The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Is a Tort Suit Against the Executor a “Will Challenge” For Purposes of the Statute of Limitations?

By Kirk Jenkins on Posted in Illinois

We conclude our previews of the civil cases on the Illinois Supreme Court’s November term oral argument docket with Bjork v. O’Meara, a case about traps for the unwary in challenges to the disposition of a decedent’s property. We previewed Bjork just after review was granted here.

Here’s the problem the Court faces in Bjork. Every state agrees that there is a strong public interest in distributing property pursuant to an estate as quickly as possible. But does that principle apply only to "frontal attack" will contests? What about tort claims for interference with a testamentary expectancy?

The decedent in Bjork passed away in early 2009. Plaintiff filed petitions for issuance of citations to discover information and recover property, arguing that assets in a bank account belonged to her, not the estate. The petitions were granted, and plaintiff received discovery. Next, the plaintiff filed a petition for leave to depose a bank officer, but that was denied. Subsequently, the estate was wound up and closed.

Six months after the estate closed — twenty months after the decedent’s death — the plaintiff sued the executor of the estate for tortious interference with testamentary expectancy, alleging that she should have received the bank account and charging the executor with fraud, undue influence, misrepresentation, and assorted other wrongdoing. The executor moved to dismiss, arguing that the action was barred by the six month statute of limitations in the Probate Act on will challenges. (755 ILCS 5/8-1) The plaintiff responded that she was stating a tort claim, not challenging the will, but the Circuit Court dismissed.

Like many cases which reach the Supreme Court, Bjork will play out in the boundary between two earlier cases. In Robinson v. First State Bank of Monticello, the Supreme Court held that when an estate is closed, the will has been established as valid. If a tort claim is based on the proposition that the will is not valid, then it must be filed within the six month statute of limitations, or the claim is barred, regardless of how it’s pled. On the other hand, there was In re Estate of Ellis, where the Court had held a tort claim was not barred, since the plaintiff hospital had not been aware of its interest in a previous will until long after the final will was probated.  Further, the Court noted that the plaintiff could not have recovered lifetime gifts to the defendant — sought in the tort suit — through a will contest.

Ultimately, the Appellate Court in Bjork affirmed the Circuit Court’s dismissal. The Court agreed that the plaintiff could not have received complete relief in a will contest, since she had no claim in intestacy to the bank account at issue. Nevertheless, the Court held that since plaintiff’s tort action challenged the property disposition in the will, it should have been filed in conjunction with the estate proceeding, within the six month state of limitations.

Bjork will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

 

Illinois Supreme Court to Consider Possible Limits on Homeowners Association Security

By Kirk Jenkins on Posted in Illinois

Our preview of the civil cases on the Illinois Supreme Court’s November oral argument docket continues with Poris v. Lake Holiday Property Owners Association [pdf], a case which poses a number of interesting questions about the limits on the authority of private security forces. Our initial look at Poris, just after review was granted, is here.

The defendant homeowners association is governed by a board of directors. Prior to the events at issue, the board had established a security department for the development, bought vehicles for the department, fitted the vehicles with oscillating and flashing lights, radar units and audio/video recording equipment. The board adopted a speed limit of 25 mph for all the association’s road, applying escalating fines for violations: $50 for a first offense between 1-10 mph over, $100 for exceeding the limit by 11-15 mph, and $200 for a first offense going sixteen or more mph over the limit.

When the plaintiff was pulled over, he was allegedly traveling at 34 mph. Plaintiff got out of his car, but the security officer told him to return to it; he then approached the vehicle and took the plaintiff’s Association membership card and drivers license. The officer then returned to his security vehicle and wrote a citation. When he again approached the plaintiff’s car, four and a half minutes later, he told plaintiff that he was being recorded. The officer identified himself as Association security, and the plaintiff allegedly said the officer had no authority to detain him. The officer responded "I am not detaining you."

The plaintiff sued the association, its entire board of directors, the chief of security and the officer involved in his stop. Among other things, the plaintiff sought a declaratory judgment that the practices and procedures of the Association security department were unlawful, as well as seeking damages for false imprisonment. The Circuit Court granted the defendants’ motion for summary judgment on all fourteen counts, but the Appellate Court reversed in part.

First, the Court addressed the security officers’ authority to stop and detain. Private security guards have no more authority than private citizens, the Court found. Thus, a security guard may only detain a citizen if he or she has reasonable grounds to believe that an offense is being committed. 725 ILCS 5/107-3. The Court held that since the speed limits were Association rules rather than statutes, the plaintiff’s alleged speeding was not an "offense." Therefore, the security officers had no authority to stop and detain for speeding.

Next, the Court turned to the security officers’ use of amber oscillating lights on their vehicles. According to the Illinois Vehicle Code, such lights may be used only on certain types of vehicles, including security companies, alarm responders and control agencies. The Court held that the Association was not a "security company," so the use of amber oscillating lights on the vehicles was likewise unlawful.

The security officers’ use of video and audio equipment was not a violation of the Illinois eavesdropping statute, the Court found. The Criminal Code provides that taping is unlawful unless all parties to a conversation consent. 720 ILCS 5/14-2(a)(1). Consent can be implicit as well as explicit. The Court concluded that when plaintiff was told that the conversation was being taped but continued talking anyway, he gave implicit consent to the taping. Nor was the security department barred from using radar to measure speed, since the applicable provision of the Vehicle Code, 625 ILCS 5/11-612, merely regulates the use of radar to enforce the law, as opposed to Association rules.

Finally, the Court turned to the plaintiff’s claim for false imprisonment. Given that the plaintiff was directed by an individual wearing a uniform, a badge and a duty belt to wait in his car (without his license), the Court found that plaintiff’s liberty was restrained. Since violation of the Association’s rules is not an "offense" justifying restraint, the plaintiff was entitled to summary judgment on his claim for false imprisonment.

Poris will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

When Is a Workers Comp Claim Not a Workers Comp Claim?

By Kirk Jenkins on Posted in Illinois

Our preview of the civil cases on the Illinois Supreme Court’s November oral argument docket continues with Skokie Castings, Inc. v. Illinois Insurance Guaranty Fund. Our initial look at Skokie Castings, just after review was granted, is here.

Skokie Castings arises from a severe workplace injury which permanently disabled the employee. At the time, the employer was a qualified self-insurer. After the Illinois Industrial Commission confirmed that the employee was totally disabled, the employer paid up to its retention amount. At that point, the employer’s excess carrier took over. But then the excess carrier went broke and was placed in receivership.

Like most states, Illinois has a system in place to protect injured workers when a workers comp insurer goes bankrupt. As part of the price of doing business in Illinois, all insurers contribute to the Illinois Insurance Guaranty Fund. When a company begins the liquidation process, its obligations are taken over by the Fund. According to the Insurance Code (215 ILCS 5/537.2), "such obligations shall not . . . exceed $300,000, except that this limitation shall not apply to any workers’ compensation claims."

So was the employer’s claim against the Fund a "workers’ compensation claim"? The Fund thought not; they paid up to the $300,000 ceiling and then stopped.

The employer filed a declaratory judgment action, seeking a declaration that the Fund had improperly stopped paying, and the $300,000 ceiling didn’t apply. The parties filed cross-motions for summary judgment; the trial court granted plaintiff’s motion, holding that the claim, despite being filed by the self-insured employer, was a "workers compensation claim" within the meaning of the statute.

The Appellate Court affirmed. The Court found that several sections of the Insurance Code noted that the Fund was intended to protect not only claimants but policyholders as well. Following a New Mexico decision rendered under a similar statutory structure, In re Delinquency Proceedings Against Mission Insurance Co., the Court held that if the legislature had intended to exclude claims by self-insured employers whose excess carriers had gone bankrupt, it would have done so. Since the statute contained no such language, the reasonable inference was that the legislature intended that such claims should fall within "workers compensation claims," and thus be exempt from the payment ceiling.

Skokie Castings will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

Why Every Line of the Notice of Security Interest Should Be Completed

By Kirk Jenkins on Posted in Illinois

For many out-of-staters, the first image that comes to mind when they hear "Illinois" is downtown Chicago. Chicago’s one of the world’s great cities, but the fact is, much of Illinois is rural. The state’s 76,000 farms cover more than 28 million acres — nearly 80% of the total land area of the state. It’s estimated that the farming sector of the Illinois economy produces on the order of $9 billion annually. So the Illinois Supreme Court is no stranger to cases impacting the farm community. An important example will be argued this month during the Court’s new term: State Bank of Cherry v. CGB Enterprises, Inc. 

State Bank starts with an Illinois farmer executing a note in the plaintiff’s favor, using certain crops as security. He then sells the crop to the defendant, a grain elevator. The plaintiff sent the defendant a Notice of Security Interest, citing the federal Food Security Act, 7 U.S.C. § 1631(e). The plaintiff sued the defendant ultimately because the defendant paid the farmer, not the plaintiff bank.

The defendant moved to dismiss. The Food Security Act, the defendant pointed out, required that a Notice of Security Interest include "a description of the farm products subject to the security interest created by the debtor, including . . . the name of each county or parish in which the farm products or produced or located." The plaintiff’s notice left the location of the crops blank. Citing an Eighth Circuit case, Farm Credit Midsouth, PCA v. Farm Fresh Catfish Co., the defendant argued that strict compliance was mandatory under the Food Security Act, so the plaintiff was out of luck.

The plaintiff had two responses. First, the plaintiff pointed out that the farmer had delivered the crops to the defendant at the defendant’s grain elevator, so what difference did it make where they’d come from? Second, the plaintiff argued that the matter was governed by the Illinois Commercial Code, specifically sections 810 ILCS 5/9-320(f) and 9-320.1. Those provisions were pretty much identical to the federal Food Security Act, but under First National Bank v. Effingham-Clay Service Co., substantial compliance with the notice requirements was close enough. The trial court concluded that it was governed by the First National Bank, an Illinois state court decision, and granted the plaintiff’s motion for judgment on the pleadings, enforcing the security interest.

A divided panel of the Appellate Court reversed. First, the Court held that the state Commercial Code was preempted by the Food Security Act, making First National Bank irrelevant. The Court noted that it wasn’t bound by the Eighth Circuit’s decision in Farm Fresh Catfish, but found that the opinion was consistent with other Federal cases on whether substantial compliance was enough under the Food Security Act. The Court noted that although the Act specifically provided that minor errors in Notices given under a central filing system were excused, it contained no such provision for Notices given directly to holders of secured crops. It followed that the Congress intended to require strict compliance.

State Bank of Cherry will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Tuesday, November 20.

How Much Authority Does an Arbitrator Have Over Dismissal of an At-Will Public Employee?

By Kirk Jenkins on Posted in Illinois

We begin our previews of the civil cases on the Illinois Supreme Court’s November term oral argument docket with Griggsville-Perry Community Unit School District No. 4. v. Illinois Educational Labor Relations Board [pdf]. Our first look at Griggsville-Perry, just after review was granted, is here.

Griggsville-Perry arose from the Board’s firing of a noncertified paraprofessional who worked in an elementary school library. In 2007, her school principal approached the employee and told her that the school board had received complaints about her performance. The principal began keeping a notebook of events relating to the employee’s performance. The following year — after a number of incidents involving the employee in 2007 — the principal recommended that the school board fire the employee. The superintendent of the district notified the employee that she would be fired at an upcoming meeting. The superintendent and principal met with the employee and her union representative twice, and items from her file were produced to her. The employee and her union representative appeared before the school board and the employee testified, but the board decided to fire her.

The union filed a grievance, and after a hearing, the arbitrator ordered the employee reinstated. When the board refused, the union filed an unfair labor practice charge. The arbitrator once again ordered reinstatement, and the Illinois Educational Labor Relations Board affirmed.

The Appellate Court reversed. The Court noted that the underlying labor agreement said nothing about personnel begin subject to termination only for just, good or proper cause. Although the contract provided for arbitration, it also stated that the arbitrator could not modify, nullify, ignore or add to the provisions of the agreement. Finally, the agreement included an integration clause. In view of these provisions, the Court criticized the arbitrator’s insistence that the Board provide "a statement of the specific acts or omissions — time, place, participants, and utterances — that it alleges justify her discharge." The arbitrator "has applied his own brand of industrial justice," the Court found, "by reading a just-cause standard into the agreement."

The Court noted the arbitrator’s claim that he was free to interpret the contract by applying "industrial common law," but found that the arbitrator’s decision had no support in either past practice of the parties or the interpretation of similar contract language in other cases. The arbitrator’s decision that the procedure given the employee was somehow deficient was "clearly erroneous," the Court found: she was given repeated warnings, attempts were made to help her, she was given reasonable prior written notice of the reasons for her dismissal, and she was allowed to testify at the hearing.

Before the Supreme Court, amicus the Illinois Association of School Boards and Illinois Association of School Administrators were equally critical of the arbitrator, arguing that he had conjured a requirement for a "full and fair hearing" out of nothing more than a contractual provision that an employee should be given notice if he or she is required to appear.   "If there ever were a decision that smelled like a five-week old unrefrigerated dead fish," amicus wrote, "it is this arbitrator’s decision."

Griggsville-Perry will be argued during the 9:00 a.m. session of the Illinois Supreme Court on Thursday, November 15.

Illinois Supreme Court Announces Docket for November Term

By Kirk Jenkins on Posted in Illinois

This afternoon, the Illinois Supreme Court announced its docket for the November term [pdf]. Join us back here over the weekend as we begin our previews of the five civil cases the Court has scheduled for argument next month:

  • Griggsville-Perry Community Unit School v. The Illinois Educational Labor Relations Board (argument November 15th);
     
  • State Bank of Cherry v. CGB Enterprises (argument November 20th);
     
  • Skokie Castings, Inc. v. Illinois Guaranty Fund (argument November 20th);
     
  • Poris v. Lake Holiday Property Owners Association (argument November 20th); and
     
  • Bjork v. O’Meara (argument November 20th).

Divided Illinois Supreme Court Abolishes Nullity Rule for Non-Lawyers’ Pleadings

By Kirk Jenkins on Posted in Illinois

This morning, a sharply divided Illinois Supreme Court held that a pleading signed by a non-lawyer is not automatically null and void. The decision was in Downtown Disposal Services, Inc. v. The City of Chicago.

We previewed the decision yesterday evening, here. The plaintiff was cited four times for violating City ordinances relating to dumpsters. When the plaintiff failed to appear, the Department of Administrative Hearings entered default judgments. The plaintiff sought to vacate the defaults, but the hearing officer denied plaintiff’s motion, inviting the plaintiff to appeal.

Filing an appeal seeking administrative review in Chicago merely involves filling out a pre-printed form. Not long after the adverse hearing decision, the president of the plaintiff corporation filed four pro se complaints challenging the hearing decision. The City moved to dismiss, arguing that Illinois law held that any pleading signed by a non-lawyer such as the president was per se null and void. The trial court reluctantly granted the motion. The Appellate Court reversed, holding that the a non-lawyer’s complaint was not necessarily void on its face.

In a four-Justice majority opinion written by Justice Anne M. Burke, the Court affirmed the Appellate Court.

The Court had no trouble finding that the president of the plaintiff corporation had engaged in the unauthorized practice of law. The simplicity of the complaint form was irrelevant to the unauthorized practice question, the Court found; legal knowledge and judgment was required to advise the plaintiff as to whether it should appeal in the first place, and that was enough.

The Court noted that other jurisdictions had split on the question of whether non-lawyers’ pleadings were automatically void. Some jurisdictions, including the Illinois Appellate Court, have held that a non-lawyer’s signature is an incurable defect, and the pleading is void. Other courts have treated the defect as curable, allowing litigants a reasonable time to find a lawyer and amend their complaint.

Following the Seventh Circuit’s decision in In re IFC Credit Corp., the Court found that: (1) a lay person’s signature on a pleading did not deprive the court of subject matter jurisdiction; and (2) the consequences of the nullity rule would typically be severe, since the statute of limitations might run while the non-lawyer’s complaint was pending, and even if it didn’t, refiling the action could be expensive.

"We hold there is no automatic nullity rule," the majority held. The Court directed lower courts to consider four factors in evaluating a motion to dismiss: (1) did the nonattorney know that his or her conduct amounted to unauthorized practice; (2) did the corporation moved diligently to correct the problem; (3) was the nonattorney’s participation minimal; and (4) did the opposing party suffer prejudice.

Applying its newly-minted test, the majority directed the lower court to reinstate the plaintiff’s complaint. The nonattorney’s participation was minimal, the majority found; the City suffered no real prejudice, and far from protecting the client, applying the nullity rule would harm the client.

Justice Lloyd A. Karmeier wrote a lengthy and spirited dissent, joined by Chief Justice Thomas L. Kilbride and Justice Robert R. Thomas. The dissenters began with a frontal attack on the majority’s holding:

Today, for the first time, the Supreme Court of Illinois has sanctioned the unauthorized practice of law by refusing to follow the nullity rule.

The dissenters argued that the majority had effectively overruled "an unbroken line of precedent dating back before the Civil War" with its holding. Point by point, the dissenters disputed the majority’s reading of the various federal and state cases it cited in support of its invalidation of the nullity rule. The rule was " not a novel or unsettled question in Illinois," the dissenters wrote. Even if the majority’s conclusion that the dismissal should be discretionary, the dissenters argued, the majority should have remanded the action for the trial court to apply its multi-factor test in the first instance.

The dissenters disputed the majority’s application of its newly minted test as well. It was far from clear, they wrote, that the president of the plaintiff corporation was unaware that his signing of the administrative complaints was the unauthorized practice of law, and ignorance of the law was not a defense anyway. The corporation had not acted promptly to rectify the problem with its complaints, the dissenters pointed out, waiting six months to file appearances through an attorney, and another five to seek leave to amend its complaints. Besides, the dissenters argued, the plaintiff had been cited multiple times years earlier, and had still not paid its fines, suggesting that the plaintiff was unworthy of sympathy. Whether or not the nullity rule might be harsh in some cases, the dissenters concluded that it certainly was not in Downtown Disposal.

Do You Need an Attorney To Sign Your Fill-in-the-Blank Form Complaint?

By Kirk Jenkins on Posted in Illinois

Tomorrow morning, the Illinois Supreme Court will file its opinion in Downtown Disposal Services, Inc. v. The City of Chicago [pdf]. Tonight we’ll preview the case. Tomorrow we’ll bring you our summary and analysis of the Court’s opinion.

Downtown Disposal began when the City Department of Transportation issued the company four administrative violation notices in connection with City ordinances relating to dumpsters. When the company failed to appear for any of the scheduled hearings before the Department of Administrative Hearings, default judgments were entered. At a later hearing on the company’s motion to set aside the defaults, the Administrative Law Officer told that company’s president that "you" have a right to appeal the decision. Shortly thereafter, the president did so, signing and filing four fill-in-the-blank pro se complaints for administrative review.

But there was a problem: the president of the company wasn’t an attorney. The City noticed the problem when the company moved for leave to file amended complaints signed by counsel. Did the president’s signature invalidate the plaintiff’s complaints for administrative review? The City moved to dismiss the company’s complaints, arguing that since a corporation couldn’t represent itself, the president’s signatures rendered the proceeding void per se.

The company opposed the motion to dismiss, arguing that the nullity rule was not, in fact, per se. Filling in a fill-in-the-blank form hardly constituted rendering legal advice or doing anything requiring legal skill, the company argued. Besides, dismissal would violate the company’s due process rights given that the preprinted form didn’t say anything about an attorney’s signature being required, and it was patently unfair to inform the company of its right to appeal without mentioning the attorney requirement.

And besides, the company added in a subsequent motion for summary judgment, as long as we’re casting aspersions on the pleadings here, the City’s complaints weren’t signed by a lawyer either, so the administrative proceeding had been void from the beginning.

The trial court reluctantly granted the City’s motion to dismiss, commenting that the law appeared to require that pleadings signed by a non-lawyer were automatically void, requiring dismissal. The court further held that the issue of the City’s apparent incapacity to bring its complaint in the first place was a separate matter which required resolution in the administrative hearing (had there been one).

The Appellate Court unanimously reversed.

The Court began by clearing away the underbrush, rejecting several of the company’s preliminary arguments. The City hadn’t waived its argument by failing to point out that the president had represented the company before the Department of Administrative Hearings, since the company failed to identify any act the president took before the agency which amounted to unauthorized practice of law. Nor did the trial court consider new evidence in finding that the president was not a lawyer, in violation of the Administrative Review Law, 735 ILCS 5/3-110. The statute applied to a merits determination, and the court never made one. There was no basis for questioning the trial court’s finding that filling in the blanks in a simple form complaint was the unauthorized practice of law, the court held.

The crux of the problem, the court found, was whether the rule that a pleading signed by a non-attorney was void required automatic or discretionary dismissal. The court recognized conflicting pronouncements on both sides of the question, but ultimately followed Applebaum v. Rush University Medical Center, where the Supreme Court held that dismissal was permitted rather than required, and only then when dismissal fulfilled the purposes of the rule, protecting the public and the integrity of the court system, and where no alternative remedy is possible.

Having decided that dismissal was not mandatory, the court ordered remand. The record suggested that the trial court likely would not have dismissed had it understood that it had discretion about the penalty, and the court concluded that the company had not acted unreasonably in believing that the president could sign the administrative review complaints. Furthermore, given that the City hadn’t complained about the matter until the motions for leave to amend were filed, the court found itself unable to perceive any prejudice from the signatures on the administrative complaints. Accordingly, the court instructed the trial court to allow leave to amend.

The Supreme Court’s decision in Downtown Disposal will be filed at 10:00 a.m. tomorrow morning. Join us back here for review and analysis.

Limits on Life after Death: Only Accrued Claims Are Viable Against Corporations Post-Dissolution

By Kirk Jenkins on Posted in Illinois

According to the Illinois Business Corporation Act, the dissolution of a corporation “shall not take away nor impair any civil remedy available” to or against the corporation, its directors or shareholders “for any right or claim existing, or any liability incurred, prior to such dissolution” as long as the lawsuit is filed within five years after dissolution. 805 ILCS 5/12.80.

But what does “right or claim existing” mean? What if the claim doesn’t accrue until after the demise of the corporation? The Illinois Supreme Court faced that question last week in Pielet v. Pielet. [pdf].

Pielet potentially posed a significant threat to Illinois business. The idea that dissolving corporations might face years of potential long-tail liability, based on conduct which occurred after the corporation’s demise, would have made winding down any corporation’s affairs considerably more difficult. In the end, the Supreme Court declined to permit such claims, holding that only claims which had actually accrued on the date of corporate dissolution were subject to the Business Corporation Act’s five-year survival statute.

Pielet arose from a generational transition at a family business. The plaintiff’s husband retired, selling the business to his sons. The sons gave their father a consulting contract, which would survive the father’s death and benefit their mother. Two years after the sale, one brother bought out the other. A series of complex corporate transactions followed, as the remaining brother moved to combine the business with a new partner from outside the family: (1) he sold an undivided one-half interest in the company to PBS One, Inc., the new partner’s business, and PBS agreed to assume half Pielet’s liabilities (including the consulting contract); (2) they formed a limited partnership, PBSIM, LP; and (3) both sides contributed their ½ interests in Pielet to PBSIM, LP. A few years later, PBS One sold its half interest in the partnership to National Material, LP, which the outside partner also owned, and PBS dissolved (National Material assumed PBS’ obligations). PBSIM, LP changed its name to Midwest Metallics in 1993, but continued to issue checks under the consulting agreement until 1998. The following year, Midwest Metallics declared bankruptcy, and the checks stopped.

The mother and father sued everyone concerned. Three counts of their complaint are relevant to our discussion here: breach of contract against National Material and NM Holding, Inc., the general partner of National Material; breach of contract against the same two entities as a “mere continuation” of PBS One; and breach of contract against PBS One – which had been dissolved for nearly five years. The parties filed cross-motions for summary judgment. The trial court granted the mother (the father by this time having died) summary judgment on all three claims, and both sides appealed. The Appellate Court reversed, saying that although the breach of contract claim against PBS was subject to the Business Corporation Act’s survival provision – despite not having accrued until after PBS’ dissolution – there were genuine issues of material fact regarding whether there had been a novation amongst all the corporate transactions. Then, for the sake of judicial economy, the court found that National Material and NM Holding would be liable if PBS was, since National Material was PBS’ successor, and NM Holding was the general partner of National Material.

Writing for a five-Justice majority of the Supreme Court, Justice Lloyd A. Karmeier affirmed in part and reversed in part. The Court rejected the plaintiff’s argument that the plaintiff’s contract rights were a “claim or right” within the meaning of the Business Corporation Act sufficient to make the survival provision applicable. Following In re Johns-Manville Asbestosis Cases, 516 F.Supp. 375 (N.D. Ill. 1981), the Court held that since the consulting contract had not been breached until years after PBS’ dissolution, the breach of contract claim against PBS necessarily failed, whether there had been a novation or not.

On the other hand, the question of whether a novation had occurred was central to determining whether or not National Material and NM Holding could be held liable. Finding that there was a considerable material dispute as to that question, the Court affirmed the denial of summary judgment.

The remainder of Pielet – and the dissenters’ only disagreement with the majority – turned on an interesting but seldom touched-on area of appellate law: what constitutes an impermissible advisory opinion. National Material and NM Holding had sought and been granted leave to appeal to the Supreme Court despite having won at the Appellate Court. Why? Because they argued that the Appellate Court’s comments that National Material was a “mere continuation” of PBS were an improper advisory opinion. The majority of the Court agreed, holding that once the Appellate Court had found a triable issue on novation, there was no need to go further.

Writing for herself and Justice Charles E. Freeman, Justice Anne E. Burke disputed the majority’s view. Justice Burke pointed out that National Material and NM Holding had also argued that they should have been granted summary judgment.   That necessarily involved proving either that there was a novation extinguishing liability, or that they were entitled to judgment on the merits. Therefore, in the view of Justices Burke and Freeman, the Appellate Court had to consider the status of National Material and NM Holding, and setting aside that portion of the opinion was erroneous.

Illinois Supreme Court Adopts Tort of Intrusion Upon Seclusion

By Kirk Jenkins on Posted in Illinois, Punitive Damages

It’s not often that you see a trial end in verdicts for both plaintiff and defendant, with both sides receiving awards of not only compensatory but punitive damages against the other. The Illinois Supreme Court heard such a case today. A 6-1 majority led by Justice Mary Jane Theis affirmed in part and reversed in part a judgment arising out of a complex employment dispute in Lawlor v. North American Corp. of Illinois.

Plaintiff was a commission-based salesperson for defendant. Just short of seven years after starting work for the defendant, the plaintiff resigned and went to work for a competitor who also sold corporate-branded promotional items. The defendant suspected that the plaintiff had violated her noncompetition agreement with the defendant, so the company instructed its lawyer to investigate. The company lawyer retained a private investigation firm which had worked for the company before.

The president of the investigation firm testified that he had conducted previous noncompetition investigations for the defendant, and that the defendant wanted him to obtain the plaintiff’s telephone records. For his part, the defendant company’s designated liaison with the private investigators testified that he relied on the lawyer and the investigator to perform the investigation and did not instruct them on what to do or not to do. He received several faxes from the investigator containing hundreds of phone numbers during the investigation, but he never asked how the phone records had been obtained.

Plaintiff was recruited to join her new company by a former employee of the defendant. In the final months before she resigned from the defendant’s employ, she spoke several times to an outside consultant hired by a customer to negotiate its business with defendant. The consultant testified by declaration that the plaintiff had encouraged him to delay awarding his business until the plaintiff moved to her new employer, but at trial, the consultant disavowed his own declaration. Only a month into her new job, the plaintiff sent her new boss a letter discussing her sales history while working for the defendant; the letter disclosed the defendant company’s typical profit margin.

The plaintiff sued the defendant for outstanding commissions; not long after, upon learning of the defendant’s investigation, she added a claim for intrusion upon seclusion. The defendant countersued for breach of the fiduciary duty of loyalty and for excess commission draw payments. At the conclusion of the trial, the jury returned a verdict for plaintiff on the intrusion claim, awarding $65,000 in compensatory damages and $1.75 million in punitive damages. The court subsequently entered judgment for defendant on its breach of fiduciary duty claim, awarding the defendant $78,781 in compensatory damages and $551,467 in punitives. On posttrial motions, the court reduced the plaintiff’s punitive damages award to $650,000. The Appellate Court affirmed the plaintiff’s judgment on the intrusion claim and reinstated the plaintiff’s original $1.75 million award of punitive damages. The Court also reversed the Circuit Court’s judgment in defendant’s favor on the breach of fiduciary duty claim. The Supreme Court affirmed in part and reversed in part.

Much of the Court’s opinion seems fact-specific and unlikely to have a dramatic influence on Illinois law going forward. The Court found that adequate evidence supported the judgment that the private investigators were an agent of the defendant for purposes of vicarious liability. The Court further held that although the defendant had apparently obtained the plaintiff’s phone records on multiple occasions, the defendant’s conduct nevertheless ranked low on all the common law criteria of gravity. Moreover, the Court held, the justification for a heavy award of punitive damages was "sharply diminished" where liability was vicarious. The court also affirmed the vacatur of the award for the defendant on the counterclaim, finding that there was no evidence that the plaintiff had breached her common law duty of loyalty.

One aspect of the decision, however, carries with it a potential impact for future litigation: in affirming the judgment in plaintiff’s favor in connection with the defendant’s investigation of her phone records, the Court adopted the tort of intrusion upon seclusion as a valid cause of action in Illinois. The Court endorsed the standard set forth in Section 652B of the Restatement(Second) of Torts for the new cause of action, holding that an intrusion upon the private affairs and concerns of another would be actionable "if the intrusion would be highly offensive to a reasonable person." How dramatic an effect on Illinois law this new cause of action has will have to await subsequent lawsuits by other parties.

Chief Justice Thomas L. Kilbride dissented in part. Although the Chief Justice agreed that the plaintiff’s judgment on her intrusion claim should be affirmed and the defendant’s judgment for breach of fiduciary duty reversed, the Chief concluded that the majority had been insufficiently deferential to the lower court’s findings with respect to the plaintiff’s claim for punitive damages. Chief Justice Kilbride wrote that he would have affirmed the Circuit Court’s remittitur of the punitive damages award to $650,000.

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