Archives for December 2013

Summary Judgment Practice: When The Deposition Clashes With The Affidavit

 

image

A summary judgment motion axiom posits that you can’t contradict prior sworn deposition testimony with a later affidavit in order to create a triable fact dispute. 

A crude example: if in a deposition you say “I didn’t suffer any monetary damages”, you can’t file an affidavit later in the lawsuit where you say “actually, come to think of it, I lost a million dollars” in order to defeat a summary judgment motion.  You’ll be bound to your earlier deposition testimony. 

Otherwise, anyone could contradict his earlier sworn testimony with impunity and undermine summary judgment’s entire evidence testing system.

Kuvedina, LLC v. Pai, 2013 WL 6499696 (N.D.Ill. 2013) examines summary judgment in the context of a conversion suit.

Facts:  Plaintiff management company hired defendant to provide consulting services to one of plaintiff’s clients.  The relationship between plaintiff and defendant soured and plaintiff fired defendant.  When defendant failed to return a company laptop, plaintiff sued in Federal court for conversion, asserting that defendant’s actions caused plaintiff to lose a large corporate client. 

Defendant moved for summary judgment and attached plaintiff’s owner’s deposition testimony as a supporting exhibit.  In the deposition, the owner gave vague, non-responsive answers and couldn’t pinpoint any evidence to support plaintiff’s money damages claim.

Result: Summary judgment entered for defendant on plaintiff’s conversion count. 

Rules/Reasoning:

Conversion is the wrongful possession of another’s property or any act that permanently or indefinitely deprives someone of the use and possession of his property.

To prove civil conversion in Illinois, a plaintiff must establish (1) a right to the property; (2) an absolute and unconditional right to the immediate possession of the property; (3) a demand for possession of the property; and (4) defendant’s wrongful and unauthorized assumed control, dominion or ownership over the property. *4. 

Money can be converted – but it must be a specific, identifiable fund (e.g. the $876 contained in defendant’s checking account at XYZ bank).  It can’t be a general obligation (“you didn’t paint my house like you promised, so you stole that $500 I gave you.)

Siding with defendant on the conversion count, the Court applied Illinois conversion case law which holds that voluntarily paid funds won’t support a conversion claim. 

The Court found that since plaintiff freely paid defendant almost $40,000 without protest,  plaintiff couldn’t show conversion as to those funds. *4.

The court did side with the plaintiff on its breach of contract, tortious interference, and fraud claims. In its summary judgment motion, defendant pointed to a factual clash between plaintiff’s owner’s earlier deposition and later affidavit testimony.

In his deposition, the plaintiff’s owner couldn’t substantiate any money damages when asked.  Yet, in his later affidavit – filed in response to defendant’s summary judgment motion – he calculated damages of over $500,000 based on defendant’s conduct.

In sustaining plaintiff’s claims, the court stated that all summary judgment evidence – be it interrogatories, depositions, or affidavits – is to some extent self-serving.  The question is a matter of degree.  

Here, the Court found that while plaintiff’s affidavit was self-serving, there were still too many factual disputes in connection with plaintiff’s contract, tortious interference and fraud claims that couldn’t be resolved on a summary judgment motion.   *5.

Take-away: Kuvedina presents a good discussion of how differing deposition versus affidavit testimony impacts the court’s summary judgment calculus and that voluntary payments by a plaintiff are unlikely to support a conversion claim.  

The case also clarifies that summary judgment movant must argue and show more than that the opponent’s evidence is self-serving to win the motion.  The moving party must show that the self-serving evidence fails to raise a genuine issue of disputed material fact. 

 

 

 

 

Employee Handbooks: Are They Enforceable Contract Rights?

imagesWhen I hear the perks enjoyed by some corporate employees – the flex time, the telecommuting, bosses who live and work in other states, getting to “work” from home about 310 days a year, etc. – I can’t help but be a bit mystified and envious.  “I know I went to Starbucks 18 times and the gym 14 times today, but I AM working.  Honest!”  Good thing I’m not jealous (cough).  Or projecting (cough cough).

Now add a corporate Home Sale Buyout Program (the Home Sale Program) to the list of fringe amenities I’ve  neither heard of nor experienced.  That’s what’s involved in Carpenter v. Sirva Relocation, LLC, 2013 WL 6454253 (N.D.Ill. 2013), a recent Northern District case where a transferred Office Depot employee sued her employer and its relocation company for not honoring promised relocation benefits.

Facts:

The plaintiff agreed to move to another state to assume a manager position and sought relocation from her employer.

Office Depot offered a three-pronged program that included facilitating the employee’s home sale, providing moving expenses and an additional lump sum payment.  The relocation program was administered by a third-party relocation company -an Office Depot independent contractor.

A salient feature of the relocation package was that if the employee’s house didn’t sell after 90 days market time, The employer would buy the home based on a contractual pricing formula.

After plaintiff accepted the transfer and moved out of state,  The Office Depot told plaintiff that it couldn’t buy plaintiff’s Chicago home since it was a Co-op – a property type outside the scope of the relocation program.

Plaintiff brought contract and tort claims against Office Depot and its independent relocation contractor.  Both defendants moved for summary judgment on all claims.

Held: Plaintiff’s breach of contract claim against Office Depot survives summary judgment.  Plaintiffs’ claims against moving contractor don’t.

Why?

The Court denied Office Depot’s summary judgment motion on plaintiff’s breach of contract claim.

Plaintiff’s claim was premised on an email and written benefits guide that summarized the relocation benefits.  The guide contained profuse boilerplate disclaimers.

An Illinois breach of contract plaintiff must show (1) the existence of a valid contract, (2) substantial performance by the plaintiff, (3) breach by the defendant, and (4) resulting damages.

For an employee handbook to create enforceable contract rights, (1) the handbook must contain a clear promise such that the employee believes an offer has been made, (2) it must be disseminated to the employee such that the employee reasonably believes the handbook consists of an offer, and (3) the employee must accept the offer by starting or continuing to work after he sees the policy/handbook statement.  

An employment contract disclaimer – if clear and direct – is a defense to a breach of contract suit based on an employee handbook.  *5.

Applying these rules, the Court held that the plaintiff offered sufficient breach of contract evidence to defeat Office Depot’s summary judgment motion.  The Court found the e-mail attachment that sketched out the Relocation program was clear and definite enough to support a colorable contract claim.

The plaintiff also offered evidence that she never saw the benefits guide that contained the co-op disclaimer.  She also showed that she accepted the job transfer in reliance on Office Depot’s email that didn’t mention the co-op exclusion.  Taken together, this was enough for plaintiff to go to trial on her breach of contract claim.  *5-6.

The Court did sustain the relocation contractor’s summary judgment motion.  There was no direct contact between plaintiff and the contractor as all talks flowed through Office Depot.

The plaintiff also didn’t show she was a third-party beneficiary of the subcontract agreement between Office Depot and the moving company: there was nothing in the subcontract that reflected an intent to benefit the plaintiff.*6.

Take-aways: Employer handbooks and published policies can create enforceable contract rights if they are specific enough for a reasonable reader to infer that an offer or promise has been made.

The case also solidifies contract law axiom that there must be privity – a connection – between two parties to give rise to contract rights.  Here, since there was no direct contact between plaintiff and the relocation company, the plaintiff couldn’t state a breach of contract claim against the company.

 

Illinois Mechanics’ Lien General Contractor Doesn’t Morph Into a Subcontractor When Property is Sold Before Recording

imageQ: Does a general contractor transform into a subcontractor where a property owner sells its property to a third party AFTER the general contractor completes its improvements but BEFORE it records its mechanics lien?

A:  No.

Q: Does it matter?

A: Yes.  Because unlike a general contractor, a subcontractor must serve a 90-day notice to the new owner in order to preserve its lien rights under Section 24 of the Mechanics’ Lien Act (the Act).  770 ILCS 60/24.  If the subcontractor doesn’t serve the 90-day notice, the lien is invalid against the third party buyer.

Those are the key questions and answers distilled from Dirtwerks Excavating, Inc. v. Koritala, 2013 IL App (2d) 130329-U, a December 2013 Second District case where real estate was sold by the original owner to various purchasers after a paving general contractor completed its work but before it timely filed its mechanics’ lien.

Facts:

Plaintiff general contractor timely recorded his lien against several properties within the four month time period required by Section 7 of the Mechanics’ Lien Act (the “Act”), 770 ILCS 60/7.  But before the contractor recorded its lien, the owner sold the properties to various home buyers.

Those home buyers successfully moved to dismiss the lien on the basis that the plaintiff converted to a subcontractor once the properties were sold.  And since the plaintiff contractor never sent a 90-day notice (per 770 ILCS 60/24), the contractor’s lien wasn’t enforceable against the defendants.

Held: Trial court reversed.  Plaintiff’s lien was proper, timely and valid against the homeowner defendants.

Reasoning:

Illinois Mechanics’ Lien Act: ‘Contractor’ v. ‘Subcontractor’

The Act’s purpose is to protect those who in good faith furnish material or labor for the improvement of real estate.  The Act permits a lien on the property where a (a) benefit has been received by the owner and (b) where the property’s value or condition has been increased or improved by the furnished labor or materials. ¶ 5. 

A “contractor” under the Act is any person who contracts with a land owner or someone authorized by the owner to enter a contract with the contractor.  A “subcontractor” is one who performs construction work for the contractor.  770 ILCS 60/1(a)(contractor def.); 770 ILCS 60/21(a)(subcontractor def.).  A subcontractor must serve the owner with written notice of its lien within 90 days after completion of the work.  770 ILCS 60/24.  A contractor does not have to comply with the 90-day notice requirement.  He (a contractor) only has to file his lien within 4 months of completion. 770 ILCS 60/7.

Can Unverified Pleading Come Back to Haunt You?

No.  A complicating factor in Dirtwerks was that plaintiff alleged in its original complaint that it was a subcontractor.  But in later complaint amendments, it alleged it was a general contractor.   But since the original complaint wasn’t verified, it was superseded by the later filed complaints. 

A verified complaint that is amended remains a part of the record and can be used to impeach the pleader.  Not so with an unverified pleading.  Once an unverified pleading is amended, it’s erased from the record.  Even so, the plaintiff’s allegation in the first complaint that it was a subcontractor wasn’t a binding admission since it was a legal conclusion (and not a factual allegation). (¶¶ 6-7).

Lien Claimants’ Status Is Determined by the Original Contracting Parties

The Court’s key holding is that the plaintiff’s status (general contractor or subcontractor) was determined by the original contracting parties.  Plaintiff originally contracted with an entity that owned the properties.  That the properties were later sold to third parties didn’t change plaintiff from a general contractor to a subcontractor (who was required to send a 90-day notice). (¶ 9).

The court pointed to cases dating back more than a century for the proposition that once a lien attaches on the date of the owner-general contractor contract, a property buyer takes the property subject to the lien – so long as the lien is recorded/perfected within the four-month window.  

In fact, Section 7 of the Act expressly binds subsequent property buyers.  That section states that a timely recorded lien binds a creditor, incumbrancer or purchaser.   (¶10); 770 ILCS 60/7.

Take-away: This seems like a fair result.  The contractor shouldn’t be penalized just because a prior owner happens to transfer the property to a new buyer before the contractor records its lien.  Dirtwerks also solidifies lien law axioms that a plaintiff’s status – be it contractor, subcontractor, or sub-subcontractor, is determined by the original contracting parties and a timely recorded lien will bind subsequent purchasers.