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A business sought to enforce a covenant not to compete against a former employee in Matter of Richard Manno & Co., Inc. v. Manno, requesting a preliminary injunction from the Supreme Court of Suffolk County, New York pending the outcome of arbitration. The agreement between the parties was part of the former employee’s severance agreement rather than a condition of his employment. The court denied the application, finding that a preliminary injunction was not an available remedy under the parties’ agreement.

The petitioner, Richard Manno & Co., Inc. manufactures and distributes steel fasteners and machined parts, with a market covering much of the United States. The respondent, Anthony Manno, was an employee of the petitioner until the two entered into a severance agreement in October 2010, in which the petitioner agreed to make various lump sum payments to the respondent in exchange for his resignation and other consideration. The agreement also included provisions for forfeiture of future payments from the petitioner upon certain acts deemed, in the sole discretion of the petitioner, to be in direct competition with the petitioner’s business. The respondent could not work with a domestic company that directly competed with the petitioner, nor could he solicit any person or business that he knew the petitioner was employing or soliciting.

The respondent allegedly formed his own business, Anthony Manno & Co., Inc., in January 2011 to engage in the same business as the petitioner. The petitioner alleges that this new company violated the non-compete agreement by engaging in direct competition in the U.S. market. It also alleged that the respondent’s new business, through such direct competition, interfered with its business relationships with its clients.

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A highly anticipated Supreme Court ruling regarding class certification recently fell a little flat of expectations. While defense attorneys feared the Court’s decision would make it easier for class-actions to attain certification using any evidence at the certification stage, plaintiffs attorneys feared the opposite. They were afraid of the Court going in the other direction and making it more difficult to use expert testimony to justify class certification. In the end the Court’s ruling was so narrow as to justify none of the fears of the two sides.

The matter before the Court involved Comcast and a class action of Comcast table television subscribers who allege that Comcast “clustered” its operations in certain regions (including the Philadelphia area) by acquiring competitors’ cable systems in those areas and then selling the competitors its own cable systems in other regions. This led to Comcast allegedly participating in four different means of stifling competition in its operating regions. One of these practices was using its dominant marketing position to deter others (called “overbuilders”) from opening competing networks in its regions.

At the class certification stage, the plaintiffs presented evidence from an expert witness who used an econometrics model to show how much lower Comcast’s prices would have been without its anticompetitive practices. However, this model showed only the effect of all four anticompetitive practices taken as a whole. The district court, on the other hand, said it would only certify a class of Comcast subscribers pursuing the overbuilder-deterrent theory of antitrust liability. While the district court recognized that the expert’s model did not calculate the damages (if any) from that particular antitrust practices, it nonetheless decided that such an amount could be calculated on a class-wide basis and so decided to certify the class. It ruled that to delve further into the specifics of the plaintiffs’ evidence would be to prematurely determine the merits of the case, a matter the court said is for the trial after the class has been certified. The Third Circuit Court agreed.

When the Supreme Court agreed to review the Third Circuit Court’s ruling, it deviated from the normal proceedings and formulated the question it wanted the parties to address: “Whether a district court may certify a class action without resolving whether the plaintiff has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.” The parties then debated whether the opinions of the plaintiffs’ expert witness were sufficient and whether they were even necessary to grant class certification.

The Supreme Court reversed the Third Circuit Court’s ruling in a 5-4 decision. According to the Supreme Court, Rule 23 (on class certification) must be satisfied. Rule 23 requires sufficient evidence that the class can prove a claim of damages in order to acquire certification. The Supreme Court ruled that this requirement must be met, even if it involves delving into the merits of the case. According to the Supreme Court’s decision, the district court’s ruling to refuse to consider any of the merit’s of the case “flatly contradicts” previous rulings on the matter by the Supreme Court, as well as Rule 23.

Despite the highly anticipated status of this ruling, it turned out to be rather disappointing as a narrow ruling, which applies to the unique context of this particular case. It is unlikely to affect most class action litigation.

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When determining the legitimacy of restrictive covenants, it is important for judges to consider all requirements of legitimacy and to do so consistently.

In a recent case, two former employees of Reliable Fire Equipment, a company which sells, installs, and services portable fire extinguishers and fire suppression and alarm systems, allegedly violated the non-competition agreement they had signed with their employer. Rene Garcia had been hired by Reliable in 1992 as a systems technician and was later promoted to sales. In 1998, Arnold Arredondo was hired by Reliable as a salesperson. Both signed non-competition agreements in which they promised not to compete with Reliable, either during their employment or for one year after ceasing to be employed by Reliable.

In early 2004, while still employed by Reliable, Arredondo began forming a company which would supply engineered fire alarm and related auxiliary systems throughout the Chicago area. The new company was christened High Rise Security Systems, LLC and Arredondo and Garcia signed an operating agreement for the company in August of that year.

That same month, Reliable’s founder and chairman heard of the two employees’ movements and confronted them. They both denied it. Arredondo resigned in September and, on October 1, Garcia was fired on suspicion of competition. In December, Reliable filed a complaint against Arredondo, Garcia, and High Rise, alleging that they had violated their non-competition agreements.

Arredondo and Garcia filed a counterclaim, alleging that the restrictive covenant was unenforceable. The court ruled that Reliable had failed to prove the existence of a legitimate business interest to justify the enforcement of the non-competition agreements and therefore ruled for Arredondo and Garcia on their counterclaim. The appellate court upheld that decision and Reliable appealed, sending the case to the Illinois Supreme Court.

The Illinois Supreme Court has said that non-competition clauses in employment contracts are enforceable so long as consideration supports the agreements and the restraints are reasonable. To determine whether the restraints are reasonable, the court uses a three-pronged test: the restraint must be necessary to protect the legitimate business interest of the promisee; it must not impose undue hardship on the promisor or the public; and the scope of the restraint must be otherwise reasonable.

In putting forth this opinion, the Court corrected two recent opinions of the appellate court which did not require a test for legitimate business interest. In Sunbelt Rentals, Inc v. Ehlers, the 4th District Court of Appeals claimed that a court needed only to consider time and territory restrictions when determining for reasonableness in a restrictive covenant. It claimed that the Illinois Supreme Court had never accepted the legitimate business interest test but the Supreme Court said that was a mistaken assumption and that the appellate court had misinterpreted the Supreme Court’s opinion in Mohanty v. St. John Heart Clinic as well as other cases.

Having rejected the reasoning in Sunbelt, the Court clarified the proper standard for conducting the legitimate business interest test. According to the Court in Nationwide Advertising Service Inc v. Kolar, an employer will be considered to have a legitimate business interest subject to protection through non-competition employment agreements if two factors are present: the employees must have gained confidential information through their employment; and customer relationships must be near permanent as a result of the nature of the business.

The Illinois Supreme Court though, overturned the Kolar decision and instead put forth that, while those, as well as other factors might be helpful in determining the question of reasonableness and enforceability, any attempt to file a complete list of factors would be futile or would immediately become obsolete. Rather, the court maintained that determining the existence of a legitimate business interest will depend upon the totality of the circumstances of the individual case.

An employment attorney who represents management, said the decision is good for employers because it actually broadened the enforceability of non-competition agreements. Under the broader standard of considering “the totality of the facts and circumstances of the individual case”, employers could argue that the company’s reputation or goodwill are worth protecting with restrictive covenants.

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With cancer being one of the biggest health scares in our country, it is frightening to think that something as seemingly innocent as a local park might be the cause of it. Whirlpool Park in Clyde, Ohio, so named because it was built by Whirlpool Corp. for its employees and their families, has been accused of being the cause of the numerous recent cancer cases which have led the Centers for Disease Control and Prevention to designate the eastern Sandusky County as a cancer cluster.

Tim Lagrou’s wife was diagnosed with non-Hodgkin’s lymphoma in 2005 and died in October 2006 at the age of 23, leaving Tim and their one-year-old son. Lagrou and two other families have now filed a $750 million class action lawsuit in Sandusky County Common Pleas Court against Whirlpool Corp., the original owner of the park, and Grist Mill Creek, the company which has owned the park since 2008. The lawsuit alleges negligence on the part of the two companies which allegedly handled, disposed, and concealed toxic waste.

The U.S. Environmental Protection Agency (EPA) tested soil in Whirlpool Park and found PCBs, carcinogenic toxins, buried under the basketball court and what used to be the tennis court.

The park closed in 2006 (the same year Lagrou’s wife died) as interest in the park waned. It was bought by Jonathan and Robert Abdoo of Grist Mills Creek in 2008 with the intention of building on the site.

Thomas Bowlus, an attorney for Grist Mills Creek, said the Abdoos were first made aware of toxic materials on the site after the EPA launched its investigation in 2012. According to the lawsuit though, Grist Mills Creek either already knew, or should have known about the toxic chemicals. The lawsuit alleges that the company breached its duty of ordinary care to neighbors by permitting the toxic materials to remain in the park.

The class action includes people who visited or used the park between 1953 and 2008 and anyone who owns property within 4,000 feet of the park. Information from Whirlpool is needed to determine the exact number of potential class members but the plaintiffs believe there could be as many as 1,000.

The lawsuit is seeking $25,000 for the named plaintiffs (the Ohio state maximum for compensatory damages) and $750 million in punitive damages for the entire class. Joseph Albrechta, who represents the plaintiffs in the suit, said that the $750 million number “was thought about very carefully”. According to Whirlpool’s website, they make $19 billion annually in sales, meaning the $750 million would comprise just two weeks of sales for them. For the families however, that amount would go a long way in helping them restore the financial losses incurred by the park’s toxicity.

The lawsuit is also seeking the instigation of a medical monitoring fund and a park cleanup fund.
Whirlpool has announced that it will further test the land in the spring.
At least 35 children within a 6.7 mile radius in eastern Sandusky County have been affected by cancer since 1996. Four of those children have died, although the Ohio EPA has been unable to determine a cause.

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Car manufacturers provide warranties for their vehicles, promising to pay for most repairs and replacements that the vehicle requires within a certain number of years of purchase of the car or up to a certain mileage. However, if enough cars experience failures of a particular variety after the warranty expires, the manufacturer could still find themselves in trouble.

Audi has found itself in that situation when a class-action lawsuit was filed against it on behalf of U.S.A. consumers who leased or bought a 2002-6 A4 or A6 model with a continuously variable transmission (CVT). The lawsuit, which was filed in January 2011, alleges that the CVTs had manufacturing and design flaws that caused them to fail and left owners with thousands of dollars in repair bills. The lawsuit also alleges that Audi knew about these flaws and intentionally concealed them from consumers.

In the preliminarily approved settlement, Audi denied the allegation that the CVTs were defective and insisted that it had “acted properly and in compliance with applicable laws and rules.” However, they also said that the expense of extended litigation “may not be in the best interests of their consumers.” Hence Audi’s settlement offer.

The settlement includes reimbursement “for certain C.V.T. transmission repairs” that occurred or will occur within 10 years or 100,000 miles of the original sale or lease of the vehicle. The original warranty covered only four years or 50,000 miles. The owners will be reimbursed for the replacement of various parts, depending on which model year they had.
The transmission control module is covered for 2003, 2004, 2005 and 2006 model year A4s and A6s. The valve body is covered for 2003-4 model A4 and A6. Replacement of the transmission without the valve body and transmission control module “is covered for the 2002, 2003, or 2004 model year Audi A4 or A6.” The settlement does not say whether it includes reimbursement of another transmission part or replacement of the entire transmission.

Some of the 2002 and 2003 models are probably beyond even the extended warranty by now, but the settlement will still reimburse the owners if the specified repair occurred within 100,000 miles or 10 years. The settlement further provides a “trade-in reimbursement cost” to make up for lost value of a 2002, 2003, or 2004 A4 or A6 that needed “a complete replacement of a C.V.T. transmission” after the normal warranty expired but the vehicle was sold or traded without repair.

The settlement does not specify whether owners in that group who had a major component fail, but did not need to replace the entire transmission, are eligible for reimbursement. It also did not indicate why the 2005-6 model year was not included in this part of the settlement.
The settlement, which covers about 64,000 Audi vehicles, was preliminarily approved on March 11 by Judge A. Howard Matz of the United States District Court for the Central District of California. The hearing for final approval has been scheduled for September.

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Our Chicago class action and consumer rights attorneys fight for consumers rights in Illinois and throughout Illinois and the country. Our Chicago class action law firm pursue breach of contract and consumer fraud cases for consumers all over the country and in Kane, DuPage and Cook County Illinois as well as throughout the states of Illinois, Indiana, Wisconsin, Iowa, and Michigan.

Our Naperville and Aurora, Illinois consumer rights private law firm handles individual and class action predatory lending, unfair debt collection, lemon law, and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue.

The Chicago consumer rights attorneys at DiTommaso Lubin are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

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In class actions, the plaintiffs have long had the power to determine whether the case gets tried in state or federal court and they have most often chose to keep the cases in state courts. In 2005, Congress adopted the Class Action Fairness Act (CAFA) in order to limit the plaintiff’s power in that decision. CAFA imposed restrictions on the kinds of cases which the plaintiff would be able to prevent from getting moved to the federal courts. Among those restrictions are if the proposed class consists of at least 100 members, minimal diversities exist between the parties, and the aggregate amount involved in the dispute is at least $5 million.
In Standard Fire Insurance Co. v. Knowles, the lead plaintiff promised not to ask for more than $5 million in damages on behalf of the absent class in order to prevent the case being moved to federal court. The issue reached the U.S. Supreme Court, which then rendered its first decision on CAFA.

In the case of Standard Fire Insurance Co. v. Knowles, it is universally acknowledged that the claims of the putative class add up to more than $5 million. However, the lead plaintiff promised that the class will not ask for more than $5 million, in order to get around CAFA’s restrictions.

Although CAFA does not specifically prohibit artificially lowering the damages sought by a class action lawsuit in order to keep the case in the state courts, the Supreme Court still sided with the defendants. In its unanimous opinion, the Supreme Court reasons that, because the class had not yet been certified, the lead plaintiff was unable to make any promises regarding the value of the claims of the entire class. Until the class attains certification, the lead plaintiff can only make promises regarding the level of claims he, as an individual, seeks.
The Supreme Court pointed out that CAFA specifies that “to determine whether the matter in controversy exceeds the sum or value of $5,000,000,” the “claims of the individual class members shall be aggregated.”

The Supreme Court made sure to point out that it believed that this decision was in line with CAFA’s primary objective of ensuring “Federal court consideration of interstate cases of national importance.”

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Two shareholders and former officers of a closely-held New Jersey company, DAG Entertainment, Inc., sued two fellow shareholders, the company, and a new company formed by the defendant shareholders in U.S. District Court. The suit, Egersheim, et al v. Gaud, et al, alleged eighteen causes of action related to alleged usurpation of corporate opportunities. The defendants moved for summary judgment as to fifteen of the eighteen causes of action, and the district court ruled that those causes of action amounted to a single cause of action under the Corporate Opportunity Doctrine. The court granted summary judgment on the fifteen causes of action, allowing three causes to proceed.

Plaintiff Kathleen Egersheim owned a three percent shareholder interest in DAG and was its former Vice President and Assistant Secretary. Plaintiff Christopher Woods owned 22.5% interest and was the former Creative Director. Defendants Luis Anthonio Gaud and Philip DiBartolo owned or controlled most of the remaining stock of the company. According to the plaintiffs, DAG began exploring an opportunity to partner with the media conglomerate Comcast in 2001. The plaintiffs claim they developed characters and show ideas for children’s television programming through 2004.

In 2005, the defendant shareholders allegedly began excluding the plaintiffs from meetings and decisions regarding DAG’s activities, and also allegedly created a new business entity called Remix, LLC without plaintiffs’ knowledge. Remix entered into a formal joint venture with Comcast. The defendants proposed ceasing DAG’s major business operations, according to the plaintiffs, and the defendants voted them out of their officer positions when they objected to this plan in September 2007. DAG essentially stopped operating at that point.

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