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Directors of a corporation owe fiduciary duties to the shareholders of the company. This means that when directors communicate with shareholders about the company, they have a fiduciary duty to exercise due care, good faith and loyalty. Directors can be held personally liable if they intentionally or recklessly mislead shareholders about the business or condition of the corporation. A Delaware Chancery Court recently dismissed a suit filed against the directors of GoPro, Inc. by a group of disgruntled shareholders who alleged that the directors misled them by issuing overly optimistic revenue guidance that the company was unable to live up to.

In 2016, GoPro, the camera manufacturer, had plans to roll out several new products to the market including a premium drone equipped with the latest GoPro cameras and a new wearable camera that has become ubiquitous among outdoor enthusiasts and influencers around the globe. GoPro’s board of directors issued revenue guidance for 2016 based on projected sales of both products. The revenue forecasts were generally positive. Continue reading ›

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Minority shareholders in closely held businesses generally lack the ability to control the actions of a company which makes them vulnerable to oppression from the controlling shareholder or shareholders. Minority shareholder oppression claims frequently include allegations that the controlling shareholders have funneled company money or resources to themselves and attempted to hide the misconduct by excluding minority shareholders from accessing books and records. Minority shareholders in Illinois are not without recourse, however, as they have a statutory right to examine the corporation’s books and records. As the First District appellate court recently reminded us, the right to examine corporate books and records demands compliance with certain technical requirements.

The case, Elleby v. Forest Alarm Service, Inc., was filed by a minority shareholder, Ruth Elleby, who owned a 33.5% interest in Forest Alarm Service, Inc. which the complaint described as a family-owned, closed corporation. In addition to Elleby, Forest had three other shareholders: Linda Lichtenauer, Mark Coyle, and Ron Lyngen who owned 33.5%, 16.5%, and 16.5% of Forest, respectively. Coyle was the President and Secretary of Forest in addition to being a shareholder. Continue reading ›

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Last year we witnessed the filing of a first of its kind putative class-action lawsuit claiming that gift cards that did not contain Braille violated the Americans with Disabilities Act (ADA) along with similar state and local laws. Within weeks, more than 240 nearly identical complaints had been filed against a multitude of retailers and restaurant chains in New York. Recently, a federal judge issued the first opinions in these gift card cases dismissing the plaintiffs’ claims. While the court granted the plaintiffs the ability to amend their complaints, it is unclear how they will be able to successfully retool the complaints given that the opinions soundly rejected the plaintiffs’ theories of liability.

The court’s first opinion came in a case captioned Dominguez v. Banana Republic LLC. In the following days, the same judge released similar opinions dismissing six additional Braille gift card lawsuits before him on the same grounds. The factual circumstances in the seven cases are similar. In each case, the plaintiffs alleged that they called the defendant and asked whether the defendant’s gift cards contained the information printed on the cards in Braille. After the defendant responded that the gift cards did not contain Braille, the plaintiffs filed suit alleging violations of the ADA and various state and local laws. Each case was filed as a putative class action on behalf of the named plaintiff and a nationwide class of similarly situated blind individuals. Continue reading ›

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As we previously discussed here, the Virginia legislature was considering a bill earlier this year that would limit the use of non-compete agreements with certain categories of employees. Earlier this month, Virginia’s governor signed a series of new employment laws including one that bans using covenants not to compete with “low-wage” employees. The law takes effect July 1, 2020, but does not apply retroactively.

The new law provides that “[n]o employer shall enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee.” It defines a “covenant not to compete” as “a covenant or agreement, including a provision of a contract of employment, between an employer and employee that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer.” Importantly, the statute clarifies that non-compete agreements “shall not restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.” Continue reading ›

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A couple of weeks ago, President Donald Trump made history as the first sitting president to file a defamation lawsuit against a media outlet. President Trump’s reelection campaign filed a lawsuit in New York state court alleging that The New York Times published defamatory statements in a 2019 opinion editorial concerning claims of a quid pro quo between Russia and then-candidate Trump’s 2016 campaign. Suits like this involving protected political speech are nearly impossible to win.

The article, entitled “The Real Trump-Russia Quid Pro Quo,” was written by a former New York Times executive editor. The article concluded that the Trump campaign and Russian officials “had an overarching deal: the quid of help in the campaign against Hillary Clinton for the quo of a new pro-Russian foreign policy.” According to the complaint, this conclusion “is false” and “knowing it would misinform and mislead its own readers,” The New York Times made the decision to publish the piece anyways.

The President’s campaign alleges that the purportedly defamatory article fails to offer any proof of its claim of a quid pro quo. Instead, the complaint alleges, the article “selectively refers to previously-reported contacts between a Russian lawyer and persons connected with the [President’s 2016] Campaign” and insinuates that “these contacts must have resulted in a quid pro quo or a deal.” Moreover, the complaint goes on to allege that the article failed to “acknowledge that, in fact, there had been extensive reporting, including in The [New York] Times, that the meetings and contacts . . . did not result in any quid pro quo or deal between the Campaign and Russia, or anyone connected with either of them.” Continue reading ›

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ATTENTION BUSINESS OWNERS: we are investigating possible wrongful denials of business interruption insurance claims due to COVID-19. If you would like us to review your policy, feel free to send it along.

With stories of COVID-19, the strain on global healthcare, and social distancing dominating headlines, the pandemic’s impact on the owners of small and medium sized businesses is sometimes lost in the shuffle. At the end of the day, business owners are people too. They deal with the same fears and concerns about Coronavirus as everyone else, plus the added anxiety that comes with being responsible for the livelihoods of employees and their families. In a time when many businesses are facing forced closures, a growing number of business owners have filed claims for business interruption coverage under their commercial insurance policies only to have those claims denied.

Business owners who have had their claims for business interruption coverage denied are not without options though. It is important in such instances to seek the assistance of an experienced insurance coverage and bad faith denial attorney who will help you review your policy, consider your options, and, importantly, determine if the insurance company wrongfully denied coverage. An attorney can negotiate on your behalf with the insurance company, and if necessary, file a lawsuit seeking a declaration of coverage and a judgment requiring payment under the policy. Continue reading ›

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President Trump’s reelection campaign has filed its third defamation lawsuit against a major media outlet in less than two weeks. The news organization named in the latest libel suit is CNN. As with the previous lawsuits that we have written about, the claims of defamation stem from statements contained in an opinion piece concerning alleged cooperation between Russia and Trump to assist the latter’s presidential bid.

The lawsuit, filed in the United States District Court for the Northern District of Georgia in Atlanta, accuses CNN of publishing a libelous opinion piece on its website CNN.com in June 2019 the topic of which was Russia’s efforts to influence the United States presidential election in 2016. The author of the piece at issue, entitled “Soliciting dirt on your opponents from a foreign government is a crime. Mueller should have charged Trump campaign officials with it,” is Larry Noble, former general counsel for the Federal Election Commission and an outspoken campaign finance advocate.

The opinion editorial, which at the time of writing is still available on CNN’s website, contains a disclaimer that Noble is a CNN contributor but the commentary is solely his own opinion, though it is unclear whether this disclaimer appeared at the time the piece was originally published. The article focuses first on the 2016 election and laying out a case for Noble’s belief that Special Counsel Robert Mueller’s report did not exonerate President Trump from claims of collusion with Russia in that election. The article then shifts focus to the upcoming election and speculates about what role if any Russia will play in influencing the election. According to the complaint, in discussing the upcoming presidential election, Noble falsely claimed that the President’s reelection campaign “assessed the potential risks and benefits of again seeking Russia’s help in 2020 and has decided to leave that option on the table.”

A large portion of the complaint is dedicated to attempting to establish that CNN acted with actual malice in publishing Noble’s piece. The alleged evidence of this bias spans many pages and paragraphs in the complaint. According to the suit, there is “extensive evidence” that both CNN and Noble “are extremely biased against the Campaign.” Continue reading ›

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A building contractor in Minnesota ordered a specific brand of flameproof lumber from a Chicago distributor of commercial building materials. Unbeknownst to the contractor, the distributor substituted its in-house brand of lumber in the order. The in-house brand of lumber had not been certified to meet the safety standards required by the architect of the buildings and the contractor was later required to rip out the lumber and replace it with new material. The contractor sued the distributor. The distributor’s insurance company then sought a judgment that it was not required to defend the distributor. The district court and the appellate court agreed, finding that the actions of the distributor were not covered under its insurance policy.

Chicago Flameproof is an Illinois-based distributor of commercial building materials, including fire retardant and treated lumber (FRT). Chicago Flameproof maintained general liability insurance through Lexington Insurance Company. Under the policy, Lexington had the right and duty to defend Chicago Flameproof against any suit seeking covered damages, but no duty to defend against any suit seeking uncovered damages.

The policy defined an occurrence as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The policy also defined “property damage” as physical injury to tangible property, including all resulting loss of that property, or loss of use of tangible property that is not physically injured. Chicago Flameproof sold lumber to Minnesota-based residential and commercial contractors JL Schwieters Construction, Inc. and JL Schwieters Building Supply, Inc. Schwieters then contracted with two building contractors, Big-D Construction Midwest, LLC and DLC Residential, LLC to provide labor and material for the framing and paneling for four building projects in Minnesota. The architectural firm on all of the projects, Elness Swenson Graham Architects, Inc. required that FRT lumber meeting the requirements set forth in the International Building Code be used for the exterior walls of each building. Continue reading ›

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A consulting company agreed to perform cost-reduction work for a hospital. The agreement it had with the hospital specified that the hospital could hire the consultancy to perform additional work outside of the scope of the agreement. The hospital did so, hiring the consultancy to prepare an RFP document and negotiate with a potential equipment supplier. After the process was completed, the hospital refused to pay the consultancy for the additional work. The consultancy sued, and the trial court determined that a contract implied in fact existed between the two companies and the hospital was required to pay for the additional work. The appellate panel determined that the trial court had not erred, and it affirmed the decision.

In 2014, Northwest Community Hospital hired ESP Global, an equipment maintenance consultancy company, to assist Northwest in reducing its equipment expenses. Peter Vincer, the president and owner of ESP testified that his company typically assists clients using a two-step approach: first ESP conducts an initial assessment of the client’s equipment service expenditures, and then it recommends cost-reduction strategies accordingly. During the second step, ESP assists the client in implementing the prior recommendation. ESP charges a flat fee for the first step and a contingency for the second step, which is calculated based on the client’s actual savings.

The two parties entered into a contract in June 2014. ESP completed the initial assessment required by the contract in early July 2014, and Northwest paid ESP $10,000. After this, Northwest expressed interest in obtaining additional services from ESP. Specifically, the hospital wanted assistance with a request for proposal that it intended to send to equipment suppliers. The two companies communicated over emailed and agreed to prepare an RFP draft, in exchange for 10% of Northwest’s savings from the RFP over a five-year period. Vincer later sent the RFP draft to Jac Higgins, the interim executive director of Northwest’s supply chain. After Northwest approved the RFP, ESP distributed it to the prospective vendors. Higgins’ employment with Northwest was later terminated. Continue reading ›

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Longtime customers of Allstate Insurance Corporation alleged that Allstate determined they were willing to pay higher prices than new customers with similar risk profiles and started hiking their auto insurance rates as a result. The customers sued Allstate, alleging that Allstate failed to disclose its practice of optimizing rates in this fashion when it filed its rates with the Illinois Department of Insurance. Allstate attempted to have the case dismissed under the filed rate and primary jurisdiction doctrines, but the circuit court denied the motion and the appellate panel affirmed.

Allstate Corporation sells property and casualty insurance, including private passenger automobile insurance, to consumers in Illinois. Several customers who had purchased insurance from Allstate for more than two decades sued Allstate, alleging that Allstate illegally increased prices for their insurance under a practice called “price optimization,” after it determined that longtime customers would be more willing to absorb price hikes than new customers. The plaintiffs alleged that as a result they were charged higher prices than new customers who presented the same risk and that Allstate’s use of price optimization was not disclosed in its rate filings with the Illinois Department of Insurance.

In the trial court, Allstate filed a motion to dismiss the complaint, arguing that the action was barred by the filed rate doctrine and the primary jurisdiction doctrine. Following a hearing, the circuit court denied Allstate’s motion to dismiss. The court determined that Allstate failed to establish that the plaintiffs’ complaint should be dismissed under either the filed rate doctrine or the primary jurisdiction doctrine. The circuit court noted that Illinois is unique in that insurers may select their own rates and merely inform the Illinois Department of Insurance of their selection. The circuit court then granted Allstate’s motion to certify the questions of whether either the filed rate doctrine or the primary jurisdiction doctrine barred plaintiffs’ suit to the appellate court and the appellate court granted interlocutory review. Continue reading ›

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