monograph feature articles monograph feature articles

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The Illinois Association of Defense Trial Counsel

First Quarter 2015

l Volume 25, Number 1

l

ISSN-2169-3668

MONOGRAPH For Your Consideration: The Current State of Post-Employment Restrictive Covenants in Illinois and National Trends Beyond Continued Employment as Adequate Consideration

FEATURE ARTICLES Folta v. Ferro Engineering: A Shift in Illinois Workers’ Compensation Protection for Illinois Employers in Asbestos Cases Accommodating the Accommodated? Not-For-Profits’ Challenges to the Contraception Mandate Exemptions

Illinois Association of Defense Trial Counsel WWW.IADTC.ORG

PRESIDENT DAVID H. LEVITT Hinshaw & Culbertson LLP, Chicago PRESIDENT-ELECT TROY A. BOZARTH HeplerBroom LLC, Edwardsville 1ST VICE PRESIDENT R. MARK MIFFLIN Giffin, Winning, Cohen & Bodewes, P.C., Springfield 2ND VICE PRESIDENT MICHAEL L. RESIS SmithAmundsen LLC, Chicago SECRETARY/TREASURER BRADLEY C. NAHRSTADT Lipe, Lyons, Murphy, Nahrstadt & Pontikis Ltd., Chicago DIRECTORS LAURA K. BEASLEY Joley, Nussbaumer, Oliver & Beasley, P.C., Belleville JOSEPH A. BLEYER Bleyer and Bleyer, Marion R. MARK COSIMINI Rusin & Maciorowski, Ltd., Champaign BRUCE DORN Bruce Farrel Dorn & Associates, Chicago JOSEPH G. FEEHAN Heyl, Royster, Voelker & Allen, P.C., Peoria ROSSANA P. FERNANDEZ Fernandez and Associates, LLC, Chicago TERRY A. FOX SmithAmundsen LLC, Chicago EDWARD K. GRASSÉ Busse, Busse & Grassé, P.C., Chicago JENNIFER GROSZEK Resolute Management, Inc., Midwest Division, Chicago JENNIFER K. GUST Hinshaw & Culbertson LLP, Chicago STEPHEN G. LOVERDE Law Office of Steven A. Lihosit, Chicago PAUL R. LYNCH Craig & Craig, LLC, Mt. Vernon WILLIAM K. MCVISK Johnson & Bell, Ltd., Chicago NICOLE D. MILOS Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, Chicago DONALD J. O’MEARA, JR. Pretzel & Stouffer, Chartered, Chicago AL J. PRANAITIS Hoagland, Fitzgerald & Pranaitis, Alton SCOTT D. STEPHENSON Litchfield Cavo LLP, Chicago TRACY E. STEVENSON Robbins Salomon & Patt, Ltd., Chicago PATRICK W. STUFFLEBEAM HeplerBroom LLC, Edwardsville HEATHER R. WATTERSON CNA, Chicago EXECUTIVE DIRECTOR Sandra J. Wulf, CAE, IOM PAST PRESIDENTS: Royce Glenn Rowe • James Baylor • Jack E. Horsley • John J. Schmidt • Thomas F. Bridgman • William J. Voelker, Jr. • Bert M. Thompson • John F. Skeffington • John G. Langhenry, Jr. • Lee W. Ensel • L. Bow Pritchett • John F. White • R. Lawrence Storms • John P. Ewart • Richard C. Valentine • Richard H. Hoffman • Ellis E. Fuqua • John E. Guy • Leo M. Tarpey • Willis R. Tribler • Alfred B. LaBarre • Patrick E. Maloney • Robert V. Dewey, Jr. • Lawrence R. Smith • R. Michael Henderson • Paul L. Price • Stephen L. Corn • Rudolf G. Schade, Jr. • Lyndon C. Molzahn • Daniel R. Formeller • Gordon R. Broom • Clifford P. Mallon • Anthony J. Tunney • Douglas J. Pomatto • Jack T. Riley, Jr. • Peter W. Brandt • Charles H. Cole • Gregory C. Ray • Jennifer Jerit Johnson • Stephen J. Heine • Glen E. Amundsen • Steven M. Puiszis • Jeffrey S. Hebrank • Gregory L. Cochran • Rick Hammond • Kenneth F. Werts • Anne M. Oldenburg • R. Howard Jump • Aleen R. Tiffany

COLUMNISTS Beth A. Bauer — HeplerBroom LLC, Edwardsville Brian J. Benoit — Goldberg Segalla LLP, Chicago James K. Borcia — Tressler LLP, Chicago Roger R. Clayton — Heyl, Royster, Voelker & Allen, P.C., Peoria Catherine A. Cooke — Robbins, Salomon & Patt, Ltd., Chicago Stacy E. Crabtree — Heyl, Royster, Voelker & Allen, P.C., Peoria James L. Craney — Lewis Brisbois Bisgaard & Smith LLP, Edwardsville Donald Patrick Eckler — Pretzel & Stouffer, Chartered, Chicago Scott L. Howie — Pretzel & Stouffer, Chartered, Chicago M. Elizabeth Dyer Kellett — HeplerBroom LLC, Edwardsville Timothy R. Lessman — SmithAmundsen LLC, Chicago David H. Levitt — Hinshaw & Culbertson LLP, Chicago Gregory W. Odom — HeplerBroom LLC, Edwardsville Bradford J. Peterson — Heyl, Royster, Voelker & Allen, P.C., Urbana Brian Smith — Heyl, Royster, Voelker & Allen, P.C., Urbana Dina L. Torrisi — HeplerBroom LLC, Chicago

CONTRIBUTORS Denise Baker-Seal — Brown & James, P.C., Belleville Theresa Bresnahan-Coleman — Langhenry, Gillen, Lundquist & Johnson, LLC, Chicago Julie K. Brown — HeplerBroom LLC, Edwardsville Patrick P. Clyder — Swanson, Martin & Bell, LLP, Chicago John P. Heil, Jr. — Heyl, Royster, Voelker & Allen, P.C., Peoria Dana Hughes — Heyl, Royster, Voelker & Allen, P.C., Rockford Zeke N. Katz — HeplerBroom LLC, Chicago N. Drew Kemp — HeplerBroom LLC, Edwardsville Emily J. Perkins — Heyl, Royster, Voelker & Allen, P.C., Peoria Kimberly A. Ross — Butler Pappas Weihmuller Katz Craig LLP, Chicago Colleen Tierney Scarola — University of Denver, Sturm College of Law, Denver CO Patrick W. Stufflebeam — HeplerBroom LLC, Edwardsville J. Matthew Thompson — Heyl, Royster, Voelker & Allen, P.C., Peoria Joshua Turk — Chicago-Kent College of Law, Chicago Geoffrey M. Waguespack — Butler Pappas Weihmuller Katz Craig LLP, Chicago Colin B. Willmott — Goldberg Segalla LLP, Chicago

IDC QUARTERLY

EDITORIAL BOARD

IN THIS ISSUE

Beth A. Bauer, Editor-in-Chief HeplerBroom LLC, Edwardsville [email protected] Brad A. Elward, Executive Editor Heyl, Royster, Voelker & Allen, P.C., Peoria [email protected] Edward J. Aucoin, Jr., Associate Editor Pretzel & Stouffer, Chartered, Chicago [email protected] John F. Watson, Assistant Editor Craig & Craig, LLC, Mattoon [email protected] Tara Wiebusch Kuchar, Assistant Editor HeplerBroom LLC, Edwardsville [email protected] J. Matthew Thompson, Assistant Editor Heyl, Royster, Voelker & Allen, P.C., Peoria [email protected]

Monograph M-I

Feature Articles

4 Folta v. Ferro Engineering: A Shift in Illinois Workers’ Compensation Protection for Illinois Employers in Asbestos Cases, by Patrick W. Stufflebeam and Julie K. Brown 27 Accommodating the Accommodated? Not-For-Profits’ Challenges to the Contraception Mandate Exemptions, by Colleen Tierney Scarola and Joshua Turk

Columns 19

The IDC Quarterly is the official publication of the Illinois Association of Defense Trial Counsel. It is published quarterly as a service to its members. Subscriptions for non-members are $100 per year. Single copies are $25 plus $5 for postage and handling. Requests for subscriptions or back issues should be sent to the Illinois Association of Defense Trial Counsel headquarters in Rochester, Illinois. Subscription price for members is included in membership dues.

Manuscript Policy

Members and other readers are encouraged to submit manuscripts for possible publication in the IDC Quarterly, particularly articles of practical use to defense trial attorneys. Manuscripts must be in article form. A copy of the IDC Quarterly Stylistic Requirements is available upon request from The Illinois Association of Defense Trial Counsel office in Rochester, Illinois. No compensation is made for articles published, and no article will be considered that has been submitted simultaneously to another publication or published by any other publication. All articles submitted will be subjected to editing and become the property of the IDC Quarterly, unless special arrangements are made. Statements or expression of opinions in this publication are those of the authors and not necessarily those of the Association or Editors. Letters to the Editor are encouraged and welcome, and should be sent to the Illinois Association of Defense Trial Counsel headquarters in Rochester, Illinois. Editors reserve the right to publish and edit all such letters received and to reply to them. IDC Quarterly, First Quarter 2015, Volume 25, No. 1., Copyright © 2015 The Illinois Association of Defense Trial Counsel. All rights reserved. Reproduction in whole or in part without permission is prohibited. THE ILLINOIS ASSOCIATION OF DEFENSE TRIAL COUNSEL • P.O. Box 588 • Rochester, IL 62563-0588 800-232-0169 • 217-498-2649 • FAX 866-230-4415 [email protected] • www.iadtc.org SANDRA J. WULF, CAE, IOM, Executive Director

For Your Consideration: The Current State of Post-Employment Restrictive Covenants in Illinois and National Trends Beyond Continued Employment as Adequate Consideration, by Geoffrey M. Waguespack, Denise Baker-Seal, Theresa Bresnahan-Coleman, James L. Craney, and Kimberly A. Ross

Appellate Practice Corner, by Scott L. Howie



56

Association News



7

Civil Practice and Procedure, by Donald Patrick Eckler



49

Civil Rights Update, by Brian Smith and John P. Heil, Jr.



18

Commercial Law, by James K. Borcia



3



33

Employment Law, by James L. Craney



25

Health Law, by Roger R. Clayton, J. Matthew Thompson, and Emily J. Perkins



67

IDC Membership and Committee Applications



61

IDC New Members



62

IDC Notice of Election

Editor’s Note, by Beth A. Bauer

54 IDC Quarterly Monograph and Feature Article Index — Volume 24

63

IDC 2015 Spring Symposium



39

Insurance Law Update, by Timothy R. Lessman



44

Legislative Update, by N. Drew Kemp



36

Medical Malpractice Update, by Dina L. Torrisi and Zeke N. Katz



2



41

Product Liability, by Brian J. Benoit and Colin B. Willmott



11

Property Insurance Law, by Catherine A. Cooke



14

Recent Decisions, by Stacy E. Crabtree



45

Supreme Court Watch, by M. Elizabeth Dyer Kellett



23

Workers’ Compensation Report, by Bradford J. Peterson and Dana Hughes



52

Young Lawyer Division, by Gregory W. Odom and Patrick P. Clyder

President’s Message, by David H. Levitt

First Quarter 2015 | IDC QUARTERLY | 1

President’s Message David H. Levitt Hinshaw & Culbertson LLP, Chicago

Illinois has now endured two of the most expensive and contentious judicial elections in United States history. In 2004, Illinois Supreme Court Justice Lloyd Karmeier won a hotly contested election, in which, according to news reports, the campaigns and their supporters spent a total of approximately $9.3 million. Ten years later, in the just concluded retention election, the total “spend” for television ads alone, was reported to be approximately $1.7 million. According to news reports, plaintiff’s lawyers with cases pending in the Illinois Supreme Court that, if successful, could result in attorney’s fees in excess of a billion dollars (yes, that’s billion with a “b”), contributed $2 million, mostly within two weeks of the retention election, to “Campaign for 2016”—a group which sought to defeat Justice Karmeier’s retention. This included $600,000 each from two lawyers at one of the law firms. This is public information available on the Illinois State Board of Elections website. http://www. elections.il.gov/campaigndisclosure/ CommitteeDetail.aspx?id=26176 Justice Karmeier received 60.7% of the vote and was narrowly retained. The precarious margin of his victory highlights the problem. Having spent millions of dollars to support their own candidate in 2004, the plaintiff’s trial bar spent millions more in the retention election—to defeat a sitting justice based on his votes to join his colleagues in two high profile, large class actions.

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Yet, they complain about the appearance of fairness when that same justice must raise campaign funds for his election and later retention. Let’s be clear: We don’t dispute the First Amendment right to raise funds and take positions on judicial elections—or any other elections. The United States Supreme Court decision in Caperton v. A.T. Massey Coal Co., Inc., 556 U.S. 868 (2009), regarding campaign contributions to judicial candidates is the law of the land. Are we now going to descend to the level where every case presents questions as to whether and how much opposing

civility, and professional competence. Our Core Values include supporting a fair, unbiased, and independent judiciary. That does not mean giving a pass to every judge, regardless of their capabilities or performance in office. When a judge does not belong on the bench, lawyers are in the best position to know, and should be free to express their opinions to the electorate. I don’t pretend that there is a good solution, nor do I pretend to have the answers—but, I do know that answers to these questions must be sought. Lawyers, or anyone, spending millions of dollars on judicial elections impacts the perception of fairness in the entire judicial system. The bottom line is this: Judges should not have to raise the kinds of dollars involved in these races. As a bar—not the “defense” bar and not the “plaintiff” bar—but as a bar as a

Let’s be clear: We don’t dispute the First Amendment right to raise funds and take positions on judicial elections—or any other elections. counsel contributed to or against the judge’s campaign? Are we now going to invite a background investigation into every appellate judge whenever we have an appeal? Judges, who take a solemn oath of office, should not be under assault because of their vote in a small number of cases involving huge monetary stakes or controversial issues. Let’s also be clear on something else: Judges, like anyone else holding public office, should be subject to legitimate criticism. The mission of the Illinois Association of Defense Trial Counsel is to ensure civil justice with integrity,

whole, we need to investigate solutions, together. This will require some outside-of-the-box thinking; so-called “merit” selection is not a panacea (it simply moves the politics to another, less transparent and less accountable setting), and putting the burden solely on judges to consider withdrawal creates the potential for parties to game the system. Both sides of the Illinois tort bar have long traditions of professional respect for each other, and it is time that we work together to find a way to reduce the absurdly high amount of money wasted in the selection and retention of Illinois judges.

Editor’s Note Beth A. Bauer HeplerBroom LLC, Edwardsville

As I write this column, it’s two days until Christmas. With three young children in the house, the atmosphere is super-charged with excitement. We don’t have a chimney so our stockings are hung on the mantle above the vent-free ceramic gas log fireplace, and we are all hopeful for something wonderful to fill them. In contrast, many of us in the defense bar feel like we got two lumps of coal from the Illinois legislature and Governor Quinn with the elimination of the construction statute of repose for personal injury claims due to asbestos exposure and the reduction of civil juries to six persons. Please see the Legislative Update column, by Drew Kemp of HeplerBroom LLC, for more information regarding IDC’s activities surrounding these two new laws. A follow-up article is also planned for the Quarterly’s next issue that will analyze the impact of these laws. Despite the coal, my Christmas spirit is revived and warmed as I read the Young Lawyer’s Report, by Patrick Clyder of Swanson, Martin & Bell, LLP and Greg Odom of HeplerBroom LLC. The Young Lawyers group held a wonderful fundraiser raising $1,000 for the Autism Research Institute. They are also conducting a winter clothing drive. Not only is the Young Lawyer’s group giving gifts to those in need but also to aspiring lawyers through the first ever law student writing competition, and to their colleagues through a refresher on things to consider before filing a counterclaim. Just as the wise men brought gifts

to Bethlehem, this issue of the Quarterly overflows with gifts (and wisdom) for all of you. Welcome Stacy Crabtree of Heyl, Royster, Voelker and Allen, P.C. as the new columnist for Recent Decisions. She reports on a case in which attorney’s fees were awarded against an employee of a local public entity. At the heart of the case is whether a collective bargaining agreement or the Tort Immunity Act controls whether the local public entity must pay the award. She also explains why an Illinois court dismissed law students’ fraud claims alleging that a law school defrauded them into enrolling in law school and obtaining juris doctor degrees. Tim Lessman of SmithAmundsen LLC writes the Insurance Law column on Central Mut. Ins. Co. v. Tracy’s Treasures, Inc., 2014 IL App (1st) 123339. The case involves claims that the defendant violated the Telephone Consumer Protection Act, which resulted in a consent judgment between a plaintiff class and the insured defendant for the amount of the insured’s policy limits. Tim explains the case and shares ideas that insurers may use to challenge such consent judgments. The Civil Practice column by Pat Eckler of Pretzel & Stouffer, Chartered, provides an update to the prior monograph on the attorney-client privilege in the context of a lawyer seeking legal advice when a client believes the lawyer has committed malpractice. Pat explains that courts in other states continue to wrestle with the application of the fiduciary-duty exception to the attorney-client privilege

when the advice is sought from a lawyer in another jurisdiction with different attorney-client privilege laws. He further examines the circumstances of which Illinois lawyers should be aware when in this situation so that the communication remains privileged. Catherine Cooke of Robbins, Salomon, & Patt, Ltd., writes on the Illinois Supreme Court’s decision in Bruns v. City of Centralia, 2014 IL 116998 in the Property Insurance column. Catherine reports that in Bruns, the supreme court answers the question of what types of distractions are within the “distraction exception” when an injury occurs due to an obvious dangerous condition on a city’s property. In Supreme Court Watch, Beth Kellett of HeplerBroom LLC, reports on some of the cases that the Illinois Supreme Court will be reviewing. The court will be addressing the application of the accountant-client privilege and whether wrongful death and survival actions may be brought in a case of death by suicide. The court will also examine when a fully litigated case, resulting in judgment, may be reopened on claims of new evidence, which includes the related question of whether a lower court may reinstate a judgment that the Illinois Supreme Court has previously ordered be reversed. This issue of IDC Quarterly also contains excellent and interesting feature articles. Colleen Tierney Scarola writes an update to Secular, For-Profit Corporations’ Ability to Challenge the Constitutionality of the Contraception Mandate, 24.2 IDC Q., 10 (2014), which discussed the five federal circuit court cases that have received religious challenges to the contraception mandate by private corporations and the courts’ decisions — Continued on next page

First Quarter 2015 | IDC QUARTERLY | 3

Editor’s Note | continued

extending certain constitutional rights to corporations. Patrick Stufflebeam of HeplerBroom LLC authored a piece concerning Folta v. Ferro Engineering, 2014 IL App (1st) 123219, where the appellate court allowed a time-barred claim alleging injuries arising from exposure to asbestos to be brought as a civil action because it is “not compensable” under the Workers’ Compensation Act. As they explain, the decision may have farreaching consequences for many Illinois employers and will be reviewed by the Illinois Supreme Court. The biggest gift is for employers and the lawyers that advise them. The Monograph gives important guidance on non-compete agreements. Employment Law Committee members Geoffrey Waguespack and Kimberly Ross of Butler Pappas Weihmuller Katz Craig LLP, Denise Baker-Seal of Brown & James, P.C., Theresa Bresnahan-Coleman of Langhenry, Gillen, Lundquist & Johnson, LLC, and James Craney of Lewis Brisbois Bisgaard & Smith LLP, wrote about the current views of Illinois courts concerning post-employment restrictive covenants. They also analyze national trends concerning adequate consideration provided to employees that agree not to compete with a former employer. By the time you read this note and this issue of the Quarterly, the holidays will have passed, but please allow me to wish you a belated Happy New Year! On that note, think about your professional goals and resolutions. One way to elevate your professional profile with fellow lawyers, judges, legislators, and clients is to write for the Quarterly. Please consider contributing an article in 2015. It may prove to be the easiest resolution to keep!

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Feature Article Patrick W. Stufflebeam* HeplerBroom LLC, Edwardsville

Folta v. Ferro Engineering: A Shift in Illinois Workers’ Compensation Protection for Illinois Employers in Asbestos Cases In June 2014, the Illinois Appellate Court, First District, issued its decision in Folta v. Ferro Engineering, 2014 IL App (1st) 123219. This holding could have far-reaching repercussions on Illinois employers sued by current or former employees for alleged injuries they suffered as a result of asbestos exposures decades earlier. According to the Illinois Workers’ Compensation Commission’s website, “Workers’ compensation is a no-fault system of benefits paid by employers to workers who experience work-related injuries or diseases.” Welcome, Illinois Workers’ Compensation Commission, http://www.iwcc.il.gov/ (last visited Dec. 12, 2014). The Illinois Workers’ Compensation Act (the Act) was designed to provide a system of compensation for employees who were injured in accidents “arising out of” and “in the course” of their employment. 820 ILCS 305/1 et seq. The Act serves a two-fold purpose: (1) to provide employees with an expedited system for recovery from work-related injuries; and (2) to provide employers with a predictable formula for their potential liabilities. Folta, 2014 IL App (1st) 123219, ¶ 26; see also 820 ILCS 310/1. In exchange for relinquishing common law defenses, the employer’s liability “became fixed under a strict and comprehensive statutory scheme, and was not subjected to the

sympathies of the jurors whose compassion for fellow employees often led to high recovery.” McNamee v. Federated Equip. & Supply Co., Inc., 181 Ill. 2d 415 (1998). The Folta court held that when “an injured employee’s potential claim under the Act is time-barred before he ever learns of it, thus depriving him of any potential for compensation under the Act,” the Act and the Workers’ Occupational Diseases Act (820 ILCS 310/1 et seq.) are not the plaintiff’s exclusive remedy as the claim is “not compensable.” This article will first analyze the Folta court’s analysis and, second, will discuss the impact of the Folta holding on Illinois employers.

About the Author Patrick W. Stufflebeam is a partner of HeplerBroom LLC in its Edwardsville (Madison County), Illinois office. He concentrates his practice primarily in the areas of toxic tort, product liability, premises liability, and commercial litigation. He is admitted to practice in Illinois, Missouri, and the Southern District of Illinois. He received his J.D. from Saint Louis University School of Law and his B.A. from Western Illinois University. Mr. Stufflebeam is a member of the IDC Board of Directors, DRI, and the Madison County Bar Association. *Julie K. Brown, associate at HeplerBroom LLC, contributed to the content of this article. Mr. Stufflebeam gratefully acknowledges her contribution.

This holding could have far-reaching repercussions on Illinois employers sued by current or former employees for alleged injuries they suffered as a result of asbestos exposures decades earlier.

Folta Facts Folta claimed exposure to asbestos during his employment at Ferro Engineering. The decedent was last employed by Ferro in 1970. Folta, 2014 IL App (1st) 123219, ¶ 2. Following his 2011 diagnosis with asbestos-related mesothelioma, 41 years after his employment with Ferro ended, he filed a civil action in the Circuit Court of Cook County, instead of a claim for compensation with the Workers’ Compensation Commission. Id. It was not disputed that decedent’s injury was accidental and arose from and was received during the course of his employment. Id. ¶ 28. The circuit court granted the employer-defendant’s motion to dismiss the cause of action because the decedent did not file his claim before the prescribed time limitations in the Act expired. Id. ¶ 3. The Illinois Appellate Court, First District, reversed the circuit court. The Acts Both the Workers’ Compensation Act and the Workers’ Occupational Disease Act (together referred to as the Acts) contain provisions that provide the exclusive remedy for an employee seeking compensation for an employmentrelated injury or disease. See 820 ILCS 310/11; 820 ILCS 305/5. The Acts’ exclusivity provisions are construed as analogous. James v. Caterpillar Inc., 242 Ill. App. 3d 538 (5th Dist. 1993).

Over time, courts have carved out exceptions to the exclusivity provisions. The exclusivity provisions of the Acts do not apply when the injury or disease: (1) was not accidental; (2) did not arise from the employment; (3) was not received during the course of employment; or (4) is not compensable. Meerbrey v. Marshall Field & Co., Inc., 139 Ill. 2d 455, 467 (1990). The Workers’ Occupational Diseases Act provides recovery only if the disablement “occurs within two years after the last day of the last exposure to the hazards of the disease, except in cases of occupational diseases caused by . . . asbestos dust and, in such cases, within 3 years after the last day of the last exposure to the hazards of such disease.” 820 ILCS 310/1(f). The Act provides, “[I]n any case of injury caused by exposure to . . . asbestos, unless application for compensation is filed with the Commission within 25 years after the last day that the employee was employed in an environment of . . . asbestos, the right to file such application shall be barred.” 820 ILCS 305/6(d). While the Folta court addressed both Acts, it focused primarily on the Workers’ Compensation Act. Folta Analysis 1. What is “Not Compensable”? Under the Act, only medical bills and temporary or permanent, partial

or total disability are compensable. 820 ILCS 305/8. Yet, the Folta court found that a time-barred claim was “not compensable,” and supported its finding based on Toothman v. Hardee’s Food Sys., Inc., 304 Ill. App. 3d 521, 525 (5th Dist. 1999) and Schusse v. Pace Suburban Bus Div. of the Reg’l Trans. Auth., 334 Ill. App. 3d 960 (1st Dist. 2002). In Toothman, the plaintiff employees sought damages for emotional distress based on an incident in which their managers strip-searched them in an attempt to find missing money. Toothman, 304 Ill. App. 3d at 523-24. The employees did not have any medical or hospital bills, and they did not miss any work. Id. at 533. In its analysis, the court focused first on the employer’s failure to determine whether the plaintiff’s claims were compensable by utilizing medical examinations permitted by civil discovery. Id. It continued, “[i]n order for injuries to be compensable under the Act, there must be some demonstrable medical evidence of injury in order for the claimant/employee to recover.” Id. The court reasoned that if the plaintiffs wanted to recover for damages outside of those allowed for in the Act, they could face the “arduous task” of presenting a civil case where they were not going to benefit from the Act’s presumptions related to an employer’s liability and an employee’s lack of contributory negligence. Id. at 534. In Schusse, the plaintiff bus driver was injured when his driver’s seat collapsed. Schusse, 334 Ill. App. 3d at 962. Later, the employer replaced the driver’s seat at issue. Id. The employee then sued his employer and the manufacturer of the seat alleging, in part, negligent spoliation of the evidence. Id. at 963. In holding the plaintiff’s spoliation of the evidence — Continued on next page

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Feature Article | continued

claims to be “not compensable” under the Act, the appellate court focused on giving each of the Meerbrey factors weight. “If an accidental injury is compensable merely because it arose out of and in the course of employment, then the fourth prong of the Meerbrey test is superfluous. This court will not interpret Meerbrey in such a way that the fourth prong becomes meaningless.” Id. at 970. As such, it held that the claims for spoliation are not compensable under the Act because they are not the type of damages that are recoverable under the Act. Id. at 969. Like Toothman and Schusse, the Folta court focused on equating compensability to recoverability to give the fourth Meerbrey exception its own weight. Unlike Toothman and Schusse, however, the Folta court was not dealing with claimed damages that are unrecoverable under the Act. Instead, the Folta court was presented with a time-barred claim. Because Toothman and Schusse hold that the type of damages sought in a claim under the Act determines their compensability, one could argue that Toothman and Schusse do not support the proposition that a time-barred claim is “not compensable” for the purpose of escaping the Act’s exclusivity provisions. Toothman and Schusse focus on the terms of the Act and the types of damages sought to determine if the claims are “compensable.” To extend this analysis to hold that any claim that does not obtain recovery under the Act is “not compensable,” and therefore outside of the Act’s exclusivity provisions, is in conflict with the language of the Act. 820 ILCS 305/5(a); 820 ILCS 305/6(d).

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2. The Court is to Interpret Legislation It is the court’s role to interpret legislation by ascertaining and giving effect to the intent of the legislature—not to legislate. Moore v. Grafton Tp. Bd. of Tr., 2011 IL App (2d) 110499, ¶ 3. “The cardinal rule of statutory interpretation, to which all other rules are subordinate, is to ascertain and give effect to the intent of the legislature.” Balmoral Racing Club, Inc. v. Topinka, 334 Ill. App. 3d 454, 458 (1st Dist. 2002). Legislative intent is best determined by the statutory language. Balmoral Racing Club, 334 Ill. App. 3d at 458-59. Further, “[a] court must consider the entire statute and interpret each of its relevant parts together.” Id. If the meaning of an enactment is unclear from the statutory language, the court may look at the law’s purpose as well as other sources such as legislative history. Carter v. Workers’ Comp. Comm’n, 2014 IL App (5th) 130151WC, ¶ 19. The language of the Act clearly provides for a period of limitation. See 820 ILCS 305/6; see also 820 ILCS 310/1. Further, there are time limitations and statute of repose specific to asbestosrelated maladies. See 820 ILCS 310/1; 820 ILCS 305/6. In addition, the Act sets forth the type of damages that are recoverable. 820 ILCS 305/8. The Act also uses language like “bar” and “exclusive” to indicate that it is an employee’s sole method of redress against an employer for injuries that are accidental and arise out of and in the course of the employment. 820 ILCS 305/6(d); 820 ILCS 305/5; 820 ILCS 305/11. If the General Assembly did not want to have claims based on asbestos-related diseases filed within 3 years, or asbestosrelated injury claims filed within 25 years, it would not have included the

clear language of sections 310/1 and 305/6. Had the General Assembly intended to provide more protracted deadlines for asbestos-related maladies, wished to provide an exception to the acts’ exclusivity for asbestos-related injuries or diseases, or wished to make other sorts of damages recoverable under the act, it would have done so. The clear language of the Act provides for a 25-year statute of repose for the filing of an application for compensation under the Act—which is the plaintiff’s exclusive remedy. 820 ILCS 305/5(a); 820 ILCS 305/6(d). Exceptions to the Act’s exclusivity provisions are meant to be limited. Rosales v. Verson Allsteel Press Co., 41 Ill. App. 3d 787, 789 (1st Dist. 1976). If the Act is read, as the Folta court suggests, to mean that a time-barred claim is “not compensable” and therefore outside of the Act’s exclusivity provisions, the plain language of the Act is ignored. Limiting the “not compensable” exception to the types of damages sought supports the plain meaning of the Act’s exclusivity provisions as well as the provisions related to the type of damages that are compensable, even if the claim arises after the limitations period prescribed in the Act. Impact of Folta At its core, Folta is a case involving an employee suing his employer for injuries sustained during the course of his employment. His injury was allegedly a result of his exposure to asbestos, and he filed his claim after the expiration of the 25-year limitations period in the Act. In offering an avenue for compensation outside of the Act, the Folta decision has placed Illinois employers at risk of timeless liability and potential jury verdicts

Civil Practice and Procedure in civil cases from employees and former employees. The result of Folta may be that some Illinois employers must either: (1) waive the timeliness defense at the Commission and defend under the Act; or (2) assert timeliness, which results in a finding of “not compensable” and subsequently civil liability. Under the second scenario, Illinois employers may be prohibited from asserting other defenses they may have had before the Commission. Further, if a civil suit is permitted against the last Illinois employer, prior employers (who are afforded protection from an employee’s claims under the Act) may face their own civil liabilities. The potential for multiple recoveries, however, goes against the clear goal of the Act. Toothman, 304 Ill. App. 3d at 533 (stating, “A part of [the] larger purpose [of the Act] is also to prevent double recoveries and the proliferation of litigation.”). If time-barred is considered “not compensable” instead of barred, the employer’s choice to “assert or waive” places them in a position of having to choose between waiving a limitations defense and proceeding in the Industrial Commission, or asserting a limitations defense and face a civil suit. Employers sued in asbestos cases, will be placed in the position of paying for workers’ compensation insurance and then only having a choice between liability under the Act or possible liability under a civil suit. The Illinois Supreme Court granted Ferro Engineering’s Petition for Leave to Appeal on September 24, 2014. The case has not yet been heard by the supreme court.

Donald Patrick Eckler Pretzel & Stouffer, Chartered, Chicago

The Attorney-Client Privilege’s Continued Expansion The Supreme Court of Oregon has joined the Supreme Court of Georgia and the Massachusetts Supreme Judicial Court in holding that under certain circumstances an attorney representing a current client can confidentially communicate with counsel regarding potential liability to that current client. Crimson Trace Corp. v. Davis Wright Tremaine LLP, 326 P.3d 1181 (Or. 2014); St. Simons Waterfront, LLC v. Hunter, Maclean, Exley, & Dunn, P.C., 746 S.E.2d 98 (Ga. 2013); RFF Family Partnership, LP v. Burns & Levinson, LLP, 991 N.E.2d 1066 (Mass. 2013). Building on the Monograph prepared by the Civil Practice Committee in the IDC Quarterly, a discussion is required of this further refusal of another state supreme court to apply the fiduciary-duty exception to the attorney-client privilege. See Donald P. Eckler, et al., The AttorneyClient Privilege in Malpractice Claims, 24.3 IDC Q., M-1 (2014). It is typical in a legal malpractice action that the claimant (former client) is able to obtain all documents related to the defendant law firm’s representation of the claimant in the underlying litigation. In a trend seen across the country, defendant law firms have successfully refused to produce communications between the lawyers involved in representing the claimant in the underlying dispute and the defendant law firm’s in-house counsel. The protected communications, which occurred while the law firm was still representing the claimant, regarded advice from the firm’s in-house counsel

to the attorneys who had allegedly committed malpractice on how to proceed in dealing with a potential or actual claim of malpractice. The defendant law firms have invoked the attorney-client privilege to shield these communications from disclosure. In seeking to obtain these communications, the plaintiffs have asked the courts to apply the fiduciaryduty exception to the attorney-client privilege. Prior to this recent trend, there was great support for this exception to be applied, and for such communications to be produced. Koen Book Distrib. v. Powell, Trachman, Logan, Carrle, Bowman & Lombardo, P.C., 212 F.R.D. 283, 285-286 (E.D. Pa. 2002); Bank Brussels Lambert v. Credit Lyonnais, S.A., 220 F. Supp. 2d 283, 287 (S.D. N.Y. 2002); — Continued on next page

About the Author Donald Patrick Eckler is a partner at Pretzel & Stouffer, Chartered. He practices in both Illinois and Indiana in the areas of commercial litigation, professional malpractice defense, tort defense, and insurance coverage. Mr. Eckler earned his undergraduate degree from the University of Chicago and his law degree from the University of Florida. He is a member of the Illinois Association of Defense Trial Counsel, the Risk Management Association, and the Chicago Bar Association. He is the co-chair of the CBA YLS Tort Litigation Committee. The views expressed in his article are his, and do not reflect those of his firm or its clients.

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SonicBlue, Inc. v. Portside Growth and Opportunity Fund., No. 07-5082, 2008 LEXIS 181, at *26 (Bankr. N.D. Cal. Jan. 18, 2008); Thelen Reid & Priest, LLP v. Marland, No. C 06-2071 VRW, 2007 U. S. Dist. LEXIS 17482 (N.D. Cal. Feb. 21, 2007); TattleTale Alarm Systems v. Calfee, Halter & Griswold, LLP, No. 10-cv-226, 2011 U.S. Dist. LEXIS 10412 (S.D. Ohio, Feb. 3, 2011). The Illinois Appellate Court First District, in Garvy v. Seyfarth Shaw LLP, 2012 IL App (1st) 110115, ¶¶ 35, 38, and MDA City Apartments LLC v. DLA Piper LLP, 2012 IL App (1st) 111047, ¶¶ 15-17, refused to acknowledge the existence of a fiduciary-duty exception to the attorney-client privilege under Illinois law, and thus, protected attorneys’ communications with each other regarding a dispute with a current client. As this trend to protect these type of communications continues to grow, whether by refusing to acknowledge the fiduciary-duty exception, as did the Illinois courts and the Oregon Supreme Court, or by recognizing the existence of the exception and finding that it did not apply, as did the courts in Georgia and Massachusetts, it is important that attorneys and their firms recognize the issue and prepare accordingly to protect themselves and their firms. The Supreme Court of Oregon Weighs In In Crimson Trace, 326 P.3d at 1195, the Supreme Court of Oregon reversed the holding of the trial court. Relying upon the language of the codified attorney-client privilege in that state, the supreme court found that the privilege applied to protect communications between the former lawyers of the plaintiff and their in-house counsel, and that the 8 | IDC QUARTERLY | First Quarter 2015

In reversing the trial court’s opinion, the Supreme Court of Oregon first addressed whether the attorneyclient privilege applied at all to this situation.

exception did not apply. Davis Wright Tremaine (DWT) was engaged by Crimson Trace to prosecute certain claims related to a patent infringement dispute with LaserMax. Id. at 1183. The patent infringement litigation turned poorly for Crimson Trace as counterclaims challenged the validity of the patent claims that served as the basis for suit. Id. DWT had prepared the original patent application, and therefore a potential conflict of interest arose between DWT and Crimson Trace. Id. at 1183-84. Crimson Trace and LaserMax ultimately reached a settlement of the patent litigation. Id. at 1184. That agreement was to be confidential. Id. However, DWT, acting as counsel for Crimson Trace, disclosed part of the settlement agreement in a way that implied that LaserMax had conceded liability. Id. LaserMax complained, and the court required that the entire agreement be disclosed. Id. Crimson Trace then brought a legal malpractice lawsuit against DWT. Id. Once the dispute between DWT and Crimson Trace arose, the lawyers representing Crimson Trace consulted with the Quality Assurance Committee (QAC) at the firm. Id. The QAC was a small group of lawyers at DWT that had been specifically designated by the firm as in-house counsel. Id. During the course of the legal malpractice claim, Crimson Trace sought the communications between the lawyers who represented Crimson Trace in the underlying litigation and the QAC. Id. at 1184-85. Finding that

the attorney-client privilege did not apply because of the conflict of interest by the QAC in representing members of the firm in conflict with clients of the firm, and in spite of the fact the communications were kept confidential, the trial court ordered that DWT produce the communications. Id. at 1185. In reversing the trial court’s opinion, the Supreme Court of Oregon first addressed whether the attorney-client privilege applied at all to this situation. Id. at 1187. Oregon’s attorney-client privilege is codified in Oregon Evidence Code Section 503. Id. The court viewed its task as determining what the legislature intended in codifying the attorney-client privilege. Id. Similar to most states, there are three elements for the attorney-client privilege to apply in Oregon: (1) the communication is between the client and lawyer; (2) the communication was confidential; and, (3) the communication was made for the purpose of obtaining advice. Id. The court rejected Crimson Trace’s argument that there is a fourth requirement: the reasonable expectations of the parties that an attorney-client relationship existed. Id. at 1188. The court rejected this argument on two bases. Id. First, the court stated that there was no support in the statute for such a requirement. Id. Second, the court rejected the attempt by Crimson Trace to apply lawyer discipline cases regarding disputes about whether an attorney-client relationship existed, holding that the reasonable expectation of the client as to the

existence of a relationship has nothing to do with the issues in this case in which the attorney and client agree that there was an attorney-client relationship. Id. After rejecting the existence of a fourth element, the supreme court turned to the first element of whether there was an attorney and client at all in this case. Id. at 1188-89. The court first stated that none of the parties contested that the privilege would have applied if the DWT lawyers had consulted with outside counsel. Id. at 1189. The court stated that nothing in the statute could be construed to preclude an in-house lawyer from being an attorney and the lawyer in the same firm as being the client in an attorney-client relationship. Id. The court rejected the argument that allowing attorneys within a firm to be counsel for other lawyers in the same firm would undermine the attorney-client relationship by holding that its interpretation of the statute prevailed over the policy argument. Id. Looking at the second element, whether the communications were confidential, the supreme court held that the communications were confidential despite having been made with lawyers in Washington, who Crimson Trace argued were subject to the more stringent restrictions of Washington law. Id. at 1190. The court rejected this argument and relied upon the requirement that Oregon applies its own law to determine evidentiary issues. Id. As to the third element, while acknowledging the trial court’s finding that the attorney-client privilege would apply but for the fiduciary-duty exception, the supreme court found that the communications were for the purpose of obtaining legal advice as to the fulfillment of professional responsibilities to Crimson Trace. Id. at 1190-91.

Having concluded that the attorneyclient privilege applied, the court then considered whether any exceptions to the privilege applied. Id. at 1191. After looking at the exceptions to the attorney-client privilege listed in the applicable statute, and determining that none of those applied, the court turned to the fiduciary-duty exception. Id. After examining the application of the fiduciary-duty exception in other jurisdictions, the supreme court ruled that because the fiduciary-duty exception was not listed as an exception to the attorney-client privilege in the Oregon statute, which was a complete enumeration of the exceptions recognized in that state, it would not recognize and adopt the exception. Id. at 1192-95. Steps to Take to Protect Communications from Disclosure To apply these principles for an Illinois practitioner, a review of the applicable Illinois Rules of Professional Conduct is important. Both Rules 1.6(b) (4) and 5.1 permit communications by lawyers in a firm with in-house lawyers. Specifically, Rule 1.6(b)(4) provides an exception to the general confidentiality requirements of Rule 1.6 for a circumstance in which a lawyer seeks “to secure legal advice about the lawyer’s compliance with these Rules.” Comment 9 to Rule 1.6 provides color to this exception: A lawyer’s confidentiality obligations do not preclude a lawyer from securing confidential legal advice about the lawyer’s personal responsibility to comply with these Rules. In most situations, disclosing information to secure such advice

will be impliedly authorized for the lawyer to carry out the representation. Even when the disclosure is not impliedly authorized, paragraph (b)(4) permits such disclosure because of the importance of a lawyer’s compliance with the Rules of Professional Conduct. Ill. Rules of Prof’l Conduct R. 1.6, cmt. 9 (2010). Rule 5.1 sheds light on the responsibilities of managing lawyers and firms of all sizes to ensure that the Rules are followed. Comment 3 to Rule 5.1 specifically contemplates the role of in-house counsel: Other measures that may be required to fulfill the responsibility prescribed in paragraph (a) can depend on the firm’s structure and the nature of its practice. In a small firm of experienced lawyers, informal supervision and periodic review of compliance with the required systems ordinarily will suffice. In a large firm, or in practice situations in which difficult ethical problems frequently arise, more elaborate measures may be necessary. Some firms, for example, have a procedure whereby junior lawyers can make confidential referral of ethical problems directly to a designated senior partner or special committee. Ill. Rules of Prof’l Conduct R. 5.1, cmt. 3 (2010). These Rules were specifically cited by the Illinois appellate court in Garvy and provide the framework for establishing procedures to comply with — Continued on next page

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the Rules and to eliminate or at least mitigate the damage from any disputes with a client. In addition to looking at the applicable Rules of Professional Conduct and comments, note that Illinois follows the control-group test prior to looking at specific steps to be taken to protect from the disclosure of communications. Consolidation Coal Co. v. Bucyrus-Erie Co., 89 Ill. 2d 103, 118-19 (1982). While there is no case on point, erring on the side of caution practitioners should assume that the control-group test would apply with equal force to law firms as it does to other corporations and organizations. Thus, for a law firm to protect communications regarding claims against the law firm in Illinois, the communications must be limited to the decision makers of the law firm and those that directly advise those decision makers. There are a number of practical suggestions to comport with the requirements of the control-group test. First, any communications regarding the issue should only be shared with the executive level of the firm. Indeed, in identifying the lawyer within the firm from whom advice regarding a conflict is sought, the firm should attempt to identify an individual on the firm’s executive committee, or other group charged with making decisions for the firm. Second, while it is preferable to consult with outside counsel for claims against the firm that may arise (because there is no dispute that communications with outside counsel would be protected), the firm should also identify in-house counsel. The identification of in-house counsel should be communicated to the lawyers in the firm so that the lawyers know from whom to seek advice in the event of a potential or actual claim against the firm based upon a particular 10 | IDC QUARTERLY | First Quarter 2015

attorneys’ conduct. This advice could be particularly important in avoiding or mitigating the extent of a claim if such advice is sought early on. Third, depending on the size of the firm, more than one in-house lawyer should be identified. This safeguard is important because an event could arise in which the designated in-house counsel was involved in the representation of the client and is therefore implicated in the alleged malpractice. If the firm has only designated one in-house lawyer, and that lawyer has a conflict, then the firm could be left without in-house counsel in that situation. Like all representations, an in-house lawyer must be free of conflict before taking on an assignment. Therefore, in drafting a policy to address these issues, backup or secondary in-house counsel should be identified. Further a procedure for identifying a conflict for the designated in-house counsel should be prepared. Because the designated in-house lawyer is likely to be a member of the executive level of the firm, procedures for shielding that lawyer from such communications regarding the defense of the firm should be undertaken if the in-house lawyer has a conflict. Fourth, the in-house lawyer, or any fees generated by outside counsel, must not be paid by or billed to the client with whom the firm is in conflict. If the client with whom the conflict exists pays for the lawyers to obtain advice, or is even billed for those services, the attorney-client privilege would likely be waived and the fiduciary-duty exception would apply. United States v. Jicarilla Apache Nation, 131 S. Ct. 2313, 2326 (2011). Keeping a strict demarcation between the representation of the client and the representation of the firm as it relates to the potential or actual claim of the client is the hallmark of maintaining

the attorney-client privilege in this very complex and ethically challenging context. Finally, any communications regarding the dispute with the client must specifically identify that those communications are intended for the purpose of analyzing its own potential liability, and not for the purpose of the client’s interests. The easiest way to do this, and to prevent billing the client for these services, would be to open a separate file for the dispute with the client. These suggestions are applicable to practitioners in Illinois and its limited scope of the attorney-client privilege and the non-codified attorney-client privilege. As illustrated in Crimson Trace, where the Supreme Court of Oregon’s analysis was entirely reliant on the language of the statute codifying the attorney-client privilege, the source of the privilege is especially important. Firms that have offices in several states, or which are handling a particular case in temporary or pro hac vice admission, should consider the possibility of variable applications of the attorney-client privilege in a given situation. Many states, including all of Illinois’ neighbors, Wisconsin, Iowa, Indiana, Missouri, and Kentucky, have codified the attorney-client privilege in a statute. IADC Multinational Legal Privilege Project-Part III, IADC (June 2012), http://www.iadclaw.org/assets/1/7/DAngelo_-_Attorney-Client_Privilege_-_ Addendum_for_States_-_June_2012. pdf. In handling cases in those states, or any state with a codified attorney-client privilege, analysis of the language of that particular codification of the privilege can be useful, and perhaps dispositive, in determining whether the fiduciary-duty exception is included in the exceptions to the privilege.

Property Insurance Law Firms should also consider whether the state in which they are practicing has adopted the control-group test or the subject-matter test, as that can be instructive as to how a firm should prepare for protecting internal communications in situations where a conflict with a client has arisen. The neighboring states of Kentucky and Iowa have both adopted the Upjohn subject-matter test. As it relates to cross-border communications within a firm related to a conflict with a client, a firm should prepare for a ruling similar to the holding in Crimson Trace that the rules regarding privilege in the state in which the malpractice action is brought apply, notwithstanding the rules in another state that may be more or less restrictive. In Crimson Trace, the action was brought in Oregon and the lawyers had communication with in-house counsel from Washington. Crimson Trace, 326 P.3d at 1190. The plaintiff argued that the more restrictive privilege in Washington should apply. Id. The Oregon Supreme Court disagreed. Id. Accordingly, if a firm has offices in other states, but designated in-house counsel in Illinois, the firm should be prepared for the other state’s rules regarding privilege to apply, and not Illinois’ rules. Conclusion This is an issue that must be addressed by firms of all sizes and by their insurers. Risk management strategies for law firms should involve taking steps to have confidential communications to mitigate or eliminate disputes with clients, and to avoid conflicts of interest that could increase the liability.

Catherine A. Cooke Robbins, Salomon & Patt, Ltd., Chicago

The Age of Distracted Living – Illinois Supreme Court Tackles the “Distracted Exception” to the Open and Obvious Rule In the era of constant internet connectivity and multitasking, it is difficult to go an hour without observing someone who is visibly distracted by one thing or another. If you look around, it is easy to spot. The hurried professional, with her head down while texting, who enters the crosswalk as it starts to flash “DON’T WALK.” The driver who has been sitting at the stop light for a full fifteen seconds after the light turns green because he is on a cell phone either texting, figuring out the fastest route to get from point A to point B, or perhaps just checking social media. What types of distractions will allow a person to claim the “distraction exception” when an injury occurs as a result of an obvious dangerous condition on property? The Illinois Supreme Court recently addressed this issue in the context of the Local Government and Governmental Employees Tort Immunity Act and provided some answers. Bruns v. City of Centralia On March 27, 2012, the plaintiff, Virginia Bruns, then 79 years old, drove to an eye clinic located in Centralia for a scheduled appointment. Bruns v. City of Centralia, 2014 IL 116998, ¶ 4. Ms. Bruns parked her car on the street in front of the clinic, just as she had on each of her previous nine visits to the

clinic. Bruns, 2014 IL 116998, ¶ 4. While walking towards the clinic entrance, she stubbed her toe on a crack in the sidewalk and fell, injuring her arm, leg, and knee. Id. At the time of the fall, Ms. Bruns was looking “towards the door and the steps” of the clinic, and while she had “definitely” noticed the crack in the sidewalk on prior visits, she was not sure she noticed it on the date of her accident. Id. The defect at issue developed over a period of several years. Roots from a nearby tree had caused the sidewalk to crack and become uneven. Id. ¶ 5. Sometime before 2009, a clinic employee had contacted the city about the sidewalk and had offered to remove the tree at — Continued on next page

About the Author Catherine A. Cooke is an associate at Robbins, Salomon & Patt, Ltd. and concentrates her practice in the area of commercial litigation and creditors’ rights. She earned her undergraduate degree from Indiana University– Bloomington in 2003, and law degree from The John Marshall Law School in 2006, where she served as Administrative Editor of The John Marshall Law Review. She is licensed to practice law in both Illinois and Indiana.

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the clinic’s expense; however, the city would not authorize removal of the 100-year-old tree because of its historic significance. Id. Later in 2009, a clinic employee had contacted the city after learning that someone had tripped and fallen, but the city never repaired the sidewalk. Id. Trial Court Proceedings The plaintiff alleged that the city negligently maintained the sidewalk and permitted it to remain in a dangerous condition. Id. ¶ 6. The city filed a motion for summary judgment, arguing that the defect was “open and obvious as a matter of law” and that it was not required to foresee and protect against injuries from an open and obvious dangerous condition. Id. The plaintiff argued that simply labeling the defect as “open and obvious” did not bar recovery because the city should have reasonably foreseen that a pedestrian could become distracted and fail to protect herself against the dangerous condition. Id. The “distraction” was the plaintiff looking up towards the clinic door, and it was a reasonable thing for the city to expect someone to do. Id. ¶ 7. There were no other alleged distractions. Id. The trial court granted the city’s motion for summary judgment and found that the sidewalk defect was open and obvious as a matter of law and rejected the plaintiff’s argument that the “distraction exception” applied under the circumstances. Id. ¶ 8. The trial court declined to expand the distraction exemption, reasoning that under the plaintiff’s argument, “the mere existence of an entrance, and/or steps leading up to it, would provide a universal distraction exception to the open and obvious doctrine.” Id. 12 | IDC QUARTERLY | First Quarter 2015

As the appellate court framed the issue, “the key question was the foreseeability of the likelihood that an individual’s attention may be distracted from the open and obvious condition.”

Appellate Court Proceedings— Was the Distraction Reasonably Foreseeable? On appeal, the parties disagreed about the application of the distraction exception. Id. As the appellate court framed the issue, “the key question was the foreseeability of the likelihood that an individual’s attention may be distracted from the open and obvious condition.” Bruns, 2014 IL 116998, ¶ 9 (citing Bruns v. City of Centralia, 2013 IL App (5th) 130094, ¶ 11). The appellate court opined that it was reasonably foreseeable that an elderly patron of the eye clinic may have his or her attention focused towards the door rather than the path immediately underfoot. Bruns, 2014 IL 116998, ¶ 9. The appellate court concluded that the city had a duty to remedy the sidewalk in a reasonable timeframe, but whether the duty had been breached was a fact question. Id. The appellate court reversed and remanded the case for further proceedings. Id. The Illinois Supreme Court Weighs In—The Common Law “Open and Obvious Rule” The underlying facts not being in dispute, the only question for the Illinois Supreme Court was whether the city owed a duty to the plaintiff. Id. ¶ 13. Under Section 3-102 of the Local Governmental Employees Tort Immunity

Act, a local public entity has the duty to exercise ordinary care and to maintain property in a reasonably safe condition. 745 ILCS 10/3-102. The Tort Immunity Act did not create the duty; it only codified the general duty that existed at common law. Bruns, 2014 IL 116998, ¶ 9; Bubb v. Springfield Sch. Dist. 186, 167 Ill. 2d 372, 377-78 (Ill. 1995). At common law, a party who owns land is not required to foresee and protect against injury if the potentially dangerous condition is open and obvious. Rexroad v. City of Springfield, 207 Ill. 2d 33, 44 (Ill. 2003). The general rationale for the principle being that the open and obvious nature of the condition will warn persons who encounter the conditions to take caution to avoid danger or injury. Bruns, 2014 IL 116998, ¶ 16; Bucheleres v. Chicago Park Dist., 171 Ill. 3d 435, 448 (Ill. 1996). The open and obvious rule has been applied not only to conditions such as fire, height, and bodies of water, but also to conditions including sidewalk defects and holes in parking lots, amongst others. Bruns, 2014 IL 116998, ¶ 17; see e.g., Rexroad, 207 Ill. 2d at 36 (hole in parking lot next to high school football field); Ward v. K Mart Corp., 136 Ill. 2d 132, 136 (Ill. 1990) (concrete post outside of retail store). When there is no dispute as to the physical nature of the condition, whether it is open and obvious is a matter of law. Bruns, 2014 IL 116998, ¶ 18. However, the fact that a condition is open and obvi-

ous is not a per se bar to a finding of duty. A court must still apply the traditional duty analysis based on the facts of the particular case. Id. ¶ 19. The “Distraction Exception” The Illinois Supreme Court considered whether the “distraction exception” to the open and obvious rule applied. Id. ¶ 20. The “distraction exception” applies when a landowner has reason to expect that a person’s attention may be distracted and as a result, “he will not discover what is obvious, or will forget what he has discovered, or fail to protect himself against it.” Id. ¶ 20 (quoting Restatement (Second) of Torts § 343A, cmt. f, at 220 (1965)). When the possessor of land has reason to expect the invitee will be distracted, the outcome of the duty analysis with respect to the first two factors (foreseeability and likelihood of injury) is “reversed.” Bruns, 2014 IL 116998, ¶ 20. In other words, the operation of the open and obvious rule negatively impacts the foreseeability and likelihood of injury, while the application of the distraction exception positively impacts the foreseeability and likelihood of injury. Id. The city urged the supreme court to reverse the appellate court’s decision for the simple reason that the plaintiff was not actually distracted. Id. ¶ 21. The city argued that the fact that the plaintiff fixed her attention on the door of the eye clinic did not constitute a “distraction.” Id. The plaintiff on the other hand, argued it was a “classic example” of the distraction exception because people do not ordinarily look downward while walking and the city should have anticipated as much. Id. The Illinois Supreme Court agreed with the city and “conclude[d] that the

mere fact of looking elsewhere does not constitute a distraction.” Id. ¶ 23. While there is no precise definition of what will constitute a distraction, some circumstance must exist that requires the plaintiff to divert his or her attention from the open and obviously dangerous condition and prevent the person from avoiding the risk. Id. ¶¶ 23-28. The distractions were also reasonably foreseeable based on the circumstances and the defendant’s conduct. Id. ¶ 29. Is a “Self-Made” Distraction Foreseeable? In contrast to the cases summarized by the court, the only “distraction” that Ms. Bruns had identified was that she was looking towards the door and steps of the clinic instead of the sidewalk at the time of her fall. Id. ¶ 30. The court distinguished that type of distraction from the other cases relied upon where the injured plaintiff was looking elsewhere to avoid another hazard or because of some other task at hand requiring the plaintiff’s attention. Id. ¶ 30.

ably a much closer call), the plaintiff high school student who was working as a manager of the football team was distracted by the football coach’s instructions to retrieve a helmet from the locker room, which caused him to fall in a hole in a parking lot while returning with the helmet. Rexroad, 207 Ill. 2d at 46. The court concluded that Ms. Bruns’ distraction was, at most a “self-made distraction.” Id. ¶ 31. The plaintiff ordinarily should not be allowed to recover for a self-created distraction that the defendant could not reasonably foresee. Whittleman v. Olin Corp., 358 Ill. App. 3d 813, 817-18 (5th Dist. 2005). The law does not require a possessor of land to anticipate or protect against a situation that “will only occur in the distracted mind of his invitee.” Whittleman, 358 Ill. App. 3d at 818. Noting that “the concept of foreseeability is not boundless,” the court disagreed with the plaintiff’s position that it is objectively reasonable for the city to expect that a pedestrian, exercising reasonable care for his or her own safety, would look elsewhere and fail to

The court found that to conclude as the plaintiff urged, that simply looking elsewhere constitutes a “legal distraction” would allow the distraction exception to swallow the open and obvious rule.

For example, in Ward v. K mart Corp, it was foreseeable that the plaintiff leaving the store while carrying a large purchase may be distracted and not notice the large cement columns outside the door. Ward, 136 Ill. 2d at 153-54. Or in Rexroad v. City of Springfield (argu-

avoid the risk of injury from an open and obvious sidewalk defect. Bruns, 2014 IL 116998, ¶ 34. The court found that to conclude as the plaintiff urged, that simply looking elsewhere constitutes a “legal distraction” would allow the — Continued on next page

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distraction exception to swallow the open and obvious rule. Id. The Illinois Supreme Court declined to do so. Nevertheless, determining how the open and obvious doctrine applies does not end the inquiry regarding the city’s duty. Id. ¶ 35. After analyzing the traditional duty factors: (1) reasonable foreseeability of the injury, (2) likelihood of injury, (3) magnitude of the burden of guarding against the injury, and (4) consequences of placing the burden on the defendant, the court concluded that the city did not have a duty to protect the plaintiff from the open and obvious sidewalk defect under the circumstances. Id. The supreme court therefore reversed the appellate court and affirmed the trial court’s award of summary judgment in the city’s favor. Id. Lessons from Bruns v. City of Centralia The Bruns v. City of Centralia ruling likely precludes “self-made distractions” like those in the opening examples from falling within the “distraction exception” to the open and obvious rule. Whether Illinois courts could conclude that a municipality should reasonably foresee a person would be distracted by a cell phone or similar handheld device still remains an open question. The Illinois Supreme Court’s refusal to allow the distraction exception to swallow the open and obvious rule should give some peace of mind to municipalities.

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Recent Decisions Stacy E. Crabtree Heyl, Royster, Voelker & Allen, P.C., Peoria

Payment of Attorney’s Fees on Behalf of Employees Remains Discretionary for Local Public Entities under the Tort Immunity Act Despite Collective Bargaining Agreement In Winston v. O’Brien, Nos. 13-3553 & 14-1371, 2014 WL 6057367 (7th Cir. Nov. 14, 2014), the plaintiff sought attorney’s fees from the City of Chicago after succeeding in a civil rights case against one of its employees. The plaintiff claimed the defendant, a City of Chicago police officer, handcuffed him and then tasered and punched him repeatedly. Winston, 2014 WL 6057367, at *1. After a jury trial, the plaintiff was awarded $1 in compensatory damages and $7,500 in punitive damages. Id. Thereafter, the plaintiff sought $336,918 in attorney’s fees, of which $187,467 was awarded because the district court found the requested hourly rate too high. Id. The plaintiff then filed a motion asking the court to order the city to pay the awarded fees or indemnify the defendant for the fees under Illinois’s Local Governmental and Governmental Employees Tort Immunity Act, 745 ILCS 10/9-102 (TIA) based on the city’s collective bargaining agreement (CBA) with its police officers. Id. at *1. The district court ruled in favor of the plaintiff, ordering the city to pay the attorney’s fees. Id. at *2. The city appealed. Id. During the pendency of the appeal, the district court ordered the city to pay additional attorney’s fees in the amount of $90,777, which were incurred by the plaintiff after his first request for fees. Id. The court of appeals

combined its review of both orders for attorney’s fees. In a civil rights action, success against an individual government employee does not necessarily entitle the plaintiff to recover fees from the employee’s governmental employer. Kentucky v. Graham, 473 U.S. 159, 168 (1985). But, the plaintiff may be entitled to such fees pursuant to a state indemnification statute. Winston, 2014 WL 6057367, at *2. The TIA provides: A local public entity is empowered and directed to pay any tort judgment or settlement for compensatory damages (and may pay any associated attorney’s fees and costs) for

About the Author Stacy E. Crabtree is an associate in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. She represents businesses, not-for-profits, and governmental entities in commercial and tort litigation in state and federal court. She also assists clients with commercial transactions, corporate governance, and compliance issues. Ms. Crabtree received her J.D., summa cum laude, from Florida Coastal School of Law and B.A., summa cum laude, from Bradley University.

which it or an employee while acting within the scope of his employment is liable in the manner provided in this Article. 745 ILCS 10/9-102. Upon applying rules of statutory construction, the court noted the discretionary language of the TIA with respect to attorney’s fees, i.e., “may pay any associated attorney’s fees,” versus the obligatory language with respect to compensatory damages, i.e., “directed to pay any tort judgment or settlement for compensatory damages.” Winston, 2014 WL 6057367, at *3 (quoting 745 ILCS 10/9-102). As a result, the court of appeals noted it was within the city’s discretion whether to pay attorney’s fees under the TIA. Id. at *3. Despite the discretionary language of the TIA, the plaintiff argued that the city made the choice in advance to pay for attorney’s fees for its officers who are liable for damages. Id. at *4. Specifically, the CBA stated that so long as an officer is acting within his or her scope of employment and cooperated with the city’s defense, the city “shall be responsible for, hold officers harmless from and pay for damages or monies which may be adjudged, assessed, or otherwise levied against any officer cover[ed] by [the CBA].” Id. at *1. The plaintiff argued it was not asking the court to enforce the CBA, but rather to interpret the TIA in light of the CBA. Id. at *4. The court of appeals noted, however, that attorney’s fees are not expressly included in the CBA. Id. at *4. The CBA only refers to “damages or monies” which, if given the broadest meaning possible, could include attorney’s fees. Id. The broadest interpretation, however, could also include punitive damages, the indemnification for which is prohibited under Illinois law. Id. The plaintiff ar-

gued the city acknowledged the CBA included attorney’s fees in a letter from the police commander, which said the city would “pay fees in compliance with” the TIA. Id. The city argued however, that the letter merely acknowledged that the city would abide by Illinois law. Id. In any event, by the plaintiff’s own acknowledgement, he was seeking indemnification under the TIA, not the CBA. Id. The plaintiff failed to offer sufficient basis for the court to find the CBA or the police commander’s letter modified the plain language of the TIA

such that a city’s decision to pay for attorney’s fees would now become an obligation. Id. The CBA did not even mention the TIA. Id. Furthermore, the CBA includes a grievance procedure and to interpret the CBA and the letter to require indemnification would risk sidestepping the grievance procedure and arbitration, “which has an important role in federal labor regulations.” Id. In conclusion, the court of appeals held that the district court erred in ordering the city to indemnify the defendant for attorney’s fees. Id. at *5.

Dismissal of Claims Against Law School Under Consumer Fraud Act Upheld In Phillips v. DePaul Univ., 2014 IL App (1st) 122817, the plaintiffs were licensed attorneys who graduated from the DePaul University College of Law between 2007 and 2011 and had difficulty finding legal employment that paid a salary sufficient to allow them to repay their student loans. Phillips, 2014 IL App (1st) 122817, ¶ 1. In a class action lawsuit, the plaintiffs alleged a claim under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act), 815 ILCS 505/1- 505/12, and further asserted claims of common law fraud and negligent misrepresentation. Id. The plaintiffs alleged the defendant published “employment and salary statistics that deceptively overstated the percentages of recent graduates who had obtained full-time legal employment with salaries in excess of $70,000.” Id. The plaintiffs further alleged that they relied upon those statistics when enrolling and remaining enrolled at DePaul. Id.

Specifically, DePaul published statistics in 2006, 2008, and 2010 reporting employment information for the preceding year’s graduating class. In 2006, DePaul published that 98% of its 2005 graduates were employed within nine months of graduation in the following areas: 57% in private practice; 21% in business; 12% in government; 4% in public interest; 3% as judicial clerks; and 2% in academia. Id. ¶ 9. DePaul also stated the mean starting salaries were $82,890 in private practice and $72,637 in business. Id. The statistics published in 2008 and 2010 were similar to 2006, varying no more than plus or minus 7% in any given category. Id. ¶¶ 10-11. The mean salaries published in 2008 were the same as those published in 2006. Id. In 2010 the mean salaries rose to $97,056 for those in private practice and $74,267 for those in business. Id. — Continued on next page

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Recent Decisions | continued

The plaintiffs claimed these statistics were “incomplete, false and materially misleading” because the percentage of employment within nine months of graduation included any type of employment, not just jobs that required or preferred a Juris Doctor (J.D.) degree, not just full-time positions, and included jobs the university provided to its own graduates while studying for the bar or otherwise looking for “real jobs.” Id. ¶ 12. With respect to calculating the mean salaries, DePaul only used salaries from those with full-time employment, which according to the plaintiffs resulted in mean salaries that “were significantly distorted to show higher salaries than statistically warranted and, therefore, were inherently misleading.” Id. ¶ 13. The amended complaint asserted that as a result of their reliance on the above statistics, the plaintiffs paid tens of thousands in tuition, some of which was paid for by tuition loans, and graduated with job prospects statistically less than they would have been had they graduated from a university with the employment numbers DePaul claimed to have. Id. ¶ 1. The plaintiffs alleged damages as follows: assuming DePaul inflated its employment statistics by X percent (X to be determined) then the advantage and value of the tuition paid by the plaintiffs to DePaul was reduced by X percent. Id. ¶ 16. As a result, the plaintiffs damages were X percent of the amount they paid to DePaul plus “a statistically determinable amount of the lifetime income they would have been expected to earn after graduating from DePaul if DePaul’s post-graduation employment statistics had been those that DePaul had represented . . . less the statistically determinable amount of the lifetime income they would now be expected to earn, having graduated 16 | IDC QUARTERLY | First Quarter 2015

from DePaul, based upon DePaul’s true post-graduation employment statistics.” Id. ¶ 17 (emphasis in original). DePaul filed a combined motion to dismiss, which the circuit court granted. Id. ¶ 1. The plaintiffs appealed. To state a claim under the [Consumer Fraud] Act, a complaint must set forth specific facts showing: (1) a deceptive act or practice by the defendant; (2) the defendant’s intent that the plaintiff rely on the deception; (3) the deception occurred in the course of trade or commerce; and (4) the consumer fraud proximately caused the plaintiff’s injury. Id. ¶ 29 (citing White v. DaimlerChrysler Corp., 368 Ill. App. 3d 278, 283 (1st Dist. 2006)). The plaintiff must suffer actual damages in an action under the Consumer Fraud Act. Id. In this case, the court found that the plaintiffs failed to allege a deceptive act or practice, failed to allege facts showing the consumer fraud proximately caused the plaintiffs’ injury, and failed to allege actual damages. I. Failure to Plead a Deceptive Act or Practice With respect to a deceptive act or practice, the complaint “must state with particularity and specificity the deceptive [unfair] manner of defendant’s acts or practices . . . .” Phillips, 2014 IL App (1st) 122817, ¶ 32 (quoting Demitro v. General Motors Acceptance Corp., 388 Ill. App. 3d 15, 20 (1st Dist. 2009)). Deceptive acts or practices include, without limitation, “the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the

concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact * * * in the conduct of any trade or commerce.” Id. ¶ 33 (quoting 815 ILCS 505/2 (1973)). The plaintiffs’ alleged the defendant committed deceptive acts or practices when failing to note the percentages of graduates in positions not requiring a J.D. degree or in part-time positions in relation to those employed within nine months of graduation, causing the plaintiffs to believe that the data reported related only to full-time legal employment. Id. ¶ 39. The defendant never stated that the statistics reported only included those in full-time legal employment and otherwise never made any affirmative misrepresentations of the statistics. The appellate court found the plaintiffs’ interpretation of the general employment statistics reported by the defendant unreasonable as a matter of law. Id. The court pointed to other recent cases in New York with similar findings of unreasonableness with respect to law graduates’ interpretation of their respective law schools’ statistics. Id. ¶ 40 (citing, e.g., Gomez-Jimenez v. N. Y. Law Sch., 956 N.Y.S.2d 54, 59 (N.Y. App. Div. 2012)). As for the percentages of employment within specific areas, only the areas of private practice and judicial clerkships presumably require or prefer a J.D. degree. Phillips, 2014 IL App (1st) 122817, ¶ 41. None of the other areas reported, namely business, governmental, academia, and public interest, expressly excluded employment as a non-attorney in the reporting. Id. In further support of finding no deceptive act or practice, the court of appeals acknowledged that it must

consider all of the information available to the plaintiffs. Id. ¶ 43 (citing Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 938-39 (7th Cir. 2001)). In addition to the reported employment statistics at issue, the plaintiffs had information available to them provided by the American Bar Association (ABA) regarding the defendant’s graduates’ employment statistics and the Official Guide to ABA-Approved Law Schools (ABA Guides), which expressly indicate those reported employment statistics include legal, non-legal, full-time and part-time jobs. Phillips, 2014 IL App (1st) 122817, ¶ 43. Concerning the plaintiffs’ allegations related to the defendant’s reporting of salaries for only those in full-time positions, the salaries were listed as averages, “meaning that some of the graduates earned more than the average while others earned less than the average.” Id. ¶ 46. No promises were made that the plaintiffs would earn at or above the salaries reported and furthermore, the ABA Guides expressly stated, “[t]he highest-paying jobs were the exception rather than the rule.” Id. In conclusion, the court of appeals found the plaintiffs did not plead a deceptive act or practice. Notably, because the court did not find the reported employment statistics to contain any incomplete, false, or misleading statements, the plaintiffs’ claims under common law fraud and negligent misrepresentation also failed. Id. ¶¶ 72, 88. II. Failure to Plead Proximate Causation In reaching the decision that the plaintiffs failed to allege proximate causation, the appellate court noted that a graduate’s success in becoming

employed and achieving a particular salary is dependent on a number of factors, including without limitation: the economy, the availability of legal jobs, his or her academic performance, practical experience, efforts in obtaining legal employment, geographic area in which employment is sought, whether he or she seeks employment in the public sector or private practice, and so on. Id. ¶ 52. Proximate cause has two requirements: (1) the cause in fact, i.e., the “but for” cause, and (2) the legal cause, i.e., that the injury was a foreseeable consequence of the misrepresentation. Id. ¶ 50. Due to the number of factors affecting job placement and salary, the court of appeals could not say “that ‘but for’ the employment information for the 2005, 2007, and 2009 classes at issue here that plaintiffs would have obtained their desired jobs/salaries even upon graduation from different law schools.” Id. ¶ 54. Because of the same factors, the court of appeals could not say the plaintiffs’ disappointing post-graduate employment status was a foreseeable consequence of the plaintiffs’ decisions to attend DePaul in reliance on the reported employment statistics. Id. ¶ 55. As a result, the plaintiffs failed to plead proximate causation under the Consumer Fraud Act. III. Failure to Plead Damages A plaintiff must suffer actual damages to bring a claim under the Consumer Fraud Act, and the claim must not be predicated on mere speculation, hypothesis, conjecture, or whim. Id. ¶ 57. The court noted the plaintiffs received exactly what they paid for, i.e., a J.D. degree. Id. ¶ 59. Additionally, the calculation methods suggested by the plaintiffs

(X percent as the loss in value the tuition paid and the difference in expected lifetime earnings) were based on the defendant’s generalized employment statistics consisting of averages from past classes. Id. ¶¶ 59-63. The statistics did not constitute any promise to the plaintiffs as to what they would actually receive, and as a result, the court did not see how the plaintiffs were actually damaged. Id. ¶¶ 59-60. Similar to Gomez-Jimenez, the court of appeals noted the calculation methods were speculative, especially given the number of factors that impact an attorney’s lifetime earnings and the lack of any certainty in predicting the impact of the factors on any plaintiff. Id. ¶¶ 60, 65. The plaintiffs’ claims were ultimately dismissed with prejudice, which the plaintiffs also contended was error. Id. ¶ 90. Notably, the claims that were the subject of the appeal were raised in an amended complaint, which the plaintiffs did not ask leave of the court to file. Id. ¶ 91. The court of appeals upheld the dismissal with prejudice noting the absence of any absolute right to amend pleadings, and citing to Matanky Realty Grp., Inc. v. Katris, 367 Ill. App. 3d 839, 844 (1st Dist. 2006), which similarly upheld the dismissal of the plaintiff’s complaint with prejudice, “where no exercise of that discretion was requested because the record demonstrates that plaintiff never sought leave to amend its complaint.” Phillips, 2014 IL App (1st) 122817, ¶ 91 (quoting Matanky Realty, 367 Ill. App. 3d at 844).

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Commercial Law James K. Borcia Tressler LLP, Chicago

Appellate Court Upholds Piercing the Corporate Veil Against Non-Shareholder Employee The Illinois Appellate Court, First District, recently dealt with the issue of piercing the corporate veil and, in so doing, clarified a muddy issue. In John Buckley and Mama Grimm’s Bakery, Inc. v. Haithham Abuzir, 2014 IL App (1st) 130469 (April 10, 2014), the court held that a non-shareholder can be liable for a debt against a corporation. The court also decided that the business was nothing more than a dummy corporation and alter ego of the defendant. Id. ¶¶ 10-11. Illinois courts have long held that the failure to follow corporate procedure may lead to the individual liability of a shareholder, director, or officer. Now, according to John Buckley, even a non-shareholder—who is not an officer, director, or employee of a corporation —may be found individually liable for a judgment against a corporation where the non-shareholder exercises only equitable ownership and control over a corporation, even if there were no allegations that the non-shareholder engaged in any wrongdoing. In John Buckley, a bakery corporation and its individual owner sought to pierce the corporate veil of a pastries corporation to collect a judgment directly from its individual financier and controller. The trial court granted the individual defendant’s motion to dismiss because he was not a shareholder, director, officer, or employee of the defendant bakery corporation. Id. ¶ 5. The plaintiffs appealed the dismissal. Id. ¶ 6.

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On appeal, the plaintiffs argued that the defendant made all of the bakery corporations’ business decisions and exercised such control over it that it amounted to a dummy corporation and alter ego of the individual defendant. Id. ¶ 3. The individual defendant made two arguments: (1) Illinois courts only pierce the corporate veil to impose liability on a corporation’s shareholders, officers, directors, or employees, and he was none of these; and (2) he was not a party to the underlying action and was therefore deprived of the ability to defend himself against the allegations made against the defendant pastries corporation. Id. ¶¶ 8-9. As to the second issue, the court held that if the plaintiffs proved the defendant was the alter ego of the bakery corporation, the decision not to defend the underlying suit would have been his own. Id. ¶ 9. After acknowledging that courts around the country were split on the issue of whether the corporate veil may be pierced to reach non-shareholders and individuals lacking a corporate title at all, the John Buckley court determined that the majority of jurisdictions have held that the defendant’s lack of shares or corporate title does not preclude veilpiercing. Id. ¶ 29. Relying on Fontana v. TLD Builders, 362 Ill. App. 3d 491 (2nd Dist. 2005), the John Buckley court concluded that Illinois is in line with the majority and held that equitable ownership as pleaded by John Buckley may satisfy the unity-of-interest-and-ownership

prong for piercing the corporate veil, regardless of whether an individual is a non-shareholder or otherwise lacks a formal title within the corporation. Id. In Fontana v. TLD Builders, Inc., 362 Ill. App. 3d 491 (2005), plaintiff property owners hired the defendant’s construction corporation to construct a single-family home. The builder abandoned the project, and the plaintiffs sued, seeking to pierce the corporation’s veil and hold the defendant personally liable. Id. at 494-95. Following a bench trial, the trial court pierced the veil and held the defendant and his corporation jointly and severally liable. Id. at 499. On appeal, the defendant argued that the trial court erred in piercing the corporate veil, because he was a non-shareholder and, therefore, the unity-of-interest-andownership prong could not be met. Id. at 500-01. The Fontana court disagreed. Id. at 501. Noting that piercing the corporate veil is an equitable remedy that looks to substance over form, the court held that status as a non-shareholder does not preclude piercing the corporate veil, because equitable ownership may satisfy the unity-of-interest-and-ownership prong. Id. at 501, 503. Illinois courts have long held that the failure to follow corporate procedure may lead to the individual liability of a

About the Author James K. Borcia is a partner with the Chicago firm of Tressler LLP, and is active in the firm’s litigation practice with an emphasis on commercial and complex litigation. He was admitted to the bar in 1989 after he received his J.D. from Chicago-Kent College of Law. Mr. Borcia is a member of the Chicago and Illinois State Bar Associations, as well as the IDC and DRI.

Appellate Practice Corner Scott L. Howie Pretzel & Stouffer, Chartered, Chicago

Illinois courts have long held that the failure to follow corporate procedure may lead to the individual liability of a shareholder, director, or officer.

shareholder, director, or officer. Now, based on John Buckley, a non-shareholder may be found individually liable for a judgment against the corporation where the non-shareholder exercises only equitable ownership and control over a corporation. This is true, even if there are no allegations that the nonshareholder engaged in any wrongdoing in the underlying case. The John Buckley decision reiterates that closely held corporations must maintain the corporate form. Simply forming a corporation is not enough for individual clients to avoid personal liability, even if the individual is not a shareholder, director, or officer of the corporation. This case stresses the importance of quality legal advice, not just in setting up the corporation, but also in operating the company as a corporation. Thus, lawyers advising such clients must stress the importance of maintaining corporate formalities in addition to the importance of adequate capitalization, issuance of stock, election of a board of directors, recording of meeting minutes, and other corporate formalities.

Supreme Court Rule 306(a)(1): Interlocutory Review of an Order Granting a New Trial Illinois Supreme Court Rule 306 provides a means to seek immediate appeal of a variety of nonfinal orders. Ill. S. Ct. R. 306. For trial lawyers, the most useful part of Rule 306 may be the provision that allows for an interlocutory appeal of an order granting a new trial. See Ill. S. Ct. R. 306(a)(1). This provision embodies the intuitive sense that it would be a considerable hardship to a party who prevailed in the first trial to have to undergo a second one before being allowed to challenge the order granting the retrial—and potentially an unnecessary burden to all parties and the court, should it ultimately be found that there was no basis for the retrial. While this edition of the Appellate Practice Corner specifically concerns interlocutory appeals of orders granting new trials, the principles and procedures that govern such appeals are also generally applicable to most of the other varieties of orders that may be appealed by petition under Rule 306. Most, but not all: “[I]nterlocutory orders affecting the care and custody of unemancipated minors,” which are appealable under Rule 306(a)(5), are governed by a different set of procedural rules that are set forth in Rule 306(b), including a more accelerated briefing schedule and the express discouragement of extensions of time. See Ill. S. Ct. R. 306(a)(5); Ill. S. Ct. R. 306(b)(1), (2), (3). Attorneys handling appeals of this sort of order should be aware of these and other dif-

ferences from the procedures that apply to orders granting new trials. Availability of Interlocutory Review of Orders Granting New Trials Rule 306(a)(1) permits an interlocutory appeal of any order granting a new trial of any kind—including an order that grants a new trial on some limited portion of the case, such as a new trial on damages alone. See, e.g., Stamp v. Sylvan, 391 Ill. App. 3d 117, 122 (1st Dist. 2009). It also permits an interlocutory appeal when a motion for a new trial is granted only in part, such as when the plaintiff moves for a new trial on damages and the trial court grants a new trial on all issues. Indeed, in that circumstance it is procedurally proper for both the plaintiff and the defendant to seek leave — Continued on next page

About the Author Scott L. Howie is a partner at Pretzel & Stouffer, Chartered, in Chicago, specializing in posttrial and appellate practice in the state and federal courts. He received his undergraduate degree from Northwestern University in 1989 and his law degree from ChicagoKent College of Law in 1994. Mr. Howie is a member and past director of the Illinois Appellate Lawyers Association, where he co-chairs the Moot Court Committee.

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Appellate Practice Corner | continued

Indeed, since the chief purpose of such a petition is to persuade the appellate court to grant review, an effective petition will be strictly limited to discussing evidence and law that are relevant to the claimed error in granting a new trial.

to appeal—the plaintiff in the hope of limiting the new trial to damages, and the defendant in the hope of avoiding another trial altogether. See, e.g., Cardona v. Del Granado, 377 Ill. App. 3d 379, 380 (1st Dist. 2007). In considering whether to seek leave to appeal such an order, a party should be aware that such an appeal might inadvertently enable the opponent to obtain greater relief than the trial court granted. Once leave to appeal is allowed, the scope of appellate review extends to “all rulings of the trial court on the posttrial motions,” regardless of whether the respondent filed a cross-petition. Ill. S. Ct. R. 306(a). In practical terms, this means that a mixed ruling on a posttrial motion—such as an order granting the plaintiff a new trial but denying the plaintiff’s request for a new trial on damages alone—is reviewable in its entirety if either the plaintiff or the defendant is successful in petitioning for leave to appeal. See White v. Garlock Sealing Techs., LLC, 373 Ill. App. 3d 309, 330 (4th Dist. 2007). Procedure for Seeking Interlocutory Review of Order Granting New Trial A party wishing to appeal an order granting a new trial without first enduring the retrial must file a petition in the appellate court within 30 days of the entry of 20 | IDC QUARTERLY | First Quarter 2015

the order. Ill. S. Ct. R. 306(c)(1). The rule sets forth the required contents of a petition in a single fairly general sentence: “The petition shall contain a statement of the facts of the case, supported by reference to the supporting record, and of the grounds for the appeal.” Id. The petition must be filed “in accordance with the requirements for briefs,” including the formatting and cover requirements set forth in Supreme Court Rule 341. Id.; see also Ill. S. Ct. R. 341(a), (c), (d), (e), (f), (g). The rules provide no formal page limitation for a petition for leave to appeal under Rule 306. The rule itself states no such limit, and while it incorporates the general technical requirements for briefs set forth in Rule 341, that rule specifically sets forth page limits for the “brief of appellant,” the “brief of appellee,” and the “reply brief,” with nothing obviously applicable to a petition for leave to appeal. See Ill. S. Ct. R. 341(b). But even without an express page limit, it is always preferable to be focused and concise, and petitions under Rule 306 are no exception. Indeed, since the chief purpose of such a petition is to persuade the appellate court to grant review, an effective petition will be strictly limited to discussing evidence and law that are relevant to the claimed error in granting a new trial. Typically, this will be the evidence and law that were at issue in

the posttrial motion. The petition must include an appendix, containing “a copy of the order appealed from, and of any opinion, memorandum, or findings of fact entered by the trial judge, and a table of contents of the record on appeal[.]” Ill. S. Ct. R. 306(c)(3). The petitioner must also file a separate docketing statement, which is due at the time the petition is filed. Ill. S. Ct. R. 312(a). A docketing fee is ordinarily required if it has not already been paid. The petition also must be accompanied by a separate supporting record, which must comply with the requirements of Supreme Court Rule 328. Ill. S. Ct. R. 306(c)(1); see also Ill. S. Ct. R. 328. In the interest of being focused and concise, a supporting record should generally include only those materials that are directly relevant to the posttrial motion. Such materials will include the motion itself, including all exhibits. A supporting record should also include any substantive filings in support of or opposition to the motion, again including exhibits, as well as reports of any proceedings at which the motion was argued. It is also good practice to include any motions or orders necessary to establish that the petition is timely, especially if there is any reason an objective observer might suspect that it is not. Assuming that the posttrial motion and related filings were accompanied by exhibits and transcripts supporting the parties’ arguments, there is generally no need for anything else at this stage. Other materials should be included only if there are very good reasons for doing so, and counsel should seriously consider whether there is any good reason to include anything that was not part of the briefing of the posttrial motion. For the same reason, it is not generally

necessary or useful for a supporting record to include all trial transcripts. (If leave to appeal is allowed, by contrast, all transcripts should be included in an additional record at that time.) The 30-day deadline for a petition may be extended on a party’s motion, which must be filed in the appellate court on or before the initial deadline. Ill. S. Ct. R. 306(c)(4). When such a motion is filed, it ordinarily will be the first thing the petitioner files in the appellate court, so it should be accompanied by any docketing fee required by that district. The deadline is not, however, tolled by a motion in the trial court seeking reconsideration of the ruling. Odom v. Bowman, 159 Ill. App. 3d 568, 570–71 (5th Dist. 1987) (citing Barnes v. Southern Ry. Co., 116 Ill. 2d 236, 241 (1987)). Rule 306 differs from other rules that confer appellate jurisdiction, such as Rules 303 and 307, because it contains no provision for the filing of motions that extend the time for appeal. Barnes, 116 Ill. 2d at 241; see also Ill. S. Ct. R. 303(a)(2), Ill. S. Ct. R. 307(b). While a respondent may file an answer within 21 days of the deadline for the petition, a deadline that may also be extended on a party’s motion, the rule discourages replies by allowing them only with the appellate court’s permission. Ill. S. Ct. R. 306(c)(2), (4). This makes it likely that the respondent will have the last word as to whether interlocutory review is warranted. Because of this, the petitioner should anticipate the respondent’s arguments against leave to appeal—which presumably were the basis for the posttrial motion—and attempt to refute them in advance. The filing of the petition does not automatically stay proceedings in the trial court—the granting of the petition has that effect—but it is common for

trial courts to refrain from any further substantive proceedings, including the new trial, while a petition for leave to appeal is pending. When the Appellate Court Grants Review If a Rule 306 petition is granted, proceedings in the trial court are automatically stayed. Ill. S. Ct. R. 306(c)(5). The rule permits the court to require the petitioner—who at that point is more accurately described as an appellant—to file a bond, but this is not generally a concern with an order granting a new trial, as such appeals ordinarily concern verdicts that have been vacated or otherwise made unenforceable by the order being appealed. See id.

any further litigation at all. The purpose of allowing an interlocutory appeal of an order granting a new trial would be defeated if the stay of such an order were vacated or modified in some way that would allow the new trial to proceed even as the appeal is pending. The granting of the petition also enables the petitioner-appellant to file an additional record on appeal consisting of materials not included in the supporting record that accompanied the petition. The procedure for requesting and filing an additional record is governed by the rules concerning records on appeal generally. See Ill. S. Ct. R. 306(c)(6) (citing Ill. S. Ct. R. 321 et seq.). Depending on what materials were made part of the supporting record, an additional record might not be necessary. Still, it is prudent to have

What amounts to good cause under the amended rule has yet to be explored, but the amendment would seem to be applicable chiefly to other sorts of orders appealable under Rule 306, and not to orders granting new trials.

Rule 306(c)(5) was amended, effective July 1, 2014, to allow the appellate court or a justice to vacate or modify the stay upon a showing of good cause. What amounts to good cause under the amended rule has yet to be explored, but the amendment would seem to be applicable chiefly to other sorts of orders appealable under Rule 306, and not to orders granting new trials. Most of those other sorts of orders concern the location or conditions of further litigation, not whether there should be

a complete record on appeal prepared, including trial transcripts, in much the same way as in appeals from judgments on trial verdicts. Such a comprehensive record will include material that is not required for the appeal, but it is far less likely to omit anything that might unexpectedly turn out to be necessary. Once review has been granted, an appeal under Rule 306 proceeds much like any other appeal. The appellant’s initial brief is due 35 days after the court — Continued on next page

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Appellate Practice Corner | continued

While it may be possible to adapt some of the argument from such a petition for use in an appellate brief, counsel should be reluctant to give up the chance to file a brief devoted solely to the arguments for reversal.

grants the petition, and further briefing requirements are governed by Rule 341. Ill. S. Ct. R. 306(c)(7). Likewise, oral argument may be requested as provided by Supreme Court Rule 352, by placing such a request on the cover of the appellate brief. Id. (citing Ill. S. Ct. R. 352(a)). A party whose petition has been allowed may elect to allow that petition to stand as its brief of appellant, so long as the party notifies the appellate court clerk of its intention to do so and supplies the requisite number of copies of the “brief”—read “petition”—that Supreme Court Rule 341 requires. See Ill. S. Ct. R. 306(c)(7). (The rule also allows a respondent to allow its answer to stand as its brief of appellee, with the same conditions.) But while the rule permits such practices, petitions and briefs serve different purposes, making it questionable whether those practices should be used. A petition for leave to appeal that has been chiefly devoted to the threshold argument that the appellate court should grant review might not thoroughly address the grounds for reversing the new-trial order and reinstating the verdict. In any event, the petition may have been partly devoted to arguing that the appellate court should grant review. While it may be possible to adapt some of the argument from such a petition for use in an appellate brief, counsel should be reluctant to give up the chance to file

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a brief devoted solely to the arguments for reversal. When the Appellate Court Denies Review Options remain even when the appellate court declines to grant review under Rule 306(a)(1). The most immediate option is to petition the appellate court for rehearing, although since most denial orders do not provide the grounds for the denial, there is rarely any evident basis on which to challenge those grounds. See Ill. S. Ct. R. 367(a). A more sensible option is to petition the supreme court for leave to appeal under Rule 315, essentially arguing that the appellate court was wrong in denying the Rule 306 petition. See Ill. S. Ct. R. 315(a). While the supreme court is unlikely to grant review at this stage, it sometimes exercises its supervisory authority to direct the appellate court to grant review, and this should be included in the relief requested in a petition under Rule 315. See id.

Even if the petitioner is forced to undergo the new trial without first being allowed to appeal the order granting it, that order is still a procedurally proper basis for an appeal if the new trial results in a judgment against that party. The initial denial of leave to appeal under Rule 306 “is not an exotic form of res judicata” or law of the case; it means only that a majority could not be mustered in favor of granting the petition. Kemner v. Monsanto Co., 112 Ill. 2d 223, 241 (1986) (quoting Lowe v. Norfolk & W. Ry. Co., 124 Ill. App. 3d 80, 90 (5th Dist. 1984)); Koenig v. Nat’l Super Markets, Inc., 231 Ill. App. 3d 665, 667–68 (5th Dist. 1992). It has no precedential or preclusive effect. Craigmiles v. Egan, 248 Ill. App. 3d 911, 918–19 (4th Dist. 1993). The fact that the appellate court has not granted an interlocutory appeal is no bar to raising the new-trial order as an error after an adverse judgment in the retrial. Conclusion But a retrial is typically something to be avoided if at all possible; nobody wants to have to win a case a second time, let alone give up a hard-fought trial victory or a favorable judgment due to a disputed claim of trial error. Rule 306(a) (1) is a useful mechanism for challenging such claims and regaining the fruits of a previous win without having to put a client’s interests at risk a second time.

A more sensible option is to petition the supreme court for leave to appeal under Rule 315, essentially arguing that the appellate court was wrong in denying the Rule 306 petition.

Workers’ Compensation Report Bradford J. Peterson Heyl, Royster, Voelker & Allen, P.C., Urbana

About the Authors

Dana Hughes Heyl, Royster, Voelker & Allen, P.C., Rockford

Bradford J. Peterson is a partner in the Urbana office of Heyl, Royster, Voelker

Appellate Court Further Restricts Employer’s Ability to Terminate Temporary Total Disability Where Employee Was Discharged for Cause

& Allen, P.C. Brad concentrates his practice in the defense of workers’ compensation, construction litigation, auto liability, premises liability, and insurance coverage issues. In recent years, Brad has become a leader in the field on issues of Medicare Set Aside trusts and workers’ compensation claims. He has written and spoken frequently on

In Interstate Scaffolding, Inc. v. Illinois Workers’ Comp. Comm’n, 236 Ill. 2d 132 (2010), the Illinois Supreme Court addressed whether an employee is entitled to temporary total disability (TTD) benefits when the employee is discharged for cause while on light duty. In Interstate Scaffolding, an employee was discharged as a result of defacing the employer’s property by writing graffiti in the employer’s storage room. Interstate Scaffolding, 236 Ill. 2d at 137-38. The supreme court found that there are three exceptions to the general rule that TTD benefits are payable until the petitioner reaches maximum medical improvement

the physical restrictions prescribed by his physician. Id. at 146. Because the employee in Interstate Scaffolding did not meet any of the three exceptions, the termination of TTD was found to be improper. Id. at 146. In Matuszczack v. Ill. Workers’ Comp. Comm’n, 214 IL App (2d) 130532WC (2014), the Illinois Appellate Court, Workers’ Compensation Commission Division, addressed the issue of whether Walmart properly terminated TTD benefits when its light duty employee was terminated for theft. Id. ¶ 24. The claimant sustained a neck, back, and right arm injury in March of

the issue. He was one of the first attorneys in the State of Illinois to publish an article regarding the application of the Medicare Secondary Payer Act to workers’ compensation claims, “Medicare, Workers’ Compensation and Set Aside Trusts,” Southern Illinois Law Journal (2002).

Dana Hughes has been an associate in the Rockford office of Heyl, Royster, Voelker & Allen, P.C. since 2006. She represents employers before arbitrators and commissioners of the Illinois Workers’ Compensation Commission and before the circuit court in third party liability claims. Ms. Hughes has also represented businesses in subrogation matters, and has defended businesses and individuals in automobile

He also acknowledged that but for stealing the

negligence and premises liability actions. Her

cigarettes, he still would have been working for

University Law Review and Kane County Bar As-

Walmart in a light duty position.

the Illinois State Bar Association’s Insurance Law

writing has been published in the Northern Illinois sociation newsletter. She has presented before Section and contributes to Heyl Royster’s annual claims handling and monthly workers’ compen-

(MMI). Id. at 135-36. The exceptions include: (1) the employee refuses to submit to medical, surgical, or hospital treatment essential to his recovery; (2) the employee refuses to cooperate in good faith with rehabilitation efforts; and (3) the employee refuses to work within

2010. Id. ¶ 4. He returned to Walmart on light duty thereafter. Id. ¶ 5. While on light duty, the claimant admittedly stole cigarettes on June 3, 2011, as well as on a “couple of days” in May of 2011. Id. ¶ 6. The claimant admitted that stealing

sation publications. Ms. Hughes recently served on the Winnebago County Bar Association’s Board of Directors and is the immediate pastchair of the Workers’ Compensation Section. She currently sits on the Association’s Diversity Committee and volunteers as an arbitrator in the 17th Circuit’s court-annexed arbitration system.

— Continued on next page

First Quarter 2015 | IDC QUARTERLY | 23

Workers’ Compensation Report | continued

the cigarettes was a criminal act and that Walmart could terminate him for such actions. Id. He also acknowledged that but for stealing the cigarettes, he still would have been working for Walmart in a light duty position. Id. The arbitrator found the matter compensable and awarded TTD benefits in reliance upon the supreme court’s holding in Interstate Scaffolding. Id. ¶ 7. The Illinois Workers’ Compensation Commission (Commission) vacated the award of TTD benefits finding that TTD benefits may be terminated or suspended where a claimant refuses to work within his physical restrictions. Id. ¶ 8. The Commission concluded that the theft of cigarettes by the claimant with knowledge that his theft could lead to termination constituted a refusal to work within his restrictions. Id. ¶ 8. The circuit court disagreed on the issue of TTD, finding that the claimant was entitled to TTD benefits. Id. ¶ 9. The Appellate Court, Workers’ Compensation Commission Division affirmed, noting that the sole issue was whether the employee’s condition had reached MMI. Id. ¶ 22. The court stated that the appropriate and sole inquiry is whether the medical condition had stabilized at the time of his termination. Id. Where the undisputed facts show that the claimant was on light duty restrictions following his accident and he remained under light duty restrictions after his termination, the claimant is entitled to TTD benefits. Id. Walmart argued that the Matuszczack case was distinguishable from the Interstate Scaffolding case in that Matuszczack admitted that he knew his actions could result in termination and that the Commission was free to exercise its discretion as to whether such knowledge constituted a refusal 24 | IDC QUARTERLY | First Quarter 2015

“As the Supreme Court pointed out, in Illinois, an at-will employee may be discharged for any reason or no reason and whether an employee is justifiably discharged is a matter ‘foreign to workers’ compensation cases’ and completely separate from issues related to the injured employee’s entitlement to TTD.”

to work within his physical restrictions. Id. ¶ 24. The appellate court rejected this argument, effectively divesting the Commission of discretion. The appellate court stated: Additionally, we find nothing in the Supreme Court’s decision that would show the result in Interstate Scaffolding was dependent upon the claimant’s knowledge, or lack thereof, as to whether his conduct could result in termination. As the Supreme Court pointed out, in Illinois, an at-will employee may be discharged for any reason or no reason and whether an employee is justifiably discharged is a matter ‘foreign to workers’ compensation cases’ and completely separate from issues related to the injured employee’s entitlement to TTD. Id. ¶ 25. The appellate court in Matuszczack also rejected the employer’s argument that the case was subject to the manifest weight of the evidence standard, which would have given deference to the Commission’s finding that the claimant

had voluntarily refused work within his restrictions by stealing from his employer when he knew he could, as a result, be terminated. Id. ¶ 16. While that exception clearly exists under Interstate Scaffolding, the appellate court instead chose to apply a de novo standard, commenting that “if the Commission relies on a legally erroneous premise to find a fact, the resulting decision is contrary to law and must be reversed.” Id. ¶ 15. Using this approach, the court’s inquiry was limited to whether the Commission had any discretion to look at the termination when evaluating whether the claimant was entitled to TTD following his termination. The appellate court gave the Commission absolutely no leeway to consider whether the claimant’s actions were, indeed, the equivalent of a voluntary refusal to accept work within his restrictions. It is troubling that employees in Illinois can remain eligible for TTD benefits notwithstanding termination for cause while on light duty. Even more troubling is the fact employees can commit criminal acts against their employer, knowing full-well that termination will result, and yet still be entitled to posttermination TTD benefits.

Health Law Update Roger R. Clayton, J. Matthew Thompson and Emily J. Perkins Heyl, Royster, Voelker & Allen, P.C., Peoria

Affidavit and Health-Professional’s Report Requirements Extended to Medical Battery Claims

prejudice and that the trial court erred in determining that all of her claims were based only on medical malpractice. Id. ¶ 2. The Second District disagreed with the plaintiff’s argument and concluded — Continued on next page

About the Authors The Illinois Appellate Court, Second District, recently re-emphasized the importance of strictly complying with the attorney affidavit and certificate of merit requirements of 735 ILCS 5/2-622 in medical malpractice cases. In McDonald v. Lipov, 2014 IL App (2d) 130401, the court addressed whether the plaintiff is required to comply with § 2-622 when pleading medical battery claims. This

meritorious” cause for filing the action. 735 ILCS 5/2-622(a)(1). The court may dismiss the action with prejudice if the plaintiff fails to comply with the statute. See Cuthbertson v. Axelrod, 282 Ill. App. 3d 1027 (1st Dist. 1996). One purpose of § 2-622 is to protect the substantive rights of the parties and deter non-meritorious litigation. McDonald, 2014 IL App (2d) 130401, ¶ 28.

One purpose of § 2-622 is to protect the substantive rights of the parties and deter non-meritorious litigation.

decision will be useful for attorneys defending medical battery claims, and will be especially useful in quickly disposing of non-meritorious suits. The Affidavit and Health-Professional’s Report Requirements Section 2-622 of the Illinois Code of Civil Procedure permits the dismissal of a medical malpractice complaint when a plaintiff fails to attach a supporting affidavit of merit. 735 ILCS 5/2-622. The plaintiff must file an affidavit stating that, based on consultation with a health professional, there is a “reasonable and

Factual Background and Procedure In McDonald, the plaintiff’s complaint alleged medical malpractice and medical battery claims. Id. ¶ 1. The trial court granted the pro se plaintiff three extensions to comply with the affidavit and report requirements of § 2-622. The defendants filed motions to dismiss arguing that the plaintiff’s filings did not meet the health-professional’s report requirements. Id. The court agreed and dismissed the plaintiff’s amended complaint with prejudice. Id. On the initial appeal, the plaintiff argued that her amended complaint should not have been dismissed with

Roger R. Clayton is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, P.C., where he chairs the firm’s healthcare practice group. He also regularly defends physicians and hospitals in medical malpractice litigation. Mr. Clayton is a frequent national speaker on healthcare issues, medical malpractice, and risk prevention. He received his undergraduate degree from Bradley University and law degree from Southern Illinois University in 1978. He is a member of the Illinois Association of Defense Trial Counsel (IDC), the Illinois State Bar Association, past president of the Abraham Lincoln Inn of Court, president and board member of the Illinois Association of Healthcare Attorneys, and past president and board member of the Illinois Society of Healthcare Risk Management. He co-authored the Chapter on Trials in the IICLE Medical Malpractice Handbook. J. Matthew Thompson is an associate in the Peoria office of Heyl, Royster, Voelker & Allen, P.C. He practices primarily in the area of general tort defense. He received his B.S. in Accounting from Culver-Stockton College in 2005 and his J.D. cum laude from Southern Illinois University School of Law in 2008. Emily J. Perkins is an associate with Heyl, Royster, Voelker & Allen, P.C. in Peoria. She concentrates her practice in the area of employment/ labor law and tort litigation, including medical malpractice and professional liability. She received her J.D. from Northern Illinois University College of Law in 2014, M.B.A. from Bradley University in 2011, and B.S. from Illinois State University in 2008.

First Quarter 2015 | IDC QUARTERLY | 25

Health Law Update | continued

The Holzrichter court affirmed summary judgment entered against the plaintiff alleging medical battery who failed to file a health professional’s report

that the plaintiff’s medical malpractice claims required her to comply with § 2-622. Id. ¶ 3. The appellate court, however, held that the trial court abused its discretion in dismissing the medical battery allegations with prejudice, and the appellate court remanded the case to allow the plaintiff the opportunity to cure the defective pleadings. Id. On remand, the plaintiff filed a 33-count second amended complaint, which attempted to allege the following claims: (1) medical battery; (2) medical negligence; (3) fraudulent concealment; (4) conspiracy; (5) violations of the Emergency Medical Treatment and Active Labor Act; (6) breach of contract; (7) vicarious liability; and (8) spoliation of evidence. Id. ¶ 4. The second amended complaint restated nine claims from the amended complaint and contained fourteen new claims. Id. ¶¶ 9-10. Following a new motion to dismiss, the trial court dismissed the second amended complaint with prejudice for failing to state a cognizable claim. Id. ¶ 4. Again, the plaintiff appealed, arguing that § 2-622 did not apply to her medical battery claims. Id. ¶ 5. Furthermore, the plaintiff argued that she satisfied the affidavit requirement of § 2-622(a) (3) by verifying the second amended complaint in accordance with § 1-109 of the Code of Civil Procedure. 735 ILCS 5/ 1-109. On this appeal, the appellate court

26 | IDC QUARTERLY | First Quarter 2015

affirmed. Id. ¶ 6. Appellate Court Analysis The Second District heavily relied on the recent opinion of a sister district in Holzrichter v. Yorath, 2013 IL App (1st) 110287, ¶ 96. In Holzrichter, the Illinois Appellate Court, First District, concluded that the plain and unambiguous language of § 2-622 did not limit the requirement of an affidavit and certifying report solely to medical malpractice claims. Id. ¶ 23. The Holzrichter court affirmed summary judgment entered against the plaintiff alleging medical battery who failed to file a health professional’s report. Id. There, the plaintiff claimed that the defendant committed medical battery by exceeding the scope of his consent in severing tendons in a procedure that did not require the medical professional to do so. The court explained that the plaintiff’s medical battery action, grounded in tort law, arose from a medical procedure that

he claimed went beyond the scope of his consent. Id. ¶ 24. The McDonald court agreed with the reasoning in Holzrichter, finding that § 2-622 can apply to medical battery claims. Id. ¶ 27. The issue was whether the defendants exceeded the surgical parameters to which the plaintiff consented. The salient issue required the assessment of the claims, which were outside the comprehension of a lay person because it required knowledge, skill, or training of a medical professional. Thus, the court held that the plaintiff required a medical expert and a supporting affidavit to sustain her medical battery claims. Id. Conclusion The affidavit and health professional’s report requirements of § 2-622 are intended to deter frivolous medical malpractice suits and medical battery claims at an early stage. The McDonald court ultimately dismissed the complaint with prejudice, reiterating the consequences of non-compliance with the requirements outlined in § 2-622. Defense counsel should advocate for the strict compliance with § 2-622 to deter frivolous medical malpractice and medical battery actions.

The McDonald court agreed with the reasoning in Holzrichter, finding that § 2-622 can apply to medical battery claims. . . . Thus, the court held that the plaintiff required a medical expert and a supporting affidavit to sustain her medical battery claims.

Feature Article Colleen Tierney Scarola* University of Denver, Sturm College of Law, Denver

Accommodating the Accommodated? Not-For-Profits’ Challenges to the Contraception Mandate Exemptions In 2010, Congress passed the Patient Protection and Affordable Care Act (Affordable Care Act), 42 U.S.C. § 2000bb-1, which aims to provide all Americans with health insurance coverage. Korte v. Sebelius, 735 F.3d 654, 659 (7th Cir. 2013). The Affordable Care Act includes a provision requiring employers to provide coverage for contraception and sterilization procedures in their employee health care plans at no cost (contraception mandate). 45 C.F.R. § 147.130. There are two ways to be exempt from the mandate: (1) qualifying as a “religious employer,” and (2) qualifying for the “accommodation.” 45 C.F.R. § 147.131. This article focuses on the accommodation. Qualifying for the Affordable Care Act’s accommodation requires that an organization be a not-forprofit, religious organization that objects to providing all or partial contraceptive coverage because of its sincerely held religious beliefs. 45 C.F.R. § 147.131(b). Additionally, the organization must also complete the EBSA Form 700 selfcertification, stating that it has satisfied the preceding three requirements. 45 C.F.R. § 147.131(b). This article is a follow up to our initial piece that discussed the five federal circuit court cases that have received religious challenges to the contraception mandate by private corporations and the courts’ decisions extending certain constitutional rights to corporations.

Colleen Tierney Scarola with assistance from Joshua Turk, Secular, For-Profit Corporations’ Ability to Challenge the Constitutionality of the Contraception Mandate, 24.2 IDC Q., 10 (2014). The on-going litigation surrounding the accommodation exemption brought by not-for-profit plaintiffs is analyzed. Due to the United States Supreme Court’s recent ruling in the consolidated cases of Sebelius v. Hobby Lobby Stores, 134 S. Ct. 678 (2013), Hobby Lobby Stores v. Sebelius, 723 F.3d 1114 (10th Cir. 2013) and Conestoga Wood Specialties Corp. v. Sec’y of U.S. Dep’t of Health & Human Servs., 134 S. Ct. 678 (2013), Conestoga Wood Specialties Corp., v. Sec’y of U.S. Dep’t of Health & Human Servs., 724 F.3d 377 (3rd Cir. 2013) (collectively Hobby Lobby), constitutional challenges to the mandate, challenges to the accommodation and its self-certification requirement, and proposed revisions to the Affordable Care Act, it is necessary to examine these pending, not-for-profit cases to determine how the goals of the law will be achieved, while protecting the religious freedoms of its challengers. The Hobby Lobby decision involved for-profit companies’ challenges to the contraception mandate on religious grounds. The for-profit entities’ position relied on the Religious Freedom Restoration Act (RFRA), 42 U.S.C. § 2000bb-1. Ultimately, the Court sided with the for-profit entities and ruled that under the

RFRA, closely held, for-profit corporations with religious owners cannot be required to pay for insurance coverage of contraception if their owners object on account of sincerely held religious beliefs. Hobby Lobby, 134 S. Ct. at 2785. The Court also found that the mandate was not the least restrictive way to ensure access to contraceptive care and noted that a less restrictive alternative, the self-certification EBSA Form 700, was provided for religious not-for-profits and that perhaps corporations should follow suit. Id. at 2782. Numerous religious-based not-forprofits object to the sufficiency of the accommodation and its self-certification process, which the Supreme Court endorsed, and have filed suit challenging it. Currently, there are 42 cases — Continued on next page

About the Author Colleen Tierney Scarola is a career consultant at the Office of Career Development & Opportunities at the University of Denver Sturm College of Law. Ms. Scarola assists students and alumni in formulating their career plans, and connects potential employers with qualified applicants. Prior to joining the Office of Career Development & Opportunities, Ms. Scarola was an associate at McVey & Parsky, LLC. Ms. Scarola represented Fortune 100 companies and self-insured businesses throughout the country. In recognition of her professional achievements, Ms. Scarola was selected as a Super Lawyers Rising Star for 2011, 2013, and 2014—a designation given to only 2.5% of attorneys in Illinois each year. Ms. Scarola received her J.D. from The John Marshall Law School in 2006. She is participates in the Lawyer-to-Lawyer Mentoring Program at The John Marshall Law School where she mentors new attorneys. *Joshua Turk, 3L at Chicago-Kent College of Law, contributed to the content of this article. Ms. Scarola gratefully acknowledges his contribution.

First Quarter 2015 | IDC QUARTERLY | 27

Feature Article | continued

pending in the federal circuit courts of appeal that seek to expand upon (or “fix”) Hobby Lobby by “accommodating the accommodated” organizations. Status of the Lawsuits Challenging the Affordable Care Act’s Birth Control Coverage Benefit, N at ’ l W omen ’ s L aw C tr . (Sept. 03, 2014), http:// www.nwlc.org/sites/default/files/pdfs/ contraceptive_coverage_litigation_ status_9-3-14_vf.pdf. The remainder of this article will highlight pending or recently decided cases from the United States Courts of Appeals, all of which are facing one or more challenges from not-for-profits regarding the accommodation. The arguments advanced by both sides are similar in all of the cases, yet the results are not always the same. The crux of the not-for-profits’ arguments is that the self-certification requirement unduly burdens their religious beliefs by requiring that they “trigger” the process of providing contraceptives and associate with a third party to provide the services that they find objectionable. As such, they claim that the self-certification requirement violates the RFRA and the First Amendment. The government’s argument has been that the burden, if any, is de minimus, thereby precluding relief. Second Circuit The plaintiffs include Diocesans, who qualify as religious employers, and non-Diocesans, who qualify for the accommodation. Both sets of the plaintiffs contend that their religious beliefs oppose the use and provision of contraceptives. The Roman Catholic Archdiocese of N.Y., et al., v. Sebelius, et al., 987 F. Supp. 2d 232 (E.D. N.Y. 2013). Together, they argued that the 28 | IDC QUARTERLY | First Quarter 2015

Together, they argued that the contraception mandate obligates them to violate their religious beliefs irrespective of the exemptions available to religious employers and entities that qualify for the accommodation.

contraception mandate obligates them to violate their religious beliefs irrespective of the exemptions available to religious employers and entities that qualify for the accommodation. The Roman Catholic Archdiocese of N. Y., 987 F. Supp. 2d at 243. The Diocesan plaintiffs, who are exempt from the mandate, advanced an atypical argument that their religious beliefs are substantially burdened because the mandate compels the non-Diocesan plaintiffs to either provide contraceptive coverage or self-certify to qualify for the accommodation. Id. at 252. The district court rejected that argument. Id. The non-Diocesan plaintiffs objected to self-certification “because to them, authorizing others to provide services that the plaintiffs themselves cannot is tantamount to an endorsement or facilitation of such services.” Id. at 243. The government argued self-certification is an administrative task that only requires the party to restate the same religious objection it already made to its third-party administrators “to ensure their plans do not cover contraception.” Id. at 249. The district court rejected the “it’s just a form” argument as unsupported by case law. Id. Instead, the court applied the “substantial pressure test” and found that the mandate and accommodation impose a substantial burden on the plaintiffs’ exercise of religion. Id. at 249-50.

Though the court ruled in favor of the plaintiffs and granted an injunction, it found that the plaintiffs would have no argument if the government, either on its own or, with a third party provided contraceptive coverage to the employees, with no action required of the plaintiffs. Because this is not currently the case, the court made clear, “[w]hat the Government cannot do—absent a compelling interest and narrow tailoring—is compel plaintiffs to act in violation of their religious beliefs.” Id. at 251, 259. The court further explained that the injunction does not prevent employees from obtaining contraception, but merely requires them to cover the costs, as was the case prior to the Affordable Care Act. Id. at 259. The government appealed the decision to the Second Circuit, where the case is currently pending. Third Circuit The United States Court of Appeals for the Third Circuit consolidated three cases that sought its review, Geneva Coll., et al., Persico, et al., Zubik et al. v. Sec’y of the U.S. Dep’t of Health & Human Servs., Docket No.: 13-3536. The underlying district court results from these three cases are discussed below. The plaintiffs in both Persico and Zubik, are bishops in the Roman Catholic Church and the government is the defen-

dant. Zubik v. Sebelius, 983 F. Supp. 2d 576 (W.D. Pa. 2013). The court noted that the mandate could not be equally applied to the plaintiffs’ dioceses and their affiliated not-for-profit entities because the dioceses are religious-employers that are exempt from the mandate, while the notfor-profits must seek accommodation. Id. at 583. Such unequal application was relevant because the dioceses’ health care plans covered the not-for-profits’ employees. Id. The plaintiffs argued that the not-for-profits would then be left to choose between four, non-satisfactory options: (1) provide health insurance that covers contraception, in violation of their religious beliefs; (2) seek accommodation via self-certification, which also violates their religious beliefs because it starts the process through which contraception is provided; (3) not provide health insurance to their employees and be monetarily penalized for doing so; or (4) provide health insurance without contraceptive coverage and be monetarily penalized for doing so. Id. at 583-84. Ultimately, the court granted the plaintiffs preliminary injunctions, which were later converted into permanent injunctions. Id. at 615; Persico v. Sebelius, 1:13-00303, 2:13-cv-001459, 2013 WL 6922024, at *2 (W.D. Pa. Dec. 20, 2013). The government appealed the decision to the Third Circuit, where oral argument was scheduled for November 21, 2014. Nat’l Women’s Law Ctr., supra. In Geneva College, the plaintiff was a not-for-profit educational institution with strong Christian roots. Geneva College v. Sebelius, 960 F. Supp. 2d 588, 591 (W.D. Pa. 2013). As a not-forprofit entity, the plaintiff qualified for the accommodation exemption from the mandate. Id. at 600. The plaintiff argued that the accommodation “does not go far enough toward protecting its

religious interests.” Geneva College, 906 F. Supp. 2d at 591. The plaintiff operates health insurance plans for its employees and students. The plaintiff advanced the unique argument that the mandate burdens not only its religious beliefs, but also its recruitment efforts of students and staff due to uncertainty as to which contraceptives and related services will be covered under its health insurance plans, placing it at an economic disadvantage. Id. at 596. Ultimately, the court issued the college a preliminary injunction, which the government appealed to the Third Circuit. Id. at 602. Fifth Circuit The plaintiffs are two universities affiliated with the Baptist Church and an intervenor affiliated with the Presbyterian Church. E. Tex. Baptist Univ., et al., v. Sebelius et al., 988 F. Supp. 2d 743, 748-51 (S.D. Tex. 2013). The plaintiffs are not religious employers, but qualify for the accommodation. E. Tex. Baptist Univ., et al., 988 F. Supp. 2d. at 754. Unlike other cases, the plaintiffs here only objected to the provision of emergency contraceptives under the mandate. Id. at 749-51. The plaintiffs contend that self-certifying provides access to emergency contraceptives in contravention of their religious beliefs that they protect “innocent life from the moment of conception until death.” Id. at 757. In response, the government argued any such burden imposed was de minimus and that the governmental interests involved, public health and gender equality, are sufficiently compelling to justify the enforceability of the accommodation against the plaintiffs. Id. The district court found that a substantial burden is imposed on the plaintiffs’ religious beliefs. Id. at 769.

The court stated, “[T]he self-certification form requires the organizations to do much more than simply protest or object . . . The purpose and effect of the form is to accomplish what the organization finds religiously forbidden and protests.” Id. at 767. In issuing the plaintiffs a permanent injunction, the court explained its view that the accommodation falls short of truly accommodating the plaintiffs in stating that “[t]he effort to accommodate the religious organizations by reducing their involvement in providing their employees with such access to emergency contraception did not end the plaintiffs’ involvement so as to avoid required acts on their part that offend their faith.” Id. at 769. The government appealed to the Fifth Circuit where the case has been consolidated with two others. Univ. of Dallas, and Roman Catholic Diocese of Fort Worth, et al., and E. Tex. Baptist Univ., et al., and Catholic Diocese of Beaumont, et al., Plaintiffs-Appellees, Westminster Theological Seminary, Intervenor Plaintiff-Appellee, v. Sylvia M. Burwell, et al., Case: 14-20112 (5th Cir. 2014). Sixth Circuit The plaintiffs are five Catholicbased, not-for-profit organizations that qualify for the accommodation. Ave Maria Found. v. Sebelius, 991 F. Supp. 2d 957, 962-63 (E.D. Mich. 2014). The plaintiffs’ primary argument in opposition to the self-certification requirement is that it requires them to indirectly support contraception, sterilization, and abortion. Ave Maria Found., 991 F. Supp. 2d at 964. While the arguments the plaintiffs asserted are similar to other related cases, the court’s response to the government’s — Continued on next page

First Quarter 2015 | IDC QUARTERLY | 29

Feature Article | continued

de minimus burden argument is particularly interesting. In explaining why it believes the de minimus burden argument fails as to sincerely-held religious beliefs, the court explained that simply completing a form is not a significant burden, as the plaintiffs also object to self-certifying, the government’s argument “amounts to a disbelief that the self-certification has much religious significance.” Id. at 965 (citing 42 U.S.C. § 2000cc-5(7)(A) (emphasis added)). The court believed that adopting the government’s argument would require examination of the sincerity of the plaintiffs’ declared beliefs “—which the government does not question—or second-guessing the importance or rationality of the plaintiffs’ convictions—a task beyond the Court’s ability or competence.” Id. Because the accommodation obligates the plaintiffs to modify their behavior, as was conceded by the government, the court held that the newly required action cannot be labeled as trivial by the government. Id. Accordingly, the district court issued the plaintiffs a preliminary injunction. Id. at 968. The government appealed the decision to the Sixth Circuit, which later consolidated the case with Legatus v. Sebelius, 901 F. Supp. 2d 980 (E.D. Mich. 2012). Since consolidation, the Sixth Circuit has decided a related case, Mich. Catholic Conference & Catholic Family Servs. v. Burwell, 755 F.3d 372 (6th Cir. 2014), in favor of the government. Id. at 398. As a result, the plaintiffs in Ave Maria Foundation now face an uphill challenge against Sixth Circuit precedent because in Michigan Catholic Conference, the court held that it is not self-certification that initiates the process through which contraceptive coverage is provided, but rather the Affordable Care 30 | IDC QUARTERLY | First Quarter 2015

Act. Id. at 387. That ruling runs directly counter to the plaintiffs’ contention in Ave Maria Foundation that self-certification “indirectly support[s] contraception, sterilization, and abortion [to which they object on religious grounds].” Ave Maria Found., 991 F. Supp. 2d at 963. Seventh Circuit The plaintiff, University of Notre Dame, is a not-for-profit Catholic university. A unique aspect of this case is that the plaintiff complied with the contraception mandate under duress by submitting the self-certification form to its insurer, but still brought action to enjoin enforcement of the mandate. Univ. of Notre Dame v. Sebelius, 743 F.3d 547, 552 (7th Cir. 2014). In accord with Roman Catholic doctrine, the plaintiff has never paid for its students or staff’s contraception or permitted its carrier to provide it. Univ. of Notre Dame, 743 F.3d at 549. The court noted that the plaintiff never identified what it wanted enjoined. Id. at 551. Instead, the court assumed that the plaintiff wanted an order forbidding insurance companies to provide any contraceptive coverage to the plaintiff’s staff and students pending final judgment in the district court. Id. at 554. The Seventh Circuit refused to issue such an order noting that the plaintiff does not have the right to prevent other institutions from engaging in acts that merely offend it. Id. In evaluating the plaintiff’s likelihood of success on the merits in the district court, the Seventh Circuit rejected the plaintiff’s argument that the process of certifying its religious objection violates its religious beliefs by “triggering” the provision of contraceptive coverage. Id. at 554. The court found that the accommodation already

exempted the plaintiff from offering contraceptive coverage. Id. at 557. The plaintiff’s broader argument—that the process of requesting the accommodation itself burdened its exercise of religion—is “paradoxical and virtually unprecedented.” Id. The court affirmed the district court’s denial of preliminary injunction. Id. No appeal has been filed in the United States Supreme Court. Eighth Circuit The plaintiffs are employers affiliated with the Catholic Church. Like the plaintiffs in other cases, they argued that the mandate, including the self-certification piece, requires them to participate in a scheme to provide coverage that they oppose. Archdiocese of St. Louis v. Burwell, No. 4:13-CV-2300-JAR., 2014 WL 2945859, at *3 (E.D. Mo. 2014). They also argued that the RFRA protects any exercise of religion and does not limit its protections to “significant” or “substantial” acts. Archdiocese of St. Louis, 2014 WL 2945859, at *6. The government did not challenge the sincerity of the plaintiffs’ beliefs and instead argued that the regulations do not impose a substantial burden on their exercise of religion. Id. The court granted the plaintiffs a preliminary injunction to enjoin enforcement of the contraception mandate until their claims are resolved. Id. at *12. The unique aspect of the decision rests with the court’s statement that “in light of legal uncertainty regarding enforceability of mandate with respect to nonprofit organizations with religious objections” it is in the public interest to preserve the status quo, enjoining enforcement of the mandate. Id. at *12. The district court also concluded that the mandate applies substantial pressure on the plaintiff’s exercise of their

religious beliefs by requiring them to choose between providing contraceptive coverage to their employees or paying substantial financial penalties if they refuse. Id. at *8. Because the plaintiffs demonstrated a substantial burden on their exercise of freedom of religion, the government had to show the mandate is the “least restrictive means of furthering a compelling governmental interest.” Id. at *9. The court determined that the mandate was not the least restrictive means to further the government’s compelling interests in promoting public health and gender equality. Id. at *11. Additionally, the court noted that the United States Supreme Court has observed that the government could achieve its goal without imposing substantial burden by assuming the cost of contraception to any woman unable to obtain it from employers. Id. at *10. The case is currently pending before the Eighth Circuit. Tenth Circuit/U.S.S.C. The plaintiffs are self-insured, not-for-profit, Catholic organizations and a Catholic third-party administrator for the organizations’ church plans. The plaintiffs asserted that executing the self-certification form burdens their religious beliefs. Little Sisters of the Poor Home for the Aged v. Burwell, 134 S. Ct. 1022 (2014). They contended that taking any action that triggers the provision of contraception, sterilization, and abortifacients violates their religious beliefs. The government did not dispute the sincerity of the plaintiffs’ beliefs, but instead challenged the plaintiff’s interpretation of how their religious beliefs are impacted by the contraception mandate and the Final Rules. Little Sisters of the Poor Home for the Aged, 6 F. Supp. 3d at 1239;

see also 78 Fed. Reg. 127, 870 (July 2, 2013). Specifically, the government argued that because the plaintiffs are eligible for the accommodation, they need “not contract, arrange, pay, or refer for contraceptive coverage.” Id. (citing 77 Fed. Reg. 7 (Jan. 3, 2012)). The district court rejected the plaintiffs’ arguments and denied their motion for a preliminary injunction. The court found that under the “eligible organizations” accommodation in the Final Rules once plaintiffs completed the selfcertification form and delivered it to their third-party administrator they satisfied the requirements of the contraception mandate and have no further obligations. Little Sisters of the Poor Home for the Aged, 6 F. Supp. 3d at 1240. Thus, the court concluded that the regulations do not require the plaintiffs to participate in the provision of contraceptive coverage or provide health benefits that include contraceptive coverage. Further, the court also determined that the plaintiffs’ religious beliefs were not substantially burdened by an authorized representative of their organizations executing the self-certification form and delivering it to their third-party administrator. Finally, the court found that the plaintiffs failed to meet their burden that an injunction was necessary to prevent an imminent harm. Id. at 1246.  The case is currently pending in the Tenth Circuit. Eleventh Circuit The plaintiff is a television network that promotes the Roman Catholic Church’s teachings, and as such, opposes the use of contraception in any form. Eternal World Television Network, Inc. v. Burwell, 13-0521-CG-C, 2014 WL 2739347, at *1 (S.D. Ala. 2014). In the

lower court, the plaintiff argued that the contraception mandate violates the RFRA, the Free Exercise Clause, the Establishment Clause, and the Free Speech Clause. Eternal World Television Network, Inc., 2014 WL 2739347, at *1. The health-care coverage the plaintiff provides to its employees excludes coverage for artificial contraception, sterilization, and abortion. Id. The plaintiff filed a motion for summary judgment and sought expedited consideration to meet the deadline for compliance with the mandate. Id. The court stated that the question is not whether anything in the mandate offends the plaintiff’s religious beliefs; rather, the focus is on the particular actions that the mandate requires the plaintiff to perform. Id. at *3. The court denied the motion, concluding that executing the self-certification form does not impose substantial burden on the plaintiff’s religious beliefs. Id. at *4. The unique aspect of this case is the court’s determination that the plaintiff’s only religious objection to the mandate hinges upon the effect it will have on other parties after the plaintiff signs the certification form and not on anything inherent in the act of signing and delivering the form. Id. at *5. The United States Court of Appeals for the Eleventh Circuit granted the plaintiff an injunction pending appeal but did not address the merits of its claims. Eternal World Television Network, Inc. v. Burwell, 756 F.3d 1339 (11th Cir. 2014). D.C. Circuit The Court of Appeals for the D.C. Circuit recently joined the short list of federal appellate courts to render judgment in a not-for-profit challenge to the accommodation. The plaintiffs — Continued on next page

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Feature Article | continued

include Priests for Life, a pro-life group of Catholic priests, and other employers. Priests For Life v. U.S. Dep’t of Health and Human Servs., No. 13-5368, 2014 WL 5904732 (D.C. Cir. Nov. 14, 2014). This case is unique because it involves the theme of “notice” as it relates to the accommodation. Priests For Life, 2014 WL 5904732, at *1. The plaintiffs argued that, under the RFRA, they have the right not to provide notice to any entity if they remove contraceptive coverage from their health plans. Id. The plaintiffs also contended that the government does not have a sufficiently compelling reason for requiring them to provide notice to be granted an accommodation. Id. Further, the plaintiffs argued that the government did not demonstrate that the notice requirement was the least restrictive way to achieve any governmental interests involved. Id. at *3. The court held that the accommodation does not violate the plaintiffs’ free exercise rights as secured under RFRA. Id. In so holding, the court stated that to opt out, all the plaintiffs must do is state their beliefs and seek what they want in a letter or two-page-form. Id. Overall, the court believed that the governmental interests involved in the accommodation are sufficiently compelling to outweigh the alleged substantial burden imposed on the plaintiffs’ free religious exercise rights. Id. The court also believed that the accommodation requires as little as it can from those that object to it. Id. But, the Obama Administration’s new proposed rules infer that even less can be required of objectors.

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The Obama Administration’s New Proposed Rules On August 22, 2014, the Obama Administration released additional proposed rules, which it claims would provide  employees of religiouslyaffiliated organizations with a way to obtain contraceptive services as part of their health insurance coverage, while respecting the religious beliefs of their employers. Administration takes steps to ensure women’s continued access to contraception coverage, while respecting religious-based objections, HHS, http://www.hhs.gov/news/ press/2014pres/08/20140822a.html (last visited Nov. 2, 2014). Under the proposed rules, religiously-affiliated employers would notify the government, not their insurers, of their objections to the contraception mandate. 79 Fed. Reg. 51118, 51124 (Aug. 27, 2014). In turn, the government would notify the insurers to provide the contraception coverage. Id. Opponents of this proposed rule contend that it is essentially the same as self-certification, as it merely changes “who” the religious employer notifies from the insurer or third-party administrator to the government. The objections asserted by the religious organizations seem to be more about what the self-certification does, as opposed to who it notifies. It may be beneficial if the proposed rule included a statement that the religious organization would make to the government, in objecting to providing contraceptives, such as: “This religiously-affiliated organization’s acknowledgment, as provided in this form, that it objects to providing all or partial contraceptive coverage as part of

its health care plan, in accordance with its sincerely held religious beliefs, in no way serves as any action or means through which contraceptive coverage is ultimately provided to its employees or other qualifying individuals, despite the fact that contraceptive coverage may ultimately be provided to some of its employees by the government or other authorized third-party.” Such a statement, coupled with the enactment of the new proposed rules, may help accommodate these accommodated not-for-profit organizations by giving added voice to their sincere religious objections. It would also attempt to provide an additional layer of removal from any responsibility they feel is assumed by self-certifying, while still ensuring contraceptive coverage, albeit by an alternate provider, to women who seek coverage under the Affordable Care Act. Few federal circuit courts of appeal have adjudicated the not-for-profit cases pending before them. Overall, the district courts have been divided as to the outcomes in these cases, with a slight advantage to the not-for-profits. As the Fifth Circuit stated in E. Tex. Baptist Univ., “Because the issues are legal and the facts are essentially undisputed, this and other district court opinions are at most data points, chiefly important as necessary steps to the appellate courts.” E. Tex. Baptist Univ., 988 F. Supp. 2d at 747. It largely remains to be determined whether the federal circuit courts of appeal will follow in the paths paved by the district courts.

Employment Law James L. Craney Lewis Brisbois Bisgaard & Smith LLP, Edwardsville

Strange Bedfellows: Employers, Unions, and the “Hybrid § 301” Claim Section 301 of the Labor Management Relations Act (LMRA) gives federal courts jurisdiction over suits to enforce the terms of a collective bargaining agreement (CBA). Nemsky v. ConocoPhillips et al., 574 F.3d 859, 864 (7th Cir. 2009). Specifically, § 301 provides that: Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this Act, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties. 29 U.S.C.S. § 185(a). As one court has explained, § 301 provides federal subject-matter jurisdiction “without respect to the amount in controversy or without regard to the citizenship of the parties,” but only over “[s]uits for violation of contracts between an employer and a labor organization. Rutherford v. Judge & Dolph, LTD., 707 F.3d 710, 714 (7th Cir. 2013). The statute contemplates claims made by employees against an employer for violations of a CBA. It, however, also seems to exclude claims by employees against a union (or

between other parties) that lack an allegation that the union or other party violated the CBA. Rutherford, 707 F.3d at 714. CBAs commonly provide that the labor union has exclusive standing to challenge employer conduct. Ordinarily, union members must first exhaust the grievance procedures in a CBA, rather than directly sue the employer. Yeftich v. Navistar, Inc., 722 F.3d 911, 914 (7th Cir. 2013). This presents an obstacle for the employee, who wishes to challenge an employer’s conduct, where the employee believes the union is not acting in his best interests in pursuing the claim. The United States Supreme Court has acknowledged a narrow exception to this obstacle. In Vaca v. Sipes, 386 U.S. 171 (1967), the Court recognized that as a practical matter, employees often cannot go directly to federal court with claims that an employer breached a CBA. This is because many CBAs have mandatory provisions that require the employee, represented by his union, to pursue his grievances through arbitration. Rutherford, 707 F.3d at 714. The Supreme Court explained that if the union then decides, for whatever reason, not to arbitrate on behalf of the employee pursuant to the mandatory arbitration clause, only then may the employee allege a CBA violation in federal court. Vaca, 386 U.S. at 185. In doing so, the employee must sue not only the employer for violating the CBA, but also the union for violating its duty of fair representation by refusing

to arbitrate. Id. (stating, “[A] situation when the employee may seek judicial enforcement of his contractual rights arises [ ] if . . . the union has sole power under the contract to invoke the higher stages of the grievance procedure, and if . . . the employee-plaintiff has been prevented from exhausting his contractual remedies by the union’s wrongful refusal to process the grievance.”). This cause of action is referred to as a hybrid § 301 claim. Without the availability of this hybrid claim, unions would have unlimited discretion to deprive injured employees of all remedies for breach of contract. Id. at 186. In the situation authorized by Vaca, the unfair labor practice claim against the union is necessarily a part and parcel of the underlying claim against the employer. Id. An employee must overcome several hurdles to maintain a hybrid § 301 claim. First, the employee must actually be in a position where he or she is contractually prevented from bringing a claim directly against the employer. Rutherford, 707 F.3d at 715. In Rutherford, the United — Continued on next page

About the Author James L. Craney is a partner in the Madison County office of Lewis Brisbois Bisgaard & Smith LLP, where his practice focuses upon general liability litigation. During his career, Mr. Craney has defended numerous employment discrimination, wrongful termination, and civil rights violation suits, both in federal and state court. He earned his B.S. from the University of Illinois in Champaign-Urbana, and his M.S. from Southern Illinois University in Carbondale. He earned his J.D. from St. Louis University, where he also obtained the program’s Health Law Certificate. Mr. Craney is a member of the IDC Employment Law Committee, and is a regular speaker before bar association and industry groups.

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Employment Law | continued

States Court of Appeals for the Seventh Circuit considered the following facts. A trucking company entered into a CBA with the Teamsters and one of its local chapters. Id. at 712. The CBA provided that any grievance regarding the interpretation of the agreement was subject to arbitration. Id. at 712. The parties ultimately failed to renegotiate and

Vaca. In Vaca, the union held sole power under the CBA to invoke the higher stages of the grievance procedure, and the employee-plaintiff was prevented from exhausting his contractual remedies by the union’s wrongful refusal to process the grievance. Vaca, 386 U.S. at 185. In contrast, the CBA in Rutherford did not require that an NLRB action be

Without the availability of this hybrid claim, unions would have unlimited discretion to deprive injured employees of all remedies for breach of contract.

renew the CBA. Id. Several employees were subsequently terminated. Id. They asked the union to bring unfair labor practices charges before the NLRB. Id. The union did so, and a settlement was reached for these claims between the union and the employer, however the employees would not consent to the settlement. Id. The union did not continue pursuing the charges with the NLRB. Id. The employees filed suit in federal district court under § 301 of the LMRA, naming both the employer and the union as the defendants. Id. They alleged the employer violated the CBA, and that the union violated its duty of fair representation when it settled the grievances before the NLRB for an amount that was unsatisfactory to the plaintiffs. Id. One issue at the forefront of Rutherford was whether the facts supported a § 301 hybrid claim. The court of appeals held that they did not, noting that the facts in Rutherford differed from those in

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initiated by the union. Rutherford, 707 F.3d at 715. The Rutherford court also noted that to the extent a violation of a CBA can be considered an unfair labor practice, the NLRB and the federal courts have concurrent jurisdiction over such claims. Id. at 716 (citing Copeland v. Penske Logistics LLC, 675 F.3d 1040, 1044 (7th Cir. 2012)). The court of appeals concluded, “the claim against [the union] simply is not part of a legitimate Section 301 ‘hybrid’ claim, and so we dismiss the claim against [the union] for lack of jurisdiction. . . .” Id. at 716. Another hurdle the plaintiff, asserting a hybrid § 301 claim, must overcome is that the claimant must adequately plead the cause of action as to the two defendants. For example, in Nemsky v. ConocoPhillips Company et al., 574 F.3d 859 (7th Cir. 2009), the plaintiff was an operating engineer at a refinery in Wood River, Illinois. Nemsky, 574 F.3d at 861. The operating engineers

were represented by a union, which had entered into a CBA with the employer, ConocoPhillips. Id. The employer instituted a new substance abuse policy, which the union opposed, filing a grievance and attempting to initiate arbitration under the CBA. Id at 862. The employer took the position that the policy was not subject to arbitration. Id. The union then challenged the policy with an unfair labor practice charge before the NLRB but, ultimately dropped its challenge. Id. A union representative testified that he had expected the NLRB to defer action, pending the outcome of an arbitration, but when the NLRB moved forward and dismissed the charge, he concluded that the NLRB agreed with the employer’s position that the policy was not subject to arbitration. Id. Ultimately, the union employee was terminated for an alleged violation of the substance abuse policy. Id. at 864. He brought suit in U.S. district court against both the employer and the union. Id. He alleged the employer had breached the CBA, and that the union had breached its duty of fair representation. The district court granted summary judgment for the defendants. Id. On review, the court of appeals first examined Nemsky’s allegation that the union breached its duty of fair representation. Id. at 866-67. Reviewing the facts in the record, the court concluded that there were sufficient facts to support Nemsky’s claims and that summary judgment on those allegations was inappropriate. Id. at 867. Turning to the claim that the employer had violated the CBA, the court of appeals concluded that summary judgment on those allegations was appropriate. Id. at 868.

THE IDC MONOGRAPH: For Your Consideration: The Current State of Post-Employment Restrictive Covenants in Illinois and National Trends Beyond Continued Employment as Adequate Consideration Geoffrey M. Waguespack Butler Pappas Weihmuller Katz Craig LLP, Chicago Denise Baker-Seal Brown & James, P.C., Belleville Theresa Bresnahan-Coleman Langhenry, Gillen, Lundquist & Johnson, LLC, Chicago James L. Craney Lewis Brisbois Bisgaard & Smith LLP, Edwardsville Kimberly A. Ross Butler Pappas Weihmuller Katz Craig LLP, Chicago

IDC QUARTERLY | Volume 25 Number 1

About the Authors Geoffrey M. Waguespack is an attorney at Butler Pappas Weihmuller Katz Craig LLP. He joined the firm in 2014 in the firm’s Employment Law group. His practice includes the handling of employmentrelated litigation and litigation prevention, such as defending employers against federal and state claims of harassment, discrimination, and wage and hour violations, as well as the development of employment policy, procedures, and handbooks. Mr. Waguespack has written successful briefs before the Illinois Supreme Court and the Illinois appellate court, as well as before the U.S. District Court for the Northern District of Illinois. Mr. Waguespack earned his law degree in 2003 from Loyola University Chicago School of Law and his undergraduate degree in government and philosophy in 1997 from The College of William & Mary in Virginia. During law school, Mr. Waguespack was a member of a moot court team and served as the Executive Editor of Publications for the Loyola Law Journal. He was the recipient of the school’s Leadership & Service Award, and he earned CALI Awards in constitutional law and legal writing. Mr. Waguespack is active in DRI and the Illinois Association of Defense Trial Counsel (IDC). The IDC has awarded Mr. Waguespack its Volunteer of the Year Award and awards for meritorious service. From 2006 to 2013, Mr. Waguespack both authored and contributed to the Employment Law Column, published in the IDC Quarterly. He served as the editor-in-chief of the IDC Quarterly from 2013 to 2014, and was on its editorial board from 2007 to 2013. From 2011 to 2013, Mr. Waguespack served as the chairperson of the IDC’s Employment Law Committee. He was also active in the Young Lawyers Division of the IDC. In addition to writing the regular Employment Law Column for the IDC Quarterly, Mr. Waguespack has co-authored several Monographs for that publication, and has contributed to the IDC Survey of Law from 2011 to 2013.

Denise Baker-Seal joined Brown & James, P.C., in 2000 and practices in the firm’s Belleville, Illinois, office. Her practice has focused on employment cases, as well as catastrophic injury cases. She frequently represents employers and other businesses, including product manufacturers, truck lines, and property owners. A life-long resident of central Illinois, Ms. Baker-Seal also participates as an arbitrator in the St. Clair County (IL) and Madison County (IL) mandatory arbitration programs. She serves on the firm’s employee/personnel committee and is also the co-founder of the Fifth Friday Initiative to increase retention and promotion of women in the firm. Prior to entering private practice, Ms. Baker-Seal served as the Judicial Law Clerk to the Honorable Lewis M. Blanton, U.S. Magistrate Judge for the U.S. District Court for the Eastern District of Missouri.

Theresa Bresnahan-Coleman is an associate at Langhenry, Gillen, Lundquist & Johnson, LLC in Chicago. Theresa concentrates her practice in civil litigation defense, with an emphasis in employment law, municipal civil rights, personal injury, and premises liability. She is a member of the IDC Local Government Law Committee and of the Chicago and Illinois State Bar Associations. She received her law degree in 2009 from New England School of Law, where she served as the managing editor of the New England Journal of International and Comparative Law and earned a CALI award in Employee Benefits. Theresa received her master of arts degree in English in 2006 from Loyola University Chicago and her bachelor of arts degree in English and Computer Applications in 2001 from the University of Notre Dame. Prior to attending law school, Theresa worked as an investigator for the Federal Trade Commission. James L. Craney is a partner in the Madison County office of Lewis Brisbois Bisgaard & Smith LLP, where his practice focuses upon general liability litigation. During his career, Mr. Craney has defended numerous employment discrimination, wrongful

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termination, and civil rights violation suits, both in federal and state court. He earned his B.S. from the University of Illinois in Champaign-Urbana, and his M.S. from Southern Illinois University in Carbondale. He earned his J.D. from St. Louis University, where he also obtained the program’s Health Law Certificate. Mr. Craney is a member of the IDC Employment Law Committee, and is a regular speaker before bar association and industry groups.

Kimberly A. Ross is a partner in the Chicago office of Butler Pappas Weihmuller Katz Craig LLP. She received her J.D. from DePaul University College of Law and her B.A. from the University of Michigan. She practices employment law, including handling claims involving harassment and discrimination under federal and state laws, wage and hour claims, general employment practices and common law torts such as negligent hiring and retention, retaliatory discharge and defamation. In addition to her litigation practice, Ms. Ross frequently conducts seminars for clients in the area of employment law, including harassment and discrimination under Title VII (race, gender, sex, religion and national origin discrimination and harassment); the Age Discrimination in Employment Act; the Americans with Disabilities Act and the Illinois Human Rights Act. She also counsels clients on general employment policies and practices, including reductions in force, hiring, performance evaluations, disciplining, conducting investigations and terminations. In addition, Ms. Ross also drafts employee handbooks and other policies, and drafts and reviews employment contracts and other agreements between employers and their employees. She counsels clients on issues such as proper classification of employees under the Fair Labor Standards Act and other matters pertaining to maintaining proper personnel files. Ms. Ross was a past Editor in Chief of the IDC Quarterly. In addition to the IDC, she is a member of Defense Research Institute (DRI) (serving as Community Chair of the Employment and Labor Law Committee), the Decalogue Society of Lawyers and the Women’s Bar Association.

For Your Consideration: The Current State of Post-Employment Restrictive Covenants in Illinois and National Trends Beyond Continued Employment as Adequate Consideration Post-employment restrictive covenants, which may include non-compete and non-solicitation agreements, are tools that many employers use to restrict the future employment of a former employee. In a non-compete agreement, the employee agrees not to perform certain actions related to his or her prior position of employment, or to engage in work that competes with his or her prior employer. Non-solicitation provisions generally restrict an employee’s ability to poach customers or other business that the employer maintains during the employee’s tenure of employment. Increasingly, employers are utilizing restrictive covenants as a tool to protect business interests. Typically, such agreements can be drafted to protect an existing customer base and to protect confidential information. Employers are seeking to enforce restrictive covenants more often through litigation, as well. Over the past decade, the frequency of such suits has increased more than 60%.1 According to a research study conducted for the Wall Street Journal, published court opinions involving covenants not to compete have increased 61% since 2002.2 Of course, this increase does not take into account cases that settle outside of court.3 Therefore, the actual number of suits involving covenants not to compete is likely much higher. This Monograph will explore national trends in the handling and enforcement of restrictive covenants among the states, with an emphasis on Illinois’ history and

recent developments regarding the law on restrictive covenants. Specifically, this Monograph explores the recent decisions of Reliable Fire Equipment Co. v. Arredondo4 and Fifield v. Premier Dealer Services, Inc.5 and how those decisions have changed the law in Illinois regarding legitimate business interests and the consideration needed to have an enforceable covenant not to compete. Whether an employer may successfully enforce a restrictive covenant depends upon the particular jurisdiction. In many states, employers are required to show that the restrictive covenant is reasonably limited in time and territory.6 Many states also require the employer to show that the agreement protects a legitimate business interest.7 For example, in Florida, a broad restrictive covenant generally will be enforced, so long as the provisions protect a legitimate business interest. 8 In the states requiring employers to prove that a restrictive covenant protects a legitimate business interest, the courts generally will consider trade secrets, confidential business information, and customer lists as protectable interests.9 Even among these states, however, courts deal differently with such agreements where a particular aspect of a restrictive covenant clause is deemed unreasonable. For example, some states abide by the “blue pencil” doctrine. Under the blue pencil doctrine, the court will strike those portions of the covenant that

are deemed unreasonable but will uphold the remaining portions of the agreement.10 Other jurisdictions apply the “red pencil” doctrine. Under the red pencil doctrine, if any term of the restrictive covenant is unreasonable, then the entire contract will be deemed void.11 Between the “blue pencil” and “red pencil” states are the so-called “purple pencil”—or “reformation”—states. In these states, courts will allow for reformation of the contract to make unreasonable terms reasonable.12 For example, if a contract states that the employee cannot work in county A, but he previously worked in county B, the court would edit the contract to refer to county B. Employers in a jurisdiction that strictly interprets restrictive covenants could attempt to evade that jurisdiction’s laws by including a choice of law provision in the employment agreement. If the chosen state law is drastically different from the law of the employer’s home state, however, the court might refuse to enforce the choice of law provision, finding that it violates public policy. 13 Employers, therefore, should never assume that restrictive covenants are iron clad. Even if a more favorable choice of law provision is added to the contract, practitioners would be remiss not to temper their clients’ expectations accordingly. States like California and North Dakota strongly disfavor non-compete agreements.14 In these states, non-compete clauses are void, except as to equity stakeholders in a company.15 There have been pushes in other states to join California’s and North Dakota’s stance on restrictive covenants either by limiting covenants not to compete or by abolishing them altogether.16 Those who favor eliminating or limiting restrictive covenants claim that such agreements inhibit economic development because they hinder entrepreneurship.17 Proponents of restrictive — Continued on next page

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covenants argue that such covenants boost economies and foster competition because companies invest more heavily in their employees when the employers can reduce the opportunity for their employees to use employer-provided training to compete with them.18 They also argue that restrictive covenants prevent employees from leaving jobs after obtaining confidential information gleaned from their employers, which is a desirable policy goal.19 Massachusetts is an example of a state that recently attempted to abolish restrictive covenants. In April 2014, Massachusetts Governor Deval Patrick introduced legislation to abolish the validity of restrictive covenants with a few exceptions, due to economic concerns regarding the enforceability of restrictive covenants.20 The state legislature responded with a compromise bill that passed the state senate. 21 The compromise bill set out parameters meant to allow such an agreement to pass judicial muster. Under the bill, restrictive covenants are enforceable only for a duration of six months or less. In addition, such agreements cannot apply to hourly workers.22 The compromise bill, however, did not pass the state legislature at the end of the legislative session.23 Massachusetts is not the only state that has recently attempted to limit the impact of restrictive covenants. In 2013, legislation was introduced in Minnesota to essentially ban such provisions, with the exception that restrictive covenants would be enforceable as to equity stakeholders in a company.24 Likewise, New Jersey recently proposed limits to restrictive covenants. New Jersey’s proposed change would invalidate any restrictive covenants entered into by a worker entitled to unemployment benefits from his or her former employer.25 Like the Massachusetts bill, neither the Minnesota nor the New Jersey bills have passed.26

In 2012, New Hampshire succeeded in changing its laws regarding the validity of non-compete clauses. Under the amendment, in order for a non-compete agreement to be valid in New Hampshire, the employer must provide a copy of the agreement to the prospective employee either before a job offer is given or at the time the job offer is made.27 If a noncompete agreement is entered into during an employee’s employment, the agreement will be valid only if the agreement coincided with a position change by the employee.28 States are showing more interest in limiting the effect of restrictive covenants. Given these developments, it appears that the growing trend across the United States is toward restricting the enforceability of restrictive covenants. A Brief History of Restrictive Covenants in Illinois: The Law Prior to Reliable Fire Equipment and Fifield The longstanding rule in Illinois has been that contracts in total restraint of trade contradict public policy and are therefore void.29 The Illinois Supreme Court recognized very early on, however, that a contract which is only a partial restraint of trade is valid, provided it is reasonable and is supported by adequate consideration.30 A modern formulation of this framework was expressed in Mohanty v. St. John Heart Clinic.31 In Mohanty, the Illinois Supreme Court noted that private contracts are not void unless it is clearly shown that the contract is contrary to public policy, or that the contract is manifestly injurious to the public welfare.32 As an example, the Mohanty court acknowledged that, in Illinois, restrictive covenants in attorney employment contracts are void as a matter of public policy.33 In contrast, the Mohanty

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opinion itself examined whether restrictive covenants in physician employment contracts violate public policy. The majority held that physician restrictive covenants are not clearly against public policy.34 As noted in the Mohanty opinion, “[the Illinois Supreme Court] has a long tradition of upholding covenants not to compete in employment contracts involving performance of professional services when the limitations as to time and territory are not unreasonable.”35 The issue of what constitutes reasonable limitations on a prior employer’s activities was specifically addressed in the Mohanty decision. The Illinois Supreme Court articulated a two-prong test to be applied when assessing the reasonableness of a restrictive covenant. The test provides: “In determining whether a restraint is reasonable it is necessary to consider whether enforcement will be injurious to the public or cause undue hardship to the promisor, and whether the restraint imposed is greater than is necessary to protect the promise.”36 Two subsequent opinions from the Illinois appellate court brought some confusion to the otherwise straightforward Mohanty analysis. The first was Sunbelt Rentals, Inc. v. Ehlers,37 a decision from the Illinois Appellate Court Fourth District. In Sunbelt Rentals, an employee was a sales representative for Sunbelt Rentals, a company that rented and sold industrial equipment. The employee, Ehlers, was responsible for developing and maintaining the company’s customer base. Ehlers was also responsible for other aspects of customer relations.38 Ehlers entered into a written employment contract with Sunbelt Rentals. The

The issue of what constitutes reasonable limitations on a prior employer’s activities was specifically addressed in the Mohanty decision. The Illinois Supreme Court articulated a two-prong test to be applied when assessing the reasonableness of a restrictive covenant.

agreement provided that while he was employed by Sunbelt Rentals, and for one year afterward, Ehlers would not directly or indirectly provide (or solicit the provision of) products or services similar to those provided by Sunbelt Rentals.39 The contract also limited this restriction to a geographic region of a 50-mile radius from Sunbelt Rentals’s store.40 After leaving Sunbelt Rentals, Ehlers accepted a position as a sales representative with Midwest Aerials & Equipment, Inc. (Midwest), which Sunbelt Rentals considered a direct competitor. Midwest sold aerial work platforms to industrial and construction companies.41 Soon after Ehlers took this position, Sunbelt Rentals sent a cease-and-desist letter to Ehlers and Midwest, demanding that Ehlers stop working for Midwest.42 The trial court granted Sunbelt Rentals’s request for a preliminary injunction, enjoining Ehlers and Midwest from violating the restrictive covenants of Ehlers’s employment agreement. 43 On appeal, the reviewing court observed that traditionally Illinois case law has evaluated the reasonableness of restrictive covenants by looking to the “limitations as to time and territory” imposed by the agreement.44 The court also noted that over the past few decades, each of the state’s five appellate districts had imposed the so-called

“legitimate-business-interest” test when evaluating whether restrictive covenants were enforceable.45 The Sunbelt Rentals court believed that this test had been created “out of whole cloth” and had no basis in Illinois law.46 Under the Fourth District’s analysis, the first reference to the “legitimatebusiness-interest” test in Illinois occurred in 1975 in Nationwide Advertising Service, Inc. v. Kolar. 47 In Kolar, the plaintiff advertising company sought to enjoin its former employee and his new employer from soliciting business from the plaintiff’s customers.48 On appeal, the Illinois Appellate Court First District discussed an employer’s interests, and whether they may be protected by contract. The court made the following observation: Our review of the cases relied on by plaintiff established that an employer’s business interest in customers is not always subject to protection through enforcement of an employee’s covenant not to compete. Such interest is deemed proprietary and protectable only if certain factors are shown. A covenant not to compete will be enforced if the employee acquired confidential information through his employment and

subsequently attempted to use it for his own benefit. [Citation omitted.] An employer’s interest in its customers also is deemed proprietary if, by the nature of the business, the customer relationship is near-permanent and but for his association with plaintiff, defendant would never have had contact with the clients in question. [Citations omitted.] Conversely, a protectable interest in customers is not recognized where the customer relationship is short-term and no specialized knowledge or trade secrets are involved. [Citation omitted.] Under these circumstances the restrictive covenant is deemed an attempt to prevent competition per se and will not be enforced.49 The Sunbelt Rentals court outlined how opinions subsequent to Kolar built from this analysis and created a “legitimate-business-interest” test.50 The Sunbelt Rentals opinion further observed that the Illinois Supreme Court has never embraced the legitimate-business-interest test in the context of restrictive covenants.51 Reviewing the Illinois Supreme Court’s restrictive covenant jurisprudence, the Sunbelt Rentals court concluded that application of the test is inconsistent with the Illinois Supreme Court’s jurisprudence governing restrictive covenant cases.52 The year after the Sunbelt Rentals decision, the Illinois Appellate Court Second District decided Steam Sales Corp. v. Summers.53 In that case, the employee Brian Summers worked for Steam Sales Corporation (Steam Sales), a company selling boiler room equipment to industrial and commercial companies.54 Summers’s duties included soliciting and servicing — Continued on next page

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customer accounts.55 After one of Steam Sales’s larger clients, Johnston Boiler, did not renew its contract with Steam Sales, Summers resigned from Steam Sales.56 A few months later, he formed his own company, BEC Equipment. It was announced that two of Steam Sales’s largest customers would end their relationship with Steam Sales and enter into contract with BEC Equipment to provide them exclusive representation.57 Summers’s employment contract included the following provision: “Restrictive Covenant For a period of two (2) years following the termination of Summers’ employment with Steam Sales, Summers shall not solicit, offer to provide, provide, sell or offer to sell any service or product identical to or similar to those which Steam Sales sells to any customer to whom Summers or Steam Sales has made sales during the immediately preceding two (2) year period prior to the date the employment relationship ends.”58 Steam Sales sought a temporary restraining order against Summers.59 The trial court granted the preliminary injunction, finding that Steam Sales’s customer list and the established client relationships were rights in need of protection.60 The court found a likelihood of success on the merits of Steam Sales’s claims, and enjoined Summers from “soliciting, offering to provide, providing, selling or offering to sell any service or product identical to or similar to those which Steam Sales sells to any customer to whom Summers or Steam Sales made sales [for a period of two years].”61 On appeal, Summers argued that the restrictive covenant was unenforceable

because Steam Sales failed to satisfy the legitimate-business-interest test.62 Summers also argued that the restrictive covenant was unreasonable in terms of time and geographic territory.63 Affirming the trial court, the appellate court in Steam Sales held that the restrictive covenant was enforceable. That court reiterated its own formulation of the legitimate-business-interest test: “Courts will not enforce a covenant not to compete unless the terms of the agreement are reasonable and necessary to protect an employer’s legitimate business interests. [Citation.] A legitimate business interest exists where: (1) because of the nature of the business, the customers’ relationships with the employer are near-permanent and the employee would not have had contact with the customers absent the employee’s employment; or (2) the employee gained confidential information through his employment that he attempted to use for his own benefit.”64 One question addressed by the Steam Sales court was whether the recent Sunbelt Rentals opinion had impacted the viability of the legitimate-business-interest test.65 The Second District noted that the Sunbelt Rentals opinion rejected the legitimatebusiness-interest test in favor of the two-prong reasonableness test set out in Mohanty.66 At the time, Mohanty was the most recent Illinois Supreme Court case addressing restrictive covenants.67 In its analysis, the Steam Sales court observed that application of the Mohanty reasonableness test versus the legitimatebusiness-interest test could lead to different results. The legitimate-business-interest

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test is outcome determinative in cases where the employer is unable to establish either a near-permanent relationship with the customer or the attainment of confidential information by the employee.68 Thus, the legitimate-business-interest test presents a greater hurdle for employers to overcome than the reasonableness test. The court reasoned, however, that eliminating the legitimate-business-interest test does not completely relieve an employer of the burden of demonstrating a protectable interest.69 In that sense, the Steam Sales court noted that there may be some merit to the Sunbelt Rentals analysis, rejecting the legitimate-business-interest test.70 Despite finding merit in the Sunbelt Rentals holding, the Steam Sales court ultimately declined to formally reject the legitimate-business-interest test.71 The court noted that under the facts of that case, the employer did establish a nearpermanent relationship with the customers at issue.72 The Steam Sales court upheld the non-compete agreement, concluding that the geographic limitation (half of northern Illinois, four counties in northwest Indiana, a portion of southern Wisconsin, and a small area in Iowa) was reasonable. The court also found that the two-year period was reasonable.73 In the wake of Sunbelt Rentals and Steam Sales, two Illinois appellate courts had either suggested or directly held that the legitimate-business-interest test should be abandoned. Mohanty—at the time, the most recent Illinois Supreme Court decision to speak on the issue—had confirmed that Illinois courts apply the two-prong reasonableness test when evaluating the limitations of a covenant not to compete. Illinois Supreme Court opinions, however, had not addressed the role, if any, of the legitimate-business-interest test, so clarification was needed.

Recent Developments: Reliable Fire Equipment Co. v. Arredondo and Fifield v. Premier Dealer Services In the years following Sunbelt Rentals and Steam Sales, Illinois courts have shaken up the landscape of restrictive covenant law in a major way. The courts also have provided much-needed clarity with respect to the applicability of the legitimate-business-interest test. Specifically, the Illinois Supreme Court has announced that the enforceability of restrictive covenants depends upon whether the entity seeking enforcement has a legitimate business interest to be protected. The court also held that the business interest, in turn, is assessed based upon the totality of circumstances presented by a given case. In addition, the Illinois Appellate Court First District has narrowed the scope of consideration that it will find adequate to support an enforceable restrictive covenant. Although it can be argued that the reach of the First District’s opinion might be limited, both developments have longranging implications for Illinois employers that seek to protect their business interests from competition by former employees. A. Reliable Fire Equipment: Assessing the Legitimate Business Interest In 2011, the Illinois Supreme Court reviewed the state of Illinois law regarding restrictive covenants. The court noted that, prior to that time, Illinois courts determined the reasonableness of a restrictive covenant by applying a three-prong test that considered whether the covenant: (1) is no greater than required for the protection of a legitimate business interest of the employer-promisee; (2) does not impose undue hardship on the employee-

promisor; and (3) is not injurious to the public.74 Courts also considered whether the extent of an employer’s legitimate business interest could be limited by type of activity, geographical area, and time.75 The supreme court acknowledged the lower courts’ disagreement about application of the legitimate-business-interest test.76 The court reconciled these divergent approaches to enforcing restrictive covenants in its 2011 opinion, Reliable Fire Equipment Co. v. Arredondo.77 In Reliable Fire Equipment, the plaintiff, a fire system designer and installer, sued two former employees who had joined a start-up business supplying fire-alarm systems in the Chicago area. As employees of the plaintiff, the two defendants had signed agreements not to compete with Reliable Fire Equipment Co. (Reliable Fire) in Illinois, Indiana, or Wisconsin for one year after their employment ended.78 The circuit court ruled that Reliable Fire failed to prove the existence of a legitimate business interest that justified enforcement of the covenants.79 A divided appellate court affirmed. The Illinois Supreme Court considered whether the circuit court applied the correct legal test to the evidence presented, and held that it had not.80 The supreme court made clear that the legitimate business interest of the employer is a long-established component of the three-part reasonableness test.81 The court stated that the common law has recognized several factors and subfactors within the component of a promisee’s legitimatebusiness-interest test, but held that “such factors are only nonconclusive aids in determining the promisee’s legitimate business interest, which in turn is but one component in the three-prong rule of reason, grounded in the totality of the circumstances.”82 The court explained that its earlier decision in Mohanty “expressly recited the legitimate interest of the prom-

isee as a component of the three-prong rule of reason.”83 Consequently, the court overruled the two recent appellate court decisions—Sunbelt Rentals and Steam Sales—for misreading the court’s decision in Mohanty.84 The court also acknowledged, but ultimately declined to adopt, the two-factor test advanced by the Illinois Appellate Court First District in Kolar, which states that a near-permanent customer relationship and an employee’s acquisition of confidential information through his employment are determinative of whether a non-compete agreement will be enforced.85 The supreme court held that enforceability should turn upon the totality of the circumstances and not upon an inflexible two-prong standard.86 After conducting its analysis, the Reliable Fire Equipment court articulated the standard for assessing an employer’s legitimate business interest as follows: [W]hether a legitimate business interest exists is based on 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.87 Under this standard, Illinois trial courts have more flexibility to enforce restrictive covenants. As a result, employers considering prospective candidates — Continued on next page

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who have entered into restrictive covenants with former employers must consider this fact. Those employers must evaluate, with aid of counsel, the nature of the restrictive covenant within the context of the work to be performed by the prospective employee. Such an evaluation will assist the employer in determining how to proceed with the possible hire, as well as the defense against any possible litigation brought by the employee’s former employer for an alleged breach of the non-compete agreement. B. Fifield v. Premier Dealer Services, Inc.: Providing Adequate Consideration Over and above the legitimate-business-interest test, a second aspect of the enforceability of a restrictive covenant is whether it is supported by adequate consideration. Employers must be mindful of the consideration they provide their employees for entering into restrictive covenants. Before the reasonableness of a restrictive covenant may be analyzed, it must be supported by adequate consideration. Employers conducting business in the First District (i.e., Cook County, including Chicago) must analyze the consideration they provide for their restrictive covenants to ensure they pass muster under the First District’s 2013 decision in Fifield v. Premier Dealer Services, Inc.88 Although the Fifield court did not provide instruction about what constitutes adequate consideration, the court held that employment of less than two years was not sufficient consideration to enforce the restrictive covenants at issue in that case. In Fifield, the plaintiff was employed by an insurance company that was acquired by Premier Dealer Services, Inc. That company developed, marketed, and administered a variety of vehicle aftermarket products.89 As a result of the sale, the plaintiff’s prior employer informed him

that his employment would end on a certain date.90 Prior to that date, the defendant offered employment to the plaintiff.91 As a condition of employment, the defendant required the plaintiff to sign an “Employee Confidentiality and Inventions Agreement” (Agreement).92 The Agreement contained nonsolicitation and noncompetition provisions that prohibited the plaintiff from competing with the defendant for two years following the termination of his employment.93 Before signing the agreement, the plaintiff negotiated with the defendant to add a provision in the agreement that provided that the restrictive covenants would not apply if the plaintiff was terminated without cause during the first year of his employment.94 The plaintiff accepted the offer of employment, signed the agreement, and began working for the defendant, but resigned three-and-a-half months later.95 Shortly thereafter, he began working for Enterprise Financial Group (EFG).96 The plaintiff and EFG filed a complaint for declaratory relief in the Circuit Court of Cook County, requesting that the trial court declare that certain provisions of the Agreement were invalid and unenforceable.97 The plaintiff and EFG later filed a motion for declaratory relief pursuant to 735 ILCS 5/2-701(b).98 The trial court entered an order granting the motion, stating that the nonsolicitation and noncompetition provisions in the Agreement were unenforceable as a matter of law for lack of adequate consideration.99 The First District affirmed. Even though the plaintiff signed the Agreement before his employment with the defendant began, the appellate court held that the provisions in the Agreement were postemployment restrictive covenants because the provisions restricted the plaintiff’s ability to seek work after his employment with the defendant ended.100 The court found instructive the reasoning and analysis of

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Bires v. WalTom, LLC,101 in which the U.S. District Court for the Northern District of Illinois observed that the U.S. Court of Appeals for the Seventh Circuit has rejected the distinction between pre- and post-hire covenants. 102 The appellate court also pointed out that Illinois courts have treated restrictive covenants signed by individuals in situations similar to the plaintiff’s situation as postemployment restrictive covenants.103 The appellate court also held that the plaintiff’s employment with the defendant, which lasted slightly longer than three months, fell far short of the two years required for adequate consideration under Illinois law.104 The court noted that Illinois courts have held repeatedly that there must be at least two years of continued employment to constitute adequate consideration in support of a restrictive covenant.105 This rule applies even if the employee resigns from his position on his own.106 The defendant petitioned the Illinois Supreme Court for leave to appeal, but the court denied the petition. Consequently, as discussed below, Illinois employers do not have clear guidance for what consideration they must offer employees to ensure enforceability of restrictive covenants. Illinois state and federal courts presented with this issue in the wake of Fifield have taken different approaches. Behind the Fifield Curtain: Does Illinois Case Law Really Require Two Years of Continued Employment as a Bright-Line Rule? Commentators have described the holding in Fifield as a bright-line rule that a two-year period of continued employment following execution of an employment agreement is now required for the consideration for an enforceable restrictive covenant to be adequate.107 That line might be a bit blurry, however, to the extent that

the Fifield holding is meant to apply to all restrictive covenants. Instead, an argument can be made that the holding is limited to those restrictive covenants where the only consideration is continued employment. The more important take-away from the Fifield decision might be that employers should ensure that the consideration for a restrictive covenant is not illusory, in addition to being adequate. The next section will deconstruct the Fifield holding and evaluate its progeny in order to explore the basis for the conclusions reached by the courts and to explore whether a bright-line rule really is the appropriate draw from the Fifield decision. A. The Case Law Relied Upon by the Court in Fifield The court in Fifield primarily relied on three cases for the proposition that Illinois courts have held repeatedly that at least two or more years of continued employment constitutes adequate consideration in support of a restrictive covenant: Lawrence & Allen, Inc. v. Cambridge Human Resource Group, Inc.,108 Brown and Brown, Inc. v. Mudron,109 and Diederich Insurance Agency, LLC v. Smith.110 In Lawrence and Allen, Inc. v. Cambridge Human Resource Group, Inc., the Illinois Appellate Court Second District held that a nearly two-and-a-half year period of continued employment, after agreeing to a postemployment restrictive covenant, was adequate consideration for the agreement.111 In that case, John Sheets began his at-will employment with the plaintiff on January 4, 1988, and on June 27, 1989, he signed a postemployment restrictive covenant under the threat of termination. No change in job title, responsibilities, or salary corresponded to the signing of the restrictive covenant, which included a covenant not to compete that precluded Sheets from competing directly

or indirectly with the plaintiff within the territorial United States for two years in the event that he quit his employment with the plaintiff. The restrictive covenant also prevented Sheets from performing directly or indirectly any similar services for the plaintiff’s clients or soliciting any of the plaintiff’s clients during the same two-year period after termination. Other than the restrictive covenant, there was no written employment contract. On November 12, 1991, Sheets ended his employment with the plaintiff and began working for the defendant, a rival of the plaintiff in the highly competitive corporate employee outplacement industry.112 The plaintiff sued the defendant for tortious interference with contract.113 At the close of discovery, the defendant moved for summary judgment, in part, on the issue of whether the covenant was supported by consideration. The trial court granted the motion.114 On appeal, the Illinois Appellate Court Second District noted that continued employment for a substantial period of time is sufficient consideration to support an employment agreement.115 The appellate court considered the nearly two-and-a-half year period during which Sheets worked to constitute a substantial period of time, thereby serving as adequate consideration to support the postemployment restrictive covenant.116 Nevertheless, the appellate court ultimately found the terms of the restrictive covenant unreasonable and affirmed the trial court’s grant of summary judgment in favor of the defendant.117 In Brown and Brown, Inc. v. Mudron, the Illinois Appellate Court Third District held that seven months of continued employment after signing a restrictive covenant was not sufficient consideration for the restriction.118 In that case, customer service representative Diane Gunderson was an at-will employee of a company that was purchased by the plaintiff. As part of the

purchase, the plaintiff required Gunderson and her co-workers from the company being acquired to sign an employment agreement with the plaintiff. One co-worker who refused to sign the agreement was terminated. The agreement stated that the employee could be terminated at any time, with or without cause. It contained a postemployment restrictive covenant that prohibited the employee from soliciting or servicing any of the plaintiff’s customers for two years after employment with the plaintiff had ended and from disclosing any of the plaintiff’s confidential information for the same post-employment period. Gunderson signed the agreement and worked for the plaintiff after the purchase of her former employer. After approximately seven months, Gunderson quit and joined one of the plaintiff’s competitors.119 The plaintiff filed suit against Gunderson and her new employer, alleging that Gunderson had breached the employment agreement by soliciting and servicing the plaintiff’s customers, as well as by taking and utilizing the plaintiff’s confidential information. After extensive discovery, Gunderson moved for summary judgment, which was granted.120 On the plaintiff’s appeal, the court addressed the issue of whether there was adequate consideration for the restrictive covenant. The court explicated: “Under Illinois law, continued employment for a substantial period of time beyond the threat of discharge is sufficient to support a restrictive covenant in an employment agreement.”121 The court noted that Illinois courts generally have held that two or more years of continued employment constitutes adequate consideration. 122 Gunderson, however, continued to work for the plaintiff for only seven months after signing the employment agreement containing the restrictive covenant. Notably, the court — Continued on next page

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declared that the fact that Gunderson quit her job did not change the analysis.123 Furthermore, even though the plaintiff claimed that Gunderson received other employee benefits as consideration for the restrictive covenant, the court had no evidence before it to establish specifically what those benefits were or how they differed from the benefits Gunderson was receiving as an employee of the acquired company. Accordingly, the court held that there was not adequate consideration to support the employment agreement and that the restrictive covenant was unenforceable.124 In Diederich Insurance Agency, LLC v. Smith, the Illinois Appellate Court Fifth District held that a three-month period of continued employment after signing a postemployment non-solicitation agreement was not sufficient consideration for the restrictive covenant. In that case, the defendant, Chad Smith, signed an employment agreement when he began working for the plaintiff. The employment agreement included a non-solicitation provision that prohibited Smith from soliciting insurance business from the plaintiff’s customers for a two-year period after he stopped working for the plaintiff.125 Five-and-a-half months after he started, Smith signed an employee confidentiality agreement that reduced the term of the non-solicitation agreement from the two-year period set forth in the original agreement to a 12-month period.126 Three months after signing the employee confidentiality agreement, Smith quit his job with the plaintiff. Eleven months later, the plaintiff received notification from one of its long-standing clients that the client would no longer be using the plaintiff’s broker services. Smith had arranged the transfer of that client’s business to another broker.127 The plaintiff then sued Smith for breaching the second non-solicitation agreement with the plaintiff, and Smith moved to dismiss. The circuit court

granted Smith’s motion, finding insufficient consideration as a matter of law for the non-solicitation agreement.128 The appellate court agreed with Smith’s position. Addressing only whether the consideration was adequate for the non-solicitation agreement, which was signed during Smith’s employment,129 the appellate court held that it was not. The plaintiff argued that the reduction of the non-solicitation period from two years to 12 months was a benefit to Smith, and thus was adequate consideration for the non-solicitation agreement. Alternatively, the plaintiff argued that Smith’s continued employment for three months after signing the non-solicitation agreement provided adequate consideration.130 The court rejected the plaintiff’s arguments, concluding that the new nonsolicitation agreement was a modification of an existing contract, requiring consideration in order to be enforceable.131 First, the court turned around the plaintiff’s argument that the reduction in the non-solicitation period to 12 months was a benefit to Smith. The court did not view the 12-month period as a benefit to Smith in the form of a reduction of a prior, lengthier restriction on him. Instead, the court viewed the restriction as a renewed promise by Smith to not compete for 12 months. Because Smith already had agreed to a 24-month non-solicitation period when he signed the employment agreement at the time that he started working for the plaintiff, the court reasoned that he already had a pre-existing duty not to compete against the plaintiff. The court, therefore, “failed to see” how a promise not to compete for 12 months could be new, valid consideration.132 Second, the court held that Smith’s continued employment for three months after signing the non-solicitation agreement was not sufficient consideration for the restriction.133 The court reasoned

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that continued employment for an at-will employee is an illusory benefit, because immediately after an at-will employee signs the non-solicitation agreement the employer can fire the employee, leaving the employee with nothing in exchange for a fresh promise not to compete.134 The court recognized that continued employment for “a substantial period” is sufficient consideration for an employment agreement and surveyed several other cases to reveal that four years had been found to qualify as a “substantial period,” but seven months had not been considered substantial.135 Citing to Lawrence & Allen, however, the court pointed to a two-year period of continued employment as adequate consideration for an employment agreement containing a restrictive covenant.136 Therefore, the court held that Smith’s three-month period of continued employment was insufficient consideration, and as a result the restrictive covenant signed by Smith was unenforceable as a matter of law.137 B. Judicial Interpretations of the Fifield Decision: Is the Jury Still Out on the Issue of Consideration? There is very little case law addressing the adequacy of consideration in the wake of Fifield. In fact, before December 2014, the only cases that cited to Fifield were Illinois circuit court cases and two cases from the U.S. District Court for the Northern District of Illinois. The federal cases are split on whether to apply the Fifield decision as requiring a bright-line two-year requirement for employment after an employee signs a restrictive covenant. On December 11, 2014, the Illinois Appellate Court Third District looked to the Fifield decision as providing a general rule of thumb on the issue of adequate consideration. Notably, that decision also suggests that the issue of adequate consideration is

a threshold issue that must be addressed before the three-pronged reasonableness test may be considered. 1. Illinois Circuit Court Cases The first case to cite to Fifield acknowledged that, in general, two years or more of continued employment constitutes adequate consideration to support a restrictive covenant, even if the employee resigns voluntarily instead of being terminated, and in taking a view similar to the reasoning of the Diederich Insurance case, found a period of employment that exceeded the twoyear “requirement” of Fifield and held that such period of time constituted adequate consideration for the restrictive covenant at issue. In Novas, Dohr & Coll OB/Gyn Associates, S.C. v. Keith,138 the plaintiff and its at-will employee, Dr. Rebecca Keith, entered into an employment agreement, which contained a two-year non-compete agreement, when she began working for the plaintiff on July 18, 2005.139 Later, they entered into an “Amended and Restated Physician Agreement” effective January 1, 2010.140 The agreement provided that Dr. Keith would not enter into a practice that competed with the plaintiff for a two-year period after her employment with the plaintiff terminated.141 Dr. Keith resigned her employment with the plaintiff effective November 24, 2011, and immediately joined practices that competed with the plaintiff.142 The plaintiff sued Dr. Keith for breach of contract and moved for a preliminary injunction against her in the Chancery Division of the Circuit Court of Cook County.143 Dr. Keith moved to strike the motion for preliminary injunction and to dismiss the plaintiff’s complaint.144 Dr. Keith argued there was not adequate consideration to support the restrictive covenant because she did not work for the plaintiff for two years or more after

she signed the amended agreement. The plaintiff argued that the restrictive covenant was supported by consideration in the form of increased compensation and additional benefits that were not afforded to Dr. Keith under her previous contract. Citing to Fifield, the circuit court acknowledged that, in general, two years or more of continued employment constitutes adequate consideration to support a restrictive covenant, even if the employee resigns voluntarily instead of being terminated.145 The circuit court, however, noted that there were portions of the original agreement signed by Dr. Keith that were not modified by the amended agreement, including the restrictive covenant, which was to continue in full force and effect. Citing to Diederich Insurance, the court reasoned that when the parties entered into the amended agreement, Dr. Keith already was bound by the restrictive covenant and thus did not make a “fresh promise” not to compete.146 Accordingly, the court concluded that the employment relationship between Dr. Keith and the plaintiff lasted more than six years, which was adequate consideration to support the restrictive covenant that was signed at the beginning of her employment and was not modified by the agreement signed during her employment.147 In Klein Tools, Inc. v. Stanley Black & Decker, Inc.,148 the Illinois Circuit Court of Cook County, Chancery Division, held that 11 months of continued employment after signing a restrictive covenant was not adequate consideration.149 In that case, regional sales manager Charles Smith had worked for the defendant for an unspecified period before being employed by the plaintiff.150 On June 16, 2012, as part of his at-will employment with the plaintiff, Smith signed an employment agreement, which contained a provision that he would not, for a period of two years, “‘in any capacity in which any Confidential

Information of the Company that Employee acquired during Employee’s Employment would reasonably be considered useful, directly or indirectly engage in, assist in or be connected in any manner with any activity on behalf of any Company Competitor.’”151 As regional sales manager, Smith was responsible for all sales activities within his region, was heavily involved in efforts to solicit business, and was granted access to the plaintiff’s confidential information, including the development of a new product line and the closely guarded strategies for its launch. On May 21, 2013, however, Smith quit his employment with the plaintiff after only 11 months and informed the plaintiff that he was going to work for the defendant—a competitor—in the same region as the one that he oversaw for the plaintiff. The plaintiff alleged that, before his separation from the plaintiff, Smith made phone calls to officers at Stanley that corresponded with the plaintiff’s key internal meetings and strategy discussions in which Smith participated, that Smith copied digital documents, and that he repeatedly accessed sensitive files on the plaintiff’s servers and on his computer, including confidential pricing information.152 The plaintiff filed suit for, among other things, breach of contract against Smith.153 Smith argued that the breach of contract count should be dismissed because the employment agreement was unenforceable. Citing to Fifield, the circuit court stated: “Smith was employed for only 11 months. This fact renders the restrictive covenants of the Employment Agreement unenforceable.”154 The court summarily dismissed as irrelevant the plaintiff’s assertion that Fifield would have a harmful effect on Illinois businesses.155 The plaintiff also argued, in the alternative, that Smith negotiated for an — Continued on next page

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additional week of vacation, which should serve as sufficient consideration for the restrictive covenants. The court, however, found the additional vacation time to be as illusory as continued employment of less than two years. Smith and the plaintiff had negotiated that Smith would accrue vacation time faster than other new employees and as a result would earn an extra week of vacation. The court reasoned that, because Smith was an at-will employee and could be terminated at any time, the extra week of vacation might never fully or even partially accrue and thus was not substantial consideration for the restrictive covenants within the employment agreement. Therefore, the court held that the restrictive covenants were not enforceable under Illinois law.156 In Vapor 4 Life, Inc. v. Nicks,157 the plaintiff filed suit against several former employees for breach of contract in the Illinois Circuit Court of Cook County, Chancery Division. 158 The defendants had signed employment agreements with the plaintiff that contained restrictive covenants, the duration of which was not stated by the court. The defendants argued that the restrictive covenants were unenforceable because the defendants were not employed by the plaintiff for at least two years, and so the complaint should be dismissed. The court noted that the defendants were correct, because as observed by the court in Fifield: “Illinois courts have repeatedly held that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant.”159 The court, however, did not grant the defendants’ motion to dismiss because the defendants failed to establish the length of their employment.160

2. Cases from the Northern District of Illinois The two cases from the U.S. District Court, Northern District of Illinois, are split on the application of Fifield as implementing a bright-line two-year requirement for continued employment after signing a restrictive covenant. In Montel Aetnastak, Inc. v. Miessen,161 the federal court refused to apply a bright-line rule regarding the period of time during which an employee is required to work in order for there to be adequate consideration for a restrictive covenant. On November 23, 2010, Kristine Miessen signed an employment agreement with the plaintiff as a regional sales manager that included a non-compete clause that prohibited her from performing any work substantially related to the business of the plaintiff for two years after the termination of the agreement.162 During her employment with the plaintiff, Miessen had direct knowledge of a unique shelving system designed for one of the plaintiff’s clients, the modifications for which the plaintiff took steps to keep secret from its competitors.163 Miessen informed the plaintiff on February 28, 2012, that she would be resigning from her position; she resigned two weeks later and went to work for a competitor.164 After the plaintiff failed to win a bid to install the shelving unit at one of the client’s stores, the plaintiff learned that another company had won the bid allegedly with the help of Miessen.165 The plaintiff filed suit, alleging among other things that Miessen had breached the non-compete provision of her employment agreement, and Miessen moved to dismiss the complaint based on inadequate consideration for the non-compete clause in the employment agreement.166 The plaintiff argued that Miessen’s 15-month employment was sufficient consideration, which rendered the employment agreement enforceable.167

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After surveying Illinois case law, however, the federal court concluded that Illinois law does not provide a clear rule concerning how to determine whether the consideration for an employment agreement is adequate.168 The federal court recognized that the Fifield and Brown and Brown opinions held that two years of continued employment were necessary to constitute a “substantial period” of employment, but noted that other Illinois cases (though not directly addressing the issue of consideration) enforced restrictive covenants where the continued employment lasted for only a year.169 The federal court also noted that, in determining whether consideration was adequate for a restrictive covenant, other Illinois cases had suggested that factors other than the period of continued employment, including whether the employee or the employer terminated the employment relationship, should be weighed when determining whether adequate consideration was provided to enforce a restrictive covenant.170 The federal court further noted that the Illinois appellate court had not previously constrained itself by applying a bright-line test with regard to what constitutes a “substantial period” of employment after signing a restrictive covenant. Citing to McRand, Inc. v. van Beelen,171 the federal court noted that, when determining whether there was adequate consideration in that case, the Illinois appellate court factored in that the employee received raises and bonuses, that the employee voluntarily resigned, and that the employee received increased responsibilities after signing the restrictive covenant, as well as the fact that the period of the employee’s continued employment was two years.172 Accordingly, the federal court refused to apply a bright-line rule regarding continued employment. Instead, the court employed a fact-specific approach to

determine whether the consideration was adequate for the restrictive covenant. The court concluded that Miessen’s 15 months of employment, coupled with her voluntary resignation, provided a “substantial period” of employment. Therefore, the court held that Miessen was provided adequate consideration and that the two-year noncompete clause within the employment agreement was enforceable.173 The U.S. District Court, Northern District of Illinois in Instant Technology, LLC v. DeFazio174 considered the fact-specific approach applied in Montel Aetnastak with respect to what constitutes a “substantial period” of continued employment and rejected that approach in favor of following the more rigid approach that defines a “substantial period” as two years or more of continued employment.175 In Instant Technology, the defendant employees signed employment agreements that contained clauses prohibiting them from soliciting business from or performing services for any of the plaintiff’s clients for a two-year period following termination. 176 The defendants received nothing but their employment in exchange for their agreement to be bound by the restrictive covenant.177 Less than two years after they signed their respective employment agreements, the plaintiff terminated the defendants.178 The defendants were then employed by one of the plaintiff’s competitors, and the plaintiff sued them for breach of contract.179 The parties proceeded through a bench trial.180 With respect to the issue of whether the consideration for the restrictive covenant was adequate, the federal court, citing Fifield, Diederich Insurance, and Brown and Brown, concluded that the Illinois Supreme Court would not alter the doctrine that defines a “substantial period” as two years or more of continued employment.181 The court, however, noted that there was no evidence at trial that the defendant

received any consideration other than their employment in exchange for their agreement to be bound by the restrictive covenant. Accordingly, the court held that, because the defendants’ continued employment did not last at least two years, the restrictive covenant was not enforceable under Illinois law.182 3. The Third District’s Decision In Prairie Rheumatology Associates, S.C. v. Francis,183 the Illinois Appellate Court Third District cited to the Fifield decision for the proposition that in Illinois there is a “general 2-year rule of thumb [of continued employment] that supports adequate consideration.”184 The court, however, did not limit its analysis to the length of employment, recognizing the possibility that other forms of consideration could be adequate as well, despite the fact that the defendant former employee did not work for the plaintiff employer for at least two years. In that case, the plaintiff employer sought to enforce a non-compete agreement against the defendant former employee that was found within the parties’ employment agreement.185 On January 7, 2012, the defendant, a licensed rheumatologist, signed a “Physician Agreement” with the plaintiff prior to joining the plaintiff’s medical practice, which offered rheumatology services within a limited geographical scope and within two specific hospitals.186 Although the defendant began her employment with the plaintiff on April 16, 2012, the Physician Agreement was effective April 9, 2012.187 The plaintiff’s practice relied primarily on referrals from physicians, including those on staff at the two hospitals. 188 The Physician Agreement provided the defendant with an annual salary, promised that the defendant would be considered for shareholder status after 18 months,

provided that the plaintiff would assist the defendant in getting staff privileges at the two hospitals from which the plaintiff received referrals, and provided that the plaintiff would pay the defendant’s hospital dues. Under the Physician Agreement, the plaintiff was to introduce the defendant to its patients and referral sources, including those physicians on staff at the hospitals with which the plaintiff was affiliated. The agreement also included a non-compete agreement, under which the defendant could not enter into the full-time or part-time practice of rheumatology in any capacity within a 14-mile radius of the plaintiff’s practice for a period of two years after the date of the defendant’s termination, regardless whether the termination was voluntary or involuntary.189 In July 2013, the defendant notified the plaintiff that she would be voluntarily terminating her employment with the plaintiff effective November 22, 2013, and that she would honor the non-compete agreement.190 On January 3, 2014, the defendant began serving rheumatology patients within nine miles of the plaintiff’s principal office.191 The plaintiff filed a complaint for injunctive relief, seeking to enforce the non-compete agreement within the Physician Agreement.192 The trial court granted a preliminary injunction in favor of the employer as to its current patients only. The trial court denied the request for injunctive relief as to former and future patients.193 The trial court first found that the non-compete agreement was ancillary to the Physician Agreement and was supported by adequate consideration. Next, it held that the non-compete agreement was reasonable as to the plaintiff’s current patients but not as to its future patients and the public at large, based on the threepronged reasonableness test discussed in — Continued on next page

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Reliable Fire Equipment.194 The plaintiff filed an appeal arguing that the trial court misapplied the reasonableness test as to its past and future patients, and the defendant cross-appealed arguing that the trial court’s decision should be reversed because the non-compete agreement lacked adequate consideration.195 The Third District stated that two determinations must be made before any further analysis of a restrictive covenant is warranted. First, the restrictive covenant must be found to be ancillary to a valid transaction or relationship. Second, adequate consideration must be found to support the covenant.196 The appellate court found that there was not adequate consideration to support the restrictive covenant. The court recognized that, in Illinois, continued employment for “a substantial period of time beyond the threat of discharge” constitutes adequate consideration to support a restrictive covenant ancillary to an employment agreement.197 The court further recognized that the promise of continued at-will employment could be an illusory benefit, and (citing Fifield) that Illinois courts “have generally held that two years or more of continued employment constitutes adequate consideration,” even if the employee voluntarily resigns or is terminated.198 The court (again citing Fifield) acknowledged that the defendant “tendered her resignation 15 months after the start of her employment with [the plaintiff] and officially left the practice after being employed for 19 months, 5 months less than the general 2-year rule of thumb that supports adequate consideration.”199 Nevertheless, the court considered the plaintiff’s argument that additional consideration provided for in the Physician’s Agreement constituted adequate consideration for the non-compete agreement. Specifically, the plaintiff claimed that

the defendant also received the plaintiff’s assistance in obtaining membership and staff privileges at hospitals, access to new referral sources, and an opportunity to expedite her advancement.200 The court, however, concluded that, based on the evidence presented at the hearing on the preliminary injunction, the defendant actually received little or no additional benefits from the plaintiff in exchange for the non-compete agreement. The evidence showed that the plaintiff did not assist the defendant in securing her hospital credentials, neglected to introduce her to referral sources, and did not pay the entirety of the defendant’s credential fee. Instead, the defendant conducted her own marketing and developed her own programs to increase her visibility. The court also found the promise of expedited advancement and partnership opportunities to be illusory benefits at best, because although the Physician’s Agreement provided that the plaintiff would be considered for partnership after 18 months, there was no guarantee that she would be provided with that benefit.201 Accordingly, the appellate court held that there was not adequate consideration to support the non-compete agreement, which was unenforceable.202 C. What to Consider when Interpreting Fifield: Is There Leeway Beyond a Two-Year Requirement? As this line of cases demonstrates, Illinois courts will not enforce a restrictive covenant for any period of time where the proffered consideration is viewed as illusory. The actions of the employee, including deliberate theft of secrets and voluntary resignation, tend not to factor into the courts’ determination. Likewise, whether the agreement is signed at the beginning of the employment relationship or at any subsequent point is irrelevant. The

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courts’ position should make employers wary, as a weak employment agreement containing a restrictive covenant that is found to be unsupported by adequate consideration provides neither a sword nor a shield against an employee who steals secrets for his or her own gain or for the benefit of a rival company. As the Klein Tools case illustrates, employers cannot rely on the courts to factor in the reality of corporate espionage when determining whether or not to enforce a restrictive covenant.203 Employers also should not rely on the courts to factor in whether the employee was sophisticated enough to negotiate the employment agreement to determine whether the consideration adequately supports a restrictive covenant. Nevertheless, for employers and practitioners, there is an approach to consideration that they can take when trying to draft and to enforce a restrictive covenant in Illinois: provide adequate consideration that is not illusory. Absent clear directives from the courts, however, this approach is easier said than done. Despite commentators’ and lower courts’ declarations that there is now a bright-line rule that two years of continued employment is required for an enforceable restrictive covenant, a careful review of the cases before and after the Fifield decision—as well as the Fifield decision itself—reveals that the line might not be so bright after all, at least not in every situation. Certainly, it is clear that courts will find that two years or more of continued employment will constitute adequate consideration for a restrictive covenant. But is the two-year period necessarily required? Are there other forms of consideration besides continued employment that could be adequate to support a restrictive covenant? As with many questions in the law, the answers to both questions might be: “It depends.”

Worth noting is the fact that no Illinois appellate court prior to Fifield had actually held that there is a two-year requirement for continued employment as adequate consideration for a restrictive covenant. To the extent that the decisions relied upon by Fifield for the proposition of a requirement of continued employment lasting two years commented on two years of continued employment, the Brown and Brown and Diederich Insurance decisions did so as a general observation of the holding in Lawrence & Allen.204 In fact, the court in Fifield initially made the same general observation, citing to Brown and Brown and stating: “Generally, Illinois courts have held that continued employment for two years or more constitutes adequate consideration.”205 In the next sentence, the Fifield court stated, “The restrictive covenant will not be enforced unless there is adequate consideration given.”206 Notably, the Illinois Supreme Court in Melena v. Anheuser-Busch, Inc. 207 recognized that continued employment is sufficient consideration for the enforcement of employment agreements. For that proposition, the supreme court in Melena cited to Lawrence & Allen and a case decided by the First District, Woodfield Group, Inc. v. DeLisle,208 both of which dealt with the enforceability of restrictive covenants. 209 As discussed above, the court in Lawrence & Allen did not make any sweeping declarations concerning how many years of continued employment constitutes adequate consideration to support a postemployment restrictive covenant; rather, it held that two-anda-half years of continued employment was adequate consideration to support a two-year postemployment restriction under the facts of that case.210 The First District in Woodfield Group remanded the question of whether the defendant employee’s 17 months of continued employment was

adequate consideration for the 18-month non-solicitation period by which she agreed to be bound after she had already begun her employment.211 After surveying the decisions in Lawrence & Allen and other cases involving the adequacy of consideration for restrictive covenants, the First District stated: We do not believe case law limits the courts’ review to a numerical formula for determining what constitutes substantial continued employment. Factors other than the time period of the continued employment, such as whether the employee or the employer terminated employment, may need to be considered to properly review the issue of consideration.210 Instead, the court noted the standard is “that substantial continued employment may constitute sufficient consideration to support a restrictive covenant agreement.”213 Remarkably, the First District in Fifield did not cite to its earlier decision in Woodfield Group, much less comment on the Woodfield Group court’s understanding of the factors to consider regarding what constitutes substantial continued employment. Instead, the court in Fifield, despite its earlier general observation that Illinois courts have held that continued employment for two years or more constitutes adequate consideration, shifted its position to a more rigid one: “Illinois courts have repeatedly held that there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant.”214 In support of this statement of the law, the court in Fifield cited Diederich Insurance, Lawrence & Allen, and Brown and Brown. 215 Again, those cases spoke in general terms regarding two years of con-

tinued employment constituting adequate consideration for a postemployment restrictive covenant, and did not hold in absolute terms that two years of continued employment is necessarily required. The elimination of the word “generally” from the statement of law made by the court in Fifield and the inclusion of the word “must” are subtle but significant changes that have given rise to the rigid interpretations of Fifield as holding that there is a two-year requirement of continued employment. It can be argued that the Fifield court’s statement that “there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant” is a misstatement of the law. Although it is true that Illinois courts have held that two years of continued employment has constituted adequate consideration in support of the restrictive covenants involved in those cases, a survey of cases reveals that the proposition is not absolute. In particular, the duration of the postemployment restrictions in the cases dealing with this issue is significant. In most cases, including Lawrence & Allen, Brown and Brown, and the cases that have cited to Fifield for this proposition, the restrictive covenants at issue were for a period of two years or more; and in those cases, where the period of employment lasted two years or more, there was adequate consideration to enforce the restrictive covenant,216 but where the period of employment lasted less than two years, there was not.217 The notable exception to this pattern is the Montel Aetnastak case from the Northern District of Illinois, more fully discussed above.218 In that case, the federal court, rejecting the rigid approach of Fifield and applying a fact-specific approach instead, found that a 15-month period of continuous employment constituted adequate consideration — Continued on next page

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for a two-year restrictive covenant.219 The Montel Aetnastak case aside, other courts, such as the court in the Woodfield Group case, have appeared willing to consider continued employment of less than two years to be adequate consideration where the period of the restrictive covenant is also less than two years, especially where the duration of employment is nearly equivalent to the length of the restrictive covenant.220 No Illinois court has addressed the issue directly, however.221 Given the facts and holdings of these cases, it is clear that, to the extent that continued employment alone is the proffered consideration for a restrictive covenant that covers a time period of two or more years, the length of continued employment must be at least two years. To the extent that the restrictive covenant covers a period of less than two years, however, there might be some leeway to argue that less than two years of employment constitutes adequate consideration, even when continued employment alone is the proffered consideration. Although it appears unlikely that Illinois courts will adopt the purely fact-specific approach championed by the federal court in Montel Aetnastak, it remains to be seen whether the two-year black-line approach will be implemented for restrictive covenants with durations that are less than two years. As illustrated above, courts appear to be willing to find adequate consideration through continued employment of less than two years where the duration of that employment is at least equal to the period of the restrictive covenant. Therefore, perhaps an employer willing to test the limits of the court’s rulings on adequate consideration could do so by drafting the terms of its restrictive covenant with language to the effect that the duration of the restrictive covenant is to be equivalent to the length of the employee’s employment after signing

the agreement, but the restrictive covenant is not to exceed two years. A more cautious employer, however, might consider providing additional consideration for an employee’s agreement to be bound by a restrictive covenant. Unfortunately, there appears to be no guidance from Illinois courts as to what precisely constitutes adequate consideration, other than two years of continued employment. Fortunately, some courts have hinted at a willingness to consider the adequacy of other consideration. For example, in Prairie Rheumatology Associates, S.C., the court considered the employer’s argument that the employee was entitled to benefits beyond continued employment for the restrictive covenant, such as receiving the employer’s assistance in obtaining membership and staff privileges at hospitals, access to new referral sources, and an opportunity to expedite her advancement, but ultimately found that those benefits never came to fruition.222 Similarly, in Brown and Brown, the court was willing to address the employer’s argument that the employee had received additional benefits as consideration for the restrictive covenant, but the court found that there was no evidence as to what those benefits were specifically or how they differed from the benefits that the employee already had been receiving prior to agreeing to the restrictive covenant.223 In Klein Tools, the court considered the employer’s argument that there was adequate consideration for the restrictive covenant because the employee negotiated for an additional week of vacation that was to accrue at a faster rate than vacation time accrued for other new employees, but the court found no evidence that the extra vacation time was to be the consideration for the restrictive covenant and, regardless, the vacation time was an illusory benefit because it might never accrue.224 Indicating a willingness

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to consider other forms of consideration, the court in Instant Technology noted that the employer did not prove (or even argue) that the employees received anything other than their employment as consideration in exchange for agreeing to the restrictive covenants.225 The take away from these cases is that Illinois courts likely will consider something other than two years of continued employment as adequate consideration for a restrictive covenant, so long as the proffered consideration is neither illusory nor essentially the same as a benefit that the employee is receiving already. What remains unclear in Illinois, however, is what form the proffered consideration must take and the value it must have before it can be considered to be adequate consideration for the restrictive covenant. A survey of the consideration found to be adequate by courts in other states might provide some guidance to employers in Illinois. What Constitutes Adequate Consideration: A Survey of Other Jurisdictions In all cases, restrictive covenants require adequate consideration to be enforceable. Lack of consideration is an affirmative defense. 226 Illinois’s definition of “consideration” is quite onerous, seemingly requiring two years of continuous employment even if the employee voluntarily leaves. Although some states have rejected continued employment altogether as consideration for restrictive covenants,227 other states’ definitions of “consideration” vary from as little as the employment itself (or continued employment if the agreement is signed while employed), to monetary payment of varying amounts, to almost everything in between. This section explores examples of the types of consideration that other

states have found adequate in support of non-compete agreements. This survey is not intended to be all-inclusive of other states, but rather is intended to illustrate other creative types of consideration aside from a specific period of employment (or beyond simply employment or continued employment in those states that allow it) that have been found adequate to support restrictive covenants. A. Monetary Consideration Not surprisingly, several states accept a monetary amount as adequate consideration in support of a restrictive covenant. What is unclear, however, is the amount that a court will consider adequate. Examples of the variables affecting the adequacy of the amount of monetary consideration appear to include the facts of the case, the particular job at issue, the interests to be protected, and the value of the information that the employer seeks to keep confidential. In Pocatello Dental Group, P.C. v. Interdent Service Corp.,228 a dentist in Idaho joined a dental group and received $400,000 cash in the transaction. The U.S. District Court, District of Idaho, held that this amount was adequate consideration, although the court did not discuss other contexts or amounts constituting adequate consideration.229 Delaware courts also have found monetary consideration paid in severance agreements in exchange for a covenant-notto-compete to be adequate.230 In Weichert Co. of Pennsylvania v. Young,231 involving an at-will management employee of a real estate sales business, there were two restrictive covenants at issue: one signed during the defendant’s employment and one signed at termination as part of a severance agreement. The terms of the restrictive covenants in both agreements were identical. The court held the covenant

signed at termination to be valid because as part of the severance agreement the employee received a total of $29,533.69, which included a $10,000 bonus, $7,341.39 in severance pay, $4,500 for a recruiting bonus, and $7,692.32 for three weeks’ salary and two weeks’ vacation.232 Similarly, in Reiman Associates, Inc. v. R/A Advertising, Inc.,233 a Wisconsin appellate court held that payment of $180,000 constituted adequate consideration for a covenant not to compete in the advertising business.234 B. Job Benefits A raise in salary, a longer lunch break, time off of work, and permission to stop using the time clock to record the employees’ work hours also may constitute adequate consideration.235 For example, in Stephen L. LaFrance Pharmacy, Inc. v. Tallant,236 the U.S. District Court, Northern District of Mississippi, held that a $400 increase in monthly base pay constituted adequate consideration for a restrictive covenant.237 In Central Adjustment Bureau, Inc. v. Ingram,238 the Supreme Court of Tennessee held that a change in the terms and conditions of employment or receipt of additional benefits (such as raises and promotions) may constitute sufficient consideration to support a non-compete agreement. 239 Likewise, the Court of Appeals of Wisconsin, in its unpublished opinion of Medrehab of Wisconsin, Inc. v. Johnson,240 held that there was adequate consideration to support a non-compete agreement where the employee signed the agreement after being promised an increase in bonuses and being told that he would not have received the increased bonuses if he refused to sign the agreement.241 In Hawaii, a promotion and salary increase may constitute sufficient consideration for a restrictive covenant.242 Likewise, a Delaware court has held that a

beneficial change in an employee’s status, such as a promotion, constitutes sufficient consideration to support a covenant not to compete agreed to after initiation of employment.243 In Delaware, an increase in salary also may be sufficient consideration to support a restrictive covenant entered into when a company acquires an employee’s employer.244 In Puritan-Bennett v. Richter,245 an employee was given consistent promotions, increased responsibilities, and greater importance in company operations after signing a covenant not to compete. Moreover, the employee had been advised that his continued employment was conditioned upon execution of a noncompete agreement when he signed it. The Kansas Court of Appeals found these benefits to be adequate consideration.246 In Kansas, an increase in salary may also constitute adequate consideration for the restrictive covenant.247 The Court of Appeals of North Carolina also has indicated that changes in pay structure, the rate of compensation, the reimbursement of employee expenses, and vacation and sick leave may be adequate consideration for a restrictive covenant, so long as the benefits are not illusory.248 C. Stock Options In Ohio, the acceptance of stock options in exchange for an executed covenant not to compete has been held to constitute sufficient consideration for a restrictive covenant.249 Stock options were also found to be adequate consideration by the Texas Supreme Court in Marsh USA Inc. v. Cook.250 The court stated that Texas law requires there to be a nexus—that the non-compete agreement be “ancillary to” or “part of” the otherwise enforceable agreement—between the business interest — Continued on next page

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being protected (goodwill, in that case) and the consideration given (stock options).251 D. Miscellaneous Forms of Consideration The Kentucky Court of Appeals in Hodges v. Todd 252 enforced a covenant not to compete where the value of a business’s goodwill was a significant portion of the sale of the business and the party bound by the restrictive covenant was the seller of the business who stayed on as an employee of the company that was sold. In that case, the employee agreed to not compete with the employer’s business for a period of five years from the date of sale of the business. In less than seven months from the date of sale, and before the termination of the employment relationship, the employee opened a competing business about 100 feet from the employer’s business location.253 The court of appeals held that the trial court had the authority to enforce the non-compete agreement.254 In Calhoun v. Everman,255 the Kentucky Court of Appeals noted that an employer’s detrimental reliance on an employee’s promise not to compete at the time the employer bought out a competitor was sufficient consideration to support the restrictive covenant.256 Other states have found support for restrictive covenants in unconventional forms of consideration as well. For example, the Kansas Court of Appeals has considered forbearance from suing to recover damages to be good consideration for a covenant not to compete.257 In Wior v. Anchor Industries, Inc.,258 an Indiana court noted that an employee’s

giving up a competing business with good future prospects, along with incurring the expense of relocating to another town, could constitute adequate consideration for an employment contract that could be terminated for cause only.259 The business that the employee gave up, however, must have been one that the employee relied upon and planned to continue to rely upon for income.260 Moving Forward with Restrictive Covenants There is little question that employers and those practitioners who advise employers regarding restrictive covenants should be mindful of Fifield and the subsequent decisions that have interpreted Illinois law to require two years of continued employment as a bright-line rule. Creative draftsmanship, however, might allow employers to continue to use restrictive covenants to protect their legitimate business interests, customer base, and confidential information. Illinois courts seem willing to consider something other than two years of continued employment as consideration, under the right circumstances. The key seems to be to craft the agreement to make clear that the proffered consideration is neither illusory nor essentially the same as a benefit that the employee is receiving already. As it appears that the burden of proof will be on the employer, employers should ensure that the proffered consideration is stated explicitly in the employment agreement, that it is a benefit that will accrue regardless of the length of employment, and that the existence of the benefit and the fact that it has accrued can be proven.

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(Endnotes) Ruth Simon & Angus Loten, Litigation Over Noncompete Clauses is Rising, Wall St. J., Aug. 14, 2013, http://online.wsj.com/news/ articles/SB1000142412788732344640457901 1501388418552. 1

2



Id.

3



Id.

Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871. 4

Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327. 5

See La. Rev. Stat. Ann. § 23:921 (2010); Or. Rev. Stat. § 653.295 (2008); S.D. Codified Laws § 53-9-11; Tex. Bus. & Com. Code Ann. § 15.50 (West 2009); Wis. Stat. § 103.465 (1998); Olsten Corp. v. Sommers, 534 F. Supp. 395 (D. Ore. 1982); Nobles-Hamilton v. Thompson, 883 So. 2d 1247 (Ala. Civ. App. 2003); Optical Partners, Inc. v. Dang, 381 S.W.3d 46 (Ark. 2011); Singh v. Batta Envtl. Assoc., Inc., No. Civ. A. 19627, 2003 WL 21309115 (Del. Ch. May 21, 2003) (unpublished opinion); Atlanta Bread Co. Int’l, Inc. v. Lupton-Smith, 679 S.E.2d 722 (Ga. 2009); Ackermann v. Kimball Int’l, Inc., 652 N.E.2d 507 (Ind. 1995); Varney Bus. Servs., Inc. v. Pottroff, 59 P.3d 1003 (Kan. 2002); Mendell v. Golden-Farley of Hopkinsville, Inc., 573 S.W.2d 346 (Ky. Ct. App. 1978); Ecology Servs., Inc. v. Clym Envtl. Servs., LLC, 952 A.2d 999 (Md. Ct. Spec. App. 2008); Timber Lake Foods, Inc. v. Estess, 72 So. 3d 521 (Miss. Ct. App. 2011); A.B. Chance Co. v. Schmidt, 719 S.W.2d 854 (Mo. Ct. App. 1986); Mont. Mountain Prods. v. Curl, 112 P.3d 979 (Mont. 2005); Ellis v. McDaniel, 596 P.2d 222 (Nev. 1979); B.O. Tech., L.L.C. v. Dray, 970 N.Y.S.2d 668 (Sup. Ct. 2013); Phelps Staffing LLC v. S.C. Phelps, Inc., 720 S.E.2d 785 (N.C. Ct. App. 2011); WellSpan Health v. Bayliss, 869 A.2d 990 (Pa. Super. Ct. 2005); Baugh v. Columbia Heart Clinic, P.A., 738 S.E.2d 480 (S.C. Ct. App. 2013); Columbus Med. Servs., LLC v. Thomas, 308 S.W.3d 369 (Tenn. Ct. App. 2009); Simmons v. Miller, 544 S.E.2d 666 (Va. 2001). 6

See Or. Rev. Stat. § 653.295 (2008); Tex. Bus. & Com. Code Ann. § 15.50 (2009); Wis. Stat. § 103.465 (1998); Nobles-Hamilton, 883 So. 2d at 1249; Optical Partners, Inc., 381 S.W.3d at 53; Singh, 2003 WL 21309115, at *7; Atlanta Bread Co. Int’l, Inc., 679 S.E.2d at 7

724; Varney Bus. Servs., Inc., 59 P.3d at 1017; A.B. Chance Co, 719 S.W.2d at 857; B.O. Tech., L.L.C., 970 N.Y.S.2d at 673; Phelps Staffing LLC, 720 S.E.2d at 792; WellSpan Health, 869 A.2d at 999; Baugh, 738 S.E.2d at 486; Columbus Med. Servs., LLC, 308 S.W.3d at 384; Simmons, 544 S.E.2d at 678.

Fla. Stat. § 542.335 (1996).

8

See Fla. Stat. § 542.335 (1996); Farm Credit Servs. of N. Cent. Wis., ACA v. Wysocki, 627 N.W.2d 444 (Wis. 2001); Clark v. Liberty Nat’l Life Ins. Co., 592 So. 2d 564 (Ala. 1992); Devnew v. Flagship Grp., Ltd., 75 Va. Cir. 436 (2006); Mercy Health Sys. of Nw. Ark., Inc. v. Bicak, 383 S.W.3d 869 (Ark. App. 2011); Beard Research, Inc. v. Kates, 8 A.3d 573 (Del. Ch. 2010); Wichita Clinic, P.A. v. Louis, 185 P.3d 946 (Kan. Ct. App. 2008); Liberty Ashes, Inc. v. Taormina, 43 Misc. 3d 1213(A) (N.Y. Sup. Ct. 2014) (unreported disposition); Market Am., Inc. v. Christman-Orth, 520 S.E.2d 570 (N.C. Ct. App. 1999); N. Pac. Lumber Co. v. Moore, 551 P.2d 431 (Or. 1976); Wolfe v. Colonial Life & Accident Ins. Co., 420 S.E.2d 217 (S.C. Ct. App. 1992). 9

See Unisource Worldwide, Inc. v. Swope, 964 F. Supp. 2d 1050 (D. Ariz. 2013); Clark’s Sales & Serv., Inc. v. Smith, 4 N.E.3d 772 (Ind. Ct. App. 2014); Beverage Sys. of the Carolinas, LLC v. Ass’n Beverage Repair, LLC, No. COA14-185, 2014 WL 3823714 (N.C. Ct. App. Aug. 5, 2014). 10

See CAE Vanguard, Inc. v. Newman, 518 N.W.2d 652 (Neb. 1994); see also Brainware, Inc. v. Mahan, 808 F. Supp. 2d 820, 829 n.2 (E.D. Va. 2011). 11

See Sentinel Integrity Solutions, Inc. v. Mistras Grp., Inc., 414 S.W.3d 911 (Tex. Ct. App. 2013); see also Brown & Brown, Inc. v. Ali, 592 F. Supp. 2d 1009 (N.D. Ill. 2009); L & B Transp., LLC v. Beech, 568 F. Supp. 2d 689 (M.D. La. 2008). 12

See Lapolla Indus., Inc. v. Hess, 750 S.E.2d 467 (Ga. Ct. App. 2013); Brown & Brown, Inc. v. Johnson, 980 N.Y.S.2d 631 (App. Div. 2014); see also Tradesman Int’l, Inc. v. Black, 724 F.3d 1004, 1007 (7th Cir. 2013). 13

Cal. Bus. & Prof. Code §§ 16600–16601 (West 2008); N.D. Cent. Code § 9-08-06 (1943). 14

Cal. Bus. & Prof. Code §§ 16600–16601 (West 2008); N.D. Cent. Code § 9-08-06 (1943). 15

See infra text accompanying notes 20-28.

16

Steven Greenhouse, Noncompete Clauses Increasingly Pop Up in Array of Jobs, N.Y. Times, June 8, 2014, at B1, http://www.nytimes. com/2014/06/09/business/noncompeteclauses-increasingly-pop-up-in-array-of-jobs. html?_r=0. 17

18

Id.

19

Id.

Sunbelt Rentals, Inc., 394 Ill. App. 3d at 422–23.

Id.; Gillis Bernard, Non-Competes Are Here to Stay in Mass. – At Least for Now, BostInno, July 31, 2014, http://bostinno.streetwise. co/2014/07/31/noncompetes-massachusettsnon-competes-are-here-to-stay-in-mass-atleast-for-now. Kyle Alspach, Compromise Hinted Over Noncompete Agreements, B oston G lobe , July 1, 2014, http://www.bostonglobe. com/business/2014/07/01/noncompete/ DJSb4Hl1kSyDzmD9sOv9NI/story.html. 21

22

Id.

23

Bernard, supra note 20.

24

Minn. H.F. 506, 88th Leg. (2013).

Gen. Assemb. 3970, 215th Leg., Reg. Sess. (N.J. 2013). 25

Minn. House of Rep., HF 506 Status in the House for the 88th Legislature (2013–2014), https://www.revisor.mn.gov/bills/bill.php?v iew=chrono&f=HF506&y=2013&ssn=0&b =house (last visited Nov. 9, 2014); Text and Status of Gen. Assemb. 3970, 215th Leg., Reg. Sess. (N.J. 2013) published by N.J. Legis. (noting that the bill is pending before the legislature), http://www.njleg.state.nj.us/2012/ Bills/A4000/3970_I1.HTM (last visited Nov. 9, 2014). 26

28

Id.

42

Id. at 425.

43

Id. at 427.

44

Id.

45

Id.

46

Id. at 426–27 (quoting Nationwide Adver. Serv., Inc. v. Kolar, 28 Ill. App. 3d 671, 673 (1st Dist. 1975)). 47

Kolar, 28 Ill. App. 3d at 672.

48

Id. at 673.

49

Sunbelt Rentals, Inc., 394 Ill. App. 3d at 426–28. 50

Id at 428.

51

Id.

52

Steam Sales Corp. v. Summers, 405 Ill. App. 3d 442 (2d Dist. 2010), overruled by Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871, ¶ 30. 53

Steam Sales Corp., 405 Ill. App. 3d at 445.

54

Id.

55

Id.

Id.

Id.

Hursen, 162 Ill. at 381.

Mohanty, 225 Ill. 2d at 65. Id. at 69.

35

Id. at 76.

Id.

59

Id. at 452. Id. at 453.

61

Id. at 456.

62

Id. at 459.

63

Id.

34

Id. at 446.

58

60

Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52 (2006).

Id. at 456–57 (quoting The Agency, Inc. v. Grove, 362 Ill. App. 3d 206, 214 (2d Dist. 2005)). 64

Bauer v. Sawyer, 8 Ill. 2d 351, 355 (1956), quoted by House of Vision, Inc. v. Hiyane, 37 36

Id.

41

57

31

33

Id. at 424.

40

N.H. Rev. Stat. Ann. § 275:70 (2014).

See Hursen v. Gavin, 162 Ill. 377, 381 (1986).

32

Id. at 423.

39

56

29

30

Sunbelt Rentals, Inc. v. Ehlers, 394 Ill. App. 3d 421 (4th Dist. 2009), overruled by Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871, ¶ 29. 37

38

20

27

Ill. 2d 32, 37 (1967), quoted in Mohanty, 225 Ill. 2d at 65.

Id. at 457–59.

65

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Id. at 457–58.

95

Id.

120

Id. at 457.

96

Id.

121

Id.

97

Id. ¶ 5.

Id. at 458.

98

Id. ¶ 6.

Id.

99

Id.

Id.

100

122

Id.

101

Bires v. WalTom, LLC, 662 F. Supp. 2d 1019 (N.D. Ill. 2009).

123

66 67 68 69 70 71 72

Id. at 458–61.

73

Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871, ¶ 18. 74

Reliable Fire Equip., 2011 IL 111871, ¶ 23.

75

See, e.g., Steam Sales Corp., 405 Ill. App. 3d 442; Sunbelt Rentals, Inc. v. Ehlers, 394 Ill. App. 3d 421 (4th Dist. 2009). 76

Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871. 77

Reliable Fire Equip., 2011 IL 111871, ¶¶ 3–7. 78

Id. ¶ 8.

79

Id. ¶¶ 13, 45–48.

80

Id. ¶¶ 17–24, 28–30 (citing Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52 (2006); Cockerill v. Wilson, 51 Ill. 2d 179 (1972); House of Vision, Inc. v. Hiyane, 37 Ill. 2d 32 (1967); Bauer v. Sawyer, 8 Ill. 2d 351 (1956); and Hursen v. Gavin, 162 Ill. 377 (1896)). 81

Reliable Fire Equip., 2011 IL 111871, ¶ 42.

82

Id. ¶ 29 (citing Mohanty, 225 Ill. 2d at 77).

83

Id. ¶¶ 28, 30 (overruling Sunbelt Rentals, Inc. v. Ehlers, 394 Ill. App. 3d 421, 430 (2009), and Steam Sales Corp. v. Summers, 405 Ill. App. 3d 442 (2010)). 84

Id. (citing Nationwide Adver. Serv., Inc. v. Kolar, 28 Ill. App. 3d 671, 673 (1st Dist. 1975)). 85

Id.

86

Id. ¶ 43.

87

Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327. 88

Fifield, 2013 IL App (1st) 120327, ¶ 3.

89

Id.

90

Id. ¶¶ 17–18.

Fifield, 2013 IL App (1st) 120327, ¶ 17 (citing Curtis 1000, Inc. v. Suess, 24 F.3d 941, 947 (7th Cir. 1994)). 102

Id. ¶ 18 (citing Lifetec, Inc. v. Edwards, 377 Ill. App. 3d 260, 263 (4th Dist. 2007)). 103

Id. ¶ 19.

104

Id.

105

Id.

106

Chad W. Moeller and William J. Tarnow II, Non-Compete Agreements: Lessons from Illinois Courts, Nat’l L. Rev., available at http://www.natlawreview.com/print/article/ non-compete-agreements-lessons-illinoiscourts (last visited Oct. 31, 2014). 107

Lawrence & Allen, Inc. v. Cambridge Human Res. Grp., Inc., 292 Ill. App. 3d 131 (2d Dist. 1997). 108

Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724 (3d Dist. 2008). 109

Diederich Ins. Agency, LLC v. Smith, 2011 IL App (5th) 100048. 110

Lawrence & Allen, Inc., 292 Ill. App. 3d at 138. 111

Id. at 133–34.

112

Id.

113

Id. at 135.

114

Id. at 138 (citing McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045, 1055 (1st Dist. 1985)). 115

Id. (citing Agrimerica, Inc. v. Mathes, 199 Ill. App. 3d 435, 442 (1st Dist. 1990), abrogated on other grounds by Roy v. Coyne, 259 Ill. App. 3d 269, 279–82 (1st Dist. 1994)). 116

Id. at 144.

Id.

117

Id.

118

91 92

Id.

93

Id. ¶ 4.

94

Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 729 (3d Dist. 2008). Brown & Brown, Inc., 379 Ill. App. 3d at 726. 119

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Id.

Id. at 728 (citing McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045, 1055 (1st Dist. 1985) (finding employment of two years and two weeks to be adequate consideration for a two-year non-compete agreement)). Id. at 729 (citing Lawrence & Allen, Inc., 292 Ill. App. 3d at 138). Id. (citing Mid-Town Petroleum, Inc. v. Gowen, 243 Ill. App. 3d 63, 69–71 (1st Dist. 1993)). The dissent in Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 730 (3d Dist. 2008) (Schmidt, J., dissenting), took issue with the majority’s characterization of the holding in the Mid-Town Petroleum case for the proposition that the fact that Gunderson quit was irrelevant and should not change the analysis. In Mid-Town Petroleum, the defendant employee Robert Gowen had worked for the plaintiff for 14 years before a new president and CEO demanded that employees (under the threat of termination) sign an employment agreement that included an 18-month non-solicitation agreement. Mid-Town Petroleum, Inc., 243 Ill. App. 3d at 64–65. Gowen initially refused to sign the agreement. He was then offered a sales manager position and would report directly to the CEO. Based on this arrangement and after reaching an agreement as to the description of the sales manager position, Gowen signed the employment agreement. Id. at 65. About seven months later, Gowen was informed that he would no longer be reporting to the CEO, would be reporting to a vice president, and would no longer have responsibility for salesmen. Id. at 65–66. The day after being informed of the change, Gowen quit his position with the plaintiff, and within the month began working for a competitor and soliciting business from the plaintiff’s customers. Id. at 64–66. The court in that case held that there was insufficient consideration to support the restrictive covenant in the employment agreement signed by Gowen, because the promises made by the plaintiff under which the agreement was signed were changed unilaterally by the plaintiff. Id. at 69–70. The dissent in Brown and Brown, in criticizing the majority’s decision not to consider the circumstances under which Gunderson quit as relevant to the determination, pointed to the circumstances under which Gowen quit his position in the Mid-Town Petroleum case. Brown & Brown, Inc., 243 Ill. App. 3d at 730 (Schmidt, J., dissenting).

The dissent noted that Gowen quit because the consideration for his agreement failed, while Gunderson in the Brown and Brown case merely quit. The dissent pointed out that the majority went a step further to hold that the consideration failed because Gunderson quit, and noted that those circumstances were a big difference from the circumstances under which Gowen quit. Id. at 730–31. Accordingly, the dissent concluded that Gunderson’s continued employment should have constituted adequate consideration. Id. at 730. The dissent predicted: “To hold, as the majority does here, that an employee can void the consideration for any restrictive covenant by simply quitting for any reason renders all restrictive employment covenants illusory in this state. They would all be voidable at the whim of the employee.” Id. Brown & Brown, Inc., 379 Ill. App. 3d at 729. Notably, the facts of the Brown and Brown case are very similar to those of Fifield. They both involved the purchase of the employee’s employer and the requirement that the employee sign a two-year restrictive covenant as a result of the sale. The employees then shortly thereafter resigned voluntarily. Interestingly, the Brown and Brown decision is the only one that the Fifield court took the time to explain the facts and holding in detail. Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327, ¶¶ 15–16. Given the similarities in the cases, it is not surprising that the Fifield court ruled the way it did, but one must consider whether the court fully developed its language that has led commentators and other courts to conclude that there is a black-line requirement of two years of continued employment for adequate consideration for a restrictive covenant. 124

Diederich Ins. Agency, LLC v. Smith, 2011 IL App (5th) 100048, ¶ 3. 125

Diederich Ins. Agency, LLC, 2011 IL App (5th) 100048, ¶ 4. 126

Id. ¶ 5.

127

Id. ¶ 6.

128

Id. ¶ 10. In limiting its determination to whether the consideration was adequate for the second non-solicitation agreement, the appellate court in Diederich Insurance made a notable distinction. Because the claim was brought under the non-compete agreement signed while Smith was employed and not under the original employment agreement (which did not contain a restrictive covenant), the claim was 129

one to enforce a restrictive covenant. Id. This distinction is significant, because it changes the court’s analysis. Generally, courts do not inquire into the adequacy of consideration, but rather determine whether it exists. Brown & Brown, Inc., 379 Ill. App. 3d at 728. In the context of postemployment restrictive covenants, however, Illinois courts have departed from that traditional rule because the courts have recognized that a promise of continued at-will employment could be an illusory benefit. Id. Therefore, the fact that the claim in Diederich Insurance was brought under the second agreement required the court to shift its analysis from whether consideration merely existed to whether it existed and was adequate. Diederich Ins. Agency, LLC, 2011 IL App (5th) 100048, ¶¶ 8, 10. 130

Id. ¶¶ 12–13.

Id. at *7 (citing Diederich Ins. Agency, LLC v. Smith, 2011 IL App (5th) 10004, ¶ 12). 146

Id.

147

Klein Tools, Inc. v. Stanley Black & Decker, Inc., No. 13 CH 13975, 2013 WL 6149305 (Ill. Cir. Ct. Oct. 16, 2013). 148

Klein Tools, Inc., 2013 WL 6149305, at *2.

149

Id. at *1.

150

Id. (quoting the plaintiff’s Amended Verified Complaint ¶ 25). 151

Id. at *1–*2.

152

Id. at *2.

153

Id. at *2 (quoting Fifield v. Premier Dealer Servs., 2013 IL App (1st) 120327, ¶ 19). 154

Id.

155

131

156

Id. ¶ 12 (citing White v. Vill. of Homewood, 256 Ill. App. 3d 354, 356–57 (1st Dist. 1993)).

157

Id. at *3.

132

Id. ¶ 15.

133

Vapor 4 Life, Inc., 2013 WL 6631082, at *1. 158

Id. ¶ 13.

134

Id. ¶ 15 (citing Corroon & Black of Ill., Inc. v. Magner, 145 Ill. App. 3d 151, 163 (1st Dist. 1986) (four years sufficient); Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 729 (3d Dist. 2008) (seven month insufficient), and Mid-Town Petroleum, Inc. v. Gowen, 243 Ill. App. 3d 63, 70–71 (1st Dist. 1993) (seven months insufficient)). 135

Diederich Ins. Agency, LLC, 2011 IL App (5th) 100048, ¶ 15 (citing Lawrence & Allen, Inc. v. Cambridge Human Res. Grp., Inc., 292 Ill. App. 3d 131 (2d Dist. 1997)). 136

Id.

137

Novas, Dohr & Coll OB/Gyn Assocs., S.C. v. Keith, No. 2013 CH 07568, 2013 WL 5409730 (Ill. Cir. Ct. Aug. 7, 2013). 138

Novas, 2013 WL 5409730, at *2, *7.

139

Id. at *2.

140

Id.

141

Id. at *3.

142

Id.

143

Id. at *4.

144

Id. at *6 (citing Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327, ¶¶ 14, 19). 145

Vapor 4 Life, Inc. v. Nicks, No. 2013 CH 14827, 2013 WL 6631082 (Ill. Cir. Ct. Dec. 3, 2013).

Id. (quoting Fifield, 2013 IL App (1st) 120327, ¶ 19). 159

Id.

160

Montel Aetnastak, Inc. v. Miessen, 998 F. Supp. 2d 694, 702 (N.D. Ill. 2014). 161

Montel Aetnastak, Inc., 998 F. Supp. 2d at 702. 162

Id.

163

Id. at 703.

164

Id.

165

Id. at 703–04, 715.

166

Id. at 715.

167

Id. at 716.

168

Id. The federal court in Montel Aetnastak, Inc. v. Miessen, 998 F. Supp. 2d 694, 716 (N.D. Ill. 2014), cited to Mid-Town Petroleum, Inc. v. Gowen, 243 Ill. App. 3d 63 (1st Dist. 1993), in support of the proposition that employment for a year has been considered a “substantial period” of employment. The Mid-Town Petroleum court stated: “Although not directly addressing the issue of consideration, other Illinois courts have enforced restrictive covenants entered into after employment began where the employee 169

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continued in the job for a substantial period.” Mid-Town Petroleum, Inc., 243 Ill. App. 3d at 69 (citing Cockerill v. Wilson, 51 Ill. 2d 179, 181, 185 (1972) (enforcing an agreement with a five-year non-compete period, where the agreement was effective on January 1, 1967 and terminated at the end of January 1968, but basing its decision on whether the scope of the restrictions was reasonable); and Shorr Paper Prods., Inc. v. Frary, 74 Ill. App. 3d 498, 500–01, 508 (2d Dist. 1979) (enforcing an agreement with a one-year non-compete period, where the agreement was signed on November 16, 1977, and terminated on November 20, 1978, but basing its decision on whether the scope of the restrictions was reasonable)). Montel Aetnastak, Inc., 998 F. Supp. 2d at 716 (quoting Woodfield Grp., Inc. v. DeLisle, 295 Ill. App. 3d 935, 943 (1st Dist. 1998) (expressing no opinion as to the adequacy of the defendant’s 17 months of continued employment after signing an agreement that contained an 18-month non-solicitation period, but opining that the case law does not limit the court to a numerical formula to determine what constitutes continued employment and that other factors, such as whether the employee or employer terminated the agreement, might need to be considered)). 170

McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045 (1st Dist. 1985). 171

Montel Aetnastak, Inc., 998 F. Supp. 2d at 716 (citing McRand, Inc., 138 Ill. App. 3d at 1055–56). 172

Id.

182

Prairie Rheumatology Assocs., S.C. v. Francis, 2014 IL App (3d) 140338. 183

Prairie Rheumatology Assocs., S.C., 2014 IL App (3d) 140338, ¶ 16. 184

Id. ¶ 1.

185

Id. ¶¶ 2–3.

186

Id. ¶¶ 3–4.

187

Id. ¶ 2.

188

Id. ¶ 3.

189

Id. ¶ 5.

190

Id. ¶ 6.

191

Id. ¶ 7.

192

Id. ¶¶ 1, 9.

193

Id. ¶ 9 (citing Reliable Fire Equip. Co. v. Arredondo, 2011 IL 111871, ¶ 17). 194

Id. ¶¶ 1, 11.

195

Id. ¶ 13 (citing Lawrence & Allen, Inc. v. Cambridge Human Res. Grp., Inc., 292 Ill. App. 3d 131, 137 (2d Dist. 1997)). 196

Id. ¶ 14 (citing McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045, 1055 (1st Dist. 1985)). 197

Id. ¶¶ 14–15 (citing Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327, ¶ 19). 198

Id. ¶ 16 (citing Fifield, 2013 IL App (1st) 120327, ¶ 19). 199

Instant Tech., LLC, 2014 WL 1759184, at *14. 176

Id. at *4.

177

Id. at *13.

Id. The defendants started their employment on different dates—March 24, 2010, June 17, 2010, and “March of 2011.” Id. at *3. One defendant was terminated on January 3, 2012, one was terminated on January 5, 2012, and one resigned on January 5, 2012. Id. at *13. 178

179

Id. at *1, *6.

180

Id. at *1.

181

Id. at *14.

Melena v. Anheuser-Busch, Inc., 219 Ill. 2d 135 (2006). Woodfield Grp., Inc. v. DeLisle, 295 Ill. App. 3d 935 (1st Dist. 1998). 208

Melena, 219 Ill. 2d at 152 (citing Woodfield Grp., Inc., 295 Ill. App. 3d at 942–43; Lawrence & Allen, Inc., 292 Ill. App. 3d at 131; and McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045, 1055 (1st Dist. 1985)). 209

210

Id. ¶ 19.

See supra text accompanying notes 148–56; see also Gallagher Bassett Servs., Inc. v. Vacala, 2012 IL App (2d) 111175-U, ¶ 23 (declining to extend Illinois law to provide that access to confidential information can constitute adequate consideration for a restrictive agreement in lieu of continued employment for a substantial period). 203

The court in Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 728–29 (3d Dist. 2008), stated: “Illinois courts have generally held that two years or more of continued employment constitutes adequate consideration. See Lawrence & Allen, Inc., 292 Ill. App. 3d at 138.” The court in Diederich Insurance Agency, LLC v. Smith, 2011 IL App (5th) 100048, ¶ 15, stated: “However, in general, 204

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See supra text accompanying notes 111–17.

Woodfield Grp., Inc., 295 Ill. App. 3d at 936–37, 942–43. The defendant-employee, Donna DeLisle, executed the restrictive covenant agreement in “February 1994,” and voluntarily resigned on July 18, 1995. Id. at 936–37. 211

212

Id. at 943.

213

Id. at 942.

Fifield, 2013 IL App (1st) 120327, ¶ 19 (emphasis added). 214

Id. ¶ 18.

Instant Tech., LLC v. DeFazio, No. 12 C 491, 2014 WL 1759184 (N.D. Ill. May 2, 2014).

Id.

207

216

202

175

206

215

201

Id.

Fifield v. Premier Dealer Servs., Inc., 2013 IL App (1st) 120327, ¶ 14 (emphasis added) (citing Brown & Brown, Inc., 379 Ill. App. 3d at 728–29). 205

Id. ¶ 17.

200

173 174

there must be at least two years or more of continued employment to constitute adequate consideration. See Lawrence & Allen, Inc. v. Cambridge Human Res. Grp., Inc., 292 Ill. App. 3d [at] 138.”

Id.

Adequate consideration was found in the following cases: Lawrence & Allen, Inc. v. Cambridge Human Res. Grp., Inc., 292 Ill. App. 3d 131 (2d Dist. 1997) (about 2½ years of continued employment held to be adequate consideration for a two-year restrictive covenant); Agrimerica, Inc. v. Mathes, 199 Ill. App. 3d 435, 442 (1st Dist. 1990) (about two years and three months of continued employment held to be adequate consideration for a two-year restrictive covenant); Corroon & Black of Ill., Inc. v. Magner, 145 Ill. App. 3d 151, 163 (1st Dist. 1986) (four years of continued employment held to be adequate consideration for a two-year restrictive covenant); McRand, Inc. v. van Beelen, 138 Ill. App. 3d 1045, 1055 (1st Dist. 1985) (about two years and two weeks of continued employment held to be adequate consideration for a two-year restrictive covenant); Canfield v. Spear, 44 Ill.

2d 49, 50, 53 (1969) (enforcing an agreement with a three-year non-compete period, where the agreement was signed in approximately May 1965 and terminated effective July 1, 1967, but not reaching the issue of the adequacy of consideration); Novas, Dohr & Coll OB/ Gyn Assocs., S.C. v. Keith, No. 2013 CH 07568, 2013 WL 5409730 (Ill. Cir. Ct. Aug. 7, 2013) (six years of continued employment (the employee’s contention that the period of continued employment was only 23 months was rejected) held to be adequate consideration for a two-year postemployment restrictive covenant). Adequate consideration was not found in the following cases: Prairie Rheumatology Assocs., S.C. v. Francis, 2014 IL App (3d) 140338, ¶ 16 (nineteen months of continued employment held to be inadequate consideration for a two-year restrictive covenant); Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 729 (3d Dist. 2008) (seven months of continued employment held to be inadequate consideration for a two-year restrictive covenant); Mid-Town Petroleum, Inc. v. Gowen, 243 Ill. App. 3d 63, 70–71 (1st Dist. 1993) (seven months of continued employment held to be inadequate consideration for a two-year restrictive covenant); Klein Tools, Inc. v. Stanley Black & Decker, Inc., No. 13 CH 13975, 2013 WL 6149305 (Ill. Cir. Ct. Oct. 16, 2013) (eleven months of continued employment held to be inadequate consideration for a two-year restrictive covenant); see also Instant Tech., LLC v. DeFazio, No. 12 C 491, 2014 WL 1759184 (N.D. Ill. May 2, 2014) (federal court holding that less than two years of continued employment was inadequate consideration for a two-year restrictive covenant); Vapor 4 Life, Inc. v. Nicks, No. 2013 CH 14827, 2013 WL 6631082 (Ill. Cir. Ct. Dec. 3, 2013) (Illinois circuit court holding that less than two years of continued employment was inadequate consideration, but the duration of the restrictive covenant was not stated in the opinion). 217

See supra text accompanying notes 161–73. Another noteworthy case that enforced a restrictive covenant of more than two years without having at least two years of continued employment is the Illinois Supreme Court case of Cockerill v. Wilson, 51 Ill. 2d 179, 181 (1972). Although not reaching the issue of consideration, the supreme court in Cockerill enforced an employment agreement containing a five-year non-compete period on the basis that 218

the scope of the restrictions was reasonable, where the agreement was effective on January 1, 1967, and terminated just over a year later, at the end of January 1968, by the employee’s discharge from the employer. Cockerill, 51 Ill. 2d at 181, 185. Montel Aetnastak, Inc. v. Miessen, 998 F. Supp. 2d 694, 716 (N.D. Ill. 2014). 219

In LKQ Corp. v. Thrasher, 785 F. Supp. 2d 737, 739, 744 (N.D. Ill. 2011), the federal court held that a period of continued employment of about 12 months was adequate consideration for a one-year restrictive covenant, while rejecting the mechanical application of a bright-line test “that, in certain situations, may have pernicious consequences.” In Shorr Paper Prods., Inc. v. Frary, 74 Ill. App. 3d 498, 500–01, 508 (2d Dist. 1979), the Illinois Appellate Court Second District enforced an agreement with a one-year non-compete period, where the agreement was signed on November 16, 1977, and terminated on November 20, 1978, but the court did not reach the issue of adequate consideration because it based its decision on whether the scope of the restrictions was reasonable. As discussed above, the court in Woodfield Grp., Inc. v. DeLisle, 295 Ill. App. 3d 935, 942–43 (1st Dist. 1998), remanded the issue to the circuit court of whether 17 months of continued employment constituted adequate consideration for an 18-month restrictive covenant. See supra text accompanying notes 211–13. 220

In Diederich Insurance Agency, LLC v. Smith, 2011 IL App (5th) 100048, the appellate court held that three months of continued employment did not constitute adequate consideration for a one-year restrictive covenant. See supra text accompanying notes 125–37. Three months of continued employment, however, cannot reasonably be held to be nearly equivalent to the one-year period of the restrictive covenant at issue in that case. 221

Prairie Rheumatology Assocs., S.C. v. Francis, 2014 IL App (3d) 140338, ¶¶ 17–18. 222

Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 729 (3d Dist. 2008). 223

Klein Tools, Inc. v. Stanley Black & Decker, Inc., No. 13 CH 13975, 2013 WL 6149305, at *3 (Ill. Cir. Ct. Oct. 16, 2013). 224

Instant Tech., LLC v. DeFazio, No. 12 C 491, 2014 WL 1759184, at *14 (N.D. Ill. May 2, 2014). 225

McCandless v. Carpenter, 848 P.2d 444, 446–47 (Idaho Ct. App. 1993). 226

The Supreme Court of Kentucky in Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345, 354 (Ky. 2014), has held that continued at-will employment alone is not consideration for a restrictive covenant. In that case, the employer asked its existing employee to sign a “Conflicts of Interests” agreement, which restricted the employee’s ability to work for a competing company for three years after the termination of his employment with his employer. Charles T. Creech, Inc., 422 S.W.3d at 347. The employer conceded that the only consideration it offered to the employee was his continued employment. Id. The employee signed the contract, but resigned his employment to take a job with a competitor about two years and four months later. Id. at 347–48. The employer sued the employee for compensatory and punitive damages, as well as injunctive relief. Id. at 349. Although the court held that continued at-will employment was no consideration at all, it suggested that a promotion, increased wages, and specialized training would be adequate consideration for a restrictive covenant. Id. at 354. See also Runzheimer Int’l, Ltd. v. Friedlen, No. 2013AP1392, 2014 WL 1465157 (Wis. Ct. App. Apr. 15, 2014) (certifying the following question to the Wisconsin Supreme Court: “Is consideration in addition to continued employment required to support a covenant not to compete entered into by an existing at-will employee?”), cert. granted, 848 N.W.2d 861. Idaho has legislated the issue. If the post-employment restriction is more than 18 months, the statute requires “consideration, in addition to employment or continued employment.” Idaho Code § 44-2704(1). Prior to the enactment of the statute in 2008, the Idaho Court of Appeals in Insurance Associates Corp. v. Hansen, 723 P.2d 190, 191–92 (Idaho Ct. App. 1986), held that a two-year restrictive covenant signed 20 months after employment began was supported by adequate consideration because the employee worked another eight months after signing the agreement but would have been terminated if he had not signed it. 227

Pocatello Dental Grp., P.C. v. Interdent Serv. Corp., Case No. CV 03-450-3-LMB, 2005 WL 1041398 (D. Idaho Apr. 7, 2005) (unpublished decision). 228

Pocatello Dental Grp., P.C., 2005 WL 1041398, at *15. 229

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Delaware Express Shuttle, Inc. v. Older, No. Civ. A. 19596, 2002 WL 31458243, *11 (Del. Ch. 2002) (unpublished decision). 230

Weichert Co. of Pa. v. Young, No. 2223VCL, 2007 WL 4372823 (Del. Ch. 2007). 231

Weichert Co. of Pa., 2007 WL 4372823, at *1–*3. 232

Reiman Assocs., Inc. v. R/A Adver., Inc., 306 N.W.2d 292 (Wis. Ct. App. 1981). 233

Reiman Assocs., Inc., 306 N.W.2d at 297.

234

Cent. Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28 (Tenn. 1984).

249

Cent. Adjustment Bureau Inc., 678 S.W.2d at 35 (applying a fact-specific analysis to determine whether there was adequate consideration for a non-compete agreement). Incidentally, the Central Adjustment Bureau Inc. court also considered (though it was not pivotal to the outcome) the fact that the defendants left their employment voluntarily. Id.

250

239

Medrehab of Wisconsin, Inc. v. Johnson, No. 96-2705, 1998 WL 102213 (Wis. Ct. App. Mar. 11, 1998) (unpublished opinion referenced in table located at 578 N.W.2d 208).

Columbus Med. Equip. Co. v. Watters, 468 N.E.2d 343, 345–46 (Ohio Ct. App. 1983); see also, e.g., Gillett Commc’ns of Milwaukee, Inc. v. Feldmeyer, No. 90-0724, 1990 WL 250403 (Wis. Ct. App. Nov. 6, 1990) (unpublished opinion referenced in table located at 464 N.W.2d 680) (noting that each time the defendant employee signed an employment agreement with a more stringent covenant against competition, the agreement provided the defendant with additional benefits).

240

236

Stephen L. LaFrance Pharmacy, Inc. v. Tallant, No. 97 CV 104-B-A, 1997 WL 392736 (N.D. Miss. June 25, 1997).

244

Stephen L. LaFrance Pharmacy, Inc., 1997 WL 392736, at *4. Interestingly, the court in Stephen L. LaFrance Pharmacy, Inc. v. Tallant, No. 3:97CV104-B-A, 1997 WL 392736, *4 (N.D. Miss. June 25, 1997), also held that the defendant’s continued employment alone constituted sufficient consideration, “particularly in light of the fact that she had signed a more restrictive covenant not to compete at the outset of her employment.” Notably, this holding is directly opposite of the conclusion reached in the Diederich Insurance case, where the Illinois appellate court did not consider continued employment to be sufficient consideration, despite the fact that the period during which the restriction applied was reduced by a year. Diederich Ins. Agency, LLC v. Smith, 2011 IL App (5th) 100048, ¶ 12.

245

235

237

Procter & Gamble Co. v. Stoneham, 747 N.E.2d 268, 276 (Ohio Ct. App. 2000).

238

Medrehab of Wisconsin, Inc., 1998 WL 102213, at *1. 241

Marsh USA Inc. v. Cook, 354 S.W.3d 764, 775–76, 780 (Tex. 2011). Marsh USA Inc., 354 S.W.3d at 775. As early as 1951, the Kentucky Court of Appeals has found that the value paid for goodwill as part of the sale of a business to be sufficient consideration to support the enforcement of a non-competition provision in the bill of sale. Ceresia v. Mitchell, 242 S.W.2d 359, 361–62 (Ky. Ct. App. 1951). 251

Hodges v. Todd, 698 S.W.2d 317 (Ky. Ct. App. 1985). 252

Hodges, 698 S.W.2d at 318.

253

Id. at 319.

254

Calhoun v. Everman, 242 S.W.2d 100 (Ky. Ct. App. 1951).

242

Technicolor, Inc. v. Traeger, 551 P.2d 163, 168–69 (Haw. 1976).

255

Faw, Casson & Co. v. Cranston, 375 A.2d 463, 467 (Del. Ch. 1977).

256

243

Hammermill Paper Co. v. Palese, No. 7128, 1983 WL 19786, *3 (Del. Ch. June 14, 1983). Puritan-Bennett Corp. v. Richter, 657 P.2d 589 (Kan. Ct. App. 1983), aff’d as modified, 679 P.2d 206 (Kan. 1984). Puritan-Bennett Corp., 657 P.2d at 592.

246

Uarco Inc. v. Eastland, 584 F. Supp. 1259, 1262 (D. Kan. 1984). 247

Young v. Mastrom, Inc., 392 S.E.2d 446, 448–49 (N.C. Ct. App. 1990) (considering benefits in the form of changes in pay structure, the rate of compensation, the reimbursement of employee expenses, and vacation and sick leave as adequate consideration for a restrictive covenant, but finding the benefits as structured in the case to be illusory, and thus declining to find the benefits to constitute consideration for the restrictive covenant). 248

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Calhoun, 242 S.W.2d at 102–03 (declining to enforce a non-compete agreement, despite acknowledging that detrimental reliance on the employee’s promise not to compete would be sufficient consideration to enforce the promise, because the employer failed to establish its detrimental reliance upon the promise). In 1915, the Supreme Court of New Mexico held that where a purchaser of a business relies on the seller’s promise not to compete as an inducement to purchase the business, the detrimental reliance of the purchaser is sufficient consideration for the seller’s agreement to not compete. Locke v. Murdoch, 151 P. 298, 302 (N.M. 1915). Evco v. Brandau, 626 P.2d 1192, 1196–97 (Kan. Ct. App. 1981) 257

Wior v. Anchor Indus., Inc., 669 N.E.2d 172, 175 (Ind. 1996). 258

Wior, 669 N.E.2d at 175–76.

259

Id. at 176–77.

260

Having found that Nemsky’s claims against the union would survive summary judgment, but his claims against the employer would not, the Seventh Circuit nonetheless affirmed the judgment to both the defendants. Id. at 868. This was because, in a hybrid § 301 claim, the “employee’s claim against the union and his claim against the employer are linked: ‘neither claim is viable if the other fails.’” Id. at 867, citing Crider v. Spectrulite Consortium, 130 F.3d 1238, 1241 (7th Cir. 1997). Similarly, in Yeftich v. Navistar, Inc., 722 F.3d 911, 913 (7th Cir. 2013), a group of employees filed suit against their employer, Navistar, alleging that they were laid off by Navistar and not rehired as work became available because the company had subcontracted their work to nonunion plants in contravention of the relevant CBA. Id. at 913. The plaintiffs filed suit under § 301 alleging breach of the CBA. Id. at 914. Although they did not name the union as the defendant, they alleged a breach of the duty of fair representation on the part of the union. Id. The district court dismissed the claim, finding that the plaintiffs had failed to plead sufficient facts to establish the union’s breach of duty. Id. at 914-15. On review, the Seventh Circuit upheld the dismissal. The court noted that when judged under the applicable standard, the plaintiffs’ conclusory and factually-bare allegations were insufficient to state a claim for breach of the duty of fair representation. Id. at 916-17. “A successful § 301 claim requires not only a breach of contract by the employer but also a breach by the plaintiffs’ union of its duty of fair representation.” Id. at 913. Because the plaintiffs in Yeftich did

not advance a meritorious claim that the union had breached its duty, the dismissal of the lawsuit against the employer was affirmed. Id. at 917. See also, Copeland v. Penske Logistics et al., 675 F.3d 1040, 1044 (7th Cir. 2012), (finding, “Plaintiffs’ argument that Local 135 did not bargain hard enough to get benefits exceeding

and the employer. As in the Nemsky case above, where a claim may exist against the union but fails as to the employer, the entire § 301 claim as to both parties is dismissed. As in the Yeftich case, where a claim may exist against the employer, but fails as to the union, the entire § 301 claim is likewise dismissed.

A successful defense to the cause of action turns on an understanding that the odds of early dismissal in a hybrid § 301 situation depend, to at least some degree, upon a certain level of coordination between the union and employer.

those provided in the CBA is not a claim for breach of contract and therefore can’t be pursued under § 301. . . . To the extent the district court granted summary judgment to the defendants [including the employer] on the hybrid contract/ DFR claim, the judgment is affirmed.”) The above-referenced cases demonstrate the relative difficulty in maintaining jurisdiction in federal courts when pursuing a hybrid theory under § 301 of the LMRA. As an initial matter, the CBA must prevent employees from bringing a claim for relief directly against the employer. Where this is not the case, the jurisdictional exception afforded by the doctrine does not exist. Moreover, even in those narrow circumstances where the basic requirements of the § 301 hybrid theory are satisfied, to prevail the plaintiff must plead a plausible claim for relief (and ultimately prove that claim) against both the union

This unique cause of action brings together two parties who may otherwise experience a certain level of tension: the union and the employer. A successful defense to the cause of action turns on an understanding that the odds of early dismissal in a hybrid § 301 situation depend, to at least some degree, upon a certain level of coordination between the union and employer. Of course, it is not necessary for the union and the employer to join each other’s pleadings, or abandon their own specific defenses. Nonetheless, a certain level of cooperation and transparency during discovery could allow both parties to take advantage of economies of scale in the litigation. This will certainly not always be easy, because the entire claim may have arisen from an underlying conflict between the union and employer in the first place.

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Medical Malpractice Update Dina L. Torrisi and Zeke N. Katz HeplerBroom LLC, Chicago

Medical Record Discovery: Some Things You May Not Know Defense counsel often wear two hats during litigation, one as the seeker of all things discoverable, the other as the protector of their clients from potential claims of physician-patient privilege or Health Insurance Portability and Accountability Act (HIPAA) violations. See 735 ILCS 5/8-802; 45 C.F.R. § 160.101 et seq. (2009) and 45 C.F.R. § 164.102 et seq. (2009). This article outlines certain exceptions that permit disclosure of otherwise privileged non-party records and additional healthcare provider data. It will also identify situations where statutory protections are inapplicable. Obtaining Non-Party Medical Records in Birth Injury Cases The physician-patient privilege provides, “[n]o physician or surgeon shall be permitted to disclose any information he or she may have acquired in attending any patient in a professional character, necessary to enable him or her professionally to serve the patient. . . .” 735 ILCS 5/8-802. As a result, the privilege may bar otherwise relevant and material information from discovery. Kunz v. S. Suburban Hosp., 326 Ill. App. 3d 951, 954-55 (1st Dist. 2001). This barrier to disclosure of pertinent records is a frequent challenge faced by defense counsel in medical malpractice lawsuits. Counsel should be aware of certain exceptions to the physician-patient privilege, which may provide access to otherwise excluded records, including two that are particularly relevant in a 36 | IDC QUARTERLY | First Quarter 2015

medical malpractice setting. First, the physician-patient privilege does not apply in civil actions against a physician for malpractice. 735 ILCS 5/8-802 (exception number two of ten). If the plaintiff places his or her own health at issue, then the plaintiff has waived the physician-patient privilege with respect to his or her medical records regarding that issue. Reagan v. Searcy, 323 Ill. App. 3d 393, 397 (5th Dist. 2001). This waiver is a necessary concession by the plaintiff because a lawsuit could not proceed without disclosure of the medical records at issue. Second, the privilege does not apply when it is waived with the express consent of the patient. 735 ILCS 5/8-802 (exception number three). Even in instances where a party’s medical records are disclosed via waiver, the medical records of non-parties to the lawsuit generally remain protected by the physician-patient privilege. In re D.H., v. Chicago Housing Auth., 319 Ill. App. 3d 771, 774 (1st Dist. 2001). Non-party medical records remain largely protected by the physician-patient privilege because the disclosure of those records “would neither serve a public interest nor the private interests of those non-party patients.” Parkson v. Cent. DuPage Hosp., 105 Ill. App. 3d 850, 855 (1st Dist. 1982). Non-parties have not placed their condition at issue. However, the protection afforded to non-parties is not absolute. Giangiulio v. Ingalls Mem’l Hosp., 365 Ill. App. 3d 823, 832 (1st Dist. 2006). Understanding the privilege’s parameters may provide

access to valuable non-party medical records and other healthcare provider data that may otherwise appear protected. Non-party medical records are frequently sought in birth injury cases. In these cases, the minor plaintiff’s medical records are discoverable via the medical malpractice exception to the physician-patient privilege, while potentially relevant prenatal records of the mother and siblings remain outside of this statutory exception. See 735 ILCS 5/8-802. Yet, the physicianpatient privilege that would otherwise protect the non-party mother’s prenatal records may be waived if the mother

About the Authors Dina L. Torrisi is a partner at HeplerBroom LLC. Ms. Torrisi focuses her practice in the area of professional liability defense and general negligence. She has extensive litigation experience in defending hospitals, physicians, and nurses. Ms. Torrisi received her B.S. from University of Illinois, Champaign-Urbana, and her J.D. from The John Marshall Law School. She is admitted to the bars of Illinois, the Northern District of Illinois, and the U.S. Supreme Court. Ms. Torrisi is a member of the Illinois Association of Defense Trial Counsel and Illinois Association of Healthcare Attorneys. She is also an Arbitrator for the Cook County Mandatory Arbitration Program. Zeke N. Katz is an associate attorney at HeplerBroom LLC. Mr. Katz graduated from Colgate University in 2006 with a Bachelor of Arts degree in Philosophy & Religion. He received his J.D. from Chicago-Kent College of Law in 2014. He is admitted to practice in Illinois. He focuses his practice in the areas of medical malpractice and insurance defense. He is a member of the American Bar Association, Illinois State Bar Association and Chicago Bar Association.

Counsel should be aware of certain exceptions to the physician-patient privilege, which may provide access to otherwise excluded records, including two that are particularly relevant in a medical malpractice setting.

places her health during her pregnancy or past pregnancies at issue. Kunz, 326 Ill. App. 3d at 954-55; El-Amin v. Dempsey, 329 Ill. App. 3d 800, 801-09 (1st Dist. 2002). In El-Amin v. Dempsey, the appellate court emphasized the pragmatic nature of applying the prenatal records exception to the physician-patient privilege. The court found that “the mother’s medical records pertaining to the period when the plaintiff was in utero [were] discoverable upon the theory of impossibility of severance.” El-Amin, 329 Ill. App. 3d at 803 (quoting Yetman v. St. Charles Hosp., 491 N.Y.S.2d 742, 298 (N.Y. App. Div. 1985)). The unique physical bond between a mother and child prior to the child’s birth compels a mother’s medical records to be simultaneously understood as the medical records of the child. Id. Thus, once the plaintiff’s medical condition was placed at issue, the physicianpatient privilege was waived with respect to the prenatal records of the non-party mother. Id. at 809. Depending upon the medical condition at issue, defense counsel may seek disclosure of prenatal records of the mother’s past pregnancies. Unlike the prenatal records of the minor plaintiff, the prenatal records of the minor plaintiff’s siblings remain protected by the physician-patient privilege. Kunz, 326 Ill. App. 3d at 956. In Kunz, where the lawsuit was brought solely on behalf of

the minor plaintiff, the court found that the physician-patient privilege was not automatically waived for the siblings of the minor plaintiff, “even when a genetic cause independent of medical malpractice may become an issue. . . .” Id. Nevertheless, the Kunz court ultimately found that when a mother places the health of her other pregnancies at issue, for example via her deposition testimony, she consequently waives her physician-patient privilege with respect to those prenatal medical records. Id. at 953. The Kunz case provides strategic guidance to practitioners seeking nonparty medical records in birth injury cases. First, these types of records should not be subpoenaed until after the mother has been deposed. A subpoena prior to the mother’s deposition would likely be quashed. Second, at the mother’s deposition, defense counsel should ask about the pregnancy at issue, as well as previous pregnancies. Depending upon the response given, this information may form the basis for showing waiver of the physician-patient privilege. While prenatal records of the minor plaintiff, and even the minor plaintiff’s siblings may be obtained, there are limits to this type of discovery. Specifically, the waiver does not apply to the minor plaintiff or minor plaintiff’s siblings’ medical records following their respective births. Id. at 958. In Kunz, the

mother’s “deposition remark that her first two children’s current health [was] ‘excellent’ [was] insufficient to waive the privilege as to the children’s subsequent medical records.” Id. The court discerned that the medical records of the siblings after their birth were unrelated to the birth injury and were therefore not discoverable. Id. Similarly, a mother’s own medical records beyond the gestation period remain privileged, even after her prenatal records have been found to be discoverable via waiver. Id. at 956. Limitations to Statutory Protections of Certain Healthcare Information While defense counsel may benefit from limitations of statutory protections and waiver, we are often on the receiving end of medical information requests that trigger our invocation of the physicianpatient privilege, HIPAA, and the Medical Studies Act, to name a few. 45 C.F.R. § 160.101 et seq. (2009) and 45 C.F.R. § 164.102 et seq. (2009); 735 ILCS 5/8-2101. These statutes limit access to protected medical information, but the protections are not all encompassing. Records that do not concern a physician’s diagnosis or treatment of a patient are not protected by the physician-patient privilege, and are therefore discoverable. Tomczak v. Ingalls Mem’l Hosp., 359 Ill. App. 3d 448, 454 (1st Dist. 2005). In Tomczak, the plaintiff requested records of triage times, treatment times, and triage acuity designations. Tomczak, 359 Ill. App. 3d at 450. The defendants “refused, claiming that the information sought was privileged and would not reasonably lead to the discovery of relevant information.” Id. at 449. The court held that the physician-patient privilege “does not apply to ordinary incidents and facts which can — Continued on next page

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Medical Malpractice | continued

be perceived by laymen and which are not necessary for a physician to treat his patient.” Id. at 453 (quoting Gourdine v. Phelps Mem’l Hosp., 336 N.Y.S.2d 316, 319 (N.Y. App. Div. 1972)). The triage and treatment times, along with the triage acuity designations, were conventional occurrences. Id. at 454. They were not necessary medical information for the physicians to perform their professional duties and were therefore not protected by the privilege. Id. The defendant also invoked the protections of HIPAA, arguing that the triage information was “protected health information” (PHI) and therefore not discoverable. Id. at 451. PHI is “any information received by a health care provider relating to the provision of health care to an individual that either identifies the individual, or could reasonably be used to identify the individual.” Id. at 456 (citing 45 C.F.R. § 160.103 (2002)). Under HIPAA, records defined as PHI may be shielded from disclosure with certain limitations. Id. (citing 45 C.F.R. § 164.512(e)(1)(ii) (2002)). The Tomczak court found the information requested did not contain the patients’ names or medical histories from which those patients could be identified. Id. at 454. Accordingly, the information did not qualify as PHI and could be disclosed regardless of HIPAA regulations. Id. at 456. In addition to looking at whether a patient’s identity could be discerned, courts also look to the substance of the medical information sought. The physician-patient privilege only applies to information used by the physician to treat the patient or reach a diagnosis. Id. at 454. For example, treatment and wait times of emergency room patients, which do not provide insight into the patients’ medical conditions, 38 | IDC QUARTERLY | First Quarter 2015

Records that do not concern a physician’s diagnosis or treatment of a patient are not protected by the physician-patient privilege, and are therefore discoverable.

treatments, or diagnoses, are considered nonmedical information. Id. at 454-55. As such, this information is not barred from discovery by the physician-patient privilege. The information protected by the privilege stems from the physician’s professional capacity or character, and the protected information is only that which is necessary for the physician to act in that capacity or serve the patient. 735 ILCS 5/8-802. An additional example where an invoked statutory protection was held inapplicable is illustrated in Zangara v. Advocate Christ Med. Ctr., 2011 IL App (1st) 091911, ¶ 38, as modified on denial of reh’g (July 22, 2011). In Zangara, the plaintiff contracted methicillin-resistant staphylococcus aureas (MRSA) while a patient at the defendant hospital. Zangara, 2011 IL App (1st) 091911, ¶ 2. During litigation, the plaintiff filed a discovery request seeking a list of all patients who contracted MRSA 90 days before the plaintiff had been admitted to the defendant hospital. Id. ¶ 3. The defendants responded that such information was protected under the Medical Studies Act. Id. ¶ 11. The Medical Studies Act, as with the physician-patient privilege and HIPAA, may safeguard records sought via discovery in a medical malpractice lawsuit. The Medical Studies Act provides in relevant part that “[a]ll information [addressing] . . . a health care practitioner’s professional competence . . . used in the course of internal quality control . . . or for improving patient

care . . . shall be privileged.” 735 ILCS 5/8-2101. However, protections under the Medical Studies Act are limited to records “generated specifically for the use of a peer-review committee.” Zangara, 2011 IL App (1st) 091911, ¶ 38 (quoting Webb v. Mount Sinai Hosp. & Med. Ctr. of Chi., Inc., 347 Ill. App. 3d 817, 825 (1st Dist. 2004)). In Zangara, the court found that documents that were “later used by a committee in the peer-review process” were not privileged under the Medical Studies Act because those documents were “created in the ordinary course of a hospital’s business.” Zangara, 2011 IL App (1st) 091911, ¶ 38. The Zangara court compared the time data analyzed under the physician-patient privilege in Tomczak to the number of MRSA infections that may have been privileged under the Medical Studies Act. Id. ¶ 42 (citing Tomczak, 359 Ill. App. 3d at 454-55). Similar to the Tomczak time data information, the number of MRSA infections were considered mere incidents of fact and were not privileged under the Medical Studies Act. Id. Familiarity with some of the exceptions that facilitate disclosure of otherwise privileged information will be beneficial for practitioners seeking discovery of non-party medical records. Congruently, knowledge as to the limitations of statutory protections may better prepare counsel in defending against requests for certain healthcare information.

Insurance Law Update Timothy R. Lessman SmithAmundsen LLC, Chicago

Telephone Consumer Protection Act Decision Provides Framework to Analyze Potentially Collusive Consent Judgments In Central Mut. Ins. Co. v. Tracy’s Treasures, Inc., 2014 IL App (1st) 123339, the Illinois Appellate Court First District reversed the grant of summary judgment in favor of an insurer regarding coverage for claims brought under the Telephone Consumer Protection Act, 47 U.S.C. § 227(b)(1) (2006) (TCPA), based on an intervening ruling from the Illinois Supreme Court finding damages sought under the statute are not punitive. However, in remanding the case, the appellate court pointed to several facts surrounding the settlement that should be examined to determine if it was reasonable. Background Central Mutual Insurance Company (Central) insured Tracy’s Treasures, Inc. (Tracy’s) under primary policies effective from 1997 to 2005 and excess policies effective from 2002 to 2005. Central Mut. Ins. Co., 2014 IL App (1st) 123339, ¶ 3. The total value of the policies was $14 million. Id. Paul Idlas (Idlas), the underlying plaintiff and putative class representative, filed suit against Tracy’s in March 2007 alleging that Tracy’s had sent junk faxes in violation of the TCPA between March 5, 2003 and March 5, 2007 (Idlas suit). Id. ¶ 7. Idlas allegedly received the unsolicited fax on July 22, 2003. Id. Tracy’s tendered its defense to Central in April 2007. Id. ¶ 8. Although

Central disclaimed coverage, it assigned an attorney to provide Tracy’s with a “courtesy defense.” Id. ¶ 9. Tracy’s lawyer subsequently filed a motion to dismiss and discovery requests. Id. In June 2007, Central filed a declaratory judgment action seeking an adjudication that it owed no duty to defend or indemnify Tracy’s with respect to the Idlas suit. Id. In November 2007, Tracy’s retained its own attorney, who sent a letter to Central in December 2007 advising that he was retained due to a conflict of interest created by Tracy’s disclaimer of coverage. Id. ¶ 10. Central consented to the substitution of counsel and indicated that it would pay the new attorney’s reasonable fees. Id. ¶ 11. Correspondence in the record indicated that Tracy’s new counsel discussed settlement with Idlas’ counsel a month before he contacted Central and even before he filed an appearance for Tracy’s. Id. ¶ 12. A settlement of $14 million, which was enforceable only against Central’s policies and coincidentally was the total value of its policies, was ultimately reached within a few weeks of the new counsel’s substitution. Id. ¶ 14. Although the Idlas complaint alleged the putative class of recipients had received faxes from March 5, 2003 to March 5, 2007, the settlement agreement defined the class as those persons who allegedly received unsolicited faxes from September 1, 2002 to July 22, 2003. Id.

¶ 19. The expansion of the class to this earlier date (which was also outside of the four-year statute of limitations Idlas claimed applied to TCPA claims) did not result in any additional claimants, although it did have the effect of implicating a $5 million Central excess policy that expired on January 29, 2003. Id. The settlement agreement further provided for Idlas’ attorneys to be paid one-third of the recovery from Central. Id. ¶ 17. Each class member was to receive up to $500.00, and any unclaimed funds were to be given to charitable organizations. Id. Tracy’s counsel filed a motion for preliminary approval of the settlement without providing notice to Central. Id. ¶ 15. The motion attached an affidavit that Central had denied coverage to Tracy’s, but it failed to mention that Central was paying for Tracy’s defense. Id. ¶ 20. The court ultimately approved the settlement. Id. ¶ 24. Central moved for summary judgment in its declaratory action, arguing — Continued on next page

About the Author Timothy R. Lessman is an attorney in Smith Amundsen’s Chicago office. Mr. Lessman has experience representing domestic and international insurers, and reinsurers in matters ranging from claims management to coverage dispute resolution via litigation, arbitration, and mediation. He has handled complex insurance and reinsurance coverage disputes involving both domestic and international policy forms. Additionally, he has experience with a variety of claims, including mass torts, environmental liability, product liability, cyber liability, employers and professional liability, government entity liability, and construction defect. Prior to his legal career, Mr. Lessman worked as a legislative aide in both the Colorado House of Representatives and the British House of Commons.

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Insurance Law Update | continued

A settlement of $14 million, which was enforceable only against Central’s policies and coincidentally was the total value of its policies, was ultimately reached within a few weeks of the new counsel’s substitution.

that the settlement was collusive and unreasonable as a matter of law under the standards articulated in Guillen v. Potomac Ins. Co. of Ill., 203 Ill. 2d 141 (2003), and that it owed no duties to Tracy’s due to a previous “buy-out” of the implicated coverage. Id. ¶¶ 29, 30. The trial court denied summary judgment as to these arguments. Id. But, it later granted summary judgment to Central based on the finding in Standard Mut. Ins. Co. v. Lay, 2012 IL App (4th) 110527 that amounts awarded under the TCPA are punitive in nature and thus uninsurable. Central Mut. Ins. Co., 2014 IL App (1st) 123339, ¶ 4. Idlas and Tracy’s appealed this decision, and while the appeal was pending, the Illinois Supreme Court reversed Lay. Id. (citing Standard Mut. Ins. Co. v. Lay, 2013 IL 114617). Central timely crossappealed and argued summary judgment in its favor could be affirmed on the basis of its earlier motions, which it claimed the trial court erroneously rejected. Id. ¶¶ 31, 35. Analysis On appeal, Idlas and Tracy argued that Central was precluded from challenging the settlement terms because Central had ceded the defense to independent counsel and because the trial court had found the settlement to be reasonable. Id. ¶ 41. The appellate court 40 | IDC QUARTERLY | First Quarter 2015

disagreed. Because it had preserved its right to contest coverage by filing a declaratory judgment action and paying Tracy’s defense costs, the appellate court found that Central retained the ability to contest both the reasonableness of the settlement and whether the claims were covered under its policy. Id. ¶¶ 51-52. The First District further found that Central did not have the opportunity to be heard in the underlying action regarding the settlement’s terms, and there were no findings showing that the insured sustained its burden of demonstrating the reasonableness of both the decision to settle and the amount of the settlement. Id. ¶ 58. The appellate court remanded the case to the trial court to address the question of whether the settlement was reasonable. It stated that the applicable test the trial court should apply in considering the question was whether Tracy’s decision to settle conformed to the standard of a “prudent uninsured” party. Id. ¶ 56. The appellate court then raised several issues for the trial court’s consideration. For example, the court questioned whether it was reasonable to agree to a $14 million settlement when Tracy’s was only able to produce a list of approximately 10,000 recipients of faxes it sent in 2002 and 2003. Id. ¶ 70. The court observed that in 2007, less than 10% of those who received the faxes would receive actual notice of the

settlement and, of those, significantly fewer were likely to file a claim. Id. Notably, the court also referenced several out-of-state decisions where awards of less than $500.00 per fax were awarded as a penalty. Id. ¶ 72. The court found that the TCPA “was not designed to put those who advertise their products or services via fax out of business.” Id. The court also raised several questions regarding the actions of Tracy’s counsel in arriving at settlement. The court referenced the decisions to forego filing a motion to dismiss based on the unsettled issue regarding the statute of limitations for TCPA claims, as well as failing to commence third-party actions seeking contribution and indemnification from fax broadcasters. Id. ¶¶ 65, 69. The court also questioned counsel’s agreement to extend the class definition to include a period outside the four-year statute of limitations that Idlas claimed was applicable, as well as the decision to allow unclaimed settlement funds to be distributed to charity. Id. ¶¶ 66-67, 73, 77. The court even stated that “the hypothetically prudent uninsured’s decision to settle on terms that allowed millions of dollars in anticipated residual settlement funds to be donated to charity strikes us both as extraordinarily generous and extremely helpful to class counsel’s quest for attorney fees.” Id. ¶ 73. Taking these areas of inquiry together, the appellate court encouraged an examination of whether Tracy’s counsel possessed the requisite adversarial relationship with Idlas’ counsel, and whether the settlement was the product of an arm’s-length negotiation. Id. ¶¶ 75-76. Central also argued that it was entitled to summary judgment because it had previously settled another TCPA case brought against Tracy’s. Id. ¶ 94. In connection with that settlement, Central

Product Liability entered into an agreement with Tracy’s in 2005 to eliminate coverage in its policies for “personal and advertising injury” coverage. Id. ¶¶ 26, 27, 95. Central argued that due to this previous “buyout,” there was no coverage afforded to Tracy’s for the Idlas suit. Id. ¶ 95. The court refused to grant summary judgment to Central on this issue because Central’s prior agreement with Tracy’s was not part of the record, and, even if it was, it could not confirm, as a matter of law, that the amount paid by Central in exchange for the elimination of the “personal and advertising injury” coverage was adequate consideration. Id. ¶ 105. The court stated, however, that if the evidence supported a finding that Tracy’s reasonably believed that no further TCPA claims would be filed against it when Tracy’s entered into the agreement, adequate consideration would exist and the agreement would operate to preclude coverage. Id. Conclusion The ruling in Tracy’s Treasures is significant for a number of reasons. The court favorably referenced other decisions finding that an award of less than $500 per TCPA violation is possible. Perhaps more importantly, the ruling acknowledges that consent judgments can be questioned if the insurer has taken appropriate measures with respect to the defense of its insured and has adequately preserved its rights to question coverage. In such instances, the Tracy’s Treasures ruling provides a framework for trial courts to use in analyzing whether consent judgments are reasonable.

Brian J. Benoit and Colin B. Willmott Goldberg Segalla LLP, Chicago

When Does the Modification of a Product Trigger an Exception to the Statute of Repose? Can a product liability claim that would otherwise be time barred by the statute of repose proceed when the product was modified after the statutory time limit? The Court of Appeals for the Seventh Circuit recently evaluated the application of the statute of repose after the plaintiff was injured using a 14-year-old muzzleloading rifle. The question presented in Hartman v. EBSCO Indus. Inc., 758 F.3d 810 (7th Cir. 2014), was whether the addition of a conversion kit 14 years after the rifle was purchased could trigger an exception to the statute of repose in Indiana. In 1994, the plaintiff, Adam Hartman, received a LK-93Wolverine brand muzzleloading rifle from his father. Hartman, 758 F.3d at 813. At that time, the Hartman’s muzzleloader was designed to use black powder, which propels the projectile after the black powder is struck by the gun’s hammer. Id. As technology evolved, newer muzzleloader rifles employed synthetic pellets as a propellant, which required a much higher temperature for ignition. When used in the Wolverine, the pellets did not always ignite because of the higher temperatures needed for ignition. Id. at 814. To alleviate the issues LK-93 Wolverine users had igniting the newer synthetic pellets, KR Warranty manufactured a conversion kit that was designed to deliver a hotter spark to ignite the pellets “more reliably.” Id. The plaintiff installed the conversion kit on November 28, 2008. Id. The following

day, the plaintiff and a few friends went to a gravel pit to “sight the rifle.” Id. The plaintiff fired the rifle twice without swabbing the barrel. Id. Prior to his third shot, the plaintiff loaded pellets into the barrel and then placed patched round balls into the barrel. Id. The manufacturer of the pellets warns against using patched round balls with their synthetic pellets because doing so creates an increased risk of accidental discharge. Id. After placing the balls in the barrel, the plaintiff attempted to seat the balls with a ramrod, which caused the gun to unexpectedly discharge, causing the ramrod and round — Continued on next page

About the Authors Brian J. Benoit is a partner in the Chicago office of Goldberg Segalla LLP. His nationwide practice focuses on the defense of product manufacturers, specializing in catastrophic losses involving fires and explosions. Mr. Benoit has authored articles and presented nationwide on investigating fire losses, evidentiary challenges, and deposing expert witnesses. Colin B. Willmott is an associate at Golberg Segalla LLP and focuses his practice on general liability and insurance coverage matters involving commercial general liability policies. Mr. Willmott is a recent graduate of the University of Illinois College of Law.

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ball to pass through the plaintiff’s hands and arms. Id. The plaintiff filed suit sounding in product liability. The action was subsequently removed and the United States District Court granted summary judgment on the ground that the applicable statute of repose in Indiana, 10 years, barred Mr. Hartman’s recovery because the rifle was 14 years old at the time of the incident. Id.

muzzleloader’s lifespan is the barrel and bore, which the conversion kit did not alter. Id. The court, in dismissing the plaintiff’s argument, likened the conversion kit to an upgraded processor in an old laptop computer versus installing a new battery into the computer when the old battery was on its last leg. Id. A new processor increases the functionality of the computer, but does not lengthen its lifespan, whereas adding a new battery

The plaintiff’s appeal focused on the two exceptions to application of the statute of repose: “(1) where a manufacturer refurbishes a product to extend its useful life, or (2) where a defective new component is incorporated into the old product.”

The plaintiff’s appeal focused on the two exceptions to application of the statute of repose: “(1) where a manufacturer refurbishes a product to extend its useful life, or (2) where a defective new component is incorporated into the old product.” Id. at 815 (citing Richardson v. Gallo Equip. Co., 990 F.2d 330, 331 (7th Cir. 1993)). These two exceptions are not apparent in Indiana’s statute of repose, but instead, derive from case law. Ind. Code Ann. § 34-20-3-1 (LexisNexis 2014); Richardson, 990 F.2d at 331. Hartman argued that the first exception applied because the modification kit extended the useful life of the muzzleloader. Hartman, 758 F.3d at 815. Hartman presented an expert, who opined that the conversion kit made the rifle more accurate, gave it higher velocity, and essentially made it a new rifle. Id. In response, KR Warranty’s expert stated that the only way to measure a 42 | IDC QUARTERLY | First Quarter 2015

to the old computer would lengthen its lifespan. Therefore, the rifle’s conversion kit made the rifle more accurate and powerful but did not enhance its lifespan. Id. Additionally, according to the district court, the extended life exception was not applicable because the exception typically applies when the manufacturer of the original product refurbishes the product to extend its useful life. Id. The alleged defect lay in the addition of a component installed by the user, and would therefore fall under the second exception, if anything. The second exception that resets the statute of repose is when a defective new component is incorporated into the old product. The district court explains that this exception can arise in two scenarios: (1) when a manufacturer issues a new, non-defective component for an old product and the addition of the new component renders the old product defec-

tive or, (2) when the new component is itself defective and it renders the entire product defective. Id. at 816. Hartman proposed two defects, one sounding in a failure to warn that not swabbing the barrel between shots could increase the likelihood of accidental discharge and two, that the conversion kit was defective. Id. Despite the plaintiff ’s two-fold defect scenario, the court clarified that the only issue was whether the inclusion of the conversion kit increased the likelihood of latent embers or unexpected discharge. Id. at 817. For this proposition, Hartman presented expert testimony to show that a modified cleaning jag, a tool that is screwed to the end of the ramrod and used to clean the barrel of the rifle between shots to clear debris and latent embers, should have been included in the conversion kit. Id. at 816. Hartman’s gunsmith expert claimed that the breech plug used as part of the modification required a specially designed jag. Id. The court, however, excluded Hartman’s expert because the modified jag proposed by the expert was “incomplete, inoperable, and unlike those used by KR Warranty or its competitors.” Id. at 819. Furthermore, since Hartman did not clean the barrel before it discharged, the usage of the jag was of no consequence. Because Hartman could not find shelter in either of the statute of repose exceptions, the court affirmed the district court’s grant of summary judgment. Id. Illinois’ Statute of Repose While not authoritative in Illinois state courts, Hartman v. EBSCO sheds light on some of the issues that arise in cases involving the use and maintenance of older products. Illinois has an exception where the statute of repose resets

10 years from the date the product was altered if the plaintiff’s injury derives from the alteration. 735 ILCS 5/13-213(c) (2). This section of the repose statute is closely related to Indiana’s second statute of repose exception. In Illinois, 735 ILCS 5/13-213 states the limitations in product liability actions. It provides that no action may commence against the manufacturer sounding in strict product liability within 12 years from the date of first sale to the initial seller or 10 years from the date of first sale to the initial consumer. 735 ILCS 5/3-213(c). Illinois courts have had several opportunities to interpret the meaning of alteration and whether certain alterations reset the statute of repose timeline. In Masters v. Hesston Corp., 291 F.3d 985 (7th Cir. 2002), the Seventh Circuit found that the plaintiff did not satisfy the alteration exception. The plaintiff injured himself on a 22-year-old hay baler because of a problem with the “twine tube” and a problem turning the hay bale after the power was turned off. Masters, 291 F.3d at 988. It was determined that this

Illinois has an exception where the statute of repose resets 10 years from the date the product was altered if the plaintiff’s injury derives from the alteration.

materials for its accomplishment” and second, that the alteration occurred within 10 years of the alteration. Id. at 990-91. The Northern District found that the statute of repose exception applied where an elevator maintenance worker was killed while fixing an elevator component that had previously been added to fix previous issues in the elevator. In Wilson v. Otis Elevator Co., 454 F. Supp. 2d 749 (N.D. Ill. 2002) the plaintiff’s decedent was working on an elevator initially installed in 1967. Wilson, 454 F. Supp. 2d at 751. As part of a maintenance agreement with the property owner, Otis installed a new car gate and cable system at some time in 1995. Id. at 750. Employees of the property reported having problems with the alterations made

Practice Tips Proximate Cause:

When dealing with a statute of repose defense, the alteration itself must have proximately caused the injuries. The court in Wilson left that determination for the fact finder. To assert the defense, the facts must be established to prevent any question about whether absent the alteration, the incident would not have occurred. Internal Recordkeeping:

For national counsel or counsel with advisory influence over corporate recordkeeping and risk management policies, the maintenance practices on machinery to which the company is aware should be discussed to alert the company when a statute of repose exception may apply. Expert Testimony:

Illinois courts have had several opportunities to interpret the meaning of alteration and whether certain alterations reset the statute of repose timeline.

condition was caused as a consequence of the machine having been re-welded at some time. Id. at 989. The court, in ruling that the exception did not apply, held that the plaintiff had not met his burden in showing first, that the manufacturer of the hay baler “rewelded the tube, authorized the rewelding, or furnished

by Otis and consequently, Mr. Wilson was attempting to fix the problem when he entered the shaft and was killed. Id. at 751. The court ruled that the alteration exception applied because the alteration, which occurred within the statutory period, could have been the proximate cause of the decedent’s injuries.

The court in Hartman refused to permit an expert to testify about whether the alteration was defective because his alternative design assertions were baseless. The credibility of expert testimony should be sufficiently developed to give the court an adequate basis in which to grant a dismissal based on a statute of repose defense. From a practical standpoint, however, this should be evaluated with the client in a case pending in Illinois because the plaintiff can still proceed on a negligence basis.

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Legislative Update N. Drew Kemp HeplerBroom LLC, Edwardsville

A Happy New Year for the Plaintiff’s Bar as Rushed Amendments to the Code of Civil Procedure Become Law In a bold and fast move, the General Assembly made important changes to the Code of Civil Procedure by passing Senate Bill 2221 (SB 2221) and Senate Bill 3075 (SB 3075) during the November 2014 veto legislative session. Senate Bill 2221 was introduced in early 2013 as a bill amending the Clerks of Courts Act. Its purpose was to change the source of the reimbursements paid to the clerks of the circuit courts for services in connection with state correctional facilities. The final version of SB 2221, however, had nothing to do with reimbursements or correctional facilities. House Amendment Number Two, introduced just before the Thanksgiving holiday, replaced all of

periods for bringing civil actions based on personal injuries that arise out of the “design, planning, supervision, observation or management of construction, or construction of an improvement to real property.” 735 ILCS 5/13-214. Id. (follow “2201-2300” hyperlink; then follow “SB2221” hyperlink; then follow “Full Text” hyperlink). Subsection (a) contains a four-year statute of limitations and subsection (b) establishes a 10-year repose period. House Amendment Number Two changed the latter by eliminating the 10-year repose period for actions “for personal injury, disability, disease, or death resulting from” a laundry list of hazardous substances. Id. A hearing on SB 2221 was held

Specifically, SB 3075 removed the language in 735 ILCS 5/ 2-1105(b) that gives litigants the right to a 12-person jury for claims over $50,000 or upon a unilateral demand for 12 jurors.

diagnosed with mesothelioma and attributes this to the short time during the 1950s that he worked as an insulator. Past IDC President Jeff Hebrank of HeplerBroom LLC testified on behalf of the IDC. Mr. Hebrank and others’ valiant efforts helped reduce the blow to some, but not all, industries. Senate Bill 2221 was further amended to limit the scope of the 10-year repose period exception to asbestos only; rather than “any pollutant, including any waste, hazardous substance, irritant, or contaminant (including, but not limited to, smoke, vapor, soot, fumes, acids, alkalis, asbestos, toxic or corrosive chemicals, radioactive waste, or mine tailings).” Id. The final version passed committee and was approved by both houses of the legislature, and was sent to Governor Quinn, who signed the bill on December 19, 2014. Like SB 2221, the enrolled version of SB 3075 had no resemblance to its original version. Illinois General Assembly, http://www.ilga.gov/legislation/ (last visited Dec. 15, 2014) (follow “30013100” hyperlink; then follow “SB3075” hyperlink; then follow “View All Action” hyperlink). SB 3075 was introduced in February 2014 and contained amendments to the Juvenile Court Act of 1987. Just before the Thanksgiving holiday, House Amendment Number One was filed and replaced the entire text of SB

About the Author the language in SB 2221 with language amending 735 ILCS 5/13-214. Illinois General Assembly, http://www.ilga.gov/ legislation/ (last visited Dec. 15, 2014) (follow “2201-2300” hyperlink; then follow “SB2221” hyperlink; then follow “View All Action” hyperlink). Section 13-214 lists limitation 44 | IDC QUARTERLY | First Quarter 2015

on December 1, 2014. John Cooney of Cooney & Conway in Chicago testified in support of the Bill with one of his clients, 82-year-old Johnny Lattner. Lattner is a former University of Notre Dame halfback, Heisman Trophy winner, and first-round pick in the 1954 NFL draft. Lattner testified that he was recently

N. Drew Kemp is an associate attorney at HeplerBroom LLC in Edwardsville, Illinois. Mr. Kemp is a University of Missouri graduate and has been defending companies in toxic tort litigation for a little over a year.

Supreme Court Watch 3075 with amendments to the Counties Code and the Code of Civil Procedure. Id. (follow “3001-3100” hyperlink; then follow “SB3075” hyperlink; then follow “Full Text” hyperlink). Specifically, SB 3075 removed the language in 735 ILCS 5/ 2-1105(b) that gives litigants the right to a 12-person jury for claims over $50,000 or upon a unilateral demand for 12 jurors. SB 3075 also mandates that counties increase the daily pay for jurors. Specifically, counties must pay $25 for the first day of attendance and $50 for each additional day. This is a significant increase over the prior law that provided for $4 to $10 per day, depending on population. SB 3075 was also set for hearing on December 1, 2014. Joseph Power of Power Rogers & Smith, P.C. in Chicago and John Cooney testified in support of the bill. Jeff Hebrank again testified on behalf of the IDC alongside other opponents. Nevertheless, SB 3075 as amended, passed both houses of the legislature, and was sent to Governor Quinn. The Governor signed SB 3075 on December 19, 2014. With the passage of SB 2221 and SB 3075, tort reform in Illinois has taken a step backwards. Many Illinois job providers who are burdened by asbestos personal injury lawsuits have lost a valuable defense. Illinois construction contractors may also be targeted. Furthermore, all Illinois defendants will likely find it harder to accurately estimate case values and reach settlements because only six jurors must reach a unanimous verdict. Other issues like the retroactive application of these new laws and their constitutionality are certain to be litigated in the near future.

M. Elizabeth Dyer Kellett HeplerBroom LLC, Edwardsville

Who Is the Holder of the Accounting Privilege and How Is that Privilege Applied? Brunton v. Kruger, No. 117663, 4th Dist. No. 4-13-0421 Following the death of the plaintiff’s parents, the plaintiff challenged her mother’s will and trust, alleging that her mother had a diminished mental capacity and was unduly influenced by the plaintiff’s brother and sister-in-law at the time her mother executed the documents. As part of the will contest case, the plaintiff issued a subpoena to the accounting firm that provided the plaintiff’s parents with estate planning services. Brunton v. Kruger, 2014 IL App (4th) 130421, ¶ 18. Invoking the accountant-client privilege in section 27 of the Illinois Public Accounting Act (225 ILCS 450/27), the accounting firm refused to produce the estate planning documents. Brunton, 2014 IL App (4th) 130421, ¶ 15. The circuit court found that while the accountant-client privilege applied, the accounting firm waived that privilege when they produced the estate planning documents to the plaintiff’s siblings. Id. ¶ 17. The circuit court also found that a testamentary exception applied to the attorney-client privilege stating, “the privilege cannot be asserted in this type of an action where the donative and testamentary intent of the clients are involved.” Id. ¶ 18 (citing In re October 1985 Grand Jury No. 746, 124 Ill. 2d 466 (1988)). Finally, the circuit court held that the estate planning information fell outside of the accounting-client privilege because the accounting firm disclosed the

documents to the personal representative of the estate. Id. ¶ 19. Therefore, the circuit court ordered the accounting firm to produce the documents. Id. ¶ 20. To create an appealable order, the accounting firm’s attorney requested that the circuit court hold him in civil contempt for refusal to comply with the court’s discovery order. Id. ¶ 21. Reviewing the case under the de novo standard, the Illinois Appellate Court Fourth District affirmed the circuit — Continued on next page

About the Author M. Elizabeth Dyer Kellett is an associate at HeplerBroom LLC. Ms. Kellett is a litigation attorney with a primary emphasis in the defense of complex, multi-party civil cases and class actions, including all aspects of product liability, particularly pharmaceutical drugs and devices. Ms. Kellett also regularly handles appeals in Illinois and Missouri. Prior to joining HeplerBroom, Ms. Kellett practiced law in Washington, D.C. and represented institutions of higher learning in administrative hearings and proceedings before the U.S. Department of Education. She also represented insurance and financial corporations and individuals in proceedings before the Securities and Exchange Commission, civil and criminal litigation, and in matters of corporate governance and compliance. Ms. Kellett earned her B.A. from Georgetown University in Washington D.C. in 2002 and her J.D. from Georgetown University Law Center in 2006.

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The circuit court found that while the accountantclient privilege applied, the accounting firm waived that privilege when they produced the estate planning documents to the plaintiff’s siblings.

court’s discovery order. First, the Fourth District found that “information or evidence a CPA receives while assisting a client with estate planning is subject to the privilege in section 27 if the CPA received the information or evidence in confidence.” Id. ¶ 35. Second, the Fourth District found that the privilege in section 27 applies to “the disclosure of confidential communications a client makes to non-CPA employees or agents of CPAs when the client is obtaining accounting services.” Id. ¶ 37. Third, expressing disagreement with several federal decisions, the Fourth District held that, while it does not explicitly mention the client, “the client, not the CPA, is the holder of the privilege that section 27 creates.” Id. ¶ 43. Fourth, noting that “[u]nder the testamentary exception, information or evidence an attorney received from the decedent while assisting the decedent with estate planning would be admissible in a subsequent will contest,” the Fourth District held, “we see no reason to regard the exception as inapplicable if a CPA rather than an attorney assisted the client with estate planning.” Id. ¶ 46. Finally, the Fourth District held that because the personal representative and other heirs to the plaintiff’s parents’ estate requested that the circuit court’s order be affirmed, the attorney-client privilege held by the plaintiff’s parents was waived. Id. ¶ 50-52. The accounting firm seeks review in the Illinois Supreme Court. First, the 46 | IDC QUARTERLY | First Quarter 2015

accounting firm argues that the Fourth District’s opinion contradicts prior precedent, which holds that the holder of the accounting privilege is the accountant, and not the client. See In re October 1985 Grand Jury No. 746, 154 Ill. App. 3d 288, 293 (1st Dist. 1987) (holding, “the client has no say in whether or not the accountant invokes the statute to prohibit disclosure of information obtained from the client”); Dorfman v. Rombs, 218 F. Supp 905, 907 (N.D. Ill. 1963) (stating, “it is clear that what the Illinois Legislature did in fact create was an accountant privilege, a privilege whose benefit was

to inure to, and which could only be claimed by, an accountant”); Radiant Burners, Inc. v. American Gas Assoc., 209 F. Supp. 321, 322 (N.D. Ill. 1962) (finding, “the language of the Illinois ‘accountant’ statute patently creates just what its title would indicate, a privilege for accountants”). Second, the accounting firm argues that the estate did not waive privilege simply by agreeing with the circuit court’s holding. Rather, because the estate had possession of the estate planning documents and did not disclose those documents to the plaintiff, the estate intended that the information would remain confidential. Moreover, because the estate and the accounting firm have a common interest, disclosure to the estate did not destroy the privilege. Finally, the accounting firm argues that, because section 27 does not explicitly include a testamentary exception, the Fourth District should not have incorporated one into the statutory accounting privilege.

Can Wrongful Death and Survival Claims Be Brought in Cases of Suicide? Turcios v. The De Bruler Co., No. 117962, 2nd Dist. No. 2-13-0331 The plaintiffs are the wife and children of the decedent and the heirs of the decedent’s estate. The plaintiffs allege that the defendant real estate developer’s wrongful acts—forcing the decedent and his family out of their validly-rented apartment by demolishing the building around them and then demolishing the rented premises even while decedent was living there—caused decedent’s suicide. Turcios v. The De Bruler Co., 2014 IL App (2d) 130331, ¶ 12. The plaintiffs filed wrongful death and survival claims against the defendant alleging, among other things, intentional

infliction of emotional distress. The circuit court held that because decedent’s death was a result of suicide, the plaintiffs could not maintain wrongful death or survival claims against the defendant as a matter of law. Turcios, 2014 IL App (2d) 130331, ¶ 46. Reviewing the case under the de novo standard, the Illinois Appellate Court Second District overruled the circuit court’s order granting the defendant’s motion to dismiss. Id. ¶ 46. The Second District first noted that because the plaintiffs alleged an intentional tort as opposed to mere negligence, the trial

court’s intervening-cause analysis was inappropriate. Id. ¶ 16. Second, numerous foreign jurisdictions and authority recognize a difference between negligence and intentional torts in cases where “the defendant’s actions cause emotional distress that leads to a suicide.” Id. ¶¶ 16, 18-20 (citing Clift v. Narragansett Television L.P., 688 A.2d 805 (R.I. 1996), Mayer v. Town of Hampton, 127 N.H. 81 (1985), R.D. v. W.H., 875 P.2d 26 (Wyo. 1994), Kimberlin v. DeLong, 637 N.E.2d 121 (Ind. 1994). The Second District found the reasoning of the United States District Court for the Northern District of Illinois particularly persuasive. Turcios, No. 117962 at ¶ 21. In Collins v. Vill. of Woodridge, the Northern District held that, in intentional tort cases, “the tort victim’s suicide generally is not considered a supervening cause, at least where the plaintiff can demonstrate that the defendant’s intentional conduct caused severe emotional distress that was a substantial factor in bringing about the suicide.” Id. ¶ 21 (citing Cindy Collins v. Vill. of Woodridge, 96 F. Supp. 2d 744, 756 (N.D. Ill. 2000)). While no Illinois court had directly ruled on this issue, the Second District found that Illinois courts “do not engage in an intervening-cause analysis when an intentional tort is at issue.” Turcios, No. 117962 at ¶ 25. Moreover, the Second District found the cases cited by the defendant to be easily distinguishable and were best read as holding “a plaintiff must show that the defendant’s conduct proximately caused the plaintiff’s emotional distress.” Id. ¶¶ 33-36 (emphasis in original). The defendant’s cases “do not say that a plaintiff must show that all resulting and compensable damages were proximately caused by the defendant.” Id. ¶ 35. Therefore, the Second District held, “where a plaintiff can satisfy the ele-

ments of the tort of intentional infliction of emotional distress and the emotional distress is a substantial factor in causing a decedent’s suicide, such causes of action are cognizable in [Illinois].” Id. ¶ 39. The defendant seeks review in the Illinois Supreme Court. First, the defendant argues that the Second District improperly held that a showing of legal cause is not required in the case of an intentional tort. If the holding is affirmed, the defendant argues, the requirement that a tortfeasor’s conduct be the “legal

cause” of the plaintiff’s injuries will be removed. The defendant further argues that the Second District conflicts with Martin v. Heinhold Commodities, Inc., 163 Ill. 2d 33 (1994), and many other Illinois opinions, which hold that the legal principle of proximate cause applies to claims of negligence as well as to intentional torts. Finally, the defendant argues that the Second District’s holding creates a new cause of action for intentional infliction of emotional distress, which is unworkable and unclear.

When Can Fully Litigated Judgments Be Reopened Based on Claims of Newly Discovered Evidence? Price v. Philip Morris, Inc., No. 117687, 5th Dist. No. 5-13-0017 The plaintiffs are consumers who filed a class action lawsuit against the defendant, a cigarette manufacturer, alleging that the defendant violated the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/ 1-12) when it used the terms “light” and “low tar” in its cigarette advertisements.

¶ 1 (citing 815 ILCS 505/10b(1) (the Consumer Fraud Act is inapplicable to claims involving conduct that has been “specifically authorized” by any federal regulatory body)). The Illinois Supreme Court denied the plaintiffs’ petition for rehearing. Id. ¶¶ 5-6. Relying on the U.S. Supreme

The Illinois Supreme Court reversed the judgment of $10.1 billion for the plaintiffs because “the challenged conduct was specifically authorized by federal regulations.”

Price v. Philip Morris, Inc., 2014 IL App (5th) 130017. The Illinois Supreme Court reversed the judgment of $10.1 billion for the plaintiffs because “the challenged conduct was specifically authorized by federal regulations.” Id.

Court’s holding in Altria Group Inc. v. Good, 555 U.S. 70 (2008), the plaintiffs filed a petition for relief from judgment pursuant to 735 ILCS 5/2-1401, arguing that evidence that the Federal Trade — Continued on next page

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Commission (FTC) did not authorize the use of the terms “light” and “low tar” was unavailable to the plaintiffs at trial and, if that evidence had been available, judgment for the plaintiffs would have been sustained. Id. ¶ 6 (citing Good, 555 U.S. at 87 (holding that federal law did not preempt claims that “lights” descriptors violated Maine’s consumer fraud statute)). The trial court dismissed the petition as untimely but the Illinois Appellate Court Fifth District reversed and remanded. Id. ¶ 8. The Illinois Supreme Court declined to address the timeliness question. On remand, the plaintiffs argued that the FTC’s 2008 amicus brief in Good and its November 26, 2008 statement that “[t]he Commission has neither defined [the terms ‘light’ and ‘low tar’], nor provided guidance or authorization as to the use of descriptors” constituted previously unknown facts that would have altered the trial court’s decision to dismiss the plaintiffs’ case. Id. ¶ 9. The trial court disagreed and found that, because it was “equally as likely that the Illinois Supreme Court would find for Defendant on the damages issue,” the plaintiffs failed to show that it was “more probably true than not” that the plaintiffs would have prevailed if they had this evidence when they initially filed their petition. Id. ¶ 11. The plaintiffs appealed, arguing in part that the trial court erred by exceeding the scope of section 2-1401 review. Id. ¶ 30. The Fifth District reversed the trial court’s order denying the plaintiffs’ petition for relief from judgment, and reinstated the $10.1 billion judgment. Id. ¶ 13. The Fifth District found the holding in Paul v. Gerald Adelman & Assocs., Ltd., 223 Ill. 2d 85 (2006), relevant and instructive. Id. ¶ 31. In Paul, the trial court granted the plaintiff’s petition for 48 | IDC QUARTERLY | First Quarter 2015

rehearing. Id. ¶ 46. The Fifth District stated that the Illinois Supreme Court upheld the Paul trial court’s order: “In ruling on plaintiff’s section 2-1401 petitions . . . it was not the trial court’s responsibility to determine the merits of the underlying causes of action.” Id. ¶ 47 (citing Paul, 223 Ill. 2d at 107). Moreover, the appellate court found the Paul court held that “issues of federal preemption and plaintiff’s ability to establish damages both devolve into fact questions more appropriate for resolution in the trial court. Id. ¶ 48 (citing Paul, 223 Ill. 2d at 108).

characterizations of previously known facts. The FTC’s 2008 statements are simply new characterizations of previously known facts. Thus, there is no new “evidence” and the plaintiffs cannot seek relief under section 2-1401. The defendant further contends that evidence cannot be newly discovered if it did not exist before judgment was entered. The FTC’s 2008 statements are new, post-judgment facts that cannot provide a basis for relief under 2-1401. The defendant asserts that the plaintiffs’ petition was untimely and that the Fifth District improperly ignored

The FTC’s 2008 statements are simply new characterizations of previously known facts. Thus, there is no new “evidence” and the plaintiffs cannot seek relief under section 2-1401. The defendant further contends that evidence cannot be newly discovered if it did not exist before judgment was entered. Here, the Fifth District noted, the trial court dismissed the plaintiffs’ claims, “after it was directed to so [sic] by the supreme court in an opinion that did not reach the merits of the underlying claim, including the question of damages.” Id. ¶ 49. The appellate court explained, “the trial court’s discussion of what the supreme court would have decided had it addressed [damages] is inherently speculative.” Id. ¶ 56. Therefore, the Fifth District held, the trial court exceeded the scope of section 2-1401 review. Id. ¶ 57. The defendant seeks review in the Illinois Supreme Court. First, the defendant argues that a section 2-1401 petition cannot be based on post-hoc

numerous appellate court decisions when it concluded that the stay of the court’s mandate pending the plaintiffs’ petition for certiorari, tolled the time for filing a section 2-1401 petition. Additionally, the defendant avers that the plaintiffs failed to meet section 2-1401’s diligence requirement because the plaintiffs did nothing to try to obtain the allegedly new evidence upon which they rely. Finally, the defendant argues that the Fifth District improperly usurped the court’s authority when it decided how the supreme court would have ruled and states that the supreme court is in the best position to address issues that it left undecided in its 2005 mandate.

Civil Rights Update Brian Smith Heyl, Royster, Voelker & Allen, P.C., Urbana John P. Heil, Jr. Heyl, Royster, Voelker & Allen, P.C., Peoria

Seventh Circuit Issues Significant Opinions Regarding Malicious Prosecution and Qualified Immunity The Seventh Circuit Court of Appeals has issued important decisions addressing whether a plaintiff may bring a Section 1983 action based upon malicious prosecution and in what circumstances a police officer is entitled to qualified immunity. In one decision, the plaintiff sought to extend the reach of Section 1983 claims to include federal claims of malicious prosecution and to expand the limits of Fourth Amendment claims. The Seventh Circuit rejected these arguments and held fast to its precedent on these issues. In another decision, the Seventh Circuit provides guidance regarding the context-specific questions a court should ask to determine whether an individual officer is entitled to qualified immunity. Attorneys that defend civil rights claims should take note of these significant opinions. Llovet v. City of Chicago In Llovet v. City of Chicago, 761 F.3d 759 (7th Cir. 2014), the Seventh Circuit reaffirmed its decision in Newsome v. McCabe, 256 F.3d 747 (7th Cir. 2001), which held “that a federal suit for malicious prosecution by state officers is permissible only if the state in which the plaintiff had been prosecuted does not provide an adequate remedy, which . . . Illinois does.” Lovett, 671 F.3d at 670 (internal citation omitted). Recently, the

Seventh Circuit concluded that Indiana state law does not provide an adequate remedy for malicious prosecution; consequently, in Indiana, it is now possible to bring a Section 1983 claim for malicious prosecution. See Julian v. Hanna, 732 F.3d 842, 848 (7th Cir. 2013). In Llovet, the plaintiff did not challenge the adequacy of Illinois’ remedy, but rather invited the court to overrule Newsome and authorize “a federal claim of malicious prosecution regardless of what alternative remedy a state provides.” Llovet, 761 F.3d at 760. The Seventh Circuit rejected the plaintiff’s invitation and also declined to expand the definition of the Fourth Amendment’s prohibition of seizures without probable cause to include the time after a person becomes a detainee pursuant to legal process, normally an arraignment. Id. at 760-62. In Llovet, the plaintiff was acquitted of aggravated battery, and thereafter, sued two Chicago police officers and the City of Chicago under Section 1983 for malicious prosecution. Id. at 760. The plaintiff alleged that the officers falsified police reports and used those false reports to persuade the prosecutor to file an aggravated battery charge against him. Id. At the time the plaintiff was charged with aggravated battery, he was already in jail, awaiting trial on a charge of misdemeanor

domestic battery. Id. at 762. The plaintiff did not deny that there was probable cause for his arrest on the misdemeanor charge, but was unable to make bail. Id. He was only released from jail after he was tried and acquitted of aggravated battery. Id. Thereafter, the misdemeanor charge was dropped. Id. The plaintiff argued that the aggravated battery charge — Continued on next page

About the Authors Brian Smith concentrates his practice in the areas of civil rights, professional liability, employment law and trucking/motor carrier litigation. Much of his practice entails defending government officials and medical professionals in cases alleging violations of constitutional rights. Brian also has experience defending employers before the Illinois Human Rights Commission and in federal court. He represents defendants in other tort litigation, including cases arising from automobile and trucking accidents. Mr. Smith has extensive motion practice experience in both state and federal courts and has authored numerous successful motions to dismiss and motions for summary judgment. In addition, he has defended the firm’s clients in depositions of plaintiffs, and fact and expert witnesses. Mr. Smith began his career with Heyl, Royster, Voelker & Allen, P.C. by clerking in the firm’s Urbana office. Following graduation from law school in 2007, he joined the firm in the Urbana office as an associate. During law school, he was a teaching assistant at the University of Illinois College of Law and a member of the University of Illinois Law Review. John P. Heil, Jr. is an ofcounsel attorney with Heyl, Royster, Voelker & Allen, P.C. He joined the firm in November 2007 after serving eleven years as an Assistant State’s Attorney in Cook County, Illinois. He received his J.D. from Chicago-Kent College of Law in 1996 and his B.S. from Bradley University in 1993. His practice includes the defense of civil rights actions, municipal liability, and general negligence matters.

First Quarter 2015 | IDC QUARTERLY | 49

Civil Rights Update | continued

Mordi v. Zeigler

The plaintiff argued that the aggravated battery charge suspended his right to a speedy trial on the misdemeanor charge, resulting in a longer jail term than he would have experienced “had it not been for defendants’ malicious actions in framing him for the aggravated battery.” suspended his right to a speedy trial on the misdemeanor charge, resulting in a longer jail term than he would have experienced “had it not been for defendants’ malicious actions in framing him for the aggravated battery.” Id. The Seventh Circuit held that because the initial seizure for the misdemeanor charge was supported by probable cause, the extended detention did not violate the Fourth Amendment. The Fourth Amendment, according to the court, “does not regulate the length of detentions after a judge or magistrate has determined that there is probable cause to detain a person on a criminal charge.” Id. The plaintiff argued that the Seventh Circuit should adopt a “continuing seizure” approach, as some other circuits have. The “continuing seizure” doctrine holds that an initially lawful detention may evolve into a Fourth Amendment violation if the initial detention extends beyond its lawful limits because of a new wrong. Id. at 763. The Seventh Circuit rejected this argument based on Heck v. Humphrey, 512 U.S. 477, 484 (1994), and the principle that “once detention by reason of arrest turns into detention by reason of arraignment . . . the Fourth Amendment falls out of the picture . . . .” Id. A new charge filed while a detainee is in jail is not an arrest or a seizure. Accordingly, the Seventh Circuit reasoned that the Fourth Amendment 50 | IDC QUARTERLY | First Quarter 2015

does not apply. Id. at 764. The Seventh Circuit opted not to expand the scope of the Fourth Amendment and made clear that the Fourth Amendment analysis ends once legal process, arraignment or otherwise, has been provided. The Seventh Circuit also held fast to its decision in Newsome, which held that the “plaintiff could not bring a federal malicious prosecution claim based on the due process clause of the Fourteenth Amendment, because this malicious prosecution remedy under state law was adequate to give him all the due process to which he was entitled.” Id. at 762 (emphasis in original). In the face of recent Seventh Circuit decisions concerning the inadequacy of Indiana’s remedies for malicious prosecution, Llovet is important. The case reiterates that Illinois provides an adequate remedy. Llovet, Newsome, and other Seventh Circuit cases leave open the “possibility of a Fourth Amendment claim against officers who misrepresent evidence to prosecutors. . . .” Llovet, 761 F.3d at 761 (internal quotation marks omitted) (quoting Johnson v. Saville, 575 F.3d 656, 663-64 (7th Cir. 2009)). As a general rule, however, the plaintiffs seeking to assert a claim of malicious prosecution must continue to do so as a state law claim brought pursuant to supplemental jurisdiction.

In Mordi v. Zeigler, 770 F.3d 1161 (7th Cir. 2014), the Seventh Circuit analyzed a non-US citizen’s rights under Article 36 of the Vienna Convention on Consular Relations (Convention). At issue was whether three Illinois State Police officers were entitled to qualified immunity for their alleged failure to provide the proper notification under the Convention. In March 2009, Officer Todd Zeigler pulled over a vehicle driven by the plaintiff, Uche Mordi. Mordi, 770 F.3d at 1162. Drugs were discovered in the car and the plaintiff was arrested and taken to a police station for interrogation.

The plaintiff was not informed of his rights under the Convention, and did not learn about those rights until a year or so after pleading guilty.

Id. The plaintiff was interrogated by Officers Chance and Healy, and that evening he was transported by Zeigler to the Effingham County Jail where he was booked. Id. Criminal proceedings were initiated in state court. Id. at 1163. Later, federal prosecutors took over the case. Id. The plaintiff ultimately pled guilty to charges of unlawful possession of a controlled substance with intent to distribute. Id. The plaintiff was a Nigerian national, and Nigeria is a party to the Convention.

Id. at 1162. The “Convention requires the authorities of the receiving State to inform the foreign national of his rights under Article 36 to have his own consular officials alerted to his arrest or detention.” Id. Officer Zeigler was unaware of the plaintiff’s citizenship; however, Officers Chance and Healy were aware that the plaintiff was Nigerian and not a U.S. citizen. Id. at 1162-63. The plaintiff was not informed of his rights under the Convention, and did not learn about those rights until a year or so after pleading guilty. Id. at 1163. He filed a Section 1983 claim against Officers Zeigler, Chance, Healy, and others. Zeigler, Chance and Healy asserted they were entitled to qualified immunity. Id. The district court denied the defendants’ motion for summary judgment, which led to an interlocutory appeal. Id. On appeal, the Seventh Circuit observed that [o]nce a public official has raised a defense of qualified immunity, the plaintiff must establish two things in order to defeat the defense: first, that the facts alleged describe a violation of a protected right; and second, that this right was clearly established at the time of the defendant’s alleged misconduct. Id. at 1163-64. (Internal citation omitted). As to the first question, prior Seventh Circuit precedent clearly established that the plaintiff did have a protected right under the Convention to have the Nigerian consulate notified of his status. Id. at 1164. As to the second question, the Seventh Circuit concluded that there is no clearly established rule that the officers had a duty to notify Mordi about

his right to consular notification under the Convention. Id. at 1165-66. The Convention states that authorities “shall inform the person concerned without delay of his rights under this subparagraph.” Id. at 1165. The Seventh Circuit analyzed whether informing someone “without delay” means at the time of arrest, transportation, interrogation, booking, or at some other time. Id. at 1165-66. Concluding that the existing opinions did not offer much guidance on these questions, the court analyzed the facts as they related to Zeigler, Chance and Healy. Each defendant interacted with Mordi shortly after his arrest for a limited time. None of the officers were

should all be held accountable if they fail to discharge ‘known’ duties like this one.” Id. at 1165. Mordi instructs that this is not the correct perspective. Rather, a court should ask context-specific questions to evaluate the particular duties of the individual officer asserting qualified immunity. Conclusion The Seventh Circuit’s opinion in Llovet maintains the status quo for malicious prosecution and Fourth Amendment claims. As such, in Illinois, defense counsel should seek dismissal of malicious prosecution claims brought

The Convention states that authorities “shall inform the person concerned without delay of his rights under this subparagraph.” The Seventh Circuit analyzed whether informing someone “without delay” means at the time of arrest, transportation, interrogation, booking, or at some other time.

responsible for booking the plaintiff. The Seventh Circuit concluded that “the details of how to implement the Article 36 duty to inform the arrestee of his rights without delay have yet to be fixed.” Id. at 1167. Accordingly, there was no clearly established law that the three officers violated and, therefore, the officers were entitled to qualified immunity. Id. The Seventh Circuit noted that “[a]t a high level of generality, one might think that federal, state and local officials all should know the laws of the United States, including its treaties, and thus

pursuant to Section 1983. The court’s Mordi decision emphasizes that when qualified immunity is asserted as a defense, context matters. The Seventh Circuit will evaluate the particular duties of an individual officer. To do so, however, counsel will often need to provide significant factual detail, such as what information an officer knew about the plaintiff, when that information was learned, and how long the officer had the plaintiff in custody before delivering him to jail, to demonstrate that qualified immunity is appropriate. First Quarter 2015 | IDC QUARTERLY | 51

Young Lawyer Division Gregory W. Odom HeplerBroom LLC, Edwardsville

bona fide assignee of negotiable instrument assigned before due.

Patrick P. Clyder Swanson, Martin & Bell, LLP, Chicago

Practical Considerations and Tips for Young Attorneys: Counterclaims The Young Lawyers Division (YLD) aims to assist young defense attorneys in their professional development. To achieve this goal, the YLD hosts events to promote networking and to educate young attorneys. The YLD also affords young attorneys numerous opportunities to contribute to their communities and the profession. Perhaps most importantly, the YLD—and the IDC as a whole— provides educational resources to further our members’ practical skills. In this edition, YLD member Patrick Clyder, of Swanson, Martin & Bell, LLP, addresses several issues regarding counterclaims, including client involvement and timing issues. Own Your Counterclaim: A Brief Overview of 735 ILCS 5/13-207 As defense attorneys, we regularly represent clients in cases involving multiple defendants. In such cases, younger attorneys are often asked to prepare claims against other defendants in the case. Although our law professors labeled such claims by one defendant against another as “cross-claims,” Illinois calls them “counterclaims.” 735 ILCS 5/2-608(a). The task of preparing a counterclaim against a co-defendant should not be reflexive. As young attorneys, we should ask ourselves why we are filing the counterclaim and whether our clients 52 | IDC QUARTERLY | First Quarter 2015

approve the filing. This is particularly important in cases involving the tripartite relationship between attorney, insurer, and insured. An insurer might want a counterclaim, but it may be poor business sense for your plumbing contractor client to file a counterclaim against the general contractor. Likewise, a retail store might not want to file a counterclaim against a longtime supplier for business reasons. If you take a moment to think outside the box, you can avoid explaining why you filed a counterclaim that made poor business sense. If you are on the receiving end of a reflexive counterclaim, consider having your client leverage an existing business relationship to force the filing party’s attorney to withdraw it. Once you have determined that a counterclaim makes good legal and business sense, a question that often arises is, “how long do I have to file a counterclaim?” The Illinois counterclaim savings statute provides: A defendant may plead a set-off or counterclaim barred by the statute of limitation, while held and owned by him or her, to any action, the cause of which was owned by the plaintiff or person under whom he or she claims, before such set-off or counterclaim was so barred, and not otherwise. This section shall not affect the right of a

735 ILCS 5/13-207. If it was not apparent from the plain language of the statute (it was not to these authors), the statute’s purpose is to prevent a plaintiff (or co-defendant) from intentionally filing late claims to preclude a defendant from filing a timely counterclaim. Cameron

About the Authors Gregory W. Odom is an Associate with HeplerBroom LLC in Edwardsville. He focuses his practice on trials involving complex business litigation matters, including toxic torts, personal injury, product and premises liability, and environmental law. Mr. Odom has represented individuals, local businesses, and Fortune 500 companies in Illinois and Missouri state and federal courts. He has successfully tried multiple cases to verdict and has successfully argued before the Illinois Court of Appeals. He received his J.D. from Southern Illinois University School of Law in 2008, and a B.A. from Southern Illinois University magna cum laude in 2005. Mr. Odom is a member of the Illinois State Bar Association, The Missouri Bar, Madison County Bar Association, St. Clair County Bar Association, and Illinois Association of Defense Trial Counsel. Patrick P. Clyder is an associate in Swanson, Martin & Bell, LLP’s Chicago office. He routinely represents product manufacturers and distributors in state, federal and international matters involving personal injury, property damage, and business disputes. Mr. Clyder also has extensive experience representing business owners, employers, and land owners in claims for personal injury and property damage stemming from incidents on their premises. He has tried cases to jury verdict as both a first and second chair attorney in the Circuit Court of Cook County and he has successfully resolved cases through mediation, settlement conference, and binding arbitration. He regularly assists Cabrini Green Legal Aid as a criminal records and criminal defense client intake volunteer.

Be mindful that if you file a timely counterclaim against a co-defendant, the savings statute will prevent you from raising most statute of limitations defenses to any counterclaim that the co-defendant might file against your client. General Corp. v. Hafnia Holdings, Inc., 289 Ill. App. 3d 495, 506 (1st Dist. 1997); see also Patsis v. Zion-Benton Twp. High Sch., No. 126, 234 Ill. App. 3d 232, 235 (2d Dist. 1992) (explaining that the statute protects “parties who have shorter limitations periods than their opponents”). The savings statute operates as follows: where the defendant A has filed a timely counterclaim against the defendant B, the defendant B may file a counterclaim against the defendant A even if the defendant B’s limitation period has run for filing its counterclaim. Barragan v. Casco Design Corp., 216 Ill. 2d 435, 443-44 (2005). On the other hand, if the defendant A had not filed a counterclaim against the defendant B, the savings statute would not apply if the defendant B sought to file a time-barred counterclaim against the defendant A. Id. at 443-44 (rejecting such counterclaims and labeling them “first-strike crossclaims”). In practice, always make sure that there are sound legal and business reasons for filing your counterclaim. Be mindful that if you file a timely counterclaim against a co-defendant, the savings statute will prevent you from raising most statute of limitations defenses to any counterclaim that the co-defendant might file against your client. Accordingly, if the counterclaim is not necessary, you might serve your

client’s interests better by allowing the time for filing a counterclaim to expire so that you do not open the door to counterclaims from the co-defendants. See Id. at 446 (explaining that the saving statute “opens the door and exposes the initiating party to otherwise stale claims by sacrificing the protection of the statute of limitations”). Lastly, rest assured that if a co-defendant files a counterclaim against your client on the date that the statute of limitations runs, the savings statute will likely permit you to file a counterclaim in return. Recent and Upcoming YLD Events Since the beginning of the 20142015 term, the YLD has been extremely productive. We have hosted multiple events, conducted a law student writing competition, organized charitable drives, held social events, and recruited new IDC members. The YLD plans to continue this momentum into the new year with many other events. On November 10, 2014, the YLD conducted a seminar, titled “Finding and Ensuring Success in Your First Position.” The event, held at The John Marshall Law School, provided information, tips, and resources to law students on finding the right job and succeeding as a young lawyer. Many thanks to The John Marshall Law School for graciously hosting this event and to the speaking

panel, which included Alexander Sweis of McKenna Storer, Lindsay Donald of Litchfield Cavo LLP, Miguel Larios of the Office of the Illinois Attorney General, Camilla Pollock-Flynn of LeBarge Campbell & Lyon LLC, and Joseph Kearney of The John Marshall Law School. The YLD also visited law students at Southern Illinois University School of Law on November 5, 2014. During the visit, we discussed with the students the benefits of becoming members of the IDC. The students were very enthused about the IDC and are in the process of forming IDC’s first law school student organization. We plan to have an event at the law school in the Spring similar to the event hosted at The John Marshall Law School. On December 4, 2014, the IDC held its annual Holiday Party. During the Holiday Party, the YLD conducted a “Spirit of the Season” fundraiser. Members donated bottles of wine/spirits and gift cards, which were raffled off, or made cash donations. Thanks to the generosity of our wonderful members, the YLD raised $1,000.00. Proceeds from the fundraiser were donated to the Autism Research Institute (ARI). The ARI is a non-profit research, resource, and referral organization that conducts and funds research that makes a difference in finding the causes of and developing safe, effective treatments for autism. Special thanks go to YLD members Kelly Hejlik and John Eggum of Foran Glennon Palandech Ponzi & Rudloff P.C. and YLD Vice-Chair, Elizabeth Barton, for all of their help in organizing and conducting the Spirit of the Season fundraiser. The fundraiser could not have happened without them. Additionally, we are extremely grateful to everyone who donated to this wonderful cause. — Continued on next page

First Quarter 2015 | IDC QUARTERLY | 53

YLD | continued

On January 9, 2015, the YLD held a seminar, titled “Succeeding as a Young Associate: Managing Cases, Building Your Brand, and Avoiding Ethical Pitfalls.” The seminar was hosted by HeplerBroom LLC in Edwardsville, Illinois. Speakers provided information, insight, and practice tips on issues highly relevant to a young attorney’s practice. The YLD is very grateful to HeplerBroom LLC for hosting the event, and to our incredible panel of speakers, which included Laura Beasley of Joley, Nussbaumer, Oliver & Beasley, James DeFranco of DeFranco & Bradley, P.C., Dominique Seymoure of Reed Armstrong Mudge & Morrissey P.C., Melissa Smart of the Illinois Attorney Registration and Disciplinary Commission, Noel Smith of HeplerBroom LLC, and Patrick Stufflebeam of HeplerBroom LLC. Many thanks also go to Pohlman USA for graciously sponsoring the seminar. The YLD also conducted a Winter Clothing Drive for the Belleville, Illinois Public School District during the months of December and January. During the Drive, we collected coats, scarves, gloves, blankets, and other winter clothing items for students. As with our previous school supply drive, IDC members more than rose to the occasion. We received numerous donations, which were delivered to the School District on January 9, 2015. The YLD appreciates and thanks everyone who donated and helped keep those in need warmer this winter. Finally, the YLD kicked off its law school writing competition in November. The competition is open to third-year law students attending Illinois law schools. Students were asked to write on potential liabilities for Internet postings and protections afforded to anonymous Internet posters. The winner of the competition will be announced in March 2015. 54 | IDC QUARTERLY | First Quarter 2015

Index of IDC Monograph and Feature Articles Volume 24 The IDC Quarterly has a rich tradition of presenting thought-provoking, timely, educational articles to the defense bar of Il­linois. This award winning legal journal is a well-respected piece of the legal landscape in Illinois and the country. Our reputation for excellence is based upon years of excellent submissions from our members. Following is an index of the Feature Articles and Monographs that have appeared in the IDC Quarterly in the past year. All of these submissions are available on our website, www.iadtc.org. We are very fortunate to have had the opportunity to present these pieces and many others to you over the years. We offer our sincere thanks to the many editors and authors who have made this journal what it is today.

Monograph Index A Practitioner’s Guide to the Consumer Product Safety Act and Navigating the Consumer Product Safety Commission (24.2.M1) Written By: Justin K. Beyer, Seyfarth Shaw LLP, Chicago The Attorney-Client Privilege in Malpractice Claims (24.3.M1) Written By: Donald P. Eckler and Matthew F. Tibble, Pretzel & Stouffer, Chartered, Chicago The Implied Warranty of Habitability in Construction Defect Cases (24.4.M1) Written By: Anthony J. Longo and Michael D. Pisano, Cassiday Schade LLP, Chicago Tort Immunity Act (24.1.M1) Written By: Howard L. Huntington, Mahoney, Silverman & Cross, LLC, Joliet; Dustin S. Fisher, Judge, James & Kujawa, LLC, Park Ridge; Matthew J. Hammer, Donohue Brown Mathewson & Smyth, LLC, Chicago; Scott D. Spears, Robbins, Salomon & Patt, Ltd., Chicago; R. Sean Hocking, Craig & Craig, LLC, Mattoon; John M. O’Driscoll, Tressler LLP, Bolingbrook; Deborah A. Ostvig, Judge, James & Kujawa, LLC, Park Ridge; James L. Craney, Lewis Brisbois Bisgaard & Smith LLP, Edwardsville; Keith E. Fruehling, Heyl, Royster, Voelker & Allen, P.C., Urbana; and Benjamin M. Jacobi, O’Halloran Kosoff Geitner & Cook, LLC, Northbrook

Feature Article Index Beware the Whistleblower: Whether Congress’s Omission of the Term “Employer” from Section 3730(h) of the False Claims Act Was Intended to Extend Liability to a Whistleblower’s Individual Supervisors (24.1.18) Written By: J. Tyler Robinson, Heyl, Royster, Voelker & Allen, P.C., Springfield; and Roger R. Clayton, Heyl, Royster, Voelker & Allen, P.C., Peoria

Congress, the Supreme Court, and the Religious Rights of Corporations (24.4.27) Written By: William G. Beatty, Johnson & Bell, Ltd., Chicago Illinois Courts Should Reject Medical Monitoring Claims for Uninjured Plaintiffs (24.1.41) Written By: Michael P. Murphy, HeplerBroom LLC, Springfield Is It Better to be LinkedOut? The Potential Ethical Implications of LinkedIn Endorsements and Recommendations (24.1.5) Written By: Melissa A. Smart, Illinois Attorney Registration and Disciplinary Commission, Chicago Pre-Mediation Telephone Conference with a Mediator—an Important Tool for Counsel (24.3.10) Written By: Russell M. Ware, SmithAmundsen LLC, Milwaukee; and Brian S. Ebener, SmithAmundsen, Chicago Recent Cases Emphasize Need for Reform with Section 19(f) Appeal Bonds in Workers’ Compensation Judicial Reviews (24.2.64) Written By: Brad A. Elward, Heyl, Royster, Voelker & Allen, P.C., Peoria Secular, For-Profit Corporations’ Ability to Challenge the Constitutionality of the Contraception Mandate (24.2.10) Written By: Colleen Tierney Scarola, McVey & Parsky, LLC, Chicago; and Joshua Turk, Chicago-Kent College of Law, Chicago The Danger of Security Manuals: How to Prevent Liability Instead of Create It (24.4.5) Written By: Stacy Dolan Fulco, Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, Chicago To the Young Lawyer: Tips for Court Appearances (24.2.23) Written By: Elizabeth K. Barton, Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C., Chicago Understanding Illinois’ New Ediscovery Rules (24.3.60) Written By: Steven M. Puiszis, Hinshaw & Culbertson LLP, Chicago When Employers Become Human Traffickers: An Overview of the Trafficking Victims Protection Act (24.3.29) Written By: Stacy E. Crabtree, Heyl, Royster, Voelker & Allen, P.C., Peoria

First Quarter 2015 | IDC QUARTERLY | 55

Association News IDC Launches Public Service Announcement In an effort to broaden our exposure and inform the public of issues faced by the Illinois defense bar, the IDC has launched the “Juries Matter. Judge Wisely.” Public Service Announcement (PSA). The PSA will be making its way through the Metro East and then the Chicagoland areas over the next several months. Currently, the billboard can be found on I-55/64/70, near the city of East St. Louis. Viewers are encouraged to visit the IDC website to learn more about judging wisely. By following the

link on our home page, viewers will learn about issues such as the 50% rule, Several Liability and Comparative Fault, Medical Bills and Seat Belts (see http:// www.iadtc.org/?page=JudgeWisely for more information). As defense counsel, we know that these rules, and many more like them, are unjust. We hope that we are able to inform and educate the public about these rules and the need for reform through the “Juries Matter. Judge Wisely.” PSA and other initiatives.

@IDCLawLife

The IDC Advance

We are excited to launch  @IDC LawLife. This new IDC Twitter Handle (profile) will  be  used  by one of our members (can you guess who it is??) to post observations on what a day in the life of a defense lawyer looks like. Get in on the conversation! Follow @IDC LawLife today!

We recently began publishing The IDC Advance, a new e-newsletter designed to recognize the work of our members. If you have news of recent successes, firm news, successful arguments, and/or personal accomplishments, we’d love to hear from you! To s u b m i t y o u r n e w s , j u s t login to www.iadtc.org and navigate to https://iadtc.site-ym.com/ general/?type=IDCAdvance. In addition to being published in The IDC Advance, we will also feature your news in our website Newsroom.

56 | IDC QUARTERLY | First Quarter 2015

Bylaws Amended At a special meeting of the membership on Friday, October 10, 2014, the IDC membership approved the following amendment to the IDC Bylaws: Section 6. Action by Board of Directors By Electronic Means. The Board may take action via electronic ballot by motion and second of any Director or Officer and upon the electronic circulation of said ballot to all members of the Board. The electronic ballot containing the proposed action shall be open for vote of all Board members for a period to be stated within the ballot, but in no event shall that period be less than five days. A proposal shall be deemed “passed” upon the approval by a majority vote of all Board members who timely respond to the electronic ballot with the exception that no vote may pass without a ballot constituting a minimum voting quorum of 11 Board Members. Any proposal receiving a majority vote of a simple quorum of Board members voting shall become effective upon tally, unless by its terms it is to be effective at an alternate date as otherwise authorized by the Bylaws. Where these Bylaws provide for other than a majority vote, action via electronic ballot shall require passage by the vote so stated in the Bylaws. This Section 6 shall only apply to actions which the Board is authorized by the Bylaws to take, except that no action may be

taken by the Board by electronic means to remove a Director, to effect a merger, consolidation, dissolution or sale, lease or exchange of assets, establish annual dues, levy special assessments, appoint officers and directors to fill vacancies, hire an employee or contract for an Executive Director. The

Executive Director, or in the absence of an Executive Director, other authorized designee, upon approval and request of the President, shall issue any electronic ballot proposal to the Board via electronic means, tally votes, and archive all electronic ballots passed.

Holiday Party The IDC Holiday Party is a great way to kick off the holiday season. We had a wonderful time this year and were fortunate to have raised $1,000 for the Autism Research Institute through our Spirit of the Season fundraiser. Special thanks to Greg Odom of HeplerBroom

LLC, Liz Barton of Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer and John Eggum and Kelly Hejlik of Foran Glennon Palandech Ponzi & Rudloff, P.C. for all of their hard work organizing the fundraiser!

Thank You to Our Spirit of the Season Donors! Brenda Baum — HeplerBroom LLC Laura Beasley — Joley, Nussbaumer, Oliver & Beasley, P.C. Troy Bozarth — HeplerBroom LLC Mark Cosimini — Rusin & Maciorowski, Ltd. Bruce Dorn — Bruce Farrel Dorn & Associates Joe Feehan — Heyl, Royster, Voelker & Allen, P.C. Terry Fox — SmithAmundsen LLC R. Howard Jump — Jump & Associates, P.C. Drew Kemp — HeplerBroom LLC Steve Loverde — Law Office of Steven A. Lihosit/Allstate Insurance Company Bill McVisk — Johnson & Bell, Ltd. Mark Mifflin — Giffin, Winning, Cohen & Bodewes, P.C. Nicole Milos — Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC Brad Nahrstadt — Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd. Steve Puiszis — Hinshaw & Culbertson LLP Tracy Stevenson — Robbins, Salomon & Patt, Ltd. Patrick Stufflebeam — HeplerBroom LLC Aleen Tiffany — Aleen R. Tiffany, P.C. Urgo & Nugent, Ltd.

— Continued on next page

First Quarter 2015 | IDC QUARTERLY | 57

Holiday Party | continued

Concealed Carry in Illinois The IDC recently hosted a Concealed Carry Seminar with Illinois Insurance Association, Illinois Retail Merchants Association, and the Illinois Manufacturers’ Association at the University Club of Chicago. The seminar covered the current issues surrounding concealed carry rights and responsibilities for individuals, employers, governmental entities, property owners and insurers.

Special Thanks to Our Speakers: James L. Craney Lewis Brisbois Bisgaard & Smith LLP Terry Fox SmithAmundsen LLC R. Howard Jump Jump & Associates, P.C. Mark J. McClenathan Heyl, Royster, Voelker & Allen, P.C. Edward J. Murphy Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd. John O’Driscoll Tressler LLP Maura Yusof Heyl, Royster, Voelker & Allen, P.C. Susan Zumph Equity Residential

58 | IDC QUARTERLY | First Quarter 2015

Concealed Carry Seminar | continued

We would also like to thank the following members for their many hours of work in developing the Concealed Carry Seminar: Jeremy Burton, Chair Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd. Denise Baker-Seal Brown & James, P.C. Theresa Bresnahan-Coleman Langhenry, Gillen, Lundquist & Johnson, LLC Patrick Cloud Heyl, Royster, Voelker & Allen, P.C. James L. Craney Lewis Brisbois Bisgaard & Smith LLP Terry Fox SmithAmundsen LLC R. Howard Jump Jump & Associates, P.C. David Levitt Hinshaw & Culbertson LLP Nicole Milos Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC John O’Driscoll Tressler LLP Bruce Schoumacher Querrey & Harrow, Ltd. Maura Yusof Heyl, Royster, Voelker & Allen, P.C. Heather Watterson CNA

First Quarter 2015 | IDC QUARTERLY | 59

After Hours Receptions

60 | IDC QUARTERLY | First Quarter 2015

Michael O’Connell Pretzel & Stouffer, Chartered, Chicago Neil R. Pandey Cremer, Spina, Shaughnessy, Jansen & Siegert, LLC, Chicago l Sponsored by: Nicole D. Milos

The IDC is proud to welcome the following members to the Association: Mark Abellera Purcell & Wardrope, Chartered, Chicago Sponsored by: Bradford Purcell

John Eggum Foran Glennon Palandech Ponzi & Rudloff, P.C., Chicago

Jarrett Adams Loyola University Chicago, Chicago l Sponsored By: DRI

Jon Elenius CNA Insurance Company, Chicago l Sponsored By: DRI

Kwabena A. Appenteng Ogletree Deakins, Chicago l Sponsored By: DRI

Ashley M. Felton Gordon Rees Scully Mansukhani LLP, Chicago l Sponsored By: DRI

Thomas W. Arvanitis Meckler Bulger Tilson Marick & Pearson, Chicago l Sponsored By: DRI

Lynn M. Geerdes Clausen Miller, P.C., Chicago l Sponsored By: DRI

Alemayehu A. Ayanaw HeplerBroom LLC, Edwardsville

Keithan Hendrick University of Illinois College of Law, Urbana l Sponsored By: DRI

Alisha Biesinger Southern Illinois University, Carbondale l Sponsored By: DRI

Katherine A. Jones Christensen Ehret, Chicago l Sponsored By: DRI

Wade Blumenshine Northern Illinois University, De Kalb l Sponsored By: DRI

Corinne M. Koopman LaBarge, Campbell & Lyon, LLC, Chicago

Jonathan J. Bobell Livingston, Barger, Brandt & Schroeder, Bloomington Violet H. Borowski Ogletree Deakins, Chicago l Sponsored By: DRI Alton Bradley University of Illinois College of Law, Urbana l Sponsored By: DRI Michael G. Butts Robert T. Varney & Associates, Bloomington Jolene M. Cecich Mulherin, Rehfeldt & Varchetto, P.C., Wheaton l Sponsored By: DRI Jeanette Conrad-Ellis The John Marshall Law School, Chicago l Sponsored By: DRI Ryan J. Devall Chicago-Kent College of Law, Chicago l Sponsored By: DRI Edward Dutton Park District Risk Management Agency, Lisle

Marc S. Lauerman Grippo & Elden, Chicago l Sponsored By: DRI Valerie C. Lengerich Swanson, Martin & Bell, LLP, Chicago l Sponsored By: DRI

Nikita Patel Northwestern University School of Law, Chicago l Sponsored By: DRI Jennifer Ries-Buntain Hall Prangle & Schoonveld LLC, Chicago l Sponsored By: DRI Blake Royall Northwestern University School of Law, Chicago l Sponsored By: DRI Elyse M. Ryan Hinshaw & Culbertson LLP, Chicago l Sponsored By: DRI Jacqueline M. Satherlie Kopka Pinkus Dolin, Buffalo Grove l Sponsored By: DRI Lena Shapiro University of Illinois College of Law, Arlington Heights l Sponsored By: DRI Sadiq M. Shariff Quinn, Johnston, Henderson & Pretorius, Peoria Jacqueline B. Sharuzi Hall Prangle & Schoonveld, Chicago l Sponsored By: DRI Eva Shonuga The John Marshall Law School, Chicago l Sponsored By: DRI

Jeffrey Marks Busse, Busse & Grassé, P.C., Chicago

Samantha L. Singer The John Marshall Law School, Chicago l Sponsored By: DRI

Fiona McEntee McEntee Law Group, Chicago l Sponsored By: DRI

Andrew J. Tessman Greensfelder, Hemker & Gale, P.C., Belleville

Lindsey T. Millman Lipe Lyons Murphy Nahrstadt & Pontikis Ltd., Chicago

Michael Toren Northern Illinois University, De Kalb l Sponsored By: DRI

Ashleigh Morpeau Northwestern University School of Law, Chicago l Sponsored By: DRI

Leslie M. Warren Sandberg Phoenix & von Gontard, P.C., St. Louis

John P. O’Brien Robert T. Varney & Associates, Bloomington

Emily M. Westfall Segal McCambridge, Chicago l Sponsored By: DRI

Thomas L. O’Carroll Hinshaw & Culbertson, LLP, Chicago l Sponsored by: David H. Levitt

Ryan Wheeler Swanson, Martin & Bell, LLP, Chicago l Sponsored By: DRI

First Quarter 2015 | IDC QUARTERLY | 61

Notice of Election In accordance with the Bylaws of the Illinois Association of Defense Trial Counsel, an election must be held to fill the vacancies of the following six (6) directors whose terms expire in 2015. The following six Directors’ terms will expire at the Annual Meeting in June 2015. Joseph A. Bleyer, Bleyer & Bleyer R. Mark Cosimini, Rusin & Maciorowski, Ltd. Terry A. Fox, SmithAmundsen, LLC Jennifer B. Groszek, Resolute Management, Inc. Al J. Pranaitis, Hoagland, Fitzgerald & Pranaitis Tracy Stevenson, Robbins, Salomon & Patt, Ltd. Recommendations for nominations of six (6) persons to be elected to the Board of Directors are now being solicited from the general membership.

All individual members of the Association are eligible for election to the Board of Directors unless otherwise excluded by the Bylaws. Corporate, Educator, and Law Student members are not eligible to serve on the Board of Directors.

The Board of Directors shall be representative of all areas of the State of Illinois, and to this end, two Districts are declared: “Cook County,” and for all remaining counties, “Statewide.” No more than four of the six directors elected each year shall office within the same District, and regardless of votes cast, only the four persons receiving the most votes may be elected from within the District. If all individual members filing Nominating Petitions are from the same District, only four shall be elected and the board shall seek out and appoint two directors from the other District. No more than two voting members of the combined Executive Committee and Board of Directors shall be partners or associates or otherwise practice together in the same law firm. The filing of a Nominating Petition for election as a director shall consist of: n The Nominating Petition. Each individual nominated must be supported by the signatures of three (3) members in good standing. n A statement by that member of his availability and commitment to serve actively on the board.

nd Availability a Statement of ent Sample Commitm

n A head and shoulders photo (high resolution jpg format preferred). n A short biography (1-2 paragraphs maximum). n A statement of no more than 200 words on why you should be elected to the Board of Directors. A sample copy of the Nominating Petition and Commitment to Serve Statement are included below for your reference. Nominations must be sent electronically to IDC Secretary/Treasurer Bradley C. Nahrstadt, Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd. at [email protected] and IDC Executive Director Sandra J. Wulf, CAE, IOM at [email protected] Nominations must be accompanied with the five items listed above. All candidates will be featured with their biography, statement of candidacy and picture in the IDC Quarterly, and this same feature will be sent to the membership if more than six petitions are received. All nominating petitions must be received by Friday, March 27, 2015. All candidates who have filed a complete nominating petition are eligible to receive an electronic copy of the IDC membership listing, upon request.

Nominat

in

g Petitio We, the un n Sample dersigned , hereby de in good sta cla n _, Trial Coun ding of the Illinois A re that we are mem ____________ __ __ __ be s ssociation __ e l. __ __________ of Defens rs od standing of go in r I, __________ e be em W m e, the und that I am a nsel and I do ersign hereby declare ense Trial Cou (fi ef D rm of to t on name, add ed, further nominate ti en ia m it oc m ss m A is co d no li an ress, c (nam the Il ability Director o and affirm my f the Illino ity, state, zip code e of person) of of the Illinois rs to ec hereby warrant ir ) for the p D is of A ssociation osition of on the Board of Defens . el ns serve actively ou C al e ri T T ri se a en l ef J C D ohn Doe ounsel. Association of (signature __. ) 20 , J __ a n __ e __ D __ oe (sign ________ ature) ___ day of ____ Jack Doe _ Dated this ____ __ __ (s __ ig __ n __ a ture) Dated this ____________ ______ da ____________ __ __ __ __ __ y __ of ______ ________ ____, 20_ Signature _. 62 | IDC QUARTERLY | First Quarter 2015

Symposium Leadership David H. Levitt Hinshaw & Culbertson LLP 2014-2015 IDC President Mark Schloemer Westfield Group

Events Committee Jeremy Burton, Chair Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd. Denise Baker-Seal Brown & James, P.C. Kimberly A. Davis Momkus McCluskey LLC James P. DuChateau Johnson & Bell, Ltd. Ryan M. Frierott Goldberg Segalla LLP Matthew L. Johnson Johnson & Bell, Ltd. Scott D. Stephenson Litchfield Cavo LLP

The Illinois Association of Defense Counsel and the Illinois Insurance Association are proud to present the Annual Spring Symposium. The Symposium, to be held Friday, April 17, 2015 at the Standard Club of Chicago will feature great CLE programming, an exhibit hall and a valuable networking reception the evening of April 16. We hope you can join us for what promises to be one of the year’s best conferences.

Heather R. Watterson CNA

— Continued on next page

First Quarter 2015 | IDC QUARTERLY | 63

Spring Symposium | continued

SCHEDULE

Symposium Recording

Thursday, April 16, 2015

4:30 – 6:30 p.m. IDC After Hours Cocktail Reception – Location TBA  

Friday, April 17, 2015 8:45 – 9:00

Opening Remarks

9:00 – 9:45

Mind the Gaps! Coverage for Cyber Liability Claims under CGL and Cyber Liability Policies Presented by: John D. Hackett and Jamie L. Hull, Cassiday Schade LLP

9:45 – 10:30

Case Updates: Tort & Insurance Law Tort Law Update: Justin K. Beyer, Seyfarth Shaw LLP Insurance Law: James P. DuChateau, Johnson & Bell, Ltd.

10:30 – 10:45

Refreshment Break

10:45 – 11:45

Ethics of Social Media Presented by: Kelly E. Purkey and Alexander Sweis, McKenna Storer

11:45 – 12:15

Lunch

12:15 – 1:15

Interplay Between CPT Coding and Medical Bills Presented by: Vicki Schweitzer, RN, BSN, CHCQM, CPC, ExamWorks Review Services

1:15 – 2:15

Recent Developments in Employee/Independent Contractor Law Presented by: Rachel B. Cowen, DLA Piper

2:15 – 2:30

Refreshment Break

2:30 – 3:15

Panel Discussion Featuring Plaintiff & Defense Counsel on Illinois Practice Development Presented by: Colin H. Dunn, Clifford Law Offices and Bradley C. Nahrstadt, Lipe, Lyons, Murphy, Nahrstadt & Pontikis, Ltd.

3:15 – 4:15

Understanding and Navigating Illinois Ediscovery Rules Presented by: Steven M. Puiszis, Hinshaw & Culbertson LLP

Continuing Legal Education Credit

The program has been approved by the Illinois MCLE  Board for 6.25 hours of continuing legal education (CLE) credit. We will apply for 1.0 hours of Illinois professionalism credit. We will apply for the following CLE credit in other states:

Indiana Missouri Wisconsin

6.25 CLE; 1.0 Professionalism 7.5 CLE; 1.2 Professionalism 7.5 CLE; 1.2 Professionalism

64 | IDC QUARTERLY | First Quarter 2015

If you are unable to attend the Symposium on April 17, please consider purchasing a copy of the recorded program. Please contact the IDC office at [email protected] or 800-232-0169 for more information.

Seminar Fees

Private Practice Attorneys      IDC Members.......................$195*      Non-Members......................$295* Governmental Attorneys..........$145 Insurance or Corporate Professionals...........................$75 Judges and Law School Students...................................$25 * We are pleased to extend a special registration fee of just $50 for all clients of Private Practice Attorneys. Registration for the Symposium includes Symposium materials, Continuing Legal Education Credit, lunch, a refreshment break and great networking opportunities at our complimentary Cocktail Reception on Thursday, April 16.

Refund Policy

Refunds must be requested in writing and will be made according to the following schedule: 100% Refund – Through March 17, 2015 50% Refund – March 18 - April 2, 2015 No Refund – April 3 - 18, 2015 Substitutions for your registration may be made. However, only one copy of seminar materials will be offered per registration. Please submit substitution information in advance of the event.

— Continued on next page

REGISTRATION 2015 Spring Symposium

April 17, 2015 n Standard Club of Chicago

4

Seminar Fees

Live Presentation

Private Practice Attorneys

IDC Members

$195*

Non-Members

$295*

Governmental Attorneys

$145

Insurance or Corporate Professionals

$75

Judges & Law School Students

$25

* We are pleased to extend a special registration fee of just $50 for all clients of Private Practice Attorneys. Badge Name: Firm: Address: City, State, Zip Code: Direct Line: (

)

ARDC Number: IL:

Email: MO:

IN:

WI:

Special Dietary/Accessibility Needs:

s

All Private Practice Attorneys may bring a client for a reduced registration fee of $50. Please list your client’s name and contact information below. Indicate here if you will NOT have a guest in attendance . Client Name:

Direct Line: (

)

Company: Address: City, State, Zip Code: Email: Special Dietary/Accessibility Needs:

Payment Information

(Do Not Fax or Email Credit Card Information)

❑ My check, number ❑ Please charge $

is enclosed for $ to my:

Card Number:

❑ Visa Exp. Date:

. ❑ MasterCard /

❑ AmEx Security Code:

Name as it appears on credit card: Credit Card Billing Address:

Please complete this registration form and return it as soon as possible to: Illinois Association of Defense Trial Counsel ■ PO Box 588 ■ Rochester, IL 62563-0588

Questions?

Phone: 800-232-0169 ■ Fax: 866-230-4415 ■ Email: [email protected] First Quarter 2015 | IDC QUARTERLY | 65

66 | IDC QUARTERLY | First Quarter 2015

Illinois Association of Defense Trial Counsel

MEMBERSHIP APPLICATION

Membership in the Illinois Association of Defense Trial Counsel is open to Individuals, Corporations, Educators, and Law Students. For a list of qualifications, visit www.iadtc.org or phone the IDC office at 800-232-0169. Applicants shall be admitted to membership upon a majority vote of the Board of Directors. I am (We are) applying for membership as a(an) (Select Only One):

Individual Attorney, in practice: Governmental Attorney, in practice: m 0-3 years ($100) m 0-3 years ($75) m 4-5 years ($150) m 4-5 years ($100) m 6-9 years ($225) m 6-9 years ($160) m 10+ years ($250) m 10+ years ($190) m Student ($20) m Educator ($75)

Corporation, with: m 1-2 Affiliates ($250) m 3-5 Affiliates ($500) m 6-10 Affiliates ($750) m 11-15 Affiliates ($1,000) m 16-20 Affiliates ($1,500)

Individual Applicant Information – Attorneys & Governmental Attorneys Prefix

First

Middle

Last

Suffix

Designation

Firm or Government Agency Address City

State

Firm or Agency Line

Zip Code

County

Direct Line

Email

Fax Line Website

Area of Practice

# of Attorneys in Firm

IDC Sponsor Name and Firm Law School

Admitted to the Bar in the State of

Home Address

City, State, Zip Code

Home Phone

Year

ARDC #

Alternate Email Address

Corporate Applicant Information Corporation Name

Business or Service Provided

Address

City, State, Zip Code

Phone Fax Website On a separate sheet of paper, please list all individuals who are to be affiliated with this Corporate Membership. Be sure to include Name, Address (if different than the corporate address), Phone, Fax, and Email Address for all affiliates.

Educator and Law Student Applicant Information Prefix

First

Middle

Last

Suffix

Law School Address Email Address

Designation

Anticipated Graduation Date City, State, Zip Code Phone

Biographical Information IDC is committed to the principle of diversity in its membership and leadership. Accordingly, applicants are invited to indicate which one of the following may best describe them: Race

Gender

Birth Date

Free DRI Membership In addition to joining the IDC, you can take advantage of the DRI Free Membership Promotion! As a new member of the IDC and if you’ve never been a member of DRI, you qualify for a 1 year free DRI Membership. If you are interested, please mark the box below and we will copy this application and send it to DRI. Also, if you have been admitted to the bar 5 years or less, you will also qualify to receive a Young Lawyer Certificate which allows you one complimentary admission to a DRI Seminar of your choice.

m Yes, I am interested in the Free DRI Membership! 54

68- | IDC QUARTERLY | Third Quarter 2013

(Application continued on next page)

Illinois Association of Defense Trial Counsel

COMMITTEE INVOLVEMENT

All Substantive Law Committees are open to any IDC member. Event and Administrative Committees are generally small committees and members are often appointed by the Board of Directors. Substantive Law Committees are responsible for writing the Monograph for the IDC Quarterly and may submit other Feature Articles. Committees keep abreast of current legislation and work with the IDC Legislative Committee, as warranted. Committees also serve as a resource to seminar committees for speakers and subjects and, if and when certain issues arise that would warrant a specific “topical” seminar, the committee may produce such a seminar.

Please select below the committees to which you would like to apply for membership:

Substantive Law Committees m Commercial Law m Construction Law

m Employment Law m Insurance Law

Administrative Committees m Events m Legislative

m Membership m Young Lawyers





m Local Government Law m Tort Law

Event Committee m Events

Membership Commitment By providing a fax number and email address you are agreeing to receive faxes and emails from the association that may be of a commercial nature. I certify that: m As an Individual Attorney, I am actively engaged in the practice of law, that at the present time a substantial portion of my litigation practice in personal injury and similar matters is devoted to the defense. m As a Corporate Member, we will support the purpose and mission of the Association. m I am currently a Professor or Associate Professor of law at an ABA accredited law school. m I am currently a Student enrolled in an ABA accredited law school. Signed

Date

Membership Investment

*

Recommended Amount: <3 years in practice.......... $15 4-5 years in practice......... $25 Voluntary Political Action Committee Donation * ................................................... $ 6-9 years in practice......... $55 Total Amount Due .................................................................................................... $ 10+ years in practice........ $75 Please Note: IDC dues are not deductible as a charitable contribution for U.S. federal income tax purposes, but may be deductible as a business expense. The IDC estimates that 2.5% of your dues are not deductible because of the IDC’s lobbying activities on behalf of its members. Membership Dues ..................................................................................................... $

Payment Information

— Do Not Fax or Email Credit Card Information —

m Enclosed is check # in the amount of $ . m Visa

m MasterCard

m Please charge Credit Card #

in the amount of $

Name as it appears on the Card

Card Security Code

Billing Address

City, State, Zip Code

m AmEx

Exp. Date /

Thank you for your interest in joining the Illinois Association of Defense Trial Counsel. Your application will be presented to the Board of Directors for approval at their next regular meeting. Until that time, if you have any questions, please contact the IDC office at:

Illinois Association of Defense Trial Counsel PO Box 588 • Rochester, IL 62563-0588 • 800-232-0169 • 217-498-2649 • www.iadtc.org

80 | IDC QUARTERLY | Fourth Quarter 2013

57

What is the IDC? We are the premier association of attorneys in Illinois representing business, corporate, professionals, and other individual defendants in civil litigation. The IDC is an exceptional community of defense attorneys dedicated to improving the judicial system and the practice of law. The IDC is a reasoned and independent voice for fairness in the legal system. We work with the business, insurance, and medical communities to ensure a fair and equal justice system for all litigants.

The IDC is

n An advocate for the legal profession n 1,000 members strong n Looked to for advice and support by the judiciary n A resource for legislators

How is the IDC Making a Difference? The IDC strengthens the practice of law and improves the skills of lawyers that defend individuals and businesses in Illinois. We enhance the knowledge of defense attorneys through our nationally respected publication the IDC Quarterly and the new Survey of Law, by our continuing legal education programs, and committees that focus on specialty practice areas like Civil Practice; Commercial Law; Employment Law; Local Government Law; and Tort Law. The IDC is working to protect the Illinois legal system, demanding a level playing field and resisting attempts to dismantle the jury system. The IDC is a respected resource providing:

n Fact sheets on the impact of pending litigation n Expertise to legislative committees and political leaders n Amicus briefs on legal issues pending before the Illinois reviewing courts

IDC members are as diverse as the clients we represent From big firms and small and all corners of the state, attorneys join the IDC based on our common issues and a common desire to improve our legal system. Over the past five decades, we have grown from an organization of mostly insurance defense attorneys to a broad-based association of litigators who represent an entire range of business and industry throughout Illinois and the United States. The diversity of our membership and clientele informs our independent and balanced view of Illinois’s judicial system and the litigation that affects it.

What are Our Core Values? n To promote and support a fair, unbiased, and independent judiciary n To take positions on issues of significance to our membership, and to advocate and publicize those positions n To promote and support the fair, expeditious, and equitable resolution of disputes, including the preservation and improvement of the jury system n To provide programs and opportunities for professional development to assist members in better serving their clients n To increase its role as the voice of the defense bar of Illinois, and to make the IDC more relevant to its members and the general public n To support diversity within our organization, the defense bar, and the legal profession

Presorted Standard U.S. Postage PAID Permit No. 650 Springfield, IL

ILLINOIS ASSOCIATION OF DEFENSE TRIAL COUNSEL P.O. Box 588 Rochester, IL 62563-0588

ILLINOIS ASSOCIATION OF DEFENSE TRIAL COUNSEL LAW • EQUITY • JUSTICE

CALENDAR of Events

l February 19

IDC / Illinois Judges Association Joint Seminar • Hinshaw & Culbertson LLP • Chicago

l February 20

Executive Committee & Board Meeting • Location TBA • Chicago

l March 24

Executive Committee & Board Meeting • Hinshaw & Culbertson LLP • Springfield

l March 24

Legislative Reception • Sangamo Club • Springfield

l April 16

Executive Committee & Board Meeting • Heyl, Royster, Voelker & Allen, P.C. • Chicago

l April 17

Spring Symposium • Standard Club • Chicago

l May 15

Executive Committee & Board Meeting • HeplerBroom LLC • Chicago

l June 5

Committee Boot Camp • Location TBA • Chicago

l June 26

Executive Committee & Board Meeting • Location TBA • Chicago