Record Does Not Support IDEA Violation

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

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

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

A Municipal Fine Is Not An FDCPA "Debt"

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

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

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

Good Moral Character Exclusion Requires The Conduct, Not The Conviction, During Statutory Period

UNITED STATES v. SUAREZ (December 16, 2011)

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

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

Whistleblower Adequately Alleged Subsection 1962(c) And 1962(d) Violations

DEGUELLE v. CAMILLI (December 15, 2011)

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

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

Secretary's Reasoned Decision Was Not "Arbitrary Or Capricious"

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

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

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

McCaskill-Bond Amendment Applies To Bankrupt Air Carrier

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

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

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

Record Established That RV Buyer Gave Manufacturer An Opportunity To Cure

ANDERSON v. GULF STREAM COACH (November 3, 2011)

Jeff and Liz Anderson had a 2008 Crescendo RV manufactured by Gulf Stream. They liked the vehicle but wanted to upgrade to a more powerful version for their tour of the Western United States. They contacted Mike Apple at Royal Gorge, a Gulf Stream dealer. He suggested a 2009 Tourmaster. The Anderson's, with Apple, examined the vehicle and consulted Gulf Stream's website. The website indicated that the vehicle came with a standard 425-hp engine. In fact, the vehicle at issue had only a 360-hp engine. Assuming the RV had the larger engine, the Anderson's purchased it "as is" and accepted delivery in September 2008. After only a few uses, they discovered numerous significant problems. They returned the RV to Royal Gorge. During the repair process, Apple discovered the presence of the smaller engine, although the original paperwork had correctly identified the engine’s horsepower. The Anderson's went back and forth with Apple and Gulf Stream. Finally, in April 2009, the Anderson's brought suit for breach of express warranty, breach of the implied warranty of merchantability, Magnuson-Moss Warranty Act violations, Indiana’s Deceptive Consumer Sales Act violations, and fraud. Magistrate Judge Nuechterlein (N.D. Ind.) granted summary judgment to the defendants on all counts. The Anderson's appeal.

In their opinion, Circuit Judges Bauer, Flaum, and Williams affirmed in part and reversed in part. The Court first addressed the Magnuson-Moss Warranty Act claim, which was based on the state law warranty claims. The statute provides a federal cause of action for failure to comply with a warranty. The statute requires, however, notice and a reasonable opportunity to cure. Although the district court concluded that the Anderson's did not give a reasonable opportunity to cure, the Court disagreed, when the record was viewed in the light most favorable to the Anderson's. Thus, summary judgment on the state law expressed warranty claim and related MMWA claim was improper. The Court reached the same conclusion with respect to the Anderson's state law implied warranty claim and its related MMWA claim. Again, the district court relied on its conclusion that the Anderson's failed to provide an opportunity to cure, with which the Court disagreed. The Court turned to the Indiana Deceptive Consumer Sales Act claim. That claim was based on the fact that the Tourmaster was designated a 2009 model but was manufactured to fulfill an order for 2008 model. The FTC is responsible for enforcing model year designation requirements. Under those requirements, although an RV manufacturer may use an older chassis on a newer model, or even the same chassis on different model years, it cannot do as it did here – use a 2007 chassis on a vehicle that is completed during the 2008 model year and call it a 2009. The district court erred in concluding that it could. But the Court also concluded that there were issues of material fact with respect to this claim because the Anderson's allegedly received documents with the RV that accurately identified the 360-hp engine. Summary judgment is therefore not appropriate for either party. Finally, the Court concluded that there was no evidence in the record of intent to deceive and affirmed summary judgment on the fraud claim.

Claim For More Informative Label Is Barred By Federal law

TUREK v. GENERAL MILLS (October 17, 2011)

Carolyn Turek brought suit against General Mills and Kellogg, alleging that the defendants' marketing of chewy bars violated the Illinois Consumer Fraud and Deceptive Business Practices Act. Specifically, she alleged that the defendants label the product as containing dietary fiber without disclosing that the principal fiber used in the product is processed and does not provide the normal benefits associated with fiber consumption. Judge Gettleman (N.D. Ill.) dismissed the suit for want of jurisdiction on the grounds that the action was preempted by federal law. Turek appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams affirmed (but on different grounds). First of all, the Court noted that the case was not one of complete preemption, where federal law pervades a field such that no state law claim could exist. The statute at issue here, the Nutrition Labeling and Education Act of 1990, provides specifically that it preempts no state law unless it is expressly preempted by the Federal Food, Drug, and Cosmetic Act. Therefore, the Court stated, the district court had jurisdiction to hear the case on the merits. The FFDCA does prohibit states from imposing labeling requirements that are not identical to the federal requirements. Federal law does impose a labeling requirements on dietary fiber. The principal requirement is that a manufacturer state the amount of fiber in each serving. The chewy bars at issue meet all the federal labeling requirements. The labeling that plaintiff suggests is missing is not identical to the federal labeling requirements and thus barred by federal law. Plaintiff's claim should have been dismissed for failure to state a claim, rather than for want of jurisdiction.

Arbitration Award Can Be Set Aside Only For A Federal Arbitration Act Enumerated Reason

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

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

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

Driver's Privacy Protection Act Does Not Prohibit Bulk Sale Of Private Information For Later Authorized Use

GRACZYK v. WEST PUBLISHING COMPANY (September 28, 2011)

Congress passed the Driver's Privacy Protection Act in 1993 to limit the dissemination of sensitive information acquired by state departments of motor vehicles. In general, the Act prohibits the disclosure of personal information obtained in connection with a motor vehicle record, although it contains several exceptions. A class of Illinois licensed drivers brought suit against West Publishing Company, alleging that West acquires sensitive personal information from motor vehicle departments for the purpose of reselling it, all in violation of the Act. Judge Gettleman (N.D. Ill.) dismissed the complaint, concluding both of that the plaintiff class lacked standing and that the complaint failed to state a claim. The class appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Williams affirmed. The Court first addressed and rejected the district court's conclusion with respect to standing. The Act creates a private right of action for the improper disclosure of personal information. The plaintiffs have alleged that West's acquisition and use of the information violates the Act. If plaintiffs prevail, West could no longer obtain and sell that information. The plaintiffs have alleged injury in fact that would be redressed by a ruling in their favor. They therefore have standing. With respect to the merits, however, the Court agreed with the district court that the complaint failed to state a claim. Here, the class does not dispute that the ultimate recipients of the sensitive information (i.e., West's customers) have a permissible use under the Act. Furthermore, the class concedes that West can lawfully obtain sensitive information from motor vehicle departments, if that information is first requested by a West customer. The class' contention is that West cannot obtain the sensitive information in bulk, without a specific request, and later sell it for an authorized purpose. Although "authorized recipient," is not defined in the Act, the Court concluded that the class' interpretation was not consistent with Congressional intent. There is no meaningful distinction between obtaining information to respond to a specific request or storing information in bulk in order to respond more efficiently to later requests. The Court also noted that the Fifth Circuit agrees and that the Department of Justice has issued an unpublished letter approving the practice. The complaint does not state a cause of action and was properly dismissed.

Complaint Fails To Adequately Allege FTAIA Exception

MINN-CHEM, INC. v. AGRIUM INC. (September 23, 2011)

The plaintiff and other direct and indirect United States potash purchasers brought a class action against potash producers. The defendants' mining operations are located in Canada, Russia, and Belarus. The defendants responded that: a) the court lacked jurisdiction under the Foreign Trade Antitrust Improvements Act, or, alternatively, b) that the complaint failed to state a claim. Judge Castillo (N.D. Ill.) denied defendants' motion but certified the order for immediate review.

In their opinion, Seventh Circuit Judges Manion, Evans (who, as a result of his death, took no part in the decision), and Sykes vacated and remanded with instructions to dismiss the complaint. The Court addressed only one of the defendants' arguments – that the FTAIA requires dismissal of the complaint. Under the FTAIA, the Sherman Act does not apply to foreign trade or commerce unless the alleged anticompetitive conduct involves U.S. imports or has a "direct, substantial, and reasonably foreseeable effect" on U.S. commerce. The Court noted the tension between its earlier United Phosphorus decision, which held that the FTAIA's requirements were jurisdictional, and the Supreme Court’s decisions in Arbaugh and Morrison, which held that similar requirements in other statutes were not jurisdictional. The Court concluded that it need not address that tension, since dismissal was required in either case. The Court cautioned that the two FTAIA exceptions -- involved U.S. import commerce or had a direct effect on U.S. commerce -- must be treated separately and distinctly. The district court erred when it concluded that the complaint was sufficient because it alleged both that the defendants were potash importers and that they conspired to fix potash prices outside the U.S. The relevant inquiry under the import exception is whether the defendants' alleged illegal behavior was directed at the import market. The complaint contains no such allegations. It contains only allegations of anticompetitive conduct directed at non-U.S. markets. With respect to the direct effect exception, the effect must be an immediate consequence of defendants’ behavior. The Court concluded that the complaint said very little about the relationship between defendants' conduct and the U.S. potash market. The allegations it does contain are too indirect to support a direct effects exception.

Dismissal For Want Of Prosecution Is Not A PLRA "Strike"

PAUL v. MARBERRY (September 6, 2011)

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

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

District Court Properly Balanced Discovery Needs With Need For Accelerated Hearing

NORINDER v. FUENTES (September 6, 2011)

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

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

Tribal Corporation's Indenture Is A "Management Contract" Under The Indian Gaming Regulatory Act

WELLS FARGO BANK v. LAKE OF THE TORCHES ECONOMIC DEVELOPMENT CORPORATION (September 6, 2011)

Lake of the Torches Economic Development Corporation is chartered under tribal law. It operates the Lake of the Torches Resort Casino in northern Wisconsin. Several years ago, the company issued $50 million in revenue bonds in order to finance a riverboat casino in Mississippi. The accompanying indenture named Wells Fargo Bank as trustee. Under the indenture, Wells Fargo was given certain oversight powers with respect to casino revenues. Lake of the Torches also agreed to a limited waiver of its sovereign immunity with respect to lawsuits related to the bonds. The Mississippi casino investment was not a success. Lake of the Torches stopped depositing casino revenue into the Wells Fargo trust account and ultimately repudiated its $46 million bond obligation. Wells Fargo brought suit for breach of the Indenture and sought the appointment of a temporary receiver. Without any notice or hearing, Judge Randa (W.D. Wis.) dismissed the case for lack of jurisdiction. He concluded that the Indenture was a management contract under the Indian Gaming Regulatory Act, that the Indenture was not approved by the National Indian Gaming Commission as required by the Act, that the Indenture was therefore void, that the waiver of sovereign immunity was also void, and that the district court lacked jurisdiction. The court also denied Wells Fargo's request for leave to file an amended complaint asserting claims under the bond documents only. Wells Fargo appeals.

In their opinion, Seventh Circuit Judges Flaum, Ripple, and Evans (who, as a result of his death, did not take part in the decision) affirmed in part and reversed and remanded in part. The Court first addressed its jurisdiction, given that the defendant was a tribal Corporation. It noted that most courts agree that Indian tribes themselves are not citizens of any state for diversity purposes. However, the 9th and 10th Circuits have held that a tribal Corporation is the equivalent of a Corporation created under state law. The Court agreed and concluded that there was no reason to treat a tribal Corporation that engages in commerce differently than its non-tribal counterparts. Turning to the merits, the Court noted that Congress passed the Act in 1988 to provide a comprehensive framework for tribal gaming. The Act requires that any management contract entered into by a tribe for the operation and management of the casino must be reviewed and approved by the Commission Chairman. Failure to do so renders the contracts void. The principal issue on appeal is whether the Indenture is a management contract under the Act. Unfortunately, the term is not defined in the statute. The Court turned to the language and overriding purpose of the Act. Although it conceded that some of the Act's provisions seemed directed at the more traditional management contracts, in which a third-party actually operates the facility, it also found some provisions that seemed to apply more broadly. Ultimately, the Court could find no strong indication that Congress intended to limit the breadth of the term. The Court also looks to statements from the Commission and from its Acting General Counsel, even recognizing that they were not entitled to any particular deference. In the end, it was clear to the Court that Congress was not simply concerned with traditional management contracts but was concerned about any agreement that allowed for some influence in management decisions. Examining the Indenture Agreement in that light, the Court concluded that it was a management agreement under the Act. In doing so, the Court focused on certain indenture provisions that gave Wells Fargo control over the trust account, limited capital expenditures, and allowed, in certain circumstances, the bond holder to retain experts to make recommendations concerning casino operations. The Court also concluded that the regulatory framework did not allow for reformation of the Indenture and removal of any offending provisions. The district court erred, however, in denying Wells Fargo leave to amend. It is premature, on the face of the complaint, to conclude that the bond documents are collateral documents under the Act or that the sovereign immunity waivers contained in those documents are also void as part of the same transaction. The Court remanded to allow Wells Fargo an opportunity to file an amended complaint.

Cause Of Employee's Injury Is Irrelevant Under FMLA

BRENEISEN v. MOTOROLA (September 2, 2011)

Motorola employed James Breneisen in several different positions between 1994 2003. In early 2001, he took 12 weeks FMLA leave for gastroesophageal reflux treatment. Upon his return, although he retained his prior salary, he was assigned to a different position, which he considered a demotion. Just a few weeks later, he took another four months leave for esophageal surgery. He took his third and final leave in early 2002, from which he never returned. Motorola terminated his employment in 2003. Breneisen brought an FMLA claim against Motorola, alleging that his supervisor's conduct exacerbated his medical condition. The district court granted summary judgment against him. On appeal, the Seventh Circuit reversed and remanded. The only claims that remained on remand were Breneisen's discrimination and retaliation claims during the five months between his second and third leaves. At Motorola's request, Magistrate Judge Mahoney (N.D. Ill.) barred evidence of any causal relationship between Motorola's conduct and Breneisen's medical condition. The court then dismissed the case, finding that Breneisen’s requested relief was unavailable during the time when he was unable to perform his job, given that he had exhausted his FMLA leave during his first leave. Breneisen appeals.
     Anna Lineweaver also worked at Motorola. She also claimed that Motorola violated her FMLA rights when it denied her tuition reimbursement and retaliated against her for taking a leave. The Seventh Circuit also reversed and remanded the district court’s summary judgment ruling against her. On remand, Motorola tendered her twice the amount she claimed she was owed. Magistrate Judge Mahoney denied her request to convert Motorola’s tender to a judgment and dismissed the case as moot. Lineweaver appeals.

In their opinion, Seventh Circuit Judges Bauer, Kanne, and Evans (who, as a result of his death, took no part in the decision) affirmed. The Court first addressed Breneisen's claim and concurred with the lower court that the cause of one's injury is irrelevant under the FMLA. The Court added that, even if such was not the case, it would be irrelevant to Breneisen because his second leave was not pursuant to the FMLA. He was no longer protected by the statute when the alleged retaliation occurred. The Court turned to Lineweaver's claim. It noted that the only interest she has left is her claim for attorney's fees. It is well settled that a claim for attorney's fees, in and out itself, is not enough to constitute a case or controversy. The district court properly dismissed the case as moot. 

Medical Malpractice Claim Did Not Accrue Until Plaintiff Knew (Or Should Have Known) Of A Doctor-Related Cause

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

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

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

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

Dismissal Sanction Was Inappropriate When Effective, Less Serious Alternatives Were Available

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

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

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

Dismissal For Lack Of Jurisdiction Is Not A PLRA "Strike"

HAURY v. LEMMON (August 25, 2011)

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

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

Law Of The Case Doctrine Applies To Subject Matter Jurisdiction

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

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

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

Feres Doctrine Bars FTCA Claim Arising Out Of On-Base Suicide

PURCELL v. UNITED STATES OF AMERICA (August 23, 2011)

In January of 2008, Christopher Purcell was serving as a hospital corpsmen in the United States Navy stationed at the Brunswick Naval Air Station. Purcell had experienced social and emotional problems since his enlistment a few years earlier. Base personnel received a notification on January 27 that he had a gun and was suicidal. Government law enforcement officers responded and arrived at his on-base residents. He was alive. Although the officers found a gun case and ammunition, they did not locate a weapon. They handcuff Purcell but removed the handcuffs to allow him to use the bathroom. While in the bathroom, Purcell shot and killed himself with a gun that he had hidden in his waistband. Michael Purcell, Christopher's father, brought a wrongful death action against the United States under the Federal Tort Claims Act. Judge Lefkow (N.D. Ill.) dismissed the complaint pursuant to Feres, which shields the government from FTCA liability when the injuries complained of "arise out of or are in the course of activity incident to service." Purcell appeals.

In their opinion, Seventh Circuit Judges Bauer, Flaum, and Evans (who, as a result of his death, did not participate in the decision) affirmed. The Court began by noting the controversy and dissension surrounding the Feres doctrine but also noting that a Supreme Court majority reaffirmed the doctrine the last time it addressed it. At that time, the Supreme Court identified three rationales for the doctrine: a) to need to protect the government-Armed Forces relationship, b) the availability of a statutory compensation scheme, and c) the need to avoid interference with internal military affairs. The fundamental question under Feres is whether the injury at issue "arose out of activity incident to military service." Applying that test, the Court concluded that the district court correctly dismissed the complaint. Citing the doctrine's "enormous breadth," the Court relied on the facts that: a) Purcell was on active duty, b) Purcell lived in on-base housing, c) Purcell was suffering from emotional problems that began after his enlistment, and d) Purcell was avoiding the military law enforcement personnel that were sent to assist him.

Drainage District's Proportionately Heavier Tax On Railroads Was A Prohibited Discriminatory Tax

KANSAS CITY SOUTHERN RAILWAY CO. v. KOELLER (July 27, 2011)

The Sny Island Levee Drainage District has operated a levee and drainage system in central Illinois for over 100 years. The system is designed to protect a 114,000-acre area from Mississippi River flooding. Over 99% of the affected area is agricultural. The rest is residential, commercial, utility, and railroads. The Kansas City Southern Railway Co. and the Norfolk Southern Railway Co. (the "Railroads") own a combined 355 acres. For decades, the District has funded its operations by assessing a per-acre fee for each landowner in the area. For the last 20 years, the fee has been $8.50 an acre. The District found itself in a precarious financial position after it experienced severe flooding in 2008 and a substantial increase in diesel fuel prices. The Commissioners decided they needed a $10 per acre fee increase. They also decided to stop charging the fee on a uniform basis. They decided pipelines, railroads, and utilities were under assessed. They hired an expert in flood protection projects and asked him to calculate the benefits for the non-agricultural properties. The expert did the analysis but he was short on hard data and used questionable methodologies. When the analysis resulted in a number that the Commissioners could not support, they "refined" the numbers. As a result, the assessments for the railroads increased by 4800-8300%. The Commissioners also exempted land within the municipalities, under the supposition that the cost of collecting the small assessments outweigh the benefits. Then they assumed that all the commercial and industrial properties other than the railroads, pipelines, and utilities were within municipal limits. The Commissioners filed a petition for authorization with the County Court, published notices in the local newspapers, and sent notices to landowners. The notice referred to a $10.00 increase per acre but did not mention the benefit-based assessments for railroads, pipelines, and utilities or the exemption for land within municipalities. The Railroads did not object and the court certified the assessment. When they first received their new assessments, the Railroads filed suit under the Railroad Revitalization and Regulatory Reform Act, which prohibits discriminatory taxes against railroads. The District moved to dismiss on Rooker-Feldmangrounds. Judge Scott (C.D. Ill.) denied the Rooker-Feldman motion and ruled that the assessment was a tax under the Act. She denied the preliminary injunction, however, because the Railroads did not submit evidence that their lands’ assessed value exceeded its true market value by 5%. After a bench trial, the court found in favor of the District, again because of the Railroads' failure to submit evidence of their lands' true market value. The Railroads appeal.

In their opinion, Seventh Circuit Judges Bauer, Wood, and Williams reversed and remanded. The Court first rejected the Rooker-Feldman argument. The doctrine only applies to state court "losers." The Railroads were not even present for, much less parties in, the state court proceedings. There is no judgment against them. Furthermore, they are not seeking a review of the state court order. They are asserting an independent federal cause of action under the Act. Two questions were presented to the Court on the merits: whether the assessment was "another tax" under the Act and, if so, whether the tax was an impermissible discrimination. With respect to the first, the Court looked to the statute, the Supreme Court, its own jurisprudence, and its sister circuits' interpretations to conclude that the assessment was a tax. It raises general revenues for use by the entire District. It is not tied to any specific project or landowner. The Court turned to whether it was discriminatory. It first had to decide who to compare the Railroads to: all property owners, other commercial and industrial property owners, or the Railroad's competitors. It recognized that the three other subsections of the section of the Act at issue dealt with different types of taxes but included reference to commercial and industrial taxpayers. Given that the fourth subsection addressed the same kinds of discrimination, the Court concluded the appropriate comparator group is the other commercial and industrial taxpayers. Since the Act does not define discrimination, the Court adopted the ordinary meaning of the word -- a failure to treat persons equally without reasonable distinction. Here, the record establishes that the Commissioners adopted a proportionately heavier tax on the Railroads. The Court cited the "inadvertent" exemption for the properties outside the municipal boundaries, the exemption for the commercial and industrial properties within the municipality, and the questionable methodology. In addressing the appropriate remedy, the Court noted that the Act provides an exemption to the Tax Injunction Act. Notwithstanding the exemption, however, the Court noted that a federal court should act with restraint in such matters. Therefore, an injunction should not enjoin the entire scheme but should eliminate the discriminatory effects by enjoining the 2009 recalculation and allowing the District another shot at a non-discriminatory assessment.

No False Claims Act Liability When Statements Were Either Not False Or Not Material

YANNACOPOLOUS v. GENERAL DYNAMICS (July 26, 2011)

In the early 1980s, General Dynamics had a consulting agreement with Dimitri Yannacopolous under which Yannacopolous helped a subsidiary market telephone equipment in Greece. The agreement was terminated in 1983. In 1987, General Dynamics agreed to sell Greece several fighter planes plus parts and services. The sale was conducted under the auspices of the United States' Foreign Military Financing program. Under that program, Greece purchased the planes from General Dynamics directly but with funds loaned to it by the United States government. When Yannacopolous learned of the sale, he demanded a commission. General Dynamics refused. Yannacopolous brought suit against General Dynamics and lost. Relying on information he obtained, at least in part, from discovery in that suit, he filed a False Claims Act complaint against General Dynamics. Judge Gettleman (N.D. Ill.) granted summary judgment to General Dynamics. Yannacopolous appeals.

In their opinion, Seven Circuit Judges Bauer, Sykes, and Hamilton affirmed. Under the False Claims Act, it is illegal to present to the United States a false or fraudulent claim for payment, to make a false statement material to a false claim, or to use a false record to conceal an obligation to pay. Individuals (known as "relators") are authorized to initiate civil suits under the Act on behalf of the United States and receive, in return, a percentage of any funds recovered. The elements of the claim are that: a) the defendants made a statement for the purpose of receiving money from the government, b) the statement was false, and c) the defendant knew the statement was false. Yannacopolous alleges several separate claims under the Act. He claimed that General Dynamics (or, in the case of d) below, Lockheed): a) lied about funds used to capitalize a Greek business development company, b) failed to disclose the deletion of the Economic Price Adjustment clause from the draft contract, c) made misrepresentations regarding spare parts purchases, and d) made misrepresentations in contract amendments. The Court considered each claim in turn. First, the Court rejected Yannacopolous's argument that General Dynamics breached the contract by charging to it its costs of establishing the Greek business development company. It did not violate the representation that "material" was of U.S. origin since the investment in the development company was not "material." Furthermore, there was nothing in the contract itself that prohibited these costs from being charged to the contract. In fact, it appeared that General Dynamics’ conduct was consistent with the contract. Yannacopolous also claimed that General Dynamics falsely certified compliance with respect to the business development company costs. Again, the Court rejected that claim, in part, because it related only to "material." It did concede that one certification neglected to explicitly refer to the contract. The Court concluded that no reasonable juror could find the omission material, since General Dynamics had recently submitted the contract for review. Second, the Court rejected Yannacopolous's argument with respect to the Economic Price Adjustment Clause deletion. The draft contract contained such a clause. It reduced the contract price because of the economic benefit General Dynamics was going to receive from advance payments. Greece agreed to delete the clause, however, in exchange for General Dynamics' agreement to deliver the planes on an accelerated schedule. Before General Dynamics submitted any invoices, it sent a letter to the government explaining that the clause was no longer applicable. Even if General Dynamics failed to comply with paragraph 10 of the Certification Agreement that required notification of any changes in the clause, the deletion of the clause was immaterial. Third, the Court rejected Yannacopolous's argument with respect to spare parts. Under the contract, $70 million was allocated for spare parts, including hardware and services. The services element was not subject to change but the hardware portion of the charge was understood to be an estimate, subject to recalculation at the end of the contract period. General Dynamics continued to submit invoices including spare parts charges after Greece decided to purchase some spare parts outside the contract. The contract required an "appropriate" adjustment to the spare parts price before the March 1987 payment. Yannacopolous maintained that General Dynamics’ failure to reduce the parts price after knowing of Greece's decision was a false statement. In order to prevail, Yannacopolous had to present evidence that General Dynamics knew that the initial estimate was incorrect and that Greece would not order $70 million in spare parts over the life of the contract. Yannacopolous did not produce evidence that General Dynamics could have known that Greece's decision to buy some spare parts elsewhere would lead to a conclusion that it would not purchase $70 million of spare parts from General Dynamics over the following decade. Next, the Court rejected Yannacopolous's interpretation of the contract with respect to the depot program and concluded there were no false invoices. Finally, Lockheed assumed all of General Dynamics' rights and obligations under the program in 1993 and entered into two contract modifications with Greece. Yannacopolous claims both are "reverse" false claims. The Court concluded that Yannacopolous did not present evidence that either modification was objectively false. 

CTA's Railroad Property Condemnation Is Preempted By Federal Law, Even If CTA Currenty Has Identical Lease Rights

UNION PACIFIC RAILROAD CO. v. CHICAGO TRANSIT AUTHORITY (July 25, 2011)

The Union Pacific Railroad Company owns a 2.8 mile right-of-way running between Chicago and Oak Park, Illinois. UP itself operates three railroad tracks on the right-of-way. Since the early 1960s, UP has leased approximately 40% of the right-of-way to the Chicago Transit Authority. The CTA runs two railroad tracks parallel to UP’s. A written lease has defined the rights and obligations of UP and CTA over the years. For example, CTA must maintain its tracks in good condition, is limited to providing passenger transportation, and must reimburse UP 40% of any joint maintenance expenses. UP, on the other hand, maintains the right-of-way and all joint facilities and has agreed to use non-standard inspection and maintenance procedures because of the proximity of the lines to each other. The CTA pays monthly rent to UP, recalculated every 10 years under a formula contained in the lease. The monthly rent increased from approximately $25,000 to approximately $90,000 when it was recalculated for the 2002-2012 lease period. The parties discussed a one-time permanent easement fee instead of a monthly rent but did not reach an agreement. In 2006, CTA issued an ultimatum. It offered approximately $7.5 million for a perpetual easement or, if that was not acceptable, it would condemn the property. UP declined and, making good on its threat, the CTA instituted condemnation proceedings. UP brought suit for an injunction, maintaining that the Interstate Commerce Commission Termination Act preempted the condemnation. Judge Dow (N.D. Ill.) granted summary judgment to UP, concluding that the condemnation was both categorically preempted and preempted "as applied." The CTA appeals.

In their opinion, Seventh Circuit Judges Flaum, Manion, and Evans affirmed. The Court addressed the underlying legal principles. Under the Supremacy Clause, federal law preempts state law that interferes with it. Congress enacted the Interstate Commerce Commission Termination Act in 1995, which gave the Surface Transportation Board exclusive jurisdiction over railroad transportation regulation. "Transportation" includes a railroad's property, facilities, and equipment that are related to the movement of passengers or property. The Court found it clear that UP and the right-of-way were covered by the statute. In addressing whether the condemnation was preempted by the statute, the Court discussed the Board's two approaches to preemption. Some state action is preempted on its face, notwithstanding its rationale. That is referred to as categorical preemption. Other state action may be preempted depending on the degree of interference with railroad operations, which is referred to as "as applied" preemption. The district court adopted the Board's approaches and found the condemnation preempted under both approaches. The Court, on the other hand, concluded that the categorical preemption approach should be used only when looking at a rule of general applicability. A condemnation is not such a rule. By definition, it relates to a specific parcel of property and each instance has a different factual setting. The Court found support for its conclusion in the Board's cases. Applying the "as applied" analysis, the Court agreed with the district court. The CTA argued that is already using the right-of-way and its condemnation is defined as being coextensive with the lease. Therefore, it argues, the condemnation can not be considered an interference at all. In fact, it is nothing more than maintaining the status quo. The Court found the CTA's logic flawed. First, the CTA’s use of the property significantly interferes with UP transportation. The fact that UP agreed to that interference, in return for significant monthly rent, does not change the nature of interference. Preemption only comes into play when the interference is forced by regulation, not when it is agreed to by contract. Second, the Court disagreed with the CTA’s assertion that the condemnation is coextensive with the lease. For example, the lease has a termination clause. If the CTA stops using the tracks for passenger transportation or otherwise fails to live up to its obligations under the lease, the lease terminates. There would be no such provision after a condemnation.

Disclosure Of Owner's Personal Information On A Parking Ticket Is Permissable

SENNE v. VILLAGE OF PALATINE (July 11, 2011)

The Court granted a petition for rehearing en banc on September 13, 2011 and vacated the following opinion.

Jason Senne left his car parked overnight in Palatine, Illinois. Unfortunately, he was parked illegally. When he returned to his car, he found that it had been ticketed. The ticket itself included his name, his address, his date of birth, his sex, his height, and his weight. It had been placed on the car approximately five hours before he discovered it. The ticket itself could also be used as an envelope if the recipient decided to pay the fine by mail. Instead of paying the $20 fine, Senne filed a class action under the Driver's Privacy Protection Act. The Act prohibits the disclosure of personal information contained in a motor vehicle record. Judge Kennelly (N.D. Ill.) granted Palatine's motion to dismiss, concluding that the placement of the ticket on the windshield did not constitute a disclosure under the Act and that, even if it did, the disclosure was permissible under the Act. Senne appeals.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Ripple (concurring in part and dissenting in part) affirmed. The Court first turned to the language of the statute to ascertain Congress's intent. The Act provides that a covered person "shall not knowingly disclose or otherwise make available" the personal information. The Court rejected the Village's strained definition of "disclose" to apply only to those situations in which information is actually shared with someone. Relying both on the standard dictionary definition of "disclose" and the rest of the statutory phrase ("or otherwise make available"), the Court concluded that the placement of a parking ticket on a car constitutes "disclosure." The Act, however, lists 14 permissible uses, one of which is that the information may be disclosed in connection with any court or agency proceeding, including the service of process. Placing a parking ticket on a car constitutes service of process. Palatine's conduct was therefore permissible. The Court specifically rejected Senne's argument that the permissible use exceptions included only disclosures that were necessary for the purpose of the exception. Finally, the Court rejected Senne's argument that including the personal information on a piece of paper that could be used as an envelope constituted a second violation. The disclosure is still in connection with the court proceeding so it was still a permissible use. Even if it was an impermissible use, it would be the ticket recipient, not the Village of Palatine, that would be liable.

Judge Ripple wrote separately. He concurred with the majority's treatment of "disclosure." In his view, however, Palatine violated the Act because it disclosed personal information that it did not need to disclose to accomplish the service of process. The exceptions must be interpreted in accordance with Congressional intent. Therefore, Judge Ripple believed that the Act must be read to limit the permissible uses to the disclosure of information that is reasonably necessary to effectuate the government's purpose. Here, none of the information Senne complains of was necessary to achieve Palatine's purpose -- to notify the owner of the car of a parking violation.

Corporations Can Be Liable Under Alien Tort Statute

FLOMO v. FIRESTONE NATURAL RUBBER CO. LLC (July 11, 2011)

A subsidiary of the Firestone Natural Rubber Company operates a large rubber plantation in Liberia. The company employs many local laborers. The jobs pay well but are sometimes hazardous. Because of the relatively high pay and strict daily production quotas, some of the employees hire their own helpers. Some of the employees even bring their own children. A number of those children brought suit against Firestone under the Alien Tort Statute. Judge Magnus-Stinson (S.D. Ind.) granted summary judgment to Firestone. The plaintiffs appeal.

In their opinion, Judges Bauer, Posner, and Manion affirmed. The Alien Tort Statute allows an alien to bring a claim in the United States federal courts for a tort "committed in violation of the law of nations." The two issues presented by the appeal are whether a corporate entity, rather than a natural person, can be liable under the statute and, if so, whether the plaintiffs have presented enough evidence of such a violation to get past summary judgment. The law of nations, or customary international law, derives from the customs and usages of civilized countries. When the statute was first enacted in 1789, it applied principally to piracy, ambassador mistreatment, and violation of safe conduct. But the statute was drafted and enacted to include additional international laws, as they developed. With respect to corporate liability, the Supreme Court has not spoken and most courts of appeals have assumed or held that they can be liable. The Second Circuit concluded that a corporation could not be liable under the Alien Tort Statute. It reasoned that corporate liability could not be customary international law since corporations have never been prosecuted under international law. The Court criticized the Second Circuit precedent because of its incorrect factual premise. It noted that German corporations that aided the Nazi effort were dissolved after World War II. The Court then considered whether there was a compelling reason for the few corporate prosecutions -- and found none. The Court ultimately distinguished between the substance of international law and its enforcement. The substantive obligations are imposed by international law but each nation must decide how to enforce those obligations. In the United States, it is common for corporations to be liable for the torts of its employees. That same principle applies to the United States enforcement of substantive violations of customary international law. The Court declined to define the outer reaches of corporate liability since it was not necessary for its decision. Having found potential corporate liability, the Court turned to the record to determine if there were genuine issues of material fact. Three international conventions helped the court to define customary international law in the case of child labor. The United Nations Convention on the Rights of the Child provides that a child need not perform work that is hazardous, that interferes with his education, or is harmful to his health or development. The Court found that statement much too vague to create an international legal norm. TheInternational Labour Organization Minimum Age Convention states that children under 14 should only do "light work." The Court also found that to be too vague. Finally, the International Labour Organization Worst Forms of Child Labour Convention states that the worst forms of child labor is work that is likely to harm the health, safety or morals of those children. Although a corresponding recommendation provided more detail to that statement, the Court still could not discern an agreed norm of conduct. The Court concluded that the plaintiffs failed to present concrete evidence of how different nations would impose liability for child labor. The Court also concluded that the plaintiffs failed to provide sufficient evidence that the specific conditions at the Firestone plantation were actionable. The record does not show how many children work on the plantations, how much work they do, how hard the work is, and how their lives compare to local children who do not live on the plantation. The Court surmised that the child of a plantation worker, even one who works himself, may be better off than the child of a non-plantation worker.

State's Transfer Of Money From Casinos To Horse Tracks Is A "Tax"

EMPRESS CASINO JOLIET CORP. v. BALMORAL RACING CLUB (July 8, 2011)

Several years ago, the State of Illinois passed laws which required the state's four largest casinos to turn over 3% of their annual revenue to the State. The laws required the State to hold the funds in a segregated account and turn them over to certain Illinois racetracks within days. The casinos brought suit against the racetracks and the Governor, alleging that the racetracks "bought" the legislation in violation of RICO. They sought a constructive trust. Judge Kennelly (N.D. Ill.) ruled that the Tax Injunction Act did not allow such a remedy. On appeal, the Seventh Circuit reversed (opinion here and intheiropinion here). Some of the defendants sought rehearing en banc. The Court granted the petition and vacated that portion of its opinion that addressed the Tax Injunction Act.

In their opinion, Chief Judge Easterbrook and Judges Bauer (dissenting), Posner, Kanne (dissenting), Wood, Sykes (dissenting), Tinder, and Hamilton affirmed. In relevant part, the TIA does not allow a federal district court to enjoin or restrain the collection of a state tax. Although the case before it does not technically seek to enjoin the collection of a tax, the Court stated that the imposition of the constructive trust would amount to the same thing. The Court was critical of some TIA jurisprudence that used "open-ended, multifactor tests" to decide if the Act applied. Instead, the Court noted a strong preference for a simple and clear rule that would distinguish between a tax and other collections of money by a state. The Court concluded that the only material distinction is that a tax generates revenue while a fine punishes and a fee pays for goods or services. The money at issue in this case must, therefore, be a tax because it is not meant to punish or pay for goods or services. The only aim of the statute only aim is to raise revenue. The fact that most taxes go to the state’s general funds and that these taxes passed through a segregated fund directly to the racetracks is irrelevant. The Court noted that lawmakers on the federal and state level frequently use their powers to redistribute wealth from one group to another.

Judge Sykes (joined by Judges Bauer and Kanne) dissented. The dissent noted that a) the suit was a civil RICO case, not a challenge to a State tax, b) not one cent of State money is at issue, c) the State is not even a party to the litigation, d) the State is simply acting as a trustee for the transfer of funds, e) the case poses no threat to Illinois' revenue. The TIA does not, therefore, prevent the case from proceeding.

Vague Affidavit Did Not Carry Employer's Burden

JOHNSON v. HIX WRECKER SERVICE (July 1, 2011)

Bobby Johnson worked twelve-hour shifts as a tow truck driver for Hix Wrecker Service in 2006. He later sued the company, claiming that he had not been paid for overtime in violation of the Fair Labor Standards Act. Hix Wrecker claimed that Johnson was not subject to the FLSA but, rather, was exempt under its motor carrier exemption. Judge Lawrence (S.D. Ind.) granted summary judgment to Hix. Johnson appeals.

In their opinion, Chief Judge Easterbrook, Circuit Judge Williams, and District Judge Pallmeyer reversed and remanded. The Court recognized that not all employees of a motor carrier are governed by the FLSA. If the employee engages only in intrastate commerce, the FLSA governs. If the employee is wholly engaged in interstate commerce, the employee is exempt from the FLSA and comes under the jurisdiction of the Secretary of Transportation. Many motor carriers and their employees engage in both in intrastate and interstate commerce -- but they cannot be subject to both statutory schemes. Under a Department of Transportation interpretation, an employee is exempt from the FLSA if the employer presents "concrete evidence" that the employee is "engaged in interstate commerce within a reasonable period of time" before the time period in question. A driver who has not engaged in interstate commerce can still be exempt if the carrier has been engaged in interstate commerce and the employee could be expected to engage in the commerce. The interpretation also adopted four months as a "reasonable period of time." In support of its motion for summary judgment, Hix did not assert that Johnson actually engaged in interstate commerce. Instead, it submitted an affidavit that asserted that Hix "routinely" provides interstate services and that Johnson could have been assigned an interstate wrecker run at any time during his employment. The Court concluded that Hicks did not carry its burden of proving the exemption. The affidavit's use of the term "routinely" was too vague to meet the four-months reasonable time threshold. In the Court's view, "routinely" could mean, for example, once every six months or once a year.

Federal Statutes Gave No Property Rights To County

SAMUEL C. JOHNSON 1988 TRUST v. BAYFIELD COUNTY (June 17, 2011)

In the middle of the 19th century, the federal government wanted to encourage railroading. It created a checkerboard-like pattern of identical square sections on federal land. It assigned the squares alternating odd and even numbers. It gave the odd-numbered sections to the railroads in fee simple. It sold the even-numbered sections. The railroads would be able to sell part of the land they owned but did not need in order to finance their operations and the acquisition of rights in the land they did not own. The Samuel C. Johnson 1988 Trust is the current owner of property in northern Wisconsin that was part of this checkerboard. It owns property in an even-numbered section that its predecessor purchased from the federal government in fee simple in the late-19th century. It also owns property in an odd-numbered section that it purchased from a railroad. Bayfield County thinks it has rights in the now-abandoned railroad right-of-way on the Trust's properties and wants to build a snowmobile trail. The Trust brought suit to quiet title. Judge Crabb (W.D. Wis.) granted summary judgment to the County. The Trust appeals.

In their opinion, Judges Posner, Wood, and Tinder reversed. The Court first addressed its jurisdiction, since the suit seems to arise under state law and there is not complete diversity. Both the plaintiff and defendant rely on federal law for their claimed property rights. Whether viewed from the plaintiff’s perspective or, since it is a type of declaratory judgment case, from the presumed suit by the defendant, the case arises under federal law. On the merits, the Court addressed each section separately. With respect to the even-numbered section, the railroad obtained its right-of-way by condemnation. The Court rejected the County's assertion that it was obtained by statute. Once the railroad abandoned the right-of-way, the Trust became the holder of the full rights to the property. With respect to the odd-numbered section, there was no right-of-way because the railroad owned the property in fee simple. When it conveyed the property to the Trust, it conveyed all rights in the property. This County has no right to build a trail.

Willful Gun Control Act Violation Requires Only Purposeful Disregard Or Plain Indifference

SHAWANO GUN & LOAN v. HUGHES (June 7, 2011)

Timothy Backes operates the Shawano Gun & Loan sporting goods store in northern Wisconsin. He has had a federal firearms license since 1998. Under the Gun Control Act of 1968, Backes has to make sure that the ATF Form 4473 is completed with each firearm transaction. The ATF conducted compliance inspections in 1999, 2004, in 2007. The store was cited for nine violations in 1999, six violations in 2004, and seven violations in 2007. Many of the 2007 violations were repeats of earlier violations. The ATF served Shawano with a Notice of Revocation in late 2007. After an evidentiary hearing, a hearing officer concluded that the ATF established five willful violations. The ATF revoked Shawano's license. Shawano filed suit seeking judicial review. Judge Griesbach (E.D. Wis.) granted summary judgment to the government. Although he did not hold an evidentiary hearing, he did accept affidavits from Backes, Backes's counsel, and several other individuals. Shawano appeals.

In their opinion, Circuit Judges Tinder and Hamilton and District Judge Murphy affirmed. The Court first found no error in the district court's decision not to hold an evidentiary hearing. The district court exercised its discretion to accept evidence beyond the administrative record but, because there were no credibility issues, proceeded by affidavit. He did not abuse his discretion in doing so. On the merits, the Court rejected Shawano's contention that the government had to prove an intentional act. A willful violation under the Gun Control Act does not require an intentional act or evil motive -- it only requires purposeful disregard or indifference. Finally, the Court rejected the argument that the small number of violations compared to the store’s total transactions could not support a finding of willful. First, the statute does not contain a de minimis exception. Second, Backes was given many opportunities to correct his business processes and failed to do so.

U.S. Has No Authority To Issue Writ Of Garnishment Against Assets Of Company In Which Judgment Debtor Invested

UNITED STATES OF AMERICA v. ROGAN (May 12, 2011)

After defrauding the Medicare and Medicaid programs and hiding his wealth, Peter Rogan fled the country. He left the United States with a $60 million judgment. The United States discovered a Georgia limited liability company in which Rogan had invested. It served the company, 410 Montgomery LLC, with a writ of garnishment. After liquidating and paying off secured creditors, Montgomery was left with approximately $4 million. The government wanted it all but Jerry and Diane Whitlow filed a claim for $175,000. Their claim is based on their one third interest in a company to which Montgomery owes $475,000. Judge Darrah (N.D. Ill.) concluded that federal law, which gives priority to writs of garnishment issued by the United States over later-issued writs, controls and denied the Whitlow's claims. The Whitlows appeal.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Sykes vacated and remanded. The Court rejected the government's position that § 3205 displaces state law when the United States issues a writ of garnishment. The section on which the government relies only establishes the priority of competing writs. If the Whitlows had a competing claim directly against Rogan's assets, for example, it would control. But that is not the case. The Court also noted that the statute only gives the government the power to issue a writ against Rogan's interest in Montgomery, not in Montgomery's actual assets. The statute also provides that state law dictates the treatment of co-owned property (like Montgomery?). The Court recognized that its conclusion left many unanswered state-law questions for the district court to deal with on remand.

Fact Issues Regarding Employer's View Of Disability Preclude Summary Judgment

MILLER v. ILLINOIS DEPARTMENT OF TRANSPORTATION (May 10, 2011)

The Illinois Department of Transportation hired Darrell Miller in 2002 as part of a bridge crew. The crew, which consisted of five employees, was responsible for a wide variety of tasks. Many of those tasks were performed at ground level, while some were performed at various heights above the ground or water. Miller had some fear of heights and there were a few jobs that he could not perform. For years, the crew worked as a team. IDOT allowed his other crew members to fill in for him on those few occasions when he could not do his assigned task. Other team members also had tasks they could not perform for various reasons and IDOT accommodated those limitations as well. In 2006, Miller was asked to do a task that he considered unsafe. He performed the task but filed a grievance. Just a few weeks later, his crew leader assigned him to a task that resulted in a panic attack. IDOT put him on sick leave. Its examiner diagnosed him with acrophobia and declared him unfit to work on the bridge crew. IDOT began treating Miller as unable to work at any height in excess of 20 feet. Miller filed a grievance and also requested an accommodation identical to that which he had enjoyed in the past. His request was denied and he was ordered to return to work. When he encountered an IDOT personnel manager, he commented to a colleague that he "would like to knock her teeth out." Miller was told to go home and was later discharged for threatening violence against another employee. After an arbitration, he returned to work but without back pay or benefits. Miller filed suit under the Americans with Disabilities Act. He alleged discrimination arising from the refusal to provide accommodation and his termination. He also alleged retaliation. Judge Stiehl (S.D. Ill.) granted summary judgment to IDOT on both counts. Miller appeals.

In their opinion, Judges Posner, Rovner, and Hamilton reversed and remanded. The ADA protects only those individuals with a disability. But disability is defined in the statute as not only having a significant impairment but also being regarded as having such an impairment. A substantial limitation on being able to work qualifies as such an impairment. Since Miller did not claim to be actually impaired, his challenge was to present evidence that IDOT regarded him as substantially limited in his ability to perform a wide range of jobs. The Court noted that the regulations require consideration of several factors, including the nature and severity of the impairment, its duration, and its longer-term impact. The Court concluded that Miller presented sufficient evidence to allow a jury to find that IDOT regarded him as limited in his ability to do a substantial number of jobs. Summary judgment on the discrimination claim was improper. On the reasonable accommodation claim, the Court also found issues of fact that should have gone to the jury. Although working at heights in extreme positions is an essential element of the crew's work, the Court concluded that a reasonable jury could find that it was not an essential element of any individual crew member's work. The Court cited the history of team accommodations in the record. A reasonable juror could also find that Miller's request for an accommodation was reasonable. Finally, on the retaliation claim, the Court found that Miller presented sufficient evidence going to IDOT’s honesty to get to a jury. The Court cited an example of a similar violent outburst that was not disciplined, the agency's general hostility towards accommodations, and the ambiguity of the threat itself.

Party Seeking Attachment Of Foreign Sovereign Assets In U.S. Must Identify Specific Assets And Plausible Statutory Exception Before Court Should Allow Even Limited Discovery

RUBIN v. THE ISLAMIC REPUBLIC OF IRAN (March 29, 2011)

A number of American citizens suffered physical and emotional injuries in a September 4, 1997 suicide bombing in Jerusalem. Several of them brought suit and obtained a $71.5 million default judgment against Iran, based on the country's training and support of Hamas. In an effort to collect on its judgment, the plaintiffs registered the judgment in Illinois and served Citations to Discover Assets on the Oriental Institute and the Field Museum. The Oriental Institute holds two collections of Persian antiquities on loan from Iran for academic study. The Field Museum holds a collection of Persian pottery and metalworks although the Field Museum claims ownership of these works and Iran does not dispute the claim, the plaintiffs assert that Iran does own the collection because they were stolen and smuggled out of the country decades ago. The museums asserted that the collections were immune from attachment under § 1609 of the Foreign Sovereign Immunities Act. Judge Manning (N.D. Ill.) ruled that only a foreign state can raise § 1609 immunity. Soon thereafter, Iran appeared and asserted its immunity. But Iran's appearance changed the litigation’s direction. The plaintiffs served Iran with discovery requests and deposition notices that sought information not only regarding the Chicago collections but also with respect to Iran's assets in the United States generally. Iran sought a protective order and moved for summary judgment on the immunity issue. The court granted the plaintiffs additional discovery before having to respond to the motion and ordered Iran to respond to general asset discovery. Iran appeals the general asset discovery order as well as the earlier order requiring it to appear and assert its immunity.

In their opinion, Circuit Judges Bauer and Sykes and District Judge Simon reversed and remanded. The Court first addressed its appellate jurisdiction, given the general rule that a order authorizing discovery is not immediately appealable. Orders denying immunity are appealable under the collateral order doctrine, and the district courts decision ordering discovery, in effect, did just that. The earlier order appealed presented a slightly different question. That order denying immunity was immediately appealable under the collateral order doctrine. But the museums did not appeal and that time has run. The effect of the museums' failure to immediately appeal is that the order is appealable the next time an appealable order is entered. Although the Court noted that, in most cases, the next appealable order is the final judgment, it is not necessarily so. Here, there is a second appealable order so the first order is properly under review. The Court turned to the merits and the interpretation of the Foreign Sovereign Immunity Act. The Act generally codified the common law of sovereign immunity. It contains two principal sections: § 1604 makes a foreign state immune from the jurisdiction of United States courts and § 1609 makes a foreign state's property in the country immune from attachment. Each section has exceptions. For example, jurisdiction in this case was premised on a § 1605 exception for cases involving money damage claims resulting from torture or killing. Similarly, the plaintiffs rely on a § 1610 exception to attachment immunity when the foreign state's property in the country is used for commercial activity. But the district court never ruled on the exception’s merits. Instead, it ruled that Iran had to appear and affirmatively plead the exception and then, once it did appear, the court focused on discovery issues rather than the merits. The Court concluded that the district court failed to appreciate the tension between ordering discovery and the sovereign’s right to immunity. Immunity generally protects its beneficiary not only from liability but also from the burdens of litigation, like discovery. Iran is presumed immune from attachment – the plaintiffs must identify particular property and demonstrate that it fits one of the exceptions. The Court noted that the Second, Fifth, and Ninth Circuits agree that discovery should be allowed to proceed narrowly in these circumstances. Therefore, a plaintiff must identify specific property and set forth a plausible argument for an exception to immunity before a court orders discovery. With respect to the district court’s order that Iran had to appear, the Court also reversed. The Act provides that a sovereign’s assets in the country “shall be” immune from execution. Relying on that statutory language, the rest of the Act, the common law immunity history, and decisions from the Fifth and Ninth Circuits , the Court held that a foreign state need not appear to assert that its property is immune from attachment. The argument can be raised by the holders of the property or by the court itself.

Joint Venturer's Hard Bargaining Did Not Amount To Extortion

RENNELL v. ROWE (MARCH 25, 2011)

Richard Rennell and Randall Rowe created a joint venture in 2004 to own and manage manufactured-housing communities in several states. Rowe provided the financing and Rennell managed the properties. After a few years, notwithstanding excellent results from Rennell, Rowe hired someone to manage the properties and no longer needed Rennell. In 2007, Rowe told Rennell that he was terminating the joint venture. He offered Rennell approximately $300,000 for his share in the venture, notwithstanding that they had recently valued it at $3.5 million. Rowe also demanded an answer within 24 hours and threatened to make the termination public if Rennell did not accept the offer. Rennell did sign the termination agreement and promised not to sue Rowe. Notwithstanding that promise, Rennell filed suit alleging two different theories of RICO liability. Judge Pallmeyer (N.D. Ill.) dismissed the complaint. Rennell appeals.

In their opinion, Judges Posner, Kanne, and Wood affirmed. The Court began its analysis with RICO's definition of "racketeering activity" as "any act or threat involving . . . extortion." Thus, the critical question for the Court was whether the complaint’s allegations described an act of extortion. The Court’s own jurisprudence establishes that extortion exists when one uses violence or threat of violence to obtain property, even if one has a claim to the property. In addition, if one has no claim to property, the use of fear, even economic fear, may amount to extortion. Economic pressure is not extortion if one has a claim to the property issue. Turning first to the question whether Rowe had a claim on Rennell's joint venture interest, the Court examined the contractual relationship between the parties. The joint venture agreement itself could be terminated only for cause -- but one of the "causes" was the termination of any one of the property management agreements. The property management agreements could be terminated without cause. Therefore, Rowe was contractually entitled to terminate a property management agreement and then terminate, for cause, the joint venture agreement. Rennell argued that even if the termination was proper, Rowe's conduct was improper because of the small payment offered, the narrow time frame for acceptance, and the threat to make the termination public. The Court rejected this argument. Rowe was a hard bargainer. But Rennell was free to reject the offer and sue for what he thought he was owed. And the threat to make the termination public, even if it would negatively impact Rennell’s business, is not extortion. The Court ended by noting that Rennell could still pursue his state law claims in state court.

District Court Erred When It Required Plaintiffs To Prove The Absence Of A Superseding Cause

BCS SERVICES v. HEARTWOOD 88 (March 24, 2011)

Cook County, Illinois obtains tax liens on properties whose owners fail to pay their taxes on time. The County, in turn, sells the liens at auction. The bidders at the auction must agree to pay the amount of the lien and can bid a percentage penalty in addition. In theory, the lien is sold to the bidder who bids the lowest penalty. In actuality, almost 85% of the bids include no penalty. The auctioneer is supposed to award the bid to the first bidder to raise her hand but, given the speed with which the bids are made, it is unlikely that she is able to do that. One way the County attempted to ensure that the bids are fair is to allow only one bidder to represent a buyer or group of buyers. Therefore, a buyer cannot increase his chances of getting a lien by flooding the room with bidders. One of the bidders at these auctions brought suit against three groups of bidders who allegedly sent multiple agents to each auction in violation of the County's rules. The plaintiffs alleged RICO violations. The district court dismissed for lack of standing because the plaintiffs had not relied on the fraud. The Seventh Circuit reversed and the Supreme Court affirmed the reversal. On remand, Chief Judge Holderman (N.D. Ill.) granted summary judgment to the defendants on the ground the plaintiffs failed to prove proximate cause. Again, the plaintiffs appeal.

In their opinion, Judges Bauer, Posner, and Manion reversed and remanded. The Court discussed, at some length, the doctrine and background of the concept of proximate cause. It concluded that discussion by noting that the concept helps the principal tort victims get compensation, simplifies litigation, appreciates the fact that people do not make decisions based on the unforeseeable consequences of their conduct, and eliminates liability in some situations where the act is only a minor clause of an injury. On the record before it, the Court then concluded that the concept had no application. The only injury was to the plaintiffs. The district court was wrong when it required the plaintiffs to prove the absence of a superseding cause rather than requiring the defendants to present evidence of the existence of such causes. Here, the defendants failed to do so. The Court also rejected defendants' alternate argument that plaintiffs could not prove damages. Relying on statistical evidence, the Court concluded that plaintiffs met their burden, at least at this stage of the case. Finally, the Court also disagreed with the district court's conclusion that plaintiffs’ inability to show an actual expectancy of a particular lien purchase doomed their intentional interference claim. On the contrary, the plaintiffs met their burden. The expectancy identified was their expectation that they would be allowed to purchase liens at a County auction conducted without fraud.

Party With Credibility Issues And Subject To A Defense Not Applicable To Others Is Not A Proper Class Representative

CE DESIGN LIMITED v. KING ARCHITECTURAL METALS (March 18, 2011)

CE Design is a small engineering firm near Chicago. It has a website where it posts its fax number and says "Contact Us." It also publishes its fax number in an online building industry directory. The directory requires a that its users allow all other directory users to communicate with it by fax or e-mail. King Architectural Metals is one of those other directory users. In 2009, King conducted a fax marketing campaign. It faxed over 50,000 advertisements, two of which went to CE Design. Design brought suit on behalf of a class pursuant to the Telephone Consumer Protection Act. Judge Bucklo (N.D. Ill.) certified a class of persons who received the fax without having given express permission. King petitions for permission to appeal from that certification.

In their opinion, Judges Posner, Manion, and Hamilton granted the petition, vacated the class certification, and remanded. The Act forbids unsolicited fax advertisements. An unsolicited advertisement is one sent without "express invitation or permission." Whether the "Contacts Us" language and the directory publication constitutes an unsolicited advertisement is a question that neither the statute, the case law, nor agency interpretations answer. Design's president testified at his deposition that he did not know that directory publication granted permission to others to communicate with Design by fax. Rule 23 requires that the class representative’s claim be typical of all claims and that the class representative will "fairly and adequately" represent the class. The Court stated that a plaintiff is not an appropriate class representative if it is subject to a defense that other class members are not subject to -- its claim is no longer typical. Likewise, a class representative should not have credibility problems. Here, the district court expressed doubts about the president's truthfulness but dismissed it as a immaterial. Questions about his credibility and the presence of a potential defense based on the expressed consent given through the directory detract from Design's ability to adequately represent the class. The Court remanded for reconsideration of the identity of the class representative. The Court emphasized that it was not questioning the viability of the class action itself.

Reservist's Differential Pay Was Not A "Benefit Of Employment"

GROSS v. PPG INDUSTRIES (March 7, 2011)

PPG Industries has employed Eric Gross as an industrial technician since 1997. Gross is a member of the United States Marine Corps Reserve. He was called up for active duty in 2004. Before he left, he met with the PPG's human resources advisor, who explained his benefits. PPG’s policy guaranteed his return to his job and also paid him the differential between his PPG salary and his military salary. PPG computed the salary differential by subtracting his military monthly base pay from his PPG monthly base pay. When Gross returned from deployment, he submitted a complaint regarding the differential calculation. Since Gross was required to work more days per month in the military, he wanted PPG to: a) calculate a daily rate of pay for his military job, and b) subtract from his PPG salary his military salary for only those days he would have worked at PPG. PPG refused to apply that calculation retroactively, but did adopt it prospectively. Gross brought suit against PPG pursuant to the Uniformed Services Employment and Reemployment Act. Judge Stadtmueller (E.D. Wis.) granted PPG summary judgment. Gross appeals.

In their opinion, Judges Cudahy, Rovner, and Evans affirmed. The Court first addressed Gross' argument that the pay calculation violated the Act. Under § 4311, someone in Gross' position cannot be denied a "benefit of employment" because of his service obligations. The Court noted that it has very recently held (opinion and intheiropinion) that § 4311 does not require an employer to provide benefits to military personnel that it does not offer to other employees. Section 4311's purpose is to protect military personnel from discrimination, not to provide preferential treatment. The Court added that Gross would not be entitled to relief even if it accepted his argument that differential pay was a "benefit of employment." PPG did not deny Gross his differential pay. It just did not pay it under Gross' calculations -- nor was it required to. Next, the Court considered and rejected Gross’ retaliation claim. The Act only prohibits an adverse employment action against a person who has sought protection under the Act. Here, there was no adverse employment action. PPG paid Gross under a calculation that it was within its rights to use and denied him no pay. Even if the calculation constituted an adverse employment action, it could not amount to retaliation. All of the calculations and payments under the PPG formula took place before Gross made any complaints. They could not possibly been in retaliation for something that had not yet occurred.

Governor Enjoys Absolute Immunity From Civil Damage Suits

On April 13, 2011, the Court granted petitions for rehearing en banc with respect to the Tax Injunction Act issue. On July 8, the en banc Court, in a 5-3 vote, disagreed with the panel and affirmed the district court’s conclusion that the Tax Injunction Act applied.

EMPRESS CASINO JOLIET CORP. v. BLAGOJEVICH (March 2, 2011)

In 2006, Illinois Governor Rod Blagojevich signed into law the 2006 Horse Racing Act. The Act required the state's four highest grossing casinos to pay 3% of their adjusted gross revenue into a fund. The fund was kept separate from other state funds and was not available to any state agency or program. Instead, the money in the fund was paid to five horseracing tracks in Illinois. The purpose of the Act, according to legislative findings, was to assist the horseracing industry, which had suffered financially after casinos were allowed to operate in Illinois. The casinos challenged the Act in state court. The Illinois Supreme Court upheld the Act against state and federal constitutional challenges. A few months later, the United States brought political corruption charges against Blagojevich. In an affidavit attached to the criminal complaint, an FBI agent described conversations in which Blagojevich discussed receiving money in return for his support of the Horse Racing Act. The casinos returned to state court and sought post-judgment relief based on this information. The state court denied relief, concluding that the legislature's motive in passing the Act was irrelevant to its constitutionality. The casinos then brought suit in federal court against Blagojevich, the racetracks, and the owner of two of the racetracks. The complaint alleged a RICO conspiracy and sought a constructive trust to prevent the racetracks from receiving any money. Blagojevich moved to dismiss on legislative immunity grounds. One or more of the defendants also moved to dismiss the RICO claim on res judicata and for failure to state a claim and moved to dismiss the constructive trust claim on several grounds: that it was barred by the Tax Injunction Act, that it was premature, that there was no unjust enrichment, res judicata, and Colorado River abstention. Judge Kennelly (N.D. Ill.) rejected the legislative immunity claim and denied the motions to dismiss the RICO claim, but dismissed the constructive trust claim on the grounds that the Tax Injunction Act eliminated jurisdiction. Blagojevich appealed the legislative immunity ruling and the casinos appealed the constructive trust ruling.

In their opinion, Judges Bauer, Posner (dissenting), and Sykes reversed both with respect to the legislative immunity claim and the constructive trust claim. With respect to legislative immunity, the Court cited Tenney for the proposition that state officials are absolutely immune from damages suits arising from their legislative activity. Although the Supreme Court has never applying that principle to a governor, the Court saw no reason that it would not apply and noted that other circuits have so extended the principle. The principle applies even when the legislative activity is illegal or improper. The Court rejected the casinos’ argument that Blagojevich’s immunity should be decided in reference to state law, relying on the Supreme Court's decision in Lake Country Estates. The Court also expressed its view that the Illinois Supreme Court's decision in Jorgensen (where it rejected Blagojevich’s claim of legislative immunity) would not control even if state law did apply. Jorgensen was not a damages case, but was a constitutional attack on Blagojevich's judicial pay raise veto. Therefore, Blagojevich is immune and the RICO claim should be dismissed. The Court moved on to consider the Tax Injunction Act argument. That Act prohibits a federal court from interfering with the collection of state taxes where there is a sufficient remedy in state court. The only real issue presented under the Act is whether the 3% casino surcharge is a tax. The Court concluded that it was not because it had none of the normal indicia of a tax. The Act never referred to as a tax, the only targets of the Act are four casinos, the only beneficiaries of the Act are five racetracks, the money is segregated from all state funds, the money is not available to any state program or agency, the Act has a regulatory purpose (protecting the racetracks from competition), and the Act was enacted under the state's police power, not its taxing power. Therefore, the Tax Injunction Act does not apply and the constructive trust claim can be considered. Given the Court's treatment of the Tax Injunction Act issue, it proceeded to consider the defendants’ alternate grounds to dismiss the constructive trust claim. First, it rejected the argument that the Illinois Supreme Court's decision on the casinos’ constitutional challenge had any preclusive effect on the case. Both the causes of action and the parties were different. Next, it rejected the argument that the state court’s denial of post-judgment relief had preclusive effect on the case. In fact, the state court denied relief because the allegations of corruption were unrelated to the constitutional challenge before the court. The Court rejected the collateral estoppel and Colorado River abstention arguments for much the same reason -- a constitutionality challenge is fundamentally different from a RICO claim. Finally, the Court rejected defendants' argument that their actions were not the proximate cause of the casinos' injuries.

Judge Posner dissented both with respect to the legislative immunity issue and the Tax injunction Act issue. With respect to immunity, he agreed that the general rule is that a state official is entitled to legislative immunity. But if Illinois grants its officials less than complete immunity, federal common law should do the same. There is no federal interest served in affording a state official more protection in federal court that he would enjoy in a state court. Because it was not clear in Jorgensen whether the Illinois Supreme Court would grant legislative immunity in a civil damages case, judge Posner would certify the question to that court. With respect to the Tax Injunction Act issue, Judge Posner agreed that the only question was whether the surcharge was a tax -- and he concluded that it was. He agreed that not every state receipt of money was a tax, but he distinguished between taxes and fees by asking whether the charge was based on a reasonable estimate of the cost of some service provided. The charge imposed on the casinos here is not a fee for a service but a subsidy for the racetracks. Therefore, it is a tax and the Tax Injunction Act applies.

Reports Of Widespread Industry Fraud Do Not Preclude FCA Claim Against An Industry Member

BALTAZAR v. WARDEN (February 18, 2011)

Advanced Healthcare Associates hired chiropractor Kelly Baltazar in 2007. Within a very short period of time, Baltazar concluded that the AHA staff regularly submitted inflated bills to the federal government. Baltazar resigned and filed suit under the False Claims Act. Judge Norgle (N.D. Ill.) dismissed the suit on the ground that the allegations were based on already public disclosures. The court based its conclusion on several federal government reports that established "prevalent fraud" by chiropractors. Baltazar appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Wood reversed and remanded. The Court conceded that there had been numerous allegations of fraud with respect to chiropractors. In fact, the report relied upon by the district court concluded that over half of the claims reviewed for that particular study were inflated. But Baltazar's allegations were not based on the study or the report. They were based on her personal knowledge of the practices of AHA. In concluding that Baltazar could proceed with her suit, the Court noted that no appellate court has held that a report of widespread fraud in a particular industry forecloses a False Claims Act suit against every member of the industry.

Wildflower Garden Is Neither Authored Nor Fixed Under Copyright Act

KELLEY v. CHICAGO PARK DISTRICT (February 15, 2011)

In 1984, the Chicago Park District gave Chapman Kelley a permit to install a large wildflower display in Chicago’s Grant Park. Kelley was a nationally known painter at the time, known principally for landscapes and floral scenes. He had already, on two occasions, transferred his creativity from the canvas to the ground. The Chicago project covered 1.5 acres and consisted of 48-60 different species of wildflowers. The flowers were placed such that they bloomed at different times, changed colors throughout the season, and increased in brightness toward the center of the project. The project was a huge success. Kelley (and volunteers) continued to maintain the project until 2004, when the Park District reduced the project to less than half of its original size and made other changes. Kelley brought suit against the Park District under the Visual Artists Rights Act of 1990 ("VARA"). He also brought a breach of contract action based on a Park Commissioner's oral promise that the project could continue. After a bench trial, Judge Coar (N.D. Ill.) entered judgment for the Park District on the VARA claim. He concluded that the project qualified as a work of visual art but was insufficiently original under copyright law to merit the protection of VARA. Alternately, he concluded that VARA did not apply because the project was site-specific art. The court entered judgment for Kelley on the contract claim, but awarded damages of only one dollar. Kelley appeals. The Park District cross-appeals.

In their opinion, Judges Manion, Sykes, and Tinder affirmed in part and reversed and remanded in part. The court explained some of the background and history of VARA, dating back to 19th-century France, the European notion of artists' moral rights, the 1886 Berne Convention, and the 1988 Senate ratification of the treaty. After the treaty's ratification, Congress amended the copyright act with VARA. It provided artists with a limited set of moral rights, including the right to prevent modification of one's work. In order to be protected by VARA, however, a work must be “a painting, drawing, print or sculpture.” In addition, the statute explicitly excludes any work not subject to copyright protection. The statute also excludes from protection the modification of a work which is a “public presentation.” The Court discussed at some length but did not decide the public presentation issue (because it decided the case on other grounds) and the painting or sculpture issue (because the Park District did not challenge the district court's conclusion). Instead, it resolved the statutory issue on copyright grounds. In order to qualify for copyright protection, a work must have a human author and must possess fixation (that is, be reduced to tangible form). The Court found both of these elements missing in the wildflower project. It concluded that a wildflower garden is not authored – it is cultivated. It is also not stable enough to be fixed. In fact, its very essence is one of change and growth. Since the work is not subject to copyright protection, is not entitled to protection under VARA. They Court also briefly addressed the contract claim. Relying on the Chicago Park District Act and the Illinois Park District Code, the Court concluded that a single Park District Commissioner had no authority to bind the District. Therefore, the oral "contract" relied upon by Kelly is invalid.

Employee Who Fails To Notify Employer Of Expected Return Date Is Not Entitled To FMLA Protection

RIGHI v. SMC CORPORATION (February 14, 2011)

SMC Corporation employed Robert Righi as a sales representative from 2004 until 2006. Righi worked out of his home in Henry, Illinois, where he lived with a roommate and his ailing mother. His principal methods of communicating with his sales manager was his cell phone and e-mail. Righi was attending a training session in Indianapolis on July 11, 2006 when he received a call that his mother was in a coma. He immediately returned home. Although he advised a colleague of his plans and asked the colleague to inform others, he did not inform his sales manager of the situation until the next morning. In fact, he turned his cell phone off and missed several calls from his sales manager on July 11. He sent his sales manager an e-mail on the morning of July 12. He stated that he needed "the next couple days off" to care for his mother, that he had vacation time, or that "I could apply for the family care act, which I do not want to do at this time." Over the next several days, Righi's sales manager attempted to reach him by phone multiple times. Righi did not answer or return the calls. His roommate finally answered one of the calls and took a message that the sales manager needed to speak with Righi as soon as possible. Righi finally called his sales manager -- after nine days of silence. SMC terminated Righi's employment the next day for violating its leave policy. The leave policy required prior approval for a leave and provided that two days absence without notification was grounds for termination. Righi brought suit against SMC pursuant to the Family and Medical Leave Act, alleging that SMC interfered with his statutory rights. Judge McDade (C.D. Ill.) granted summary judgment to SMC on two grounds: that Righi was not entitled to FMLA protection because he stated in his e-mail that he did not want it, and that he was not entitled to FMLA protection because he did not comply with the Act's regulations requiring notification of a return date. Righi appeals.

In their opinion, Judges Flaum, Wood, and Sykes affirmed. In order to be entitled to protection under the FMLA, employee must notify his or her employer of a desire to take leave and of a projected return date. With respect to the former, the Court disagreed with the district court's conclusion. Very little is required of an employee to trigger the FMLA protection. Putting an employer on notice of a basis for leave is sufficient. An employee can waive FMLA protection, but only by a clear expression of intent to do so. The Court concluded that Righi met the notice requirements with his July 12 e-mail. It mentioned the “family care act” and left open, at least, the possibility that he could choose to use it. The Court also concluded that his expressed desire not to use it was not a clear expression of a waiver. The Court agreed with the district court, however, with respect to its alternate grounds for summary judgment. Righi was obligated under the FMLA and its regulations to keep SMC informed of his anticipated return date. The regulations require him to provide that information within two working days. Here, Righi never provided that notice and, in fact, ignored all of SMC's attempts to obtain additional information. He is not entitled to the FMLA's protection.

FDCPA Allows Debt Collector To Communicate With Consumer's Lawyer

TINSLEY v. INTEGRITY FINANCIAL PARTNERS (February 11, 2011)

Integrity Financial Partners (IFP) is a debt collector and was trying to collect a debt from Christopher Tinsley. Tinsley retained a lawyer and had the lawyer send a letter to IFP advising them that Tinsley refused to pay the debt and had no assets. The lawyer further requested that all collection efforts cease and advised IFP to "direct all future communications to our office." When IFP called the lawyer and requested payment, Kinsley filed suit under the Fair Debt Collection Practices Act. Chief Judge Holderman (N.D. Ill.) granted summary judgment to the defendants. Tinsley appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Hamilton affirmed. The Court began with § 1692(c)(c) of the Act. That section prohibits any communication by a debt collector with the “consumer" when it is advised that the consumer refuses to pay the debt or asks for no further communication on the debt. Tinsley argues that the prohibition on communicating with the consumer applies equally to communicating with the consumers attorney, his agent. Tinsley relies on the section of the Act that defines "communication" as conveying information directly or indirectly. Surely, he argues, communication with one’s lawyer is an indirect communication to the client. The Court noted that Tinsley's argument had been accepted by at least one district court and had apparently not been considered at the appellate court level. Although expressing some attraction to the argument at a superficial level, the Court reconsidered after it put the section in context. For example, subsections (a) and (b) of the Act are written in such a way that they would make no sense if a consumer and his lawyer were interchangeable. Furthermore, the Court noted that it is unlikely that Congress intended to prohibit all communication with a consumer’s lawyer. Finally, the Act’s definition of consumer does not include lawyer. Taking the Act as a whole, together with its purposes, the Court concluded that IFP's communication with Tinsley's lawyer was not prohibited by the Act.

Loan Modification Offer Is An ECOA "Extension Of Credit"

ESTATE OF DOROTHY DAVIS v. WELLS FARGO BANK (January 12, 2011)

In 1999, Dorothy Davis lived in a single-family home in Kankakee, Illinois. She was a widow, she was elderly, and she was African-American. A man approached her and offered to make some repairs to her home – and get a new home loan to pay for them. She ended up borrowing almost $90,000 from Mortgage Express and paying over $30,000 in settlement charges. She sued Mortgage Express. A jury found (apparently in Mortgage Express’ absence) in her favor. The court entered judgment for over $135,000 – a judgment she has since been unable to collect. Before Mortgage Express went out of business, it transferred her loan. The loan is now held by Wells Fargo Bank and serviced by Litton Loan Servicing. Wells Fargo and Litton have continued their attempts to collect on the loan. They proposed a modification, demanded payment, and pursued a foreclosure action. Davis, and now her estate, sued Wells Fargo and Litton. She asserted fraud and unconscionability claims under state law, race discrimination claims under both the Fair Housing Act and the Equal Credit Opportunity Act, and a claim for violating the Home Ownership and Equity Protection Act. Judge Aspen (N.D. Ill.) dismissed all of the claims except the FHA claim, on which he granted summary judgment to the defendants. The Estate appeals.

In their opinion, Seventh Circuit Judges Evans, Sykes, and Hamilton affirmed. The Estate’s biggest problem lies in the statutes of limitations, which vary from one to five years. There are only three acts that occurred within even the longest of those periods that could support the Estate's claims: Litton's modification proposal, Wells Fargo's failure to tell Davis that it had acquired the mortgage, and Litton's payoff demand. The Court addressed each of the claims in that light. With respect to unconscionability, the allegations must relate to the formation of the contract. None of the allegations within the limitations periods do so -- the claim was properly dismissed. With respect to fraud, a plaintiff must show reliance. The only possible allegation within the limitations period relating to fraud is Wells Fargo's failure to advise Davis of the loan transfer. Assuming that could amount to a fraudulent omission, Davis never alleged that she relied on it -- the claim was properly dismissed. With respect to the Home Ownership and Equity Protection Act, that statute requires lenders to make certain disclosures in connection with a loan. None of the allegations within the limitations period trigger the disclosure requirements -- the claim was properly dismissed. With respect to the Equal Credit Opportunity Act, the Court stated that that Act prohibits race discrimination against an "applicant," which is further defined as a person who receives an "extension of credit." The Court concluded that Litton's offer to modify the loan, which occurred within the limitations period, was an "extension of credit." Davis further alleged that the offer was racially discriminatory. The Court therefore concluded that the claim should have survived a motion to dismiss. The Court nevertheless affirmed the district court. It found that the defendants would have prevailed on summary judgment for the same reason they did on the FHA claim. Davis simply failed to put forth evidence of discrimination. Finally, the Court considered that FHA claim, the only claim that survived a motion to dismiss in the district court. Davis was given the opportunity, on summary judgment, to come forward with evidence that the defendants discriminated against her on the basis of race. Again, she was limited to conduct occurring within the limitations period. That "evidence" consisted of a) two unsigned and undated affidavits, which the court struck because they did not comply with the rules, b) the declarations of two former Wells Fargo employees, which the court struck because Davis never disclosed the declarants during discovery, and c) Davis' testimony that she believed she was the victim of race discrimination. Davis waived any complaint regarding the affidavits or declarations because she failed to raise any meaningful opposition to the district court’s reasoning on appeal. Her unsubstantiated personal beliefs are simply insufficient to support her claim.

Lender Cannot Take Advantage Of RESPA Safe Harbor Unless It Provides Notice Of The Account Correction

CATALAN v. GMAC MORTGAGE CORP. (January 10, 2011)

Saul Catalan and Mia Morris bought a home in Matteson, Illinois in mid-2003. RBC Mortgage Company financed the purchase. Their first payment of $1,598 was due on August 1. Unfortunately, RBC's system showed a payment due on July 1, thus triggering an almost 2 year nightmare. By the time they made their first on-time payment, the RBC system consider them late. By the time they made their second on-time payment, RBC consider them in default and increased their monthly payment amount. Within months, RBC was returning their monthly checks uncashed. RBC filed for foreclosure in February of 2004 but transferred the mortgage toGMAC Mortgage in September. But nobody told the plaintiffs -- so they sent their September payment to RBC. In September, GMAC sent the plaintiffs an inaccurate account statement that showed them behind almost $8,000. GMAC also demanded proof of insurance coverage and then returned the September check (which it had received from RBC). The plaintiffs wrote a letter in October to the Department of Housing and Urban Development detailing the problems with RBC and GMAC and asking several questions about the servicing of their account. HUD sent the letter on to GMAC. Plaintiffs also wrote to GMAC directly on October 7 and October 15. Those letters sought information about the transfer of the loan and other information about the account. GMAC responded to the October 7 letter with information about the account. Then GMAC sent a letter telling them they were in default to the tune of almost $10,000. GMAC also responded to the letter it received from HUD. In November, the plaintiff sent over $11,000 to GMAC. They described the problems they had with RBC's servicing of the loan. They also made some demands regarding GMAC's future handling of their account. GMAC began foreclosure proceedings in November and began notifying the credit bureaus of the delinquency. Plaintiffs wrote several times in December, demanding that GMAC credit their $11,000 payment to the account. Instead of crediting the account, GMAC returned the check. In December, GMAC dismissed the foreclosure proceedings, returned the plaintiffs' December payment, and advised the plaintiffs that they were preparing for new foreclosure proceedings. Finally, in January of 2005, with HUD's help, the plaintiffs sent a check for almost $16,000 and GMAC brought their account current and stopped reporting it as delinquent. The plaintiff brought suit under the Real Estate Settlement Procedures Act (RESPA). They also brought state law claims for negligence and breach of contract. Judge Lindberg (N.D. Ill.) granted summary judgment to defendants. Plaintiffs appeal.

In their opinion, Chief Judge Easterbrook, Circuit Judge Hamilton, and District Judge Springmann affirmed in part and reversed in part. RESPA is a consumer protection statute dealing with the servicing of real estate loans, among other things. It requires lenders to notify borrowers when a loan is transferred and to respond promptly to written requests for information. It does include a "safe harbor" for a lender that discovers an error and, within 60 days and before suit is filed or a written notice from the borrower is received, it corrects the error and notifies the borrower. The Court first considered the safe harbor provision since the district court relied on it to find for the defendants. The Court disagreed with the district court. The safe harbor provision clearly requires notification to the borrower of the error. The record shows no such notice and GMAC does not even contend that one exists. Without the safe harbor, the Court proceeded to consider whether GMAC violated RESPA's requirement that they respond to requests for information. That requirement is only triggered by a "qualified written request," which is defined as written correspondence that either requests information or states a belief that an account is in error. The plaintiffs identified five letters that they claim met this test. The Court first rejected the GMAC's argument that the letters did not qualify because they did not contain sufficient reasons for plaintiffs belief that the account was an error. Then the Court addressed each of the five letters in turn. First, it found the October 6 letter to HUD to be a "qualified written request." It contained much detail and it requested specific information. The fact that it was not sent directly to GMAC does not change the result. The statute allows for a request to come from an agent of the borrower. Next, the Court concluded that three letters were not "qualified written request." Letters that simply enclosed payments, stated expectations, or requested processing of a check -- but did not request information or state a belief that the account was in error – did not trigger the response requirement. Finally, the Court found the December 17 letter, which disputed GMAC's attempt to collect and which requested specific information, was a "qualified written request." The Court remanded to the district court to consider whether GMAC satisfied its RESPA obligations with respect to the two letters that triggered a duty. The Court also instructed the district court to consider, on remand, the claims that GMAC violated RESPA by failing to notify the plaintiffs of the loan transfer. The Court also reversed and remanded with respect to the breach of contract claim. That claim is that GMAC breached the agreement when they refused to accept the September and November payments. The district court held that plaintiffs' intentional nonpayment in October was a breach. The Court identified several issues of material fact that precluded summary judgment. For example, was GMAC's delay in applying the payments reasonable or unreasonable and was plaintiffs' failure to pay justified by the earlier conduct of RBC and GMAC. The Court affirmed the dismissal of the negligence claim. The Illinois economic loss doctrine precludes tort recovery for economic losses caused by a breach of contract. Finally, the Court rejected the GMAC argument that summary judgment was appropriate even on the RESPA and breach of contract claims because the plaintiffs lacked evidence of damages. The Court agreed that actual damages are essential for both the RESPA and breach of contract claim. Taking the evidence in the light most favorable to the plaintiffs, the Court found sufficient disputed issues of fact with respect to damages arising out of the credit application denials and the plaintiffs' emotional distress to preclude summary judgment.

No Sherman Act Violation When Evidence Equally Supports Inferences Of Lawful And Unlawful Canduct

OMNICARE v. UNITEDHEALTH GROUP (January 10, 2011)

Medicare's Part D subsidized prescription program was scheduled to go into effect on January 1, 2006. Participation proposals from health insurance companies for were due in August of 2005. Both UnitedHealth Group ("United"), a very large national health insurance company, and PacifiCare, a small California health insurance company, were independently preparing their proposals in early 2005. At the same time, however, they were engaged in merger discussions. By mid-2005, they were meeting regularly and exchanging information. A successful Part D proposal had to demonstrate access to a network of pharmacies adequate to serve the program's participants. In furtherance of that requirement, both United and PacifiCare were in discussions with Omnicare, the largest institutional pharmacy in the country. United’s efforts were successful. Although it had some concerns regarding Omnicare's contract terms, it entered into a reimbursement contract with a reimbursement rate comparable to that Omnicare offered others. PacifiCare's negotiations fared less well. Ultimately, PacifiCare submitted its Part D proposal without an Omnicare deal. The formal merger agreement was signed in early July and the companies continued their meetings and information exchange. In September, they collaborated on a strategic options memorandum addressing the integrated company's options with respect to PacifiCare's wholly-owned pharmacy benefits manager subsidiary. At some point, Omnicare became concerned that patients who were insured by PacifiCare but located in facilities exclusively managed by Omnicare would not have access to their prescriptions once the program began. An Omnicare employee even sent an e-mail to United, asking if PacifiCare would be included in the United contract when their deal closed. United replied that PacifiCare would follow its own Part D strategy even if the deal closed. Concerned that it would not be able to service PacifiCare insured, Omnicare reopened the contract negotiations. PacifiCare offered the same deal that it had offered earlier -- Omnicare accepted it without negotiations or counteroffers. In doing so, it agreed to a reimbursement rate significantly lower than that it had received from United. Shortly after Omnicare entered into that contract, United informed Omnicare of its concerns regarding the collateral contract terms and reopened their negotiations. By the time those negotiations stalled, the merger was complete. United advised Omnicare that it would operate under the PacifiCare agreement. Omnicare filed suit against United, PacifiCare, and the PacifiCare subsidiary. It alleged violations of the Sherman Act and the Kentucky Consumer Protection Act as well as claims of fraud, conspiracy, and unjust enrichment. Judge Pallmeyer (N.D. Ill.) granted the defendants' motions for summary judgment. Omnicare appeals.

In their opinion, Seventh Circuit Judges Kanne and Tinder and District Judge Griesbach affirmed. Section 1 of the Sherman Act prohibits agreements that unreasonably restrain trade, including agreements to fix prices. Price fixing agreements are usually between or among sellers but buyers can violate Section 1 as well. To succeed on a Section 1 claim, a plaintiff must show an agreement among the defendants, an unreasonable restraint of trade, and an injury. The district court concluded that Omnicare never got past the first element in that it failed to produce evidence of any concerted action by the defendants that was inconsistent with lawful conduct. Conduct that is as consistent with lawful competition as it is with an illegal conspiracy does not, by itself, allowing an inference of an antitrust violation. The Court noted that it would apply the Market Force two-part test. First, it determines whether the evidence is equally consistent with permissible and improper conduct. If so, it searches for other evidence that would seem to exclude the notion of independent actions. Within that framework, the Court analyzed the evidence: the strategic options memorandum, the information exchange, the prohibition on PacifiCare's incurring major contract liability, PacifiCare's negotiating tactics, the e-mails regarding whether PacifiCare would be included under the United contract, the different reimbursement rates, and United's conduct after Omnicare signed the PacifiCare agreement. In each case, the Court either concluded that the evidence did not equally support an inference of unlawful conduct or, if it did, there was little evidence to exclude the possibility of independent behavior. It also concluded that the evidence, when viewed together, was more supportive of a lawful inference that a conspiratorial one, particularly when viewed in light of the Part D chronology and Omnicare's own role in the events. The Court turned to the state law claims. The fraud claim was based exclusively on United's e-mail concerning PacifiCare's Part D strategy. At most, however, the e-mail is a statement of intent regarding future conduct. Illinois law requires that such statements be part of a scheme to defraud. Since the Court found no such scheme, the common law fraud claim cannot prevail. Likewise, the unjust enrichment claim is based on the allegations of illegal conspiracy. Since the Court found no such conspiracy, that claim fails as well.

Section 8 Landlord Has No Property Interest In Program Participation

KAHN v. BLAND (December 23, 2010)

The “Section 8” federal housing subsidy program provides rental assistance to low-income families. Although funded federally, the program is administered by local public housing agencies. Both the beneficiary families and the participating landlords must meet certain qualifications and are governed by a host of regulations. In Champaign County, Illinois, the program is run by the Housing Authority of Champaign County (HACC). In 2003, Latif Kahn, a qualified landlord with a contract with HACC, rented a subsidized apartment to Andrew Washington. At Washington' request, and allegedly with the approval of HACC, Kahn also rented some space in the building's basement to Washington outside the program. After Kahn evicted Washington in for nonpayment of rent, Washington brought the existence of this "side lease" to the HACC's executive director. The director advised Kahn that the lease was a violation of program regulations and that he was terminating Kahn's contracts and barring him from the program. Kahn was never given an opportunity to explain or appeal. The HACC sent a letter to each of Kahn's four tenants and advised them that they would have to move. In fact, however, Kahn’s contract with respect to only one of the tenants was terminated pursuant to the letter. Another contract was terminated when the contracted unit failed to pass an inspection. The other two tenants actually remained. One prospective tenant was denied an opportunity to rent an apartment from Kahn and was told by HACC that Kahn was an "undesired person." Kahn brought suit, alleging procedural and substantive due process claims against the director and a due process claim against HACC. Chief Judge McCuskey (C.D. Ill) granted the defendants' motion for judgment as a matter of law at the close of plaintiff's case. Kahn appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Tinder affirmed. Both the substantive and procedural due process claims require the identification of a property or liberty interest. The Court concluded that Kahn had not established a property interest from a) his termination from the program, b) the termination of the contracts, or c) disputes regarding the remaining contracts. First, notwithstanding his allegations, the record was clear that he was never terminated from the program. The director made threatening statements but had no authority to bar Kahn from the program and, in fact, Kahn continued to participate in the program. Second, although the HACC did refuse to enter into new contracts with Kahn, nothing in the statute or regulations entitles him to enter into new contracts. Finally, Kahn's rights with respect to his existing contracts do not raise constitutional issues. They simply give rise to possible state breach of contract claims. With respect to a liberty interest, the Court concluded that Kahn forfeited the claim -- but also concluded that the claim would not succeed. The liberty interest recognized by the Fourteenth Amendment protects a person's right to pursue an occupation, but not a specific job. Here, although the defendants' conduct may have affected Kahn 's ability to lease to certain individuals, it did not preclude him from his occupation.

Challenger To Supplemental Nutrition Assistance Program Disqualification Has The Burden Of Proof

FELLS v. UNITED STATES (December 23, 2010)

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

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

Expert Medical Testimony That Did Not Establish Causal Link Was Properly Stricken

MYERS v. ILLINOIS CENTRAL RAILROAD CO. (December 15, 2010)

Timothy Myers joined the Illinois Central Railroad (now part of CN Southern) right after his high school graduation. He worked for the Railroad for over 30 years in a number of jobs. All of his jobs were physically demanding and dangerous. Over his career. Myers injured an ankle, both knees, an elbow, and his back. He had surgeries on his back (twice) and on his left elbow and his right knee. He brought suit against the Railroad under the Federal Employers' Liability Act (FELA). He alleged that his physical problems were caused by the Railroad's failure to provide a safe workplace. Myers listed four experts -- three treating physicians and an ergonomist. Chief Judge McCuskey (C.D. Ill.) struck all four experts and granted summary judgment to the Railroad. Myers appeals.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton affirmed. FELA is not a strict liability scheme -- negligence and causation are both required. Sometimes, expert testimony is unnecessary because a layperson can understand the causal link between particular conduct and an injury. Here, however, Myers does not allege a specific injury. He alleges gradual deterioration. The Court stated that the general rule in such cases is that expert testimony on causation is required. That general rule applies here. Although Myers proffered four experts, none of them can satisfy this requirement. The ergonomist can testify about the dangerous conditions in a rail yard but cannot link those conditions to any specific injury. The treating physicians were prepared to offer an opinion that the working conditions were the cause of Myers' injuries. However, the Court concluded that those opinions were general medical opinions that were not the product of any particular acceptable methodology. Indeed, the treating physicians simply made causation assumptions. The district court did not err in striking the experts, nor in granting summary judgment. 

Union Cannot Take Advantage Of Status Quo Without Taking Necessary Steps To Resolve Representation Dispute

INTERNATIONAL BROTHERHOOD OF TEAMSTERS AIRLINE DIVISION v. FRONTIER AIRLINES (December 13, 2010)

Frontier Airlines' Denver mechanics were represented by the International Brotherhood of Teamsters. The National Mediation Board so certified. Republic Airways, whose mechanics were not represented by a union, acquired Frontier. When Republic announced that it was moving maintenance work from Denver to its Milwaukee facility, the Teamsters objected. They claimed that the Board's certification of it as the bargaining unit prevented Republic from altering their working conditions without negotiations. Republic disagreed. The Teamsters filed suit under the Railway Labor Act. Judge Adelman (E.D. Wis.) issued a preliminary injunction maintaining the status quo (i.e., preventing the transfer of the maintenance work) until the representation issue was decided. Frontier appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Williams vacated and remanded with instructions to issue a revised injunction. At issue here is whether the Teamsters represent the Frontier mechanics. Under the Act, the Frontier mechanics are a separate bargaining unit represented by the Teamsters if Republic operates its subsidiary airlines as individual transportation systems. If, on the other hand, Republic operates a single transportation system, all of its mechanics are members of the same bargaining unit. If that is the case, Frontier can represent none of them. The problem is that only the National Mediation Board can resolve this representation dispute and only a union can ask the Board for such a resolution. The Court noted that the Teamsters, with its injunction in hand, have no incentive to seek that resolution. The Court resolved the standoff by applying "age-old equitable principles." It vacated the injunction and remanded the case to the district court for the issuance of a new injunction to be conditioned on the Teamster's prompt application to the Board for a resolution of the representation issue.

Driver's Volatile Manner Of Expressing Safety Concern Crossed The Line

FORMELLA v. UNITED STATES DEPARTMENT OF LABOR (December 10, 2010)

Don Formella has been driving a truck for more than four decades. In late 2005, he started driving for Schnidt Cartage, a small, local transportation company near Chicago. On a February morning in 2006, Formella arrived at work and discovered that he had been assigned to a different truck than he had been driving. Formella inspected the vehicle and discovered missing permits, non-operable lights, and mismatched tires. Formella was particularly concerned about the potential safety hazard of the mismatched tires. Formella complained to the company's vice president, Linda Marcus. Marcus' and Formella's versions of what happened next vary greatly. Formella claims it was a professional exchange, in which he indicated his belief that the truck was not in compliance with federal and state law -- after which Marcus fired him. Marcus, on the other hand claims that Formella was loud and volatile, that she listened to and made arrangements to correct each of his safety complaints -- and that she fired him only after he became more and more agitated and unstable. Other Schnidt employees confirmed several aspects of Marcus' account of the exchange. Formella filed a complaint with the Department of Labor, alleging that Schnidt fired him for in retaliation for his safety complaints, in violation of the Surface Transportation Assistance Act. After an evidentiary hearing, the ALJ found that Schnidt discharged Formella because of his volatile conduct, not in retaliation for his complaints. An administrative review board upheld the decision. Formella seeks review.

In their opinion, Seventh Circuit Judges Kanne, Rovner, and Williams denied review. The Surface Transportation Assistance Act prohibits an employer from taking any disciplinary action against a driver who refuses to drive a vehicle that does not comply with regulations. The statute was amended in 2007 to make it easier for a driver to sustain his burden. Prior to 2007, a driver had to show that his protected conduct was a but-for cause of the discipline. Since the amendment, a driver only has to show that his protected conduct was a contributing factor in the discipline. The employer then must demonstrate by clear and convincing evidence that it would have acted similarly even in the absence of the protected conduct. The ALJ considered the pre-amendment burden, since the amendment took effect after the conclusion of the hearing but before the decision. The Court rejected Formella's argument that it should consider his case under the amended statute. Because he asked neither the ALJ nor the review board to consider the amendments, Formella has forfeited that argument. On the merits, the Court accepted the ALJ's findings regarding Schmidt's reason for termination since they were supported by the record. The Court then noted that this case was, nevertheless, a close one. Employees are given some degree of latitude in expressing their safety complaints to their employers. Here, Formella assaulted no one, threatened no one, and prevented no one from doing his work. He did lose his temper and shout. Although it concluded that reasonable people could differ, the Court found that the review board was neither arbitrary nor illogical in concluding that Formella’s conduct exceeded that latitude. 

Shipowner's Counterclaim Is An Unlawful "Device" Under The Jones Act

DEERING v. NATIONAL MAINTENANCE & REPAIR (December 2, 2010)

On March 11, 2009, the Mississippi River was at flood stage. Vincent Deering, a riverboat pilot for National Maintenance & Repair, was operating a towboat moving barges at a National facility. Deering had difficulty controlling the boat (because, he alleges, of a defective steering mechanism). Another boat offered assistance but ended up making matters worse. The towboat sank and Deering suffered serious injuries. Deering filed suit in state court under the Jones act and admiralty law. National filed a Limitation of Liability Act petition in federal court. Under that Act, a shipowner’s liability is limited to the ship’s value (here, according to National, a $30,000 salvage value). The federal court stayed the state action, Deering refiled his claims in federal court, and National filed a counterclaim for the value of the ship. Deering moved for dismissal of the counterclaim. Judge Herndon (S.D. Ill.) granted the motion on the grounds that counterclaims that are, by their very nature, setoffs to Jones Act claims, are not allowed. National appeals.

In their opinion, Seventh Circuit Court of Appeals Judges Posner, Kanne, and Williams affirmed. As it frequently does, the Court first addressed its jurisdiction. National relied on § 1292(a)(3), which allows interlocutory appeals from orders "determining the rights and liabilities of the parties." The principal purpose of this section is to allow appeals from liability determinations in admiralty cases before the usually separate and frequently costly relief proceedings. Although that is not the situation here, the Court noted that the appeal presented a case to those in which interlocutory appeals are allowed in non-admiralty cases: it involved a controlling question of law, the issue is separate from both the personal injury claim and the liability limitation petition, and none of the facts relevant to the underlying claims are relevant to the appeal. Also noting that other courts have allowed jurisdiction in these circumstances, the Court concluded that it did have jurisdiction to hear the appeal. The Court proceeded to the merits. The Federal Employers' Liability Act (FELA), which is incorporated by reference into the Jones Act, provides that "any . . . device whatsoever" that is intended to exempt a common carrier from liability is void. Here, the only purpose of the counterclaim is to act as a setoff to Deering's personal injury claim. Relying on the plain language of the statute, the state of the law at the time it was enacted, and public policy, the Court concluded that National's counterclaim was a void "device" under the Jones Act. The Court distinguished the Fifth Circuit's decision in Withhart, in which the court held that a counterclaim was not such a device. Withhart was a Jones Act case but relied principally on a prior FELA case. The Court noted several fundamental differences between the Jones Act and FELA that the Withhart case did not address that could have distinguished the case from the earlier precedent. It also questioned the correctness of both decisions. In the end, though, it merely distinguished Withhart. There was no limitation of liability issue in Withhart. The Court concluded that the "one-two punch" -- the combination of a property damage counterclaim and a limitation of liability petition that would wipe out a substantial injury claim -- was not allowed by the Act.

Prisoner Gets A Prison Litigation Reform Act "Strike" Only If Earlier Action Was Dismissed In Its Entirety

TURLEY v. GAETZ (November 2, 2010)

Greg Turley is an inmate in an Illinois prison. He claims that prison employees are retaliating against him because he has brought past litigation regarding his prison conditions. He filed a § 1983 complaint against prison employees and sought to proceed in forma pauperis (IFP). Judge Murphy (S.D. Ill.) denied his request to proceed IFP. He concluded that Turley was ineligible for IFP status because he has had it least part of three prior lawsuits dismissed for failure to state a claim. Turley appeals.

In their opinion, Judges Ripple, Kanne, and Sykes reversed and remanded. The Court noted that the issue in the case was the proper interpretation of the Prison Litigation Reform Act (“PLRA”). One section of the PLRA (the “three strike” rule) attempts to restrict a prisoner's ability to proceed IFP if he has a history of frivolous litigation. Specifically, it states that a prisoner cannot proceed IFP if he has, on three or more occasions, brought “an action or appeal” that was dismissed as frivolous, malicious, or for a failure to state a claim. Turley's relevant litigation history comes from three complaints: 1) a district court dismissed one claim for failure to state a claim and allowed two claims to go to the jury -- the case settled after a jury verdict in Turley's favor, 2) a district court dismissed a claim against some defendants for failure to state a claim and later granted summary judgment in favor of the remaining defendants, and 3) a district court dismissed one claim against all defendants and a second claim against some defendants for failure to state a claim and granted summary judgment to the remaining defendants on account of Turley's failure to exhaust administrative remedies. In each of Turley's complaints, therefore, at least one claim was dismissed for failure to state a claim and at least one claim survived dismissal. The question for the Court was whether any of these dismissals constituted a "strike" under the PLRA. The Court started with the statutory language. It stated that the terms "action" and "claim" are well defined. An action refers to the allegations of the complaint while a claim is an individual request for relief. The natural reading of the statute and its use of “action,” not “claim,” is therefore that a prisoner gets a strike when an action is dismissed in its entirety for one of the three statutory reasons. The D.C., Fifth, Sixth, and Eighth Circuits have concluded likewise. Although comfortable in its holding, the Court felt it necessary to address the earlier opinions in George and Boriboune. They each stated that a prisoner could get a strike when any claim was dismissed. The Court decided that the cases did not control –- and did not need to be overruled -- since neither case was presented with or decided the action versus claim issue and the references in dicta were not essential to the outcome. As further support for its conclusion, the Court noted that the Eighth Circuit decision predated both cases and the D.C. and Sixth Circuit cases predated George. Neither Seventh Circuit panel indicated an intention to create a circuit split or circulated its opinion pursuant to Circuit Rule 40(e). Finally, the Court examined Turley's litigation history in light of its holding and concluded that Turley not only did not have three strikes -- he had none.

The Court originally released this opinion on October 14 and withdrew it a day later. Although the opinion does not overrule a prior decision of the Court, apparently the panel thought its treatment of George and Boriboune warranted circulation to the active members of the Court under Circuit Rule 40(e). No judge favored a rehearing en banc. 

Intrastate Commuter Railroad Operator Is A "Covered Employer" Under The Railroad Retirement Act To The Extent It Also Conducts Interstate Dispatching Services

HERZOG TRANSIT SERVICES v. UNITED STATES RAILROAD RETIREMENT BOARD (October 22, 2010)

The Dallas Area Rapid Transit and the Fort Worth Transportation Authority (collectively, the "Transit Authorities") own a stretch of railroad track between the two cities on which they provide commuter rail service. Four other railroad companies operate interstate freight service on the same stretch of track. Herzog Transit Services has operated the commuter service for the Transportation Authorities since 1996. Before 2001, Herzog had no involvement with the interstate carriers. In 2001, however, the Transit Authorities contracted with Herzog to provide all dispatching operations, including interstate, for the track. Shortly thereafter, a Herzog employee asked the Railroad Retirement Board for a determination that Herzog was a "covered employer" under the Railroad Retirement Act. The Board found that Herzog was a covered employer to the extent it was providing dispatching services to interstate carriers. Herzog and the Transit Authorities petitioned for review of the order.

In their opinion, Judges Ripple, Kanne, and Sykes (dissenting) denied the petition. The Court first embarked on a short history of American railroads, their pension plans, the Railroad Retirement Act (the "Retirement Act"), and the Railroad Unemployment Insurance Act (the "Unemployment Act"). The purpose of the Retirement Act is to provide a retirement system for employees of the nation's railroads; the Unemployment Act provides unemployment insurance for the same employees. The Court then recited the relevant definitions and principles:
     • the Court and the parties agreed that an "employer" is the same under each act
     • the acts adopted a broad definition of employer in order to prevent the railroads from setting up subsidiaries to avoid coverage
     • an employer includes "any carrier by railroad subject to the jurisdiction of the Surface Transportation Board"
     • the Interstate Commerce Commission Termination Act of 1995 (“ICCTA”), which sets forth the Surface Transportation Act's jurisdiction, defines "rail carrier" as one "providing common carrier railroad transportation for compensation"
     • the Court adopted the common law definition of "common carrier" -- an entity holding itself out as offering transportation services to anyone willing to pay
     • the ICCTA defines "transportation" as equipment related to passenger or property of movement by rail and services relating to that movement
     • the Surface Transportation Board has jurisdiction over all rail carrier transportation
     • the statutory scheme should be construed broadly to cover employees who play different roles within the railway system
     • the statutory scheme must not be limited by the business operation models in use at the time of its passage.
Applying those definitions and principles to the facts at hand, the Court agreed with the Board that Herzog’s dispatching function was a necessary and integral part of the interstate operation and therefore was operation as a "rail carrier" subject to the Retirement Act. The Court distinguished the Board's earlier RAILTRAN decision. That decision involved the same rail lines at an earlier point in time and under a different operating structure. Dallas and Fort Worth co-owned the line, which was managed by a state agency. A railroad company conducted the freight and commuter operations and had operating and dispatching duties. Dallas and Fort Worth sought a declaratory judgment from the Board that a revised arrangement, under which they would contract with a third party to operate the commuter service and perform dispatching duties, would not make them employers under the acts. The Board concluded that it would not -- they would continue to be non-operating owners. The Court believed the RAILTRAN was consistent with the Board's decision here. In both cases, the non-operating owner (Dallas and Fort Worth in RAILTRAN -- the Transportation Authorities in this case) was found not to be an employer. In RAILTRAN, the employer status of the entity conducting the dispatching operations (i.e., the analog to Herzog) was not at issue.

Judge Sykes dissented. She took no issue with the history or the definitions relied upon by the majority. She concluded, however, that providers of subsidiary services such as dispatching are not "common carriers" since they did not hold themselves out as providing rail service to the public. Judge Sykes believed that RAILTRAN was directly on point and supported her conclusion. According to her analysis, RAILTRAN held that the non-operating owner would not become an "employer" if it assumed interstate dispatching functions or contracted with someone to do so. If the Transportation Authorities would not become "employers" if they took over the dispatching function, judge Sykes concluded that Herzog did not become an employer when it contracted with them to do that very same task.

Margin Violation Is Not An Affirmative Defense To An Action On A Note

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

COSTELLO v. GRUNDON (October 18, 2010)

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

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

Prisoner Gets A Prison Litigation Reform Act "Strike" Only If Earlier Action Was Dismissed In Its Entirety

On October 15, the Court withdrew this opinion. The appeal remains under advisement.

TURLEY v. GAETZ (OCTOBER 14, 2010)

Greg Turley is an inmate in an Illinois prison. He claims that prison employees are retaliating against him because he has brought past litigation regarding his prison conditions. He filed a § 1983 complaint against prison employees and sought to proceed in forma pauperis (IFP). Judge Murphy (S.D. Ill.) denied his request to proceed IFP. He concluded that Turley was ineligible for IFP status because he has had it least part of three prior lawsuits dismissed for failure to state a claim. Turley appeals.

In their opinion, Judges Ripple, Kanne, and Sykes reversed and remanded. The Court noted that the issue in the case was the proper interpretation of the Prison Litigation Reform Act (“PLRA”). One section of the PLRA (the “three strike” rule) attempts to restrict a prisoner's ability to proceed IFP if he has a history of frivolous litigation. Specifically, it states that a prisoner cannot proceed IFP if he has, on three or more occasions, brought “an action or appeal” that was dismissed as frivolous, malicious, or for failure to state a claim. Turley's relevant litigation history comes from three complaints: 1) a district court dismissed one claim for failure to state a claim and allowed two claims to go to the jury -- the case settled after a jury verdict in Turley's favor, 2) a district court dismissed a claim against some defendants for failure to state a claim and later granted summary judgment in favor of the remaining defendants, and 3) a district court dismissed one claim against all defendants and a second claim against some defendants for failure to state a claim and granted summary judgment to the remaining defendants on account of Turley's failure to exhaust administrative remedies. In each of Turley's complaints, therefore, at least one claim was dismissed for failure to state a claim and at least one claim survived dismissal. The question for the Court was whether any of these dismissals constituted a "strike" under the PLRA. The Court started with the statutory language. It stated that the terms "action" and "claim" are well defined. An action refers to the allegations of the complaint while a claim is an individual request for relief. The natural reading of the statute and its use of “action,” not “claim,” is therefore that a prisoner gets a strike when an action is dismissed in its entirety for one of the three statutory reasons. The D.C. Fifth, Sixth, and Eighth Circuits have concluded likewise. Although comfortable in its holding, the Court felt it necessary to address the earlier opinions in George and Boriboune. They each stated that a prisoner could get a strike when any claim was dismissed. The Court decided that the cases did not control – and did not need to be overruled -- since neither case was presented with or decided the action versus claim issue and the references in dicta were not essential to the outcome. As further support for its conclusion, the Court noted that the Eighth Circuit decision predated both cases and the D.C. and Sixth Circuit cases predated George. Neither Seventh Circuit panel indicated an intention to create a circuit split or circulated its opinion pursuant to Circuit Rule 40(e). Finally, the Court examined Turley's litigation history in light of its holding and concluded that Turley not only did not have three strikes -- he had none.

Court Must Resolve Challenged "Imminent Danger" Allegation Before Granting In Forma Pauperis Motion

TAYLOR v. WATKINS (October 14, 2010)

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

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

Conduct In Compliance With Federally-Approved State Implementation Plan Cannot Be Sanctioned For Non-Compliance With Federal Regulation

UNITED STATES v. CINERGY CORP. (October 12, 2010)

Cinergy Corp. (and its affiliates) owns several electric power plants in the Midwest. Years ago, the U.S. EPA charged Cinergy with violations of the Clean Air Act at several of its facilities. Specifically, the agency alleged that the company made "major" modifications that resulted in increased nitrogen oxide and sulfur dioxide emissions without obtaining a permit. In an earlier appeal, the Seventh Circuit held that the federal regulation at issue required emissions to be measured on an annual, rather than an hourly, basis. On remand to Judge McKinney (S.D. Ind.), the case was tried. A jury found that four of the alleged modifications were likely to have increased the sulfur dioxide and nitrogen oxide annual emissions and should have been permitted. Cinergy appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Rovner reversed. The Court addressed the verdict with respect to the two pollutants separately. With respect to sulfur dioxide, Indiana's implementation plan in effect at the time of the modifications did use hourly capacity rather than annual emissions to determine the necessity of a permit. This was true even though: the federal statute and regulation defined it otherwise, Indiana had agreed to revise its plan, and Indiana had actually adopted appropriate amendments to its plan -- but it failed to submit the plan for approval for several years. The Court concluded that Cinergy could not be held liable when it complied with the approved Indiana plan. With respect to nitrogen oxide, the parties agree that the annual emissions standard governs. Here, Cinergy attacks the agency's experts and the formula they used to predict those annual emissions. In effect, the expert witnesses testified that an increase in capacity would result in an equal increase in generation and pollutant emissions. The Court concluded that that formula was only appropriate in the case of a baseload generating plant, which is in almost continuous operation. It did not take into consideration the operational differences between baseload, cycling, and peaking plants. The plant at issue is a cycling plant and operated on a regular, although not continuous, schedule. Although there are methods for predicting annual emissions from a cycling plant, the Court concluded that a remand was not necessary. The agency conceded that it could not prove its case if the expert testimony was disallowed.

Person's Good Name Is Not A Protectable "Commercial Interest" Under Lanham Act § 43(a)

STAYART v. YAHOO! (September 30, 2010)

Beverly Stayart sounds like a bit of a renaissance woman. Self-described as "sophisticated, well-educated, and highly intelligent," she has a University of Chicago M.B.A, engages in humanitarian efforts in support of baby seals and wolves and wild horses, researches genealogy, has published scholarly papers on the Internet, and writes poetry. One day, she conducted a Yahoo! Search on her own name. That search, and others that followed, produced troubling results. In addition to the links about herself and her activities, she found links to pharmaceutical companies, pornographic websites, and much more. She demanded that Yahoo! remove the offensive links. Yahoo! declined. Stayart brought suit alleging a violation of § 43(a) of the Lanham Act. Judge Randa (E.D. Wis.) dismissed the complaint on the grounds that she had no commercial interest in her name. Stayart appeals.

In their opinion, Circuit Judges Manion and Williams and District Judge Darrah affirmed. The Court noted that Stayart did not challenge the well-established rule that § 43(a) requires a showing of commercial interest. Instead, she argued that her extensive and varied activities and presence on the Internet established a commercial interest in her name. The Court disagreed. Section 43(a) is a remedy for a commercial plaintiff who seeks to protect its commercial interest. Stayart's activities may be laudable -- they are not commercial.

Continuous And Deliberate Exploitation Of The Illinois Market, Even If Virtual, Satisfies Minimum Contacts

UBID v. THE GODADDY GROUP (September 29, 2010).

The GoDaddy Group operates a domain name registration site called GoDaddy.com. GoDaddy has taken significant steps to limit its physical presence to Arizona. It is incorporated there, it is headquartered there, its computer servers are all located there, and the great majority of its offices and employees are there. Its non--physical presence is another story. It advertises nationally (including on the last six Super Bowls), it sponsors professional race car driver Danica Patrick and professional golfer Anna Rawson, and it advertises in sports arenas (including those of the Chicago-based Cubs, White Sox, Bulls, and Blackhawks). It has hundreds of thousands of Illinois customers and millions of dollars of Illinois revenue annually. Chicago-based uBID, an Internet excess-inventory auctioneer, brought suit against GoDaddy for violating the Anti-Cybersquatting Consumer Protection Act. The GoDaddy conduct that uBID complains of is its practice of selling domain names that are confusingly similar to existing domain names (including uBID’s), selling advertising on those websites, and profiting from the confusion it has created. Judge Kocoras (N.D. Ill.) dismissed the complaint for lack of personal jurisdiction. uBID appeals.

In their opinion, Judges Flaum, Manion, and Hamilton reversed and remanded. The Court first considered and rejected the existence of general jurisdiction. General jurisdiction requires such extensive contacts that a defendant is considered to be present for all purposes. Here, although GoDaddy's contacts are extensive, they are limited to its domain name services. The Court concluded that it would be unfair to consider GoDaddy present for all conceivable claims. With respect to specific jurisdiction, the Court noted that the question has not changed since International Shoe -- is it "fair and reasonable" to require the defendant to respond to the claim? The analysis is a three-part test addressing the sufficiency of the contacts, the relationship between the contacts and the claim, and International Shoe's requirement that it not offend notions of "fair play and substantial justice." With respect to the sufficiency of the contacts, the Court relied heavily on Keeton. In that case, the Supreme Court upheld jurisdiction in New Hampshire over Hustler Magazine. Hustler had no offices or employees in New Hampshire, did not particularly target the state, and very little of its revenue came from the state. But Hustler "continuously and deliberately" exploited the market. That was enough for the Supreme Court to permit jurisdiction. The Court concluded that GoDaddy continuously and deliberately exploited the Illinois market and reached the same conclusion. The fact that GoDaddy can do that in a virtual, rather than physical, sense does not dictate a different result. With respect to the relationship between the contacts and the claim, the Court applied a proportional and foreseeable test (declining to endorse either the but-for or proximate causation tests relied upon by some courts -- and also declining to adopt or reject the Zippo test). The Court concluded that the relationship was close enough. In fact, it found the contacts and the claims "intimately related." Finally, the Court considered the "substantial justice" factors. Some of them favored the exercise of jurisdiction; none of them favored GoDaddy. Requiring GoDaddy to answer the claim in Illinois is not unfair.

Judge Manion concurred. Although he agreed that personal jurisdiction was proper, he disagreed with the Keeton test applied by the majority. In his view, the claim does not arise out of Go Daddy's advertisements at sporting events or out of its hundreds of thousands of relationships with Illinois residents. Instead, it arises out of its cybersquatting -- profiting from advertisements that it places on domain names that allegedly infringe uBID’s trademark. Instead of Keeton, Judge Manion would look to the intentional harms test from Calder. Each of the three prongs of the Calder test are satisfied here: a) the conduct was intentional, b) the conduct was aimed at Illinois since it was targeted correctly at uBID, and c) GoDaddy knew that uBID would be harmed in Illinois. 

District Court Improperly Weighed The Evidence In Granting Summary Judgment

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

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

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

State Environmental Regulation Lacking In Objectively Measureable Metrics Is Not Subject To Citizen Suit Enforcement

MCEVOY v. IEI BARGE SERVICES (September 7, 2010)

IEI Barge Services (Services) is a bulk material handler with a facility on the banks of the Mississippi River in East Dubuque, Illinois. Among other materials, Services handles coal, receiving it from train cars and loading it onto river barges. Several of Services' neighbors, including Charles McEvoy, complained that the coal-handling activity releases coal dust which, in turn, is blown onto their properties. McEvoy filed suit in early 2006 under the citizen-suit provisions of the Clean Air Act. Other neighbors filed similar suits in early 2007. The theory of recovery in both suits is that Services' violation of two Illinois environmental regulations provided plaintiffs with a remedy under the Act. Judge Kapala (N.D. Ill.) granted summary judgment to Services in both cases. The plaintiffs appealed -- the appeals were consolidated.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Wood affirmed. The Court turned its attention to the Act. The citizen-suit provision of the Act permits a private action against a person who is alleged to have violated "an emission standard or limitation under this chapter." Under the definition of that phrase, the enforceable standards and limitations are (as is relevant to the appeal): a) an "emission limitation, standard of performance or emission standard," and b) "any other standard, limitation, or schedule established under any permit issued pursuant to [another section of the Act] or under any applicable State implementation plan." In order to be enforceable under the Act, therefore, the Illinois regulations at issue must qualify under one of those two definitions. Before proceeding to an application of the Act to the regulations, the Court expressed its disagreement with the district court's interpretation of the second prong. The district court found that the phrase was ambiguous and concluded that the better reading was that it allowed enforcement only of a standard contained in a permit -- as opposed to a standard contained in a permit or a State implementation plan. The Court found that the statute was not ambiguous and that the natural reading allowed for enforcement of a standard contained in a permit or a State implementation plan. The first regulation the plaintiffs seek to enforce is entitled "Prohibition of Air Pollution" and, in the Court's words, says little more than "thou shall not pollute." The Court concluded that this "broad, hortatory statement" does not qualify as a standard or limitation enforceable under the Act. The second regulation, the "Fugitive Particulate Matter" regulation, presented a closer question. The regulation contained more specifics than the general prohibition, but fell far short of other highly specific standards contained in Illinois' regulations. The Court referred to some of the undefined words in the regulation: "visible," "an observer," "looking generally," "at a point beyond," etc. The Court noted that other Illinois regulations contain more specific metrics subject to objective measurement. The Fugitive Particulate Matter regulation does not. Finding no additional guidance or definitions to guide its interpretation, he Court concluded that the regulation could not be enforced through the Act.

The Sherman Act Does Not Preempt Wisconsin's Minimum Gasoline Markup Requirement

FLYING J, INC. V. VAN HOLLEN (September 3, 2010)

A Wisconsin statute requires a minimum markup on gasoline sold in the state. The statute itself provides the formula with which to calculate the markup. The statute also authorizes a state agency to sue violators, issue cease and desist orders, and seek injunctions. It also provides for a private cause of action. Despite receiving over 1500 complaints of violations between 2003 and 2008, the agency did not prosecute one case. Flying J, a Wisconsin gasoline retailer, brought suit to enjoin the state from enforcing the minimum markup provisions. It alleged that the statute was preempted by the Sherman Act. Judge Randa (E.D. Wis.) agreed and issued a permanent injunction. When the state defendants elected not to appeal, the Wisconsin Petroleum Marketers and Convenience Store Association moved to intervene. The Court, in an earlier opinion (intheiropinion), reversed the District Court's denial of the intervention motion and accepted the Association as the appellant.

In their opinion, Judges Posner, Ripple, and Kanne reversed, dissolved the injunction, and remanded. In order to be preempted by the Sherman Act, a statute must mandate or authorize illegal conduct or place "irresistible pressure" to violate the law. Flying J's argument that the statute allows gasoline retailers to collude on prices is not enough -- the statute does not on its face mandate or authorize that conduct. Furthermore, there was no evidence in the record of actual collusion. The Court thought the outcome controlled by the Supreme Court's decision in Fisher. Flying J also argued that the statute was preempted as a "hybrid" statute (in which a government enforces prices set at the discretion of private parties). The Court concluded that the statute is not a hybrid statute. In hybrid statute cases, private parties -- not the state -- set the prices. Here, the state sets the minimum price. The fact that the statute includes a private cause of action and a “meet competition” exception does not make it a hybrid.

Burden-Shifting Analysis Does Not Apply After Plaintiff Presents Case-In-Chief

RUNYON v. APPLIED EXTRUSION TECHNOLOGIES (August 30, 2010)

Timothy Runyon began working at Applied Extrusion Technologies' (AET) Terre Haute, Indiana plant in 2005 at the age of 45. A few months later, the company hired Troy Corbett, about fifteen years his junior. The two men worked for the same supervisor and had the same job title. Runyon had two fairly serious and heated altercations with coworkers in his first seven months on the job. Then, in February of 2006, Runyon and Corbett got into a heated argument that escalated into a fight. Both men were suspended for three days and instructed to write letters of apology. Runyon's letter focused more on his desire to remain employed and did not address the fight or issue an apology until its fourth and final paragraph. Corbett's letter, on the other hand, opened with an apology and expressed his sincere regret. Because of the earlier two incidents and the content of the letter, AET fired Runyon. It did not fire Corbett. Runyon brought an action against the company based on the Age Discrimination in Employment Act ("ADEA"). Judge McKinney (S.D. Ind.) granted judgment as a matter of law to AET at the close of Runyon's case-in-chief. Runyon appeals.

In their opinion, Judges Posner, Flaum, and Wood affirmed. The Court stated that Runyon was wrong in approaching the appeal as if it were a McDonnell Douglas indirect proof analysis. That burden-shifting approach is only appropriate at summary judgment, not after a plaintiff has had an opportunity to present his entire case at trial. The question at that time is whether he presented enough evidence to allow a rational factfinder to rule in his favor. On that question, Runyon must fail. He presented insufficient evidence to carry his burden that his age rather than his behavior was the real reason for his discharge.

2010 Statute Provides Answer To Fiscal Year 1996 Medicare Question

UNIVERSITY OF CHICAGO MEDICAL CENTER v. SEBELIUS (August 25, 2010)

Prior to 1980, the federal Medicare program treated teaching hospitals and non-teaching hospitals the same for reimbursement purposes. Teaching hospitals, however, had higher service costs. The Secretary established an adjustment for teaching hospitals in 1980. The adjustment was based on the number of full-time equivalent (FTE) residents employed on a particular date. When Congress further amended the Medicare reimbursement program in 1983, it included an indirect medical education (IME) adjustment to replace the Secretary's 1980 directive that also was based on the number of FTEs. The regulations in effect in 1996 required a resident to be assigned to the outpatient department of a hospital or the "portion" of the hospital subject to the 1983 program. Further amendments in 2001 excluded time spent in research not associated with treatment or diagnosis even if the resident was assigned to one of those two departments. The University of Chicago Medical Center included pure research time in calculating its residents' FTE count for fiscal year 1996. The Medicare program Administrators excluded that time. The district court disagreed. Judge Andersen (N.D. Ill.) concluded that "outpatient department" and "portion" are geographic areas, not spheres of operation as argued by the Administrator. The Secretary appeals.

In their opinion, Judges Cudahy, Evans, and Sykes affirmed. Although the Court agreed that the plain language of the regulation referred to a resident's geographic location, it also conceded that the answer to the ultimate question was not clear. If the regulation was ambiguous, the Court would have to address the degree of deference owed to the Secretary. In any event, the Court concluded that legislation enacted after oral argument provided the answer. The Patient Protection and Affordable Care Act, enacted in March of 2010, allowed the inclusion of non-patient care activities in the IME FTE count retroactively to 1983. It also provided that pure research activities should not be counted after 2001. Although the 2001 provision specifically stated that no inference should be drawn regarding pre-2001 calculations, the Court concluded that pure research was a subcategory of "non-patient care activities" and therefore specifically included in the Act's retroactive language.

Inference Unsupported By Evidence Is Not Enough To Survive Summary Judgment

TRENTADUE v. REDMON (August 18, 2010)

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

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

Prisoner Capable Of Representing Himself In A Civil Case Was Not Entitled To Appointment Of Counsel

ROMANELLI v. SULIENE (August 11, 2010)

Ron Romanelli was incarcerated at the Columbia County Jail. He claims that he was in desperate need of medical attention while incarcerated and that Dr. Suliene and Sgt. Kuhl violated his rights to adequate medical care. The district court granted Romanelli leave to proceed on his § 1983 claim but denied his motion for court-appointed counsel as premature. The court denied a second motion a few months later, concluding that Romanelli was capable of representing himself. After the court denied the defendant's motions for summary judgment, it also denied Romanelli's third request for counsel. The court concluded that the case was not complex, that Romanelli had successfully defeated the summary judgment motions, and that the Romanelli was provided with detailed trial instructions. The case proceeded to trial before Magistrate Judge Crocker. The Magistrate Judge ruled that the defendants were permitted to impeach Romanelli with evidence of prior convictions for issuing worthless checks, bail jumping, and sexual assault -- he did not permit impeachment with evidence of Romanelli's convictions for resisting/obstructing an officer and failure to report as a sex offender. A jury concluded that Romanelli did not suffer from a serious medical condition. The court entered judgment in favor of the defendants. Romanelli appeals.

In their opinion, Judges Ripple, Kanne, and Sykes affirmed. The Court first noted the absence of any right to counsel in a civil case but added that a district court has discretion under 28 U.S.C. § 1915(e)(1) to appoint counsel. In exercising that discretion, the court should examine whether the plaintiff is indigent, whether the plaintiff has made reasonable attempts to retain counsel, whether the case is complex, and whether the plaintiff is capable of representing himself. The Court concluded that the district court applied that proper standard and did not abuse its discretion in denying court-appointed counsel to Romanelli. The court acted within its discretion in denying a) the first motion -- it was too early for the court to make the necessary determinations, b) the second motion -- exceptional circumstances were absent and the court made a threshold determination that Romanelli was capable of representing himself in a relatively simple case, and c) the third motion -- Romanelli had proven himself capable of his own representation. The Court added that Romanelli had a very weak case on the facts and suffered no obvious prejudice due to the lack of professional representation. With respect to the evidence of prior convictions, the Court also concluded that the trial court did not abuse its discretion. The Court relied on the facts that almost all of the evidence relating to Romanelli's prior convictions was brought into the record by Romanelli himself and that the court included limiting instructions to the jury. Finally, the Court also noted that any evidentiary error would have been harmless given Romanelli's lack of credibility and the dearth of corroborating evidence.

Federal Regulations Do Not Prohibit Motor Carrier Insurance Chargebacks

OWNER-OPERATOR INDEPENDENT DRIVERS ASS’N v. MAYFLOWER TRANSIT (August 9, 2010)

Mayflower Transit is in the business of transporting household goods from one location to another. It frequently provides this service by leasing equipment. Mayflower pays the truck's owner-operator a per-mile fee. Federal regulations require Mayflower's trucks to be insured. Mayflower acquires insurance and deducts its cost from the fees it pays the owner-operators. A group of drivers and their trade association filed suit against Mayflower under 49 U.S.C. § 14704(a)(2), contending that Mayflower’s practice violates a federal regulation that prohibits a motor carrier from requiring its drivers to purchase any product or service from it as a condition of its lease. Judge Baker (S.D. Ind.) dismissed some claims on statute of limitations grounds and dismissed the insurance claims on the ground that the deduction did not violate the regulation. The owner-operators appeal.

In their opinion, Chief Judge Easterbrook and Judges Williams and Tinder affirmed and remanded. First addressing the limitations issue, the Court noted that § 14705(c) contains a two-year statute of limitations applicable to the administrative proceedings referenced in § 14704(b) but does not mention § 14704(a)(2). The district court applied the two-year statute anyway, concluding that a scrivener's error was responsible for the omission. The Court disagreed. It conceded that the text of the statute was inconsistent with the legislative history and that Congress may have intended a two-year limitations period. Nevertheless, the unambiguous text governs. Since the statute therefore contains no internal statute of limitations, the court concluded that the residual four-year limitations period applies. On the merits, the Court agreed with the district court. The federal regulation requires a motor carrier to purchase insurance -- the regulation is silent on who pays for it. Furthermore, the regulation relied on by the owner-operators only prohibits the lessor from requiring the purchase of a good or service from it. Since Mayflower does not and cannot sell insurance, the insurance deduction cannot be the purchase of a good or service from Mayflower. Finally, another section of the same regulation requires a lessor to specify in its lease the amount of any insurance chargeback. Although the plaintiffs suggest a convoluted reading of that section, the plain meaning of the section is inconsistent with the notion that Mayflower's charge for insurance is prohibited.

Individuals with Disability Education Act Requires Actual, Not Hypothetical, Adverse Effect On Performance

MARSHALL JOINT SCHOOL DISTRICT v. C.D. (August 2, 2010)

Minor student C.D. was a kindergarten student when he was diagnosed with EDS, a genetic disease affecting the joints. He had poor upper body strength and stability accompanied by chronic pain. The school district evaluated him pursuant to the Individuals with Disability Education Act (“IDEA”) and began providing special education services to C.D. in his gym class. The district developed an Individualized Education Program ("IEP") pursuant to which C.D. received adaptive physical education, physical and occupational therapy, and other aids and programming modifications. The following year, the district developed a new IEP. Among other changes, the new IEP required regular consultation between his adaptive gym teacher and his regular gym teacher. When C.D. reached second grade, the district again reevaluated his entitlement to special education and determined that he no longer met the criteria -- that he had an ailment that adversely affects his educational performance and that he needs special education. The district concluded that he met neither criterion. C.D.'s parents sought administrative review. After a lengthy administrative hearing, the administrative law judge (ALJ) concluded that C.D. was still eligible for special education. Judge Crabb (W.D. Wis.) affirmed. The school district appeals.

In their opinion, Judges Cudahy (concurring), Manion, and Williams reversed and remanded. The Court first took some care in identifying the precise issue on appeal in what it viewed as a complicated case. The Court specifically noted that, notwithstanding significant discussion and attention to C.D.'s academic performance, the only issue was whether he was entitled to special education in his gym classes. In order to qualify as a "child with a disability" under the Act, C.D. must have a health condition that adversely affects his educational performance and thus requires special education. The Court found little evidence in the record addressing the first prong and indications that the ALJ misapplied the test. There was evidence in the record that C.D.'s health condition could affect his educational performance and the ALJ did conclude that C.D.'s health condition could affect his educational performance. But there was little probative evidence that it actually did affect his performance – which is what the Act requires. The Court thus concluded that C.D. was unable to satisfy the first prong of the Act's test. Alternatively, the Court addressed the second prong of the test -- whether C.D. needed special education. The Court reviewed in detail the evidence presented on that issue and concluded that the ALJ impermissibly discounted testimony of C.D.’s special education gym teacher and that the record lacked substantial evidence or a reasoned basis for the finding that C.D. needed special education in gym.

Judge Cudahy concurred. Although he joined in the majority's result, he expressed the need for caution in overruling findings of fact based on witness reliability and in balancing the weight to be given medical professionals versus education professionals.

Collective Bargaining Agreement Does Not Trump State Law That Requires Payment For "Donning and Doffing"

SPOERLE v. KRAFT FOODS GLOBAL (August 2, 2010)

Kraft Foods operates an Oscar Mayer plant in Madison, Wisconsin. It requires its employees to wear boots, hardhats, smocks, and hairnets for safety and cleanliness. Obviously, it takes a short time each day to put on and take off this equipment. The Fair Labor Standards Act provides that an employer must pay an employee for the time spent "donning and doffing." However, the Act allows for the non-payment of that time if a collective bargaining agreement so provides. The Collective Bargaining Agreement between Kraft and its union does so provide and Kraft does not compensate its employees for the activity. Several employees brought suit against Kraft. They alleged that Wisconsin's state law also requires "donning and doffing" payment and does not have a collective bargaining agreement exception. Judge Crabb (W.D. Wis.) agreed and entered judgment in plaintiffs' favor. Kraft appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Evans affirmed. The Court first focused on the plain language of § 203(o) of the Act, which is the definition of “Hours Worked” and contains the collective bargaining agreement exception. Section 203(o) specifically limits its application to §§ 206 and 207 of the Act -- the federal provisions relating to minimum wage and overtime. The Court turned its attention to § 218(a) of the Act, which specifically allows a state to specify a higher minimum wage or a shorter maximum workweek than that provided in the Act. Since Wisconsin could establish a higher minimum hourly wage, the Court reasoned that it would be "senseless" to preclude it from dictating what work hours should be compensated. The Court therefore concluded that the Act did not prevent a state from requiring the donning and doffing payment. Finally, the Court also concluded that federal labor law did not preempt the Wisconsin law since it does not interfere with the collective bargaining process – it simply sets forth a requirement that an employer must meet.

Arbitrator's Reservation Of "Right to Amend" Does Not Alter The Finality Of His Award

BOARD OF TRUSTEES v. ORGANON TEKNIKA CORP. (July 27, 2010)

The University of Illinois licenses certain intellectual property rights to Organon Teknika for the manufacture of a cancer drug. In return, the University collects a royalty. Because the royalty depends on Organon's revenue and because Organon is allowed to sell to its affiliated companies, the license allows the University to challenge the royalty rate. In the case of a challenge, an arbitrator is asked to determine whether Organon is receiving the equivalent of an arms-length negotiated rate. The University did challenge the rate in 2006. After receiving evidence, the arbitrator concluded that the rate was appropriate and issued a final award closing the proceedings without modifying the rate. He also sent the parties his final bill. In the final two sentences of his award, he explicitly "reserve[d] the right" to amend his findings if new evidence became available. The University neither sought judicial review nor reconsideration under the Federal Arbitration Act. Instead, after six months, it asked the arbitrator to reconsider. When Organon refused to consent to any further proceedings, the University filed suit to compel the resumption of arbitration. Judge Guzmán (N.D. Ill.) dismissed the suit, though on a ground neither party had requested -- that the arbitrator had never issued a final award. Organon appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Hamilton vacated and remanded. At first blush, the Court questioned its appellate jurisdiction. In the court below, the University had requested an order compelling Organon to arbitrate and Organon had objected to such an order. The court dismissed the suit without granting the University its requested relief. Nevertheless, the University did not appeal -- but Organon did. On the face of it, it appears that Organon prevailed. A prevailing party cannot appeal the judgment even if it disagrees with the content or rationale of the opinion. Upon deeper analysis, however, the Court appreciated that Organon was in fact attacking the judgment. What it wanted was finality -- a dismissal with prejudice -- rather than the dismissal without prejudice entered by the court. Satisfied with its jurisdiction, the Court addressed the merits. It had little difficulty in concluding that the district court erred in concluding that the arbitration was still pending. The arbitrator resolved the dispute, referred to the award as his final decision, and sent his final bill. The reservation in the final two sentences, in the Court's opinion, was nothing more than the arbitration equivalent of Rule 60(b)(2). Just as Rule 60(b)(2) does not stand in the way of the finality of a judgment, neither does the arbitrator's reservation. Under the Federal Arbitration Act, the University had 90 days within which to present new evidence. It did not do so. The arbitration is over. 

Payment Demand Is Not An Absolute Requirement For Communication To Be "Made In Connection With" Under FDCPA

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.

Surface Transportation Assistance Act Reinstatement Exception Is Limited To Application Of Public-Safety Concerns

ROADWAY EXPRESS v. UNITED STATES DEPARTMENT OF LABOR (July 22, 2010)

When Peter Cefalu applied for a job as a truck driver with Roadway Express in 1999, he lied on his application. He stated that he left two prior jobs voluntarily. In fact, in both cases, he was fired for reckless driving. Roadway fired him a few years later, shortly after he supported a co-worker's grievance against Roadway. Cefalu filed an administrative complaint claiming that his dismissal violated the Surface Transportation Assistance Act of 1982. During the administrative proceedings, Roadway claimed that it fired Cefalu not because of his protected activity but because of its then recent discovery of his dishonesty on his application. Roadway refused, even when ordered, to disclose the source of its information. The administrative law judge sanctioned Roadway. The judge prohibited the introduction of any evidence learned from the undisclosed source. Without that evidence, Roadway could not rebut Cefalu's allegations. The ALJ found for Cefalu and ordered his reinstatement. The Administrative Review Board (“ARB”) affirmed. On appeal to the Seventh Circuit, the Court upheld the sanction at the merits stage but remanded to allow Roadway an opportunity to establish, for purposes of reinstatement, that it would have fired Cefalu absent the protected activity. On remand, the administrative law judge concluded that Roadway failed to meet its burden. The ARB affirmed. Roadway petitions for review.

In their opinion, Judges Posner, Ripple, and Wood denied the petition. The Court first revisited its earlier conclusions and its distinction between the use of the sanction at the merits stage and the reinstatement stage. Although the statute seems to require reinstatement, the Court borrowed the Mt. Healthy "mixed motive" framework to avoid the “absurd” result of reinstating an unsafe driver. The framework would allow Roadway to meet its burden by showing that it would have fired Cefalu because of his driving history even in the absence of his protected activity. The exception the Court adopted was limited to a showing of a public safety concern. The Court rejected Roadway's attempts to meet its burden by showing that it would have fired Cefalu for his dishonesty, as opposed to his driving. On its review of the record, the Court found the evidence of Roadway's treatment of drivers with similar records ambiguous. There was evidence that Roadway fired several drivers who were involved in accidents -- there was evidence that Roadway retained several drivers who were involved in accidents. The Court had little difficulty, therefore, in finding that the administrative decision was supported by "substantial evidence" -- the applicable standard of review.

Acceptable Zoning Criterion Allows Village To Exclude Religious Assembly

 RIVER OF LIFE KINGDOM MINISTRIES v. HAZEL CREST (July 2, 2010)

The Village of Hazel Crest refused to allow the River of Life Kingdom Ministries ("Ministries") to locate its church in a commercial area of the village. Ministries had a very small congregation and hoped to relocate its facilities from a dirty warehouse in Chicago Heights to Hazel Crest. The area in which it wanted to locate was designated a commercial district under the village's zoning ordinance. New noncommercial uses were excluded from the district under the ordinance. Judge Gottschall (N.D. Ill.) denied the Ministries' request for a preliminary injunction under the Religious Land Use and Institutionalized Persons Act (“RLUIPA”). On October 27, 2009, a panel of the Seventh Circuit affirmed (the intheiropinion post). On petition by Ministries, the Court granted rehearing en banc.

In their opinion, the entire court affirmed, with Judges Manion, Cudahy, Rover, and Williams concurring and Judge Sykes dissenting. The "equal-terms" provision of RLUIPA prohibits a local government from instituting a land-use regulation that treats a religious institution "on less than equal terms with" a nonreligious institution. The Court addressed two different tests - one from the Third Circuit and one from the Eleventh. The Third Circuit approach is to identify a) the ordinance’s goals and b) the nonreligious assemblies comparable to the religious assembly at issue. The ordinance is consistent with the equal terms provision if the reasons for excluding a nonreligious assembly are applicable to the religious assembly. The Eleventh Circuit approaches the equal terms provision more literally. An ordinance that permits a nonreligious assembly must permit a religious assembly. The Eleventh Circuit test does include an exception -- unequal treatment could survive if it passed a "strict scrutiny" test. Although the panel had adopted the Third Circuit approach, the en banc court rejected both approaches. The Court believed the Eleventh Circuit’s approach was overprotective of religious groups (due, in large part, to the dictionary definition of "assembly") and that the "strict scrutiny" exception had no basis in the statute. With respect to the Third Circuit's test, its focus on the regulatory purpose of the zoning regulation was problematic to the Court. Instead, the Court adopted a variation of the Third Circuit test. It replaced the "subjective and manipulable" regulatory purpose test with an "objective" zoning criteria test. The zoning criteria used by Hazel Crest include setting aside land for commercial uses in order to generate tax revenue and to provide a convenient shopping area. When it created the district, it not only excluded churches but also excluded other nonreligious assemblies that did not offer opportunities for shopping or generate tax remedy. The Court concluded that Hazel Crest's adoption of an acceptable zoning criterion -- commercial district -- and its neutral application of the regulation demonstrated that Ministries was unlikely to prevail on the merits. It thus affirmed the district court's denial of the motion for a preliminary injunction.

Judge Cudahy concurred. He wrote separately to express his view that there was little difference in the Third Circuit’s “regulatory purpose” test and the Court’s “zoning criterion” test.

Judge Manion concurred. He wrote separately to express his view that the case was rather straight forward and that the en banc court's opinion unnecessarily crafted a test to apply to more difficult cases. He also took issue with the opinion's discussion of a complicated Establishment Clause issue.

Judge Williams concurred (joined by Judges Cudahy and Rovner). Judge Williams expressed her belief that the Third Circuit's "regulatory purpose" test adopted by the panel is the proper test.

Judge Sykes dissented. She explored in detail the history of RLUIPA as well as the text of the statute, not limited to the "equal terms" provision. She also laid out the history of the "equal terms" jurisprudence in the Third, Eleventh, and Seventh Circuits. She noted that the Seventh Circuit had approved of the Eleventh Circuit approach until the panel opinion in this case. In her view, the plain language of RLUIPA prohibits any zoning regulation that treats a religious assembly on less than equal terms with a non-religious one. It contains no requirement of discriminatory motive or bias. Judge Sykes concluded that the Ministries demonstrated a likelihood of success -- the zoning regulation's allowance of gymnasiums, health clubs, and day care centers in the district where the church is not allowed is sufficient to show unequal terms.

Timber Sale's Environmental Impact Statement Need Not Analyze Cumulative Effects Imposed By Contemplated But Undefined Future Project

HABITAT EDUCATION CENTER v. U.S. FOREST SERVICE (June 29, 2010)

The federal government has been managing over 1,000,000 acres of forest in the Chequamegon-Nicolet National Forest in northern Wisconsin for almost 100 years. In the last eight years, the U.S. Forest Service has proposed 17 different timber sale projects. Habitat Education Center has administratively challenged almost every project. One of those projects is the Twentymile sale, announced in 2004, covering almost 9,000 acres. The Center argued that the sale, particularly in conjunction with a prior sale on immediately adjacent property, would have a negative impact on wildlife. The Forest Service authorized the project in February of 2007 over the Center's objections. The Center's administrative appeal was also unsuccessful. They filed suit in June 2007, contending that the Forest Service' environmental impact statement failed to consider the cumulative impacts of "past, present, and reasonably foreseeable future actions," in violation of the National Environmental Policy Act (NEPA). In November of 2008, just before argument on cross motions for summary judgment, the Forest Service announced another sale, the Twin Ghost project, on immediately adjacent property. Judge Adelman (E.D. Wis.) asked for supplemental briefing but ultimately concluded that the project was not "reasonably foreseeable" under NEPA at the time of the Twentymile project authorization and granted summary judgment to the Forest Service. The Center appeals.

In their opinion, Circuit Judges Flaum and Wood and District Judge St. Eve affirmed. The Court first addressed the Forest Service's argument that the Center forfeited any claim with respect to the Twin Ghost project by not raising it in the administrative process. Instead of addressing the Center's possible forfeiture, the Court concluded that the Forest Service waived the forfeiture argument by not raising it sufficiently in the district court in the supplemental briefing. On the merits, the Court noted that several of its sister circuits (specifically citing cases from the 1st, 3rd, 9th, and 11th) have held that the effects of a contemplated project need not be discussed if there is not yet a meaningful basis for assessing the impact of the project. The Court concurred with that approach. At the time the Twentymile project was approved, the Service had not even identified the goals of the Twin Ghost project. Of course, as the Court noted, the Twin Ghost project assessment must include a thorough analysis of the cumulative effects of the Twin Ghost and Twentymile projects. Any negative cumulative effects can be addressed during that process. Finally, the Court did concede that the better practice would have been for the Service to disclose the current state of contemplated future projects, even if a thorough analysis was not possible.  

RICO Statute Of Limitations Is Not Automatically Extended By Full Length Of Defendants' Obstructive Behavior

JAY E. HAYDEN FOUNDATION v. FIRST NEIGHBOR BANK (June 22, 2010)

Jay Hayden died in 1985. His will established the Jay E. Hayden Foundation and named Robert Cochonour as executor. Between 1985 and 2001, Cochonour allegedly embezzled from both the Foundation and from accounts belonging to Hayden's mother and his mother’s friend. Cochonour apparently had the cooperation of First Neighbor Bank in carrying out his misdeeds. By 2002, Cochonour admitted that he had stolen some money and had resigned his state court judgeship. The trustees of the Foundation were aware that it no longer had any assets but there was no record of what happened. For several years, Cochonour and the bank took steps to prevent the plaintiffs from learning additional facts. Eventually, in May of 2008, plaintiffs brought a RICO action against the bank, two law firms, and several associated individuals. Judge Reagan (S.D. Ill.) granted defendants' motion to dismiss on statute of limitations grounds. Plaintiffs appeal.

In their opinion, Judges Posner, Rovner, and Tinder affirmed. The statute of limitations for a RICO claim, stated the Court, is four years and begins to run when the plaintiffs discover or should have discovered the injury and the injurer. Here, the Court concluded that the plaintiffs had significant suspicions by mid-2003 but may not have had sufficient information to bring suit until 2005. If the defendant engages in obstructive conduct, however, that prevents a plaintiff from obtaining sufficient information to file its complaint, the defendant is equitably stopped from pleading the statute of limitations defense for the period of obstructive behavior. Plaintiffs allege that that is what happened here. The Court recognized a split of authority regarding the impact of equitable estoppel on limitations period. Some courts have allowed an extension of a limitations period for the full amount of the delay while others have held that a plaintiff must commence the action as soon as possible after the obstruction ends. The Court decided to apply the latter rule -- particularly in a RICO case where the Supreme Court has emphasized the importance of prompt action. In applying the "as soon as possible" rule, the Court stated that plaintiffs had enough information in 2005 to complete their investigation and file suit long before the three years they actually used. Notwithstanding the Court's conclusion that the action was barred by the statute of limitations, it also addressed the defendants' alternative argument that the complaint failed to state a RICO cause of action. The Court concluded that it did not since it did not allege that the defendants used an enterprise (i.e., their conspiracy) to engage in a pattern of racketeering activity.

Claims By 100+ Plaintiffs Is Not A CAFA "Mass Action" When No Single Complaint Names 100 Or More

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.

Malpractice Carrier Is Given An Opportunity To Establish Actual Prejudice From Insured's Lack Of Cooperation

MEDICAL ASSURANCE CO. v. HELLMAN (June 21, 2010)

Dr. Mark Weinberger was a wealthy Indiana physician. It seems, however, that only a portion of his wealth resulted from his legitimate medical practice. The rest of it came from defrauding insurance companies. In 2004, facing the prospect of civil and criminal litigation, Weinberger disappeared during a European vacation (read about his escapades on America's Most Wanted). Hundreds of malpractice claims were filed against him in the months following his disappearance. Those claims are working their way through Indiana's medical malpractice statutory procedures, although only four have proceeded to the actual lawsuit stage. Medical Assurance Company is Weinberger's malpractice insurance provider. It brought a declaratory judgment action, seeking a declaration that Weinberger's disappearance breached his duty of cooperation and thus voided its duty to defend. Judge Sharp (N.D. Ind.) concluded that Medical had shown no actual prejudice and therefore stayed the proceedings. Medical appeals.

In their opinion, Judges Flaum, Manion, and Wood vacated and remanded. The Court quickly resolved two jurisdictional issues. First, the Court upheld diversity jurisdiction notwithstanding Medical's "information and belief" allegation of the citizenship of the 300+ individual defendants (the state malpractice plaintiffs). Although such an allegation is generally insufficient standing alone, the additional factors -- that each defendant was a claimant within the Indiana malpractice system and that no defendant contradicted the allegation --satisfied the Court. With respect to its appellate jurisdiction, the Court concluded that the district court's order was appealable under Quackenbush as an abstention-based stay order. On the merits, the Court noted that the Declaratory Judgment Act is a procedural device that allows a judge to declare the rights of the parties under the applicable state or federal law. One legitimate reason to refrain from such a declaration is the existence of a parallel proceeding. The proper inquiry in such a case includes consideration of the identity of the parties, the similarity of the issues, the relief available to the plaintiff, and whether a declaration will clarify the obligations of the parties. Applying those principles, the Court concluded that the district court abused its discretion by issuing its stay order. Under Indiana law, Medical must show actual prejudice to prevail on its breach of cooperation argument. Although the district court thought that Medical could not show actual prejudice without interfering with the malpractice actions, the Court concluded that Medical should at least be given the chance.

Hobbs Act Jurisdictional Inquiry Takes Precedence Over Chevron Step-One Analysis

CE DESIGN v. PRISM BUSINESS MEDIA (May 27, 2010)

Prism Business Media publishes trade magazines and sponsors tradeshows. CE Design subscribes to several Prism publications. When Prism sent an unsolicited fax to CE Design in 2004, CE Design filed a putative class action under the Telephone Consumer Protection Act (TCPA). The TCPA prohibits the sending of unsolicited advertisements to fax machines. Prism moved for summary judgment, arguing that an FCC implementing order allowed the sending of unsolicited advertisements to the fax machines of companies with which the sender had an "established business relationship (EBR)." Judge Pallmeyer (N.D. Ill.) granted summary judgment to Prism. CE Design appeals.

In their opinion, Judges Flaum, Kanne, and Evans affirmed. The Court describes the issue before it as the classic “chicken-and-the-egg” dilemma. On the one hand, the Hobbs Act reserves to the courts of appeals the power to determine the validity of an FCC order -- and requires a petition for reconsideration with the FCC before a request for relief from a court of appeals. Here, the district court relied on the Hobbs Act and refused to consider the validity of the FCC order creating the EBR exemption. On the other hand is the familiar Chevron analysis used to review an agency's construction of a statute. In the first step of that analysis, a court determines whether the statute is silent or ambiguous on the issue which is the subject of the agency's order. Only if it is silent or ambiguous does the court examine the reasonableness of the agency action. CE Design asserts that the TCPA is unambiguous on the meaning of "unsolicited advertisement" so the court need not consider the FCC order. The Court rejected CE Design's position. An Article III court's first obligation is to ensure its jurisdiction -- before any consideration of the merits. Thus, if the Hobbs Act and the Chevron analysis were really analogous to the "chicken-and-the-egg," the Court would have to address the jurisdictional question in the Hobbs Act before engaging in the Chevron analysis. Alternatively, the Court concluded that the two approaches were not really in conflict. The result of CE Design's own Chevron argument would have been the invalidation of the FCC order by the district court -- exactly the result that the Hobbs Act prohibits. On the merits of the EBR exemption itself, the Court had no difficulty in agreeing with the district court that the exemption applied on the facts of the case.

Summary Criminal Contempt Finding Was Improper When The Conduct Did Not Take Place In The Judge's Presence

FEDERAL TRADE COMMISSION v. TRUDEAU (May 20, 2010)

Kevin Trudeau was found guilty of civil contempt of court for violating the terms of a consent order. In 2009, the Seventh Circuit affirmed Judge Gettleman's (N.D. Ill) finding of contempt (see intheiropinion) but remanded for reconsideration of a nearly $40 million penalty. During the course of the remand proceedings, Trudeau instigated an e-mail barrage on Judge Gettleman. He asked his radio listeners, his website viewers, and his e-mail list readers to send e-mails directly to the judge in support of his cause. Most of the e-mails were polite and innocuous -- some, however, were at least mildly threatening. In all, the judge received over 300 e-mails. The next afternoon, the judge found Trudeau guilty of criminal contempt and sentenced him to 30 days of incarceration. Trudeau appeals.

In their opinion, Judges Manion, Rovner, and Tinder vacated and remanded. Substantively, a judge has the authority to punish "misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice" under 18 U.S.C. § 401. Procedurally, Rule 42(a) of the Federal Rules of Criminal Procedure provides the framework for a typical finding of criminal contempt. Here, however, the court used the summary procedures of Rule 42(b). A summary finding of direct criminal contempt under Rule 42(b) requires that the contemptuous behavior occur in the presence of the judge. The fundamental principle that a court should use the least possible power in a contempt case requires not only that the contempt finding is permissible under Rule 42(b) but that there is also a compelling reason to invoke it. The Court found neither present here. The conduct that he punished did not occur in his physical presence. In fact, he had to summon Trudeau to court to impose the penalty. The Court also found no evidence in the record of a disruption of the court's ability to function or other compelling reason to use the summary procedures. The Court declined to address Trudeau's arguments that his conduct did not meet the "presence" requirement of § 401 and that it was protected by the First Amendment.

A Later Filed Qui Tam Action Is "Related" To An Earlier One If It Is Materially Similar to A Situation That Would Have Been Revealed By The Earlier Complaint Or Resulting Investigation

UNITED STATES v. APRIA HEALTHCARE GROUP (May 19, 2010)

Two qui tam actions were filed against Apria Healthcare Group in the late 1990s, accusing Apria of fraudulently billing the Medicare and Medicaid programs from 1995-98. Years later, but while those actions were still pending, Christine Chovanec filed this action, similarly alleging fraudulent billing by Apria from 2002-04 in Illinois. Judge Kocoras (N.D. Ill.) dismissed the action with prejudice pursuant to 31 U.S.C. § 3730(b)(5), which provides that no person may bring a "related action" based on the facts of a pending action brought by another person. Four days later, the earlier cases were settled. Chovanec moved for reconsideration. The court denied. Chovanec appeals.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Sykes vacated and remanded. The Court first held that the statute means what it says -- that no person "may . . . bring a related action based on the facts” of another pending action. Any action thus brought must be dismissed, rather than stayed. The Court next addressed whether Chovanec's action was a "related action." It aligned itself with other courts of appeals and concluded that the statute's reference to "facts" meant the material facts in the original relator's complaint. The Court explained that it was the complaints in those cases, not the settlement, that provided the material facts. Those complaints alleged an ongoing national fraud. Therefore, even though Chovanec's allegations referred to later years and a specific office, they were related to the original allegations. Concluding, therefore, that the statute required the dismissal of her complaint, the Court nevertheless vacated the judgment. Now that the original complaints are no longer pending, nothing in § 3730(b)(5) prevents her from refiling. The district court should have dismissed without prejudice.

The Court Overrules Rodgers' Holding That the Imposition of the Maximum Calculated Penalty Under 18 U.S.C. Section 2520(c)(2) Is Mandatory

DIRECTV v. BARCZEWSKI (May 13, 2010)

David Barczewski and Jonathan Wisler purchased electronic equipment that was actually marketed for its ability to intercept DirecTV signals. They both also participated in discussion groups whose purpose was to exchange advice about intercepting and decrypting those signals. When DirecTV sued them, a jury found that Wisler had intercepted signals without authorization for 435 days and that Barczewski had distributed four unauthorized decryption devices. The court imposed a statutory penalty of $44,000 against Barczewski and $43,500 against Wisler. Barczewski and Wisler appeal.

In their opinion, Chief Judge Easterbrook and Judges Flaum and Sykes affirmed in part and vacated and remanded in part. The Court first summarily rejected defendants' contentions that DirecTV did not have a private right of action under 18 U.S.C. § 2520 or 47 U.S.C. § 605. It noted that every court of appeals that had considered the questions agreed. It also quickly disposed of their argument that an exception in the statute for an "aeronautical communication system" applied because a DirecTV witness at trial stated that DirecTV was such a system. Whatever the witness meant, the Court interpreted the statute and concluded that DirecTV is not the kind of system referred to in the exception. Finally, the Court addressed the issue of the penalty. Although it affirmed the calculation of Barczewski’s penalty, it vacated the award of the penalty against Wisler. The statute provides that a court "may” assess the greater of a) the sum of the plaintiff's damages and the violator's profits, or b) the greater of $100 per day of violation or $10,000. In 1990, the Court held, in Rodgers v. Wood, that the imposition of the highest penalty under that calculation was mandatory. Part of the Rodgers rationale was that Congress changed the statute and replaced “shall” with “may” without any explanation for a change from mandatory to discretionary. Rodgers was also the first Court of Appeals decision interpreting that section. Since Rodgers, each of the four other circuits that have addressed the question has disagreed – and concluded that the language is permissive. Upon a careful review of the statutory language, the rationale of Rodgers, the analyses from the other circuits, and the policy considerations, the Court overruled Rodgers' holding that the maximum penalty was mandatory. It vacated the award and remanded to the district court.

Court Declines To Overturn Well-Reasoned Opinion

FINCHER v. SOUTH BEND HERITAGE FOUNDATION (May 10, 2010)

The South Bend Housing Authority (SBHA) evicted Marshall Fincher from one of its public housing units. Fincher then requested tenancy, under Section 8 of the United States Housing Act, in a building owned by the South Bend Heritage Foundation (SBHF). Based on the eviction, SBHF denied his application without a hearing. Fincher brought suit against SBHF. The district court granted summary judgment to SBHF, concluding that Fincher did not have a property interest in any specific SBHF housing and that he failed to identify any contract term between SBHF and HUD for which he was a claimed third-party beneficiary. Fincher appeals.

In their opinion, Circuit Judges Flaum and Wood and District Judge St. Eve affirmed. The Court noted that its 1984 decision in Eidson v. Pierce held that there was no property interest for a Section 8 applicant for a housing unit. Considering Fincher's request that Eidson be overruled, the Court reviewed the analysis of the case and noted that another circuit had expressly adopted its reasoning. The only circuit to squarely contradict the case did so in 1982 -- and its reasoning was considered and rejected in Eidson. The Court distinguished the few other cases brought forth by Fincher. Finding that Eidson was well reasoned and seeing no significant changes in the law since its publication, the Court declined to overturn it. With respect to the third party beneficiary claim, the Court agreed with the district court that Fincher cited no contract term or federal housing regulation that gives rise to any enforceable right.

Indiana State Advocacy Agency Has An Implied Right Of Action Under The Protection And Advocacy For Individuals With Mental Illness Act To Seek Injunctive And Declaratory Relief

INDIANA PROTECTION AND ADVOCACY SERVICES v. INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION (April 22, 2010)

In 1986, Congress enacted the Protection and Advocacy for Individuals with Mental Illness Act (the "Act"). The general purpose of the Act was to protect the rights of individuals with mental illnesses and specifically to assist states in operating protection and advocacy systems for those individuals. States are entitled to federal funds if they create such a protection and advocacy system. The system can be either a private entity or an independent state agency. Indiana created Indiana Protection and Advocacy Services ("Services"), an independent agency. The Act gives Services the authority to investigate instances of abuse and requires that Services have access to patient records. In 2006, Services opened investigations into two instances of possible abuse or neglect at the LaRue Carter Memorial Hospital. LaRue Carter is a psychiatric hospital operated by the Indiana Family and Social Services Administration ("FSSA"). In both investigations, Carter withheld patient records requested by Services. Services brought an action against the State of Indiana, FSSA, and three state officials in their official capacities. The complaint sought only injunctive and declaratory relief. The district court granted the relief. A panel of the Seventh Circuit reversed. The panel concluded that Services did not have a private right of action under the Act, could not sue under § 1983 because it was not a "person" under that section, and that the Eleventh Amendment barred the suit. Services sought rehearing en banc.

In their opinion, Chief Judge Easterbrook (dissenting) and Judges Posner (concurring), Flaum, Kanne, Rovner, Wood, Williams, Sykes, and Hamilton affirmed the judgment of the district court as modified to provide relief only against the named state officials. The Court first held that the Eleventh Amendment did not bar the suit. Although that amendment typically prevents a state or its agencies and officials from being sued in federal court by its own citizens, there are exceptions. Under the Ex parte Young exception, a state official who violates a federal law is considered to be acting outside his or her authority and not immune from suit. The required inquiry is whether the complaint seeks prospective relief for an ongoing violation of federal law. The Court found that inquiry satisfied with respect to the individually named state officials, although not with respect to the state and FSSA. Next, the Court concluded that the Act authorized Services’ suit. The Court undertook an analysis of whether Congress intended to create a private right and private remedy in the Act. Citing several provisions of the Act and interpreting the language, structure and purpose of the Act, the Court concluded that Congress did create a private right of action for access to patient records for protection and advocacy systems such as Services. In doing so, it rejected the defendants' arguments that the Act is simply an exercise of Congress's spending power, that the obligation to provide access to patient records is simply a condition inherent in accepting federal funding, and that the only remedy for the violation is to cut off the funding. Finally, on the merits, the Court had little difficulty in rejecting defendants' argument that the peer review records sought by Services were not "records" under the Act. It simply adopted the unanimous treatment given the question by the four circuits that have addressed the issue.

Judge Posner joined the Court's opinion "without reservation" but wrote separately on whether the Act provided a private cause of action. He wrote of several practical considerations that he believed supported the conclusion that the Act contained a private right of action.

Chief Judge Easterbrook dissented. Although he agreed with the conclusion that the Ex parte Young exception to Eleventh Amendment immunity applied, he disagreed with the conclusion that Services had a private cause of action. With respect to § 1983, Services is not a "person" and therefore cannot sue under that section. With respect to the Act itself, Chief Judge Easterbrook concluded that the Supreme Court's cases do not support the conclusion that a right of action can be implied in the Act.

Gasoline Station Franchisee's Abandonment Of His Business Is Not An Unlawful Termination Under The PMPA

AL'S SERVICE CENTER v. BP PRODUCTS NORTH AMERICA (March 26, 2010)

Al's Service Center was a gasoline service station and a franchisee of BP Products North America. In 2002, the State of Illinois decided to condemn a portion of the service station property. Although the portion of the premises subject to condemnation was small, the impact on the property was large. It would affect two of the five entrances and increase congestion. BP notified Al's of its intent to terminate the franchise relationship when the condemnation occurred. The condemnation went forward in June of 2005. Al's franchise contracts expired a month later -- BP asked Al’s to vacate the premises. Notwithstanding the condemnation, the expiration of the agreements, and BP's request to vacate, the parties continued to do business as usual. In the summer of 2006, Al's alleges that at BP failed to deliver gasoline for a period of twelve days. Later that same summer, Al’s asked BP to replace its roadside sign that that state had removed during construction. BP refused. Al's eventually abandoned its business in May 2008. It brought suit against BP for compensatory and punitive damages under both the Petroleum Marketing Practices Act and state law. The district court granted summary judgment to BP after denying Al’s request to add the state law claims. Al’s appeals.

In their opinion, Judges Posner, Rovner, and Sykes affirmed. The Court addressed the PMPA claims. Under the PMPA, a dealer is protected from termination of his franchise under certain circumstances. The Court looked for the termination. It concluded that the franchise was not terminated by the 2003 letter (there was no change in the relationship), it was not terminated by the demand to vacate the premises after the actual condemnation (although the Court concluded that BP could have terminated at that time), it was not terminated by the alleged supply interruption (although it may have been a breach of contract), and it was not terminated by the refusal to replace the sign (it did not meet the Mac’s Shell test for constructive termination). Thus, the Court concluded that the franchise came to an end when Al’s abandoned the premises on its own volition – not a violation of the PMPA. The Court also concluded that the lower court correctly refused to allow the state law claim amendments.

Statutory Limitation Is Not Jurisdictional Unless Congress Clearly Says So

MILLER v. HERMAN (March 25, 2010)

John Miller and his wife entered into an oral agreement with James Herman and his company to build the Millers a new home in Lakemoor, Illinois. As part of the construction, Herman purchased and installed windows made by Pella Products. According to Miller, the windows leaked from the time of their installation. Herman provided some additional caulking and Pella inspectors reinstalled one of the windows – but nothing helped. Miller filed an eight-count complaint against Herman and Pella in federal court. The federal claims were breach of warranty claims pursuant to the Magnuson-Moss Warranty -- Federal Trade Commission Improvement Act (the “Act”). In effect, the Act provides a federal forum to consumers for breach of warranty claims. Miller also pleaded state law counts for breach of contract, breach of implied warranty of habitability, common law fraud, and a violation of the Illinois consumer fraud act. Herman moved to dismiss the federal claims for lack of subject matter jurisdiction, contending that the fact that the windows were not "consumer-products" under by the Act deprived the court of jurisdiction. Pella filed a motion for summary judgment, also contending that the windows were not "consumer-products," but casting its argument as Miller’s inability to satisfy the elements of the claim as opposed to a failure of jurisdiction. Miller filed a consolidated response to the motions. The district court concluded that it lacked subject matter jurisdiction and granted the motion to dismiss. Miller appeals.

In their opinion, Judges Bauer, Manion, and Tinder affirmed, as modified, the dismissal of the federal counts and vacated and remanded the dismissal of the state law claims. The Court first addressed the jurisdiction versus merits confusion below -- whether, if the windows are not covered by the Act, the court lacks jurisdiction or the plaintiff simply loses on the merits. The Court recited the Supreme Court's "bright line" test. In Arbaugh, the Supreme Court stated that a statutory limitation should be treated as non-jurisdictional unless Congress clearly states that it is jurisdictional. The "consumer product" language in the Act is not part of the jurisdictional section or otherwise clearly treated as jurisdictional. The Court concluded that it was therefore not facing a jurisdictional limitation. On the merits, the central issue in both the motion to dismiss and motion for summary judgment is whether the windows were "consumer-products" under the Act. Finding the statutory definition both expansive and "somewhat hazy," the Court directed its attention to the FTC interpretations of the Act. It decided to give the interpretations a significant degree of deference since they were issued by the administering agency, they were issued using notice and comment procedures, they have stood the test of time, and they are based on the legislative history of the Act. The parties argued competing interpretations. Miller relied on 16 C.F.R. § 700.1(e), particularly on language that stated that construction products are "consumer products" when they are sold over-the-counter. The defendants, on the other hand, relied on 16 C.F.R. § 700.1(f), and specifically on language stating that construction materials are not "consumer products" when a consumer enters into a contract with a builder to construct a new home. Although the Court conceded that the FTC interpretations cited by the parties drew a fine line between what is and what is not a consumer product, it saw no reason to not respect the line. Following the interpretations, and the application of those interpretations by other courts, the Court concluded that the windows were not "consumer-products" within the meaning of the Act. As modified to reflect the merits rather than jurisdictional dismissal, the Court affirmed the dismissal of the federal counts. The district court dismissed the state law claims because it thought it had to, since it concluded that it lacked subject matter jurisdiction. Although the general rule is that a federal court will not retain wholly state law claims once federal claims are dismissed before trial, it is not required to. Since the district court did not even consider its authority to retain the state law claims, the Court reversed and remanded for that purpose. 

Common-Law Proximate Cause Is Not A Requirement In An FELA Suit

McBRIDE v. CSX TRANSPORTATION (March 16, 2010)

Robert McBride was a locomotive engineer for CSX Transportation. After several years as a long-distance engineer, McBride expressed an interest to transfer to a job where he would work more regular hours with fewer nights away from home. In April 2004, he went on a qualifying run with a supervising engineer. Much of the ten-hour shaft involved switching, the process of adding and dropping individual cars from the locomotive. The switching process requires heavy use of the manual brakes. Toward the end of his shift, while operating the brakes, McBride experienced extreme pain in his hand. He has since undergone two surgeries and physical therapy but still experiences pain and numbness. He filed an action for negligence under the Federal Employers' Liability Act. At trial, McBride offered an instruction on causation that would instruct the jury that defendant’s negligence had to play "a part - no matter how small" in bringing about the injury. CSX offered an instruction that included a requirement that defendant’s negligence be a "proximate cause" of the injury. The court used the McBride instruction. The jury found in McBride's favor. CSX appeals.

In their opinion, Judges Ripple, Rovner, and Sykes affirmed. The Court first noted that courts have "grappled" with the proper causation standard under FELA since the Act was passed. The Act provides that the injury must result "in whole or in part" from the employer's negligence. The Court noted that early cases did not conclude that the "in whole or in part of" language eliminated the common-law proximate cause requirement. Later cases, however, including the Supreme Court's decision in Rogers, suggested that a less stringent standard of causation should apply under FELA. Many courts of appeals interpreted Rogers as relaxing the standard of causation. The Supreme Court addressed the question again in Sorrell. Although the majority skirted the question, Justice Souter's concurring opinion stated that Rogers did not eliminate the proximate cause requirement. Justice Ginsburg's opinion, concurring in the judgment, stated her view that the causation standard in FELA cases is more relaxed than in tort litigation generally. Although the Court concluded that Justice Souter's position is a plausible one, it declined to adopt it. It noted that the majority in Sorrell did not even address the question, other statements of the Supreme Court have suggested a broader reading, and all other circuit courts that have addressed the issue have concluded that Rogers adopted a relaxed standard of probable cause. Finally, the Court noted that Congress is well aware of the decisions adopting a relaxed standard of causation and could clarify the FELA. It therefore found no error in the lower court's instruction.

Exception To Waiver Of Sovereign Immunity Results In Dismissal On The Merits - Not For Lack Of Jurisdiction

WILLIAMS v. FLEMING (February 26, 2010)

Jessie Williams had several million dollars of loans from Family Bank & Trust Company. As of late 2005, Williams' loans were in good standing -- he had never even been late with a payment. The FDIC conducted a routine examination of Family Bank in late 2005. Jerry Fleming was the Associate Examiner in charge. Williams alleges that Fleming made racially disparaging remarks about him, the city of Harvey, and the Bank's practice of lending to African-Americans. Williams also alleges that Fleming instructed the Bank not to lend to him anymore. Williams brought a Fifth Amendment claim against Family Bank, an Illinois Human Rights Act claim against the Bank and the United States, and a Fifth Amendment Bivens claim against Fleming. The district court: dismissed Family Bank because it is not a state actor, dismissed the United States on sovereign immunity grounds and because the FDIC did not act as a financial institution (an element of the Illinois Human Rights Act claim), and dismissed Fleming pursuant to the Federal Tort Claim Act's judgment bar. Williams appeals only the dismissal of Fleming.

In their opinion, Judges Kanne, Rovner, and Williams affirmed. The general rule, noted the Court, is that one may not sue the United States for torts committed by it or its agents. The Federal Tort Claims Act was enacted to allow suits against the United States under certain circumstances and with certain limitations. One of the limitations is the judgment bar, which provides that a judgment in one action bars a claim arising from the same subject matter against the government employee allegedly responsible for the tortious act. The issue here was whether the dismissal of the United States was such a judgment that barred the action against Fleming. Although the district court labeled its dismissal as one for lack of subject matter jurisdiction, thereby raising the issue of whether a judgment must be on the merits to trigger the judgment bar, the Court disagreed. Although it recognized that its view was the minority position, the Court reiterated its approach to the statutory exceptions to waiver. The Federal Tort Claims Act authorizes federal courts to hear tort claims against the United States. If the tort claim falls within one of the exceptions to the Act's waiver of sovereign immunity, the claim is dismissed because the United States has a defense -- not because the court is deprived of jurisdiction. The dismissal below was therefore on the merits, and the judgment bar applies.

A "Substantially Justified" Position Has A Reasonable Basis In Fact And Law

UNITED STATES v. THOUVENOT, WADE & MOERSCHEN (February 18, 2010)

The Equal Access to Justice Act allows a party that prevails against the United States in litigation to recover its attorneys' fees unless the position of the United States is found to be "substantially justified." Three cases before the Court allowed it to address that standard. In the first, the United States charged an apartment complex site engineer with violating the Federal Housing Act. The trial court denied defendant's motion for summary judgment and its motions for judgment as a matter of law. After the jury returned a defense verdict, however, the court awarded fees to the defendant. Because the defendant's insurer paid for much of its defense, the insurer would receive much of the award. The United States appeals. In the second case, the court affirmed the denial of a Social Security claimant's application for benefits. After the Seventh Circuit reversed and remanded, concluding that a crucial consultant's opinion was entitled to no weight, the court denied an award of fees. The claimant appeals. In the third case, the district court reversed the administrative denial of Social Security benefits but denied the claimant's application for fees. The basis for the reversal was the administrative law judge's possible mischaracterization of some testimony and failure to fully explain the connection between the claimant's condition and his ability to work. The claimant appeals.

In their opinion, Judges Posner, Flaum, and Sykes reversed, reversed, and affirmed. The Court first noted that "substantially justified" was not defined in the statute nor, in their view, was its meaning self-evident. Relying on the title of the statute and its limited application only to persons of lesser means, the Court concluded that the government's position need not be frivolous to justify an award of fees. The Court identified a threshold between frivolous and meritorious, at which a case has a reasonable basis in law and fact, that the United States must meet to be "substantially justified." Applying that standard to the first case, the Court held that there was a presumption that the United States’ position is substantially justified if it survives summary judgment. Just because the jury ultimately decided in favor of the defendant does not mean that the government fell short of its threshold. Although the Court reversed the award of fees, it decided to provide guidance to the lower courts on the additional issue of the impact of a liability insurer on an award of fees. In its view, the Act should not be applied differently if a party otherwise entitled to a fee award his had some of its fees paid by its insuror. In the second case, the Court concluded that the lower court was wrong in denying a fee award. Even though the lower court was originally convinced of the merits of the government's position, the court must be guided by the appellate opinion. If an appellate court reverses in a case it considers a close call, the fact that the lower court was convinced of the merits may support a substantial justification finding. Here, however, the Court made it clear in its earlier opinion that the government's position was not justified. Finally, in the third case, the district court had reversed an administrative denial of benefits but refused to award fees. Like the prior case's "close call" reference, the Court concluded that the lower court was well within its discretion to reverse a denial of benefits but to conclude that the position taken was "substantially justified."

Telecommunications Act's "In Writing" Requirement Is Satisfied By An Explanation That Allows For Meaningful Review

HELCHER v. DEARBORN COUNTY (February 9, 2010)

Cincinnati Bell Wireless provides wireless services to, among others, the people of Dearborn County, Indiana. In order to improve signal coverage in the area, Cincinnati Bell decided it needed a new cell phone tower. It selected a piece of agriculturally zoned property for the tower and applied for a conditional use permit. The company worked with two consultants to the local Zoning Board in completing its application. The consultants recommended that the granting of the permit, although it was the first time they had recommended the construction of a new tower over the co-location of transmitters onto existing structures. The Board met and heard from the consultants, Bell, and a number of local landowners who opposed the tower. The Board denied the application. At a later meeting, the Board denied Bell's request to reconsider the denial and approved the minutes of the earlier meeting. Bell sued the Board, alleging several violations of the Telecommunications Act of 1996. Specifically, Bell alleged that the decision was not based on substantial evidence, that the Board minutes did not constitute a sufficient written decision, that the Board unreasonably discriminated against Bell, and that the decision effectively denied wireless services. The district court granted summary judgment to the defendants. Bell appeals.

In their opinion, Judges Flaum, Rovner, and Wood affirmed. Bell raised the same four arguments. The Court started with the "in writing" requirement of the Telecommunications Act, a question of first impression in the Seventh Circuit. Other circuits' holdings range from allowing a "Denied" stamp on an application to demanding detailed conclusions linked to specific evidence. Noting that the purpose of the requirement is to ensure meaningful judicial review, the Court joined several other circuits in concluding that the requirement is met if there is a sufficient explanation of the Board's reasons to allow a court to evaluate the supporting evidence. Here, the "writing" is the seventeen pages of minutes. The Court concluded that they were sufficient under the Act. They described the issues, the evidence presented by both sides, the concerns of the Board, and the specific Ordinance provisions on which the Board based its denial. On the Court’s review of Bell’s argument that the denial was not supported by substantial evidence, it considered each of the three Ordinance provisions separately. Although the Court found the evidence in support of one of the Ordinance violations thin, it concluded that the other two were supported by substantial evidence. Finally, the Court rejected the “effectively prohibit” and “unreasonably discriminates” arguments. On the former, Bell failed to show that alternatives did not exist. On the latter, Bell presented no evidence of another carrier that was treated more favorably.

Absence Of "Substantial Control" Defeats Title IX Liability

DOE-2 v. MCLEAN COUNTY UNIT DISTRICT NO. 5  (January 22, 2010)

Jane Doe-2 was an elementary school student in the Urbana School District between 2005 and 2007. She alleges that she was sexually harassed by one of her teachers. She also alleges that: a) the same teacher was employed by the McLean County School District from 2002 to 2005, b) the teacher sexually harassed McLean County students during that time, c) McLean County school officials were aware of the harassment, and d) school officials concealed the harassment and provided a positive letter of recommendation. In fact, the teacher pleaded guilty to aggravated criminal sexual abuse of students in both school districts in 2007. Doe-2 brought suit against both school districts and district officials. The Urbana defendants settled. Against the McLean defendants, Doe-2 asserts a federal Title IX claim and a state court claim. The court dismissed the claims. Doe-2 appeals.

In their opinion, Judges Cudahy, Wood and Tinder affirmed. Although the Court recognized the existence of a private right of action under Title IX, it also noted its reluctance, pursuant to Supreme Court precedent, to expand implied statutory remedies. In order to state a Title IX claim, a victim of sexual harassment must establish that a school district had actual knowledge of the harassment and had substantial control over both the person and context of the harassment. Since the McLean defendants had no control over the teacher while he was employed in Urbana, the Court concluded that the Title IX requirements were not met. The Court also rejected Doe-2’s theory in which liability rested on the defendant's conduct while the teacher was still a McLean employee and under defendants’ control. The Court held to its requirement that the acts of harassment be under the defendants’ control. Addressing the plaintiff's state law claim of willful and wanton misconduct, the Court focused on the element of duty. One does not normally have a duty to protect another from an attack by a third person. Such a duty can sometimes arise out of a special relationship between the plaintiff and defendant. In fact, a school district sometimes does have a duty to protect its students. The Court was aware of no precedent, however, finding the existence of a duty where the student and the location of the offense were beyond the defendants' authority.

Motion To Reopen Citizenship Application After Termination Of Removal Proceedings Eliminates The §1503(a) Bar

ORTEGA v. HOLDER (January 15, 2010)

Angie Ortega was the target of removal proceedings brought by the government in 2001. She asserted as a defense in those proceedings that she was a United States national. While the proceeding was pending, she filed an application for citizenship with the Immigration and Naturalization Service. When her application was denied, she appealed to the Office of Administrative Appeals (AAO). Meanwhile, the Immigration Judge in the removal proceedings dismissed with prejudice, concluding that she had in fact proven her citizenship. Months later, the AAO denied her appeal. She filed a motion to reopen and to reconsider, in which she referred to the ruling of the Immigration Judge. The AAO, four years later, denied her motion. It concluded that her motion was untimely in that it had been filed with the wrong office. It also concluded that it was at best a motion to reconsider rather than a motion to reopen. Although the regulations permit consideration of untimely motions to reopen upon a showing of reasonableness, they do not allow such discretion for a motion to reconsider. Ortega brought an action in federal court seeking a declaration of nationality under 8 U.S.C. §1503(a). On the government's motion, the district court dismissed the action on the ground that her citizenship arose in connection with her removal proceeding and her claim therefore fell within the §1503(a) exclusion. Ortega appeals.

In their opinion, Judges Flaum, Ripple and Sykes reversed and remanded. The Court began with the language of the statute. It provides that a person who is denied a right or privilege of citizenship on the ground that she is not a national may bring an action for a declaration of citizenship. The statute contains an exception. It prohibits an action if the issue of the person’s status as a national arose "by reason of, or in connection with" a removal proceeding. The Court emphasized that its interpretation of the words of the statute must also consider its context and its relationship to other provisions. In doing so, the Court stated that the exceptions were designed to prevent judicial interference into removal proceedings and to maintain a single, exclusive opportunity to challenge a removal order. Examining the various options for obtaining a declaration of citizenship, the Court concluded that Congress failed to consider the scenario in which worked Ortega found herself. A judicial declaration of citizenship, when it is pursued through the removal route, is available only when there is an order of removal that can be reviewed under §1252. Since Ortega prevailed at her removal proceeding, there was no order of removal to challenge. The Court was quite certain that Congress did not purposefully leave those in Ortega's situation without a remedy. The proper approach in such a case is to begin the application process anew after the termination of the removal proceedings. Although the government suggested a resubmission of one's application was required, the Court preferred a motion to reopen the citizenship proceedings on the “new fact” of the termination of removal proceedings. That re-instituted matter would no longer be burdened with the “arose by reason of” exclusion of §1503. Here, Ortega already filed a motion to reconsider after the removal proceedings had been terminated. She was then denied relief. Her status as a national is no longer considered to have arisen in the removal proceeding. She can avail herself of the declaratory judgment relief available under §1503.

City's Unsupported Demand For Special Use Permit Is A "Substantial Burden" Under RLUIPA

WORLD OUTREACH CONFERENCE CENTER v. CITY OF CHICAGO (December 30, 2009)

In Chicago, the World Outreach Conference Center ("WOCC") operates a community center. It is a Christian organization, one of whose goals is to assist and provide relief to the needy and suffering. WOCC purchased the center in 2005 from the YMCA. Although the land was rezoned several years ago, YMCA's operations were a legal nonconforming use. WOCC wants to operate the building by renting out its many apartments – just as the YMCA did. The Center did need a single-room-occupancy (SRO) license to operate. Apparently because an alderman had wanted a financial backer to acquire the property, the City refused to grant the license. WOCC brought suit under the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), challenging the City's refusal to grant the license. Although the City eventually did grant the license, the suit continued with its claim for damages. The court dismissed the complaint. WOCC appeals.

In Peoria, the Trinity Evangelical Lutheran Church purchased property adjacent to its church. It wanted to raze the building in order to build a family center. The City, in response to a neighborhood group’s application, designated the building a landmark and blocked the demolition. Trinity brought suit under RLUIPA, alleging that the landmark designation imposed a substantial burden on religious activities. The court granted summary judgment to Peoria. Trinity appeals. 

In their opinion (in these consolidated cases), Judges Cudahy, Posner and Rovner affirmed in part and reversed in part in Chicago and affirmed in Peoria. RLUIPA prohibits government land-use regulation that imposes a substantial burden on religious activities unless it is in support of a compelling government interest and is the least restrictive means to the end. It also prohibits non-equal or discriminatory treatment directed at a religious assembly through land-use regulation. The Court first addressed and rejected Chicago’s argument that RLUIPA exceeds Congress’ authority, relying on the enforcement clause of the Fourteenth Amendment as well as Congress’ power to regulate interstate commerce. On the merits in WOCC, the Court concluded that the dismissal of WOCC’s substantial-burden claim was erroneous. WOCC was entitled to operate without the special use permit demanded by the City and the City had no basis for refusing the SRO license. The burden was substantial and there was no compelling government interest. The Court also: a) affirmed the dismissal of the discrimination claim (WOCC was badly treated – but it had nothing to do with religion), b) reversed the dismissal of the equal protection claim (on a class-of-one theory), and c) affirmed the dismissal of the damages claim for violation of the Chicago Zoning Ordinance.On the merits in Peoria, the Court concluded that the burden imposed on Trinity did not reach “substantial.” The property had value and could be sold and there are suitable alternatives for the family center.

Intrastate Delivery Is Considered Part Of Interstate Commerce

COLLINS v. HERITAGE WINE CELLARS (December 21, 2009)

Heritage Wine Cellars is a wholesale wine importer and distributor. It buys wines outside of Illinois (and frequently outside of the country) and brings it to Illinois for sale to retail stores. Although it controls the wine and its shipment during the entire journey, Heritage retains independent contractor carriers to bring the wine into the state. Within Illinois, it uses its own trucks and drivers to distribute the wine. Anthony Collins is one of those truck drivers employed by Heritage. He and other drivers brought an action against Heritage pursuant to the Fair Labor Standards Act (FLSA). They allege that Heritage failed to pay required overtime. The district court ruled that Collins transported the wine in interstate commerce and Heritage was therefore exempt from the overtime provisions of the FLSA. Collins appeals.

In their opinion, Judges Posner, Manion and Tinder affirmed. The Court critically noted the jurisprudence surrounding the "interstate commerce" issue. It found no fewer than seventeen "unweighted technical criteria" in the cases and regulations. Although admitting that some cases may require a more complex analysis, the Court found four criteria that allowed it to dispose of the case. Those criteria were: a) although Heritage did not have a customer for all of the wine it imported, its volume of imports was determined by customer demand, b) Heritage did not process or otherwise modify the wine at its warehouse, c) Heritage maintained control over the wine, and d) the shipper bore the ultimate responsibility for transportation charges. Under those circumstances, concluded the Court, the wholly intrastate leg of a shipment is considered to be part of interstate commerce.

PMPA Notice Period Does Not Start While Franchisor Is Investigating Conflicting Accounts

RAO v. BP PRODUCTS NORTH AMERICA (December 9, 2009)

Salik Rao operated as a BP gasoline service station dealer in the Chicago area. For 10 years beginning in the early 1990s, Rao gave over $100,000 worth of cash and gifts to a BP sales manager. In return, the sales manager performed many favors for Rao, to his great benefit. In 2003, Rao reported this improper activity to BP. However, he characterized it as extortion on the part of the sales manager. BP begin an investigation which ultimately led to the termination of the sales manager in November of 2003. BP continued its investigation, seeking to confirm the extortion. Although Rao promised to cooperate, he never met with BP after November of 2003 and affirmatively withdrew his pledge of cooperation in June of 2004. BP notified Rao in October 2004 that it was terminating its franchise relationship with him because of his improper activity. Rao brought suit under the Petroleum Marketing Practices Act ("PMPA"), as well as RICO, fraud, breach of contract and extortion. The court dismissed the counts based on RICO, fraud and breach of contract and granted summary judgment on the PMPA claim. Rao appeals.

In their opinion, Judges Bauer, Flaum and Williams affirmed. The principal issue on appeal was whether BP's notice of termination was sufficient under the PMPA. The PMPA, which protects service station franchisees, allows early termination of franchise agreements in certain circumstances, which Rao does not contest here. The PMPA requires the franchisor to give a notice of such early termination within 120 days of when it "first acquired actual or constructive knowledge" of the reason for the termination. Here, it is uncontested that BP knew of the improper conduct well over 120 days before providing termination notice. The Court focused, however, on what BP knew when and what BP did. From the fall of 2003 through the middle of 2004, Rao continued to insist that he was a victim of the sales manager's extortion. The sales manager, at the same time, insisted that the gifts were given voluntarily in exchange for his favors. The Court concluded that the statute did not require BP to give notice while it was still investigating the allegations. It was not until Rao ceased his cooperation that the clock started. BP's notification was sent within 120 days of that date and was therefore proper. The Court affirmed the rest of the lower court's judgment as well.

Class Failed To Show That Post-Work Showering Was Integral Part of Employment

MUSCH v. DOMTAR INDUSTRIES (November 25, 2009)

Alan Musch is an hourly maintenance employee at one of Domtar's paper mills in Wisconsin. Because he is regularly exposed to hazardous chemicals during a shift, he must shower and change his clothes before leaving the mill. He is not compensated for that time. He brings an action on behalf of himself and the other maintenance employees under the Fair Labor Standards Act and Wisconsin state law for overtime compensation. The court entered summary judgment for Domtar. The class appeals.

In their opinion, Judges Bauer, Kanne and Evans affirmed. The FLSA does require an employer to pay its employees for all their work. Although an employer is generally not required to compensate an employee for activities (such as cleaning up) at the end of the workday, compensation may be required if the activity is an integral part of the employment. The Court agreed with the district court's findings that the class failed to establish that chemical exposure was so pervasive that cleanup was required at the end of each day. The Court also noted that Domtar had a policy requiring maintenance employees to shower and change clothes whenever they were exposed to hazardous chemicals, even if not at the end of their shift. The Court concluded that the activities were non-compensable.

Silence In Notice Of Reopening Supports Dismissal Of Administrative Appeal

LITTLE COMPANY OF MARY HOSPITAL v. SEBELIUS (November 24, 2009)

Little Company of Mary Hospital (the "Hospital") participates in the federal Medicare program. Because it serves a disproportionate number of low-income patients, it is entitled to an adjustment to its payments based on a formula that takes into account both Medicaid patient-days and Supplemental Security Income patient-days. Under the reimbursement scheme, the hospital submits its reports and its assigned Intermediary reviews and issues a Notice of Program Reimbursement (NPR). The NPR is final if not appealed within 180 days. Beyond the direct appeal process, however, an Intermediary can reopen a specific issue within three years, on its own or at a provider's request. The Intermediary then issues a revised NPR. The revised NPR is subject to the same appeal rights, but only with respect to those issues actually reopened. The Hospital did not appeal the NPR issued in September 2000, covering the period ending June 1998. It did, however, request a reopening within three years. It requested a recalculation of both its Medicaid and SSI patient-days. The Intermediary granted the reopening with respect to Medicaid patient-days but did not mention SSI patient-days. When the Intermediary issued its revised NPR with adjusted Medicaid days, the Hospital appealed with respect to both the revised Medicaid days and the refusal to adjust SSI days. After it exhausted its administrative remedies without success, the Hospital filed suit. The court denied the Hospital's requested discovery and granted summary judgment against it. The Hospital appeals.

In their opinion, Judges Posner, Flaum and Rovner affirmed. The Court identified the issue as whether the intermediary reopened the SSI calculation when it reopened the Medicaid calculation. If the SSI calculation was never reopened, it is not subject to appeal. The Hospital argues that the SSI calculation was reopened -- but that the Intermediary simply denied relief. The Court relied on the Intermediary's notice of reopening. The notice of reopening is required by the regulations and here gave the Hospital notice that the Intermediary was reopening the Medicaid calculation. It did not provide notice of a reopening of the SSI calculation. The Court concluded that the silence with respect to the SSI calculation indicated that it was not reopened. With respect to the discovery requests, the Court concluded that the district court did not abuse its discretion. The general rule is that administrative review is confined to the administrative record. The Hospital failed to make its case for an exception.

FHA Discrimination Actions May Cover Post-Purchase Conduct

BLOCH v. FRISCHHOLZ (November 13, 2009)

The Blochs have owned and occupied several units in the Shoreline Towers condominium building in Chicago for years. The Blochs are Jewish – each of them has, for years, displayed a mezuzah on the doorpost of his or her unit. In 2001, the Board of Managers of the Condo Association enacted a new rule that prohibited the placement of "objects of any sort" outside any unit in the building. For several years, enforcement of the rule was generally limited to the removal of clutter. In 2004, however, the Association begin to interpret the rule to include a mezuzah (as well as wreaths, crucifixes, political posters, etc.). Despite repeated appeals and attempts to educate the Board on the religious significance of a mezuzah, the practice continued. The Blochs filed suit, seeking relief under the Fair Housing Act (FHA) and 42 U.S.C . § 1982. The district court granted summary judgment to the defendants. A panel of the Seventh Circuit affirmed, with one dissent. The Blochs sought rehearing en banc.

In their opinion, Chief Judge Easterbrook and Judges Bauer, Posner, Kanne, Wood, Evans, Sykes and Tinder affirmed in part and reversed and remanded in part. The Blochs asserted three separate FHA theories -- the Court addressed each in turn. Under § 3604(a), it is unlawful to "refuse to sell or rent" or to "refuse to negotiate for the sale or rental" or to "otherwise make unavailable" a dwelling to a person because of religion. Referring to its decision in Halprin, the Court stated that the FHA is generally concerned with access to housing and does not support a claim of discrimination arising after a purchase. Although the Court thought the section might support a constructive eviction claim, it concluded that the Blochs could not maintain such a claim since they never vacated the premises. The Court affirmed with respect to § 3604(a). Section 3604(b) prohibits discrimination based on religion against any person in the terms or conditions of the sale or rental of a dwelling. The Court concluded that one of the terms and conditions of the Blochs' purchase of a condominium unit was their agreement to be governed by the Condo Association and its Board of Managers. Although § 3604(b) does not address isolated discriminatory conduct of neighbors, the Court concluded that it did prohibit the Association from discriminating against the Blochs in its enforcement of its rules. The Blocks could rely on § 3604(b) if they produced sufficient evidence of discrimination. Thirdly, the Court considered § 3617 of the FHA. That section makes it unlawful to "coerce, intimidate, threaten, or interfere" with any person's exercise or enjoyment of any right granted by other sections of the FHA. The Court concluded, effectively overruling part of Halprin, that the interference could occur post-purchase. Like their claim under § 3604(b), the Court concluded that the Blochs could pursue a claim under § 3617 if there were sufficient evidence of discriminatory intent. On the issue of discriminatory intent, the Court concluded that the combination of facts and inferences on the record was sufficient to allow a jury to conclude that the conduct of the Association was intentionally discriminatory toward the Blochs because of their religion.

Voter Registration Form Is Not A Motor Vehicle Record Under The Driver's Privacy Protection Act

LAKE v. NEAL (November 6, 2009)

Joseph Lake applied for a drivers license with the Illinois Department of Motor Vehicles (“DMV”). The National Voter Registration Act permits a citizen to register to vote at the same time he or she applies for a driver’s license -- so Lake filled out a voter registration form. After he allegedly learned that someone acquired his personal information from the Chicago Board of Election Commissioners, Lake filed suit. He alleges that the Board violated the Driver's Privacy Protection Act (“DPPA”) when it disclosed his personal information. The district court granted a motion to dismiss. Lake appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Evans affirmed. The DPPA does provide a private cause of action against one who discloses information "from a motor vehicle record." The statute defines "motor vehicle record" as any record that pertains to any one of several documents issued by the DMV. The Court concluded that the voter registration form does not pertain, in the common sense of that word, to any document issued by the DMV. Although it can be filled out as part of the same process, it is not a part of and has nothing to do with any DMV documents. Since it is not a “motor vehicle record,” there is no cause of action for the wrongful disclosure of information contained therein.

Court Considers Effect Of Permitted And Non-Permitted Uses On Government Goals In Considering RLUIPA Violation

RIVER OF LIFE KINGDOM MINISTRIES v. HAZEL CREST (October 27, 2009)

River of Life Kingdom Ministries ("Ministries") is a small religious organization that does not occupy its own facility. Instead, it shares space with two other religious organizations in a dirty warehouse. The Ministries decided to purchase a new facility where it could better promote its community goals. It purchased property in Hazel Crest, even though the village had zoned the area for economic redevelopment. The ordinances allowed general commercial and retail uses but did not allow religious services. After its application for a special-use exception was denied, the Ministries filed a complaint and motions for a temporary restraining order and preliminary injunction. The complaint alleged that the ordinance violated the Equal Terms provision of the Religious Land Use and Institutionalized Persons Act ("RLUIPA"). While the motion for a preliminary injunction was pending, the village amended the ordinance to exclude meeting halls, public schools, community centers and other uses in an effort to ensure the ordinance's compliance with RLUIPA. The court denied the preliminary injunction. The Ministries appeal.

In their opinion, Judges Cudahy, Manion and Williams affirmed. The Court first stated the burden for obtaining a preliminary injunction: a reasonable likelihood of success on the merits, irreparable harm and a balancing of the harms based on the likelihood of success. With respect to its likelihood of success on the merits, the Court concluded that the Ministries was unlikely to succeed. The Equal Terms provision of the Act prohibits land-use regulations that treat religious assemblies on "less than equal terms" with non-religious assemblies. The Court discussed and critiqued the approaches of the Eleventh and Third Circuits. The Court preferred the Third Circuit approach, which allows a court to compare the effects of the allowed and disallowed uses on the local government's goals. Here, Hazel Crest's goal was to create a tax-generating commercial district. All of the "assemblies" that were allowed by the ordinance were commercial ventures. The Court concluded that the village's exclusion of non-commercial uses, including religious assemblies, was not likely to violate the RLUIPA. Although the Court then concluded that the relocation was instrumental to the Ministries' mission and could be considered irreparable harm, it did not believe that that harm significantly outweighed the harm to Hazel Crest.

A State Court Complaint Need Not Be Dismissed During The Pendency Of A Shipowner's Limitation Of Liability Act Proceeding -- A Stay Is Sufficient

AMERICAN RIVER TRANSPORTATION CO. v. RYAN (August 27, 2009)

Kerrie Vesolowski was a passenger on a motor boat when it collided with a barge. Vesolowski sued American River Transportation Co. to recover for injuries in state court. American filed an action in federal court pursuant to the Shipowner's Limitation of Liability Act. The Act limits a shipowner's liability to the value of its ship if it can prove that the acts complained of occurred without its privity or knowledge. The Act also requires that any claims brought against the owner “cease” during the pendency of the proceedings. The district court ordered that Vesolowski’s proceedings be stayed. Vesolowski complied. After more than a year, American asked the court to find Vesolowski (and others) in contempt and to impose sanctions. The court granted the motion and required Vesolowski to dismiss her state court action. Vesolowski appeals.

In their opinion, Judges Bauer, Ripple and Wood reversed and remanded. The Court first clarified its jurisdiction, noting that it has jurisdiction over an order modifying an injunction but lacks jurisdiction over an order interpreting an injunction. The Court concluded that the order modified the earlier injunction because it required that the case be dismissed, rather than merely stayed. Addressing the merits, the Court noted that the order had two possible bases: 1) the Act requires a dismissal rather than a stay, or 2) the Act requires only a stay and the dismissal is a sanction for Vesolowski's actions during the stay. The Court rejected the first basis. The use of the word "cease" in the Act and the Act's provision preserving Vesolowski's right to her state court remedy convinced the Court that the Act only requires a stay. The Court rejected the second basis as well, as it found no grounds for a sanction. The state case remained stayed. Vesolowski's only action was to add additional defendants and theories of liability. American never had to respond in state court. The Court expressed its opinion that the district court did not intend the dismissal order to be a sanction. If it did, however, it was an abuse of discretion.

Veterans' Benefits Improvement Act's Elimination Of A Statute of Limitations Is Not Applied Retroactively

MIDDLETON v. CITY OF CHICAGO (August 24, 2009)

From 1960 until 1989, Charles Middleton served in the Air Force. On two occasions in the early 1990s, he applied for positions with the City of Chicago. He was not hired for either position. In 2007, Middleton sued the City pursuant to the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA). He alleged that the City refused to employ him on account of his military service. The district court applied the four year "catch-all" statute of limitations in 28 U.S.C. § 1658 (a) and dismissed his complaint. Middleton appeals.

In their opinion, Judges Kanne, Rovner and Wood affirmed. The Court considered not only the application of § 1658 (a) to the claim but also the provisions of the Veterans' Benefits Improvement Act (VBIA), enacted after the appeal. Section 1658 was enacted in 1990. Its purpose, said the Court, was to minimize the borrowing of state statutes of limitations for federal causes of action. It provided a four-year statute of limitations for any federal claim brought under a later-enacted statute, if the statute had no expressed limitations period. USERRA was enacted four years later and contained no expressed statute of limitations. The Court concluded, based on the plain meaning of the statute, that the four-year limitations applied. In doing so, it rejected the Middleton's arguments that: 1) the section did not apply because USERRA was simply an amendment of an earlier-enacted statute, and 2) the legislative history indicated Congress' intent that no statute of limitations apply. The Court turned its attention to the VBIA. The VBIA eliminates any limitations period for a USERRA cause of action. The Court noted the "well-established" rule that a statute should not be applied retroactively unless Congress' intent is clear. Nothing in the statute addresses retroactivity. The Court concluded that the statute should not be given retroactive effect. Finally, the court rejected Middleton's argument that the VBIA was merely a clarification of existing law.

The Defense Base Closure And Realignment Act Of 1990 Supersedes The Provisions Of An Earlier Statute Granting A State's Governor Veto Power Over Redeployment Of A National Guard Unit

QUINN v. GATES (July 29, 2009)

Congress passed the Defense Base Closure and Realignment Act of 1990 in order to prevent local interests from outweighing national needs with respect to base closures. The Act creates a Commission that recommends changes and disbands once it delivers its report to the President. The President can accept or reject the recommendations, but only in their entirety. If the President accepts the recommendations, they are forwarded to Congress. Congress can allow the recommendations to proceed, in their entirety, or they can reject the recommendations, also in their entirety. The all-or-none approach was a key component of the legislation. In 2005, a Commission made recommendations that were accepted by the President and Congress. One recommendation was to move fifteen F-16 jets assigned to the Illinois Air National Guard to a base in Indiana. The Governor of Illinois brought suit to enjoin the recommendations, contending that federal law granted veto power to a state's governor before any changes could be made to a unit of the National Guard. The district court dismissed the suit for a third time (the first two were reversed by the Seventh Circuit). The Governor appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Sykes affirmed. The question on appeal was whether the Act trumped other limitations on the President's power to change National Guard assignments. The Court, citing Justice Souter's concurrence in Dalton, concluded that the Act gave the President unfettered discretion to accept or reject a Commission’s recommendations. The end result, however, had to be a wholesale acceptance or rejection. Any attempt to cherry pick is forbidden by the Act. The Court concluded that the Act provided an independent means for the President to realign national resources and supersedes any prior statute that is incompatible with its premise. The Court emphasized that it was not holding that it lacked subject-matter jurisdiction -- only that the Governor loses on the merits.

State System Established Under The Developmental Disabilities Assistance And Bill Of Rights Act Is Not A "Person" For Section 1983 Purposes And Cannot Sue A State Agency In Federal Court

INDIANA PROTECTION AND ADVOCACY SERVICES v. INDIANA FAMILY AND SOCIAL SERVICES ADMINISTRATION (July 28, 2009)

The State of Indiana receives federal funds under programs designed to assist those with disabilities and mental illnesses. In return, it must have a system to protect and advocate for their rights. The Indiana Protection and Advocacy Services ("Services") is the system the state created for that purpose. As such, it is entitled to investigate incidents of abuse and neglect and to see patient records, unless the patient has a legal guardian in charge of his or her interests. When a mentally disabled patient died at a state hospital, Services investigated. The hospital refused to turn over the patient's medical records. Services filed suit in federal court, naming the hospital and the state agency in charge of its operation, Indiana Family and Social Services Administration. The district court found that the hospital was required to turn over the records. The defendants appeal.

In their opinion, Chief Judge Easterbrook and Judges Sykes and Kendall vacated and remanded. The Court never reached the merits. It noted that neither statute in question created an express right of action for a state system such as Services. If there is a private right of action to enforce the provisions of the statutes, it comes from § 1983. The Court added, however, that Services is a state actor. It is therefore not a "person" under § 1983 and cannot sue a state agency. The Court remanded with instructions to dismiss for lack of jurisdiction.

The Adam Walsh Child Protection And Safety Act of 2006 Does Not Apply To Persons In The Physical, But Not Legal, Custody Of The Bureau Of Prisons

UNITED STATES v. HERNANDEZ-ARENADO (July 6, 2009)

Pablo Hernandez-Arenado (Hernandez) was awarded immigration parole when he came to the United States from Cuba as part of the Mariel Boatlift. Four years later, Hernandez pled guilty to the sexual assault of a young boy and was sentenced to five years in state prison. He admitted to several hundred similar episodes. The Immigration and Naturalization Service (“INS”) revoked his parole and placed him in a Bureau of Prisons (“BOP”) facility after his release from state prison, pending deportation. Hernandez filed a petition for a writ of habeas corpus after 20 years in custody, after the Supreme Court ruled that the statute under which Hernandez was being held only allowed a reasonable period of custody pending removal. The petition was granted and his release was ordered. Before Hernandez was released, the government sought to civilly commit him as a sexually dangerous person pursuant to the Adam Walsh Act. The district court denied the petition, holding that the Adam Walsh Act applied only to individuals "in the custody of" the BOP and that Hernandez was in fact in the custody of Immigration and Customs Enforcement (“ICE”), the successor agency to INS. The government appeals.

In their opinion, Judges Ripple, Rovner and Evans affirmed. The Court stated that the Supreme Court has recognized different meanings for the word "custody" in different contexts. Here, for example, the BOP has physical custody of Hernandez but the ICE has legal custody. The Court went on to say that the Bureau of Persons has physical custody of many persons for whom it does not have legal custody and, in fact, has legal custody of many persons over whom it does not have physical custody. The Court did not believe that the applicability of the Act should turn on a factor, like physical custody, that is random and manipulable. Even the government refused to suggest a standard test for determining custody, and does not believe that every person in its physical custody is subject to the Act. The Court insisted on giving the term a meaning that applied beyond the narrow facts of the case. It rejected a physical custody trigger and instead adopted the interpretation that the Act applied to all federal offenders, whether they were in the physical custody of the Bureau of Prisons or not, but not to persons in the physical control of the BOP simply as a service to another agency.

Court Adopts Majority Position That "Based Upon" Language In The Qui Tam Jurisdictional Bar Is Satisfied When The Relator's Allegations Are Substantially Similar To The Publicly Disclosed Allegations

GLASER v. WOUND CARE CONSULTANTS, INC. (July 2, 2009)
 

Carol Glaser is a Medicaid recipient with some serious medical problems. She started receiving care at Wound Care Consultants, Inc. in 2002. At some point, an attorney contacted her and advised her that Wound Care may have submitted improper billing to Medicaid. Glaser filed a qui tam action under the False Claims Act in April of 2005. However, several months before she filed, a routine audit led the Centers for Medicare & Medicaid Services ("CMS") to begin an investigation of Wound Care. Glaser and her attorney stated that they were unaware of the CMS investigation. Nevertheless, the district court dismissed the action on the ground that it was based upon a public disclosure and that Glaser was not an “original source.” Glaser appeals.

In their opinion, Judges Cudahy, Kanne and Sykes affirmed. The Court described the essence of the False Claims Act. The Act prohibits false payment claims to the government. It allows private citizens to file actions on the government’s behalf and receive a substantial share of the recovery, if successful. Qui tam actions, as they are called, are barred if the action is “based upon the public disclosure” of allegations unless the person is an “original source.” This jurisdictional bar necessitates a three-part inquiry: a) whether the allegations have been publicly disclosed, b) if so, whether the action is based upon the disclosure, and c) if so, whether the person is an original source. The Court applied the test to the facts. Public disclosure is satisfied when, as here, the very agency responsible for investigating claims of abuse has started an investigation before the action was filed. The fact of the investigation need not be widely known. With respect to the second prong, the Court noted its earlier precedent that held that “based upon” meant that the allegations actually depended on and were derived from the publicly disclosed information. However, the Court recognized that eight other circuits apply a different test -- an allegation is "based upon" publicly disclosed information when the allegations are substantially similar. The Court conceded the merits of the majority position. Although its construction of the statute is consistent with the plain language doctrine, the Court recognized that its position made the third prong of the test -- original source -- superfluous. In doing so, the Court overruled Bank of Farmington and Caremark. Applying their new standard, the Court concluded that Glaser's allegations were not only substantially similar, but were nearly identical, to those of CMS. Finally, with respect to the third prong of the test, the Court held that Glaser was not an "original source" of the information contained in her action. The Court principally relied on the fact that Glaser knew of the fraudulent conduct only through her attorney but asserted the attorney-client privilege to prevent disclosure of how she learned the information. Thus, she did not meet the burden of proving that she had independent knowledge of the fraud.

The Resolution Of An Employee's Personal Employment Suit Does Not Preclude A Later Qui Tam Action

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.

FELA's Provision That Eliminates A Contributory Negligence Reduction In Damages If A Railroad Violates A Safety Statute Only Applies To Statutes That Implement Federal Safety Norms

FLETCHER v. CHICAGO RAIL LINK, L.L.C. (May 28, 2009)

William Fletcher was injured while driving a utility vehicle in a rail yard. He sued Chicago Rail Link under the Federal Employers Liability Act. He alleged that the accident was caused by the railroad's failure to maintain the vehicle in a safe condition. A jury awarded him $700,000 in damages but also found that he was 50% negligent himself. Under FELA, such a finding would reduce the damages by one half unless the court finds that the employer violated "any statute enacted for the safety of employees" and that the violation contributed to the accident. The district court found that Chicago Rail Link had violated an Illinois Commerce Commission regulation and awarded full damages. Chicago Rail Link appeals.

In their opinion, Judges Posner, Manion and Kanne affirmed in part and reversed in part. The Court first noted that the "any statute" language in FELA includes regulations issued by a state agency which is "participating in investigative and surveillance activities" pursuant to 49 U.S.C. § 20105. Section 20105 allows the Secretary of Transportation to prescribe investigative and surveillance activities to enforce safety regulations and provides that a state may participate in those activities when the safety practices are regulated by a state authority. The Court disagreed with the lower court's ruling that all railroad worker safety regulations are included within § 20105. Rather, the Court concluded that FELA only applies to state regulations that support or implement federal safety norms. Since the Illinois regulation at issue was not such a regulation, the Court determined that it was not "any statute" as contemplated by FELA. The Court remanded for the 50% reduction in damages.

Labor Union Has An Implied Cause Of Action Under § 501 Of The Labor-Management And Reporting Disclosure Act Of 1959

INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 150 v. WARD (April 16, 2009)

Local 150 represents over 22,000 union members in Illinois, Indiana and Iowa. Joseph Ward was its treasurer 1986 until 2007. In 1994, the president of the local asked Ward to purchase property adjacent to the local’s headquarters. Instead of purchasing the property for the union, however, Ward participated in the purchase of the property by an investment group. The group sold the parcel several years later at a substantial profit. Local 150 filed a complaint against Ward, alleging violations of § 501 of the Labor-Management and Reporting Disclosure Act of 1959 (the “Act”) and breaches of fiduciary duty. The district court dismissed the complaint, concluding that § 501 does not allow a labor union to bring a private cause of action. Local 150 appeals.

In their opinion, Judges Kanne, Williams and Sykes reversed and remanded. The Court started with the language of the Act. Section 501(a) imposes fiduciary duties, including a duty of loyalty, on a union’s officers and agents. Section 501(b) creates a federal cause of action for individual union members. Damages recovered under § 501 (b) inure to the benefit of the union itself. Before a union member may sue, she must make a demand that the union take appropriate action and then must receive the court’s permission, on a showing of good cause, to proceed. The Act is silent on a union’s ability to bring an action. On that threshold question, the Court first found no express cause of action under a plain reading of the Act. With respect to whether the Act contains an implied cause of action, the Court noted a split of authority between the Ninth in Eleventh Circuits. Relying on the Supreme Court’s holding in Alexander, the Court concluded that its task was to determine whether Congress intended to create both a private Right and a private remedy. The Court's analysis of the text and structure of § 501 led it to conclude that Congress did intend to create both a federal right and a federal remedy for a union.

Local Government's Eminent Domain Power Is Not Pre-Empted By Federal Housing Laws, Even If It Does Clash With Their Purpose

CITY OF JOLIET, ILLINOIS v. NEW WEST, L.P. (April 9, 2009)

The City of Joliet filed eminent domain proceedings to acquire the Evergreen Terrace Apartments. New West, the owner of the apartment complex, filed an action under 42 U.S.C. § 1983. New West sought an injunction and damages, alleging that federal law preempted Joliet's attempts to condemn the property. The district court originally put the condemnation on hold and dismissed the § 1983 action. On the first appeal, the Court reversed and directed the district court to resolve the condemnation proceedings. On remand, HUD intervened and contended that the condemnation was precluded by two different federal statutes. The district court rejected HUD’s argument and certified the case for interlocutory appeal. New West and HUD appeal.

In their opinion, Chief Judge Easterbrook and Judges Williams and Sykes affirmed. The court reviewed the three federal statutes in play. Section 8 of the Housing Act of 1937 provides federal rent subsidies. Section 221 of the National Housing Act creates a federal government mortgage insurance program. Finally, the Multifamily Assisted Housing Reform and Affordability Act of 1997 provides a mechanism for HUD to renegotiate mortgages under section 221. Owners who renegotiate under the 1997 Act must promise to maintain availability for low income tenants for 30 years. Evergreen Terrace participated in all three programs. The Court held in the first appeal that Section 8 does not preempt any eminent domain proceeding. HUD argues that a condemnation would interfere with the purposes of Section 221 and the 1997 Act, both of which are designed to preserve low income housing stock. The Court noted that the Supreme Court recently warned against using preemption inferred from a clash of goals and objectives. Only if an agency has issued a preemptive regulation with the force of law should that power be used expansively. The Court noted that no such HUD regulation exists with respect to eminent domain powers. In fact, the Court did not even agree that the clash of goals even existed. All three federal statutes are voluntary. Even when used, private owners can withdraw from the programs at any time. Without such a regulation, the Court concluded that the eminent domain should go forward.

Tax Activist's Promotion And Sale Of Package Designed To Encourage Non-Compliance With Federal Tax Law Is A "Plan" Prohibited By 26 U.S.C. § 6700

UNITED STATES v. BENSON (April 6, 2009)

William Benson claims to believe that the 16th Amendment to the United States Constitution was never properly ratified and that, as a result, the federal income tax system is unconstitutional. Benson has written a book on the subject and promotes and sells a package of materials that he claims will allow citizens to refuse to file federal income tax returns and still avoid liability as a result. The United States brought an action against Benson in federal court pursuant to 26 U.S.C. § 6700. The United States sought an injunction preventing Benson from promoting and selling his tax avoidance materials and also sought a list of Benson's customers. The district court enjoined Benson from promoting and selling his package of materials but declined to order him to produce a list of his customers. Benson and the United States appeal.

In their opinion, Judges Bauer, Ripple and Evans affirmed in part, reversed in part and remanded. The Court affirmed the lower court's grant of injunctive relief. The Court first concluded that Benson's activities fit within the broad definition of a § 6700 "plan." Second, the Court concluded that Benson knew or should have known that many of the statements included in the materials were false. Finally, the Court concluded that the statements were material because they could have a substantial impact on a person's decision to purchase his package of materials. Next, the Court concluded that the United States met the injunctive relief threshold contained in the statute. Considering the totality of the circumstances, the court relied on the facts that Benson's violation was not isolated and that he was not likely to stop without the injunction. With respect to Benson's First Amendment claim, the Court concluded that the language of the injunction was specific enough to prohibit only false or deceptive commercial speech -- -- speech not protected by the First Amendment. Benson is still free to encourage political action, communicate a political message, and otherwise share his views about the 16th Amendment or the federal tax system. The Court reversed the lower court with respect to its decision on the customer list. A district court has the authority to issue orders that may be necessary for the enforcement of the tax laws. The Court noted that such an order would not harm Benson but would serve the public interest by allowing the government to both warn Benson's customers of the falsity of his claims and also to enforce the income tax laws of the United States.

Injunction Against City Specifying Detailed Process For Handling Compensatory Time Off Requests Was Improper - There Is An Adequate Remedy At Law

HEITMANN v. CITY OF CHICAGO (March 25, 2009)

The City of Chicago and the police officers' union have agreed to a procedure for police officers to take compensatory time off in lieu of overtime pay. Under the Fair Labor Standards Act, a public employee who has accrued compensatory time off and has requested to use it is permitted to "use such time within a reasonable period after making the request if the use of the compensatory time does not unduly disrupt the operations of the public agency." Several officers with accumulated compensatory time off brought a suit against the City. They contend that they should be allowed to take a particular days of their own choosing unless their absence at that time would result in a shortage of available officers. Conversely, the City contends that it is the department's choice. In their view, an officer may submit a generic request for compensatory time off. The City then decides what days, if any, to allow. The magistrate judge below concluded that the City had no set procedure. The lack of procedure failed to ensure the rights of the officers. He issued a detailed injunction specifying the process the City must use in response to future applications. The City appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Williams vacated the injunction and remanded. As an initial matter, the Court noted that the Fair Labor Standards Act only allows injunctions in suits by the Secretary of Labor and only when the remedy at law is inadequate. Here, any failure of the City to honor the officers' time off rights is compensable by money. The unavailability of an injunction, however, does not mean that the officers are not entitled to a remedy. The Court concluded that the statutory language was not clear and included such open-ended words as "reasonable" and "undue." But the Court looked to an agency regulation that does address the issue. The agency's approach is not unreasonable and is thus entitled to deference under Chevron. The regulation defines "reasonable period" and "unduly disrupt" - and it does so in the same way that the officers do. The Court vacated the injunction and remanded for an award of non-injunctive relief to be determined by the magistrate judge.

Motor Carrier Act's Insurance Requirement Is Stated In Per-Accident, Not Per-Person, Terms

CAROLINA CASUALTY v. ESTATE OF KARPOV (March 17, 2009)

Stanislaw Gill was driving his tractor-trailer on the Indiana Toll Road when he rear-ended a stopped car. More collisions followed. Eventually, four persons died and many others were injured. Carolina Casualty insured Gill and his employer. The policy provided a limit of $1 million of coverage for any one accident. Carolina Casualty filed an interpleader action, naming Gill, his employer, and everyone who had filed a claim arising out of the accident. Carolina Casualty deposited $1 million with court and sought a declaration that $1 million was the limit of its liability. The court granted summary judgment to Carolina Casualty. Margarita Karpov appeals individually and as administratrix of the estate of Dimitry Karpov.

In their opinion, Judges Cudahy, Manion and Williams affirmed. The sole issue on appeal was whether the Motor Carrier Act (“MCA”) and the endorsement issued by Carolina Casualty verifying compliance with the MCA establish coverage limits of $750,000 per person. The Court agreed that the MCA, in § 31139(b), establishes a $750,000 minimum level of financial responsibility. Appellants cite § 13906 for the proposition that the $750,000 level was a per-person, rather than a per-accident, threshold. Section 13906 provides: “The security must be sufficient to pay not more than the amount of the security, for each final judgment against the registrant for bodily injury to, or death of, an individual resulting from the negligent operation, maintenance, or use of motor vehicles, . . . .” Appellants rely on the “for each final judgment” language to argue that the limit was per person. The Court found little authority on the subject. Two district courts have relied on the “not more than” language to hold that § 13906 creates a limit of coverage from a single accident. One of the decisions was affirmed, albeit in an unpublished opinion. The Court agreed with the rationale of the district courts and held that the MCA did not create a per-person limit. The Court also rejected appellants’ argument that the policy endorsement itself created a per-person limit, on several grounds: a) the endorsement merely verifies compliance with the MCA, which does not adopt a per-person limit, b) the endorsement specifically refers to the per-accident limits in the policy itself, and c) the language of the endorsement is provided in a government regulation and states the limits “for each accident.” Finally, the Court found nothing in legislative history or public policy that supported a different conclusion.

Federal Regulation of Railroad Roadbed Design and Construction Does Not Preempt State Requirement of Switchyard Walkways

 NORFOLK SOUTHERN v. BOX (February 11, 2009)

The State of Illinois requires railroads to install walkways alongside railroad tracks in any switching yard built or renovated after February 2003. Norfolk Southern challenged the requirement in the district court, contending that it is preempted by federal law. The district court found for Illinois, first holding that federal law does not cover the subject matter and then, after a bench trial, deciding that the regulation does not conflict with a federal objective. Norfolk Southern appeals. 

In their opinion, Chief Judge Easterbrook and Judges Bauer and Sykes affirmed. The Court first noted a split in both state and federal courts over whether state walkway rules are compatible with federal law. Courts have upheld rules in California, Colorado, and Maryland. Texas and Indiana rules have been struck down as preempted by federal law. The Court3 looked to the federal law. Federal law requires that regulations relating to railway safety be as nationally uniform as practicable – but it allows a state safety regulation to remain in effect until a federal regulation covers the subject matter of the state regulation. There are no federal regulations dealing with railway walkways in particular. Norfolk Southern contends that the comprehensive federal regulation of roadbed design and construction "covers" walkways because they are so integrally related. The Court, noting that the Supreme Court has adopted a more narrow reading of "cover" than Norfolk Southern, rejected that notion. In fact, the Court referred to a still-standing 1977 federal decision to leave walkway regulation to the states. The Court moved on to the question whether the Illinois scheme conflicts with federal objectives. Illinois grants broad discretion over the design and construction of the walkways. Norfolk Southern presented expert testimony that the only viable walkway construction material was gravel but that even gravel would cause drainage problems. The district court discounted the latter conclusion for two reasons. First, photographs in the record of Norfolk Southern switching yards showed that the shallower slope between tracks that the expert said would cause drainage problems already existed. Yet, the expert could not describe the drainage problems or show evidence of yards that had the V-shaped slope he testified was necessary to prevent drainage problems. Second, in response to the court’s questions, the expert was unable to testify regarding the history of compliance with walkway regulations in other states that have had the requirement for years. If compliance with the regulation led to all sorts of drainage or other problems, the records in those states surely would show that. The Court did not find the district court’s finding clearly erroneous on that issue. Finally, the Court refused to address Norfolk Southern’s complaints that specific local situations might make compliance impossible, advising the railroad to work details out with the Commission.

Congress' Explicit Intent To Alter Reservation Boundaries Can Be Found in the Circumstances Surrounding the Act and in Subsequent Events

WISCONSIN v. THE STOCKBRIDGE-MUNEE COMMUNITY (January 20, 2009)

The Mohican ancestors of the Stockbridge-Munee Indians (“Tribe”) moved from western Massachusetts to New York and, eventually, to Wisconsin early in the 1800s. Additional pressure to move yet again produced two factions within the Tribe – those that wanted to move farther west and those that wanted to eliminate the tribal structure, remain in Wisconsin, and become full U.S. citizens (more history here). A treaty was eventually entered into in 1856. The Tribe gave up the land it had in return for the creation of a reservation consisting of the Bartelme and Red Springs townships, also in Wisconsin. Problems with the land – it was heavily forested and hard to farm but the Tribe was not allowed to sell the timber – and continued internal conflicts led to further Congressional intervention. Pursuant to acts passed in 1871, 1893 and 1906, much of the land was sold, proceeds were divided among tribal members, some members were ousted from the Tribe, and some were later reinstated. Finally, tribal members agreed to accept land or cash in lieu in full settlement of their rights, including those arising under the 1856 treaty. Years later, the Department of the Interior helped the Tribe reacquire some, but not all, of the original two townships. Why does all of this matter? Because the Tribe is now allowed to operate gaming activities within the boundaries of its reservation. The Tribe bought the Pine Hills golf club in 1993 and operates slot machines there. Wisconsin thinks Pine Hills is not within the current boundaries of the reservation. It sued to enjoin the gambling and for a declaration setting forth the boundaries of the reservation. The district court granted summary judgment to Wisconsin. The Tribe appeals.

In their opinion, Judges Posner, Ripple and Evans affirmed. The Court made the “unremarkable” observation that a reservation, once established, must remain intact unless and until Congress explicitly alters it. An intent by Congress to do so cannot be inferred lightly. A court should first look at the language of a statute. In the absence of a clear intent, a court can look at the circumstances surrounding the act, and even subsequent events. The Court addressed the 1871 act and found, based on the language of the Act and surrounding circumstances, that Congress meant to reduce the size of the reservation. The Court noted that Congress was addressing the internal conflict in the Tribe. It expected many members of the Tribe to accept a share of the proceeds of the sale of the property and sever ties with the Tribe. A smaller Tribe needed less land. The Court also pointed out that the 1871 Act was consistently interpreted afterward as having reduced the size of the reservation. The Court next addressed the 1906 Act. It, too, lacked an explicit statement of Congressional intent. Again, the Court considered the circumstances. It concluded that all parties – Congress, the Department of Interior, the Tribe – all expected the 1871 Act to complete the allotment of land to the Tribe and extinguish the 1856 reservation in its entirety. One key fact, in the Court’s opinion, was that the land was allotted in fee simple, a requirement for the abolition of the reservation. Again, the Court noted that subsequent events supported the conclusion that the reservation had been eliminated by the Act. By 1910, all the original reservation property had been sold or was held by members of the Tribe in fee simple. The Court concluded that the current extent of the reservation is only that which has been reacquired with the assistance of the Department of the Interior – and it does not include the Pine Hills property.

Judge Ripple concurred, only to emphasize the point that the Court did not in any way depart from the general rule that Congress must be explicit in any attempt to alter or disestablish a reservation.

A Federal Investigator's Decision to Knowingly Provide False Information to Local Prosecutor Does Not Meet the "Discretionary Function" Exception Test in the Federal Tort Claims Act

REYNOLDS v. UNITED STATES (December 9, 2008)

On an August afternoon in 2003, a security guard employed by General Security Services Corp. (“GSSC”) was on duty at the Federal Building in Indianapolis. (These facts are from Reynolds complaint, taken as true for purposes of the opinion.) Somehow, he ended up naked, on the roof of the building, and locked out of the building. Eventually, a colleague let him in. The two of them reported the incident (except for the naked part) to Maureen Reynolds, a GSSC officer. Several weeks later, Federal Protective Services (“FPS”) began an investigation. Two FPS investigators interviewed Reynolds. She told them what she knew. Although they knew that she was unaware of the nudity, the two investigators told the local prosecutor that she had lied. Reynolds was charged with false reporting and acquitted at trial. GSSC fired her because of the allegations of criminal conduct. Reynolds sued the United States under the Federal Tort Claims Act (“FTCA”). She alleged that the investigators had initiated a malicious prosecution. The district court dismissed for lack of subject matter jurisdiction. Reynolds appeals.

In their opinion, Judges Ripple, Rovner and Evans reversed and remanded. The Court addressed the requirements and exceptions to a FTCA action. The FTCA allows tort suits against the United States for torts committed by federal officials if those same acts would impose liability under state law for a private person. There are several exceptions to liability. The Court first corrected the district court’s treatment of these exceptions as limitations on jurisdiction. They are not. They are, instead, limitations on the right to recover and subject to a motion to dismiss for failure to state a claim. Although the district court relied on three different exceptions to the FTCA, the government only addressed one of Reynold’s arguments. The Court agreed that the district court was in error in its analysis of the “government employee” and “law enforcement” exceptions. It turned to the “discretionary function” exception. The Court noted the two requirements needed to establish the discretionary function exception: a) the conduct must involve an element of judgment, and b) the conduct must amount to a permissible exercise of policy judgment. The Court rejected the government’s argument that the conduct was akin to a prosecutor’s decision to prosecute. The Court agreed that a decision to prosecute is discretionary but held that the conduct in this case – knowingly providing false information to the prosecutor – is separable from that decision. A federal investigator’s decision to lie under oath does not meet the discretionary function test. Reynolds has alleged conduct that would amount to malicious prosecution under Indiana law and has therefore stated a claim under the FTCA.
 

Debt Collector's Assessment of Collection Fees it Has Not Incurred Violates FDCPA

SEEGER v. AFNI, INC. (December 8, 2008)

AFNI is a debt collector. Cingular is (or was) a cellular telephone service provider. Cingular contracts with individuals to provide telephone service. It typically includes in its contracts a provision that its customer is obligated to pay the fees of a collection agency and other costs Cingular incurs in enforcing its rights under the contracts. In 2004-05, Cingular sold some delinquent customer accounts to AFNI. AFNI sent collection letters to plaintiff Seeger and others. The letters stated that the recipient was responsible for collection fees. In 2005, Seeger and other plaintiffs filed suit. They alleged that AFNI’s actions violated the Fair Debt Collection Practices Act (“FDCPA”) and the Wisconsin Consumer Act (“WCA”). The district court certified a class and granted summary judgment to the class. It held that AFNI’s action violated both the FDCPA and WCA because the owner of a debt is not allowed to impose a collection fee for its own benefit (as opposed to that it pays a third-party collector). AFNI appeals.

In their opinion, Judges Bauer, Cudahy and Wood affirmed. The Court agreed that AFNI could prevail if the fee was allowed either by the contract or by Wisconsin law. It turned first to the law. Wisconsin does permit recovery of losses that are the natural and probable result of a breach of contract. The Court noted, however, that the record was silent on the issue of AFNI’s cost of debt collection and could not support a characterization of the fee as a form of allowable damages. Turning to the contracts, the Court agreed with the court below that the contracts allowed Cingular only to collect fees it “incurred” in collecting a debt. The way the parties structured their arrangement, neither Cingular nor AFNI “incurred” any collection fees. Finally, the Court addressed AFNI’s argument that it was entitled to the bona fide defense in the FDCPA. The Court identified a growing split in the circuits on the issue of whether the bona fide defense applies to mistakes of law. It did not express an opinion on that issue, however. Rather. it decided that AFNI did not maintain reasonable procedures to prevent the error, which is an element of the defense.

Appellant Who Ignores Binding and Controlling Supreme Court Precedent Ordered to Show Cause Why it Should Not Pay Appellee's Fees and Costs

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

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

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

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

Indirect Financial Supporters of Terrorist Groups Can Be Liable Under 18 U.S.C. § 2333(a)

BOIM v. HOLY LAND FOUNDATION FOR RELIEF AND DEVELOPMENT (December 3, 2008)

David Boim was a Jewish teenager living in Israel. He had dual Israeli/American citizenship. In 1996, he was killed by gunfire near Jerusalem. Boim’s parents brought suit under 18 U.S.C. § 2333(a). They alleged that defendants Muhammad Salah, Holy Land Foundation for Relief and Development (“HLF”), the American Muslim Society (“AMS”) and the Quranic Literacy Institute (“QLI”) all provided financial support to Hamas and that their son had been killed by Hamas gunmen. The district court rejected the argument that financial assistance was not international terrorism under § 2333(a) in denying defendants’ motion to dismiss. On an interlocutory appeal, the Seventh Circuit affirmed. The district court granted summary judgment on liability to plaintiffs with respect to Salah, HLF and AMS. A jury found QLI liable and assessed damages against all defendants of $52 million before trebling. On appeal, a Seventh Circuit panel vacated and remanded to redetermine liability. The plaintiffs petitioned for rehearing en banc, which was granted.

In their opinion, the Court affirmed in part, reversed in part and remanded. The Court first addressed whether the statute even applies to defendants who are alleged only to have provided financial support to those engaged in terrorism. The statute does not specifically mention secondary liability and the Supreme Court in Central Bank of Denver held that a statute that did not mention secondary liability did not create secondary liability. Instead of resolving that issue directly, however, the Court explored an alternative approach. It parsed the language of sections 2331, 2332, 2333 and 2339. Section 2333 creates a cause of action for a person injured “by reason of an act of international terrorism.” Section 2331 includes in the definition of international terrorism “acts dangerous to human life” that violate the U.S. criminal law. The Court concluded that financial assistance to Hamas is an “act dangerous to human life” and violates section 2339. Section 2339 was enacted in 1994 and makes it a crime to provide “material support” knowing that it could be used in carrying out a violation of section 2332. Section 2332 criminalizes the killing of an American citizen outside the U.S. The Court followed this chain to determine that a mere financial contribution to a terrorist organization could violate section 2333. Having determined that the defendants could be liable, the Court proceeded to examine the cause of action and its elements. On the element of intent, the Court held that the defendants must either have known or been deliberately indifferent to whether the organization they funded committed terrorist acts. Given the extreme conduct of the terrorist groups, the Court concluded that it was enough to know the character of the organization. With respect to causation, the Court held that the knowing contributors could not avoid liability on causation because, as a whole, they significantly increased the possibility that Boim would be a target of a Hamas terrorist act.

Applying these principles to the facts of the case, the Court addressed each defendant’s liability. It reversed with respect to HLF. The district court had erroneously applied principles of collateral estoppel from earlier litigation to the liability of HLF. The Court remanded for an analysis of HLF’s liability in light of its opinion. The Court reversed outright the findings as against Salah. Salah had been in custody during the period between the enactment of section 2339(a) and the shooting of Boim and could not have provided material support to Hamas during that time. The Court affirmed the findings as against defendants AMS and QLI. It found sufficient evidence that AMS knew that Hamas was a terrorist organization and that it provided material support to Hamas. QLI had elected not to participate in its trial and therefore could not object to the jury instructions or findings.

Finally, the Court addressed the lower court’s determination that the men who killed Boim were members of Hamas. The principle evidence on that point was the affidavit of an expert witness, Dr. Paz. Paz, an expert on terrorism, based his conclusion on terrorist internet sites, notes from a U.S. foreign service officer, and an Islamic-language document purporting to reflect the conviction of one of the murderers. The Court conceded that much of the evidence on which Paz relied was inadmissible. Noting that experts are not limited to admissible evidence in forming their opinions, the Court concluded that the type of evidence on which Paz relied is relied on by security and terrorism experts generally. The Court also noted that the defendants did not introduce any evidence to the contrary. The Court found no error in the lower court’s consideration of the affidavit.

Judge Rovner wrote separately, concurring in part and dissenting in part. Judge Rovner took principal exception to the majority’s conclusions with respect to causation and the Paz affidavit. She believed that the majority practically eliminated a causation requirement. She would have at least required expert testimony regarding the financial structure of Hamas and the various organizations it controlled. With respect to Paz, she criticized the majority for not only allowing the affidavit based on unproven evidence but for allowing it to support summary judgment. She noted that the defendants are not required to rebut factual propositions on which plaintiff has the burden of proof and has not properly supported. Judge Rovner would remand with respect to all defendants.

Judge Wood also wrote separately, concurring in part and dissenting in part. Judge Wood principally criticized the majority for its treatment of causation with respect to AMS and QLI. She concedes that “but-for” causation is sometimes not necessary, but she noted that the majority also eliminated the requirement for “sufficient” cause and apparently put little limitation on the remoteness of liability. Judge Wood would require at least proof that AMS and QLI contributed a “non-trivial” sum of money to an organization that was sufficiently connected to Hamas that the money indirectly supported Hamas’ terrorist mission. She also would impose a proximate cause limitation on the acts of the defendants, which the majority did not do. Judge Wood also disagreed with the majority’s statements on the scope of liability under the statute, calling it “awfully vague.” Finally, she disagreed with the treatment of the Paz affidavit and would remand to allow plaintiffs to meet the threshold requirements of Rule 702.