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

LINCOLN NATIONAL LIFE INSURANCE CO. V. BEZICH (June 25, 2010)

Peter Bezich is a Lincoln National Life Insurance Company policyholder. He has a variable life policy, under which he can allocate funds to either a General Account or a Separate Account. The General Account accumulates premium payments while the Separate Account is an investment account registered with the SEC. Each month, Lincoln National deducts cost-of-insurance charges from a policyholder's account proportionately to the amounts invested in each of the two accounts. Bezich brought a class action in Indiana state court, alleging that Lincoln National breached the terms of the policy in the way it calculated the cost-of-insurance charges. Lincoln National removed the case to federal court under the Class Action Fairness Act (CAFA). Judge Van Bokkelen (N.D. Ind.) remanded the case to state court, relying on the CAFA exception for cases that solely involve claims relating to rights and obligations created by any “security.” Lincoln National petitioned for leave to appeal.

In their opinion, Judges Bauer, Posner, and Wood dismissed the petition for want of jurisdiction. Although the Court was first obliged to look at its appellate jurisdiction, it noted that the language governing its appellate jurisdiction was identical to the language creating the removal exception relied on by the district court. The core question for both is whether the policy is a "security" as defined by the Securities Act of 1933. Although the Court conceded there was authority in different contexts supporting Lincoln National's desire to look at the two component parts of the policy (and find one a security and one not), the Court rejected the applicability of those cases. It cited its agreement with the Eleventh Circuit's decision in Herndon that treated a variable life policy as a "security" under the Securities Litigation Uniformed Standards Act of 1998. Here, the claims of the class concern a promise made by Lincoln National that applied whether a policyholder's funds were in the General or Separate Account. The policy treated as a whole meets the definition of "security" -- the Court therefore lacks jurisdiction to consider the petition.

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MUSCARELLO v. OGLE COUNTY BOARD OF COMMISSIONERS (June 24, 2010)

Ogle County, Illinois joined the "green" movement in 2003 by amending its zoning ordinances to allow for the construction of windmills. Baileyville Wind Farms received the first special use permit for 40 windmills in 2005. The county also adopted a plan to protect residential, but not non-residential, property owners in the event of any diminution of property value. Patricia Muscarello owns nonresidential property adjacent to the proposed windfarm and has opposed its siting from the beginning. Unsuccessful in her attempts to block the project locally, Muscarello brought suit. She brought constitutional claims (unlawful taking, due process, equal protection), common law claims (trespass, nuisance), and state law claims (declaratory judgment, administrative review, writ of certiorari, unlawful taking, due process, equal protection, injunctive relief). She named over forty defendants, including Ogle County and related entities and individuals, the parties to the administrative proceedings, and Baileyville and its corporate parents. Judge Kapala (N.D. Ill) dismissed all the federal and common law claims as either unripe or for failure to state a claim. He then declined to exercise supplemental jurisdiction over the state law claims. He also denied a request by Baileyville to stay administrative proceedings regarding the expiration of the special use permit. Both parties appeal.

In their opinion, Judges Bauer, Wood, and Williams affirmed. The Court first addressed the three federal constitutional claims. The takings claim alleged no physical taking but relied on the “regulatory taking” concept. Under that concept, the permit must render her land useless for her to prevail. That is not the case here. Alternatively, the Court noted that Muscarello’s takings claim fails also because she failed to exhaust available state remedies. The Court rejected her equal protection claim that addressed the differential treatment afforded to residential and nonresidential landowners. Not only was it also unripe because of her failure to exhaust, the Court concluded that it would meet the deferential "rational basis" test. With respect to the due process claim, the Court concluded that Muscarello had no protectable property interest in the lifting of restrictions on adjacent property. The Court next addressed the state common-law claims, for which Muscarello asserted diversity jurisdiction. The district court never resolved the jurisdictional question, dismissing instead on ripeness grounds. On appeal, the Court considered both issues. The Court applied its citizenship analysis and concluded that Muscarello established diversity jurisdiction. On the merits, however, the Court agreed with the district court that Illinois law requires an invasion for both a trespass and nuisance. Since the windmills have not yet been built, there is no invasion -- and no trespass or nuisance. Finally, the Court considered the several state claims for which Muscarello asserted supplemental jurisdiction. It found no abuse of discretion for the dismissal of those claims. However, since it had just established that diversity jurisdiction did exist, it questioned whether the district court should have kept these claims under diversity jurisdiction. Although a plaintiff has the burden of establishing the court’s jurisdiction, a district court should rarely dismiss when jurisdiction in fact exists but was improperly pleaded. Here, the plaintiff had been given several opportunities to properly plead jurisdiction -- and she failed to do so. The Court decided not to do it for her. Finally, the Court found no abuse of discretion in the district court's denial of Baileyville’s requested stay.

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PARRA v. NEAL (June 23, 2010)

Ambrosio Medrano filed the necessary papers to get his name listed as a candidate for 25th Ward Chicago alderman on the February 2007 ballot. Several voters challenged his papers. They asserted that his prior felony conviction prevented him from holding office. The Election Board and the circuit court sided with Medrano. Paper and electronic ballots were prepared with his name. Just four days before the election, the Illinois Supreme Court reversed the circuit court. It ordered the Election Board to either remove Medrano’s name from the ballot or, if it remained, to disregard any votes cast for him. The Election Board had insufficient time to correct the ballots. Instead, it posted signs in three languages at all polling places and distributed individual notices to every voter in the ward in which his name was on the ballot. The signs and notices explained that a vote for Medrano would not be counted. Nevertheless, Medrano received 178 votes. Eight of those voters brought an action pursuant to § 1983 claiming that the Election Board violated equal protection by disregarding their votes. Judge Darrah (N.D. Ill.) granted summary judgment to defendants. Plaintiffs appeal.

In their opinion, Judges Manion, Rovner, and Tinder affirmed. The Court emphasized the reluctance of a federal court to become entangled in state election matters. A § 1983 action can therefore prevail only if the defendants acted willfully and intended to undermine the voting process or impair the plaintiffs' voting rights. The Court found no proof -- or even allegation -- of wrongdoing on the part of the Election Board. In fact, it did what it had to do by following the mandate of the Supreme Court.

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IN RE: MCKINNEY (June 23, 2010)

When Lonnie McKinney fell behind on the property taxes for his Peoria County duplex, the county sold the tax debt to Salta Group. McKinney had two years within which to pay the debt after the sale. He did not and was notified that the property had been sold. He still had several months to redeem the property before Salta Group would receive a tax deed to the property. One day before the end of the redemption period, McKinney filed for bankruptcy. He proposed a bankruptcy plan that allowed an additional five years to pay off the tax debt. Salta Group filed an objection to the plan. The bankruptcy court denied the objection and Judge McDade (C.D. Ill.) affirmed. Salta Group appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Tinder dismissed for want of jurisdiction. The Court first addressed its -- and the district court's -- jurisdiction. The jurisdictional statute grants jurisdiction over "final" decisions and orders of the bankruptcy court. The Court conceded that the concept of finality is murkier in the bankruptcy arena than it is elsewhere because of the frequent existence of numerous discrete disputes within a single bankruptcy case. The test the Court applied was whether the order resolves a dispute that, but for the bankruptcy, would have been a discrete lawsuit. It concluded that Salta’s claim was not such a dispute. The order did not resolve any part of Salta's claim -- it merely resolved one issue.

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JAY E. HAYDEN FOUNDATION v. FIRST NEIGHBOR BANK (June 22, 2010)

Jay Hayden died in 1985. His will established the Jay E. Hayden Foundation and named Robert Cochonour as executor. Between 1985 and 2001, Cochonour allegedly embezzled from both the Foundation and from accounts belonging to Hayden's mother and his mother’s friend. Cochonour apparently had the cooperation of First Neighbor Bank in carrying out his misdeeds. By 2002, Cochonour admitted that he had stolen some money and had resigned his state court judgeship. The trustees of the Foundation were aware that it no longer had any assets but there was no record of what happened. For several years, Cochonour and the bank took steps to prevent the plaintiffs from learning additional facts. Eventually, in May of 2008, plaintiffs brought a RICO action against the bank, two law firms, and several associated individuals. Judge Reagan (S.D. Ill.) granted defendants' motion to dismiss on statute of limitations grounds. Plaintiffs appeal.

In their opinion, Judges Posner, Rovner, and Tinder affirmed. The statute of limitations for a RICO claim, stated the Court, is four years and begins to run when the plaintiffs discover or should have discovered the injury and the injurer. Here, the Court concluded that the plaintiffs had significant suspicions by mid-2003 but may not have had sufficient information to bring suit until 2005. If the defendant engages in obstructive conduct, however, that prevents a plaintiff from obtaining sufficient information to file its complaint, the defendant is equitably stopped from pleading the statute of limitations defense for the period of obstructive behavior. Plaintiffs allege that that is what happened here. The Court recognized a split of authority regarding the impact of equitable estoppel on limitations period. Some courts have allowed an extension of a limitations period for the full amount of the delay while others have held that a plaintiff must commence the action as soon as possible after the obstruction ends. The Court decided to apply the latter rule -- particularly in a RICO case where the Supreme Court has emphasized the importance of prompt action. In applying the "as soon as possible" rule, the Court stated that plaintiffs had enough information in 2005 to complete their investigation and file suit long before the three years they actually used. Notwithstanding the Court's conclusion that the action was barred by the statute of limitations, it also addressed the defendants' alternative argument that the complaint failed to state a RICO cause of action. The Court concluded that it did not since it did not allege that the defendants used an enterprise (i.e., their conspiracy) to engage in a pattern of racketeering activity.

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ANDERSON v. BAYER CORP. (June 22, 2010)

Bayer Corporation manufactured a prescription medication called Trasylol. A lawyer in St. Clair County, Illinois brought suit against Bayer alleging personal injury resulting from the use of the medication. The action was brought in five separate complaints with 171 plaintiffs spread among the complaints. All but one (the one apparently a mistake) of the virtually identical complaints named fewer than 100 plaintiffs. Bayer removed, citing the "mass action" removal mechanism of the Class Action Fairness Act ("CAFA"). Judge Murphy (S.D. Ill) remanded the four complaints that had fewer than 100 plaintiffs. Bayer petitioned to appeal under CAFA.

In their opinion, Judges Flaum, Manion, and Evans denied the petition. CAFA's "mass action" provision allows a defendant to remove an action if it has 100 or more plaintiffs and otherwise meets CAFA’s removal requirements. The provision specifically excludes an action in which claims are consolidated upon the request of a defendant. The Court found this plain language of the statute dispositive of Bayer's request. Apparently, Congress anticipated this very situation and decided to allow plaintiffs to proceed in state court by limiting each complaint to fewer than 100 plaintiffs. Although the Court concluded that CAFA removal was not available, it did note that the claims could be removable in the future if, for example, the claims were consolidated for trial. The Court declined to consider Bayer's alternative argument that diversity jurisdiction existed under a fraudulent misjoinder theory. The exception to the general rule prohibiting review of a remand order that allowed the Court's review of the "mass action" argument applies only to the remand of class actions. Since these cases are not class actions under CAFA, the Court lacks jurisdiction to review the district court's decision regarding fraudulent joinder.

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JUNKERT v. MASSEY (June 21, 2010)

Roger Massey, the Sheriff of the DeWitt County, Illinois, began an investigation into a series of local burglaries. His investigation led him to Richard Baker. Baker provided much information to the police about his activities and those of Jeffrey McCall: a) he received stolen guns from McCall, b) he sold drugs with McCall, c) he named his cocaine source, d) McCall told him that McCall's attorney (a female) used cocaine, and e) McCall told him that he paid his attorney with stolen laptops. Massey corroborated some of the information from Baker. Additional investigation established that McCall's lawyer was Dodie Junkert, the only female lawyer in the county. Massey used the information from Baker in preparing an affidavit for a search warrant for Junkert's office and residence. When Massey informed Junkert of the existence of the search warrant, she admitted receiving the stolen laptops from McCall and arranged for their return. The police searched her office and home anyway. They found no computers but did find evidence of drug use. Junkert brought an action under § 1983, alleging that the Massey’s lack of probable cause for the search warrant violated her Fourth Amendment rights. A jury found in favor of Massey. Junkert appeals from Judge Mills' (C.D. Ill.) denial of her motion for judgment as a matter of law.

In their opinion, Judges Bauer, Evans, and Tinder affirmed. The Court addressed whether the affidavit provided probable cause for the search, applying a totality of the circumstances test. It focused on the degree of cooperation, the extent of personal observation, the amount of detail, the time interval, and whether the affiant appeared before the judge. The Court found the affidavit severely lacking -- it lacked personal observation, it specified no time period, and the affiant did not personally appear. Even with the other positive aspects of the affidavit, the Court found it "difficult to conclude" that the affidavit provided a substantial basis for the search. Without actually deciding whether probable cause existed, however, the Court addressed qualified immunity. It noted that Massey is personally liable for damages only if courts have held that a materially similar affidavit lacked probable cause or if the affidavit was so lacking that any reasonable officer would have known it lacked probable cause. The Court found neither. Notwithstanding the weaknesses in the affidavit, the Court concluded that there were enough indicia of probable cause to support Massey’s reliance on it. Massey was therefore entitled to a qualified immunity defense.

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MEDICAL ASSURANCE CO. v. HELLMAN (June 21, 2010)

Dr. Mark Weinberger was a wealthy Indiana physician. It seems, however, that only a portion of his wealth resulted from his legitimate medical practice. The rest of it came from defrauding insurance companies. In 2004, facing the prospect of civil and criminal litigation, Weinberger disappeared during a European vacation (read about his escapades on America's Most Wanted). Hundreds of malpractice claims were filed against him in the months following his disappearance. Those claims are working their way through Indiana's medical malpractice statutory procedures, although only four have proceeded to the actual lawsuit stage. Medical Assurance Company is Weinberger's malpractice insurance provider. It brought a declaratory judgment action, seeking a declaration that Weinberger's disappearance breached his duty of cooperation and thus voided its duty to defend. Judge Sharp (N.D. Ind.) concluded that Medical had shown no actual prejudice and therefore stayed the proceedings. Medical appeals.

In their opinion, Judges Flaum, Manion, and Wood vacated and remanded. The Court quickly resolved two jurisdictional issues. First, the Court upheld diversity jurisdiction notwithstanding Medical's "information and belief" allegation of the citizenship of the 300+ individual defendants (the state malpractice plaintiffs). Although such an allegation is generally insufficient standing alone, the additional factors -- that each defendant was a claimant within the Indiana malpractice system and that no defendant contradicted the allegation --satisfied the Court. With respect to its appellate jurisdiction, the Court concluded that the district court's order was appealable under Quackenbush as an abstention-based stay order. On the merits, the Court noted that the Declaratory Judgment Act is a procedural device that allows a judge to declare the rights of the parties under the applicable state or federal law. One legitimate reason to refrain from such a declaration is the existence of a parallel proceeding. The proper inquiry in such a case includes consideration of the identity of the parties, the similarity of the issues, the relief available to the plaintiff, and whether a declaration will clarify the obligations of the parties. Applying those principles, the Court concluded that the district court abused its discretion by issuing its stay order. Under Indiana law, Medical must show actual prejudice to prevail on its breach of cooperation argument. Although the district court thought that Medical could not show actual prejudice without interfering with the malpractice actions, the Court concluded that Medical should at least be given the chance.

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JUDGE v. QUINN (June 16, 2010)

For 125 years after the founding of our country, the two senators from each state were chosen by that state's legislature. The Seventeenth Amendment changed that. It provided for the direct election of senators by the people. The Seventeenth Amendment also changed the method by which a Senate vacancy was addressed. It provided that the State executive issue writs of election. It added that the state legislature "may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct." Barack Obama created such a vacancy when, after being elected President, he resigned his Senate seat on November 16, 2008. The governor of Illinois appointed Roland Burris as United States Senator from Illinois to serve out the almost 2 years remaining in Obama's term. Two Illinois registered voters brought suit pursuant to § 1983. They alleged that Illinois' failure to hold an election to fill the vacancy violates the Seventeenth Amendment. Judge Grady (N.D. Ill.) denied the preliminary injunction and dismissed the complaint without prejudice. Plaintiffs appeal.

In their opinion, Judges Rovner, Wood, and Tinder affirmed. The Court concluded that plaintiffs had standing. Their alleged injury was not a general grievance but a denial of their right to vote. The injury was traceable to the Governor's conduct and it could be redressed by a favorable decision. On the merits, the Court first addressed the likelihood of success prong of the preliminary injunction test. It looked to the language of the amendment: a) the principal clause obligated the state's executive to issue a writ of election in the event of a vacancy, b) the proviso clause preserved the executive's pre-amendment power to appoint a temporary replacement so as to maintain the state's representation in the Senate, and c) the Court concluded that the "as the legislature may direct" language in the proviso referred to the legislature's power to control the Senatorial election. Reading the clauses together, the Court held that the amendment requires the state to hold a popular election to fill a vacancy and requires the governor to issue a writ that includes a date for the election. The logistics of that election, however, are left to state law, including the legislature's power over the date of the election. Illinois has set the date for that election as the same date of the general election. The practical impact, therefore, is that the people of Illinois will elect a Senator to serve the remainder of Obama’s term (through January of 2011) and a successor to Obama in the same election. Given that it is plaintiffs' claim that the Governor has not issued that writ, the Court concluded that they had established a strong case of likelihood of success. Unfortunately for them, they had not shown any irreparable harm. Without a showing of irreparable harm, the district court did not abuse its discretion in denying the injunction.

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SEIFERT v. ALEXANDER (June 14, 2010)

The State of Wisconsin has two sets (primary and general) of elections during its election years. Non-partisan officeholders, including judges and many county and municipal officers, are elected in the spring. Candidates for these positions are slated without party affiliation. In the fall, elections are held for partisan officeholders, including the sheriff and district attorney. In 2004, the Wisconsin Supreme Court amended the Wisconsin Code of Judicial Conduct to prohibit a judge or judicial candidate from a) being a member of any political party, b) endorsing or speaking on behalf of another candidate, and c) personally soliciting campaign contributions. John Siefert has been a circuit court judge in Wisconsin since 1999. Siefert would like to join the Democratic Party, endorse partisan candidates for office, and solicit contributions for his upcoming campaign. He brought suit pursuant to § 1983 against the members of the Wisconsin Judicial Commission for injunctive and declaratory relief. Judge Crabb (W.D. Wis.) declared the rules unconstitutional and enjoined their enforcement. The Commission appeals.

In their opinion, Judges Flaum, Rovner (dissenting in part), and Tinder affirmed in part and reversed in part. The Court described its task as an attempt to "harmonize . . . two strains of First Amendment law." On the one hand, in White I, the Supreme Court applied strict scrutiny in striking down a code of conduct that prohibited judges from taking positions on legal and political issues. On the other hand, the Supreme Court applied the less stringent Pickering standard in Letter Carriers and Garcetti and balanced the public employee's right to speak against the government's interests. The Court addressed each prohibition separately. With respect to the party membership prohibition, the Court found it content-based and applied strict scrutiny. Although a state does have a compelling interest in the lack of bias in its judiciary, the Court found that the prohibition was not narrowly tailored to serve that interest and struck it down. With respect to the partisan candidate endorsement prohibition, the Court noted a distinction between an endorsement of another and speech regarding a judge's own views. The distinction supported the application of a balancing approach instead of strict scrutiny. In balancing the state's interest in a fair judiciary with the judiciary's interest in endorsing candidates, the Court concluded that the state's interest prevailed. The Court did express its concern that the prohibition only applied to partisan elections. That under-inclusiveness could have invalidated the prohibition under a strict scrutiny approach – but the Court concluded that it did not under the balancing approach. Finally, with respect to the personal solicitation prohibition, the Court noted that Buckley created two approaches. Candidates' spending restrictions are met with strict scrutiny -- candidates' contributions restrictions are met with a less rigorous standard. The personal solicitation prohibition was a contribution restriction and therefore analyzed under the less rigorous approach. The Court found a strong state interest in protecting against the appearance of a quid pro quo that a direct personal solicitation might create. Even though the prohibition does not prevent a candidate from a reviewing a contributor list and applies even to family members, where the risk of a quid pro quo is remote, the Court found that the regulation was closely enough drawn to the state's interest to be constitutional.

Judge Rovner agreed with the panel in its treatment of the party membership restriction and the personal solicitation restriction. She dissented, however, from its treatment of the partisan candidate endorsement restriction. Her fundamental disagreement was with the majority's application of a balancing test. In her view, White I requires the application of a strict scrutiny standard in evaluating a content-based restriction. Under a strict scrutiny approach, the under-inclusiveness noted by the majority opinion is fatal to its constitutionality.

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HANSON v. DANE COUNTY (June 15, 2010)

The 911 line was dead when the Dane County dispatcher picked it up. The dispatcher called the number back but there was no answer. The police were alerted. When the police arrived at the home of David and Karen Hanson, Karen asked them to leave. She advised the police that she had called 911 but could not remember why -- she also said that she and David had been arguing but that she could not remember why. The officers continued their investigation. They questioned David and Karen separately and also questioned the couple's 15 and 13-year-old daughters. David ultimately admitted that Karen had called 911 after he "bumped" her during a heated argument. The police arrested David and charged him with domestic battery. The charges were dropped when Karen refused to cooperate. David Hanson filed suit pursuant to § 1983 alleging violations of the Fourth, Fifth, and Fourteenth Amendments. Judge Crabb (W.D. Wis.) granted summary judgment to the defendants. Hanson appeals.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Manion affirmed. The Court first rejected Hanson's argument that the police entry was without probable cause in violation of the Fourth Amendment. The Court concluded that an unanswered 911 callback itself provides probable cause. The Court also rejected the argument that the officers violated the Fourth Amendment by remaining on the premises after Karen asked them to leave. Her demeanor and her obviously false statements that she could not remember why she called or why she and David were fighting support the reasonableness of the officers' actions. The officers also acted reasonably in questioning the children given David and Karen's lack of cooperation. In addition, any substantive due process rights would belong to the children, who are not parties directly or indirectly. Finally, the Court rejected David's claim that his separate questioning amounted to a custodial interrogation and that the officers "violated" Miranda by not delivering its warnings. Although the district court had resolved the issue on qualified immunity grounds by concluding that a reasonable officer would not have found the interrogation "custodial," the Court found that analysis unnecessary. The Miranda doctrine governs the use in court of incriminatory statements. It does not prohibit a compelled statement nor does it allow a claim of damages for the failure to provide the warning.

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TINDLE v. PULTE HOME CORP. (June 9, 2010)

Terry and Diane Tindle moved into their new home in West Dundee, Illinois in late 2003. Their home was part of a subdivision developed by Pulte Home Corp. Soon after moving in, the Tindles noticed holes developing in both their front and rear yards. They complained about the holes in the front yard. Although Pulte considered them normal, they did repair the holes. For months, the Tindles used their rear yard without incident. In the summer of 2004, however, Terry Tindle stepped into a concealed hole in the rear yard. He suffered serious injuries to his leg. Tindle brought suit against Pulte. Judge Manning (N.D. Ill.) granted summary judgment to Pulte. Tindle appeals.

In their opinion, Judges Flaum, Kanne, and Evans affirmed. The Court noted that Illinois law generally excuses a vendor of real property from liability for personal injury after transfer of possession. Section 353 of the Restatement (Second) of Torts, also the law in Illinois, creates a five-pronged exception to the general rule. A vendor can be liable if a) it knew of a hazardous condition that created an unreasonable risk, b) it concealed or failed to disclose the condition, c) it had reason to believe the purchaser would not discover the condition, d) physical harm resulted from the condition before the purchaser knew of the condition and risk, and e) the purchaser did not have an opportunity to protect against the risk. The Court concurred with the district court that Tindle could not meet his § 353 obligations both because of the state of his knowledge and that of Pulte. First, Tindle was well aware of the dangerous condition created by the holes in his yard. That knowledge defeats any recovery under § 353. Second, Tindle presented no evidence that Pulte was aware of the dangerous condition at the time of the sale. That lack of knowledge independently defeats recovery under § 353.

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LANTZ v. COMMISSIONER OF INTERNAL REVENUE (June 8, 2010)

Kathy Lantz was married to a dentist with whom she filed joint federal tax returns. Unfortunately, she was also married to a dentist who was convicted of Medicare fraud and who the IRS accused of understating their joint tax liability. When she received a notice of tax levy and information from the IRS regarding innocent spouse relief, she allowed her then estranged husband to respond. Although he requested a due process hearing and application for such relief, he died before taking any other action. In 2006, the tax obligation exceeded $1 million. The IRS applied Lantz’ 2005 income tax refund of $3200 to her tax liability. Unemployed and poor, she applied for innocent spouse relief. The IRS rejected her application because she had failed to apply within two years from the notice of intent to levy. The Tax Court invalidated the two-year deadline. The Commissioner appeals.

In their opinion, Judges Posner, Flaum, and Williams reversed and remanded. Section 6015 of the Internal Revenue Code provides several avenues of relief to innocent spouses. Subsection (b) relief requires that the spouse have had no reason to know of the understatement. Subsection (c) relief requires that the spouse no longer be married to the person with whom he or she filed. Both subsections (b) and (c) contain a statutory two-year limitations period. Subsection (f), under which Lantz applied, contains no statutory limitations period. It provides that the IRS may grant innocent spouse relief when it is not available under either subsection (b) or (c) and is otherwise equitable under all the facts and circumstances. The Treasury Department, by regulation, imposed a two-year deadline on subsection (f). The Court found nothing improper with the Department's action. First of all, the fact that Congress did not include a limitations period does not mean that it intended the statute not have one. The Court noted that borrowing a statute of limitations from another statute is a common judicial practice – so common, in fact, that Congress can be assumed to endorse it. Second, the subsection does not even require the IRS to grant relief. Since it can deny relief altogether, it can decide to deny relief to late claimants. Finally, the subsection itself begins with the phrase "under procedures prescribed" by the Treasury Department. That congressional delegation of authority to the Department certainly allows it to set a deadline for an application.

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UNITED STATES v. 5443 SUFFIELD TERRACE (June 9, 2010)

Customs officials first discovered Richard Connors smuggling Cuban cigars in 1996. They confiscated over 1100 cigars from him as he attempted to enter the United States. He continued to smuggle. He continued to get caught. On March 15, 1997, local police confiscated more cigars from Connors' home at 5443 Suffield Terrace in Skokie, Illinois. They turned them over to federal officials the following day. Finally, in late 1999, federal officials again seized hundreds of cigars from the Suffield Terrace home. Connors was convicted of several offenses. On March 14, 2002, the United States filed a civil forfeiture action to seize Connors' house. They alleged two grounds: that the house was paid for with proceeds of the smuggling operation and that the house was used to facilitate the smuggling operation. Connors moved to dismiss, arguing that the five-year statute of limitations began to run in 1996, when the United States first discovered his smuggling activity. Judge Gettleman (N.D. IL) denied the motion and granted summary judgment to the United States. Connors appeals.

In their opinion, Judges Posner, Kanne, and Rovner affirmed. The civil forfeiture statute requires that an action be filed within five years "after the time when the alleged offense was discovered." The Court found the meaning of "alleged offense" unambiguous. It refers to the offense that gives rise to the right of forfeiture. Where there are several such offenses, nothing in the statute prohibits a forfeiture action when at least one of the offenses falls within the five-year period of limitations. The civil forfeiture action in this case is based on the March 15, 1997 offense. The action is therefore not time-barred. On the merits, the Court found that Connors waived the argument that he had additional sources of income not considered by the court because he failed to raise it properly below.

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PRATE INSTALLATIONS, INC. v. CHICAGO REGIONAL COUNCIL OF CARPENTERS (June 4, 2010)

Prate Installations, Inc. filed a grievance against its Union, the Chicago Regional Counsel of Carpenters, in 2003. Prate alleged that the Union's requirement that Prate pay hourly wages while allowing competitors to pay on a piece work basis violated the Collective Bargaining Agreement (CBA). The parties selected an arbitrator in accordance with the terms of the 2001 CBA. Arbitrator Martin issued an award in September of 2008. He awarded close to $10 million in damages, injunctive relief and attorney's fees. Meanwhile, the parties entered into a new CBA in 2005 that modified the arbitration procedure. It established a rotating panel of arbitrators -- Martin was not on the panel. Prate brought suit to confirm the award. Judge St. Eve (N.D. IL) confirmed the damages award, as amended to eliminate damages after the revised CBA, and the attorneys’ fees. She also vacated the equitable relief because it applied after the expiration of the earlier CBA. Both parties appeal.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Manion affirmed. The Court noted that their review of the arbitration award is quite limited. Here, the arbitrator relied on the contract in concluding that the Union was in violation. The district court correctly upheld that conclusion. The Court also found that the district court correctly determined that Arbitrator Martin had no authority under the 2005 CBA. His damages award covering the period after the new CBA was therefore improper. The analysis of the equitable award is slightly different. Martin could have ordered equitable relief if he issued his award prior to the expiration of the earlier agreement. Since he did not, however, the Court concluded that it had to treat the equitable remedy like the damages remedy and vacated it.

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IN RE: SHERWIN-WILLIAMS CO. (June 7, 2010)

Sherwin-Williams Co. is a defendant in a number of cases pending in federal court in Wisconsin before Judge Adelman (E.D. WI). The plaintiffs in those cases seek recovery against the manufacturers of white lead carbonate pigment for injuries allegedly caused by the ingestion of the pigment. Because none of the plaintiffs can identify the actual manufacturer of the pigment ingested, they rely on the Wisconsin Supreme Court's 2005 decision in Thomas. In Thomas, the Supreme Court adopted the risk contribution exception to traditional negligence theories in the lead pigment context. The Wisconsin Supreme Court was criticized for several of its decisions during the 2005 term, including Thomas. Judge Adelman co-authored a Law Review article that was published in 2007 defending the court's decisions. Although he disclaimed any opinion on the merits of those decisions, he did call Thomas a "positive development." Sherwin-Williams asked Judge Adelman to recuse himself because of the article. He refused. Sherwin-Williams seeks a writ of mandamus.

In their opinion, Judges Kanne, Rovner, and Tinder denied the petition. The Court stated that the test for disqualification of a judge is whether his impartiality might be questioned. The test must be applied from the perspective of a reasonable person who is aware of all surrounding facts and circumstances. Applying that test, the Court concluded that no reasonable reader would believe that the judge formed any opinion on the merits. Even more importantly, however, the Court stated that Judge Adelman's views of the case were irrelevant. As a federal district court sitting in a diversity case, he is obligated to apply Wisconsin law as interpreted by the state’s Supreme Court. A reasonable person would understand that situation and not question his impartiality because of the article.

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 POER v. ASTRUE (May 27, 2010)

Darrell Poer has been an attorney in the Social Security Administration's (SSA) Office in Indianapolis for years. In 2003, he testified on behalf of two female African-American employees in a suit against Allen Kearns, the Hearing Office Director. In 2005, a more senior attorney position opened in the Indianapolis office. Poer applied for the position. Under the applicable procedures used by the office, a) the HR Department processed applications and made a list of the best qualified candidates, b) they forwarded the list of candidates to Administrative Law Judge (ALJ) de la Torre for his recommendation, and c) ALJ de la Torre forwarded her recommendation to ALJ Lillios, who is the decision-maker. In addition, the practice of the office was to cancel a vacancy if fewer than three qualified candidates existed. At the time of the 2005 vacancy, severe budget cuts prohibited moving employees from one region to another and severely limited relocation expenses. The list of candidates for the 2005 promotion included Poer and two other candidates, one from inside the region and one from outside the region. ALJ de la Torre received the candidate list from Kearns and understood from Kearns that Poer was the only candidate from within the region – and therefore the only viable candidate. The vacancy expired without a selection. Kearns advised the region office: "no FTEs available." Kearns represented himself to Poer as the selecting official and told Poer that he was not selected because he was the only candidate on the list. Poer filed suit, alleging that the SSA failed to promote him in retaliation for his testimony against Kearns. Judge Barker (S.D. Ind.) granted summary judgment to the SSA, concluding that no decision-maker was even aware of Poer's testimony and that there was no evidence of Kearns significantly influencing the promotion decision. Poer appeals.

In their opinion, Judges Ripple, Manion, and Williams affirmed. At least for purposes of the summary judgment motion, the SSA conceded that Poer engaged in protected activity and suffered an adverse job action -- two of the three requirements under the direct method of proof in a Title VII claim of retaliation. The third requirement, a causal connection between the two, was the only issue for the court. Since it was undisputed that the decision-makers were unaware of Poer's protected activity, Poer had to succeed in imputing the alleged retaliatory motive of Kearns to the decision-makers to establish a causal connection. The Court noted that it has imputed such motives when the non-decision-maker has concealed information or fed false information to the decision-maker. Here, the evidence supports an inference that Kearns provided false information to ALJ de la Torre. However, the evidence also establishes that the false information had no impact on ALJ de la Torre's decision not to fill the vacancy. Whether the other two candidates came from outside the region, as mistakenly believed by de la Torre, or came from outside Indianapolis, as is the truth, ALJ de la Torre's decision would have been the same. Because of the relocation expense restrictions, Poer was the only viable candidate and could not have been promoted under agency policy. His retaliation claim fails.

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CE DESIGN v. PRISM BUSINESS MEDIA (May 27, 2010)

Prism Business Media publishes trade magazines and sponsors tradeshows. CE Design subscribes to several Prism publications. When Prism sent an unsolicited fax to CE Design in 2004, CE Design filed a putative class action under the Telephone Consumer Protection Act (TCPA). The TCPA prohibits the sending of unsolicited advertisements to fax machines. Prism moved for summary judgment, arguing that an FCC implementing order allowed the sending of unsolicited advertisements to the fax machines of companies with which the sender had an "established business relationship (EBR)." Judge Pallmeyer (N.D. Ill.) granted summary judgment to Prism. CE Design appeals.

In their opinion, Judges Flaum, Kanne, and Evans affirmed. The Court describes the issue before it as the classic “chicken-and-the-egg” dilemma. On the one hand, the Hobbs Act reserves to the courts of appeals the power to determine the validity of an FCC order -- and requires a petition for reconsideration with the FCC before a request for relief from a court of appeals. Here, the district court relied on the Hobbs Act and refused to consider the validity of the FCC order creating the EBR exemption. On the other hand is the familiar Chevron analysis used to review an agency's construction of a statute. In the first step of that analysis, a court determines whether the statute is silent or ambiguous on the issue which is the subject of the agency's order. Only if it is silent or ambiguous does the court examine the reasonableness of the agency action. CE Design asserts that the TCPA is unambiguous on the meaning of "unsolicited advertisement" so the court need not consider the FCC order. The Court rejected CE Design's position. An Article III court's first obligation is to ensure its jurisdiction -- before any consideration of the merits. Thus, if the Hobbs Act and the Chevron analysis were really analogous to the "chicken-and-the-egg," the Court would have to address the jurisdictional question in the Hobbs Act before engaging in the Chevron analysis. Alternatively, the Court concluded that the two approaches were not really in conflict. The result of CE Design's own Chevron argument would have been the invalidation of the FCC order by the district court -- exactly the result that the Hobbs Act prohibits. On the merits of the EBR exemption itself, the Court had no difficulty in agreeing with the district court that the exemption applied on the facts of the case.

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HABITAT EDUCATION CENTER v. UNITED STATES FOREST SERVICE (May 27, 2010)

The United States Forest Service decided to allow logging on thousands of acres of national forest in Wisconsin. The winning bidder for the logging permit bid $55,000. Habitat Education Center, a nonprofit corporation whose mission is to promote environmental quality, sued to prevent the issuance of the permit. Judge Goodstein (E.D. Wis.) granted a preliminary injunction but required Habitat to post a $10,000 bond. The court rejected Habitat's argument that a non-profit should not have to post a bond. The judge later dissolved the injunction and granted summary judgment to the Forest Service. Habitat appeals -- but only from the order setting the bond.

In their opinion, Judges Posner, Ripple, and Kanne affirmed. The Court first addressed mootness and standing. The order had not become moot since Habitat can be liable to the Forest Service up to the amount of the bond. Also, it has incurred a loss, and therefore has standing, because it has lost the time value of its $10,000. On the merits, the Court agreed with the district court. Rule 65 (c) states that a court may issue an injunction "only if" the moving party posts security in an amount sufficient to cover any costs sustained by the other party if the injunction was wrongly issued. The rule does not contain an exemption for non-profits. Notwithstanding the unambiguous language of the rule, the Court noted that other courts have created at least two exceptions -- where there is simply no threat of damage to the non-moving party and where an appropriate bond would exceed the movent's ability to pay. Neither of those situations exists here. The Court also rejected Habitat's argument that the amount of the bond was excessive, given the risk of loss to the Forest Service. The loss was the delay of one year. The evidence is that the rebidding process itself will cost $2350. Although the winning bid may equal or exceed $55,000, it also may not. Given the uncertainty of the costs to be incurred by the Forest Service, the amount of the bond was appropriate.

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LEONARD v. EASTERN ILLINOIS UNIVERSITY (May 26, 2010)

For almost 20 years, Robert Leonard worked in a janitorial position at Eastern Illinois University. Leonard was of Native American descent and was very outspoken and active on those issues. In particular, Leonard was very critical of the use by the University of Illinois (since discontinued) of a Native American mascot called “Chief Illiniwek.” In March 2005, Leonard applied for a promotion. He interviewed before a panel of six supervisors, two of whom wore shirts picturing Chief Illiniwek. Although the University of Illinois basketball team was scheduled to play a collegiate championship game that very night, Leonard was offended by the shirts and believed them to be a statement regarding Leonard's criticism of the mascot. Neither Leonard nor any other applicant was promoted as a result of the March 2005 interviews. In April, Leonard complained to the school's Office of Civil Rights. As a result of his complaint, the supervisors were requested not to wear clothing depicting the Chief Illiniwek when dealing with Leonard. In October of 2005, Leonard and seven others applied for another promotion. They all interviewed before the same six supervisors without incident. The University promoted the three applicants who scored the highest -- Leonard was seventh of the eight. Leonard brought suit against the University under Title VII. He alleged that the University failed to promote him in retaliation for his earlier complaint. Judge McCuskey (C.D. Ill.) granted summary judgment to the University. Leonard appeals.

In their opinion, Judges Bauer, Evans, and Tinder affirmed. Leonard had proceeded in the trial court under the direct method of proof, which requires him to prove, among other things, a causal connection between a protected activity and an adverse job action. The Court found no such evidence. There was no evidence that the supervisors reacted negatively to his complaint or that the results of the scoring showed any bias. All six supervisors scored Leonard in the bottom half of the candidates. A causal link cannot be inferred from "suspicious timing" because of the six-month gap between the complaint and the interviews. The Court also rejected Leonard's attempt to use 10-year-old statements of allegedly anti-Native American bias to support an inference of retaliation.

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WALLACE v. MCGLOTHAN (MAY 26, 2010)

Tracey Wallace had trouble reading small print and driving at night. She decided to have surgery so that she would not need to wear contacts or glasses. She went to Dr. McGlothan for LASIK surgery. Unfortunately, the surgery was not successful. A complication arose first during the procedure on her right eye. Notwithstanding the complication, Dr. McGlothan nevertheless performed the same procedure on her left eye -- with the same result. Wallace sought treatment from Drs. Connor and Price. They treated her for years, with some improvement. She continues, however, to suffer the effects of the unsuccessful surgery. The Indiana Medical Review Panel concluded that McGlothan was negligent but only with respect to the left eye. Wallace and her husband brought suit. Judge McKinney (S.D. Ind.) granted partial summary judgment. He relied on the Panel’s opinion in finding that McGlothan violated the standard of care with respect to her left eye but was not liable for any damage to her right. A jury trial was held on damages. The defendant moved for judgment as a matter of law at the close of the evidence, arguing that Wallace failed to prove the permanence of the injury. After a jury verdict of approximately $700,000, McGlothan renewed his motion with respect to the permanence of the injury and also addressed an allegedly undisclosed pre-existing condition. The court denied the motion. McGlothan appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Tinder affirmed. First, the Court rejected Wallace's argument that McGlothan waived the pre-existing condition argument by failing to include it in his pre-verdict motion. The Court agreed that McGlothan improperly included in his Rule 50 (b) motion an argument that was not included in his pre-verdict motion. Although the plaintiffs could have objected, they did not. They therefore waived their waiver argument. The Court then proceeded to uphold the decision on the merits. First, it concluded that the objections to the expert testimony were forfeited. Second, it found the testimony of the experts sufficient for the jury to conclude that the damage was permanent. Third, it concluded that the testimony of the experts was sufficient for the jury to find a causal link between the surgery and Wallace's condition, unrelated to a pre-existing condition. Fourth, it concluded that the evidence linking the condition to the left eye as opposed to the right eye, although sparse, was sufficient. Finally, the Court rejected defendant's complaints about discovery abuse and perjury.

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CARMICHAEL v. VILLAGE OF PALATINE (May 21, 2010)

Palatine police officer Timothy Sharkey stopped an automobile being driven by Albert Carmichael and Keith Sawyer as they returned to their motel parking lot. Sharkey searched both Carmichael and the automobile. He found marijuana and cocaine. When asked why he had pulled them over, Sharkey stated that it was because the automobile lacked a front license plate and had tinted windows. After fellow officer Steve Bushore arrived, Sharkey conducted a search of Sawyer. In the motel parking lot, he pulled Sawyer's pants down and shined a flashlight into his underwear. The officers let Sawyer go but arrested Carmichael on drug charges. They also cited him for having no functioning taillights. In his report, Officer Sharkey made no mention of the tinted windows or absence of front license plate. At a hearing on a motion to suppress the evidence, Sharkey testified that the reason for his stop was the non-functioning tail lights, not the license plate or tinted window. Other testimony established that the tail lights were functioning at the time of the stop. The trial judge suppressed the evidence and all charges were dropped. Carmichael and Sawyer sued the Village and the officers under § 1983. They alleged unreasonable search and seizure, false arrest, and excessive force, as well as state law claims. Judge Kendall (N.D. Ill.) granted summary judgment to the defendants. She concluded, on the search and seizure claim, that the fact that a window was tinted and the front plate was missing provided probable cause. On Sawyer's unreasonable search claim, she concluded that it was constitutional without any detailed examination of the manner in which it was carried out. The court found the remainder of the claims waived. Carmichael and Sawyer appeal.

In their opinion, Judges Ripple, Manion, and Williams affirmed in part and reversed and remanded in part. A traffic stop is reasonable, said the Court, if the police have probable cause to believe that a violation has occurred. The inquiry is an objective one and focuses on what the officer knew at the moment of the stop. Here, the tinted window and missing license plate did constitute moving violations and could have supported a stop of the vehicle. However, the uncontroverted evidence is that Officer Sharkey was not aware of either violation at the time to stop. Therefore, probable cause did not exist. For much the same reason, the Court concluded that Sharkey was not entitled to qualified immunity. The Court also found summary judgment with respect to the search of Sawyer in error. Although the defendants purported to request summary judgment on all counts, they made no mention of this search in their brief in the district court. They bear the initial burden of demonstrating that the summary judgment requirements are met -- they failed to do so. Conversely, the district court was correct in concluding that the plaintiffs waived the remainder of their federal and state law claims because of their perfunctory response to the defendants' request for summary judgment on those issues.

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ESTATE OF BLANCO v. PRUDENTIAL INSURANCE CO. (May 21, 2010)

Norman Blanco was hired by Porsche Engineering Services in April of 2005. After one month of employment, he was covered by Porsche's benefit plan. The plan included both short and long term disability benefits. Blanco suffered a heart attack in July and, by the end of August, was no longer able to work. The long-term disability plan had a pre-existing condition exclusion. It precluded coverage for conditions for which the beneficiary, in the three months prior to his coverage effective date, had either a) received care or took medication or b) had symptoms for which a prudent person would have sought care. Pursuant to the pre-existing condition exclusion, Prudential denied Blanco's claim for long-term benefits. Blanco filed an ERISA suit. Judge McKinney (S.D. Ind.) granted summary judgment to Prudential.

In their opinion, Judges Cudahy, Flaum, and Evans affirmed. Before addressing the core issue, the Court noted that a) Blanco had a long history of heart problems, including congestive heart failure (CHF), for which he was being treated and b) pre-existing condition exclusions were regularly upheld. On the merits, the Court found that he failed to qualify under either prong of the exclusion. He was taking heart medication. The fact that he was taking it for hypertension as well as CHF does not matter. Even if it did, the hypertension and CHF are related and taking medication for the hypertension would disqualify him. The Court also found that Blanco was excluded under the second prong of the policy. He had an episode of high blood pressure for which a prudent person would have sought treatment.

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ALVAREZ v. CITY OF CHICAGO (May 21, 2010)

A group of Chicago Fire Department paramedics brought a collective action under the Fair Labor Standards (FLSA) against the City of Chicago. The complaint alleged that this City violated the FLSA by not properly calculating overtime payments. The plaintiffs identified ten different ways the City allegedly miscalculated overtime pay, not all of which applied to each paramedic's situation. Over three hundred paramedics eventually opted into the collective action. When several were dismissed for failure to opt in in time, they filed their own individual suit with the same allegations. The two cases were consolidated. Judge Hibbler (N.D. Ill.) granted summary judgment to the City as against all plaintiffs. He concluded that the fact that each plaintiff would use a different combination of the various alleged miscalculations prevented them from being similarly situated. He also directed the plaintiffs to arbitrate their complaints, even though he recognized that arbitration under the collective bargaining agreement was not mandatory. The plaintiffs appeal.

In their opinion, Judges Cudahy, Flaum, and Evans reversed and remanded. The Fair Labor Standards Act allows employees to bring complaints as collective actions, on behalf of themselves and others similarly situated. Although a district court is given substantial discretion to manage collective actions, the Court concluded that the district court had misinterpreted a prior case. In Jonites, the Court had found a collective action inappropriate in a situation requiring significant individual fact-finding. Here, although different plaintiffs would be affected by different sub claims, very little individual fact-finding will be required. In addition, the Court concluded that the district court erred in comparing the efficiency of the collective action to arbitration. If the plaintiffs are willing to proceed individually, the proper comparison is between those individual actions and a collective action. Finally, even if a collective action is unwarranted, the proper remedy is not to dismiss the action but to convert it to individual actions.

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FEDERAL TRADE COMMISSION v. TRUDEAU (May 20, 2010)

Kevin Trudeau was found guilty of civil contempt of court for violating the terms of a consent order. In 2009, the Seventh Circuit affirmed Judge Gettleman's (N.D. Ill) finding of contempt (see intheiropinion) but remanded for reconsideration of a nearly $40 million penalty. During the course of the remand proceedings, Trudeau instigated an e-mail barrage on Judge Gettleman. He asked his radio listeners, his website viewers, and his e-mail list readers to send e-mails directly to the judge in support of his cause. Most of the e-mails were polite and innocuous -- some, however, were at least mildly threatening. In all, the judge received over 300 e-mails. The next afternoon, the judge found Trudeau guilty of criminal contempt and sentenced him to 30 days of incarceration. Trudeau appeals.

In their opinion, Judges Manion, Rovner, and Tinder vacated and remanded. Substantively, a judge has the authority to punish "misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice" under 18 U.S.C. § 401. Procedurally, Rule 42(a) of the Federal Rules of Criminal Procedure provides the framework for a typical finding of criminal contempt. Here, however, the court used the summary procedures of Rule 42(b). A summary finding of direct criminal contempt under Rule 42(b) requires that the contemptuous behavior occur in the presence of the judge. The fundamental principle that a court should use the least possible power in a contempt case requires not only that the contempt finding is permissible under Rule 42(b) but that there is also a compelling reason to invoke it. The Court found neither present here. The conduct that he punished did not occur in his physical presence. In fact, he had to summon Trudeau to court to impose the penalty. The Court also found no evidence in the record of a disruption of the court's ability to function or other compelling reason to use the summary procedures. The Court declined to address Trudeau's arguments that his conduct did not meet the "presence" requirement of § 401 and that it was protected by the First Amendment.

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PELLA CORP. v. SALTZMAN (May 20, 2010)

Pella Corp. is in the business of manufacturing and selling home windows. It has sold in excess of 6 million "ProLine" casement windows. When a wood rotting problem arose, Pella set up a customer service program to compensate affected purchasers. A group of those purchasers brought a class action. The suit alleges that Pella committed consumer fraud when it failed to disclose the alleged design defect and the problems it was causing. Judge Zagel (N.D. Ill.) certified seven classes: a) a nationwide Rule 23(b)(2) class of persons who own structures containing the casement windows that have not been replaced, and b) six statewide Rule 23(b)(3) classes of persons whose windows have already been replaced because of the defect. The court refused to certify causation, damages, and statute of limitations issues. Pella petitioned for leave to appeal.

In their opinion, Judges Posner, Williams, and Tinder granted the petition and affirmed. The Court agreed that consumer fraud actions frequently present problems when treated as class actions. That does not, however, equal a general rule that they can never be so treated. Here, the principal issue is whether there is a single design defect in the window that leads to wood rot. The Court concluded that the district court was well within its discretion in deciding that the issue is best resolved in a class context. The problems inherent in treating consumer fraud cases in a class context are not present in this case. The issues are not complex, the central questions are all the same, and the class members must prove causation and damages on an individual basis.

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IN RE: BURLINGTON NORTHERN SANTA FE RAILWAY CO. (May 19, 2010)

A number of residents of the town of Bagley, Wisconsin filed a class-action suit in state court against Burlington Northern Santa Fe Railway (BNSF). They allege that BNSF's failure to maintain its railroad trestle resulted in a flood and damage to their property. BNSF removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). After Judge Crabb (W.D. Wis.) denied the class' motion to remand, the class moved to amend the complaint to withdraw all class allegations. The court granted the motion and remanded the case to state court. It analogized the situation to one in which class certification is denied and noted that district courts were divided on the impact of denial of class certification on CAFA jurisdiction. BNSF requested leave to appeal.

In their opinion, Judges Kanne, Wood, and Sykes granted the petition, vacated the remand order, and remanded. The Court noted the general rule that jurisdiction is determined at the time of removal. It then cited its recent decision in Cunningham Charter Corp. (see intheiropinion), which was decided after the district court's remand. In Cunningham Charter, the Court concluded that the denial of class certification did not require remand of a case removed under CAFA. The same considerations that lead to that conclusion should apply when class action status is amended away voluntarily.

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IN RE: SOUTH BEACH SECURITIES (May 19, 2010)

South Beach Securities, Inc. is controlled by Leon Greenblatt and was once a registered securities dealer. In the early 2000s, Greenblatt orchestrated a number of financial transactions among South Beach and other companies, including Scattered Corporation, which he controlled in whole or in part. At the time, South Beach's only potential assets were net operating losses. As a result of the transactions, Scattered became South Beach's only creditor. South Beach filed a Chapter 11 petition and submitted a plan of reorganization. The U.S. Trustee opposed confirmation of the plan. The bankruptcy court refused confirmation and dismissed the petition. Judge Lefkow (N.D. Ill.) affirmed. Scattered and South Beach appeal.

In their opinion, Judges Posner, Flaum, and Wood affirmed and issued a show-cause order. The Court first addressed the argument that the U.S. Trustee was not even authorized to oppose confirmation of the plan on the ground that its primary purpose was to avoid taxes. Although the Court thought the Internal Revenue Code's guidance is a ”mishmash," it concluded that the Trustee was a "party in interest" under § 1129(d) and authorized to oppose the plan. The Court specifically relied on § 307's grant of authority to the Trustee to "be heard on any issue." On the merits, the Court not only concluded that the proposed plan would not confer the desired tax consequences, it found at least three reasons why the plan could not be confirmed. First, a plan cannot be confirmed if its principal purpose is to avoid taxes. Second, a plan must be rejected if it is not proposed in good faith. Here, the lack of good faith is illustrated by the absence of any outside creditors or any real debt. Finally, a plan cannot be confirmed without the approval of the non-inside owners of at least one class of impaired claims. Because of Scattered's insider status, no such owners exist in this case. The Court concluded that the appeal was frivolous, invited the Trustee to apply for sanctions, and issued an order for the appellants and their lawyers to show cause why they should not be sanctioned.

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UNITED STATES v. APRIA HEALTHCARE GROUP (May 19, 2010)

Two qui tam actions were filed against Apria Healthcare Group in the late 1990s, accusing Apria of fraudulently billing the Medicare and Medicaid programs from 1995-98. Years later, but while those actions were still pending, Christine Chovanec filed this action, similarly alleging fraudulent billing by Apria from 2002-04 in Illinois. Judge Kocoras (N.D. Ill.) dismissed the action with prejudice pursuant to 31 U.S.C. § 3730(b)(5), which provides that no person may bring a "related action" based on the facts of a pending action brought by another person. Four days later, the earlier cases were settled. Chovanec moved for reconsideration. The court denied. Chovanec appeals.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Sykes vacated and remanded. The Court first held that the statute means what it says -- that no person "may . . . bring a related action based on the facts” of another pending action. Any action thus brought must be dismissed, rather than stayed. The Court next addressed whether Chovanec's action was a "related action." It aligned itself with other courts of appeals and concluded that the statute's reference to "facts" meant the material facts in the original relator's complaint. The Court explained that it was the complaints in those cases, not the settlement, that provided the material facts. Those complaints alleged an ongoing national fraud. Therefore, even though Chovanec's allegations referred to later years and a specific office, they were related to the original allegations. Concluding, therefore, that the statute required the dismissal of her complaint, the Court nevertheless vacated the judgment. Now that the original complaints are no longer pending, nothing in § 3730(b)(5) prevents her from refiling. The district court should have dismissed without prejudice.

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OGDEN V. ATTERHOLT (MAY 18, 2010)

In late 2006, Paul Ogden was hired as the manager of the Title Insurance Division of the Indiana Department of Insurance. He reported to Carol Mihalik, the head of the Consumer Protection Unit. Mihalik in turn reported to James Atterholt, the Commissioner. From early on, Ogden was critical of Mihalik. He even managed to avoid her and report directly to Atterholt on some of his projects. In September 2007, Ogden took two separate steps related to Mihalik. First, he filed a formal complaint with the State Personnel Division, complaining that Mihalik did not follow hiring regulations, misused funds, and fostered a hostile work environment. A few days later, he delivered a memorandum to Atterholt requesting that his division be removed from the Mihalik’s Unit. Almost all of the reasons in support of his request referred to Mihalik’s incompetence or dishonesty. Many of them repeated items from his formal complaint. He did not refer to his formal complaint, however, nor did the memorandum suggest the need for any discipline. A few hours after receiving the memorandum, Atterholt summoned Ogden to his office and gave him an opportunity to resign or be fired. Ogden resigned -- but then sued the Department, Atterholt, and Mihalik. He claimed a violation of his First Amendment rights under § 1983. Magistrate Judge Magnus-Stinson (S.D. Ind.) granted summary judgment to the defendants. Ogden appeals.

In their opinion, Judges Williams, Sykes, and Tinder affirmed. The only First Amendment issue addressed by the Court was whether Ogden's speech was constitutionally protected. Relying on the Supreme Court's decision in Garcetti, the Court held that it was not. Garcetti tells us that public employees' speech is not constitutionally protected when the statements are made "pursuant to their official duties." Here, the Court concluded that the memorandum was simply a request for departmental reorganization – a request which fell squarely within the scope of his official duties. Although many of the reasons given alleged incompetence and dishonesty on the part of his superior, they were all made in support of this effort to convince Atterholt of the need to reorganize.

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PETTITT v. THE BOEING COMPANY (May 17, 2010)

In the spring of 2007, a Boeing 737 crashed in Cameroon -- all those aboard died. A few years later, six lawsuits were filed relating to the accident in Cook County Circuit Court. All six suits were removed to federal court pursuant to the Multiparty, Multiforum Trial Jurisdiction Act (MMTJA). Three of the six suits have since been dismissed. The other three were assigned to three different district court judges. In one of those cases, Boeing moved for a reassignment and consolidation of the case to the judge with the lowest numbered case, pursuant to local rule. Instead of ruling on the motion, however, the court on its own remanded the case to state court. The basis for his remand was the fact that not all the defendants had consented to the removal. Boeing appeals.

In their opinion, Circuit Judges Cudahy and Kanne and District Judge Darrah vacated and remanded. The Court first addressed its jurisdiction, since a remand order under § 1447 (c), as this is, is generally not appealable. The Court clarified that, although it cannot review the propriety of such an order, it can determine whether a court possessed the actual power to do what it did. Here, in fact, it concluded that the court had no such power. Any defect in the removal was a procedural defect -- and procedural defects are waived if not raised by motion within 30 days of removal. The district court has no power, on its own, to remand after the passage of the 30 days. As an aside, the Court noted the absence of any procedural defect. Acknowledging that removal generally requires the consent of all defendants, the Court stated that removal under the MMTJA does not require all defendants' consent.

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