Doctrine and declined to agree with Plaintiff's argument that Defendants' conduct fell with in an exception to the rule. Finally, the Court denied the motion to dismiss the settlement agreement breach claim as the effect of Defendants' breaches had yet to be determined.

Continue reading "Northern District of Illinois Federal Court Grants Motion to Strike Plaintiff's Request for Injunctive Relief in Breach of Contract Case" »

At DiTommaso-Lubin, we pride ourselves on staying abreast of changes in the law that may affect our clients, especially those rendered by the highest court in the state. The Supreme Court of Illinois released a new decision not long ago that was picked up by our Lombard business litigation attorneys, and the case is of particular interest to business owners who have personally guaranteed a business loan. In JP Morgan Chase Bank, N.A. v. Earth Foods, Inc. the Court addressed the meaning of the term surety and whether a guarantor falls within that definition under the Illinois Sureties Act.

The initial dispute in JP Morgan Chase Bank, N.A. v. Earth Foods, Inc. arose from a line of credit extended by Plaintiff JP Morgan Chase Bank to Defendant Earth Foods. The loan was personally guaranteed by the three co-owners of Earth Foods, and three years after the line of credit was first extended, Earth Foods defaulted on the loan. Plaintiff then filed a lawsuit against both the company for breach of contract and the co-owners as guarantors of the defaulted loan. The individual Defendants asserted an affirmative defense that the guaranty obligation was discharged under the Sureties Act because the Act applies to both guarantors and sureties and the law does not distinguish between the two. Plaintiffs then filed a motion for summary judgment, which was granted by the trial court. In granting the motion, the court held that the individual Defendants were guarantors and the Act only applied to sureties. Defendants appealed the trial court's decision, and the appellate court held that the term surety encompassed both a surety and a guarantor under the Act and remanded the case. Plaintiffs petitioned the Supreme Court to review the appellate court's reversal.

On appeal, the Supreme Court performed an extensive statutory analysis of the Illinois Sureties Act. In performing this analysis, the Court first determined that dictionaries, treatises and past court decisions recognize a clear legal distinction between guarantors and sureties. They then went on to determine the legislative intent behind the Sureties Act through a discussion of other laws related to the same subject matter. Through their discussion, the Court held that a suretyship differs from a guaranty in that a suretyship is a primary obligation to ensure the debt is paid, while a guaranty is an obligation to pay the debt if the principal does not pay. The Court went on to say that the plain language of the Act indicates that the protections of the Sureties Act are not applicable to guarantors. Despite this ruling, the Court held that summary judgment was improperly granted in JP Morgan Chase Bank's favor and remanded the case to the trial court due to genuine issues of fact regarding whether the parties intended the individual Defendants to be guarantors or sureties for the loan in question.

JP Morgan Chase Bank, N.A. v. Earth Foods, Inc. unequivocally answered the question whether the terms surety and guarantor are interchangeable for the purposes of the Illinois Sureties Act. Despite the fact that there is a clear distinction between the two, the Supreme Court allows for the intent of the parties to rule when including either term in a loan agreement. Therefore, business owners should be careful when drafting and negotiating the terms of a guarantor or a surety and be clear which role is intended by the parties to avoid a potential lawsuit down the road.

Continue reading "A Guarantor is Not a Surety Under the Illinois Sureties Act" »

Business litigation is necessarily an adversarial process – the stakes are high and as such the opposing parties in most lawsuits will fight over many issues during the case. One of the most contentious segments of any case is the discovery process. Because the information obtained during discovery can make or break a case, it is important to understand the law in this area. In that vein, our Berwyn business attorneys would like to share a recent Illinois Appellate Court decision that may affect many of our clients the next time they go to court.

In Mueller Industries Inc. v. Berkman, Defendant Berkman worked for Plaintiff as president of a company owned by Plaintiff pursuant to an employment contract. During his employment, Defendant formed an investment partnership and obtained a 10% ownership interest in a company that was one of Plaintiff's primary suppliers. Defendant's lawyer – whose firm was also counsel for Plaintiff – advised him how to structure the investment venture so as to not run afoul of his employment contract with Plaintiff. The initial employment agreement subsequently expired, and a new open-ended agreement was consummated that contained a non-compete clause and other restrictive covenants governing outside financial interests and business opportunities. Defendant then had his attorney form a new company to compete with Plaintiff, and Defendant subsequently resigned his position with Plaintiff.

Plaintiff filed suit for breach of his employment contract and breach of fiduciary duty, alleging Defendant profited personally at the expense of Mueller through his investment partnership. A discovery dispute ensued when Defendant refused to produce documents related to his investment in the supply company and his creation of the competing company. Defendant refused production based upon the 5th amendment and attorney-client privileges. Plaintiff filed a motion to compel production, which was granted by the trial court.

Defendant appealed the trial court's grant of the motion, and reasserted that the documents were privileged. The Appellate Court reversed in part, holding that Defendant's pre-existing relationship with his lawyer kept all communication prior to the attorney's firm's representation of Plaintiff privileged. However, all communications after the dual representation began were no longer so protected because Defendant no longer had any reasonable expectation of confidentiality. Finally, the Court found that Defendant had failed to demonstrate that producing the requested documents would amount to incriminating testimony, but remanded the case with orders for the lower court to perform an in camera review of the disputed documents and urged the trial court to make a detailed record of its findings.

Continue reading "Appellate Court of Illinois Orders in Camera Review of Potentially Privileged Documents in Action for Breach of Fiduciary Duty" »

While most businesses strive to maintain employee stability, the fact of the matter is that during the course of any company's existence there will be a certain amount of turnover. In states like Illinois, many employers utilize employment contracts that contain non-compete clauses and other restrictive covenants to protect themselves when employees depart. In spite of these precautionary measures, disputes will often still occur, which is why our Aurora non-compete lawyers are always watching developments in this area of the law.

In Steam Sales Corp. v. Summers, Defendant Summers worked for Plaintiff soliciting and servicing customer accounts pursuant to a written employment agreement that contained both non-compete and liquidated damages clauses. The clauses were to be effective for two years after the cessation of Defendant's employment with Plaintiff. Plaintiff had several exclusive relationships with manufacturers, which gave it access to information not available to its competitors that served as an advantage in the marketplace. Defendant had access to this information, and after working for Plaintiff for almost two years, he quit to form a competing company and subsequently obtained the business of two of Plaintiffs (now) former clients.

In response, Plaintiff filed suit for Defendant's violation of the restrictive covenant contained in the employment agreement between the parties and demanded injunctive relief pursuant to the liquidated damages clause in the contract. The circuit court granted the preliminary injunction based upon the non-compete clause and enjoined Defendant from soliciting or selling any service or product similar or identical to Plaintiff's. Defendant then filed an interlocutory appeal. The Appellate Court found that Plaintiff had not breached the parties' contract and that the restrictive covenant was enforceable because it was reasonable in its geographic (Defendant's sales territory when he worked for Plaintiff) and temporal scope and in its application.

Continue reading "Illinois Appellate Court grants Preliminary Injunction in Action to Enforce Non-Competition Clause in Employment Contract" »

In a very informative short piece, the Wall Street Journal reports that Howard Stern has filed suit regarding Sirius/XM's failure to pay Stern and his agent stock bonus payments that were part of Stern's compensation package. Stern initially did not press for the payments for a few years but has now filed suit for non-payment. The main issue in the dispute is whether XM subscribers post merger can be included in the target subscriber base numbers which trigger stock bonus payment obligations. The article states:

Howard Stern, who seems to be in a perpetual fight with his bosses, is at it again.

The production company for the radio personality is suing Sirius XM, claiming the satellite radio company has refused to pay stock awards it owes to him based on subscriber targets in Stern’s contract. The lawsuit also says Sirius owes money to Stern’s agent under a consulting agreement.

“World-renowned radio personality Howard Stern (“Stern”) put Sirius on the map,” the lawsuit says. “But, with the exception of a stock award that Sirius paid for the initial year of Stem’s contract, Sirius has refused to pay One Twelve [the production company for Stern's show] the additional performance-based stock awards to which One Twelve is entitled.”

You can read the full article by clicking here. You can read the Complaint in the lawsuit by clicking here.

Another interesting article on the dispute appeared in Forbes. That article provides some speculation on the behind the scenes motives driving the case and can be read by clicking here.

Continue reading "Wall Street Journal Reports: "Howard Stern Sues Sirius XM"" »

The issues faced by our clients, and particularly our business clients, are often complex both factually and legally. Our Palatine business lawyers recently discovered a case filed in Du Page county that illustrates how business legal issues can, and often do, dovetail with personal legal issues. Prignano v. Prignano demonstrates the importance of obtaining legal advice before making business agreements and contracts that include will and probate issues.

In Prignano v. Prignano, the widow of George Prignano, a man who owned several businesses with his brother Louis, sued that brother for allegedly failing to honor an agreement that the survivor of the two brothers would buy the decedent brother's share of their co-owned businesses. The Prignano brothers jointly owned two corporations, Sunrise Homes and Rainbow Installations, and were equal partners in 710 Building Partnership. The Plaintiff widow alleged that the Defendant had an oral agreement with her deceased husband George whereupon Louis would purchase George's share of their three businesses with the proceeds from life insurance policies purchased for that purpose. Plaintiff also alleged that she and Defendant had an oral agreement that Defendant would purchase his brother's share of the businesses from Plaintiff.

After George's death, Defendant, who was the executor of George's estate, allegedly kept George's share of the businesses and the life insurance payments for himself unbeknownst to Plaintiff. When Plaintiff discovered this, she filed suit against him for fraud, breach of fiduciary duty, breach of contract, and unjust enrichment. The trial court ruled in her favor on all counts and awarded her damages and prejudgment interest. Defendant then appealed the trial court's finding of liability and the award of prejudgment interest.

On appeal, the Second District of the Appellate Court of Illinois reaffirmed the trial court's finding that both oral agreements (between the brothers and between Plaintiff and Defendant) were valid and enforceable due to the testimony of third parties who were aware of the oral agreement between the brothers, and the existence of a written agreement that was drawn up after the oral contract between Plaintiff and Defendant was initially formed. The Court also found that Defendant owed a fiduciary duty to Plaintiff as he was a corporate officer and partner in the businesses, and upon George's death, his interest in the businesses was transferred to Plaintiff. As such, the Court held that Defendant owed Plaintiff a duty to exercise “the highest degree of honesty and good faith” in dealing with Plaintiff, and Defendant breached that duty. The Court then vacated the trial court's judgment on the unjust enrichment claim because Plaintiff was victorious on her breach of contract claim. The Court stated that unjust enrichment does not apply when there is a breach of contract under Illinois law. Finally, the Court reaffirmed the award of prejudgment interest because Plaintiff had been deprived of money that was rightfully hers, and Defendant should not profit from his wrongful retention of the funds.

Prignano v. Prignano exemplifies why business owners should have all of their business agreements and contracts reviewed by a trained legal professional. Family business owners, in particular, should guard against casual or oral agreements, as personal relationships can be strained when there is a misunderstanding regarding such agreements. If you are unsure about the legality or legitimacy of your business agreements, or are currently in a dispute, you should consult a discerning Chicago and Naperville business attorney to determine your rights.

Continue reading "If You Have a Business Agreement, Get It in Writing!" »

Our Chicago trade secrets attorneys were interested to see a recent trade secrets lawsuit coming from the high-dollar world of professional sports. Palace Sports & Entertainment, owner of the Detroit Pistons basketball team, is suing rival venue and sports company Olympia Entertainment Inc., plus nine ex-employees who moved to Olympia, for alleged theft of its confidential trade secrets. Crain’s Detroit Business reported that the claim stems from the movement of ten Palace employees to Olympia, starting in February when Palace president Tom Wilson left to run a new venture for Olympia and its parent company, Ilitch Holdings. This venture was to look into a new venue for the Detroit Red Wings, also owned by Ilitch. Nine people followed Wilson, including two executive vice presidents. In Michigan state court, Palace accuses them of breach of contract, breach of fiduciary duty, unfair competition, conspiracy, conversion, tortious interference and misappropriation of trade secrets.

According to the complaint in Palace Sports & Entertainment Inc. v. Olympia Entertainment Inc., dated June 8, 2010, Palace is accusing the ex-employees of taking and misusing trade secrets, despite having signed different versions of a confidentiality agreement that gave them a fiduciary role in Palace’s confidential information. The contract also contained restrictive covenants not to disclose such information to people outside the company, or use it for their own or anyone else’s gain. Confidential information was defined broadly, including “any technical, economic, financial, marketing or other information, which is not common knowledge.” Palace alleges that the ex-employees misappropriated information including suite prices, customer and prospect lists and sales notes, a business plan, marketing plans, suite assignments, appointment logs, proposals, vendor lists and at least one contract. When Palace notified Olympia of the first theft, it said, Olympia provided physical documents and lists of files. But Olympia did not provide the electronic data behind those files, Palace alleged and has even put some of the data on its own computers.

Palace demanded that Olympia return all of the electronic files and physical documents; that each ex-employee swear an oath that all of the information has been returned; and that a third-party expert be allowed to comb Olympia’s computers and the ex-employees’ personal computers for the information. Olympia has not complied. In its lawsuit, Palace said this caused it immediate and irreparable harm by enabling unfair competition. Olympia said publicly that it believed Palace simply did not like losing its employees. No further court documents are freely available, but trial is set for May 27, 2011.

This case generated great interest in the Detroit press, in part because Ilitch was considering buying the Pistons from Palace. But as Illinois business lawyers, we would like to discuss the strength of Palace’s case, judging by the allegations made in its complaint. Specifically, we suspect that the defendants could consider a defense based on whether the information they are accused of stealing was actually confidential trade secrets. Under the laws of Michigan, Illinois and other states, some information is not a trade secret because it is widely available to the public and not valuable. Thus, a trade secrets lawsuit cannot survive if it is based on the use of information such as lists of businesses copied from a phone book. Even if Palace’s confidentiality agreement defines such information as confidential, employees would be under no obligation to comply. The agreement cited in the complaint may also be subject to a challenge for being overly broad or vague because its definition of confidential business information includes “any information, not known to the general public.” This could easily include information with no special economic value.

Continue reading "Detroit Pistons Owner Sues Competitor and Ex Employees for Alleged Trade Secrets Theft" »

As Illinois mediation and arbitration lawyers, we were interested to see a decision confirming that parties may invoke their contractual rights to arbitrate even after some participation in the other side’s lawsuit. TSP-Hope Inc. v. Home Innovators of Illinois, Inc., No. 1-07-1028 (Ill. 4th June 26, 2008) pits a Springfield housing nonprofit, TSP-Hope Inc., against residential construction company Home Innovators of Illinois. The two made a contract in July of 2005 for the construction of houses. In the summer of 2006, construction stopped. Shortly after, TSP-Hope sued for breach of contract and other causes.

About a month later, the defendant filed for an extension of time to plead, saying the plaintiff had served a demand three days before for the defendant to file suit to enforce its liens. Another month later, the defendant filed an answer and counterclaims, including duress in contract formation, breach of contract and enforcement of the liens. After a series of motions and counter-motions, the defendant in July of 2007 filed to dismiss all claims and compel arbitration. In this motion, the defendant claimed that the plaintiff had verbally agreed to mediation before the lawsuit. The parties’ contract specified that they should use mediation at first, and then binding arbitration with a specified arbitration company, to resolve disputes. The trial court eventually granted the defendants’ motion to dismiss a breach of contract claim, saying it had not been waived by participation in the litigation. After a motion to reconsider failed, the plaintiff appealed.

Unusually, the Fourth said, the defendants did not file a brief in the appeals case. However, the court said it had sufficient evidence from the plaintiffs’ brief. That brief argued that defendants had waived their right to arbitration by waiting almost 11 months to assert it, and by submitting arbitrable issues to the trial court in the meantime. To determine whether this is true, the Fourth wrote, it needed to determine whether the defendant had acted inconsistently with its right to arbitrate. Under Cencula v. Keller, 152 Ill. App. 3d 754, 757, 504 N.E.2d 997, 999 (1987), this can include submitting arbitrable issues to the court.

The Fourth then ran down a list of past cases in which a party was found to have waived its right to arbitration. In all of those cases, the court noted, parties had conducted discovery and made pleadings that were more than just responses to the other side. Neither of these was true in this case, it said. It is true that the defendant’s counterclaims could have waived its right to arbitration, the court said, but this is not automatic. In this case, the counterclaim “appeared to be responsive to plaintiff’s complaint” as well as the plaintiff’s demand to enforce its liens. Under those circumstances, the Fourth concluded that the defendant had not acted inconsistently with its right to arbitrate. Thus, the appeals court affirmed that trial court was correct to find that there was no waiver.

Continue reading "Filing Counterclaims Does Not Waive Contractual Right to Arbitration, Fourth District Rules" »