Articles Posted in Commercial Litigation

The Illinois Supreme Court has reversed a lower court’s ruling in a case involving an alleged breach of fiduciary duty.

In this case, the trial court first ruled that, although defendants had breached their fiduciary duties to the plaintiff, Indeck Energy Services, Indeck had failed to establish any usurpation of a corporate opportunity. The court found that both the turbine and the funding opportunities were still available to Indeck at the time of trial.

After a bench trial in favor of the defendant, the appellate court then reversed the trial court’s ruling, holding that it was “immaterial” whether a corporate opportunity still existed for Indeck. 2019 IL App (2d) 190043.  According to the appellate court, once Indeck established that defendants DePodesta and Dahlstrom had breached their fiduciary duty by choosing not to disclose or tender the funding opportunity to Indeck, that “answered in the affirmative the corporate-usurpation question.”

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Michael Maschmeyer was the co-owner of Chicago Roof, Deck and Garden LLC (CRDG) with 42.5% of the interest in the company. Darren Flynn and Tomasz Bartosiewicz owned the remaining 57.5% interest in the company.

Flynn and Maschmeyer had been partners for several landscaping and real estate development businesses in the past. They formed CRDG to provide outdoor living design, construction and landscaping services. All construction work was done by another company owned by Bartosiewicz and CRDG’s captive subcontractor.

Between 2009 and 2014, Maschmeyer deposited more than $1.7 million in checks made payable to CRDG, all for CRDG labor, to his personal bank account and refused to return $850,000 when confronted by Flynn and Bartosiewicz. Instead, Maschmeyer and his wife, Anne, formed Urban Rooftops LLC, a company directly competing with CRDG.

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ABC Acquisition Co.’s breach of fiduciary duty claim was brought against James Trausche, the former president of Aetna Bearing Co. Trausche’s business assets were acquired by ABC.  This issue of law presented a question of first impression under Illinois law about an officer’s obligations to a successor corporation.

After ABC purchased substantially all of Aetna’s assets (including intellectual property) and hired three of Aetna’s employees (including Donald Koziel) Trausche formed AIP Products Corp., hired Koziel and started competing against ABC.

ABC filed a federal complaint in the Northern District of Illinois in Chicago. ABC alleged that Trausche, AIP, and Koziel violated the federal Defend Trade Secrets Act and the Illinois Trade Act (Count 1 and 2). The complaint also alleged that Koziel violated the Computer Fraud and Abuse Act and breached his employment agreement (Count 3 and 4) and that Trausche and Koziel breached fiduciary duties allegedly owed to ABC.

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In this appeal, the defendant Michael Maschmeyer’s conduct as a member of the plaintiff, Chicago Roof, Deck and Garden LLC (CRDG), led to an appeal regarding the claimed interest owed CRDG. Plaintiffs Darren Flynn and Tomasz Bartosiewicz owned the rest of the membership interest.

After a bench trial, the trial judge found that Maschmeyer breached his fiduciary duty as a member of CRDG by taking business opportunities that should have been first offered to CRDG. The trial court entered judgment in favor of CRDG and against Maschmeyer as follows: (1) $1,768,927 in compensatory damages, (2) $236,350 in prejudgment interest, and (3) $651,104 in punitive damages. The total judgment in favor of CRDG and against Maschmeyer was $2,656,381.

However, the trial judge also found that CRDG was required to compensate Maschmeyer for the fair value of his membership interest upon his disassociation from CRDG, which the court found occurred on June 16, 2014. The trial court determined that the fair value of Maschmeyer’s membership interest was $2,867,376 and entered judgment in favor of Maschmeyer and against CRDG in that amount. After setting off the amount of the judgment against Maschmeyer, the trial court’s judgments resulted in a net judgment in favor of Maschmeyer and against CRDG in the amount of $210,995.

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Clarisha Benson and Lorenzo Smith each purchased an opaque, seven-ounce box of Fannie May chocolates for $9.99 plus tax. Benson purchased Fannie May’s Mint Meltaways and Smith purchased Fannie May’s Pixies. Although the boxes accurately disclosed the weight of the chocolate within, and the number of pieces in each box, the boxes were emptier than either had expected.

The box of Mint Meltaways contained approximately 33% empty space and the box of Pixies contained approximately 38% empty space.

The plaintiffs eventually sued Fannie May on behalf of themselves and a putative class, alleging violations of Illinois Consumer Fraud and Deceptive Business Practices Act and asserted claims for unjust enrichment and breach of implied contract.

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The Illinois Appellate Court has affirmed the decisions of two Cook County judges related to the suit filed by SFG Capital LLC. The suit was filed against Patrick W. Kane in 2010; it was alleged that Kane defaulted on a loan. Following a consent agreement, the trial court entered a $783,000 judgment against Kane payable to SFG. In an attempt to satisfy the judgment, SFG initiated a citation to discover assets proceedings to identify available assets that Kane might have owned.

In 2012, William Platt, an estranged business partner of Kane, signed a promissory note for $1.2 million payable to Kane. The trial court ordered all rights, title and interest in the Platt note to be transferred to SFG on April 14, 2016, with instructions that SFG “may take such further action as necessary to enforce payment on the . . . note.”

Access Realty Group, the plaintiff in this case, acquired the SFG judgment by way of an assignment on April 14, 2017, and became the successor in interest to SFG. Platt is the sole shareholder of Access, as well as its president, secretary and registered agent.
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Within a year of when Michael Booth signed an employment agreement that had a non- competition clause, he resigned as president of Axion RMS and then went to work for a competitor. It was also alleged that, after leaving Axion RMS, he started luring away former colleagues. Axion sued Booth for the alleged violation of the non-compete contract.

A circuit court judge dismissed the case because (1) the alleged consideration for the restrictive covenant was Booth’s continued employment, and (2) several Illinois Appellate Court cases require, as a bright-line rule, two years of subsequent employment to qualify as adequate consideration for such provisions.

The circuit court judge also denied Axion’s request for leave to file an amended complaint that cured this problem (by alleging that the consideration for the non competition agreement included a boost in Booth’s salary, from $300,000 to $500,000 a year; his receipt of shares in the business; plus a promotion to president from vice president of sales).

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Illinois Gov. J.B. Pritzker has signed into law the Collective Bargaining Freedom Act, which became effective April 12, 2019. Under the new law, local governments will no longer be able to pass right-to-work ordinances.

The legislation is a signal of Gov. Pritzker’s approach to workforce regulation. A similar bill was passed in the previous General Assembly session, but the law was vetoed by then-Gov. Bruce Rauner.

The Act explains, “It is the policy of the State of Illinois that employers, employees, and their labor organizations are free to negotiate collectively.”

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Guitar Center sells musical instruments. It created a new brand of woodwind and brass instruments produced by Eastman known as “Ventus.”

Barrington owns the trademark “Vento,” which is used in relation to instruments it sells.  Barrington began using its mark in commerce in 2009 and achieved gross sales just under $700,000. Barrington filed for registration of its “Vento” mark in January 2010. In March 2011, Guitar Center began selling instruments using the “Ventus” mark, with gross sales totaling about $5 million.

Barrington filed suit against Eastman, Music & Arts, Guitar Center and Woodwind.

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Union Tank Car Co. relied on business records of third parties without any testimony from employees of those other companies to quantify damages caused by a breach of lease for 47 railcars.

An appeal was taken to the Illinois Appellate Court from a $1.27 million judgment entered in a Cook County bench trial. NuDevco Partners guaranteed the lease and argued that the trial court was wrong in ruling that Union Tank satisfied the requirement for the business records exception to the hearsay rule. NuDevco also claimed that the best-evidence-rule barred testimony about Union Tank’s wire transfers in payments to third parties.

The tankers were for shipping petroleum. The lessee, a subsidiary company of NuDevco, stopped paying rent and shipped the tankers back to Union Tank. To prove up freight, switching and storing charges, Union Tank presented invoices from its vendors, plus testimony from its director of fleet repair and the general manager of the lease division about receipts and payment of the bills.

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