Articles Posted in Best Business And Class Action Lawyers Near Chicago

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 ›

In a recent decision, the Delaware Court of Chancery granted a motion to dismiss filed by the defendants in response to a shareholder’s lawsuit requesting to compel the company to pay a dividend and also seeking to find that the board of directors breached their fiduciary duty of care.

The plaintiff in the case of Buckley Family Trust v. Charles Patrick McCleary, was the Buckley Family Trust. The trust was one of seven stockholders of McCleary, Inc., a privately held snack food company headquartered in South Beloit, Illinois near Rockford, and only one of two stockholders that were not family members of the Company’s founder, Eugene “Mac” McCleary. Neither of the two non-family member shareholders served on the Company’s board of directors.

Unhappy with the direction of the Company and the decisions being made by the Company’s board of directors, the Plaintiff filed a two-count complaint against the Company and the five family members who served on the Company’s board of directors. In its first count, the Trust alleged that the board of directors engaged in minority shareholder oppression by failing to declare a dividend for seven years. In its complaint, the Trust argued that the Company had the funds to pay a dividend but refused to in an effort to squeeze-out the Trust and force it to sell its shares to the defendants at a steep discount.

In its second count, the Trust sought to bring a shareholder derivative action against the board of directors for allegedly breaching their fiduciary duties when it approved certain actions and failed to act on other occasions. In particular, the Trust sought to challenge the Company’s decisions to transition away from the grocer Aldi, a key customer; to authorize building a new warehouse; and to improve the Company’s production facilities to do business with a competitor. The Trust also challenged various non-actions by the board members including their failure to authorize improvements to the Company’s existing food production facilities or to manage the Company’s tax obligations and to observe corporate formalities.

In deciding the motion to dismiss, it reviewed the requirements for adequately pleading each of the Trust’s claims. With regard to the shareholder oppression claim, the Court found that the Trust failed to demonstrate that the board member’s actions were part of a squeeze-out scheme. For one, the Court pointed to the fact that the decision affected the Trust and the members of the board equally as they were all holders of common stock and would share equally on a pro rata basis any dividend paid by the Company. The Court also pointed to the fact that the “steep discount” referenced by the Trust in the Complaint was a contractually agreed to “discount of thirty (30%) percent applicable to all non-voting shares for lack of marketability and control” found in the Common Stock Purchase and Restriction Agreement to which the shareholders were a party. Consequently, the Court dismissed the claim concluding that the lack of dividend was not an abuse of discretion and that there was no evidence of self-interest.

In turning to the second claim, the Court noted that the Trust did not make a pre-suit demand on the board members before filing the derivative action on behalf of the Company. Consequently, the Court was required to analyze whether failing to make such a demand was excused under the demand futility exception to the demand requirement, which excuses the failure to make such a demand if it would have been futile to do so. The Trust argued that a demand would have been futile because the board members faced significant likelihood of personal liability under any such suit brought by the Company, a recognized exception to the demand requirement.

The Court reviewed various board meeting minutes and other documents presented by the parties to determine if the board members sought to properly educate themselves before making decisions or whether they acted with reckless indifference or without the bounds of reason, which would open them up to a substantial risk of personal liability. The Court determined that this evidence did not establish that the board acted recklessly or outside the ordinary bounds of reason. As such, the Court concluded that the Trust failed to demonstrate that making a demand on the board before filing the lawsuit would have been futile, and dismissed the Trust’s derivative claim.

The Court’s full opinion can be found here. Continue reading ›

Recently, the U.S. Seventh Circuit Court of Appeals held that a putative class action lawsuit alleging a technical violation of the Illinois Biometric Information Privacy Act (BIPA) was sufficient to establish the Article III standing required in order to proceed in federal court, reversing the District Court’s dismissal of the claims. Only time will tell the full impact of this ruling but it does have the potential to be an important precedent that any business operating in Illinois and collecting fingerprints or utilizing facial-recognition technology must be aware of. Beyond its potential impact on Illinois businesses, the ruling is another decision interpreting the Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins and the requirements set forth in that opinion for establishing Article III standing, and particularly the injury-in-fact prong of the standing analysis.

The plaintiff, Christine Bryant, worked for a call center in Illinois which had a workplace cafeteria with vending machines operated by the Compass Group. The machines did not accept cash and instead, employees had to scan and use their fingerprints to create user accounts and to purchase items.

Bryant initially filed a putative class action lawsuit in state court in the Circuit Court of Cook County. Her complaint alleged that Compass violated Section 15(b) of BIPA, which contains the requirement to obtain informed consent of individuals, by failing to: (1) inform her in writing that her biometric identifier was being collected or stored; (2) inform her in writing of the specific purpose and length of term for which her fingerprint was being collected, stored, and used; or (3) obtain her written release to collect, store, and use her fingerprint. Bryant’s complaint additionally alleged that Compass had also violated another section of BIPA, Section 15(a), which requires private entities that collect biometric information to make publicly available a data retention schedule and guidelines for permanently destroying the collected biometric identifiers, by failing to make such a written policy available to her or the other putative class members.

Following the filing of Bryant’s complaint in state court, Compass removed the action to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d). In a somewhat unusual twist, it was the plaintiff who argued that she lacked Article III standing required to litigate her claims in federal court. Bryant argued that what she alleged in her complaint were bare procedural violations that did not constitute an injury-in-fact under Spokeo. The district court agreed with Bryant and remanded the action to state court. Compass appealed the district court’s ruling to the Seventh Circuit. This set up an odd dynamic on appeal where Compass, the defendant, argued that Bryant’s allegations did constitute an injury-in-fact sufficient to confer subject matter jurisdiction on the federal court.

Compass’s primary argument in favor of standing was that the Illinois legislature, bypassing BIPA, elevated to protectable status an individual’s right to control his or her own biometric identifiers and information. The Court agreed with Compass with regard to Bryant’s claims concerning violations of Section 15(b) of BIPA. Relying on Justice Thomas’s concurrence in Spokeo, the Court focused on whether Bryant’s claims sought to vindicate a private right or a public one, which the Court characterized as “a useful distinction.” The Court reasoned that the disclosure requirements in Section 15(b) of BIPA protect a private right by granting individuals a right to be fully informed as to how their biometric information will be used before deciding to disclose such information. By contrast, the Court held that the public disclosure requirements in Section 15(a) of BIPA protect a public right because Section 15(a) creates an obligation to the public generally. Consequently, the Court only found the injury-in-fact requirement satisfied with regard to Bryant’s Section 15(b) claims but not her Section 15(a) claims.

The Court’s entire opinion is available online here. Continue reading ›

Every time you hear a famous song playing in a commercial, it’s because the producers paid for the right to use that song in their commercial … or at least they were supposed to. According to a recent copyright lawsuit the Doobie Brothers filed against Bill Murray, the famous actor allegedly failed to obtain permission from the band before using one of their hits in a commercial for his clothing line.

Murray, along with his brothers, released a line of golf clothing under the name William Murray. One of his recent commercials promoting the clothing line featured the song, “Listen to the Music”, a hit created by the Doobie Brothers that reached #11 on the Billboard chart in 1972.

The commercial featuring the song was specifically promoting a polo shirt called Zero Hucks Given, which is named after the fictional character, Huckleberry Finn. The clothing line is meant to bring back the loud golfing clothes that were popular in the 1970s, which could be why Murray chose to use a song from the early ‘70s to evoke that time period in his advertisements.

Peter T. Paterno, the attorney representing the Doobie Brothers, sent a letter to Murray notifying him of the lawsuit. Paterno also represents other musicians whose music Murray has allegedly stolen for use in commercials promoting his line of golf wear, although the Doobie Brothers are the only plaintiffs named in this copyright lawsuit. Continue reading ›

Business partnerships sometimes come to an end. As we have written about previously, it is important going into a partnership to have an agreed-upon exit strategy in place. However, as a recent decision from an Indiana appeals court highlights, it is important for business partners to not only include exit provisions in their partnership agreements, operating agreements, or shareholder agreements but to carefully think through the wording of the provisions to avoid disputes and misunderstandings later.

In Hartman v. BigInch Fabricators & Construction Holding Company, Inc., the dispute considered by the court involved interpretation of a provision in the parties’ shareholder agreement that required the company to purchase the shares of any shareholder who was involuntarily terminated at “appraised market value on the last day of the year preceding the valuation, determined in accordance with generally accepted accounting principles by a third-party valuation company.”

The plaintiff in the case, Blake Hartman, was a co-founder and longtime president and director of the company called BigInch Fabricators & Construction Holding Company. Hartman was one ten shareholders, none of which owned a majority stake in the company. In 2006, the shareholders entered into a shareholder agreement.

The agreement included a buyback provision (also known as a repurchase agreement) requiring the company to purchase the shares of any shareholder who was involuntarily terminated as an officer or director of the company. The purchase was to be made at “appraised market value on the last day of the year preceding the valuation, determined in accordance with generally accepted accounting principles by a third-party valuation company.” The agreement did not define the term “appraised market value” or elaborate on the methodology to be used by a third party in performing the valuation.

In March 2018, Hartman was involuntarily terminated as a director and officer of BigInch. At the time of his termination, Hartman owned 8,884 shares in the company, representing a 17.77% interest. As required by the shareholder agreement, the company hired an appraiser to calculate the value of the company for the purposes of valuing Harman’s shares for repurchase. The appraiser calculated the fair market value of Hartman’s shares to be $2,398,000.00, which included discounts for the marketability of the shares and the lack of control represented by Hartman’s minority interest.

Hartman filed a declaratory judgment action contesting the valuation and requesting that the court declare the value of his shares. Hartman argued that the appraiser’s application of the “fair market value” standard to value his shares was not in accordance with the agreement because that standard presupposes an “open market” of willing sellers and willing buyers.

At the outset of its analysis, the Court began by explaining the utility of buyback provisions or repurchase agreements like those included in the BigInch shareholder agreement. Close corporations generally lack a market for their shares, the Court explained, because the only people interested in owning the business are the “incorporated partners” who are intimately involved with the entity. Because there is often no market for one’s shares, it is difficult and speculative to value a close corporation’s shares, which is why repurchase agreements frequently specify the valuation method to be used.

The Court turned its attention to two popular business valuation methods: the “fair value” method and the “fair market value” method. The Court next outlined the differences between the two methods. The “fair value” standard seeks to ensure that shareholders were fairly compensated. The “fair market value” standard, on the other hand, attempts to determine the amount that a willing seller and willing buyer would arrive at after negotiations. Because the fair market value standard attempts to approximate the results of a real-life negotiation, discounts for lack of control and lack of marketability are appropriate.

The question for the Court was which valuation method did the BigInch shareholder agreement require. The agreement did not specify but instead only required an “appraised market value.” The trial court held that this required application of the fair market value method which permitted discounts for lack of marketability and lack of control. On appeal, the Court disagreed and held that the proper valuation methodology in a forced sale is the fair value method.

The Court concluded that “minority and control discounts have no application in compelled transactions to a controlling party.” Applying such discounts in forced sales involving the company purchasing back shares from a minority shareholder would result in a windfall to the purchasing majority shareholder or shareholders. A windfall would result because “a sale of the minority shareholders’ shares to majority shareholders consolidates or increases the power of those already in control.” Given that the majority shareholders are already benefitting by increasing their power, it does not follow that the majority shareholders should be able to realize this benefit at a discount.

The Court’s full opinion is available online here. 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 ›

In a unanimous opinion, the U.S. Supreme Court recently ruled that allowing nonsignatories to an international arbitration agreement to compel arbitration through domestic equitable estoppel doctrines does not conflict with the signatory requirement of the U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention).

That case, GE Energy Power Conversion France SAS v Outokumpu Steamless USA, LLC, stems from a 2007 contract between a contractor and steel manufacturer for the construction of mills in the manufacturer’s steel plant. The plaintiff, an international subsidiary of the global power company, General Electric, had been subcontracted by the contractor to produce nine motors for the mills. Outokumpu Stainless USA, LLC (which acquired ownership of the plant), and its insurers sued GE Energy after the motors allegedly failed.

GE Energy moved to dismiss the case and sought to compel arbitration by enforcing the arbitration clauses in the contract between the contractor and steel manufacturer. A Federal District Court granted the motion to dismiss and compel arbitration. The Eleventh Circuit Court of Appeals reversed, holding that the New York Convention: (i) requires parties seeking to compel arbitration to be signatories of the arbitration agreement, and (ii) precludes the use of state-law doctrines of equitable estoppel to compel arbitration in conflict with the Convention’s signatory requirement. In reversing the Eleventh Circuit, the Supreme Court held that use of state law doctrines of equitable estoppel to compel arbitration by nonsignatories to an international arbitration agreement was not barred by or conflict with the New York Convention.

Before announcing its holding, the Court first analyzed the two primary authorities at issue in the case, the Federal Arbitration Act (“FAA”) and the New York Convention. The Court began it discussion by noting its previous holdings that the FAA permits a nonsignatory to rely on state-law equitable estoppel doctrines to enforce an arbitration agreement. Generally, in the arbitration context, the Court explained “equitable estoppel allows a nonsignatory to a written agreement containing an arbitration clause to compel arbitration where a signatory to the written agreement must rely on the terms of that agreement in asserting its claims against the nonsignatory.” 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 ›

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