Articles Posted in Business Disputes

A couple who defaulted on their mortgage filed suit against prospective purchasers who dropped out of a short sale agreement shortly before closing. Though the couple later sold the property at a different short sale, the appellate panel determined that the $35,000 difference in the prices was a loss attributable to the bank that owned the mortgage. As such, the panel affirmed the decision of the district court regarding the calculation of damages.

Hartwell P. Morse III and Deborah B. Morse owned property commonly known as 282 Stonegate in Clarendon Hills, Illinois. The property was encumbered by two mortgages, one held by Chase Bank and the other held by PNC Bank. The Morses defaulted on both mortgages. In August 2015, the couple entered into a contract for the sale of the property to Anthony Donati and Concetta Donati for $410,000.

The contract contained a “short sale addendum” which indicated that the plaintiffs were selling the property for less than they owed on their mortgages. The sale was contingent upon the plaintiffs’ obtaining PNC bank’s consent. In September 2015, the bank consented to the sale, provided that it received all of the proceeds and that the plaintiffs received $0 at closing. The bank also agreed not to pursue a deficiency judgment against the plaintiffs. Continue reading ›

Two small pharmacies sued a pharmacy benefits manager for antitrust violations, alleging that the benefits manager had conspired with Walgreens to drive the small pharmacies from the benefits manager’s network and therefore harm their business. The district court ruled in favor of the benefits manager. After appealing, the 7th Circuit found that the pharmacies had not alleged that either the benefits manager or Walgreens had monopoly power in the relevant markets as required under Section 2 of the Sherman Act, and it, therefore, affirmed the decision of the district court.

Prime Therapeutics LLC is a pharmacy benefits manager. Sharif Pharmacy, Inc. and J&S Community Pharmacy, Inc. were both members of the Prime pharmacy network. Under Medicare, Medicaid, and private health insurance plans, patients had significant financial incentives to buy their prescription drugs from pharmacies within the network. Prime eventually terminated both Sharif and J&S from the network after audits uncovered irregularities in invoicing for prescription drugs.

Both Sharif and J&S filed suits against Prime, alleging violations of the Sherman Antitrust Act. Three customers who had to temporarily move their prescriptions to less convenient pharmacies also joined the suits. Both Sharif and J&S alleged that Prime’s decision to audit their pharmacies was pretextual, in an effort to eject competing pharmacies from the network after Prime entered into a joint venture with Walgreens in 2016. Sharif and J&S noted that Prime sent letters to both pharmacies’ customers saying that Sharif and J&S would no longer accept their insurance and recommending that customers have their prescriptions filled at a nearby Walgreens. Prime also retained funds from both pharmacies as a result of the audits. The district courts both ruled in favor of Prime, and Sharif and J&S appealed. The 7th Circuit consolidated then consolidated the appeals. 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 ›

When a film production equipment rental company in Chicago began losing business to a new competitor, it sought to blame a state economic development agency. The company sued the state agency, alleging that the agency conspired to steer state incentives to the new business in violation of the U.S. Constitution and the Sherman Antitrust Act. The appellate panel disagreed, finding that the actions of the state agency were not actionable, as the competitor had consistently reached out to the state agency for help, applied for grants and development programs that the plaintiff did not, and offered superior equipment and facilities for film production.

Since 1979, Chicago Studio has operated a film and television production studio in Chicago, Illinois. Chicago Studio has four studio stages measuring 62,000 square feet. Chicago Studio requires production companies to lease its production equipment for a 0.4% charge. The studio does not have installed air conditioning, but Chicago Studio provides industry-standard portable air conditioning units for an additional charge. Additionally, Chicago Studio does not have screen docks, which allow large trailers to unload equipment inside the studio.

Cinespace began operating a studio in Chicago around 2010. By the end of 2012, Cinespace had 600,000 square feet of floor space and 10 stages. The studio expanded to 1.5 million square feet of floor space and 30 stages by Januar 2015. Cinespace’s studio can accommodate two-story sets and includes air conditioning, inside breezeways and scene docks, concrete floors, sound-proof walls, and new offices. Cinespace permits production companies to use any equipment rentals they choose, including an unaffiliated equipment rental company called Cinelease that charges 0.2%.

Chicago Studio sought to put the blame for its failure to make a profit following Cinespace’s opening on the Illinois Department of Commerce and Economic Opportunity, Illinois Film Office, and Betsy Steinberg, a state employee responsible for promoting the Illinois film industry. Chicago Studio alleged that the defendants unlawfully steered state incentives and business to Cinespace in violation of the Sherman Act and equal protection and due process under the Fourteenth Amendment. The district court granted the defendants’ motions to dismiss the Sherman Act and due process claims. It later granted summary judgment on the equal protection claim to the defendants. Chicago Studio then appealed. Continue reading ›

After a tradeshow exhibit vendor was stiffed on the payment of a contract by a middleman, it sued the tool manufacturer to recover its debt. At the same time, it filed a claim in the bankruptcy proceeding of the middleman. The district court ruled that the plaintiff could not pursue a claim against the manufacturer because it had a claim pending in the middleman’s bankruptcy proceeding. The 7th Circuit panel reversed, finding that there was no concept of judicial estoppel where a pending claim in a bankruptcy proceeding barred seeking the collection of a debt from a third party.

TRUMPF, Inc., the U.S. subsidiary of an international business, makes specialty tools such as precision laser cutters. TRUMPF sells many of its products at trade shows. It hired Lynch Exhibits to handle its appearance at the 2017 FABTECH show in Chicago. Lynch then subcontracted with CSI Worldwide to provide some of the necessary services.

CSI contended that it told TRUMPF that it was unsure of Lynch’s reliability. CSI stated that it would do the work only if TRUMPF paid it directly or guaranteed Lynch’s payment. According to CSI, TRUMPF assented. The two entities did not sign any undertaking to that effect. CSI did the work and then billed Lynch. Lynch did not pay. CSI filed an involuntary bankruptcy petition against Lynch, who then filed a voluntary bankruptcy petition. CSI claimed approximately $530,000 as a creditor, and also filed suit against TRUMPF under diversity jurisdiction, seeking $530,000 on theories including unjust enrichment and promissory estoppel. Continue reading ›

All too often attorney misconduct in the course of litigation goes unreported and unpunished. Incivility in litigation delays the resolution of cases, taxes an already overburdened judiciary, and increases the cost of litigating a matter. Despite this, attorney incivility is regrettably on the rise in state and federal courts around the country. One federal magistrate judge recently decided that enough was enough and issued a benchslap to a pair of attorneys for misconduct at a deposition. In his recent opinion in Sokolova v. United Airlines, Magistrate Judge Jeffrey Cole issued a scathing rebuke of the attorneys while offering a primer on proper deposition decorum.

The deposition that spawned dueling sanctions motions and accusations and cross-accusations of discovery misconduct got off to an unceremonious start with plaintiffs’ counsel arriving nearly 30 minutes late according to the opinion. Things improved little from there. Almost immediately after starting the deposition, things went off the rails when plaintiffs’ attorney took issue with the interpreter’s translation of the oath. Continue reading ›

When companies decide where to establish a headquarters or where to expand, they must weigh several factors such as access to qualified candidates and tax laws. One factor businesses are considering more and more is the litigation climate of a state or local jurisdiction. According to a recent study, that does not bode well for Illinois, which ranked last among states for the quality of its litigation climate among businesses. Additionally, the City of Chicago and Cook County ranked as the worst local jurisdiction in the nation according to the same study.

Since 2002, the U.S. Chamber Institute for Legal Reform has conducted a survey to explore how fair and reasonable the states’ liability systems are perceived to be by U.S. businesses. Last year’s survey was performed by The Harris Poll and consisted of more than 1,300 respondents consisting of in-house general counsel, senior litigators, and other senior executives at companies with at least $100 million in annual revenues.

The survey broadly focuses on perceptions of a state’s liability system by asking participants to assign a state a grade of A, B, C, D, or F in each of the following areas:

  • Overall treatment of tort and contract litigation
  • Enforcing meaningful venue requirements
  • Treatment of class action suits and mass consolidation suits
  • Damages
  • Proportional discovery
  • Scientific and technical evidence
  • Trial judges’ impartiality
  • Trial judges’ competence
  • Juries’ fairness
  • The quality of the appellate review

These grades were then used to develop the ranking of each state. The study also sought to identify specific cities or counties that might impact a state’s ranking. Accordingly, participants were given a list of cities or counties with reputations for having a poor litigation climate and asked to select two that have the least fair and reasonable litigation environments.

The results of the study were published in a report titled The 2019 Lawsuit Climate Survey: Ranking the States. Overall, Illinois ranked 50 out of 50. Illinois beat out Louisiana (49th), California (48th), Mississippi (47th), and Florida (46th) for the dubious distinction as the state with the worst litigation climate. Illinois has ranked in the bottom five states every year since 2005. Its highest ranking came in 2002, the first year the study was conducted when Illinois was ranked 34th. Continue reading ›

Labor unions are supposed to negotiate with employers on behalf of the workers, but according to a recent lawsuit against Fiat Chrysler, the officials of the United Auto Workers union (UAW) allegedly exploited their position to line their own pockets, rather than negotiate better terms for their workers. According to the lawsuit, filed by General Motors, Fiat Chrysler allegedly bribed UAW officials in order to get more favorable rates than their competitors.

Gary Jones, the former president of the UAW, has not been charged by the Justice Department, but he came under scrutiny when federal prosecutors found that union officers from a regional office Jones used to lead had charged more than $1 million in personal spending, including luxury travel. Jones took a leave of absence in November after the FBI raided his home in August and has since resigned as president of the UAW while the union was working to force him out of that position.

Several officers of the UAW and three people who used to work as executives for Fiat Chrysler have all pleaded guilty in cases that revealed that both the auto company and the union siphoned off millions of dollars (some of which was intended for a training center) for personal luxuries, including extravagant travel and meals. Continue reading ›

After two companies got into a dispute about the timeframe for payment of invoices, the 7th Circuit Court of Appeals found that the district court had erred in not considering the parties’ course of dealings to determine what a fair time to pay would have been.

In 1999, Valley Drive Systems, Inc. began manufacturing parts for Arctic Cat, Inc. In 2002, Driveline assumed control of Valley Drive Systems, Inc.’s assets. In June of that year, Driveline and Arctic Cat entered into a contract where Driveline would provide specifically-manufactured hubs, axels/half-shafts, outer and inner tie rods, shift shafts, and steering stops. The contract made Driveline a “just-in-time supplier” for Arctic Cat. Driveline provided its goods and filled orders daily with regular deliveries to Arctic Cat. Continue reading ›

A condo association held an insurance policy on its condo buildings. In 2014, a hail and wind storm damaged the siding on several of the buildings. The storm, however, damaged only the south and west-facing sides of the buildings. The association’s insurer initially paid the association several million to repair the damage, which covered the replacement cost of siding for the south and west sides of the buildings. The association found, however, that matching siding was no longer produced. The insurer refused to pay the cost of replacing the siding on all sides of the building, so the association sued. The district court ruled in favor of the association, and the insurer appealed. The appellate panel affirmed. The panel found that requiring the insurer to replace all sides of the building was a sensible construction of the contract, given that replacing the siding such that two sides of the building did not match the other two would reduce the value of the properties and keep the insured from being made whole.

Windridge of Naperville Condominium Association held an insurance policy via Philadelphia Indemnity Insurance Company. In May 2014, a hail and wind storm-damaged buildings owned by Windridge. These buildings were insured by Philadelphia Indemnity. The storm directly damaged the siding only on the buildings’ south and west sides. Philadelphia Indemnity paid Windridge $2.1 million for the damage, which covered the replacement of the siding on the south and west sides.

Windridge, however, sought replacement of the siding on all four sides of the building, as matching siding for the south and west sides was no longer available. Philadelphia Indemnity refused to pay those costs, arguing that it was only responsible for replacing the siding that was directly damaged by the storm. The district court granted summary judgment for Windridge, and Philadelphia Indemnity appealed. Continue reading ›

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