The Illinois Appellate Court, First District, recently issued a decision in one of the “365/360 method” cases. (See attached). As you are aware, claims and defenses under the Illinois Interest Act based on lenders’ use of the 365/360 method for calculating interest are quite prevalent now, especially with the use of Laser Pro loan documents. In RBS Citizens v. RTG-Oak Lawn, LLC, RBS filed a complaint for mortgage foreclosure, which included claims seeking recovery of unpaid amounts under the loan, after the defendants defaulted on a loan. In response, the defendants asserted affirmative defenses and counterclaims based on RBS’s use of the 365/360 method, including alleged violations of the Interest Act (815 ILCS 205/1 et seq.), the duty of good faith and fair dealing, the Consumer Fraud Act (815 ILCS 505/1 et seq.), and common law fraud. Like many other circuit court judges presented with similar claims, Judge Delort of the Circuit Court of Cook County dismissed the defendant’s affirmative defenses and counterclaims with prejudice.

In a well-reasoned opinion, the Appellate Court affirmed the trial court’s dismissal as to all claims. With respect to the Interest Act, the court found that the language in the note explicitly provided that interest would be computed with the 365/360 method. The court rejected the defendant’s argument to the contrary -- that the note was ambiguous due to use of the term “per annum” in other provisions -- noting that the term “per annum” was not used in the paragraph discussing how interest would be charged or calculated. Because success of the remaining claims all required that the note’s interest provision be found improper, the court affirmed the circuit court’s dismissal of those claims as well.

The RBS court addressed one final issue. The defendants had signed forbearance agreements containing waiver of defense provisions. The court strongly suggested that by executing the forbearance agreements, the defendants waived any affirmative defense or counterclaim based upon the Interest Act and common law fraud. While the court did not actually rule on this issue, choosing instead to directly dispose of the Interest Act claim, the language in the opinion emphasizes the importance of including these types of waiver provisions in forbearance agreements.

This opinion, coupled with last year’s enactment of Senate Bill 1118, is obviously good news to lenders and should largely put to rest borrowers’ use of Interest Act claims as a defense to lenders’ actions on notes, although we expect to see some additional claims based on the particular language of different notes. SB 1118 amended the Interest Act to clarify that an annual interest rate for commercial loans may be lawfully computed on a 360-day year.

Lowis & Gellen LLP have been successfully chosen as the winner of the Corporate Intl Magazine 2010 Legal Award for:

“Mergers & Acquistions Law Firm of the Year in Illinois”
&
“Banking & Finance Law Firm of the Year in Illinois”

December 2010 Lowis & Gellen partners Pam Gellen and Scott Wolfe successfully defended a University hospital and its doctors in an alleged wrongful death case. The suit was brought on behalf of a 29 year old mother of 4 who died from a pulmonary embolus just minutes after delivering twins. The plaintiff claimed the woman was at high risk for deep vein thrombosis (DVT) and pulmonary embolus (PE) in the latter part of her pregnancy and should have been provided with DVT prophylaxis. An expert for the plaintiff testified that DVT prophylaxis would have prevented a DVT and would have prevented the PE and death. The defense argued that the patient was not considered high risk and the options for DVT prophylaxis were either ineffective (TED hose or sequential compression boots) or carried an unacceptable risk of bleeding (prophylactic anticoagulation). The jury apparently believed the defense argument that the doctors didn't have a crystal ball and without knowing the outcome, the doctors could legitimately conclude that the risk of anticoagulation outweighed the risk of DVT and PE without anticoagulation.

The plaintiff asked the jury to award over $13million. The jury returned a verdict in favor of the defendants.

Not Guilty Achieved in Favor of Lowis & Gellen’s Client in Colonoscopy Case

Lowis & Gellen partners Mark J. Smith and Scott R. Wolfe attained a Not Guilty verdict in favor of their client, a gastroenterologist, in Cook County, Illinois. The plaintiff, a 50-year-old male, presented to the defendant gastroenterologist for his initial screening colonoscopy. Defendant located a pre-cancerous polyp that he removed and estimated the location as the distal transverse colon. He also found a likely cancerous 1.2 cm sessile polyp which he could not remove and estimated its location at 30 cm from the anal verge, likely in the sigmoid colon. The defendant tattooed the area to make finding the very small lesion easier. Surgery for removal of the cancer was arranged. Based on the colonoscopy report and location estimates, he believed the cancer was in the sigmoid colon. However, the surgeon could not find the tattoo so he removed the patient’s entire sigmoid colon. Pathology revealed the tissue removed contained no tattoo and no cancer. A repeat colonoscopy at another institution revealed the tattoo and the cancer remained in the patient and was likely in the distal transverse colon. The second surgeon performed a completion colectomy, removing the entire remainder of the plaintiff’s colon. Had the sigmoid colon not been previously removed, the second surgeon may have salvaged the sigmoid. If the sigmoid could have been salvaged Plaintiff would likely have better control of bowel movements. Plaintiff now has 20 plus bouts of diarrhea or loose stools per day with frequent incontinence, has never returned to work, cannot engage in any normal activities or socializing and cannot sleep normally as he wakes frequently due to loose stools. Plaintiff alleged Defendant negligently described the location of the two lesions found on colonoscopy. Specifically that the cancer tattooed was actually in the transverse colon and the polyp removed was in the sigmoid colon. Plaintiff claimed the incorrectly described lesions caused an unnecessary operation and unnecessary removal of undiseased tissues that should have been saved. Plaintiff then had to undergo a second operation to remove the cancer. Plaintiff is now left with so little colon he cannot control his loose stools whereas if he had the sigmoid in tact, he would likely have well formed stool and could work and have a normal life.



Mark and Scott argued the colonoscopy was performed well. During a colonoscopy distance and locations are mere estimates. They argued the defendant utilized reasonable estimates and then went above and beyond the standard of care by tattooing the area. All experts, including plaintiff’s retained expert agreed the tattoo should have made locating the cancer 100% accurate, regardless of the verbal description in the report. Defendants further argued a complete colectomy should have been done anyway due to the patient’s history of cancer, family history of colon polyps and young age. Defendants also denied plaintiff was as severely disabled as claimed and argued he should be able to work.



Plaintiff asked for $2.9 Million against Lowis & Gellen's client. The jury found in Mark & Scott's favor in under two hours.



For more details about this case or any questions regarding Lowis & Gellen’s professional malpractice experience, please contact Scott Wolfe at swolfe@lowis-gellen.com

Lowis & Gellen LLP Attorney Charlotte Felber was sworn in to practice law in the state of New York on June 22, 2010.