Tag: Illinois

Purchaser Collection of Pre-Closing Rent Deficiency

In the purchase and sale of real property which is leased to tenants, sellers and purchasers must pay particular attention to the allocation of rent collected both before and after the closing.  A typical purchase and sale agreement will include, among other things, language addressing the allocation of rent by the parties for the current period as well as the collection of delinquent rent after closing which is attributable to the seller’s period of ownership prior to closing.  In negotiating a contract, the parties will need to determine whether the purchaser is responsible for attempting to collect pre-closing delinquent rents and the rights of the seller to pursue tenants after closing for any such pre-closing delinquent rents.

Collection of pre-closing delinquent rent can be a complicated issue for purchasers and sellers to resolve.  On the one hand, the purchaser may be reluctant to allow the seller to undermine the financial condition of a tenant by pursuing lawsuits against a tenant that may be paying current rent to the new landlord.  On the other hand, a former owner does not have a full range of typical landlord remedies at its disposal to effectively induce tenants to pay delinquent rent as the former owner cannot assert an eviction action against a tenant and terminate the tenant’s right of occupancy.

The tension between purchasers and sellers with respect to pre-closing, delinquent rent is further complicated by a recently decided opinion issued by the Illinois Appellate Court in 1002 E. 87th Street LLC v. Midway Broadcasting Corporation (2018 IL.) App. 1st 171691, June 5, 2018).  In that case, the Court upheld a lower court ruling that Illinois law does not permit the purchaser of real estate to pursue claims against a tenant for pre-closing, unpaid rent under a lease assigned to the purchaser at closing.  The purchase and sale agreement between the purchaser and seller in that case contained standard provisions confirming that the “landlord” under the lease included any successors and assigns.  It also provided that all obligations and liabilities of the original landlord were binding on the purchaser, as successor landlord.  That would include any pre-closing landlord defaults that remained uncured.  Notwithstanding the successor landlord’s assumption of the lease, including, potential liability for pre-closing defaults of its predecessor, the Court ruled that the successor landlord did not have the right to recover pre-closing rent.  The Court specifically stated that the rule in Illinois is that rent in arrears is not assignable.

The lesson to be learned from the 1002 E. 87th Street case is that it is important to negotiate and set the expectations of the parties with respect to pre-closing delinquent rents at the time of contract.  Since a predecessor landlord may have little power other than initiating litigation (which is not desired by the successor landlord) against a tenant for delinquent rent and the successor landlord is unable to maintain an action for that delinquent rent, parties must give careful thought to the method of addressing the collection of pre-closing delinquent rent.  Fortunately, there are a number of different approaches that the parties may employ to coordinate and enhance the collection of pre-closing, delinquent rent.

For further information regarding the purchase and sale of commercial real estate as well as matters involving the rights of sellers, purchasers and tenants, please contact:

Jeffrey M. Galkin at:

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

A Baseless Lawsuit Was Filed Against My Business. Can I Recover My Attorneys’ Fees?

Defending lawsuits is sometimes an unfortunate but necessary part of doing business. Whether the case was quickly dismissed by the court, or whether you won the case after a trial, you and your attorneys knew the case was unfounded from the beginning and yet you had to spend substantial time and money that you could have devoted to your business in order to successfully defeat the case.

Depending on the facts and circumstances and whether the suit was pending in state or federal court, your fees may be recoverable from other side as a sanction for filing a “frivolous” claim against you. However, absent a contract or statute providing otherwise, you will most likely be unable to recover your attorneys’ fees simply because you won your case.

Assuming the suit was filed in Illinois, sanctions may be available. Generally, to recover fees against a party or his or her attorney under either rule, it must be shown that the party and/or his attorney either: (1) failed to reasonably investigate the facts or the law before filing the offending complaint, (2) filed the complaint for the purpose of harassment, delay, or to increase the cost of litigation for the opposing party.  One principal difference between the federal rule and the Illinois rule is that under the federal rule, only an attorney can be monetarily sanctioned based on unwarranted legal contentions. Thus, if the complaint was filed in federal court, while both the attorney and client are responsible for ensuring that the facts contained in the complaints are accurate and complete, only the attorney may be sanctioned for a complaint based on a claim or argument that is not warranted by existing law.  By contrast, under certain circumstances, the Illinois rule permits the court to sanction both the party and his attorney—even if the complaint is found to have been legally (as opposed to factually) unwarranted.

It is important to note that not every meritless case is considered “frivolous” for purposes of recovering attorneys’ fees. The United States Supreme Court has held that an action or claim is frivolous if “it lacks an arguable basis either in law or in fact.” Similarly, the Seventh Circuit Court of Appeals has characterized a filing that is incoherent and lacks a legal basis as “frivolous.” Thus, “frivolous” does not necessarily mean “meritless,” but rather, a frivolous suit lacks a factual or legal basis, and as such, has very little chance of being won.  For this reason, it is recommended that a party wishing to seek sanctions do so at the end of the case, i.e., after the court makes a determination that the claim lacks legal and/or factual merit.

In addition, as the Seventh Circuit Court of Appeals recently determined, whether a case or claim is “frivolous” is not the end of the inquiry. A request for attorneys’ fees may nonetheless be denied where fees that were incurred were “self-inflicted” by, for example, pursuing one strategy over another, or briefing an appeal on the merits rather than filing a motion to dismiss for lack of jurisdiction.

Both the federal rule and the Illinois rule are discretionary and are strictly applied by the courts. As such, sanctions are infrequently granted. Regardless of how and when your litigation was resolved, you and your attorneys should evaluate whether it would be appropriate to seek sanctions, and if so, whether it would be worthwhile from a cost perspective.

If you have any questions regarding a litigation matter you find yourself involved in, please contact:

Katherine A. Grosh at:

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


[1]  This article is the first of a three-part series: Part II will address the recovery of attorneys’ fees pursuant to various Illinois statutes, and Part III will address the recovery of attorneys’ fees pursuant to a contract where the dispute is resolved outside of the litigation context.

Keeping your Trade Secrets Safe: The Runaway Employee

How can a business protect its critical information when an employee goes to work for a competitor? Many employers simply assume that if it deems information “confidential,” the law automatically protects it when an employee leaves and goes to work for a competitor.  That’s not necessarily the case.  In order to protect its confidential information, such as intellectual property, information, systems, customer lists, pricing information and the like, an employer must take affirmative steps long before the rogue employee leaves to ensure that its information is protected.  Such information can be protected from disclosure both under Illinois common law and pursuant to the Illinois Trade Secrets Act (“ITSA”).

An employer’s trade secrets, such as its customer lists, are a protectable interest. An employer has a clear and ascertainable right in protecting its trade secrets. To show information is a trade secret under ITSA, an employer must meet two threshold requirements. First, it must show the information was sufficiently secret to provide the employer with a competitive advantage. Second, the employer must show that it took affirmative measures to stop others from acquiring or using the information. Examples of steps employers typically take to keep information confidential include keeping the information under lock and key, limiting computer access, requiring confidentiality agreements, and other employer efforts to advise employees that the information imparted to them must be kept secret. Establishing this second prong is where employers typically fall short.

Where employers have invested substantial time, money, and effort to obtain a secret advantage, the secret should be protected from an employee who obtains it through improper means. Although employees may take general knowledge or information with them that they developed during their employment, they may not take confidential information, including trade secrets. The taking does not have to be a physical taking by actually copying the names. A trade secret can be misappropriated by physical copying or by memorization. Using memorization to rebuild a trade secret does not transform the trade secret from confidential information into non-confidential information. A trade secret can also be obtained through reverse engineering

Whether and how an employer keeps information secret is one of the most important factors when determining whether information is a trade secret. When information is generally known or understood in an industry, even if it is unknown to the public at large, it does not constitute a trade secret. If a business fully discloses information throughout an industry through a catalog or other literature, it is not considered a trade secret. If the information can be readily duplicated without considerable time, effort, or expense, it is not considered a trade secret. If a customer list, for example, is generally available to all employees and the employees are not required to sign confidentiality agreements, the list is likely not considered a trade secret.

By far the most litigation in this area is over whether an employer’s customer list is a confidential trade secret.  Whether customer lists constitute trade secrets largely depends on the facts of each case.  Customer lists and other customer information can be considered a protectable trade secret if the information has been developed by the employer over a number of years at great expense and kept under tight security. However, the same type of information is not protectable where it has not been treated as confidential and secret by the employer, was generally available to other employees and known by persons in the trade, could be easily duplicated by reference to telephone directories or industry publications, and where the customers on such lists did business with more than one company or otherwise changed businesses frequently so that their identities were known to the employer’s competitors.

Illinois courts have found that customer lists do not constitute protectable trade secrets where, for example: a) the particular industry was competitive and customers often dealt with multiple companies; b) the employer had failed to produce sufficient evidence to demonstrate that the customer list was subject to reasonable efforts to protect its secrecy; and c) sufficient efforts had not been taken to maintain the list’s secrecy. To be a protectable trade secret, the employer must demonstrate the information it seeks to protect was sufficiently secret to provide it with a competitive advantage. However, for steps to be deemed sufficient to protect a trade secret, extensive steps must be taken to protect both the electronic and hard copies of the purported trade secret.

For more information regarding the protection of a company’s confidential information, please contact:

Howard L. Teplinsky at:

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

Estate Tax Developments under the New Tax Act – What about Illinois residents?

Under the Tax Cuts and Jobs Act, the new federal estate tax system “exempts” from federal estate tax, all estates under $11.2 million for each decedent, meaning that a married couple could have an estate of $22.4 million and not incur any federal estate taxes. This higher amount means that most estates will not be subject to federal estate tax. These amounts will be subject to increase, based upon increases in the Consumer Price Index; however, the amount “sunsets” after 2026, and the amounts will be reduced by half.  The good news is that many estate plans can be drafted with little regard to federal estate taxes in some states. The bad news is that residents of Illinois are subject to a much lower threshold and may need to examine their estate plans in light of the Illinois thresholds.

Illinois taxes all estates in excess of $4 million AND, if not structured properly, both spouses may not be able to take advantage of the full amount. While federal law generally permits a surviving spouse to “use” any unused exemption amount of their deceased spouse, Illinois does not permit this. For federal tax purposes, if one spouse dies with a $6 million dollar taxable estate, then under some circumstances, the surviving spouse may use his or her own exemption of $11.2 million, plus the “unused” $5.2 million of the deceased spouse.

“Typical” estate planning has often maximized the federal exemption amount on the first spouse to die by putting that into a segregated trust while leaving everything else to the surviving spouse. If you have not looked at your estate planning documents, you should do so immediately. Under the “typical” plan, the surviving spouse is often only entitled to receive income from that segregated trust which holds the maximum federal exemption amount; principal distributions are based upon need. Thus, the surviving spouse may not be able to access principal of the decedent’s estate without establishing a need. And to make matters worse, if that trust holds more than $4 million dollars, then there will be liability for Illinois estate taxes upon the death of the first spouse.

If you have any questions about your estate plan or how federal and Illinois estate taxes affect your estate planning, please call or contact:

Morris Saunders at:

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

 

Want to Get a Photography Business Started in Illinois?

Levin Ginsburg attorney, Dean Tatooles, is an avid photographer and spends the majority of his free time with others that share his passion for photography. Many photographers, like Dean, are also professionals from a wide range of disciplines. Some of those professionals are interested in marketing and possibly selling their images. To that end, Dean is frequently asked how to get a photography business started up in Illinois. Although not all encompassing, below are a few tips for getting a photography business legally up and running.

First, you should determine what type of business entity you will use. In Illinois, the two most common types of business entities used by photographers are limited liability companies (“LLCs”) and corporations. An LLC provides a business structure that can combine “pass-through taxation” like a partnership, with the limited liability protection of a corporation. A corporation also provides for limited liability and can provide other tax benefits that an LLC cannot provide.

Then you should choose a name in which you desire to conduct your business. You could use your own name (“Jonathan Dough Photography”) or you may prefer to use a different name (“Sunshine Photography”). If you are incorporating or organizing an LLC, then you need to determine whether a particular business name is available. You can visit the Illinois Secretary of State’s name search website at http://www.ilsos.gov/corporatellc/. A desired business name must be recognizably different from others, which are already on-file. If you are operating as a general partnership or a sole proprietorship, then you need to check the county records where the business is located.

Once you have created a name for your business and have determined the type of business entity (we will presume you have elected to be either an LLC or a corporation), it is time to make the photography business official with the state of Illinois.

An LLC’s name in Illinois must end with the words “Limited Liability Company”, “L.L.C.”, or “LLC.” Similarly, any domestic corporation’s name in Illinois must include either “Corporation”, “Company”, “Incorporated”, “Limited”, or an abbreviation of any of these words. An LLC may be the easiest route to go as it does not have the extensive corporate formalities and requirements of a corporation but offers, among other things, the limited liability protection of a corporation.

Often times, photography businesses operate under a “trade name” after they are formed. If an entity conducts with a name other than the name officially registered with the Illinois Secretary of State, an “Assumed Business Name Registration” must also be filed with the Illinois Secretary of State.

There is no requirement to register a photography business with the Federal government; however, it must be registered with the Illinois Department of Revenue if business is conducted in Illinois, or with Illinois customers. Once registration is complete, a certificate of registration and State Tax ID Number will be issued. These documents also serve as the business’s sales tax permit, retailer permit, and/or wholesaler permit. You may also need to register with the city and county in which you do business.

Likewise, a Federal Tax ID Number or “FEIN” is required by the Federal government to identify a business entity and is necessary to open a bank account. A business seeking to obtain a FEIN can apply for one online here at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online.

As a final point, a photography business requires a significant investment of both time and money. Business insurance should be secured to help minimize the risks associated with running a business and against unexpected events that may occur. If a photography business has employees, business insurance, such as worker’s compensation insurance and unemployment insurance are required.

If you have specific questions about starting up your photography business, please do not hesitate to contact us:

Dean Tatooles at:

dtatooles@lgattorneys.com or 312-368-0100

Illinois Adopts Uniform Interstate Depositions and Discovery Act

On July 20, 2015, Governor Rauner signed into law a bill that enacts the Uniform Interstate Depositions and Discovery Act (the “Act”). The Act reduces the costs and simplifies the process of litigation in out of state cases where it is necessary to engage in discovery, such as the production of documents or taking of depositions, of a party or parties that are located in the State of Illinois. The Act has been adopted in thirty-eight (38) states and has been introduced for consideration by the legislature in several others.

Prior to the adoption of the Act, an out of state litigant seeking to issue a subpoena to an individual or entity in Illinois was required to file a petition with the Illinois court located in the county where the individual or entity resides, is employed, or transacts business. For example, if a lawsuit pending in Wisconsin, involving a car accident in Wisconsin, was witnessed by an individual who resides in Cook County, Illinois, the parties to the lawsuit would be required to issue a subpoena in Wisconsin, institute an action and file a petition with the Cook County Circuit Court, obtain an order from the Cook County court, and then issue a subpoena in Illinois for testimony of the witness.

Under the Act, this process is streamlined.  An out of state litigant seeking to subpoena a witness in Illinois must simply submit a subpoena issued in another state to the clerk of the court in Illinois, who will then issue an Illinois subpoena for service on the witness in Illinois. Although the Act simplifies the procedure of obtaining a subpoena in an out of state case, subpoenas issued in Illinois are still governed by the Illinois Supreme Court Rules and Illinois state law, including rules regarding the service of subpoenas, motions to quash subpoenas, and the taking of depositions.

If you have any questions regarding the State of Illinois’ adoption of the Uniform Interstate Depositions and Discovery Act, please contact:

Kristen E. O’Neill at:

koneill@lgattorneys.com or 312-368-0100

Attention Businesses: Improper Solicitations for Corporate Reporting Services

Businesses should be alerted to the following which was posted on the Illinois Secretary of State’s website….

Corporate Solicitation Alert— A firm called Annual Business Services is contacting Illinois businesses in an attempt to collect a $125 fee to fill out a corporation’s “Annual Minutes Form.” The Illinois Business Corporation Act does not require corporations to file an “Annual Minutes Form” or pay such a fee with the state or any private entity. If a business would like to file a complaint in relation to this solicitation, please contact the Illinois Attorney General’s Office Consumer Fraud Division at 800-243-0618.

Additionally, if you would like to discuss any corporate reporting correspondence from Annual Business Services or any other entity which you suspect may be improper, or to discuss the actual corporate reporting requirements for Illinois before year-end, please contact:

Morris R. Saunders at:

msaunders@lgattorneys.com or 312-368-0100

New Illinois Law Provides Greater Protections for Pregnant Employees

In August 2014, Governor Pat Quinn signed into law Public Act 98-1050, which is commonly referred to as the “Pregnancy Workers Fairness Act” (the “Act”). The Act, which becomes effective January 1, 2015, provides greater protections for pregnant workers, requiring all Illinois employers to provide reasonable accommodations to any employee or job applicant for pregnancy and child-birth related conditions, unless doing so would impose an undue hardship on the employer.

The Act amends the Illinois Human Rights Act to include pregnancy as a protected class. “Pregnancy” is defined as “pregnancy, childbirth, or medical or common conditions related to pregnancy or childbirth.” Employers are now required to provide pregnant employees with “reasonable accommodations”—the same type of accommodations employers are already required to provide to workers with temporary disabilities. Reasonable accommodations may include light duty, assistance with manual labor, and additional or extended bathroom breaks.  An employer may only refuse a requested accommodation if the employer can demonstrate that the accommodation presents an undue hardship on its ordinary business operations. The Act also prohibits discrimination in the hiring and employment of pregnant workers and those affected by a medical or common condition related to pregnancy or childbirth.

Employers must also post a notice regarding employees’ rights under the Act in a conspicuous location or include this information in the employer’s employee handbook.

To discuss any questions you may have about the effect of this new law on your business, please contact:

Kristen E. O’Neill at:

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

Levin Ginsburg at the Greater Chicago Food Depository

August 20, 2013 was an exciting day for all of us at Levin Ginsburg as our entire firm volunteered to serve at the Greater Chicago Food Depository. Our goal yesterday was to prepare 3,000 pounds of rice for shipment to various GCFD facilities throughout our community. As always, our terrific team was up to the task and we ended our day with 3,312 pounds or rice ready for distribution. We are proud of the great work the GCFD does every day for people in need and very happy to be able to lend our support to those efforts.

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"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,
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