Emergency Commercial Litigation

Good Faith and Fair Dealing Requirements for Corporate Managers Impacts Oppression Litigation

November 26, 2023 | Peter S. Lubin and Patrick Austermuehle

In Illinois, as in many other jurisdictions in the United States, co30-333rporate or LLC oppression lawsuits typically involve allegations of minority shareholders or members being treated unfairly or in bad faith by the majority shareholders or members. These lawsuits are often brought under various legal theories, such as breach of fiduciary duty or breach of the implied covenant of good faith and fair dealing. Below are some key points related to fairness and good faith in Illinois corporate or LLC oppression lawsuits:

Fiduciary Duties: Shareholders in corporations and members in LLCs owe certain fiduciary duties to the company and to each other. These duties include the duty of loyalty and the duty of care. Majority shareholders or members have a duty to act in good faith and fairness when dealing with the company and minority shareholders or members.
Business Judgment Rule: Illinois, like most states, applies the business judgment rule, which generally provides protection to corporate or LLC directors and officers for their decisions as long as they are made in good faith, with due care, and in the best interests of the company. However, the rule does not shield them from liability for self-dealing or actions taken in bad faith.
Oppression Claims: Minority shareholders or members may bring oppression claims if they believe that the majority has engaged in oppressive, fraudulent, or unfairly prejudicial conduct that harms their rights and interests. Courts will examine whether the conduct was done in bad faith and whether it resulted in oppression or unfair treatment.
Judicial Remedies: If a court finds that oppression or unfair treatment has occurred, it may order a variety of remedies, such as a buyout of the minority’s interest, a dissolution of the company, or other equitable relief designed to rectify the harm and protect the minority’s rights.
Operating Agreements and Shareholder Agreements: The terms of the operating agreement (for LLCs) or the shareholder agreement (for corporations) often play a significant role in determining the rights and obligations of the parties involved. These agreements may contain provisions related to governance, dispute resolution, and protections against oppression.
Good Faith and Fair Dealing: In addition to specific statutory and fiduciary duties, Illinois law recognizes the implied covenant of good faith and fair dealing in contracts, including operating agreements and shareholder agreements. This implies that parties must act honestly and fairly in their dealings with each other, and they should not act to undermine the other party’s reasonable expectations.

Google Ads Is Facing a Federal Antitrust Lawsuit

March 3, 2023 | Peter S. Lubin and Patrick Austermuehle

In theory, when people talk about online advertising, they could be talking about advertising on a variety of platforms. In addition to Google, each social media platform has its own advertising options. Amazon and Bing also have advertising. But for most people, online advertising is synonymous with Google Ads. Google has the largest share of online advertising by far, accounting for almost 29% of the total digital advertising revenue generated in 2021.

The U.S. Department of Justice, along with eight states, is suing Google for allegedly abusing its monopoly on digital advertising. According to the lawsuit, Google systematically aimed to control large portions of the high-tech tools involved in digital advertising so they could control the market.

By filing the lawsuit, the Department of Justice is hoping to force Google to sell all of its ad technology products, including the software it uses to buy and sell ads, the marketplace it uses to complete the transactions, and the service it uses to display ads across the internet. The lawsuit is also seeking to force Google to stop engaging in allegedly anticompetitive practices. Continue reading ›

The Legal Battle Over the Game “Fortnite” Continues Between Apple and Epic Games

October 3, 2020 | Peter S. Lubin and Patrick Austermuehle

Apple’s app store is one of the most popular in the world, which means you need to play nice with Apple if you’re creating an app and you want to get in front of the millions of people who use Apple’s store to download apps. But Apple takes a percentage of every payment made to an app creator through their app store, which is why it retaliated after Epic Games introduced a new in-app payment system within their videogame, “Fortnite”. Apple removed the game from its app store as soon as it became aware of the update to the popular videogame.

Epic responded with a lawsuit that asked the court for an injunction against Apple that would require the tech giant to put the game back in its app store. It claimed Apple is acting as a monopoly with a payment system that allegedly suppresses competition and inflates prices.

Apple countersued with a claim that the videogame company had breached its contract with Apple by introducing an in-app payment system within the game that avoided the 30% cut every other app creator pays Apple and Google for placement in their app stores. Within hours of the addition of the in-app payment system, both tech giants had removed “Fortnite” from their app stores.

In its own complaint, Apple accused Epic, a multi-billion-dollar company, of trying to derive significant financial benefit from placing its videogame in Apple’s app store without sharing any of those profits with Apple.

Back in June, Tim Sweeney, Epic’s CEO, emailed executives of Apple, including the CEO, Tim Cook, asking for a special agreement that would exempt Epic from some of its contractual obligations, including the ones dealing with payments made in the app store. Apple rejected those terms, and in early August Epic sent to the app store an updated version of “Fortnite” that the company described as a “hotfix”, but Apple alleges it was more like a Trojan horse. The “hotfix” version of the videogame allegedly allowed it to bypass Apple’s normal review process and payment system, thereby allowing Epic to sneak into Apple’s app store a videogame that charged customers in the app, rather than in the app store.

Once the “Trojan horse” version of the videogame was in Apple’s app store, Sweeney sent another email to Apple saying that his company refused to abide by Apple’s payment processing rules, after which his company activated the in-app payment system, which Apple alleges was little more than theft.

Apple’s app store has about 1 billion global customers, and in just the first seven months of 2020, in-app purchases, premium apps, and subscriptions generated almost $39 billion in global revenue. Apple claims the fees it takes from app purchases help the company fund the development and maintenance of an app store that provides a safe and secure environment for customers to purchase and download third-party software.

For Epic’s part, the videogame company has earned more than $600 million by working with Apple. Continue reading ›

BankDirect, Inc. v. Capital Premium — Appellate Court Rules Injunction Should Have Terminated — Chicago emergency business injunction lawyers near Oak Brook and Naperville

February 12, 2019 | Peter S. Lubin and Patrick Austermuehle

When a contract between two loan servicing corporations contained a drop-dead date specifying that it could not be extended past June 2018, the district court erred in granting one corporation an injunction that kept the contract in force past the drop-dead date. The appellate court found that interpreting the contract as the district court did would have trapped one party in the contract with no way to extricate itself and that this outcome could not have been the intended outcome of the agreement.

BankDirect Capital Finance and Capital Premium Financing both participate in the market for loans to finance insurance premiums. In 2010, Capital Premium exhausted the line of credit that funded its operations. It approached BankDirect with a request for operating capital. BankDirect was willing to purchase the loans that Capital Premium made, and to pay Capital Premium to service those loans while they were outstanding, but it demanded a right to purchase Capital Premium’s business outright after five years.

Capital Premium agreed to the terms and the contract went into force in December 2010. The option to purchase could be exercised near the fifth anniversary. If BankDirect elected not to purchase Capital Premium, then either side could extend the term by notice given before Jan. 4, 2016; otherwise, the deal would wrap up on Jan. 31, 2016. Any extension could not exceed the contract’s drop-dead date, June 1, 2018, after which neither side would have any obligation to the other. Continue reading ›

Crash Course in Intellectual Property Law — Chicago Business Dispute Attorneys Near Oak Brook and Naperville

March 15, 2016 | Peter S. Lubin and Patrick Austermuehle

Our Chicago business dispute lawyers have extensive experience prosecuting and defending intellectual property, copyright, trademark, partner disputes and complex business lawsuits.

Illinois Partnership Dispute Law — Our Chicago Business Dispute Attorneys Represent Partners and Shareholders in Business Lawsuits

March 1, 2016 | Peter S. Lubin and Patrick Austermuehle

Our business litigation firm has handled Illinois partnership disputes for many years. We have handled partnership disputes in a wide variety of different contexts from lawyer and doctor disputes to disputes by real-estate development partners.

We have handled TRO’s and preliminary injunction matters and dissolution of partnerships that have lasted over two decades.

How Long is Long Enough: Substantial Employment Standard for Non-Compete Agreements — Our Chicago Non-Compete Agreement Attorneys Litigate Non-Compete Agreement Cases Throughout the Chicago Area

January 21, 2015 | Peter S. Lubin and Patrick Austermuehle

How Long is Long Enough: Substantial Employment Standard
for Non-Compete Agreements

Non-Compete covenants are among the strongest ways to protect against an employee potentially walking away with vital and, even more importantly, confidential information of the employer. Though it has long been established that timing plays a large role in whether or not an employment agreement is enforceable, a new holding has established that timing may not be everything when it comes to a post employment non-compete agreement.

A two-year time frame was considered to be the main threshold to satisfy “substantial” employment, however, the ruling in Montel Aetnastak, Inv.v. Miessen, 998 F. Supp. 2d 694 (N.D. Ill. 2014), demonstrates that because of inconsistencies between both lower Illinois courts and the Illinois Supreme Court, the implementation of a bright-line rule is not the determining factor when it come making a decision whether employment was “substantial”. Also, the Court determines that over broad post-employment non-compete covenant is not for the Court to narrow under the facts in that case. Continue reading ›

Preliminary Injunction to Prevent Alleged Customer Soliciation

January 5, 2015 | Peter S. Lubin and Patrick Austermuehle

Crown Packaging Int’l, Inc. v. Brown, 2014 IL App (1st) 140284-U

“Preliminary Injunction to Prevent Alleged Customer Soliciation”

The Illinois Appellate Court held in July, 2014, that the trial court below did not abuse its discretion when it granted a preliminary injunction against defendants who allegedly operated a secret competing business in violation of a restrictive covenant.

Crown Packaging supplies craft breweries with containers such as glass bottles, bottle caps, and related items. In December 1998, Crown Packaging entered into an employment agreement with Brown, which contained a non-compete clause.

In September 2010, Brown started an alleged ‘secret’ side business, Libation Container, Inc. Crown Packaging alleged that Libation competed with Crown Packaging and solicited its customers, and that Brown failed to seek Crown Packaging’s permission to sell craft brewing containers on his own through Libation Container Inc. while employed by Crown Packaging. Brown denies the claims. Continue reading ›

Illinois Court Dismisses Putative Shareholder Class Action, Finding Lack of Alleged Injuries – Noble v. AAR Corp.

July 10, 2013 | Peter S. Lubin and Patrick Austermuehle

An Illinois federal court granted a motion to dismiss in a putative shareholder derivative class action, having already denied the plaintiff’s application for a temporary restraining order (TRO). Noble v. AAR Corp., et al, No. 12 C 7973, memorandum and order (E.D. Ill., Apr. 3, 2013). The plaintiff asserted causes of action for various alleged breaches of fiduciary duty on behalf of the corporation, but the court found that the lawsuit was a direct action, primarily for the plaintiff’s benefit as a shareholder, rather than a derivative one.

The dispute related to a recommendation by the Board of Directors to the shareholders of AAR Corporation, a publicly-traded company, regarding an executive compensation plan. The Board made a unanimous proposal regarding the corporation’s “say on pay” plan, which allowed the shareholders to vote on executive pay as required by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), 15 U.S.C. § 78n-1. In a seventy-page proxy statement, the Board asked the shareholders to approve an advisory resolution regarding executive compensation at the corporation’s annual shareholder meeting, which was scheduled for October 10, 2012.

The plaintiff filed suit against the corporation and individual Board members, alleging that the Proxy Statement failed to disclose various details about what the Board considered before making its proposal. Noble, memorandum at 5. He claimed that the individual defendants breached their fiduciary duties of good faith, care, and loyalty to the shareholders, and that the corporation aided and abetted these breaches. Id. at 5-6. The defendants removed the case to federal court on October 4, 2012. The following day, the plaintiff filed a motion for a TRO, asking the court to stop the shareholder vote. The court held a hearing on October 9 and denied the motion. On October 10, the shareholders approved the Board’s proposal, with seventy-seven percent of the shares voting in favor. Id. at 1-2.

Reuter’s Reports: “Kraft Loses Bid to Keep Distributing Starbucks”

February 6, 2011 | Peter S. Lubin and Patrick Austermuehle

It is very difficult to obtain an injunction when monetary damages can compensate for a business’s losses. A recent article in Reuter’s regarding Kraft Food’s bid to require Starbucks to allow it to continue to distribute Star Buck’s coffee illustrates the point. Reuter’s reports:

A federal judge rejected Kraft Foods’ bid to force Starbucks Corp to keep using Kraft to distribute packaged coffee to supermarkets in North America and Europe, a decision that allows Starbucks to move ahead with a new partner.

In a ruling from the bench, U.S. District Judge Cathy Seibel in White Plains, New York, on Friday also noted that Starbucks could end up owing Kraft “a boatload of money” if an arbitrator decided the coffee chain breached a 1998 agreement with Kraft.