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

FLETCHER v. MENARD CORRECTIONAL CENTER (October 28, 2010)

Anthony Fletcher is an inmate at Menard Correctional Center in Illinois. He claims that prison guards used excessive force while they were transferring him to a new cell. He further claims that he suffered significant injuries and that he was denied medical treatment for those injuries and for his asthma and diabetes. He brought suit asserting those constitutional violations and attempted to proceed in forma pauperis. Unfortunately, he had three "strikes" (prior frivolous suits) and thus could not proceed in forma pauperis without relying on the "under imminent danger of serious physical injury" exception. Even more unfortunately, his judge had presided over one of those earlier "strikes" in which Fletcher alleged a failure to treat his asthma and diabetes. Fletcher's medical records in that case showed that he did not have asthma or diabetes. Judge Baker (C.D. Ill.) ruled that he therefore did not come within the exception and dismissed his complaint. Fletcher appeals.

In their opinion, Judges Bauer, Posner, and Wood affirmed. Although the Court affirmed the dismissal, it did so on different grounds. On the imminent danger exception to the three strike rule, the Court concluded that the district court erred. Although Fletcher did not have asthma or diabetes, the district court did not consider his additional allegation that he was denied treatment for injuries suffered from the excessive force. Untreated injuries could pose as much a threat as untreated illnesses and could qualify as an “imminent danger.” Nevertheless, the Court found an alternative ground to affirm the dismissal. The Prison Litigation Reform Act requires a prisoner to exhaust administrative remedies before bringing suit. The Court imagined a scenario in which a prisoner would not be required to exhaust administrative remedies -- if he is in imminent danger and no administrative remedy is available to avert that danger. Here, however, Illinois has an emergency procedure under which a grievance is directed immediately to the warden. Fletcher took advantage of that procedure but waited only two days before filing his suit. Under these circumstances, the Court concluded that he was not excused from the exhaustion requirement of the Act. 

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PARKEY v. SAMPLE (October 27, 2010)

Indiana State Trooper Jason Sample was the Marijuana Eradication Coordinator in his northeastern Indiana police district. He was quite knowledgeable about marijuana, its use, and its growth. In early 2005, several things raised his suspicion about the activities of Hammond resident James Parkey: a) the DEA told him that Parkey received shipments from a company known to sell marijuana growing supplies, b) Parkey had a criminal record, and c) Parkey's basement windows were covered. Based on this suspicion, Sample inspected the trash containers behind Parkey's residence on two occasions. On each occasions, he discovered marijuana stems, marijuana cigarette remnants, and discarded mail addressed to Parkey. Sample obtained a search warrant based on the DEA tip, the trash inspection results, and Parkey's criminal record. The search resulted in the seizure of 10 marijuana plants. Although charges were filed against Parkey, they were later dismissed. Parkey filed suit pursuant to § 1983, alleging a violation of his Fourth Amendment right against unreasonable search and seizure. Judge Lee (N.D. Ind.) granted summary judgment to Sample. Parkey appeals.

In their opinion, Judges Posner, Kanne, and Sykes affirmed. Parkey principally attacks the veracity of the affidavit. But, the Court stated, there is a presumption of validity that attaches to the affidavit. In order to avoid summary judgment on that issue, Parkey must have evidence that Sample made misstatements "knowingly or intentionally or with a reckless disregard for the truth." He must also show that the misstatements were necessary to the determination of probable cause. The Court concluded that he did neither. Parkey does not contest the Sample received a tip from the DEA and that he found the stems and remnants in his trash. Instead, he asserts that Sample failed to prove that the remnants were his or that Sample researched his criminal history. Attacking the lack of evidence supporting a warrant affidavit is not sufficient to defeat summary judgment. The Court added that Parkey loses even if Sample misrepresented Parkey’s criminal record. The criminal record was not necessary to the finding of probable cause.

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HERZOG TRANSIT SERVICES v. UNITED STATES RAILROAD RETIREMENT BOARD (October 22, 2010)

The Dallas Area Rapid Transit and the Fort Worth Transportation Authority (collectively, the "Transit Authorities") own a stretch of railroad track between the two cities on which they provide commuter rail service. Four other railroad companies operate interstate freight service on the same stretch of track. Herzog Transit Services has operated the commuter service for the Transportation Authorities since 1996. Before 2001, Herzog had no involvement with the interstate carriers. In 2001, however, the Transit Authorities contracted with Herzog to provide all dispatching operations, including interstate, for the track. Shortly thereafter, a Herzog employee asked the Railroad Retirement Board for a determination that Herzog was a "covered employer" under the Railroad Retirement Act. The Board found that Herzog was a covered employer to the extent it was providing dispatching services to interstate carriers. Herzog and the Transit Authorities petitioned for review of the order.

In their opinion, Judges Ripple, Kanne, and Sykes (dissenting) denied the petition. The Court first embarked on a short history of American railroads, their pension plans, the Railroad Retirement Act (the "Retirement Act"), and the Railroad Unemployment Insurance Act (the "Unemployment Act"). The purpose of the Retirement Act is to provide a retirement system for employees of the nation's railroads; the Unemployment Act provides unemployment insurance for the same employees. The Court then recited the relevant definitions and principles:
     • the Court and the parties agreed that an "employer" is the same under each act
     • the acts adopted a broad definition of employer in order to prevent the railroads from setting up subsidiaries to avoid coverage
     • an employer includes "any carrier by railroad subject to the jurisdiction of the Surface Transportation Board"
     • the Interstate Commerce Commission Termination Act of 1995 (“ICCTA”), which sets forth the Surface Transportation Act's jurisdiction, defines "rail carrier" as one "providing common carrier railroad transportation for compensation"
     • the Court adopted the common law definition of "common carrier" -- an entity holding itself out as offering transportation services to anyone willing to pay
     • the ICCTA defines "transportation" as equipment related to passenger or property of movement by rail and services relating to that movement
     • the Surface Transportation Board has jurisdiction over all rail carrier transportation
     • the statutory scheme should be construed broadly to cover employees who play different roles within the railway system
     • the statutory scheme must not be limited by the business operation models in use at the time of its passage.
Applying those definitions and principles to the facts at hand, the Court agreed with the Board that Herzog’s dispatching function was a necessary and integral part of the interstate operation and therefore was operation as a "rail carrier" subject to the Retirement Act. The Court distinguished the Board's earlier RAILTRAN decision. That decision involved the same rail lines at an earlier point in time and under a different operating structure. Dallas and Fort Worth co-owned the line, which was managed by a state agency. A railroad company conducted the freight and commuter operations and had operating and dispatching duties. Dallas and Fort Worth sought a declaratory judgment from the Board that a revised arrangement, under which they would contract with a third party to operate the commuter service and perform dispatching duties, would not make them employers under the acts. The Board concluded that it would not -- they would continue to be non-operating owners. The Court believed the RAILTRAN was consistent with the Board's decision here. In both cases, the non-operating owner (Dallas and Fort Worth in RAILTRAN -- the Transportation Authorities in this case) was found not to be an employer. In RAILTRAN, the employer status of the entity conducting the dispatching operations (i.e., the analog to Herzog) was not at issue.

Judge Sykes dissented. She took no issue with the history or the definitions relied upon by the majority. She concluded, however, that providers of subsidiary services such as dispatching are not "common carriers" since they did not hold themselves out as providing rail service to the public. Judge Sykes believed that RAILTRAN was directly on point and supported her conclusion. According to her analysis, RAILTRAN held that the non-operating owner would not become an "employer" if it assumed interstate dispatching functions or contracted with someone to do so. If the Transportation Authorities would not become "employers" if they took over the dispatching function, judge Sykes concluded that Herzog did not become an employer when it contracted with them to do that very same task.

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JONES v. ASTRUE (October 22, 2010)

Jacklin Jones was injured in a car accident in 2001. Over the course of the next several years, she sought medical treatment as her condition worsened. She complained of lower back pain and numbness in her hands. The objective medical evidence, including the results of multiple MRIs, identified the principal problem as a mild, lower- back disc bulge. Her orthopedic surgeon advised her to discontinue the strong pain medication and instead to lose weight and begin physical therapy. She quit her job in November of 2003 because of her pain. She continued to see the orthopedic surgeon, who continued to tell her to lose weight and get into better condition. Jones sought disability benefits. At her hearing, she testified that she was in substantial pain, that she could not sit or stand for long periods, that her pain medication made her drowsy and nauseous, and that she had trouble holding onto objects. A vocational expert, responding to the ALJ's hypotheticals, testified that there were over 3000 jobs available for a person with Jones' conditions. The ALJ concluded that Jones was not disabled, finding that she could perform simple, routine, sedentary work. In reaching that conclusion, the ALJ found Jones' testimony about the intensity of her pain not credible. Judge Randa (E.D. Wis.) concluded that substantial evidence supported the decision and affirmed. Jones appeals.

In their opinion, Chief Judge Easterbrook and Circuit Judge Flaum and District Judge Hibbler affirmed. Jones' principal argument was that the ALJ's credibility determination was flawed. The Court noted that that determination is entitled to significant deference and would be overturned only if "patently wrong." Here, the ALJ credited a significant amount of Jones' testimony, there was substantial objective medical evidence in the record inconsistent with Jones' testimony regarding the extent of her pain, and Jones' treating physicians did not consider her disabled. An ALJ may not ignore subjective statements of pain simply because they are not supported by medical evidence. An ALJ may, however, consider subjective statements of pain as exaggerations when they are inconsistent with objective medical evidence. Here, the Court found that her testimony was inconsistent with objective medical evidence and concluded that substantial evidence supported the ALJ's findings.

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REYNOLDS v. CB SPORTS BAR (October 22, 2010)

Loretta Reynolds (according to her complaint) had car trouble while leaving Jerzey’s Sports Bar in O’Fallon, Illinois. The bartender told her no cabs were available and suggested she get a ride from another patron. Two other patrons agreed to give her a ride but first bought her several drinks (and possibly drugged her). Reynolds realized while in their car that they were not driving her to her hotel but were intent on sexually assaulting her. She managed to escape but, in the process, was hit by a car and severely injured. She brought suit against the two other patrons and CB Sports, the establishment’s owner. She alleged alternatively that the bartender “knew or should have known” that the patrons were getting her drunk in order to sexually assault her or that the bar and bartender intentionally aided the patrons in doing so. Judge Gilbert (S.D. Ill.) dismissed the complaint against CB Sports, finding no duty under the circumstances. Reynolds appealed. While her appeal was pending, the court entered a default judgment against one of the individual defendants and held a hearing on damages. At the hearing, Reynolds presented additional facts with respect to the night in question – including that two different bartenders refused her request for a phone book, told her that no taxis were available, and vouched for the character of the two other patrons.

In their opinion, Judges Posner, Ripple (dissenting), and Kanne reversed and remanded. The Court first considered the significance of the testimony at the damages hearing. Prior to Iqbal and Twombly, a plaintiff was free to offer an unsubstantiated version of the events on appeal in support of its position as long as it was consistent with the complaint. The Court concluded that Iqbal and Twombly raised the bar with respect to the content of the complaint but did not limit a plaintiff’s ability to argue facts outside the complaint to show that a complaint should not have been dismissed. Next, to the extent the complaint alleged an intentional tort, the Court noted that CB Sports could not be liable. It turned to the negligence claim and, specifically, the existence of a duty. Under Illinois law, the general rule is that a business owner is liable for foreseeable criminal attacks while an invitee is on the premises. Generally, liability does not attach for an attack off the premises. The Court noted, however, that Illinois courts have recognized some exceptions to the off-premises rule. Illinois courts have extended liability to off-premises attacks In Shortall, Osborne, and Haupt – but in each case the attack took place just off the premises. Here, the attack was over a mile away. Nevertheless, it was the foreseeability of the attack that the courts considered in Shortall, Osborne, and Haupt. And here, taking the facts alleged as true, the attack was foreseeable. Foreseeability is not enough, however. The Court also considered the likelihood of the injury, the burden on the establishment owner, and the consequences of that burden. Here, the likelihood is high given the intentional scheme at play. The burden and consequences of imposing that duty are not high. The Court emphasized that this was not a burden to investigate – only a burden to protect when it was aware of an intent to injure. The Court was satisfied that Reynold’s allegations sufficiently pled a duty. Finally, the Court declined to find an absence of proximate cause as a matter of law and emphasized that it was not accepting Reynold’s “voluntary undertaking” theory of liability.

Judge Ripple dissented. Although he recognized the Illinois courts’ expansion of off-premises business invitee liability, he disagreed with the Court’s further extension of the principle. On the one hand, Reynold’s complaint alleges an intentional act. Judge Ripple would not extend negligence principles to the situation where the employee is a participant in the execution of the planned attack. As for the alternate allegation that the bartender “should have known,” Judge Ripple believed the burden imposed by the panel opinion on the establishment is too great. He saw no facts alleged in the complaint upon which to base a “should have known” conclusion. Either way, Judge Ripple thought the panel opinion extended Illinois law beyond where the Illinois Supreme Court would go.

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REDMOND v. FIFTH THIRD BANK (October 20, 2010)

After he defaulted on his mortgage and became the target of a foreclosure proceeding, James Redmond filed for Chapter 13 bankruptcy protection. The bankruptcy court entered an agreed order which stayed the foreclosure, established a monthly payment plan, and required an April 1, 1998 balloon payment to Fifth Third Bank, the lender. Just prior to April 1, Redmond asked for a payoff latter in order to close on a new loan. He got two letters – each with a different amount. He asked for an explanation but eventually failed to get the loan (he says because of the Bank’s error) and failed to make the balloon payment. The Bank again brought a foreclosure action. The parties litigated that suit (for seven years!) until a few weeks before trial. At that point (June 2005), Redmond asked the bankruptcy court to reopen the bankruptcy proceedings, alleging a violation of the agreed order and plan. It refused. A year later, Redmond filed another motion asking to reopen the proceedings. The bankruptcy court again refused, but the district court on appeal reversed and instructed the bankruptcy court to consider whether the Bank sought any pre-petition debts. On remand, the bankruptcy court again denied the motion on the grounds that it was untimely, that the state court could resolve the issues, and that the arguments lacked merit. Judge Manning (N.D. Ill.) affirmed. Redmond appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Sykes affirmed. The Court first noted that a bankruptcy judge has a great deal of discretion in deciding whether to reopen a case and that the standard of review is an abuse of discretion. The bankruptcy court considered the proper factors: length of time since the case was closed, an available forum to entertain the claim, and whether the claims have merit. The Court addressed each in turn. First, with respect to timeliness, the Court found no abuse of discretion. The record suggested that the timing of the motion (a few weeks before trial) was for the purpose of delay. That, combined with the prejudice to the Bank in incurring years of attorneys’ fees, justified the denial. Second, with respect to the merits of the underlying claims, the Court also found no abuse of discretion. It agreed that Redmond’s claims (that the payoff letter violated the automatic stay, the agreed order, the plan, and the discharge) were all without merit. Finally, the Court agreed that Redmond had an adequate forum (the state court) to litigate his claims.

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On October 15, a panel of the Seventh Circuit ruled that Illinois’ mandatory “brief period of silence” in public schools statute was constitutional (opinion and intheiropinion). In order to reach that conclusion, the panel (Judges Ripple and Manion – Judge Williams dissented) had to conclude that the statute had a secular purpose – that is, that the Illinois legislature really intended to require a brief moment of silence every morning in every Illinois public school to calm the students. Really? Does anyone believe that?

Judge Williams in dissent said “let’s call a spade a spade – statutes like these are about prayer in schools.” Isn’t she right? There are thousands of public schools in Illinois – large and small, rural and urban – serving millions of students of varied ages, intelligences, and socio-economic backgrounds. For the past forty years, every Illinois public school teacher has had the statutory right to observe a moment of silence if he or she thought it would help calm the students. According to the majority opinion, one reason for making the period of silence mandatory was that not enough teachers were taking advantage of the opportunity. If the true purpose of the moment was to quiet students, it makes sense that some teachers in some classrooms saw no need for the moment and others did. However, if the true purpose is to make sure that every student has an opportunity to pray, a teacher’s or school district's failure to cooperate would be a concern.

In Wallace, the Supreme Court found Alabama’s moment of silence unconstitutional. But apparently the record there was replete with references to the legislators’ intent that the moment be a moment of prayer. Maybe our Illinois legislators learned a little something from their Alabama counterparts and were able to pass the statute without being so obvious about their collective intent.

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BONTE v. U.S. BANK (October 19, 2010)

Travis and Jolene Bonte own a home in the small village of Woodville in west-central Wisconsin. In late 2005, they took out a third mortgage on the home. A few years later, the Bontes brought an action for rescission. They alleged that there were ten discrepancies between the HUD-1 settlement statement and the Truth in Lending Act (TILA) statement and disclosures. U.S. Bank, the mortgage holder, moved to dismiss for failure to state a claim. It argued that none of the errors alleged related to a “material” disclosure as required for TILA rescission. In response, the Bontes simply restated their allegations and the applicable legal standard. Judge Crocker (W.D. Wis.) dismissed the complaint, holding that the Bontes waived their opposition to the motion by failing to respond but also concluding that U.S. Bank was correct. The Bontes appeal.

In their opinion, Judges Posner, Rovner, and Sykes affirmed. The Court agreed with U.S. Bank’s statement of the applicable law – that rescission (at least after three days) requires proof of a “material” non-disclosure. Regulation Z identifies eighteen required disclosures and names five of them as material: the APR, the finance charge, the amount financed, the total of payments, and the payment schedule. The Court noted that the Bontes alleged that the ten errors related to the APR, the finance charge, and the amount financed. But U.S. Bank went through each of the errors and showed how they did not related to any material disclosure. The Bank provided citations and reasons why each did not qualify as a material disclosure. The Court noted that the Bontes failed to respond to any of the Bank’s arguments. Just as they did in the district court, they merely restated their conclusory allegation that the errors related to material disclosures. Iqbal requires a two-step approach. The Bontes meet the first step – a “short and plain statement” of their claim. But they failed, said the Court, to satisfy the second prong – demonstrating a plausible entitlement to relief. Just because they couched their allegation of materiality as a factual allegation, a court is not required to accept it as true. It is, in fact, a legal conclusion – not a factual allegation. By failing to respond to the Bank’s arguments, they have waived any argument that the errors related to material disclosures.

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On June 16, 2011, the Court granted a petition for panel rehearing and vacated this opinion and judgment.

COSTELLO v. GRUNDON (October 18, 2010)

Several senior Comdisco, Inc. employees participated in the company’s shared investment plan (SIP) program. Under the program: a) participants purchased Comdisco stock, b) the purchase was funded exclusively by personal loans, c) the participants executed promissory notes in their personal capacities, d) Comdisco guaranteed the loans, e) the lenders remitted the loan proceeds directly to Comdisco, f) Comdisco held the shares, g) there were several restrictions on the ability to sell the stock, and h) participants delivered a blank stock power to Comdisco. Within two years, the stock price had risen from $34.50 to $53.00. Many participants sold their shares and made a nice profit. Others, however, did not and were still holding the stock when Comdisco went into bankruptcy. The lenders settled with Comdisco on the guaranty obligation. As part of the settlement, the lenders assigned their rights under the notes to the Comdisco Litigation Trustee. The Trustee brought individual actions against the participants. He moved for summary judgment against two of the participants. The court granted the Trustee’s motion, holding that the Trustee made a prima facie case and rejecting several defenses: a) the alleged misrepresentations were expressions of legal opinion and could not support a fraud finding, b) defendants had not shown reliance, c) defendants could not assert a violation of Regulation U as a defense, and d) a negligent misrepresentation defense was not available against the Trustee. The Trustee subsequently moved for summary judgment against the remaining defendants on the same papers. Defendants raised new defenses. Judge Gettleman (N.D. Ill.) granted the Trustee’s motion, rejecting the additional defenses. The defendants appeal.

In their opinion, Judges Kanne, Rovner, and Tinder affirmed in part and vacated in part. The Court addressed each of the many arguments on appeal in turn. Regulations G and U Violations Defense: Although the Court discussed at length and questioned the district court’s treatment of Comdisco’s or the lenders’ violation of Regulation U or G, it ultimately concluded that it did not need to decide the issue. It concurred with the district court that, even if a violation existed, it did not provide an illegality defense. Relying on Bassler, Blair, and Shearson, the Court noted that the regulations were not meant to protect individual investors and a violation does not make the underlying contract illegal. Section 10(b) Illegality Defense: The Court did disagree with the district court’s treatment of defendants’ defense under § 10(b) of the Securities Exchange Act of 1934. Although the Trustee moved for summary judgment based only on the absence of a false statement, the district court granted it on the absence of scienter, raised only in the reply brief. The Court stated that the Trustee had the initial burden of identifying the basis of his request for relief – the defendants were not required to respond to other grounds, even if later raised in the reply. Although the defendants could have responded to the Trustee’s arguments or sought further discovery, they were not required to do so. Furthermore, the Court found that the district court’s requirement of a heightened “strong inference” of scienter was improper. Finally, the Court declined to itself affirm on the alternative grounds raised by the Trustee in its reply below. Section 17(a) Defense: The district court’s ruling with respect to defendants’ defense under § 17(a) of the Securities Act of 1933 was erroneous for the same reason as the ruling on § 10(b). The court improperly ruled that defendants failed to present evidence of scienter when they were under no obligation to do so at this stage of the proceedings. Fraud and Negligent Misrepresentation Set-Off Defenses: With respect to the fraud and negligent misrepresentation set-off defenses, the district court adopted the ruling and reasoning of it decision on the first summary judgment motion. There is nothing wrong with that, said the Court, except here the defendants presented a new legal argument on the fraud defense and additional evidence with respect on the negligent misrepresentation defense that the court did not consider. The Court concluded that summary judgment in the Trustee’s favor on both was error. Excuse of Non-Performance Defense: Lastly, the Court held that it was error to grant summary judgment on the excuse of non-performance defense. The defendants argued that the lenders’ non-compliance with § 17(a), § 10(b), and Regulation U amounted to a breach of contract and thus excused their performance. The Court concluded that the district court erred in granting summary judgment with respect to the §§ 17(a) and 10(b) claims – given that the Court had just vacated the summary judgments on the underlying defenses. With respect to Regulation U, however, the Court agreed that a violation would not excuse performance since the participants were not in the “zone of interest.” The Court remanded for further proceedings.

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GEORGE v. NATIONAL COLLEGIATE ATHLETIC ASSOC. (October 18, 2010)

Tom George and the other plaintiffs took part in a basketball ticket distribution system operated by the National Collegiate Athletic Association (NCAA). They submitted applications for tickets with payment for the requested tickets and a $6.00 fee for every application. Successful applicants received their tickets – unsuccessful applicants received a refund of the ticket price. Both forfeited the fee. The plaintiffs, all unsuccessful applicants, brought suit alleging that the scheme was an unlawful lottery under Indiana law. Judge Lawrence (S.D. Ind.) found that the in pari delicto defense applied and dismissed the complaint. On appeal, the Seventh Circuit reversed (opinion and intheiropinion). The Court concluded that the in pari delicto defense did not apply. It also held that the plaintiffs alleged the elements of an unlawful lottery under Indiana law and that Indiana’s “bona fide business transaction” exception did not apply. It distinguished the Indiana Supreme Court’s approval of a similar ticket distribution system used by the Indianapolis Colts. Judge Cudahy dissented, disagreeing with the majority on each of its three conclusions. The NCAA petitioned for rehearing and rehearing en banc.

In their opinion, Circuit Judges Cudahy and Kanne and District Judge Darrah granted the petition for rehearing, vacated the earlier opinion, and certified three questions to the Indiana Supreme Court. The Court noted that the question was a close one that could have significant consequences on sports ticket distribution systems. It certified to the Indiana Supreme Court three questions: a) do the complaint allegations state the elements of an unlawful lottery, b) if a), does the NCAA system meet the “bona fide business transaction” exception to an unlawful lottery, and c) if a), are the claims subject to the in pari delicto defense.

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SHERMAN v. KOCH (October 15, 2010)

In 1969, the Illinois legislature authorized, but did not require, public school teachers to "observe a brief period of silence" to be used as "an opportunity for silent prayer or for silent reflection." The legislature added a section to the act in 2002 declaring a student's right to exercise religion freely and to be free from State pressure regarding the exercise or non-exercise of religion. In 2007, the legislature made the brief period of silence mandatory. Dawn Sherman, a public high school student, brought suit through her father under § 1983. She brought a facial challenge under both the First and Fourteenth Amendments. Judge Gettleman (N.D. Ill.) granted a preliminary injunction, certified a plaintiff class of state public school students, certified a defendant class of state public school districts, granted summary judgment to the plaintiff class, and permanently enjoined the statute’s implementation. He concluded that the statute violated the First Amendment in that it failed the first two prongs of the Lemon test (it had no secular purpose and its primary effect was to advance religion). He also concluded that the statute was unconstitutionally vague under the Fourteenth Amendment. The defendants appeal.

In their opinion, Judges Ripple, Manion, and Williams (dissenting) reversed. The Court briefly addressed and rejected the argument that Sherman lacked standing because she suffered no damage (since she was only subjected to silence). Sherman alleged that the practice violates the First Amendment. Her status as a student is enough for standing. On the merits, the Court applied the Lemon test. Under Lemon, a statute: a) must have a secular legislative purpose, b) must not primarily advance or inhibit religion, and c) must "not foster an excessive government entanglement with religion." The Court first concluded that the statute had a secular legislative purpose under the first Lemon prong. It relied on the plain meaning of the statute, its context, its legislative history, and the events leading to its passage. It concluded that each of those factors supported the articulated legislative purpose of providing a moment of silence at the beginning of a school day in order to calm the students. The record was very different from the record in Wallace, in which the Supreme Court held that Alabama's similar statute lacked any secular purpose. In fact, the Court found support for its view in the Wallace concurring opinions of Justices O'Connor and Powell. With respect to the second Lemon prong, the Court concluded that the statute's primary effect was not to advance or inhibit religion. The Court relied principally on the statute's language. The statute expressly provided that the brief period of silence could not be conducted as a religious exercise -- and thus did not advance religion. It also expressly provided that the moment of silence was an opportunity for prayer or silent reflection -- and thus did not inhibit religion. Since no one raised the third Lemon prong, the Court concluded that the statute met the test and did not violate the Establishment Clause. The Court briefly considered the facial Fourteenth Amendment vagueness challenge. The Due Process Clause does not require perfection and precision, particularly where criminal penalties are not at issue and particularly in a school setting. Although the statute does not provide any details regarding the moment of silence’s logistics, testimony in the record indicates that school districts are quite capable of providing that detail. The facial challenge fails.

Judge Williams dissented from the panel's opinion with respect to the First Amendment challenge. Her view can be gleaned from one sentence in her opinion: ([L]et’s call a spade a state -- statutes like these are about prayer in schools." Notwithstanding the deference that should be shown to the legislature's stated purpose and the fact that there are statements of secular purpose in the record, Judge Williams believed they were pretextual. She relied principally on two things: the specific reference to prayer and the inclusion of prayer as one of (and the first of) two available alternatives for the moment of silence. She believed that the statute endorsed religion and thereby violated the Establishment clause.

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LUMBERMENS MUTUAL CASUALTY CO. v. BROADSPIRE MANAGEMENT SERVICES (October 13, 2010)

Broadspire Management Services purchased an insurance administration business from Lumbermens Mutual Casualty Co. The parties agreed on a purchase price formula tied to the business’ success over the following four years. Under the contract, Broadspire calculated a proposed payment each year and submitted a report to Lumbermens. It used a different contract formula to calculate the expected earnings of any business sold during the first four years and submitted a similar report to Lumbermens. Lumbermens had 90 days to accept the calculation or submit a "Disagreement Notice" with a reasonably detailed basis for its disagreement. The agreement provided for binding arbitration in the event of a disagreement. Lumbermens ultimately disagreed with four Broadspire reports and sought arbitration. Broadspire claimed that the "Disagreement Notices" were deficient and refused to arbitrate. Lumbermens filed a Petition in Aid of Arbitration. Judge Leinenweber (N.D. Ill.) ordered arbitration, concluding that the sufficiency of the notice was a question for the arbitrator. Broadspire appeals.

In their opinion, Justice O'Connor and Judges Williams and Sykes affirmed. The only question before the Court was whether a court or an arbitrator should rule on Broadspire's "insufficient notice" argument. The Court concluded that the Supreme Court's decision in Howsam provided the answer. There, the Supreme Court held that a question relating to a grievance’s timeliness was a "gateway procedural dispute" for the arbitrator. The Seventh Circuit, following Howsam, has distinguished between substantive and procedural questions – the latter being questions for the arbitrator. Employers Insurance held that a consolidation question was a procedural one for the arbitrator. Zürich American likewise held that a question regarding the preclusive effect of a state court judgment was a procedural question for the arbitrator. Here, there is no disagreement regarding the existence of an agreement to arbitrate, which would be decided by a judge. The only disagreement is a procedural one and is properly in the hands of the arbitrator.

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On October 15, the Court withdrew this opinion. The appeal remains under advisement.

TURLEY v. GAETZ (OCTOBER 14, 2010)

Greg Turley is an inmate in an Illinois prison. He claims that prison employees are retaliating against him because he has brought past litigation regarding his prison conditions. He filed a § 1983 complaint against prison employees and sought to proceed in forma pauperis (IFP). Judge Murphy (S.D. Ill.) denied his request to proceed IFP. He concluded that Turley was ineligible for IFP status because he has had it least part of three prior lawsuits dismissed for failure to state a claim. Turley appeals.

In their opinion, Judges Ripple, Kanne, and Sykes reversed and remanded. The Court noted that the issue in the case was the proper interpretation of the Prison Litigation Reform Act (“PLRA”). One section of the PLRA (the “three strike” rule) attempts to restrict a prisoner's ability to proceed IFP if he has a history of frivolous litigation. Specifically, it states that a prisoner cannot proceed IFP if he has, on three or more occasions, brought “an action or appeal” that was dismissed as frivolous, malicious, or for failure to state a claim. Turley's relevant litigation history comes from three complaints: 1) a district court dismissed one claim for failure to state a claim and allowed two claims to go to the jury -- the case settled after a jury verdict in Turley's favor, 2) a district court dismissed a claim against some defendants for failure to state a claim and later granted summary judgment in favor of the remaining defendants, and 3) a district court dismissed one claim against all defendants and a second claim against some defendants for failure to state a claim and granted summary judgment to the remaining defendants on account of Turley's failure to exhaust administrative remedies. In each of Turley's complaints, therefore, at least one claim was dismissed for failure to state a claim and at least one claim survived dismissal. The question for the Court was whether any of these dismissals constituted a "strike" under the PLRA. The Court started with the statutory language. It stated that the terms "action" and "claim" are well defined. An action refers to the allegations of the complaint while a claim is an individual request for relief. The natural reading of the statute and its use of “action,” not “claim,” is therefore that a prisoner gets a strike when an action is dismissed in its entirety for one of the three statutory reasons. The D.C. Fifth, Sixth, and Eighth Circuits have concluded likewise. Although comfortable in its holding, the Court felt it necessary to address the earlier opinions in George and Boriboune. They each stated that a prisoner could get a strike when any claim was dismissed. The Court decided that the cases did not control – and did not need to be overruled -- since neither case was presented with or decided the action versus claim issue and the references in dicta were not essential to the outcome. As further support for its conclusion, the Court noted that the Eighth Circuit decision predated both cases and the D.C. and Sixth Circuit cases predated George. Neither Seventh Circuit panel indicated an intention to create a circuit split or circulated its opinion pursuant to Circuit Rule 40(e). Finally, the Court examined Turley's litigation history in light of its holding and concluded that Turley not only did not have three strikes -- he had none.

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TAYLOR v. WATKINS (October 14, 2010)

Corey Taylor is an inmate in Illinois prison. He claims that his jailers violated his civil rights. Among other things, he says that they contaminate his food, withhold his mail, and even beat him. He filed suit under § 1983 and requested permission to proceed in forma pauperis (IFP). This is not the first time that Taylor has made this sort of allegation. In fact, Taylor has three "strikes" (that is, he has filed at least three prior actions against government entities or employees that have been dismissed as malicious, frivolous, or for failure to state a claim). He therefore cannot proceed in forma pauperis under § 1915A unless he meets the in "imminent danger of serious physical injury" exception. He did allege imminent danger but the defendants challenged the allegation. Judge Murphy (S. D. Ill.) held an evidentiary hearing, concluded that Taylor was not in imminent danger, denied IFP status, and dismissed the case when Taylor failed to pay the fee. Taylor appeals and requests permission to proceed IFP on appeal.

In their opinion, Judges Kanne, Wood, and Hamilton denied his request to proceed IFP and gave notice that the appeal would be dismissed if Taylor failed to pay the docketing fee within 14 days. The Court cited the Third Circuit's distinction between challenged and unchallenged imminent danger allegations. If the allegation is unchallenged, it is accepted as true. If the defendants challenge the allegation of imminent danger, however, the court must resolve that question before proceeding. The Court stated that its decision in Ciarpaglini is not to the contrary. There, the defendants did not deny the allegations -- they simply argued that the allegations did not meet the imminent danger threshold. The district court did the proper thing here in conducting a hearing to resolve the allegations of imminent danger.

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UNITED STATES v. CINERGY CORP. (October 12, 2010)

Cinergy Corp. (and its affiliates) owns several electric power plants in the Midwest. Years ago, the U.S. EPA charged Cinergy with violations of the Clean Air Act at several of its facilities. Specifically, the agency alleged that the company made "major" modifications that resulted in increased nitrogen oxide and sulfur dioxide emissions without obtaining a permit. In an earlier appeal, the Seventh Circuit held that the federal regulation at issue required emissions to be measured on an annual, rather than an hourly, basis. On remand to Judge McKinney (S.D. Ind.), the case was tried. A jury found that four of the alleged modifications were likely to have increased the sulfur dioxide and nitrogen oxide annual emissions and should have been permitted. Cinergy appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Rovner reversed. The Court addressed the verdict with respect to the two pollutants separately. With respect to sulfur dioxide, Indiana's implementation plan in effect at the time of the modifications did use hourly capacity rather than annual emissions to determine the necessity of a permit. This was true even though: the federal statute and regulation defined it otherwise, Indiana had agreed to revise its plan, and Indiana had actually adopted appropriate amendments to its plan -- but it failed to submit the plan for approval for several years. The Court concluded that Cinergy could not be held liable when it complied with the approved Indiana plan. With respect to nitrogen oxide, the parties agree that the annual emissions standard governs. Here, Cinergy attacks the agency's experts and the formula they used to predict those annual emissions. In effect, the expert witnesses testified that an increase in capacity would result in an equal increase in generation and pollutant emissions. The Court concluded that that formula was only appropriate in the case of a baseload generating plant, which is in almost continuous operation. It did not take into consideration the operational differences between baseload, cycling, and peaking plants. The plant at issue is a cycling plant and operated on a regular, although not continuous, schedule. Although there are methods for predicting annual emissions from a cycling plant, the Court concluded that a remand was not necessary. The agency conceded that it could not prove its case if the expert testimony was disallowed.

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PALKA v. SHELTON (October 7, 2010)

Peter Palka's hopes of becoming a Chicago police officer were dashed when he was kicked out of the Police Academy. His father Tadeusz, a 28-year veteran of the Cook County Sheriff's Department, thought the termination was discriminatory and based on the fact that Peter was Polish. The elder Palka tried to convince Matthew Tobias, the official in charge of the Academy, to reinstate his son. Tobias assured Palka that Peter was terminated for cause and refused to reverse the decision. A few months later, the receptionist at his children’s school advised Tobias that an unidentified man with a Polish accent called and asked questions about the children. Tobias suspected Palka and began an investigation. Phone records revealed that someone in the Cook County Building at 69 W. Washington in Chicago had placed a call to the school on the afternoon in question. Tobias was now convinced -- he reported the call to the local police, he opened an incident report and checked Palka for outstanding warrants, he asked senior officers to speak with Palka, and he filed a formal complaint with the Sheriff's Department's Office of Internal Affairs. Palka was suspended with pay. Shortly before a formal disciplinary hearing that would decide his fate, the Department offered Palka full retirement benefits (including badge and firearm credentials) if he resigned. He did resign, but never received his credentials. Palka filed suit pursuant to § 1983, alleging procedural and substantive due process violations, occupational liberty deprivations, and Monell claims. Judge Kendall (N.D. Ill.) dismissed the complaint with prejudice. Palka appeals.

In their opinion, Judges Ripple, Kanne, and Sykes affirmed. The Court rejected each of Palka’s contentions in turn. First, the procedural due process claim relating to his suspension fails because a suspension with pay does not trigger due process protection unless there is a claim of indirect economic consequences. Palka makes no such allegation. Second, the procedural due process claim relating to his resignation also fails. Palka was simply given a choice to avail himself of the procedural protections offered by the Merit Board (and risk losing everything) or to resign with retirement benefits. He was not deprived of due process protections -- he traded them away. Third, the substantive due process claim fails. Public employment termination does not give rise to a substantive due process claim unless it is accompanied by an allegation of other constitutional violations or inadequate state remedies, neither of which is present here. To the extent that Palka relied on police misconduct to support the substantive due process claim, the Court stated that it did not meet the high “shocks the conscience” threshold. Fourth, the occupational liberty claim fails. Palka failed to allege public disclosure an essential element of the claim. The County's failure to grant him badge and firearm credentials, on which Palka bases this claim, was not publicly disclosed nor does Palka allege that any potential future employer learned of it. Finally, because there is no constitutional violation, there can be no Monell liability.

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COGSWELL v. CITIFINANCIAL MORTGAGE CO. (October 5, 2010)

In January 2001, the Patrick Group (PG) purchased a mortgage (and the underlying note) from CitiFinancial Mortgage Co. However, CitiFinancial could not locate the original note or mortgage. It gave PG a copy of the mortgage but could not locate even a copy of the note. PG ran into complications when it substituted for CitiFinancial in the pending foreclosure proceeding. A title search disclosed a gap in the recorded ownership of the mortgage. Because PG could not produce even a copy of the note, the court directed a verdict against PG. The appellate court affirmed. PG then brought suit for breach of contract against CitiFinancial. Judge Norgle (N.D. Ill.) granted summary judgment to CitiFinancial, concluding that the agreement did not require transfer of the note and that, even if it did, CitiFinancial’s failure to transfer was not the cause of PG's damages. PG appeals.

In their opinion, Judges Flaum, Ripple, and Sykes reversed and remanded. The Court first addressed whether the contract required the physical transfer of the note. The Court took issue with the district court's treatment of this as a question of law, as if it were a question regarding the existence of a contract. Here, there is no doubt that a contract exists. The only question concerns its terms -- and that is a question of fact. Relying on PG's offer letter, the contract itself, and an uncontested affidavit, the Court concluded that the contract was ambiguous. Although the district court's reading of the contract was plausible, it is not the only reasonable reading. The district court improperly resolved this factual dispute on summary judgment. It must go to a trier of fact. The Court turned to causation. Again, the Court disagreed with the district court and its holding that the failure to transfer was not the cause of damages because PG could have enforced its rights on alternative paths. The Court stated that Illinois applies a special rule to breach of contract cases when the alleged harm is a result of an adverse judicial outcome. In those cases, causation is a question of law and depends on an analysis of what a reasonable court would have done had the defendant not breached the contract. Here, the Court concluded that a reasonable Illinois court would have allowed PG to proceed with the foreclosure if it had a copy of the note. Thus, CitiFinancial's breach caused PG's damages. The Court also rejected CitiFinancial’s alternative paths argument, although it first re-categorized the arguments as "failed to mitigate," rather than failed to prove causation. It held that, under Illinois foreclosure law, a reasonable court would have ruled against PG on both the lost-note affidavit and the personal judgment theories.

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WILSON v. PRICE (October 4, 2010)

Midnight Auto Express is a car repair business located in Aldermen Keith Price's Sixth Ward in Harvey, Illinois. Midnight apparently had a number of cars parked illegally in front of its shop on May 2, 2008 because Price received a number of complaints from his constituents. Price unsuccessfully tried to get the City to remove the cars. Undaunted, he paid a personal visit to the shop and spoke with Christopher Wilson, a mechanic. Wilson refused Price's demand to move the cars and also refused to contact the owner. Instead, he walked away. Price attacked Wilson, leaving him unconscious. Wilson and his wife brought suit against Price and Harvey, alleging claims under and state law. Judge Hibbler (N.D. Ill.) dismissed the § 1983 claim on the ground that Price had not acted under color of state law and declined to exercise jurisdiction over the state claims. The Wilsons appeal.

In their opinion, Judges Ripple, Manion, and Williams affirmed. The only issue on appeal was whether Price was acting under color of state law. The Court noted that the fact that he is a government official is not enough. An act is under color of state law when it is a misuse of the power the actor has been granted by state law. In other words, it must be related to the performance of his official duties. The Court noted that Price's aldermanic duties are purely legislative. As such, they involve enacting legislation and related legislative investigation. The Court analyzed his conduct to determine whether the required relationship existed. Of course, none of his activities that day related to the passage of legislation. He could, however, have visited the repair shop as part of his legislative investigation role. Even if that is so, however, the Court concluded that he crossed over into a law enforcement role once he ordered the cars moved. Since Price had no enforcement authority, his actions were not related to his official duties – and not under color of state law. The altercation was one between private citizens and does not support a § 1983 action.

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ANNEX BOOKS, INC. v. CITY OF INDIANAPOLIS (October 1, 2010)

The City of Indianapolis passed an ordinance that restricted adult bookstores’ hours of operation. After the district court rejected a challenge to the ordinance, the Seventh Circuit reversed and remanded (the opinion and intheiropinion). The Court concluded that the evidentiary record did not satisfy intermediate scrutiny. The record evidence it related to the dispersal of adult businesses offering live entertainment -- instead of relating to hours restrictions on businesses not offering live entertainment. On remand, the City offered one additional piece of evidence at a preliminary injunction hearing. It was a study that concluded that Sioux City, Iowa saw a reduction in crime after it dispersed adult businesses. Judge Barker (S.D. Ind.) denied the injunction. The City appeals.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Rovner affirmed. The Court found several flaws in the City's position. First, the study, like the earlier evidence, related to a dispersal ordinance, not a restricted-hours ordinance. Second, the study did not control for any other variables (like bars opening or closing, for example). Third, more police protection for adult business patrons is preferable to closing them. Given the state of the record, the Court concluded that the district court did not abuse its discretion in denying the injunction.

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MOBILE ANESTHESIOLOGISTS CHICAGO v. ANESTHESIA ASSOCIATES OF HOUSTON METROPLEX (October 1, 2010)

Mobile Anesthesiologists Chicago ("Chicago") provides on-site anesthesia services, is based in Chicago, has been in business for 15 years, registered the website www.mobileanesthesiologists.com, registered Mobile Anesthesiologists as a federal trademark, and has affiliate offices in other U.S. cities, including Houston. Anesthesia Associates of Houston Metroplex ("Houston") was founded by Dr. Eric Chan. Dr. Chan is its sole member and it operates only in the Houston area. Chan registered the website www.mobileanesthesia.com, where he advertises his practice to the greater Houston area. Dr. Chan is a licensed anesthesiologist in Texas but in no other state, and he has never conducted business in Illinois or visited Illinois for business. Chicago brought suit in Illinois federal court alleging that Houston violated federal law by registering a confusingly similar domain name. Judge Norgle (N.D. Ill.) dismissed the complaint for lack of personal jurisdiction. Chicago appeals.

In their opinion, Judges Flaum, Wood, and Hamilton affirmed. The Court first rejected Chicago's argument that Houston waived its personal jurisdiction defense when it asked for a continuance of the preliminary injunction hearing and for discovery. Waiver of personal jurisdiction requires much more than that, said the Court. The Court proceeded to the merits of the personal jurisdiction defense under the familiar federal due process and International Shoe rubric. General jurisdiction was not alleged, so it proceeded to analyze specific jurisdiction. Chicago relied on the Calder "expressly aimed" test. The Florida defendants in Calder were required to appear in California on a libel charge because the allegedly libelous story was about a California resident and the "brunt of the harm" was felt in California. The Court reviewed its “not . . . entirely consistent” application of Calder in Wallace, Indianapolis Colts, and Janmark. It concluded that Wallace, and its rejection of the notion that a defendant with no contacts in a forum could be forced to defend there simply by alleging an intentional tort, was the proper application of Calder (while rejecting the notion that Indianapolis Colts or Janmark actually conflicted with Calder). Here, Chicago's only evidence is that Houston maintained a website, accessible in Illinois, under a confusingly similar name and therefore caused injury in Illinois. The Court concluded that that was insufficient "express aiming" to establish personal jurisdiction. The Court also rejected Chicago's alternative theories that its federal trademark registration somehow established personal jurisdiction in Illinois and that Houston's actions were "expressly aimed" at Illinois after its receipt of Chicago's cease-and-desist letter.

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IN RE: RESOURCE TECHNOLOGY CORP. (October 1, 2010)

Resource Technology Corporation (RTC) used to be in the business of converting gas emissions from garbage landfills to electricity. It had exclusive gas conversion rights at several Illinois landfills. The business failed and RTC entered bankruptcy. The bankruptcy trustee entered into a settlement agreement with Chiplease and Scattered, two creditors founded by former RTC officers and directors. Among other things, the agreement provided: a) the trustee agreed to assume several of the landfill contracts and assign them to Chiplease and Scattered, b) Chiplease agreed to pay RTC's operating expenses during the bankruptcy, and c) Chiplease agreed to place $500,000 in escrow as security for the operating expense agreement. The bankruptcy court approved the settlement. The landfill owners objected to the assignment, arguing that § 365's "adequate assurance of future performance" requirement was not met. The principals of Chiplease and Scattered testified that the two companies would lend the requisite $3 million to the trust that had been set up to run the business. Nevertheless, the bankruptcy court rejected the assignment. It concluded that the trust was not capable of performing, that the trust could not require Chiplease and Scattered to lend the money, and that the two companies had financial problems of their own. Judge Kennelly (N.D. Ill.) affirmed. The trust appeals.

Meanwhile, Chiplease never established the $500,000 escrow as required by the agreement. Acting on a complaint by administrative claimants, the bankruptcy court rejected Chiplease's argument that it should be excused because it had already actually paid over $1 million in expenses and ordered it to establish the escrow. Judge Kennelly again affirmed. He also ordered Chiplease to establish the escrow and found it in contempt when it failed to do so. Chiplease appeals.

In their opinion, Judges Ripple, Rovner, and Sykes affirmed on the consolidated appeals. First, with respect to the assignment of the contracts, the Court recited the factors relevant to "adequate assurance”: financial ability, economic climate, whether a guarantee exists, the reputation of the party, and any past history. The bankruptcy court applied the correct standard -- a "more likely than not" requirement. The record showed that performance would require $3 million, that financing was essential, that the trust had no enforceable right to financing, and that the trust was controlled by the same people who controlled RTC when it entered bankruptcy. In addition, the record was practically silent with respect to how Chiplease and Scattered were going to raise the necessary funds. The bankruptcy court acted within its discretion in concluding that the trust failed to carry its burden. With respect to the escrow appeal, the Court concluded that the bankruptcy court did not abuse its discretion in requiring Chiplease to comply with the clear and unambiguous terms of the order. The bankruptcy court was interpreting its own order and is entitled to substantial deference. Finally, with respect to the contempt appeal, the Court concluded that the district court did not abuse its discretion. There was actually no dispute that Chiplease failed to comply with the court's order. Its only response was an “inability to pay” defense. Particularly in light of evidence that Chiplease presented in support of the landfill contract assumption that it had millions of dollars in assets, Chiplease did not meet its burden of proving that inability.

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STAYART v. YAHOO! (September 30, 2010)

Beverly Stayart sounds like a bit of a renaissance woman. Self-described as "sophisticated, well-educated, and highly intelligent," she has a University of Chicago M.B.A, engages in humanitarian efforts in support of baby seals and wolves and wild horses, researches genealogy, has published scholarly papers on the Internet, and writes poetry. One day, she conducted a Yahoo! Search on her own name. That search, and others that followed, produced troubling results. In addition to the links about herself and her activities, she found links to pharmaceutical companies, pornographic websites, and much more. She demanded that Yahoo! remove the offensive links. Yahoo! declined. Stayart brought suit alleging a violation of § 43(a) of the Lanham Act. Judge Randa (E.D. Wis.) dismissed the complaint on the grounds that she had no commercial interest in her name. Stayart appeals.

In their opinion, Circuit Judges Manion and Williams and District Judge Darrah affirmed. The Court noted that Stayart did not challenge the well-established rule that § 43(a) requires a showing of commercial interest. Instead, she argued that her extensive and varied activities and presence on the Internet established a commercial interest in her name. The Court disagreed. Section 43(a) is a remedy for a commercial plaintiff who seeks to protect its commercial interest. Stayart's activities may be laudable -- they are not commercial.

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UBID v. THE GODADDY GROUP (September 29, 2010).

The GoDaddy Group operates a domain name registration site called GoDaddy.com. GoDaddy has taken significant steps to limit its physical presence to Arizona. It is incorporated there, it is headquartered there, its computer servers are all located there, and the great majority of its offices and employees are there. Its non--physical presence is another story. It advertises nationally (including on the last six Super Bowls), it sponsors professional race car driver Danica Patrick and professional golfer Anna Rawson, and it advertises in sports arenas (including those of the Chicago-based Cubs, White Sox, Bulls, and Blackhawks). It has hundreds of thousands of Illinois customers and millions of dollars of Illinois revenue annually. Chicago-based uBID, an Internet excess-inventory auctioneer, brought suit against GoDaddy for violating the Anti-Cybersquatting Consumer Protection Act. The GoDaddy conduct that uBID complains of is its practice of selling domain names that are confusingly similar to existing domain names (including uBID’s), selling advertising on those websites, and profiting from the confusion it has created. Judge Kocoras (N.D. Ill.) dismissed the complaint for lack of personal jurisdiction. uBID appeals.

In their opinion, Judges Flaum, Manion, and Hamilton reversed and remanded. The Court first considered and rejected the existence of general jurisdiction. General jurisdiction requires such extensive contacts that a defendant is considered to be present for all purposes. Here, although GoDaddy's contacts are extensive, they are limited to its domain name services. The Court concluded that it would be unfair to consider GoDaddy present for all conceivable claims. With respect to specific jurisdiction, the Court noted that the question has not changed since International Shoe -- is it "fair and reasonable" to require the defendant to respond to the claim? The analysis is a three-part test addressing the sufficiency of the contacts, the relationship between the contacts and the claim, and International Shoe's requirement that it not offend notions of "fair play and substantial justice." With respect to the sufficiency of the contacts, the Court relied heavily on Keeton. In that case, the Supreme Court upheld jurisdiction in New Hampshire over Hustler Magazine. Hustler had no offices or employees in New Hampshire, did not particularly target the state, and very little of its revenue came from the state. But Hustler "continuously and deliberately" exploited the market. That was enough for the Supreme Court to permit jurisdiction. The Court concluded that GoDaddy continuously and deliberately exploited the Illinois market and reached the same conclusion. The fact that GoDaddy can do that in a virtual, rather than physical, sense does not dictate a different result. With respect to the relationship between the contacts and the claim, the Court applied a proportional and foreseeable test (declining to endorse either the but-for or proximate causation tests relied upon by some courts -- and also declining to adopt or reject the Zippo test). The Court concluded that the relationship was close enough. In fact, it found the contacts and the claims "intimately related." Finally, the Court considered the "substantial justice" factors. Some of them favored the exercise of jurisdiction; none of them favored GoDaddy. Requiring GoDaddy to answer the claim in Illinois is not unfair.

Judge Manion concurred. Although he agreed that personal jurisdiction was proper, he disagreed with the Keeton test applied by the majority. In his view, the claim does not arise out of Go Daddy's advertisements at sporting events or out of its hundreds of thousands of relationships with Illinois residents. Instead, it arises out of its cybersquatting -- profiting from advertisements that it places on domain names that allegedly infringe uBID’s trademark. Instead of Keeton, Judge Manion would look to the intentional harms test from Calder. Each of the three prongs of the Calder test are satisfied here: a) the conduct was intentional, b) the conduct was aimed at Illinois since it was targeted correctly at uBID, and c) GoDaddy knew that uBID would be harmed in Illinois. 

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CITY OF CHICAGO v. STUBHUB! (September 29, 2010)

The practice of "scalping" tickets, or selling them above face value, is generally illegal in Illinois. But there are exceptions. One is for an Internet auction site -- but only if it registers with the State, either collects and remits taxes or publishes a notice on its site advising the actual reseller of its tax obligations, and agrees to provide information about any reseller if requested by law enforcement or government official. StubHub! operates just such a site and complies with those requirements of Illinois law. It has chosen the "notice" alternative rather than the "collects and remits" alternative. The City of Chicago would rather have StubHub! collect the tax so it does not have to worry about whether each of thousands of resellers pay it – so it amended an ordinance requiring direct payment by StubHub!. The City filed suit seeking a declaration that StubHub! is responsible for the taxes. Judge Andersen (N.D. Ill.) dismissed the complaint on the ground that tickets are "tangible or personal property" and that, therefore, the Preemption Act prohibits a home-rule municipality from imposing the tax. Chicago appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Kanne certified a question to the Illinois Supreme Court. The Court first disposed of StubHub's arguments that federal law somehow barred the tax. First, the Communications Decency Act is simply irrelevant to the issue. Second, the Internet Tax Freedom Act prohibits “[m]ultiple or discriminatory taxes on electronic commerce.” The Chicago tax is neither. Turning back to state law, the Court recognized that an intermediate state court has concluded that a ticket is "tangible or personal property" (ironically, adopting a point argued by the City). A federal court sitting in diversity will frequently follow (even though not required to) an intermediate state court's ruling, if there is no reason to believe that the state Supreme Court would rule otherwise. Even if the ruling is erroneous, later state-court cases that address the same issue can correct the error. Here, however, the Court was concerned that the state Supreme Court might never be heard on the issue. Apparently, there are only two cases that address the issue. Both started in state court but were removed to federal court – and any future-filed case will likely be removable. The Court, therefore, requested the Illinois Supreme Court to advise "whether municipalities may require electronic intermediaries to collect and remit amusement taxes on resold tickets."

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GATES v. CITY OF CHICAGO (September 27, 2010)

Chicago police arrested Luster Nelson in February of 2004 on a narcotics charge -- and seized the $59 in cash that he had on his person at the time. Chicago police arrested Elton Gates in January of 2003 on a non-narcotics charge -- and seized the $113 in cash that he had on his person at the time. Gates and Nelson were each given a property inventory receipt that included instructions for the return of their property. Gates ultimately pled guilty and unsuccessfully sought the return of his $113. The charges against Nelson were dismissed. He also was unsuccessful in his attempt to retrieve his $59. Gates and Nelson brought a class action suit against the City and various individuals. They alleged due process violations in that the City: seized their property and kept it without instituting a forfeiture proceeding, misrepresented when their property would be available, kept their property after the conclusion of criminal proceedings, and maintained a policy designed to delay the return of property. They sought the return of their cash, damages, and attorney's fees. They also included state law claims for conversion, replevin, and unjust enrichment, among others. Shortly after they filed suit, the City sent each a check in the full amount of his alleged property loss and offered to pay interest. The plaintiffs returned the checks. The court certified two classes of individuals (one for narcotics arrestees, one for non-narcotics arrestees) who had had property taken from them during a particular period, whose criminal cases had been resolved, and who had not been able to recover their property. The Seventh Circuit affirmed the class certification. Judge Castillo (N.D. Ill.), on remand, granted summary judgment to the City on the federal claims, refused to certify a class on the state restitution claims, and dismissed those claims as moot. The plaintiffs appeal.

In their opinion, Judges Kanne, Rovner, and Wood affirmed in part and vacated and remanded in part. The Court first turned to the sufficiency of the notice. It looked to the Supreme Court decisions in West Covina and Memphis Light for guidance. In West Covina, the Supreme Court upheld a notice that did not give many specifics about the procedure for obtaining the return of one's property but the procedures were generally available in public sources. Conversely, in Memphis Light, the Supreme Court held that a public utility must give its customers notice of its internal procedure for resolving billing disputes because the procedure was not otherwise publicly available. Here, part of the procedure for property recovery is contained in Illinois statutes and is publicly available. However, the record shows that the police also use internal procedures that are not described in generally available documents. The Court concluded that the notice provided to the plaintiffs did not satisfy Memphis Light and violated due process. The Court referred to the City's instructions as a "model of misdirection" and concluded that summary judgment for the City was premature. The narcotics arrestee class also challenges the additional notice that is sent to the home of narcotics arrestees. Their position is that the City should check the sheriff's website to determine if the arrestee is incarcerated, either before sending the notice or at least upon return of an undelivered notice. A notice, under due process, must be reasonably calculated to inform interested parties. Generally, a notice mailed to the interested party's residence is sufficient -- unless, of course, there is reason to know it would be ineffective. The Court concluded that summary judgment for the City was premature with respect to the narcotics notice. The extra notice to narcotics arrestees is not just a notice -- it is a document required to recover property. The record is not clear regarding the burden on the City to check the website, either for all notices or for those returned undelivered. The City failed to meet its burden that the mailing of the notice meets the Mullane standard.

The Court moved to the consideration of the adequacy of the procedures themselves. Again, the Court concluded that summary judgment for the City was error. First, it identified a number of factual disputes regarding the actual procedure. Second, it discussed a series of Second Circuit cases (McLendon, Butler, and Alexandre) to clarify the difference between having procedures for the return of property and having remedies if the procedures fail. A post-deprivation remedy is not a defense to a § 1983 action if the deprivation is a result of established procedures. Here, the arrestees were apparently required to obtain an arresting officer's signature on a form, and the officer could refuse arbitrarily. This does not comply with due process requirements – and cannot be corrected with a simple post-deprivation remedy. As an aside, the Court noted that the significant amount of money and number of arrestees unable to reclaim their property are indications that the policy is suspect. Finally, the Court affirmed the district court's dismissal of the restitution claims. Those claims sought nothing more than a return of the plaintiff's property. The City's tender of the full amount of the claim is sufficient to make the plaintiff whole.

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JUDGE v. QUINN (September 24, 2010)

Barack Obama created a vacancy in the United States Senate when he resigned his seat in November of 2008. Apparently, he got a better job. Illinois’ governor appointed Roland Burris to serve the remaining years of his term. Two Illinois voters brought suit, alleging that Illinois violated the Seventeenth Amendment by failing to hold a popular election. In a June 16, 2010 opinion (opinion and intheiropinion), the Seventh Circuit affirmed the denial of a preliminary injunction. The Court held that the plaintiffs had shown a strong likelihood of success on the merits (that the Seventeenth Amendment requires an election to fill any Senate vacancy) but had failed to show irreparable harm, since there was still adequate time to hold the election. The district court then held a series of hearings, during which Illinois ultimately agreed to hold the election (after the Court denied a rehearing and rehearing en banc). The State put forth a proposal, agreed to by the plaintiffs, under which the special election would be held the same day as the already-scheduled general election for the same seat -- and the candidates on the special election ballot would be those same candidates as on the general election ballot. Senator Burris, whose name will not be on the general election ballot, objected. He wanted his name included on the special election ballot, either by collecting some designated number of signatures or simply by agreement. Judge Grady (N.D. Ill.) adopted the State's proposal. The governor issued a writ of election and the court issued its preliminary injunction. Senator Burris appeals.

In their opinion, Judges Rovner, Wood, and Tinder affirmed. The Court first turned to Burris' argument that the case presented a nonjusticiable political question. Only two of the Baker factors were relevant, said the Court, and it resolved both against Burris. First, there was not a "lack of judicially discoverable and manageable standards." The Seventeenth Amendment, state law, and past Illinois history provided the rules and standards. Second, the question is not within the exclusive province of the political branch. When constitutional rights are infringed by the inaction of a state, a federal court has the power to hear the case and fashion a remedy. The Court next addressed Burris' argument that the court interfered with the role of the Illinois General Assembly when it decided whose names would appear on the special election ballot. The Court held that Burris waived this argument by not raising it below -- but also concluded that, although the states have principal responsibility for controlling the procedural aspects of these elections, a district court has the power to fashion a remedy for a constitutional violation. Finally, the Court rejected the notion that the district court order was an unconstitutional ballot access restriction. There is nothing in the order that excludes a particular class of candidates and the order is narrowly tailored to affect only one election.

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RK CO. v. SEE (September 22, 2010)

Dr. Jackie See founded Harvard Scientific Corporation (HSC) and was very active in its efforts to develop and market a product to treat sexual dysfunction. In 1997, the FDA discovered that HSC had falsified some findings in its new drug application. The FDA began an audit and instructed HSC to cease its clinical studies. Throughout 1997 and 1998, however, HSC continued to make public statements claiming that it was moving forward with its product and that the FDA had approved further clinical trials, when it had not. In mid-1998, RK Co. purchased $500,000 worth of HSC stock. By mid-1999, HSC was bankrupt and RK’s stock was worthless. RK sued HSC, Dr. See, and other HSC employees. After lengthy litigation, Dr. See (the last remaining defendant) and RK consented to a bench trial before a magistrate judge. Magistrate Judge Keys (N.D. Ill.) found for RK on each of the claims. See appeals.

In their opinion, Judges Bauer, Rovner, and Williams affirmed. The Court first rejected See's argument that RK was not the "real party in interest" because it was not a true legal entity for several reasons: a Rule 17 (a) "real party in interest" objection may be waived, See waived it by not bringing it up until midway through the trial, the fact that he may not have known until trial is not excused since over seven years had elapsed since the complaint's filing, and the only consequence of a more timely objection would have been a substitution of parties. The Court also rejected See's standing arguments. It concluded that RK easily met the minimum requirements for constitutional standing (injury in fact, causation, and redressability) and that See waived the prudential standing argument. Next, the Court held that the magistrate judge did not err in finding that the evidence was sufficient to support the claims. See challenged the lower court's decision to admit certain deposition testimony but failed to include in the record the transcript of the proceedings below. The Court dismissed his challenge, being unable to meaningfully review the court's reasoning. Finally, the Court found no abuse of discretion in the lower court's award of prejudgment interest and attorney's fees. Prejudgment interest is presumptively available and See failed to specify any particular objections to the fees.

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GUAJARDO-PALMA v. MARTINSON (September 20, 2010)

Cesar Guajardo-Palma is a prisoner in a Wisconsin facility. He brought suit alleging that his constitutional rights were violated when prison employees opened nine pieces of his incoming mail outside of his presence. None of the mail was from his lawyer. One document was from the district court and was a matter of public record. The others were from federal and state agencies and, though not public documents, were not particularly sensitive. Judge Crabb (W.D. Wis.) dismissed the complaint for failure to state a claim. Guajardo-Palma appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Hamilton affirmed. The Court engaged in a lengthy analysis of the jurisprudence in this area, including such topics as the interception of a letter from a lawyer, the interception of a letter to a lawyer, whether the analysis is properly a First Amendment analysis or a right of access to the courts analysis (the "more straightforward" approach) or the right to a fair hearing, the Sixth Amendment issues that arise if the prisoner is a criminal defendant, the accommodation required between a prisoner's interest in confidentiality and the prison's interest in security, whether an unjustified interception of legal mail is a violation or simply a potential violation that requires a showing of hindrance, the appropriate remedy for a violation, and the fact that such a violation would be subject to a harmless error analysis. The Court then put its imprimatur on an approach described in Wolff -- the prison official should be allowed to open, in the prisoner's presence, mail that purports to be from the prisoner's lawyer to ensure that it is what it purports to be. Of course, the actual communications at issue in the case were not to or from a lawyer. The prisoner had not asserted any interference with his rights to pursue his litigation nor had he claimed to be intimidated. The Court concluded that the prison's practice of opening communications that are not sensitive and not likely to provide insights into a legal strategy is harmless and not a constitutional violation.

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AMERISURE MUTUAL INSURANCE v. MICROPLASTICS, INC. (September 20, 2010)

Microplastics manufacturers small plastic components. In 2004, it sold components to Valeo for use in manufacturing automobile door latch assemblies. Before the end of that year, it was apparent that the components were defective. Attempts to resolve the problem were unsuccessful. Valeo terminated the contract and applied money still owing to offset its damages. Microplastics filed suit for breach of contract -- Valeo asserted a counterclaim alleging that Microplastics failed to meet its engineering and quality specifications. Microplastics notified Amerisure, its insurer under a series of CGL policies. The policies provided coverage for "property damage," defined as physical injury to or loss of use of tangible property. Amerisure denied coverage and filed an action for a declaration that it had no duty to defend or indemnify. Microplastics and Valeo settled the underlying dispute. Judge Nordberg (N.D. Ill.) granted summary judgment for Amerisure. Microplastics appeals.

In their opinion, Judges Cudahy, Ripple, and Hamilton affirmed. Under Illinois law, a court compares the allegations of the complaint to the policy language. If those allegations potentially fall within the policy language, the insurer has a duty to defend. Here, the policy covers "property damage" -- but property damage coverage applies to liability for damage to the property of others, not to the cost of repairing the insured's own property. The Court noted that it was unclear from Valeo's counterclaim whether it was asserting such loss. The Court conceded that it was theoretically possible that some of Valeo's losses resulted from damage to property other than the defective product. Theoretical losses, however, are not enough. The duty to defend is triggered only by actual allegations in the complaint, not implied ones. There is nothing in the complaint or the record suggesting any "property damage."

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