Litigation/Business Trials/Business Lawsuits/Business Litigation

Seventh Circuit Affirm’s Trial Court Decision on Partnership Dispute But Reverses Trial Court on Copyright Issue — Chicago Partnership Dispute Lawyers — Chicago Business Dispute Trial Attorneys

October 8, 2013 | Peter S. Lubin and Patrick Austermuehle

The Seventh Circuit has affirmed most of a district court ruling involving an Illinois partnership dispute involving claims for fraud, excessive partnership distributions and fraud in a trademark application for a corporate logo. The cases highlights that partnership disputes can result in very time consumer and expensive litigation when there is no clear-cut written partnership agreement. In this case, the victorious defendants were awarded substantial attorneys fees.

The case arose out of the following facts. Three individuals Swift, Schaltenbrand, and Siddle joined together as partners to operate a mail-order pharmacy, divide the profits from that business, and eventually sell the book of customers to another pharmacy. After some initial success, the partners began taking profit distributions that far exceeded the partnership’s profits and according to the Seventh Circuit did not square with any formula. All of the partners according to the Seventh Circuit’s description of the facts seemed pleased to strip the enterprise of monies and to even take out loans to do that:

Soon after the partnership started gaining steam, however, the partners began exploiting their informal arrangement for personal gain. Swift, Siddle, and Schaltenbrand repeatedly requested andreceived) profit distributions that far exceeded the amounts to which they were entitled under the agreement.
Despite the fact that the partnership was a money‐losing enterprise, the partners continually found the funds for distributions. For example,
evidence presented to the court indicated that, from 2005 to 2009,
the partnership operated at a net loss of over$400,000. During this same period,
however, Swift, Schaltenbrand, and Siddle received nearly $4 million in combined distributions.

Swift even persuaded Schaltenbrand to take out loans to facilitate
these unjustified payments to the partners. For his part, Swift concealed his excessive demands (which he knew had
no basis in the actual profitability of the partnership) commingling them with DeliverMed’s requests for cost reimbursements.
Swift and Schaltenbrand each became aware of the other’s excessive
distributions, but neither of them cared. So long as each
partner was able to obtain his own unjustified share of
partnership funds, no one made a fuss.
However, when a dispute erupted between the partners
Swift sued Schaltenbrand and Siddle claiming that
they had taken more money than the allegedly
agreed upon percentages and that he was therefore
entitled to larger distributions and owed money.

The district court listened to 14 days of testimony before ruling in favor Schaltenbrand and Siddle holding that Swift never properly included fraud claims, wasn’t a credible witness and couldn’t support his damages claims for greater distributions with evidence of a contract setting the agreed upon percentages. The court also invalidated a copyright registration that Swift’s marketing company obtained for a logo used by the partnership, finding that Swift knowingly misrepresented a material fact in the application to register a copyright in the logo.

The Seventh Circuit affirmed in part, agreeing that Swift did not prove Schaltenbrand and Siddle breached any obligation to provide him with a certain percentage of the distributions or even that such an obligation or contract to provide set percentages existed. The Seventh Circuit also found Swift waived fraud claims by failing to include them in the final pretrial order. The Seventh Circuit held that the district court erred by invalidating the copyright registration without first consulting the Register of Copyrights as to the significance of the inaccurate information. The Copyright Act requires courts to perform this “curious procedure” before invalidating a registration based on a fraud on the Copyright Office. The Seventh Circuit remanded the case so that Register could be notified and the issue decided based on the requirements of the statute.

You can view the entire opinion here.

EA Sports Settles With Ex-Players

October 1, 2013 | Peter S. Lubin and Patrick Austermuehle

ESPN reports:

While current NCAA players fight for their right to make money, a large group of former college football players scored a major victory Thursday.

Shortly after Electronic Arts announced it would stop producing a college football game beginning next year, the video game company — together with Collegiate Licensing Company, which holds the licensing rights to the trademarks of the majority of colleges and universities — filed papers to the U.S. District Court in Northern California that it had settled its case brought by former players.

Fox Business Reports: “Lawsuits on the Way Against Nasdaq?” — Chicago Business Lawyers Who Can Help Your Business

September 29, 2013 | Peter S. Lubin and Patrick Austermuehle

Watch the latest video at video.foxbusiness.com

Judge Orders Yelp Review Down — We Defend Consumers Sued For Negative Reviews of a Business

September 27, 2013 | Peter S. Lubin and Patrick Austermuehle

Our business attorneys and consumer lawyers have successfully protected businesses from false reviews online and represented consumers wrongly sued to stop them from posting negative reviews about businesses that commit fraud or mistreat their customers.

Lie Spotting Video — Our Chicago Fraud and Shareholder’s Rights Lawyers Bring Suit For Plaintiffs Damaged by Lies

December 10, 2012 | Peter S. Lubin and Patrick Austermuehle

NPR Reports: “$1 Billion BOA Lawsuit Claims Mortgage Fraud”

October 31, 2012 | Peter S. Lubin and Patrick Austermuehle

The Chicago trial attorneys at our firm have experience in complex business and fraud litigation. We work with some of the top whistle blower and qui tam lawyers in the country. The business fraud law firm of Lubin Austermuehle represents whistleblowers who are pursing qui tam lawsuits at any level of government, including claims under the Illinois Whistleblower Act, the Chicago whistleblower ordinance and the federal False Claims Act. Based in Chicago and Oak Brook, Ill., our Illinois and Naperville, and Chicago qui tam and False Claims Act lawyers stand ready to represent whistleblowers throughout the United States — regardless of whether prosecutors have decided to join the lawsuit. If you know about fraud against a government agency and you’re ready to speak up, you can learn more about whistleblower lawsuits at a free, confidential consultation. To set one up, please contact Lubin Austermuehle online or call 630-333-0333 today.

Exposing Madoff’s Ponzi Scheme — Our Chicago Fraud and Whistle Blower Lawyers Help Businesses Who Have Suffered From Fraud Recover Their Losses

October 11, 2012 | Peter S. Lubin and Patrick Austermuehle

https://www.youtube.com/watch?v=4xYkQnCUl5E

To learn more about our qui tam, blower, fraud, partnership and business dispute practice click here. Lubin Austermuehle’s Chicago business trial lawyers have more than two and half decades of experience helping business clients on unraveling complex business fraud and breach of fiduciary duty cases. We work with skilled forensic accountants and certified fraud examiners to help recover monies missappropriated from our clients and from government. Our Chicago litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and sucessfully as possible, helping business clients protect their investements and get back to business as usual. From offices in Oak Brook, near Lake Forest, and Evanston, we serve clients throughout Illinois and the Midwest.

If you know about fraud on the government and are prepared to blow the whistle, and you’d like to discuss how the experienced Illinois qui tam and whistle blower attorneys at Lubin Austermuehle can help, we would like to hear from you. To set up a consultation with one of our Chicago qui tam and whistle blower lawyers, please call us toll-free at 630-333-0333 or contact us through the Internet.

Michigan Toxic Pollution Class Action Stalls in Circuit Court – Dow Chemical v. Henry

August 25, 2011 | Peter S. Lubin and Patrick Austermuehle

A Michigan court recently pumped the breaks on a class action toxic pollution suit against Dow Chemical, finding that while property owners may be able to prove that the chemical giant contaminated local rivers and surrounding property with toxins, the plaintiffs did not meet the standards for bringing the suit as a class action.

The Michigan Messenger’s Eartha Jane Melzer reports that “[o]perations at Dow’s Midland plant have spread dioxin — a highly toxic and cancer-causing byproduct of the chemical manufacturing process — and other chemicals, through the Tittabawassee and Saginaw Rivers and into Lake Huron. Flooding of the rivers downstream from Dow has deposited dioxin-laden sediments on properties in the floodplain.”
Dow Chemcial v. Henry concerns a suit by roughly 150 Tittabawassee property owners filed against Dow on behalf of the more than 2,000 people with property in the floodplain in 2003 and claiming that their property had lost value due to contamination. Two years later, Saginaw County Judge Leopold Borello certified the class of property owners, a ruling that Dow appealed to the Michigan Supreme Court.

In order to be certified as a class, Michigan law requires that a group of plaintiffs meet the following criteria:

(a) the class is so numerous that joinder of all members is impracticable;
(b) there are questions of law or fact common to the members of the class that predominate over questions affecting only
individual members;
(c) the claims or defenses of the representative parties are typical of the claims or defenses of the class;
(d) the representative parties will fairly and adequately assert and protect the interests of the class; and
(e) the maintenance of the action as a class action will be superior to other available methods of adjudication in promoting the convenient administration of justice.

MCR 3.501(A)(1). On appeal, the state supreme court remanded the case to Judge Borello, requiring that he analyze the action under criteria (c) and (d) above.

Upon further consideration, Borello reversed his earlier approval of class status for the group. In so doing, he relied on the recent U.S. Supreme Court decision in Wal-Mart Stores v. Dukes, a 5-4 ruling in which the court reversed a lower court’s decision to certify a class of women employees alleging bias in pay and promotions, noting that the company’s decentralized structure meant that the case involved millions of employment decisions and that the women failed to show “some glue holding the alleged reasons for all those decisions together.”

Chicago Tribune Reports on Litigation Arising Out of Bankruptcy of Giordano’s Pizza Franchisor

August 14, 2011 | Peter S. Lubin and Patrick Austermuehle

The Chicago Tribune has recently reported on two lawsuits arising out of the bankruptcy of the franchisor for the Giordano’s pizza chain.

In one suit the bankruptcy trustee has sued franchisee for failing to use the the required pizza dough thus allegedly harming the quality and uniformity of Giordano’s pizzas. This type of lawsuit often arises in the franchise setting the article explains. The article states:

It’s common, especially in the restaurant business, for a franchisor to dictate suppliers in their franchise agreements.

“If a customer does not receive essentially the same product, same quality and same experience, the brand image is tarnished and the customer less likely to patronize the franchise in the future,” said Christian Burden, a Quarles & Brady LLP partner focusing on disputes involving distributors and franchises. “To use the quintessential example of the Big Mac, from the franchisor’s perspective, a Big Mac in Chicago must taste and appear generally the same as a Big Mac in Los Angeles, Toronto, Brazil, and so on.”

But it’s also not unheard of for franchisees such as those at Giordano’s to look for alternative sourcing. …

You can read the full article by clicking here.

The other Tribune article details a lawsuit filed by the former Giordano’s franchisor claiming that the franchisor’s lender-banks, former lawyers and other franchisees conspired to rob them of the business. You can view a copy of the complaint in this lawsuit by clicking here. The article describes the lawsuit’s claims as follows:

The lawsuit said that the men enlisted Fifth Third Bank, Giordano’s chief lender, as well as Chicago lawyer Michael Gesas and several Giordano’s franchisees “to participate in the scheme” in which they’d push the Apostolous out and take over the company. Secret meetings were held from September 2010 to February 2011, the lawsuit said. Gesas didn’t respond to a request for comment.

First, they intended to weaken the Chicago-based deep dish pizza chain financially, the suit said. Then, the Apostolous “were fraudulently induced” into signing agreements in August 2010 and October 2010 that worsened their lending terms with Fifth Third, which is owed more than $40 million in the bankruptcy.

Fifth Third threatened to “throw the family in the street” if they didn’t go along with the new terms, the lawsuit said. Aynessazian, who also owns eight Giordano’s franchises, Roche and Gesas made “material omissions” to the Apostolous and failed to represent the interests of the Glenview family, the suit said.

Before the execution of the October 2010 deal with Fifth Third, Apostolou had a heart attack, leaving him even more dependent on his lawyers and Aynessazian. The stress also prompted him to see a psychiatrist, the lawsuit said.

“The final step of the scheme involved seizing control of (Giordano’s) by pressuring the Apostolous into filing a Chapter 11 bankruptcy by which the assets and value of (Giordano’s) could be usurped for the benefit of Fifth Third, and the Apostolous’ ownership interests could be purchased at a materially deflated price for the benefit of the franchisee takeover group,” the lawsuit said.

You can read the full article by clicking here.

CNN reports: Designer Loses First Round of Trademark Lawsuit on Red Soled High Heels — Lawyer Vows to Continue the Fight on Appeal and Lambasts Judge’s Decision

August 14, 2011 | Peter S. Lubin and Patrick Austermuehle

CNN reports that French Shoe Designer Christian Louboutin lost the first round of a trademark lawsuit seeking to protect his iconic red soled high heels. Louboutin’s lawyer blasted the Court’s decision and vowed he would fight on in an appeal. The story explains that many designers want to use red soled shoes and don’t think they should be excluded from doing so with one designer receiving a monopoly on that color. The story states:

“Everyone sees the flash of red and associates the red with Louboutin,” attorney Harley Lewin said Thursday about his client.
In fact, Louboutin’s red soles have graced many a red carpets, adorning the feet of celebrities Oprah Winfrey, Heidi Klum and Sarah Jessica Parker. …
In his decision Wednesday, U.S. District Judge Victor Marrero acknowleded that in choosing a red sole for his shoes, Louboutin had “departed from longstanding conventions and norms of his industry,” to create a product, “so eccentric and striking that it is easily perceived and remembered.”
However, Marrero went on to say that, “Louboutin’s claim to the ‘the color red’ is, without some limitation, overly broad and inconsistent with the scene of trademark registration.”
“This was a trademark that never should’ve been issued,” David Bernstein, attorney for the defendant, Yves Saint Laurent said. …
Judge Marrero’s decision drew parallels between painters and fashion designers, calling them both members of a creative industry where no one should be barred from using color to achieve their aesthetic. Doing so could, “interfere with creativity and stifle competition.”
Bernstein agrees. “No designer should be able to monopolize a color.” …
Lewin says his client “separated his shoes from everyone else’s by using a red sole.”
Lewin said he’s never had such an outpouring from his fellow attorneys, law professors and members of the fashion industry, telling him, “This [verdict] is an abomination. Tell your client to appeal.”

You can read the full story by clicking here.