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As we have written about previously, one of the concerns with purchasing a minority stake in a closely held corporation is the potential for shareholder oppression. This concern is even more relevant when a non-family-member considers buying into a family-owned business. One minority shareholder found this out the hard way when he suffered a backlash after raising concerns about the conduct of the founder and majority shareholder of a closely held Illinois corporation.

In 1962, Kenneth Packer founded Packer Engineering Inc. (“PEI”) and its parent company, The Packer Group, Inc. (“TPG”), in Du Page County. Packer soon grew PEI into a well-respected professional engineering firm. Both PEI and TPG shared a number of the same officers and directors, including Packer who served as the board chairman for both companies.

In 1979, Edward Caulfield was hired by PEI as its director of mechanical engineering. In 2002, Caulfield became president and chief technical officer of PEI. Caulfield was offered a minority equity interest in TPG in addition to his base salary of $500,000. Continue reading ›

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After a tradeshow exhibit vendor was stiffed on the payment of a contract by a middleman, it sued the tool manufacturer to recover its debt. At the same time, it filed a claim in the bankruptcy proceeding of the middleman. The district court ruled that the plaintiff could not pursue a claim against the manufacturer because it had a claim pending in the middleman’s bankruptcy proceeding. The 7th Circuit panel reversed, finding that there was no concept of judicial estoppel where a pending claim in a bankruptcy proceeding barred seeking the collection of a debt from a third party.

TRUMPF, Inc., the U.S. subsidiary of an international business, makes specialty tools such as precision laser cutters. TRUMPF sells many of its products at trade shows. It hired Lynch Exhibits to handle its appearance at the 2017 FABTECH show in Chicago. Lynch then subcontracted with CSI Worldwide to provide some of the necessary services.

CSI contended that it told TRUMPF that it was unsure of Lynch’s reliability. CSI stated that it would do the work only if TRUMPF paid it directly or guaranteed Lynch’s payment. According to CSI, TRUMPF assented. The two entities did not sign any undertaking to that effect. CSI did the work and then billed Lynch. Lynch did not pay. CSI filed an involuntary bankruptcy petition against Lynch, who then filed a voluntary bankruptcy petition. CSI claimed approximately $530,000 as a creditor, and also filed suit against TRUMPF under diversity jurisdiction, seeking $530,000 on theories including unjust enrichment and promissory estoppel. Continue reading ›

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The restaurant industry has long been a notorious boys’ club, full of misogyny and sexual harassment. With men maintaining most of the power in the industry, women didn’t feel like they had a choice other than to put up with the constant groping and harassment from both male staff and patrons, but a new settlement in a New York sexual harassment case might change all that – or at least move the needle in the right direction.

At the end of 2017, the New York Times reported on multiple allegations made by 11 women working at the Spotted Pig in Manhattan that the owner of the restaurant, Ken Friedman, had repeatedly groped and sexually harassed them. The plaintiffs also allege that Friedman fostered a sexist environment in which they constantly felt unsafe and unwelcome and that he retaliated against them when they tried to speak out against the mistreatment.

The New York State attorney general’s office investigated the matter and recently ordered Friedman to pay the 11 plaintiffs a combination of $240,000, to be split among them and paid out over the next two years, as well as 20% of all his profits from the restaurant over the next ten years, including any money he makes off the sale of the restaurant (of which he currently owns 75-80%) if he decides to sell it. The women are unlikely to see any money from his profits since the restaurant has been in the red for a while, but the almost quarter-million-dollar settlement is nothing to sneeze at. Continue reading ›

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Arbitration and the enforceability of arbitration provisions have been hot topics in employment and consumer litigation for a number of years. Over the last decade, the U.S. Supreme Court has issued numerous opinions on the subject as well have a number of state supreme courts. In Shockley v. PrimeLending, 929 F.3d 1012 (8th Cir. 2019), the federal appellate court of the Eighth Circuit recently held that an arbitration provision in an employee handbook was not binding on the employee.

The plaintiff, Jennifer Shockley, was employed by PrimeLending from June 2016 through July 2017. After leaving the company, Shockley filed a collective action lawsuit against PrimeLending in federal court for allegedly violating the Fair Labor Standards Act (FLSA). PrimeLending moved to compel arbitration on the basis that a provision in its employee handbook required all disputes to be decided by binding arbitration. The District Court denied PrimeLending’s motion. On appeal, the Eighth Circuit affirmed.

PrimeLending maintained an intranet accessible by its employees, which contained employment-related information, such as its new hire policies and its employee handbook. The employee handbook contained an arbitration provision which provided:

If the dispute cannot be settled through negotiation, you and the Company agree to attempt in good faith to resolve the covered dispute exclusively through final and binding arbitration in accordance with the terms, conditions, and procedures of this Arbitration Clause. Continue reading ›

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Alison Victoria, a Chicago native and one of the stars of HGTV’s “Windy City Rehab” has said that she wants to take over Chicago and put her stamp on every neighborhood. Whether fellow Chicagoans want that is another matter, and one that is currently being handled (at least in part) in the courts since Victoria and her partner, Donovan Eckhardt, is being sued by the buyers of one of their home renovations.

The house at 2308 W. Giddings Street sold for $1.36 million after Victoria and Eckhardt gave it a makeover. The end of the episode featuring the house showed it looking fixed up with fresh paint and chic furniture, but according to the current residents’ allegations (which are denied), the rehab was only skin deep, while severe structural damage continues to cause problems. Continue reading ›

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CNN has agreed to settle a multi-million dollar defamation lawsuit with Covington Catholic student Nicholas Sandmann earlier this month. A CNN spokesperson has confirmed that a settlement was reached but the news outlet has declined to offer further details.

In March of last year, Sandmann filed a defamation lawsuit against CNN seeking more than $275 million in compensatory and punitive damages. The lawsuit alleged that the cable news networked engaged in a “vicious attack” against Sandmann in its coverage of him following his encounter with 64-year-old Native American Nathan Phillips in January of that year.

According to the complaint, which was filed in federal court in Kentucky, “CNN falsely asserted” that Sandmann and his classmates were in a “racis[t]” “mob mentality” and “looked like they were going to lynch” a nearby group of Black Hebrew Israelites “because they didn’t like the color of their skin” or “their religious views.” The suit goes on to allege that CNN further reported that Sandmann and his classmates “surrounded” Phillips and “harassed and taunted” him, creating “a really dangerous situation” during which Sandmann “blocked [Phillips’] escape” and caused Phillips to “fear for his safety and the safety of those with him.” Continue reading ›

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Democratic presidential candidate and congresswoman Tulsi Gabbard filed a defamation lawsuit last week against Hillary Clinton over statements the former Secretary of State made during an interview characterizing Gabbard as a Russian asset. The complaint, filed in the U.S. District Court for the Southern District of New York, seeks more than $50 million in damages as well as an award of punitive damages for alleged damage to Gabbard’s professional and personal reputation.

Clinton’s allegedly defamatory comments are merely part of an ongoing feud between the politicians that dates back at least until 2016. According to the lawsuit, Clinton has sought revenge on Gabbard ever since Gabbard endorsed Senator Bernie Sanders in the 2016 Democratic presidential primary. Clinton, who the lawsuit refers to as a “cutthroat politician,” made the allegedly slanderous statements as “retribution” for Gabbard’s “perceived slight,” the lawsuit claims. Continue reading ›

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All too often attorney misconduct in the course of litigation goes unreported and unpunished. Incivility in litigation delays the resolution of cases, taxes an already overburdened judiciary, and increases the cost of litigating a matter. Despite this, attorney incivility is regrettably on the rise in state and federal courts around the country. One federal magistrate judge recently decided that enough was enough and issued a benchslap to a pair of attorneys for misconduct at a deposition. In his recent opinion in Sokolova v. United Airlines, Magistrate Judge Jeffrey Cole issued a scathing rebuke of the attorneys while offering a primer on proper deposition decorum.

The deposition that spawned dueling sanctions motions and accusations and cross-accusations of discovery misconduct got off to an unceremonious start with plaintiffs’ counsel arriving nearly 30 minutes late according to the opinion. Things improved little from there. Almost immediately after starting the deposition, things went off the rails when plaintiffs’ attorney took issue with the interpreter’s translation of the oath. Continue reading ›

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When an employee of a medical parts manufacturer was caught up in a foreign corrupt practices investigation of his employer and subsequently fired, the employee could not sue the employer for defamation. The employer included the former employee on a list of prohibited parties that the employer claimed posed an unacceptable compliance risk for the company. The appellate panel found that these statements were not defamatory because they were expressions of opinion or were the truth.

Biomet is a global corporation that manufactures and sells medical devices. Biomet is headquartered in Warsaw, Indiana. Biomet subsidiary Biomet Argentina, SA employed Alejandro Yeatts from 2005 to 2015. Yeatts worked in the position of Business Manager for South America from 2008 through 2014. Yeatts responsibilities included implementing Biomet’s compliance policies.

Biomet had a distribution agreement with Prosintese, a Brazillian company run by Sergio Galindo. In 2008, Biomet terminated that agreement after it learned that Galindo had bribed healthcare providers to promote and market Biomet products. This conduct is prohibited by the Foreign Corrupt Practices Act. Yeatts was informed after the fact that Galindo had paid bribes. Yeatts had also attended FCPA training sessions explaining prohibited conduct. Continue reading ›

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The owner of an upscale downtown Chicago hotel sued a competing hotel elsewhere in the city for trademark infringement. After more than a year, the plaintiff company eventually voluntarily dismissed its suit. The defendants then moved for attorney fees. The district court initially denied the motion, finding that the plaintiffs had not brought the type of exceptional case that warranted fee-shifting after dismissing the claims. The defendants appealed, and the appellate panel determined that the district court applied the wrong standard in evaluating the motion for fee-shifting. The panel reversed the decision of the district court and remanded the case with instructions for the court to reanalyze the request for fees under the correct standard.

LHO Chicago River, LLC, owns an upscale downtown Chicago hotel that underwent a branding change in February 2014 when it became “Hotel Chicago,” a signature Marriott venue. Around May 2016, Joseph Perillo and his three associated entities opened their own “Hotel Chicago” only three miles from LHO’s site. LHO then sued the defendants for trademark infringement and unfair competition under the Lanham Act, as well as for trademark infringement and deceptive practices under Illinois state law. Continue reading ›

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