Archives for June 2016

Corporate Five-Year Winding Up or “Survival” Period Has Harsh Results for Asbestos Injury Plaintiffs – Illinois Court

An Illinois appeals court recently considered the interplay between the corporate survival statute, 805 ILCS 5/12.80 (the “Survival Act”), which governs lawsuits against dissolved corporations) and when someone can bring a direct action against another person’s liability insurer.

The personal injury plaintiffs in Adams v. Employers Insurance Company of Wasau, 2016 IL App (3d) 150418 sued their former employer’s successor for asbestos-related injuries. Plaintiffs also sued the former company’s liability insurers for a declaratory ruling that their claims were covered by the policies.

The former employer dissolved in 2003 and plaintiffs filed suit in 2011. The plaintiffs alleged the dissolved company’s insurance policies transferred to the shareholders and the corporate successor. The insurers moved to dismiss on the basis that the plaintiff’s suit was untimely under the Survival Act’s five-year winding up (“survival”) period to sue dissolved companies and because Illinois law prohibits direct actions against insurers by non-policy holders.

Affirming dismissal of the suit against the insurers, the court considered the scope of the Survival Act and whether its five-year repose period (the time limit to sue a defunct company) can ever be relaxed.

The Survival Act allows a corporation to sue or be sued up to five years from the date of dissolution. The suit must be based on a pre-dissolution debt and the five-year limit applies equally to individual corporate shareholders.  The statute tries to strike a balance between allowing lawsuits to be brought by or against a dissolved corporation and still setting a definite end date for a corporation’s liability. The five-year time limit for a corporation to sue or be sued represents the legislature’s determination that a corporation’s liability must come to and end at some point.

Exceptions to the Survival Act’s five-year repose period apply where a shareholder is a direct beneficiary of a contract and where the amount claimed is a “fixed, ascertainable sum.”

The Court held that since the plaintiffs didn’t file suit until long after the five-year repose period expired, and no shareholder direct actions were involved, the plaintiffs’ claims against the dissolved company (the plaintiffs’ former employer) were too late.

Illinois law also bans direct actions against insurance companies. The policy reason for this is to prevent a jury in a personal injury suit from learning that a defendant is insured and eliminate a jury’s temptation to award a larger verdict under the “deep pockets” theory (to paraphrase: “since defendant is protected by insurance, we may as well hit him with a hefty verdict.”)

The only time a direct action is allowed is where the question of coverage is entirely separate from the issue of the insured’s liability and damages. Where a plaintiff’s claim combines liability, damages and coverage, the direct action bar applies (the plaintiff cannot sue someone else’s insurer).

Here, the plaintiffs’ coverage claim was intertwined with the former employer’s (the dissolved entity) liability to the plaintiffs.  As a result, the plaintiffs action was an impermissible direct action against the dissolved company’s insurers.

Take-aways:

The Case starkly illustrates how unforgiving a statutory repose period is.  While the plaintiff’s injuries here were substantial, the Court made it clear it had to follow the law and that where the legislature has spoken – as it had by enacting the Survival Act – the Court must defer to it. Otherwise, the court encroaches on the law-making function of the legislature.

Another case lesson is that plaintiffs who have claims against dissolved companies should do all they can to ensure their claims are filed within the five-year post-dissolution period.  Otherwise, they risk having their claims time-barred.

 

Revenge Porn – The Implicated Civil Claims

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 this year 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.8

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)

Debtor’s Refusal to Return Electronic Data = Embezzlement – No Bankruptcy Discharge – IL ND

FNA Group, Inc. v. Arvanitis, 2015 WL 5202990 (Bankr. N.D. Ill. 2015) examines the tension between the bankruptcy code’s aim of giving a financial fresh start to a debtor and the Law’s attempt to protect creditors from underhanded debtor conduct to avoid his debts.

After a 15-year employment relationship went sour, the plaintiff power washing company sued a former management-level employee when he failed to turn over confidential company property (the “Data”) he had access to during his employment.

After refusing a state court judge’s order to turn over the Data and an ensuing civil contempt finding, the defendant filed bankruptcy.

The plaintiff filed an adversary complaint in the bankruptcy case alleging the defendant’s (now the debtor) embezzlement and wilfull injury to company Data.

The plaintiff asked the bankruptcy court to find that the debtor’s obligations to the plaintiff were not dischargeable (i.e. could not be wiped out).

Siding with the plaintiff, the Court provides a useful discussion of the embezzlement and the wilfull and malicious injury bankruptcy discharge exceptions.

The bankruptcy code’s discharge mechanism aims to give a debtor a fresh start by relieving him of pre-petition debts. Exceptions to the general discharge rule are construed strictly against the creditor and liberally in favor of the debtor.

Embezzlement under the bankruptcy code means the “fraudulent appropriation of property” by a person to whom the property was entrusted or to whom the property was lawfully transferred at some point.

A creditor who seeks to invoke the embezzlement discharge exception must show: (1) the debtor appropriated property or funds for his/her benefit, and (2) the debtor did so with fraudulent intent.

Fraudulent intent in the embezzlement context means “without authorization.” 11 U.S.C. s. 523(a)(4).

The Court found the creditor established all embezzlement elements. First, the debtor was clearly entrusted with the Data during his lengthy employment tenure. The debtor also appropriated the Data for his own use – as was evident by his emails where he threatened to destroy the Data or divulge its contents to plaintiff’s competitors.

Finally, the debtor lacked authorization to hold the Data after his resignation based on a non-disclosure agreement he signed where he acknowledged all things provided to him remained company property and had to be returned when he left the company.

By holding the Data hostage to extract a better severance package, the debtor exhibited a fraudulent intent.

The court also refused to allow a debtor discharge based on the bankruptcy code’s exception for willful and malicious injury. 11 U.S.C. s. 523(a)(6).

An “injury” under this section equates to the violation of another’s personal or property rights. “Wilfull” means an intent to injure the person’s property while “malicious” signals a conscious disregard for another’s rights without cause.

Here, the debtor injured the plaintiff by refusing to release the Data despite a (state) court order requiring him to do so. Plaintiff spent nearly $200,000 reconstructing the stolen property and retaining forensic experts and lawyers to negotiate the Data’s return.

Lastly, the debtor’s threatening e-mails to plaintiff in efforts to coerce the plaintiff to up its severance payment was malicious under Section 523 since the e-mails exhibited a disregard for the importance of the Data and its integrity.

Take-aways:

The bankruptcy law goal of giving a debtor fiscal breathing room has limits. If the debtor engages in intentional conduct aimed at evading creditors or furthers a scheme of lying to the bankruptcy court, his pre-petition debts won’t be discharged.

This case is post-worthy as it gives content to the embezzlement and wilfull and malicious property damage discharge exceptions.