Articles Posted in Business Disputes

When a class action settles, class members generally have three options: (1) remain a part of the class, (2) opt-out of the settlement, or (3) object to the settlement. Many courts have bemoaned a perceived rise in the abuse of the third option by class members using a technique commonly referred to as “objector blackmail.” Objector blackmail involves class members filing frivolous objections to a class settlement, appealing decisions approving the settlement over such objections, and then seeking to obtain a side payment from the defendant in exchange for dismissal of their appeals. A recent Seventh Circuit opinion may spell the beginning of the end of this practice.

The issue of objector blackmail was front and center in the case of Pearson v. Target Corp. The plaintiffs in Pearson filed a putative class action alleging that the retailer Target, among others, made false claims about dietary supplements they manufactured and distributed. In March of 2013, the parties reached a settlement and asked the district court to approve it. After the first settlement was thrown out on appeal, the parties then reached a second settlement. Following the district court’s preliminary approval of the second settlement, three class members objected to the settlement. The objections ran the gamut from the number of class counsel’s fees to the failure of the defendants to admit liability under a statute they had not been accused of violating in the case. Continue reading ›

Terminating an employee can be a difficult thing for an employer. It can become even more difficult if the former employee decides to sue her former employer. An Illinois appellate court recently addressed such a situation and ultimately found that the trial court had properly granted summary judgment in favor of the employer on the former employee’s claims of retaliatory discharge and intentional infliction of emotional distress.

The plaintiff, Rita DiPietro began working for GATX Corporation, a Chicago-based equipment finance company, in July 2016 as a customer service representative. During her employment, the plaintiff took sick leave occasionally to care for her mother. Her manager told her to record this time off in the company’s timekeeping program. The program only accepted time recorded in half-day increments. As a consequence, even when the plaintiff took leave of fewer than four hours, the timekeeping program would reflect that she had taken four hours of leave.

When the plaintiff discussed the issue of the timekeeping program overstating the amount of sick time she had used, her manager allegedly told her to continue using the system to track her leave time. The plaintiff later complained about the sick time issue to both her manager’s manager and someone in the human resources department. She allegedly asked that her manager not be informed about the complaints because her manager had warned her not to complain to human resources or her manager’s manager about the issue. Nonetheless, her manager was informed of the plaintiff’s complaints.

Upon learning that the plaintiff had gone over her head, the plaintiff’s manager allegedly began contacting the plaintiff’s coworkers to question them about the plaintiff, seeking negative information that could be used to justify terminating the plaintiff. Approximately six weeks after making her complaint to HR and her manager’s manager, the plaintiff was terminated.

When the plaintiff requested a copy of her personnel file from GATX, it allegedly contained handwritten notes from the plaintiff’s manager that falsely documented counseling sessions with the plaintiff and back-dated documents that purported to criticize the plaintiff. The plaintiff denied that her manager or anyone else told her that her performance was deficient, counseled her in any respect, or took away any of her responsibilities. Instead, she asserted that she frequently received praise from upper management and attached emails representing a portion of those accolades to her pleadings. She also pointed to the fact that she received a rating of “solid achievement” on her only performance review and was given an above-average performance bonus in response. Continue reading ›

The Edelson law firm filed a motion to protect its Lion Air Crash victims’ settlement monies from alleged selling off by Erika Jayne of her expensive designer clothing suspecting she would allegedly spend the proceeds in violation of the Court’s order.  The Motion states in relevant part:

On information and belief, some and likely all of the property offered for sale is community property in which Tom Girardi has an interest, and is therefore among his assets. For example, one of the items offered for sale is a $1,000 dress from Australian label Ellery. Ellery was founded during the Girardis’ marriage and the dress therefore could not have been acquired prior to the marriage. Further, while Edelson is unaware of the exact relationship between Vestiaire Collective and Erika Girardi, Erika Girardi may be attempting to move Tom Girardi’s assets outside the United States by selling them through a French company. Although Erika Girardi is not herself a party to the asset freeze order, she is bound by it. “[A]n injunction is binding on the parties to the proceeding; their officers, agents, and employees (acting in that capacity); and nonparties with notice who are either ‘legally identified’ with a party or who aid and abet a party’s violation of the injunction.” Nat’l Spiritual Assembly of Baha’is of U.S. Under Hereditary Guardianship, Inc. v. Nat’l Spiritual Assembly of Baha’is of U.S., Inc., 628 F.3d 837, 840 (7th Cir. 2010). “[T]he ‘legal identity’ justification for binding nonparties is limited to those who have notice of the injunction and are so closely identified in interest with the enjoined party that it is reasonable to conclude that their rights and interests were adjudicated in the original proceeding.” Here, Erika Girardi has notice of the injunction, because a copy of it was sent to her attorney. And even though divorce proceedings have been initiated, Erika Girardi could not be more closely associated with Tom Girardi. The property she is attempting to sell likely belongs, in part, to Tom Girardi, and she is only permitted to manage or sell it as a fiduciary to Tom Girardi. In addition, Edelson PC suspects that Tom Girardi and Erika Girardi have acted and continue to act in concert to divert money from Girardi Keese for their personal use. Tom Girardi’s creditors attested to $20 million in “loans” advanced to Erika Girardi’s company by Girardi Keese. Given the opacity of Tom Girardi and Girardi Keese’s finances, there is every reason to believe that Erika Girardi has client money. Simply put: the Court froze all of Tom Girardi’s assets, and that means all community property is frozen too. Erika Girardi must stop selling her clothes.

Here is the motion filed by the Edelson firm regarding stopping Erika Jayne from selling off her expensive clothing. Continue reading ›

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 ›

After the governor of Illinois issued an executive order banning gatherings greater than 50 people due to the SARS-CoV-2 pandemic, the Illinois Republican Party sued. The state GOP alleged that the order’s carve out for religious services violated the Free Exercise Clause of the First Amendment because it privileged religious services over other types of speech, including political speech. The appellate panel disagreed, finding that the order did not violate the Free Exercise Clause because it was clear that speech that accompanies religious exercise had a privileged position under the First Amendment and that the executive order permissibly accommodated religious activities.

In response to the SARS-CoV-2 pandemic, Governor J. B. Pritzker of Illinois has issued a series of executive orders designed to limit the virus’ opportunities to spread. The Illinois Republican Party and some of its affiliates believe that one executive order issued by Pritzker, a ban on gatherings of groups larger than 50, violated the Free Speech Clause of the First Amendment because it contained a carve-out for the free exercise of religion, which allowed religious organizations to gather in groups of larger than 50 individuals.

The plaintiffs sought a permanent injunction against EO 43, assuming that such an injunction would permit them to gather in groups larger than 50, rather than reinstate the stricter ban for religion that some of the Governor’s earlier executive orders included. The district court denied the plaintiffs’ request for an injunction, and the plaintiffs appealed.

The appellate panel began by stating that the argument of the plaintiffs was essentially that religious groups were privileged over other groups in terms of limits on gatherings and that the only difference between the religious groups and others was the content of their speech. The panel found that, based on the Supreme Court’s Religion Clause cases, it was clear that speech that accompanies religious exercise has a privileged position under the First Amendment, and that EO43 permissibly accommodates religious activities. Continue reading ›

ATTENTION BUSINESS OWNERS: we are investigating possible wrongful denials of business interruption insurance claims due to COVID-19. If you would like us to review your policy, feel free to send it along.

As we have written about previously, the COVID-19 pandemic and the numerous restrictions and shelter in place orders that have been implemented have spawned a number of lawsuits from business owners against insurance companies. These suits seek to determine coverage for business income losses that resulted from businesses being forced to shut down in compliance with government orders. A recent ruling from a federal judge in Kansas City could open the window for thousands of businesses whose insurers have denied their COVID-19-related claims.

Background of the COVID Coverage Disputes

Businesses holding all risk or business income interruption polices have submitted claims throughout the country to their insurers seeking coverage for business interruptions based on COVID-19-related closures. The claims generally seek recovery of lost business income and extra expenses incurred due to having to close their places of business as a result of the presence of the virus or government orders. The response from insurance companies has been almost universal: denial of the claims on the basis that the losses do not constitute a “direct physical loss or damage” at the covered property. Following the filing of hundreds of insurance coverage lawsuits, some plaintiffs are seeking consolidation of the federal lawsuits in multidistrict litigation. The Judicial Panel on Multidistrict Litigation heard an argument for consolidation in August and is expected to issue a decision in the coming weeks.

To date, most court decisions have sided with insurance companies. The courts in these cases have held that the risks posed by COVID-19 do not meet the direct physical loss or damage requirement for coverage under the insured’s respective policies. The recent opinion from U.S. District Court Judge Stephen Bough is definitely an outlier but gives new ammo for those businesses whose claims have not yet been decided or who have yet to file suit against their insurance companies. Continue reading ›

The COVID-19 pandemic has disrupted all kinds of businesses all over the world, but small businesses have been hit the hardest. Many business owners pay for business insurance to help them cover the costs of doing business when they can’t do business, or to cover the costs of litigation if they get sued.

But this pandemic has put so many small businesses out of business, even if just temporarily, those insurers have been flooded with claims – and when insurers get flooded with claims, they usually look for excuses to avoid paying all those claims.

Hiscox is a major insurance company that specializes in selling business insurance to small business owners, often directly over the internet without the aid of an insurance broker. When many of those policyholders tried to file claims with Hiscox for business disruption, Hiscox allegedly claimed the pandemic is not covered under the terms of their business disruption insurance policy.

In response to the insurance company’s refusal to pay up, almost 350 policyholders came together to form the Hiscox Action Group. Mishcon de Reya, a law firm based in London, has been hired to represent Hiscox Action Group and they quickly entered into arbitration against Hiscox over the unpaid business disruption insurance claims.

Hiscox is not the only insurance company refusing to pay small business owners for the losses they have suffered as a result of COVID-19. Seven other insurance companies, along with Hiscox, are taking part in a UK court test case to determine whether insurers can be made to pay business disruption claims in the wake of COVID-19. Continue reading ›