Saturday, November 7, 2015

Financial Exploitation of an Elderly Person or a Person with a Disability

Effective January 1, 2016, the Illinois Criminal Code will be amended to include a new crime called "financial exploitation of an elderly person or a person with a disability." The new crime is a Class 4 felony if the value of the property is $300 or less and goes up to a Class 1 felony if the value is greater than $50,000.  

The new statute also creates a civil cause of action with the same name. The civil cause of action is available whether or not the defendant has been charged or convicted of a criminal offense under this section.  The civil cause of action provides for treble damages plus attorneys' fees to the victim or the estate of the victim.

A person commits financial exploitation of an elderly person or a person with a disability when he or she "stands in a position of trust or confidence with an elderly person or a person with a disability and he or she knowingly and by deception or intimidation obtains control over property of an elderly person or a person with a disability or illegally uses the assets or resources of an elderly person or a person with a disability."  

The statute defines "elderly" as someone over 60 years of age. The statute also provides that a person stands in a position of trust or confidence with an elderly person or person with a disability when he (i) is a parent, spouse, adult child or other relative by blood or marriage of the victim; (ii) is a joint tenant or tenant in common with the victim; (iii) has a legal or fiduciary relationship with the victim; (iv) is a financial planning or investment professional; or (v) is a paid or unpaid caregiver for the victim.

The new statute is located at 720 ILCS 5/17-56.

Sunday, October 25, 2015

Child Representatives Enjoy Absolute Immunity

In Davidson v. Gurewitz (October 20, 2015) (here), the Appellate Court, Second District, held that a child representative appointed under section 506(a) of the Marriage and Dissolution of Marriage Act enjoys absolute immunity from malpractice liability.

Pursuant to section 506(a)(3), the trial court appointed Thomas Gurewitz as the child representative of the divorcing parent’s minor child. After the trial court entered the judgment of dissolution, the mother sued Gurewitz for malpractice. The mother claimed that Gurewitz completed his duties as a child representative on October 1, 2012, when the parties entered into a parenting agreement that settled all issues relating to the best interests of the child. The plaintiff further alleged that instead of withdrawing from the case after completing his duties, Gurewitz participated in the trial by cross-examining the plaintiff and making a closing argument. According to the malpractice complaint, Gurewitz’s unauthorized actions resulted in the entry of a judgment “replete and filled with vindictiveness relating to [plaintiff].”

Gurewitz moved to dismiss the malpractice action arguing that it was barred by the doctrine of absolute immunity. The appellate court acknowledged that section 506(a) does not, by its terms, immunize child representatives. But the court determined that the common law affords immunity to court-appointed child representatives. Thus, the Second District aligned itself with the First District’s decision in Vlastelica v. Brend (here), finding that absolute immunity is necessary so that a child representative can “fulfill his obligations without worry of harassment and intimidation from dissatisfied parents.”

Saturday, September 26, 2015

Peter Rogan Will Plead Guilty to Perjury for Lying During a Citation

Peter Rogan was on the wrong side of one of the most famous "collections" cases of all time. I wrote a five-part blog post about Dexia v. Rogan back in 2011. The Dexia case involved more than $100 million and the resulting opinion from the 7th Circuit contained nearly that many tips for commercial litigators. My original post can be found HERE.

I was fortunate enough to attend a seminar given by the plaintiff's lawyers about this case. It was absolutely fascinating. These guys literally traveled the globe to recover Rogan's assets. He had established trusts that were located in multiple foreign countries around the world. His current perjury charges stemmed from his denials under oath about those trusts during a citation to discover assets.

Mr. Rogan was back in the news this week because he finally returned to Chicago after fighting extradition from Canada for the last several years. He is expected to plead guilty to perjury this week and could be sentenced immediately. All "collections" lawyers will smile when the cell door closes behind this guy.

Wednesday, September 16, 2015

Returning Client Papers upon Termination of the Attorney-Client Relationship

Rule 1.16(d) of the Illinois Rules of Professional Conduct requires that a lawyer “surrender papers and property to which the client is entitled” upon the termination of a representation. As recognized in ABA Formal Opinion 471 (2015), the trick is determining the precise papers “to which the client is entitled.” In Opinion 471, the ABA recognized two approaches to the issue: (1) the “entire file” approach which dictates the return of every page of the client’s file unless a specific exception applies and (2) the “end product” approach, which requires surrender of the lawyer’s final product but not drafts or memos reflecting a lawyer’s legal or factual research.

Which approach does Illinois take? In adopting the “end product” approach, Illinois State Bar Opinion 94-13 (1995, affirmed 2010), identified seven categories of documents maintained in the course of representing a client. Opinion 94-13 then applied the “end product” test to each category of documents with the following results.

1.     Documents furnished by the client. Rule 1.15(b) requires that these materials be returned “promptly” upon the client’s request.

2.     Correspondence between the lawyer and client. Rule 1.4(a) entitles the client to reasonable access to this correspondence. But since by definition the client has previously received or sent these letters or emails, the lawyer can charge a reasonable amount to provide copies.

3.     Correspondence between the lawyer and third parties. Rule 1.4(a) entitles clients to copies of “significant correspondence” with third parties. If the lawyer previously provided copies of these documents, the lawyer may charge for additional copies. The client is also entitled to copies of “routine administrative correspondence” if the client agrees to pay for the copies.
4.     Pleadings, briefs, and other documents filed with a tribunal or agency. Rule 1.4(a) entitles clients to copies of “significant” pleadings and other filings. Although a lawyer is not required to provide routinely filed papers such as service certificates, a client is entitled to routine filings upon reimbursement of reproduction costs.

5.     Contracts, wills, corporate records, and similar documents. Rule 1.4(a) entitles a client to the final version (not drafts or working copies) of these documents. If the client received copies of the documents during the course of the representation, the lawyer may charge a reasonable sum for supplying additional copies.

6.     Administrative materials such as memos concerning conflicts, a client’s credit status, and time records. These documents are usually prepared for internal use and so are not relevant to the status of a client’s case. Thus, neither Rule 1.4(a) nor Rule 1.15(b) requires production of these administrative materials.

7.     Notes, drafts, internal memos, and legal and factual research. Illinois Opinion 94-13 concludes that since these items are the property of the lawyer, not the client, they need not be produced.  

Of course, an Illinois lawyer is free to supply all documents of whatever type or category to a client and many lawyers do so.

Monday, August 31, 2015

Aurora's Habitual Drunkard List is Unconstitutional

On August 25, 2015, the Aurora City Council amended the City's liquor ordinance to prevent any holder of a liquor license from selling or giving alcoholic liquor to "known habitual drunkards." The new section of the liquor ordinance is linked HERE.

The ordinance defines a known habitual drunkard as a person who, within the past 180 days:
  • Has been convicted of six or more civil or criminal offenses in which the police officer who made the arrest determined, based upon the training and experience of the officer, that the person was under the influence of alcohol;
  • Has been transported and hospitalized six or more times under conditions where the person appeared to be incapacitated by alcohol and in need of emergency treatment; or
  • Has been subject to six or more convictions or hospitalizations in any combination as described above.
The police chief maintains the list and shall "in his judgment" determine the contents of the list. Whenever the chief determines that a person meets the definition of a known habitual drunkard, the chief shall cause that person's name and photograph to be placed on the list.

Unfortunately for the City Council, the Illinois and United States Constitutions prohibit the government from depriving people of life, liberty, or property without due process of law. The due process requirement acts as a safeguard against the arbitrary denial of a person's legal rights by the government. Due process generally requires notice and the opportunity to be heard (defend yourself) before being deprived of your legal rights.

The United States Supreme Court has held that "where a person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and the opportunity to be heard are essential." Wisconsin v. Constantineau, 400 U.S. 433 (1971)

The Constantineau case involved a Wisconsin law that allowed police chiefs to "post notices in retail liquor outlets naming persons to whom the sale of liquor is forbidden because of their prior excessive drinking." The Wisconsin law did not provide for any notice to the individual before their names and pictures were posted in bars and liquor stores. 

The Supreme Court declared the law unconstitutional because any public labeling or characterization of an individual that will expose him to public embarrassment and ridicule requires that the individual involved must be given notice and an opportunity to defend himself. The Supreme Court noted that "the right to be heard before being condemned to suffer grievous loss of any kind is a principle basic to our society" and that being publicly named a drunkard by the government is just such a "grievous loss."

Admittedly, the Aurora ordinance does provide for notice to affected persons. The police chief has to provide the person with a written notice that their name will be placed on the list. The burden is then on that person to appeal the determination within five days of receiving the notice.

However, the notice provisions are insufficient and the Aurora ordinance violates the principles of due process, as well as Supreme Court precedent, for several reasons.

First, the ordinance on its face requires the chief to place people on the list without due process. See Sec. 3 ("Whenever the chief determines that a person meets the definition of a known habitually intoxicated person ... the chief or designee shall cause the name of that person to be placed on said list.").

Second, the notice provision of the Aurora ordinance is confusing and illusory. It offers no protection to the people of Aurora at all. According to the Supreme Court, the individual must be given notice and the opportunity to present his side of the story BEFORE being publicly ridiculed by the government.

Section 4 of the Aurora ordinance appears to comply with the law by saying that the police chief shall provide the person with a written notice that their name "will be placed" on the list of habitual drunkards. This section, standing alone, implies that the person will have the chance to defend himself before being placed on the list. However, the person's name is already on the list pursuant to Section 3. 

Furthermore, the person's only remedy after receiving the notice is to appeal under Section 5. An appeal is defined as "a proceeding undertaken to have a decision reconsidered by bringing it to a higher authority." Appeal, Black's Law Dictionary (10th Ed. 2014). By labeling this section as an appeal, the City is admitting that the determination of habitual drunkenness has already been made and that the person's only remedy is to seek reconsideration. 

Also, Section 5(v) provides that if the person is successful with his appeal, the chief shall "remove" the person's name from the list. Don't try to fool us Aurora, the person's name is already on the list long before you send him any notice, meaning that the Government has publicly ridiculed someone without due process. 

Third, the definition of a habitual drunkard is vague and subjective. Nothing in the entire ordinance requires anyone to actually be drunk. If a person "appears" to be drunk six times in six months they are labeled a habitual drunkard without any other evidence. A quick search of Web MD reveals no less than 10 other conditions than can cause slurred speech besides alcohol consumption, including stroke, brain aneurysm, hypoglycemia, etc. It's not a very high burden that the City has to meet.

In conclusion, it appears that Aurora's new habitual drunkard list violates the due process requirements of the State and Federal Constitutions.

Tuesday, August 4, 2015

50 Cent is Broke

As most of you know, Curtis James Jackson, III a/k/a 50 Cent filed Chapter 11 bankruptcy on July 13, 2015. He filed what's commonly known as a skeleton petition, which is a bare-bones filing used to get a case on file quickly and which does not contain the required disclosures regarding assets and liabilities. He then filed a motion to extend the timeline to file his actual disclosures, which was granted. On August 3, 2015, he finally filed the rest of his schedules.

To make a long story short, he was almost $8M underwater on the day he filed bankruptcy. I have attached the relevant documents below. Here is a brief explanation of the interesting documents: Schedule A contains his real estate holdings; Schedule B contains all of his other personal property and assets; Schedule D lists the mortgage on his house; Schedule F lists all other unsecured debts, except child support; Schedule I lists monthly income; and Schedule J lists monthly expenses.

Here are the highlights:

  • Total Assets: $24,823,899.18
  • Total Debts: $32,509,549.91
  • Monthly Income: $184,969.58
  • Monthly Expenses:  $108,000
  • Cash in the bank: $10,554,486.13
  • Ownership interests in his companies: $4,412,712.24
  • Total value of his automobiles: $500,618
  • Monthly child support: $14,600
  • Monthly household expenses/utilities: $72,000
  • Monthly meals and entertainment: $3,000
  • Monthly wardrobe: $3,000

Here are the complete schedules. Take a look and let me know if you have any questions about anything in here.

Saturday, August 1, 2015

Amendments to Illinois Pro Hac Vice Rules

The Supreme Court of Illinois amended Rule 707 (renamed as Permission for an Out-of-State Attorney to Provide Legal Services in Proceedings in Illinois) and made related amendments to Rules 756(a) and (a)(1) and 718(e) and (f), all effective for appearances filed in proceedings on or after July 1, 2013. The amendments do not require any action by an out-of-state attorney who obtained permission to enter an appearance in an Illinois proceeding prior to July 1, 2013.

Amended Rule 707 permits an out-of-state attorney to enter an appearance in a proceeding in Illinois before a court, a court-annexed alternative dispute resolution body, or a agency or administrative tribunal of the State of Illinois or of a local government unit, if the attorney: 
  • meets licensure and other eligibility requirements
  • associates with an Illinois attorney who files an appearance in the proceeding
  • files a verified Statement with the tribunal

No order of the tribunal permitting the appearance is required. However, the attorney must serve the verified Statement on the ARDC, register annually with the ARDC, and pay fees to the ARDC.

Amended Rule 707 does not affect the longstanding practice under which an out-of-state attorney authorized to practice law in another United States jurisdiction is permitted to provide legal services at a deposition in an Illinois proceeding without need of separate Rule 707 permission, if the out-of-state attorney is assisting an attorney whose appearance in the proceeding is authorized, regardless of the location of the deposition. The out-of-state attorney is subject to the disciplinary jurisdiction of the Supreme Court of Illinois (Supreme Court Rules 751(a), 752(a) and (b), 779(a) and Rule 8.5 of the Illinois Rules of Professional Conduct). The longstanding practice is consistent with Rule 5.5 of the Illinois Rules of Professional Conduct. This practice does not permit an out-of-state attorney to file an appearance or to provide legal services before the tribunal, including the filing of any pleading, motion, or other document,  without obtaining Rule 707 permission.

Click here for instructions for a Rule 707(d) statement and for a listing of fees and requirements.

Friday, July 17, 2015

Donut Fridays

The South Carolina Bar Ethics Advisory Committee has issued an opinion (here) approving a law firm's weekly delivery of a box of donuts to banks and real estate agencies that refer clients to the firm. The boxes also contain beverage "koozies" bearing the firm's name and a coupon for $50.00 off a consultation or real estate closing. The Advisory Committee found that Rule 7.2(c) of the South Carolina Rules of Professional Conduct governed the situation. Like Illinois Rule 7.2(b), the South Carolina rule prohibits a lawyer from giving "anything of value to a person for recommending the lawyer's services." According to the South Carolina opinion, as long as the weekly donut boxes were delivered regardless of whether the recipient had referred clients to the firm that week, Rule 7.2 was not violated. A violation would occur, however, if delivery of the donut box was contingent on referrals to the firm.

For large sections of suburban Chicago such a transparent advertising ploy offering “koozies,” discount coupons, and donuts simply would not work. In those communities the box would need to contain "koozies," discount coupons, and kale.

Monday, July 6, 2015

Continued Employment as Consideration for Postemployment Non-Compete Clauses

McInnis v. OAG Motorcycle Ventures, 2015 IL App (1st) 130097 (here), provides valuable insight concerning the enforceability of restrictive covenants in employment contracts. The appellate court began by summarized the requirements for an enforceable restriction on an employee’s future employment, namely, that the restrictive covenant is (1) ancillary to a valid contract, (2) supported by adequate consideration, and (3) reasonable.

Moving to the heart of the matter, the court evaluated the adequacy of the consideration supporting the restrictive covenant in McInnis’s employment contract with OAG. The court recognized that employment for a substantial period of time after initiation of an at-will employment agreement can be sufficient consideration. But the court also noted that Illinois case law appears to require at least two years of continuous employment to permit a finding of adequate consideration. Since McInnis had been employed by OAG for only 18 months, the court found the consideration inadequate and affirmed the trial court’s denial of OAG’s motion for a preliminary injunction enforcing the covenant.

The majority opinion in McInnis holds that for continued employment standing alone to constitute adequate consideration, the employment must continue at least two years. Employment for a shorter period is insufficient. The dissent argued that such a “bright-line” test is illogical and unfair and that there is no reason that employment for 23 months should automatically be deemed inadequate consideration to support a restrictive covenant.

The value of the opinion lies not only in its thorough discussion of Illinois cases on the two-year “bright-line” rule but also in its discussion of the split among the federal courts interpreting Illinois law on the issue.