Articles Posted in Breach of Contract

 The vast majority of breach of contract lawsuits in commercial litigation involve one party to a contract suing the other party to the contract for failing to perform. Recently, an Illinois Appellate Court was forced to address a less common scenario where the plaintiff alleging a breach of contract was not a party to the original contract. The court ultimately ruled that a non-party property owner could not assert breach of contract or negligence claims against parties to various construction contracts between the tenants of the property and the contractors and architects. The Court based its conclusion on the determination that the property owner was not an intended beneficiary of the contracts at issue.

Navigant Development, LLC owned a restaurant property on Wells Street in downtown Chicago. After two separate tenants completed two separate renovations at the property, defects in the trusses supporting the property’s ceiling were discovered. Further investigation revealed extensive damage to several of the trusses forcing Navigant to shut the building down and make repairs costing nearly a million dollars to fix the structure. Navigant’s insurer paid Navigant for the cost of these repairs and for the income lost during the time the restaurant was closed. As the owner’s subrogee, the insurer then sued various contractors and architects involved in the renovation projects, alleging multiple counts of breach of contract and negligence. In its complaint, the insurer alleged that Navigant was an intended third-party beneficiary because the defendants knew the work was to be performed at a property owned by Navigant.

The defendants sought dismissal of the claims arguing that Navigant was not an intended third-party beneficiary of the contracts at issue. The defendants also argued that the negligence claims were precluded by the economic loss doctrine. The trial court ultimately granted the defendants’ motions with prejudice finding that Navigant could not be an intended third-party beneficiary to the contracts between defendants and Navigant’s tenants. The trial court also found that the negligence claims were barred by the economic loss doctrine and that none of the exceptions to the doctrine applied to the case. After the court denied the insurer’s motion to reconsider the dismissal, the insurer appealed. Continue reading ›

A former teacher at a high school who was fired later sued the school, alleging he was fired because he was an atheist. After the teacher was dismissed, the school published a press release on its website stating that the teacher had been terminated. The teacher and the school entered into a settlement agreement that included a nondisparagement clause. The teacher later sued the school a second time, arguing that it violated the nondisparagement clause by keeping the press release active on its website. The district court granted summary judgment for the school, and the teacher appealed. The appellate panel affirmed the decision of the district court, finding that the settlement agreement clause was only forward-looking and that the teacher could have negotiated for the removal of the existing press release but failed to do so. The panel rejected the teacher’s argument that each time a person accessed the press release online a new breach occurred.

In August 2013, Middlebury Community Schools hired Kevin Pack to teach high school German. Pack’s employment was terminated less than a year later, in April 2014. Soon after the termination, the school published a press release about Pack on its website criticizing Pack. The press release remains publicly available on the school’s website. In January 2015, Pack sued the school, claiming that it fired him because he was an atheist. Continue reading ›

Almost as soon as reality TV gained prominence in our popular culture, it ceased to be reality. Producers and showrunners end up with hours and hours of footage that has to be edited down to fit the time frame of the TV show, but it didn’t take long for them to realize they could also edit the footage to tell a story … even a story that wasn’t there.

Donovan Eckhardt, one of the co-hosts of the hit HGTV show “Windy City Rehab”, alleges the network and the producers sought to create a story for their viewers by making him appear to be the villain in the story of the breakup of his professional relationship with his co-host, Alison Victoria, but Eckhardt alleges they went further than just editing raw footage.

According to the lawsuit, the show filmed scenes when Eckhardt was not present that made it look like Eckhardt was embezzling funds from their rehab projects. The camera would show Victoria looking as though she was trying to figure out where the money had gone, but Eckhardt insists every bill was cleared by Victoria and that she knew their company’s financial situation throughout every step of the process.

The allegations that Victoria was acting when she appeared to be puzzling over financial statements that didn’t add up make one wonder what else she did on the show that was acting for the benefit of the camera and not based in any reality. In one scene in the second season of the show, she teared up while discussing her rocky business relationship with Eckhardt, whose lawsuit alleges the tears were fake. Continue reading ›

A company that provided administrative and payroll services was acquired by a bank under a stock purchase agreement. The agreement provided for the escrow of $2 million dollars, that was to be released to the sellers after a period of time had passed after the sale. Several months after the sale, a former employee came forward to reveal potentially fraudulent practices on the part of the administrative company. After an investigation by an outside law firm, the bank demanded indemnification from the sellers, but the sellers refused. The bank then sued in an attempt to recover money it had paid out to settle claims with the company’s clients. The district court determined that the indemnification claim was made too long after the bank first learned about the potential issues, but the appellate court found that undisputed facts did not show this to be the case and determined that the district court erred in granting summary judgment.

The Damian Services Corporation provides various administrative and payroll services to independent temporary staffing companies. The baseline level of service that Damian provides is short-term payroll funding to pay the temp agencies’ employees. Damian also offers other services to clients who pay more. Although Damian contracted with its temp agency clients, it invoiced the end-user companies that hired the temporary workers. The end-user employers would then pay Damian, which would, in turn, send the payments to the temp agencies after taking its cut as a fee for its services.

Damian encouraged its client staffing agencies to obtain prompt payment by providing discounts or levying fees depending on how long it took for the end-user employers to pay. These discounts and fees were negotiated independently with each staffing firm. In 2009, Damian changed its invoicing practices in such a way that made it much more difficult for staffing firms to receive discounts for prompt payment and more likely to be levied with fines. Continue reading ›

For producers and manufacturers, alike supply contracts have many advantages. For manufacturers, it ensures a steady supply of raw goods for manufacturing, and for producers, it secures a steady stream of revenue. All contracts though come with the risk that one of the parties will breach them. In a recent decision, the Seventh Circuit provided guidance for interpreting the “adequate assurances” provision of Section 2-609 of the Uniform Commercial Code.

The dispute at issue is nearly a decade old. In 2009, BRC Rubber & Plastics Inc., a designer, and manufacturer of rubber and plastic products primarily for the automotive industry entered into a five-year supply contract with Continental Carbon Company for the supply of carbon black, an ingredient often used in the manufacture of rubber products. The agreement included baseline prices for three types of carbon black and provided that the prices were “to remain firm throughout the term of this agreement.”

In 2011, the supply of carbon black became generally tight and shortages were commonplace. In response, Continental sought to unilaterally increase the prices it charged BRC. BRC responded to the news of the price increase by objecting that the increases breached the contract. Continental refused to rescind the increase and its vice president of marketing and development instructed the sales representative in charge of the BRC account to withhold shipments to BRC unless it agreed to the increase.

Even after being informed of the anticipated increase price, BRC continued placing new orders at the contact prices. Continental did not respond to BRC’s objections to the increase but did continue to fulfill the orders until May of 2011. After Continental missed a shipment, BRC contacted Continental but Continental’s representative would not guarantee to supply product under existing purchase orders and claimed that it was “out of his control.” Without a confirmation that Continental would perform in conformity with the contract, BRC scrambled to find alternate suppliers and eventually received a shipment from another provider at spot rates higher than the contract rate. Continue reading ›

Two inventors who were entitled to royalties on the sales of products sued the purchaser of their former company over their royalty rights. The litigation and arbitration took years, and after the third round of arbitration, the arbitrator determined that the inventors were not entitled to compensation from the company they sued. Despite this finding, the two continued to engage in litigation against the firm. After their final suit was dismissed in the district court, the company sought sanctions for bringing a groundless lawsuit. The district court granted the motion, finding that the suit had been barred by the doctrine of res judicata and the plain language of the governing agreements. The appellate panel agreed, determining that the results of the third and fourth rounds of arbitration made the suit frivolous and it affirmed the imposition of sanctions.

In 1997, Tai Matlin and James Waring co-founded Gray Matter Holdings, LLC. In 1999, they entered into a Withdrawal Agreement with Gray Matter. The agreement entitled Matlin and Waring to royalties on the sales of certain key products. In 2003, Gray Matter sold some of its assets to Swimways Corp.

Since that sale, Matlin and Waring have been engaged with Gray Matter in protracted litigation and arbitration over their royalty rights. During the third arbitration, the arbitrator determined that Gray Matter had not transferred its royalty obligations to Swimways in 2003, and therefore remained solely responsible for any royalty compensation owed to Matlin and Waring under the Withdrawal Agreement. Continue reading ›

A plastics company purchased ingredients from a producer of rubber products for many years under a series of short-term agreements. A few years after signing a long-term agreement, the rubber producer attempted to unilaterally raise the price of the products it was selling to the plastics company. When the plastics company protested that this was not allowed under the agreement, the rubber producer failed to make scheduled deliveries on time. The plastics company then sought an alternate source of rubber and sued the producer for the difference in cost it paid. The district court determined that the rubber company failed to adequately assure the plastics manufacturer of its ability to perform under the contract, and the plastics company was therefore entitled to seek supplies elsewhere and recoup damages. The appellate panel affirmed, finding that the plastic company’s actions were reasonable under the Uniform Commercial Code.

BRC Rubber & Plastics, Inc. designs and manufactures rubber and plastic products, primarily for the automotive industry. Continental Carbon Company manufactures carbon black, an ingredient in many rubber products. Before 2010, BRC bought all the carbon black it needed from Continental, though the two companies did not have a long term supply contract.

In 2009, BRC solicited bids from several suppliers of carbon black, seeking a long-term contract to ensure continuity of supply. Continental won the bidding, and in late 2009 the two companies signed a five-year contract to run to Dec. 31, 2014. Continental agreed to supply BRC with approximately 1.8 million pounds of prime furnace black annually in equal monthly quantities. The contract listed baseline prices for three types of carbon black which were to remain firm throughout the agreement. The contract also included instructions for calculating the feedstock price adjustment to account for fluctuations in the price of oil and gas. Continue reading ›

When workers get sued by their employer for breaching their employment contract, it’s fairly common for the workers to argue that the contract was invalid, but it’s less common for them to claim their signature on the contract was forged. That’s what Eric M. Frieman said when USI Insurance Services, LLC, sued him for allegedly stealing clients away from Wells Fargo to work with his new employer, RCM&D Self-Insured Services Inc., otherwise known as SISCO.

Frieman started working for Wells Fargo Insurance Services USA Inc. in 2008 as an employee benefits producer. In 2010, he signed an employment contract with Wells Fargo that included clauses that forbade him from working for a competitor and/or soliciting clients from Wells Fargo to switch to his new employer.

But when Frieman left Wells Fargo in 2016 to go work for RCM&D, he allegedly actively solicited 18 clients he had served while working at Wells Fargo and invited them to switch over to RCM&D, which they did. USI purchased Wells Fargo in 2017 and they are named as the main plaintiffs in the non-compete lawsuit against Frieman.

Rather than denying that the employment contract he signed with Wells Fargo is valid, Frieman claimed that he had never signed the document and that his signature had been forged. He insisted he only has one signature and that the signature above his name on his employment contract with Wells Fargo does not match his signature. Continue reading ›

After the manufacture of granola bars went awry, the company that hired the manufacturer sued the manufacturer alleging breach of contract among other claims. The granola company alleged that the manufacturer failed to supply the required number of granola bars and supplied bars that were defective. The suit was filed in Illinois, and the defendant manufacturer, headquarters in Illinois, attempted to transfer the case to Michigan where the production of the bars had occurred. The trial court denied this motion, finding that Illinois was an appropriate forum, and the appellate panel of the Illinois Appellate Court agreed and affirmed.

18 Rabbits, Inc. is a California corporation with headquarters in San Francisco, CA. Hearthside Food Solutions is a Delaware corporation with headquarters in Downers Grove, IL. 18 Rabbits hired Hearthside to toll manufacture its premium organic granola bars, in a process by which 18 Rabbits would supply the raw materials for the bars, Hearthside would manufacture them, and 18 Rabbits would own the completed product. In August 2016, the two companies executed a mutual confidentiality agreement.

The two companies met shortly thereafter to discuss the possibility of Hearthside manufacturing the bars. Beginning in September 2016, Hearthside’s Illinois-based managers participated in multiple, weekly telephone calls with 18 Rabbits. Hearthside represented that it could manufacture the bars to 18 Rabbits’ specifications and to satisfy all of 18 Rabbits’ customers’ orders for bars. Continue reading ›

Two property owners got into a dispute regarding a roof that encroached onto a neighboring property. The roof was constructed after the prior owners of both properties agreed and entered into a revokable license. The trial court found that the roof was an encroachment and granted summary judgment for the plaintiffs. The appellate panel disagreed, finding that the encroachment was unintentional, and the cost of replacing the roof was great while the benefit to the plaintiff of having the roof replaced was minimal. Therefore the panel determined that the trial court abused its discretion in finding for the plaintiff.

JCRE Holdings owns property in Peoria Heights. GLK Land Trust owns the neighboring property. Gary L. Kempf is the trustee of GLK Land Trust. The two properties share a common wall. In 1982, the prior owners of the properties entered into and recorded a “Party Wall Agreement.” The agreement designated the shared wall as a common support wall. In 1996, when two other sets of owners owned the properties, one received permission from the other to construct a sloped roof that hung over a portion of the wall onto the others’ property.

In 2014, JCRE sued GLK alleging that the overhanging roof constituted a trespass. The complaint sought injunctive and other relief. The parties filed cross-motions for summary judgment. The trial court denied both motions. After motions to reconsider, the trial court granted JCRE’s motion, finding that the agreement between the prior property owners constituted a revocable license that JCRE revoked. GLK then appealed. Continue reading ›

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