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

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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UNITED STATES v. LIGAS   December 1, 2008

Lawrence Ligas owed the government over $300,000 in taxes, penalties, and interest. Federal tax liens attached to his property. The United States brought an action in February 2004, just prior to the expiration of the statute of limitations. Ligas received a copy of the summons and complaint by mail but did not waive personal service. Between February of 2004 and February of 2005, the government failed to serve Ligas properly. In March, the court granted the government’s fourth request for an extension and permitted service by posting the summons and complaint on the door of Ligas’ home, by mailing copies to his home by certified mail, and by faxing copies to a fax number listed on Ligas’ pro se appearance form. On Ligas’ motion, the district court vacated its March order and dismissed the complaint for failure to serve Ligas. The court determined that the government had not been diligent in its service attempts and was not entitled to the fourth extension. The court relied on two facts – that Ligas’ co-defendant (the bank holding a mortgage on his property) had successfully served Ligas and that the government could not provide evidence of its pre-2005 attempts to serve Ligas. On the same day, Ligas sought to have the tax liens quashed. The government responded by asking for reconsideration of the court’s dismissal, arguing that Ligas had submitted to personal jurisdiction and waived objection to service by appearing to quash the liens. The court agreed. It reinstated the complaint and eventually granted summary judgment to the government. Ligas appeals.

In their opinion, Judges Bauer, Evans and Sykes reversed and remanded. The Court recited the general rules that a defendant must be served through one of the methods listed in FRCP 4, that a person must normally be served within 120 days but an extension may be granted, and that a complaint must be dismissed if it is not served within the allowed time. The Court concluded that the district court had correctly dismissed the complaint for the government’s failure to serve Ligas. The Court disagreed with the district court’s assessment of the impact of Ligas’ request to quash the tax liens. The Court stated that a defendant’s assertion of a right to affirmative relief does not generally waive an objection to jurisdiction. The affirmative relief can be unrelated to the jurisdiction issue (such as a counterclaim) or related to the jurisdictional issue (such as here, where the enforceability of the tax lien depended on the success of the jurisdiction argument). The fact that Ligas had other methods available to attack the liens did not change the Court’s view of the impact of his appearance. The Court also concluded that Ligas’ participation in the proceedings after the court’s reinstatement did not act as a waiver of his jurisdiction objection.

Judge Evans dissented from the panel’s opinion. Judge Evans emphasized that the court’s dismissal had been without prejudice. The government could refile and attempt service anew. He recognized that even the government itself thought there were serious statute of limitations barriers to a new complaint. But the barriers were not established as fact. The government could refile and put Ligas to the burden of establishing the defense. Since extinguishing the liens did not necessarily follow from the dismissal, Judge Evans believed that the district court did not abuse its discretion in reinstating the complaint. 

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MUHAMMAD v. OLIVER (November 10, 2008)

The Dennis Muhammad Community and Economic Development Corporation (“MDC”) is a Chicago-based minority business enterprise. It entered into a joint venture agreement with CDA Management (“CDAM”). The purpose of the venture was to bid on a contract to install air conditioners in Chicago Housing Authority (“CHA”) buildings. Their bid was successful but the relationship quickly soured. In 2002, MDC sued CDAM and the related non-profit Chicago Dwellings Association (“CDA”). MDC alleged, in a state court action, that the defendants breached the joint venture agreement by not allowing MDC to do the work it had agreed to do. The court granted CDA’s motion to dismiss on the ground that CDA was not a party to the agreement. Later, on MDC’s own motion, the court dismissed MDC’s complaint against CDAM without prejudice. In 2007, MDC brought suit in federal court against CDA, CDAM, and Christine Oliver. Oliver was the CEO of both CDA and CDAM. MDC repeated the same allegations it had made in the earlier state court suit. It added an allegation under § 1981 that the defendants had used MDC as a “minority front” to increase their chances of success on the bid for the CHA contract. The district court dismissed CDA and CDAM on res judicata grounds and dismissed Oliver because she was not a party to the joint venture. MDC appeals.

In their opinion, Judges Cudahy, Posner, and Rovner affirmed. The Court observed that, although the two complaints relied to some extent on different legal theories, they did both arise out of the same facts. When a prior case arising out of the same facts is abandoned after an adverse ruling, as the Court concluded the state court suit was, the judgment generally bars a later suit. When there are multiple defendants, as is here, the bar against one operates as a bar against all, if they arose out of the same facts. The Court found that all three defendants were alleged to be in violation of § 1981 for the identical conduct. The Court concluded that the earlier suit barred the federal complaint against all defendants. The Court also rejected MDC’s argument that there had been a stipulation to reserve all rights upon dismissal. The Court concluded that there was no evidence, or even allegation in the complaint, of such an agreement. Finally, the Court rejected MDC’s claim that the lower court erred by dismissing on res judicata grounds when a) the defendants never raised it and b) it is not one of the FRCP 12(b) defenses that are allowed to be raised by motion . The Court held that the dismissal was proper. The application of res judicata eliminates unnecessary lawsuits. It can be raised by the court on its own motion. Also, when an affirmative defense like res judicata is shown on the face of the complaint, it can be dismissed on motion.

The Court did conclude that the court below erred in dismissing Oliver on the grounds that she was not a party to the joint venture agreement. A claim of tortious interference with contractual rights on account of race does state a cause of action under § 1981. Nevertheless, Oliver is still entitled to dismissal. First, the Court pointed to its prior discussion of res judicata. The dismissal of the state court complaint barred a cause of action against any defendant arising out of the same facts. Oliver’s does. Second, when liability rests on the doctrine of respondeat superior, as it does here, the plaintiff cannot bring an action against the “servant” (Oliver) when judgment has already been entered for the “master” (CDA, CDAM). Third, and most significantly, the Court concluded that the complaint did not actually allege tortious interference on account of race. The Court stated that the allegation that the defendants included MDC to gain a bidding advantage, and then cheated them out of that advantage, did not allege racial discrimination. The Court observed that it was greed, not discrimination, that drove the defendants’ decision. The district court’s result was correct. 

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ATKINS v. CITY OF CHICAGO (November 10, 2008)

William Atkins was a passenger in a car driven by his brother Adam in October, 2003. A Chicago police officer stopped the car and arrested William on a parole violation warrant with his name. William professed his innocence. He continued to insist he was the “wrong man” but never asked to see a lawyer or took any legal action. He was released – thirty seven days later. He brought an action under 42 U.S.C. § 1983 against the arresting officers and prison guards, among others. He alleged that his arrest was unlawful, that he was mistreated in prison, and that the Department of Corrections lacked procedures for identifying cases of mistaken identity. Adam joined in the suit as far as it complained of the arrest. Both Atkins brothers were represented by the same lawyer. In December of 2006, the lawyer filed a document captioned a “Motion to Substitute” that alerted the court to the untimely death of William. The lawyer stated that he was going to open an estate so that William’s wife Brandie could continue the lawsuit. The district court denied the motion. There was no one yet with proper status to substitute. After 90 days, the defendants moved to dismiss on the grounds that no substitution had been made within 90 days of a “suggestion of death.” The court allowed an additional month for a proper substitution. The day before the new deadline, Atkins’ lawyer filed a motion to substitute Mrs. Atkins, but she was still not yet named as his personal representative. The district court dismissed William’s case. An Illinois probate court appointed Mrs. Atkins as personal representative of William’s estate about ten days later. Mrs. Atkins appeals the district court’s dismissal.

In their opinion, Judges Posner, Flaum, and Evans reversed and remanded. The Court rejected Mrs. Atkins' arguments that the delay was excusable and that the suggestion of death did not start the 90-day clock because it was unauthorized. The Court did hold, however, that the suggestion of death did not start the clock because FRCP 25(a) requires service. Although the rule does not specifically identify the non-parties on whom service is required, the Court concluded that it certainly includes the deceased’s successors or personal representatives. Since Mrs. Atkins had the largest stake in maintaining the case, she had to be served. The Court recognized that Mrs. Atkins clearly knew of her husband’s death and it saw no indication that the Motion for Substitution was filed without her knowledge or authorization. Nevertheless, the rule requires service and her knowledge does not excuse the lack of service. The 90-day clock has not started. Mrs. Atkins should be allowed to proceed as plaintiff.

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ANDONISSAMY v. HEWLETT-PACKARD CO. (November 7, 2008)

Sanjay Andonissamy, a French citizen of Indian ancestry, began his employment with Hewlett-Packard (“HP”) in April of 2001. He was in the country on an HP-sponsored H-1B visa. [The following is Andonissamy’s version of the story – HP’s version differs greatly] After the events of September 11, 2001, Ken Smith, Andonissamy’s supervisor, began to make derogatory racial, ethnic, and nationalist remarks to and about Andonissamy. Andonissamy frequently complained to Smith’s supervisor. Smith placed Andonissamy on remedial performance plans, allegedly in retaliation for Andonissamy’s complaints about Smith. Andonissamy began taking medication for anxiety and depression in 2002. He was being treated, but his physician never placed him on any restricted work schedule. Andonissamy’s condition worsened in early 2003 after the deaths of his brother and nephew. In May of 2003, Smith made a false report to the company implicating Andonissamy as a security threat. HP fired Andonissamy on June 23, 2003. On September 16, Andonissamy filed an EEOC complaint alleging national origin discrimination. The EEOC dismissed his complaint and issued a right to sue letter. Andonissamy filed a complaint in federal court in April of 2004. In addition to his complaints of national origin discrimination under Title VII and 42 U.S.C. § 1981, Andonissamy added a Family and Medical Leave Act count. In November of 2005, Andonissamy added Smith as a defendant on an assault count. The district court dismissed Smith and granted summary judgment to HP. Andonissamy appeals.

In their opinion, Judges Flaum, Williams, and Sykes affirmed. The Court first addressed Andonissamy’s Title VII hostile work environment claim. In order to survive summary judgment, Andonissamy had to show that a) he was subjected to unwelcome harassment, b) the harassment was based on his national origin, c) it was severe and pervasive enough to amount to a hostile and abusive environment, and d) there exists a basis for employer liability. The Court did not address the first three elements because it found no basis for employer liability. An employer can be vicariously liable for the conduct of a supervisor but can only be liable for the conduct of a co-worker if the company was negligent in discovering or remedying the harassment. A supervisor for purposes of Title VII is the person with the ability to affect the terms and conditions of the plaintiff’s employment. Smith, although he was Andonissamy’s “supervisor” in the sense that he directed his performance, was not a Title VII supervisor. There was no evidence that Smith was able "to hire, fire, promote, demote, discipline or transfer" Andonissamy. In order to hold HP liable for the acts of Smith as co-worker, Andonissamy had to establish that he complained or that the discrimination was so pervasive that HP’s knowledge could be inferred. Although Andonissamy did complain to Smith’s supervisor, he did not specifically complain about national origin discrimination. The Court agreed with the district court that Andonissamy therefore did not make out a Title VII claim. With respect to his companion § 1981 claim, the Court stated that a plaintiff can proceed under the direct or indirect method. The direct method requires evidence that an adverse employment action was based on the plaintiff's national origin. The Court found no such evidence in the record. Under the indirect method, a plaintiff must establish, among other elements, that he was meeting his employer’s legitimate performance expectations. The Court noted that the record contained numerous references to Andonissamy’s performance problems. The Court concluded that Andonissamy was therefore unable to establish a § 1981 claim under either method.

Andonissamy’s retaliation claim could also be established under the direct or indirect method. The indirect method for retaliation, like discrimination, contains an element that Andonissamy was meeting HP’s performance obligations. The Court rejected Andonissamy’s indirect method for establishing his retaliation claim for the same reason it rejected it for his discrimination claim. Under the direct method, Andonissamy had to establish that: a) he engaged in statutorily protected activity, b) his employer took an adverse employment action, and c) there was a causal connection between the two. The Court held that his complaints to HP did not include complaints of national origin discrimination. He was thus unable to establish the statutorily protected activity element. The Court concluded that he failed to establish a retaliation claim under either method. With respect to the FMLA count, the Court noted that Andonissamy never asked for any leave and did not exhibit any dramatic changes in behavior that would have put HP on notice of a need for leave. The Court agreed with the district court that Andonissamy failed to meet his burden under the FMLA.

Finally, the Court addressed Andonissamy’s assault claim against Smith. The assault claim was added to the case after the statute of limitations on the claim had expired. Andonissamy argued that the claim related back to the original claim and was thus permissible under FRCP 15(c). The Court affirmed the dismissal, stating that a claim against a new defendant relates back only when there is a case of mistaken identity. Since Smith supervised Andonissamy for years, that cannot be the case here.

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

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

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

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

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

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U.S.O. CORP. v. MIZUHO HOLDING CO. (October 28, 2008)

U.S.O. Corp. (“USO”) is incorporated in Delaware but is the wholly-owned subsidiary of a Japanese company. Its headquarters are in Japan. USO invested in a limited partnership. Like USO, the partnership was incorporated in Delaware. It also had its principal place of business in Japan and the partners all had addresses in Japan. The partnership invested in another partnership, which acquired a building in Chicago, Illinois. The partnership held the building investment for ten years. USO sued Mizuho Holding Co. (“Mizuho”) and alleged that Mizuho failed to pay the amounts due to USO during its investment and misappropriated USO’s portion of the proceeds of the sale of the building, almost $7 million. The acts complained of occurred mostly in Japan. Most of the witnesses and record evidence exists in Japan. Mizuho brought a declaratory judgment suit in Japan raising the same issues, albeit eight months after USO sued in the United States. The district court dismissed the suit based on forum non conveniens. USO appeals.

In their opinion, Judges Posner, Ripple, and Evans affirmed. The Court thought that Mizuno’s case that it would be unreasonably burdened to have to defend in the United States was “compelling.” USO argued that its choice of forum, particularly as an American company, should not be rejected lightly. The Court did not question the existence of a presumption in favor of plaintiff’s choice of forum. But it also noted the many legal principles that limit a plaintiff’s choice – jurisdiction, venue, and removal, to name a few. The Court looked to the Supreme Court’s decision in Piper Aircraft Co. v. Reyno for guidance. There, the Supreme Court held that dismissal is proper, even for an American company, if the balance of conveniences demonstrates that the defendant would be burdened by being forced to litigate in the plaintiff’s chosen forum. The deference to Americans is not based on nationalism but on the assumption that a home forum is more convenient to an American than it likely would be to a foreign company. The Court noted that USO was not really “American” except through incorporation. The assumption of convenience did not apply in its case. Here, the Court listed a host of reasons to dismiss: a) the presence of witnesses and documents in Japan, b) the need for interpreters and translators if litigated in the U.S., c) the probable application of Japanese law, d) the pending, “well-advanced” case in Japan, and e) the refusal of the Japanese court to abate its case in favor of a U.S. case. Piper also directed the Court to look at how the public’s interest is affected. The public interest considerations include burdening an American jury with a wholly foreign dispute and forcing a court to struggle with Japanese law. The balance of conveniences and the public interest in this case clearly favor a dismissal.

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THOROGOOD V. SEARS, ROEBUCK & CO.  (October 28, 2008)

Steve Thorogood bought a dryer at Sears, Roebuck & Co. (“Sears”). Sears’ point-of-sale literature stated that the drum inside the dryer was made of stainless steel. In fact, part of Sears’ dryer drum was made of a coated, non-stainless steel. Thorogood filed a class action on behalf of himself and other purchasers of the dryer in 28 states and the District of Columbia. He alleged that he thought that the entire drum was made of stainless steel, that the non-stainless part rusted and stained his clothes, and that Sears’ advertising was deceptive. Thorogood based his claim on the Tennessee Consumer Protection Act. The district court certified the class. Sears appeals.

In their opinion, Judges Posner, Kanne, and Evans reversed and remanded for decertification. The panel started by observing some of the benefits of the class action procedure, as well as some of its downsides. One particular downside of some class actions, according to the Court, is the undermining of federalism. Thorogood’s case presented a good example. Thorogood was attempting to litigate 500,000 claims of residents of 29 jurisdictions in one federal court. These claims would be “wrested from the control” of those jurisdictions and their laws. The Court was troubled that certain procedural rules that govern the relief to which those 500,000 claimants would be entitled would be ignored. Specifically, for example, Tennessee’s consumer protection act does not allow a class action in state court. Although the Court recognized that the Tennessee rule did not prevent the class action from proceeding under federal law, the expansion of available relief did trouble the Court. The Court’s concerns led it to approach the class action aspect of the case with caution.

The Court found the case to be a particularly poor candidate for class action treatment. Not only did common issues of fact not predominate over individual issues of fact, the Court stated that there were no common issues of fact. Thorogood’s concerns about rust were “idiosyncratic.” The Court doubted that any of the other 500,000 claimants believed as he did. Each class member would have to individually establish, at a hearing, his or her: a) understanding of the meaning of the stainless steel advertising, b) reliance on the advertising’s meaning that the stainless steel drum would prevent rust stains, and c) damages. Since there was no common, single understanding of the advertising, the class should not have been certified. The Court did note a certain difficulty in determining individual relief as well. That difficulty could have been managed through an aggregate class relief approach, had the case been otherwise suitable for class treatment.  

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KAY V. BOARD OF EDUCATION (October 27, 2008)

Gail Kay taught in the Chicago public school system. After she retired in 1994, she brought a § 1983 action against the Board of Education (“Board”). She alleged that the Board penalized her on account of her speech. The parties settled the litigation in 1996 and her case was dismissed. In the settlement, the Board offered to rehire Kay into an available future position. In 1997, she was offered an opportunity to return to her former school. She taught for seven more years – yet she never received another paycheck. After retiring again in 2004, she brought suit against the Board in federal court to enforce the 1996 settlement, alleging that her seven years of teaching without pay was a breach of the settlement. The district court dismissed the case on its own accord for “lack of venue” because Kay was governed by a collective bargaining agreement that required arbitration. Kay appeals.

In their opinion, Chief Judge Easterbrook and Judges Sykes and Tinder vacated the judgment of the court and remanded with instructions to dismiss for lack of subject matter jurisdiction. First, the Court listed several reasons why the court erred in dismissing the suit because of the collective bargaining agreement’s arbitration clause: a) only the union and employer can invoke the clause, b) a settlement of a dispute is not arbitrable as a claim arising under the agreement, c) a collective bargaining agreement cannot require the arbitration of civil rights claims, and d) the Board cannot compel arbitration with a volunteer, which they claim is Kay’s status. The panel also criticized the court below for acting independently, without benefit of the views of the parties.

Although the Court held that the lower court erred in dismissing the complaint, it identified (and asked for supplemental briefing on) a different problem. The Supreme Court’s decision in Kokkonen v. Guardian Life Ins. Co. makes clear that the vehicle for enforcement of a settlement of a federal case is a contract claim, which cannot be brought in federal court unless it qualifies independently under diversity principles. Apart from a settlement, a state’s wage-payment statute is the proper vehicle for a claim for unpaid wages. Kay conceded that she has no federal claim to enforce the settlement or for unpaid wages. She asserted, however, a claim that the Board’s failure to abide by the settlement is further retaliation for her assertion of constitutional rights. The only assertion of rights she maintains, however, are those that pre-dated the settlement. The Court noted that the Board’s failure to pay cannot be deemed a revived retaliation claim under Kokkonen. Finally, the panel did consider whether the Kokkonen rule applied in the context of a state actor defendant. It held that the Constitution does not require a state actor to keep its promise; it only requires some process before depriving a person of property. Kay’s opportunity to litigate her case in state court is process enough.  

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CHAUDHRY v. NUCOR STEEL  (October 15, 2008)

Subhash Chaudhry has worked at Nucor, which manufactures rolled steel sheets, since 1988. In 2007, he worked as a Quality Control Inspector (“QCI”). [The following are allegations of the complaint, taken as true.] His responsibilities included inspecting the rolled steel sheets produced at the temper mill. Nucor increased the pay grades of some QCIs in 2003, but not those, like Chaudhry, who worked at the temper mill. Chaudhry’s complaints fell on deaf ears. Chaudhry complained that some of his co-workers made fun of him and called him names. Those complaints were ignored as well. Chaudhry also tried to improve his salary through a program in which QCIs who attended a training session and made four customer visits in a year could qualify for a pay grade increase. Chaudhry frequently asked for opportunities to make a customer visit.  Nucor controlled the visits and never gave him such an opportunity. On July 28, 2006, Chaudhry filed a charge of discrimination with the EEOC. He alleged that Nucor’s failure to give him the pay raise that they gave other QCIs amounted to discrimination against him on account of his race, religion, and national origin in violation of Title VII of the Civil Rights Act of 1964. He further stated that Nucor had prevented him from making customer visits and qualifying for a pay grade increase. In a later letter to the EEOC, he complained of the harassment. On February 7, 2007, Chaudhry filed suit alleging that Nucor violated Title VII by: a) raising the salaries of other QCIs whose jobs required less effort, b) informing other QCIs of customer visit opportunities, and c) failing to control the employees’ harassment of him. Nucor initially answered the complaint. A few months later, however, the Supreme Court decided Ledbetter. Nucor, relying on Ledbetter, asked the district court to dismiss the complaint. The court agreed and dismissed the pay discrimination claim. It also dismissed the harassment claim, holding that it was not a part of the EEOC charge and Chaudhry’s letter did not expand the scope of the charge. The court then dismissed the case and entered final judgment (the same day) without addressing the customer visit charge. Chaudhry attempted to amend his complaint to add a § 1981 claim. Nucor objected because judgment had already been entered. In his reply, Chaudhry asked the court to treat his motion as a motion to amend the judgment. The court apparently did so but treated the date of the reply brief as the date of the motion and denied it as untimely. Chaudhry appeals.

In their opinion, Judges Bauer, Flaum, and Williams reversed and remanded. The Court began its analysis with Title VII and Ledbetter. Before filing a Title VII complaint, an employee must file a charge with the EEOC. The charge must be filed within 300 days of the alleged unlawful employment practice. The alleged unlawful employment practice, under Ledbetter, is the single, discrete unlawful act at issue, even if the effects of the act continue with each paycheck. The Court agreed with the conclusion of the district court that the discrete act with respect to the raise claim was Nucor’s June, 2003 decision to give raises to the other QCIs. Since Chaudhry did not file his charge within 300 days of that date, the district court correctly dismissed this claim.

With respect to the customer visit claim, however, the same analysis produced a different result . The Court observed that Chaudhry’s EEOC charge and complaint alleges that Nucor denied him a raise every year by preventing him from participating in customer visits. Each of those decisions was a new violation. Since Chaudhry filed his charge within 300 days of the last of those acts, his customer visit claim is not time-barred by Ledbetter. The Court also rejected Nucor’s claim that its alleged failure to notify Chaudhry of a customer visit opportunity was not a materially adverse employment decision. The failure to notify deprived Chaudhry of compensation which he would have earned, at least as the complaint reads, but for the failure.

The Court commented on the pleading amendment dispute as well, although the remand eliminated any need to decide the issue. The Court criticized the district court, referring to its actions in entering judgment on the same day it granted the motion to dismiss as “unorthodox” and its handling of the motion to reopen as “hyper-technical.”

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DOMINQUEZ v. HENDLEY (September 30, 2008)

Alejandro Dominguez was fifteen when a neighbor accused him of sexual assault. He was convicted of home invasion and sexual assault and spent four years in prison before he was paroled. Dominguez always maintained his innocence. He eventually proved his innocence through DNA testing. Not only did he succeed in getting his conviction vacated, the Governor pardoned him. Dominguez brought this action against an investigating police officer and the City of Waukegan under 42 U.S.C. §1983. He alleged that the officer (a) withheld exculpatory material from the prosecutor and defense, (b) conducted an improper and prejudicial identification, and (c) fabricated evidence. At trial, the jury returned a verdict in favor of Dominguez in excess of $9 million. Hendley and the City appeal.
 

In their opinion, Judges Bauer, Ripple, and Wood affirmed. The appellants raised numerous issues, none of which convinced the panel of reversible error.

• The Court rejected the Statute of Limitations argument as the complaint was filed within two years of the date the conviction was vacated. One who brings a §1983 claim for violation of due process based on denial of a fair trial must first have the conviction vacated. The limitations period runs from that date. The appellants’ argument that it should run from the arraignment would have merit only if the complaint was based on false arrest rather than unfair trial.
• The Court rejected the argument that Hendley was entitled to qualified immunity because Dominguez did not prove that Hendley proximately caused the alleged violations. In the eyes of the Court, the argument was not one of qualified immunity, but simply an attack on the sufficiency of the evidence of the violations. The Court found sufficient evidence to support the verdict.
• The Court found as irrelevant whether Dominguez proved that the arrest was without probable cause. Again, Hendley was misreading the complaint as one simply attacking the arrest.
• Appellants’ next argument was that Dominguez did not properly plead or prove that Hendley failed to provide exculpatory evidence. Any supposed flaw in the pleading was overcome by Hendley’s failure to object and presentation of affirmative evidence on the issue. The panel had no difficulty in finding sufficient evidence in the record to support the verdict.
• Appellants’ argued a number of errors in the instructions. Some were rejected because they were based on the appellants’ erroneous “false arrest” theory. Others were addressed to causation. The Court found that the district court’s instructions on proximate cause were sufficient.
• The appellants’ submitted a litany of supposed trial errors, the cumulative effect of which they claim deprived them of a fair trial. The Court never had to address the cumulative effect of any errors because, in fact, they held that not one of the items raised amounted to error.
   

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FOSTER V. DELUCA (September 29, 2008)

Stacie Foster, a Democrat, was employed by the City of Chicago Heights, Illinois. Shortly after the citizens of Chicago Heights elected a Republican mayor, Anthony DeLuca, her employment was terminated. Foster brought suit against the City and DeLuca under 42 U.S.C. §1983, alleging that her First Amendment freedom of association rights had been violated. The district court granted a motion to dismiss and, on the same day, entered final judgment. Foster moved to alter the judgment pursuant to Rule 60(b) of the Federal Rules of Civil Procedure (FRCP) and to amend her complaint. The court denied the motions. Foster appeals.

In their opinion, Judges Rovner, Evans, and Williams reversed. The Court noted that relief under Rule 60(b) is extraordinary and that its review of the lower court’s denial of leave to amend is for abuse of discretion. Notwithstanding these high bars, the Court determined that the circumstances warranted a reversal. FRCP 15(a) provides that amendments to pleadings should be “freely given” and that one opportunity to amend is available “as a matter of course” before a responsive pleading is served. Since the motion to dismiss is not considered a responsive pleading under Rule 15(a), the court have either given Foster an opportunity to amend or provided an explanation for its denial. The court abused its discretion in not doing either. Also, the court left Foster with no option but to move to alter the judgment since it entered final judgment the same day.

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DEICHER v. CITY OF EVANSVILLE, WISCONSIN (September 19, 2008)

Mary Mezera divorced Jimmy Reiners after years of alleged physical and psychological abuse. She remarried and moved from Evansville, Wisconsin into a new community, keeping her location secret from Reiners. In February 2006, Reiners phoned the Evansville Police and asked for Mezera’s current address, claiming he needed to contact her in relation to past due mortgage payments. The police obtained her address from the state motor vehicle records and gave it to Reiners. He began to contact Mezera, putting her and her husband in fear of their safety. Mezera and her husband sent a Notice of Claim to the Police Department on April 22. They filed suit on June 30, alleging a violation of the Driver’s Privacy Protection Act (“DPPA”). During damages deliberations at trial, the jury asked for the date of the filing of the complaint, a date which was not in the record. The plaintiffs asked that instead they be given the Notice of Claim, which was a trial exhibit. The trial judge gave the jury the date of the complaint and refused to provide the Notice of Claim. The jury awarded $25,000 in compensatory and punitive damages. The district court granted plaintiffs’ request for attorney fees under DPPA but reduced the amount from almost $200,000 to $25,000 on the ground that the fee award should not exceed the damage award. Then he reduced their request for fees in preparing the fee petition by an equal percentage on the ground that that was the degree to which their petition was successful. Plaintiffs appeal.

in their opinion, Judges Posner, Rovner, and Williams reversed and remanded for a new trial on damages. The Court considered whether the lower court erred in providing the date of the complaint to the jury or erred in not providing the Notice of Claim. First, the Court held that the date of the filing of the complaint is a public record, not extrinsic evidence, and therefore the court did not err. Next, the Court observed that it is generally within the trial court’s discretion to determine which exhibits are provided to the jury. Thus, a trial court’s decision is reviewed under a clear abuse of discretion standard. Nevertheless, the court found a clear abuse of discretion here. At trial, the plaintiffs argued that the police officer who gave the address to Reiners had fabricated his report in order to come within an exception to DPPA liability. The date on which the police first learned of the claim (i.e., the date of the Notice) was a key part of this argument. The plaintiffs argued to the trial court that the real target of the jury’s inquiry during their deliberations was the date of the Notice, not the date of the complaint (which had not even been discussed at trial). The Court emphasized that the error was not in failing to provide the Notice but the possible prejudice in providing the date of the complaint without providing the Notice, thus possibly creating confusion in the eyes of the jury.
Although the Court did not rule on the plaintiffs’ objections to the district court’s fee decisions because of the remand, it did note that the automatic reduction of trial fees to the amount of the damage award and the automatic reduction of the fee petition fee in the same ratio were “likely unreasonable.”
 

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