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

FTC v. TRUDEAU (November 29, 2011)

Kevin Trudeau advertises his books on infomercials. The FTC, after entering into a court approved settlement, alleged that Trudeau violated the settlement and sought a contempt finding. Judge Gettleman (N.D. Ill.) agreed and found Trudeau in contempt. He imposed a $37.6 million fine and banned Trudeau from making infomercials for three years. On appeal, the Seventh Circuit affirmed (opinion and intheiropinion) the finding of contempt but remanded on the sanctions. It concluded that the district court failed to adequately explain its rationale for the monetary sanctions and also concluded that a complete ban was inappropriate, in that he did not give Trudeau an opportunity to comply with the agreement. On remand, Judge Gettleman reinstated the monetary penalty, explaining that he arrived at it by multiplying the number of books ordered through the 800 number by the price of the books plus shipping. The court also imposed a $2 million performance bond if Trudeau wanted to do any more infomercials, to be effective for five years. Trudeau appeals.

In their opinion, Seventh Circuit Judges Ripple, Manion, and Tinder affirmed. The Court rejected Trudeau's argument that the fine was improper because it was based on consumer loss. That is an appropriate approach to a contempt finding even if, as he alleges, Trudeau did not benefit to the same degree as the consumers lost. The Court actually noted that the district court's figures were conservative. It only included those books that were sold through the infomercial’s 800 number, even though other books were sold through the Internet and retail outlets. With respect to the performance bond, the Court rejected Trudeau's argument that the FTC had to show significantly changed circumstances. That rule applies only in institutional reform cases. Here the proper test is whether the order was achieving its purpose -- and it clearly was not. Finally, the Court rejected Trudeau's First Amendment argument and found the requirement narrowly enough drawn to meet the constitutional standard: a) the bond is only triggered if Trudeau decides to engage in infomercials, b) the district court gave him an opportunity to seek a reduction in the amount of the bond with proof of his financial position, and c) the amount of the bond is proportional to the threatened harm.

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STATE OF MICHIGAN v. UNITED STATES ARMY CORPS OF ENGINEERS (August 24, 2011)

The Chicago Area Waterway System is a system of canals and channels with locks and dams in northeastern Illinois. The System links Lake Michigan with the Mississippi River. Although it has been a boon to commerce, tourism, transportation, and public health, it has created some problems. Two particular species of carp that could wreak monumental ecological damage to the Great Lakes have migrated up the Mississippi River and have entered the System. The Army Corps of Engineers and the Metropolitan Water Reclamation District of Greater Chicago have taken and are taking many steps to prevent the carp from reaching the Great Lakes. But the States of Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin filed suit under the federal common law of nuisance and § 702 of the Administrative Procedure Act, alleging that the Corps and the District are not taking sufficient steps to avert the potential crisis. Judge Dow (N.D. Ill.) denied the plaintiffs' motion for a preliminary injunction. The States appeal.

In their opinion, Seventh Circuit Judges Manion, Wood, and Williams affirmed. The Court first stated the familiar elements needed for a preliminary injunction: likely to succeed on the merits, likely to suffer irreparable harm, the harm without an injunction is greater than the harm an injunction would impose on the defendants, and the injunction is in the public interest. The Court first addressed likelihood of success and expressed its disagreement with the district court's assessment of that as "modest." The Court concluded that the federal common law of nuisance applied to the State's allegations, rejecting defendants' arguments that it did not apply because either the defendants were not physically moving the fish themselves or that the allegations did not involve a traditional pollutant. The Court briefly addressed, without deciding, the underdeveloped argument that a federal common law of nuisance claim it does not stand against the United States. Although it found that excluding such claims would be consistent with the origins of the tort, it also questioned why the claim could not lie against the United States as an owner of a dam or other facility that might create a nuisance. In any event, given its ultimate conclusion, the Court proceeded on the assumption that the claim was appropriate. Next, the Court addressed the Corps' claim of sovereign immunity and concluded that APA § 702 waives sovereign immunity for these declaratory and injunctive claims. The Court moved to the defendants’ displacement doctrine argument. That doctrine addresses the relationship between the courts and Congress and provides that the exercise of federal common law by the courts in an area is no longer necessary once Congress addresses the question. The question presented here is whether Congress has done enough to displace the common law. In Milwaukee I, Supreme Court said that Congress had not displace the federal common law even though it had enacted several laws touching upon the subject matter. In Milwaukee II and American Electric Power, however, the Supreme Court held that more comprehensive legislation in the areas did displace the federal common law. Here, although the Court recognized some Congressional activity (for example, the National Invasive Species Act) in the area, it concluded that it fell far short of the comprehensive schemes in Milwaukee II and American Electric Power and did not displace the federal common law. The Court turned to the actual evidence presented by the plaintiffs on their claim and considered whether the identified activity was a nuisance and whether it was sufficiently threatening to require equitable relief. Although the Court found little error in the district court's factual findings that the potential for harm was significant, it disagreed with its conclusion that the risk of that harm occurring was not sufficient to warrant injunctive relief. The Court noted that the magnitude of the potential harm was tremendous, that it was increasing, and that it probably could not be undone if once it occurred. It therefore gave the benefit of the doubt to the plaintiffs that the risk was imminent and concluded that they satisfied the likelihood of success element needed for a preliminary injunction. With respect to plaintiffs' likelihood of success on its APA claim, the Court concluded that that claim was co-extensive with the federal common law claim and need not be addressed separately. The second element required for a preliminary injunction is irreparable harm. The Court concluded that plaintiffs met their burden of showing irreparable harm, relying on much the same evidence relevant to the likelihood of success element. Again, it concluded (as, apparently, did the parties) that the harm, if it occurred, would be genuinely irreparable. And again, given the severity of that harm, it gave the States the benefit of the doubt on the degree of risk that the harm would actually occur. The Court turned to the balancing of harms -- comparing the harm that would occur in the absence of an injunction with the harm an injunction would impose on the defendants. It concluded that the harm to the defendants in the event the injunction issued substantially outweighed any benefit to the plaintiffs for two reasons. First, it evaluated the specific requests for relief individually and found substantial problems inherent in the requests. Some of the requests provided little benefit at significant cost. At least one of the request was already under study by the Corps. Simply put, the record did not establish that the requested relief would do much to address the problem and, to the extent it would, it created other risks. It compared that "benefit" with the harm an injunction would impose on the defendants. It concluded that it would impose significant cost, it would increase the risk of flooding, it would negatively impact commercial and recreational boating, and it would interfere with police and fire protection services on the Chicago River. Second, the Court concluded that an injunction would interfere with the ongoing efforts of the federal and local agencies already addressing the problem. Federal courts, it said, should tread carefully when federal and state agencies, expert in the area, are already addressing a problem. In concluding that the district court did not abuse its discretion in denying injunctive relief, the Court emphasized that the landscape could change at any time. New evidence is being developed on an almost daily basis and the agency response is subject to political pressures and budgets. Any significant change in that landscape could be grounds for the district court's re-examination of the issue.

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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.

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 EZELL v. CITY OF CHICAGO (July 6, 2011)

A few days after the Supreme Court found Chicago's handgun ban unconstitutional in McDonald, the Chicago City Council passed the Responsible Gun Owners Ordinance. Among other things, the ordinance required one hour of range training for gun ownership but prohibited firing ranges in the city. Several Chicago residents and three interested organizations brought suit, alleging that the range ban violates the Second Amendment. They sought a temporary restraining order, a preliminary injunction, and a permanent injunction. Judge Kendall (N.D. Ill.) denied the TRO and held a hearing on the preliminary injunction. After hearing testimony, the court denied injunctive relief on the grounds that plaintiffs were not irreparably harmed and were not likely to succeed on the merits. The court also found the balance of harm to favor the City of Chicago. Plaintiffs appeal.

In their opinion, Judges Kanne, Rovner (concurring in the judgment), and Sykes reversed and remanded with instructions to enter the preliminary injunction. The Court first addressed irreparable injury and adequate remedy at law. It took issue with the district court's focus on the incidental travel burdens that the ordinance imposed. First, constitutional harm cannot be measured by considering whether the right can be exercised in another jurisdiction. Second, the challenge here is a facial challenge, where harm is not measured by reference to particular persons. Third, the Court compared Second Amendment interests to First Amendment interests, where irreparable harm is sometimes presumed. The Court turned to likelihood of success on the merits. Relying principally on Heller and McDonald, the Court described a framework for resolving Second Amendment litigation. The first question, which requires an historical inquiry, is whether the activity in question is even protected by the Second Amendment. For example, Heller pointed out that some restrictions might survive a challenge because the right at issue was not understood to be a public right at the time the Second (or Fourteenth) Amendment was ratified. The second inquiry is into the justification for the restriction -- the regulatory means and the public benefits end. The nature of the standard of review depends on how close the right is to the core of the Amendment and the severity of the burden imposed. The Court then applied the framework to Chicago's ordinance and first concluded that range training is not outside the protection of the Second Amendment. The "central component" of the Amendment -- the right to keep and bear arms -- would mean little without the right to train and practice. The court distinguished the eighteenth and nineteenth century statutes and regulations cited by Chicago as being merely regulatory or time, place, and manner restrictions. The Court proceeded to the second inquiry and used First Amendment jurisprudence to decide which form of heightened scrutiny was appropriate. It stated that a severe burden on a core right requires strong public interest justification and a close fit between means and the end. More modest burdens on less court rights need less justification. Here, the ordinance is a total ban on a right close to the core of the Second Amendment. The City must satisfy something more rigorous than intermediate scrutiny. The Court found that Chicago had failed to come close. All of its evidence with speculative or conclusory or could be countered with much less burdensome regulatory efforts. The Court concluded that the plaintiffs had a strong likelihood of success on the merits. For much the same reason, the Court concluded that the balance of harms favored the plaintiffs. It ordered that an appropriate injunction be entered on remand.

Judge Rovner wrote separately, concurring in the judgment. She pointed out that the right at issue was not all firearms training but was limited to live training at a firing range. Other types of training, including simulated training, are not at issue and may be enough to make the core right meaningful. She therefore did not agree that the right was as close to the core as the rest of the panel and that, as result, required more than intermediate scrutiny. She also found support in the eighteenth and nineteenth century regulations distinguished by the majority.

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ROCHE DIAGNOSTICS CORP. v. MEDICAL AUTOMATION SYSTEMS (May 24, 2011)

Medical Automation Systems contracted with Roche Diagnostics to provide software for its glucose monitors and other products. The initial term of the contract was 2006-2010. Under the contract, Roche had the right to use the software for two years after the contract's expiration and had a right of first refusal to purchase MAS if MAS agreed to sell its stock to one of Roche's competitors "during the term of this Agreement." MAS notified Roche that it would not extend the agreement beyond 2010. Roche also discovered that MAS was in negotiations to sell its stock to a Roche competitor. Roche attempted to exercise its right of first refusal but MAS declined, relying on the fact that the transaction would not close until 2011, beyond the term of the Agreement. Although the contract required the parties to arbitrate any dispute regarding the right of first refusal, it allowed either party to seek an injunction pending arbitration. Roche did exactly that. Judge Barker (S.D. Ind.) found that allowing the sale would cause Roche irreparable harm by threatening both its ability to use the software for two additional years and its actual right of first refusal because of the difficulty in unwinding the transaction. She also found, however, that enjoining the sale would cause irreparable injury to MAS. She therefore issued an injunction allowing the sale’s completion but protecting Roche's ability to use the software for two more years. Roche appeals.

In their opinion, Chief Judge Easterbrook and Judges Wood and Williams affirmed, as modified. On Roche's request for an injunction pending appeal, the Court issued an order allowing the completion of the sale and protecting Roche's two-year use but added several conditions to ensure that MAS was maintained separately after the sale. Although appellate review of an order of this type is deferential, the Court identified an error in the district court. In balancing the harm, the court included on MAS's side of the ledger the injury caused by the delay in resolving the merits -- whether Roche has a valid right of first refusal. But the Court noted that the delay and resulting uncertainty is a function of the party's arbitration agreement. Allowing the sale would not avoid any uncertainty. Without that uncertainty on the MAS side of the ledger, the balance of harm favors Roche. The Court therefore affirmed the district court's injunction by including the hold-separate conditions, which will protect Roche in the event it prevails on the merits.

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STONE v. BOARD OF ELECTION COMMISSIONERS FOR THE CITY OF CHICAGO (May 4, 2011)

The City of Chicago requires that mayoral candidates collect 12,500 registered voter signatures over a 90 day period in order to be listed on the ballot. A number of individuals brought suit in federal court, alleging constitutional violations. In late 2010, the plaintiffs moved for a preliminary injunction. They sought to prohibit enforcement of the signature requirement for the February 2011 election. Judge Dow (N.D. Ill.) denied their request for an injunction. Plaintiffs appeal.

In their opinion, Judges Kanne, Rovner, and Sykes dismissed. The Court noted that the February 2011 election had taken place two months before the appeal was even argued. The only relief plaintiffs sought in their motion for a preliminary injunction related to that election. The relief they seek is no longer available. The Court noted that it lacks the power to decide questions that cannot affect litigants’ rights. The Court noted the familiar "capable of repetition, yet evading review" mootness exception. But that exception does not apply here. The plaintiffs' claims will not evade review. Their underlying suit challenging the constitutionality of Chicago's signature requirement remains pending.

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KARTMAN v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY (February 14, 2011)

In early 2006, a severe hailstorm hit the Indianapolis, Indiana area, causing extensive property damage. Almost 50,000 area residents filed insurance claims under homeowners insurance policies with State Farm Fire and Casualty Company. State Farm adjusted and paid over $263 million on hose claims. The following year, however, several State Farm policyholders filed suit for breach of contract, bad faith denial of benefits, and unjust enrichment. The suit was brought as a class action and alleged that State Farm underpaid claims and failed to use a uniform standard for evaluating the hail damage. The class sought damages and an injunction ordering State Farm to reinspect the roofs under a uniform standard. Judge Lawrence (S.D. Ind.) refused to certify a Rule 23(b)(3) damages class because of the need for individual underpayment determinations. He did certify, however, a Rule 23(b)(2) class to address whether the class was entitled to an injunction requiring the uniform reinspections. State Farm sought interlocutory review of the certification order.

In their opinion, Judges Cudahy, Wood, and Sykes granted the petition of review, reversed, and remanded with instructions to decertify the class. The Court’s problem with the district court's approach was a basic one – what are the claims? An insurance policy is a contract. For its part, the insurer agrees to pay for covered losses. It does not agree to use a particular standard in evaluating any alleged damage. An insurance policy also implicates tort law as a result of the bad faith denial of benefits claim. But again, tort law does not consider the failure to use a uniform standard a breach of a duty of good faith. Neither contract law nor tort law imposed a separate duty on State Farm to use a particular method to evaluate an insured's loss. The district court’s treatment of the uniform standard claim as a separate claim was error. Having clarified the claims, the Court turned to Rule 23. Rule 23(b)(2) requires that class-wide injunctive relief be both appropriate with respect to the class as a whole and final. The Court found both requirements absent here. First, with respect to appropriate, the Court noted that the class could not even satisfy the most basic of equitable relief requirements -- irreparable harm. Whatever their loss, it can be adequately satisfied with damages. The balance of hardships is also inequitable. The cost of compliance would be enormous, with little benefit. The Court also found that the injunction would be an administrative challenge and impractical. Second, the injunction did not meet the Rule 23 finality requirement. The plaintiffs are not seeking uniform roof inspections as their final remedy. Even in their view, the inspections are merely stepping stones to further proceedings on liability. The injunction does not meet the Rule 23(b)(2) requirements -- the class should not have been certified.

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BLOCKOWICZ v. WILLIAMS (December 27, 2010)

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

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

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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.

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

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

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

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DEXIA CRÉDIT LOCAL v. ROGAN (November 24, 2010)

Peter Rogan was apparently engaged in a large Medicare and Medicaid fraud scheme in the 1990s through Edgewater Medical Center, a hospital he owned in Chicago. In a government False Claims Act case, a federal district court concluded that Edgewater submitted over $19 million in false claims. Dexia Crédit Local ("Dexia") also sued Rogan and his partners after it was forced to pay $55 million to Edgewater's bondholders under a letter of credit. Rogan defended that suit for years but eventually fled to Canada (but see). Dexia obtained a $124 million default judgment (see an earlier opinion and intheiropinion). Meanwhile, Rogan's entities had funneled millions of dollars to Florida and Belizean trusts he set up for each of his three children. Rogan's lawyer was the trustee of each of the trusts. Dexia started supplementary proceedings against the trusts by serving the trustee. During those proceedings, the district court dismissed two parties in the underlying litigation after it was discovered that their presence in the case destroyed diversity. After a bench trial, Judge Kennelly (N.D. Ill.) granted Dexia's motion to turn over the assets of the trusts. Alternatively, the court imposed a constructive trust on the trust's property. The Rogan children (the "Children") appeal.

In their opinion, Seventh Circuit Judges Kanne and Williams and District Judge Springmann affirmed. The Children raised numerous arguments on appeal, each of which was considered and rejected by the Court. First, the Court rejected the argument that diversity jurisdiction was lacking because LaSalle Bank, an Illinois corporation, assumed part of Dexia's risk. Dexia is a corporation formed under the laws of France. The Court rejected the notion that Dexia and La Salle operated together as some form of unincorporated association. Next, the Children argued that the were invalid because the underlying judgment was not final when those proceedings were commenced. It is true that the underlying judgment was not final when the supplementary proceedings were commenced, due to the bankruptcy status of one of the non-diverse parties. However, the non-diverse parties were dismissed retroactively. The Court concluded that the complaint in the supplementary proceedings should be read as if the non-diverse parties were never a part of the case. The district court therefore did not err in allowing the case to proceed. Third, the Children asserted that the district court had no authority to adjudicate their property rights. The Court disagreed with the premise of the argument. The district court was not adjudicating the Children's property rights. The supplementary proceedings alleged that the trusts contained assets of Rogan, the judgment debtor. The district court agreed -- it did not exceed its authority in so doing. Next, the Court rejected the Children's argument that they were entitled to a jury trial. The Court focused on the nature of the remedy. Because the relief sought and obtained was purely equitable, the Children were not entitled to a jury. Fifth, the Children argued that Illinois' five-year statute of limitations for constructive trusts applied, that the limitations period began to run when Dexia filed suit, and that Florida's 12-year statute of repose for fraud actions also barred the proceedings. The Court disagreed, holding that Illinois' seven-year statute for enforcement of judgments applied and that Florida law did not apply. Next, the Court agreed with the district court that issue preclusion prevented re-litigation of the factual finding by the district court in the False Claims Act case that Rogan's fraud began no later than 1993. Issue preclusion applies when the issue is the same, when it was actually litigated, when the finding was essential to the judgment, and when the party against whom it is to be applied was represented in the prior action. Although the Children were not parties to the prior proceeding, the Court concluded that the "adequately represented" exception applied since their interests coincided with their father's. Next, the court affirmed the district court's imposition of the constructive trust, notwithstanding a suggestion that legitimate funds could have been commingled. Once Dexia met its burden, it was up to the Children or the Trustee to provide evidence of any commingling. Finally, the Court rejected the Children's challenges to the form of the citation and Robert's challenge to personal jurisdiction.

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THE NATIONAL SPIRITUAL ASSEMBLY OF THE BAHÁ’ÍS OF THE UNITED STATES OF AMERICA UNDER THE HEREDITARY GUARDIANSHIP v. NATIONAL SPIRITUAL ASSEMBLY OF THE BAHÁ’ÍS OF THE UNITED STATES OF AMERICA (November 23, 2010)

The Bahá’í faith dates back to Persia and the mid-19th century. Its original group of followers in the United States formed the National Spiritual Assembly (the "Assembly") in 1909. In 1964, a group led by Charles Remey split off from the Assembly because of a disagreement over the line of succession. That group formed the National Spiritual Assembly Under the Hereditary Guardianship (the "Guardianship"). The Guardianship brought a lawsuit against the Assembly in the Northern District of Illinois. The suit sought possession of the Assembly's properties, including its magnificent house of worship in Wilmette, Illinois. The Assembly counterclaimed for trademark infringement and unfair competition. The district court held for the Assembly, finding that it was the highest authority for the Bahá’í Faith in the United States and was entitled to the exclusive use of its marks. In 1966 , the court entered an injunction prohibiting the use of the Assembly's marks by the Guardianship. The Guardianship dissolved shortly thereafter. Forty years later, the Assembly returned to court seeking contempt sanctions against the several individuals and organizations: a) Joel Marangella, who was Remey's assistant and actively involved in the Guardianship, but who later split off from Remey and organized several religious assemblies, including the Provisional National Bahá’í Council (the "Council") b) Franklin Schlatter, who was a founder, officer, and active member of the Guardianship, but who also later joined the Council, c) the Council, and d) two organizations created by Dr. Leland Jensen (Jensen served at one time as a Guardianship Board member but was no longer active in the organization at the time of the earlier litigation), one of which handles administrative matters and the other of which publishes books regarding the Bahá’í faith. After a thorough evidentiary hearing, Judge St. Eve (N.D. Ill.) concluded that the respondents were not in privity with the Guardianship and were thus not bound by the injunction. In so holding, she expressly rejected the Merriam decision from the First Circuit. The Assembly appeals.

In their opinion, Seventh Circuit Judges Bauer, Manion, and Sykes affirmed. The Court first commented briefly on the content of the original injunction. A few years after it was entered, the Supreme Court decided Presbyterian Church, in which it stated that a civil court could decide church property claims based on "neutral principles of law," but could not resolve underlying disputes over doctrine. The Court found certain aspects of the original injunction in tension with Presbyterian Church. Although the content of the injunction was not under review, the Court stated that it would proceed with some sensitivity to the constitutional issue. On the merits, the principal issue was whether the respondents, all non-parties to the original litigation, were nonetheless bound by the terms of the injunction. The general rule is that one is not bound by a judgment in litigation in which one is not a party. One exception is for a party's officers or agents. But that exception only applies when they act in their official capacities. Since the Guardianship dissolved decades ago, that exception cannot apply. Another exception applies to people acting in concert with a bound party. On the facts in this record, the exception also is not implicated. Finally, there is an exception for those in "privity" with a bound party. Although there is no hard and fast rule for what constitutes privity, the Court emphasized that the doctrine is bound by due process and it is restricted to those so closely tied with bound parties that it is reasonable to conclude that their interests were represented in the original litigation. The Court identified two categories of parties in privity -- successors in interest and those "legally identified" with a bound party. The two principal authorities on "legally identified" are Judge Hand's decision in Alemite and the First Circuit's decision in Merriam. The district court declined to follow Merriam because of a perceived tension with Alemite. The Court disagreed, concluding that the opinions could be reconciled. While Alemite's conclusion was that a salesman was not bound by an injunction issued against his corporation, the court recognized that a class of persons that are legally identified with the bound party could be bound. In Merriam, the court held that a key employee could be bound if there is a very close identity of interest combined with significant control in the organization and an involvement in the underlying litigation. Although the Court concluded that the district court erred in not following Merriam, it ultimately concluded that the court reached the right result. The Merriam inquiry includes factors such as a person’s position and degree of responsibility in a corporation, the person's participation in the original litigation, and the similarities between the activities of the bound party and the respondent. Here, with respect to Marangella, Schlatter, and the Council, the Court identified the significant dissimilarities between the activities of the Council and those of the Guardianship. Although Marangella and Schlatter participated in the Guardianship to varying degrees, they broke off and formed a new organization that was not a mere continuation of the old. In fact, the district court found a "robust doctrinal divide" between the organizations. They should not be considered "legally identified" with the Guardianship. Next, with respect to the Jensen organizations, the Court focused on Jensen's disassociation from any active governing role in the organization before the injunction was issued. Thus, Jensen does not even satisfy the “key employee” prong of the Merriam test. Finally, the Court rejected the argument that a trademark registration filing that claimed a path of successorship from Remey to the current president of Jensen’s organizations established legal successorship so as to bind those organizations. There was no evidence of any link between Remey and the organizations other than the filing.

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

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

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

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JUDGE v. QUINN (September 24, 2010)

Barack Obama created a vacancy in the United States Senate when he resigned his seat in November of 2008. Apparently, he got a better job. Illinois’ governor appointed Roland Burris to serve the remaining years of his term. Two Illinois voters brought suit, alleging that Illinois violated the Seventeenth Amendment by failing to hold a popular election. In a June 16, 2010 opinion (opinion and intheiropinion), the Seventh Circuit affirmed the denial of a preliminary injunction. The Court held that the plaintiffs had shown a strong likelihood of success on the merits (that the Seventeenth Amendment requires an election to fill any Senate vacancy) but had failed to show irreparable harm, since there was still adequate time to hold the election. The district court then held a series of hearings, during which Illinois ultimately agreed to hold the election (after the Court denied a rehearing and rehearing en banc). The State put forth a proposal, agreed to by the plaintiffs, under which the special election would be held the same day as the already-scheduled general election for the same seat -- and the candidates on the special election ballot would be those same candidates as on the general election ballot. Senator Burris, whose name will not be on the general election ballot, objected. He wanted his name included on the special election ballot, either by collecting some designated number of signatures or simply by agreement. Judge Grady (N.D. Ill.) adopted the State's proposal. The governor issued a writ of election and the court issued its preliminary injunction. Senator Burris appeals.

In their opinion, Judges Rovner, Wood, and Tinder affirmed. The Court first turned to Burris' argument that the case presented a nonjusticiable political question. Only two of the Baker factors were relevant, said the Court, and it resolved both against Burris. First, there was not a "lack of judicially discoverable and manageable standards." The Seventeenth Amendment, state law, and past Illinois history provided the rules and standards. Second, the question is not within the exclusive province of the political branch. When constitutional rights are infringed by the inaction of a state, a federal court has the power to hear the case and fashion a remedy. The Court next addressed Burris' argument that the court interfered with the role of the Illinois General Assembly when it decided whose names would appear on the special election ballot. The Court held that Burris waived this argument by not raising it below -- but also concluded that, although the states have principal responsibility for controlling the procedural aspects of these elections, a district court has the power to fashion a remedy for a constitutional violation. Finally, the Court rejected the notion that the district court order was an unconstitutional ballot access restriction. There is nothing in the order that excludes a particular class of candidates and the order is narrowly tailored to affect only one election.

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GOLDHAMER v. NAGODE (September 2, 2010)

Don Goldhamer and Robin Schirmer participated in a peaceful demonstration near a military recruitment booth during the Taste of Chicago festival in the summer of 2006. They expressed their opposition to military recruitment by handing out fliers and speaking to passers-by. The police asked them to relocate to a designated area. When they refused, the police ordered them to leave. Again they refused. They were arrested and charged with a city ordinance violation. The ordinance makes it unlawful to fail to disperse when ordered to do so -- but only in a situation where "three or more persons are committing acts of disorderly conduct in the immediate vicinity, which acts are likely to cause substantial harm.” A state court ultimately dismissed the charges for failure to prosecute. Goldhamer and Schirmer brought suit under § 1983, alleging that the ordinance was facially invalid under the First Amendment and that it was unconstitutionally vague. They sought an injunction and damages. Judge Grady (N.D. Ill.) granted plaintiffs summary judgment on liability and permanently enjoined enforcement of the ordinance. The City appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Hamilton vacated and remanded. The Court first noted that, although the district court had not disposed of all claims, it had limited appellate jurisdiction under § 1292(a)(1). Before reaching the merits, the Court addressed the plaintiffs' standing on their request for injunctive relief. Among other things, they must show that a favorable decision from the court will prevent or redress the injury. The Court found that element absent. There is no evidence in the record of any disorderly conduct in their vicinity -- an essential element of the offense for which they were arrested. Given that their conduct was clearly outside the scope of the ordinance, the requested injunction is unlikely to prevent future injury. The Court concluded that this misuse of the ordinance by the Chicago police does not provide a basis on which a federal court should examine the constitutionality of the law. The Court added that plaintiffs of course have standing to challenge their arrest and seek money damages.

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 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.

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

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

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

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

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

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

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RUSSIAN MEDIA GROUP v. CABLE AMERICA (March 10, 2010)

Russian Media Group (RMG) sells Russian language television programming to residential customers. It charges a monthly fee to its subscribers and, in return, obtains programming and maintains transmission hardware. RMG filed suit against Cable America, alleging that Cable America unfairly competed with it by obtaining similar programming by fraud. The district court found that Cable America distributed programming at twenty different multi-family residential properties by pirating an individual subscriber's satellite signal and distributing the signal to other residents of the properties for a fee. RMG moved for a preliminary injunction on its claim under the Illinois Cable Piracy Act. The district court granted the injunction and ordered Cable America to stop distributing the Russian language programming at the twenty properties and to disconnect any of its receivers. Cable America appealed that order but did not comply with the injunction. It was held in contempt for its conduct. Months later, Cable America filed an "emergency motion” to modify the injunction. The motion was denied on the grounds that it was not timely, it was not a real emergency, and that the district court lacked jurisdiction to modify an injunction that was on appeal. Cable America appeals.

In their opinion, Judges Flaum, Rovner and Hamilton affirmed. The Court first rejected Cable America's challenge to the breadth of the injunction. A district court has wide discretion in defining the parameters of an injunction, particularly where there is a record of unlawful conduct. The injunction may even prohibit otherwise lawful conduct when that is necessary to ensure appropriate relief to the plaintiff. The Court noted a pattern of deception and misconduct on the part of Cable America in the district court in concluding that the court did not abuse its discretion. The Court then refused to even consider the argument that the injunction was invalid because the Illinois Cable Piracy Act was preempted by federal copyright law. Defendants never raised that argument at the district court level. Finally, the Court rejected Cable America’s res judicata defense. Although the parties did settle a prior lawsuit that arose from a set of similar facts, the facts alleged and proved in the case before the Court occurred after the prior settlement and the injunction was based on a violation of a law that did not even exist at the time of the prior settlement.

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PRO'S SPORTS BAR & GRILL v. CITY OF COUNTRY CLUB HILLS (December 16, 2009)

Pro's Sports Bar & Grill is located in Country Club Hills, Illinois. Pro's submitted an application for a liquor license. Pursuant to local procedure, the City Council considered an ordinance on November 26, 2007 for the granting of that license. There is significant dispute about what happened at the council meeting. At a minimum, there is confusion about the formalities undertaken. There certainly was discussion about granting a license with limited hours. In any event, at the end of the meeting, an ordinance granting the license was approved. A Class A license with regular hours was issued. Shortly thereafter, however, the license was reissued as a Class A-1 license (a category of license not even defined in the municipal code). The local police began enforcing the license as if it had the limited hours which were discussed in the earlier council meeting. In 2008, when Pro's applied for a reissuance of the license, it was issued with limited hours, even though the normal practice is to be issued a license on its original terms and conditions. Pro's filed suit pursuant to § 1983, alleging a violation of its procedural due process rights. The court granted a preliminary injunction prohibiting the enforcement of the limited hours. The City of Country Club Hills appeals.

In their opinion, Judges Flaum, Manion and Wood affirmed. The Court started with its two-part test for approaching a procedural due process claim. It first identifies whether there is a protected liberty or property interest and then asks whether a party was deprived of its interest without due process. The principal issue in dispute was whether the original license contained the limited hours. If it did, the renewal did not result in any deprivation. If it did not, the renewal restrictions would have resulted in a deprivation. The bare language of the original ordinance granted an unrestricted license. The Court found the language of the ordinance unambiguous and rejected the defendants' argument that it should be interpreted otherwise because of either the intent of the City Council or because it was a scrivener's error. Having found a deprivation of the property interest, there was little dispute about the City's failure to provide adequate process -- since it provided none. Finally, the Court found no error in the lower court's balancing of the preliminary injunction factors.
 

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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.

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UNITED AIR LINES, INC. v. AIR LINE PILOTS ASSOCIATION (March 9, 2009)

United Air Lines, Inc. ("United") and the Air Line Pilots Association ("ALPA"), the collective bargaining representative for the pilots, have a long and contentious history of labor negotiations. The events of September 11, 2001 put additional pressure on that relationship. Their current collective bargaining agreement was negotiated in 2003 and amended in 2004 and 2005. In late 2006, ALPA attempted to reopen contract negotiations. According to United, ALPA took a number of coordinated measures in an attempt to pressure United. United sued ALPA in July of 2008 under Section 2, First of the Railway Labor Act (“RLA”). Shortly thereafter, ALPA agreed to direct its members not to engage in the disruptive activities. The district court, after an evidentiary hearing, granted United's request for a preliminary injunction. ALPA appeals.

In their opinion, Judges Rovner, Wood and Sykes affirmed. The Court addressed the four main issues on appeal: a) that the claim was barred by the six-month statute of limitations, b) that ALPA had made reasonable efforts under the RLA, c) that United failed to satisfy the requirements of Section 6 of the Norris-LaGuardia Act ("NLGA"), and d) that United failed to satisfy the requirements of Section 7 of the NLGA. With respect to the statute of limitations, the Court noted that the RLA borrows the six-month statute of limitations from the National Labor Relations Act. Although the court agreed that the conduct of ALPA began long before the suit was filed, it concluded that the action was not time-barred. ALPA engaged in unlawful action both before and during the six-month period and their actions created new injuries within the six-month period. The Court found no merit in ALPA'S argument that it made reasonable efforts to halt its members’ unlawful conduct. It relied on the district court's thorough findings of fact and accorded them substantial deference. With respect to the Section 6 requirement -- that United is required to prove that ALPA participated in or ratified the unlawful conduct -- the Court again relied heavily on the thorough findings of fact by the district court. It concluded that United’s statistical evidence, in combination with ALPA's coded communications, were sufficient to meet its burden. Finally, the Court rejected ALPA’s argument that the injunction was not necessary to prevent a violation of Section 2, First of the RLA. The Court conceded the general prohibition in the NLGA barring injunctions against labor unions, but noted an exception when there is a specific violation of a provision of the RLA. Even though ALPA had entered into an agreement to voluntarily cease its wrongful conduct, the district court found that it's conduct was inconsistent with its agreement. The Court concluded that the lower court was within its discretion to find that an injunction was the only way to ensure compliance with the RLA.

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GIRL SCOUTS OF MANITOU COUNCIL v. GIRL SCOUTS OF THE UNITED STATES OF AMERICA (December 15, 2008)

Juliette Low founded the Girl Scouts of the United States of America (“GSUSA”) in 1912. GSUSA is run by a national council and its board of directors. In its almost 100 years of existence, GSUSA has developed a large network of local girl scout councils. GSUSA first chartered Girl Scouts of Manitou (“Manitou”) as a council in 1950. As of 2005, there were over 300 local councils. Each council has a charter issued by GSUSA that defines the relationship between the two and grants the council the right to maintain scouting throughout its jurisdiction. In 2005, GSUSA announced a plan to consolidate councils. It planned to reduce the number of councils to just over one hundred. Each council would be larger and, GSUSA hoped, more efficient. The plan would have required Manitou to merge 60% of its territory with six other nearby councils and cede 40% of its territory to two other councils. Manitou decided not to go along. It filed suit in February 2008 against GSUSA. It alleged breach of contract, tortious interference and a violation of the Wisconsin Fair Dealership Law. It sought to permanently enjoin GSUSA from altering its territory. The district court denied Manitou’s request for a preliminary injunction without a hearing. The court held that Manitou had failed to demonstrate that it would suffer irreparable harm in the absence of the injunction. Manitou appeals.

In their opinion, Judges Posner, Kanne and Tinder reversed and entered the requested order enjoining GSUSA. The Court led off with the familiar two-phase test for a preliminary injunction. A movant must demonstrate: a) irreparable harm, b) inadequate legal remedy, and c) a likelihood of success. The movant who succeeds in that first phase enters a second phase in which the court balances the injury to the plaintiff, its likelihood of success, the possible injury to the defendant if the injunction issues, and the public interest. The court uses a balancing test in which the greater the plaintiff’s likelihood of success, the less the balance of harm needs to be in its favor. Applying that test, the Court first addressed irreparable harm, the only of the first-phase factors addressed by the district court. The Court disagreed with the court below. It found that Manitou’s loss of jurisdiction would severely affect its ability to generate revenue and harm its goodwill. That harm would not be rectified if a final judgment were entered in its favor and the loss of jurisdiction reversed. The Court also disagreed with the court below on the application of the Wisconsin Fair Dealership Law, under which a “dealer” in Manitou’s circumstances enjoys a statutory presumption of irreparable harm. The Court found that Manitou fit within the statutory definition of “dealer” in the act.

Having found that Manitou established irreparable harm and also noting that the record contained sufficient information to address the rest of the two-phase analysis without remand, the Court proceeded to do so. The Court found that the timing of and difficulty in calculating a damages award established that Manitou’s legal remedies were inadequate. On the likelihood of success factor, the Court noted that it only had to find a “better than negligible” chance of success to satisfy this prong. The Court evaluated only the Wisconsin Fair Dealership Law claim and found that Manitou satisfied that minimal standard.

In addressing the balancing portion of the test, the Court found a “drastic imbalance” in favor of Manitou. The Court noted that the national GSUSA program to consolidate regions was not even scheduled to be completed for a year. Any delay in the Wisconsin part of that plan would not lead to any harm to GSUSA. In addition, any harm to GSUSA could be rectified later. The Court did not feel the need to conduct a deeper analysis of Manitou’s likelihood to succeed given the imbalance of the harm.

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SIERRA CLUB V. FRANKLIN COUNTY POWER (October 27, 2008)

In August of 2000, Franklin County Power of Illinois (“FCPI”) applied to the Illinois EPA (“IEPA”) for a Prevention of Significant Deterioration permit in order to construct a power plant. The IEPA issued the permit on July 3, 2001. The permit provided that it would become invalid if FCPI: a) did not begin construction of the plant’s boilers within eighteen months, or b) discontinued construction for eighteen months, or c) failed to complete construction within a reasonable time. On December 2, 2002, FCPI contracted with an engineering and construction company to work with it exclusively to negotiate a construction contract. On December 18, FCPI arranged for excavation to begin. Excavation equipment was delivered to the site on January 3, 2003. Although the contractor began the excavation on January 8, it terminated its work in February because of a dispute. The landlord filled in the excavation in July. FCPI began the excavation anew in September of 2004. Shortly afterward, the IEPA determined that construction had commenced. In November, the IEPA made a preliminary determination that the permit had expired. The determination was appealed and the appeal is still pending. In May of 2005, the Sierra Club filed suit under the citizen suit provision of the Clean Air Act (“CAA”). FCPI moved to dismiss and for summary judgment on the grounds that the permit was valid and that Sierra Club lacked standing. The district court denied the motion. Instead, it entered summary judgment for Sierra Club and permanently enjoined FCPI from building the power plant until it obtained a permit.

In their opinion, Judges Bauer, Ripple, and Williams affirmed. The Court first addressed Sierra Club’s standing. An organization has standing only if: a) one of its members has standing, b) the interests at stake in the litigation are germane to the organization’s purpose, and c) an individual’s participation is not required. FCPI challenged only the first prong. Sierra Club relied on its member Barbara McKasson. In order to prevail on summary judgment, Sierra Club had to submit evidence to establish that: a) she suffered an actual or imminent, concrete injury, b) the injury is traceable to the actions complained of, and c) a favorable decision would likely redress the injury. McKasson stated that she and her family have regularly traveled to within three miles of the proposed plant site and there engaged in such activities as camping, fishing, and kayaking. The Court found that Sierra Club satisfied the individual standing test: a) McKasson will either be exposed to pollutants if she continues her trips or will have to forego the trips, either of which is sufficient injury, b) the injury is actual even though the plant is not yet built, c) the injury is traceable to the plant, even if the plant reduces its emissions, and d) an injunction will redress the harm for some period of time, even if FCPI eventually obtains a new permit.

The Court next addressed FCPI’s claim that Sierra Club’s action is not ripe until IEPA issues a decision on the permit appeal. The Court said that the plain language of the CAA allows a citizen suit against a person who is alleged to be in violation of a permit or who proposes to construct without a permit. The Court found that FCPI was either in violation of the permit because it failed to commence construction in time or, if the expired permit is akin to no permit, it is proposing to build one without one. Either way, the Court found that the suit was proper under the CAA.

On the issue of whether FCPI “commenced” construction, the Court stated that FCPI could commence construction in either of two ways.  It could begin “ a continuous program of physical on-site construction” or it could enter into binding contracts to complete construction within a reasonable tim.  To qualify, the contracts could not be canceled without a substantial penalty.  FCPI argued that there were genuine issues of fact regarding this test, precluding summary judgment. The Court had little trouble concluding that FCPI could not meet the continuous construction test. The only work it did was to excavate a hole. Even that was not permanent, since it was later filled in. The Court also found that FCPI lapsed in its construction activities for over eighteen months, even if it did begin on time. The Court also rejected FCPI’s argument that it’s binding contract meant that it had “commenced construction.” The contract was merely an agreement to negotiate in good faith in an attempt to reach an agreement on a construction contract. The fact that it contained a penalty clause was not enough to make it a qualifying contract.

Finally, FCPI argued that the district court had no authority to enter an injunction or, in the alternative, that it erred in not applying the traditional four-part analysis for injunctive relief. The Court relied on the plain language of the CAA to reject FCPI’s lack of authority argument. Although the Court was a little more troubled by the second argument, it also resolved it in Sierra Club’s favor. It first found that the lower court’s merits decision that FCPI did not have a valid permit accomplished essentially the same thing as an injunction - it required FCPI to get a permit. The Court’s also conducted its own analysis of the four factors and found that they favored Sierra Club. 

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LINEBACK v. SPURLINO MATERIALS  (October 8, 2008)

Spurlino Materials (“Spurlino”) produces and sells concrete. In 2005, several employees began a union representation effort. Spurlino management allegedly campaigned heavily against the union. Notwithstanding those efforts, the company employees voted to be represented by the union. The NLRB certified the union and it began negotiating its first contract with Spurlino in early 2006. The parties continued to negotiate through early 2007, but were unable to agree on contract terms (and apparently still have not). Attendance at union meetings declined during this period, possibly because of fears of retaliation by Spurlino. Spurlino management allegedly continued an intense harassment campaign against the union.

Spurlino historically used a seniority-based dispatch procedure. Spurlino sent out each of its drivers in order of seniority until each had been given one assignment. The rest of the assignments for each day were dispatched in order of each driver’s return from his or her original assignment.  In December of 2005, Spurlino was awarded a large contract to provide concrete for the construction of a new football stadium for the Indianapolis Colts. A separate labor agreement covered the stadium project. Stadium contractors paid higher wages under the separate agreement than Spurlino normally paid its employees. Thus, Spurlino drivers preferred the stadium work over other Spurlino assignments. The union alleges that Spurlino used the opportunities provided by the stadium contract to retaliate and discriminate against the leaders of the union movement. It claims that Spurlino a) manipulated the seniority dispatch system to keep the union leaders from the preferred jobs at the stadium, b) changed the way work was assigned when it built a temporary, portable plant, and c) instituted a thirteen-factor performance review to discriminate against union leaders. In August of 2006, the union filed a series of unfair labor practice charges against Spurlino. They were consolidated into an NLRB complaint that alleged that Spurlino: a) discriminated against union leaders because of their activities, b) changed pre-existing work assignment policies without negotiation, and c) implemented an evaluation procedure without negotiation. The ALJ commenced a hearing. During a hearing recess, in May of 2007, the NLRB requested injunctive relief from the district court pending a final Board decision. In June, the court entered an order enjoining Spurlino from a) retaliating against union members, b) acting unilaterally to change the terms and conditions of employment, c) refusing to bargain in good faith, and d) interfering with employees’ exercise of their rights. Spurlino appeals. Shortly after Spurlino’s appeal, the ALJ issued its order. It concluded that Spurlino had discriminated against union leaders and had unilaterally changed the terms and conditions of employment. That order is on appeal before the NLRB.

In their opinion, Judges Bauer, Ripple, and Manion (concurring) affirmed. The Court noted that the National Labor Relations Act authorizes injunctive relief, pending resolution of an NLRB claim, in “just and proper” circumstances. The factors are the same as those that apply to injunctive relief in other contexts: a) no adequate remedy at law, b) irreparable harm that outweighs harm to the employer, c) the public interest, and d) likelihood of success on the merits. The Court addressed each in turn. NLRB proceedings are frequently slow, potentially allowing time for employers to “chill” union activities. Especially in the case of new union representation, there is a risk that no remedy at law will adequately address the harm. On the issue of irreparable harm, the lower court had clear evidence of Spurlino’s hostility toward the union and continued discrimination toward the union and its leaders. The public interest was served by an order prohibiting an unfair labor practice. The district court had found “strong showings” of likelihood of success on the discrimination and unilateral changes in the terms of employment charges and “at least a substantial showing” on the good faith bargaining charge. The Court concluded that the district court considered the right factors and it found no error in its evaluation of them. It did not abuse its discretion.

The Court next addressed the scope of the injunction entered by the district court. Spurlino argued that each of the four paragraphs of the injunction was overbroad. The Court addressed each paragraph in turn under the FRCP 65(d) requirement that injunctions be specific and “describe in reasonable detail” the acts enjoined. The Court also noted that a court may enjoin acts a) which are similar to acts it has found to be unlawful and b) whose commission, if not enjoined, can fairly be anticipated from the defendant’s past conduct. Spurlino argued that paragraphs 1 and 2 were overbroad. Paragraph 1 enjoins retaliation against “all” union members, even though the complaint alleges retaliation against a few named leaders. Paragraph 2 enjoins “all” unilateral actions to change terms and conditions of employment, though the complaint’s allegations were less broad. The Court relied on the district court’s finding of a “continuous and deliberate” effort by Spurlino to undermine the union in holding that these paragraphs were not overbroad. Paragraph 3 enjoins Spurlino from refusing to bargain in good faith. The complaint’s allegation of refusal to bargain was limited to the portable plant. The Court also upheld this paragraph, relying on the district court’s finding that Spurlino engaged in a pattern of refusals to bargain and that further refusals were likely to occur, if not enjoined. Paragraph 4 of the injunction broadly enjoined Spurlino from “in any like manner interfering with, restraining, or coercing employees’ exercise of their rights.” The Court observed that the provision was similar to a provision struck by the Supreme Court in NLRB v. Express Pub. Co.. However, it relied on the addition of the word “like,” not present in the Express injunction, to uphold the paragraph as within the power of the court to enjoin related unlawful acts.

Judge Manion concurred. He wrote separately to emphasize that the injunction against refusing to bargain in good faith does not enjoin “any” refusals to bargain. It only enjoins refusals that are similar to the refusals alleged by the NLRB and found by the district court.

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