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

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

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

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

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VIRNICH v. VORWALD (December 20, 2011)

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

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

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

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

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

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

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

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

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LG DISPLAY CO. v. MADIGAN (November 18, 2011)

The Illinois Attorney General filed suit in state court against LG Display and other LCD panel manufacturers, alleging violations of the Illinois Antitrust Act. The complaint sought damages for the state itself, as purchaser, and also sought damages for the state's residents, under parens patriae. The defendants removed the complaint to federal court under the Class Action Fairness Act. Judge Dow (N.D. Ill.), on plaintiff’s motion, remanded the case to state court. Defendants petition for permission to appeal.

In their opinion, Seventh Circuit Judges Flaum, Williams, and Tinder denied the petition. A remand order is generally not reviewable on appeal. Here, however, the defendants argue that the Attorney General's claim is really a disguised class action or mass action under CAFA. Under CAFA, a class action is a civil action brought under Rule 23 (or similar state statute or rule) as a class action by a class representative. The Attorney General's case was not brought under Rule 23 or a state counterpart, was not brought by a class representative, and was not brought as a class action. It was brought as a parens patriae case, authorized by the Illinois Antitrust Act. Therefore, the case is not a class action. Under CAFA, a mass action is an action brought by 100 or more persons proposed to be tried jointly because of common questions of law or fact. But here, there is only the claim of the Attorney General. Also, CAFA expressly excludes from the mass action definition actions asserted on behalf of the general public pursuant to a state statute. Therefore, the case is not a mass action. The district court was correct in remanding the case to the state court.

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DAMASCO v. CLEARWIRE CORPORATION (November 18, 2011)

Jerome Damasco brought a class action suit in state court against Clearwire Corporation. He alleged that Clearwire sent unsolicited text messages in violation of the Telephone Consumer Protection Act. He sought both injunctive relief and damages for the more than 1,000 people he estimated received the text messages. Clearwire offered to settle the case by paying Damasco (and up to 10 additional people) the maximum statutory penalty ($1,500) and agreed to stop sending the unsolicited messages. Damasco never responded. A few days later, Clearwire removed the case to federal court. Damasco moved for class certification almost immediately. Within a day, Clearwire moved to dismiss on the grounds that its settlement offer rendered the case moot. Judge Zagel (N.D. Ill.) agreed with Clearwire and dismissed, concluding that the Seventh Circuit's Holstein decision controlled. A complete settlement offer before a class certification filing moots the named plaintiff’s claim. Damasco appeals.

In their opinion, Seventh Circuit Judges Manion, Rovner, and Tinder affirmed. Article III of the Constitution requires federal courts to hear only live cases and controversies. As such, a party must maintain a personal stake in the litigation. Here, once Clearwire expressed its willingness to give Damasco everything to which he may have been entitled under the law, there is no more controversy. The Court has held in the past that a plaintiff cannot avoid mootness simply by moving to certify the class after the offer. Although the Court recognized that several other circuits have allowed plaintiffs to seek class certification after such a full offer, the Court reiterated its belief that such a rule violated Article III and declined to adopt it. A simple solution exists to any concern that defendants could frustrate class actions by simply offering each named plaintiff a full settlement. That solution is to move for class certification at the time the complaint is filed. The filing of the motion protects the plaintiffs and the class. The Court also noted that a plaintiff, to the extent he believes he is not ready to place the class certification issue to the court, can seek additional time for further investigation or discovery.

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FEDEX GROUND PACKAGE SYSTEM v. UNITED STATES JUDICIAL PANEL ON MULTIDISTRICT LITIGATION (November 17, 2011)

FedEx truck drivers filed a number of class actions around the country against the company alleging that the company misclassified them as independent contractors rather than employees. Because the cases presented many common fact issues, the Judicial Panel on Multidistrict Litigation consolidated a number of them and transferred them to the Northern District of Indiana for consolidated pretrial proceedings. In 2010, Judge Miller (N.D. Ind.) granted summary judgment to FedEx in most of the cases and granted summary judgment to the plaintiffs on some claims in a few cases. His orders resolved all of the claims in 22 of the then-pending cases, which are now on appeal to the Seventh Circuit. In the then-pending 12 cases in which all claims were not resolved, Judge Miller recommended to the JPML that they be transferred back to their originating courts. The JPML concurred. FedEx seeks a writ of mandamus.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton denied the petition. At the stage of the proceedings that Judge Miller found himself in, he had basically two options for the unresolved cases. He could have issued partial final judgments under Rule 54(b). Had he done so, plaintiffs would have had to appeal immediately to the Seventh Circuit. FedEx preferred that approach. Another option, the one that he took, was to transfer the partially resolved cases back to their originating courts for further proceedings. Under that option, any appeal after a final judgment would be taken in the originating court. The Court noted that each option has advantages and disadvantages. To qualify for the extraordinary writ of mandamus, however, FedEx needs to show that it has no other avenue for relief and its right to the writ is "clear and indisputable." Although FedEx clearly satisfied the first requirement, it failed to satisfy the second. The Court noted the strong arguments in favor of either approach and stated that the selection of the correct approach under the circumstances should be within the discretion of the transferee court and the JPML. The JPML did not abuse its discretion.

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STEVO v. FRASOR (November 17, 2011)

Allan Stevo lives in Blue Island, Illinois and has been active in local politics for years. When the City passed an ordinance requiring outside water meters in 2001, Stevo defied it -- and continued to defy it for years. Finally, four years later, and after seven weeks without water, Stevo installed a water meter. But he then sued the City and various officials, alleging a due process violation and a "class of one" equal protection claim. With consent, the case was originally assigned to Magistrate Judge Keys. It was later reassigned to Magistrate Judge Finnegan. The discovery cutoff was extended seven times over the course of a number of months. Eventually, Stevo's request for additional discovery time was denied and defendants moved for summary judgment. Stevo did not respond to the merits of the summary judgment motion. Instead, he opposed it on grounds that it violated Local Rule 56.1. Magistrate Judge Finnegan (N.D. Ill.) denied the motion but allowed Stevo more time to respond to the merits. He declined to do so. She granted summary judgment to the defendants. Stevo appeals.

In their opinion, Seventh Circuit Judges Posner, Sykes, and Hamilton affirmed. On appeal, Stevo challenges both the denial of additional time for discovery and the denial of his opposition to summary judgment on Local Rule 56.1 grounds. But the Court first considered an argument he raised for the first time in his reply brief -- that he did not consent to the entry of judgment by the magistrate judge. Normally, an argument raised for the first time in a reply brief is waived. Here, however, the Court treats the absence of a valid consent to proceed before a magistrate judge as an impediment to its appellate jurisdiction. So it addressed the issue and found no defect. Both parties expressly consented, in writing, to the assignment to Magistrate Judge Keys. Although the written consent form is somewhat ambiguous regarding the parties' consent to further reassignment to Magistrate Judge Finnegan, the Court found it unnecessary to resolve the ambiguity. It found that all the parties impliedly consented by continuing to litigate in front of Magistrate Judge Finnegan through discovery and summary judgment. Furthermore, although the signed consent form does not appear in the district court docket or the record on appeal, the defense counsel provided a copy to the court and the Court supplemented the record pursuant to Federal Rule of Appellate Procedure 10(e)(2). On the merits, Stevo challenges only the magistrate judge's decision to deny further discovery and to not strictly enforce a local rule. Appellate review of both those decisions is by the abuse of discretion standard. With respect to the discovery cutoff, the Court stated that it would not reverse without a showing of "actual and substantial prejudice." It found none. With respect to the enforcement of a local rule, the Court noted that it has frequently held that district courts are entitled to strictly enforce the local rules. Here, it held the converse -- that a district court is entitled to forgo strict enforcement of the local rules.

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SAMBRANO v. MABUS (November 8, 2011)

Cathleen Sambrano filed an EEOC charge alleging that the Department of the Navy, her employer, discriminated against her on account of her race, gender, national origin, age, and disability. Because she was a federal employee, the EEOC decided her claim on the merits and ruled against her. Sambrano filed a federal complaint repeating her allegations. Although the district court set a discovery schedule, Sambrano conducted no discovery and instead filed a motion for judgment on the pleadings. The court denied the motion. Sambrano still took no discovery. More than a year passed. Judge Norgle (N.D. Ill.) dismissed the case for want of prosecution pursuant to Local Rule 41.1. That prompted Sambrano's lawyer to file an ex-parte motion to vacate the dismissal. The court denied the motion (under Local Rule 5.3) for failure to serve the defendant. Sambrano appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Manion and Rovner affirmed -- and also issued a show cause order to Sambrano's counsel for filing a frivolous appeal and violating Circuit Rule 30. The Court noted that Sambrano could have argued that the district court erred in dismissing the case without any notice to the litigants. Instead, her brief contends that Local Rule 41.1 violates due process. In addition to making this frivolous argument, Sambrano violated Circuit Rule 30's requirement that an appellant include the order under review in an appendix. Counsel also submitted a false certification under Rule 30. The Court concluded that counsel's conduct implied that he is not competent to litigate in federal courts. Thus, it issued the show cause order why he should not be sanctioned, censured, suspended, or disbarred.

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KAWASAKI HEAVY INDUSTRIES v. BOMBARDIER RECREATIONAL PRODUCTS (October 21, 2011)

In 2006 and 2007, Kawasaki and Bombardier were embroiled in a patent dispute that led to several federal lawsuits. Kawasaki brought suit in Texas and Bombardier brought suits in both Florida and Texas. The parties reached a settlement in late 2007, pursuant to which they agreed to dismiss the lawsuits, agreed not to bring a future suit for patent infringement, and agreed to resolve any controversy arising out of the settlement through various alternative dispute mechanisms, including binding arbitration. The agreement also required Bombardier to cause its security agreements with its bank to be subordinated to the settlement agreement. Kawasaki executed the agreement in March of 2008, after receiving assurances from Bombardier that its bank had agreed to the subordination. In fact, Bombardier's bank refused to subordinate its security interests. Kawasaki returned to federal court in Texas and asked the court to vacate the earlier dismissal and require Bombardier to comply with the settlement agreement. The court refused. Kawasaki appealed but also engaged, with Bombardier, in court-ordered mediation. Kawasaki later dismissed the appeal and filed a new action in the Southern District of Illinois requesting specific performance of the settlement agreement's obligations. Kawasaki also brought claims against Bombardier's attorneys and its bank. Bombardier moved to dismiss or, in the alternative, to stay the claims pending arbitration. Chief Judge Herndon (S.D. Ill.) denied the motion. Bombardier appeals.

In their opinion, Seventh Circuit Judges Flaum, Manion, and Sykes reversed as to the Bombardier claims and vacated as to the other claims. The Court noted that the arbitration agreement was broad enough to cover the dispute between the parties. The only reason to deny Bombardier's request to arbitrate, then, would be that it waived that right. The district court so concluded, citing Bombardier's participation in the Texas district court litigation, the appeal, and the court-ordered mediation. The Court recognized that a party can waive a contractual arbitration right, and that the waiver can be explicit or inferred. In order to infer such a waiver, however, a court must determine the party acted inconsistent with its right to arbitrate, given all the circumstances. Relevant considerations include a party's diligence, delay, participation in court proceedings, and prejudice. Although the Court conceded that Bombardier participated in the court proceedings and mediation, it concluded that its participation was not inconsistent with exercising its right to arbitrate. All of its actions were in response to Kawasaki's actions and it never agreed to allow the Texas court to resolve the dispute -- it never even addressed the merits. Had it not participated in the proceedings or mediation, it risked a default judgment. Likewise, although there has been some delay, the delay is not inconsistent with Bombardier's right to arbitrate. It has consistently asserted its right to arbitrate the dispute, and it is Kawasaki's dispute that is an issue. Bombardier was not required to take any affirmative steps. It is enough for it to continue to assert its willingness to arbitrate and forgo any participation in substantive litigation. The district court erred in denying the motion to dismiss or stay. With respect to the other parties, the Court vacated the district court's order. First, Bombardier has no standing to protect the rights of the other defendants. Second, the issue whether the arbitration clause applies to the non-signatories is not ripe for review. Kawasaki does not want to arbitrate those claims and the non-signatories have not indicated their desire, one way or the other.

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MCCAULEY v. CITY OF CHICAGO (October 20, 2011)

Glenford Martinez was released from prison in 2006, after serving 13 years for attempted murder. The following year, he was arrested for domestic battery after he allegedly choked his former girlfriend, Mersaides McCauley. Martinez could have been held without bail had the Illinois Department of Corrections issued a parole violation warrant. They did not -- and he was released on bail. McCauley obtained an order of protection, but to no avail. Martinez continued to violate the order. In early 2008, Martinez shot and killed McCauley and then killed himself. McCauley's estate brought a number of federal and state claims against numerous defendants, including an equal protection claim against the City of Chicago and Roger Walker, the then-IDOC Director. Judge St. Eve (N.D. Ill.) dismissed the federal claims and declined to exercise jurisdiction over the state claims. With respect to the equal protection claims, she concluded that female victims of domestic violence are not a protected class and that Eleventh Amendment sovereign immunity precluded any recovery against Walker in his official capacity. The court denied the estate's request to conduct discovery to support a personal capacity claim against Walker. The estate appeals.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton (dissenting in part) affirmed. The Court criticized the district court's analysis but ended up with the same result. The Court approached the case by asking whether the complaint sufficiently pleaded facts that would allow an inference that the City maintained a "policy, custom, or practice" of discrimination against a group to which McCauley belonged. Twombly and Iqbal require specific facts that support the legal claims, rather than legal conclusions and conclusory allegations. After disregarding the complaint's legal conclusions, the Court found that the factual allegations did not satisfy the Monell standard. In fact, the factual allegations alleged that the City failed to provide special protection to female victims of domestic violence, not that it failed to provide equal protection. The equal protection claim against the City was properly dismissed. The Court also affirmed the denial of discovery related to the Walker personal capacity claim, although again for different reasons. Given that there is nothing in the record to suggest that Walker had any personal involvement in Martinez' parole, the district court's refusal to allow discovery on the issue was not an abuse of discretion.

Judge Hamilton dissented from the majority's dismissal of the equal protection claim against the court City. His dissent was primarily an attack on Iqbal, its heightened pleading requirements, its inconsistency with other rules and practice, and its difficulty in application. He believed that the estate's complaint adequately alleged an equal protection claim by alleging that the City treated domestic violence less seriously than other crimes and that it had a custom of doing so. Even if he concluded that the complaint fell short, however, he would have remanded to give the estate an opportunity to amend its pleading to meet the heightened standard.

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CITY OF CHICAGO v. FEDERAL EMERGENCY MANAGEMENT AGENCY (October 17, 2011)

The airlines that use O'Hare and Midway Airports have Use Agreements with the City of Chicago that define the rights of the parties. Pursuant to the Agreement, the City estimates its operating and maintenance expenses each year for the upcoming year. Each airline is obligated to pay its proportionate share of these expenses, based on its projected landings. At the end of each year, the City compares its actual costs to its projected costs and either collects additional funds from the airlines or refunds any excess money. The City only projects for ordinary snow removal expenses. In 1999 and 2000, the City spent approximately $8 million in extraordinary snow removal costs. The Federal Emergency Management Agency picked up almost $6 million of that amount pursuant to federal law. FEMA's generosity, however, was short-lived. Relying on another provision of federal law that requires recipients of federal assistance to repay the United States if the assistance duplicates other benefits available, FEMA asked the City to return the funds. It took the position that the federal assistance duplicated the funds available to the city under the Use Agreements. The City brought suit against FEMA under the Administrative Procedure Act on the ground that the duplicate benefits provision relied on applies only to available insurance proceeds. But, as alternative protection, the City stipulated that the airlines were responsible for the snow removal costs under the Use Agreements. The airlines moved to intervene either as a matter of right or permissively in order to argue the position that the Use Agreements are limited to ordinary snow removal expenses. Judge Norgle (N.D. Ill.) denied the motions. The airlines appeal.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams reversed. The Court discussed at length, without deciding its applicability, intervention as a matter of right under Rule 24(a). It declined to decide that issue because it decided that the airlines should have been permitted to intervene permissively under Rule 24(b). Permissive intervention is about economies of litigation and is allowed when a party has a claim or defense sharing a common question of law or fact and when the intervention would not unnecessarily delay or prejudice the underlying adjudication. The Court concluded that the intervention might cause some delay and require some limited additional discovery. On the other hand, it might eliminate the need for subsequent litigation between the airlines and the City. The Court concluded that there was no basis to deny permissive intervention.

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AFFYMAX v. ORTHO-MCNEIL-JANSSEN PHARMACEUTICALS (October 3, 2011)

Affymax and Ortho-McNeil-Janssen Pharmaceuticals created a joint venture in 1992 to develop peptide compounds. Their agreement assigned ownership based on development efforts. If a compound was jointly developed, it was jointly owned. If a compound was solely developed by either company, that company owned it. The parties also agreed to arbitrate all ownership disputes. Affymax brought suit in 2004 with respect to the ownership of the so-called '940 family and '078 family. After arbitration, a panel concluded that Ortho owned the ‘078 family and that the parties jointly owned the ‘940 family. Judge Kennelly (N.D. Ill.) confirmed most of the arbitration ruling but vacated the award with respect to its conclusion that Ortho owned the foreign patents in the ‘078 family. Ortho appeals (Affymax also appealed, but to the Federal Circuit).

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Wood and Tinder reversed. The Court first addressed appellate jurisdiction. Patent controversies that arise over a contractual dispute, as this one does, arise under the contract, not the patent. Therefore, the Federal Circuit's jurisdiction over patent disputes has not been triggered. The Court concluded that it was the proper forum, with jurisdiction over the district court's order vacating a part of the panel's award. On the merits, the Court noted that the Federal Arbitration Act gives four reasons a district court may rely on in vacating an arbitration award. The reason given by the district court here – the panel’s disregard of law -- is not one of those four reasons. The court's order was therefore error, if in fact that was the only basis for its conclusion. Before finding error, the Court considered whether the panel exceeded its powers, which is one of the four reasons permitting the vacation of an award, and is somewhat related to the district court's rationale. The Court concluded that the panel resolved the dispute pursuant to the 1992 contract’s directions and did not exceed its powers in doing so.

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PURCELL v. BANK OF AMERICA (October 3, 2011)

Kristine Purcell brought suit in state court against Bank of America under the Fair Credit Reporting Act and state law. She alleged that the bank reported to credit agencies that she was delinquent in her loan payments, when it knew she was not. The Bank removed the case to federal court and sought judgment as a matter of law on the FCRA claim. It argued that the Act did not provide a private damages claim for their alleged conduct. It also moved to dismiss the state claims with prejudice on preemption grounds. Judge Moody (N.D. Ind.) agreed with the Bank and dismissed the FCRA claim but concluded that the state law claims were not preempted. He dismissed them without prejudice. The Bank appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Bauer and Sykes reversed and remanded. Section 1681t(a) of the Act provides that state law claims are not preempted except as provided in subsection (b). Subsection (b) states that no requirement or prohibition relating to furnishing information to credit agencies may be imposed "under the laws of any State." The district court concluded that "laws" means only statutes, not common law. The Court disagreed. As long ago as 1938, in Erie R. R. v. Tompkins, the Supreme Court held that the word "laws" in the Rules of Decision Act included all sources of law, including the common law. The Court also found support in the Dictionary Act and in Congressional drafting manuals. The Court rejected the district court's reliance on a perceived inconsistency within the Act if "laws" included all common law. In the Court's view, the subject sections were compatible and did not support the district court's conclusion. Therefore, the “laws” reference in FCRA includes the common law and the state law claims are preempted.

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CEDAR FARM v. LOUISVILLE GAS AND ELECTRIC COMPANY (September 29, 2011)

Cedar Farm owns almost 2500 acres of property bordering the Ohio River in southern Indiana. The property is unusual. It contains, among other things, an antebellum mansion listed on the National Register of Historic Places and a habitat for a number of rare and endangered species. Almost 90% of the property is encumbered by an oil and gas lease with Louisville Gas and Electric Company. Under the express terms of the Lease, it terminates if: a) Louisville stops using it for gas production or storage, b) Louisville surrenders it (for $1.00), or c) Louisville fails to make required payments after a demand and 30 days to cure. The Lease also requires Louisville to pay for any damages it causes the property. Cedar Farm brought suit against Louisville, alleging that Louisville removed trees unnecessarily, installed unsightly pump jacks, and dumped construction debris, among other things. Although its original complaint sought both damages and ejectment, Cedar Farm ultimately dismissed its damages count with prejudice and proceeded solely on its ejectment claim. Judge Hamilton (S.D. Ind.) granted summary judgment to Louisville, concluding that the only remedy in the Lease for Louisville's alleged conduct is damages. Cedar Farm appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Wood and Williams affirmed. Under Indiana law, a lessee under an oil and gas lease acquires a property interest once it begins production. After that point, courts are reluctant to terminate leases if the lessor can be adequately compensated by damages. Cedar Farm contends that this is such a case, given the property's historical and environmental significance and Louisville's egregious treatment of the land. The Court conceded that such could be the case but concluded that Cedar Farm could not simply rely on its allegations at summary judgment stage. Since there is no evidence in the record supporting the complaint's allegations, and no claim that Cedar Farm was prevented from presenting such evidence, summary judgment for Louisville was appropriate. The Court also declined Cedar Farm's request for certification to the Indiana Supreme Court.

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KEELING v. ESURANCE INSURANCE COMPANY (September 26, 2011)

Esurance Insurance Company has issued over 50,000 automobile insurance policies with uninsured/underinsured motorist coverage. It has collected more than $600,000 in premiums and paid no claims. A class of policyholders brought suit for fraud against Esurance, alleging that the uninsured/underinsured coverage was worthless given the policy language. Esurance removed the action to federal court pursuant to the Class Action Fairness Act. Chief Judge Herndon (S.D. Ill.) concluded that the amount in controversy included the $600,000 in premiums, what little amount it would cost to amend the policy form as requested by the class, and punitive damages. Concluding that a $4.4 million punitive damage award was "legally impossible," he remanded the class action to state court on the ground that it did not meet the $5 million amount in controversy threshold. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Kanne reversed and remanded. The Court noted that the district court stated the correct "legally impossible" standard but applied it improperly. First, the value of the injunctive relief is not simply the cost of changing a form. Esurance currently reports a $125,000 annual profit on the challenged coverage. Eliminating the coverage (and the profit) would cost Esurance $1.5 million (the present value of $125,000 for 20 years). Therefore, the question becomes whether it is "legally impossible" for the plaintiffs to be awarded $3 million in punitive damages. A $3 million punitive damage award, compared to the $600,000 in actual class injury, would only be a multiplier of five. Illinois courts have affirmed punitive damage awards with higher multipliers. The Supreme Court has suggested that such a multiplier would not be unconstitutional. Although such an award might be improbable, the Court concluded that it was not "legally impossible" and that the amount in controversy requirement was met.

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WILLIAMS v. ADAMS (September 23, 2011,)

Bruce Williams brought a § 1983 lawsuit against several police officers, claiming he was arrested without probable cause and assaulted. Williams brought the suit pro se and proceeded in forma pauperis. After he received a draft pretrial order from the defendants, Williams hired an attorney. For months, however, the attorney failed to respond to the defendants’ draft order. The defendants moved for dismissal and sanctions. After Williams' attorney responded to the order, the defendants withdrew their dismissal request but continued to press for sanctions. A magistrate judge, after two hearings, concluded that Williams and his attorney (who, by that time, had withdrawn from the case) were jointly liable for sanctions in excess of $9,000. Defendants rejected Williams' proposed payment plan and, after five months had passed, moved for dismissal. Judge Andersen (N.D. Ill.) granted the motion and dismissed the case. Williams appeals.

In their opinion, Seventh Circuit Judges Posner, Rovner, and Wood reversed and remanded. Sanctions imposed by a district court must be proportionate to the wrong. Here, Williams had little ability to pay but did have a lawsuit with enough merit that he was about to proceed to trial against the police officer defendants. He also complained to the Illinois Attorney Registration and Disciplinary Commission about his attorney's conduct. As a result, his attorney was suspended from practicing law for a short time and ordered to pay the sanctions, which he did. Under these circumstances, the dismissal of the complaint was an unreasonable sanction.

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HUON v. JOHNSON & BELL (September 21, 2011)

The law firm of Johnson & Bell fired associate Meanith Huon in early 2008. Huon filed charges with the EEOC and the Illinois Department of Human Rights. He also filed suit in state court against several attorneys and the firm, alleging defamation and intentional infliction of emotional distress. The state court dismissed the complaint on the ground that the allegedly defamatory statements were protected by either the qualified or absolute privilege. Huon appealed that decision. Meanwhile, Huon asserted race and national origin discrimination claims, and a state claim for tortious interference with prospective business relationship, in federal court, again naming the firm and several of its attorneys. The defendants moved to dismiss or, in the alternative, to stay under the Colorado River abstention doctrine. Judge Manning (N.D. Ill.) concluded that both suits arose out of the same core facts but that the lack of a final judgment in the state court case did not yet bar the federal case. She therefore decided to stay the federal case pending the resolution of the state appeal. Huon appeals.

In their opinion, Seventh Circuit Judges Posner, Rovner, and Wood vacated the stay and remanded for further proceedings. The Court noted that the Colorado River doctrine is a very narrow exception to a court's "virtually unflagging obligation" to exercise its jurisdiction. It is appropriate only in the most exceptional circumstances. The principal question is whether the cases are parallel and would be resolved by examining the same evidence. The Court concluded that much of the evidence Huon would need to prove discrimination would be irrelevant to his state court defamation and emotional distress claims. Even if the cases were parallel, the Court emphasized the exceptional circumstances required to justify a stay. The Court identified 10 factors in Adkins, many of which were not considered by the district court and those that were considered were considered rather perfunctorily. In any event, the Court concluded that the district court focused on the potential future res judicata effect of the state court appeal. That is not enough to justify the stay. The Court remanded the case to the district court "for another look."

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STANARD v. NYGREN (September 19, 2011)

H. Michael Stanard and his wife built an outdoor amphitheater on property they owned in rural McHenry County, Illinois. For years, they hosted public events there, including a 40th anniversery tribute to Woodstock  in 2009. They brought suit against the Sheriff of McHenry County and 22 of his deputies, as well as the County itself, alleging that Sheriff Nygren forced them to use County deputies for security at these events at inflated rates. The original complaint contained 28 counts, asserting, among others, §§ 1983 and 1985 claims, RICO claims, and state law claims. The complaint made no effort to identify which defendants were guilty of what conduct. The defendants moved to dismiss the complaint pursuant to Rule 12(b)(6). After missing numerous deadlines to respond, the plaintiffs finally responded almost six months late. Judge Kapala (N.D. Ill.) granted the motion. He dismissed several frivolous counts with prejudice and dismissed others without prejudice, giving plaintiffs' attorney an opportunity to be plead more concisely. Again, plaintiffs missed deadlines before filing a motion for leave to file an amended complaint. Very few of the original complaint's deficiencies were corrected. Even some specific concerns addressed by the district court in its original ruling were ignored. The court denied the motion but gave plaintiffs yet another chance. Again, plaintiffs filed an amended complaint without correcting the complaint’s fundamental deficiencies. The district court dismissed the federal claims with prejudice. Plaintiffs appeal.

In their opinion, Seventh Circuit Judges Manion, Rovner, and Sykes affirmed. The Court first noted that plaintiffs' counsel's inability to meet deadlines spilled over into the Seventh Circuit. Notwithstanding three extensions, the brief was filed late and without a proper jurisdictional statement. The Court turned to the merits. It noted that the Rules 8 and 10 pleading requirements are meant to ensure that a complaint puts the defendant on notice of the claims against him. When a complaint is unintelligible and lacks the coherence and organization to put a defendant on notice, dismissal is an appropriate remedy. The Court concluded that the Stanard’s complaint was just that. It cited the numerous sentences in excess of 100 words, the lack of any cohesive core allegation against the defendants, the numerous conclusory allegations, and the grammatical errors, just to name a few. Plaintiffs were given two opportunities, with specific instructions, to correct these deficiencies and failed to do so. Although leave to amend a complaint is normally allowed, the district court did not abuse its discretion in dismissing the complaint under these circumstances. In addition to affirming the dismissal, the Court ordered plaintiffs' counsel to show cause why he should not be disciplined and ordered the clerk to forward a copy of its opinion to the Attorney Registration and Disciplinary Commission of Illinois.

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NELSON v. NAPOLITANO (September 15, 2011)

Herman Nelson and two other federal air marshals brought suit against the Department of Homeland Security, alleging age and race discrimination and retaliation. While the suit was pending, but before the DHS had answered the complaint, one of the plaintiffs was arrested and charged with sexual assault. Fearing that that fact might negatively affect their lawsuit, the plaintiffs voluntary dismissed their complaint under Rule 41(a)(1)(A). Nine months later, after the statute of limitations had run, the plaintiffs moved under Rule 60(b) to “reinstate the complaint.” Judge Dow (N.D. Ill.) denied the motion. Plaintiffs appeal.

In their opinion, Seventh Circuit Judges Kanne, Rovner, and Sykes affirmed. Although a voluntary dismissal under Rule 41 is generally treated as if the underlying case were never filed, the district court retains jurisdiction to consider a Rule 60(b) motion. So the district court did have jurisdiction to consider the motion. The Court concluded, however, that the district court did not abuse its discretion in denying it. Rule 60(b) allows the court to provide relief for several stated reasons. The plaintiffs never identified which basis it relied on – nor did it make any argument in support of any particular basis. In fact, plaintiffs' counsel mistakenly thought that federal practice mirrored Illinois practice. Under Illinois practice, he would have had a one-year safe harbor within which to refile his complaint. The district court was well within its discretion to determine that counsel's misunderstanding of federal practice did not justify Rule 60 relief.

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PAUL v. MARBERRY (September 6, 2011)

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

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

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NORINDER v. FUENTES (September 6, 2011)

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

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

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

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

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

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

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

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

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

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HAURY v. LEMMON (August 25, 2011)

Michael Haury, an Indiana prison inmate, filed a pro se lawsuit alleging that prison personnel interfered with the delivery of his legal mail and also failed to provide a sufficient law library. Judge Miller (N.D. Ind.) denied his request to proceed in forma pauperis. He concluded that Haury had "three strikes" under the Prison Litigation Reform Act of 1995. Haury appeals.

In their opinion, Seventh Circuit Judges Coffey, Rovner, and Hamilton reversed and remanded. The Prison Litigation Reform Act does bar an inmate from filing a civil suit and proceeding in forma pauperis if he has three "strikes" -- that is, if three prior lawsuits were dismissed as frivolous, malicious, or for failing to state a claim. Here, Haury's third strike is a 1991 case that the court below described as being dismissed as "frivolous for want of jurisdiction." The Court noted that that was not entirely accurate. In fact, although a portion of the 1991 complaint was dismissed for failure to state a claim, two claims were dismissed for lack of jurisdiction. The judge who dismissed the case did not characterize the case is frivolous. The PLRA does not list lack of jurisdiction as a basis on which to impose a strike. The Court noted that the D.C., Ninth, and Second Circuits have all concluded that dismissal for lack of jurisdiction does not amount to a strike (unless, of course, the assertion of jurisdiction as frivolous). The Court was persuaded by its sister circuits’ reasoning and concluded that the district court erred in denying in forma pauperis status.

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SIERRA CLUB v. KHANJEE HOLDING (US) (August 24, 2011)

Franklin County Power wanted to build a coal power plant in southern Illinois. It applied to the Illinois Environmental Protection Agency for a permit in 2000. The EPA issued the permit. By its terms, the permit would become invalid if construction was not commenced within 18 months. Khanjee Holding became lead developer for the project in 2002. The project was delayed due to collateral disputes. In late 2004, the EPA determined, at least on a preliminary basis, that the permit had expired. Sierra Club filed suit to prevent construction of the power plant. The district court granted the motion for summary judgment and enjoined construction. The Seventh Circuit affirmed (opinion and intheiropinion), concluding that Sierra Club had standing to sue, that the defendants failed to commence construction within the required 18 months, and that the permit had expired. Sierra Club sought penalties and fees in the district court. Judge Gilbert (S.D. Ill.) imposed a $100,000 statutory penalty and awarded attorneys fees and costs. Khanjee appeals.

In their opinion, Seventh Circuit Judges Bauer, Ripple, and Williams affirmed. The Court first addressed Khanjee's challenge to subject matter jurisdiction under the Clean Air Act. It noted that it had decided the jurisdictional issue in the first appeal and that it had become the law of the case. It rejected Khanjee's argument that the doctrine did not appy to subject matter jurisdiction, although it recognized some earlier precedents that suggested as much. On the merits, the Court concluded that Khanjee had waived its constitutional violation claims and was left only with its claim that its relationship with the other original defendants was insufficient to support a penalty. The Court rejected that argument both on the law of the case doctrine and, alternatively, on the merits. Even if, as Khanjee argues, the Claim Air Act citizen suit provision allows an action only against an owner or operator, Khanjee exercised enough control over the project that it can be considered an owner or operator. With respect to the size of the penalty, the Court concluded that the district court considered all the appropriate factors and imposed a reasonable penalty. Finally, the Court found that the district court did not abuse its discretion in awarding fees and costs. It rejected Khanjee’s argument that a court should not award fees to "well-funded" parties.

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ANCHORBANK v. HOFER (August 18, 2011)

Clark Hofer was an AnchorBank employee. Through his employer, he had an individual 401(k) account. One of the investment options in the account was the AnchorBank Unitized Fund, which consisted of cash and AnchorBank stock. In late 2008 and early 2009, Hofer and two colleagues, also bank employees, engaged in trades in the Fund. AnchorBank and the Trustee of the Fund brought suit against Hofer, alleging violations of Sections 9(a) and 10(b) of the Securities Exchange Act of 1934, Wisconsin securities law, and common law claims for breach of fiduciary duty and unjust enrichment. Magistrate Judge Crocker (W.D. Wis.) dismissed the complaint with prejudice. He concluded that plaintiffs failed to meet the loss causation pleading requirements. Plaintiffs appeal.

In their opinion, Seventh Circuit Judges Manion, Wood, and Williams reversed and remanded. The only issue on appeal was the sufficiency of the complaint. The Court noted that plaintiffs had to satisfy the Federal Rules of Civil Procedure 8(a) and 9(b) general pleading requirements, the Securities Exchange Act of 1934 sections 9(a) and 10(b) pleading requirements, and the Private Securities Litigation Reform Act pleading requirements. The Court concluded that plaintiffs satisfied the Rule 8(a) short and plain statement requirement and the Rule 9(b) fraud with particularity requirement. With respect to the latter, the Court noted that the complaint described the setup of the Fund, how it bought and sold stock on the open market, how it maintained its cash-to-stock ratio, how Hofer and his colleagues used their knowledge of Fund practices to buy and sell in ways that affected the price of the underlying stock, and how Hofer and his colleagues enjoyed extraordinary gains in doing so. The Court turned to the pleading requirements of the Securities Exchange Act and the PSLRA. On appeal, Hofer asserts that the complaint failed to adequately allege scienter, reliance, economic loss, and loss causation. The Court disagreed. It summarized the particular allegations of the complaint and found each of the elements adequately alleged. It noted that Hofer had competing explanations for his conduct that could affect scienter and reliance -- but rejected the assertion that they justified dismissal of the complaint. The Court also conceded that general economic conditions could have contributed to the dramatic decline in the value of AnchorBank stock. A plaintiff need not allege or prove that its entire loss is the result of the defendant's conduct -- only that it is a plausible cause of some of the loss.

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DURAN v. TOWN OF CICERO (August 9, 2011)

Alejandro and Maria Duran threw a party at their Cicero, Illinois home to celebrate their daughter’s baptism. Close to 100 people attended. The Cicero police received two telephone complaints from neighbors. Shortly after the Cicero police responded to the second complaint, the party guests and the police exchanged heated words. Once the police actually entered the property, ostensibly to make an arrest, the verbal melee became a physical one. Seventy-eight guests claim they were physically injured and several police officers required medical treatment. The police made seven arrests but there were no convictions. The 78 injured guests brought suit against 17 police officers and the Town of Cicero pursuant to § 1983 and Illinois law. They also asserted a spoliation of evidence claim based on the police's confiscation of two video cameras, one that was returned but that did not contain any footage of the physical confrontation and one that was not returned that did contain footage of the confrontation. Before trial, Cicero stipulated to his liability under § 1983 and to its vicarious liability on the state law claims. The jury returned verdicts in favor of 23 plaintiffs, on which the court entered judgment. The court then tried to spoliation case. It excluded from that case the issue of the returned video camera, rejecting plaintiffs' theory that preventing the creation of evidence amounts to spoliation. Cicero filed a Rule 59 motion to amend the judgments pursuant because they appeared to list separate awards against both the individual defendants and Cicero for the same injuries. Judge Grady (N.D. Ill.) denied the motion. Cicero appeals the denial of the Rule 59 motion. The plaintiffs cross-appeal.

In their opinion, Seventh Circuit Judges Ripple, Manion, and Sykes vacated and remanded in part and affirmed in part. The Court first addressed Cicero's appeal. It noted the fundamental principle that a plaintiff is only entitled to one recovery for his injuries. Here, Cicero had stipulated to its liability and that issue should not have been submitted to the jury. It was -- and they were obviously confused. In addition, instructions and special verdict forms asked damages to be assessed by defendant or by claim and not for a particular injury to a particular plaintiff. A Rule 59(e) motion is a proper way to correct a manifest error of law such as this. The Court concluded that it was reasonably clear what the jury was trying to do and remanded for an amended judgment to eliminate any possibility of double recovery. The plaintiffs raise three issues on appeal: the exclusion of the videotape, the exclusion of misconduct complaints against one defendant, and the exclusion of a civil rights conviction against another defendant. First, the Court agreed with the district court that the evidence regarding the returned video camera was properly excluded. Spoliation occurs only when one fails to preserve existing evidence. Here, plaintiffs argue that the videographer would have continued recording the physical melee, creating valuable evidence for trial. That does not amount to actionable spoliation in Illinois. Second, the Court concluded that the district court did not abuse its discretion in excluding four misconduct complaints accusing one of the defendants of verbally abusing minorities. The Court noted the substantial leeway a district court has in ruling on an issue like this that requires a balancing of the evidence’s probative value with its prejudicial effect. Third, the plaintiffs sought to introduce a criminal conviction on a civil rights charge against another officer. They argued admissibility under either Rule 609(a)(1) or 609(a)(2). The Court concluded that plaintiffs forfeited their (a)(1) argument because they did not renew it at trial after the court's conditional pretrial ruling excluding it. With respect to (a)(2), the Court concluded that, although there was some evidence of an attempted cover-up, the crime with which the officer was charged and convicted did not involve dishonesty.

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

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

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

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

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

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

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

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

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

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TOWNSQUARE MEDIA v. BRILL (July 21, 2011)

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

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

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CARDENAS v. CITY OF CHICAGO (July 20, 2011)

Chicago Police Officer Alejandro Gallegos obtained a search warrant that authorized a search of Maria Cardenas' apartment. Gallegos and other officers executed the warrant on December 14, 2007. According to Cardenas' complaint, the officers entered without knocking, threatened Cardenas and others with guns, and searched recklessly. They found nothing and left. Cardenas and the other apartment occupants filed suit against Gallegos and the City of Chicago. The Cook County Sheriff successfully served the City. They attempted to serve Gallegos through the Police Superintendent's Office but the summons was returned unserved in May 2008. In November, plaintiffs’ counsel wrote to the City’s counsel and asked the City to waive service on Gallegos or to provide his home address. In a telephone conversation in December, the City’s counsel informed plaintiffs’ counsel did it could not do the former and would not do the latter. The City and Gallegos moved to dismiss in September of 2009. Gallegos sought dismissal because he had never been served. The City sought dismissal under the Tort Immunity Act on the grounds that the City could not be liable for Gallegos's actions where Gallegos himself is not liable. Plaintiffs opposed the motion and also obtained an alias summons that they served properly through the Police Department’s Office of Legal Affairs on November 9. Judge Norgle (N.D. Ill.) granted the motions to dismiss. He concluded that plaintiffs had not served Gallegos in a timely manner and found no good cause that would support an extension. He also agreed with the City that there was no municipal liability without Gallegos in the case. Plaintiffs appeal.

In their opinion, Judges Posner, Kanne, and Hamilton affirmed. Any person that files a lawsuit has 120 days within which to serve a copy of the summons and complaint on each defendant. A district court judge has the discretion to extend the 120-day period if there is a showing of good cause. The Court noted that it reviewed such decisions on an abuse of discretion standard. The Court first rejected plaintiffs' contention that the May 2008 attempted service on the Superintendent was sufficient. That attempt occurred before the case was removed so Illinois law applies. Under Illinois law, service on a defendant’s employer is not sufficient. Next, the Court found no abuse of discretion in the denial of an extension. It is clear that the district court considered a number of factors, including the fact that the expiration of the statute of limitations would bar a refiling of the suit. The plaintiffs did not perfect service for over a year and a half after filing the suit, they took very few steps to attempt to do so, and they knew of the consequences of the failure to do so. The Court could not conclude that the district court abused its discretion in failing to grant an extension. Finally, the Court conceded that a dismissal of this type is usually made without prejudice. Here however, where the statute of limitations has run, a dismissal with prejudice is appropriate.

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LOGAN v. WILKINS (July 8, 2011)

John Logan used to own a mobile home park in east-central Indiana. He claims that he no longer owns it as a result of the conduct of various local government officials and employees. Beginning in 2005, he says, these people started rumors that the health department was going to close the park, told the tenants to stop paying rent, obtained an order for the destruction of thirteen homes, hired an inept contractor who ended up destroying fourteen homes, and stole property. In September 2007, he lost the mobile home park to foreclosure. He also claims that the sheriff had someone order the tenants to vacate after the foreclosure. Logan brought suit in March of 2009 pursuant to §§ 1983 and 1981. Judge Lawrence (S.D. Ind.) dismissed the complaint. He found most of the allegations untimely under § 1983's two-year statute of limitations. The only claims within the two-year period related to the post-foreclosure conduct. Since Logan no longer own the property at that time, he had no claim. In an amended complaint, Logan alleged that the defendants concealed their conspiracy. The district court again dismissed. Logan appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Williams affirmed. In Indiana, the statute of limitations for a § 1983 claim is two years and it runs from the time a plaintiff knew or should have known of a constitutional violation. A defendant may be estopped from asserting a statute of limitations defense if the defendant has concealed material facts from the plaintiff. Logan has not alleged any such facts on the part of the defendants. He simply claims that his attorney was prompted to investigate upon receiving some information at some point after the conduct occurred. But Logan and his attorney knew of the facts as they occurred and they could have investigated earlier. With respect to the post-foreclosure claims, the Court stated that Logan waived any argument by not addressing the claims in his opening brief. The Court added that no facts were alleged to support Logan's conspiracy theory. Finally, the Court declined Logan's request to remand for an opportunity to amend his complaint once again.

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ALIOTO v. TOWN OF LISBON (July 7, 2011)

Two Lisbon, Wisconsin supervisors asked Sergeant Tom Alioto to investigate his boss, the police chief. Alioto did so and submitted a report, apparently implicating the chief in unlawful behavior. Lisbon suspended the chief and made Alioto the acting police chief. Shortly thereafter, under threat of litigation, the town reinstated the chief. Alioto claims that the chief got revenge by defaming him in the press, pursuing baseless criminal charges with the district attorney, and imposing unreasonable requirements when Alioto wanted to return to the department after a medical leave. Alioto brought suit against Lisbon and the chief under § 1983, alleging violations of his "constitutional rights." When the defendants challenged the allegations and moved for judgment on the pleadings, Alioto agreed to a briefing schedule. On the day the brief was due, however, Alioto did not respond to defendants' arguments. Instead, he moved to file an amended complaint. Judge Stadtmueller (E.D. Wis.) denied the motion for leave to amend and granted defendants' motion to dismiss. He concluded that Alioto waived any arguments on the merits by not respond to defendants’ motion and failed to show good cause for leave to amend. Alioto appeals.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Rovner affirmed. The Court noted that Rule 15(a)(2) contains a fairly lenient standard for granting leave to file an amended complaint. But Rule 16 requires a court to set a scheduling order with a deadline for amended pleadings, which the court did in this case. The scheduling order set a November 2008 deadline for amended pleadings. Rule 16(b)(4) requires good cause to modify a scheduling order. Here, Alioto requested leave to file his amended complaint months after the deadline. The district court was correct in evaluating his request under the standards both of Rule 16 and Rule 15. The court did not abuse its discretion in finding an absence of good cause. The principle good cause factor is diligence. Here, not only did Alioto request leave several months after the deadline, he waited until the last day of the briefing schedule to even advise the court and the defendants of his request. With respect to the motion to dismiss, the Court also affirmed. Not only did Alioto not respond to any of defendants' arguments in the district court, he never really addressed the waiver argument on appeal.

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COSTELLO v. GRUNDEN (June 28, 2011)

Several senior Comdisco, Inc. employees participated in the company's shared investment plan (SIP) program. Under the program: a) participants purchased Comdisco stock, b) the purchase was funded exclusively by personal loans, c) the participants executed promissory notes in their personal capacities, d) Comdisco guaranteed the loans, e) the lender remitted the loan proceeds directly to Comdisco, f) Comdisco held the shares, g) there were several restrictions on the ability to sell the stock, and h) participants delivered a blank stock power to Comdisco. Although some SIP participants later sold their stock and made healthy profits, others were still holding the stock when Comdisco went into bankruptcy. As part of the settlement on the guarantee, the lender assigned its rights under the notes to the Comdisco Litigation Trustee. The Trustee brought suit against the participants and moved for summary judgment against two of them. Judge Gettleman (N.D. Ill.) granted the Trustee's motion for summary judgment, rejecting the defendants' defenses. The court then granted the Trustee's motion for summary judgment against the remaining defendants on the bases of his earlier ruling and his rejection of the additional defense. Defendants appeal. The Seventh Circuit issued an opinion on October 18, 2010. On June 16, 2011 the Court granted a petition for panel rehearing and vacated the October opinion and judgment.

In their opinion, Judges Kanne, Rovner, and Tinder vacated the summary judgments in favor of the Trustee and remanded for further proceedings. The defendants raised several arguments on appeal. First, the defendants argued that the district court erred in not allowing them to assert violations of Regulations G and U as affirmative defenses. The Court agreed. It concluded that a private right of action under either § 7(d) or § 29(b) is not a prerequisite to asserting a violation of Regulation G or U as an affirmative defense. It also concluded that the "zone of interests" prudential standing requirement does not apply when a party uses a violation of the statute or regulations defensively. Second, the defendants argued that the district court erred in concluding that Comdisco and the lender did not violate the regulations. Again, the Court agreed. With respect to Comdisco, the Court concluded that the Trustee did not raise it in his summary judgment papers. With respect to the lender, the Court identified genuine issues of fact with respect to the good faith non-reliance exception. Third, the defendants challenged the summary judgment ruling on the § 10(b) illegality defense. The Trustee originally only argued that the defendants could not prove falsity. In his reply brief, he then argued that defendants had to establish all elements of the defense. The Court concluded that the defendants did not have to present their evidence on the other elements of the defense and that the district court erred in granting summary based on lack of scienter. The Court also held that the district court erred in applying a heightened "strong inference" of scienter requirement. Fourth, the defendants argued that the notes are unenforceable due to violations of § 17(a) of the Securities Act. Because the Trustee defended the district court's ruling only on lack of scienter, the Court vacated the judgment for the same reasons it vacated with respect to the illegality defense. Fifth, the defendants challenged the district court's extension of its ruling with respect to the first two defendants to the other defendants. The district court's ruling with respect to the first two defendants was that the misrepresentations were expressions of legal opinion and therefore could not support a fraud claim. But the later defendants identified an exception to that general rule. The district court erred in that it never considered the argument. Finally, the defendants argued that the district court erred in granting summary judgment on their excuse-of-nonperformance defense. Based on its earlier rulings that summary judgment on the counts alleging statutory and regulatory violations was improper, the Court also concluded that summary judgment on the excuse-of-nonperformance defense was improper.

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ABM SECURITY SERVICES v. DAVIS (June 16, 2011)

ABM Security Services’ employees filed a class action against the company in Illinois state court. The complaint alleged that ABM violated the Illinois Minimum Wage Law by not compensating its employees for time worked before and after their shifts. ABM filed a notice of removal in which it calculated the amount in controversy to be in excess of $10 million. It reached that amount by multiplying minutes per day of alleged unpaid time by number of employees by average wage. It then added the 2% statutory penalty. It also noted that that number could increase by $1.5 million if overtime calculations were used. Judge Shadur N.D. Ill.) asked ABM to recalculate the number, excluding employees who opted into a California class-action. ABM filed an amended notice with calculations of approximately $5.2 million (straight time) and $7.8 million (overtime). The court asked for still additional information and instructed ABM to exclude vacation and sick days. ABM's new number was approximately $5.2 million. The court again disagreed, particularly with the penalty calculation. It did its own calculation and came up with a number approximately $5,000 short of the $5 million amount in controversy requirement. Additionally, the court concluded that class counsel could not have done $5,000 worth of legal work to make up that deficit. He remanded the case to state court. ABM petitions for permission to appeal.

In their opinion, Judges Bauer, Kanne, and Sykes granted the petition, reversed, and remanded. The Court stated the standard -- once the removing party offers a plausible explanation for reaching the $5 million threshold, the case should remain in federal court unless that recovery amount is legally impossible. Here, the Court found that ABM's calculations were reasonable and also found its interpretation of the statutory penalty reasonable. The district court did not establish that the recovery was legally impossible. It should not have remanded. Alternatively, the Court also criticized the district court's conclusion that attorneys’ fees incurred by plaintiffs up to the time of removal could not bridge the $5,000 gap.

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BANK OF AMERICA v. VELUCHAMY (June 16, 2011)

Pethinaidu and Parameswari Veluchamy owed Bank of America $39 million. When they defaulted, the Bank brought suit and obtained a judgment. The Bank began post-judgment proceedings to locate assets to satisfy the judgment. The Veluchamys were not very cooperative during those proceedings. They were slow in providing some information and refused to provide other information, asserting a Fifth Amendment privilege. Meanwhile, mostly through other sources, the Bank learned that the Veluchamys had transferred almost $20 million out of U.S. banks and into Indian banks. The Bank sought an emergency order requiring the Veluchamys to produce the transferred funds and to surrender their passports until they did so. Judge Shadur (N.D. Ill.) granted the Bank's request and ordered the Veluchamys to relinquish their passports. The Veluchamys appeal.

In their opinion, Judges Posner, Kanne, and Tinder affirmed. The Court first addressed its jurisdiction since the order obviously was not a final judgment. The Court concluded that it met the requirements for the collateral order exception -- it conclusively determined a question, the question is separate from the merits, and the decision would be unreviewable after a final judgment. A district court's powers in a post-judgment proceeding are governed by state law. Illinois law provides a number of tools, including the power to compel a party to produce funds under its control. The Court concluded that the power to compel a party to produce funds implied a power over the party itself. The Court emphasized that the such power is minimal and should be exercised only when necessary. Here, the Veluchamys had transferred most of their funds out of the country, they seemed to have significant assets in India and elsewhere, and they were reluctant to provide information about their assets. The Court concluded that this was the rare case where an order to surrender passports was warranted.

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PHILOS TECHNOLOGIES v. PHILOS & D, INC. (June 15, 2011)

In late 2008, Philos Technologies brought suit for conversion against a South Korean company and two South Korean individuals. All the defendants were served but none appeared. Instead, the two individuals sent an informal letter to the court. In it, they claimed to have no relationship with Philos, that their relationship was with a Korean company, and requested dismissal of the lawsuit. The district court eventually entered a default judgment in Philos's favor for almost $3 million. Eleven months later, defendants moved to vacate the default judgment under Rule 60(b)(4) on the ground that the court lacked personal jurisdiction over the defendants. Judge Hibbler (N.D. Ill.) denied the motion, apparently as untimely, without reaching the merits of the jurisdiction question. Defendants appeal.

In their opinion, Judges Cudahy, Manion, and Hamilton reversed and remanded. The Court first addressed its standard of review. Although a Rule 60(b)(4) motion is usually reviewed with a somewhat deferential abuse of discretion standard, it is a per se abuse of discretion to deny such a motion if the underlying judgment is void. The Court turned to the timeliness issue. It noted the two options a defendant has to challenge personal jurisdiction. On the one hand, a defendant can appear and object and, if unsuccessful, take a direct appeal. On the other hand, a defendant can risk a default judgment and later challenge that judgment under Rule 60. That collateral challenge can be taken at any time. One thing a defendant may not do, however, is take advantage of both strategies. A defendant may not, for example, appear, challenge jurisdiction, abandon the challenge, and then reassert the challenge under Rule 60. Thus, the critical issue is whether the defendants' informal letter constituted an appearance. The answer is easy with respect to the Corporation because a Corporation cannot appear pro se. The Court also concluded that the individual defendants did not appear, applying the less stringent pro se filing standard. An appearance generally requires an indication that the defendant is going to defend the suit. Here, to the contrary, the Court found that defendants' letter was their explanation why they were not going to defend the suit. On the merits of the jurisdictional issue, the Court remanded to the district court for its consideration.

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LEWIS v. SCHOOL DISTRICT #70 (June 1, 2011)

After School District #70 fired Debra Lewis, she brought suit. She alleged, among other things, violations of the Family and Medical Leave Act. Although her employer prevailed in the district court, the Seventh Circuit reversed the FMLA and breach of contract counts. On April 25, 2009, on remand, the parties orally agreed to a settlement in the presence of a magistrate judge. Within weeks, however, Lewis learned that the school superintendent had been accused and was under investigation for child molestation. Lewis refused to sign the settlement agreement. Judge Stiehl (S.D. Ill.) granted defendants' motion to enforce the oral settlement and, when Lewis continued to refuse to sign the agreement, he dismissed the case with prejudice. Lewis appeals.

In their opinion, Circuit Judges Bauer and Williams and District Judge McCuskey affirmed. Illinois enforces oral settlement agreements if there is an offer, acceptance, and a meeting of the minds on its terms. Given the record in open court before the magistrate judge, the Court had no difficulty in finding each element. Lewis also argued that the agreement should be set aside because of the defendants' "fraud." The Court agreed that a contract could be set aside when there is evidence of fraud in the inducement but found the materiality element lacking here. Although the Court conceded that knowledge of the investigation could have given Lewis more bargaining power and possibly a more valuable settlement, it would have been unrelated to the defendants' conduct in terminating her employment. The Court turned to the sanction imposed by the district court. Although it believed the result "unfortunate" and noted that Lewis turned a substantial recovery into nothing, the Court found no abuse of discretion. The district court ordered Lewis to sign the settlement agreement several times and it warned her that not doing so could result in dismissal and sanctions. Only after eight months had passed did he dismiss the case.

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JOHNSON v. CYPRESS HILL (June 1, 2011)

In 1993, hip-hop group Cypress Hill released its "Black Sunday" album. One of its tracks includes an excerpt of a song written years earlier by Syl Johnson, an African-American blues and soul singer. The history of the song -- "Is It Because I'm Black" -- is as follows: a) Johnson wrote the song in 1968, b) Twinight Records released a recorded version in 1969, c) Johnson recorded the song in 1972 but never released it in the United States, d) Johnson received a copyright registration in 1997 for a sound recording compilation that he thought included the song but did not, and e) a copyright was registered in 2003 on the words and music. Johnson filed suit against Cypress Hill in 2003, alleging copyright infringement based on the 1997 sound recording compilation copyright. In 2006, the owner of Twinight Records filed a declaration that the 1997 copyright did not include the song. In 2007, a Cypress Hill member testified that he used the 1969 version. Cypress Hill moved for summary judgment on the grounds that pre-1969 sound recordings are not protected under the Copyright Act and that the 1997 copyright did not include the song. Johnson moved to amend his complaint, dropping his original claims and substituting claims for common-law misappropriation and infringement of the 2003 composition copyright. Judge Norgle (N.D. Ill.) denied the motion to amend and granted summary judgment to Cypress Hill. The court also awarded attorneys' fees and costs on the ground that the complaint was baseless. Shortly thereafter, Johnson reasserted his misappropriation claim in a new case in state court (Johnson II). Cypress Hill removed the case to federal court and moved to dismiss on res judicata grounds. The court dismissed. Johnson appeals both orders.

In their opinion, Judges Manion, Evans, and Hamilton affirmed. The Court first concluded that the district court did not abuse its discretion in denying the motion to amend. Johnson knew that his claims were deficient for months, if not years, before he sought to amend his complaint. The case was four years old, discovery was long closed, and a summary judgment motion was on file. Allowing such a radical change of direction at that stage in the case would have been prejudicial to Cypress Hill. With respect to the fee award, the Court concluded that Johnson could not overcome the strong Copyright Act presumption to award fees to a prevailing party. Finally, the court affirmed the dismissal of Johnson II on res judicata grounds. Although the latter case involved a different legal theory, the facts in both cases are identical. That is enough to satisfy the identity of cause of action requirement.

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WALTON v. BAYER CORPORATION (May 23, 2011)

Cathy Walton alleges that she suffered serious injuries as a result of taking a prescription drug manufactured by a Bayer Corporation affiliate and sold at a pharmacy operated by Niemann Foods. She brought suit against Bayer and Niemann in Illinois state court, alleging that the two defendants failed to warn of the drug's serious side effects. Although Niemann is an Illinois citizen, Bayer removed the case to federal court on the grounds that Niemann was improperly joined. Chief Judge Herndon (S.D. Ill.) denied Walton's request to remand and dismissed Niemann, with prejudice. Walton abandoned prosecution of the suit after that order. The court later dismissed the suit with prejudice when Walton refused to comply with a discovery order. Walton appeals.

In their opinion, Judges Cudahy, Posner, and Manion affirmed. The Court first confirmed its own appellate jurisdiction, notwithstanding Bayer's argument that Walton should not be allowed to turn a non-appealable interlocutory order into an appealable order by abandoning the case. The Court distinguished the cases Bayer cited and concluded that there was nothing wrong with her tactic. She should be allowed to risk her claim's success on being right about jurisdiction. The Court next turned to the question of the district court's jurisdiction. It rejected Walton’s first argument that the complaint did not meet jurisdictional amount. Her alleged injuries are quite serious and suggest that she is seeking at least the jurisdictional amount -- and she has not exercised her absolute ability to defeat removal by committing to accept no more than the jurisdictional amount. The Court also rejected her argument that a minor procedural defect precluded federal jurisdiction. The Court turned to her principal argument -- lack of complete diversity. Walton argued both that Niemann was a proper defendant and that, if it was not, fraudulent joinder's "common defense" exception applied. With respect to the first of those arguments, the Court looked to the "learned intermediary" doctrine, under which one's prescribing physician is principally responsible for warning a patient of a drug's side effects and a manufacturer is excused from any obligation to warn. Under Illinois law, a pharmacy like Niemann is only obligated to warn a customer of risks that are known to it but possibly unknown to the prescribing physician (for example, potential interactions with other prescriptions dispensed by the pharmacy). Since Walton did not allege that Niemann had such knowledge, Niemann had no obligation to warn and was properly dismissed. With respect to Walton's second argument, the Court turned to the common defense exception to fraudulent joinder. Under that doctrine, if a plaintiff makes identical claims against both the diverse and non-diverse defendants, a fraudulent joinder argument is really an attack on the merits of the entire case. That attack must be resolved in the state court. If, therefore, Bayer and Niemann both have the same learned intermediary defense, it must be resolved in state court. That is not the case, however. Walton alleges that Bayer concealed the drug's side effects, even from physicians. The two defendants therefore do not share a common defense, the exception to fraudulent joinder does not apply, and the district court properly dismissed Niemann. As an aside, the Court noted that a Walton victory based on the common defense exception in the appellate court would have resulted in a remand, only for Walton to lose in state court. The doctrine of judicial estoppel would not allow Walton to argue in the appellate court that her claims against Bayer and Niemann were identical and then argue in state court that her claim against Bayer was different.

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COMMODITY FUTURES TRADING COMMISSION v. LAKE SHORE ASSET MANAGEMENT LTD. (May 11, 2011)

A bank located in tiny Andorra invested over $7 million in Lake Shore Asset Management's commodity trading pools. Instead of receiving account statements, the Bank monitored its account on Lake Shore's website. When the website was taken down in late 2007, the Bank made inquiry. It learned that Lake Shore's assets were frozen and that it was under investigation for fraud. The bank made some assumptions about the similarity of U.S. and Andorran law and did nothing. Meanwhile, the CFTC sued Lake Shore, obtained a default judgment, and placed Lake Shore’s remaining assets with a receiver. In early 2009, the receiver notified Lake Shore’s creditors that they had 45 days within which to file a claim. Although the notice to the Bank was addressed properly, it contained no individual's name. The Bank claims that it never received the notice. By the time it contacted the receiver, the claims window had closed and the receiver denied the claim. The Bank sought permission from the district court. Judge Manning (N.D. Ill.) rejected the request to be included in the asset distribution. GAMAG, another Lake Shore investor, did file a claim that was allowed on the same pro-rata basis as the other investors’ claims. GAMAG, however, claims that it is a creditor rather than a shareholder and is entitled to priority. Judge Manning rejected GAMAG's position. The Bank and GAMAG both appeal.

In their opinion, Judges Posner, Kanne, and Sykes affirmed. The Court first determined that the correct standard for deciding whether to allow the late claim is the "excusable neglect" standard contained in Rule 60(b)(1). The excusable neglect standard is an "all relevant circumstances" one, which the Court simplified: on the one hand are the excuse’s validity and the negative consequences to the Bank of denying the late claim -- on the other hand is the negative consequences to the other parties of granting the late claim. The Court concluded that the district court did not err in finding that the Bank did not have a good excuse. It knew about Lake Shore’s troubles and did nothing, it didn't include the name of a bank officer on its account statement to ensure successful notice, and it made inexcusable assumptions about the similarity of U.S. and Andorran law. Although the adverse consequences of losing its entire claim are great, they are not enough to conclude that the district court erred in denying the claim. The prejudice to the others is not having to pay the Bank’s claim, since all agree that the claim is valid if timely. Rather, it is the delay resulting from the recalculation of shares, additional approval of the district court, and the potential "hornets nest" that could be created by the recalculations. The Court concluded that the district court did not abuse its discretion in denying the claim. With respect to the GAMAG claim, the Court rejected the creditor-versus-shareholder argument. Although GAMAG did have a different kind of arrangement with Lake Shore than most of the other investors, the Court concluded that the differences were not of the kind to make it a creditor. Creditors enjoy priority because they give up any upside benefit. Here, GAMAG's deal with Lake Shore was identical to other shareholders in terms of the allocation of risk.

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UNITED STATES v. GEORGE A. WHITING PAPER CO. (May 4, 2011)

The Fox River flows through central and eastern Wisconsin. The river is heavily contaminated with PCBs. The most prevalent PCB is Aroclor 1242 but the river also contains Aroclor 1254 and 1260. The United States brought suit under CERCLA against 11 potentially responsible parties, including Appleton Papers Inc. and NCR, in 2009. Appleton and NCR are currently involved in a cleanup at the river and are seeking contribution from many other PRPs. The United States filed suit against several de minimis defendants and provided notice of proposed settlements. Appleton and NCR objected. After revising one settlement upward based on the objection, the United States moved for approval of the settlements. Appleton and NCR intervened. Judge Griesbach (E.D. Wis.) approved the settlements. Appleton and NCR appeal.

In their opinion, Circuit Judges Kanne and Tinder and District Judge Herndon affirmed. The Court first noted its "double dose" of deference. The district judge should approve the settlement if it is fair and reasonable and consistent with CERCLA. The Court, in turn, reviews that decision for an abuse of discretion only. The Court first concluded that there was a substantial amount of information in the record which provided a rational basis for the district court's conclusion. The Court then rejected, simply because it was false, appellants' contention that the government's comparative fault analysis did not include all PCB discharges. Finally, the Court concluded that Appleton and NCR failed to meet their "heavy burden" of showing that the government was wrong in its toxicity calculations. The district court did not abuse its discretion in finding those calculations reasonable.

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IN RE: MOTOROLA SECURITIES LITIGATION (May 4, 2011) 

Motorola created the Motorola 401(k) Profit-Sharing Plan for the benefit of its current and former employees. It is a defined contribution retirement plan. The Plan Administrator is the Profit-Sharing Committee, a committee appointed by the Motorola's Board of Directors. Plan participants decide how much to invest and where to invest among available funds. One of the available funds is a Motorola Stock Fund. Participants who invest in the stock fund do not acquired title to Motorola stock, but rather own a pro-rata share in the Fund. The Fund's assets are almost entirely Motorola stock. A number of plaintiffs initiated a class-action securities fraud case against Motorola in 2003 relating to its relationship with a Turkish wireless provider. The class was defined as including all persons "who purchased publicly traded Motorola, Inc. common stock" and specifically excluded any Motorola "affiliate." The parties settled the litigation for $190 million. The Plan submitted a claim for a share of the settlement. Judge Pallmeyer (N.D. Ill.) denied the claim on two grounds: first, Plan participants were not purchasers of "publicly traded" stock and second, the Plan was a Motorola "affiliate." The Plan intervened and appeals.

In their opinion, Circuit Judges Evans and Sykes and District Judge Simon affirmed. The Court disagreed with the district court on its "publicly traded" rationale. The district court found that the Plan was not a class member because plan participants did not purchase publicly traded stock. But it is the Plan that is the claimant here, and the Plan regularly purchased publicly traded Motorola stock. The Court agreed with the district court, however, on the "affiliate" issue, although not for the identical reason. The district court concluded that the Plan was an affiliate applying an ordinary usage definition of affiliate and concluding that the Plan and Motorola were closely associated. The Court chose to apply a securities law definition of affiliate. Under that definition, an affiliate is one who controls, is controlled by, or is under common control with another. Control is defined as the power to manage or direct. Motorola controlled the Profit-Sharing Committee and the Committee had general operational control of the Plan. The Court concluded that the Plan was excluded from the class as an affiliate under the class definition.

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CHICAGO REGIONAL COUNCIL OF CARPENTERS v. VILLAGE OF SCHAUMBURG (May 2, 2011)

The Village of Schaumburg, Illinois, owns the Schaumburg Renaissance Hotel. The Chicago Regional Council of Carpenters represents the hotel's housekeepers. On August 18, 2009, in the midst of stalled collective bargaining negotiations, the Union staged a demonstration. The local police allowed the demonstration to proceed after the Union agreed to follow a specified route and to control noise. When they attempted a repeat performance on August 31, the police turned them away. They filed suit on September 2 under § 1983 alleging a violation of their First Amendment rights. A couple of months later, the Village refused the Union's request to distribute pamphlets at the hotel. Both sides filed motions for summary judgment -- but the Union focused its argument on the pamphlet incident rather than the demonstration incident. Judge Lindberg (N.D. Ill.) granted summary judgment to the Village, concluding that the Union forfeited its claims regarding the demonstration and never amended its complaint to address the pamphlet issue. The court denied the Union’s belated request to amend its complaint. The Union appeals.

In their opinion, Circuit Judges Posner and Wood and District Judge Adelman affirmed. When the Union filed its complaint in September, it complained only of the August event. The Union never amended its complaint but was abundantly clear in its summary judgment papers that it was abandoning the August claims. The district court was correct in granting summary judgment on the August claim – the only claim before it. Although the Union could have and did request an opportunity to amend, the district court did not abuse its discretion in denying that belated request.

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MEJIA v. COOK COUNTY (April 22, 2011)

Michael Mejia was an inmate at the Cook County Jail on October 9, 2005. There was an incident that day and Mejia suffered contusions, lacerations, and bruises. There are significant factual disputes about the incident and the cause of his injuries. Mejia brought suit pursuant to § 1983 against the County and a number of jail employees, alleging excessive force in violation of the Constitution. The case proceeded to trial, where a jury found for the defendants. Judge Lefkow (N.D. Ill.) denied Mejia's motion for a new trial. She concluded that the weight of the evidence supported Mejia but that she could not grant the motion unless a reasonable person could not believe the testimony "because it contradicts indisputable physical facts or laws." Mejia appeals.

In their opinion, Judges Kanne, Wood, and Sykes vacated and remanded. The question presented to the Court was whether the district court applied the proper standard in its ruling on the motion for a new trial. A district court has the power to grant a new trial and should do so when the jury's verdict is against the manifest weight of the evidence. That is not the standard the district court used. Instead, it used the "indisputable facts” standard. But that standard is only used when the district court, in assessing the weight of the evidence, wants to take a piece of evidence out of consideration entirely. The Court noted that applying the "indisputable facts" standard to the weighing process generally would inappropriately raise the bar for a motion for new trial. Having concluded that the district court applied the long standard, the Court considered the County's argument that a remand would be futile because granting the motion would be an abuse of discretion and Mejia's argument that remand would be futile because the district court already decided that the verdict was against the manifest weight of the evidence. The Court rejected both extremes. With respect to the County's argument, the Court declined to express an opinion on the correct outcome once the proper standard is applied. With respect to Mejia's argument, the Court noted that the district court concluded only that the evidence tended to favor Mejia, not that the verdict was against the manifest weight of the evidence.

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BOURKE v. CONGER (April 19, 2011)

David Bourke was tried and convicted of murder in 1998. His attorneys, Scott Conger and Wayne Brucar, argued self-defense. The appellate court reversed his conviction on the grounds that the state did not disprove his self-defense claim. Bourke brought suit in federal court alleging that certain state officials suppressed evidence in violation of the Constitution and that his attorneys committed malpractice. He later dismissed all federal claims but the District Court retained is discretionary supplemental jurisdiction over the malpractice claim. The only surviving claim is that his attorneys did not adequately voir dire a potential juror about his views on firearms and alcohol. Bourke's expert concluded that his attorneys did not meet the applicable standard of care. Judge Zagel (N.D. Ill.) granted summary judgment to the attorneys, concluding that Bourke failed to establish that the attorneys' omissions were a but-for cause of the guilty verdict. Bourke appeals.

In their opinion, Judges Cudahy, Flaum, and Kanne affirmed. One of Illinois’ requirements for a legal malpractice claim is that the attorney's breach of duty proximately caused the damages. Here, Bourke had to show that, but for the malpractice, he would have prevailed at trial. The Court recognized that Illinois courts generally prefer to have juries decide proximate cause but added that those same courts do not hesitate to decide it when there are no factual issues. Here, the only evidence in support of the causation is the expert’s conclusion that there was a "reasonable likelihood" that the attorneys' conduct resulted in the guilty verdict. The Court noted that the expert provided no basis for that conclusion. When an expert report provides only conclusions, without supporting analysis or reasoning, it is not enough to create a genuine issue of fact. Summary judgment was proper.

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BLOMBERG v. SERVICE CORPORATION INTERNATIONAL (April 14, 2011)

Employees of Service Corporation International brought a class action in Illinois state court against their employer, alleging that it failed to properly compensate them for hours worked, in violation of the Illinois Wage Payment and Collection Act and the Illinois Minimum Wage Law. SCI removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). Judge Coleman (N.D. Ill.) remanded the case to state court on the grounds that SCI failed to establish the $5 million minimum amount in controversy required by CAFA. SCI petitions for permission to appeal.

In their opinion, Judges Posner, Wood, and Hamilton granted the petition and reversed and remanded. When one party challenges CAFA’s amount in controversy requirement, the other party must establish that fact by a preponderance of the evidence. The Court appreciated the difficulty a party has in establishing that fact when the plaintiff controls many of the facts and reveals little information about the scope of its claim. Here, SCI did provide some support for this jurisdictional fact. It cited deposition testimony in a similar case against it in another state regarding the number of allegedly unpaid hours. If the Illinois class members had similar allegedly unpaid hours, the threshold would be met. It also cited a Virginia case against it by significantly fewer class members wherein the class itself asserted CAFA jurisdiction. The Court found this evidence plausible and sufficient to support SCI's good faith estimate of the amount in controversy requirement. Unless it is legally impossible for them to recover $5 million, which the plaintiffs have not even argued, removal was appropriate.
 

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BACK DOCTORS LTD. V. METROPOLITAN PROPERTY AND CASUALTY INSURANCE CO. (April 1, 2011)

Back Doctors Ltd., a medical service provider, believed that Metropolitan Property and Casualty Insurance Co. used software that resulted in medical providers being underpaid for their services. Back Doctors filed suit in Illinois state court, on behalf of a class, alleging that Metropolitan breached its contracts with its insurers and violated the Illinois Consumer Fraud and Deceptive Business Practices Act. The suit asks for $2.9 million in damages. Metropolitan removed the case to federal court pursuant to the Class Action Fairness Act. Back Doctors moved to remand on the ground that their $2.9 million demand did not meet CAFA’s $5 million amount in controversy requirement. Judge Reagan (S.D. Ill.) agreed, stating that removal is disfavored and that Metropolitan had not demonstrated a "reasonable probability" that the $5 million threshold had been met. Metropolitan petitioned to appeal.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Evans granted the petition, vacated the remand order, and remanded. The Court first noted that the Supreme Court, in St. Paul Mercury, established the “amount in controversy” test in 1938 -- the threshold is met unless plaintiff cannot possibly recover the jurisdictional minimum. The Court then recited some of the history of the Circuit’s "reasonable probability" test in reference to the amount in controversy. It arose in 1993 in Shaw in reference to a plaintiff's burden to prove jurisdictional facts by a preponderance of the evidence. But the amount in controversy is not a jurisdictional fact, like where a company is incorporated or headquartered. After several years of misapplication, the Court tried to clarify the phrase in 2005 in Brill. When that failed, the Court eliminated the phrase entirely in 2006 in Sadowski. The Court even circulated the Sadowski opinion pursuant to Circuit Rule 40(e) so that it had the effect of an en banc decision. Unfortunately, there is obviously still some confusion. Having established the correct test, the Court asked whether a $5 million recovery was possible. It concluded that it was because of the possibility of punitive damages. Back Doctors, although it has not specifically asked for punitive damages, may still recover them. They have not disavowed them, they have cited no Illinois case disallowing punitive damage coverage when it is not pleaded, and they have a fiduciary duty to other class members to maximize the class recovery. The Court added that Illinois does have a procedure whereby a plaintiff can cap its relief. Back Doctors has not taking advantage of the procedure. Since a $5 million recovery is possible, removal was appropriate.

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LEE v. COOK COUNTY (March 22, 2011)

Twelve African-American Cook County employees believed that the County discriminated against them on account of their race in making promotions. They filed a charge with the EEOC. The EEOC issued right-to-sue letters in March 2008. The employees brought suit pursuant to Title VII in May of 2008, well within the 90-day window. Judge Castillo (N.D. Ill.) did not think that the twelve plaintiffs belonged in the same suit. So, in a September 18 order, he dismissed the complaint without prejudice and gave each individual plaintiff 40 days within which to file an individual action. But three of the plaintiffs waited over seven months before filing their individual actions. Judge Kendall (N.D. Ill.) and Judge St. Eve (N.D. Ill.) dismissed the individual actions as untimely. Plaintiffs appeal.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Posner affirmed -- and issued sanctions. The Court first pointed out that there was nothing improper about the original filing. Rule 20 only requires multiple plaintiffs to share a common question of law or fact, which we have here. It does not require that a common question predominate, as do the class action rules. The district court therefore erred when it dismissed the complaint. The plaintiffs should have appealed, but they did not. Instead, the plaintiffs waited several months, refiled, and appeal the dismissal of the refiled complaints. So the Court turned to the merits of the actual appeal and agreed with the district courts that refiled actions were untimely. First, the district court's order directing the plaintiffs to file individual actions within 40 days did not extend the statute of limitations or the EEOC filing window. Second, equitable tolling requires a litigant to pursue his rights diligently. Plaintiffs' lawyer did anything but. Third, the Court rejected plaintiffs' argument that the defendants either waived or waited too long to assert the limitations defense. Having resolved the merits of the case against the plaintiffs, the Court turned to their lawyer. It noted his "calamitous handling" of the case in the district court, the "sloppy performance" in the appellate court, his several procedural gaffes, his failure to file required pleadings, his grossly inadequate response to the Court’s order to show cause, and his numerous violations of the Circuit Rules. The Court reprimanded the attorney, fined him $5000, and ordered him to send a copy of the opinion to his clients.

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OWENS v. HINSLEY (March 18, 2011)

While imprisoned in the Menard Correctional Center, James Owens became unhappy with prison conditions and with the prison's response to his complaints. So he started a hunger strike. He spent 21 days in his cell and four in the infirmary before he ate again. He lost 20 pounds but suffered no medical complications. Within weeks, he began a second hunger strike. This time, he spent 25 days in his cell and almost 3 weeks in the infirmary. He ate again only after the prison began force-feeding him. He lost 30 pounds on his second hunger strike but again suffered no medical complications. He submitted an informal grievance complaining that he should have been moved to the infirmary sooner. His counselor ignored the grievance. The following year, on two separate occasions, Owens was assaulted by cellmates, complained to guards, and was assaulted again before the guards did anything. Owens brought suit pursuant to § 1983. The complaint contained seven separate claims against 15 different defendants. Chief Judge Herndon (S.D. Ill.) dismissed five of the seven claims at screening and granted summary judgment to the defendants on the other two. Owens appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Wood affirmed. The Court first noted that the complaint violated the rules of civil procedure regarding joinder and should either have been severed into two separate actions or dismissed for improper joinder. However, since improper joinder is not jurisdictional, the Court addressed each claim's merits in turn. His claim that prison officials violated the Constitution when they ignored his grievances is frivolous -- prison grievance procedures are not required by the Constitution. His claim that his First Amendment right to demonstrate was violated when the prison force-fed him is frivolous -- there is no constitutional right to refuse life-saving medical treatment. His claim that the guards failed to protect him from cellmate assaults fails -- no reasonable juror could find that the guards deliberately ignored a substantial risk of serious harm. His claim that the prison was deliberately indifferent when it did not move him from his cell to the infirmary during his hunger strikes fails, although not for the reason relied upon by the district court. His allegation, in his verified response to summary judgment,  that he submitted an informal grievance is the equivalent of an affidavit. The court should have considered it. The claim still fails because he failed to exhaust administrative remedies when he did not follow up his informal grievance with a written grievance to a designated prison official. The district court dismissed the other three claims without prejudice because the allegations of misconduct were not linked to a particular defendant. Although an amended complaint may have corrected some of that problem, the Court concluded that the district court did not abuse its discretion in denying leave to amend when Owens failed to comply with local procedure, failed to follow the court's instructions for refiling, and filed claims that had already been dismissed at screening.

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JOSEPH v. ELAN MOTORSPORTS TECHNOLOGIES RACING CORP. (March 14, 2011)

Timothy Wardrop had a written employment agreement with Elan Motorsports Technologies, Inc. ("Inc."). Several years ago, he filed a complaint alleging a breach of the agreement. Unfortunately, he named as the only defendant Elan Motorsports Technologies Racing Corp. ("Corp."), Inc.'s parent. Eventually, Wardrop discovered his mistake and asked for leave to file an amended complaint naming Corp. He also asked that the amendment relate back to the filing of the complaint since the statute of limitations had long run. Judge McKinney (S.D. Ind.) concluded that the amendment could not relate back and dismissed the case. Wardrop appeals.

In their opinion, Circuit Judges Posner and Wood and District Judge Adelman reversed and remanded. The Court first pointed out the district court's procedural error after it concluded that the amendment would not relate back. Instead of dismissing the case, the court should have allowed the amendment under Rule 15(a)(2) and then entered judgment both for the original defendant (since it was not a party to the contract) and the added defendant (because the statute of limitations had run). But the Court identified a more fundamental error. The district court erred when it concluded that the amendment did not relate back. Its error, however, was understandable since the Supreme Court decided Krupski after the district court’s decision. Before Krupski, the Court's jurisprudence focused on what the plaintiff knew or should have known. Here, Wardrop's almost six-year delay in discovering his mistake was inexcusable. But the Supreme Court has now held that a district court makes only two inquiries: whether the defendant sought to be added to the complaint knew or should have known that it was the intended target of the litigation, and whether the plaintiff's delay has prejudiced the new defendant. A plaintiff's carelessness may still be relevant, but only to the prejudice prong of the test. That test is satisfied here. Inc. knew from the moment of service that Wardrop intended to sue the firm with whom he had employment contract -- and that was Inc. And any harm that Inc. has suffered is the direct result of its own failure to advise Wardrop of his mistake. The Court did comment that the amended complaint contained both additional legal theories and legal claims. A complaint need not allege legal theories so the inclusion of additional ones does not affect its relation back. That may not be true with respect to the new claim (quantum meruit). But the Court left it up to the district court to consider that issue in the first instance.

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ALDRIDGE v. FOREST RIVER, INC. (March 8, 2011)

Linda Aldridge and her husband purchased a recreational vehicle manufactured by Forest River. The RV was equipped with a step controller, a device that expands and retracts the vehicle's steps. The step controller was manufactured by Specific Cruise Systems. During a Florida vacation, Linda Aldridge fell while descending the steps. Aldridge brought suit against Forest River and SCS, alleging theories of strict liability in that the step controller retracted without warning, causing her fall. Throughout motion practice, expert discovery, and interrogatory answers, Aldridge limited her theory of liability to the allegedly defective step controller. Shortly before trial, over Aldridge’s objection, the trial court granted Forest River's motion in limine to bar any argument that the RV itself was the defective product. At trial, Aldridge attempted to amend her complaint to allege that the RV was a defective product. The court denied her request. The trial court also amended Aldridge's jury instruction that would have asked the jury to determine if the RV was defective. The jury found in favor of the two defendants. Judge Bucklo (N.D. Ill.) denied the request for a new trial, concluding that Aldridge had maintained throughout the proceedings that the step controller was the cause of her injuries and expanding the theory of liability would prejudice the defendants. Aldridge appeals.

In their opinion, Circuit Judges Kanne and Tinder and District judge Herndon affirmed. The Court noted that it reviewed all of Aldridge’s contentions -that the district court erred in granting the motion in limine, denying the motion to amend, amending the jury instruction, and denying the motion for a new trial --- under an abuse of discretion standard. Not surprisingly, the Court was not persuaded by any of Aldridge's contentions. The grant of the motion in limine conformed to the expectations of the parties and prevented surprise. The denial of the motion to amend prevented the reopening of discovery and the addition of the new liability theory during trial. The amendment of the jury instruction conformed to the evidence presented during the trial and was not misleading or improper. The denial of the motion for new trial was proper when there was a reasonable basis to support the verdict.

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IN RE: BERGERON (MARCH 4, 2011)

Lucille Iacovelli was not happy with her plastic surgery. She allegedly posted several derogatory comments about the doctor on the Internet. The doctor brought suit for, among other things, defamation. The district court judge entered an injunction ordering that all such postings be removed. Rich Bergeron maintained some of the websites that contained the alleged defamatory postings and was, for purposes of the injunction, Iacovelli's agent. Judge Barker (S.D. Ind.) refused Bergeron's request for her to recuse herself, held him in contempt, and imposed a monetary sanction. The defamation suit remains pending in the district court and Bergeron's appeal from the sanctions order is pending in the appellate court. Here, Bergeron petitions for a writ of mandamus in order to remove Judge Barker.

In their opinion, Judges Posner, Williams, and Tinder denied the petition. The Court first distinguished between Bergeron's desire to remove the judge from the defamation case and his desire to remove her from the contempt proceedings. Bergeron is not a party to the defamation case. As such, he has no basis on which to seek Judge Barker's removal. He is obviously a party to the contempt proceedings and mandamus is a proper vehicle to bring the recusal issue to the Court's attention. But here, the judge is through with the case -- there is nothing to remove her from. The Court indicated that the result could have been different under two scenarios. First, Bergeron sought mandamus before the sanction was imposed. Had he also sought and been granted a stay of those contempt proceedings, the Court could have considered his arguments. Second, the Court indicated that it might have ordered a new proceeding in an "egregious case" of bias. The appearance of impropriety alleged here is not such a case.

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HERNANDEZ v. COOK COUNTY SHERIFF'S OFFICE (February 24, 2011)

Several Cook County Jail inmates escaped in February of 2006. Jail authorities immediately suspected that the escapees had inside help. One guard admitted his involvement. Six additional guards came under suspicion. Internal and criminal investigations were conducted. Several of the guards were suspended with pay. The guards also claimed they were treated harshly during the investigation and discouraged from contacting the union or an attorney. Ultimately, one guard was suspended for five days and two left the department. Administrative charges were dropped against the other three. The six guards brought suit against the Sheriff's office alleging a violation of their First Amendment rights, and included state law intentional infliction of emotional distress and false imprisonment claims. They claimed that the investigation was in retaliation for their safety complaints (the plaintiffs allegedly complained about security and overcrowding problems in the jails) and political views (the head of their unit was running for Sheriff against the incumbent sheriff's Chief of Staff). The defendants moved to dismiss the constitutional claims on qualified immunity grounds and the state law claims on statutory immunity grounds. The court never ruled on that motion. The defendants later moved for summary judgment, but only briefly argued qualified immunity and did not argue statutory immunity in their opening brief. Judge Guzman (N.D. Ill.) a) granted summary judgment on the merits on the retaliation claim based on safety complaints, b) denied summary judgment on the retaliation claim based on political views, c) denied the request for qualified immunity, concluding that defendants had waived it, and d) denied summary judgment with respect to the state law claims. Defendants appeal only the denial of qualified immunity on the constitutional claims.

In their opinion, Judges Cudahy, Flaum, and Wood reversed and remanded. The Court noted that the denial of a motion for summary judgment is ordinarily not appealable. It is, however, when the requested grounds for summary judgment is qualified immunity and when the denial involves only legal issues. Since a finding of waiver is a legal issue, the Court has jurisdiction to entertain the appeal. The Court seemed to have little difficulty in concluding that the district court erred in finding waiver. Although an underdeveloped argument can amount to waiver, it does so only when it provides inadequate notice of the argument. Here, defendants have argued qualified immunity from the beginning of the case. They argued in their motion to dismiss, they argued unambiguously (albeit briefly) in their opening summary judgment brief in a section captioned "Qualified Immunity," and they argued it at length in their reply brief. Arguments raised for the first time in reply briefs are generally considered waived, but arguments more fully developed in reply briefs do not necessarily suffer the same fate. The plain fact is that plaintiffs were on notice of the argument and defendants treatment of it did not constitute a waiver. Finding no waiver, the Court addressed the merits of the argument. The familiar test has two prongs -- whether the defendants violated a constitutional right and, if so, whether that right was clearly established at the time. When the constitutional violation concerns a public employee's First Amendment rights, a court first must determine whether the speech involves a matter of public concern. If it does, the court applies a balancing test. If it does not, the employee is not entitled to constitutional protection. Based on the district court's findings on the safety complaint retaliation claims, the Court was able to determine as a matter of law that the speech did not involve a matter of public concern. The plaintiffs were acting in response to their duties as employees and are not entitled to constitutional protection. Therefore, there was no constitutional violation, and the defendants are entitled to qualified immunity. With respect to the political retaliation claim, however, the Court was unable to reach such a conclusion. The district court failed to identify the disputed and undisputed facts, nor did it make any findings regarding materiality. The Court remanded for that purpose.

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POLZIN v. GAGE (February 18, 2011)

Gerald Polzin pleaded guilty in 2005 to sexual abuse of two teenage boys. In connection with his presentence investigation, Polzin claimed he was himself a victim of sexual abuse as a boy at the hands of his uncle, an Appleton, Wisconsin police officer. The prosecutor asked the Wisconsin Department of Justice to investigate. The Appleton Police Department declined to conduct its own investigation. Although the prosecutor expressed doubts about the allegations, the trial judge considered it a mitigating factor in Polzin's sentence. Polzin a) filed a state civil suit against Appleton and several police officers which was resolved against him and affirmed on appeal, b) took an appeal from his sentence which was also affirmed on appeal, c) brought a state motion for postconviction relief, and d) brought a § 1983 suit against the prosecutor, the trial judge, the court reporter and the state investigators. In the § 1983 case, he alleged the falsification of evidence and the fabrication of the sentencing transcript. His motion for postconviction relief was pending when he filed his § 1983 claim. He asked the district court to stay the case because of the Supreme Court’s holding in Heck that a § 1983 challenge to a conviction cannot be made unless the conviction has been invalidated. Judge Griesbach (E.D. Wis.) denied the request for a stay, concluding that Polzin was not faced with a statute of limitations problem like Wallace. His claims were akin to malicious prosecution, which do not accrue until the prosecution terminates in his favor. The court therefore dismissed the complaint as barred by Heck. On a motion for reconsideration, however, the court added that Polzin also failed to state a claim on the merits. Specifically, the court ruled that the claims against the court reporter and trial court judge were frivolous in that neither had a role in the investigation and that his claims regarding the investigation did not amount to a constitutional violation. Polzin appeals.

In their opinion, Judges Coffey, Flaum, and Ripple affirmed in part and vacated and remanded in part. The Court held (for the first time) that a district court can ignore the Heck doctrine and proceed to the merits since Heck is not jurisdictional. On the merits, the Court concluded that a) the judge had absolute immunity with respect to the claims of falsifying the transcript, b) the court reporter is not liable because the transcript attached to the complaint showed that Polzin's allegations about the transcript were actually wrong, and c) the prosecutor is entitled to absolute immunity either as a prosecutor or as a witness at the sentencing hearing. Finally, the Court did point out that the district court did not specifically address Polzin's claims against the prosecutor and state investigators in their investigatory role. It remanded for further explanation or consideration of that claim.

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DELAPAZ v. RICHARDSON (February 14, 2011)

Pablo Delapaz and Michael Sarkauskas are both employees of the City of Chicago's Department of Streets and Sanitation (DSS). They are also both supporters of the Hispanic Democratic Organization. In 2001 in 2002, DSS Commissioner Al Sánchez appointed both men to temporary acting foremen positions in the Department. Michael Picardi replaced Sanchez as Commissioner several years later. Delapaz and Sarkauskas still occupied their temporary positions. Shortly after Picardi became Commissioner, he ordered the elimination of all acting foreman positions and the return of those employees to their prior positions. When Deputy Commissioner Richardson advised Delapaz that he would have to return to his prior position, he also remarked: "Your guy is gone." Both Delapaz and Sarkauskas assumed their prior positions in the summer of 2005, as did all the other acting foremen. Later that year, the Richardson appointed another man as an acting Foreman for snow removal purposes. That man was a contributor and volunteer for Chicago Alderman Richard Mell. Delapaz and Sarkauskas filed suit against Deputy Commissioner Richardson under § 1983, alleging that he violated their First Amendment rights of free association by demoting them because of their HDO affiliation. Judge Marovich (N.D. Ill.) granted summary judgment to Richardson. Delapaz and Sarkauskas appeal.

In their opinion, Circuit Judges Flaum and Evans and District Judge McCuskey affirmed. The Court agreed that a public employee’s firing or demotion because of his or her political affiliation is a First Amendment violation. But to state a claim against a particular defendant, a plaintiff must establish that the defendant participated or caused the deprivation. In their summary judgment response pursuant to local rule, plaintiffs admitted that Picardi ordered the demotions, not Richardson. Courts are entitled to rely on these admissions. In light of the admission, the plaintiffs cannot establish Richardson's liability. The Court did cite another reason why they could not prevail: they waived the Richardson liability argument by not addressing it in their response brief in the district court. And the Court cited yet a third reason why they could not prevail: the merits. The only evidence the plaintiffs presented that Richardson even knew of their HDO affiliation is the "your guy" remark he made to Delapaz, an apparent reference to Sanchez. But they presented no evidence that Sanchez was even affiliated with HDO or, if he was, that Richardson knew about it. And they presented no evidence at all that Richardson knew of Sarkauskas’ HDO affiliation -- only that the timing of his demotion (two weeks after Delapaz) was suspicious. Without a triable issue of fact on whether he knew of their party affiliation, Richardson is entitled to summary judgment.

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HURST v. HANTKE (February 10, 2011)

Joseph Hurst suffered a stroke while incarcerated in an Illinois prison. More than eight months later, he filed a grievance complaining of his treatment by the prison’s medical staff. The prison denied the grievance on the grounds that it was not filed within 60 days, as required by law. Hurst appealed the denial, contending that the stroke left him almost totally incapacitated "until just recently." The prison rejected his appeal on the ground that Hurst provided no justification. Hurst brought suit pursuant to § 1983 alleging deliberate indifference on the part of the prison’s medical staff. Judge Kapala (N.D. Ill.) granted summary judgment for the defendants on the ground that Hurst had failed to exhaust his internal prison remedies. Hurst appeals.

In their opinion, Judges Posner, Evans, and Hamilton affirmed. The Court concluded that the prison was wrong in denying Hurst's appeal. The law does not require an inmate to submit evidence in support of a claim of good cause any more than a plaintiff is required to submit evidence with a complaint. The prison could have insisted on additional substantiation, in which case Hurst would have had to supply it. Notwithstanding the error at the internal prison level, the Court nevertheless affirmed. Because when he sued, and when the defendants moved for summary judgment, Hurst was required to present evidence that he exhausted his administrative remedies -- that is, that he had filed a grievance as soon as he was reasonably able. He had an opportunity -- and an obligation -- at that stage to substantiate his good cause claim. Because he did not, summary judgment for defendants was appropriate.

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BUSSON-SOKOLIK v. MILWAUKEE SCHOOL OF ENGINEERING (February 10, 2011)

Dustin Busson-Sokolik attended the Milwaukee School of Engineering. In 1999, he signed a promissory note with the school in the amount of $3000. In the note, he promised to repay the money and to pay all reasonable collection costs. The School sued Busson-Sokolik in 2005 to recover the unpaid amount and obtained a default judgment of almost $6000. Busson-Sokolik filed for bankruptcy shortly thereafter. An adversary proceeding in the bankruptcy court determined that the debt was non-dischargeable. The School obtained a judgment of over $16,000 that included costs and fees. Busson-Sokolik appealed the decision to the district court, where the proceedings became rather contentious. Busson-Sokolik accused the School of false statements. The School moved to strike a portion of Busson-Sokolik's reply brief because it raised arguments not raised in the bankruptcy court or in his opening brief. Chief Judge Clevert (E.D. Wis.) denied Busson-Sokolik's motion for sanctions, granted the School's motion to strike portions of the brief and motion for costs and fees, and affirmed the bankruptcy court's judgment on the merits. He awarded over $80,000. Busson-Sokolik and his attorney appeal.

In their opinion Judges Power, Flaum, and Hamilton affirmed in all respects except that it reduced the sanction portion of the award by half. The Court noted that bankruptcy proceedings generally discharge all of a debtor's financial obligations. There are exceptions, however. One exception is for an educational loan under § 523(a)(8)(A). The Court rejected Smith's argument that the $3000 was not a loan. In order for there to be a loan, there must be a) a contract, b) the transfer of money, and c) a promise to repay the money at a later date. Those three elements are all present here. The Court also rejected Smith's argument that the loan was not educational. The Court acknowledged that some courts apply a "use" test while others apply a "purpose" test. It adopted the "purpose" test as being more consistent with the statutory language in the broader statutory goals. Here, the purpose test was satisfied because Smith was a student, he had to be a student to qualify for the loan, the money was deposited into his student account, and the loan was part of a total financial assistance package. The purpose of the loan was educational and the district court was correct in concluding that the loan was not discharged. The Court also affirmed the award of fees and costs. Although fees and costs are normally not awarded in American litigation, they are where there is a statute or a contract, unless otherwise prohibited. The promissory note contained Busson-Sokolik’s promise to pay these costs. That promise is enforceable. The Court did not consider Busson-Sokolik's arguments that fees and costs were improper under the merger doctrine. Smith did not raise that argument in either the bankruptcy court or in his initial district court brief. Thus, he has waived it twice and no exceptional circumstances exist that would compel the Court to overlook the waivers. The Court found no error in the denial of Busson-Sokolik's motion for sanctions, in that he failed to honor the safe harbor provision of Rule 9011. The Court also found ample evidence in support of the district court’s award of sanctions against Busson-Sokolik and his attorney. They ignored deadlines, filed baseless pleadings, ignored procedural requirements, and made duplicative filings. But they did not necessarily act in bad faith and the appeal was not necessarily frivolous. The merits of the merger argument was never considered because of waiver and it does have some basis in law. In light of all that and also considering Busson-Sokolik’s status as a student who has filed for bankruptcy, the Court exercised its discretion to reduce the sanctions by half.
 

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THE YORK GROUP v. WUXI TAIHU TRACTOR CO. (February 4, 2011

The York Group was involved in a lawsuit in federal district court in Texas. It wanted Daniel Benefield to provide evidence in that lawsuit, so it subpoenaed him. Benefield neither complied with the subpoena nor sought any protection from it. Benefield also ignored a district court order enforcing the subpoena and two contempt hearings. The district court found him in civil contempt, fined him $22,000, and ordered him to pay York's legal fees. Benefield continued to ignore the proceedings -- until York garnished his checking account. Benefield sought relief under Rule 60(b), arguing that he was never served with the subpoena. Judge Lindberg (N.D. Ill.) held an evidentiary hearing and concluded that he had been properly served. Benefield sought reconsideration under Rule 59(e), in which he presented some new arguments. The court denied the motion. Benefield appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Tinder affirmed. The Court first had to decide which of the three orders (the contempt finding, the 60(b) order, and the 59(e) order) were reviewable. The contempt finding is not reviewable because it was a final order, the time for appeal has elapsed, and no post-judgment motion was filed in time to suspend its finality. The Rule 60 order, because it was not filed within the time to suspend the original judgment's finality, is treated as a new proceeding. Therefore, the timely Rule 59 motion deferred the time to appeal the Rule 60 order. Therefore, Benefield's notice of appeal on the Rule 60 order is timely and the Court has jurisdiction to consider it (and the Rule 59 motion arguments, if they are not waived). With respect to the Rule 60 motion, the district judge conducted an evidentiary hearing where he consider evidence from Benefield, a process server, and a next-door neighbor. The Court concluded there was clearly adequate evidence to support the district court's conclusion. The two new Rule 59 arguments, that the subpoena named both Benefield and his proprietorship and that the neighbor held a grudge against him, were forfeited. Both arguments should have been raised before or at the Rule 60 hearing. The Court did add that neither argument could be successful on the merits. The addition of the name of one's proprietorship on the face of a subpoena does not make it unenforceable. With respect to the neighbor, Benefield’s counsel rejected an opportunity to recess the hearing in order to rebut the affidavit.

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APPLICATIONS OF HERAEUS KULZER, GMBH, FOR ORDERS COMPELLING DISCOVERY FOR USE IN A FOREIGN PROCEEDING v. BIOMET (January 24, 2011)

Heraeus Kulzer, a German company and a leading producer of bone cement, sued Biomet, an American company, in a German court. Heraeus Kulzer alleges that Biomet obtained confidential information from a former Heraeus Kulzer distributor and used it in a competing product. As part of its case preparation, Heraeus Kulzer sought discovery in Indiana federal court. Judge Miller (N.D. Ind.) denied the application, concluding that Heraeus Kulzer was attempting to circumvent German law and that Heraeus Kulzer's requests were overly broad.

In their opinion, Circuit Judges Bauer and Posner and District Judge Pallmeyer reversed and remanded. The Court stated that § 1782 allows a district court to order the production of documents for use in a foreign tribunal. In the sound discretion of a district court, an applicant can obtain as much discovery as if the case had been brought in that court. The Court noted however, the potential for abuse in different ways: seeking discovery that is already available in the foreign court for harassment purposes only, seeking discovery that would be inadmissible in a foreign court again for harassment purposes, inundating a foreign court with evidence that would be inadmissible in an American court, seeking discovery that the foreign court would disapprove of because of the cost of compliance, and obtaining a discovery advantage by using American discovery rules while limiting one's adversary to foreign discovery rules. The Court saw no abuse, however, in Heraeus Kulzer's application. It appeared that the requested discovery was not available under the German procedures and there was no indication that the requested evidence would be inadmissible. Biomet neither sought any relief from the German court nor sought any conditions on Heraeus Kulzer's application from the American court. Because Heraeus Kulzer had demonstrated a need for the discovery, it is Biomet’s burden to establish that the discovery would be inappropriate under the statute. Since Biomet did not do that, the Court held that the § 1782 requirements were met. The Court also stated that the district court committed error by turning down the request without requiring some negotiation as to its scope. Biomet had refused to meet with Heraeus Kulzer to negotiate restrictions on the discovery and the district court never demanded evidence from Biomet as to its alleged burden. Once a party establishes entitlement to § 1782 discovery, the matter is governed by the federal discovery rules. They Court remanded for further consideration of the request under those rules. 

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SPANO v. THE BOEING COMPANY (January 21, 2011)

Like most American companies, the Boeing Company and the International Paper Company offered their employees participation in defined-contribution benefit plans. Members in each of the plans brought suit against each company and the plans. The allegations in each of the suits were quite similar. They claimed that the plans breached their fiduciary duties by a) paying excessive fees and expenses, b) choosing to include imprudent investment options in the plans, and c) concealing information from plan participants. Chief Judge Herndon (S.D. Ill.) certified a class in each case under Rule 23(b)(1). Each class definition included all persons who are, were, or ever will be participants or beneficiaries of the plan. Boeing and IP sought review.

In their opinion, Judges Bauer, Wood, and Tinder granted the request for review, vacated each certification order, and remanded. The Court noted that the case was brought under § 502(a)(2) of ERISA, which allows a participant to bring a civil action for relief under § 409, which in turn makes a fiduciary personally liable for a breach of fiduciary duty. In 1985, the Supreme Court held, in Russell, that a fiduciary in a defined-benefit plan context was not personally liable to a participant for damages. In a defined-benefit plan, assets are held in trust and the plan is administered by a fiduciary. Obligating a fiduciary to restore funds to the plan is sufficient to make the plan whole. In 2008, the Supreme Court had an occasion to apply that principle to a defined-contribution plan in LaRue. LaRue alleged a breach by a fiduciary that affected his account only and sought restoration of that amount to his account. Relying principally on the differences between defined-benefit and defined-contribution plans, the Supreme Court held that § 502(a) does authorize recovery for breaches of fiduciary duty that impair only the assets in a particular participant's account. But LaRue was an individual claim. The consolidated appeals involve class claims. The Court had to distinguish between an individual injury and an injury that should be considered a plan injury -- only a complaint about the latter is appropriately treated as a class. The Court turned to Rule 23. In order to proceed as a class, a claim must meet all of the elements of Rule 23(a) and fit into one of the 23(b) categories. For class certification purposes, a district court should not take the facts as alleged but, rather, make any required factual determinations. If the court finds that the claims meet the Rule 23 requirements, it issues an order in which it certifies and defines the class. The class definition is a very important aspect of the order, affecting both the litigation's scope and its res judicata effect. With those principles in mind, the Court turned first to the Boeing case. Although the Court found that the class met the numerosity and commonality requirements of Rule 23(a), it concluded that it did not meet the typicality and adequacy of representation requirements. Given the breadth of the class definition and the specific objections to two of the several investment options included in the plan, it is possible that many plan participants never owned shares in the targeted funds. Because the plaintiffs could potentially correct the Rule 23(a) problems by redefining the class, the Court also addressed Rule 23(b). The Court mentioned the Supreme Court’s cautionary remarks in Ortiz regarding the use of mandatory (b)(1) classes. Again, using the class definition certified, the Court concluded that the class could not meet the (b)(1)(A) or (b)(1)(B) requirements. The class was simply too diverse to for the Court to conclude that the class members had an identity of interest or that there was a risk of incompatible standards of conduct. Turning to the IP class, the Court found some of the same problems. It addressed the theories of relief (misrepresentation, imprudent investment, and excessive fees) individually. Under the misrepresentation theory, the Court concluded that it was not clear that the class representative's claims were typical of those of the group. With respect to the imprudent investment theory, the Court concluded (like in the Boeing class) that the allegation that some funds were imprudent while others were not, in conjunction with the diversity of the class, made the claim inappropriate for class treatment. Finally, with respect to the excessive fee theory, it appears that some fees were plan specific while others were fund specific. Given the class members’ different decisions regarding specific fund investments, this theory is also not appropriate for class treatment. The Court again emphasized that its decision was based on the definition provided by the district court and that it was not holding that an appropriate class could not be defined.

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PIRELLI ARMSTRONG TIRE CORPORATION RETIREE MEDICAL BENEFITS TRUST v. WALGREEN COMPANY (January 21, 2011)

Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust uses a Pharmacy Benefit Manager (PBM) to administer its relationships with pharmacies that the Trust's members use to fill prescriptions and that the Trust then reimburses for amounts in excess of the members’ co-pays. The PBM sets the maximum reimbursable price for the most frequently used prescriptions. Reimbursement for less popular medications is the average wholesale price, set by the manufacturers. The average wholesale price is almost always more than if the price had been set by a PBM. In the case of two particular drugs, Ranitidine and Fluoxetine, one form of the drug (i.e., capsule versus tablet) was on the controlled price list and the other was governed by the average wholesale price. It is illegal in Illinois for a pharmacy to dispense a drug in a form other than that which was prescribed. The Trust brought suit against Walgreens, alleging that the pharmacy filled members' prescriptions for those two drugs in the form that provided them the greatest reimbursement, regardless of which form was prescribed. The complaint cited several grounds for the Trust's belief that Walgreens committed this fraud: a) a preliminary review of its own reimbursement data that showed 12 members had prescriptions filled at Walgreens with the more expensive form of one of the drugs, and that three of those 12 members had apparently the same prescriptions filled at other pharmacies with the less expensive form of the drug, b) the allegations of a 2003 whistleblower suit that alleged that Walgreens filled prescriptions for the drugs with the more expensive form, and c) the data collected by a different PBM that compared Walgreens’ choice of drug form with other pharmacies and concluded that Walgreens’ rate of filling prescriptions with the higher priced drugs was overwhelmingly greater. The suit was originally brought as a class action and encompassed prescriptions in 35 states. It scope was narrowed, however to Illinois only and the Illinois Consumer Fraud and Deceptive Business Practices Act. The Trust also included an unjust enrichment claim under Illinois law. Judge Kendall (N.D. Ill.) granted Walgreens' motion to dismiss on the grounds that the Trust failed to adequately plead fraud and that it failed to allege that it had been injured. The Trust appeals.

In their opinion, Judges Flaum, Manion, and Tinder affirmed. The Illinois Act does make it unlawful to use fraud in trade or commerce. But it also is governed by the heightened fraud pleading requirements of the federal rules. The general rule is that a plaintiff cannot satisfy that heightened standard with allegations "on information and belief." Although the plaintiff does not use those words, the allegations fit the concept. There is an exception to that general rule where the plaintiff has no access to the facts constituting the fraud and where he adequately provides the grounds for his suspicions. The Court considered the support cited in the complaint in that light. First, it gave little weight to the allegations of the whistleblower suit. Allegations in other lawsuits are typically given little weight, particularly here, when those allegations themselves, for the most part, are made on information and belief. Second, the Court afforded little weight to the data set collected by the other PBM. Although that data does support a belief that a third party payor was injured, it does little to support the Trust, particularly since it is based on a different set of reimbursement data. The Trust had available its own reimbursement data. Third, the Court turned to that reimbursement data and found it wanting as well. There is not much data to begin with and the Court wondered why the Trust's pre-filing inquiry could not have resulted in a more robust data set. The suspicious examples themselves were few. In a universe of thousands of members and thousands of pharmacies nationwide, 12 erroneous prescriptions is not evidence of fraud. The Trust simply did not provide enough data and context to meet the heightened standard. Although the Trust may be correct that the small subset of members who had their prescriptions filled differently at Walgreens and other pharmacies is "suspiciously consistent" with fraud, it is not enough to satisfy the fraud pleading requirement. The district court was correct in dismissing the statutory count. Finally, the Court concluded that the district court was correct in dismissing the unjust enrichment claim. In Illinois, an unjust enrichment claim is not a separate cause of action but an equitable remedy. The Trust pleads its unjust enrichment claim on the same facts as it pleads its statutory claim. Those allegations of fraud are governed by the same pleading standard and must be dismissed for the same reason.

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CZARNIECKI v. CITY OF CHICAGO (January 21, 2011)

For a few months in late 2006 in early 2007, Wojciech Czarniecki was a probationary police officer with the Chicago Police Department. He alleges that Assistant Deputy Superintendent Tobias made several negative references to his Polish ancestry in a discussion about Czarniecki's use of exam study guides. He alleges that his dismissal followed shortly thereafter and that another Polish probationary officer was dismissed at about the same time. He brought suit under § 1983 against the City and Tobias, alleging national origin discrimination in violation of the 14th Amendment. The district court granted summary judgment to the City. Shortly before trial, the court granted Czarniecki's motion to dismiss his claim against Tobias without prejudice - but conditioned the dismissal on a requirement that he seek her permission if he ever wanted to refile it. Czarniecki appealed that order because of its refiling condition, then sought permission to refile and appealed that order when the court denied permission on the grounds that his first appeal deprived her of jurisdiction. A few months later, Czarniecki filed a new complaint alleging national origin discrimination in violation of Title VII of the Civil Rights Act of 1964, naming only the City. Judge St. Eve (N.D. Ill.) dismissed the complaint on res judicata grounds. Czarniecki appeals.

In their opinion, Seventh Circuit Judges Bauer, Flaum, and Hamilton consolidated the three appeals, affirmed the res judicata dismissal, and dismissed the other appeals as moot. The Court noted the three familiar ingredients of federal res judicata (federal res judicata applies when the earlier judgment was in federal court): a final decision, a dispute arising out of the same operative facts, and the same parties. The Court found that the three requirements were met here. There is no dispute that the earlier decision against the City was final, the parties are the same (the fact that Tobias is not a defendant in the second suit is of no consequence), and the claim arises from the same operative facts. The fact that he sets forth a new theory of liability, even with different proof requirements, does not change the res judicata result. The Court also rejected Czarniecki's argument that res judicata should not apply because he lacked a "right to sue” letter at the time of his first complaint and could not have brought a Title VII claim. The Court concluded that Czarniecki had several ways in which he could have dealt with that situation -- splitting his claims was not one of them. Finally, the Court dismissed as moot Czarniecki's two other appeals since both only dealt with his ability to refile.

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ARLIN-GOLF v. VILLAGE OF ARLINGTON HEIGHTS (January 21, 2011)

Ronald Popp and Victor Valenti purchased the Arlin-Golf Shopping Center in the Village of Arlington Heights, Illinois in 2001. Within a year, the Village implemented a Tax Increment Financing District and announced that the Center would be demolished and the property redeveloped within months. The Village never followed through with its plan, however. The owners claim that they did encourage Center tenants to leave, discouraged prospective tenants from renting, and generally continued to announce falsely that the property would be condemned and redeveloped. The owners sued the Village in state court challenging the ordinance itself and alleging that the Village's actions constituted a taking under Illinois' Constitution. In 2008, the owners and the Village settled their lawsuit. Under the terms of the settlement, the owners dismissed the suit with prejudice and the Village purchased the property for $1.6 million. A few weeks after the sale closed, the owners brought suit in federal court against the Village, several Village officials, a brokerage firm that had assisted the owners in trying to sell the property before the settlement, a local bank, and the bank's chairman. Their complaint included allegations of violations of the Equal Protection, Due Process, and Takings Clauses, among others. Essentially, their claim was that the defendants' actions resulted in significant financial losses in connection with their ownership of the Center. Judge Coar (N.D. Ill.) dismissed the complaint on res judicata grounds. The owners appeal.

In their opinion, Judges Cudahy, Flaum, and Kanne affirmed. The Court noted the three res judicata requirements: a) a final judgment, b) identity of cause of action, and c) the identity of the parties. Under Illinois law, identity of cause of action exists if the claims arise from the same operative facts, even if they assert totally different theories of relief. The Court found that test met here. Both suits arise from the Village's implementation of its ordinance and the conduct of the defendants that allegedly led to the owners’ financial losses. The federal suit does not allege any material facts that occurred after the state court settlement. The Court also found no error in the district court's refusal to allow the owners to amend their pleadings, noting that the owners did not submit a proposed amended complaint to the district court in order to show that an amendment would not be futile.

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HOSKINS v. DART (January 20, 2011)

Joshua Hoskins had a number of complaints about the way he was treated in an Illinois prison. They included the use of excessive force, the denial of medication, and the inadequate processing of grievances. He brought five separate complaints under § 1983 against the Cook County  Sheriff and prison officials. He used a court-issued form for each of his complaints. The form contained a section which required him to list any prior lawsuits that he had filed. Hoskins listed none although he had filed three earlier civil rights lawsuits and, indeed, was still litigating them. The form contained several notices that severe sanctions, including dismissal, could result from a failure to fill out the forms correctly. During screening, the district court discovered the omission. Judge Manning (N.D. Ill.) concluded that the omissions were fraudulent and dismissed the complaints with prejudice. Hoskins appeals.

In their opinion, Judges Bauer, Tinder, and Hamilton affirmed. First, the Court found no clear error in the district court's finding of fraud. Although Hoskins claimed that the error was innocent in that it was based on another inmate's instructions, the court was well within its rights to reject that explanation. Second, the Court found no abuse of discretion in the district court's choice of sanction. Courts generally have significant discretion in imposing sanctions on those who violate its rules. Here, the district court considered lesser sanctions but chose dismissal because of the inadequacy of monetary sanctions in a pauper proceeding, the importance of the information requested in administering the three strike rule, and the multiple warnings on the form itself of the consequences of dishonesty. 

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PROTECTIVE LIFE INSURANCE CO. v. HANSEN (January 19, 2011)

B&K Enterprizes, a Wisconsin limited liability company, operated a gasoline service station in Manitowoc, Wisconsin. Richard McDonald was a founding member of B&K and managed the station’s day-to-day affairs. B&K purchased a $1 million life insurance policy on McDonald from Protective Life Insurance Co. It then financed the operations by assigning its interest in the insurance proceeds as security for several loans. After an audit established that McDonald had misappropriated funds from and mismanaged B&K, the other LLC members removed McDonald -- but it was too late. The members hired Michael Culligan to wind up operations and liquidate the company. Culligan submitted a form to Protective to transfer ownership of the insurance policy from B&K to McDonald. Because the policy erroneously identified B&K as a corporation, Protective returned the form to Culligan for a second officer’s signature (one signature was sufficient for an LLC). Culligan never resubmitted the form. Under the impression that he was the new owner of the policy, McDonald submitted a change of beneficiary form substituting Megan Hansen, a woman he had been dating, for B&K. McDonald then committed suicide. Protective filed an interpleader action naming both B&K and Hansen. Judge Griesbach (E.D. Wis.) entered judgment for B&K. Hanson appeals.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Williams affirmed. The Court noted that Hansen presented a multi-layered argument. She first asked that the original contract be reformed to accurately indicate B&K’s status as a limited liability company instead of a corporation. She then asks that Culligan's request to transfer ownership to McDonald be effectuated on the theory that Protective's policy was to grant such a request from a limited liability company on one signature. Finally, she asks to give effect to McDonald's request to change beneficiaries. The Court assumed, without deciding, that Hansen could succeed in reforming the policy to reflect B&K’s accurate corporate form. It rejected, however, her additional requests. Reformation is available only if the document fails to reflect the parties' intent. Hansen's requests to give effect to Culligan’s request to change ownership and McDonald’s request to change beneficiaries do not fit within that legal theory – and the Court could identify no other theory that could achieve Hansen's goals. What matters is what happened – not what Hansen speculates would have happened if the policy properly identified B&K. The Court also rejected Hansen’s third party beneficiary argument. Finally, the Court noted its agreement with the district court's conclusion that reformation, as an equitable remedy, would be inappropriate even if all of its elements were satisfied. Here, the equities heavily favor being B&K and reformation would be improper.

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KORAL v. BOEING COMPANY (January 4, 2011)

An Boeing airplane crashed in the Netherlands in 2009. One hundred seventeen plaintiffs have filed suit in Illinois state court in 29 separate actions. Boeing filed motions to dismiss the state court actions on the basis of forum non conveniens, citing the considerable inconvenience of transporting its witnesses from out-of-state in 29 different trials. In response, the plaintiffs pointed out that the standard practice in aviation crash cases is to establish liability by trying a small number of exemplar cases, thereby significantly reducing the inconvenience. Boeing used that response to remove all the state court cases to federal court, arguing that plaintiffs' comment was a proposal for a joint trial and thus qualified the case as a "mass action" under the Class Action Fairness Act. Judges Shadur, Guzman, Conlon, Coleman, and St. Eve (N.D. Ill.) each granted motions to remand. Boeing petitions for an appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder granted the petition and affirmed the remands. Under Rule 1332, a "mass action” is a civil action in which the claims of 100 or more people are "proposed to be tried jointly," except when the proposal is by a defendant. So Boeing’s “proposal cannot be a Rule 1332 proposal. Here, the only “proposal” is plaintiffs' predictions about what might happen as the case progresses. That falls short of a Rule 1332 proposal – Boeing’s removal was therefore premature. 

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IN RE: TEXT MESSAGING ANTITRUST LITIGATION (December 29, 2010)

Class-action plaintiffs assert that the four defendants violated federal antitrust law by conspiring to fix the prices of text messaging services. Over the defendants' objection, Judge Kennelly (N.D. Ill) allowed the filing of a second amended complaint. The defendants sought certification for an interlocutory appeal on the adequacy of the complaint under Twombly. The court so certified. Defendants appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder accepted the appeal and affirmed. The Court first addressed plaintiffs' argument that they not even consider the appeal because it does not involve a "controlling question of law" as required by the rules. The Court rejected that argument. Certainly the question is controlling, since an adverse decision would probably terminate the case. And, although it is not a strict question of law like the interpretation of a statute or the Constitution, it does require the interpretation and application of the Twombly legal standard. Since the development of the standard is relatively recent and its interpretation and application not yet routine, the Court granted the application. On the merits, the Court agreed with the district court that the complaint's allegations were sufficiently plausible to satisfy Twombly. The complaint does allege parallel behavior -- the kind of allegation that was found insufficient in Twombly. But it alleges more: that the four defendants control 90% of the market, that the four defendants belonged to a trade association and exchanged information, that the four defendants each increased its prices at a time of falling costs, and that the four defendants each moved from very different and complex pricing structures to a uniform approach. There is no smoking gun, no direct evidence of conspiracy, but the allegations do amount to the "parallel plus" behavior required by Twombly. The plaintiffs should be allowed to proceed with discovery.

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LABELLA WINNETKA, INC. v. THE VILLAGE OF WINNETKA (December 29, 2010)

LaBella Winnetka operated as a restaurant in Winnetka, Illinois since 1993. It occupies a leased space and renews the lease from time to time. It also has a liquor license. Each year, Winnetka sends it a renewal form. Each year LaBella completes the form and Winnetka renews the license. A fire at the building in early 2007 damaged the roof over the LaBella dining room and forced its closure. The Village refused to allow repairs to the restaurant’s interior until the roof was fixed. It also refused to allow LaBella to reopen the undamaged portion of its leased premises. At the same time, other restaurants, even one operating out of the same building, were allowed to reopen in allegedly similar circumstances. LaBella's most recent liquor license was due to expire in March of 2008. Winnetka never sent a renewal form and terminated the license went LaBella did not file for renewal. LaBella brought suit against the Village and the Village Manager, alleging a violation of its equal protection, substantive due process, and procedural due process rights. The complaint alleged that the benefits bestowed on the other restaurants came about because of their friendships with the Village Manager. Judge Kendall (N.D. Ill.) granted defendants' motion to dismiss. LaBella appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. The Court first considered the "class of one" equal protection claim. In order to state such a claim, one must allege treatment different from others "similarly situated." LaBella concedes that the restaurants that were allowed to reopen did not incur the same major fire damage as the LaBella roof. They are therefore not "similarly situated" and the equal protection claim fails. The Court next considered and rejected LaBella's substantive due process claim relating to its property interest in its lease and business. In order to prevail on that claim, LaBella had to show an independent constitutional violation or the inadequacy of state law remedies. It did neither. Finally, the Court rejected LaBella's procedural due process claims related to the liquor license non-renewal. First, to the extent the claim is based on the Village's simple failure to send a renewal form, there was no constitutional deprivation. Second, to the extent the claim is that the Village revoked the license without notice or hearing, the allegations of the complaint fall far short of even the notice pleading requirements of the federal rules. Finally, the claim fails because LaBella does not even allege that it took advantage of post-deprivation remedies or that they were inadequate.

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UNIVERSITY OF WISCONSIN v. PHOENIX INTERNATIONAL SOFTWARE (December 28, 2010)

The Court withdrew this opinion on February 10, 2011 and granted Phoenix’ Petition for Rehearing limited to the sovereign immunity issue. Supplemental briefing and oral argument will focus on:
       Whether the district court erred in concluding that plaintiff‐appellee Board of Regents of the University of Wisconsin (Wisconsin) did not waive any sovereign immunity it may have had
to the counterclaims asserted by defendant‐appellant Phoenix International Software (Phoenix),
or otherwise consent to their adjudication in this case?
       Whether the counterclaims brought by Phoenix against Wisconsin are compulsory or
permissive counterclaims under FED. R. CIV. P. 13? 

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

In their opinion, Seventh Circuit Judges Flaum, Wood (dissenting in part), and Tinder reversed and remanded for trial on the likelihood of confusion issue but affirmed on the sovereign immunity issue. The Court first addressed the likelihood of confusion issue and specifically the standard of review. Wisconsin had two choices to challenge the Board's decision: a direct appeal to the Federal Circuit limited to the record below and decided on a substantial evidence standard, or a new action in the district court allowing it to supplement the record below. Since Wisconsin chose the latter course, the Court's standard of review is layered. The Board's findings are owed typical administrative appeal deference while the new evidence is treated like a typical summary judgment record and viewed in the light most favorable to the non-moving party. That required the Court to distinguish the Board's findings from new evidence below. The Court concluded that the district court erred in reversing the Board. The principal issue in the case is the likelihood of confusion. The Board considered the actual nature and use of the software while the district court focused its analysis on the description of the products in their registration materials. But whether the public may be confused (i.e., attribute the products to a single source) is the real focus of the multiple factor likelihood of confusion test. The district court was wrong when it focused principally on the products' similarities and matters of use (and doubly wrong when it focused exclusively on the written descriptions). On the other hand, the Board was right when it focused on the facts that the marks were identical, their functions were similar, and sophisticated purchasers were likely to believe that their sources were related. The Court reinstated the Board's findings. It considered Wisconsin's new evidence but found it not sufficient to overcome those findings and compel summary judgment in Wisconsin's favor. It therefore remanded for a trial on likelihood of confusion. The Court next considered Phoenix's counterclaims, which the district court dismissed on sovereign immunity grounds. There are two exceptions to the Eleventh Amendment's grant of sovereign immunity. The first is when Congress regulates state behavior pursuant to the Fourteenth Amendment. The second is when a state waives its immunity and consents to suit. The Court noted that the Supreme Court has already found unconstitutional the Patent Remedy Act's creation of state liability for patent infringement in Florida Prepaid. Given the similarities between the two statutes, the Court found the decision controlling. With respect to waiver, the Court first rejected the argument that Wisconsin's participation in the regulated trademark process amounted to waver, again relying on Florida Prepaid. Lastly, the Court addressed and rejected the argument that Wisconsin voluntarily waived its sovereign immunity when it chose to challenge the Court's decision by filing a suit in the district court. The Court distinguished the Supreme Court's Lapides decision, in which Georgia was not allowed to invoke sovereign immunity after it removed a case from state court. Here, Wisconsin's filing simply reflected its choice of a forum for judicial review. It did not alter the nature of the proceedings in any way.

Judge Wood agreed with the majority on the likelihood of confusion with issue and also with respect to whether Wisconsin's participation in a federal regulatory program constituted a waiver of sovereign immunity. She dissented, however, on the issue of whether Wisconsin's district court challenge to the Board’s decision constituted a waiver. The issue is not, she said, whether the state is a defendant, a plaintiff, an intervenor, or an appellant. It is, instead, the voluntariness of the decision and its consequences. Here, Wisconsin chose to file a case. Lapides controls -- Wisconsin has waived sovereign immunity. Wisconsin was not even required to appeal. It could have accepted that the Board's decision. Similarly, it could have appealed to the Federal Circuit, where Phoenix would not have been able to file a counter court. Instead, Wisconsin chose to gain a litigation advantage by filing in the district court. Just like in the Lapides case, Wisconsin was using its sovereign immunity to gain a litigation advantage. Finally, Judge Wood wrote at length suggesting that it may be time to reconsider a "commercial act" exception to the scope of sovereign immunity.

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BLOCKOWICZ v. WILLIAMS (December 27, 2010)

David, Mary, and Lisa Blockowicz filed a lawsuit against Joseph Williams and Michelle Ramey. They alleged that the defendants defamed them by posting untruthful statements on several websites. The defendants never responded to the lawsuit. The court entered a default judgment and issued an injunction requiring the defendants to remove the defamatory statements. When the defendants made no attempt to comply with the injunction, the Blockowiczs contacted the operators of each of the websites at issue and asked each to remove the offending statements. Each website complied with the request -- except www.ripoffreport.com ("ROR"). ROR is a website whose purpose is to host comments about bad business practices. Posters must first enter into a contract with the site operator. Among other things, posters agree not to post defamatory remarks, agree to indemnify the operator, and agree that the operator will not remove material even at their request. The Blockowiczs sought to enforce their injunction directly against ROR under Rule 65 as a third party with actual notice who was "in active concert or participation" with a bound party. Chief Judge Holderman (N.D. Ill) denied the request. The Blockowiczs appeal.

In their opinion, Seventh Circuit Judges Cudahy, Flaum, and Wood affirmed. The Court first rejected ROR's personal jurisdiction defense. Although it mentioned it in a footnote in its initial response below, ROR waived the defense when it participated in the briefing and oral argument in the district court. On the merits, the Court noted that Rule 65(d)(2) binds not only the parties but other persons with actual notice who are in "active concert or participation" with the parties. Here, ROR conceded that it had actual notice -- the only issue was its "concert or participation." The Court rejected the Blockowiczs’ bases for that requirement: a) the contract between ROR and the defendants was entered into before the alleged wrongdoing and cannot be the basis for "active concert," and b) ROR’s mere inactivity of not removing the postings cannot be the basis for "active concert." Finally, the Court stated that the Blockowiczs’ argument that the district court should have invoked its inherent authority was waived since it was not raised below. Even if not waived, however, the Court noted that it would have been an inappropriate remedy. The only appropriate avenue for relief is a contempt charge against the original defendants.

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BAUSCH v. STRYKER CORP. (December 23, 2010)

Several days after the FDA advised the Stryker Corp. that its Trident hip replacement system’s manufacturing process was deficient, Margaret Bausch received a new hip -- a Trident. Bausch's Trident failed, she required additional surgery, and she experienced a number of medical problems. Bausch brought a negligence and strict liability suit under state law, alleging that the device violated federal law. Judge Der-Yeghiayan (N.D. Ill) granted the defendants' motion to dismiss on the grounds that the claims were preempted by federal law. The court also entered final judgment without allowing Bausch an opportunity to amend. Bausch appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Manion and Hamilton reversed and remanded. The Court first considered express preemption. Class III medical devices such as the Trident system are granted an express, but limited, preemption defense from product liability claims by the Medical Device Amendments of 1976. Citing the Supreme Court's decisions in Lohr and Riegel, the Court stated that the preemption protection applies to devices that comply with federal law and does not preclude claims based on a violation of federal law. Although expressly not deciding whether Bausch would be able to prove the allegations of her complaint that the device violates federal law, the Court concluded that the express preemption defense should not preclude her from trying. The Court also rejected the defendants' implied preemption defense under Buckman. Buckman involved an allegation of fraud on the FDA -- the Supreme Court expressly distinguished that type of claim from a traditional state court claim. Having concluded that the claims alleged were not preempted, the Court next addressed whether they were adequately stated under Iqbal and Twombly. The Court concluded that both the original complaint and the proffered amended complaint met that standard. With respect to the original complaint, although it did not specify the specific federal violation, it did provide enough information to put defendants on notice of the nature of the claim. This is particularly true in the situation here, because the victim of a defective product frequently does not know the exact nature of the defect and much information regarding Class III medical devices is kept confidential by law. The Court also concluded that the proffered amended complaint was sufficient and should not have been rejected. It provided additional factual detail as well as a clarification that Bausch was proceeding under a federal violation theory. The Court found no merit in any of the district court's rationales for denying leave to amend and cautioned district courts to allow a party an opportunity to amend after dismissal for failure to state a claim, even if the court is skeptical of the party's ability to successfully do so. 

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PARVATI CORP. v. OAK FOREST (December 23, 2010)

In early 2004, Parvati Corp. decided to sell a motel it owned in Oak Forest, Illinois to Bethlehem Enterprise, Inc. The sale was contingent on Bethlehem's ability to secure municipal permission to operate a senior-living facility on the site. The Oak Forest Zoning Commission denied the request in early 2006, citing a recently enacted ordinance that prohibited the requested use. Parvati and Bethlehem filed suit seeking judicial review of the administrative decision. They also sought money damages under federal statutory and constitutional claims. Judge St. Eve (N.D. Ill.) affirmed the administrative decision and dismissed a state law administrative review count. She then, on plaintiffs' motion, dismissed the federal statutory and constitutional claims and entered final judgment. Several months later, Parvati (without Bethlehem) filed a new lawsuit reasserting the federal statutory and constitutional claims. After several more months, Parvati moved for post-judgment relief in the original case on the grounds that the City had misrepresented the validity of the ordinance on which it relied. The City responded on the merits but also maintained that Parvati lacked standing because it had since conveyed the property to its lender in lieu of foreclosure. The district court found that Parvati had standing, notwithstanding the sale of the property, because of the potential preclusive effect of the judgment on Parvati's new lawsuit. On the merits, however, the district court rejected the request for post-judgment relief because Parvati could have raised the ordinance’s invalidity before judgment. Parvati appeals.

In their opinion, Associate Justice O'Connor (Ret.) and Seventh Circuit Judges Williams and Sykes vacated and remanded with instructions to dismiss for want of jurisdiction. The Court addressed the central issue of standing. Parvati certainly met all the standing requirements at the inception of litigation. It owned the property and suffered an actual injury traceable to the City's conduct. Once it transferred ownership of the property, however, it lost its standing. First, the available relief cannot help its cause. Next, the Court then rejected the district court's basis for standing -- the refiling of the federal statutory and constitutional claims. The Court noted that constitutional standing requires that the injury be "fairly traceable" to the City's conduct. Here, the injury (the potentially preclusive effect of the earlier judgment) is not traceable to any conduct of the City. Instead, it is traceable exclusively to Parvati‘s litigation strategy and conduct. The potential injury would not exist had Parvati pressed its statutory and constitutional claims in the original litigation. Thus, Parvati lacks standing and the court should not have entertained its motions.

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FELLS v. UNITED STATES (December 23, 2010)

Stephen Fells owned and operated a small convenience store in Milwaukee, Wisconsin. The store participated in the Supplemental Nutrition Assistance Program (formerly known as the Food Stand Program). An automated monitoring program identified a number of questionable transactions at Fells’ store in 2007. The United States Department of Agriculture conducted an investigation, which revealed a significant number of transactions larger than normal for a store of that size and a significant number of unusual, even-dollar transactions. The USDA determined that Fells violated Program regulations and disqualified him from the Program. Fells appealed administratively. The USDA affirmed its determination. Fells sought judicial review. Magistrate Judge Goodstein (E.D. Wis.) upheld the agency's determination, ruling that Fells had the burden of proof to establish the invalidity of the determination and that he failed to sustain his burden. Fells appeals.

In their opinion, Seventh Circuit Judges Ripple, Manion, and Sykes affirmed. The Court first addressed the burden of proof issue. The statute provides for a trial de novo on judicial review of an agency determination. The statute provides no other guidance on the trial procedures or the burden of proof. The Court noted that it had never directly resolved the issue but that it had consistently followed the Fifth Circuit's decision in Redmond, in which that court concluded that the agency action was entitled to a "presumption of validity." The Sixth and Ninth Circuits have also concluded that a store owner challenging agency action has the burden of proof. The Court thus made explicit the rule that its earlier decisions had adopted implicitly -- that the store owner had the burden to prove by a preponderance of evidence that the challenged determination was invalid. Applying a clearly erroneous standard, the Court determined that Fells failed to carry his burden. Although the evidence was largely circumstantial, the district court did review the evidence and Fells' explanations. Its affirmance of the agency's determination was not clearly erroneous.

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ARROW GEAR CO. v. DOWNERS GROVE SANITARY DISTRICT (December 10, 2010)

A number of residents of Downers Grove, Illinois brought a class action in 2004 against Arrow Gear Company and others for damages. The suit alleged that Arrow and the others contaminated the local groundwater with industrial solvents. The parties settled the suit in 2006 for approximately $16 million. The defendants allocated the settlement amount amongst themselves in a series of agreements. As part of the settlement, each defendant released every other defendant from a future claim for contribution. Although the release was broad, it provided that it did not release any claims other than those specified and did not release claims that "may arise in other litigation or in other contexts." The court then dismissed the case with prejudice. A few years later, Arrow brought CERCLA contribution suits for costs it had incurred against those same defendants. Judge Darrah (N.D. Ill.) dismissed the suit as barred by res judicata. Arrow appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Sykes reversed. The Court first addressed its appellate jurisdiction, since the district court did not dismiss the suit against all defendants. Arrow took a voluntary dismissal without prejudice with respect to two of the defendants. A decision is not final, and appellate jurisdiction does not exist, if the plaintiff has the opportunity to refile against some defendants. That was the case here. However, as the Court has done before on more than one occasion, it provided Arrow's lawyer an opportunity at oral argument to convert the without prejudice dismissal to a with prejudice dismissal. Arrow's lawyer accepted the invitation and satisfied the Court of its appellate jurisdiction. The Court also briefly addressed the district court's jurisdiction. This is a case that involves enforcement of a settlement agreement -- and the general rule is that a district court does not have jurisdiction of such a claim without an independent basis for its jurisdiction. But here, Arrow's claim does have such an independent basis. The claim is based on CERCLA. The fact that the defendants interposed a settlement agreement as the basis for its res judicata defense does not strip the court of its federal question jurisdiction. On the merits, the Court seemed to have little difficulty concluding that res judicata did not bar the suit. The agreements between the defendants in the earlier class action was limited to the allocation of the $16 million in damages paid to the private plaintiffs. The current suit seeks contribution for an additional $5 million that Arrow has incurred as a result of an EPA investigation. The settlements in the earlier suit did not release Arrow's claims in the current one.

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RELATIONAL, LLC v. HODGES (December 8, 2010)

Robert Hodges and his brother operated Laminate Kingdom, a flooring business in Florida. In 2005, Hodges personally guaranteed up to $750,000 of Laminate's indebtedness to Relational, an equipment financer. The contract allowed for service of process on Hodges at his primary residence address in Miami by registered or certified mail. Relational brought suit on the guarantee shortly after Laminate entered bankruptcy proceedings. When it tried to serve Hodges by mail, it discovered that he had sold his house and returned to the United Kingdom without any forwarding address. Relational used a private investigator to locate Hodges. It discovered a U.K. government database on which Hodges listed his residential address in Harborne, Birmingham. Process server Karen Johns delivered the complaint to the listed address and signed a return of service and affidavit stating that she served a man at that address who identified himself as Robert Hodges. Soon, Relational received correspondence from English solicitors claiming that the address was not that of Robert Hodges but of his grandmother and that none of his family members knew of Hodge’s whereabouts. On Relational’s motion, the court entered a default judgment for $750,000. Relational attempted to enforce the default judgment for almost a year in the U.K. It met with resistance and delays by Hodges. The day before a hearing was scheduled in the U.K. to enforce the judgment, Hodges filed a Rule 60(b)(4) motion in the U.S. court, claiming he was never served. The court held an evidentiary hearing. When the court refused to allow John's to testify telephonically, Relational obtained and offered a supplemental affidavit. The supplemental affidavit added to her original affidavit a physical description of the man she served, which matched Hodges. The supplemental affidavit was not, however, certified by an administrator of oaths. Hodges testified that he did not live at the address, that he was never served, and that he was in a local pub on the day in question. Judge Coar (N.D. lll.) denied Hodges’ motion to strike the supplemental affidavit and denied, as well, his motion to vacate. Hodges appeals.

In their opinion, Seventh Circuit Judges Wood, Evans, and Sykes affirmed. The only issue on appeal was the factual question of whether Relational proved service on Hodges. The Court noted that the supplemental affidavit, notwithstanding the substantial attention it received from both parties, was immaterial. A signed return of service is prima face proof of service and can only be rebutted with strong and convincing evidence. Johns' original affidavit identifies the person she served as well as the time and place of service. That is all that is required to shift the burden to Hodges to rebut the presumption. Here, the district court found that Hodges failed to do so -- relying principally on credibility determinations. The district court noted that Hodges' behavior was consistent with dodging his obligations. He left the country without a forwarding address, he listed an address with the U.K. government that he then claimed was not his residence, and he delayed the judgment enforcement proceedings for almost a year. The Court deferred to the district court’s credibility determinations. The court was well within its discretion to deny Hodges' motion.

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AMERICAN BANK v. CITY OF MENASHA (November 29, 2010)

The City of Menasha, Wisconsin financed a power plant conversion by issuing bonds. Unfortunately, the project ended up over-budget and the city defaulted on the bonds. Several bondholders, including American Bank, filed a class action against the City. The suit alleged violations of federal securities law. A few weeks after filing suit, the Bank submitted a public records request to the City pursuant to state law. When Menasha refused to produce the requested records, the Bank obtained an order from a state court ordering compliance. Instead of complying, Menasha sought a stay from the district court in which the class action was pending. Judge Springmann (N.D. Ind.) granted the motion and issued a stay under the Private Securities Litigation Reform Act, as amended by the Securities Litigation Uniform Standards Act. The Act requires that discovery be stayed while a motion to dismiss is pending and authorizes a district court to stay state court discovery proceedings when necessary. The Bank appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes reversed. The Court first addressed its jurisdiction. Although discovery orders are usually not appealable, there are exceptions – plus, this may not be a discovery order. The Court concluded that jurisdiction was inseparable from the merits. If the Bank is right on the merits, it is not a discovery order but an appealable injunction. If the City is right on the merits, it is a discovery order and unappealable unless it fits within an exception. The Court sided with the Bank. First of all, discovery is a well defined word in federal civil procedure and does not generally include the entirety of a party's investigation. Second, if the Act meant to use it in a different way, there must be a reason based on statute or policy. The policy behind the discovery stay is to prevent one party from using discovery to impose exorbitant costs on the other for the purpose of inducing a settlement. That concern does not exist here, since the cost of complying with the public records request can be charged to the Bank. Menasha concedes that it couldn't refuse a newspaper's request for the same records, nor could it have refused the Bank's request if it made the request a few weeks before filing the complaint rather than a few weeks after. The City not only does not convince the Court to adopt a broad definition of "discovery" in the Act -- it convinces the Court that their interpretation is futile, would create a “precedent of unmanageable scope,” and would hold the law “out to ridicule.”

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RESEARCH AUTOMATION v. SCHRADER-BRIDGEPORT INTERNATIONAL (November 23, 2010)

Schrader-Bridgeport International (SRI) contracted with Research Automation to custom build a high-pressure cleaning machine. A dispute arose between the parties and each filed suit against the other -- Research in Illinois and SRI in Virginia. Research asked the Illinois federal court to enjoin SRI from proceeding in Virginia, and SRI asked the Illinois federal court to transfer its case to Virginia under § 1404(a). Judge Gottschall (N.D. Ill.) denied Research's request and granted SRI's. Research appeals.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton affirmed. The Court briefly addressed its appellate jurisdiction because the transfer decision would generally not be appealable as an interlocutory order. However, since the denial of the injunction is appealable, the Court exercised pendant appellate jurisdiction over the “inextricably intertwined” transfer order. On the merits, the Court identified the relevant factors the district court should consider in exercising its discretion to transfer under § 1404 (a): the availability and access to witnesses and other resources, the location of the events, docket congestion, time to trial, each court's familiarity with the law, and the local community's interest in the matter. Here, the district court considered the appropriate factors and concluded that Virginia was the more appropriate forum. The court relied principally on Virginia's connection to the events -- where the contract was negotiated and where it was to be performed. The Court concluded that the district court did not abuse its discretion in its finding. The Court rejected Research's reliance on a rigid "first-to-file" rule. The Seventh Circuit does not adhere to such a rigid rule, particularly where the cases are mirror images. In fact, it is the suit that seeks coercive (here SRI), rather than declaratory, relief that is generally favored in that situation, regardless of who filed first. Although the Court conceded that the Eleventh and Federal Circuits apply a more rigid rule, most other circuits are in accord with the Seventh Circuit. The order of filing should simply be one factor considered as part of the § 1404 (a) analysis.

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CYRUS v. TOWN OF MUKWONAGO (November 10, 2010)

Twenty-nine-year-old Nicholas Cyrus lived with his parents in Mukwonago, Wisconsin. Cyrus suffered from bipolar disorder and had occasional delusional episodes. He was known by the local police in his small community for his unusual behavior but was not considered dangerous. On the evening of July 8, 2006, Cyrus left his parents' home wearing only his bathrobe following a dispute with his mother . He remained missing until early the next morning when a town resident reported to the police that an unknown man wearing only a bathrobe was trespassing on his property. Lt. Czarnecki responded to the call. Czarnecki suspected that the "unknown man" was Cyrus. He knew Cyrus and knew that he had been reported missing the night before. There are slight factual disputes regarding what happened next but, generally, Czarnecki unsuccessfully tried to get Cyrus' attention and cooperation. After Cyrus refused a request to talk and moved toward the house, Czarnecki used his Taser on him. Cyrus fell to the ground. He tried to get up but wobbled and fell. Czarnecki used his Taser again and Cyrus rolled down the driveway. By this time, a second officer had arrived at the scene. The two officers tried to handcuff Cyrus but he was lying on his hands. When the officers could not pry his hands loose, Czarnecki used his Taser several more times. The officers finally got him handcuffed but, when they rolled him over, they discovered he was not breathing. Cyrus died later that day. His parents brought a § 1983 Fourth Amendment excessive force claim against the officers and the municipality. The plaintiffs offered two experts -- one to testify regarding reasonable force and one (the Medical Examiner, who reformed the autopsy) on the cause of death. The Medical Examiner testified at her deposition that many factors contributed to Cyrus' death, including the stress of the struggle, his fear, his mental condition, his physical position, the pain, and the shock. She testified that she could not state that any particular factor was more significant than another. Judge Randa (E.D. Wis.) excluded the testimony of both experts relating to the cause of death, principally because the Medical Examiner could not isolate a primary cause of Cyrus' death. The court then granted summary judgment to the defendants, finding that there were no material disputes of fact and that the Taser use was not excessive force as a matter of law. Plaintiffs appeal.

In their opinion, Circuit Judges Bauer and Sykes and District Judge Simon reversed and remanded. The Court recognized that most of the material facts were undisputed (principally because the victim was dead). However, it rejected the district court's conclusion for two reasons. First, the Court identified several material facts that were in dispute. Czarnecki testified that he used his Taser only five or six times but the Taser's internal register recorded 12 trigger pulls. The parties also disagreed about whether Cyrus walked or ran toward the house. Second, excessive force claims require an analysis of all the circumstances surrounding the use of force. Facts that may not technically be in dispute may be susceptible of different interpretations, making summary judgment appropriate. For example, there were potentially different inferences that a jury could draw from the fact that Cyrus rolled down the driveway. Was it an attempt to escape or merely an involuntary reaction to the shock? Other factors the jury could consider also tended to support the unreasonableness of the force: Cyrus had not committed a serious offense, he did not violently resist the officers, he was not armed, and he suffered from a mental illness. Since a jury could reasonably conclude that Czarnecki's multiple Taser uses constituted unreasonable force, summary judgment was inappropriate. The Court also rejected defendants' alternative position that plaintiffs could not prove causation without the excluded expert testimony. The Court conceded that proof of causation will be more difficult without the Medical Examiner's testimony. However, it found that the record was not totally devoid of evidence upon which a jury could conclude that the force caused Cyrus's death. Expert testimony is not necessary if the facts relied on are such that lay persons can understand them and draw appropriate conclusions from them. Here, Cyrus stopped breathing shortly after receiving the shocks, there is no evidence of a prior injury or condition, the toxicology report showed the absence of drugs, and there is no evidence of an intervening cause. On this record, the Court concluded that a jury could find causation.

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THOROGOOD v. SEARS, ROEBUCK AND CO. (November 2, 2010)

For the third time in two years, the Seventh Circuit has an occasion to decide an appeal in this failed attempt at a class action. Steve Thorogood filed a class action on behalf of residents of 28 states and the District of Columbia. He alleged that Sears' advertising and representations regarding the stainless steel content of a dryer drum constituted a violation of consumer protection laws. The Court reversed the district court's class certification order (the opinion and intheiropinion). It concluded that there were no common issues of fact and that the case was a particularly poor case for class certification. On remand, Sears made a $20,000 offer of judgment on Thorogood's individual claim. Because that amount exceeded Thorogood's maximum recovery, the district court dismissed the case as moot. The Court affirmed, rejecting Thorogood's argument that he was entitled to substantial attorneys' fees (the opinion and intheiropinion). Undaunted, Thorogood's counsel continued his "quixotic . . . quest" and filed an almost identical class-action suit in California. The California district court ruled that the case was barred by collateral estoppel. After plaintiffs alleged additional facts in an amended complaint, however, the court reversed its ruling and allowed the case to proceed with discovery. Sears returned to the Illinois district court and sought to enjoin the continued prosecution of the California case. Judge Leinenweber (N.D. Ill.) denied the motion, concluding that the availability of a collateral estoppel defense was adequate relief. Sears appeals.

In their opinion, Judges Posner, Kanne, and Evans reversed and remanded. The Court first noted that the district court had jurisdiction notwithstanding the fact that the original case was no longer pending. Sears' motion was brought pursuant to the All Writs Act, which authorizes a federal court to issue commands that are necessary to effectuate prior decisions of the court. The Court turned its attention to the merits, which required it to determine whether the district court abused its discretion. Ordinarily, a collateral estoppel defense would amount to an adequate remedy at law and preclude injunctive relief under the All Writs Act. The Court concluded, however, that several factors in the case militated otherwise: the near frivolous nature of the complaint itself, its poor fit as a class action, the difficulty in structuring proper relief, counsel's stated intention to circumvent the district court's order, counsel's position that California consumer protection law is different when his earlier position in the Illinois case was that all class members were governed by the same law, the potential for abuse in class proceedings, the cost of pretrial discovery, and California counsel's "threat to turn the screws" if the case did not settle. The district court apparently did not take these considerations into account and may have believed that the mere availability of the collateral estoppel defense precluded relief. Although conceding that the California court's order deserved respect, the Court mentioned that the California court misunderstood the case and was not going to revisit certification until after discovery. In addition, its orders were not appealable. Sears is therefore without an adequate remedy at law and the district court abused its discretion in denying the injunction. The Court left the details of the injunction to the district court but made several comments nonetheless: the lawyers and all of the original class members should be subject to the injunction, the injunction should not prohibit individual claims, the additional named defendant in the California suit is entitled to no relief, no unnamed class member should be punished with contempt until served with a copy of the injunction, and the injunction should not prohibit class actions with materially different allegations. Finally, the Court noted that the Supreme Court recently granted certiorari in a case regarding a federal court's power to enjoin a state court proceeding. In consideration of that fact, the Court directed that the injunction should encompass state court proceedings but should specifically allow for a modification in consideration of the ultimate decision in the case. 

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BONTE v. U.S. BANK (October 19, 2010)

Travis and Jolene Bonte own a home in the small village of Woodville in west-central Wisconsin. In late 2005, they took out a third mortgage on the home. A few years later, the Bontes brought an action for rescission. They alleged that there were ten discrepancies between the HUD-1 settlement statement and the Truth in Lending Act (TILA) statement and disclosures. U.S. Bank, the mortgage holder, moved to dismiss for failure to state a claim. It argued that none of the errors alleged related to a “material” disclosure as required for TILA rescission. In response, the Bontes simply restated their allegations and the applicable legal standard. Judge Crocker (W.D. Wis.) dismissed the complaint, holding that the Bontes waived their opposition to the motion by failing to respond but also concluding that U.S. Bank was correct. The Bontes appeal.

In their opinion, Judges Posner, Rovner, and Sykes affirmed. The Court agreed with U.S. Bank’s statement of the applicable law – that rescission (at least after three days) requires proof of a “material” non-disclosure. Regulation Z identifies eighteen required disclosures and names five of them as material: the APR, the finance charge, the amount financed, the total of payments, and the payment schedule. The Court noted that the Bontes alleged that the ten errors related to the APR, the finance charge, and the amount financed. But U.S. Bank went through each of the errors and showed how they did not related to any material disclosure. The Bank provided citations and reasons why each did not qualify as a material disclosure. The Court noted that the Bontes failed to respond to any of the Bank’s arguments. Just as they did in the district court, they merely restated their conclusory allegation that the errors related to material disclosures. Iqbal requires a two-step approach. The Bontes meet the first step – a “short and plain statement” of their claim. But they failed, said the Court, to satisfy the second prong – demonstrating a plausible entitlement to relief. Just because they couched their allegation of materiality as a factual allegation, a court is not required to accept it as true. It is, in fact, a legal conclusion – not a factual allegation. By failing to respond to the Bank’s arguments, they have waived any argument that the errors related to material disclosures.

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On June 16, 2011, the Court granted a petition for panel rehearing and vacated this opinion and judgment.

COSTELLO v. GRUNDON (October 18, 2010)

Several senior Comdisco, Inc. employees participated in the company’s shared investment plan (SIP) program. Under the program: a) participants purchased Comdisco stock, b) the purchase was funded exclusively by personal loans, c) the participants executed promissory notes in their personal capacities, d) Comdisco guaranteed the loans, e) the lenders remitted the loan proceeds directly to Comdisco, f) Comdisco held the shares, g) there were several restrictions on the ability to sell the stock, and h) participants delivered a blank stock power to Comdisco. Within two years, the stock price had risen from $34.50 to $53.00. Many participants sold their shares and made a nice profit. Others, however, did not and were still holding the stock when Comdisco went into bankruptcy. The lenders settled with Comdisco on the guaranty obligation. As part of the settlement, the lenders assigned their rights under the notes to the Comdisco Litigation Trustee. The Trustee brought individual actions against the participants. He moved for summary judgment against two of the participants. The court granted the Trustee’s motion, holding that the Trustee made a prima facie case and rejecting several defenses: a) the alleged misrepresentations were expressions of legal opinion and could not support a fraud finding, b) defendants had not shown reliance, c) defendants could not assert a violation of Regulation U as a defense, and d) a negligent misrepresentation defense was not available against the Trustee. The Trustee subsequently moved for summary judgment against the remaining defendants on the same papers. Defendants raised new defenses. Judge Gettleman (N.D. Ill.) granted the Trustee’s motion, rejecting the additional defenses. The defendants appeal.

In their opinion, Judges Kanne, Rovner, and Tinder affirmed in part and vacated in part. The Court addressed each of the many arguments on appeal in turn. Regulations G and U Violations Defense: Although the Court discussed at length and questioned the district court’s treatment of Comdisco’s or the lenders’ violation of Regulation U or G, it ultimately concluded that it did not need to decide the issue. It concurred with the district court that, even if a violation existed, it did not provide an illegality defense. Relying on Bassler, Blair, and Shearson, the Court noted that the regulations were not meant to protect individual investors and a violation does not make the underlying contract illegal. Section 10(b) Illegality Defense: The Court did disagree with the district court’s treatment of defendants’ defense under § 10(b) of the Securities Exchange Act of 1934. Although the Trustee moved for summary judgment based only on the absence of a false statement, the district court granted it on the absence of scienter, raised only in the reply brief. The Court stated that the Trustee had the initial burden of identifying the basis of his request for relief – the defendants were not required to respond to other grounds, even if later raised in the reply. Although the defendants could have responded to the Trustee’s arguments or sought further discovery, they were not required to do so. Furthermore, the Court found that the district court’s requirement of a heightened “strong inference” of scienter was improper. Finally, the Court declined to itself affirm on the alternative grounds raised by the Trustee in its reply below. Section 17(a) Defense: The district court’s ruling with respect to defendants’ defense under § 17(a) of the Securities Act of 1933 was erroneous for the same reason as the ruling on § 10(b). The court improperly ruled that defendants failed to present evidence of scienter when they were under no obligation to do so at this stage of the proceedings. Fraud and Negligent Misrepresentation Set-Off Defenses: With respect to the fraud and negligent misrepresentation set-off defenses, the district court adopted the ruling and reasoning of it decision on the first summary judgment motion. There is nothing wrong with that, said the Court, except here the defendants presented a new legal argument on the fraud defense and additional evidence with respect on the negligent misrepresentation defense that the court did not consider. The Court concluded that summary judgment in the Trustee’s favor on both was error. Excuse of Non-Performance Defense: Lastly, the Court held that it was error to grant summary judgment on the excuse of non-performance defense. The defendants argued that the lenders’ non-compliance with § 17(a), § 10(b), and Regulation U amounted to a breach of contract and thus excused their performance. The Court concluded that the district court erred in granting summary judgment with respect to the §§ 17(a) and 10(b) claims – given that the Court had just vacated the summary judgments on the underlying defenses. With respect to Regulation U, however, the Court agreed that a violation would not excuse performance since the participants were not in the “zone of interest.” The Court remanded for further proceedings.

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TAYLOR v. WATKINS (October 14, 2010)

Corey Taylor is an inmate in Illinois prison. He claims that his jailers violated his civil rights. Among other things, he says that they contaminate his food, withhold his mail, and even beat him. He filed suit under § 1983 and requested permission to proceed in forma pauperis (IFP). This is not the first time that Taylor has made this sort of allegation. In fact, Taylor has three "strikes" (that is, he has filed at least three prior actions against government entities or employees that have been dismissed as malicious, frivolous, or for failure to state a claim). He therefore cannot proceed in forma pauperis under § 1915A unless he meets the in "imminent danger of serious physical injury" exception. He did allege imminent danger but the defendants challenged the allegation. Judge Murphy (S. D. Ill.) held an evidentiary hearing, concluded that Taylor was not in imminent danger, denied IFP status, and dismissed the case when Taylor failed to pay the fee. Taylor appeals and requests permission to proceed IFP on appeal.

In their opinion, Judges Kanne, Wood, and Hamilton denied his request to proceed IFP and gave notice that the appeal would be dismissed if Taylor failed to pay the docketing fee within 14 days. The Court cited the Third Circuit's distinction between challenged and unchallenged imminent danger allegations. If the allegation is unchallenged, it is accepted as true. If the defendants challenge the allegation of imminent danger, however, the court must resolve that question before proceeding. The Court stated that its decision in Ciarpaglini is not to the contrary. There, the defendants did not deny the allegations -- they simply argued that the allegations did not meet the imminent danger threshold. The district court did the proper thing here in conducting a hearing to resolve the allegations of imminent danger.

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COGSWELL v. CITIFINANCIAL MORTGAGE CO. (October 5, 2010)

In January 2001, the Patrick Group (PG) purchased a mortgage (and the underlying note) from CitiFinancial Mortgage Co. However, CitiFinancial could not locate the original note or mortgage. It gave PG a copy of the mortgage but could not locate even a copy of the note. PG ran into complications when it substituted for CitiFinancial in the pending foreclosure proceeding. A title search disclosed a gap in the recorded ownership of the mortgage. Because PG could not produce even a copy of the note, the court directed a verdict against PG. The appellate court affirmed. PG then brought suit for breach of contract against CitiFinancial. Judge Norgle (N.D. Ill.) granted summary judgment to CitiFinancial, concluding that the agreement did not require transfer of the note and that, even if it did, CitiFinancial’s failure to transfer was not the cause of PG's damages. PG appeals.

In their opinion, Judges Flaum, Ripple, and Sykes reversed and remanded. The Court first addressed whether the contract required the physical transfer of the note. The Court took issue with the district court's treatment of this as a question of law, as if it were a question regarding the existence of a contract. Here, there is no doubt that a contract exists. The only question concerns its terms -- and that is a question of fact. Relying on PG's offer letter, the contract itself, and an uncontested affidavit, the Court concluded that the contract was ambiguous. Although the district court's reading of the contract was plausible, it is not the only reasonable reading. The district court improperly resolved this factual dispute on summary judgment. It must go to a trier of fact. The Court turned to causation. Again, the Court disagreed with the district court and its holding that the failure to transfer was not the cause of damages because PG could have enforced its rights on alternative paths. The Court stated that Illinois applies a special rule to breach of contract cases when the alleged harm is a result of an adverse judicial outcome. In those cases, causation is a question of law and depends on an analysis of what a reasonable court would have done had the defendant not breached the contract. Here, the Court concluded that a reasonable Illinois court would have allowed PG to proceed with the foreclosure if it had a copy of the note. Thus, CitiFinancial's breach caused PG's damages. The Court also rejected CitiFinancial’s alternative paths argument, although it first re-categorized the arguments as "failed to mitigate," rather than failed to prove causation. It held that, under Illinois foreclosure law, a reasonable court would have ruled against PG on both the lost-note affidavit and the personal judgment theories.

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RK CO. v. SEE (September 22, 2010)

Dr. Jackie See founded Harvard Scientific Corporation (HSC) and was very active in its efforts to develop and market a product to treat sexual dysfunction. In 1997, the FDA discovered that HSC had falsified some findings in its new drug application. The FDA began an audit and instructed HSC to cease its clinical studies. Throughout 1997 and 1998, however, HSC continued to make public statements claiming that it was moving forward with its product and that the FDA had approved further clinical trials, when it had not. In mid-1998, RK Co. purchased $500,000 worth of HSC stock. By mid-1999, HSC was bankrupt and RK’s stock was worthless. RK sued HSC, Dr. See, and other HSC employees. After lengthy litigation, Dr. See (the last remaining defendant) and RK consented to a bench trial before a magistrate judge. Magistrate Judge Keys (N.D. Ill.) found for RK on each of the claims. See appeals.

In their opinion, Judges Bauer, Rovner, and Williams affirmed. The Court first rejected See's argument that RK was not the "real party in interest" because it was not a true legal entity for several reasons: a Rule 17 (a) "real party in interest" objection may be waived, See waived it by not bringing it up until midway through the trial, the fact that he may not have known until trial is not excused since over seven years had elapsed since the complaint's filing, and the only consequence of a more timely objection would have been a substitution of parties. The Court also rejected See's standing arguments. It concluded that RK easily met the minimum requirements for constitutional standing (injury in fact, causation, and redressability) and that See waived the prudential standing argument. Next, the Court held that the magistrate judge did not err in finding that the evidence was sufficient to support the claims. See challenged the lower court's decision to admit certain deposition testimony but failed to include in the record the transcript of the proceedings below. The Court dismissed his challenge, being unable to meaningfully review the court's reasoning. Finally, the Court found no abuse of discretion in the lower court's award of prejudgment interest and attorney's fees. Prejudgment interest is presumptively available and See failed to specify any particular objections to the fees.

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MCCANN v. IROQOUIS MEMORIAL HOSPITAL (September 13, 2010)

Valerie McCann was forced out of her job as director of physicians' services at Iroquois Memorial Hospital in early February of 2006, most likely as part of a reorganization spearheaded by a new CEO. She was not happy. Dr. Leslie Lindberg provided radiology services to the Hospital. He also disapproved of the new administration and feared that the reorganization could put his opportunities at risk as well. McCann paid a visit to Dr. Lindberg at the Hospital later in February on unrelated business. At some point, the conversation turned to the subject of the Hospital. They were both critical of the Hospital, the CEO, and the Trustees. Unbeknownst to them, much of the conversation was recorded on Lindberg's dictation machine. Susan Freed, who oversaw the staff that transcribed dictated notes, learned of the conversation. She had it transcribed and she turned it over to the CEO. The CEO informed the trustees and provided the transcript to one of them. McCann and Lindberg brought suit against Freed, the CEO, the Hospital, and the trustees. They asserted claims under the Federal Wiretap Act as well as state law. Plaintiffs' theory is that Freed, while collecting some papers from Lindberg's office during his conversation with McCann, surreptitiously turned on his dictation machine to record the conversation. Freed denied doing so. Defendants’ theory is that Lindberg forgot to turn the machine off when McCann arrived. Judge Baker (C.D. Ill.) granted summary judgment to the defendants. McCann and Lindberg appeal.

In their opinion, Judges Flaum, Manion, and Rovner affirmed with respect to the CEO and the trustees but vacated and remanded with respect to the Hospital and Freed. The Court first addressed defendants' argument that it should not consider the McCann and Lindberg affidavits submitted in response to the summary judgment motion because they contradicted earlier testimony about the date of the conversation. The Court conceded that such a rule exists but cautioned that it does not apply when sufficient reasons are provided for any discrepancies. First of all, the Court thought the date to be immaterial. Second, and more important, the changes are easily explained here. The plaintiffs were originally mistaken about the date of the recorded conversation. Information that became readily available only after the complaint was filed (the timestamp on the recording, cell phone records, and canceled checks) all confirmed that the conversation took place on February 24 -- not February 10, as the plaintiffs originally believed. On the merits, the Court addressed the elements of the Wiretap Act claims. The Act prohibits intentionally "intercepting" a conversation or using or disclosing the contents of an interception, knowing that it was unlawful. The Court concluded that there were genuine issues of material fact when all facts and inferences were drawn in plaintiffs' favor. Even if one side's version of the facts or theory is more believable, summary judgment is not the stage to weigh evidence or make credibility determinations. The claims against Freed and the Hospital can proceed. On the other hand, the record contains no evidence on which to base the CEO’s or the trustees’ liability. The only allegation against the CEO is that he used or disclosed the interception -- but that Act requires that he do so with the knowledge that the interception was unlawful. The record does not support such a conclusion. With respect to the trustees, the only allegation is that one of them knew the interception was illegal -- but not that he used or disclosed the information. Even if true, his knowledge would not amount to a violation of the Act.

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IN RE SPECHT (September 8, 2010)

Years ago, Eric Specht started a small business that he called Android Data Corporation. He registered "Android Data" as a trademark and registered the domain name “androiddata.com." Within a few years, however, he allowed the business to fold, the domain name registration to lapse, and the corporation to be dissolved. He must have had a change of heart several years later when Google came out with the Android operating system for cell phones. He tried to resurrect the corporation, he registered the domain name "android-data.com" –and then he sued Google and a number of other defendants for trademark infringement. The case was assigned to Judge Leinenweber. After the case had been pending for a year and as discovery was closing, he sought leave to add four defendants, including AT&T. Because his wife is on the AT&T board and together they own AT&T stock, Judge Leinenweber is never assigned a case in which AT&T is a party. Nevertheless, the judge decided to hear the motion. He denied the motion to amend and also refused to recuse himself. Specht petitioned for a writ of mandamus.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Hamilton denied the petition. With respect to 28 U.S.C. §§ 455(b)(5) and 455(b)(6), the Court noted that disqualification depends on the relationship between a judge and a "party." Since AT&T is not a party, those sections do not require disqualification. The Court did conclude, however, that § 455(a)’s disqualification requirement when a judge's impartiality might be questioned comes into play. Although the Court expressly rejected the notion that the mere filing of the motion required recusal, it did conclude that a judge should not decide the merits of a motion if granting the motion would require his recusal. The proper procedure, said the Court, would have been for Judge Leinenweber to refer the underlying motion to another judge. If the uninterested judge denied the motion, Judge Leinenweber could continue to preside over the case. The Court nevertheless concluded that mandamus was unnecessary because it, as a disinterested panel, could decide the motion. Indeed, in the Court's view, granting the motion would be an abuse of discretion -- the case is a year old, discovery is closed, AT&T could have been named when the case was filed, and Google is the only necessary defendant for the relief requested.

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. HYATT (September 3, 2010)

In June and August of 2008, the SEC issued two third-party subpoenas to Brian Hollnagel and BCI Aircraft Leasing (BCI) in connection with other federal litigation. Over several weeks, BCI produced a significant amount of material. The SEC found problems with each production and requested additional information. The SEC ultimately became frustrated with what it believed to be inadequate compliance. On August 28, it filed a motion for a rule to show cause why BCI should not be held in contempt. The notice of motion indicated that the SEC would appear in court on September 3 and "seek a hearing date" on its motion. On September 3, BCI did not appear and the SEC asked the court to order a complete and proper production, to hold BCI in contempt, and to award attorney's fees. The court did so. It then issued two orders. The first indicated that the matter was continued to September 10 and asked for BCI's response to the motion by September 5. The second order was prepared by the SEC -- it held BCI in contempt, it ordered a full and complete production by September 5, it imposed a $1000 per day fine for noncompliance, and it awarded attorneys fees. The court vacated its first order the following day. Although BCI filed a substantive response, the court struck it as moot. Eventually, Judge Lindberg (N.D. Ill.) found that BCI had substantially complied with the subpoenas and rescinded the fine. He did not, however, vacate the contempt finding or the award of fees. BCI appeals.

In their opinion, Circuit Judges Posner and Sykes and District Judge Van Bokkelen vacated the contempt order. The Court first rejected BCI's argument that the subpoenas, which were issued by the SEC attorney, were not court orders and could not therefore be the basis for a contempt finding. Rule 45 of the Federal Rules of Civil Procedure is on point. Rule 45(e) specifically states that a court may hold a person in contempt for failure to comply with a subpoena and does not distinguish between a subpoena issued by a court or one prepared by an attorney. The Advisory Committee Notes make the point even more clearly. The notes, however, also make it clear that a court's contempt power should be used more sparingly and with greater attention to the non-party's rights when the subpoena is issued by an attorney. Although BCI did not exercise its rights to object to or move to quash the subpoenas, it was certainly entitled to adequate notice of an attempt to hold it in contempt. At a minimum, the SEC was required to give notice of the place and time for a hearing. Here, the Court noted that the SEC could have simply moved for a finding of contempt and provided notice to BCI of the time and place when it would appear on its motion. But it did not. Instead it used the obsolete and unnecessary “motion for rule to show cause” procedure. Under that procedure, the first appearance of the parties seeks only a preliminary order directing the alleged contemnor to "show cause" why it should not be held in contempt. The Court concluded that the SEC, having chosen to proceed in a certain manner, should be held to the traditional practice associated with that procedure. BCI did not have adequate notice that a hearing on contempt was to be held on September 3.

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BODUM USA v. LA CAFETIERE, INC. (September 2, 2010)

In 1991, Bodum Holding purchased the stock of a French company whose principal product was a french-press coffeemaker sold under the name “Chambord.” One of the principal investors in the French company also owned Household, a British company that sold a very similar looking French-press coffeemaker under the “La Cafetiere” name. The parties negotiated over Household's ability to continue selling its coffeemaker after the sale. An early draft of the sales agreement allowed it to sell the La Cafetiere only in England. The later, signed version allowed it to sell the La Cafetiere anywhere in the world except France. In 2006, Household began distributing the La Cafetiere in the United States. Bodum filed suit under state and federal law. Judge Kennelly (N.D. Ill.) granted summary judgment to Household. Bodum appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner (concurring) and Wood (concurring) affirmed. The only issue the Court addressed was the meaning of the contract, which was governed by French law. Although FRCP 44.1 allows the use of expert testimony as an aid to the interpretation of foreign law, the Court criticized the practice. Instead, it noted its preference for treatises. Here, the Court relied on the plain language of the contract and its "straightforward" negotiation history in concluding that Household was within its rights to sell its product in the United States. It rejected Bodum's argument that a provision in the French Civil Code required a trial to determine the actual intent of the parties.

Judge Posner agreed with the disposition on the merits but wrote a separate concurrence even more critical than Chief Judge Easterbrook of the practice of using experts to aid the court in foreign law interpretation. In his judgment, courts should rarely rely on expert testimony for the meaning of foreign law. Judge Posner has expressed this view in the past, as well (see his opinion in Sunstar, Inc. v. Alberto-Culver Co. - and my post).

Judge Wood also agreed with the disposition of the case on the merits and also wrote separately on the subject of Rule 44.1. Judge Wood, however, disagreed with the harsh criticism from her colleagues. In her judgment, experts are frequently necessary to ensure that a district court judge completely understands the nuances of foreign law.

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WICKENS v. SHELL OIL CO. (August 31, 2010)

Daniel and Pamela Wickens owned a small parcel of land in central Indiana that had previously been the site of a Shell gasoline station. During preparations for the sale of the parcel, they discovered that the soils were contaminated. Their attorney, Mark Shere, began negotiations with Shell -- under the Indiana Underground Storage Tank Act (the “Act”), a person who takes steps to remedy soil contamination caused by an underground storage tank may be reimbursed by the owner and may recover his attorneys' fees if he brings a successful suit. When a neighbor's property (also the site of a former gasoline station -- but not owned by Shell) was also found to be contaminated, the parties fought over the source and responsibility for the contamination. The Wickenses brought suit in early 2005. The district court denied Shell's summary judgment motion, concluding that it probably bore full responsibility for the contamination. Although the Wickenses continued to control the investigation and rack up remediation costs and attorneys' fees, the parties could not seem to reach a settlement. The court adopted a three month freeze on the parties' liability for each other's fees and costs in early 2007 in an attempt to foster a resolution. She also instructed the parties to select and retain an independent consultant to investigate the properties. Notwithstanding the court's order, the parties continued to incur substantial fees and costs during and after the freeze. The parties finally reached an agreement -- Shell purchased the property, made a payment for property damages, and agreed that the Wickenses were entitled to their costs and fees. They left the calculation up to the court. Judge Barker (S.D. Ind.) awarded all of the Wickenses' costs and fees up to the point of her freeze order, after which she disallowed all costs (with the exception of some corrective action costs pursuant to a state work plan) and fees. On post-judgment motions, the court a) deducted the amount of fees billed as attorney services by Shere’s wife, a non-attorney, and b) admonished Shere for concealing the fact that his fees were largely paid by an insurance company throughout the litigation but granted Shell no relief. Shell appeals. Shere (after being allowed to appear as a real party in interest) cross-appeals.

In their opinion, Circuit Judges Bauer and Wood and District Judge Kennelly affirmed in part and reversed and remanded in part. The only issues on appeal relates to the award of expert costs and attorneys' fees. The Court first concluded that the lower court correctly applied a statutory purpose test for calculating a fee award under the Act. Second, the Court ruled that the lower court did not abuse its discretion in concluding that the statutory purpose was satisfied as of January 2007. The Court rejected Shell's suggestions that an earlier date was appropriate and the Wickenses's suggestions that a later date was required. Next, the Court upheld (with a small clerical error reversed and remanded) the deduction for fees incurred by Shere’s wife. There was nothing wrong with the her time entries. They could have been billed as non-attorney time -- but were improperly billed as attorney time. Finally, the Court concluded that the district court did not clearly err in its award of expert costs after January 2007. On Shere’s cross-appeal, the Court a) found no abuse of discretion in denying prejudgment interest, b) concluded that Shell suffered no prejudice from Shere’s insurance concealment and found no error in the court's denial of relief, and c) refused to consider Shere’s complaint that the district court was unduly critical of his litigation conduct.

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MEYERS v. NATIONAL RAILROAD PASSENGER CORP. (AMTRAK)(August 30, 2010)

Greg Meyers was an Amtrak pipe fitter for years. It was a difficult job -- requiring lifting, twisting, reaching, etc., frequently in confined spaces. Meyers' size (approximately 350 pounds) made the job even more difficult. He started experiencing problems in 2004. He was referred to Dr. Rosseau, a neurosurgeon, who diagnosed him with cervical spondylosis and carpal tunnel syndrome. Rosseau performed carpal tunnel surgery in 2004 and back surgery in 2008. Dr. Tonino, an orthopedic surgeon, operated on his right shoulder in 2007. Meyers brought suit against Amtrak under the Federal Employers' Liability Act ("FELA"). He alleged that his injuries were caused by Amtrak's failure to use ordinary care. He relied on the Rosseau and Tonino expert reports and a report by his expert ergonomist. Judge Der-Yeghiayan (N.D. Ill.) granted partial summary judgment to Amtrak on statute of limitations grounds but then struck the reports of both doctors and the ergonomist. Without those reports and testimony, Meyers was unable to establish the elements of the offense. The court granted full summary judgment. Meyers appeals.

In their opinion, Judges Kanne, Williams, Hamilton affirmed. The Court addressed only the doctor expert issue. It stated that a party offering an expert witness who was retained to provide expert testimony in a case must comply with the requirements of Rule 26(a)(2). Those requirements include disclosing the bases of the expert's opinions and the reasons for them, which Meyers did not. The Court noted that it had never ruled on whether a treating physician is required to comply with those disclosure requirements if the subject of the opinion was not determined at the time of treatment. It concluded that a treating physician should be held to the same disclosure requirement if the physician is offered for testimony regarding the cause of injury and that testimony is based on a conclusion that was not made at the time of treatment. The testimony of Meyers' two doctors fits that definition and was properly excluded. Without those reports, there is no evidence of causation and summary judgment was appropriate.

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METAVANTE CORP. v. EMIGRANT SAVINGS BANK (August 30, 2010)

Emigrant Savings Bank wanted to expand its operations by launching an on-line bank. In early 2004, Emigrant met with Metavante Corp. The Metavante team presented its system, emphasizing its ability to service a great number of accounts. The Emigrant team knew that certain capabilities were still being developed and that the system lacked some desired traits. Nevertheless, Metavante submitted a proposal referencing existing clients and indicated that its product was in current use. It even identified Capital One as a client reference. The parties negotiated an agreement over the next several months and signed it in August. Under the agreement, Metavante was to provide electronic banking and funds transfer services. Metavante warranted that it would provide those services in a "commercially reasonable manner." Certain services were exempt from the warranty because they contained their own service-level target measurements. Finally, the agreement allowed termination for cause (but with broad cure rights), termination for convenience (for a fee), and termination for convenience and migrating the process to an in-house solution (with a lower termination fee). The program went live in early 2005. It had many flaws – for example, it could not ensure that a customer had sufficient funds to make a particular transfer, it generated error messages, it could not complete online applications, and it failed to process some transactions. On the other hand, Emigrant landed 250,000 new accounts and over $6 billion in deposits. It advertised its bank as "the most successful" bank of its type. Metavante brought suit against Emigrant in September 2005 and gave notice of termination for non-payment. Emigrant objected but made the payments. Several months later, Metavante again gave notice of termination for nonpayment. Emigrant countered that it was terminating for cause for Metavante 's "flawed and inadequate" performance. Metavante amended its complaint to add breach of contract claims. Emigrant counterclaimed for fraud in the inducement. After a bench trial, Judge Stadtmueller (E.D. Wis.) ruled that Metavante had not materially breached the contract but awarded the lower termination fee, finding that Emigrant had migrated the system to an in-house solution. The court also awarded approximately $10 million in attorneys' fees to Metavante. Emigrant appeals.

In their opinion, Judges Ripple, Manion, and Tinder affirmed. First, although criticizing the district court for its oral decision and verbatim adoption of many of Metavante 's proposed findings of fact, the Court declined Emigrant's invitation to apply a less deferential standard of review. Second, although criticizing the district court for its inadequate reliability determination with respect to Metavante's expert, its de novo review led it to conclude that the testimony was relevant and reliable. Third, with respect to whether Metavante breached its "commercially reasonable" warranty, the Court concluded that the district court did not err in considering the venture's success as probative evidence. Although a venture's success may not conclusively establish the commercial reasonableness of a party's performance, a court is certainly entitled to consider it. Here, the district court considered it as one factor, albeit a significant one, of many. Fourth, the Court found no clear error in the district court's finding of commercial reasonableness. The Court specifically cited the working relationship between the parties, the fact that both parties understood they were dealing with a new technology, and the fact that Metavante undertook diligent efforts to correct problems when they occurred. Fifth, the Court concluded that the record supported the district court's conclusion that there was no breach of the implied duty of good faith and fair dealing. Sixth, with respect to Emigrant's fraud claims, the Court found that Emigrant failed to prove reliance or falsity. The Court concluded that it was unreasonable for Emigrant to rely on any of the early "sales pitch" statements, given that these two sophisticated businesses proceeded to negotiate over several months a complex arms-length transaction. The negotiation process and the contract itself made the expectations and capabilities of the parties very clear -- Emigrant may not rely on any earlier inconsistent statements. With respect to falsity, the Court concluded that the district court did not err in its finding that none of the representations at issue amounted to fraud. Finally, the Court turned to the fee award. Several issues were presented related to the fee award. The fee shifting provision in the contract provided that the "prevailing party" is entitled to fees. The Court concluded that Emigrant's partial success in the court's awarding of the $3.8 million lower termination fee instead of the $20.7 million higher termination fee did not make it a prevailing party on that issue and entitle it to fees. The Court also concluded that the submission of redacted bills was sufficient under Medcom. Although a request for fees must be reasonable under a fee shifting provision, the Court noted that market considerations normally render unnecessary line by line scrutiny of individual time entries. The district court acted within its discretion in awarding the fees.

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BERRY v. CHICAGO TRANSIT AUTHORITY (August 23, 2010)

Cynthia Berry was one of only two females among the approximately fifty Chicago Transit Authority (CTA) employees in her work area. Early in 2006, during a morning break, Berry alleges that she was the victim of sexual harassment. The episode included significant, unwelcome physical touching. She reported the episode to a supervisor the following day. According to Berry, her supervisor told her she could lose her job if she pursued charges, told her he was going to protect the CTA, and instructed her to stay away from the break area. The supervisor took statements from the other witnesses, all of whom identified Berry as the aggressor. The official internal investigation came to the same conclusion. Shortly thereafter, Berry went on short-term leave and never returned to her job. She sought injured-on-duty status, which would have qualified her for workers compensation, but alleges that her supervisor refused. Berry brought suit for sex discrimination and hostile work environment. Judge Conlon (N.D. Ill.) granted summary judgment to the CTA, concluding that the CTA took prompt and reasonable steps in response to the allegations and that Berry suffered no adverse employment action. Berry appeals.

In their opinion, Judges Kanne, Rover, and Tinder affirmed in part and reversed and remanded in part. The Court agreed with the district court that Berry could not establish an adverse employment action -- so her discrimination claim must fail. Berry asserted a hostile environment claim both with respect to her co-worker (the unwelcome physical contact) and her supervisor (his dismissive comments). The Court first pointed out that Berry's testimony, although self-serving and uncorroborated, can be evidence of a disputed fact if it is based on personal knowledge. With respect to the hostile environment claim against the supervisor, the Court criticized the lower court for discounting Berry's testimony but nonetheless concluded that the dismissive comments were not severe or pervasive enough to constitute a hostile environment. They were infrequent, not threatening, and did not interfere with her employment. The allegations against the co-worker were different. Unwelcome and uninvited contact with intimate body parts is the most severe type of harassment. The Court concluded that Berry's claim could go forward. In addition, the Court concluded that the claim against the CTA based on the co-worker's harassment should go forward. Again, the Court criticized the district court's treatment of Berry's testimony. She contends that her supervisor sabotaged the investigation. A reasonable fact finder could find that the CTA was negligent in responding to her charges, and therefore liable.

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TRENTADUE v. REDMON (August 18, 2010)

During the 2003-2004 school year, Major Lee Redmon supervised the Junior ROTC program at Pekin High School and Mark Cole was one of his instructors. Cole admittedly had sexual contact with a female student on multiple occasions. The student reported the abuse to her mother on November 5. They immediately reported the incident to school authorities, the school district, and the police. The student's stepfather confronted Redmon. According to the stepfather, Redmon said that "this incident has happened before." After the local newspaper reported the incident, two former students came forward with allegations that they two had been abused by Cole, one in 1996 and one in 2002. The student brought suit against Redmon under § 1983 and against the school district under Title IX. Judge Mihm (C.D. Ill.) dismissed the action against Redmon based on circuit precedent that Title IX precludes a § 1983 action based on supervisor liability. The court later entered summary judgment for the school district on the Title IX claim. The student appeals.

In their opinion, Judges Flaum, Wood, and Sykes affirmed as modified. The Court first concluded that the district court was in error in dismissing the § 1983 claim -- but only because of the Supreme Court's intervening holding in Fitzgerald that such a claim is not precluded by Title IX. Since the district court did not address the claim on the merits, a remand would normally be appropriate. However, here the § 1983 claim rested on the same set of facts as the Title IX claim, which the court did fully consider on the merits, so a remand is unnecessary. Liability under either theory requires evidence of knowledge and indifference or facilitation -- on the part of Redmon with respect to the § 1983 claim and on the part of the school district with respect to the Title IX claim. The parties do not dispute that neither the school officials nor Redmon knew of Cole's abuse of the plaintiff. It is also undisputed that no school official knew of the two earlier incidents. The only issue, therefore, is whether Redmon knew of either of the earlier incidents. Plaintiff's entire argument rests on Redmon’s "this incident happened before" statement. But Redmon testified that he did not know of Cole's earlier abuse and explained his reference to an earlier incident as one involving his predecessor, not Cole. On that record, the Court concluded that the plaintiff's interpretation of the remark was mere speculation unsupported by evidence. At the summary judgment stage, plaintiff had the obligation to identify some evidence on that issue.

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ABCARIAN v. MCDONALD (August 13, 2010)

Dr. Herand Abcarian was a senior surgeon at the University of Illinois College of Medicine and the University of Illinois Medical Center in Chicago. Over time, he clashed frequently with co-employees over issues like recruitment, compensation, risk management, and benefits. He alleges that several of these co-employees conspired to defame him and deprive him of his constitutional rights. In particular, he alleges: a) they caused the University to settle a malpractice claim against him for almost $1 million, b) the reported the malpractice settlement to federal and state databanks, and c) they caused the malpractice plaintiff's attorney to file suit against Abcarian only to then have it dismissed as a result of the settlement. Abcarian brought suit pursuant to § 1983, alleging constitutional violations of his right to free speech, equal protection, and procedural due process. Judge Der-Yeghiayan (N.D. Ill.) dismissed for failure to state a claim. He also denied Abcarian's requests to amend the judgment and to amend his complaint. Abcarian appeals.

In their opinion, Judges Kanne, Williams, and Hamilton affirmed. The Court first addressed his First Amendment claim that he was retaliated against for his speech. Garcetti dealt with an employer's retaliation and the Court noted that it had already reserved judgment once about whether that rule applied to a co-employee's retaliation. Again, the Court ducked the question whether Garcetti applies to all employees but did conclude that it applies to employees whose actions are advancing the interests of their employer. The Court also concluded that a practical view of the speech, keeping in mind Abcarian's role and the content and context of the speech, lead to the conclusion that he spoke as a public employee under Garcetti, not as a private citizen. His speech was therefore not protected. Abcarian's equal protection claim was a "class-of-one" claim under which a plaintiff need not allege a suspect classification. The plaintiff must, however, allege arbitrary treatment without a rational basis. The basis of Abcarian's claim is that the defendants reported the malpractice settlement. But they had no discretion in the matter. Federal and state law required the report and would have exposed them to punishment had they failed to report. The Court concluded that the lack of discretion precluded an equal protection claim. Abcarian's third constitutional claim was a procedural due process claim based on the defendants' defamation. In order for defamation to rise to the level of a due process violation, a plaintiff must allege that was stigmatized by publicly disclosed information and that he suffered a loss of employment opportunities. The Court concluded that Abcarian could not meet this test because he still maintains his same positions at the Medical Center and College of Medicine. One cannot be thought to have been deprived of something that one still possesses. Finally, the Court concluded that Abcarian could not and did not meet the test for a Rule 59(e) motion. Since a post-judgment amendment would only be allowed if his Rule 59(e) motion was granted and it was clear that the district court had entered a final judgment, Abcarian was also not entitled to amend his complaint.

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MCALLISTER v. PRICE (August 12, 2010)

Frank McAllister, who suffers from diabetes, was driving his car alone early one afternoon when he suddenly went into a severe hypoglycemic state. McAllister's car struck two other vehicles before coming to rest. Although McAllister was not injured, witnesses described him as staring into space and convulsing. Burns Harbor police officer Jerry Price responded. The dispatch advised Price that the accident may have been caused by an intoxicated driver. Price confronted McAllister. When McAllister failed to follow his instructions or respond to his questions, Price removed him from his car with force. According to a witness, Price threw him to the ground, put his full weight on his back, and handcuffed him. Eventually, and only after the suggestion of a bystander, Price checked McAllister for medical alert identification. He discovered a diabetes alert necklace on McAllister and released him. McAllister suffered from a broken hip and a bruised lung. He brought a § 1983 complaint against Price. Judge Van Bokkelen (N.D. Ind.) denied Price's request for summary judgment on qualified immunity grounds, concluding that there were genuine issues of material fact. Price brought an interlocutory appeal.

In their opinion, Judges Bauer, Flaum, and Tinder affirmed. A qualified immunity defense requires that a court answer two questions: whether there is a constitutional deprivation and whether the constitutional right was "clearly established" at the time. The Court first addressed the deprivation -- whether Price used excessive force. Three factors mattered: the degree of severity of any offense, whether the victim was a safety threat, and whether the victim was a flight risk. Before addressing the merits of the excessive force claim, the Court resolved two evidentiary issues. First, it concluded that the district court did not err in allowing evidence of McAllister's hip injury, even though there was no conclusive medical testimony that Price's actions caused the injury. Some causal evidence is all that is required for the jury to consider the evidence. Second, the Court concluded that the district court did not err in considering McAllister's diabetic condition. Although a police officer is not required to accommodate unknown conditions, here McAllister was obviously suffering from something and Price was trained in recognizing diabetes, trained in recognizing intoxication, and trained to look for medical alert identifications. On the merits of the constitutional deprivation question, the Court concluded that there was sufficient evidence for a jury to conclude that the amount of force used was excessive. On the second question, the Court concluded that the case law in effect at the time of the incident was sufficient to "clearly establish" McAllister's rights to be free from the excessive force as alleged.

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ROBINSON v. CITY OF HARVEY (August 6, 2010)

In 2002, Archie Robinson prevailed in his claim against the City of Harvey and police officer Manuel Escalante. A jury awarded him $25,000 in compensatory damages (jointly and severally) and $250,000 in punitive damages against Escalante. Two years later, the district court ordered the defendants to pay approximately $500,000 in attorneys' fees. Escalante settled. After the Seventh Circuit affirmed the fee award, the City paid the compensatory damages and the attorneys’ fees. Almost a year later, Robinson sought additional fees for: a) defending against Escalante's post-verdict motions, b) defending against Escalante's attempts to stay enforcement of the judgment, c) prosecuting the original motion for fees, and d) prosecuting the appeal. Judge Lefkow (N.D. Ill.) awarded an additional $277,000. The City appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Tinder reversed. The Court identified two distinct problems with the district court's award. First, the first two items related to effort undertaken by Robinson with respect to the punitive damage award against Escalante. The City is not, and never was, liable for that award. The City is therefore not responsible for any of those fees incurred. The second problem with the award is its timing. The first appeal, from the 2004 fee award, presumed that the $500,000 fee award was complete and final. In fact, if it was not, the Court would not have had jurisdiction to consider it and would have dismissed the appeal. Robinson represented at the time that the fee award was final. He cannot have it otherwise. The Court did note that the last item, fees incurred in defending the 2004 fee award on appeal, could constitute a separate request not affected by the finality of the district court's ruling. But a party has only 90 days within which to seek such an award. Robinson waited much longer without good reason and without seeking an extension. Although the district court accepted his untimely request, the Court concluded that it had no good reason to do so.

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PARISH v. CITY OF ELKHART (July 30, 2010)

A jury found Christopher Parish guilty of the 1996 shooting of Michael Kershner in his Elkhart, Indiana home. Evidence uncovered during his post-conviction proceedings supported a different conclusion: that Kershner was shot in a drug deal and was not even in his home at the time, and that local police threatened witnesses and otherwise fabricated evidence in an effort to falsely convict Parish of the crime. Parish's conviction was vacated in 2006 by the Indiana Court of Appeals. The state then dropped all charges. Parish brought suit pursuant to § 1983, alleging the denial of a fair trial. He also brought state claims for false arrest, false imprisonment, and intentional infliction of emotional distress (“IIED”). Judge Lozano (N.D. Ind.) dismissed all but the § 1983 fair trial claim on statute of limitations grounds. The court granted Parish's request for a Rule 54(b) certification. Parish appeals.

In their opinion, Judges Posner, Flaum, and Williams affirmed in part and reversed in part. Parish conceded, at oral argument, the propriety of the dismissal with respect to the claims for false arrest and false imprisonment. Thus, the only issue on appeal is the dismissal of the IIED claim. The parties agreed that the statute of limitations for the claim is two years from the date it accrued. The Court discussed four cases in its analysis of when an Indiana IIED claim accrues. In Heck, the Supreme Court held that a state prisoner could not bring a § 1983 suit for damages until his conviction was overturned. A judgment would have implied the invalidity of his conviction – the claim was therefore an improper collateral attack on the conviction. An Indiana appellate court followed Heck in Scruggs, when it dismissed false imprisonment claims. The Scruggs plaintiffs, still imprisoned, were also attacking the validity of their convictions. Next, in Wallace, the Supreme Court held that a claim for false arrest or false imprisonment requires a detention without legal process and therefore ends when legal process (e.g., appearance before a magistrate) is granted. The cause of action accrues at the same time -- when the false imprisonment ends. The Court distinguished Heck. Unlike in Heck, the Wallace claim for false imprisonment did not challenge the validity of a conviction. In fact, it did not even require a conviction. Finally, in Johnson, another Indiana appellate court concluded that a false arrest claim accrued at the time of arraignment (when process was granted) but that other claims of emotional discretion and invasion of privacy based on an unreasonable search accrued at the time of the search. Thus, the general rule requires an examination of whether the tort was complete before conviction (e.g., an IIED claim tied to an unreasonable search) or not (e.g. an IIED claim tied to a false conviction). If the former, the claim accrues upon completion of the tort. If the latter, the claim accrues upon completion of the tort unless it directly implicates the validity of the conviction. If it does, the claim does not accrue until the conviction has been lifted. Applying these principles to Parish's claim, the Court concluded that the IIED claims were not complete prior to conviction. In fact, the conviction was an integral part of Parish’s IIED allegations. The Court then concluded that the claim also attacks the validity of Parish's conviction and could not have been brought while the conviction was still outstanding. Parish brought the claim within two years of his exoneration – it is timely.

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SWANSON v. CITIBANK (July 30, 2010)

Gloria Swanson, an African-American, brought suit against Citibank and its appraiser alleging violations of the Fair Housing Act and common law fraud. She alleged the following facts: She applied for a home equity loan at a local Citibank branch. She became suspicious that the bank was trying to discourage African-American applications when a bank representative told her she had to be accompanied by her husband (a joint owner of the property). She was also told that Citibank's loan standards were stricter than those of a competing bank which had already denied her a loan. Nevertheless, she returned the following day and completed the application process. Based in large part on Swanson's statement that the home was worth $270,000, Citibank conditionally approved a $50,000 loan. However, when an independent appraiser retained by Citibank appraised the home at only $170,000, Citibank rejected the application. Swanson later ordered her own appraisal, which came in at $240,000. Judge Zagel (N.D. Ill.) granted defendants' motions to dismiss. Swanson appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner (dissenting in part) and Wood affirmed in part and reversed in part. The dismissal gave the Court the opportunity to review the pleading standards in light of the recent Supreme Court decisions in Twombly, Erickson, and Iqbal. First, the Court noted that none of the decisions questioned the validity of Rule 8's requirement of a "short and plain statement of the claim." Nevertheless, Twombly and Iqbal referred to a "plausibility" requirement. The Court viewed that requirement as one in which a court asks if whether it could happen, not whether it did happen. Applying those principles to Swanson's allegations against Citibank, the Court concluded that her bare-bone allegations of the type of discrimination, the discriminator, and the setting of the discrimination were sufficient to state a Fair Housing Act claim. Her fraud claim, however, implicated the "state with peculiarity" requirement of Rule 9(b) and an actual damages pleading requirement. Since Swanson did not plead any damages, her fraud claim was properly dismissed. Applying the principles to Swanson's claims against the appraiser, the Court again concluded that her bare-bone allegations that the appraiser understated the value of her home because of her race stated a claim under the Fair Housing Act. The Court affirmed the dismissal of the fraud claims for the same reason as it did those against Citibank.

Judge Posner agreed with the majority's treatment of the fraud claims but dissented from their treatment of the housing discrimination claims. He believed that the complaint set out an "obvious alternative explanation" for the actions of both the bank and the appraiser. With respect to the bank, Judge Posner cited the economic downturn, the fact that Swanson had already been denied a loan by another bank, and the fact that the appraisal suggested any loan would be undersecured. With respect to the appraiser, he noted the inexact nature of the business and the fact that errors are frequently made. Iqbal teaches us that if there is an "obvious alternative" to the invidious discrimination alleged by the plaintiff, the discrimination alternative is not a plausible one.

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GBUREK v. LITTON LOAN SERVICING (July 27, 2010)

Camille Gburek’s mortgage was serviced by Litton Loan Servicing. As of December 2007, Gburek was in default. She received two letters that month, one from Litton and one from Titanium Solutions on behalf of Litton. Neither letter demanded payment. The Litton letter offered to "discuss foreclosure alternatives" and "help preserve your homeownership." It requested financial information to help it consider its options. The Titanium Solutions letter also requested personal financial information and also offered to assist Gburek to find a way to avoid foreclosure. Gburek filed a class action under the Fair Debt Collection Practices Act. She alleges that each of the communications to her, as well as the communication between Litton and Titanium Solutions, violated the Act. Judge Shadur (N.D. Ill.) dismissed the complaint for failure to state a claim, concluding that the communications were not made "in connection with the collection of any debt" as required by the Act. Gburek appeals.

In their opinion, Judges Bauer, Flaum, and Sykes reversed and remanded. The Court noted that there are two threshold requirements for the FDCPA to apply. The first, that the defendant is a "debt collector," is conceded. The second, whether the communication at issue was "made in connection with the collection of any debt," is the issue on appeal. The Court looked to three of its prior decisions for guidance -- Bailey, Horkey, and Ruth. Bailey concluded that a communication was not "made in connection" because the debtor was not in default, any threats contained in the letter were prospective, and the communication contained no payment demand. The lack of payment demand was simply one factor in the analysis. Horkey concluded that the act did apply, even without an explicit demand for payment, when the reason for the communication was to induce the debtor to settle the debt. Finally, Ruth concluded that the Act applied to a privacy notice that was sent with a collection letter. The Court focused on the relationship between the parties and the fact that the communications were sent together. Thus, the Court emphasized that there is no bright line rule with respect to a demand requirement. Several factors are relevant in the analysis -- whether there is an explicit payment demand, the purpose and context of the communications, and the relationship between the parties. The Court applied the principles to each of the three communications at issue to determine whether the allegations were sufficient to survive the motion to dismiss. With respect to each of the letters sent to Gburek, the Court found that their context and content brought them within the Act. Gburek was in default and both letters sought financial information and her cooperation in discussing alternatives to foreclosure. The communication between Litton and Titanium Solutions is likewise "made in connection." It is clear that Litton engaged Titanium Solutions for the sole purpose of assisting it in collecting the debt. The Court declined to address any of the substantive issues with respect to the alleged violations in that they were not adequately developed on appeal.

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ANDERSON v. AON CORP. (July 26, 2010)

Robert Anderson sold his California insurance brokerage firm to Aon Corporation in 1997. He received approximately 95,000 shares of Aon stock when it was trading around $69 per share. Within five years, its share price had fallen to approximately $14. Anderson brought suit in state court in California, his state of residency, and alleged only violations of California securities law. He alleged that the fall in share price was due to the company’s mismanagement, that the mismanagement was fraudulently concealed until 2002, and that he would have sold the shares earlier absent the concealment. Aon removed on diversity grounds. Anderson shortly thereafter dismissed without prejudice, anticipating that the federal court was going to transfer the case to Illinois under § 1404(a). He refiled, again in California state court, and added two California citizen defendants (to prevent diversity). Curiously, this time he included a federal claim (RICO) in his complaint. Aon removed on federal question grounds and also asserted that the additional defendants were fraudulently joined. Anderson dismissed his federal claim and asked that the case be remanded. Instead, the California district court transferred the case to Illinois. Judge Manning (N.D. Ill.) applied Illinois law and dismissed the complaint for failure to state a claim. Anderson appeals.

In their opinion, Chief Judge Easterbrook and Judges Williams and Tinder reversed and remanded. The Court first addressed its appellate jurisdiction, since one of Anderson's arguments was that the California federal court should have remanded to state court, instead of transferring, once he dismissed his RICO claim. The Court recognized that some circuits have held that appellate review in cases such as this is split between the transferor court's circuit and the transferee court's circuit -- but it concluded otherwise. A § 1404(a) transfer is not separately reviewable. The only review comes after a final decision when all rulings of the Illinois court (even if to apply law of the case) are reviewed. On the merits of the transfer decision, the Court concluded that the lower court acted appropriately. There was jurisdiction when the suit was filed because of the federal claim and there was supplemental jurisdiction over the state law claim under § 1367(a). Once the federal claim was dismissed, the district court had discretion to either remand or to assert its supplemental jurisdiction over the state court claims until resolution. The Court cited Andersen's legal maneuvering as one reason the court prudently kept (and transferred) the case. On the substantive merits of the claim, however, the Court found error. The transfer of the case should not affect the applicable law. Here, the court should have applied the California choice-of-law rules to determine which state's substantive law applied. The California choice-of-law rule has three parts: first, it asks whether the different states' laws are different; second (if they are different), it examines each states' interest to decide whether a true conflict exists; and third (if there is a true conflict), it applies the law of the state whose interests would be most impaired by the adoption of the other state's law. The Court noted that the substantive law at issue here was the viability of a "holder action." A holder action is a private action for damages by an investor who claims that he continued to hold the stock, when he would otherwise have sold, because of the deceit of the defendant. The Supreme Court, in Blue Chip Stamps, concluded that holder actions are not viable under federal securities laws. However, they are viable under California securities laws. The Illinois Supreme Court has not spoken, although Illinois generally follows federal law in this area. The Court therefore concluded that there was a true conflict under the choice of law rules in the California. It also concluded that the third prong of the test favored California in that California has affirmatively accepted the viability of a holder action and Illinois has not spoken on the issue. Anderson should thus be allowed to proceed with the action. The Court concluded by noting a number of significant obstacles in Anderson's path but left them to be addressed, in the first instance, by the district court.

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GEORGE v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION (July 16, 2010)

The National Collegiate Athletic Association (NCAA) sponsors annual championship tournaments in several sports, including men's basketball. The NCAA uses a ticket distribution system for many of those tournaments. For example, in the 2009 men's basketball championship tournament, a person who wanted tickets to the final games of the tournament was required to submit an application, advance the cost of any tickets desired, and include a $6.00 nonrefundable fee. The NCAA selected the "winners" at random. It returned to the others the amount advanced for the tickets. It kept the fees from all entries. Several non-winning applicants brought a class action against the NCAA. They allege that the distribution system is a lottery in violation of Indiana law. The complaint also includes claims for unjust enrichment, civil conspiracy, monies had, and violations of the Indiana Deceptive Consumer Sales Act. Judge Lawrence (S.D. Ind.) dismissed the complaint with prejudice. Plaintiffs appeal.

In their opinion, Circuit Judges Cudahy (dissenting) and Kanne and District Judge Darrah reversed and remanded. The Court looked to Indiana law for the elements of a prohibited lottery. There are three: a prize, an element of chance, and consideration. The Court concluded that plaintiffs had sufficiently alleged each of the three elements. In the process, the Court distinguished Lesher, an Indiana court of appeals case. Lesher held that a professional football season ticket distribution scheme did not constitute an unlawful lottery. Here, the prize element is met by the allegation that the tickets are actually more valuable than their face price, an allegation made but not established on summary judgment in Lesher. The chance element is obvious from the random drawing aspect of the distribution scheme. The Court rejected, at this motion to dismiss stage, the NCAA's argument that there may be times when no chance is involved (for example, if the demand for tickets does not exceed the supply). The consideration element is supplied by the allegation that the NCAA keeps the handling fee for every entry. The Court rejected the NCAA's argument that the "bona fide business transactions" exception to the Indiana gambling statute applied. It concluded both that the ticket distribution scheme was not a "bona fide business transaction" and that, in any event, the exception only applies to gambling, not to lotteries. Finally, the Court addressed the principle of in pari delicto. The Lesher court noted that it would have used the concept to dismiss the lottery count, concluding that the plaintiffs were equally at fault for participating in the scheme. Here, the Court first noted that the Lesher statements were dicta but then concluded that the complaint's allegations were that the plaintiffs participated unwittingly. Since all of the counts of the plaintiffs' complaint incorporated and relied on the lottery count, the Court reversed as to all counts.

Judge Cudahy dissented. He concluded that the case was fundamentally indistinguishable from Lesher. He cited several reasons for affirming the district court: a) that the nonrefundable nature of the fee (the primary Lesher distinction) did not elevate the scheme to a lottery, b) that the in pari delicto logic of Lesher was persuasive and should be applied to the plaintiffs, c) that the fact that scarce tickets might command a resale price higher than face price is irrelevant, and d) that the NCAA's conduct fell within the "bona fide business transaction" exception.

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GOLDEN v. HELEN SIGMAN & ASSOCIATES (July 2, 2010)

Bruce Golden and his wife were involved in a bitter and hostile divorce. The dispute centered principally on the division of their assets and the custody of their only child. Golden added a battlefield when he brought suit in federal court. The defendants included his child’s court appointed representative and his wife’s attorneys, close friend and neighbor, and two business associates. His claims were based on federal copyright law, RICO, and § 1983 as well as several state law theories. He accused the lawyers of defamation, the lawyers and business associates of copyright infringement, the representative of defamation and failing to maintain neutrality, and the neighbor of a false 911 report. Judge Gottschall (N.D. Ill.) stayed the copyright infringement claim pending completion of the state court divorce proceedings and dismissed all other claims -- the RICO claim for failure to plead sufficiently the predicate acts and pattern of racketeering activity, the § 1983 claim because the representative had not acted under color of state law and enjoyed absolute immunity, and the state law claims by choosing not to exercise supplemental jurisdiction. The lawyers, the representative, and the friend all sought sanctions under Rule 11. The district court concluded that some of the claims did violate Rule 11 and ordered Golden to pay the defendants' attorneys' fees for the offending claims. Golden settled with the attorneys and appeals.

In their opinion, Judges Cudahy, Wood, and Sykes affirmed. The Court first noted that the only merits decision challenged on appeal was the § 1983 claim against the representative. It identified a potentially thorny issue with respect to absolute immunity. Although a child representative is entitled to absolute immunity when carrying out its court appointed duties, it may not be when it functions in a role closer to that of the child's attorney. The complaint did allege acts relating to that role. The Court declined to resolve that issue, however, instead identifying the Rooker-Feldman doctrine as a jurisdictional bar. Under that doctrine, a party may not seek redress in a lower federal court for an injury caused by a state court judgment. Here, the Court determined that the only injury Golden complained of arose directly from the state court custody orders. The Court therefore affirmed the dismissal of the § 1983 claim. With respect to sanctions, the Court first rejected Golden's argument that the Rule 11 motions were not timely -- both because he failed to raise it in the district court and because the district court did not abuse its discretion in allowing them. On the fees themselves, the Court concluded that the district court was well within its discretion in identifying counts on which to impose a sanction and in its method of calculating the amount of the sanction. Finally, the Court declined to impose sanctions on Golden for the appeal. Although he raised several frivolous arguments, he did advance some positions that could not be dismissed summarily.

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MURPHY v. EDDIE MURPHY PRODUCTIONS (July 1, 2010)]

Eddie Murphy Productions and the other defendants were involved in the creation of The PJs, an animated television show. In its three seasons on the air, the show won three Emmy Awards. Daryl Murphy (unrelated to Eddie) brought suit in 2004, asserting that the defendants used his copyrighted material for the show. The district court judge viewed videotapes of Murphy's material and The PJs and granted summary judgment to the defendants. The court concluded that the works were not substantially similar, there was evidence of prior creation, and there was no evidence of defendants' access to Murphy's material. While that decision was on appeal, Murphy filed another similar complaint. The district court promptly dismissed it. In 2008, Murphy filed a pro se pleading styled as a Rule 60 motion. Counsel for Murphy then appeared, withdrew the motion, and asked for leave to file an amended complaint. Several days after missing a second deadline, Murphy asked for another extension. Judge Darrah (N.D. Ill.) denied the request on the grounds both that he already missed two deadlines and that an amendment would be futile. Murphy appeals.

In their opinion, Judges Cudahy, Posner, and Evans affirmed. The Court noted the different standards governing a request for extension of time made before the deadline and one made after the deadline. The former may be granted for "good cause" while the latter should be granted only upon a showing of "excusable neglect." Here, the Court concluded that the district court acted within its discretion in finding no "excusable neglect." Both factors, prejudice to the defendant and reason for the delay, favored the defendants. The Court also concurred in the independent rationale for denial of the motion that an amendment would be futile.

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ANDERSON v. BAYER CORP. (June 22, 2010)

Bayer Corporation manufactured a prescription medication called Trasylol. A lawyer in St. Clair County, Illinois brought suit against Bayer alleging personal injury resulting from the use of the medication. The action was brought in five separate complaints with 171 plaintiffs spread among the complaints. All but one (the one apparently a mistake) of the virtually identical complaints named fewer than 100 plaintiffs. Bayer removed, citing the "mass action" removal mechanism of the Class Action Fairness Act ("CAFA"). Judge Murphy (S.D. Ill) remanded the four complaints that had fewer than 100 plaintiffs. Bayer petitioned to appeal under CAFA.

In their opinion, Judges Flaum, Manion, and Evans denied the petition. CAFA's "mass action" provision allows a defendant to remove an action if it has 100 or more plaintiffs and otherwise meets CAFA’s removal requirements. The provision specifically excludes an action in which claims are consolidated upon the request of a defendant. The Court found this plain language of the statute dispositive of Bayer's request. Apparently, Congress anticipated this very situation and decided to allow plaintiffs to proceed in state court by limiting each complaint to fewer than 100 plaintiffs. Although the Court concluded that CAFA removal was not available, it did note that the claims could be removable in the future if, for example, the claims were consolidated for trial. The Court declined to consider Bayer's alternative argument that diversity jurisdiction existed under a fraudulent misjoinder theory. The exception to the general rule prohibiting review of a remand order that allowed the Court's review of the "mass action" argument applies only to the remand of class actions. Since these cases are not class actions under CAFA, the Court lacks jurisdiction to review the district court's decision regarding fraudulent joinder.

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UNITED STATES v. 5443 SUFFIELD TERRACE (June 9, 2010)

Customs officials first discovered Richard Connors smuggling Cuban cigars in 1996. They confiscated over 1100 cigars from him as he attempted to enter the United States. He continued to smuggle. He continued to get caught. On March 15, 1997, local police confiscated more cigars from Connors' home at 5443 Suffield Terrace in Skokie, Illinois. They turned them over to federal officials the following day. Finally, in late 1999, federal officials again seized hundreds of cigars from the Suffield Terrace home. Connors was convicted of several offenses. On March 14, 2002, the United States filed a civil forfeiture action to seize Connors' house. They alleged two grounds: that the house was paid for with proceeds of the smuggling operation and that the house was used to facilitate the smuggling operation. Connors moved to dismiss, arguing that the five-year statute of limitations began to run in 1996, when the United States first discovered his smuggling activity. Judge Gettleman (N.D. IL) denied the motion and granted summary judgment to the United States. Connors appeals.

In their opinion, Judges Posner, Kanne, and Rovner affirmed. The civil forfeiture statute requires that an action be filed within five years "after the time when the alleged offense was discovered." The Court found the meaning of "alleged offense" unambiguous. It refers to the offense that gives rise to the right of forfeiture. Where there are several such offenses, nothing in the statute prohibits a forfeiture action when at least one of the offenses falls within the five-year period of limitations. The civil forfeiture action in this case is based on the March 15, 1997 offense. The action is therefore not time-barred. On the merits, the Court found that Connors waived the argument that he had additional sources of income not considered by the court because he failed to raise it properly below.

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IN RE: SHERWIN-WILLIAMS CO. (June 7, 2010)

Sherwin-Williams Co. is a defendant in a number of cases pending in federal court in Wisconsin before Judge Adelman (E.D. WI). The plaintiffs in those cases seek recovery against the manufacturers of white lead carbonate pigment for injuries allegedly caused by the ingestion of the pigment. Because none of the plaintiffs can identify the actual manufacturer of the pigment ingested, they rely on the Wisconsin Supreme Court's 2005 decision in Thomas. In Thomas, the Supreme Court adopted the risk contribution exception to traditional negligence theories in the lead pigment context. The Wisconsin Supreme Court was criticized for several of its decisions during the 2005 term, including Thomas. Judge Adelman co-authored a Law Review article that was published in 2007 defending the court's decisions. Although he disclaimed any opinion on the merits of those decisions, he did call Thomas a "positive development." Sherwin-Williams asked Judge Adelman to recuse himself because of the article. He refused. Sherwin-Williams seeks a writ of mandamus.

In their opinion, Judges Kanne, Rovner, and Tinder denied the petition. The Court stated that the test for disqualification of a judge is whether his impartiality might be questioned. The test must be applied from the perspective of a reasonable person who is aware of all surrounding facts and circumstances. Applying that test, the Court concluded that no reasonable reader would believe that the judge formed any opinion on the merits. Even more importantly, however, the Court stated that Judge Adelman's views of the case were irrelevant. As a federal district court sitting in a diversity case, he is obligated to apply Wisconsin law as interpreted by the state’s Supreme Court. A reasonable person would understand that situation and not question his impartiality because of the article.

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HABITAT EDUCATION CENTER v. UNITED STATES FOREST SERVICE (May 27, 2010)

The United States Forest Service decided to allow logging on thousands of acres of national forest in Wisconsin. The winning bidder for the logging permit bid $55,000. Habitat Education Center, a nonprofit corporation whose mission is to promote environmental quality, sued to prevent the issuance of the permit. Judge Goodstein (E.D. Wis.) granted a preliminary injunction but required Habitat to post a $10,000 bond. The court rejected Habitat's argument that a non-profit should not have to post a bond. The judge later dissolved the injunction and granted summary judgment to the Forest Service. Habitat appeals -- but only from the order setting the bond.

In their opinion, Judges Posner, Ripple, and Kanne affirmed. The Court first addressed mootness and standing. The order had not become moot since Habitat can be liable to the Forest Service up to the amount of the bond. Also, it has incurred a loss, and therefore has standing, because it has lost the time value of its $10,000. On the merits, the Court agreed with the district court. Rule 65 (c) states that a court may issue an injunction "only if" the moving party posts security in an amount sufficient to cover any costs sustained by the other party if the injunction was wrongly issued. The rule does not contain an exemption for non-profits. Notwithstanding the unambiguous language of the rule, the Court noted that other courts have created at least two exceptions -- where there is simply no threat of damage to the non-moving party and where an appropriate bond would exceed the movent's ability to pay. Neither of those situations exists here. The Court also rejected Habitat's argument that the amount of the bond was excessive, given the risk of loss to the Forest Service. The loss was the delay of one year. The evidence is that the rebidding process itself will cost $2350. Although the winning bid may equal or exceed $55,000, it also may not. Given the uncertainty of the costs to be incurred by the Forest Service, the amount of the bond was appropriate.

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CARMICHAEL v. VILLAGE OF PALATINE (May 21, 2010)

Palatine police officer Timothy Sharkey stopped an automobile being driven by Albert Carmichael and Keith Sawyer as they returned to their motel parking lot. Sharkey searched both Carmichael and the automobile. He found marijuana and cocaine. When asked why he had pulled them over, Sharkey stated that it was because the automobile lacked a front license plate and had tinted windows. After fellow officer Steve Bushore arrived, Sharkey conducted a search of Sawyer. In the motel parking lot, he pulled Sawyer's pants down and shined a flashlight into his underwear. The officers let Sawyer go but arrested Carmichael on drug charges. They also cited him for having no functioning taillights. In his report, Officer Sharkey made no mention of the tinted windows or absence of front license plate. At a hearing on a motion to suppress the evidence, Sharkey testified that the reason for his stop was the non-functioning tail lights, not the license plate or tinted window. Other testimony established that the tail lights were functioning at the time of the stop. The trial judge suppressed the evidence and all charges were dropped. Carmichael and Sawyer sued the Village and the officers under § 1983. They alleged unreasonable search and seizure, false arrest, and excessive force, as well as state law claims. Judge Kendall (N.D. Ill.) granted summary judgment to the defendants. She concluded, on the search and seizure claim, that the fact that a window was tinted and the front plate was missing provided probable cause. On Sawyer's unreasonable search claim, she concluded that it was constitutional without any detailed examination of the manner in which it was carried out. The court found the remainder of the claims waived. Carmichael and Sawyer appeal.

In their opinion, Judges Ripple, Manion, and Williams affirmed in part and reversed and remanded in part. A traffic stop is reasonable, said the Court, if the police have probable cause to believe that a violation has occurred. The inquiry is an objective one and focuses on what the officer knew at the moment of the stop. Here, the tinted window and missing license plate did constitute moving violations and could have supported a stop of the vehicle. However, the uncontroverted evidence is that Officer Sharkey was not aware of either violation at the time to stop. Therefore, probable cause did not exist. For much the same reason, the Court concluded that Sharkey was not entitled to qualified immunity. The Court also found summary judgment with respect to the search of Sawyer in error. Although the defendants purported to request summary judgment on all counts, they made no mention of this search in their brief in the district court. They bear the initial burden of demonstrating that the summary judgment requirements are met -- they failed to do so. Conversely, the district court was correct in concluding that the plaintiffs waived the remainder of their federal and state law claims because of their perfunctory response to the defendants' request for summary judgment on those issues.

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ALVAREZ v. CITY OF CHICAGO (May 21, 2010)

A group of Chicago Fire Department paramedics brought a collective action under the Fair Labor Standards (FLSA) against the City of Chicago. The complaint alleged that this City violated the FLSA by not properly calculating overtime payments. The plaintiffs identified ten different ways the City allegedly miscalculated overtime pay, not all of which applied to each paramedic's situation. Over three hundred paramedics eventually opted into the collective action. When several were dismissed for failure to opt in in time, they filed their own individual suit with the same allegations. The two cases were consolidated. Judge Hibbler (N.D. Ill.) granted summary judgment to the City as against all plaintiffs. He concluded that the fact that each plaintiff would use a different combination of the various alleged miscalculations prevented them from being similarly situated. He also directed the plaintiffs to arbitrate their complaints, even though he recognized that arbitration under the collective bargaining agreement was not mandatory. The plaintiffs appeal.

In their opinion, Judges Cudahy, Flaum, and Evans reversed and remanded. The Fair Labor Standards Act allows employees to bring complaints as collective actions, on behalf of themselves and others similarly situated. Although a district court is given substantial discretion to manage collective actions, the Court concluded that the district court had misinterpreted a prior case. In Jonites, the Court had found a collective action inappropriate in a situation requiring significant individual fact-finding. Here, although different plaintiffs would be affected by different sub claims, very little individual fact-finding will be required. In addition, the Court concluded that the district court erred in comparing the efficiency of the collective action to arbitration. If the plaintiffs are willing to proceed individually, the proper comparison is between those individual actions and a collective action. Finally, even if a collective action is unwarranted, the proper remedy is not to dismiss the action but to convert it to individual actions.

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PELLA CORP. v. SALTZMAN (May 20, 2010)

Pella Corp. is in the business of manufacturing and selling home windows. It has sold in excess of 6 million "ProLine" casement windows. When a wood rotting problem arose, Pella set up a customer service program to compensate affected purchasers. A group of those purchasers brought a class action. The suit alleges that Pella committed consumer fraud when it failed to disclose the alleged design defect and the problems it was causing. Judge Zagel (N.D. Ill.) certified seven classes: a) a nationwide Rule 23(b)(2) class of persons who own structures containing the casement windows that have not been replaced, and b) six statewide Rule 23(b)(3) classes of persons whose windows have already been replaced because of the defect. The court refused to certify causation, damages, and statute of limitations issues. Pella petitioned for leave to appeal.

In their opinion, Judges Posner, Williams, and Tinder granted the petition and affirmed. The Court agreed that consumer fraud actions frequently present problems when treated as class actions. That does not, however, equal a general rule that they can never be so treated. Here, the principal issue is whether there is a single design defect in the window that leads to wood rot. The Court concluded that the district court was well within its discretion in deciding that the issue is best resolved in a class context. The problems inherent in treating consumer fraud cases in a class context are not present in this case. The issues are not complex, the central questions are all the same, and the class members must prove causation and damages on an individual basis.

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IN RE: BURLINGTON NORTHERN SANTA FE RAILWAY CO. (May 19, 2010)

A number of residents of the town of Bagley, Wisconsin filed a class-action suit in state court against Burlington Northern Santa Fe Railway (BNSF). They allege that BNSF's failure to maintain its railroad trestle resulted in a flood and damage to their property. BNSF removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). After Judge Crabb (W.D. Wis.) denied the class' motion to remand, the class moved to amend the complaint to withdraw all class allegations. The court granted the motion and remanded the case to state court. It analogized the situation to one in which class certification is denied and noted that district courts were divided on the impact of denial of class certification on CAFA jurisdiction. BNSF requested leave to appeal.

In their opinion, Judges Kanne, Wood, and Sykes granted the petition, vacated the remand order, and remanded. The Court noted the general rule that jurisdiction is determined at the time of removal. It then cited its recent decision in Cunningham Charter Corp. (see intheiropinion), which was decided after the district court's remand. In Cunningham Charter, the Court concluded that the denial of class certification did not require remand of a case removed under CAFA. The same considerations that lead to that conclusion should apply when class action status is amended away voluntarily.

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PETTITT v. THE BOEING COMPANY (May 17, 2010)

In the spring of 2007, a Boeing 737 crashed in Cameroon -- all those aboard died. A few years later, six lawsuits were filed relating to the accident in Cook County Circuit Court. All six suits were removed to federal court pursuant to the Multiparty, Multiforum Trial Jurisdiction Act (MMTJA). Three of the six suits have since been dismissed. The other three were assigned to three different district court judges. In one of those cases, Boeing moved for a reassignment and consolidation of the case to the judge with the lowest numbered case, pursuant to local rule. Instead of ruling on the motion, however, the court on its own remanded the case to state court. The basis for his remand was the fact that not all the defendants had consented to the removal. Boeing appeals.

In their opinion, Circuit Judges Cudahy and Kanne and District Judge Darrah vacated and remanded. The Court first addressed its jurisdiction, since a remand order under § 1447 (c), as this is, is generally not appealable. The Court clarified that, although it cannot review the propriety of such an order, it can determine whether a court possessed the actual power to do what it did. Here, in fact, it concluded that the court had no such power. Any defect in the removal was a procedural defect -- and procedural defects are waived if not raised by motion within 30 days of removal. The district court has no power, on its own, to remand after the passage of the 30 days. As an aside, the Court noted the absence of any procedural defect. Acknowledging that removal generally requires the consent of all defendants, the Court stated that removal under the MMTJA does not require all defendants' consent.

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ENVISION HEALTHCARE v. PREFERREDONE INSURANCE CO. (May 12, 2010)

PreferredOne, a health insurance company, entered into a contract with Envision Healthcare, a wholesale insurance broker, for the marketing and sales of its insurance products. Envision sold one of those insurance products to Bradley Romer. Romer had two knee surgeries, with serious complications, that resulted in a hospital bill in excess of $100,000. Upon receiving the hospital bill, PreferredOne did a little investigating into Romer's application. It concluded that he omitted a pre-existing condition. It then rescinded the policy and refused to pay the balance of the hospital bill. Romer brought a breach of contract suit in state court against PreferredOne. PreferredOne filed a third-party complaint against Envision for indemnification. Envision then filed suit against PreferredOne in federal court seeking a declaration that it had no duty to indemnify. It then unsuccessfully sought to dismiss the state court third-party complaint on the grounds that it involved the same legal issue. PreferredOne moved to dismiss the federal action. Concluding that the federal and state cases involved the same parties and presented the same legal issue, the district court dismissed the case under the Wilton/Brillhart doctrine of abstention. Envision appeals.

In their opinion, Judges Bauer, Manion, and Tinder affirmed. The Court first noted that its standard of review of the district court's decision to abstain is for abuse of discretion. Applying that standard, the Court found no abuse. In fact, it noted that the case presented a "classic example" of the proper use of the Wilton/Brillhart doctrine -- only declaratory relief is sought and a parallel state court action, between the same parties and addressing the same issue, is proceeding.

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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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HAPPEL v. WALMART STORES (April 19, 2010)

Heidi Happel was diagnosed with multiple sclerosis in the early 1990s. In 1993, her primary care physician prescribed a pain reliever for an unrelated condition. In fact, she was allergic to the medication. Her physician phoned the prescription to a Walmart pharmacy were Happel typically filled her prescriptions. Despite the fact that Walmart's computer system and Happel's husband both alerted the pharmacist to her allergy, he filled the prescription anyway. Happel immediately went into anaphylactic shock. Her general health quickly deteriorated. She and her husband sued Walmart -- Happel brought a negligence claim and her husband brought a loss of society claim. The Happels listed the original diagnosing physician as a witness but did not disclose him as an expert or tender an expert report. They did list a neurologist as their expert. Just before trial, the Happels attempted to add the diagnosing physician as an expert. The district court denied their request. The court also excluded much of the neurologist’s testimony. In its instructions, the court included the loss of society claim within the negligence claim. It then submitted to the jury a verdict form that contained only a single line for an award of damages. The jury awarded $465,400. The court reduced the award by $150,000 because of a settlement before trial with the primary care physician. The Happels appeal.

In their opinion, Judges Flaum, Williams, and Sykes reversed and remanded. The Court first addressed the expert issues. With respect to the diagnosing physician, the Court noted that the Happels only addressed his qualifications – but that was not the basis for the lower court's exclusion. The Court found no abuse of discretion in the lower court's excluding the diagnosing physician as an expert when plaintiffs failed to disclose him as such during discovery. With respect to the neurologist, the district court excluded his testimony regarding Happel's multiple sclerosis because he had very little experience with multiple sclerosis. The Court found no abuse of discretion. With respect to the damages verdict, the Court noted that the lower court treated the loss of society claim as simply one aspect of the overarching negligence claim. Although the court instructed the jury to return separate verdicts for each of the plaintiffs, the verdict form it provided had only a single line for a damages award. The Court concluded that the jury instructions and the form of verdict were ambiguous. As a result, it is impossible to determine Although it was error to give the instruction and use the form, the Court noted that it still had to find prejudice before granting a new trial. It found prejudice in reference to the set-off amounts. Each individual plaintiff had settled with the primary care physician for $75,000 each. If the jury intended to award each of the plaintiffs more than $75,000, the $150,000 ($75,000 from each) set off is correct. However, if the jury's intent was to award either plaintiff less than $75,000, that plaintiff's set-off would be capped at the amount of the award and the total set-off would then be less than $150,000. Having found prejudice, the court reversed for new trial on damages.

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AMERICAN HONDA MOTOR CO. V. ALLEN (April 7, 2010)

American Honda Motor Co. ("Honda") manufactures motorcycles. One such motorcycle, the Gold Wing GL1800, is the subject of a class action lawsuit. The plaintiffs, purchasers of the GL1800, allege that the motorcycle has a design defect. The defect, they allege, results in excessive shaking of the steering assembly. The plaintiffs moved for class certification. They relied on a report prepared by Mark Ezra for support for their allegation of the predominance of common issues. In his report, Ezra had developed a standard for the dissipation of steering oscillation in motorcycles. He tested one GL 1800 and concluded that it did not meet this standard. Honda argued that the report did not meet the Daubert standard. The district court expressed its concern that the standard was not supported by empirical evidence and was not generally accepted by the engineering community and that his sample size of one was inadequate. Nevertheless, it refused to strike the report and granted the motion for class certification. Honda petitioned for leave to appeal.

In their opinion, Judges Posner, Evans, and Tinder granted the petition, vacated the denial of the motion to strike and the order certifying a class, and remanded. The Court acknowledged that it had not yet considered the specific question of whether a Daubert challenge must be resolved prior to class certification. It has, however, held that a district court must make all legal and factual determinations necessary to ensure that class requirements are met. The Court thus held that a district court must conclusively resolve challenges to an expert report if the report is critical to class certification. Here, the district court started the correct analysis but never actually decided the question. Instead, it simply decided not to exclude the entire report at what it referred to as the "early stage of the proceedings." The district court abused its discretion in doing so. In fact, the Court went on to conclude that the Ezra report should have been excluded under a Daubert analysis. Applying the Daubert factors, the Court noted the lack of evidence that the standard has been generally accepted or that any tests have been performed to support it. The Court also stated that the sample size of one would rarely be sufficient to extrapolate its results to an entire fleet of motorcycles. Without the report, the plaintiffs cannot meet the predomination requirement of class certification.

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SANDRA T.E. v. SOUTH BERWYN SCHOOL DISTRICT 100 (March 30, 2010)

In early 2005, local police arrested an elementary school band teacher and charged him with numerous counts of sexual abuse. Within days of his arrest, some of the victims and the victims’ families sued the school district and the principal. In response to the arrest and its attendant publicity, as well as the lawsuit, School District 100’s School Board retained the law firm of Sidley Austin. According to the engagement letter, Sidley Austin was to investigate the administration's response to the allegations of sexual abuse and provide legal services in connection with the investigation. The attorneys interviewed many employees and former employees. They took notes and prepared interview memoranda. The law firm delivered an oral report to the School Board in closed session and submitted a written summary of their investigation, which they marked confidential. After the preparation of the report, Sidley Austin did not participate directly in the litigation. The plaintiffs sought discovery from them, however. The firm turned over a number of documents, but withheld the notes and memoranda on the grounds of the attorney-client privilege and work-product doctrine. The district court ordered the firm to turn over the documents, ruling that the law firm acted as "investigators" -- not as "attorneys." Sidley Austin appeals.

In their opinion, Judges Rovner, Wood, and Sykes reversed. The Court first defined its terms: a) the attorney-client privilege protects communications between a client and its attorney, made in confidence, for the purpose of obtaining legal advice, and b) the work-product doctrine protects documents that are prepared by attorneys in anticipation of litigation. In this case, the district court's views were developed in a series of hearings relating to discovery requests against the School District. Sidley Austin was not provided notice or an opportunity to be heard. The Court concluded that the district court erred by focusing on letters from the School District to parents emphasizing the district’s desire to investigate and discover the truth. The district court did not, on the other hand, focus on what the Court considered the "most important" evidence, the engagement letter. The engagement letter specifically indicated that the investigation was a necessary prerequisite to the delivery of legal advice to the School Board. The engagement letter itself, as well as the conduct of the attorneys, brought this investigation within the attorney-client privilege under the Supreme Court's decision in Upjohn. The Court also concluded that the materials at issue were protected by the work-product doctrine. The district court's contrary conclusion was based upon its treatment of the law firm as investigators. The law firm was hired, at least in part, in response to the filing of the lawsuit. The Court emphasized that the work-product protection may actually be more than just an alternative ground for confidentiality. The attorney-client privilege may not cover all of the witness interviews, since some of the witnesses were not district employees.

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CHANG v. BAXTER HEALTHCARE CORP. (March 26, 2010)

A number of residents of Taiwan brought suit against manufacturers of clotting factors. They allege that the defendants improperly processed donated blood in California and continued to sell it in foreign countries after they knew it was contaminated. The plaintiffs are mainly hemophiliacs who were infected with HIV from the contaminated clotting factors. The plaintiffs also allege that the defendants fraudulently induced a settlement agreement and they allege a breach of the settlement agreement. The district court dismissed the claims, some on the merits as untimely and others pursuant to the doctrine of forum non conveniens. The plaintiffs appeal.

In their opinion, Judges Posner, Evans, and Tinder affirmed. The Court first addressed the dismissals on the merits. It approved the district court’s conclusion that the claims were untimely both because they were filed outside the statute of limitations period and because the California court would apply the Taiwanese 10 year statute of repose (the plaintiffs were infected in the 1980s). Although the plaintiffs assert that their claims arose in California, the Court disagreed. The rule in California is there is no tort without an injury -- and the injuries occurred in Taiwan. A California court would apply the statute of repose either under its own “borrowing” statute or under a more general "balancing of interests" approach to conflict of laws. The Court next addressed the breach of settlement agreement claim which the district court dismissed on forum non conveniens grounds. The Court found that the relevant clause in the settlement agreement was ambiguous and that extrinsic evidence would be necessary. Most of the people with relevant evidence live in Taiwan. In addition, Taiwan law makes it difficult to gather evidence in Taiwan for use in another country. The Court found nothing that would favor the case being tried in United States – dismissal was proper. Another claim that was dismissed on forum non-conveniens grounds is the individual claim by a woman who claims to have been infected by her boyfriend. Although all the same considerations favored the dismissal of this claim, the Court examined it more closely because of the possibility the claim would be time-barred if brought in Taiwan. Dismissal under forum non-conveniens is improper if the other forum is inadequate and will not provide a fair hearing. Here, however, the California court would apply the Taiwanese limitations period just as the Taiwanese court would. Since the statute of limitations would be the same and the convenience factors all favor Taiwan, the Court affirmed the dismissal.

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FIRST BANK v. DJL PROPERTIES (March 24, 2010)

First Bank filed two lawsuits against DJL Properties in state court. In both cases, DJL filed class-action counterclaims. First Bank removed both cases to federal court, pursuant to the provisions of the Class Action Fairness Act. Both district court judges to whom the cases were assigned remanded. First Bank sought leave to appeal.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Williams granted the petitions for leave to appeal but affirmed the district courts. The Court stated that the law is settled, possibly for over 150 years, that a state court plaintiff cannot remove the case to federal court, even if that plaintiff becomes a counter-defendant. The 4th and 9th Circuits have applied that long-standing general rule to the Class Action Fairness Act. The Court agreed. The Act specifically refers to the general removal sections of the statute where "defendant" is limited to a defendant, it uses the phrase "any defendant," and it uses a word that has a long-established meaning. The Court specifically noted the value in giving words used by Congress their standard meaning. Congress could have easily expanded the removal rights in the Act to counter-defendants. It did not. 

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SCHMIDT v. EAGLE WASTE & RECYCLING (March 22, 2010)

Eagle Waste & Recycling hired Tammy Schmidt as a sales representative. Eagle is in the business of residential and commercial waste removal services. Schmidt spent most of her time outside the office on sales calls. When she was in the office, she managed her sales calls and plans, she worked on marketing and advertising plans for the business, she was responsible for customer service and customer database maintenance, and she ordered parts and authorized repairs. Schmidt was compensated with a base salary and a commission. Schmidt brought an action under the Fair Labor Standards Act for overtime. Eagle filed for summary judgment – Schmidt responded but not in accordance with local rules. When Eagle pointed out the error, Schmidt sought to modify her response but she waited two weeks and did not file her proposed modification with her request. The court denied her request and granted summary judgment to Eagle. Schmidt appeals.

In their opinion, Judges Posner, Flaum, and Sykes affirmed. The Court first addressed the procedural issue. It remarked that it “routinely” affirms district courts’ strict adherence to the local rules regarding summary judgment. Particularly here, where Schmidt did not respond quickly after she became aware of the error, the district court did not abuse its discretion. On the merits, the Court noted that an “outside salesperson” is exempt from the overtime requirements of the FLSA. An outside salesperson is one whose primary duty is making sales and who is regularly engaged in activity outside the office. Although it is the employer’s burden to prove the exemption and the exemption is narrowly construed against the employer, the Court concluded Schmidt was exempt. She spent the majority of her time outside the office and much of her work at the office was incidental to her outside sales work. Alternatively, the Court concluded that Schmidt was exempt under the FSLA’s combination exemption, which exempts persons who perform a combination of otherwise exempt duties. The majority of Schmidt’s non-sales duties were duties that are exempt under the administrative employee exemption. If she does not qualify as exempt purely on the basis of her sales work, she certainly does on the basis of her combined sales and administrative work.

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SANDRA T.E. v. GRINDLE (March 17, 2010)

Three female elementary school classmates at Pershing Elementary School attended a seminar on "inappropriate touching" at their school in May of 2001. After the seminar, they wrote a short letter to the presenter stating that they were uncomfortable with the conduct of their band teacher. The presenter shared the note with Karen Grindle, Pershing's principal. Although Grindle met with the band teacher, the students, some parents, and the school's social worker, the accounts of their meetings varied. The allegations are that Grindle downplayed the significance and the seriousness of the accusations. Additional incidents surfaced in January and April of the following year. Again, Grindle is alleged to have minimized the significance of the incidents. One of the students who wrote the original letter in 2001 revealed to her mother, in 2005, her version of what happened. Her mother informed the police, a criminal investigation was launched, other victims came forward, and the band teacher pleaded guilty to multiple counts of aggravated criminal sexual abuse. Several of the children and their parents filed an action pursuant to section 1983, alleging a violation of their equal protection and substantive due process rights. The district court granted summary judgment on the section 1983 claim to all defendants except Grindle and the band teacher. Grindle appeals.

In their opinion, Judges Flaum, Rovner, and Hamilton affirmed. The basis of Grindle's appeal is her claim to qualified immunity. The Court recited the familiar two-part test: whether a constitutional right was violated, and whether the right was "clearly established" at the time of the conduct. With respect to the equal protection claim, the Court concluded that well-developed law at the time of Grindle's conduct held that a supervisor could be liable for deliberately ignoring an equal protection violation of her subordinate. In addition, the sexual harassment by the subordinate was a well-established equal protection violation. The Court concluded that plaintiffs presented sufficient evidence from which a jury could infer that Grindle intentionally discriminated against the girls to withstand summary judgment. With respect to the substantive due process claim, Grindle argued that she had no duty to protect the students from the abuse at the hands of the band teacher. The Court agreed that state officials do not generally have an obligation to protect citizens from violence, but noted the "special relationship" exception to that rule. Although the Court agreed that it had once rejected the "special relationship" theory in the student context, it also noted that the Third Circuit held otherwise in Stoneking. The Stoneking decision has been recognized in the circuit as one that is viable and, in fact, has been followed on several occasions in the district courts of the circuit. The Court concluded that a reasonable elementary school principal should have concluded that she could be liable for ignoring, or even covering up, a teacher's sexual abuse of a student. Finally, the Court noted that the plaintiffs allege that Grindle's own actions establish the constitutional violation, and not just her mere failure to act or prevent. Thus, they meet the test of Iqbal.

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MINIX v. CANARECCI (February 26, 2010)

While on leave from a mental hospital where he was a patient, Gregory Zick was arrested and incarcerated in the St. Joseph County Jail. The jail provided medical and mental health services through contracts with third-party vendors Memorial Home Care and Madison Center. Jail personnel became aware during Zick's booking that he had attempted suicide in the past and was taking medications to treat his suicidal thoughts. Zick was originally put in medical segregation and on suicide watch. He was transferred into the general population, however, a few days later after he denied having suicidal thoughts. About a month later, he was placed back in medical segregation after he refused to take his medication and a jail officer noticed a razor blade missing. Again, after a few days, he was released from medical segregation because he was alert and denied thoughts of suicide. Later that night, he hanged himself with a bed sheet. Cathy Minix, his personal representative, brought an action pursuant to § 1983 against the Sheriff, the medical providers, and several jail employees. She alleged violations of the Eighth and Fourteenth Amendments based on the defendants' display of deliberate indifference. The district court granted summary judgment to all defendants except the Sheriff. Minix then accepted an offer of judgment from the Sheriff. She appeals the summary judgment rulings in favor of Memorial Home Care and its employee Dr. David, Madison Center and its employee Christine Lonz, and the supervisor of the nursing staff, Jeanne James.

In their opinion, Judges Bauer, Kanne, and Tinder affirmed. The Court first addressed its jurisdiction, in light of the offer of judgment and its acceptance. Since the claim against the Sheriff was against him in his official capacity, and therefore could not have included punitive damages under § 1983, the punitive damage claims against the other defendants present a live controversy, even if the acceptance of the offer of judgment limits additional compensatory damages. On the merits, the Court first identified the two elements of an inadequate medical care claim under the Eighth or Fourteenth Amendment: a substantial risk to one's safety because of an objectively serious harm, and deliberate indifference to that risk. A jail suicide case automatically satisfies the first element. The second element requires that each defendant know that there is a substantial risk of suicide -- and intentionally disregard it. The Court addressed each defendant under that standard and found summary judgment proper in each case: a) Lonz was unaware of Zick’s suicidal history or thoughts, b) there was no evidence that Madison Center adopted or condoned any unconstitutional policy and there was no causal link between any Madison Center practice and the suicide, c) Zick's behavior in segregation did not provide Nurse James with actual knowledge of a substantial risk of suicide, d) Dr. David was not directly involved in Zick's treatment, and e) there was a lack of evidence that Memorial Home condoned or adopted an unconstitutional practice.

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ELUSTRA v. MINEO (February 9, 2010)

Three sisters and their friends were enjoying a night at Buffalo Wild Wings restaurant in the summer of 2007. A dispute arose over the girls' bill. The police were called and the girls were arrested on charges of disorderly conduct. The charges were dropped. The sisters brought an action against the restaurant, its owner, and the responding police officer. The girls' mother, Christine Lopez, appeared as next friend of the two minor girls. The magistrate held a settlement conference, attended by the plaintiffs, Lopez, their attorney, and the defendants' attorneys. Although the conference was off the record, the magistrate judge reported that the parties agreed to a $6000 settlement. The girls' father, a nonparty, argued with the girls' attorney and declared that he would find new representation. At that point, the family left, although their attorney remained. The Magistrate Judge entered a recommendation to the district court to dismiss the case with prejudice in accordance with the settlement agreement. At a hearing a short time later before the district court, the girls' attorney appeared again and advised the district court that the girls' recollection was that was no agreement. The district court dismissed the case with prejudice. Ten business days later, Lopez filed a handwritten pro se “Motion to vacate and Reinstate.” Newly retained counsel supplemented the motion nine days later. The district court did not recognize the pro se filing as a Rule 59(e) motion and treated counsel’s motion as a Rule 60(b) motion and denied it. The girls appeal.

In their opinion, Judges Flaum, Wood and Sykes affirmed. The Court first considered its scope of review. If Lopez' handwritten motion is considered as a timely Rule 59(e) motion, then the time to appeal the underlying judgment did not begin to run until that motion was denied and the Court can consider the merits. If not, the Court can only review the denial of the motion to reconsider. The problem with the first motion is that it was brought pro se by Christine Lopez. Normally, next friends and other representative parties may not appear pro se. Although the Court determined that federal law controlled whether Lopez’ filing should be allowed, it found guidance within Illinois state law. The Court cited several Illinois cases where the court applied a flexible rule, particularly where the filing simply preserved a party's right to go forward, as opposed to a more general prosecution of a suit. The Court also emphasized that the purpose of the rule is to protect the rights of the represented party. The Court concluded that the circumstances of the case -- where the parties had counsel through judgment, where the parties retained counsel to litigate the Rule 59(e) and later proceedings, where the parties were only unrepresented for a short time, but where the next friend filed a pro se motion during that time to preserve their appellate rights -- warranted a recognition of the motion. The Court also concluded that the motion met the requirements of Rule 7(b)(1), notwithstanding its brevity. It was in writing, it stated the grounds for seeking the order, and it stated the relief sought. Having reached the merits, however, the Court rejected the girls' position. An oral settlement agreement is valid if there is an offer, acceptance, and meeting of the minds. Here, the only contemporaneous evidence is the magistrate judge’s statement on the record that the parties understood the consequences of their agreement and reached a settlement. That is enough to conclude that there was a meeting of the minds.

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BERGQUIST v. MANN BRACKEN, LLP (January 26, 2010)

Sandra Bergquist owed money to the bank that issued her a credit card. The bank retained the law firm of Mann Bracken to collect the debt. The firm arbitrated the dispute before the National Arbitration Forum, as provided in the credit card agreement. The bank prevailed at the arbitration and a state court entered judgment enforcing the arbitration award. Bergquist was suspicious of the connection between Mann Bracken and the National Arbitration Forum. She asked the state court to set aside its judgment enforcing the award. It did so and dismissed the case with prejudice. She also filed a class-action on behalf of all persons who were pursued by Mann Bracken and had their claims arbitrated before the National Arbitration Forum. The defendants removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). The district court remanded, concluding that the Rooker-Feldman doctrine precluded federal jurisdiction of the claim. Defendants appeal.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Rovner vacated and remanded. The Court first rejected the argument that CAFA trumps Rooker-Feldman. Although CAFA expands federal jurisdiction with respect to class actions, it does not change the Rooker-Feldman limitation on collateral attacks of state court decisions. The Court concluded, however, that the Rooker-Feldman doctrine had no application in the case. First, although the district court recognized the inapplicability of the doctrine to Bergquist's individual claim (because the state case had been dismissed with prejudice), it nevertheless remanded because Bergquist sought relief on behalf of others who had lost in state court. The Court found this to be error. The district court was not allowed to remand the entire case because some portion of it did not belong in federal court. A federal court must exercise the jurisdiction that does exist. Second, it was not apparent to the Court that any claim need be remanded. The Court identified three possible subclasses: those who won in state court, those who lost in state court, and those who neither won nor lost. The class can be defined to eliminate those who lost in state court, the only persons in the class with a Rooker-Feldman problem. The Court remanded for a determination of whether the jurisdictional requirements were met under that revised class definition.

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CUNNINGHAM CHARTER CORP. v. LEARJET (January 22, 2010)

Cunningham Charter Corp. brought a breach of warranty and products liability class action against Learjet in state court. Learjet removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). After the district court denied class certification for failure to satisfy the requirements of Rule 23, it remanded the case to state court. The district court concluded that the denial of certification deprived the court of federal jurisdiction under CAFA. Learjet sought leave to appeal.

In their opinion, Judges Posner, Coffey, and Flaum granted leave to appeal and reversed and remanded. CAFA, said the Court, grants federal jurisdiction to certain class actions. A class action is defined as "any civil action filed under rule 23." The statute also specifically provides that it applies before or after a class is certified. Based on these and other provisions of CAFA, as well as the principles that jurisdiction is determined at the time of filing and is generally not affected by later developments, the Court concluded that CAFA jurisdiction does not depend on class certification.
 

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REGER DEVELOPMENT v. NATIONAL CITY BANK (January 20, 2010)

Reger Development is an Illinois real estate development company. In 2007, the company opened a $750,000 line of credit with National City Bank. The company signed a promissory note and provided the personal guarantee of its principal, Kevin Reger. In several places, the note makes reference to the fact that it is payable "on demand." The company made its payments in a timely manner for the first year. Nevertheless, the bank asked it to pay down $125,000 of principal. Reger did so. A month later, the bank advised Reger that it was reducing the amount of the line of credit and also wanted to restructure some of the principal and secure it with a mortgage. The bank told Reger that it was possible that they would demand payment of the entire amount if he did not agree to the modifications. Reger brought suit, alleging breach of contract and fraud. The district court dismissed the case for failure to state a claim. Reger appeals.

In their opinion, Judges Flaum, Williams, and Sykes affirmed. The Court noted that Illinois law generally implies a covenant of good faith and fair dealing in a contract. It does not apply, however, to demand notes. Reger argued that general references to due dates and default provisions in the note were inconsistent with a demand instrument. The Court noted the repeated and explicit references in the instrument to National City's right to demand payment at any time. The note is clearly and unambiguously a demand note, concluded the Court. Since it is a demand instrument, the bank's insistence on modifications did not amount to a breach. With respect to the fraud count, the Court focused on the intent element. It stated that Reger must establish that the bank intended to and did induce him. In order to meet that element, Reger asked the court to infer that the bank intentionally drafted ambiguous documents so as to mislead him. The Court had already considered the ambiguity of the document with respect to the breach of contract claim. Not only had it not found it ambiguous, it found it rather straightforward. Reger failed to allege the element of intent with the particularity necessary in a fraud count -- the dismissal of that count is affirmed.

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CARR v. TILLERY (January 12, 2010)

Rex Carr was a lawyer in southern Illinois. He and his partners had several agreements concerning the allocation of fees earned by the firm. The agreements continued in effect after the dissolution of the firm in 2003. Significant disputes arose, and a host of lawsuits were filed, with respect to those fees. A Memorandum of Understanding (MOU) was agreed to in 2004. It was meant to control the distribution of all fees, past and future, among the partners. Notwithstanding an agreement to dismiss all pending cases, Carr actually amended a counterclaim in one of the pending actions to assert that he had been fraudulently induced to enter into the MOU. The claim was eventually dismissed and the dismissal was affirmed. While the appeal was pending, Carr brought four separate suits in state court, then brought this federal case, and then voluntarily dismissed the state cases. He brought the federal case under RICO, repeating many of the allegations of the earlier suits, including the fraudulent inducement claim. The district court dismissed the suit for failure to state a claim. Carr appeals. The defendants cross-appeal from the court's denial of their motion for sanctions.

In their opinion, Judges Posner, Ripple, and Wood affirmed in part and vacated and remanded in part. On the merits, the Court disagreed with the court below that all the claims were barred by the doctrine of res judicata. The complaint contains at least one claim that postdates the earlier dismissal. The Court held that the claims were barred, however, by Illinois' "one refiling" rule. Under that rule, a plaintiff who voluntarily dismisses a complaint may start a new action within one year or the remaining period of limitations. Illinois courts have held the rule to mean that a plaintiff may commence only one new action after a voluntary dismissal. Here, Carr filed four lawsuits in Illinois before he filed the federal lawsuit. He dismissed all of the state court suits soon after he filed a federal suit. Although each of the state court suits was based on a different theory of liability or sought different relief, they all arose from the same events. That is true even for the claim postdating the earlier dismissal, a claim that the defendants violated the MOU. The Court next considered whether the RICO claim, on which federal jurisdiction was based, was so weak so as to not support jurisdiction. Such a conclusion would lead the Court to dismiss for lack of jurisdiction rather than on the merits. Although the Court termed the claimant a "complete nonstarter," since it was so on the basis of an affirmative defense, the Court concluded that a dismissal on the merits with prejudice was more appropriate. On the cross-appeal, the Court found the denial of sanctions erroneous. Although the defendants based their motion on § 1927, which does not apply to misconduct prior to the filing of the federal complaint, the Court saw no reason why the district court could not invoke its inherent, common law power to punish attorney misconduct. The filing of multiple lawsuits, including the present frivolous one, was ground enough for the Court to direct the district court to assess a proper sanction and consider enjoining Carr from conducting further related litigation.

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PATTERSON v. INDIANA NEWSPAPERS, INC. (December 8, 2009)

Lisa Coffey and James Patterson were both employees in the editorial department of The Indianapolis Star in 2003 when Dennis Ryerson was named editor. Both describe themselves as "traditional Christians" opposed to homosexuality on religious grounds. Both believe that Ryerson's opposing view was somehow responsible for their employment troubles. Neither, however, had particularly stellar employment records. Coffey regularly violated the newspaper's overtime rule. She ultimately left the newspaper when a restructuring left her with the choice of a part-time editorial job or a full-time copy-desk job -- when what she wanted was a full-time editorial job. Patterson's issues were more substantive. His writing was weak and he made frequent, serious mistakes. After many warnings, Patterson was fired. Coffey and Patterson brought suit. They both alleged violations of Title VII for discrimination on the basis of religion. Patterson also alleges age and race discrimination, in violation of Title VII and the Age Discrimination and Employment Act (ADEA), and retaliation for filing an EEOC complaint. Finally both plaintiffs include a claim for negligent infliction of emotional distress. The court granted summary judgment against both plaintiffs. Coffey and Patterson appeal.

In their opinion, Judges Cudahy, Flaum and Sykes affirmed. Although the Court noted the parties' sharply diverging views of the facts in some respects, it ultimately found no reason to resolve them. Both plaintiffs were required to establish that they met their employer's legitimate performance expectations and that they were treated less favorably than a similarly situated employee. With respect to Coffey, the Court concluded that she failed to establish her prima facie case. First, the evidence of her regular violation of the overtime policy was undisputed. Second, she failed to identify any similarly situated employee, much less one who was treated more favorably. Patterson suffered the same fate. All of his discrimination claims (religion, race, and age) and his retaliation claim require that he prove that he was meeting the newspaper's expectations. To the contrary, the record contains his long history of performance problems. Finally, the Court rejected the state law negligent infliction of emotional distress claims. Indiana law requires a "direct physical impact" to recover for emotional distress -- losing a job does not qualify.

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BOND v. UTRERAS (November 10, 2009)

Diane Bond filed a § 1983 action against the City of Chicago and several police officers in 2004. The parties settled. The court entered an agreed order of dismissal on March 23, 2007. About a week earlier, however, journalist Jamie Kalven filed a petition to intervene. Kalven sought to modify a protective order in the case and to obtain access to documents produced during discovery. The City opposed access -- Bond did not substantively respond to the petition. The court granted the motion to intervene and rescinded the protective order. The City appeals.

In their opinion, Judges Kanne, Sykes and Tinder (concurring) vacated and remanded. Although the Court recognized its earlier decisions allowing permissive intervention to challenge a protective order, it emphasized that those cases involved ongoing litigation or access to records in the court file. Here, neither of those conditions is present. The case was over and none of the records sought were ever filed with the court. Therefore, stated the Court, the lower court should have addressed Kalven’s standing. Standing requires that an actual controversy exist at all stages of the proceeding. The Court noted that the circuit had never addressed the relationship between Article III standing and the rule for permissive intervention. This is not a typical permissive intervention case -- where the party seeks to come into an ongoing case on the side of one of the parties. Specifically not addressing whether standing is required for permissive intervention in an ongoing case, the Court concluded that independent standing was required to intervene in a case to challenge a protective order after the case was dismissed. The Court then rejected Kalven's standing on both right to discovery and First Amendment grounds. The Court based the former on the fact that none of the discovery sought had been filed with the court. The general right of public access to court documents is not implicated. The latter was based on the fact that the parties in the litigation stipulated to the protective order. No one placed any limitation on another's speech. Finally, the Court rejected any notion that the revocation of the protective order was within the lower court's inherent power.

Judge Tinder concurred in the result. He got there differently, however. Judge Tinder believed that Kalven had standing based on the public's general right of access to judicial proceedings. He concluded, however, given the timing of the request and the lack of a sufficient showing of abuse with respect to the protective order, that the district court erred on the merits.

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IN RE: SAFECO INSURANCE CO. (October 22, 2009)

Safeco Insurance Co. of America ("SICA") and Safeco Insurance Co. Of Illinois ("SICI") are subsidiaries of Safeco Corp. and provide automobile insurance. Although SICI adjusts its own claims only, SICA adjusts its claims and the claims of several other companies owned by Safeco. In 2005, Dr. F. Ryan Bemis, a chiropractor, filed a class action in Illinois state court against SICI and SICA. The complaint included causes of action based on breach of contract, consumer fraud statutes and unjust enrichment. It alleged a scheme by SICA and SICI to reduce medical payments coverage through its use of particular audit software. The Class Action Fairness Act of 2005 (“CAFA”) became effective seven days after the complaint was filed. Bemis later dismissed the statutory and unjust enrichment counts and amended the breach of contract count. In 2009, the state court granted class certification to a class consisting of all persons insured by Safeco insurance companies in 14 different states who had their claims adjusted by the specific software in question. Safeco removed the case to federal court, asserting that the class definition amounted to the commencement of a new action for CAFA purposes. The district court remanded, concluding that the class definition related back to the original complaint. Safeco sought leave to appeal.

In their opinion, Judges Ripple, Manion and Kanne granted leave to appeal and affirmed the judgment. The Court agreed with the district court that federal jurisdiction would have existed under CAFA. The Act is not retroactive, however, and the action was filed before its effective date. Therefore, stated the Court, removal under CAFA is proper only if the class certification amounted to the commencement of a new action. The central question in a relation-back analysis is whether the original pleading provided adequate notice of the class' claims. Although SICA continued to add affiliates to its roster of those for whom it processed claims after the complaint was filed, the Court concluded that the class definition related back to the filing of the complaint. The gravamen of the complaint was the use of the particular claims-processing software by SICA. The original complaint put the defendants on notice that any claim adjusted with that software was within the scope of the complaint. 

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FANNON v. GUIDANT CORP. (October 21, 2009)

Guidant Corporation is a worldwide manufacturer of medical devices, including pacemakers and implantable cardioverter defibrillators ("ICDs"). In the 1990s, Guidant released a new ICD model. Within a few years, it discovered a design flaw. Although it corrected the flaw in new production runs, it never recalled the flawed units nor did it advise doctors or the public of the flaw. In 2004 and 2005, Guidant and J&J were involved in merger negotiations. Guidant issued several press statements and filed several SEC forms without mentioning its potential liability arising from the flawed devices. After a young man died and the New York Times prepared to report on the flaws, Guidant disclosed the problems in a letter to physicians. Shortly thereafter, the FDA issued a national recall. Guidant's stock price fell and J&J reconsidered its merger intentions. Eventually, Boston Scientific agreed to buy Guidant. Guidant's share price fluctuated between $63 and $80 during this time period. A number of class-action suits were filed, beginning in 2005. Some were voluntarily dismissed -- a second set was consolidated in the district court. Almost a year after the first complaints were filed, plaintiffs in the consolidated cases filed a consolidated complaint. A few days later, plaintiffs filed an amended consolidated complaint. Almost two years later, the court dismissed the complaint on the ground that it failed to meet the stringent scienter pleading requirements of the Private Securities Litigation Reform Act. The court also denied plaintiffs leave to amend and denied a rule 59(e) motion to set aside the judgment and allow for an amended complaint. Plaintiffs appeal.

In their opinion, Judges Bauer, Flaum and Wood affirmed. The Court first noted that the plaintiffs, in their appeal, do not challenge the district court's evaluation of the merits of the complaint. They only challenge the court's decisions to dismiss the complaint with prejudice and to not allow an amendment. The Court recognized the jurisprudence which advises that a better course in PSLRA cases is to dismiss without prejudice. The Court also recognized the specific factual backdrop of the case -- that numerous individual cases had been filed, that a consolidated complaint was filed a year later, that the consolidated complaint was amended and that the dismissal came two years after that. Given the amount of time and number of opportunities, the Court concluded that the district court did not abuse its discretion in dismissing with prejudice. With respect to the court's denial of the Rule 59(e) motion, the Court also concluded that it was not an abuse of discretion. The Court relied on the facts that plaintiffs made a strategic decision not to insert new evidence prior to the original ruling on the motion to dismiss and also that the court below was of the opinion that the amended complaint did not adequately address the deficiencies of the original complaint.

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WALSH v. CHEZ (October 21, 2009)

Jason Walsh was diagnosed with autism early in his life. His parents took him to Dr. Michael Chez for treatment. Chez prescribed a daily dosage of 50 mg of prednisone. One side-effect of prednisone is its negative impact on the body's ability to fight infection. A short time after the beginning of his prednisone treatment, Jason developed pneumonia. Dr. Chez reduced the prednisone treatment from 50 mg per day to 50 mg twice a week. A few months later, Jason died. Jason's parents brought a medical malpractice case against Dr. Chez. The Walshes submitted expert reports supporting their theory that the abrupt dosage reduction was the cause of their son's death. The district court excluded the reports on the ground that they failed to articulate a standard of care. The court dismissed the case. The Walshes appeal.

In their opinion, Judges Cudahy, Flaum and Wood reversed and remanded. The Court focused on the Rule 26 duty to disclose information regarding an expert's testimony. The purpose of the rule is to allow an opposing party a reasonable opportunity to address the expert's opinion. Examining the reports of the two experts, the Court concluded that each expressed an opinion that the conduct of Dr. Chez was not consistent with the standard of care. Dr. Chez was on notice of the Walshes' theory of malpractice. The fact that there may have been numerous ways of properly weaning Jason from the prednisone does not affect the experts' opinions that Dr. Chez' approach fell below the standard of care.

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KISWANI v. PHOENIX SECURITY AGENCY (October 16, 2009)

Ibrihim Kiswani was arrested for, and later acquitted of, an unlawful use of weapon charge. He filed an action against several police officers and the Phoenix Security Agency, alleging unlawful arrest and malicious prosecution, as well as other counts. Most of the counts were resolved prior to trial. Two counts against one individual officer were resolved at trial -- one on a motion for judgment as a matter of law and one by the jury. Judgment was entered on June 16, 2008. On June 24, Kiswani filed a renewed motion for judgment as a matter of law and a Rule 59 motion for a new trial. The magistrate judge denied the motions on August 20. On September 12, Kiswani moved for reconsideration of those motions. That motion was denied on September 24. Kiswani appeals (on September 29).

In their opinion, Judges Bauer, Rovner and Williams affirmed. First, in an order prior to argument, the Court limited the appeal only to a review of the September 12 motion for reconsideration. The August 20 order triggered the time for appeal of the merits judgment. The September 12 motion did not toll that time in that it was not filed within ten days of the judgment. On its review of Kiswani's September 12 motion for reconsideration, the Court stated that it should be considered a motion to alter or amend the judgment. That motion, under Rule 59(e), must be filed no later than 10 days after entry of judgment. Here, since the judgment was entered on June 16, the motion was not timely. The Court then turned to Rule 60(b), since an untimely Rule 59 motion automatically becomes a Rule 60(b) motion. The Court noted, however, that a Rule 60(b) motion must raise a new ground for collateral attack. Here, the motion raises the same argument as the earlier motions and is therefore inappropriate as a Rule 60(b) attack. Untimely under one rule and inappropriate under another – the Court affirmed.

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COONEY v. ROSSITER (September 30, 2009)

Deborah Cooney and her husband were divorced in 1998. The court granted her custody of their two sons. Her ex-husband later petitioned for a transfer of custody. The court appointed a lawyer to act as the children's representative. Cooney alleges that the representative arranged to have a psychiatrist appointed and then suggested to the psychiatrist that she suffered a particular mental illness. The psychiatrist's report did conclude that she suffered from the mental illness. Cooney alleges that her ex-husband received a copy of that report but that she did not. Based on the report, the court granted temporary custody to the ex-husband. She brought suit against the judge, the representative, the psychiatrist, the children's therapist and the ex-husband's lawyer. The court dismissed her complaint. Cooney appeals.

In their opinion, Judges Bauer, Posner and Wood affirmed. The Court first found the state court judge absolutely immune since he was acting in his judicial capacity. Next, the Court found that the psychiatrist and representative were also entitled to absolute immunity, since the acts complained of all occurred within their official duties. Finally, the Court concluded that the factual allegations against the two private persons failed to meet federal pleading standards. Although citing Bell Atlantic and Iqbal and the heightened pleading standard established therein, the Court found that Cooney's allegations were too vague to meet even the pre-existing heightened pleading requirement for conspiracy allegations.

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BISSESSUR v. THE INDIANA UNIVERSITY BOARD OF TRUSTEES (September 11, 2009)

Bissessur was a graduate student in the School of Optometry at Indiana University. The 2004-2005 school year was not a banner one for him. He received an incomplete and two D+ grades, was banned from one clinical rotation and failed another rotation. The University dismissed him. Bissessur filed suit and alleged violations of his substantive and procedural due process and equal protection rights. He also alleged a breach of implied contract. The district court dismissed for failure to state a claim. Bissessur appeals.

In their opinion, Judges Flaum, Williams and Tinder affirmed. The Court first concluded that, although a student does not have a federal constitutional right to a graduate education, an implied contract could give rise to a property interest. That interest, in turn, would receive constitutional protection. In order to find the implied contract, however, a student must establish an identifiable promise that was breached. Bissessur admittedly made no such allegations in this complaint. He instead relies on the conclusory allegations of his complaint and his representation that the specific promises will be unearthed during discovery. Citing Bell Atlantic and Iqbal, the Court concluded that be fell "drastically short" of the current federal pleading requirements.

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 PRINCE v. STEWART (September 2, 2009)

The Chicago Teachers Union fired Earl Prince from his job. Prince filed an administrative discrimination charge. He then brought an action pro se for employment discrimination under Title VII before he received any response from the Illinois Department of Human Rights or the EEOC. The district court dismissed the complaint because Prince had not yet received a right-to-sue letter. Several months later, after Prince had received the letter, the district court granted his motion to reopen the case. The court vacated the order, however, a few days later at Prince's request. Months later, on the last day to sue, Prince again moved to reopen the case. This time, the judge turned him down -- and it was too late to file a new complaint. Prince appeals.

In their opinion, Judges Posner, Coffey and Manion reversed and remanded. The Court recognized Prince's mistake when he followed up the first order reopening his case with a request to reinstate the dismissal. He was simply going to be out of the jurisdiction for a short time and need not have worried about his temporary unavailability. However, the Court also recognized that no one was prejudiced by his mistake. If the second motion to reopen was filed in a timely fashion, the Court could not see any reason why it should not have been granted. The Court concluded that the district court’s lulling of the pro se litigant into believing that he did not have to refile his complaint amounted to equitable tolling.

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AUTO-OWNERS INSURANCE CO. v. WEBSOLV COMPUTING (September 1, 2009)

Websolv sent an unsolicited fax to the dental office of Guy Bibbs. The fax was an advertisement for a healthcare seminar. Bibbs sued Websolv in state court. Websolv tendered its defense to Auto-Owners Insurance Co. Auto-Owners filed an action in federal court seeking a declaratory judgment that it had no duty to defend. Although the parties stipulated to the application of Iowa law, the court applied Illinois law and granted Websolv’s motion for summary judgment. Auto-Owners appeals.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Sykes reversed and remanded. The Court first addressed the choice-of-law issue. The Court concluded that the district court should have honored the parties' stipulation that Iowa law controls. When the parties agree on which state's law should govern and that choice is reasonable, the court should apply that law. The lower court was incorrect in its belief that it was required to apply the law of the forum. The court is only required to apply the choice-of-law rules of the forum -- in order to determine which forum’s law is the correct substantive law. Here, under Illinois' choice-of-law rules, Iowa law would apply. The Court turned to the merits, applying Iowa law. The claim in the case is that Websolv violated the Telephone Consumer Protection Act (“TCPA”) by sending the unsolicited fax. Websolv claims the suit is covered either under the policy's advertising injury section or its property damage section. The Court rejected both theories. The advertising injury section requires the company to defend its insureds for suits alleging injury from the publication of material that "violates a person's right of privacy." Recognizing that a right of privacy could refer either to matters of secrecy or matters of seclusion, the Court concluded that an Iowa court would apply the policy’s coverage only in the secrecy context. The rights protected by the TCPA, on the other hand, are privacy rights arising in the seclusion context. The Court relied, in part, on the use of the word "publication" in the policy. Publication is more relevant in the secrecy context than the seclusion context. With respect to the property damage theories, the Court noted that the only alleged property damage was the use of ink and paper from the fax machine. The Court held that this damage fell within the exclusion in the policy for "expected or intended" consequences. Websolv certainly expected its fax transmission to result in the use of ink and paper on the recipient’s end.

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FTC v. TRUDEAU (August 27, 2009)

Kevin Trudeau is an author and a marketer, particularly in the medium of infomercials. In that capacity, he has dueled with the FTC for years. The parties entered into a Consent Order in 2004. The order, in part, prohibited Trudeau from using infomercials to advertise a product. An exception to the prohibition was that Trudeau could market publications as long as the infomercial did not misrepresent the content of the publication. The Consent Order bought a few years of peace, until 2007. That all changed with the publication of his book, Weight Loss Cure. The weight-loss program contained in the book prescribes, in part: organic six meals/day diet, enema-like procedures performed by specialists, daily hormone injections, avoidance of any medications and a host of other dietary and lifestyle restrictions. Trudeau began appearing in infomercials touting the book. He called the program “easy,” “simple,” and said that it could be completed in the home. He failed to mention many of the restrictions. The FTC sought a contempt finding against Trudeau for violating the Consent Order. The district court agreed. The FTC sought a sanction of $46 million to reimburse the purchasers of the book and a modification of the Consent Order to require a performance bond before any further infomercials. The court instead required Trudeau to disgorge $5 million in profits and banned him completely from infomercials for three years. On an FTC motion to correct a mathematical error, the court increased the monetary sanction to $37 million. Trudeau appeals.

In their opinion, Judges Ripple, Manion and Tinder affirmed in part but vacated and remanded with respect to the sanctions. On the merits of the contempt finding itself, the Court upheld the district court. It concluded that Trudeau had agreed not to misrepresent the content of the book, that he had misrepresented it in numerous ways, that the fact that the book itself described the program as “easy” did not excuse the misrepresentations, and that many of his statements were patently false. The Court then addressed the remedies. With respect to the $37 million, the Court noted that it had to be a civil, rather than a criminal, sanction since the proceedings did not have criminal sanction protections. Although a criminal sanction can simply be a fine, a civil sanction must either compensate the complainant or coerce future conduct. If the latter, it must afford an opportunity to purge. The Court concluded that the sanction was not coercive – therefore, it had to compensate. But here, the court below did not describe how it reached the figure or what was to happen to the money. The Court concluded that the court’s failure to describe the methodology it used, to adequately substantiate the award with factual findings, and to address the administration of the funds required remand. The Court deferred to the lower court on remand the exact particulars of both the methodology for computing the award and the method of distribution. The Court also rejected Trudeau’s request for additional procedural safeguards on remand. Finally, with respect to the infomercial ban, the Court concluded that it was a coercive, rather than compensatory, civil sanction and it could not stand without an opportunity to purge.

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SALMERON v. ENTERPRISE RECOVERY SYSTEMS (August 27, 2009)

Rhonda Salmeron was fired by Enterprise Recovery Systems ("ERS"). Thereafter, she brought a qui tam action, alleging that ERS engaged in fraud related to its student loan debt collection practices. Jorge Sanchez represented Salmeron. During the three years the suit was pending in district court, Sanchez missed numerous deadlines, failed to appear in court and repeatedly failed to live up to his promises. Sanchez' conduct ultimately led the trial court to dismiss the case. On Sanchez' motion, the court reopened the case -- but warned Sanchez that it was "the final warning." Within weeks, confidential documents produced by the defendants in the case appeared on the Internet. Although no confidentiality order was in place at the time, the defendants emphasized to Sanchez that they intended the documents to be confidential and the parties agreed to keep them so. The principal reason the confidentiality agreement was not in place was because Sanchez never provided any comments or changes. Sanchez admitted leaking the document to numerous outside sources. The court dismissed the case with prejudice, finding that Sanchez violated the agreement with defendants' counsel to keep the documents confidential. Salmeron appeals.

In their opinion, Judges Ripple, Manion and Tinder affirmed. The Court first expressed its agreement with the district court that Sanchez had agreed to keep the documents confidential, pending the entry of a protective order. The Court next concluded that Sanchez' disclosure of the document to a member of the press was sufficient to support the court's finding of willfulness. The Court went on to reject the additional arguments: Sanchez had fair warning of the possibility of dismissal, defendants' failure to obtain the protective order earlier does not excuse Sanchez’ conduct, a showing of prejudice to the defendants is not required, and the government's interest in the case does not warrant a different result. In short, the Court found no clear error or abuse of discretion.

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BROOKS v. ROSS (August 20, 2009)

Victor Brooks served on the Illinois Prison Review Board ("PRB"). One of the functions of the PRB is to make certain parole decisions. In 2002, the parole request of inmate Harry Aleman came before the PRB. The hearing was unusual both because of Aleman's notoriety for murder and bribery and because a Department of Corrections employee provided a statement in support of his parole. Brooks cast the only vote in support of parole. Because of the high profile of the situation, the department began an investigation. The investigation resulted in several reports, some of which accused Brooks of accepting bribes to vote in favor of parole. Eventually, Brooks and the department employee were indicted for their conduct -- and later acquitted. Brooks filed suit under § 1983 and state law against numerous state officials, alleging claims of deprivation of due process, malicious prosecution, conspiracy and intentional infliction of emotional distress. The district court dismissed for failure to state a claim. Brooks appeals.

In their opinion, Judges Flaum, Wood and Tinder affirmed. The Court chose to address the claims under principles of timeliness, sovereign immunity and pleading requirements. First, a § 1983 claim borrows its statute of limitations from a state personal injury action. Here, that limitation is two years. Brooks' complaint was filed within two years of his acquittal, but more than two years after his indictment. The malicious prosecution and federal due process claims both require an allegation of acquittal and are therefore timely. The federal and state conspiracy claims and the intentional infliction of emotional distress claim complain of his prosecution. An acquittal is not a pleading element of any of them. Under Illinois law, the Court concluded that the indictment was a single overt act that triggered the statute of limitations for those claims. They are therefore time-barred. Second, Illinois law requires tort suits against the state to be brought in the Illinois Court of Claims. Although the Court recognized the exception if a state actor exceeds his authority, it concluded that the malicious prosecution claim did not fall within the exception and was therefore barred. Finally, the Court concluded that Brooks' due process claim did not meet the pleading requirements of the Supreme Court's recent opinions in Twombly, Erickson and Iqbal. Under those cases, a plaintiff is required to provide notice of his claim, a court must accept allegations as true unless they fail to provide sufficient notice, and the court need not accept conclusory or abstract allegations. Here, Brooks does provide many specific allegations, but the allegations describe conduct that is just as consistent with legal behavior as it is with illegal behavior. The only allegations that adequately describe illegal behavior merely recite the elements of the cause of action and do not put the defendants on notice of their specific conduct that is alleged to have violated the Constitution or law.

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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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ESKRIDGE v. COOK COUNTY (August 17, 2009)
 

Michelle Eskridge died of pneumonia after having been treated at Access Community Health Network (Access) and Stroger Hospital. Access was a U. S. Public Health Service facility and Stroger was a Cook County facility. Michelle's parents sued Access and Cook County in state court. The United States removed the case to federal court, where the case against the U.S. was dismissed for failure to exhaust Federal Tort Claims Act remedies. The court remanded the case against Cook County to state court. The Eskridges exhausted their remedies and filed a second suit in federal court against the county and the United States and dismissed the earlier suit. Later, having decided to pursue only Cook County, the Eskridges filed yet a third lawsuit, in state court, against Cook County and moved to dismiss the federal suit. Their motion was granted. Meanwhile, in state court, Cook County moved to dismiss the suit on procedural grounds. Upon realizing the merits of the County’s defense, the Eskridges filed a motion in federal court for relief from their own voluntary dismissal, claiming they intended only to dismiss the United States. The court denied the motion. They then moved for reconsideration, a motion which was considered a second Rule 60(b) motion, which was also denied. The Eskridges appeal.

In their opinion, Judges Evans, Williams and Tinder affirmed. The Court first noted its extremely deferential review. First, Rule 60(b) is itself an extraordinary remedy. Second, appellate review proceeds under an "extremely deferential" standard. Third, here, the Eskridges did not appeal from the original Rule 60(b) order but only from the denial of their request for reconsideration. On the merits, The Court noted that relief under Rule 60(b) typically involves a misunderstanding. Here, the Eskridges' attorney asked for the relief granted. The fact that he did not anticipate the actual consequences of his request does not compel the relief requested.

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SCHUR v. L.A. WEIGHT LOSS CENTERS, INC. (August 14, 2009)

Pamela Hoppe, an Illinois citizen, joined a weight loss program at her local L.A. Weight Loss Center ("Center"). After just several months of diet and nutritional supplements, Hoppe died of acute liver hepatitis. Her estate filed suit in state court against the Center alleging a variety of state law claims. The Center removed the case to federal court on diversity grounds, where the parties conducted discovery for just over one year. The estate then amended its complaint, adding claims against two Center employees, both Illinois residents. The estate then moved to remand the case to state court because of the new lack of diversity. On the Center's motion, the court struck the amended complaint on the grounds that the new defendants were fraudulently joined. Later, the court granted summary judgment to the Center. The estate appeals.

In their opinion, Judges Bauer, Kanne and Sykes vacated and remanded. The Court addressed the jurisdictional issue first. It noted that 28 U.S.C § 1447(e) applies when a plaintiff seeks to join a non-diverse party that would eliminate subject matter jurisdiction. A district court has two options -- it can deny the joinder and keep the case or it can allow the joinder and remand the case. It should not do what the court did here – allow the joinder and keep the case. The Court then adopted a framework of factors a lower court should consider in exercising its discretion on joinder: the plaintiff's motive, the timeliness of the request, the harm to the plaintiff if denied, and other equitable considerations. Before addressing these factors, the Court “detoured” to address whether the district court had the authority to reverse the joinder decision, further complicated by the fact that a magistrate judge had granted the motion to amend. In the particular posture of this case, the Court concluded that the district court was permitted to reconsider the magistrate's order. Because the motion was granted as a routine matter without any indication of its jurisdictional significance, the Court joined several other courts in concluding that a district court may reconsider a prior joinder decision when it was unaware that joinder would defeat diversity. Finally, the Court proceeded to examine the lower court's exercise of its discretion. The lower court had relied on the doctrine of fraudulent joinder in striking the amended complaint. It found that it was unlikely that the estate could prevail against the individual defendants. The Court concluded that the district court misapplied Illinois law in reaching that conclusion. Although vicarious liability can result in employer liability for employees' misconduct when the acts were committed within the scope of employment, it does not affect the employees' direct liability. The Court found that it was error to conclude that it was unlikely for the state to succeed against the individual employees. With respect to the plaintiff’s delay in adding the individual employees, the Court acknowledged that the amendment followed a year of discovery but emphasized that the amendment came within a few months of the estate learning of each employee's role in the events prior to Hoppe's death. Thus, the Court concluded that the lower court abused its discretion in denying the remand. Since it had no jurisdiction, it should not have reached the merits and neither did the Court.

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FRENCH v. WACHOVIA BANK (July 31, 2009)

Brian French and his siblings (“French”) are the beneficiaries of the trust set up by their father. Wachovia Bank (the “Bank”) is the trustee of the French Trust. French sued the bank, alleging in Count I that the Bank breached its duties and in Count II that the bank provided false information with respect to life insurance policies. On the Bank's motion to compel arbitration, the court determined that only Count II was subject to arbitration. The court ordered the parties to arbitrate Count II and stayed proceedings with respect to Count I. French moved to amend the complaint to dismiss Count II and to lift the stay with respect to Count I. The court granted the motion on October 23. However, in response to an inquiry from the Bank, French denied that they had abandoned the Count II claims. On December 21, the Bank reasserted its request to compel arbitration on Count II and to stay Count I. The court denied the motion. The Bank appeals.

In their opinion, Judges Ripple, Manion and Tinder affirmed. The Court first addressed its jurisdiction. It noted that, under the Federal Arbitration Act, an interlocutory appeal may be taken from an order refusing to stay an action or refusing to order arbitration. The Court noted the existence of the October 23 order, which was not timely appealed, and noted the rule that a party cannot simply file a second motion and appeal from its denial when it failed to appeal from the denial of the first motion. Here, however, the Court relied on the ambiguity of the status of Count II after the October 23 order to conclude that an interlocutory appeal of the definitive denial of arbitration in the April 23 order was proper. On the merits, the Court agreed with the district court. Once French amended the complaint to eliminate Count II, the complaint at issue contained only Count I. Count I was not subject to arbitration. The Court concluded that the district court therefore correctly denied the request to compel arbitration.

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GABBANELLI ACCORDIONS & IMPORTS, L. L. C. v. DITTA GABBANELLI UBALDO DI ELIO GABBANELLI (July 30, 2009)

Gabbenelli Accordions & Imports ("American Gabbenelli") used to be the American distributor for a predecessor of defendant Ditta Gabbenelli Ubaldo Di Elio Gabbenelli ("Italian Gabbenelli"). Disputes arose between the two companies in the 1990s. In 1999, the two companies entered into an agreement under which American Gabbenelli retained the exclusive right to use the Gabbenelli mark in North America and Italian Gabbenelli retained the exclusive right to use it in Italy. The parties further agreed that future disputes would be resolved by arbitration. Notwithstanding the arbitration agreement, Italian Gabbenelli sued American Gabbenelli in an Italian court and American Gabbenelli filed this suit in the United States. American Gabbenelli charged Italian Gabbenelli with trademark infringement. The district court first rejected Italian Gabbenelli's contention that the arbitration agreement deprived the court of jurisdiction. Nevertheless, the court stayed proceedings pending the outcome of the Italian litigation. When no decision was rendered within a few years, the court lifted the stay. American Gabbenelli served Italian Gabbenelli with requests for admissions in May of 2005. Italian Gabbenelli finally appeared through counsel in October of 2005 but did not respond to the requests for admissions. Italian Gabbenelli filed an opposition to American Gabbenelli's motion for summary judgment in June of 2007, and also asked for leave to deny the requests for admissions, which had since been deemed admitted. The court denied that request and granted American Gabbenelli's motion for summary judgment. Italian Gabbenelli appeals.

In their opinion, Judges Posner, Flaum and Wood affirmed in part, reversed in part and remanded. The Court rejected Italian Gabbenelli's appeal on liability. First, it agreed with the district court that the arbitration agreement did not deprive the court of jurisdiction. Second, it concluded that the Italian judgment (since rendered) was irrelevant because it was rendered after the district court judgment. Third, the Court concluded that the district court was within its rights in not allowing Italian Gabbenelli to reopen the requests for admissions after ignoring them for several years. The Court did reverse, however, with respect to damages. The district court awarded damages for lost profits plus statutory damages of $500 for each infringing accordion. The Lanham Act allows statutory damages only for violations on which compensatory damages are not awarded. The district court's award of lost profits and statutory damages with respect to the same accordions was improper. The Court also criticized the district court for awarding statutory damages on each individual item sold. The Act allows statutory damages on each "type of goods," not on individual goods. The Court remanded for a redetermination of damages.

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CONSUMER PRODUCTS RESEARCH & DESIGN v. JENSEN (July 16, 2009)

Consumer Products Research & Design ("CPRD") holds a patent for a wireless smoke detector. CPRD entered into contracts with two companies owned, respectively, by a father and his son. One company, owned by the father, agreed to develop and market the product. The other, owned by the son, was responsible for its manufacturing. Unhappy with of the relationship, CPRD filed a complaint alleging fraudulent inducement and breach of contract. A jury awarded over $700,000 in damages. Defendants appeal.

In their opinion, Judges Cudahy, Flaum and Rovner affirmed. The Court rejected the defendants’ first argument, that the evidence was insufficient to support the verdict, because none of the defendants filed a motion for judgment as a matter of law after the verdict. The defendants did move for judgment as a matter of law under Rule 50 (a) after the liability phase of the bifurcated trial. The Court held, however, that a party's failure to comply with Rule 50 (b) after the verdict forfeits any claim on appeal challenging the sufficiency of the evidence. The Court also rejected defendants’ jury instruction argument. The defendants accepted the jury instructions without complaint in the court below and forfeited their objection. 

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UNITED STATES v. ROLLS-ROYCE CORPORATION (June 30, 2009)

Curtis Lusby was an engineer at Rolls-Royce Corp. He became suspicious that the company was falsely certifying that one of its aircraft engines met government specifications so he informed his superiors. He claims that the company fired him for doing so. He brought suit under the False Claims Act, alleging that the company punished him for preparing to bring an action under the statute. The parties jointly dismissed the suit in 2003. However, two months earlier, Lusby had filed a qui tam action under seal. The court dismissed the action for failure to plead fraud with particularity and because of the claim preclusion effect of the earlier lawsuit. Lusby appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Wood affirmed in part and reversed in part. The Court first addressed claim preclusion. It noted its 2007 decision in Cole. In Cole, the Court held that a person who did not prevail on a Title VII claim cannot later bring both a personal and qui tam claim under the False Claims Act. Here, however, Lusby disputes one of the elements of claim preclusion -- that the cases involve the same parties (Cole conceded the issue). The Court noted that the United States is not an actual party to a qui tam suit unless it intervenes. It is, however, the real party in interest. In addition, the Court identified several procedural requirements for qui tam litigation that would make it very difficult to bring a personal claim in the same suit. The Court concluded that the resolution of an employee's personal suit does not preclude a later qui tam suit. With respect to the particularity issue, the Court stated that the complaint contained quite specific allegations of fraud. It rejected Rolls-Royce's argument that a specific allegation of the details of the invoices was required. The Court did affirmed the lower court with respect to Lusby's allegations that Rolls-Royce committed fraud during the earlier settlement negotiations.

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BAKERY MACHINERY & FABRICATION v. TRADITIONAL BAKING, INC. (June 29, 2009)

Bakery Machinery & Fabrication (BMF) retained attorney James Hinterlong to pursue Traditional Baking, Inc. (TBI) in a contract action in an Illinois court. TBI removed the action to federal court. Hinterlong failed to file an appearance, neglected to file Rule 26 disclosures on time, failed to respond to TBI's amended counterclaim, did not provide a copy of a sanctions order to his client as ordered by the court, and never answered a request for admission. The court ordered Hinterlong to file his appearance, pay a sanction, and pay past sanctions. The court warned Hinterlong that it would strike BMF's pleadings if he did not comply. He did not comply. The court struck BMF's pleadings, granted TBI's motion for default and entered judgment against BMF for $582,000. Some months later, BMF moved to substitute counsel and stay the proceedings. The court denied substitute counsel's motion to vacate the judgment. BMF appeals.

In their opinion, Judges Bauer, Ripple and Wood affirmed. The Court began by noting that a district court has substantial discretion in deciding a Rule 60 motion. Citing its prior jurisprudence, the Court stated that an attorney's misconduct is the problem of the client under the law of agency. Even when that misconduct rises above simple negligence or lack of diligence, it does not entitle the client to the "extraordinary" relief provided in Rule 60. Even here, where BMF sued Hinterlong and discovered he lacked malpractice insurance, the situation does not meet the exceptional circumstances test.

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FREEDOM MORTGAGE CORPORATION v. BURNHAM MORTGAGE, INC. (June 23, 2009)

Freedom Mortgage Corp. loaned money to property purchasers arranged by broker Burnham Mortgage, Inc. After the purchasers defaulted, Freedom purchased the properties with credit bids at auction, was awarded default judgments for the difference between the purchase prices and the outstanding debts, and later resold the properties for less than their purchase price. Freedom claims (in its complaint, taken as true) that Burnham conducted a scam whereby it arranged to over-appraise properties, sponsor sham sales, and have Freedom lend money on its inflated understanding of the properties’ purchase prices. Title insurers indemnified Freedom for damages caused by a failure to close according to Freedom's specifications. Freedom sued Burnham and the insurers for fraud and under RICO. The court first ruled that, under Illinois law, Freedom was not able to recover from a third party any damages on the theory that the property was worth less than it had been purchased for at the foreclosure sale. The court later ruled that Freedom's claim was barred by claim preclusion and by the Rooker-Feldman doctrine. Freedom appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Evans reversed and remanded. The Court quickly disposed of the Rooker-Feldman argument. Rooker-Feldman comes into play when a party complains about a state court judgment in federal court. Here, Freedom is the prevailing state court party in the foreclosure action, and is complaining about injuries from conduct that predated the state court proceedings. Rooker-Feldman does not apply. With respect to claim preclusion, the Court noted that Illinois does not require all claims to be made in a single action - only if they relate to the same transaction. Since Illinois treats claims on a guarantee, for example, as a separate transaction, the Court concluded that it would allow a separate claim against a third party for fraud. As for issue preclusion, the Court agreed that Freedom is stuck with its credit bid purchase prices as the value of the properties. That does not eliminate damages, however -- it only limits them.

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BAILEY v. ROOB (June 8, 2009)

The State of Indiana has a Medicaid for the Disabled program that provides medical benefits to persons who suffer from disabilities. A consent decree resulting from earlier litigation required the State to follow certain procedures in collecting and evaluating applications. It must obtain complete medical histories for twelve months, it must get additional medical information when necessary, and it must ensure that the medical records are complete before an eligibility determination. Plaintiffs filed a petition to hold the defendants in civil contempt for violating these requirements of the consent decree. In discovery, the State produced a representative sample of benefit applications, consisting of 26 files. The district court reviewed the files and concluded 17 were complete, five contained only a summary form of medical history, and four were “less complete” than the five that contained the form. The court denied the contempt motion, however, because neither party presented evidence of what should be considered a "complete" history. In fact, the court invited the plaintiffs to refile their motion and introduce testimony on that issue. Instead, plaintiffs appeal.

In their opinion, Judges Flaum, Manion and Rovner affirmed. The Court first rejected plaintiffs’ argument that the district court imposed an erroneous burden of proof. Plaintiffs claimed that the court required them to prove the State's lack of reasonable diligence instead of treating it as an affirmative defense. The Court held that it is a plaintiff's burden to foreclose a finding of reasonable diligence by clear and convincing evidence. Alternatively, the Court concluded that the district court rejected plaintiffs’ motion simply because they had not shown a violation, not that they had failed to foreclose reasonable diligence. The Court next rejected plaintiffs’ argument that it had shown a violation, at least with respect to the four least-complete files. The Court concluded that the district court did not abuse its discretion in declining to make factual findings that the four files violated the consent order. The district court found the arguments of the parties inconclusive on what constituted a complete medical file. Finally, the Court rejected the plaintiffs’ argument that "complete medical history" always requires a treating physician's records. A court reads the requirements of the consent decree just like it reads the requirements of a contract. The Court concluded that, in similar contexts, it has not interpreted "complete" in a strict, absolute sense. The Court was unable, on the incomplete record, to categorically conclude that a summary form of medical history is always a violation of the regulation. 

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ASKEW v. SHERIFF OF COOK COUNTY (May 18, 2009)

Carl Askew alleges that he was the victim of excessive force at the hands of Officer Lopez while a pretrial detainee in the Cook County Jail. He filed a lawsuit naming Lopez and the Sheriff. He included two theories of relief under a 42 U.S.C. § 1983 -- that Lopez used excessive force and that Lopez was deliberately indifferent to his safety. The district court dismissed his complaint on the grounds that he failed to name Cook County as a defendant. Askew appeals.

In their opinion, Judges Flaum, Rovner and Wood vacated and remanded. The Court concluded that the district court misapplied Rule 19. Rule 19 draws a distinction between joinder of parties when it is feasible and joinder of parties when it is not feasible -- because it would defeat jurisdiction or the party is beyond the personal jurisdiction of the court or the party could make an objection to the venue. Rule 19 (a)(1) addresses a "required party" whose joinder is feasible. Once such a party is identified, Rule 19 (a)(2) requires a court to order that the person be made a party. Here, the Court concluded that the lower court was correct in finding that Cook County was a required party, at least part of it. It correctly read Carver II for the proposition that an Illinois county is a necessary party in any suit seeking damages from its sheriff. Ironically, Askew waived his claim against the Sheriff in his appellate brief. Although he did so under the mistaken impression that the lower court was correct in dismissing the claim against the Sheriff, he is bound by his waiver. The case may still proceed against Lopez, however. The county is not an indispensable party in the case against Lopez. Any judgment entered against Lopez would be entered against him in his individual capacity notwithstanding any right on his part to recover the judgment from the county.

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ABAD v. BAYER CORPORATION (May 1, 2009)

In one case, several hundred Argentine hemophiliacs brought a class action against Bayer Corporation and others, alleging that they were infected with AIDS as a result of the defendants’ negligence. In another case, Argentina plaintiffs brought suit against U.S. companies arising out of an automobile accident. Plaintiffs allege that defendants were negligent in the design and manufacture of the vehicle and its tires. Both cases were filed in federal district courts against American defendants by foreign plaintiffs for injuries sustained in Argentina. After significant discovery, the judge in each case dismissed the case based on the doctrine of forum non conveniens. The plaintiffs appealed.

In their opinion, Judges Posner, Evans and Tinder affirmed. The parties agree that the standard of review is an abuse of discretion. The Court first addressed whether the plaintiffs are entitled to a choice of forum presumption. Although the Court conceded that such a presumption is typical, it concluded that the presumption has little influence on the outcome when plaintiffs seek to maintain the litigation on the defendants’ turf while the defendants would rather engage on the plaintiffs’ turf. In those cases, district courts should simply weigh the advantages and disadvantages of the respective fora. In Gulf Oil Corp., the Supreme Court provided a long list of factors that a lower court should consider in applying forum non conveniens. The Court reviewed the circumstances of the two cases to determine whether either district judge abused his/her discretion. In the AIDS case, the Court looked at a number of factors, including the burden of translation and the cost of discovery. In the end, however, the determining factor was that Argentine law would govern, whether the cases were tried in the United States or Argentina. The Court found further support for dismissal in the fact that the case involved the application of market share liability, an uncertain area of Argentine law. The Court reached the same conclusion with respect to the automobile accident case. Again, although the legal issues were not as complex or uncertain, Argentine law would apply. An Argentine court is more competent than an American court to apply its law. The Court found no abuse of discretion.

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MARSHALL v. H&R BLOCK TAX SERVICES, INC. (April 30, 2009)

Suit was filed in state court against a defendant class of companies. The defendant class consisted of H&R Block Tax Services, Inc. ("TSI") and its affiliates or franchisees. The suit, brought on behalf of a plaintiff class, alleged violations of the Illinois Consumer Fraud Act. The state court certified the defendant class and originally three plaintiff classes, including people in all 50 states and the District of Columbia. On TSI's motion, the court decertified the defendant class but refused to decertify the plaintiff class, although it did narrow it to residents of only 13 states. TSI removed the case pursuant to the Class Action Fairness Act (CAFA), on the theory that the decertification of the defendant class occurred after CAFA’s effective date and increased TSI’s potential liability. The district court remanded the case to state court. TSI requested leave to appeal, which the Court granted.

In their opinion, Chief Judge Easterbrook and Judges Posner and Tinder reversed. A case that was filed before the effective date of CAFA may still become removable if a court's ruling after its effective date increases a defendant's potential liability and does not "relate back" to the original claim. The Court first explored whether the decertification increased TSI's potential liability. On the pleadings, the Court concluded that TSI's potential liability may well have increased. Before decertification, it was not liable for the unlawful acts of all class members simply because it was a corporate affiliate, or because it was a class representative. Similarly, although the original complaint alleged joint and several liability, the complaint included three other defendants. The Court could not determine whether the plaintiffs sought to hold TSI liable for all the affiliates. The Court concluded that the plaintiffs may well be attempting to hold TSI liable for the acts of all the affiliates after decertification, which would appear to increase TSI's liability. With respect to whether the change "relates back" to the original complaint, the Court looked to whether the original complaint provided sufficient notice of the scope of the claim such that the defendant should not be surprised by the increased scope. Relying on its own conclusion that TSI's original liability was significantly less than it was facing after the ruling, the Court concluded that it did not relate back.

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SMART v. LOCAL 702 INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS (April 7, 2009)

Ronald Smart’s non-union electrical company was awarded a contract to perform electrical work at a sports complex. He claims that Local 702 threatened the owner of the sports complex and coerced him to replace Smart’s company with union electricians. Smart brought an action against the local under the Illinois Antitrust Act. He also brought state law unwarranted prosecution and malpractice claims against the union’s lawyers (claims arising from earlier legal actions against Smart by the union). The district court dismissed the antitrust claim, concluding that it was preempted by the National Labor Relations Act. It also dismissed the state law claims, holding that the malpractice claim could not be brought against a lawyer who had never represented Smart and that the unwarranted prosecution claim required that he prevailed in the underlying litigation (he did not). Smart appeals

In their opinion, Judges Ripple, Kanne and Tinder affirmed in part, reversed in part and remanded. The Court first addressed its jurisdiction. The Court observed that there was an apparent lack of diversity and lack of a federal question in the complaint. Although the union raised a federal preemption defense, federal preemption does not normally provide a basis for asserting jurisdiction. One exception to that rule is the "complete preemption" doctrine. When an area is completely preempted by federal law and Congress substitutes a federal cause of action, a claim purportedly based on state law is considered a federal claim. Here, the Court first concluded that Smart's state antitrust claim was preempted by federal law. Next, it noted that Congress provided a cause of action in 29 U.S.C. § 187 with respect to injuries resulting from a secondary boycott. The Court found "ample evidence" that Congress intended to convert state common-law antitrust complaints into federal claims. The Court therefore concluded that § 187 completely preempted Smart’s state law antitrust claim and provided an exclusive federal remedy. The Court remanded that part of the case to the district court for further proceedings. The Court agreed with the lower court's analysis of the state law unwarranted prosecution and malpractice claims.

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STAR INSURANCE CO. v. RISK MARKETING GROUP (March 31, 2009)

Star Insurance Company ("Star") and its co-plaintiffs registered a $2.4 million judgment in the Northern District of Illinois and began proceedings to collect it. Star also brought a separate action to pierce the corporate veil of defendants Risk Marketing and Cebcor Service Corp. In the collection proceedings, Star sought to set aside fraudulent transfers, to enjoin the disposition of assets, to appoint a receiver and to dissolve the corporate defendants. Instead of responding to Star’s requests, the defendants moved to consolidate the enforcement proceedings with the action to pierce the corporate veil. On August 31, 2007, the court enjoined the disposition of transferred assets and ordered the individual defendants to turn over certain assets in their possession. It also denied their motion to consolidate. On October 19, the court granted Star’s motion for judicial dissolution and the appointment of a receiver. On January 23, 2008 the court entered judgment for $2.4 million against the individual defendants. The defendants appeal the lower court's orders of August 31 and January 23.

In their opinion, Judges Bauer, Rovner and Evans affirmed. The Court first addressed its jurisdiction to review the August 31 order. The Court cited the general rule that an order is final and appealable if the decision ends the litigation on the merits and does not contemplate further activity. With respect to the August 31 order, the Court noted that the entire order was not immediately appealable. The decision contained separate orders arising from separate motions contained in the same document. Although the preliminary injunction order and turn-over order were immediately reviewable, the denial of the motion to consolidate was not appealable until the final judgment. The Court determined that it therefore had jurisdiction to review the earlier denial of consolidation.

On the merits, the Court found that the district court did not abuse its discretion in declining to consolidate. The Court recognized that there were similarities between the collection case and the piercing the veil case but noted that the two proceedings sought completely different results. The Court also held that the district court properly entered judgment against the individual defendants for failing to return the object of the fraudulent transfers. The lower court properly applied Illinois law to the collection proceedings, found that fraudulent transfers had been made, ordered the property returned, and entered judgment as a sanction against the individual defendants for violating the order.

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FOR YOUR EASE ONLY, INC. v. CALGON CARBON CORP. (March 31, 2009)

For Your Ease Only ("FYEO") sells jewelry boxes on the Home Shopping Network (“HSN”). Several years ago, FYEO obtained a default judgment in excess of $2 million against Mark Schneider and his wholly owned company Product Concepts Company ("PCC"). At the time of the judgment, PCC's principal assets were a relationship with and the right to payments from the HSN. In order to collect the judgment, FYEO began searching for assets. Schneider had since moved to Costa Rica. It noticed the deposition of Doug Fournier, Schneider’s brother-in-law. The subpoena advised Fournier of the lawsuit and the judgment. When Fournier got the subpoena, he met Schneider in Costa Rica. There, Schneider transferred his company's rights under the HSN agreement to a company that Fournier would create when he returned to the United States (Anewco). FYEO served HSN with a third-party citation prohibiting them from transferring any property or money to the judgment debtors. Notwithstanding the citation, HSN paid almost $400,000 to Anewco. FYEO requested an order for the turnover of all payments made by HSN. The district court denied the request, concluding that Fournier had acted in good faith and the transfer was not voidable under the Uniform Fraudulent Transfer Act (UFTA). FYEO appeals.

In their opinion, Judges Posner, Wood and Tinder vacated the judgment of the district court and remanded. The Court identified one of the central issues on appeal as whether Schneider’s transfer to Fournier was made in good faith. Relying on Illinois cases, the Court concluded that a transferee who knows about a judgment against a transferor does not take assets in good faith. Here, the records indicated that Fournier knew about the judgment against Schneider at the time of transfer. Since he did not accept the assets in good faith, the transfer is voidable under the UFTA. The other issue on appeal is whether HSN violated the citation when it began making payments to Anewco. The Court rejected HSN's argument that it should not be found liable because it faced the choice of violating the citation or breaching the contract. The Court noted that HSN could have arranged to have had the funds held in escrow or in the registry of the court. Nevertheless, the Court concluded that the record was not clear that HSN had actually violated the citation. The Court therefore remanded for the district court to make that initial determination.  

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UNITED STATES v. APPROXIMATELY 81,454 CANS OF BABY FORMULA (March 25, 2009)

Federal agents seized thousands of cans of powdered baby formula from a warehouse. They suspected that the cans had been stolen from retail stores. Many of the cans had altered labels - some of the cans were even past their "use by" date. The government filed a civil forfeiture suit, which is still pending in the district court. The owner of the cans asked the court for permission to sell those cans that were not yet beyond their “use by” date. The court denied the motion. The owner appeals.

In their opinion, Judges Posner, Sykes and Dow affirmed. The court first addressed the jurisdictional issue. Because the ruling on the motion was not a final appealable decision, the appellant relied on the "collateral order" doctrine. Under that doctrine, the Court noted, a party may take an immediate appeal from an order if it involves issues separate from those of the underlying litigation and there is a risk of irreparable harm. The Court found both criteria present in this case. The issues were clearly separate and, although unclear, the possibility of a monetary remedy from the government was unlikely.

On the merits, the Court noted that the procedural rules governing asset forfeiture actions were quite vague and provided no particular criteria for deciding a motion like the one presented to the court below. They do not, for example, as appellant argues, provide that the government has the burden of proof. The Court concluded that the lower court had considerable discretion in ruling on the motion. The judge below conducted an evidentiary hearing, where there was conflicting evidence concerning the threat posed by the formula. The Court could not conclude that the lower court abused its discretion in denying the motion.

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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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BECK v. DOMBROWSKI (March 20, 2009)

Philip Beck (and the class he represents) was a shareholder of Equity Office Property Trust ("EO"), a real estate investment trust. In late 2006, after EO agreed to be acquired by Blackstone Group, a bidding war ensued between Blackstone and Vornado. Offers and counter offers were each followed by a new proxy solicitation from EO's board. Eventually, EO accepted Blackstone's last bid. Beck brought suit under the Securities Exchange Act and SEC Rule 14a-9, as well as under state law. He alleged misrepresentations and omissions in the proxy solicitation. The district court dismissed the federal claims for a failure to plead the required state of mind with particularity. The court dismissed the state law claim under the doctrine of abstention. Beck appeals.

In their opinion, Judges Posner, Wood and Tinder affirmed. The Court first identified the erroneous basis on which the district court had dismissed the action. Rule 14a-9 does not require a state of mind for a violation -- only a misrepresentation or omission. Notwithstanding the district court's error, the Court still concluded that the complaint should be dismissed. Citing the principle of Bell Atlantic that a defendant should not have to incur the expense of discovery unless the complaint is a substantial one, the Court found that the plaintiffs’ theories were too speculative to survive. The Court also affirmed the lower court's dismissal of the state law claim under Colorado River abstention.

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MALONE v. RELIASTAR LIFE INSURANCE CO. (March 12, 2009)

Gordon Beeler disappeared in January of 1998, leaving behind a wife of 30 years, four children, a business partner and $2.6 million in life insurance policies. A trust was the beneficiary of the policies. The insurance companies denied benefits in 2003, and again in 2005, citing evidence that Beeler may have been alive. The beneficiaries brought suit against the insurance companies, seeking death benefits and punitive damages. The district court granted summary judgment to the insurance companies on the punitive damages claim. The breach of contract claim was tried to a jury. The trustee presented evidence that Beeler had been missing since the date of his disappearance, that the family had conducted numerous investigations into his disappearance, and that he had not been in communication with his family or friends since the day of his disappearance. The insurance companies presented evidence of a troubled family situation, a strained marriage, and witnesses who claimed to have seen Beeler after the date of his disappearance. The jury returned a verdict in favor of the defendants. The district court denied the trustee’s Motion for a New Trial. The trustee appeals.

In their opinion, Judges Kanne, Williams and Sykes affirmed in part, vacated in part and remanded for a new trial. On the punitive damages issue, the Court concluded that there was a good-faith dispute over coverage. Under Indiana law, a good-faith coverage dispute precludes punitive damages. The Court affirmed the district court. With respect to the death benefits claims, however, the Court found that the district court had erred. In Indiana, a claimant may prove an insured’s death in two different ways. It can present evidence, direct or circumstantial, that the insured is, in fact, dead. Alternatively, it can seek a common law presumption of death by showing that the individual has been "inexplicably absent" for seven years, that the individual has not communicated with close family and friends and that the individual cannot be found despite diligent search. That presumption can be rebutted by proof of facts inconsistent with the presumption. The Court found two errors in the district court's approach to the trial. First, the district court erred in instructing the jury that "inexplicably absent" meant that Beeler’s absence was "unexplained by circumstances other than those suggesting death." The Court concluded that the presumption arises when the plaintiff proves a seven-year absence, a lack of communication, and an inability after diligent search to find the person. Any evidence offered to explain the disappearance is relevant only to rebutting the presumption. Second, the Court found error in the special verdict form. The jury was asked three questions: whether the plaintiff raised the presumption of death, whether the defendants rebutted the presumption of death, and whether plaintiff proved that Beeler was, in fact, dead. The special verdict form instructed the jury to conclude its deliberations if it answered no to the first question. The jury did answer no to the first question, it did conclude its deliberations, and it never considered whether plaintiff proved that Beeler was, in fact, that. The Court conceded that either of the two errors, standing alone, might not have required a reversal. Considered together, however, they amounted to reversible error.

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SECURITIES AND EXCHANGE COMM. v. KOENIG (February 26, 2009)

James Koenig was the Chief Financial Officer of Waste Management, Inc. In the early 1990s, after years of acceptable growth, the company’s financial performance began to suffer. Koenig devised several accounting strategies that made the company appear more profitable than it was. Koenig resigned in January of 1997. In October of 1997, the company disclosed in a press release that its financial statements were inaccurate and unreliable. The SEC filed a complaint against Koenig in March of 2002. At trial, the jury found that his accounting strategies were fraudulent. The court imposed a $2.1 million civil penalty, ordered the disgorgement of almost $1 million in bonuses, imposed $1.2 million in pretax interest, and enjoined Koenig from serving as a director of a public company. Koenig appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Wood affirmed in part, reversed in part and remanded. The Court first addressed Koenig's statute of limitations argument. Although recognizing that the statute is five years and that more than five years passed between Koenig's resignation and the filing of the complaint, the Court rejected Koenig's argument. Instead, the Court noted that there has long been a special rule for statutes of limitations in fraud cases. A victim of fraud has the full statutory time to file, beginning from the date the wrong came to light or would have with due diligence. Since Koenig's accounting misdeeds were not public until the company issued its press release and Koenig never claimed that the SEC could have known earlier, the complaint was timely. The Court then addressed several trial management objections. It concluded that the lower court did not err in allowing the SEC to put on evidence of the motives of the company's new management. Although originally denying the SEC's motion in limine, the lower court admitted motive evidence after Koenig "opened the door." The court had warned Koenig that it would allow the evidence if Koenig made motive at issue. Second, the Court approved of the trial court’s practice of allowing the jurors to submit questions for witnesses and found no abuse of discretion. Third, the Court found no violation of the discovery or notice rules in the SEC's calling as its witness Koenig’s own expert, whom he did not call. Koenig also complains that the $2.1 million penalty was greater than allowed by the statute. The statute limits a penalty to no greater than the greater of $100,000 or the defendant’s pecuniary gain. The court included pre-judgment interest in its calculation of pecuniary gain. The Court approved of this formula. It held that pecuniary gain is the amount the defendant obtained as a result of his fraudulent accounting practices plus any return he could have made by investing that sum, until its disgorgement. The Court did disagree with the district court's computation of Koenig's bonuses. The company awards bonuses based on increases in the company's earnings over the prior year. Based upon the testimony of the SEC's expert, the Court concluded that the company’s corrected earnings increased from 1991 - 1992. The Court remanded for a recalculation of Koenig’s bonuses and, if necessary, a recalculation of the penalties.

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SHALES v. GENERAL CHAUFFEURS, SALES DRIVERS AND HELPERS LOCAL UNION NO. 330 (February 27, 2009)

The losers is in a contested union election sued the winners. The defendants prevailed on all counts. As discovery proceeded during the case, it became apparent that plaintiffs could not support some of their claims. Defendants demanded that some claims be withdrawn, to no avail. Defendants asked for sanctions under 28 U.S.C. §1927 and FRCP 11. The court ordered plaintiffs’ attorney, James Banks, to pay $80,000 in sanctions. Banks appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Williams affirmed. The Court first addressed the defendant’s argument that the appeal was not timely. Defendants argued that Bank's motion to reconsider should not have suspended the time for appeal because it lacked merit. The Court declined to adopt such a rule. The actual rule is that the existence of the motion, and not it's merit, is what suspends the time for appeal. The Court then addressed Bank's principal argument -- that the district court should have taken into account his ability to pay in determining a sanction. The Court agreed that Rule 11 requires a court to take into account a sanctioned party’s resources. However, the Court noted that the lower court also imposed sanctions under § 1927, with a finding of bad faith. The Court concluded that tort damage principles apply to a determination of sanctions under § 1927. As such, the measure of damages depends on the victim's loss, not a lawyer's ability to pay.

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GOLDEN YEARS HOMESTEAD v. BUCKLAND (February 19, 2009)

Golden Years Homestead, Inc. (“Golden Years”) operates a nursing facility in Fort Wayne, Indiana. In early 2000, the Indiana Department of Health (“IDH”) conducted an annual certification inspection, as required by Golden Years’ participation in the Medicaid program. The inspection took place over a span of ten days. At some point during the inspection, the inspection team became upset with the conduct of the Golden Years’ team. From then on, the inspection team became loud, overly critical, hostile and accusatory. The team left information favorable to Golden Years out of its report. Golden Years was cited for seventeen violations. After a six-day evidentiary hearing and administrative appeals, all but one of the citations was reversed. Golden Years brought a lawsuit against the inspectors under 42 U.S.C. § 1983 for constitutional violations and state law claims for abuse of process and malicious prosecution. The district court granted summary judgment for the inspectors. Golden Years appeals the dismissal of the state law claims.

In their opinion, Judges Bauer, Rovner and Sykes affirmed. The Court first addressed Golden Years’s complaint that the court dismissed the state law claims sua sponte. The Court disagreed. Although the inspectors did not specifically address the state law issues in their motion, they did ask for all counts to be dismissed. Furthermore, Golden Years actually addressed the state law counts in its response. The lower court acknowledged the general rule that a court will decline to exercise jurisdiction over state law claims if all federal claims are dismissed before trial. The Court approved the lower court’s invocation of the exception to the rule when the state law claims are meritless. On the substance of the malicious prosecution claim, the Court stated that Golden Years was required to prove malice. Although it seemed to accept that the inspectors’ conduct was overzealous and unprofessional, the Court concluded that the evidence did not support personal animosity or malice. Similarly, the Court concluded that the evidence of hostility and rancor was insufficient to establish the ulterior motive requirement for abuse of process.

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COLLINS v. ILLINOIS (February 2, 2009)

Margaret Collins has had a long-running dispute with the State of Illinois over her employment with the Illinois State Library. This is her third lawsuit, which the Seventh Circuit remanded to the district court for consideration of some of her claims. The road got a little bumpy after remand. The court ordered her to amend her complaint on four different occasions and forced her to respond to discovery. The parties finally arrived at an agreeable date for her deposition. Although she did appear, she refused to submit to interrogation with parties present. She was told they had a right to be there. One of the lawyers offered to call the magistrate to resolve the issue. Collins left. The defendants moved for dismissal of her complaint for discovery abuse and for their fees for preparing for the deposition. The court dismissed the complaint, stating that her refusal was “willful and egregious.” He also concluded that complaints she had about the court reporter and police officers in the vicinity were baseless. He also ordered Collins to pay the defendants’ fees and costs. Collins appeals.

In their opinion, Judges Bauer, Ripple and Rovner affirmed. The Court appreciated the severity of dismissal as a discovery abuse sanction. The sanction is appropriate, however, when there is willfulness or bad faith and the sanction is proportionate to the conduct. The Court found the district court’s decision reasonable. It made a finding of willfulness. And the record established a pattern of Collins’ efforts to hinder the progress of the case. The Court also rejected, in short shrift, Collins’ complaints about the award of fees and the bias of the district court judge.  

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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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ARMSTRONG v. LASALLE NATIONAL BANK (January 13, 2009)

A number of lawsuits were initiated in several different federal district courts by participants in Amsted Industries, Inc.’s (“Amsted”) Employee Stock Ownership Plan (“ESOP”). The complaints allege violations of ERISA, breach of contract, breach of fiduciary duty and conversion. The Judicial Panel on Multidistrict Litigation (“Panel”) consolidated the cases for pretrial proceedings in the Northern District of Illinois. That court ordered the cases consolidated into two groups – retiree claims and non-retiree claims. The non-retirees added LaSalle Bank as a defendant. All the claims eventually were resolved except the non-retiree claims against LaSalle. The non-retiree plaintiffs and LaSalle participated in pretrial proceedings, including the setting of a trial date. A few weeks before the pretrial order was due, the plaintiffs moved to remand their claims. LaSalle objected. The court granted the remand, reluctantly and with some consternation. It also certified two questions under 28 U.S.C. § 1292(b): a) whether filing an amended complaint agreeing to jurisdiction and venue and adding a defendant that can only be sued in the transferee court constitutes consent to trial in the transferee court, and b) whether waiver of a right to remand under § 1407 requires evidence of a “deliberate relinquishment of a known right.” LaSalle appeals.

In their opinion, Judges Ripple, Rovner and Tinder affirmed. The Court began with the statute. Section 1407(a) provides that cases transferred and consolidated by the Panel “shall be remanded” to the transferor court after pretrial proceedings, unless otherwise terminated. The Court mentioned the Supreme Court’s emphasis on the plain meaning of the statute in Lexecon vs. Milberg Weiss, in which the Supreme Court struck down the practice of district courts transferring a case to itself. The analysis did not stop with Lexecon, however. The Court recognized that § 1407(a) is a venue statute. Since a party can consent to venue and waive its right to remand, the Court addressed waiver. The Court found no authority on the proper standard to apply in a § 1407(a) waiver context. It found its jurisprudence on the waiver of a right to arbitrate instructive. In Halim v. Great Gatsby’s Auction Gallery, the Court held that the standard to determine waiver of the right to arbitration is whether, under all the circumstances, the party alleged to have waived has acted inconsistently with that right. The focus should be on the party’s actions as a whole, not any one action. The Court suggested that the standard for a § 1407(a) waiver should be higher than for a right to arbitrate, noting the statutory source of the remand right as well as the mandatory language. The Court did not actually decide the issue since it concluded that LaSalle could not even get over the “acted inconsistently” hurdle. On the merits of the waiver, the Court stated that only two actions of the plaintiffs were cited as supporting a waiver – its statement in the consolidated complaint that venue was proper in the transferor court and its participation in pretrial proceedings in which trial dates were set. Neither, in the Court’s view, amounted to a waiver. With respect to the venue statement, the Court noted that the consolidated complaint was filed at the request of the court and that venue, in fact, was proper in that court. Nothing about the statement was inconsistent with a desire for a remand. With respect to the plaintiffs’ participation in pretrial proceedings in which trial dates were set, the Court admitted that much aggravation could have been avoided had the plaintiffs made their intentions more clear. However, the conduct was not inconsistent with a desire for a remand.

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KATZ v. GERARDI (January 5, 2009)

Jack Katz brought this action on behalf of a class of persons who contributed real property to a real estate investment trust (“REIT”). In exchange, they received an interest in the REIT. The REIT merged into a new entity in 2007. The interest-holders were offered either cash or an interest in the new entity. Katz took the cash but filed suit in state court, alleging that the offer violated the terms of their original agreement with the REIT. He based the action on the Securities Act of 1933 ( “’33 Act”). Defendants removed the suit to federal court under the Class Action Fairness Act of 2005 (“CAFA”). The district court concluded that removal was not allowed by the ’33 Act. The defendants petition for appeal.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Sykes granted the petition and vacated and remanded the decision of the district court. The Court first addressed whether Katz’ action was even one under the ’33 Act. The ’33 Act applies only to purchasers of securities – Katz and the class members are sellers of securities. The Court was inclined to believe that Katz was styling his claim as one under the ’33 Act in order to prevent removal. The district court had acknowledged the same issue. It decided that the weakness of the pleading went to the merits, not to whether it was removable. The Court recognized the difficulty in distinguishing between a claim designed to defeat federal jurisdiction and one, though ultimately unsuccessful, is properly pleaded. Ultimately, the Court decided to accept the pleading as one under the ’33 Act and address the conflict between the laws.

The ’33 Act provides that actions brought under the statute in state court are not removable except in particular circumstances. CAFA allows for removal of class actions if certain criteria are met – which admittedly are met here. The Court noted the canons of construction that apply when statutes are in conflict – an older statute yields to a newer and a less specific yields to a more specific. But the Court concluded that it did not have to apply those canons. The statutes, in fact, are not incompatible. The very language of CAFA provides the answer. The broad removal authority granted by CAFA is modified by the almost identical lists of exceptions in §1332(d)(9) and §1453(d). The Court concluded that class actions brought under the ‘33 Act are removable unless one of the §1453(d) exceptions applies. Katz relied on one of the exceptions – claims that relate to rights and duties relating to any security. The Court noted an inconsistency between Katz’ attempts to fit his claim into the exception while still relying on the ‘33 Act. Nevertheless, the Court decided the best course was to remand to determine whether the claim fit within the exception.

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DOSS v. CLEARWATER TITLE (December 24, 2008)

Doss refinanced his home. First Franklin Financial Corporation (“Franklin”) loaned him $135,000 on the condition that he obtain title insurance. He did so. At closing, the itemization of costs indicated that he paid $500 for the title insurance. In fact, he paid almost $1500. Doss filed suit against Franklin and others, alleging violations of the Truth in Lending Act (“TILA”) and the Illinois Consumer Fraud and Deceptive Practices Act. The court entered a default judgment against Franklin, which Franklin moved to set aside. Other defendants moved to dismiss for failure to state a claim, alleging that Doss sold his home before filing suit. Although Doss disputed this fact in the district court, the court nevertheless granted the motion and dismissed the TILA count. The court then exercised its discretion to dismiss the state law claims as well. It also struck “as moot” all pending motions, including Franklin’s motion to set aside the default. Doss appeals.

In their opinion, Judges Manion, Wood and Tinder reversed and remanded. The Court first rejected defendants’ argument that the district court lacked jurisdiction because of Doss’ sale of the property. TILA does provide that the right of rescission expires upon the sale of the property. That provision is not jurisdictional, however. It is simply a precondition to substantive relief. The Court also addressed its own jurisdiction, given that the district court dismissed without prejudice. Although a dismissal without prejudice is usually not appealable, the Court held that the case fit within an exception. The Court will entertain an appeal where it is clear that the court below was finished with the case and where TILA’s three year period of repose would have prevented Doss from refiling the case.

On the merits, the Court held that the district court erred in relying on the deed, a matter outside the pleading, in granting a Rule 12(b)(6) motion. Instead, the court should have converted the motion to a Rule 56 motion for summary judgment and given Doss a chance to respond. Furthermore, the deed was not a subject for judicial notice since its very validity was in dispute. The Court added that a) Franklin’s motion was not moot but since it did not cross-appeal, the default judgment is final, and b) the state law claims should be reinstated.

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IN RE LIMITNONE (December 19, 2008)

LimitNone, a software development company, was pitching an e-mail application to Google. Before a March 2007 meeting, the parties signed confidentiality agreements that included a forum-selection clause naming a California county as the exclusive venue for disputes. Both agreements limited modifications to writings signed by both parties. LimitNone claims that a Google employee later “accepted” an agreement that provided for exclusive jurisdiction in Illinois by clicking on the “Accept” button for the LimitNone License Agreement. After Google developed its own application, LimitNone brought an action in Illinois state court. It alleged violations of the Illinois Trade Secrets Act (“ITSA”) and the Illinois Consumer Fraud and Deceptive Practices Act. Google removed to federal court, asserting that the ITSA was preempted by the federal Copyright Act. LimitNone sought a remand. On Google’s motion, the district court transferred the case to the Northern District of California under § 1406(a), holding that the California forum-selection clause applied and venue was improper in Illinois. LimitNone petitions for a writ of mandamus.

In their opinion, Judges Bauer, Coffey and Sykes denied the petition. The Court first addressed whether mandamus was the proper vehicle for relief. The Court noted that the Supreme Court has approved mandamus for challenging transfers under § 1404 but has suggested that it is inappropriate for transfers under § 1406. But the Court concluded that the district court erroneously applied § 1406. Section 1406 applies only when venue is improper. Here, notwithstanding the forum-selection clause, venue was proper in the district court. The Court treated the transfer as based on § 1404 and found mandamus to be the proper vehicle for review.

On the merits, however, the Court rejected LimitNone’s arguments that the lower court erred in a) transferring the case before ruling on subject matter jurisdiction, and b) making factual determinations regarding the transfer argument before ruling on subject matter jurisdiction. The Court conceded that the Supreme Court requires a determination of subject-matter jurisdiction before a ruling on the merits. The Supreme Court does not, however, mandate a particular sequence in determining jurisdictional issues. The transfer was not a decision on the merits. The district court was within its discretion in ruling on the venue issue before the subject-matter jurisdiction issue. Furthermore, the court was well within its power to resolve factual disputes that were necessary to the adjudication of the venue issue. The Court noted that district courts are frequently required to resolve disputed factual issues before ruling on preliminary issues such as personal jurisdiction, diversity of citizenship or amount in controversy, for example. The fact that LimitNone may be barred from relitigating that issue does not change the result.

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AARON v. MAHL (December 18, 2008)

Jim Aaron and Susan Scott (f/k/a/ Mahl) were cohabiting lovers in the 1990s until Aaron left Scott. At about the same time that Aaron left, Scott was sued by her former law firm for embezzlement. The firm obtained a judgment of more than a million dollars against Scott that they then assigned to Aaron. Aaron has been attempting to collect the judgment for years, following Scott from California to Indiana to South Carolina. Aaron found some assets in Indiana in a Merrill Lynch account. A state court ordered Merrill Lynch not to transfer or dispose of the assets. Aaron nevertheless obtained a writ of execution, with which Merrill Lynch refused to comply. Scott moved to quash the writ. Aaron filed suit in district court to enforce the writ and require Merrill Lynch to turn over the funds. Merrill Lynch counterclaimed and also filed for interpleader against Aaron and Scott. At Scott’s request, the court stayed the suit pending the state court’s consideration of her motion to quash the writ. The state court quashed the writ, an order upheld on appeal. The district court lifted the stay and granted Merrill Lynch summary judgment on its interpleader claims, entered final judgment pursuant to FRCP 54(b), and awarded attorney’s fees from the interpleader stake. Scott appeals from both the grant of interpleader and the award of attorney fees.

In their opinion, Judges Bauer, Wood and Tinder affirmed. Interpleader, said the Court, is used when a stakeholder is exposed to double liability or must litigate conflicting claims. The stakeholder must have a “real and reasonable” fear. Scott raise two arguments in support of her assertion that Merrill Lynch’s fear was not real: 1) that res judicata bars Aaron’s claims because of the state court rulings, and 2) that Aaron’s federal complaint was frivolous. The Court found Scott’s position incredible, noting that Merrill Lynch had been embroiled for five years in what was at its core a dispute between Aaron and Scott over Scott’s assets. Merrill Lynch had been sued or threatened with suit by both of them. The Court concluded that: 1) Scott was simply wrong in her interpretation of the res judicata effects of the state court judgments, and 2) the fact that Scott proceeded under a different legal theory after the stay was lifted than before did not make the claim frivolous. Merrill Lynch had a real and reasonable fear of competing claims and was properly granted interpleader.

On the issue of attorney fees, the Court rejected Scott’s argument that the fees should not have been awarded out of the stake while she was appealing the very order granting interpleader. Its decision on that issue rendered her argument moot. As for her claim that fees should have been charged against Aaron, the Court stated that the trial court had discretion to order that attorney’s fees be paid to a disinterested stakeholder out of the stake itself.

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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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FLYING J INC. v. CITY OF NEW HAVEN (December 5, 2008)

Flying J develops and operates travel plazas for truck drivers and other travelers. It purchased 50+ acres in New Haven, Indiana (the “City”) to develop a new travel plaza. The City opposed the development and took the position that it was not allowed under the then-current zoning. Flying J ultimately prevailed in the Indiana state courts on its challenge to the City’s position. Undaunted, the City amended its zoning ordinance to limit developments of this type to two acres. The Flying J development was the only parcel affected by this limitation. The City held several public meetings on the amendment but never gave Flying J specific notice of them. In August of 2007, the City advised Flying J that its development must comply with the two acre rule. Flying J filed suit in September, alleging violations of its rights under the U.S. and Indiana Constitutions. The district court dismissed for failure to state a claim. Flying J appeals.

In their opinion, Judges Bauer, Flaum and Williams affirmed. The Court first addressed the City’s position that the Court lacked jurisdiction under the principles of Williamson County. The Supreme Court in Williamson County held that takings claims in land use cases are not ripe until the local authority has reached a final decision, including a decision on a variance application and compensation. Courts have applied the doctrine to takings claims even when they are labeled as due process or equal protection claims. The Court noted that it has created an exception for claims alleging the malicious conduct of a government agent unrelated to a legitimate state objective. Flying J’s allegations of the City’s protracted litigation, its covert amendment to the ordinance, the ordinance’s application only to Flying J, and the potential conflicts of interest of several commission members fit its claim within that exception.

The Court next addressed whether Flying J stated a claim. Relying on its precedent in Wroblewski and Lauth, the Court identified the pleading standard for a class-of-one equal protection claim. In those cases, the plaintiff must negate any set of facts that provides a rational basis for the classification challenged. Animus of the defendant comes into play only after the plaintiff has pled facts that show the irrationality of the government’s conduct. Flying J does allege facts that would show that the City took its actions in response solely to Flying J’s development but it does not allege facts to establish that the zoning amendment was irrational. Flying J’s allegations therefore do not overcome the presumption of rationality the government enjoys in cases of this nature.

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HOUSKINS v. SHEAHAN  (November 25, 2008)

Virgean Houskins was an employee of the Cook County Department of Corrections. One September morning in 2001, she found herself sitting in her car in the parking lot of her place of employment, waiting for a parking space to open up. Correctional Officer Keith entered the lot and took what Houskins believed was her space. Houskins uttered some profanities about Keith (which he heard) and proceeded to park in another space. A verbal confrontation between the two ended with Keith striking Houskins in the face. Correctional Officer Calderone arrived a few moments later but did nothing. Houskins reported to work, filed an incident report, and also reported the incident to her supervisor, Tolbert. Tolbert took Houskins and Bowers to the Internal Affairs Division (“IAD”) to make out a complaint. Houskins also filed a police report. The IAD dismissed the charges against Keith and Calderone as not conclusive but upheld an obscene language charge against Houskins. Upon further department review, the finding against Houskins was upheld but the dismissal of the complaint against Keith and Calderone was reversed. Houskins filed a complaint pursuant to 42 U.S.C. § 1983 against the Sheriff and Cook County, alleging a) that the Sheriff retaliated against her for filing the complaints and charges against Keith, b) that a “code of silence” policy existed for correctional officers and those who violated it were subject to retaliation, and c) that the Sheriff employed a disciplinary system in which certain officers with clout were exempted from discipline. Houskins also brought pendant state court claims of assault and battery against Keith. At trial, the jury returned a verdict against the Sheriff and Keith. It awarded $240,000 against the Sheriff and $10,000 in compensatory and $50,000 in punitive damages against Keith. The Sheriff and Keith appeal.

In their opinion, Judges Bauer, Manion and Williams affirmed the judgment and damages award with respect to Keith and reversed and remanded with respect to the Sheriff. The Court first addressed two preliminary procedural issues. Houskins argued that the Sheriff could not appeal a denial of summary judgment after a jury verdict and also that the Sheriff waived the argument by not raising it in the final pre-trial order. The Court noted that while denials of summary judgments motions based on the sufficiency of the evidence are generally not reviewable, the Sheriff’s motion raised a question of law – whether Houskins’ speech was constitutionally protected – and was therefore appealable. The Court also held that the failure to raise it in the final pre-trial order did not constitute a waiver. On the merits of the speech issue, the Court looked to the Supreme Court’s Garcetti decision. Garcetti requires a court first to decide whether a plaintiff is speaking as a private citizen on a matter of public interest. Houskins complained of retaliation for two different instances of speech – her internal complaint and her police report. The Court concluded that her internal complaint was not protected speech. She was required to report misconduct as part of her official job responsibilities. With respect to the police report, the Court concluded that it was not part of her job responsibilities but that she was speaking about a matter of purely personal interest. Her purpose in filing the police report was not to air a grievance about conditions at the jail or her safety as an employee. The Court found that Houskins’ speech was not constitutionally protected and that the lower court therefore erred in denying the Sheriff’s motion for summary judgment. The Court added that Houskins’ Monell claims that the Sheriff had a policy of retaliation and selective discipline had to fail as well. A Monell claim cannot stand where the alleged official policy did not result in a constitutional violation.

With respect to the jury’s verdict for Houskins on her claims of assault and battery against Keith, the Court rejected each of Keith’s arguments on appeal. It held that a) the district court properly asserted supplemental jurisdiction over the state law claims since they pertained to the same set of circumstances alleged in the federal claim, b) the district court did not abuse its discretion in denying a separate trial for Keith, c) the judge’s comments to Keith’s counsel did not indicate bias, and d) the award of punitive damages was not excessive. The Court affirmed the judgment against Keith.

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