Challenge To Chicago's Firing Range Ban Likely To Succeed

Posted on July 13, 2011 by Michael Rigney

 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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Injunctive Relief Is Not A Proper Remedy For Underpayment Of Insurance Claim Case

Posted on March 11, 2011 by Michael Rigney

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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Being Wrongfully Forced To Arbitrate Is Not Irreparable Harm

Posted on March 2, 2011 by Michael Rigney

TRUSTMARK INSURANCE CO. v. JOHN HANCOCK LIFE INSURANCE CO. (U. S. A.) (January 31, 2011)

Trustmark Insurance Company agreed to reinsure certain risks underwritten by John Hancock Life Insurance Company. Their agreement contained a broad arbitration clause. When a dispute arose regarding one of the agreement's exclusions, the companies submitted it to arbitration. The arbitration panel consisted of one person selected by each company and a third person selected by the first two. The panel's award, which was affirmed by district court, supported Hancock. The parties entered into a confidentiality agreement that precluded them from discussing the proceedings or the award. When Trustmark refused to pay, Hancock instituted a second arbitration. Hancock named as its arbitrator the same person who had arbitrated the earlier dispute. The other two arbitrators were not involved in the earlier dispute. After the panel decided that it could consider the evidence and result from the first arbitration, but before it addressed the merits, Trustmark brought suit. It sought to enjoin any further arbitration while Hancock's chosen arbitrator remained on the panel. Its position was that the arbitration clause required "disinterested" arbitrators and that Hancock's arbitrator was not disinterested because of his knowledge of and participation in the first arbitration. Trustmark also argued that the panel could not interpret the confidentiality agreement from the first arbitration because that agreement did not contain its own arbitration clause. Judge Zagel (N.D. Ill.) issued the injunction. Hancock appeals.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Rovner reversed. The Court concluded that there was no support for the district court's finding of irreparable injury. Going forward with arbitration, even if one has not agreed to it, is not irreparable harm. A party that believes arbitrators have exceeded their authority may seek to deny enforcement of the award under the Federal Arbitration Act. The only injury, therefore, is delay and cost – and those are not irreparable injuries. Although that conclusion would have been enough to reverse the district court, the Court also expressed its disagreement with the district court on the merits with respect to both the confidentiality agreement and the "disinterested" arbitrator. In the arbitration context, "disinterested" is defined as lacking a personal stake in the outcome. It does not mean lacking knowledge about the dispute. The Hancock arbitrator has no personal stake and is therefore is disinterested and entitled to participate on the arbitration panel. With respect to the confidentiality agreement, the Court concluded that the panel was entitled to resolve the dispute about its effect. The parties agreed to arbitrator disputes arising from the contract. The arbitrators are entitled to consider and resolve procedural and ancillary issues like the effect of the confidentiality agreement.
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Local Girl Scout Council is a "Dealer" Under the Wisconsin Fair Dealership Law and Entitled to Presumption of Irreparable Harm

Posted on February 10, 2009 by Michael Rigney

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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