Chicago Business Litigation Lawyer Blog

Recently Settled Lawsuit Over Large Payday Lender’s Use of Non-Compete Agreements Provides Lessons on How to Use Such Agreements — Chicago and Evanston Non-Compete Agreement Attorneys

January 25, 2019 | Peter S. Lubin and James V. DiTommaso

When non-compete agreements can and cannot be used?

One of outgoing attorney general Lisa Madigan’s final acts was to settle a lawsuit the Attorney General’s office had brought against one of the nation’s largest payday lenders Check Into Cash alleging that the lender’s use of non-compete agreements ran afoul of Illinois law.

Illinois is one of a growing number of states cracking down on the widespread, indiscriminate use of non-compete agreements, particularly with low-skill or low-wage employees. Many employers who use non-compete agreement do not use them for their intended purpose–to protect an employer’s proprietary and valuable information–but instead, use them to prevent employees from leaving and to reduce the available workforce for competitors. It is this practice many states are seeking to curb.

States are also targeting another group of employers: those who attempt to use non-competition agreements for their intended purpose but do so using overly broad, poorly worded agreements. Courts have grown increasingly hostile to such agreements, opting to throw out the entire agreements rather than reign in or rework them (sometimes called blue penciling).

Three things are certain in the area of non-compete agreements (also referred to as restrictive covenants): (1) the agreement must be narrowly tailored so that it protects the employer’s legitimate business interest but does not unnecessarily go beyond that; (2) a poorly worded non-compete agreement is worse than no agreement as it provides a false sense of security but will likely not be enforced by a court (a fact an employer will learn only after lengthy, costly litigation); and (3) a non-compete agreement is not the type of agreement you can set and forget.

Non-compete law, perhaps more than any other area of law, is constantly changing and evolving. A do-it-yourself non-compete agreement or one drafted years ago likely will not hold up in court today. It is wise to have an attorney experienced in non-compete agreement law review and update your non-compete agreement every few years. The money spent now will more than pay off later when you are relying on that agreement to prevent an employee from walking out the door and taking your valuable, proprietary information to a competitor.

What non-compete agreements are and are not.

A non-compete agreement is a contract (or a provision in a contract) between an employer and an employee that prohibits the employee from performing certain activities within a specified geographic area for a set amount of time. The purpose of non-compete agreements is to protect an employer’s proprietary and valuable information. An employer who invests time and money in training an employee and discloses valuable information that the employer has developed at great expense wants protection from that employee leaving and using that information to directly compete with the employer. Examples of the type of information an employer might want to protect include customer lists, vendor lists, pricing lists, methods and procedures, and client renewal dates (for insurance brokers). Employers often use non-compete agreements in conjunction with non-solicitation agreements to further protect them from the impact of losing an employee.

Non-compete agreements are not a mechanism for retaining employees by eliminating all alternative employment opportunities. They also are not a mechanism for preventing competitors from being able to find workers for open positions. If there is evidence that an employer has used non-compete agreements for these prohibited purposes, a court will not enforce the agreement.

The first thing an employer must understand is when a non-compete (or non-solicitation) agreement can and cannot be used. As the Check Into Cash lawsuit demonstrates, non-compete agreements are not appropriate for all employees. The Illinois Freedom to Work Act, 820 ILCS 90/1 et seq., prohibits the use of non-compete agreements for employees whose earnings do not exceed the greater of minimum wage or $13 per hour. Continue reading ›

Oak Forest Properties v. RER Financial, Inc. — Breach of Lease Contract Dispute Resolved — Chicago Real-Estate Litigation Attorneys

January 25, 2019 | Peter S. Lubin and James V. DiTommaso

Where circuit court did not err when it ordered plaintiff and defendant to each pay their own attorneys’ fees in case for breach of a lease agreement because the plaintiff and defendant both won and lost on some of their claims, and neither party prevailed on claims that were significantly complex.

Oak Forest Properties is a landlord that operates a strip mall in Oak Forest, Illinois. RER Financial is a franchisee of a consumer tax preparation business. The two companies entered into a commercial lease agreement. Oak Forest agreed to divide one of its buildings into two spaces, and RER agreed to lease one of those spaces. Oak Forest agreed to take on the construction costs of the division, and RER agreed to bear the costs of any interior construction of the space after the division.

The agreement required Oak Forest to finish construction before RER started any aspects of its interior build-out. The parties, however, ignored that requirement and combined their efforts to divide and build-out space, using the same contractor and a single building permit for all work. Eventually, the parties’ relationship broke down and RER exercised an option to terminate the lease. Continue reading ›

Mitek v. Diedrich — Trade Secret and Non-Disclosure Agreement Claims Dismissed for Lack of Personal Jurisdiction by Federal District Court — Chicago Non-Compete Agreement Attorneys Near Oak Brook

January 24, 2019 | Peter S. Lubin and James V. DiTommaso

A complaint alleging breach of a non-disclosure agreement and misappropriation of trade secrets was successfully dismissed for lack of jurisdiction where the defendant was not alleged to have sold a competing product within the state in which the action was filed.

Brad Diedrich worked from May 2003 through September 2017 for Mitek Corporation, an Illinois manufacturer of audio equipment. Diedrich worked as a Senior Engineering Manager for most of his time at the company. Through his work, Diedrich learned trade secrets and confidential information at Mitek. In 2016, Diedrich signed a non-disclosure agreement. The agreement also contained non-competition and non-solicitation clauses.

In April 2017, Diedrich went with Mitek’s President and CEO, John Ivey, to a Hong Kong electronics fair. At the fair, one of Mitek’s business partners, EVR, proposed to sell Mitek a digital signal processing amplifier. Ivey asked the company to send information regarding the proposal to Diedrich, but Diedrich failed to follow up on the proposal. Soon after, EVR agreed to work with a division of MTX to develop the new product. After executing a confidentiality agreement, EVR sent a prototype to MTX, which Diedrich viewed and examined. Continue reading ›

McIntosh v. Walgreens Boots Alliance — Illinois Appellate Court Finds Voluntary Payment Doctrine Does Not Defeat Consumer Fraud Claims

January 24, 2019 | Peter S. Lubin and James V. DiTommaso

The Illinois Appellate Court reversed a decision by the Illinois Circuit Court in a class action concerning the Consumer Fraud Act, where a retailer was alleged to have improperly collected taxes on exempt bottled water products. The court found that the voluntary payment doctrine did not apply to a payment that was allegedly obtained through deceptive business practices or acts. The court also found that an intent to deceive could be shown by evidence that the payment of the tax by the consumer was a predictable consequence of the retailer asking the consumer to pay the tax.

In 2008, the City of Chicago began imposing a five-cent tax on the sale of bottled water within city limits. Retailers are required to include the tax in the price of bottled water. The city excludes certain bottled beverages from the tax including certain brands of sparkling and mineral water, and other flavored and carbonated water products.

Destin McIntosh sued Walgreens Boots Alliance in Illinois state court. McIntosh filed a class action alleging that Walgreens violated the Consumer Fraud and Deceptive Business Practices Act by charging the bottled water tax on sparkling water sales that were supposed to be exempt. Walgreens attempted to dismiss the case, arguing that McIntosh’s claim was barred because the tax was disclosed to McIntosh at the time of purchase and that the tax was remitted to the city. The Illinois circuit court granted the motion, and McIntosh appealed. Continue reading ›

Invado v. Forward Science Distribution — District Court Allows Trade Secrets Theft Case to Proceed — Parties Later Enter Judgment in Favor of Defendant — Top Chicago Copyright Lawyers — Chicago Trade Secret Attorneys

January 24, 2019 | Peter S. Lubin and James V. DiTommaso

A maker of medical devices was denied on its motion to dismiss a complaint alleging breach of a confidentiality agreement and breach of the Defend Trade Secrets Act. The court found that the plaintiff had sufficiently alleged facts showing that the defendant misappropriated confidential information to bring a rival product to market, and that the misappropriation potentially occurred after the DTSA was enacted, even though the initial disclosures occurred several years prior to the statute’s effective date. The Court’s decision did not resolve the case on the merits; it simply found that claims which could withstand a motion to dismiss had been alleged. The matter was later resolved by a Stipulated Judgment entering judgments in favor of the Defendants and against the Plaintiff.

Invado is a pharmaceutical company that developed two oral treatment products, NeutraSal and NeutraCaine. In 2014, Invado held discussions with Forward Science, an Illinois company, about the possibility of Forward Science becoming an independent sales agent for Invado. The two parties later signed a confidentiality agreement, in which Forward Science agreed to use any confidential information Invado provided only for the purpose of exploring a business relationship with Invado. After the agreement was signed, Invado disclosed proprietary information to Forward Science regarding its business models, and its processes for manufacturing, distribution, and pricing. The parties ultimately did not form a business relationship.

A year later, the president of Forward Science made a medical device filing with the Food and Drug Administration for a new oral treatment product. The filling stated that Invado’s products were predicate devices for its new product, SalivaMAX. In 2017, Forward Science announced a new oral pain relief product, SalivaCAINE. Prior to 2015, Forward Science did not manufacture or sell products in the same market as Invado. Continue reading ›

DiTommaso Lubin’s Lawyers Named Super Lawyers and Rising Stars in 2019

January 23, 2019 | Peter S. Lubin and James V. DiTommaso

Super Lawyers named Chicago and Oak Brook business trial attorney Peter Lubin a Super Lawyer in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Patrick Austermuehle of the Firm was named a Rising Star again. Peter Lubin and Patrick Austermuehle have consistently won this honor which is only given to 5% of Illinois’ attorneys each year.

DiTommaso Lubin’s Oak Brook and Chicago business trial lawyers have over thirty years experience in litigating complex class action, consumer rights and business and commercial litigation disputes. We handle libel and defamation cases, First Amendment issues and emergency business lawsuits involving injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud.

DiTommaso Lubin’s Wheaton, Naperville, and Aurora litigation attorneys have more than two and half decades of experience helping business clients unravel the complexities of Illinois and out-of-state business laws. Our Chicago business, commercial, class-action, and consumer 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 consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices in Oak Brook, near Naperville and Glen Ellyn, we serve clients throughout Illinois and the Midwest.

Cilliers v. Cobalt Northern District of Illinois Opinion on Deceptive Purchase of Intellectual Property

January 23, 2019 | Peter S. Lubin and James V. DiTommaso

A technology company that was accused of purchasing intellectual property and assets in a deceptive manner was denied its motion to dismiss a complaint against it for breach of contract and fraud. The plaintiffs alleged that the technology company deceived them, inducing them to sell their assets and intellectual property with promises that the company would maintain and expand the WiFI network that the plaintiffs ran when the technology company intended only to use the IP and assets to attract new rounds of investment. The court found that the technology company failed to develop its arguments in its motion and that its failure to elaborate and cite authority waived its arguments.

Chirstiaan Cilliers, Daphne Cilliers, World WiFi Network, Inc., and Sunrise Global Marketing, Inc. sued Cobalt Holdings, Inc., in federal court alleging fraud, breach of contract, and several state-law claims. The plaintiffs claimed that Cobalt fraudulently induced them to enter into agreements to sell all of their business assets and intellectual property, consisting of a roaming WiFi network it had developed and maintained in several Caribbean countries. The plaintiffs alleged that Cobalt told them that it intended to further develop the WiFI network when it, in fact, held no licenses to operate WiFI networks in the Caribbean and wanted to acquire the network and intellectual property solely to attract investors as part of a planned round of funding. Continue reading ›

7th Circuit Opinion in Beaton v. SpeedyPC Affirming Class Certification Order

January 23, 2019 | Peter S. Lubin and James V. DiTommaso

Where district court did not err when it certified a class of consumers of software that promised to improve the function of their computers, and then ran worthless fixes. The appellate panel found that the class requirements were satisfied because all consumers saw the same advertisements, and the software allegedly functioned the same on every user’s machine.

Archie Beaton saw an advertisement on the internet for SpeedyPC Pro software. The advertisement suggested that SpeedyPC Pro could improve the performance of a user’s computer, and offered a free test to check the user’s machine for flaws. Beaton downloaded a free trial of the software and ran its test on his machine. The test reported hundreds of errors, and told Beaton that purchase of the full version of the software could fix the errors and improve performance. Beaton dutifully purchased the full version of the software, but after running its fix feature several times, nothing changed on his machine.

Beaton later sued SpeedyPC in federal court in the Northern District of Illinois. Beaton filed a class action, alleging that SpeedyPC fraudulently told all users of its software that their computers were in need of fixes, and then, after the users bought the full version of SpeedyPC Pro, performed functionally worthless fixes. Beaton defined the class in his case as that of “all individuals and entities in the United States who purchased SpeedyPC Pro.” He also defined a subclass representing only Illinois consumers. The district court certified Beaton’s proposed class and subclass for claims of the breach of implied warranties of fitness and merchantability, and claims under the Illinois Consumer Fraud and Deceptive Business Practices Act for the subclass. SpeedyPC filed an interlocutory appeal challenging the class certification. Continue reading ›

Common Defenses and Privileges to Defamation

January 21, 2019 | Peter S. Lubin and James V. DiTommaso

Being sued for defamation can be a costly and anxiety-inducing experience. It is essential to understand a bit about what defamation (also referred to sometimes as libel or slander) is and importantly what some of the common defenses and privileges to such a claim are. However, there is no substitute to hiring an attorney skilled and experienced in the area of defamation defense law.

What is Defamation?

Defamation is a false statement made to others that harms a person’s reputation in the community. Defamation law is based on the premise that a person’s good reputation has value and one who harms that good reputation by making false statements should be made to pay. In Illinois, the plaintiff (the person or business claiming to have been defamed) who makes a claim of defamation generally has the burden of proof (the obligation to put forward evidence).

A defamation claim generally has three elements that the plaintiff the must prove in order to recover damages: (1) a false statement; (2) made to a third party (also known as publication); (3) that harms the plaintiff’s reputation. A plaintiff who proves a defamation claim can recover monetary damages and even an injunction in some cases. Fortunately, there are several common defenses and privileges to a charge of defamation that you can assert to avoid having a defamation judgment entered against you.

Defamation vs. Libel and Slander?

Sometimes you will hear defamation referred to as libel or slander (or that a defendant libeled or slandered the plaintiff). Libel and slander are simply different forms of defamation. Libel is defaming someone in writing. Slander is defaming someone orally. In the past, courts dealt with libel and slander claims differently, and each claim had different elements that needed to be proved along with different defenses. Illinois courts have long since discarded the distinctions between the claims and now simply refer to both types of claims as defamation.

Common Defenses and Privileges to a Charge of Defamation

Truth

Truth is an absolute defense to a charge of defamation. An essential element of a defamation claim is that the allegedly defamatory statement was false. It is not enough simply to prove that the statement damaged the plaintiff’s reputation. The statement must also be false. It is important to note that the statement need not be 100% true in every single detail for this defense to apply. A statement need only be “substantially true” for the defense to apply. This means that the allegedly damaging part of the statement must be true even if some of the minor, peripheral details were not accurate.

In practice, if you are going to say something negative about a business or individual, you should only do so if such a statement is backed up by verifiable evidence. Continue reading ›

7th Circuit Upholds $50,000 Sanction of Drew Peterson’s Former Attorney Joel Brodsky

January 18, 2019 | Peter S. Lubin and James V. DiTommaso

The 7th Circuit Opinion affirming the $50,000 sanction of attorney Joel Brodsky issued. In upholding the $50,000 sanction against attorney Joel Brodsky, the 7th Circuit concluded:

“Brodsky’s egregious behavior, obvious on the face of the record and emphasized at length by the court, more than justified the court’s choice of sanction. Brodsky’s rhetoric was inappropriate and outlandish, and his attempt to implicate the court in his fraud—and to use legal process as a tool to intimidate a witness—was beyond the pale.”

You can read the full opinion here.