Monday, December 28, 2009


by David McCarthy

If you value yourself as much as you value others (and why wouldn’t you?), the car insurance you buy will include UM/UIM coverage, and at limits equal to the limits of your liability coverage.

UM stands for “uninsured motorist” and UIM for “underinsured motorist.” In case you are in an accident, you will want as much insurance for your own injuries as for the injuries of people you hit. So buy UM/UIM coverage, and buy it at limits equal to the limits of your liability coverage.

Picture this:

You are rear-ended at a red light by an “at-fault” driver whose limits of liability insurance (say, $100,000.00) are not nearly enough to compensate you for your medical expense, your lost income, your pain and suffering, and all the rest of it. Can you go against your own insurance company for the UIM coverage under your own policy? Yes, but only if the limits of your liability insurance exceed the limits of his liability insurance. If his liability limits equal or exceed yours, he is not “underinsured” in relation to you.

You would fare no better if you had greater limits of liability coverage (say, $250,000.00 per person/ $500,000.00 per occurrence) but only $100,000.00/ $300,000.00 of UM/UIM coverage (which is to say, that you provided more insurance for the people you hit than you provided for yourself). You not only want to buy UM/UIM coverage, you want to buy it at limits equal to the limits of your liability coverage.

UM/UIM insurance protects you in case you are hit by a driver who has no insurance, or by a hit-and-run driver, or by a driver whose liability limits are less than your liability limits. UM/UIM insurance helps fill the gap between the value of your injury and the amount of insurance available to pay for it.

Your relationship with your own insurance company will be adversarial because you will be looking to it to pay you for that part of your claim which exceeds the limits of liability insurance of the at-fault driver but does not exceed the limits of your UM/UIM coverage. (No matter what the value of your claim, your insurer will not pay out in excess of the limits of your coverage.)

It is easy to foul up a UM/UIM claim.

A mis-timed “okay” is all it takes. We recently got a call from a man who believed he had an open-and-shut UIM case and who was annoyed that his insurer had not already cut him a check. To us it was at least as likely that he had outsmarted himself, but he did not stay on the telephone long enough to tell for sure. He had already received a “policy limits” offer from the insurer of the “at-fault” driver and he had already told the adjuster for his own insurer to “open a file” for his UIM claim. He acknowledged he had reached a point at which some professional advice would be of help to him. Alas, he may have taken one step too many, but there is no way to tell, for at that point, something that meant more to him than his UIM claim came up, he ended the call, and nothing further has been heard from him.

We assumed that he had already prejudiced the right of his own insurer to pursue the at-fault driver, and so his UIM claim was DOA.

But beyond that, he was indulging some rosy assumptions that his insurer was likely to challenge. For one thing, he took his best-case outcome for granted, and he carped that he did not have a check in hand already. His best-case was a payment of $145,000.00 under the UIM clause of his auto policy, that is, the limits of his UIM coverage ($250,000.00) reduced by payments from the insurer of the “at-fault” driver ($100,000.00) and from the “med pay” clause of his own policy ($5,000.00). His actual medical expense to that point was rather modest. The evaluation of the case was predicated on “wage loss” and on “future medical expense.”

As for “wage loss” we would love to know how he planned to reconcile the fact that he was working full, eight-hour shifts with his assertion that he was receiving only half pay. His insurer is apt to want a plausible explanation for that.

Additionally, there was a conflict between his complaints that his insurer had not yet offered him the full $145,000.00 and his assertion that surgery was inevitable (and lots of physical therapy thereafter) but that he would not have this surgery for at least four months. (It is not the practice of liability insurance companies to throw gobs of money at you while you are still being treated for your injuries and before you have reached the point of “maximum medical improvement.”)

Then there is the question of comparative fault, that is, the extent to which the caller’s own negligence caused his injuries.

It does not follow from the fact that the other insurer made a “policy limits” offer that the caller’s own insurer will proceed as if the caller were free of fault. On the contrary, and because they are spending their own money, they will investigate whether, and to what extent, their insured was responsible for his own injuries. And even were they to conclude that he was utterly blameless, they might formulate a settlement offer that factors in some comparative fault.

Our caller professed dismay that his insurance company had not yet written him a check for the full $145,000.00. We allow for the possibility that he will not receive a dime on his UIM claim because he blundered at a critical moment in dealing with the representatives of both insurers.

Saturday, December 19, 2009

Friday, November 27, 2009


by David McCarthy

It has long been my position that an attorney preoccupied with his/ her win-loss record would rather oppose a non-competition agreement than attempt to enforce it. They have been difficult to enforce in Illinois, and for good reason: They are a restraint on trade.

But the worm is turning. First, the "blue pencil rule" has gained some traction in Illinois. There was a time when our courts would withhold enforcement of a non-competition agreement if they determined that it was unduly broad in time or area, even if the agreement included a "blue pencil" clause.

The "blue pencil" clause, a staple of non-competition agreements, authorizes a court-ordered narrowing of time and area limitations if those which the agreement recites are deemed too broad. Illinois was slow to accept the "blue pencil rule" on the theory that it amounted to re-making the agreement of the parties. And this spared employers from a sordid temptation to overreach on the front end. After all, why not shoot for the moon -- write in outrageous time and area restrictions -- if, worst case, the court can be counted on to apply the "blue pencil rule" and pare back the time and area restrictions? Nonetheless, over time, the "blue pencil rule" has gained some favor in Illinois.

In September of 2009 one of our Illinois Appellate Courts took an even more dramatic step in favor of the enforceability of non-competition agreements. The Fourth District Appellate Court (central Illinois, including Springfield) held that the "legitimate business interest" prong of the analysis was irrelevant. For ages, the proponent of a non-competition agreement was obliged to establish (i) the reasonableness of the time and area restrictions and (ii) that enforcement (an injunction) was necessary to protect a "legitimate business interest" of the employer (e.g., an interest in preserving confidential information or a "near-permanent" relationship with customers). In today's Fourth District, the proponent need only show that the time and area restrictions are reasonable (and the "blue pencil rule" is often available in aid of that showing).

Does this matter in the real world? You bet it does. Some time ago, we successfully opposed an action to enforce a non-competition agreement on the grounds that the former employer did not have the "legitimate business interest" that was necessary to obtain an injunction. Our client spent all his time at the office of the customer, and the only "confidential information" accessible to him was the customer's information, not the employer's information. Additionally, the customer relied on its own personnel and a number of other outside organizations for the same sorts of services which the employer provided. Finally, despite allegations that "vast sums" had been expended to cultivate the customer, the evidence was to the contrary: All advertising was generic. No advertising was customer-specific. And beyond that the "vast sums" spent to woo the customer consisted of $130.00 doled out to buy lunch on a number of occasions.

All that would be irrelevant in today's Fourth District. Whether the law of the Fourth District will become the law elsewhere in Illinois remains to be seen. There is now a conflict among the districts, and one of the chief functions of the Illinois Supreme Court is to resolve conflicts among the Appellate Courts. Stay tuned.

Saturday, October 31, 2009


By David McCarthy

You don't need a well-written contract when everyone is performing as agreed. You need it when things change for the worse. Everything is always changing, of course, and all too often changing for the worse.

A number of matters that have come into the office lately have driven those points home. In one case, a client dealing with a known rascal preferred to sign off on an agreement that was virtually drawn on a cocktail napkin than to pay an attorney a few bucks to "rascal-proof" the agreement. It was only a matter of time before the rascal did what rascals do. The client has paid far more to keep the rascal in check and the effectiveness of those efforts is much harder to measure than would be so had a well-written contract been drawn at the start of the relationship between rascal and client.

In another case a group of would-be partners had the good sense to commission a well-drawn contract on the front end. Their objective was to share gains and losses equally.

That seems simple enough, doesn't it?

Imagine several boys with paper routes who meet in their tree house and deposit their collections in a coffee can. At the end of the month, they count out the money in the can and divide it equally.

What could go wrong with that?

Not much if they are all delivering the same newspaper to the same number of customers, achieving the same rate of collection, depositing every dime they agreed to deposit; and if no third parties have any claim on the money in the coffee can (e. g., the Internal Revenue Service, the Illinois Department of Revenue, the Illinois Department of Employment Security, spouses, children, dependents, and all the rest of it).

Since the would-be partners are grown men with lives and obligations that are a bit more complicated than those of boys with paper routes in a tree house, putting down on paper an agreement that meets the needs of all is of utmost importance and demands care and attention.

Tuesday, October 6, 2009


by David McCarthy

Query: When an employee with seniority and an employee with a disability vie for the same job, who gets it?

Usually the employee with seniority, according to the U.S. Supreme Court.

In 1990 a man named Barnett injured his back while employed as a cargo handler by U. S. Airways Inc.. He invoked his own seniority rights to gain a less demanding position in the mail room. Two years later his position, among others, was opened to seniority-based employee bidding, and Mr. Barnett learned that two co-workers who were senior to him intended to bid for his positions.

Mr. Barnett proposed to U. S. Airways that it accommodate his disability by exempting his position from the seniority system. Ultimately the employer refused, Mr. Barnett lost his job, and he sued U. S. Airways on the grounds that it had discriminated against him in violation of the Americans With Disabilities Act ("ADA").

Summary judgment for the defendant-employer was reversed on appeal. Then the U. S. Supreme Court, in another 5-4 decision, reversed the Court of Appeals and remanded the case to the trial court.

The Court held that the accommodation requirements of the ADA do not oblige an employer to disregard its own seniority system unless the plaintiff-employee shows "special circumstances" warranting from the seniority system in that particular case.

What does a "special circumstance" look like?

The Court offered only one example, to wit, that of an employer who has so often exercised a unilateral right to make exceptions to its seniority system that one more exception will not matter. It is too soon to tell whether the seniority-is-trump rule will be swallowed up tby the "special circumstances" exception, but it is predictable


by David McCarthy

There was a time when it was widely understood and accepted that tenure was conditioned on being published.

Interestingly, officials of the University of Wisconsin were sued for refusing (by a vote of 7 to 1) to grant tenure to an assistant professor of physical education who had published nothing. The contract of employment did not guarantee tenure, but only that plaintiff would be considered for tenure. The case was dismissed on dispositive pre-trial motions and the Seventh Circuit Court of Appeals affirmed the dismissal.

Plaintiff brought a claim under Title VII of the Civil Rights Act that alleged sexual discrimination in the form of "associational discrimination."

It contended, in gist, that tenure had been denied to plaintiff because of her association with a male employee of the university who had earlier filed a sex discrimination claim (and who also cast the only vote in favor of granting tenure to plaintiff). The Title VI claim was found to be time barred.

A claim predicated on denial of equal protection failed for want of evidence that plaintiff had been treated differently from similarly situated candiates for tenure and for want of evidence that the individual defendants were motivated by an intent to discriminate against persons such as plaintiff.

Plaintiff asserted that she was a class of one, a heterosexual female professor who befriended a heterosexual male professor who filed a sex discrimination complaint. However, she did not carry her burden of establishing that the defendant's justification for discriminating against her was irrational and arbitrary.

Finally, the Court rejected a claim that denial of tenure carried a stigma so great that at two different performance reviews prior to the time when plaintiff came up for tenure, the Dean had told her that publishing would be a "critical factor" in the tenure decision.

After the litigation commenced and after the defendants filed their motion for summary judgment, the response of plaintiff flagrantly disregarded local rules pertaining to statements of fact and citations of law. The trial judge therefore disregarded a large part of plaintiff's opposition. Plaintiff charged the trial judge with abuse of discretion. The Court of Appeals rejected that contention.


by David McCarthy

Being transferred from the day shift to the night shift does not constitute sexual discriminiation.

A woman grown accustomed to the day shift quit as soon as she had been transferred to the night shift and sued for "constructive" discharge on the grounds that any reasonable person would deem the change of shift unbearable.

The Seventh Circuit Court of Appeals affirmed summary judgement in favor of the defendant-employer on the grounds that transfer from day shift to night shift did not constitute an "adverse employment action."

The case is noteworthy for its rejection of the sexist position of the plaintiff.

She accused her boss of preying on her "wifely instincts": He knew she would resign rather than accept transfer to the night shift because she was a dutiful wife, caregiver in the home and not the principal breadwinner.
Or so the argument went.

The Appeals Court remarked that the plaintiff -- apart from having no evidence in support of her speculations -- was attempting to build a case on the very gender stereotyping which Title VII of the Civil Rights Act of 1964 was designed to eradicate from the workplace (Grube v. Lau Industries Inc. No. 00-4131, 7-19-01).

Saturday, September 26, 2009


We are in the pre-suit phase of an upstairs-downstairs dispute between neighbors that was touched off by a cat in the upstairs unit raising the lever-action faucet in the kitchen sink when no one was home. Water damage to the unit below was the result.

Getting to yes on a settlement has been a challenge because our opposing counsel and the occupants he represents appear to have an agenda. So when the facts and the law collide with his assumptions, he ignores the facts and the law and clings to assumptions.

His "proofs" of damage appear to have been "manufactured" to serve an agenda that preceded the proofs, and his assumption that the upstairs neighbor was negligent is contrary to law.

His error is obvious. He has forgotten the basic rule on this subject that is drilled into first-year law students: Every dog gets one bite. True, there is no dog in this fight, and no bite, for that matter. But there is a question of notice.

Under the common law, the owner or keeper of a dog was liable if the dog bit someone only if he was on notice that the dog was prone to bite people. So the first bite was "free," if you will. The first bite put the owner on notice of the dog's viciousness. A statute that has since been enacted imposes strict liability: If an unprovoked dog bites someone, the owner is liable, without regard to notice or carefulness.

Common law negligence governs the case at hand. Our opponents seem to know this but to have forgotten the notice element of the negligence case. They must plead and prove that the owner or keeper of the cat was on notice that the cat was capable of turning on the faucet.

Sunday, September 13, 2009


We went to trial against a first-time homebuilder and got a judgment that required him to refund the full purchase price to our client ($280,000.00) and take back a deed to the house. The defendant asserted that he was a "casual seller" on the grounds that he had lived in the house after he built, and therefore he was liable, if at all, only for damages (e.g., costs of repair).

Cross examination of him at the end of trial showed that he was a "builder-vendor" and as such liable to take back the house and refund the purchase price. A snapshot of the house and its front lawn clearly showed a "for sale" sign from one of the national real estate agencies. Under it was a little white sign that could not be read with the naked eye. But a magnifying glass showed that the sign said the house had been built by the defendant's home-building company.

The snapshot was shown to the defendant, who said the white sign was too small to read. The magnifying glass was pulled out and handed to him. "Try this." The defendant pushed aside the glass and the photo, looked the judge in the eye, and told him the sign said the house had been built by his company.

Result: Instead of a judgment for damages, which would have meant that our client had to keep the house, there was a judgment for rescission: The defendant took back the house and refunded the purchase price.

Tuesday, September 8, 2009


Books I've been reading and recommend:

Anonymous Lawyer by Jeremy Blachman
Right-on description of the insanity of large firm law practice.

Team of Rivals by Doris Kearns Goodwin
Best Christmas present I received this past year. Thanks to my wonderful wife I enjoyed hours of insight into one of Illinois' best lawyers.

Miles Gone By: a literary autobiography by William F. Buckley, Jr. and from his son, Christopher Buckley, Losing Mum and Pup. Father and son were two very different people.

American Lion by Jon Meachem
A great birthday present. I'm a quarter of the way through. So far, so good.

Saturday, September 5, 2009


by David McCarthy

Enforceable covenants not to compete are, like giant pandas, few and far between.

Because they are restraints on trade.

The law abhors restraints on trade, and therefore covenants not to compete will be scrutinized with care to ascertain whether they do or do not prevent competition per se. One object of this scrutiny is an element that is always indispensable to formation of a contract but usually a matter of indifference: consideration, or what might be more easily understood as quid pro quo, though the scholars cringe when the terms are used interchangeably. Consideration is the "great divide" of contracts, the element which separates promises that will be enforced from those that will not.

When the contract under examination is a covenant not to compete, the law will take pains to examine consideration for its presence and for its adequacy.

Often enough the consideration for a covenant not to compete is cast in terms of continued employment. Is that consideration? Yes but only when the employment continues for a "substantial" period of time following formation of the agreement. What is a "substantial" period of time? There are decisions holding that employment for more than two years following formation of the agreement qualifies as "substantial."

One way to eliminate the uncertainty as to whether the continued employment is or is not "substantial" is to offer a different form of consideration, namely, a definite and substantial sum of money that is over and above what would otherwise be the employee's due, e.g., $250.00.

Consideration is a necessary but not sufficient condition. Its absence is fatal to the existence of a contract but its presence does not, in and of itself, make the agreement enforceable. There would be further scrutiny to ascertain whether a legitimate and protectible business interest of the plaintiff-employer is at stake and whether the restrictions in the agreement in question exceed what is reasonably required to protect those business interests.

Sunday, August 30, 2009


by David McCarthy

Small claims court is a good place to be a plaintiff, if you must be a plaintiff at all.

It is a fast, simple, low-cost way to get a decision on a claim for money only that does not exceed $5,000, exclusive of interest and costs. Simplified pleading is permitted, discovery is prohibited except by court order, and generally there will be a trial on the date due for the defendant to respond to the summons.

The advantages are so great that it is worth considering ways to cope with some of the restrictions and requirements of the procedure.

One, a corporation which is a plaintiff must be represented by an attorney no matter how small its claim my be, but individuals may represent themselves no matter how great their claims may be. So a corporation might consider selling and assigning its claim to an individual, who can elect to proceed with or without counsel. The assignment should be in writing.

Two, when one plaintiff has claims against one defendant that aggregate more than $5,000.00, it is well to consider filing the claims in separate counts or even in separate suits.

Three, for those claims in excess of $5,000.00 that cannot be separated into counts there is no law against praying for the $5,000.00 maximum and waiving the right to the excess.

Thursday, August 27, 2009


If you were offered a deed to the Brooklyn Bridge for a million dollars, would you take the deed and pay the million dollars? That would be a great deal only if the deed gave you ownership of the bridge and a disaster if the deed were just a fancy piece of paper.

That risk is controlled by title insurance which sellers promise to provide to buyers. An insurer of land titles will protect a buyer against certain risks posed by rights and interest third parties may have in the land.

The insurer will investigate the existence and extent of the seller's interest in the relevant property by examining public records and otherwise. If and when it is satisfied that the seller is the true owner of the property, it will commit itself to insure the seller's title against the claims of others, subject to certain exceptions.

Friday, August 21, 2009


Divorce and Family Law, Paul Nordini

Special Education Law, Mary Denise Cahill

Disability Law, Robert Farley

Divorce and Family Law, Marsha Cellucci


By David McCarthy

Illinois is still a work at will state.

Put another way, the general rule was, and still is, that the employment relationsip is terminable at will by the employer or by the employee. The employer's right might be diminished or impaired by contract (e.g., a collective bargaining agreement) or by law. The fetters imposed by law on an employer's right to end the employment relationship at any time for any reason have been a hot topic for a long time. For years the fastest growing category of "employment-discrimination" claims has been not race, or sex. or national origin, but retaliation.

Small wonder.

A retaliation case is easy to manufacture, easy to prove, and it pays well. It starts by engaging in "protected activity" e.g., submitting to the boss a false and malicious claim that a co-worker and rival has committed sexual harassment will suffice if a true and honest complaint is unavailable. The law will repay the sociopath's mendacity by heaping rewards and protection on him or her.

A maliciously false complaint will gain for the employee the functional equivalent of a no-cut contract.

The employer who dares to end the employment relationship will be sued for retailiatory discharge, will be presumed guilty in most cases, and will be found guilty unless the presumption is perfectly overcome: the jurors possessed of Alan Alda sensibilities must be convinced that there was not even a tinge of retaliatory motive. Yet the more outrageous and unforgivable the complaint, the greater the chance that notions of "payback" figured in the decision to terminate.

It is not for nothing that claims of "retaliation" are a growth industry. If you believe this is an exaggeration, call us for details about the disgraceful state of the law.

Sunday, August 9, 2009


By David McCarthy

Wish we had a nickel for each time somone involved in a traffic accident has said, "The other guy got a ticket." That fact is irrelevant to the question whether the "other guy" is or is not liable for any injuries or property damage that may have ensued.

For that matter if the ticket ripens into a conviction, that too is irrelevant and inadmissible, at least if the offense in question was a minor one. If the other guy pleads guilty to the offense, that is admissible; but not the fact that he was ticketed or the fact that he was convicted... Another common misconception: Traffic accident reports are a latter day equivalent of the burning bush talking to Moses.

Not so.

They are hearsay, they often involve multiple layers of hearsay, and in general the police officers who write up the reports did not witness the events in question. Unless the report qualifies for that arcane exception to the hearsay rule known as past recollection recorded, it will not be admitted into evidence... Linda Tripp would have been at risk in Illinois, too.

Remember her?

The woman who taped her telephone conversations with Monica Lewinsky?

Illinois is an "all-party" state. It is a crime to hear or record a conversation without the consent of all parties to the conversation. And as an astute observer recently pointed out, you know all those "Soccer Moms" on the sidelines on Saturday morning with their camcorders whirring?

Felons all.

(720 ILCS 5/13-1 et seq.)

Friday, July 31, 2009


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).

Sunday, July 26, 2009


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).

Friday, July 24, 2009


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.

Wednesday, July 22, 2009


$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.

Tuesday, July 21, 2009


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.

Sunday, July 19, 2009


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.

Friday, July 17, 2009


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.

Wednesday, July 15, 2009


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).

Monday, July 13, 2009


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.

Sunday, July 12, 2009


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.