Articles Posted in Corporate Compliance

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In 2005, plaintiffs, former Beeland minority shareholders, hired the McGuireWoods law firm to sue Beeland’s managers and majority shareholder, alleging misappropriation of Beeland’s intellectual property. Plaintiffs brought these claims in their individual capacities and derivatively on behalf of Beeland. In 2008, the court dismissed several claims without prejudice all claims. Plaintiffs’ new counsel obtained leave to amend and added counts against Beeland’s corporate counsel, Sidley Austin. The court dismissed all claims against Sidley as untimely and dismissed all individual claims against Sidley on the grounds plaintiffs lacked standing in their individual capacities. In 2011, plaintiffs settled with Rogers; relinquished their ownership interests in Beeland, and, in their individual capacities, sued McGuireWoods for breach of fiduciary duty for failing to timely assert obvious claims against Sidley. The court granted McGuireWoods summary judgment. The appellate court noted that in the underlying action the court never ruled on the merits of derivative claims against Sidley and remanded for a determination as to whether plaintiffs would have been successful in a derivative but for failure to add Sidley in a timely manner. The Illinois Supreme Court held that plaintiffs are bound by the trial court’s determination in the underlying case that they had no standing to bring individual claims against Sidley; even assuming they were successful, plaintiffs could not have collected personally on any judgment against Sidley on the derivative claims. McGuireWoods’s failure to assert claims against Sidley in a timely manner caused no injury to plaintiffs in their individual capacities, which is the only capacity in which they are proceeding. View "Stevens v. McGuireWoods L.L.P." on Justia Law

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Plaintiffs are minority limited partners in Urban Shopping Centers, L.P., in which defendants acquired a majority interest in 2002. Plaintiffs allege breach of fiduciary and contractual duties, claiming that, pursuant to the operating agreement, defendants were not to compete with them in business opportunities. They alleged that defendants stopped growing plaintiffs’ business, disregarded partnership agreement terms, and stole plaintiffs’ opportunities. During discovery, plaintiffs moved to compel production of documents concerning business negotiations in which each defendant’s attorney discussed with nonclients liability and obligations as Urban’s general partner and use of a “synthetic partnership” to avoid partnership obligations. Defendants claimed privilege, but plaintiffs argued that, having disclosed legal advice on these subjects with each other outside of any confidential relationship, defendants could not later object that those subjects were privileged. The motion was granted; defendants refused to comply and were held in contempt. The appellate court affirmed. The supreme court reversed, holding that attorney-client privilege had not been waived because the sought-after disclosures had occurred in an extrajudicial context and were not thereafter used by the clients to gain a tactical advantage in litigation. The “subject-matter waiver” doctrine was not shown to be applicable. View "Ctr. Partners, Ltd. v. Growth Head GP, LLC, " on Justia Law

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Chicago issued plaintiff, Downtown Disposal, notices for violating ordinances pertaining to dumpsters and requiring Downtown Disposal to appear at administrative hearings on various dates. When Downtown Disposal failed to appear, the department of administrative hearings entered default judgments for costs and penalties. Van Tholen, president of Downtown Disposal, moved to set aside the judgments, alleging the company did not receive notice. At a consolidated hearing, Van Tholen advised the hearing officer that for five years, Downtown Disposal had made several attempts to change its address on file with the city, but the city had not changed its records. The hearing officer rejected the argument. Van Tholen filled out and signed pro se complaints for administrative review, using preprinted forms supplied by the clerk’s office. Attorney Boonstra later filed appearances on behalf of Downtown Disposal. The trial court dismissed, holding that actions filed by nonattorneys on behalf of a corporation are null and void. The appellate court reversed and remanded. The Illinois Supreme Court affirmed. An attorney’s signature was not jurisdictional and its absence did not render the proceedings null and void. Application of the nullity rule would be harsh since no purpose underlying the rule was implicated and an alternative remedy was available. View "Downtown Disposal Servs. Inc. v. City of Chicago" on Justia Law