Elsener v. Brown
996 N.E.2d 84
Ill. App. Ct.2013Background
- James Elsener sold his Illinois newspaper (The Business Ledger) to Brown Publishing Company (BPC); Brown Business Ledger, LLC (BBL) was formed in Illinois as a BPC subsidiary to operate the paper. Roy Brown (BPC president/CEO) was named president of BBL and signed Elsener’s three-year employment contract on BBL’s behalf.
- The contract (governed by Illinois law) provided an $85,000 base salary and a severance clause entitling Elsener to the remaining contract salary if terminated "not for cause," plus a one-year noncompete; the contract was signed in Illinois and work was performed in Illinois.
- Elsener was terminated August 18, 2009 (not for cause). He demanded lump-sum severance; BBL/BPC did not pay. BPC/BBL later entered bankruptcy; bankruptcy court lifted the stay to allow Elsener to pursue Brown individually and Elsener waived claims against the estates.
- Trial court found Roy Brown personally liable under the Illinois Wage Payment and Collection Act (Wage Act), entered judgment for Elsener for the unpaid severance, and awarded attorney fees and prejudgment interest. Brown appealed, arguing lack of personal jurisdiction, extraterritorial application of the Wage Act, inability to pay, and contract interpretation.
- The appellate court affirmed: it held Illinois had personal jurisdiction over Brown based on his role as president of an Illinois company; Brown was "in this State" for purposes of the Wage Act; the contract required a lump-sum severance due at the next payday; and Brown knowingly permitted the Wage Act violation (so is liable under section 13). Attorney fees and interest were allowed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Roy Brown | Brown was BBL’s president; contract formed/performed in Illinois; Brown’s acts as officer give Illinois jurisdiction | Brown lived and worked in Ohio; fiduciary-shield protects him; he had minimal Illinois contacts | Jurisdiction proper: Brown was president of an Illinois LLC (BBL) and had sufficient contacts; fiduciary-shield inapplicable here |
| Applicability of Illinois Wage Act to Brown | Brown acted "in this State" as BBL’s president and falls within the Wage Act’s reach | Brown is an Ohio resident; Wage Act only applies to employers "in this State" so it does not cover him | Brown was "in this State" for Wage Act purposes given his role as president of an Illinois company and operational control |
| Personal liability under Wage Act ("knowingly permit") | Brown knowingly permitted BBL’s failure to pay severance (signed contract, received demands, could direct payment) | Brown lacked ability to pay by the due date because BBL/BPC were insolvent and control shifted to creditors/consultants | Brown knowingly permitted the violation: court found BBL had ability to pay before bankruptcy and Brown retained authority to resolve payment; Andrews distinguished |
| Contract interpretation & remedies (lump sum, fees, interest) | Contract required lump-sum severance due at next payday; Elsener entitled to statutory fees and interest | Severance should be paid biweekly during noncompete (not lump sum); contract’s exclusive remedies clause waived fees/interest | Contract construed to require lump-sum severance; statutory attorney fees and prejudgment interest not waived by contract and were awarded |
Key Cases Cited
- Rollins v. Ellwood, 141 Ill. 2d 244 (Ill. 1990) (recognizing fiduciary-shield doctrine limiting jurisdiction over employees acting solely for employer)
- Andrews v. Kowa Printing Corp., 217 Ill. 2d 101 (Ill. 2005) (defining "knowingly permit" under Wage Act and excusing officer liability when control was lost to creditors before termination)
- Khan v. Van Remmen, Inc., 325 Ill. App. 3d 49 (Ill. App. 2001) (Wage Act coverage and limits on defining an employer "in this State")
- Adams v. Catrambone, 359 F.3d 858 (7th Cir. 2004) (nonresidents who work in Illinois for in-state employers may be covered by the Wage Act)
- People ex rel. Morse v. E&B Coal Co., 261 Ill. App. 3d 738 (Ill. App. 1994) (officers who accept directorship of Illinois corporations may be subject to Illinois jurisdiction)
- International Business Machines Corp. v. Martin Property & Casualty Ins. Agency, Inc., 281 Ill. App. 3d 854 (Ill. App. 1996) (officers/directors of Illinois corporations can reasonably foresee being haled into Illinois court for corporate conduct)