Articles Posted in Business Disputes

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The Dream of Owning a Business — and the Nightmare That Followed

Some of our business clients come to us after realizing that the dream business they purchased is nothing like what they were sold. One of our current matters involves a small investor who purchased a business after reviewing glossy marketing materials, tax returns, and financial statements provided by the seller and a business broker.

On paper, the business appeared to be thriving: strong revenue, steady growth, and attractive profit margins. The buyer agreed to pay a substantial price based on those numbers and on the seller’s written warranties in an asset purchase agreement that the financials were “accurate” when provided and at closing.

Shortly after the sale, the new owner began comparing the point-of-sale (POS) data to the historic financials. The numbers did not come close to matching. The prior owner had used numerous no-tax transactions or other sleights of hand o inflate apparent sales. A later reconciliation showed the alleged inflated sales figures.

Our lawsuit in that matter alleged common-law fraud, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, and breach of contract. The theory is straightforward: the seller and broker supplied false financial statements and a misleading sales materials, failed to disclose critical POS discrepancies, and then warranted in the purchase agreement that the financials were accurate.

815 ILCS 505/2 declares it unlawful to use deception, misrepresentation, or the concealment of material facts in trade or commerce. By overstating revenues and hiding expenses, the seller engaged in precisely the sort of conduct the statute is designed to prevent. Those statutory claims complement our common-law fraud counts> In cases like this and other consumer fraud cases, we seek both rescission and damages, including punitive damages where the conduct is willful and part of a pattern. If the plaintiff is an individual we also seek aggravation inconvenience and stress damages.

The Role of Forensic Accounting and POS Analysis

In many business-fraud and corporate freeze out and breach of fiduciary duty matters, our ability to tell a compelling story depends on the numbers. We work closely with forensic accountants who examine POS data, bank records, tax returns, and internal spreadsheets. They quantify how much the revenues were inflated and how that inflation translated into an overpayment for the business or in case of corporate freeze otu cases excessive paymetns to the controlling managers through expense account or other types of over compensation..

Because we regularly collaborate with forensic accountants in fraud and breach-of-fiduciary-duty cases, we know how to translate technical accounting conclusions into plain language that judges and juries can understand.

Strategic Remedies: Damages, Rescission, or Both

Buyers who are defrauded into purchasing a business often have a choice: seek rescission and unwind the transaction, or affirm the deal and sue for the difference between what they paid and what the business was actually worth. In our cases, we often preserve both options, making clear in our pleadings that our client may elect rescission before trial.

We also pursue punitive damages based on the willful nature of the misconduct: the seller and broker did not simply make a mistake, they allegedly used fake sales entries and omitted sales tax on numerous transactions to pump up the numbers in a way that would be obvious to any experienced industry player. That type of conduct often justifies a substantial punitive award on top of actual damages and also sets the stage for stress and aggravation damages.

What Makes Our Firm Effective in Deal-Fraud Litigation

Our practice combines commercial litigation, consumer-fraud work, and a deep bench of relationships with forensic experts. In deal-fraud cases like this, we typically:

  • Obtain and analyze POS data, merchant statements, and bank records;
  • Compare tax returns and internal financials against source data;
  • Depose brokers, accountants, and sellers about what they knew and when; and
  • Use consumer-fraud statutes like 815 ILCS 505/2 to pursue fee-shifting.

Because we also handle business squeeze-out and freeze-out cases, we are familiar with disputes among partners and shareholders that often arise when one owner discovers that another brought them into a business based on false numbers. Continue reading ›

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The New Reality: Accusations Before Investigation

In the modern environment, a single social-media post can trigger a storm of attention, formal investigations, and sometimes a lawsuit. We have dealt with this type of situtation in many of our lible and business control cases.

Our firm represents pleaintiffs and defendants in these highly chargds cases that sit at the intersection of social causes and modern defamation or business control law.

Discovery Battles Over PR Firm Documents

A major battleground in these case can be obtaining through discovery outside public relations firm documents  and communciations when the opposing side has relied on such a firm. Those documents can matter if for instance they show whether the lawsuit is a genuine attempt to vindicate a reputation—or part of a broader public-relations campaign and lawfare as opposed to legitimate libel or business control suit

Illinois law treats discovery as broadly relevant if it has any tendency to make a fact in issue more or less probable. A 2019 appellate decision reported at 2019 IL App (1st) 182354, ¶ 35, and another at 2017 IL App (1st) 161918, ¶ 14, emphasize that discovery is not limited to what will be admissible at trial, but also includes what may lead to admissible evidence. That principle supports our effort to obtain communications with the public relations firm that helped craft talking points, draft emails to classmates, and shape threats to witnesses.

Courts have also recognized that public-relations work is generally not protected as attorney work product, even if it touches on litigation strategy. Decisions reported at 265 Ill. App. 3d 654 (1st Dist. 1994), 329 F.R.D. 628 (N.D. Cal. 2019), and 290 F.R.D. 421 (S.D.N.Y. 2013) hold that communications with outside consultants like publicists are ordinarily discoverable. We rely on that authority to argue that the PR firm documents must be produced.

Defamation in the Age of Anonymous Accounts

Because the original accusations in some of cases were posted through social-media accounts that sometimes hid the poster’s identity, we also deal with the cutting edge of online defamation. We regularly work with subpoenas to platforms such as Yelp, Google and SnapChat, IP and device information, and cross-referencing of screenshots, deletion logs, and metadata to tie anonymous statements back to real people.

Our role is not to silence legitimate speech about misconduct, but to defend people who tell the truth and to prosecute peole who libel our clients.

What Sets Our Firm Apart in Defamation Work and Business Dispute Work

Our lawyers have handled complex  libel and business control suits that blend:

  • High-profile media coverage, social-media and PR campaigns;
  • Aggressive discovery disputes over expert witnesses, PR firms, and internal investigations.

Because we routinely litigate both defamation and business torts, we are comfortable with large-scale document collections, forensic email and text discovery, and cross-border issues when the parties and witnesses are in different states. Continue reading ›

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Why Forensic Accounting Matters in Complex Business Fraud

Civil RICO and serious breach-of-fiduciary-duty cases live and die by the numbers. It is not enough to allege that a business partner or investment promoter “took money”; you have to show how funds moved, which entities were involved, and how those transactions fit into a pattern of racketeering activity such as wire fraud or mail fraud under 18 U.S.C. §1962.

In several of our current matters, we represent investors and entrepreneurs in disputes involving digital assets, closely held companies, and high-risk ventures where the financial records are a maze of limited-liability companies, internal transfers, and shifting balance sheets. In those cases, we partner with seasoned forensic accountants to reconstruct what really happened.

Examples from Our Current and Recent Matters

In one ongoing dispute involving a internet marketing venture, a member was told that affiliated companies were profitable and well-capitalized. A forensic review of balance sheets and income statements, however, showed that one entity reported net income in one year but then sustained significant losses the next and was insolvent within months, with liabilities exceeding assets by millions of dollars. Those findings undercut the fraud narrative.

We have also worked with forensic experts whose prior engagements include uncovering a nationwide investment schemes and hundreds of millions in fiduciary fraud or execessive fess and compensation all masked as loans of legitimate fees and services.  That level of real-world experience matters when your case involves serious allegations and high stakes.

How We Integrate Forensic Accounting into Civil RICO Theories

Civil RICO claims require proof of an enterprise, a pattern of racketeering activity, and injury to business or property. Forensic accountants help us tie those elements together by:

  • Mapping flows of funds between entities and individuals;
  • Identifying sham invoices, circular transfers, and unexplained withdrawals;
  • Testing whether financial statements fairly reflect underlying transactions; and
  • Quantifying investor losses and unjust enrichment.

When those analyses show, for example, that new investor money was consistently used to pay earlier investors, or that insiders siphoned funds through related-party contracts, we can frame those facts as predicate acts of wire or mail fraud. That can support a civil RICO claim alongside more traditional causes of action like common-law fraud, breach of fiduciary duty, and unjust enrichment.

Translating Complex Numbers for Judges and Juries

A good forensic report is only half the battle. The other half is turning spreadsheets and accounting jargon into a compelling trial story. Our lawyers are used to working hand-in-hand with forensic experts to prepare clear exhibits—timelines of transfers, simplified charts of related entities, and before-and-after net-worth analyses—that judges and jurors can understand at a glance.

Because we handle both business-tort cases and libel matters arising out of fraud accusations, we are sensitive to the reputational consequences of alleging racketeering. We carefully vet the evidence before including a civil RICO count, ensuring that our pleadings are supported by detailed, defensible forensic work rather than speculation.

What Makes Our Team Unique

Our firm’s approach to complex financial cases is different in several ways:

  • We involve forensic accountants early, often before suit is filed, so that we can shape the complaint around hard data rather than guesswork;
  • We are comfortable litigating in both state and federal courts, and we understand the procedural nuances of civil RICO and related claims;
  • We treat forensic experts as true partners in strategy, not just witnesses to be dropped in at the end of a case; and
  • We never lose sight of the human stakes—clients whose businesses, investments, and reputations are on the line.

Whether your dispute involves a digital-asset startup, a distressed operating company, or a complex web of related entities, this blend of legal and forensic expertise can be decisive.

 

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Summary: Law firms and professional companies are businesses too. When lawyer‑owners divert funds, freeze out a co‑owner, or weaponize firm control, a derivative suit or oppression claim can be the right tool—if you respect both corporate law and the professional‑ethics overlay.

Typical patterns we see:

  • Unilateral transfers disguised as “distributions” or “draws.” Bank statements and ACH histories are the first stop; courts expect contemporaneous paper (or pixels) to back up allegations.

  • Access choke‑points. Changing login credentials to trust accounts, practice‑management billing, or accounting software is a hallmark of a freeze‑out. Immediate injunctions can restore access and stop dissipation.

  • Mixing direct and derivative claims. A lawyer‑member’s “personal” grievance is often the company’s harm in disguise. Keep the derivative and individual lanes clean to survive motions to dismiss.

  • What to plead and prove:

  • Derivative standing (and demand/futility). Say who controls the firm, why a demand would be futile, and what records you sought before filing.

  • Statutory backbone. For LLC law practices, cite 805 ILCS 180/40‑1 (derivative actions) and the LLC Act’s fiduciary duties and information rights (15‑1, 15‑3, 15‑5). For PC/corporate forms, remember the oppression statute (12.56) and corporate records rights.

  • Remedies that actually help. Courts can impose constructive trusts on misdirected funds, order real‑time access to trust‑accounting and billing systems, and enjoin further unilateral withdrawals while the case proceeds.

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The elements required to establish a joint venture are broadly consistent across the search results. They include:

1. An express or implied agreement to carry on an enterprise (805 ILCS 206/202), (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987)), (Yokel v. Hite, 348 Ill.App.3d 703 (2004)).

2. A manifestation of intent by the parties to be associated as joint venturers (805 ILCS 206/202), (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987), (O’Brien v. Cacciatore, 227 Ill.App.3d 836 (1992)).

3. A joint interest as shown by the contribution of property, financial resources, effort, skill, or knowledge by each joint venturer (805 ILCS 206/202), (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987)), (Yokel v. Hite, 348 Ill.App.3d 703 (2004)).

4. Some degree of joint proprietorship or mutual right to exercise control over the enterprise (805 ILCS 206/202), (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987)).

5. Provision for the joint sharing of profits and losses (805 ILCS 206/202), (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987)), (O’Brien v. Cacciatore, 227 Ill.App.3d 836 (1992)).

It is important to note that all four criteria must be established or a joint venture does not exist (Fogt v. 1-800-Pack-Rat, LLC, 2017 IL App (1st) 150383 (2017)).

The obligation of a joint venturer to account to another member of the joint venture arises from the fiduciary nature of their relationship. The relationship between joint venturers, like that existing between partners, is fiduciary in character and imposes upon the participants an obligation of loyalty and good faith in their dealings with each other with respect to the enterprise (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987)). In the case of a sale of joint venture property by one joint adventurer, the other is entitled to an accounting on principal and interest profit, if any, received by the seller on the purchase money mortgage received when the joint venture property was liquidated (Burtell v. First Charter Service Corp., 83 Ill.App.3d 525 (1980)).

However, it’s important to note that whether or not a joint venture exists is a question for the trier of fact as they are in the best position to judge the credibility of the witnesses (Ambuul v. Swanson, 162 Ill.App.3d 1065 (1987)), (Thompson v. Hiter, 356 Ill.App.3d 574 (2005)), (Andrews v. Marriott Intern., Inc., 2016 IL App (1st) 122731 (2016)). Continue reading ›

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In Illinois, there are several circumstances under which a partner can sue another partner (Battles v. LaSalle Nat. Bank, 240 Ill.App.3d 550 (1992)), (In re Ascher, 141 B.R. 652 (1992), (Hux v. Woodcock, 130 Ill.App.3d 721 (1985)):

1. A partner can sue another for a breach of fiduciary duty, such as if a partner sells partnership property to a third party without approval from all partners (Battles v. LaSalle Nat. Bank, 240 Ill.App.3d 550 (1992)), (Nussbaum v. Kennedy, 267 Ill.App.3d 325 (1994).

2. A partner or partnership can bring an action against a co-partner if the plaintiff’s claim can be decided without a full review of the partnership accounts. This means that if the issue between partners can be resolved without an accounting, one partner can sue the other. However, if such an issue requires an accounting, that is the proper remedy to seek under the Illinois Partnership Act (In re Ascher, 141 B.R. 652 (1992)).

3. The capacity to sue is determined under Illinois law, and a partnership must sue in the name of all its partners (Stotler and Co. v. Reisinger, Not Reported in F.Supp. (1987). In other words, to sue a partnership, it is necessary to sue and serve all of the partners (Gerut v. Poe, 11 F.R.D. 281 (1951)).

4. A partner may not sue individually to recover damages for injury to the partnership (Hux v. Woodcock, 130 Ill.App.3d 721 (1985)), (Creek v. Village of Westhaven, 80 F.3d 186 (1996)). The lawsuit must be filed on behalf of the partnership and not the individual partner.

5. In cases involving a limited partnership, a limited partner can sue the general partners for alleged breaches of fiduciary and contractual duties arising under a written limited partnership agreement (Illinois Rockford Corp. v. Dickman, 167 Ill.App.3d 113 (1988)). However, limited partners do not have a cause of action for damages to their interest in a limited partnership as long as the partnership exists and has not been dissolved or liquidated (766347 Ontario Ltd. v. Zurich Capital Markets, Inc., 249 F.Supp.2d 974 (2003)).

6. A partner may maintain an action against a co-partner absent an accounting in certain situations, including upon claims involving express personal contracts between the partners, and also upon claims involving the failure to comply with an agreement constituting a condition precedent to the formation of a partnership (Hux v. Woodcock, 130 Ill.App.3d 721 (1985)).

7. Illinois courts may imply rights of action from Illinois statutes under certain circumstances. These include instances where the plaintiff is a member of the class for whose benefit the Illinois legislature enacted the statute; implication of the right is consistent with the underlying purpose of the statute; the plaintiff’s claimed injury is one which the Illinois legislature designed the statute to prevent; and a private right of action is necessary to effectuate the purposes of the statute (Bane v. Ferguson, 707 F.Supp. 988 (1989)). Continue reading ›

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Extensive Experience in Partnership, LLC Member, and Shareholder Disputes

At DiTommaso Lubin, we understand the complexities of business disputes in closely held companies. Whether you are facing a partnership disagreement, LLC member conflict, or shareholder dispute, our experienced attorneys are here to provide you with the guidance and representation you need to protect your interests.

Personalized Attention for Closely Held Companies

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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.

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Illinois has two rules that can be used to dismiss cases which allows for more flexibility in defending some actions then in federal court where there is only one means to seek dismissal of an action.

A Section 2-615 motion to dismiss and a Section 2-619 motion to dismiss under Illinois law are two distinct legal tools, each serving specific purposes.

A Section 2-615 motion to dismiss tests the legal sufficiency of a complaint by challenging whether the complaint states a claim upon which relief can be granted. This motion is concerned with defects appearing on the face of the complaint and does not rely on matters outside the complaint. It admits all well-pleaded facts and attacks the legal sufficiency of the complaint [5], [7], [12]. The court, in ruling on a 2-615 motion, considers only the allegations in the pleadings.

On the other hand, a Section 2-619 motion to dismiss acknowledges the legal sufficiency of the complaint but asserts that there are certain external defects or defenses that defeat the claims. It admits the legal sufficiency of the plaintiff’s claim but asserts ‘affirmative matter’ outside of the pleading that defeats the claim. This motion is sometimes referred to as a ‘Yes, but’ motion because it essentially says, ‘Yes, the complaint was legally sufficient, but an affirmative matter exists that defeats the claim’.

The two types of motions can be combined under Section 2-619.1, but it is important to maintain procedural distinctions between them. Each part of a combined motion should be limited to and specify that it is made under one of Sections 2-615, 2-619, or 2-1005, and should clearly show the points or grounds relied upon under the Section upon which it is based.

In dealing with these motions, the court interprets all pleadings and supporting documents in the light most favorable to the plaintiff. Furthermore, dismissals pursuant to sections 2-615, 2-619, and 2-619.1 are reviewed de novo. Continue reading ›

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In Illinois, tortious interference with contract and tortious interference with prospective business relations are two distinct torts with different pleading requirements.

To establish a case for tortious interference with contract, the plaintiff must show the following [7]:
1) Existence of a valid and enforceable contract between the plaintiff and another party
2) The defendant’s awareness of this contractual relationship
3) The defendant intentionally and unjustifiably induced a breach of the contract, which results in a subsequent breach by the other contracting party
4) The plaintiff suffered damages as a result of the breach. Continue reading ›

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