Business Disputes

Family Business Dispute About Alleged Trade Secrets of a Long Time Evanston Diner Erupts Into a Lawsuit — Our Chicago Family Business Dispute Lawyers Handle Many Types of Disputes for Closely Held Businesses

May 28, 2015 | Peter S. Lubin and James V. DiTommaso

Familial relationships can be tough. When you combine them with the added stress of trying to run a family business together, sometimes it can be a recipe for disaster. Marla Cramin, the owner of Sarkis Cafe, a popular diner that has been business in Evanston for many years, has filed a second lawsuit against her brother, who also happens to be the former manager she had hired to run Sarkis Cafe for many years.

Cramin and her husband, Jeff Cramin, bought the diner in 2000 from its original owner, Sarkis Tashjian. When Jeff died in an accident in 2002, Marla hired her brother, Scott Jaffe, to manage the diner for her. Cramin fired her brother in 2012 and he went on to start his own restaurant in Highland Park, which just opened in April. It was originally called the Order Up Diner, but after he settled a lawsuit with his sister, he changed the name to the Uptown Diner. Continue reading ›

Appellate Court Reverses Part of Trial Court Ruling on Partnership Dispute Case

May 7, 2015 | Peter S. Lubin and James V. DiTommaso

Just like any relationship, the breakup of a law firm is complicated, especially when a partner start a new business of their own. In the case of Bernstein & Grazian, P.C. v. Grazian & Volpe, P.C., 402 Ill. App. 3d 961, 931 N.E.2d 810 (2010), the actions of the partners themselves throughout the dissolution of the firm and the fiduciary duty owed to one another play a large role in the division of fees once the firm has closed its doors.

Attorney and partner of Bernsterin and Grazain, Bernstein left the firm to open his own practice. Grazian complained that his former partner allegedly breached his fiduciary duty by opening up his own firm while still working for the current firm. Bernstein denied these claims and the trial court ruled in his favor. The Court determined that there was no breach of fiduciary duty by Bernsiten and that there he was entitled to 10% of the fees for all of the open cases at Bernstein and Grazian before he left. Continue reading ›

Non-Competition Agreements – When Can They be Enforced?

April 23, 2015 | Peter S. Lubin and James V. DiTommaso

Many clients come to us with misunderstandings with regard to non-compete agreements which are often called covenants not to compete. Some clients believe because an employee signed the agreement it is an iron glad and enforceable agreement no matter how broad and restrictive the terms of the agreement. Some employees come in with the belief that the agreements can never be enforced against them. So when are these agreements enforceable? It depends on many factors.

Each state has its own set of rules but there are many similarities in those states that enforce such agreement. In California, however, they are invalid and against policy. Illinois courts, on the other hand, enforce such agreements when they are:

In writing;
Made part of the employment contract;
Supported by valid consideration such as two years of employment or other payments;
Reasonable as to time and territory; and
Designed to protect the employer’s legitimate business interests.

The first two requirements are fairly self-explanatory. The last three, however, require analysis and review of the facts and circumstances.

Supported by valid consideration:

Consideration is a concept that applies to all kinds contracts, not simply to non-compete agreements. Contracting party must each obtain some consideration or benefit for entering into the contract. The contract must provide to each party a benefit to which that party would not be entitled if the party had not entered into the contract. With non-compete agreements, the affected employee might receive a new job, a promotion, a raise or a bonus for his or her agreement to enter into a non-compete or work for the employer for a significant period such as two years after entering into the agreement. In summary, for an employee to be bound that employee has to obtain some real benefit for entering into the agreement or work a long time for the company after signing the agreement.

Reasonable as to time and territory:

Non-compete agreements cannot usually be unlimited when it comes to time and territory. In other words, a business cannot subject former employees to an agreement with restricts them from competing everywhere, forever. Determining what is reasonable however depends on many circumstances.

Designed to protect the employer’s legitimate business interests:

Courts will only enforce restrictions on an individual’s right to work when the employer can show that those restrictions protect a legitimate business interest. Such interests can be protecting client relationships and confidential or secret information that provides a competitive advantage and was developed at substantial cost. In crafting covenants not to compete, employers should avoid restricting employees more than is needed to protect legitimate interests and the substantial investment they have made in developing competitive advantages for their businesses.

The Takeaway:

The truth is that many courts do not like to enforce covenants not to compete unless they are properly tailored and do like to put people out of work.

DiTommaso Lubin’s Oak Brook and Chicago Attorney Peter Lubin Named 2015 Illinois Super Lawyers as Class-Action, Business Litigation and Consumer Rights Attorney

October 30, 2014 | Peter S. Lubin and James V. DiTommaso

Super Lawyers named Chicago and Oak Brook business trial attorney Peter Lubin a Super Lawyer in the Categories of Class Action, Business Litigation and Consumer Rights Litigation. DiTommaso Lubin’s Oak Brook and Chicago business trial lawyers have over a quarter of century of experience in litigating complex class action, consumer rights and business and commercial litigation disputes. We handle emergency business law suits involving injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud.

Peter S. Lubin

online at

Business Dispute Alleges Mismanagement at Well Known Chicago Car Dealership

April 7, 2014 | Peter S. Lubin and James V. DiTommaso

Business partnerships can be tricky. When running a business, it is important to remember that there is a difference between the profits that go to pay the owners’ salaries and the money that gets invested back into the company. If one owner takes money from the company’s funds to pay for his personal expenses, he is doing a disservice to the business as well as to his business partner. Illinois law allows for the harmed owner to bring the matter to court and allege violations of Illinois corporate and partnership law and under the right circumstances seek attorneys, interest and punitive damages.

Famed local car dealer, Al Piemonte is known for promoting his dealerships in long-running television advertisements is the subject of claims of mismanagement by one of the alleged owners of his Melrose Park dealership. Piemonte owns three car dealerships in the Chicago area. Todd O’Reilly, who alleges he is a co-owner of Piemonte’s Ford dealership in Melrose Park, has recently filed a lawsuit in Cook County court against his business partner, accusing him and his third wife, Rosanna, of grossly mismanaging the company. According to the lawsuit, the successful car dealership is currently “sitting on more than $6 million in cash”. Piemonte has allegedly been using that money to fund personal expenses for himself and his family, including his adult daughter’s cell phone bill and a Mercedes for his second wife. Piemonte denies all of the claims in the lawsuit.

The complaint alleges that the company’s money has been used to pay for Piemonte’s personal credit card bills and to provide health insurance for relatives of Piemonte who have never worked for the company. Piemonte also allegedly used company money to pay for repairs on a car belonging to a family member who lives out of state and has no affiliation with the business. Additionally, Piemonte allegedly used company money to pay for pest-control treatments in his home and his sister-in-law’s home.

The complaint alleges that O’Reilly “has observed Piemonte use (the business’) money to pay for various personal expenses including clothes, massages, country club memberships, and the costs associated with remodeling his condo”. These claims must be litigated and proven.

O’Reilly’s original partnership with Piemonte allegedly allows him to purchase Piemonte’s majority share in the company for book value upon his death. After a series of recent hospitalizations and medical procedures, the 82-year-old Piemonte allegedly began to rethink the arrangement. At Rosanna’s urging, Piemonte allegedly approached O’Reilly to discuss modifying the terms of the business partnership. When O’Reilly allegedly refused, the complaint alleges that the Piemontes began allegedly excluding him from meetings and barring him from the sales floor and the service department. The lawsuit claims that the Piemontes want Rosanna’s son to take over the business instead of selling Piemonte’s shares to O’Reilly. O’Reilly has stated that he has no intention of parting with his shares in the company and that he has filed the lawsuit in order to protect his financial interests in the company.

The lawsuit alleges that the dealership “is being grossly mismanaged by Piemonte and Rosanna” and that “Piemonte has systematically controlled and used the corporation for the benefit of him and his family members … In doing so, Piemonte has been using (the dealership) as his personal piggy bank.” Piemonte denies these claims.

The lawsuit is seeking to have Piemonte repay all of the money he allegedly took from the company to pay for personal expenses; claims which he has denied. The lawsuit also asks for the court to appoint a custodian or receiver to oversee the business and on an emergency basis but Chancery Judge Neil Cohen denied the request for an appointment immediately leaving that issue perhaps open to further litigation.

New Jersey Supreme Court Requires Mediated Settlement to be in Writing

November 7, 2013 | Peter S. Lubin and James V. DiTommaso

While courts usually use the law to determine who has the right in a case, supreme courts can sometimes use a case as motivation to create new laws or to modify existing laws. In a recent case, the New Jersey Supreme Court did both of these things. The case, Willingboro Mall v. Franklin Avenue, involved a pre-existing law which the court used to rule in the case. However, the court determined that, in future cases, a slightly different set of standards would be used.

The case involved the sale of a mall which was handled in mediation. However, the settlement was never put in writing before the mediation closed. A few weeks after the settlement, Willingboro rejected the settlement and Franklin filed a motion to enforce the settlement. In his filing, Franklin included certifications from its attorney and the mediator. Rather than filing a motion to dismiss the case based on breach of mediation confidentiality, Willingboro filed an opposing motion in which it included certification from its manager regarding the substance of the parties’ discussion during mediation. During discovery, both Franklin and Willingboro agreed to waive any issues of confidentiality concerning the mediation process.

A four-day hearing followed, during which testimony was given from the mediator as well as Willingboro’s manager and attorney. However, halfway through the hearing, Willingboro changed its mind and moved for an order to expunge “all confidential communications” which had been disclosed and to bar any further disclosures regarding the mediation. The court ruled, however, that Willingboro had already waived its right to confidentiality and the hearing proceeded. At the end of the hearing, the trial court determined that the settlement was binding and ruled to enforce it, “[even] though the [settlement] terms were not reduced to formal writing at the mediation session.”

Willingboro appealed the decision until it reached the New Jersey Supreme Court. The Supreme Court upheld the rulings of the lower courts, enforcing the settlement. In determining a breach of confidentiality, the Court considered the rule governing mediation which states that “an agreement evidenced by a record signed by all parties to the agreement is an exception to the mediation-communication privilege.” Although this rule does not specify that the agreement must be made in writing, it does require some sort of documentation of the agreement, whether written or on tape, to be signed by all parties involved in the mediation. Given that there was no such signed record, the court ruled that this exception did not apply in the current case.

Willingboro’s attempt to dismiss the case based on this rule was therefore rejected.
Although the court agreed that the testimony of the mediator was a breach of confidentiality, it found that Willingboro had waited too long before objecting to the breach. The court further rejected Willingboro’s assertions that its own disclosures were permitted, but that Franklin’s disclosures consisted a breach of confidentiality.

However, in order to avoid such confusion from resulting in similar lawsuits in the future, the New Jersey Supreme Court added that, from now on “if the parties to mediation reach an agreement to resolve their dispute, the terms of that settlement must be reduced to writing and signed by the parties before the mediation comes to a close” in order to be enforced.”

Fox Business Reports: “Lawsuits on the Way Against Nasdaq?” — Chicago Business Lawyers Who Can Help Your Business

September 29, 2013 | Peter S. Lubin and James V. DiTommaso

Watch the latest video at video.foxbusiness.com

Claim for Fraud in the Sale of a Business Requires Proof of Both Reasonable and Justifiable Reliance on a Misrepresentation – Walid v. Irene Couture

May 17, 2013 | Peter S. Lubin and James V. DiTommaso

A couple who bought a retail business in New Jersey filed suit for fraud, alleging that the seller materially misrepresented the business’ revenues. After a bench trial, the lower court ruled for the defendants in Walid v. Yolanda for Irene Couture, Inc., holding that the plaintiffs did not demonstrate by clear and convincing evidence that their reliance on the defendants’ misrepresentations was justified. The New Jersey Superior Court, Appellate Division vacated the judgment, finding the defendants liable for fraud, remanding the case, and instructing the trial court to apportion liability among the defendants.

Anwar and Donna Walid, saw an online listing for the sale of a retail business, Irene’s Bridal Shop. They contacted the listing broker, who gave them a “fact sheet” from the owner, Yolanda for Irene Couture, Inc. (YIC). The fact sheet stated that the business had annual sales exceeding $500,000 and profits of almost $300,000. The listed sales price was $700,000. The Walids agreed to a purchase price of $700,000, subject to “proof of sales” and review by an attorney and an accountant. They retained an attorney, but Mr. Walid decided, against the attorney’s advice, to examine the financial reports himself rather than hire an accountant. YIC’s financial information showed annual income from 2003 through early 2006 well in excess of $500,000. The Walids obtained bank financing, and the sale closed in May 2006.

The business failed, and the Walids filed suit against YIC, its owner, and the accountant who prepared the financial reports Mr. Walid had reviewed prior to the sale. They amended the complaint to include Yolanda Couture, Inc. (YC), a New York company owned by YIC’s owner. They alleged that YC’s revenues were deposited into YIC’s bank accounts in order to inflate YIC’s earnings.

Sale of Domain Names Used for Online Health Food Retail Leads to Lawsuit for Fraud, Breach of Contract – Inventory Recovery Corp. v. Gabriel

April 19, 2013 | Peter S. Lubin and James V. DiTommaso

A business sued two individuals in a New Jersey federal district court in Inventory Recovery Corp. v. Gabriel, alleging that the defendants materially misrepresented the details of a sale of several hundred internet domain names. The plaintiff asserted multiple causes of action, including fraud, breach of fiduciary duty, and breach of contract. The court dismissed all but two of the causes of action on the defendants’ motion.

The plaintiff, Illinois-based Inventory Recovery Corporation (IRC), sought to purchase 324 internet domain names from the defendants, Richard Gabriel and Ashley Gabriel. The defendants used the domain names in the business of selling nutraceutical food, which the court describes as food with health benefits. IRC’s president met with the defendants in January 2010 to discuss the purchase of the domain names and the associated business, and negotiations continued into February. Richard Gabriel provided IRC with financial documents related to business income and expenses. This included expenses for Google advertising, the business’ main marketing activity. He allegedly described robust sales and a positive relationships with the merchant banks that serviced customer payments for the business.

The parties entered into a series of contracts on February 26, 2010 for the sale of the domain names. They closed the same day, and the plaintiff paid the $5.6 million purchase price with a real estate parcel in the Bahamas, an airplane, and a sum of cash. According to testimony presented in the case, the plaintiff allegedly later discovered that the business did not have good relationships with its merchant banks, its Google advertising account was suspended, and the defendants had allegedly artificially inflated the business’ revenues.

New Jersey Court Dismisses Claim for Violation of Corporate Opportunity Doctrine in Closely-Held Business Dispute – Egersheim v. Gaud

March 22, 2013 | Peter S. Lubin and James V. DiTommaso

Two shareholders and former officers of a closely-held New Jersey company, DAG Entertainment, Inc., sued two fellow shareholders, the company, and a new company formed by the defendant shareholders in U.S. District Court. The suit, Egersheim, et al v. Gaud, et al, alleged eighteen causes of action related to alleged usurpation of corporate opportunities. The defendants moved for summary judgment as to fifteen of the eighteen causes of action, and the district court ruled that those causes of action amounted to a single cause of action under the Corporate Opportunity Doctrine. The court granted summary judgment on the fifteen causes of action, allowing three causes to proceed.

Plaintiff Kathleen Egersheim owned a three percent shareholder interest in DAG and was its former Vice President and Assistant Secretary. Plaintiff Christopher Woods owned 22.5% interest and was the former Creative Director. Defendants Luis Anthonio Gaud and Philip DiBartolo owned or controlled most of the remaining stock of the company. According to the plaintiffs, DAG began exploring an opportunity to partner with the media conglomerate Comcast in 2001. The plaintiffs claim they developed characters and show ideas for children’s television programming through 2004.

In 2005, the defendant shareholders allegedly began excluding the plaintiffs from meetings and decisions regarding DAG’s activities, and also allegedly created a new business entity called Remix, LLC without plaintiffs’ knowledge. Remix entered into a formal joint venture with Comcast. The defendants proposed ceasing DAG’s major business operations, according to the plaintiffs, and the defendants voted them out of their officer positions when they objected to this plan in September 2007. DAG essentially stopped operating at that point.