Plan Was Entitled To Rely On "Thorough And Reasonable" Opinions Of Consulting Physicians
BLACK v. LONG-TERM DISABILITY INSURANCE (September 18, 2009)
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Elizabeth Black was the executive director of the Milwaukee World Festival, Inc., the organization that operates an annual summer music festival in Milwaukee. In early 2001, she had surgery to repair two aneurysms. She returned to work after several weeks and was well enough to run the festival that summer. Although her contract was not scheduled to expire until the end of 2003, she sought a renewal after the 2001 festival. The organization deferred a decision until 2002. When that time came, many of her relationships with coworkers had deteriorated. She complained, and had several doctors support her complaints, that the stress and abuse of her job was harmful to her health. In July of 2003, the organization elected not to extend her contract. Within a month, Black claimed that she was disabled and could no longer work. She filed a disability claim with the organization's plan. The plan denied the claim, based on a review of the records she submitted. After an administrative appeal, the plan’s underwriter consulted four physicians and a psychiatrist, each of whom reviewed her records and concluded that she was not disabled. The underwriter denied the appeal. Black appealed to the district court, which granted summary judgment to the plan. Black appeals.
In their opinion, Judges Evans, Williams and Tinder affirmed. The Court reiterated that it’s standard of review, because of the plan’s discretion, is arbitrary and capricious. The Supreme Court's Glenn decision simply requires the court to consider a plan administrator's conflict of interest -- it does not result in a heightened standard of review. On the merits, the administrator's decision was well supported by the record. The plan's consulting physicians were unanimous in their belief that Black's condition was stable. The administrator also considered Black's treating physician's reports. The administrator found those reports to be slanted one way when she was seeking a contract extension and the other way when she was seeking disability benefits. The Court concluded that the administrator was allowed to rely on the thorough and reasonable explanations given by the consulting physicians. Finally, although Black's Social Security disability determination is a factor that should be considered in a benefits determination, the Court noted that the administrator did consider the determination and discounted it because the Social Security Administration did not have the same medical records available to it.
Late And Incomplete Notice Of Bankruptcy Filing Is Insufficient To Bar Creditor
TIDWELL v. SMITH (September 23, 2009)
When Dr. Bruce Smith filed a bankruptcy petition in 2004, plaintiffs had separate lawsuits pending against him in state court. Smith listed neither of them on his creditors schedule, although he did list their attorney. That petition was dismissed, however, and a second petition filed a year later listed neither the plaintiffs nor their attorney. Plaintiffs' claims were potentially non-dischargeable because they were based on an alleged sexual assault. Plaintiffs never received notice of the petition. However, in late December, just a few weeks before the deadline for objecting to the discharge, Smith's lawyers in the state court cases filed motions asking for transfers to the bankruptcy calendar. The motions were received in plaintiffs' lawyer's office on December 23. He was out of town and did not actually see them until January 4 of the next year, five days before the deadline. The motions provided very little information about the bankruptcy, other than its filing. The deadline came and went. The bankruptcy court entered an order of discharge. Almost a year later, plaintiffs sought relief from the bankruptcy court. After taking testimony, the court concluded that plaintiffs could proceed against Smith in state court. In doing so, the court specifically found that the omission of plaintiffs from the schedule was deliberate and that the notice, albeit received before the final discharge, was too late. The district court affirmed the decision of the bankruptcy court. Smith appeals.
In their opinion, Judges Rovner and Evans and District Judge Van Bokkelen affirmed. The Court first declined to even consider Smith's challenge to the finding of deliberateness. The bankruptcy court declined to grant relief under section 727, which requires fraud. Instead, it granted relief under section 523, which only requires that the debt was unscheduled and the creditors did not have notice. With respect to the notice, the Court agreed that it was untimely. Notice must be reasonably calculated to inform an interested party of the action and provide a reasonable time to respond. Given the timing of the notice as well as its content, the Court concluded that the service of the state court motions was insufficient.
Reasonable Delegation of Responsibility by Contractor Negates Breach of Duty
AGUIRRE v. TURNER CONSTRUCTION COMPANY (September 30, 2009)
Jose Aguirre was employed as a bricklayer by one of the subcontractors involved in the renovation of Chicago's Soldier Field. He was seriously injured when he fell off a scaffold. He brought this personal injury suit against the joint venture that was acting as general contractor for the project. The court first found that the general contractor had no duty to Aguirre and that Aguirre could not avail himself of res ipsa loquitur, in that the general contractor did not have exclusive control of the scaffold. It granted summary judgment to the defendants. On appeal, the Seventh Circuit reversed on both grounds, concluding that the defendants assumed a duty and that exclusive control is not an element of res ipsa loquitur. On remand, the case was tried to a defense verdict. Aguirre appeals.
In their opinion, Judges Posner, Ripple and Kanne affirmed. The general rule, stated the Court, is that a general contractor is not liable to someone injured as a result of the negligence of a subcontractor. An exception applies, however, when the contractor either by law or contract is required to care for the safety of the subcontractor's employees. Here, the general contractor took active steps to ensure the safety of all employees on the project. The exception therefore applies. Having found a duty, the Court proceeded to address the issue of whether it was breached. The subcontractor itself assembled the scaffold hours before the accident. Although the general contractor imposed strict requirements for scaffolds and inspected them frequently, the Court concluded that it did not breach its duty by not inspecting every one before it was used. The accident was caused either by the negligence of Aguirre or the subcontractor. Finally, the Court addressed the fact that the scaffold was missing a middle railing, the presence of which might have prevented the injuries by giving Aguirre something to grab as he fell. The problem with that, said the Court, is that the middle railing is not designed for that purpose. To rely on the absence of a safety measure, the injury complained of must be one that the safety measure was designed to prevent.
Uncertainty About Merits Is Sufficient To Affirm Preliminary Injunction
HOOSIER ENERGY RURAL ELECTRIC COOPERATIVE v. JOHN HANCOCK LIFE INSURANCE COMPANY (September 17, 2009)
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Hoosier Energy Rural Electric Cooperative and John Hancock Life Insurance Company entered into a lease-leaseback of a Power Plant in order to take advantage of excess depreciation deductions held by Hoosier. Because the transaction exposed John Hancock to substantial financial risks, Hoosier arranged with Ambac Assurance Corporation to pay to Hancock $120 million upon the occurrence of certain events. One of those events was a reduction in Ambac’s credit rating. If that occurred, Hoosier had 60 days to replace the surety. It did occur. Even with an extension, Hoosier did not replace the surety. John Hancock demanded performance. Ambac was ready and able to perform but Hoosier filed suit and obtained a temporary restraining order and a preliminary injunction. Ambac’s performance would require Hoosier to cover the payment, which would drive Hoosier into bankruptcy. John Hancock appeals.
In their opinion, Chief Judge Easterbrook and Judges Kanne and Wood affirmed. The Court began with the requirements for equitable relief: irreparable injury, a plausible claim on the merits and the balance of equities. The Court accepted the district court’s finding of irreparable injury and proceeded to address the merits. The district court had found merit in two Hoosier arguments: that the transaction was illegal and must be unwound and that Hoosier is at least temporarily excused under the doctrine of "temporary commercial impracticability." The Court disagreed with respect to the first prong. Whether or not the IRS allows the parties to take advantage of the intended tax consequences, the Court believed that the parties were still bound by their contractual obligations. With respect to the second prong, the Court noted that New York courts do not recognize "temporary commercial impracticability." Although they do recognize the defense of impossibility, they take a dim view of it and do not excuse performance when the "impossibility" is the result of financial hardship. If, as Hancock claims, Hoosier had the option to replace the surety, the Court did not believe that an impossibility defense would stand. If, however, as Hoosier claims, it had a duty to replace the surety, an impossibility defense might prevail. The Court found enough uncertainty in the contract and the facts surrounding Hoosier's ability or inability to replace the surety that it concluded that the district court was correct with respect to Hoosier's prospect of prevailing. Finally, the Court required the district court to re-examine the amount of the injunction bonds to protect John Hancock and urged the district court to allow Hancock to realize its surety if Hoosier is not able to replace the surety within a few months.
"In The Open" Exclusion Does Not Apply to Property That Is Outside But Protected From The Elements
TWENHAFEL v. STATE AUTO PROPERTY AND CASUALTY INSURANCE CO. (September 14, 2009)
Roger Twenhafel owns a business that manufactures wood cabinets. He stores some of his wood inventory outdoors. Just before a violent storm hit in late 2006, he covered the inventory with a tarp and secured it with heavy blocks and beams. In spite of this effort, the storm lifted and carried the tarp away. The inventory was damaged. Twenhafel made a claim against State Auto Property and Casualty Insurance Company. The policy covered all losses except those specifically excluded. State Auto denied the claim, relying on an exclusion for rain damage to property "in the open." Twenhafel brought suit for breach of the insurance policy. The district court found that "in the open" was not ambiguous and it meant property that was exposed to the elements with no protection. The court granted summary judgment to Twenhafel and awarded prejudgment interest at 6.98% and postjudgment interest at .96%. State Auto appeals.
In their opinion, Judges Rovner and Evans and District Judge Van Bokkelen affirmed in part, vacated in part and remanded. The interpretation of the insurance contract, started the Court, is a question of law. A court's objective is to give effect to the intention of the parties. Ambiguity exists only if there are multiple reasonable interpretations. Here, the contract covered all losses except those specifically excluded. The relevant exclusion, for property "in the open," is not defined. The Court concluded that the common, unambiguous meaning of that phrase is "exposed to the elements." Since the property was not exposed, the district court correctly granted summary judgment against State Auto on the merits. The Court also affirmed the damage award. Twenhafel was unable to quantify the loss at his deposition, but did so later in an affidavit. State Auto did not object to the affidavit. Finally, the Court vacated the award of prejudgment interest. Although it agreed that prejudgment interest was appropriate, the award exceeded the statutory rate of 5% and was not supportable by any exception.
Insufficient Details Of Work Restrictions And Job Duties Fails "Similarly Situated" Requirement
MCGOWAN v. DEERE & CO. (September 11, 2009)
William McGowan, an African-American male, had over 20 years of employment at Deere & Company when he injured his back. He eventually underwent surgery. He returned to work with a 25-pound weight restriction imposed by the company doctor. His surgeon and physical therapist both cleared him, on separate occasions, to return to work with less onerous restrictions. The weight restriction prevented him from returning to his prior job and also disqualified him from two other positions. McGowan brought an action under Title VII and § 1981, complaining of Deere's refusal to reinstate him and refusal to select him for the other positions. The district court granted summary judgment to Deere. McGowan appeals.
In their opinion, Judges Flaum and Williams and District Judge Lawrence affirmed. The Court first noted that the elements and proof necessary for Title VII and § 1981 are essentially identical. McGowan proceeded under the indirect approach, in which he had to prove, among other things, that other persons similarly situated but not in his protected class were treated more favorably. The similarly situated test, said the Court, is a flexible test. The purpose is to identify a sufficient number of common factors between the claimant and others in order that a meaningful comparison can be made. The critical comparators here are job duties and weight restrictions. The court concluded that McGowan did not provide sufficient evidentiary basis for either job duties or weight restrictions on the employees that the proffered as similarly situated. He therefore failed to make a prima facie case. Alternatively, the Court concluded that McGowan failed to produce any evidence that Deere's stated reasons for its decisions were discriminatory.
Plaintiff's Conclusory Allegations Fail to Meet The Federal Pleading Standard
BISSESSUR v. THE INDIANA UNIVERSITY BOARD OF TRUSTEES (September 11, 2009)
Bissessur was a graduate student in the School of Optometry at Indiana University. The 2004-2005 school year was not a banner one for him. He received an incomplete and two D+ grades, was banned from one clinical rotation and failed another rotation. The University dismissed him. Bissessur filed suit and alleged violations of his substantive and procedural due process and equal protection rights. He also alleged a breach of implied contract. The district court dismissed for failure to state a claim. Bissessur appeals.
In their opinion, Judges Flaum, Williams and Tinder affirmed. The Court first concluded that, although a student does not have a federal constitutional right to a graduate education, an implied contract could give rise to a property interest. That interest, in turn, would receive constitutional protection. In order to find the implied contract, however, a student must establish an identifiable promise that was breached. Bissessur admittedly made no such allegations in this complaint. He instead relies on the conclusory allegations of his complaint and his representation that the specific promises will be unearthed during discovery. Citing Bell Atlantic and Iqbal, the Court concluded that be fell "drastically short" of the current federal pleading requirements.
Police Officer's Errors In A Warrant Request Were Not Intentional False Statements or A Reckless Disregard For The Truth
SUAREZ v. TOWN OF OGDEN DUNES (September 11, 2009)
William Suarez hosted a high school graduation party on the beach behind his parents' home in Ogden Dunes, Indiana. Beer was served. Around 11:00 p.m., a local police officer happened by and noticed the activity. While warning one young man for his illegal parking, he was verbally abused by several others. Believing that the party was getting out of control, the officer left to get help. Meanwhile, Suarez ended the party, put out the bonfire and invited a small group of his friends inside to spend the night. Suarez' mother, concerned that the police may return, instructed the boys to remain upstairs. The officer returned with a bevy of squad cars. He saw that there were still several cars in the driveway, although no people were present. Suspicious that the underage drinking was continuing inside the house, the officer telephoned a local judge for a search warrant. He described the earlier scene of abuse and fairly raucous behavior. He added that there were bottles in the back yard, that a number of teenagers retreated into the house and that teenagers hiding behind couches were visible through a window of the house. He got his warrant -- they broke down the door -- they arrested Suarez and his mother. William was wrestled and pepper-sprayed during his arrest. Suarez and his mother brought this action under § 1983, alleging an unlawful search and an unlawful arrest. William also complained of excessive force. Most of the case was resolved with summary judgment in the defendants' favor. The excessive force claim against three of the officers was tried to a jury, resulting in a defense verdict. William and his mother appeal.
In their opinion, Judges Flaum, Williams and Tinder affirmed. The illegal search claim, stated the Court, depends on the existence of probable cause. Because the plaintiffs challenged the statements made by the officer to the judge, as opposed to the decision of the judge, they must show that the officer made false statements knowingly or with reckless disregard for the truth and that the statements were necessary for the determination of probable cause. The Court first considered the claim that he made false statements by implying that he actually saw the teenagers retreat into the house and by omitting the fact that almost an hour elapsed between the earlier raucous behavior and his return to the home. The Court concluded that these were not materially false statements. The officer's earlier observations combined with the fact that a number of cars were still at the house supported an inference that the party was still taking place. The Court also rejected the claim that the officer did not personally observe every fact reported to the judge. He was entitled to rely on the collective knowledge of the gathered officers. Probable cause therefore existed and the search was lawful. The existence of probable cause for the search disposes of William's unlawful arrest claim. As for his mother's, the officers had reason to believe that she was permitting minors to consume alcohol in her home, a violation of Indiana law. Her arrest, also, was lawful.
Case Remanded For Hearing When Evidence Does Not Support Rationale For Adult Business Regulation
NEW ALBANY DVD v. CITY OF NEW ALBANY (September 10, 2009)
New Albany DVD set out to operate an adult entertainment business in New Albany, Indiana. It purchased property, obtained licenses and renovated a building. Although the land was properly zoned, the City refused to conduct a final inspection, a requirement for occupancy. Instead, it imposed a moratorium on new adult businesses. During the moratorium, it changed the zoning rules to prohibit the operation of an adult business on the property selected by New Albany DVD. The new rules prohibit the operation of an adult business within 1000 feet of a church or any property zoned residential. The site is within 200 feet of both. New Albany DVD brought suit under § 1983, alleging a violation of the First Amendment. The district court held that the ordinance was likely unconstitutional and issued an injunction allowing New Albany DVD to open. The City appeals.
In their opinion, Chief Judge Easterbrook and Judges Ripple and Rovner remanded. The Court first disagreed with the lower court's rationale -- that the regulation was not narrowly tailored for its purpose -- for issuing the injunction. Although Alameda Books and other cases require narrow tailoring of regulations of adult businesses, the Court concluded that the dispersal regulation at issue had often been used and sustained after challenge. The Court went on, however, to agree with the court’s result under a different rationale. It noted that the studies relied on by the City focused on live-entertainment businesses. New Albany DVD offers take-home materials only. The City’s attempts to overcome this hurdle by offering anecdotal evidence of increased litter and theft was rejected as well. The Court agreed that the City might be able to use those justifications, but concluded that sufficient evidence did not exist in the record. Finally, the Court referred, as it did in its earlier Annex Books opinion (see post), to Justice Kennedy’s opinion in Alameda Books as a guide to the evidence required under the intermediate scrutiny standard.
Class Treatment Is Held Inappropriate For Challenge To Post-Bond Detention
HARPER v. SHERIFF OF COOK COUNTY (September 8, 2009)
Robert Harper was arrested on September 29, 2005. The next afternoon, a judge found probable cause, set bond and remanded him to the custody of the sheriff. Apparently, Harper's wife was at the probable cause hearing and was willing and able to post a cash bond. She eventually posted it a few hours later but Harper was not released from custody until hours after that. During that time, he was in the custody of the sheriff undergoing pre-release processing. Harper brought an action against the Sheriff, alleging that the pre-release procedures are unconstitutional. The district court granted Harper's motion for class certification, although it found his class definition too broad and asked for a redefinition. The Sheriff appeals.
In their opinion, Judges Bauer, Sykes and Tinder vacated and remanded. The Court first clarified that it had jurisdiction, notwithstanding the lower court's request for a redefinition of the class. The open definition was of no consequence since the court certified the class. Before it addressed class certification, the Court first had to decipher the crux of the complaint. It noted that Harper complained of specific intake procedures as well as the general practice of holding detainees after bond had been posted. Relying specifically on representations at oral argument, the court focused on the latter of these two issues -- the post-bond detention. On the merits of that argument, however, the Court concluded that the reasonableness of the detention would depend on the specific facts and circumstances of each individual case. The Court cited a number of factors: time of day, number of detainees, collateral events, etc. The Court also addressed Harper's equal protection claim that persons with money or influence can avoid the detention. Without addressing the merits, the Court concluded that this claim, too, was not appropriate for class disposition.
A Plaintiff's Failure To Present Evidence That Her Fall On A Patch Of Ice Outside Defendant's Restaurant Resulted From An Unnatural Accumulation Of Ice Precludes Recovery
CICIORA v. CCAA, INC. (September 4, 2009)
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Lela Ciciora went to Burrito Jalisco one winter day in Chicago to pick up her lunch. She parked in the lot and used the sidewalk to get to the store. It had snowed earlier but the snow had been removed from the sidewalk. A store employee had also salted the sidewalk that morning. Nevertheless, Ciciora slipped on a small patch of ice and fractured her ankle. She brought a personal injury lawsuit against the owner of the premises and CCAA, who ran the restaurant. The district court granted summary judgment to the defendants. Ciciora appeals.
In their opinion, Judges Kanne, Rovner and Evans affirmed. The Court started with the general rule that a property owner has no duty to remove natural accumulations of snow and ice. A duty may exist, however, if one is contractually obligated to do so or if one voluntarily does so. Here, the restaurant owner voluntarily cleared and salted the sidewalk regularly. The Court noted that a volunteer could be liable if her actions resulted in an unnatural accumulation or increased an existing hazard in some other manner. There was simply no evidence presented, however, of an unnatural accumulation or of an aggravation of existing hazard. Ciciora relied on mere speculation. The district court properly granted summary judgment. Similarly, the court concluded that Ciciora failed to present any evidence that the owner of the premises failed to exercise reasonable care in its obligation to maintain the sidewalks.
Parties To An Arbitration May Agree To Keep Information Confidential But Agreement Does Not Prevent Discovery Of The Information By A Third Party
GOTHAM HOLDINGS v. HEALTH GRADES (September 3, 2009)
Gotham Holdings and Health Grades are parties to litigation pending in New York. In that proceeding, Health Grades maintained that an award in its earlier arbitration with Hewitt Associates supported its litigation position. Although it tendered the award and related documents in the litigation, Gotham asked for more. Health Grades refused. Gotham subpoenaed the documents directly from Hewitt in Illinois. The court ordered Hewitt to turn over the documents, which it is willing to do. Health Grades appeals.
In their opinion, Chief Judge Easterbrook and Judges Williams and Sykes affirmed. The Court noted that Health Grade's refusal was based on a confidentiality provision in the arbitration. The first ground on which it affirmed was a specific section of the confidentiality agreement that allowed documents to be produced in response to a subpoena. Additionally, even if the agreement did not so provide, the Court held that the parties to the arbitration could only bind themselves. They cannot, by agreement, limit a third party's access to the documents.
The Injury Suffered By A Citizen Mistakenly Arrested On An Unpaid Parking Ticket Warrant Is Too Remote To Satisfy "Zone of Interests" Standing
THOMAS v. CITY OF PEORIA (September 3, 2009)
A lawyer for the city of Peoria sought and obtained a warrant for the arrest of Joshua Thomas. Joshua’s crime -- nine unpaid parking tickets. Sometime later, Joseph Thomas was stopped for a traffic violation. Although the names and addresses of Joshua and Joseph did not match, the driver's license number on the arrest warrant for Joshua did match that of Joseph. Joseph was arrested. He was later released when it was determined that he was, indeed, not Joshua. Joseph brought an action under § 1983 against the City and the lawyer who obtained the warrant. He alleged a deprivation of his Fourth Amendment and due process rights. The court dismissed for failure to state a claim. He then denied class certification. Thomas appeals.
In their opinion, Judges Cudahy, Posner and Tinder affirmed. The Court first addressed "zone of interest" standing. The Court explained zone of interest standing as a requirement of federal common law that limits the class of persons entitled to sue. Remoteness of injury is one of those limitations. Here, for example, assuming state law does not authorize an arrest for unpaid parking tickets and that such an arrest would therefore violate the Constitution, Joshua Thomas is the one within the class of people the policy is designed to protect. Joseph’s interest is to remote to be recognized. Alternatively, the Court went on to conclude that Joseph would fare no better even if he was within the zone of interest. The Supreme Court held in Moore that a otherwise reasonable arrest (which this is) is not unconstitutional simply because it was for an offense that does not authorize arrest. The Court easily disposed of the due process argument. Finally, the Court added that the individual defendant would in any event have absolute immunity as a prosecutor performing a prosecutorial function.
Evidence Of Discriminatory Intent Based On First-Hand Experience, Even If Uncorroborated And Self-Serving, Is Enough To Get A Discrimination Claim To The Jury When It Is Coupled With An Adverse Job Action
DARCHAK v. CITY OF CHICAGO BOARD OF EDUCATION (September 3, 2009)
Anna Darchak, a native of Poland, worked for several years in the Chicago public school system as a teacher of English as a Second Language. In 2005, she was hired as a full-time teacher at the Princeton Alternative Center on a one-year contract. It was not a good year. Almost immediately, Darchak complained that Hispanic students were being treated more favorably than Polish students. Darchak alleges that Princeton's principal made several disparaging remarks in reference to Darchak's heritage. Later in the year, the principal assigned Darchak to a classroom with a large number of Spanish speaking students. Darchak complained – and she received a negative evaluation. The principal chose not to renew Darchak's contract at the end of the year. Darchak filed suit, alleging retaliatory discharge, First Amendment retaliation under § 1983, and national origin discrimination under Title VII. The district court granted summary judgment to the defendants. Darchak appeals.
In their opinion, Judges Cudahy, Ripple and Wood affirmed in part and reversed in part. The Court addressed each claim in turn. First, with respect to the state law claim of retaliatory discharge, the Court stated that Darchak had to demonstrate that she was discharged, that the discharge was retaliatory, and that the discharge violated a clear mandate of public policy. The Court concluded that the claim failed on both the first and third elements. First, Darchak was not discharged -- her one-year contract was not renewed. Second, the public policy relied on by Darchak -- equal education -- has never been recognized by Illinois courts as support for a retaliatory discharge claim. With respect to her First Amendment retaliation claim, the Court concluded that the Board of Education was not liable under Monell. Although Darchak alleged that the principal was a final policymaker, the Court stated that Illinois law makes the Board the final policymaker. The Court agreed that the Board's adoption of the principal's recommendation could be a basis for liability but only if they adopted the retaliatory basis as well. The Court found no evidence of that. Finally, with respect to the Title VII national origin discrimination claim, the Court noted that she put forth both a direct and an indirect case. The Court rejected her indirect method approach because she could not demonstrate pretext with respect to the Board's reasons for nonrenewal. On her direct method, however, the court found that Darchak presented sufficient circumstantial evidence to reach a jury. The evidence of derogatory remarks followed shortly by a disciplinary notice from the principal follow later by the nonrenewal establish a prima facie case. The fact that Darchak's testimony is uncorroborated and self-serving does not change that result, as the district court believed. The testimony is based on her first-hand experience and deserves to be considered. The Court concluded that the evidence raised a question of intent that had to go to the jury.
Intermediate Scrutiny Of Adult Bookstore Regulations Requires Evidence Of The Public Benefit Of The Particular Restrictions
ANNEX BOOKS, INC. v. CITY OF INDIANAPOLIS (September 3, 2009)
The City of Indianapolis regulates “adult entertainment businesses”. The regulations include a license requirement, store lighting requirements, Sunday closings and restricted weekday hours. Prior to 2003, any retail establishment that received 50% of its revenue or devoted 50% of its space to adult materials was considered such a business. In 2003, Indianapolis reduced the 50% threshold to 25%. Four businesses that fell within that new definition brought suit, challenging both the licensing procedures and the definition. The district court rejected the challenges to both. The businesses appeal.
In their opinion, Chief Judge Easterbrook and Judges Flaum and Rovner affirmed in part and reversed in part. The Court adopted the district court's opinion with respect to the licensing challenge. It went on to address the challenge to the definition. The Court noted that Indianapolis conceded that the law is subject to "intermediate" scrutiny in that the plaintiffs are booksellers. Indianapolis relies on the reduction of crime and other negative effects of adult businesses. The Court identified a problem, however. Indianapolis relied on studies accepted by the Supreme Court and on a study it conducted years earlier that associated higher crime with adult businesses. But the studies all dealt with the effect of regulations dispersing adult businesses. The Indianapolis ordinance does not deal with dispersal -- it deals with store hours and store conditions. The studies also dealt with businesses that offered live entertainment, unlike three of the four plaintiffs in the case. The Court concluded that an evidentiary hearing was required. At the hearing, the City must present relevant evidence supporting its restrictions on adult businesses that satisfies the intermediate standard of the Supreme Court's decision in Alameda Books. The Court referred to Justice Kennedy's opinion, reflecting the holding of Alameda Books, as instructive. In order to meet the constitutional challenge, said Justice Kennedy, an ordinance must suppress the secondary effects of the regulated business yet leave the availability and amount of speech "substantially intact."
After Lulling Pro Se Plaintiff Into Thinking The Procedure Was Proper, District Court Erred In Denying Motion To Reopen On The Last Day Of The Limitations Period
PRINCE v. STEWART (September 2, 2009)
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The Chicago Teachers Union fired Earl Prince from his job. Prince filed an administrative discrimination charge. He then brought an action pro se for employment discrimination under Title VII before he received any response from the Illinois Department of Human Rights or the EEOC. The district court dismissed the complaint because Prince had not yet received a right-to-sue letter. Several months later, after Prince had received the letter, the district court granted his motion to reopen the case. The court vacated the order, however, a few days later at Prince's request. Months later, on the last day to sue, Prince again moved to reopen the case. This time, the judge turned him down -- and it was too late to file a new complaint. Prince appeals.
In their opinion, Judges Posner, Coffey and Manion reversed and remanded. The Court recognized Prince's mistake when he followed up the first order reopening his case with a request to reinstate the dismissal. He was simply going to be out of the jurisdiction for a short time and need not have worried about his temporary unavailability. However, the Court also recognized that no one was prejudiced by his mistake. If the second motion to reopen was filed in a timely fashion, the Court could not see any reason why it should not have been granted. The Court concluded that the district court’s lulling of the pro se litigant into believing that he did not have to refile his complaint amounted to equitable tolling.
Municipal Liability Cannot Be Based On Retaliatory Firing By Department Head Who Did Not Have Final Policymaking Authority
WATERS v. CITY OF CHICAGO (September 2, 2009)
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Daniel Waters was a painter in the Chicago Department of Transportation (CDOT). In 2000, he refused a request by his supervisor to participate in a political campaign. At about the same time, he twice contacted local investigative journalists. On one occasion, he complained about a bridge that he thought was in such a state of disrepair that it was a danger to the public. On the other occasion, he complained that the City was making some improvements to a piece of property and that it did not own. Several of his superiors were unhappy with his conduct. He was transferred into a job working for a supervisor for whom he had worked before several times. Their relationship was strained, at best. Within a matter of weeks, Waters had several run-ins with his supervisor and was reported multiple times for violent behavior. A deputy commissioner recommended his firing. The department did not act on the recommendation. Department policy required that Waters be given an opportunity to respond to the charges of violence before any discipline was handed out. Waters provided his side of the story -- but the department ruled that his conduct amounted to violence in the workplace. The deputy commissioner resubmitted his recommendation. A pre-termination hearing was held. Commissioner Rice, who held the only authority to fire, terminated Waters. Waters sued the City under § 1983, alleging First Amendment retaliation. A jury awarded Waters $225,000 in damages and the court awarded more than $1 million in back pay, front pay and pension benefits. The City appeals.
In their opinion, Judges Manion, Rovner and Tinder vacated, reversed and remanded. The Court stated that, under Monell, a city can be liable for a constitutional deprivation but only if it resulted from a policy or practice, or that the injury was caused by someone with final policymaking authority. Waters relied on the latter prong. Final policymaking authority comes from state and local law, though. Here, said the Court, local law gives policymaking authority to the City Council, which has delegated it to the Commissioner of Human Resources. Although the Court recognized that department commissioners do have some authority to execute existing policy, they do not have policymaking authority. Since Commissioner Rice had no such authority, municipal liability cannot be based on her actions. The Court went on to note that Waters presented no evidence that Rice’s termination was in retaliation for his exercise of his First Amendment rights. Even if she had policymaking authority, the absence of that evidence would have defeated his claim.
Court Will Look To Original Contract Schedule And Surrounding Circumstances In Determining A "Reasonable" Time For Performance
INTERNATIONAL PRODUCTION SPECIALISTS v. SCHWING AMERICA, INC. (SEPTEMBER 2, 2009)
North Shore Sanitary District (NSSD) entered into a contract with Voest-Alpine Industries to build a wastewater treatment plant. Voest-Alpine in turn contracted with Schwing America to supply and install five silos and associated equipment. Schwing in turn agreed to pay International Production Specialists (IPS) almost $700,000 to fabricate and install the five silos. The original schedule provided that the silos were to be delivered by December of 2001, approximately 4 months after Schwing and IPS entered into their agreement. NSSD suspended work on the project prior to the delivery dates. Schwing instructed IPS to continue its fabrication effort with respect to the two silos with the earliest installation dates but to cease any work on the site. NSSD restarted the project two years later -- but changed the physical location of the plant. The change in location resulted in a dispute between Schwing and IPS. In fact, IPS advised Schwing that it would not complete the project. After further negotiations, the project was back on. Schwing advised IPS of a new schedule requiring installation of the first two silos in August of 2004 and the other three in December of 2004. Although IPS completed the installation of the first two silos almost on time, the other three became a problem. When the silos were still not delivered by February of 2005, Schwing terminated the contract and completed the work through other subcontractors at significant cost. IPS sued for breach of contract -- Schwing countersued. After a trial, the court concluded that Schwing both did not breach and was justified in terminating the contract. The court awarded damages of almost $500,000. IPS appeals.
In their opinion (PDF), Judges Flaum, Rovner and Williams affirmed in part and reversed in part. The Court noted that Schwing terminated the contract because of IPS's failure to satisfactorily complete the work within a specified time. If IPS's performance within a particular time was required and its failure destroyed an essential element of the contract, it would be a material breach. Under Wisconsin law, a material breach would release Schwing from its continuing performance. The Court looked to the contract. It concluded that the original agreement contained an expectation for performance within a particular time. Of course, the time frame was eliminated when NSSD put the project on hold. After the project started back up, a layout schedule contained expectations for completing the project. Considering the complexity of the project and the number of subcontractors, the Court concluded that the time frames in the layout schedule were reasonable contractual expectations. Alternatively, the Court stated that the law would imply a reasonable time for performance if the contract is silent. Given the original schedule of delivery and installation as well as the later layout schedule, the Court concluded that the schedule reflected a reasonable time for performance. Therefore, the Court agreed with the district court that IPS materially breached and that Schwing was entitled to damages. The Court also concluded that the district court did not err in its computation of damages, with one exception. At the time of IPS's breach, Schwing still owed approximately $50,000 on the contract. To put Schwing in an equivalent, but no better, position then it would have been without a breach requires it to credit IPS for the $50,000.
Significant Control Over And Complete Lack Of Equity In Formation Of Company Result In Piercing Of Its Corporate Veil
LABORERS' PENSION FUND v. LAY-COM, INC. (September 2, 2009)
King & Larsen, Lord & Essex and Lay-Com are all in the development or construction business. Mike King is the owner of King & Larsen. Lord & Essex and Lay-Com are both owned directly or indirectly by members of the Popp family. King & Larsen had a collective bargaining agreement that required it to make contributions to the plaintiff fund. When it ran into financial difficulty, Lord & Essex and Lay-Com came to its rescue. They loaned money and paid some bills. The companies then entered into a complex series of transactions that resulted in the transfer of most of King & Larsen's assets to a new company, M. A. King. The tax and union pension fund liabilities of King & Larsen remained behind, in an otherwise empty shell. The pension fund sued King & Larsen, M. A. King and Mike King for the unpaid contributions. After obtaining default judgments, the funds added Lay-Com, Lord & Essex, the Lay Trust and John Popp as defendants. The district court found Lay-Com, Lord & Essex and the Lay Trust liable on a veil-piercing theory and dismissed John Popp. All parties appeal.
In their opinion, Judges Cudahy, Manion and Tinder affirmed in part and reversed in part. The Court identified the sole issue on appeal as whether it was appropriate to pierce the corporate veil of M. A. King, as successor to King & Larsen, to reach the other defendants. A primary purpose of the corporate structure is to limit liability. An exception to that limitation of liability occurs when a corporation is used as a mere instrumentality of another. The Court stated that the plaintiffs must both demonstrate that there exists a unity of interest in ownership between or among the companies and that honoring the corporate fiction would result in an injustice. A principal factor in addressing the former is whether the companies respected their separateness. A principal factor in addressing the latter is whether the company operates with sufficient capital. Addressing each of the four defendants, the Court concluded that the test was met with respect to Lay-Com. First, Lay-Com exerted substantial control over M.A. King and did not allow it to operate separately. Second, M.A. King was created with not only inadequate capital – it was created with no equity capital. The Court concluded no capital is inadequate as a matter of law. Although the Court found the analysis with respect to Lord & Essex more difficult, it also concluded that Lord and Essex was a important part of the scheme and did not maintain its separateness from M.A. King. The Court concluded that the Lay Trust and John Popp individually played no role in the scheme. It found neither subject to liability under veil-piercing.
Plaintiff's Continued Pressing of "Worthless" Counts Through Summary Judgment Justifies An Award Of Fees
MACH v. WILL COUNTY SHERIFF (September 1, 2009)
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Michael Mach was a Will County Deputy Sheriff assigned to the traffic division. For years, he maintained a satisfactory performance record. That changed after 2003. Because of budget pressure, the department notified the deputies in the traffic division that they could be temporarily assigned to the patrol division. Mach and other deputies were not happy. He started acting out, failing to follow directives, disregarding instructions, and neglecting his duties. After reprimands and warnings, he was permanently transferred to the patrol division. Mach brought an action pursuant to the Age Discrimination in Employment Act (ADEA). In addition to his transfer, he stated five other grounds for his claim. In response to the defendants’ opening briefing on summary judgment, he abandoned all five of those other grounds. The court granted summary judgment to the Sheriff and also awarded fees of 5/6 of the costs of preparing the summary judgment motion, reflecting effort that went into attacking the "worthless" claims. Mach appeals.
In their opinion, Judges Bauer, Flaum and Kanne affirmed. On the merits, Mach relied on the direct method of proof, which required him to produce evidence that he was transferred because of his age. The Court noted an absolute lack of evidence in the record supporting any such inference. His poor job performance was well documented by the department. The only circumstantial evidence of age discrimination was one stray comment made by an individual who had no influence on the transfer decision. Mach's ADEA claim fails. With respect to the fee award, the Court noted a prior holding that ADEA does not preclude an award of fees to a prevailing defendant if a plaintiff litigates in bad faith. Here, the Court concluded that the district court did not abuse its discretion in ruling that Mach litigated the five claims in bad faith. The Court noted its belief that such sanctions would be rare -- here the district court explicitly held that the five claims were "worthless."
Court Should Honor Parties' Reasonable Stipulation That Iowa Law Governs Their Dispute
AUTO-OWNERS INSURANCE CO. v. WEBSOLV COMPUTING (September 1, 2009)
Websolv sent an unsolicited fax to the dental office of Guy Bibbs. The fax was an advertisement for a healthcare seminar. Bibbs sued Websolv in state court. Websolv tendered its defense to Auto-Owners Insurance Co. Auto-Owners filed an action in federal court seeking a declaratory judgment that it had no duty to defend. Although the parties stipulated to the application of Iowa law, the court applied Illinois law and granted Websolv’s motion for summary judgment. Auto-Owners appeals.
In their opinion, Chief Judge Easterbrook and Judges Cudahy and Sykes reversed and remanded. The Court first addressed the choice-of-law issue. The Court concluded that the district court should have honored the parties' stipulation that Iowa law controls. When the parties agree on which state's law should govern and that choice is reasonable, the court should apply that law. The lower court was incorrect in its belief that it was required to apply the law of the forum. The court is only required to apply the choice-of-law rules of the forum -- in order to determine which forum’s law is the correct substantive law. Here, under Illinois' choice-of-law rules, Iowa law would apply. The Court turned to the merits, applying Iowa law. The claim in the case is that Websolv violated the Telephone Consumer Protection Act (“TCPA”) by sending the unsolicited fax. Websolv claims the suit is covered either under the policy's advertising injury section or its property damage section. The Court rejected both theories. The advertising injury section requires the company to defend its insureds for suits alleging injury from the publication of material that "violates a person's right of privacy." Recognizing that a right of privacy could refer either to matters of secrecy or matters of seclusion, the Court concluded that an Iowa court would apply the policy’s coverage only in the secrecy context. The rights protected by the TCPA, on the other hand, are privacy rights arising in the seclusion context. The Court relied, in part, on the use of the word "publication" in the policy. Publication is more relevant in the secrecy context than the seclusion context. With respect to the property damage theories, the Court noted that the only alleged property damage was the use of ink and paper from the fax machine. The Court held that this damage fell within the exclusion in the policy for "expected or intended" consequences. Websolv certainly expected its fax transmission to result in the use of ink and paper on the recipient’s end.
A Plaintiff Who Voluntarily Settles Her Individual TILA Claim Lacks A Sufficiently Concrete Interest To Appeal The Denial Of Class Certification
MURO v. TARGET CORP. (August 31, 2009)
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Christine Muro held a Target "Guest Card" for a few years. In late 1999, she paid off the balance and requested that her account be closed. In 2004, Target sent her an unsolicited Visa Card. Muro never used, or even activated, the card. She brought an action under §§ 1637 and 1642 of the Truth in Lending Act (“TILA”). With respect to § 1642, which prohibits the unsolicited issuance of a credit card, the court denied class certification. It concluded that Muro's claims were not typical of the claims of most of the proposed class (because most of the class members had an open “Guest Card” account) and that she had failed to establish numerosity with respect to the claims for which her claims were typical. Muro settled her individual § 1642 claim, reserving the right to appeal the denial of class certification. The court granted summary judgment to Target and denied class certification on the § 1637 claims. Muro appeals.
In their opinion, Judges Ripple, Rovner and Evans affirmed. With respect to § 1642, the Court noted that the narrow issue was whether a named plaintiff in a putative class action could settle her individual claim and still appeal an adverse decision on class certification. Referring to the Supreme Court's decisions in Geraghty and Roper, the Court stated that a plaintiff has to have a personal stake in the adjudication of the certification issue to maintain an appeal. The Court recognized a difference of opinion among courts as to whether a mere reservation of a right to appeal is sufficient interest to maintain an appeal. Upon reflection, the Court concluded that a voluntary settlement by a putative class plaintiff strips the plaintiffs of any personal interest in the litigation sufficient to support an appeal. Here, although Muro accepted the settlement with a reservation of her right to appeal, she retains no stake in the litigation and no right to appeal. As an aside, the Court indicated its agreement with the district court on the merits of its denial of class certification. With respect to § 1637, which requires certain disclosures before "opening" an account, the Court also agreed with the lower court. The issue on the § 1637 claim was when an account is "opened." The TILA is silent but the Federal Reserve Board regulations require the disclosures before the first transaction. Concurring with the regulation's approach, the Court noted that Muro had never activated or used her card. She had no § 1637 claim.
Court's Failure To Explain The Methodology It Used To Reach A $37 Million Civil Contempt Sanction And The Manner Of Its Administration Results In Reversal
FTC v. TRUDEAU (August 27, 2009)
Kevin Trudeau is an author and a marketer, particularly in the medium of infomercials. In that capacity, he has dueled with the FTC for years. The parties entered into a Consent Order in 2004. The order, in part, prohibited Trudeau from using infomercials to advertise a product. An exception to the prohibition was that Trudeau could market publications as long as the infomercial did not misrepresent the content of the publication. The Consent Order bought a few years of peace, until 2007. That all changed with the publication of his book, Weight Loss Cure. The weight-loss program contained in the book prescribes, in part: organic six meals/day diet, enema-like procedures performed by specialists, daily hormone injections, avoidance of any medications and a host of other dietary and lifestyle restrictions. Trudeau began appearing in infomercials touting the book. He called the program “easy,” “simple,” and said that it could be completed in the home. He failed to mention many of the restrictions. The FTC sought a contempt finding against Trudeau for violating the Consent Order. The district court agreed. The FTC sought a sanction of $46 million to reimburse the purchasers of the book and a modification of the Consent Order to require a performance bond before any further infomercials. The court instead required Trudeau to disgorge $5 million in profits and banned him completely from infomercials for three years. On an FTC motion to correct a mathematical error, the court increased the monetary sanction to $37 million. Trudeau appeals.
In their opinion, Judges Ripple, Manion and Tinder affirmed in part but vacated and remanded with respect to the sanctions. On the merits of the contempt finding itself, the Court upheld the district court. It concluded that Trudeau had agreed not to misrepresent the content of the book, that he had misrepresented it in numerous ways, that the fact that the book itself described the program as “easy” did not excuse the misrepresentations, and that many of his statements were patently false. The Court then addressed the remedies. With respect to the $37 million, the Court noted that it had to be a civil, rather than a criminal, sanction since the proceedings did not have criminal sanction protections. Although a criminal sanction can simply be a fine, a civil sanction must either compensate the complainant or coerce future conduct. If the latter, it must afford an opportunity to purge. The Court concluded that the sanction was not coercive – therefore, it had to compensate. But here, the court below did not describe how it reached the figure or what was to happen to the money. The Court concluded that the court’s failure to describe the methodology it used, to adequately substantiate the award with factual findings, and to address the administration of the funds required remand. The Court deferred to the lower court on remand the exact particulars of both the methodology for computing the award and the method of distribution. The Court also rejected Trudeau’s request for additional procedural safeguards on remand. Finally, with respect to the infomercial ban, the Court concluded that it was a coercive, rather than compensatory, civil sanction and it could not stand without an opportunity to purge.
Sexual-Harassment Plaintiff Cannot Establish A Tangible Employment Action When She Simply Stopped Reporting For Work
ROBY v. CWI, INC. (August 27, 2009)
Misty Roby was a cashier at a CWI retail store. For months, she experienced sexual-harassment by a store supervisor, Joe Schiavone. Notwithstanding the fairly frequent and offensive behavior, she did not report it. Only after another supervisor overheard a comment she made to a coworker and specifically asked her about it did she report the conduct. The store manager immediately reported it to Human Resources, which conducted an investigation. The company reorganized the store schedule so as to minimize the times Roby and Schiavone worked together. As a result of the investigation, Schiavone received a written warning. Roby was informed of the results of the investigation. Several weeks later, when Roby complained about having to close the store with Schiavone, she was allowed to go home and stay home until the store manager returned from vacation. Although the company told her that they could not accommodate her desire to never be scheduled at the same time as Schiavone, they kept her on the schedule and expected her to come to work. She simply never returned. Instead, she brought an action under Title VII alleging the sexual harassment and also alleging that she was retaliated against for her complaints. The district court granted summary judgment to CWI. Roby appeals.
In their opinion, Judges Flaum, Williams and Lawrence affirmed. In order to prevail on a hostile work environment claim, the Court noted that Roby had to demonstrate employer liability. Here, because Schiavone is a supervisor, the company is strictly liable if there was a tangible adverse employment action. If not, however, the company may assert an affirmative defense that they used reasonable care in trying to prevent the harassment and that Roby failed to take advantage of corrective opportunities. The Court found no tangible employment action. The record presented insufficient support for an actual discharge or for the degree of intolerable working conditions necessary to establish a constructive discharge. Although Roby continued to have to work with Schiavone, CWI made an effort to minimize their contact. Without a tangible employment action, the Court found that the company met its burden on the affirmative defense. It conducted an effective investigation and disciplined Schiavone. Roby, on the other hand, failed to report the behavior when it first occurred and did not take advantage of the company’s anti-harassment policy. With respect to Roby's retaliation claim, she must establish the presence of a material adverse employment action. The Court found no such evidence in the record.
Attorney's Disclosure Of Document He Agreed To Keep Confidential Was Sufficient Reason For Dismissal Sanction After The Court's "Final Warning" For Misconduct
SALMERON v. ENTERPRISE RECOVERY SYSTEMS (August 27, 2009)
Rhonda Salmeron was fired by Enterprise Recovery Systems ("ERS"). Thereafter, she brought a qui tam action, alleging that ERS engaged in fraud related to its student loan debt collection practices. Jorge Sanchez represented Salmeron. During the three years the suit was pending in district court, Sanchez missed numerous deadlines, failed to appear in court and repeatedly failed to live up to his promises. Sanchez' conduct ultimately led the trial court to dismiss the case. On Sanchez' motion, the court reopened the case -- but warned Sanchez that it was "the final warning." Within weeks, confidential documents produced by the defendants in the case appeared on the Internet. Although no confidentiality order was in place at the time, the defendants emphasized to Sanchez that they intended the documents to be confidential and the parties agreed to keep them so. The principal reason the confidentiality agreement was not in place was because Sanchez never provided any comments or changes. Sanchez admitted leaking the document to numerous outside sources. The court dismissed the case with prejudice, finding that Sanchez violated the agreement with defendants' counsel to keep the documents confidential. Salmeron appeals.
In their opinion, Judges Ripple, Manion and Tinder affirmed. The Court first expressed its agreement with the district court that Sanchez had agreed to keep the documents confidential, pending the entry of a protective order. The Court next concluded that Sanchez' disclosure of the document to a member of the press was sufficient to support the court's finding of willfulness. The Court went on to reject the additional arguments: Sanchez had fair warning of the possibility of dismissal, defendants' failure to obtain the protective order earlier does not excuse Sanchez’ conduct, a showing of prejudice to the defendants is not required, and the government's interest in the case does not warrant a different result. In short, the Court found no clear error or abuse of discretion.
A State Court Complaint Need Not Be Dismissed During The Pendency Of A Shipowner's Limitation Of Liability Act Proceeding -- A Stay Is Sufficient
AMERICAN RIVER TRANSPORTATION CO. v. RYAN (August 27, 2009)
Kerrie Vesolowski was a passenger on a motor boat when it collided with a barge. Vesolowski sued American River Transportation Co. to recover for injuries in state court. American filed an action in federal court pursuant to the Shipowner's Limitation of Liability Act. The Act limits a shipowner's liability to the value of its ship if it can prove that the acts complained of occurred without its privity or knowledge. The Act also requires that any claims brought against the owner “cease” during the pendency of the proceedings. The district court ordered that Vesolowski’s proceedings be stayed. Vesolowski complied. After more than a year, American asked the court to find Vesolowski (and others) in contempt and to impose sanctions. The court granted the motion and required Vesolowski to dismiss her state court action. Vesolowski appeals.
In their opinion, Judges Bauer, Ripple and Wood reversed and remanded. The Court first clarified its jurisdiction, noting that it has jurisdiction over an order modifying an injunction but lacks jurisdiction over an order interpreting an injunction. The Court concluded that the order modified the earlier injunction because it required that the case be dismissed, rather than merely stayed. Addressing the merits, the Court noted that the order had two possible bases: 1) the Act requires a dismissal rather than a stay, or 2) the Act requires only a stay and the dismissal is a sanction for Vesolowski's actions during the stay. The Court rejected the first basis. The use of the word "cease" in the Act and the Act's provision preserving Vesolowski's right to her state court remedy convinced the Court that the Act only requires a stay. The Court rejected the second basis as well, as it found no grounds for a sanction. The state case remained stayed. Vesolowski's only action was to add additional defendants and theories of liability. American never had to respond in state court. The Court expressed its opinion that the district court did not intend the dismissal order to be a sanction. If it did, however, it was an abuse of discretion.
Government's Equitable Claim For A Cleanup Remedy Was Not Discharged In Bankruptcy
UNITED STATES v. APEX OIL CO. (August 25, 2009)
Years ago, a corporate predecessor of Apex Oil Co. owned a refinery near Hartford, Illinois. According to the EPA, the operation of the refinery contributed to the contamination of the groundwater in the area. The United States brought an action, pursuant to the Resource Conservation and Recovery Act (RCRA), for an injunction to require Apex to clean up the site. Apex argued that its earlier discharge in bankruptcy relieved it of any cleanup obligation. The district court issued the injunction. Apex appeals.
In their opinion, Judges Cudahy, Posner and Kanne affirmed. The Court identified the principal issue on appeal as whether the government's claim for the injunction was discharged in bankruptcy. Under the bankruptcy laws, the Court stated that a debtor is discharged from any "liability on a claim." A "claim" is further defined as a "right to payment" or a "right to an equitable remedy for breach of performance if such breach gives rise to a right to payment." The Court concluded that the natural reading of the bankruptcy provision is that an equitable claim is dischargeable if the holder can obtain a money judgment in lieu of the injunction under certain circumstances. Here, however, the statute under which the government sought the injunction (RCRA) does not authorize any form of money judgment -- the only remedy available to the government is a cleanup order. The fact that the cleanup order would require a significant payment by Apex did not convert the injunction into a money judgment. The Court distinguished the Supreme Court's opinion in Kovacs. In Kovacs, the plaintiffs were seeking money from the debtor. Apex also challenged the injunction itself on vagueness grounds. The Court actually agreed that the injunction was vague and that it has in the past insisted on compliance with the requirement that an injunction describe in some reasonable detail the acts required. However, the Court concluded that that policy applies when compliance with the rule is feasible. Here, the subject of the injunction is a complicated refinery remediation. In such cases, more leeway is necessary.
Veterans' Benefits Improvement Act's Elimination Of A Statute of Limitations Is Not Applied Retroactively
MIDDLETON v. CITY OF CHICAGO (August 24, 2009)
From 1960 until 1989, Charles Middleton served in the Air Force. On two occasions in the early 1990s, he applied for positions with the City of Chicago. He was not hired for either position. In 2007, Middleton sued the City pursuant to the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). He alleged that the City refused to employ him on account of his military service. The district court applied the four year "catch-all" statute of limitations in 28 U.S.C. § 1658 (a) and dismissed his complaint. Middleton appeals.
In their opinion, Judges Kanne, Rovner and Wood affirmed. The Court considered not only the application of § 1658 (a) to the claim but also the provisions of the Veterans' Benefits Improvement Act (VBIA), enacted after the appeal. Section 1658 was enacted in 1990. Its purpose, said the Court, was to minimize the borrowing of state statutes of limitations for federal causes of action. It provided a four-year statute of limitations for any federal claim brought under a later-enacted statute, if the statute had no expressed limitations period. USERRA was enacted four years later and contained no expressed statute of limitations. The Court concluded, based on the plain meaning of the statute, that the four-year limitations applied. In doing so, it rejected the Middleton's arguments that: 1) the section did not apply because USERRA was simply an amendment of an earlier-enacted statute, and 2) the legislative history indicated Congress' intent that no statute of limitations apply. The Court turned its attention to the VBIA. The VBIA eliminates any limitations period for a USERRA cause of action. The Court noted the "well-established" rule that a statute should not be applied retroactively unless Congress' intent is clear. Nothing in the statute addresses retroactivity. The Court concluded that the statute should not be given retroactive effect. Finally, the court rejected Middleton's argument that the VBIA was merely a clarification of existing law.
Jail Guards' Willingness to Defy "Code of Silence" and Report Coworker Abuse of Inmates Is Not Constitutionally Protected Speech Under Garcetti
FAIRLEY v. ANDREWS (August 20, 2009
Fairley and Gackowski were employed as guards at the Cook County Jail. Both complained about their fellow guards' mistreatment of prisoners. After one particularly brutal incident, the affected prisoners filed suit. Fairley and Gackowski infuriated some of the other guards by their willingness to testify truthfully about their knowledge of the incident. They were both harassed and taunted, verbally and physically. Ultimately, they both quit. Fairley testified in a deposition a few weeks before he quit. Gackowski gave a deposition after he quit. Both testified at the trial, which resulted in a defense verdict. Fairley and Gackowski brought an action under § 1983, alleging that the defendants violated their free speech rights by assaulting them as a result of their willingness to report the abuse of prisoners and to testify truthfully. Shortly before trial, the district court ordered the exclusion of all evidence of events that occurred prior to the plaintiffs’ depositions. The judge reasoned that anything that occurred prior to their speech could not be considered as retaliation or punishment for that speech. Without that evidence, the guards accepted a dismissal. Fairley and Gackowski appeal.
In their opinion, Chief Judge Easterbrook and Judges Posner and Wood affirmed in part and reversed in part. The Court first clarified its jurisdiction, given the guards' acceptance of a dismissal after the court’s evidentiary ruling. The Court concluded that a party can decide that further pursuit of its case in the trial court is hopeless and accept a judgment against it in order to appeal. On the merits, the Court addressed both of plaintiffs' theories: that the defendants punished them for reporting defendants’ misconduct and that defendants taunted them to prevent their future testimony. On the first theory, the Court concluded that their claim was barred by Garcetti. Garcetti provides that the First Amendment does not protect speech that is part of one's job. Here, one guard’s report about another guard's conduct is part of the job. But Garcetti applies as against an employer - here, the defendants are coworkers. The Court concluded that it did not have to reach the coworker issue. The guards' Monell argument that the jail had a policy against reporting any guard misconduct linked the employer's liability and the coworker's liability. On the second theory of liability, however, the Court concluded that Garcetti did not control. The speech at issue in the second theory was the guards' testimony in the prisoners' trial. That speech is not part of the job. The Court concluded that Fairley and Gackowski could recover against a defendant who made threats that were designed to discourage their trial testimony.
When Parties Offer Diametrically Opposed Versions Of Events, Summary Judgment Must Be Denied If The Plaintiffs' Version Supports Liability
GONZALEZ v. CITY OF ELGIN (August 20, 2009)
A number of former high school classmates attended a wedding. Afterward, they gathered at the home of one of them. They visited late into the night and early morning. As the group was about to break up, one of them (who had left earlier to go to a local restaurant) returned to tell the others that his wife and brother were being assaulted outside the restaurant. Several members of the group went to the restaurant. The fight was over and the attackers were gone – but the police had arrived. Here, the testimony in the record supports two versions of a story. Several members of the group described a situation in which a number of police officers were out of control. They testified to beatings, kicks, and pepper-sprays. The police, on the other hand, described an unruly mob, disorderly conduct and resisting arrest. The police arrested several of the group. Most of the charges were dismissed. Six members of the group brought an action against the City and several police officers. They alleged violations of the Fourth Amendment, under § 1983, for unlawful arrest, excessive force, and failure to intervene. They also alleged state law malicious prosecution and a respondeat superior claim against the City. The district court granted summary judgment to the defendants and added that the defendants were also entitled to qualified immunity. Plaintiffs appeal.
In their opinion, Judges Posner, Flaum and Wood reversed and remanded. On the unlawful arrest claim, the Court noted that the plaintiffs had to show an arrest without probable cause. The Court reviewed the evidence in support of probable cause for the arrests for mob action, resisting arrest and battery. In each case, the Court concluded that the facts were contested. The plaintiffs’ version supported a conclusion that probable cause did not exist. On the excessive force claims, the Court again criticized the lower court for not viewing the facts in a light most favorable to plaintiffs. A reasonable jury could find that the police used greater force than necessary considering the totality of circumstances. For the same reason, the failure to intervene judgment was reversed. Next, the Court had little difficulty in rejecting the qualified immunity argument. The plaintiffs stated constitutional violations of an arrest without probable cause and the use of excessive force. Both constitutional rights are clearly established. Finally, the Court reversed with respect to the state law claims for much the same reason – there were genuine issues of material fact.
Gender Discrimination Claim Fails When Plaintiff, Although Female, Fails To Link Her Alleged Mistreatment With That Fact
COFFMAN v. INDIANAPOLIS FIRE DEPARTMENT (August 20, 2009)
Tonya Coffman worked as a firefighter in Indianapolis for a few years without incident. In 2003, however, several of her coworkers began to express concern about her ability to drive safely because of her height (she is less than 5 feet tall). The department conducted a series of safety evaluations, which she passed. The concerns continued -- another round of evaluations followed. Her coworkers’ concerns expanded beyond safe driving into issues concerning her mood and interactions with others. Eventually, the department recommended a fitness-for-duty evaluation and a transfer to limited-duty status. The evaluation resulted in an individual therapy referral and more fitness evaluations. After one of those evaluations, she was approved for light duty and eventually returned to full active duty. Coffman sued the department and several individuals under Title VII. She alleged that the driving tests and fitness evaluations were gender discrimination and harassment. She also brought a claim alleging that the medical examinations violated the ADA. The district court granted summary judgment against Coffman on all claims. Coffman appeals.
In their opinion, Chief Judge Easterbrook and Judges Posner and Rovner affirmed. The Court first addressed her Title VII claim under the direct method of proof. Coffman asserted that the record established a "convincing mosaic" of evidence from which a jury could conclude that she was the victim of gender discrimination. To the contrary, the Court found an absence of any evidence in the record that the driving evaluations, the fitness evaluations or her reassignments occurred, even in part, because of her gender. Her failure to do so illustrates the correctness of the district court summary judgment ruling. On her hostile work environment claim, the court concluded that the conduct of the department did not amount to degrading or hostile behavior. In fact, the Court noted that much of the conduct she complains of was accompanied by offers of support and guidance. In addition, as with the discrimination claim, Coffman failed to create a causal link between the alleged hostile behavior and her gender. With respect to the ADA claim, the Court noted that the statute prohibits a covered employer from requiring a medical examination unless it is shown to be job related and a business necessity. Based on the special work environment of a fire department and its responsibility to the public at large, as well as the fact that the department experienced two suicides in the preceding months, the Court concluded that the examinations were consistent with the requirements of the statute.
Union Employer's Transaction Did Not Meet The Statutory Safe-Harbor Requirements And Did Not Result In A Transfer Of Its Former Subsidiaries' Contribution History For Withdrawal Liability Calculation Purposes
CENTRA, INC. V. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND (August 20, 2009)
CenTra, Inc. is a family-owned holding company with several subsidiaries, including the Detroit International Bridge Co. (“DIBC”), which operates the Ambassador Bridge between Detroit and Windsor. Prior to 1995, two of the other subsidiaries were Central Cartage Company and Central Transport, Inc. Each of those subsidiaries had labor agreements with unions and contributed to the defendant's pension fund. The company reorganized in 1995. It created two new subsidiaries to take on the union-trucking operations of Cartage and Transport and a third subsidiary to engage in non-union operations. It then merged Cartage and Transport into the holding company. Those companies ceased to exist. Shortly thereafter, the holding company contributed selected assets and liabilities of the former subsidiaries into the newly formed union-trucking subsidiaries. The stock in the new subsidiaries was sold the following year to U.S. Truck, a company controlled by members of the same family. The new companies did not do well and U.S. Truck was liquidated within a few years. DIBC still had union agreements and contributed to the defendant's pension fund until 1997. Under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), an employer withdrawing from a multi-employer pension plan must pay a "withdrawal liability," a proportionate share of the plans underfunded, vested benefits. A complex formula for calculating the withdrawal liability is based for the most part on an employer's history of contributions. Here, defendant assessed in excess of $14 million in withdrawal liability against CenTra, including in its calculations the contribution history of Cartage and Transport, the two subsidiaries that ceased to exist in 1995. CenTra challenged the assessment in arbitration and was successful in getting it reduced to under $1 million. The district court reinstated the assessment. CenTra appeals.
In their opinion, Judges Cudahy, Ripple and Wood affirmed. The Court examined the re-organization process one step at a time to determine the effect on the company's withdrawal liability under the MPPAA. The first step, the merger of Cartage and Transport into CenTra, resulted in CenTra inheriting the contribution histories of those subsidiaries. In the second step, CenTra transferred selected assets and liabilities of the former subsidiaries into the new subsidiaries. The Court concluded that this transaction did not meet the statute's specific safe-harbor requirements for transferring the contribution histories from CenTra into the new subsidiaries. The assets and liabilities of the old subsidiaries were not transferred intact into the new subsidiaries, but were transferred piecemeal at the discretion of CenTra. The district court was correct in concluding that the calculation of the withdrawal liability of CenTra included the contribution history of Cartage and Transport.
Statute of Limitations For A Section 1983 Conspiracy To Prosecute Claim Begins To Run On The Date Of Indictment, Not The Date Of Acquittal
BROOKS v. ROSS (August 20, 2009)
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Victor Brooks served on the Illinois Prison Review Board ("PRB"). One of the functions of the PRB is to make certain parole decisions. In 2002, the parole request of inmate Harry Aleman came before the PRB. The hearing was unusual both because of Aleman's notoriety for murder and bribery and because a Department of Corrections employee provided a statement in support of his parole. Brooks cast the only vote in support of parole. Because of the high profile of the situation, the department began an investigation. The investigation resulted in several reports, some of which accused Brooks of accepting bribes to vote in favor of parole. Eventually, Brooks and the department employee were indicted for their conduct -- and later acquitted. Brooks filed suit under § 1983 and state law against numerous state officials, alleging claims of deprivation of due process, malicious prosecution, conspiracy and intentional infliction of emotional distress. The district court dismissed for failure to state a claim. Brooks appeals.
In their opinion, Judges Flaum, Wood and Tinder affirmed. The Court chose to address the claims under principles of timeliness, sovereign immunity and pleading requirements. First, a § 1983 claim borrows its statute of limitations from a state personal injury action. Here, that limitation is two years. Brooks' complaint was filed within two years of his acquittal, but more than two years after his indictment. The malicious prosecution and federal due process claims both require an allegation of acquittal and are therefore timely. The federal and state conspiracy claims and the intentional infliction of emotional distress claim complain of his prosecution. An acquittal is not a pleading element of any of them. Under Illinois law, the Court concluded that the indictment was a single overt act that triggered the statute of limitations for those claims. They are therefore time-barred. Second, Illinois law requires tort suits against the state to be brought in the Illinois Court of Claims. Although the Court recognized the exception if a state actor exceeds his authority, it concluded that the malicious prosecution claim did not fall within the exception and was therefore barred. Finally, the Court concluded that Brooks' due process claim did not meet the pleading requirements of the Supreme Court's recent opinions in Twombly, Erickson and Iqbal. Under those cases, a plaintiff is required to provide notice of his claim, a court must accept allegations as true unless they fail to provide sufficient notice, and the court need not accept conclusory or abstract allegations. Here, Brooks does provide many specific allegations, but the allegations describe conduct that is just as consistent with legal behavior as it is with illegal behavior. The only allegations that adequately describe illegal behavior merely recite the elements of the cause of action and do not put the defendants on notice of their specific conduct that is alleged to have violated the Constitution or law.
Impressive Credentials, Work Experience And Job Evaluations Are Not Enough To Demonstrate That An Employee Is Meeting Her Employer's Legitimate Expectations At The Time Of An Adverse Employment Action
DEAR v. SHINSEKI (August 20, 2009)
Deborah Dear, an African-American woman, had impressive educational and employment credentials when she was hired by a Veterans Affairs hospital in 2004. She continued to do well and received positive evaluations for a few years. In 2006, however, her supervisor discovered that the morale in her department was very low and staff members were complaining about Dear’s supervision. The supervisor also witnessed Dear engage in inappropriate discipline. Another supervisor asked Dear to develop and submit a plan for improving the situation. Dear did develop and submit a plan -- but it was late and failed to address many of the issues. Dear was temporarily reassigned to a non-supervisory position with a decrease in salary. She was replaced by a white woman. Dear filed an EEO complaint alleging race discrimination. Several days later, she was permanently reassigned to a staff nurse position. Dear filed a lawsuit pursuant to Title VII, alleging race discrimination, retaliation and hostile work environment. The district court granted summary judgment to the defendant. Dear appeals.
In their opinion, Judges Cudahy, Ripple and Wood affirmed. The Court addressed Dear’s discrimination claim under the indirect method of proof. The parties did not dispute that Dear was in a protected class and that her reassignment was an adverse employment action. The Court addressed the other two elements: whether she was meeting her employer's legitimate expectations and whether she identified a similarly situated employee who was treated more favorably. The Court concluded that she met neither element. With respect to meeting expectations, Dear relied on her impressive education and employment history. While those may be relevant, the Court emphasized that it must look to her performance at the time of the adverse employment action. The record contained several instances of her failure to meet expectations at the time of her reassignment. Dear also failed to meet her burden of identifying a similarly situated employee who was treated differently. The same two shortcomings prevent her from avoiding summary judgment on her retaliation claim. Finally, with respect to her hostile work environment claim, the Court noted that there was little support in the record for her contention that the environment was hostile to African-Americans.
State Court Order On Arbitrability Of Claims Has Preclusive Effect In Federal Court When Court Resolved Issue In A Reasoned Opinion
HABER v. BIOMET, INC. (August 20, 2009)
Biomet produces artificial joints. It contracted with Paul Haber to be its distributor in parts of Florida. Their relationship was governed by two contracts -- one made in 1995 and one made in 1999. The 1995 contract contained a forum selection clause favoring an Indiana court. The 1999 contract contained a clause requiring arbitration in Chicago. Biomet came to believe that Haber was in breach of the contracts and brought an action in Indiana state court. In response, Haber filed a complaint in the local federal court to compel arbitration. The federal court dismissed the complaint, concluding that venue for such an action was proper only in Chicago, the selected forum of the arbitration. Haber also moved to compel arbitration in the state court action. The state court compelled arbitration only on claims that arose under the 1999 agreement and ordered Biomet to identify which of its claims arose under that agreement. Haber did not appeal the state court decision -- Haber did appeal the federal court decision.
In their opinion, Judges Posner, Kanne and Wood affirmed. Before addressing the venue issue, the Court addressed res judicata. The Indiana court, although not resolving all matters, concluded that claims under the 1995 agreement were not arbitrable. The Court had to decide whether that ruling was of sufficient finality to be afforded res judicata effect. Indiana requires finality for issue preclusion. The factors a court should look at are whether: the parties were fully heard, the decision was rendered in a reasoned opinion, the order was appealable, and the order was appealed. The Court concluded that the state court’s order was final. The issue was before the court, was decided in a reasoned opinion and was appealable (though not appealed). Having found finality, the Court easily concluded that the order met the next four elements barring relitigation: a court of competent jurisdiction, an issue actually determined, identical parties, and a decision on the merits. The state court ruling was entitled to preclusive effect. The Court also briefly addressed the venue issue. Section 4 of the Federal Arbitration Act requires that, if an arbitration clause selects a forum for arbitration, a motion to compel the arbitration must be brought in a court in the forum selected. The venue decision was thus proper.
Fax Confirmation From A Sender's Machine Is Enough To Create Issue Of Fact Regarding Whether EEOC Charge Was Timely
MONCEF LAOUINI v. CLM FREIGHT LINES, INC. (August 20, 2009)
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Moncef Laouini, an Arab from Tunisia, worked as a truck driver for CLM until he was fired in 2006. He sued the company under Title VII for race and national-origin discrimination. He alleges that he filed a charge with the EEOC on April 12, 2007 (a date that both parties agree was the deadline). The EEOC's record of the charge indicates that it was not processed until April 16. CLM moved to dismiss the complaint as untimely. Laouini responded with an affidavit from his lawyer. The affidavit indicated that either the lawyer or his assistant faxed the charge to the EEOC on April 12. Laouini also submitted a printout of the confirmation from his lawyer’s fax machine indicating that a three-page document had been transmitted to the EEOC's fax number on April 12. The district court converted the motion to dismiss into a motion for summary judgment and granted summary judgment to CLM. Laouini appeals.
In their opinion, Judges Flaum, Kanne and Wood vacated and remanded. The Court began by noting that the failure to file a charge in a timely manner is an affirmative defense and the burden is on CLM to demonstrate an absence of a genuine issue of material fact. The Court moved on to the significance of the fax confirmation, an issue not yet addressed by the Court. The Court noted that several other courts have concluded that a fax confirmation creates a rebuttable presumption that the fax was, indeed, received by the intended recipient. Other courts have stopped short of that, but treat the fax confirmation as creating an issue of fact on the question of receipt. The Court concluded that the fax confirmation was strong evidence of receipt and that CLM presented no evidence to the contrary. Summary judgment was therefore inappropriate.
Statutory Award Of Attorneys' Fees Need Not Be Proportional To The Recovery
ANDERSON v. AB PAINTING AND SANDBLASTING (August 20, 2009)
Under its collective bargaining agreement, AB Painting and Sandblasting was required to make contributions to several union benefit plans. The trustee of the plans brought an action under ERISA to collect overdue contributions. The court granted summary judgment to the fund for the entire amount claimed ($6,500). The court awarded attorneys’ fees of only $10,000, however, on a request in excess of $50,000. The amount claimed, stated the district court, was “disproportionate” to the amount at stake. The trustee appealed.
In their opinion, Judges Bauer, Manion and Sykes reversed and remanded. The Court noted that ERISA requires an award of “reasonable” attorneys’ fees in a successful action to recover overdue contributions. The district court should begin with the “lodestar” (hours times a reasonable rate)and adjust it upon consideration of a number of factors, including the amount at stake and the results obtained. The Court cited its own jurisprudence, however, where it has rejected any requirement of proportionality between the result and the fee award. In fact, one of the policy reasons behind fee-shifting statutes is the promotion of meritorious claims that would not be brought otherwise. In a situation where Congress has spoken by including a fee-shifting provision in a statute, a court should only look at whether the time expended was a reasonable approach to the desired end. Here, the lower court did not opine on the reasonableness of the hours spent achieving the outcome. The Court remanded for such a recalculation.
