In most cases, when an insurance company has a duty to defend an insured, the insurance company gets to pick the attorney that defends the business or individual being sued. Insurance companies often use what is known as “panel counsel,” an attorney or law firm that an insurance company regularly uses to represent its insureds.  Many times, the interests of the insurance company and the insured are aligned: resolve the case for the least amount of money possible. But sometimes a conflict of interest exists that causes their interests to diverge. In such instances, the insured is generally entitled to select its own attorney and the insurance company still has to pay the reasonable cost of defense. What circumstances constitute a conflict of interest though? In Xtreme Protection Services, LLC v. Steadfast Ins. Co., the First District found that the possibility of a large award of punitive damages created a conflict of interest that entitled the insured to select its own independent attorneys.

In October 2016, Xtreme Protection Services, LLC (“Xtreme”) was named as a defendant in a lawsuit filed by David Isreal which alleged claims of assault and intentional infliction of emotional distress among other causes of action. The plaintiff alleged that Xtreme, acting though one of its employees, placed listening devices in Mr. Isreal’s office, attached GPS devices to his vehicle, and sent him numerous harassing text messages. The plaintiff sought compensatory damages of $120,000 and more than $4 million in punitive damages.

Xtreme, a security services company, had an “armed security services” liability policy issued by Steadfast Insurance Company (“Steadfast”). The policy included an indemnity for bodily injury and property damage but expressly excluded coverage for intentional conduct and punitive damages. After being sued, Xtreme retained an attorney who tendered the complaint to Steadfast for coverage. Steadfast advised that it would retain its own counsel to defend Xtreme. Steadfast then retained counsel for Xtreme under a reservation of rights based on the punitive damages exclusion and on the basis that the underlying complaint alleged intentional conduct. Xtreme notified Steadfast that it did not want to be represented by Steadfast’s selected counsel due to a conflict of interest between Steadfast and Xtreme.

Xtreme later filed suit against Steadfast seeking a declaration that Xtreme was entitled to select its own counsel because of the conflict of interest caused by the possibility of a large punitive damages award. Steadfast sought its own declaration that it no longer had a duty to defend Xtreme because Xtreme had breached its duty to cooperate with Steadfast. After cross-motions for judgment on the pleadings, the trial judge found that the conflict of interest caused by the potential of a large punitive damages award in the underlying lawsuit entitled Xtreme to select its own counsel. Continue reading ›

Non-compete agreements were originally intended to prevent high-level executives from taking trade secrets and client relationships to a competitor, but companies have recently been expanding their use of non-compete agreements to almost all their employment contracts, even with workers earning minimum wage. It has become a way to lock low-wage employees into their current jobs because the terms of their non-compete contract often make it impossible for them to find work in a related field.

At the same time, while non-compete agreements might not do much harm to employees at the executive level because they have more bargaining power, workers at the lower levels often have little-to-no bargaining power and are often unaware of their options when it comes to their employment contracts. Whether that means negotiating the terms of their contract, or recognizing when the contract is invalid, low-wage workers tend to have fewer options than those higher up the ladder.

While there is no federal law putting limitations on when companies can use non-compete agreements, there are a variety of state laws that either ban or limit non-compete agreements within the state. California is famous for their total ban on non-compete agreements, while other states, like Washington, have recently added limitations to when companies can use non-compete clauses and what terms can be included in those contracts. Continue reading ›

Contracts are ubiquitous. Every company is a party to numerous different contracts. Leases, purchase agreements, vendor agreements, supply contracts, and employment agreements are just a few of the contracts that a company typically enters in the normal course of business. The parties to a contract expect the other to live up to its obligations as set forth in the written contract. One important rule that many companies and business owners are not aware of, however, is that oral modifications to the terms of a contract can trump the written obligations in a contract, even if the contract expressly prohibits oral modifications.

The recent case of Miller UK Limited v. Caterpillar Inc. demonstrates the significant consequences of this rule. In Miller, the parties entered a written agreement in which Miller agreed that it would “not disclose to Caterpillar any confidential or proprietary information unless our two companies otherwise first agree in writing.” Subsequently, at a meeting between the companies, the parties orally agreed to keep any information shared at the meeting confidential. At that same meeting, Miller shared confidential and proprietary information with Caterpillar concerning technical specifications for a coupling system Miller had developed which allowed earthmover and excavator vehicles to attach shovels, buckets, and other attachments to their mechanical arms quickly without requiring the vehicle operator to leave its cab. Caterpillar later developed its own coupling system that was similar to Miller’s system.

Miller sued Caterpillar for breach of contract and violation of the Illinois Trade Secret Act (“ITSA”). A jury ultimately awarded Miller $16 million on its breach of contract claim and $74.6 million on its ITSA claim. After trial, Caterpillar sought to have the verdict vacated. Caterpillar argued that none of the information Miller shared at the meeting could be considered confidential because the parties’ written contract prohibited sharing confidential or proprietary information without first entering a written nondisclosure agreement. Consequently, Caterpillar argued, because the information was shared without such an agreement, Miller could not as a matter of law prove a trade secret misappropriation claim under ITSA—as proof that the plaintiff took appropriate steps to keep a trade secret confidential is a requirement of an ITSA claim. Continue reading ›

Chicgo-non-compete-agreement-and-Chicago-trade-secret-lawyers-300x115A doctor who owned her own practice, billed her patients directly, and filed taxes as a self-employed physician was not an employee of the hospital she had privileges at, and therefore was not entitled to sue the hospital for discrimination after it revoked her practice privileges.

For almost 13 years, Dr. Yelena Levitin performed surgeries at Northwest Community Hospital in Arlington Heights, Illinois. Levitin is a female, Jewish surgeon of Russian descent. She owns and operates Chicago Surgical Clinic, Ltd., a private medical practice. From 2000 until 2013, most of her revenue came from the work she performed at Northwest.

In 2008, Levitin complained to Northwest that Dr. Daniel Conway, another surgeon, was harassing her. Levitin alleged that Conway repeatedly criticized her medical decisions, undermined her in front of her patients, and interrupted one of her surgeries. Northwest reprimanded Conway, and the harassment stopped in January 2009. After that, at least four doctors filed complaints concerning Levitin’s professional judgment. Another refused to work with Levitin entirely. The head of pathology complained that Levitin habitually requested inappropriate tests from his department. In response to the complaints, Dr. William Soper, then the chair of Northwest’s surgery department, informed Levitin that he would begin proactively reviewing the surgeries she scheduled for potential issues.

Soper also reviewed Levitin’s prior surgeries. He referred 31 cases to the Medical Executive Committee, which oversees physician credentialing at Northwest. The committee found that Levitin deviated from the appropriate standard of care in four of the cases. The committee initially determined that Levitin should receive quarterly reviews, but it reconvened after Levitin operated on a patient without proper sedation. At this meeting, the committee decided to revoke Levitin’s practice privileges. Levitin appealed the committee’s decision but was unsuccessful in getting her privileges reinstated. Continue reading ›

This month the Copyright Alternative in Small-Claims Enforcement Act of 2019 (“CASE Act”) was introduced in the Senate (S. 1273) by a number of Senators including Dick Durbin of Illinois and in the House (H.R. 2426) by Representatives Hakeem Jeffries and Doug Collins. The CASE Act seeks to provide individual creators and small businesses, who create the vast majority of creative works but are the least able to afford costly intellectual property litigation, with an affordable forum to adjudicate small claims against copyright infringers. The CASE Act would create the equivalent of a small claims court within the United States Copyright Office. The bill (referred to informally as “the small claims bill”) closely track recommendations made by the Copyright Office in its comprehensive 2013 study on the subject. The CASE Act has received sizeable bipartisan support in both houses.

Important elements of the CASE Act include provisions that would:

  • Cap damages at $30,000 per proceeding (and preclude awards of injunctive relief);
  • Create a Copyright Claim Board (“CCB”) comprised of three judges with copyright law and alternative dispute resolution experience;
  • Make participation voluntary by allowing an alleged infringer to opt out of the small claims process (which would require the copyright owner to file an infringement claim in federal court);
  • Allow the entire proceeding to be conducted on paper, obviating in-person appearances;
  • Require parties to pay their own attorney fees, if any;
  • Discourage bad faith claims, counterclaims, and defenses by (1) permitting fee shifting awards to be entered against bad actors, and (2) barring “repeat offenders” from filing claims before the CCB for a period of time.

Continue reading ›

A small producer of musical instruments sued Guitar Center, alleging that Guitar Center violated its trademark on the name for a line of woodwind instruments. The plaintiff made a mistake in its suit, however, and named several subsidiary corporations of Guitar Center as additional defendants. After a trial, a jury was asked to determine whether each of the organizations were liable for infringing conduct. The jury, however, found that only the sales that occurred at Guitar Center branded stores were infringing, which amounted to a tiny fraction of the total sales across Guitar Center and all of its subsidiary brands. A district court found that the judgment could not be amended, and the appellate court agreed. The appellate court stated that the judgment was rationally supported by the evidence at trial and the plaintiff gave it no reason to think that the verdict would have been different if it had correctly identified the other stores as subsidiaries of Guitar Center.

Guitar Center makes and sells musical instruments. In 2010, it created a new brand of woodwind and brass instruments produced by Eastman, “Ventus.” Barrington Music Products owns the trademark “Vento,” which it uses in relation to the instruments it sells. Barrington began using the mark in commerce in May of 2009 and achieved gross sales just shy of $700,000. Barrington filed for registration of its “Vento” trademark in January 2010. In March 2011, Guitar Center began selling flutes, trumpets, alto saxophones, tenor saxophones, and clarinets using the “Ventus” mark, with gross sales totaling about $5 million.

Barrington eventually sued Music & Arts Centers, Guitar Center Stores, Inc., Woodwind & Brasswind Inc., and Eastman Music Company for trademark infringement. Evidence at trial demonstrated that the bulk of sales occurred at Music & Arts Centers, totaling $4.9 million, with only $3,228 in sales coming from Guitar Center. The jury found that only the sales made by Guitar Center stores were infringing and awarded Barrington the total amount of those sales — $3,228. After the judgment was entered, Barrington filed a motion pursuant to Rule 59(e) asking the district court to amend the damages award. Barrington had discovered that the only distinct corporate entity was Guitar Centers, Inc., while Music & Arts and Woodwind were each divisions of Guitar Center. Barrington moved to amend the judgment to include the total volume of all sales. The district court denied the motion, and Barrington appealed. Continue reading ›

Recently, a unanimous U.S. Third Circuit appellate court upheld payroll company Automatic Data Processing’s (“ADP”) non-compete agreements but remanded the case to the district court for tailoring. The federal appeals court reversed a decision by the district court which had found the covenants not to compete to be unenforceable. In reversing the lower court, the Third Circuit found that the non-compete agreements were necessary to protect ADP’s client relationships and goodwill, interests that New Jersey courts, “consistently recognize as legitimate.”

According to the Third Circuit’s opinion, ADP requires certain high-performing employees to sign non-compete agreements and similar pledges in order to qualify for stock option awards. These restrictive covenants prohibit employees who received stock options from working for a competitor for one year and from soliciting ADP’s current or prospective clients for two years after leaving ADP. Two former ADP employees challenged ADP’s practice, alleging that the restrictive covenants were more onerous than they needed to be. The Third Circuit found that the solution in such circumstances is to amend, or “blue pencil” the non-compete agreements, not find them entirely unenforceable. Continue reading ›

A class action lawsuit recently filed in a federal court in Washington accuses Getty Images, Inc. (“Getty”) of allegedly duping customers into paying for fictitious copyright licenses for images in the public domain that can be used freely.

The plaintiff in the case, Texas digital marketing company CixxFive Concepts LLC, claims that it was one of the victim’s of Getty’s wrongful conduct and alleges that Getty’s actions violated the RICO Act and state consumer protection laws. The wrongful conduct, according to the complaint, was not merely charging for the public domain images but rather deceiving customers into believing they needed to buy licenses for access to those images and purporting to restrict the use of those public domain images. The complaint concedes that “charging for public domain images is not illegal by itself,” but goes on to allege that “Getty’s and/or Getty US’s conduct goes much further than this… Using a number of different deceptive techniques, Getty and/or Getty US misleads its customers and potential customers into believing that it or one of its third-party contributors owns the copyright to all of the images available on its website, and that a license from Getty and/or Getty US is required to use all of the images on its website [when] [i]n truth, anyone is free to use public domain images, without restriction, and by definition in a non-exclusive manner, without paying Getty and/or Getty US or anyone else a penny.”

The complaint goes on to allege that “Getty and/or Getty US purport to restrict the use of the public domain images to a limited time, place, and/or purpose, and purport to guarantee exclusivity in the use of public domain images,” and that Getty’s license agreement currently “prohibits the use of licensed public domain works in on-demand products, such as ‘postcards, mugs, t-shirts, calendars, posters, screensavers or wallpapers,’ or in electronic templates, such as ‘website templates, business card templates, electronic greeting card templates, and brochure design templates.’” This conduct, the complaint alleges “deceptively purports to restrict the licensee’s preexisting right to free and unfettered use of public domain images.”

To add insult to injury, the complaint also alleges that Getty (through a company License Compliance Services, Inc. (“LCS”) which the complaint alleges Getty owns or controls) regularly sends copyright infringement letters to businesses using public domain images online “accusing them of infringing copyrights in public domain images.” The complaint gives an example alleging that “LCS sent a letter to Carol Highsmith, the noted American photographer who has donated tens of thousands of images to the Library of Congress, accusing her nonprofit foundation of copyright infringement for using one of her own public domain images.”

The lawsuit seeks to represent all licensees who have paid Getty for public domain images and seeks to recover treble damages, costs and attorney’s fees as well as an injunctive relief preventing Getty from “wielding a false claim of ownership of over intellectual property that is rightfully in the public domain.”

A copy of the complaint against Getty can be obtained here. Continue reading ›