Archives for March 2015

Business Compulsion And Economic Duress – Illinois Case Note

In Williamson v. Ill-Eagle Enterprises, Ltd., 2015 WL 802250, a manufacturer of framed art and wall décor sued the New Jersey-based designer of those items and its corporate President (the “Guarantor”) for breach of contract and breach of a written guaranty, respectively.  The guaranty contained a forum selection clause fixing Illinois as the site for any litigation related to the contract and guaranty.

The Guarantor moved to dismiss claiming the guaranty lacked consideration (that is, he didn’t get anything in return for signing the guaranty) and that it was signed under duress. The corporate defendant filed counterclaims which the plaintiff moved to dismiss.

Denying both motions (the Guarantor’s and plaintiff’s motions to dismiss), the court addressed important questions concerning the enforceability of personal guarantees signed after an underlying contract is signed and how specific a claimant must allege lost profits when seeking them as part of its damage claim.  (Part 2 of this post will discuss the lost profits analysis.)

In disposing of the guarantor’s motion to dismiss, the court pronounced these key principles:

– A guaranty that is signed after a contractual obligation already exists is enforceable but only if additional consideration is given to the guarantor;

– A promise not to sue a corporate principal is sufficient additional consideration to support a post-contract guaranty;

– The consideration to support a guaranty doesn’t have to flow directly to the guarantor; instead, a promise to benefit a third party is sufficient;

– Where a party forgoes a claim in good faith, even it ultimately proves invalid, that forbearance is still sufficient to support a guaranty.

Here, the court found that the Guarantor signed the guaranty to avoid the plaintiff suing his company for over $300,000 in merchandise. As a result, the plaintiff’s promise not to sue was sufficient consideration to bind the Guarantor.

Next, the court rejected the Guarantor’s argument that he was coerced into signing the guaranty.  Economic duress, also known as business compulsion, releases a party from a contract who is strong-armed into signing it under duress.

It’s hard to prove duress under Illinois law though.  The duress defense only applies where one is induced by a wrongful act or threat to sign a contract under circumstances that deprive him of his free will.  Hard bargaining or exerting financial pressure isn’t enough to show duress or business compulsion.

The court found the plaintiff at most engaged in hard bargaining by requiring the corporate President’s guaranty.  This was evident by the fact that the corporate defendant owed plaintiff over $300K and was long in arrears at the time the guaranty was signed.

Plaintiff’s chosen business tactic of conditioning future product deliveries on the Guarantor’s promising to pay the corporate debt to the Plaintiff as added security for payment, wasn’t extreme enough to deprive the Guarantor of his freedom of choice, the court said.

Take-aways:

1/ A guaranty signed after the underlying contract is signed is still enforceable if extra consideration is furnished to the guarantor;

/2 A promise to not sue the guarantor’s corporate employer (or affiliate) can be sufficient consideration to support a guaranty;

3/ Economic duress or business compulsion requires more than one party exerting financial pressure on another.  The conduct must be wrongful in the moral sense and eliminate the other party’s free will.

 

 

“But, But I’m So Busy!!” (What To Do When You’re Appointed Counsel in Federal Civil Rights Case – A 10-Step Guide)

I had barely finished running through the halls seeking high-fives for my recent Federal Trial Bar membership acceptance when I received a cryptic email from the Northern District’s electronic filing system.  The late Judge Hibbler (perhaps the nicest judge I’ve ever been before) had appointed me to represent a pro se plaintiff – an Illinois inmate – in a Section 1983 action against Illinois prison officials and a private health company that staffed the prison.  The plaintiff alleged the defendants were deliberately indifferent to his serious medical condition.

Prior to this, my knowledge of civil rights cases consisted mainly of what I saw on bad Lifetime movies. (Redundant?)  I had a vague memory of Brian Dennehy and Jaclyn Smith frantically trying to secure justice for someone wronged by the system.  (Not to get too tangential here, but is there any Lifetime movie that doesn’t star one or both of them? Tom Skerritt and Valerie Bertinelli (of “One Day At A Time”/Eddie VH fame) seem to figure prominently in the network’s offerings, too.)

Not only had I never litigated a civil rights case, but my personal injury suit experience was correspondingly anemic.  I’d handled a few “soft-tissue-fender-benders” sporadically through the years but that was it.

I also had taken a grand total of one doctor deposition back around the Y2K  era.  All I remember from that painful experience was lots of stammering in front of a decorated surgeon whose ultra-plush office was a shrine to All Things Diploma.  This was going to be uncharted terrain in every way.

Here’s what I did:

1/ Legal Research: I first reviewed the handwritten complaint and the judge’s screening order for clues as to what allegations are necessary to sustain a deliberate indifference claim.  I then researched the pleading and proof elements of section 1983 (42 U.S.C. § 1983) deliberate indifference cases.

Luckily, in addition to Westlaw and Lexis, there are a ton of Internet resources that provide useful primers on Section 1983 suits.  The Prisoner Litigation handbook (http://www.ilnd.uscourts.gov/home/_assets/_documents/2002%20prison%20litigation%20handbook.pdf) also proved valuable.

My legal research focused on the case annotations to the Section 1983 statute and the Prisoner Litigation Reform Act, 42 U.S.C. § 1997e (1994 ed. & Supp. II).   My 7th Circuit and Northern District (IL) case law research honed in on “deliberate indifference” cases.  There are many.

Some of the stand-out features of deliberate indifference suits include:

No vicarious liability.  If you are suing a prison official, for instance, you must allege specific conduct that he/she participated in.  It’s not enough to say that he/she is the principal of agent staff doctors.  You must allege the official’s active participation in the civil rights deprivation (here, wilfully ignoring a serious medical condition).

– Unconstitutional custom or practice.  If you sue the private contracting entity (prisons often contract with private third parties for medical services), you have to allege an unconstitutional custom or practice – namely, a widespread practice of ignoring serious inmate medical problems – for the entity to be liable for the acts of its agents;

Med Mal “plus“: A colorable deliberate indifference claim requires allegations and proof that go beyond medical malpractice.  Negligence isn’t enough and neither is a difference of treatment opinion. (“I think the staff Dr. should have done x, y, z instead of only x and y.”)

It’s also not enough to make out a civil rights claim to show that another medical provider would have treated the inmate differently or that the prison medical staff was negligent.  The law requires specific evidence of intentional conduct, recklessness or a knowing failure to act in the face of a clear duty to do so;

Exhaustion of Administrative Remedies:  A biggie.  The Prisoner Litigation Reform Act (42 U.S.C. ¶ 1997(e)(a)) and the Illinois Administrative Code (20 Ill.Admin.Code ¶ 504.810(b), 850) require an inmate to go through an elaborate grievance procedure where he first submits a claim to a grievance counselor all the way up to an Illinois Dept. of Corrections Administrative Law Judge with some stops in between.

A failure to exhaust the statutory grievance procedure will result in dismissal of a complaint as premature.  I was lucky in the sense that my client was well-versed in the intricacies of the prisoner grievance procedure and he followed the procedures to the letter.  Others aren’t so fortunate.   I see many dispositive motions filed by Section 1983 defendants based on a prisoner’s failure to exhaust his administrative remedies.

Pacer – the Federal Pacer site also proved valuable. (see https://www.pacer.gov). I can’t tell you how many times I was able to view summary judgment motions and responses filed in deliberate indifference cases that had similar facts and personnel to my case.  Reviewing these on-line briefs gave me insight into what was to come as well as what arguments were likely to survive summary judgment.

After researching and once I was clear on the pleading and factual elements, I moved for leave to amend the complaint.

2/ Helpers and Guides: After I filed the amended complaint, I was contacted by Jim Chapman – a prisoners’ rights attorney who contracts with the Northern District.  He provided me some invaluable prison litigation literature and other resources.

I also attended an all day workshop geared towards pro bono counsel in prisoner suits.  These workshops are held once a month (I believe) at the Dirksen building and are largely attended by pro bono appointed counsel.  Alan Mills of the Uptown People’s Law Center also provided valuable insight and counsel.

Also: if you have an “in” at a large firm, many of them have pro bono departments devoted exclusively to cases like Section 1983/prisoner suits.    Chances are your “Biglaw” counterpart  will have handled a case against the same defendants you have sued.  One person in particular was extremely helpful in sharing deposition outlines, etc.

3/ Prison Litigation Coordinator: A Valuable Liaison. I then contacted the prison litigation coordinator and arranged for a telephone conference with my client.  Everything must be in writing.  You send some proposed dates for a phone call with your client and the coordinator will return a fax to you with the date and time.  You then wait for the (collect) call on the appointed date and time

4/ Client contact (phone): On the scheduled call date, I fielded the collect call, introduced myself and discussed the case.  I asked my client to send me everything – disciplinary reports, grievance documents and medical records

5/ Client contact (in-person visit) I also found it beneficial to meet in person. Again, I went through the prison litigation coordinator to arrange these visits.  Once there, I met with the client and discussed strategy.  I met with my client two more times; once to prepare for his deposition and another time to prepare for trial.

6/ Discovery: From there, the case proceeds like any other civil case – with written discovery, motion practice and depositions.  I subpoenaed medical records  and produced my client for his deposition, and deposed several defendants and their expert witnesses.

District Court Fund Regulations 1-3 allowed me to offset some of the expert witness expenses the case required.  (http://www.ilnd.uscourts.gov/home/clerksoffice/rules/admin/pdf-orders/General%20Order%2011-0003%20-%20Local%20Rules%20Appendix%20E.pdf); LR 83.36.

These Regulations provide that appointed counsel can seek prepayment of litigation expenses of up to $3,000.  I filed a motion for reimbursement of funds up to this amount and presented it to the court. From there, I took the order to the Clerk’s office and they produced a reimbursement check about a week later.

I also located and named an expert of my own and had him prepare a written report supporting my client’s theory of the case.

7/ Court Hearings: Some judges will bend over backwards to help you when they realize you are appointed counsel.  For others, it won’t matter: You will be held to the same deadlines as your opponent.  So, expect the “look at me! I’m altruistic” excuse for missing a deadline to fall on deaf ears.

8/ Settlement Conference: Expect a referral to a Magistrate judge for a settlement conference.  My client attended by video feed.  The Magistrate did a good job of outlining the strengths and weaknesses to my client directly and discussed the merits of settlement.

9/ Summary Judgment: If the settlement conference doesn’t resolve the case, and mine didn’t,  FRCP 56 and Local Rule 56 take center stage here – just like any other case.  The movant must supply a statement of facts that dictate summary judgment while the respondent must offer its own version of facts that create a triable question of fact.

10/ Trial. We survived summary judgment and the case went to trial.  Jury selection took a long time.

I wanted jurors whom I thought might harbor some animosity towards penal institutions; either based on their personal experiences or those of close friends or family members. The defense, of course, wanted jurors who fit the profile of someone who espoused respect for authority and correctional institutions. There were multiple jurors that fit each demographic and each side made numerous challenges for cause.

Then, just like that, it was time for opening statements.

Afterwords

We settled on day one of the trial.  My client was relieved and very appreciative that he had someone in his corner fighting for him after a lifetime of experiencing quite the opposite.

So – after nearly four years of sometimes acrid litigation with a tough defense firm opponent, I ask myself, Would I Want To Do It Again? Probably not.  The reason is purely economic.  Litigating a civil rights case involving multiple doctors and experts is simply cost-prohibitive; especially if you are a solo practitioner or work for a small firm.  Yes, you can recover fees if you win, but the odds aren’t in your favor on that score.

I saw firsthand the disparity between large law firms and smaller ones in pro bono litigation.  The former have the resources and infrastructure to spare no expense (e.g. they can fly across the country taking depositions) while the latter smaller firms are forced to litigate on a shoestring budget. But that’s a topic for another time.

Putting the financial issue aside, I can say that my appointed counsel case was rewarding both professionally and personally.  It forced me out of my Precious Comfort Zone and I felt I truly helped someone.  The experience tested my limits in terms of legal procedure, substantive law, and logistics and is one I won’t soon forget.

 

 

Default “Orders”, Default “Judgments” And “DWPs” – Illinois Quick Hits

Jackson v. Hooker, 397 Ill.App.3d 614 (1st Dist. 2010) is dated but relevant for its interesting procedural history and nuanced discussion of appellate procedure, the difference between default orders and default (money) judgments and the appropriate time to vacate a dismissal for want of prosecution (“DWP”).

After obtaining an order of default against the defendant, the plaintiff didn’t show up for the prove-up hearing and the case was dismissed for want of prosecution (“DWP’d”). Four months later, the plaintiff moved to vacate the DWP.  The trial court denied the motion and granted the plaintiff leave to file a Section 2-1401 petition to vacate the DWP. Plaintiff did so and the court granted the motion and reinstated the default.

Plaintiff later obtained a $700,000 money judgment after a prove-up hearing. This time, the defendant moved to vacate the judgment. The trial court denied the motion for failure to comply with Section 2-1401. Defendant appealed.

Reversing the default judgment, the trial court first focused on the nature of DWPs and when and how to vacate them.  The guideposts:

When a case is DWPd, a plaintiff has one year (or within the remaining limitations period) to file a new action under Code Section 13-217 (735 ILCS 5/13-217);

– A DWP order only becomes final and appealable when the one-year refiling period lapses.  Until that one-year time period expires, the DWP isn’t a final order and can’t be appealed;

– In addition, the one-year period doesn’t start running until after a court rules on a motion to vacate a DWP.  (For example: if a case is DWP’d on January 1, 2015, the plaintiff has through January 1, 2016 to refile the case.  If the DWP is vacated on June 1, 2015, the plaintiff has one year – through June 1, 2016 – to refile.);

Code Section 2-1301 (735 ILCS 5/2-1301) allows a court to set aside any (non-final) default order at any time or to set aside a final judgment within 30 days of the judgment’s entry;

– After 30 days from the judgment date, the more stringent Section 2-1401 standards apply (735 ILCS 5/2-1401).  Section 2-1401 applies to judgments more than 30 days but less than 2 years old;

– A default order (an “order of default”) is simply a non-final order that prevents the defaulting party from making additional defenses but doesn’t determine any rights or remedies;

– A default judgment is the specific act that ends the litigation and finally decides the dispute;

– A default judgment has two elements: (1) a finding of the issues for the plaintiff; and (2) an assessment of damages.

(¶¶ 4-9)

Here, Since the one-year refiling period hadn’t expired when the plaintiff sought to vacate the DWP, the motion was timely.  As a result, Section 2-1401 didn’t apply and the plaintiff didn’t have to show due diligence or a meritorious defense.

The court also held that Section 2-1401 also didn’t apply to the defendant’s motion to vacate the default judgment in favor of the plaintiff. A default order entered in October 2007 but the default judgment didn’t enter until June 2008.  Since the defendant filed his motion to vacate the default judgment within 30 days of June 2008, the more relaxed standards of Section 2-1301 applied.  ¶ 9; also see (here)

Take-aways:

The case contains some good procedural reminders.  Specifically, an order of default differs qualitatively from a default judgment.  The latter assigns a dollar value to the plaintiff while a default order doesn’t award any monetary relief.

The case also stresses that a dismissal for want of prosecution isn’t a final (and therefore appealable) order until one-year elapses from (a) the date of the dismissal or (b) from the date a motion to vacate the DWP is denied.

Lastly, this case reaffirms the key differences between motions to vacate judgments before (Section 2-1301 motions) and after (Section 2-1401 motions) 30 days.