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It may have once been thought that officers constituted as being fiduciaries in a manager-managed LLC setting. Who or what are fiduciaries? Fiduciaries are individuals in whom another has placed the utmost trust and confidence to manage and protect property or money. The relationship wherein one person has an obligation to act for another’s benefit. Typically, it has been those members who operated the business that owed fiduciary duties of loyalty and reasonable care to non-managing LLC owners.  They normally uphold legal positions of trust with one or more parties and  take care of money or assets for another person.  Now, a managing member of an LLC is an individual who holds an ownership interest in the company, participates in its day-to-day management and has authority to contract on behalf of the company. So are managing members fiduciaries? Since most states have codified the fiduciary duties owed by officers and directors, a recent First District Court has affirmed a trial court finding that this is NOT the case.

In the case of 800 South Wells Commercial LLC v. Cadden, 2018 IL App (1st) 162882 (May 9, 2018) Cook Co., 3rd Div, (FITZGERALD SMITH), the courts looked at these issues in greater depth and length and gave more definitive answers in terms of scopes and duties of member-managed LLCs.  It looked at a situation that involved a manager-managed Illinois LLC which was formed to obtain a leasehold interest in River City Complex’s commercial space and parking garage and the manager and member appointed Cadden to be the LLC’s vice president. Within four years, the LLC defaulted on both its mortgages. The LLC claimed that fiduciary duties were owed only because he held the title of vice president. The Court was quick to grant summary judgment which went further to say that there was no evidentiary basis to demonstrate that any fiduciary duty was owed to the LLC.  Consequently, there was no breach.  Continue reading ›

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Illinois Appellate Court Ruling on Due Process Rights of Incarcerated Parents

A recent ruling in the Illinois Appellate Court decided if an incarcerated father had his due process rights violated because he was unable to attend a hearing terminating his parental rights since he was in a federal correctional facility in Wisconsin.

Two very young children J.S. and T.S. were found home alone by the Rockford police in their mother’s home. J.S. (seven years old) stated to the responding officers that he sometimes would babysit his brother T.S. (one-year-old). During the investigation, police found marijuana, scales, and a BB Pistol at the unattended home. The Department of Children and Family Service took J.S. and T.S. under protective custody. At this time their father was already in a federal correctional facility in Wisconsin. The father was previously indicted and convicted of drug trafficking crimes and possession of a firearm in furtherance of drug trafficking crimes. The father had other prior convictions.

As a result of the incident, the State filed neglect petitions as to J.S. and T.S. The trial court was aware that the father was in Wisconsin due to his incarceration. The trial court appointed counsel to the children’s father and a writ of habeas corpus was issued asking the federal correctional facility to have the father delivered to the trial court, but the writ was denied. Typically, the federal government does not honor a state writ of habeas corpus. The mother of the children stipulated to one count of the neglect petition, which alleged that the minors were left unsupervised for an unreasonable period of time. The trial court concluded that J.S. and T.S. were neglected minors and DCFS was appointed as their legal guardian and custodian. Continue reading ›

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A recent ruling in the Illinois Appellate Court decided a very tough decision about two very qualified parents and whether the one parent could move out of Illinois with their minor child, so she could pursue her dream job.

Two individuals were married and had one minor child, they decided to separate and had been granted joint custody and decision making for their child. While married the couple lived in the City of Chicago and then later moved to Downers Grove in their marital home. During the divorce proceedings the marital home was sold, and the father moved to a rental home a few doors down from the marital home and the mother moved to an apartment nearby. The minor child’s mother had the life long dream of getting her Ph.D. from a school in North Carolina. The mother petitioned the circuit court to relocate to North Carolina because she was successful in being admitted to the Ph.D. program that she wanted to attend and would work in her dream job while studying for her degree. Experts for both parents determined that both parents had a successful and nurturing relationship with their minor child and that she would succeed with either parent in Illinois or North Carolina. The father objected to his minor child moving away to North Carolina as, among other things, he would not see her as often and would not have as many in-person interactions with his daughter. Continue reading ›

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Courts and now legislators are competing against the trend of non-compete clauses in employment agreements.

For it is Democratic leaders that have joined the bandwagon in terms of wanting to prohibit the use of covenants not to compete nationwide. Per Senator Warren’s press release, implementation of the clauses will reduce bargaining power for employees, stifle competition and innovation.  All of that combined hurts Americans and their opportunities. This will eventually, in turn, give greater power to the Department of Labor.

If legislation was in place, there will most likely be a ban through fines on employers who either fail to notify employees that non-compete agreements are illegal or who require employees to sign covenants not to compete. Such a bill would specifically enact a law to protect its trade secrets. As it stands, no legislation is in place that would not allow that to happen. Continue reading ›

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The dismissal of a lawsuit filed against the Irving School District by the father of a child whose homemade clock was mistaken for a bomb.  It was alleged that the child’s civil rights were violated when the police charged with the making of a “hoax bomb.”  The federal complaint also addressed the issue of taking the child into custody and later dropping the charges.  Since it has been determined that the boy and his father are able to amend their lawsuit, they have until June 1 to make changes.  For that reason, it is likely that their claim has not ended there.

So the clock ticks and it is likely that a new lawsuit would be filed.  The student knew it was not a bomb, never threatened anyone and he never said it was one or alarmed anyone.  The lawyer further added that “despite all of those things, they yanked him out of his chair, put him in handcuffs and arrested him. There was no cause for arrest.”

The court rationale in the ruling was that Principals are responsible for the safety of the students and others on campus.  Part of that included making decisions for students and in the prospect of death.  The school now faces a lawsuit based on the Equal Protection Clause of the U.S. Constitution and Title VI of the Civil Rights Act of 1964.  The Judge dismissed the lawsuit indicating that there was no religious or racial discrimination.  “Plaintiff does not allege any facts from which this court can reasonably infer that any IISD employee intentionally discriminated against A.M. based on his race or religion,” the Judge wrote in his ruling.  This is one reason why facts need to be pleaded properly.  In a difficult case, the need of the students and their safety must be weighed against religious and racial profiling.  This is the same boy that Obama once applauded and now is being dismissed in a Trump’s America.  Mohamed was a 14-year-old freshman when the incident happened at his high school in September 2015. The charge against Mohamed was dropped, and the boy gained public support from President Obama, who invited him to the White House after saying that “we should inspire more kids like you to like science.” Continue reading ›

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A recent copyright ruling involving embedded Tweets of quarterback Tom Brady has created alarm among the digital media, where photos are embedded and linked to on a routine basis. In a copyright infringement case that could have a far-reaching impact on anyone who uses images on a blog or website, the Southern District of New York considered how photos are shown on one site but stored on another site’s server implicate the image owner’s exclusive display right under the federal Copyright Act.

District Court Judge Katherine Forrest held that when news organization defendants embedded Tweets on their web pages, they violated the plaintiff’s display right, and “the fact that the image was hosted on a server owned and operated by an unrelated third party (Twitter) does not shield them from this result.”

Plaintiff Justin G. took a photo of New England Patriots quarterback Brady with the Boston Celtics manager in East Hampton, N.Y., in 2016. He uploaded it to his Snapchat page, where it went viral with the help of Twitter. Several news outlets including defendants Breitbart, Time Inc., and the Boston Globe then embedded the Tweeted image in their articles. Justin sued under the Copyright Act, claiming he never licensed the rights to display his photo. The other named defendants include Yahoo!, Vox Media and Gannett.

“A review of the legislative history reveals that the drafters of the 1976 Amendments [to the Act] intended copyright protection to broadly encompass new, and not yet understood, technologies,” Judge Forrest wrote, addressing the law’s application to the new frontier of social media. Continue reading ›

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The ousted founder and former CEO of Orion Energy Systems, Inc., cannot prevail in his federal whistleblowing claim against the company because his complaints to the board did not amount to whistleblowing under the Sarbanes-Oxley Act, the Seventh Circuit recently ruled in considering his appeal.

Neal V. founded Orion in 1996 and took the company public in 2007. His tenure became bumpy in 2012 when Neal asked Orion’s board to help cover the costs of his divorce.

Soon after, Neal and the board began to clash over multiple managerial and other issues, with Neal objecting to everything from excessive legal bills to unauthorized alcohol consumption by the board. The board refused his request to disclose these matters to shareholders, and Neal failed to report them in Orion’s quarterly and annual statements filed with the SEC.

As the conflict between Neal and the board over the running of the company escalated, the board discovered that about one-third of the $170,000 it had reimbursed him for his divorce expenses was unaccounted for. Neal blamed this on a fee dispute with his divorce attorney.

Consequently, the board removed Neal as CEO in September 2012 and renamed him “chairman emeritus.” Among the reasons it cited was high senior management turnover which it attributed to Neal’s “intimidating leadership style.”

Unhappy with his demotion, Neal announced his resignation, which triggered new disagreements over his severance package. Shortly before a board meeting convened to discuss Neal’s termination, he sent an email to the board reiterating his managerial complaints against them and accusing them of conspiring against him. Although he later characterized this email as a “complaint” pursuant to Orion’s whistleblower policy as well as Sarbanes-Oxley, it did not reference any official complaint filed with the SEC or other government entity, nor did it provide the board with new information or do anything except “simply rehash the numerous personal and professional grievances about which he had been complaining over the course of the past year,” in the words of the court. Continue reading ›

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Some states, such as California, North Dakota, Montana and Oklahoma already ban non-compete agreements throughout the state, including agreements that were signed in other states where non-compete agreements are recognized. But now Democratic U.S. Senators are looking to expand such bans all over the country.

Elizabeth Warren, Ron Wyden, and Chris Murphy have come together to propose what they call the Workforce Mobility Act (WMA). If it makes it through Congress, the new federal law would place a nationwide ban on companies writing non-compete agreements into their employment contracts.

Non-compete agreements were first used only with high-level executives and they were designed to prevent those executives from going to work with a competitor and taking trade secrets and/or client relations with them. While such actions would clearly harm their former employer, and many businesses have successfully proven that their non-compete agreements protect only their legitimate business interests, non-compete agreements have become increasingly stringent, while at the same time more widespread, in the past decade or so, further inhibiting employment opportunities for workers.

While the first non-compete agreements included limits on both geography and time (usually six months to a year), companies have continued to extend these limitations, some going so far as to forbid even minimum-wage workers from going to work for any competitor anywhere in the world, thereby purportedly limiting those workers’ ability to find new employment.

Employee advocates have long warned about the unfairness of non-compete agreements and their effect of keeping workers chained to their employer. It inhibits a worker’s ability to grow as an individual and also gives companies more opportunities to take advantage of their workers, especially when such agreements are combined with arbitration agreements, in which any dispute between the company and their employers are required to be settled in arbitration, where the employee is at a distinct disadvantage. Continue reading ›

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Sometimes truth really is stranger than fiction.

As if the idea of a monkey (a “crested macaque,” to be precise) taking a perfect selfie wasn’t strange enough, the lawsuit that followed is.

In 2011, David Slater, a British nature photographer, was taking pictures of the wildlife on the Tangkoko reserve in Indonesia when a monkey by the name of Naruto managed to get Slater’s camera away from him. Naruto took several pictures before Slater managed to get his camera back and one of those pictures turned out to be a perfect selfie – Naruto even smiled and looked right at the camera as he snapped a picture of himself.

Later on, Slater published a book that included some of the pictures Naruto had taken, which had been dubbed “monkey selfies.” That’s when the People for the Ethical Treatment of Animals (PETA) got involved.

PETA sued Slater on behalf of Naruto, trying to claim that, because Naruto had taken the picture, Naruto owned the copyright to that photo. By publishing those photos, Slater had allegedly violated Naruto’s copyright, according to PETA’s lawsuit.

A federal district judge in San Francisco dismissed PETA’s claims in early 2016, saying that, since Naruto was not a person, he could neither own a copyright. Continue reading ›

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The makers of products for newborns and young children, Johnson & Johnson, were subject to suit for their talcum powder.  It was alleged that lung cancer came about due to use of that powder.  As a result, a New Jersey banker and his wife were awarded $37 million in compensation for damages sustained.  More specifically, $30 million for him and $7 million for his wife.  Johnson and Johnson assumed 70% of the liability for the illness. The supplier of the talc mineral is what was linked to the cross contamination with asbestos being mined.  For that reason, they were hit with the other 30% of the liability.  In addition, there are thousands of other cases tying its talc products to ovarian cancer.

The way the mesothelioma acted was by having inhalation of the baby powder dust by regular use since his 1972. The jury was a seven-woman jury, which had found that asbestos was concealed in their products, making the product deadly.  This is despite the evidence that Johnson & Johnson has long tested its products for contamination and the other party argued that asbestos exposure could have come from somewhere else other than the talc.  “The evidence was clear that his asbestos exposure came from a different source such as the asbestos found in his childhood home or schools,” a spokeswoman had said and they will most likely consider an appeal.  Punitive damages are also yet to come, as the second phase of the trial is to begin next week.  On Tuesday, the jurors will make the decision as to whether or not to award punitive damages. Johnson & Johnson said it was disappointed by the jury’s most recent decision. Johnson & Johnson still affirms that its products are not carcinogenic and never have or do not contain traces of asbestos fibers. Continue reading ›

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