Articles Posted in Commercial Litigation

The Illinois Appellate Court has reversed and remanded the decision dismissing the lawsuit brought by Advantage Marketing Group Inc. James P. Keane Sr. was one of the founders of Advantage Marketing Group Inc. Keane maintained a 35% shareholder stake in the company.  Keane had formally served as a director, officer and employee at Advantage Marketing.

Despite not being a company officer for the past several years, Keane repeatedly held himself as an owner and received the same bonus as Patty Hermann, the majority shareholder director at Advantage Marketing, and was a “principle employee . . . with wide-ranging responsibilities equivalent to those of an officer.”

Keane had developed and maintained Advantage Marketing’s natural records and explored strategic acquisitions, buying up competing businesses.

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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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A December 2017 binding arbitration awarded unpaid sales representative commissions, punitive damages and attorney’s fees against Chicago medical device distributor MioMed Orthopaedics Inc. The  circuit court judge in the case confirmed judgment against the company in the amount of $91,654.21, plus costs.

The judgment was entered after Kreisman Law Offices’ attorney Robert Kreisman moved the court for summary judgment. MioMed’s counsel opposed the motion. After the motion was granted and judgment entered, MioMed’s lawyer moved to have the court reconsider that judgment order, which was denied.

Up to now, MioMed has refused to satisfy the judgment. Post-judgment processes are underway. Under Illinois law, judgments carry a 9% per annum interest rate until satisfied.

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A new law in Illinois prohibits employers from entering into noncompete contracts with employees who earn $13 per hour or less. The Illinois Freedom to Work Act (Public Act 099-0860) became effective on Jan. 1, 2017. The law makes it illegal for an Illinois employer to enter into a “covenant not to compete” contract with any of its “low-wage employees.”

The term “covenant not to compete” is defined to extend to any agreement restricting a covered employee from the following:

  • Working for another employer for a specified period of time.
  • Working in a specified geographic area.
  • Performing other “similar” work for another employer.

Any contract with a “low-wage employee” who contains any covenant not to compete is “illegal and void.” The act is limited to agreements entered into after the effective date of Jan. 1, 2017. The act comes out of the movement to curb employers from locking lower-level employees into unfair noncompeting contracts.

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Generally the law in Illinois states that a guarantor is entitled to assert the same defenses that would be available to the principal obligor. W.W. Merck White Lead Co. v. McGahey, 159 Ill.App. 418 (1st Dist. 1911).

“Under Illinois law, ‘the liability of a guarantor is limited by and is no greater than that of the principal debtor and . . . if no recovery could be had against the principal debtor, the guarantor would also be absolved of liability.’ ‘Although the language of a guaranty agreement ultimately determines a specific guarantor’s liability, the general rule is that discharge, satisfaction or extinction of the principal obligation also ends the liability of the guarantor.’” Riley Acquisitions v. Drexler, 408 Ill.App.3d 392, 402 (1st Dist. 2011), quoting Edens Plaza Bank v. Demos, 277 Ill.App.3d 207, 209 (1st Dist. 1995).

In the Riley case, the guarantors were two joint obligations to the bank. The bank released one of the obligors. The other obligor was a dissolved corporation. Under the applicable state law, the five-year post-dissolution time period for collecting against the dissolved corporation had expired.

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The Illinois Appellate Court has ruled in a dispute regarding who should inherit a home in Highland Park, Ill. Although a trust instrument stated the house was part of the trust, there was no separate, formal documentation showing that a transfer of the house had been placed in the trust. The court In re Estate of Mendelson considered whether the house was properly transferred into the trust. The court noted that it could “find no Illinois authority on point.”

The Illinois Appellate Court held that the house was a part of the trust because it was described in it although there was no recorded deed transferring the real estate to the trust.

In the Mendelson case, the chain of title to the house was complex. In 2005, Diane Mendelson executed the deed that placed title to the house in joint tenancy with herself and her son. The deed was never recorded because she enjoyed a property tax benefit as the sole title owner of the property.

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The Illinois Appellate Court for the First District recently reviewed a case regarding the piercing of a corporate veil. Piercing the corporate veil is a practice in which a lawyer will prove that the corporation that would otherwise protect its shareowners from personal liability is really a façade or fiction that allows for the “piercing” of that veil to recover from the true owners. The appeals panel reversed a trial court’s decision that dismissed plaintiffs’ claim in a case involving whether the plaintiffs were employees or independent contractors.

Piercing the corporate veil is not a cause of action but instead a “means of imposing liability in an underlying cause of action.”

A firmly established corporate entity stands on its own unless its corporate veil is pierced for different reasons. In many cases, once a party obtains a judgment against a corporation, the party then may attempt to pierce the corporate veil of liability protection and hold the dominant shareholders responsible for the corporate judgment.

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The Neck & Back Clinic in Chicago was providing physical rehabilitation services to patients. In 1998, the clinic signed a series of leases for exterior building wall space to advertise its services. The clinic leased that advertising space through a company called Travisign, operated by David Travis. The Neck & Back Clinic alleged that Travis “represented that he was authorized to lease certain walls for advertising and that he had secured the requisite permits to place advertisements on the designated walls.”

However, in 2009, the clinic was notified that it had violated the Chicago Municipal Code by putting up advertisements without the proper city permits. The clinic was fined $3,000 and received another notice of violation. The clinic filed suit against Travis claiming breach of contract and fraud.

Travis and the clinic filed motions for summary judgment claiming that the other had failed to live up to its contractual obligations. The Circuit Court judge granted summary judgment in favor of the clinic finding that “Travis never secured the proper permits” and that he “did not perform his contractual obligations.” The Circuit Court judge awarded more than $10,000 in damages to the clinic. After dismissing a secondary claim against another party, Travis appealed.

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In October 2006, Stericycle Inc. entered into a contract with RQA Inc. to buy a segment of its business for $8 million.

Stericycle acquired the unlimited right to use RQA’s software. In addition, the two companies entered into a non-competition agreement. In 2010, the two companies contracted again, this time entering into an asset purchase agreement for $18 million.

One of the assets purchased was RQA’s “Recall and Retrieval Business Services Unit,” which was called the RR assets. The agreement made note that Stericycle would be refunded a portion of the purchase price if Stericycle did not achieve certain pre-set revenues.

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