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.

Reminder to Chicago Landlords: Tenants Must be Notified of a Pending Foreclosure Action

Under the City of Chicago Residential Landlord Tenant Ordinance (“RLTO”), owners and landlords of residential property located in the City of Chicago must notify their tenants of a foreclosure action within seven (7) days of being served with the foreclosure complaint. If the foreclosure action is pending at the time the lease is executed, the owner or landlord must disclose in writing to the tenant that the foreclosure complaint is pending.

The notice must comply with the following requirements:

  • Be in writing;
  • Be sent to all tenants of the premises and to any other third party who has a consistent pattern and practice of paying rent on behalf of the tenant;
  • Identify the court in which the foreclosure action is pending, the case name, and the case number; and
  • Include the following language: “This is not a notice to vacate the premises. This notice does not mean ownership of the building has changed. All tenants are still responsible for payment of rent and other obligations under the rental agreement. The owner or landlord is still responsible for their obligations under the rental agreement. You shall receive additional notice if there is a change in owner.”

If an owner or landlord fails to provide the required notice, the tenant may terminate the rental agreement upon thirty days (30) written notice to the owner or landlord. Additionally, in a civil lawsuit, the tenant can recover $200 in statutory damages, plus any other actual damages incurred as a result of the owner or landlord’s failure to provide the requisite notice.

If you have any questions about your obligations under the RLTO, or would like assistance in issuing a foreclosure notice to your tenants, please contact:

Kristen E. O’Neill at:

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

Have You Looked at Your Estate Plan Documents Lately?

Does this sound familiar?

“John and Mary kept delaying any discussions about preparing estate planning. After they had their first child, Jack, they finally decided it was time to discuss their estate plan with a lawyer. They set up a trust for Jack if anything happened to John and Mary and designated John’s parents, who were then 65, as Jack’s guardian and the trustee of the trust. Since they had meager assets, they left everything outright to him at age 25. John and Mary ignored these documents and made none of the transfers recommended by their lawyer to avoid probate.

Ten years passed by. They now have three children, Jack, (10) Jackie (7) and Maureen (4). Jack’s parents have moved away to enjoy warmer climates.

John and Mary should revisit their estate planning desires. Are his parents still capable of raising their children? When Maureen is 16, Jack’s parents will be 87. Have Jack and Mary considered planning possibilities for their digital assets? What about their business? Can it operate after they are no longer able to manage it? Are their children able to handle their inheritance as originally planned? Are John and Mary’s health care powers and living will directions up-to-date? Have they considered the effect that taxes and probate might have on their plan? Are there any other special circumstances they need to plan for?

We recommend you review your estate plan every 2-3 years or more often based upon your changes in family and your finances. Isn’t it time you reviewed your estate plan??

To discuss any questions you have regarding your estate plan or for a complimentary estate plan review, please contact:

Morris Saunders at:

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

Michael Weissman to be a Featured Speaker at Upcoming Events

Michael Weissman will be a featured speaker at the Specialized Lending Conference for the National Credit Union Association. The conference will take place on May 24, 2017 at the Downtown Hilton Hotel in Tampa, Florida.

Michael will also be both a speaker and moderator at a program sponsored by the Illinois State Bar Association’s Section Council on Commercial Banking, Collections and Bankruptcy. The program will take place on June 8, 2017 at the ISBA headquarters at 20 South Clark Street in Chicago, Illinois. To register, or for more information please click here.

Decisions Facing Trademark Holders In A Post-BREXIT Europe

While the BREXIT decision has been made, much ambiguity remains on the issue of trademark rights holders and their interests that are currently protected by European Union trademarks, commonly referred to as “EUTMs”.

Neither Theresa May’s BREXIT speech in January 2017, nor the UK government’s white paper entitled “United Kingdom’s exit from and new partnership with the European Union” published in February 2017 advise or guide trademark holders as to whether their rights will continue to be protected in the UK or whether trademark holders’ rights vis a vis the UK will simply cease to exist.  However, certain intellectual property organizations such as The Chartered Institute of Trademark Attorneys (CITMA) have offered some ideas as to how this issue may be addressed.  Their suggestions include the following three approaches: (1) the UK plus, (2) The Jersey model, (3) The Montenegro model, (4) The Tuvalu model, (5) Veto, (6) The Republic of Ireland model and (7) Conversion.  The following is a description of how each approach would address the issue post-BREXIT.

(1) The UK plus

EUTM protection would be extended to include the UK, and possibly other European countries who are not currently members of the EU.

(2) The Jersey model,

The UK would deem EUTM registrations to have the same rights in the UK as they do in the EU and UK courts would recognize EUTM registrations as if they were UK registered marks for purposes of enforcement.  However, the UK would not otherwise record these trade marks in the UK Trade Mark Office.

(3) The Montenegro model

All existing EU trade mark registrations would automatically be entered into the UK trade mark register as UK registrations where the marks would have the same description of services, same registration date, and where applicable, the same priority and seniority.

(4) The Tuvalu model

Like The Montenegro model, the existing EU trade mark registrations would be entered onto the UK Intellectual Property Office (“UKIPO”) registry, but only if the EU trade mark holder filed a form requesting the same within a prescribed time frame (to be determined).

(5) Veto

The Veto system would resemble the Montenegro model where holders of EU trade mark registrations could request a mirror-image UK registration, but the UKIPO could then elect to refuse certain registrations that would not have been registrable under the UK laws, had the original application been filed in the UK.

(6) The Republic of Ireland model

Registrations in the EU would be enforceable in the UK until such time as the EU registration renewal deadline, at which time the EU registration holder would be required to create a UK registration that corresponds to its EU registration in addition to filing its EU renewal.  Likely the UK registration would have to be filed within a certain amount of time after the EU renewal.

And

(7) Conversion

All EU registered trade marks would be automatically converted to UK applications, where they would then go through a full examination by the UKIPO as if it was a newly filed UK application.

While it remains to be seen which method will be adopted in 2019 when BREXIT takes effect, likely one of these approaches will become the procedure to follow.  Businesses with sales in Europe and the UK should consider filing a separate trademark application in the UK now, as a precautionary measure. To learn more about how to protect brands in Europe and the UK, please contact:

Natalie A. Remien at:

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

Unexpected Liability for Service Providers

With “hacking” and identify thefts becoming all too common place, each service provider must place more and more emphasis on protecting itself from legal liability caused by not only its own actions, but the actions of the company(ies) to whom it outsources. This article provides an introduction to contracting for service providers with an eye toward gaining legal platform upon which to adequately defend itself, if necessary.

In addition to government compliance, which will vary depending upon the industry, any company that collects personal information during the course of providing its services must take steps to safeguard itself from legal liability arising due to unwanted disclosures.  One way to provide a legal safety net is to consider the applicable issues in the service provider’s agreement.  The following is an abbreviated checklist.

  1. Whether personally identifiable information will be provided to service provider’s employees, and if so, what measures are taken to narrowly tailor the need to expose such information to only those employees or third parties who need to know in order to provide the service.  In considering this, a service provider may want to consider identifying types of employees or third parties that may be exposed to such information, or even listing such persons and having them sign a confidentiality agreement with respect to such information.
  2. When does a service provider have to notify a customer of a security breach?   Is there an obligation to notify customers of a potential privacy-related compliance issue?  Or, only when a security breach has occurred?  If a security breach is defined, service providers will be required to undertake all tasks from notification to remediation and payment for such remediation upon receipt of a complaint.
  3. While necessary, service providers will want to limit their contractual obligations to comply with compliance with IT management standards such as the International Organization for Standardization certification.
  4. If the service provider receives credit card information of customers, then at the very least, the following issues must be considered:
    1. Limitation of access of personal information to authorized employees or parties
    2. Securing business facilities, data centers, paper files, servicers, backup systems and computing equipment (mobile and other equip with info storage capability;
    3. Implementing network/ device application, database and platform security
    4. Securing info transmission storage and disposal
    5. Implementing authorization and access controls with media, apps, operating systems and equipment
    6. Encrypting highly sensitive personal information stored on any mobile media
    7. Encrypting highly sensitive transmitted over public or wireless networks
    8. Strictly segregating personal information from and info of service provider or its other customers so that personal information is not commingled;
    9. Implementing appropriate personnel security and integrity procedures and practices (conducting background checks, and providing appropriate privacy and info security training to service providers’ employees.

If you have any questions regarding your liability for disclosure of personal information, please contact:

Natalie Remien at:

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

testimonials

"We've worked with Levin Ginsburg since the 1980s...we have grown with them and have a very high level of comfort and confidence with this firm." Jay Nichols, President,
Badger Murphy
"Astute, responsive and practical. Those are three reasons why we work with Levin Ginsburg." Bryan L. Oyster, V.P. and General Manager,
Bentley Forbes