New Address

Starting Monday, July 11, 2016, my new address will be:

120 N. La Salle St.

20th Floor

Chicago, IL 60602

All other contact information will remain the same.

Sen. Paul Introduces the FAIR Act

Jul 24, 2014

WASHINGTON, D.C. – Sen. Rand Paul yesterday introduced S. 2644, the FAIR (Fifth Amendment Integrity Restoration) Act, which would protect the rights of citizens and restore the Fifth Amendment’s role in seizing property without due process of law. Under current law, law enforcement agencies may take property suspected of involvement in crime without ever charging, let alone convicting, the property owner. In addition, state agencies routinely use federal asset forfeiture laws; ignoring state regulations to confiscate and receive financial proceeds from forfeited property.

The FAIR Act would change federal law and protect the rights of property owners by requiring that the government prove its case with clear and convincing evidence before forfeiting seized property. State law enforcement agencies will have to abide by state law when forfeiting seized property. Finally, the legislation would remove the profit incentive for forfeiture by redirecting forfeitures assets from the Attorney General’s Asset Forfeiture Fund to the Treasury’s General Fund.

“The federal government has made it far too easy for government agencies to take and profit from the property of those who have not been convicted of a crime. The FAIR Act will ensure that government agencies no longer profit from taking the property of U.S. citizens without due process, while maintaining the ability of courts to order the surrender of proceeds of crime,” Sen. Paul said

Click HERE for the FAIR Act legislation text.

Illinois Employer-Employee Non-Compete Agreements Judged By The Totality Of The Circumstances

Up until 2009, the prevailing law was that employer-employee non-compete agreements were reasonable only if they: (1) were no greater than is required for the protection of a legitimate business interest of the employer; (2) do not impose undue hardship on the employee; and (3) do not harm the public. Non-compete agreements were also subject to limitations on the activities prohibited, geographical area and time. These rules were established as far back as 1896.

In 2009, however, one Appellate Court rejected the long-standing three-prong “legitimate business interest” test for the reasonableness of a non-compete agreement. In that case, the appellate court upheld a non-compete agreement because it found the time and territory restrictions to be reasonable. It found that it did not need to apply the “legitimate business interest” test because the Illinois Supreme Court had never “embraced” the test and the test’s application was inconsistent with Illinois Supreme Court precedent. It went so far as to declare that the test was “judicial gloss” incorrectly applied by appellate courts.

In 2011, the Illinois Supreme Court found that the wayward appellate court had “misread” a prior case to support its “erroneous” decision. The Supreme Court had expressly recited the interests of the employer as a component of the three-prong rule or reasonableness. And Illinois continues to require businesses to demonstrate they have a legitimate business interest in order to enforce a non-compete agreement.

The Illinois Supreme Court went on to discuss the various approaches appellate courts had used to determine whether an employer had met the “legitimate business interest” test. It found that the approaches usually collapsed into differing lists of factors. As a result, the appellate courts had not found an exact formula for courts to apply. Essentially, each decision was based on the totality of its own facts.

The Illinois Supreme Court held that the factors applied in various prior cases are only “nonconclusive aids” in determining the employer’s legitimate business interest in any future case. “Each case must be determined on its own particular facts. Reasonableness is gauged not just by some but by <em>all</em> of the circumstances. The same identical contract and restraint may be reasonable and valid under one set of circumstances, and unreasonable and invalid under another set of circumstances.”

“Whether a legitimate business interest exists is based upon the totality of the facts and circumstances of the individual case. Factors to be considered in this analysis include, but are not limited to, the near-permanence of customer relationships, the employee’s acquisition of confidential information through his employment, and time and place restrictions. No factor carries any more weight than any other, but rather its importance will depend on the specific facts and circumstances of the individual case.”

Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871.

The material on this blog is provided for informational purposes only and does not constitute legal advice. Nor is the material promised or guaranteed to be current, complete, or up-to-date. If you have any questions, please contact Lance R. Minor.

Sports Organizers Not Protected by the Contact Sports Exception for Injuries Caused by Improper Field Set-Up

In Illinois, people are normally responsible for injuries to others caused by their negligence. One exception to this is the contact sports rule which protects participants in contact sports unless the injury results from intentional or willful and wanton conduct.

The Illinois Appellate Court was asked to decide whether the organizers of a sporting event were also protected by the exception when the plaintiff claimed that his injury was caused by the organizer’s alleged improper set up of the field.

DeCamp Junction, Inc. set up an informal amateur softball league every summer in Staunton, Illinois. During one of the league games, a first baseman, Gregory Gvillo was attempting to field a ball thrown by his team mate at third base while keeping his foot on first base. Just after Gvillo caught the ball the batter collided with him while attempting to reach first base. The collision resulted in injuries to Gvillo.

Gvillo sued DeCamp alleging that it had provided a playing field that was unreasonably dangerous. Gvillo also claimed that DeCamp had not followed certain rules of the  Softball Association of America that are designed to prevent collisions like the one that caused his injury.

DeCamp filed a motion arguing that it was entitled to judgment as a matter of law because (1) it was protected by the contact sports exception and (2) ASA rules regarding the setup of fields did not apply to an “informal summer beer league” that was not sponsored by the ASA. The trial court agreed with DeCamp and entered judgment in DeCamp’s favor.

Gvillo appealed the judgment arguing that the contact sport exception did not apply to DeCamp because it was the organizer of the event rather than a participant in a game. Illinois courts had already determined that the contact sports exception applied to claims involving participants in softball games. The only case which addressed the application of the exception to non-participants involved a hockey game where one player had been injured by another player and the injured player had sued the organizers and the referees’ association for failing to properly instruct players and coaches on the rule against body checking from behind. The appellate court found that coaching and officiating involve “subjective decision making that often occurs in the middle of a fast-moving game” and that “it is difficult to imagine activities more prone to second guessing than coaching and officiating.” It held that the contact sports exception applied to the coaches and referees in that case.

Gvillo argued that the circumstances in his case were distinguishable from the two points made in the hockey case. DeCamp’s setting up of the softball diamond was not inherently subjective like coaching or refereeing decisions. And it also did not involve split-second decision-making in the middle of a game. The appellate court agreed with Gvillo. It also found that application of ASA rules did nothing to “interfere with vigorous participation in the sport.”

It is clear that Illinois courts view the contact sports exception narrowly so that it only protects those who are involved in the games and playing within the rules.

Gvillo v. DeCamp Junction, INc. 2011 Ill. App. (5th) 100262

The material on this blog is provided for informational purposes only and does not constitute legal advice. Nor is the material promised or guaranteed to be current, complete, or up-to-date. If you have any questions, please contact Lance R. Minor.

Chicago Can’t Force On-Line Auctioneers to Charge You an Amusement Tax, But that Doesn’t Mean You Don’t Have to Pay It!

The City of Chicago sued StubHub, Inc. to collect amusement taxes for ticket auctions StubHub hosted for events located in Chicago. It all started with Chicago attempting to enforce the Ticket Scalping Act, which a long, long time ago (1923 to be exact) prohibited tickets to events from being sold anywhere but the venue’s box office. The Act was broadened in 1935 to allow tickets to be sold away from venue box offices, but the tickets could be sold for no more than face value. The Act remained this way until 1991 when the Illinois State legislature added an exception for ticket brokers–resellers could sell tickets at above face value if they registered with the State and, of course, paid all applicable state and local taxes.

In 1995, Chicago started requiring resellers to collect an “amusement tax” not only for the face value of the tickets they sold but for the “portion of the ticket price that exceeds the amount that the reseller paid for the tickets.”

In 2002, after tickets started showing up for sale at on-line auction sites like StubHub, the State legislature replaced the Ticket Scalping Act with the Ticket Sale and Resale Act, which required auction sites to either collect taxes associated with the sale or inform resellers of their obligation to pay any applicable taxes.

In 2006, Chicago amended its tax code so that not only resellers but “reseller’s agents” were required to collect and pay amusement tax for the charges they made to customers.

In 2007, Chicago notified StubHub that it believed StubHub had the duty to collect and remit the amusement tax on thousands of ticket resales from 2000 through 2007. Chicago initiated a lawsuit in the Circuit Court of Cook County requesting an order requiring StubHub to produce records and submit to an audit, fining StubHub for failing to comply with the City tax code and a judgment in the amount of the unpaid tax revenues for the 2000-2007 time period plus interest.

StubHub removed the lawsuit to the United States District Court for the Northern District of Illinois and filed a motion to dismiss. The District Court dismissed the case ruling that Illinois law did not allow Chicago to impose amusement taxes on internet sites.

Chicago appealed the case to the Seventh Circuit Court of Appeals which determined that Illinois law did allow Chicago to impose amusement taxes on internet sites. But the Seventh Circuit felt that there were so many underlying questions that had not previously been addressed by Illinois courts, they were better served to let the Illinois Supreme Court decide the issues.

The Illinois Supreme Court found that Chicago was within its right to determine that StubHub was a “reseller’s agent.”

The next issue was for the Supreme Court to decide whether Chicago had the power to impose an obligation on an internet company to collect and remit amusement taxes even if it was a “reseller’s agent.” The Court decided the issue was governed by home rule. The concept of home rule is based upon a preference for local solutions to local problems–but the powers of local governments extend only to matters “pertaining to” their affairs, and not those of the State.

The Supreme Court looked to the Auction License Act of 2002 which provides that the State is to regulate internet auctioneers. It found that the Ticket Sale and Resale Act is consistent with the aims of the Auction License Act. The Ticket Sale and Resale Act specifically gives auctioneers the choice of collecting and remitting any applicable taxes or notifying resellers of their liability to pay the taxes. Auctioneers also have the duty to maintain records of sales and to turn over pertinent records to local tax officials if they relate to a criminal investigation.

The Supreme Court concluded that Chicago’s ordinance did not pertain to its own government affairs and that Chicago had overstepped its home rule authority.

City of Chicago v. StubHub, Inc., Docket No. 111127 (Oct. 6, 2011)

So, what’s the lesson here? If you use StubHub or any other on-line auction site to sell tickets (or any other goods for that matter) that does not collect all applicable taxes at the time of the sale and you thereafter fail to remit any applicable federal, state or local taxes the taxman might just come knocking on your door.

National Flood Insurance Act of 1968

The National Flood Insurance Act of 1968, 42 U.S.C. Sec. 4012a (2006) (the “Flood Act”), requires federally insured lenders of mortgage real estate loans to determine if the borrower’s property is located in a special flood hazard area.

Following an affirmative flood determination, the lender must notify the borrower of that determination and require the borrower to purchase flood insurance. If the borrower fails to purchase flood insurance within 45 days of the lender’s notice, “the lender or servicer for the loan shall purchase the insurance on behalf of the borrower and may charge the borrower for the cost of the premiums and fees incurred by the lender or servicer for the loan in purchasing the insurance.” 42 U.S.C. Sec. 4012a(e)(2). A lender may delegate its flood determination duties to a third-party flood determiner provided the flood determiner “guarantees the accuracy of the information.” 42 U.S.C. Sec. 4104b(d).

While Illinois courts have held that the Flood Act does not create a duty on the part of mortgage lenders to disclose flood hazards to borrowers (Mid-America Nat’l Bank of Chicago v. First Savings & Loan Ass’n of South Holland, 161 Ill. App. 3d 531 (1987)) and that borrowers cannot bring a private cause of action arising out of the lender’s failure to comply with the Flood Act (Lehman v. Arnold, 137 Ill. App. 3d 412 (1985)), the Illinois Appellate Court for the Third District has held that a borrower may in certain circumstances bring a private cause of action against a third-party flood determiner. Klecan v. Countrywide Home Loans, Inc., Appeal No. 3-10-0084 (June 29, 2011).

In Klecan, the Appellate Court found that while the plain language of the Flood Act authorized lenders to rely upon third-party determiners without incurring liability for the determiner’s mistakes, the Flood Act did not extend similar immunity to suits by borrowers against flood determiners. The Court went on to analyze Klecan’s complaint to see if it stated a claim for negligence. To state a claim for negligence a plaintiff must plead facts demonstrating the existence of a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately caused by the breach.

In deciding whether the flood determiner owed a duty to the borrower, the Appellate Court relied upon prior case law where the Illinois Supreme Court held that a surveyor could be held liable to a third-party purchaser who built his garage on his neighbor’s lot as a result of a negligent survey. Rozny v. Marnul, 43 Ill. 2d 54 (1969). The Appellate Court found that the flood determiner’s role is of similar importance in a real estate transaction as that of a surveyor. It further found that while the determiner was hired by the lender, its finding directly impacts the decision of the borrower to purchase flood insurance. Because the Klecans were foreseeable plaintiffs, the Court held that the flood determiner owed them a duty of care in the preparation of their flood determination.

With the flooding that has occurred in Chicago recently, home owners without flood insurance should make a determination whether a third-party flood determiner made a mistake in determining whether their property was located in a special flood hazard area.

City of Chicago Licensing Requirements for Businesses

Title 4 of the Chicago Municipal Code requires all businesses located within Chicago to register their businesses with the department of business affairs and consumer protection unless the particular business is specifically excluded from registration. A separate license is required for each separate business location. The following information is required to be provided for a license:

(1) the names of the owners, general partners and officers;

(2) the addresses for all locations within Chicago;

(3) a detailed and comprehensive description of the business;

(4) whether the business has ever filed for bankruptcy;

(5) whether the business was purchased as part of a bulk sale; and

(6) any further information requested by the commissioner of business affairs and consumer protection.

Except under certain circumstances, a business can elect either a two of four year license renewal period. If a business intends to change its location, a new license must be obtained before the business can start operating at the new location. Ownership of licenses cannot be transferred.

A business’s ability to operate between midnight and 5:00 a.m. is considered a severable privilege. The privilege to operate during that time period may be suspended or terminated if it is determined that the business creates a nuisance during those hours.