Posts from: August 2017

Is the Confession of Judgment Provision In My Contract Enforceable?

Answer: In a consumer transaction, no.¹ In a commercial transaction, it depends.

A typical “confession of judgment” provision in a commercial contract (e.g., a promissory note) authorizes the creditor upon a default under the agreement to obtain a judgment for the amount owed without notice to the debtor(s) or guarantor(s), and allows the creditor to immediately execute on the judgment. The clause will most likely contain a “warrant of attorney” authorizing the appointment of an attorney to appear for the debtor, to waive personal jurisdiction and service, and to consent to an amount due and owing by the creditor. Thus, a party in default under an agreement containing a confession of judgment provision often first learns about the lawsuit against him after collection efforts have begun, when his bank accounts have been frozen or a lien has been recorded against his property. Courts will permit this judicial “shortcut” only if (a) the contractual provision is enforceable in the first place, and (b) the creditor takes the right steps to obtain the judgment after a default.

On the first point, a judgment by confession is void where it requires extrinsic evidence to prove the underlying debt. The Illinois Supreme Court in Grundy County Nat. Bank v. Westfall, 49 Ill.2d 498, 500–01 (1971) has held: “Judgments by confession are circumspectly viewed. … ‘The power to confess a judgment must be clearly given and strictly pursued, and a departure from the authority conferred will render the confessed judgment void.’ The extent of the liability undertaken must be ascertainable from the face of the instrument in which the warrant is granted. … ‘A judgment by confession must be for a fixed and definite sum, and not in confession of a fact that can only be established by testimony outside of the written documents, required by the statute to be filed in order to enter up a judgment by confession.” See also Ninow v. Loughnane, 103 Ill.App.3d 833, 836 (1st Dist. 1981); State National Bank v. Epsteen, 59 Ill.App.3d 233 (1st Dist. 1978). Numerous other courts have likewise held that a guaranty or underlying instrument purporting to grant power to confession judgment that is all-encompassing—for example, one that refers to “any and all debts, liabilities and obligations of every nature or form of the debtor,” including future debts, is so broad as to be void. Thus, if your confession of judgment clause is broad-sweeping or does not clearly describe the extent of the debtor’s liability, or if proving the amount owed requires reference to other documents extraneous to the instrument itself, the confession of judgment clause – and any judgment later obtained thereon – is void. While it is certainly advisable for clients finding themselves on the defensive end of this situation to act quickly, Illinois law permits a void judgment to be attacked at any time.

As to the second point, because the confession of judgment remedy is a creature of an Illinois statute, it must be strictly construed. See 735 ILCS 5/2-1301(c).  Voidness issues aside, that section requires the creditor to file a confession judgment suit only in the county in which (1) the note or obligation containing the confession of judgment clause was executed, (2) one or more of the defendants reside, or (3) in which any real or personal property owned by any of the de­fendants is located.

Because Illinois courts view judgments by confession with some skepticism, the law affords various remedies and means of challenging them not covered by this article. For further information on how to defend a judgment by confession case or to use such a provision offensively, contact:

Katherine A. Grosh at:

(312) 368-0100 or kgrosh@lgattorneys.com.


¹ A “consumer transaction” is defined as the “sale, lease, assignment, loan, or other disposition of an item of goods, a consumer service, or an intangible to an individual for purposes that are primarily personal, family, or household.” 735 ILCS 5/2-1301(c). If the instrument authorizing the judgment by confession in a consumer transactions was executed prior to September 24, 1979, however, it is still enforceable. Id.

An Employer Can Be Liable for Accessing an Employee’s Personal Email Even if the Employee Engaged in Misconduct

Over the last several years, communication via email and text has become commonplace in the workplace. Oftentimes, employees use one device for both personal and work-related communication regardless of whether that device is employee-owned or employer-provided. There is no doubt that employers may have legitimate business reasons for monitoring employee communications. For example, an employee may leave the company and the employer is concerned that she has taken confidential information or illegally solicited clients. Employers feel entitled to review data stored on employer-provided, particularly where employees are instructed that the company owns the devices and has the right to monitor the data.  As a general rule, the law supports employers here.  An employer’s zeal to snoop, however, may subject it to both civil and criminal penalties under both federal and state statutes.

The Electronic Communication Privacy Act (ECPA) and the Stored Communications Act (SCA) both govern an employer’s ability to review electronic communications. The ECPA prohibits the interception of electronic communications, and the term “interception” as used in the ECPA has been interpreted narrowly. The SCA makes it illegal to “access without authorization a facility through which electronic communication service is provided,” making it illegal to obtain access to certain communications in electronic storage. With regard to an employer’s review of employee emails sent through web-based email accounts like Gmail or Hotmail, the most frequent scenario is where the former employer is able to access the former employee’s web-based email account because the employee saved his username and password on a device provided by the employer. In these cases, courts have typically sided with the former employee and have been reluctant to punish the former employee for failing to take appropriate steps to secure their own personal information and allegedly private communications.  The former employee’s own negligence in securing personal data is not a defense for the employer.

Bottom line – an employer should seek advice before accessing an employee’s personal email account without authorization even though it has the ability to do so.

For more information on this topic please contact:

Howard Teplinsky at:

312-368-0100 or hteplinsky@lgattorneys.com.

Revisions to the Illinois Limited Liability Act

The Illinois Limited Liability Company Act (805 ILCS 180) (the “LLC Act”) recently underwent significant revisions which became effective on July 1, 2017.  The changes to the LLC Act align with the revised Uniform Liability Company Act, and Illinois now joins fifteen other states in modeling the revised Uniform Liability Company Act.  Although the LLC Act is often minimally revised, this is the first major overhaul of the LLC Act in over two decades.  Some of the significant revisions are:

  1. Operating Agreements. The goal of the revisions is to make the LLC’s Operating Agreement (similar to a partnership agreement) the primary controlling document for the LLC.  Under the prior version of the LLC Act, the management of the LLC was designated in the Articles of Organization.  Now, the LLC is presumed to be member-managed unless the Operating Agreement indicates that the LLC is manager-managed. Further, the revised LLC Act now permits an LLC to have an oral Operating Agreement, exempting the Operating Agreement from complying with the Illinois Statute of Frauds (740 ILCS 80/2).  (The Illinois Statute of Frauds requires all documents that exist in effect for more than one year to be in writing.)  However, it is strongly recommended that all LLCs have a written Operating Agreement in the event a dispute arises between members as to the terms of such Agreement.
  1. Fiduciary Duty. Under the revised LLC Act, an LLC may now restrict or eliminate the fiduciary duties of a member or manager to the LLC so long as it is clear and ambiguous in the Operating Agreement.  The Operating Agreement can identify the specific activities that will not violate the member or manager’s fiduciary duties to the LLC.  Note, the duty of care cannot be waived or eliminated, but it may be altered by the Operating Agreement, so long as such alterations do not allow for intentional misconduct or a knowing violation of law.  Further, such modifications of the fiduciary duties, including the duty of care, cannot alter or eliminate the obligations of good faith and fair dealing.  It is highly recommended that an LLC’s Operating Agreement include specific language providing that any alterations or waivers will be allowed to the extent they are permissible under the LLC Act and other applicable law.
  1. Member’s Authority to Bind LLC. Previously, a member was able to bind an LLC to agreements “solely by being a member”.  Now, a third party can no longer rely on an individual’s status as a member of the LLC to bind the LLC to any agreements executed by the member. A third party will want to conduct further due diligence to confirm such member’s authority to bind the LLC.  The revised LLC Act requires that there be express authority granted by the LLC to the member in order for the member to bind the LLC to any contractual obligation.  A Statement of Authority may be filed by the LLC with the Illinois Secretary of State indicating which managers and members have the authority to bind the LLC and to what extent. The Statement of Authority will be deemed to be “constructive notice” to third parties. For example, the Statement of Authority will indicate which managers and members may execute documents for transactions relating to the LLC’s real estate and other transactions on behalf of the LLC.  If the Statement of Authority does pertain to real estate, the Statement may also be recorded in the county in which the real estate is located and can be relied on in good faith by potential purchasers. On the other hand, if a manager or member does not want the authority granted to it in a Statement of Authority, the manager or member has the option to file a Statement of Denial with the Secretary of State, retracting any such authority.

As a result of the significant changes to the LLC Act, it is imperative to have a current Operating Agreement in place for your LLC.  The LLC Act applies to all Illinois limited liability companies; therefore, where an LLC Operating Agreement is silent on a particular issue, the LLC Act’s provision governs.  We encourage you to consider the impact of the revisions on your LLC and its Operating Agreement, conduct a review of your LLC’s existing Operating Agreement, or consider preparing a new Operating Agreement.

For more information on this topic or to discuss any of the above recommendations, please contact:

Pamela Szelung at:

312-368-0100 or pszelung@lgattorneys.com.

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