Chicago Business Litigation Lawyer Blog

Trademark Dispute Between Naperville Small Business and National Corporation Can Proceed

October 16, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

In a business trademark dispute, the Seventh Circuit has ruled that large auto parts retailer AutoZone may proceed with its trademark infringement lawsuit against a two-store automotive services business in Naperville and Wheaton, Illinois, called Oil Zone and Wash Zone. AutoZone, Inc. v. Michael Strick, No. 07-2136 (7th. Cir. Sept. 11, 2008).

AutoZone sells auto parts and products, and has been well-known in the Chicago area since the early 1990s, according to the opinion. In that decade, defendant Michael Strick opened his Oil Zone stores outside Chicago, in Wheaton and Naperville. These stores sold automotive services such as oil changes, not parts or products; the Naperville location also offered car washes under the name “Wash Zone.”

AutoZone learned of Strick’s businesses in 1998, but did not contact him until sending a letter in February of 2003. It filed a lawsuit against Strick and his businesses near the end of that year, alleging service mark, trademark and trade name infringement and trademark dilution under the federal Lanham Act, federal unfair competition law, the Illinois Trademark Registration and Protection Act and Illinois common law. Both sides sought summary judgment, which was granted to Strick only, on his claim that there was no reasonable likelihood of confusion between his trademark and AutoZone’s. Strick’s defense of laches — that AutoZone had waited too long to sue — was not addressed. AutoZone appealed on the likelihood of confusion issue.

Protect Yourself from Abusive Bill Collectors With the Fair Debt Collection Practices Act

October 14, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

We have watched with dismay as report after report rolls in with bad financial news. Just like other Americans, many individuals and families here in the Chicago area are having more trouble making ends meet right now and may be at risk of losing their homes. Because our consumer rights and debt collection abuse prevention lawyers handle consumer litigation in Chicago, Oak Brook, Naperville and other parts of Illinois, we are particularly concerned about unfair and abusive practices by bill collectors, who many people may be hearing from more and more these days. Many consumers don’t realize it, but we are actually protected under federal law from some of the worst excesses of collection agencies by the Fair Debt Collection Practices Act.

The FDCPA prohibits abusive and deceptive conduct by companies that collect debts. This covers a wide variety of practices, including misleading statements and outright lies, threats, abusive or foul language, attempts to embarrass the consumer publicly, bypassing the consumer’s lawyer and tacking on fees or interest the consumer never agreed to. Under the law, debt collectors may not harass you with repeated unnecessary phone calls, call you names, use a raised voice or curse words, or call you at work after you’ve explained in writing that your employer does not allow it. If they threaten lawsuits, wage garnishments or other legal actions, those actions must be possible and they must follow through.

In addition, the law requires debt collectors to follow certain rules, including:

Fallen Investment Bank Socked With Fair Debt Collection Practices Lawsuit

October 13, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Given all of the more recent high-profile financial failures, it might be easy to forget the fall of Bear Stearns, the first investment bank to go down in our current economic downturn. But we were interested to read recently that the firm recently settled charges that it violated the Fair Debt Collection Practices Act, a federal law our Chicago, Naperville and Oak Brook debt collection abuse prevention lawyers work with often in our Chicago consumer rights litigation practice. According to the Chicago Tribune, Bear Stearns and its mortgage debt collection subsidiary, EMC Mortgage, settled multiple FDCPA charges with the Federal Trade Commission for $28 million in September, and also agreed to change its loan servicing policies.

As with so much other economic news in 2008, the problem started with subprime and other non-standard mortgages. Bear Stearns was heavily invested in these (by buying them from the original lenders), a choice that is largely blamed for its failure. EMC serviced those mortgages, and according to the FTC, committed multiple violations of the FDCPA in its dealings with mortgage holders. The FTC complaint charged EMC with failing to check into the information provided by the original lenders on the mortgages, which led to incorrect charges and incorrect reports to credit bureaus that hurt the homeowners’ credit. EMC was also charged with:

• Charging fees homeowners never authorized, including a $500 fee for “loan modification”

Our Chicago, Aurora and Joliet Class Action and Consumer Rights Attorneys Can File Suit to End Debt Collector Abuse

October 12, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

With our economy on the scids, debt collection abuse is on the rise. You can contact our Chicago area debt collection abuse prevention attorneys for a free consultation to advise you if you can stop debt collection abuse by filing suit. You can click here to see a copy of the Fair Debt Collection Practices Act, the federal law which prohibits debt collection abuse.

The FTC offers the following advice on preventing Debt Collector Harassment:

Fair Debt Collection

Marketing Fraud Costs Pharmaceutical Maker $62 Million for Settlement

October 10, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Illinois Attorney General Lisa Madigan and 32 other states’ attorneys general scored a victory for consumers Oct. 7 when they reached a $62 million settlement with drug maker Eli Lilly over claims of unfair and deceptive marketing. The Associated Press reported that states sued Lilly for marketing its drug Zyprexa for off-label uses not approved by the Food and Drug Administration. They also alleged that Lilly failed to fully disclose the drug’s side effects to doctors and patients. In announcing the settlement, Madigan’s office reported that Illinois will receive about $3.6 million.

Zyprexa (olanzapine) is an antipsychotic approved for patients with schizophrenia and manic depression. The FDA gives doctors the discretion to prescribe drugs for off-label uses, but requires that drug makers market their drugs only for the approved uses. According to the multi-state lawsuit, Lilly actively promoted the drug’s use for dementia in elderly patients, in children and in high doses, even though none of those uses are FDA-approved. In fact, one side effect of Zyprexa is an increased risk of death in elderly patients with dementia — the drug’s label carries a “black box” warning, the strongest warning possible in the U.S. Other side effects of Zyprexa include weight gain, diabetes, hyperglycemia and cardiovascular problems. Some of these side effects are the subjects of separate consumer protection lawsuits around the United States.

As consumer lawyers who handle health care fraud and deceptive advertising cases throughout the Chicago area, we are extremely interested in this consumer protection litigation. The dollar amount in this case is very large — though it could be larger, especially if claims about Zyprexa’s side effects are true. But more important even than the money are the non-financial terms of the settlement. Eli Lilly agreed to stop all off-label promotions for Zyprexa and to give its medical staff — not its marketing department — the final decision on all medical references and letters about the drug. It also cannot give samples of the drug to doctors and other medical practitioners who do not handle schizophrenia or manic depression.

Using Forensic Accountants and Certified Fraud Examiners in Shareholder, Business, Divorce and Commerical Litigation

July 23, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

As Chicago business, shareholder rights and commercial law litigators, we frequently handle cases involving allegations of business fraud or financial mismanagement, often as part of complex business dispute, that require significant expertise in financial issues. When handling a divorce involving a family business or other closely held company, we also sometimes find we need an expert’s help properly valuing the business, so we can help our clients get the most equitable possible distribution of marital property.

Our Chicago, Oak Brook, Wheaton and Naperville business trial attorneys have handled many complex business and commecial law litigation matters which have involved presenting or cross-examining accounting witnesses.

While we’re confident in our legal skills, these situations call for specialized financial skills. To give our clients the best possible representation in business, shareholder and other commercial disputes, we sometimes retain a forensic accountant or fraud examiner. Both of these jobs are twofold: They help attorneys and their clients understand the complex financial aspects of their cases, and they may also be called to testify as expert witnesses. A forensic accountant’s job is to examine a person or corporation’s accounts “cold,” from the outside; the subject isn’t generally expected to cooperate. Similarly, a fraud examiner delves deep into a company’s finances, looking for the source of anything that seems inconsistent or suspicious. Both can serve as expert witnesses who help establish the value of a business or testify to the existence of fraud.

Shareholders Cannot Sue Bank One Officers, Appeals Court Decides

July 22, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

In a shareholder derivative action related to 2004’s merger between Bank One and J.P. Morgan Chase, the Illinois First District Court of Appeal upheld the dismissal with prejudice of a complaint filed by Bank One shareholders. Shaper v. Bryan, No. 1-05-3849 (March 8, 2007).

The dispute grew out of the high-profile merger of Bank One with J.P. Morgan Chase. As part of the deal, J.P. Morgan agreed to issue stock to each Bank One shareholder worth 14% more than the Bank One shares’ closing price on the day of the merger. In other words, Bank One shareholders received extra value as part of the deal. Bank One CEO James Dimon would serve as president and COO of J.P. Morgan Chase for two years, after which he would take over for the existing CEO. These two men negotiated both the premium and the succession plan themselves.

Media reports soon appeared, suggesting that Bank One shareholders could have gotten a much larger premium from another company or through another negotiator. The media also reported that Dimon was eager to move to New York and take over as the leader of J.P. Morgan Chase, offering to do the deal for no premium at all if he could start as CEO without waiting the two years.

Will Executor’s Bad Faith Trumps Shareholder Stock Redemption Agreement By Decedent

July 21, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

In a shareholder and breach of fiduciary duty dispute arising from a probate case involving a closely held corporation with two shareholders, the Illinois Third District Court of Appeal has ruled that a shareholder agreement made by a decedent does not allow the remaining shareholder to execute the decedent’s will in bad faith. In re Estate of Talty, No. 3–06–0669 (Oct. 29, 2007).

Thomas Talty owned 50% of a closely held corporation (an auto dealership in Morris, Illinois), with his brother William Talty. They each also owned half of the land the dealership was built on, and had an interest in half of an adjoining parcel of land owned by a land trust. Thomas wrote a will in 2000 naming William as executor and naming Thomas’s wife, Helen Talty, as sole residual beneficiary of the estate.

The will gave William the right to purchase Thomas’s shares of the dealership from his estate, but required that the purchase price be determined by an independent appraiser appointed by the probate court. Similarly, it gave William the right to purchase Thomas’s half of the land, but at fair market value set by an independent appraiser approved by the probate court. Separately, in 2001, William and Thomas made a corporate agreement allowing their company to buy the shares of any deceased shareholder. It specified that the fair market value of the shares should be determined by an accountant agreed on by the company and the decedent’s representative, or, if they couldn’t agree, appointed by the probate court.

Shareholder May Withdraw Complaint, Appeals Court Rules in Corporate Dispute

July 18, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

A minority shareholder may withdraw his complaint under the Illinois Business Corporation Act of 1983, because the majority shareholder failed to meet requirements of that law, the Illinois Third District Court of Appeal ruled in an Illinois shareholder dispute lawsuit. Lohr v. Havens, 3-06-0930 (Nov. 11, 2007).

Charles Lohr owned a large minority of the stock in Phoenix Paper Products, Inc., a closely held private corporation in Illinois. He and another shareholder, James Durham, became concerned about possible financial mismanagement by the majority shareholder and president, Terry Havens, and their accountant, Samuel Morris. In months of correspondence, they accused Havens and Morris of taking unspecified inappropriate actions without shareholder approval.

This culminated in a 2003 lawsuit by Lohr alleging that Havens and Morris were misusing the company’s resources and acting illegally. Count I of the suit asked the court to either order a buyout of all Lohr’s stock or dissolve the company. Havens filed a timely election to buy Lohr’s shares, but Lohr accused Havens of illegally doing this without shareholder approval. After two years of discovery, Lohr asked to withdraw Count I and its associated demands, but Havens objected. The trial court found that because Havens hadn’t notified shareholders about the election, it was invalid, allowing Lohr to dismiss Count I of his complaint. Havens appealed.

LLC Members Owe Company, Manager No Fiduciary Duty, Appeals Court Rules

July 17, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Only managers in manager-operated limited liability corporations have a fiduciary duty to the company or to other members, the First District Court of Appeal ruled in a usurpation of corporate opportunity lawsuit involving a closely held LLC. Katris v. Carroll, No. 1-04-3639 (Dec. 23, 2005).

Peter Katris was one of four members/officers and two managers of an Illinois limited liability corporation, Viper Execution Systems LLC. Viper LLC was formed to market a type of options-related software, also called Viper, written by LLC member Stephen Doherty for member Lester Szlendak. Its articles of organization specified that management was vested in Katris and the other manager, William Hamburg.

Defendant Patrick Carroll employed Doherty before and during the organization, and defendant Ernst & Company later hired Doherty to work with Carroll. Their work included the writing of another software program, WWOW, which Katris believed was functionally similar to Viper. Five years after the organization, Katris sued Carroll and Ernst for collusion and usurpation of corporate opportunity because of WWOW’s similarity to Viper. (He also sued Doherty for collusion and breach of fiduciary duty, claims they later settled.)