Archives for September 2017

Pontiac GTO Buyer Gets Only Paltry Damage Award Where He Can’t Prove Lost Profits Against Repair Shop – IL Court

Spagnoli v. Collision Centers of America, Inc., 2017 IL App (2d) 160606-U portrays a plaintiff’s Pyrrhic victory in a valuation dispute involving a 1966 Pontiac GTO.  

The plaintiff car enthusiast brought a flurry of tort claims against the repair shop defendant when it allegedly lost the car’s guts after plaintiff bought it on-line.

The trial court directed a verdict for the defendant on the bulk of plaintiff’s claims and awarded the plaintiff only $10,000 on its breach of contract claim – a mere fraction of what the plaintiff sought.

The Court first rejected plaintiff’s lost profits claim based on the amounts he expected to earn through the sale of car once it was repaired.

A plaintiff in a breach of contract action can recover lost profits where (1) it proves the loss with a reasonable degree of certainty; (2) the defendant’s wrongful act resulted in the loss, and (3) the profits were reasonably within the contemplation of the defendant at the time the contract was entered into.

Because lost profits are naturally prospective, they will always be uncertain to some extent and impossible to gauge with mathematical precision.  Still, a plaintiff’s damages evidence must afford a reasonable basis for the computation of damages and the defendant’s breach must be traceable to specific damages sustained by the plaintiff.  Where lost profits result from several causes, the plaintiff must show the defendant’s breach caused a specific (measurable) portion of the lost profits. [¶¶ 17-20]

Agreeing with the trial court, the appeals Court found the plaintiff failed to present sufficient proof of lost profits.  The court noted that the litigants’ competing experts both valued the GTO at $80,000 to $115,000 if fully restored to mint condition.  However, this required the VIN numbers on the vehicle motor and firewall to match and the engine to be intact.  Since the car in question lacked matching VIN numbers and its engine missing, the car could never be restored to a six-figures value range.

The Court also affirmed the directed verdict for defendant on plaintiff’s consumer fraud claim.  To make out  valid Consumer Fraud Act (CFA) claim under the Consumer Fraud Act a plaintiff must prove: (1) a deceptive act or unfair practice occurred, (2) the defendant intended for the plaintiff to rely on the deception, (3) the deception occurred in the course of conduct involving trade or commerce, (4) the plaintiff sustained actual damages, and (5) the damages were proximately cause by the defendant’s deceptive act or unfair conduct. A CFA violation can be based on an innocent or negligent misrepresentation.

Since the plaintiff presented no evidence that the repair shop made a misrepresentation or that defendant intended that plaintiff rely on any misrepresentation, plaintiff did not offer a viable CFA claim.

Bullet-points:

  • A plaintiff in a breach of contract case is the burdened party: it must show that it is more likely than not that the parties entered into an enforceable contract – one that contains an offer, acceptance and consideration – that plaintiff substantially performed its obligations, that defendant breached and that plaintiff suffered money damages flowing from the defendant’s breach.
  • In the context of lost profits damages, this case amply illustrates the evidentiary hurdles faced by a plaintiff.  Not only must the plaintiff prove that the lost profits were within the reasonable contemplation of the parties, he must also establish which profits he lost specifically attributable to the defendant’s conduct.
  • In consumer fraud litigation, the plaintiff typically must prove a defendant’s factual misstatement.  Without evidence of a defendant’s misrepresentation, the plaintiff likely won’t be able to meet its burden of proof on the CFA’s deceptive act or unfair practice element.

Truthful Information Can’t Support An Intentional Interference With Employment Suit – IL Court

 

 

The Illinois First District recently discussed the contours of pre-suit discovery requests in cases that implicate fee speech concerns and whether truthful information can ever support an intentional interference with employment claim.

After relocating from another state to take a compliance role with a large bank, the plaintiff in Calabro v. Northern Trust Corporation, 2017 IL App (1st) 163079-U, was fired after only two weeks on the job for failing to disclose his forced removal from a prior compliance position.

When the defendant refused to identify the person who informed it of plaintiff’s prior firing, plaintiff sued to unearth the informant’s identity.  Plaintiff planned to sue that person for intentional interference with plaintiff’s employment contract.

The trial court dismissed plaintiff’s petition for pre-suit discovery and the plaintiff appealed.

Affirming, the Court construed pre-suit discovery request under Supreme Court Rule 224 narrowly.  That rule allows a petitioner to discover the identity of someone who may be responsible in damages to petitioner.

To initiate a request for discovery under Rule 224, the petitioner files a verified petition that names as defendant the person(s) from whom discovery is sought and states why discovery (along with a description of the discovery sought) is necessary.  An order granting a Rule 224 petition is limited to allowing the plaintiff to learn the identity of the responsible party or to at least depose him/her.

To show that discovery is necessary, the petitioner must present sufficient allegations of actionable harm to survive a Section 2-615 motion to dismiss.  That is, the petition must state sufficient facts to state a recognized cause of action.

But Rule 224 limits discovery to the identity of someone who may be responsible to the petitioner.  A petitioner cannot use Rule 224 to engage in a “vague and speculative quest to determine whether a cause of action actually exists.”

Here, the petitioner didn’t know what was actually said by the third party who alerted defendant to petitioner’s prior compliance role ouster.  The Court viewed this as petitioner’s tacit admission he didn’t know whether he possessed a valid interference claim.

The Court then focused on the veracity of the third-party’s statement.  To be actionable, an intentional interference claim requires the supply of false data about a plaintiff.  Accurate and truthful information, no matter how harmful, cannot underlie an intentional interference action. This is because allowing someone to sue another for imparting truthful information would raise First Amendment problems and discourage dissemination of accurate facts.

Truthful statement immunity is also supported by Section 772 of the Restatement (Second) of Torts which makes clear that one who purposely causes another not to perform a contract or enter into a business relationship is not liable for improper interference where that person gives truthful information.  And while the Court pointed out that the Restatement hadn’t been formally adopted the Illinois Supreme Court, appeals courts still looked to the Restatement for guidance on tortious interference questions.  (¶¶ 18-19).

Afterwords:

This case portrays an interesting application of Rule 224 – a device often employed in the personal injury context instead of in the commercial or employment law arenas.  While the rule provides a valuable tool for plaintiffs trying to identify possible defendants, it doesn’t give a petitioner a blank check to engage in wide-ranging, “fishing expedition” requests.  The discovery petitioner must still state a colorable claim as a precondition to obtaining a pre-suit discovery order from the court.

Calabro also vaunts the importance of free speech in our society.  After all, the petitioner’s intentional interference claim was predicated on a true statement – the petitioner was fired from a former compliance role.  The Court makes clear that a valid interference action requires a false statement and that accurate information isn’t actionable interference.

Clearly, the Court viewed the potential for chilling truthful information as more concerning than an individual’s private contract rights with an employer.

 

 

Sole Proprietor’s Mechanics Lien OK Where Lien Recorded in His Own Name (Instead of Business Name) – IL Court

 

While the money damages involved in Gerlick v. Powroznik (2017 IL App (1st) 153424-U) is low, the unpublished case provides some useful bullet points governing construction disputes.  Chief among them include what constitutes substantial performance, the recovery of contractual “extras,” and the standards governing attorney fee awards under Illinois’s mechanics lien statute.

The plaintiff swimming pool installer sued the homeowner defendants when they failed to fully pay for the finished pool.  The homeowners claimed they were justified in short-paying the plaintiff due to drainage and other mechanical problems.

After a bench trial, the court entered judgment for the pool installer for just over $20K and denied his claim for attorneys’ fees under the Act.  Both parties appealed; the plaintiff appealed the denial of attorneys’ fees while the defendants appealed the underlying judgment.

Held: Affirmed

Reasons:

A breach of contract plaintiff in the construction setting must prove it performed in a reasonably workmanlike manner.  In finding the plaintiff sufficiently performed, the Court rejected the homeowners’ argument that plaintiff failed to install two drains.  The Court viewed drain installation as both ancillary to the main thrust of the contract and not feasible with the specific pool model (the King Shallow) furnished by the plaintiff.

The Court also affirmed the trial court’s mechanic’s lien judgment for the contractor.  In Illinois, a mechanics lien claimant must establish (1) a valid contract between the lien claimant and property owner (or an agent of the owner), (2) to furnish labor, services or materials, and (3) the claimant performed or had a valid excuse of non-performance.  (¶ 37)

A contractor doesn’t have to perform flawlessly to avail itself of the mechanics’ lien remedy: all that’s required is he perform the main parts of a contract in a workmanlike manner.  Where a contractor substantially performs, he can enforce his lien up to the amount of work performed with a reduction for the cost of any corrections to his work.

The owners first challenged the plaintiff’s mechanics’ lien as facially defective.  The lien listed plaintiff (his first and last name) as the claimant while the underlying contract identified only the plaintiff’s business name (“Installation Services & Coolestpools.com”) as the contracting party.  The Court viewed this discrepancy as trivial since a sole proprietorship or d/b/a has no legal identity separate from its operating individual.  As a consequence, plaintiff’s use of a fictitious business name was not enough to invalidate the mechanic’s lien.

The Court also affirmed the trial court’s denial of plaintiff’s claim for extra work in the amount of $4,200.  A contractor can recover “extras” to the contract where (1) the extra work performed or materials furnished were outside the scope of the contract, (2) the extras were furnished at owner’s request, (3) the owner, by words or conduct, agreed to compensate the contractor for the extra work, (4) the contractor did not perform the extra work voluntarily, and (5) the extra work was not necessary through the fault of the contractor.

The Court found there was no evidence that the owners asked the plaintiff to perform extra work – including cleaning the pool, inspecting equipment and fixing the pool cover.  As a result, the plaintiff did not meet his burden of proving his entitlement to extras recovery. (¶¶ 39-41).

Lastly, the Court affirmed the trial court’s denial of attorneys’ fees to the plaintiff.  A mechanics’ lien claimant must prove that an owner’s failure to pay is “without just cause or right;” a phrase meaning not “well-grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.” 770 ILCS 60/17(a).  Here, because there was evidence of a good faith dispute concerning the scope and quality of plaintiff’s pool installation, the Court upheld the trial court’s denial of plaintiff’s fee award attempt.

Afterwords:

1/ A contractor doesn’t have to perform perfectly in order to win a breach of contract or mechanics’ lien claim.  So long as he performs in a workmanlike manner and substantially completes the hired-for work, he can recover under both legal theories.

2/ A sole proprietor and his fictitious business entity are one and the same.  Because of this business owner – d/b/a identity, the sole proprietor can list himself as the contractor on a lien form even where the underlying contract lists only his business name.