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

HALE v. CHU (August 9, 2010)

Plaintiffs Hale and others filed a derivative action against China Online, Victor Chu, and others. They alleged that the defendants breached certain fiduciary duties owed to China Online and its shareholders. Chu removed, asserting that diversity exists if China Online is ignored -- and China Online should be ignored because it was fraudulently joined. Plaintiffs moved to remand and Chu moved to dismiss. Judge Kendall (N.D. Ill.) denied the former and granted the latter. The court relied on the fact that the company’s dissolution terminated plaintiffs' status as shareholders and their ability to bring a derivative action. Alternatively, the court stated that it would dismiss for plaintiffs' failure to make the requisite demand or show futility. Plaintiffs appeal.

In their opinion, Judges Bauer, Flaum, and Tinder affirmed. On appeal, the plaintiffs conceded that they had no right to bring a derivative action in the name of China Online. For the first time, they asked the Court to treat the complaint as a direct claim brought by China Online against the same defendants. The Court refused to so. An issue not raised before the district court is waived on appeal. The Court noted that the plaintiffs failed to raise the argument even after the district court invited supplemental briefs on the issue of derivative actions and dissolved corporations.

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LINCOLN NATIONAL LIFE INSURANCE CO. V. BEZICH (June 25, 2010)

Peter Bezich is a Lincoln National Life Insurance Company policyholder. He has a variable life policy, under which he can allocate funds to either a General Account or a Separate Account. The General Account accumulates premium payments while the Separate Account is an investment account registered with the SEC. Each month, Lincoln National deducts cost-of-insurance charges from a policyholder's account proportionately to the amounts invested in each of the two accounts. Bezich brought a class action in Indiana state court, alleging that Lincoln National breached the terms of the policy in the way it calculated the cost-of-insurance charges. Lincoln National removed the case to federal court under the Class Action Fairness Act (CAFA). Judge Van Bokkelen (N.D. Ind.) remanded the case to state court, relying on the CAFA exception for cases that solely involve claims relating to rights and obligations created by any “security.” Lincoln National petitioned for leave to appeal.

In their opinion, Judges Bauer, Posner, and Wood dismissed the petition for want of jurisdiction. Although the Court was first obliged to look at its appellate jurisdiction, it noted that the language governing its appellate jurisdiction was identical to the language creating the removal exception relied on by the district court. The core question for both is whether the policy is a "security" as defined by the Securities Act of 1933. Although the Court conceded there was authority in different contexts supporting Lincoln National's desire to look at the two component parts of the policy (and find one a security and one not), the Court rejected the applicability of those cases. It cited its agreement with the Eleventh Circuit's decision in Herndon that treated a variable life policy as a "security" under the Securities Litigation Uniformed Standards Act of 1998. Here, the claims of the class concern a promise made by Lincoln National that applied whether a policyholder's funds were in the General or Separate Account. The policy treated as a whole meets the definition of "security" -- the Court therefore lacks jurisdiction to consider the petition.

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MUSCARELLO v. OGLE COUNTY BOARD OF COMMISSIONERS (June 24, 2010)

Ogle County, Illinois joined the "green" movement in 2003 by amending its zoning ordinances to allow for the construction of windmills. Baileyville Wind Farms received the first special use permit for 40 windmills in 2005. The county also adopted a plan to protect residential, but not non-residential, property owners in the event of any diminution of property value. Patricia Muscarello owns nonresidential property adjacent to the proposed windfarm and has opposed its siting from the beginning. Unsuccessful in her attempts to block the project locally, Muscarello brought suit. She brought constitutional claims (unlawful taking, due process, equal protection), common law claims (trespass, nuisance), and state law claims (declaratory judgment, administrative review, writ of certiorari, unlawful taking, due process, equal protection, injunctive relief). She named over forty defendants, including Ogle County and related entities and individuals, the parties to the administrative proceedings, and Baileyville and its corporate parents. Judge Kapala (N.D. Ill) dismissed all the federal and common law claims as either unripe or for failure to state a claim. He then declined to exercise supplemental jurisdiction over the state law claims. He also denied a request by Baileyville to stay administrative proceedings regarding the expiration of the special use permit. Both parties appeal.

In their opinion, Judges Bauer, Wood, and Williams affirmed. The Court first addressed the three federal constitutional claims. The takings claim alleged no physical taking but relied on the “regulatory taking” concept. Under that concept, the permit must render her land useless for her to prevail. That is not the case here. Alternatively, the Court noted that Muscarello’s takings claim fails also because she failed to exhaust available state remedies. The Court rejected her equal protection claim that addressed the differential treatment afforded to residential and nonresidential landowners. Not only was it also unripe because of her failure to exhaust, the Court concluded that it would meet the deferential "rational basis" test. With respect to the due process claim, the Court concluded that Muscarello had no protectable property interest in the lifting of restrictions on adjacent property. The Court next addressed the state common-law claims, for which Muscarello asserted diversity jurisdiction. The district court never resolved the jurisdictional question, dismissing instead on ripeness grounds. On appeal, the Court considered both issues. The Court applied its citizenship analysis and concluded that Muscarello established diversity jurisdiction. On the merits, however, the Court agreed with the district court that Illinois law requires an invasion for both a trespass and nuisance. Since the windmills have not yet been built, there is no invasion -- and no trespass or nuisance. Finally, the Court considered the several state claims for which Muscarello asserted supplemental jurisdiction. It found no abuse of discretion for the dismissal of those claims. However, since it had just established that diversity jurisdiction did exist, it questioned whether the district court should have kept these claims under diversity jurisdiction. Although a plaintiff has the burden of establishing the court’s jurisdiction, a district court should rarely dismiss when jurisdiction in fact exists but was improperly pleaded. Here, the plaintiff had been given several opportunities to properly plead jurisdiction -- and she failed to do so. The Court decided not to do it for her. Finally, the Court found no abuse of discretion in the district court's denial of Baileyville’s requested stay.

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VINCE v. ROCK COUNTY (May 3, 2010)

Scot Vince had long been a confidential informant for Rock County law enforcement. Vince brought a civil rights action against the County and others after he was beaten while in the Rock County Jail. He alleged a violation of his constitutional rights by being placed in the jail's general population, considering his prior cooperation with law enforcement. Summary judgment was entered against him. His Rule 59 motion was denied on February 10, 2010. Vince's counsel filed a notice of appeal on March 12, the last day to do so. The clerk's office advised Vince's counsel that he used the wrong event code on his notice of appeal and asked that he re-file a notice with the proper code. He did so on March 18. The Seventh Circuit staff questioned the timeliness of the notice.

In their opinion, Judges Bauer, Posner, and Evans concluded that the appeal was timely. The Court relied on three rules of appellate jurisdiction to resolve the issue: a) FRCP Rule 83(a)(2) cautions that a non-willful failure to comply with a local form requirement should not cost a party a right, b) FRCP Rule 5(d)(4) directs a clerk to accept papers notwithstanding a nonconformity with local rules, and c) FRAP Rule 3(c)(4) prohibits an appeal's dismissal for "informality" of the form or title on the notice. The Court concluded that Vince's failure to include the proper event code was an error of form and was the only error on the notice. As such, and in conformity with the Court's earlier decision in Carelock, the appeal is timely. The Court concluded with an admonishment to counsel generally to be very careful with electronic transmissions so as to avoid any adverse affects on their appeals.

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TRUHLAR v. UNITED STATES POSTAL SERVICE (April 12, 2010)

Kenneth Truhlar was injured while working as a letter carrier for the United States Postal Service. He was required to periodically submit a form to the Department of Labor (DOL) in order to collect his partial disability payments. On the forms, he reported that he had no other job during the period for which he was claiming disability. In fact, Truhlar was a bass guitarist in a rock band and earned several thousand dollars during the period in question. The Service suspended him -- his union filed a grievance and, when it was denied, appealed. After the Service completed its investigation and concluded that Truhlar violated several rules, it notified Truhlar of its decision to terminate his employment. Again, the union grieved -- again, it appealed the denial of the grievance. Meanwhile, the DOL sought repayment of the benefits he had already received and a federal prosecutor considered criminal charges. The union and the Service agreed to a stay of the grievances pending the disposition of those actions. Truhlar appealed the DOL forfeiture order. The prosecutor decided not to prosecute. When a newly appointed postmaster inquired into the status of the pending grievances, she was provided with the Service's and the Department's reports concluding that Truhlar had knowingly failed to report outside income. She was also told, though incorrectly, that Truhlar had not appealed the forfeiture order. The postmaster met with the union representative and passed that accurate information to him. Based on the internal investigation, the Department's investigation, the prosecutor's rationale for declining to prosecute, and his belief that the DOL proceedings were complete, the union representative decided to withdraw the grievances. The Service terminated Truhlar's employment. A few months later, the Department's forfeiture order was reversed. The Appeals Board decided that the form did not put Truhlar on notice that he had to report his bass guitarist earnings. Truhlar filed suit under § 301 of the Labor Management Relations Act. He alleged that the Service violated the collective bargaining agreement by terminating him without cause and alleged that the union breached its duty of fair representation by not pursuing the grievances. The district court granted summary judgment to the defendants. Truhlar appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Evans affirmed. In a § 301 "hybrid" action, a plaintiff must prevail on both his claims against his employer and his union. Here, the district court concluded that the Service did not violate the collective bargaining agreement. Since that conclusion was enough to grant summary judgment to the Service, the district court did not address Truhlar's claim against the union. On appeal, the union renewed its argument that it did not breach its duty of fair representation. Truhlar never responded to that argument, explaining at oral argument that he did not think he was required to address a position he had not lost below. The Court explained that an appellee may defend the district court's judgment on any ground raised below. The Court concluded that Truhlar had therefore forfeited any opposition to the union's position on fair representation. Notwithstanding that conclusion, the Court reviewed Truhlar's district court submissions on the topic and concluded that Truhlar would lose on the merits as well. Truhlar's burden was to show that the union's actions were arbitrary and discriminatory or in bad faith. The Court noted that the union representative met with the postmaster, reviewed the internal investigation, reviewed the Department's report and decision, and considered the actions of the prosecutor before reaching his decision to withdraw the grievances. Far from arbitrary, the Court considered the representative's decision rational.

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WRIGHTSELL v. COOK COUNTY (March 31, 2010)

Lance Wrightsell is a former prisoner of the Cook County Jail. He brought an action against the County pursuant to § 1983. He alleged that the County's practice of making only one dentist available to the 10,000 inmates of the jail constituted cruel and unusual punishment in violation of the Eighth Amendment to the Constitution. After the district court denied his request for class certification, he agreed to an offer of judgment of $10,000 and renounced his right to appeal. John Smentek, another former inmate, also had a class action pending in the district court -- against the same defendant, alleging the same constitutional violation, and represented by the same attorney. Wrightsell, notwithstanding his renunciation, appeals the district court's denial of class certification. Smentek petitions for leave to intervene in the appeal.

In their opinion, Judges Posner, Wood, and Tinder denied the petition to intervene and dismissed the appeal. The Court addressed some of the complexities involved in class actions and appeals -- for example, the distinction between the named plaintiff as plaintiff and as class representative and the distinction between voluntary and involuntary settlements. Here, the named plaintiff, after denial of class certification, settled his individual claim and waived his right to appeal as class representative. The Court noted competing policy considerations but concluded that Wrightsell resigned his representative status when he waived his right to appeal. Thus, his appeal should be dismissed. The fact that Wrightsell settled, however, does not affect the rights of the other potential class members, including Smentek. But a potential class member who wishes to appeal the denial of class certification must first seek to intervene in the district court and must do so within the time period for filing a notice of appeal. Smentek did not -- his petition to intervene should be denied.

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IN RE: WHIRLPOOL CORP. (March 3, 2010)

LG Electronics brought suit against Whirlpool Corp., alleging that it infringed a trademark in a dryer. During the course of the litigation, LG requested the production of communications between Whirlpool lawyers and Whirlpool's outside advertising agencies. Whirlpool objected on two grounds: because the communications were privileged, asserting that the advertising agency employees were de facto employees of the company, and because the company and the agencies shared a common legal interest. Whirlpool appealed and filed a writ of mandamus.

In their opinion, Chief Judge Easterbrook and Judges Wood and Evans dismissed the appeal and denied the writ. Whirlpool alternatively appealed and filed for mandamus because the issue of the appealability of orders dealing with the attorney-client privilege was pending before the Supreme Court in Mohawk Industries. The Supreme Court has now ruled -- and concluded that such orders are not appealable as collateral orders. The Court thus dismissed the appeal. On a petition for a writ of mandamus, the Court stated that Whirlpool must show that the order will not be reviewable at the end of the case and is patently wrong. The Court noted that the district court gave the Whirlpool's arguments careful consideration and issued a "lengthy and thoughtful" decision. The Court found nothing in Whirlpool's petition that convinced it that the district court made a serious error.

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STORIE v. RANDY'S AUTO SALES (December 17, 2009)

Larry Storie purchased a truck from the Duckett Truck Center in June of 2004. Unbeknownst to Storie, the truck had quite a history. Duckett purchased the truck from West Side Auto Parts in February, who purchased it from Randy's Auto Sales in January, who purchased it from St. Paul Mercury Insurance Company, also in January. St. Paul acquired the truck after it was involved in an accident -- an accident in which its driver was killed -- and declared a total loss. St. Paul applied for a certificate of title in Tennessee. The title was issued to St. Paul and forwarded to Randy's -- and to Westside -- and to Duckett. No one applied for a salvage title. Storie learned of his truck's checkered past only after 18 more months and 200,000 more miles. He brought suit against Randy's. He alleges that Randy's violated an Indiana statute that requires a person who obtains a wrecked vehicle without a salvage title to apply for one within 31 days of his receipt of title. The district court granted summary judgment to Randy's, concluding that it could not have obtained a salvage title since it no longer owned the vehicle by the time it received the title from St. Paul. Storie appeals.

In their opinion, Judges Cudahy, Wood and Sykes certified a question to the Indiana Supreme Court. The Court noted that, read literally, the Indiana statute could apply to current and former owners. However, the Court identified several competing interpretations of the statute -- some supporting its application to former owners and others not. For example, one argument that it might be limited to current owners is that it requires the state to issue a certificate of a salvage title as proof of ownership. That suggests that a former owner should not apply for the title. An opposing argument is that the presumed purpose of the statute, to protect consumers from purchasing wrecked vehicles, could be evaded simply by selling the vehicle before the certificate of title is transferred. The Court concluded that the statute was ambiguous and that the question raised should be answered by the Indiana Supreme Court. Before the Court certified the question, however, it had to conclude that the answer to the question would be outcome determinative. The Court considered and rejected Randy's alternate arguments, concluded that the answer to the question was outcome determinative and certified it to the Indiana Supreme Court.

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MURO v. TARGET CORP. (August 31, 2009)

Christine Muro held a Target "Guest Card" for a few years. In late 1999, she paid off the balance and requested that her account be closed. In 2004, Target sent her an unsolicited Visa Card. Muro never used, or even activated, the card. She brought an action under §§ 1637 and 1642 of the Truth in Lending Act (“TILA”). With respect to § 1642, which prohibits the unsolicited issuance of a credit card, the court denied class certification. It concluded that Muro's claims were not typical of the claims of most of the proposed class (because most of the class members had an open “Guest Card” account) and that she had failed to establish numerosity with respect to the claims for which her claims were typical. Muro settled her individual § 1642 claim, reserving the right to appeal the denial of class certification. The court granted summary judgment to Target and denied class certification on the § 1637 claims. Muro appeals.

In their opinion, Judges Ripple, Rovner and Evans affirmed. With respect to § 1642, the Court noted that the narrow issue was whether a named plaintiff in a putative class action could settle her individual claim and still appeal an adverse decision on class certification. Referring to the Supreme Court's decisions in Geraghty and Roper, the Court stated that a plaintiff has to have a personal stake in the adjudication of the certification issue to maintain an appeal. The Court recognized a difference of opinion among courts as to whether a mere reservation of a right to appeal is sufficient interest to maintain an appeal. Upon reflection, the Court concluded that a voluntary settlement by a putative class plaintiff strips the plaintiffs of any personal interest in the litigation sufficient to support an appeal. Here, although Muro accepted the settlement with a reservation of her right to appeal, she retains no stake in the litigation and no right to appeal. As an aside, the Court indicated its agreement with the district court on the merits of its denial of class certification. With respect to § 1637, which requires certain disclosures before "opening" an account, the Court also agreed with the lower court. The issue on the § 1637 claim was when an account is "opened." The TILA is silent but the Federal Reserve Board regulations require the disclosures before the first transaction. Concurring with the regulation's approach, the Court noted that Muro had never activated or used her card. She had no § 1637 claim.

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FLYING J, INC. v. VAN HOLLEN (August 20, 2009)

A Wisconsin statute prohibits a gasoline retailer from selling its product below cost plus a defined markup. The statute contains both state and private remedies of both an injunctive and damages nature. Flying J is such a gasoline retailer. It sued the state, seeking to enjoin enforcement of the statute on the grounds that it was preempted by the Sherman Act. The district court granted the injunction. During the time period for taking an appeal, the state decided not to appeal. An association of gasoline retailers asked the district court for leave to intervene both as of right under Rule 24(a)(2) and as permissive under Rule 24(b)(1)(B). The court denied the intervention on the grounds that it was untimely and that the association's members lacked the requisite interest. The association appeals.

In their opinion, Judges Posner, Ripple and Kanne vacated. Intervention pursuant to Rule 24(a)(2) requires both that the party have an interest in the action and be within the class of persons the law is intended to protect. Here, the members of the association are the direct beneficiaries of the statute and would be directly harmed by the invalidation of the statute. The court concluded that this interest was sufficient for intervention. The Court also concluded that the association's motion was not untimely. Since their interest was simply to prosecute the appeal that the state decided to forgo, it is indeed timely. The Court did consider somewhat problematic the Rule 24(a)(2) requirement that a disposition of the action would impair the association's ability to protect its interests. The district court's injunction would not prevent one of the association's members from bringing a private action for damages or for an injunction -- although it would be a substantial inconvenience. Instead of resolving that issue, the Court turned to the request for permissive intervention. Permissive intervention does not contain the same impairment requirement. Relying on its earlier analysis of the association's interest and the timeliness of its request, combined with its conclusion that Flying J would not be prejudiced, the Court concluded that permissive intervention should be allowed. Instead of remanding to the district court, the Court treated the intervener as the appellant and ordered briefing.

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MCMILLIAN V. SHERATON CHICAGO HOTEL & TOWERS (May 29, 2009)

Several guests at the Chicago Sheraton Hotel were injured while on escalators in September 2003. The injuries they suffered included a separated shoulder, a scalp laceration, a leg laceration, a sprained knee and a torn ligament. They brought a personal injury suit against the hotel owners. During discovery, they learned of two other escalator malfunction incidents at the hotel in the days before their incidents. Each of the other incidents, however, took place on different escalators. The district court excluded all evidence of accidents on escalators other than the ones on which the plaintiffs were injured. Because of the exclusion of the evidence of other injuries, the plaintiffs consented to a dismissal of the case with prejudice, expressly reserving the right to appeal the judge's order excluding evidence. The court entered final judgment. Plaintiffs appeal.

In their opinion, Chief Judge Easterbrook and Judges Ripple and Tinder vacated and remanded. Before it addressed the issue of the exclusion of the evidence, the Court considered three jurisdictional issues: the existence of a final judgment, the affect of the consensual disposition, and the satisfaction of the jurisdictional amount. The Court satisfied itself that the order of the district court was final, notwithstanding the absence of the term "with prejudice." It also satisfied itself that the plaintiffs’ consent to the entry of the judgment was not a waiver of a right to appeal, given their clear reservation of that right. The plaintiffs were not as successful, however, with respect to the Court's consideration of the jurisdictional amount. The Court stated that each plaintiff must present competent evidence that his or her claim meets the $75,000 jurisdictional threshold. Here, each of the four plaintiffs alleges medical expenses between zero and $10,000. Although each also alleges future medical expenses and pain and suffering, none of them submitted any competent evidence of the value of his or her claim. The Court vacated and remanded with instructions to dismiss for want of jurisdiction.

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A. BAUER MECHANICAL, INC. v. JOINT ARBITRATION BOARD (March 25, 2009)

A. Bauer Mechanical, Inc. ("Bauer") and Chicago Journeymen Plumbers' Local Union 130 ("Union") were parties to a collective bargaining agreement. Pursuant to that agreement, the Joint Arbitration Board of the Plumbing Contractors' Association and Chicago Journeymen Plumbers' Local Union ("Board") has the authority to resolve their disputes. In 2005, the Board found that Bauer had failed to make some required contributions and ordered it to pay over $54,000. Bauer filed a complaint in state court to vacate the award. The Union removed the case to federal court and filed a motion for leave to file instanter an answer to Bauer's complaint and a counterclaim to enforce the arbitration award. The answer and counterclaim were attached to the motion. The district court granted the motion. Bauer did not respond. At a hearing on the Union's motion for entry of judgment, Bauer argued that the pleadings were not properly filed. The court explicitly recognized the pleadings and gave Bauer 14 days to respond to the counterclaim. Bauer filed a response but, again, challenged the propriety of the pleadings and did not address the merits. The court entered judgment on the Union's counterclaim. Bauer filed a timely notice of appeal. A few months later, on the Union's motion, the court dismissed Bauer's complaint and declared all judgments final and appealable. Bauer did not file a timely appeal of that order.

In their opinion, Judges Manion, Wood and Williams affirmed. The Court first addressed the jurisdictional issue. The parties all agreed that the final judgment was the judgment of the court dismissing the complaint. Bauer filed its notice of appeal several months earlier. The Court cited Rule 4 (a)(2) of the Federal Rules of Appellate Procedure, which treats a notice of appeal that is filed after a decision but before the entry of judgment as if it was filed on the date of judgment. Here, Bauer's complaint and the Union's counterclaim were mirror images of the other. The Court concluded that Bauer's belief that the earlier order disposed of all issues was reasonable and treated his notice of appeal as if it were filed on the date of judgment.

On the merits, the Court agreed with the district court that the Union's answer and counterclaim were properly considered. The Court agreed with Bauer that a motion is not a pleading. However, relying on the district court's discretion to manage its docket, the fact that the federal rules do not prohibit the attachment of a pleading to a motion and the plain reading of Rules 7 (a), (b), and 10, the Court approved of the district court's approach.

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With all the talk about Judge Sotomayor and her place on the political/legal spectrum, the vast majority of news and commentary focuses on her written opinions and her speeches. What about the opinions of the court in which she was a member of the panel but not the author of the opinion? Of course the opinions of her colleagues reveal nothing about her writing ability or style or her depth of reasoning or even her sense of humor --- but don't they say a lot about her point of view? In fact, do they say any less about her point of view  than an opinion authored by the judge herself?

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SOLIS V. CURRENT DEVELOPMENT CORP. (March 5, 2009)

George Klein is the president and sole shareholder of Current Development Corporation (CDC). CDC sponsored two employee benefit plans. The Department of Labor objected to the way Klein ran the plans and filed suit in District Court. In a settlement by consent order, Klein agreed to terminate both plans and distribute their assets -- a vacant parcel of land and almost $900,000 in cash. Klein allowed the plan participants to choose to take their shares in cash or in an ownership interest in the property. Almost everyone selected the cash option. Klein and his wife, themselves plan participants, were left with a 97% interest in the land. While Klein was winding up the plans, unbeknownst to the participants, he was negotiating the sale of the property. He used a property value of $1.7 million in calculating the participants' shares, even though he had already rejected a $2.3 million purchase offer. The Department of Labor found out about these negotiations and returned to court. The court concluded that Klein had breached his duty of loyalty to the participants and removed him as trustee. The court also appointed an independent fiduciary, who soon sold the property for $2.6 million. The independent fiduciary concluded, after a review of CDC's books and records, that Klein owed the plan another $170,000. The court ordered Klein to repay the money, with prejudgment interest. The independent fiduciary then calculated the final asset distribution figures, which the court adopted. Klein appeals.

In their opinion, Judges Bauer, Rovner and Evans dismissed in part and affirmed in part. The Court first addressed the jurisdictional issue. Klein filed two notices of appeal -- one after the court's denial of his motion to reconsider the order of prejudgment interest, and one after the court’s final payment determination. The Court noted that the consent decree itself was a final order. All orders after that were post-judgment orders. The Court compared a post-judgment proceeding to a freestanding lawsuit. In determining its scope of appeal, an appellate court will look for the nature of the proceeding and a final determination of the issues. Here, the Department of Labor began the proceedings when it filed its motion seeking Klein's removal as trustee and disgorgement of his gains. Thus, the proceeding was not final until both those issues were decided. The Court concluded that the post-judgment proceedings were final upon the court's determination of the distribution amounts. Since Klein filed a timely notice of appeal from that decision, the Court concluded that it had appellate jurisdiction of the matters presented during the proceedings. The Court dismissed Klein’s first appeal. The Court then addressed the standard of proof. Klein attempted to characterize the proceeding as one for civil contempt – with an accompanying clear and convincing standard of proof. The Court rejected that conclusion, holding that the proceeding was merely one for violation of the consent order. On the merits, the Court had little difficulty dismissing Klein's arguments: a) he waived his right to evidentiary hearing, b.) he should have disclosed the ongoing negotiations for the sale of the property to the plan's participants, c.) the court authorized the investigation into his operation of the plan, and d) the lower court's order for Klein to return money he took from the plan's assets in violation of ERISA and the final determination order were not clearly erroneous.

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KURZ v. FIDELITY MANAGEMENT & RESEARCH CO. (February 23, 2009)

Kurz and Heinzl both invested in portfolios managed by Fidelity Management & Research Co. (“Fidelity”). Apparently, some Fidelity employees placed trades with Jeffries & Co. in return for kickbacks from Jeffries. The SEC initiated a proceeding under the Investment Company Act and the Investment Advisors Act. Fidelity and the SEC entered into a consent decree. Kurz and Heinzl thereafter filed a class-action suit in state court, alleging that the employees’ conduct resulted in a breach of contract by Fidelity. Fidelity removed to federal court on the basis that their failure to disclose the employees’ misconduct was a securities law issue. The district court denied Kurz’ motion to remand and entered judgment for Fidelity. Kurz appeals.

In their opinion, Chief Judge Easterbrook and Judges Sykes and Kendall affirmed. The Court referred to the Securities Litigation Uniform Standards Act of 1998 (the “Act”). The Act generally bars class actions based on state law which allege an omission of a material fact “in connection with the purchase or sale of a covered security. The Court noted that there are exceptions to the bar (like a derivative action) but Kurz did not invoke any exception. Instead, his position was that the claim was a contract claim -- not one for a misrepresentation or omission. The Court agreed that a true action for breach of contract would not be barred by the Act but concluded that Kurz could not maintain an action for breach of contract. The principal reason for his inability to do so was the complete absence of any promise made by Fidelity to Kurz.

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IN RE: FISCHER (January 23, 2009)

Eugene Fischer is in prison. In a proceeding in the district court, the Government moved to renew a forfeiture judgment against him. The court granted the Government’s request by an order entered on November 5, 2008. Fischer asserts that he never was served with a copy of the order and only discovered its existence when he received a copy of the docket sheet in January 2009. His time for appeal having long ago run, Fischer filed a petition for mandamus seeking permission to file a notice of appeal from the November order.

In their opinion, Judges Ripple, Manion and Rovner denied his petition (but provided the road map for Fischer to follow). The Court cited to FRAP 4(a)(6). That rule provides that a district court can reopen the time to file a notice of appeal if: a) the party did not receive notice of the entry of the order being appealed, b) the party seeks leave within the earlier of 180 days after the entry of the order or 7 days after receiving proper notice, and c) no party would be prejudiced. The Court directed Fischer to file the proper motion in the district court with an explanation of his receipt of the order and a statement commenting on any prejudice to a party.

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We see it and hear it all the time. Conversation and communication have become much more casual in the world-wide social network. The same tendencies have been creeping into more formal business and legal settings for years. I thought that one of the last bastions of formality to cede to this trend would be the courts – especially the appellate courts. The briefs and arguments, although not necessarily stiff and humorless, are typically serious and respectful and pretty formal.

An oral argument in the Seventh Circuit typically begins with a “May it please the Court” or a “Good morning, your Honors.” The members of the panel are referred to throughout most arguments in one of a few ways: a) by name (e.g., Chief Judge Easterbrook, Judge Wood), b) by formal title (e.g., Chief Judge, Judge), or sometimes by informal title (e.g., sir, ma’am). They are rarely referred to as “you guys.” I was quite surprised to hear an attorney in a recent argument begin the substance of his remarks with “I’d like to talk to you guys . . . .” He did, in case you are wondering, start off with “May it please the Court.”

Any thoughts? Are we hanging on to remnants of formality that serve no purpose – or even get in the way of progress and justice? Does the formality of the courtroom merely reflect the formality of the law and the respect for the significant private and public rights that are decided every day? Is it a “generational” thing? The Gen Xers, and later the Gen Yers, will someday dominate the courts – will they maintain the decorum? Should they?
 

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Experienced appellate practitioners need not read further.

I encourage less experienced practitioners to listen to the January 12th oral argument in Perry. The defendant raised a jurisdictional issue based upon its belief that plaintiff was not timely in its notice of appeal. The parties took opposite positions on whether an order “terminating the case” or an order granting summary judgment entered two days earlier was the judgment appealed from.

The Court, however, found neither position persuasive. The panel, particularly Chief Judge Easterbrook, believed there was no proper judgment in the record. They expressed frustration that district courts (and the lawyers before them) are not following the FRCP 58 entry-of-judgment requirements . Regardless how the Court eventually disposes of the issue, practitioners are advised to follow the advice of the Court and ensure that a proper judgment is entered. As Chief Judge Easterbrook put it, a proper Rule 58 judgment requires a separate document and must state the relief granted and be signed by the judge.

Assuming there was no proper judgment entered in the case, the plaintiff does not have to worry about the timing issue. FRAP 4(a)(7)(A)(ii) provides that the judgment is considered entered 150 days from the entry of the order. Even if none of this affects the validity of an appeal (see FRAP 4(a)(7)(B)), any party before the Court would rather not waste the time at argument addressing the issue and incur the frustration of the panel.  

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ROSS-TOUSEY v. NEARY (December 17, 2008)

Marvin Ross-Tousey and his wife Deborah (the “debtors”) filed a Chapter 7 bankruptcy petition. Because their household income was above the median income level, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) subjected their petition to a means test. The means test is used to distinguish those debtors who can repay a portion of their debts from those who cannot. A debtor who has enough disposable income to pay at least $166.67 per month to his creditors is expected to file under Chapter 13. A Chapter 7 filing is presumptively abusive in that circumstance. The debtors claimed a vehicle ownership expense allowance of over $800, although they had no debt or lease payments. With that deduction, they had no disposable income and met the means test. The United States Trustee (“UST”) moved to dismiss their petition for abuse. The UST first asserted abuse based on a totality of the circumstances. The UST later amended the motion to include presumptive abuse on the grounds that they should not have taken the vehicle ownership allowance. The bankruptcy court denied the motion. The district court reversed, holding that a debtor cannot claim a vehicle ownership allowance for vehicles he owns outright. The district court remanded for proceedings to determine whether the debtors could rebut the presumption. The debtors appealed. The UST moved to dismiss for absence of finality because the bankruptcy court had not ruled on whether the presumption could be rebutted. The debtors conceded that they could not rebut the presumption.

In their opinion, Judges Flaum, Rovner and Williams reversed and remanded. The Court first considered two jurisdictional issues: whether there was a “final order” to review and whether the time period for the UST’s amendment of the motion to dismiss was jurisdictional. On the first issue, the Court found that both the bankruptcy court’s order and the district court’s order were final. In the case of the bankruptcy order, the only remaining act was to distribute the debtors’ assets. In the district court’s reversal and remand, the only obligation of the bankruptcy court was to either dismiss the petition or convert it to a Chapter 13 proceeding, at the option of the debtors. The presence of these continued ministerial acts did not divest the Court of jurisdiction. On the timing issue, the Court stated that the statute set a deadline for filing a motion to dismiss. The UST’s original motion met the deadline but the amendment to add the presumptive abuse ground did not. The Court appreciated that the Supreme Court’s decision in Bowles seems to say that filing deadlines found in statutes are jurisdictional, while those found elsewhere are not. Nevertheless, relying on the Supreme Court’s later decision in John R. Sand & Gravel and the fact that much case law would be overturned by such a reading of Bowles, the Court found a different path. In John R. Sand & Gravel, the Supreme Court distinguished between statutes of limitations designed to protect defendants from stale claims from those that that sought to achieve a “system-related goal,” with only the latter classified as jurisdictional. Since the bankruptcy deadline existed principally to protect a debtor from delay and not to achieve some broader system goal, the Court held that it was not jurisdictional and any objection was waived by the debtors.

The Court proceeded to the merits. The means test in the BAPCPA includes, in the definition of monthly expenses, “applicable" monthly expenses specified by the National and Local Standards found in the Internal Revenue Manual (“IRM") and “actual" monthly expenses for other defined expenses. The vehicle ownership allowance at issue is one of two transportation components found in the Local Standards. The Court noted that the issue it faced has been litigated frequently but never decided by a circuit court. Two approaches have emerged, depending on the treatment of the word “applicable” in the statute. The IRM approach treats “applicable” as meaning “relevant” and concludes that a debtor with no lease or debt payment on a vehicle has no “relevant” cost of ownership. The Plain Language approach, on the other hand, treats “applicable” as that number “applied” by the Local Standards for the debtors’ region and number of vehicles. The Court was persuaded by the Plain Language approach. It decided that, to give effect to all the words of the statute, “applicable” could not mean the same as “actual.” Since it could not refer to the debtors’ actual expense, it must refer to the deductions listed in the Local Standards. The Court found additional support for its holding in: a) the inconsistency in the statute’s disallowance of debt as an expense and the IRM approach’s conditioning the transportation allowance on debt, b) Congress’ specific language throughout other sections of the means test to describe allowable deductions, c) an absence of any indication that Congress intended the IRM methodology to be used in the means test, d) the avoidance of an unfair result if the allowance is limited to debtors with car payments, and e) the recognition that allowing the deduction only avoids a presumption of abuse – abuse can be shown independently.  

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BINGHAM v. NEW BERLIN SCHOOL DISTRICT (December 4, 2008)

Sam Bingham was a Wisconsin high school student. His parents petitioned their school district to provide special education services for him. The district did not do so. Sam transferred to a private school. After Sam graduated, his parents filed a request for a hearing with the Wisconsin Department of Public Instruction. They alleged that the school district had failed to comply with the Individuals with Disabilities Education Act (“IDEA”). They asked for reimbursement of their private school tuition costs. Before a hearing was held, the district reimbursed the Binghams for the full amount they requested. The administrative law judge dismissed the petition as moot. The Binghams asked for a declaration that they had “prevailed” for purposes of seeking attorneys’ fees under IDEA. The administrative law judge refused. The Binghams appealed to the district court. The court concluded that the Binghams were not prevailing parties and denied their motion for attorneys’ fees. The Binghams appeal.

In their opinion, Judges Flaum, Rovner and Williams affirmed. In fact, the Court very quickly and easily resolved the sole issue presented by the appeal – whether the Binghams were entitled to attorneys’ fees under IDEA – against the Binghams. In Buckhannon, the Supreme Court in 2001 held that a voluntary monetary settlement by a defendant does not entitle a plaintiff to “prevailing party” status. The Court further noted that every circuit that has considered the issue has applied Buckhannon to IDEA cases.

The Court went on because it was troubled by the plaintiffs’ conduct. The plaintiffs and their counsel were well aware of Buckhannon and yet did not even cite it in their papers. The Court emphasized that it was not the fact that they appealed which was disturbing. Buckhannon has been the target of much criticism, especially when applied to IDEA. The Court allowed for the possibility that the Binghams could have elected to appeal solely for the purpose of preserving an argument for the Supreme Court. Having decided instead to ignore binding precedent, the Court ordered the Binghams and their counsel to show cause why they should not be ordered to pay the defendant’s costs and fees of the appeal. 

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MARRS v. MOTOROLA, INC. (November 7, 2008)

Michael Marrs sued Motorola, Inc. and several of its benefit plans (“Motorola”), alleging violations of ERISA. The parties stipulated to class action certification. Marrs served as the class representative. The district court granted summary judgment to Motorola. Marrs appealed. Marrs moves for leave to correct his notice of appeal.

In their opinion, Judges Cudahy, Posner, and Flaum denied Marrs’ motion. Marrs’ original notice was in his name only. It did not mention other claimants or the class. In fact, it did not indicate that he is appealing in any capacity other than individually. Marrs moved to amend his notice to indicate that he is appealing on behalf of the class. The Court began with Rule 3(c) of the Federal Rules of Appellate Procedure. That rule provides that a notice of appeal in a class action is sufficient if it names one person who is qualified to bring the appeal. It also provides that an appeal should not be dismissed for failure to name a party “whose intent to appeal is otherwise clear from the notice.” The Court cited its decision in Murphy v. Keystone Steel & Wire Co. for the further proposition that the notice of appeal by a class representative must indicate the he is appealing in his representative capacity. One of the reasons the Court limited the appeal in Murphy to the named plaintiffs was the inclusion on the notice of another party who was not a class member. The Court also looked to its decision in Clay v. Fort Wayne Community Schools. In Clay, there were two separate classes. The Court held that the appeal in the name of one class did not support review of the claims of the other. Neither case involved a single class as the only plaintiff. Nevertheless, the Court found the differences “too slight” to warrant a different result.

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MAHER v. CITY OF CHICAGO (October 31, 2008)

Jerome Maher, a Naval Reservist, went to work for the City of Chicago in 1990. Although he alleges that he was promised an “assistant commissioner” position, his initial position involved managing accounts receivable and developing a computer system in the Aviation Department. In February of 1991, Maher was called to active duty. He alleges that his supervisor was displeased. Upon Maher’s return in September of the same year, he was named “Director of Revenue” at an increased salary. He alleges that his supervisor continued to criticize and threaten his employment because of his military obligations. He also was forced to report to a former subordinate. Maher filed, but later withdrew, a formal complaint with the Department of Labor. He alleged that he had been denied advancement and subjected to humiliation because of his military service. After an internal reorganization in 1993, Maher was named “Manager of Finance.” He received another salary increase and a larger staff. Maher alleged that his office was unusable for a week and that other supervisors harassed and were critical of him and his service. The Navy again called Maher to active duty from August 1996 to May of 1997. The City initially refused to assign Maher to his former duties upon his return. Following complaints and meetings, Maher was given his former responsibilities in July of 1997, although two former staff members were reassigned to work for his supervisor. In January, 1998, the City transferred Maher to its Landside Operations, a division of the Aviation Department that handles ground transportation at the city’s airports. In this position, Maher developed a high-speed rail system and an intermodal facility, operated the parking facilities, and supervised snow removal. Maher sued the City in 2003. He alleged that he suffered adverse employment consequences as a result of his military service on three separate occasions: a) when the City did not give him an assistant commissioner title in 1991, b) when the City named him Manager of Finance in 1993 but again did not give him an assistant commissioner title, and c) when the City transferred him to the Landside Division in 1998. He alleged a violation of the Uniformed Services Employment and Reemployment Rights Act (“USERRA”). The magistrate judge granted summary judgment to the City on the 1991 and 1993 claims, concluding that Maher produced no evidence that he was hired as an assistant commissioner and produced insufficient evidence that the City’s actions were motivated solely by his military commitment. The magistrate also ruled that laches barred the 1991 action. Maher’s 1998 claim went to trial. The magistrate ruled that evidence of the 1991 and 1993 claims could not be presented at that trial. After one hung jury, a second jury found for the City. Maher appeals: a) the summary judgment on the 1991 claim, b) the exclusion of evidence of the 1991 and 1993 claim from the jury, and c) the jury verdict on the 1998 claim.

In their opinion, Judges Manion, Wood, and Williams affirmed. On the 1991 claim, the Court noted that Maher challenged only the magistrate’s laches ruling. He did not challenge the magistrate’s alternative holding that there were no genuine issues of material fact and the City was entitled to judgment as a matter of law. When a lower court provides more than one independent ground for a holding, the appellant’s failure to challenge one of them is a waiver of any claim of error with respect to the entire holding. Notwithstanding the Court’s finding of a waiver, it did also address the laches argument on the merits. The Court agreed with the magistrate. Laches requires an unreasonable lack of diligence and prejudice. Maher points to both his Department of Labor complaint and his internal complaints as evidence of his due diligence. The Court noted that the Department of Labor complaint was withdrawn eleven years before the suit was filed. One informal complaint was made five years into that eleven year period. The Court found that the two complaints did not amount to reasonable diligence. The Court also found prejudice to the City. The person who hired Maher testified that he had very little recollection of the circumstances of Maher's hiring.

The Court next addressed the magistrate’s exclusion of the evidence of the 1991 and 1993 incidents at the second trial of the 1998 incident. The Court found that the magistrate did not abuse his discretion. Neither incident was relevant to any alleged adverse employment action in 1998 and both took place before the 1998 decision-maker was in charge.

Finally, Maher challenged the sufficiency of the evidence at the 1998 trial. The Court concluded that Maher’s challenge was procedurally defective. Maher did not file either a FRCP 50(a) or 50(b) motion, both of which are required before challenging the sufficiency of the evidence on appeal. Maher conceded as much at oral argument. Nevertheless, the Court proceeded to analyze his argument under the “heavy burden” of a sufficiency of the evidence challenge. Under the USERRA, Maher must establish that he suffered an adverse employment action motivated at least in part by his military service. The Court found against Maher on both points. Maher relied on the facts that he lacked a staff, was not using his CPA qualifications, had a supervisor with less college education, and was responsible for snow removal. The Court held that none of these establish the existence of an adverse employment action. In his new position, he was responsible for large-scale projects involving hundreds of millions of dollars and handled millions of dollars of billing. An adverse employment action must be more disruptive than just a change in responsibilities. Maher also did not establish that a reasonable juror must have found that hostility toward his service was the reason for his transfer. Maher relied on the promotions of others ahead of him, but the person who transferred Maher to Landside was not the same person who promoted the others. When different decision –makers are involved, said the Court, one should not conclude that the difference in their actions was the result of discrimination. The jury had the opportunity to make the inferences that Maher argued – but it didn’t. They were not required to on the record in the case.

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VIILO v. EYRE (October 27, 2008)

Virginia Viilo was enjoying a quiet August evening in her backyard, accompanied by several family members and Bubba, her dog. Suddenly, Bubba heard a commotion in Viilo’s front yard and ran down the side of the house. It seems that six Milwaukee police officers, acting on a tip that a felon had entered the house with a dangerous dog, had arrived and were approaching the house. Bubba leapt a three foot fence and ran toward the officers. Officer Carter shot Bubba twice, seriously injuring him. Bubba retreated into bushes near the house. Carter continued to watch Bubba while the other officers spoke with Viilo. Viilo asked to get Bubba or call for help. The police refused. Sergeant Eyre arrived about ten minutes after Carter shot Bubba. Eyre approached the bushes where Bubba was hiding. According to many witnesses, Bubba came out limping and whimpering. Eyre ordered Carter to shoot Bubba. Carter shot Bubba a third, and a fourth time, killing him. Viilo sued the city and Carter and Eyre under 42 U.S.C. § 1983, alleging a violation of her Fourth Amendment rights. The district court denied Carter and Eyre’s motion for summary judgment on qualified immunity grounds. Carter and Eyre appeal.

In their opinion, Judges Bauer. Cudahy, and Williams dismissed the appeal for lack of jurisdiction. The Court began with the familiar two-part analysis for qualified immunity – whether the alleged facts establish a violation of a constitutional right and whether that right was clearly established. Although the panel briefly discussed the application of the test and found it compelling, it decided it could not reach the merits.

Appeals are generally heard after a final order. Interlocutory appeals are an exception to that rule. The Supreme Court, in the Mitchell v. Forsyth and Johnson v. Jones cases, clarified the scope of the exception in qualified immunity cases. The appeal cannot attack the presence or absence of disputes of fact. It must be limited to the question of law: whether the facts establish a violation of a clearly established constitutional right. The panel pointed out that there can be disputed factual issues in the case. The appellants just cannot contend that the court below erred in ruling that the evidence created an issue for the jury. They must accept alleged or stipulated facts or the facts that the court below found had sufficient support to go to a jury. Here, the court below found that there were sufficient facts to support a reasonable jury’s finding that Bubba was shot the third and fourth time as he was “crying, sitting down, moving slowly, or headed to the backyard.” The officers argue for qualified immunity based on a totally different set of facts. Their appeal must be dismissed.

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NEGRETE v. NATIONAL RAILROAD PASSENGER CORP. (AMTRAK) (October 27, 2008)

Jorge Negrete was a track repair worker for Amtrak.  He injured his back on the job. He sued Amtrak, alleging a permanent disability. During discovery, Negrete: a) withheld the names of doctors who did not support his claim, b) provided false information during his deposition regarding his income, c) was “less than forthcoming” at his deposition regarding who performed maintenance at his apartments, and d) missed twenty-one discovery deadlines (in one case by over a year). The district court dismissed the case for these abuses. Negrete appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Sykes affirmed. The Court observed that dismissal is a drastic penalty for discovery abuses. In the case, however, the “appalling” conduct of Negrete supported the dismissal. He lied about the principal issues in the case – how severe were his injuries and whether he could work. The Court not only affirmed the dismissal, it referred its opinion to the United States Attorney’s Office.

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