(December 2024)  The firm is pleased to announce that partner Antonio DeBlasio and the litigation team at DeBlasio Law Group recently  settled a corporate litigation lawsuit involving claims that a client was fraudulently induced to execute a promissory note and sell a substantial stake in a limited liability company franchise valued at $3 million.  Terms of the settlement are confidential.

One of the key issues in the DuPage County lawsuit was the execution of a promissory note to repay a specific sum of money despite the fact that the “lender” had never subsequently loaned the full amount to the maker of the note.  Under Illinois law, this failure presented a significant obstacle to enforcement of the promissory note, especially when the “lender” (plaintiff) filed a verified complaint stating under oath that it had in fact loaned the money.  See e.g., Brown v. Grimes, 192 Cal. App. 4th 265, 277 (2011)  (“When a party’s failure to perform a contractual obligation constitutes a material breach of the contract, the other party may be discharged from its duty to perform under the contract.”); see also Bisla v. Parvaiz, 379 Ill.App.3d 567, 572-573 (1^st Dist. 2008) (court held a material “breach of contract can operate to discharge the duties of a non-breaching party” where “the breach worked to defeat the bargained-for objective of the parties or caused disproportionate prejudice to the non-breaching party”).

Another significant issue in the case was the lender’s fraudulent actions to induce execution of the promissory note and to induce the purchase of a significant equity stake in the LLC.  During a discovery deposition, the lender admitted that it was a “shell” company and that it did not have the capital needed to fund the loan or to meet any capital calls as a new member of the LLC.  These facts and others formed the basis for a fraudulent inducement claim against the member / lender under Illinois law. See Shanahan v. Schindler, 63 Ill. App. 3d 82 (1st Dist. 1978) (where promisor was fraudulently induced to sign the promissory note, contract was voidable at promisor’s option and court upheld the established principle that a party committing fraud should be precluded from benefiting therefrom); see also Tower Investors, LLC v. 111 E. Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1030-1031 (1^st Dist. 2007) (“Fraud in the inducement of a contract is a defect which renders the contract voidable at the election of the innocent obligor).

Claims of material breach of contract and fraud require a meticulous analysis of the underlying facts and a close working relationship with counsel to further develop those facts. Attorney Antonio DeBlasio has been selected by Super Lawyers® in 2008 and in each year from 2014 through 2025.  No more than 5% of Illinois attorneys receive this distinction.  Mr. DeBlasio has over 30 years of experience as an Illinois attorney, representing businesses, individuals, employees, employers, estates and beneficiaries of estates in Illinois.  For information on scheduling a consultation, call DeBlasio Law Group at (630) 560.1123, or you may reach us through our firm’s website at www.DGLLC.net/contact.

The post DeBlasio Law Group Obtains Settlement in Lawsuit Involving Fraudulent Inducement to Execute Promissory Note and Sale of Equity Stake in LLC Franchise. appeared first on DeBlasio Law Group, LLC.

On October 4, 2024 the Seventh Circuit U.S. Court of Appeals issued a compelling decision in favor of an executive regional sales leader allowing his claim for over $330,000 in unpaid incentive compensation to proceed against his employer under the powerful Illinois Wage Payment and Collection Act.  The employer (a multi-billion dollar consulting firm) argued that it did not owe the bonus because the incentive plan terms stated that any payment under the plan was “at the sole discretion of the Corporate Vice President,” was “subject to the company’s discretion” and therefore, could not create a contract between the employee and the employer.   Das v. Tata Consultancy Servs., 2024 U.S. App. LEXIS 25209 (7^th Cir. Oct. 4, 2024).

The Wage Act defines “wages” as “any compensation owed an employee by an employer pursuant to an employment contract or agreement between the 2 parties, whether the amount is determined on a time, task, piece, or any other basis of calculation.” 820 ILCS 115/2 (emphasis added).  For “separated” former employees, the Wage Act defines “final compensation” as “wages, salaries, earned commissions, earned bonuses, and . . . any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties.”  820 ILCS 115/2 (emphasis added).

Under the Wage Act, a current of former employee can prevail on a claim by showing that the employee entered into an “employment contract or agreement” and is owed “wages” or “final compensation”, as those terms are defined in the Wage Act.  Schultze v. ABN AMRO, Inc., 2017 IL App (1st) 162140, ¶ 22; Landers-Scelfo v. Corporate Office Systems, Inc., 356 Ill. App. 3d 1060, 1068 (2^nd Dist. 2005).

In the recent Das case, the Seventh Circuit confirmed that there does not need to be a formally negotiated “contract” for the employee to succeed (citing the well-known Illinois case of Landers-Scelfo v. Corp. Off. Sys., Inc., 356 Ill. App. 3d 1060, 1067 (2d Dist. 2005).  Indeed the Seventh Circuit confirmed that under Landers-Scelfo, an “agreement” alone is sufficient, 820 Ill. Comp. Stat. 115/2, and an “agreement” is nothing more than “a manifestation of mutual assent on the part of two or more persons[.]”  Landers-Scelfo, 356 Ill. App. 3d at 1067 (quotations omitted).  The Court also confirmed that at the pleading stage, all the employee must do is plead facts showing mutual assent to terms that support recovery.

In Das,  the Court identified the “key inquiry” as “whether under Illinois law the disclaimers are incompatible with mutual assent.” It noted that Illinois courts have not directly answered this question, but they have twice allowed Wage Act claims to proceed in the face of such language, and also noted that an Illinois Department of Labor regulation is in accord with the rule in those cases.  Das, 2024 U.S. App. LEXIS 25209 at *4-6.

Indeed, Illinois courts have held that the Illinois “legislature purposely included the term ‘agreement’ in the definition of ‘final compensation’ (820 ILCS 115/2 (West 2008)), and an ‘agreement’ is more expansive than a contract because an ‘agreement’ merely requires a “manifestation of mutual assent by the parties without requiring the formalities and accompanying legal protections of a contract.”  Schultze, 2017 IL App (1st) 162140, ¶ 23 (appeal denied) (citing Landers-Scelfo, 356 Ill. App. 3d at 1068 (holding that an “agreement” under the Wage Act can be entirely implicit) (quoting Zabinsky v. Gelber Group, Inc., 347 Ill. App. 3d 243, 249 (1^st Dist. 2004)).

Moreover, the Das Court observed that the Illinois Administrative Code (56 Ill. Adm. Code 300.450), broadly defines the term “agreement” under the Wage Act, and states: “‘Agreement’ means the manifestation of mutual assent on the part of two or more persons. An agreement is broader than a contract and an exchange of promises or any exchange is not required for an agreement to be in effect.  An agreement may be reached by the parties without the formalities and accompanying legal protections of a contract and may be manifested by words or by any other conduct, such as past practice. Company policies and policies in a handbook create an agreement even when the handbook or policy contains a general disclaimer such as a provision disclaiming the handbook from being an employment contract, a guarantee of employment or an enforceable contract. While a disclaimer may preclude a contract from being in effect, it does not preclude an agreement by two or more persons regarding terms set forth in the handbook relating to compensation to which both have otherwise assented. An agreement exists even if does not include a specific guarantee as to the duration of the agreement or even if one or either party reserves the right to change the terms of the agreement.”

The Seventh Circuit in Das emphasized even though a contract may have disclaimers indicating the employer has discretion, “[u]nder Illinois law, every contract has at least one limit—to perform within the bounds of “good faith and fair dealing.”   Das, 2024 U.S. App. LEXIS 25209, *11.   Accordingly, the Court in Das held that the “disclaimer language alone in the written plan does not preclude [the employer’s] agreement to pay [the employee] under the plan’s terms.  Das, 2024 U.S. App. LEXIS 25209, *13.

In the end, the Seventh Circuit in Das reversed the decision of the federal district court which had dismissed Das’ Wage Act claim against his employer and remanded the case back to the federal district court where Mr. Das will be allowed to pursue his claim for the unpaid incentive compensation.

Attorney Antonio DeBlasio has been selected by Super Lawyers® in 2008 and in each year from 2014 through 2025.  No more than 5% of Illinois attorneys receive this distinction.  Mr. DeBlasio has over 30 years of experience as an Illinois attorney, representing businesses, individuals, employees, employers, estates and beneficiaries of estates in Illinois.  For information on scheduling a consultation, call DeBlasio Law Group at (630) 560.1123, or you may reach us through our firm’s website at www.DGLLC.net/contact.

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The Court granted the TRO to prevent the demolition and destruction of the leased property and also awarded mandatory injunctive relief directing the landlord to restore the keypad codes to the building entrances to ensure our client’s right of access to, and quiet use and enjoyment of, the leased office premises, which were critical to its business operations.

Attorney Antonio DeBlasio has been selected by Super Lawyers® in 2008 and in each year from 2014 through 2025.  No more than 5% of Illinois attorneys receive this distinction.  Mr. DeBlasio has over 30 years of experience as an Illinois attorney, representing businesses, individuals, employees, employers, estates and beneficiaries of estates in Illinois.  To reach Mr. DeBlasio, you may call (630) 560-1124.  For more information on the firm, visit www.DGLLC.net.

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In their motions for summary judgment, both Bank of America and the Stuarts claimed that the contractor’s mechanic‘s  lien fraudulently stated that the contractor completed all the work required under the construction agreement by September 12, 2009, when in fact, the contractor did not even begin construction on the Stuarts’ house until sometime in October or November of 2009.  The Stuarts further claimed that the contractor’s mechanic‘s lien falsely stated that they owed plaintiff $46,200 as of September 12, 2009, when the first payment under the parties’ retail installment contract was not due until November 1, 2009.  The contractor did not dispute these allegations, but instead, claimed that the false statements in its mechanic‘s lien amounted to nothing more than “erroneous overcharges and overstatements” and that the record does not support the circuit court’s finding that it recorded the mechanic‘s lien with the intent to defraud defendants. The Court disagreed.

Section 7 of the Illinois Mechanic’s Lien Act provides that: “No such lien shall be defeated to the proper amount thereof because of an error or overcharging on the part of any person claiming a lien therefor under this Act, unless it shall be shown that such error or overcharge is made with intent to defraud.” 770 ILCS 60/7.  Intent to defraud may be inferred from documents containing overstated lien amounts combined with additional evidence. The requirement that there be intent to defraud is designed to protect an honest lien claimant who makes a mistake rather than a dishonest claimant who knowingly makes a false statement. When there is evidence, however, that the lien claimant knowingly filed a lien claim containing false statements the claim will be defeated because the effect of such a lien claimant’s claim is to give the appearance of a greater encumbrance on the property than that to which he is entitled. Thus, not only will Illinois courts invalidate a mechanic‘s lien on the basis of actual fraud, but also on the basis of constructive fraud. The additional evidence required to establish constructive fraud may, however, come in the form of an affidavit, signed by an agent of a contractor’s company, which is attached to the mechanic‘s lien claim, and which falsely attests to the truth of overstatements and overcharges made by the contractor. 

In the Stuart case, the Court ruled that there was “no room for doubt over whether [the contractor], at the very least, committed constructive fraud. The allegations of fraud were not merely based on overstatements or overcharges, but rather on patently false statements that plaintiff used to establish its right to a mechanic‘s lien in the first place.   First, the plaintiff’ contractor’s mechanic‘s lien, recorded on September 17, 2009, falsely stated that all the work required under the construction agreement, including the construction of the garage, basement, and deck, was completed by September 12, 2009. This statement was proven false by plaintiff’s own admission that “it completed work at the subject property in or about June, 2010.” Plaintiff must have known that it had not completed all the work required under the construction agreement as the Department of Buildings only issued a building permit on September 10, 2009.  Likewise, the “completion certificates,” which plaintiff had the Stuarts sign as the project progressed, clearly indicate that plaintiff knew that as of September 17, 2009, it had not constructed any of the land improvements (the garage, deck, and basement) required under the construction agreement.

Beyond providing a fabricated completion date, plaintiff’s mechanic‘s lien also stated falsely that the Stuarts owed plaintiff $46,200 as of September 12, 2009. This statement was proven false by the clear and unambiguous terms of the parties’ retail installment contract, under which the Stuarts were not required to make the first installment payment until November 1, 2009.

Finally, plaintiff attached to its mechanic‘s lien the signed and sworn affidavit of the president of plaintiff’s company, falsely attesting to the truth of the overstatements and overcharges made in its mechanic‘s lien claim.  On appeal, the Court ruled that the circuit court could reasonably infer that plaintiff knew that its mechanic‘s lien contained false statements.  As such, the Court ruled that it “had no choice but to conclude that plaintiff’s mechanic‘s lien, based on patently false statements, constituted constructive fraud.”

DeBlasio Law Group’s founding member, Attorney Antonio DeBlasio, has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys in Illinois receive this distinction.  Contact Mr. DeBlasio at (630) 560-1123 or via our website, www.DGLLC.net/contact.

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Background

In 2004, Cruz and Juan Calderon purchased a condominium in Chicago. The purchase was financed by a promissory note for $69,800 that Cruz and Calderon executed in favor of Olympus Mortgage Company (Olympus), AAM’s predecessor in interest.  The note was executed on October 22, 2004, and it was secured by a second mortgage on the condominium, executed on the same day.   Although the note’s maturity date is November 1, 2034, section 4 of the note provides for acceleration in the case of default, as follows:

“(B) Notice from Note Holder

If I do not pay the full amount of each monthly payment on time, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, I will be in default. That date must be at least 10 days after the date on which the notice is mailed to me or, if it is not mailed, 10 days after the date on which it is delivered me.

(C) Default

If I do not pay the overdue amount stated in the notice described in Section 4(B) below [sic], I will be in default. If I am in default, the Note Holder may require me to immediately pay the full amount of principal which has not been paid and all the interest that I owe on that amount.”

Under the heading “Giving of Notices,” the note states:

“Any notice that must be given to me under this Note will be given by delivering it or mailing it by certified mail addressed to me at the Property Address above [i.e., the condominium]. A notice will be delivered to me at a different address if I give the Note Holder a written notice of my different address.”

The note expressly referenced the acceleration provision in Olympus’s mortgage on the condominium, as follows:  “In addition to the protections given to the Note Holder under this Note, a Mortgage, dated October 22, 2004, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Mortgage describes how and under what conditions I may be required to make immediate payment in full of all amounts that I owe under this Note.”  The referenced text in the mortgage is a standard acceleration clause titled “Acceleration; Remedies” stating in bold print: “[U]pon Borrower’s breach of any covenant or agreement of Borrower in this Mortgage, including the covenants to pay when due any sums secured by this Mortgage, Lender prior to acceleration shall give notice to Borrower *** specifying: (1) the breach; (2) the action required to cure such breach; (3) a date, not less than 10 days from the date the notice is mailed to Borrower, by which such breach must be cured; and (4) that failure to cure such breach may result in acceleration of the sums secured by this Mortgage, foreclosure by judicial proceeding, and sale of the Property.”

Default in Payment

Cruz and Calderon ceased making payments on the note after July 5, 2005. In November 2005, the senior lender filed an action to foreclose on the condominium. Long Beach Mortgage Co. v. Ortiz, No. 05-CH-20399 (Cir. Ct. Cook County). A judgment of foreclosure and sale was entered, and the condominium was sold at a judicial sale in 2006. Olympus, as the junior lender, was named as a defendant in the foreclosure case but did not participate in the proceedings. After the condominium was sold, Olympus assigned the note to Ameriquest Mortgage Company, which assigned the note to AAM.

Demand Letters

Over the next several years, AAM sent four letters to Cruz demanding payment of the debt. None of the letters were sent by certified mail.

• The first letter, dated February 21, 2008, was sent from AAM’s counsel to Cruz and Calderon at the condominium address. The letter explained that AAM recently acquired the loan file and that “your account is seriously past due” with an unpaid balance of $69,587.60 (e., the entire outstanding principal). The letter also offered a “repayment plan,” under which Cruz and Calderon could pay $487.11 per month for six months to be reevaluated for another repayment or settlement plan, and a “settlement plan,” under which Cruz and Calderon could pay 60% of the principal balance to be forgiven of any remaining obligations. It provided that these offers were good for 60 days, after which AAM would “exercise all of its legal rights” under the loan.
• The second letter, dated May 5, 2008, was sent from an AAM loan counselor to Cruz at a California Avenue address in (Cruz claims he never resided there.) In the letter, the loan counselor recommended that Cruz call him to “work out a solution” with his debt. The letter did not state the overdue amount or provide a period for repayment.
• The third letter, dated January 21, 2010, was sent from AAM’s legal review department to Cruz and Calderon at the California Avenue address. It stated that AAM “has reviewed your account and is currently in the process of forwarding it to our legal ” Again, the letter did not state the overdue amount or provide a period for repayment.
• The fourth and final letter, dated April 23, 2013, was sent from AAM’s counsel to Cruz and Calderon at a Van Buren Street address in Chicago. It stated that Cruz and Calderon owed $69,587.60 in principal and $58,809.24 in accrued interest, for a total of $128,396.84. It further stated that Cruz and Calderon had 14 days in which to make payment in full if they wished to resolve the matter without a lawsuit.

The Lawsuit

In 2013, plaintiff, Associates Asset Management, LLC (AAM), brought a breach of contract action against Cruz, seeking payment on the promissory note with a maturity date of November 1, 2034. The complaint sought the full amount due plus interest, as if the note had been accelerated.

Cruz filed an answer in which he alleged, as an affirmative defense, that AAM failed to give him notice of its intent to declare a default and accelerate the note, which he claimed was a “condition precedent” (e.g., contingency) to filing a lawsuit against him. Cruz stated that under the plain language of the note, AAM was required to send him a pre-default notice, giving him a 10-day grace period in which he could cure the missing payments to avoid default.  He claimed that AAM could not sue him until this was done.

At trial, the court found that personal service of the complaint (lawsuit) on Cruz constituted sufficient notice of both default and acceleration, and  entered judgment for AAM in the amount of $120,402.86, representing the entire principal amount, interest accrued from the date of service until the date of judgment, and attorney fees.

Cruz appealed that ruling and the Illinois Appellate Court agreed, holding that AAM’s suit was premature, that it failed to give proper notice of default and acceleration under the note, and that the mere filing of the lawsuit was not sufficient notice under the terms of the promissory note.  An absolutely devastating outcome for AAM, and a terrific win for the homeowner.

The Winning Arguments on Appeal

On appeal, Cruz argued that AAM’s suit was premature because AAM did not fulfill the contractual conditions precedent to declaring default and accelerating the note. He further argued that the trial court erred when it found that service of process was sufficient to satisfy those requirements.

AAM argued that, because the note provided that “the Note Holder may send … a written notice”, it is permissive rather than mandatory and, therefore, sending such a notice was not required.  The Appellate Court held that while AAM was “technically” correct, concomitantly, the note holder is not required to try and collect any outstanding debt either. The note holder may forbear pursuing its rights in case of nonpayment. But considering the note as a whole, the court ruled that if the note holder wishes to declare default (as AAM clearly did), the only contractual mechanism for doing so was by following the procedure set forth in sections 4(B) and (C). Thus, the Appellate Court agreed with Cruz that, under the plain language of the note, notice is a contractual condition precedent to default.  The Court also ruled that the note required AAM to give a preacceleration notice as described in the “Acceleration; Remedies” clause of the mortgage.

Condition Precedent

The Court next turned to the central issue of this case, namely, whether the trial court erred in concluding that AAM satisfied the note’s predefault and preacceleration notice requirements. Cruz argued that AAM’s notices were inadequate and AAM’s suit was therefore premature. AAM did not dispute that it failed to strictly comply with the note’s notice requirements, but it argues that it gave Cruz the “essential information” to advise him that payment under the note was long overdue.

Under Illinois law, a “condition precedent” is an act that must be performed or an event that must occur before a contract becomes effective or before a party is required to perform.  Accetturo, 2016 IL App (1st) 152783, ¶ 32.  As discussed, the note in this case sets forth conditions precedent to both default and acceleration. Cf. Credit Union 1 v. Carrasco, 2018 IL App (1st) 172535, ¶ 15, 424 Ill. Dec. 302, 107 N.E.3d 1021 (satisfaction of mortgage’s preacceleration notice requirement was a condition precedent to suit); Accetturo, 2016 IL App (1st) 152783, ¶ 33 (same). Where a contract contains express conditions precedent, strict compliance with those conditions is required, and “[c]ourts will enforce express conditions precedent despite the potential for harsh results for the noncomplying party.” Midwest Builder Distributing, Inc. v. Lord & Essex, Inc., 383 Ill. App. 3d 645, 668, 891 N.E.2d 1, 322 Ill. Dec. 371 (2007) (citing Dodson v. Nink, 72 Ill. App. 3d 59, 64, 390 N.E.2d 546, 28 Ill. Dec. 379 (1979) (“It is well established that where a contract contains a condition precedent, the contract does not become enforceable or effective until the condition is performed or the contingency occurs.”)).

On this issue, the Appellate Court ruled that all four of AAM’s demand letters were severely deficient in substance. The first letter did not state the overdue amount, much less give Cruz a 10-day period to pay that amount to avoid default. Rather, it stated that Cruz owed the entire outstanding principal, as if the note had already been accelerated. The second and third letters were even more deficient: they referred generically to “this debt” and “your account” but made no reference to the amount of the debt and did not provide any grace period for repayment. The fourth letter, like the first, described the note as already having been accelerated since it asserted that the entire outstanding principal was “due and owing” and demanded that Cruz pay the entire sum (not just the overdue payments) within 14 days to avoid litigation. These are not mere technical deficiencies; rather, AAM failed to provide most of the information required under the contract. Thus, it ruled that AAM’s letters, whether viewed separately or together, were insufficient to meet the contractual conditions precedent to default and acceleration.

Similarly, it ruled that AAM’s complaint was deficient as a notice of default and acceleration since it neither advised Cruz of the overdue payment amount nor gave a grace period to pay that amount, but sought the full accelerated balance from him.  Thus, it held that the trial court’s finding that the complaint complied with the conditions precedent in the note was against the manifest weight of the evidence. Moreover, it held that AAM’s failure to provide Cruz with the contractually required notices prior to default and acceleration divested AAM of the right to file this breach of contract action, citing Midwest Builder Distributing, 383 Ill. App. 3d at 668 (“[c]ourts will enforce express conditions precedent despite the potential for harsh results for the noncomplying party”).

All in all, this was a tremendous victory for the homeowner who stuck to the plain language of the contract which required notice of default and notice of acceleration before he would be found in default.

DeBlasio Law Group’s founding member, Attorney Antonio DeBlasio, has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys in Illinois receive this distinction.  Contact Mr. DeBlasio at (630) 560-1123 or via our website, www.DGLLC.net/contact.

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The Illinois Wage Payment and Collection Act (IWPCA), 820 ILCS 115/1 et seq.,  is a powerful law that allows employees (and former employees) to sue for the timely and complete payment of earned wages or final compensation, including earned bonuses and commissions.  The IWPCA does not require a formal employment contract.  Rather, it only requires an “agreement” which is defined more broadly as the manifestation of mutual assent on the part of two or more persons. 

In Christmas Vaction, Clark Griswold complains that he received a holiday bonus every year for 17 years except the current one.  A similar scenario played out in Schultze v. ABN AMRO, Inc., 2017 IL App (1st) 162140 P24, in which the Illinois Appellate Court agreed that an executive employee was entitled to a $2 million annual bonus (not the $200,000 bonus ABN paid to him).

In Schultze, the executive never had a written employment contract.  Nevertheless, the court agreed that “ABN’s past conduct of awarding [the executive] an annual bonus for more than two decades manifested an agreement to award a bonus as a component of [the executive’s] total compensation.”  Based on this and other evidence, the court ruled that there was an “agreement” and “unequivocal promise” to pay the executive a bonus as part of his compensation.  The court rejected ABN’s argument that the annual bonus was discretionary.

The court agreed that in setting Schultze’s 2008 performance bonus, ABN deviated from a longstanding methodology that it had used to calculate executive bonuses in the past, including taking into consideration the bonuses paid to the executive’s predecessor.  The fact that ABN did not communicate the change in the bonus calculation methodology to Schultze before Schultze fully performed his employment responsibilities to earn his bonus for 2008 did not help ABN’s cause.  It is also noteworthy is that under the IWPCA, Schultze was awarded 5% prejudgment interest, attorneys’ fees and costs.

Attorney Antonio DeBlasio has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys receive this distinction.  DeBlasio Law Group has over 90 years of combined experience representing businesses, individuals and estates in Illinois.  Contact him to discuss your wage and bonus claim at (630) 560-1123.

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Antonio DeBlasio represented the clients at trial against the insurance company.  Mr. DeBlasio is the founding member of the DeBlasio Law Group.  He has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys receive this distinction.

The post Jury Verdict Against Insurance Company That Failed to Pay on Policy When Classic Car Stolen at National Car Show. appeared first on DeBlasio Law Group, LLC.

Who Is Covered By The ISRA?

Under Section 1 of the ISRA, a “sales representative” means a person who contracts with a principal to solicit orders and who is compensated, in whole or in part, by commission, but shall not include one who places orders or purchases for his own account for resale or one who qualifies as an employee of the principal pursuant to the Illinois Wage Payment and Collection Act.  820 ILCS 120/1.  In sum, it generally covers independent contractors (not employees) who solicits sales for a person or company and who gets paid in whole or in part by commission.  It will not cover you if you solicit sales and then resell the product to someone else.

Who Is A “Principal” Under the ISRA?

Section 1 of the ISRA defines a “principal” as either a sole proprietorship (someone operating a business in his own name or as d/b/a), partnership, corporation or other business entity whether or not it has a permanent or fixed place of business in this State and which:
(A)  Manufactures, produces, imports, or distributes a product for sale;
(B)  Contracts with a sales representative to solicit orders for the product; and
(C)  Compensates the sales representative, in whole or in part, by commission.

What Amount of Commission Are You Entitled To?

Section 1 also defines when a commission becomes due.   First, if there is a contract between the salesperson and the principal (the company you are working for), then the terms of the contract control when the commission is due.   Second, if there is no contract, or if the terms of the contract do not provide when the commission becomes due (or the terms are ambiguous or unclear), the past practice used by the parties shall control when the commission becomes due.   If neither of these factors exist to clearly ascertain when the commission becomes due, the “custom and usage” prevalent in this State for the parties’ particular industry shall control.

When Are Commissions to Be Paid?

Under the ISRA, commissions due at the time of termination of a contract between a sales representative and principal shall be paid within 13 days of termination, and commissions that become due after termination shall be paid within 13 days of the date on which such commissions become due.  820 ILCS 120/2.  Importantly, if the contract language tries to waive this requirement, the ISRA states that such a waiver is void.  In other words, it would be unenforceable.  Moreover, a claim under the ISRA will only exist if the relationship between the sales rep and the principal has terminated.

This is because the ISRA is intended to protect sales representatives from being denied commissions that are due or may become due after a contract is terminated.  Fararo v. Sink LLC, Nos. 01 C 6956, 2002 U.S. Dist. LEXIS 23022 (N.D. Ill. Nov. 27, 2002); Klessman & Assoc., Inc. v. American Sensors, Inc., No. 97 C 0556, 1998 U.S. Dist. LEXIS 7124 (N.D. Ill. Apr. 28, 1998) (Grady, J.).  The ISRA, therefore, will not apply to a sales relationship where a contract is still in effect.”   Id.

Punitive Damages Under the ISRA.

One of the most powerful advantages of the ISRA is that the salesperson may recover punitive damages and attorneys’ fees.  Section 3 of the ISRA states that a principal who fails to comply with the provisions of Section 2 (timing of the commission payment) or with any contractual provision concerning timely payment of commissions due upon the termination of the contract with the sales representative, shall be liable in a civil action for exemplary damages in an amount which does not exceed three (3) times the amount of the commissions owed to the sales representative.  820 ILCS 120/3.  This treble damage provision gives the sales representative significant leverage in negotiations and litigation.

Courts have ruled that an award of punitive damages under the ISRA requires the salesperson to prove the principal’s failure to timely pay his commissions was willful and wanton or the result of a vexations refusal to pay. Staebell v. L’amour Hosiery, Inc., No. 98 C 50167, 2002 U.S. Dist. LEXIS 11030 (N.D. Ill. June 18, 2002); Staebell v. L’amour Hosiery, Inc., No. 98 C 50167, 2002 U.S. Dist. LEXIS 11030 (N.D. Ill. June 18, 2002) (award of punitive damages must be supported by a finding of culpability exceeding bad faith, such as evidence that the principal’s conduct was intentional, outrageous, or done with evil motive or reckless indifference to the salesperson’s rights).

Attorneys’ Fees Under The ISRA.

Section 3 of the ISRA also states that a principal shall pay the sales representative’s reasonable attorney’s fees and court costs.  820 ILCS 120/3.

This provision is mandatory because the ISRA states that a court “shall” award reasonable attorneys’ fees and costs to a prevailing party, and no finding of bad faith is required.  Nicor Energy v. Dillon, No. 03 C 1169, 2004 U.S. Dist. LEXIS 86 (N.D. Ill. Jan. 7, 2004); Maher & Assocs. v. Quality Cabinets, 267 Ill. App. 3d 69 (Ill. App. Ct. 2d Dist. 1994); Staebell v. L’amour Hosiery, Inc., No. 98 C 50167, 2002 U.S. Dist. LEXIS 11030 (N.D. Ill. June 18, 2002) (salesperson did not need to show that the corporation’s conduct was willful or wanton in order to recover the salesperson’s attorney’s fees and costs).

The trial lawyers at DeBlasio Law Group have the experience you need to face the most difficult challenges in court, including the Circuit Court of Cook County, the DuPage County Circuit Court in Wheaton and the Will County Circuit Court in Joliet. With offices in Oakbrook Terrace, Illinois, we are strategically located near the major circuit courts and major highways and interstates.  Call us at (630) 560.1123.  www.DGLLC.net.

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The attorneys at our firm were hired by two Malaysian clients who sued to recover for consulting services rendered to a U.S.-based company in China.   Our attorneys aggressively pursued the claims and defended our clients from counterclaims in excess of $1,000,000 for breach of contract, fraud, conversion and interference with economic advantage, all of which were voluntarily dismissed by the U.S. Company after it paid our clients to settle the case.  One of the best memories from this case was when the Malaysian clients paid a personal visit to the home of attorney Antonio DeBlasio and personally delivered two large stuffed panda bears for his two daughters, Isabella and Angelina.

The lawyers at DeBlasio Law Group have the experience you need to face the most difficult challenges in court, including the DuPage County Courthouse located in Wheaton, Illinois.  Strategically located in Oakbrook Terrace, Illinois, our office is conveniently located minutes from the DuPage Courthouse and major highways and interstates.  Call us for a consultation on any business related litigation matter at 630.560.1123.  www.DGLLC.net/contact.

The post DuPage County Trial Attorneys Resolve Consulting Dispute, $1 Million Counterclaim Dismissed. appeared first on DeBlasio Law Group, LLC.

Does Illinois recognize a cause of action for tortious inducement of breach of fiduciary duty?  The answer is yes.  Our law firm recently defended a client accused of tortious inducement of breach of fiduciary duty in a lawsuit filed against it in Cook County Circuit Court.  The case was settled on favorable terms to our client before trial.

In Illinois, to state such a claim for tortious inducement of breach of fiduciary duty, the plaintiff must allege facts supporting each of three elements: (1) that the defendant colluded with a fiduciary in committing a breach of duty; (2) that the defendant induced or knowingly participated in such breach; and (3) that the defendant knowingly accepted the benefits resulting from that breach.  Regnery v. Meyers, 287 Ill. App. 3d 354, 364 (1st Dist. 1997) (citing Village of Wheeling v. Savros, 89 Ill. App. 3d 450, 454-55 (1st Dist. 1980)); see also, Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 508-09 (7th Cir. 2007) (citing Regnery) (affirming dismissal of claim).

First and foremost, there can be no claim for tortious inducement of breach of fiduciary duty where, as here, a plaintiff cannot allege and prove that a person or entity did breach a fiduciary duty to the plaintiff.   One example would be an employee or officer of a company that breached a fiduciary duty to an employer.  Lawlor v. North American Corp. of Illinois, 2012 IL 112530 at ¶¶ 69-74 (affirming decision finding that employee had not steered any business away from employer, despite unproven attempts to do so).

There also needs to be evidence that the defendant “colluded with” a person that owed a fiduciary duty to the plaintiff.   Center for Pain Control v. McCall, 2012 IL App (2d) 110649-U at ¶¶ 39-40 (dismissing conspiracy claim for failure to allege the commission of any act by the defendant in furtherance of another party’s unlawful act of diverting plaintiff’s money, and holding that a “complaint must set forth more than the conclusion that there was a conspiracy; it must allege specific facts from which the existence of a conspiracy may be properly inferred.”).  Plaintiff must do more than simply offer up generalized, conclusory allegations of a “conspiracy” or “collusion.”  Plaintiff needs facts.   Ottawa Sav. Bank v. JDI Loans, Inc., 374 Ill. App. 3d 394, 403 (2nd Dist. 2007) (affirming dismissal of tortious inducement of breach of fiduciary duty claim where plaintiff “made no specific allegations of collusion”).

As to the second element – the defendant induced or knowingly participated in such breach of fiduciary duty – the plaintiff needs to be ready to show evidence that the defendant induced or knowingly participated in the fiduciary’s breach of his or her fiduciary duty.  For example, plaintiff should try to show that the defendant was the party who initiated or created the plan for the fiduciary to divert business from an employer to the defendant.   Ottawa Sav. Bank, 374 Ill. App. 3d at 403 (affirming dismissal of tortious inducement of breach of fiduciary duty claim where plaintiff “made no specific allegations . . . that defendants did anything to induce CLC to breach its fiduciary duty to Ottawa . . . . Nor were there any specific allegations that any breach by CLC was caused by the defendants’ conduct.”).  The court in Regnery court found that the defendant had “initiated” the idea that led to the breach of fiduciary duty.  Regnery, 287 Ill. App. 3d at 364.

From a defendant’s standpoint, if there is no evidence that the defendant had any knowledge of the fiduciary’s obligations to an employer or other plaintiff, that will assist the defense.  See Ottawa Sav. Bank, 374 Ill. App. 3d at 403 (affirming dismissal of tortious inducement of breach of fiduciary duty claim where plaintiff “did not plead that defendant . . . knew the content, terms, or conditions of Plaintiff’s contract or relationship with CLC[.]”)   If there is no evidence that the defendant “knowingly participated in all steps of the transaction”, that will also help the defense.  See Regnery, 287 Ill. App. 3d at 364.

Lastly, plaintiff also has to allege and prove that the defendant knowingly accepted the benefits resulting from the person’s breach of fiduciary duty.   For example, if the breach resulted in the defendant obtaining a new client that was wrongfully diverted from the plaintiff, that is relevant.  But speculative allegations that a client might leave and go with the defendant’s company is probably not enough.    See Verb v. Motorola, Inc., 284 Ill. App. 3d 460, 472 (1st Dist. 1996) (affirming dismissal of complaint containing allegations based upon theoretical possibilities of injury or damages that amounted to “conjecture and speculation”); Jamieson v. Amer. Nat. Safe Deposit Co., 133 Ill. App. 2d 647, 651 (1st Dist. 1971) (affirming dismissal of complaint against defendants and holding that “[w]hile we agree that inferences may be drawn from facts well pleaded, those inferences must be reasonable inferences and not mere conjecture and speculation”).  Also, Illinois law is clear that employees (whether they are fiduciaries or not of an employer) may plan, form and outfit a competing corporation so long as they do not commence competition while still working for an employer.   Cooper Linse Hallman Capital Management, Inc. v. Hallman, 368 Ill. App. 3d 353, 357 (1st Dist. 2006).

To talk about your breach of fiduciary duty case, the attorneys at DeBlasio Law Group can be reached at (630) 560-1123 or via our website at www.DGLLC.net/contact.

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