Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : GVC Ltd. Law Firm

TOWNSEL v. DISH NETWORK L.L.C. (February 16, 2012)

Jacqueline Townsel purchased satellite TV services from DISH Network. Townsel signed up for two years of service and agreed to pay a termination fee if she discontinued the service within two years. When Townsel stopped paying her monthly charge during the contract term, DISH charged her debit card for the termination fee. Townsel brought suit against DISH, alleging that the debit card charge violated the Social Security Act's § 407 (a). That section provides that Social Security benefits are not assignable. Townsel alleges that the only funds in the account tied to her debit card are her Social Security benefits and that, therefore, her agreement to allow DISH to charge that card was a prohibited "assignment." Judge Guzman (N.D. Ill.) dismissed the complaint. Townsel appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Hamilton affirmed. The Court first considered the question of whether § 407 (a) operates as a private damages action or is merely a defensive measure. No other court of appeals has decided the question, although a few district courts have said no. Ultimately, the Court decided to do the same thing the district court below did -- leave the question alone and go to the merits. On the merits, the Court identified a fundamental distinction between spending money from an account whose sole source was Social Security benefits and assigning those benefits. All Townsel did is engage in a commercial transaction in which she allowed DISH to charge her account under certain circumstances. She could have given them a different account or she could have put non-Social Security benefits in her debit card account. Her agreement with DISH was simply not an assignment.

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RWJ MANAGEMENT COMPANY v. BP PRODUCTS NORTH AMERICA, INC. (February 16, 2012)

As part of a changing business strategy, BP began selling its company operated gasoline stations in 2006. It sold several stations in Illinois and Indiana to RWJ Management Co. and several more Illinois stations to Nrupesh Desai. RWJ and Desai both sued BP in Illinois state court alleging Illinois Franchise Disclosure Act violations. When they both added federal Petroleum Marketing Practices Act claims, BP removed the case to federal court. The parties embarked on over a year of pretrial practice, involving 35 hearings, 45 orders, 70 motions, 21 volumes of discovery material, rules violations, shifting claims for relief, and a January 19, 2011 trial date. Less than two weeks before trial, the plaintiffs withdrew their federal claims. About a week later, Judge Pallmeyer (N.D. Ill.) remanded the case to state court. BP appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Circuit Judges Bauer and Sykes affirmed. Under the supplemental jurisdiction doctrine, the district court has the discretion to remand state claims when it has dismissed all claims over which it had original jurisdiction. In fact, there is a presumption that a district court will remand state claims when federal claims are dismissed before trial. There are exceptions -- when the statute of limitations has run, when substantial judicial resources have already been expended, or when the outcome of the state claims is not in doubt. The Court noted that the district court is entitled to substantial deference in applying the presumption. BP relies principally on the substantial judicial resources exception and on the Miller Aviation case. The Court rejected BP’s position. Here, unlike in Miller, the substantial judicial resources that have been expended to date have focused mostly on discovery disputes, not on the merits. Also, the state law at issue is relatively complex and unsettled, another factor favoring remand. Moreover, the fact that the Illinois state court will have to apply Indiana law with respect to one site, the fact that there is a discovery sanction issue yet unresolved, and the fact that the remand took place just days before trial did not change the Court's conclusion.

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JOHNSON v. GDF, INC. (February 13, 2012)

In May of 2005, Robert Johnson brought a class action for unpaid overtime against his employer GDF, an Oak Park, Illinois Domino's pizza franchise. By July, he was no longer working at Domino's. At his deposition almost a year later, Johnson admitted that he was only unemployed for about a month and also that he had failed to disclose prior criminal convictions when he originally applied at Domino's. The state court denied class certification in mid-2006. Johnson filed a federal retaliation claim in 2007. Johnson rejected GDF's offer to settle both suits for $25,000. GDF paid Johnson over $4,000 in the state court case. The parties engaged in no further settlement discussions in the federal case. After a trial, a jury awarded Johnson $1,000 in back pay and $4,000 in punitive damages. GDF paid Johnson another $5,000 to settle his request for liquidated damages. Johnson's lawyer sought $112,000 in attorneys fees. Judge Guzman (N.D. Ill.) accepted a magistrate judge's recommendation to award only $1800 on the theory that the case should have settled within hours had Johnson's attorney been candid about Johnson's limited damages. Johnson appeals.

In their opinion, Seventh Circuit Judges Bauer and Tinder and District Judge Magnus-Stinson reversed and remanded. The Court criticized the district court's reliance on Spegon. In that case, the plaintiff had a simple overtime claim that the employer did not contest. The only issue was how much was owed. Although the parties settled rather quickly, plaintiffs attorney sought over $7,000 in fees. The Seventh Circuit affirmed the district court's reduction in fees on the grounds that the case should have been settled within a few hours. The Court cited several differences between Spegon and Johnson's facts. GDF knew by the time of Johnson's deposition that his potential recovery was quite low. Although it did make a substantial settlement offer, there were no further settlement discussions or offers of judgment. Instead, the case went to trial. Therefore, Johnson's attorney is entitled to the reasonable hours required to try the case. With respect to the appropriate hourly rate, the Court stated that the district court erred in rejecting affidavits of a market rate on the grounds that the affidavits did not distinguish between FSLA and Title VII cases, as he thought they should. It is not up to the district court determine what the market is and he should not disregard affidavits on that ground. Finally, the Court concluded the district court erred in considering only prior fee awards to Johnson's attorney where the fee was contested. A prior fee award is relevant whether it is contested or not.

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ST. PAUL FIRE & MARINE INSURANCE CO. v. SCHILLI TRANSPORTATION SERVICES INC. (February 13, 2012)

St. Paul Fire & Marine Insurance Company issued insurance policies to Schilli Transportation Services and several related, but separate, corporations. Schilli was a freight broker and never owned any trucks or employed any truck drivers. Some of the other insureds were interstate motor carriers. The St. Paul policy had a $1 million coverage limit with a $100,000 deductible per occurrence. In several places in the policy, it provided that "you" agreed to reimburse and agree to repay amounts expended up to the deductible amount. The introduction section of the policy defines "you" as the "insured named here." The policy then lists Schilli Transportation with a notation that other insureds names are on the back. The back listed the eight related, but separate, companies. The insureds had six claims in the two years in which the policy was in effect. Most of the claims involved vehicle accidents. St. Paul sent invoices to Schilli seeking reimbursement for its expenses up to the deductible cap. When Schilli refused to pay, St. Paul brought suit against Schilli and two of the other corporations. Magistrate Judge Rodovich (N.D. Ind.) granted summary judgment to St. Paul, finding that the policy clearly and unambiguously referred to all of the corporations listed in the policy as jointly responsible for repayment of the amounts up to the deductible cap. Schilli appeals.

In their opinion, Seventh Circuit Judges Ripple and Hamilton and District Judge Myerscough reversed and remanded. Applying Indiana law, the Court stated that the clear and ambiguous language must be given effect but that if the language is susceptible to more than one reasonable interpretation, it is ambiguous and should be strictly construed against the insurer. Referring to the policy provisions and particularly the word "you," the Court concluded that the policy was ambiguous. The manner in which the insureds were listed, with Schilli on the front and the other 8 companies on the back, could lead a reasonable person to either the conclusion that the companies were to be treated individually or that they were to be treated as a group. The Court found other support for its finding in another sections of the policy. The Court remanded for consideration of the parties' intent.

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PHILLIPS v. ALLEN (February 10, 2012)

Ruby Graham and her mother Elizabeth were attacked as they entered the Bellwood, Illinois Library. The attacker stole $5,000 from Ruby and shot both of them. Ruby gave police a description of their attacker. A police officer visited Elizabeth in the hospital the following day to question her. Ruby and a neighbor were there at the same time. The neighbor informed the officer of the rumor that Wydrick Phillips, who lived in same neighborhood, was robbing people after they cashed tax refund checks. Later that same day, Ruby positively identified Phillips as her attacker from a group of photographs at the police station. Phillips was arrested and charged but later acquitted. There was no corroborating evidence and significant exculpatory evidence, including an alibi. Phillips brought suit under § 1983, complaining that he had been arrested without probable cause. Judge Dow (N.D. Ill.) granted summary judgment to the defendants. Phillips appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Circuit Judges Posner and Wood affirmed. Phillips' principal argument on appeal is that Ruby's photo identification was unreliable given her presence earlier in the hospital room when the neighbor repeated the rumor about Phillips. The problem is that Phillips relies principally on Biggers, which addressed the admissibility of evidence at trial. It held that photo spread identification evidence could not be used at trial if it was the result of an unduly suggestive procedure. The Court considered both the law and the psychology behind witness identifications in rejecting Phillips' request to extend Biggers from the trial phase to the arrest phase and from a rule of evidence to a basis for damages. The Court also commented that Phillips would not benefit even if it decided to accept his invitation to extend Biggers. The defendants would certainly be entitled to qualified immunity for their past actions.

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BLOOD v. VH-1 MUSIC FIRST (February 9, 2012)

Dennis Hernandez caused a serious traffic accident late one September afternoon when he crossed the I-57 median in southern Illinois. The local fire department closed the northbound lanes. Four hours later, David and Paul Blood approached the still-stalled traffic and safely stopped. Shortly thereafter, however, a T.E.A.M. Logistics truck driven by Milinko Cukovic collided with the Bloods’ vehicle, seriously injuring David. Blood brought suit against Logistics and Cukovic. Logistics and Cukovic brought a third-party complaint against Hernandez and his employer, alleging that Hernandez' earlier negligence was the proximate cause of the later accident. Blood settled with Logistics and Cukovic and amended his complaint to name Hernandez. Judge Murphy (S.D. Ill.) granted summary judgment in Hernandez' favor on the ground that Blood could not prove proximate cause. Blood appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Ripple and Kanne affirmed. Applying Illinois law, the Court stated that proximate cause, although normally a jury question, can be resolved as a matter of law by considering the passage of time, whether the original wrongdoer's force continued until the later event, whether the intervenor’s act was extraordinary, and whether the intervenor’s action was a normal response to the situation. Applying those factors to the facts, the Court noted that the four hour window between the original accident and the later accident was much longer than in other Illinois appellate cases finding a break in the causal chain. More importantly, however, the Court concluded that no reasonable juror could find proximate cause given the extraordinary nature of Cukovic's acts. In clear weather, on a flat road, when all the vehicles that preceded him were able to stop, Cukovic hit the Blood's at almost 55 miles per hour. His negligence broke the causal link.

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ROLFS v. COMMISSIONER OF INTERNAL REVENUE (February 8, 2012)

Theodore Rolfs and his wife purchased a house and three-acre lakefront lot in Chenequa, Wisconsin. In order to make way for a new house they wanted to build on the property, the Rolfs donated the house to the local fire department to be burned in a training exercise. The Rolfs then claimed a $76,000 charitable deduction on their tax return, relying on a before and after appraisal. The IRS disallowed the deduction. The Tax Court agreed. The Rolfs Appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook, Circuit Judge Hamilton, and District Judge Myerscough affirmed. The Court began with the well-established legal principles that: a) taxpayers may deduct the amount of charitable contributions, b) the objective features of the transaction determine its deductibility, c) the fair market value is an objective determination at the time of the contribution, and d) any return benefit must be deducted from the contribution's fair market value. Here, the taxpayers' before and after appraisal method fails to take into account two things. First, the taxpayers did not donate the house to the fire department unconditionally. It had to be burned down. Therefore, it has negligible value and the Rolfs’ before appraisal was overstated. Second, by donating the house to the fire Department, the taxpayers saved approximately $10,000 in demolition costs. They had to deduct this amount from any donated value. Any value remaining in the house was certainly less than the benefit received by the taxpayers and they are entitled to no charitable deduction.

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WIRTZ v. CITY OF SOUTH BEND (February 7, 2012)

A Catholic high school in South Bend, Indiana wanted to build an athletic complex on an adjacent parcel. The City bought the land and proposed to give the land to the School in return for the right to use the complex at certain times. A number of city residents brought suit alleging a First Amendment violation and sought to enjoin the transaction. Judge Miller (N.D. Ind.) granted the injunction. Instead of appealing, the City modified its proposal. It proposed to sell the property to the School at an average appraised value. The court refused to modify the injunction. Again, the City decided to modify its proposal rather than appeal. It proposed to sell the property to the highest bidder. The court was satisfied and dissolved the injunction, the plaintiffs were satisfied, and the School bought the property. But the City was not satisfied and appealed.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Manion dismissed the appeal. First, the Court concluded that the appeal was not timely. It actually does not seek review of the final order dissolving the injunction. Instead, it seeks review of the two earlier orders refusing to modify the injunction. However, the time for seeking review of those orders is long gone. The City could have sought review of those orders, along with the final order, had the district court refused to dissolve the injunction. But a party cannot seek review of a judgment on which it prevailed. Second, the Court concluded that the appeal was moot since the City was not seeking rescission or some kind of refund. The Court rejected the City's contention that the appeal fit within the "capable of repetition but evading review" exception. The fact that the School was in a hurry to begin construction is not a sufficient reason to invoke the exception. Furthermore, the exception only applies when the issue is likely to be faced again in the future -- and that is unlikely here. Finally, the Court noted that the City could have easily achieved its goals had it appealed the first district court order and sought expedited appellate review.

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HEINEN v. NORTHROP GRUMMAN CORP. (February 7, 2012)

Gregory Heinen accepted a job offer from Northrop Grumman Corp. that required him to move from his home in California to Illinois. As part of the hiring process, Heinen entered into an employment contract, a contract agreeing to abide by Northrop's dispute resolution process, and a relocation agreement. The dispute resolution process requires arbitration of all employment related disputes. The other two contracts do not refer to arbitration. Heinen brought suit in Illinois state court alleging that Northrop breached the relocation agreement. Northrop removed on diversity grounds, asserting that Heinen was a Massachusetts "resident," and therefore a Massachusetts "citizen." Judge Conlon (N.D. Ill.) dismissed the complaint on the ground that Heinen's agreement to arbitrate extended to his complaints about the relocation agreement. Heinen appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Rovner and Tinder affirmed and denied Northrop's motion for sanctions. The Court had little difficulty in affirming on the merits. The dispute resolution agreement requires Davis to arbitrate "[a]ny employment-related claim." The clause is broad enough to cover a relocation benefits dispute since relocation benefits are related to employment. Collateral to the merits, the Court was quite critical of the lawyering in two respects. First, Northrop's removal papers referred only to residence. Citizenship for diversity purposes is based on domicile, not residence. The amended removal papers, filed after oral argument, were quite sufficient to show that Heinen was domiciled in Massachusetts. Northrop's failure to adequately allege citizenship in its original removal papers wasted a lot of the Court's time and the clients’ money. Second, Northrop sought sanctions for what it called a frivolous appeal but failed to follow Rule 38 in doing so and then unnecessarily filed a separate motion for sanctions after oral argument. The Court agreed that the appeal was frivolous but declined to award sanctions to a party that itself fails to follow the rules.

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DAVIS v. OCKOMON (February 3, 2012)

Larry Davis worked on Democrat Mark Lawler's 1988 Anderson, Indiana mayoral campaign. When Lawler was elected, Davis asked for a position in his administration. Although he had no relevant experience, he was offered the position of Senior Humane Officer. He accepted. Davis remained in the position for the 15 years that Lawler remained mayor. He even remained in the position for a Republican mayor’s four year term, although the Republican mayor did replace many other administration employees with members of his own party. In the 2007 Democratic primary election, Davis supported the losing candidate. He then refused to support the Democratic candidate in the general election. The Democrat won and immediately terminated Davis. Davis brought suit pursuant to § 1983, claiming a First Amendment violation. Judge Lawrence (S.D. Ind.) granted summary judgment to defendants, concluding that Davis' position, based on the job description, was that of a policymaker. Davis appeals.

In their opinion, Seventh Circuit Judges Cudahy, Kanne, and Sykes affirmed. Since the City admitted that Davis was terminated for political reasons, the only issue on appeal was whether Davis' position fits within the exception prohibiting political firing. One group that fits within the exception are policy makers. The Court recognized that determining whether a particular employee is a policymaker is sometimes difficult. The determination should consider both the amount and type of the employee's discretion and should focus on the powers of the office rather than by a particular employee’s actual performance. In applying those principles to the facts, the Court looked to the local ordinances that defined the position’s role, rather than the job description. It found that the ordinances gave the Senior Humane Officer position the authority to promulgate permit regulations, revoke permits, and promulgate animal adoption policies. It rejected Davis' argument that that discretion involved professional rather than political judgment, particularly given that Davis had no professional expertise. Ultimately, the Court concluded that Davis' position did fit within the policymaking exception to the general rule and did not violate the First Amendment.

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NAUMEN v. ABBOTT LABORATORIES (February 3, 2012)

In mid-2003, Abbott Laboratories decided to spin off its Hospital Products Division, creating Hospira. As part of its plan to ensure the new venture's success, Abbott decided that: a) Division employees could not transfer out of the Division before the spinoff, b) neither Abbott nor Hospira would hire from the other for a period of two years, c) Division employees could not retire before the spinoff (and begin receiving a pension) and return to Hospira afterwards, and d) after an initial period, Hospira employees would be covered by Hospira's benefits plan. Abbott did give several Division executives retention bonuses to allay their concerns about reduced post-spinoff benefits. After the spinoff, Hospira adopted a benefits plan that was significantly less generous than Abbott's. A class of Division/Hospira employees brought suit, alleging that Abbott violated ERISA. Judge Gettleman (N.D. Ill.) entered judgment for the defendants after a bench trial. The class appeals.

In their opinion, Seventh Circuit Judges Kanne, Evans (who, as a result of his death, took no part in the decision), and Sykes affirmed. ERISA's section 510 prohibits interference with plan benefits. But section 510 requires an allegation of the specific intent of preventing the use of benefits. Here, the Court concluded that the district court did not err in finding that employee benefits was not an issue during the decision to spinoff the Division. Although the plaintiffs framed their complaint in various ways, the conclusion is the same. Without proof of specific intent, the plaintiff's cannot prevail under a section 510 argument. The Court turned to the fiduciary duty claim. That claim is that Abbott failed to disclose the specifics of the post-spinoff Hospira benefits plan before the spinoff. The record discloses that Hospira benefits were determined by Hospira after the spinoff. The Court agreed with the district court that the executive retention bonuses paid pre-spinoff was not proof that Abbott knew what the benefits were going to be. Abbott's statements prior to the spinoff were not misleading. In fact, they were true.

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JAMIE S. v. MILWAUKEE PUBLIC SCHOOLS (February 3, 2012)

The Individuals with Disabilities Education Act imposes on participating states a rather complicated and individualized scheme of substantive and procedural requirements in order to ensure that disabled students receive a free public education. For example, it requires the state to identify and evaluate children who may need special education and to develop an individual plan for the services provided to each child. There are many procedural safeguards included within the substantive requirements. Wisconsin is a participating state and must comply with IDEA. The Wisconsin Department of Public Instruction is responsible for IDEA compliance and has various enforcement mechanisms if a school district within the state is non-compliant. A group of disabled children brought a class action against the Department and the Milwaukee Public Schools in 2001. Eventually, the district court certified a class of students "who are, have been or will be either denied or delayed" participation in the process. After a bench trial on liability, the court found that the defendants violated IDEA. Over MPS' objections, the Department then settled with the class by agreeing to order MPS to meet certain deadlines. After the remedial phase of the trial, the district court ordered a court-monitored remedial scheme. MPS appealed that order, also seeking review of the court's earlier orders on class certification, liability, and the Department settlement. The class did not cross-appeal but did appeal from two orders entered a few months later concerning the independent monitor and class notice.

In their opinion, Seventh Circuit Judges Flaum, Rovner (concurring in part and dissenting in part), and Sykes dismissed the plaintiffs' appeal and, on MPS' appeal, vacated and remanded. The Court first addressed both parties' jurisdictional challenges. Under section 1292(a)(1), an order granting a mandatory injunction is appealable. An interlocutory order fits within the exception only if it effectively grants the relief sought and affects a party's ability to obtain relief by a later appeal. The Court rejected the class' argument that MPS' appeal was premature. Although the district court had not finalized its view on the independent monitor or class notice, the Court concluded that the remedial order gave relief to the plaintiffs and substantially affected MPS' rights. The Court therefore concluded that it was a mandatory injunction and appealable. The Court also exercised pendant appellate jurisdiction over the district court's earlier orders because they were "sufficiently intertwined" with the remedial order to permit review. The Court turned to the class' appeal and concluded that the appeal from the later order was an attempt to seek review of the earlier order. The class missed the deadline to appeal the remedial order -- it cannot obtain review simply by appealing a later order. The Court turned to certification issues. It concluded that the class certification order was flawed in that: a) the class definition was indefinite in that it included class members who remained unidentified and had no process to ascertain class membership, b) the class did not satisfy the commonality requirement in that the class never identified a common factual or legal question, and c) the class did not meet the requirements for an injunction class under Rule 23(b)(2) because it did not call for class-wide injunctive relief. Having vacated the injunction, the Court also vacated the liability and remedial orders. Finally, with respect to the Department's settlement, the Court concluded that the Department did not have the authority to do what it promised to do in the settlement agreement. The district court, therefore, abused its discretion in approving the settlement.

Judge Rovner wrote separately, concurring in part and dissenting in part. She took issue with the majority's comments regarding the feasibility of a class at all under the circumstances. Her opinion made two basic points: 1) that systemic IDEA violations should be cognizable, whether as illegal policies or widespread practices, and 2) that the inability to identify the class members until the remedial phase of litigation should not preclude certification. With respect to that second point, she cited the McDonald case, a challenge to United Air Lines' rule prohibiting its flight attendants from being married. In the litigation, many of the actual class members were not identified until the remedial phase, when they were allowed to prove individual entitlement in adversarial hearings.

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EMERGENCY SERVICES BILLING CORPORATION, INC. v. ALLSTATE INSURANCE CO. (February 2, 2012)

Westville, Indiana's Volunteer Fire Department responds to car accidents when there is a hazardous material release. It incurs response costs when it does. In order to recover those costs, it brought suit (actually, its billing agent did) against several insurance companies who insured the owners of four vehicles that were involved in such accidents. It based its suit on the CERCLA's cost recovery provisions. Judge DeGuilio (N.D. Ind.) dismissed the complaint on the ground that none of the automobiles involved in the accidents was a "facility" under CERCLA. The Department appeals.

In their opinion, Seventh Circuit Judges Bauer, Flaum, and Sykes affirmed. The Court noted that CERCLA does allow a responder to a hazardous material situation to seek cost recovery action from a facility owner. The only issue on appeal was whether the automobiles involved in the accidents fall within the statute's definition of "facility.” The definition specifically includes motor vehicles but then excludes "any consumer product in consumer use." The Court first ruled that the Department did not waive its contention that "consumer product" was ambiguous. Although it is true that the Department did not use the word ambiguous until after dismissal in the district court, it has always pushed the court to use outside sources in interpreting a statute. Since the district court could only use those sources if the statute was ambiguous, the Court, particularly on the record before it, concluded that there was no waiver. The Court agreed with the district court that the statute was unambiguous. Although “consumer product” is not defined in the statute, the Court concluded that the dictionary definition made that term clear and unambiguous. It rejected the defendants' argument that the Consumer Product Safety Act's specific exclusion of motor vehicles from the definition of "consumer product" was evidence that the term has two different meanings. The Court pointed out that the CPSA excludes motor vehicles not because of a different understanding of what a consumer product is but because motor vehicles are regulated by different agencies. Having concluded that the automobiles at issue are not covered by the term "facility" in CERCLA, the Court nevertheless alternatively approached the same question as if "consumer product" was ambiguous. It considered the extrinsic materials, including EPA guidance, offered by the defendants and came to the same conclusion -- a private person's automobile is not a "facility" under CERCLA.

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BROWN v. BOWMAN (February 2, 2012)

Bryan Brown applied for admission to the Indiana Bar in 2007. The Indiana Board of Law Examiners, which governs the Bar's admissions process, referred Brown to the Judges and Lawyers Assistance Program for evaluation. The Program assists the Board by evaluating bar applicants when asked. The Program referred Brown to a psychologist, who noted the possibility of a bipolar disorder but suggested further psychiatric testing. Brown wrote several letters expressing his concern about the political and religious content of the examinations but ultimately agreed to the psychiatric evaluation. The psychiatrist concluded that Brown suffered from a personality disorder. Brown continued his complaints to the Board and the Program, even requesting a civil rights investigation. Eventually, the Board denied Brown's application for admission. Brown requested and was granted a hearing. When the Board affirmed its decision, Brown sought and was denied reconsideration, appealed unsuccessfully to the Indiana Supreme Court, and was denied certiorari by the United States Supreme Court. He filed a multi-count federal lawsuit against various defendants, including the psychologist, the psychiatrist, and the clinical director of the Program. Brown alleged violations of the First Amendment, due process, and equal protection. Judge Springmann (N.D. Ind.) dismissed the claims on the grounds that they were barred by the Rooker-Feldman doctrine and also concluded that several individual defendants were entitled to absolute immunity. Brown appeals

In their opinion, Seventh Circuit Judges Cudahy, Kanne, and Sykes affirmed. Under the Rooker-Feldman doctrine, a lower federal court has no jurisdiction in cases that attack prior state court judgments. It applies not only when a federal court is asked to overturn a state court judgment but also where the claims are so "inextricably intertwined" with the state court proceedings that the federal court is in essence reviewing the judgment. In the latter case, the court must also determine that the plaintiff had a reasonable opportunity to raise the issues in the state court proceedings. Here, Brown does not ask the court to reverse the state court judgment but his claims do require the federal court to review the Indiana Supreme Court's proceedings. Brown made the same arguments he makes here in the state court and the state court had the power to resolve the. His claims are therefore barred under Rooker-Feldman. Given the Court's resolution of the Rooker-Feldman issue, it was unnecessary to address the immunity issue. Nevertheless, the Court expressed its opinion that the psychologist, psychiatrist, and clinical director were likely entitled to a witness' common law absolute immunity and the Director was also likely entitled to statutory immunity.

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HESS v. KANOSKI & ASSOCIATES (February 2, 2012)

The Kanoski & Associates law firm hired Lawrence Hess in 2001 pursuant to a written employment agreement. Although the arrangement apparently worked well for years, Ronald Kanoski, the firm's president, fired Hess on February 14, 2007. The firm reassigned many of the cases Hess was working on to Kennith Blan, Jr., who worked as an independent contractor at the firm. Hess believed that he was owed compensation from the settlement of some of the cases on which he had been working when he left. The firm rejected his demands. Hess filed attorney's liens in state court on two cases that had been settled. Those claims were unsuccessful, as well, since he had no current attorney-client relationships. Hess brought suit in federal court, alleging state law contract fraud and conspiracy claims, among others. Chief Judge McCuskey (C.D. Ill.) granted summary judgment to the defendants on the ground that the state law proceedings collaterally estopped Hess. Hess appeals.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Tinder reversed in part, affirmed in part, and remanded. The Court first addressed the Illinois Wage Payment and Collection Act and breach of contract claims and found that the district court erred in dismissing them. First, it concluded that Hess did not admit, as the district found, that he had been paid all that he was due. Second, the Court concluded that the state court decisions did not collaterally estop Hess. The issues in those cases were different from the issues Hess raises in the federal case. Third, on the merits, the Court concluded that the employment agreement, which promised "40% of all fee revenue generated," was susceptible of more than one meaning. Fees could be "generated" under the contract either when work was done or when monies were received. The Court remanded for the district court to interpret the contract, possibly with extrinsic evidence. The Court did note that Hess had a better claim to fees that were actually received by the firm within 30 days of his termination since he had a contractual right to 30-days notice. With respect to the tortious interference and inducement claims, the Court stated that they could not lie against the firm and its president since one cannot tortiously interfere with one's own contract and could not lie against Blan since there was no evidence that he was involved in the termination. Finally, the Court quickly disposed of the "ragtag" of remaining claims.

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GONZALEZ v. VILLAGE OF WEST MILWAUKEE (February 2, 2012)

 Jesus Gonzalez, a Wisconsin gun rights activist, openly carried a handgun into retail stores near Milwaukee on two occasions in 2008 and 2009. One was a home improvement store, which was fairly busy at the time, and in which he shocked and startled a number of shoppers and employees. The other was a large retail store. He entered it late at night when the employees were emptying cash registers and begin shopping for ammunition. On both occasions, local police arrested Gonzalez for disorderly conduct. In the 2008 incident, West Milwaukee police asked him for his Social Security number and other identifying information. One officer commented that he might have to stay longer if he did not provide it. In both incidents, local authorities retained Gonzalez' gun for several weeks. Gonzalez was not prosecuted in either incident. Gonzalez brought suit against the officers and police departments for false arrest, for keeping his guns too long, and for violating the Privacy Act by asking for his Social Security number and not making required disclosures. Judge Adelman (E.D. Wis.) granted summary judgment to the defendants. Gonzalez appeals.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Sykes affirmed. The Court first addressed the false arrest claim. It noted that his request for prospective declaratory relief was moot -- both because of a 2011 Wisconsin statute that specifically provides that openly carrying a firearm is not disorderly conduct and because Gonzalez has since been convicted of first-degree reckless homicide and can no longer lawfully possess a firearm. Nevertheless, his damage claims remain viable. In order to prevail on his false arrest claims, however, he must show that the officers lacked probable cause. But for the state and federal constitutions, the Court considered the case fairly straightforward. Gonzales created a disturbance during both incidents and frightened employees and shoppers. That is normally enough for probable cause for arrest for disorderly conduct. But Wisconsin adopted a constitutional provision in 1998 guaranteeing a right to bear arms. The Court therefore thought it more prudent to address qualified immunity, the district court's alternative holding, rather than probable cause. Qualified immunity would protect the officers if there was no constitutional violation or if the right they allegedly violated was not clearly established at the time. Even though Wisconsin adopted the constitutional amendment, Wisconsin law also prohibited carrying concealed weapons. The tension between these two provisions was still unsettled at the time of Gonzalez' arrests, notwithstanding two Wisconsin Supreme Court decisions. The federal constitutional right to bear arms was also unsettled at the time. Heller was not decided until after the first arrest and McDonald was not decided until after both. The Court concluded that right allegedly violated was not clearly established and the officers were entitled to qualified immunity. Next, the Court rejected Gonzales' unlawful seizure claim. A seizure takes place when property is taken. Continued retention of property, even if illegal, is not actionable under the Fourth Amendment. Finally, the Court turned to Gonzalez' Privacy Act of 1974 claim. That Act makes it illegal to deny any right to a person because of the person's refusal to disclose his Social Security number and also contains disclosure requirements. The Court first addressed whether the Act even applies to non-federal agencies. Although the plain language of the Act states that Section 7 applies to federal, state, and local agencies, the Sixth Circuit has concluded that it only applies to federal agencies, relying on an internal inconsistency created by a codification mistake. The Court joined the Eleventh Circuit in concluding that Section 7 applies to local agencies. On the merits, the Court concluded that the record did not support Gonzales' claim that the West Milwaukee officers denied him any right or benefit. With respect to the Section 7(b) claim, it found that the officers did violate the disclosure requirements but that they are protected by qualified immunity since it was not clear that the section applied to local agencies.

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PARKER v. FRANKLIN COUNTY COMMUNITY SCHOOL CORPORATION (January 31, 2012)

Franklin County High School belongs to the Eastern Indiana Athletic Conference. The Conference is responsible for scheduling games for both the girls' and boys' varsity basketball teams. In the 2009-2010 season, almost 95% of the boys' games were played in primetime (an evening before a non-school day), while just over 50% of the girls' games were. Primetime games draw larger crowds from both the school and the community and include performances by cheerleaders, bands, and dancers. Amber Parker and Tammy Hurley brought suit against Franklin County, the other Conference schools, and eight other non-conference schools who were part of the varsity teams' schedules. Parker and Hurley both had daughters on the Franklin County varsity basketball team at one time. The plaintiffs alleged that the schools' scheduling practices violated Title IX of the Education Amendments of 1972 and also violated their equal protection rights. Judge Lawrence (S.D. Ind.) granted summary judgment on the equal protection claims on sovereign immunity grounds and on the Title IX claims on the ground that the scheduling disparity was not so substantial that it amounted to a denial of athletic opportunity equality. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Circuit Judges Wood and Tinder vacated and remanded. The Court noted that most Title IX litigation has addressed accommodation claims, in which plaintiffs allege a failure to establish athletic programs. The Franklin County claim, however, is an "equal treatment" claim. Title IX not only requires that schools establish programs for females, but prohibits discrimination against females in the operation of those programs. Although Title IX does not mention athletic programs, the Department of Health, Education, and Welfare regulations implementing the statute clearly prohibit discrimination in high school athletic programs. Under HEW policy interpretations, several factors are relevant to deciding whether equal treatment exists, including game schedules and practice times. The statute does not require identical benefits or treatment but does require that any disparities in treatment not be substantial enough to deny equality of opportunity. The Court addressed whether the plaintiffs made a case that amounted to the "systemic, substantial disparity" required to esyablish a violation. It concluded that they had. Franklin County has maintained the scheduling disparity for years, notwithstanding repeated attempts and requests to change it. There is evidence in the record in the record of the significant negative impact the disparity has had, including an increased interference with academics, a loss of audience and support, and a feeling of inferiority. The Court turned to the plaintiffs' equal protection claim. The district court did not reach the merits of the claim, instead dismissing it on sovereign immunity grounds. The Court approached the issue differently, by considering whether the defendants were persons under § 1983. The answer to that question depends on whether they are "arms of the state" and therefore not § 1983 persons or are more like municipal corporations, which are section 1983 persons. The Court concluded that school corporations are local government units subject to suit under § 1983. It reached the same result in an alternative Eleventh Amendment analysis. The key issue under the Eleventh Amendment is whether the state is obligated to pay any judgment. In this case, any judgment against the defendants will be paid by the defendants, not the state. Having determined that the defendants are subject to suit under § 1983, the Court remanded for consideration of the merits.

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BEARY LANDSCAPING v. COSTIGAN (January 31, 2012)

Generally, construction workers in Illinois engaged in public works are required to be paid the "general prevailing rate" for work of that type in the locality where the work is being performed. The public body in charge of the work determines the general prevailing rate, usually by simply adopting the Department of Labor's numbers. The Department, in turn, arrives at its numbers through an annual investigation. In the case of laborers, the Department simply asks the the Laborers Union, which represents many Illinois laborers, for its current wages. A group representing landscape laborers, a subcategory of all laborers, asked the Department to create a subcategory (which would lead to a separate, lower, prevailing rate) for landscape laborers. The Department refused and that refusal was upheld in Illinois state court. Nevertheless, in 2005, the Illinois Landscape Contractors Bargaining Association entered into a collective bargaining agreement with the Teamsters and the Operating Engineers that included a rate for landscape laborers that was lower than the Department's specified wage. Companies that were subject to the collective bargaining agreement paid the lower wage. The Department sued them in state court. That suit is stayed because a number of landscape contractors filed suit in federal court against the Department alleging that the Department violated the nondelegation doctrine when it simply adopted the Laborers Union's wage rate. Judge Zagel (N.D. Ill.) granted summary judgment to the Department.

In their opinion, Seventh Circuit Judges Posner and Kanne and District Judge Pratt affirmed. The nondelegation doctrine generally forbids Congress from delegating its legislative powers to federal agencies without sufficient guidance on how those powers should be used. That doctrine simply does not apply. But the Court recognized a related doctrine that prohibits a state from authorizing a private person to deprive another person of property without due process. Here, the plaintiffs complain that the Department simply accepts the Laborers Union wage rates, to plaintiffs' detriment. But the Court noted that the Department's determination was subject to challenge, both administratively and judicially. The plaintiffs failed to object to the determination when it was made. With those remedies available, the Court concluded that the department did not make any improper delegation to a private party.

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ROSS v. RBS CITIZENS, N.A. (January 27, 2012)

Charter One operates over 100 banks in Illinois. Each bank has a branch manager and assistant branch manager. The banks also have other employees, such as tellers and personal bankers. Charter One classifies its tellers and personal bankers as non-exempt (i.e., entitled to overtime) and its managers and assistant managers as exempt (i.e., not entitled to overtime). Synthia Ross and James Kapsa worked for Charter One as a teller and assistant branch manager, respectively. Ross and Kapsa brought a class action against Charter One pursuant to the Fair Labor Standards Act and the Illinois Minimum Wage Law. The suit alleged that Charter One had an informal policy of denying properly earned overtime pay and that it misclassified the assistant branch manager position as exempt. Judge Lefkow (N.D. Ill.) certified two Rule 23(b)(3) classes for the Illinois claim -- a class of non-exempt employees and a class of assistant branch managers. Charter One appealed the certification order.

In their opinion, Circuit Judges Kanne and Evans (who, as a result of his death, took no part in the decision) and District Judge Clevert affirmed. At the time of the appeal, the only issue raised by Charter One was whether the certification order complied with Rule 23(c)(1)(B). But the Supreme Court decided Dukes shortly after the oral argument so the Court asked for further briefing on whether the class satisfied the Dukes commonality requirement. Rule 23(c)(1)(B) requires that a class certification order define the class, the class claims, and the issues or defenses. The rule was added to the federal rules relatively recently and his not been the subject of much of appellate court consideration. The Court found the Third Circuit's discussion in Wachtel persuasive. Wachtel stated that the rule requires a comprehensive and specific definition of the class claims and issues and defenses, as well as a definition of the class itself. Therefore, the Court held that the certification order (or an accompanying opinion) must contain a class definition and a complete list of the claims and issues and defenses. Applying that test to the district court's order, the Court found that the class definition was sufficiently precise in that it included all current or former hourly employees, or those who worked as assistant branch managers, within the appropriate time period. The Court also concluded that the statement of claims and issues was adequate. The district court listed the claims that will be litigated at the class level. The Court rejected Charter One's argument that several issues were omitted. Those "issues" were merely trial strategy questions. Having found the certification sufficiently precise, the Court turned to the commonality requirement. It concluded that the class met the commonality requirement, even after Dukes. In Dukes, the Supreme Court reversed the certification of a class of 1.5 million current and former Wal-Mart employees. It concluded that the class could not show that the millions of employment decisions were proof of a general discrimination policy. The Court found several distinctions between Dukes and Charter One. First, the Charter One class is orders of magnitude smaller than the Dukes. Second, the Dukes class had to show discriminatory motive while the Charter One class need not. Third, Dukes focused on the managers' significant discretion while the Charter One class alleges a single company policy. The Court found the commonality requirement is satisfied.

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DIXON v. ATI LADISH LLC (January 26, 2012)

In late 2010, Allegheny Technologies, Inc. acquired Ladish Co. for cash and stock. Apparently Allegheny overpaid because its share price dropped after the announcement. Irene Dixon, a Ladish shareholder, filed suit alleging that the company and its directors violated federal and state law by failing to disclose certain facts in its registration statement and proxy solicitation. Judge Stadtmueller (E.D. Wis.) dismissed the federal claims on the grounds that Dixon did not satisfy the Private Securities Litigation Reform Act of 1995 and dismissed the state claims pursuant to the business judgment rule. Dixon appeals the dismissal of the state claims.

In their opinion, Seventh Circuit Chief Judge Easterbrook, Circuit Judge Cudahy, and District Judge Pratt affirmed. The Court addressed a few preliminary matters. First, the fact that the sale has consummated does not moot Dixon's claim for damages. Second, the Court noted that the Securities Litigation Uniform Standards Act of 1998 preempts most state law claims that rely on registration or proxy statement omissions. Since the defendants did not raise it, they have forfeited the argument. The defendants may not have forfeited much, since Dixon's claim may well fit within an exception to Act's preemption. On the merits, the Court noted that the business judgment rule simply does not apply. Since it is a common law rule, it does not apply when the state has addressed the subject by statute. Wisconsin has. Its statute provides that a director is not liable for a breach of duty unless that breach fits one of the statute's subsections. Defendants rely on the statute on appeal but did not cite it in the district court. Instead of attempting to show that her allegations fit within one of the statute's subsections, Dixon's only response is that the defendants forfeited their reliance on the statute. The Court disagreed. The defendants made the substantive argument in the district court. A party does not waive an argument simply by failing to cite the best authority for it in the district court. Defendants' conduct does not fit within any of the subsections – Dixon's claims fail.

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TRIBBLE v. EVANGELIDES (January 26, 2012)

Chicago Police officers arrested Terence Tribble for drinking on a public way. They added drug charges when their search revealed a small amount of heroin and cocaine. The drinking charges were dismissed and a judge found no probable cause for the drug charges at a preliminary hearing, even though the prosecution had physical evidence of a small amount of drugs. Tribble filed suit under § 1983 against the officers who arrested him, alleging unlawful arrest and search. In response to Tribble's plan to introduce the judge's “no probable cause” finding at trial, the officers sought to introduce testimony that courts frequently throw out drug cases that involve small amounts of drugs. The district court barred all testimony about why the judge did what he did. Notwithstanding that ruling, the defendants introduced testimony at trial of the Assistant State's Attorney from the preliminary hearing. She testified that approximately 25% of drug cases resulted in no probable cause findings and that the overwhelming majority of them involved small amounts of narcotics. The jury returned a verdict for the defendants. Tribble moved for a new trial on the grounds that the witness testified as an expert without proper disclosures or foundation. Judge Hibbler (N.D. Ill.) denied the motion, concluding not only that the witness did not offer an expert opinion but offered no opinion at all. Tribble appeals.

In their opinion, Seventh Circuit Judges Bauer and Tinder and District Judge Magnus-Stinson affirmed in part, reversed in part, and remanded. The Court disagreed with the district court with respect to whether the witness offered an opinion. The witness summarized her experiences in the criminal court and drew conclusions about the way the court operated. The Court referred to these as "textbook examples" of opinion testimony. Although lay opinions are admissible under Rule 701 without the requirements imposed by Rule 702, lay opinions may not be based on specialized knowledge. Here, the witness' testimony was based on her experience as an Assistant State's Attorney at hundreds of preliminary hearings. Thus, it was based on specialized knowledge and the defendants should have complied with the rules of evidence and civil procedure. Since the testimony was not disclosed, it should be excluded unless the failure to disclose was substantially justified or harmless. The Court concluded that it was neither. The district court had earlier ruled that he would not allow testimony such as this. It turned out to be extremely prejudicial and Tribble was given no opportunity to prepare for it or rebut it. Tribble is entitled to a new trial. The Court found no error in the district court's a) denial of Tribble's attempt, one-week before trial, to amend his complaint to include a strip search claim, or b) refusal to delay jury selection because it conflicted with Tribble's preliminary hearing in an unrelated burglary charge.

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CHICAGO UNITED INDUSTRIES, LTD. v. CITY OF CHICAGO (January 24, 2012)

Chicago United Industries sells a number of products to the City of Chicago and, until recently, had annual sales between $10 million and $20 million per year. Chicago United was certified by Chicago as an MBE -- a minority-owned business enterprise -- and thus received favorable treatment in its dealings with the City. In 2005, the City began to suspect that Chicago United was a broker, not a wholesaler. Brokers are not eligible for MBE status. In March, the City notified Chicago United that it was investigating its status and considering revocation. At the same time, it notified Chicago United that it was considering barring the company from City contracts altogether as a result of an alleged shortage. Although it took no formal action at that time, it substantially reduced its purchases from Chicago United for the next five months. The City never revoked Chicago United's MBE status. It did try, in mid-2005, to debar Chicago United but gave up after Chicago United sued and obtained a temporary restraining order. In the suit, Chicago United and its two principals alleged a number of constitutional violations as well as a state law breach of contract claim. Judge Dow (N.D. Ill.) granted summary judgment to the defendants. Chicago United appeals.

In their opinion, Seventh Circuit Judges Posner and Kanne and District Judge Pratt affirmed. The Court addressed and rejected the claim brought by the company's principals that the debarment (which lasted eight days) deprived them of their right to pursue their occupation and was thus violation of due process. First, an eight-day bar is a temporary loss not amounting to a deprivation of liberty. Second, the claim was brought on behalf of the principles and they never lost their jobs. There simply was no deprivation. The Court turned to Chicago United's claim that the City deprived it of its property (its MBE certification) without due process. The Court agreed that the certification can be property under the due process clause. But, the City never revoked the certification, did not destroy its value even though it reduced its purchases, and did not violate any of the certification's terms. The conduct did not amount to a due process violation. Finally, the Court addressed the state law breach of contract claim. The Court conceded that there was some "weak and vague" evidence, as well as conjecture, that the City may have breached some requirements contracts but concluded that Chicago United failed to produce sufficient actual evidence of a breach.

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SCANLAN v. EISENBERG (January 20, 2012)

Martin Bucksbaum and his brother founded General Growth Properties, a real estate investment trust with $34 billion in market capitalization. When Bucksbaum's daughter Mary was a child, he and his brother set up several trusts naming her as the principal beneficiary. The Trustee, General Trust Company, was authorized to distribute income or principal to Mary (now Mary Bucksbaum Scanlan) as it deemed "necessary for her support" or "in her best interests." Marshall Eisenberg and Earl Melamed, of the Neil, Gerber & Eisenberg law firm represented Scanlan personally. They also represented General Growth and the Trustee. They also owned General Growth stock. They also control General Trust Company, the Trustee. In 2007 and 2008, General Growth stock constituted approximately 65% of the Trust's assets. Nevertheless, the Trust purchased hundreds of millions of dollars of additional General Growth stock. Eisenberg and Melamed approved the purchasers, both in their capacities with the Trustee and as lawyers for the transaction. The Trust suffered over $200 million in losses when General Growth declared bankruptcy in 2009. Scanlan brought suit against the Trustee, Eisenberg, Melamed, and their law firm for breach of fiduciary duty and legal malpractice. Judge Grady (N.D. Ill.) concluded that Scanlan lacked standing because she could not show that the Trust would not be able to make any discretionary distribution to which she was entitled during her lifetime. Scanlan appeals.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Tinder reversed and remanded. To establish standing, plaintiff must establish an injury in fact, a causal relationship between the injury and the defendant's conduct, and the likelihood that a favorable decision will redress the injury. The district court focused on the injury in fact requirement and concluded that the Trust, now worth approximately $800 million notwithstanding the losses, will be able to fund any required distribution. Since her only interest was in potential discretionary payments, he concluded that there was no injury in fact. The Court looked to Illinois law's treatment of a discretionary trust beneficiary. Section 94 of the Restatements (Third) of Trusts identifies who is entitled to bring an action against the trustee. A comment to that section explains that the beneficiaries of the trust include a person who is entitled to receive a discretionary distribution. A beneficiary whose rights are adversely affected has standing to bring suit. The Court then looked to Illinois law and the law of other jurisdictions to conclude that a discretionary beneficiary has an equitable interest in the trust. As a beneficiary, Scanlan is owed a fiduciary duty by the Trustee. She has standing to assert her interest in the proper administration of the Trust.

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IN RE: RIVER EAST PLAZA, LLC (January 19, 2012)

When River East Plaza LLC defaulted on its mortgage in early 2009, LNV Corp., which held the first mortgage, started foreclosure proceedings. Shortly before the scheduled sale of the property, River East filed for bankruptcy. In its plan, it proposed to exchange LNV's lien for one that was an "indubitable equivalent" under section 1129(b)(2)(A)(iii). Bankruptcy Judge Wedoff (N.D. Ill.) rejected the plan and dismissed the petition. River East brought a direct appeal under section 158(d)(2)(A).

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. At the time of the bankruptcy, River East's only asset was an office building in downtown Chicago. It was valued at only $13.5 million, but River East owed LNV $38.3 million. LNV chose to swap its combined secured and secured claims for a secured claim for $38.3 million. River East's plan proposed to replace the lien with a lien on $13.5 million in 30-year Treasury bonds. River East argued that the liens were equivalent because the bonds would grow in value over time and eventually be worth $38.3 million. The bankruptcy court concluded that a secured creditor who has swapped its secured and unsecured claims for a secured claim equal to the total debt cannot be forced to accept substitute collateral. Here, the substitute collateral may eventually be more valuable than the lien on River East's building. But the two present very different risk profiles. The Court concluded that an undersecured creditor should not be forced to accept the substitute collateral. Finally, the Court concluded that the bankruptcy court did not abuse its discretion in not considering River East's third proposed plan. River East had already submitted two plans without complying with the statute and LNV has waited long enough to enforce its lien.

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GORE v. ALLTEL COMMUNICATIONS, LLC (January 19, 2012)

In October 2005, Christopher Gore contracted with First Cellular to provide wireless service for his four different wireless lines. Only one line used used GSM technology. Alltel acquired First Cellular in May of 2006. Although Alltel transitioned the three non-GSM lines by October, it was never able to transition the GSM line. Alltel sent Gore an invoice in November of 2006. The invoice provided, among other things, that any dispute must be settled by arbitration. Gore then initiated a class action against Alltel, alleging breach of contract, deceptive trade practices, civil conspiracy, aiding and abetting, and unjust enrichment. Alltel removed the case to federal court under the Class Action Fairness Act and moved to compel arbitration. Chief Judge Herndon (S.D. Ill.) denied the motion. Alltel filed an interlocutory appeal.

In their opinion, Seventh Circuit Judges Kanne and Williams and District Judge DeGuilio reversed and remanded. Although there is a federal policy favoring arbitration, a court should not require a party to submit a dispute to arbitration unless he has agreed to do so. That determination is a matter of state contract law. Once it is clear that the parties have agreed to arbitrate some issues, any questions regarding the scope of the arbitration should be resolved by the arbitrator. Here, the First Cellular agreement does not an contain arbitration clause but the Alltel agreement does. Since Gore's allegations bring both agreements into play, he should be compelled to arbitrate only if the Alltel arbitration clause is broad enough or if the Alltel agreement incorporates the First Cellular one. The Court rejected Alltel's argument that its agreement incorporated the First Cellular agreement and turned to whether the clause was broad enough. Here, the clause includes "any dispute arising out of this agreement or relating to the services and equipment." The Court addressed each cause of action with that broad arbitration clause in mind. Since the breach of contract claim relates to Alltel's failure to transition the GSM line, it must be arbitrated. Likewise, the civil conspiracy claim, the aiding and abetting claim, and the unjust enrichment claim all relate, at least in part, to the Alltel agreement and must be arbitrated. The Court then examined the Illinois Consumer Fraud and Deceptive Practices Act and the Uniform Deceptive Trade Practices Act claims, which allege that First Cellular engaged in unlawful conduct by selling the GSM lines knowing that they would soon be inoperable. But even those claims are strongly linked to the Alltel services. It, too, must therefore be arbitrated. Finally, the Court noted that Gore's claim that the Alltel agreement was unconscionable is also one that must be decided by the arbitrator in the first instance.

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LEBAMOFF ENTERPRISES v. HUSKEY (January 17, 2012)

An Indiana state law prohibits retail liquor stores from shipping wine to its customers except through the use of its own employees. Lebamoff Enterprises, which owns several retail liquor stores in northern Indiana, and two wine consumers who live more than 100 miles from Lebamoff's stores brought suit challenging the law’s constitutionality. They argue that the law is preempted by the Federal Aviation Administration Authorization Act of 1994 and also violates the Constitution's commerce clause in that it unduly burdens interstate commerce. Judge Magnus-Stinson (S.D. Ind.) entered judgment for the state. The plaintiffs appeal.

In their opinion, Seventh Circuit Judges Posner, Sykes, and Hamilton (concurring in the judgment) affirmed. The Court first addressed the preemption argument. The Federal Aviation Administration Authorization Act prohibits a state from enacting a law "related to a price, route, or service of any motor carrier." Although the state law does not regulate motor carriers, it does prohibit them from performing a service. But this is not a simple case of a federal and state law in conflict. The interests that Indiana is protecting are within the core powers of the Twenty-First Amendment. With the power of the Constitution on both sides, a court must balance the competing interests. There is a strong presumption of validity when, as here, the interests are core. Upon balancing those interests, the Court concluded that Indiana’s attempts to limit underage drinking prevailed. The preemption argument fails. The plaintiffs' second argument is that the law so burdens interstate commerce that it violates the commerce clause. The commerce clause does not permit states to discriminate in favor of local producers. The statute does not expressly so discriminate but it does allow wineries (in or out of state) to deliver to customers if they have verified a customer’s age at the winery in person. When a statute directly discriminates against interstate commerce, it is generally struck down. When the effect on commerce is indirect, a court looks to the state’s interest and balances the local benefit with the interstate burden. Here, the Court ultimately concluded that there was no effect on interstate commerce, even incidental. Therefore, the statute stands.

Judge Hamilton wrote in concurrence, reaching the same result through a different route. He would not have applied a balancing test. When a state is exercising its core Twenty-First Amendment powers, as is the case here, the law should be upheld without further analysis.

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KEETON v. MORNINGSTAR, INC.. (January 13, 2012)

Doris Keeton began working for Morningstar, Inc., an independent investment research company, in 2002. She was one of three Compliance Consultants. Keeton was African-American and the other two were white. As of April 2008, the three consultants all had salaries between $65-70,000. Keeton's salary was $68,000. After the 2010 salary increases, the salaries ranged from $70-73,000. Keeton made $70,000. Keeton filed an EEOC complaint, alleging that Morningstar discriminated with respect to salary on account of her race. She later filed suit alleging race discrimination and retaliation. When Keeton produced confidential and privileged documents during discovery, Morningstar conducted an investigation. Although Morningstar took no disciplinary action as a result of the investigation, Keeton added a retaliation count her complaint. The court set a briefing schedule on Morningstar's summary judgment motion. Keeton missed the original deadline for a response brief, missed a second date on which her attorney had promised a response, and still had filed nothing nine days after that. On the 10th day, Keeton moved to file her response instanter. Twenty-three minutes later, Judge St. Eve (N.D. Ill.) entered an order granting summary judgment to Morningstar. Later that day, the court denied Keeton's motion. Keeton appeals.

In their opinion, Seventh Circuit Judges Manion, Rovner, and Tinder affirmed. The Court first addressed Keeton's argument that the district court erred in dismissing the case as moot. The district court did not dismiss the case as moot -- it dismissed the motion as moot. The Court concluded that the district court did not abuse its discretion in doing so. Other than citing a busy schedule and a broken arm, Keeton's attorney never adequately explained why he could not meet the court's deadlines or his own promised filing date, or even why he could not request an extension. On the merits, the Court noted that it would deem Morningstar's statement of uncontested facts admitted because of the lack of a response but would still view those facts in a light most favorable to Keeton. Applying the McDonnell Douglas indirect method, the Court concluded that Morningstar presented a legitimate, nondiscriminatory reason for the salary differentials among its consultants. Their initial salaries were based on market forces and their increases were based on performance reviews. Keeton presented no evidence that these reasons were pretext. The Court examined her two retaliation claims under the indirect method and concluded that she was unable to establish a prima facie case for either. Her pre-suit retaliation claim fails because she never reported her discrimination complaints to her employer. Thus, she never engaged in any protected activity Her post-suit retaliation claim fails because Morningstar did not discipline her or otherwise cause her to suffer an adverse employment action.

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HARRIS v. WARRICK COUNTY SHERIFF'S DEPARTMENT (January 13, 2012)

Kevin Harris successfully worked in part-time and dispatcher jobs for the Warrick County Sheriff's Department for several years before he was hired as a full-time deputy sheriff in 2007. The Department has a one-year probationary period, during which it can dismiss a deputy without cause. The Sheriff became disappointed in Harris' performance very early on. Harris violated department policy and generally did not seem committed to his position. The Sheriff even offered to return him to the dispatcher position he held just prior to his appointment as a deputy. Harris refused -- but continued to ignore Department policy. The Department terminated Harris in January of 2008. Harris brought suit under Title VII and § 1981, alleging race discrimination. Chief Judge Young (S.D. Ind.) granted summary judgment to the Department. Harris appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Flaum and Sykes affirmed. Harris relied on the direct method of proof for his claim. He cited the facts that: a) some deputies watched portions of Blazing Saddles in his presence, b) some of the deputies gave him racially-based nicknames, and c) several white deputies were retained even though they had performance problems during their probationary periods. The Court rejected the theory. First, Blazing Saddles is a critically acclaimed movie that makes fun of all sorts of social and ethnic stereotypes. It does not support racial discrimination. Second, although the nicknames presented more compelling evidence, Harris offered no evidence that any of the decision-makers used nicknames. Third, Harris failed to satisfy his burden to establish that the white deputies who were retained were similarly situated to him. Harris was terminated for violating procedures, disobeying direct orders, and generally failing to commit to his job. Although the white deputies had performance problems, none of their problems were the same or similar to Harris'.

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MESSNER v. NORTHSHORE UNIVERSITY HEALTHSYSTEM (January 13, 2012)

Northshore University HealthSystem merged with Highland Park Hospital in 2000. In 2004, the FTC challenged the merger as a violation of the Clayton Act. An ALJ agreed and ordered Northshore to divest Highland Park. The FTC affirmed on the merits but reversed on the remedy. Instead of requiring a divestment, it ordered the two hospitals to use separate negotiating teams for their contracts. Steven Messner filed a class-action lawsuit in 2008 against Northshore, alleging monopolization, attempted monopolization, and a violation of the Clayton Act. In support of their motion for class certification, plaintiffs relied on Dr. Dranove. Dranove proposed to use the "difference in differences" method of estimating the antitrust impact on the class. The method compares Northshore's price changes to a control group both before and after the merger. Northshore argued that there was no class-wide antitrust impact and that, in fact, there were class members who were not affected by the alleged price increases at all. Judge Lefkow (N.D. Ill.) denied class certification on the grounds that the individual questions regarding the antitrust impact predominated over common questions. Messner appeals.

In their opinion, Seventh Circuit Judges Sykes, Tinder, and Hamilton vacated and remanded. A Rule 23(b)(3) class must satisfy, in addition to the standard certification requirements, that common questions of law and fact predominate over individual questions. The class raises two issues on appeal. First, they allege error when the district court failed to decide the admissibility of defendant’s expert report. Instead of conducting a Daubert analysis, the court indicated that the class could raise any shortcoming’s it thought the report presented and the court would give the report the weight it deserved. The Court disagreed. A district court should make an explicit Daubert finding when an expert report is critical to class certification, as it was here. The Court rejected Northshore's argument that the American Honda rule should only apply when a district court grants certification, not when it denies it. The class also alleges that the district court erred in applying the predominance test. The predominance test is not a rigid, mechanical test. It is satisfied when common questions make up the bulk of the case and can be resolved for all class members at one time. It does not require the absence of an individual question. Here, the elements of the underlying claim are that Northshore violated the Clayton Act and that the members of the class suffered injury. It is clear that common questions predominate with respect to the first element, the violation. Dr. Dranove contended that he could use common evidence and a common methodology to prove the antitrust impact on the class members, even when that impact was not necessarily the same for each member. The district court's requirement that the impact be the same for each class member was error. The Court also concluded that Dranove did not concede that uniform price increases were necessary for his analysis. Finally, the Court rejected Northshore's argument that the class could not be certified because it contained class members who were not or could not be harmed. The fact that some class members were not harmed and may not prevail on the merits is not a reason for denial of class certification. Of course, if a class contains a number of members who could not have been harmed, the class may have been defined too broadly. The Court rejected the argument that this class was defined too broadly but invited the district court to revisit the issue if additional discovery so indicated.

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EQUAL EMPLOYMENT OPPORTUNITY COMMISSION v. MANAGEMENT HOSPITALITY OF RACINE (January 9, 2012)

Salauddin Janmohammed owned a number of IHOP restaurants, including one in Racine, Wisconsin. The Racine IHOP contracted with Flipmeastack, owned by Janmohammed’s wife, to provide payroll, human resources, and compliance services. Flipmeastack oversaw the daily operations at the Racine IHOP. In 2005, the Racine IHOP's district manager was Steve Smith, its general manager was Michelle Dahl, and its assistant managers were Nadia Del Rio and Junior Gutierrez. The Racine IHOP had a sexual harassment policy that stated that any form of harassment was absolutely forbidden and that employees were to report improper behavior to any manager. In 2004 and 2005, two teenaged employees at the Racine IHOP complained of sexual harassment. One complained to Smith but said that his response was passive, that she never heard from him again, and that she began being treated differently and more poorly. She also complained that an assistant manager engaged in extreme forms of sexual harassment, including physical touching. She claims she reported that behavior to other managers but got no response. The other teenager also complained about egregious sexual harassment by the same assistant manager. She also complained to other managers, who did nothing. The Racine IHOP began its own investigation only after a private investigator for the teenager’s attorney began asking questions. Gutierrez quit during the investigation and, as a result of the investigation, Smith decided to fire Dahl for violating the sexual harassment policy. Dahl sued Smith for sexual harassment but lost at summary judgment. The EEOC then filed suit on behalf of the two teenaged servers. A jury awarded one of the servers $1,000 in compensatory damages and the other $4,000 in compensatory damages and $100,000 in punitive damages. After the verdict, the defendants: a) moved for judgment as a matter of law, b) argued that they had established their Faragher/Ellerth affirmative defense, and c) that the punitive damages should be stricken or reduced. The EEOC asked that all the defendants be jointly and severally liable and also asked for injunctive relief. Judge Adelman (E.D. Wis.) denied the defendants motions and granted the EEOC's motions. The defendants appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook, Circuit Judge Bauer, and District Judge Young affirmed in part, reversed in part, and remanded. The Court first addressed defendants' motion for judgment as a matter of law. The only question is whether the evidence is sufficient to support the verdict. With respect to the sexual harassment claims, the Court appeared to have little difficulty in concluding that a rational jury could have found that the servers were subjected to a hostile work environment. It occurred "every shift," it was "highly offensive," and it included "physical touching." The Court turned to the Faragher/Ellerth affirmative defense. Under that defense, an employer can escape liability if it can prove that it exercised reasonable care to prevent and correct any improper behavior and that the employee unreasonably failed to take advantage of corrective or preventive measures. The mere existence of a sexual harassment policy is not enough. The Court stated that a reasonable jury could have found that the defendants exercised reasonable care -- but did not have to. Furthermore, even with the policy, a jury could have found that it was not effective. There was evidence in the record that none of the Racine IHOP managers followed the policy, that the training was ineffective, and that their investigation was not prompt. The Court turned to the employees' actions. Although neither employee reported the 2005 harassment to Smith, the Court noted that: a) the policy did not require a report to Smith, b) both employees reported the harassment to managers, and c) one employee's earlier reports to Smith had gone unheard (and even backfired). The Court found the jury’s determination that the employees took appropriate action not unreasonable.. The Court turned to the punitive damage award. Punitive damages are available under Title VII. Defendants' only challenge to the award is that they are inappropriate because it engaged in a good faith effort to implement an anti-discrimination policy. Again, the Court concluded that a rational jury could have found the policy ineffective and that the company did not engage in a good faith effort to enforce it. The defendants challenged the denial of their motion for new trial on two grounds -- that there should have been a special verdict form for the Faragher/Ellerth defense and that the district court improperly admitted certain evidence. The Court rejected both grounds. First, the use of a special verdict form is within the sound discretion of the district court and there was nothing confusing about the verdict form, in light of the instructions given. Second, the Court ruled that the harassment evidence of two other individuals was not an abuse of discretion. Finally, the Court turned the defendants appeal of the district court's finding of liability for Flipmeastack. The EEOC advanced two theories for liability -- a traditional “pierce the corporate veil” theory and a "directing the discriminatory act" theory. The district court rejected both of those theories but sua sponte found Flipmeastack liable on a control theory, a theory not advanced or defended by either party. The Court found that the district court’s holding was error for two reasons. First, it was error to adopt a position based on a case not advanced or cited by either party. Second, deciding whether Flipmeastack was liable under the control theory is a question for the jury in the first instance, not the court.

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INDEPENDENT TRUST CORP. v. STEWART INFORMATION SERVICES CORP. (January 6, 2012)

For much of the 1980s and 1990s, Intercounty Title Insurance Company provided real estate closing and title insurance services in the Chicago area to Stewart Information Services. Lawrence Capriotti and Jack Hargrove controlled Intercounty. Stewart agreed to insure the escrow account that Intercounty managed as part of its service. Unfortunately, Capriotti and Hargrove used the escrow funds to invest in various moneymaking schemes -- and lost a lot of money. The escrow fund was $26 million in the hole by 1989. Stewart found out and pressured Intercounty to fix it. Capriotti and Hargrove "fixed it" by funneling millions of dollars from trusts held by InTrust, of which they were also directors. Stewart and Stewart's customers benefited from this transfer. The Illinois Commissioner of the Office of Banks and Real Estate began an investigation in 1994 but did not learn of the transfers until 2000. The Commissioner put InTrust into receivership. The receiver recovered millions of dollars in civil suits against Capriotti, Hargrove, Intercounty, and ITI Enterprises. In 2010, the receiver brought a multi-count complaint against Stewart. In response to a motion to dismiss on statute of limitations grounds, the receiver relied on the doctrine of adverse domination in arguing that the statute of limitations was tolled before 2000. Judge Darrah (N.D. Ill.) dismissed the claims on limitations grounds. The receiver appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Hamilton affirmed. The Court first two made preliminary points. One, although the statute of limitations is an affirmative defense and need not be anticipated by the complaint, Rule 12(b)(6) dismissal is appropriate if the complaint itself sets out all the elements of the defense. Two, the Court will apply state law with respect to the statute of limitations as well as tolling and equitable estoppel to this state law claim. In Illinois, the doctrine of adverse domination tolls the statute of limitations for a claim by a corporation against its officers and directors for the period in which the officers and directors were in control. Illinois applies the doctrine against co-conspirators of the directors as well. The Court rejected the receiver's argument that the doctrine applies even without proof of a conspiracy. The Illinois appellate Court, in Larney, held that a conspiracy claim was unnecessary but that proof of complicity between the director and the defendant was necessary. The Illinois Supreme Court has not yet spoken. The district court was correct to rely on Larney and not make its own prediction about what the highest Illinois court would do. The Court also was not persuaded to extend Larney. The Court next rejected the receiver's argument that he met the Larney test. In order to meet that test, the receiver had to plausibly suggest (under Twombly) that Stewart agreed to participate in a common scheme to commit an unlawful act. The receiver alleged that Stewart received monthly financial statements from Intercounty, that it was aware of the improper use of escrow funds, that it did not terminate its agreement with Intercounty, that it knew it was at risk as the fund’s insurer, and that it pressured Intercounty to fix the problem. But what he did not allege was an agreement between Stewart and Intercounty. Stewart's failure to step in does not amount to a conspiracy. The adverse domination doctrine does not apply to Stewart and the receiver's claims are barred. The receiver also complains about the district court's dismissal with prejudice without leave to amend. A district court should normally give leave to amend freely, particularly in light of decisions like Iqbal and Twombly. But the receiver has offered nothing meaningful to suggest that it could overcome the deficiencies in its complaint. The district court did not abuse its discretion.

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IN RE: HOLLY MARINE TOWING, INC. (January 6, 2012)

Holly Marine operated a tugboat service on Lake Michigan out of a facility at 9320 S. Ewing Avenue in Chicago. It went into bankruptcy in 2007. The S. Ewing property was sold for over $900,000. Competing claims arose. Each of Holly's co-owners (a couple going through a divorce) and the estate itself claimed the sale proceeds. A settlement gave the estate 50% of the proceeds and each co-owner 25%. The co-owners also paid the estate’s attorneys $65,000 from their shares. An administrative creditor objected to the $65,000 payment. The bankruptcy court approved the settlement and denied the creditor's motion to amend the order. Judge Kendall (N.D. Ill.) affirmed. The creditor appeals.

In their opinion, Seventh Circuit Judges Bauer, Manion, and Kanne affirmed. The Court first addressed standing, since the $65,000 came from the co-owners and would revert to the co-owners (and not to the creditors) if the order is reversed. The Court found that the creditor had standing. Although it may not be able to reach the $65,000, that is a question on the merits, not on standing. The creditor has provided services to the estate and is an administrative creditor. It has a pecuniary interest in the settlement and standing. On the merits, the Court found no error in the district court's conclusion that the $65,000 was never part of the estate. The bankruptcy court considered all the claims on the $900,000 sale proceeds and approved the agreed-upon distribution. The $65,000 payment came from the co-owners’ share, not the estate’s. Therefore, the general priority scheme between creditors does not apply. The Court also found no abuse of discretion in the bankruptcy court’s approval of the settlement. The bankruptcy court carefully considered all the interests involved and weighed them against the costs of further litigation. The ultimate settlement was within a reasonable range of outcomes.

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COLEMAN v. DONAHOE (January 6, 2012)

The United States Postal Service employed Denise Coleman, without incident, for over 20 years until 2005. That was the year her longtime supervisor retired and she was assigned to a new supervisor, William Berry. Coleman and Berry are African-American, the manager who appointed Berry is white. Coleman thought she was passed over because of her gender and she also believe that Berry was treating her poorly. She started making complaints. Over the next few months, she claims that Berry assigned her to disgusting tasks that were not part of her regular work, disciplined her unfairly, and ignored her medical restrictions after a surgery. Coleman entered a psychiatric unit. She complained of depression, anxiety, and insomnia. Her treating psychiatrist wrote that she had "homicidal ideations" when talking about Berry. Coleman was discharged after a few weeks much improved and in stable condition. On the same day she was discharged, however, her treating psychiatrist told Berry that Coleman had made threats on his life. The Postal Service immediately put Coleman on off duty status and, a few weeks later, notified the police. Coleman was fired in January of 2006 for violating the Postal Service's ban on "Violent and/or Threatening Behavior." An arbitrator ordered her reinstatement in late 2007. Coleman filed suit, alleging race and gender discrimination as well as retaliation. Judge Coar (N.D. Ill.) granted summary judgment to the defendant, concluding that Coleman: a) failed to identify similarly situated employees, b) offered no pretext evidence, and c) failed to carry her burden under the direct method. Coleman appeals.

In their opinion, Seventh Circuit Judges Wood, Tinder, and Hamilton reversed and remanded. The Court first addressed the discrimination claims. It did so only under the indirect method. Under the McDonnell Douglas framework, a plaintiff must show that she is a member of a protected class, that she met her employer's expectations, that she suffered an adverse job action, and that a similarly situated individual not in the class was more favorably treated. If she meets that test, the employer then has the burden to establish a nondiscriminatory reason for its conduct. If it can do so, the burden then shifts back for the plaintiff to establish that the stated nondiscriminatory reason is a pretext. The defendants conceded that Coleman met three of the four prima facie prongs -- challenging only the similarly situated prong. The Court noted that the similarly situated analysis is a flexible one and should take into account all factors -- but that a similarly situated employee must be comparable to the plaintiff in all material respects. That usually requires the same supervisor, the same conduct, and the same standards. Here, Coleman's comparators were two white male employees who held a knife to a black colleague’s throat. The two were suspended for seven days. The district court rejected them as comparators because they had different supervisors and different jobs. The Court disagreed with the district court's conclusion. Although the white males had different supervisors, the facility's maintenance operations manager was the decisionmaker in each case. Similarly, although the white males had different job duties, the decisions in this case had nothing to do with their duties. All three were subject to the same Postal Service policy with respect to violence in the workplace. Finally, they were each disciplined for violating the same rule. The Court concluded that the employees were similar enough to survive summary judgment. With respect to pretext, the Court rejected Coleman's request to give the arbitrator’s decision preclusive effect. Not only did the arbitrator not address the same question that the Court addresses, but arbitration decisions in general are not given preclusive effect. Nevertheless, the Court concluded that Coleman satisfied her burden on pretext. Given the arbitrator's conclusion, the context of Coleman's "threats," the decision to terminate her instead of have her undergo a fitness evaluation, and the very selective enforcement evidenced by the comparator analysis is sufficient to defeat summary judgment. The Court turned to the retaliation claims. In order to prevail, Coleman has to show that she engaged in protected activity, suffered an adverse employment action, and that there was a causal connection. Here, the only disputed element is the causal connection. The Court concluded that the combination of the suspicious timing of the Postal Service's conduct and the evidence of pretext were enough to survive summary judgment

Judge Wood wrote separately, concurring in the judgment. Interestingly, Judges Tinder and Hamilton joined in Judge Wood's concurrence. The opinion suggested that, now almost 40 years after McDonnell Douglas, the Supreme Court should simplify the approach that district courts take in addressing employment litigation at the summary judgment stage.

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SHERMAN v. QUINN (January 3, 2012)

The 2009 "Illinois Jobs Now!" bill included grants to thousands of not-for-profit corporations and local governments. Robert Sherman filed suit against Governor Quinn seeking injunctive relief, contending that numerous grants to religious organizations and others violated the First Amendment’s Establishment Clause. On August 6, 2010, Chief Judge McCuskey (C.D. Ill.) granted defendants' motion to dismiss, on various grounds. The court denied a motion to reconsider on October 14. On November 16, one day after the period to appeal had expired, Sherman sought an extension of time within which to file his notice of appeal. The district court granted the motion and Sherman filed his notice of appeal within the extended time. Defendants appeal.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams dismissed for lack of jurisdiction. The Court noted that there was some confusion regarding the interpretation of Federal Rule of Appellate Procedure 4(a)(5). Prior to the 2002 amendments, the Court had held that the more lenient "good cause" standard applied if the request for extension was made within the 30-day appeal period and the "excusable neglect" standard applied after the period had run. The 2002 amendments clarified the rule. During or after the 30-day period does not matter. What matters is fault. The excusable neglect standard applies when there is fault and the good cause standard applies when there is no fault. Here, Sherman relied on the good cause standard but he concedes that the conditions leading to his need for an extension were within his control, and therefore constituted fault. The Court applied the excusable neglect standard. The only reason Sherman’s counsel gave was that he was overloaded with obligations, including running for governor. The Court stated that a heavy workload does not constitute excusable neglect. The district court abused its discretion in granting the extension and the Court lacks jurisdiction to hear the appeal.

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IN RE: ORTIZ (December 30, 2011)

Aurora Health Care filed proofs of claim in thousands of Wisconsin bankruptcy cases between 2003 and 2008. The filings were public and contained some medical treatment information. Two class actions were filed against Aurora alleging that it violated a Wisconsin statute that requires that all health records be kept confidential. Bankruptcy Judge Kelley (E.D. Wis.) granted summary judgment to Aurora in both cases. The classes appealed directly from the bankruptcy court.

In their opinion, Seventh Circuit Judges Williams and Tinder and District Judge Gottschall dismissed for lack of appellate jurisdiction. When the Court heard oral argument, it believed that it had appellate jurisdiction under Section 158(d)(2). But then the United States Supreme Court decided Stern v. Marshall, in which it held that bankruptcy judges lacked authority to enter final judgments in traditional common law actions. After receiving additional briefing, the Court addressed the jurisdictional issue. First, it looked to what authority Congress gave to the bankruptcy courts. Congress gave the bankruptcy courts authority in cases arising under, arising in, or related to Title 11. But Congress gave the courts authority to issue final orders only in "core" proceedings and core proceedings are those that either arise under Title 11 or arise in a Title 11 case. The Court concluded that the debtors' claims were core proceedings in that they arose in a bankruptcy case. Satisfied that the bankruptcy court had congressional authority to do what it did, the Court turned to whether Congress exceeded its powers under the Constitution. It concluded that it did. Just like the claim in Stern, the debtors' claims are private party claims involving interests of state law. Just because these ordinary state law claims are related to the debtors' bankruptcy cases does not mean that the bankruptcy court has jurisdiction to issue a final order. The Court also concluded that the bankruptcy court's ruling did not fit within any the other types of orders that are directly appealable under Section 158(d)(2)(A).

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NATIONAL PRODUCTION WORKERS UNION INSURANCE TRUST v. CIGNA CORP. (December 30, 2011)

The National Production Workers Union Insurance Trust decided that it wanted to provide a life insurance benefit to its members. Specifically, it wanted a policy that provided a $100,000 total death benefit and it wanted the Trust to be a 50% beneficiary. It turned to its insurance broker, Robert Mondo. Mondo sent out an RFP to various insurance companies. The Life Insurance Company of North America responded with a summary proposal. The summary did not mention the beneficiary provision. The Trust accepted the proposal and Life sent Mondo an application and draft policy. The policy did not contain the requested beneficiary provision. The application provided that payment of the premium constituted acceptance of the policy's terms and conditions. The Trust signed the application and sent in its first premium. About six months later, the Trust submitted its first claim. Life denied the Trust's claim and paid the entirety of the benefits to the deceased's son. The Trust continued to demand its share. Finally, Life terminated the policy. In its letter terminating the policy, Life's attorney suggested that there had been no "meeting of the minds." The Trust filed suit for declaratory judgment and rescission as well as breach of contract, unjust enrichment, and negligence. Life counterclaimed for unpaid premiums. Judge Hibbler (N.D. Ill.) dismissed the negligence count and Judge Dow (N.D. Ill.) granted summary judgment to Life on the complaint and entered judgment for Life on its counterclaim for $95,000. The Trust appeals.

In their opinion, Seventh Circuit Judges Bauer, Manion, and Kanne affirmed. The Trust raised several issues on appeal, all of which were rejected by the Court. First, the Court rejected the Trust's argument that the termination letter’s reference to "no meeting of the minds" created an issue of fact regarding the contract's existence. Although the Court called the letter's wording "unfortunate," it concluded that the letter provided no objective evidence of the parties' intent when the contract was signed months earlier. The Trust signed the application and agreed to pay and paid the premiums. Life provided coverage until termination. The letter is irrelevant. Second, the Court rejected Life's argument that Mondo's agency terminated before he delivered the policies to Trust. The record is simply otherwise. Mondo continued to act as the Trust's broker for years and continued to communicate with Life with respect to this particular policy, even submitting the first claim. Furthermore, even if Mondo's agency terminated before he delivered the policy, the Trust still had access to it and is charged with knowledge of its contents. Third, the Court rejected the Trust's appeal with respect to the unjust enrichment claim. Since the Court has already held that a contract existed, and the unjust enrichment claim cannot stand in the face of a contract, that claim must fail. Finally, the Court affirmed judgment in Life's favor on the unpaid premiums. The record is clear that Life remained at risk until the end of September. The Trust offered no evidence to support its argument that it should not have had to pay premiums for the final two months.

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 DRAPER v. MARTIN (December 30, 2011)

The State of Illinois' fiscal year 2005 budget called for the layoffs of almost 200 Department of Transportation employees. On June 15, 2004 four IDOT employees received written notices advising them that they would be laid off "effective close of business June 30, 2004." Exactly 2 years after that effective date, on June 30, 2006, three of the four filed suit in federal court pursuant to section 1983 alleging violations of the First Amendment and due process. The fourth filed suit in Illinois state court. The state court case was removed to federal court. Judges Scott and Mills (C.D. Ill.), respectively, granted summary judgment to the defendants on statute of limitations grounds. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Ripple and Kanne affirmed. The statute of limitations for a Section 1983 claim in Illinois is two years. When the claim arises out of an alleged discriminatory discharge, the cause of action accrues when the plaintiff is put on notice, not on the actual date of discharge. There is an exception for procedural due process cases, which accrue on the date of discharge. Although three plaintiffs did bring procedural due process claims, they waived them when they failed to argue them. Plaintiffs' principal argument is that their notices did not reflect a final termination decision and thus did not start the limitations period running. The Court rejected that contention. Each notice said "you will be laid off." A reasonable person would consider the notice unequivocal.

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UNITED STATES v. PECORE (December 30, 2011)

The Bureau of Indian Affairs created the Hazardous Fuels Reduction program. Hazardous fuels, the accumulated dry brush and trees in a forest, increase the threat of wildland fires. In 2000, the Menominee Indian Tribe of Wisconsin submitted a proposal for federal funding of fire reduction work. The proposal asked for funds to create forest roads with fuel breaks alongside the roads. The Bureau approved the proposal and the Tribe began work. In 2001, after receiving reports of the Tribe's diversion of funds, the Bureau conducted a personal inspection of some of the work and concluded that the invoices overstated the work completed. After further meetings and exchange of information, a second personal inspection confirmed the Bureau's beliefs. The Office of Inspector General began an investigation. In 2005 the Bureau and the tribe discussed the results of the investigation and appeared ready to settle the government's charges. Settlement efforts broke down in 2006 and the United States filed suit under the False Claims Act against two individuals involved in the project. The two individuals prevailed at trial and moved for attorney's fees or sanctions. Judge Griesbach (E.D. Wis.) denied the motions. The individuals appeal.

In their opinion, Seventh Circuit Judges Bauer, Manion, and Kanne affirmed. Under the Equal Access to Justice Act, the district court could have awarded fees if it found that the government's position was not substantially justified. In order to be substantially justified, a position must be reasonably based on facts, reasonably based in law, with a reasonable connection between the facts and the law. The Court concluded that the district court did not abuse its discretion in finding that the government's position on both the facts and the law was reasonable. First, the government had reasonable grounds to believe that the defendants submitted false invoices in violation of the False Claims Act. Second, with respect to the facts, the Court emphasized that the government need not be correct and need not convince the jury. It only needs a reasonable basis. Here, the government survived a motion to dismiss and a motion for summary judgment, creating a rebuttable presumption that their position was reasonable. The record shows hotly disputed evidence and confusion in the Tribe's invoices. The district court did not abuse its discretion in finding reasonableness. The defendants also sought sanctions under Rule 37 for the government's refusal to make certain admissions with respect to expenses incurred for work performed. Again, the test is not whether a person prevailed on the issue, but whether he acted reasonably. The Court concluded the district court did not abuse its discretion when it concluded that the government acted reasonably.

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CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND v. SCOFBP (December 27, 2011)

Michael Cappy operated a number of businesses, including SCOFBP, MCRI, and MCOF. SCOFBP operated a lumber yard in O’Fallon, Missouri. MCOF owns the lumberyard. MCRI owns property in Rock Island, Illinois. When SCOFBP went bankrupt and stopped paying into Central States' pension fund, the Fund brought suit against all three entities for withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980. Judge Pallmeyer (N.D. Ill.) entered judgment for the Fund.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Tinder and Hamilton affirmed. Under the Act, a "trade or business" under "common control" with the withdrawing firm is jointly and severally liable for withdrawal liability. The Court first turned to the question whether the solvent entities were "trades or businesses" under the Act. Although the Act does not define what constitutes a trade or business, the Court applied the Groetzinger test of whether the entity engaged in an activity regularly and continuously for the primary purpose of income or profit. The Court concluded that both MCRI and MCOF were trades or businesses. Both are engaged principally in the ownership of property. Owning property can be a personal investment, and not a trade or business, under the right circumstances. This case does not present those circumstances. Both companies were for-profit, both had bank accounts and federal employer identification numbers, both maintained offices and retained professionals to provide services. Next, the Court considered whether the entities were all under common control at the time SCOFBP incurred withdrawal liability. Cappy's business empire was a rather complex one. He filed for personal bankruptcy in 1999. In 2004, the district court affirmed the bankruptcy court's holding that Cappy's transfers were fraudulent and that all of his holdings, including MCOF and MCRI, were part of the bankruptcy estate and under common control. But SCOFBP incurred its liability in 2001. Even though the bankruptcy court's order followed that date by several years, the Court concluded that a withdrawal liability creditor could rely on that later decision to establish earlier common control.

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ATA AIRLINES v. FEDERAL EXPRESS CORP. (December 27, 2011)

The Department of Defense maintains what is known as the Civil Reserve Air Fleet. The Fleet is actually a group of commercial air carriers who commit to provide aircraft in the event of a national emergency. The carriers are not compensated for these commitments directly but are given points that are valuable in competing for the Department's non-emergency needs, for which the commercial carriers are compensated. Commercial carriers formed teams for the purposes of bidding to be included in the Fleet. FedEx is the leader of one of those teams which, prior to 2008, included ATA Airlines. Three one-year contracts among the team members defined their relationship. They allocated the non-emergency business, they fixed commission rates, and they identified each team member's emergency commitment, among other things. The team also entered into a three-year "agreement" that distributed business among the team members. That agreement was more a planning document than a contract since the Department accepted bids on an annual basis and the team members could change on an annual basis. The 2006 three-year letter agreement (effective for the 2007 - 2009 Fleet years) allocated half of the team's non-emergency business to ATA. The 2008 one-year contracts reduced ATA's allocation. FedEx then decided to drop ATA from its team, effective 2009. ATA withdrew from the team in mid-2008, went into bankruptcy, and filed a breach of contract claim against FedEx. ATA obtained a jury verdict of over $65 million. FedEx appealed. ATA filed a conditional cross-appeal from Chief Judge Young's refusal to allow it to present a $28 million promissory estoppel claim.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Wood reversed. Particularly when a contract involves sophisticated commercial entities and a lot of money, the doctrine of indefiniteness renders a contract unenforceable when a crucial term is omitted and it cannot be provided through interpretation. Under the doctrine of indefiniteness, the three-year letter agreement was unenforceable. The Court noted a number of terms that were missing, most significantly FedEx's compensation for acting as team leader. That number was negotiated annually, giving consideration to the facts and circumstances at the time. Given its reversal of the jury verdict, the Court turned to ATA's conditional promissory estoppel claim cross-appeal. First, it rejected FedEx’s assertion that the Airline Deregulation Act preempted the claim. The Act deals with state's regulatory policies, not private undertakings, and does not preempt a promissory estoppel claim. Next, the Court addressed the merits. A promise is enforceable under the doctrine of promissory estoppel if a promisee reasonably relied on it and incurred a cost and the promisor should have reasonably so anticipated. The three-year letter agreement did contain a promise that ATA would receive 50% of the team's business. Given the nature of the agreement, however, the Court concluded that ATA should not have reasonably relied on that promise. It knew that the landscape could change in any year and the one-year contracts could diverge from the three-year agreement. Having decided the appeal, the Court spent more than half of its written opinion criticizing ATA's use of regression analysis to prove its damages. It specifically alerted district court judges to their obligations to evaluate expert testimony even to the point of appointing a neutral expert, if necessary.

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CHICAGO TITLE LAND TRUST COMPANY v. POTASH CORPORATION OF SASKATCHEWAN SALES LIMITED (December 27, 2011)

Potash Corporation of Saskatchewan Sales Limited signed a 10-year lease with Chicago Title Land Trust Co. in 1995 for space in a Skokie, Illinois office building. Several years later, Potash wanted significantly more space in the same building and so advised Chicago Title. When Chicago Title could not provide the space, Potash exercised what it thought was a contractual option to cancel. Chicago Title interpreted the lease differently and brought suit in state court against Potash and its parent for breach of lease. After years of litigation, Potash prevailed. While that suit was pending, Chicago Title brought a fraud suit against Potash's CEO and General Counsel. The suit was originally dismissed without prejudice with leave to re-plead but, after 2 1/2 years without repleading, was dismissed with prejudice. Undaunted, Chicago Title filed suit in federal court against Potash and its parent, again alleging breach of lease and fraud. Judge Bucklo (N.D. Ill.) dismissed on res judicata grounds, citing both state court cases.

In their opinion, Seventh Circuit Judges Manion, Williams, and Tinder affirmed. The Court applied Illinois res judicata law because the earlier cases were in state court. Illinois requires a final judgment on the merits in the earlier case and the same cause of action and parties. Applying that test, the Court agreed with the district court that the state court suit against the individuals barred the current suit. It was dismissed with prejudice for failure to state a claim, which is the equivalent of adjudication on the merits. The two cases plead the same cause of action under Illinois' transactional test, even though they plead different theories, because they arise from the same group of operative facts. Finally, the cases involve the same parties. As corporate officers, the CEO and General Counsel are in privity with Potash and are considered the same parties. The Court recognized that Chicago Title did not bring a breach of lease claim against the individual defendants and possibly could not have, since individuals are generally not liable on a corporation's lease. But that does not change the result. Chicago Title had one cause of action arising out of the same set of operative facts. It was its decision to split the cause of action and it must live with the consequences.

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IN RE: TRANS UNION CORPORATION PRIVACY LITIGATION (December 27, 2011)

Over a decade ago, a number of class actions were filed against Trans Union Corp. for violating the Fair Credit Reporting Act. The cases were consolidated and eventually settled for $75 million. Judge Gettleman (N.D. Ill.) entered an order that allowed Trans Union to be reimbursed from the $75 million fund for the settlement of, and the attorneys fees for, a separate Texas state court case. Class counsel appealed, asserting that they should get a portion of the Texas lawyers' fees because they are the ones that created the large fund. The Texas lawyers are not parties in the district court proceedings and have not sought intervention in the district court. Instead, they filed a motion in the Seventh Circuit asking not for intervention but to be added to the appellate docket as an appellee.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Wood granted the motion and added the Texas lawyers as parties to the appeal. The Court viewed the Texas lawyers' position with some skepticism. It believed that they wanted to be heard on appeal so they can defend the district court's decision to let Trans Union pay it out of the $75 million fund. On the other hand, they do not want to be parties and be subject to the district court's scrutiny of its contingent fee agreement or an order of the district court to return some of the fees received. The Texas lawyers clearly have a right that is at risk on this appeal. They therefore have a right to be a party. But, as a party, the district court will have the opportunity -- indeed, the obligation -- to make inquiry into the reasonableness of fees.

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M.B. v. HAMILTON SOUTHEASTERN SCHOOLS (December 22, 2011) 

M.B., the son of Damian and Amy Berns, was four years old when he suffered a traumatic brain injury. The Berns approached Hamilton Southeastern Schools for information about special education services. Within a few months, both the Berns' psychologist (Dr. Bryan Hudson) and the School's psychologist had evaluated M.B. The Berns and the School held several meetings over the course of the next year to develop a individualized education program. A principal point of contention was the Berns' frequent requests that M.B. be provided full days of schooling (as recommended by Dr. Hudson) and the School's reluctance or inability to do so. The Berns eventually moved M.B. to a different school and initiated proceedings at the Indiana State Department of Education. After a due process hearing, a hearing officer found that the school had not denied M.B. an appropriate education and refused to grant any relief to the Berns. The Indiana Board of Special Education Appeals agreed. On the administrative record, Judge Pratt (S.D. Ind.) denied the Berns' request for relief. The Berns appeal.

In their opinion, Seventh Circuit Judges Williams and Tinder and District Judge Gottschall affirmed. Under the Individuals with Disabilities Education Act, a state that accepts federal funding for educating disabled children must provide a "free, public, and appropriate" education that is reasonably calculated to provide an educational benefit. The IDEA contains both procedural and substantive requirements. The Berns made several arguments on appeal, which the Court addressed in turn. First, the Court rejected the argument that procedural inadequacies constituted denial of a free education. There were some procedural errors, but they were not significant enough to amount to a denial of a free and appropriate education. There were other alleged procedural errors that could have risen to that level but were unsupported by the record. Second, the Court concluded that the School did not violate the IDEA by not providing full-day education. The administrative record contains evidence that M.B. was making progress toward his goals in his half-day program. Although Dr. Hudson thought otherwise, the School was not required to give his report or testimony dispositive weight and was allowed, in fact was required, to consider the entire record. The conclusions of the administrative tribunals were reasonable. Third, the Court rejected the Berns' argument that the school violated the IDEA by not commencing services within 60 instructional days. The Court found that the School met its 60-day requirement. Plus, any delay was due to the Berns' refusal for several months to give consent to the school to conduct an evaluation. Finally, the Court noted that the Berns failed to meet their burden of proving that the new school was an appropriate placement. Under the IDEA, when parents unilaterally transfer schools, they are entitled to reimbursement only if they show both that earlier school violated the IDEA and that the new school was an appropriate placement.

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IN RE: RIVER WEST PLAZA - CHICAGO, LLC (December 22, 2011)

River West Plaza - Chicago owned and operated a shopping center in Chicago before it filed for bankruptcy. At the time of its filing, Frank Schwab was the plaintiff in a state court case against River West. He filed a notice of claim with the bankruptcy court. The bankruptcy court disallowed his claim on the ground that he was not a creditor. His best case was a claim for equity -- which was worthless. River West and its largest creditor filed a joint liquidation plan and proposed to sell the shopping center. Although Schwab appealed the bankruptcy court’s disallowance of its claim to the district court and objected to the joint liquidation plan and sought a stay pending resolution of his appeal, the bankruptcy court denied the stay and approved the liquidation plan and approved the sale. Schwab failed to file a timely appeal of the bankruptcy court’s denial of the stay and plan confirmation. Judge Bucklo (N.D. Ill.) dismissed his appeal of the disallowance order as moot. Schwab appeals.

In their opinion, Seventh Circuit Judges Bauer and Tinder and District Judge Magnus-Stinson dismissed the appeal. Under the bankruptcy code, if a bankruptcy court approves the sale of property, the later reversal of that approval will not affect the validity of the sale unless the sale proceedings are stayed pending appeal. Here, the sale was approved and is now complete. No one challenges the purchasers status as a good-faith purchaser under the Code. Even if Schwab is right and his claim should have been allowed, the Court will not upset the sale of the property. But Schwab contends that the sale of the property need not be upset because the proceeds exist. The Court conceded the point, but stated that the proceeds are not available to Schwab for two reasons. One, the Court would consider it an unallowed end-run around Schwab's inability to attack the sale itself. Two, Schwab never appealed the bankruptcy court's order approving the joint liquidation plan. Schwab’s appeal is moot.

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GULLEY v. MARKOFF & KRASNY (December 22, 2011)

In 2008, the City of Chicago imposed fines on Victor Gulley for Municipal Code violations. Gulley did not pay the fines because he no longer owned the real property associated with the violations. The City retained the law firm of Markoff & Krasny to collect the fines. Gulley brought suit against Markoff & Krasny pursuant to the Fair Debt Collection Practices Act alleging a number of specific statutory violations. The law firm moved to dismiss the complaint on the ground that the fines were not "debts" under the Act. Judge Gettleman (N.D. Ill.) agreed. Gully appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Sykes affirmed. In affirming, the Court relied on: a) the language of the Act, which states that a "debt" must arise out of a transaction in which the subject of the transaction is "primarily for personal, family, or household purposes" b) the FTC (which is entitled not to Chevron deference but to respectful consideration in this context), which specifically excludes fines from the definition of "debts," and c) the consistent findings of district courts (no Court of Appeals has addressed the issue in a written opinion) excluding fines from FDCPA coverage.

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TABATABAI v. WEST COAST LIFE INSURANCE COMPANY (December 16, 2011)

Firouzeh Keshmiri submitted an application for a $500,000 life insurance policy to West Coast Life Insurance Company in 2006. She chose the "Super Preferred" classification and submitted her first $100 payment. She also signed a conditional receipt agreement, which provided that the insurance would not become effective until all tests were completed and would not be effective unless approved within 90 days. Keshmiri submitted to blood and urine tests. Her test results indicated that her cholesterol level was high as was her red blood cell count. West Coast asked its broker to request a second urine specimen. Before it did so,Keshmiri was diagnosed with a brain tumor and had surgery. As a result of the brain surgery, West Coast found her uninsurable. She died about a year later. Her husband, Habibollah Tabatabai, filed suit for breach of contract and breach of implied duty of good faith and fair dealing. His theory was that West Coast's delay in requesting the second urine specimen was the only reason Keshmiri was unable to complete the insurance application. Judge Stadtmueller (E.D. Wis.) granted summary judgment to West Coast. Tabatabai appeals.

In their opinion, Seventh Circuit Judges Bauer, Rovner, and Williams affirmed. The Court first addressed the doctrine of prevention. Under that doctrine, a failure to perform is excused if the other party to the contract hinders or prevents performance. Tabatabai argues that his wife would have completed performance of the condition under the insurance contract but for the actions of West Coast and that therefore they should be barred from relying on her failure to perform. But here, West Coast acted in good faith. The record contains evidence of several attempts to advise Keshmiri of the second test requirement. Without evidence of purposeful misconduct, the doctrine of prevention does not apply. The Court noted that there was an alternate ground for denying her application anyway. Her cholesterol level did not qualify for the "Super Preferred" classification. As for the duty of good faith and fair dealing, the Court pointed out that it exists only in contractual relationships. Here, no contract was ever formed because of Keshmiri's failure to submit the second urine specimen and because of her cholesterol test results.  

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SURITA v. HYDE (December 22, 2011) 

Waukegan, Illinois enacted an ordinance in 2002 pursuant to which the police could impound a vehicle if its driver was caught driving without a license or proof of insurance. The ordinance was very unpopular in the city, particularly among the minority population. At a large rally in 2004, José Surita confronted a city official. The official complained to the Mayor that Surita was very angry and that she feared a physical attack. Two days later, Surita attempted to speak during "audience time" at a City Council meeting. The Mayor refused to let him speak until he apologized to the official. The Mayor did allow others to speak on a variety of topics, including the towing ordinance. Margaret Carrasco also opposed the ordinance. When the Chief of Police heard that she was going to conduct a rally, he sent a police officer to her home to request a meeting. She came to a meeting where she was asked to comply with the City's Assembly Ordinance. A city attorney advised her that she would have to pay a permit fee of $1500 to pay for the extra police officers that the Chief determined would be needed. The City imposed a permit fee requirement on only 2 of 530 events over the last five years, both involving towing ordinance protests. The rally was never held. Chris Blanks also opposed the ordinance. Blanks was organizing a rally to be held in one of the City's parks, which are not covered by the Assembly Ordinance. Nevertheless, when the city attorney learned that Blanks did not have a permit, she sent a police officer to his home with a letter telling him that he was violating the Assembly Ordinance. Blanks cancelled the rally. Surita, Carrasco, and Blanks brought suit against the City, the Mayor, and the Police Chief, alleging First Amendment violations. Judge Shadur (N.D. Ill.) denied the requests for qualified immunity by the Mayor and the Police Chief. The Mayor and the Police Chief appeal.

In their opinion, Seventh Circuit Judges Manion (concurring in part and dissenting in part) and Williams and District Judge Clevert affirmed the qualified immunity denials with respect to Surita's and Carrasco's claims but reversed the denial with respect to Blanks’ claims. The Court first addressed its appellate jurisdiction since no final judgment was entered below. When the district court's summary judgment order is one denying qualified immunity, it is immediately appealable if the appeal can be resolved without resolving a disputed question of fact. The question on qualified immunity is whether the defendants' actions violated a constitutional right that was clearly established at the time. With that foundation, the Court turned to each plaintiff’s claim. With respect to Surita’s claims against the Mayor, the Court first noted that "audience time" is a designated public forum under First Amendment law and that, therefore, any content-based restriction on speech is subject to strict scrutiny. Here, defendants argued that the restriction was not content-based since others spoke out against the ordinance at the same meeting. But restrictions based on the identity of the speaker are content-based as well. Since the restriction was content-based, it had to be narrowly tailored to effectuate a compelling state interest and there was no evidence that it was. It was, in fact, a sanction for Surita’s earlier speech and behavior. The Court therefore concluded that there was a First Amendment violation. The Court then had little difficulty in finding that the constitutional right was well-established. The Court turned to Carrasco's claims against the Chief of Police. The Court first determined that the Chief was involved enough in the conduct to be personally liable. He called the meeting with Carrasco, he sent an officer to her home, and he computed the amount of extra police support that translated into the amount of the fee. There is nothing necessarily wrong with charging a fee even for the use of a traditional public forum -- but it must be content neutral. Under Forsyth County, a content-based flexible fee is unconstitutional. Here it is undisputed that the Chief took content into consideration. He testified that he needed more police support for a rally protesting the ordinance then he would for one in support of the ordinance. There was a constitutional violation and it was clearly established at the time of the meeting. Carrasco also claimed that the Chief retaliated against her for prior speech. The Court concluded that there were genuine issues of material fact with respect to the qualified immunity test in this context and so it could not be determined on appeal. Finally, the Court turned to Blank's claims against the Chief. Here, the Court determined that the Chief was not sufficiently involved in the City's conduct to support personal liability. It was the city attorney, not the Chief of Police, that applied the Assembly Ordinance to Blanks. Although the Chief received copies of the attorney's correspondence to Blanks, that is not enough to establish personal liability.

Judge Manion wrote separately, concurring in the majority's treatment of Surita’s claims and Blank’s claims but disagreeing with its treatment of Carrasco's claims. Judge Manion believed that the record did not support a finding of personal liability with respect to Carrasco’s claims against the Chief. It was the city attorney, not the Chief, that was principally involved in applying the Assembly Ordinance to Carrasco. The undisputed evidence is that the Chief did not know that the city attorney was going to impose the fee.

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BROADDUS v. SHIELDS (December 21, 2011)

As of 2001, Bret Broaddus and Kevin Shields were partners in Will Partners, LLC. Broaddus was in a bad car accident in November of that year. Between February and September 2002, a legal guardian conducted Broaddus' affairs. In early 2003, Shields purchased Broaddus’ interest in Will Partners for $600,000. In May 2008, Broaddus brought suit against Shields for breach of fiduciary duty, alleging that Shields lied to him about the company’s financial health. The suit was filed five years and two months after the sale. Shields moved for summary judgment on statute of limitations grounds. Judge St. Eve (N.D. Ill.) granted the motion, rejecting Broaddus’ invocation of the discovery rule. The court also granted summary judgment to Shields on his counterclaims for contractual indemnification and fee shifting. The court awarded approximately $800,000 in attorneys fees. Broaddus appeals.

In their opinion, Seventh Circuit Judges Flaum and Manion and District Judge Magnus-Stinson affirmed. The Court first concluded that Broaddus waived his legal disability argument in that he raised it for the first time on appeal. The Court also concluded that Broaddus waived his discovery rule argument. Although he raised and argued it in the district court, he did not raise it in his opening brief on appeal. The Court also rejected the discovery rule argument on its merits. Broaddus had the burden of proving the date of discovery. His evidence on that point was generally inadmissible and unreliable. Turning to the counterclaims, the Court noted that Broaddus’ sole argument was that his agreements to indemnify Shields only applied to third party claims. Relying on the contractual language, the general definition of indemnify, and Delaware law, the Court agreed with the district court that the indemnification provisions were enforceable. Finally, the Court found Broaddus’ challenges to the fee award without merit.

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