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

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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