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Articles Posted in Appellate Court

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Christopher B. Burke Engineering, Ltd. vs. Heritage Bank of Central IL

Docket No. 118955 Opinion Filed November 19, 2015

In this Opinion the Illinois Supreme Court comes down on the side of common sense when it comes to lienable improvements under §1 of the Illinois Mechanics Lien Act 770 ILCS 60/1. After reversing the lower Courts however, the case was sent back down to the Circuit Court to determine whether the owner of the property “knowingly permitted” improvements to be made.

Facts

In 2006 Carol and Glen Harkins (collectively, the “Harkins”) offered to buy property from Carol Shenck (“Shenck”) for the purpose of subdividing it and developing a subdivision. Burke Engineering (“Burke”) was hired by the Harkins to perform necessary prep work related to the development of the property. So while the work performed by Burke was integral to, and resulted in, improvements to the property (plat of subdivision, etc.), at the time that the work was done under a contract with Harkins, the property was still owned by Shenck. Eventually, the Harkins closed and development began according to the work done by Burke.

Heritage Bank of Central Illinois (“Heritage”) financed the purchase of the property in 2007 and held a Mortgage Lien. But thanks to the Great Recession, work stopped in 2008 and the Harkins failed to pay Burke (or anyone else). As 2008 dragged on however, Burke had still not been paid and eventually the company filed a Mechanics Lien against property – which by this time was owned by the Harkins (the “Lien”). In response, the Harkins filed Bankruptcy. This left Burke to foreclose its lien or not get paid at all.

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7th Circuit Court Seal

BRC Rubber & Plastics, Inc. v. Cont’l Carbon Co.
U.S. Court of Appeals for the Seventh Circuit
Docket: 14-1555 and 14-1416  Opinion: November 5, 2015

In this opinion the 7th Circuit Court of Appeals sets the record straight about an alleged Output-Requirements Contract and settles a dispute based on the terms of a supplier agreement.

Facts

Continental Carbon Company (CCC) sells carbon black, a material used in rubber products. BRC Rubber & Plastics (BRC) makes rubber products for the auto industry. In 2010 the companies entered into a contract under which CCC agreed to supply about 1.8 Million lbs./yr. of carbon black to BRC.  In 2011 however, Continental could no longer keep up with demand from other customers and had to refuse certain orders from BRC, which inturn put BRC in a bind with its customers, causing a chain reaction.BRC sued, alleging that CCC had breached the contract.

Procedural History

The Indiana District Court treated the agreement between them as an “Output/Requirements” contract that obligated CCC to sell as much carbon black as BRC wanted while requiring BRC to buy all its carbon black from CCC. On that basis, the District Court concluded, CCC had indeed breached its obligation by failing to sell as much carbon black as BRC wanted.
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Henderson Square Condo. Assoc’n v. LAB Townhomes, LLC et al.
Citation: 2015 IL 118139 Opinion Date: November 4, 2015

After LAB Townhomes, the developer of Henderson Square, made false sales claims, built shoddy units, and engaged in fraud and negligent conduct in order to sell units, the Condominium Association sued it under the Chicago Municipal Code’s prohibition on the use of material misrepresentations, as well as Illinois case and statutory law relating to breach of the implied warranty of habitability, fraud, and negligence.

Following an initial defeat in the Trial Court based on allegedly filing late, the Appellate Court and eventually the Illinois Supreme Court determined that the bad actions of the developer permitted a longer time-horizon for the Plaintiff condo owners to pursue their rights.

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Donnawell v. Hamburger, No. 15-1006 (7th Cir. 2015)

Appeal from District Court, ND Illinois, Eastern Div. 12 C 9074
Argued Oct.01, 2015 — Decided Oct.20, 2015

In this appeal of a shareholder derivative suit concerning a stock option plan used as executive compensation, the Plaintiff appealed from dismissal with prejudice by the District Court for the Northern District of Illinois, Eastern Division.

The Plaintiff was a stockholder in DeVry Education Group, a Delaware company that owns and operates for-profit colleges. Plaintiff brought a Shareholder Derivative Action against current and former DeVry Board members. It ended up in Federal Court due to diversity of citizenship (Illinois vs. Delaware).

The 7th Circuit affirmed the District Court’s dismissal, applying Delaware corporate law.

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7th Circuit Court Seal

EAR vs. Brandt/Brandt vs. Horseshoe Hammond, 14‐2174
Appeal from District Court (ND IL ED) 12‐cv‐00271
Decided Oct. 13, 2015

Introduction

In an Adversary Proceeding in the Chapter 11 Bankruptcy case of Equipment Acquisition Resources (EAR), Plan Administrator William Brandt (Brand) sought to avoid and recover the so-called “fraudulent transfers” made to EAR’s founder that he subsequently lost gambling at Horseshoe Casino.

Facts

EAR was established in 1997 to manufacture and refurbish machinery for use in creating technology products. Beginning in 2005 however, it also began defrauding creditors through crooked equipment financing activities. As a result, founder Sheldon Player and a company Officer named Malone pocketed about $17 Million each.

It was not until September 2009 that an outside forensic accounting firm hired by EAR’s Board of Directors detected the fraud. In response to the revelation about the wrongdoing, the company’s Board and all Officers resigned. EAR’s shareholders then elected William Brandt as the sole Board Member and Chief Restructuring Officer. Shortly thereafter the company sought Chapter 11 Bankruptcy protection.

Procedural History

Brandt filed an Adversary proceeding against Player and Malone in the Chapter 11 case pursuant to 11 U.S.C. 544, 548, and 550 to avoid and recover the transfers made to them. Brandt prevailed, then had to collect from Horseshoe.

In the ensuing case in the District Court, Horseshoe moved for Summary Judgment under the aegis of the statutory “Good Faith” defense in 11 U.S.C. 550(b)(1). Horseshoe prevailed in the District Court.

Brandt appealed the District Court’s ruling, arguing that it had misinterpreted §550(b)(1) and, in addition, it should have granted his prior Motion to Compel production of documents related to investigations conducted by Horseshoe concerning Player.

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Fin. Freedom Acquisition, LLC v. Standard Bank & Trust Co.

Illinois Supreme Court, 2015 IL 117950 Opinion Date: September 24, 2015

In this case arising from a 2009 “reverse equity” mortgage, the issue was whether a Bank acting as Trustee of a trust holding property was entitled to the same relief under the Truth in Lending Act (TILA) 15 U.S.C. 1601 as the actual consumer borrowers. Want to guess what happened?

Facts

OneWest sued Standard, as Trustee, to foreclose a reverse equity adjustable-rate mortgage: the typical killer loan that Banks promoted to borrowers who later found themselves buried in unsustainable debt. In a stroke of ironic genius, Standard filed a Counterclaim in the foreclosure action based on violations of TILA by OneWest.

Procedural History

The Circuit Court dismissed Standard’s Counterclaim; the decision was affirmed by the Appellate Court because Standard was deemed not to an “obligor” under TILA entitled to rescind the transaction. To this point, Illinois Courts were confirming the common-sense notion that a pro-consumer law should not be used to benefit yet another Bank.

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7th Circuit Court Seal

Peoples Gas Light & Coke Co, v. Beazer East Inc.
7th Cir. Court of Appeals Docket: 14-3634 Opinion: September 21, 2015

In 1920 Peoples Gas and Beazer’s predecessor entered into a contract under which Beazer agreed to operate the coke byproduct and carbureted water gas plant at Crawford Station, Chicago using its patented coke-oven technology and Peoples Gas agreed to purchase all the gas and coke manufactured at the plant for distribution to consumers.

Chicago Coke opened in 1921. 7 years later Peoples acquired the assets of Chicago Cok and, eventually, its stock. Peoples then took over operations until 1956. Some of that land is still owned by Peoples. Peoples worked with the U.S. and Illinois EPA to investigate any potential contamination at the Crawford site and entered into agreements with the EPA to do cleanup. For investigation and removal work at Crawford, Peoples incurred over $70,000,000 in costs. Peoples sued Beazer to recover costs under CERCLA, 42 U.S.C. 9607(a) and 42 U.S.C. 9613(f)(3)(B).
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Duff v. Central Sleep Diagnostics, LLC
7 Cir. U.S. Court of Appeals Docket No. 13-3837 Opinion September 10, 2015

Original Claim
Investors in Central Sleep sued the company as well as Dachman, its promoter, and others. Their claims included fraud, the Racketeering Influenced and Corrupt Organizations Act (RICO), conversion, fraudulent conveyance, civil conspiracy, and securities fraud. Dachman was also singled out for fraudulent conduct; he spent stolen investor funds on a tattoo parlor, vacations, cruises, a new Land Rover, rare books, personal stock trading, and gambling. The Judge ordered Central Sleep into receivership and issued a stay against “all civil legal proceedings” involving Defendants.

Attorney Claim
Attorney Goodman had represented the Defendants and obtained a judgment for his unpaid legal fees. He submitted a claim to the Receiver for that amount; but also filed a lien on the proceeds of Dachmans’ separate State Court medical malpractice suit. Neither Goodman nor the Dachmans informed the Receiver or Judge about those proceedings. When the Receiver learned of the malpractice suit he immediately recovered the settlement proceeds and proposed a distribution plan. Goodman objected to the plan and argued that unlike the other creditors he was entitled him to full – rather than pro rata – payment.
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