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

SCHULZ v. GREEN COUNTY (July 20, 2011)

Wisconsin law requires each county in the state to provide defined juveniles services through a juvenile-intake worker. Green County is a small Wisconsin County on the Illinois border. Due to its size, it can employ its juvenile-intake worker through its court system or its Human Services Department. The Green County Circuit Court employed Sheila Schulz as the County's juvenile-intake worker from 1997 to 2008. During that time, she supervised some part-time employees. She was making $26.99 per hour in 2008. As part of a cost-cutting effort, the Green County Board of Supervisors eliminated Schulz's job and created a new job within the Human Services Department with much the same responsibilities, except it did not include supervising other employees. The County hired Schulz to fill that position at an hourly rate of $19.28. Schulz brought suit against the County, alleging that its actions deprived her of a property interest without due process in violation of § 1983. Chief Judge Conley (W.D. Wis.) granted summary judgment to the County. Schulz appeals.

In their opinion, Chief Judge Easterbrook, Circuit Judge Bauer, and District Judge Young affirmed. The Court admitted the general rule that a government employee who can be removed from her position only for cause has a property interest in that position and may not be fired from it without due process. A corollary to the general rule, however, is the reorganization rule. If a government eliminates a position, there is no longer anything in which one can have a property interest. But the Court noted that the reorganization rule might not apply if the reorganization only affects a single person. In that case, the reorganization might simply be a pretext. The record in this case does not support the notion that the County's reorganization was a pretext to fire Schulz. First, the undisputed record shows nothing but that the County reorganized to save money. Second, if the purpose of the reorganization was to get rid of Schulz, the County would not have hired her to fill the new position.

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TROVARE CAPITAL GROUP v. SIMKINS INDUSTRIES (July 20, 2011)

In late 2006, Leon Simkins decided to sell the family owned folding carton business and its affiliates, in which he was a controlling shareholder. He engaged Mesirow Financial to act as broker. Trovare Capital Group was interested and contacted Mesirow. In late May of 2007, Simkins and Trovare entered into a letter of intent ("LOI"). The agreement was generally nonbinding but did give Trovare a 90-day exclusivity period and obligated Simkins to pay a $200,000 fee if it breached the exclusivity period or gave Trovare written notice of a unilateral termination of the negotiations. The LOI included a termination date of September 30, 2007, after which neither party any obligations. Shortly afterward, the negotiations went south. Trovare's environmental consultant concluded that all real properties involved needed further environmental testing. Simkins and his family became more and more concerned about their own liabilities that would arise from a sale. At one point, Simkins told his own negotiating team that he did not want to go through with the deal. Although the parties continued to communicate, both Mesirow and Trovare began doubting the sellers’ sincerity. Trovare even demanded the breakup fee as early as August. After the communications stopped, Trovare brought suit against Simkins for the $200,000 fee. Judge Gettleman (N.D. Ill.) granted summary judgment to the defendants, concluding that the undisputed facts established that they did not terminate the negotiations and that they negotiated in good faith. Trovare appeals.

In their opinion, Circuit Judges Kanne and Evans and District Judge Clevert reversed and remanded. The Court quickly dispensed with Trovare's argument that it was entitled to the contractual $200,000 fee. The LOI imposed that obligation on the sellers only if they breached the exclusivity period or gave written notice of the termination of negotiations. Neither occurred here. Trovare also alleged, however, a breach of the implied covenant of good faith and fair dealing. The Court noted that Trovare could prevail on that claim if it proved that the sellers had decided to terminate negotiations but simply refused to provide a written notice. The Court disagreed with the district court that the undisputed record showed continued good faith negotiations beyond the termination date. The Court concluded that a reasonable trier of fact could conclude that the continued communications were not actually negotiations. The Court pointed to several parts of the record, including: a) Simkins’ statement that he “definitely" did not want to consummate the deal, b) Simkins later willingness to negotiate only if Trovare agreed to five demands, and c) the sellers’ misrepresentations that the second phase environmental inspections had already begun. Summary judgment for the defendants was error.

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CARDENAS v. CITY OF CHICAGO (July 20, 2011)

Chicago Police Officer Alejandro Gallegos obtained a search warrant that authorized a search of Maria Cardenas' apartment. Gallegos and other officers executed the warrant on December 14, 2007. According to Cardenas' complaint, the officers entered without knocking, threatened Cardenas and others with guns, and searched recklessly. They found nothing and left. Cardenas and the other apartment occupants filed suit against Gallegos and the City of Chicago. The Cook County Sheriff successfully served the City. They attempted to serve Gallegos through the Police Superintendent's Office but the summons was returned unserved in May 2008. In November, plaintiffs’ counsel wrote to the City’s counsel and asked the City to waive service on Gallegos or to provide his home address. In a telephone conversation in December, the City’s counsel informed plaintiffs’ counsel did it could not do the former and would not do the latter. The City and Gallegos moved to dismiss in September of 2009. Gallegos sought dismissal because he had never been served. The City sought dismissal under the Tort Immunity Act on the grounds that the City could not be liable for Gallegos's actions where Gallegos himself is not liable. Plaintiffs opposed the motion and also obtained an alias summons that they served properly through the Police Department’s Office of Legal Affairs on November 9. Judge Norgle (N.D. Ill.) granted the motions to dismiss. He concluded that plaintiffs had not served Gallegos in a timely manner and found no good cause that would support an extension. He also agreed with the City that there was no municipal liability without Gallegos in the case. Plaintiffs appeal.

In their opinion, Judges Posner, Kanne, and Hamilton affirmed. Any person that files a lawsuit has 120 days within which to serve a copy of the summons and complaint on each defendant. A district court judge has the discretion to extend the 120-day period if there is a showing of good cause. The Court noted that it reviewed such decisions on an abuse of discretion standard. The Court first rejected plaintiffs' contention that the May 2008 attempted service on the Superintendent was sufficient. That attempt occurred before the case was removed so Illinois law applies. Under Illinois law, service on a defendant’s employer is not sufficient. Next, the Court found no abuse of discretion in the denial of an extension. It is clear that the district court considered a number of factors, including the fact that the expiration of the statute of limitations would bar a refiling of the suit. The plaintiffs did not perfect service for over a year and a half after filing the suit, they took very few steps to attempt to do so, and they knew of the consequences of the failure to do so. The Court could not conclude that the district court abused its discretion in failing to grant an extension. Finally, the Court conceded that a dismissal of this type is usually made without prejudice. Here however, where the statute of limitations has run, a dismissal with prejudice is appropriate.

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LUSTER v. ILLINOIS DEPARTMENT OF CORRECTIONS (July 19, 2011)

Milton Luster is an African American male. In June of 2006, he was a lieutenant with the Illinois Department of Corrections assigned to the Dwight Correctional Center in Dwight, Illinois. On June 6, he and Christine Cole, a white female guard, got into a heated conversation during which Cole called Luster a "bitch." Luster filed an incident report accusing Cole of insubordination. Two days later, Cole filed her own report. In her report, she acknowledged a consensual affair with Luster years earlier and reported that Luster on two occasions had pinned her against the wall and put his mouth on her neck, that he had touched her buttocks, that he made suggestive remarks to her, and that he made unsolicited and uninvited phone calls and visits to her home. The Department began an investigation and put Luster on paid leave. Luster denied all the allegations but two other guards told investigators that they witnessed at least one of the incidents. In his final report, the investigator criticized Cole for the "bitch" remark and for her delay in reporting the harassment but credited her report of the events. The resulting disciplinary proceedings ended with a recommendation that Luster be fired. The warden agreed and suspended Luster without pay. As she was required to do under regulations, she requested the approval of the Illinois Department of Central Management Services for Luster's firing. Lester could have, but did not, file a grievance or administrative appeal. Instead, he resigned. He brought suit against the Department, alleging that he was fired because of his race in violation of Title VII. Judge Mihm (C.D. Ill.) granted summary judgment to the Department. Luster appeals.

In their opinion, Judges Posner, Tinder, and Hamilton affirmed. The Court stated the familiar elements under the indirect method of proof: member of a protected class, meeting the Department's performance expectations, an adverse employment action, and a similarly situated coworker treated more favorably. The first and third elements were not at issue and, here, the second and fourth elements merged. Luster put forward two "similarly situated" employees who he claims were treated more favorably. The Court rejected one of them as a comparator because the admissible evidence established that the accusations against that employee were found to be unsubstantiated. The other employee was an apt comparator. Accusations of physical harassment of a female coworker were found substantiated. That employee was also suspended without pay pending his discharge. Up until that point, the Court noted, he and Luster were treated identically. But the comparator employee, unlike Luster, successfully grieved his termination. The same opportunity was available to Luster. Therefore, he was not treated more favorably than Luster. The Court added that even if it had found a prima facie case, the Department would still prevail because it came forward with a legitimate, nondiscriminatory reason for their treatment of Luster. Luster did not provide sufficient evidence to allow a reasonable jury to conclude that the Department's reason was pretextual.

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WOODS v. COMMISSIONER OF THE INDIANA DEPARTMENT OF CORRECTIONS (July 19, 2011)

In 2005, the Commissioner of the Indiana Department of Corrections suspected that inmates were using pen-pal internet sites to fraudulently obtain money. The Commissioner ordered an investigation. An investigator reviewed pen-pal websites, interviewed several pen-pals, read the online profiles of hundreds of inmates, and investigated the source of funds deposited into inmates' trust accounts. The investigation concluded that most inmates misrepresent themselves on pen-pal websites and that some pen-pals felt deceived by inmates but it was unable to substantiate any meaningful financial fraud. Nevertheless, the investigator recommended capping inmates' trust accounts, limiting the source of trust account funds to family members and other authorized individuals, and prohibiting inmates from soliciting money or advertising for pen-pals. The Department adopted the latter two recommendations. Inmates brought a class action suit against the Department, alleging that the regulations violated the First Amendment. Judge Magnus-Stinson (S.D. Ind.) granted summary judgment to the Department. The inmates appeal.

In their opinion, Judges Bauer, Posner, and Manion affirmed. The Court first noted that First Amendment rights can be curtailed more broadly in the present context than otherwise. A prison regulation need only be "reasonably related to legitimate penological interests" to be upheld. And even the plaintiffs concede that the department has a legitimate interest in preventing inmates from fraudulently soliciting money from pen-pals. The only question, therefore, is whether the limitations adopted by the Department are reasonably related to that objective. To be so, the regulation must have a valid and rational connection with the objective, the inmates must have alternative ways of exercising their rights, the impact on the rest of the prison community and staff must be considered, and there may not be a less restrictive alternative that achieves the same goal. The Court found the test met. First, the regulation is directly related to the goal of preventing fraud. Second, the inmates have alternative ways of exercising their First Amendment rights. They can still send and receive letters, they receive newspapers and magazines, and they can even develop pen-pals through groups that visit the prison. Third, it is reasonable to believe that lifting the ban would result in more inmate fraud and put a greater burden on prison staff. Finally, the Court rejected the inmates' contention that the source limitation for inmates' trust accounts was a sufficient alternative, without the additional pen-pal solicitation ban. It recognized that the source limitation could be very effective but deferred to the prison administrators' judgment that the ban was also required.

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CLARENDON NATIONAL INSURANCE CO. V. MEDINA (July 13, 2011)

Guillermo and Maria Medina's son gave his old truck cab to his mother. Although she could not drive it, Guillermo had a commercial license and experience. With Maria's authorization, Guillermo got a job with Town Trucking. Federal law requires interstate truckers like Town to either own their equipment or enter into a lease with the owner. Guillermo and Town entered into a operating agreement in which Guillermo purported to lease Maria's cab to Town. Although Maria never signed the agreement and was not familiar with its contents, she did know that Guillermo entered into a contract with Town and that he did it with her permission. Town had $1 million in insurance coverage for its drivers, including Guillermo, that provides coverage when they are using equipment on Town business. Guillermo also obtained a $750,000 policy to cover him while using the equipment not on Town business. In late November 2006 Guillermo delivered a load of shingles to a store in McHenry, Illinois and was returning with an empty trailer to pick up a second load for delivery. It was during this return trip that Guillermo lost control of his vehicle and struck a small truck, killing its driver. Town’s insurer settled the lawsuit brought by the driver's parents for the policy limits. Guillermo's insurer, Clarendon National, denied coverage. It relied on the policy’s exclusion for accidents that happen when the vehicle is in the business of anyone to whom it is rented. Clarendon filed suit, seeking a declaration of its obligations. The defendants claimed that the exclusion did not apply because the vehicle was actually never rented to Town by Maria, its lawful owner. Judge Kendall (N.D. Ill.) granted summary judgment to Clarendon, concluding that Guillermo entered into the agreement with Town with Maria's knowledge and permission. Defendants appeal.

In their opinion, Judges Rovner, Wood, and Tinder affirmed. In Illinois, the Court stated, an insurance agreement is a contract and the general rules of contract construction apply. If the language of the policy is unambiguous, it should be applied as written. The Court found no ambiguity in the Clarendon policy. The only question is whether the truck was rented to Town at the time of the accident. The Court recognized that the lawful owner of the truck did not sign the agreement. The Court nevertheless found that the truck was rented to Town, the exclusion applied, and Clarendon had no coverage obligation. First, federal regulations define "owner" as including someone who does not have title but has the exclusive use of the equipment. Second, Maria and Guillermo had an agency relationship and Illinois law allows an agent to act on behalf of an undisclosed principal. Third, the agreement between Guillermo and Town satisfied all the requirements for a written contract.

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REEDSBURG UTILITY COMMISSION v. GREDE FOUNDRIES (July 13, 2011)

Grede Foundries owned a smelting plant in Reedsburg, Wisconsin. It purchased its electrical utility services from Reedsburg Utility Commission, the local municipal utility. It was a hefty user of those services. It’s monthly bill was usually $600-$700,000, about a third of Reedsburg's operating revenue. When Grede filed for Chapter 11 bankruptcy in June of 2009, it owed Reedsburg in excess of $1.3 million. Wisconsin law dictates how a municipal utility collects arrearages. It must provide notice by October 15 of the October 1 arrearage amount and it submits a list of properties and arrearages to the local government by November 16. The amounts due become a lien on the property serviced and included on property tax bills as a special charge. If it remained unpaid, the County eventually paid the city and assumed responsibility for collection. Reedsburg started that process but it was halted when Grede filed a motion to enforce the bankruptcy stay and hold Reedsburg in contempt for violating the stay. The bankruptcy court did not hold Reedsburg in contempt but ordered it to refrain from taking any further action to collect the bills. The bankruptcy court later found that Reedsburg did violate the stay. Judge Crabb (W.D. Wis.) affirmed. Reedsburg appeals.

In their opinion, Circuit Judges Tinder and Hamilton and District Judge Murphy affirmed. The Court noted that the bankruptcy stay is one of the fundamental protections under the bankruptcy laws. It generally prohibits any act to collect or recover from the bankruptcy estate or to enforce any lien. The parties agree that Reedsburg's actions are covered by the prohibition. Reedsburg, however, argues that its actions fall within one of the exceptions to the stay -- either perfecting a prepetition interest in property, determining tax liability, or perfecting a lien for a special tax or assessment. The Court addressed each in turn, noting that exceptions to the automatic stay should be interpreted narrowly. With respect to the prepetition interest in property, the Court looked to Wisconsin law. All Reedsburg did before the filing of the petition was deliver services and invoice Grede. Undoubtedly, those actions created a debt. But they did not create an interest in property. Since the petition was filed long before the process began in early October, the Court did not have to decide when, during that process, Reedsburg may have obtained a property interest. It certainly did not obtain one before the series of actions even began. The next exception provides that a determination of tax liability, a notice of tax deficiency, and the making of an assessment for a tax does not violate the stay. Although, under the statutory procedure, the Reedsburg charges may appear on Grede's property tax bill, they are not taxes. They are not a source of revenue to pay for public benefits but the recovery of the cost of delivering utility services. The third exception is for "the creation or perfection of a statutory lien for an ad valorem property tax." Again, the Court concluded that Grede's utility charges were not taxes or special taxes or special assessments. None of the automatic stay exceptions apply.

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COLLINS v. AMERICA'S SERVICING CO. (July 13, 2011)

In 2004, Phillip Collins bought a house in Lowell, Indiana. His lender assigned the mortgage servicing obligations to America's Servicing Company shortly after closing. Under the terms of the mortgage, Collins’s payment was due on the first of the month with a 15-day grace period, a late fee was assessed after the grace period, and any payment was always applied first to the oldest obligation. Collins missed his payments in September and October of 2006. He sought assistance from ASC. Collins and ASC entered into a forbearance agreement. Under the agreement: a) Collins did not have to make his November payment, b) the amount of his November payment was prorated over the following eight months’ payments, c) his due date was extended to the 15th of each month, d) the grace period was eliminated, and e) ASC would continue credit reporting. Collins apparently did not understand the agreement. He thought that he could avoid late fees and protect his credit under the agreement if he simply made his regular, though now slightly increased, monthly payments. Collins and ASC entered into a second agreement in April. ASC agreed not to accelerate the loan if Collins made his regular monthly payments for the following four months. Like the earlier agreement, there was no grace period and credit reporting continued. In fact, ASC charged late fees every month and reported him delinquent every month after September. Collins discovered this when he tried to refinance in August 2007. Collins sent a letter to ASC pursuant to the Real Estate Settlement Procedures Act (RESPA) and requested that ASC remove the late fees and retract any negative credit reports. ASE responded to the letter but refused his requests. He now faces foreclosure. Collins filed suit alleging violations of RESPA, the Indiana Home Loan Practices Act, and breach of contract. Judge Miller (N.D. Ind.) granted summary judgment to ASC on all counts. He concluded that ASC responded to Collins' RESPA request according to the statute. He concluded that Collins failed to prevent evidence of either a breach of contract or a material misrepresentation in violation of the Indiana statute. Collins appeals the latter two rulings.

In their opinion, Judges Bauer, Kanne, and Evans affirmed. The Court first addressed the breach of contract claim. The Court concluded that ASC fully complied with the terms of the mortgage, the first forbearance agreement, and the second forbearance agreement. After Collins missed his September and October payments, he was always in arrears. Even if he made every monthly payment, the monthly payments went to past due obligations. The fact that Collins understood otherwise, and may have even been told otherwise, does not help him. The language of the contracts is unambiguous and Collins cannot rely on oral modifications for a breach of contract under Indiana law. Likewise, Collins cannot succeed on his Indiana Home Loan Practices Act claim. The written agreements are very clear. Collins cannot prove that ASC made a knowing or intentional material misrepresentation.

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TREAT v. TOM KELLEY BUICK PONTIAC GMC, INC. (July 13, 2011)

The Kelley Automotive Group operates a number of car dealerships, including Tom Kelley Buick Pontiac GMC ("Kelley") in Fort Wayne, Indiana. Kelley hired Jill Treat and her son Cody in July of 2006. Kelley fired them both three months later. The Treats brought a multi-count complaint against Kelley, including a claim for unpaid wages under the Indiana Wage Payment Statute. Judge Lee (N.D. Ind.) granted summary judgment to Kelley. The Treats appeal.

In their opinion, Circuit Judges Tinder and Hamilton and District Judge Murphy affirmed. The Court addressed two similar Indiana wage recovery statutes. The Wage Payment Statute dictates the frequency of wage payments, addresses the situation if an employee leaves a job voluntarily, and allows a person to recover in any court with jurisdiction the amount of wages due and liquidated damages. The Indiana Wage Claims Statute addresses the situation where an employer discharges an employee. In the case of a wage dispute, the Commissioner of Labor is required to enforce the law, to institute actions for penalties, and to refer a claim to the Attorney General, who can initiate a claim on behalf of the claimant. The remedy under the Claims statute is the same as the remedy under the Payment statute. The Indiana Supreme Court has stated, in dicta, that the statutes are mutually exclusive. The Payment statute applies to individuals still employed or who voluntarily resigned. The Claims statute applies to individuals who were fired. However, the Treats’ complaint raises issues that arose during their employment as well as after their termination. Although one Indiana appellate case supports the Treats' position, the Court predicted that the Indiana Supreme Court would conclude that a person’s status at the time of the claim would govern. Here, the Treats filed a claim after they were terminated by Kelley. Therefore, their appropriate remedy was under the Claims statute, not the Payment statute.

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NEWPAGE WISCONSIN SYSTEM, INC. v. UNITED STEEL, PAPER & FORESTRY, RUBBER, MANUFACTURING, ENERGY ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION (July 12, 2011)

NewPage Wisconsin System recently closed several paper mills that it operates in Wisconsin in order to save money. It also stopped subsidizing medical care for retirees over 65. The Union claimed the subsidy elimination violated both the Retiree Health Plan and the Collective Bargaining Agreement. It brought suit under § 301 of the Labor Management Relations Act and ERISA § 502 in the Southern District of Ohio. Several weeks later, NewPage filed a declaratory judgment action in the Western District of Wisconsin raising the same issues. Judge Crabb (W.D. Wis.) dismissed the suit. She concluded that the court did not have subject matter jurisdiction over the ERISA claim. The court did have jurisdiction over the LMRA claim but dismissed in deference to the Ohio suit. NewPage appeals.

In their opinion, Chief Judge Easterbrook, Circuit Judge Bauer, and District Judge Young vacated and remanded. The Court noted that § 2201 authorizes declaratory judgment actions but does not itself grant subject matter jurisdiction. Jurisdiction must arise from the substantive claims. The Court agreed with the district court that ERISA § 502(a)(3) only grants jurisdiction for a request for appropriate equitable relief. There is no such request here. Nevertheless, the Court found two other bases for jurisdiction. First, ERISA § 502(e) grants jurisdiction for actions arising under its subchapter. NewPage's claim does arise under that subchapter. In order to determine jurisdiction for a declaratory judgment action, a court must determine whether a complaint filed by the defendant would meet jurisdictional requirements. The Court looked to the actual complaint filed by the defendants in Ohio to conclude that it, and therefore the declaratory judgment action, came within § 502(e) jurisdiction. Second, the Court looked to § 1331’s general federal question jurisdiction grant. ERISA claims are always federal in nature. In concluding that the district court had jurisdiction of both the ERISA claim in the LMRA claim, the Court had to overrule part of its 2008 decision in Newell Operating Co. (another part of the decision was overruled in 2010). The Court next addressed whether the district court abused its discretion in dismissing the case in deference to the Ohio litigation. Since the district court decision, that case has stalled on procedural matters and is on appeal in the Sixth Circuit. Wisconsin now seems to be the better forum for litigating the issues on the merits. The Court remanded to the district court, however, to make that decision.

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COBIGE v. CITY OF CHICAGO (July 12, 2011)

In the summer of 2006, the Chicago Police arrested Patricia Cobige on a drug charge. It was not the first time she was arrested. She was sentenced to four years in prison in 1998 on drug charges and, again, sentenced to three years in prison in 2001. Unfortunately, after her 2006 arrest, she suffered a heart arrhythmia and died while in police custody. Her son brought suit against several police officers and the City under both state and federal law. A jury awarded $5 million in compensatory damages and $4,000 in punitive damages. The defendants appeal.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Williams affirmed in part and vacated and remanded in part. The Court examined the trial evidence. It concluded that a jury could have found that Cobige had uterine tumors, that she experienced severe abdominal pain as a result, that the pain led her to produce more adrenaline, that the adrenaline in combination with a pre-existing heart condition caused her death, that routine examinations and care would have prevented her death, and that four police officers ignored her complaints of pain. The City's principal argument is that the plaintiff's expert testified that death can occur only a short period after each spike in adrenaline and that there was testimony that Cobige died in a peaceful sleep. The Court conceded the point but countered that the jury was not required to believe the testimony that she died in her sleep. They could have reasonably believed that she continued to experience the pain throughout the night until her death -- or even that she had been dead for hours. The City also complained that plaintiff's expert was not an expert in police procedures. Again, the Court conceded the point but countered that his testimony only went to Cobige's need for treatment. The City could have presented evidence that she was not treated because of other extenuating circumstances. But it did not. The Court did take issue with the district court's exclusion of much evidence concerning Cobige's drug problem and history of arrests. The district court allowed her son to testify that she was a friend, a supporter, and a role model and that she provided wise advice. The court then admitted evidence only of Cobige 's latest drug conviction. The court relied on evidence Rules 404(b) and 609. Rule 609 is irrelevant in that it deals with attacks on the witness’ character for truthfulness and Cobige obviously never testified. Rule 404(b) also deals with evidence of character and prohibits such evidence when it is offered to show "action in conformity therewith." That is not why the City offered the evidence. It offered the evidence on the question of damages. The exclusion of that evidence requires a new trial, which should be limited to the subject of damages.

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KIMBRELL v. BROWN (July 11, 2011)

Kary Brown collided with a car while he was driving a truck for Koetter Woodworking. Melvin Kimbrell, a passenger in the car, suffered injuries. Kimbrell brought a personal injury action against both Brown and Smith in October of 2008, although he did not serve process until June of 2009. When Brown advised the district court that he had filed a bankruptcy petition in February 2008, the court stayed the proceeding as to him. Koetter moved to dismiss based on Kimbrell's failure to use reasonable diligence in serving process. Judge Gilbert (S.D. Ill.) granted the motion but did not enter judgment. Kimbrell appeals.

In their opinion, Judges Evans, Sykes, and Hamilton dismissed for lack of jurisdiction. The final judgment rule provides that a judgment may not be appealed until the litigation in the district court is over and there is nothing more for the court to do but execute the judgment. On appeal, Kimbrell takes the position that his claim against Brown was void ab initio because it was filed in violation of the bankruptcy stay. The Court noted a debate in other circuits about whether such an action is void or voidable, but felt no need to weigh in. Even if it is void ab initio, the Bankruptcy Code provides avenues for later adjudication. Instead, the Court noted that Kimbrell has taken inconsistent positions regarding his claim against Brown. In fact, the Court discovered that the stay was actually lifted before oral argument and Kimbrell filed a new complaint against Brown. The Court likened the situation to a sort of judicial estoppel, in which a party prevails in one phase of the case on a particular argument and then adopts a contradictory argument in an attempt to prevail in a later phase of the case. Here, Kimbrell has never prevailed, but his gamesmanship in appealing the dismissal of Koetter while still pursuing Brown is unacceptable. The case remains open and unfinished. The final judgment rule does not allow the Court to consider the merits. 

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SENNE v. VILLAGE OF PALATINE (July 11, 2011)

The Court granted a petition for rehearing en banc on September 13, 2011 and vacated the following opinion.

Jason Senne left his car parked overnight in Palatine, Illinois. Unfortunately, he was parked illegally. When he returned to his car, he found that it had been ticketed. The ticket itself included his name, his address, his date of birth, his sex, his height, and his weight. It had been placed on the car approximately five hours before he discovered it. The ticket itself could also be used as an envelope if the recipient decided to pay the fine by mail. Instead of paying the $20 fine, Senne filed a class action under the Driver's Privacy Protection Act. The Act prohibits the disclosure of personal information contained in a motor vehicle record. Judge Kennelly (N.D. Ill.) granted Palatine's motion to dismiss, concluding that the placement of the ticket on the windshield did not constitute a disclosure under the Act and that, even if it did, the disclosure was permissible under the Act. Senne appeals.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Ripple (concurring in part and dissenting in part) affirmed. The Court first turned to the language of the statute to ascertain Congress's intent. The Act provides that a covered person "shall not knowingly disclose or otherwise make available" the personal information. The Court rejected the Village's strained definition of "disclose" to apply only to those situations in which information is actually shared with someone. Relying both on the standard dictionary definition of "disclose" and the rest of the statutory phrase ("or otherwise make available"), the Court concluded that the placement of a parking ticket on a car constitutes "disclosure." The Act, however, lists 14 permissible uses, one of which is that the information may be disclosed in connection with any court or agency proceeding, including the service of process. Placing a parking ticket on a car constitutes service of process. Palatine's conduct was therefore permissible. The Court specifically rejected Senne's argument that the permissible use exceptions included only disclosures that were necessary for the purpose of the exception. Finally, the Court rejected Senne's argument that including the personal information on a piece of paper that could be used as an envelope constituted a second violation. The disclosure is still in connection with the court proceeding so it was still a permissible use. Even if it was an impermissible use, it would be the ticket recipient, not the Village of Palatine, that would be liable.

Judge Ripple wrote separately. He concurred with the majority's treatment of "disclosure." In his view, however, Palatine violated the Act because it disclosed personal information that it did not need to disclose to accomplish the service of process. The exceptions must be interpreted in accordance with Congressional intent. Therefore, Judge Ripple believed that the Act must be read to limit the permissible uses to the disclosure of information that is reasonably necessary to effectuate the government's purpose. Here, none of the information Senne complains of was necessary to achieve Palatine's purpose -- to notify the owner of the car of a parking violation.

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UNIVERSAL MORTGAGE CORP. v. WURTTEMBERGISCHE VERSIGHERUNG AG (July 11, 2011)

Ray Hightower worked for Universal Mortgage Corp., a company that originated mortgage loans and sold them to investors. When Universal sold the loans, it warranted that the loans complied with the Federal National Mortgage Corporation standards. For over a year, Hightower took kickbacks from an outside broker in return for ensuring that Universal approved non-compliant loans. Universal sold the loans without knowledge of their non-compliant status. Some of the loans went into default. When those investors realized that Universal had breached its compliance warranty, they exercised their rights to force Universal to repurchase the loans. Universal estimates that its exposure will be $4.5 million. Universal filed a claim under its bankers blanket bond issued by a consortium of Lloyds of London underwriters. The bond indemnified Universal for "[d]irect financial loss" it suffered "by reason of and directly caused by . . . dishonest acts by any Employee." The bond also excluded any loss "resulting from" a loan repurchase from an investor. The underwriters denied the claim. Universal brought suit for breach of contract and bad faith denial of an insurance claim. Judge Stadtmueller (E.D. Wis.) granted a motion to dismiss, concluding that Hightower's fraud did not "directly cause" the loss and that the repurchase exclusion applied. Universal appeals.

In their opinion, Judges Posner, Flaum, and Sykes affirmed. The Court noted that the bond form has been around for decades and that many of its terms have well-established meanings. But two camps have emerged on the proper meaning of "directly cause." One camp has adopted the proximate cause principle from tort law. But this case is governed by Wisconsin law, and Wisconsin has adopted a "direct means direct" definition of "directly cause." Here, Universal's liability is to a third party. Even if its loss from that liability is due to employee misconduct, the employee misconduct did not "directly cause" the loss. The Court rejected Universal’s argument that its loss arose when it initially approved the non-compliant loans. Even if it did, it recovered that loss when it sold the loans to investors. The loss it now seeks to recover is the loss from its obligation to those investors. Alternatively, the Court agreed with the district court that the repurchase exclusion applied and barred coverage.

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HARVEY v. TOWN OF MERRILLVILLE (July 11, 2011)

The mostly African-American residents of a Merrillville, Indiana subdivision were unhappy with their retention pond. It frequently flooded and they thought it attracted mosquitoes. When town officials considered a subdivision expansion, the residents became even more concerned. They attempted to express those concerns to town officials. They claim that the officials ignored them, subjected them to racial slurs, and were generally less responsive than they were to the white residents of a different subdivision. Several of the residents filed suit pursuant to § 1983 alleging a violation of the Fourteenth Amendment’s equal protection clause. They also brought many state law claims. They named as defendants the Town, the town engineer, and a large number of other town employees. In a December 2, 2010 order, Judge Van Bokkelen (N.D. Ind.) granted summary judgment to the defendants (but failed to mention the engineer) on the ground that plaintiffs failed to identify a similarly situated class. He also declined to exercise supplemental jurisdiction over the state law claims and "remanded" the case to state court. After the engineer sought clarification, the court issued an order the following day pursuant to Rule 60(a) granting summary judgment to the engineer. A few months later, the district court entered Rule 58 judgment as to all defendants. Plaintiffs appealed the December 2 order, but mentioned all defendants. The plaintiffs did not file a notice of appeal with respect to the December 3 order or the later judgment.

In their opinion, Judges Cudahy, Kanne, and Tinder affirmed as modified. The Court first rejected the engineer's arguments that: a) plaintiffs failed to effectively appeal summary judgment in his favor because they did not appeal from the December 3 order or the later judgment, and b) plaintiffs waived their argument as to him by not developing it adequately. With respect to the former, the Court noted that failed attempts to comply with Federal Rule of Appellate Procedure 3  are generally not fatal if the appellee is not harmed. Here, the appellant's identified the engineer by name and even included a copy of the judgment in their brief, which also named him. Their technical noncompliance does not prevent the Court from having jurisdiction. With respect to the latter, the Court acknowledged many deficiencies in the briefing but concluded that plaintiffs addressed the engineer enough to avoid waiver. On the merits, the Court agreed that plaintiffs failed to make out an equal protection claim sufficient to get past summary judgment. To do that, the plaintiffs had to present evidence that they were in a protected class, that they were similarly situated to others in an unprotected class, and that they were treated differently. They did present some evidence of similarities with the residents of another subdivision but they failed to carry the day. There was more evidence of substantial differences between the groups, including subdivision zoning differences and the fact that the other subdivision did not even have a retention pond. In addition, plaintiffs failed to present evidence, other than their pleadings, that the other residents even belonged to an unprotected class. And finally, the record seems to show that the other residents group was actually treated less favorably than the plaintiffs. The district court did err, however, in remanding the case to state court. The case did not originate in state court and cannot be remanded there. The district court should have dismissed without prejudice.

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WEITZENKAMP v. UNUM LIFE INSURANCE COMPANY OF AMERICA (July 11, 2011)

On August 12, 2011, the panel granted a Petition for Rehearing and withdrew this opinion.

As a Time Warner Cable employee, Susie Weitzenkamp participated in its disability plan. Under the plan, a participant is entitled to 24 months of benefits if she can no longer perform her job duties. After 24 months, a participant must be unable to perform any occupation in order to continue receiving benefits. The plan also provides that benefits cease after 24 months in any event if the disability is primarily based on self-reported symptoms that are not verifiable by standard medical examinations. The plan administrator provided participants with a summary plan description ("SPD"). The SPD did not mention the self-reported symptoms exception. In December of 2005, Weitzenkamp became unable to work and was diagnosed with fibromyalgia, chronic pain, anxiety, and depression. Weitzenkamp applied for and received benefits. Weitzenkamp also applied for and received Social Security benefits. In August 2008, the plan administrator discontinued Weitzenkamp's benefits. It concluded both that she was not disabled and that she was ineligible for benefits based on the self-reported symptoms exception. Weitzenkamp brought suit against the administrator. The administrator counterclaimed to recover an overpayment created by the retroactive award of Social Security benefits. Judge Griesbach (E.D. Wis.) granted summary judgment to the administrator on both the complaint and counterclaim. Although the court concluded that the finding of no disability was arbitrary and capricious, it agreed that she was ineligible for benefits because of the self-reported symptoms exception. Weitzenkamp appeals. The administrator cross-appeals the arbitrary and capricious ruling.

In their opinion, Circuit Judges Rovner and Hamilton and District Judge Lefkow affirmed in part, reversed in part, and dismissed in part. The Court stated that ERISA requires an SPD to describe the plan’s requirements for benefits eligibility and note any circumstances that would result in a denial or loss of benefits. The SPD here did not mention the self-reported symptoms exception. It therefore failed to communicate to the plan participants the true scope of the plan and, therefore, violated ERISA. The plan administrator is estopped from relying on the exception. Summary judgment in its favor was error. With respect to the overpayments, the Court agreed with the district court. The Social Security Act does provide that benefits are not subject to levy, attachment, or garnishment. But that is not what the administrator has done. It only seeks a lien on the funds it has already paid to Weitzenkamp, not her Social Security benefits. It is entitled to recover the overpayments in this manner. In its cross-appeal, the administrator sought to challenge the district court's finding that the no disability conclusion was arbitrary and capricious. The Court noted that the cross-appeal was improper. A cross-appeal should be taken only one the party seeks a judgment different from that already rendered. When a party seeks merely to affirm a judgment on alternate grounds, as is the case here, it should raise it in the main appeal. The plan administrator therefore forfeited that argument. Finally, the Court considered whether it was proper to reinstate benefits or merely remand for further proceedings. Given that the plan administrator originally found her eligible for benefits and then withdrew those benefits improperly, the proper remedy is to return to the status quo and reinstate benefits retroactively. The Court noted, however, that the administrator is free to review her present eligibility.

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FLOMO v. FIRESTONE NATURAL RUBBER CO. LLC (July 11, 2011)

A subsidiary of the Firestone Natural Rubber Company operates a large rubber plantation in Liberia. The company employs many local laborers. The jobs pay well but are sometimes hazardous. Because of the relatively high pay and strict daily production quotas, some of the employees hire their own helpers. Some of the employees even bring their own children. A number of those children brought suit against Firestone under the Alien Tort Statute. Judge Magnus-Stinson (S.D. Ind.) granted summary judgment to Firestone. The plaintiffs appeal.

In their opinion, Judges Bauer, Posner, and Manion affirmed. The Alien Tort Statute allows an alien to bring a claim in the United States federal courts for a tort "committed in violation of the law of nations." The two issues presented by the appeal are whether a corporate entity, rather than a natural person, can be liable under the statute and, if so, whether the plaintiffs have presented enough evidence of such a violation to get past summary judgment. The law of nations, or customary international law, derives from the customs and usages of civilized countries. When the statute was first enacted in 1789, it applied principally to piracy, ambassador mistreatment, and violation of safe conduct. But the statute was drafted and enacted to include additional international laws, as they developed. With respect to corporate liability, the Supreme Court has not spoken and most courts of appeals have assumed or held that they can be liable. The Second Circuit concluded that a corporation could not be liable under the Alien Tort Statute. It reasoned that corporate liability could not be customary international law since corporations have never been prosecuted under international law. The Court criticized the Second Circuit precedent because of its incorrect factual premise. It noted that German corporations that aided the Nazi effort were dissolved after World War II. The Court then considered whether there was a compelling reason for the few corporate prosecutions -- and found none. The Court ultimately distinguished between the substance of international law and its enforcement. The substantive obligations are imposed by international law but each nation must decide how to enforce those obligations. In the United States, it is common for corporations to be liable for the torts of its employees. That same principle applies to the United States enforcement of substantive violations of customary international law. The Court declined to define the outer reaches of corporate liability since it was not necessary for its decision. Having found potential corporate liability, the Court turned to the record to determine if there were genuine issues of material fact. Three international conventions helped the court to define customary international law in the case of child labor. The United Nations Convention on the Rights of the Child provides that a child need not perform work that is hazardous, that interferes with his education, or is harmful to his health or development. The Court found that statement much too vague to create an international legal norm. TheInternational Labour Organization Minimum Age Convention states that children under 14 should only do "light work." The Court also found that to be too vague. Finally, the International Labour Organization Worst Forms of Child Labour Convention states that the worst forms of child labor is work that is likely to harm the health, safety or morals of those children. Although a corresponding recommendation provided more detail to that statement, the Court still could not discern an agreed norm of conduct. The Court concluded that the plaintiffs failed to present concrete evidence of how different nations would impose liability for child labor. The Court also concluded that the plaintiffs failed to provide sufficient evidence that the specific conditions at the Firestone plantation were actionable. The record does not show how many children work on the plantations, how much work they do, how hard the work is, and how their lives compare to local children who do not live on the plantation. The Court surmised that the child of a plantation worker, even one who works himself, may be better off than the child of a non-plantation worker.

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LOGAN v. WILKINS (July 8, 2011)

John Logan used to own a mobile home park in east-central Indiana. He claims that he no longer owns it as a result of the conduct of various local government officials and employees. Beginning in 2005, he says, these people started rumors that the health department was going to close the park, told the tenants to stop paying rent, obtained an order for the destruction of thirteen homes, hired an inept contractor who ended up destroying fourteen homes, and stole property. In September 2007, he lost the mobile home park to foreclosure. He also claims that the sheriff had someone order the tenants to vacate after the foreclosure. Logan brought suit in March of 2009 pursuant to §§ 1983 and 1981. Judge Lawrence (S.D. Ind.) dismissed the complaint. He found most of the allegations untimely under § 1983's two-year statute of limitations. The only claims within the two-year period related to the post-foreclosure conduct. Since Logan no longer own the property at that time, he had no claim. In an amended complaint, Logan alleged that the defendants concealed their conspiracy. The district court again dismissed. Logan appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Williams affirmed. In Indiana, the statute of limitations for a § 1983 claim is two years and it runs from the time a plaintiff knew or should have known of a constitutional violation. A defendant may be estopped from asserting a statute of limitations defense if the defendant has concealed material facts from the plaintiff. Logan has not alleged any such facts on the part of the defendants. He simply claims that his attorney was prompted to investigate upon receiving some information at some point after the conduct occurred. But Logan and his attorney knew of the facts as they occurred and they could have investigated earlier. With respect to the post-foreclosure claims, the Court stated that Logan waived any argument by not addressing the claims in his opening brief. The Court added that no facts were alleged to support Logan's conspiracy theory. Finally, the Court declined Logan's request to remand for an opportunity to amend his complaint once again.

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EMPRESS CASINO JOLIET CORP. v. BALMORAL RACING CLUB (July 8, 2011)

Several years ago, the State of Illinois passed laws which required the state's four largest casinos to turn over 3% of their annual revenue to the State. The laws required the State to hold the funds in a segregated account and turn them over to certain Illinois racetracks within days. The casinos brought suit against the racetracks and the Governor, alleging that the racetracks "bought" the legislation in violation of RICO. They sought a constructive trust. Judge Kennelly (N.D. Ill.) ruled that the Tax Injunction Act did not allow such a remedy. On appeal, the Seventh Circuit reversed (opinion here and intheiropinion here). Some of the defendants sought rehearing en banc. The Court granted the petition and vacated that portion of its opinion that addressed the Tax Injunction Act.

In their opinion, Chief Judge Easterbrook and Judges Bauer (dissenting), Posner, Kanne (dissenting), Wood, Sykes (dissenting), Tinder, and Hamilton affirmed. In relevant part, the TIA does not allow a federal district court to enjoin or restrain the collection of a state tax. Although the case before it does not technically seek to enjoin the collection of a tax, the Court stated that the imposition of the constructive trust would amount to the same thing. The Court was critical of some TIA jurisprudence that used "open-ended, multifactor tests" to decide if the Act applied. Instead, the Court noted a strong preference for a simple and clear rule that would distinguish between a tax and other collections of money by a state. The Court concluded that the only material distinction is that a tax generates revenue while a fine punishes and a fee pays for goods or services. The money at issue in this case must, therefore, be a tax because it is not meant to punish or pay for goods or services. The only aim of the statute only aim is to raise revenue. The fact that most taxes go to the state’s general funds and that these taxes passed through a segregated fund directly to the racetracks is irrelevant. The Court noted that lawmakers on the federal and state level frequently use their powers to redistribute wealth from one group to another.

Judge Sykes (joined by Judges Bauer and Kanne) dissented. The dissent noted that a) the suit was a civil RICO case, not a challenge to a State tax, b) not one cent of State money is at issue, c) the State is not even a party to the litigation, d) the State is simply acting as a trustee for the transfer of funds, e) the case poses no threat to Illinois' revenue. The TIA does not, therefore, prevent the case from proceeding.

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ALIOTO v. TOWN OF LISBON (July 7, 2011)

Two Lisbon, Wisconsin supervisors asked Sergeant Tom Alioto to investigate his boss, the police chief. Alioto did so and submitted a report, apparently implicating the chief in unlawful behavior. Lisbon suspended the chief and made Alioto the acting police chief. Shortly thereafter, under threat of litigation, the town reinstated the chief. Alioto claims that the chief got revenge by defaming him in the press, pursuing baseless criminal charges with the district attorney, and imposing unreasonable requirements when Alioto wanted to return to the department after a medical leave. Alioto brought suit against Lisbon and the chief under § 1983, alleging violations of his "constitutional rights." When the defendants challenged the allegations and moved for judgment on the pleadings, Alioto agreed to a briefing schedule. On the day the brief was due, however, Alioto did not respond to defendants' arguments. Instead, he moved to file an amended complaint. Judge Stadtmueller (E.D. Wis.) denied the motion for leave to amend and granted defendants' motion to dismiss. He concluded that Alioto waived any arguments on the merits by not respond to defendants’ motion and failed to show good cause for leave to amend. Alioto appeals.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Rovner affirmed. The Court noted that Rule 15(a)(2) contains a fairly lenient standard for granting leave to file an amended complaint. But Rule 16 requires a court to set a scheduling order with a deadline for amended pleadings, which the court did in this case. The scheduling order set a November 2008 deadline for amended pleadings. Rule 16(b)(4) requires good cause to modify a scheduling order. Here, Alioto requested leave to file his amended complaint months after the deadline. The district court was correct in evaluating his request under the standards both of Rule 16 and Rule 15. The court did not abuse its discretion in finding an absence of good cause. The principle good cause factor is diligence. Here, not only did Alioto request leave several months after the deadline, he waited until the last day of the briefing schedule to even advise the court and the defendants of his request. With respect to the motion to dismiss, the Court also affirmed. Not only did Alioto not respond to any of defendants' arguments in the district court, he never really addressed the waiver argument on appeal.

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BOGAN v. CITY OF CHICAGO (July 6, 2011)

Nicole Evans's eight-year-old son called 911 at about 2:30 a.m. to report that his mother was being beaten. When officers arrived at her apartment, a male voice swore at them from inside. They then heard a woman scream and eventually found her on the roof. She was partially dressed, mentally distraught, and physically injured. She told the police that she wanted her boyfriend arrested. The police saw the boyfriend through an apartment window and went after him. He ran to the rear of the apartment and they followed, searching every room. Other officers had arrived at the building and advised that an African-American male was on the rear porch. The officers arrived at a door which they assumed was a door to the porch. They tried to kick it in but Sharon Bogan opened the door from the inside. She identified the boyfriend as her son. Chicago police searched the apartment but did not find boyfriend. Bogan brought suit against the City of Chicago and the officers under § 1983. She alleged a Fourth Amendment violation. A jury returned a verdict for the defendants. Judge Kennelly (N.D. Ill.) denied her motion for judgment as a matter of law. Bogan appeals.

In their opinion, Circuit Judges Ripple and Hamilton and District Judge Murphy affirmed. The Court first addressed Bogan's claim that the exigent circumstances instruction was error. The district court instructed the jury that Bogan had to prove that a reasonable officer would not have believed that a crime suspect was in the apartment. The Court noted that it had never addressed that precise question. It had, however, addressed the burden of proof question with respect to consent. In Valance, the Court concluded that a defendant asserting a consent exception to a warrantless search claim has the burden of coming forward with evidence but the plaintiff still has the ultimate burden of persuasion. The Court concluded that its rationale there also applied to the exigent circumstances exception as well. The Court acknowledged that there is a split in the circuits on the question, but countered that the split has existed for some time. The Court next addressed Bogan's argument that it was error to allow one of the officers to testify regarding his subjective beliefs during the search of Evans’s apartment. The Court recognized that the exigent circumstances exception cannot be satisfied with a police officer’s subjective view. Instead, the factfinder views the totality of the circumstances as they would have appeared to a reasonable person in the officer’s position. Here, the officer's testimony simply explained his progress and decisions made during this search. The information could have been helpful to a jury in assessing the reasonableness of his actions. Finally, the Court found no error in the district court's rejection of Bogan's request for judgment as a matter of law. There was sufficient evidence in the record from which a jury could conclude that the officers reasonably believed the boyfriend was in the apartment.

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 BROOKS v. CITY OF AURORA (July 6, 2011)

Early one June evening in 2008, two Aurora police officers were staking out a location suspected of being a front for drug activity when they observed Michael Brooks driving through an adjacent parking lot. They knew Brooks but had never seen him drive. When they checked, they discovered that his license had been suspended for over a decade. Before they could take any action, however, they were called away. One of the officers later completed a traffic ticket and obtained a warrant for Brooks's arrest. The police served the warrant a few weeks later. When they arrived at his apartment, Brooks was barbecuing. An officer took him aside and explained the reason for the visit -- that he was under arrest. Brooks denied driving the car, claimed that it was not even working at the time, pulled his wrists away, and started backpedaling and waving his arms. The officer fired two bursts of pepper spray and ultimately immobilized Brooks. He was arrested and charged with the driving offense and resisting a peace officer. He was acquitted of both charges. Brooks filed suit against the police officers and the City of Aurora pursuant to § 1983. He alleged false arrest, false imprisonment, and excessive force. The defendants moved for summary judgment on the false arrest and excessive force claims and asserted qualified immunity on the excessive force claim. Judge Coar (N.D. Ill.) found probable cause and granted summary judgment on the false arrest claim. Sua sponte, he granted summary judgment on the false imprisonment claim for the same reason. Finally, he found that defendants were entitled to qualified immunity on the excessive force claim.

In their opinion, Chief Judge Easterbrook and Judges Ripple and Tinder affirmed. The Court first addressed probable cause on the false arrest and imprisonment claims. Probable cause depends on the facts and circumstances at the time of the arrest and whether a prudent person, with the officers knowledge, would believe that the suspect has committed, is committing, or is about to commit an offense. The offense at issue here, resisting a peace officer, requires "a physical act of resistance or obstruction . . . that impedes, hinders, interrupts, prevents, or delays the performance of the officer’s duties, such as by going limp or forcefully resisting arrest." Although Brooks claims that he had no intent to resist (but just to tell his wife to bring his wallet to the station), the undisputed evidence in the record supports the proposition that a reasonable officer could have believed that he did. Although there is disputed evidence regarding whether Brooks was actually driving a car on the night in question, that evidence is not material. First, resisting even an unlawful arrest violates the statute. Second, Brooks was not actually arrested and detained until after the officers had probable cause to believe that he had resisted the arrest. The Court saw no error in the false imprisonment summary judgment. The analysis is the same for both claims and Brooks never proffered a reason why an opportunity to respond to the false imprisonment claim was necessary. With respect to the excessive force claim, the Court did not decide the deprivation prong of the qualified immunity test. It noted that courts have held the use of pepper spray appropriate in resisting arrest situations and that courts have considered it excessive if its use is unprovoked or gratuitous. Here, regardless of Brooks's intentions, a reasonable police officer could have concluded that he was resisting arrest and that the use of pepper spray would be appropriate. Therefore, the officer is entitled to qualified immunity.

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 EZELL v. CITY OF CHICAGO (July 6, 2011)

A few days after the Supreme Court found Chicago's handgun ban unconstitutional in McDonald, the Chicago City Council passed the Responsible Gun Owners Ordinance. Among other things, the ordinance required one hour of range training for gun ownership but prohibited firing ranges in the city. Several Chicago residents and three interested organizations brought suit, alleging that the range ban violates the Second Amendment. They sought a temporary restraining order, a preliminary injunction, and a permanent injunction. Judge Kendall (N.D. Ill.) denied the TRO and held a hearing on the preliminary injunction. After hearing testimony, the court denied injunctive relief on the grounds that plaintiffs were not irreparably harmed and were not likely to succeed on the merits. The court also found the balance of harm to favor the City of Chicago. Plaintiffs appeal.

In their opinion, Judges Kanne, Rovner (concurring in the judgment), and Sykes reversed and remanded with instructions to enter the preliminary injunction. The Court first addressed irreparable injury and adequate remedy at law. It took issue with the district court's focus on the incidental travel burdens that the ordinance imposed. First, constitutional harm cannot be measured by considering whether the right can be exercised in another jurisdiction. Second, the challenge here is a facial challenge, where harm is not measured by reference to particular persons. Third, the Court compared Second Amendment interests to First Amendment interests, where irreparable harm is sometimes presumed. The Court turned to likelihood of success on the merits. Relying principally on Heller and McDonald, the Court described a framework for resolving Second Amendment litigation. The first question, which requires an historical inquiry, is whether the activity in question is even protected by the Second Amendment. For example, Heller pointed out that some restrictions might survive a challenge because the right at issue was not understood to be a public right at the time the Second (or Fourteenth) Amendment was ratified. The second inquiry is into the justification for the restriction -- the regulatory means and the public benefits end. The nature of the standard of review depends on how close the right is to the core of the Amendment and the severity of the burden imposed. The Court then applied the framework to Chicago's ordinance and first concluded that range training is not outside the protection of the Second Amendment. The "central component" of the Amendment -- the right to keep and bear arms -- would mean little without the right to train and practice. The court distinguished the eighteenth and nineteenth century statutes and regulations cited by Chicago as being merely regulatory or time, place, and manner restrictions. The Court proceeded to the second inquiry and used First Amendment jurisprudence to decide which form of heightened scrutiny was appropriate. It stated that a severe burden on a core right requires strong public interest justification and a close fit between means and the end. More modest burdens on less court rights need less justification. Here, the ordinance is a total ban on a right close to the core of the Second Amendment. The City must satisfy something more rigorous than intermediate scrutiny. The Court found that Chicago had failed to come close. All of its evidence with speculative or conclusory or could be countered with much less burdensome regulatory efforts. The Court concluded that the plaintiffs had a strong likelihood of success on the merits. For much the same reason, the Court concluded that the balance of harms favored the plaintiffs. It ordered that an appropriate injunction be entered on remand.

Judge Rovner wrote separately, concurring in the judgment. She pointed out that the right at issue was not all firearms training but was limited to live training at a firing range. Other types of training, including simulated training, are not at issue and may be enough to make the core right meaningful. She therefore did not agree that the right was as close to the core as the rest of the panel and that, as result, required more than intermediate scrutiny. She also found support in the eighteenth and nineteenth century regulations distinguished by the majority.

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SCHREIBER FOODS v. LEI WANG (July 5, 2011)

Cade Wang lives in China and operates Mature Sky, a trading company. Wang’s cousin, Lei Wang, operates an automotive supply company in Chicago. When Cade was looking for a dairy products supplier in the United States, he approached Lei. Lei, in turn, approached Schreiber Foods. Mature Sky placed a small order for whey protein concentrate -- the transaction was a success. A few months later, Lei Wang negotiated a much larger order -- a $600,000 order for D70, an ingredient in infant formula. Without telling anyone, Schreiber substituted RMW-2 (which it claims is materially identical) for the D70. The end customer refused to accept the product or pay for it. Schreiber did not pursue either the end customer or Mature Sky. Instead, it filed suit against Lei Wang. Schreiber alleged that Wang fraudulently represented that the end customer had promised to buy the product from Mature Sky. Judge Griesbach (E.D. Wis.) granted summary judgment to Wang on the ground that the claim was barred by the economic-loss doctrine. Schreiber appeals.

In their opinion, Judges Posner, Kanne, and Hamilton affirmed. Under the economic-loss doctrine, a plaintiff cannot pursue a tort remedy when he has a contract and an adequate remedy under contract law. Some states do not apply the doctrine where, as here, there are fraud allegations. Wisconsin's fraud exception, however, is very narrow. It requires that the fraud be extraneous to the contract. Here, the alleged fraud is "interwoven" with the contract. The Court noted that the circumstances (two foreign companies with which Schreiber was not familiar, an automobile parts supplier intermediary, the product substitution) required Schreiber to deal with these uncertainties through the contract. The Court also rejected Schreiber's contention that its claim fell within the sale of services exception to the economic-loss doctrine. The Court noted that Wisconsin applies that exception only when the contract is predominantly one for the sale of services, which this is not.

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ROBERTHENRY DAVIS, SR. v. TIME WARNER CABLE OF SOUTHEASTERN WISCONSIN (July 5, 2011)

Time Warner Cable of Southeastern Wisconsin employs two sales teams. The inside team takes calls from business subscribers and is paid mostly through commissions. The outside team is responsible for landing new customer accounts and is paid principally by salary. In the early 2000s, the inside team was comprised of mostly African Americans and the outside team was comprised of mostly whites. Roberthenry Davis was an African-American member of the inside team. Two women, one African-American and one white, joined the inside team in 2005. The white saleswoman's lack of success created friction on the team and even led to rumors outside the team. The team's manager, a white male, criticized the African-Americans on the team for not being more cohesive. The African-Americans objected to that treatment and Davis complained. In late 2006, Davis erroneously treated a simple service request as a commissionable transaction, even though two of his colleagues disagreed. Time Warner ultimately reversed Davis' treatment of the request and concluded that he had violated employee guidelines. Time Warner fired Davis. After further investigation, however, a human resources manager recommended that the company reinstate Davis with back pay, but with a warning and an improvement plan. Although there was disagreement within the company, Davis was soon reinstated. Davis was unhappy about the way he was treated when he returned and he was also unhappy with a new compensation scheme that reduced commission opportunities for the inside team. Davis filed suit, alleging that Time Warner discriminated against him and retaliated against him when it fired him and when it changed the compensation scheme. Judge Adelman (E.D. Wis.) granted summary judgment to Time Warner on the ground that race was not a motivating factor in the company's actions. Davis appeals.

In their opinion, Judges Flaum, Manion, and Tinder affirmed. The Court addressed each claim (discriminatory firing, retaliatory firing, discriminatory compensation, and retaliatory compensation) separately. With respect to discriminatory firing, the Court agreed with the district court that Davis failed to provide evidence of a causal connection between Time Warner’s conduct and his termination. The Court noted that there was some evidence of his manager's insensitivity, or even bigotry, but no evidence that it was a motivating factor. And there was evidence that Time Warner strictly enforced its guidelines and had fired many employees, both white and African-American, for violations similar to Davis’. Davis' retaliatory firing claim was based on his complaints to his manager about what he perceived as unfair treatment. Again, the Court noted the lack of evidence that it was his complains that led it to his termination. Indeed, the evidence was that the company regularly terminated employees for guidelines violations. Davis classified his discriminatory compensation claim as a disparate treatment claim. In order to succeed on that claim, he had to produce evidence that Time Warner reduced his compensation on account of his race. Here, the revised compensation plan applied to all employees of whatever race on the inside team. That fact, coupled with the fact that a member of the inside team could transfer to the outside team, leads to the inescapable conclusion that the decision was not race-based. Finally, the Court reached the same conclusion with respect to Davis' retaliatory compensation claim. There was no evidence to link his complaints to his manager with the changes in the compensation plan.

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JOHNSON v. HIX WRECKER SERVICE (July 1, 2011)

Bobby Johnson worked twelve-hour shifts as a tow truck driver for Hix Wrecker Service in 2006. He later sued the company, claiming that he had not been paid for overtime in violation of the Fair Labor Standards Act. Hix Wrecker claimed that Johnson was not subject to the FLSA but, rather, was exempt under its motor carrier exemption. Judge Lawrence (S.D. Ind.) granted summary judgment to Hix. Johnson appeals.

In their opinion, Chief Judge Easterbrook, Circuit Judge Williams, and District Judge Pallmeyer reversed and remanded. The Court recognized that not all employees of a motor carrier are governed by the FLSA. If the employee engages only in intrastate commerce, the FLSA governs. If the employee is wholly engaged in interstate commerce, the employee is exempt from the FLSA and comes under the jurisdiction of the Secretary of Transportation. Many motor carriers and their employees engage in both in intrastate and interstate commerce -- but they cannot be subject to both statutory schemes. Under a Department of Transportation interpretation, an employee is exempt from the FLSA if the employer presents "concrete evidence" that the employee is "engaged in interstate commerce within a reasonable period of time" before the time period in question. A driver who has not engaged in interstate commerce can still be exempt if the carrier has been engaged in interstate commerce and the employee could be expected to engage in the commerce. The interpretation also adopted four months as a "reasonable period of time." In support of its motion for summary judgment, Hix did not assert that Johnson actually engaged in interstate commerce. Instead, it submitted an affidavit that asserted that Hix "routinely" provides interstate services and that Johnson could have been assigned an interstate wrecker run at any time during his employment. The Court concluded that Hicks did not carry its burden of proving the exemption. The affidavit's use of the term "routinely" was too vague to meet the four-months reasonable time threshold. In the Court's view, "routinely" could mean, for example, once every six months or once a year.

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BRENNAN v. CONNORS (June 30, 2011)

For several years in the 1990s, attorney Edward Brennan represented tennis legend Jimmy Connors. Brennan's law firm dissolved in 1997. The next year, Brennan sued Connors, alleging that Connors terminated their agreement without fulfilling his obligations. Connors settled that suit years later for over $10 million. The settlement agreement contained an indemnification clause, pursuant to which both Brennan and Connors indemnified the other. Shortly after the settlement, Brennan's former law partner sued him. He alleged that Brennan committed fraud and breached his fiduciary duty by delaying Connors' payment until the firm dissolved. Brennan then sued Connors for a declaration that Connors should indemnify him for any liability he owed to his former partner. Judge Murphy (S.D. Ill.) dismissed the complaint, finding a) the indemnification failed because of its "infinitely repeating loop," b) contractual indemnification for intentional misconduct generally violates Illinois’ public policy, and c) the indemnification did not fit into any exception to the general rule. Brennan appeals.

In their opinion, Judges Bauer, Flaum, and Evans affirmed. The Court disagreed with the district court's interpretation of the contract. Instead of a repeating loop, the Court concluded that a better interpretation was that the indemnity language referred back to the first sentence of the agreement. In that sentence, both Connors and Brennan warranted that each was the sole owner of the rights at issue in the litigation. Therefore, the indemnification only kicked in if a third party claimed to be an assignee of one of them – which was not the case here. Alternatively, the Court held that the indemnity was unenforceable because Illinois public policy prohibits indemnities for intentional misconduct. The Court found Brennan's argument that indemnities for intentional past conduct are enforceable unsupported in Illinois law.

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SMEIGH v. JOHNS MANVILLE, INC. (June 29, 2011)

For years, Aaron Smeigh was a model employee at Johns Manville. He had a spotless record. That changed in September of 2008. It was then that Smeigh severed his finger at work. While awaiting the arrival of an ambulance, Smeigh told his supervisor that he did not take drugs but that he might not be able to pass a drug test. He said it was because he had recently been in a room where marijuana had been smoked. The supervisor told the plant manager that Smeigh might not pass a drug test. In fact, Smeigh took a drug test at the hospital and it came back negative. The company considered whether Smeigh's statement violated Johns Manville's substance abuse policy. A human resources manager decided that it was. The company decided to allow Smeigh to keep his job if he entered into a Stipulation of Understanding. The stipulation would require him to meet with a counselor, submit to random drug and alcohol tests, and possibly pay for the tests. Smeigh refused to sign the agreement and the company fired him. After the union filed a grievance, the company offered to hire him back if he passed a drug test and agreed to be subject to random drug tests over two years. Again, Smeigh refused. A union secretary cleaned out his locker to separate company property from personal property. Someone apparently stole some of his personal property before it was returned to him. Smeigh brought suit for unlawful discharge in retaliation for filing a workers' compensation claim and for civil conversion under state law. Judge Pratt (S.D. Ind.) granted summary judgment to the company. Smeigh appeals

In their opinion, Judges Flaum, Evans, and Tinder affirmed. Although an employee can recover damages if he has been terminated for filing a workers' compensation claim, he must present evidence that his termination was solely in retaliation for filing such a claim. Here, Smeigh relies on indirect evidence of causation. In fact, he relies almost exclusively on timing. The Court noted the timing is rarely sufficient, by itself, to create a question of fact. In addition, here there is an intervening event -- his refusal to sign the stipulation. The Court noted that the record shows that the company actually submitted the workers’ compensation claim on his behalf, wanted him to sign the stipulation and retain his job, and was willing to reinstate him a few months later. No reasonable jury could find in his favor. The Court also affirmed on the conversion count. In order to prevail on such a claim, a plaintiff must prove criminal intent. Here, company policy required a company employee to clear out a terminated employee's locker, separate company property from personal property, and return the personal property. The record shows that the employee's control over Smeigh's property was authorized or, at least, she had a reasonable belief that it was. In addition, the only defendant is the company and there is no evidence in the record that the company knew that the employee continued to possess Smeigh's property and Smeigh did not argue vicarious liability. The Court chastised Smeigh for even including the conversion count in the appeal without even explaining his rationale for disagreeing with the district court's analysis. Notwithstanding its criticism, the Court declined to impose sanctions.

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RIVER ROAD HOTEL PARTNERS v. AMALGAMATED BANK (June 28, 2011)

In 2007 and 2008, a number of related entities (the "Chicago Debtors") borrowed in excess of $150 million to build a hotel and convention center near Chicago's O'Hare Airport. Their lenders designated Amalgamated Bank as administrative agent and trustee. At about the same time, another group of related entities (the "Los Angeles Debtors") borrowed in excess of $140 million to purchase a hotel and build a parking garage near the Los Angeles’ LAX Airport. Their lenders also designated Amalgamated Bank as administrative agent and trustee. Both the Chicago Debtors and the Los Angeles Debtors ran into financial trouble and filed Chapter 11 petitions in August of 2009. Both groups of debtors filed a similar reorganization plans. Under both plans, the debtors proposed to sell their assets and distribute the proceeds among their creditors. They also proposed procedures for conducting the sales, which included selling the assets free and clear of liens without allowing the lenders to bid their credit at the sales. Bankruptcy Judge Black (N.D. Ill.) ruled that the plans could not be confirmed because they did not comply with § 1129(b)(2)(A). Both groups of debtors requested and received certifications for direct appeal to the Seventh Circuit.

In their opinion, Judges Cudahy, Manion, and Hamilton affirmed. The only real issue on appeal was the proper construction of the Bankruptcy Code’s § 1129 and, specifically, the exceptions to the requirement that a reorganization plan must either be accepted by the claimants or leave their claims unimpaired. Subsection (b)(1) requires those plans to be "fair and equitable." Subsection (b)(2)(A) defines "fair and equitable." Historically, most debtors that propose plans that are not accepted by the claimants (known as cramdown plans) have sought approval under subsection (b)(2)(A)(ii). But subsection (ii) requires that any asset sale permit credit bidding (where secured claimants can offset their claims against the assets’ purchase price). Neither plan at issue in this appeal allows credit bidding so neither plan can be confirmed under subsection (ii). Instead, the debtors seek confirmation under subsection (b)(2)(A)(iii). That subsection allows confirmation if the claimants receive the "indubitable equivalent" of their claims. The Court addressed two questions -- whether any plan could be confirmed under subsection (iii) or only those that fell outside the scope of (i) and (ii), and if the former, whether the debtors' plans met the "indubitable equivalent" test. On the first of those issues, the Court noted that the Fifth and Third Circuits have recently held that subsection (iii) can be used for any plan. But the Court's own analysis of the statute differed. First, it found that the statute did not unambiguously allow confirmation of the debtors' plans. In fact, it found that the better reading of the statute was that subsection (iii) defined "fair and equitable" only for those plans that did not fit the descriptions in subsections (i) or (ii). It concluded, therefore, that the Code contemplated that an asset sale meeting the subsection (ii) description must satisfy the subsection (ii) requirements. These plans did not.

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The "Stainless Steel Dryer That Wasn't" Saga Continues

On Monday, the Supreme Court granted certiorari in Thorogood v. Sears, Roebuck, vacated the judgment, and remanded for reconsideration in light of Smith v. Bayer.  The remand will be Mr. Thorogood's fourth appearance before the Court. In October, 2008, the Court reversed a class certification order (opinion and intheiropinion). In February of last year, it affirmed the dismissal of the case as moot (opinion and intheiropinion). In November of last year, it reversed and remanded to the district court for the entry of an order barring the continued prosecution of a mirror class action in a California court (opinion and intheiropinion). Two weeks ago, the Supreme Court decided Smith. In Smith, a federal court denied a class certification motion and later enjoined a state court proceeding by a different plaintiff seeking class certification in a case with similar allegations. The Supreme Court reversed, holding that the case did not fit within the relitigation exception to the Anti-Injunction Act.

The cases are distinguishable. For example, both Thorogood cases are in federal court and would apply the same Rule 23 analysis - not so in Smith. And the Thorogood panel was familiar with the issues raised in Smith and did not think it necessary to await the Supreme Court's ruling.

I anxiously await the next chapter of this compelling saga.

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