Small business owners are constantly evaluating new ways in which to control costs, reduce overhead, and increase profits.  Unfortunately, disputes are an inevitable

consequence of operating a business and sometimes this results in costly litigation.  However, given the fact that roughly 95% of all lawsuits eventually settle, it is

important to consider your cost-saving alternatives before rushing to the courthouse.

Alternative Dispute Resolution generally refers to either Arbitration or Mediation.  Arbitration is generally the more formal of the two and is usually associated with a

binding ruling.  On the other hand, Mediation is usually non-binding and much less formal, often held in a conference room setting.  This discussion will focus on the

process of Mediation.

Mediation can either be ordered by a court or initiated by individuals - even if a lawsuit is not pending.  The Mediator is selected from a pool of candidates by mutual

agreement of the parties and is usually a retired judge with at least 15 years of experience hearing cases similar to yours.  The process usually begins with the

parties providing a joint submission to the Mediator that sets forth the undisputed facts of the case.  Most Mediators charge by the hour and the parties usually split

the cost equally.  

After evaluating the joint submission, the Mediator usually will hold a scheduling conference call.  This will either take place between the attorneys,  or the parties if

they are not represented by counsel (generally not a good idea).  During the conference call, the Mediator will usually not discuss the merits of the case beyond what

is needed to estimate the length of the mediation.

Once the mediation is scheduled, the parties will appear and usually meet separately with the Mediator after which a joint session will be held.  The rules of evidence

are greatly relaxed in a mediation, and depending on the complexity of the dispute, there may or may not be testimony of outside witnesses. 

Upon conclusion of the mediation, the Mediator will usually submit an opinion.  This opinion can serve as a glimpse to what the parties can expect at trial. 

Sometimes this is enough to result in settlement.  However, other times if settlement is not possible, it can serve as an informal pre-trial of the disputed issues.   

If you are engaged in a business dispute, you need to consider all of your options prior to filing a lawsuit.  Or, if you have been sued, it is usually a good idea to

consider mediation early in the process to avoid the costs of litigation. 

At Roth Law Group, LLC, we have experience mediating business disputes and are available to discuss your legal options at 312-419-9599.  

Any small business owner can tell you that collecting overdue receivables is a major hassle.  Sometimes, the amount at issue doesn't justify hiring an attorney.  So,

what do you do?  Write off the uncollectable account or proceed in court on your own?  What if your small business is sued in Small Claims Court, can you represent

yourself?  The answer depends on the amount in controversy and the type of business structure under which you operate.    

Under Illinois Supreme Court Rule 281, Small claims matters are limited to claims of $10,000 or less, exclusive of interest and costs.  Notably, a corporation cannot

appear as a claimant unless represented by counsel.  However, a corporation can defend itself, provided the amount at issue is less than $10,000, and it does not

wish to assert a counterclaim. 

In summary, a corporation will need to retain counsel to initiate any collection action in the Circuit Court, regardless of the amount at issue.  However, if a small

business is sued in Small Claims Court, the owner can usually represent the company (even if it is a corporation) provided that it will not file a counterclaim and the

amount in controversy remains at $10,000 or less.

Contact us at 312-419-9599 to discuss your collections issues. 

Chicago - Roth Law Group Managing Partner Karl W. Roth has been named to the Board of Directors of the Wayne Wright American Legion Post 1052.  Post 1052 is

located in Chicago, Illinois and its membership supports Veterans and local charities throughout the Greater Chicagoland area. 

Roth, a former Marine Major and KC130 Pilot, has been a member of Post 1052 since returning from service in Operation Iraqi Freedom. 

Roth Law Group is a proud supporter of The Wounded Warrior Project.     

Suppose you obtain a judgment for money damages, either following trial or by default, what's next?  Most likely, the judgment debtor isn't going to hand you a check

on the way out of the courthouse.  And should the debtor claim he/she is unable to pay the judgment, you would be well served to verify this information.  Enter the

Citation to Discover Assets.

Creditors must obtain leave of court to issue a Citation to Discover Assets and the judgment debtor needs to be advised of his/her rights.  The Citation is held under

oath and usually in the presence of a court reporter.  During the Citation, the judgment debtor will be required to produce copies of documents evidencing their

financial condition.  These usually include tax returns, bank statements and any other information regarding assets owned by the debtor.  Once identified, the creditor

can move to lien the debtor's property and eventually seek a turnover order from the court, thus effectively taking control of the given assets. 

Harsh penalties are possible for judgment debtors who fail to to comply with court orders setting Citations, so it is a post-judgment tool with teeth.

Contact us today for a free consultation at 312-419-9599 to discuss your collection issues.   

April 6, 2009
BY TIM NOVAK Sun-Times Columnist

A court battle involving a City of Chicago contractor that has been paid $140 million over the last decade to build police stations, schools and other public facilities is

raising questions about how the city ensures that the businesses it hires keep their promises to subcontract work to companies owned by women and minorities.

By law, the city requires contractors to do so. It's a way to make sure women and minorities get their share of city business.

But it didn't work that way on the construction of a $10 million fire station in Rogers Park, a lawsuit claims -- an allegation that a city official says is being looked into.A city contractor -- Castle Construction Corp. of Markham -- pulled a bait-and-switch on the construction of the firehouse, according to the lawsuit and other records.

Castle promised city officials it would subcontract all of the masonry work on the job to a minority-owned company, for $1.5 million.

Instead, records show Castle hired a white-owned masonry company -- for $550,000 less.

Then, after most of the work was finished, Castle fired the white-owned subcontractor, LCS Construction of Downers Grove.

LCS president Kenneth Littwin Sr. is now suing Castle, saying the company has refused to pay more than $775,000 it owes for labor and materials.

Beside raising questions about city monitoring of contractors, the suit could also lead Mayor Daley's Public Building Commission to seek monetary damages from

Castle for failing to live up to its commitment to give minority-owned companies 23 percent of the work on the Rogers Park fire station.

"We're troubled by the circumstances that appear before us right now,'' said Kevin Smith, spokesman for the building commission. "There are sufficient irregularities

[that] we intend to look closely at the measures we have in place to make sure that the expectations we have of the general contractor and the use of minority

subcontractors are met.''

Castle faces similar allegations involving work for the CTA, which fired the company last October, according to a CTA spokeswoman. Castle owes money to

subcontractors it used to build two CTA equipment-washing facilities, including $216,000 to Littwin's company, according to its lawsuit filed by the Roth Law Group.

John Eannace, an attorney representing Castle president Robert Blum of New Lenox, declined to comment.

Castle and Blum could also be facing other legal problems. A federal grand jury recently subpoenaed three Illinois state agencies, seeking records on any contracts

Castle and Blum got under ousted former Gov. Rod Blagojevich. Blum is a friend and business associate of former top Blagojevich adviser and campaign fund-raiser

Christopher Kelly.

The firehouse deal dates to March 13, 2007. That's when the Chicago Public Building Commission awarded Castle two contracts -- $10 million to build the fire station

and another $21 million to build a new 7th District police station in Englewood.

Castle committed to hiring George Anthony Garth Masonry, a minority-owned company, to work on both projects. Castle said it would pay Garth $1.5 million for the

fire station and $3.8 million for the police station.

But Garth Masonry, faced with "financial difficulties,'' couldn't handle both projects, according to court records in the Littwin case. So Castle hired Littwin's company to

do masonry work on the fire station that began in September 2007, records show.

Castle should have first gotten permission from the Public Building Commission before replacing Garth's company, according to a report last August by Trinal Inc., a

minority-owned company the commission uses to monitor minority- and woman-owned business enterprise participation on city jobs.

"Castle never notified the PBC of any difficulties meeting its M/WBE commitments,'' the Trinal report says.

"There was no documentation provided to explain or support Castle's contention that it was impossible for G.A.G. Masonry to perform on the project. Additionally,

there was no documentation provided to explain or support the 'numerous deficiencies' that led to terminating LCS Construction and the supposed re-engagement of

G.A.G. Masonry as a replacement'' on the fire station project.

Castle maintains that Garth's company was always involved in the firehouse project, providing "quality control services and other construction management services''

while Littwin's workers laid the bricks, according to a letter Blum's son Anthony sent Littwin after Littwin's company was fired in November 2007 -- after nearly all of the

masonry work was done.

Garth's attorney Jeff Corso said Garth was surprised to learn that Castle had hired someone else to do the masonry work on the fire station. "Castle had LCS do

some of the work, and we complained about that,'' Corso said. "We went in and said, 'We're supposed to be on the job.'"

Littwin sees himself as having been "caught in the middle."

"And I'm still trying to collect my money,'' he said.

Most small business owners understand the importance of shielding themselves against personal liability arising from their corporate activities.  At The Roth Law

Group, we counsel our corporate clients to observe recognized corporate formalities to avoid "piercing of the corporate veil" which could leave business owners

personally liable for the liabilities of their businesses.

For example, many new business owners are not aware that comingling of personal and business funds can have dire consequences.  In order to avoid this, we

suggest that our clients establish and fund business bank accounts before they conduct their first corporate transaction.  Case law has established that business

owners who use their business accounts for personal expenses might be liable for comingling.   

Next, it is important that accounting records be well maintained and kept up to date and that the company be adequately capitalized so that it is able to cover its

liabilities.  For instance, if a company is ordering on credit without the means of paying its suppliers, the owners might be later found personally liable if the business

later defaults.  Also, this helps avoid comingling of accounts between business and personal.  

Insurance is also important and we recommend that our clients obtain a Commercial General Liability Policy as well as Director and Officer insurance prior to

beginning operations.  Again, if your business is not adequately insured, the possibility of personal liability is very real. 

Finally, good record keeping and staying up to date with the Secretary of State is an ongoing obligation.  If a business fails to file its annual report, they may lose their

"good standing" status, which essentially wipes away thier corporate shield. 

These examples are not intended to provide an exhaustive list of corporate formalities and business owners are encouraged to consult with a corporate attorney to

make sure they are in compliance with all formalities recognized by law.    

The fundamental question facing creditors is whether or not the potential costs of a collection action are worth the amount they are owed by the debtor, and if they

prevail in thier collection action, will they be able to collect?  The reality is that the costs of protracted litigation can sometimes outweigh the amount of the debt. 

The Illinois State Bar Association recently submitted proposed legistlation to the Illinois General Assembly that it hopes will encourage settlement by modifying the

Illinois Interest Act and how it treats prejudgment interest.  Presently, the Illinois Interest Act provides interest at a rate of 5% annually on most written agreements

prior to the entry of judgment.  Following the entry of judgment, interest accrues at the rate of 9% annually. 

The ISBA proposal is designed to encourage quicker settlements by allowing debtors to avoid incuring prejudgment interest, or alternatively denying recovery by

creditors.  First, the proposed legislation would modify the manner in which prejudgment interest accrues by tying it to the average Treasury Bill rate for the year

proceeding commencement of the collection action.  Next, within 120 days of answering a complaint, the debtor may make a settlement offer.  If the creditor does not

accept the offer withing 30 days and is awarded an amount less than the settlement offer at trial, it will be barred from collecting prejudgment interest. 

We advise all of our clients to implement interest and attorney's fees provisions in their Terms and Conditions.  The reasons for this are two-fold: (1) attorney's fees are

only recoverable if provided for by contract or statute; and (2) clearly set forth interest provisions allow them to maximize rates prior to entry of judgment.  Notably,

these recomendations cannot insure the recovery of either attorney's fees or interest, becuase in many instances, the court has discretion in these areas.      

The proposed legislation appears below.  

§ 2-1303.1 (a) If a party seeks money damages in an action at law or in arbitration, prejudgment interest must be awarded from the date the party from whom money

damages are sought is given written notice of the claim for money damages or the action or arbitration is filed, whichever is earlier, until the award or judgment is

entered. Actions at law include counter-claims, third-party actions, and claims for contribution. The written notice of the claim for money damages must reference this

Section and be tendered by (1) personal service by the sheriff or private process server; (2) certified mail, return receipt requested; or (3) any method in which delivery

is documented and tracked by accepted business practices. The written notice may be tendered by party seeking money damages or his or her attorney and may be

tendered to the party from whom money damages are sought, that party’s attorney, or that party’s liability insurer.

(b) The prejudgment interest rate will be calculated by the Comptroller using a rate equal to the average one-year constant maturity United States Treasury bill rate of

the preceding calendar year before the cause of action is filed plus two percentage points. The Comptroller must calculate this rate and publish it on his or her official

website by January 10th of every year.

(c) Any defendant may avoid paying prejudgment interest by making a written offer of settlement to plaintiff at any time after that defendant has entered an answer to a

complaint, petition, or demand for arbitration but no later than 120 days after entering an answer. If the plaintiff does not accept that offer of settlement in writing within

30 days of his or her receipt of it, and the plaintiff’s award or judgment against that defendant is less than or equal to that offer of settlement, no prejudgment interest

may be awarded against that defendant. The parties may agree in writing to extend the 120-day period for defendant to make a written offer of settlement.

(d) This Section does not apply to any of these parties or situations:

(1) A unit of local government, as defined Section 1 of Article VII of the Constitution, a school district, a community college district, or any other governmental entity.

(2) Actions in small claims.

(3) Claims for punitive damages.

(4) If the cause of action and its legal dispute are subject to a written contract or agreement between the litigants in which prejudgment interest is authorized by the

contract or agreement entered into after January 1, 2010.

(5) If the cause of action and its legal dispute are governed by a more specific statute.

Section 99. This Act takes effect on Jan. 1, 2010 and applies to all actions accrued on or after that date. (Source: P.A. 85-907.)

Litigation is time consuming and expensive.  Well-worded contracts and standardized terms and conditions have proven effective in limiting or even disclaiming liability

in certain commercial transactions.  Small business owners can also define venue to avoid trial in a foreign jurisdiction or even limit resolution to arbitration in an effort

to avoid the uncertainty of a jury trial. 

One of your first orders of business for 2009 should be to "tune-up" your contracts and implement standardized terms and conditions.  Call us today to discuss these

and other important litigation avoidance strategies.   

The Clerk of the Circuit Court of Cook County, Illinois has announced that a pilot program implementing electronic filing is to begin March 30, 2009.  Other counties

have already implemented similar electronic filing programs and it has been used in federal courts since 2000.  The implications of allowing electronic filing are clear

when it comes to the substantial time and cost savings lawyers will realize.  

The Roth Law Group will participate in the E-Filing Advisory/Leadership Committee begining January 8, 2009.  It is hoped that the plan will be approved and gain wide

acceptance (or mandatory compliance) in order to move the Clerk's office into the 21st Century.       

Many business owners assume that acquiring a business through an asset purchase - as opposed to a stock purchase - automatically protects them from the pre-

sale liabilities of the seller.  In reality, most states have measures in place that allow transfer of outstanding tax liability to the new owner;  regardless of whether the

business was acquired through an asset or stock purchase.

In order to try to avoid inheriting the tax liability of the predecessor, business purchasers may wish to provide notice to the state department of revenue to obtain a tax

clearance certification.  This is In addition to any bulk-sales notification usually required by the states to notify creditors of the sale.  

The Roth Law Group can help you navigate your business sale or acquisition.  Call us today for a free consultation.