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November 2016 Archives

THE ILLINOIS OPEN MEETINGS ACT REQUIRES PUBLIC BODIES TO MAKE A PUBLIC RECITAL OF THE MATTER UNDER CONSIDERATION BEFORE VOTING

BUT HOW WILL THE ILLINOIS SUPREME COURT RULE?
Two cases from the Fourth District Appellate Court interpreting the "Public Recital" requirement of the Illinois Open Meetings Act have set the stage for the Illinois Supreme Court to weigh in on this issue.
Section 2 (e) of the Illinois Open Meetings Act (5 ILCS 120/2 (West 2014)) sets forth what is known as the "Public-Recital" requirement. It states as follows:"Final action. No final action may be taken at a closed meeting. Final action shall be preceded by a public recital of the nature of the matter being considered and other information that will inform the public of the business being conducted."
In Board of Education of Springfield School District No. 186 v. Attorney General of Illinois, 2015 IL App (4th) 140941, the appellate court determined that the Board of Education of Springfield complied with the public-recital requirement of section 2(e) of the Act before it approved an agreement terminating the employment of its superintendent, by posting an agenda on its website that included an item entitled, " 'Approval of a Resolution regarding the *** Agreement *** Between Superintendent *** Milton *** and the Board.' " (Id. ¶ 7) with a hyperlink directly underneath that item linked to a digital copy of the agreement. (Id. ¶ 39).
In addition, at the meeting, the Board's president introduced the item by stating as follows: " 'I have item 9.1, approval of a resolution regarding the *** Agreement. The Board president recommends that the Board ***vote to approve the *** Agreement between *** Milton *** and the Board." Id. ¶ 7.
But in a case just decided this month Allen v. Clark County Park District Board of Commissioners2016 IL App (4th) 150963 the Fourth District Appellate Court ruled that the Clark County Park District Board of Commissioners violated the Act's public recital requirement when they voted to approve unidentified leases and covenants but only announced that approval of lease rates and covenants were the matters up for consideration before moving to approve both.
However, the appellate court stopped short of setting forth any specific requirements for public recitals in general, leaving that task for the Illinois Supreme Court because it has granted leave to appeal to hear the Springfield case.Watchdog groups and public bodies will want to follow the progress of the Springfield case carefully because the Illinois Supreme Court may be in a position to clarify what public bodies must do to meet this requirement.
Peter M. Storm
Cooper, Storm & Piscopo

Illinois Appellate Court Rules That Shareholders in a Dispute Cannot Be Forced to Pay for A Provisional Director

Illinois Appellate Court Rules That Shareholders in a Dispute Cannot Be Forced to Pay for A Provisional Director
In Sinkus v. BTE Consulting 2017 IL App (1st) 152135 the First District Appellate Court reversed a trial court's ruling holding a shareholder in contempt after he refused to obey the Court's order directing him to contribute to a capital call ordered by the Court to pay for a provisional direction which the Court appointed pursuant to Section 12.56(g) of the Business Corporation Act of 1983 ("Act") (805 ILCS 5/12.56(g) (West 2014)). The order grew out a lawsuit between two shareholders each owning fifty percent (50%) of the shares of the corporation. The Plaintiff resigned as a director and sued the other shareholder for breach of fiduciary duties and other claims alleging among other things that the other shareholder had diverted corporate business to another company he had formed. Plaintiff moved to disqualify the Defendant shareholder's attorney from representing both the corporation and the individual shareholder but the trial court denied that motion and appointed a provisional director instead. Because the corporation allegedly did not have sufficient funds to pay the provisional director, the trial court ordered both shareholders to contribute first $25,000 each to pay the provisional director and later another $30,000 each, but the Plaintiff refused to comply with the court's orders. The Plaintiff allowed the court to hold him in contempt and impose a fine and then appealed the order.
The appellate court held that the trial court lacked the authority to have ordered the Plaintiff to contribute to the payment of the provisional director's fees. Noting that Section 6.40 of the Business Corporation Act provides that shareholders are not responsible for financial obligations of the corporation other than the payment of the full consideration for their equity shares. 805 ILCS 5/6.40. The Appellate Court then further held that plain language of Section 12.56(g) of the Act requires that the compensation of a provisional director appointed under the Act be paid by the corporation, not its shareholders.
The Court mentioned in passing that shareholders may agree in a written shareholder's agreement to be subject to capital calls. The Court cited Salce v. Saracco,409 Ill. App. 3d 977 (2011) in which the court considered what is necessary to plead a breach of contract claim for the breach of a capital call provision in a shareholder's agreement.
In the wake of the ruling in Sinkus, a controlling shareholder's request to appoint a provisional director in a shareholder dispute will almost certainly result in the corporation and not the complaining shareholder being held responsible for the payment of the provisional director's fees. And from a business planning perspective, those considering investing in a close corporation should be wary of shareholder agreements that authorize capital calls in the event of a dispute or litigation between shareholders.
Peter M. Storm Posted 20th March 2017 by Peter Storm

WARNING: THE INDEMNITY CLAUSE IN YOUR ILLINOIS SNOW REMOVAL CONTRACT FOR 2016-2017 MIGHT BE VOID

Illinois has just enacted "The Snow Removal Service Liability Limitation Act".
This new law declares that any indemnity, hold harmless, or liability shifting provisions in snow removal contracts entered into after the effective date of the new law, August 25, 2016, are void and against public policy in Illinois. Basically, it is no longer possible for snow removal customers (Shopping centers, Home Owner's Associations, Condominium Associations, other property owners, etc.) to shift to the snow removal contractor the liability for snow and ice related accidents and injuries arising out of the negligence of the property owner or their customers or members. Similarly, snow removal contractors can no longer contractually require their customers to assume the liability for and defend claims for accidents and injuries that are the fault of the snow removal contractor.
This change in the law is the result of a continuing effort on the part of the Accredited Snow Contractors Association to have all snow-industry states adopt their model legislation.
Proponents of the new legislation say that it will lower insurance rates, and increase the value of professional snow and ice management services, because property owners will no longer be able to pass their liability on to the contractor. They also claim that snow removal customers will not have contracts that reduce services essential to create safe conditions.
Snow removal contractors and property owners/managers throughout Illinois should seek legal counsel to be sure that their snow removal contracts for the coming winter season comply with this law.
Peter M. StormCooper, Storm & Piscopo

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