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7th Circuit Court Seal

Am. Commercial Lines, LLC v. Lubrizol Corp.

U.S. Court of Appeals for the 7th Circuit
Docket No. 15-3242  Opinion: March 25, 2016

In this case about manufacturer liability in the setting of a commercial distribution relationship, a customer attempts to hold the manufacturer of a product liable for the distributor’s failures. The customer’s claims are based on the so-called “special relationship” between the distributor and manufacturer, as well as the customer’s status as an alleged intended beneficiary of the distribution arrangement. The 7th Circuit, however, was having none of it.

Factual Background

American Commercial Lines (ACL) manufactures and operates tow boats and barges that operate on US inland waterways. Lubrizol manufactures industrial lubricants and additives. VCS Chemical Corp. (VCS) distributed Lubrizol products to customers such as ACL.

Lubrizol and VCS jointly persuaded ACL to buy product through VCS. But before delivery began Lubrizol terminated VCS as a distributor – without informing ACL. VCS did not inform ACL either. Instead of telling ACL that it could no longer provide the Lubrizol product, VCS supplied a substitute. When ACL figured out the switch it sued both VCS and Lubrizol, arguing that the two must have enjoyed a “special relationship” because of their apparent cooperating in selling ACL on the idea of buying the Lubrizol product.

Procedural History

In its lawsuit in the District Court, ACL claimed that it had been duped by VCS who was acting on behalf of Lubrizol, and that as a result both companies were liable for the switch. ACL settled. Lubrizol brought a Motion to Dismiss and the District Court dismissed it. ACL appealed the dismissal of Lubrizol to the 7th Circuit.

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Understanding-the-ADA-GorenAre you in compliance with the American’s with Disabilities Act (ADA)? What happens if you’re not? Is there a way to fix or retrofit your workspace to be ADA compliant? This week’s post summarizes a recent article from Understanding the ABA, the blog maintained by Attorney William D. Goren. In Understanding the Burden of Proof When ADA Remediation Is at Issue, Goren discusses building and retrofitting ADA-compliant structures. Highlights of the article include:

Title III Requirements

Title III of the ADA calls for ADA compliance in construction or remediation of non-compliant structures. Specifically:

Buildings constructed after 1992 must accord with ADA Architectural Guidelines. The specific guideline depends upon the year the building was built.

Renovations to existing buildings must also comply with ADA Architectural Guidelines; and the path of travel to the renovations must allow access by persons with disabilities.

Existing facilities must include whatever changes are “readily achievable.”

Readily Achievable Remediation

Where ADA remediation is required, “readily achievable” changes mean those that are achievable without much difficulty or expense; and that determination in turn means looking at several factors including:

  1. the nature and cost of the action needed;
  2. the overall financial resources of the site or sites involved in the action;
  3. the number of persons employed at the site;
  4. the effect on expenses and resources;
  5. legitimate safety requirements necessary for safe operation, including crime prevention measures;
  6. if applicable: A) the geographic separateness and the administrative or fiscal relationship of the site or sites in question to any parent Corporation or entity; B) the overall financial resources of any parent Corporation or entity; C) the overall size of the parent Corporation or entity with respect to the number of employees; D) the number, type, and location of its facilities; and E) the type of operation or operations of any parent Corporation or entity, including the composition, structure, and functions of the work force of the parent Corporation or entity.

What is Readily Achievable

Examples of “readily achievable” ADA remediation of existing buildings include:

  1. Installing ramps;
  2. Making curb cuts in sidewalks and entrances;
  3. Repositioning shelves;
  4. Rearranging tables, chairs, vending machines, display racks, and other furniture;
  5. Repositioning telephones;
  6. Adding raised markings on elevator control buttons;
  7. Installing flashing alarm lights;
  8. Widening doors;
  9. Installing offset hinges to widen doorways;
  10. Eliminating a turnstile or providing an alternative accessible path;
  11. Installing accessible door hardware;
  12. Installing grab bars in toilet stalls;
  13. Rearranging toilet partitions to increase maneuvering space;
  14. Insulating lavatory pipes under sinks to prevent burns;
  15. Installing a raised toilet seat;
  16. Installing a full-length bathroom mirror;
  17. Repositioning the paper towel dispenser in a bathroom;
  18. Creating designated accessible parking spaces;
  19. Installing an accessible paper cup dispenser at an existing fountain;
  20. Removing high pile, low density carpeting; and
  21. Installing vehicle hand controls.

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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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ada25-logo

This guest-post, a synopsis of “Let’s Talk About Arbitration” by Attorney William Goren from his blog, Understanding the ADA.  The original post discusses issues pertaining to arbitration of claims arising under the Americans with Disabilities Act. The author assumes that readers know the difference between arbitration and mediation. Covered points include these:

  • Can an ADA claim be subject arbitration?
  • Are there situations in which an arbitration agreement is deemed unconscionable?
  • Can an arbitration agreement assert that an award cannot be challenged for any reason?

The post also discusses:

  1. Whether an arbitration agreement covers ADA matters will depend upon how it is phrased, but if phrased broadly enough, an arbitration agreement can cover ADA matters.
  2. An arbitration agreement can be held unconscionable, but proving that an arbitration agreement is unconscionable is not an easy task.
  3. An arbitration agreement that prevents any challenges whatsoever to the award may well be declared against public policy (It was in Georgia, and Georgia very closely follows the Federal Arbitration Act).
  4. The Second Circuit goes with the stay, but the U.S. Court of Appeals are split on this. Ultimately, it will all come down to what “shall,” means.
  5. In a comment the author also notes a recent California Supreme Court case concluding that the Federal Arbitration Act preempts state requirements as to how notification is given that an agreement is subject arbitration (font size for example).

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By Guest Blogger: Paul B. Porvaznik, Esq.

When you file for bankruptcy, you sign sworn schedules that itemize your assets.  If you fail to fully disclose or update your asset summary, you risk a creditor objecting to your discharge on the basis of fraud.  Another peril of nondisclosure concerns claims that arise after the bankruptcy filing; like future lawsuits.   So, what happens if a claim develops after you file your bankruptcy petition but before you are granted a discharge and you don’t inform the bankruptcy court of this claim?  That’s the question examined in Schoup v. Gore, 2014 IL App (4th) 130911 (4 Dist. 2014), a case that will doubtless serve as a cautionary tale for future bankruptcy petitioners.

 In Schoup the debtor filed in 2010 and obtained a discharge in 2012.  Several months into the case the debtor was injured on private property, giving rise to a premises liability claim.  The debtor didn’t tell the bankruptcy court or trustee of the premises suit until after his bankruptcy case was discharged. Indeed, after obtaining his discharge the debtor filed that claim. The property owners moved for summary judgment on the basis of judicial estoppel, arguing that the plaintiff’s failure to disclose the suit as an asset in his bankruptcy barred the post-discharge action entirely.  The trial court agreed and the plaintiff/debtor appealed.

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Okay nobody dies, but the case does address the long-overdue question:

What happens when the property taxes of a Chapter 13 Debtor, protected by the Automatic Stay, are sold at auction? 

Here the Bankruptcy Court for the Northern District of Illinois, Eastern Division, had to decide whether a Chapter 13 Plan of Reorganization affects the deadline for the Debtor to redeem sold taxes. 

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Guest Post By Jonathan Trent

Edited by M. Hedayat, Esq.


It’s that time of year again! As January winds down business owners are contemplating new projects, new ideas, and New Year’s resolutions. Putting together resolutions can be an eye opening experience… or a chore. Sure, you want to continue improving what works, weed out what doesn’t, and learn from the past to avoid making the same mistakes in the future. But when the rubber meets the road, how do you make that call?

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How does a company with $69.8 million in assets and only $9.2 million in liabilities end up filing for Chapter 11 bankruptcy protection? The answer is crime doesn’t pay, especially when you get caught hiring a hit man to make someone “stop breathing.”

An Offer A Creditor Can’t Refuse…Unless Someone’s Wearing a Wire.

Daniel Dvorkin, a local developer who was formerly in charge of Dvorkin Holdings LLC, was arrested in July after telling a federal informant that he would pay $100,000 for the informant to find a hit man that would make sure one of his creditors would sleep with the fishes. The cooperating witness was wearing an audio and video recording device for several of the conversations with Dvorkin. The target was an attorney who owned a corporation that had recently won an $8.2 million judgment against Dvorkin.

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In re 444 North Northwest Hwy, LLC

444 North Northwest Hwy. LLC and Northbrook Bank & Trust were embroiled in a foreclosure action in the Illinois courts when 444 filed for Chapter 11 protection and became the Debtor in Possession.

The parties faced off over numerous issues in Bankruptcy Court; so the Judge consolidated the issues for trial. 3 days before the trial date however, the Debtor in Possession brought a motion to disqualify the lawyers for the bank, Much Shelist, based on “conflicts” arising from contact between a lawyer at Much Shelist and the principal of 444 North, John Heintz.

Of course neither the lawyer that spoke with Heintz, nor Much Shelist itself, had represented the Debtor. In fact, Heinz once stated on the record that he did not recognize that firm name. His memory had apparently failed right up until he swore out the affidavit days before trial.

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Everyone has heard of Bernie Madoff. But have you heard of James and Verna Pilon? If you live in Chicagoland, you better pay attention-the Pilons are a couple from Joliet that have swindled investors out of over $1 million. Both are headed to federal prison.

Before the Pilons were caught and sentenced however, they perpetrated a fraud against nearly 40 investors. How did this happen?

Enemies, and an Error, of the State