Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : GVC Ltd. Law Firm

EXELON GENERATION COMPANY v. LOCAL 15, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS (March 29, 2012)

In 1991, the Nuclear Regulatory Commission promulgated regulations requiring nuclear generator operators to develop programs governing unescorted access within their nuclear facilities. Among other things, the regulations provided that only a licensee could grant unescorted access, that a licensee could delegate to a contractor certain elements of the authorization program, and that a licensee had to have review procedures for any employee whose unescorted access privileges were revoked or denied. For almost 20 years, the Commission took the position that labor arbitrators could review and reverse access denials for employees in unionized plants. In 2008, in a lawsuit between Exelon and Local 15 of the International Brotherhood of Electrical Workers, a federal district court held that access denials were grievable and that the regulations did not foreclose an arbitrator's review In 2009, the Commission revised the regulations. After the revisions, an operators' consortium updated its implementation criteria in which it stated that unescorted access decisions are subject only to an internal management review and could not be reviewed by a third party (including an arbitrator). The Commission staff reviewed the implementation criteria and found that it met "the intent and substance of" the new regulations. Exelon filed another complaint for a declaratory judgment that the 2009 amendments changed the Commission's view on the issue. Judge Gettleman (N.D. Ill.) granted summary judgment to Exelon. Local 15 appeals.

In their opinion, Seventh Circuit Judges Kanne, Sykes, and Hamilton reversed. The Court applied the same rules of construction it would apply to statutes. The first of those rules is to determine whether the regulation has a plain and unambiguous meaning. If so, that meaning governs. If not, the Court will resort to other means to ascertain the intended meaning. The Court first addressed the modification that required an independent internal management review as part of the review procedure. The earlier version of the regulation allowed, but did not require, an internal management review. The Court concluded that the regulation was clear and unambiguous and did not, as Exelon urged, preclude any form of review that was not the internal management review. The Court turned to another section of the regulation that provided that a licensee was the only one who could grant unescorted access. Exelon urged that the regulation therefore prohibited an arbitrator's review. Although the Court agreed that the provision was ambiguous and susceptible to multiple meanings, it ultimately concluded based on context that Exelon's reading was wrong. Most significant to the Court was the fact that review by an arbitrator was a very controversial issue when the regulation was first promulgated, that the Commission adopted an unequivocal position that the regulation did not prohibit review by an arbitrator, and that nowhere in the text of the modified regulation or any of its history does the Commission suggest that it is adopting such a fundamental change. The Court reasoned that it can expect an agency to say something when it reverses a significant, long-standing policy. Finally, the Court rejected Exelon's contention that the Commission's acceptance of the industry consortium's position is entitled to Auer-Seminole Rock deference. Under that concept, an agency's interpretation of its own regulation is generally controlling unless it is plainly erroneous or inconsistent with the regulation. The Court declined to give deference to the Commission's action. The Commission merely described the guidance as acceptable. It did not adopt or incorporate it by reference. In fact, the APA would not have permitted the Commission staff to endorse an interpretation that contradicts the Commission's own prior interpretation. The guide is the industry's interpretation -- not the Commission's -- and is not entitled to deference.

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GEINOSKY v. CITY OF CHICAGO (March 28, 2012)

Mark Geinosky received 24 parking tickets from the City of Chicago between October 2007 and the end of 2008. They were all illegitimate and they were all written by officers from the same police unit. Although Geinosky was able to get them all dismissed, he complained to the Police Department. Receiving no satisfaction, he contacted the Chicago Tribune and also filed suit. He named the City of Chicago and eight individual officers alleging an Equal Protection "class of one" claim, a substantive due process claim, and a civil conspiracy claim. Judge Darrah (N.D. Ill.) dismissed his claims for failure to state a cause of action. Geinosky appeals.

In their opinion, Seventh Circuit Judges Posner, Wood, and Hamilton reversed in part, affirmed in part, and remanded. The Court first addressed the "class of one" claim. Under the Equal Protection Clause, a person can bring a claim alleging that he was treated different from others who are similarly situated without a rational basis. These claims are appropriate when the allegations are that law enforcement engaged in irrational and malicious application of law. The Court noted that there must be limitations in order to not transform every incident of improper conduct into a constitutional claim. The limitations depend on the type of claim. For example, the Court noted that "class of one" claims are not recognized in the public employment context. The requirement that a plaintiff point to a similarly situated individual treated differently is a limitation when the complaint has to do with a governmental prosecution or investigation. The district court relied on Geinosky's failure to identify a similarly situated individual in dismissing his claim. The Court disagreed. The nature of the alleged harm itself demonstrates the discriminatory intent. There is simply no need for Geinosky to identify specific individuals who did not receive 24 illegitimate parking tickets over the course of 14 months. The Court also reversed the dismissal of the conspiracy claim since it was based on the dismissal of the Equal Protection Claim. It also rejected defendants' argument that the conspiracy claim was inadequately pleaded. In fact, the Court noted that it could hardly imagine that the alleged harassment was not the product of a conspiracy. Finally, the Court affirmed the district court's dismissal of the substantive due process claim. Such a claim requires behavior that "shocks the conscience." That bar is very high and is not met here.

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WIGOD v. WELLS FARGO BANK (March 7, 2012)

In 2009, the Secretary of the Treasury set aside $50 billion in federal money to assist homeowners facing foreclosure. The Secretary negotiated agreements with mortgages servicers, including Wells Fargo, to induce them to refinance the mortgages they serviced. Lori Wigod submitted a request to Wells Fargo for such a refinance. She submitted financial information and Wells Fargo determined that she was eligible for the program. Wigod and Wells Fargo entered into a Trial Period Plan agreement, as required by the Program. Although Wigod complied with the requirements of the trial plan, Wells Fargo refused to offer her a permanent loan modification. Wigod filed a seven-count complaint for breach of contract, promissory estoppel, breach of Wells Fargo's agreement with the Secretary, negligent hiring and supervision, fraudulent misrepresentation and concealment, negligent misrepresentation and concealment, and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. Judge Manning (N.D. Ill.) dismissed all counts. Smith appeals.

In their opinion, Seventh Circuit Judges Ripple (concurring) and Hamilton and District Judge Myerscough affirmed in part, reversed in part, and remanded. The Court considered each of Wigod’s claims and concluded that: a) she adequately alleged an offer, consideration, and clear and definite enough terms to state a state-law claim for breach of the Trial Period Plan agreement; b) she adequately alleged a promise and her reliance sufficient to state a state-law promissory estoppel claim; c) the economic loss doctrine forecloses her negligent hiring and supervision, negligent misrepresentation, and negligent concealment claims; d) she adequately alleged Wells Fargo's fraudulent misrepresentation, her reasonable reliance, and a sufficient "scheme" to state a claim for promissory fraud, e) her fraudulent concealment claim fails in that she failed to show that there was any special fiduciary-like relationship between her and Wells Fargo, and f) she adequately stated a claim for a violation of the Illinois consumer fraud statute. The Court turned to Wells Fargo's contention that Wigod’s claims were preempted, either by field preemption or conflict preemption. The Court rejected the argument that the Home Owners Loan Act "occupies the field" and preempts Wigod’s state law claims. That Act only preempts state laws when they interfere with federal regulation, which Wigod’s claims do not. The Court also concluded that the state-law claims were not preempted by conflict preemption. Finally, the Court addressed Wells Fargo's argument that there should be no state-law claim since Congress did not create a private right of action under the Program. The absence of a private right of action in a federal statute does not prevent a plaintiff from pursuing a state-law claim related to the statute.

Judge Ripple wrote a concurring opinion expressing his view that the United States should have filed an amicus curiae brief to assist in the Court in its disposition of the issues.

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SCHULTZ v. AVIALL, INC. LONG-TERM DISABILITY PLAN (March 2, 2012)

Kathleen Schultz and Mary Kelly were former employees of Aviall, Inc. and Perkins Coie, respectively, and were covered by their employers’ disability benefit plans. Both plans provided that a disabled employee’s benefits were reduced by the amount of Social Security benefits received by the employee. Both plans included in that set-off benefits paid to the employee herself and benefits paid to her dependent children under a “loss of time disability” provision. Schultz and Kelly brought a class action under ERISA against the plans. They argued both that the benefits paid to their dependent children as a result of their own disability was not a “loss of time disability” benefit and, alternatively, that the plan’s plain language was ambiguous and should be construed against the plan. Judge Castillo (N.D. Ill.) dismissed the case for failure to state a claim. Plaintiffs appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Hamilton affirmed. The Court first noted that its review was de novo because neither plan contained language conferring discretion on the plan administrator, even though there was discretionary language in the summary plan descriptions. On the merits, the Court turned to general principles of contract interpretation – give language its plain and ordinary meaning, read the plan as a whole, and do not render any terms superfluous. The Court concluded that the clear language was not ambiguous and that it included benefits paid to an employee’s child as a result of the employee’s disability in the Social Security off-set. 

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ADT SECURITY SERVICES, INC. v. LISLE-WOODRIDGE FIRE PROTECTION DISTRICT (February 27, 2012)

In 2009, the Lisle-Woodridge Fire Protection District passed an ordinance that required commercial buildings and multi-family residences to have fire alarms that connected wirelessly with a central monitoring board. The ordinance also dictated that a single vendor would provide and service the equipment. Several alarm companies that had competed for this business in the past brought suit against the District. The complaint included constitutional claims as well as federal and state statutory claims. Relying exclusively on state law, Judge Shadur (N.D. Ill) permanently enjoined the implementation of the ordinance. The District appeals.

In their opinion, Seventh Circuit Judges Wood, Tinder, and Hamilton affirmed in part and reversed in part. The District is a creature of state law, specifically the Illinois Fire Protection District Act. The District’s powers are only those expressly granted by the statute. On this appeal from a permanent injunction, the Court considered the crucial factor to be success on the merits. The merits included whether the District had the authority to require all alarms systems to connect to a central facility, require wireless connections, and require all participants to use a single vendor chosen by the District. The Court concluded that the questions were ones of first impression that the Illinois Supreme Court had not yet spoken on – and on which it was obligated to predict how that court would rule. It quickly rejected the district’s arguments that either the statute’s general purpose section or administrative section conferred the required power. Under the statute’s substantive section, the District is given the “power to adopt and enforce fire prevention codes and standards parallel to national standards.” The Court addressed each of the ordinance’s three aspects under that test. It concluded that the direct connect requirement met the “parallel” test even though it was somewhat more demanding than the national standard and that the wireless requirement met the test as well. With respect to the exclusive provider requirement, however, the Court concluded that it was not consistent with national standards. The national standards allow a district to control the receiving end of the system, but not the transmitting end.
 

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ROLFS v. COMMISSIONER OF INTERNAL REVENUE (February 8, 2012)

Theodore Rolfs and his wife purchased a house and three-acre lakefront lot in Chenequa, Wisconsin. In order to make way for a new house they wanted to build on the property, the Rolfs donated the house to the local fire department to be burned in a training exercise. The Rolfs then claimed a $76,000 charitable deduction on their tax return, relying on a before and after appraisal. The IRS disallowed the deduction. The Tax Court agreed. The Rolfs Appeal.

In their opinion, Seventh Circuit Chief Judge Easterbrook, Circuit Judge Hamilton, and District Judge Myerscough affirmed. The Court began with the well-established legal principles that: a) taxpayers may deduct the amount of charitable contributions, b) the objective features of the transaction determine its deductibility, c) the fair market value is an objective determination at the time of the contribution, and d) any return benefit must be deducted from the contribution's fair market value. Here, the taxpayers' before and after appraisal method fails to take into account two things. First, the taxpayers did not donate the house to the fire department unconditionally. It had to be burned down. Therefore, it has negligible value and the Rolfs’ before appraisal was overstated. Second, by donating the house to the fire Department, the taxpayers saved approximately $10,000 in demolition costs. They had to deduct this amount from any donated value. Any value remaining in the house was certainly less than the benefit received by the taxpayers and they are entitled to no charitable deduction.

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MESSNER v. NORTHSHORE UNIVERSITY HEALTHSYSTEM (January 13, 2012)

Northshore University HealthSystem merged with Highland Park Hospital in 2000. In 2004, the FTC challenged the merger as a violation of the Clayton Act. An ALJ agreed and ordered Northshore to divest Highland Park. The FTC affirmed on the merits but reversed on the remedy. Instead of requiring a divestment, it ordered the two hospitals to use separate negotiating teams for their contracts. Steven Messner filed a class-action lawsuit in 2008 against Northshore, alleging monopolization, attempted monopolization, and a violation of the Clayton Act. In support of their motion for class certification, plaintiffs relied on Dr. Dranove. Dranove proposed to use the "difference in differences" method of estimating the antitrust impact on the class. The method compares Northshore's price changes to a control group both before and after the merger. Northshore argued that there was no class-wide antitrust impact and that, in fact, there were class members who were not affected by the alleged price increases at all. Judge Lefkow (N.D. Ill.) denied class certification on the grounds that the individual questions regarding the antitrust impact predominated over common questions. Messner appeals.

In their opinion, Seventh Circuit Judges Sykes, Tinder, and Hamilton vacated and remanded. A Rule 23(b)(3) class must satisfy, in addition to the standard certification requirements, that common questions of law and fact predominate over individual questions. The class raises two issues on appeal. First, they allege error when the district court failed to decide the admissibility of defendant’s expert report. Instead of conducting a Daubert analysis, the court indicated that the class could raise any shortcoming’s it thought the report presented and the court would give the report the weight it deserved. The Court disagreed. A district court should make an explicit Daubert finding when an expert report is critical to class certification, as it was here. The Court rejected Northshore's argument that the American Honda rule should only apply when a district court grants certification, not when it denies it. The class also alleges that the district court erred in applying the predominance test. The predominance test is not a rigid, mechanical test. It is satisfied when common questions make up the bulk of the case and can be resolved for all class members at one time. It does not require the absence of an individual question. Here, the elements of the underlying claim are that Northshore violated the Clayton Act and that the members of the class suffered injury. It is clear that common questions predominate with respect to the first element, the violation. Dr. Dranove contended that he could use common evidence and a common methodology to prove the antitrust impact on the class members, even when that impact was not necessarily the same for each member. The district court's requirement that the impact be the same for each class member was error. The Court also concluded that Dranove did not concede that uniform price increases were necessary for his analysis. Finally, the Court rejected Northshore's argument that the class could not be certified because it contained class members who were not or could not be harmed. The fact that some class members were not harmed and may not prevail on the merits is not a reason for denial of class certification. Of course, if a class contains a number of members who could not have been harmed, the class may have been defined too broadly. The Court rejected the argument that this class was defined too broadly but invited the district court to revisit the issue if additional discovery so indicated.

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INDEPENDENT TRUST CORP. v. STEWART INFORMATION SERVICES CORP. (January 6, 2012)

For much of the 1980s and 1990s, Intercounty Title Insurance Company provided real estate closing and title insurance services in the Chicago area to Stewart Information Services. Lawrence Capriotti and Jack Hargrove controlled Intercounty. Stewart agreed to insure the escrow account that Intercounty managed as part of its service. Unfortunately, Capriotti and Hargrove used the escrow funds to invest in various moneymaking schemes -- and lost a lot of money. The escrow fund was $26 million in the hole by 1989. Stewart found out and pressured Intercounty to fix it. Capriotti and Hargrove "fixed it" by funneling millions of dollars from trusts held by InTrust, of which they were also directors. Stewart and Stewart's customers benefited from this transfer. The Illinois Commissioner of the Office of Banks and Real Estate began an investigation in 1994 but did not learn of the transfers until 2000. The Commissioner put InTrust into receivership. The receiver recovered millions of dollars in civil suits against Capriotti, Hargrove, Intercounty, and ITI Enterprises. In 2010, the receiver brought a multi-count complaint against Stewart. In response to a motion to dismiss on statute of limitations grounds, the receiver relied on the doctrine of adverse domination in arguing that the statute of limitations was tolled before 2000. Judge Darrah (N.D. Ill.) dismissed the claims on limitations grounds. The receiver appeals.

In their opinion, Seventh Circuit Judges Flaum, Kanne, and Hamilton affirmed. The Court first two made preliminary points. One, although the statute of limitations is an affirmative defense and need not be anticipated by the complaint, Rule 12(b)(6) dismissal is appropriate if the complaint itself sets out all the elements of the defense. Two, the Court will apply state law with respect to the statute of limitations as well as tolling and equitable estoppel to this state law claim. In Illinois, the doctrine of adverse domination tolls the statute of limitations for a claim by a corporation against its officers and directors for the period in which the officers and directors were in control. Illinois applies the doctrine against co-conspirators of the directors as well. The Court rejected the receiver's argument that the doctrine applies even without proof of a conspiracy. The Illinois appellate Court, in Larney, held that a conspiracy claim was unnecessary but that proof of complicity between the director and the defendant was necessary. The Illinois Supreme Court has not yet spoken. The district court was correct to rely on Larney and not make its own prediction about what the highest Illinois court would do. The Court also was not persuaded to extend Larney. The Court next rejected the receiver's argument that he met the Larney test. In order to meet that test, the receiver had to plausibly suggest (under Twombly) that Stewart agreed to participate in a common scheme to commit an unlawful act. The receiver alleged that Stewart received monthly financial statements from Intercounty, that it was aware of the improper use of escrow funds, that it did not terminate its agreement with Intercounty, that it knew it was at risk as the fund’s insurer, and that it pressured Intercounty to fix the problem. But what he did not allege was an agreement between Stewart and Intercounty. Stewart's failure to step in does not amount to a conspiracy. The adverse domination doctrine does not apply to Stewart and the receiver's claims are barred. The receiver also complains about the district court's dismissal with prejudice without leave to amend. A district court should normally give leave to amend freely, particularly in light of decisions like Iqbal and Twombly. But the receiver has offered nothing meaningful to suggest that it could overcome the deficiencies in its complaint. The district court did not abuse its discretion.

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COLEMAN v. DONAHOE (January 6, 2012)

The United States Postal Service employed Denise Coleman, without incident, for over 20 years until 2005. That was the year her longtime supervisor retired and she was assigned to a new supervisor, William Berry. Coleman and Berry are African-American, the manager who appointed Berry is white. Coleman thought she was passed over because of her gender and she also believe that Berry was treating her poorly. She started making complaints. Over the next few months, she claims that Berry assigned her to disgusting tasks that were not part of her regular work, disciplined her unfairly, and ignored her medical restrictions after a surgery. Coleman entered a psychiatric unit. She complained of depression, anxiety, and insomnia. Her treating psychiatrist wrote that she had "homicidal ideations" when talking about Berry. Coleman was discharged after a few weeks much improved and in stable condition. On the same day she was discharged, however, her treating psychiatrist told Berry that Coleman had made threats on his life. The Postal Service immediately put Coleman on off duty status and, a few weeks later, notified the police. Coleman was fired in January of 2006 for violating the Postal Service's ban on "Violent and/or Threatening Behavior." An arbitrator ordered her reinstatement in late 2007. Coleman filed suit, alleging race and gender discrimination as well as retaliation. Judge Coar (N.D. Ill.) granted summary judgment to the defendant, concluding that Coleman: a) failed to identify similarly situated employees, b) offered no pretext evidence, and c) failed to carry her burden under the direct method. Coleman appeals.

In their opinion, Seventh Circuit Judges Wood, Tinder, and Hamilton reversed and remanded. The Court first addressed the discrimination claims. It did so only under the indirect method. Under the McDonnell Douglas framework, a plaintiff must show that she is a member of a protected class, that she met her employer's expectations, that she suffered an adverse job action, and that a similarly situated individual not in the class was more favorably treated. If she meets that test, the employer then has the burden to establish a nondiscriminatory reason for its conduct. If it can do so, the burden then shifts back for the plaintiff to establish that the stated nondiscriminatory reason is a pretext. The defendants conceded that Coleman met three of the four prima facie prongs -- challenging only the similarly situated prong. The Court noted that the similarly situated analysis is a flexible one and should take into account all factors -- but that a similarly situated employee must be comparable to the plaintiff in all material respects. That usually requires the same supervisor, the same conduct, and the same standards. Here, Coleman's comparators were two white male employees who held a knife to a black colleague’s throat. The two were suspended for seven days. The district court rejected them as comparators because they had different supervisors and different jobs. The Court disagreed with the district court's conclusion. Although the white males had different supervisors, the facility's maintenance operations manager was the decisionmaker in each case. Similarly, although the white males had different job duties, the decisions in this case had nothing to do with their duties. All three were subject to the same Postal Service policy with respect to violence in the workplace. Finally, they were each disciplined for violating the same rule. The Court concluded that the employees were similar enough to survive summary judgment. With respect to pretext, the Court rejected Coleman's request to give the arbitrator’s decision preclusive effect. Not only did the arbitrator not address the same question that the Court addresses, but arbitration decisions in general are not given preclusive effect. Nevertheless, the Court concluded that Coleman satisfied her burden on pretext. Given the arbitrator's conclusion, the context of Coleman's "threats," the decision to terminate her instead of have her undergo a fitness evaluation, and the very selective enforcement evidenced by the comparator analysis is sufficient to defeat summary judgment. The Court turned to the retaliation claims. In order to prevail, Coleman has to show that she engaged in protected activity, suffered an adverse employment action, and that there was a causal connection. Here, the only disputed element is the causal connection. The Court concluded that the combination of the suspicious timing of the Postal Service's conduct and the evidence of pretext were enough to survive summary judgment

Judge Wood wrote separately, concurring in the judgment. Interestingly, Judges Tinder and Hamilton joined in Judge Wood's concurrence. The opinion suggested that, now almost 40 years after McDonnell Douglas, the Supreme Court should simplify the approach that district courts take in addressing employment litigation at the summary judgment stage.

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CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND v. SCOFBP (December 27, 2011)

Michael Cappy operated a number of businesses, including SCOFBP, MCRI, and MCOF. SCOFBP operated a lumber yard in O’Fallon, Missouri. MCOF owns the lumberyard. MCRI owns property in Rock Island, Illinois. When SCOFBP went bankrupt and stopped paying into Central States' pension fund, the Fund brought suit against all three entities for withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980. Judge Pallmeyer (N.D. Ill.) entered judgment for the Fund.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Tinder and Hamilton affirmed. Under the Act, a "trade or business" under "common control" with the withdrawing firm is jointly and severally liable for withdrawal liability. The Court first turned to the question whether the solvent entities were "trades or businesses" under the Act. Although the Act does not define what constitutes a trade or business, the Court applied the Groetzinger test of whether the entity engaged in an activity regularly and continuously for the primary purpose of income or profit. The Court concluded that both MCRI and MCOF were trades or businesses. Both are engaged principally in the ownership of property. Owning property can be a personal investment, and not a trade or business, under the right circumstances. This case does not present those circumstances. Both companies were for-profit, both had bank accounts and federal employer identification numbers, both maintained offices and retained professionals to provide services. Next, the Court considered whether the entities were all under common control at the time SCOFBP incurred withdrawal liability. Cappy's business empire was a rather complex one. He filed for personal bankruptcy in 1999. In 2004, the district court affirmed the bankruptcy court's holding that Cappy's transfers were fraudulent and that all of his holdings, including MCOF and MCRI, were part of the bankruptcy estate and under common control. But SCOFBP incurred its liability in 2001. Even though the bankruptcy court's order followed that date by several years, the Court concluded that a withdrawal liability creditor could rely on that later decision to establish earlier common control.

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VIRNICH v. VORWALD (December 20, 2011)

Daniel Virnich was a director of Communications Products Corporation. CPC had a banking relationship with American Trust and Savings Bank. When CPC was experiencing financial difficulties in the early 2000s, the Bank asked for additional collateral or repayment and sought personal guarantees. Virnich alleges that it was at this time that the Bank's loan officer concocted a plan to damage Virnich’s reputation. He alleges that the loan officer contacted other banks, tried to instigate an FBI investigation, and conspired with Michael Polsky to act as a receiver. In fact, the Bank brought an ex parte motion for a receiver and Polsky was appointed. CPC's owners agreed to sell its assets and released Polsky and the bank. They also sought permission from the receivership court to bring a derivative action on behalf of CPC against the Bank. But Polsky, as receiver, had already brought a lawsuit against Virnich and the co-owner for breach of fiduciary duty. A jury awarded CPC over $6 million in damages, which Polsky tried to collect from Virnich. The appellate court reversed the jury verdict. Meanwhile, Virnich filed suit in federal court against the Bank, the loan officer, and Polsky for tortious interference with contract, negligence, and a violation of a Wisconsin statute which prohibits conspiracies to maliciously injure the business of another. Judge Crabb (W.D. Wis.) dismissed most of the claims on the grounds that they were derivative and should have been brought by CPC and dismissed the Wisconsin statutory claim for failure to state a claim. Virnich appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Hamilton affirmed. Under Twombly, a complaint must state a claim that is "plausible on its face." The Wisconsin statute requires allegations that the defendants acted in concert, with a common purpose, to injure Virnich's reputation or business, maliciously, resulting in financial harm. The district court concluded that Virnich failed to allege a plausible conspiracy, given that Polsky was a professional receiver and that it was not plausible that he would engage in the alleged conspiracy, and failed to allege malice. The Court disagreed. Notwithstanding Polsky's role as a professional receiver, the Court concluded that Virnich adequately alleged conspiracy. Similarly, Virnich adequately alleged that the defendants irrationally wanted to cause him harm. Therefore, Virnich adequately alleged a statutory violation. Nevertheless, the Court affirmed the district court for a different reason. Every alleged action by Polsky was taken in his role as the court-appointed receiver. Virnich had an opportunity to contest Polsky's appointment in the receivership court and he did not. When he sought leave to file a derivative action against the Bank, the receivership court concluded that he had waived that right. Under principles of collateral estoppel, Virnich is precluded from relitigating issues already litigated in the receivership court. The Court also concluded that precluding Virnich's statutory claim would be consistent with fundamental fairness, which is a necessary finding for collateral estoppel in Wisconsin.

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REDD v. NOLAN (November 29, 2011)

Samone Redd was a probationary correctional officer with the Cook County Department of Corrections in May of 2007 when she witnessed an altercation in which a friend was involved. When the friend later complained that she was hit in the face with a beer bottle during the altercation, the Chicago Police investigated. Redd was initially cooperative. The officers investigating the case later found her to be uncooperative and filed a complaint that she was failing to cooperate in an ongoing investigation. Redd alleges that her "failure to cooperate" was simply her refusal to go along with the officer’s request that she lie. The Sheriff’s Department investigated the charges against Redd and eventually sustained several of them. The results of the investigation ended with a recommendation that the Department terminate Redd. On October 31, just 13 days before her probationary employment would end, Redd was told that she would be discharged if she did not resign. She chose to resign. Redd brought suit against the original investigating officer for tortiously interfering with her employment. She also sued the County for First Amendment retaliation, retaliatory discharge, and procedural due process. The City claim was dismissed for failure to state a claim and Magistrate Judge Denlow (N.D. Ill.) granted summary judgment to the County on the remaining claims. Redd appeals.

In their opinion, Seventh Circuit judges Posner, Flaum, and Hamilton affirmed. With respect to the intentional interference claim, the Court noted that Redd alleged that the complaint with the County was made not by the officer, but by an Assistant State's Attorney. Although she tries to create liability on the part of the officer by alleging a conspiracy, she offers no facts to support the allegation. The Court turned to her First Amendment retaliation and state retaliatory discharge claims. It agreed with the district court that Redd presented no evidence from which a jury could conclude that the County's actions were in retaliation for her conduct during the investigation. The Court went on to note that, even in such had been presented, the investigator was not part of the termination decision. Finally, the Court turned to her due process argument. On its face, the argument seemed to lack merit. Redd was still a probationary officer and possessed no protectable property interest in continued employment under Illinois law. But Illinois courts have concluded that a municipal body can afford more protection than required by Illinois law -- all that is required is a "clear policy statement." In Redd's employment agreement, she confirmed that she was "on probation and can be terminated for cause." Notwithstanding the "for cause" language in the terms of her employment, the Court concluded that the phrase was not a sufficiently clear policy statement to provide protection amounting to a property interest. Since she had no protectable property interest, she was entitled to no particular procedures.

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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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E360 INSIGHT, INC. v. THE SPAMHAUS PROJECT (September 2, 2011)

The Spamhaus Project is a U.K. company that wants to rid the world of unwanted e-mail. To further this end, it provides lists of spam distributors to Internet service providers. The Internet service providers can, in turn, prevent spam from reaching its addressees. After the Project added Illinois company e360 to its list, however, it got sued. E360 brought suit in state court for tortious interference with contract, tortious interference with prospective economic advantage, and defamation. Although the Project removed the case and initially participated in the litigation, it later informed the district court that it would no longer defend the case. The district court entered a default judgment and awarded over $11 million in damages, based on the affidavit of e360's operator David Linhardt. The Project changed its mind and moved to set aside the judgment under Rule 60(b)(4). The district court denied the motion and the Seventh Circuit affirmed. But the appellate court also vacated the damages award, concluding that the Linhardt affidavit was an insufficient basis on which to calculate damages. On remand, Judge Kocoras (N.D. Ill.) awarded $27,000 on the tortious interference with contract claim and one dollar nominal damages on each of the other two claims. The Project appeals -- e360 cross-appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Hamilton vacated and remanded with instructions. Before addressing the merits, the court resolved some evidentiary and sanctions issues. It: a) affirmed the district court's sanctions for e360’s gross discovery abuses, b) affirmed the district court's denial of e360's motion to compel discovery that the Court found irrelevant or, at least, the absence of which created no prejudice, c) affirmed the district court's striking of e360's damages spreadsheet that was submitted well after the discovery cutoff, and d) affirmed the district court's exclusion of most of e360's primary damages witness on lack of credibility grounds. The Court turned to the principal issue on appeal -- the amount of damages. Since it had affirmed the district court's exclusion of much of e360’s evidence, the Court affirmed the two nominal damage awards. The $27,000 tortious interference with contract damages award rested on evidence that e360 lost three customers that accounted for $27,000 a month in revenue. The district court concluded that the company would have continued to do business with these three customers for one month in the absence of the Project's conduct. But the Court noted that gross revenue is not a proper measure of damages. Since there was no evidence in the record regarding what portion of that revenue was actually profit, the Court reduced the award on that count to nominal damages of one dollar as well. The Court remanded with instructions to enter judgment for three dollars.

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LADY DI’S, INC. v. ENHANCED SERVICES BILLING, INC. (August 16, 2011)

Enhanced Services Billing and ILD Telecommunications are what are known as "billing aggregators." They are, in essence, the middleman between telephone companies and service providers. Service providers are vendors that provide services, sometimes related to telecommunications and sometimes not, to individuals and businesses. They use billing aggregators to process and transmit the costs of the services to their customers on the customer’s telephone bill. Lady Di's is a small Indiana business run by Dianne Markin-Venn. AT&T is its telephone company. In 2008, both ESBI and ILD placed charges on Lady Di’s AT&T bill. Lady Di’s filed suit, alleging unjust enrichment and a violation of Indiana's Deceptive Commercial Solicitation Act. It alleged that the charges were all unauthorized. Judge Barker (S.D. Ind.) granted summary judgment to the defendants. Lady Di’s appeals.

In their opinion, Seventh Circuit Judges Rovner and Hamilton and District Judge Lefkow affirmed. Lady Di’s case arises out of Indiana's attempts to control cramming, which is the practice of charging telephone customers for unauthorized services. The Indiana General Assembly passed a statute the provided that a customer could not be billed for unauthorized services. The Indiana Utility Regulatory Commission promulgated a rule that required certain telecommunications providers to maintain several kinds of documentation before charging a customer for a service. The regulation only applies to primary inter-exchange carriers, local exchange carriers, and their billing agents and does not provide a private cause of action. Although the plaintiff originally alleged that the charges were actually unauthorized, defendants brought forth evidence that the services were authorized. Notwithstanding the facts that Lady Di’s authorized the services and that the regulation provided no private cause of action, Lady Di’s asserts its claims for unjust enrichment and Deceptive Commercial Solicitation Act. The Court rejected the arguments. First, the Court concluded that ESBI and ILD were not subject to the regulation because they were not billing agents for a primary inter-exchange carrier or a local exchange carrier. The undisputed facts show that they were neither authorized nor retained to act on these carriers’ behalf. In fact, the local carrier charged these defendants a fee for using its monthly billing system to collect on behalf of itself and its service providers. Second, even if ESBI and ILD were subject to the regulation, they would still be entitled to summary judgment on the unjust enrichment claim. Unjust enrichment requires that the defendant’s retention of a benefit be unjust. Here, Lady Di’s ordered the services for which it was charged. The Court concluded that an Indiana court would not extend the theory of unjust enrichment to such a case. Third, even if ESBI and ILD were subject to the regulations, they would be entitled to summary judgment on the Deceptive Commercial Solicitation Act claim. The statute, on its face, applies to the act of billing for services not yet ordered. Lady Di’s ordered the services in question -- the statute simply does not apply.

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VANCE v. RUMSFELD (August 8, 2011)

In 2005 and 2006, American citizens Donald Vance and Nathan Ertel were working for a privately owned security company in Iraq. They allege that: a) they came to believe that their employer was engaged in illegal activity, b) they reported their suspicions to the FBI, c) they continued to share information with American officials in Iraq, d) their employer became suspicious and confiscated their credentials, e) American officials "rescued" them and seized their personal property, and f) they were detained, physically and psychologically abused, tortured, treated inhumanely, and assaulted for weeks. They were never charged with a crime and were eventually released. Plaintiffs brought suit against former Secretary of Defense Donald Rumsfeld and other, unidentified defendants. The complaint alleged unconstitutional inhumane treatment, denial of procedural due process, and denial of access to the courts. They also brought a claim against the United States for the return of their personal property. Judge Andersen (N.D. Ill.) dismissed the due process and access claims but refused to dismiss the inhumane treatment claim or the personal property claim. Rumsfeld appeals the inhumane treatment claim -- the United States appeals the personal property claim.

In their opinion, Seventh Circuit Judges Manion (concurring in part, dissenting in part), Evans, and Hamilton affirmed in part and reversed in part. The Court first addressed the Bivens claim against Rumsfeld. It identified three issues: whether there were adequate allegations of Rumsfeld's personal responsibility, whether Rumsfeld was entitled to qualified immunity, and whether a Bivens remedy is even available to a United States citizen in a war zone. First, the Court concluded that the complaint adequately alleged Rumsfeld's personal involvement and responsibility under Rule 8 and Iqbal and Twombly. The complaint alleged, among other things, that Rumsfeld approved a list of interrogation techniques contrary to the Army Field Manual, that he directed that those techniques be used in Iraq, that he was well aware of detainee abuse generally, that he took no action in response to the Ronald W. Reagan National Defense Authorization Act's directive to ensure that detainees were treated in a humane manner, that he continued to approve interrogation techniques not authorized by the Army Field Manual even after the Detainee Treatment Act's limitations of techniques to those authorized in the manual, and that he did not investigate or correct detainee abuse. The Court found that those allegations sufficiently alleged his personal involvement in the policies that led to plaintiffs’ torture and that he was deliberately indifferent to their mistreatment. The Court turned to the issue of qualified immunity and the Saucier two-step test. The Court had little difficulty in concluding that the alleged treatment, if true, "shocks the conscience" and violates substantive due process. In fact, Rumsfeld did not really argue otherwise. Likewise, the Court had little difficulty in concluding that a reasonable United States official would have known that the alleged treatment, if true, would amount to a constitutional violation. Finally, the Court turned to the central issue -- whether Bivens allows a suit for damages by a United States citizen alleging unconstitutional treatment occurring in a war zone. The Court applied the Supreme Court's two-step test: 1) is there a sufficient alternative remedy for the wrong and 2) do "special factors" weigh against recognizing the remedy. Finding no alternative remedy, it focused on the second step. In addressing in the second step, the Court emphasized that the complaint was not a broad challenge to the country’s interrogation or detention policies. It was, instead, a narrow claim for damages. The court found its key elements familiar: a) Bivens has been used by prisoners who have asserted abuse in federal prisons, b) Bivens has been used by civilians who have asserted violation of constitutional rights by military personnel, and c) Bivens has been used against high-ranking government officials, including cabinet members. The Court rejected the defendants’ arguments that a wartime or national security environment counsel against judicial intervention. Finally, the Court emphasized the fact that plaintiffs were United States citizens and distinguished a line of cases that concluded that Bivens did not provide a damages remedy to aliens. It ultimately concluded that there were no special factors standing in the way of a Bivens remedy. With respect to the personal property claim, the Court reversed the district court. It concluded that the "military authority" exception in the Administrative Procedure Act precludes judicial review.

Judge Manion concurred in the personal property portion of the majority's opinion but dissented from the Bivens portion. Judge Manion stated that special factors counsel against applying Bivens in this context and that the majority ignored precedent to that effect and, instead, extended the principle beyond where it has ever been applied. Judge Manion was particularly sensitive to the risks posed by the judiciary getting involved in matters of national security and wartime decisions.

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LINEBACK v. IRVING READY-MIX (August 5, 2011)

Irving Ready-Mix has five concrete plants in northern Indiana. For years, its truck drivers have been represented by the Teamsters. The last collective bargaining agreement expired on May 31, 2010. Attempts to negotiate a new agreement failed and the drivers went on strike the next day. Irving announced that it would no longer recognize the union as the employees' bargaining representative and offered jobs directly to the drivers. The union filed unfair labor practice charges with the NLRB. A week after an ALJ heard evidence, but before its decision, the NLRB regional director filed a petition for a section 10(j) injunction. The ALJ then ruled and concluded that Irving was subject to the NLRA unfair labor practice restrictions and that it had violated two of those provisions. In reaching its conclusion, it rejected Irving's contention that it was not bound by the unfair labor practices provisions because it was "engaged primarily in the building and construction industry" under section 8(f). Judge DeGuilio (N.D. Ind.) granted the motion for a preliminary injunction and ordered Irving to recognize the union. Irving appeals.

In their opinion, Seventh Circuit Judges Manion, Wood and Hamilton affirmed. A section 10(j) injunction is an extraordinary remedy and should be granted only when necessary to protect the integrity of the collective bargaining process. Here, Irving does not challenge three of the four requirements for such an injunction -- irreparable harm, balance of harms, and the public interest. It only challenges the assessment of likelihood of success. Its contention is that ready-mix concrete companies are "engaged primarily in the building and construction industry" and not subject to some of the unfair labor practice restrictions. The Court noted that the Board has repeatedly held since 1988 that ready-mix concrete employers are not in the building and construction industry as that phrase is used in the statute. Irving, on the other hand, suggests that the 1988 decision is wrong and cites an earlier Board decision which held that a flooring installer was "primarily engaged." The Court disagreed and found the post-1988 jurisprudence solidly in favor of the Board's position.

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YANNACOPOLOUS v. GENERAL DYNAMICS (July 26, 2011)

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

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

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LUSTER v. ILLINOIS DEPARTMENT OF CORRECTIONS (July 19, 2011)

Milton Luster is an African American male. In June of 2006, he was a lieutenant with the Illinois Department of Corrections assigned to the Dwight Correctional Center in Dwight, Illinois. On June 6, he and Christine Cole, a white female guard, got into a heated conversation during which Cole called Luster a "bitch." Luster filed an incident report accusing Cole of insubordination. Two days later, Cole filed her own report. In her report, she acknowledged a consensual affair with Luster years earlier and reported that Luster on two occasions had pinned her against the wall and put his mouth on her neck, that he had touched her buttocks, that he made suggestive remarks to her, and that he made unsolicited and uninvited phone calls and visits to her home. The Department began an investigation and put Luster on paid leave. Luster denied all the allegations but two other guards told investigators that they witnessed at least one of the incidents. In his final report, the investigator criticized Cole for the "bitch" remark and for her delay in reporting the harassment but credited her report of the events. The resulting disciplinary proceedings ended with a recommendation that Luster be fired. The warden agreed and suspended Luster without pay. As she was required to do under regulations, she requested the approval of the Illinois Department of Central Management Services for Luster's firing. Lester could have, but did not, file a grievance or administrative appeal. Instead, he resigned. He brought suit against the Department, alleging that he was fired because of his race in violation of Title VII. Judge Mihm (C.D. Ill.) granted summary judgment to the Department. Luster appeals.

In their opinion, Judges Posner, Tinder, and Hamilton affirmed. The Court stated the familiar elements under the indirect method of proof: member of a protected class, meeting the Department's performance expectations, an adverse employment action, and a similarly situated coworker treated more favorably. The first and third elements were not at issue and, here, the second and fourth elements merged. Luster put forward two "similarly situated" employees who he claims were treated more favorably. The Court rejected one of them as a comparator because the admissible evidence established that the accusations against that employee were found to be unsubstantiated. The other employee was an apt comparator. Accusations of physical harassment of a female coworker were found substantiated. That employee was also suspended without pay pending his discharge. Up until that point, the Court noted, he and Luster were treated identically. But the comparator employee, unlike Luster, successfully grieved his termination. The same opportunity was available to Luster. Therefore, he was not treated more favorably than Luster. The Court added that even if it had found a prima facie case, the Department would still prevail because it came forward with a legitimate, nondiscriminatory reason for their treatment of Luster. Luster did not provide sufficient evidence to allow a reasonable jury to conclude that the Department's reason was pretextual.

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TREAT v. TOM KELLEY BUICK PONTIAC GMC, INC. (July 13, 2011)

The Kelley Automotive Group operates a number of car dealerships, including Tom Kelley Buick Pontiac GMC ("Kelley") in Fort Wayne, Indiana. Kelley hired Jill Treat and her son Cody in July of 2006. Kelley fired them both three months later. The Treats brought a multi-count complaint against Kelley, including a claim for unpaid wages under the Indiana Wage Payment Statute. Judge Lee (N.D. Ind.) granted summary judgment to Kelley. The Treats appeal.

In their opinion, Circuit Judges Tinder and Hamilton and District Judge Murphy affirmed. The Court addressed two similar Indiana wage recovery statutes. The Wage Payment Statute dictates the frequency of wage payments, addresses the situation if an employee leaves a job voluntarily, and allows a person to recover in any court with jurisdiction the amount of wages due and liquidated damages. The Indiana Wage Claims Statute addresses the situation where an employer discharges an employee. In the case of a wage dispute, the Commissioner of Labor is required to enforce the law, to institute actions for penalties, and to refer a claim to the Attorney General, who can initiate a claim on behalf of the claimant. The remedy under the Claims statute is the same as the remedy under the Payment statute. The Indiana Supreme Court has stated, in dicta, that the statutes are mutually exclusive. The Payment statute applies to individuals still employed or who voluntarily resigned. The Claims statute applies to individuals who were fired. However, the Treats’ complaint raises issues that arose during their employment as well as after their termination. Although one Indiana appellate case supports the Treats' position, the Court predicted that the Indiana Supreme Court would conclude that a person’s status at the time of the claim would govern. Here, the Treats filed a claim after they were terminated by Kelley. Therefore, their appropriate remedy was under the Claims statute, not the Payment statute.

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PHILOS TECHNOLOGIES v. PHILOS & D, INC. (June 15, 2011)

In late 2008, Philos Technologies brought suit for conversion against a South Korean company and two South Korean individuals. All the defendants were served but none appeared. Instead, the two individuals sent an informal letter to the court. In it, they claimed to have no relationship with Philos, that their relationship was with a Korean company, and requested dismissal of the lawsuit. The district court eventually entered a default judgment in Philos's favor for almost $3 million. Eleven months later, defendants moved to vacate the default judgment under Rule 60(b)(4) on the ground that the court lacked personal jurisdiction over the defendants. Judge Hibbler (N.D. Ill.) denied the motion, apparently as untimely, without reaching the merits of the jurisdiction question. Defendants appeal.

In their opinion, Judges Cudahy, Manion, and Hamilton reversed and remanded. The Court first addressed its standard of review. Although a Rule 60(b)(4) motion is usually reviewed with a somewhat deferential abuse of discretion standard, it is a per se abuse of discretion to deny such a motion if the underlying judgment is void. The Court turned to the timeliness issue. It noted the two options a defendant has to challenge personal jurisdiction. On the one hand, a defendant can appear and object and, if unsuccessful, take a direct appeal. On the other hand, a defendant can risk a default judgment and later challenge that judgment under Rule 60. That collateral challenge can be taken at any time. One thing a defendant may not do, however, is take advantage of both strategies. A defendant may not, for example, appear, challenge jurisdiction, abandon the challenge, and then reassert the challenge under Rule 60. Thus, the critical issue is whether the defendants' informal letter constituted an appearance. The answer is easy with respect to the Corporation because a Corporation cannot appear pro se. The Court also concluded that the individual defendants did not appear, applying the less stringent pro se filing standard. An appearance generally requires an indication that the defendant is going to defend the suit. Here, to the contrary, the Court found that defendants' letter was their explanation why they were not going to defend the suit. On the merits of the jurisdictional issue, the Court remanded to the district court for its consideration.

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JACKMAN FINANCIAL CORP. V. HUMANA INSURANCE CO. (May 31, 2011)

Kunta Torrence participated in his employer's benefits plan that included a $15,000 life insurance policy issued by Humana Insurance. Torrence named his brother as beneficiary. The policy included a "facility-of-payment" clause. That clause covered the situation in which the named beneficiary is not alive at the time of the insured's death. It gave Humana the option to pay the proceeds of the policy to the insured's spouse, children, parents, siblings, or estate. Sadly, Torrence and his brother were both killed in the same car accident. Their mother, Nancy Kelly, borrowed $10,000 from Jackman Financial in order to pay for the funerals. She assigned a portion of the life insurance proceeds to Jackman to secure the loan. Two days later, she was appointed administrator of her son's estate. She completed a beneficiary form for Humana identifying herself as the beneficiary. At Humana's request, Kelley also completed an affidavit identifying Torrence's family members. Humana later advised Kelly that it had decided to turn over the proceeds to Torrence’s minor children. Jackman filed suit for denial of benefits under ERISA. Judge Norgle (N.D. Ill.) granted summary judgment to Humana. Jackman appeals.

In their opinion, Judges Rovner, Williams, and Hamilton affirmed. A facility-of-payment clause gives an insurer broad discretion in distributing the policy proceeds. Humana has an absolute right to choose from the list of possible recipients. Even though Humana knew that Kelly had already assigned much of the proceeds to Jackman, it was under no obligation to turn over the proceeds to Kelly or the estate. The Court then considered Humana's request for fees. Under ERISA, a prevailing party has a modest but rebuttable presumption in favor of fees. The Court applied the "substantially justified" test in denying fees to Humana. It considered that the case was filed in good faith, that neither Kelly nor Jackman new of the facility-of-payment clause at the time of the assignment, and that Jackman gave notice of its claim long before Humana paid out the proceeds. The Court did warn that it might decide differently if future litigants continue to challenge facility-of-payment clauses.

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MERCATUS GROUP, LLC v. LAKE FOREST HOSPITAL (May 26, 2011)

Mercatus Group and Evanston Northwestern Healthcare planned to build a medical center in Lake Bluff, Illinois. A short distance away stood Lake Forest Hospital. Threatened by the competition the new medical center would create, the Hospital attempted to stop the project. Its strategy took several forms. First, it lobbied Lake Bluff officials to deny necessary approvals. Second, it encouraged Hospital employees and community members to do the same through a public relations campaign. Third, it disparaged Mercatus to its partner. Fourth, it offered incentives to two practice groups that intended to leave the Hospital, in order to get them to stay. The Hospital's campaign was quite successful. Mercatus never opened the medical center. Instead, it brought suit under the Sherman Act, alleging that the Hospital had monopolized or attempted to monopolize the market for physician services. Judge Manning (N.D. Ill.) dismissed some of the case for failure to state a claim and granted summary judgment to the Hospital on the rest. She concluded that the Hospital’s lobbying activity was protected by the First Amendment and that the other conduct did not violate the antitrust laws. Mercatus appeals.

In their opinion, Judges Bauer, Manion, and Hamilton affirmed. Mercatus concedes that the Noerr-Pennington doctrine would immunize the Hospital’s lobbying efforts if they were truthful, but asserts that they fall within the fraud exception and are not immunized. But the Noerr-Pennington fraud exception only applies to adjudicative proceedings. So the Court proceeded to consider whether the Village Board proceedings were legislative or adjudicative. Before considering the number of factors that bear on that question, the Court noted that it had to tread lightly because the fraud exception was an exception to a doctrine created on constitutional grounds. Ultimately the Court concluded that the Board acted legislatively, not adjudicatively. The Board: a) generally makes policy, b) is ill-equipped to conduct adjudicative proceedings, c) conducts its business informally, d) allows ex parte lobbying activity, e) does not follow rules of evidence or hear testimony under oath, and f) operates with significant discretion. Summary judgment on the claim based on the Hospital’s activities before the Village Board was proper. The Court reached the same result for much the same reason with respect to the public relations campaign. The Hospital’s conduct was protected by the Noerr-Pennington doctrine. With respect to the Hospital’s allegedly false communications with other businesses, the Court concluded that they were not related to the lobbying efforts and not immunized. However, the Court also found an absence of any coercive conduct. Even if the statements were false, they are not actionable under the antitrust law. Finally, with respect to the Hospital’s successful efforts to retain physician groups that had originally decided to leave, the Court found no evidence in the record of any anticompetitive conduct. The Hospital is not required to sit back and allow these groups to leave. They simply did what the Mercatus group did to get them to leave – it offered them incentives.

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

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

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

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ADKINS v. VIM RECYCLING, INC. (May 3, 2011)

VIM Recycling operates a waste dump in Elkhart, Indiana. It entered into an Agreed Order with the Indiana Department of Environmental Management in 2007 relating principally to the removal of certain waste it referred to as "C" grade waste. When VIM did not comply with the order by the September 2008 deadline, IDEM sued them in state court. A group of area residents attempted to intervene and expand the scope of the lawsuit beyond "C" waste. They also sought damages. When the state court judge limited their intervention to the original scope of the lawsuit, they withdrew their claims. Instead, in October, they brought a RCRA suit in federal court, after providing the required notice and waiting the required time period. Their federal suit included claims relating not only to "C" waste, but also to “A”, “B”, and “C&D” wastes. It sought relief both under RCRA’s "violation" provision, alleging that VIM violated several Indiana regulations, and under RCRA’s "endangerment" provision, alleging that the VIM waste site presented an imminent and substantial danger. About a month later, IDEM brought a second lawsuit in state court, this one relating to "B" waste. VIM moved to dismiss the RCRA "violation" action on the grounds that RCRA prohibited a private action when the state is diligently prosecuting an action. VIM also asked for abstention under both Burford and Colorado River. Chief Judge Simon (N.D. Ind.) agreed, dismissed the "violation" count, and abstained on the "endangerment" count. Plaintiffs appeal.

In their opinion, Circuit Judges Ripple (concurring in part and dissenting in part) and Hamilton and District Judge Murphy reversed and remanded. The Court first addressed the "violation" count and the statutory bar. The Court corrected the parties’ treatment of the issue as jurisdictional, noting the Supreme Court's recent reminders to distinguish between truly jurisdictional rules and other, claims-processing rules. The RCRA statutory bar is a claims-processing rule. On the merits, the statutory bar prohibits the commencement of an action if a state "has commenced and is diligently prosecuting" an action requiring compliance with the same standard or regulation. The Court concluded that neither IDEM action totally barred the private action. The second action was not "commenced" at the time of the federal action so it cannot bar the action. The first action was commenced before the federal action so it bars the federal action -- but only to the extent that the claims overlap. The RCRA plaintiffs’ "C" claims were properly dismissed but the plaintiffs' other claims with respect to other types of waste can be pursued. The Court turned to the two abstention doctrines at issue in the case. Although the Court noted that it was applying an abuse of discretion standard of review, it also noted that federal courts have a "virtually unflagging obligation" to exercise their jurisdiction and should not abstain from doing so except in exceptional circumstances. Colorado River abstention comes into play when there are parallel state and federal proceedings and judicial economy supports abstention. But there must be both parallel proceedings and exceptional circumstances. Here, the Court found neither. The parties are not the same, the claims are not the same, and the state court case would not dispose of the federal case. Furthermore, Congress, in enacting RCRA, expressly contemplated simultaneous federal and state court proceedings. The Court concluded that the district court did abuse its discretion in adopting Colorado River abstention. Burford abstention, on the other hand, comes into play when a federal proceeding could be disruptive to a coherent state policy on a matter of public concern. But the Court noted that Burford abstention requires a state forum with specialized expertise. Since the IDEM cases are proceeding before a court of general jurisdiction, Burford abstention simply does not apply.

Judge Ripple concurred with most of the majority's conclusions but dissented with respect to Colorado River abstention. He believed that the simultaneous proceedings were a "recipe for delay, confusion, and wasted judicial resources" and satisfied the requirements for Colorado River abstention.

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be2 LLC v. IVANOV (April 27, 2011)

be2 Holding is a German company that operates an Internet dating site at be2.com. The site has 14 million users in 36 countries. Its U.S. subsidiary, be2 LLC, is a Delaware company. The companies filed suit against Nikolay Ivanov, alleging, among other things, that Ivanov violated the Lanham Act by offering an Internet dating site at be2.net. Ivanov, a resident of New Jersey, did not appear or answer the complaint. Judge Shadur (N.D. Ill.) entered a default judgment. The plaintiff companies submitted several documents to support their damage claim. One document showed that be2.net had 20 registered users with Chicago addresses. Another described Ivanov as the CEO and co-founder of be2.net. A third document was Ivanov's LinkedIn profile, which also described him as the co-founder and CEO of be2.net. Ivanov moved to vacate the judgment for lack of personal jurisdiction. He submitted an affidavit asserting that: a) he was not the co-founder or CEO of be2.net, b) he was not compensated for any work he did for be2.net, c) most of his work consisted of translating web content, d) the CEO title stood for "Centralized Expert Operator," and e) he had never been to Illinois. The court found his affidavit not credible and denied the motion.

In their opinion, Judges Flaum, Wood, and Hamilton reversed and remanded. Personal jurisdiction over Ivanov depends on whether he has the minimum contacts with Illinois to satisfy Due Process. In the Internet arena, due process requires more than simply operating a website accessible in the forum state. The defendant must, in some fashion, target an audience in the forum state. Here, the record does not support that conclusion. The only evidence of the site’s contacts with Illinois is the document showing 20 Illinois users. Without some evidence that Ivanov targeted an Illinois market, personal jurisdiction was improper and the default judgment must be vacated and the complaint dismissed.

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GROESCH v. CITY OF SPRINGFIELD (March 28, 2011)

Kevin Groesch, Greg Shaffer, and Scott Allin are all white males, were all police officers in the Springfield, Illinois Police Department, all voluntarily resigned from the department, all sought reemployment with the department, and all were ultimately rehired between 1989 and 1996 as entry-level officers pursuant to City policy. Donald Schluter, on the other hand, is African-American. He also was a Springfield police officer who sought reinstatement after a voluntary resignation. He was rehired in 2000 -- but he was given a retroactive leave of absence and he returned to the force with full credit for his prior years of service. The City policy had not changed but the City Council enacted a special ordinance allowing the exception. The police union challenged the ordinance in state court but it was upheld. The City ignored the white officers' request to be credited with their prior years of service. A state court dismissed, on statute of limitations grounds, the officers’ lawsuit alleging disparate treatment under the Illinois Constitution. The officers then filed race discrimination claims under Title VII in federal court in 2004. Judge Scott (C.D. Ill.) denied the City's motions for summary judgment in late 2006, relying on the "paycheck accrual" rule, under which each department paycheck amounted to a separate discriminatory act. Five months later, however, the Supreme Court decided Ledbetter and rejected the paycheck accrual rule. The district court reversed course and granted the City's motion. The court also ruled that the officers' § 1983 claims were barred by res judicata because they could have been brought in the state court action. The officers appeal.

In their opinion, Judges Bauer, Wood, and Hamilton affirmed in part, reversed in part, and remanded. The Court first noted that Congress enacted the Lilly Ledbetter Fair Pay Act of 2009 during the pendency of the appeal. In effect, the Act reinstated the paycheck accrual rule and also made the reinstatement retroactive to any claim pending on the day of the Supreme Court's decision or later. The City attempted to avoid application of the Act or distinguish the case -- but to no avail. The Court reversed the district court with respect to the Title VII claims relating to the time period after the state court dismissal. Next, although the Act only directly applies to Title VII actions, the Court concluded that the paycheck accrual rule applied to pay discrimination claims under § 1983, as well. Finally, the Court considered the impact of the earlier state court decision. Under Illinois law, res judicata requires a final judgment, an identity of causes of action, and an identity of parties. The district court correctly concluded that res judicata bars recovery for claims that arose before the date of the final judgment. But each individual paycheck after that final judgment supports a separate cause of action and triggers a new statute of limitations. They therefore do not share an identity of causes of action and are not barred by res judicata. The Court emphasized that the state court had never ruled on the merits, therefore not implicating collateral estoppel or issue preclusion.

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SILVERMAN v. BOARD OF EDUCATION (March 21, 2011)

Amy Silverman taught special education at a Chicago public high school during the 2004-2005 school year. Because she was a probationary teacher, her contract was subject to annual renewal. In early 2005, the Board of Education decided to eliminate a special education teacher slot at her school. The principal decided not to renew Silverman's contract. Silverman was pregnant at the time. She complained to the EEOC. A few months later, the Board offered her a position at the same school for the 2005-2006 school year. Silverman accepted the position, although she thought it was a more difficult assignment. The Board did not renew her contract for the 2006-2007 school year. Silverman brought suit under Title VII, alleging that the Board discriminated against her as a result of her gender by not renewing her contract when she was pregnant and also retaliated against her, after she filed an EEOC charge, by offering her a more difficult assignment and, again, not renewing her contract. Judge Manning (N.D. Ill.) granted summary judgment to the Board. Silverman appeals.

In their opinion, Circuit Judges Tinder and Hamilton and District Judge Murphy affirmed. Before addressing the merits, the Court rejected Silverman’s argument that the district court erred by not considering the EEOC's reasonable cause finding. A district court has much discretion in how it treats a reasonable cause determination. On the merits, the Court noted that Silverman chose to proceed under both the direct and indirect methods of proof. Silverman had no direct evidence of discriminatory intent so she attempted to create a "convincing mosaic" of circumstantial evidence under direct method. She attempted to do so almost exclusively with what these she thought was evidence of suspicious timing and her principal’s ambiguous comment regarding her maternity leave. The Court was not convinced. First, suspicious timing is rarely enough by itself. Second, although the principal decided not to renew Silverman's contract shortly after learning of her pregnancy, the Board’s records actually show that the principal decided to renew her contract on two separate occasions after learning of her pregnancy. The decision not to renew only came after the Board decided to eliminate a position. With respect to the indirect method, the Board stipulated to a prima facie case for summary judgment purposes. The only issue on appeal, therefore, was whether the Board articulated a nondiscriminatory reason for its actions and whether that reason was a pretext. The Board did offer such a reason. It argued that Silverman was the weakest of the probationary teachers, based on performance evaluations. Although Silverman disagreed with the evaluations, that is not enough to make the reason a pretext. Silverman raised no issue regarding the honesty of the evaluations, only their accuracy. The Court also rejected Silverman's speculation arising out of the fact that the principal interviewed other candidates for the position that she offered Silverman in 2005. The Court also rejected Silverman's retaliation claim. Under the direct method: a) the offering of a "more difficult" position is not an adverse employment action since the Board was not obligated to offer her any position, b) the negative performance evaluations could amount to an adverse employment action but there is no evidence that they were causally related to the EEOC charge, and c) the Board's 2006 decision not to renew was an adverse employment action but, again, is not causally connected to the charge. Under the indirect method, the Court concluded both that Silverman failed to identify a similarly situated individual and failed to offer sufficient evidence of pretext.

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RABE v. UNITED AIR LINES (February 28, 2011)

United Air Lines hired Laurence Rabe as a flight attendant in 1993. Although United assigned her to fly out of Paris , she signed an employment agreement in Chicago. Pursuant to the terms of the agreement, she was to perform her work on United's aircraft, she was required to join the flight attendants' union in the United States, she agreed that her employment would be governed by United States law, and she agreed that only a United States court would have jurisdiction over any employment claim. Rabe transferred to Hong Kong in 1997. She was on leave between 2002 and 2005, when she returned to Hong Kong. She was fired in 2008 amid allegations that she had misused travel vouchers. Rabe brought suit pursuant to Title VII, the Age Discrimination and Employment Act, and the Illinois Human Rights Act. She alleged that the real reason for her termination was the fact that she was a lesbian. Judge Pallmeyer (N.D. Ill.) dismissed the complaint, concluding that she lacked subject matter jurisdiction because Rabe was a non-citizen working principally outside of the country. The court did not address United's argument that the claims were precluded or preempted by the Railway Labor Act. Rabe appeals.

In their opinion, Chief Judge Easterbrook and Judges Coffey and Hamilton reversed and remanded. The Court first corrected the nature of the issue. Although Title VII and ADEA generally do not protect non-citizens working outside the country, it is not because district courts lack subject matter jurisdiction. The Supreme Court, in Arbaugh, held that Title VII's minimum employee threshold is a merits question, not a jurisdictional one. That same analysis applies here. Therefore, the Court concluded that the district court should have treated United’s argument as a motion to dismiss for failure to state a claim. On that issue, the Court stated that whether Rabe was protected by the statutes was debatable. Her recent employment involved very few flights to or from the United States, but her earlier employment mostly involved United States flights. The Court also noted without deciding that the United States registration of the aircraft on which she worked might be enough to justify statutory protection. Ultimately, though, the Court concluded that United’s motion to dismiss should have been denied for other reasons. United elected to protect itself from the uncertainties associated with international employment by insisting, in the employment agreement, that Rabe's employment was to be governed by United States law. She agreed. Therefore, in addition to her colorable statutory claims, she has state law claims for breach of contract or promissory estoppel. She should have been allowed to proceed on those claims. The Court also decided to address the Railway Labor Act question, although the district court did not. It concluded that the claims were not precluded or preempted because they are not based on the collective bargaining agreement and will not require a construction of that agreement.

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REGEN CAPITAL I, INC. v. UAL CORP. (February 18, 2011)

AT&T Corp. was a creditor in United Air Lines’ bankruptcy, with a $4.9 million claim arising from defaulted telecommunications contracts. AT&T assigned the United claims to ReGen Capital I, a firm that purchases discounted claims against debtors. Under bankruptcy law, United would have to cure any default if it wanted to assume these executory contracts. In United's proposed reorganization plan, it listed the AT&T contracts on in "Assumed Executory Contracts" exhibit. The plan also allowed United to reject an executory contract within 15 days after the parties or the court established the cure amount. The bankruptcy court confirmed the plan. United treated the ReGen claim as a general unsecured claim and paid $626,000. ReGen submitted a cure claim, based on United’s inclusion of the contracts on its exhibit. United objected and also filed its notice of intent to reject the contracts. The bankruptcy court found for United on alternate grounds: that ReGen's rights to the claims did not include a cure right and that United properly rejected the contracts. Judge Darrah (N.D. Ill.) agreed. ReGen appeals.

In their opinion, Judges Kanne, Tinder, and Hamilton affirmed. The Court disagreed with the lower courts’ interpretation of ReGen’s rights under the AT&T assignment. The agreement between AT&T and ReGen assigned AT&T's pre-petition unsecured claims and "any actions, claims, lawsuits or rights of any nature" that arise out of those claims. That definition, the Court concluded, was broad enough to include the unsecured claims and any cure claims connected with them. The Court agreed with the lower courts, however, on their alternate basis for holding in United’s favor. The Court emphasized that its review was limited. When a bankruptcy court interprets a reorganization plan that it earlier approved, it is entitled to full deference. Here, the plan specifically gave United the right to reject an executory contract up to 15 days after the cure amount was established. That 15 day period never even started running. United's inclusion of the contracts on its exhibit and the court's approval of that exhibit as part of its plan amounted only to the court's approval of United's ability to assume the contracts. Neither the listing of the contracts nor the approval of the plan constituted an assumption of the contracts themselves. In fact, the contracts could not be assumed until there was a cure. The bankruptcy court did not abuse its discretion in concluding that United properly rejected the executory contracts.

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SCHANDELMEIER-BARTELS v. CHICAGO PARK DISTRICT (February 8, 2011)

Cathleen Schandelmeier-Bartels, a Caucasian, began working for the Chicago Park District in early 2006. She reported to Andrea Adams (an African-American) who reported to Alonzo Williams (an African-American) who reported to Megan McDonald (a Caucasian). [Taking the facts in a light most favorable to Smith] During the summer of 2006, Schandelmeier-Bartels was supervising summer camp. One day, she heard what she thought was the sound of flesh being struck and a child's screams. Upon investigation, she came upon a young African-American child who had been suspended from summer camp. The child's aunt was kneeling over him with her arm raised and a belt in her hand. The child was crying and had visible welts on his arm. When Schandelmeier-Bartels told the aunt to stop, the aunt and the child left. Schandelmeier-Bartels reported the incident to Adams. Adams stated that what happened was acceptable discipline in their culture. Schandelmeier-Bartels reported the incident to the Illinois Department of Children and Family Services and, on their advice, to the police. The next morning, Adams, in the company of the child's aunt, confronted Schandelmeier-Bartels. Adams screamed at her, criticized her for sending the police to the aunt’s house, repeated her statement about the acceptability of that type of discipline in her culture, and ordered Schandelmeier-Bartels out of her office. Adams immediately sent a memo to McDonald complaining of Schandelmeier-Bartels’ poor performance. She recounted several examples, including failure to supervise, failure to report an emergency, and poorly written incident reports. The last example she gave was the incident with the young child. The Park District fired Schandelmeier-Bartels by the end of the day. Schandelmeier-Bartels filed suit for race discrimination under Title VII. A jury awarded her $200,000 in compensatory damages. Judge Coar (N.D. Ill.) granted the Park District’s motion for judgment as a matter of law. He concluded that Adams' racial animus did not affect the termination decision. Schandelmeier-Bartels appeals. The Park District cross-appealed the court's conditional denial of its motion for a new trial (although the Court pointed out that the cross-appeal was unnecessary).

In their opinion, Judges Manion, Williams, and Hamilton affirmed in part and reversed in part. The Court first addressed Schandelmeier-Bartels’ appeal. It noted that the case was based on a "cat's paw" theory. There was evidence of a racial animus on the part of Schandelmeier-Bartels’ supervisor but not on the part of the decision-maker. The Court noted the lack of consistency in recent cases regarding what is necessary to bridge that causal gap. Is evidence that the biased employee exerted "singular influence" over the decision-maker required or will something less suffice? The Court concluded that it need not resolve that issue since it found that a reasonable jury could have found for Schandelmeier-Bartels even under the more stringent test. Viewing the evidence in a light most favorable to Schandelmeier-Bartels, the jury could have found that Adams' input was decisive and that neither McDonald nor the human resources representative conducted an independent investigation. The Court thus reinstated the jury's verdict on liability. It turned to the Park District’s motion for a new trial. First, it rejected the argument that the district court should have modified a jury instruction in response to a jury question during deliberations. The objection came too late in the proceedings and, given the entirety of the instructions, there was no plain error. Second, the Court addressed the admittedly improper suggestion by plaintiff’s counsel during closing argument that an important e-mail actually had been created after the fact. Although the suggestion was without merit and even baseless, the Court noted that closing argument remarks rarely require a new trial. This remark was no different -- it was not an abuse of discretion for the district court to deny the new trial. Finally, the Court addressed the amount of the compensatory damage award. Although the Court found a rational connection between the evidence and a significant compensatory damage award, it concluded that the evidence did not support the $200,000 award. It relied on similar cases from the circuit to reduce the award to $30,000 (noting that, but for the district court judge’s retirement, it would have remanded the issue to him for redetermination).

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CZARNIECKI v. CITY OF CHICAGO (January 21, 2011)

For a few months in late 2006 in early 2007, Wojciech Czarniecki was a probationary police officer with the Chicago Police Department. He alleges that Assistant Deputy Superintendent Tobias made several negative references to his Polish ancestry in a discussion about Czarniecki's use of exam study guides. He alleges that his dismissal followed shortly thereafter and that another Polish probationary officer was dismissed at about the same time. He brought suit under § 1983 against the City and Tobias, alleging national origin discrimination in violation of the 14th Amendment. The district court granted summary judgment to the City. Shortly before trial, the court granted Czarniecki's motion to dismiss his claim against Tobias without prejudice - but conditioned the dismissal on a requirement that he seek her permission if he ever wanted to refile it. Czarniecki appealed that order because of its refiling condition, then sought permission to refile and appealed that order when the court denied permission on the grounds that his first appeal deprived her of jurisdiction. A few months later, Czarniecki filed a new complaint alleging national origin discrimination in violation of Title VII of the Civil Rights Act of 1964, naming only the City. Judge St. Eve (N.D. Ill.) dismissed the complaint on res judicata grounds. Czarniecki appeals.

In their opinion, Seventh Circuit Judges Bauer, Flaum, and Hamilton consolidated the three appeals, affirmed the res judicata dismissal, and dismissed the other appeals as moot. The Court noted the three familiar ingredients of federal res judicata (federal res judicata applies when the earlier judgment was in federal court): a final decision, a dispute arising out of the same operative facts, and the same parties. The Court found that the three requirements were met here. There is no dispute that the earlier decision against the City was final, the parties are the same (the fact that Tobias is not a defendant in the second suit is of no consequence), and the claim arises from the same operative facts. The fact that he sets forth a new theory of liability, even with different proof requirements, does not change the res judicata result. The Court also rejected Czarniecki's argument that res judicata should not apply because he lacked a "right to sue” letter at the time of his first complaint and could not have brought a Title VII claim. The Court concluded that Czarniecki had several ways in which he could have dealt with that situation -- splitting his claims was not one of them. Finally, the Court dismissed as moot Czarniecki's two other appeals since both only dealt with his ability to refile.

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FOLLETT HIGHER EDUCATION GROUP v. BERMAN (January 21, 2011)

Berman & Associates (“B&A”) is an Illinois advertising brokerage firm. It places ads in media outlets for a fee. One of its clients is Follett Higher Education Group, a college bookstore management company. Under their contract, Follett agreed to pay B&A 110% of the purchased ads. B&A then paid the outlet directly, retaining the 10% as its fee. In mid-2006, Follett discovered that B&A had not paid for some of the purchased advertising. Follett paid the bills directly. In August of that year, Jay Berman (the sole shareholder of B&A) petitioned for personal bankruptcy. He listed B&A’s debts in his petition. Follett brought an adversary proceeding in bankruptcy, asserting that the debt was non-dischargeable under § 523(a)(4) because Berman had breached a fiduciary duty. The bankruptcy court found for Berman, concluding that Follett had failed to prove that Berman or B&A was a fiduciary. Judge Dow (N.D. Ill.) affirmed. Follett appeals.

In their opinion, Seventh Circuit Judges Kanne, Tinder, and Hamilton affirmed. The Court noted that generally a debtor's debts are discharged in bankruptcy. One of the exceptions to that rule comes in § 523(a)(4), which applies to a "defalcation while acting in a fiduciary capacity." In order to establish the exception, the creditor must establish that the debtor was a fiduciary to the creditor when the debt originated and that the debt was caused by defalcation or fraud. The only issue on appeal was whether Berman or B&A acted as a fiduciary. The Court rejected both of Follett's theories. The first theory was that Berman was a fiduciary and relied on the Illinois principle that a corporate director owes a fiduciary duty to the corporation, its shareholders, and (upon insolvency) its creditors. But the Court noted that not every fiduciary created by state law acts "in a fiduciary capacity" under § 523. The special relationship must have existed before and be unrelated to the alleged wrong. Therefore, a director's fiduciary obligation to a creditor, created upon insolvency, does not transform the pre-insolvency relationships to fiduciary ones. Berman is therefore not a § 523 fiduciary to Follett. Under Follett's second theory, B&A is the fiduciary under the contract and Jay Berman is personally liable under a veil piercing argument. The Supreme Court has cautioned against finding a fiduciary duty in a ordinary commercial transaction, even though most commercial transactions involve some semblance of trust. A § 523 fiduciary should be found only where there is an express trust or an implied fiduciary status imposed by law. The Court addressed each in turn. With respect to an express trust, the Court found nothing in the contracts that supported an intent to create a trust. There were neither separate accounts nor segregation of funds. The Court turned to the implied fiduciary status issue. Generally speaking, contract obligations do not establish a § 523 fiduciary relationship. The Court referred to its decision in Frain, were it found that relationship in the context of a contract among shareholders. But in Frain, the debtor was the corporation's CEO and thus had a natural knowledge advantage. He also had "ultimate power" through his day-to-day control of the business. Here, there are no special confidences, no knowledge or power disparity, and no duties created by law. The relationship is simply a contractual one and does not fit within the § 523(a)(4) exception.

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

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

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

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

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

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

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EEOC v. AUTOZONE (December 30, 2010)

John Shepherd was a parts sales manager at AutoZone in Macomb, Illinois. His job duties included pitching in to help with routine cleaning assignments, like mopping the floor. A computerized system assigned the jobs randomly. Shepherd had an old back injury, however, that interfered with his ability to perform these physical tasks. His head would swell, he would get headaches, and he would sweat profusely. He was receiving medical treatment. Notwithstanding the treatment, Shepherd took medical leaves on several locations between 2001 and 2003. After one such leave, he asked to be excused from the mop detail based on his physician’s physical restrictions. AutoZone accommodated his request, but only on occasion. When he returned from his 2003 leave, his physician originally recommended no mopping. He modified that restriction when AutoZone advised Shepherd that he could not return to work with the complete restriction. Shepherd suffered another incident while mopping in September of 2003. Again, he took a medical leave. Although he was authorized to return as early as December of 2003 with no greater restrictions than he had in September, AutoZone did not allow his return. Instead, it kept him on involuntary leave until February of 2005 and then dismissed him. The EEOC filed a complaint on his behalf pursuant to the Americans with Disabilities Act. The complaint alleged that AutoZone failed to accommodate Shepherd's disability between March and September 2003, that AutoZone discriminated against him by refusing to allow him to work after 2003, and that AutoZone's dismissal of him was in retaliation for his filing charges. Magistrate Judge Gorman (C.D. Ill.) granted summary judgment to AutoZone on the failure to accommodate claim, concluding that Shepherd was not disabled within the meaning of the statute between March and September 2003. He did not reach the other claims. The EEOC appeals.

In their opinion, Seventh Circuit Judges Manion, Sykes, and Hamilton reversed and remanded. The ADA requires an employer to make "reasonable accommodations" for the mental or physical limitations of a "qualified individual with a disability." A disability under the ADA is a "physical or mental impairment that substantially limits one or more of the major life activities." The Court concluded that a rational jury could find that Shepherd suffered from a disability in 2003. First, self-care is a major life activity and the record is replete with references to Shepherd's inability to care for himself. He needed help dressing, brushing his hair, bathing, tying his shoes, and brushing his teeth. He certainly had an impairment -- but was it substantial. The implementing regulations require a court to consider the nature, severity, duration, and expected continuing impact of an impairment. Here, the record, particularly on summary judgment, shows that Shepherd required help on an almost daily basis and experienced episodes multiple times a week. The Court had no difficulty in concluding that a reasonable jury could conclude that his impairment was substantial. Finally, the Court rejected AutoZone's contention that medical evidence was required to establish a substantial impairment. Neither the statute nor the regulations require it. The nature of the limitations and the detailed testimony were sufficient to establish the impairment and its scope.

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BAUSCH v. STRYKER CORP. (December 23, 2010)

Several days after the FDA advised the Stryker Corp. that its Trident hip replacement system’s manufacturing process was deficient, Margaret Bausch received a new hip -- a Trident. Bausch's Trident failed, she required additional surgery, and she experienced a number of medical problems. Bausch brought a negligence and strict liability suit under state law, alleging that the device violated federal law. Judge Der-Yeghiayan (N.D. Ill) granted the defendants' motion to dismiss on the grounds that the claims were preempted by federal law. The court also entered final judgment without allowing Bausch an opportunity to amend. Bausch appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Manion and Hamilton reversed and remanded. The Court first considered express preemption. Class III medical devices such as the Trident system are granted an express, but limited, preemption defense from product liability claims by the Medical Device Amendments of 1976. Citing the Supreme Court's decisions in Lohr and Riegel, the Court stated that the preemption protection applies to devices that comply with federal law and does not preclude claims based on a violation of federal law. Although expressly not deciding whether Bausch would be able to prove the allegations of her complaint that the device violates federal law, the Court concluded that the express preemption defense should not preclude her from trying. The Court also rejected the defendants' implied preemption defense under Buckman. Buckman involved an allegation of fraud on the FDA -- the Supreme Court expressly distinguished that type of claim from a traditional state court claim. Having concluded that the claims alleged were not preempted, the Court next addressed whether they were adequately stated under Iqbal and Twombly. The Court concluded that both the original complaint and the proffered amended complaint met that standard. With respect to the original complaint, although it did not specify the specific federal violation, it did provide enough information to put defendants on notice of the nature of the claim. This is particularly true in the situation here, because the victim of a defective product frequently does not know the exact nature of the defect and much information regarding Class III medical devices is kept confidential by law. The Court also concluded that the proffered amended complaint was sufficient and should not have been rejected. It provided additional factual detail as well as a clarification that Bausch was proceeding under a federal violation theory. The Court found no merit in any of the district court's rationales for denying leave to amend and cautioned district courts to allow a party an opportunity to amend after dismissal for failure to state a claim, even if the court is skeptical of the party's ability to successfully do so. 

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KIMMEL v. WESTERN RESERVE LIFE ASSURANCE CO. (November 23, 2010)

Richard Kimmell submitted an application for a $500,000 life insurance policy to Western Reserve Life Assurance Co. on November 13, 2006. He submitted a $385 premium with the application. The application provided that Western had 60 days to act on the application and, if it did not act, the application would be deemed declined. Kimmel received a conditional receipt from Western. The conditional receipt stated that the conditional coverage would terminate upon Western’s rejection, acceptance, offer of insurance on different terms, or the expiration of 60 days, whichever came first. The 60 day period expired without any action by Western. Kimmel died several weeks later. Western returned Kimmel’s premium and denied his widow June's claim. June Kimmel brought suit against Western. Magistrate Judge Cherry (N.D. Ind.) granted summary judgment to Western. June Kimmel appeals.

In their opinion, Seventh Circuit Judges Manion, Tinder, and Hamilton affirmed. A dispute centered on a life insurance policy is resolved like any other contract dispute. If the contract language is unambiguous, it controls. Here, the express, plain language of the conditional receipt provides conditional coverage for no more than 60 days, unless the company acts otherwise. Kimmel had no reasonable expectation of any broader coverage and the district court was correct in granting summary judgment on the coverage issue. The Court next addressed Kimmell's bad faith claim. Although Indiana law does impose a duty of good faith between an insurer and its insured, the Court did not believe that an Indiana court would impose such a duty between an insured and an applicant for insurance. The Court found Western's cavalier treatment of the application "inexplicable" and "a poor way to run an insurance company," but it concluded that it was not actionable under state law.

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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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TAYLOR v. WATKINS (October 14, 2010)

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

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

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MOBILE ANESTHESIOLOGISTS CHICAGO v. ANESTHESIA ASSOCIATES OF HOUSTON METROPLEX (October 1, 2010)

Mobile Anesthesiologists Chicago ("Chicago") provides on-site anesthesia services, is based in Chicago, has been in business for 15 years, registered the website www.mobileanesthesiologists.com, registered Mobile Anesthesiologists as a federal trademark, and has affiliate offices in other U.S. cities, including Houston. Anesthesia Associates of Houston Metroplex ("Houston") was founded by Dr. Eric Chan. Dr. Chan is its sole member and it operates only in the Houston area. Chan registered the website www.mobileanesthesia.com, where he advertises his practice to the greater Houston area. Dr. Chan is a licensed anesthesiologist in Texas but in no other state, and he has never conducted business in Illinois or visited Illinois for business. Chicago brought suit in Illinois federal court alleging that Houston violated federal law by registering a confusingly similar domain name. Judge Norgle (N.D. Ill.) dismissed the complaint for lack of personal jurisdiction. Chicago appeals.

In their opinion, Judges Flaum, Wood, and Hamilton affirmed. The Court first rejected Chicago's argument that Houston waived its personal jurisdiction defense when it asked for a continuance of the preliminary injunction hearing and for discovery. Waiver of personal jurisdiction requires much more than that, said the Court. The Court proceeded to the merits of the personal jurisdiction defense under the familiar federal due process and International Shoe rubric. General jurisdiction was not alleged, so it proceeded to analyze specific jurisdiction. Chicago relied on the Calder "expressly aimed" test. The Florida defendants in Calder were required to appear in California on a libel charge because the allegedly libelous story was about a California resident and the "brunt of the harm" was felt in California. The Court reviewed its “not . . . entirely consistent” application of Calder in Wallace, Indianapolis Colts, and Janmark. It concluded that Wallace, and its rejection of the notion that a defendant with no contacts in a forum could be forced to defend there simply by alleging an intentional tort, was the proper application of Calder (while rejecting the notion that Indianapolis Colts or Janmark actually conflicted with Calder). Here, Chicago's only evidence is that Houston maintained a website, accessible in Illinois, under a confusingly similar name and therefore caused injury in Illinois. The Court concluded that that was insufficient "express aiming" to establish personal jurisdiction. The Court also rejected Chicago's alternative theories that its federal trademark registration somehow established personal jurisdiction in Illinois and that Houston's actions were "expressly aimed" at Illinois after its receipt of Chicago's cease-and-desist letter.

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

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

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

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

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AMERISURE MUTUAL INSURANCE v. MICROPLASTICS, INC. (September 20, 2010)

Microplastics manufacturers small plastic components. In 2004, it sold components to Valeo for use in manufacturing automobile door latch assemblies. Before the end of that year, it was apparent that the components were defective. Attempts to resolve the problem were unsuccessful. Valeo terminated the contract and applied money still owing to offset its damages. Microplastics filed suit for breach of contract -- Valeo asserted a counterclaim alleging that Microplastics failed to meet its engineering and quality specifications. Microplastics notified Amerisure, its insurer under a series of CGL policies. The policies provided coverage for "property damage," defined as physical injury to or loss of use of tangible property. Amerisure denied coverage and filed an action for a declaration that it had no duty to defend or indemnify. Microplastics and Valeo settled the underlying dispute. Judge Nordberg (N.D. Ill.) granted summary judgment for Amerisure. Microplastics appeals.

In their opinion, Judges Cudahy, Ripple, and Hamilton affirmed. Under Illinois law, a court compares the allegations of the complaint to the policy language. If those allegations potentially fall within the policy language, the insurer has a duty to defend. Here, the policy covers "property damage" -- but property damage coverage applies to liability for damage to the property of others, not to the cost of repairing the insured's own property. The Court noted that it was unclear from Valeo's counterclaim whether it was asserting such loss. The Court conceded that it was theoretically possible that some of Valeo's losses resulted from damage to property other than the defective product. Theoretical losses, however, are not enough. The duty to defend is triggered only by actual allegations in the complaint, not implied ones. There is nothing in the complaint or the record suggesting any "property damage."

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KINGSTAD v. STATE BAR OF WISCONSIN (September 9, 2010)

Any person who wants to practice law in Wisconsin must join the Wisconsin State Bar and pay the compulsory dues it charges its members. Pursuant to Wisconsin Supreme Court rule, the Bar may fund activities that are related to its purposes but may not fund “political or ideological activities that are not reasonably intended for the purpose of regulating the legal profession or improving the quality of legal services.” In 2007, the State Bar proposed to use compulsory dues for a public image campaign. Several members objected. An arbitrator ruled in the Bar's favor. On appeal, Magistrate Judge Crocker upheld the finding. The objectors appeal.

In their opinion, Judges Bauer, Rovner, and Hamilton affirmed. The First Amendment is implicated when a state requires its attorneys to join a group and to provide financial support for that group. The Supreme Court has concluded that some mandatory associations are permissible because they serve legitimate governmental purposes. Mandatory state bars are such associations. There are limits, however, to the types of activities that can be funded by compulsory dues. The Court referred to its 1996 decision in Thiel. In that case, the Court found constitutional a Wisconsin rule that permitted the funding of non-political and non-ideological activities even if they were not germane to the “constitutional purposes” (that is, the purposes that justify the association’s existence under the First Amendment) of the association. In an alternative holding, the Court concluded that the activities at issue were germane to those purposes. Since Thiel, however, the Supreme Court has decided United Foods and the First Circuit has decided Romero. In United Foods, the Supreme Court held that mandatory support for an agricultural collective's generic advertising violated the First Amendment. Although the speech was not political or ideological, the Supreme Court concluded that it was not related to an otherwise proper goal that justified the collective’s existence. Likewise, in Romero, the First Circuit held that a bar association's mandatory life insurance plan violated the First Amendment. The court concluded that mandatory dues are permissible only for activities that were germane to the purposes that justified the association. In light of United Foods and Romero, the Court overruled one of the alternative holding in Thiel and concluded that the State Bar's mandatory dues must be reasonably related to one of its dual constitutional purposes -- regulating the profession or improving the quality of legal services. In applying that standard to the activities in question, the Court adopted a deferential, "reasonably related," standard of review. The Court concluded that the public image campaign expenditures were germane to improving the quality of legal services. The campaign was meant to improve lawyers' public image, which could lead to better client relationships, which could lead to higher-quality services.

Because the panel opinion overruled one of the alternative holdings of Thiel, it was circulated among active service judges. Although no judge favored rehearing en banc on that issue, Judge Sykes favored rehearing on the panel's application of the standard to the activities in question. She wrote separately, dissenting from the denial of rehearing en banc. She called the panel's approach "procedurally questionable" and "substantively flawed." With respect to procedure, Judge Sykes noted that the arbitrator never ruled on "germaneness" and that there is very little in the record on that issue. She suggested the remand requested by the objectors might be appropriate. With respect to substance, she took exception to the panel's conclusion that the campaign was germane. Not only was there no support in the record for that conclusion, what little there was in the record supported the opposite conclusion. The campaign was about marketing and in the interests of the lawyers, not the public.

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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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SKS & ASSOCIATES v. DART (August 27, 2010)

SKS & Associates owns a number of residential rental properties in and around Chicago. From time to time, SKS has used Illinois' eviction procedures to deal with tenants who do not pay their rent. In November of 2008, the Chief Judge of the Cook County Circuit Court entered a General Order that prohibited the Sheriff from carrying out an eviction order during a specified period around the winter holidays, whenever the temperature was lower than 15°, or when the Sheriff determined that "extreme weather conditions" threatened the health and welfare of persons evicted. SKS brought an action pursuant to § 1983 against the Chief Judge and the Sheriff. It alleges that the Order denies it equal protection, deprives it of property without due process, and that it amounts to the establishment of a religion. Judge Shadur (N. D. Ill.) dismissed the action before the defendants appeared. SKS appeals.

In their opinion, Judges Kanne, Wood, and Hamilton affirmed. Although a federal court should normally exercise the jurisdiction which it has been granted by the Constitution, there are exceptions. The Court noted the four main abstention doctrines: Pullman, Burford, Younger, and Colorado River. With respect to each of these doctrines, a federal court can decline to exercise its jurisdiction. The Younger doctrine, the only abstention doctrine inapplicable here, teaches a federal court to abstain from resolving federal constitutional claims when doing so would interfere with ongoing state proceedings. The Younger doctrine started in the criminal context and required abstention when a criminal defendant sought to block a state prosecution on federal constitutional grounds. The Supreme Court has extended it, on a limited basis, to civil proceedings. It has not, however, extended to a situation, like this, where SKS is not the target of any state enforcement. Nevertheless, the Court identified the same principles (equity, comity, and federalism) at stake here that support the Younger doctrine. SKS wants a federal court to tell a state court how to manage its cases. Doing so would demonstrate a lack of respect for the state court's abilities. Furthermore, the Court did not believe that SKS had no state remedies. It could simply ask the court to issue an eviction order notwithstanding the General Order, it could file suit in state court to vacate the General Order, or it could seek a writ of mandamus to compel a reversal of the Order. SKS must allow a state court the opportunity to address its constitutional complaints about the Order.

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ABCARIAN v. MCDONALD (August 13, 2010)

Dr. Herand Abcarian was a senior surgeon at the University of Illinois College of Medicine and the University of Illinois Medical Center in Chicago. Over time, he clashed frequently with co-employees over issues like recruitment, compensation, risk management, and benefits. He alleges that several of these co-employees conspired to defame him and deprive him of his constitutional rights. In particular, he alleges: a) they caused the University to settle a malpractice claim against him for almost $1 million, b) the reported the malpractice settlement to federal and state databanks, and c) they caused the malpractice plaintiff's attorney to file suit against Abcarian only to then have it dismissed as a result of the settlement. Abcarian brought suit pursuant to § 1983, alleging constitutional violations of his right to free speech, equal protection, and procedural due process. Judge Der-Yeghiayan (N.D. Ill.) dismissed for failure to state a claim. He also denied Abcarian's requests to amend the judgment and to amend his complaint. Abcarian appeals.

In their opinion, Judges Kanne, Williams, and Hamilton affirmed. The Court first addressed his First Amendment claim that he was retaliated against for his speech. Garcetti dealt with an employer's retaliation and the Court noted that it had already reserved judgment once about whether that rule applied to a co-employee's retaliation. Again, the Court ducked the question whether Garcetti applies to all employees but did conclude that it applies to employees whose actions are advancing the interests of their employer. The Court also concluded that a practical view of the speech, keeping in mind Abcarian's role and the content and context of the speech, lead to the conclusion that he spoke as a public employee under Garcetti, not as a private citizen. His speech was therefore not protected. Abcarian's equal protection claim was a "class-of-one" claim under which a plaintiff need not allege a suspect classification. The plaintiff must, however, allege arbitrary treatment without a rational basis. The basis of Abcarian's claim is that the defendants reported the malpractice settlement. But they had no discretion in the matter. Federal and state law required the report and would have exposed them to punishment had they failed to report. The Court concluded that the lack of discretion precluded an equal protection claim. Abcarian's third constitutional claim was a procedural due process claim based on the defendants' defamation. In order for defamation to rise to the level of a due process violation, a plaintiff must allege that was stigmatized by publicly disclosed information and that he suffered a loss of employment opportunities. The Court concluded that Abcarian could not meet this test because he still maintains his same positions at the Medical Center and College of Medicine. One cannot be thought to have been deprived of something that one still possesses. Finally, the Court concluded that Abcarian could not and did not meet the test for a Rule 59(e) motion. Since a post-judgment amendment would only be allowed if his Rule 59(e) motion was granted and it was clear that the district court had entered a final judgment, Abcarian was also not entitled to amend his complaint.

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 HOLMSTROM v. METROPOLITAN LIFE INSURANCE CO. (August 4, 2010)

Lanette Holmstrom developed a painful nerve condition in her right arm in 2000 and stopped working. Metropolitan Life Insurance Company administered her employer's benefit plan. MetLife paid disability benefits first under the "own-occupation" standard and then under the "any-occupation" standard for several years. Meanwhile, Holmstrom underwent three surgeries. None of the surgeries relieved her pain. Her physician diagnosed complex regional pain syndrome and concluded that further surgical intervention was unwarranted. Instead, Holmstrom was placed on a heavy pain medication regimen. With MetLife's help, Holmstrom applied for and began receiving Social Security benefits. Despite any lack of improvement in her condition, MetLife terminated Holmstrom's benefits in 2005 after a periodic review. Its rationale for the denial was that the medical data "no longer support(ed)" the severity of her impairment. Holmstrom appealed and provided substantial additional information, including a 2005 Functional Capacity Evaluation ("FCE") and a detailed statement from her physician with his diagnosis and his conclusion that she could perform no hand functions. MetLife denied the appeal, noting a lack of "objective findings." MetLife specifically noted that it could have reached a different decision had it been provided a more thorough FCE. Holmstrom submitted the requested FCE and additional test results. MetLife's physicians concluded that Holmstrom's physical limitations were not severe and that her diagnosis was not established by medical data. After a further exchange, one of MetLife's physicians recommended an independent medical examination. MetLife upheld its denial of benefits without seeking such an examination. Holmstrom brought suit under ERISA. Judge Dow (N.D. Ill.) granted summary judgment to MetLife. Holmstrom appeals.

In their opinion, Judges Kanne, Wood, and Hamilton reversed and remanded. Even applying the arbitrary and capricious standard of review, the Court found error. The Court first rejected three of Holmstrom arguments: a) that MetLife could not periodically review and reverse prior benefit decisions, b) that MetLife had to prove that her condition actually improved to reverse its course, and c) that the court could take into consideration MetLife's "batting average" in other federal cases challenging its benefit decisions. On the other hand, the Court found that several factors supported an arbitrary and capricious conclusion: a) erroneously concluding that certain normal test results contraindicated the diagnosis, b) unreasonably demanding objective pain data were no objective test exists, c) not adequately explaining its rejection of the FCEs, d) failing to even consider the Social Security determination, e) discounting Holmstrom's own extensive medical history, f) rejecting the evidence of Holmstrom's cognitive impairment resulting from the medication regimen, g) relying on the opinion of the records-review doctors in the face of overwhelming contrary evidence, h) ignoring the recommendations of its own physician to conduct an independent medical examination, and i) its repeated practice of asking for new data and then rejecting the data for reasons never communicated to Holmstrom. Holmstrom submitted evidence sufficient to establish her disability -- MetLife failed to counter it with sound reasoning supported by the record. The Court added that it saw several factors that suggested a conflict of interest existed. Finally, with respect to the remedy, the court conceded that the normal remedy in such a case is a remand for a fresh administrative decision. Here, however, there was an earlier award of benefits, there has been no apparent positive change in Holmstrom's condition, and the Court had a "firm grasp" of the merits. It decided that the appropriate remedy was a reinstatement of benefits. It remanded for the district court to consider the request for fees, costs, and interest.

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IN RE: SOLIS (July 9, 2010)

Luis Solis hired an attorney to bring a workers' compensation claim after he suffered serious spinal injuries on the job. The attorney settled the claim. Solis was to receive almost $110,000. Unfortunately, the attorney's assistant stole the settlement money (as well as over $1 million in other clients' finds). She later sent him a check for $62,000, representing to him that it was a partial settlement payment. Solis hired a second attorney to recover the unpaid settlement amount. He entered into a contingent fee agreement with the attorney under which he agreed to pay 40% of "any gross amount recovered." The attorney filed suit in state court seeking damages for the unpaid settlement amount as well as a declaration that Solis was entitled to keep the $62,000 he already had. The case settled -- the defendants paid $60,000 and relinquished all claims to the $62,000. Solis filed a bankruptcy petition before the settlement was consummated. The trustee in bankruptcy recovered the settlement amount. Solis’ attorney filed a claim for 40% of both the $60,000 and $62,000. The trustee objected. The bankruptcy court allowed the claim but only with respect to the $60,000 in new money. Judge Reinhard (N.D. Ill.) affirmed. The attorney appeals.

In their opinion, Judges Manion, Williams, and Hamilton affirmed. The Court interpreted the fee agreement under Illinois contract law, which construes contingent fee agreements strictly in favor of the client. The plain language of the contract obligates Solis to pay a contingent fee on any money "recovered." The Court had little difficulty in concluding that the $60,000 was the only money "recovered" by the attorney. Although the attorney may have conferred a benefit on Solis by clarifying his right to keep the $62,000, the contingent fee agreement does not address that situation. The Court assumed that the attorney could have drafted an agreement (in clear and explicit language) that provided a contingent fee for a successful resolution of any claims on the $62,000 -- it simply refused to stretch the definition of "recovered" under the existing agreement.

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

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

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

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

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

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STOKES v. BOARD OF EDUCATION (March 19, 2010)

Nyokia Stokes has four children who attend the same elementary school in Chicago. One of her children, a third-grade daughter, had a problem with a classmate. Ebony Scott, the classmate's mother, paid a visit to Stokes' home one night and allegedly threatened her. Stokes and her mother, Carnelita Stokes, met with the police and the school principal, Johnny Banks, the next morning. Banks agreed to host a meeting between Stokes and Scott. When Stokes and her mother returned to the school that very afternoon to pick up Stokes' kindergarten daughter, they encountered Ebony Scott and her cousin in the school office. The factual accounts of what happened next vary. What is clear is that Scott, Scott’s cousin, and Stokes were involved in a lengthy physical and verbal altercation. Most accounts agree that Scott was the aggressor and Stokes was the victim. Approximately thirty kindergarten students entered the office during the altercation and became extremely upset. Banks arrived in the office as the altercation was ending. He instructed Scott and her cousin to go into his office and instructed Stokes and her mother to go to another room. Stokes' mother refused to leave and continued yelling at Banks. Banks swore out criminal complaints against all four women and they were arrested. They were released several hours later and the charges against them were dismissed. The Stokes sued Banks and the school district under § 1983, alleging a violation of their Fourth Amendment rights. The district court granted summary judgment to the defendants. The Stokes appeal.

In their opinion, Judges Posner, Manion, and Hamilton affirmed. The gist of the Stokes' complaint is that Banks lacked probable cause to swear out the criminal complaints. The existence of probable cause, therefore, is an absolute bar to recovery. Because the case was decided on summary judgment, the Court examined the record to see if there was a genuine dispute of material fact with respect to the existence of probable cause. A complaining witness is not expected to determine whether a person's behavior satisfies the essential elements of a crime. To the contrary, probable cause involves the exercise of judgment and depends on the facts and circumstances of the case. Here, even resolving factual disputes in the Stokes' favor, the record shows that Banks entered the room and found Stokes involved in a violent and loud altercation. Many young school children were in the same room and visibly upset. Those undisputed facts provide probable cause for Banks to sign a criminal complaint against Stokes. Although Stokes' mother was not actually involved in a physical altercation, she was in the same room and Banks knew that she was Stokes' mother. Her yelling and refusal to comply with Banks' request to leave contributed to the chaos. Thus, Banks had probable cause to sign the complaint against Carnelita . The facts that were developed after the incident supported the Stokes' position that they were the victims of the altercation and that they did nothing to incite it nor did they retaliate. Nevertheless, the Court noted that Banks was not required to conduct an investigation. He was responsible for maintaining order and had to do so quickly. He exercised the judgment of a reasonable person in taking the action that he did.

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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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