Chicago Business Litigation Lawyer Blog

Fifth District Allows Non-Compete Lawsuit by Madison County Doctors to Go Forward

November 11, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Illinois covenant not to compete attorneys were interested to see a ruling in a long-running contract dispute between three Madison County doctors. The Fifth District Court of Appeals has given a green light to a lawsuit over a covenant not to compete. The Madison St. Clair Record reported July 1 that the court allowed Dr. Tina Gingrich to pursue a non-compete lawsuit against her former business partner, Dr. Christina Midkiff. At issue is a covenant in the stock purchase agreement of their former corporation, Tina M. F. Gingrich, M.D., P.C., doing business as Maryville Women’s Center, an ob-gyn practice. The covenant said Midkiff and a third partner, Dr. Marlene Freeman, were not permitted to open a competing ob-gyn practice within 20 miles of Maryville Women’s Center for five years.

The underlying facts are complicated. Midkiff and Freeman joined Gingrich’s practice in the late 1990s, entering into a stock purchase agreement that gave them one-third of the shares each. That agreement also contained the covenant not to compete at issue here, as well as a provision giving Gingrich veto power. The three doctors later disagreed over issues not specified, and in 2002, Midkiff and Freeman sued Gingrich for several causes of action, including shareholder relief and a declaratory judgment that the covenant not to compete was unenforceable. Gingrich countersued and later filed a notice of stock sale offering to buy out the shares owned by the other two. That offer used a formula rather than a dollar amount to determine what she would pay for the shares. For that reason, the trial court granted a motion to strike her notice.

Gingrich filed an interlocutory appeal, and the resulting 2005 Fifth District opinion established that a formula is a valid way to offer to buy stock under the Business Corporations Act. The case was sent back to trial court, but before the court could complete its bench trial, Midkiff and Freeman sold Gingrich their shares. Midkiff started her own practice in Maryville on the first day of 2007, bringing her staff from the Maryville Women’s Center. Later that January, the trial court determined how much Gingrich should pay for Midkiff’s shares. It also refused to enforce the covenant not to compete against Midkiff, as to work she had done at a local hospital. Shortly afterward, Gingrich filed the instant lawsuit, seeking to enforce the covenant not to compete as to both the hospital and Midkiff’s new office in Maryville. The trial court dismissed the case, saying the issue had already been decided, and Gingrich appealed to the Fifth District again.

According to the Record, the Fifth District reversed that trial court ruling in June. For the majority, Justice Wexstten wrote that Gingrich’s breach of contract claim had not been decided in the prior suit, which he said had to do with the valuation of the stock shares Gingrich was trying to purchase. The decision did not enforce the non-compete clause, and in fact, the justices specifically said they made no ruling as to whether the clause was reasonable. Instead, their ruling sends the case back down to the trial court for a decision.

Best Websites on the Internet for Class Action and Consumer Law Issues — “Can My Boss Do That” Website Spells Out Worker Employment Rights in Plain English

November 11, 2010 | Peter S. Lubin and Patrick Austermuehle

The website Can My Boss Do That sets down in plain english your rights as an employee. The website has a great section on http://www.canmybossdothat.com/category.php?id=6. It explains when you are entitled to get paid.

This website is a great resource for finding out your legal rights as a employee.

AT&T Case Heard By Supreme Court and Most Media Outlets Predict Consumer Victory Based on State’s Rights Principles

November 11, 2010 | Peter S. Lubin and Patrick Austermuehle

Slate published an excellent article handicapping that the Supreme Court in the AT&T case will vote in favor of consumer class actions continuing. The article explains in in plain English what is at stake in the case and the arcane legal issues on which the decision will turn. You can view the entire article by clicking here. This article like most of those written by the major newspapers, media outlets and blogs, such as the Wall Street Journal, New York Times, ADR Blog, predicts a consumer victory based on deference to state’s rights and California’s right to invalidate an unconscionable class action ban in an arbitration agreement.

The Slate article states:

In plain English, the Supreme Court needs to decide whether Corporate America can make ordinary slobs like us, who sign take-it-or-leave-it contracts, give up our right to file class-action suits. And in case you’re wondering why class-action suits matter to us ordinary slobs, consider this: Not a lot of lawyers are willing to take on AT&T for $30.32. Sometimes the only way to police misconduct—particularly small differentials in pay (based on, say, race or gender) or itsy bitsy fraudulent representations—is by pooling litigants together and suing together as a class.

Nursing Home Cannot Compel Arbitration Under Unclear Contract, Third District Rules

November 10, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Illinois arbitration attorneys noted an appellate decision reminding parties to arbitration contracts to ensure that their language is clear as to what exactly should be arbitrated. In Peterson v. Residential Alternatives of Illinois, No. 3-09-0743 (Ill. 3rd June 7, 2010), Rachel Peterson, as the administrator of the estate of Jacob H. Terhorst, sued Terhorst’s former nursing home. Terhorst died at a home run by Residential Alternatives of Illinois, and the estate had sued the nursing home company for wrongful death and violations of the Illinois Nursing Home Care Act. The home succeeded in compelling arbitration at the trial court level, but the Third District Court of Appeal reversed, saying the language of the arbitration agreement was unclear.

Terhorst was 92 when he entered Hawthorne Manor in Peoria. He was a resident from Nov. 29, 2006 to June 2, 2007, the day of his death. On Jan. 7, 2009, his estate’s executor, Ann Bonono, filed a lawsuit against Hawthorne Manor’s parent company, Residential Alternatives. That claim alleged that Residential Alternatives failed to provide adequate care to Terhorst and neglected and abused him, resulting in injuries, pain, mental anguish, financial costs and eventually, his death. It sought more than $100,000 for wrongful death and violations of the Nursing Home Care Act. The defendant filed an answer to plaintiff’s complaint.

But less than a month later, the defendant also moved to dismiss the claim and compel arbitration. In support, it included a contract and a separate arbitration agreement, both dated Nov. 29, 2006 and signed by legal representatives for the company and for Terhorst. Neither document mentioned the other, and the contract indicated that it contained seven pages, all seven of which were the contract itself. The arbitration agreement stated that “any and all disputes arising hereunder shall be submitted to binding arbitration and not to a court for determination.” The next paragraph stated that in the event that a dispute was determined not covered by the agreement, the parties agreed that the dispute should be heard by a judge rather than a jury, and that the prevailing party had the right to recover its costs.

In response to the defendant’s motion to compel arbitration, the plaintiff argued that no enforceable agreement existed; that the defendant had waived its right to arbitration by answering the complaint; and that Illinois public policy is against waiving any rights under the Nursing Home Care Act. Ultimately, the trial court agreed with the defendant that the arbitration agreement controlled the dispute and sent the case to arbitration. This appeal followed. During its pendency, plaintiff Rachel Peterson was granted leave to replace plaintiff Ann Bonomo.

On appeal, the plaintiff argued that the arbitration agreement was unenforceable; that it was void pursuant to the Act, caselaw and public policy; that the defendant had waived its rights; and that the wrongful death claim should not be arbitrated because its plaintiffs were not parties to the agreement. The Third noted that there was no dispute over the contract. However, the defendant argued that it and the arbitration agreement should be considered one unified document, whereas the plaintiff argued that they should be considered separate documents.

Caselaw shows that some courts have chosen to interpret separate documents executed on the same day by the same people as the same document, the court noted. However, it said, these were documents that referred to or expressly incorporated other documents. Furthermore, the court said, it is well established in Illinois law that parties may not incorporate one agreement into another without expressly indicating an intention to do so, and there is a presumption against interpreting contracts in a way that adds conditions that could easily have been explicitly added in writing. In this case, the Third said, the parties could easily have added an arbitration agreement to the contract itself, but they did not — in fact, the seven-page contract states that it is complete within those seven pages. The court found that this choice was deliberate and consistent with case law, so it rejected the argument that both documents should be considered one document.

Next, the Third looked at whether the arbitration agreement itself creates an independent contractual obligation to arbitrate all controversies arising out of the nursing home care. The court concluded that it could not interpret the agreement that way. The agreement called for arbitration with this language: “Without limiting any rights set forth in other provisions of this AGREEMENT, any and all disputes arising hereunder shall be submitted to binding arbitration and not to a court for determination.” This is circular language, the court said, and it does not reference the nursing home care contract at all. A later reference to “any other document signed or initialed in connection with this AGREEMENT” also does not adequately indicate any intention to connect with the contract. For that reason, the court wrote, it cannot agree that the two documents should be treated as one. Thus, the court found that the case should not go to arbitration because the nursing home contract was not subject to the arbitration agreement. The trial court’s decision was reversed.

Federal Arbitration Act Controls Dispute Between Construction Companies, Third District Finds

November 9, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Illinois mediation and arbitration attorneys were interested in a court ruling on the controlling legal authority in a dispute over whether an issue is arbitrable. R.A. Bright Construction Inc. v. Weis Builders Inc., No. 3-09-0910 (Ill. 3rd June 9, 2010) pits construction company Weis Builders against its subcontractor, R.A. Bright Construction. A dispute later arose in which Bright claimed Weis owed it $765,701 under two contracts the parties had signed. Bright sued and Weis moved to dismiss, or alternatives, to compel arbitration. The trial court denied the motion, but two judges from the Third District Court of Appeal reversed that decision under the Federal Arbitration Act. A third dissented, saying the FAA cannot apply because no interstate commerce was involved in the dispute.

Weis, a Minnesota company with offices in four states, was originally hired to build a Wal-Mart in Lockport, Ill. Weis in turn hired Bright to do concrete work for $2.93 million, and later, underground utilities work for $679,567. Neither party alleged fraud or misrepresentation in those contracts. For reasons the opinion does not discuss, Bright alleged that Weis owed it $765,701 on those two contracts, which Weis denied. Bright sued and Weis filed a motion to dismiss and compel arbitration, or alternatively, to stay and compel arbitration, under the Federal Arbitration Act. Before that motion could be heard, Bright filed an amended complaint seeking to enforce a mechanic’s lien against Wal-Mart for the money. The trial court later denied the motion from Weis and this appeal followed.

In its appeal, Weis argued that section 2 of the FAA compels arbitration because the Illinois Supreme Court has found that the FAA mandates judicial enforcement of arbitration agreements “in any … contract evidencing a transaction involving commerce.” Bright disagreed for two reasons. It argued that the FAA does not apply because no interstate commerce was involved in this transaction. And even if it does, Bright said, the clause in question violates the Illinois Building and Construction Contract Act.

The Third started with the issue of whether the contract between Weis and Bright was interstate commerce. The U.S. Supreme Court has found that the FAA preempts state laws hostile to arbitration and is intended to exercise power over interstate commerce to the fullest, the court noted. To interpret this situation, it relied in part on Allied-Bruce Terminix Cos. v. Dobson, 513 U.S.265, 278, 130 L. Ed. 2d 753, 767, 115 S. Ct. 834, 841 (1995), in which the Supreme Court overturned the Alabama Supreme Court on a motion to compel arbitration. In that case, a homeowner was suing a pest control company for inadequate work, and the pest control company argued that the FAA applied because it had a “slight nexus” with interstate commerce. While the work was contracted and performed locally, the companies were multistate and some materials came from out of state.

Despite the intention of the parties to stay local, the Supreme Court wrote, a strict reading of the facts showed that the commerce was in fact interstate. Similarly, the Third wrote, the transaction between Bright and Weis was an interstate transaction in fact. Weis is a multistate corporation and Bright bought some materials from a Wisconsin company. Thus, their contract was interstate commerce within the meaning of the FAA and that law applied.

The Third next disposed of Bright’s argument that the clause violates the Illinois Building and Construction Contract Act, because the FAA allows consideration of contract defenses “upon such grounds as exist at law or in equity for the revocation of any contract.” While this is valid, the court said, a defense based on the Act is not grounds to contest “any contract”; it is grounds only to contest construction and building contracts. It noted that the state Supreme Court had recently made a similar ruling in Carter v. SSC Odin Operating Co., No. 106511 (Il April 15, 2010). Finally, the Third rejected a forum non conveniens defense, saying this is not a general contract defense but a procedural mechanism. Thus, a two-judge majority reversed the trial court and remanded the case with orders to stay and compel arbitration. The dissenter, Justice McDade, disagreed that the contract between Bright and Weis was a transaction involving interstate commerce, and thus argued that the FAA does not apply to this case. “Nothing beyond ‘the multistate nature of one of the parties’ (slip order at 8) demonstrates that the transaction ‘in fact’ involved interstate commerce.”

Video Explaining that an Employer’s Material Breach of an Employment Agreement Can Invalidate a Non-Compete Agreement

November 7, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Chicago non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

Lubin Austermuehle handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommas-Lubin a Chicago business law firm represent both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Based in Oakbrook Terrace and downtown Chicago, our Schaumburg noncompete clause lawyers take cases from Naperville, Keniworth, Aurora, Lake Forest, and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact us through the Internet or call toll-free at 630-333-0333 today.

Indiana Attorney General Warns About Extended Warranty Fraud

November 7, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Chicago automobile fraud attorneys focus on bringing suit for auto-fraud claims. We recently settled a suit involving purchase of $9,000 used car that was in reality 3 different cars welded together for $100,000. Our fees come from the recovery and we only get paid if we win or settle your case. We have has similar large six figure or near six figure settlements for clients who purchased certified used cars that in fact were rebuilt wrecks.

If you believe you purchased a motorcycle, car, rv or other product that is a lemon, have been a victim of auto fraud, auto dealer fraud, auto repair fraud or have been deceived into buying a flood car, rebuilt wreck or salvage vechicle Lubin Austermuehle may be able to help rectify the problem. We or experienced co-counsel are prepared to file suit in the right case in the Chicago area or anywhere in the country. For a free consultation on your rights as an employee, contact us today.

Our Auto Dealer Fraud, Auto Repair Fraud Auto Fraud, RV Fraud, Motorcycle Fraud and Boat Fraud private law firm and our affliated co-counsel handle individual and class action consumer rights, lemon law, and autofraud lawsuits that government agencies and public interest law firms may decide not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. Lubin Austermuehle is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to employee and consumer fraud and rip-offs, and in the right case filing employee or consumer protection lawsuits and class-actions you too can help ensure that consumers’ rights are protected from unscrupulous, illegal or dishonest practices.

Video on Extended Warranty Fraud

November 7, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Chicago lemon law attorneys focus on bringing suit for auto-fraud claims. We recently settled a suit involving purchase of $9,000 used car that was in reality 3 different cars welded together for $100,000. Our fees come from the recovery and we only get paid if we win or settle your case. We have has similar large six figure or near six figure settlements for clients who purchased certified used cars that in fact were rebuilt wrecks.

If you believe you purchased a motorcycle, car, rv or other product that is a lemon, have been a victim of auto fraud, auto dealer fraud, auto repair fraud or have been deceived into buying a flood car, rebuilt wreck or salvage vechicle Lubin Austermuehle may be able to help rectify the problem. We or experienced co-counsel are prepared to file suit in the right case in the Chicago area or anywhere in the country. For a free consultation on your rights as an employee, contact us today.

Our Auto Dealer Fraud, Auto Repair Fraud Auto Fraud, RV Fraud, Motorcycle Fraud and Boat Fraud private law firm and our affliated co-counsel handle individual and class action consumer rights, lemon law, and autofraud lawsuits that government agencies and public interest law firms may decide not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. Lubin Austermuehle is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to employee and consumer fraud and rip-offs, and in the right case filing employee or consumer protection lawsuits and class-actions you too can help ensure that consumers’ rights are protected from unscrupulous, illegal or dishonest practices.

LA Time’s Opinion Piece on Upcoming Supreme Court Case Which Could End Most Consumer Class Actions

November 5, 2010 | Peter S. Lubin and Patrick Austermuehle

A thoughtful opinion piece appeared in the LA Times on the upcoming oral argument before the Supreme Court in the case which will decide if corporations can take away consumers’ rights to file class actions through take it or leave it form contracts.

The opinion piece which appeared in the LA Times states in part:

“The marketplace is fairer for consumers and workers because there’s a deterrent out there,” said Deepak Gupta, an attorney for the advocacy group Public Citizen who will argue on consumers’ behalf before the Supreme Court on Tuesday.

Second District Voids Contractor’s Arbitration Clause Because Homeowners Never Signed It

November 3, 2010 | Peter S. Lubin and Patrick Austermuehle

Our Illinois consumer protection attorneys were pleased to see a recent victory in an Illinois appeals court for consumers concerned about the effects of mandatory binding arbitration. In Artisan Design Build, Inc. v. Bilstrom, No. 2-08-0855 (Ill. 2nd Sept. 22, 2009), David and Jody Bilstrom of Hinsdale, Ill., hired Artisan Design Build of Wisconsin to remodel their home. Their contract provided, among other things, an arbitration clause saying disputes “shall be subject to and decided by mediation or arbitration.” The repairs required eight changes to the original contract, significantly increasing the overall price of the work. The Bilstroms paid the first six bills, but refused to pay the seventh despite multiple requests. On Sept. 20, 2006, they locked Artisan out of the project and told it they had hired someone else to finish the job. Artisan claimed they owed $208,695.69.

In April of 2008, Artisan sued the Bilstroms to foreclose its mechanic’s lien; for breach of contract; and for unjust enrichment. The Bilstroms filed a motion to dismiss, claiming Artisan had violated the Illinois Home Repair and Remodeling Act by failing to finish its work within the contracted time; failing to carry insurance; and failing to provide them with a consumer rights pamphlet. The parties continued the case several times while they tried without success to reach a settlement. When that proved fruitless, Artisan filed a complaint with the American Arbitration Association. The Bilstroms moved to stay the arbitration, saying Artisan had voided that part of the contract by suing first, and by violating the Home Repair and Remodeling Act. The trial court agreed with them, prompting an amended complaint from Artisan. The trial court dismissed that and Artisan appealed, arguing that it did not violate the Act or waive the arbitration clause.

On appeal, the Second District first considered whether Artisan had violated the Act by failing to furnish a consumer rights pamphlet. The Bilstroms had argued that the Act’s language makes any violation an unlawful act that nullifies the contract. Artisan countered that the Act does not require courts to dismiss an otherwise valid claim just because a contractor fails to provide the pamphlet. The appeals court agreed, finding that the plain language of the Act provides no remedy other than a Consumer Fraud Act lawsuit. Furthermore, the court wrote, the legislature could not possibly have intended to allow consumers to void contracts for failure to provide the pamphlet, because allowing this would allow consumers to essentially steal from contractors. Thus, the appeals court found that the trial court was wrong to dismiss Artisan’s amended complaint.

Artisan had less luck on the question of whether it had waived its right to arbitration by filing a lawsuit first. Section 15.1 of the Act also requires contractors to advise clients of binding arbitration and waiver of jury trial clauses, which consumers should be able to reject or accept.

Failure to advise, or to obtain acceptance, explicitly voids the clause. Artisan clearly failed to do so in this case, the Second District wrote, because there are no signatures or “accept” or “reject” notations in the appropriate place on the contract. This argument does not reach the issue of whether Artisan waived its right to binding arbitration, the court said, but it can affirm on any grounds in the record. It did affirm the trial court’s decision on the arbitration clause, and remanded the case for further proceedings on Artisan’s amended complaint.