Chicago Business Litigation Lawyer BlogDiTommaso Lubin is a commercial law firm based in Chicago and Oakbrook Terrace, Illinois that focuses on handling all of the legal issues confronting businesses in today’s world. We represent both plaintiffs and defendants, and we have experience representing clients in matters ranging from contract disputes to fraud. Our Chicago business law attorneys have over two and half decades of experience in business lawsuits and have won favorable verdicts in “bet the business” lawsuits. DiTommaso Lubin has Chicago business litigation attorneys who can identify and understand the legal issues in a dispute, no matter how complex they may be. We will use our resources and knowledge to formulate a plan of action that will help further your interests, resolve your problems, and get you back to growing your business. Our focus with each client is to resolve the legal issues efficiently and with minimal costs, while still providing outstanding representation. If your business is being sued or you are seeking advice to stay out of court, call our Naperville business lawyers to discuss what DiTommaso Lubin can do for you. For a consultation, call 630-333-0333 or send us an email through our website.
Articles Posted in Business Disputes
Northern District of Illinois Federal Court Grants Motion to Strike Plaintiff’s Request for Injunctive Relief in Breach of Contract Case
DiTommaso Lubin has successfully litigated many business disputes, and in our many years of experience we have found that contract claims are among the most contentious conflicts. Because so many of our clients deal with breach of contract issues, our Elmhurst business attorneys are always mindful of new court decisions issued in this area of the law. In fact, our lawyers just discovered one such case, Jumpfly Inc. v. Torling, in the US District Court for the Northern District of Illinois.
Jumpfly Inc. v. Torling pits a Plaintiff employer against two former employees who allegedly violated the non-compete agreements signed when they were hired by Plaintiff. Plaintiff contends that Defendant Torling started a competing pay-per-click internet advertising side-business while in Defendant’s employ, and upon discovering its employee’s side-business, fired him and sent a cease and desist letter demanding that he stop violating the non-compete. The parties eventually negotiated a settlement allowing Torling to continue his business, but the agreement prohibited him from soliciting any of Plaintiff’s employees. Torling allegedly solicited Defendant Burke — who was working for Plaintiff at the time under a similar non-compete agreement — and got him to quit his position with Plaintiff to work for Defendant Torling.
Plaintiff then filed suit against the two individuals and the new company (Windy City) that they worked for — alleging rescission of a settlement agreement, breach of contract, violations of the Lanham Act and Illinois Deceptive Trade Practices Act, and intentional interference with contract based upon non-compete agreements between the parties. Plaintiff’s requested the Court to enjoin Defendants’ competitive business conduct and for monetary damages. In response, Defendants filed a motion to strike Plaintiff’s request for injunctive relief and filed a motion to dismiss under 12(b)(6).
The Court granted the motion to strike as to the breach of contract claim because the two year term of the non-compete agreement had already expired and an injunction would result in an unreasonable restraint of trade. The Court also noted that Plaintiff’s seven-month delay — after discovery of the illicit conduct — in asking for an injunction also weighed in favor of Defendants. The Court denied the motion to strike as to the statutory claims, however, because injunctive relief is provided by both laws which rendered the motion premature.
Next, the Court granted Defendants’ motion to dismiss the breach of contract and intentional interference with contract claims due to pleading insufficient facts that Defendant Windy City induced either of the individual Defendants to breach their contracts with Plaintiff. In dismissing Plaintiffs conspiracy to interfere with contract, the Court applied the Intracorporate Conspiracy Doctrine and declined to agree with Plaintiff’s argument that Defendants’ conduct fell with in an exception to the rule. Finally, the Court denied the motion to dismiss the settlement agreement breach claim as the effect of Defendants’ breaches had yet to be determined.
A Guarantor is Not a Surety Under the Illinois Sureties Act
At DiTommaso Lubin, we pride ourselves on staying abreast of changes in the law that may affect our clients, especially those rendered by the highest court in the state. The Supreme Court of Illinois released a new decision not long ago that was picked up by our Lombard business litigation attorneys, and the case is of particular interest to business owners who have personally guaranteed a business loan. In JP Morgan Chase Bank, N.A. v. Earth Foods, Inc. the Court addressed the meaning of the term surety and whether a guarantor falls within that definition under the Illinois Sureties Act.
The initial dispute in JP Morgan Chase Bank, N.A. v. Earth Foods, Inc. arose from a line of credit extended by Plaintiff JP Morgan Chase Bank to Defendant Earth Foods. The loan was personally guaranteed by the three co-owners of Earth Foods, and three years after the line of credit was first extended, Earth Foods defaulted on the loan. Plaintiff then filed a lawsuit against both the company for breach of contract and the co-owners as guarantors of the defaulted loan. The individual Defendants asserted an affirmative defense that the guaranty obligation was discharged under the Sureties Act because the Act applies to both guarantors and sureties and the law does not distinguish between the two. Plaintiffs then filed a motion for summary judgment, which was granted by the trial court. In granting the motion, the court held that the individual Defendants were guarantors and the Act only applied to sureties. Defendants appealed the trial court’s decision, and the appellate court held that the term surety encompassed both a surety and a guarantor under the Act and remanded the case. Plaintiffs petitioned the Supreme Court to review the appellate court’s reversal.
On appeal, the Supreme Court performed an extensive statutory analysis of the Illinois Sureties Act. In performing this analysis, the Court first determined that dictionaries, treatises and past court decisions recognize a clear legal distinction between guarantors and sureties. They then went on to determine the legislative intent behind the Sureties Act through a discussion of other laws related to the same subject matter. Through their discussion, the Court held that a suretyship differs from a guaranty in that a suretyship is a primary obligation to ensure the debt is paid, while a guaranty is an obligation to pay the debt if the principal does not pay. The Court went on to say that the plain language of the Act indicates that the protections of the Sureties Act are not applicable to guarantors. Despite this ruling, the Court held that summary judgment was improperly granted in JP Morgan Chase Bank’s favor and remanded the case to the trial court due to genuine issues of fact regarding whether the parties intended the individual Defendants to be guarantors or sureties for the loan in question.
JP Morgan Chase Bank, N.A. v. Earth Foods, Inc. unequivocally answered the question whether the terms surety and guarantor are interchangeable for the purposes of the Illinois Sureties Act. Despite the fact that there is a clear distinction between the two, the Supreme Court allows for the intent of the parties to rule when including either term in a loan agreement. Therefore, business owners should be careful when drafting and negotiating the terms of a guarantor or a surety and be clear which role is intended by the parties to avoid a potential lawsuit down the road.
Appellate Court of Illinois Orders in Camera Review of Potentially Privileged Documents in Action for Breach of Fiduciary Duty
Business litigation is necessarily an adversarial process – the stakes are high and as such the opposing parties in most lawsuits will fight over many issues during the case. One of the most contentious segments of any case is the discovery process. Because the information obtained during discovery can make or break a case, it is important to understand the law in this area. In that vein, our Berwyn business attorneys would like to share a recent Illinois Appellate Court decision that may affect many of our clients the next time they go to court.
In Mueller Industries Inc. v. Berkman, Defendant Berkman worked for Plaintiff as president of a company owned by Plaintiff pursuant to an employment contract. During his employment, Defendant formed an investment partnership and obtained a 10% ownership interest in a company that was one of Plaintiff’s primary suppliers. Defendant’s lawyer – whose firm was also counsel for Plaintiff – advised him how to structure the investment venture so as to not run afoul of his employment contract with Plaintiff. The initial employment agreement subsequently expired, and a new open-ended agreement was consummated that contained a non-compete clause and other restrictive covenants governing outside financial interests and business opportunities. Defendant then had his attorney form a new company to compete with Plaintiff, and Defendant subsequently resigned his position with Plaintiff.
Plaintiff filed suit for breach of his employment contract and breach of fiduciary duty, alleging Defendant profited personally at the expense of Mueller through his investment partnership. A discovery dispute ensued when Defendant refused to produce documents related to his investment in the supply company and his creation of the competing company. Defendant refused production based upon the 5th amendment and attorney-client privileges. Plaintiff filed a motion to compel production, which was granted by the trial court.
Defendant appealed the trial court’s grant of the motion, and reasserted that the documents were privileged. The Appellate Court reversed in part, holding that Defendant’s pre-existing relationship with his lawyer kept all communication prior to the attorney’s firm’s representation of Plaintiff privileged. However, all communications after the dual representation began were no longer so protected because Defendant no longer had any reasonable expectation of confidentiality. Finally, the Court found that Defendant had failed to demonstrate that producing the requested documents would amount to incriminating testimony, but remanded the case with orders for the lower court to perform an in camera review of the disputed documents and urged the trial court to make a detailed record of its findings.
Illinois Appellate Court grants Preliminary Injunction in Action to Enforce Non-Competition Clause in Employment Contract
While most businesses strive to maintain employee stability, the fact of the matter is that during the course of any company’s existence there will be a certain amount of turnover. In states like Illinois, many employers utilize employment contracts that contain non-compete clauses and other restrictive covenants to protect themselves when employees depart. In spite of these precautionary measures, disputes will often still occur, which is why our Aurora non-compete lawyers are always watching developments in this area of the law.
In Steam Sales Corp. v. Summers, Defendant Summers worked for Plaintiff soliciting and servicing customer accounts pursuant to a written employment agreement that contained both non-compete and liquidated damages clauses. The clauses were to be effective for two years after the cessation of Defendant’s employment with Plaintiff. Plaintiff had several exclusive relationships with manufacturers, which gave it access to information not available to its competitors that served as an advantage in the marketplace. Defendant had access to this information, and after working for Plaintiff for almost two years, he quit to form a competing company and subsequently obtained the business of two of Plaintiffs (now) former clients.
In response, Plaintiff filed suit for Defendant’s violation of the restrictive covenant contained in the employment agreement between the parties and demanded injunctive relief pursuant to the liquidated damages clause in the contract. The circuit court granted the preliminary injunction based upon the non-compete clause and enjoined Defendant from soliciting or selling any service or product similar or identical to Plaintiff’s. Defendant then filed an interlocutory appeal. The Appellate Court found that Plaintiff had not breached the parties’ contract and that the restrictive covenant was enforceable because it was reasonable in its geographic (Defendant’s sales territory when he worked for Plaintiff) and temporal scope and in its application.
Wall Street Joural Reports Apple Sues HTC
Our Chicago commercial litigation attorneys at DiTommaso Lubin handle complex class action lawsuits and other commercial disputes. You can contact us on the internet by clicking here or call us at our toll free number 630-333-0333.
Wall Street Journal Reports: “Howard Stern Sues Sirius XM”
In a very informative short piece, the Wall Street Journal reports that Howard Stern has filed suit regarding Sirius/XM’s failure to pay Stern and his agent stock bonus payments that were part of Stern’s compensation package. Stern initially did not press for the payments for a few years but has now filed suit for non-payment. The main issue in the dispute is whether XM subscribers post merger can be included in the target subscriber base numbers which trigger stock bonus payment obligations. The article states:
Howard Stern, who seems to be in a perpetual fight with his bosses, is at it again.
The production company for the radio personality is suing Sirius XM, claiming the satellite radio company has refused to pay stock awards it owes to him based on subscriber targets in Stern’s contract. The lawsuit also says Sirius owes money to Stern’s agent under a consulting agreement.
“World-renowned radio personality Howard Stern (“Stern”) put Sirius on the map,” the lawsuit says. “But, with the exception of a stock award that Sirius paid for the initial year of Stem’s contract, Sirius has refused to pay One Twelve [the production company for Stern’s show] the additional performance-based stock awards to which One Twelve is entitled.”
You can read the full article by clicking here. You can read the Complaint in the lawsuit by clicking here.
Another interesting article on the dispute appeared in Forbes. That article provides some speculation on the behind the scenes motives driving the case and can be read by clicking here.
If You Have a Business Agreement, Get It in Writing!
The issues faced by our clients, and particularly our business clients, are often complex both factually and legally. Our Palatine business lawyers recently discovered a case filed in Du Page county that illustrates how business legal issues can, and often do, dovetail with personal legal issues. Prignano v. Prignano demonstrates the importance of obtaining legal advice before making business agreements and contracts that include will and probate issues.
In Prignano v. Prignano, the widow of George Prignano, a man who owned several businesses with his brother Louis, sued that brother for allegedly failing to honor an agreement that the survivor of the two brothers would buy the decedent brother’s share of their co-owned businesses. The Prignano brothers jointly owned two corporations, Sunrise Homes and Rainbow Installations, and were equal partners in 710 Building Partnership. The Plaintiff widow alleged that the Defendant had an oral agreement with her deceased husband George whereupon Louis would purchase George’s share of their three businesses with the proceeds from life insurance policies purchased for that purpose. Plaintiff also alleged that she and Defendant had an oral agreement that Defendant would purchase his brother’s share of the businesses from Plaintiff.
After George’s death, Defendant, who was the executor of George’s estate, allegedly kept George’s share of the businesses and the life insurance payments for himself unbeknownst to Plaintiff. When Plaintiff discovered this, she filed suit against him for fraud, breach of fiduciary duty, breach of contract, and unjust enrichment. The trial court ruled in her favor on all counts and awarded her damages and prejudgment interest. Defendant then appealed the trial court’s finding of liability and the award of prejudgment interest.
On appeal, the Second District of the Appellate Court of Illinois reaffirmed the trial court’s finding that both oral agreements (between the brothers and between Plaintiff and Defendant) were valid and enforceable due to the testimony of third parties who were aware of the oral agreement between the brothers, and the existence of a written agreement that was drawn up after the oral contract between Plaintiff and Defendant was initially formed. The Court also found that Defendant owed a fiduciary duty to Plaintiff as he was a corporate officer and partner in the businesses, and upon George’s death, his interest in the businesses was transferred to Plaintiff. As such, the Court held that Defendant owed Plaintiff a duty to exercise “the highest degree of honesty and good faith” in dealing with Plaintiff, and Defendant breached that duty. The Court then vacated the trial court’s judgment on the unjust enrichment claim because Plaintiff was victorious on her breach of contract claim. The Court stated that unjust enrichment does not apply when there is a breach of contract under Illinois law. Finally, the Court reaffirmed the award of prejudgment interest because Plaintiff had been deprived of money that was rightfully hers, and Defendant should not profit from his wrongful retention of the funds.
Prignano v. Prignano exemplifies why business owners should have all of their business agreements and contracts reviewed by a trained legal professional. Family business owners, in particular, should guard against casual or oral agreements, as personal relationships can be strained when there is a misunderstanding regarding such agreements. If you are unsure about the legality or legitimacy of your business agreements, or are currently in a dispute, you should consult a discerning Chicago and Naperville business attorney to determine your rights.
NPR Reports: “Thinly Veiled: Lawsuit Over Steamy Rihanna Video Sparks Debate On Copycat Culture”
NPR reports on a very interesting recently filed law suit regarding allegations that the pop singer Rhianna’s latest video crosses the line an plagiarizes the photo images of David LaChapelle and thus violates copyright law. The story states:
Fashion photographer David LaChapelle is known for staging photo shoots with lots of bright colors, outrageous costumes, and sexy, surreal images. …
When compared side-by-side, the video does bear striking similarities to the photos LaChapelle claims were plagiarized. In once scene, Rihanna lies semi-nude on a table, surrounded by reporters in clown wigs. The corresponding LaChapelle photo depicts a woman lying in a hospital bed, also half-naked and also surrounded by clowns in business attire.
In his complaint against Rihanna, LaChapelle alleges, “Defendants are wrongly implying to the public that plaintiff was involved in the creation of the Music Video or that plaintiff has endorsed, approved or otherwise consented to its creation.”
You can read or listen to the entire story by clicking here.
Fourth District Reverses Trial Court for Second Time in Case Pitting Farm Against Neighbors
Our Chicago business emergency attorneys were interested to read an appellate opinion in which the Fourth District Court of Appeal reversed a Sangamon County judge for the second time in the same case. The Rochester Buckhart Action Group v. Young, No. 4-09-0037 (Ill. 4th Sept. 8, 2009) is a lawsuit filed by a community group attempting to stop Robert Young from building a hog farm on his property. The Rochester Buckhart Action Group, a nonprofit that opposes activities it feels decreases the quality of life in its area, sued to stop Young, arguing that the hog farm should be regulated as a new farm rather than an extension of Young’s existing dairy farm. The trial court granted the group’s request for a preliminary injunction, but the Fourth District Court of Appeal reversed it. On remand, Young asked for costs and damages stemming from that injunction, but the trial court denied it — only to be reversed again by the Fourth.
Young’s property already had a 40-cow dairy farm, and had once had a 2,300-animal hog confinement operation that was demolished in 2004. He notified the Illinois Department of Agriculture of his intention to add a 3,750-hog finishing operation, which is where piglets are grown into adult pigs. In that notification, he told the state that this would be an expansion of an existing operation, not a new operation. The Rochester Buckhart Action Group disagreed and sued for a declaratory judgment under the Livestock Management Facilities Act, which requires public notice, comment and hearing for new facilities. The lawsuit also included counts for nuisance and public nuisance. It moved for a preliminary injunction stopping construction of the hog farm. That order also required the plaintiff to post a $60,000 bond. The trial court then declined to vacate its decision and the defendant successfully appealed to the Fourth.
On remand, the defendant requested costs and damages, pursuant to the Code of Civil Procedure on a “wrongfully entered injunction.” He requested the proceeds of the $60,000 bond to set off the $294,159.01 that he said the injunction cost him. The plaintiff moved to strike that motion, claiming there was no adjudication of the injunction as “wrongful.” The trial court granted that motion to strike, saying it did not believe the injunction was wrongful and thus, the defendant could not recover costs. This appeal followed, arguing that the defendant’s situation met the definition of “wrongful” in the Code of Civil Procedure.
The Fourth agreed. It noted that Illinois Supreme Court precedent allows damages only when judgment has been entered that a preliminary injunction or temporary restraining order was entered wrongfully. The plaintiff argued that there was no such adjudication, but the Fourth was not convinced. It said its prior opinion was a legal determination that the injunction was wrongfully issued. “It is hard to fathom what the appeal in Rochester I was all about if it was not a determination of whether the trial court rightfully or wrongfully enjoined defendant from continuing the construction on his hog farm. The sole issue in Rochester I was whether the trial court erred in declining to vacate the preliminary injunction.” Furthermore, the court noted, Jefco Laboratories, Inc. v. Carroo, 136 Ill. App. 3d 826, 829, 483 N.E.2d 1004, 1006 (1985) specifically said there was only a semantic distinction between “in error” and “wrongfully issued.”
The plaintiffs next argued that the preliminary injunction order was the law of the case because the defendant did not appeal that order — he appealed the trial court’s refusal to vacate it. However, the Fourth said, the issue of the injunction itself was before the court when the issue of whether to vacate the order for an injunction was before it. Thus, it wrote, the defendant cannot be said to have waived the issue of whether the injunction was properly issued.
Finally, the plaintiffs said damages should not be awarded because it is a nonprofit “seeking to vindicate public rights.” It supported that argument by citing Save the Prairie Society v. Greene Development Group, Inc., 338 Ill. App. 3d 800, 801, 789 N.E.2d 389, 390 (2003), in which the First District Court of Appeal found that the trial court should not have imposed a $200,000 bond on a nonprofit seeking to serve the public interest. It is true that the Code of Civil Procedure gives trial courts discretion not to impose bond if it would be a hardship, the Fourth said, but no rule of law says this must be done in every case. The plaintiff did not object to the bond as a hardship at the time, it noted. And the state Supreme Court noted in Buzz Barton & Associates, Inc. v. Giannone, 108 Ill. 2d 373, 384, 483 N.E.2d 1271, 1276 (1985) that it would be “inequitable and would invite spurious litigation” to allow parties to interfere with legal activities without being held liable for wrongful interference.
That is the situation in this case, the Fourth said. It reversed and remanded the trial court, saying the defendant is entitled to damages and the trial court must allow him an opportunity to prove any damages.