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

MARION COUNTY CORONER'S OFFICE v. EEOC (July 27, 2010)

Kenneth Ackles, an African-American male, was elected Marion County, Indiana coroner in November 2004. Two deputy coroners -- white male John Linehan and African-American female Alfarena Ballew -- sought the position of chief deputy coroner. The chief deputy coroner is responsible for the day-to-day management of the office. Ackles chose Linehan because he was currently serving in that position on an interim basis. Very early on, Ackles made it clear to Linehan that he wanted to increase the number of African-American employees (particularly deputies) in the office. The relationship between Ackles and Linehan did not go well: Ackles complained that Linehan received a salary increase without his knowledge, Ackles and Linehan disagreed over disciplining Ballew, Ackles instructed Linehan not to report Ballew's tardiness, Ackles told Linehan not to file a police report concerning a missing $3000, and Ackles instructed Linehan not to discipline the janitor who allegedly took the $3000. Finally Linehan filed a hostile work environment complaint with the human resources department. On that very day (November 14), Ackles told Linehan that he was going to make a change in the chief deputy position but that Linehan was to continue performing his duties. Some of those duties were later reassigned but Linehan continued to receive the same salary. A few weeks later (December 2), Linehan received a letter terminating his employment. Although the letter provided no reason for the termination of employment, Ackles testified later that he had "lost confidence and trust" in Linehan. Ackles named Ballew the new permanent chief deputy coroner. Shortly thereafter, Ackles and Ballew canceled an outsourcing contract for autopsies and hired directly several of the company's employees. They hired only African-Americans -- none of the white employees were offered positions. Linehan filed an EEO charge against the coroner's office. He alleged race, sex, and age discrimination as well as retaliation for protected activity. His charge was processed administratively at the EEOC pursuant to the Government Employee Rights Act (GERA). The ALJ found that Ackle's testimony was incredible (among other things), that his reason for terminating Linehan's employment was pretextual, and that Linehan was demoted and fired on account of his race and in retaliation for his complaint. The ALJ awarded front and back pay, attorney's fees, and compensatory damages in the amount of $200,000. The EEOC affirmed. The Coroner's Office petitions for review.

In their opinion, Judges Manion, Evans, and Sykes granted in part, denied in part, vacated in part, and reversed and remanded. The Court noted, under GERA, that it should uphold the decision of the EEOC if it is supported by substantial evidence. Here, the heart of the case is the pretext analysis. Although the Court admitted that this analysis looks only to whether the employer’s explanation was "honestly believed," it nevertheless found a wealth of evidence that the "lost confidence and trust" rationale was pretextual. It cited the testimony concerning the discipline of Ballew, the janitor theft, and Linehan’s raise in support of its conclusion. Next, it considered the issue of the EEOC’s jurisdiction. GERA applies only to policymaking employees chosen by an elected official. The coroner’s office argued that Linehan was not a policymaking employee when he was fired because of the November 14 demotion. The Court rejected the argument. Linehan was certainly stripped of some duties before he was fired but he was never formally demoted, he continued to receive his salary, and the December 2 letter advised that he was being terminated from the position of “Chief Deputy Coroner.” Finally, the Court addressed the $200,000 award of compensatory damages. The Court concluded that the award bore no rational relation to the very scant evidence of Linehan’s suffering and was excessive compared to similar cases. It offered a remittitur of $20,000 or a new hearing on damages.

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BOARD OF TRUSTEES v. ORGANON TEKNIKA CORP. (July 27, 2010)

The University of Illinois licenses certain intellectual property rights to Organon Teknika for the manufacture of a cancer drug. In return, the University collects a royalty. Because the royalty depends on Organon's revenue and because Organon is allowed to sell to its affiliated companies, the license allows the University to challenge the royalty rate. In the case of a challenge, an arbitrator is asked to determine whether Organon is receiving the equivalent of an arms-length negotiated rate. The University did challenge the rate in 2006. After receiving evidence, the arbitrator concluded that the rate was appropriate and issued a final award closing the proceedings without modifying the rate. He also sent the parties his final bill. In the final two sentences of his award, he explicitly "reserve[d] the right" to amend his findings if new evidence became available. The University neither sought judicial review nor reconsideration under the Federal Arbitration Act. Instead, after six months, it asked the arbitrator to reconsider. When Organon refused to consent to any further proceedings, the University filed suit to compel the resumption of arbitration. Judge Guzmán (N.D. Ill.) dismissed the suit, though on a ground neither party had requested -- that the arbitrator had never issued a final award. Organon appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Hamilton vacated and remanded. At first blush, the Court questioned its appellate jurisdiction. In the court below, the University had requested an order compelling Organon to arbitrate and Organon had objected to such an order. The court dismissed the suit without granting the University its requested relief. Nevertheless, the University did not appeal -- but Organon did. On the face of it, it appears that Organon prevailed. A prevailing party cannot appeal the judgment even if it disagrees with the content or rationale of the opinion. Upon deeper analysis, however, the Court appreciated that Organon was in fact attacking the judgment. What it wanted was finality -- a dismissal with prejudice -- rather than the dismissal without prejudice entered by the court. Satisfied with its jurisdiction, the Court addressed the merits. It had little difficulty in concluding that the district court erred in concluding that the arbitration was still pending. The arbitrator resolved the dispute, referred to the award as his final decision, and sent his final bill. The reservation in the final two sentences, in the Court's opinion, was nothing more than the arbitration equivalent of Rule 60(b)(2). Just as Rule 60(b)(2) does not stand in the way of the finality of a judgment, neither does the arbitrator's reservation. Under the Federal Arbitration Act, the University had 90 days within which to present new evidence. It did not do so. The arbitration is over. 

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PRIME EAGLE GROUP LTD. v. STEEL DYNAMICS (July 27, 2010)

Prime Eagle Group Ltd. is the assignee of a Thai company that built a steel mill in Thailand in the 1990s. During the mill’s construction, the company ran into difficulty and sought the assistance of Steel Dynamics, an expert in the field. Early on, with Steel Dynamic’s help, the venture was successful and profitable. In the late 1990s, however, when the region was in a recession and steel prices were deflated, Steel Dynamics decided to withdraw. It reported to company management and investors that the mill had design flaws and corrective action would cost $100 million. The company's president did not agree and reported his position to the board of directors. He was fired and investors soon pulled out. Lightning put the mill out of commission in December of 1998. Several years later, after the company came out of reorganization, it commissioned an engineering study. The study concluded that the original design was sound and the mill has operated successfully since -- without an expenditure of $100 million. Prime Eagle brought suit against Steel Dynamics for fraud. Judge Moody (N.D. Ind.) concluded that the suit was untimely under Indiana’s six-year statute of limitations and entered judgment for Steel Dynamics. Prime Eagle appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Tinder affirmed. Prime Eagle concedes that the suit was filed ten years after the alleged fraud but asserts that the claim did not accrue until the company learned the results of the 2002 report. The Court noted that the only real issue is whether the president's knowledge is imputed to the company. The president wrote a lengthy and comprehensive letter to the board detailing his disagreement with Steel Dynamics. He certainly knew enough at that time for the company to commission an investigation. Instead of doing so, however, the board fired him and did nothing for four years. The general rule is that an employee's knowledge is imputed to the corporation. Only two exceptions to the rule exist, neither of which applies here. The Court rejected Prime Eagle's argument that a third exception -- for an employee who has lost the confidence of the board -- applies and noted that a federal court is the wrong place to even argue for a new exception to state law. Finally, the Court rejected Prime Eagle's equitable tolling argument. Under equitable tolling, Prime Eagle is required to act diligently after the tolling event (its insolvency) terminates. Here, they failed to do so. In fact, they delayed at least four years before taking any action.

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GBUREK v. LITTON LOAN SERVICING (July 27, 2010)

Camille Gburek’s mortgage was serviced by Litton Loan Servicing. As of December 2007, Gburek was in default. She received two letters that month, one from Litton and one from Titanium Solutions on behalf of Litton. Neither letter demanded payment. The Litton letter offered to "discuss foreclosure alternatives" and "help preserve your homeownership." It requested financial information to help it consider its options. The Titanium Solutions letter also requested personal financial information and also offered to assist Gburek to find a way to avoid foreclosure. Gburek filed a class action under the Fair Debt Collection Practices Act. She alleges that each of the communications to her, as well as the communication between Litton and Titanium Solutions, violated the Act. Judge Shadur (N.D. Ill.) dismissed the complaint for failure to state a claim, concluding that the communications were not made "in connection with the collection of any debt" as required by the Act. Gburek appeals.

In their opinion, Judges Bauer, Flaum, and Sykes reversed and remanded. The Court noted that there are two threshold requirements for the FDCPA to apply. The first, that the defendant is a "debt collector," is conceded. The second, whether the communication at issue was "made in connection with the collection of any debt," is the issue on appeal. The Court looked to three of its prior decisions for guidance -- Bailey, Horkey, and Ruth. Bailey concluded that a communication was not "made in connection" because the debtor was not in default, any threats contained in the letter were prospective, and the communication contained no payment demand. The lack of payment demand was simply one factor in the analysis. Horkey concluded that the act did apply, even without an explicit demand for payment, when the reason for the communication was to induce the debtor to settle the debt. Finally, Ruth concluded that the Act applied to a privacy notice that was sent with a collection letter. The Court focused on the relationship between the parties and the fact that the communications were sent together. Thus, the Court emphasized that there is no bright line rule with respect to a demand requirement. Several factors are relevant in the analysis -- whether there is an explicit payment demand, the purpose and context of the communications, and the relationship between the parties. The Court applied the principles to each of the three communications at issue to determine whether the allegations were sufficient to survive the motion to dismiss. With respect to each of the letters sent to Gburek, the Court found that their context and content brought them within the Act. Gburek was in default and both letters sought financial information and her cooperation in discussing alternatives to foreclosure. The communication between Litton and Titanium Solutions is likewise "made in connection." It is clear that Litton engaged Titanium Solutions for the sole purpose of assisting it in collecting the debt. The Court declined to address any of the substantive issues with respect to the alleged violations in that they were not adequately developed on appeal.

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SMITH v. SIPI, LLC (July 27, 2010)

Keith and Dawn Smith lived in their Joliet, Illinois home for years. When Dawn inherited title to the home in 2004, it was subject to a state tax lien. Pursuant to Illinois law, it was auctioned off at a tax sale in late 2001. SIPI, LLC was the successful bidder and received a certificate of purchase. Under Illinois tax sale procedure, the sale is followed by a redemption period, during which the owner may redeem the property. If it is not redeemed, the buyer can obtain a tax deed to the property. The tax deed must be recorded within one year after the expiration of the redemption period. The Smiths' redemption period expired on November 1, 2004. SIPI acquired the deed in April of 2005 and recorded the deed in May of 2005. In April 2007, the Smiths petitioned for bankruptcy and filed an adversary complaint against SIPI to avoid the tax sale as a fraudulent transfer under § 548 of the Bankruptcy Code. The bankruptcy court concluded that the tax sale did not occur within the two year "look back period" because the sale was perfected when the redemption period expired in November 2004. Judge Guzman (N.D. Ill.) affirmed. The Smiths appeal.

In their opinion, Judges Williams, Sykes, and Tinder reversed and remanded. The Court noted that the only real issue in the case was whether the buyer’s interest in the property was "perfected" under bankruptcy law before or after the outer limit of the look back period -- April 13, 2005. The redemption period expired four months earlier but the tax deed was issued two days later and recorded 36 days later. Under § 548, a buyer’s interest is perfected when the owners can no longer convey a superior interest to a bona fide purchaser. The Court looked to the Illinois Property Tax Code for guidance, since the issue was one of first impression for the Court. The Court concluded that the statute considers the time of recording to be the point where the buyer's rights are superior to a bona fide purchaser. The Court did express some concern whether a bona fide purchaser could even exist after a tax sale, given the extensive public proceedings associated with tax sales and the "without notice" requirement of a bona fide purchaser. Ultimately, the Court was comfortable in rejecting the notion that a bona fide purchaser could never prevail after a tax sale.

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ANDERSON v. AON CORP. (July 26, 2010)

Robert Anderson sold his California insurance brokerage firm to Aon Corporation in 1997. He received approximately 95,000 shares of Aon stock when it was trading around $69 per share. Within five years, its share price had fallen to approximately $14. Anderson brought suit in state court in California, his state of residency, and alleged only violations of California securities law. He alleged that the fall in share price was due to the company’s mismanagement, that the mismanagement was fraudulently concealed until 2002, and that he would have sold the shares earlier absent the concealment. Aon removed on diversity grounds. Anderson shortly thereafter dismissed without prejudice, anticipating that the federal court was going to transfer the case to Illinois under § 1404(a). He refiled, again in California state court, and added two California citizen defendants (to prevent diversity). Curiously, this time he included a federal claim (RICO) in his complaint. Aon removed on federal question grounds and also asserted that the additional defendants were fraudulently joined. Anderson dismissed his federal claim and asked that the case be remanded. Instead, the California district court transferred the case to Illinois. Judge Manning (N.D. Ill.) applied Illinois law and dismissed the complaint for failure to state a claim. Anderson appeals.

In their opinion, Chief Judge Easterbrook and Judges Williams and Tinder reversed and remanded. The Court first addressed its appellate jurisdiction, since one of Anderson's arguments was that the California federal court should have remanded to state court, instead of transferring, once he dismissed his RICO claim. The Court recognized that some circuits have held that appellate review in cases such as this is split between the transferor court's circuit and the transferee court's circuit -- but it concluded otherwise. A § 1404(a) transfer is not separately reviewable. The only review comes after a final decision when all rulings of the Illinois court (even if to apply law of the case) are reviewed. On the merits of the transfer decision, the Court concluded that the lower court acted appropriately. There was jurisdiction when the suit was filed because of the federal claim and there was supplemental jurisdiction over the state law claim under § 1367(a). Once the federal claim was dismissed, the district court had discretion to either remand or to assert its supplemental jurisdiction over the state court claims until resolution. The Court cited Andersen's legal maneuvering as one reason the court prudently kept (and transferred) the case. On the substantive merits of the claim, however, the Court found error. The transfer of the case should not affect the applicable law. Here, the court should have applied the California choice-of-law rules to determine which state's substantive law applied. The California choice-of-law rule has three parts: first, it asks whether the different states' laws are different; second (if they are different), it examines each states' interest to decide whether a true conflict exists; and third (if there is a true conflict), it applies the law of the state whose interests would be most impaired by the adoption of the other state's law. The Court noted that the substantive law at issue here was the viability of a "holder action." A holder action is a private action for damages by an investor who claims that he continued to hold the stock, when he would otherwise have sold, because of the deceit of the defendant. The Supreme Court, in Blue Chip Stamps, concluded that holder actions are not viable under federal securities laws. However, they are viable under California securities laws. The Illinois Supreme Court has not spoken, although Illinois generally follows federal law in this area. The Court therefore concluded that there was a true conflict under the choice of law rules in the California. It also concluded that the third prong of the test favored California in that California has affirmatively accepted the viability of a holder action and Illinois has not spoken on the issue. Anderson should thus be allowed to proceed with the action. The Court concluded by noting a number of significant obstacles in Anderson's path but left them to be addressed, in the first instance, by the district court.

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PORTIS v. CITY OF CHICAGO (July 23, 2010)

The City of Chicago arrests thousands of individuals each year for crimes punishable only by monetary fines. These crimes include disorderly conduct, peddling, and minor traffic offenses, among others. The police procedure after such arrests is to confirm the identity of the individual, the existence of probable cause, and that the individual is not wanted for a more serious offense. At that point in the process, an individual is entitled to be released on a personal-recognizance bond. All that remains is the bond’s processing and approval and the return of any personal belongings that were taken upon the arrest. The individual is then released. A number of persons who were subjected to this process brought a class action against the City. They allege that if the period of time between the entitlement to release and the actual release exceeds two hours, the confinement is unreasonable and in violation of the Fourth Amendment. Judge Gettleman (N.D. Ill.) agreed and certified the question for appeal. The City appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Evans accepted the appeal -- and reversed and remanded. The Court compared the district court's ruling with the Supreme Court's decision in McLaughlin. In that case, the Supreme Court adopted a 48-hour test for the reasonableness of the period between arrest and presentation to a magistrate. That test differed in two ways from the district court's test: first, it looked at the entire process between arrest and presentation rather than one phase of the process -- and second, the 48-hour test was a presumption rather than a bright line rule. McLaughlin specifically rejected the adoption of arbitrary bright lines by courts -- only a legislature should venture there. The reasonableness of a detention should be decided as a whole -- not with relation to its component parts -- and should be decided individually -- not as a class. So not only did the Court find error in the lower court's decision on the merits, it also directed the district court to decertify the class. The named plaintiffs may still proceed individually with their claims that their detention was unreasonable.

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AUTO-OWNERS INSURANCE CO. v. MUNROE (July 22, 2010)

Joshua Munroe was driving his tractor-trailer northbound on an Illinois highway when he approached three southbound tractor-trailers, all owned by Wayne Wilkins Trucking. The middle truck attempted to pass but was unable to do so successfully. Munroe's truck first struck the middle truck and then collided head on with the trailing truck. Munroe suffered very serious burns and injuries. The southbound trucks were all insured under a single policy issued by Auto-Owners Insurance Company. The policy had a $1 million per occurrence limit and included a combined limit provision which limited its liability to $1 million per occurrence regardless of the number of vehicles involved in the accident. Munroe settled with the insurers for the million dollar limit, less the amount paid in property damage. The insurance company agreed to file a declaratory judgment action -- Munroe reserved the right to seek additional damages if they court ruled that coverage exceeded the million dollars. Judge Baker (C.D. Ill.) granted summary judgment to Auto-Owners. Munroe appeals.

In their opinion, Judges Ripple, Manion, and Sykes affirmed. The Court had no difficulty in first concluding that the insurance policy was not ambiguous and limited coverage to $1 million per occurrence. Only if there were multiple occurrences would the coverage exceed $1 million. Illinois uses the "cause theory" in analyzing the number of occurrences. Under that theory, there must be multiple "separate and intervening human acts" to create multiple occurrences. Here, although Munroe alleged that each of the three drivers was individually and separately negligent, the accident was a single, uninterrupted event without intervening causes. It was thus a single occurrence. The Court also rejected Munroe's argument that the Motor Carriers Act and the MCS-90 endorsement required combined coverage of $2.25 million. The Court was "skeptical" of the argument that the endorsement applied on a per vehicle basis but found it unnecessary to decide that question. By its own terms, the endorsement is triggered only by a final judgment. With no final judgment, the endorsement does not apply.

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FM INDUSTRIES v. CITICORP CREDIT SERVICES (July 22, 2010)

FM Industries brought a copyright infringement suit against Citicorp Credit Services. Judge Conlon (N.D. Ill.) found material disputes with respect to FM’s prospective relief and Citicorp’s ongoing infringement and set the case for trial. FM's lawyer, Wayne Rhine, was late in his obligation to prepare a draft pretrial order. When he did so, it was "egregiously noncompliant." Despite extensions of time and cooperation from the defendants, Rhine never fixed the problem. Eventually, the court dismissed the case for want of prosecution. The district court awarded approximately $750,000 in attorneys’ fees to the defendants under the copyright statute. The court also found that Rhine and his co-counsel William McGrath had vexatiously multiplied the proceedings under § 1927 and imposed a joint and several sanction of $35,000. FM, Rhine, and McGrath appeal.

In their opinion, Chief Judge Easterbrook and Judges Wood and Tinder affirmed in part and reversed in part. The Court first noted that any argument on the merits was irrelevant. The only reason the case did not go to trial was the dismissal sanction. On that issue, the Court had no difficulty in finding it proper. The non-compliant pretrial order with was, in the Court's words, the "straw that broke the camel's back." The Court recited the delays, the warnings, the absurd damage demands, the missed time limits, the overreaching discovery demands -- the list went on. The dismissal sanctioned was permissible under Rule 16 and was proportionate to the conduct. With respect to the statutory award of fees, the Court stated that a prevailing defendant is presumed entitled to fees under the statute and FM presented no reason to reverse that presumption. Finally, with respect to § 1927 sanctions, the Court concluded that Rhine's litigation behavior was vexatious and deserving of sanctions. McGrath, however, presented a different story. Although he did file an appearance and signed five pleadings, he was not accused of any direct misdeeds. He cannot be sanctioned under § 1927 for the misdeeds of his co-counsel or even for his failure to prevent them. The Court reversed the award of sanctions against McGrath.

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ROADWAY EXPRESS v. UNITED STATES DEPARTMENT OF LABOR (July 22, 2010)

When Peter Cefalu applied for a job as a truck driver with Roadway Express in 1999, he lied on his application. He stated that he left two prior jobs voluntarily. In fact, in both cases, he was fired for reckless driving. Roadway fired him a few years later, shortly after he supported a co-worker's grievance against Roadway. Cefalu filed an administrative complaint claiming that his dismissal violated the Surface Transportation Assistance Act of 1982. During the administrative proceedings, Roadway claimed that it fired Cefalu not because of his protected activity but because of its then recent discovery of his dishonesty on his application. Roadway refused, even when ordered, to disclose the source of its information. The administrative law judge sanctioned Roadway. The judge prohibited the introduction of any evidence learned from the undisclosed source. Without that evidence, Roadway could not rebut Cefalu's allegations. The ALJ found for Cefalu and ordered his reinstatement. The Administrative Review Board (“ARB”) affirmed. On appeal to the Seventh Circuit, the Court upheld the sanction at the merits stage but remanded to allow Roadway an opportunity to establish, for purposes of reinstatement, that it would have fired Cefalu absent the protected activity. On remand, the administrative law judge concluded that Roadway failed to meet its burden. The ARB affirmed. Roadway petitions for review.

In their opinion, Judges Posner, Ripple, and Wood denied the petition. The Court first revisited its earlier conclusions and its distinction between the use of the sanction at the merits stage and the reinstatement stage. Although the statute seems to require reinstatement, the Court borrowed the Mt. Healthy "mixed motive" framework to avoid the “absurd” result of reinstating an unsafe driver. The framework would allow Roadway to meet its burden by showing that it would have fired Cefalu because of his driving history even in the absence of his protected activity. The exception the Court adopted was limited to a showing of a public safety concern. The Court rejected Roadway's attempts to meet its burden by showing that it would have fired Cefalu for his dishonesty, as opposed to his driving. On its review of the record, the Court found the evidence of Roadway's treatment of drivers with similar records ambiguous. There was evidence that Roadway fired several drivers who were involved in accidents -- there was evidence that Roadway retained several drivers who were involved in accidents. The Court had little difficulty, therefore, in finding that the administrative decision was supported by "substantial evidence" -- the applicable standard of review.

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INDIA BREWERIES v. MILLER BREWING CO. (July 21, 2010)

India Breweries, Inc. (IBI) is a "virtual brewer." On the one hand, it acquires the rights to brew a beer. On the other hand, it partners with other companies to actually brew and distribute the beer. One of those companies was Mohan Meakin, an Indian brewer with whom it entered into a joint venture to brew and distribute beer in India. IBI then entered into an agreement with Miller Brewing Company pursuant to which it hoped to market Miller's brands in India. The agreement required IBI to get written approval from Miller before it began commercial brewing at any brewery. If the brewing was going to take place with a contract brewer, the agreement required IBI to obtain Miller's approval of its contractual relationship as well. IBI proposed two breweries to Miller. A Miller team visited the breweries and advised IBI that they did not meet Miller's requirements. IBI continued to explore other options with limited success. On a few occasions, it sent Miller equipment lists from potential brewing partners. On each occasion, Miller concluded that the facilities did not meet its requirements. It refused to actually visit and inspect any facility until it received assurances of adequate equipment and specifications. IBI filed suit for breach of contract. It claimed that Miller was required to inspect each brewery it proffered. Miller counterclaimed for fraudulent inducement and negligent misrepresentation. Judge Clevert (E.D. Wis.) granted summary judgment to Miller on IBI's claim but denied summary judgment on the counterclaim. The parties then stipulated to a dismissal without prejudice of the counterclaim, under which Miller agreed not to refile it unless IBI was successful in its appeal. IBI appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Tinder affirmed. The Court first addressed its appellate jurisdiction. It noted that the stipulation of the parties that permitted the refiling of the counterclaim in certain circumstances destroyed the finality of the district court's order. Without finality, there is no appellate jurisdiction. However, because Miller agreed to an unconditional dismissal when pressed at oral argument, the finality requirement is satisfied and the Court proceeded to the merits. On the merits, the Court found for Miller. It rejected IBI's argument that the contract was ambiguous and could be read to require Miller to inspect any brewery it proffered. In fact, the Court found that interpretation "patently unreasonable." First, that requirement would not be rational since it would require Miller to go all the way to India to inspect a brewery that it already knew would not meet its requirements. Second, since Miller could reject a nonaffiliated brewer for any or no reason, requiring inspection in those circumstances would also be irrational. The Court also noted that the contract required Miller's approval of the contractual relationship with nonaffiliated brewers. Since Miller had not yet had an opportunity to review those relationships, it could also reject the brewers on that ground. Finally, although the Court conceded that Wisconsin law implies a duty of good faith in any contractual relationship, it found that Miller did not breach that duty.

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CHANEY v. PLAINFIELD HEALTHCARE CENTER (July 20, 2010)

Brenda Chaney, an African-American female, worked at the Plainfield Healthcare Center as a nursing assistant for three months in the summer of 2006. Plainfield's policy (possibly undertaken in a good faith belief that it was required by law to do so) was to acquiesce in its residents' racial preferences. Accordingly, every daily assignment sheet noted that particular residents preferred no African-American nursing assistants. Chaney also was the target of a number of derogatory racial comments during her employment. Plainfield did take corrective action when instances of racial remarks were reported. In September of 2006, Chaney and a coworker both refused to come to the aid of a resident. A nurse reported the incident and also reported that Chaney used profanity when she ultimately did respond. Although the unit supervisor's investigation and knowledge of Chaney led her to be skeptical of that charge, the director of nursing decided to fire Chaney. She was informed that the reason for her termination of employment was her use of profanity. Chaney brought an action under Title VII alleging a hostile work environment and an unlawful termination. Judge Barker (S.D. Ind.) granted summary judgment to Plainfield. Chaney appeals.

In their opinion, Judges Rovner, Williams, and Sykes reversed and remanded. The Court had "no trouble" concluding that Chaney's work environment was objectively offensive. It relied not only on the overt derogatory comments and the more subtle remarks supported by the record, but also the fact that the daily assignment sheet contained the racial restrictions. The Court rejected Plainfield's argument that its policy was reasonable and necessary to comply with law. Although recognizing that gender discrimination may sometimes be allowed to accommodate privacy interests, the Court stated that the same is not true for racial discrimination. The Court also concluded that Indiana law did not require the policy and, even if it did, federal law would trump the requirement. On a practical level, the Court recited a number of options an employer has when faced with racial hostilities. With respect to the discharge claim, the Court concluded that a reasonable jury could find that Plainfield's decision to fire Chaney was motivated by race. It relied on Plainfield's shifting justification for its action, the unusual way in which the incident investigation was conducted and concluded, and the absence of any disciplinary action with respect to the other nursing assistant involved in the incident.

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MCGOWAN v. HULICK (July 20, 2010)

Michael McGowan was incarcerated in an Illinois prison in 2006. He filed a pro se lawsuit pursuant to state law and § 1983 against a dentist and the prison's dental director alleging the following facts: In November of 2006, his tooth began to hurt. His pleas for assistance finally resulted in an appointment with a dentist in late January 2007. The dentist refused to provide a filling but agreed to extract the tooth. The procedure did not go well. McGowan was in severe pain, the tooth broke apart, and the dentist had to remove pieces of the tooth from his mouth with an ice pick. After the procedure, the pain increased, a mass of tissue developed, and he developed a sinus perforation. Other than pain relievers and temporary fixes, McGowan received no treatment until August, months after the extraction. The complaint alleges detailed facts regarding his requests for treatment and the delay occasioned at least in part by the prison dental director. Judge Herndon (S.D. Ill.) dismissed the case with prejudice for failure to state a claim pursuant to the § 1915A screening. The court acknowledged the long delay in treatment but concluded that it did not amount to deliberate indifference. The court did not address the state law negligence claims. McGowan appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Wood vacated and remanded. The Court noted the "well-established" Eighth Amendment test -- that deliberate indifference to serious medical (or dental) needs can amount to a violation. Delay itself can equal deliberate indifference in circumstances where it made conditions worse. Here, the Court concluded that the allegations against the prison dental director were erroneously dismissed. It noted the very specific complaint allegations of significant delays before McGowan was able to see the dentist, the oral surgeon, and finally the specialist. At this screening stage of this proceeding, the Court concluded that the allegations were sufficient to proceed. The Court reviewed the allegations against the dentist quite differently. It saw that as a dispute over which procedure was used and the competence with which it was performed. Although the ice pick allegation gave the Court the most pause, it decided that the allegation was simply that some instrument that looked like an ice pick was used. Although possibly supporting a negligence or gross negligence conclusion, the Court concluded that the allegations cannot support a finding of deliberate indifference. With respect to the state law negligence claims, the Court reinstated the claim with respect to the dental director and instructed the district court to modify its dismissal of the dentist to be without prejudice.

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BRANDT v. VILLAGE OF WINNETKA (July 20, 2010)

William Brandt, Jr. resides in Winnetka, Illinois and is active politically. He has hosted several receptions for candidates and officeholders at his home. In the aftermath of such an event in 1996 for President Clinton, Winnetka passed an ordinance that requires event sponsors to pay for the “special services” required by the events. Special services includes things like additional police presence and traffic control measures. Notwithstanding the ordinance, Winnetka has not asked Brandt to pay for any special services occasioned by the several events he has sponsored since its passage. The village has invoked the ordinance on three occasions -- one for President Bush and two for Laura Bush. Political committees, rather than the individual sponsor, paid for at least two of those events. Brandt filed suit pursuant to § 1983, seeking a declaratory judgment that the ordinance violates the First Amendment. He alleged that it "chilled" his willingness to sponsor events and that it engaged in viewpoint discrimination on the theory that more controversial candidates would require more special services. Judge Dow (N.D. Ill) dismissed the complaint on the grounds that Brandt lacked standing. Brandt appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Tinder affirmed as modified. The Court noted that the district court dismissed for lack of standing because Brandt had not established an injury -- but also mentioned its belief that the issue was not ripe and that it may be an improper case to exercise the court's discretion to issue a declaratory judgment. The Court concluded that the district court was in error when it found an absence of standing. Standing can be found when there is an actual or impending injury, even though that injury may be small and not absolutely certain. Here, the Court found sufficient injury (as well as causation and redressability) to support standing. The Court concurred with the district court, however, in its decision not to exercise its discretion to issue a declaratory judgment. Brandt does not challenge the ordinance on its face -- only as applied. The record does not show that the ordinance will be applied in a discriminatory fashion or that it has had any effect on speech. Such an abstract record does not lend itself to a constitutional adjudication at this time.

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DOCTORS NURSING & REHABILITATION CENTER v. SEBELIUS (July 16, 2010)

Doctors Nursing & Rehabilitation Center (“DNRC”) is a nursing home located in Salem, Illinois. The Medicare program reimburses DNRC for certain procedures on a per procedure basis. DNRC has a dispute with the program regarding the proper rate at which it was reimbursed for pulse-oximetry tests. A pulse-oximetry test is a noninvasive procedure for measuring blood oxygen levels, usually by placing a sensor on a patient's fingertip. DNRC presented its claims through the proper administrative channels, first through a fiscal intermediary and then through a “Qualified Independent Contractor.” Both levels of review rejected DNRC's challenge. It brought suit for underpayment of benefits. Health and Human Services, the agency that administers the Medicare program, decided to reopen the administrative proceedings. In the district court, it moved to dismiss for lack of jurisdiction on the ground that there was no longer final agency action. Judge Scott (C.D. Ill.) granted the motion and dismissed the case. DNRC appeals.

In their opinion, Judges Posner, Manion, and Hamilton reversed and remanded. A party may seek judicial review of a "final decision" in any case that arises under the Medicare Act. Here, the dismissal by the Qualified Independent Contractor satisfies that final decision requirement. For several reasons, the Court concluded that an agency is not able to divest a court of its jurisdiction by simply reopening an administrative proceeding. First, it relied on the general rule that jurisdiction is analyzed at the time of filing. Second, it noted that the controlling statute contains a specific provision allowing an agency to request a court, before answering and for good cause, to remand the case to the agency. The provision would make no sense if an agency had that power on its own. Finally, the Court noted that an inferior tribunal generally transfers authority over a matter at the time of an appeal. The Court also rejected the agency's request to remand the case to the district court with instructions to remand the case to the agency. The Court left that decision to the district court in the first instance.

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JONES v. RES-CARE, INC. (July 16, 2010)

Tamika Jones, an African-American female, has several complaints about the way she was treated during her employment at Res-Care. She claims she was promoted in both 2003 and 2004 and acquired increased job responsibilities without an increase in compensation -- unlike several non-African-American employees. She claims she had to specially request time off and that she was denied tuition reimbursement -- unlike several non-African-American employees. She claims she was passed over for promotions in April and November of 2005 and June of 2006 – in favor of non-African-American employees. She filed an EEOC charge in August of 2006, referring to the November 2005 failure to promote and the tuition reimbursement treatment. In 2007, while under specific orders not to vary her work schedule without permission, she returned from her honeymoon three days early. She was given corrective action for the incident. She brought suit under Title VII in June of 2007. She filed a second EEOC charge in November of that year, claiming that the corrective action from the honeymoon incident was in retaliation for the first EEOC charge. She also amended her complaint accordingly. Testimony was elicited during discovery that the Executive Director, after an internal investigation established that Jones improperly charged her employer for some lunches, called her either a "rat" or a "fink" and referred to her as "untrustworthy" to another employee. Jones added a state law slander claim. Judge Lawrence (S.D. Ind.) granted summary judgment to Res-Care on all claims. Jones appeals.

In their opinion, Circuit Judges Manion and Williams and District Judge Darrah affirmed. One of the principal issues on appeal was the timing of the acts of discrimination and the content and timing of the EEOC charge. The Court concluded that the retaliation claim was the only claim that was both mentioned in an EEOC charge and occurred within the 180 days prior to the date of the charge. Jones struck out on each of her three attempts around the ruling: Strike 1) the Court rejected Jones' arguments of continuing violation (they were all discrete acts), Strike 2) the Court rejected her equitable tolling argument (she failed to meet the "aware of the possibility" standard), and Strike 3) the Court rejected her “closely related” argument ("part of a pattern" is not enough). On the merits of the honeymoon incident retaliation claim, the Court concluded both that the corrective action imposed did not amount to an adverse employment action and that Jones failed to establish a causal link between the corrective action and the EEOC charge. The Court also agreed with the district court on the defamation count. Indiana law grants a qualified privilege to alleged defamatory statements if they relate to the fitness of employee and are contained in intra-company communications. The privilege can be lost in certain circumstances, including if it was motivated primarily by ill will. The record established that the statements at issue met the definition of qualified privilege and Jones offered no evidence of ill will other than the offensiveness of the terms themselves -- which is not enough.

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GEORGE v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION (July 16, 2010)

The National Collegiate Athletic Association (NCAA) sponsors annual championship tournaments in several sports, including men's basketball. The NCAA uses a ticket distribution system for many of those tournaments. For example, in the 2009 men's basketball championship tournament, a person who wanted tickets to the final games of the tournament was required to submit an application, advance the cost of any tickets desired, and include a $6.00 nonrefundable fee. The NCAA selected the "winners" at random. It returned to the others the amount advanced for the tickets. It kept the fees from all entries. Several non-winning applicants brought a class action against the NCAA. They allege that the distribution system is a lottery in violation of Indiana law. The complaint also includes claims for unjust enrichment, civil conspiracy, monies had, and violations of the Indiana Deceptive Consumer Sales Act. Judge Lawrence (S.D. Ind.) dismissed the complaint with prejudice. Plaintiffs appeal.

In their opinion, Circuit Judges Cudahy (dissenting) and Kanne and District Judge Darrah reversed and remanded. The Court looked to Indiana law for the elements of a prohibited lottery. There are three: a prize, an element of chance, and consideration. The Court concluded that plaintiffs had sufficiently alleged each of the three elements. In the process, the Court distinguished Lesher, an Indiana court of appeals case. Lesher held that a professional football season ticket distribution scheme did not constitute an unlawful lottery. Here, the prize element is met by the allegation that the tickets are actually more valuable than their face price, an allegation made but not established on summary judgment in Lesher. The chance element is obvious from the random drawing aspect of the distribution scheme. The Court rejected, at this motion to dismiss stage, the NCAA's argument that there may be times when no chance is involved (for example, if the demand for tickets does not exceed the supply). The consideration element is supplied by the allegation that the NCAA keeps the handling fee for every entry. The Court rejected the NCAA's argument that the "bona fide business transactions" exception to the Indiana gambling statute applied. It concluded both that the ticket distribution scheme was not a "bona fide business transaction" and that, in any event, the exception only applies to gambling, not to lotteries. Finally, the Court addressed the principle of in pari delicto. The Lesher court noted that it would have used the concept to dismiss the lottery count, concluding that the plaintiffs were equally at fault for participating in the scheme. Here, the Court first noted that the Lesher statements were dicta but then concluded that the complaint's allegations were that the plaintiffs participated unwittingly. Since all of the counts of the plaintiffs' complaint incorporated and relied on the lottery count, the Court reversed as to all counts.

Judge Cudahy dissented. He concluded that the case was fundamentally indistinguishable from Lesher. He cited several reasons for affirming the district court: a) that the nonrefundable nature of the fee (the primary Lesher distinction) did not elevate the scheme to a lottery, b) that the in pari delicto logic of Lesher was persuasive and should be applied to the plaintiffs, c) that the fact that scarce tickets might command a resale price higher than face price is irrelevant, and d) that the NCAA's conduct fell within the "bona fide business transaction" exception.

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MEDMARK CASUALTY INSURANCE CO. v. AVENT AMERICA (July 15, 2010)

Avent America manufactures a number of products for children and babies. Several class actions have been filed against Avent alleging a) that certain Avent products contain Bisphenol-A (“BPA”), b) that Avent was aware of research indicating that BPA was harmful, c) that Avent claimed their products were safer than its competitors', and d) that plaintiffs suffered economic damages because they stopped using the products once they learned of the risk of harm. The complaints contained no allegations of actual bodily injury to the plaintiffs. In fact, Avent moved to dismiss the complaints because they lacked sufficient allegation of injury. The court did dismiss all but the unjust enrichment counts for any plaintiff who either used or disposed of the product before learning of the BPA -- concluding that those plaintiffs were unaffected by the alleged concealment. Meanwhile, Avent tendered the cases to a number of insurance carriers who had provided general commercial liability insurance over the relevant years. The language in each of the policies was substantially the same and provided coverage for damages "because of bodily injury." The carriers denied coverage and suit was filed. Judge Leinenweber (N.D. Ill) held for the carriers because of the absence of any allegation of bodily injury in the underlying complaint. Avent appeals.

In their opinion, Judges Flaum, Wood, and Hamilton affirmed. The Court began with the familiar Illinois standard for a duty to defend -- the duty to defend arises if the complaint’s allegations are even potentially within the scope of coverage. The Court considered and rejected the carriers' argument that Avent was judicially estopped from arguing that the underlying complaint alleged bodily injury when it argued in its motion to dismiss that the complaint did not allege bodily injury. Cautioning that a court must be careful in applying judicial estoppel in duty to defend cases, the Court found that Avent's argument was not in direct tension with its prior position. On the merits, the Court agreed with the carriers. The theory of relief stated in the complaints was for economic harm -- had the plaintiffs known of the risk of harm of BPA, they would not have purchased the product. There is a total absence of any claim of bodily injury, direct or indirect. The "because of" language in the policies may broaden the umbrella of coverage over a simple "bodily injury" policy, but the damages in such a case must be related somehow to bodily injury. Here, they are not. The Court recognized that the complaints could be amended in the future to include allegations of bodily injury. The Court noted that the carriers admitted during oral argument that they would have to reassess their coverage positions in such a case.

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GACEK v. AMERICAN AIRLINES (July 15, 2010)

John Gacek was a baggage handler for American Airlines. In December of 2005, he suffered a severe sprain to a finger on his left hand. The doctor advised him to wear a splint and to avoid lifting anything with that hand. Gacek called in sick on December 29, 30, and 31. He failed to answer or return a phone call from American on the 29th. Its suspicions aroused because of the inability to reach Gacek and the holiday timing, American hired a detective to conduct surveillance. Gacek was videotaped running errands and generally using his hands to lift and carry objects. Gacek first told American that he had the flu -- he later changed his story and asserted that he called in sick because his finger was bothering him. American fired him. He brought an action under the Illinois Workers' Compensation Act for retaliatory discharge. Judge Conlon (N.D. Ill.) granted summary judgment to American. Gacek appeals.

In their opinion, Judges Posner, Wood, and Hamilton affirmed. Although the Court quickly concluded that no reasonable jury could decide that the reason for American's action was the opening of the claim file as opposed to lying about having the flu and disobeying doctor's orders, it decided to address a recurring issue that it had previously ducked. That issue is whether the summary judgment framework in this case is provided by Illinois law or by federal law (that is, McDonnell Douglas). In the 1998 Clemons case, the Illinois Supreme Court specifically rejected McDonnell Douglas in the context of a state workers' compensation retaliatory discharge claim. It's stated rationale was that it did not want to reduce the plaintiff’s burden of proving its case. The Court noted that the application of the Illinois test could result in a different outcome. Illinois requires proof of causation, whereas a McDonnell Douglas plaintiff could potentially prevail without such proof. The Court then addressed whether, under Erie, the Illinois test is a substantive or procedural rule in order to determine whether it should be applied in a diversity case. Although recognizing that the rule was ostensibly procedural, the Court concluded that it was nevertheless substantive under Erie and should be applied in the case. It based its conclusion on the fact that the test applies to a discrete area of substantive law and was motivated by substantive concerns. Illinois simply chose not to provide the McDonnell Douglas advantage to state retaliatory discharge plaintiffs -- the federal courts must honor that policy choice and apply it in diversity cases. Here, Gacek is unable to establish causation since he presented no credible evidence that American's stated reasons for firing him were not credible.

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IN RE: SOLIS (July 9, 2010)

Luis Solis hired an attorney to bring a workers' compensation claim after he suffered serious spinal injuries on the job. The attorney settled the claim. Solis was to receive almost $110,000. Unfortunately, the attorney's assistant stole the settlement money (as well as over $1 million in other clients' finds). She later sent him a check for $62,000, representing to him that it was a partial settlement payment. Solis hired a second attorney to recover the unpaid settlement amount. He entered into a contingent fee agreement with the attorney under which he agreed to pay 40% of "any gross amount recovered." The attorney filed suit in state court seeking damages for the unpaid settlement amount as well as a declaration that Solis was entitled to keep the $62,000 he already had. The case settled -- the defendants paid $60,000 and relinquished all claims to the $62,000. Solis filed a bankruptcy petition before the settlement was consummated. The trustee in bankruptcy recovered the settlement amount. Solis’ attorney filed a claim for 40% of both the $60,000 and $62,000. The trustee objected. The bankruptcy court allowed the claim but only with respect to the $60,000 in new money. Judge Reinhard (N.D. Ill.) affirmed. The attorney appeals.

In their opinion, Judges Manion, Williams, and Hamilton affirmed. The Court interpreted the fee agreement under Illinois contract law, which construes contingent fee agreements strictly in favor of the client. The plain language of the contract obligates Solis to pay a contingent fee on any money "recovered." The Court had little difficulty in concluding that the $60,000 was the only money "recovered" by the attorney. Although the attorney may have conferred a benefit on Solis by clarifying his right to keep the $62,000, the contingent fee agreement does not address that situation. The Court assumed that the attorney could have drafted an agreement (in clear and explicit language) that provided a contingent fee for a successful resolution of any claims on the $62,000 -- it simply refused to stretch the definition of "recovered" under the existing agreement.

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 RIVER OF LIFE KINGDOM MINISTRIES v. HAZEL CREST (July 2, 2010)

The Village of Hazel Crest refused to allow the River of Life Kingdom Ministries ("Ministries") to locate its church in a commercial area of the village. Ministries had a very small congregation and hoped to relocate its facilities from a dirty warehouse in Chicago Heights to Hazel Crest. The area in which it wanted to locate was designated a commercial district under the village's zoning ordinance. New noncommercial uses were excluded from the district under the ordinance. Judge Gottschall (N.D. Ill.) denied the Ministries' request for a preliminary injunction under the Religious Land Use and Institutionalized Persons Act (“RLUIPA”). On October 27, 2009, a panel of the Seventh Circuit affirmed (the intheiropinion post). On petition by Ministries, the Court granted rehearing en banc.

In their opinion, the entire court affirmed, with Judges Manion, Cudahy, Rover, and Williams concurring and Judge Sykes dissenting. The "equal-terms" provision of RLUIPA prohibits a local government from instituting a land-use regulation that treats a religious institution "on less than equal terms with" a nonreligious institution. The Court addressed two different tests - one from the Third Circuit and one from the Eleventh. The Third Circuit approach is to identify a) the ordinance’s goals and b) the nonreligious assemblies comparable to the religious assembly at issue. The ordinance is consistent with the equal terms provision if the reasons for excluding a nonreligious assembly are applicable to the religious assembly. The Eleventh Circuit approaches the equal terms provision more literally. An ordinance that permits a nonreligious assembly must permit a religious assembly. The Eleventh Circuit test does include an exception -- unequal treatment could survive if it passed a "strict scrutiny" test. Although the panel had adopted the Third Circuit approach, the en banc court rejected both approaches. The Court believed the Eleventh Circuit’s approach was overprotective of religious groups (due, in large part, to the dictionary definition of "assembly") and that the "strict scrutiny" exception had no basis in the statute. With respect to the Third Circuit's test, its focus on the regulatory purpose of the zoning regulation was problematic to the Court. Instead, the Court adopted a variation of the Third Circuit test. It replaced the "subjective and manipulable" regulatory purpose test with an "objective" zoning criteria test. The zoning criteria used by Hazel Crest include setting aside land for commercial uses in order to generate tax revenue and to provide a convenient shopping area. When it created the district, it not only excluded churches but also excluded other nonreligious assemblies that did not offer opportunities for shopping or generate tax remedy. The Court concluded that Hazel Crest's adoption of an acceptable zoning criterion -- commercial district -- and its neutral application of the regulation demonstrated that Ministries was unlikely to prevail on the merits. It thus affirmed the district court's denial of the motion for a preliminary injunction.

Judge Cudahy concurred. He wrote separately to express his view that there was little difference in the Third Circuit’s “regulatory purpose” test and the Court’s “zoning criterion” test.

Judge Manion concurred. He wrote separately to express his view that the case was rather straight forward and that the en banc court's opinion unnecessarily crafted a test to apply to more difficult cases. He also took issue with the opinion's discussion of a complicated Establishment Clause issue.

Judge Williams concurred (joined by Judges Cudahy and Rovner). Judge Williams expressed her belief that the Third Circuit's "regulatory purpose" test adopted by the panel is the proper test.

Judge Sykes dissented. She explored in detail the history of RLUIPA as well as the text of the statute, not limited to the "equal terms" provision. She also laid out the history of the "equal terms" jurisprudence in the Third, Eleventh, and Seventh Circuits. She noted that the Seventh Circuit had approved of the Eleventh Circuit approach until the panel opinion in this case. In her view, the plain language of RLUIPA prohibits any zoning regulation that treats a religious assembly on less than equal terms with a non-religious one. It contains no requirement of discriminatory motive or bias. Judge Sykes concluded that the Ministries demonstrated a likelihood of success -- the zoning regulation's allowance of gymnasiums, health clubs, and day care centers in the district where the church is not allowed is sufficient to show unequal terms.

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GOLDEN v. HELEN SIGMAN & ASSOCIATES (July 2, 2010)

Bruce Golden and his wife were involved in a bitter and hostile divorce. The dispute centered principally on the division of their assets and the custody of their only child. Golden added a battlefield when he brought suit in federal court. The defendants included his child’s court appointed representative and his wife’s attorneys, close friend and neighbor, and two business associates. His claims were based on federal copyright law, RICO, and § 1983 as well as several state law theories. He accused the lawyers of defamation, the lawyers and business associates of copyright infringement, the representative of defamation and failing to maintain neutrality, and the neighbor of a false 911 report. Judge Gottschall (N.D. Ill.) stayed the copyright infringement claim pending completion of the state court divorce proceedings and dismissed all other claims -- the RICO claim for failure to plead sufficiently the predicate acts and pattern of racketeering activity, the § 1983 claim because the representative had not acted under color of state law and enjoyed absolute immunity, and the state law claims by choosing not to exercise supplemental jurisdiction. The lawyers, the representative, and the friend all sought sanctions under Rule 11. The district court concluded that some of the claims did violate Rule 11 and ordered Golden to pay the defendants' attorneys' fees for the offending claims. Golden settled with the attorneys and appeals.

In their opinion, Judges Cudahy, Wood, and Sykes affirmed. The Court first noted that the only merits decision challenged on appeal was the § 1983 claim against the representative. It identified a potentially thorny issue with respect to absolute immunity. Although a child representative is entitled to absolute immunity when carrying out its court appointed duties, it may not be when it functions in a role closer to that of the child's attorney. The complaint did allege acts relating to that role. The Court declined to resolve that issue, however, instead identifying the Rooker-Feldman doctrine as a jurisdictional bar. Under that doctrine, a party may not seek redress in a lower federal court for an injury caused by a state court judgment. Here, the Court determined that the only injury Golden complained of arose directly from the state court custody orders. The Court therefore affirmed the dismissal of the § 1983 claim. With respect to sanctions, the Court first rejected Golden's argument that the Rule 11 motions were not timely -- both because he failed to raise it in the district court and because the district court did not abuse its discretion in allowing them. On the fees themselves, the Court concluded that the district court was well within its discretion in identifying counts on which to impose a sanction and in its method of calculating the amount of the sanction. Finally, the Court declined to impose sanctions on Golden for the appeal. Although he raised several frivolous arguments, he did advance some positions that could not be dismissed summarily.

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SANTA'S BEST CRAFT v. ST. PAUL FIRE AND MARINE INSURANCE CO. (July 1, 2010)

JLJ, Inc. manufactures Christmas lights. So does Santa's Best Craft, LLC (“SBC”). In 2002, JLJ claimed that SBC copied its packaging and slogan and sent a cease-and-desist letter. SBC forward JLJ's letter to St. Paul Fire and Marine Insurance Company, its general liability insurer. St. Paul denied coverage. St. Paul again denied coverage after JLJ brought suit. JLJ amended the suit in 2004 to add two members of SBC and a licensee (Monogram). SBC brought suit for a declaration that St. Paul provide a defense. SBC settled the underlying litigation in late 2004 for $3.5 million. SBC reimbursed Monogram for $1.3 million in defense costs under a contractual indemnity. Although the St. Paul policy covered Monogram as an indemnitee, Monogram never tendered its defense. Judge Gettleman (N.D. Ill.) concluded that St. Paul had a duty to defend but had not breached it. It then stayed the action pending the result of state court litigation. SBC had brought suit in state court against Zürich American Insurance Company, which insured SBC prior to St. Paul. Zürich brought St. Paul into that action. The state court entered judgment in favor of the plaintiffs for their defense costs but denied prejudgment interest. The district court then concluded that St. Paul was not required to indemnify SBC for the settlement costs on the ground that some claims were not covered and the settlement amount was not allocated between covered and uncovered claims. SBC appeals.

In their opinion, Judges Cudahy, Flaum, and Evans affirmed in part and reversed and remanded in part. The Court first concluded that the St. Paul policy did create a duty to defend. That duty arises when the allegations of the complaint are potentially within the provisions of the policy. Here, both the complaint and the policy refer to the unauthorized use of a slogan. The Court also concluded that neither the intellectual property or the "material previously made known" exclusions governed. With respect to the former, coverage is not excluded simply because "trade dress" claims, which are a subset of the slogan infringement claim, are excluded. With respect to the latter, the parties' admissions established its inapplicability. Second, the Court agreed with the district court that St. Paul did not breach its duty to defend. Under Illinois law, St. Paul's action for declaratory judgment before trial satisfied its obligation. Third, the Court addressed the settlement payment. It noted that different states have adopted different approaches to settlement costs indemnification when the settlement includes covered and uncovered claims. It ultimately predicted that an Illinois court would apply a "primary focus" test under which an insured would have the burden to show that the primary focus of the settled claims was a potentially covered loss. The Court remanded for that determination. Fourth. the Court determined that St. Paul was not obligated to reimburse SBC for Monogram’s defense costs. A prerequisite to St. Paul's duty to defend an indemnitee is a determination that no conflict of interest exists. Here, the district court concluded, and the Court agreed, that such a conflict existed. Finally, the Court noted that the district court addressed prejudgment interest with respect only to the Monogram defense costs, not to the plaintiffs' defense costs. It remanded for consideration of that as well. 

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MURPHY v. EDDIE MURPHY PRODUCTIONS (July 1, 2010)]

Eddie Murphy Productions and the other defendants were involved in the creation of The PJs, an animated television show. In its three seasons on the air, the show won three Emmy Awards. Daryl Murphy (unrelated to Eddie) brought suit in 2004, asserting that the defendants used his copyrighted material for the show. The district court judge viewed videotapes of Murphy's material and The PJs and granted summary judgment to the defendants. The court concluded that the works were not substantially similar, there was evidence of prior creation, and there was no evidence of defendants' access to Murphy's material. While that decision was on appeal, Murphy filed another similar complaint. The district court promptly dismissed it. In 2008, Murphy filed a pro se pleading styled as a Rule 60 motion. Counsel for Murphy then appeared, withdrew the motion, and asked for leave to file an amended complaint. Several days after missing a second deadline, Murphy asked for another extension. Judge Darrah (N.D. Ill.) denied the request on the grounds both that he already missed two deadlines and that an amendment would be futile. Murphy appeals.

In their opinion, Judges Cudahy, Posner, and Evans affirmed. The Court noted the different standards governing a request for extension of time made before the deadline and one made after the deadline. The former may be granted for "good cause" while the latter should be granted only upon a showing of "excusable neglect." Here, the Court concluded that the district court acted within its discretion in finding no "excusable neglect." Both factors, prejudice to the defendant and reason for the delay, favored the defendants. The Court also concurred in the independent rationale for denial of the motion that an amendment would be futile.

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CW CAPITAL ASSET MANAGEMENT v. CHICAGO PROPERTIES (June 29, 2010)

Blockbuster, the movie rental company, has been hurt by increasing competition and changing business models. As a result, it has abandoned some of its stores. One of those stores was leased from Chicago Properties, a commercial landlord. Blockbuster settled the ensuing breach of lease lawsuit for $161,000, although it owed Chicago Properties future rents of $471,000. The mortgage on the property was held in trust as part of a mortgage-backed security. Bank of America is the trustee and CW Capital Asset Management is the servicer. CW Capital has been granted comprehensive power and authority with respect to the management of the trust’s assets. It brought suit under the parties' "Subordination, Non-Disturbance and Attornment Agreement" (the “Agreement”) for the $471,000. Judge Zagel (N.D. Ill) found for the defendants after a bench trial but then dismissed the suit on the grounds that CW Capital, as servicer, was not the real party in interest. CW Capital appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Evans reversed with directions (still finding for the defendants but on the merits). The Court first addressed the real party in interest issue. It concluded, based on its review of the law and the documents, that the trust held legal title to the claim but delegated equitable ownership to CW Capital. That was enough to be a real party in interest. Alternatively, even if CW Capital is not a real party in interest, the Court noted that the case should proceed under Rule 17(a)(3) since the trustee ratified CW Capital's suit in the district court. On the merits, the court noted that the Agreement defines the rights of the parties in the event of a default. Here, notwithstanding Blockbuster's breach, Chicago Properties has not defaulted. Since it continues to meet its monthly obligations, the terms of the Agreement relied on by CW Capital have not been triggered. With respect to the claims based on the mortgage itself and the owners' guaranty, the Court concluded that the settlement with Blockbuster was not a violation. Finally, the Court upheld the district court's award of attorney's fees to Blockbuster under a "prevailing party" term of the Agreement. The Court concluded that the fact that Blockbuster did not prevail on an "unimportant" counterclaim did not change its status as a prevailing party under the Agreement. Although the defendants had prevailed in the district court (on the real party in interest dismissal), the Court reversed that dismissal with directions to enter judgment on the merits for the defendants.

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HABITAT EDUCATION CENTER v. U.S. FOREST SERVICE (June 29, 2010)

The federal government has been managing over 1,000,000 acres of forest in the Chequamegon-Nicolet National Forest in northern Wisconsin for almost 100 years. In the last eight years, the U.S. Forest Service has proposed 17 different timber sale projects. Habitat Education Center has administratively challenged almost every project. One of those projects is the Twentymile sale, announced in 2004, covering almost 9,000 acres. The Center argued that the sale, particularly in conjunction with a prior sale on immediately adjacent property, would have a negative impact on wildlife. The Forest Service authorized the project in February of 2007 over the Center's objections. The Center's administrative appeal was also unsuccessful. They filed suit in June 2007, contending that the Forest Service' environmental impact statement failed to consider the cumulative impacts of "past, present, and reasonably foreseeable future actions," in violation of the National Environmental Policy Act (NEPA). In November of 2008, just before argument on cross motions for summary judgment, the Forest Service announced another sale, the Twin Ghost project, on immediately adjacent property. Judge Adelman (E.D. Wis.) asked for supplemental briefing but ultimately concluded that the project was not "reasonably foreseeable" under NEPA at the time of the Twentymile project authorization and granted summary judgment to the Forest Service. The Center appeals.

In their opinion, Circuit Judges Flaum and Wood and District Judge St. Eve affirmed. The Court first addressed the Forest Service's argument that the Center forfeited any claim with respect to the Twin Ghost project by not raising it in the administrative process. Instead of addressing the Center's possible forfeiture, the Court concluded that the Forest Service waived the forfeiture argument by not raising it sufficiently in the district court in the supplemental briefing. On the merits, the Court noted that several of its sister circuits (specifically citing cases from the 1st, 3rd, 9th, and 11th) have held that the effects of a contemplated project need not be discussed if there is not yet a meaningful basis for assessing the impact of the project. The Court concurred with that approach. At the time the Twentymile project was approved, the Service had not even identified the goals of the Twin Ghost project. Of course, as the Court noted, the Twin Ghost project assessment must include a thorough analysis of the cumulative effects of the Twin Ghost and Twentymile projects. Any negative cumulative effects can be addressed during that process. Finally, the Court did concede that the better practice would have been for the Service to disclose the current state of contemplated future projects, even if a thorough analysis was not possible.  

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KENSETH v. DEAN HEALTH PLAN (June 28, 2010)

In 1987, Deborah Kenseth decided to do something about her serious weight problem. She underwent a surgical procedure known as vertical banded gastroplasty (“VBG”) and shed 120 pounds. Kenseth joined Highsmith, Inc., a library furniture and supply distributor, in 1996. Kenseth elected to participate in the Dean Health Plan through her employer. The plan did not cover surgical treatment for gross obesity such as VBG. It also generally excluded any services "related to" a non-covered service. Several years later, Kenseth began to experience complications arising from the VBG. In 2004, she had a surgical procedure to address one of those complications. Notwithstanding the plan language, Dean paid for the procedure. The procedure, however, was not totally successful. Her physician recommended a gastric bypass procedure as a long-term solution to her situation. After the surgery was scheduled, the physician's office provided standard instructions to Kenseth. Included in the instructions was a direction to call her insurance company to check on coverage. Kenseth did just that. Kenseth described the procedure to the Dean customer service agent as one dealing with the "bottom of the esophagus." She did not disclose, she says unintentionally, that the procedure was related to her 1987 VBG surgery. The plan representative told her that the procedure would be covered. The day after the surgery, Dean made its initial decision to deny coverage. Its rationale was that the procedure addressed a complication arising from, and therefore related to, the VBG, a non-covered service. Kenseth unsuccessfully challenged Dean's decision internally. She then brought suit under ERISA and state law. She asserted that: a) Dean breached its fiduciary obligation because the plan was unclear both as to coverage and as to how she could determine coverage and because Dean failed to provide a pre-approval authorization procedure, b) Dean was collaterally estopped from denying benefits because of the representative's "approval," and c) Dean violated Wisconsin law on an insurer's ability to deny coverage for pre-existing conditions. Judge Crabb (W.D. Wis.) granted summary judgment to Dean on all counts. Kenseth appeals.

In their opinion (as amended), Judges Manion, Rovner, and Tinder affirmed in part, vacated in part, and remanded. First, the Court affirmed summary judgment on collateral estoppel. Kenseth failed to advise the Dean customer service agent of the connection between the procedure and her earlier surgery, even if unintentionally. Equitable estoppel should not be applied when the party being estopped is unaware of a material fact. Second, the Court also affirmed with respect to the state statutory argument. The Wisconsin statute deals with pre-existing conditions. The exclusion on which Dean relies focuses on the nature of the benefit, not whether it was pre-existing. Third, the Court addressed the breach of fiduciary duty claim. Such a claim requires a plan fiduciary, a breach, and harm. Dean is a plan fiduciary, not because it is the customer service agent's employer, but because it is a claims administrator with discretionary authority to assess a plan participant's entitlement to benefits. Thus, it owes the plan participants duties of loyalty and reasonable care. One core duty to beneficiaries is the duty to disclose all material information. That duty has a negative component (not to mislead or misrepresent) but also has an affirmative component (to communicate material facts). Here, on the record before the Court, it concluded that a fact finder could determine the Dean had a duty to a) advise callers to its customer service line that they were not entitled to rely on any advice recieved, and b) inform callers how to obtain a binding determination of coverage. Dean could have avoided that liability by providing plan beneficiaries with a clear and unambiguous statement of benefits. Although the Court concluded that Dean's statement of benefits was clear that a procedure like the VBG was not covered, it concluded that the "related to" exclusion was not clear. In addition to the fact that the language itself was not clear, the Court also referred to the fact that Dean had already paid for a procedure to address a complication of the original surgery. Finally, the Court had no difficulty in finding an injury caused by Dean's breach of its fiduciary duty. Having found a breach and an injury, the Court turned to the remedy. It emphasized that Kenseth's claim was not a denial of benefits claim under section 1132(a)(1)(B) nor was it a representative action under section 1109 (a). Instead, it was an individual action under section 1132 (a)(3). But that section allows only equitable relief, not damages. The Court remanded to allow Kenseth an opportunity to identify, if possible, an appropriate form of equitable relief.

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PICKETT v. SHERIDAN HEALTH CARE CENTER (June 25, 2010)

Danielle Pickett was employed as a housekeeper at the Sheridan Health Care Center in Zion, Illinois. In 2005 and 2006, she was the victim of several incidences of inappropriate remarks and touching by nursing home residents. Although the Center responded to her complaints, the promised response never quite succeeded. In a June 2006 meeting with several Center staff members, the Center agreed to reassign Pickett from cleaning residents' rooms, although, according to Pickett, the Center's VP of Operations suggested that Pickett invited the inappropriate conduct. The next morning, Pickett had a very emotional conversation with the Center's Administrator. According to Pickett, the Administrator said some things that indicated that her job may be in jeopardy. The meeting ended with Pickett still upset and in tears. Instead of resuming her assigned tasks, she left the Center. She called the Administrator the next day to ask if she still was employed. He consulted with the VP of Operations and advised Pickett that she no longer had a job. Beginning about a month later, after Picket filed an EEOC claim, the Center offered on several occasions to reinstate Pickett. She refused several such offers but eventually returned to the Center in January of 2007. She brought suit against the Center for sexual harassment and for retaliatory firing under Title VII. Judge Pallmeyer (N.D. Ill) granted summary judgment to the Center on the harassment claim. The retaliation claim went to trial. The jury found for Pickett and awarded $15,000 in compensatory and $50,000 in punitive damages. The court awarded back pay and injunctive relief. The Center appeals.

In their opinion, Judges Flaum, Kanne, and Evans affirmed. The Court first rejected the Center's argument that Pickett could not prevail on the retaliation claim because she could not prevail on the harassment claim. In order to prevail on retaliation, a plaintiff need only show statutorily protected conduct, adverse action, and a causal link. The Court found that there was sufficient evidence of each of those elements in the record -- the jury was entitled to find in Pickett's favor. Each of the Center's other arguments was also rejected: a) counsel’s "send some message" language in closing argument was not improper, b) the compensatory damage award was not excessive and did not require corroborating evidence from a third party, and c) the court did not abuse its discretion in allowing the punitive award to stand in light of the evidence that supported a conclusion that the Center knew it might be retaliating when it terminated Pickett's employment.

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