Chicago Federal Law Blog

Important Update: Transitioning to New Website

noreply@blogger.com (Jake A. Leahy) — Mon, 12 Dec 2022 20:58:00 +0000

Thank you for visiting. We are currently in the process of moving our blog over to ChicagoLitigationBlog.com. We will continue to provide relevant and up-to-date content, but we will have more resources over there. Please be sure to hit "subscribe" at the new site! Thank you for visiting.

- Jake A. Leahy

Illinois Supreme Court: iPhone Recording of Surveillance Video is Not Barred by Best Evidence Rule (People v. Smith)

noreply@blogger.com (Jake A. Leahy) — Thu, 01 Dec 2022 21:52:00 +0000

Carl Smith Jr. was convicted of residential burglary and sentenced to 6 ½ years’

imprisonment. The conviction arises from the crime victim arriving home to find a door that

did not open properly, and who subsequently found dozens of missing hydrocodone pills,

removed jewelry, and that an apartment window had been broken.

At the trial court, Mr. Smith moved to exclude iPhone video evidence which re-recorded

surveillance video. Mr. Smith argued the videos were not admissible pursuant to the Illinois

Rule of Evidence 1003 and 1004, or alternatively that they are barred by the common law

best evidence rule. In short, Mr. Smith contended that the duplicate video did not meet the

requirements to overcome the preference that the original be admitted. After hearings on

the topic, the Jackson County judge denied the motion to bar admission. Mr. Smith was

convicted after a jury trial. On appeal, the Fifth District Appellate Court affirmed that the

iPhone video footage of the video surveillance system was properly admitted into evidence.

The first question in front of the Illinois Supreme Court was whether the video clips of

surveillance footage re-recorded on an iPhone are admissible pursuant to Illinois Rule of

Evidence 1003 or 1004, or barred by the best evidence rule. The second question the Court

answers is whether Mr. Smith forfeited arguing that the video clips lacked sufficient

foundation to be admissible at trial. The questions about admissibility are reviewed de novo

and the trial court’s decisions are reviewed for abuse of discretion.

In the Supreme Court, Mr. Smith argued the iPhone video clips are inadmissible, as they

are not the originals of the evidence. The Court broke down the rule through multiple layers.

First, it defined the terms “writing and recordings” to include “photographing,” which also

includes “video tapes.” Therefore, the Court reasoned that the clips were considered

“writings and recordings,” as defined in Illinois Rule of Evidence 1001, which is in turn

applicable to the other rules. Further, the Court reasons the iPhone video is a duplicate due

to the “electronic re-recording.” With these definitions, the Rules 1003 and 1004 analysis

then come into consideration. A duplicate is generally admissible to the same extent as the

original, unless there is a “genuine question about the original’s authenticity, or if there are

other reasons that make it unfair to admit the duplicate rather than the original. Rule 1004

also allows the duplicate to be admissible if the originals are lost or destroyed, unless the

originals were destroyed in bad faith.

The Illinois Supreme Court cites the plain language of the rules and specific circumstances

in the case at bar, to determine that the iPhone video clips are considered duplicates as

defined by Illinois Rule of Evidence 1001(4). With that definition, it is then, the Court holds, admissible under Rule 1003.

The Illinois Supreme Court declined to require that the duplicate provide the entirety of the original recording. The Court also rejected the Defendant’s argument that not showing the entire video was unfair, reasoning that there is no no-speculative reason to state that the full recording would have contained relevant evidence. As such, the trial court did not abuse its discretion in admitting the evidence.

Accordingly, the Supreme Court held that video clips recorded on an iPhone, of a video

surveillance recording, is admissible evidence. As to the second question, Mr. Smith

abandoned the foundation argument by not raising it on appeal.

Author: Jake A. Leahy

Nakiya Moran v. Calumet City, Illinois

noreply@blogger.com (Jake A. Leahy) — Tue, 29 Nov 2022 20:00:00 +0000

Nakiya Moran was convicted for murder and aggravated battery with a firearm, arising out of a 2006 shooting in Calumet City, Illinois. After being convicted, the defendant learned that Calumet City had failed to turn over a ballistics report, which tied the firearm used to a different shooting. Moran alleged that this evidence had to have been turned over pursuant to Brady v. Maryland, 373 U.S. 83 (1963) (establishing the rule that the prosecution must turn over all evidence that might exonerate the defendant).

Moran sought postconviction relief under the Brady standard, a state court vacated the conviction and allowed a new bench trial in 2017. The new evidence was admitted at the retrial. Moran was acquitted.

Moran subsequently filed a lawsuit in federal court, seeking damages for the more than ten years he spent in federal prison. His complaint was brought against the city, detectives, and a crime scene technician. The Northern District of Illinois entered summary judgment in favor of the new defendants (the city and its employees), and the District Court denied Moran's leave to file an amended complaint.

The issue in front of the Seventh Circuit Court of Appeals is whether the District Court abused its discretion in denying Moran's leave to file an amended complaint.

In his complaint, Moran's counts arise from: Section 1983, where he alleges the suppression violated his due process rights under Brady; fabrication of evidence, where he must prove a police office manufactured evidence to be used against him falsely (Whitlock v. Brueggemann, 682 F.3d 567, 580 (7th Cir. 2012); and state law claims, including malicious prosecution, civil conspiracy, and respondent superior and indemnity.

The question then turns over the standard upon which a trial judge can determine whether to permit leave to file an amended complaint. To file an amended complaint, the party must obtain written consent of the opposing party, or by obtaining leave from the court. F.R.C.P. 15(a)(2). Districts courts are generally expected to permit leave, unless there is a compelling reason not to, such as futility.

While the standard of review undertaken by the Seventh Circuit is based upon abuse of discretion (where the District Court found the amendment to be futile), the questions of law, which were used to determine the amendment to be futile, is reviewed de novo.

While the Seventh Circuit extensively discusses the facts of the case, the analysis based on the actual merits of the argument is rather brief. In short, the court appears to believe the case to largely be without merit, and therefore, it able to write deferentially to the District Court. The Seventh Circuit also notes that to sustain futility, allegations must be in some way based on fact, rather than be statements that are simply speculative in nature.

This case, including its procedural and past history is important as it stands to show two important concepts. First, it demonstrates the absolute requirement for the prosecutor to turn over all evidence which might be used to exonerate the defendant, in turn, this also shows how important it is that all of said evidence actually be turned over.

Secondly, the Seventh Circuit opinion provides instructive guidance on when a judge may properly deny motion for leave to file an amended complaint. While these are typically supposed to be granted, it is well within the discretion for the trial court to deny it when the allegations are not strong and those that are present, are primarily speculative.

Read the Seventh Circuit's opinion here.

Class Action Suit Filed Against Mercedes Over 3G Internet Compatability

noreply@blogger.com (Jake A. Leahy) — Fri, 04 Nov 2022 18:38:00 +0000

A federal class action lawsuit was filed Thursday against Mercedes-Benz in the Northern District of Illinois. The Complaint brings suit on behalf of Jim Rose, of Illinois; Anita Gian, of New York; and similarly situated individuals. Specifically, individuals who purchased Mercedes vehicles which were equipped with the "MBRACE" systems in their vehicles.

A variety of Mercedes models included this technology, ranging from models created in 2000, up to certain models from 2017; the 2017 models included some of the most expensive offerings, like the G-Class Coupe, S-Class cabriolet, and the S65 AMG. The Complaint alleges however that the technology became effectively obsolete, when wireless carriers upgraded and removed 3G capability in 2022.

The MBRACE system uses 3G connection to report emergencies, and phone roadside assistance. While this system was primarily offered in the more expensive Mercedes-Benz models, the technology was not prepared for the transition away from 3G by wireless carriers. As a result, the high tech systems allegedly no longer was functional.

The Complaint alleges that "no later than 2012," Mercedes-Benz was aware, or should have been aware, that the system would become obsolete. The German car company did not publicly acknowledge that the system would become obsolete until 2021. The Complaint alleges that not only did Mercedes fraudulently conceal this information, but that it had a contractual obligations to remedy the situation by repairing or replacing the system, as outlined in the warranty offered with its vehicles.

The alternative offered by Mercedes is for people to purchase the "Verizon Hum," at their own expense, with their own hardware, and with data or subscription fees on their own dime. The Complaint also notes that this system was designed in 2015, but it has been 4G compatible since then.

An interesting component of the factual elements of the Complaint is that it goes into previous instances where Mercedes similarly was "behind the eight ball" when it comes to adapting to technology. The Complaint references a 2008 class action settlement, In re: Mercedes-Benz Tele Aid Contract Litigation. That case involved technology offered by the manufacturer from 1999 through 2006. That technology relied on analogue systems, which the FCC announced in 2002 would be eventually phased out.

Despite this announcement, Mercedes did not seize selling the analogue depending technology until 2006, two years prior to its obsolescence.

The Complaint alleges several distinct causes of action.

The first cause of action is an alleged violation of the Magnusson-Moss Warranty Act. The Act applies to warranties for consumer products, ultimately requiring that any warranties provide detailed information about what is covered. A company which fails to cover what is expressly stated, may run afoul of this 1975 statute.

The second cause of action is an alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The Complaint makes reference to several provisions of the Act, including language pertaining to "deceptive, fraud, false pretense . . . misrepresentation or concealment . . . omission of material fact . . ." that is likely to "deceive or mislead a reasonable consumer." Ill. Comp. Stat. Section 505/2.

The third cause of action is brought under the Illinois Uniform Deceptive Trade Practices Act. This Act runs very similarly to the Consumer Fraud and Deceptive Business Practices Act, and incorporates many of the same sorts of alleged violations. This Act uses language such as "false statements, misrepresentations, and omissions," but these must be tied to factors like the "characteristics, quality, and source of goods and services in a manner that is likely to deceive or mislead a reasonable customer." 815 ILCS Section 510/2/.

The primary distinction between counts two and three is that count two applies to the likelihood to deceive a consumer, whereas the statute relied upon in count three requires that the "deception be grounded in characteristics, quality, and source of goods or services."

The fourth cause of action is for Breach of Express Warranty, a sate law claim which applies when a merchant sells good, a warranty is offered, and said warranty is not followed. 810 ILCS Section 5/2-313 & 5/2A-210.

The fifth cause of action is for Breach of Contract / Common Law Warranty, brought under Illinois common law. The Complaint alleges Mercedes had a contractual obligations, and its warranty, by refusing to cure the defects cause by the obsolete technology included in the MBRACE system.

The sixth cause of action is Fraud By Concealment, also brought under Illinois common law. This portion relies upon Mercedes' representations that its vehicles were among the safest, yet it made no disclosure that this program would become obsolete.

The seventh cause of action is Unjust Enrichment, also brought under Illinois common law. This is grounded in the company's knowledge that the technology would become obsolete, yet it did nothing, changed, nothing, and fixed nothing; according to the Complaint.

The eighth cause of action is brought under the New York General Business Law Section 349. This allegation is characterized by material misrepresentations made about the safety, reliability, and durability of its vehicles; and that Mercedes materially concealed facts about the "imminent obsolescence" of MBRACE.

The ninth cause of action is for False Advertising, brought under Section 350 of the New York General Business Law. This allegation is also based on the same above alleged material misrepresentations, but it also alleges that this caused deceptive and misleading advertising; and that these deceptions were likely to mislead a reasonable consumer.

The tenth cause of action alleges Breach of Express Warranty, brought under New York statute. This allegations stems from the fact that Mercedes offered a Limited Warranty on its vehicles, and that because the MBRACE system was defective, it had a duty under the warranty to repair.

The eleventh cause of action is for Breach of Contract / Common Law Warranty, based on New York common law. These allegations are largely the same as Count five, which brought forward the same allegations, but under Illinois common law.

The twelfth cause of action is for Fraud by Concealment, brought under New York Common Law. This count largely mirrors count six, which was for the same tort under Illinois common law.

The thirteenth and final cause of action is for Unjust Enrichment, brought under New York common law. This cause of action largely mirrors the seventh count of the Complaint, which alleged the same under Illinois common law.

In all, the Complaint seeks to have damages awarded to the entirety of the class. The Plaintiffs have demanded a trial by jury, and they are not seeking a specific amount in damages at this point.

Read the entire Complaint here.

Jake A. Leahy

Chess World in Uproar as Defamation Lawsuit Filed Against Reigning World Champion Carlsen

noreply@blogger.com (Jake A. Leahy) — Thu, 27 Oct 2022 18:17:00 +0000

The chess world has been turned upside down, by a 19-year-old champion who defeated the perennial greatest in the world, Magnus Carlsen. After the teenager defeated Carlsen at the Sinquefield Cup tournament ("Cup") in September of 2022 in St. Louis, Missouri, rumors swirled about alleged cheating by the teenager, Hans Neiman, the champion of the important chess tournament. While it was not the first time Carlsen was defeated by Nieman, it was the first time that happened at an officially sanctioned event.

While Carlsen never directly accused Nieman of cheating, he is purported to have done so in so many words. Carlsen decided to not participate in the rest of the Cup, something nearly unheard of for a reigning world champion. Soon thereafter, the two faced off again at a new tournament, the Julius Baer Generation Cup. After one move, Carlsen decided to forfeit the game and not move forward.

Notably, this is the not the first time Neiman has been accused of cheating. In fact, Neiman has admitted to cheating in past matches, including matches with money on the line. Despite the speculation that Neiman has continued to cheat, including in recent matches, there has been no hard evidence offered to suggest that Neiman cheated in the Cup earlier this year.

Resulting from these "allegation," Neiman alleges harm as a result of the allegations, he alleges retaliation, including through Chess.com, a prominent chess community which acquired Carlsen's company through a merger for $83 million.

The Complaint characterizes Carlsen's "accusations" as having had "no legitimate basis." Neiman does not allege that Carlsen actually made any specific direct accusations, rather that his course of conduct would be reasonably perceived as defamatory allegations. The Complaint specifically states that Carlsen knew:

(i) the public would believe his accusations of cheating against Neimann, even though Carlsen had no legitimate basis to believe Neimann actually cheated against him;

(ii) he could ensure that no reputable chess tournament would invite Niemann to compete in the future; and

(iii) his false accusations would cause other top chess players to boycott Niemann as well.

Neiman seeks $100 million in damages, based upon Neiman being banned from Chess.com after the purported allegations. The Complaint also names Hikaru Nakamura, a prominent Chess.com streamer for "amplifying" the purported allegations; against Chess.com executive Danny Resnch, for alleged defamatory press releases; and against Chess.com for its purported role in the retaliation.

Time will tell what happens in response to this. The only certainty is that the chess world will continue to be upside down with everything going on.

Read the entire Complaint filed in the United States District Court for the Eastern District of Missouri here.

Jake A. Leahy

Court Finds Uber Arbitration Agreement Invalid, In-App Terms and Conditions Not Enough

noreply@blogger.com (Jake A. Leahy) — Wed, 19 Oct 2022 16:44:00 +0000

A Pennsylvania Appeals Court considered the extent that a purported arbitration agreement is enforceable for riders on the Uber app. It is increasingly commonplace for users to "agree" to clickthrough, scroll through, or hyperlinked terms and conditions, in order to use an app or other sort of online program. While these sorts of agreements are generally considered to be acceptable, there may be certain provisions which require further attention.

Shannon Chilutti filed a lawsuit against Uber after being injured while riding in the car. Uber contends however, that Chilutti may not file a lawsuit and request a jury trial because of the mandatory arbitration agreement which is included in Uber's terms and conditions. On the first page of the court's decision, the court tips its hand, characterizing the central issue as "whether a party should be deprived of their constitutional right to a jury trial when they purportedly enter into an arbitration agreement via a set of hyperlinked 'terms and conditions' on a website or smartphone applications that they never clicked on, viewed, or read." Chilutti v. Uber Technologies, Inc., Pa. Super. Ct., No. 1023 EDA 2021, 10/12/22, (Emphasis omitted).

The Pennsylvania trial court ruled in favor of Uber, granting Uber's petition to compel arbitration. The Appellants raised one issue on the appeal, "Did the trial court err in granting [Appellee's] Petition to Compel Arbitration . . . [when] Appellees failed to establish that Uber's registration process and/or subsequent emails properly communicated an offer to arbitrate? Chilutti, No. 1023 EDA 2021.

The first issue considered by the court was whether the trial court's order compelling arbitration is considered a final and appealable order, and therefore, whether jurisdiction is proper. The court states that the an interlocutory order is final and appealable if it is "(1.) separable from and collateral to the main cause of action; (2.) the right involved is too important to be denied review; and (3.) the question presented is such that if review is postponed until final judgment in the case, the claimed right will be irreparably lost." Commonwealth v. Wells, 719 A.2d 729, 730 (Pa. 1998).

The court's analysis here primarily arises under the third prong. Namely that should the appeal be denied and Chilutti be required to go through arbitration, there will be no further judicial action, as the arbitration proceedings would have been completed. The standard to review arbitration is in fact, virtually impossible. Courts may only intervene in nonjudicial arbitration when there is some sort of unjust award which results from fraud, misconduct, corruption, or other irregularity. Sage v. Greenspan, 765 A.2d 1139, 1142 (Pa. Super.2000).

The next section is the primary substantive issue causing the appeal. The second portion involved arbitration, browse wrap agreements, and the right to a jury trial. Chilutti argues that the agreement does not represent a meeting of the minds, but cedes that perhaps registrants do in fact agree to pay money for ride sharing services with the company. Chilutti, No. 1023 EDA 2021. The court adopts a two part test to decide whether arbitration should in fact be compelled. The test first asks whether there is in fact a validly formed contract including an arbitration agreement; and the second portion asks whether the dispute arises within the cope of the validly formed agreement. Smay v. E.R. Stuebner, Inc., 864 A.2d 1266, 1270 (Pa. Super. 2004).

The court largely cites to a Ninth Circuit case, where the court affirmed the district court's denial of a motion to compel when the design and content of the websites did not properly call attention to the terms and conditions, or when pressing "continue" constituted acceptance. The court here cites to that standard and notes that the terms and condition tab here is on a website which is not underlined, capitalized, or italicized, and also after significant personal information was already provided by the user. Berman v. Freedom Fin. Network, LLC, 30 F.4th 849, 855-56 (U.S. 9th Cir. 2022).

Despite the use of Berman, the court eventually rules that the Berman standard is not enough, rather it is necessary to show that a party unambiguously manifested asset to a specific arbitration agreement. The test outlined by the court and now established requires, "explicitly stating on the registration websites and application screens that a consumer is waiving a right to a jury trial when they agree to the company's "terms and conditions," and the registration process cannot be completed until the consumer is fully informed of that waiver; and (2.) when the agreements are available for viewing after a user has clicked on the hyperlink, the waiver should not be hidden in the "terms and conditions" provision but should appear at the top of the first page in bold, capitalized text." Chilutti, No. 1023 EDA 2021.

In short, compelling arbitration, at least in Pennsylvania, will require a company to explicitly state that the user is waiving his or her right to a trial by jury. Further, this need to be bold and capitalized at the top of the first page an agreement. While lawyers may understand what an arbitration agreement entails, the terms are too ambiguous for a non-attorney to understand that the "arbitration agreement" in the middle of page three, actually amounts to a voluntary renouncement of a constitutionally protected right to a trial by jury.

While this decision is by no means binding on the rest of the country, it provides an important incite into what sorts of requirements may be necessary in order to establish valid contracts in the digital age.

Chilutti v. Uber Technologies, Inc., Pa. Super. Ct., No. 1023 EDA 2021, 10/12/22.

Biden Administration Looks to Change Who is Considered a Gig Worker Under Proposed DOL Regulation

noreply@blogger.com (Jake A. Leahy) — Tue, 11 Oct 2022 18:22:00 +0000

Tuesday morning, the Department of Labor announced new regulations pertaining to how gig workers are classified. The battle has often taken place in the past at the state level, for example, ride share companies recently invested heavily to defeat propositions in California which would have required that drivers for Uber and Lyft be classified as traditional employees, rather than independent contractors.

The regulation will require a review period and comments will be received. The 184 page proposed regulation includes a new framework, which departs from the Trump-era test, which primarily considered 1.) the nature and degree of control over the work; and 2.) the worker's opportunity for profit or loss. While the previous test included three other factors, those two were the primary considerations as to whether a worker can be classified as an independent contractor.

Under this test, the Eleventh Circuit ruled that an employer's control of actions in certain instances is justified and is considered to be irrelevant under the economic reality analysis, since the primary analytical framework requires a review of the "nature and degree of the employer's rule," rather than a review of why said control exists. Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1316 (Eleventh Circuit 2013).

The new test purports to establish a "totality of the circumstances" review, which will include several new factors into a balancing test. The regulation states that this sort of review is well-established, as a six pronged test was established in the Supreme Court opinions Rutherford and Silk.

The new test would review the (a.) economic reality test, based upon multiple factors to form a totality of the circumstances review; and (b.) economic reality factors, such as (i.) opportunity for profit or loss depending on managerial skill, (ii.) investments by the worker and their employer, (iii.) degree of permanence of the work relationship, (iv.) nature and degree of control, (v.) extent to which the work performed is an integral part of the employer's business, (vi.) skill and initiative, and (viii.) additional factors.

The proposed regulations will surely have a major impact on any employer with independent contractors. If and when it officially kicks in, a thorough review will surely be warranted to ensure proper compliance.

Read the proposed DOL regulation here.

New Complaint Filed Against Lexis Nexis, Over Personal Information Collected and Distributed to Law Enforcement

noreply@blogger.com (Jake A. Leahy) — Mon, 03 Oct 2022 16:29:00 +0000

A privacy suit against Lexis Nexis Risk Solutions was removed to federal court last week, six weeks after it was originally filed in the Circuit Court of Cook County. The complaint was filed by several Chicago-area activists, who are objecting to Lexis Nexus’s bulk sale of personally identifiable data, specifically regarding the sale of this information to law enforcement agencies.

Lexis Nexis offers data available to purchase, the company claims the information is 99% accurate, and that there are 276 million so-called “Lexis IDs.” Put into context, there are just over 258 million American adults, according to the 2020 census.

The complaint, primarily brought by immigration activists, alleges that law enforcement is permitted to buy this information, including license plate scanner information, and is in turn, able to obtain farm more information than would be possible through other methods. Namely, law enforcement is able to obtain these records without seeking a court order, subpoena, or any other sort of process. In fact, the complaint alleges that Immigration and Customs Enforcement (“ICE”) has a $22 million annual contract with Lexis Nexis.

While the complaint alleges issues with the sale of this information generally, it is notable that government agencies are often able to purchase information that others would not be able to. For example, license plate scanner information can provide a tremendous amount of insight into an individual’s whereabouts. However, this appears to only be offered to law enforcement agencies.

The complaint includes counts under the Consumer Fraud and Deceptive Business Practice Act under 815 ILCS 505; Unjust Enrichment; Intrusion Upon Seclusion; and Declaratory Relief. The complaint outlines that the overarching legal theory is that the Illinois common law prohibits capturing private information and redistributing it without compensation and consent.

The breadth of the information included in these reports is quite expansive. Lexis included some information where information originates from, including everything from water bills, to potential cell phone tower pings, to rental history, or holding status.

While it would appear that the complaint faces an uphill battle moving forward, any findings in favor of the Plaintiffs may have significant ramifications for law enforcement and data collection companies alike. It is also interesting to consider this lawsuit in the context of the surge of litigation involving the Biometric Information Privacy Act ("BIPA") in Illinois. While BIPA is not at concern in this case, the general movement towards protecting personally identifiable information, in Illinois specifically, has created significant barriers for companies involves with collecting certain types of information.

Read the complaint here.

More Biometric Information Privacy Act Litigation, BIPA Suit Against Amazon Removed to Federal Court

noreply@blogger.com (Jake A. Leahy) — Thu, 22 Sep 2022 15:36:00 +0000

A Biometric Information Privacy Act Complaint against Amazon was removed to the Northern District of Illinois on Wednesday morning. The class action Complaint alleges that Amazon unlawfully obtained biometric information of its employees at several locations.

Notably, the suit states that it is unclear how long Amazon stores the biometric information, which likely runs afoul of the Illinois statute. Among other portions of the Act, the Complaint alleges that Amazon knowingly disregarded the requirements to inform employees that biometric information was being collected, that a written release be obtained prior, and that the company was profiting off of the information.

One particularly interesting element of the Factual Background portion of the Complaint is its explanation of BIPA, including references to its legislative history. Specifically, the Complaint outlines how BIPA was created after Pay by Touch, which provided fingerprint scanners to grocery retailers specifically across Illinois, filed for bankruptcy, and as a result, the General Assembly was concerned about how said information might be subsequently sold in the bankruptcy proceedings.

Among the issues with Amazon’s technology, includes its facial recognition technology, which collects, maintains, and utilizes information of its individual employees. Not only does Amazon collect the information through the technology, per the Complaint, but it also stores the information in a searchable format through various databases.

While many raise issues regarding how BIPA has adversely impacted employers who may not have been aware of the violations, the alleged issues here involve the use of biometric collection information as recent as earlier this year.

The Complaint alleges that despite Amazon surely being aware of the Illinois law, it has at least thousands of these types of factual recognition cameras across its facilities in the state of Illinois.

The causes of action listed in the complaint include: 1.) Failure to Institute, Maintain, and Adhere to Publicly Available Retention Schedule and Destruction Guidelines, pursuant to 740 ILCS Section 14/15(a); Failure to Obtain Informed Written Consent and Release Before Collecting or Obtaining Biometric Identifiers or Information, pursuant to 740 ILCS Section 14/15(b); Sale, Lease, Trade, or Otherwise Profit from Biometric Identifiers and Information, pursuant to 740 ILCS Section 14/15(c); and Disclosure or Dissemination of Biometric Identifiers and Information Before Obtaining Consent, pursuant to 740 ILCS Section 14/15(d).

The Prayer for Relief portion asks the court to rule on the aforementioned issues, as well as injunctive relief, and attorney’s fees. It seems like every day, there is a new suit filed under the Biometric Information Privacy Act, these sorts of claims surely do not appear to be going away anytime soon.

Jake A. Leahy

Breach of Contract Complaint Filed Over Unpaid Marketing Materials

noreply@blogger.com (Jake A. Leahy) — Tue, 20 Sep 2022 18:06:00 +0000

Xpressdocs Partners, L.P. ("ExpressDocs") filed a breach of contract lawsuit Monday morning against D'Aprile Properties, LLC, Midwest Lending Corporation, and Ryan D'Aprile ("D'Aprile"), individually; in the Northern District of Illinois, alleging breach of contract in the amount of $317,391.57 for alleged marketing services rendered. The Complaint alleges that the Defendants are ultimately one and the same, as D'Aprile, and the entities largely operate in the same fashion, as such, it alleges the Defendants together failed to pay the marketing bills for over six months.

Xpressdocs provides a wide variety of marketing services, its website lists brand management, automated direct mail, and print and direct mail fulfillment; as the three primary tabs of services provided. Xpressdocs also is geared towards specific industries, with Real Estate being listed as the first option under "By Industry," on its website.

Ryan D'Aprile is a real estate agent based in Illiniois, which also offers financing services and is licensed in Illinois, Indiana, Michigan, Wisconsin, and Florida. Its mortgage financing arm appears to be separate from the real estate portion, but D'April is listed under both entities.

The complaint alleges, and includes exhibits, demonstrating that the parties have had a Marketing Services Agreement on the books since 2016, this agreement purportedly included a variety of services, including digital services, direct mail, and other sorts of similar activities.

The fact-intensive Complaint goes into some interesting considerations as to corporate structure of D'Aprile's holdings, which helps to lay the foundation to naming each entity. For example, the Complaint lays out that when payments were remitted, they came from inconsistent sources, sometimes from D'Aprile individually, and sometimes through the different companies.

The Complaint admits that D'April had attempted on several occasions to setup a payment plan with Xpressdocs, however, Xpressdocs alleges that these efforts were not good faith and were only to "string along" the company, in the hopes that it would continue to provide marketing services.

The Causes of Action against D'Aprile and his holdings include, Breach of Contract, Quantum Meruit (in the alternative), Suit on Sworn Account, Conspiracy, and Violation of the Theft Liability Act. In total, Xpressdocs is seeking relief in the amount of the entire unpaid amount, reasonable attorney's fees, and pre-judgment and post-judgment interest.

Read the entire complaint here.

Jake A. Leahy

Several Class Actions Filed Over Facebook Pixel Use by Subscription Platforms

noreply@blogger.com (Jake A. Leahy) — Tue, 13 Sep 2022 13:58:00 +0000

Several prominent companies have been hit with digital privacy class action suits over the past week in the Northern District of Illinois. Lisa Cuevas filed a class action in the Northern District of Illinois against Bloomberg L.P., alleging violations of the federal Video Privacy Protection Act, 18 U.S.C. Section 2711 (“VPPA”). Plaintiff claims that Defendant’s knowingly disclosure digital privacy information of its digital subscribers to a third-party. Namely, the purported information was distributed to Meta (parent company of Facebook).

Brittney Wright’s case against Buzzfeed brings forward a largely identical claim as the one brought against Bloomberg just a few weeks prior. Likewise, there is another similar suit pending, which was filed recently, against Warner Brothers by the same firm, Peiffer, Wolf, Carr, Kane, Conway & Wise. A similar suit was filed against Time Warner.

The Bloomberg LP complaint alleges the company distributed personal Facebook Identification information and viewed video URL information to Meta. This information was distributed via the Facebook Pixel, which facilitates the transfer of personal data.

While cookies are a near constant across the internet, each of these complaints include a fairly robust discussion of the respective obligations under federal Video Privacy Protection Act, specifically for subscription services. Each of these complaints indicate that paid subscribers to premium services, had their personally identifiable viewing information released to the third-party, Meta, without first obtain written consent from the user.

One provision cited in the complaints of the Video Privacy Protection Act requires that consent to collect personally identifiable information must be collected “in a form distinct and separate from any form setting forth other legal or financial obligations of the consumer.”

While these suits seem on their surface similar to the numerous recent claims under Illinois’ Biometric Information Privacy Act (740 ILCS 14/5), there are some stark differences. For starters, the Illinois Act was passed in 2008, and it largely sought to protect consumers from the issues discussed in the Act. The Video Privacy Protection Act, on the other hand, was passed in 1988 in response to Robert Bork’s VHS rental history being released during his Supreme Court nomination history.

Besides the expansion beyond VHS or video rentals, another stark difference arises as well. The federal law authorizes up to $2,500 in actual damages for disclosure outside the ordinary course of business. This stands in stark contrast to the Illinois biometric law, which does not require a showing of actual damages.

Read the Chicago Federal Law Blog.

Onslaught of BIPA Lawsuits Continue to Threaten Businesses Across Illinois

noreply@blogger.com (Jake A. Leahy) — Wed, 07 Sep 2022 14:37:00 +0000

While several prominent claims under Illinois' "Biometric Information Privacy Act" have already settled, and claimants have received their checks (Facebook, Google, etc.), dozens of claims continue to remain in federal courts across Illinois. According to Law.com's "Radar," there were 34 cases filed between the Northern, Central, and Southern Districts of Illinois in August.

The 34 number is larger than the average of 21 complaints filed monthly over the past calendar year, the sheer volume each and every months suggests this sort of litigation is unlikely to go away anytime soon. The unique sort of lawsuits, which arise from the landmark biometric privacy legislation which puts Illinois on an island on its own, has continued to create a unique headache for entities large and small.

Litigation pertaining to the Act has been far reaching, but caselaw has continuously painted an increasingly clear picture as to obligations when a violation did in fact take place. For example, Rosenbach v. Six Flags Entertainment Corp., 2019 IL 123186 (Ill. 2019), reiterated that the plain language of the statute specifically authorizes claims to move forward, even when no actually injury is demonstrated. This is crucial, as it would seem to be very rare when an actual injury took place under this law. The statute specifically authorizes "aggrieved [person] shall have a right of action." 740 ILCS 14/1.

When it comes to whether an insurance company's defense of an insured entity is precluded by the Employment-Related Practices Exclusion, often a key provision of a commercial insurance policy, courts have come to different decisions, often depending upon the facts. Understanding the current status of the law in this area is unclear, as the Seventh Circuit's decision earlier this year in USA Gymnastics v. Liberty Insurance Underwriters, No. 20-1245 (7th. Cir. 2022), which pertains to timelines of appealing of a requirement to defend an insured, may raise more questions than answers when it comes to specific fact specific patterns.

In the last month, separate class action complaints have been filed against companies in numerous industries and sizes, including not only giants like Youtube, Home Depot, and Amazon; but also several lesser known companies based in Illinois.

The takeaway for businesses? There may still be serious concerns regarding previous BIPA violations. Just because no lawsuit is pending, does not mean the company is in the clear at this point. There is no shortage of BIPA litigation. While the law is still rather ambiguous in certain contexts, it is unambiguous that BIPA is here to stay and companies will continue to shell out massive checks as a result.

Read the statutory text of BIPA here.

Business Lender Appeals SBA's Denial of PPP Forgiveness Over Implementation of "Exclusion Rule"

noreply@blogger.com (Jake A. Leahy) — Wed, 31 Aug 2022 18:58:00 +0000

Earlier this week, Franklin Capital Holdings LLC ("Franklin Capital") filed suit against the United States Small Business Administrator ("the SBA") in the United States District Court of Northern Illinois, after the SBA denied forgiveness of Franklin Capital's Paycheck Protection Program ("PPP") forgivable loan.

PPP was administered in 2020 as part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). Rather than allocating grants to businesses, the program was administered as a "forgivable loan," meaning that businesses would have their loan forgiven in its entirety should they meet certain qualification criteria.

The beginning of the complaint addresses the procedural requirements to bring suit in Federal court pertaining to an adverse administrative decision. Namely, that Plaintiff is entitled to judicial review of a Final Administrative decision. After the SBA reached its final decision, it was then appealed to Office of Hearings and Appeals ("OHA"), as required by law. After those two agencies issued final decisions, then an appeal to Federal district court is permissible, pursuant to the Code of Federal Regulations. As such, Franklin Capital appealed to the Northern District of Illinois.

To qualify for forgiveness, an entity must use at least 60% of funds obtained from PPP for payroll expenses, the entity must be considered an "eligible recipient," and a formal application must be submitted.

As the CARES Act passed in March of 2020, interpretation of the statute and subsequent regulatory guidance sometimes came swiftly and abruptly, sometimes bypassing the typical thirty day notice requirement to implement regulations under the Administrative Procedures Act. The SBA instituted an Interim Final Rule on April 15, 2020, less than one month after passage of the PPP program. The purported purpose of the regulation's expedited status was to assure that small businesses would be able to apply for the loan in a way which they have the full understanding of its requirements.

That April 15, 2020 Rule excluded financial businesses primarily engaged in lending or investments from applying for relief under the CARES Act. However, Franklin Capital applied for the loan initially prior to the April 15 date, as such, Franklin Capital argues that it was operating pursuant to the guidance at the time, namely, the statutory language passed by Congress, which Franklin Capital asserts, did not preclude those types of financial services.

Franklin Capital also notes that the SBA did not allege that the company was ineligible due to its size, amount, or the use of funds; the sole basis is based on the type of business. Although the initial loan application was accepted, notwithstanding these requirements, the SBA argued in Administrative hearings that the refusal to object to the privately executed loan, did not amount to an approval of SBA funding.

In order to overcome the previous Administrative decisions, Franklin Capital must demonstrate that the SBA's final agency decision went against the Congressional statute and that the decision was arbitrary and capricious. Franklin Capital notes that Congress had intended that "all business concerns," which Plaintiff argues, means that Congress did not intend for the SBA to use its previous rules and regulations pertaining to availability of SBA loans. The SBA "Exclusion Rule," which predates the pandemic, already excluded certain types of organizations, including, financial institutions, real estate developers, finance companies, and life insurance businesses. While Plaintiff does not object to the validity of the prior regulations, it argues that applying this criteria, in light of the "all business concerns" standard, runs directly counter to the Congressional intent.

To support its assertion as to the expansiveness of the Congressional intent, Franklin Capital also cites the second round of PPP funding which was later passed by Congress in 2020. That second round, excluded certain types of businesses, including, specifically restricted "financial businesses primarily engaged in the business of lending." Plaintiff asserts that the second round, in essence, adopted the "Exclusion Rule," based on the language of the statute, but this language was not included in the first round.

Franklin Capital further asserts the SBA decision was Arbitrary, Capricious, and an Abuse of Discretion. Notably, the complaint cites other decisions made by the SBA. One of the reasons given as a basis to determine the type of business was that the company had used the code "522220" on its tax return, indicating its specific sector in the financial services industry. The complaint alleges that publicly available PPP data shows 163 entities were listed under the exact same code, who were granted student loan forgiveness. In fact, 64 of said entities were approved for the loan after the effective date of the April 15 Regulation.

The complaint prays that the court reverse the administrative decisions; declare that the rule's application runs contrary to statute; declare that the April 15 Regulation could not be applied; declare that the April 15 Regulation's "Exclusion Rule," was arbitrary and capricious; declare that Exclusion Rule's application was not statutorily authorized; declare that denial of loan was arbitrary and capricious; aware costs and reasonable attorneys' fees; and other relief the court deems just and proper.

Appealing a final administrative decision to federal court is always an uphill battle. The reality is that finding a decision was arbitrary and capricious is not an easy task, however Franklin Capital does include some helpful bits of information that provide some insight into the inconsistent decisions coming from the SBA. The one factor that I find most helpful to Franklin Capital's decision is regarding the code "522220." Given that this number helps explain, at least in portion, the decision of how to classify the entity, it seems like a clear red flag that so many other similarly situated organizations were able to obtain funding. This case may have far reaching impact to other sectors as well, especially those which were deemed ineligible for PPP funding in the early days of its implementation.

Read the entire complaint here.

Federal Court Finds University Remote Exam Scan as Unreasonable Under Fourth Amendment

noreply@blogger.com (Jake A. Leahy) — Tue, 30 Aug 2022 14:45:00 +0000

For many university students, the “new normal” often includes room scans during remote proctored exams. Despite the protocols obvious relation to the integrity of exams, this practice has now been ruled unconstitutional by a federal Judge in the Northern District of Ohio.

A chemistry student filed suit against Cleveland State University, a public institution of higher education. The federal court granted summary judgment in favor of the plaintiff, the Cleveland State student. The plaintiff’s argument centered around the notion that the room scan was a search pursuant to the Fourth Amendment. And as such, it was an unreasonable search inconsistent with the Fourth Amendment to the United States Constitution.

In order for the state action to be considered a search, they found that the plaintiff must demonstrate a subjectively reasonable expectation of privacy, furthermore, society must provide for said expectation to be reasonable. Here, the plaintiff was in his home, which is subject to heightened scrutiny, but he was also in his bedroom.

While the university argued that this sort of room scan is “standard industry practice,” and while the record did not reflect that any other student objected to the practice, the court reasons that privacy in the bedroom is one of the bedrock places upon which society can agree that privacy should be expected.

The court also specifically analyzed the case under the Wyman v. James, 400 U.S. 309 (1971) framework. Wyman involved a welfare beneficiary who was denied benefits after refusing to allow a caseworker to enter into the home. In that case, the Supreme Court ruled in favor of the state, despite recognizing the heightened scrutiny as applied to searches of the home. The Court reasoned that the entrance was not a search, as refusal was not criminal and not compelled, rather monetary benefits were solely tied to the entry. The Plaintiff recognized that Wyman provides some strong authority to suggest that the national room scan. However, the Court accepted the argument, recognized Wyman’s lack of general recognition, and distinguished it from the case at bar.

It is interesting that the Court analogized this case more with some cases from the Appellate level which distinguished fact patters from Wyman, rather than to go with the binding Supreme Court precedent. It is fairly obvious that a room scan of items in plain view is far less intrusive than a government officer entering into one’s home. Likewise, the inability to remotely take a test from home, seems like a far lesser punishment than refusing entitlement benefits. Yet, the Court did elect to take the argument that is much stronger when it comes to policy, but perhaps not stronger when it comes to stare decisis.

After establishing that the investigation constitutes a search, the next question for the court to consider was whether the search was reasonable. The determination of whether a search is reasonable, requires the court to balance the intrusion on Fourth Amendment interests, with the promotion of government interest. Although the Constitution outlines a warrant requirement, a warrant is not absolutely required. The court reasons that if the search is reasonable absent a warrant, then the search is perfectly constitutional.

To determine whether the government has a special need, which therefore permits further intrusion, the court looks at several factors: (1.) the privacy interest; (2.) character of intrusion; (3.) extent of government concern; and (4.) efficacy of the means of concern. The court here found that the privacy interest of the bedroom and home was still a major privacy interest, notwithstanding the Plaintiff’s status as a student. The character of the intrusion weighs an interesting factor. Namely, that due to the pandemic, a student concerned with privacy did not in fact have an option to take online classes. This suggests that the court’s reasoning may not withstand a similar type of protocol for an online optional class. The court acknowledged that the government interest here, clearly weighs in favor of the Defendant, to support the integrity of the exam. Finally, the court recognizes that other safeguards would also advance the government’s interest, such as recording students during exams or employing remote proctors.

On balance, the court concluded Plaintiff’s privacy interests in his home, outweigh Cleveland State’s interests in scanning his room. In turn, the court found that Cleveland State’s procedures of room scans was unconstitutional.

As reference above, this decision may raise more questions than it answers. For example, are room scans unconstitutional in connection with remote-optional exams, rather when they were required during the pandemic? Despite the court’s reasoning on efficacy, would a remote proctor who is watching the bedroom, not also amount to an unconstitutional search and seizure. While the court’s reasoning is interesting, it would seem hard to believe that this decision will not be reversed on appeal.

Read the court opinion here.

Jake A. Leahy

Seventh Circuit Throws Out RICO Case Against ComEd

noreply@blogger.com (Jake A. Leahy) — Tue, 23 Aug 2022 18:56:00 +0000

A $150 million class action lawsuit against ComEd's parent company, Exelon, had previously been filed and appealled to the Seventh Circuit. The lawsuit points to the alleged bribery and numerous indictments, including "Public Official A," former House Speaker Mike Madigan, as a basis to bring forward the complaint under the Racketeer Influenced and Corrupt Organizations Act ("RICO").

Yesterday, the Seventh Circuit agreed with the District Court to toss the case. The injury alleged was based upon rate increases deriving from the fact that ComEd had been bribed by the former Speaker of the Illinois House. The District Court had dismissed the suit as it stated that paying a state mandated utility rate is not a cognizable injury under RICO, the Appellate Court affirmed.

The Seventh Circuit opinion goes into some detail about the type of corruption that was allegedly in play in Springfield and beyond. The court states that through the scheme, ComEd paid bribes to people associated with the Madigan enterprise and that in return, favorable legislation to ComEd was passed through the Illinois House of Representatives. The primary two specific bills, which were signed into law, involved the Energy Infrastructure and Modernization Act of 2011; the 2013 amendments to the 2011 legislation; and the Future Energy Jobs Act of 2016.

Some of the bribes that were allegedly paid included three Madigan directed subcontractors who did "little or no work," a contract with a Madigan affiliated law firm, and paid interns from the Speaker's Ward. Notably, the 2013 bill was originally vetoed by then Governor Pat Quinn. The Speaker called it up for a vote again in an override attempt. The Speaker was able to swing several Democratic legislators who had previously voted against the legislation, to now vote for it. He was successful, the bill was passed into law absent a signature from the Governor.

The legislation that was passed in 2013 changed the way energy was regulated in several ways. First, it limited the authority of the ICC. Rather than have fairly broad authority to determine rates, the rate increases were now largely determined by statute. Additionally, certain infrastructure improvements were authorized by the utility and ComEd was allowed to pass on that cost to the consumer.

Regarding the 2016 law, the Speaker also had six members of a committee removed, members who were likely to vote against the bill. Rather than face committee opposition, it passed unanimously. That bill allocated billions for nuclear power plants, a new fee based on Zero Emissions Credits, and new utilities.

The Seventh Circuit's analysis of the complaint focuses on the "filed rate doctrine." This doctrine states that a filed rate has the "force and effect" of a statute. As this is the case, Illinois courts do not have the authority to change rates for any reason.

The court construes the complaint as seeking the court to retroactively adjust the rates that had been paid, which runs afoul of the filed rate doctrine, which has also been largely adopted by federal courts. The court relies heavily on Keogh, 260 U.S., a U.S. Supreme Court decision which found that in order to sustain an injury of a legal right violation under RICO, that an injury had not occurred when a company paid a carrier's rate.

The court's decision strikes a blow to the RICO claim against ComEd, largely due to the fact that ComEd's decision making is interpreted as subjected to similar deference as a government actor.

Read the opinion here.

Michigan Tribunal Rules Wayfair Does Not Create Nexus for Local Tax Based on Resident Agent

noreply@blogger.com (Jake A. Leahy) — Mon, 22 Aug 2022 17:20:00 +0000

The 2018 Supreme Court decision in South Dakota v. Wayfair overturned the 1992 decision Quill Corp. v. North Dakota, which was a decision that strictly prohibited states from imposing sales taxes on vendors through mail order or internet businesses unless the vendor had a "physical presence" in the state. That decision, which came in the early days of the internet, represented a strikingly different world of internet sales. For example, Amazon was still two years away from its launch and Jeff Bezos had yet to even sell a book online.

The Michigan Tax Tribunal recently issued a decision in Apex Laboratories International, Inc. v. City of Detroit. This matter was brought forward after years of continued litigation, as the case was remanded to the Tribunal from the Court of Appeals over the question of whether the the Supreme Court's Wayfair decision changed the ruling as to whether Apex could be found liable for local taxes instituted by the City of Detroit.

In its recent decision, the Michigan Tax Tribunal found that its prior decision is unaffected by the Supreme Court's Wayfair decision. The Michigan Tax Tribunal had previously found that the company's explanation that "Detroit was listed for administrative convenience convincing." While the City of Detroit argued that because the company listed Detroit on its tax returns, based on its registered agent, it should be subject to the city's corporate tax.

Upon remand, the case was sent back to the Michigan Tax Tribunal in order to focus their arguments on "Wayfair, Quill, and the Due Process and Commerce Clauses, and to allow the Tribunal to make a ruling in the first instance."

The forty-four page decision provided an expansive explanation of the procedural history, the Supreme Court's decisions, and other similar issues involved. However, its actual decision was fairly short and to the point. The Tribunal's decision found that the Corporation did not have nexus with the City of Detroit, and therefore was not subject to the City of Detroit Income Tax ("CDIT") in the disputed years.

The Tribunal noted specifically that while there was a Detroit address listed on the holding company, its ties to the area were, by design, minimal. The Corporation did not have a single employee, office, or employee in the City of Detroit. Likewise, the Corporation did not have any sales or market in the City of Detroit. Rather, the clear purpose of the Detroit company was exclusively to hold company stock.

Next, the phrase "commercial domicile" was evaluated, to determine whether the Corporation had nexus with the City of Detroit. However, the Tribunal found that the City of Detroit did not use this language itself, and there was no reason to apply it here.

Notably, the Corporation's setup was in Detroit because it did have officers and directors located in Detroit. These individuals were involved with preparing and executive closing documents as it pertained to the sale of stock, which would be finalized in Canada. So while there were no employees or sales in Detroit, Executives and Directors were physically located in Detroit. This type of structure is notable as other entities determine how to structure their entity to avoid establishing nexus in an unfavorable manner.

The Tribunal's decision is an interesting one. While it is surely not binding for agencies or decision makers across the country, it does provide an important analysis of some of the questions that will be continued to be weighed in establishing nexus after the Supreme Court's decision in Wayfair.

Read the entire Tax Tribunal decision here.

Logistics Company Files Suit Against Employer of Former Employee for Misappropriating Confidential Information

noreply@blogger.com (Jake A. Leahy) — Fri, 19 Aug 2022 13:53:00 +0000

Earlier this week, Pittsburgh Logistics Systems, Inc. ("PLS") filed a fifteen page complaint against Traffix USA, Inc. in the Northern District of Illinois. The complaint includes both state level and federal claims, the federal claims involve 18 U.S.C. Section 1836, the Defend Trade Secrets Act.

The factual background begins by describing the type of trade PLS is involved in. Specifically, PLS is a third-party logistics company servicing a wide array of industries such as lumber, automative, and oil. In short, PLS is a third-party logistics provider which seeks to connect carriers and customers in order to make the transfer of goods more efficient.

PLS claims that its operations are based upon a propriety system which includes client information and which are able to make the transport of goods as efficient as possible. Notably, PLS on its own, does not own or operate any of the vehicles or other equipment used in the transportation of goods. PLS is solely involved with connecting carriers and customers.

The proprietary information that PLS has, according to the complaint, includes a list of identifiable customer information such as the customer contacts which are primarily responsible for transporting certain types of goods, the shipping lanes which said customer uses, typical contract terms, and other similar information.

PLS outlines its typical hiring process, which often includes hiring people who previously had no experience in the industry. These individuals are then trained in a process in order to gain a thorough understanding of the industry. PLS claims that a major reason why the company can afford to have such an expensive process for onboarding it because it requires employees to enter into certain restrictive covenants when they begin employment. Specifically, employees are required to enter into confidentiality, non-solicitation, and non-compete clauses. PLS outlines that said covenants are essential for the business as its competitors would be able to poach its employees without recourse.

In July 2018, PLS hired an Associate Director of Intermodal, Intermodal referring to the shipment of freight between two or more distinct modes of transportation. The new Associate Director's employment agreement included the above mentioned typical provisions, including the confidentiality provision.

After leaving the company in December 2021, the Associate Director left the company, at which time he was reminded of the presence of the employment agreements. He did not contest. At one point the following year, PLS received information that said former Associate Director was attempting to change user information for an industry platform. The new email he was trying to use was for a different logistics company.

The complaint is being brought against Traffix, the Associate Director's new employer, not against the breaching employee. The complaint says (among other factors) that Traffix knew or should have known about the restrictive covenants and that Traffix had actual or constructive knowledge of the former Associate Director's previous employment.

The specific Counts included in the complaint include:

I. Tortious Interference With Contract;

II. Tortious Interference With Business Relationships;

III. Violation of Illinois Trade Secrets Act; and

IV. Violation of Defend Trade Secrets Act (18 U.S.C. Section 1836).

Two factors stand out as to what makes this complaint interesting. First, that non-compete restrictions now face steep restrictions to implementation and are categorically illegal for many employees in Illinois beginning on January 1, 2022. However, the law's effective date only applied to new employment agreements, not on pre-existing agreements. I bring this up because confidentiality covenants are still permitted under the Illinois law, which demonstrates how this type of litigation is likely not to go anywhere.

Second, this lawsuit was filed against the new employer, rather than against the current employee. This goes to show how effective indemnification or other sorts of provisions in employment agreements can help to shield the employee. That is, even though it would not have made much of a difference to the employee here, since the claim was not brought against him.

Read the entire complaint here.

Pittsburgh Logistics Systems, Inc. v. Traffix USA, Inc, Case. No. 1:22-cv-4323, Northern District of Illinois.

Read the Chicago Federal Law Blog.

New Treas. Reg. Provides New Guidance on IRS and State Investigations of Non-Profit Tax Status

noreply@blogger.com (Jake A. Leahy) — Tue, 16 Aug 2022 16:51:00 +0000

Today, the Internal Revenue Service officially published a new Treasury Regulation entitled "Disclosure of Information to State Officials Regarding Tax-Exempt Organizations." Prior to enactment, the IRS was often unable to communicate with a state Attorney General regarding an ongoing investigation pertaining to the status of a non-profit organization. At times, this often amounted to both organizations investigating substantially similar issues, however, the IRS was unable to disclose the status of an ongoing investigation unless it had been finalized.

While the IRS was able to share some information with certain state officers, the IRS is now directed to inform a so-called "appropriate State officer" ("ASO") of (1.) a refusal to recognize an entity as a charitable organization; (2.) a charitable organization which no longer meets the guidelines to be tax-exempt; and (3.) mailing a notice of deficiency for any tax imposed under IRS Section 507 or Chapters 41 or 42 of the Internal Revenue Code. Additionally, the ASO will be notified when a charitable organization has been dissolved. Upon request, the IRS will also now be authorized to provide supporting documents to the ASO as requested. Previously, privacy guidance would have prevented this type of disclosure from being made.

Furthermore, the IRS will have broader leeway to disclose other sorts of information to the ASO. The IRS will be able to disclosure refusals to recognize a tax-exempt entity, proposed revocations of recognition, and notices of deficiency of excise tax. Likewise, the IRS was only previously able to disclose of returns and return information of organizations, these were required to be related to the final determinations by the agency. The Treas. Reg., naturally includes numerous other regulations which similarly provide for an extended ability of the Treasury to communicate with ASOs.

In order to assure compliance with other privacy interests, any agency on the receiving end of return information must file a report providing for the safeguards which have been implemented to ensure there will be no unauthorized disclosure or review of the records.

In reviewing the comments received pertaining to the proposed Regulation, a major issue discussed was regarding the aforementioned disclosure requirement. While one commentator indicated that states might be unwilling to receive information as necessary to comply with the disclosure requirement, the Treasury ultimately decided that there are similar agreements in place with all 50 states and District of Columbia which apply to the administrative agency tasked with carrying out the state tax laws. The final decision to keep this in, according the Treasury, also is "important in fulfilling the... enforcement of State law regarding exempt organizations consistent with statutory requirements."

Read the entire Treas. Reg. for yourself.

State Attorneys General Take Aim at BlackRock ESG Investment Strategy

noreply@blogger.com (Jake A. Leahy) — Tue, 16 Aug 2022 16:27:00 +0000

Traditionally, the conversation in board rooms has almost exclusively been about maximizing profits and in turn, prioritizing shareholder value. As Environmental, Social, and Governance (ESG) becomes a more common phrase in the corporate setting, the so-called "stakeholder capitalism" still may face significant roadblocks to implementing social priorities when they run afoul of the potential returns of investors.

In a letter to BlackRock dated August 4, 2022, 19 state Attorneys General signed on to question BlackRock's statements made to various state agencies pertaining to the fund's investments in the energy sector. Specifically, the fund is alleged to be focusing all of its investments on climate, the letter claims there have been roughly 2,300 company engagements specifically on climate.

Although the decision to prioritize climate concerns when it comes to energy has become increasingly popular in the media and in politics, many state laws require that pension fund investments focus on maximizing financial concern. It is not lost on the Republican signed letter that fears of an imminent economic downturn may be playing a significant role in terms of assuring pension funds are equipped for a rapid decline in the stock and equities markets.

An additional consideration that makes the letter interesting is the notion that much of the decarbonization priority from BlackRock has not only taken place behind closed doors. In fact, the fund's efforts have been heavily publicized, as ESG has become an increasingly popular term with investors and in the political sphere. For example, BlackRock has said that it will have a dialogue with some leading environmental advocacy organizations to discuss reaching net-zero emissions. However, these state Attorneys General have a far different idea of what dialogue should look like under state law.

"Regarding BlackRock’s commitments to climate change advocacy organizations, you state that you have joined them “to participate in dialogue with governments, companies, and financial institutions on sustainability issues important to our clients.”7 Under our state laws, the desired “dialogue” regarding any potential energy transition would be how to maximize financial returns, which would potentially include the opportunistic purchasing of fossil fuel assets discarded by companies seeking to meet net zero commitments."

The entire letter has six different sections in which it outlines the potential issues with state law and BlackRock's energy investment strategy. Those sections are: 1.) Neutrality; 2.) Dialogue; 3.) Duty of Loyalty; 4.) Duty of Care; 5.) Antitrust; and 6.) Energy Boycotts.

To many, ESG is the next logical step to take in order for corporations to play a leading role in advancing change when it comes to social or climate related issues. Yet, state law largely continues to require certain duties for shareholders to investors. It remains to be seen whether shareholders, and pension funds for that matter, will be able to successfully argue against ESG implementation in the boardroom.

Read the entire letter here.

Jake A. Leahy

Jury Selection Begins in R. Kelly Case in Chicago Federal Court

noreply@blogger.com (Jake A. Leahy) — Mon, 15 Aug 2022 20:28:00 +0000

Chicago, Illinois - This morning, jury selection began for the Chicago portion of the federal case against Rapper R. Kelly. Although Kelly was convicted and sentenced to 30 years in prison in a Brooklyn federal court for racketeering and Mann Act violations last year, this trial is focused on allegations of corruptly fixing a 2008 Trial. Specifically, he is accused of conspiring with two associates by hiding numerous sexual assault allegations he faced against minors. The 2008 case took place in state court, at the Circuit Court of Cook County.

The next federal case will now be heard at the federal courthouse in downtown Chicago. The case is being presided over by Judge Harry Leinenweber, who is a District Judge in the Northern District of Illinois who assumed Senior status in 2002. The 85 year old Judge was appointed to the bench by Ronald Reagan in 1985. Prior to his appointment, he served as counsel to numerous municipalities and as a state representative.

During voir dire at the federal courthouse today, news reports broke about Judge Leinweber denying the defense's request to remove any potential juror who has seen the "Surviving R. Kelly" docuseries. While it is correct that the Judge decided not to categorically toss these jurors, the follow up questioning or jurors then asked, for those who had seen the series, whether they could remain unbiased.

While I did not see the entirety of the day-long jury selection process, I did see a portion of it. Some of the jurors who were dismissed said that they had seen the series and could not remain biased. These jurors were generally dismissed very quickly. Certain jurors indicated that they had heard of R. Kelly, or perhaps even heard of the docuseries, but did not know enough to form an opinion or to be biased. Evidently, the jurors filled out a questionnaire last Thursday. The Judge asked each of the jurors if they had learned any information since they filled out the questionnaire. While most indicated that they had not, some did.

For example, one juror indicated that he would like to revise his previous statement about knowledge. That juror indicated that he had since learned that Kelly was a "musician," but he did not indicate about any knowledge of the charges. That jury did not appear to be dismissed, although the juror indicated he had an advanced degree in classical music.

One juror was dismissed because she said she had heard of the charges, would try to remain unbiased, but that she was an educator and has been trained to advocate for children. She stated that she would do her best, but would have a hard time not relating with the children. She was dismissed.

While other jurors provided a range of answers, ranging from having heard of R. Kelly as a rapper, to having no knowledge of the defendants at all, it is as interesting to point out the questions that were not asked, as much as the questions that were. For example, jurors were asked whether they had seen the "Surviving R. Kelly Docuseries" or if they had heard about the case. Jurors were not asked whether they knew of Kelly as a rapper or any of his music. There was also additional questioning on occasion as to whether a juror had been, or had a close family member or relative, who had been the victim or sexual abuse. Additionally, certain jurors were summarily dismissed after revealing that they had personal hardships or who had seen the trial on the news.

Must of the decision making took place at sidebars, behind the scenes. In a courtroom full of probably well over a dozen attorneys for the various defendants, there was a lot of discussion taking place over the individual headsets.

It is hard to imagine the difficulty in finding a suitable unbiased jury. Given the public exposure to the trial, many of the potential jurors were aware of the allegations and had already formed opinions as to Kelly's guilt. Nonetheless, there were plenty who seemed perfectly suitable and impartial. It will be an interesting case to follow.

Jake A. Leahy

Hoffman Estates Dentist Alleges Regulatory Taking and Equal Protection Violations Against Village

noreply@blogger.com (Jake A. Leahy) — Mon, 15 Aug 2022 11:40:00 +0000

Earlier this month, Dr. Sam Arkmakjian (“Plaintiff”) filed a civil rights lawsuit against the Village of Hoffman Estates. The suit arises over the repeated denials in zoning variances to the properties which Dr. Arkmakjian has owned for nearly thirty years on the corner of Golf Road and Apple Street. The properties include about 40,000 square feet and which currently only shelters one single family home on the property.

Plaintiff claims that in the almost three decades since he first obtained the property, the character of the surrounding community has shifted dramatically. For example, the surrounding properties had been almost exclusively zoned as residential, but today they are almost entirety commercial. According to the complaint, all of the properties to the south, north, and east of the Property are zones and operated as commercial properties. For example, there is a car wash directly adjacent to the subject property.

While the complaint does not allege that the Village has not right to enact zoning restrictions, the claim is that the Village has denied applications with no rational basis in fact or law, that there has been a multi-year effort to deprive Plaintiff of economically beneficial use of the property, and the Village has continuously selectively enforced private Declaration of Covenants and Use Restrictions. Furthermore, the Plaintiff alleges that the disparate treatment from the Village is based on Plaintiff’s Armenian ancestry.

The complaint includes certain other relevant details that help paint the picture as to why this litigation is arising. For example, the adjacent car wash has been present in the community since 1956. However, in 2016 the car wash unveiled plans to expand its current operations, Plaintiff objected to the expansion, both in writing and in person to the Village. In order to expand the car wash, Gold Car Wash, Inc. had to obtain a special use permit from the Village, this was issued by the Village despite Plaintiff’s objections. Specifically, Plaintiff objected claiming it is difficult to rent out the residential property due to the noise and debris that come out of the car wash.

Today, the two adjacent lots owned by Plaintiff on the corner only include one single family residential home. Previously, it included a second home as well. However, after a prolonged time in which Plaintiff was unable to rent the property, Plaintiff decided to bulldoze the home and leave it as a vacant lot.

As he claimed there was no viable residential use of the Property available, he asked that the Village rezone the property from residential to commercial. Within the proposal, he asked that a multi-tenant retail/office building be permitted, he also asked that a drive-thru be permitted.

After exerting significant resources to have a plan proposed to the Village in 2018, the Planning and Zoning Commission approved the proposal 8-1 in 2018. The report noted the changes in character to the surrounding character over the years and the increased commercial zoning in the surrounding areas. However, the Village Board decided to vote against the proposal.

In 2019, Plaintiff submitted a similar proposal to rezone the property to commercial. That too, was rejected by the Village. Plaintiff was advised to try again after the following municipal election.

After taking some time off on offering proposals, Plaintiff came back in 2022 with a new iteration of the plan. This time, he went to the Planning and Zoning Commission seeking a “courtesy review” of a 4,500 square foot office building, without a drive-thru or similar type of retail proposals which he had previously included. This time, Plaintiff would be the sole tenant of the office building, as it would function as a dental office. The Village staff determined that there was enough space for setbacks and buffers, and that the parking would not create a problem.

While the 2022 proposal in front of the Village was only a courtesy review, and not a binding decision, members of the Village Board allegedly offered their input as to the proposal. The complaint alleges that one of the members said “I’ll never vote to flip these residentials to commercial ever.” Additionally, the Village discussion referenced the restrictive covenants which run with the property. These covenants were created in 1959, prior to the establishment of the Village of Hoffman Estates. Furthermore, the 2018 staff report indicates that the “Village is not a party to, nor does it enforce private covenants.”

Prior to the onset, Plaintiff did send a Demand Letter in May of 2022, requesting that the 2022 Development be permitted or to pay him for the economic loss. The complaint alleges that the Vilalge did not respond.

The complaint alleges the following:

Equal Protection Violations, under the Fourteenth Amendment to the U.S. Constitution and under Article I, Section 2 of the Illinois Constitution;
Takings Clause Violations, under the Fifth and Fourteenth Amendments of the U.S. Constitution, and Article I, Sections 2 and 15 of the Illinois Constitution;
Violation of Ordinance-Arbitrary and Capricious Conduct; and a
Writ of Mandamus.

It will be particularly interesting to see if the Count under the “Takings Clause” amounts to anything. While the Takings Clause count of the complaint does not go into detail about the Village’s decision to expand the car wash previously, it would seem like this too, would help to paint the picture as to how this might amount to a regulatory taking.

The 1922 decision Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) established that a government action might amount to a regulatory taking, even in the absence of actual physical disruption of the land. However, it would surely appear to be unlikely that a refusal to allow a zoning variance from residential to commercial would amount to a regulatory taking under the Fifth Amendment, given the other factors at play it might be possible to see that a Court might rule in the Plaintiff’s favor.

An additional factor to consider as to whether the regulatory taking doctrine might be suitable here, is the fact that the 2022 proposal varied greatly from the proposals in 2018 and 2019. While those had asked for mixed-use commercial zoning, and even a drive-thru, it would seem as if an owner-occupied dental suite would be one of the easier revisions to the plan that could be sought.

While this case may make for interesting law as it plays itself out in court, perhaps the Village Board will just go back and indicate that it will approve a zoning variance should he seek one again in the future.

Read the complaint here.

Jake A. Leahy

Small Business Pass-Through Entity Tax Scrapped From Inflation Reduction Act

noreply@blogger.com (Jake A. Leahy) — Mon, 08 Aug 2022 14:28:00 +0000

Small business owners have always had it tough — making payroll, dealing with customers, and of course, writing a large check to Uncle Sam at the end of the year — but this year inflation is making things particularly hard. Yet somehow, Senate Democrats think kicking these people while they’re down is a good plan.

There’s growing traction among Senate Democrats to put in place a new tax on pass-through entities to help pay for Biden’s Build Back Better plan. While advocates claim that expanding the small business tax is “closing loopholes,” the reality is that this would result in a tax increase on the vast majority of Main Street shops. According to the Tax Foundation, over 90% of American businesses are set up as pass-through entities. That is, income is reported on the tax return of the business owner, rather than paying a separate corporate rate.

This new tax would hurt small businesses that are already struggling under current record levels of inflation. It’s a horrible plan.

Read further in Real Clear Policy.

"Better Call Saul" in Actual Legal Trouble, Faces Liberty Tax Trademark Suit

noreply@blogger.com (Jake A. Leahy) — Thu, 04 Aug 2022 17:28:00 +0000

Liberty Tax filed a trademark infringement lawsuit earlier this week against the producers of the hit series “Better Call Saul.” The prequel to “Breaking Bad,” the show depicts the capricious attorney, Jimmy McGill turned Saul Goodman, who often involves himself with criminal enterprises and unethical behavior generally.

In Season 6, Episode 2, Goodman goes to “Sweet Liberty Tax Services,” which is operated by the Kettlemans, a convicted felon alongside his wife. Earlier in the series, Mr. Kettleman was involved with embezzling taxpayer funds in his elected position as County Treasurer. Goodman goes there for some questionable tax preparation advice at Sweet Liberty, which also includes an inflatable Statue of Liberty outside its storefront in a New Mexico desert. Upon entry, there are numerous other depictions of the Statue of Liberty throughout the office space.

Now, Liberty Tax Service, the actual company, has filed a complaint in the Southern District of New York for Trademark infringement, based on the depictions. The complaint also points out an ironic detail from the show. Goodman, then Jimmy McGill, accepted a bribe from the Kettlemans, which he in turn, used to erect a billboard donning his initials, “JMM,” which also happened to be a prominent law firm in town, of which his brother was a named partner.

In the show, Jimmy McGill is sued by the law firm for trademark infringement, alleging that his use of “JMM” and alongside a similar color scheme amounted to a violation of the firm’s intellectual property rights. The court ruled against him, finding that he could not claim fair use. He went to the airwaves with his claims, creating an advertising campaign based on the premise that he was being targeted by the legal establishment.

Now the show, through its producers, now face a similar type of suit for its depiction of Liberty Tax Services. The complaint alleges that the fictional and real depiction of Liberty tax are “virtually identical and indistinguishable from the actual Liberty Tax Service location as shown in Figure 2.”

Figure 1, Fictional Depiction Figure 2, Actual Location

Besides the obvious similarities, Liberty Tax Service also cites its trademarks on “Liberty Tax Service,” “Liberty Tax,” “Liberty Tax Service” with the Statue of Liberty Design, the Statue of Liberty sculpture mark for tax preparation, and several other allegedly relevant Trademark registrations.

The complaint alleges that the fictional depiction amounts to “Infringement and Tarnishing of Liberty Tax’s Trademarks and Trade Dress.” Notably, citing information and belief, AMC has its own protocols to obtain intellectual property rights of materials to be depicted in its programming. No such rights were obtained or requested in the instant case. Liberty Tax claims AMC failed to follow its own terms and procedures in airing this episode.

The complaint also alleges the “Unauthorized Use of Liberty Tax’s Trademarks and Trade Dress is Willful, Creates Confusion, and Cause Harm to Liberty Tax.” This portion also alleges the intent to confuse the public, by purporting the fictional location to be an actual location of Liberty Tax.

The specific causes of actions alleged include:

Federal Trademark Infringement, pursuant to 15 USC Section 1114;
Federal Trade Dress Infringement, pursuant to 15 USC Section 1114;
Federal Trademark and Trade Dress Dilution, pursuant to 15 USC Section 1125(c);
Defamation;
Disparagement; and
Injurious Falsehoods.

Liberty Tax seeks the following judgment and relief from the court:

The court enter judgment in favor of Liberty Tax on all counts;
Issue a permanent injunctive to prevent further injury; and
Grant monetary relief, including, compensatory damages as authorized by the Lanham Act and New York law; an accounting of profits from the alleged acts, punitive damages, enhanced or treble damages, attorneys’ fees and costs, prejudgment and postjudgment interest, and other and further relief which the court deems just and proper.

How similar is too similar when it comes to a fictional depiction of protected intellectual property? Did AMC anticipate this problem and determine that fair use precluded this sort of claim?

Read the entire complaint here.

Jake A. Leahy is JD Candidate at the University of Illinois Chicago School of Law and Publisher of the Chicago Federal Law Blog.

SEC alleges "smart contracts" company was Ponzi and Pyramid Scheme; SEC v. Okhotnikov

noreply@blogger.com (Jake A. Leahy) — Tue, 02 Aug 2022 15:01:00 +0000

On Monday, the Securities and Exchange Commission (“Commission”) filed a suit in the Northern District of Illinois against the executives and promoters of Forsage.io (“Forsage”), alleging various violations of securities law.

According to its website, Forsage is a “Decentralized networking platform based on smart contracts that connects people from all over the world and opens the limitless possibilities of the new economic financial system,” further, the company claims “All data is stored in the blockchain and can be verified by clicking on the smart contract address.”

The complaint alleges that millions of retail investors entered into transactions via Forsage, transacting smart contracts that operated on various blockchains, such as Ethereum, Tron, and Binance, the total amount transacted on the platform is said to be over $300 million.

While the complaint does say the company had the blockchain and smart contracts technology, it was set up as a “textbook Ponzi scheme.” It was also setup, per the complaint, as an illegally structured pyramid scheme. The Commission alleges that the company did not actually or purport to sell any consumable product and had no revenue, the only revenue was from the investors. According to the Commission’s theory, investors set up their crypto wallet to eventually purchase portions of their smart contracts, investors were, in turn, sent a portion of profits directly into their crypto wallets. Additionally, when investors recruited other investors, it is said that the person who recruited the investor was then paid a share of the new investment. This is the primary portion of the complaint for the Ponzi scheme, against the Founders.

On the other hand, the Promoters are referred to by the Commission as the “Crypto Crusaders,” who allegedly were involved with the scheme to defraud investors though either fraud or deceit.

Notably, when confronted by federal investigators about the alleged Ponzi scheme, the Founders completely denied the allegations and stated that Forsage is in fact a perfectly legitimate operation.

The complaint asks the court to enter the following:

i. A permanent injunction and restrainting order preventing Defendants from further violating securities law and enjoining said individuals from engaging in further conduct;

ii. Enter an order compelling Defendants to pay disgorgement with prejudgment interest; and

iii. Compel civil damages to be paid by the named Defendants.

The forty-none (49) page complaint goes into detail about how the Commission believes the actors structured the company and how each individual smart contract was structured. Additionally, it provides graphic representations of how commissions were paid out to “partners,” for their recruiting of other investors.

While actual knowledge of the pyramid scheme is not alleged against the Promoters, the Promoters knew, or were reckless in not knowing that Forsage fit into the category as the company did not offer any sort of bona fide retail sales; the Commission cites the Promoters previous involvement in multilevel marketing to indicate the Promoters should have known the distinction.

This multi-national operation has been on the radar of securities commissions across the globe. Over two years ago, the Phillipines Commission issued a public notice indicating that they had been investigating Forsage and found that the organization was involved in the fraudulent sale of unregistered securities. Furthermore, the Montana Commissioner of Securities and Insurance issued a seize and desist to Forsage over one year ago. As these investigations went on, the “Crpyto Crusaders,” posted publicly why Forsage was not a Ponzi scheme, as well as why it was not a pyramid scheme.

The five count complaint specifically alleges the following violations of federal law:

I. Unregistered Offers and Sales of Securities in Violation of Sections 5(a) and 5(c) of the Securities Act;

II. Fraud in Violation of Section 17(a)(1) of the Securities Act;

III. Fraud in Violation of Section 17(a)(3) of the Securities Act;

IV. Fraud in Violation of Section 10(b) and Rule 10b-5(a) of the Exchange Act; and

V. Fraud in Violation of Section 10(b) and rule 10b-5(c) of the Exchange Act.

As Forsage expressly denies all allegation, at least as indicated to federal investigators previously, it will be interesting to see if and how this plays out through the legal system. While there only appears to be a civil complaint at this time, perhaps criminal charges could be around the corner against certain individuals involved as well.

Read the Commission’s entire complaint here.

Jake A. Leahy is a J.D. Candidate at the University of Illinois Chicago School of Law and the Publisher of this blog, the Chicago Federal Law Blog.

Chicago Cubs face DOJ ADA complaint alleging inadequate wheelchair access at Wrigley Field - United States v. Chicago Baseball Holdings

noreply@blogger.com (Joseph Leahy) — Mon, 01 Aug 2022 14:34:00 +0000

Earlier this month, the Department of Justice filed suit against Chicago Baseball Holdings LLC, Wrigley Field Holdings LLC, WF Master Tenant LLC, & Chicago Baseball Club LLC, in United States v. Chicago Baseball Holdings.

The 29 page complaint alleges several violations of the Americans with Disabilities Act. The complaint’s allegations mainly arise from the Wrigley Field renovations done as part of the 1060 project. The Department of Justice alleges the Chicago Cubs violated the ADA by:

I. Removing centrally located wheelchair seating to make room for new clubs, including the Makers Mark Barrel Room, the W club, the Budweiser Patio, & the Catalina Club, and placing the wheelchair seating in the back rows of these sections.

II. Concentrating the wheelchair seating away from the rest of the crowd, generally in the back rows of the stadium, eliminating the dispersion of wheelchair seating that existed before the renovations.

III. A majority of wheelchair seats in all sections (bleachers, upper grandstand, lower grandstand) do not have an adequate sightline over standing spectators.

IV. Counter surfaces are too high throughout the stadium, including ticket windows, concession stands, condiment stands, & paper towel dispensers.

V. Lacking seats with foldable or retracting arm rests.

The crux of the complaint from the DOJ is that the Cubs not only neglected to improve the already poor conditions of wheelchair accessibility, but consciously made those conditions worse in the renovations. While it might appear on the surface that the complaint arises due to the standards in the over century old stadium, the main issues involve the worse conditions for wheelchair access after the renovations were completed.

The two main breaches of duty in which the DOJ is alleging against the ball club, are that they are not providing sight lines that are substantially equivalent to, or better than those available to able bodied spectators; as well as failing to comply with the ADA's vertical dispersion & integration mandates, that had existed at Wrigley before the renovations.

The sightline from wheelchair accessible seating allegedly fails to provide an adequate sightline for a majority of those seats, as they have the last rows of the bleachers right in front of the seats. To address the issue of sightline, those in the final rows of the bleachers are supposedly asked to not stand throughout the duration of the game, which is to be enforced by the ushers. However the complaint claims that the ushers rarely, if ever, ask those in the final rows of the bleachers not to stand.

The ADA requires venues like Wrigley Field to have 5% of their aisle seats have retracting or foldable arm rests, for disabled fans who are able to maneuver without a wheelchair. With 3734 aisle seats in the stadium, the ADA requires 187 aisle seats with foldable or retracting arm rests, however there are only 44 of such seats in Wrigley.

Prior to the 1060 project, wheelchair seating had existed throughout a large portion of the main concourse of the bleachers, with 15 wheelchair accessible, unobstructed seats, even with standing fans in front of them. After the renovations, 3 wheelchair seats are in section 501 in the left field corner, and 16 seats are in the "batter's eye" area, which is located in a different section of the ballpark than the main concourse of the bleachers.

The Cubs responded with a statement saying:

"[The Cubs] are disappointed in the decision by the U.S. Department of Justice to file suit and hope the matter can be resolved amicably, but we will defend Wrigley Field and our position it meets accessibility requirements for fans...The renovation of Wrigley Field greatly increased accessibility of the ballpark and was completed in accordance with applicable law and historic preservation standards consistent with the ballpark’s designation as a National and City of Chicago landmark... Since the Department of Justice’s initiation of its review in November 2019, we have fully cooperated with every inquiry and made several offers to voluntarily further enhance accessible features of the ballpark, including seating, restrooms, concessions and other key accessibility elements, in response to the Department’s inquiry."

Most ADA complaints are typically not brought by the Department of Justice. The Department has demanded a trial by jury in the case. It remains to be seen whether the case will settle and what remedies the Cubs will be willing to provide.

Read the entire complaint here.

Joseph J. Leahy is a J.D. Candidate at the University of Illinois Chicago School of Law.

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Chicago Cubs face DOJ ADA complaint alleging inadequate wheelchair access at Wrigley Field - United States v. Chicago Baseball Holdings

"Better Call Saul" in Actual Legal Trouble, Faces Liberty Tax Trademark Suit