In Illinois, the situation regarding LLC minority members bringing a derivative lawsuit for member oppression is quite specific. The Illinois Limited Liability Company Act allows LLC members to file a derivative action to protect the interests of the LLC. This is particularly relevant when the LLC itself has a cause of action, but the managers or members have failed to pursue it. Such a derivative action enables members to enforce the rights of the LLC and recover damages on its behalf.

However, it’s important to understand that a derivative action is distinct from a member oppression claim. While derivative actions are filed on behalf of the LLC for wrongs against the LLC, certain types of member oppression claims are brought by individual members against the controlling members for actions that unfairly prejudice the minority members’ rights or interests and case-specific injury to the minority member but not the LLC as a whole.

For a derivative action to be initiated, certain conditions must be met. The member initiating the action should not be a manager of the LLC, and they must have made a written demand on the managers or members of the LLC to take action to enforce the right. If the managers or members fail to take action within 90 days, the member can then file a lawsuit on behalf of the LLC. It is crucial to note that derivative actions are complex and can be costly, so seeking advice from an experienced business attorney is recommended.

For member oppression, minority LLC members in Illinois have legal options to protect their interests and seek remedies, such as judicial dissolution, breach of fiduciary duty claims, specific performance or injunctive relief, and buyout or monetary damages. Again, legal counsel is crucial in navigating these options and understanding the rights and legal remedies available under the Illinois Limited Liability Company Act.

Continue reading ›

When a shareholder or LLC (Limited Liability Company) member faces a “freeze-out” or “squeeze-out,” they are typically being pushed out of the company’s decision-making process or their economic interests are being diminished. This can be a challenging and complex situation, requiring a careful and strategic approach. Here are some general steps that might be considered:
  1. Understand Your Legal Rights and Documents: Review the company’s governing documents, such as the bylaws, shareholder agreement, or operating agreement. These documents often outline the rights and obligations of shareholders or members and may contain provisions relevant to your situation.
  2. Gather Evidence: Document any actions that contribute to the freeze-out or squeeze-out. This could include meeting minutes, emails, financial statements, or any other relevant communications.
  3. Seek Legal Advice: Consult with an attorney who specializes in corporate law, particularly someone experienced in shareholder/member rights in LLCs or corporations. They can provide advice specific to your situation, including the interpretation of any legal documents and the identification of any breaches of fiduciary duties or violations of state laws.
  4. Explore Negotiation and Mediation: Before taking any legal action, consider whether the situation can be resolved through negotiation or mediation. These alternative dispute resolution methods can often be less costly and time-consuming than litigation.
  5. Consider Your Goals: Identify what you want to achieve. Do you want to regain your position in the company, receive compensation for your lost interests, or simply exit the company in a fair manner? Your goals will guide your strategy moving forward.
  6. Possible Litigation: If negotiations fail and your legal rights are being significantly infringed upon, litigation may be necessary. Your attorney can advise on the likelihood of success and the costs involved.
  7. Financial Implications: Consider the financial impact of your chosen course of action, including legal fees, potential loss of income, and any tax implications.
  8. Communication with Other Shareholders/Members: If other shareholders or members are also being affected, it might be beneficial to communicate with them. There could be strength in numbers, either in negotiations or in legal action.
  9. Understand the Impact on Relationships: Consider the long-term business relationships and how they will be affected by your actions. Sometimes the best legal strategy might not align with your long-term business or personal relationships.
  10. Plan for the Future: Regardless of the outcome, think about your future with or without the company. This might involve considering other business opportunities or roles.

Every situation is unique, and the best course of action will depend on the specific circumstances, the governing laws of the state where the LLC or corporation is registered, and the details of the company’s governing documents. It’s crucial to balance legal considerations with practical business and personal considerations.

Continue reading ›

Several cases in Illinois have awarded punitive damages for auto fraud by used car dealers. One such case is “Gent v. Collinsville Volkswagen, Inc.” where the court upheld punitive damages against the dealership for fraud or gross negligence, though the award was reduced from $12,000 to $3,000 as it was deemed excessive.

In the case “Totz v. Continental Du Page Acura”, punitive damages were awarded to the buyers for misrepresentations about the car’s condition, violating the Consumer Fraud and Deceptive Business Practices Act. This case was referred to in “Pigounakis v. Autobarn Motors”, where the court ruled that punitive damages can be awarded for outrageous conduct, specifically reckless indifference to the rights of others.

The case “Perez v. Z Frank Oldsmobile, Inc.” also awarded punitive damages for fraudulent actions other than misrepresenting a car’s mileage. In “Tague v. Molitor Motor Co.”, a $17,000 punitive damages award was justified due to the dealer’s pattern of bad faith and the danger posed to the customer and others due to unexpected brake failure. Continue reading ›

Fake internet reviews can potentially state claims for deception under Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) laws. UDAAP laws are designed to protect consumers from deceptive practices by businesses, including misleading statements about products and services. This protection ensures consumer confidence, particularly in financial transactions, and it addresses unfair practices that can financially harm consumers and which they cannot reasonably avoid.

Under these laws, if a business or service provider uses fake reviews to deceive consumers into making purchases or forms a misleading impression about their products or services, this could be construed as a violation of UDAAP. Civil penalties may apply in these cases, regardless of whether the deceptive acts were committed intentionally or accidentally. It’s important to note that the scope of UDAAP violations is broad and can encompass a range of deceptive practices, including those occurring in online environments.

The Federal Trade Commission (FTC) has specifically addressed the issue of fake reviews and other misleading endorsements. The FTC is exploring rulemaking to combat deceptive or unfair review and endorsement practices, including the use of fake reviews, suppression of negative reviews, and payment for positive reviews. These actions are considered deceptive and can mislead consumers who rely on reviews for genuine feedback on products or services, and they can unfairly disadvantage honest businesses.

Overall, fake internet reviews have the potential to fall under UDAAP violations due to their deceptive nature and the misleading information they present to consumers. Continue reading ›

In Illinois, the elements of tortious interference with prospective business relationships are as follows:

1) A reasonable expectation of the plaintiff entering into a valid business relationship.
2) The defendant’s knowledge of this expectancy.
3) The defendant’s intentional and unjustifiable interference, causing a breach or termination of the expectancy.
4) The plaintiff suffering damage as a result of the defendant’s interference.

Several notable cases have detailed and applied these principles. In Titan Intern., Inc. v. Becker, the plaintiffs claimed that the defendants interfered with their prospective business relations with various entities, causing economic harm. In Force Partners, LLC v. KSA Lighting & Controls, Inc., it was highlighted that commercial competitors can interfere with each other’s prospective business relationships as long as the intent is not solely motivated by malice or ill will. Doctor’s Data, Inc. v. Barrett clarified that a reasonable expectancy requires more than the mere hope of a business relationship – a plaintiff must identify a reasonable business expectancy with a specific third party. In Labor Ready, Inc. v. Williams Staffing, LLC, it was established that a company can state a claim against a competitor for tortious interference by alleging that the competitor purposely interfered with prospective business relations through various means, causing the company to lose future business. Lastly, in Giant Screen Sports LLC v. Sky High Entertainment, it was emphasized that a plaintiff must allege that the defendant’s interference prevented the expectancy from being fulfilled.

Additional case law includes Buckley v. Peak6 Investments, LP, which explained that even when an employer’s statement is deemed privileged from a tortious interference claim, the plaintiff can still prevail by showing that the defendant acted with malice. This can be achieved by showing that the defendant made unjustified statements, excessively published statements, or made statements in conflict with the interest which gave rise to the privilege. Furthermore, the terms “tortious interference with prospective economic advantage”, “business expectancy”, and “business relations” are used interchangeably under Illinois law, as noted in Allstate Insurance Company v. Ameriprise Financial Services, Inc. Finally, Butler v. Holstein Association, USA, Inc. clarified that a plaintiff must demonstrate that the defendant purposefully interfered, preventing the plaintiff’s legitimate expectancy from ripening into a valid business relationship. These cases collectively provide a comprehensive view of tortious interference with prospective business relations under Illinois law.

Continue reading ›

The statute of limitations that applies to a contract that is both oral and written is generally that of an oral contract. This is because if essential terms of the contract cannot be fully ascertained from the written contract itself and require oral evidence to be complete, it is treated as an oral contract for the purposes of the statute of limitations.

Illustratively, in Illinois, actions on written contracts are generally subject to a 10-year statute of limitations, while actions on oral contracts have a 5-year statute of limitations. Therefore, for a contract that is both oral and written, the 5-year statute of limitations would be applied.

Moreover, a contract is considered to be written if all the essential terms of the contract are in writing and can be determined from the document itself. If additional oral evidence is needed to make the contract complete, then the contract is treated as being oral under the statute of limitations. However, if parol evidence is not necessary to establish the existence of an essential term, but is used to interpret a term, the contract is deemed a written contract and the ten-year statute of limitations applies. Continue reading ›

Excessive management fees charged by a majority owner can potentially be the basis for a derivative lawsuit in certain circumstances. In corporate law, a derivative lawsuit is a legal action brought by shareholders on behalf of a corporation against third parties, often including insiders such as officers, directors, or controlling shareholders. The key issues in such a lawsuit typically involve allegations of breach of fiduciary duty, abuse of control, fraud, or mismanagement.

When a majority owner charges excessive management fees, it may be construed as a breach of fiduciary duty or misuse of their position to the detriment of the corporation and its minority shareholders. In such cases, the following elements are often considered:

  1. Breach of Fiduciary Duty: Majority owners owe a fiduciary duty to the corporation and its shareholders. Charging excessive fees could be seen as a breach of this duty, especially if it harms the corporation’s financial health or is not in the best interest of all shareholders.
  2. Fairness and Reasonableness: The fees must be fair and reasonable. If the fees are exorbitant compared to industry standards or the services rendered, it could be a ground for legal action.
  3. Impact on Minority Shareholders: If the excessive fees adversely affect the minority shareholders or the value of their shares, it can be a strong basis for a derivative suit.
  4. Corporate Governance and Approval Processes: The procedures followed in approving the fees are also important. If the majority owner bypassed normal governance processes or used their influence to approve the fees without proper oversight, it could strengthen the case for a lawsuit.
  5. Jurisdiction and Specific Laws: Laws regarding fiduciary duties and shareholders’ rights vary by jurisdiction. The specific legal standards and precedents in the jurisdiction where the corporation is incorporated will play a critical role.

Continue reading ›

In order to win a consumer fraud case about a rebuilt wrecked automobile or vehicle, it would be necessary to demonstrate several key points.

1. The seller misrepresented or concealed the actual condition of the vehicle, such as by failing to disclose that the vehicle was a rebuilt wreck or had sustained significant collision damage, or by falsely advertising the vehicle’s condition or mileage. This could include selling a vehicle with a defective paint job as new, or failing to disclose known safety issues, such as the vehicle’s tendency to accelerate unintentionally.

2. The defendant knew about the actual condition of the vehicle but failed to disclose it in the case of an omission of material fact claim. This could be demonstrated by showing that the seller was more involved in the purchase and sale of vehicles than a private party involved in an isolated transaction, or that a cursory inspection by someone experienced in the automobile business would have revealed the damage. In the case of inaccurate or false statements, knowledge of the falsity of the statement is not required as innocent misstatements can state a claim for consumer fraud.

The elements of a wrongful removal or freezing out of a partner in a business context include the following:

1. Exclusion of a partner from participation in the business: This implies that a partner is denied the right to participate in the operations and decisions of the business [1]. For instance, actions such as serving a partner with a notice of default, stating that they are no longer a partner, removing their name from partnership tax returns, and refusing to provide them with access to partnership books, records, and information can be seen as a wrongful exclusion.

2. Violation of implicit duty of good faith between partners: Partners owe each other the duty to exercise the highest degree of honesty and good faith in their dealings and in the handling of partnership assets. A genuine issue of material fact that precludes summary judgment on whether expulsion of a partner violated this duty also constitutes an element of a wrongful removal or freeze out.

3. Breach of the right of a partner to a formal accounting: Any partner has the right to a formal accounting in relation to partnership affairs. If this right is breached through a wrongful exclusion, it forms one of the elements.

4. Disregard of the partner’s advice and wishes, irreconcilable differences and personal ill-will between the partners, refusal to keep accounts open to the co-partners, refusal to account at reasonable times, and refusal to pay over profits as agreed: These are also listed as acts and circumstances that can justify a decree of dissolution and therefore can be seen as elements of wrongful removal or freeze-out.

Continue reading ›

Choosing the best attorneys for a corporate oppression matter in Illinois involves considering several factors. Look for a legal team with extensive experience in corporate law and specifically in handling shareholder disputes and oppression cases. They should have a strong track record of successfully advocating for minority shareholders’ rights. Also, consider firms that offer personalized attention to understand the unique aspects of your situation and provide tailored legal strategies. It’s important to choose attorneys who are adept in both negotiation and litigation, as resolving these disputes can require a flexible approach. Firms like Lubin Austermuehle, known for their experience in business litigation, including shareholder and LLC member disputes, is a good choice. Continue reading ›

Contact Information