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Lawpulse

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By Helen Gunnarsson

SLAPP suits take a hit

A new bill would discourage developers and others from suing - and thus trying to silence - opponents of their subdivisions, landfills, and the like.

Inherent in the idea of a democracy are the rights of citizens to participate in government, to express their views on subjects of public interest, and to petition government officials for action on those subjects. When people realize that they might get sued for engaging in any of those activities, however, they may make a rational economic decision not to take part in such constitutionally protected activities.

The General Assembly has acted to curb such lawsuits, known as SLAPPs. By unanimous votes in both houses, the General Assembly passed SB 1434, termed the Citizen Participation Act.

Strategic Lawsuit Against Public Participation

SLAPP stands for Strategic Lawsuits Against Public Participation. The bill defines the term at section 5: a civil action for money damages filed against a citizen or organization as a result of their valid exercise of their constitutional rights to petition, speak freely, associate freely, and otherwise participate in and communicate with government. In the same section, the bill notes a disturbing increase in such suits.

SLAPPs frequently arise in the context of real estate development, according to Springfield lawyer Donald Craven, general counsel to the Illinois Press Association. Perhaps a developer proposes a project such as a subdivision - or a land-fill, or a factory farm - in an area where none yet exist.

Property owners in the area get wind of the project and decide to take an active role in opposing it. They may exercise their opposition by attending meetings of the county board or zoning board of appeals, writing letters to their elected representatives or newspapers, demonstrating peacefully, or circulating petitions. Though such actions are protected by the United States Constitution, someone standing to profit from the proposed development - the developer, perhaps - may file suit against those opposing the project, alleging defamation, interference with contract, or some other tort.

A SLAPP may have little or no chance of success on its merits, Craven says. But merely filing the SLAPP serves the plaintiff's purpose because the project opponents have to dedicate resources they might have used for further constitutionally protected activity directed against the project to hiring counsel and defending the lawsuit. Thus, as the public policy section of SB 1434 observes, both SLAPPs and the threat of SLAPPs deter citizens from engaging in important constitutionally protected activity.

"[T]he statute will have to be used"

Section 15 of SB 1434 makes it applicable to any motion to dispose of a claim in a judicial proceeding on the grounds that the claim relates to an act of the moving party in furtherance of his or her rights of petition, speech, association, or otherwise to participate in government. The section further provides that "[a]cts in furtherance of the constitutional rights to petition, speech, association, and participation in government are immune from liability, regardless of intent or purpose, except when not genuinely aimed at procuring favorable government action, result, or outcome."

The bill provides that upon the filing of a motion to dispose of such a claim, the court must convene a hearing and make a decision on the motion within 90 days after notice of the motion. Discovery is suspended pending a decision on the motion, except that with leave of court for good cause shown, discovery is permitted on whether the movants' acts are not immunized from liability under the act.

Unless the responding party produces clear and convincing evidence that the moving party's acts are not immunized under the statute, the court is to grant the motion and dismiss the claim. The bill directs the appellate court to expedite any appeal from a trial court's failure to rule on the motion within that period or from a trial court order denying the motion.

The bill goes on to provide a strong disincentive for filing a SLAPP: section 25 requires the court to award the prevailing movant reasonable attorney's fees and costs incurred in connection with the motion. The act does not provide fees to a prevailing respondent.

Craven notes that SLAPPs may also arise in the context of consumer opposition to certain products or other business or government activities. He hails the passage of SB 1434 as a needed antidote to the chilling effect of SLAPPs on constitutionally protected citizen activity. "I have no doubt that the statute will have to be used," Craven predicts, to chill the inclination to file SLAPPs.

SB 1434 was sent to the governor June 29, 2007. Read more about SLAPPs at http://chillingeffects.org/, the Chilling Effects Clearinghouse (a joint project of the Electronic Frontier Foundation and Harvard, Stanford, Berkeley, University of San Francisco, University of Maine, George Washington School of Law, and Santa Clara University School of Law clinics), and http://www.casp.net/, the California Anti-SLAPP Project.

Court upholds support-arrearage payments at 60 percent of income

The third district upheld a ruling requiring an obligor to pay 60 percent of his income to pay off a child-support/maintenance arrearage totaling more that $200,000.

Are there limits on a circuit court's authority to set the amount of a noncustodial parent's periodic payments toward arrearages in child support and maintenance after his current obligation to pay support ends? If so, what are they?

The third district of the Illinois Appellate Court has answered these questions in a recent opinion, Crank v Crank, 2007 WL 2034388 (3d D 2007). Kankakee County judge Adrienne Albrecht, who authors ISBA's state court case digests for ISBA's E-Clips, believes the opinion does a good job of explaining this poorly understood aspect of Illinois family support law.

Court not forbidden from increasing payments

Upon their divorce in 1991, the circuit court of Hancock County ordered Gary Crank to pay child support and maintenance to his former wife, Carita. In 2006, the parties agreed that those obligations were terminated as of July 2005 and that Gary owed a substantial arrearage. The court determined the total amount of his arrearage at $220,209.55, representing $34,663.06 in child support owed to Carita, $7,000 in child support owed to the state of Illinois, $123,098.69 in maintenance owed to Carita, $5,998.69 in medical arrearages, and $49,449.11 in interest.

Immediately before Gary's current obligations terminated, his court-ordered periodic payments stood at $96 per week plus 20 percent of his bonuses. When the court determined the arrear-ages in 2006, it reset his periodic payment amount at $300 per week - 60 percent of his income.

Gary appealed, arguing that the circuit court had no authority to increase his weekly payment from $96 to $300 per week to satisfy his arrearages. He also argued that under the Illinois Wage Assignment Act the court lacked authority to order him to pay more than 15 percent of his weekly earnings, which would have been $94.94. The appellate court rejected both of his contentions and upheld the circuit court's ruling.

In support of his argument that the court could not lawfully order him to pay more than the amount of his support obligation at the time of its termination, Gary cited 750 ILCS 5/505(g-5). That statute provides in relevant part that if there is an unpaid arrearage or delinquency amounting to at least one month's support obligation as of the date current support is terminated, the periodic support payment is to continue in the same amount, in addition to any previously required arrearage payment, to be applied toward satisfying the arrearage.

Noting that the statute continues, "The total periodic amount to be paid toward satisfaction of the arrearage or delinquency may be enforced and collected by any method provided by law for enforcement and collection of child support....," the appellate court observed that neither that statute nor the legislative debates suggested that after an obligor's current support was terminated, the circuit court was restricted to the previous periodic payment amount in setting a new amount to satisfy the arrearage.

Rather, the statute's plain language shows "that its purpose is to act as a default provision for setting periodic payment amounts to satisfy an arrearage posttermination." Id at *4. Nothing in the Illinois Marriage and Dissolution of Marriage Act, therefore, prevented the circuit court from increasing Gary's posttermination payments to satisfy his arrearage.

No 15-percent cap on arrearage payments

The court proceeded to consider Gary's second argument, that Illinois's Wage Assignment Act limited the circuit court to ordering no more than 15 percent of his gross weekly earnings to satisfy his arrearage. The court first pointed out that the Wage Assignment Act's percentage limitation does not apply to child support or maintenance debts.

Rather, said the court, the Income Withholding for Support Act, 750 ILCS 28/1 et seq, applies to the collection of those arrearages. And that statute, the court noted, "place[s] high limitations on what can be withheld to satisfy support obligations in conformity with federal law." Id at *4.

As the court continued, the Income Withholding for Support Act provides in relevant part that "[w]ithholding of income under this Act shall not be in excess of the maximum amounts permitted under the federal Consumer Credit Protection Act." 750 ILCS 28/35(c). The federal statute, in turn, provides as follows:

(2) The maximum part of the aggregate disposable earnings of an individual for any workweek which is subject to garnishment to enforce any order for the support of any person shall not exceed-

(A) where such individual is supporting his spouse or dependent child (other than a spouse or child with respect to whose support such order is used), 50 per centum of such individual's disposable earnings for that week; and

(B) where such individual is not supporting such a spouse or dependent child described in clause (A), 60 per centum of such individual's disposable earnings for that week."

15 USC section1673(b)(2)(A), (B) (2000).

Because Illinois has adopted the limits expressed in federal law, the maximum that may be withheld from a weekly wage for family support purposes, including an arrearage, is not 15 percent but 50 or 60 percent, depending on the circumstances, the court said.

It concluded, therefore, that the circuit court's order increasing Gary's weekly payments from $96 to $300 - 60 percent of Gary's income - to satisfy his arrearage was proper. The court affirmed the circuit court's determination.

Legal aid groups would benefit from cy pres statute

A bill would make it more likely that legal aid and other charitable organizations will end up with leftover class-action settlement proceeds.

As this issue of the Journal goes to press, legislation that will codify the cy pres doctrine in class action suits awaits Governor Blagojevich's signature. The bill, which will benefit legal aid and other organizations promoting access to justice, is SB 486, passed unanimously by both houses of the General Assembly.

Approaching the original intention

"Cy pres" is an Old French legal term meaning "as close as." The term refers to an equitable doctrine originally used in the administration of estates. Where a court determines that all distributions cannot be made in exact accordance with the terms of the instrument in probate, it generally will, whenever possible, seek to effectuate the maker's intent by finding a way to distribute funds in a manner that approaches the original intention.

Courts have found the cy pres doctrine useful in class action suits as well. Chicago lawyer Bob Glaves, Executive Director of the Chicago Bar Foundation who, with fellow Chicago lawyer and ISBA member Karl Leinberger, assisted in drafting SB 486, explains that where some class members entitled to distributions cannot be located, or where the administrative cost of finding some members and making distributions to them would render doing so infeasible, courts have found that the doctrine permits them discretion to direct the leftover funds to be distributed to charitable organizations instead of, for example, directing them to be turned over to the state as unclaimed property or returned to the defendant. If signed into law, Glaves says, SB 486 will give Illinois state courts clear direction for distributing such residual funds.

The bill will add a new section, 2-807, to the Illinois Code of Civil Procedure. The section defines residual funds as unclaimed funds, such as uncashed checks or other unclaimed payments, that remain in a common fund created in a class action after court-approved payments are made for class members' claims, for attorney's fees and costs, and for any agreed reversions to a defendant.

It goes on to provide that any order approving a proposed class action settlement that results in the creation of a common fund for the benefit of the class must establish a process for the administration of the settlement and provide for the distribution of any residual funds to one or more nonprofit organizations whose principal purpose is to promote or provide services eligible for funding under the Illinois Equal Justice Act, 30 ILCS 765/1 et seq. Up to half of the residual funds may, if the court finds good cause, be distributed to other nonprofit charitable organizations.

The bill is a perfect fit for unclaimed or undistributable funds in class action suits, Glaves says. "Every class action is about access to justice because it's a method of grouping people together when, as individuals, they would not have a meaningful way of pursuing their claims." For residual class action funds to be distributed to organizations, including legal aid programs, that enhance access to justice, makes perfect sense given this underlying principle, Glaves believes.

Though courts have used the common law cy pres doctrine to distribute residual funds to some very worthy nonprofit organizations, Glaves says, "Litigants and judges often don't give enough thought to keeping the funds in the justice system." SB 486 will ensure that at least half of any such funds remain in the legal system to facilitate public access to justice and enhance the functioning of the courts, Glaves says.

Money left on the table

Asked how often he expects the bill will come into play, Glaves responds, "We don't know how much, or how often, there are residual funds in class actions. But it's not unusual for some class members to move without leaving a forwarding address, or for some to fail to submit claims or cash their checks."

Given that, he suggests it may be a frequent occurrence to have a relatively small amount of funds remaining unclaimed within a class action suit. And even a relatively small amount of residual funds that, if distributed, might have amounted to pennies in the pockets of the class members, can make a big difference in the budget of a legal services provider accustomed to operating on a shoestring.

Glaves provides an example of a hypothetical class action suit with class membership numbering 100,000, in which each class member is to receive $40 as part of the settlement. Two thousand class members in this hypothetical case cannot be located, do not submit claims, or do not cash their checks, yielding residual funds in the amount of eighty thousand dollars.

It's not likely to be economically or administratively feasible to go to the bother of trying to locate those 2,000 members or to distribute additional checks to the remaining 98,000 class members. That would amount to an extra 20 cents or so apiece after postage and administrative expenses, Glaves suggests. Turning those funds over to the state as unclaimed property merely shifts that economic and administrative burden to the government, and courts may not be sympathetic to conferring a benefit upon the defendants by turning the funds back over to them, since doing so isn't exactly close to the intent of the settlement.

If, instead, the court approves distributing that $80,000 in residual funds to a legal aid organization, those monies may be of substantial assistance in providing critical legal information and other resources for the public, setting up self-help legal assistance programs, or funding a pro bono program for the needy, to give just a few examples. And such a distribution does seem to be more nearly in keeping with, or cy pres, the original intent of the class award, since it ends up benefiting the public.

Glaves emphasizes that where class members have not been fully compensated in a settlement, their counsel will be likely to request that the court release any residual funds to those members whose whereabouts are known. If all have been paid in full, however, releasing those funds to legal services and other nonprofit organizations as defined in the bill is "a great way to raise the consciousness of judges, counsel, and litigants of the need to advance the cause of access to justice for the many thousands of vulnerable Illinoisans unable to afford necessary legal assistance."

The bill was sent to the governor on June 29, 2007. Its effective date is July 1, 2008.

New law allows Human Rights Act plaintiffs to file in circuit court

Complainants under the Illinois Human Rights Act can now file in circuit court instead of with state agencies. This brings Illinois into line with federal practice and that of 38 states.

Anew law gives complainants under the Illinois Human Rights Act the option of filing suit in circuit court instead of continuing to proceed before the Illinois Department of Human Rights and the Illinois Human Rights Commission. As a result, Chicago plaintiffs' lawyer Aaron Maduff says, Illinois law recognizes discrimination and sexual harassment claims as "at least as important as auto accidents, credit card collections, divorces, and small claims."

Time-consuming and cumbersome

The Illinois Human Rights Act is the state counterpart to the federal civil rights laws, including Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act. It prohibits discrimination on a number of bases, including race, sex, national origin, religion, marital status, and sexual preference, in the contexts of employment, public accommodations, real estate transactions, financial credit, and higher education.

To invoke the remedies of the statute, an aggrieved person must first file a charge of unlawful discrimination with the Illinois Department of Human Rights. The Department's task is to investigate the charge's allegations and determine whether there is substantial evidence for them.

With certain procedural nuances, if the Department finds substantial evidence, it will attempt to conciliate the parties and, if conciliation proves unsuccessful, will file a complaint based on the charge with the Illinois Human Rights Commission. If it finds that no substantial evidence exists, it will dismiss the charge.

A charging party may request the review of a charge's dismissal by the Department's general counsel; complaints filed with the Illinois Human Rights Commission proceed in a fashion similar to complaints in Illinois's circuit courts. If the Department fails to act on a charge within 365 days, the charging party may file his or her own complaint with the Commission.

Administrative proceedings under the Human Rights Act have long been the subject of various criticisms. Complainants and respondents alike have charged that the process is overly time-consuming and that some of the administrative procedures are cumbersome and unproductive.

Additionally, a finding on the part of either agency, even after lengthy and time-consuming proceedings, will not act as res judicata so as to prevent proceedings on the same allegations in federal court under the analogous federal civil rights statute (assuming that one exists).

The new law, PA 95-0243, addresses those criticisms by permitting parties charging discrimination in most contexts, including employment and public accommodations, to file complaints based on their charges with the circuit courts instead of continuing to proceed before the two agencies. It also returns the review of charge dismissals by the Department to the Illinois Human Rights Commission, which was responsible for deciding those appeals before a statutory change in the mid-1990s.

Bringing Illinois in line with 38 states

The law's proponents greet it as beneficial for complainants and respondents alike, noting that a majority of other states give complaining parties the right to have their cases heard in court, as do the federal civil rights statutes. "Complex cases can drag on at the Illinois Human Rights Commission," says Chicago plaintiffs' lawyer Aaron Maduff, who's the current vice-president and legislative liaison of the Illinois chapter of the National Employment Lawyers' Association. "They can clog the system by using up too many agency resources," he says, noting that the state agencies have been underfunded and understaffed for years.

Maduff and fellow Chicago plaintiffs' lawyer Randall Schmidt believe that both state administrative agencies perform and should continue to perform important functions in the resolution of discrimination claims. Says Schmidt, "Discrimination is different from other claims. We need government to look at employers [and other entities subject to the Human Rights Act] to make sure they're complying with the law."

Analogizing the state Department and Commission to the federal Equal Employment Opportunity Commission, Schmidt says "Enforcement is an important function. Relying on individual lawsuits just won't work" to stop discrimination.

But the Department and the Commission perform additional important functions that the EEOC does not, Schmidt continues. Noting the absence of filing fees and the general prohibition of depositions in agency proceedings, he says, "They provide a low cost forum to try a discrimination case with or without an attorney." He also says both agencies have been very successful at resolving cases.

Emphasizing the desirability of giving aggrieved parties procedural options, Schmidt and Maduff agree that the Human Rights Commission will continue to be the preferred forum for the trial of many complaints, so that the law will not result in a sudden avalanche of lawsuits in the circuit courts. Maduff suggests that straightforward cases with direct evidence of unlawful discrimination are prime examples of the sort of case that an administrative agency is well fitted to resolve on a far speedier basis than many circuit courts.

Schmidt, for his part, suggests that complainants of sexual harassment may prefer to bring their cases to the Commission for resolution because of the general prohibition of depositions and the greater privacy that, as a practical matter, exists at the agency. (Though hearings before the Commission are public, Schmidt notes that it's far less likely to find members of the public and press attending agency hearings than hearings at courthouses.).

The two also expect complainants and their counsel to consider, among other factors, the relative cost and convenience of litigating in a local courthouse with the right to a jury trial versus the need to travel to Springfield or Chicago, where the Commission's offices are located, or participate in Commission proceedings by telephone or snail mail.

Maduff and Schmidt say giving complainants the option of proceeding in circuit court will also benefit respondents. "Anything that speeds up the process is good for both sides," says Schmidt. Additionally, he notes, a decision on the part of a circuit court will eliminate duplicative proceedings at the federal level, for it will act as res judicata on the claim.

Maduff comments that respondents to complaints may prefer "to defend locally, before a locally elected judge, with a local attorney with whom they feel comfortable." Proceedings at the local courthouse may be far less time-consuming for a lawyer with many cases than a special trip to the state agency, he continues.

He also expects the law to open up new practice options for lawyers across the state. "Attorneys won't feel pressure to refer out cases because they're not close to Chicago or Springfield."

In sum, the two say, PA 95-0243 will give the courts the cases for which they're equipped and can resolve faster than the agency, and will give the agency the cases for which it's properly equipped and can resolve faster than the courts. Its effective date is January 1, 2008.

New law on attorney modification clauses in real-estate contracts?

Has the second district made it easier for a party to a real estate contract to make a counteroffer disguised as a mere "modification"?

The second district of the Illinois Appellate Court recently issued two opinions, authored by the same justice, addressing the effect of actions taken under the same or similar attorney approval clauses in contracts for the sale of residential real estate.

A prominent real estate practitioner fears that one opinion in particular might create confusion about what constitutes a counteroffer. That's an important issue, because a counteroffer can open the door for the other party to reject the deal.

The cases are Patel v McGrath, 2007 WL 1933968 (2d D 2007), and Jennings v Baron, 2007 WL 2190080 (2d D 2007).

The Patel case

The attorney approval clause at issue in Patel read as follows:

Attorney Review: The respective attorneys for the Parties may approve, disapprove, or make modifications to this Contract, other than stated Purchase Price, within five (5) business days after the Date of Acceptance. Disapproval or modification of this Contract shall not be based solely upon stated Purchase Price. Any notice of disapproval or proposed modifications(s) by any Party shall be in writing. If within ten (10) business days after the date of Acceptance written agreement on proposed modifications(s) cannot be reached by the Parties, this Contract shall be null and void and earnest money refunded to Buyer upon written direction of the Parties to Escrowee. If written notice is not served within the time specified, this provision shall be deemed waived by the Parties and this Contract shall remain in full force and effect.

The clause in Jennings was identical, save the sentence prohibiting purchase price being the sole reason for disapproval or modification of the contract, which was not at issue.

The Patels offered to buy real estate from McGrath in Burr Ridge, and McGrath accepted the offer. Within five business days after McGrath's acceptance, the Patels' attorney sent a letter to McGrath's attorney requesting certain modifications to the contract.

The Patels' attorney included the following language in the letter: "Please be advised that the above modifications should not be construed as a revocation of the current Contract, nor should they be construed as a counter-offer."

On the same day, McGrath's attorney sent a letter to the Patels' attorney. That letter both rejected the Patels' proposed modifications and, with no explanation, disapproved the contract. McGrath then, according to the opinion, relisted the property for half a million dollars more than the original listing price.

The next day, the Patels' attorney sent a letter to McGrath's attorney accepting the rejection of the Patels' proposed modifications and demanding specific performance of the contract. The Patels then filed a complaint seeking specific performance.

McGrath moved to dismiss, arguing that the letter from the Patels' attorney rejected the contract and that McGrath's attorney properly disapproved the contract within the review period. The trial court granted the motion.

The appellate court reversed, finding, first, that a contract was formed upon McGrath's acceptance of the Patels' offer. The court then stated that normally invocation of the attorney-approval clause triggers a rejection of the contract. But, citing Hubble v O'Connor, 291 Ill App 3d 974, 684 NE2d 816 (1st D 1997) and the Restatement (Second) of Contracts, the court found that the clause in the Patels' first letter, stating that it was to be considered neither a revocation of the contract nor a counteroffer, rendered the letter a mere "invitation to negotiate a variation of the terms of the already-existing contract." Patel at *5.

That letter, then, was just what it said it was: neither a rejection of the contract nor a counteroffer. The contract for McGrath's sale to the Patels, then, remained in effect.

McGrath's attorney, however, did disapprove the contract within the period specified in the contract. The court observed that under the contract, McGrath was not required to provide any reason for the disapproval to the Patels.

But, noting the property's immediate relisting at a substantially higher price, the court found a question of material fact as to what role, if any, the purchase price played in the disapproval. The court therefore reversed the circuit court's order of dismissal and remanded the case.

The Jennings case

The Patel case inspired spirited discussions among ISBA members, both on and off ISBA's electronic transactional discussion group. Chicago lawyer Mike Maslanka and Lisle lawyer Steven Bashaw believe that the court has modified the law on attorney approval clauses.

Bashaw notes that his consistent position - up to now - has been, "You can't make it not a counteroffer by saying it's not." He fears that the court's ruling will create uncertainty.

Maslanka, though, is sanguine, suggesting that the holding "probably won't have a huge impact on most deals, as only the high-priced properties are likely to end up in litigation." He further suggests "Practitioners may now need to handle transactions differently depending on which appellate district they're in."

Bashaw prefers the court's reasoning in Jennings, which, in his view, provides counsel with more certainty. There, Jennings' and the Barons' attorneys entered into negotiations for modifications to the contract for the Barons' purchase of real estate from Jennings. Ultimately, the Barons' attorney approved the contract provided that Jennings agreed to certain modifications, including that the property was not appraised for less than the purchase price.

Jennings did not respond to that letter within 10 business days. The Barons' attorney subsequently sent a letter declaring the contract null and void. Jennings subsequently did respond and addressed, but did not agree to, the Barons' requests for modifications. The Barons did not purchase the property.

Jennings sued, alleging breach of contract. The Barons filed an affirmative defense that the contract was null and void under the attorney approval clause because the parties had not reached an agreement on proposed modifications to the contract. After a bench trial, the trial court found that the Barons had not validly terminated the contract and awarded Jennings damages and costs. The Barons appealed.

Looking to the language of the contract, the court noted that it provided that it would be null and void if written agreement on proposed modifications could not be reached within 10 business days. The parties did not dispute that they did not reach a written agreement within that period. End of story, said the court: the lack of a written agreement on the proposed modifications within the 10 days rendered the contract null and void.

Wondering whether Jennings may require sequels, Bashaw finds it interesting that, as the court pointed out in a footnote, the parties argued as if the agreement were required within 10 business days of the date of the proposed modifications - not of the date of acceptance (and contract formation). He expresses concern that the case "ignores the reality that coming to an agreement on anything [in a residential real estate transaction] within 10 days is virtually impossible."

Certainly, as practitioner comments on ISBA's transactional discussion group show, the moral of both cases is caution when acting for either buyer or seller under the attorney-approval clause.