Business Disputes

DiTommaso Lubin Partner Authors Amicus Brief in Fee Petition Case Successfully Resulting in Reversal of Trial Court

October 2, 2022 | Peter S. Lubin and James V. DiTommaso

In a case that has potentially far-reaching implications for fee petitions, the Illinois Third District appellate court formally adopted a framework for considering such petitions laid out by the Supreme Court nearly four decades ago. Perhaps just as important, the Third District rebuffed the trial court’s reduction of attorney fees awarded to a successful plaintiff without explaining the reasoning for the reduction. The Court ultimately reversed the trial court’s award and remanded the case for further consideration of the plaintiff’s fee petition.

The plaintiff in the case, Austin Casey III, bought a used vehicle from the defendant, Rides Unlimited Chicago, Inc. The vehicle broke down two hours into Casey’s return trip to his home in Michigan. Casey had the vehicle towed back to Rides Unlimited the same day and requested a refund of the purchase price. Rides Unlimited refused. Casey then sued Rides Unlimited alleging violations of the various statutes including the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act). After discovery, Casey filed a motion for summary judgment on his claim that Rides Unlimited violated Section 2L of the Consumer Fraud Act.

Section 2L prohibits a vehicle dealership from “exclud[ing], modify[ing], or disclaim[ing] the implied warranty of merchantability . . . before midnight of the 15th calendar day after delivery of a used motor vehicle or until a used motor vehicle is driven 500 miles after delivery, whichever is earlier.” It further provides that any “attempt to exclude, modify, or disclaim the implied warranty of merchantability or to limit the remedies for a breach of the warranty in violation of this Section renders a purchase agreement voidable at the option of the purchaser.”

The trial court granted Casey’s motion for summary judgment, awarded Casey the purchase price, and dismissed Casey’s other claims. Casey then filed a petition for attorney fees under Section 10a(c) of the Consumer Fraud Act, which provides that a court “may award, in addition to the relief provided in this Section, reasonable attorney’s fees and costs to the prevailing party.” Casey sought $10,640 in attorney fees and $454.52 in costs, for a total of $11,094.52. The trial court held a hearing on the fee petition and ultimately granted the petition but reduced the fee award to only $2,500. Casey appealed the trial court’s reduced fee award.

The Third District court of appeals granted leave to the National Association of Consumer Advocates and the Illinois Trial Lawyers Association to file an amicus curiae brief in support of Casey’s position that the trial court erred in reducing the attorney fee award. Our own Patrick Austermuehle authored the amicus brief that ultimately resulted in the Third District’s reversal and remand of the case back to the trial court to reconsider Casey’s petition for attorney fees. Continue reading ›

Delaware Judge Finds for Elon Musk on Breach of Fiduciary Duty Claims

June 12, 2022 | Peter S. Lubin and James V. DiTommaso

A Delaware Chancery Court judge recently rendered a post-trial verdict in the In re Tesla Motors Stockholder Litigation in which he found in favor of co-founder and CEO of Tesla Motors, Elon Musk, on claims that Musk breached his fiduciary duties, was unjustly enriched, and created corporate waste in connection with Tesla’s 2016 acquisition of the SolarCity Corporation.

This high-profile, high-stakes lawsuit stemmed from alleged conflicts of interest created by Musk’s leadership and ownership of both companies during the 2016 acquisition. At the time of the merger, Musk was SolarCity’s largest stockholder and chaired its board of directors. At the same time, he owned 22% of Tesla stock and served as CEO and a director of Tesla. When the potential acquisition of SolarCity came up, Tesla’s board elected not to form a special committee of independent directors to negotiate the transaction. It did, however, condition approval of the acquisition on the “affirmative vote of a majority of the minority of Tesla’s disinterested stockholders” and recused Musk from certain Board discussions regarding the acquisition.

Despite these protections, the plaintiff shareholders alleged that Musk, as Tesla’s controlling shareholder, exerted his influence over Tesla’s board to approve the acquisition at an unfair price, following a highly flawed process, in order to bail out his (and other family members’) foundering investment in SolarCity. Plaintiffs named both Musk and members of Tesla’s board as defendants and sought damages as well as equitable remedies. Before trial, all defendants except Musk settled with plaintiffs, leaving only the claims against Musk proceeding to an 11-day trial over July and August 2021. Continue reading ›

California Court Rules that Jury Must Decide Issue of Willfulness in Fair Credit Reporting Act Class Action

May 24, 2022 | Peter S. Lubin and James V. DiTommaso

A California state appellate court recently issued an opinion reviving a class-action lawsuit concerning alleged violations of requirements employers must follow when performing employment-related background checks. In its opinion, the Court reversed summary judgment entered in favor of book retailer Barnes & Noble in a class-action lawsuit accusing the retailer of failing to strictly comply with the requirements for obtaining authorization for background checks found in the Fair Credit Reporting Act (FCRA). The Court’s decision breathes new life into the putative class action which was remanded to the trial court for further proceedings.

The FCRA is a federal statute that is meant to protect consumer privacy and promote fair and accurate credit reporting. Part of the law contains a number of requirements that employers must follow when performing employment-related background checks. Two of these requirements are found in 15 U.S.C. 1681b and require an “employer who obtains a consumer report about a job applicant first to provide the applicant with a standalone, clear and conspicuous disclosure of its intention to do so, and to obtain the applicant’s consent.” The FCRA further requires that the disclosure be contained in a document that consists solely of the disclosure.

In 2018, the plaintiff applied to work for Barnes & Noble. During the application process, Barnes & Noble’s consumer reporting agency, First Advantage, emailed the plaintiff a link to a website containing the retailer’s consumer report disclosure and asked her to authorize Barnes & Noble to perform a background check. The plaintiff alleges that she clicked the link, viewed the disclosure, and authorized Barnes & Noble to perform the background check.

First Advantage had prepared the consumer report disclosure statement that appeared on Barnes & Noble’s website. Included with the statement was a footnote that stated:

Nothing contained herein should be construed as legal advice or guidance. Employers should consult their own counsel about their compliance responsibilities under the FCRA and applicable state law. First Advantage expressly disclaims any warranties or responsibility or damages associated with or arising out of information provided herein.

Delaware Court Rules that Consent to Merger in Stockholders Agreement Did not Waive Right to Bring Fiduciary Duty Claims

April 15, 2022 | Peter S. Lubin and James V. DiTommaso

Recently, the Delaware Court of Chancery refused to dismiss an action for post-closing damages stemming from alleged breaches of fiduciary duty brought by former stockholders of Authentix Acquisition Company, Inc. In doing so, the Court rejected the defendants’ arguments that a provision in a stockholders agreement entered by the plaintiffs waived such claims for breaches of fiduciary duties.

The dispute arose out of the sale of Authentix to Blue Water Energy in 2017. The plaintiffs in the case were holders of common stock in Authentix. In connection with their investment in the company, the plaintiffs entered into a Stockholders Agreement which provided that they would “consent to and raise no objections against” any sale of the company approved by Authentix’s board and holders of at least 50% of outstanding shares. In 2017, the board approved a sale to Blue Water Energy over the objection of one of the plaintiffs, a director stockholder. The sale was also approved by holders of more than 50% of the company’s outstanding shares.

In response to the sale, the plaintiffs filed suit for post-closing damages, alleging various breaches of fiduciary duties by three former directors and officers of Authentix as well as the preferred stockholders of Authentix who plaintiffs alleged controlled the company. In response, the defendants moved to dismiss the plaintiffs’ claims arguing that the plaintiffs had waived any right to bring such claims. According to the defendants, because the sale was approved by Authentix’s board and at least 50% of the outstanding shares, the Stockholders Agreement precluded plaintiffs from raising any objections related to the sale. Continue reading ›

Seventh Circuit Rules for Insurer in COVID-related Business Interruption Litigatio

January 8, 2022 | Peter S. Lubin and James V. DiTommaso

The U.S. Court of Appeals for the Seventh Circuit recently joined the Sixth, Eighth, Ninth, and Eleventh Circuits in ruling in favor of insurers facing COVID-19 business interruption lawsuits. The consolidated appeal dealt with three different claims under Illinois law brought by affected businesses in a diversified range of industries from a dentist office to a hotel.

Each of the plaintiffs was a business that had purchased a commercial-property insurance policy from the Cincinnati Insurance Company. Shortly after the initial outbreak of COVID in Illinois, Governor J.B. Pritzker issued several executive orders that forced each business to shut down or drastically scale back operations. As a result, the businesses claimed to have lost substantial business income and submitted claims to Cincinnati under their policies. Cincinnati denied each of the plaintiff’s insurance claims. Continue reading ›

When Flooding and Other Problems Occur, Developer and Residents Point Fingers

December 29, 2021 | Peter S. Lubin and James V. DiTommaso

Back in September the resident-run condo board of 432 Park Avenue in Manhattan sued the developer of the building for $125 million to repair 1,500 alleged defects to the luxury condo building. According to the lawsuit, multiple residents experienced flooding in their units and noise as a result of alleged building defects. They also reported elevators that would get stuck and trap residents for hours.

The lawsuit further alleges that the construction issues have affected the building’s management, causing common charges to go up by 39% and insurance premiums to go up 300%.

The building’s developer denies the allegations made in the September lawsuit, arguing the allegations of safety defects were exaggerated, and that many of the problems it acknowledged were either caused and/or exacerbated by the residents themselves. According to the developer, it tried to address some of the issues listed in the residents’ lawsuit, but it claims the condo association either cancelled appointments or blocked access to the building when repairs were scheduled to be made.

As a result, the developer has filed a counter lawsuit against the condo board for defamation. According to the developer’s lawsuit, 90% of the building’s units were sold at the time the condo association filed its lawsuit, but sales dropped dramatically after the residents started making their allegations against the building’s developer. To back up its point, the developer pointed out that, overall, 2019 was a strong year for luxury condo sales, suggesting the lag in sales at the 432 Park Avenue building was most likely due at least in part to resident complaints. The developer has not specified the amount of damages it is seeking in its lawsuit against its residents, but it’s likely to be tens of millions of dollars.

The president of the condo board denies all the allegations made in the developer’s defamation lawsuit. Continue reading ›

Is There a Statute of Limitations on Reclaiming Stolen Artwork?

December 16, 2021 | Peter S. Lubin and James V. DiTommaso

The Nazis viewed modern art as “degenerate” and therefore confiscated whatever pieces of art they found to be “degenerate,” but that didn’t stop them from profiting off those pieces of art.

While the Nazi party refused to display artwork it did not approve of in German museums, they saw nothing wrong with selling the artwork to foreign buyers, which is how many pieces of art confiscated by the Nazis came to be displayed in American museums. That puts those museums in a morally uncomfortable position.

While the Nazis claim they “confiscated” works of art from its citizens, the truth is that they stole the artwork and used the proceeds from selling it to fund a fascist regime that killed millions of people.

In general, American museums recognize that artworks “confiscated” by Nazis are stolen, and that the Nazis had no legal right to sell them. As a result, American museums have returned many pieces of stolen artwork to the heirs of their original owners or creators, but the Philadelphia Museum of Art is still hanging on to “Composition with Blue” by Piet Mondrian, which was “confiscated” by the Nazis and sold to an American during WWII.

Mondrian had given the painting to Sophie Küppers, a German art historian and dealer, shortly after he completed it in 1926. The next year, Küppers moved to the Soviet Union, leaving the painting in Hanover at the Provinzialmuseum. After the Nazis came to power, they “confiscated” the painting, whereupon it was given to Karl Buchholz to sell to a foreign buyer.

Buchholz had a business partner, Curt Valentin, who was based in New York, so Buchholz sent the painting to Valentin to be sold in the United States. Valentin sold it to an art collector named Albert E. Gallatin. Continue reading ›

Seventh Circuit Rebuffs Software Company’s Attempt to Enforce Arbitration Agreement in Third Party User Agreement

September 25, 2021 | Peter S. Lubin and James V. DiTommaso

It is not at all uncommon for a company to require individuals to agree to its Terms of Use when they sign up for an online service or when creating an account on a website or mobile app. It is also not uncommon for that service, website, or app to incorporate technology from multiple different providers. Such was the case in a case recently decided by the federal Seventh Circuit Court of Appeals. In its opinion, the Seventh Circuit rebuffed arguments by a technology company that it should be entitled to enforce certain arbitration provisions in a user agreement between OfferUp and its users.

Onfido owns and licenses the TruYou facial recognition software, which is marketed as software aimed at helping online resellers verify their identity. OfferUp, an online marketplace for buying and selling used items, uses the TruYou software in its mobile app to verify the identities of its users.

One of OfferUp’s users, Fredy Sosa, sued Onfido, alleging that its TruYou software violated the Illinois Biometric Information Privacy Act (BIPA). Sosa signed up to become a verified user on OfferUp’s mobile app. The identity verification process involved uploading photographs of his driver’s license and face. OfferUp’s verification process allegedly involved using Onfido’s TruYou software to extract and store biometric identifiers contained in the uploaded photos to verify that the face in the photograph matches the face on the driver’s license. Sosa subsequently filed a putative class action lawsuit against Onfido alleging that the company violated the BIPA by failing to provide him with a biometric data retention policy or to advising him whether and when it will permanently delete the biometric identifiers that it derived from his face. Sosa additionally alleged that Onfido violated the BIPA by failing to require him to sign a written release allowing it to “collect, use, or store his biometric identifiers derived from his face.”

After Onfido removed the case to an Illinois federal court, it sought to have the lawsuit dismissed and to compel arbitration of Sosa’s claims. The company relied on an arbitration provision in OfferUp’s Terms of Service which Sosa agreed to when signing up as a user of the OfferUp marketplace as the basis for seeking to compel arbitration of Sosa’s claims. The district court denied Onfido’s motion to stay Sosa’s complaint and compel individual arbitration, finding that Onfido cannot enforce the arbitration provision because it wasn’t a party to the agreement between OfferUp and its users. Continue reading ›

Class-Action Lawsuit Alleges that Amazon’s Alexa Violates the Illinois BIPA

September 15, 2021 | Peter S. Lubin and James V. DiTommaso

Amazon is facing a class-action lawsuit filed in the Madison County Circuit Court alleging that Amazon’s Alexa violates the Illinois Biometric Information Privacy Act (BIPA). In setting out its case against Amazon, the Complaint quotes an interview with former Amazon senior editor James Marcus in which he said that “It was made clear from the beginning that data collection was also one of Amazon’s businesses. All customer behavior that flowed through the site was recorded and tracked. And that itself was a valuable commodity.”

The Complaint details the near ubiquity of Amazon’s voice-based virtual assistant Alexa by alleging that Alexa is embedded in numerous Amazon devices such as Echo speakers, Fire tablets, and others. The Complaint goes on to allege that Alexa can additionally be integrated into other devices such as phones, TVs, thermostats, appliances, lights, and many more consumer products.

The Complaint alleges that after Alexa responds to a request, Amazon collects and subsequently stores “voiceprints” of the user, and “transcriptions” of the voiceprints. These voiceprints and transcriptions constitute biometric identifiers or biometric information regulated by BIPA, according to the Complaint. The suit goes on to allege that Amazon does not delete the voiceprint or transcription after Alexa has responded. Instead, the Complaint alleges, Amazon uses these recordings to collect biometric information which it uses to improve the speech and voice recognition capabilities of Alexa.

Although Alexa is supposed to activate only after hearing its “wake word,” the Complaint alleges that Alexa-enabled devices frequently capture conversations by accident without being triggered. The Complaint cites a study conducted by Ruhr-Universität Bochum and the Bochum Max Planck Institute for Cyber Security and Privacy that allegedly discovered more than 1,000 sequences of words that incorrectly trigger smart speakers, such as Alexa. According to the Complaint, the study found that Alexa was inadvertently activated by the words “unacceptable” and “election.” Continue reading ›

Owner of Manufacturing Plant Sued for Chemical Contamination

August 11, 2021 | Peter S. Lubin and James V. DiTommaso

A manufacturing plant may have closed four years ago, but according to multiple lawsuits, the effects of the alleged mismanagement of dangerous chemicals used at the plant are still affecting residents of the area surrounding the now-defunct plant.

The plant in Tioga, LA opened in 1961 and made pressure relief valves for the oil and gas industry. The plant was sold to and absorbed by various companies over the years, and the plant was finally shut down for good in 2017 after the company that owned and ran it was absorbed by General Electric Oil & Gas in 2010, and the two companies combined became known as GE-Dresser.

In November of 2011, when the plant was still up and running, a fire hydrant near the plant broke and water filled an area that had been excavated for repairs. According to some of the recent lawsuits, a chemical sheen could be seen on the surface of the standing water.

A few months later, GE-Dresser notified the Louisiana Department of Environmental Quality (LDEQ) about a spill at the plant that had resulted in trichloroethylene (TCE) and tetrachloroethylene (PCE) getting released into the ground around the plant. The chemicals are used to clean grease from metal, and neither exists naturally, but has to be made in a lab.

The LDEQ installed monitoring wells to test the soil and groundwater for dangerous levels of TCE and PCE, but allegedly did nothing to notify residents about the possibility that toxic chemicals had been released into their environment until January of 2020, when the department first learned about the contamination levels in the Aurora Park subdivision. Some residents claim they weren’t notified of the contamination until months later in 2020. Continue reading ›