Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

REYNOLDS v. UNITED STATES (December 9, 2008)

On an August afternoon in 2003, a security guard employed by General Security Services Corp. (“GSSC”) was on duty at the Federal Building in Indianapolis. (These facts are from Reynolds complaint, taken as true for purposes of the opinion.) Somehow, he ended up naked, on the roof of the building, and locked out of the building. Eventually, a colleague let him in. The two of them reported the incident (except for the naked part) to Maureen Reynolds, a GSSC officer. Several weeks later, Federal Protective Services (“FPS”) began an investigation. Two FPS investigators interviewed Reynolds. She told them what she knew. Although they knew that she was unaware of the nudity, the two investigators told the local prosecutor that she had lied. Reynolds was charged with false reporting and acquitted at trial. GSSC fired her because of the allegations of criminal conduct. Reynolds sued the United States under the Federal Tort Claims Act (“FTCA”). She alleged that the investigators had initiated a malicious prosecution. The district court dismissed for lack of subject matter jurisdiction. Reynolds appeals.

In their opinion, Judges Ripple, Rovner and Evans reversed and remanded. The Court addressed the requirements and exceptions to a FTCA action. The FTCA allows tort suits against the United States for torts committed by federal officials if those same acts would impose liability under state law for a private person. There are several exceptions to liability. The Court first corrected the district court’s treatment of these exceptions as limitations on jurisdiction. They are not. They are, instead, limitations on the right to recover and subject to a motion to dismiss for failure to state a claim. Although the district court relied on three different exceptions to the FTCA, the government only addressed one of Reynold’s arguments. The Court agreed that the district court was in error in its analysis of the “government employee” and “law enforcement” exceptions. It turned to the “discretionary function” exception. The Court noted the two requirements needed to establish the discretionary function exception: a) the conduct must involve an element of judgment, and b) the conduct must amount to a permissible exercise of policy judgment. The Court rejected the government’s argument that the conduct was akin to a prosecutor’s decision to prosecute. The Court agreed that a decision to prosecute is discretionary but held that the conduct in this case – knowingly providing false information to the prosecutor – is separable from that decision. A federal investigator’s decision to lie under oath does not meet the discretionary function test. Reynolds has alleged conduct that would amount to malicious prosecution under Indiana law and has therefore stated a claim under the FTCA.
 

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AA SALES v. CONI-SEAL (December 9, 2008)

Gerald Saltzman, owner and sole employee of AA Sales, and Coni-Seal started working together in the early 1980s. Coni-Seal manufactured automotive parts. Saltzman was a sales representative. Early successes led to a written agreement in 1987. The contract provided AA Sales with a 6% commission on sales to approved accounts and with 5 years of post-termination commissions on accounts previously sold by AA Sales. AA and Coni-Seal later agreed to negotiate commissions on an account-by-account basis. In 1994, Coni-Seal approved AA to solicit AutoZone, a large retailer of automotive parts. Shortly thereafter, their relationship began to sour. In 1995, Coni-Seal reassigned several accounts away from AA. In return for releasing the accounts, AA agreed to a monthly fee and a 2% commission on sales to the accounts it released. Coni-Seal authorized a second sales representative for AutoZone in 2003. Coni-Seal began selling to AutoZone in 2004. It paid no commissions to AA on these sales. AA filed suit for breach of contract and violation of the Illinois Sales Representative Act (“ISRA”). The district court granted summary judgment to Coni-Seal. AA appeals.

In their opinion, Judges Cudahy, Flaum and Rovner affirmed in part and reversed in part. The Court agreed with the district court that AA was not responsible for the AutoZone sales but disagreed that that ended the inquiry. The issue for the Court was whether the parties’ contract entitled it to commissions. The Court determined that the contract required Coni-Seal to pay a commission: a) during the life of the contract on all sales to approved accounts, whether AA was responsible for the sale or not, and b) after termination of the contract, only on sales to accounts for which AA was responsible for sales during the life of the contract. The Court proceeded to address the issue of whether Coni-Seal’s sales to AutoZone were “sales to approved accounts.” The parties’ versions of the development of the AutoZone account differed considerably. The Court reversed and remanded for trial.

With respect to AA’s claims on the 1995 oral contract, the Court held that it was not a new contract, but a modification of the termination provisions of the 1987 contract. Since it did not include a term of years to apply to the new post-termination commissions, the Court applied the five year term from the 1987 contract. Since Coni-Seal had already paid the commissions for over ten years, the Court affirmed the district court’s judgment on the 1995 contract.

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SEEGER v. AFNI, INC. (December 8, 2008)

AFNI is a debt collector. Cingular is (or was) a cellular telephone service provider. Cingular contracts with individuals to provide telephone service. It typically includes in its contracts a provision that its customer is obligated to pay the fees of a collection agency and other costs Cingular incurs in enforcing its rights under the contracts. In 2004-05, Cingular sold some delinquent customer accounts to AFNI. AFNI sent collection letters to plaintiff Seeger and others. The letters stated that the recipient was responsible for collection fees. In 2005, Seeger and other plaintiffs filed suit. They alleged that AFNI’s actions violated the Fair Debt Collection Practices Act (“FDCPA”) and the Wisconsin Consumer Act (“WCA”). The district court certified a class and granted summary judgment to the class. It held that AFNI’s action violated both the FDCPA and WCA because the owner of a debt is not allowed to impose a collection fee for its own benefit (as opposed to that it pays a third-party collector). AFNI appeals.

In their opinion, Judges Bauer, Cudahy and Wood affirmed. The Court agreed that AFNI could prevail if the fee was allowed either by the contract or by Wisconsin law. It turned first to the law. Wisconsin does permit recovery of losses that are the natural and probable result of a breach of contract. The Court noted, however, that the record was silent on the issue of AFNI’s cost of debt collection and could not support a characterization of the fee as a form of allowable damages. Turning to the contracts, the Court agreed with the court below that the contracts allowed Cingular only to collect fees it “incurred” in collecting a debt. The way the parties structured their arrangement, neither Cingular nor AFNI “incurred” any collection fees. Finally, the Court addressed AFNI’s argument that it was entitled to the bona fide defense in the FDCPA. The Court identified a growing split in the circuits on the issue of whether the bona fide defense applies to mistakes of law. It did not express an opinion on that issue, however. Rather. it decided that AFNI did not maintain reasonable procedures to prevent the error, which is an element of the defense.

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FLYING J INC. v. CITY OF NEW HAVEN (December 5, 2008)

Flying J develops and operates travel plazas for truck drivers and other travelers. It purchased 50+ acres in New Haven, Indiana (the “City”) to develop a new travel plaza. The City opposed the development and took the position that it was not allowed under the then-current zoning. Flying J ultimately prevailed in the Indiana state courts on its challenge to the City’s position. Undaunted, the City amended its zoning ordinance to limit developments of this type to two acres. The Flying J development was the only parcel affected by this limitation. The City held several public meetings on the amendment but never gave Flying J specific notice of them. In August of 2007, the City advised Flying J that its development must comply with the two acre rule. Flying J filed suit in September, alleging violations of its rights under the U.S. and Indiana Constitutions. The district court dismissed for failure to state a claim. Flying J appeals.

In their opinion, Judges Bauer, Flaum and Williams affirmed. The Court first addressed the City’s position that the Court lacked jurisdiction under the principles of Williamson County. The Supreme Court in Williamson County held that takings claims in land use cases are not ripe until the local authority has reached a final decision, including a decision on a variance application and compensation. Courts have applied the doctrine to takings claims even when they are labeled as due process or equal protection claims. The Court noted that it has created an exception for claims alleging the malicious conduct of a government agent unrelated to a legitimate state objective. Flying J’s allegations of the City’s protracted litigation, its covert amendment to the ordinance, the ordinance’s application only to Flying J, and the potential conflicts of interest of several commission members fit its claim within that exception.

The Court next addressed whether Flying J stated a claim. Relying on its precedent in Wroblewski and Lauth, the Court identified the pleading standard for a class-of-one equal protection claim. In those cases, the plaintiff must negate any set of facts that provides a rational basis for the classification challenged. Animus of the defendant comes into play only after the plaintiff has pled facts that show the irrationality of the government’s conduct. Flying J does allege facts that would show that the City took its actions in response solely to Flying J’s development but it does not allege facts to establish that the zoning amendment was irrational. Flying J’s allegations therefore do not overcome the presumption of rationality the government enjoys in cases of this nature.

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JOHNSON v. ORR (December 04, 2008)

David Johnson obtained a certificate of purchase for a tax-delinquent piece of land in Cook County (the “County”). The certificate allowed him to acquire the property by following certain notice requirements and by then petitioning the court. He complied with the notice requirements. Before he petitioned the court, the County realized that its determination of delinquency was in error. The County and Johnson agreed to an order, entered by the court, declaring the tax sale in error and directing the cancellation of the certificate and return of the purchase price. Notwithstanding the order, Johnson petitioned the state court for a deed. Johnson later filed suit in federal court. He alleged that the County’s failure to issue the deed violated his constitutional rights and the Interstate Land Sales Full Disclosure Act, as well as various other state statutory and common laws. The court granted defendant’s motion to dismiss, ruling that the complaint sought review of a state court decision in violation of the Rooker-Feldman doctrine and that jurisdiction was barred by the Tax Injunction Act (“TIA”). Johnson appeals.

In their opinion, Judges Ripple, Evans and Tinder affirmed. The Court first addressed the Rooker-Feldman doctrine. That doctrine deprives federal courts (except the Supreme Court) of jurisdiction to hear a party complain about the effects of a state court judgment. Although Johnson attempted to style his request for relief as something other than an attack on the state court judgment, the Court looked beyond the complaint to identify the actual injury. Johnson’s injury, the state court’s failure to grant him a tax deed, comes directly from the order entered by the court canceling the certificate. The gravamen of his complaint is that the court’s order was erroneous. The district court therefore lacked subject matter jurisdiction of Johnson’s constitutional claims. Johnson also alleged a violation of the Interstate Land Sales Full Disclosure Act (the “Act”), a federal statute. Although a claim pursuant to a federal statute would normally provide subject matter jurisdiction, the Court stated that such a claim should be dismissed if it is “wholly insubstantial and frivolous.” The Court concluded that Johnson’s claim was just that. The Act applies only to sales of real estate. Here, the County did not sell the property and Johnson did not buy the property. Even if there was a sale, the Court observed that the Act would not apply because it contains an exemption for a sale by a government body. Although it did not have to, the Court did briefly address the TIA issue. It disagreed with the district court’s conclusion that the TIA applied. The TIA only applies where the relief requested would reduce the State’s tax benefit or impede the collection of taxes. The Court found neither present in the case.
 

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BINGHAM v. NEW BERLIN SCHOOL DISTRICT (December 4, 2008)

Sam Bingham was a Wisconsin high school student. His parents petitioned their school district to provide special education services for him. The district did not do so. Sam transferred to a private school. After Sam graduated, his parents filed a request for a hearing with the Wisconsin Department of Public Instruction. They alleged that the school district had failed to comply with the Individuals with Disabilities Education Act (“IDEA”). They asked for reimbursement of their private school tuition costs. Before a hearing was held, the district reimbursed the Binghams for the full amount they requested. The administrative law judge dismissed the petition as moot. The Binghams asked for a declaration that they had “prevailed” for purposes of seeking attorneys’ fees under IDEA. The administrative law judge refused. The Binghams appealed to the district court. The court concluded that the Binghams were not prevailing parties and denied their motion for attorneys’ fees. The Binghams appeal.

In their opinion, Judges Flaum, Rovner and Williams affirmed. In fact, the Court very quickly and easily resolved the sole issue presented by the appeal – whether the Binghams were entitled to attorneys’ fees under IDEA – against the Binghams. In Buckhannon, the Supreme Court in 2001 held that a voluntary monetary settlement by a defendant does not entitle a plaintiff to “prevailing party” status. The Court further noted that every circuit that has considered the issue has applied Buckhannon to IDEA cases.

The Court went on because it was troubled by the plaintiffs’ conduct. The plaintiffs and their counsel were well aware of Buckhannon and yet did not even cite it in their papers. The Court emphasized that it was not the fact that they appealed which was disturbing. Buckhannon has been the target of much criticism, especially when applied to IDEA. The Court allowed for the possibility that the Binghams could have elected to appeal solely for the purpose of preserving an argument for the Supreme Court. Having decided instead to ignore binding precedent, the Court ordered the Binghams and their counsel to show cause why they should not be ordered to pay the defendant’s costs and fees of the appeal. 

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BOIM v. HOLY LAND FOUNDATION FOR RELIEF AND DEVELOPMENT (December 3, 2008)

David Boim was a Jewish teenager living in Israel. He had dual Israeli/American citizenship. In 1996, he was killed by gunfire near Jerusalem. Boim’s parents brought suit under 18 U.S.C. § 2333(a). They alleged that defendants Muhammad Salah, Holy Land Foundation for Relief and Development (“HLF”), the American Muslim Society (“AMS”) and the Quranic Literacy Institute (“QLI”) all provided financial support to Hamas and that their son had been killed by Hamas gunmen. The district court rejected the argument that financial assistance was not international terrorism under § 2333(a) in denying defendants’ motion to dismiss. On an interlocutory appeal, the Seventh Circuit affirmed. The district court granted summary judgment on liability to plaintiffs with respect to Salah, HLF and AMS. A jury found QLI liable and assessed damages against all defendants of $52 million before trebling. On appeal, a Seventh Circuit panel vacated and remanded to redetermine liability. The plaintiffs petitioned for rehearing en banc, which was granted.

In their opinion, the Court affirmed in part, reversed in part and remanded. The Court first addressed whether the statute even applies to defendants who are alleged only to have provided financial support to those engaged in terrorism. The statute does not specifically mention secondary liability and the Supreme Court in Central Bank of Denver held that a statute that did not mention secondary liability did not create secondary liability. Instead of resolving that issue directly, however, the Court explored an alternative approach. It parsed the language of sections 2331, 2332, 2333 and 2339. Section 2333 creates a cause of action for a person injured “by reason of an act of international terrorism.” Section 2331 includes in the definition of international terrorism “acts dangerous to human life” that violate the U.S. criminal law. The Court concluded that financial assistance to Hamas is an “act dangerous to human life” and violates section 2339. Section 2339 was enacted in 1994 and makes it a crime to provide “material support” knowing that it could be used in carrying out a violation of section 2332. Section 2332 criminalizes the killing of an American citizen outside the U.S. The Court followed this chain to determine that a mere financial contribution to a terrorist organization could violate section 2333. Having determined that the defendants could be liable, the Court proceeded to examine the cause of action and its elements. On the element of intent, the Court held that the defendants must either have known or been deliberately indifferent to whether the organization they funded committed terrorist acts. Given the extreme conduct of the terrorist groups, the Court concluded that it was enough to know the character of the organization. With respect to causation, the Court held that the knowing contributors could not avoid liability on causation because, as a whole, they significantly increased the possibility that Boim would be a target of a Hamas terrorist act.

Applying these principles to the facts of the case, the Court addressed each defendant’s liability. It reversed with respect to HLF. The district court had erroneously applied principles of collateral estoppel from earlier litigation to the liability of HLF. The Court remanded for an analysis of HLF’s liability in light of its opinion. The Court reversed outright the findings as against Salah. Salah had been in custody during the period between the enactment of section 2339(a) and the shooting of Boim and could not have provided material support to Hamas during that time. The Court affirmed the findings as against defendants AMS and QLI. It found sufficient evidence that AMS knew that Hamas was a terrorist organization and that it provided material support to Hamas. QLI had elected not to participate in its trial and therefore could not object to the jury instructions or findings.

Finally, the Court addressed the lower court’s determination that the men who killed Boim were members of Hamas. The principle evidence on that point was the affidavit of an expert witness, Dr. Paz. Paz, an expert on terrorism, based his conclusion on terrorist internet sites, notes from a U.S. foreign service officer, and an Islamic-language document purporting to reflect the conviction of one of the murderers. The Court conceded that much of the evidence on which Paz relied was inadmissible. Noting that experts are not limited to admissible evidence in forming their opinions, the Court concluded that the type of evidence on which Paz relied is relied on by security and terrorism experts generally. The Court also noted that the defendants did not introduce any evidence to the contrary. The Court found no error in the lower court’s consideration of the affidavit.

Judge Rovner wrote separately, concurring in part and dissenting in part. Judge Rovner took principal exception to the majority’s conclusions with respect to causation and the Paz affidavit. She believed that the majority practically eliminated a causation requirement. She would have at least required expert testimony regarding the financial structure of Hamas and the various organizations it controlled. With respect to Paz, she criticized the majority for not only allowing the affidavit based on unproven evidence but for allowing it to support summary judgment. She noted that the defendants are not required to rebut factual propositions on which plaintiff has the burden of proof and has not properly supported. Judge Rovner would remand with respect to all defendants.

Judge Wood also wrote separately, concurring in part and dissenting in part. Judge Wood principally criticized the majority for its treatment of causation with respect to AMS and QLI. She concedes that “but-for” causation is sometimes not necessary, but she noted that the majority also eliminated the requirement for “sufficient” cause and apparently put little limitation on the remoteness of liability. Judge Wood would require at least proof that AMS and QLI contributed a “non-trivial” sum of money to an organization that was sufficiently connected to Hamas that the money indirectly supported Hamas’ terrorist mission. She also would impose a proximate cause limitation on the acts of the defendants, which the majority did not do. Judge Wood also disagreed with the majority’s statements on the scope of liability under the statute, calling it “awfully vague.” Finally, she disagreed with the treatment of the Paz affidavit and would remand to allow plaintiffs to meet the threshold requirements of Rule 702.

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KING v. CITY OF MADISON (December 4, 2008)

Gail King was a city bus driver in Madison, Wisconsin (“City”). She developed some health issues and became unable to work. After she took a six-month unpaid disability leave, the City placed her on layoff status. If she became able to return to work during the layoff period, her collective bargaining agreement gave her the right to a) displace the most junior employee in her bargaining unit with an equal or lower job classification, b) fill a vacant position within her bargaining unit for which she was qualified, or c) compete for any vacant positions in other bargaining units. When she received doctor’s permission to return to work, it was qualified by a requirement that she not drive a bus. Based on her seniority and job classification, however, driving a bus was the only job which she could choose by right. King did apply for several vacant positions outside her unit but she was found not to be most qualified and was not selected. The City terminated King after two years of leave, a remedy they were entitled to under the collective bargaining agreement. King brought this action under the Americans with Disabilities Act (“ADA”). She alleged that the City failed to accommodate her disability. The district court granted summary judgment to the City. It held that King’s medical condition did not substantially limit her major life activity and she was therefore not a qualified individual with a disability. Additionally, it held that the City provided reasonable accommodation. King appeals.

In their opinion, Judges Ripple, Wood and Tinder affirmed. The Court stated the requirements of an ADA claim. To prevail, King had to establish that she is a qualified individual with a disability, that the City was aware of her disability, and that the City failed to accommodate her disability. The Court addressed only the accommodation prong. Although an employer can accommodate a disabled person by reassigning her to a different job, an employer need not do so if it would violate a “legitimate, nondiscriminatory” policy of the employer. The City’s collective bargaining agreement is such a policy. The City complied with the policy in a neutral manner and was not in violation of the ADA.

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HOUSKINS v. SHEAHAN  (November 25, 2008)

Virgean Houskins was an employee of the Cook County Department of Corrections. One September morning in 2001, she found herself sitting in her car in the parking lot of her place of employment, waiting for a parking space to open up. Correctional Officer Keith entered the lot and took what Houskins believed was her space. Houskins uttered some profanities about Keith (which he heard) and proceeded to park in another space. A verbal confrontation between the two ended with Keith striking Houskins in the face. Correctional Officer Calderone arrived a few moments later but did nothing. Houskins reported to work, filed an incident report, and also reported the incident to her supervisor, Tolbert. Tolbert took Houskins and Bowers to the Internal Affairs Division (“IAD”) to make out a complaint. Houskins also filed a police report. The IAD dismissed the charges against Keith and Calderone as not conclusive but upheld an obscene language charge against Houskins. Upon further department review, the finding against Houskins was upheld but the dismissal of the complaint against Keith and Calderone was reversed. Houskins filed a complaint pursuant to 42 U.S.C. § 1983 against the Sheriff and Cook County, alleging a) that the Sheriff retaliated against her for filing the complaints and charges against Keith, b) that a “code of silence” policy existed for correctional officers and those who violated it were subject to retaliation, and c) that the Sheriff employed a disciplinary system in which certain officers with clout were exempted from discipline. Houskins also brought pendant state court claims of assault and battery against Keith. At trial, the jury returned a verdict against the Sheriff and Keith. It awarded $240,000 against the Sheriff and $10,000 in compensatory and $50,000 in punitive damages against Keith. The Sheriff and Keith appeal.

In their opinion, Judges Bauer, Manion and Williams affirmed the judgment and damages award with respect to Keith and reversed and remanded with respect to the Sheriff. The Court first addressed two preliminary procedural issues. Houskins argued that the Sheriff could not appeal a denial of summary judgment after a jury verdict and also that the Sheriff waived the argument by not raising it in the final pre-trial order. The Court noted that while denials of summary judgments motions based on the sufficiency of the evidence are generally not reviewable, the Sheriff’s motion raised a question of law – whether Houskins’ speech was constitutionally protected – and was therefore appealable. The Court also held that the failure to raise it in the final pre-trial order did not constitute a waiver. On the merits of the speech issue, the Court looked to the Supreme Court’s Garcetti decision. Garcetti requires a court first to decide whether a plaintiff is speaking as a private citizen on a matter of public interest. Houskins complained of retaliation for two different instances of speech – her internal complaint and her police report. The Court concluded that her internal complaint was not protected speech. She was required to report misconduct as part of her official job responsibilities. With respect to the police report, the Court concluded that it was not part of her job responsibilities but that she was speaking about a matter of purely personal interest. Her purpose in filing the police report was not to air a grievance about conditions at the jail or her safety as an employee. The Court found that Houskins’ speech was not constitutionally protected and that the lower court therefore erred in denying the Sheriff’s motion for summary judgment. The Court added that Houskins’ Monell claims that the Sheriff had a policy of retaliation and selective discipline had to fail as well. A Monell claim cannot stand where the alleged official policy did not result in a constitutional violation.

With respect to the jury’s verdict for Houskins on her claims of assault and battery against Keith, the Court rejected each of Keith’s arguments on appeal. It held that a) the district court properly asserted supplemental jurisdiction over the state law claims since they pertained to the same set of circumstances alleged in the federal claim, b) the district court did not abuse its discretion in denying a separate trial for Keith, c) the judge’s comments to Keith’s counsel did not indicate bias, and d) the award of punitive damages was not excessive. The Court affirmed the judgment against Keith.

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GREENE-THAPEDI v. UNITED STATES December 3, 2008

In 1996, Llwellyn Greene-Thapedi filed a tax return for tax year (“TY”) 1992. The government challenged her reported tax liability. Ultimately, the U.S. Tax Court determined that she owed an additional ≈$10,000. In December 1997, the IRS assessed a deficiency for the amounts owed plus interest and asserts that it sent Green-Thapedi a notice of deficiency. Green-Thapedi claims that she never received the notice. When the U.S. threatened to levy assets, Green-Thapedi paid the ≈$10,000 and interest through December 1997 but refused to pay the additional interest on the ground that she did not receive the notice. She also brought suit in tax court to recover a ≈$10,000 overpayment on her tax for TY1999. While her suit was pending, the government applied the TY1999 overpayment to the claimed TY1992 deficiency. Green-Thapedi brought an action in federal district court to recover the TY1999 overpayment. The district court stayed the action pending the outcome in the tax court. The tax court held that her TY1999 claim was moot because the government had credited her claimed overpayment to TY1992. The government moved to dismiss in the district court for Green-Thapedi’s failure to exhaust administrative remedies in that she never made a refund claim with the IRS. The district court denied the motion. It held that Green-Thapedi’s petition in the tax court constituted an informal claim for refund. Green-Thapedi then amended her complaint to add a claim for a refund of ≈$10,000 for TY1992. The court below found that the government properly calculated Green-Thapedi’s taxes and penalties and found that Green-Thapedi did not present sufficient evidence to rebut the government’s position on the notice. Green-Thapedi appeals.

In their opinion, Judges Ripple, Wood and Tinder vacated and remanded. The Court did not address the tax computation and notice issues decided below. Instead, it found that the district court lacked subject matter jurisdiction. Once the government applied Green-Thapedi’s TY1999 overpayment to TY1992, the case became about TY1992. `The Court disagreed with the district court that the informal claim doctrine conferred subject matter jurisdiction. It held that the informal claim doctrine excuses non-compliance with certain formal administrative requirements only when those deficiencies are later corrected. Here, Green-Thapedi never filed an administrative claim for TY1992. The Court vacated and remanded with instructions to the district court to dismiss the complaint.

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POWERS v. RICHARDS December 2, 2008

Robert Powers was employed by the State of Illinois in 2002 as Deputy Director of the Department of Central Management Services. Powers is alleged to have been part of a scheme to help certain state employees keep their jobs. The employees had been appointed to their jobs for four-year terms. During those terms, they could not be fired but for cause. Instead of allowing their terms to expire shortly after the election of a new governor and risk being replaced, these employees voluntarily resigned before the election. They were then reappointed to new four-year terms. Powers signed the personnel forms that were necessary for the scheme to succeed. Powers did not have the authority to sign the forms and did so knowing that the Director would not. In October of 2002, Powers took a new job as Executive Secretary of the Civil Service Commission (“Commission”). The role of the Commission is to hear appeals of state employees regarding discharges and discipline, modify personnel rules, and investigate personnel violations. Powers’ role as Executive Secretary included drafting rules and regulations, making recommendations regarding resolution of disputes, and interpreting the Personnel Code, among others. When a new governor took office in January of 2003, he began an investigation into the late appointments. The governor’s office concluded that Powers was involved in the scheme and referred its findings to the Commission. The Commission suspended Powers and authorized its Chairman to conduct a hearing. The Chairman was authorized to fire Powers if he did not produce exculpatory evidence at the hearing. The Chairman notified Powers of his rights and held a hearing. The Chairman recommended that Powers be fired – and he was. Powers received a post-deprivation hearing before an ALJ. The ALJ concluded that the firing was warranted. Powers brought suit under 42 U.S.C. § 1983. He alleged that his firing was a deprivation of his right to association because it was on account of his party affiliation. He also alleged a lack of pre-deprivation procedural due process. The defendants conceded, for purposes of summary judgment, that Powers was fired because he was a Republican. The district court granted summary judgment to all defendants. Powers appeals.

In their opinion, Judges Manion, Rovner, and Evans affirmed. The Court stated that the First Amendment does not prohibit a firing based on party loyalty if that loyalty is necessary to properly perform the job. The considerations in determining that necessity include whether the position allows for meaningful input into government decision-making and involves political discretion. The Court reviewed Powers’ job description to decide whether the position was such a position. The Court recited the job’s numerous responsibilities and concluded that they did include broad discretion to make policy, interpret the law, and speak on behalf of the Commission. The position is therefore one into which an incoming administration can appoint someone of its own party. With respect to Powers’ procedural due process argument, the Court noted that when a person is afforded a full post-deprivation hearing, a pre-deprivation hearing satisfies due process if it includes notice, an explanation of the evidence, and an opportunity to be heard. Since Powers concedes that he had all that is required, he cannot prevail. Finally, the Court was not persuaded by Powers’ unsupported claim that the Commission had already decided to fire him before the hearing.

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UNITED STATES v. LIGAS   December 1, 2008

Lawrence Ligas owed the government over $300,000 in taxes, penalties, and interest. Federal tax liens attached to his property. The United States brought an action in February 2004, just prior to the expiration of the statute of limitations. Ligas received a copy of the summons and complaint by mail but did not waive personal service. Between February of 2004 and February of 2005, the government failed to serve Ligas properly. In March, the court granted the government’s fourth request for an extension and permitted service by posting the summons and complaint on the door of Ligas’ home, by mailing copies to his home by certified mail, and by faxing copies to a fax number listed on Ligas’ pro se appearance form. On Ligas’ motion, the district court vacated its March order and dismissed the complaint for failure to serve Ligas. The court determined that the government had not been diligent in its service attempts and was not entitled to the fourth extension. The court relied on two facts – that Ligas’ co-defendant (the bank holding a mortgage on his property) had successfully served Ligas and that the government could not provide evidence of its pre-2005 attempts to serve Ligas. On the same day, Ligas sought to have the tax liens quashed. The government responded by asking for reconsideration of the court’s dismissal, arguing that Ligas had submitted to personal jurisdiction and waived objection to service by appearing to quash the liens. The court agreed. It reinstated the complaint and eventually granted summary judgment to the government. Ligas appeals.

In their opinion, Judges Bauer, Evans and Sykes reversed and remanded. The Court recited the general rules that a defendant must be served through one of the methods listed in FRCP 4, that a person must normally be served within 120 days but an extension may be granted, and that a complaint must be dismissed if it is not served within the allowed time. The Court concluded that the district court had correctly dismissed the complaint for the government’s failure to serve Ligas. The Court disagreed with the district court’s assessment of the impact of Ligas’ request to quash the tax liens. The Court stated that a defendant’s assertion of a right to affirmative relief does not generally waive an objection to jurisdiction. The affirmative relief can be unrelated to the jurisdiction issue (such as a counterclaim) or related to the jurisdictional issue (such as here, where the enforceability of the tax lien depended on the success of the jurisdiction argument). The fact that Ligas had other methods available to attack the liens did not change the Court’s view of the impact of his appearance. The Court also concluded that Ligas’ participation in the proceedings after the court’s reinstatement did not act as a waiver of his jurisdiction objection.

Judge Evans dissented from the panel’s opinion. Judge Evans emphasized that the court’s dismissal had been without prejudice. The government could refile and attempt service anew. He recognized that even the government itself thought there were serious statute of limitations barriers to a new complaint. But the barriers were not established as fact. The government could refile and put Ligas to the burden of establishing the defense. Since extinguishing the liens did not necessarily follow from the dismissal, Judge Evans believed that the district court did not abuse its discretion in reinstating the complaint. 

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KELLEY v. MED-1 SOLUTIONS  (November 25, 2008)

Brian Kelley received medical treatment at St. Vincent Carmel Hospital (“St. Vincent”). When Kelley failed to pay for the services, St. Vincent hired Med-1 Solutions, LLC (“Med-1”) to collect the amounts due. Although St. Vincent always owned the debt, it gave Med-1 the right to collect it. Med-1 sued Kelley in an Indiana small claims court. It attached documents to the small claims court form which indicated that the debt was owed to St. Vincent. Med-1 also attached Kelley’s financial responsibility form he had signed prior to receiving medical treatment. That form provided for payment of “reasonable attorney fees” if the debt was assigned to a collection agency. St. Vincent paid Med-1’s fees and costs and a percentage of the amount collected. Med-1’s in-house attorneys received a percentage of the attorney fees collected by Med-1. Med-1 obtained a judgment against Kelley for $892.09. Kelley and several others in a similar situation brought suit against Med-1, its owner, and its in-house attorneys. Plaintiffs alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), claiming that Med-1 was not entitled to attorney fees and that its claims that it was were false and deceptive. The district court dismissed the complaint. Plaintiffs appeal.

In their opinion, Judges Bauer, Flaum and Williams affirmed. The issue before the Court was whether the case was controlled by the Rooker-Feldman doctrine. That doctrine, taken from two Supreme Court decisions, Rooker v. Fidelity Trust Co. and District of Columbia Court of Appeals v. Feldman, prohibits a lower federal court review of a decision of a state court. Plaintiffs attempted to avoid the application of Rooker-Feldman by characterizing their complaint as one attacking defendants’ representations and requests for attorneys fees, not the actual state court judgment awarding the fees. The Court did not accept the distinction. It concluded that if it found that defendants were not entitled to fees and therefore violated the FDCPA, it was also determining that the state court judgments were in error. The Court next addressed the “reasonable opportunity” exception to the Rooker-Feldman doctrine. Plaintiffs contended that they were unable to raise their FDCPA claims in the Indiana small claims venue. The Court disagreed. The plaintiffs could have transferred their case out of the small claims venue and litigated their FDCPA claims. The Court concluded that plaintiffs had a “reasonable opportunity” to litigate their claims and their complaint was properly dismissed. In addition, the Court questioned the continued viability of the “reasonable opportunity” exception since the Supreme Court’s decision in Exxon Mobil Corp. v. Saudi Basic Industries.

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ILLINOIS BELL TELEPHONE CO. v. BOX  (November 26, 2008)

Illinois Bell Telephone Co. (“Illinois Bell”) is a provider of local telephone service. The Illinois Commerce Commission (“ICC”) ordered Illinois Bell to provide certain elements of service, including access to switching centers and splitting, to competing carriers at its cost. Illinois Bell brought suit against the Commission to be relieved of that obligation. The district court granted summary judgment to Illinois Bell. The ICC and intervenor Globalcom, Inc. appeal.

In their opinion, Judges Posner, Ripple, and Evans affirmed. The Court first noted the federal interest and approach to the telecommunication industry. Congress and the FCC have established certain requirements to promote competition in the industry. Section 251 of the Telecommunications Act of 1996 (“Act”) requires carriers like Illinois Bell to provide certain services to other carriers on an unbundled basis and at cost. The FCC determines which services are included, after considering whether access is necessary and whether denial of access would impair the requesting carrier’s ability to provide its service. If the FCC decides a service meets the section 251 criteria, a carrier can request the service from carriers like Illinois Bell at its cost. Section 271 of the Act also entitles carriers to gain access to other unbundled services from “Bell Operating Companies” such as Illinois Bell. Unlike section 251, however, section 271 does not require that access be provided at cost. The FCC allows a carrier to charge a market rate for section 271 services.

The Court found that the ICC’s order that Illinois Bell provide services at cost was inconsistent with Sections 251 and 271. The Court noted that the ICC was, in effect, overruling the FCC. The Court pointed out that the savings clause of section 251 allowed state orders that were consistent with and did not prevent implementation of the section. The Court concluded that the ICC’s orders were inconsistent with and did substantially prevent the implementation of the federal policy. The Act does not specifically forbid the requirement imposed by the ICC but to allow it would defeat the goals of the FCC. The Court concluded that only network services identified by the FCC under section 251 are required to be provided at cost. Other services, even if required to be provided, can be charged at a market price. 

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