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

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

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

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

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

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

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

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

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PRIME EAGLE GROUP LTD. v. STEEL DYNAMICS (July 27, 2010)

Prime Eagle Group Ltd. is the assignee of a Thai company that built a steel mill in Thailand in the 1990s. During the mill’s construction, the company ran into difficulty and sought the assistance of Steel Dynamics, an expert in the field. Early on, with Steel Dynamic’s help, the venture was successful and profitable. In the late 1990s, however, when the region was in a recession and steel prices were deflated, Steel Dynamics decided to withdraw. It reported to company management and investors that the mill had design flaws and corrective action would cost $100 million. The company's president did not agree and reported his position to the board of directors. He was fired and investors soon pulled out. Lightning put the mill out of commission in December of 1998. Several years later, after the company came out of reorganization, it commissioned an engineering study. The study concluded that the original design was sound and the mill has operated successfully since -- without an expenditure of $100 million. Prime Eagle brought suit against Steel Dynamics for fraud. Judge Moody (N.D. Ind.) concluded that the suit was untimely under Indiana’s six-year statute of limitations and entered judgment for Steel Dynamics. Prime Eagle appeals.

In their opinion, Chief Judge Easterbrook and Judges Manion and Tinder affirmed. Prime Eagle concedes that the suit was filed ten years after the alleged fraud but asserts that the claim did not accrue until the company learned the results of the 2002 report. The Court noted that the only real issue is whether the president's knowledge is imputed to the company. The president wrote a lengthy and comprehensive letter to the board detailing his disagreement with Steel Dynamics. He certainly knew enough at that time for the company to commission an investigation. Instead of doing so, however, the board fired him and did nothing for four years. The general rule is that an employee's knowledge is imputed to the corporation. Only two exceptions to the rule exist, neither of which applies here. The Court rejected Prime Eagle's argument that a third exception -- for an employee who has lost the confidence of the board -- applies and noted that a federal court is the wrong place to even argue for a new exception to state law. Finally, the Court rejected Prime Eagle's equitable tolling argument. Under equitable tolling, Prime Eagle is required to act diligently after the tolling event (its insolvency) terminates. Here, they failed to do so. In fact, they delayed at least four years before taking any action.

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