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

NATIONAL SHOPMEN PENSION FUND v. DISA INDUSTRIES (August 8, 2011)

In the early 2000s, DISA Industries, an Illinois foundry-equipment business, made contributions to its Union's multiemployer pension plan. After only two years of contributions, DISA closed the plant covered by the plan and ceased its contributions. The Plan calculated the company's withdrawal liability at $602 a month. The company challenged the calculation and stated its intent to begin arbitration -- but also began paying the monthly liability. Several months later, the Plan recalculated the monthly liability at $978 and asked for an increase. DISA disagreed with the recalculation and filed a demand for arbitration. It also refused to pay the increased amount. The Plan filed suit in the District of Columbia seeking the recalculated amount. The district court there expressed its doubts about the recalculation but thought the issue should be resolved by the arbitrator. The court also did not think that the statutory obligation to pay withdrawal liability pending a challenge applied in the case of a recalculation. The court therefore dismissed the complaint. After the district court opinion, DISA withdrew its arbitration demand. The Plan then filed suit in Illinois contending that the company was in default and liable for the full amount. Judge Kendall (N.D. Ill.) concluded that the Plan's withdrawal liability calculation was in error, that the company was therefore not in default, and dismissed the complaint. The Union appeals.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Williams reversed. Under ERISA, an employer who withdraws from a multiemployer pension plan is obligated to contribute to the plan that amount of money that represents its employees' share of the unfunded benefits. The employer is usually required to make the payments requested by the fund during any challenge to the calculation. If an employer challenges the calculation but refuses to make the requested payments, the plan may file suit to collect those interim payments. If, however, an employer refuses to make the requested payments without challenging the calculation or the liability, the Plan may file suit to collect the entirety of the liability and the company forfeits any defense that it could have raised with the arbitrator. Here, the Court rejected the district court's conclusion that the Plan could only impose the recalculated amount through arbitration. Instead, the Court concurred with the position taken by the PBGC that the plan may reassess withdrawal liability while the amount is still being challenged in litigation or arbitration. The Plan's reassessment is therefore valid. Since DISA terminated the arbitration proceedings and has not paid the Plan's assessment, it is in default and has forfeited its defenses.

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VANCE v. RUMSFELD (August 8, 2011)

In 2005 and 2006, American citizens Donald Vance and Nathan Ertel were working for a privately owned security company in Iraq. They allege that: a) they came to believe that their employer was engaged in illegal activity, b) they reported their suspicions to the FBI, c) they continued to share information with American officials in Iraq, d) their employer became suspicious and confiscated their credentials, e) American officials "rescued" them and seized their personal property, and f) they were detained, physically and psychologically abused, tortured, treated inhumanely, and assaulted for weeks. They were never charged with a crime and were eventually released. Plaintiffs brought suit against former Secretary of Defense Donald Rumsfeld and other, unidentified defendants. The complaint alleged unconstitutional inhumane treatment, denial of procedural due process, and denial of access to the courts. They also brought a claim against the United States for the return of their personal property. Judge Andersen (N.D. Ill.) dismissed the due process and access claims but refused to dismiss the inhumane treatment claim or the personal property claim. Rumsfeld appeals the inhumane treatment claim -- the United States appeals the personal property claim.

In their opinion, Seventh Circuit Judges Manion (concurring in part, dissenting in part), Evans, and Hamilton affirmed in part and reversed in part. The Court first addressed the Bivens claim against Rumsfeld. It identified three issues: whether there were adequate allegations of Rumsfeld's personal responsibility, whether Rumsfeld was entitled to qualified immunity, and whether a Bivens remedy is even available to a United States citizen in a war zone. First, the Court concluded that the complaint adequately alleged Rumsfeld's personal involvement and responsibility under Rule 8 and Iqbal and Twombly. The complaint alleged, among other things, that Rumsfeld approved a list of interrogation techniques contrary to the Army Field Manual, that he directed that those techniques be used in Iraq, that he was well aware of detainee abuse generally, that he took no action in response to the Ronald W. Reagan National Defense Authorization Act's directive to ensure that detainees were treated in a humane manner, that he continued to approve interrogation techniques not authorized by the Army Field Manual even after the Detainee Treatment Act's limitations of techniques to those authorized in the manual, and that he did not investigate or correct detainee abuse. The Court found that those allegations sufficiently alleged his personal involvement in the policies that led to plaintiffs’ torture and that he was deliberately indifferent to their mistreatment. The Court turned to the issue of qualified immunity and the Saucier two-step test. The Court had little difficulty in concluding that the alleged treatment, if true, "shocks the conscience" and violates substantive due process. In fact, Rumsfeld did not really argue otherwise. Likewise, the Court had little difficulty in concluding that a reasonable United States official would have known that the alleged treatment, if true, would amount to a constitutional violation. Finally, the Court turned to the central issue -- whether Bivens allows a suit for damages by a United States citizen alleging unconstitutional treatment occurring in a war zone. The Court applied the Supreme Court's two-step test: 1) is there a sufficient alternative remedy for the wrong and 2) do "special factors" weigh against recognizing the remedy. Finding no alternative remedy, it focused on the second step. In addressing in the second step, the Court emphasized that the complaint was not a broad challenge to the country’s interrogation or detention policies. It was, instead, a narrow claim for damages. The court found its key elements familiar: a) Bivens has been used by prisoners who have asserted abuse in federal prisons, b) Bivens has been used by civilians who have asserted violation of constitutional rights by military personnel, and c) Bivens has been used against high-ranking government officials, including cabinet members. The Court rejected the defendants’ arguments that a wartime or national security environment counsel against judicial intervention. Finally, the Court emphasized the fact that plaintiffs were United States citizens and distinguished a line of cases that concluded that Bivens did not provide a damages remedy to aliens. It ultimately concluded that there were no special factors standing in the way of a Bivens remedy. With respect to the personal property claim, the Court reversed the district court. It concluded that the "military authority" exception in the Administrative Procedure Act precludes judicial review.

Judge Manion concurred in the personal property portion of the majority's opinion but dissented from the Bivens portion. Judge Manion stated that special factors counsel against applying Bivens in this context and that the majority ignored precedent to that effect and, instead, extended the principle beyond where it has ever been applied. Judge Manion was particularly sensitive to the risks posed by the judiciary getting involved in matters of national security and wartime decisions.

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BOARD OF REGENTS OF THE UNIVERSITY OF WISCONSIN SYSTEM v. PHOENIX INTERNATIONAL SOFTWARE (August 5, 2011)

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

In their opinion, Seventh Circuit Judges Flaum, Wood, and Tinder granted the petition for rehearing limited to the sovereign immunity question, reaffirmed its earlier ruling reversing summary judgment, and also reversed the district court on its finding of sovereign immunity. Although the rehearing was limited to the sovereign immunity issue, the Court did readdress the summary judgment issue. It concluded, as it had done earlier, that the district court erred when it granted summary judgment to the Board of Regents, particularly in light of the TTAB finding and the standard of review. The central question is whether customers are likely to be confused. The TTAB applied the correct standard and looked at the right factors. The district court was wrong when it criticized the TTAB be for considering the actual nature of the products and it was also wrong when it focused so heavily on the registration materials themselves. The TTAB gave three reasons for canceling Wisconsin's mark: they were identical, they performed similar functions, and a sophisticated purchaser would likely believe that there was some relationship between them. Although Wisconsin put on additional evidence challenging these conclusions, it was not sufficient to eliminate any fact issue. The Court turned to sovereign immunity. Although the Eleventh Amendment confers immunity upon a state, it is not absolute. First, Congress can authorize suits against states. Although Phoenix's counterclaims did rely on statutes in which Congress subjected states to liability, the Court doubted that either would survive a constitutional challenge. The Supreme Court has already struck down provisions for state liability in the false advertising and patent infringement areas. Second, a state may voluntarily waive sovereign immunity by its litigation conduct. In Lapides, the Supreme Court held that Georgia waived its sovereign immunity when it removed to federal court a complaint that had been filed in state court. The Supreme Court stated that it would be "unfair" to allow a state to both invoke federal jurisdiction and then to assert sovereign immunity to deny that very jurisdiction. The Court found that the majority of its sister courts had read Lapides to state a general rule, as opposed to being limited to its facts. The Court also concluded that the general rule need not be limited to instances of removal. Here, Wisconsin did not raise sovereign immunity during the administrative proceedings and chose to challenge the findings of those proceedings by filing a separate federal lawsuit. The Court explored the four alternative paths that Wisconsin could have taken that would not have resulted in a waiver -- do nothing after the TTAB finding, refuse to participate at all in the administrative proceedings, file suit in state court, and appeal the administrative findings to the Federal Circuit. One principle that stands out in Lapides is that a state should not be able to advance its litigation position by choosing a federal forum and then asserting sovereign immunity. The Court identified at least three advantages that inured to Wisconsin's benefit because of its choice of the federal forum. The Court then had to resolve whether Wisconsin's waiver extended far enough to permit Phoenix’s federal counterclaims. Relying on guidance from the Supreme Court and its sister circuits, the Court concluded that the waiver was broad enough to encompass compulsory counterclaims. Under Rule 13(a), a compulsory counterclaim is one that arises out of the same transaction or occurrence. The Court had no difficulty, applying the "logical relationship" test, to conclude that the Phoenix counterclaims arose out of the same occurrence as Wisconsin's challenge. Phoenix, therefore may pursue its counterclaims on remand.

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LINEBACK v. IRVING READY-MIX (August 5, 2011)

Irving Ready-Mix has five concrete plants in northern Indiana. For years, its truck drivers have been represented by the Teamsters. The last collective bargaining agreement expired on May 31, 2010. Attempts to negotiate a new agreement failed and the drivers went on strike the next day. Irving announced that it would no longer recognize the union as the employees' bargaining representative and offered jobs directly to the drivers. The union filed unfair labor practice charges with the NLRB. A week after an ALJ heard evidence, but before its decision, the NLRB regional director filed a petition for a section 10(j) injunction. The ALJ then ruled and concluded that Irving was subject to the NLRA unfair labor practice restrictions and that it had violated two of those provisions. In reaching its conclusion, it rejected Irving's contention that it was not bound by the unfair labor practices provisions because it was "engaged primarily in the building and construction industry" under section 8(f). Judge DeGuilio (N.D. Ind.) granted the motion for a preliminary injunction and ordered Irving to recognize the union. Irving appeals.

In their opinion, Seventh Circuit Judges Manion, Wood and Hamilton affirmed. A section 10(j) injunction is an extraordinary remedy and should be granted only when necessary to protect the integrity of the collective bargaining process. Here, Irving does not challenge three of the four requirements for such an injunction -- irreparable harm, balance of harms, and the public interest. It only challenges the assessment of likelihood of success. Its contention is that ready-mix concrete companies are "engaged primarily in the building and construction industry" and not subject to some of the unfair labor practice restrictions. The Court noted that the Board has repeatedly held since 1988 that ready-mix concrete employers are not in the building and construction industry as that phrase is used in the statute. Irving, on the other hand, suggests that the 1988 decision is wrong and cites an earlier Board decision which held that a flooring installer was "primarily engaged." The Court disagreed and found the post-1988 jurisprudence solidly in favor of the Board's position.

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FIELDS v. SMITH (August 5, 2011)

Andrea Fields, Matthew (a.k.a. Jessica) Davison, and Vankemah Moaton are all inmates in the Wisconsin Department of Corrections system and are all male-to-female transsexuals. They have each been diagnosed with Gender Identity Disorder, a condition in which an individual identifies with the gender that does not match his or her own physical characteristics. Prior to 2010, each had been receiving hormonal therapy. Then Wisconsin adopted the Inmate Sex Change Prevention Act, which prohibited the Department of Corrections from using any funds to provide hormonal therapy or sexual reassignment surgery. Fields and the others brought a class action challenging the Act’s constitutionality. Chief Judge Clevert (E.D. Wis.) denied class certification but conducted a trial on the individual claims. After hearing substantial expert testimony, the court concluded that the Act violated the Eighth Amendment, both as applied and on its face. Defendants appeal.

In their opinion, Seventh Circuit Judges Rovner and Wood and District Judge Gottschall affirmed. The Eight Amendment prohibits cruel and unusual punishment. Prison officials violate it when they display "deliberate indifference" to prisoners' medical needs. The Court conceded that two cases, one from 1987 and one from 1997, provide some support for defendants’ views that hormone therapy and sexual reassignment surgery are not required by the Eighth Amendment. The Court noted, however, that the support came from dicta or short comments that were based on certain assumptions pertaining to cost and the availability of alternative treatments. Now, years later, the district court heard expert testimony concerning those assumptions. The defendants concede that GID is a serious medical condition, do not contend that the Act’s prohibitions are defensible on a cost savings basis, and they presented no evidence that an alternative treatment could accomplish similar results. The trial evidence established that hormone therapy was the only effective treatment for plaintiffs' condition. Denying the only effective treatment for a serious medical condition violates the Eighth Amendment. The Court also rejected the defendants’ argument that prison security was a sufficient reason to ban the treatments. Finally, the Court concluded that the district court did not abuse its discretion in finding the Act facially unconstitutional.

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DYNEGY MARKETING AND TRADE v. MULTIUT CORP. (August 4, 2011)

For years, Multuit purchased natural gas wholesale from Dynegy Marketing and Trade. Nachshon Draiman personally guaranteed Multuit's obligation. In 1997, Dynegy expressed interest in acquiring Multuit. Under a confidentiality agreement, it conducted its due diligence. Dynegy ultimately chose not to acquire Multuit but instead entered into a joint venture with one of Multuit's competitors. The relationship soured but Multuit continued to purchase from Dynegy. Multuit was unable to pay its current invoices, however and owed Dynegy in excess of $1.5 million by the end of 2000. On several occasions, Multuit attempted to reach agreement on a long-term price guarantee with Dynegy unsuccessfully. Dynegy ultimately stopped providing gas to Multuit in December 2002 and filed suit. Multuit responded with a host of counterclaims. Shortly after the complaint was filed, the FERC issued a report in which it identified efforts to manipulate price indices in the Western United States energy markets. Dynegy was implicated but the report was limited to the Western United States. In discovery, Multuit attempted to obtain information from Dynegy regarding its price index reporting and calculation. The magistrate judge did not allow it. Dynegy moved for summary judgment on some of its claims and all of Multuit's counterclaims. In response, Multuit submitted an excerpt from the FERC report and a lengthy declaration containing, for the first time, its damage estimates. Judge Nordberg (N.D. Ill.) excluded the declaration and granted Dynegy's motion. After denying Multuit's motion for reconsideration, the court entered judgment pursuant to Rule 54(b). The Seventh Circuit remanded for a prejudgment interest calculation. On remand, Multuit again moved for reconsideration and supplemented the record with additional affidavits. The court denied the motion and entered judgment for Dynegy. Multuit appeals.

In their opinion, Seventh Circuit Judges Kanne and Tinder and District Judge Herndon affirmed. Multuit was chastised by the panel for its "kitchen sink" approach (it presented nine issues) on appeal. The Court considered and rejected each: a) the district court did not err in excluding the declaration when it was the first time Multuit disclosed its damages theory, b) Dynegy's vague statements about "best price" did not amount to an enforceable oral contract, c) there can be no enforceable long-term price agreement when the record presents no evidence of either the price term or duration, d) Dynegy's mistake in failing to invoice Multuit for interest for a period of time did not amount to an implied agreement to forego interest, e) Dynegy offered sufficient proof of its own damages by presenting an expert who testified regarding the invoices and interest calculations, f) the record does not support a conclusion that any alleged price manipulation in the Western United States affected Dynegy's price and therefore its damages, g) Multuit cannot recover on its breach of contract counterclaim when it presented no evidence of damages, h) Multuit cannot recover on its Robinson-Patman Act counterclaim when it presented no evidence of damages, and i) Multuit waived its challenge to the denial of the motion for reconsideration by not addressing the grounds upon which the district court denied it.

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PREMIUM PLUS PARTNERS v. GOLDMAN, SACHS & CO. (August 5, 2011)

On October 31, 2001, a Goldman Sachs employee provided its traders with certain information about 30-year government bonds that had not yet been made public. The traders bought futures contracts for the 30-year bonds and made a lot of money when the bonds’ price rose significantly. Unfortunately, their abnormal trading practices led to an SEC investigation. The SEC filed a civil complaint in September 2003. In March of 2004, Premium Plus Partners brought a class action on behalf of traders who had short positions in the bonds on October 31, no matter when they sold. Judge Der-Yeghiayan (N.D. Ill.) denied class certification. George Tomlinson, an individual investor who held a short position on October 31, then filed suit along with four other individual investors. Judge Bucklo (N.D. Ill.) dismissed the complaint on the pleadings, concluding that the two year statute of limitations had run before the class action had been filed (during which it would have been suspended). Meanwhile, in the Premium case, Goldman Sachs made an offer of judgment for the full amount of Premium's damages plus interest. Premium accepted the offer but also wanted to continue with the suit in order to certify a class and spread its costs among other class members. The court entered judgment on the Rule 68 offer and rejected Premium's proposed plan. Tomlinson then sought to intervene as class representative. The court denied that motion. Premium appeals the order denying class certification, Tomlinson appeals the order denying his motion to intervene, and Tomlinson also appeals the order dismissing his individual suit.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Sykes and Tinder affirmed with a modification. The Court first addressed the individual Tomlinson appeal. On the statute of limitations question, the Court assumed that the Merck federal securities fraud rule applies to a commodities fraud case because it was more favorable to Tomlinson than the understanding of the statute under the Commodity Exchange Act. Under Merck, the statute does not begin to run until the plaintiff discovers (or could have discovered) the essential facts of the violation, including scienter. Tomlinson admits that he was aware of his injury on October 31 and learned soon thereafter that Goldman Sachs had traded on nonpublic information. The central question, then, is whether Tomlinson could have discovered that Goldman Sachs acted with scienter. The Court concluded that all the facts regarding the transactions were in the public domain well before April of 2002. The fact that Goldman Sachs denied it and that the SEC did not file until late 2003 is of no moment. The district court did not err in dismissing the individual Tomlinson suit. The Court's decision on that appeal made their analysis of Tomlinson's intervention appeal rather simple. Since he has filed and lost his individual suit, he is not even a member of a potential class, much less an effective representative of the class. The Court turned to Premium's appeal. It noted that Premium had two options: a) it could have rejected the Rule 68 offer and continued with the case, or b) it could have accepted the Rule 68 offer and keep the case alive long enough for a viable class representative to intervene and pursue the class allegations. It cannotdo what it wants to do -- continue to push ahead with the case as class representative in the hopes of spreading some of its costs and increasing its net recovery. Finally, the Court did find an error in the district court's computation of interest. The court should have calculated a compound, rather than simple, interest. The Court remanded for a recalculation. 

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YANCICK v. HANNA STEEL CORPORATION (AUGUST 3, 2011)

Hanna Steel Corporation employed Matthew Yancick, a white man, for a few years in the mid-2000s. Hanna has a policy prohibiting all forms of harassment and instructs employees to report any harassment to the Human Resource Manager or the General Manager. Yancick signed an acknowledgment of the policy and pledged to follow it. Smith worked with Brad Johnson, an African-American man, while at Hanna. Originally, their relationship was good. It began to deteriorate in early 2005. The two had several confrontations, some of which had racial overtones and some of which did not. Johnson also had confrontations with other employees. Yancick complained at times to his immediate supervisor but never to the Human Resources Manager or the General Manager. In December of that year, Yancick suffered severe and permanent injuries when a steel coil fell on him from a machine operated by Johnson. Yancick asserts that the action was intentional and brought a hostile work environment claim under § 1981. Hanna moved for summary judgment. Yancick moved for and was granted additional time under Rule 56 but was warned by the district court that no additional time would be allowed. With four minutes left in his extension, Yancick filed an oversized brief with a motion for leave to file. He did not file any of the referenced exhibits. A short time later, Yancick filed a substitute response that met all of the page and word limits, again accompanied by a motion for leave to file but again unaccompanied by any exhibits. He finally filed the exhibits a few days later. Judge McDade (C.D. Ill.) denied the motion's, did not consider his response or his disputed facts, and granted summary judgment to Hanna. Yancick appeals.

In their opinion, Seventh Circuit Judges Wood, Williams, and Tinder affirmed. The Court first addressed the procedural issue and noted that it routinely endorses district courts' strict compliance with local rules. The Court rejected Yancick's argument that he had good cause or that his failure was simply a "requirement of form" under Rule 83. The Court found no abuse of discretion in the district court's ruling. On the merits, Yancick must prove that: a) he endured a subjectively and subjectively offensive environment, b) race was the cause, c) the conduct was severe or pervasive, and d) there must be a basis for employer liability. The Court conceded that the record before the coil incident showed that Johnson's conduct was immature and boorish and that he exhibited hostility toward Yancick, but concluded that it did not amount to the severe and pervasive work environment required. In fact, most of Johnson's hostility was not race based. With respect to the coil incident itself, Yancick relied in large part on lay opinion testimony that Johnson was racist to support his assertion that the act was intentional. The Court concluded that the testimony was unsupported by facts and merely reflected the witnesses’ beliefs. In addition, the record supports the conclusion that the incident was an accident and not intentional. Finally, the Court noted that Yancick failed to establish employer liability. Hanna had a formal procedure in place. Yancick was aware of it. Yancick did not take advantage of the remedies provided.

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MORISCH v. UNITED STATES OF AMERICA (July 29, 2011)

Gerald Morisch visited the emergency room at the VA Medical Center in Marion, Illinois, complaining of jaw and neck pain. He was referred to a dentist. A few days later, he had an appointment with his primary care physician at the Medical Center. He was referred to an ENT specialist. The specialist noticed a small mass of his neck. She performed a biopsy and ordered a CT scan. The radiologist that perform a CT scan recommended an ultrasound follow-up -- but no one told Morisch. About a month later, Morisch suffered a stroke. He brought a medical malpractice claim against the United States under the Federal Tort Claims Act. Morisch and his wife both testified that she called the St. Louis VA Hospital, where Morisch had the CT scan, on two occasions and reported stroke symptoms. Judge Murphy (S.D. Ill.) entered judgment in the government's favor after a four-day bench trial, concluding that he failed to establish a violation of the standard of care or any proximately caused injury. Morisch appeals.

In their opinion, Seventh Circuit Judges Williams and Tinder and District Judge Gottschall dismissed. The Court first noted that the transcript of the government expert’s testimony from the four-day trial is the only part of the trial record included in the appellate record. The Court concluded that it could not sufficiently review the record. Morisch thus forfeited his appeal. Notwithstanding that conclusion, the Court went on to conclude that the district court did not err in its finding. In order to prevail on his tort claim, Morisch had to establish the proper standard of care, a failure to comply with that standard, and a proximately caused injury. Proximate cause requires expert testimony. Here, the expert testimony was that, without the evidence of the phone call, the doctors had no reason to follow-up with Morisch after his examination. The district court did not err in concluding that the telephone call testimony should be disregarded. It was unsupported by phone records and inconsistent with other testimony and logic. Morisch’s stroke was therefore not the foreseeable result of any conduct on the part of the VA Hospital. 

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GEORGIA-PACIFIC CONSUMER PRODUCTS v. KIMBERLY-CLARK CORP. (July 28, 2011)

Georgia-Pacific has been selling toilet paper for over 100 years. About 20 years ago, it introduced a diamond-shaped embossed design on its toilet paper and rebranded it Quilted Northern. It obtained trademarks, copyrights, and utility and design patents. When Kimberly-Clark introduced a quilted design on its brand of toilet paper, Georgia-Pacific filed suit. The complaint alleged unfair competition and trademark infringement. Judge Kendall (N.D. Ill.) granted summary judgment to Kimberly-Clark, concluding that the diamond design was functional and not subject to trademark protection. Georgia-Pacific appeals.

In their opinion, Seventh Circuit Judges Kanne, Evans, and Sykes affirmed. Under the Lanham Act, a trademark registration creates a rebuttable presumption of validity. If a challenger, however, shows strong evidence of functionality, the mark holder has a heavy burden of demonstrating that the mark is not merely functional. The Supreme Court addressed functionality in TrafFix, where it stated that a feature is functional "if it is essential to the use or purpose of the article or if it affects the cost or quality of the article." The Court found several TrafFix factors to be relevant: a) a description of functionality in a utility patent, b) advertising the feature, c) difficulty in creating an alternative design, and d) the effect on quality or cost. First, the Court looked to the utility patents and compared the trademarks’ "essential feature" with the utility patents’ "central advance." The parties agreed that the essential feature is the embossed diamond design. All five utility patents also point to the diamond design as the central advance. This is strong evidence of functionality. The Court found support for its conclusion when it went behind the patents' claims themselves to the specifications. The first factor, therefore, supported a finding of functionality. With regard to the second factor, the Court noted significant advertising that linked the diamond design to various utilitarian benefits. That also supports functionality. The third factor, alternative designs, does not particularly support functionality since there are numerous alternatives. The final factor is the design's effect on quality. The Court agreed with the district court that Georgia-Pacific makes numerous claims of quality enhancement based on the design. The Court thus concluded that Georgia-Pacific failed to rebut Kimberly-Clark's, strong evidence of functionality. The Court briefly discussed and rejected Georgia-Pacific claims regarding packaging design and latches.

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KANSAS CITY SOUTHERN RAILWAY CO. v. KOELLER (July 27, 2011)

The Sny Island Levee Drainage District has operated a levee and drainage system in central Illinois for over 100 years. The system is designed to protect a 114,000-acre area from Mississippi River flooding. Over 99% of the affected area is agricultural. The rest is residential, commercial, utility, and railroads. The Kansas City Southern Railway Co. and the Norfolk Southern Railway Co. (the "Railroads") own a combined 355 acres. For decades, the District has funded its operations by assessing a per-acre fee for each landowner in the area. For the last 20 years, the fee has been $8.50 an acre. The District found itself in a precarious financial position after it experienced severe flooding in 2008 and a substantial increase in diesel fuel prices. The Commissioners decided they needed a $10 per acre fee increase. They also decided to stop charging the fee on a uniform basis. They decided pipelines, railroads, and utilities were under assessed. They hired an expert in flood protection projects and asked him to calculate the benefits for the non-agricultural properties. The expert did the analysis but he was short on hard data and used questionable methodologies. When the analysis resulted in a number that the Commissioners could not support, they "refined" the numbers. As a result, the assessments for the railroads increased by 4800-8300%. The Commissioners also exempted land within the municipalities, under the supposition that the cost of collecting the small assessments outweigh the benefits. Then they assumed that all the commercial and industrial properties other than the railroads, pipelines, and utilities were within municipal limits. The Commissioners filed a petition for authorization with the County Court, published notices in the local newspapers, and sent notices to landowners. The notice referred to a $10.00 increase per acre but did not mention the benefit-based assessments for railroads, pipelines, and utilities or the exemption for land within municipalities. The Railroads did not object and the court certified the assessment. When they first received their new assessments, the Railroads filed suit under the Railroad Revitalization and Regulatory Reform Act, which prohibits discriminatory taxes against railroads. The District moved to dismiss on Rooker-Feldmangrounds. Judge Scott (C.D. Ill.) denied the Rooker-Feldman motion and ruled that the assessment was a tax under the Act. She denied the preliminary injunction, however, because the Railroads did not submit evidence that their lands’ assessed value exceeded its true market value by 5%. After a bench trial, the court found in favor of the District, again because of the Railroads' failure to submit evidence of their lands' true market value. The Railroads appeal.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Williams reversed and remanded. The Court first rejected the Rooker-Feldman argument. The doctrine only applies to state court "losers." The Railroads were not even present for, much less parties in, the state court proceedings. There is no judgment against them. Furthermore, they are not seeking a review of the state court order. They are asserting an independent federal cause of action under the Act. Two questions were presented to the Court on the merits: whether the assessment was "another tax" under the Act and, if so, whether the tax was an impermissible discrimination. With respect to the first, the Court looked to the statute, the Supreme Court, its own jurisprudence, and its sister circuits' interpretations to conclude that the assessment was a tax. It raises general revenues for use by the entire District. It is not tied to any specific project or landowner. The Court turned to whether it was discriminatory. It first had to decide who to compare the Railroads to: all property owners, other commercial and industrial property owners, or the Railroad's competitors. It recognized that the three other subsections of the section of the Act at issue dealt with different types of taxes but included reference to commercial and industrial taxpayers. Given that the fourth subsection addressed the same kinds of discrimination, the Court concluded the appropriate comparator group is the other commercial and industrial taxpayers. Since the Act does not define discrimination, the Court adopted the ordinary meaning of the word -- a failure to treat persons equally without reasonable distinction. Here, the record establishes that the Commissioners adopted a proportionately heavier tax on the Railroads. The Court cited the "inadvertent" exemption for the properties outside the municipal boundaries, the exemption for the commercial and industrial properties within the municipality, and the questionable methodology. In addressing the appropriate remedy, the Court noted that the Act provides an exemption to the Tax Injunction Act. Notwithstanding the exemption, however, the Court noted that a federal court should act with restraint in such matters. Therefore, an injunction should not enjoin the entire scheme but should eliminate the discriminatory effects by enjoining the 2009 recalculation and allowing the District another shot at a non-discriminatory assessment.

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MATRIX IV, INC. v. AMERICAN NATIONAL BANK AND TRUST CO. OF CHICAGO (July 28, 2011)

Stylemaster and Matrix IV were both in the molded-plastics industry in the 1990s. In 1997, Stylemaster borrowed money from American National Bank and pledged all of its assets and property as security. In 2001, Stylemaster placed a number of larger-than-usual orders with Matrix. Stylemaster became delinquent on its payments. Matrix brought suit for breach of contract in 2002. Shortly thereafter, Stylemaster filed for bankruptcy. Matrix submitted a $7.2 million claim and American National submitted a $9.6 million claim. Stylemaster's owners formed a new company and purchased Stylemaster's assets at a bankruptcy sale. Matrix objected to the sale and also moved to dismiss the bankruptcy petition on the grounds of fraud. The bankruptcy court, after a hearing, approved the sale. Matrix filed further objections and a motion to reconsider, continuing to insert fraud on the part of Stylemaster and its owners. The bankruptcy court found no evidence of fraud or collusion and denied Matrix's motion. American National filed an adversary proceeding seeking a declaration that its lien had priority over Matrix's. Again, Matrix asserted its allegations of fraud in response. After a trial, the bankruptcy judge concluded that American National's lien had priority, again rejecting Matrix’s claims of fraud and collusion. The district court and the Seventh Circuit affirmed. Meanwhile, Matrix filed a separate suit against American National and Gateway, another company formed by Stylemaster's principals. The complaint alleged common law fraud and RICO violations and parroted Matrix's allegations of fraud and collusion made in the bankruptcy court. Judge Norgle (N.D. Ill.) entered judgment on the pleadings in favor of American National and Gateway, concluding that Matrix's claims were barred by both res judicata and collateral estoppel. The district court denied, however, Gateway's request for Rule 11 sanctions. Matrix appeals. Gateway cross-appeals -- and seeks frivolous appeal sanctions.

In their opinion, Seventh Circuit Judges Bauer and Sykes and District Judge Griesbach affirmed. The Court addressed the two concepts at issue. Res judicata (or claim preclusion) requires party identity, cause of action identity, and a final judgment on the merits. Here, the only disagreement is cause of action identity and final judgment. Collateral estoppel (or issue preclusion) is a narrower concept and requires that the issue be the same issue as in the prior litigation, that the issue was actually litigated, that a determination of the issue was essential to the final judgment, and that the party against whom the concept is used was fully represented. The Court first addressed res judicata. It concluded that Matrix's fraud allegations are the same basic allegations it made in the bankruptcy court and that there was a final judgments on the merits. Instead of concluding, however, that res judicata/claim preclusion barred the suit, the Court turned to its 1990 decision in Barnett. Barnett addressed a bankruptcy court's jurisdiction and the difference between "core" and "non-core" proceedings. There, the Court held that a later-filed RICO claim, because it was non-core, was not barred by res judicata even though the claims had been raised in an earlier bankruptcy proceeding. But Barnett is inconsistent with the Court's own pre-and post-Barnett jurisprudence as well as with other circuit’s decisions. Because the matter was not briefed and because a narrower ground existed on which to resolve the case, the Court did not resolve the conflict. Instead, it concluded that the elements of collateral estoppel were clearly present and that Matrix was thus barred from relitigating the issues it raised in the bankruptcy proceedings. The Court also affirmed the district court's denial of sanctions, concluding that Matrix's claims were at least colorable.

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BURNELL v. GATES RUBBER CO. (July 27, 2011)

Eddie Burnell, an African-American male, worked in Gates Rubber Co.'s tool room from 1993 to 1996. He claims that he was subjected to racial discrimination during this time. After several years elsewhere, he returned to the tool room in 2003. In December of 2006, his supervisor instructed him to perform a task. When he did not do so, the supervisor issued a written warning. Burnell refused to accept the warning, claiming that he did not have time to perform the task. Burnell complained to the plant manager that the warning was inappropriate. His principal excuse was that he did not have time to complete the task. He later added that he had safety concerns. At a later meeting, the plant manager accused Burnell of "playing the race card." The employee relations manager convinced the plant manager not to fire Burnell if he signed a commitment letter. They presented Burnell with a commitment letter that implied that he was guilty of insubordination and dishonesty. He refused to sign the letter. He was fired. Burnell brought suit, alleging Title VII discriminatory discharge and retaliatory discharge claims and a § 1981 discrimination claim. Judge Kapala (N.D. Ill.) granted summary judgment to Gates. Burnell appeals.

In their opinion, Seventh Circuit Judges Kanne, Rovner, and Sykes affirmed in part and reversed and remanded in part. The Court first addressed his Title VII discriminatory discharge claim along with his § 1981 claim, which the Court noted are nearly identical. The Court rejected Burnell's claim under the direct method. Most of Burnell's circumstantial evidence related to the 1993-1996 period. The sum of his circumstantial evidence would not permit a rational jury to make a causal connection between Burnell’s termination and race discrimination. The Court also rejected the claim under the indirect method since he could satisfy neither the “met expectations” nor the "similarly situated" prongs of the test. The Court turned to his Title VII retaliatory discharge claim. Burnell clearly suffered a materially adverse employment action and engaged in statutorily protected activity. In fact, he complained quite regularly about what he felt were discriminatory practices in the workplace. To succeed on his retaliation claim, therefore, he needed only to connect his termination with his complaints. The Court relied almost exclusively on the plant manager's "playing the race card" comment, along with the history of discrimination complaints, to conclude that his claim should have survived summary judgment.

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FRIZZELL v. SZABO (July 27, 2011)

Thomas Frizzell was on his way to work one November afternoon in Springfield, Illinois when Sangamon County Sheriff’s Deputy Carl Szabo noticed (he asserts) that Frizzell was not wearing a seatbelt. Szabo followed Frizzell for several minutes, until Frizzell arrived in the parking lot of his place of employment. Their accounts of what happened next differ substantially. Deputy Szabo testified that Frizzell ignored his instructions to return to his car, ran toward the door of the building, and attempted to enter the building. Frizzell asserts that he was in a hurry because he was late for work, that he did not originally realize that Szabo was talking to him, and that he wanted to clock in before talking so as not to be late. In any event, Szabo used his taser on Frizzell. When Frizzell continued to ignore orders to stay down, Szabo tased him several more times. Finally, Szabo used pepper spray and physically subdued Frizzell. Frizzell lost his job and claims that he felt weak and tired for several weeks following the incident. He did not, however, seek medical treatment. Frizzell brought suit against Szabo pursuant to §§ 1983 and 1988 for excessive force and false arrest. Szabo brought a counterclaim for battery, seeking $75,000. After trial, Judge Scott (C.D. Ill.) refused to give a nominal damages instruction. She changed her mind and gave such an instruction, however, after the jury sent back a note asking if they had to award damages if they found in plaintiff's favor. The jury found against Frizzell on the false arrest claim, found against Szabo on the counterclaim, and found in Frizzell's favor on the excessive force claim but awarded nominal damages. Chief Judge McCuskey (C.D. Ill.) denied a motion to alter the award and also denied attorney's fees. Frizzell appeals.

In their opinion, Seventh Circuit Judges Kanne and Evans and District Judge Clevert affirmed. The Court noted that a nominal damages instruction can be appropriate where: a) an officer uses both justifiable and excessive force but any injury relates to the justifiable force, b) where a jury might conclude that the evidence of injury is not credible, or c) where the degree of the injury itself does not support greater damages. The Court found two of those situations in this case. First, the jury could have concluded that the use of the taser was justifiable but the pepper spray afterwards was not -- but that Frizzell's injuries related only to the use of the taser. Second, Frizzell produced very little evidence of injury related to the pepper spray. The district court did not err in giving the instruction or in denying the motion to alter the judgment. The Court turned to the motion for attorney's fees. On that issue, the district court properly considered the difference between the amount plaintiffs sought and the actual award, the significance of the legal issue at stake, and the litigation's public purpose. The Court agreed that those factors weighed against any award of fees. First, although Frizzell never requested a specific award at trial, he did refer to Szabo's $75,000 counterclaim request as a starting point. The difference between $1.00 and anything near $75,000 is significant. Second, Szabo did not prevail on his false arrest claim and prevailed without measurable damages on his excessive force claim. He cannot claim that he prevailed on any significant legal issue. Finally, there was no public purpose served by the litigation. It was simply a private injury.

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MORRISON v. YTB INTERNATIONAL, INC. (July 27, 2011)

YourTravelBiz.com (also known as YTB International) is based in Illinois and operates a business in which its customers purchase the right to act as a travel agent and sell travel services to the public. A number of its customers brought suit against YTB. They brought the suit as a class action on behalf of all of YTB’s customers and invoked jurisdiction under the Class Action Fairness Act. The class alleged that YTB's business practices violated the Illinois Consumer Fraud Act's prohibition on pyramid schemes. The Act prohibits businesses in which a customer's income is based primarily on inducing others to participate rather than on the amount of goods or services sold. Judge Murphy (S.D. Ill.) dismissed the complaint. First, he ruled that YTB's transactions with the non-Illinois class members were not covered by the Act. Second, he ruled that he should decline to exercise CAFA jurisdiction over the remaining intrastate claims under § 1332(d)(4). Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Flaum and Rovner vacated and remanded. The Court rejected the district court's rationale for dismissing the case. CAFA jurisdiction is examined at the time of the filing of the complaint. Here, the plaintiffs proposed a nationwide class that met the CAFA jurisdictional requirements. Although the district court labeled its dismissal of the non-Illinois plaintiffs as one based on standing, it was wrong. The ruling that the Illinois Act does not cover transactions with out-of-state plaintiffs is a ruling on the merits, not a jurisdictional one. Notwithstanding the district court's error, the Court concluded that it also had to resolve the Illinois Consumer Fraud Act question. It likened § 1332(d)(4) to abstention, a concept under which a federal court has jurisdiction but declines to exercise it. If non-resident plaintiffs are covered by the Act, the claim is predominately interstate and a federal court should resolve the entire claim. Whether the non-resident plaintiffs are covered by the Act is governed by the Illinois Supreme Court's decision in Avery. There, the court concluded that the Act applies if "the circumstances that relate to the disputed transaction occur primarily and substantially in Illinois." The Court found the factors here quite balanced: YTB's only office was in Illinois, it included an Illinois choice of law clause in its contracts, and it conducted training sessions in Illinois -- but the class members come from many different states, the class members' losses incurred in different states, and some states may not prohibit pyramid schemes. On balance, the Court concluded that the factors, although they may not compel application of Illinois law, they certainly did not defeat its application. The complaint therefore must survive a motion to dismiss.

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YANNACOPOLOUS v. GENERAL DYNAMICS (July 26, 2011)

In the early 1980s, General Dynamics had a consulting agreement with Dimitri Yannacopolous under which Yannacopolous helped a subsidiary market telephone equipment in Greece. The agreement was terminated in 1983. In 1987, General Dynamics agreed to sell Greece several fighter planes plus parts and services. The sale was conducted under the auspices of the United States' Foreign Military Financing program. Under that program, Greece purchased the planes from General Dynamics directly but with funds loaned to it by the United States government. When Yannacopolous learned of the sale, he demanded a commission. General Dynamics refused. Yannacopolous brought suit against General Dynamics and lost. Relying on information he obtained, at least in part, from discovery in that suit, he filed a False Claims Act complaint against General Dynamics. Judge Gettleman (N.D. Ill.) granted summary judgment to General Dynamics. Yannacopolous appeals.

In their opinion, Seven Circuit Judges Bauer, Sykes, and Hamilton affirmed. Under the False Claims Act, it is illegal to present to the United States a false or fraudulent claim for payment, to make a false statement material to a false claim, or to use a false record to conceal an obligation to pay. Individuals (known as "relators") are authorized to initiate civil suits under the Act on behalf of the United States and receive, in return, a percentage of any funds recovered. The elements of the claim are that: a) the defendants made a statement for the purpose of receiving money from the government, b) the statement was false, and c) the defendant knew the statement was false. Yannacopolous alleges several separate claims under the Act. He claimed that General Dynamics (or, in the case of d) below, Lockheed): a) lied about funds used to capitalize a Greek business development company, b) failed to disclose the deletion of the Economic Price Adjustment clause from the draft contract, c) made misrepresentations regarding spare parts purchases, and d) made misrepresentations in contract amendments. The Court considered each claim in turn. First, the Court rejected Yannacopolous's argument that General Dynamics breached the contract by charging to it its costs of establishing the Greek business development company. It did not violate the representation that "material" was of U.S. origin since the investment in the development company was not "material." Furthermore, there was nothing in the contract itself that prohibited these costs from being charged to the contract. In fact, it appeared that General Dynamics’ conduct was consistent with the contract. Yannacopolous also claimed that General Dynamics falsely certified compliance with respect to the business development company costs. Again, the Court rejected that claim, in part, because it related only to "material." It did concede that one certification neglected to explicitly refer to the contract. The Court concluded that no reasonable juror could find the omission material, since General Dynamics had recently submitted the contract for review. Second, the Court rejected Yannacopolous's argument with respect to the Economic Price Adjustment Clause deletion. The draft contract contained such a clause. It reduced the contract price because of the economic benefit General Dynamics was going to receive from advance payments. Greece agreed to delete the clause, however, in exchange for General Dynamics' agreement to deliver the planes on an accelerated schedule. Before General Dynamics submitted any invoices, it sent a letter to the government explaining that the clause was no longer applicable. Even if General Dynamics failed to comply with paragraph 10 of the Certification Agreement that required notification of any changes in the clause, the deletion of the clause was immaterial. Third, the Court rejected Yannacopolous's argument with respect to spare parts. Under the contract, $70 million was allocated for spare parts, including hardware and services. The services element was not subject to change but the hardware portion of the charge was understood to be an estimate, subject to recalculation at the end of the contract period. General Dynamics continued to submit invoices including spare parts charges after Greece decided to purchase some spare parts outside the contract. The contract required an "appropriate" adjustment to the spare parts price before the March 1987 payment. Yannacopolous maintained that General Dynamics’ failure to reduce the parts price after knowing of Greece's decision was a false statement. In order to prevail, Yannacopolous had to present evidence that General Dynamics knew that the initial estimate was incorrect and that Greece would not order $70 million in spare parts over the life of the contract. Yannacopolous did not produce evidence that General Dynamics could have known that Greece's decision to buy some spare parts elsewhere would lead to a conclusion that it would not purchase $70 million of spare parts from General Dynamics over the following decade. Next, the Court rejected Yannacopolous's interpretation of the contract with respect to the depot program and concluded there were no false invoices. Finally, Lockheed assumed all of General Dynamics' rights and obligations under the program in 1993 and entered into two contract modifications with Greece. Yannacopolous claims both are "reverse" false claims. The Court concluded that Yannacopolous did not present evidence that either modification was objectively false. 

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WHITE PEARL INVERSIONES S.A. v. CEMUSA, INC. (July 26, 2011)

Cemusa is a U.S. subsidiary of a Spanish company that places street furniture (bus shelters, trash bins, etc.) in the European market. Cemusa hired White Pearl Inversiones, a Uruguayan company, to help it break into the United States market. Cemusa and White Pearl collaborated informally in responding to opportunities in Miami and San Antonio. Cemusa was successful in both cities. They entered into a Letter Agreement in March of 2003 in anticipation of a similar opportunity in New York City. Cemusa agreed to pay $240,000 for White Pearl's guidance on strategy and professional introductions. The Letter Agreement also provided that the $240,000 would be deducted from any compensation owed under the anticipated Master Agreement. Cemusa and White Pearl did enter into a Master Agreement days later. The Master Agreement provided that the parties would enter into city-specific RFP Agreements for each project. It also provided that White Pearl would receive 3.75% of Cemusa's net revenue in any given project if an RFP Agreement did not provide otherwise. The right to the fee vested on the issuance of an RFP. The Master Agreement was terminable by either party on 30 days notice. Cemusa terminated the Master Agreement in February 2004, before any RFP had issued. New York City issued its RFP the following month. Cemusa was awarded contracts in each of the city's five boroughs. Cemusa refuses to pay White Pearl any more than the Letter Agreement's $240,000. White Pearl filed suit for breach of contract as well as numerous other state law claims. Judge Andersen (N.D. Ill.) dismissed the complaint. White Pearl appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Bauer and Williams affirmed. The Court first addressed jurisdiction. The complaint states that White Pearl is a Uruguayan corporation -- but Uruguay does not have corporations like the U.S. It does have limited liability businesses, however. The Court ultimately found that it did not have to decide White Pearl's status. It would either be treated like a corporation or like a joint-stock company. Since its only equity investors are citizens of Brazil, complete diversity is established either way. The Court next addressed the source of applicable law. The Letter Agreement expressly provides that is it is to be governed by the laws of Spain. But neither party mentioned the law of Spain. They both cite Illinois and New York cases. As a result, the Court considered dismissing the appeal on forfeiture grounds. It decided not to do so, but warned that it could in a less straightforward case. It turned to the merits. White Pearl does not claim that it was not paid the $240,000 provided for in the Letter Agreement. Likewise, White Pearl does not contest Cemusa's termination of the Master Agreement. A court will not resort to quantum meruit or unjust enrichment to modify a contract's price term. White Pearl agreed to a set fee. Cemusa is not obligated to compensate it for effort that it voluntarily offered above anything required by the contract. The Court did briefly mention the Illinois remedy in quantum meruit when a party terminates a contract after most of the work has been completed. It gave as examples the attorney who is fired right before the jury's verdict or the real estate agent who is fired the day before closing. White Pearl's efforts are not analogous, however. It is more akin to the attorney or real estate agent who consults with a client and does some preliminary work but is not hired. White Pearl is entitled to the $240,000 – no more.

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WESTERN GLOVE WORKS v. XMH CORP. (July 26, 2011)

Simply Blue, an XMH subsidiary, entered into a contract with Western Glove Works under which Western granted a sublicense to Simply Blue to sell womens' jeans with the trademark "Jag." The contract went into effect on December 17, 2002. The sublicense expired, after some extensions, on June 30, 2003. After the expiration of the sublicense, Western took over the right to sell the jeans but Simply Blue provided substantial services for a fee. In 2009, while the contract was still in effect, XMH sought bankruptcy relief for itself and some of its subsidiaries (including Simply Blue). XMH sought the approval of the bankruptcy court to sell Simply Blue's assets (including the executory contract with Western). The bankruptcy court refused, agreeing with Western that the contract was a trademark sublicense and could not be assigned without Western's permission. XMH appealed that order to the district court. The district court allowed the purchasers to substitute for XMH and reversed the bankruptcy court. Western appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Williams affirmed. The Court first resolved several jurisdictional issues. First, it rejected Western’s argument that the purchasers, who had not appealed the bankruptcy court order, had waived their right to prosecute the appeal. XMH did appeal and later sold the assets that involve the contract at issue. The purchasers are simply stepping into the shoes of XMH, like an assignee. Second, the Court noted that it had a bankruptcy appeal in which neither the bankrupt nor the trustee was a party. But the bankruptcy court had jurisdiction over the dispute when it was filed. Subsequent events have not deprived the courts of federal jurisdiction. Finally, the Court rejected the purchaser's argument that the district court’s order was not final. Although the district court did remand to the bankruptcy court, the bankruptcy court need only issue the order allowing the assignment. When there is a remand for a ministerial act only, the order is appealable. The Court turned to the merits. The Bankruptcy Code limits the assignment of an executory contract if "applicable law" allows the non-debtor party to the contract to refuse to accept the assignee’s performance. Here, "applicable law" is trademark law which prohibits the assignment of a license unless expressly authorized (which it is not here). If, therefore, the arrangement between Western and Simply Blue at the time of the assignment was a trademark sublicense, the assignment should not be allowed. But the sublicense expired in 2003. Western argues that the continuing contractual obligations constituted some sort of implied sublicense. The Court disagreed. The contract is clear. When the sublicense expired, the rights in a trademark reverted to Western. Notwithstanding the substantial services provided by Simply Blue, there was no longer a sublicense. The debtor's assignment is permissible.

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NOVA DESIGN BUILD, INC. V. GRACE HOTELS, LLC (July 26, 2011)

Grace Hotels entered into a contract with Nova Design Build to provide architectural services in connection with its construction of a Holiday Inn Express in Waukegan, Illinois. In addition to the architectural fees, Grace promised to pay a $15,000 penalty if it did not use Nova's construction affiliate to build the hotel. The parties' relationship soured during the design phase and Grace did not use Nova's affiliate to build the hotel. Nova completed the design and registered a copyright for it. Because its computers had been stolen, Nova had to create a duplicate of its designs to satisfy the Copyright Office’s requirement of submitting a copy of the designs. Nova then sued Grace, alleging federal copyright infringement as well as state law claims. The gist of Nova's allegations is that Grace infringed its copyright when it used Nova’s designs to construct the hotel. Judge Der-Yeghiayan (N.D. Ill.) granted summary judgment to Grace on the ground that Nova's design re-creation did not satisfy the Copyright Office requirements.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Kanne and Wood affirmed. The Court first addressed federal jurisdiction. Under the doctrine set forth in T.B. Harms Co., a federal court has jurisdiction under the Copyright Act only if the complaint seeks a remedy granted by the Act, as opposed to a contract remedy. In Harms, the issue concerned the ownership of the copyright, not its infringement. Here, however, Nova clearly alleges infringement and seeks a Copyright Act remedy. The fact that Grace has set forth a state contract law defense is immaterial. On the merits, the Court disagreed with the district court's resolution. The Copyright Act requires the registrant to submit a complete copy of the designs seeking to be registered. The submission must be "virtually identical" to the original designs. The Court concluded that the record supported Nova's claim that the submitted designs met the requirement and did not support the district court's speculation that Nova had to resort to employees’ memories to re-create its designs. Notwithstanding its disagreement with the district court on the registration requirement issue, the Court nevertheless affirmed. Before inquiring into whether the completed hotel infringed Nova's design, a court must identify the aspects of Nova's design that he can be protected. The only design aspects that can be protected are those that have originality. Here, Nova's designs were based on a Holiday Inn Express model. Although Nova added some features and changed others, there was not enough originality or creativity in the changes to qualify for Copyright Act protection. Grace was entitled to summary judgment.

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UNION PACIFIC RAILROAD CO. v. CHICAGO TRANSIT AUTHORITY (July 25, 2011)

The Union Pacific Railroad Company owns a 2.8 mile right-of-way running between Chicago and Oak Park, Illinois. UP itself operates three railroad tracks on the right-of-way. Since the early 1960s, UP has leased approximately 40% of the right-of-way to the Chicago Transit Authority. The CTA runs two railroad tracks parallel to UP’s. A written lease has defined the rights and obligations of UP and CTA over the years. For example, CTA must maintain its tracks in good condition, is limited to providing passenger transportation, and must reimburse UP 40% of any joint maintenance expenses. UP, on the other hand, maintains the right-of-way and all joint facilities and has agreed to use non-standard inspection and maintenance procedures because of the proximity of the lines to each other. The CTA pays monthly rent to UP, recalculated every 10 years under a formula contained in the lease. The monthly rent increased from approximately $25,000 to approximately $90,000 when it was recalculated for the 2002-2012 lease period. The parties discussed a one-time permanent easement fee instead of a monthly rent but did not reach an agreement. In 2006, CTA issued an ultimatum. It offered approximately $7.5 million for a perpetual easement or, if that was not acceptable, it would condemn the property. UP declined and, making good on its threat, the CTA instituted condemnation proceedings. UP brought suit for an injunction, maintaining that the Interstate Commerce Commission Termination Act preempted the condemnation. Judge Dow (N.D. Ill.) granted summary judgment to UP, concluding that the condemnation was both categorically preempted and preempted "as applied." The CTA appeals.

In their opinion, Seventh Circuit Judges Flaum, Manion, and Evans affirmed. The Court addressed the underlying legal principles. Under the Supremacy Clause, federal law preempts state law that interferes with it. Congress enacted the Interstate Commerce Commission Termination Act in 1995, which gave the Surface Transportation Board exclusive jurisdiction over railroad transportation regulation. "Transportation" includes a railroad's property, facilities, and equipment that are related to the movement of passengers or property. The Court found it clear that UP and the right-of-way were covered by the statute. In addressing whether the condemnation was preempted by the statute, the Court discussed the Board's two approaches to preemption. Some state action is preempted on its face, notwithstanding its rationale. That is referred to as categorical preemption. Other state action may be preempted depending on the degree of interference with railroad operations, which is referred to as "as applied" preemption. The district court adopted the Board's approaches and found the condemnation preempted under both approaches. The Court, on the other hand, concluded that the categorical preemption approach should be used only when looking at a rule of general applicability. A condemnation is not such a rule. By definition, it relates to a specific parcel of property and each instance has a different factual setting. The Court found support for its conclusion in the Board's cases. Applying the "as applied" analysis, the Court agreed with the district court. The CTA argued that is already using the right-of-way and its condemnation is defined as being coextensive with the lease. Therefore, it argues, the condemnation can not be considered an interference at all. In fact, it is nothing more than maintaining the status quo. The Court found the CTA's logic flawed. First, the CTA’s use of the property significantly interferes with UP transportation. The fact that UP agreed to that interference, in return for significant monthly rent, does not change the nature of interference. Preemption only comes into play when the interference is forced by regulation, not when it is agreed to by contract. Second, the Court disagreed with the CTA’s assertion that the condemnation is coextensive with the lease. For example, the lease has a termination clause. If the CTA stops using the tracks for passenger transportation or otherwise fails to live up to its obligations under the lease, the lease terminates. There would be no such provision after a condemnation.

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IN RE: GOLF 255, INC. (July 22, 2011)

Golf 255's creditors petitioned to have it declared bankrupt in late 2006. The bankruptcy court appointed Robert Eggmann as trustee, granted Eggmann's motion to sell the corporation's principal asset (a golf course), and ultimately approved the sale. Nick Jakich and Jay Dunlap, Golf's owners, opposed the petition and the sale, appealed from the sale order, moved to remove the trustee, and moved to dismiss the proceedings -- all to no avail. Over a year later, they continued their challenge. They asked to conduct discovery on whether the bankruptcy proceedings and sale had been fraudulent, and asked the court to rescind the sale and investigate their allegations of fraud. The bankruptcy court denied the requests. Finally, they opposed the Eggmann's request to close the case. The bankruptcy court closed the case. Judge Murphy (S.D. Ill.) affirmed. Jakich and Dunlap appeal.

In their opinion, Seventh Circuit Judges Posner and Manion and District Judge Lefkow affirmed. The Court recognized that the bankruptcy court treated the request for discovery and an investigation into fraud as a Rule 60 motion. Fraud is a basis for setting aside a judgment if the motion is filed within one year of the judgment unless there is "fraud on the court," in which case the motion can be brought at any time. The appellants insisted that a former Golf shareholder did commit fraud on the court by manipulating the proceedings and the court in forcing the sale of the golf course. The Court noted that "fraud on the court" is not defined in the rule but considered it important to define it narrowly because of its unlimited deadline. So the court asked what kind of fraud should open a judgment to collateral attack years after its entry. It answered its own question -- fraud that is unlikely to be discovered, even with diligent inquiry, for years. It cited as examples bribing a judge, tampering with a jury, or submitting forged documents. Applying that definition to the facts before it, the Court found the claim baseless. The shareholder was not acting as a lawyer during the bankruptcy proceedings, but as a creditor. If he submitted inflated claims, and encouraged others to do so as well, he would have committed fraud -- but not a fraud on the court. The Court added two remarks. First, it noted that no one who looked at the allegations of fraud, including the trustee, the bankruptcy court judge, the district court judge, and a mediator, found any merit in the allegations. Second, rescission of the bankruptcy sale would be improper unless there was a finding that the golf course buyer, a local recreation district, was complicit in the fraud and there is no evidence of that. Finally, the Court granted Eggmann’s motion for sanctions under Rule 38.

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CONTINENTAL CASUALTY CO. v. SYCAMORE SPRINGS HOMEOWNERS ASSOCIATION (July 22, 2011)

Courtyard Homes at Sycamore Springs built and sold the residential units in a subdivision outside Indianapolis in the White River floodplain. The original developer had taken several steps to protect the homes in this low-lying area from the possibility of flooding. Courtyard reversed some of those protections when it filled in one of the retention ponds to build more units and converted some single-family units to duplexes. In September of 2003, a retention pond overflowed and flooded several homes during a period of heavy rains. The Homeowners Association brought suit against Courtyard, demanding that it reduce future flooding hazards. Courtyard tendered its defense to its insurer, Continental Casualty Company. Continental denied coverage and filed a declaratory judgment action. Meanwhile, the Homeowners Association and Courtyard settled the state court case for $335,000. The Association agreed to accept $35,000 of that from Courtyard. Judge McKinney (S.D. Ind.) granted summary judgment to Continental on the grounds that the complaint sought only property improvements, not compensation for loss. The Homeowners Association appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Bauer and Evans affirmed. The Court agreed with the district court that the insurance policy did not cover any cost of improving flood protection. The Court also recognized, as did the district court, that part of the $335,000 settlement may have covered compensation for some homeowners' losses in addition to property improvements. But neither the settling parties nor the district court judge allocated that amount between improvements and compensation -- now it is too late.

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PAKOVICH v. VERIZON LTD PLAN (July 22, 2011)

Lisa Pakovich became disabled during her employment with Verizon. Verizon denied her request for long-term disability benefits under its ERISA plan. Although the district court affirmed the denial, the Seventh Circuit reversed and remanded to the plan administrator for a new determination. Pakovich heard nothing from the administrator for almost 5 months so she filed another suit. Shortly thereafter, the Plan agreed to pay all the benefits she requested and moved to dismiss her suit as moot. Judge Reagan (S.D. Ill.) denied the motion, entered judgment for Pakovich in the amount the Plan agreed to pay, but denied Pakovich's fee motion.

In their opinion, Seventh Circuit Judges Flaum, Evans, and Tinder vacated in part and affirmed in part. The Court first agreed with the Plan that Pakovich's case was moot. The Plan agreed to pay everything she asked for in her claim for benefits. Her fee request did not prevent her case from being moot. The Court next considered whether the district court even had jurisdiction of her fee claim. Relying on its FOIA jurisprudence, the Court concluded that a district court retains equitable jurisdiction to address a fee claim. Addressing the merits of the fee claim, the Court noted that a fee award under ERISA has two elements. First, the claimant must show "some degree of success on the merits." Second, the defendant's position must be not substantially justified. The Court ultimately determined that it did not need to decide either of those elements. Here, the district court denied her fee request because of inadequate documentation and support for either the hourly rate or the time spent. It was her burden to adequately support her request. The district court did not abuse its discretion when it denied fees.

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BENUZZI v. BOARD OF EDUCATION (July 21, 2011)

Thirty years ago, the Chicago Public School System hired Jessica Benuzzi, a white woman now in her fifties, as one of its first female custodial assistants. A promotion in 2004 qualified her to be the senior custodian at a large school. She was granted a transfer to a school that was closed and undergoing major renovation -- and was scheduled to be opened as the John J. Pershing West Magnet School in the fall 2005. In March of 2005, however, the Board of Education named Cheryl Watkins as the new Pershing principal. Watkins is an African-American woman in her forties. From their first encounter, the two women did not get along. Over the next several school years, Benuzzi complains that Watkins refused to accommodate her request for a shift change, unfairly reprimanded her on numerous occasions, treated her very roughly, demanded a fitness for duty examination, and suspended her without pay on more than one occasion. Benuzzi filed a gender discrimination charge with the EEOC in October 2006. She updated the charges several times thereafter. She filed suit against Watkins and the Board in June 2009 alleging, among the things, gender discrimination and retaliation under Title VII. A few days after Watkins waived service, she reprimanded Benuzzi again. When Benuzzi wouldn't sign the reprimand, she asked the Board to remove her from the school. The Board refused. Watkins was present at Benuzzi's deposition on February 25, 2010. The very next day, Watkins restricted Benuzzi's presence at Pershing and also issued a Notice of Disciplinary action that referred to nine different instances going back several months. Judge Conlon (N.D. Ill.) granted summary judgment to the defendants. In doing so, she did not consider most of Benuzzi's factual submissions because their length violated a local rule. Benuzzi appeals.

In their opinion, Seventh Circuit Judges Flaum, Wood, and Tinder affirmed in part and vacated and remanded in part. The Court first addressed the district court's ruling on the factual submissions. It emphasized its support for local rules and a district court’s policy to insist upon strict compliance. The rule at issue here is 56.1, which requires that a party opposing summary judgment respond to the movant’s statement of facts in no more than forty "short numbered paragraphs." Benuzzi's filed forty paragraphs but her paragraphs sometimes ran as long as 18 lines. Apparently, the district court considered only four of Benuzzi's paragraphs. The Court expressed some concern about such a strict interpretation of the standard that uses the word "short." Since both sides acquiesced at oral argument to the Court's consideration of the entire record, the court did not need to decide if the 56.1 ruling was an abuse of discretion. On the merits, the Court first addressed her gender discrimination claim. One of the requirements for her to succeed on the claim is to show not only that the reasons for her suspensions were dishonest but that they were, in fact, based on discrimination. Benuzzi presented no evidence that gender bias had any impact on Watkins's decisions. Her gender discrimination claim must fail without that link. The Court turned to her retaliation claim. It quickly concluded that she satisfied the statutorily protected activity element and that her suspension without pay was a materially adverse action. The Court also concluded that the Notice of Disciplinary Action and memorandum restricting her hours could constitute a materially adverse action and left that question for a jury. The Court acknowledged that written warnings are generally not enough to constitute a materially adverse action but noted that the context here (numerous charges, for minor transgressions, going back several months, delivered the day after she was deposed) could lead a jury to conclude otherwise. Finally, the Court considered causation. Again, the Court thought that a jury should decide causation with respect to the Notice of Disciplinary Action. Suspicious timing is frequently not enough to establish causation. But here, where the gap was so short and there were no intervening events, a jury should decide. The Court decided that there was not enough causation evidence to send the retaliation claim to the jury.

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TOWNSQUARE MEDIA v. BRILL (July 21, 2011)

In 2002, creditors of several of Alan Brill's media companies forced them into bankruptcy. The bankruptcy court ordered the companies' radio stations sold. Regent Communications, Inc. was the successful bidder at the sale, although Brill also bid. After several years passed, Brill filed a 111-page complaint in Indiana state court against Regent and a number of other defendants, alleging both tort and contract claims based on state law. The gist of Brill's claim against Regent is that Regent used information obtained from Brill but subject to a confidentiality agreement to outbid Brill for the radio stations. Several of the defendants, creditors in the original bankruptcy case, removed the case to the bankruptcy court in the Southern District of Indiana. Before the bankruptcy court ruled, Brill filed an amended complaint in which Regent was the only defendant and the confidentiality agreement violations were the only claims. The bankruptcy court concluded that the amended complaint was not related to the bankruptcy case. The court therefore concluded that it had no jurisdiction over the case and remanded it to the Indiana state court. Chief Judge Young (S.D. Ind.) affirmed the remand order. Regent appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Rovner dismissed the appeal. The first question for the Court was whether the order was appealable. Under the Supreme Court's reading of § 1447 (the Seventh Circuit has held that the bankruptcy removal section is identical to § 1447), a case remanded for lack of subject matter jurisdiction is not appealable. Although the district court said it lacked jurisdiction, the Court disagreed. When the case was removed, the original creditors were still defendants and the case was challenging the confirmation of the plan. The case was therefore related to the bankruptcy case and within the court's jurisdiction. The Court then assumed, without deciding, that the bankruptcy court also acquired supplemental jurisdiction over the state law claims. The resolution of the federal claim (here by the filing of an amended complaint) did not eliminate the court's jurisdiction over the state law claims. It did create a situation in which the court had the discretion, depending on the number of factors, to keep or remand the claims. Under Carlsbad Technology, the remand of such state law claims is not a remand for lack of jurisdiction but simply a decision to relinquish supplemental jurisdiction. That would normally mean that the order is reviewable under § 1447. But that is not what happened in the bankruptcy court. Regent tried to keep the case in federal court on the ground that even the amended complaint's claims were within the bankruptcy court's jurisdiction -- and that argument was properly rejected by the lower courts. The Court concluded that it could review the order only if it could properly characterize the lower courts' orders as declining to exercise supplemental jurisdiction, despite the words used. The bankruptcy court was very clear in its order that the dismissal was for want of jurisdiction. The Supreme Court concluded in Kircher that an order unmistakably premised on lack of subject matter jurisdiction, even if clearly wrong, is not reviewable. The Court concluded that that was the case here, particularly since neither the courts nor Regent ever argued supplemental jurisdiction.

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CRAWFORD v. COUNTRYWIDE HOME LOANS (July 21, 2011)

L. V. Crawford and his wife Yvette purchased a home in La Porte, Indiana in 2001 with the help of a mortgage from Countryside Home Loans. After they fell behind on their mortgage payments a few years later, they hired Foreclosure Solutions to help them renegotiate their mortgage and save their home. Countrywide refused to renegotiate and filed a foreclosure proceeding. Foreclosure Solutions told the Crawfords that it would provide an attorney to represent them. An attorney did file an appearance but neither he nor Foreclosure Solutions resisted summary judgment in the foreclosure proceeding. A state court entered a foreclosure judgment in August of 2006. Fannie Mae purchased the home at a sheriff's sale in December of that year. A writ of assistance to evict the Crawfords became effective in late 2008. Several months later, deputies from the La Porte County Sheriff’s Office evicted the Crawfords from their home. The Crawfords filed almost identical suits in state and federal court against Countrywide, the La Porte County Board of Commissioners, the La Porte Sheriff, and the attorney hired by Foreclosure Solutions. The state court case was removed and consolidated with the federal case. Judge Simon (N.D. Ind.) dismissed the Commissioners, the Sheriff, and the attorney under Rule 12(b)(6). On the claims against Countrywide, the district court dismissed two claims under the Rooker-Feldman doctrine and granted summary judgment to Countrywide on the others. The Crawfords appeal.

In their opinion, Circuit Judges Kanne and Evans and District Judge Clevert affirmed on the merits but vacated and remanded in part to address a procedural matter. The Court first addressed jurisdiction and the Rooker-Feldman doctrine. Under that doctrine, a lower federal court is not allowed to review a state court judgment. The doctrine does not prevent state court losers from bringing independent federal claims, even if the claims are related to the subject matter of the state court suit. The Court agreed with the district court that two of the 22 claims presented were barred by the Rooker-Feldman doctrine. One complained that the foreclosure and eviction violated fundamental fairness and their equal protection rights. The other presented a defense to the foreclosure complaint. The Court concluded that the other 20 claims could be resolved without impugning the foreclosure judgment. The Court turned to the summary judgment ruling in favor of Countryside. It first rejected the Crawfords' contention that they were not required to affirmatively produce evidence because Countrywide did not submit materials sufficient "to foreclose the possibility" that there were disputes of material fact, citing the Supreme Court's decision in Adickes. The Crawfords misread Adickes. A party moving for summary judgment need not show that the non-moving party’s claims are impossible in order to trigger a response requirement -- it need only show an absence of evidence in support of those claims. The district court applied the right standard. On the merits of the summary judgment ruling, the Court found that the Crawfords did not establish the existence of disputed facts. Much of the "facts" the Crawfords presented consisted of general reports of predatory lending that did not relate to their specific claims. The rest of the facts presented relate to their complaints against Foreclosure Solutions and the deputies and are not material to their claims against Countryside. Finally, the Court affirmed with little discussion the dismissal of the other defendants and the denial of the Crawfords request to add defendants. The Court vacated one of the district court's orders and remanded to allow the district court to identify which specific parts of the removed case were dismissed on jurisdictional grounds and to remand that portion of the case to the state court.

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