Archives for June 2015

Contractor’s Substantial Performance Of Home Repair Work Defeats Homeowners’ Breach of Contract Suit – IL 5th Dist.

Brown v. Daech & Bauer, 2015 IL App (5th) 140203-U, serves as a recent example of a court applying the substantial performance doctrine in favor of a contractor in a disgruntled homeowner’s breach of contract suit versus the contractor.

The homeowner plaintiffs sued the contractor for defective work on plaintiffs’ home after some hail damage.  The plaintiffs joined statutory claims for violation of the Home Remodeling and Repair Act (HRRA) and the Consumer Fraud Act (CFA) in their complaint.

For its part, the contractor counterclaimed for monies withheld by the plaintiff.  After a bench trial, the lower court sided with the contractor and awarded it damages.  It ruled against the plaintiffs on all claims.

 The 5th District affirmed and in doing so, gives some content to both the substantial performance and partial performance doctrine under Illinois contract law.

In Illinois, contractors aren’t required to perform with surgical precision.  Instead, contractors only need to exhibit the “honest and faithful performance of the material and substantial parts of the contract with no willful departure from or omission of the essential terms of the contract.” This is the substantial performance doctrine.

Like most legal tests, the substantial performance one is fluid and fact-based.  A contractor can meet the standard even where there are some defects, deviations or omissions from the contract.  So long as the project’s structural integrity remains intact and any contractual deviations can be fixed without damaging the property, the contractor can likely show substantial performance and recover under the contract.  The homeowner’s recourse when faced with a substantially (as opposed to perfectly) performing contractor is to take a credit against the contract price for any defects in the contractor’s work.

The appeals court agreed with the trial court’s finding that the plaintiff met the substantial performance standard. Since this finding wasn’t against the manifest weight of the evidence (“unreasonable, arbitrary, not based on the evidence”), the judgment for the contractor was upheld.

The court also found that the contractor could recover under the related doctrine of partial performance. This rule applies where a plaintiff performs most but not all of the material terms of a contract – where it consists of several component parts that can be neatly separated from each other. The key inquiry in deciding whether a contract is “entire” as opposed to “severable” (divisible, basically) is whether the parties gave a single assent to the whole transaction or whether they agreed separately to various parts of the contract.

Here, the court found that while the contractor didn’t finish about $1,000 worth of the $4,000-plus contract, it could still recover for the portions of the contract it did sufficiently perform.  The court found that certain aspects of the contract were different enough to allow piecemeal recovery.

Lastly, the court rejected the homeowners’ HRRA claim premised on the contractor’s failure to supply the required statutory brochure.  First, the court agreed with the contractor’s argument that it did in fact provide all HRRA disclosures.  Moreover, even if it didn’t furnish the forms, the plaintiff still failed to show any measurable damages caused by the HRRA breach.  At most, this was a technical violation that didn’t merit wholesale defeat of the plaintiff’s suit.

Take-aways:

A pretty straight-forward illustration of the substantial performance doctrine and what a homeowner and contractor must show to win on a breach of contract suit based on faulty construction. The case emphasizes that contractors aren’t held to a flawlessness standard but instead they only must perform the material parts of a contract in a workmanlike fashion.

This case also signals a court’s unwillingness to defeat a contractor claim where there is a technical violation of the HRRA.  Absent actual damages flowing from an HRRA misstep, a homeowner likely won’t win on this claim.

 

 

Seventh Circuit Files: Court Voids LLC Member’s Attempt to Pre-empt LLC’s Suit Against That Member

In Carhart v. Carhart – Halaska International, LLC, (http://law.justia.com/cases/federal/appellate-courts/ca7/14-2968/14-2968-2015-06-08.html) the plaintiff LLC member tried to shield himself from a lawsuit filed against him by the LLC by (1) taking an assignment of a third-party’s claim against the LLC; (2) getting and then registering a default judgment against the LLC; (3) seizing the LLC’s lone asset: its lawsuit against the plaintiff; and (4) buying the lawsuit for $10K.  This four-step progression allowed the plaintiff to extinguish the LLC’s claim against him.

Plaintiff was co-owner of the defendant LLC.  After a third-party sued the LLC in Minnesota Federal court (the “Minnesota Federal Case”), Plaintiff paid the third-party $150,000 for an assignment of that case.  Plaintiff then obtained a $240K default judgment against the LLC.

Meanwhile, the LLC, through its other owner, sued the plaintiff in Wisconsin State Court (the “Wisconsin State Case”) for breach of fiduciary duty in connection with plaintiff’s alleged plundering of the LLC.  While the Wisconsin State Case was pending, Plaintiff registered the Minnesota judgment against the LLC in Wisconsin Federal court.

Plaintiff, now a judgment creditor of the LLC, filed suit in Wisconsin Federal Court (the “Wisconsin Federal Case”) to execute on the $240K judgment against the LLC.  The Wisconsin District Court allowed the plaintiff to seize the LLC’s lone asset – the Wisconsin State Case (the LLC’s breach of fiduciary duty claim against plaintiff) – for $10,000.  This immunized the plaintiff from liability in the Wisconsin State Case as there was no longer a claim for the LLC to pursue against the plaintiff.  The LLC appealed.

The Seventh Circuit voided the sale of the Wisconsin State Case finding the sale price disproportionately low.

Under Wisconsin law, a chose in action is normally considered intangible property that can be assigned and seized to satisfy a judgment.  However, the amount paid for a chose in action must not be so low as to shock the conscience of the court.

In this case, the court branded the plaintiff a “troll of sorts”: it noted the plaintiff buying the LLC’s claim (the Wisconsin State Case) at a steep discount: the defendant paid $150,000 for an assignment of a third-party claim against the LLC and then paid only $10,000 for the LLC’s breach of fiduciary duty claim against plaintiff.

The court found that under Wisconsin law, the $10,000 the plaintiff paid for the LLC’s claim against him was conscience-shockingly low compared to the dollar value of the LLC’s claim.  The plaintiff did not purchase the LLC’s lawsuit in good faith.  The Seventh Circuit reversed the District Court’s validation of plaintiff’s $10K purchase so the LLC could pursue its breach of fiduciary duty claim against the plaintiff in the Wisconsin State Case.

Take-aways:

This seems like the right result.  The court guarded against a litigant essentially buying his way out of a lawsuit (at least it had the appearance of this) by paying a mere fraction of what the suit was possibly worth.  

The case serves as an example of a court looking beneath the surface of a what looks like a routine judgment enforcement tool (seizing assets of a judgment debtor) and adjusting the equities between the parties.  By voiding the sale, the LLC will now have an opportunity to pursue its breach of fiduciary duty claim against the plaintiff in state court. 

Planting GPS Device On Car Not Enough for Invasion of Privacy Claim – IL Fed Court

Troeckler v. Zeiser, 2015 WL 1042187, a recent Southern District of Illinois case, examines this question adapted to a plaintiff’s intrusion on seclusion claim filed against her ex-husband – the defendant who, with some help, secretly affixed a GPS device (a “black box”) to the plaintiff’s car.

The defendant’s two principal acts giving rise to plaintiff’s suit were (1) installing the GPS device; and (2) repeatedly trying to log-in to the plaintiff’s personal email, computer and cell phone accounts.  Plaintiff sued for invasion of privacy/intrusion on seclusion (the “Intrusion Claim”) and conspiracy against the ex-husband and the people he hired to install the device and log in to plaintiff’s e-mail.

The defendant moved to dismiss all claims and the Court dismissed some claims and sustained others.

On the Intrusion Claim, the court noted that in Illinois, intrusion on seclusion is a species of the invasion of privacy tort.  To make out a valid invasion of privacy claim in Illinois, a plaintiff must demonstrate (1) an unauthorized intrusion or prying into the plaintiff’s seclusion; (2) an intrusion that is offensive or objectionable to a reasonable person, (3) the matter upon which the intrusion occurs is private; and (4) the intrusion causes anguish and suffering.

Element (3) – the intrusion involves something that is private – generates the most litigation.  Case examples of private matters include poking holes in a bathroom ceiling and installing hidden cameras in a doctor’s examination room.  Conversely, private facts contained in public records (name, address, SS #, e.g.) do not satisfy the privacy element.

The court looked to a New Jersey case for guidance as to whether installing a GPS device was actionable intrusion on seclusion.  The New Jersey court in Villanova v. Innovative Investigations, Inc., 21 A.3d 650 (N.J.App.Ct 2001) held that a defendant who surreptitiously placed a GPS monitor on her ex-husband’s car (to see if he was cheating on her) was not an invasion of privacy where there was no evidence the defendant drove his car into a private or secluded location.

Following the reasoning of the NJ case, the Troeckler court dismissed the plaintiff’s Intrusion Claim since the plaintiff failed to allege that she drove her car somewhere in which she had a reasonable expectation of privacy.

The plaintiff fared better on the Intrusion Claim as it pertained to the defendant hacking into her private email accounts.  The court found that for purposes of a motion to dismiss, the plaintiff did sufficiently allege a claim for invasion of privacy based solely on the e-mail allegations.

The plaintiff won and lost parts of her conspiracy claim against her ex and the various people he enlisted to help him install the GPS device and breach the plaintiff’s emails accounts.  Civil conspiracy requires concerted action and an underlying wrongful act.  Since the plaintiff failed to establish invasion of privacy on her Intrusion Claim, there was no predicate tort for the conspiracy.

The result was different with respect to the e-mail hacking though.  Since logging in to the plaintiff’s private accounts was a possible invasion of privacy (at least at the early pleading stage), the conspiracy claim survived as it related to the e-mail claims.

Afterwords:

1/A defendant’s unauthorized hacking into a plaintiff’s private email accounts can underlie an intrusion on seclusion/invasion of privacy claim;

2/ In the context of installing a monitoring device on someone’s car, the privacy tort is applied literally: if the plaintiff doesn’t show that she drove somewhere private or “secluded,” invasion of privacy isn’t the proper cause of action to assert.  With the benefit hindsight, the plaintiff probably should have pled a violation of the civil stalking statute based on the defendant’s GPS installation.