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

EATON v. INDIANA DEPARTMENT OF CORRECTIONS (September 9, 2011)

The Indiana Department of Corrections employed Autumn Eaton as a correctional officer from early 2006 until early 2008.. For her first year, she had watch tour duty, which required her to walk her assigned unit and monitor the inmates. She was reassigned to control room duty in early 2007, a more attractive assignment that did not involve physical contact with inmates. She also had an attractive work schedule. In late 2007, the Department reprimanded her for excessive absenteeism and warned that she could be given a less attractive work schedule. In fact, shortly after the reprimand, she was assigned to a less attractive work schedule. Before the change took place, she took several weeks of FMLA leave. When she returned, she resumed her duties under the attractive schedule. She was later in a car accident and given certain work restrictions by her physician. Although she did not originally disclosed the restrictions to the Department for fear of a schedule reassignment, she eventually did. The Department told her that her schedule would not be changed. In March of 2008, Eaton returned from a vacation to learn that she had been reassigned from the control room back to watch tour duty. In fact, she was assigned to duty in the "worst unit" in the facility. She refused the assignment, insisting that it was inconsistent with her medical restrictions and that she was not capable of doing it. Her supervisor demanded her badge, which she begrudgingly turned over, insisting that she did not want to quit her job. Her mother, also a Department correctional officer, met with Eaton's supervisor. Although the supervisor originally advised Eaton's mother that Eaton could return for her next shift, he later retracted the statement and barred Eaton from the facility. Eaton brought suit under Title VII for gender discrimination. Judge Magnus-Stinson (S.D. Ind.) granted summary judgment to the Department, concluding that she failed to make out a prima facie case under the indirect method because the male comparators she identified were not similarly situated. Eaton appeals.

In their opinion, Seventh Circuit Judges Rovner and Wood and District Judge Gottschall reversed and remanded. The only issue for the Court on appeal is whether a jury could conclude that a similarly situated male employee received more favorable treatment. A similarly situated analysis requires a factual inquiry into whether the employees are similar enough that any differences in the way their employer treated them cannot be attributed to factors other than, in this case, gender. The district court found that the two employees differed in the way they rejected a job assignment and in their disciplinary histories. Although the Court agreed that there were some minor differences in the way the two employees rejected a new job assignment, it concluded that a reasonable fact finder could overlook those differences and find the employees similarly situated. With respect to the employees' disciplinary histories, the Court noted that the record was clear that the Department did not consider Eaton's disciplinary history in terminating her employment. A factor that an employer does not consider in a termination decision cannot be used as a factor to distinguish the employee from a similarly situated employee, regardless of its significance. Therefore, the district court erred in granting summary judgment to the Department.

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DOE v. ELMBROOK SCHOOL DISTRICT (September 9, 2011)

Prior to 2000, Brookfield Central and Brookfield East High Schools in Brookfield, Wisconsin held their graduation ceremonies in their gymnasiums. The venues were generally considered quite uncomfortable -- hot, cramped, uncomfortable seating. Central's senior class officers for the Class of 2000 recommended to the school and District that the ceremony be moved to the Elmbrook Church, a local non-denominational Christian institution. The school adopted the recommendation and held its graduation ceremony at the Church from 2000 until 2010, when it moved the ceremony to its newly-constructed district fieldhouse. Brookfield East traveled a similar path and held its graduation ceremony at the Church from 2002 until 2010. Both the inside and the outside of the Church reflect its Christian heritage. There are crosses and other religious symbols outside the church. The lobby, through which all visitors must pass, contains religious banners and symbols as well as tables with religious literature. A large cross hangs in the sanctuary, where the ceremony takes place. Bibles and hymnals can be found in all the pews. Several parents objected to the ceremonies' venue. A group of current and former students and their parents brought suit against the District alleging that the practice violated the First Amendment. Chief Judge Clevert (E.D. Wis.) granted summary judgment to the District. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Flaum (dissenting in part), and Ripple affirmed. The Court first addressed justiciability, given the renovation of both gymnasiums and the construction of a new fieldhouse. All 2010 ceremonies were held in those facilities and the District has no present intention to use the Church again. But the Supreme Court has said that a defendant's voluntary decision to stop allegedly wrongful conduct does not make a case moot unless the party seeking mootness meets a heavy burden of proving that the behavior cannot be expected to recur. The District did not meet that burden. Although the District does not currently intend to use the Church again, it has not officially ruled it out. Next, the Court addressed the fact that the plaintiffs were proceeding anonymously, as Does. Although anonymous litigation is disfavored and the Court was mildly critical of the district court's failure to explain his reasoning in granting the motion, the Court nevertheless found no abuse of discretion. Nothing in the record suggests that the district court did not carefully consider the question and apply the proper legal standard and the basis for the ruling is fairly apparent from the eight sworn declarations presented by the plaintiffs. Given the intensely emotional nature of religious beliefs and the fact that some of the plaintiffs are children, the district court was well within its discretion to conclude that the plaintiffs' privacy interest outweighed the public interest in transparent judicial proceedings. The Court turned to the merits. The Supreme Court developed a three-pronged test in Lemon for Establishment Clause cases. A practice violates the clause if it has no legitimate secular purpose, if it advances or inhibits religion as its primary effect, or if it fosters excessive entanglement with religion. The Court concluded that the District did not violate the First Amendment: a) the students were not forced to participate in any religious exercise, as was the case in Lee, b) the iconography was not associated with the District, c) an objective observer would not assume that the presence of religious paraphernalia suggested the District’s endorsement thereof, d) the District has not sponsored any religious display, e) the students and the district selected the Church for totally secular purposes, f) there is no evidence that the Church used the event to influence the ceremony or that the District used the event to endorse religion, and g) the use of taxpayer funds for the Church rental was appropriate as a standard fee for use arrangement.

Judge Flaum concurred in the majority's opinion with respect to justiciability and anonymity but dissented on the merits. He concluded that a public school graduation at a church where there are both live human beings and inanimate objects urging religious messages on children violated the Establishment Clause. In his view, the venue's "sheer religiosity" conveyed a message of District endorsement.

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REHER v. VIVO (September 7, 2011)

Ronald Reher caused a bit of a commotion in Edson Park in Lombard, Illinois on a May day in 2007. The park is located behind the apartment building where Ezeldra Outlaw and her daughter Ashley lived. Outlaw and Reher had been romantically involved in the past. In fact, Ashley was their daughter. Reher had seen neither of them for over four years. Apparently because he carried a video camera and binoculars, several of the adults in the park became suspicious. Outlaw approached him and yelled at him and broke his video camera. Others in the park took his bicycle. Soon, a number of police officers arrived. Officer Gabinski was aware of a history of domestic disputes and orders of protection concerning Reher and Outlaw. When she told Reher that she did not believe his story (that he was videotaping nature scenes), he became upset and called her a “bitch.” At that point, Officer Vivo arrested him for disorderly conduct. Reher brought suit against Gabinski and Vivo pursuant to § 1983 for an unlawful arrest. Judge Conlon (N.D. Ill.) granted summary judgment to the defendants, finding that the defendants had probable cause for the arrest or, in the alternative, were entitled to qualified immunity.

In their opinion, Seventh Circuit Judges Rovner, Williams, and Hamilton affirmed. Under Illinois law, a disorderly conduct charge requires unreasonable conduct that disturbs another and threatens to provoke a breach of the peace. Videotaping others in Illinois is not illegal unless it is also accompanied by other suspicious circumstances. The Court emphasized that neither Reher's swearing nor the neighbors’ general agitation satisfied the test. Officer Gabinski knew a lot more, however. Based on her extensive knowledge of the Reher /Outlaw relationship and past incidents, the Court concluded that she had probable cause to arrest Reher. In the alternative, it concluded that she was entitled to qualified immunity. Officer Vivo did not have the same historic knowledge. He was aware that some of the adults in the park accused Reher of videotaping the children. He also knew that one woman stated that Reher had been to the park several times earlier watching the children. The Court concluded that those allegations did not give rise to probable cause. It did conclude, however, that Vivo could have had a reasonable belief that they did. He was therefore entitled to qualified immunity.

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PAUL v. MARBERRY (September 6, 2011)

Jeffrey Paul, an inmate in an Indiana federal prison, brought suit alleging that prison personnel used excessive force in removing him from his cell, in violation of the Eight Amendment. It was the fifth lawsuit that Paul had filed while in custody. Each of the prior four lawsuits had been dismissed as unintelligible under Rule 8(a)(2). In each case, the court gave Paul leave to amend. In each case, Paul did not take advantage of that opportunity. In each case, the court dismissed without prejudice for failure to prosecute. Judge Lawrence (S.D. Ind.) denied Paul's request to proceed in forma pauperis on the grounds that he had three "strikes" under the Prison Litigation Reform Act. Paul appeals.

In their opinion, Seventh Circuit judges Posner, Kanne, and Hamilton reversed and remanded. The statute imposes a "strike" when a complaint is dismissed as "frivolous, malicious, or fails to state a claim." But Paul's strikes are not for those reasons. All of his complaints were dismissed for failure to prosecute, a basis not listed in the statute. The Court noted, however, that the proper procedure after a plaintiff fails to take advantage of permission to amend an unintelligible complaint is a dismissal with prejudice for failure to state a claim. Nevertheless, the Court concluded that a plaintiff, particularly a pro se prisoner plaintiff, should be allowed to rely on what courts actually did, not what they should have done. None of Paul's prior dismissals constituted strikes. He should be allowed to proceed in forma pauperis.

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NORINDER v. FUENTES (September 6, 2011)

Magnus Norinder, a Swedish citizen, and Sharon Fuentes, a United States citizen living in Texas, met on the Internet in 2006. Their romance flourished. They were engaged in Sweden in February 2007, they conceived a child in Sweden in April, they were married in Sweden in August. Fuentes returned to Texas to complete a fellowship and Norinder joined her in January of 2008. In July of 2008, the couple and their new child moved to Sweden. Their relationship soured, seemingly as quickly as it had blossomed. There were many fights, some physical. Both experienced professional setbacks. Fuentes accused Norinder of alcohol and drug abuse. Fuentes and their son traveled to the United States in March of 2010, ostensibly for a two-week vacation. Instead, Fuentes informed Norinder that she was remaining in the United States with their son. Within a few months, Norinder found them in southern Illinois. He filed a petition under the International Child Abduction Remedies Act. Judge Stiehl (S.D. Ill.) concluded that Sweden was the child's "habitual residence" and ordered him returned. Fuentes appeals.

In their opinion, Seventh Circuit Judges Manion, Wood, and Hamilton affirmed. The Act implements the Hague Convention, to which both Sweden and the United States are parties. It provides for the return of a child to his country of "habitual residence" when a child has been removed in violation of the Convention. Here, the Court first addressed Fuentes' contention that the district court limited her discovery rights improperly. It concluded that the district court acted properly in balancing the need for an expedited schedule in a case like this with Fuentes' need for discovery. The Court noted that Fuentes did not act expeditiously, that the district court accommodated several of her requests, that the district court actually bifurcated the hearing so as to resolve issues that were not related to her discovery request first, and Fuentes did not even object to the court's discovery order. On the merits, Fuentes asserted both that the United States was the child's "habitual residence" and that she carried her burden in proving that a return to Sweden would expose their child to grave harm. With respect to the former, the Court had no difficulty concluding that the district court did not err. Fuentes moved most of her personal belongings to Sweden, received permanent residency status there, took Swedish lessons, was negotiating for a hospital position, and retained no residence in the United States. With respect to the grave risk of harm exception, the Court noted that the district court specifically found Norinder more credible than Fuentes with respect to their testimony about his behavior and his treatment of their child. As a result, Fuentes did not meet the demanding clear and convincing evidence standard imposed by the Act. Finally, Fuentes challenges the district court's fee award. The Court found no abuse of discretion in the district court's treatment of Fuentes' line item challenges and rejected her financial hardship argument because of a lack of support in the record.

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WELLS FARGO BANK v. LAKE OF THE TORCHES ECONOMIC DEVELOPMENT CORPORATION (September 6, 2011)

Lake of the Torches Economic Development Corporation is chartered under tribal law. It operates the Lake of the Torches Resort Casino in northern Wisconsin. Several years ago, the company issued $50 million in revenue bonds in order to finance a riverboat casino in Mississippi. The accompanying indenture named Wells Fargo Bank as trustee. Under the indenture, Wells Fargo was given certain oversight powers with respect to casino revenues. Lake of the Torches also agreed to a limited waiver of its sovereign immunity with respect to lawsuits related to the bonds. The Mississippi casino investment was not a success. Lake of the Torches stopped depositing casino revenue into the Wells Fargo trust account and ultimately repudiated its $46 million bond obligation. Wells Fargo brought suit for breach of the Indenture and sought the appointment of a temporary receiver. Without any notice or hearing, Judge Randa (W.D. Wis.) dismissed the case for lack of jurisdiction. He concluded that the Indenture was a management contract under the Indian Gaming Regulatory Act, that the Indenture was not approved by the National Indian Gaming Commission as required by the Act, that the Indenture was therefore void, that the waiver of sovereign immunity was also void, and that the district court lacked jurisdiction. The court also denied Wells Fargo's request for leave to file an amended complaint asserting claims under the bond documents only. Wells Fargo appeals.

In their opinion, Seventh Circuit Judges Flaum, Ripple, and Evans (who, as a result of his death, did not take part in the decision) affirmed in part and reversed and remanded in part. The Court first addressed its jurisdiction, given that the defendant was a tribal Corporation. It noted that most courts agree that Indian tribes themselves are not citizens of any state for diversity purposes. However, the 9th and 10th Circuits have held that a tribal Corporation is the equivalent of a Corporation created under state law. The Court agreed and concluded that there was no reason to treat a tribal Corporation that engages in commerce differently than its non-tribal counterparts. Turning to the merits, the Court noted that Congress passed the Act in 1988 to provide a comprehensive framework for tribal gaming. The Act requires that any management contract entered into by a tribe for the operation and management of the casino must be reviewed and approved by the Commission Chairman. Failure to do so renders the contracts void. The principal issue on appeal is whether the Indenture is a management contract under the Act. Unfortunately, the term is not defined in the statute. The Court turned to the language and overriding purpose of the Act. Although it conceded that some of the Act's provisions seemed directed at the more traditional management contracts, in which a third-party actually operates the facility, it also found some provisions that seemed to apply more broadly. Ultimately, the Court could find no strong indication that Congress intended to limit the breadth of the term. The Court also looks to statements from the Commission and from its Acting General Counsel, even recognizing that they were not entitled to any particular deference. In the end, it was clear to the Court that Congress was not simply concerned with traditional management contracts but was concerned about any agreement that allowed for some influence in management decisions. Examining the Indenture Agreement in that light, the Court concluded that it was a management agreement under the Act. In doing so, the Court focused on certain indenture provisions that gave Wells Fargo control over the trust account, limited capital expenditures, and allowed, in certain circumstances, the bond holder to retain experts to make recommendations concerning casino operations. The Court also concluded that the regulatory framework did not allow for reformation of the Indenture and removal of any offending provisions. The district court erred, however, in denying Wells Fargo leave to amend. It is premature, on the face of the complaint, to conclude that the bond documents are collateral documents under the Act or that the sovereign immunity waivers contained in those documents are also void as part of the same transaction. The Court remanded to allow Wells Fargo an opportunity to file an amended complaint.

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CARROLL v. STRYKER CORP. (September 6, 2011)

Matthew Carroll was a commissioned sales representative for Stryker Corporation, a medical instrument manufacturer. Each year, Stryker sent its commissioned salespeople a compensation plan that sets sales targets and described the compensation structure. Carroll failed to meet his sales quotas in 2006 and 2007. Beginning in 2008, Stryker warned Carroll that he had to meet his sales quota each quarter or face termination. Although he was short of his quota on March 31, 2008, Carroll had a sale in progress that, if closed, would put him over his target. Stryker rejected the purchase order on March 31 because it sought to modify Stryker's normal terms and conditions. The company gave Carroll an extra day to submit a satisfactory purchase order. When he did not, Stryker fired him. Within a month, Stryker had resumed negotiations with Carroll’s potential customer, modified the financing term that it had earlier refused to modify, consummated the deal, and paid a commission to Carroll’s successor. Carroll brought suit in state court under a Wisconsin wage payment statute. He also asserted claims for quantum meruit and unjust enrichment. Stryker removed the case to federal court, asserting that the statutory claim plus attorneys fees met the $75,000 diversity jurisdiction amount in controversy threshold. But Stryker then asserted in its answer that the statutory claim was unavailable to Carroll because it did not apply to commissioned salespeople. When Stryker made the same argument in its motion for summary judgment, Carroll sought to withdraw the statutory claim and add a claim for breach of contract. Magistrate Judge Crocker (W.D. Wis.) granted summary judgment to Stryker, holding that the equitable remedies could not succeed in light of the written compensation contract, and denied the motion for leave to amend, citing delay and lack of good cause. Carroll appeals.

In their opinion, Seventh Circuit Judges Manion, Evans (who, as a result of his death, took no part in the decision), and Sykes affirmed. The Court first addressed the propriety of the removal, given that the statutory damages on which it was based appeared to be unavailable to a commissioned salesperson. The Court noted that it may have concluded that it lacked jurisdiction if the statutory claim was the only claim presented. It noted, however, that Carroll included claims for compensatory damages under the quantum meruit and unjust enrichment counts that satisfied the jurisdictional amount requirements. Turning to the merits, the Court stated that Wisconsin law permits quantum meruit and unjust enrichment claims only in the absence of an express contract. Although the Court conceded that Carroll had no employment contract and could be discharged at will, it also concluded that he did have an express compensation contract. Each year, the company sent out a compensation plan. Although the plan was not signed by the parties, Carroll continued to work and Stryker continued to pay him. That is all that is required for an express contract. The equitable claims were properly dismissed. Finally, the Court had little difficulty in finding no abuse of discretion in the district court's denial of Carroll's request to amend. It was filed seven months after a court-imposed deadline and less than a month before the end of discovery. Particularly given that Carroll was aware of the statutory problem from the very onset of the case, the denial was quite reasonable.

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LOOMIS v. EXELON CORP. (September 6, 2011)

Exelon Corp. maintains a defined-contribution pension plan for its employees. It offers its participants 24 no-load mutual funds among its 32 different options. The expense ratios of the 24 funds range from 0.03% to 0.96%, depending on how actively the fund is managed. The expenses are deducted from the fund assets and therefore, in effect, paid for by the participants. Some participants brought suit against the Plan under ERISA, alleging that the Plan violated its fiduciary duties by 1) offering only funds that are available to the general public, and 2) requiring the Plan's participants to pay for the funds’ expenses. Judge Darrah (N.D. Ill.) concluded that the claim was controlled by Hecker and dismissed it. The court also awarded $42,000 in costs. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Tinder affirmed. The Court stated that it had resolved the first of the plaintiffs' complaints in Hecker, where the Court held that a plan's menu of 25 mutual funds that were available to the public with expense ratios ranging from 0.07% to 1.00% was acceptable as a matter of law. The Court expressed no interest in overruling Hecker. The plaintiffs' second claim, that the Plan should cover the expenses of the funds, was not presented in Hecker. But if fails also. Although Exelon could have set up its Plan in that way, it was not required to. An employer can act in its own interest when it designs a plan and decides how much to contribute. The Court turned to the costs award. Rule 54(d), on which the district court relied in awarding costs, creates a presumption in favor of the prevailing party unless a statute or rule provides otherwise. ERISA, on the other hand, provides that a court in its discretion may allow costs to either party. Plaintiffs contend that ERISA is therefore a statute that provides otherwise and thus supersedes Rule 54 (D.). They further contend that ERISA requires a finding of bad faith or harassment to award costs. The Court conceded that it had never addressed the question head-on and that it's treatment of the question has not been consistent. It concluded that it did not need to resolve the question, because it disagreed with plaintiffs' premise that ERISA required a finding of bad faith in order to award costs. Both the rule and ERISA give the district court discretion to award costs -- that is what the district court did.

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RODGERS v. WHITE (September 2, 2011)

The Illinois Secretary of State employed Mark Rodgers as a lawn maintenance worker for over 20 years. He was the only black employee on a 27-person crew. He was fired in 2006 by Donna Fitts, the Department director and a white woman, and Stephen Roth, the personnel director and a white man. The termination arose from two or three incidents. First, a late 2005 Inspector General report concluded that Rodgers and his supervisor, Dave Rusciolelli, who is white, allowed their crewmembers to use state-owned equipment on personal time. The department recommended a 3-day suspension for Rusciolelli and an 18-day suspension for Rodgers, although neither suspension was ever implemented. Second, in early 2006, Fitts discovered that Rogers, Rusciolelli, and a third man, a white crew supervisor, were recording overtime off the books. The Department had imposed a moratorium on overtime. This off-the-books system allowed crewmembers to work overtime in return for later, equivalent personal time off. Third, Rodgers skipped a meeting that Fitts called because he was not told it was mandatory and because Fitts had not approved overtime for the meeting. In mid-2006, Fitts recommended Rodgers' termination. Her termination memorandum cited as grounds only the abuse of state equipment and the improper overtime but her letter to Rodgers also included his failure to attend the meeting. Following arbitration, Rodgers was reinstated with back pay. Nevertheless, he brought suit against the Secretary of State under Title VII and against Fitts and Roth under §§ 1981 and 1983. Chief Judge McCuskey (C.D. Ill.) granted summary judgment to the defendants. He concluded that Rodgers had no direct evidence of discrimination and that, under the indirect method, Rodgers failed to identify a similarly situated coworker. Rodgers appeals.

In their opinion, Seventh Circuit Judges Bauer, Cudahy, and Tinder vacated and remanded. The Court agreed with the district court with respect to the direct method. It disagreed, however, with respect to the indirect method. The Court conceded that supervisors generally are not good comparators under the similarly situated analysis. But here, it found Rusciolelli a good comparator. Rodgers and Rusciolelli were accused of the same things, were equally responsible, and were disciplined by the same supervisor. The only substantial difference is the accusation that Rogers failed to attend a meeting but there are at least material fact questions regarding that meeting. Rodgers has therefore identified a similarly situated white individual who was treated more favorably -- summary judgment should not have been granted.

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E360 INSIGHT, INC. v. THE SPAMHAUS PROJECT (September 2, 2011)

The Spamhaus Project is a U.K. company that wants to rid the world of unwanted e-mail. To further this end, it provides lists of spam distributors to Internet service providers. The Internet service providers can, in turn, prevent spam from reaching its addressees. After the Project added Illinois company e360 to its list, however, it got sued. E360 brought suit in state court for tortious interference with contract, tortious interference with prospective economic advantage, and defamation. Although the Project removed the case and initially participated in the litigation, it later informed the district court that it would no longer defend the case. The district court entered a default judgment and awarded over $11 million in damages, based on the affidavit of e360's operator David Linhardt. The Project changed its mind and moved to set aside the judgment under Rule 60(b)(4). The district court denied the motion and the Seventh Circuit affirmed. But the appellate court also vacated the damages award, concluding that the Linhardt affidavit was an insufficient basis on which to calculate damages. On remand, Judge Kocoras (N.D. Ill.) awarded $27,000 on the tortious interference with contract claim and one dollar nominal damages on each of the other two claims. The Project appeals -- e360 cross-appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Hamilton vacated and remanded with instructions. Before addressing the merits, the court resolved some evidentiary and sanctions issues. It: a) affirmed the district court's sanctions for e360’s gross discovery abuses, b) affirmed the district court's denial of e360's motion to compel discovery that the Court found irrelevant or, at least, the absence of which created no prejudice, c) affirmed the district court's striking of e360's damages spreadsheet that was submitted well after the discovery cutoff, and d) affirmed the district court's exclusion of most of e360's primary damages witness on lack of credibility grounds. The Court turned to the principal issue on appeal -- the amount of damages. Since it had affirmed the district court's exclusion of much of e360’s evidence, the Court affirmed the two nominal damage awards. The $27,000 tortious interference with contract damages award rested on evidence that e360 lost three customers that accounted for $27,000 a month in revenue. The district court concluded that the company would have continued to do business with these three customers for one month in the absence of the Project's conduct. But the Court noted that gross revenue is not a proper measure of damages. Since there was no evidence in the record regarding what portion of that revenue was actually profit, the Court reduced the award on that count to nominal damages of one dollar as well. The Court remanded with instructions to enter judgment for three dollars.

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 IN RE: LONGVIEW ALUMINUM, L.L.C. (September 2, 2011)

Dominic Forte was one of five members of Longview Aluminum's Board of Managers. His relationship with the rest of the board was strained, however. In 2001 and 2002, his requests to inspect records were all denied. He actually sued the majority interest board member, alleging that he used his interest to prevent Forte from looking at records or participating in any decisions. The Board formally suspended Forte’s right to view any records in mid-2002. In November of 2002, Forte agreed to leave the Board in return for a $400,000 payment. Longview paid Forte $200,000 on November 7, 2002. In January of 2003, it paid him an additional $15,000 in attorneys fees. Longview filed for Chapter 11 bankruptcy relief in March 2003. The bankruptcy trustee sought the return of both payments. Forte conceded that the $15,000 payment was a preferential transfer since it occurred within 90 days prior to the bankruptcy filing. He resisted the demand for the $200,000, however. He challenged the trustee's application of the one-year preferential transfer window for an "insider." The bankruptcy court concluded that Forte was an insider and held for the trustee. Judge Der-Yeghiayan (N.D. Ill.) affirmed. Forte appeals.

In their opinion, Seventh Circuit Judges Bauer, Flaum, and Williams affirmed. The Court noted that the Bankruptcy Code defines an insider as a director, officer, person in control, partnership of a general partner debtor, general partner, or any relative of them. Courts have generally held that the list is not exhaustive and that the relevant inquiry is whether the relationship at issue has the same characteristics or is similar to the listed relationships. Under Delaware law, the members of a limited liability company are responsible for its management. The Court concluded that the district court did not err in finding that Forte, as an L.L.C. member, is akin to a director and thus qualifies as an insider. The Court cautioned, however, that one’s title is not dispositive if it does not reflect the reality of the individual’s relationship to the organization. The Court rejected Forte's argument that his inability to access the company's records or participate in any meaningful way in the company's management meant that he was not an insider. Forte had meaningful rights, including voting rights, until he received the first payment. He qualifies as an insider and the payment is a preferential transfer.

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KOLBE & KOLBE HEALTH & WELFARE BENEFIT PLAN v. THE MEDICAL COLLEGE OF WISCONSIN, INC. (September 2, 2011)

Scott Gurzynski worked for the Kolbe & Kolbe Millwork Co. and participated in its welfare benefit plan. His daughter K.G. was born in 2007. Although he submitted an enrollment change to the Plan in mid-2007, it was incomplete. For example, he neglected to indicate whether K.G. lived with him and whether he claimed her as a tax exemption. It was not until late November that he admitted that she did not live with him and that he was not claiming her as an exemption. The Plan requested additional information without success. It eventually denied enrollment status to K.G. in June 2008. Meanwhile, K.G. had received over $1.5 million in medical care from the Medical College of Wisconsin and the Children's Hospital of Wisconsin, all paid for by the Plan. After its decision denying K.G. enrollment status, the Plan asked the Medical College and the Children's Hospital to refund the money the Plan had paid. They refused. In a second amended complaint, the Plan seeks recovery under three theories: a) ERISA § 502(a)(3) equitable relief, b) unjust enrichment under federal common law, and c) breach of contract. Judge Crabb (W.D. Wis.) dismissed each of the claims and awarded attorneys fees to the defendants. The Plan appeals.

In their opinion, Seventh Circuit Judges Flaum and Williams and District Chief Judge Herndon affirmed in part and reversed and remanded in part. The Court addressed each theory in turn. ERISA § 502(a)(3) allows a Plan fiduciary to bring an equitable claim to enforce a term of the Plan. Here, the Plan seeks to enforce the Plan's overpayment provision. Under that provision, the Plan is entitled to seek recovery of payments it has made in error. However, the Plan limits that right to recovery from a "Covered Person." Although that term is not defined in the Plan, it is clear that neither the defendants, who provided the medical services, nor K.G., who was denied enrollment in the Plan, is a "Covered Person." The ERISA count was properly dismissed. In fact, in addressing the unjust enrichment count, the Court noted that ERISA had nothing to do with the case. K.G. was never covered by the Plan -- there is no need to interpret ERISA or the Plan. Therefore, there is also no ERISA unjust enrichment claim. The Court turned to the state law breach of contract claims. First, it concluded that the claims were not preempted by ERISA since the claims do not relate to the terms of the Plan. Instead, they relate to the contracts between the Plan and the defendants. The Court therefore remanded the state law claims to the district court, with the comment that the normal practice would be to decline to exercise supplemental jurisdiction over the claims. With respect to attorney's fees, the Court stated that the basic question, after the prevailing party's showing of some degree of success on the merits, is whether the losing party's position was substantially justified or merely harassment. The district court had concluded that the ERISA and state law claims were not substantially justified. The Court concluded that that was an abuse of discretion. It found all of plaintiffs claims to be substantially justified and taken in good faith – and reversed the fee award.

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BRENEISEN v. MOTOROLA (September 2, 2011)

Motorola employed James Breneisen in several different positions between 1994 2003. In early 2001, he took 12 weeks FMLA leave for gastroesophageal reflux treatment. Upon his return, although he retained his prior salary, he was assigned to a different position, which he considered a demotion. Just a few weeks later, he took another four months leave for esophageal surgery. He took his third and final leave in early 2002, from which he never returned. Motorola terminated his employment in 2003. Breneisen brought an FMLA claim against Motorola, alleging that his supervisor's conduct exacerbated his medical condition. The district court granted summary judgment against him. On appeal, the Seventh Circuit reversed and remanded. The only claims that remained on remand were Breneisen's discrimination and retaliation claims during the five months between his second and third leaves. At Motorola's request, Magistrate Judge Mahoney (N.D. Ill.) barred evidence of any causal relationship between Motorola's conduct and Breneisen's medical condition. The court then dismissed the case, finding that Breneisen’s requested relief was unavailable during the time when he was unable to perform his job, given that he had exhausted his FMLA leave during his first leave. Breneisen appeals.
     Anna Lineweaver also worked at Motorola. She also claimed that Motorola violated her FMLA rights when it denied her tuition reimbursement and retaliated against her for taking a leave. The Seventh Circuit also reversed and remanded the district court’s summary judgment ruling against her. On remand, Motorola tendered her twice the amount she claimed she was owed. Magistrate Judge Mahoney denied her request to convert Motorola’s tender to a judgment and dismissed the case as moot. Lineweaver appeals.

In their opinion, Seventh Circuit Judges Bauer, Kanne, and Evans (who, as a result of his death, took no part in the decision) affirmed. The Court first addressed Breneisen's claim and concurred with the lower court that the cause of one's injury is irrelevant under the FMLA. The Court added that, even if such was not the case, it would be irrelevant to Breneisen because his second leave was not pursuant to the FMLA. He was no longer protected by the statute when the alleged retaliation occurred. The Court turned to Lineweaver's claim. It noted that the only interest she has left is her claim for attorney's fees. It is well settled that a claim for attorney's fees, in and out itself, is not enough to constitute a case or controversy. The district court properly dismissed the case as moot. 

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WILLIAMS v. ROHN AND HAAS PENSION PLAN (September 2, 2011)

In 2002, Gary Williams filed a class action against the Rohm and Haas Pension Plan, alleging that his lump-sum distribution should include cost-of-living adjustments. The district court granted summary judgment to the class. The Seventh Circuit affirmed and remanded for a damages calculation. On remand, the Plan took the position that class members who took early retirement were entitled to no damages. The parties reached a settlement before the issue was adjudicated. One group of class members objected to the settlement on the ground that it discriminated against early retirees, who (they maintained) should have been given separate counsel. The group also objected to the amount of fees awarded. Another objector claimed that the settlement released his unrelated claims and that he should have been allowed to opt out. Judge Barker (S.D. Ind.) approved the settlement. The objectors appeal.

In their opinion, Seventh Circuit Judges Bauer, Kanne, and Evans (who, as a result of his death, took no part in the decision) affirmed. First, the Court affirmed the district court's fairness finding with respect to the early retirees. The Court noted that the early retirees received $60 million as part of the settlement on a claim that rested on unsettled law. The district court had already heard arguments on the issue and was well positioned to assess the settlement's fairness. Her decision was not clearly erroneous. Likewise, her decision not to create a separately represented subclass was not an abuse of discretion. With respect to the individual objector, the Court concluded that the settlement only released pension plan related claims. The district court did not abuse its discretion in denying his opt out. Finally, with respect to the fee award, the Court stated that, given the district court's application of the correct methodology and intimate familiarity with the litigation, it did not abuse its discretion in the fee award.

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FRYE v. THOMPSON STEEL COMPANY (September 2, 2011)

During Basil Frye's long employment with Thompson Steel Company in Franklin Park Illinois, he suffered two work-related injuries. He received over $80,000 in workers’ compensation settlements for permanent partial disabilities. In 2007, Thompson decided to close its Franklin Park facility and Frye chose to take early retirement. The company's Retirement Committee, which administered Frye's pension, advised Frye that his pension benefits would first go to repay the workers’ compensation settlement amounts. The Plan provided that amounts paid to an employee for an injury causing "disability in the nature of a permanent disability" would be deducted from the employee's pension benefits. Frye challenged the Committee's determination unsuccessfully. He then filed suit under ERISA’s § 502 to recover benefits. Magistrate Judge Cole (N.D. Ill.) granted summary judgment to Frye, concluding that the Committee's decision was arbitrary and capricious. The court based its ruling on the Plan's definition of disability. Thompson appeals.

In their opinion, Seventh Circuit Judges Ripple, Evans (who, as a result of his death, took no part in the decision), and Sykes reversed and remanded. The Court first noted that the Committee had substantial leeway in interpreting the Plan under the arbitrary and capricious standard of review. Although it is not free to disregard unambiguous language, its construction and interpretation of ambiguities is entitled to substantial deference. Here, the Plan defined disability as when an employee "has been totally disabled by bodily injury or disease so as to be prevented thereby from engaging in any occupation or employment." The Court conceded that there were two reasonable interpretations of the Plan’s settlement offset section. Under one, a permanent partial disability like Frye's could be an offset disability because it is in the nature of a permanent disability. Under another, an offset disability must be one that prevents the employee from engaging in any occupation or employment, which Frye’s is not. The Court found nothing in the Plan’s structure or the application of common sense to resolve the ambiguity. The Committee was entitled to interpret the plan to the best of its ability and its interpretation was reasonable. The Court remanded with instructions to enter summary judgment for Thompson.

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EDGENET, INC. v. HOME DEPOT U.S.A. (September 2, 2011)

When Home Depot wanted a classification system for its inventory database, it went to Edgenet. Home Depot and Edgenet entered into a contract for the creation of the taxonomy. The contract provided that Edgenet owned the intellectual property and that Home People had a no-cost license as long as Edgenet continued to provide services. If Home Depot terminated its service contract with Edgenet, the license terminated and Home Depot had to either purchase a $100,000 perpetual license or stop using the taxonomy. In early 2009, Home Depot gave notice that it would no longer be needing Edgenet’s services and tendered $100,000 for the perpetual license. Edgenet filed suit alleging that Home Depot infringed its copyright on the taxonomy. Judge Stadtmueller (E.D. Wis.) dismissed the claim, concluding that Home Depot had a right to use the taxonomy under the contract. Edgenet appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Sykes and Tinder affirmed. The Court first addresses its jurisdiction and satisfied itself that the case really arose under the copyright law and was not merely a breach of contract case. On the merits, the Court criticized the lower court for relying on Rule 12(b)(6) instead of Rule 56 when it relied on matters outside the pleadings but nevertheless affirmed its result. The Court concluded that: a) Home Depot never used the taxonomy in any prohibited way, b) Home Depot had the perpetual license option on the taxonomy's current version, not just the original one, and c) Home Depot exercised its option while its license was still in effect.

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HARRIS v. QUINN (September 1, 2011)

The Illinois Department of Human Services runs two programs that provide in-home care to Illinois residents. One is operated by the Division of Rehabilitation Services and the other is operated by the Division of Developmental Disabilities. In both programs, eligible individuals work with program counselors to develop individual service plans. In the Rehabilitation Program, once a service plan is in place, the eligible individual may select any qualified personal assistant to implement the plan. The individual and the assistant enter into employment agreement, the terms of which are dictated by the Department. In 2003, after the Illinois legislature passed a law designating the personal assistants as state employees for collective bargaining purposes, a majority of the Rehabilitation Program personal assistants voted to unionize. A majority of the Disability Program personal assistants rejected unionization. The collective bargaining agreement between the Rehabilitation Program Union and the State contains a "fair share" provision that requires personal assistants who are not members of the union to pay a proportionate share of the collective bargaining costs. In 2010, personal assistants from both programs filed suit against the Governor and the unions. They alleged that the fair share fees violated the First Amendment. The Disability Program personal assistants alleged that they were harmed by the threat of a future agreement. Judge Johnson-Coleman (N.D. Ill.) dismissed the Rehabilitation Program claim for failure to state a claim and dismissed the Disability Program claim on jurisdictional grounds. The personal assistants appeal.

In their opinion, Seventh Circuit Judges Manion, Wood, and Hamilton affirmed and remanded. The Court first addressed the Rehabilitation Program plaintiffs. It remarked that there is a long line of Supreme Court cases approving fair share agreements. The Court rejected plaintiffs' contention that the Supreme Court cases were not controlling because the personal assistants are employees of the patients, not the state. The Court relied on the ordinary definition of employer -- one who directs the activities of a worker under a contract and pays his wages -- as well as the concept that an employee can have more than one employer. The Court gave the legislative designation no weight but, instead, looked at the State's relationship to the personal assistants. It concluded that the state has significant control -- it sets qualifications, defines job responsibilities through the service plan, and pays the wages, among other things. The Court concluded that this significant amount of control made the State an employer. It also rejected plaintiffs' argument that the Supreme Court cases should not apply because of their unique circumstances. The Court turned to the Disabilities Program personal assistants’ claim. It agreed with the district court that that claim was not ripe in that it rested on future events that may or may not occur. The Court did conclude that the district court erred in dismissing the Disability Program claim with prejudice. A claim dismissed on ripeness grounds is typically dismissed without prejudice. The Court remanded for the proper dismissal.

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ARROYO v. UNITED STATES OF AMERICA (September 1, 2011)

Maria Arroyo received medical care at the federally-funded Erie Family Health Center during her pregnancy. Her doctors there detected no problems with her pregnancy. She gave birth to a son in May of 2003, more than a month premature. Her doctors never gave her a series of tests that are typically administered in the last month of pregnancy to detect the risk of the baby contracting a disease from his mother's blood. In those situations where the tests are not administered, medical professionals involved in the birth are more vigilant in identifying risk factors and treating the baby. Although Arroyo's baby did exhibit several risk factors, the treating doctors failed to detect or treat an infection. The baby suffered permanent brain damage. The hospital told Arroyo that her son suffered brain damage because of exposure to blood but did not tell her that it could have been prevented. A year later, Arroyo gave birth to a second son. In connection with that birth, she learned about the risk of infection and what could be done about it. A few months later, she saw a lawyer’s ad on television that prompted her to consult her own lawyer. In December of 2005, the Arroyos filed a medical malpractice claim against the two treating physicians in state court. Because the Erie Center doctors are treated as federal employees, the United States assumed the liability and the case proceeded in federal court under the Federal Tort Claims Act. Judge St. Eve (N.D. Ill.) found in favor of the Arroyos after a bench trial, concluded that the claim was brought within the two year statute of limitations, and awarded over $29 million in damages. The United States appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Posner (concurring) affirmed. An FTCA claim is timely if it is filed within two years of its accrual. A claim accrues when the plaintiff discovers or should have discovered that he has been injured by an act attributable to the government. The Court emphasized that knowledge of government control is necessary. Here, the Court concluded that the district court did not err in finding that the claim did not accrue until 2004 (either at the time of Arroyo’s second birth or the time of the television commercial). The only information the hospital provided in 2003 was the biological cause of the injury. There is no evidence that the Arroyos knew that there was potential malpractice. The Court also concluded the district court did not err in concluding that a reasonably diligent person would also not have known to pursue a deeper inquiry in 2003. The Court rejected the government's position that any individual injured while under the care of a medical professional should assume some fault on the part of that professional.

Judge Posner wrote a separate concurrence. He agreed with the panel opinion in its entirety. In his concurrence, he addressed two questions that were not, and did not have to be, decided by the panel -- the characteristics of the objective "reasonable person" in deciding whether a plaintiff should have discovered his injury and the duty of a medical provider to be more candid with its patients.

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THE NATURE CONSERVANCY v. WILDER CORPORATION OF DELAWARE (September 1, 2011)

The Wilder Corporation of Delaware owned 6,660 acres of farmland in central Illinois. In 2000, it sold the property to The Nature Conservatory, which intended to use it as a nature preserve. As part of the agreement, Wilder promised to remove hazardous and toxic substances from the property. The Conservancy brought suit in early 2006 on a number of contract matters. During discovery, it discovered petroleum contaminated soil on the property and amended its complaint. Judge Mihm (C.D. Ill.) granted summary judgment to the Conservatory. Wilder appeals.

In their opinion, Seventh Circuit Judges Rovner, Wood, and Tinder affirmed. The only issue on appeal is Wilder's contention that the petroleum contamination claim should be barred by the equitable doctrine of laches because it was filed seven years after the property transfer and five years after Wilder vacated the property. The Court noted that, in Illinois, laches will bar equitable relief when a party fails to assert a right over a period of time and causes prejudice to the other party. Here, the Conservancy's claim for relief is not in equity but for damages. Although the Court conceded that Illinois’ distinction between law and equity has evolved over the years, it did not believe that an Illinois court would apply laches to a simple breach of contract case for money damages between private actors. It concluded that it did not have to definitively answer that question, however, as it found that Wilder's defense failed for lack of prejudice. The Court noted that the record was devoid of any evidence of prejudice. Although Wilder claimed that the delay prevented him from showing prejudice, he never attempted to discover any facts that would support his claim of prejudice, in discovery or otherwise.

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 RODAS v. SEIDLIN (August 31, 2011)

The Crusaders Central Clinic Association is a federally funded community health center in Rockford, Illinois that serves an underserved population. Dr. William Baxter is one of the Clinic's physicians. The Clinic also contracted with the University of Illinois College of Medicine. For a fixed annual fee, the College provided backup services. When College physicians provided services, the Clinic was authorized to collect fees from its patients. One of Dr. Baxter's patients was Gloria Rodas. In the early morning of August 2, 2001, Rodas went into labor. Dr. Baxter met her at the hospital and assumed her care. The delivery turned problematic and Dr. Baxter sought the assistance of two College physicians. They eventually delivered the baby by Cesarean section, but she died within weeks. One of the College physicians prepared a bill for her services rendered and transmitted it to the Clinic -- the other physician did not. Rodas filed a medical malpractice suit in 2003. Because of the Clinic's federal funding, it and Dr. Baxter were considered to have federal status. Rodas’ suit was against the United States in federal court under the Federal Tort Claims Act. The United States removed and substituted itself as defendant. Since Rodas had not exhausted administrative remedies, she dismissed her claims against the United States The case was remanded to state court. Rodas exhausted her administrative remedies and then amended her state court complaint, adding the United States. The United States again removed. The two College physicians moved for summary judgment under the Illinois Good Samaritan Act. Under the Act, a physician who provides emergency care in good faith without a fee is not liable for malpractice. Judge Kapala (N.D. Ill.) agreed and granted summary judgment to the physicians. After that judgment was entered, the United States moved to dismiss the case on jurisdictional grounds under the doctrine of derivative jurisdiction. The district court denied that motion. Rodas appeals.

In their opinion, Seventh Circuit Judges Bauer, Flaum, and Williams reversed and remanded. The Court first addressed the jurisdictional issue. Under the doctrine of derivative jurisdiction, a federal court lacks jurisdiction of a suit removed from state court if the state court had no jurisdiction. This is true even if the suit could have been brought originally in the federal court. The Court looked at the propriety of the removal itself. Under § 1442, the federal officer removal statute, a case "commenced" in state court against the United States may be removed. The United States (as amicus) argues that the case was not commenced against it since it was not an originally named defendant. The Court rejected that argument, relying on the plain language of the statute and congressional intent. Removal was proper if the United States was named in an amended pleading, which it was. Therefore, removal under § 1441 was proper and the derivative jurisdiction doctrine would seem to lead to the conclusion that jurisdiction does not exist. The Court looked to the Supreme Court decisions in Grubbs and Caterpillar, in which the Court distinguished between procedural defects and true jurisdictional defects. In those cases, improper removals were not discovered until after judgment was entered. In both cases, the Supreme Court concluded that jurisdiction was present in cases where procedural defects were corrected before judgment. The Court concluded that the derivative jurisdiction doctrine was not an essential ingredient of subject matter jurisdiction but was more akin to a procedural defect. That the state court lacked jurisdiction does not, therefore, defeat the federal court’s jurisdiction.
          The Court turned to the merits and the interpretation of the Illinois Good Samaritan Act. The Court first rejected the defendants' argument that, because they occupy salaried positions and received no compensation from Rodas, neither received a fee. Relying on the plain language of the statute and the dictionary, the Court concluded that services can be rendered for a fee even if the rendering physician receives no compensation directly from that fee. That concluded the matter with respect to the physician who actually submitted the paperwork to the Clinic for processing the fee. The other physician never submitted the paperwork. There was no fee at all. But the physician’s general practice was to complete the paperwork. In fact, he testified that he did not recall ever providing services without preparing the fee paperwork. The Court concluded that there was a genuine issue of fact regarding whether he acted in good faith.

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PADULA v. LEIMBACH (August 29, 2011)

Jerome Clement experienced a hypoglycemic episode while driving to work one day. He turned into a parking lot and stopped near a truck scale. A 911 call triggered a police response. The responding officers were told to respond to an intoxicated man in a car. The officers tried to wake Clement. Clement did not comply with police orders, spoke in angry tones, and even swung at an officer. The officers physically removed him from the car and attempted to handcuff him. He continued to resist. The officers continued to use force, including hitting him with a baton, kneeling on his head, and spraying him with Mace. Eventually, a paramedic arrived and transported him to the hospital. He died two weeks later of unrelated causes. His estate brought suit under § 1983 for wrongful arrest and excessive force against the officers and for failure to train and supervise against the City of East Chicago, Indiana and its Police Department. Judge Van Bokkelen (N.D. Ind.) granted summary judgment to the defendants. The estate appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Flaum and Sykes affirmed. The Court first addressed the wrongful arrest charge and found ample evidence to support probable cause. Clement drove off the road, was slouched over in his car, was unkempt, and had bloodshot eyes. Furthermore, there was no indication, such as a necklace or bracelet, that he suffered from diabetes. Summary judgment on the unlawful arrest claim was appropriate. The Court turned to the excessive force claim and applied the objectively reasonable standard. Again, the Court found ample evidence in the record to support the conclusion that the officers responded reasonably. Clement refused to comply with police orders and resisted their attempts to handcuff him. The officers' response was commensurate with the situation. With respect to the inadequate training and supervision counts, the Court concluded that they were waived or, if not waived, they failed because the underlying arrest and excessive force counts failed.

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KASALO v. HARRIS & HARRIS, LTD. (August 26, 2011)

Mariana Kasalo brought suit under the Fair Debt Collection Practices Act against Harris & Harris. Her attorney included two class accounts in her complaint. Harris & Harris admitted that it violated the Act with respect to Kasalo, but denied that its normal practices violated the Act. The parties informed the district court judge that they intended to settle the individual claim. Although the court expressed skepticism with respect to the class claims, he allowed some discovery. Over the following months, status hearings were held, Kasalo's attorney abandoned two class theories but developed a third, and the attorney missed due dates and failed to inform the court of his intentions. When Kasalo's attorney showed up late for a May 2010 status hearing, Judge Guzmán (N.D. Ill.) dismissed the case for want of prosecution. When he showed up minutes later, the court instructed him to file a motion for reconsideration explaining why he had not been more diligent in prosecuting the case. The court later denied that motion. Kasalo appeals.

In their opinion, Seventh Circuit Judges Rovner, Wood, and Evans (who, as a result of his death, took no part in the decision) reversed and remanded. A dismissal for want of prosecution is an extremely harsh remedy and should only be used when, considering all the circumstances, less serious sanctions are unsatisfactory. The factors include the frequency of plaintiff's shortcomings, whether the shortcomings are attributal to the plaintiff or her lawyer, any prejudice, the impact on the court, and the merits of the suit. The Court noted that most of the factors weigh against an outright dismissal. Courts should consider less serious sanctions and normally should provide a warning to a party before dismissal. Here, the district court did neither. In fact, the Court specifically noted the presence of a much more appropriate remedy. The district court could have denied class certification and allowed the parties to settle the individual claim. The plaintiff then could have sought review of the class certification denial.

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SEREDNYJ v. BEVERLY HEALTHCARE (August 26, 2011)

Beverly Healthcare hired Victoria Seredynj as activity director at its Golden Living nursing home in Valparaiso, Indiana in 2006. Included within Seredynj's duties were several that were physically strenuous. Other employees frequently helped Seredynj with those duties. Seredynj learned that she was pregnant in January of 2007. She informed her supervisor and continued with her normal tasks. After a few months, however, she developed complications. Her doctor told her not to engage in strenuous activities. Under Beverly's modified work policy, Seredynj was not entitled to any restricted or limited duty. She was therefore told that she would not be allowed to return to work until she was released to full duty. Beverly terminated Seredynj's employment in March. Her attorney soon thereafter requested an Americans with Disabilities Act or Pregnancy Discrimination Act accommodation. Beverly declined. Seredynj filed suit against Beverly alleging gender discrimination under Title VII, pregnancy discrimination under the PDA, disability discrimination under the ADA, and retaliation. Judge Miller (N.D. Ind.) granted summary judgment to Beverly. Seredynj appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judge Bauer and District Judge Young affirmed. The Court first addressed the PDA and Title VII claims. The legal analysis is the same for both. Seredynj proceeded under both the direct and indirect methods of proof. The Court rejected Seredynj's argument that Beverly's modified work policy, which only accommodates ADA-disabled employees, was evidence of discrimination. The PDA only requires that employers treat pregnant employees the same as non-pregnant employees. Beverly’s work policy does just that and is not direct evidence of discrimination. The Court also rejected her argument that Beverly's refusal to accommodate her, given that other employees frequently assisted her with strenuous tasks before her pregnancy, was direct evidence of discrimination,. The Court pointed out that voluntary assistance is materially different than a formal accommodation. The Court concluded that she failed under the direct method. Under the indirect method, Seredynj had the burden to show that a similarly situated non-pregnant employee was treated more favorably. None of the individuals suggested by Seredynj, however, were similarly situated. Her indirect claim must fail. Summary judgment was properly granted on the gender and pregnancy discrimination claims. The court turned to the ADA. It's first inquiry was whether she was disabled under the Act, an issue of first impression in federal appellate courts. Under the Act, a disability is either: a) a physical or mental impairment that substantially limits one or more major life activity, b) a record of such an impairment, or c) being regarded as having such an impairment. The Court addressed each possibility. First, although pregnancy is not an impairment, the Court concluded that a pregnancy with the complications experienced by Seredynj may be an impairment. The Court did not definitively resolve that issue, given its further treatment of the claim. The impairment at issue must substantially limit a major life activity. Generally short-term, temporary conditions do not meet the definition. Here, Seredynj’s condition did not even last as long as her pregnancy and did not affect her ability to conceive again. The Court therefore concluded that Seredynj was not disabled under the first possibility. For the same reasons, Seredynj was not disabled under the record of disability possibility. Finally, the Court stated that the record did not support any belief on Beverly’s part that Seredynj had such an impairment. Summary judgment in Beverly's favor on the ADA claim was therefore appropriate. The Court turned to the retaliation claim, which consisted of Seredynj's claim that Beverly looked for an opportunity to fire her after receiving her attorney’s letter seeking an accommodation. To prevail, Seredynj must prove that she suffered an adverse employment action. Since Beverly terminated her employment before it even received the attorneys letter, she cannot possibly do that -- summary judgment was proper.

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FREDA v. COMMISSIONER OF INTERNAL REVENUE (August 26, 2011)

In 1985, Pizza Hut wanted to switch to a sausage made under a process developed by C&F. Since C&F could not satisfy Pizza Hut’s purchase needs, C&F disclosed its process to Pizza Hut under a confidentiality agreement and also licensed its process to several of Pizza Hut's other suppliers. C&F brought suit against Pizza Hut and IBP in 1993, alleging that Pizza Hut shared the sausage process with IBP without a license agreement and started buying its sausage from IBP. It alleged that Pizza Hut misappropriated and disclosed trade secrets and that it suffered lost profits and lost opportunities. The district court dismissed the claims against Pizza Hut but assessed over $10 million in damages against IBP. After an appellate court affirmed the damages award, IBP paid the judgment. C&F treated $2.86 million of the judgment as ordinary income on its determination that that reflected its lost profits. It treated the rest as capital gains. The appellate court also reversed the dismissal of Pizza Hut and remanded the case. The parties settled that claim for $15 million. C&F characterized the $6 million it realized from the settlement as a trade secret sale and reported it as long-term capital gain. Its shareholders did the same. The Commissioner of Internal Revenue issued notices of deficiency to the shareholders, asserting that the $6 million should be treated as ordinary income. After a one-day trial, Judge Chiechi (U.S. Tax Ct.) sustained the Commissioner’s determination. The court rejected the arguments that the settlement proceeds were for damage to a capital asset (C&F's trade secrets) and that the settlement proceeds reflected the sale of a capital asset.

In their opinion, Seventh Circuit Judges Flaum, Manion (dissenting), and Tinder affirmed. Although the Court conceded that the "origin of the claim" doctrine was not directly applicable, it concluded that its underlying principles were. Under that doctrine, settlement proceeds are to be classified based on the nature of the action settled. The Court concluded that the Tax Court's finding of fact that the settlement was for lost profits, lost opportunities, operating losses, and expenditures was not clearly erroneous. Under that finding, the shareholders' argument that the settlement was for damages to a capital asset was rejected. The shareholders had the burden of demonstrating that the settlement proceeds were for something other than that. That they failed to do. The Court also rejected the sale of a capital asset argument. It found no support in the record for such a conclusion.

Judge Manion dissented. Although he concurred with the panel's treatment of the asset sale argument, he believed that the settlement proceeds should be treated as a recovery of value lost when a trade secret was misappropriated. Under his understanding, the Tax Court misread the complaint. Although the complaint did seek lost profits, Judge Manion pointed out that the complaint was filed against both Pizza Hut and IBP. The claim against IBP was for lost profits. The claim remaining after the IBP settlement was a trade secret misappropriation claim. The Pizza Hut settlement was compensation for its diminished value and should have been treated as capital gains.

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