Chicago Business Litigation Lawyer Blog

Service Agreements Require Timely Payment, Compliance with Contractual Terms to Be Enforceable by Consumers – M&B Graphics v. Toshiba Business Solutions

October 18, 2012 | Peter S. Lubin and James V. DiTommaso

A company that leased photocopier machines to a printing company prevailed on a motion for summary judgment in a breach of contract claim brought by the business leasing the copy machines. In M&B Graphics, Inc. v. Toshiba Business Solutions (USA), Inc., the U.S. District Court for the Eastern District of Michigan ruled that the defendant was justified in terminating service agreements for its machines due to the plaintiff’s noncompliance with the terms of the agreements.

M&B Graphics (M&B), a Michigan printing company, began leasing three photocopiers from Toshiba Business Solutions on August 10, 2009. The lease had a term of sixty-three months, with monthly payments of $2,520. The parties also executed service agreements for each of the three copiers. Toshiba would perform routine repairs and maintenance on the copiers, and M&B would pay a flat monthly fee and a per-copy fee. Toshiba had the right to terminate the service agreements if M&B failed to make timely payment of the monthly service fees or failed to use the copiers in strict accordance with Toshiba’s specifications. Either party could terminate the agreements by giving written notice thirty (30) days prior to the anniversary date.

Business Planning — Non-Compete Agreements

October 15, 2012 | Peter S. Lubin and James V. DiTommaso

https://www.youtube.com/watch?v=Ozu72S9wzYA

Non-compete agreements are increasingly more common in today’s competitive business environment.

Non-compete agreements, confidentiality and other restrictive covenants are a great tool for protecting trade secrets, customer lists, and other sensitive information, but only if the agreement is enforceable in a court of law. The issue of enforceability of non-compete agreements is a complex legal question that is the subject of much business litigation. If you are party to a non-compete or confidentiality agreement – whether as an employee or employer – it is helpful to consult with a knowledgeable business litigation attorney like the Hinsdale business litigation attorneys at DiTommaso Lubin. We have represented employees and employers throughout DuPage, Cook, Kane and Lake Counties in non-compete litigation including representing large public corporations and high level executives in lawsuits arising from non-compete agreements. We also draft non-compete and confidentiality agreements for our corporate clients.

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 James V. DiTommaso

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

To learn more about our qui tam, blower, fraud, partnership and business dispute practice click here. DiTommaso Lubin’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 DiTommaso Lubin 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.

Clawing Back Profits From A Ponzi Scheme — What is the Law?

October 5, 2012 | Peter S. Lubin and James V. DiTommaso

https://www.youtube.com/watch?v=VbW2cj_k_WE

To learn more about our qui tam and whistle blower practice click here. DiTommaso Lubin’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 Aurora, and Naperville, 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 DiTommaso Lubin can help, we would like to hear from you. To set up a consultation with one of our Hinsdale and Wheaton qui tam and whistle blower lawyers, please call us toll-free at 630-333-0333 or contact us through the Internet.

When a Failure to Deny an Allegation Constitutes and Admission – Kule-Rubin v. Bahari Group

October 4, 2012 | Peter S. Lubin and James V. DiTommaso

A defendant’s failure to deny allegations in a responsive pleading to a complaint can serve as an admission of those allegations. In Kule-Rubin, et al v. Bahari Group, Limited, the U.S. District Court for the Southern District of New York granted the plaintiffs’ motion for judgment on the pleadings as to four of the claims asserted in their complaint for wage violations. The plaintiffs argued in their motion that the defendant, in its answer to their original complaint, had not expressly denied certain allegations. The court deemed those allegations admitted by the defendants, and granted judgment on the plaintiffs’ claims that were supported by those admissions. The court also dismissed two counterclaims by the defendant.

The defendant is a manufacturer, distributor, and retailer of clothing. The individual owners of the company were also named as defendants. The eleven plaintiffs were employees who began working for defendant at different times beginning in 1994. According to the plaintiffs’ complaint, the defendant began withholding wages from certain plaintiffs in October 2010, and it withheld wages from all of its employees starting that November. The defendant allegedly withheld commission wages, expense reimbursements, and health insurance premiums from some plaintiffs beginning two years earlier. The defendant told the plaintiffs that if they continued to work for the defendant, it would pay them all back wages and current wages later. All eleven plaintiffs continued working for the defendant until November 30, 2010, when the defendant terminated them.

Supreme Court To Address Standards For Class Certification in Securities Fraud Actions and Whether Plaintiffs Need to Prove “Fraud On The Market” Claim to Certify a Class-Action

October 1, 2012 | Peter S. Lubin and James V. DiTommaso

The Supreme Court in Amgen, Inc. v. Connecticut Retirement Plans & Trust Funds has recently agreed to decide on whether federal courts in certifying a securities class must decide in order to certify the class whether the fact of damages claims regarding a “fraud on the market” have merit or are true. Federal courts generally didn’t decide the merits of the case in class actions at the time of class certification. However, in the wake of the Supreme Court’s decision the Walmart class action corporate defendants and business interests have urged the Court to make Plaintiffs prove their case at the class certification stage.

An excellent article discussing the Supreme Court’s decision to hear Amgen and its ramifications can be reviewed by clicking here. The article explains the significance of the Supreme Court’s decision to hear the case as follows:

For over 20 years, the “fraud on the market” theory, which the Supreme Court endorsed in Basic Inc. v. Levinson, 485 U.S. 224 (1988), has been a key tool for plaintiffs in class action securities fraud litigation under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. The theory posits that the price of a security trading in an efficient market reflects all publicly available information about that security. Based on that premise, the theory gives rise to a rebuttable presumption that investors rely on material misrepresentations reflected in market prices at the time they transact. Without this presumption, plaintiffs purporting to assert class action securities fraud claims would have difficulty showing reliance on a class-wide basis, and hence satisfying the typicality and predominance prerequisites to class certification under Fed. R. Civ. P. 23(a) and 23(b)(3). Decisions as to class certification strongly influence the balance of leverage as between plaintiffs and defendants in class actions generally. Thus, the showing plaintiffs must make in order to invoke the “fraud on the market” theory is a critical issue in securities litigation.

The impact of the Supreme Court’s decision in Amgen could go well beyond securities actions and make it more difficult to ever certify any type of class action.

IRS Awards Whistleblower a Record $104 Million

September 29, 2012 | Peter S. Lubin and James V. DiTommaso

It was announced on September 11, 2012 that the Internal Revenue Service awarded $104 million to whistleblower Bradley C. Birkenfeld for his role in providing information regarding an illegal offshore banking scheme by his employer, UBS. Not only is this the first major award by the IRS since its whistleblower program went into effect in 2006, it is believed to be the largest award given to an individual under any U.S. whistleblower program.

Birkenfeld learned in 2005 that UBS was providing illegal tax avoidance advice to its clients, and reported it to the bank’s compliance office. When UBS failed to alter its practices, in 2007 Birkenfeld informed U.S. authorities of the bank’s activities, which led to an enforcement action. In February 2009, UBS entered into an agreement with the government, pursuant to which it paid $780 million in fines and provided the names of more than 4,500 American clients who had participated in scheme. The government implemented a tax amnesty program that year, in which more than 14,000 Americans participated, leading to the recovery of more than $5 billion in unpaid taxes.

Prior to the adoption of the current whistleblower program, the IRS had discretion whether to pay an award to a whistleblower. IRS guidelines set awards at 1 percent, 10 percent, or 15 percent, and awards were not appealable. Under changes that were adopted in 2006, the IRS is required to pay whistleblowers 15 percent to 30 percent or recoveries which exceed $2 million. Moreover, whistleblowers now have the right to appeal an award to the Tax Court.

SEC’s First Whistleblower Award is for Maximum Amount

September 26, 2012 | Peter S. Lubin and James V. DiTommaso

The Securities and Exchange Commission announced its first award under the SEC’s Whistleblower Program on August 21, 2012. The whistleblower will receive nearly $50,000, which represents 30 percent of the amount collected thus far in an SEC enforcement action.

The SEC Whistleblower Program, which has been in effect for one year, has its roots in the Dodd-Frank Wall Street Reform and Consumer Protection Act, and is designed to provide monetary incentives to individuals to report possible violations of the federal securities laws to the SEC.

In order to qualify for an award under the program, a person must:
• voluntarily provide “original information” about a possible violation; and
• the information must lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million.

If these conditions are met, the Dodd-Frank Act authorizes the SEC to award individuals providing the information from 10 percent to 30 percent of any money collected in an enforcement proceeding. In the instant action, the SEC obtained an order of more than $1 million in sanctions, but has only collected $150,000 to date. If the SEC is successful in collecting more, the amount awarded to the whistleblower should be increased.

The identity of the whistleblower who received the award was not disclosed by the SEC. This is consistent with several provisions of the SEC program designed to protect individuals with pertinent information of potential securities violations. When an individual supplies information to the SEC, they can do so anonymously through an attorney. Even when information is not submitted anonymously, the SEC will endeavor to protect the identity of the whistleblower as much as possible. Moreover, provisions exist which provide redress to whistleblowers who are subjected to retaliation by an employer.

New Jersey Court Shoots Down Forum Selection Clause in UPS Franchise Case – The Business Store v. Mail Boxes Etc.

September 20, 2012 | Peter S. Lubin and James V. DiTommaso

In The Business Store v. Mail Boxes Etc., the District Court for the District of New Jersey considered the effect of a “forum selection clause” in a business dispute between companies from different states, finding that these clauses are not always enforceable.

In 2003, Plaintiff The Business Store, Inc., a New Jersey company, entered into a franchise agreement with Defendants Mail Boxes, Etc. (MBE) – a California company – and United Parcel Service (UPS), under which Plaintiff was to operate a UPS franchise in Spotswood, New Jersey. The parties entered into two additional agreements for new stores in 2007. Two years later, however, a disagreement arose over $80,000 in royalties that Defendants argued they were owed. When the parties could not reach an agreement, Defendants terminated the franchise agreements.

Plaintiff sued Defendants in New Jersey state court, alleging breach of the franchise agreements and an implied duty of good faith and fair dealing, as well as tortious interference with contract, fraud and violation of the New Jersey Franchise Practices Act (NJFPA). After Defendants removed the case to federal court – on diversity of citizenship grounds: the parties are from different states – they filed a motion to transfer the case to the federal district court in the Southern District of California. Defendants argued that the “forum selection clause” in each of the franchise agreements dictated that any disputes be litigated in California.

The court denied the motion to transfer, finding that each of the factors to be considered in reviewing a venue transfer request weighed in favor of New Jersey. 28 U.S.C. Section 1404(a) provides that “for the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district . . . where it might have been brought.” The court noted that it considers “all relevant factors to determine whether on balance the litigation would more conveniently proceed and the interest of justice be better served by transfer to a different forum,” and that the burden is on the party requesting transfer to show that it is warranted.

The court began by finding that, because MBE’s principal place of business is in San Diego, the action would have been proper if originally brought in the Southern District of California. Nevertheless, the court noted that “[a] strong presumption of convenience exists in favor of a domestic plaintiff’s chosen forum.” Moreover, the fact that the dispute arose in New Jersey – where the contract was executed and performed – also weighed against transfer.

Illinois Court Limits Consumer Fraud Claims in Business Disputes – Classic Business Corporation v. Equilon Enterprises, LLC.

September 6, 2012 | Peter S. Lubin and James V. DiTommaso

In Classic Business Corporation v. Equilon Enterprises, LLC., the District Court for the Northern District of Illinois explains that while the state’s consumer fraud and deceptive business practice law is an important weapon in combating shady business operations, it is intended to protect private consumers rather than business entities.

Plaintiffs, gas station operators in the Chicagoland area, brought the action against Shell claiming that the company violated both its contracts with Plaintiffs and a duty of good faith by unilaterally changing its pricing methodology. Plaintiffs are considered “open dealers” because they own the real property on which their gas businesses are located rather than leasing it from Shell. Pursuant to a Retail Sales Agreement (“RSA”), Plaintiffs buy gas from Shell at the price in effect “at the time loading commences at the Plant for the place of delivery” and, in turn, are free to set the retail price at which they later sell the gas.

Plaintiffs claim that after agreeing to the RSA terms, Shell changed the way in which it sells gas – using wholesalers rather than selling directly to retailers – as well as its pricing method. As a result, according to Plaintiffs, Shell now sells the same gas to wholesalers and non-open dealers at a lower price than it sells to Plaintiffs and other open dealers in an attempt to drive them out of the business. In their complaint, Plaintiffs alleged the following counts: 1) federal price discrimination; 2) breach of contract and the Illinois Commercial Code based on the unilateral fuel price increase; 3) breach of contract for invoicing Plaintiffs for more fuel than was actually delivered; 4) violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2 et seq. (the “CFDBPA”); and 5) a claim for declaratory relief pursuant to the Illinois Declaratory Judgment Act.

The court granted Shell’s motion to dismiss the CFDBPA count (as well as the declaratory relief claim). In so doing, it noted that the proper test in reviewing a CFDBPA claim involving two businesses who are not consumers is “whether the alleged conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.” In this case, the court found that Shell’s alleged practice of selling gas to the “relatively few” open dealers in the area at a higher rate than that charged to wholsesalers and other retailers “is not equivalent to a trade practice addressed to the market generally,” despite the fact that it may ultimately result in higher prices for Plaintiffs’ customers. Finally, the court quoted the Illinois Supreme Court’s decision in Avery v. State Farm in ruling that “[a] breach of contractual promise, without more, is not actionable under the [Illinois] Consumer Fraud Act.”