Business Law & Practice Section MCLE Meeting Attorney Resource Center

August 13, 2019

11:45 AM – Noon Welcome/Introductions Nancy Fallon-Houle

Noon – 1:00 PM Program

Where There's Smoke, There's Fyre: Tips to Reduce Litigation Risk

Steve Silvey and Sarah Dunkley, Patterson Law Firm, LLC

Speakers’ Bios are attached

Sarah and Steve will provide a look into contemporary issues affecting or increasing litigation risks, such as media and social media's impact using the exposure and litigation arising out of the Fyre Festival as a case example, and ways to mitigate risks, including early involvement of litigation attorneys in negotiation and drafting agreements.

Next Meeting: 9/10/2019 - Business Valuation: Looks Can Be Deceiving - Don’t Judge a Business’ Value by its (Reported) Numbers - Henry Kaskov – Use the link below to register for this meeting: https://www.dcba.org/events/EventDetails.aspx?id=1268401&group=

DCBA Events: 8/15/2019 - DCBA Leadership Training and Orientation – Pinstripes - Oak Brook

8/15/2019 – DCBA Happy Hour - Pinstripes - Oak Brook

8/22/19 –DCBA Golf Outing at Cantigny – Wheaton

Earn CLE Online!

DCBA OnDemand CLE is Now Powered by IICLE The Illinois Institute for Continuing Legal Education (IICLE®) and the DuPage County Bar Association (DCBA) are excited to offer a new IICLE®Share collaboration to provide DCBA members a high quality and reliable online learning experience. Members can find the link to The Illinois Institute for Continuing Legal Education (IICLE) on the DCBA website under “Legal Community”OnDemand CLE Online CLE Catalog

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Speakers’ Bios

Sarah Dunkley:

Sarah is a litigation attorney with experience practicing in Federal and State Courts in the US and Australia. She primarily litigates complex commercial and business dispute on behalf of companies, partnerships and individuals. Prior to working as a litigation lawyer, Sarah was the Associate to the Hon. Justice Michael Murray at the Supreme Court of Western Australia.

Sarah’s brief response to your inevitable questions about Australia are as follows: yes, she has:

• Swum with sharks • Eaten kangaroo • Killed a snake

Steve Silvey:

Defers to Sarah’s adventures although he works with sharks, ate a snake and once saw a kangaroo at Brookfield Zoo. Steve has a unique combination of legal and business experience. He concentrates his civil litigation practice in complex commercial, business and risk management matters. Former co-founder and managing partner of a national firm, president of a software company, CEO of a professional development company, co-founder of a trucking company, and chairman of a non-profit senior center. Steve is a Certified Litigation Management Professional (less than 300 attorneys nationwide at the time). He created business and administrative operations for one of the top four national market leaders and negotiated and implemented a strategic alliance program of more than 8,000 independent financial advisors. A former law clerk for the Chief Justice of the Illinois Court of Claims and law clerk for a Hearing Officer of the former Illinois Department of Financial Institutions where he assisted in investigations and administrative hearings.

Steve is a USA Hockey Level 5 Masters Certified Coach and recently won a USA Hockey National Pond Hockey Championship.

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Business Law Section Council – LEGAL UPDATE – August 2019

Legislative Update

Illinois Public Act 101-0177 (effective 7/31/19)

This law amends the Equal Pay Act of 2003 by, among other things, preventing any employer,

employment agency, employee or agent from: a) screening job applicants based on current or prior

wages, salary history, benefits or other compensation by requiring minimum or maximum current

or prior compensation amounts and b) requesting or requiring wage or salary history from an

applicant or that applicant’s current or prior employer as a condition of being interviewed, being

considered for a position, being offered employment or being employed. This restriction does not

apply if the current or past compensation information is a matter of public record or if the applicant

is applying for a new job with his or her current employer. The employer can disclose to an

applicant the compensation or benefits being offered in a prospective job and can discuss the

applicant’s expectation for compensation or benefits in the prospective job without violating the

new law. The employer can also receive wage or salary history voluntarily provided by an

applicant, as long as that information is not considered in making an employment decision. This

law provides a civil remedy to applicants for violations of the compensation history restrictions in

the form of injunctive relief, damages, special damages not to exceed $10,000, and attorneys’ fees

and costs. This new law also bars employers from preventing an employee from disclosing his or

her own compensation and benefits.

Illinois Public Act 101-0221 (signed by the governor 8/8/19; the relevant sections noted here

become effective 1/1/20)

This new law, entitled the Workplace Transparency Act, makes substantial changes to the law

governing: a) persons employing 15 or more employees, b) a party to a public contract regardless

of the number of employees, c) the State and any political subdivision regardless of the number of

employees, and d) an apprentice or training committee.

Such employers are required to institute an annual sexual harassment training program for all

employees based upon a free model program to be published by the Department of Human Rights

or a comparable program. Further, any employers of any size who have been subject to an

unfavorable judgment or administrative ruling for an unlawful employment practice will also be

required to make specific annual disclosures to the Department of Human Rights regarding the

number and nature of further unfavorable unlawful employment judgments or rulings during the

2

year. The Department can also inquire about the settlement of such claims. There are also special

provisions in the Act for employers in the bar and restaurant business. Employers failing to comply

with annual disclosure requirements or with annual sexual harassment training can be subject to

civil penalties.

In addition, employers cannot enter into any contract preventing the reporting of unlawful conduct,

including a crime or an unlawful employment practice, to federal, state or local officials. Further,

contract provisions limiting the disclosure of unlawful employment practices are generally against

public policy and void. However, employers can include a provision in an agreement as a

condition of employment or continued employment if it includes bargained-for consideration, is

in writing and contains specific provisions that allow for certain types of disclosures to

governmental agencies or as required by legal process. Further, confidentiality provisions in

termination or settlement agreements will need to include certain language and follow certain

procedures to be enforceable, to the extent that they seek to limit the disclosure of unlawful

employment practices. An employee that challenges the enforceability of a contract provision

precluded by this Act and prevails is entitled to recover his or her attorneys’ fees and costs. The

Act also expressly clarifies that employers can ask their employees, such as human resources

employees, to maintain the confidentiality of unlawful employment practice claims asserted by

others. Finally, the Act expands the liability of employers for unlawful harassment to include

harassment against non-employees working for them.

Submitted by: Desmond Curran, a partner with Sullivan Hincks & Conway in Oak Brook

3

Business Law Committee - Links for Committee Members

LinkedIn Group for Business Law Committee – DuPage County (IL) Bar Association

https://www.linkedin.com/groups/12013153

LinkedIn Group for DuPage County Bar Association

https://www.linkedin.com/groups/849357

Online Demand CLE on DCBA

http://www.dcba.org/ then log in.

From logged in on home page, go to bottom center of page beige bar to “Quick Links”. Then click

on “On Demand CLE”., which brings you to this page:

https://dcba.site-ym.com/?page=Online

Then go to “Click Here to Launch the DCBA Catalog”:

Which brings you to the IICLE Page at:

https://www.iicle.com/dcba?affiliateid=4&pagesize=12

Illinois Institute for Continuing Legal Education (IICLE) and the DCBA

https://c.ymcdn.com/sites/dcba.site-

ym.com/resource/resmgr/mcle_seminars/How_to_Access_OnDemand_CLE.pdf

Business Law Section Council – LEGAL UPDATE – August 2019

Legislative Update

Illinois Public Act 101-0177 (effective 7/31/19)

This law amends the Equal Pay Act of 2003 by, among other things, preventing any employer, employment agency,employee or agent from: a) screening job applicants based on current or prior wages, salary history, benefits or othercompensation by requiring minimum or maximum current or prior compensation amounts and b) requesting or requiringwage or salary history from an applicant or that applicant’s current or prior employer as a condition of being interviewed,being considered for a position, being offered employment or being employed. This restriction does not apply if thecurrent or past compensation information is a matter of public record or if the applicant is applying for a new job with hisor her current employer. The employer can disclose to an applicant the compensation or benefits being offered in aprospective job and can discuss the applicant’s expectation for compensation or benefits in the prospective job withoutviolating the new law. The employer can also receive wage or salary history voluntarily provided by an applicant, as longas that information is not considered in making an employment decision. This law provides a civil remedy to applicantsfor violations of the compensation history restrictions in the form of injunctive relief, damages, special damages not toexceed $10,000, and attorneys’ fees and costs. This new law also bars employers from preventing an employee fromdisclosing his or her own compensation and benefits.

Illinois Public Act 101-0221 (signed by the governor 8/8/19; the relevant sections noted here become effective1/1/20)

This new law, entitled the Workplace Transparency Act, makes substantial changes to the law governing: a) personsemploying 15 or more employees, b) a party to a public contract regardless of the number of employees, c) the State andany political subdivision regardless of the number of employees, and d) an apprentice or training committee.

Such employers are required to institute an annual sexual harassment training program for all employees based upon a freemodel program to be published by the Department of Human Rights or a comparable program. Further, any employers ofany size who have been subject to an unfavorable judgment or administrative ruling for an unlawful employment practicewill also be required to make specific annual disclosures to the Department of Human Rights regarding the number andnature of further unfavorable unlawful employment judgments or rulings during the year. The Department can alsoinquire about the settlement of such claims. There are also special provisions in the Act for employers in the bar andrestaurant business. Employers failing to comply with annual disclosure requirements or with annual sexual harassmenttraining can be subject to civil penalties.

In addition, employers cannot enter into any contract preventing the reporting of unlawful conduct, including a crime oran unlawful employment practice, to federal, state or local officials. Further, contract provisions limiting the disclosure ofunlawful employment practices are generally against public policy and void. However, employers can include a provisionin an agreement as a condition of employment or continued employment if it includes bargained-for consideration, is inwriting and contains specific provisions that allow for certain types of disclosures to governmental agencies or as requiredby legal process. Further, confidentiality provisions in termination or settlement agreements will need to include certainlanguage and follow certain procedures to be enforceable, to the extent that they seek to limit the disclosure of unlawfulemployment practices. An employee that challenges the enforceability of a contract provision precluded by this Act andprevails is entitled to recover his or her attorneys’ fees and costs. The Act also expressly clarifies that employers can asktheir employees, such as human resources employees, to maintain the confidentiality of unlawful employment practiceclaims asserted by others. Finally, the Act expands the liability of employers for unlawful harassment to includeharassment against non-employees working for them.

Submitted by: Desmond Curran, a partner with Sullivan Hincks & Conway in Oak Brook

Business Law Committee - Links for Committee Members

LinkedIn Group for Business Law Committee – DuPage County (IL) Bar Associationhttps://www.linkedin.com/groups/12013153

LinkedIn Group for DuPage County Bar Associationhttps://www.linkedin.com/groups/849357

Online Demand CLE on DCBAhttp://www.dcba.org/ then log in.

From logged in on home page, go to bottom center of page beige bar to “Quick Links”. Then click on “On Demand CLE”.,which brings you to this page:https://dcba.site-ym.com/?page=Online

Then go to “Click Here to Launch the DCBACatalog”:Which brings you to the IICLE Page at:https://www.iicle.com/dcba?affiliateid=4&pagesize=12

Illinois Institute for Continuing Legal Education (IICLE) and the DCBAhttps://c.ymcdn.com/sites/dcba.site-ym.com/resource/resmgr/mcle_seminars/How_to_Access_OnDemand_CLE.pdf

12/8/2019

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WHERE THERE’S SMOKE, THERE’S FYRE: TIPS TO REDUCE LITIGATION RISKSarah Dunkley & Steve SilveyPatterson Law Firm, LLCAugust 13, 2019

LEARNING OBJECTIVES

• Common litigation risks

• How risks have evolved over time

• Contemporary example of the effect of the media and social media on claims

• Mitigation of litigation risks

12/8/2019

2

COACHELLA IN THE CARIBBEAN

• The Facts• Musician Ja Rule and Billy McFarland

team up for “Woodstock for Millenials” in 2017 – it is named Fyre Festival

• Fyre used a social media based ad campaign featuring internet influencers (dubbed “Fyre Starters”) to go to a deserted island formerly owned by Pablo Escobar to party and experience “the best in food, art, music, and adventure”

THE FACTS (CONTINUED)• Attendees arrive to wet mattresses,

cheese sandwiches, and mishandled luggage

• Fyre Festival was slated to take place on April 28-30, 2017 and May 5-7, 2017

• The festival was launched to create hype for an app to book celebrities for private events

• Packages were between $1000 -$12,000

• Early deluxe VIP packages were up to $250,000

• Attendees out for thousands of dollars with their health and safety compromised

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THE FACTS (CONTINUED)• March 2018: McFarland pleaded

guilty to one count of wire fraud and to defraud investors and ticket holders, and a second count to defraud a ticket vendor while out on bail.

• October 2018: McFarland sentenced to six years in federal prison and ordered to forfeit the $25.6 million he had collected from investors. He was also barred from serving as either an officer or a director of a public company.

THE FACTS

• Fun fact: McFarland is doing his time at NY's Otisville federal prison ... same place Trump's ex-lawyer, Michael Cohen

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LITIGATION RISKS: THE

FYRE STARTS BURNING

• There were at least eight civil lawsuits filed against the Fyre Festival organizers in very quick succession, in the immediate aftermath of the festival, including:

• JUNG v. McFarland et al (April 30, 2017): class action filed in the U.S. District Court for the Central District of California, asserts claims of fraud, breach of contract, breach of covenant of good faith, and negligent misrepresentation and seeks upwards of $100 million in damages;

• Chelsea Chinery, Shannon McAuliffe and Desiree Flores v. McFarland et al (May 2, 2017): three individuals filed a breach of contract, negligent misrepresentation and fraud suit of their own in Los Angeles County Superior Court against Ja Rule and McFarland.

THE FYRE CONTINUES

• Petrozziello v. Fyre Media, Inc. et al (May 2, 2017): festival-goer Andrew Petrozzielo filed a $5 million-plus class action of his own, citing violations of the New Jersey Consumer Fraud Act, breach of contract, and breach of implied covenant of good faith and fair dealing;

• Seth Crossno and Mark Thompson from North Carolina filed a lawsuit against McFarland claiming they each spent about $13,000 on VIP packages for the festival, which turned out to be a scam.

• In total, they were awarded $5 million, consisting of $1.5 million for each of them in compensatory damages, accounting for travel, lodging, pain and suffering, and emotional distress. They each were also awarded $1 million in punitive damages;

• EHL Funding LLC v. McFarlane, et al (May 11, 2017): EHL Funding LLC, a New York-based financing company, has filed a $3 million suit against the Fyre Fest organizers, claiming that they have defaulted on their $3 million loan.

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LITIGATION RISKS: THE FYRE

STARTS BURNING

CONT.

• In the first lawsuit filed by plaintiff Daniel Jung and celebrity lawyer Mark Geragos it was claimed that Ja Rule, or Jeffrey Atkins as he is legally known, and McFarland allegedly knowingly "lured" festival goers into "a complete disaster, mass chaos, and a post-apocalyptic nightmare." The lawsuit claims the event was closer to "Hunger Games" and "Lord of the Flies" than the Coachella experience the founders were promising. They are looking for compensatory and punitive damages. In fact, Geragos & Geragos prepared a $100 million class-action lawsuit and filed it before the weekend was over.

• This lawsuit was dismissed in July 2019, as against Ja Rule, with the Court ruling the complaint didn't specify when statements promoting the event were made or allege they were false at the time.

LITIGATION RISKS: THE FYRE

STARTS BURNING

CONT.

• Lawsuits have arisen out of Fyredocumentaries being made, including ones about rights to festival footage used without permission

• The plaintiff voluntarily withdrew the case after a settlement was reached

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RISKS

• Litigation itself comes with risks, both for your client and you as an attorney

• Attorney Risk: As a representative of clients, Illinois Rules of Professional Conduct dictate that a lawyer performs various functions:

• As advisor, a lawyer provides a client with an informed understanding of the client’s legal rights and obligations and explains their practical implications.

• As advocate, a lawyer zealously asserts the client’s position under the rules of the adversary system.

• As negotiator, a lawyer seeks a result advantageous to the client but consistent with requirements of honest dealings with others.

• As an evaluator, a lawyer acts by examining a client’s legal affairs and reporting about them to the client or to others.

AN EVOLUTION

Definition: risk management

The optimal allocation of resources to arrive at a cost-effective investment inDEFENSIVE measures within an organization.Risk management minimizes both risk and costs.http://www.pcmag.com/encyclopedia_term

Risk Management is one of the specialties in the field of management.By definition risk management is a process that involves making and implementingdecisions that will minimize the adverse effects of accidental losses uponan organization. Making these decisions involves a five step decision process:

(1) identifying loss exposures;(2) examining alternative risk management techniques;(3) selecting the best risk management technique(s);(4) implementing the chosen risk management technique(s); and(5) monitoring the results to ensure the risk management program remains effective.© Copyright 2003 Rice University Risk Management at Rice University, MS-91

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APPLY RISK MANAGEMENT IN THE CONTEXT OF WHAT AN ORGANIZATION IS TRYING TO ACHIEVE

RATHER THAN WHAT IT WANTS TO AVOID.

IMPLEMENT PRINCIPALS OF MANAGING STRATEGY RATHER THAN FEAR OR MERE COMPLIANCE.

Property

Vehicle

WaterWind

PaperPeople

Product

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ATTORNEY RISK

• You also have a duty to the Court and to your opponent, for example not to file improper or frivolous claims. Everyone needs to be aware of the requirements of Rule 137 when filing.

• Are these cases real or fake?• Customers Sue McDonald’s Over Unwanted

Cheese • Woman Sues Canada Dry Ginger Ale for not

Containing Real Ginger • Man Sues to Change His Age—for Online

Dating Apps • Waiter Fired for Being Rude Claims He’s Just

French, Files Discrimination Lawsuit • Man Gets $5 Million for Ant Bites

CLIENT RISK• Costs

• Protection of information: Confidentiality, data protection and waiver of privilege

• Counterclaims

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PROTECTION OF INFORMATION

• Confidentiality – use NDAS, ensure your firm has clear protocols and policies for its staff

• Litigation hold letters – make it routine to send• Data protection – these laws and regulations change

quickly. • Remember that every communication (with privilege

exceptions) is discoverable. This extends to verbal communications.

PROTECTION OF INFORMATION CONTINUED

• Waiver of privilege – Illinois and Federal Court have different standards, but policy in both is for limited application of attorney client privilege. For example, Illinois uses the “control group” standard, so if your client is a company you need to quickly establish who forms that group and limit forwarding of emails, etc

• If there is more than one relevant entity, you may want to consider a common interest or joint defense agreement to allow for the exchange of information without waiving privilege.

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COUNTERCLAIMS

• Filing a claim opens yourself up to those counterclaims, that may have otherwise not have come to light.

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EVOLUTION OF RISKS

• Volume of litigation/increased costs• Exposure and less ability/chance to limit that

exposure• The advent of new technology and industries

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PUTTING OUT THE FYRE: MITIGATING THE RISK

• Litigation is about management and, as detailed on one of the may blogs on Fyre Festival: “Any program manager worth their salt would have looked at the large scope of tasks, begun estimating their duration and then looking at what can be gated into releases or milestones for the cross-functional teams. This helps to align all the teams behind common goals, timelines and an understanding of how they are moving towards the goal.”

• Preparation /planning: “Their plan was to get everyone really drunk and they’ll forget how shitty this really is.”

• Undertake initial due diligence and assessment of the evidence and claims.

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BONUS: BLOWING THE LOCATION• Norman’s Cay was formerly owned

by Pablo Escobar,

• The new owner of Norman’s Cay—eager to distance the island from its unsavory past—specifically instructs Fyre not to promote the island by reference to Pablo Escobar.

• Fyre Festival’s very first marketing materials boast of the Escobar connection

• Fyre loses the venue

PUTTING OUT THE FYRE: MITIGATING THE RISK

• Using experts – that includes legal experts if your matter happens to bring up certain issues.

• Spend your legal costs/effort wisely (Kendall Jenner, for instance, received a quarter-million dollars for a single Instagram post to promote Fyre Festival).

• Adhere to the terms (and spirit) of the agreement. It will save on litigation costs in the long run, even if the deal doesn’t turn out quite as well as you hoped.

• Post judgment/recovery: McFarland is incarcerated and insolvent right now. How do you recover?

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Steve C. Silvey, J.D., CLMPPatterson Law Firm, LLC200 W. Monroe StreetSuite 2025Chicago, Illinois 60606(312) 558-9598ssilvey@pattersonlawfirm.com

Q & A Sarah DunkleyPatterson Law Firm, LLC200 W. Monroe StreetSuite 2025Chicago, Illinois 60606(312) 558-9598sdunkley@pattersonlawfirm.com

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