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

UNITED STATES OF AMERICA v. ROGAN (May 12, 2011)

After defrauding the Medicare and Medicaid programs and hiding his wealth, Peter Rogan fled the country. He left the United States with a $60 million judgment. The United States discovered a Georgia limited liability company in which Rogan had invested. It served the company, 410 Montgomery LLC, with a writ of garnishment. After liquidating and paying off secured creditors, Montgomery was left with approximately $4 million. The government wanted it all but Jerry and Diane Whitlow filed a claim for $175,000. Their claim is based on their one third interest in a company to which Montgomery owes $475,000. Judge Darrah (N.D. Ill.) concluded that federal law, which gives priority to writs of garnishment issued by the United States over later-issued writs, controls and denied the Whitlow's claims. The Whitlows appeal.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Sykes vacated and remanded. The Court rejected the government's position that § 3205 displaces state law when the United States issues a writ of garnishment. The section on which the government relies only establishes the priority of competing writs. If the Whitlows had a competing claim directly against Rogan's assets, for example, it would control. But that is not the case. The Court also noted that the statute only gives the government the power to issue a writ against Rogan's interest in Montgomery, not in Montgomery's actual assets. The statute also provides that state law dictates the treatment of co-owned property (like Montgomery?). The Court recognized that its conclusion left many unanswered state-law questions for the district court to deal with on remand.

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BLOOMFIELD STATE BANK v. UNITED STATES OF AMERICA (May 11, 2011)

Bloomfield State Bank made a mortgage loan secured by real estate and all rents directly or indirectly related to the real estate. A few years later, the mortgagor defaulted and the IRS filed a tax lien against the real property. A court-appointed receiver rented some of the property the following year. The IRS filed for a declaratory judgment that its tax lien had priority over the Bank's lien with respect to the rental income. Judge McKinney (S.D. Ind.) granted summary judgment to the IRS. The Bank appeals.

In their opinion, Judges Posner, Wood, and Tinder reversed and remanded. The federal tax law gives a security interest priority over a tax lien only when the secured property is in existence at the time of the lien. The IRS argues that the "property" referred to in the statute is the rent itself -- which was not in existence at the time of the tax lien. The Bank argues that the "property" referred to in the statute is the real estate -- which was in existence at the time of the tax lien. The Court noted that there were no reported appellate decisions on the issue and inconsistent lower court rulings. The Court concluded that the statute was clear and the government was wrong. The statute's reference to property is a reference to the property that is the source of the value to repay the loan, not the proceeds from that value. Here, the source of the value is the real property. The real property existed when the mortgage was issued, long before the tax lien was filed. The rental income belongs to the Bank.

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COMMODITY FUTURES TRADING COMMISSION v. LAKE SHORE ASSET MANAGEMENT LTD. (May 11, 2011)

A bank located in tiny Andorra invested over $7 million in Lake Shore Asset Management's commodity trading pools. Instead of receiving account statements, the Bank monitored its account on Lake Shore's website. When the website was taken down in late 2007, the Bank made inquiry. It learned that Lake Shore's assets were frozen and that it was under investigation for fraud. The bank made some assumptions about the similarity of U.S. and Andorran law and did nothing. Meanwhile, the CFTC sued Lake Shore, obtained a default judgment, and placed Lake Shore’s remaining assets with a receiver. In early 2009, the receiver notified Lake Shore’s creditors that they had 45 days within which to file a claim. Although the notice to the Bank was addressed properly, it contained no individual's name. The Bank claims that it never received the notice. By the time it contacted the receiver, the claims window had closed and the receiver denied the claim. The Bank sought permission from the district court. Judge Manning (N.D. Ill.) rejected the request to be included in the asset distribution. GAMAG, another Lake Shore investor, did file a claim that was allowed on the same pro-rata basis as the other investors’ claims. GAMAG, however, claims that it is a creditor rather than a shareholder and is entitled to priority. Judge Manning rejected GAMAG's position. The Bank and GAMAG both appeal.

In their opinion, Judges Posner, Kanne, and Sykes affirmed. The Court first determined that the correct standard for deciding whether to allow the late claim is the "excusable neglect" standard contained in Rule 60(b)(1). The excusable neglect standard is an "all relevant circumstances" one, which the Court simplified: on the one hand are the excuse’s validity and the negative consequences to the Bank of denying the late claim -- on the other hand is the negative consequences to the other parties of granting the late claim. The Court concluded that the district court did not err in finding that the Bank did not have a good excuse. It knew about Lake Shore’s troubles and did nothing, it didn't include the name of a bank officer on its account statement to ensure successful notice, and it made inexcusable assumptions about the similarity of U.S. and Andorran law. Although the adverse consequences of losing its entire claim are great, they are not enough to conclude that the district court erred in denying the claim. The prejudice to the others is not having to pay the Bank’s claim, since all agree that the claim is valid if timely. Rather, it is the delay resulting from the recalculation of shares, additional approval of the district court, and the potential "hornets nest" that could be created by the recalculations. The Court concluded that the district court did not abuse its discretion in denying the claim. With respect to the GAMAG claim, the Court rejected the creditor-versus-shareholder argument. Although GAMAG did have a different kind of arrangement with Lake Shore than most of the other investors, the Court concluded that the differences were not of the kind to make it a creditor. Creditors enjoy priority because they give up any upside benefit. Here, GAMAG's deal with Lake Shore was identical to other shareholders in terms of the allocation of risk.

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MILLER v. ILLINOIS DEPARTMENT OF TRANSPORTATION (May 10, 2011)

The Illinois Department of Transportation hired Darrell Miller in 2002 as part of a bridge crew. The crew, which consisted of five employees, was responsible for a wide variety of tasks. Many of those tasks were performed at ground level, while some were performed at various heights above the ground or water. Miller had some fear of heights and there were a few jobs that he could not perform. For years, the crew worked as a team. IDOT allowed his other crew members to fill in for him on those few occasions when he could not do his assigned task. Other team members also had tasks they could not perform for various reasons and IDOT accommodated those limitations as well. In 2006, Miller was asked to do a task that he considered unsafe. He performed the task but filed a grievance. Just a few weeks later, his crew leader assigned him to a task that resulted in a panic attack. IDOT put him on sick leave. Its examiner diagnosed him with acrophobia and declared him unfit to work on the bridge crew. IDOT began treating Miller as unable to work at any height in excess of 20 feet. Miller filed a grievance and also requested an accommodation identical to that which he had enjoyed in the past. His request was denied and he was ordered to return to work. When he encountered an IDOT personnel manager, he commented to a colleague that he "would like to knock her teeth out." Miller was told to go home and was later discharged for threatening violence against another employee. After an arbitration, he returned to work but without back pay or benefits. Miller filed suit under the Americans with Disabilities Act. He alleged discrimination arising from the refusal to provide accommodation and his termination. He also alleged retaliation. Judge Stiehl (S.D. Ill.) granted summary judgment to IDOT on both counts. Miller appeals.

In their opinion, Judges Posner, Rovner, and Hamilton reversed and remanded. The ADA protects only those individuals with a disability. But disability is defined in the statute as not only having a significant impairment but also being regarded as having such an impairment. A substantial limitation on being able to work qualifies as such an impairment. Since Miller did not claim to be actually impaired, his challenge was to present evidence that IDOT regarded him as substantially limited in his ability to perform a wide range of jobs. The Court noted that the regulations require consideration of several factors, including the nature and severity of the impairment, its duration, and its longer-term impact. The Court concluded that Miller presented sufficient evidence to allow a jury to find that IDOT regarded him as limited in his ability to do a substantial number of jobs. Summary judgment on the discrimination claim was improper. On the reasonable accommodation claim, the Court also found issues of fact that should have gone to the jury. Although working at heights in extreme positions is an essential element of the crew's work, the Court concluded that a reasonable jury could find that it was not an essential element of any individual crew member's work. The Court cited the history of team accommodations in the record. A reasonable juror could also find that Miller's request for an accommodation was reasonable. Finally, on the retaliation claim, the Court found that Miller presented sufficient evidence going to IDOT’s honesty to get to a jury. The Court cited an example of a similar violent outburst that was not disciplined, the agency's general hostility towards accommodations, and the ambiguity of the threat itself.

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EVA'S BRIDAL LTD. v. HALANICK ENTERPRISES (May 10, 2011)

Forty-five years ago, Eva Sweis opened the first "Eva's Bridal" shop in Chicago. The business was quite successful, selling dresses for brides and bridesmaids. The business eventually passed to her daughter and son-in-law. They sold one of their "Eva's Bridal" shops in a Chicago suburb to Nayef Ghusein. Their agreement required a $75,000 annual payment for the right to use the name. The agreement did not require Ghusein to conduct his operations according to any particular guidelines. The agreement expired in 2002 but Ghusein continues to operate the store under the same name without paying an annual fee. Eva's Bridal brought suit pursuant to the Lanham Act. Judge Darrah (N.D. Ill.) dismissed the complaint, concluding that plaintiffs abandoned the mark when they allowed Ghusein to use it without exercising any control over the nature and quality of the business. Plaintiffs appeal.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Ripple affirmed. The Court noted that plaintiffs concede that "naked licensing" (that is, licensing without exercising control over the business) results in the abandonment of a mark. Plaintiffs contend, however, that Ghusein uses the same high-quality designers that they used when they operated the store and that they therefore had no need to oversee the business. But the Court disagreed. Trademark law does not require a licensor to insist on high-quality -- only to insist on a consistent level of quality. The degree of control required of a licensor depends both on customer expectations and the nature of the business itself. The Court concluded that it was not necessary to decide how much control was enough for these plaintiffs because they exercised no control at all. The fact that they knew the identical dresses might be available at the shop says nothing about other aspects of a customer's experience. The district court was correct in finding the mark abandoned.

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STONE v. BOARD OF ELECTION COMMISSIONERS FOR THE CITY OF CHICAGO (May 4, 2011)

The City of Chicago requires that mayoral candidates collect 12,500 registered voter signatures over a 90 day period in order to be listed on the ballot. A number of individuals brought suit in federal court, alleging constitutional violations. In late 2010, the plaintiffs moved for a preliminary injunction. They sought to prohibit enforcement of the signature requirement for the February 2011 election. Judge Dow (N.D. Ill.) denied their request for an injunction. Plaintiffs appeal.

In their opinion, Judges Kanne, Rovner, and Sykes dismissed. The Court noted that the February 2011 election had taken place two months before the appeal was even argued. The only relief plaintiffs sought in their motion for a preliminary injunction related to that election. The relief they seek is no longer available. The Court noted that it lacks the power to decide questions that cannot affect litigants’ rights. The Court noted the familiar "capable of repetition, yet evading review" mootness exception. But that exception does not apply here. The plaintiffs' claims will not evade review. Their underlying suit challenging the constitutionality of Chicago's signature requirement remains pending.

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GENERAL INSURANCE COMPANY OF AMERICA v. CLARK MALL CORP. (May 4, 2011)

Discount Mega Mall in Chicago was damaged in a major fire in the fall of 2007. It filed a claim with its commercial general liability carrier, General Insurance. It also tendered to General the defense of claims brought by its tenants. General filed a declaratory judgment action against Clark Mall Corporation d/b/a Discount Mega Mall Corporation as well as its principals and tenants seeking an order that it had no duty to defend or indemnify. The defendants asserted five counterclaims for: a) an order that defense and indemnity was required, b) damages for breach of contract, c) damages for a vexatious refusal to defend, d) damages for a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and e) damages for fraud. The defendants moved for judgment on the pleadings with respect to the duty to defend. Magistrate Judge Cole (N.D. Ill.) ruled that General failed to produce evidence establishing the exclusion on which they based their denial of coverage and concluded that it had a duty to defend. Although the magistrate judge originally concluded that the refusal to defend was not vexatious, he later explained that he had not rejected the argument conclusively. At General's request, the magistrate judge entered his ruling as a final judgment under Rule 54(b). General appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Sykes dismissed for want of appellate jurisdiction. The Court made a few comments on the merits presented by the appeal but moved quickly to consider appellate jurisdiction. Rule 54(b) requires that an order be final and that there is no just reason to delay an appeal. In order for in order to be final, it must be the final disposition of a claim in the case. A court must compare the issue resolved in the claim on appeal with those that remain. That comparison here shows that the judgment was not final. The vexatious refusal to defend claim still pends. The common law fraud claim still pending includes allegations relating to General's refusal to defend. Since several of the counterclaims still pending are intertwined with the judgment on the duty to defend, the judgment was not final and the Court has no appellate jurisdiction.

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UNITED STATES v. GEORGE A. WHITING PAPER CO. (May 4, 2011)

The Fox River flows through central and eastern Wisconsin. The river is heavily contaminated with PCBs. The most prevalent PCB is Aroclor 1242 but the river also contains Aroclor 1254 and 1260. The United States brought suit under CERCLA against 11 potentially responsible parties, including Appleton Papers Inc. and NCR, in 2009. Appleton and NCR are currently involved in a cleanup at the river and are seeking contribution from many other PRPs. The United States filed suit against several de minimis defendants and provided notice of proposed settlements. Appleton and NCR objected. After revising one settlement upward based on the objection, the United States moved for approval of the settlements. Appleton and NCR intervened. Judge Griesbach (E.D. Wis.) approved the settlements. Appleton and NCR appeal.

In their opinion, Circuit Judges Kanne and Tinder and District Judge Herndon affirmed. The Court first noted its "double dose" of deference. The district judge should approve the settlement if it is fair and reasonable and consistent with CERCLA. The Court, in turn, reviews that decision for an abuse of discretion only. The Court first concluded that there was a substantial amount of information in the record which provided a rational basis for the district court's conclusion. The Court then rejected, simply because it was false, appellants' contention that the government's comparative fault analysis did not include all PCB discharges. Finally, the Court concluded that Appleton and NCR failed to meet their "heavy burden" of showing that the government was wrong in its toxicity calculations. The district court did not abuse its discretion in finding those calculations reasonable.

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IN RE: MOTOROLA SECURITIES LITIGATION (May 4, 2011) 

Motorola created the Motorola 401(k) Profit-Sharing Plan for the benefit of its current and former employees. It is a defined contribution retirement plan. The Plan Administrator is the Profit-Sharing Committee, a committee appointed by the Motorola's Board of Directors. Plan participants decide how much to invest and where to invest among available funds. One of the available funds is a Motorola Stock Fund. Participants who invest in the stock fund do not acquired title to Motorola stock, but rather own a pro-rata share in the Fund. The Fund's assets are almost entirely Motorola stock. A number of plaintiffs initiated a class-action securities fraud case against Motorola in 2003 relating to its relationship with a Turkish wireless provider. The class was defined as including all persons "who purchased publicly traded Motorola, Inc. common stock" and specifically excluded any Motorola "affiliate." The parties settled the litigation for $190 million. The Plan submitted a claim for a share of the settlement. Judge Pallmeyer (N.D. Ill.) denied the claim on two grounds: first, Plan participants were not purchasers of "publicly traded" stock and second, the Plan was a Motorola "affiliate." The Plan intervened and appeals.

In their opinion, Circuit Judges Evans and Sykes and District Judge Simon affirmed. The Court disagreed with the district court on its "publicly traded" rationale. The district court found that the Plan was not a class member because plan participants did not purchase publicly traded stock. But it is the Plan that is the claimant here, and the Plan regularly purchased publicly traded Motorola stock. The Court agreed with the district court, however, on the "affiliate" issue, although not for the identical reason. The district court concluded that the Plan was an affiliate applying an ordinary usage definition of affiliate and concluding that the Plan and Motorola were closely associated. The Court chose to apply a securities law definition of affiliate. Under that definition, an affiliate is one who controls, is controlled by, or is under common control with another. Control is defined as the power to manage or direct. Motorola controlled the Profit-Sharing Committee and the Committee had general operational control of the Plan. The Court concluded that the Plan was excluded from the class as an affiliate under the class definition.

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ADKINS v. VIM RECYCLING, INC. (May 3, 2011)

VIM Recycling operates a waste dump in Elkhart, Indiana. It entered into an Agreed Order with the Indiana Department of Environmental Management in 2007 relating principally to the removal of certain waste it referred to as "C" grade waste. When VIM did not comply with the order by the September 2008 deadline, IDEM sued them in state court. A group of area residents attempted to intervene and expand the scope of the lawsuit beyond "C" waste. They also sought damages. When the state court judge limited their intervention to the original scope of the lawsuit, they withdrew their claims. Instead, in October, they brought a RCRA suit in federal court, after providing the required notice and waiting the required time period. Their federal suit included claims relating not only to "C" waste, but also to “A”, “B”, and “C&D” wastes. It sought relief both under RCRA’s "violation" provision, alleging that VIM violated several Indiana regulations, and under RCRA’s "endangerment" provision, alleging that the VIM waste site presented an imminent and substantial danger. About a month later, IDEM brought a second lawsuit in state court, this one relating to "B" waste. VIM moved to dismiss the RCRA "violation" action on the grounds that RCRA prohibited a private action when the state is diligently prosecuting an action. VIM also asked for abstention under both Burford and Colorado River. Chief Judge Simon (N.D. Ind.) agreed, dismissed the "violation" count, and abstained on the "endangerment" count. Plaintiffs appeal.

In their opinion, Circuit Judges Ripple (concurring in part and dissenting in part) and Hamilton and District Judge Murphy reversed and remanded. The Court first addressed the "violation" count and the statutory bar. The Court corrected the parties’ treatment of the issue as jurisdictional, noting the Supreme Court's recent reminders to distinguish between truly jurisdictional rules and other, claims-processing rules. The RCRA statutory bar is a claims-processing rule. On the merits, the statutory bar prohibits the commencement of an action if a state "has commenced and is diligently prosecuting" an action requiring compliance with the same standard or regulation. The Court concluded that neither IDEM action totally barred the private action. The second action was not "commenced" at the time of the federal action so it cannot bar the action. The first action was commenced before the federal action so it bars the federal action -- but only to the extent that the claims overlap. The RCRA plaintiffs’ "C" claims were properly dismissed but the plaintiffs' other claims with respect to other types of waste can be pursued. The Court turned to the two abstention doctrines at issue in the case. Although the Court noted that it was applying an abuse of discretion standard of review, it also noted that federal courts have a "virtually unflagging obligation" to exercise their jurisdiction and should not abstain from doing so except in exceptional circumstances. Colorado River abstention comes into play when there are parallel state and federal proceedings and judicial economy supports abstention. But there must be both parallel proceedings and exceptional circumstances. Here, the Court found neither. The parties are not the same, the claims are not the same, and the state court case would not dispose of the federal case. Furthermore, Congress, in enacting RCRA, expressly contemplated simultaneous federal and state court proceedings. The Court concluded that the district court did abuse its discretion in adopting Colorado River abstention. Burford abstention, on the other hand, comes into play when a federal proceeding could be disruptive to a coherent state policy on a matter of public concern. But the Court noted that Burford abstention requires a state forum with specialized expertise. Since the IDEM cases are proceeding before a court of general jurisdiction, Burford abstention simply does not apply.

Judge Ripple concurred with most of the majority's conclusions but dissented with respect to Colorado River abstention. He believed that the simultaneous proceedings were a "recipe for delay, confusion, and wasted judicial resources" and satisfied the requirements for Colorado River abstention.

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CHICAGO REGIONAL COUNCIL OF CARPENTERS v. VILLAGE OF SCHAUMBURG (May 2, 2011)

The Village of Schaumburg, Illinois, owns the Schaumburg Renaissance Hotel. The Chicago Regional Council of Carpenters represents the hotel's housekeepers. On August 18, 2009, in the midst of stalled collective bargaining negotiations, the Union staged a demonstration. The local police allowed the demonstration to proceed after the Union agreed to follow a specified route and to control noise. When they attempted a repeat performance on August 31, the police turned them away. They filed suit on September 2 under § 1983 alleging a violation of their First Amendment rights. A couple of months later, the Village refused the Union's request to distribute pamphlets at the hotel. Both sides filed motions for summary judgment -- but the Union focused its argument on the pamphlet incident rather than the demonstration incident. Judge Lindberg (N.D. Ill.) granted summary judgment to the Village, concluding that the Union forfeited its claims regarding the demonstration and never amended its complaint to address the pamphlet issue. The court denied the Union’s belated request to amend its complaint. The Union appeals.

In their opinion, Circuit Judges Posner and Wood and District Judge Adelman affirmed. When the Union filed its complaint in September, it complained only of the August event. The Union never amended its complaint but was abundantly clear in its summary judgment papers that it was abandoning the August claims. The district court was correct in granting summary judgment on the August claim – the only claim before it. Although the Union could have and did request an opportunity to amend, the district court did not abuse its discretion in denying that belated request.

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BAGLEY v. BLAGOJEVICH (May 2, 2011)

In 2003, the Illinois Department of Corrections’ chain of command at its high-security facilities comprised 12 layers, including captain. Although the captains were not represented, other IDOC employees were. The American Federation of State, County and Municipal Employees represented sergeants and other employees in its RC-6 bargaining unit and represented lieutenants in its CU-500 bargaining unit. Another union, the Illinois State Employees Association attempted to organize the captains in 2002. At the same time, Illinois faced a huge budget deficit. Newly-elected Governor Blagojevich had promised to reduce spending and eliminate government management layers. So he proposed eliminating the captain position. After the Legislature passed a budget that included the captain position, Blagojevich vetoed it. Illinois' plan was to place the captains in other agencies, denote them to lieutenants, or lay them off. The AFSCME opposed the plan to place former captains into open lieutenant positions because it wanted its own members placed in those positions. Illinois also created a new position of "shift commander." Some captains became lieutenants and joined the CU-500 bargaining unit. IDOC calculated their seniority pursuant to the CBA as their demotion date. Some captains became officers and joined the RC-6 bargaining unit. IDOC gave additional seniority to these employees based on its interpretation of that CBA. The union objected and filed a grievance. IDOC and the union ultimately agreed to calculate seniority based only on the employee's continuous service after his return to the unit. A number of former captains sued Governor Blagojevich and other officials pursuant to § 1983, alleging that the elimination of the captain position and seniority treatment were in retaliation for their attempts to unionize. The plaintiffs sought to depose Blagojevich. Between February 2007 and October 2008, the parties fought over the deposition. The district court ultimately granted Blagojevich’s request for a protective order on legislative immunity grounds. Several months later, Judge Mills (C.D. Ill.) granted summary judgment to the governor, also on legislative immunity grounds. The other defendants then moved for summary judgment. The plaintiffs conceded, given the law of the case, that the other defendants were entitled to immunity on the job elimination claim. They did oppose summary judgment on the seniority retaliation count. Judge Mills granted summary judgment to the other defendants. He did not agree that the law of the case settled the immunity question and concluded that plaintiffs waived it by not contesting it. On the seniority retaliation claim, he concluded that there was no causal link between the union officials and the administration. Plaintiffs appeal.

In their opinion, Judges Kanne, Tinder, and Hamilton affirmed. The Court first addressed legislative immunity. Bogan tells us that the question of whether an action is legislative and therefore entitled to absolute immunity depends on the nature of the act rather than the actor's intent. There, the Supreme Court looked both to the form and substance of the action. Although the Court noted that Bogen does not require that two-part test, it nevertheless applied it. With respect to form, the Court had little difficulty in concluding that a governor's veto is legislative. In fact, the plaintiffs forfeited the point. With respect to substance, the Court distinguished an individual firing with the elimination of a position (and noted that other circuits applied the same distinction). The termination of one employee's job is not legislative in substance -- but the elimination of an entire position is. Having concluded that Blagojevich's acts were legislative, the Court stated that he was thus entitled to immunity both from the suit and from defending himself in the suit. The district court did not abuse its discretion in blocking the deposition. With respect to the seniority retaliation count, the Court agreed with the district court that the evidence presented on the record was insufficient to create a genuine dispute of fact on causation.

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ZELLNER v. HERRICK (April 29, 2011)

Robert Zellner was a biology teacher at Cedarburg High School in Cedarburg, Wisconsin between 1995 and 2006. He was active in Cedarburg Education Association (the teacher's union) throughout his employment and was its president between 2003 and 2005. The relationship between the District and the Union during this time was quite strained. During his presidency, Zellner was very publicly critical of the District, in particular Superintendent Daryl Herrick. After his presidency ended in August of 2005, Zellner remained active in the Union but no longer spoke out publicly. Also in August 2005, Zellner signed his consent to a new District computer usage policy. The policy notified District employees that their computer usage was not private and could be monitored, expressly prohibited access to offensive pictures, and warned that any violation could result in disciplinary action. Soon thereafter, the District’s IT Department had to clean up Zellner's computer for a second time. The IT technician reported to her supervisor her opinion that Zellner's computer problems were caused by visiting “questionable” Internet sites. The Director of Technology reported these suspicions to Superintendent Herrick, who ordered monitoring software be placed on the computer. The Director of Technology checked the usage logs from time to time. In December, the log indicated that Zellner had visited a number of pornographic websites. Herrick confronted Zellner, who admitted accessing pornography on the District computer several times and conceded that his actions violated school policy. Zellner refused to resign. The School Board held a disciplinary hearing in January. The Board gave Zellner an opportunity to testify and present evidence. He declined to testify but instead read a statement apologizing for his conduct and admitting using poor judgment. The School Board considered a range of discipline but ultimately chose to fire Zellner. A state trial court and appellate court upheld the termination. Zellner filed suit in federal court, alleging a violation of his due process rights and his First Amendment rights. Judge Randa (E.D. Wis.) dismissed the due process claim and granted summary judgment to the defendants on the First Amendment claim. Zellner appeals.

In their opinion, Judges Manion, Evans, and Hamilton affirmed. Although the Court was somewhat critical of the district court's dismissal of the due process claim sua sponte, it nevertheless upheld the dismissal. Even if the Zellner were able to make out a due process claim, the only relief to which he would be entitled was a opportunity to be heard. He was given a hearing and he was given an opportunity to testify. Instead, he read a statement which did not even dispute the charges. He is entitled to no more process. The Court also agreed with the district court's ruling on the First Amendment claim, finding an absence of proof of but-for causation. Notwithstanding the years of animosity between Zellner and the School District, the Court concluded that no jury could find that Zellner's union activities amounted to but-for causation. Zellner admits that he accessed pornography on the District computer and that his conduct violated the District’s policy. Therefore, the School District had a legitimate, nondiscriminatory reason to fire him.

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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION v. KONICA MINOLTA BUSINESS SOLUTIONS U.S.A. (April 29, 2011)

Konica Minolta Business Solutions hired Elliot Thompson, an African-American male, in early 2005. Konica assigned him to a Tinley Park, Illinois sales team. Thompson believe that he was being discriminated against because of his race and registered a complaint with Konica's Human Resources Department in late October. Konica fired him the very next day, Thompson filed a charge with the EEOC. He alleged that he was subjected to different terms and conditions of employment and was discriminated against on account of his race. Konica initially cooperated with the EEOC investigation. During its investigation, the EEOC learned that Konica had four Chicago area facilities, that only six of its 120 employees were African-American, that all six were assigned to the Tinley Park facility, and that five of the six were on the same sales team. The EEOC issued a comprehensive subpoena, requesting substantial information regarding Konica's hiring history at all four sites. Konica petitioned to revoke the subpoena. The EEOC denied the petition. Judge Manning (N.D. Ill.) granted the EEOC's application for an order enforcing the subpoena. Konica appeals.

In their opinion, Judges Cudahy, Flaum, and Wood affirmed. Although the EEOC has primary authority for enforcing Title VII and must investigate discrimination charges, its authority is limited to evidence relevant to the charge. The Supreme Court adopted a generous relevance standard in Shell Oil. The EEOC need only have a "realistic expectation" that the requested evidence will advance its investigation. Although Thompson's charge did not include any allegations relating to his hiring, the Court had no trouble finding that the EEOC subpoena met the relevance test. Any discrimination in hiring or team assignments would be relevant to the EEOC's investigation of Thompson’s treatment. The Court also concluded that Konica failed to adequately develop its burdensomeness argument.

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EDWARDS v. BRIGGS & STRATTON RETIREMENT PLAN (April 29, 2011)

Briggs & Stratton employed Augusta Edwards until November of 2005. She stopped working because of several nerve conditions, including carpal tunnel and cubital tunnel syndromes. Edwards' doctor believed that she was totally and permanently disabled. She filed a claim with the Briggs & Stratton Retirement Plan in August 2007. The Plan’s physician rendered an opinion that she was not permanently disabled. The Plan denied her claim on September 29 and advised her that she had 180 days to appeal the denial. The Plan received Edwards’ appeal on April 11, 2008, 195 days after she received the denial. She offered no explanation for her tardiness. The Plan refused to consider her appeal. Edwards filed suit under ERISA against the plan. Magistrate Judge Goodstein (E.D. Wis.) granted summary judgment to the Plan. Edwards appeals.

In their opinion, Circuit Judges Tinder and Hamilton and District Judge Murphy affirmed. The Court noted that its review was under the arbitrary and capricious standard because the Plan gave its administrator discretionary authority to determine eligibility. The Court further noted that it has interpreted ERISA to require exhaustion of administrative remedies. That requirement, however, rests with the discretion of the district court and can be excused where, for example, an appeal would have been futile. Here, Edwards does not dispute that her appeal was late. But she does not claim that an appeal would have been futile. The Court rejected her attempt to excuse the tardiness because of the "substantial compliance" doctrine. It noted that the doctrine had never been used in such a way. The Court also rejected her arguments based on the Wisconsin "notice-prejudice" statute, interpreting her earlier letters as notices of appeal, and the Plan's conflict of interest. Here, the Plan adopted a reasonable appeal deadline, included the deadline in the Plan documents, and gave Edwards specific notice at the time it denied her claim. Although the Plan could have exercised its discretion to entertain the appeal, it was not arbitrary and capricious for it not to do so.

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be2 LLC v. IVANOV (April 27, 2011)

be2 Holding is a German company that operates an Internet dating site at be2.com. The site has 14 million users in 36 countries. Its U.S. subsidiary, be2 LLC, is a Delaware company. The companies filed suit against Nikolay Ivanov, alleging, among other things, that Ivanov violated the Lanham Act by offering an Internet dating site at be2.net. Ivanov, a resident of New Jersey, did not appear or answer the complaint. Judge Shadur (N.D. Ill.) entered a default judgment. The plaintiff companies submitted several documents to support their damage claim. One document showed that be2.net had 20 registered users with Chicago addresses. Another described Ivanov as the CEO and co-founder of be2.net. A third document was Ivanov's LinkedIn profile, which also described him as the co-founder and CEO of be2.net. Ivanov moved to vacate the judgment for lack of personal jurisdiction. He submitted an affidavit asserting that: a) he was not the co-founder or CEO of be2.net, b) he was not compensated for any work he did for be2.net, c) most of his work consisted of translating web content, d) the CEO title stood for "Centralized Expert Operator," and e) he had never been to Illinois. The court found his affidavit not credible and denied the motion.

In their opinion, Judges Flaum, Wood, and Hamilton reversed and remanded. Personal jurisdiction over Ivanov depends on whether he has the minimum contacts with Illinois to satisfy Due Process. In the Internet arena, due process requires more than simply operating a website accessible in the forum state. The defendant must, in some fashion, target an audience in the forum state. Here, the record does not support that conclusion. The only evidence of the site’s contacts with Illinois is the document showing 20 Illinois users. Without some evidence that Ivanov targeted an Illinois market, personal jurisdiction was improper and the default judgment must be vacated and the complaint dismissed.

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MEJIA v. COOK COUNTY (April 22, 2011)

Michael Mejia was an inmate at the Cook County Jail on October 9, 2005. There was an incident that day and Mejia suffered contusions, lacerations, and bruises. There are significant factual disputes about the incident and the cause of his injuries. Mejia brought suit pursuant to § 1983 against the County and a number of jail employees, alleging excessive force in violation of the Constitution. The case proceeded to trial, where a jury found for the defendants. Judge Lefkow (N.D. Ill.) denied Mejia's motion for a new trial. She concluded that the weight of the evidence supported Mejia but that she could not grant the motion unless a reasonable person could not believe the testimony "because it contradicts indisputable physical facts or laws." Mejia appeals.

In their opinion, Judges Kanne, Wood, and Sykes vacated and remanded. The question presented to the Court was whether the district court applied the proper standard in its ruling on the motion for a new trial. A district court has the power to grant a new trial and should do so when the jury's verdict is against the manifest weight of the evidence. That is not the standard the district court used. Instead, it used the "indisputable facts” standard. But that standard is only used when the district court, in assessing the weight of the evidence, wants to take a piece of evidence out of consideration entirely. The Court noted that applying the "indisputable facts" standard to the weighing process generally would inappropriately raise the bar for a motion for new trial. Having concluded that the district court applied the long standard, the Court considered the County's argument that a remand would be futile because granting the motion would be an abuse of discretion and Mejia's argument that remand would be futile because the district court already decided that the verdict was against the manifest weight of the evidence. The Court rejected both extremes. With respect to the County's argument, the Court declined to express an opinion on the correct outcome once the proper standard is applied. With respect to Mejia's argument, the Court noted that the district court concluded only that the evidence tended to favor Mejia, not that the verdict was against the manifest weight of the evidence.

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BOURKE v. CONGER (April 19, 2011)

David Bourke was tried and convicted of murder in 1998. His attorneys, Scott Conger and Wayne Brucar, argued self-defense. The appellate court reversed his conviction on the grounds that the state did not disprove his self-defense claim. Bourke brought suit in federal court alleging that certain state officials suppressed evidence in violation of the Constitution and that his attorneys committed malpractice. He later dismissed all federal claims but the District Court retained is discretionary supplemental jurisdiction over the malpractice claim. The only surviving claim is that his attorneys did not adequately voir dire a potential juror about his views on firearms and alcohol. Bourke's expert concluded that his attorneys did not meet the applicable standard of care. Judge Zagel (N.D. Ill.) granted summary judgment to the attorneys, concluding that Bourke failed to establish that the attorneys' omissions were a but-for cause of the guilty verdict. Bourke appeals.

In their opinion, Judges Cudahy, Flaum, and Kanne affirmed. One of Illinois’ requirements for a legal malpractice claim is that the attorney's breach of duty proximately caused the damages. Here, Bourke had to show that, but for the malpractice, he would have prevailed at trial. The Court recognized that Illinois courts generally prefer to have juries decide proximate cause but added that those same courts do not hesitate to decide it when there are no factual issues. Here, the only evidence in support of the causation is the expert’s conclusion that there was a "reasonable likelihood" that the attorneys' conduct resulted in the guilty verdict. The Court noted that the expert provided no basis for that conclusion. When an expert report provides only conclusions, without supporting analysis or reasoning, it is not enough to create a genuine issue of fact. Summary judgment was proper.

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BLOMBERG v. SERVICE CORPORATION INTERNATIONAL (April 14, 2011)

Employees of Service Corporation International brought a class action in Illinois state court against their employer, alleging that it failed to properly compensate them for hours worked, in violation of the Illinois Wage Payment and Collection Act and the Illinois Minimum Wage Law. SCI removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). Judge Coleman (N.D. Ill.) remanded the case to state court on the grounds that SCI failed to establish the $5 million minimum amount in controversy required by CAFA. SCI petitions for permission to appeal.

In their opinion, Judges Posner, Wood, and Hamilton granted the petition and reversed and remanded. When one party challenges CAFA’s amount in controversy requirement, the other party must establish that fact by a preponderance of the evidence. The Court appreciated the difficulty a party has in establishing that fact when the plaintiff controls many of the facts and reveals little information about the scope of its claim. Here, SCI did provide some support for this jurisdictional fact. It cited deposition testimony in a similar case against it in another state regarding the number of allegedly unpaid hours. If the Illinois class members had similar allegedly unpaid hours, the threshold would be met. It also cited a Virginia case against it by significantly fewer class members wherein the class itself asserted CAFA jurisdiction. The Court found this evidence plausible and sufficient to support SCI's good faith estimate of the amount in controversy requirement. Unless it is legally impossible for them to recover $5 million, which the plaintiffs have not even argued, removal was appropriate.
 

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FREEDOM FROM RELIGION FOUNDATION v. OBAMA (April 14, 2011)

Presidential proclamations inviting citizens to pray are as old as the country itself, dating back to George Washington. Congress enacted a statute in 1988 that calls on the President to issue an annual proclamation setting aside the first Thursday in May as a National Day of Prayer. President Barack Obama issued such a proclamation on April 30, 2010. Freedom From Religion Foundation filed suit against President Obama and his Press Secretary, alleging that the statute and the proclamations contravene the First Amendment. Judge Crabb (W.D. Wis.) agreed, concluding that the statute and the proclamation violated the First Amendment. She issued an injunction forbidding any further such proclamations. The President and his Press Secretary appeal.

In their opinion, Chief Judge Easterbrook and Circuit Judges Manion and Williams (concurring) vacated and remanded with instructions to dismiss. The Court first addressed plaintiffs’ standing and found it lacking. In order to establish standing, one must show injury, causation, and redressability. The statute itself imposes a duty only on the President. The plaintiffs do not have standing to object to a statute that imposes duties only on others. But the proclamation is addressed to all citizens, including the plaintiffs. The proclamation, however, imposes no duty -- it simply makes a request. Plaintiffs cannot show any injury caused by such a request. The Court cited the Supreme Court's decisions in Newdow and Valley Forge Christian College as controlling precedent.

Judge Williams concurred in a separate opinion. She distinguished Newdow, disagreed with what she thought was the majority's conclusion that a change in behavior is required for standing, noted a number of Supreme Court decisions on the merits where the standing injury is hard to distinguish from that of the Foundation, but ultimately concluded that Valley Forge precludes standing.

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HUSS v. IBM MEDICAL AND DENTAL PLAN (April 13, 2011)

Eileen Huss was an IBM employee and participated in the IBM Medical and Dental Plan. Huss’ son Joseph had a mental disability and was entirely dependent on Huss and her husband for his support. In 2005, Joseph was 24 years old and enrolled in his father's medical plan. But Huss wanted him enrolled in her plan at the time of her anticipated retirement at the end of 2006. Plan representatives told her that her son would be eligible to enroll at that time and that she need not take any additional steps until her retirement. In January of 2007, a month after her retirement, a Plan representative told her that Joseph was ineligible because she had not submitted a written application years earlier (60 days before he turned 23). Huss requested a summary of the plan and any relevant material. A plan representative responded that the 2006 Summary Plan Description (SPD), which Huss already had, was the only relevant document. Huss specifically requested plan language that was in effect in 2004, the year Joseph turned 23. Huss retained a lawyer who asked for reconsideration and again requested plan language and documents from the earlier years. Plan administrator R. A. Barnes denied relief based on language from the 2006 SPD. Barnes did provide some of the earlier language. Huss made her final appeal based on the 2004 SPD language, which did not require a written request. Barnes again denied eligibility. Huss brought suit pursuant to ERISA against both the Plan and Barnes. She sought benefits and statutory damages for failure to provide documents. Judge Zagel (N.D. Ill.) granted summary judgment to Huss on both counts, assessed statutory penalties of over $15,000, and awarded fees and expenses of over $86,000. Defendants appeal.

In their opinion, Judges Kanne, Williams and Tinder vacated and remanded on the claim for benefits, affirmed in part and reversed in part on the statutory penalties, and vacated and remanded the award of fees and expenses. The Court began with the eligibility issue. Since the administrator has discretion under the Plan’s language, Barnes' decision is reviewed under an arbitrary and capricious standard. The Court recognized Hackett's "sweeping language" to the effect that the plan in effect at the time a claim is denied is the plan that controls. But the Court noted that the type of dispute in Hackett was quite different and concluded that the nature of the dispute dictates whether earlier language might control. Here, where the Plan's denial is based on failure to satisfy a condition precedent, the controlling plan language must be that which was in effect when the claimant's ability to satisfy the condition precedent expired. In this case, that is the language in effect in 2004. Barnes' exclusive reliance on the 2006 SPD makes her actions arbitrary and capricious. With respect to eligibility under the earlier language, the Court found the earlier language ambiguous regarding the need for a parent's request for coverage continuation. Because of the ambiguity and the a plan administrator’s broad discretion, the Court concluded that Barnes’ interpretation -- that an employee had to make a request within 60 days of the dependent’s 23rd birthday -- was not unreasonable. A genuine issue of fact existed, however, with respect to whether Huss actually made that request. The Court remanded to the administrator for further development of the record and other proceedings. The Court next addressed the statutory penalty award. It affirmed the penalties associated with the Plan's original failure to send Huss the 2003 plan documents. The Court had already determined that this was the controlling document and the Plan did not produce it within the statutory time period. The district court’s second statutory penalty, however, related to defendant’s failure to produce a number of SPDs published between 2004 and 2007. Although the Court conceded that these documents would show the evolution of the condition precedent language and may have been helpful to Huss, it concluded that they did not fall within the category of documents that ERISA required defendants to produce. The district court therefore abused its discretion in awarding those penalties. Finally, the Court turned to the fee award. It noted that the Supreme Court had recently concluded, contrary to prior Seventh Circuit jurisprudence, that an ERISA plaintiff may still be awarded fees if her case is remanded to the administrator if she shows "some degree of success." The Court expressed its disagreement with some of the district court's findings but ultimately decided simply to vacate the award, given its treatment of the merits. The district court will have another opportunity to consider a fee award after remand.

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PEABODY v. DAVIS (April 12, 2011)

Jonathan Peabody joined the Rock Island Corporation, a closely held operation, in 1998. He first invested in the company’s pension plan in 1999 when he rolled over a $167,000 IRA into the Plan. Almost all of the rolled over funds were used to purchase Rock Island stock. There was no market for, and therefore no easy way to value, the stock. The Plan's trustee issued valuation statements periodically. At different times between 2000 and 2004, it was assigned values of $757, $500, $625 and $550 per share. Peabody left Rock Island in 2004. At the time he had 835 Rock Island shares. Peabody and Rock Island entered into a loan agreement pursuant to which Rock Island agreed to purchase the stock and to pay $350 per share in one year. However, when the loan became due, Rock Island was unable to pay. It went out of business in 2005. Peabody brought suit against the company, the Plan trustees, and two insurance companies that had issued policies protecting Rock Island against employee dishonesty. Judge Coar (N.D. Ill.) held a bench trial and ruled that: a) Peabody had waived any fiduciary duty claim with respect to the initial rollover or the defendants' failure to diversify his account, b) the Plan and the trustee's violated their fiduciary duties by maintaining the Rock Island investment and by failing to distribute the benefit, c) one trustee breached his fiduciary duty by offering the loan, d) ERISA prohibited the loan transaction, e) Rock Island itself was not liable, and f) Peabody did not have standing to assert a claim against the insurance company defendants. The court awarded damages based on a $500 per-share valuation in reliance on the fact that the Plan purchased shares for Peabody's account at that price in 2001. Peabody and the defendants appealed.

In their opinion, Judges Cudahy, Flaum, and Kanne affirmed in part and reversed and remanded in part. The Court first noted it was dealing with three separate claims: a) a § 502(a)(2) claim against the fiduciaries on behalf of the Plan, b) a § 502(a)(1)(b) claim for benefits, and c) a § 502(a)(3) equitable claim against the insurance companies. The Court first concluded that the trustees breached their fiduciary duties under § 502(a)(2). A new SEC rule had substantial negative implications for the company's profit margins and its stock steeply declined over a five-year period. The trustee's knew of the changed rule, knew it was prominent, and knew of its significant impact on Rock Island’s business model. The company did not require employees to invest in Rock Island stock. In fact, Peabody apparently had a greater percentage of company stock than any other employee. A prudent investor would have divested earlier. The Court also concluded that Peabody's initial consent to the stock purchase did not affect the trustee's continuing fiduciary duty over the course of the investment. The Court rejected Peabody's alternative theory of liability arising from the loan for stock transfer. Although the Court agreed that the transaction violated ERISA, it concluded that Peabody suffered no damages from the transaction. As the Court pointed out, it was simply the trade "of worthless stock for a worthless loan." The district court erred, however, in computing damages when it applied the $500 per-share figure to all of the stock. The Court remanded for a damages recalculation, advising the district court to start with Peabody's original investment , consider using average values over the length of the investment, and assume that 25% to 33% of the stock could have been left in the account without violating a duty of prudence. The Court also affirmed the district court's rejection of Peabody's § 502(a)(1)(B) benefits claim on the grounds that it would result in no additional relief. Finally, the Court agreed with the district court’s rejection of the § 502(a)(3) claim against the insurance companies. That section allows for "other appropriate equitable relief." The Supreme Court has limited the section to "typical" equitable relief. Peabody's request for money damages from the insurance policies is not typical equitable relief.

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GEORGE v. KRAFT FOODS GLOBAL, INC. (April 11, 2011)

Kraft Foods Global, Inc. sponsored an ERISA defined contribution plan for its employees. Each participating employee had an account and was able to choose where to invest. The plan offered up to nine different funds, including two company stock funds and a number of multi-stock funds. The plan contracted with Hewitt & Associates to track the accounts and transactions and State Street Bank to manage the fund's assets. A number of Plan participants filed suit against seven defendants in 2006, alleging that the defendants mismanaged the company stock funds and paid excessive fees to the service providers. The original fact discovery deadline was March of 2008. The parties completed the class certification motion briefing by January 2008. In May 2008, plaintiffs sought to amend their complaint to add 21 defendants and to add claims challenging a number of investment decisions. Magistrate Judge Schenkier (N.D. Ill.) denied the motion, concluding that the plaintiffs had known about the facts in support of the amendment for quite some time, that the plaintiffs never advised the court of their desire to amend, and that the new claims were substantially different from the original claims. The court then certified a class and granted summary judgment to the defendants. Plaintiffs appeal.

In their opinion, Circuit Judges Cudahy (concurring in part and dissenting in part) and Rovner and District Judge Adelman affirmed in part and reversed and remanded in part. The Court first addressed the district court's denial of the motion to amend. The district court found that the plaintiffs were aware of the facts supporting the amendment early on, that they never asked for a amendment deadline, and that the addition of the new defendants and claims would prejudice both the defendants and the court. The Court found no abuse of discretion. The Court also found no error in the district court's refusal to allow an expert witness. The expert's opinion related only to the claims in the amended complaint and was not relevant to the case without it. On the merits, the Court first addressed the plaintiffs allegations with respect to the company stock funds. The plaintiffs complained of the defendants' decision to operate these funds on a unitized basis. The benefits of unitization are that it allows transactions to consummate more quickly and it allows the Plan to save on transaction costs by offsetting purchase orders with sell orders. Two alleged downsides of unitization are: a) the Fund gets lower returns when the stock appreciates because of the need to keep a portion of the fund in cash or other liquid investments, and b) unitization incentivizes more transactions and higher transaction costs, since transaction costs are deducted from the fund value rather than allocated to individual traders. Plaintiffs' legal theory is that defendants breached their fiduciary duty by not eliminating unitization or at least adopting measures to limit the number of transactions. Notwithstanding contrary conclusions by the district court, the Court could find nothing in the record establishing that a decision was ever made. But a failure to make a decision, one way or the other, when a prudent man would have done so, is also a breach of ERISA’s fiduciary obligation. The Court therefore reversed and remanded for further consideration. The Court turned to the allegations regarding the Hewitt and State Street fees. With respect to Hewitt, the Court reversed the summary judgment in defendants' favor. Plaintiffs' allegations are that the fiduciaries should have, but did not, solicit competitive bids before extending the Hewitt contract. Plaintiffs’ expert testified to that opinion and further opined that the plan overpaid Hewitt. Defendants assert that they received consultants’ opinions that the Hewitt contract was prudent. The district court erred when it weighed the expert opinion at the summary judgment stage and also erred when it concluded that reliance on experts was sufficient for judgment as a matter of law. With respect to the State Street claims, the court affirmed summary judgment for defendants. Plaintiffs' allegations here are that the fiduciaries allowed State Street to retain as income interest from "float" without even knowing the amount of that income. The Court noted, however, that the defendants submitted a declaration that they received annual income reports. Plaintiffs did not contradict the declaration. Plaintiffs point to no other breach of duty evidence. Summary judgment for the defendants was appropriate.

Judge Cudahy concurred in part and dissenting in part. He would have affirmed the district court decision in its entirety. First, unitization is a "universally accepted investment practice" and whether or not to adopt it is a routine investment consideration. Nothing in ERISA requires a fiduciary to create a record of the balancing of its pluses and minuses. Second, with respect to the Hewitt claim, Judge Cudahy agreed with the district court that the long relationship between the Fund and Hewitt and the Fund's reliance on consultants to evaluate the fee’s prudence satisfies its fiduciary duties.

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ROUGHNECK CONCRETE DRILLING & SAWING CO. v. PLUMBERS’ PENSION FUND (April 7, 2011)

Roughneck Concrete Drilling & Sawing Co. is a Chicago-based construction company. Its concrete drilling services are used in the building construction industry. Sometimes its services are used in connection with a building's plumbing, sometimes in connection with a building’s electrical system, and sometimes in connection with other aspects of a building’s construction. Roughneck employs union plumbers or electricians or laborers, depending on the purpose of its work. It has collective bargaining agreements with unions representing each. The pension fund representing the plumbers union conducted an audit and concluded that Roughneck had done plumbers work without employing plumbers. They concluded that Roughneck owed $2.2 million in contributions. They filed grievances with the Joint Arbitration Board pursuant to the collective bargaining agreement. Roughneck responded by filing its own grievance. Several days before the scheduled JAB hearing, Roughneck wrote to the administrator of the National Plan, an agreement between employers and the national unions. Roughneck claimed that the Fund's grievances were "impediments to job progress" and that the dispute should therefore be resolved by the Joint Conference Board. The JCB resolves jurisdictional disputes between different crafts. The Fund disagreed but the National Plan administrator scheduled a hearing for the day before the JAB hearing. At the JCB hearing, an arbitrator ruled that the dispute was in fact beyond the authority of the JAB and ordered the JAB hearing canceled. No one told the JAB about the order, so it went forward with the hearing. Roughneck did not attend. The JAB found for the Fund and ordered Roughneck to pay over $3.3 million. Roughneck filed two actions -- one to vacate the JAB order and one to enforce the JCB order. Judge Lefkow (N.D. Ill.) found for the Fund, concluding that Roughneck had waived its objection to the JAB's jurisdiction, both by submitting a grievance and by not appearing at the hearing. It was therefore bound by the JAB order and could not avail itself of the JCB order. Roughneck appeals.

In their opinion, Judges Bauer, Posner, and Williams reversed and remanded. The Court first concluded that the Fund's failure to bring suit to set aside the JCB order did not prevent it from raising a defense in Roughneck's suit to set aside the JAB order. It could have sued to set aside that order but it would be redundant to require it to file its own suit when it raised a timely challenge in Roughneck’s suit. On the merits, the Court concluded that Roughneck did not waive any rights. Roughneck could have handled things better -- it could have invoked the jurisdiction of the National Plan earlier, it could have informed the JAB of the JCB decision, it could have shown up at the JAB hearing. Nevertheless, it did withdraw its consent to the JAB arbitration before any order was issued. It was entitled to do so. Finally, the Court noted that judicial review of arbitration awards is so limited that multiple, inconsistent awards can be enforced. Here, however, it is impossible for the parties to comply with both orders. The Court reversed with instructions to vacate the JAB order and enforce the JCB order.

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