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

BLUE CROSS BLUE SHIELD OF MASSACHUSETTS, INC. V. BCS INSURANCE CO. (December 16, 2011)

BCS Insurance Co. is a captive insurer owned by the various state Blue Cross Blue Shield plans. The contract between BCS and the state plans requires arbitration if BCS declines a state plan’s request for reimbursement. After a number of healthcare providers filed class actions against the state plans, twelve state plans sought a defense and indemnification from BCS. BCS declined and the plans demanded arbitration as a group. When the plans' arbitrator and BCS' arbitrator could not agree on a third, several of the plans requested the district court to make the appointment under § 5 of the Federal Arbitration Act. BCS cross-petitioned to compel individual, rather than consolidated, arbitration. It argued that the consolidated versus individual arbitration issue was a question for the district court, rather than one for the arbitrator. Judge Lefkow (N.D. Ill.) denied BCS' cross-petition and BCS appealed. Before the Seventh Circuit acted on the appeal, Chief Judge Holderman (N.D. Ill.) appointed the third arbitrator. BCS again appealed, arguing that the district court lost its jurisdiction to act on the plans' request at the time of the first appeal. The appeals were consolidated.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judge Cudahy and District Judge Pratt dismissed the first appeal for want of jurisdiction and affirmed on the second appeal. The Court first turned to whether it had appellate jurisdiction of the first, interlocutory appeal. The Federal Arbitration Act allows an appeal from an order denying a request for arbitration. BCS argues that its petition was just that – a motion to compel arbitration. Since it was denied, an appeal is proper. The Court disagreed. It noted that, notwithstanding the pleading’s title, BCS was not seeking arbitration. Arbitration was already ongoing. What BCS wanted was for a federal judge to order an arbitration panel to proceed in a particular way. Since the first order did not deny a request for arbitration, the Court dismissed it want of jurisdiction. With respect to the second appeal, the district court was well within its rights to appoint the third arbitrator. BCS does not even assert otherwise. Though it could have stopped there, he Court went on to address the underlying dispute -- whether a court or the arbitration panel rules on the consolidated versus individual arbitration debate. The Court stated that the district court should have allowed the arbitration panel to decide that question, under the Court's Wausau decision. The only question for court is whether the parties have agreed to arbitrate and here they have.

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VIRNICH v. VORWALD (December 20, 2011)

Daniel Virnich was a director of Communications Products Corporation. CPC had a banking relationship with American Trust and Savings Bank. When CPC was experiencing financial difficulties in the early 2000s, the Bank asked for additional collateral or repayment and sought personal guarantees. Virnich alleges that it was at this time that the Bank's loan officer concocted a plan to damage Virnich’s reputation. He alleges that the loan officer contacted other banks, tried to instigate an FBI investigation, and conspired with Michael Polsky to act as a receiver. In fact, the Bank brought an ex parte motion for a receiver and Polsky was appointed. CPC's owners agreed to sell its assets and released Polsky and the bank. They also sought permission from the receivership court to bring a derivative action on behalf of CPC against the Bank. But Polsky, as receiver, had already brought a lawsuit against Virnich and the co-owner for breach of fiduciary duty. A jury awarded CPC over $6 million in damages, which Polsky tried to collect from Virnich. The appellate court reversed the jury verdict. Meanwhile, Virnich filed suit in federal court against the Bank, the loan officer, and Polsky for tortious interference with contract, negligence, and a violation of a Wisconsin statute which prohibits conspiracies to maliciously injure the business of another. Judge Crabb (W.D. Wis.) dismissed most of the claims on the grounds that they were derivative and should have been brought by CPC and dismissed the Wisconsin statutory claim for failure to state a claim. Virnich appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Hamilton affirmed. Under Twombly, a complaint must state a claim that is "plausible on its face." The Wisconsin statute requires allegations that the defendants acted in concert, with a common purpose, to injure Virnich's reputation or business, maliciously, resulting in financial harm. The district court concluded that Virnich failed to allege a plausible conspiracy, given that Polsky was a professional receiver and that it was not plausible that he would engage in the alleged conspiracy, and failed to allege malice. The Court disagreed. Notwithstanding Polsky's role as a professional receiver, the Court concluded that Virnich adequately alleged conspiracy. Similarly, Virnich adequately alleged that the defendants irrationally wanted to cause him harm. Therefore, Virnich adequately alleged a statutory violation. Nevertheless, the Court affirmed the district court for a different reason. Every alleged action by Polsky was taken in his role as the court-appointed receiver. Virnich had an opportunity to contest Polsky's appointment in the receivership court and he did not. When he sought leave to file a derivative action against the Bank, the receivership court concluded that he had waived that right. Under principles of collateral estoppel, Virnich is precluded from relitigating issues already litigated in the receivership court. The Court also concluded that precluding Virnich's statutory claim would be consistent with fundamental fairness, which is a necessary finding for collateral estoppel in Wisconsin.

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UNITED STATES v. SUAREZ (December 16, 2011)

José Suarez, a Mexican native, became a permanent resident of the United States in 1978. Over the course of the next 20 years, he was arrested on a few occasions but the charges were always dismissed. In mid-1996, Suarez was engaged in marijuana distribution but was not immediately charged. In December of that year, he applied for naturalization. He disclosed his earlier charges but not the marijuana distribution activity just months earlier. He eventually became a United States citizen in May of 1998. A few months later, he was charged and convicted for marijuana trafficking. He was sentenced to 87 months in prison. A few years after his release, the United States sought to revoke his naturalization on the grounds that he lacked the good moral character required for citizenship and had illegally procured his naturalization. Judge Dow (N.D. Ill.) granted summary judgment to the United States. Suarez appeals.

In their opinion, Seventh Circuit Judges Kanne, Rovner, and Sykes affirmed. Good moral character is required for citizenship. The relevant statute lists several qualities that would disqualify a person under the moral character requirement. One of those is a conviction for a controlled substance offense if the offense was committed during the five-year period prior to the application filing. The Court concluded that the conviction for the offense need not occur prior to the application. Suarez’s citizenship was therefore properly revoked. However, because the Government did not share the Court's view on the conviction’s timing and argued, instead, that the statute’s catchall provision applied, the Court addressed it. Federal regulations, which here are entitled to Chevron deference, provide that an applicant lacks good moral character if he violates a controlled substance law during the statutory period. The regulation does not speak to a conviction. Therefore, the Court concluded that Suarez was ineligible for citizenship under the catchall provision as well. Finally, the Court provided a third route under which Suarez would be barred from citizenship. Another federal regulation provides that an applicant lacks good moral character if, absent extenuating circumstances, he committed unlawful acts and was later convicted. The Court noted its concurrence with the Eleventh Circuit that a conviction during the statutory period was not required. Since Suarez raised no issues of material fact guarding the "extenuating circumstances" exception, he is ineligible for citizenship and his citizenship was properly revoked.

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PICKETT v. SHERIDAN HEALTH CARE CENTER (December 15, 2011)

Danielle Pickett’s retaliation claim against her former employer, Sheridan Health Care Center, was tried to a jury. The jury awarded her $15,000 in compensatory damages and $50,000 in punitive damages. The Seventh Circuit affirmed (opinion and intheiropinion). Pickett had agreed to pay her attorney a $7,500 flat fee and a 1/3 contingent fee. She also agreed to assign to him any statutory fee. Her attorney sought statutory fees of approximately $130,000. Judge Pallmeyer (N.D. Ill.) rejected the attorney's claimed $592/hour market rate. Relying on the CPI and the Laffey Matrix (neither of which had been mentioned or relied on by the parties) and the fact that the attorney was entitled to the flat fee and the contingent fee on top of the statutory fee, she set a market rate of $400. Based on that rate, she awarded $70,000 in fees. Although she originally awarded almost $10,000 to the law firm that prepared the fee petition, she later reversed herself and denied those fees on the grounds that Pickett's lawyer had not be prepaid them. Plaintiff appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Wood vacated and remanded with respect to the principal fee award and reinstated the fees to the firm that prepared the fee petition. Under Title VII, the prevailing party can recover attorney's fees. Fees are generally calculated by multiplying the time reasonably incurred by a reasonable rate. When the attorney seeking fees has no set hourly rate because he typically works on a contingent basis, courts should determine the rate based upon what similarly experienced attorneys charge. Here, the Court concluded that the district court was influenced by the fact that Pickett's attorney was receiving the flat, contingent, and statutory fees. It was error for her to do so. The Supreme Court has adopted the lodestar approach (hours times rate) notwithstanding its shortcomings and has recognized that lawyers can receive both contractual and statutory fees. The district court is not allowed to reduce the statutory fee recovery simply because the client also agreed to a contingent fee (and, for that matter, a flat fee). Since the Court was not sure how much the contingent fee agreement contributed to the hourly rate reduction, it remanded for further consideration. The Court did agree that the evidence supporting the almost $600 an hour rate was lacking. However, the district court erred in disregarding the rates offered in affidavits of other practicing attorneys on the ground that they did not perform contingent work -- and erred when it reduced the award because of a lack of evidence of prior fee awards in contested cases. With respect to the district court's use of the consumer price index and the Laffey Matrix, the Court did not consider the use of either to be a problem. However, the district court should have given the parties an opportunity to address the use of those matters. Ultimately, the Court emphasized that it was not rejecting the $400 rate approved by the district court. It was just unsure how the court reached that number. Finally, the Court reinstated the fee award to the firm that prepared the fee petition. The only reason the district court gave for reversing its prior award was that the firm had not been prepaid. There is no such requirement. Particularly since the district court approved the award in the first instance, it does not appear that the court had any issue with the reasonableness of the fee.

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DEGUELLE v. CAMILLI (December 15, 2011)

Michael DeGuelle worked for S. C. Johnson & Son, Inc. in its tax department. In the early 2000s, he came to believe that the company was submitting false income tax reports to the IRS. He discussed his concerns with several others within the company to no avail. He complained to Human Resources that Global Tax Counsel Wenzel was creating a hostile work environment by instructing him to engage in what he considered illegal activity. Wenzel criticized DeGuelle for taking his complaints outside the department, even becoming physically aggressive, and gave DeGuelle a negative performance review. The tension between the two continued for months. Finally, DeGuelle indicated that he was going to file a whistleblower complaint with the Department of Labor. The company offered to pay some of his attorney's fees if he would sign a release and confidentiality agreement. He declined and filed the complaint, attaching financial documents and internal communications. He continued to press the issue internally at the company as well. He provided company counsel with a lengthy memorandum detailing his concerns. The company offered one-year severance if he resigned and signed a confidentiality agreement. DeGuelle refused. A few weeks later, the company began an investigation of DeGuelle relating to the documents he disclosed in his complaint. He was eventually terminated for disclosing company documents. The company filed suit in state court for breach of contract and for the recovery of documents. DeGuelle filed suit in federal court, alleging RICO violations, breach of contract, wrongful termination, and defamation. Judge Stadtmueller (E.D. Wis.) dismissed the RICO claims with prejudice and declined to exercise jurisdiction over the state law claims. DeGuelle appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Hamilton reversed and remanded. The Court addressed the RICO pleading requirements. Under §1964(c), DeGuelle must allege that he was injured by reason of a § 1962 violation. DeGuelle alleged violations of subsections 1962(c) and 1962(d). Subsection (c) requires a "pattern of racketeering activity" allegation. Northwestern Bell requires that the alleged predicate acts of racketeering be related to each other and that there is a continuing threat. Finally, subsection (c) requires "but for" causation between the racketeering activity and the plaintiff's injury. Since DeGuelle’s alleged injuries were related only to the retaliation and since the retaliatory attacks were not themselves a pattern of racketeering activity, the Court concluded that the retaliatory activity must be related to the tax fraud activity. The Court found the district court erred in concluding that they were unrelated because they involved different people, motives, and victims. The retaliatory conduct was inherently related to the scheme that DeGuelle exposed. Specifically relying on the Sarbanes-Oxley whistleblower provisions, the Court stated that courts must examine the facts in each case to determine if the retaliation is related to the underlying wrongdoing. The Court concluded, on the record before it, that DeGuelle satisfied the Northwestern Bell test for his subsection (c) allegation. DeGuelle also alleged a subsection (d) claim. Under subsection (d), DeGuelle must allege an agreement to commit at least two predicate acts. The Court concluded that DeGuelle adequately alleged an agreement among the tax department defendants. Again, since DeGuelle's alleged injury was related only to the retaliatory conduct, the Court inquired whether DeGuelle adequately alleged an agreement between the participants in the tax fraud and the participants in the retaliation. It concluded that the complaint adequately, although sparsely, alleged that the retaliatory actors aided the tax fraud actors in concealing their conduct and thus were part of the original tax fraud conspiracy.

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POWERS v. USF HOLLAND, INC. (December 15, 2011)

USF Holland is a large regional trucking company. Drivers at its South Bend, Indiana, terminal are classified as either city or road drivers. City drivers have local routes and frequently assist in dock work, i.e., loading and unloading. Road drivers, on the other hand, drive much longer distances and engage in much less dock work. Keith Powers was a Holland road driver in 2004 when his wife became pregnant. He asked Holland to switch him to city driver status in order to be home more often. Holland granted the request. Within a month, Powers regretted the move. He started experiencing discomfort and lack of mobility as a result of the additional dock work he was required to do is a city driver. Holland rejected his request to return to his prior assignment, citing a restriction in the collective bargaining agreement. Powers' condition worsened and he went on unpaid medical leave in August 2004. In December 2005, he asked to return to work. His physician imposed medical restrictions, including "limited hours of dock work" and "road driver work only." Two Holland supervisors told Powers that he could not return to work until he could work without restrictions. A Human Resources manager told Powers said that she needed clarification regarding the restrictions and also asked him to have his physician fill out a "Request for Accommodation" form. Powers never completed the form. Instead, he brought suit against Holland under the Americans with Disabilities Act. He alleged that Holland violated the ADA by enforcing a "100% healed policy" and thatt Holland discriminated against him and retaliated against him. Judge Van Bokkelen (N.D. Ind.) granted summary judgment to Holland. Powers appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Manion affirmed. The Court noted that, although Powers brought several distinct claims, each claim required proof that Powers was disabled under the ADA. To be ADA-disabled, a person must have an impairment that "substantially limits one or more of the major life activities," or must have a record of such an impairment, or must be regarded as having such an impairment. The only major life activity at issue in the appeal was working. Powers made claims under both the “having an impairment” and “regarded as having an impairment” prongs. The Court first addressed whether Powers had an impairment. In order to meet that condition, Powers had to show that he was significantly restricted in his ability to work compared to others. The Court concluded that the evidence did not support that conclusion. Powers line of work is truck driving. The only restrictions noted by his physician related to the dock work associated with the truck driving. In fact, Powers testified that he was physically capable of driving. The fact that he is unable to perform a job where the driving is accompanied by significant dock work does not make him significantly restricted in truck driving. The Court turned to the "regarded as" prong. Under that prong, a person can be ADA-disabled if his employer believes that he has a substantial impairment in a major life activity. The Court found no such evidence in the record. In so concluding, the Court rejected Powers' contention that the company's "100% healed policy" supported that position. That policy does not violate the ADA (at least the pre-2008 ADA that applies in this case) unless the person is actually disabled.

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ADVENTIST GLENOAKS HOSPITAL v. SEBELIUS (December 15, 2011)

The federal Medicare program reimburses hospitals for the care they provide to eligible patients. The reimbursement amount is calculated through the application of a rather complicated formula. One element of the formula is a hospital’s "wage index," which, in turn, depends on the average hourly wage in the hospital's Metropolitan Statistical Area. The average hourly wage is computed using actual hospital wage and hour data. Most hospital employees are not paid for lunchtime. Some hospitals, however, pay their employees for a half-hour lunch. All other things being equal, including a half-hour paid lunchtime in the data results in a lower average hourly wage and less Medicare reimbursement. A number of hospitals asked the Secretary of the Department of Health and Human Services to exclude paid lunchtime hours from the formula. When she refused, the hospitals appealed to the Provider Reimbursement Review Board. The Board upheld the Secretary's decision. The hospitals sought review in the district court. Judge Guzman (N.D. Ill.) concluded that the Secretary's decision was not arbitrary or capricious or otherwise unlawful and granted summary judgment in her favor. The hospitals appeal.

In their opinion, Seventh Circuit Judges Cudahy, Manion, and Sykes affirmed. The Court first noted that its review was quite limited. The Secretary's decision will stand unless it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." The Court conceded that there was some logic in the hospitals’ position -- as did the Secretary. Indeed, the Secretary supported her decision principally on administrative convenience grounds. She decided to include not only paid lunchtime, but also other paid leave time such as military leave, jury duty, sick leave, etc. The last time the Secretary solicited public comment, there was significant disagreement among the commentators over how to treat things like paid lunchtime. Given that the Secretary has considered her alternatives and adequately explained her decision, the approach is reasonable and legal and will stand.

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BROWN v. COLUMBIA SUSSEX CORP. (December 15, 2011) 

James Piggee runs the organization Giving Education Meaningful Substance. For two decades, he has organized an annual trip that exposes African-American high school students to predominately black universities. The destination for the Spring 2008 trip was Louisiana and Texas. The group reserved 41 rooms at the Marriott Hotel in Baton Rouge Louisiana. Within a few days, the hotel canceled the reservation. Piggee, the students, and the chaperones (268 in all) filed suit against Marriott, alleging that the cancellation was racially motivated. In the district court, Marriott served discovery requests on the plaintiffs in December of 2009. Several deadlines came and went. A motion to compel was granted and ignored. The district court sanctioned the plaintiffs for their delay. Finally, almost a year after the discovery was served, Chief Judge Simon (N.D. Ind.) dismissed the case pursuant to Rule 37(b) with respect to the 200 or so plaintiffs that had not responded to discovery. Plaintiffs appealed.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. The Court first addressed its jurisdiction. After the original appeal, the Court ordered briefing on jurisdiction since it appeared that the district court had not entered a final judgment. During the time for briefing, the appellant's returned to the district court and obtained a Rule 54(b) final judgment -- but did not file a new notice of appeal. In FirsTier, the Supreme Court concluded that a notice of appeal was timely when it followed a district court's decision but preceded its entry of judgment. In that case, however, the only thing that followed the notice was the actual entry of the judgment. Here, the plaintiffs had to move for and support a Rule 54 judgment. The Court identified two alternate readings of FirsTier. Under one reading, a premature notice of appeal is allowed if it is followed only by the ministerial task of entering judgment. Under another reading, a premature notice of appeal is allowed if, with respect to the claim being appealed, the only thing remaining is the entry of the judgment. The Court concluded that the latter interpretation was the correct one and held the notice timely. On the merits, the Court seemed to have little difficulty in finding the dismissal sanction, although serious, not inappropriate. Plaintiffs’ counsel missed numerous discovery deadlines, violated court orders, did not have the resources to handle the case, had not even spoken with many of the plaintiffs, and was warned that the court had given its "final extension." No more is necessary.

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RODRIGUEZ v. COOK COUNTY (December 15, 2011)

More than a decade ago, Angel Rodriguez was convicted of murder by a state court jury. An appellate court concluded that the evidence presented was insufficient to sustain the verdict and reversed. Rodriguez filed a federal civil rights suit against two officers involved in his arrest. He lost at the trial court level and the Seventh Circuit affirmed in 2006. Rodriguez obtained a "certificate of innocence" under Illinois state law in 2009. On the grounds that the certificate created a new cause of action, Rodriguez again filed suit in 2010 against the original defendants and three prosecutors. Judge Conlon (N.D. Ill.) dismissed the case against the original defendants on res judicata grounds and dismissed the case against the new defendants on statute of limitations grounds. She also dismissed the state law claims against the prosecutors on subject matter jurisdiction grounds, concluding that they were entitled to state immunity. Rodriguez appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Tinder affirmed. The Court addressed the Illinois law at issue. The statute, enacted in 2008, allows a person who has had a conviction set aside after serving prison time to obtain a certificate of innocence and file a petition in the Illinois Court of Claims for compensation. It does not, and could not, alter the effect of a federal court judgment nor does it, although it could, toll or extend the limitations period for a § 1983 suit. Rodriguez' claim accrued in 2000, when the Illinois appellate court reversed his conviction. His certificate of innocence does nothing to change that. The federal claims are time-barred. The Court did disagree with the district court's treatment of the state law claims against the prosecutors. It is not clear whether Rodriguez asserts his claim against the prosecutors in their official or personal capacities. But, if the former, the suit is really against the State and the prosecutors should be dismissed. If the latter (which the district court assumed), there is no jurisdictional barrier to the suit proceeding in federal court. The prosecutors could simply assert state law immunity as an affirmative defense. Nevertheless, since it was clear that the district court would have declined to exercise its supplemental jurisdiction over the state law claims, its error had no effect. The Court affirmed the dismissal without prejudice, as modified.

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KELLAR v. SUMMIT SEATING INC. (December 14, 2011)

Susan Kellar was promoted to a sewing manager at Summit Seating, a small vehicle-seat manufacturer, in 2004. She remained an hourly employee. Keller managed about eight employees and was responsible for making sure they had their equipment and instructions and that their work was completed on time. Shortly after she voluntarily resigned in 2009, she brought a Fair Labor Standards Act claim. She alleged that she regularly arrived at work 15-45 minutes early and that she used much of the time working (checking schedules, handing out materials, checking patterns, etc.). Her sister, another Summit employee who was frequently with her during those times, claims that Kellar did not work before her shift began. Keller admits that she never told Summit's owners that she was working prior to the beginning of her shift and that Summit had a written policy requiring preapproval for overtime. Magistrate Judge Nuechterlein (N.D. Ind.) granted summary judgment to Summit. Keller appeals.

In their opinion, Seventh Circuit Judges Evans (who, as a result of his death, took no part in the decision) and Williams and District Judge Conley affirmed, although on different grounds. Although the FLSA requires an employer to pay overtime when an employee works over 40 hours, the Portal-To-Portal Act exempts certain preliminary activities. The magistrate judge concluded that the exemption applied, but in doing so ignored Kellar’s own affidavit. He erred in doing so. Although she offered no additional evidence, her affidavit was sufficient to create an issue of fact with respect to the preliminary activities exemption. The Court also concluded that Kellar's work did not fit within the de minimis doctrine, which allows an employer to ignore otherwise compensable work if it only amounts to a few minutes. Keller asserts that she worked anywhere from 10-40 minutes a day before her actual shift began. That does not qualify as to minimus. In order to qualify for overtime, however, Keller must demonstrate that her employer had actual or constructive knowledge of her effort. The FLSA does require an employer to be reasonably diligent and oversee the work of its employees. Here, Summit had no reason to believe that Kellar was working overtime and is not liable for overtime payments under the FLSA.

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ABUELYAMAN v. ILLINOIS STATE UNIVERSITY (December 13, 2011)

Illinois State University classifies its professors in two ways. First, a professor is ranked either as an assistant professor, an associate professor, or a full professor. The University's expectations of a professor depend on his or her ranking. Professors are also classified as tenured, probationary tenure-track, or nontenure-track. The University conducts fairly rigorous annual evaluations to assess its faculty members’ performance. The University hired Eltayeb Abuelyaman, an Arab Muslim, as a probationary tenure-track associate professor in 2001. The University's evaluation committee gave Abuelyaman low performance scores for several years and elected not to reappoint him in March 2006. Abuelyaman filed a complaint with the EEOC alleging race, religion, and national origin discrimination. He cited several bases for his allegation. First, he complained several times to Dr. Dennis that Dennis' decision to give greater weight to student evaluations disadvantaged foreign born professors. Second, Abuelyaman supported another professor’s complaint that the professor had been discriminated against with respect to his non-renewal. Third, Abuelyaman was involved in the investigation of another professor’s complaint that Dr. Dennis improperly used his authority on a Search Committee to steer the committee to a candidate that Dennis preferred. Abuelyaman filed suit pursuant to Title VII for 1) discrimination, 2) retaliation for backing his fellow professor’s discrimination claims, and 3) retaliation for participating in the Dr. Dennis complaint. Judge Mihm (C.D. Ill.) granted summary judgment to the University on the discrimination claim and the first retaliation claim. He granted a motion for judgment as a matter of law at the close of plaintiff’s case on the second retaliation claim. Abuelyaman appeals.

In their opinion, Seventh Circuit Judges Ripple, Manion, and Sykes affirmed. The Court first addressed and rejected the University's argument that the district court abused its discretion in granting Abuelyaman an extension of time to file the notice of appeal. Abuelyaman’s attorney attempted to file the notice of appeal electronically before the filing deadline and thought she had done so. When she realized, six days later, that her filing had not been successful, she promptly filed a motion for an extension. The district court did not abuse its discretion in finding excusable neglect under Rule 4(a)(5). On the merits, Abuelyaman proceeded under the direct method of proof. His principle argument was that he was treated differently from other, similarly situated faculty members. The Court agreed with the district court that Abuelyaman fell far short of meeting his burden. First, his comparisons to tenured faculty members did not meet the "similarly situated" test. Second, the Court found that the University’s treatment of underperforming non-tenured faculty members was very similar to their treatment of Abuelyaman. With respect to his retaliation claims, Abuelyaman had to show that he was engaged in protected activity and that there was a causal relationship between the activity and his non-renewal. His first claim, that the University retaliated against him for his complaints about discrimination directed at a fellow faculty member, fails both because he did not raise it in time in the district court and because there is no evidence in the record that the decision-makers knew of his involvement in that matter when they decided not to renew his contract. The second claim, that the University retaliated against him for his involvement in the Dennis investigation, fails because Abuelyaman was not engaged in protected activity. The Dennis investigation did not involve any allegations of discriminatory conduct. Abuelyaman’s involvement was therefore not protected under Title VII.

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WISCONSIN RIGHT TO LIFE STATE POLITICAL ACTION COMMITTEE v. BARLAND (December 12, 2011)

The Wisconsin Right to Life's State Political Action Committee is an independent political committee that does not make contributions to candidates nor does it coordinate with any candidate or party. Wisconsin law places a $10,000 cap on an individual' s political contributions, whether they be to candidates, parties, or independent political committees. Two Wisconsin residents wished to make a $5,000 contribution to the PAC in 2010 but could not do so legally because of other contributions they had already made or planned to make. The PAC filed suit, alleging that the Wisconsin statute was unconstitutional to the extent it limited contributions to independent political committees. The PAC moved for a preliminary injunction, anticipating the fall 2010 elections. Instead, Chief Judge Clevert (E.D. Wis.), at defendants request, granted a Pullman abstention motion. The court based its ruling on the pendency of a case before the Wisconsin Supreme Court challenging an amended campaign finance rule. The PAC returned to the District Court in 2011, in anticipation of an unprecedented six state senator recall elections. The district court denied the motion. The PAC appealed and moved for an injunction pending appeal. A Seventh Circuit motions panel granted the motion and the Court expedited the appeal.

In their opinion, Seventh Circuit judges Posner, Flaum, and Sykes vacated the district court's abstention order and remanded with instructions to enter a permanent injunction. Before reaching the merits of the request for injunctive relief, the Court considered several preliminary challenges raised by the defendants. First, the Court concluded that the PAC had standing. The complaint alleged a proper pre-enforcement challenge. The PAC identified actual contributors who attested to their desire to make contributions in excess of the statutory limit. Second, the Court rejected the defendants' ripeness argument. The fact that the injunction pending appeal allowed the contributors freedom during the 2011 elections and their generalized desire to do so "in the future" does not establish a lack of ripeness. Future elections are only months away and the Court understood the contributors' "in the future" attestation to include those elections. Third, the Court rejected the contention that the conclusion of the 2011 recall elections made the claim moot. The Court noted that the claim probably could fit within the "capable of repetition yet evades review" exception but concluded that it need not decide that. The contributors’ claims were not limited to the 2011 recall elections. Fourth, the Court concluded that Pullman abstention was not appropriate. Although several aspects of the PAC’s case and the case pending before the Wisconsin Supreme Court overlap, the $10,000 contribution limit is not one of them. The state court's decision will therefore have no impact on the constitutional challenge to the $10,000 cap. The Court turned to the merits. It noted that laws limiting political speech are subject to strict review. The Supreme Court has drawn a distinction between limits on political campaign contributions, which are frequently upheld when the limitation is narrowly drawn to serve a important government interest, and limits on political expenditures, which are subject to strict scrutiny and are usually not upheld. Citizens United held that the only government interest at play is political corruption or the appearance of corruption. Since the kind of quid pro quo political corruption that the government is concerned about does not exist in the context of a independent political organization, a limitation on its expenditures cannot survive constitutional scrutiny. Even though the Wisconsin statute at issue addresses contributions, and not expenditures, the result is the same.

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BPI ENERGY HOLDINGS v. IEC (MONTGOMERY), LLC (December 8, 2011)

BPI is in the business of producing natural gas from coal. Drummond Company is a large coal mining company. Because companies like BPI need access to coal from which to extract natural gas and companies like Drummond need someone like BPI to extract the gas before it can be safely mine the coal, alliances between companies like these are common. BPI and Drummond entered into a memorandum of understanding pursuant to which the parties agreed that BPI would sell its coal rights to Drummond and Drummond would lease to BPI the extraction rights in its coal holdings. The MOA stated that it was not a binding agreement and merely was intended to form the basis of an agreement. The parties soon entered into a letter of intent that was more specific. It identified BPI's coal interests and Drummond's gas extraction opportunities and further described the alliance expectations of the parties. It also provided, however, that it was not binding upon the parties and it did not provide the terms for the gas extraction leases. Notwithstanding the nonbinding nature of the agreement, BPI began transferring some of its coal rights to Drummond. Drummond did not return the favor and eventually terminated the alliance. BPI brought suit against Drummond for promissory fraud. Chief Judge Herndon (S.D. Ill.) granted summary judgment to Drummond. BPI appeals.

In their opinion, Seventh Circuit Judges Posner, Sykes, and Hamilton affirmed. Because there was no contract between the parties, BPI brought its action based on promissory fraud. Although promissory fraud is recognized in Illinois, it is recognized only if it is part of a scheme to defraud. Illinois’ "scheme" requires either a pattern of fraudulent statements or a particularly egregious one. The Court first addressed and rejected Drummond's statute of frauds defense. Although it characterized Illinois' position as "murky," it concluded that Illinois has adopted the majority rule that promissory fraud is a tort and not subject to the Statute of Frauds. Turning to the merits of the fraud claim, the court simply concluded that BPI's evidence was insufficient. The Court also noted that the case would fail for lack of reliance. Both the memorandum and the letter of intent with were nonbinding. Both anticipated that a final, binding agreement would be negotiated. They had not yet even agreed on the terms for the gas extraction leases. Drummond's reliance on these nonbinding agreements was reckless and does not satisfy the justifiable reliance element of fraud.

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SWEARINGEN v. MOMENTIVE SPECIALTY CHEMICALS (December 7, 2011)

Paul Swearingen delivered a tank of chemicals to the Momentive Specialty Chemical facility in Carpentersville, Illinois in March of 2010. At the request of Momentive’s personnel, he climbed on top of the truck to open the dome lid. Although he noticed low-hanging fire extinguishing system piping, he nevertheless began to stand on top of the truck. He hit his head and fell to the ground, suffering injuries. Swearingen filed suit against Momentive, alleging that it failed to warn him of the risk from the piping and failed to provide him with a harness. Judge St. Eve (N.D. Ill.) granted summary judgment to Momentive, concluding that it owed no duty of care because the hazard was open and obvious and the deliberate encounter exception did not apply. Swearingen appeals.

In their opinion, Seventh Circuit Judges Flaum and Manion and District Judge Magnus-Stinson affirmed. Under Illinois law, a negligence plaintiff must plead and prove the existence of a duty of care. Without a duty, there is no liability. The Illinois Supreme Court has identified four factors in the duty inquiry: the injury's reasonable foreseeability, its likelihood, the extent of the burden of guarding against it, and the consequences of placing the burden on the defendant. Although the Court noted that Illinois law requires the four-factor inquiry even in an open and obvious or deliberate encounter exception situation, it addressed the appeal from both perspectives. First, on the open and obvious inquiry, the Court noted that Swearingen did not dispute that the hazard was open and obvious. The Court rejected his deliberate encounter exception, which requires evidence that the defendant had reason to believe that Swearingen would nevertheless deliberately encounter the known hazard. Swearingen presented no such evidence. In fact, the evidence was that Swearingen ignored his own training and the company's safety protocols when he failed to maintain three points of contact with the ladder. Second, with respect to the four-factor test, the Court concluded that the injury was not reasonably foreseeable or likely and the burden and consequences of requiring Momentive to guard against the injury were significant. Therefore, there was no duty under the four-factors analysis, either. Finally, the Court rejected Swearingen's argument that he created material issues of genuine fact. Even if he did, the facts at issue were unrelated to duty. Without a duty, there is no liability. 

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MARR v. BANK OF AMERICA (December 6, 2011)

In 2007, Richard Marr refinanced his home mortgage with Countrywide Bank. Summit Title closed the loan in February. Marr signed an acknowledgment at that time that he had been given two copies of the right to rescind notice, as required by the Truth in Lending Act. The closing agent gave Marr the closing documents, which he alleges he put in a folder and kept in a filing cabinet in his home. Two years later, his attorney inspected the folder in connection with an unrelated matter and discovered only one copy of the notice to rescind. Marr brought suit to rescind, relying on the statutory three-year rescission period when a lender fails to provide two copies of the notice. He testified that he removed nothing from the closing folder between the time he received it and the time he turned it over to his lawyer. The closing agent testified regarding the standard procedures for closing, which included providing the borrower with two copies of the notice. Marr testified that the February closing did not follow the standard procedures outlined in the agent’s affidavit. Judge Stadtmueller (E.D. Wis.) granted summary judgment to the defendants based on the rebuttable presumption created by Marr’s signed acknowledgment. The court ruled that his testimony was not enough to overcome the presumption. Marr appeals.

In their opinion, Seventh Circuit Judges Wood, Tinder, and Hamilton reversed and remanded. The Court first noted that the Act does create a rebuttable presumption but that it does so by saying that it "does no more than" create the presumption. The Court interpreted this language as a warning to courts to not overvalue the presumption. The Third Circuit has recently ruled that the borrowers testimony by itself is sufficient to overcome the presumption. The Court declined to adopt that extreme a position because Marr presented more than that: the folder contained only one copy of the notice, he testified that he removed nothing from the folder, and he testified that the closing agent did not follow standard operating procedures during closing. A reasonable jury could believe that he received only one copy of the notice.

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HLAVACEK v. BOYLE (December 6, 2011)

Eric Hlavacek enrolled in the Southern Illinois University School of Dental Medicine in 2005. He failed a required course in the fall semester, failed it again the next semester, failed another course in the spring 2007 semester, and failed three courses (one of them twice) in the fall 2007 semester. In early 2008, the University informed Hlavacek that he was being dismissed for unsatisfactory academic performance. Hlavacek challenged his dismissal at a hearing, filed a grievance with the school’s Office of Institutional Compliance, and sought review through several school officials, including the President -- all to no avail. Hlavacek filed suit against the school, alleging they violated his procedural due process rights. Judge Murphy (S.D. Ill.) dismissed the complaint for failure to state a claim. Hlavacek appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Wood and Tinder affirmed. The Court assumed that Hlavacek had a cognizable property interest in his dental school education and turned to whether he was afforded the required process. In the educational institution setting, academic dismissals require very little process. They require notice and a careful decision -- but they do not even require a hearing. Here, Hlavacek was put on notice that he was on academic probation, and he was given repeated second chances. Though he was not even entitled to a hearing, he was given a hearing and a grievance and several additional audiences before the dismissal was final. He received more than due process.

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IN RE: IFC CREDIT CORP. (December 5, 2011)

Northbrook Bank & Trust had a fraud suit pending against IFC Credit Corporation when IFC declared bankruptcy on July 27, 2009. The Chapter 7 petition filed on that day was signed by IFC's non-lawyer president. IFC filed an amended petition -- signed by a lawyer -- the following day. The Bank refiled its complaint in the bankruptcy proceeding. The Bank and the trustee settled a preference dispute conditioned on a finding of jurisdiction. The bankruptcy court had rejected the Bank's argument that the bankruptcy proceeding was void because the original petition was not signed by a lawyer. Judge Manning (N.D. Ill.) agreed. The Bank appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Wood affirmed. The Court recognized the rule (and the practical reasons behind) that corporations are not permitted to represent themselves. But that does not make it an element of subject matter jurisdiction. The Supreme Court in recent years has limited the number of rules that actually involve subject matter jurisdiction. Subject matter jurisdiction is all about the competence of a court to decide case, not about the conduct of the parties in those cases. After considering the potential consequences, the Court concluded that the rule against pro se corporate litigants was not jurisdictional. Of course, the bankruptcy court could have dismissed the petition had it discovered the error before it had been corrected. Here, IFC amended the petition pursuant to Bankruptcy Rule 1009(a). Although that rule does not address relations back, the Court concluded that a bankruptcy court could allow the petition to relate back to the original filing.

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STEVENS v. HOUSING AUTHORITY OF SOUTH BEND (December 1, 2011)

Bridgett Stevens and her two sons moved into public housing in South Bend, Indiana in 2007. The lease she signed with the Housing Authority of South Bend provided that any involvement in criminal activity by Stevens, her household, or guests could result in immediate termination of the lease. In late 2007, two men were involved in a gunfight in the building's parking lot. One man was Stevens' daughter's boyfriend -- the other was the daughter's former boyfriend, the father of her children, and the invited guest of Stevens son. The Authority issued a notice to vacate the apartment by the end of January, 2008. Stevens filed suit alleging that the Authority violated the Fair Housing Act, that it interfered with her right to make a contract, that it breached its contract with HUD, and that it violated her equal protection and due process rights. The Authority filed a counterclaim for immediate possession of Stevens' apartment. Months later, the authority issued another 30-day notice to vacate. The second notice was based on October and November 2008 incidents of domestic abuse. The Authority issued a third notice in November based on yet another incident of domestic abuse. Stevens never challenged the second or third notices. She vacated the apartment in January 2009. Judge Lozano (N.D. Ind.) granted summary judgment to the Authority. Stevens appeals.

In their opinion, Seventh Circuit judges Posner, Kanne, and Rovner affirmed. The Court first addressed the district court's conclusion that her claims based on the first notice were moot as a result of her involuntary departure after the second and third notices. Her claim is moot if she no longer retains an interest in the outcome. First, she is not entitled to injunctive or declaratory relief because of her failure to challenge the later notices. Second, she does not claim any out-of-pocket losses. Third, although she does claim damages for emotional distress, the Court concluded that she did not meet the standard for proving emotional damages when her testimony is the only offered proof. In so concluding, the Court also rejected Stevens’ contention that the first notice was unlawful in that she had no control over the men who fought. The Court concluded that the Authority's notice was lawful. Under Rucker, no fault evictions based on the criminal activity of invited guests are lawful, even if the criminal activity was without the knowledge of the tenant. The Court turned to her Fair Housing Act claim that the Authority's decision on where to locate the apartment was an act of segregation. But Stevens' proof consisted entirely of her unsupported personal observations. The record is devoid of any evidence concerning the demographics of the community today or when the complex was built in 1961.
 

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COMMITTEE OF CONCERNED MIDWEST FLIGHT ATTENDANTS FOR FAIR AND EQUITABLE SENIORITY INTEGRATION v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS AIRLINE DIVISION (November 30, 2011)

In mid-2009, Midwest Airlines was losing money and in dire financial circumstances. In fact, it had only nine airplanes. Republic Airways Holding purchased Midwest's parent. Within a few months, Republic had given up Midwest’s planes and its federal certificate. It kept its gates and its takeoff and landing slots. It integrated the seniority lists for several kinds of employees but it furloughed Midwest's pilots and flight attendants. Although the flight attendants were eligible to be rehired, the Teamsters Union would assign them new-hire seniority status. Several flight attendants filed suit, contending that the Federal Aviation Act requires Republic to merge the flight attendants' seniority lists. Judge Randa (E.D. Wis.) granted summary judgment to the union. The flight attendants appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Williams reversed and remanded. The Court turned to the language of the act. It noted that the Act requires seniority list integration when two "air carriers" are "involved" in a "covered transaction." Relying on the statutory language, the Court concluded that Midwest was an "air carrier" because they held a certificate, that Midwest was "involved" in the transaction even though it was its parent that was acquired, and that the transaction was a "covered transaction" because Republic acquired all of Midwest's stock and combined two air carriers into a single carrier. The Court noticed the absence in the Act of any reference to the bankruptcy or financial wherewithal of an air carrier. In fact, the Court added that the statute grew out of the acquisition of Trans World Airlines at the time of its bankruptcy. Congress clearly did not mean to exempt bankrupt air carriers from the Act’s requirements.

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REDD v. NOLAN (November 29, 2011)

Samone Redd was a probationary correctional officer with the Cook County Department of Corrections in May of 2007 when she witnessed an altercation in which a friend was involved. When the friend later complained that she was hit in the face with a beer bottle during the altercation, the Chicago Police investigated. Redd was initially cooperative. The officers investigating the case later found her to be uncooperative and filed a complaint that she was failing to cooperate in an ongoing investigation. Redd alleges that her "failure to cooperate" was simply her refusal to go along with the officer’s request that she lie. The Sheriff’s Department investigated the charges against Redd and eventually sustained several of them. The results of the investigation ended with a recommendation that the Department terminate Redd. On October 31, just 13 days before her probationary employment would end, Redd was told that she would be discharged if she did not resign. She chose to resign. Redd brought suit against the original investigating officer for tortiously interfering with her employment. She also sued the County for First Amendment retaliation, retaliatory discharge, and procedural due process. The City claim was dismissed for failure to state a claim and Magistrate Judge Denlow (N.D. Ill.) granted summary judgment to the County on the remaining claims. Redd appeals.

In their opinion, Seventh Circuit judges Posner, Flaum, and Hamilton affirmed. With respect to the intentional interference claim, the Court noted that Redd alleged that the complaint with the County was made not by the officer, but by an Assistant State's Attorney. Although she tries to create liability on the part of the officer by alleging a conspiracy, she offers no facts to support the allegation. The Court turned to her First Amendment retaliation and state retaliatory discharge claims. It agreed with the district court that Redd presented no evidence from which a jury could conclude that the County's actions were in retaliation for her conduct during the investigation. The Court went on to note that, even in such had been presented, the investigator was not part of the termination decision. Finally, the Court turned to her due process argument. On its face, the argument seemed to lack merit. Redd was still a probationary officer and possessed no protectable property interest in continued employment under Illinois law. But Illinois courts have concluded that a municipal body can afford more protection than required by Illinois law -- all that is required is a "clear policy statement." In Redd's employment agreement, she confirmed that she was "on probation and can be terminated for cause." Notwithstanding the "for cause" language in the terms of her employment, the Court concluded that the phrase was not a sufficiently clear policy statement to provide protection amounting to a property interest. Since she had no protectable property interest, she was entitled to no particular procedures.

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FTC v. TRUDEAU (November 29, 2011)

Kevin Trudeau advertises his books on infomercials. The FTC, after entering into a court approved settlement, alleged that Trudeau violated the settlement and sought a contempt finding. Judge Gettleman (N.D. Ill.) agreed and found Trudeau in contempt. He imposed a $37.6 million fine and banned Trudeau from making infomercials for three years. On appeal, the Seventh Circuit affirmed (opinion and intheiropinion) the finding of contempt but remanded on the sanctions. It concluded that the district court failed to adequately explain its rationale for the monetary sanctions and also concluded that a complete ban was inappropriate, in that he did not give Trudeau an opportunity to comply with the agreement. On remand, Judge Gettleman reinstated the monetary penalty, explaining that he arrived at it by multiplying the number of books ordered through the 800 number by the price of the books plus shipping. The court also imposed a $2 million performance bond if Trudeau wanted to do any more infomercials, to be effective for five years. Trudeau appeals.

In their opinion, Seventh Circuit Judges Ripple, Manion, and Tinder affirmed. The Court rejected Trudeau's argument that the fine was improper because it was based on consumer loss. That is an appropriate approach to a contempt finding even if, as he alleges, Trudeau did not benefit to the same degree as the consumers lost. The Court actually noted that the district court's figures were conservative. It only included those books that were sold through the infomercial’s 800 number, even though other books were sold through the Internet and retail outlets. With respect to the performance bond, the Court rejected Trudeau's argument that the FTC had to show significantly changed circumstances. That rule applies only in institutional reform cases. Here the proper test is whether the order was achieving its purpose -- and it clearly was not. Finally, the Court rejected Trudeau's First Amendment argument and found the requirement narrowly enough drawn to meet the constitutional standard: a) the bond is only triggered if Trudeau decides to engage in infomercials, b) the district court gave him an opportunity to seek a reduction in the amount of the bond with proof of his financial position, and c) the amount of the bond is proportional to the threatened harm.

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 EGAN MARINE CORP. v. GREAT AMERICAN INSURANCE COMPANY OF NEW YORK (November 23, 2011)

Egan Marine Corporation operates vessels on the Chicago Sanitary and Ship Canal. Its sister company, Service Welding and Shipbuilding operates the shipyard. Egan and SWS obtained insurance from the Great American Insurance Company against an event that exposed either to specific federal statutory environmental liability. The policy covered each of the companies’ vessels up to $5 million. In January of 2005, an Egan tugboat was pushing an Egan barge filled with slurry oil up the canal when the barge exploded. The Coast Guard designated the barge as the source of the discharge and notified Egan that it could be held financially responsible for all damages. Great American hired Egan and SWS to conduct spill management, cleanup, and salvage operations. The companies agreed to provide those services at cost. A dispute arose between the parties regarding Egan's billing methodology. The parties also were at odds over the amount of coverage. Great American took the position that the barge was the only vessel involved in the incident and the coverage was therefore limited to $5 million. Egan took the position that both the barge and the tugboat were involved and that coverage extended to $10 million. The Coast Guard sent a letter on May 18, 2005 indicating that the emergency response was complete except for oil remaining in the canal, which it directed Egan to remove. The Illinois EPA filed suit for an injunction, civil penalties, and costs. Great American paid for Egan's expense for some time, but then stopped. The United States also brought suit, seeking removal costs and civil penalties. The suit names both the tugboat and the barge as responsible. Egan and SWS brought suit against Great American alleging breach of contract and breach of good faith and fair dealing. Great American counterclaimed for a declaratory judgment. On summary judgment, Judge Kennelly (N.D. Ill.) ruled that Great American satisfied its policy obligations with respect to the barge but that it breached the policy by not honoring the $5 million coverage for the tugboat. After a bench trial, the court ruled that the only damages from the breached contract were unpaid defense costs, that Great American did not breach the contract by disputing and refusing to pay the total amounts claimed by Egan for the recovery efforts, that Great American breached the contract by refusing any coverage after the Coast Guard letter, and that Great American did not breach its duty of good faith and fair dealing. Both parties appeal.

In their opinion, Seven Circuit Judges Bauer, Flaum, and Sykes affirmed. First, the Court concluded that Great American's refusal to pay the amounts claimed by Egan on the ground that they did not represent Egan's "costs," was not clear error. Egan had refused an opportunity to provide additional justification for its claims to Great American and the record evidence did not support a conclusion that they were entitled to the money claimed. Second, the Court also found no error in the district court's conclusion that coverage extended beyond the date of the Coast Guard letter but did not extend beyond the date of the Illinois EPA's lawsuit, in which there was no mention of any ongoing threat of contamination. Third, the Court concluded that New York law does not recognize an independent breach of good faith claim that is based on the same evidence as a breach of contract claim. Fourth, the Court agreed that the tugboat was entitled to coverage in that it was a "vessel" under federal pollution statutes, that it was the barge's sole means of propulsion, and that it therefore posed a substantial threat of discharge. Finally, the Court concluded that Egan incurred defense costs in the Illinois EPA suit as part of its exposure under federal and state pollution statutes. The defense costs were therefore covered under the policy.

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IN RE: FORT WAYNE TELSAT, INC. (November 23, 2011)

Indiana University held an FCC license that allowed it to broadcast educational materials on specified frequencies. Afraid that it might lose its license for non-use, the University agreed to transfer it to the Fort Wayne Public Broadcasting Service. In turn, the Service agreed to lease part of the license to Fort Wayne Telsat, a local television broadcaster. Unfortunately, after Telsat spent $350,000 modifying some of its equipment in anticipation of acquiring the license lease, it ended up in bankruptcy. The trustee filed a promissory estoppel claim against the University, which the parties agreed to settle for $100,000. JAS Partners, the debtor's principal unsecured creditor, opposed the settlement. It contended that the trustee should have gone after the license itself, which it valued at over $4 million. The bankruptcy judge concluded that the trustee had acted prudently. Judge Springmann (N.D. Ind.) agreed. Partners appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Wood affirmed. The Court engaged in a relatively straightforward litigation risk analysis. It identified the various legal theories and some of the evidence in support of and in opposition to them. It identified the potential value of the license, which it concluded was only approximately $600,000. Finally, it considered the litigation cost to obtain the license. In the end, the Court concluded that the trustee had, at best, a 50% likelihood of obtaining the $600,000, resulting in a gross expected gain of $300,000. Considering the likely litigation cost, the Court concluded that the trustee acted reasonably in settling for $100,000.

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GONZALEZ-SERVIN v. FORD MOTOR COMPANY (November 23, 2011)

Two particular situations have generated much litigation and disagreement over the proper forum in which to resolve a dispute. The Gonzalez-Servin litigation is one of many cases brought as a result of alleged defects in tires that were installed on Ford vehicles in Latin America. The accident at issue occurred in Mexico and resulted in the death of a Mexican citizen. Judge Barker (S.D. Ind.) granted a forum non conveniens motion, concluding that Mexico is a more appropriate forum. The Kerman litigation is one of many cases filed against blood products manufacturers that alleged infections as a result of contamination. The case was brought by Israeli citizens. Judge Grady (N.D. Ill.) granted a forum non conveniens motion to transfer the case to Israel. The defendants in both cases appeal. The Seventh Circuit consolidated the appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Tinder affirmed both orders. The Court was very critical of the appellate advocacy in both cases. The transfer of similar cases has come before the Court in the past. In 2009, the Court affirmed the transfer of a defective tire case to Argentina. In 2009 and 2010, the Court affirmed a transfer of contaminated blood products cases. The Court was very critical of the appellants' "ostrich-like tactic" of pretending that those dispositive precedents did not exist. The Gonzalez-Servin brief did not even mention the cases, even though appellee's response brief cited them repeatedly. The Kerman opening brief was filed before the relevant cases were decided but its reply brief barely touched on the precedent, even though, again, appellee's brief relied on them heavily. The Court stated that an appellant has three choices when faced with apparently dispositive precedent: a) urge the Court to overrule it, b) distinguish it, or c) preserve the argument for a petition for certiorari. Ignoring it is not an option.

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G.G. v. GRINDLE (November 23, 2011)

Nine female South Berwyn School District 100 students brought suit against their school principal, Karen Grindle, for failing to prevent the students' sexual abuse by their band teacher. Details of the abuse were presented at trial. Each student's story was different. One student, G.G., testified about two incidents of sexual contact when she was 10 years old. One involved the touching of her breast, the other the touching of her thigh. Other students testified of more prolonged and egregious conduct. G.G.'s counselor testified that the experience was very traumatic, that G.G. was diagnosed with post-dramatic stress disorder as a result of the abuse, and that the events caused severe emotional damage. A jury found in plaintiffs' favor and awarded compensatory damages ranging from $100,000-$750,000 per plaintiff. They awarded G.G. $250,000. The jury also awarded a collective $100,000 in punitive damages. After the jury award, all plaintiffs except G.G. settled. Grindle filed a motion for remittitur, arguing that the evidence did not support the verdict. She also asked that the punitive damages be stricken. Judge Hibbler (N.D. Ill.) denied the motion. Grindle appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Wood affirmed. The Court first addressed the compensatory damage award. The Court applied a three-part test -- whether the verdict is monstrously excessive, whether there is a rational connection between the evidence and the verdict, and whether the amount of the verdict is comparable to other cases. Since neither party submitted circuit cases for comparison and since the monstrously excessive prong of the test is more properly considered within the rational connection prong, the Court focused on that prong. It rejected Grindle's contention that the two "innocuous" events testified to by G.G. did not support the verdict. First, it is not the number or nature of the events but, rather, the impact on the plaintiff that should be considered. G.G. was the youngest victim and suffered severe emotional harm. Second, the fact that the jury distinguished between each of the students and awarded damages amounts along a fairly large spectrum demonstrates their careful consideration of the individual evidence. Third, the Court rejected Grindle's contention that other factors (her drug use, sexual experimentation, attempted suicide) led to G.G.'s troubles. The Court noted the substantial evidence tying G.G.'s troubles back to the abuse. Finally, the Court did note that the damage award was at the lower end of the spectrum for the nine students. The verdict was reasonable in light of the evidence. The Court next considered the punitive damage award and whether it was excessive. It rejected Grindle's argument that the award was excessive because she was not directly involved in the abuse and jury must have been focusing on the abuse. There is evidence in the record that she knew or should have known of the abuse and did nothing. That is enough for a punitive damages award.

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CITY OF CHICAGO v. STUBHUB! (November 23, 2011)

The City of Chicago assesses an amusement tax on the sale of tickets to sporting events, concerts, etc. StubHub! and eBay both operate Internet auction sites on which they resell tickets. The City of Chicago brought separate suits against StubHub! and eBay, alleging that it had a right to assess and collect from them a tax on the difference between the original and the resale price. Judges Andersen (N.D. Ill.) and Manning (N.D. Ill.), respectively, rejected Chicago's argument. On appeal, the Seventh Circuit certified (opinion and intheiropinion) the issue to the Illinois Supreme Court. On October 6, 2011, a unanimous Illinois Supreme Court held that Chicago was not allowed to collect the amusement tax from Internet auction sites. Instead of filing a position statement pursuant to Circuit Rule 52 (b), Chicago sought an extension of time, indicating that it was going to request a rehearing from the Illinois Supreme Court.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Bauer and Kanne denied the request for an extension and affirmed the district court judgments. It concluded that the extension would serve no practical purpose, that Chicago did not explain why it thinks a unanimous court would suddenly reverse course, and that Chicago could file post-judgment motions in the district courts in the unlikely event the Illinois Supreme Court changed its ruling.

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CREATIVE MONTESSORI LEARNING CENTERS v. ASHFORD GEAR LLC (November 22, 2011)

Lawyers from a firm that specializes in bringing class-action suits under the Telephone Consumer Protection Act obtained information about advertising faxes from a fax broadcaster, in return for a promise of confidentiality. The information they obtained revealed that Ashford Gear had sent almost 15,000 advertising faxes. The Creative Montessori Learning Center was (or may not have been) one of the recipients. The firm communicated with the Center, indicating that a class action already existed. The Center became the named plaintiff in a suit filed by the firm. Plaintiffs sought class certification. Defendants opposed certification on the grounds that the lawyers' misconduct (in breaching their confidentiality promise and in misrepresenting to the Center the status of the action) demonstrated that the lawyers would not adequately represent the class. Judge Gettleman (N.D. Ill.) agreed that there had been misconduct but concluded that the misconduct was a subject for bar authorities and certified the class. Ashford Gear sought permission for leave to appeal from the class certification.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Posner vacated and remanded. The Court, as it has on several occasions recently, commented on the dangers of class actions, particularly in situations with statutes like the Telephone Consumer Protection Act. The Act provides for $500 in statutory damages for the recipient of an unsolicited fax advertisement (trebled if willful or knowing). But, in bringing it as a class action, counsel has turned it into a case worth over $11 million. The Court also emphasized the need for trustworthy class lawyers, given the incentives for class lawyers and defendants' lawyers to recommend settlements that reward the class lawyers at the clients' expense. Here, lawyers for the class have already exhibited their lack of integrity. Although the district court recognized that fact, it concluded that "only the most egregious misconduct" by class counsel was grounds for denial of class certification. The Court noted that that was an erroneous standard. Instead, any misconduct that casts serious doubts on class counsels’ loyalty is grounds for denial of certification. The Court remanded for a reevaluation of whether class counsel will adequately represent the class, given the misconduct.

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MCCANN v. HY-VEE, INC. (November 22, 2011)

Denise and Anthony McCann divorced in 2002. The decree required Anthony to transfer stock in the closely held company by whom he was employed to Denise and to pay child support through 2007 and alimony through 2012. The decree also provided that the alimony obligation could end as early as 2007 if Anthony sold the stock and gave Denise the proceeds. According to Denise, the company's CFO told her that the shares could not be sold until Anthony died or left the company. In fact, that was not the case and Anthony did sell the stock in 2007, gave Denise the proceeds, and stopped making alimony payments. Denise filed suit against the company in September of 2009, alleging a violation of Section 10 (b) of the Securities Exchange Act and Rule 10b-5. Judge Nordberg (N.D. Ill.) dismissed the case on statute of limitations grounds. Denise appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. The Court first addressed the Company's alternative grounds urged for dismissal -- that there was no purchase or sale of stock. The Court concluded otherwise and held that the 2007 sale by Anthony was actually an involuntary sale by Denise and that the 2002 transfer pursuant to the divorce decree was also a sale in that Denise gave up certain demands in return for the shares. Returning to the timeliness issue, the Court noted that the statute allows a securities fraud case to be brought no later than two years after the discovery of facts constituting the violation or five years after the violation. Although the Court addressed the two-year prong, it based its holding solely on the five-year prong. Under that part of the statute, a plaintiff has five years to sue from the date of the violation. Denise argued that the violation occurred in 2007, when Anthony sold the stock and stopped making the alimony payments. The Court agreed that that was the time of her injury but concluded that injury was not an element of the "violation" indicated in the statute. Here, the alleged violation occurred when the CFO misrepresented the restrictions or limitations on Anthony's ability to sell the stock. That occurred in 2002. Denise's 2009 suit is untimely.

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ALEMAN v. VILLAGE OF HANOVER PARK (November 21, 2011)

Rick Aleman operated a daycare in his Hanover Park home. Joshua, one of the children in his care, had been feverish and lethargic his first two days under Aleman’s care. Then, on the third day, he stopped breathing. Aleman picked him up and shook him gently to see if he could get a response. Getting none, he performed CPR and then called 911. Joshua was taken to the hospital and Aleman was taken to the police station. He was held for several hours without questioning and then questioned for several hours. Although Aleman was allowed to call his lawyer several times, and his lawyer told the police that he was invoking his right to remain silent, Aleman eventually signed a waiver. The police told Aleman the three doctors told them that a shaking caused Joshua's injury. They were lying. Based on the statements, Aleman "admitted" that he must have shaken the baby too hard and hurt him. At the same time, he continued to express his disbelief that he could have caused the injuries. Aleman was charged with aggravated battery. A few days later, Joshua died. Aleman was rearrested and charged with first-degree murder. The charges were eventually dropped. Doctors explained that a child could go for a few days, usually in a lethargic state, after being shaken but before losing consciousness. The investigation also disclosed that Joshua's mother had a criminal record and had beaten and shaken Joshua in the past. In addition, one of the lead investigators had apparently developed a sexual attraction to Joshua's mother and did what he could to steer the investigation toward Aleman. Aleman brought suit pursuant to § 1983 against several state and local police officers. Judge Bucklo (N.D. Ill.) granted summary judgment to the defendants. Aleman appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Wood affirmed in part and reversed and remanded in part. The Court quickly concluded that the first arrest was supported by probable cause. Aleman was the last person to be with Joshua and admitted shaking him, the doctors believed his injury resulted from being shaken, and the information about Joshua's mother was not yet known. The second arrest was a constitutional violation, however. By that time, one of the officers had already lied to one of the doctors and obstructed the investigation into Joshua’s mother. The police also engaged in improper tactics during their interrogation. The interrogation itself also violated Miranda. Aleman invoked his right to counsel on more than one occasion. The police should have terminated the interrogation until a lawyer was present or until Aleman initiated a conversation. Instead, they badgered him into signing a waiver. Since the statements he made were critical elements of the murder charge, the Miranda violation is actionable under § 1983. In addition to the Miranda violation, the content of the interrogation was also improper. Aleman is not a medical expert but was given (false) information that he must have been the cause of Joshua's injury. The false information distorted his ability to make a rational choice. Finally, with respect to the malicious prosecution under state law, the Court again distinguished between the first and second arrest. Illinois law requires proof of malice in a malicious prosecution action. Given the circumstances of the first arrest, the district court was correct in granting summary judgment to the defendants. With respect to the second arrest, however, a reasonable jury could find that the officer who obstructed justice and tried to protect Joshua's mother, at Aleman’s expense, had improper motives. 

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MILESTONE v. CITY OF MONROE (November 21, 2011)

The city of Monroe, Wisconsin (the "Swiss Cheese Capital of the U.S.A.") operates a Senior Center for its older residents. Nine volunteers sit on the Monroe Senior Citizens Board, which promulgated a Code of Conduct for the center. Edith Milestone used the center frequently, but not without incident. She was a frequent disruptive influence at the center and was warned about her failure to behave reasonably. In late 2008, she got into a heated discussion with the center's Director and threatened to sue her. The next day, the Center sent Milestone a letter advising her that she was no longer welcome. The letter listed the various alleged violations of the Center's Code. At Milestones request, the Senior Citizens Board held an evidentiary hearing and affirmed the ban. The Board also advised Milestone that she could appeal the finding to the Monroe Common Council. Instead of appealing, Milestone brought a § 1983 suit against Monroe, alleging violations of her due process and free speech rights. Magistrate Judge Crocker (W.D. Wis.) granted summary judgment to the defendants on the ground that neither the Director nor the Board were final policymakers for Monell purposes. Milestone appeals.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton affirmed. The Court agreed with the magistrate, at least as far as he went. In order to establish liability against the city, there must be (in this case) a decision by a municipal agent with final policymaking authority. It is clear that neither the Director nor the Board had that authority. The Director's decisions are all subject to review by the Board. Under state and local law, the Board did not have final policymaking authority. The Monroe Common Council retained ultimate authority over the Board's activity in this area. Although the city cannot be liable for the actions of the Director or the Board under Monell, Milestone also brought a claim based on the Code of Conduct itself. The code is municipal policy and can subject the city to liability if it, as Milestone alleged, violates the First Amendment. Because the Code is content neutral, it's restrictions are acceptable if they are: a) narrowly tailored, b) to achieve a significant governmental interest, and c) allow for ample alternative communication channels. The Court concluded that the Code met each of these requirements. First, the rules only require visitors to treat each other with respect and to refrain from abusive language. Second, the Center's goal was to create a pleasant and upbeat environment for its older citizens. Third, the Code does not restrict a visitor's right to express herself, as long as she does so respectfully. The Code is a content-neutral reasonable time, place, and manner restriction and does not violate the First Amendment. Finally, the Court rejected Milestone's void for vagueness claim. Any person of reasonable intelligence would understand what conduct is prohibited.

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