‘Your Check Bounced Like a Superball®!’ – Bad Check Laws in Illinois – Civil Liability

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(photo credit: www.sportsunlimitedinc.com)

The civil provisions of the Illinois Deceptive Practices Act, 720 ILCS 5/17-1 (a criminal statute), govern situations where a defendant issues bad checks with intent to defraud.  Section 5/17-1(B) provides:

(B) Bad checks.

A person commits a deceptive practice when:

(1) With intent to obtain control over property or to pay for property, labor or services of another,….he or she issues or delivers a check or other order upon a real or fictitious depository for the payment of money, knowing that it will not be paid by the depository. The [court] may infer that the defendant knows that the check or other order will not be paid by the depository and that the defendant has acted with intent to defraud when the defendant fails to have sufficient funds or credit with the depository when the check or other order is issued or delivered, or when such check or other order is presented for payment and dishonored on each of 2 occasions at least 7 days apart. In this paragraph (B)(1), “property” includes rental property (real or personal).

(2) He or she issues or delivers a check or other order upon a real or fictitious depository in an amount exceeding $150 in payment of an amount owed on any credit transaction for property, labor or services, or in payment of the entire amount owed on any credit transaction for property, labor or services, knowing that it will not be paid by the depository, and thereafter fails to provide funds or credit with the depository in the face amount of the check or order within 7 days of receiving actual notice from the depository or payee of the dishonor of the check or order.

The caselaw distills a civil bad check claim to the following elements: a plaintiff (the party to whom an NSF check was given) must show: (1) that defendant delivered a check to obtain services, labor and property of another, (2) that defendants knew the checks would not be honored, (3) that defendants acted with intent to defraud and (4) the defendants failed to pay on demand.

The corporate officer who signs a bad checks can also be individually liable under the Act.  This is an offshoot of the active participation rule: a corporate officer is liable for torts in which he actively participates.

Once a bad check claimant shows these elements, the Deceptive Practices Act’s civil liability provisions kick in.  Section 17-1(E) provides:

Civil liability. A person who issues a check or order to a payee in violation of paragraph (B)(1) and who fails to pay the amount of the check or order to the payee within 30 days following either delivery and acceptance by the addressee of a written demand both by certified mail and by first class mail to the person’s last known address or attempted delivery of a written demand sent both by certified mail and by first class mail to the person’s last known address and the demand by certified mail is returned to the sender with a notation that delivery was refused or unclaimed shall be liable to the payee….for, in addition to the amount owing upon such check or order, damages of treble the amount so owing, but in no case less than $100 nor more than $1,500, plus attorney’s fees and court costs.

An action under this subsection (E) may be brought in small claims court or in any other appropriate court. As part of the written demand required by this subsection (E), the plaintiff shall provide written notice to the defendant of the fact that prior to the hearing of any action under this subsection (E), the defendant may tender to the plaintiff and the plaintiff shall accept, as satisfaction of the claim, an amount of money equal to the sum of the amount of the check and the incurred court costs, including the cost of service of process, and attorney’s fees

So, if you are civilly prosecuting an NSF check case for a client, you should (a) be on the lookout for the check being returned twice in a 7-day period; and (b) send the 30-day demand by certified and regular mail.  Once the 30-day period elapses, you can file suit in Law Division ($30K and higher), Muni ($10,000-$30,000) or Muni small claims (under $10,000) and recover the face amount of the check plus up to $1,500 for each returned check and attorneys’ fees and costs.

For the less litigious, there’s Section 3-806 of the Uniform Commercial Code (810 ILCS 5/3-806). This statute governs “non litigated” bad check collections.  Under this section, the aggrieved party can recover the amount of the check, and the greater of $25 or reasonable costs, expenses, and attorneys’ fees incurred in collecting on the bad check.  However, to recover more than $25, the check recipient must  provide 30-days notice by certified mail to the party that delivered the bad check and give that party an opportunity to cure by making good on the check.

 

 

 

 

Collecting Your Illinois Judgment Part II: the Citation Order

Per my earlier post – neophyte collection lawyers often wonder what they should put in the order once the citation examination concludes.  Section 2-1402(c) sets forth several possible orders that can enter.

The Citation Respondent Appeared and Answered

Broadly, if the debtor appears and you conduct the examination, you can either dismiss or discharge the citation, continue it, or order a turnover of funds or property.  I enter a dismissal if the debtor fully complied and has no assets, I continue the proceedings if the debtor does not produce the requested documents, and I enter a turnover order if the debtor or a third-party answers that there are funds or property that can be applied towards the judgment.

For a third-party citation, typically issued to the debtor’s bank, I enter a dismissal order which provides that the bank turnover the non-exempt funds within 7 days.  If the bank fails to pay, I move for a Rule to Show Cause and entry of conditional judgment.  This gets the bank’s attention.

Another possible order on the citation return date is an installment payment order which I file with the court.  An example of this is found at: http://12.218.239.52/Forms/pdf_files/CCG0105.pdf.

Citation Fails to Appear

Surprisingly, debtors often fail to appear on the Citation return date.  When this happens, you ask for a “Rule” – shorthand nomenclature for Rule to Show Cause.  That’s also a pre-printed form found in the courtroom.  You fill out the required information and have it served personally on the debtor.  If the debtor fails to respond to the served Rule, you request a body attachment or “writ of attachment”.  That order will contain a $1,000 bond amount (usually), and should be placed with the Sheriff, who – at some point – will contact the debtor and physically bring him/her to the courtroom.

Collection counsel should familiarize themselves with House Bill 5434 – eff. July, 2012 (http://www.ilga.gov/legislation/BillStatus.asp?DocNum=5434&GAID=11&DocTypeID=HB&LegId=65695&SessionID=84)

which added requirements specifically concerning body attachments.  Basically, no body attachment will issue until creditor obtains personal or abode service of a Rule to Show Cause on the debtor, there is a maximum $1,000 bond amount, and the body attachment expires after 1 year.

The Computer Fraud and Abuse Act: ‘Damage’ and ‘Loss’ Elements (7th Circuit/ND IL)

Security7_610x426The Computer Fraud And Abuse Act, 18 U.S.C. s. 1030 et seq. (CFAA) – the Federal statute that criminalizes various forms of computer hacking – is an odd mix of precise terms of art and vague, amorphous phrasing.

One CFAA area rife with unsettled litigation is the Act’s “damage” and “loss” requirements.  The CFAA specifically defines both terms but the unsettled question concerns whether underlying physical damage to the computer or computer data is necessary to prove “loss.”  That is, does a CFAA plaintiff have to prove computer damage FIRST before it can try to satisfy the $5,000 loss threshold?

Under the CFAA, “Damage” means any impairment to the integrity or availability of data, a program, a system, or information (e.g. physical damage to a computer or its data).  18 U.S.C. § 1030(e)(8).  “Loss” equals the cost of responding to an offense, conducting a damage assessment, and restoring the data, program, system, or information to its condition prior to the offense as well as any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.  18 U.S.C. § 1030(11)

Q: What Constitutes Damage Under the CFAA? 

A: A synthesis of Seventh Circuit cases provides the following “damage” examples:

(i) destruction, corruption, or deletion of electronic files;

(ii) physical destruction of a hard drive;

(iii) smashing hard drive with a hammer; installing shredding software;

(iv) installing secure-erasure software; and

(v) diminishing usability of computer system.

Q: What Does Not Constitute Damage?

A:  (i) copying, e-mailing or printing electronic files;

(ii) stealing employer computer data and sending it to competitor;

(iii) e-mailing confidential data to private email address to use in competing business; and

(iv) disclosure of trade secrets.

Q: What Constitutes ‘Loss’ Under the CFAA

A: The Northern District (Ill.) holds that CFAA “loss” encompasses

(1) the cost of investigating or repairing a computer or computer system following a violation that caused damage to a computer or computer system, or

(2) revenue lost, cost incurred, or other consequential damages incurred because of the interruption of service.

TriTeq, 2012 WL 394229, * 7; Navistar, Inc. v. New Baltimore Garage, Inc., 2012 WL 4338816, *8 (N.D.Ill. 2012); Farmers Ins. Exchange v. Auto Club Group, 823 F.Supp.2d 847 (N.D.Ill. 2011) 

Q: Is Physical Computer Damage Required In Order to Establish CFAA ‘Loss’?

A: This is the question that is the most unsettled, both in the Seventh Circuit and nation-wide.  Some courts adopt an expansive view of loss and hold that damage isn’t required. Others give a restrictive reading to CFAA loss and hold that a CFAA plaintiff can still satisfy the statutory loss element even if there’s no underlying computer damage.

Some District Court cases in the Seventh Circuit that hold that underlying computer damage is required to show loss include: TriTeq Lock & Sec. LLC v. Innovative Secured Solutions,LLC, 2012 WL 394229 (N.D.Ill. 2012); Farmers Ins. Exchange v. Auto Club Group, 823 F.Supp.2d 847, 851-856 (N.D.Ill. 2011); 1st Rate Mortg. Corp. v. Vision Mortg. Servs. Corp., 2011 WL 666088 at *2 (E.D.Wis. Feb. 15, 2011).

Cases that represent a broader of view of loss – that physical damage or data destruction is not required to show loss – include Navistar, Inc. v. New Baltimore Garage, Inc., 2012 WL 4338816, *8 (N.D.Ill. 2012); SKF USA, Inc. v. Bjerkness, 636 F.Supp.2d 696, 721 (N.D.Ill. 2009).

The statutory text supports the expansive application of the latter cases: that physical damage is not a prerequisite to establishing CFAA loss; at least with respect to CFAA information (defendant accesses protected computer and obtains information) and fraud (defendant breaches computer in connection with furthering a fraud) claims.  18 U.S.C. § 1030(a)(2), (4).

Afterwords: The strongest case from a CFAA plaintiff’s perspective is where the defendant has caused physical damage including data destruction or deletion, coupled with quantifiable monetary loss to remedy the damage.

The weakest case will be where there the plaintiff is trying to recover money damages in the absence of physical harm to computer equipment or data.  In cases where a computer or its data hasn’t been harmed or compromised, a CFAA plaintiff’s claim will likely hinge on the severity of the defendant’s conduct; such as whether he violated a non-disclosure or non-compete and whether he accessed trade secrets or confidential information belonging to the plaintiff.