Articles Posted in Business Disputes

After a corporation attempted to designate its principal agent the right to file an answer to a complaint pro se, the trial court found that the corporation had not properly appeared before the court and awarded a default judgment to the plaintiff. The corporation attempted to have the default judgment declared void, and the trial court found that the corporation had not demonstrated that it acted with due diligence to explain its failure to file a proper appearance. The appellate panel determined that the trial court did not err and that the corporation’s petition failed under both a standard 2-1401 and a subsection (f) analysis.

AZM Group, Inc. executed an asset purchase agreement with Askew Insurance Group, LLC. The APA addressed AZM’s purchase of Askew. The terms of the agreement stated that Askew would continue its current lease agreement for its office space from September 2014 to April 2017. A separate sublease agreement between AZM and Askew would enable AZM to sublease Askew’s office space from the same time period. AZM agreed to pay Askew $1300 per month for rent. Askew would then add the additional amount to total the monthly rent at $1550, to be paid to the landlord by Askew. Continue reading ›

Best-Chicago-Business-Dispute-Lawyer-1-300x189AbbVie, a pharmaceutical company headquartered in Illinois, was sued by a trading firm after it conducted a Dutch auction to determine the price for its tender offer to repurchase shares of its own stock. Shareholders participated in the auction, offering to sell their stock back to AbbVie, and the lowest offered prices were selected by AbbVie until AbbVie had reached $7.5 billion worth of repurchases. AbbVie hired a company to receive bids and determine the final price it would purchase shares at. That company published preliminary numbers and later corrected them after the market had closed. The trading firm alleged that by publishing the preliminary numbers and correcting them after the close of trading, AbbVie had violated the Securities Exchange Act. The 7th U.S. Circuit Court of Appeals ruled in favor of AbbVie, affirming the decision of the district court and finding no violation.

AbbVie, Inc. made a tender offer to repurchase as much as $7.5 billion of its outstanding shares. AbbVie conducted a Dutch auction to determine the price. AbbVie began the auction by setting the price at $114. Shareholders participated by offering to sell their shares at or below $114. AbbVie then selected the lowest price that would allow it to purchase $7.5 billion of shares from the tendering shareholders.

The auction took place from May 1, 2018, to May 29, 2018. On May 30, AbbVie announced that it would purchase 71.4 million shares for $105 per share. AbbVie’s stock, which had been trading at $100 closed at $103 on May 30. Approximately an hour after the close, AbbVie announced that it had received corrected numbers from the company it hired to receive bids, Computershare Trust Co. Instead of purchasing 71.4 million shares at $105 a share, AbbVie would purchase 72.8 million shares at $103 a share. The next day, AbbVie’s share price fell to $99.

Walleye Trading LLC filed suit, contending that AbbVie’s announcement of preliminary numbers, followed by corrected numbers after trading closed, violated § 10(b) and 14(e) of the Securities Exchange Act of 1934. Walley also argued that William Chase, a controlling manager of AbbVie, was liable under § 20(a) of the act. The district court dismissed Walleye’s complaint for failing to state a claim, and Walleye appealed. Continue reading ›

Back in January of 2012, the City of Westland Police and Fire Retirement System filed a class-action lawsuit against MetLife Inc. They alleged that the insurance company used data from the Social Security Administration’s “Death Master File” (DMF) to determine when to stop paying annuities to deceased policyholders, but allegedly did not use the same database to determine when to pay out life insurance policies or the Retained Asset Account, although it could have easily done so.

The insurance company also allegedly failed to include data from the DMF regarding its pending payouts in its quarterly reports to its shareholders, thereby underreporting to its investors the amount of money it would have to pay out to policyholders and overestimating its quarterly profits. This withholding of information made MetLife’s investors think the company had less money in outgoing payouts than it actually had, which allegedly resulted in MetLife maintaining stock prices that were artificially high – as soon as the information was made public, the insurance company’s stock prices allegedly dropped and the plaintiffs of the lawsuit allege they suffered financial damages.

Despite the fact that regulators had looked into the insurance company’s alleged misuse (or at least misreporting) of the data contained in the DMF, MetLife also allegedly failed to disclose to its shareholders the fact that regulators were investigating the insurance company’s misuse of the DMF. Continue reading ›

Gary Ganzi and his sister, Claire Ganzi Breen, sued their cousins back in 2012 for allegedly cheating them out of millions of dollars in royalties over the course of more than 40 years. A state court judge in Manhattan sided with the Ganzi siblings, saying the actions of the defendants, Walter Ganzi Jr. and Bruce Bozzi Jr., constituted a breach of fiduciary duty in which they prioritized their own financial wellbeing above the responsibility they bore their shareholders.

The defendants are the grandsons of the original founders of the iconic Palm steakhouse, and together they own a controlling share of the company, Just One More Restaurant Corp., which owns the chain of restaurants. They have opened more than 20 Palm restaurants across the U.S. and have licensed intellectual property related to the restaurant, including the right to use the name, logo, and the look and feel of the original Palm. The Ganzi siblings own all that intellectual property and the defendants allegedly licensed that property from them every time they opened a new Palm restaurant.

The price of licensing that intellectual property was set at a flat rate more than four decades ago, and as a result, the Ganzi siblings have been paid $6,000 in licensing fees for every new Palm restaurant that opens, but they claim that it’s worth much more. Continue reading ›

Hudson’s Bay (HBC), the Canadian retail company that owns Saks, among other high-end stores, has been sued by lenders who claim the reorganization of the company that happened earlier this year was conducted in an attempt to set up a secret corporate shell game that has robbed the credit that exists as insurance on the $850 million loan the plaintiffs have invested in the company.

The lawsuit centers around the fact that, as the owner of stores like Saks and Lord & Taylor, HBC was responsible for guaranteeing payment on all loans for the stores, including making sure the rent was paid if the stores themselves were in financial distress or unable to make rent for any other reason.

Earlier this year, HBC formed a new Bermuda corporation, which is owned by shareholders with a controlling interest in HBC, as well as executives at the highest levels of HBC’s corporate hierarchy. According to the plaintiff, Situs Holdings, this transfer of assets is not only improper but also violates the loan agreement and puts at risk the company’s ability to repay the loan.

HBC denies all the allegations, claiming the restructuring amounted to little more than a change in name and some paper shuffling. It also alleges that Situs never had any claim on the assets of HBC that were reassigned in the course of the restructuring process. The Canadian retail company insists that Situs’s reaction to the restructuring is far beyond what the restructuring actually accomplishes and that the plaintiff’s claims that HBC allegedly conducted this restructuring in secret, deliberately keeping it concealed from Situs, are likewise false. Continue reading ›

If someone is accused of defrauding investors in one city, does that mean that person can’t do business with another company in another city? Especially before the allegations of fraud have been determined by a court of law?

That’s the question James “Woody” Dillard’s attorneys and business partners are asking as investors who were allegedly defrauded by Dillard try to claim potential vendors for Dillard and his business partners should have all their facts in order before signing on the dotted line.

Dillard has recently partnered with Streamline Boats of Hialeah, Florida, which makes semi-custom fishing boats. Although the company is only a couple years old, it has already changed locations several times and is currently looking to sign a lease for warehouse space at the Port of Pensacola. The city of Pensacola has put the lease on hold while they investigate.

Specifically, the city is worried about styrene, a foul-smelling by-product from working with fiberglass, which is a prominent material used to make all kinds of boats these days. Having made strides in reducing their emissions and their impact on the environment, the city is concerned that having a boat manufacturer in their warehouse district will undo much of the work they’ve done towards making and maintaining a more eco-friendly city.

Sanchez, one of the managers of Streamline Boats, claims they use very little styrene in the production of their boats, and that they invest heavily in the warehouse space they use to make sure they don’t stink it up. Essentially, they strive to become ideal tenants.

But two investors who invested in another of Dillard’s business ventures claim emissions should be the least of the city’s concerns when deciding whether to approve the lease. Continue reading ›

The ARDC Hearing Board recommended a two-year suspension for attorney Joel Brodsky due in large part to a case where his own attorney Joe “the Shark” Lopez admitted that Brodsky engaged in “Rambo” tactics. The Hearing Board found based on clear and convincing evidence that Brodsky harrassed opposing counsel and the Plaintiff’s expert witness with baseless claims.  It held:

We find the Administrator proved a violation of Rule 3.1 by clear and convincing evidence. Moreover, we concur with the district court’s view of Respondent’s actions as “wildly inappropriate” and the Seventh Circuit’s opinion that his conduct was “beyond the pale.”

As to Brodsky’s failure to provide any meaningful apology or show true remorse the Hearing Board had this to say:

After a dispute occurred between Chairman and members of the board of directors of closely held corporation, Chairman removed several members from the board and sued them for civil conspiracy, tortious interference, libel, and breach of fiduciary duty. The Delaware Court of Chancery granted the defendants’ motion to dismiss, finding that the plaintiffs failed to allege facts sufficient to prove civil conspiracy, breach of fiduciary duty, or tortious interference. The court also determined that the Chairman was a limited-purpose public figure and the plaintiffs therefore did not meet the heightened pleading standard for their libel claim.

In 2010, Todd O’Gara founded Wanu, a Delaware corporation based in California that produces nutrient-infused water. In 2014, O’Gara stepped down as CEO, but continued as Wanu’s President, Chairman, and largest stockholder. In 2017 O’Gara executed voting agreements and irrevocable proxies with a number of Wanu stockholders. The voting agreements, combined with his shares, gave O’Gara control over approximately fifty-two percent of the voting power in Wanu.

In March 2018, a majority of Wanu’s board of directors voted to remove Wanu’s CEO, Steve Dollase. In April 2018, Dollase and two Wanu stockholders, Jay Binkley and Greg Hunter, raised allegations against O’Gara. The three alleged that O’Gara had inhibited Dollase’s ability to perform as Wanu’s CEO in a variety of ways. The three also alleged that O’Gara’s business expenses and spending were excessive and unsustainable and that O’Gara had executed an unauthorized certificate issuing several hundred thousand shares to himself.

In May 2018, Wanu engaged independent counsel to investigate the allegations. The investigation concluded in July 2018 and its findings, that Dollase was informed or had the ability to be informed about many of the issues he complained about; that his allegations were motivated by his dislike of O’Gara’s management style and personality; that he was generally not well-liked as a leader; and that his management style created tension within the office, were reported to the board. After this, the Dollase faction raised new allegations against O’Gara, namely that O’Gara made misstatements about his educational background in various documents prepared for prospective investors in 2014 and 2015. Wanu engaged another investigator to look into the new allegations. This investigator summarized his findings in August 2018, stating that he was unable to confirm that O’Gara had in fact received degrees from the various educational institutions he claimed to have attended. Continue reading ›

A building contractor in Minnesota ordered a specific brand of flameproof lumber from a Chicago distributor of commercial building materials. Unbeknownst to the contractor, the distributor substituted its in-house brand of lumber in the order. The in-house brand of lumber had not been certified to meet the safety standards required by the architect of the buildings and the contractor was later required to rip out the lumber and replace it with new material. The contractor sued the distributor. The distributor’s insurance company then sought a judgment that it was not required to defend the distributor. The district court and the appellate court agreed, finding that the actions of the distributor were not covered under its insurance policy.

Chicago Flameproof is an Illinois-based distributor of commercial building materials, including fire retardant and treated lumber (FRT). Chicago Flameproof maintained general liability insurance through Lexington Insurance Company. Under the policy, Lexington had the right and duty to defend Chicago Flameproof against any suit seeking covered damages, but no duty to defend against any suit seeking uncovered damages.

The policy defined an occurrence as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The policy also defined “property damage” as physical injury to tangible property, including all resulting loss of that property, or loss of use of tangible property that is not physically injured. Chicago Flameproof sold lumber to Minnesota-based residential and commercial contractors JL Schwieters Construction, Inc. and JL Schwieters Building Supply, Inc. Schwieters then contracted with two building contractors, Big-D Construction Midwest, LLC and DLC Residential, LLC to provide labor and material for the framing and paneling for four building projects in Minnesota. The architectural firm on all of the projects, Elness Swenson Graham Architects, Inc. required that FRT lumber meeting the requirements set forth in the International Building Code be used for the exterior walls of each building. Continue reading ›

A consulting company agreed to perform cost-reduction work for a hospital. The agreement it had with the hospital specified that the hospital could hire the consultancy to perform additional work outside of the scope of the agreement. The hospital did so, hiring the consultancy to prepare an RFP document and negotiate with a potential equipment supplier. After the process was completed, the hospital refused to pay the consultancy for the additional work. The consultancy sued, and the trial court determined that a contract implied in fact existed between the two companies and the hospital was required to pay for the additional work. The appellate panel determined that the trial court had not erred, and it affirmed the decision.

In 2014, Northwest Community Hospital hired ESP Global, an equipment maintenance consultancy company, to assist Northwest in reducing its equipment expenses. Peter Vincer, the president and owner of ESP testified that his company typically assists clients using a two-step approach: first ESP conducts an initial assessment of the client’s equipment service expenditures, and then it recommends cost-reduction strategies accordingly. During the second step, ESP assists the client in implementing the prior recommendation. ESP charges a flat fee for the first step and a contingency for the second step, which is calculated based on the client’s actual savings.

The two parties entered into a contract in June 2014. ESP completed the initial assessment required by the contract in early July 2014, and Northwest paid ESP $10,000. After this, Northwest expressed interest in obtaining additional services from ESP. Specifically, the hospital wanted assistance with a request for proposal that it intended to send to equipment suppliers. The two companies communicated over emailed and agreed to prepare an RFP draft, in exchange for 10% of Northwest’s savings from the RFP over a five-year period. Vincer later sent the RFP draft to Jac Higgins, the interim executive director of Northwest’s supply chain. After Northwest approved the RFP, ESP distributed it to the prospective vendors. Higgins’ employment with Northwest was later terminated. Continue reading ›

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