Illinois Wage Payment Act Doesn’t Apply to Future Payments – Ill. 1st Dist.

moneyIt’s likely a sign of the economic times that there seems to be an uptick* in published cases involving the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 (IWPCA).

The IWPCA offers a powerful remedy for unpaid wages allowing a separated employee to recover money damages from his ex-employer.  Specifically, the IWPCA plaintiff can recover unpaid wages, plus monthly interest at 2%  and attorneys’ fees incurred in enforcing his employment contract rights.

Majmudar v. House of Spices (India), Inc., 2013 IL App (1st) 130292 examines whether a Wage Act claim applies to unpaid future payments under a multi-year employment contract.  The answer? No, it doesn’t.

In Majmudar, the plaintiff and defendant entered into a five-year written employment contract totaling about $625K plus some additional benefits.  The defendant fired the plaintiff just 15 months into the 60-month term and plaintiff sued under the IWPCA.

After a bench trial, the trial court entered judgment for the plaintiff on his breach of contract count but found for the defendant employer on the Wage Act claim.

On the breach of contract count, the court found that the employer defendant prematurely breached the 5-year contract by firing the plaintiff with 45 months left on the contract. But the court only awarded the plaintiff $173K, less than two years’ worth of payments.

The court found the plaintiff failed to make reasonable efforts to find substitute employment and so didn’t mitigate his damages.

On the IWPCA count, the trial court sided with the defendant on the basis that the statute doesn’t allow recovery for future payments.  Plaintiff appealed.

Affirming the trial court, the First District focused on the IWPCA language allowing a plaintiff to recover earned wages or final compensation.  “Wages” are broadly defined as any compensation owed by an employer to an employee pursuant to an employment contract.

  “Final compensation” means wages, salaries, commissions, bonuses, and the monetary equivalent of unused vacation pay, holiday pay and any other contractual compensation owed to a separated (as opposed to current) employee.   ¶¶ 11-12, 820 ILCS 115/2. 

The IWPCA requires an employer to pay final compensation to the separated employee by the next scheduled payday and to pay current employees (bi-weekly or semi-monthly) no later than 13 days after the end of the last pay period.  820 ILCS 115/4, 5.

In rejecting plaintiff’s claim for 45 months of future payments, the Court looked to dictionary (Black’s and Merriam-Webster’s) definitions of “compensation” (payment received in return for service rendered) and “owe” (to be obligated to pay for something received) for guidance.

Applying these definitions, the Court held that once the defendant terminated the employment contract, the defendant no longer received anything of value from the plaintiff.

This led the Court to squarely hold that unpaid future wages under a terminated contract are not “final compensation” and cannot be recovered under the Wage Act.  ¶ 15.

Comments: For such a high-dollar contract, the details were surprisingly sparse.

The plaintiff could have pressed for a contract term that said if the employer untimely terminated the contract, plaintiff could accelerate the remaining payments under thr contract.

Majmudar gives the IWPCA a narrow reading – applying it to wages previously earned by a separated employee; not to future payments owed on a terminated contract.

 

7 Blown Discovery Deadlines Over 18 Months = Dismissal With Prejudice As Rule 219 Sanction (IL 1st Dist.)

Let’s see.  12 court hearings over a year-and-a-half devoted entirely to discovery disputes.  7 missed deadlines – 3 of which were “final” – and one of those 3 was even “final, final, final, final, final!”.  And still – no discovery compliance from the plaintiff.  There  was even an intermediate contempt sanction of a $500 fine and another court order assessing a daily fine of $50 to induce plaintiff to appropriately respond to defendant’s discovery.  Again, nothing. So what’s a judge to do?

In Illinois, she has options.  Many of them.  Supreme Court Rule 219 gives the court wide latitude to fashion myriad sanctions against litigants to ensure discovery compliance and dissuade future violations.  The sanctions options include striking pleadings and defenses, entering default orders and barring a violating party from raising defenses or offering evidence on the subject of the unanswered discovery requests.  Even outright dismissal with prejudice, the harshest sanction of all, is allowed if the discovery abuse is severe enough.  See SCR 219(c)(v).

Master Hand Contractors, Inc. v. Convent of Sacred Heart, 2013 IL App (1st) 123788-U, a factual snapshot of which is the lead-in to this article, illustrates especially egregious discovery conduct.  There, the trial court dismissed a mechanics’ lien plaintiff’s suit with prejudice after it violated 7 court discovery orders (3 with “final” deadlines) over an 18-month time span.  The First District affirmed the trial court’s ultimate sanction based on the plaintiff’s pattern of discovery abuses and blatant flouting of multiple court orders.

Facts: Plaintiff general contractor filed a mechanics lien suit to recover on a $2,000,000-plus construction contract for renovation work on a private school.  The plaintiff’s lien claim was nearly $400,000.  The case quickly degenerated into an acrimonious discovery dispute with the defendant school repeatedly serving unanswered discovery requests on the plaintiff contractor.  Most of the school’s discovery requests sought plaintiff’s “electronically stored information” (ESI).  Over the course of a year-and-a-half and 12 separate hearings devoted to discovery issues,  the contractor still hadn’t properly answered the school’s ESI requests.  Eventually, the trial court – after first assessing several progressive sanctions short of dismissal – had seen enough and dismissed plaintiff’s suit with prejudice under Supreme Court Rule 219(c)(v).  Master Hand, ¶¶ 9-10.  The contractor appealed on the basis that the dismissal sanction was too harsh.

Held: trial court affirmed.  Plaintiff’s case dismissed with prejudice.

Rules/Reasoning:

Supreme Court Rule 219 provides for progressive sanctions including dismissal with prejudice.  A court also has inherent authority to control its docket and to sanction discovery abuses.  Master Hand, ¶15.  Dismissal power is proper where the “record shows deliberate and continuing disregard for the court’s authority.”  Id.  A trial court’s decision to impose sanctions is reviewed for an abuse of discretion which means, in the discover sanctions context, that “no reasonable person would agree with the position adopted by the trial court.”  Master Hand, ¶ 13.

Here, because plaintiff violated so many court orders over such a lengthy time frame, the trial court had discretion to dismiss plaintiff’s case.  The First District also noted that the trial court “progressively disciplined” the plaintiff; giving it many chances to comply with discovery – as evidenced by the three “final” deadlines issued by the court – and to escape sanctions.  Master Hand, ¶ 15.  The Court also pointed out that the trial judge was uniquely qualified to assess the propriety of the defendant’s discovery requests (which plaintiff claimed was “abusive”) since the judge specifically handled mechanics lien cases and was versed in document-intensive construction disputes.

Take-aways: Discovery rules and court orders aren’t suggestions or advisory.  While dismissal with prejudice is extreme and there are more mild sanctions choices, the trial court here didn’t dismiss plaintiff’s case lightly.  In fact, each sanction assessed by the court was carefully calibrated to give the plaintiff a chance to comply with discovery and to have its case heard on the merits.  But after so many hearings and blown deadlines, the case became farcical and the court had no choice but to dismiss it.  Master Hand also underscores the importance of having proper ESI search and production protocols in place.  It’s clear that plaintiff’s lack of ESI discovery savvy was a major deficiency in its discovery responses and was critical to the trial court’s dismissal sanction.

 

BMW Dealership Defeats Fraud Suit On Statute of Limitations Grounds (ND IL)

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Occasionally, I’ll have a case that appears to be governed by two or more conflicting statutes of limitations.  For example, one statute will give a plaintiff four years to file suit while an apparently equally applicable one compresses the time to sue to two years.  As plaintiff, I usually (not always) argue for the longer limitations period to apply, while as defendant, I want the shortened time span (so I can move to dismiss the too-late complaint).  

In Belsky v. Fields Imports, Inc., 2013 WL 5819232 (N.D.Ill. 2013), the Northern District methodically analyzes which of two seemingly applicable (and conflicting) limitations periods (is it 10 years or 4 years?) applies to a breach of contract suit involving a defective motor vehicle.

Facts:

Plaintiff sued a car dealership and warranty service administrator for breach of various written agreements generated in connection with plaintiff’s purchase of a BMW.  Plaintiff bought the  car in 2005 and bought the service contract – which provided for repair and replacement of specified car parts – in 2009.  Plaintiff alleged that in 2012 she noticed that the car had a defective engine bolt.  When the defendants failed to provide warranty coverage for the bolt problem, plaintiff sued under state law breach of contract theories.  Defendants’ filed separate Rule 12(b)(6) motions to dismiss plaintiff’s complaint.  The court granted the motion and dismissed all counts of plaintiff’s complaint with prejudice.

Q: Why?

A: Plaintiff’s breach of contract claims against the dealership failed for two reasons: (1) the claims were time-barred; and (2) plaintiff failed to allege which part of the sales contract the dealer breached.  The court held that the four-year limitations period set forth in Uniform Commercial Code (“UCC”) Section 2-725 (810 ILCS 5/2-725) governed the plaintiff’s sales contract count. 

The UCC applies to “sales” transactions involving “goods” and Section 2-725 simply provides that “an action for breach of any contract for sale must be commenced within 4 years after the cause of action accrued“.  Belsky, *3, 810 ILCS 5/2-725(1).   There is also no “discovery rule”: the four year time limit applies regardless of whether the plaintiff lacked knowledge of the breach.  810 ILCS 5/2-725(2). 

Plaintiff argued that Illinois’ ten-year limitation period for written contract applied.  See 735 ILCS 5/13-206.  But the Court sided with defendants and applied the shorter four-year limitations period.  It held that the BMW, a car, clearly met the UCC’s definition of “goods” (a “thing” that was “moveable” at contract inception) and involved a “sale” (passing of title from seller to buyer for a price).  *3 (UCC Section 2-105(1)(goods definition); UCC Section 2-106(1)(sale def.). 

In addition, Code Section 13-206 (the ten-year statute for written contracts) expressly exempts claims under UCC Section 2-725 (the four-year rule) from its scope.  Section 13-206’s lead-in provides “except as provided in Section 2-725 of the Uniform Commercial Code…”.   Applying the four-year limitation, the Court held that the plaintiff’s breach of contract claims were three years too late and dismissed the case.  *3.

In dismissing the plaintiff’s service contract claims, the Court relied on agency law.  It held that the dealer entered into the contract on behalf of a disclosed principal (the warranty administrator).  Black letter agency rules dictate that an agent (here, the dealer) of a disclosed principal (the administrator) isn’t liable on contracts entered into for its principal.  *7.   The Court also dismissed the plaintiff’s service contract claim against the administrator because like the sales contract, the service contract also specifically excluded engine bolt defects from its coverage.  *9-10.

Take-aways: Where two conflicting limitations periods potentially control, the one that more specifically matches the facts will govern.  A contract for the sale of a “good” (like a car) will trigger the UCC’s four-year time span rather than the ten-year rule for written contracts. 

Also, a contractual disclaimer, if easy to read and find, will be upheld.