September, 2011 Issue of Legal Trends

In this issue of Legal Trends, we analyze the three jury verdicts that our office obtained this spring and early summer.

Commercial Litigation

Paper Recovery, Inc. v. The Segerdahl Corporation, et. al.

On July 15, 2011, a jury in the Circuit Court of Cook County returned a $3.25 million verdict for Gene Hollander’s client, Paper Recovery, Inc. and against The Segerdahl Corporation and its wholly owned subsidiary, Segerdahl Graphics, Inc.

These were the facts of the Paper Recovery case.
Paper Recovery is a wastepaper recycler and had two written contracts with each of the Segerdahl entities to haul away their wastepaper. The Segerdahl parties are commercial printers in Wheeling, Illinois. On October 13, 2006, the parties entered into the written agreements. Paper Recovery agreed to purchase all of the wastepaper generated by both companies and pay the entities depending upon what grade of wastepaper was delivered at the time.

Shortly after the contracts were entered into, Paper Recovery began adjusting or downgrading various bales of wastepaper that were graded incorrectly by the Segerdahl Defendants. Paper Recovery would pay the Segerdahl entities the lesser price. By the end of 2006, Paper Recovery was adjusting the bales on a daily basis. The evidence established at trial was that Gary Gardner, the Vice-President of The Segerdahl Corporation, was frustrated that the company was not making as much money that it did with its prior wastepaper vendor. He instructed the employees to intentionally misgrade the paper, by grading it as the most expensive blend.

The evidence introduced at the trial also established that Paper Recovery adjusted the prices on 246 occasions during the performance of the contract. Confronted with this documentation at trial, Gardner admitted that he lied on a daily basis “to get Paper Recovery’s attention.” The Segerdahl Defendants contended that the contracts gave them the exclusive right to grade the wastepaper, though there was no such language like that in the contracts. Further, Paper Recovery had its President, Steven Levy, and two independent industry experts testify that a wastepaper recycler always retains the right to adjust or downgrade improperly graded wastepaper.

During the performance of the contracts, Mr. Levy offered to assist the Segerdahl entities in the grading process, but the companies never took him up on his request. Instead on April 5, 2007, the Segerdahl entities terminated the contracts after only six months, leaving three and one half years left on the agreements. Segerdahl hired a competitor of Paper Recovery to haul away their wastepaper, on a much more profitable basis for the printing companies. Later in 2007, Paper Recovery sold off most of its business and only operated on a brokerage basis. The Segerdahl Defendants not only disputed that they were liable, but they also claimed that Paper Recovery was not damaged to the extent they it claimed it was. To prove its damages, Paper Recovery retained an economist, Dr. Gary Skoog, who rendered opinions as to what Paper Recovery’s lost profits were under the written contracts.

Prior to trial, Paper Recovery attempted to settle the case, but The Segerdahl Defendants made no settlement offer. Since the verdict, Paper Recovery has filed two post-trial motions, one for prejudgment interest and one for attorneys’ fees (which the contracts provided for). Assuming that Paper Recovery gets full relief, the total judgment will climb to $4,552,000. Gene Hollander tried the case with Mitchell Ruchim and Rocky Hudson of Ruchim and Hudson, LLC.

 

Nick Chareas – Sales Commissions case.

From October, 1996 to March 20, 2009, Nick Chareas was employed as a sales representative for a company, selling medical software. The company, through its Vice-President of Sales, Vernon Mathias, agreed to compensate Chareas, in part, through a multi-tiered commission plan. The company, for a number of years, did not provide Chareas or the other salespeople commission statements. In the late 1990’s, the company was unable to pay its salespeople all of their commissions.

Chareas claimed that he was owed substantial commissions. The company disputed that Chareas was entitled to the percentages he claimed and that he was also not entitled to commissions for certain deals and components of others.

During the course of his employment, Chareas made repeated demands upon the company’s Chief Executive Officer for a reconciliation of his commissions. The owner continually put Chareas off, and conceded at trial that it was not a priority for him.

On March 20, 2009, the company terminated Chareas’s employment and provided him with a reconciliation at that time, purportedly showing that the company overpaid him and that Chareas owed the company $90,000. Chareas filed suit in the Circuit Court of Cook County for breach of contract and fraud. The company filed a Counterclaim against Chareas, but voluntarily dismissed their claim immediately prior to trial for strategic reasons.

Prior to trial, the court dismissed a portion of Chareas’s claims, ruling that they were barred by the statute of limitations. The Defendants dropped their settlement offer from $40,000 to $10,000. Chareas’s settlement demand was $75,000. During the course of the trial, the CEO was repeatedly impeached by prior sworn testimony from his deposition, along with his deposition testimony from a companion case brought by another former officer. On May 19, 2011, a jury returned a verdict in favor of Chareas and against the Defendants for $454,000. Gene Hollander tried the case along with associate Gina Shawver.

Interviews with the jurors post-trial revealed that they were extremely bothered that the CEO put Chareas off for 13 years concerning his requests.

Employment Law

Belson v. Olson Rug Company.

Bruce Belson was a salesman employed by Olson Rug Company. By all indications, during the seven years that he was employed by the company, he performed well. On March 8, 2007, Belson injured himself while at work. He informed his supervisor on March 10, and was consequently written up for insubordination. On March 12, 2007, Belson sought worker’s compensation benefits. Later that day, Olson Rug terminated Belson’s employment.

Belson filed suit against the company in the Circuit Court of Cook County alleging retaliatory discharge. The company disputed the claim, and contended that the real reason that it fired Belson was that he was insubordinate and allegedly threatened a supervisor.

Prior to trial, Olson Rug offered $2,000 to settle the case. Paul Ryan, one of Belson’s attorneys, asked the jury to award his client the sum of $328,000. In a very unusual development, the jury awarded Belson $350,000, $22,000 more than Ryan sought.

Paul Ryan commented that, “We made every reasonable attempt to resolve this case prior to trial. My client is very satisfied that the jury vindicated his position.”

Office News

Gene Hollander was a guest speaker on WGN Radio’s program, “Legally Speaking,” which aired on September 4. The show featured discussion on current developments in employment law.