Facing a recently filed putative class action lawsuit over the labeling and marketing of its toddler formula, baby formula manufacturer Gerber has asked a federal judge in Chicago to dismiss the suit arguing that reasonable parents buying its toddler formula couldn’t possibly be misled by the claims on its Good Start Grow products. The motion comes on the heels of the dismissal of a second class action lawsuit involving Gerber’s formula by a Virginia federal judge earlier in the month.

In her complaint, plaintiff Melissa Garza alleges that Gerber makes a toddler formula that is marketed as nutritional, but which actually contains added sugars and less protein than cow’s milk. Garza alleges that Gerber’s Good Start GentlePro Infant Formula and Good Start Grow Toddler Drink are marketed nearly identically without disclosing that the toddler formula has added sugar, less protein and more carbohydrates than whole cow’s milk.

The complaint alleges that Gerber’s failure to adequately distinguish the two products and disclose that its toddler formula is inconsistent with expert advice constitute violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, the consumer fraud acts of other states and the federal Magnuson Moss Warranty Act and has unjustly enriched Gerber. Garza seeks to represent herself and a class of individuals in Illinois, Iowa, Arkansas, Wyoming, North Dakota, and Utah who purchased Gerber’s toddler formula.

The toddler formula, which the complaint refers to as a “transition formula” (a term Gerber takes issue with in its motion to dismiss), contains nearly the same ingredients as Gerber’s infant formula and is fortified with vitamins D and E as well as iron. However, Garza alleges that a global consensus of pediatric health organizations, including the American Academy of Pediatrics (AAP) Committee on Nutrition and the relevant Sub-Committee of the World Health Organization (WHO) have advised that transition formula is not recommended and that toddlers can meet all nutritional needs from whole cow’s milk, water and healthy foods. Continue reading ›

In a recent decision, the Illinois Supreme Court held that clients ordered to pay punitive damages can sue their attorneys to recover the money. In doing so the Court considered and rejected arguments that state law and public policy protect lawyers from being subject to punitive damages awards.

Midwest Sanitary Service Inc. retained St. Louis law firm Sandberg, Phoenix & Von Gontard to represent it in a whistleblower retaliation case filed against it by a former employee. Midwest lost the trial which resulted in a jury award of $160,000 in compensatory damages and, important to the case before the Court, $625,000 in punitive damages against the company. Following the verdict, Midwest sued its lawyers for malpractice alleging that the attorneys had committed various mistakes in the case including failing to designate defense witnesses in time and eliciting harmful testimony from a state official during cross-examination.

For their part, the attorneys sought dismissal of the legal malpractice suit arguing that Section 2-1115 of the Illinois Code of Civil Procedure prohibition against awarding punitive damages in medical or legal malpractice cases precluded Midwest from recovery of the punitive damages award. It also argued that allowing recovery in a legal malpractice suit of punitive damages awarded in an underlying suit would violate the public policy of Illinois. The trial court rejected the law firm’s arguments that it could not be held responsible for the punitive damages award. The Fifth District appellate court sided with the trial court. The Illinois Supreme Court granted the law firm’s petition for leave to appeal.

Initially, the Court noted that the malpractice case was still ongoing and that the appeal had not come from a final and appealable judgment but was an interlocutory appeal brought pursuant to Illinois Supreme Court Rule 308. As such, the Court’s task was to answer the question of whether, in a legal malpractice action, punitive damages incurred in an underlying action, which were proximately caused by the alleged negligence of the attorneys in the underlying action, can be recovered as compensatory damages from the allegedly negligent attorneys in a legal malpractice action. Continue reading ›

An Illinois appeals court recently found a political candidate in Madison County could not be held liable for defamation for statements in a press release finding that the allegedly defamatory statements were privileged and thus immune from liability. Former Madison County IT director, Rob Dorman and former administrator Doug Hulme filed the lawsuit claiming that the press release statements were false and defamatory and ultimately cost them their jobs.

In April 2020, Robert Daiber, the Democrat candidate for county board chairman was identified as one of several local Democratic politicians calling for the dismissal of top officials in Madison county board chairman Kurt Prenzler’s administration. In the press release Daiber was quoted as saying “[a] criminal investigation by six law enforcement agencies has made it clear how extensive corruption and abuses of power are in the Prenzler administration. Madison County must act now to restore public trust by immediately dismissing the Prenzler aides who have committed these truly shocking actions.”

The press release also cited affidavits released from the investigation as providing “conclusive evidence that top aides . . . attempted a pay-for-play scheme by offering a county job to a congressional staff person in exchange for the appointment to a U.S. Attorney position of their political accomplice” and “a scheme to hack into and spy on e-mails of the Madison County judiciary and the offices of elected county officials (neither of which are under the jurisdiction of the County Chairman or County Board) for political purposes.”

Days after the publication of the press release Dorman and Hulme were fired from their positions with the county. Dorman filed suit against Daiber several months later and Hulme joined as a plaintiff shortly thereafter. In their complaint, the plaintiffs allege that the statements in the press release were false and defamatory and that they had been exonerated from any wrongdoing at the conclusion of the investigation and a subsequent probe by the Attorney General. Despite being exonerated, the plaintiffs alleged that the statements in the press release had caused them to lose their jobs. Continue reading ›

Earlier this year, the governor of Delaware signed Senate bill 273 which amended various provisions of the Delaware General Corporation Law (GCL). The changes became effective August 1, 2022. Most notable among the changes was the amendment of Section 102(b)(7) of the GCL to allow corporations to exclude or limit certain officers from personal liability for breaches of their fiduciary duty of care. In order for corporations to take advantage of this change in the law, companies must include a provision in their certificate of incorporation eliminating or limiting its officers from personal liability for breaches of the duty of care.

Under Delaware corporate law, directors and officers of Delaware corporations owe the corporation and its shareholders certain fiduciary duties. One of the two chief fiduciary duties that directors and officers owe to the corporation and shareholders is called the duty of care. The duty of care requires directors and officers to exercise care and act in an informed manner when acting for the corporation and making decisions on its behalf.

Since 1986, with the addition of Section 102(b)(7) to the GCL, corporations have been authorized to eliminate or limit the personal liability of directors for monetary damages for  breaches of the duty of care. However, until passage of the amended Section 102(b)(7) this year, corporations could not do the same for its officers, even though the Delaware Supreme Court repeatedly affirmed that officers owe the same fiduciary duties as directors. Now corporations can insulate its officers as well as directors from personal liability for breaches of the duty of care.

It is important to understand the limits of this newly amended Section 102(b)(7). First, it doesn’t apply to all officers but only to those officers “deemed to have consented to service by the delivery of process to the registered agent of the corporation pursuant to § 3114(b) of Title 10” which includes the president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, controller, treasurer, or chief accounting officer along with anyone identified in the corporation’s SEC filing as one of the most highly compensated executive officers, or anyone who has, by agreement with the corporation, consented to be identified as an officer for the purposes of Section 3114(b) of the GCL. Continue reading ›

The Seventh Circuit federal appeals court recently determined that a Wisconsin newspaper did not commit defamation when it published a 2018 story concerning a local financial adviser. In affirming the district court’s finding in favor of the newspaper, the Seventh Circuit found that the allegedly defamatory article was largely accurate and protected under what is known under Wisconsin law as the judicial-action privilege, which protect publishers who report on court activity.

In August 2018, the Wausa Daily Herald published an article by reporter Sam Wisneski titled Wisconsin financial advisor accused of violating a dead man’s trust, mishandling $3 million. In the article Wisneski chronicled the allegedly bad-faith handling of the $3 million trust of deceased Wisconsin man Joe Geisler by his financial advisor, Thomas Batterman.

The story recounted the life of Geisler who, upon his death at the age of 88, left his more than $3 million estate to charity with detailed instructions to divide the money equally among four specific charities: the Superior Diocese of the Catholic Church, Bruce High School in northwestern Wisconsin, the Alzheimer’s Association and the American Cancer Society for local events.

A local wealth management firm, Vigil Asset Management, which was operated by Batterman, was made trustee and tasked with administrating the trust holding Geisler’s money. Batterman administered the trust but nearly a year after Geisler died, Batterman had allegedly only distributed $80,000 of the trust’s assets. This led the American Cancer Society to file suit in a Wisconsin state court to seek the removal of Vigil and Batterman as administrator of the trust.

The article detailed the judicial proceedings of the suit against Batterman and recounted the state court’s ultimate decision to remove Batterman and install a successor trustee, who disbursed the trust’s assets immediately. The article also mentioned how the court in that suit concluded that Batterman violated his fiduciary duties owed to the trust. The article went on to recount that the court ordered Batterman to pay the beneficiaries’ litigation expenses because his conduct “amounted to something of bad faith, fraud or deliberate dishonesty.”

Batterman initially demanded that the Daily Herald retract the article. Instead, the newspaper updated the article the following month by including a new paragraph clarifying that “[a]lthough a judge later found that Batterman had not committed fraud, theft or embezzlement, he ruled that the financial adviser had engaged in multiple acts of ‘bad faith’ and ordered him to be removed from handling the Geisler trust and to pay part of the charities’ legal fees.” The updated article also added the modifier “criminal” before the noun “wrongdoing” so that the sentence read: “Neither Batterman nor Richards has been charged with any criminal wrongdoing in the Geisler case.”

In October 2019, Batterman sued the Daily Herald alleging that the 2018 article was defamatory. The paper moved to dismiss the complaint for failure to state a claim. The District Court judge dismissed the majority of the case after finding that the article was substantially true and would not imply any new criminal misconduct on Batterman’s part to an ordinary reader. The paper then moved for summary judgment on the surviving claim of defamation that had not been dismissed. The District Court granted summary judgment finding that the paper had established that the article’s portrayal of Batterman as a bad faith financial actor was true, and, thus, by definition could not be defamatory. Batterman appealed. Continue reading ›

In a recent decision, the Seventh Circuit federal court of appeals affirmed the dismissal of an action for breach of fiduciary duty brought against two investment firms by a disgruntled customer. In ruling that the District Court properly dismissed the claims, the Court found that the fiduciary duties the investment firms owed to the plaintiff did not include a duty to stop the plaintiff’s daughter who acted under a power of attorney from making certain withdrawals from the plaintiff’s accounts.

The plaintiff, Joseph Allen, amassed a net worth of nearly $8 million dollars. He enlisted the services of the defendants, Brown Advisory, LLC and Brown Investment Advisory & Trust Company, to help him invest and manage his wealth. When Allen and his wife experienced declining health and he could no longer manage their finances, Allen granted a financial power of attorney to his daughter Elizabeth Key. For several years Key used the power of attorney to make withdrawals from Allen’s investment accounts. Those withdrawals had depleted the value of Allen’s IRA accounts from approximately $2.3 million to less than $600,000.

Five years later, Allen revoked the power of attorney and sued the two investment companies in Indiana state court accusing the defendants of breach of fiduciary duty and breach of contract. He alleged that Key’s withdrawals (or some of them) were not to his benefit and that the investment companies should not have honored them. The defendants moved to dismiss Allen’s complaint.

The District Court judge granted the defendants’ motion, reasoning that the investment firms could not be liable for breach of contract because the challenged withdrawals were directed by Key and authorized by her power of attorney. The trial court also dismissed Allen’s breach of fiduciary duty claim after holding that Maryland law does not recognize a separate cause of action for breach of fiduciary duty arising from a contractual relationship. Allen appealed the dismissal. Continue reading ›

The death of a loved one or a business partner can be difficult. The administration of a large estate can add to that difficulty. Often the duty of settling the estate and distributing the assets falls to a fiduciary such as an attorney, a trustee, a personal representative, an administrator or an executor. That fiduciary holds a position of trust and is responsible for holding and managing property that belongs to the beneficiaries.

With this position of trust comes certain legal obligations that are owed to the estate’s beneficiaries such as the duties of care and loyalty.

In the context of being an executor or administrator, a fiduciary duty is a legal obligation to act in the best interest of the beneficiaries of the estate. Illinois law imposes various responsibilities and duties on these individuals, including:

  • Acting in the grantor’s and beneficiary’s best interests
  • Acting loyally and uphold a duty of care
  • Avoiding conflicts of interest
  • Abstaining from engaging in self-dealing (i.e. taking actions that personally benefit the trustee or executor at the expense of or contrary to the best interest of the beneficiaries)
  • Avoiding favoring one beneficiary over another
  • Investing the estate’s assets to maintain or increase their value
  • Distributing estate assets to the intended beneficiaries correctly and in a timely manner

Continue reading ›

In a case that has potentially far-reaching implications for fee petitions, the Illinois Third District appellate court formally adopted a framework for considering such petitions laid out by the Supreme Court nearly four decades ago. Perhaps just as important, the Third District rebuffed the trial court’s reduction of attorney fees awarded to a successful plaintiff without explaining the reasoning for the reduction. The Court ultimately reversed the trial court’s award and remanded the case for further consideration of the plaintiff’s fee petition.

The plaintiff in the case, Austin Casey III, bought a used vehicle from the defendant, Rides Unlimited Chicago, Inc. The vehicle broke down two hours into Casey’s return trip to his home in Michigan. Casey had the vehicle towed back to Rides Unlimited the same day and requested a refund of the purchase price. Rides Unlimited refused. Casey then sued Rides Unlimited alleging violations of the various statutes including the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act). After discovery, Casey filed a motion for summary judgment on his claim that Rides Unlimited violated Section 2L of the Consumer Fraud Act.

Section 2L prohibits a vehicle dealership from “exclud[ing], modify[ing], or disclaim[ing] the implied warranty of merchantability . . . before midnight of the 15th calendar day after delivery of a used motor vehicle or until a used motor vehicle is driven 500 miles after delivery, whichever is earlier.” It further provides that any “attempt to exclude, modify, or disclaim the implied warranty of merchantability or to limit the remedies for a breach of the warranty in violation of this Section renders a purchase agreement voidable at the option of the purchaser.”

The trial court granted Casey’s motion for summary judgment, awarded Casey the purchase price, and dismissed Casey’s other claims. Casey then filed a petition for attorney fees under Section 10a(c) of the Consumer Fraud Act, which provides that a court “may award, in addition to the relief provided in this Section, reasonable attorney’s fees and costs to the prevailing party.” Casey sought $10,640 in attorney fees and $454.52 in costs, for a total of $11,094.52. The trial court held a hearing on the fee petition and ultimately granted the petition but reduced the fee award to only $2,500. Casey appealed the trial court’s reduced fee award.

The Third District court of appeals granted leave to the National Association of Consumer Advocates and the Illinois Trial Lawyers Association to file an amicus curiae brief in support of Casey’s position that the trial court erred in reducing the attorney fee award. Our own Patrick Austermuehle authored the amicus brief that ultimately resulted in the Third District’s reversal and remand of the case back to the trial court to reconsider Casey’s petition for attorney fees. Continue reading ›

Abuse of trust is considered a breach of the fiduciary duties owed by the trustee of a will or estate. When an individual decides how to distribute his or her estate among one or more beneficiaries, he or she will typically name a trustee who will be responsible for carrying out those wishes. A trustee may be a person or an organization and, in fact, can be anyone specified by the deceased, from a family member or friend to a lawyer to a financial investment company.

Depending on the size of the estate and the complexity of the deceased’s instructions, acting as a trustee can involve coordinating with multiple beneficiaries and being entrusted with distributing millions of dollars. Whenever there is a lot of money and someone in a position of trust, there is a potential for abuse. When a person in a position of trust, like a trustee, abuses that trust, it can be devastating for all involved.

If the trustee does not perform its duties in a careful and loyal manner as instructed, the trustee has engaged in an abuse of trust and breached its fiduciary duties. Because a trustee is expected to make judgment calls at times regarding the best disposition of the estate, it can be difficult to determine if an abuse of trust has taken place. This is where it can be useful to consult with an experienced breach of fiduciary duty attorney as not all breaches are cut and dried. Continue reading ›

After passing one of the strictest non-compete laws in the nation, the District of Columbia Council has responded to criticisms about the bill by passing the Non-Compete Clarification Amendment Act of 2022 which significantly scales back key aspects of the non-compete ban law enacted back in 2021 but which has not yet gone into effect after the Council has delayed its enactment several times in response to feedback from employer groups.

The non-compete ban, passed by the Council in 2020 and enacted in 2021, sought to impose a near-universal ban on simultaneous and post-termination employment restrictions for employees working in D.C. Since the inception of the ban, it has been subject to much criticism and numerous extensions of its effective date. However, the Clarification Amendment, which will take effect on October 1, 2022, changes the scope of the ban from nearly all non-compete agreements to only those whose total annual compensation is less than $150,000 ($250,000 for medical specialists). Compensation is defined to include more than just salary but accounts for bonuses, commissions, overtime premiums, and vested stock as well but does not include “fringe benefits other than those paid to the employee in cash or cash equivalents.”

The Clarification Amendment will now proceed to the desk of the Mayor, where it is expected to be signed, and then will be subject to a 30-day congressional review period which likely will expire in mid-to-late November. The amendment contains a number of significant “clarifications” to the non-compete ban law and gives D.C. employers options for utilizing non-compete agreements and other policies, such as conflict of interest policies, that were set to be prohibited. Continue reading ›

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