Recovering Your Attorneys Fees In Litigation: Illinois’ 8 Factored Test

A recent Illinois Fourth District case provides a quick summary of  the factors a court considers when determining prevailing party attorneys’ fees under the Illinois Consumer Fraud Act (CFA) and spotlights the “mere continuation” exception to the rule governing corporate successor liability.

In Clayton v. Planet Travel Holdings, 2013 IL App (4th) 120717, the plaintiffs sued a travel agency, a successor agency and the principal of both agencies for consumer fraud and breach of contract based on a botched vacation package.

Plaintiff sought to recover the $11,000-plus deposit plaintiffs made when the travel agency failed to timely book a group trip.  After a bench trial, the court awarded the plaintiffs just under $6,000 in compensatory damages and attorneys’ fees and costs of over $30,000.  All three defendants – the predecessor and successor agencies and the corporate principal appealed.

Held: Affirmed.

Attorneys’ Fees Factors

The Appellate Court affirmed the trial court’s damage and fee awards noting that the CFA allows the winning party to recover its reasonable attorneys’ fees.  815 ILCS 505/10a(c); Clayton, ¶ 24.

The factors a court considers when determining what is a reasonable fee are: (1) the skill and standing of the attorney; (2) nature of the case; (3) novelty or difficulty of the issues and work involved; (4) importance of the matter; (5) degree of responsibility required; (6) the usual and customary charges for comparable services; (7) benefit accruing to the client; and (8) whether the was a reasonable connection between the fees charged and amount involved in the litigation. ( ¶ 25)

A trial court is able to use its own knowledge, experience and case familiarity in examining the fee question and its award is reviewed under an abuse of discretion standard.  (¶ 25).  The Appellate Court found that the plaintiffs properly documented their fees and costs and claimed fees of over $30,000 was reasonable for over four years of work.  Id., ¶ 30.

Mere Continuation Exception

The Fourth District also affirmed the trial court’s money judgment against the agencies’ principal.  He operated the predecessor agency for several years, sold its assets to himself for $1, later dissolved it and then formed a “new” agency with an almost identical name.

However, in the 13-month interim period between the dissolution of the first company and formation of the second one, The principal continued to operate the travel agency business as a sole proprietorship. (¶¶ 36, 41)

The “mere continuation” rule is an exception to the general rule that a successor corporation is not liable for the transferor’s debts. The exception applies where “the purchasing corporation is merely a continuation or reincarnation of the selling corporation” or where the new corporation maintains the same or similar management and ownership, but “merely wears different clothes”.  ¶ 40.  In any mere continuation calculus, the key element is identity of ownership.

Held: Corporate officer is personally liable for the judgment under the mere continuation rule.

Reason: After the dispute with plaintiffs had already crystallized, the corporate principal engineered the sale of the predecessor agency to himself for a dollar and continued to operate the business as a sole proprietorship. (¶ 41).

Some 13 months later, the principal formed the similarly named successor agency.  During that time span, the principal operated the sole proprietorship from the same address and used the same checking accounts as the prior corporation.  He also filed tax returns on behalf of both Agencies entities and generally operated the travel business without interruption.  Id.

Based on these factors, the Court found that all three same-sounding travel businesses shared a common ownership. ¶ 41. The Court held that  the principal  couldn’t escape personal liability for the corporate debts because he continued the travel business as a sole proprietorship after the former agency dissolved.  ( ¶ 42)

Conclusion: Clayton is instructive on the factors an Illinois court considers when passing on an attorney fee petition and in discussing the mere continuation rule for corporate successor liability.  The case’s main lesson is that if a corporate agent  dissolves a corporation and later forms a separate company – but continues to run the business as a “dba” or sole proprietorship in the interim – that agent can be personally responsible for any obligations arising before the new corporation is formed.


‘Your Check Bounced Like a Superball®!’ – Bad Check Laws in Illinois – Civil Liability


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The civil provisions of the Illinois Deceptive Practices Act, 720 ILCS 5/17-1 (a criminal statute), govern situations where a defendant issues bad checks with intent to defraud.  Section 5/17-1(B) provides:

(B) Bad checks.

A person commits a deceptive practice when:

(1) With intent to obtain control over property or to pay for property, labor or services of another,….he or she issues or delivers a check or other order upon a real or fictitious depository for the payment of money, knowing that it will not be paid by the depository. The [court] may infer that the defendant knows that the check or other order will not be paid by the depository and that the defendant has acted with intent to defraud when the defendant fails to have sufficient funds or credit with the depository when the check or other order is issued or delivered, or when such check or other order is presented for payment and dishonored on each of 2 occasions at least 7 days apart. In this paragraph (B)(1), “property” includes rental property (real or personal).

(2) He or she issues or delivers a check or other order upon a real or fictitious depository in an amount exceeding $150 in payment of an amount owed on any credit transaction for property, labor or services, or in payment of the entire amount owed on any credit transaction for property, labor or services, knowing that it will not be paid by the depository, and thereafter fails to provide funds or credit with the depository in the face amount of the check or order within 7 days of receiving actual notice from the depository or payee of the dishonor of the check or order.

The caselaw distills a civil bad check claim to the following elements: a plaintiff (the party to whom an NSF check was given) must show: (1) that defendant delivered a check to obtain services, labor and property of another, (2) that defendants knew the checks would not be honored, (3) that defendants acted with intent to defraud and (4) the defendants failed to pay on demand.

The corporate officer who signs a bad checks can also be individually liable under the Act.  This is an offshoot of the active participation rule: a corporate officer is liable for torts in which he actively participates.

Once a bad check claimant shows these elements, the Deceptive Practices Act’s civil liability provisions kick in.  Section 17-1(E) provides:

Civil liability. A person who issues a check or order to a payee in violation of paragraph (B)(1) and who fails to pay the amount of the check or order to the payee within 30 days following either delivery and acceptance by the addressee of a written demand both by certified mail and by first class mail to the person’s last known address or attempted delivery of a written demand sent both by certified mail and by first class mail to the person’s last known address and the demand by certified mail is returned to the sender with a notation that delivery was refused or unclaimed shall be liable to the payee….for, in addition to the amount owing upon such check or order, damages of treble the amount so owing, but in no case less than $100 nor more than $1,500, plus attorney’s fees and court costs.

An action under this subsection (E) may be brought in small claims court or in any other appropriate court. As part of the written demand required by this subsection (E), the plaintiff shall provide written notice to the defendant of the fact that prior to the hearing of any action under this subsection (E), the defendant may tender to the plaintiff and the plaintiff shall accept, as satisfaction of the claim, an amount of money equal to the sum of the amount of the check and the incurred court costs, including the cost of service of process, and attorney’s fees

So, if you are civilly prosecuting an NSF check case for a client, you should (a) be on the lookout for the check being returned twice in a 7-day period; and (b) send the 30-day demand by certified and regular mail.  Once the 30-day period elapses, you can file suit in Law Division ($30K and higher), Muni ($10,000-$30,000) or Muni small claims (under $10,000) and recover the face amount of the check plus up to $1,500 for each returned check and attorneys’ fees and costs.

For the less litigious, there’s Section 3-806 of the Uniform Commercial Code (810 ILCS 5/3-806). This statute governs “non litigated” bad check collections.  Under this section, the aggrieved party can recover the amount of the check, and the greater of $25 or reasonable costs, expenses, and attorneys’ fees incurred in collecting on the bad check.  However, to recover more than $25, the check recipient must  provide 30-days notice by certified mail to the party that delivered the bad check and give that party an opportunity to cure by making good on the check.





Corporate Successor Liability in Illinois: the Rule and Exceptions

Corporate successor liability’s focal point is whether a purchasing corporation (Company 2) is responsible for the purchased corporation’s (Company 1) pre-sale contract obligations. 

It’s an important question because the Company 1 will usually have no assets after the purchase.  Creditors of Company 1 will then try to pin liability on Company 2.

The general rule in Illinois is that a corporation that purchases the assets of another corporation is not responsible for the debts or liabilities of a transferor corporation.  

The rule is designed to protect good faith purchasers from unassumed liability and to maximize the fluidity of corporate assets.  

The four exceptions to this rule are: (1) where there is an express or implied agreement of assumption; (2) where the transaction amounts to a consolidation or merger of the purchaser or seller corporation; (3) where the purchaser is merely a continuation of the seller; and (4) where the transaction is fraudulent – done for the purpose of escaping the seller’s obligations.

The express assumption exception only applies if the plaintiff can produce an agreement where the purchasing corporation agrees to assume the selling corporation’s obligations.

If the agreement is silent, there is no express assumption.  Implied assumption is trickier and requires an examination of the selling and buying corporations’ conduct.  

The merger or consolidation exception applies where the plaintiff demonstrates: (a) continuity of management, personnel, physical location, assets, and business operations; (b) continuity of shareholders; (c) that the seller ceases its business operations quickly after the sale; and (d) the buyer assumes the seller’s liabilities and obligations that are necessary for seamless perpetuation of the seller’s business operations. 

In examining the continuation exception, the court’s focus is whether the purchasing corporation is a reincarnation of the seller corporation and has same or similar management but merely “wears different clothes”. 

The continuity calculus includes whether there is a common identity of officers, directors and shareholders between the selling and purchasing corporations.    

Exact commonality between the selling and purchasing corporations’ management isn’t required for the court to find a continuation.

In assessing whether the fraud exception applies to the general rule of no corporate successor liability, the court looks at multiple factors set forth in the Illinois Fraudulent Transfer Act. 740 ILCS 160/5(b)(1)-(11) including the timing of the transfer from seller to purchaser, whether the seller paid and whether purchaser received adequate consideration, whether the seller became insolvent at or shortly after the transfer, whether the transfer was to an insider (officer, director shareholder of the selling corporation), etc.


To temper the possible harsh results of a corporate transfer wiping out any chance of creditor recovery, I try to put language in a contract saying that if there is a transfer from defendant to another entity during the term of the contract, the defendant promises to both promptly notify my client in writing and make the new, purchasing company aware of the contract and its obligations under it.