Chicago Business Litigation Attorney Blog

Supreme Court Issues Ruling On Challenging Fairness of Arbitration Clause

Tue, 06 Jul 2010 12:31:33 -0600

Ruling in favor of the appellant, the Supreme Court established a standard for challenging the fairness of arbitration clauses in court. See Rent-A-Center, West v. Jackson, 2010 WL 2471058
(2010). Through a 5-4 majority, the court in Rent-A-Center, West v. Jackson held that if a party challenges the validity of an entire agreement, then the validity question, as per the language of the contract, may be decided by an arbitrator. See Id. If the challenge is specific to the arbitration provision, and not the entire agreement, then a court may have jurisdiction to decide the challenge. See Id.

In 2004, Jackson entered into an employment contract with Rent-A-Center that included an arbitration provision which specifically precluded Jackson from pursuing any claim in court. Id. The Agreement provided for arbitration of all “past, present or future disputes arising out of Jackson's employment with Rent-A-Center.” Id. Further, it also provided that an “Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this Agreement.” Id. Included in this agreement was the authority to arbitrate “any claim that all or any part of this Agreement is void or voidable.” Id. In 2007, Jackson filed a lawsuit against the defendant in federal district court. Id. The defendant filed a motion to dismiss the claim on the grounds that the contract clearly and unambiguously provided for arbitration of the claim. Id. Jackson argued that the arbitration agreement was procedurally and substantively unconscionable and that the enforceability of such an agreement was for a court to decide. Id.

The arbitration provision of the employment agreement signed by the parties had two parts. Id. The first part required that any dispute arising out of Jackson's employment was to be settled by arbitration. Id. The second part stated that any challenge as to the validity of the arbitration provision was also to be settled by an arbitrator. Id. The Court held that if Jackson had only challenged the second part- the validity of arbitration provision- then a court may have had jurisdiction. See Id. Since Jackson challenged the entire agreement as being unconscionable, and the contract specifically stated that a challenge of this nature was to go to arbitration, then the issue of unconscionability of the entire agreement was to be determined by an arbitrator. See Id.

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Supreme Court Applies Stricter Pleading Standard for Civil Actions

Tue, 02 Mar 2010 15:47:08 -0600

In Ashcroft v. Iqbal, the Supreme Court reinforced the Twombly Court’s interpretation of Federal Rule of Civil Procedure 8(a)(2). Ashcroft v. Iqbal, 129 S.Ct. 1937, (2009). In Twombly, the Court developed a plausibility standard to determine whether a complaint sufficiently states a claim showing the pleader is entitled to relief. See id. The Twombly Court’s plausibility standard requires the pleader to establish their claim with facts “in those contexts where such amplification is needed to render the claim plausible." Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, (2007). “A claim may have facial plausibility when the Plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” See Ashcroft v. Iqbal.

“Although [the court] must accept well-pled facts as true, it is not required to accept a plaintiff’s legal conclusions.” Sinaltrainal v. Coca-Cola Company, 578 F.3d 1252, (2009). “A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not be sufficient.” See Ashcroft v. Iqbal. “Legal conclusions can provide the frame work of a complaint but they must be supported by factual allegations.” Bell Atlantic Corporation v. Twombly.

Illinois Courts Define Respondeat Superior

Thu, 04 Feb 2010 18:24:21 -0600

In Illinois, an employer is subject to vicarious liability for his employees under the doctrine of respondeat superior. Bank of America, N.A. v. Bird.392 Ill.App.3d 621, 911 N.E.2d 1239, 331 Ill.Dec. 1009 (2009). Under this doctrine, an employer can be held liable for his employee’s misconduct if the misconduct is within the scope of the employment. See id. In order to show that an employee’s actions are within the scope of his employment, “the conduct must be of the kind the employee is employed to perform, must occur within the authorized time and space limits of the employment, and must be done at least in part to serve the employer, rather than be for the employee’s personal ends.” Bagent v. Blessing Care Corp., 224 Ill.2d 154, 164-65, 308 Ill.Dec. 782, 862 N.E.2e 985, 991-92 (2007).

Delaware Courts Discuss Proper Purpose for the Inspection of Corporate Books and Records

Mon, 21 Dec 2009 09:00:00 -0600

A stockholder of a Delaware corporation, under 8 Del. C. § 220, has a statutory right to inspect the books and records of the corporation. Norfolk County Retirement System v. Jos. A. Bank Clothiers, Inc., 2009 WL 353746 (Del.Ch.) For a stockholder to obtain the books and records of the corporation they must have a proper purpose for the request. See id. Proper purpose, as defined by § 220, “is a purpose reasonably related to the plaintiff’s interest as a stockholder. See id. Delaware courts have recognized that investigating the possibility of pursuing a derivative action based on perceived wrongdoing by a corporation’s officers or directors represents a proper purpose for a § 220 demand. See id. However, the scope of documents available to a stockholder’s request under § 200 is limited. See id. Delaware courts repeatedly have held that “the scope of inspection should be circumscribed with precision and limited to those documents that are necessary, essential, and sufficient to the stockholder’s purpose.” See id.

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid J. Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.

Illinois Courts Recognize Promissory Estoppel As A Cause of Action

Mon, 16 Nov 2009 10:32:41 -0600

Illinois Courts define promissory estoppel as a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Restatement (Second) of Contracts § 90(1), at 242 (1981). To establish a claim for promissory estoppel in Illinois, the plaintiff must prove that the defendant made an unambiguous promise to plaintiff, the plaintiff relied on such promise, the plaintiff’s reliance was expected and foreseeable by defendants, and the plaintiff relied on the promise to its detriment. Newton Tractor Sales, Inc. v. Kubota Tractor Corporation, 233 Ill.2d 46, 906 N.E.2d 520, 329 Ill.Dec. 322 (2009).

Promissory estoppel may be an option for a party to recover without the presence of a contract. Newton Tractor Sales, Inc. v. Kubota Tractor Corporation (2009). Under the doctrine of promissory estoppel although there may be absent a bargain for consideration, a person who makes a promise may nonetheless be bound by its terms. Bank of Marion v. Robert Fritz, Inc., 57 Ill.2d 120, 311 N.E.2d 138 (1974). Promissory estoppel is most extensively recognized as a defensive measure with respect to the abandonment of existing legal rights. Newton Tractor Sales, Inc. v. Kubota Tractor Corporation (2009). However, in Illinois and other states, the Courts also understand promissory estoppel as an offensive theory of recovery, or cause of action, in any situation where one party relies on the promise of another party to its detriment in such a manner that it would be an injustice not to enforce the promise. See id.

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.

U.S. Supreme Court Holds Forum Selection Clauses are Generally Enforceable

Wed, 04 Nov 2009 12:30:05 -0600

According to the U.S. Supreme Court, a forum selection clause is prima facie valid and should be enforced unless enforcement is shown by the opposing party to be unreasonable under the circumstances. Applied Card Systems, Inc. v. Winthrop Resources Corp., No. Civ. A. 03-4104, 2003 WL 22351950, *2. Moreover, the United States Supreme Court has explicitly held that a forum selection clause in a standardized, non-negotiable contract may be quite permissible. See Carnival Cruise Lines, Inc. v Shute, 499 U.S. 585, 593-94, 111 S.Ct 1522, 113 L.Ed.2d 622 (1991). The Courts reason that a party, especially one that conducts business around the world, might have a special interest in limiting the jurisdictions in which it could be subject to suit. Tricome v. Ebay, Inc. 2009 WL 3365873 (E.D.Pa.) However, the Courts may deem a forum selection clause invalid if there is some form of contractual unconscionability. See id. For instance, courts may deem the forum selection clause unenforceable if the party challenging the user agreement did not have a meaningful choice regarding the acceptance of its provisions because there were high pressure tactics or external pressures used to require the acceptance of the agreement. See id.

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid J. Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.

Illinois Courts’ Requirements for Piercing the Corporate Veil

Tue, 27 Oct 2009 09:18:17 -0600

In Illinois, generally, the law regards a corporation as an entity separate and distinct from its officers, shareholders, and directors and therefore those parties will not be held personally liable for the corporation’s debts and obligations. Melko v. Dionisio, 219 Ill.App.3d 1048, 1063, 162 Ill.Dec. 623, 580 N.E.2d 586, 594 (1991). However, in certain circumstances, the corporate form may be disregarded, such as where the corporation is merely the alter ego or the business conduit of another dominating personality. See id.

In Illinois, piercing the corporate veil is a task which the courts should generally undertake reluctantly. Pederson v. Paragon Pool Enterprises, 214 Ill.App.3d 815, 819, 158 Ill.Dec. 371, 574 N.E.2d 165, 167 (1991). The Courts should not interfere with the corporate form anymore than it would a private contract, and the corporate veil should only be pierced when it appears that something in the particular situation has “gone amiss.” Tower Investors, LLC v. 111 East Chestnut Consultants, Inc, 371 Ill.App.3d 1019, 864 N.E.2d 927, 309 Ill.Dec. 686. Particularly, in breach of contract cases, courts should apply even more stringent standards to determine when to pierce the corporate veil than they would in tort cases. See id.

Illinois Courts may pierce the corporate veil if the two following requirements are satisfied. First, if there is such a unity of interest and ownership that the separate personalities of the corporation and the parties who compose it no longer exist. Second, if the circumstances are such that adherence to the fiction of a separate corporation would promote injustice or inequitable circumstances. Pederson v. Paragon Pool Enterprises, 214 Ill.App.3d 815, 819, 158 Ill.Dec. 371, 574 N.E.2d 165, 167 (1991). In a breach of contract case, “additional compelling facts,’ “such as a finding of fraud, may also be required. Main Bank of Chicago v. Baker, 86 Ill.2d at 205-06, 56 Ill.Dec. 14, 427 N.E.2d at 101-02 (1981). Where there is no evidence of any misrepresentation, no attempt to conceal any facts, and the parties possess a total understanding of all of the transactions involved, Illinois courts will not pierce the corporate veil in a breach of contract situation. See id.

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid J. Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.

Illinois Courts Provide Requirements For A Joint Venture or Partnership to Exist

Thu, 22 Oct 2009 11:44:28 -0600

Illinois courts have held that for a partnership or joint venture to exist a written agreement may not be required as long as specific requirements are satisfied. The Uniform Partnership Act defines a partnership as “an association of two or more persons to carry on as co-owners of a business for profit." 805 ILCS 205//6(1) (West 2002). “A relationship between two or more parties may be considered a partnership by the courts if the parties join together to carry on a venture for their common benefit, each contributing property or services and having a community of interest in the profits of the venture." Kennedy v. Miller, 221 Ill.App.3d 513, 521, 163 Ill Dec. 934, 582 N.E.2d 200 (1991). “Partnership legal principles govern joint ventures and the only distinction of consequence between the two is that a joint venture relates to a single enterprise or transaction, whereas a partnership relates to a general business of a particular kind.” Dremco, Inc. v. South Chapel Hill Gardens, Inc., 274 Ill.App.2d 534, 538, 211 Ill.Dec. 39, 654 N.E.2d 501 (1995). Even though a written agreement may not be necessary, a bald assertion that a partnership or joint venture exists is not sufficient to plead the existence of such a relationship. Romanek, 324 Ill.App.3d at 405, 257 Ill.Dec. 436, 753 N.E.2d 1062. Therefore, the courts generally look for some sign of a venture for common benefit between the two parties and in particular for some indication of a sharing of profits. Landers-Scelfo v. Corporate Office Systems, Inc., 356 Ill.App.3d 1060, 827 N.E.2d 1051, 293 Ill.Dec. 170 (2005).

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid J. Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.

Illinois Courts Define Strict Liability in Product Liability Cases

Mon, 05 Oct 2009 08:16:22 -0600

Illinois Courts have held that in a product liability case, strict liability may be predicated on a finding that the product is unreasonably dangerous, regardless of who is at fault. Miller v. Dvornik, 149 Ill.app.2d 883, 889, 103 Ill.Dec. 139, 501 N.E.2d 160, 164 (1986). The focus when determining strict liability is whether a product is unreasonably dangerous and whether the product in its present state, without the installation of optional safety devices, is dangerous because it fails to perform in the manner reasonably to be expected in light of its nature and intended function.” Miller, 149 Ill.App.2d at 888, 103 Ill.Dec. 139, 501. An important aspect of strict liability is that proof of negligence is unnecessary. Heyen v. Sanborn Manufacturing Co., 223 Ill.App.3d 307, 315, 165 Ill.Dec. 407, 584 N.E.2d 841, 846 (1991).

Moreover, Illinois Courts have held that strict liability can be imposed upon any party who sells a product in a defective condition unreasonably dangerous to the user or consumer. Lamkin v. Towner 138 Ill.2d 510, 528, 150 Ill.Dec. 562, 563 N.E.2d 449, 457 (1990). A seller who puts a defective product into the stream of commerce runs the risk of being held strictly liable for injuries caused by the product, regardless of whether the seller actually knew of the defect, contributed to the defect or failed to discover the defect. Sims v. Teepak, Inc., 143 Ill.App.2d 865, 867, 97 Ill.Dec. 914, 493 N.E.2d 721, 723-24 (1986).

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm. Litigators Walid J. Tamari and Grant Blumenthal practice in the law firm's complex litigation practice group.

Illinois Courts Define Contractual Unconscionability

Mon, 21 Sep 2009 15:24:44 -0600

Illinois courts have held that a contract may be deemed unconscionable when it is improvident, oppressive, or completely one sided. Streams Sports Club, Ltd. v. Richmond, 99 Ill.2d 182, 191, 75 Ill.Dec. 667, 457 N.E.2d 1226, 1232 (1983). Additionally, Illinois courts have provided two requirements, procedural unconscionability and substantive unconscionability, that could be present for a contract to be deemed unconscionable and therefore unenforceable. Zobrist v. Verizon Wireless 354 Ill.App.3d 1139, 822 N.E.2d 531, 290 Ill.Dec. 946 (2004).

The first requirement, procedural unconscionability, is defined by the courts as some type of impropriety during the process of forming the contract depriving the party of a meaningful choice. See id. The factors the courts consider are: the circumstances surrounding the transaction, including the manner in which the contract was entered into, whether each party had a reasonable opportunity to understand the terms of the contract and whether important terms were hidden. Franks Maintenance & Engineering, Inc. v. C.A. Roberts Co., 86 Ill.App.3d 980, 989-90, 42 Ill.Dec. 25, 408 N.E.2d 403, 410 (1980). In Illinois, however, just because a contract is presented by a party in a superior bargaining position without allowing the other party to negotiate any contract terms does not necessarily mean that the clause or contract is unconscionable. Koveleskie v. SBC capital Markets, Inc., 167 F.3d 361, 367 (7th Cir.1999).

The second requirement, substantive unconscionability, is defined by the courts as situations where a clause or term in a contract is allegedly one sided. See Zobrist. However, if the plaintiff knowingly and freely assents to a clause that works a substantial disadvantage against the plaintiff, he or she cannot be later heard to complain of the clause. See id.

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a business litigation firm based in Chicago, Illinois. Walid J. Tamari and Grant Blumenthal are partners in the law firm's complex litigation practice group.

Illinois Court Holds That Information About Customers’ Needs and Requirements When Selling Ordinary Goods May Not Be Considered a Trade Secret

Fri, 04 Sep 2009 14:56:03 -0600

For the purposes of determining trade secret protection, an Illinois Court has held that information about customers’ needs and requirements may have a different status under the law that depends on whether the business sells goods or if the business provides a service. Del Monte Fresh Produce, N.A., Inc. v. Chiquita Brands International Inc., 616 F.Supp.2d 805 (2009).

Courts are more likely to deem information about customers’ needs and requirements a trade secret when the business provides professional services. See id. Under these circumstances, customers maintain trust in a particular seller, and that trust is a valuable business asset created by years of management that the employee is not likely allowed to take with him. See id.

However, information about customers’ needs and requirements generally may not be considered a trade secret when dealing with the selling of ordinary goods. See id. The current price and quality, rather than a past investment in meeting customers needs, are the decisive factors in the continued success of the business, and they are not appropriated by the departing employee. See id.

About Tamari & Blumenthal, LLC: Tamari & Blumenthal, LLC is a Chicago-based business litigation and business law firm. The law firm represents clients in a broad range of business disputes. Attorneys Walid J. Tamari and Grant Blumenthal are the law firm’s co-managing partners.

Illinois Courts Define Acts Constituting Fraudulent Intent

Thu, 12 Feb 2009 16:12:03 -0600

Illinois courts have held that fraud consists of anything calculated to deceive, including positive acts, omissions, concealment, breach of legal or equitable duty, and breach of a trust or confidence. Rybak v. Provenzale, 181 Ill.App.3d 884, 899 (2d Dist. 1989). The basic concept of fraud is founded on conduct calculated to deceive. Illinois Jurisprudence, Personal Injury and Torts § 13:01. Fraud has been said to comprise anything calculated to deceive and may consist of a single act, a single suppression of truth, suggestion of falsity, or direct falsehood, innuendo, look, or gesture. Id. A fraudulent misrepresentation may consist of actions, words, or other conduct that constitutes a statement of fact. Id. A representation is fraudulent when, to the knowledge or belief of its utterer, it is false in the sense in which it is intended to be understood by the recipient. Miller v. Lockport Realty Group, Inc., 377 Ill.App.3d 369, 377 (1 Dist. 2007).

Litigators, Walid J. Tamari and Grant Blumenthal, are co-chairs of the firm's commercial litigation practice group.

Illinois Courts Hold That An Opinion Does Not Constitute Actionable Fraud

Mon, 02 Feb 2009 17:15:10 -0600

Generally, Illinois courts require a false representation relating to a matter of fact, rather than opinions, to establish a cause of action for fraud. Illinois Jurisprudence, Personal Injury and Torts § 13:06. Opinions are usually matters of judgment, estimates, and guesses, and a person relies on such at his or her own risk. Id. As a general rule, Illinois law will not support a claim for fraud predicated on an opinion. Schrager v. North Community Bank, 328 Ill.App.3d 696, 704 (1st Dist. 2002).

However, an exception exists where the circumstances suggest that a plaintiff may have justifiably relied on the opinion as though it was a statement of fact. Schrager, 328 Ill.App.3d at 704. A statement that appears to be an opinion when standing alone, may in fact be a statement of fact for purposes of fraud when evaluated in context and in light of all the facts and circumstances of a case. Illinois Jurisprudence, Personal Injury and Torts § 13:06. Illinois courts consider the following factors to help determine whether a statement is one of fact or opinion: the sophistication of the parties; the accessibility of outside information; and whether the speaker has held himself or herself out to have special knowledge. Id.

Wherever a party states a matter which might otherwise be only an opinion, but does not state it as the expression of his own opinion, but as an affirmative fact material to the transaction, the statement clearly becomes an affirmation of the fact within the meaning of the rule against fraud. Schrager, 328 Ill.App.3d at 704. Therefore, the First District Illinois Appellate Court held that the general rule of analyzing whether a statement is one of fact or opinion is that it is the sense in which the statement is reasonably understood, not the form of the statement which is important or controlling. Id. Whether a statement is one of fact or of opinion depends on all the facts and circumstances of a particular case. Illinois Jurisprudence, Personal Injury and Torts § 13:06.

Illinois Courts Hold Actual Malice is Required to Sustain a Cause of Action for False Light Invasion of Privacy

Thu, 29 Jan 2009 18:22:39 -0600

The Illinois First District Appellate Court held that to state a cause of action for false light invasion of privacy, the plaintiff must prove that: (1) the plaintiff was placed in a false light before the public as a result of the defendant's actions; (2) the false light in which the plaintiff was placed would be highly offensive to a reasonable person; and (3) the defendant acted with actual malice, that is, with knowledge that the statements were false or with reckless disregard for whether the statements were true or false. Brennan v. Kadner, 351 Ill.App.3d 963, 971 (1st Dist. 2004).

For purposes of establishing a cause of action for false light invasion of privacy, Illinois courts have adopted the “actual malice ” rule. Dubinsky v. United Airlines Master Executive Council, 303 Ill.App.3d 317, 330 (1st Dist. 1999). Actual malice has been defined by the Illinois Supreme Court as “knowledge that the statements made by a defendant were false or that such statements were made with reckless disregard as to their truth or falsity.” Poulos v. Lutheran Social Services of Illinois, Inc., 312 Ill.App.3d 731, 741 (1st Dist. 2000). To sustain a cause of action for false light invasion of privacy, the plaintiff must prove actual malice by clear and convincing evidence. Illinois Jurisprudence, Personal Injury and Torts § 17:48.

Furthermore, the actual malice requirement is premised on the nature of the false light tort as involving intentional wrongdoing and outrageous conduct. Illinois Jurisprudence, Personal Injury and Torts § 17:48. Thus, in false light invasion of privacy cases, it is not necessary to determine whether the plaintiff is a private or public figure, as is required in some defamation cases, because actual malice must be proven regardless of whether the plaintiff is a private or public figure. Id.

Illinois Courts Have Held That Statements Concerning Future Intent And Future Conduct Are Not Actionable As Fraud

Tue, 30 Dec 2008 09:53:33 -0600

Illinois courts have held that statements concerning future intent or conduct are not actionable as fraud. Illinois Non-Profit Risk Management Ass'n v. Human Service Center of Southern Metro-East, 378 Ill.App.3d 713, 723 (4th Dist. 2008). In most cases, a defendant must make representations about past or existing facts in order to create actionable fraud. Illinois Jurisprudence, Personal Injury and Torts § 13:08. Generally, representations or predictions about intention or future conduct are not actionable as fraud. Id. Illinois courts have held that a promise to do something in the future, generally, will not constitute actionable fraud, even if made with the intention not to perform. Id.

However, there is an exception that exists where Illinois courts have found fraud in future promises. Chatham Surgicore, Ltd. v. Health Care Service Corp., 356 Ill.App.3d 795, 804 (1st Dist. 2005). A promise to perform an act in the future made by one who intends not to perform does not constitute actionable fraud, unless the false promise of future performance is part of a scheme or device to defraud another. Id. In order to comprise fraud, the promise must be part of a scheme to commit fraud, or a fraudulent device. Illinois Jurisprudence, Personal Injury and Torts § 13:08. Illinois courts warn that it is difficult to distinguish between a promise made with an intent not to perform, and one made as part of a pre-existing fraudulent scheme. Id. Proof of the fraud scheme exception to the general rule for future promises requires a statement made with an intent to induce reliance and actual reliance. Id.