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

IN RE: HOLLY MARINE TOWING, INC. (January 6, 2012)

Holly Marine operated a tugboat service on Lake Michigan out of a facility at 9320 S. Ewing Avenue in Chicago. It went into bankruptcy in 2007. The S. Ewing property was sold for over $900,000. Competing claims arose. Each of Holly's co-owners (a couple going through a divorce) and the estate itself claimed the sale proceeds. A settlement gave the estate 50% of the proceeds and each co-owner 25%. The co-owners also paid the estate’s attorneys $65,000 from their shares. An administrative creditor objected to the $65,000 payment. The bankruptcy court approved the settlement and denied the creditor's motion to amend the order. Judge Kendall (N.D. Ill.) affirmed. The creditor appeals.

In their opinion, Seventh Circuit Judges Bauer, Manion, and Kanne affirmed. The Court first addressed standing, since the $65,000 came from the co-owners and would revert to the co-owners (and not to the creditors) if the order is reversed. The Court found that the creditor had standing. Although it may not be able to reach the $65,000, that is a question on the merits, not on standing. The creditor has provided services to the estate and is an administrative creditor. It has a pecuniary interest in the settlement and standing. On the merits, the Court found no error in the district court's conclusion that the $65,000 was never part of the estate. The bankruptcy court considered all the claims on the $900,000 sale proceeds and approved the agreed-upon distribution. The $65,000 payment came from the co-owners’ share, not the estate’s. Therefore, the general priority scheme between creditors does not apply. The Court also found no abuse of discretion in the bankruptcy court’s approval of the settlement. The bankruptcy court carefully considered all the interests involved and weighed them against the costs of further litigation. The ultimate settlement was within a reasonable range of outcomes.

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

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

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

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STEVO v. FRASOR (November 17, 2011)

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

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

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NORINDER v. FUENTES (September 6, 2011)

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

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

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WILLIAMS v. ROHN AND HAAS PENSION PLAN (September 2, 2011)

In 2002, Gary Williams filed a class action against the Rohm and Haas Pension Plan, alleging that his lump-sum distribution should include cost-of-living adjustments. The district court granted summary judgment to the class. The Seventh Circuit affirmed and remanded for a damages calculation. On remand, the Plan took the position that class members who took early retirement were entitled to no damages. The parties reached a settlement before the issue was adjudicated. One group of class members objected to the settlement on the ground that it discriminated against early retirees, who (they maintained) should have been given separate counsel. The group also objected to the amount of fees awarded. Another objector claimed that the settlement released his unrelated claims and that he should have been allowed to opt out. Judge Barker (S.D. Ind.) approved the settlement. The objectors appeal.

In their opinion, Seventh Circuit Judges Bauer, Kanne, and Evans (who, as a result of his death, took no part in the decision) affirmed. First, the Court affirmed the district court's fairness finding with respect to the early retirees. The Court noted that the early retirees received $60 million as part of the settlement on a claim that rested on unsettled law. The district court had already heard arguments on the issue and was well positioned to assess the settlement's fairness. Her decision was not clearly erroneous. Likewise, her decision not to create a separately represented subclass was not an abuse of discretion. With respect to the individual objector, the Court concluded that the settlement only released pension plan related claims. The district court did not abuse its discretion in denying his opt out. Finally, with respect to the fee award, the Court stated that, given the district court's application of the correct methodology and intimate familiarity with the litigation, it did not abuse its discretion in the fee award.

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GOMEZ v. ST. VINCENT HEALTH (August 15, 2011)

St. Vincent Health operates a number of hospitals and health care facilities in central Indiana and employs thousands of people. Federal law obligates it to give timely notice to any qualified person who leaves it employ of his or her right to extended health insurance coverage under COBRA. St. Vincent uses a third-party administrator to manage the process of sending out these COBRA notices. To monitor and ensure its compliance with this requirement, St. Vincent also established an oversight system, pursuant to which an outside accounting firm audited its program, and a call center, where current and former employees can get benefits questions answered. Notwithstanding these safeguards, three former employees filed a class-action against St. Vincent in February of 2006 alleging that many employees received their COBRA notices late or not at all. St. Vincent conducted an internal investigation and concluded that over 200 individuals in the preceding 21 months failed to receive timely notices. It provided notices to each of those individuals, allowed a retroactive benefits selection, and even offered a payment plan if the individual had trouble becoming current with premium payments. Meanwhile, the district court declined to certify the class for several reasons, including inadequate class counsel, and granted summary judgment to St. Vincent on the individual claims. The plaintiffs filed an appeal, but later withdrew it. Undaunted, plaintiffs' counsel solicited new class representatives from information it acquired in the first case and filed a new, almost identical, class action. The two named plaintiffs are Blanca Gomez and Joan Wagner-Barnett. Gomez received her COBRA notice 17 months late but she testified that she would not have elected to extend her benefits. Wagner-Barnett also received notice 17 months late, testified that she would have extended coverage, and contends that she incurred almost $1000 in out-of-pocket expenses that she would not have otherwise incurred. Judge Barker (S.D. Ind.) denied class certification on inadequacy of counsel grounds. On the individual claims, the district court concluded that the circumstances did not warrant a statutory penalty, that Gomez suffered no damage since she would not have elected extended coverage anyway, and awarded Wagner-Barnett $396 in damages, the difference between her out-of-pocket prescription costs and the premium she would have paid. Gomez and Wagner-Barnett appeal.

In their opinion, Seventh Circuit Judges Cudahy, Kanne, and Tinder affirmed. The appeal raises three issues: the amount of Wagner-Barnett’s damages, the propriety of a statutory penalty, and class certification. The Court first questioned the propriety of any damages. ERISA’s enforcement provision does not authorize compensatory damages -- only equitable relief and "such other relief" as is proper. Here, the district court followed a practice used by other district courts (and at least condoned by Courts of Appeals) to include, as "such other relief," a party's medical expenses less the premiums that would have been paid. Although "reticent" to condone such an approach, the Court found no error. The amount was small, it did not contradict ERISA’s plain language, and St. Vincent did not appeal on that ground. With respect to Wagner-Barnett’s request for additional medical expenses, the Court concluded that the district court did not abuse its discretion in denying those expenses. The Court turned to statutory penalties. Under the statute, the district court could have imposed as much as $110 a day in statutory penalties. The Court found no error in the district court's approach. It considered the right factors, including any prejudice to the former employee and the nature of the company’s conduct. There is no evidence of bad faith or gross negligence on the part of St. Vincent. Furthermore, there is no evidence of any prejudice to the plaintiffs. When same Vincent discovered its noncompliance, it contacted the former employees, provided notice, allowed for a retroactive election, and even offered a payment plan to catch up on the unpaid premiums. Finally, the Court turned to the class certification issue. Again, it found no error. It noted that counsel did not even address much of the district court's rationale with respect to his diligence, respect for judicial resources, and promptness. 

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

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

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

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

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

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

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JOHNSON v. CYPRESS HILL (June 1, 2011)

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

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

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

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

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

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

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

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

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GEORGE v. KRAFT FOODS GLOBAL, INC. (April 11, 2011)

Kraft Foods Global, Inc. sponsored an ERISA defined contribution plan for its employees. Each participating employee had an account and was able to choose where to invest. The plan offered up to nine different funds, including two company stock funds and a number of multi-stock funds. The plan contracted with Hewitt & Associates to track the accounts and transactions and State Street Bank to manage the fund's assets. A number of Plan participants filed suit against seven defendants in 2006, alleging that the defendants mismanaged the company stock funds and paid excessive fees to the service providers. The original fact discovery deadline was March of 2008. The parties completed the class certification motion briefing by January 2008. In May 2008, plaintiffs sought to amend their complaint to add 21 defendants and to add claims challenging a number of investment decisions. Magistrate Judge Schenkier (N.D. Ill.) denied the motion, concluding that the plaintiffs had known about the facts in support of the amendment for quite some time, that the plaintiffs never advised the court of their desire to amend, and that the new claims were substantially different from the original claims. The court then certified a class and granted summary judgment to the defendants. Plaintiffs appeal.

In their opinion, Circuit Judges Cudahy (concurring in part and dissenting in part) and Rovner and District Judge Adelman affirmed in part and reversed and remanded in part. The Court first addressed the district court's denial of the motion to amend. The district court found that the plaintiffs were aware of the facts supporting the amendment early on, that they never asked for a amendment deadline, and that the addition of the new defendants and claims would prejudice both the defendants and the court. The Court found no abuse of discretion. The Court also found no error in the district court's refusal to allow an expert witness. The expert's opinion related only to the claims in the amended complaint and was not relevant to the case without it. On the merits, the Court first addressed the plaintiffs allegations with respect to the company stock funds. The plaintiffs complained of the defendants' decision to operate these funds on a unitized basis. The benefits of unitization are that it allows transactions to consummate more quickly and it allows the Plan to save on transaction costs by offsetting purchase orders with sell orders. Two alleged downsides of unitization are: a) the Fund gets lower returns when the stock appreciates because of the need to keep a portion of the fund in cash or other liquid investments, and b) unitization incentivizes more transactions and higher transaction costs, since transaction costs are deducted from the fund value rather than allocated to individual traders. Plaintiffs' legal theory is that defendants breached their fiduciary duty by not eliminating unitization or at least adopting measures to limit the number of transactions. Notwithstanding contrary conclusions by the district court, the Court could find nothing in the record establishing that a decision was ever made. But a failure to make a decision, one way or the other, when a prudent man would have done so, is also a breach of ERISA’s fiduciary obligation. The Court therefore reversed and remanded for further consideration. The Court turned to the allegations regarding the Hewitt and State Street fees. With respect to Hewitt, the Court reversed the summary judgment in defendants' favor. Plaintiffs' allegations are that the fiduciaries should have, but did not, solicit competitive bids before extending the Hewitt contract. Plaintiffs’ expert testified to that opinion and further opined that the plan overpaid Hewitt. Defendants assert that they received consultants’ opinions that the Hewitt contract was prudent. The district court erred when it weighed the expert opinion at the summary judgment stage and also erred when it concluded that reliance on experts was sufficient for judgment as a matter of law. With respect to the State Street claims, the court affirmed summary judgment for defendants. Plaintiffs' allegations here are that the fiduciaries allowed State Street to retain as income interest from "float" without even knowing the amount of that income. The Court noted, however, that the defendants submitted a declaration that they received annual income reports. Plaintiffs did not contradict the declaration. Plaintiffs point to no other breach of duty evidence. Summary judgment for the defendants was appropriate.

Judge Cudahy concurred in part and dissenting in part. He would have affirmed the district court decision in its entirety. First, unitization is a "universally accepted investment practice" and whether or not to adopt it is a routine investment consideration. Nothing in ERISA requires a fiduciary to create a record of the balancing of its pluses and minuses. Second, with respect to the Hewitt claim, Judge Cudahy agreed with the district court that the long relationship between the Fund and Hewitt and the Fund's reliance on consultants to evaluate the fee’s prudence satisfies its fiduciary duties.

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

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

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

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HOSKINS v. DART (January 20, 2011)

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

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

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ALLORD v. ASTRUE (January 13, 2001)

Gary Smith served as a Marine in Vietnam. He now suffers from post-traumatic stress disorder. He applied for disability benefits in October of 1996. He asserted that he suffered from the disability since his retirement from the Marine Corps in 1987. Since he was last eligible for Social Security benefits in December of 1992, he had to show that he was disabled at that time. He is entering his fifteenth year of trying to do just that. A local agency denied his claim, an ALJ denied his claim, the agency stipulated on review to a remand for consideration of additional evidence, a different ALJ denied his claim, a district court affirmed the denial, the Seventh Circuit reversed and remanded to the Agency, a third ALJ denied his claim, and a district court has reversed and remanded. Judge Crabb (W.D. Ill.) identified two errors in the last ALJ decision. First, he failed to follow the directions from the Seventh Circuit in assessing a witness's credibility. Second, he did not adequately explain his reasons for discounting a treating physician's opinion and adopting the opinion of another. Nevertheless, the district court declined Smith's request to remand with instructions to award benefits. Smith appeals.

In their opinion, Seventh Circuit Judges Kanne, Williams, and Tinder affirmed. The only issue on appeal is whether the record below requires a finding that Smith was disabled in December 1992. The Court first noted that it would apply an abuse of discretion standard rather than the de novo review typically applied in a Social Security benefits case. That is because it is the claimant appealing the district court's refusal to remand for the award of benefits. The Court found no abuse of discretion. First, although Smith is correct that the ALJ erred in not adequately describing why he discounted the treating physician's testimony, the record does not support the conclusion that he could not do so. In fact, the district court itself noted that contradictory inferences could be drawn from the testimony and Smith does not challenge that reasoning. Second, the Court rejected Smith's argument that the agency’s "obduracy" is sufficient reason to award benefits. The record must provide the reason to award benefits. Third, the Court rejected Smith's argument that a remand would be futile. He expressed confidence that the agency would not continue to ignore its directions and those of the district court.

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

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

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

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

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

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

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SOTTORIVA v. CLAPS (August 17, 2010)

Joseph Sottoriva was a State of Illinois employee and a member of the United States Army Reserve. He was on leave from the State for approximately 17 months in 2003 and 2004. The State's policy was to retain reservists on the payroll and continue to compensate them at their regular rate of pay, minus their military income. The State consistently overcompensated Sottoriva, despite its best efforts to calculate the proper amounts. Shortly before Sottoriva's return, the State calculated that he owed approximately $18,000 in excess compensation. He filed a union grievance, which the union (apparently without his consent) resolved with the State by agreeing to repay the $18,000 under a payment plan. While still negotiating the payment plan, the State recalculated the excess compensation as $24,000. Sottoriva was given several repayment options. When he selected none of them, the State notified him that it would begin involuntary withholding. Sottoriva brought a three count complaint against the department's director and the State Comptroller: a) Count I sought to enjoin any wage reduction, alleging due process violations with respect both to the original union grievance procedure and the State's failure to conduct any hearing with respect to the recalculation, b) Count II sought monetary damages for Sottoriva’s tax losses, and c) Count III sought to remove the director from office for an alleged violation of the State Finance Act. On Count I, Judge Scott (C.D. Ill.) granted summary judgment to the defendants with respect to the $18,000 calculation but granted summary judgment to Sottoriva on any amount above the $18,000 figure, concluding that the State had not provided a meaningful hearing. Sottoriva withdrew Count II. The court held that Count III was barred by the Eleventh Amendment. Sottoriva sought an award of attorney's fees. The court carefully calculated a "lodestar" figure and reduced it by 67%. Sottoriva appeals.

In their opinion, Judges Ripple, Kanne, and Sykes vacated and remanded. The Court noted that § 1988(b) allows the district court, in its discretion, to award attorney's fees to a prevailing party. Although the Court grants great latitude in setting a fee award, a district court must justify its award. The Court applied a two-part test to the district court's reduction of the "lodestar." The first question was whether a downward reduction was appropriate. The second question was whether the amount of the reduction was reasonable. Here, the Court answered the first question affirmatively. Although Sottoriva prevailed on one portion of his due process claim, he also failed on a significant part of his request for relief. With respect to the amount of the reduction, however, the Court vacated. Although it expressed no opinion on the reasonableness of the 67% reduction, it concluded that the district court did not sufficiently explain its rationale for imposing that reduction. In particular, the Court was concerned that the lower court was engaged in unacceptable "claim counting" and simply awarded one third of the fees incurred because Sottoriva prevailed on one of the three counts asserted. The lack of explanation amounted to an abuse of discretion.

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GASTINEAU v. WRIGHT (January 19, 2010)

James and Christy Gastineau were plaintiffs in a Fair Debt Collection Practices Act (FDCPA) case. They were represented by Robert Duff. Although Duff was not their original counsel and did not become so until about three years into the case, he did negotiate the settlement of the case on the first day of trial. He asked for attorney's fees of approximately $140,000. The district court judge awarded approximately $50,000, reducing both the number of hours and the hourly rate in setting that amount. Duff appeals.

In their opinion, Judges Kanne and Tinder and District Judge Griesbach affirmed. The Court first noted that an award of attorney's fees is reviewed on a "highly deferential" version of the already deferential abuse of discretion standard. The district court concluded that Duff’s hours were excessive. He noted that Duff was inexperienced in FDCPA cases and became involved fairly late in the case, after most of the discovery and motion practice had been completed. Much of the time spent was learning the law. The court also concluded that Duff’s rate was excessive for the subject matter. He relied on an affidavit of an experienced lawyer in the area who believed that to be so. The Court found no impediment to the combined reduction of both hours and rate. Having found no abuse of discretion, the Court affirmed.

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GICLA v. UNITED STATES (July 15, 2009)

David Gicla fractured his right ankle in a motorcycle accident when he was 20. Twenty years later, experiencing pain and swelling, he went to the Westside VA Medical Center in Chicago for treatment. He had ankle implant surgery. Unfortunately, the surgery was not successful. More unfortunately, additional treatment and surgeries were also unsuccessful and doctors had to amputate Gicla's right leg below the knee. Gicla brought this malpractice action under the Federal Tort Claims Act. After a bench trial, the court found in favor of the United States. Gicla appeals.

In their opinion, Judges Bauer, Posner and Rovner affirmed. Gicla's principal argument was that the court should have stricken the testimony of the government's medical expert for a Rule 26 disclosure violation. The expert had testified at his deposition that he had not reviewed a series of x-rays in reaching his opinion. On the day of his testimony, however, he did review the x-rays. Gicla's counsel did not learn of that fact until the he cross-examined the expert. The Court agreed with Gicla that Rule 26 requires disclosure of any information considered by an expert in forming an opinion, and requires a party to supplement that disclosure. The Court also agreed that Rule 37 provides for the exclusion of expert testimony in the case of a disclosure violation. But the Court also noted that Rule 37 provides that exclusion is not appropriate if the failure to disclose was harmless. Here, the only real impact of the violation was that Gicla could no longer cross examine him on his failure to examine the x-rays. The court allowed Gicla's counsel a recess to reassess his cross-examination, or to contact his own expert, or to demonstrate actual prejudice to the court. The Court concluded that the lower court did not abuse its discretion when it determined that the violation was harmless. 

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