Archives for July 2015

Land Trust Beneficiary Can Sue On Title Policy; Title Insurer Not An Information Provider Under Economic Loss Rule – IL 2d Dist.

Two key questions the Illinois Second District appeals court asked and answered in Warczak v. Attorneys’ Title Guaranty Fund, Inc., 2015 IL App (2d) 140677-U are (1) whether a land trust beneficiary can sue under a title insurance policy naming the trustee as the covered entity (answer: yes) and (2) if a title insurer that issues a title commitment to a property buyer is in the business of providing information under the negligent misrepresentation exception to the Illinois economic loss rule (answer: no).

The plaintiff bought vacant land in September 2005 (titling it in a land trust; plaintiff was the beneficiary) and the defendant issued a title insurance policy against the property at the same time.  A month earlier (August 2005), the title insurer issued a title commitment that failed to list 2003 taxes as unpaid.  A tax buyer eventually recorded a tax deed against the property in 2008.  When the plaintiff found out, he sued to recover under the title policy.

The plaintiff’s three-count complaint sought a declaratory judgment that he was entitled to title policy coverage and added claims for negligence and breach of contract (alleging breach of the defendant’s sale closing services) against the insurer. The trial court granted the insurer’s motion to dismiss the declaratory action and later entered summary judgment for the insurer on the breach of contract and negligence complaint counts.  Plaintiff appealed.

Partially reversing the trial court, the appeals court addressed legal standing to sue on behalf of a land trust and whether a title commitment provides “information” for the guidance of others sufficient to arm the recipient with a negligent misrepresentation claim against the insurer.

The court reversed dismissal of plaintiff’s declaratory judgment suit and found the plaintiff had standing to sue under the policy as trust beneficiary.  The operative rules relied on by the court included:

– in a land trust (“L-T”), the beneficiary wields broad management power over the property;

– an L-T beneficiary can possess, manage and control the property and also receive income generated from the property;

– the L-T beneficiary maintains all incidents of property ownership except for title to the property (which is held in the name of the Trustee);

– the hallmarks of L-T ownership are (1) secrecy of ownership and (2) ease of property transfer ;

– because of his intimate involvement with the property, the L-T beneficiary has property tax obligations and can pursue litigation affecting the property.

Here, while the trustee was the named title policy insured, it was clear that the parties viewed the plaintiff as the property owner based on their conduct.  In addition, while the plaintiff wasn’t a named insured under the policy, his involvement in the property was so extensive that he was effectively the real party in interest under the title policy.  As a result, the court reversed dismissal of the declaratory judgment suit.  (¶¶ 37-42).

The court did affirm summary judgment for the insurer on the plaintiff’s negligence claim.  The economic loss rule, which prevents a plaintiff from recovering purely economic losses (costs of repair, replacement, lost profits, etc.) in tort (negligence, e.g.) when a contract defines the relationship, defeated the claim.  The governing contract here was the written agent/escrow agreement between the parties.

An exception to the economic loss rule exists where a defendant makes a negligent misrepresentation and is in the business of providing information for the guidance of others in their business dealings.  Following Illinois Supreme Court guidance, the court found that a title insurer who issues a title commitment – as opposed to a title abstract (which does furnish information) – is not in the business of providing information.  This is because a title commitment only specifies what title defects an insurer will not cover; it (the title commitment) limits the risks (of defective title) that an insurer will cover.  (¶¶ 54, 58-59).

In the end, the court found that any information provided by the insurer in the title commitment was ancillary to the sale of title insurance – the main purpose of the parties’ dealings.  Otherwise, the court said, the title insurer would be cast in the role of guarantor of the property’s title condition – something the insurer never signed up for.  ¶ 59.

Take-aways:

1/ L-T beneficiary can sue on title policy naming the trust as insured where beneficiary has hands-on relationship with the property;

2/ The economic loss rule bars negligent misrepresentation claim against title insurer based on title commitment.  This is because title commitment doesn’t provide information.  Instead, it serves to notify an insured (like the plaintiff here) of what defects the insurer is excluding.  Any information is tangential to the main thrust of the contract – to provide insurance over certain title defects.

 

 

 

‘It Seemed Like a Good Idea At The Time’: Revenge Porn In Illinois – A Crime With Myriad Civil Components

Camera

Nation-wide vilification of revenge porn (“RP”) – the unconsented on-line dissemination of sexual photos or images of others (almost always females) – reached an ironic crescendo on Good Friday of 2015 when a California judge  sentenced Kevin Bollaert, 28, proprietor of the UGotPosted.com and ChangeMyReputation.com Websites, to an 18-year prison term after a jury convicted him of identity theft and extortion.1

Mr. Bollaert’s sites allowed users (usually jilted paramours) to post intimate photos of third parties without their permission.  When the terrified photographed party would contact the site to take the images down, Mr. Bollaert would then extract (extort?) a “settlement” payment from the party.

The near two-decades long jail sentence can be viewed as a culmination of cultural outrage at RP as evidenced by a flurry of civil verdicts across the country and (at current writing) 16 state legislatures criminalizing the practice.  Mr. Bollaert’s lengthy punishment, aside from giving him some time to consider “was it worth it?”, may also prove a symbolic harbinger of what’s to come for future RP peddlers.

Hostility toward RP has bled into varied sectors of society.  In the international realm, Great Britain recently (April 2015) criminalized the practice by enacting a law that provides for tough penalties against RP defendants and other nations across the globe are likely to follow suit.2

RP has infiltrated the sports arena, too.  In December of last year, New York Jets linebacker Jermaine Cunningham was arrested and charged after he posted naked photos of his ex-girlfriend on-line and sent them to her family members (ouch!).   Mr.vCunningham pled not guilty in May 2015 to various criminal invasion of privacy charges.3

Most recently, RP hit the news on an astronomical scale as Google, the Web search behemoth, announced it would allow anyone to delete images posted without their permission.4  Social media titans Twitter, Facebook and Reddit followed in Google’s wake and announced similar policies that police the posting of sexually explicit media.5

But while RP’s criminalization garners the most media attention – Illinois’ own statute, which took effect in June 2015, is praised by privacy advocates as particularly robust 6 – RP also gives rise to a plethora of civil causes of action and provides fertile ground for creative lawyering.

This article briefly discusses the various civil claims under Illinois law that are implicated in a case where a defendant – be it an individual or Website owner – posts sexual photos without someone’s consent.

Wikipedia describes RP as “sexually explicit media that is publicly shared online without the consent of the pictured individual.”7  Typically, RP is uploaded by a victim’s ex-partner whose goal is to shame the imaged victim and who sometimes includes the victim’s name, social media links and other identifying information.

Many times, the salacious images are “selfies”, pictures taken by the RP victim.  The harmful impact of RP is (or should be) self-evident: sociologists and psychologists have studied RP recipients and heavily documented the toxic psychological, social and  financial ramifications they suffer.

The legal community has also taken notice of RP’s proliferation in this digitally-drenched culture.  Witness international mega-firm K&L Gates’ recent launch of a legal clinic dedicated to helping RP plaintiff’s get legal redress

Civil verdicts

Civil suits against RP defendants appear to be gaining traction.  For just in the past year or so, juries and judges in several states have hit both individual and corporate RP defendants with substantial money judgments.  A California and Ohio court recently socked RP defendants with $450,000 default judgments and civil juries in Florida and  Texas awarded RP plaintiffs $600,000 and $500,000, respectively. 10, 11. 

My research has revealed only a single revenge porn case pending in Illinois, but no published decisions yet. 12

“So What’s A Gal (Almost Always)/Guy To Do?” – Common Law and Statutory Civil Claims

Aside from lodging a criminal complaint, an RP plaintiff has an array of common law and statutory remedies at her disposal.  A brief summary of the salient causes of action under Illinois law that attach to a revenge porn follows.

(1) Invasion of Privacy – Public Disclosure of Private Facts

Illinois recognizes four common-law invasion of privacy torts, those being (1) an unreasonable intrusion upon the seclusion of another; (2) an appropriation of another’s name or likeness; (3) a public disclosure of private facts; and (4) publicity that reasonably places another in a false light before the public. 13

To state a common law claim for invasion of privacy through public disclosure of private facts, a plaintiff must prove: “(1) publicity was given to the disclosure of private facts; (2) the facts were private, and not public, facts; and (3) the matter made public was such as to be highly offensive to a reasonable person.” 14

Generally, to satisfy the publicity element of the tort, a plaintiff must show that the information was disclosed to the public at large; however, the publicity requirement may be satisfied where a disclosure is made to a small number of people who have a “special relationship” with the plaintiff. 15  An invasion of a plaintiff’s right to privacy is important if it exposes private facts to a public whose knowledge of those facts would be embarrassing to the plaintiff.

This might equate to the “general public” if the person is a public figure, or a particular public such as fellow employees, club members, church members, family, or neighbors, if the person isn’t a public figure. 16

Invasion of privacy damages include actual, nominal, and punitive ones. 17

An intrusion on seclusion invasion of privacy plaintiff must show: (1) an unauthorized intrusion or prying into a plaintiff’s seclusion; (2) the intrusion is highly offensive or objectionable to a reasonable person; (3) the matters upon which the intrusion occurred were private; and (4) the intrusion caused anguish and suffering. 17-a

RP Application:  Posting a sexual image on the Internet would qualify as “publicity” and “private” matters under any reasonable interpretation.  And nonconsensual posting would signal highly offensive content to a reasonable person.  The plaintiff’s biggest hurdle would be quantifying his damages in view of the paucity of published RP cases.  But judging from the above default and jury awards, damages ranging from $450,000-$600,000 don’t seem to shock the court’s conscience.  In addition, an intrusion on seclusion claim could fail if the RP case involved a selfie – since that would seem to defeat the “private” and “seclusion” elements of the tort.

(2) Illinois Right of Publicity Act (the “IRPA”)

In 1999, IRPA replaced the common law misappropriation of one’s likeness – the second (2) above branch of the four common-law invasion of privacy torts outlined above.  Illinois recognizes an individual’s right to “control and to choose whether and how to use an individual’s identity for commercial purposes.” 18  The right of publicity derives from the right to privacy  and is “designed to protect a person from having his name or image used for commercial purposes without (her) consent.” 19

“Commercial purpose” under the IRPA means the public use or holding out of an individual’s identity (i) on or in connection with the offering for sale or sale of a product, merchandise, goods, or services; (ii) for purposes of advertising or promoting products, merchandise, goods, or services; or (iii) for the purpose of fundraising. 20 “Identity” means “any attribute” of a plaintiff including a photograph or image of the person. 21

Plaintiff must prove revenue that a defendant generated through the use of Plaintiff’s image.  Failing that, plaintiff can recover statutory damages of  $1,000. 22.  An IRPA plaintiff can also recover punitive damages and attorneys’ fees. 23.

RP Application: RP fits snugly within IRPA’s coverage.  It specifically applies to photographs or images.  If the RP defendant was making money off the unconsented Web postings, and IRPA claim could prove both a viable and valuable claim that would allow the plaintiff to recover statutory damages and attorneys’ fees.

(3), (4) Intentional and Negligent Infliction of Emotional Distress

“To prove a cause of action f0r intentional infliction of emotional distress, the plaintiff must establish three elements: (1) extreme and outrageous conduct; (2) intent or knowledge by the actor that there is at least a high probability that his or her conduct would inflict severe emotional distress and reckless disregard of that probability; and (3) severe emotional distress.” 24

A negligent infliction of emotional distress plaintiff must plead and prove the basic elements of a negligence claim: a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately caused by that breach. 25  A bystander negligent infliction plaintiff must prove a physical injury or illness resulting from the conduct. 26  

Since literally millions consume social media on a daily basis (27), perhaps it’s not a stretch to see a bystander make out a negligent infliction claim based on RP aimed at a bystander’s close relative for example.

RP Application  Under prevailing social mores, posting sexually explicit media    designed to shame someone or to extract money from them would likely meet the objectively extreme and outrageous test.  The intent or reckless disregard element would likely be imputed to a defendant by virtue of him publicizing the offending material.  The unanswered questions would be damages.  Putting it rhetorically, how would you (judge or jury) compensate the RP where there is no precise numerical formula?

(5) Copyright Infringement

Copyright infringement as applied to the RP setting represents a creative – and some way the best – way to attack RP.  28  The Federal copyright scheme particularly fits a RP situation involving “selfies” – which, by some accounts, make up nearly 80% of RP claims. 29

Copyright law gives an owner the exclusive rights – among others – to duplicate and exhibit a work.  Copyright protection exists for any work fixed in a tangible medium and includes photographs and videos. 30  The copyright infringement plaintiff must establish (1) she owns the copyright in the work; and (2) the defendant copied the work without the plaintiff’s authorization.18  Inputting a copyrighted work onto a computer qualifies as “making a copy” under the Copyright Act. 31

The catch here is that formally registering the work is a precondition to filing suit for infringement. 32

Being able to sue a defendant for copyright infringement is obviously an important right since that is copyright law’s “teeth”: a winning copyright plaintiff can recover statutory damages, actual damages plus attorneys’ fees. 33

But it begs the question – is it realistic that an RP plaintiff is going to draw more attention to a salacious photo by registering it with a Federal government agency?  Not likely.  Nevertheless, a copyright claim could lie for RP conduct involving a plaintiff’s selfies if she registered them with the US Copyright office.

What about the CDA (Communications Decency Act)?

Another important consideration in the RP calculus involves Section 230 of the Communications Decency Act (“CDA”) – a statute on which much electronic “ink” has spilled and that is beyond the scope of this article.  34  Basically, as I understand it, the CDA immunizes Web service providers (Comcast, AOL, etc.) from a third-party’s publication of offensive content but not Web content providers.  35  So the CDA inquiry distills to whether a Website defendant is a service provider (in which there would be immunity) or content provider (in which case there wouldn’t be).36.

(6) Negligence

A common law negligence action against an RP spreader constitutes another creative adaptation of a tried-and-true cause of action to a decidedly post-modern tort (and crime).  An Illinois, a negligence plaintiff must plead and prove (1) the defendant[s] owed a duty of care; (2) the defendant[s] breached that duty; and (3) the plaintiff’s resulting injury was proximately caused by the breach. 37

The plaintiff would have to prove that the RP defendant owed a duty of care not to post and distribute intimate images of the plaintiff, that the defendant breached the duty by indiscriminately posting the image, and that plaintiff suffered injury as a proximate cause.

Like the privacy torts encapsulated above, the key questions seem to be causation and damages.  That is – what numerical damages can the RP plaintiff establish that are traceable to the illicit (electronic) is is  publication?  Conceivably, she could request lost wages, medical and psychological treatment costs, pain and suffering, loss of a normal life, etc. – the entire gamut of damages a personal injury plaintiff can seek.

Afterwords:

RP is a subject whose contours seem to be in perpetual flux as the law is fluid and still developing.  In fact, by the time this article is published, it’s possible that there will be a flurry of legislative, political and even case law developments that make some of the contents dated.

That said, as on-line privacy issues and social media use continue to pervade our culture and expand on a global level, and as publishers of private, salacious photographs aren’t learning their collective lesson, RP will likely secure its foothold in cyberlaw’s criminal and civil landscapes.

The above is not an exclusive list of potential revenge porn causes of action.  As states (and countries) continue to enact laws punishing RP, it’s likely that civil damage claims attacking the practice will mushroom in lockstep with RP’s rampant criminalization.

References:

1. http://www.nbcsandiego.com/news/local/Kevin-Bollaert-Revenge-Porn-Sentencing-San-Diego-298603981.html

2. http://www.independent.co.uk/news/uk/home-news/revenge-porn-illegal-in-england-and-wales-under-new-law-bringing-in-twoyear-prison-terms-10173524.html

3. http://www.msn.com/en-us/sports/nfl/nfl-linebackers-case-highlights-rise-of-revenge-porn-laws/ar-BBj8sP9

4.  http://bigstory.ap.org/article/ff3b7f7b697b4af295935ed6a482ca1e/google-cracks-down-revenge-porn-under-new-nudity-policy

5. http://www.huffingtonpost.com/mary-anne-franks/how-to-defeat-revenge-porn_b_7624900.html

6. http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=098-1138 (text of Illinois’ revenge porn law, eff. 6.1.15)

7. https://en.wikipedia.org/wiki/Revenge_porn

8.  http://www.huffingtonpost.com/mary-anne-franks/how-to-defeat-revenge-porn_b_7624900.html

9.  http://dealbook.nytimes.com/2015/01/29/law-firm-founds-project-to-fight-revenge-porn/?_r=0

10. http://arstechnica.com/tech-policy/2015/03/revenge-porn-creepsters-ordered-to-pay-900000-in-default-judgment

11. http://www.brownanddoherty.com/florida-jury-delivers-record-setting-600000-00-verdict-in-revenge-porn-case.php; http://www.houstonchronicle.com/news/houston-texas/houston/article/Jury-awards-500-000-in-revenge-porn-lawsuit-5257436.php6.

12. http://articles.redeyechicago.com/2014-03-11/news/48127548_1_hunter-moore-mary-anne-franks-legislators

13.  Ainsworth v. Century Supply Co., 295 Ill.App.3d 644, 648, 230 Ill.Dec. 381, 693 N.E.2d 510 (1998).

14-16.  Miller v. Motorola Inc., 202 Ill.App.3d 976, 978, 148 Ill.Dec. 303, 560 N.E.2d 900, 902 (1990), citing W. Keeton, Prosser & Keeton on Torts § 117, at 856–57 (5th ed.1984)

17.  Lawlor v. North American Corporation, 2012 IL 112 530, ¶¶ 58-65

17-a.  Huon v. Breaking Media, LLC, 2014 WL 6845866 (N.D.Ill. 2014) 

18-19. Trannel v. Prairie Ridge Media, Inc., 2013 IL App (2d) 120725, ¶¶ 15-16

20. 765 ILCS 1075/1.

21. 765 ILCS 1075/5

22. 765 ILCS 1075/40(a)(2)

23. 765 ILCS 1075/40(b)

24. Doe v. Calumet City, 161 Ill.2d 374 (1994)

25-26.  Rickey v. CTA, 98 Ill.2d 546 (1983)

27.  http://www.statista.com/statistics/264810/number-of-monthly-active-facebook-users-worldwide/ (Facebook has 1.44B users; Twitter has 236M; Instagram – 300M)

28-29. http://www.washingtonpost.com/news/the-intersect/wp/2014/09/08/how-copyright-became-the-best-defense-against-revenge-porn/

30-31: In re Aimster Copyright Litigation, 343 F.3d 643 (7th Cir. 2003)

32.  17 U.S.C. § 1104

33.  http://copyright.gov/circs/circ01.pdf

34.  https://www.law.cornell.edu/uscode/text/47/230

35.  http://www.defamationremovallaw.com/what-is-section-230-of-the-communication-decency-act-cda/

36.  Zak Franklin, Justice for Revenge Porn Victims: Legal Theories to Overcome Claims of Civil Immunity by Operators of Revenge Porn Websites, 102 Cal. L. Rev. 1303 (Oct. 2014).                               

37. Corgan v. Muehling, 143 Ill.2d 296, 306 (1991)

 

The (Ruthless?) Illinois Credit Agreements Act

The Illinois Credit Agreements Act, 815 ILCS 160/1, et seq. (the “ICAA”) and its requirement that credit agreements be in writing and signed by both creditor and debtor, recently doomed a borrower’s counterclaim in a multi-million dollar loan default case.

The plaintiff in Contractors Lien Services, Inc. v. The Kedzie Project, LLC, 2015 IL App (1st) 130617-U, sued to foreclose on a commercial real estate loan and sued various guarantors along with the corporate borrower.

The borrower counterclaimed, arguing that a “side letter agreement” (“SLA”) signed by an officer of the lender established the parties’ intent for the lender to release additional funds to the borrower – funds the borrower claims would have gotten it current or “in balance” under the loan. The trial court disagreed and entered a $14M-plus judgment for the lender plaintiff.  The corporate borrower and two guarantors appealed.

Held: Affirmed

Rules/Reasoning:

The ICAA provides that a debtor cannot maintain an action based on a “credit agreement” unless it’s (1) in writing, (2) expresses an agreement or commitment to lend money or extend credit or (2)(a) delay or forbear repayment of money and (3) is signed by the creditor and the debtor. 815 ILCS 160/2

An ICAA “credit agreement” expansively denotes “an agreement or commitment by a creditor to lend money or extend credit or delay or forbear repayment of money not primarily for personal, family or household purposes, and not in connection with the issuance of credit cards.”  So, the ICAA does not apply to consumer transactions.  It only governs business/commercial arrangements.

The ICAA covers and excludes claims that are premised on unwritten agreements that are even tangentially related to a credit agreement as defined by the ICAA.

The borrower argued that the court should construe the SLA with the underlying loan as a single transaction: an Illinois contract axiom provides that where two instruments are signed as part of the same transaction, they will be read and considered together as one instrument.

The court rejected this single transaction argument.  It found the SLA was separate and unrelated to the loan documents.  The SLA post-dated the loan documents as evidenced by the fact that the  SLA specifically referenced the loan.  Conversely, the loan made no mention of the SLA (since it didn’t exist when the loan documents were signed).

All these facts militated against the court finding the SLA was part-and-parcel of the underlying loan transaction.

Another key factor in the court’s analysis was the defendants admitting that the SLA post-dated the loan (and so was a separate and distinct writing).  The court viewed this as a judicial admission – defined under the law as “deliberate, clear, unequivocal statement by a party about a concrete fact within that party’s knowledge.”

Here, since the SLA was not part of the loan modification, it stood or fell on whether it met the requirements of the ICAA.  It did not since it wasn’t signed by both lender and borrower.  The ICAA dictates that both creditor and debtor sign a credit agreement.  Here, since the debtor didn’t sign the SLA (it was only signed by lender’s agent), the SLA agreement was unenforceable.  As a consequence, the lender’s summary judgment on the counterclaim was proper.

Afterwords:

This case and others like it show that a commercially sophisticated borrower – be it a business entity or an individual – will likely be shown no mercy by a court.  This is especially true where there is no fraud, duress or unequal bargaining power underlying a given loan transaction.

Contractor’s Lien Services also illustrates in stark relief that ICAA statutory signature requirement will be enforced to the letter.  Since the borrower didn’t sign the SLA (which would have arguably cured the subject default), the borrower couldn’t rely on it and the lender’s multi-million dollar judgment was validated on appeal.