In a victory for Levin Ginsburg’s client Nano Gas Technologies, Inc., the United States Court of Appeals for the Seventh Circuit reversed the district court’s interpretation of an arbitration award, holding that the defendant could not “wait until he dies” to pay a portion of a damage award. In Nano Gas Technologies, Inc. v. Roe, Case Nos. 21-1809; 1822 (7th Cir., Apr. 25, 2022) the Seventh Circuit ruled that the district court had misinterpreted an arbitration award in concluding that the defendant could satisfy a $500,000 judgment “in such manner as Roe chooses.” In refusing to allow Nano Gas to immediately enforce the underlying arbitration award, the district court interpreted the arbitrator’s “in such manner as [defendant] chooses” language as allowing the defendant to choose when to satisfy the arbitration award, if ever, including by whatever assets he had left at the time of his death. Nano Gas appealed from the district court’s judgment.
Agreeing with Nano Gas, the Appellate Court concluded that, although Mr. Roe “invited ambiguity” through an alternative reading of “in such manner as Roe chooses,” his reading was unreasonable. The Appellate Court recognized that Roe could not “refuse to turn over his only identifiable asset, choose hypothetical forms of payment that may never come to fruition, or require Nano Gas to wait until he dies.” The court agreed with Nano Gas that both the language of the arbitrator’s opinion and common sense resolved this issue. Finally, recognizing that although in certain cases district courts may send a case back to the arbitrator to clarify an award, the Seventh Circuit rejected that procedure in this case because the award’s language compelled only one conclusion.
The panel reversed the district court’s findings regarding Roe’s discretion to satisfy the $500,000 award and remanded to allow Nano Gas to resume enforcing the entire judgment without delay. Levin Ginsburg Shareholder and Chair of Litigation Department, Howard L. Teplinsky, authored the appellate briefs and argued the case on appeal.
Some judges have an extraordinary ability to explain their decisions in an easily understood and relatable manner. Such was the case in a very recent decision involving whether an employer’s commercial general liability insurance policy (“CGL”) covered an employee’s claims under the Illinois Biometric Information Privacy Act (“BIPA”). In State Automobile Mutual Insurance Company v. Tony’s Finer Foods, No. 20-cv-6199, Judge Steven Seeger of the United States District Court for the Northern District of Illinois was tasked with deciding whether a standard exclusion in a CGL policy relieved the insurer of its duty to defend a BIPA claim. BIPA is an Illinois statute that, among other things, requires private entities that obtain biometric information from an individual to first inform the individual that the information was being collected and stored and obtain a release from the subject. In the employment context, oftentimes employers collect biometric information (such as fingerprints) for time keeping purposes. In the last seven years, litigation over alleged BIPA violations have exploded and employers often look to their insurance companies to assist in the defense. Judger Seeger ultimately held that the “employment-related practices” exclusion did not preclude insurance coverage, undoubtedly good news for employers.
An “Employment-Related Practices” exclusion is common in CGL policies. Essentially, the exclusion precludes coverage for certain employment-related claims made by employees against their employers. In the policy at issue in the State Automobile case, coverage was specifically excluded for “personal or advertising injury” to “any person” arising out of “(a) refusal to employ that person; (b) termination of that person’s employment; or (c) employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination…” The court recognized that subparts (a) and (b) were not at issue and the only question was whether the underlying lawsuit was about an injury to the employee arising out of “employment-related practices.” The insurance company argued that the exclusion applied because the case arose out of the manner in which employees clock in and out of work. While the argument was “an appealing one,” the court took a closer look at the exclusion and determined that it did not apply. First, the court recognized that the exclusion was the “third part of a trilogy” with the first two parts covering hiring and firing. The judge reasoned that the third subpart, “arising out of employment related practices,” read with parts one and two appears to apply specifically to adverse employment action “and not any and all claims about something that happens at work.” The judge further stated that even though clocking in or out is an employment practice or policy, the fact that the text then contains a “laundry list” of targeted disciplinary practices, “using one’s finger to clock-in and clock-out is an awkward fit in that string, at best.” In determining that the third clause, when read in tandem with the first two clauses, could not be interpreted as generally excluding all claims arising out of employment, Judge Seeger cited to the well-known and respected Sesame Street doctrine of “one of these things is not like the others – one of these things just doesn’t belong.” After recognizing that other courts have come to differing conclusions, the court nonetheless ruled in favor of the employer and denied the insurer’s motion for summary judgment on whether it had a duty to defend the BIPA claim.
If you would like to discuss these or similar issues in more detail, please contact Howard L. Teplinsky at (312) 368-0100 or email@example.com.
Business transactions close principally because of the relationship between the parties. While seemingly crucial, parties frequently neglect to see past the strength of their relationship to determine what potential risks lie ahead should the business deal turn sour. When formalizing business transactions in writing, parties are often hesitant to include language that could “upset the other side” or that they think could cause the deal to fall through. Accordingly, the parties may leave out important language in contracts addressing, for example, a party’s failure to perform, believing it could never happen. Yet, the decision to exclude such contractual provisions could lead to time consuming and costly litigation.
Contracts traditionally address dispute resolution through arbitration or mediation, but there are other creative solutions. Any dispute resolution provision should be tailored specifically to the transaction after careful consideration of what would happen if either side breaches the contract.
An arbitration clause requires the parties to proceed with resolution of their disputes outside of the court system. Arbitration is a confidential proceeding presided over by individuals who are typically selected by the parties who have a particular expertise in the relevant industry. The arbitrators will hear the case and formulate a decision based on the evidence presented. Arbitration can be more efficient and less expensive than litigating in court because it is a less formal process without the motion practice, pleadings, discovery, and rules of evidence typically involved in litigation.
Additionally or alternatively, the parties could agree on a mediation provision. A mediation provision would compel the business owners or other company representatives to confer in-person or via video conference and make a good faith effort to resolve their disputes before either party may file a lawsuit. In addition to litigation avoidance, such a provision often ensures contract longevity through renewed communications between the same individuals who originally negotiated the contract.
Another way to prevent hair-trigger filings of breach of contract suits is through a default clause. A default clause requires the complaining party to first provide notice of the obligation they believe the other party failed to meet and an opportunity to cure that default. Contract terms are usually agreed to once the “why” behind them is communicated appropriately with the other party.
Levin Ginsburg prides itself on carefully and effectively negotiating contracts on behalf of its clients and helping contracting parties understand why certain provisions are in place to protect their interests. If you would like to schedule a consultation to prepare, review or negotiate your commercial contracts or to discuss any other business-related matter, please contact Joseph A. LaPlaca at firstname.lastname@example.org or (312) 368-0100.
Business relationships are typically governed by written or oral contracts. However, not all contracts are alike. Sometimes, the contract is not signed by all of the parties. Other times, the contract is missing key material terms. Generally, businesses and individuals assume that the entities they do business with will keep their word and pay them after services are performed.
What happens when the entity for whom you performed work refuses payment, contending that no contract exists? If there is in fact no legally enforceable contract, how do you recover the money you are owed?
Thankfully, the law has developed equitable remedies that will allow you to recover for the services you performed, even if no contract exists. Specifically, you may have a claim for either quantum meruit or unjust enrichment (or both). Both equitable principles assume that no contract exists between the parties. Quantum meruit is Latin for “what one has earned” and it stands for the equitable principle that an individual who performed non-gratuitous work should be entitled to the reasonable value of his or her services. Similarly, unjust enrichment imposes an equitable obligation on someone who has received a benefit to the detriment of another, which includes compensating the party who incurred the detriment.
Asserting a claim based on either theory, however, would not entitle you to recover your attorneys’ fees. This underscores the importance of having a written contract in place to ensure you receive the full value of the work you perform.
If you would like to schedule a consultation to discuss a contractual dispute, or if you need to update your existing contracts, please contact Roenan Patt at email@example.com or (312) 368-0100.
As many employers have discovered, it is becoming increasingly difficult to attract and retain talented employees. One method is to provide an attractive deferred compensation plan for your key employees.
Deferred compensation plans may be of two general varieties – “qualified” or “non-qualified”. In a qualified plan, such as a profit-sharing plan or a 401k plan, there are various laws regarding the terms of those plans. These terms may include who is eligible to participate, vesting schedules, and the permitted amount of annual contributions. In these plans, the employer receives an income tax deduction when it makes a contribution to the plan. The employee includes in its income the amount it receives from the plan upon distribution. If the employee leaves the employer, the employee may take all vested amounts.
In “non-qualified” plans, the governing laws are less rigid in terms of eligibility and other terms of the plan. The employer may choose who may participate, provided the employer does not discriminate based on protected classes, such as race and gender.
In a non-qualified plan, the employer may add different vesting schedules and include non-competition provisions, as well as other provisions intended to encourage the employee to remain in the employ of the employer. In non-qualified plans, the employer is entitled to an income tax deduction when the employee is required to include the amounts in its income.
Some of the more common provisions in non-qualified plans include the following:
- Vesting- The vesting schedule could be as long as the employer feels is necessary. Practically speaking, it should not be so long that the employee does not “see” the benefit in remaining with the employer.
- Incentives- The contribution could be dependent on the business attaining certain revenues or profits.
- Payouts to Employee- Amounts could be payable to the employee upon the employee’s death, disability, or retirement at a certain age. Payments could be made over a period of time (e.g., monthly over five years) and can be tied to certain restrictive covenant periods.
- Non-Competition- The employee would agree not to compete with the employer after termination of employment.
- Payments Upon Sale of Business- The plan could be structured so that the employee would receive payments upon the sale of the business. Often these types of plans issue “phantom equity” to the employee. This “phantom equity” has no voting rights or any other rights that an equity holder might have. However, the “phantom equity” has a value attributed to it, and that value is paid to the employee upon the sale of the business.
While many employees expect that the employer will have a “qualified plan”, a qualified plan does not provide an incentive for the employee to remain employed with the employer because the employee may leave at any time and take all vested benefits. With a “non-qualified plan”, the employee is provided an incentive to remain with the employer. If the employee leaves “early”, then he or she may forfeit any benefits which would have been provided.
The job market continues to be volatile, and businesses are willing to take more risks to hire proven talent. That means taking the best people from their competition. Business owners therefore need to start preparing for when (not if) a key employee leaves to join a competitor.
Below are some ideas to help you prepare for a key employee’s potentially sensitive exit to a competitor and ensure your business is protected: begin preparing and setting up a plan of action so you are prepared to handle.
• Review current restrictive covenant and confidentiality agreements. This is particularly important right now because non-compete laws are changing in Illinois and in other states in the US.
• Update confidentiality agreements to require employees to submit information about their digital footprint on their personal devices, including making those devices available for a forensic review upon the employee’s exit.
• Consider implementing phantom equity programs or bonus plans.
• Evaluate your hybrid-work environment and focus on flexibility.
• Audit your IT protocols and ensure your most important data is being monitored and its confidentiality maintained.
• Limit which employees get access to sensitive information – gone are the days that every employee gets access to all your information.
When an employee leaves to join a competitor, employers should immediately take certain preliminary steps to identify possible wrongdoing:
• Preserve the employee’s email and activity logs. This data is often auto deleted unless you place a hold on the information.
• Review emails sent to personal email addresses.
• Review all emails sent with attachments.
• Review activity logs.
• Preserve any devices used by the employee.
• Conduct an internal investigation to determine if there has been any other unusual activity.
• Retain a computer forensic expert.
Once these preliminary steps are completed, consider sending a cease-and-desist letter to the former employee and the new employer to ensure any damage is contained. Depending on the circumstances, filing a lawsuit (including seeking immediate injunctive relief) may offer the best protection for your business.
The attorneys at Levin Ginsburg can help businesses prepare for and react to the departure of key employees so that any impact is mitigated. For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at firstname.lastname@example.org, or (312) 368-0100.
You have spent years — maybe even decades — developing and creating your product. Finally, your product is ready to be put to market, and you plan on licensing it to other companies or individuals. But how do you protect yourself and your rights in the product while allowing another person or entity to use it?
The first step is knowing that nobody understands your product better than you. You should learn the reasons why the licensee plans to use your product and what other entities or individuals will have access to it (e.g., third parties working with the licensee). Next, consider whether you want to continue developing the product while licensing it, or if the product is in “final” form. This should spark other considerations, including:
• Ownership rights in your product – the licensee must realize that, unlike full ownership, the license is merely a group of specific rights that the licensee obtains while product ownership remains with you.
• How long and for what price should the license be granted – this will be dictated by the market, but research should be done to ensure profitability.
• Any required maintenance on the product while it is being licensed and what that process will entail – will there be maintenance fees associated with the licensing?
• Audit rights – determine the number of users of your product and ensure you are being compensated appropriately.
• Should specific restrictions or permissions be in place to alter or improve the product? Who owns any alteration or improvement made during the licensing period?
• Indemnification – will licensee defend you against claims made by third parties? Determine which claims the licensee is responsible for and which claims you are responsible for.
• Taxes – Be specific about the allocation of tax liability. Certain states have laws that restrict the ability to allocate.
• Limitation of liability – if the product malfunctions or is defective, you may be on the hook for things such as the lost profits of the company to whom you licensed the product unless your license agreement states otherwise. Additionally, you likely want licensee to provide proof of insurance before licensing.
These are just some of the things you should consider before licensing your product. Along with other contractual terms and conditions, these items should be included in a written license agreement signed by both parties. It is better to work with your legal, technical, and finance teams before finalizing a written license agreement to ensure profitability and the full protection of rights in your product. Levin Ginsburg regularly deals in the licensing of products to help grow businesses. If you are considering licensing your product and would like to discuss these, or any other related issues, please contact Joseph A. LaPlaca at email@example.com or (312) 368-0100.
Insurance is a key part of managing risk and protecting against unexpected financial losses. Individuals and businesses alike can benefit from the right coverage, whether it be your personal auto policy, commercial general liability policy, or property damage coverage. But don’t assume that just because you have a policy you are fully covered. Insurance policies are often full of exclusions and fine print. Even with the most reputable insurers, policies are rarely “one size fits all.”
A recent Illinois appellate court decision is a prime example. In Farmers Insurance Exchange v. Cheekati, et al., 2022 IL App (4th) 210023, the insureds were homeowners who, while unable to sell their property, rented it to a tenant. That tenant was injured when a defective staircase at the home collapsed. The insureds made a claim under their homeowner’s policy with Farmers, undoubtedly expecting they would be covered for the injury occurring in their home. They were not—Farmers denied coverage based on two policy exclusions: the first preluded coverage for bodily injury to any insured or any “resident of the residence premises;” the second precluded coverage for bodily injury “in connection with the rental or holding for rental” of the premises. Based on those exclusions, the appellate court affirmed the trial court’s judgment in favor of Farmers, declaring that it had no duty to defend or provide coverage to its insureds.
The lesson here: review your policy documents carefully and make sure you are getting the coverage you think you are paying for. For more information regarding these or similar issues, please contact Mark L. Evans at firstname.lastname@example.org or (312) 368-0100.
Individuals and businesses procure insurance to protect against a variety of potential losses. For example, individuals insure their homes in case of property damage, and businesses insure for certain potential economic losses. When a loss occurs, often times the claim process seems simple: the insured submits a claim and the insurer pays the claim. However, things are not always so simple. The insurer may take the position that it is only required to pay some of the loss, or it may deny the claim altogether by contesting either the existence or the scope of coverage.
Contesting the scope of coverage or denying coverage outright is not necessarily bad faith. Bad faith is defined under Illinois law as conduct by an insurer that is “vexatious and unreasonable.” In an insurer is found to have committed bad faith, Section 155 of the Insurance Code allows the prevailing insured to recover reasonable attorneys’ fees, costs, and significant penalties.
Section 154.6 of the Illinois Insurance Code delineates certain improper claims practices that could constitute bad faith depending on the circumstances. Some examples include:
• Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue.
• Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under the insurer’s policies.
• Failing to adopt and implement reasonable standards for the prompt investigations and settlement of claims arising under its policies.
• Compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them.
• Refusing to pay claims without conducting a reasonable investigation based on all available information.
• Failing to affirm or deny coverage of claims within a reasonable time after poof of loss statements have been completed.
While an insurance company who commits an improper claims practice under Section 154.6 of the Insurance Code is not per se engaged in bad faith, courts will review the totality of the circumstances in determining whether the insurer’s conduct was “vexatious and unreasonable” under Section 155. Such a finding would entitle the insured to recover fees and penalties.
Having an experienced attorney evaluate your individual or business insurance claims is critical for swift and effective resolution. For more information regarding these or similar issues, please contact Roenan Patt at email@example.com or (312) 368-0100.
Assume that your business is sued for multiple claims including negligence, defamation, and fraud arising out of the same event. Most likely, your business has a commercial general liability policy of insurance that provides coverage for negligence claims, but not intentional torts. What protections does that policy actually provide?
Although intentional acts are typically excluded from insurance policies, your business’s insurer would have a “duty to defend” your business from the negligent and intentional acts in this hypothetical. This means that the insurance company must appoint an attorney for your business at the insurer’s expense (less any applicable deductible) to defend the suit. Although a duty to defend may exist, the insurer ultimately might not be required to pay (indemnify) your business if the plaintiff were to recover a money judgment against the business for those claims based on the intentional acts. This is because Illinois law is clear that an insurer’s duty to defend its insured is broader than the duty to indemnify the insured.
As for the duty to defend, if the facts alleged in the underlying complaint fall within, or potentially within, the policy’s coverage, the insurer’s duty to defend is triggered. The insurer’s duty to defend is triggered even if the allegations in the complaint are groundless, false, or fraudulent, and even if only one of several of the plaintiff’s theories is within the potential coverage of the policy. In the hypothetical lawsuit, even if some of the claims alleged against your business ultimately are not covered, the insurer likely has a duty to defend against both the covered and uncovered claims. However, the duty to indemnify only arises if the insured has a judgment against it on an underlying claim and that the insured’s activity is covered by the policy. Thus, if judgment is entered against the business on an uncovered claim, the insurer will not have a duty to pay that judgment entered against your business even though its appointed attorney defended the claim.
Having an experienced attorney evaluate your business’s insurance policy for coverage is critical. For more information regarding these or similar issues, please contact Roenan Patt at firstname.lastname@example.org or (312) 368-0100.