The Supreme Court recently issued its first ever opinion interpreting the Computer Fraud and Abuse Act, 18 U.S.C. §1030. In issuing its opinion, the Court limited the scope of the Computer Fraud and Abuse Act and resolved a circuit split on the meaning of “exceeds authorized access” found in the statute. In a 6-3 opinion, Justice Amy Coney Barrett, in her first signed majority opinion, said the Court would not turn “millions of otherwise law-abiding citizens” into criminals if they violated their employer’s computer-use policies at work by using their computers to send personal e-mails, do online shopping, or plan a vacation.

At issue, the Court said, were so-called “inside hackers” who have legal access to a computer but exceed their authorized authority by using the information for unauthorized purposes. Adopting the government’s “breathtaking” interpretation of the phrase “exceeds authorized access,” the Court explained, would turn every violation of a computer-use policy into a criminal act.

The immediate beneficiary of the Court’s ruling was a former Georgia police sergeant, Nathan Van Buren. Van Buren was authorized to use the Georgia Crime Information Center database to check license plates as part of his job. He unwittingly found himself caught up in an FBI sting when he took a $5,000 payment from a man who claimed that he wanted to learn about a stripper he had just met. After using his official computer to perform the requested search, Van Buren was charged and convicted of violating the Computer Fraud and Abuse Act for exceeding his “authorized access.”

The Computer Fraud and Abuse Act was enacted in 1986, during the early stages of the internet. The statute imposes criminal or civil liability on any person who “intentionally accesses a computer without authorization” or “exceeds authorized access” and, in doing so, obtains information from a “protected computer.” The statute does not define the term “without authorization” but does define the term “exceeds authorized access” in a rather opaque way. Pleading a claim under the statute requires a plaintiff to allege that the defendant (i) intentionally accessed a computer, (ii) lacked authority to access the computer or exceeded authorized access to the computer, (iii) obtained data from the computer, and (iv) caused a loss of $5,000 or more during a one-year period. Continue reading ›

In a unanimous ruling, the Supreme Court recently came down hard on the Federal Trade Commission by eliminating its ability to seek monetary relief in court under Section 13(b) of the Federal Trade Commission Act (FTC Act). The ruling comes as quite a blow to the FTC which has been recovering monetary penalties from defendants under Section 13(b) of the FTC Act for nearly half a century. The full impact of this ruling remains to be seen and may not become clear for several years.

Section 13(b) monetary relief is among the FTC’s primary tools for obtaining recovery in the cases it pursues, particularly in consumer protection matters. For instance, in fiscal year 2019 alone, the FTC filed 49 complaints in federal court and obtained 81 permanent injunctions and orders, resulting in more than $723 million in consumer redress or disgorgement. The ruling is also likely to affect antitrust enforcement in the pharmaceutical industry where the FTC has pursued disgorgement amounts as high as $1.2 billion. Going forward, the FTC will be limited to injunctive relief in the vast majority of matters unless it pursues other avenues of recovery available under different sections of the FTC Act.

The case, AMG Capital Management, LLC v. Federal Trade Commission, began when the FTC filed a lawsuit in federal court against payday lender AMG Capital Management, its owner, Scott Tucker, and several other entities under Section 5(a) of the FTC Act for allegedly misleading consumers with certain terms of payday loans. A payday loan is a high-interest, short-term loan, typically marketed to low-income consumers in need of quick cash. They generally come with exorbitantly high interest rates and short repayment schedules and have been called predatory by a number of consumer rights advocacy groups, such as the National Association of Consumer Advocates.

In its complaint, the FTC alleged that AMG Capital Management and other related entities engaged in numerous deceptive acts and practices in connection with how it collected loan payments from borrowers, often resulting in consumers paying hundreds or thousands of dollars more than the cost of the loan disclosed in the loan application documents.

The FTC could have initiated the case by using administrative proceedings available to it under Sections 5 and 19 of the FTC Act. Instead, though the FTC skipped these administrative proceedings and initiated the case directly in federal court seeking a permanent injunction and equitable monetary relief in the form of restitution and disgorgement under Section 13(b) of the FTC Act. The district court directed the defendants to pay $1.27 billion in restitution and disgorgement. On appeal from the judgment, the Ninth Circuit affirmed, citing circuit precedent interpreting the statutory text of Section 13(b) broadly to include the authority to award restitution and other forms of monetary relief as “necessary to accomplish complete justice.” Continue reading ›

Not every renter loves his landlord. And many people express their feelings, for better or for worse, on social media. However, sometimes what is said on social media can land a person in hot water. Such was the case for one Iowa resident whose social media venting landed him in court as the defendant in a defamation lawsuit that wound its way all the way up to the Iowa Supreme Court. Luckily for the individual, the Iowa Supreme Court held that referring to a landlord as a “Slumlord” was not defamatory but constituted non-actionable opinion.

The plaintiff in the case was Richard Bauer, the manager of the Bauer Apartments located in the small town of Sloan, Iowa. The defendant was Bradley Brinkman, who lived across the street from the Bauer Apartments. The dispute that landed Brinkman in court started out having nothing to do with him at all.

A dog care facility, Pet Perfect, began construction next to the Bauer Apartments. Bauer was concerned that issues would arise from the dogs and their feces due to the outdoor area being constructed. Bauer tried to get the construction stopped. First, he contacted the Sloan City Council. He also contacted the owner of Pet Perfect about his concerns and offered to buy the parcel of land where the facility was being built. The owner refused to sell. Next, Bauer filed suit against the City of Sloan and the city council members claiming they failed to enforce a zoning ordinance in approving the construction of the facility.

During this ordeal, Pet Perfect posted on its own Facebook page about Bauer’s lawsuit and cameras he had installed on the exterior of the apartments. The daughter of Pet Perfect’s owner also posted about the ordeal on her own personal Facebook page. She included in her post a photo of a letter Bauer’s attorney sent to her mother. Several people commented on the post, including Brinkman, who it turned out was a friend of the owner of Pet Perfect. Brinkman’s Facebook comment stated:

It is because of shit like this that I need to run for mayor! [grinning emoji] Mr. Bauer…you sir are a PIECE OF SHIT!!! Let’s not sugar coat things here people. Kathy Lynch runs a respectable business in this town! You sir are nothing more than a Slum Lord! Period. I would love to have you walk across the street to the east of your ooh so precious property and discuss this with me!

Continue reading ›

Illinois recently joined a growing list of states that have passed laws constraining the use of restrictive covenants by employers. The Illinois legislature passed Senate Bill 672 which imposes significant limitations on the use by Illinois employers of non-compete and non-solicitation agreements. The bill achieves this by amending the Illinois Freedom to Work Act to establish new requirements for agreements containing restrictive covenants and to codify standards for the use of non-solicitation agreements. Governor Pritzker is expected to sign the bill into law. Once signed by the governor the bill would take effect on January 1, 2022, though significantly the bill would not apply retroactively and would only apply to restrictive covenants entered into after this date.

Illinois’ Freedom to Work Act, originally passed in 2017, prohibited “covenants not to compete” for “low-wage employees,” defined as those earning the greater of minimum wage or up to $13.00 per hour. The Act only addressed covenants not to compete, leaving employers unsure as to whether the statutory limitations also applied to provisions prohibiting former employees from soliciting the employer’s employees or customers. The newly passed bill clears up that uncertainty by amending the Act to apply explicitly to non-solicitation agreements as well. The bill explicitly defines the term “covenant not to solicit” broadly as any agreement that “(1) restricts the employee from soliciting for employment the employer’s employees or (2) restricts the employee from soliciting, for the purpose of selling products or services of any kind to, or from interfering with the employer’s relationships with, the employer’s clients, prospective clients, vendors, prospective vendors, suppliers, prospective suppliers, or other business relationships.”

The bill additionally clarifies that “covenants not to compete” do not include confidentiality or nondisclosure agreements, trade secret protection agreements, invention assignment agreements or covenants, agreements by which the employee agrees not to reapply for employment to the same employer after termination of the employee or, importantly, agreements entered into in connection with purchase and sale transactions.

Significantly, the bill replaces the definition of “low-wage,” which referred only to hourly wages, with an annualized earnings requirement, joining states like Washington and Maine. The bill would prohibit employers from entering into non-compete agreements with employees who earn $75,000 per year or less. The bill incrementally increases the earning threshold every 5 years through 2037. The earning threshold increases to $80,000 per year beginning on January 1, 2027, $85,000 per year beginning on January 1, 2032, and $90,000 per year beginning on January 1, 2037. A covenant not to compete entered into in violation of the bill is void and unenforceable. Continue reading ›

The Illinois Supreme Court’s recent decision in a foreclosure action could have far-reaching implications for litigations within the state. In a 5-2 decision, the Court ruled that anyone seeking to serve a defendant in Cook County via special process server must first secure a Cook County judge’s authorization for the summons to be valid.

The case arose from a foreclosure action in Kankakee County. In the underlying case, the plaintiff Municipal Trust and Savings Bank filed a complaint for mortgage foreclosure against defendant Dennis J. Moriarty in December 2016 and issued summons from Kankakee County, where the mortgaged commercial properties are located. A special process server ultimately served the defendant at Rush Hospital in Chicago, which is located in Cook County. Upon the plaintiff’s motion, the circuit court entered a judgment for foreclosure and sale. Following entry of the foreclosure judgment, a sheriff’s sale was held on the property, and plaintiff was the successful bidder. The bank then filed a motion for confirmation of the foreclosure sale.

The defendant filed a Section 2-1401 petition challenging the judgment as void arguing that the circuit court was without personal jurisdiction to enter the default judgment in the foreclosure proceeding. The Defendant asserted that under section 2-202 of the Code, a special process server cannot serve process on a defendant in Cook County without first being appointed by the circuit court. The circuit court denied the defendant’s section 2-1401 petition finding that the special process server was not required to be specially appointed to serve process on the defendant. The appellate court affirmed. The defendant petitioned for leave to appeal to the Illinois Supreme Court, which granted his petition. Continue reading ›

The Fair Debt Collection Practices Act (FDCPA) gives consumers crucial protections against predatory debt collection practices, such as calling late at night, using harassing language, pursuing individuals for debts they don’t owe, and using misleading communications in debt collection attempts. The FDCPA governs the practices of third-party debt collectors, those who buy a delinquent debt from original creditors, like medical providers or credit card companies.

A common practice of these third-party debt collectors is to outsource parts of its debt-collection operations to various vendors. In an apparent issue of first impression, the Eleventh Circuit considered whether the FDCPA applies to communications between a third-party debt collector and its vendors. The FDCPA prohibits debt-related communications about a consumer with third parties without the consumer’s consent or a court order. Thus, the issue for the Eleventh Circuit was whether communications between a debt collector and its vendors constituted debt-related communications about a consumer in violation of the FDCPA. In a decision that has the potential to upend the debt collection industry, the Eleventh Circuit ruled that such communications were in fact governed by the FDCPA. A likely result of this decision will be a wave of FDCPA class action lawsuits, particularly in the states within the Eleventh Circuit (Alabama, Florida and Georgia). Continue reading ›

An Illinois Appellate Court recently considered a putative class action lawsuit alleging that a senior housing community operator violated several consumer protection statutes in connection with its contracts with residents. The First District affirmed the trial court’s dismissal of the claims finding that the trial court properly concluded that the contracts did not violate the statutes and granted summary judgment to senior housing community operator.

The defendant is an Illinois not for profit corporation that operates an independent living senior housing community for persons 55 years and older in Glenview, Illinois. The plaintiff filed the lawsuit as the executor of the estate of Marjorie Hamilton and sought to represent a class of other similarly situated individuals. Hamilton entered into a “Residency and Services Agreement” with the defendant for an apartment at the senior living facility Chestnut Square. The Agreement provided for an initial deposit that was to be paid by Hamilton to reserve a residence in Chestnut Square which would bear interest at the passbook savings rate established by Bank One.

In February 2013, Hamilton notified the defendant of her intent to terminate her residency. The defendant did not refund her entrance fee until July 2014. When it did, Hamilton did not receive any interest with her entrance fee refund. Even before the refund, the plaintiff filed a class action complaint against the defendant asserting claims of unconscionability; breach of contract; and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, the Security Deposit Interest Act and the Security Deposit Return Act. The trial court subsequently dismissed the unconscionability claim with prejudice, dismissed the Consumer Fraud Act claim without prejudice, and denied the defendant’s motion to dismiss the Deposit Return Act and Interest Act claims.

The trial court ultimately granted class certification for the Deposit Return Act and Interest Act claims but denied class certification for the Consumer Fraud Act and breach of contract claims. After class notice had been provided to the class members, the defendant filed for summary judgment as to all claims and plaintiff filed a cross-motion for partial summary judgment on liability under the Interest Act and Deposit Return Act claims. After hearing the arguments of both parties, the trial court granted summary judgment in favor of the defendant on both the class claims and the plaintiff’s individual claims. The plaintiff subsequently appealed these rulings to the First District Appellate Court.

As the Court noted, the crux of the plaintiff’s case depended on whether the Court found the Agreement to be a lease or a services agreement. A secondary issue in the case was whether the entrance fee could constitute a security deposit. Turning to the first question, the Court identified the requisite elements for an agreement to be considered a lease: (1) it must delineate the extent and bounds of the property; (2) it must identify a rental price and time and manner of payment; and (3) must set forth the term of the lease. After reviewing the terms of the Agreement, the Court determined that it could not be considered a lease under Illinois law. Continue reading ›

 The vast majority of breach of contract lawsuits in commercial litigation involve one party to a contract suing the other party to the contract for failing to perform. Recently, an Illinois Appellate Court was forced to address a less common scenario where the plaintiff alleging a breach of contract was not a party to the original contract. The court ultimately ruled that a non-party property owner could not assert breach of contract or negligence claims against parties to various construction contracts between the tenants of the property and the contractors and architects. The Court based its conclusion on the determination that the property owner was not an intended beneficiary of the contracts at issue.

Navigant Development, LLC owned a restaurant property on Wells Street in downtown Chicago. After two separate tenants completed two separate renovations at the property, defects in the trusses supporting the property’s ceiling were discovered. Further investigation revealed extensive damage to several of the trusses forcing Navigant to shut the building down and make repairs costing nearly a million dollars to fix the structure. Navigant’s insurer paid Navigant for the cost of these repairs and for the income lost during the time the restaurant was closed. As the owner’s subrogee, the insurer then sued various contractors and architects involved in the renovation projects, alleging multiple counts of breach of contract and negligence. In its complaint, the insurer alleged that Navigant was an intended third-party beneficiary because the defendants knew the work was to be performed at a property owned by Navigant.

The defendants sought dismissal of the claims arguing that Navigant was not an intended third-party beneficiary of the contracts at issue. The defendants also argued that the negligence claims were precluded by the economic loss doctrine. The trial court ultimately granted the defendants’ motions with prejudice finding that Navigant could not be an intended third-party beneficiary to the contracts between defendants and Navigant’s tenants. The trial court also found that the negligence claims were barred by the economic loss doctrine and that none of the exceptions to the doctrine applied to the case. After the court denied the insurer’s motion to reconsider the dismissal, the insurer appealed. Continue reading ›

The restaurant industry has long been famous for chefs who yell, insult, and throw things at their staff. Various reality TV shows, such as Hell’s Kitchen, have even glorified celebrity chefs throwing temper tantrums when something comes out of the kitchen with minor imperfections, and even targets of such abuse often say it’s just part of the job: you put up with the abuse, you get better, and you move up the ladder until you’re head chef at your own restaurant … if you’re a man.

Recent movements, including #MeToo and Black Lives Matter, have called for society to stop enabling the toxic behavior of white men in power, including chefs. Change doesn’t happen overnight, but the call has been heard and the tide has shown signs of turning, however slowly.

One of the most recent chefs to come under fire for creating a toxic work environment, as well as for allegedly violating various labor laws is Blaine Wetzel, head chef and co-owner of the Willows Inn. The inn is located on Lummi Island near the San Juan archipelago in Washington State and is only accessible by ferry. People come from all over the country to stay at the inn and eat at the restaurant, all while enjoying the rustic scenery of the island, but the employees allege the true story of the inn is much uglier.

Many former employees of the Willow Inn allege Wetzel used sexist, racist, and homophobic slurs with his staff. Wetzel also allegedly used a slur to suggest some of his staff members were mentally challenged when he didn’t consider their work to be up to par.

According to several employees, the abuse wasn’t always verbal, especially when it came to the girls and women who worked at the Willows Inn. Wetzel and other male employees allegedly plied them with drugs and alcohol (including underage employees), often to the point of unconsciousness. The toxic behavior started at the top with Wetzel who at one point allegedly offered a girl a ride home after work, then drove to his house and refused to take her home until after she’d taken shots with him. He then allegedly drove her home while drunk. Continue reading ›

As we previously covered here, an Illinois appellate court revived a lawsuit filed by Chicago Bears legend Richard Dent which seeks to learn the identity and addresses of unidentified individuals who published allegedly defamatory statements about Dent which allegedly cost him several lucrative marketing contracts. Following the ruling in Dent’s favor, the respondents in the case sought to challenge the First District’s ruling and requested a review of the case by the Illinois Supreme Court. Recently, the Illinois Supreme Court granted the petition for leave to appeal and will hear arguments in the case later this year.

For background, the case dates back to 2018 when energy supplier Constellation NewEnergy terminated various energy supply and marketing contracts with Dent and his company RLD Resources, LLC. Dent met with the energy company’s attorneys during which the attorneys informed Dent that the company had received complaints about him from multiple individuals accusing him of inappropriate comments and conduct at several Constellation-sponsored events. The attorneys refused to identify the complaining individuals. Shortly after the meeting, Constellation terminated its contracts with Dent. Continue reading ›

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