Illinois Court Rejects Challenge To Written Settlement Agreement

Schrager v. Bailey, Ill: Appellate Court, 1st Dist., 1st Div. 2012 - Google Scholar:

This is an odd case in which the plaintiff settled with the defendant, signed a written settlement agreement and release, and then sued again.

The court dismissed the claims in the second case.

The court described the settlement in case No. 1 as follows:

"¶ 5 In 2002, plaintiff Schrager filed a legal malpractice suit against the defendants and attorney James T. Hynes.^[1] The suit alleged that the defendants committed legalmalpractice when they took a voluntary dismissal of a federal suit they had filed on plaintiff Schrager's behalf. The suit was refiled in the circuit court of Cook County only to be dismissed with prejudice based on the single-refiling rule.

¶ 6 In June 2006, plaintiff Schrager agreed to dismiss the malpractice suit and settle his claim against the defendants based on their representation that they had relied on advice from attorney Hynes in deciding to dismiss the federal suit. As part of the settlement negotiations, plaintiff Schrager requested affidavits from the defendants to support their representation. The Agreement provided in pertinent part as follows:

"13. NO CONDITIONS PRECEDENT: Each of the parties to this Agreement acknowledges that no conditions precedent and no promise, inducement, or agreement not stated herein has been made to them in connection with this Agreement except that it is expressly agreed and understood that this Agreement is contingent upon the entry of an order granting Defendants' motion for Good Faith Finding in the Lawsuit.

14. INTEGRATION AND NO RELIANCE CLAUSE//AMENDMENT: This Agreement and the exhibits attached hereto constitute the entire understanding and agreement of the parties hereto and supercede any and all other written or oral agreements, representations or understandings. No representations, inducements, promises or agreements, oral or written have been made by SCHRAGER or Releasees or anyone acting on behalf of Releasees which are not contained herein, and any prior letters of intent, agreement, promises, negotiations, statements or representations not expressly set forth in this Agreement have not been relied upon in any respect and shall be of no force or effect. SCHRAGER agrees and warrants that in entering into this Agreement, SCHRAGER is solely relying upon the information contained in this Agreement and not in reliance upon any other information. No modification, amendment or alteration to this Agreement shall be effective unless in a writing signed by the Parties hereto."

The Agreement also contained an acknowledgment by the parties that they received independent legal advice as to the "effect and import" of its provisions. By June 30, 2006, the Agreement had been signed by all parties.

¶ 7 On July 6, 2006, the circuit court found the Agreement had been made in good faith and dismissed plaintiff Schrager's claims against the defendants."

...

The court holds: "¶ 34 We conclude that the integration/nonreliance clause in the Agreement precluded plaintiff Schrager from proving justifiable reliance, which was fatal to his cause of action for fraud."

I have printed the clauses in the well-drafted settlement agreement to show how good lawyers can draft such clauses to avoid future claims.

Edward X. Clinton, Jr.

www.clintonlaw.net

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Insurance Company Has No Duty To Defend Stranger Operating Insured's Car

MERCURY INSURANCE COMPANY OF ILLINOIS v. SMOROVSKY, Dist. Court, ND Illinois 2012 - Google Scholar:

The court granted summary judgment to the insurance company on the ground that the driver of the car, Smorovsky, did not have permission to use the vehicle.  The opinion does not explain how Smorovsky managed to get the car started, whether he had a key or whether the car had been stolen.  There is a hint that Smorovsky was a garage attendant where the car was garaged.

In any event, because he was not an insured under the policy, Smorovsky had no coverage and the insurance company had no duty to defend.

Edward X. Clinton, Jr.

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Insurance Coverage - Ohio Court Holds That Trial Court Should Not Have Considered Mediation Proceedings

Kuhn v. 21st Century Ins. Co., 2012 Ohio 2598 - Ohio: Court of Appeals, 5th Appellate Dist. 2012 - Google Scholar:


This is an insurance coverage case arising out of an auto accident.  The parties went to mediation.  The mediation was unsuccessful.  The trial court then granted the defendant's motion to dismiss the complaint.


Mediation is confidential and non-binding.  The trial court apparently relied on facts that it learned during the mediation and dismissed the complaint.  The Ohio Appellate court reversed: "We hold, under the circumstances presented in this case, the trial court committed reversible error in utilizing the mediation process as a means of considering matters outside of the pleadings in order to rule on appellee's motion to dismiss under Civ.R. 12(B)(6)."


Edward X. Clinton, Jr.

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Insurance Coverage - No Coverage Where Policy Lapses

This case is captioned Edward v. State Farm Insurance Company, 2012 Ill. App (1st) 112176.

Plaintiff brought suit against State Farm for breach of contract and specifically for failing to pay damages arising from an auto accident that occurred after the insurance policy lapsed and was cancelled for nonpayment.  State Farm brought a declaratory judgment counterclaim alleging that there was no duty to cover an accident that occurred when the policy was not in force.

While this would appear to be an obvious defense to a payment, the Circuit Court of Cook county found that State Farm had "waived" its defense to coverage by reinstating the policy when the premium was eventually paid.  The Circuit Court, Judge Pamela E. Hill Veal,  also found that State Farm acted in bad faith and awarded $50,000 in punitive damages.

State Farm refunded her the premium for the period when the policy was not in force.  State Farm reinstated the policy but refused to provide retroactive coverage.

The Appellate Court reversed on the ground that (a) plaintiff breached the contract by failing to pay the premium on time; (b) State Farm declined to offer retroactive coverage and did not waive its rights.  State Farm also provided a clear and unequivocal cancellation notice.

Comment: State Farm should not have had to go to the Appellate Court to have this decision reversed.

Edward X. Clinton, Jr.

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Third Circuit Rules Against Allstate In Coverage Dispute

ALLSTATE PROPERTY AND CAS. INS. CO. v. Squires, 667 F. 3d 388 - Court of Appeals, 3rd Circuit 2012 - Google Scholar:

Squires was injured in an accident and sought insurance coverage under the uninsured motorist clause of his automobile insurance policy.  The case was governed by Pennsylvania law.  The trial court ruled in favor of Allstate, but the Third Circuit reversed.  Squires was injured by a box dropped from another vehicle which caused him to have a car accident.

The court summarized the issue as follows: "Accordingly, the sole issue that the Court decided was "whether an accident caused by a box which fell from an uninsured motor vehicle can be attributed, as a matter of law, to the `ownership, maintenance or use' of an automobile." App. at 5. The Court answered this question in the negative, concluding that there is UM coverage for policies containing the "arising out of" language only when a vehicle—and not some other object such as the box—was "the instrumentality causing . . . the [a]ccident." App. at 11. Accordingly, on March 2, 2011, the Court granted Allstate's motion for judgment on the pleadings, denied its motion to dismiss the counterclaims as moot, and dismissed Squires's counterclaims as moot."


The third circuit disagreed on the ground that because the box was dropped from another vehicle, the accident was attributed to the "ownership, maintenance or use" of an automobile.  Because Allstate conceded that the accident was caused by a box dropped from another vehicle, the accident was caused by the "ownership, maintenance or use" of an automobile.


Edward X. Clinton, Jr.




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Federal Court Dismisses Coverage Case Because of Pending State Court Case

EVANSTON INSURANCE COMPANY v. RESIDENTIAL PRIVATE CARE, LLC, Dist. Court, ED Michigan 2012 - Google Scholar:

The district court in Michigan has dismissed a declaratory judgment action filed by an insurance company alleging that there was no coverage for an incident.  The underlying state court case alleged that an employee of Residential Private care stole money and jewelry from a patient.

The court explained the requirements as follows:

"In determining whether it is proper for a district court to exercise subject matter jurisdiction over a declaratory judgment request, the Sixth Circuit applies the five factors enumerated in Grand Trunk W. R.R. Co. v. Consol. Rail Co., 746 F.2d 323, 326 (6th Cir. 1984). The five factors are:

(1) whether the declaratory action would settle the controversy;

(2) whether the declaratory action would serve a useful purpose in clarifying the legal relations in issue;

(3) whether the declaratory remedy is being used merely for the purpose of "procedural fencing" or "to provide an arena for a race for res judicata;"

(4) whether the use of a declaratory action would increase friction between our federal and state courts and improperly encroach on state jurisdiction; and

(5) whether there is an alternative remedy which is better or more effective.

Id.

With respect to the fourth factor — whether the use of a declaratory action would increase friction between our federal and state courts — courts are to consider three additional sub-factors:

(1) whether the underlying factual issues are important to an informed resolution of the case;

(2) whether the state trial court is in a better position to evaluate those factual issues than is the federal court; and

(3) whether there is a close nexus between the underlying factual and legal issues and state law and/or public policy, or whether federal common law or statutory law dictates a resolution of the declaratory judgment action.

Scottsdale Ins. Co. v. Roumph, 211 F.3d 964, 968 (6th Cir. 2000); see alsoTravelers Indem. Co. v. Bowling Green Professional Associates, PLC, 495 F.3d 266, 271 (6th Cir. 2007).^[2]"

^{The court held that the federal court case would cause friction with the state court an impermissibly encroach on that court's jurisdiction.}

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Edward X. Clinton, Jr.

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Trade Secrets Claim Rejected Where Company Did Not Protect Trade Secrets

FAIL SAFE LLC v. SMITH CORPORATION, No. 11–1354., March 29, 2012 - US 7th Circuit | FindLaw:

The Seventh Circuit affirmed the district court's rejection by summary judgment of certain trade secret claims.  The district court found that the plaintiff had failed to take reasonable measures to protect its trade secrets and had, in fact, voluntarily disclosed those secrets to the Defendant corporation.  The Seventh Circuit affirmed.

The Seventh Circuit summarized its decision as follows:

"This case is about whether a plaintiff can sustain a trade secret or unjust enrichment claim when that plaintiff fails to take any protective measures to safeguard its proprietary information. Business relationships do not always develop under formulaic circumstances. But where one company fails to take any protective steps to shield its proprietary information, it cannot then expect the law to protect it when the relationship sours. For this reason, we affirm."


Comment: these are words to live by for small businesses trying to protect trade secrets.


Edward X. Clinton, Jr.

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