Articles Posted in Business Disputes

Our longtime co-counsel and colleague Dmitry Feofanov argued an important case this week before the Illinois Supreme Court concerning a consumer’s ability to revoke acceptance of a brand new RV with a hidden defect — a leaky roof.  The consumers revoked acceptance after the RV dealer couldn’t provide an estimated completion date for the repairs. An RV is a summer product and the consumers feared (correctly) that they would lose the use of the RV which is a summer product for the entire summer if they did not revoke acceptance.  The trial and appellate courts ruled that the consumers should have given the dealer the opportunity to repair the RV. We filed an amicus brief in the Supreme Court on behalf of the National Association of Consumer Advocates supporting the position that a consumer or buyer of goods does not have to provide an opportunity to cure for a material defect as this that undercuts the value of the product to the buyer and can revoke acceptance.

You can also listen to the oral argument below.

Continue reading ›

Where an asset purchase agreement between two companies did not contemplate the forfeiture of an entire reserve payment as a result of an audit of assets taking one month longer than originally contemplated, and such a forfeiture would result in a windfall for one of the parties.

ARC Welding Supply Co. was a distributor of compressed gases and welding supplies in Vincennes, Indiana. As part of an asset purchase agreement American Welding & Gas, Inc. paid ARC $1,534,796.06 for ARC’s assets, of which the primary assets where its asset cylinders. Some cylinders were already rented to ARC’s clients, so determining the number of asset cylinders that could be transferred from ARC to American was difficult. As a result, American withheld $150,000 for 180 days to protect against a shortage of up to 1,200 out of a potential 6,500 cylinders.

American conducted an audit of the number of cylinders, beginning with those at ARC’s facility, and then those that were rented to existing clients. American did not visit every client, only those for whom rental records could not clearly indicate the number of cylinders in the client’s possession. The agreement originally specified that settlement would occur on or before April 15, 2015. Ron Adkins, American’s President, and CEO, informed ARC’s owner, Charles McCormick, that the audit was taking longer than expected and the overall count was shorter than expected. As a result, American wanted to extend the time for the audit as a means of locating every possible cylinder. At the conclusion of the audit in May 2015, the final number of cylinders was 4,663, 1,837 short of the estimated total of 6,500. As a result, American did not pay the $150,000 that was held back, and ARC filed suit. Continue reading ›

When officers of a corporation misrepresented the capacity of the corporation to meet requirements of an RFID manufacturing project, the district court allowed some claims for breach of contract, quantum meruit, and unjust enrichment to proceed. The court also dismissed some claims against the individual officers of the corporation, based on questions regarding the existence of valid contracts between the client and the officers.

A-1 Packaging Solutions, Inc. is a corporation that selects and provides RFID (Radio Frequency Identification) technologies from a variety of manufacturers to provide custom solutions for customers. Fiberteq hired A-1 to design an asset and inventory tracking system for its facility in Danville, Illinois. A-1 contacted several manufacturers and distributors who provided the relevant technology, in search of options to complete the system.

Dr. William Davidson and Jan Svoboda, the Chief Technology Officer and President of Firefly RFID systems, were one company contacted by A-1. In response, Davidson and Svoboda told A-1 that Firefly had expertise in RFID hardware and deployments, and had the capability to build the system that A-1 had designed. As part of the negotiation, A-1 specified to Firefly that any rights to the software created by Firefly were required to be transferred to A-1. Firefly agreed. A-1 then retained Firefly to assist in designing and building the RFID system for Fiberteq. Continue reading ›

The district court granted summary judgment to a bank on a breach of contract claim where a bank customer was precluded from suing bank for payment of fraudulent checks because customer did not report fraud within 90 days of receiving statement containing copy of first fraudulent check, and account agreement specified that fraud was required to be reported within 90 days.

Designer Direct, Inc. has a bank account with PNC Financial Services Group, Inc. Three of Designer Direct’s officers are authorized signers on its bank account. Between October 2016 and May 2017, Designer Direct’s former office manager, Kristiana Ostojic, forged one of those officers’, Stephen Rebarchak, signature on thirty-nine checks drawn on the account. Each check was made payable either to Ostojic or KO Development. The sum total of the fraudulent checks was $185,421.94

Ostojic deposited each check at either US Bank or JP Morgan Chase. The checks were then eventually presented to PNC for payment and were processed during the normal course of business through an automated system. PNC mailed account statements to Designer Direct each month. Each statement identified checks drawn on the account by date, check number, and amount. PNC also included copies of drawn checks with each statement.

Rebarchak reviewed all of the statements sent by PNC but did not see the electronic check copies because Ostojic intercepted the online statements and removed the check images before he could see them. When Rebarchak did finally see one of the checks, in May 2017, he was immediately aware of the fraud and notified PNC the next day. Designer Direct eventually sued PNC in federal district court in the Northern District of Illinois for breach of contract, alleging that PNC breached the account agreement by failing to exercise ordinary care in the payment of the checks. Continue reading ›

Where the mortgage on a development company’s property was mistakenly recorded as satisfied, and then later corrected, the mistaken release did not extinguish the debt, and the contract was still effective.

Trinity 83 Development borrowed $2 million from a bank in return for a mortgage on real property and a note. Five years later, in 2011, the bank sold both the mortgage and the note to ColFin Midwest Funding, who relied on Midland Loan Services to collect the payments due. Two years later, Midland recorded a “satisfaction” document indicating that all debts associated with the note and mortgage had been paid. This recording was in error, as the loan was still outstanding. Unaware of the mistake, Trinity continued making payments on the loan. Continue reading ›

Where a construction manager overstated amount in mechanic’s lien by more than 100%, and overstatement consisted of work performed by other contractors that manager did not have a contractual relationship with, the circuit court did not err in granting summary judgment to restaurant owner alleging constructive fraud on part of the construction manager.

In August 2017, MEP Construction filed suit against Truco MP and Randhurst Improvements seeking to foreclose upon a mechanic’s lien and other relief. The complaint alleged that Truco and MEP entered into a verbal contract in April 2014 in which MEP would provide construction management and related services to Truco for the purpose of building out Truco’s restaurant in Mount Prospect, Illinois. MEP alleged that it fully performed the work it was required to perform as of May 2015 and that Truco paid only $612,447.15 of $791,781.16. MEP recorded a mechanic’s lien in September 2015 with the Cook County Recorder of Deeds. Continue reading ›

Our firm today filed an amicus brief or friend of the court brief in the on behalf of the National Association of Consumer Advocates and Consumers for Auto Reliability and Safety in an important consumer rights case and commercial law case, arising out of an interpretation of a provision of the Uniform Commercial Code. That provision expressly allows for consumers to revoke acceptance of and return for a full refund a product with hidden defects without having to allow the seller the opportunity to repair the defects. The express language of UCC requires this result yet the trial and the appellate court ignored the plain language of the UCC and that the majority of states interpret this provision of the UCC to allow for revocation of acceptance without any opportunity to cure. The Illinois Supreme Court decisions dictate that Illinois should follow the majority view of the other States in interpreting UCC provisions.

This case involves an RV that Plaintiffs bought in April for a summer vacation. When the RV turned out to be allegedly defective (massive water leaks), and when, by August, the RV Dealer/Warrantor allegedly would not give an estimate as to when it would repair the RV, and allegedly refused to “cure,” Plaintiffs revoked acceptance and canceled their contract.  Continue reading ›

When a contract dispute arose between two telecommunications companies over the rates charged during the switching process of telephone call transmission, district court committed error in granting partial summary judgment to plaintiff, as it was likely that the same facts and issues would appear before the appellate court in the future after the FCC resolved certain regulatory issues.

Local Exchange Carriers and Interexchange Carriers are types of telecommunications service providers. LECs operate in limited geographical regions, and IXCs transport calls between them, enabling consumers to make long distance telephone calls. IXCs pay a fee in exchange for access to an LEC’s network. These rates are set either by regulatory agencies or in negotiated agreements between the IXC and the LEC.

In February 2009, Peerless Network, a LEC, and Verizon, an IXC, entered into one such agreement. The contract provided for lower rates for certain switching services. If a rate in the agreement did not apply, Peerless billed Verizon at its tariff rates, which were the rates that Peerless had filed with the Federal Communications Commission. In 2013, the relationship between Peerless and Verizon broke down, and Verizon began withholding payment. In September 2014, after negotiations failed to resolve the dispute, Peerless sued Verizon.

Peerless’ complaint alleged several counts, including breach of the Tandem Service Agreement, and breach of federal and state tariffs. Verizon asserted that Peerless was not entitled to the higher rates that it charged, due to its status as an Access Stimulator, which is a LEC that charges high rates to companies engaged in high volume call services, such as adult entertainment calls, chat lines and “free” conference call lines. Such LECs charge high rates to IECs and then pass a portion of the tariff revenue back to the companies that generated the high call volume. In turn, the FCC regulates the maximum rates that LECs meeting this definition can charge. Continue reading ›

Best-Chicago-Commercial-Litigation-Lawyers-200x300Knowing where to bring a lawsuit and what state’s laws to apply can have a huge impact on the success of business litigation. Courts have developed extensive and complicated rules and procedures for determining where a lawsuit should be brought and which jurisdiction’s laws to apply, but that procedure is rarely simple or straightforward. Conflicts between the laws of two or more states can complicate the matter further. Agreeing in advance to jurisdiction and venue can provide certainty and save a great deal of time and money in the unfortunate event litigation does ensue. For this reason, companies often address in the contract itself how any disputes or litigation will be handled. A common example includes “forum selection” or “choice of venue” provisions, which identify a specific state (or even a specific county within a state) as the proper jurisdiction and venue for litigation.

Forum selection is a particularly important part of a contract when the parties are from different jurisdictions, especially when the laws of those jurisdictions differ significantly from one another. A forum selection provision gives a business the security of knowing that any litigation will take place in a familiar location applying a familiar set of substantive laws. However, a poorly worded forum selection provision may not provide the security hoped for as a recent opinion from Delaware’s Chancery Court in a partnership dispute case demonstrates. The case, In re Bay Hills Emerging Partners I, L.P., et al, involved the issue of whether a forum selection provision in a limited partnership agreement required all lawsuits to be filed exclusively in Kentucky. Continue reading ›