Articles Posted in Contract Litigation

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The Illinois Appellate Court has reversed a summary judgment order that was entered by a Cook County judge in favor of Safeway Insurance Co. In this case, Jeffrey and Stephanie Hadary were injured in a car crash when Carlos Velez was driving a car he rented from Hertz Corp. The Hadarys claimed that they had suffered injuries that amounted to damages in excess of $40,000, which was the insurance limits of Velez’s insurance carrier, American Access Casualty Co., which had limits of $20,000 per person and $40,000 per accident. The Hadarys reportedly declined to buy the “liability insurance supplement” when they rented the car from Hertz.

Under Illinois’ financial responsibility law, Hertz was bound to provide a bond, an insurance policy or certificate of self-insurance that promised to pay judgments against its customers and anyone driving a Hertz vehicle with a customer’s consent. Section 9-105 of the Illinois Vehicle Code required Hertz to provide this liability coverage with limits of (a) $50,000 for injury to one person or damage to property and (b) $100,000 for injuries to two or more persons.

After American Access paid its $40,000 policy limits to Hadarys, who paid $57 as a premium for underinsured motorist coverage from Safeway Insurance Co. with limits of $100,000 per person and $300,000 per occurrence, they alleged that Velez was an underinsured motorist.

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Dr. Linda Bluestein was a shareholder in Central Wisconsin Anesthesiology S.C. and a member of its board of directors. After losing the vote that terminated her employment contract, Bluestein filed a lawsuit against the corporation for allegedly violating three statutes that protect “employees.” Those statutes were the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964. The presiding federal judge concluded, however, that Bluestein was an employer of the corporation and not an employee. The court granted Central Wisconsin’s motion for summary judgment disposing of her lawsuit.

The 7th U.S. Circuit Court of Appeals in Chicago affirmed the trial judge’s order and applied the “non-exclusive list of six factors” that the U.S. Supreme Court adopted in Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003), as criteria for determining whether a shareholder qualifies as an employee under statutes that don’t provide a “working definition” of the word.

The U.S. Court of Appeals tangled with the question of determining the meaning of the term “employee.” The Supreme Court reasoned that, when the statute (ADA) does not provide a working definition, the courts should turn to the common law test for determining who qualifies as an employee. Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003).

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An industrial design firm, nClosures, produced metal cases for tablet computers, such as the iPad. Ian LeBlanc designed a case for nClosures in early 2011 called the Rhino Elite. In May 2011, the co-founders of nClosures attended a tradeshow in Chicago to showcase the Rhino Elite prototypes.

At the tradeshow, the co-founders Daniel Gorman and Daniel McKean met with Greg Carlson, CEO of Block and Co. Block manufactured metal cash drawers but was interested in entering into the tablet enclosure market. Carlson approached Gorman and McKean about a possible relationship. At a May 24, 2011 meeting, the two companies signed a confidentiality agreement regarding the potential deal between them.

After signing the agreement, nClosures gave Block the design files for the Rhino products. The parties then attempted to negotiate a written contract concerning the manufacture and sale of the tablet enclosures.

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In a case that involved thousands of toxic tort liability cases, the Illinois Appellate Court has ruled that an industrial manufacturer must turn over documents it alleged were privileged to a company indemnifying it.

In March 1999, automotive systems manufacturer BorgWarner Inc. acquired Kuhlman Corp. and its subsidiaries, including Kuhlman Electric Corp (KEC).

Since the 1950s, KEC has operated a facility in Mississippi that produces electrical transformers. As part of the Kuhlman Corp. sale, KEC represented that there was no soil contamination on its Mississippi property.

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In a commodities fraud case, it was contended by the plaintiff, the Commodity Futures Trading Commission (CFTC), that previous versions of a defendant expert’s report should be produced and not be privileged because of communications between the lawyer and this expert witness.

In 2010, the work-product privilege provided by Federal Rule of Civil Procedure 26(b)(4)(B) and (C) was extended to cover drafts of reports from experts with three exceptions. This privilege extends to communications between lawyers and experts.

The CFTC argued that the defendants “should be deemed to have forfeited Rule 26(b)(4)’s work-product protection because there is evidence that defendants’ counsel participated in drafting sections of the report.” The U.S. magistrate judge handling this U.S. District Court case rejected the CFTC’s forfeiture argument stating: “The CFTC’s approach would require an analysis of the degree of counsel involvement (both quantity and quality) in the drafting of the report. Such an analysis would necessarily require production of all of the drafts of the report for comparison, as well as production of all, or virtually all, communications between expert and counsel. The drafters intended Rule 26(b)(4)(B) and (C) to protect against that discovery.”

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The Illinois Business Corporation Act, Section 7.75, gives shareholders the right to inspect a company’s records, “but only for a proper purpose.” The Illinois Business Corporation Act was amended in 1984, requiring shareholders to make their demand in writing, “stating with particularity the records sought to be examined and the purpose therefore.” 805 ILCS 5/7.75.

The plaintiffs in this case, Sunlitz Holding Co. (and three of the company’s shareholders) appealed from an order that dismissed its complaint for mandamus against Trading Block Holdings Inc., which claimed that it had satisfied the “proper purpose” and “particularity” requirements.

The lawsuit complaint contained exhibits attaching two letters the plaintiff sent to Trading Block. In an April 1, 2013 letter, plaintiff Sunliz said it wanted to inspect the corporation’s records “to determine the financial condition of the company, the character of the management of the company and whether the company’s financial practices were appropriate.” In another letter dated May 17, 2013, the plaintiff said he was worried that the corporation was being used “as a piggy bank for the insiders and the board of directors.”

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Robert Lodholtz was seriously injured in 2011 while working at a plant owned by Pulliam Enterprises in Indiana. Lodholtz filed a personal-injury lawsuit against Pulliam in the Indiana state court. Pulliam called on Granite State Insurance Co., its primary liability insurer, along with New Hampshire Insurance Co., to defend and indemnify it against the lawsuit.

Granite State refused to indemnify Pulliam stating that Lodholtz as an employee should pursue his claim for worker’s compensation. Lodholtz disagreed arguing that he was employed by another company while he worked at Pulliam’s plant and therefore had no basis for a worker’s compensation claim.

Pulliam chose not to file an answer to the complaint, so Lodholtz moved for default judgment, which was granted. Lodholtz then agreed with Pulliam not to pursue the default judgment and in return Pulliam assigned to Lodholtz its rights against Granite State. Granite State then moved to intervene in Lodholtz’s lawsuit. The Indiana state court denied the motion to intervene.

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Levia Moultrie began working at Penn Aluminum in 1990. Over the next 20 years, Moultrie worked in different positions, including forklift operator, block operator, utility coiler and scrap chopper.

In September 2008, Moultrie used his seniority to take on the job of forklift operator. The collective bargaining agreement between Moultrie’s union and Penn Aluminum gave Moultrie two days to show that he could perform the job.

A little more than a week after Moultrie switched into the forklift operator job, he began experiencing performance problems. During one shipment he was tasked with handling, Moultrie incorrectly hooked up some wires causing a delay in a shipment.

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Hennessy Industries was a car part manufacturer. It was sued frequently for asbestos-related personal injury claims. Hennessy sought insurance coverage for these claims from National Union Fire Insurance Co. The companies entered into a cost-sharing agreement in 2008. However, as the lawsuits and claims came in, Hennessy asked National Union to indemnify its settlements and defense costs. To resolve their differences about what was owed, Hennessy demanded arbitration under the agreement. Illinois law would be applied.

Hennessy filed a lawsuit against National Union under the Illinois Insurance Code, 215 ILCS 5/155(1), which provides that, in cases involving vexatious and unreasonable delay, the court may award reasonable attorney fees, other costs, plus an additional amount.

Hennessy claimed that National Union’s delays in providing coverage were vexatious and unreasonable. The federal district court judge in Chicago declined to dismiss the case, acknowledging a provision that “the arbitrator shall not be empowered or have jurisdiction to award punitive damages, fines or penalties,” but held that Hennessy’s claim arose under statutory law rather than under the cost-sharing agreement.

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The 7th Circuit Court of Appeals in Chicago has affirmed the dismissal of a fraud case in the U.S. District Court for the Northern District of Illinois. Patrick Camasta filed a lawsuit against Joseph A. Bank Clothiers Inc. claiming that prior to making purchases at the company’s far north suburban store in Deer Park, Ill., that he saw an advertisement about “sale prices” for certain items.

Camasta’s complaint did not specify when or where he saw the advertisement, what exactly the advertisement said, what the “sale prices” were or what particular merchandise was eligible for the sale.

At the Deer Park Joseph A. Bank store, Camasta found that there was a promotion in which customers were able to buy one shirt and get two for free. Camasta purchased six shirts for $167. After his purchases, Camasta alleged that he learned that Bank’s practice was to advertise normal retail prices as normal price reductions. Camasta alleged but for this fraudulent retail tactic, he would not have purchased the six shirts.

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