Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : GVC Ltd. Law Firm

ELLIS v. DHL EXPRESS (January 11, 2011)

In late 2008, DHL announced that it was discontinuing its domestic shipping business. Five of its Chicago facilities were sure to close. The union successfully negotiated severance agreements. One agreement was available to full-time drivers and provided 10 weeks severance. The other agreements provided only four weeks. The drivers had less than a week to make their decisions. Other employees had between two and six weeks. Workers who were already laid off at the time the severance package was negotiated were nevertheless eligible for the four-week agreement. Eventually, 506 DHL employees accepted a package, resigned, and signed a release. The employees who did not accept a severance package received no severance but did retain seniority and recall rights and, of course, did not release the company from any claims. John Ellis and Timothy Price, both DHL drivers, brought suit against DHL alleging a violation of the Worker Adjustment and Retraining Notification (WARN) Act. Judge Kennelly (N.D. Ill.) granted summary judgment to DHL. He concluded that the WARN Act did not apply because a) the layoffs did not constitute a "plant closing" under the Act because the five facilities were not a single site, b) the employment losses were less than the Act’s 33% trigger, and c) the employees who accepted severance packages did so voluntarily and are therefore not counted as involuntary separations under the Act. Ellis and Price appeal.

In their opinion, Seventh Circuit Judges Wood, Evans, and Tinder affirmed. The Court stated that the WARN Act requires covered employers to provide 60-days notice of a plant closing or mass layoff. The Act does not apply if fewer than 33% of full-time employees are affected. Since the plaintiffs concede that the 33% threshold would not be met if the 506 employees who accepted the severance packages are not considered "affected," the Court confined its review to that issue. Although the Act excludes "voluntary" departures from its definition of employment losses, it does not define "voluntary." The Secretary of Labor has clarified the term, a clarification to which the Court gives significant weight. The clarification states that incentive retirement programs should normally be considered voluntary if the employer has not created a hostile environment or otherwise improperly induced employees. The Court rejected plaintiffs' argument that the economic uncertainties and narrow window within which to make decisions made those decisions involuntary. The agreements were negotiated by the union for the benefit of the employees and they were written clearly. The record contains no evidence that the company put any improper pressure on any employees. The Court recognized the narrow decision window but concluded that it did not transform the decisions into involuntary ones. The Court also rejected the argument that employees who were already laid off at the time they accepted a severance package could not have resigned "voluntarily." Although they were not working, the Court noted that they gave up valuable seniority and recall rights when they signed their agreements. Finally, the Court affirmed the District Court's decision to sua sponte grant summary judgment to DHL's German parent. The claims against the parent were identical to the claims against DHL.

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HEYDE v. PITTENGER (January 11, 2011)

Raymond Heyde owns residential property in Tazewell County, Illinois, just south of Peoria. In late 2003, Heyde received his 2004 tax assessment notice. He filed a complaint with the County Board of Review, asserting that the $207,000 assessment was too high (the proper assessment level is 33 1/3% of the property's fair cash value). The Board reduced the assessment to $140,000. He complained again after he received his 2005 notice, which increased the assessment to $149,000. The Board declined to reduce their assessment. The assessment went up again in 2006, to $153,000. Again, he complained and submitted a then-recent $435,000 property appraisal (which would result in a $145,000 assessment). The Board not only did not reduce the assessment, but increased it to $436,000 in a June 1, 2006 decision. Heyde continued to complain about his assessment each year -- the Board refused to budge. Heyde appealed the June 1 decision to the Illinois Property Tax Appeal Board. Although the Appeal Board reduced the assessment, Heyde was still dissatisfied and has sought administrative review in state court. He also has additional appeals before the Appeal Board for subsequent years. In 2007, Heyde filed a § 1983 action against the members of the Board and the County Assessors. He alleged that the defendants deprived him of equal protection rights, conspired to deprive him of his equal protection rights and retaliated against him for exercising his lawful challenge rights. Judge Mihm (C.D. Ill.) concluded that the members of the Board had absolute immunity and dismissed the complaint as to them. He dismissed without prejudice as to the Assessors based on principles of comity on the grounds that Heyde had not exhausted state remedies. Heyde appeals.

In their opinion, Seventh Circuit Judges Cudahy, Rovner, and Evans affirmed. Addressing first case against the Board members, the Court noted that absolute immunity does apply to a quasi-judicial adjudicatory body when it acts in a capacity functionally equivalent to that of a judge or prosecutor. It does not, however, apply to administrative or ministerial acts. Relying on the Board’s statutory authority and the Court’s own precedent, the Court concluded that Board members were entitled to absolute immunity. They fit neatly within the factors identified by the Supreme Court in Butz. The Court turned to the claims against the Assessors. In McNary, the Supreme Court held that challenges to state tax systems must occur within the state’s courts, with final review in the Supreme Court. A § 1983 action is therefore not the proper vehicle. The Court rejected Heyde's argument that the Illinois system failed to meet the "plain, speedy and efficient" exception to the McNary rule. The Court recognized the delays inherent in the Illinois system but concluded (not for the first time) that they were not enough to avoid McNary.

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CATALAN v. GMAC MORTGAGE CORP. (January 10, 2011)

Saul Catalan and Mia Morris bought a home in Matteson, Illinois in mid-2003. RBC Mortgage Company financed the purchase. Their first payment of $1,598 was due on August 1. Unfortunately, RBC's system showed a payment due on July 1, thus triggering an almost 2 year nightmare. By the time they made their first on-time payment, the RBC system consider them late. By the time they made their second on-time payment, RBC consider them in default and increased their monthly payment amount. Within months, RBC was returning their monthly checks uncashed. RBC filed for foreclosure in February of 2004 but transferred the mortgage toGMAC Mortgage in September. But nobody told the plaintiffs -- so they sent their September payment to RBC. In September, GMAC sent the plaintiffs an inaccurate account statement that showed them behind almost $8,000. GMAC also demanded proof of insurance coverage and then returned the September check (which it had received from RBC). The plaintiffs wrote a letter in October to the Department of Housing and Urban Development detailing the problems with RBC and GMAC and asking several questions about the servicing of their account. HUD sent the letter on to GMAC. Plaintiffs also wrote to GMAC directly on October 7 and October 15. Those letters sought information about the transfer of the loan and other information about the account. GMAC responded to the October 7 letter with information about the account. Then GMAC sent a letter telling them they were in default to the tune of almost $10,000. GMAC also responded to the letter it received from HUD. In November, the plaintiff sent over $11,000 to GMAC. They described the problems they had with RBC's servicing of the loan. They also made some demands regarding GMAC's future handling of their account. GMAC began foreclosure proceedings in November and began notifying the credit bureaus of the delinquency. Plaintiffs wrote several times in December, demanding that GMAC credit their $11,000 payment to the account. Instead of crediting the account, GMAC returned the check. In December, GMAC dismissed the foreclosure proceedings, returned the plaintiffs' December payment, and advised the plaintiffs that they were preparing for new foreclosure proceedings. Finally, in January of 2005, with HUD's help, the plaintiffs sent a check for almost $16,000 and GMAC brought their account current and stopped reporting it as delinquent. The plaintiff brought suit under the Real Estate Settlement Procedures Act (RESPA). They also brought state law claims for negligence and breach of contract. Judge Lindberg (N.D. Ill.) granted summary judgment to defendants. Plaintiffs appeal.

In their opinion, Chief Judge Easterbrook, Circuit Judge Hamilton, and District Judge Springmann affirmed in part and reversed in part. RESPA is a consumer protection statute dealing with the servicing of real estate loans, among other things. It requires lenders to notify borrowers when a loan is transferred and to respond promptly to written requests for information. It does include a "safe harbor" for a lender that discovers an error and, within 60 days and before suit is filed or a written notice from the borrower is received, it corrects the error and notifies the borrower. The Court first considered the safe harbor provision since the district court relied on it to find for the defendants. The Court disagreed with the district court. The safe harbor provision clearly requires notification to the borrower of the error. The record shows no such notice and GMAC does not even contend that one exists. Without the safe harbor, the Court proceeded to consider whether GMAC violated RESPA's requirement that they respond to requests for information. That requirement is only triggered by a "qualified written request," which is defined as written correspondence that either requests information or states a belief that an account is in error. The plaintiffs identified five letters that they claim met this test. The Court first rejected the GMAC's argument that the letters did not qualify because they did not contain sufficient reasons for plaintiffs belief that the account was an error. Then the Court addressed each of the five letters in turn. First, it found the October 6 letter to HUD to be a "qualified written request." It contained much detail and it requested specific information. The fact that it was not sent directly to GMAC does not change the result. The statute allows for a request to come from an agent of the borrower. Next, the Court concluded that three letters were not "qualified written request." Letters that simply enclosed payments, stated expectations, or requested processing of a check -- but did not request information or state a belief that the account was in error – did not trigger the response requirement. Finally, the Court found the December 17 letter, which disputed GMAC's attempt to collect and which requested specific information, was a "qualified written request." The Court remanded to the district court to consider whether GMAC satisfied its RESPA obligations with respect to the two letters that triggered a duty. The Court also instructed the district court to consider, on remand, the claims that GMAC violated RESPA by failing to notify the plaintiffs of the loan transfer. The Court also reversed and remanded with respect to the breach of contract claim. That claim is that GMAC breached the agreement when they refused to accept the September and November payments. The district court held that plaintiffs' intentional nonpayment in October was a breach. The Court identified several issues of material fact that precluded summary judgment. For example, was GMAC's delay in applying the payments reasonable or unreasonable and was plaintiffs' failure to pay justified by the earlier conduct of RBC and GMAC. The Court affirmed the dismissal of the negligence claim. The Illinois economic loss doctrine precludes tort recovery for economic losses caused by a breach of contract. Finally, the Court rejected the GMAC argument that summary judgment was appropriate even on the RESPA and breach of contract claims because the plaintiffs lacked evidence of damages. The Court agreed that actual damages are essential for both the RESPA and breach of contract claim. Taking the evidence in the light most favorable to the plaintiffs, the Court found sufficient disputed issues of fact with respect to damages arising out of the credit application denials and the plaintiffs' emotional distress to preclude summary judgment.

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OMNICARE v. UNITEDHEALTH GROUP (January 10, 2011)

Medicare's Part D subsidized prescription program was scheduled to go into effect on January 1, 2006. Participation proposals from health insurance companies for were due in August of 2005. Both UnitedHealth Group ("United"), a very large national health insurance company, and PacifiCare, a small California health insurance company, were independently preparing their proposals in early 2005. At the same time, however, they were engaged in merger discussions. By mid-2005, they were meeting regularly and exchanging information. A successful Part D proposal had to demonstrate access to a network of pharmacies adequate to serve the program's participants. In furtherance of that requirement, both United and PacifiCare were in discussions with Omnicare, the largest institutional pharmacy in the country. United’s efforts were successful. Although it had some concerns regarding Omnicare's contract terms, it entered into a reimbursement contract with a reimbursement rate comparable to that Omnicare offered others. PacifiCare's negotiations fared less well. Ultimately, PacifiCare submitted its Part D proposal without an Omnicare deal. The formal merger agreement was signed in early July and the companies continued their meetings and information exchange. In September, they collaborated on a strategic options memorandum addressing the integrated company's options with respect to PacifiCare's wholly-owned pharmacy benefits manager subsidiary. At some point, Omnicare became concerned that patients who were insured by PacifiCare but located in facilities exclusively managed by Omnicare would not have access to their prescriptions once the program began. An Omnicare employee even sent an e-mail to United, asking if PacifiCare would be included in the United contract when their deal closed. United replied that PacifiCare would follow its own Part D strategy even if the deal closed. Concerned that it would not be able to service PacifiCare insured, Omnicare reopened the contract negotiations. PacifiCare offered the same deal that it had offered earlier -- Omnicare accepted it without negotiations or counteroffers. In doing so, it agreed to a reimbursement rate significantly lower than that it had received from United. Shortly after Omnicare entered into that contract, United informed Omnicare of its concerns regarding the collateral contract terms and reopened their negotiations. By the time those negotiations stalled, the merger was complete. United advised Omnicare that it would operate under the PacifiCare agreement. Omnicare filed suit against United, PacifiCare, and the PacifiCare subsidiary. It alleged violations of the Sherman Act and the Kentucky Consumer Protection Act as well as claims of fraud, conspiracy, and unjust enrichment. Judge Pallmeyer (N.D. Ill.) granted the defendants' motions for summary judgment. Omnicare appeals.

In their opinion, Seventh Circuit Judges Kanne and Tinder and District Judge Griesbach affirmed. Section 1 of the Sherman Act prohibits agreements that unreasonably restrain trade, including agreements to fix prices. Price fixing agreements are usually between or among sellers but buyers can violate Section 1 as well. To succeed on a Section 1 claim, a plaintiff must show an agreement among the defendants, an unreasonable restraint of trade, and an injury. The district court concluded that Omnicare never got past the first element in that it failed to produce evidence of any concerted action by the defendants that was inconsistent with lawful conduct. Conduct that is as consistent with lawful competition as it is with an illegal conspiracy does not, by itself, allowing an inference of an antitrust violation. The Court noted that it would apply the Market Force two-part test. First, it determines whether the evidence is equally consistent with permissible and improper conduct. If so, it searches for other evidence that would seem to exclude the notion of independent actions. Within that framework, the Court analyzed the evidence: the strategic options memorandum, the information exchange, the prohibition on PacifiCare's incurring major contract liability, PacifiCare's negotiating tactics, the e-mails regarding whether PacifiCare would be included under the United contract, the different reimbursement rates, and United's conduct after Omnicare signed the PacifiCare agreement. In each case, the Court either concluded that the evidence did not equally support an inference of unlawful conduct or, if it did, there was little evidence to exclude the possibility of independent behavior. It also concluded that the evidence, when viewed together, was more supportive of a lawful inference that a conspiratorial one, particularly when viewed in light of the Part D chronology and Omnicare's own role in the events. The Court turned to the state law claims. The fraud claim was based exclusively on United's e-mail concerning PacifiCare's Part D strategy. At most, however, the e-mail is a statement of intent regarding future conduct. Illinois law requires that such statements be part of a scheme to defraud. Since the Court found no such scheme, the common law fraud claim cannot prevail. Likewise, the unjust enrichment claim is based on the allegations of illegal conspiracy. Since the Court found no such conspiracy, that claim fails as well.

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GREENBERGER v. GEICO GENERAL INSURANCE CO. (January 10, 2011

The day after Stephen Greenberger got into a car accident, a GEICO insurance adjuster inspected his car and gave him a check for over $3200. Greenberger kept the money but never repaired the car. A few months later, in connection with the possible sale of the car, a mechanic estimated that the damage was closer to $5000. Greenberger eventually donated the car to charity. He brought suit against GEICO for breach of contract, fraud, and violation of the Illinois Consumer Fraud and Deceptive Practices Act. His claim is that GEICO purposely understates the value of necessary repairs in its estimates. Although he filed the action as a class action, the court never ruled on class certification. Judge Manning (N.D. Ill) dismissed the statutory fraud claim and granted summary judgment to GEICO on the contract and common law fraud claims. Greenberger appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Circuit Judges Kanne and Sykes affirmed. First, the Court concluded that the breach of contract claim was foreclosed by the Illinois Supreme Court's decision in Avery. That case stands for the proposition that a physical examination of the insured's automobile is necessary to prevail on a claim that one's insurer breached its promise to restore the automobile to its prior condition. Although Avery dealt with an insurer's practice of not using original equipment manufacturer parts, the principle is the same. The Court rejected Greenberger's attempts to distinguish Avery on the ground that he had an actual higher estimate. It also rejected his theory that GEICO failed to meet industry standards. With respect to the former, a higher estimate cannot establish the fact of a breach, although it may be admissible, supporting evidence. With respect to the latter, the Court noted that GEICO's promise was not to repair according to any industry standard. The Court also noted that Greenberger could not prove damages without the automobile. Second, the Court affirmed the district court's dismissal of the statutory fraud claim. The Act prohibits unfair and deceptive practices but does not apply to every simple contract dispute. Again, Avery controls. It held that a deceptive practice must include more than simply a promise and a breach. Here, Greenberger has only that. Finally, the Court addressed the common law fraud claim. That claim fails for the same reason the statutory fraud claim fails. Greenberger cannot identify a fraudulent act other than the breach. The Court noted that the claim also fails to the extent it alleges fraudulent concealment. Fraudulent concealment requires a fiduciary relationship. Insurers are generally not fiduciaries and Greenberger has not alleged with any specificity any reason why they should be considered so here.

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FEINBERG v. RM ACQUISITION (January 6, 2011)

Henry Feinberg used to be a senior executive at Rand McNally & Company. He participated in its unfunded, supplemental, deferred compensation plan. The company itself was the plan administrator. Rand McNally went through a bankruptcy and, several years later, sold all of its assets to RM Acquisition. The sales documents provided that RM was not acquiring the liabilities associated with the deferred compensation plan. Feinberg and others brought a suit under ERISA against the plan, Rand McNally, and RM. It later dismissed the plan and Rand McNally since neither had any assets. Judge Andersen (N.D. Ill) dismissed the complaint against RM for failure to state a claim. Feinberg appeals.

In their opinion, Judges Posner, Flaum, and Sykes affirmed. The Court noted the general rule that one can purchase the assets of a company without also purchasing its liabilities. Here, RM did just that. It specifically provided that it was not assuming the liabilities associated with the deferred compensation plan. But there is an exception to that rule regarding the successor liability of RM. If the claim arises from an alleged violation of federal rights and two conditions are met, the successor to the business may be liable. The two conditions are a) that the successor have notice of the claim before the acquisition, and b) there is substantial continuity in the business operations. However, Fienberg has made no showing of "substantial continuity" so his ERISA § 502 claim must fail. The Court noted that Fienberg could possibly have a claim against the company's shareholders if they received, as a distribution, the consideration the company received in exchange for its assets. The Court also rejected Fienberg's argument that he had a claim under § 510. That section makes it unlawful to "discharge, fined, suspended, expelled, discipline, or discriminate" against a plan beneficiary for exercising a right under the plan. Although the Court rejected the notion that the section applies only to employer/employee relationships, it nevertheless concluded that RM was not interfering with any participant's rights in the plan.

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AMES v. HOME DEPOT (January 6, 2011)

Diane Ames had a five-year, incident free employment record with Home Depot when she asked her store manager for the company's assistance with her alcohol problem. She enrolled in the company's employee assistance program and was put on paid leave. She was told that she could return when she had a treatment plan, passed a drug and alcohol test, and obtained return authorization. She did so and returned to work within a month. The following month, however, she was arrested for driving under the influence. When Home Depot found out, it required her to schedule an alcohol treatment evaluation. The company gave her several extensions within which to schedule the evaluation. In the meantime, she sought scheduling accommodations from her manager so she could attend her Alcoholics Anonymous meetings, she provided her manager a treatment note from her physician, and she shared many of her other personal difficulties with her manager. During a regularly scheduled shift on December 23, an assistant manager suspected that she was under the influence of alcohol. She was immediately tested. When the company learned that she tested positive for alcohol, it decided to terminate her for substance abuse. Her manager scheduled a meeting with her on January 2 to notify her. She missed the meeting because she began drinking more and checked herself into a hospital on January 1. Home Depot mailed Ames a letter on January 10 informing her of the termination of her employment. Ames filed suit pursuant to the Family and Medical Leave Act and the Americans with Disabilities Act. Judge Coar (N.D. Ill.) granted summary judgment to Home Depot on those claims. Ames appeals.

In their opinion, Judges Manion, Tinder, and Hamilton affirmed. On her claim under the FMLA that Home Depot interfered with her leave rights, Ames was required to establish (among other things) that she was entitled to leave under the Act. An employee is entitled to live under the FMLA only if she is suffering from a "serious health condition," which is defined as an illness that involves inpatient care or continuing treatment. Substance abuse can qualify as a serious health condition but only if it meets the inpatient care or continuing treatment standard. The record contains no evidence of either. She did check into a hospital, but that was after her employment was terminated. Therefore, no reasonable juror could conclude that she had a serious health condition -- her FMLA interference claim fails. Ames also asserted an FMLA retaliation claim, pursuant to which she had to establish that she engaged in a protected activity, that she suffered an adverse job action, and that there was a causal connection between them. The Court addressed only the causal connection prong. Here, the record contains no evidence that Home Depot's decision to fire Ames was related to any alleged request for FMLA leave – her FMLA retaliation claim fails. Lastly, the Court rejected Ames' ADA claim. In order to prevail on that claim, she had to establish that she had a disability. Alcoholism can be a disability under the ADA but only if it "substantially limits" a major life activity. Ames offered no evidence that her alcoholism even adversely affected her life's activities. In fact, the only evidence on that score was her testimony that it did not affect her performance on the job. Her ADA claim fails.

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MMG FINANCIAL CORP. v. MIDWEST AMUSEMENTS PARK (January 5, 2011)

Cameron Motorsports entered into a joint venture called Team Hurricane with MMG Financial. Go-karts made in Italy are branded by Cameron and sold by Team Hurricane, while MMG provides financing to the purchasers. Midwest Amusements Park operated a go-cart racetrack in Shawano, Wisconsin. Team America represented to Midwest that Cameron would assemble and break-in the go-karts, as well as supply training materials. Midwest ordered 24 go-karts. MMG sent Midwest a document purporting to represent its oral agreement to finance the purchase. The agreement reflected a 24% annual percentage rate. Midwest never signed the documents. The go-karts were nevertheless delivered. Soon thereafter, Midwest began complaining about the go-karts and about the proposed interest rate. Midwest eventually sent MMG a document reflecting a 12% rate -- MMG never signed that document. Meanwhile, Midwest never made a payment. In mid-2006, MMG sued Midwest for breach of contract. Midwest counterclaimed on the grounds that MMG never paid Cameron and that MMG breached warranties because the go-karts did not work properly. Judge Griesbach (E.D. Wis.) granted summary judgment to MMG on the counterclaim. MMG's breach of contract case went to trial. The jury found for MMG, concluding that there was an oral contract with a 24% interest rate. Midwest appeals.

In their opinion, Chief Judge Easterbrook, Circuit Judge Flaum, and District Judge Hibbler affirmed. The Court first addressed Midwest's challenge to the court’s award of summary judgment on its counterclaim. The Court agreed with the district court that Midwest's evidence -- statements of its employees describing the statements of Cameron employees -- was "classic hearsay" and properly excluded. Since this was the only evidence Midwest relied on, summary judgment for MMG was proper. Next, the Court addressed Midwest’s affirmative defense that it was entitled to a set off because MMG failed to pay Team Hurricane for the go-karts. Midwest’s theory was that MMG’s failure to pay Team Hurricane resulted in Team Hurricane not addressing the many problems Midwest was having with the go-karts. The problem with Midwest's position is that it relied exclusively on an e-mail from CRG to Cameron. The Court never addressed whether the district court properly excluded that evidence. Instead, it concluded that the e-mail was irrelevant because it bore no relation to MMG's payment of its obligations. Finally, the Court summarily rejected Midwest's arguments regarding the jury instructions, the verdict form, and its motion for a new trial.

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RAY v. CITY OF CHICAGO (January 5, 2011)

A Chicago Police officer pulled over Nona Ray for driving an night without headlights. He arrested her when he found cocaine in her car. She was charged with possession of a controlled substance and was detained for several hours. The officer also impounded her vehicle. The drug charges against her were eventually dropped. She contested the seizure of her automobile but a hearing officer found in favor of the City. Ray brought suit against the City and the officer, claiming a deprivation of her Fourth and Fourteenth Amendment rights. She also sought review of the hearing officer's finding and challenged the constitutionality of the seizure ordinance. Judge Zagel (N.D. Ill) dismissed the complaint. Ray appeals.

In their opinion, Seventh Circuit Judges Cudahy, Rovner, and Evans affirmed. First, the Court rejected Ray's claim that the officer lacked probable cause to believe that she possessed drugs. The officer had probable cause to believe she committed a traffic offense -- that is all he needed for the arrest. Second, the Court rejected Ray's claim that the length of her detention violated the Constitution. The Court noted that it has held that detentions of up to 14 hours were reasonable absent an improper purpose, which is not alleged here. Third, the Court rejected her malicious prosecution-type claim that the officer planted the drugs. Because Illinois recognizes a malicious prosecution tort, she cannot bring a constitutional claim. Fourth, to the extent she alleged a Brady claim and did not waive it, the Court rejected it. A Brady claim is not viable in a situation where a person is never prosecuted. Finally, the Court rejected her claim regarding the impoundment of her automobile. Not only did she fail to adequately state any reason to reverse the district court, the Court's independent review of the district court's rationale convinced it that it was correct.

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STINNETT v. CITY OF CHICAGO (JANUARY 4, 2011)

Gregory Stinnett was a black male Ambulance Commander in Chicago's Fire Department. He took the promotional exam for Field Officer in 2000. Based on his score and seniority, he ranked 32nd. Over the next several years, the Department promoted from the list on eight different occasions. By February of 2007, after the Department promoted two white officers, Stinnett's name was next in line and there were vacancies. Unfortunately, promotions for the additional vacancies were not budgeted. By the time of the next promotions in March 2008, the Department had retired the 2000 list and had administered a new exam -- and Stinnett went from 1st to 48th. He brought suit against the City, alleging that its failure to promote him violated Title VII. Judge St. Eve (N.D. Ill.) granted summary judgment to the City. Stinnett appeals.

In their opinion, Seventh Circuit Judges Posner, Tinder, and Hamilton affirmed. Under McDonnell Douglas, the Court noted that Stinnett can survive summary judgment if he shows that he was qualified for a promotion, was denied the promotion, a similarly situated member of another race got the promotion, and the City was unable to articulate a nondiscriminatory reason for its conduct. The district court concluded that Stinnett was not similarly situated to either a) the two white officers who were just ahead of Stinnett on the 2000 list and promoted in February 2007 or b) to all of the officers (some of whom were white) who had been promoted ahead of Stinnett from the 2007 list. The Court disagreed with the former. Stinnett was not claiming that he should have been promoted ahead of the two officers who ranked higher in 2007 -- he was claiming that the City should not have stopped filling vacancies when it got to him on the list. Thus, the Court concluded he was similarly situated to the last two promotions from the 2000 list because they were all eligible for the 2007 promotions. Getting past the similarly situated hurdle was not enough for Stinnett, however. The City's reasons for its behavior -- that it filled the only two budgeted promotions in 2007 and that it needed to update its promotion list from time to time to allow newer employees a chance for a promotion -- was reasonable. The fact that the last two promotions were white males and the next name on the list was that of a black male does not make its behavior suspicious. Also, the record clearly establishes that the Department official who closed down the 2000 list did not know whose name was next.

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KORAL v. BOEING COMPANY (January 4, 2011)

An Boeing airplane crashed in the Netherlands in 2009. One hundred seventeen plaintiffs have filed suit in Illinois state court in 29 separate actions. Boeing filed motions to dismiss the state court actions on the basis of forum non conveniens, citing the considerable inconvenience of transporting its witnesses from out-of-state in 29 different trials. In response, the plaintiffs pointed out that the standard practice in aviation crash cases is to establish liability by trying a small number of exemplar cases, thereby significantly reducing the inconvenience. Boeing used that response to remove all the state court cases to federal court, arguing that plaintiffs' comment was a proposal for a joint trial and thus qualified the case as a "mass action" under the Class Action Fairness Act. Judges Shadur, Guzman, Conlon, Coleman, and St. Eve (N.D. Ill.) each granted motions to remand. Boeing petitions for an appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder granted the petition and affirmed the remands. Under Rule 1332, a "mass action” is a civil action in which the claims of 100 or more people are "proposed to be tried jointly," except when the proposal is by a defendant. So Boeing’s “proposal cannot be a Rule 1332 proposal. Here, the only “proposal” is plaintiffs' predictions about what might happen as the case progresses. That falls short of a Rule 1332 proposal – Boeing’s removal was therefore premature. 

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EEOC v. AUTOZONE (December 30, 2010)

John Shepherd was a parts sales manager at AutoZone in Macomb, Illinois. His job duties included pitching in to help with routine cleaning assignments, like mopping the floor. A computerized system assigned the jobs randomly. Shepherd had an old back injury, however, that interfered with his ability to perform these physical tasks. His head would swell, he would get headaches, and he would sweat profusely. He was receiving medical treatment. Notwithstanding the treatment, Shepherd took medical leaves on several locations between 2001 and 2003. After one such leave, he asked to be excused from the mop detail based on his physician’s physical restrictions. AutoZone accommodated his request, but only on occasion. When he returned from his 2003 leave, his physician originally recommended no mopping. He modified that restriction when AutoZone advised Shepherd that he could not return to work with the complete restriction. Shepherd suffered another incident while mopping in September of 2003. Again, he took a medical leave. Although he was authorized to return as early as December of 2003 with no greater restrictions than he had in September, AutoZone did not allow his return. Instead, it kept him on involuntary leave until February of 2005 and then dismissed him. The EEOC filed a complaint on his behalf pursuant to the Americans with Disabilities Act. The complaint alleged that AutoZone failed to accommodate Shepherd's disability between March and September 2003, that AutoZone discriminated against him by refusing to allow him to work after 2003, and that AutoZone's dismissal of him was in retaliation for his filing charges. Magistrate Judge Gorman (C.D. Ill.) granted summary judgment to AutoZone on the failure to accommodate claim, concluding that Shepherd was not disabled within the meaning of the statute between March and September 2003. He did not reach the other claims. The EEOC appeals.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton reversed and remanded. The ADA requires an employer to make "reasonable accommodations" for the mental or physical limitations of a "qualified individual with a disability." A disability under the ADA is a "physical or mental impairment that substantially limits one or more of the major life activities." The Court concluded that a rational jury could find that Shepherd suffered from a disability in 2003. First, self-care is a major life activity and the record is replete with references to Shepherd's inability to care for himself. He needed help dressing, brushing his hair, bathing, tying his shoes, and brushing his teeth. He certainly had an impairment -- but was it substantial. The implementing regulations require a court to consider the nature, severity, duration, and expected continuing impact of an impairment. Here, the record, particularly on summary judgment, shows that Shepherd required help on an almost daily basis and experienced episodes multiple times a week. The Court had no difficulty in concluding that a reasonable jury could conclude that his impairment was substantial. Finally, the Court rejected AutoZone's contention that medical evidence was required to establish a substantial impairment. Neither the statute nor the regulations require it. The nature of the limitations and the detailed testimony were sufficient to establish the impairment and its scope.

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IN RE: TEXT MESSAGING ANTITRUST LITIGATION (December 29, 2010)

Class-action plaintiffs assert that the four defendants violated federal antitrust law by conspiring to fix the prices of text messaging services. Over the defendants' objection, Judge Kennelly (N.D. Ill) allowed the filing of a second amended complaint. The defendants sought certification for an interlocutory appeal on the adequacy of the complaint under Twombly. The court so certified. Defendants appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder accepted the appeal and affirmed. The Court first addressed plaintiffs' argument that they not even consider the appeal because it does not involve a "controlling question of law" as required by the rules. The Court rejected that argument. Certainly the question is controlling, since an adverse decision would probably terminate the case. And, although it is not a strict question of law like the interpretation of a statute or the Constitution, it does require the interpretation and application of the Twombly legal standard. Since the development of the standard is relatively recent and its interpretation and application not yet routine, the Court granted the application. On the merits, the Court agreed with the district court that the complaint's allegations were sufficiently plausible to satisfy Twombly. The complaint does allege parallel behavior -- the kind of allegation that was found insufficient in Twombly. But it alleges more: that the four defendants control 90% of the market, that the four defendants belonged to a trade association and exchanged information, that the four defendants each increased its prices at a time of falling costs, and that the four defendants each moved from very different and complex pricing structures to a uniform approach. There is no smoking gun, no direct evidence of conspiracy, but the allegations do amount to the "parallel plus" behavior required by Twombly. The plaintiffs should be allowed to proceed with discovery.

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OPP v. STATES ATTORNEY OF COOK COUNTY (December 29, 2010)

Christine Opp, Edward Barrett, and Leonard Cahnmann were each employed as Cook County Assistant State's Attorneys as of the end of 2006. Each of them was dismissed in the first three months of 2007, ostensibly for budgetary reasons. Each of the three filed suit claiming that his or her dismissal was a violation of the Age Discrimination in Employment Act ("ADEA"). Judges Bucklo, Leinenweber, and Castillo (N.D. Ill.) each granted the defendants' motion to dismiss on the grounds that the plaintiffs were excluded from ADEA coverage because they held policymaking positions. The plaintiffs appeal.

In their opinion, Seventh Circuit Judges Bauer, Sykes, and Hamilton affirmed. ADEA excludes from the definition of "employee" elected officials, anyone on an elected official's staff, or an appointee of an elected official "on the policymaking level." The Court noted that, unlike the Second Circuit, it applies the same test in an ADEA case that it applies in a First Amendment political affiliation case. That test is whether the position authorizes "meaningful input into governmental decision-making." In applying the test, a court should look at the powers inherent in the job rather than any one person’s actual duties. The powers inherent in the position of Assistant State's Attorney are set by state law and have been described in prior decisions of the Court. In fact, an Assistant State's Attorney is a surrogate for the State's Attorney and does have the power to create policy. The plaintiffs therefore hold policymaking positions and are not covered by ADEA.

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LABELLA WINNETKA, INC. v. THE VILLAGE OF WINNETKA (December 29, 2010)

LaBella Winnetka operated as a restaurant in Winnetka, Illinois since 1993. It occupies a leased space and renews the lease from time to time. It also has a liquor license. Each year, Winnetka sends it a renewal form. Each year LaBella completes the form and Winnetka renews the license. A fire at the building in early 2007 damaged the roof over the LaBella dining room and forced its closure. The Village refused to allow repairs to the restaurant’s interior until the roof was fixed. It also refused to allow LaBella to reopen the undamaged portion of its leased premises. At the same time, other restaurants, even one operating out of the same building, were allowed to reopen in allegedly similar circumstances. LaBella's most recent liquor license was due to expire in March of 2008. Winnetka never sent a renewal form and terminated the license went LaBella did not file for renewal. LaBella brought suit against the Village and the Village Manager, alleging a violation of its equal protection, substantive due process, and procedural due process rights. The complaint alleged that the benefits bestowed on the other restaurants came about because of their friendships with the Village Manager. Judge Kendall (N.D. Ill.) granted defendants' motion to dismiss. LaBella appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. The Court first considered the "class of one" equal protection claim. In order to state such a claim, one must allege treatment different from others "similarly situated." LaBella concedes that the restaurants that were allowed to reopen did not incur the same major fire damage as the LaBella roof. They are therefore not "similarly situated" and the equal protection claim fails. The Court next considered and rejected LaBella's substantive due process claim relating to its property interest in its lease and business. In order to prevail on that claim, LaBella had to show an independent constitutional violation or the inadequacy of state law remedies. It did neither. Finally, the Court rejected LaBella's procedural due process claims related to the liquor license non-renewal. First, to the extent the claim is based on the Village's simple failure to send a renewal form, there was no constitutional deprivation. Second, to the extent the claim is that the Village revoked the license without notice or hearing, the allegations of the complaint fall far short of even the notice pleading requirements of the federal rules. Finally, the claim fails because LaBella does not even allege that it took advantage of post-deprivation remedies or that they were inadequate.

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UNIVERSITY OF WISCONSIN v. PHOENIX INTERNATIONAL SOFTWARE (December 28, 2010)

The Court withdrew this opinion on February 10, 2011 and granted Phoenix’ Petition for Rehearing limited to the sovereign immunity issue. Supplemental briefing and oral argument will focus on:
       Whether the district court erred in concluding that plaintiff‐appellee Board of Regents of the University of Wisconsin (Wisconsin) did not waive any sovereign immunity it may have had
to the counterclaims asserted by defendant‐appellant Phoenix International Software (Phoenix),
or otherwise consent to their adjudication in this case?
       Whether the counterclaims brought by Phoenix against Wisconsin are compulsory or
permissive counterclaims under FED. R. CIV. P. 13? 

Phoenix International Software and the University of Wisconsin each registered the mark CONDOR with the Patent and Trademark Office. Phoenix has used the mark since 1978 and registered it in 1997. Wisconsin registered its mark in 2001. Each mark refers to computer software, although the Phoenix system is designed principally for mainframe systems and the Wisconsin system is designed principally for individual computers. Phoenix petitioned the Trademark Trial and Appeal Board to cancel Wisconsin's mark on the ground that it creates confusion. The Board granted the petition and canceled the mark. Wisconsin challenged the Board's decision by filing an action in federal district court. Phoenix counterclaimed for trademark infringement and false designation of origin. Judge Crabb (W.D. Wis.) reversed the Board’s determination on Wisconsin's motion for summary judgment and also dismissed Phoenix's counterclaims on sovereign immunity grounds. Phoenix appeals.

In their opinion, Seventh Circuit Judges Flaum, Wood (dissenting in part), and Tinder reversed and remanded for trial on the likelihood of confusion issue but affirmed on the sovereign immunity issue. The Court first addressed the likelihood of confusion issue and specifically the standard of review. Wisconsin had two choices to challenge the Board's decision: a direct appeal to the Federal Circuit limited to the record below and decided on a substantial evidence standard, or a new action in the district court allowing it to supplement the record below. Since Wisconsin chose the latter course, the Court's standard of review is layered. The Board's findings are owed typical administrative appeal deference while the new evidence is treated like a typical summary judgment record and viewed in the light most favorable to the non-moving party. That required the Court to distinguish the Board's findings from new evidence below. The Court concluded that the district court erred in reversing the Board. The principal issue in the case is the likelihood of confusion. The Board considered the actual nature and use of the software while the district court focused its analysis on the description of the products in their registration materials. But whether the public may be confused (i.e., attribute the products to a single source) is the real focus of the multiple factor likelihood of confusion test. The district court was wrong when it focused principally on the products' similarities and matters of use (and doubly wrong when it focused exclusively on the written descriptions). On the other hand, the Board was right when it focused on the facts that the marks were identical, their functions were similar, and sophisticated purchasers were likely to believe that their sources were related. The Court reinstated the Board's findings. It considered Wisconsin's new evidence but found it not sufficient to overcome those findings and compel summary judgment in Wisconsin's favor. It therefore remanded for a trial on likelihood of confusion. The Court next considered Phoenix's counterclaims, which the district court dismissed on sovereign immunity grounds. There are two exceptions to the Eleventh Amendment's grant of sovereign immunity. The first is when Congress regulates state behavior pursuant to the Fourteenth Amendment. The second is when a state waives its immunity and consents to suit. The Court noted that the Supreme Court has already found unconstitutional the Patent Remedy Act's creation of state liability for patent infringement in Florida Prepaid. Given the similarities between the two statutes, the Court found the decision controlling. With respect to waiver, the Court first rejected the argument that Wisconsin's participation in the regulated trademark process amounted to waver, again relying on Florida Prepaid. Lastly, the Court addressed and rejected the argument that Wisconsin voluntarily waived its sovereign immunity when it chose to challenge the Court's decision by filing a suit in the district court. The Court distinguished the Supreme Court's Lapides decision, in which Georgia was not allowed to invoke sovereign immunity after it removed a case from state court. Here, Wisconsin's filing simply reflected its choice of a forum for judicial review. It did not alter the nature of the proceedings in any way.

Judge Wood agreed with the majority on the likelihood of confusion with issue and also with respect to whether Wisconsin's participation in a federal regulatory program constituted a waiver of sovereign immunity. She dissented, however, on the issue of whether Wisconsin's district court challenge to the Board’s decision constituted a waiver. The issue is not, she said, whether the state is a defendant, a plaintiff, an intervenor, or an appellant. It is, instead, the voluntariness of the decision and its consequences. Here, Wisconsin chose to file a case. Lapides controls -- Wisconsin has waived sovereign immunity. Wisconsin was not even required to appeal. It could have accepted that the Board's decision. Similarly, it could have appealed to the Federal Circuit, where Phoenix would not have been able to file a counter court. Instead, Wisconsin chose to gain a litigation advantage by filing in the district court. Just like in the Lapides case, Wisconsin was using its sovereign immunity to gain a litigation advantage. Finally, Judge Wood wrote at length suggesting that it may be time to reconsider a "commercial act" exception to the scope of sovereign immunity.

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BLOCKOWICZ v. WILLIAMS (December 27, 2010)

David, Mary, and Lisa Blockowicz filed a lawsuit against Joseph Williams and Michelle Ramey. They alleged that the defendants defamed them by posting untruthful statements on several websites. The defendants never responded to the lawsuit. The court entered a default judgment and issued an injunction requiring the defendants to remove the defamatory statements. When the defendants made no attempt to comply with the injunction, the Blockowiczs contacted the operators of each of the websites at issue and asked each to remove the offending statements. Each website complied with the request -- except www.ripoffreport.com ("ROR"). ROR is a website whose purpose is to host comments about bad business practices. Posters must first enter into a contract with the site operator. Among other things, posters agree not to post defamatory remarks, agree to indemnify the operator, and agree that the operator will not remove material even at their request. The Blockowiczs sought to enforce their injunction directly against ROR under Rule 65 as a third party with actual notice who was "in active concert or participation" with a bound party. Chief Judge Holderman (N.D. Ill) denied the request. The Blockowiczs appeal.

In their opinion, Seventh Circuit Judges Cudahy, Flaum, and Wood affirmed. The Court first rejected ROR's personal jurisdiction defense. Although it mentioned it in a footnote in its initial response below, ROR waived the defense when it participated in the briefing and oral argument in the district court. On the merits, the Court noted that Rule 65(d)(2) binds not only the parties but other persons with actual notice who are in "active concert or participation" with the parties. Here, ROR conceded that it had actual notice -- the only issue was its "concert or participation." The Court rejected the Blockowiczs’ bases for that requirement: a) the contract between ROR and the defendants was entered into before the alleged wrongdoing and cannot be the basis for "active concert," and b) ROR’s mere inactivity of not removing the postings cannot be the basis for "active concert." Finally, the Court stated that the Blockowiczs’ argument that the district court should have invoked its inherent authority was waived since it was not raised below. Even if not waived, however, the Court noted that it would have been an inappropriate remedy. The only appropriate avenue for relief is a contempt charge against the original defendants.

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BAUSCH v. STRYKER CORP. (December 23, 2010)

Several days after the FDA advised the Stryker Corp. that its Trident hip replacement system’s manufacturing process was deficient, Margaret Bausch received a new hip -- a Trident. Bausch's Trident failed, she required additional surgery, and she experienced a number of medical problems. Bausch brought a negligence and strict liability suit under state law, alleging that the device violated federal law. Judge Der-Yeghiayan (N.D. Ill) granted the defendants' motion to dismiss on the grounds that the claims were preempted by federal law. The court also entered final judgment without allowing Bausch an opportunity to amend. Bausch appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Manion and Hamilton reversed and remanded. The Court first considered express preemption. Class III medical devices such as the Trident system are granted an express, but limited, preemption defense from product liability claims by the Medical Device Amendments of 1976. Citing the Supreme Court's decisions in Lohr and Riegel, the Court stated that the preemption protection applies to devices that comply with federal law and does not preclude claims based on a violation of federal law. Although expressly not deciding whether Bausch would be able to prove the allegations of her complaint that the device violates federal law, the Court concluded that the express preemption defense should not preclude her from trying. The Court also rejected the defendants' implied preemption defense under Buckman. Buckman involved an allegation of fraud on the FDA -- the Supreme Court expressly distinguished that type of claim from a traditional state court claim. Having concluded that the claims alleged were not preempted, the Court next addressed whether they were adequately stated under Iqbal and Twombly. The Court concluded that both the original complaint and the proffered amended complaint met that standard. With respect to the original complaint, although it did not specify the specific federal violation, it did provide enough information to put defendants on notice of the nature of the claim. This is particularly true in the situation here, because the victim of a defective product frequently does not know the exact nature of the defect and much information regarding Class III medical devices is kept confidential by law. The Court also concluded that the proffered amended complaint was sufficient and should not have been rejected. It provided additional factual detail as well as a clarification that Bausch was proceeding under a federal violation theory. The Court found no merit in any of the district court's rationales for denying leave to amend and cautioned district courts to allow a party an opportunity to amend after dismissal for failure to state a claim, even if the court is skeptical of the party's ability to successfully do so. 

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KAHN v. BLAND (December 23, 2010)

The “Section 8” federal housing subsidy program provides rental assistance to low-income families. Although funded federally, the program is administered by local public housing agencies. Both the beneficiary families and the participating landlords must meet certain qualifications and are governed by a host of regulations. In Champaign County, Illinois, the program is run by the Housing Authority of Champaign County (HACC). In 2003, Latif Kahn, a qualified landlord with a contract with HACC, rented a subsidized apartment to Andrew Washington. At Washington' request, and allegedly with the approval of HACC, Kahn also rented some space in the building's basement to Washington outside the program. After Kahn evicted Washington in for nonpayment of rent, Washington brought the existence of this "side lease" to the HACC's executive director. The director advised Kahn that the lease was a violation of program regulations and that he was terminating Kahn's contracts and barring him from the program. Kahn was never given an opportunity to explain or appeal. The HACC sent a letter to each of Kahn's four tenants and advised them that they would have to move. In fact, however, Kahn’s contract with respect to only one of the tenants was terminated pursuant to the letter. Another contract was terminated when the contracted unit failed to pass an inspection. The other two tenants actually remained. One prospective tenant was denied an opportunity to rent an apartment from Kahn and was told by HACC that Kahn was an "undesired person." Kahn brought suit, alleging procedural and substantive due process claims against the director and a due process claim against HACC. Chief Judge McCuskey (C.D. Ill) granted the defendants' motion for judgment as a matter of law at the close of plaintiff's case. Kahn appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Tinder affirmed. Both the substantive and procedural due process claims require the identification of a property or liberty interest. The Court concluded that Kahn had not established a property interest from a) his termination from the program, b) the termination of the contracts, or c) disputes regarding the remaining contracts. First, notwithstanding his allegations, the record was clear that he was never terminated from the program. The director made threatening statements but had no authority to bar Kahn from the program and, in fact, Kahn continued to participate in the program. Second, although the HACC did refuse to enter into new contracts with Kahn, nothing in the statute or regulations entitles him to enter into new contracts. Finally, Kahn's rights with respect to his existing contracts do not raise constitutional issues. They simply give rise to possible state breach of contract claims. With respect to a liberty interest, the Court concluded that Kahn forfeited the claim -- but also concluded that the claim would not succeed. The liberty interest recognized by the Fourteenth Amendment protects a person's right to pursue an occupation, but not a specific job. Here, although the defendants' conduct may have affected Kahn 's ability to lease to certain individuals, it did not preclude him from his occupation.

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PARVATI CORP. v. OAK FOREST (December 23, 2010)

In early 2004, Parvati Corp. decided to sell a motel it owned in Oak Forest, Illinois to Bethlehem Enterprise, Inc. The sale was contingent on Bethlehem's ability to secure municipal permission to operate a senior-living facility on the site. The Oak Forest Zoning Commission denied the request in early 2006, citing a recently enacted ordinance that prohibited the requested use. Parvati and Bethlehem filed suit seeking judicial review of the administrative decision. They also sought money damages under federal statutory and constitutional claims. Judge St. Eve (N.D. Ill.) affirmed the administrative decision and dismissed a state law administrative review count. She then, on plaintiffs' motion, dismissed the federal statutory and constitutional claims and entered final judgment. Several months later, Parvati (without Bethlehem) filed a new lawsuit reasserting the federal statutory and constitutional claims. After several more months, Parvati moved for post-judgment relief in the original case on the grounds that the City had misrepresented the validity of the ordinance on which it relied. The City responded on the merits but also maintained that Parvati lacked standing because it had since conveyed the property to its lender in lieu of foreclosure. The district court found that Parvati had standing, notwithstanding the sale of the property, because of the potential preclusive effect of the judgment on Parvati's new lawsuit. On the merits, however, the district court rejected the request for post-judgment relief because Parvati could have raised the ordinance’s invalidity before judgment. Parvati appeals.

In their opinion, Associate Justice O'Connor (Ret.) and Seventh Circuit Judges Williams and Sykes vacated and remanded with instructions to dismiss for want of jurisdiction. The Court addressed the central issue of standing. Parvati certainly met all the standing requirements at the inception of litigation. It owned the property and suffered an actual injury traceable to the City's conduct. Once it transferred ownership of the property, however, it lost its standing. First, the available relief cannot help its cause. Next, the Court then rejected the district court's basis for standing -- the refiling of the federal statutory and constitutional claims. The Court noted that constitutional standing requires that the injury be "fairly traceable" to the City's conduct. Here, the injury (the potentially preclusive effect of the earlier judgment) is not traceable to any conduct of the City. Instead, it is traceable exclusively to Parvati‘s litigation strategy and conduct. The potential injury would not exist had Parvati pressed its statutory and constitutional claims in the original litigation. Thus, Parvati lacks standing and the court should not have entertained its motions.

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FELLS v. UNITED STATES (December 23, 2010)

Stephen Fells owned and operated a small convenience store in Milwaukee, Wisconsin. The store participated in the Supplemental Nutrition Assistance Program (formerly known as the Food Stand Program). An automated monitoring program identified a number of questionable transactions at Fells’ store in 2007. The United States Department of Agriculture conducted an investigation, which revealed a significant number of transactions larger than normal for a store of that size and a significant number of unusual, even-dollar transactions. The USDA determined that Fells violated Program regulations and disqualified him from the Program. Fells appealed administratively. The USDA affirmed its determination. Fells sought judicial review. Magistrate Judge Goodstein (E.D. Wis.) upheld the agency's determination, ruling that Fells had the burden of proof to establish the invalidity of the determination and that he failed to sustain his burden. Fells appeals.

In their opinion, Seventh Circuit Judges Ripple, Manion, and Sykes affirmed. The Court first addressed the burden of proof issue. The statute provides for a trial de novo on judicial review of an agency determination. The statute provides no other guidance on the trial procedures or the burden of proof. The Court noted that it had never directly resolved the issue but that it had consistently followed the Fifth Circuit's decision in Redmond, in which that court concluded that the agency action was entitled to a "presumption of validity." The Sixth and Ninth Circuits have also concluded that a store owner challenging agency action has the burden of proof. The Court thus made explicit the rule that its earlier decisions had adopted implicitly -- that the store owner had the burden to prove by a preponderance of evidence that the challenged determination was invalid. Applying a clearly erroneous standard, the Court determined that Fells failed to carry his burden. Although the evidence was largely circumstantial, the district court did review the evidence and Fells' explanations. Its affirmance of the agency's determination was not clearly erroneous.

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TRINITY HOMES LLC v. OHIO CASUALTY INSURANCE CO. (December 22, 2010)

Literally thousands of hopeful Indiana homeowners entered into contracts with Trinity Homes, an Indiana general contractor, to construct residential housing. Trinity, in turn, delegated the actual construction of the homes to a number of subcontractors. A significant number of the homes had structural damage. Many of the homeowners sued Trinity. Trinity turned to its insurance carriers. It had multiple CGL policies as well as an umbrella policy with Cincinnati Insurance Co. When none of the insurers recognized an obligation to defend, Trinity brought suit for a declaration of coverage. Most of the CGL carriers then settled. Under the terms of the settlements, each carrier paid at least 75% of its policy limit and Trinity agreed to cover the balances. Two carriers held out. Ohio Casualty Insurance Co., a CGL carrier, argued that the damage to the homes was not "property damage" caused by an "occurrence." Cincinnati Insurance Co., the umbrella insurer, argued that the umbrella coverage was not triggered because a number of the underlying policies were not exhausted. Judge Barker (S.D. Ind.) granted both insurers' motions for summary judgment. Trinity appeals.

In their opinion, Seventh Circuit Judges Cudahy and Kanne and District Judge Darrah reversed and remanded. The Court first addressed the ruling in Ohio Casualty’s favor. In that ruling, the district court distinguished between damage to a home being built and damage to property other than the home. Relying on the Indiana Appellate Court opinion in Sheehan, it stated that the former was not covered by a standard CGL policy, while the latter was. The district court also ruled that the faulty workmanship did not constitute an "occurrence." Subsequent to the district court's ruling, the Indiana Supreme Court issued its opinion in Sheehan and reversed, holding that a standard CGL policy does cover damage to a home caused by faulty workmanship. The Court therefore reversed for reconsideration in light of Sheehan. The Court then turned its attention to the Cincinnati Insurance umbrella policy. The district court had granted summary judgment on two grounds -- first, that the settlements under the policy limits did not exhaust the underlying policies and therefore did not trigger the umbrella coverage and second, that Trinity failed to show that certain other underlying policies were unavailable. The Court disagreed on both points. With respect to the settlements, the Court concluded that the Cincinnati policy was ambiguous. As such, it must be construed in Trinity's favor. Cincinnati could have used language that made it clear that an underlying policy was not exhausted until the full policy limit was paid by the insurer. The Court found that the actual language used was susceptible to an interpretation that the policy was exhausted when the carrier paid a significant percentage of the policy limit and the insured took responsibility for the rest. Although the Court found no Indiana precedent on point, it relied on cases from the Second and Third Circuits as well as Indiana public policy encouraging settlements. With respect to the unavailability of two other CGL policies, the Court noted that Trinity offered a declaration that referred to those policies and explained the circumstances giving rise to their unavailability. The declaration was based on the declarant's personal knowledge and provided significant detail. The Court concluded that the declaration was sufficient to establish a genuine issue of fact, notwithstanding its self-serving nature.

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