I DIDN'T KNOW DEFENSE WON'T WORK

By David McCarthy

The I-didn't-know defense will not work for the owner of a dog who bites someone. A statute has anachronized the old every-dog-gets-one-bite rule of the common law. The victim need not prove that the owner was negligent in handling the dog or knew the dog was inclined to bite people. If the victim has a right to be where he is, and the dog bites without provocation, the owner is liable. (510 ILCS 5/16).

SELLERS OF REALTY CAN'T HAVE IT BOTH WAYS

By David McCarthy

A clause in a real estate contract that gives seller an option to recover liquidated damages or actual damages is unenforceable for violating public policy.

An "option" of that kind distorts the purpose of liquidated damages, i.e., to pre-arrange settlement for a sum certain when actual damages would be hard to determine, and subjects buyers to a penalty when liquidated damages exceed actual damages. (Catholic Charities etc. v. Thorpe No. 1-99-1717).

IT IS LAW, NOT PHILOSOPHY

By David McCarthy

Personal injury plaintiffs are entitled to recover wages and salary lost even if they continued to receive full pay during their injury-caused absence from work. We recently had to educate a client's boss and, incredibly an insurance adjuster about the "collateral source rule."

The damages a defendant is liable for are not reduced one bit by benefits provided to a plaintiff by a collateral source (e.g., an insurer who pays the medical bills, an employer who continues to pay salary), and evidence of benefits bestowed by a collateral source is not admissible at trial. An adjuster in Louisiana recently asserted that her insured was not answerable for wage loss on the grounds that our client had continued to draw full pay while convalescing. To her credit, the adjuster acknowledged her error when it was demonstrated and offered appropriate compensation for the wage loss. That is more than can be said for the boss.

Despite a painstaking briefing about the collateral source rule, the boss maintained that because the employee had not been docked pay during his absence, seeking compensation for wage loss was immoral and illegal.

FIRM NEWS

• $70,000.00 settlement in case with truck company for injuries to motorist who needed no hospitalization and had medical bills under $6,000.00.

• Six years of litigation culminated in settlement for client-contractor who rebuilt flood-damaged mansion. Our client got every dime of the insurance proceeds at stake. The homeowner, our opponent, was represented by a 22-lawyer Chicago firm that is nationally known for representing "victims" of "toxic mold."

• $25,000 settlement for snowboarding injuries suffered in a header off a “rail” at local ski hill.

• The Illinois Tollway Authority demanded $30,000 from our client for unpaid tolls and penalties. Our defense: mistaken identity. One telephone call and one letter resolved the matter. Fines and penalties paid by client: zero.


• We bested the largest law firm in Oak Brook when we successfully defended a young computer consultant from overseas who was sued for violation of a non-compete agreement, unfair competition, and misappropriation of trade secrets by his former employer, a national consulting company. Their application for a preliminary injunction was denied after an evidentiary hearing of several days, which established, among other things, that the "vast sums" allegedly expended to cultivate the pertinent customer amounted to less than $130.00 for a few lunches. They appealed. The trial judge was affirmed. The opponent then threw in the towel and dropped the case.


• We won a trial against a high-brow Chicago firm in the U.S. Bankruptcy Court in Chicago. Our client was the trustee of a $40 million debtor's estate. The defendant-opponent faced a "preference" liability of nearly $400,000.00 and had only one defense worth talking about, i.e., that the trustee had blown the statute of limitations. We established at trial that the trustee's personnel got the suit papers to the courthouse on time, and it was an employee of the court clerk's office who delayed in processing them.

WHAT HAPPENS AT A REAL ESTATE CLOSING?

By David McCarthy

Seller and buyer perform the promises they made to each other in their contract for the purchase and sale of the property. Buyer pays seller the purchase price. Seller conveys the property to buyer by delivering a deed for the real estate and a bill of sale for the personal property.

Those activities are basic to any real estate closing. Other action may be required at the closing, and some promises are typically performed prior to the closing. The contract, which must be written to be binding, serves as a "to do" list.

Buyers often obtain a mortgage loan to help pay the purchase price. In such cases there is not only a "closing" on the sale between buyer and seller, but also a "closing" on the loan between buyer and lender. The lender pays money to the seller on behalf of the buyer.

The buyer gives the lender a promissory note and mortgage. The note is buyer's promise to repay the loan. The mortgage grants the lender a lien interest in the real estate that can be foreclosed on in case buyer does not repay the loan. Real estate sales so often close at the office of a title insurance company because they so often involve a mortgage loan. The title insurance company serves as an agent of the lender in such cases.

TENANCY BY THE ENTIRETIES: NOT NEW AND NOT BULLET PROOF

By David McCarthy

Who said real estate owned in tenancy by the entireties is beyond the reach of creditors of one of the tenants? The United States Supreme Court has just held otherwise, at least insofar as the creditor is the United States itself. United States v. Craft (No. 001831, April 17, 2002) held that a husband's interest in Michigan real estate, which was owned in tenancy by the entireties, was subject to a federal tax lien.

Tenancy by the entireties only seemed to be the hot new thing in residential real estate in the 1990s. In fact it originated in the ancient common law under the theory that a wife had no legal existence apart from her husband, and it basically disappeared in the 19th Century with the passage of the Married Women's Acts. Illinois abolished this form of ownership in 1861 and resurrected it in 1990 by amendment to the Joint Tenancy Act.

In Illinois it is available only to married couples and only for their homestead. It was said to possess two virtues which plain old joint tenancy did not: (1) tenancy by the entireties cannot be severed except by the consent of both tenants and (2) the property so held is beyond reach of creditiors of only one of the tenants. The second point is proving to be an overstatement.

The first Illinois decision on the subject held that the protections of tenancy by the entirety were absolute -- a creditior of only one tenant could not reach entireties property under any circumstance. A later decision held that a creditor of only one tenant could reach entireties property by invoking the Fraudeulent Transfer Act and demonstrating that the tenancy had been created with intent to defraud creditors. Still later the Illinois General Assembly and the Illinois Supreme Court entered the conversation.

First, the Joint Tenancy Act was so amended as to subject entireties property to the claims of the creditors of only one tenant if the tenancy was created with the "sole intent" of defauding creditors.

Next, the Illinois Supreme Court held that the "sole intent" standard was more exacting than the "actual intent" standard of the Fraudulent Transfer Act. Now the U. S. Supreme Court has effectively eliminated any obligation to prove fraud at all to the extent that the creditor is the U.S. itself.

OF HOOTERS, FAXES AND CHERRY PICKER'S HEAVEN

By David McCarthy

The cost of sending an unsolicited advertisement by fax starts at $500.00. Just ask Hooters, the restaurant people. A client of ours was recently sued in another state for $1,500.00 under the Telephone Consumer Protection Act, 47 U.S.C. 277.

The misconduct?

Its marketing firm faxed an unsolicited one-page flyer to the wife of an attorney who built his practice out of suing small businesses that have not heard what happened to Hooters last year: a Hooters franchise in Georgia was forced into bankruptcy by a $12 million judgment in a class action lawsuit for unsolicited faxes advertising lunch specials.

The statute authorizes an individual to sue for minimum statutory damages of $500.00 (or for actual damages in the most unlikely event that they exceed statutory damages). The statute provides for strict liability, that is, if the recipient did not consent to the solicitation, the advertiser is liable for $500.00. The statute authorizes treble damages -- $1,500.00 for one page -- if the defendant "willfully or knowingly" violated the act.

Such phrases usually mean the plaintiff must demonstrate that the defendant was motivated by actual malice or ill will. But as for the statute in question, a case for a willful and knowing violation may be made simply by showing that the transmittal was not a matter of dialing a wrong number.

Nor may the advertiser defend on the grounds that a thrid-party vendor provided or dialed the fax number. Hooters learned that the hard way, too. It was no defense that it had acquired the relevant fax numbers from a third-party vendor. (The vendor, incidentally, was a former "Hooter's girl" who answered to the name "Bambi," and who took off for points unknown when the litigation began.) The rationale for the stiff damages imposed by the statute is that fax advertising is done at the expense of the prospective customer.


But still, fifteen hundred dollars for one page sent to the fax of a person who got up on the wrong side of the bed?

It seems a bit heavy-handed.

Until one recognizes that there are a lot of rascals out there who have developed a host of amusing, if not legally effective, dodges (e.g., the use of fax machines that do not leave "fax tracks," sending advertisements to a former occupant of the building).

Our favorite?

The bold ones announcing, in boilerplate, that this advertisement is being sent to you because you asked for it, but if you didn't ask for it, please accept our apology and call the following number to have your name removed from our list.

ARBITRATION OF JOB DISCRIMINATION CLAIMS

by David McCarthy

Employees with claims against their employers for discrimination or otherwise can be enjoined from suing in court and compelled to go to arbitration if they have so agreed.

The U.S. Supreme Court recently ruled that an employee who filed a race discrimination suit against the national retailer which employed him was properly enjoined from prosecuting the suit and obligated to submit his claims to arbitration because he had agreed to do so in writing when he signed an application for employment.

A contract that requires arbitration of disputes rather than litigation is not illegal. The courts profess to welcome arbitration as an alternative to litigation. For fast decisions and low costs, arbitration has jury trials beat, and the rights and remedies of an employee are in no way diminished or impaired by arbitration.

So one might have expected a unanimous "yes" to the question whether the contract at issue was enforceable. In fact, the vote on the Supreme Court was 5-4, and the justices were aligned exactly as they had been in Bush v. Gore. (Circuit City v. Adams, No. 99-1379).

ONE-ON-ONE WITH INSURANCE ADJUSTER: OVERMATCHED

by David McCarthy

Those who attempt to settle their own personal injury claims by one-on-one negotiation with an insurance adjuster are overmatched. From what we have seen, the adjusters promise only reimbursement of medical expenses, and the do-it-yourself plaintiffs think that is a pretty fair deal.

In fact, an injured person is entitled to compensation for lost wages, disability, pain and suffering, and disfigurement (if there is disfigurement). Will there be some permanent disability? Will the plaintiff ever be as able and healthy as before? That is compensable.

Will the pain continue into the future? Is additional medical care reasonably certain to be needed in the future? All that is compensable. Don't settle for mere reimbursement of medical expenses.


A recent telephone inquiry revealed the wisdom of seeking legal counsel early. A would-be plaintiff decided she wanted to sue because arthritis was developing at the sites of her injuries. All this surfaced two days before the pertinent statute of limitations expired. Not enough time.

ANATOMY OF A LAWSUIT

By David McCarthy

All lawsuits have three phases: pleading, discovery and trial. In small claims court pleading is simplified, discovery is available only by permission of the court, and the rules of evidence are applied laxly if at all.

Pleadings. Lawsuits start with a plaintiff's complaint, a brief description of the acts and omissions imputed to the defendant and of the injury or damage allegedly caused thereby (e.g., personal injury, property damage, monetary loss).


The defendant will file an answer that admits and denies the various allegations of the complaint, thereby identifying the "triable issues" of the case, the contested questions of fact whose resolution is the purpose of a trial. Sometimes the answer will be accompanied by affirmative defenses or a counterclaim or both, to which the plaintiff will respond in like fashion, i.e., by admissions and denials. Cases can be dismissed on motion at the pleadings phase but that occurs about as often as the Cubs play in the World Series.


Discovery. In the discovery phase the facts that appear in skeleton form in the pleadings are fleshed out. Of the many tools available for this task, three are standard: requests for documents; interrogatories, written questions answered in writing on oath; and deposition, oral questions answered orally on oath. (President Clinton's impeachment woes started with interrogatories in the sexual discrimination lawsuit of Paula Jones that inquired whether other government employees had been subjected to conduct of the kind Ms. Jones complained of.)

Trial. The facts that emerge from the process above described may be lopsided enough to invite a trial avoidance procedure known as a motion for summary judgment. It proposes that trial is not needed because the important facts are undisputed and the judge need only apply the relevant law to the uncontested facts and enter judgment. This tool is used more often by defendants than by plaintiffs because plaintiffs must prove all elements of their prima facie case whereas defendants will prevail if any one element is obviated.

If summary judgment fails (and it often does because the standard of proof is exacting), and if the lawsuit cannot be settled, and if the plaintiff will not voluntarily withdraw it, then what is left is a trial. The office of a trial is to resolve questions of fact, that are still in dispute by the time the case reaches the trial phase. The facts of a case may be tried to a jury or tried to judge. But the law is always determined by a judge and never by a jury.