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

IN RE: TRANS UNION CORPORATION PRIVACY LITIGATION (December 27, 2011)

Over a decade ago, a number of class actions were filed against Trans Union Corp. for violating the Fair Credit Reporting Act. The cases were consolidated and eventually settled for $75 million. Judge Gettleman (N.D. Ill.) entered an order that allowed Trans Union to be reimbursed from the $75 million fund for the settlement of, and the attorneys fees for, a separate Texas state court case. Class counsel appealed, asserting that they should get a portion of the Texas lawyers' fees because they are the ones that created the large fund. The Texas lawyers are not parties in the district court proceedings and have not sought intervention in the district court. Instead, they filed a motion in the Seventh Circuit asking not for intervention but to be added to the appellate docket as an appellee.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Wood granted the motion and added the Texas lawyers as parties to the appeal. The Court viewed the Texas lawyers' position with some skepticism. It believed that they wanted to be heard on appeal so they can defend the district court's decision to let Trans Union pay it out of the $75 million fund. On the other hand, they do not want to be parties and be subject to the district court's scrutiny of its contingent fee agreement or an order of the district court to return some of the fees received. The Texas lawyers clearly have a right that is at risk on this appeal. They therefore have a right to be a party. But, as a party, the district court will have the opportunity -- indeed, the obligation -- to make inquiry into the reasonableness of fees.

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BPI ENERGY HOLDINGS v. IEC (MONTGOMERY), LLC (December 8, 2011)

BPI is in the business of producing natural gas from coal. Drummond Company is a large coal mining company. Because companies like BPI need access to coal from which to extract natural gas and companies like Drummond need someone like BPI to extract the gas before it can be safely mine the coal, alliances between companies like these are common. BPI and Drummond entered into a memorandum of understanding pursuant to which the parties agreed that BPI would sell its coal rights to Drummond and Drummond would lease to BPI the extraction rights in its coal holdings. The MOA stated that it was not a binding agreement and merely was intended to form the basis of an agreement. The parties soon entered into a letter of intent that was more specific. It identified BPI's coal interests and Drummond's gas extraction opportunities and further described the alliance expectations of the parties. It also provided, however, that it was not binding upon the parties and it did not provide the terms for the gas extraction leases. Notwithstanding the nonbinding nature of the agreement, BPI began transferring some of its coal rights to Drummond. Drummond did not return the favor and eventually terminated the alliance. BPI brought suit against Drummond for promissory fraud. Chief Judge Herndon (S.D. Ill.) granted summary judgment to Drummond. BPI appeals.

In their opinion, Seventh Circuit Judges Posner, Sykes, and Hamilton affirmed. Because there was no contract between the parties, BPI brought its action based on promissory fraud. Although promissory fraud is recognized in Illinois, it is recognized only if it is part of a scheme to defraud. Illinois’ "scheme" requires either a pattern of fraudulent statements or a particularly egregious one. The Court first addressed and rejected Drummond's statute of frauds defense. Although it characterized Illinois' position as "murky," it concluded that Illinois has adopted the majority rule that promissory fraud is a tort and not subject to the Statute of Frauds. Turning to the merits of the fraud claim, the court simply concluded that BPI's evidence was insufficient. The Court also noted that the case would fail for lack of reliance. Both the memorandum and the letter of intent with were nonbinding. Both anticipated that a final, binding agreement would be negotiated. They had not yet even agreed on the terms for the gas extraction leases. Drummond's reliance on these nonbinding agreements was reckless and does not satisfy the justifiable reliance element of fraud.

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IN RE: IFC CREDIT CORP. (December 5, 2011)

Northbrook Bank & Trust had a fraud suit pending against IFC Credit Corporation when IFC declared bankruptcy on July 27, 2009. The Chapter 7 petition filed on that day was signed by IFC's non-lawyer president. IFC filed an amended petition -- signed by a lawyer -- the following day. The Bank refiled its complaint in the bankruptcy proceeding. The Bank and the trustee settled a preference dispute conditioned on a finding of jurisdiction. The bankruptcy court had rejected the Bank's argument that the bankruptcy proceeding was void because the original petition was not signed by a lawyer. Judge Manning (N.D. Ill.) agreed. The Bank appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Wood affirmed. The Court recognized the rule (and the practical reasons behind) that corporations are not permitted to represent themselves. But that does not make it an element of subject matter jurisdiction. The Supreme Court in recent years has limited the number of rules that actually involve subject matter jurisdiction. Subject matter jurisdiction is all about the competence of a court to decide case, not about the conduct of the parties in those cases. After considering the potential consequences, the Court concluded that the rule against pro se corporate litigants was not jurisdictional. Of course, the bankruptcy court could have dismissed the petition had it discovered the error before it had been corrected. Here, IFC amended the petition pursuant to Bankruptcy Rule 1009(a). Although that rule does not address relations back, the Court concluded that a bankruptcy court could allow the petition to relate back to the original filing.

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IN RE: FORT WAYNE TELSAT, INC. (November 23, 2011)

Indiana University held an FCC license that allowed it to broadcast educational materials on specified frequencies. Afraid that it might lose its license for non-use, the University agreed to transfer it to the Fort Wayne Public Broadcasting Service. In turn, the Service agreed to lease part of the license to Fort Wayne Telsat, a local television broadcaster. Unfortunately, after Telsat spent $350,000 modifying some of its equipment in anticipation of acquiring the license lease, it ended up in bankruptcy. The trustee filed a promissory estoppel claim against the University, which the parties agreed to settle for $100,000. JAS Partners, the debtor's principal unsecured creditor, opposed the settlement. It contended that the trustee should have gone after the license itself, which it valued at over $4 million. The bankruptcy judge concluded that the trustee had acted prudently. Judge Springmann (N.D. Ind.) agreed. Partners appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Wood affirmed. The Court engaged in a relatively straightforward litigation risk analysis. It identified the various legal theories and some of the evidence in support of and in opposition to them. It identified the potential value of the license, which it concluded was only approximately $600,000. Finally, it considered the litigation cost to obtain the license. In the end, the Court concluded that the trustee had, at best, a 50% likelihood of obtaining the $600,000, resulting in a gross expected gain of $300,000. Considering the likely litigation cost, the Court concluded that the trustee acted reasonably in settling for $100,000.

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GONZALEZ-SERVIN v. FORD MOTOR COMPANY (November 23, 2011)

Two particular situations have generated much litigation and disagreement over the proper forum in which to resolve a dispute. The Gonzalez-Servin litigation is one of many cases brought as a result of alleged defects in tires that were installed on Ford vehicles in Latin America. The accident at issue occurred in Mexico and resulted in the death of a Mexican citizen. Judge Barker (S.D. Ind.) granted a forum non conveniens motion, concluding that Mexico is a more appropriate forum. The Kerman litigation is one of many cases filed against blood products manufacturers that alleged infections as a result of contamination. The case was brought by Israeli citizens. Judge Grady (N.D. Ill.) granted a forum non conveniens motion to transfer the case to Israel. The defendants in both cases appeal. The Seventh Circuit consolidated the appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Tinder affirmed both orders. The Court was very critical of the appellate advocacy in both cases. The transfer of similar cases has come before the Court in the past. In 2009, the Court affirmed the transfer of a defective tire case to Argentina. In 2009 and 2010, the Court affirmed a transfer of contaminated blood products cases. The Court was very critical of the appellants' "ostrich-like tactic" of pretending that those dispositive precedents did not exist. The Gonzalez-Servin brief did not even mention the cases, even though appellee's response brief cited them repeatedly. The Kerman opening brief was filed before the relevant cases were decided but its reply brief barely touched on the precedent, even though, again, appellee's brief relied on them heavily. The Court stated that an appellant has three choices when faced with apparently dispositive precedent: a) urge the Court to overrule it, b) distinguish it, or c) preserve the argument for a petition for certiorari. Ignoring it is not an option.

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CREATIVE MONTESSORI LEARNING CENTERS v. ASHFORD GEAR LLC (November 22, 2011)

Lawyers from a firm that specializes in bringing class-action suits under the Telephone Consumer Protection Act obtained information about advertising faxes from a fax broadcaster, in return for a promise of confidentiality. The information they obtained revealed that Ashford Gear had sent almost 15,000 advertising faxes. The Creative Montessori Learning Center was (or may not have been) one of the recipients. The firm communicated with the Center, indicating that a class action already existed. The Center became the named plaintiff in a suit filed by the firm. Plaintiffs sought class certification. Defendants opposed certification on the grounds that the lawyers' misconduct (in breaching their confidentiality promise and in misrepresenting to the Center the status of the action) demonstrated that the lawyers would not adequately represent the class. Judge Gettleman (N.D. Ill.) agreed that there had been misconduct but concluded that the misconduct was a subject for bar authorities and certified the class. Ashford Gear sought permission for leave to appeal from the class certification.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Cudahy and Posner vacated and remanded. The Court, as it has on several occasions recently, commented on the dangers of class actions, particularly in situations with statutes like the Telephone Consumer Protection Act. The Act provides for $500 in statutory damages for the recipient of an unsolicited fax advertisement (trebled if willful or knowing). But, in bringing it as a class action, counsel has turned it into a case worth over $11 million. The Court also emphasized the need for trustworthy class lawyers, given the incentives for class lawyers and defendants' lawyers to recommend settlements that reward the class lawyers at the clients' expense. Here, lawyers for the class have already exhibited their lack of integrity. Although the district court recognized that fact, it concluded that "only the most egregious misconduct" by class counsel was grounds for denial of class certification. The Court noted that that was an erroneous standard. Instead, any misconduct that casts serious doubts on class counsels’ loyalty is grounds for denial of certification. The Court remanded for a reevaluation of whether class counsel will adequately represent the class, given the misconduct.

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MCCANN v. HY-VEE, INC. (November 22, 2011)

Denise and Anthony McCann divorced in 2002. The decree required Anthony to transfer stock in the closely held company by whom he was employed to Denise and to pay child support through 2007 and alimony through 2012. The decree also provided that the alimony obligation could end as early as 2007 if Anthony sold the stock and gave Denise the proceeds. According to Denise, the company's CFO told her that the shares could not be sold until Anthony died or left the company. In fact, that was not the case and Anthony did sell the stock in 2007, gave Denise the proceeds, and stopped making alimony payments. Denise filed suit against the company in September of 2009, alleging a violation of Section 10 (b) of the Securities Exchange Act and Rule 10b-5. Judge Nordberg (N.D. Ill.) dismissed the case on statute of limitations grounds. Denise appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. The Court first addressed the Company's alternative grounds urged for dismissal -- that there was no purchase or sale of stock. The Court concluded otherwise and held that the 2007 sale by Anthony was actually an involuntary sale by Denise and that the 2002 transfer pursuant to the divorce decree was also a sale in that Denise gave up certain demands in return for the shares. Returning to the timeliness issue, the Court noted that the statute allows a securities fraud case to be brought no later than two years after the discovery of facts constituting the violation or five years after the violation. Although the Court addressed the two-year prong, it based its holding solely on the five-year prong. Under that part of the statute, a plaintiff has five years to sue from the date of the violation. Denise argued that the violation occurred in 2007, when Anthony sold the stock and stopped making the alimony payments. The Court agreed that that was the time of her injury but concluded that injury was not an element of the "violation" indicated in the statute. Here, the alleged violation occurred when the CFO misrepresented the restrictions or limitations on Anthony's ability to sell the stock. That occurred in 2002. Denise's 2009 suit is untimely.

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ALEMAN v. VILLAGE OF HANOVER PARK (November 21, 2011)

Rick Aleman operated a daycare in his Hanover Park home. Joshua, one of the children in his care, had been feverish and lethargic his first two days under Aleman’s care. Then, on the third day, he stopped breathing. Aleman picked him up and shook him gently to see if he could get a response. Getting none, he performed CPR and then called 911. Joshua was taken to the hospital and Aleman was taken to the police station. He was held for several hours without questioning and then questioned for several hours. Although Aleman was allowed to call his lawyer several times, and his lawyer told the police that he was invoking his right to remain silent, Aleman eventually signed a waiver. The police told Aleman the three doctors told them that a shaking caused Joshua's injury. They were lying. Based on the statements, Aleman "admitted" that he must have shaken the baby too hard and hurt him. At the same time, he continued to express his disbelief that he could have caused the injuries. Aleman was charged with aggravated battery. A few days later, Joshua died. Aleman was rearrested and charged with first-degree murder. The charges were eventually dropped. Doctors explained that a child could go for a few days, usually in a lethargic state, after being shaken but before losing consciousness. The investigation also disclosed that Joshua's mother had a criminal record and had beaten and shaken Joshua in the past. In addition, one of the lead investigators had apparently developed a sexual attraction to Joshua's mother and did what he could to steer the investigation toward Aleman. Aleman brought suit pursuant to § 1983 against several state and local police officers. Judge Bucklo (N.D. Ill.) granted summary judgment to the defendants. Aleman appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Wood affirmed in part and reversed and remanded in part. The Court quickly concluded that the first arrest was supported by probable cause. Aleman was the last person to be with Joshua and admitted shaking him, the doctors believed his injury resulted from being shaken, and the information about Joshua's mother was not yet known. The second arrest was a constitutional violation, however. By that time, one of the officers had already lied to one of the doctors and obstructed the investigation into Joshua’s mother. The police also engaged in improper tactics during their interrogation. The interrogation itself also violated Miranda. Aleman invoked his right to counsel on more than one occasion. The police should have terminated the interrogation until a lawyer was present or until Aleman initiated a conversation. Instead, they badgered him into signing a waiver. Since the statements he made were critical elements of the murder charge, the Miranda violation is actionable under § 1983. In addition to the Miranda violation, the content of the interrogation was also improper. Aleman is not a medical expert but was given (false) information that he must have been the cause of Joshua's injury. The false information distorted his ability to make a rational choice. Finally, with respect to the malicious prosecution under state law, the Court again distinguished between the first and second arrest. Illinois law requires proof of malice in a malicious prosecution action. Given the circumstances of the first arrest, the district court was correct in granting summary judgment to the defendants. With respect to the second arrest, however, a reasonable jury could find that the officer who obstructed justice and tried to protect Joshua's mother, at Aleman’s expense, had improper motives. 

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BROWN v. CALAMOS (November 10, 2011)

The Calamos Convertible Opportunities and Income Fund is a closed-end investment fund. It issues common stock, which is not redeemable, and preferred stock, which is similar to a bond and can be traded at auction. Since the Fund's investments generally earned more than the interest paid to the holders of preferred stock, the fund's owners (holders of the common stock) benefit. During the 2008 financial crisis, the auction market for the preferred stock collapsed. The holders of the preferred stock could have been stock with their then-low interest rate and the holders of common stock would not have been affected. But the Fund redeemed the preferred stock -- at a premium. A class of common stock owners brought suit in state court against the Fund, alleging that it and its parent breached their fiduciary obligation to the shareholders in order to placate the banks and brokers that they did business with. The Securities Litigation Uniform Standards Act of 1998 prohibits state law class actions with more than 50 class members if the suit is not exclusively derivative and it alleges a misrepresentation or omission of a material fact in connection with the purchase or sale of a security. If such a case is brought, a defendant may remove the case to federal court and the court should dismiss the case. That is exactly what Judge Bucklo (N.D. Ill.) did here, with prejudice, and without addressing class certification. The class appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes affirmed. The Court first recognized that the complaint contained a specific disclaimer that it was not a claim based on a misstatement or omission. Notwithstanding the disclaimer, however, the Court stated that the complaint does allege, either explicitly or implicitly, both misrepresentations and omissions. Before affirming on that rather simple ground, the Court addressed various approaches taken by the Circuits. The Sixth Circuit takes a literal approach and would dismiss if the complaint can be interpreted to allege a misrepresentation or omission. On the other end of the spectrum, the Third Circuit would not bar the suit if the misrepresentation or omission alleged is not essential to the suit's success. In the middle is the Ninth Circuit, which would follow the Sixth Circuit and dismiss the case but dismiss it without prejudice, in order to allow the plaintiff to remove the offending allegation. After some discussion and criticism of each of the various approaches, the Court concluded that the suit would be barred under any reasonable standard because the fraud allegations were central to the case. Furthermore, an amendment to the complaint would not be appropriate. Given the significance of the fraud allegations, the plaintiffs would certainly try to get them back into the case if it were to be remanded to state court.

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ROSE ACRE FARMS v. COLUMBIA CASUALTY CO. (November 1, 2011)

Rose Acre Farms is one of the largest egg producers in the country. It belongs to the United Egg Producers, a trade association. Rose Acre advertises that it complies with the UEP animal husbandry guidelines. Its website makes the same point. The website also states that it sells eggs from both caged and roaming chickens and that its eggs from roaming chickens cost more than regular eggs. A number of class-action suits were filed against Rose Acre, alleging it violated Section 1 of the Sherman Act and conspired to fix the price of eggs. Rose Acre tendered its defense to its insurance company under its "personal and advertising injury" coverage. The insurers declined to defend the company. Rose Acre brought suit for a declaration of coverage. Judge Barker (S.D. Ind.) granted summary judgment to the insurance companies. Rose Acre appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Wood affirmed. Under the policy language, Rose Acre is covered for the offense of "the use of another's advertising idea in your ‘advertisement.’" the Court rejected Rose Acre’s contention that it was entitled to coverage because of its advertisements mentioning the high cost of egg production. First, the antitrust complaints do not mention the company's website and complain only about fixing the price of eggs from caged chickens. Second, the coverage extends only to using "another's" advertising idea. There is no "another" alleged here. Third, the history of this standard policy provision makes clear that it was intended to apply to cases of misappropriation. Finally, the policy contains an exclusion for an advertising injury that is caused by the insured with the knowledge that it would violate another's rights. The complaint’s deliberate participation in a conspiracy allegations fall within that exclusion.

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IN RE: RESOURCE TECHNOLOGY CORP. (OCTOBER 31, 2011)

Samuel Roti owned a Holiday Inn just outside Chicago, adjacent to a landfill operated by Congress Development Company. Resource Technology Corporation was under contract with Congress to build and operate a system for collecting gases generated by the landfill. As of September, 2005, Resource was in Chapter 7 bankruptcy and a trustee was appointed to operate the business until liquidation. Days after the trustee was appointed, the landfill gas collection system failed, causing foul odors to be released into the Holiday Inn. Roti filed an administrative claim in the Resource bankruptcy for the damages to his business. The bankruptcy court rejected the claim. Judge Kennelly (N.D. Ill.) agreed. Roti appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Hamilton affirmed. The Court acknowledged that the foul odors that emanated from the property as a result of the failure of the gas collection system could constitute a nuisance -- and a nuisance for which Resource was responsible. That fact makes Roti a creditor of Resource's Chapter 7 estate. But Roti never asked to be a general creditor of the estate. Instead, he sought administrative claim priority status. Generally, administrative claims get priority because they either enhance or preserve the value of the estate and thereby benefit the other creditors. Paying off a tort claim, at least under these circumstances, would not seem to benefit the other creditors. In Reading, the Supreme Court held that tort claims arising from the operation of a Chapter 11 bankruptcy estate should be treated as administrative claims. The Court distinguished Reading, but not on the obvious Chapter 11 versus Chapter 7 basis. Instead, it concluded that the important factor was whether the firm was operating. Here, the trustee was not operating Resource's gas collection system. The bankruptcy estate had no money to repair the system an had minimal revenues there from. The trustee’s mandate was to liquidate the operations as quickly as possible. Under those circumstances, tort liability should not be considered an administrative expense.

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BROWN v. COUNTY OF COOK (or 25, 2011)

Between 2003 and 2005 (when he retired), Thomas Brown was a sergeant in the Cook County Sheriff’s Office. He was on a list of 16 officers eligible for promotion. Brown never contributed to then-Sheriff Michael Sheahan's campaign, was a Republican (Sheahan was a Democrat), and several years earlier had donated a small amount to Sheahan’s challenger. Brown was never promoted -- only 5 of the 16 were. But Brown filed suit pursuant to § 1983 alleging that he was passed over because of his political affiliation. Judge Coleman (N.D. Ill.) granted summary judgment to the County. Brown appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Williams affirmed. The Court first noted that the Mount Healthy "motivating factor" analysis remains the appropriate analysis in a First Amendment violation case (citing its Greene decision, released shortly after oral argument). Under that test, Brown had to present evidence that his political affiliation was a motivating factor in not being promoted. The burden would then shift to the County to convince a jury that it was not a "but for" factor. Brown's evidence falls far short of the motivating factor threshold. First, two of the five officers who were promoted had not contributed to Sheahan's campaign. Second, Brown has not controverted the testimony of Sheahan and his deputies that they either did not know Brown or did not know his political affiliation. Third, the fact that Sheahan promoted a female officer who was the subject of a serious misconduct allegation is not relevant to Brown's First Amendment claim. It may have been relevant to a gender discrimination claim, but the district court refused to allow Brown to amend his complaint.

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CITY OF CHICAGO v. FEDERAL EMERGENCY MANAGEMENT AGENCY (October 17, 2011)

The airlines that use O'Hare and Midway Airports have Use Agreements with the City of Chicago that define the rights of the parties. Pursuant to the Agreement, the City estimates its operating and maintenance expenses each year for the upcoming year. Each airline is obligated to pay its proportionate share of these expenses, based on its projected landings. At the end of each year, the City compares its actual costs to its projected costs and either collects additional funds from the airlines or refunds any excess money. The City only projects for ordinary snow removal expenses. In 1999 and 2000, the City spent approximately $8 million in extraordinary snow removal costs. The Federal Emergency Management Agency picked up almost $6 million of that amount pursuant to federal law. FEMA's generosity, however, was short-lived. Relying on another provision of federal law that requires recipients of federal assistance to repay the United States if the assistance duplicates other benefits available, FEMA asked the City to return the funds. It took the position that the federal assistance duplicated the funds available to the city under the Use Agreements. The City brought suit against FEMA under the Administrative Procedure Act on the ground that the duplicate benefits provision relied on applies only to available insurance proceeds. But, as alternative protection, the City stipulated that the airlines were responsible for the snow removal costs under the Use Agreements. The airlines moved to intervene either as a matter of right or permissively in order to argue the position that the Use Agreements are limited to ordinary snow removal expenses. Judge Norgle (N.D. Ill.) denied the motions. The airlines appeal.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams reversed. The Court discussed at length, without deciding its applicability, intervention as a matter of right under Rule 24(a). It declined to decide that issue because it decided that the airlines should have been permitted to intervene permissively under Rule 24(b). Permissive intervention is about economies of litigation and is allowed when a party has a claim or defense sharing a common question of law or fact and when the intervention would not unnecessarily delay or prejudice the underlying adjudication. The Court concluded that the intervention might cause some delay and require some limited additional discovery. On the other hand, it might eliminate the need for subsequent litigation between the airlines and the City. The Court concluded that there was no basis to deny permissive intervention.

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TUREK v. GENERAL MILLS (October 17, 2011)

Carolyn Turek brought suit against General Mills and Kellogg, alleging that the defendants' marketing of chewy bars violated the Illinois Consumer Fraud and Deceptive Business Practices Act. Specifically, she alleged that the defendants label the product as containing dietary fiber without disclosing that the principal fiber used in the product is processed and does not provide the normal benefits associated with fiber consumption. Judge Gettleman (N.D. Ill.) dismissed the suit for want of jurisdiction on the grounds that the action was preempted by federal law. Turek appeals.

In their opinion, Seventh Circuit Judges Cudahy, Posner, and Williams affirmed (but on different grounds). First of all, the Court noted that the case was not one of complete preemption, where federal law pervades a field such that no state law claim could exist. The statute at issue here, the Nutrition Labeling and Education Act of 1990, provides specifically that it preempts no state law unless it is expressly preempted by the Federal Food, Drug, and Cosmetic Act. Therefore, the Court stated, the district court had jurisdiction to hear the case on the merits. The FFDCA does prohibit states from imposing labeling requirements that are not identical to the federal requirements. Federal law does impose a labeling requirements on dietary fiber. The principal requirement is that a manufacturer state the amount of fiber in each serving. The chewy bars at issue meet all the federal labeling requirements. The labeling that plaintiff suggests is missing is not identical to the federal labeling requirements and thus barred by federal law. Plaintiff's claim should have been dismissed for failure to state a claim, rather than for want of jurisdiction.

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WILDER CORPORATION OF DELAWARE v. THOMPSON DRAINAGE AND LEVEE DISTRICT (September 27, 2011)

Wilder Corporation owned several thousand acres of farmland on the Illinois River in Fulton County, Illinois. It sold the land in 2002 to The Nature Conservancy, which intended to restore it to an ecologically functional floodplain. Wilder warranted that the land was not contaminated by petroleum. Unfortunately, Wilder was wrong and the property was contaminated, apparently as a result of the local drainage district’s use and storage of petroleum on the property. The Conservancy sued Wilder for breach of contract and obtained a judgment for several hundred thousand dollars. Wilder brought suit against the drainage district, seeking indemnification for the damages it was ordered to pay the Conservancy. Judge Mihm (C.D. Ill.) granted summary judgment to the Conservancy. Wilder appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Hamilton affirmed. The Court briefly explored the common law of indemnity. It noted that the most common form of indemnity is contractual, as in an insurance policy. There is also non-contractual indemnity, as in where tort liability is shifted from a blameless person to a blameworthy one. Here, however, Wilder wants to shift its contractual liability on the theory that it was blameless and that the drainage district was blameworthy for the petroleum contamination. But the doctrine of indemnity simply does not apply in a situation like this. The district had no control over what warranties Wilder gave to the Conservancy. Furthermore, Wilder could have insisted on a subrogation clause, in which case he could have stepped into the Conservancy's shoes in a nuisance claim against the district. Having failed to do so, it cannot shift the liability to the district. The Court noted that the suit was also barred by the economic-loss doctrine.

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WILLIAMS v. ADAMS (September 23, 2011,)

Bruce Williams brought a § 1983 lawsuit against several police officers, claiming he was arrested without probable cause and assaulted. Williams brought the suit pro se and proceeded in forma pauperis. After he received a draft pretrial order from the defendants, Williams hired an attorney. For months, however, the attorney failed to respond to the defendants’ draft order. The defendants moved for dismissal and sanctions. After Williams' attorney responded to the order, the defendants withdrew their dismissal request but continued to press for sanctions. A magistrate judge, after two hearings, concluded that Williams and his attorney (who, by that time, had withdrawn from the case) were jointly liable for sanctions in excess of $9,000. Defendants rejected Williams' proposed payment plan and, after five months had passed, moved for dismissal. Judge Andersen (N.D. Ill.) granted the motion and dismissed the case. Williams appeals.

In their opinion, Seventh Circuit Judges Posner, Rovner, and Wood reversed and remanded. Sanctions imposed by a district court must be proportionate to the wrong. Here, Williams had little ability to pay but did have a lawsuit with enough merit that he was about to proceed to trial against the police officer defendants. He also complained to the Illinois Attorney Registration and Disciplinary Commission about his attorney's conduct. As a result, his attorney was suspended from practicing law for a short time and ordered to pay the sanctions, which he did. Under these circumstances, the dismissal of the complaint was an unreasonable sanction.

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DAKOTA, MINNESOTA & EASTERN RAILROAD CORP. v. WISCONSIN & SOUTHERN RAILROAD CORP. (September 20, 2011)

Dakota, Minnesota & Eastern Railroad and Wisconsin & Southern Railroad both operated freight lines in southern Wisconsin. Wisconsin approached Dakota in an effort to purchase some rail line near Janesville, Wisconsin. The line included a 200-foot spur connecting the line with a plant owned by Freedom Plastics. Freedom’s facility was the only plant on the spur. It shipped several carloads a week and was Dakota's largest customer in the area. So Dakota did sell the line to Wisconsin but retained the right to use the line and retained an exclusive easement to serve Freedom over the spur. Years later, Freedom entered receivership. The receiver eventually sold the Janesville plant to North American Pipe Corporation. Wisconsin started shipping for North American, contending that Dakota’s exclusive easement terminated when the plant was sold. Dakota brought suit against Wisconsin, alleging two theories of recovery: 1) breach of contract, on the theory that the exclusive easement was not personal to Freedom but rather referred to the plant itself, and 2) trespass, on the theory that Dakota never sold the tracks, only the land under the tracks. Chief Judge Conley (W.D. Wis.) granted summary judgment to Wisconsin on both claims. Dakota appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Manion affirmed. With respect to the breach of contract claim, the Court sided with Wisconsin. It rejected Dakota's claim that "trade usage" converted its right to serve Freedom to a right to serve the facility, no matter who owned it. Dakota’s only evidence (a railroad worker’s affidavit) was insufficient to establish trade usage, said the Court. Trade usage requires at least management-level, if not expert, opinion testimony. Then, although it found the contract unambiguous, it considered extrinsic evidence because the parties both relied on it. But the evidence of negotiations did not support Dakota's position. With respect to the trespass claim, the Court noted that the contract of sale excluded the spur tracks but the quitclaim deed did not. Given that inconsistency, the Court stated that the deed controls. Furthermore, the rails are fixtures and sold with the real property to which they are attached. In any event, the Court concluded that the trespass claim was unnecessary. If Dakota had the contract right it claimed, it would prevail on the contract claim without the trespass claim. If it did not have those rights, it could prevail on neither

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PAUL v. MARBERRY (September 6, 2011)

Jeffrey Paul, an inmate in an Indiana federal prison, brought suit alleging that prison personnel used excessive force in removing him from his cell, in violation of the Eight Amendment. It was the fifth lawsuit that Paul had filed while in custody. Each of the prior four lawsuits had been dismissed as unintelligible under Rule 8(a)(2). In each case, the court gave Paul leave to amend. In each case, Paul did not take advantage of that opportunity. In each case, the court dismissed without prejudice for failure to prosecute. Judge Lawrence (S.D. Ind.) denied Paul's request to proceed in forma pauperis on the grounds that he had three "strikes" under the Prison Litigation Reform Act. Paul appeals.

In their opinion, Seventh Circuit judges Posner, Kanne, and Hamilton reversed and remanded. The statute imposes a "strike" when a complaint is dismissed as "frivolous, malicious, or fails to state a claim." But Paul's strikes are not for those reasons. All of his complaints were dismissed for failure to prosecute, a basis not listed in the statute. The Court noted, however, that the proper procedure after a plaintiff fails to take advantage of permission to amend an unintelligible complaint is a dismissal with prejudice for failure to state a claim. Nevertheless, the Court concluded that a plaintiff, particularly a pro se prisoner plaintiff, should be allowed to rely on what courts actually did, not what they should have done. None of Paul's prior dismissals constituted strikes. He should be allowed to proceed in forma pauperis.

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SROGA v. WEIGLEN (August 18, 2011)

Chicago Police officers arrested Kevin Sroga 13 times between November 2003 and January 2008. Three are at issue on this appeal. First, he tried to stop a City employee from towing his car. A crowd gathered and a police officer instructed him to stand down. Instead, he jumped on the car as it was being towed away and was arrested for disorderly conduct. Second, only months later, he found himself in another confrontation with a City employee ready to tow one of his cars. This time, he got into the car and ignored repeated police requests to get out. One of the officers on the scene noticed a Chicago Police Department ticket book in yet another Sroga vehicle. He was arrested on suspicion of theft. Third, a year or so later, he was arrested for criminal trespass to "state-supported" land. He was taking a shortcut through a police station parking lot that was marked with signs that said "Parking Police Personnel Only." He brought suit against the City pursuant to § 1983, asserting that each of these three arrests was an unreasonable seizure. Judge Guzmán (N.D. Ill.) granted summary judgment to the defendants. Sroga appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Hamilton affirmed. The Court addressed each of the three arrests in turn. With respect to the first arrest, the Court noted that disorderly conduct is not particularly well-defined. One of its definitions is to provoke a "breach of the peace." The Restatement (Second) of Torts defines breach of the peace as an offense "likely to cause an immediate disturbance of public order." The Court concluded that jumping on a moving car being towed away fit that description. The Court rejected Sroga's argument that a police bulletin warning officers that courts typically throw out disorderly conduct cases when the complaining witness is a police officer amounted to some limitation on this arrest. With respect to the second arrest, the Court found probable cause that Sroga exercised control over the ticket book knowing that it was not his and without any effort to return it to its rightful owner. The fact that Sroga may have had an explanation for the ticket book’ presence (which the Court doubted) did not negate probable cause. As an aside, the Court added that Sroga could have been charged at either of the first arrests with resisting or obstructing the performance of a police officer in that he disobeyed lawful orders in both cases. Even though the charge was not identified by the officers at the time, it would have defeated his claims of unreasonable seizure. The Court turned to the third arrest for criminal trespass. Here, the Court concluded that the police did not have probable cause to arrest Sroga merely for crossing the parking lot. In order to make out a charge of trespass on state-supported land, there must be some indicia (a fence or signs) that put the public on notice that their entry is forbidden. The only signs here referred to the parking of cars. But the Court did find that Sroga's conduct in the parking lot, where he looked into several police cars and struck up a conversation with an officer, did give police probable cause to believe that Sroga was interfering with the lawful use of the land. The Court added that Sroga could not have been convicted of the offense since notice is a requirement -- and the notice was insufficient. Two officers stated that they thought the signs provided adequate notice and the Court found those understandings, although incorrect, not so unreasonable as to defeat probable cause.

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WESTERN GLOVE WORKS v. XMH CORP. (July 26, 2011)

Simply Blue, an XMH subsidiary, entered into a contract with Western Glove Works under which Western granted a sublicense to Simply Blue to sell womens' jeans with the trademark "Jag." The contract went into effect on December 17, 2002. The sublicense expired, after some extensions, on June 30, 2003. After the expiration of the sublicense, Western took over the right to sell the jeans but Simply Blue provided substantial services for a fee. In 2009, while the contract was still in effect, XMH sought bankruptcy relief for itself and some of its subsidiaries (including Simply Blue). XMH sought the approval of the bankruptcy court to sell Simply Blue's assets (including the executory contract with Western). The bankruptcy court refused, agreeing with Western that the contract was a trademark sublicense and could not be assigned without Western's permission. XMH appealed that order to the district court. The district court allowed the purchasers to substitute for XMH and reversed the bankruptcy court. Western appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Williams affirmed. The Court first resolved several jurisdictional issues. First, it rejected Western’s argument that the purchasers, who had not appealed the bankruptcy court order, had waived their right to prosecute the appeal. XMH did appeal and later sold the assets that involve the contract at issue. The purchasers are simply stepping into the shoes of XMH, like an assignee. Second, the Court noted that it had a bankruptcy appeal in which neither the bankrupt nor the trustee was a party. But the bankruptcy court had jurisdiction over the dispute when it was filed. Subsequent events have not deprived the courts of federal jurisdiction. Finally, the Court rejected the purchaser's argument that the district court’s order was not final. Although the district court did remand to the bankruptcy court, the bankruptcy court need only issue the order allowing the assignment. When there is a remand for a ministerial act only, the order is appealable. The Court turned to the merits. The Bankruptcy Code limits the assignment of an executory contract if "applicable law" allows the non-debtor party to the contract to refuse to accept the assignee’s performance. Here, "applicable law" is trademark law which prohibits the assignment of a license unless expressly authorized (which it is not here). If, therefore, the arrangement between Western and Simply Blue at the time of the assignment was a trademark sublicense, the assignment should not be allowed. But the sublicense expired in 2003. Western argues that the continuing contractual obligations constituted some sort of implied sublicense. The Court disagreed. The contract is clear. When the sublicense expired, the rights in a trademark reverted to Western. Notwithstanding the substantial services provided by Simply Blue, there was no longer a sublicense. The debtor's assignment is permissible.

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IN RE: GOLF 255, INC. (July 22, 2011)

Golf 255's creditors petitioned to have it declared bankrupt in late 2006. The bankruptcy court appointed Robert Eggmann as trustee, granted Eggmann's motion to sell the corporation's principal asset (a golf course), and ultimately approved the sale. Nick Jakich and Jay Dunlap, Golf's owners, opposed the petition and the sale, appealed from the sale order, moved to remove the trustee, and moved to dismiss the proceedings -- all to no avail. Over a year later, they continued their challenge. They asked to conduct discovery on whether the bankruptcy proceedings and sale had been fraudulent, and asked the court to rescind the sale and investigate their allegations of fraud. The bankruptcy court denied the requests. Finally, they opposed the Eggmann's request to close the case. The bankruptcy court closed the case. Judge Murphy (S.D. Ill.) affirmed. Jakich and Dunlap appeal.

In their opinion, Seventh Circuit Judges Posner and Manion and District Judge Lefkow affirmed. The Court recognized that the bankruptcy court treated the request for discovery and an investigation into fraud as a Rule 60 motion. Fraud is a basis for setting aside a judgment if the motion is filed within one year of the judgment unless there is "fraud on the court," in which case the motion can be brought at any time. The appellants insisted that a former Golf shareholder did commit fraud on the court by manipulating the proceedings and the court in forcing the sale of the golf course. The Court noted that "fraud on the court" is not defined in the rule but considered it important to define it narrowly because of its unlimited deadline. So the court asked what kind of fraud should open a judgment to collateral attack years after its entry. It answered its own question -- fraud that is unlikely to be discovered, even with diligent inquiry, for years. It cited as examples bribing a judge, tampering with a jury, or submitting forged documents. Applying that definition to the facts before it, the Court found the claim baseless. The shareholder was not acting as a lawyer during the bankruptcy proceedings, but as a creditor. If he submitted inflated claims, and encouraged others to do so as well, he would have committed fraud -- but not a fraud on the court. The Court added two remarks. First, it noted that no one who looked at the allegations of fraud, including the trustee, the bankruptcy court judge, the district court judge, and a mediator, found any merit in the allegations. Second, rescission of the bankruptcy sale would be improper unless there was a finding that the golf course buyer, a local recreation district, was complicit in the fraud and there is no evidence of that. Finally, the Court granted Eggmann’s motion for sanctions under Rule 38.

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TOWNSQUARE MEDIA v. BRILL (July 21, 2011)

In 2002, creditors of several of Alan Brill's media companies forced them into bankruptcy. The bankruptcy court ordered the companies' radio stations sold. Regent Communications, Inc. was the successful bidder at the sale, although Brill also bid. After several years passed, Brill filed a 111-page complaint in Indiana state court against Regent and a number of other defendants, alleging both tort and contract claims based on state law. The gist of Brill's claim against Regent is that Regent used information obtained from Brill but subject to a confidentiality agreement to outbid Brill for the radio stations. Several of the defendants, creditors in the original bankruptcy case, removed the case to the bankruptcy court in the Southern District of Indiana. Before the bankruptcy court ruled, Brill filed an amended complaint in which Regent was the only defendant and the confidentiality agreement violations were the only claims. The bankruptcy court concluded that the amended complaint was not related to the bankruptcy case. The court therefore concluded that it had no jurisdiction over the case and remanded it to the Indiana state court. Chief Judge Young (S.D. Ind.) affirmed the remand order. Regent appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Rovner dismissed the appeal. The first question for the Court was whether the order was appealable. Under the Supreme Court's reading of § 1447 (the Seventh Circuit has held that the bankruptcy removal section is identical to § 1447), a case remanded for lack of subject matter jurisdiction is not appealable. Although the district court said it lacked jurisdiction, the Court disagreed. When the case was removed, the original creditors were still defendants and the case was challenging the confirmation of the plan. The case was therefore related to the bankruptcy case and within the court's jurisdiction. The Court then assumed, without deciding, that the bankruptcy court also acquired supplemental jurisdiction over the state law claims. The resolution of the federal claim (here by the filing of an amended complaint) did not eliminate the court's jurisdiction over the state law claims. It did create a situation in which the court had the discretion, depending on the number of factors, to keep or remand the claims. Under Carlsbad Technology, the remand of such state law claims is not a remand for lack of jurisdiction but simply a decision to relinquish supplemental jurisdiction. That would normally mean that the order is reviewable under § 1447. But that is not what happened in the bankruptcy court. Regent tried to keep the case in federal court on the ground that even the amended complaint's claims were within the bankruptcy court's jurisdiction -- and that argument was properly rejected by the lower courts. The Court concluded that it could review the order only if it could properly characterize the lower courts' orders as declining to exercise supplemental jurisdiction, despite the words used. The bankruptcy court was very clear in its order that the dismissal was for want of jurisdiction. The Supreme Court concluded in Kircher that an order unmistakably premised on lack of subject matter jurisdiction, even if clearly wrong, is not reviewable. The Court concluded that that was the case here, particularly since neither the courts nor Regent ever argued supplemental jurisdiction.

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FLOMO v. FIRESTONE NATURAL RUBBER CO. LLC (July 11, 2011)

A subsidiary of the Firestone Natural Rubber Company operates a large rubber plantation in Liberia. The company employs many local laborers. The jobs pay well but are sometimes hazardous. Because of the relatively high pay and strict daily production quotas, some of the employees hire their own helpers. Some of the employees even bring their own children. A number of those children brought suit against Firestone under the Alien Tort Statute. Judge Magnus-Stinson (S.D. Ind.) granted summary judgment to Firestone. The plaintiffs appeal.

In their opinion, Judges Bauer, Posner, and Manion affirmed. The Alien Tort Statute allows an alien to bring a claim in the United States federal courts for a tort "committed in violation of the law of nations." The two issues presented by the appeal are whether a corporate entity, rather than a natural person, can be liable under the statute and, if so, whether the plaintiffs have presented enough evidence of such a violation to get past summary judgment. The law of nations, or customary international law, derives from the customs and usages of civilized countries. When the statute was first enacted in 1789, it applied principally to piracy, ambassador mistreatment, and violation of safe conduct. But the statute was drafted and enacted to include additional international laws, as they developed. With respect to corporate liability, the Supreme Court has not spoken and most courts of appeals have assumed or held that they can be liable. The Second Circuit concluded that a corporation could not be liable under the Alien Tort Statute. It reasoned that corporate liability could not be customary international law since corporations have never been prosecuted under international law. The Court criticized the Second Circuit precedent because of its incorrect factual premise. It noted that German corporations that aided the Nazi effort were dissolved after World War II. The Court then considered whether there was a compelling reason for the few corporate prosecutions -- and found none. The Court ultimately distinguished between the substance of international law and its enforcement. The substantive obligations are imposed by international law but each nation must decide how to enforce those obligations. In the United States, it is common for corporations to be liable for the torts of its employees. That same principle applies to the United States enforcement of substantive violations of customary international law. The Court declined to define the outer reaches of corporate liability since it was not necessary for its decision. Having found potential corporate liability, the Court turned to the record to determine if there were genuine issues of material fact. Three international conventions helped the court to define customary international law in the case of child labor. The United Nations Convention on the Rights of the Child provides that a child need not perform work that is hazardous, that interferes with his education, or is harmful to his health or development. The Court found that statement much too vague to create an international legal norm. TheInternational Labour Organization Minimum Age Convention states that children under 14 should only do "light work." The Court also found that to be too vague. Finally, the International Labour Organization Worst Forms of Child Labour Convention states that the worst forms of child labor is work that is likely to harm the health, safety or morals of those children. Although a corresponding recommendation provided more detail to that statement, the Court still could not discern an agreed norm of conduct. The Court concluded that the plaintiffs failed to present concrete evidence of how different nations would impose liability for child labor. The Court also concluded that the plaintiffs failed to provide sufficient evidence that the specific conditions at the Firestone plantation were actionable. The record does not show how many children work on the plantations, how much work they do, how hard the work is, and how their lives compare to local children who do not live on the plantation. The Court surmised that the child of a plantation worker, even one who works himself, may be better off than the child of a non-plantation worker.

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SCHREIBER FOODS v. LEI WANG (July 5, 2011)

Cade Wang lives in China and operates Mature Sky, a trading company. Wang’s cousin, Lei Wang, operates an automotive supply company in Chicago. When Cade was looking for a dairy products supplier in the United States, he approached Lei. Lei, in turn, approached Schreiber Foods. Mature Sky placed a small order for whey protein concentrate -- the transaction was a success. A few months later, Lei Wang negotiated a much larger order -- a $600,000 order for D70, an ingredient in infant formula. Without telling anyone, Schreiber substituted RMW-2 (which it claims is materially identical) for the D70. The end customer refused to accept the product or pay for it. Schreiber did not pursue either the end customer or Mature Sky. Instead, it filed suit against Lei Wang. Schreiber alleged that Wang fraudulently represented that the end customer had promised to buy the product from Mature Sky. Judge Griesbach (E.D. Wis.) granted summary judgment to Wang on the ground that the claim was barred by the economic-loss doctrine. Schreiber appeals.

In their opinion, Judges Posner, Kanne, and Hamilton affirmed. Under the economic-loss doctrine, a plaintiff cannot pursue a tort remedy when he has a contract and an adequate remedy under contract law. Some states do not apply the doctrine where, as here, there are fraud allegations. Wisconsin's fraud exception, however, is very narrow. It requires that the fraud be extraneous to the contract. Here, the alleged fraud is "interwoven" with the contract. The Court noted that the circumstances (two foreign companies with which Schreiber was not familiar, an automobile parts supplier intermediary, the product substitution) required Schreiber to deal with these uncertainties through the contract. The Court also rejected Schreiber's contention that its claim fell within the sale of services exception to the economic-loss doctrine. The Court noted that Wisconsin applies that exception only when the contract is predominantly one for the sale of services, which this is not.

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SAMUEL C. JOHNSON 1988 TRUST v. BAYFIELD COUNTY (June 17, 2011)

In the middle of the 19th century, the federal government wanted to encourage railroading. It created a checkerboard-like pattern of identical square sections on federal land. It assigned the squares alternating odd and even numbers. It gave the odd-numbered sections to the railroads in fee simple. It sold the even-numbered sections. The railroads would be able to sell part of the land they owned but did not need in order to finance their operations and the acquisition of rights in the land they did not own. The Samuel C. Johnson 1988 Trust is the current owner of property in northern Wisconsin that was part of this checkerboard. It owns property in an even-numbered section that its predecessor purchased from the federal government in fee simple in the late-19th century. It also owns property in an odd-numbered section that it purchased from a railroad. Bayfield County thinks it has rights in the now-abandoned railroad right-of-way on the Trust's properties and wants to build a snowmobile trail. The Trust brought suit to quiet title. Judge Crabb (W.D. Wis.) granted summary judgment to the County. The Trust appeals.

In their opinion, Judges Posner, Wood, and Tinder reversed. The Court first addressed its jurisdiction, since the suit seems to arise under state law and there is not complete diversity. Both the plaintiff and defendant rely on federal law for their claimed property rights. Whether viewed from the plaintiff’s perspective or, since it is a type of declaratory judgment case, from the presumed suit by the defendant, the case arises under federal law. On the merits, the Court addressed each section separately. With respect to the even-numbered section, the railroad obtained its right-of-way by condemnation. The Court rejected the County's assertion that it was obtained by statute. Once the railroad abandoned the right-of-way, the Trust became the holder of the full rights to the property. With respect to the odd-numbered section, there was no right-of-way because the railroad owned the property in fee simple. When it conveyed the property to the Trust, it conveyed all rights in the property. This County has no right to build a trail.

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AMERICAN BOTTOM CONSERVANCY v. U.S. ARMY CORPS OF ENGINEERS (June 14, 2011)

Waste Management of Illinois, Inc. operates a landfill near Madison, Illinois. The landfill is just southwest of the Horseshoe Lake State Park. Waste Management wants to build a second landfill even closer to the park. In order to do so, it wants to destroy approximately 18 acres of wetlands. Waste Management has applied to the Illinois Environmental Protection Agency for a permit to build the landfill. That application is pending. Waste Management also applied to the Army Corps of Engineers for a permit to destroy the wetlands. That permit was granted on the condition that Waste Management create twice as many wetlands as they destroy. American Bottom Conservancy, an environmental group, brought suit challenging the permit. Judge Murphy (S.D. Ill.) dismissed the suit on the grounds that the Conservancy failed to establish standing. The Conservancy appeals.

In their opinion, Circuit Judges Posner and Manion and District Judge Lefkow reversed. The only issue before the Court was standing. To establish standing, a plaintiff must establish that granting the relief sought will avert or mitigate injury to him caused by the defendants. The Conservancy filed affidavits from several of its members who enjoy watching the birds and wildlife in the park, particularly at the southern end near the wetlands. They assert that Waste Management's wetland destruction will adversely affect the wildlife population and, therefore, their enjoyment of the park. The Court concluded that plaintiff’s member’s reduced enjoyment was an injury caused or to be caused by Waste Management. The Court also found that the injury was not implausible. The habitat reduction will likely negatively affect the wildlife population and the replacement wetlands will not be able to support a new wildlife population for some time. If the permit is voided, the wetlands and the wildlife population will be preserved. That is enough to confer standing on the Conservancy. The Court rejected Waste Management's alternative argument to find in its favor on the merits. It an appellee wants a judgment affirmed on an alternative ground, it need not file a cross-appeal. If, however, an appellee wants a judgment changed (here, from a dismissal without prejudice to a dismissal with prejudice), it must file a cross-appeal. Waste Management did not.

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GIRL SCOUTS OF MANITOU COUNCIL v. GIRL SCOUTS OF THE UNITED STATES OF AMERICA (May 31, 2011)

The Girl Scouts of the United States of America is the national Girl Scouts organization. It charters local councils, authorizing them to use the "Girl Scout" mark and sell Girl Scout cookies. One of those councils is the Manitou Counsel in eastern Wisconsin. Several years ago, the national organization decided to reduce the number of local councils. Manitou was one of the councils that would disappear under the reorganization. Manitou brought suit under the Wisconsin Fair Dealership Law. It obtained a preliminary injunction stopping the restructuring. However, on the merits, Judge Stadtmueller (E.D. Wis.) granted summary judgment to the national organization, concluding that applying the Wisconsin law to the national organization would violate their First Amendment freedom of expression rights. Manitou appeals.

In their opinion, Judges Posner, Kanne, and Tinder affirmed in part, reversed in part, and remanded. The Court rejected the First Amendment argument. Although the national organization's activities do include protected expression, that does not mean they are exempt from state laws that have a remote, at worst, impact on that expression. The national organization claims that its First of Amendment protection comes from its attempts to reorganize its structure to become more racially and ethnically diverse. The Court noted that there was actually no evidence in the record connecting diversity with the reorganization. Without that connection, the argument fails. The Court turned to the alternative argument, rejected by the district court, that the national organization's activities do not violate the Wisconsin Fair Dealership Law. The Court first refused to recognize a statutory exemption for non-profits. Next, the Court concluded that the statute required "good cause" to eliminate the council entirely, even though the national organization had the right to alter territory boundaries. They Court wrestled with a definition of "good cause" but ultimately found no need to resolve it. It concluded that: a) the national organization abandoned its argument that business reasons provided the good cause, and b) it found its argument that its expressive activity provided good cause unsupported by the record. The Court also affirmed the dismissal of the common law claims and ordered the reinstatement of the injunction.

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VERKUILEN v. MEDIABANK (May 27, 2011)

MediaBank provides complex software programs to advertising agencies. The software integrates a number of different functions and is custom-designed to meet the varying needs of its purchasers. MediaBank employs Penny Verkuilen as an account manager. In that position, she acted as a liaison between the company’s software engineers and its customers. She had to make sure she understood the customers' needs, communicated those needs to the engineers, and trained the customers on the finished product. Verkuilen brought suit against MediaBank under the Fair Labor Standards Act, alleging that she was denied overtime. Judge Grady (N.D. Ill.) granted summary judgment against her on the ground that she fit within the administrative exception to the overtime requirement. Verkuilen appeals.

In their opinion, Chief Judge Easterbrook and Judges Cudahy and Posner affirmed. The Court started with the "pretty vague" Department of Labor regulation describing the administrative exception. It provides that the employee’s "primary duty" must include the exercise of discretion and independent judgment and must include non-manual work directly related to general business operations of the employer or its customers. The Court concluded that Verkuilen’s primary duty was directly related to the business operations of her employer and its customers. She was directly responsible for understanding each customer's needs, translating those needs into specifications that could be understood by the software engineers, and assisting the customers in implementing the solution. In fact, the Court believed that Verkuilen was a "picture-perfect example" of someone to whom the overtime requirement should not apply.

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WALTON v. BAYER CORPORATION (May 23, 2011)

Cathy Walton alleges that she suffered serious injuries as a result of taking a prescription drug manufactured by a Bayer Corporation affiliate and sold at a pharmacy operated by Niemann Foods. She brought suit against Bayer and Niemann in Illinois state court, alleging that the two defendants failed to warn of the drug's serious side effects. Although Niemann is an Illinois citizen, Bayer removed the case to federal court on the grounds that Niemann was improperly joined. Chief Judge Herndon (S.D. Ill.) denied Walton's request to remand and dismissed Niemann, with prejudice. Walton abandoned prosecution of the suit after that order. The court later dismissed the suit with prejudice when Walton refused to comply with a discovery order. Walton appeals.

In their opinion, Judges Cudahy, Posner, and Manion affirmed. The Court first confirmed its own appellate jurisdiction, notwithstanding Bayer's argument that Walton should not be allowed to turn a non-appealable interlocutory order into an appealable order by abandoning the case. The Court distinguished the cases Bayer cited and concluded that there was nothing wrong with her tactic. She should be allowed to risk her claim's success on being right about jurisdiction. The Court next turned to the question of the district court's jurisdiction. It rejected Walton’s first argument that the complaint did not meet jurisdictional amount. Her alleged injuries are quite serious and suggest that she is seeking at least the jurisdictional amount -- and she has not exercised her absolute ability to defeat removal by committing to accept no more than the jurisdictional amount. The Court also rejected her argument that a minor procedural defect precluded federal jurisdiction. The Court turned to her principal argument -- lack of complete diversity. Walton argued both that Niemann was a proper defendant and that, if it was not, fraudulent joinder's "common defense" exception applied. With respect to the first of those arguments, the Court looked to the "learned intermediary" doctrine, under which one's prescribing physician is principally responsible for warning a patient of a drug's side effects and a manufacturer is excused from any obligation to warn. Under Illinois law, a pharmacy like Niemann is only obligated to warn a customer of risks that are known to it but possibly unknown to the prescribing physician (for example, potential interactions with other prescriptions dispensed by the pharmacy). Since Walton did not allege that Niemann had such knowledge, Niemann had no obligation to warn and was properly dismissed. With respect to Walton's second argument, the Court turned to the common defense exception to fraudulent joinder. Under that doctrine, if a plaintiff makes identical claims against both the diverse and non-diverse defendants, a fraudulent joinder argument is really an attack on the merits of the entire case. That attack must be resolved in the state court. If, therefore, Bayer and Niemann both have the same learned intermediary defense, it must be resolved in state court. That is not the case, however. Walton alleges that Bayer concealed the drug's side effects, even from physicians. The two defendants therefore do not share a common defense, the exception to fraudulent joinder does not apply, and the district court properly dismissed Niemann. As an aside, the Court noted that a Walton victory based on the common defense exception in the appellate court would have resulted in a remand, only for Walton to lose in state court. The doctrine of judicial estoppel would not allow Walton to argue in the appellate court that her claims against Bayer and Niemann were identical and then argue in state court that her claim against Bayer was different.

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BLOOMFIELD STATE BANK v. UNITED STATES OF AMERICA (May 11, 2011)

Bloomfield State Bank made a mortgage loan secured by real estate and all rents directly or indirectly related to the real estate. A few years later, the mortgagor defaulted and the IRS filed a tax lien against the real property. A court-appointed receiver rented some of the property the following year. The IRS filed for a declaratory judgment that its tax lien had priority over the Bank's lien with respect to the rental income. Judge McKinney (S.D. Ind.) granted summary judgment to the IRS. The Bank appeals.

In their opinion, Judges Posner, Wood, and Tinder reversed and remanded. The federal tax law gives a security interest priority over a tax lien only when the secured property is in existence at the time of the lien. The IRS argues that the "property" referred to in the statute is the rent itself -- which was not in existence at the time of the tax lien. The Bank argues that the "property" referred to in the statute is the real estate -- which was in existence at the time of the tax lien. The Court noted that there were no reported appellate decisions on the issue and inconsistent lower court rulings. The Court concluded that the statute was clear and the government was wrong. The statute's reference to property is a reference to the property that is the source of the value to repay the loan, not the proceeds from that value. Here, the source of the value is the real property. The real property existed when the mortgage was issued, long before the tax lien was filed. The rental income belongs to the Bank.

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COMMODITY FUTURES TRADING COMMISSION v. LAKE SHORE ASSET MANAGEMENT LTD. (May 11, 2011)

A bank located in tiny Andorra invested over $7 million in Lake Shore Asset Management's commodity trading pools. Instead of receiving account statements, the Bank monitored its account on Lake Shore's website. When the website was taken down in late 2007, the Bank made inquiry. It learned that Lake Shore's assets were frozen and that it was under investigation for fraud. The bank made some assumptions about the similarity of U.S. and Andorran law and did nothing. Meanwhile, the CFTC sued Lake Shore, obtained a default judgment, and placed Lake Shore’s remaining assets with a receiver. In early 2009, the receiver notified Lake Shore’s creditors that they had 45 days within which to file a claim. Although the notice to the Bank was addressed properly, it contained no individual's name. The Bank claims that it never received the notice. By the time it contacted the receiver, the claims window had closed and the receiver denied the claim. The Bank sought permission from the district court. Judge Manning (N.D. Ill.) rejected the request to be included in the asset distribution. GAMAG, another Lake Shore investor, did file a claim that was allowed on the same pro-rata basis as the other investors’ claims. GAMAG, however, claims that it is a creditor rather than a shareholder and is entitled to priority. Judge Manning rejected GAMAG's position. The Bank and GAMAG both appeal.

In their opinion, Judges Posner, Kanne, and Sykes affirmed. The Court first determined that the correct standard for deciding whether to allow the late claim is the "excusable neglect" standard contained in Rule 60(b)(1). The excusable neglect standard is an "all relevant circumstances" one, which the Court simplified: on the one hand are the excuse’s validity and the negative consequences to the Bank of denying the late claim -- on the other hand is the negative consequences to the other parties of granting the late claim. The Court concluded that the district court did not err in finding that the Bank did not have a good excuse. It knew about Lake Shore’s troubles and did nothing, it didn't include the name of a bank officer on its account statement to ensure successful notice, and it made inexcusable assumptions about the similarity of U.S. and Andorran law. Although the adverse consequences of losing its entire claim are great, they are not enough to conclude that the district court erred in denying the claim. The prejudice to the others is not having to pay the Bank’s claim, since all agree that the claim is valid if timely. Rather, it is the delay resulting from the recalculation of shares, additional approval of the district court, and the potential "hornets nest" that could be created by the recalculations. The Court concluded that the district court did not abuse its discretion in denying the claim. With respect to the GAMAG claim, the Court rejected the creditor-versus-shareholder argument. Although GAMAG did have a different kind of arrangement with Lake Shore than most of the other investors, the Court concluded that the differences were not of the kind to make it a creditor. Creditors enjoy priority because they give up any upside benefit. Here, GAMAG's deal with Lake Shore was identical to other shareholders in terms of the allocation of risk.

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ROUGHNECK CONCRETE DRILLING & SAWING CO. v. PLUMBERS’ PENSION FUND (April 7, 2011)

Roughneck Concrete Drilling & Sawing Co. is a Chicago-based construction company. Its concrete drilling services are used in the building construction industry. Sometimes its services are used in connection with a building's plumbing, sometimes in connection with a building’s electrical system, and sometimes in connection with other aspects of a building’s construction. Roughneck employs union plumbers or electricians or laborers, depending on the purpose of its work. It has collective bargaining agreements with unions representing each. The pension fund representing the plumbers union conducted an audit and concluded that Roughneck had done plumbers work without employing plumbers. They concluded that Roughneck owed $2.2 million in contributions. They filed grievances with the Joint Arbitration Board pursuant to the collective bargaining agreement. Roughneck responded by filing its own grievance. Several days before the scheduled JAB hearing, Roughneck wrote to the administrator of the National Plan, an agreement between employers and the national unions. Roughneck claimed that the Fund's grievances were "impediments to job progress" and that the dispute should therefore be resolved by the Joint Conference Board. The JCB resolves jurisdictional disputes between different crafts. The Fund disagreed but the National Plan administrator scheduled a hearing for the day before the JAB hearing. At the JCB hearing, an arbitrator ruled that the dispute was in fact beyond the authority of the JAB and ordered the JAB hearing canceled. No one told the JAB about the order, so it went forward with the hearing. Roughneck did not attend. The JAB found for the Fund and ordered Roughneck to pay over $3.3 million. Roughneck filed two actions -- one to vacate the JAB order and one to enforce the JCB order. Judge Lefkow (N.D. Ill.) found for the Fund, concluding that Roughneck had waived its objection to the JAB's jurisdiction, both by submitting a grievance and by not appearing at the hearing. It was therefore bound by the JAB order and could not avail itself of the JCB order. Roughneck appeals.

In their opinion, Judges Bauer, Posner, and Williams reversed and remanded. The Court first concluded that the Fund's failure to bring suit to set aside the JCB order did not prevent it from raising a defense in Roughneck's suit to set aside the JAB order. It could have sued to set aside that order but it would be redundant to require it to file its own suit when it raised a timely challenge in Roughneck’s suit. On the merits, the Court concluded that Roughneck did not waive any rights. Roughneck could have handled things better -- it could have invoked the jurisdiction of the National Plan earlier, it could have informed the JAB of the JCB decision, it could have shown up at the JAB hearing. Nevertheless, it did withdraw its consent to the JAB arbitration before any order was issued. It was entitled to do so. Finally, the Court noted that judicial review of arbitration awards is so limited that multiple, inconsistent awards can be enforced. Here, however, it is impossible for the parties to comply with both orders. The Court reversed with instructions to vacate the JAB order and enforce the JCB order.

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RANDALL v. ROLLS-ROYCE CORP. (March 30, 2011)

Rolls-Royce Corporation sets its employee compensation in three stages. First, it sets up compensation categories with broad pay ranges into which it assigns classes of employees it thinks are of equal value to the company. Second, within each compensation category, it creates narrower pay ranges for each job based on market conditions. Third, the company authorizes supervisors to adjust compensation individually. Female employees of one of the Rolls-Royce's Indiana facilities brought a class action pursuant to the Equal Pay Act and Title VII, alleging that Rolls-Royce engaged in sex discrimination by paying male employees more than female employees and by denying female employees promotions. Judge Barker (S.D. Ind.) denied class certification and granted summary judgment to Rolls-Royce. Plaintiffs appeal.

In their opinion, Judges Posner, Flaum, and Sykes affirmed. The Court noted that the average male employee compensation was approximately 5% higher than female employee compensation in the same compensation categories throughout the complaint period. But is that differential the result of sex discrimination, which would violate Title VII? The company's expert testified that the differential disappeared when adjustments were made for differences in the jobs performed. The plaintiff's expert failed to rebut this testimony. Plaintiffs’ Title VII base pay claim must therefore fail. Their Equal Pay Act claim also fails. Although that claim does not require proof of discrimination, the Court concluded that the district court was correct in finding that the plaintiffs failed to meet the statutory comparator requirement. The named plaintiffs' promotion claims also fail. Again, the company's expert corrected the data to account for male employees with the same title but substantially different responsibilities and found that females are, in fact, much more likely to be promoted that males. Again, plaintiffs failed to rebut the testimony. The Court also affirmed the district court's denial of class certification. It concluded that the named plaintiffs were not adequate class representatives because their promotion claims were weaker than many other class members and because they had a conflict of interest. They are supervisors and have some control over the compensation of both male and female employees. In reaching its conclusion, the Court rejected plaintiffs' attempt to style its action as a Rule 23(b)(2) claim (under which they might avoid the adequacy issues). The request for monetary relief and the need for individual calculations and hearings make the case inappropriate for Rule 23(b)(2) treatment.

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CDX LIQUIDATING TRUST v. VENROCK ASSOCIATES (March 29, 2011)

Cadant was founded in 1998 to develop systems for home Internet access. It was based in Illinois but it was incorporated in Maryland. Two venture capital firms, Venrock and J.P. Morgan, invested in the company and received preferred stock in exchange. Eric Copeland, a Venrock principle, also became a Cadant board member. In early 2000, the Cadant board rejected a tentative $300 million purchase offer. Several months later, the company started experiencing financial difficulties. After considering several options, the board approved an $11 million bridge loan from Venrock and J.P. Morgan. Copeland negotiated the loan on behalf of Cadant. On January 1, 2001, the company reincorporated in Delaware. In May, the company entered into a second bridge loan from Venrock and J.P. Morgan, this time for $9 million. Again, Copeland negotiated for Cadant. The agreement provided that the lenders would be entitled to twice the outstanding principal if Cadant was liquidated. Cadant defaulted and sold its assets for stock valued at $55 million. The sale amount was just enough to pay off creditors and preferred shareholders. It was approved by the board and also a simple majority of shareholders. The common stock shareholders brought suit charging several directors with breaches of their duty of loyalty and also alleging that Venrock and J.P. Morgan aided and abetted the directors. In an earlier appeal to the Seventh Circuit, the Court held that the case was improperly brought and should be brought as a derivative suit. Judge Norgle (N.D. Ill.) bifurcated the trial and granted defendants' motion for judgment as a matter of law at the end of the plaintiffs' liability case. Plaintiffs appeal.

In their opinion, Judges Posner, Flaum, and Sykes reversed and remanded. The Court first addressed choice of law. Illinois choice of law principles direct the Court to the law of the state of incorporation in a breach of fiduciary duty case. Maryland law therefore applied to the first alleged breach (the purchase offer rejection). That allegation was properly dismissed because Maryland imposes no duty on directors to accept, or even respond, to a purchase proposal. The other allegations, relating principally to the bridge loans, straddled the Delaware reincorporation. The negotiations for the first loan began before the reincorporation but the loan was finalized shortly after. Since it could not apply the laws of both states, the Court looked to which state’s law the parties would have expected to govern and which state had the higher regulatory interest. The answer to both questions was Delaware. So the court turned to the merits, applying Delaware law. The district judge had given too grounds for granting judgment: insufficient evidence of proximate cause, and insufficient evidence of a breach of fiduciary duty. The Court disagreed with the district court's approach to causation. Under Delaware law, once a plaintiff rebuts the business judgment defense with evidence of a breach of fiduciary duty, the burden shifts to the directors to prove the transaction's "entire fairness" to the shareholders. If the transaction at issue is the sale of the company, for example, the directors can prove that they obtained the highest reasonable value and therefore "caused" no loss. Here, the defendant directors had to rebut the breach evidence by proving that their misconduct had no effect on the outcome of the deal. In addition to the fact that the district court applied the burden of causation improperly, the Court also concluded that there was enough causation evidence to send the case to a jury. A similar company brought $300 million in the marketplace shortly after Cadant brought $55 million. There is evidence that the oppressive terms of the bridge loans negotiated by Copeland contributed to Cadant's inability to bring fair value. The Court also rejected the defendant directors' argument that there could be no breach of loyalty when their conflict of interest was fully disclosed. But the directors are not accused of disloyalty because they had a conflict of interest -- they are accused of actually being disloyal. Actual disloyalty is not excused by disclosing a conflict of interest. Finally, the Court concluded that the evidence of aiding and abetting on the part of Venrock and J.P. Morgan was sufficient to get the plaintiffs to a jury.

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BCS SERVICES v. HEARTWOOD 88 (March 24, 2011)

Cook County, Illinois obtains tax liens on properties whose owners fail to pay their taxes on time. The County, in turn, sells the liens at auction. The bidders at the auction must agree to pay the amount of the lien and can bid a percentage penalty in addition. In theory, the lien is sold to the bidder who bids the lowest penalty. In actuality, almost 85% of the bids include no penalty. The auctioneer is supposed to award the bid to the first bidder to raise her hand but, given the speed with which the bids are made, it is unlikely that she is able to do that. One way the County attempted to ensure that the bids are fair is to allow only one bidder to represent a buyer or group of buyers. Therefore, a buyer cannot increase his chances of getting a lien by flooding the room with bidders. One of the bidders at these auctions brought suit against three groups of bidders who allegedly sent multiple agents to each auction in violation of the County's rules. The plaintiffs alleged RICO violations. The district court dismissed for lack of standing because the plaintiffs had not relied on the fraud. The Seventh Circuit reversed and the Supreme Court affirmed the reversal. On remand, Chief Judge Holderman (N.D. Ill.) granted summary judgment to the defendants on the ground the plaintiffs failed to prove proximate cause. Again, the plaintiffs appeal.

In their opinion, Judges Bauer, Posner, and Manion reversed and remanded. The Court discussed, at some length, the doctrine and background of the concept of proximate cause. It concluded that discussion by noting that the concept helps the principal tort victims get compensation, simplifies litigation, appreciates the fact that people do not make decisions based on the unforeseeable consequences of their conduct, and eliminates liability in some situations where the act is only a minor clause of an injury. On the record before it, the Court then concluded that the concept had no application. The only injury was to the plaintiffs. The district court was wrong when it required the plaintiffs to prove the absence of a superseding cause rather than requiring the defendants to present evidence of the existence of such causes. Here, the defendants failed to do so. The Court also rejected defendants' alternate argument that plaintiffs could not prove damages. Relying on statistical evidence, the Court concluded that plaintiffs met their burden, at least at this stage of the case. Finally, the Court also disagreed with the district court's conclusion that plaintiffs’ inability to show an actual expectancy of a particular lien purchase doomed their intentional interference claim. On the contrary, the plaintiffs met their burden. The expectancy identified was their expectation that they would be allowed to purchase liens at a County auction conducted without fraud.

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CE DESIGN LIMITED v. KING ARCHITECTURAL METALS (March 18, 2011)

CE Design is a small engineering firm near Chicago. It has a website where it posts its fax number and says "Contact Us." It also publishes its fax number in an online building industry directory. The directory requires a that its users allow all other directory users to communicate with it by fax or e-mail. King Architectural Metals is one of those other directory users. In 2009, King conducted a fax marketing campaign. It faxed over 50,000 advertisements, two of which went to CE Design. Design brought suit on behalf of a class pursuant to the Telephone Consumer Protection Act. Judge Bucklo (N.D. Ill.) certified a class of persons who received the fax without having given express permission. King petitions for permission to appeal from that certification.

In their opinion, Judges Posner, Manion, and Hamilton granted the petition, vacated the class certification, and remanded. The Act forbids unsolicited fax advertisements. An unsolicited advertisement is one sent without "express invitation or permission." Whether the "Contacts Us" language and the directory publication constitutes an unsolicited advertisement is a question that neither the statute, the case law, nor agency interpretations answer. Design's president testified at his deposition that he did not know that directory publication granted permission to others to communicate with Design by fax. Rule 23 requires that the class representative’s claim be typical of all claims and that the class representative will "fairly and adequately" represent the class. The Court stated that a plaintiff is not an appropriate class representative if it is subject to a defense that other class members are not subject to -- its claim is no longer typical. Likewise, a class representative should not have credibility problems. Here, the district court expressed doubts about the president's truthfulness but dismissed it as a immaterial. Questions about his credibility and the presence of a potential defense based on the expressed consent given through the directory detract from Design's ability to adequately represent the class. The Court remanded for reconsideration of the identity of the class representative. The Court emphasized that it was not questioning the viability of the class action itself.

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VODAK v. CHICAGO (March 17, 2011)

In early 2003, a group of people in Chicago opposed to the United States' anticipated invasion of Iraq wanted to express their opposition. They wanted to hold a march at the same time as the invasion, but they did not know when that would happen. A Chicago ordinance requires a permit for a demonstration and typically requires five days notice of the march's date and route. For "good compelling cause," the City will act within two days. When, as here, the two-day requirement cannot be met, the City has an informal practice of waiving the permit requirement. Although non-permitted demonstrations typically use the same standard route, the police and demonstrators never agreed on a route. The invasion took place on March 19. The protesters gathered on March 20. Part of the way along their announced route, thousands of the protesters detoured. They marched toward Michigan Avenue, a major commercial thoroughfare in Chicago. The police blocked access to the street and told the march organizers to return to their starting point or disperse. They threatened to arrest anyone entering Michigan Avenue. The police claim they also shouted these warnings through bullhorns. Most of the marchers either dispersed or began to return to their starting point. Along the way, hundreds of marchers started approaching Michigan Avenue again on a different cross street. There is a dispute in the record regarding the marchers' presence on that street -- there is some evidence that at least some of the marchers thought they were directed there by the police. The police again blocked Michigan Avenue. This time, however, they also sealed off the marchers in the other direction. They started arresting the marchers and any other person who happened to be on that one block stretch of Chicago Avenue. Most of those arrested were released without being charged -- others had their charges dismissed. Two lawsuits were filed against the City and several police officers pursuant to § 1983, alleging violations of the First and Fourth amendments, as well as state law. Judge Kendall (N.D. Ill.) dismissed both suits against the officers on qualified immunity grounds and against the City because no policymaker had been responsible for the officers' conduct. Plaintiffs appeal.

In their opinion, Circuit Judges Posner and Wood and District Judge Adelman reversed and remanded. The Court first noted that the police were well within their rights in blocking Michigan Avenue. A large protest march was getting out of control. They could, and did, order the crowd to disperse or return to their starting point. But, on the undisputed record, they only communicated their orders to the organizers. According to hundreds of affidavit filed in the record, many of the marchers were unaware of any order to disperse or return. The Court emphasized this point because the only reason the police gave for the arrests several blocks away from where they gave the orders is the marchers' defiance of these orders. At the time of the arrest, the police had no good reason to believe that the people they were arresting knew they were violating a valid police order. Of course, the police only needed probable cause to make the arrests. But because there was no permit, no agreed-upon route, and no effective means of communicating an order to the thousands of marchers, a police officer on Chicago Avenue could not have a reasonable belief that the hundreds of marchers there knew of the orders. The Court rejected the District Court's conclusion that the right allegedly violated was not "clearly established" at the time. Decades before the march, the Supreme Court held that, if police revoke permission to march, they must give notice of the revocation before arresting alleged violators. In fact, the Court even stated that this is one situation that is so obvious that precedent is not required. The police cannot give permission to march, then withdraw the permission without telling anyone, and arrest the marchers. With respect to the dismissal of the City, the Court also disagreed with the district court. In order to hold the city liable, plaintiffs must show that the conduct was authorized or directed by a policymaker. But that does not mean only the City Council. Here the City Council defers to the Superintendent of Police as the sole policymaker with respect to demonstrations. In addition to his sole policymaking role, the Superintendent monitored and approved the very police conduct at issue. That satisfies Monell.

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JOSEPH v. ELAN MOTORSPORTS TECHNOLOGIES RACING CORP. (March 14, 2011)

Timothy Wardrop had a written employment agreement with Elan Motorsports Technologies, Inc. ("Inc."). Several years ago, he filed a complaint alleging a breach of the agreement. Unfortunately, he named as the only defendant Elan Motorsports Technologies Racing Corp. ("Corp."), Inc.'s parent. Eventually, Wardrop discovered his mistake and asked for leave to file an amended complaint naming Corp. He also asked that the amendment relate back to the filing of the complaint since the statute of limitations had long run. Judge McKinney (S.D. Ind.) concluded that the amendment could not relate back and dismissed the case. Wardrop appeals.

In their opinion, Circuit Judges Posner and Wood and District Judge Adelman reversed and remanded. The Court first pointed out the district court's procedural error after it concluded that the amendment would not relate back. Instead of dismissing the case, the court should have allowed the amendment under Rule 15(a)(2) and then entered judgment both for the original defendant (since it was not a party to the contract) and the added defendant (because the statute of limitations had run). But the Court identified a more fundamental error. The district court erred when it concluded that the amendment did not relate back. Its error, however, was understandable since the Supreme Court decided Krupski after the district court’s decision. Before Krupski, the Court's jurisprudence focused on what the plaintiff knew or should have known. Here, Wardrop's almost six-year delay in discovering his mistake was inexcusable. But the Supreme Court has now held that a district court makes only two inquiries: whether the defendant sought to be added to the complaint knew or should have known that it was the intended target of the litigation, and whether the plaintiff's delay has prejudiced the new defendant. A plaintiff's carelessness may still be relevant, but only to the prejudice prong of the test. That test is satisfied here. Inc. knew from the moment of service that Wardrop intended to sue the firm with whom he had employment contract -- and that was Inc. And any harm that Inc. has suffered is the direct result of its own failure to advise Wardrop of his mistake. The Court did comment that the amended complaint contained both additional legal theories and legal claims. A complaint need not allege legal theories so the inclusion of additional ones does not affect its relation back. That may not be true with respect to the new claim (quantum meruit). But the Court left it up to the district court to consider that issue in the first instance.

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IN RE: BERGERON (MARCH 4, 2011)

Lucille Iacovelli was not happy with her plastic surgery. She allegedly posted several derogatory comments about the doctor on the Internet. The doctor brought suit for, among other things, defamation. The district court judge entered an injunction ordering that all such postings be removed. Rich Bergeron maintained some of the websites that contained the alleged defamatory postings and was, for purposes of the injunction, Iacovelli's agent. Judge Barker (S.D. Ind.) refused Bergeron's request for her to recuse herself, held him in contempt, and imposed a monetary sanction. The defamation suit remains pending in the district court and Bergeron's appeal from the sanctions order is pending in the appellate court. Here, Bergeron petitions for a writ of mandamus in order to remove Judge Barker.

In their opinion, Judges Posner, Williams, and Tinder denied the petition. The Court first distinguished between Bergeron's desire to remove the judge from the defamation case and his desire to remove her from the contempt proceedings. Bergeron is not a party to the defamation case. As such, he has no basis on which to seek Judge Barker's removal. He is obviously a party to the contempt proceedings and mandamus is a proper vehicle to bring the recusal issue to the Court's attention. But here, the judge is through with the case -- there is nothing to remove her from. The Court indicated that the result could have been different under two scenarios. First, Bergeron sought mandamus before the sanction was imposed. Had he also sought and been granted a stay of those contempt proceedings, the Court could have considered his arguments. Second, the Court indicated that it might have ordered a new proceeding in an "egregious case" of bias. The appearance of impropriety alleged here is not such a case.

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ZAMECNIK v. INDIAN PRAIRIE SCHOOL DISTRICT (March 1, 2011)

Heidi Zamecnik and Alexander Nuxoll were public high school students who opposed homosexuality on religious grounds. In response to a "Day of Silence" promoted by a group critical of those who harassed homosexuals, they participated in a "Day of Truth" the next following school day. Zamecnik wore a shirt bearing the phrase "Be Happy, Not Gay." A school official covered the words "Not Gay" and prohibited the phrase as a violation of the school’s rule against derogatory comments. Zamecnik and Nuxoll brought suit and sought a preliminary injunction. The district court denied the application for an injunction. Almost 3 years ago, the Court reversed. The Court reviewed the phrase as "only tepidly negative" and concluded that the school district presented insufficient facts to support a conclusion that the words would lead to substantial disruption under Tinker. Judge Hart (N.D. Ill.) eventually granted summary judgment to the plaintiffs, awarded each $25 in damages, and entered a permanent injunction. The permanent injunction is more expansive than the preliminary one in that it runs in favor of all students and includes not just shirts but also all clothing and personal items. The District appeals.

In their opinion, Judges Posner, Kanne, and Rovner affirmed. The Court first rejected the District's argument that injunctive relief was moot because Zamecnik had graduated and Nuxoll had finished his classes and was about to graduate. The Court noted that the injunction now runs in favor of all students, not just the named plaintiffs. Such an injunction is proper as long as the group is specified. The District then argued that it presented enough evidence to survive summary judgment. The Court considered the three types of evidence presented. The first was "negligible" -- an affidavit of a school official recounting statements by unidentified school officials themselves recounting statements by unidentified students purportedly identifying incidents of homosexual harassment. The second type was evidence of the harassment of Zamecnik. But statements that are otherwise permissible cannot be suppressed simply because they are met by violence or harassment by those who oppose the speaker's view. In addition, the harassment was not engendered by the T-shirt, but by the lawsuit. The third piece of evidence presented by the District was an expert report, of which the Court was particularly critical. The opinion section of the expert’s 38-page expert report consisted of 2 1/2 pages and, in the Court's view, failed to satisfy any of the Rule 702 requirements. In fact, the Court noted that his conclusion -- that the phrase at issue is "particularly insidious" in a public school setting -- "comes out of nowhere." The expert described no methodology or research and gave no indication that he is familiar at all with the school the plaintiffs attended. His opinions are nothing more than mere conclusions. The district court was correct in concluding that this evidence was insufficient to survive summary judgment. Finally, the Court affirmed the $25 damage awards as justified by the record.

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MILLER v. DOBIER (February 11, 2011)

Dale Miller is confined pursuant to the Sexually Violent Persons Commitment Act. While confined, he was disciplined on two separate occasions in 2007 and 2008. In 2007, he was accused of threatening a deputy sheriff. A disciplinary committee found him guilty of those charges and reduced his status within the institution. As a result, he lost certain privileges; including longer visitation, later access to the day room, and access to electronic equipment. In 2008, he was accused of damaging furniture, breaking a window, and threatening staff. Again, a disciplinary committee upheld the charges in a hearing. Miller was placed in "close" status for a month. His punishment again included lost privileges. He had an earlier curfew, no yard privileges, shorter visits, no access to special events, and no use of the library or exercise room. Miller brought suit against institution officials pursuant to § 1983 claiming a denial of procedural due process. Judge Baker (C.D. Ill.) granted summary judgment to the defendants. Miller appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Wood affirmed. The Court never addressed Miller’s evidence of procedural deficiencies. Instead, it concluded that the due process clause was not even implicated. There is no constitutional due process requirement unless there is a deprivation of liberty or property. When a lawfully committed person is subjected to discipline, the due process clause is not implicated unless the institution substantially worsens the conditions of his confinement. Here, even while Miller was in "close" status, he had much freedom. The reduction in his status does not amount to a deprivation of a liberty interest.

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HURST v. HANTKE (February 10, 2011)

Joseph Hurst suffered a stroke while incarcerated in an Illinois prison. More than eight months later, he filed a grievance complaining of his treatment by the prison’s medical staff. The prison denied the grievance on the grounds that it was not filed within 60 days, as required by law. Hurst appealed the denial, contending that the stroke left him almost totally incapacitated "until just recently." The prison rejected his appeal on the ground that Hurst provided no justification. Hurst brought suit pursuant to § 1983 alleging deliberate indifference on the part of the prison’s medical staff. Judge Kapala (N.D. Ill.) granted summary judgment for the defendants on the ground that Hurst had failed to exhaust his internal prison remedies. Hurst appeals.

In their opinion, Judges Posner, Evans, and Hamilton affirmed. The Court concluded that the prison was wrong in denying Hurst's appeal. The law does not require an inmate to submit evidence in support of a claim of good cause any more than a plaintiff is required to submit evidence with a complaint. The prison could have insisted on additional substantiation, in which case Hurst would have had to supply it. Notwithstanding the error at the internal prison level, the Court nevertheless affirmed. Because when he sued, and when the defendants moved for summary judgment, Hurst was required to present evidence that he exhausted his administrative remedies -- that is, that he had filed a grievance as soon as he was reasonably able. He had an opportunity -- and an obligation -- at that stage to substantiate his good cause claim. Because he did not, summary judgment for defendants was appropriate.

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ENBRIDGE PIPELINES (ILLINOIS) L.L.C. v. MOORE (January 24, 2011)

Over 70 years ago, a predecessor to Enbridge Pipelines ("Pipeline") built 120 miles of 10-inch pipeline through central Illinois. The owners of the properties under the surface of which the pipeline ran granted easements for the pipeline "so long as such pipe lines . . . are maintained." When Pipeline acquired it, the line had been inactive for almost 25 years. Pipeline wanted to replace the line with a larger one and extend it by 50 miles. Several landowners objected, claiming that the pipelines were not "maintained," under the easement, and that the easement rights were no longer valid. Pipeline brought 25 different lawsuits in two different district courts in Illinois seeking a declaration that the easements were still in effect. Judge Baker (C.D. Ill.) and Chief Judge Herndon (S.D. Ill.) granted summary judgment to Pipeline in each case that was not settled. A number of the defendants appeal. The Court consolidated the appeals.

In their opinion, Circuit Judges Bauer and Posner and District Judge Pallmeyer affirmed. The Court first addressed the jurisdictional amount requirement, which several of the defendants denied, though without any evidence or argument in support. Pipeline introduced evidence that it would cost far in excess of $75,000 per property to reroute the pipeline. The Court rejected the defendants' theory that Pipeline would not have to reroute but could acquire new easements for less than $75,000 per property. If rerouting the pipeline would cost in excess of $75,000 per property and would also result in significant delays, a rational property owner would demand at least that much. The amount in controversy requirement is satisfied. On the merits, the Court concluded that the easement's use of the word "maintain" is ambiguous. Relying on the economic value of property rights and the undesirability of demanding significant investment simply to preserve those rights, the Court concluded that the more plausible meaning of "maintain" is simply to retain or occupy. Here, the pipeline owners never deliberately abandoned their property rights. They simply chose, as the owner of a property right can, not to use that property right for a period of time. That intention, in conjunction with the considerable maintenance that was performed during that period, is enough to satisfy any reasonable interpretation of "maintain."

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ATKINS v. CITY OF CHICAGO (January 25, 2011)

In late 2003, Chicago police officers arrested William O. Atkins because they had a parole violation warrant for "William Atkins." Atkins was kept in custody overnight and then transferred to the custody of the Illinois Department of Corrections and held for 36 days. Atkins alternately claimed that he was not the warrant's William Atkins and that he was that William Atkins but that he could not violate his parole because it had expired. After his release, Atkins sued the arresting officers, the City of Chicago, and several employees of the Department of Corrections. The complaint alleged an unlawful arrest as against the City defendants and an unlawful detention as against the state defendants. Judge Shadur (N.D. Ill.) dismissed the suit for failure to state a claim. Atkins appeals.

In their opinion, Judges Posner, Manion, and Hamilton (concurring in part and concurring in judgment) affirmed. The Court began with the arrest and whether the officers had probable cause. Although the police lacked probable cause to stop the vehicle in which Atkins was a passenger, they nevertheless had an affidavit with his name on it. If he was the person named in the warrant, the absence of probable cause to stop the car does not vitiate the probable cause to arrest him. The affidavit matched Atkins’ first name, last name, gender, race, day of birth, month of birth, and the first three digits of his Social Security numbers. It did not match Atkins’ height, weight, or year of birth. Given the closeness of the match, the Court concluded that the officers did not err in arresting Atkins or, if they did, it was a reasonable error and did not violate Atkins's constitutional rights. Atkins' stronger complaint is that the state defendants held him unlawfully for 36 days, despite his protests. The Court stated that alleged parole violators must be afforded a preliminary hearing "as promptly as convenient" to determine probable cause and a full hearing within a "reasonable time." The hearings can be administrative. Atkins had an administrative hearing on the seventh day of his incarceration but failed to convince the hearing officer that he was either not the same William Atkins or that his parole has expired. It was on the 36th day that Atkins had his full hearing and was released. The Court noted a possible distinction between the due process rights of an alleged parole violator who admits the parole but denies the violation and an alleged parole violator who denies that he is even on parole. The former has already agreed to administrative adjudication of parole as one of the terms of his parole. The latter has not. But that would give every alleged parole violator an opportunity for two hearings. Particularly given the Court's belief that a judicial hearing is not necessarily superior to an administrative hearing, the Court doubted that the difference would lead to a constitutional distinction. It never resolved the issue, however, because its belief that the question was novel inescapably led to the conclusion that the defendants were entitled to qualified immunity. Finally, the Court addressed Atkins' claim that he was mistreated during the 36 days of confinement. The Court ultimately concluded that the claims were properly dismissed. Notwithstanding the fact that Atkins was represented by counsel and had already amended his complaint three times, the Court noted that some allegations were highly implausible while others were contradicted or internally inconsistent. Atkins never stated a plausible claim for a constitutional violation. In addition, Atkins has died and his the estate has no way of even presenting his version of the facts.

Judge Hamilton joined the majority opinion with respect to the claims against the City defendants, the conditions of confinement claims, and the qualified immunity holding He wrote separately, however, to address the merits of the alleged due process violation. Generally, a person arrested without a warrant is entitled to a judicial hearing within 48 hours. An alleged parole violator is entitled to much less protection -- but only because he is already on parole and has a more limited liberty interest. Here Atkins claimed that he was not the parolee named in the warrant. Judge Hamilton therefore concluded that due process imposes procedural protections on identification challenges to parole violation warrants. He addressed the issue under the Matthews framework, considering: the private interest, the risk of erroneous deprivation, and the government interest. The private interest is basic liberty, the risk of error is likely significant, and the government interest is closely aligned with the private interest. Weighing those factors, Judge Hamilton concluded that a claim of misidentification should be resolved by a prompt appearance before a judge.

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APPLICATIONS OF HERAEUS KULZER, GMBH, FOR ORDERS COMPELLING DISCOVERY FOR USE IN A FOREIGN PROCEEDING v. BIOMET (January 24, 2011)

Heraeus Kulzer, a German company and a leading producer of bone cement, sued Biomet, an American company, in a German court. Heraeus Kulzer alleges that Biomet obtained confidential information from a former Heraeus Kulzer distributor and used it in a competing product. As part of its case preparation, Heraeus Kulzer sought discovery in Indiana federal court. Judge Miller (N.D. Ind.) denied the application, concluding that Heraeus Kulzer was attempting to circumvent German law and that Heraeus Kulzer's requests were overly broad.

In their opinion, Circuit Judges Bauer and Posner and District Judge Pallmeyer reversed and remanded. The Court stated that § 1782 allows a district court to order the production of documents for use in a foreign tribunal. In the sound discretion of a district court, an applicant can obtain as much discovery as if the case had been brought in that court. The Court noted however, the potential for abuse in different ways: seeking discovery that is already available in the foreign court for harassment purposes only, seeking discovery that would be inadmissible in a foreign court again for harassment purposes, inundating a foreign court with evidence that would be inadmissible in an American court, seeking discovery that the foreign court would disapprove of because of the cost of compliance, and obtaining a discovery advantage by using American discovery rules while limiting one's adversary to foreign discovery rules. The Court saw no abuse, however, in Heraeus Kulzer's application. It appeared that the requested discovery was not available under the German procedures and there was no indication that the requested evidence would be inadmissible. Biomet neither sought any relief from the German court nor sought any conditions on Heraeus Kulzer's application from the American court. Because Heraeus Kulzer had demonstrated a need for the discovery, it is Biomet’s burden to establish that the discovery would be inappropriate under the statute. Since Biomet did not do that, the Court held that the § 1782 requirements were met. The Court also stated that the district court committed error by turning down the request without requiring some negotiation as to its scope. Biomet had refused to meet with Heraeus Kulzer to negotiate restrictions on the discovery and the district court never demanded evidence from Biomet as to its alleged burden. Once a party establishes entitlement to § 1782 discovery, the matter is governed by the federal discovery rules. They Court remanded for further consideration of the request under those rules. 

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MARTINEZ v. ASTRUE (January 19, 2011)

Anita Martinez and her five children live in her mother's basement. Martinez suffers from depression, bipolar disorder, and severe arthritis. She is on medication for both her mental and physical complaints. An ALJ denied her claim for disability benefits. Francis Rider is 61 years old, extremely obese, has severe arthritis in her right knee, and suffers from back pain. An ALJ denied her request for disability benefits. Christine Pound is 60 years old and suffers from coronary artery disease, cartoid artery disease, back pain, and restless leg syndrome. But Pound only had Social Security coverage through the end of 2003. At that time, her conditions were under control and she used only mild medication to treat her pain. An ALJ denied her request for disability benefits. Martinez, Rider, and Pound appeal.

In their opinion, Judges Posner, Ripple, and Rovner consolidated the three appeals and reversed and remanded in Martinez and Rider and affirmed in Pound. In these consolidated appeals, the Court again (as in Spiva (opinion and intheiropinion) and Parker (opinion), both opinions also written by Judge Posner) took the opportunity to criticize the Social Security Administration and its handling of benefit claims. It specifically disapproved of the common ALJ practice of concluding a claimant's statements are not credible without explanation and also noted many ALJs’ apparent lack of familiarity with mental illness. On the merits of the appeals, the Court: a) reversed and remanded the benefits denial in Martinez because the ALJ's superficial opinion discounted Martinez' testimony as "not entirely credible" without explanation, ignored much of the evidence, overlooked the fact that she stopped taking her medication at times because of her condition, and never considered the cumulative impact of her various problems, b) reversed and remanded the benefits denial in Rider because the ALJ ignored the treating doctor's opinion that she was not capable of prolonged standing or walking, relied on contrary opinions of non-treating physicians, made findings inconsistent with the evidence, ignored the uncontroverted testimony that Rider could not afford a knee replacement, and failed to consider the impact of her obesity on her physical condition, and c) affirmed the benefits denial in Pound because, although her condition deteriorated rapidly after 2004, the ALJ conducted a thorough analysis and denied benefits in a thorough opinion that concluded that Pound could perform sedentary work (and was therefore not disabled) when her coverage expired. 

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SMITH v. PETERS (January 19, 2011)

Anthony Smith was incarcerated in Indiana state prison. He brought suit against prison employees, alleging violations of the First and Eighth amendments. According to the allegations of his complaint, he was a) forced to work outside in freezing conditions without protective equipment (including gloves), b) forced to work in a group with axes and shovels without receiving safety instruction, and c) retaliated against for filing grievances complaining about the work conditions. Chief Judge Young (S.D. Ind.) dismissed the complaint, concluding that a) the outdoor work was merely "the usual discomforts of winter" and b) Smith's fear of dangerous working conditions was not actionable in the absence of a physical injury. He did not address the First Amendment claim. Smith appeals.

In their opinion, Seventh Circuit Judges Posner, Wood, and Williams reversed and remanded. On the protective clothing claim, the Court stated that the allegations of forcing Smith to work in freezing conditions without gloves is sufficient to state an Eighth Amendment Claim. On the dangerous conditions claim, the Court agreed that Smith was not entitled to injunctive relief (because he had been transferred to another prison) or compensatory damages (because of 42 U.S.C. § 1997e(e)’s a physical injury requirement). However, the complaint's allegation of a reckless exposure to serious physical injury does state an Eighth Amendment claim and the Court concluded that Smith is entitled to seek remedies not precluded by § 1997e (including nominal and punitive damages). Finally, the Court noted that the complaint stated a claim for a First Amendment violation and the district court erred by not addressing it.

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IN RE: TRANS UNION CORP. PRIVACY LITIGATION (January 14, 2011)

A number of Fair Credit Reporting Act class actions against Trans Union were consolidated in the Northern District of Illinois. Lawyers for some of the plaintiffs ("MDL Counsel") agreed with Trans Union in 2006 to settle the case for $40 million (including $20 million cash). Dawn Wheelahan was counsel for another set of plaintiffs. She and counsel for yet a third set of plaintiffs ("Texas Counsel") opposed the settlement and persuaded the district court to reverse its earlier approval of the settlement. A few years later, the case settled for $110 million (including $75 million cash). The settlement agreement capped lawyers' fees at $18.75 million (17% of the settlement amount), which the lawyers asked for. Judge Gettleman (N.D. Ill.) reduced the fees to $10.83 million but then referred the matter to a special master and approved the special master's recommendation of a $13 million award, allocated 63% to MDL counsel, 22% to Wheelahan, and 15% to Texas counsel. Wheelahan appeals.

In their opinion, Judges Posner, Kanne, and Wood modified and remanded. The Court noted that the special master relied on four things in quantifying the amount of his recommended award: a) an academic study that found an average fee award of 17.6-19.5% in settlements between $79-$190 million, b) a group of securities cases (that have higher discovery costs and therefore should allow for higher fees) from which he extrapolated a fee award of 3.8-23.2% in a settlement this size, c) the fact that the settlement contained $35 million in non-cash value (which he viewed as having less value than cash and on which he awarded only a 5% fee), and d) the risk of losing. The Court found that the special master erred in at least three ways. He did not resolve the wide range of fees in the securities cases or quantify a reduction for the reduced cost of discovery. His reduction of the fee award for the non-cash component of the settlement was arbitrary and unwarranted. His analysis of the risk of losing was weak and inconclusive. The Court noted that simply eliminating the discount on the non-cash value brought the fee award back up to $16.5 million. But it ultimately concluded, because of the combination of errors, that the master’s rationale for reducing the $18.75 million originally requested was not persuasive. Turning to the allocation recommendation, the Court stated that the special master gave MDL Counsel full credit for the $40 million component and 50% credit for the additional $70 million component. The master also noted that MDL Counsel's investment in the case was valued at 4.3 times Wheelahan's investment. The Court noted that this ratio is considerably higher than the fee recommendation and ultimately concluded that the special master's allocation recommendations were appropriate. Against the backdrop of an appropriate allocation but an unsupported reduction in total award, the Court turned to Wheelahan's request. It concluded (applying “rough justice”) that she was entitled to her allocation recommended by the master (22%) but that she was entitled to that percentage of the amount originally requested. Therefore, the Court ordered that she be awarded an additional $1.425 million.

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R.G. WEGMAN CONSTRUCTION CO. v. ADMIRAL INSURANCE CO. (January 14, 2011)

Brian Budrik suffered serious injuries in a fall at a construction site where he was working. He brought a negligence action against several parties, including R.G. Wegman Construction Company, which managed the site. Wegman was an additional insured on a $1 million policy with Admiral Insurance Company. Wegman also had an excess policy with a $10 million limit. Wegman tendered the case to Admiral, which accepted and controlled the defense. According to Wegman, Admiral knew fairly early on that Budrik's injuries were quite serious, and knew that there was a significant possibility that the ultimate loss would exceed the policy limits, and yet failed to advise Wegman of that risk. Wegman claims that it did not appreciate the risk until right before trial. It advised its excess carrier immediately but the carrier refused coverage because of the late notice. Budrik prevailed at trial and the court entered a judgment in excess of $2 million against Wegman. Wegman filed suit against Admiral, alleging that it breached its duty of good faith. Judge Zagel (N.D. Ill.) dismissed the complaint. Wegman appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Tinder reversed and remanded. The Court first had to deal with a jurisdictional issue. After Admiral removed the case to federal court, Wegman amended its complaint to add Budrik as a defendant. Since Budrik and Wegman are both Illinois citizens, the federal court may not have had diversity jurisdiction. But the Court noted that Wegman sought no relief against Budrik. Since there was no basis for adding him, and he is not necessary to resolve the case, the Court dismissed him and proceeded to the merits. The Court noted that a defendant with insurance coverage frequently has no interest in the litigation. If there is no reason to believe that the outcome will exceed the policy limits, only the insurer has a financial stake in the case. In those cases, it makes sense for the insurer to control the defense, to retain competent counsel, and to stay informed of the progress of the litigation. But here, accepting the allegations as true, Admiral learned early on that the outcome could exceed the $1 million policy limit. This fact created a conflict of interest between Admiral and Wegman. The existence of the conflict of interest requires the insurer to notify the insured. Admiral was duty bound to advise Wegman so that Wegman could take whatever steps were necessary to protect its own interest. Of course, the Court emphasized that it was relying only on the pleadings and that Wegman would still have to prove its allegations.

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FEINBERG v. RM ACQUISITION (January 6, 2011)

Henry Feinberg used to be a senior executive at Rand McNally & Company. He participated in its unfunded, supplemental, deferred compensation plan. The company itself was the plan administrator. Rand McNally went through a bankruptcy and, several years later, sold all of its assets to RM Acquisition. The sales documents provided that RM was not acquiring the liabilities associated with the deferred compensation plan. Feinberg and others brought a suit under ERISA against the plan, Rand McNally, and RM. It later dismissed the plan and Rand McNally since neither had any assets. Judge Andersen (N.D. Ill) dismissed the complaint against RM for failure to state a claim. Feinberg appeals.

In their opinion, Judges Posner, Flaum, and Sykes affirmed. The Court noted the general rule that one can purchase the assets of a company without also purchasing its liabilities. Here, RM did just that. It specifically provided that it was not assuming the liabilities associated with the deferred compensation plan. But there is an exception to that rule regarding the successor liability of RM. If the claim arises from an alleged violation of federal rights and two conditions are met, the successor to the business may be liable. The two conditions are a) that the successor have notice of the claim before the acquisition, and b) there is substantial continuity in the business operations. However, Fienberg has made no showing of "substantial continuity" so his ERISA § 502 claim must fail. The Court noted that Fienberg could possibly have a claim against the company's shareholders if they received, as a distribution, the consideration the company received in exchange for its assets. The Court also rejected Fienberg's argument that he had a claim under § 510. That section makes it unlawful to "discharge, fined, suspended, expelled, discipline, or discriminate" against a plan beneficiary for exercising a right under the plan. Although the Court rejected the notion that the section applies only to employer/employee relationships, it nevertheless concluded that RM was not interfering with any participant's rights in the plan.

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STINNETT v. CITY OF CHICAGO (JANUARY 4, 2011)

Gregory Stinnett was a black male Ambulance Commander in Chicago's Fire Department. He took the promotional exam for Field Officer in 2000. Based on his score and seniority, he ranked 32nd. Over the next several years, the Department promoted from the list on eight different occasions. By February of 2007, after the Department promoted two white officers, Stinnett's name was next in line and there were vacancies. Unfortunately, promotions for the additional vacancies were not budgeted. By the time of the next promotions in March 2008, the Department had retired the 2000 list and had administered a new exam -- and Stinnett went from 1st to 48th. He brought suit against the City, alleging that its failure to promote him violated Title VII. Judge St. Eve (N.D. Ill.) granted summary judgment to the City. Stinnett appeals.

In their opinion, Seventh Circuit Judges Posner, Tinder, and Hamilton affirmed. Under McDonnell Douglas, the Court noted that Stinnett can survive summary judgment if he shows that he was qualified for a promotion, was denied the promotion, a similarly situated member of another race got the promotion, and the City was unable to articulate a nondiscriminatory reason for its conduct. The district court concluded that Stinnett was not similarly situated to either a) the two white officers who were just ahead of Stinnett on the 2000 list and promoted in February 2007 or b) to all of the officers (some of whom were white) who had been promoted ahead of Stinnett from the 2007 list. The Court disagreed with the former. Stinnett was not claiming that he should have been promoted ahead of the two officers who ranked higher in 2007 -- he was claiming that the City should not have stopped filling vacancies when it got to him on the list. Thus, the Court concluded he was similarly situated to the last two promotions from the 2000 list because they were all eligible for the 2007 promotions. Getting past the similarly situated hurdle was not enough for Stinnett, however. The City's reasons for its behavior -- that it filled the only two budgeted promotions in 2007 and that it needed to update its promotion list from time to time to allow newer employees a chance for a promotion -- was reasonable. The fact that the last two promotions were white males and the next name on the list was that of a black male does not make its behavior suspicious. Also, the record clearly establishes that the Department official who closed down the 2000 list did not know whose name was next.

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KORAL v. BOEING COMPANY (January 4, 2011)

An Boeing airplane crashed in the Netherlands in 2009. One hundred seventeen plaintiffs have filed suit in Illinois state court in 29 separate actions. Boeing filed motions to dismiss the state court actions on the basis of forum non conveniens, citing the considerable inconvenience of transporting its witnesses from out-of-state in 29 different trials. In response, the plaintiffs pointed out that the standard practice in aviation crash cases is to establish liability by trying a small number of exemplar cases, thereby significantly reducing the inconvenience. Boeing used that response to remove all the state court cases to federal court, arguing that plaintiffs' comment was a proposal for a joint trial and thus qualified the case as a "mass action" under the Class Action Fairness Act. Judges Shadur, Guzman, Conlon, Coleman, and St. Eve (N.D. Ill.) each granted motions to remand. Boeing petitions for an appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder granted the petition and affirmed the remands. Under Rule 1332, a "mass action” is a civil action in which the claims of 100 or more people are "proposed to be tried jointly," except when the proposal is by a defendant. So Boeing’s “proposal cannot be a Rule 1332 proposal. Here, the only “proposal” is plaintiffs' predictions about what might happen as the case progresses. That falls short of a Rule 1332 proposal – Boeing’s removal was therefore premature. 

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IN RE: TEXT MESSAGING ANTITRUST LITIGATION (December 29, 2010)

Class-action plaintiffs assert that the four defendants violated federal antitrust law by conspiring to fix the prices of text messaging services. Over the defendants' objection, Judge Kennelly (N.D. Ill) allowed the filing of a second amended complaint. The defendants sought certification for an interlocutory appeal on the adequacy of the complaint under Twombly. The court so certified. Defendants appeal.

In their opinion, Seventh Circuit Judges Posner, Wood, and Tinder accepted the appeal and affirmed. The Court first addressed plaintiffs' argument that they not even consider the appeal because it does not involve a "controlling question of law" as required by the rules. The Court rejected that argument. Certainly the question is controlling, since an adverse decision would probably terminate the case. And, although it is not a strict question of law like the interpretation of a statute or the Constitution, it does require the interpretation and application of the Twombly legal standard. Since the development of the standard is relatively recent and its interpretation and application not yet routine, the Court granted the application. On the merits, the Court agreed with the district court that the complaint's allegations were sufficiently plausible to satisfy Twombly. The complaint does allege parallel behavior -- the kind of allegation that was found insufficient in Twombly. But it alleges more: that the four defendants control 90% of the market, that the four defendants belonged to a trade association and exchanged information, that the four defendants each increased its prices at a time of falling costs, and that the four defendants each moved from very different and complex pricing structures to a uniform approach. There is no smoking gun, no direct evidence of conspiracy, but the allegations do amount to the "parallel plus" behavior required by Twombly. The plaintiffs should be allowed to proceed with discovery.

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INTERNATIONAL BROTHERHOOD OF TEAMSTERS AIRLINE DIVISION v. FRONTIER AIRLINES (December 13, 2010)

Frontier Airlines' Denver mechanics were represented by the International Brotherhood of Teamsters. The National Mediation Board so certified. Republic Airways, whose mechanics were not represented by a union, acquired Frontier. When Republic announced that it was moving maintenance work from Denver to its Milwaukee facility, the Teamsters objected. They claimed that the Board's certification of it as the bargaining unit prevented Republic from altering their working conditions without negotiations. Republic disagreed. The Teamsters filed suit under the Railway Labor Act. Judge Adelman (E.D. Wis.) issued a preliminary injunction maintaining the status quo (i.e., preventing the transfer of the maintenance work) until the representation issue was decided. Frontier appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Williams vacated and remanded with instructions to issue a revised injunction. At issue here is whether the Teamsters represent the Frontier mechanics. Under the Act, the Frontier mechanics are a separate bargaining unit represented by the Teamsters if Republic operates its subsidiary airlines as individual transportation systems. If, on the other hand, Republic operates a single transportation system, all of its mechanics are members of the same bargaining unit. If that is the case, Frontier can represent none of them. The problem is that only the National Mediation Board can resolve this representation dispute and only a union can ask the Board for such a resolution. The Court noted that the Teamsters, with its injunction in hand, have no incentive to seek that resolution. The Court resolved the standoff by applying "age-old equitable principles." It vacated the injunction and remanded the case to the district court for the issuance of a new injunction to be conditioned on the Teamster's prompt application to the Board for a resolution of the representation issue.

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ARROW GEAR CO. v. DOWNERS GROVE SANITARY DISTRICT (December 10, 2010)

A number of residents of Downers Grove, Illinois brought a class action in 2004 against Arrow Gear Company and others for damages. The suit alleged that Arrow and the others contaminated the local groundwater with industrial solvents. The parties settled the suit in 2006 for approximately $16 million. The defendants allocated the settlement amount amongst themselves in a series of agreements. As part of the settlement, each defendant released every other defendant from a future claim for contribution. Although the release was broad, it provided that it did not release any claims other than those specified and did not release claims that "may arise in other litigation or in other contexts." The court then dismissed the case with prejudice. A few years later, Arrow brought CERCLA contribution suits for costs it had incurred against those same defendants. Judge Darrah (N.D. Ill.) dismissed the suit as barred by res judicata. Arrow appeals.

In their opinion, Seventh Circuit Judges Posner, Kanne, and Sykes reversed. The Court first addressed its appellate jurisdiction, since the district court did not dismiss the suit against all defendants. Arrow took a voluntary dismissal without prejudice with respect to two of the defendants. A decision is not final, and appellate jurisdiction does not exist, if the plaintiff has the opportunity to refile against some defendants. That was the case here. However, as the Court has done before on more than one occasion, it provided Arrow's lawyer an opportunity at oral argument to convert the without prejudice dismissal to a with prejudice dismissal. Arrow's lawyer accepted the invitation and satisfied the Court of its appellate jurisdiction. The Court also briefly addressed the district court's jurisdiction. This is a case that involves enforcement of a settlement agreement -- and the general rule is that a district court does not have jurisdiction of such a claim without an independent basis for its jurisdiction. But here, Arrow's claim does have such an independent basis. The claim is based on CERCLA. The fact that the defendants interposed a settlement agreement as the basis for its res judicata defense does not strip the court of its federal question jurisdiction. On the merits, the Court seemed to have little difficulty concluding that res judicata did not bar the suit. The agreements between the defendants in the earlier class action was limited to the allocation of the $16 million in damages paid to the private plaintiffs. The current suit seeks contribution for an additional $5 million that Arrow has incurred as a result of an EPA investigation. The settlements in the earlier suit did not release Arrow's claims in the current one.

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SPIVA v. ASTRUE (December 6, 2010)

David Spiva had a very unfortunate childhood. His father was shot to death, his mother beat him, he attempted suicide in his teens, he served time in prison, and he experienced urges to hurt himself and others. At the age of 28, he was working as a stock shelver at a WalMart store in Mississippi. He checked himself into a psychiatric clinic because he continued to have thoughts of harming himself and others. He was diagnosed as having a psychotic disorder, a mood disorder, and a personality disorder. He was released after several days with a prescription for antidepressant. Within months, he returned because "evil spirits" were after him. Again, he was released after several days with prescriptions for antipsychotic and antidepressant medications. The clinic psychiatrist believed that he could maintain steady employment if he continued to take the drugs and received treatment. Spiva never returned to his job. Instead, he moved to Milwaukee in 2006 and has since lived with various relatives. He was hospitalized again in 2006 and 2007, still complaining about evil spirits. He filed for Social Security benefits. Two state mental health professionals evaluated his condition. One concluded that he could probably perform routine tasks and interact with coworkers. The other thought that he could work but that he had difficulty concentrating and interacting with other people. Spiva was the only witness at his hearing. He testified that he was unable to work because of his "evil thoughts" and "doing bad." He also testified that he sometimes babysat for his daughter, helped out at a day-care facility, and had recently attended two parties hosted by a relative. The ALJ determined that Spiva suffered from schizophrenia, depression, and attention deficit disorder but concluded that he was not totally disabled because he could still perform his last job (at Wal-Mart). Judge Stadtmueller (E.D. Wis.) affirmed. Spiva appeals.

In their opinion, Seventh Circuit Judges Posner, Tinder, and Hamilton reversed and remanded. The Court was very critical of both the ALJ and the Justice Department's lawyers. With respect to the ALJ, the Court found the opinion totally lacking in an analysis of Spiva's ability to work at WalMart. The Court wondered how a "psychotic person busy trying to cope with evil spirits" could interact with the number of customers found in a typical WalMart store. Because the ALJ found that he could continue in his old job, she made no finding with respect to any other employment he was capable of and whether such employment was available in the area. The Court also criticized her vague references to Spiva's lack of credibility. That conclusion is simply unsupported by the record. Finally, the Court questioned the ALJ's understanding of mental illness, giving her remarks about Spiva's failure to take his medication. The Court stated that keeping mental patients on medication is one of the most serious treatment problems. In short, the ALJ's opinion was unsatisfactory. Next, with respect to the Justice Department lawyers, the Court believed they overstepped their role under Chenery. That doctrine requires the court to review the product of the authorized agency, not the Justice Department lawyers' later justification for such product. Here, the lawyers argued many points from the record that were not part of the ALJ's analysis or consideration. The harmless error doctrine will allow the affirmance of an agency decision if it is overwhelmingly supported by the record even if the agency failed to adequately state its opinion with appropriate record references. The doctrine does not, however, allow affirmance simply because the agency's lawyers have cited enough record evidence to lead to the conclusion that the agency might reached the same decision on remand. The best the Justice Department lawyers can do here is the latter.

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DEERING v. NATIONAL MAINTENANCE & REPAIR (December 2, 2010)

On March 11, 2009, the Mississippi River was at flood stage. Vincent Deering, a riverboat pilot for National Maintenance & Repair, was operating a towboat moving barges at a National facility. Deering had difficulty controlling the boat (because, he alleges, of a defective steering mechanism). Another boat offered assistance but ended up making matters worse. The towboat sank and Deering suffered serious injuries. Deering filed suit in state court under the Jones act and admiralty law. National filed a Limitation of Liability Act petition in federal court. Under that Act, a shipowner’s liability is limited to the ship’s value (here, according to National, a $30,000 salvage value). The federal court stayed the state action, Deering refiled his claims in federal court, and National filed a counterclaim for the value of the ship. Deering moved for dismissal of the counterclaim. Judge Herndon (S.D. Ill.) granted the motion on the grounds that counterclaims that are, by their very nature, setoffs to Jones Act claims, are not allowed. National appeals.

In their opinion, Seventh Circuit Court of Appeals Judges Posner, Kanne, and Williams affirmed. As it frequently does, the Court first addressed its jurisdiction. National relied on § 1292(a)(3), which allows interlocutory appeals from orders "determining the rights and liabilities of the parties." The principal purpose of this section is to allow appeals from liability determinations in admiralty cases before the usually separate and frequently costly relief proceedings. Although that is not the situation here, the Court noted that the appeal presented a case to those in which interlocutory appeals are allowed in non-admiralty cases: it involved a controlling question of law, the issue is separate from both the personal injury claim and the liability limitation petition, and none of the facts relevant to the underlying claims are relevant to the appeal. Also noting that other courts have allowed jurisdiction in these circumstances, the Court concluded that it did have jurisdiction to hear the appeal. The Court proceeded to the merits. The Federal Employers' Liability Act (FELA), which is incorporated by reference into the Jones Act, provides that "any . . . device whatsoever" that is intended to exempt a common carrier from liability is void. Here, the only purpose of the counterclaim is to act as a setoff to Deering's personal injury claim. Relying on the plain language of the statute, the state of the law at the time it was enacted, and public policy, the Court concluded that National's counterclaim was a void "device" under the Jones Act. The Court distinguished the Fifth Circuit's decision in Withhart, in which the court held that a counterclaim was not such a device. Withhart was a Jones Act case but relied principally on a prior FELA case. The Court noted several fundamental differences between the Jones Act and FELA that the Withhart case did not address that could have distinguished the case from the earlier precedent. It also questioned the correctness of both decisions. In the end, though, it merely distinguished Withhart. There was no limitation of liability issue in Withhart. The Court concluded that the "one-two punch" -- the combination of a property damage counterclaim and a limitation of liability petition that would wipe out a substantial injury claim -- was not allowed by the Act.

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AMERICAN BANK v. CITY OF MENASHA (November 29, 2010)

The City of Menasha, Wisconsin financed a power plant conversion by issuing bonds. Unfortunately, the project ended up over-budget and the city defaulted on the bonds. Several bondholders, including American Bank, filed a class action against the City. The suit alleged violations of federal securities law. A few weeks after filing suit, the Bank submitted a public records request to the City pursuant to state law. When Menasha refused to produce the requested records, the Bank obtained an order from a state court ordering compliance. Instead of complying, Menasha sought a stay from the district court in which the class action was pending. Judge Springmann (N.D. Ind.) granted the motion and issued a stay under the Private Securities Litigation Reform Act, as amended by the Securities Litigation Uniform Standards Act. The Act requires that discovery be stayed while a motion to dismiss is pending and authorizes a district court to stay state court discovery proceedings when necessary. The Bank appeals.

In their opinion, Seventh Circuit Judges Posner, Flaum, and Sykes reversed. The Court first addressed its jurisdiction. Although discovery orders are usually not appealable, there are exceptions – plus, this may not be a discovery order. The Court concluded that jurisdiction was inseparable from the merits. If the Bank is right on the merits, it is not a discovery order but an appealable injunction. If the City is right on the merits, it is a discovery order and unappealable unless it fits within an exception. The Court sided with the Bank. First of all, discovery is a well defined word in federal civil procedure and does not generally include the entirety of a party's investigation. Second, if the Act meant to use it in a different way, there must be a reason based on statute or policy. The policy behind the discovery stay is to prevent one party from using discovery to impose exorbitant costs on the other for the purpose of inducing a settlement. That concern does not exist here, since the cost of complying with the public records request can be charged to the Bank. Menasha concedes that it couldn't refuse a newspaper's request for the same records, nor could it have refused the Bank's request if it made the request a few weeks before filing the complaint rather than a few weeks after. The City not only does not convince the Court to adopt a broad definition of "discovery" in the Act -- it convinces the Court that their interpretation is futile, would create a “precedent of unmanageable scope,” and would hold the law “out to ridicule.”

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THOROGOOD v. SEARS, ROEBUCK AND CO. (November 2, 2010)

For the third time in two years, the Seventh Circuit has an occasion to decide an appeal in this failed attempt at a class action. Steve Thorogood filed a class action on behalf of residents of 28 states and the District of Columbia. He alleged that Sears' advertising and representations regarding the stainless steel content of a dryer drum constituted a violation of consumer protection laws. The Court reversed the district court's class certification order (the opinion and intheiropinion). It concluded that there were no common issues of fact and that the case was a particularly poor case for class certification. On remand, Sears made a $20,000 offer of judgment on Thorogood's individual claim. Because that amount exceeded Thorogood's maximum recovery, the district court dismissed the case as moot. The Court affirmed, rejecting Thorogood's argument that he was entitled to substantial attorneys' fees (the opinion and intheiropinion). Undaunted, Thorogood's counsel continued his "quixotic . . . quest" and filed an almost identical class-action suit in California. The California district court ruled that the case was barred by collateral estoppel. After plaintiffs alleged additional facts in an amended complaint, however, the court reversed its ruling and allowed the case to proceed with discovery. Sears returned to the Illinois district court and sought to enjoin the continued prosecution of the California case. Judge Leinenweber (N.D. Ill.) denied the motion, concluding that the availability of a collateral estoppel defense was adequate relief. Sears appeals.

In their opinion, Judges Posner, Kanne, and Evans reversed and remanded. The Court first noted that the district court had jurisdiction notwithstanding the fact that the original case was no longer pending. Sears' motion was brought pursuant to the All Writs Act, which authorizes a federal court to issue commands that are necessary to effectuate prior decisions of the court. The Court turned its attention to the merits, which required it to determine whether the district court abused its discretion. Ordinarily, a collateral estoppel defense would amount to an adequate remedy at law and preclude injunctive relief under the All Writs Act. The Court concluded, however, that several factors in the case militated otherwise: the near frivolous nature of the complaint itself, its poor fit as a class action, the difficulty in structuring proper relief, counsel's stated intention to circumvent the district court's order, counsel's position that California consumer protection law is different when his earlier position in the Illinois case was that all class members were governed by the same law, the potential for abuse in class proceedings, the cost of pretrial discovery, and California counsel's "threat to turn the screws" if the case did not settle. The district court apparently did not take these considerations into account and may have believed that the mere availability of the collateral estoppel defense precluded relief. Although conceding that the California court's order deserved respect, the Court mentioned that the California court misunderstood the case and was not going to revisit certification until after discovery. In addition, its orders were not appealable. Sears is therefore without an adequate remedy at law and the district court abused its discretion in denying the injunction. The Court left the details of the injunction to the district court but made several comments nonetheless: the lawyers and all of the original class members should be subject to the injunction, the injunction should not prohibit individual claims, the additional named defendant in the California suit is entitled to no relief, no unnamed class member should be punished with contempt until served with a copy of the injunction, and the injunction should not prohibit class actions with materially different allegations. Finally, the Court noted that the Supreme Court recently granted certiorari in a case regarding a federal court's power to enjoin a state court proceeding. In consideration of that fact, the Court directed that the injunction should encompass state court proceedings but should specifically allow for a modification in consideration of the ultimate decision in the case. 

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FLETCHER v. MENARD CORRECTIONAL CENTER (October 28, 2010)

Anthony Fletcher is an inmate at Menard Correctional Center in Illinois. He claims that prison guards used excessive force while they were transferring him to a new cell. He further claims that he suffered significant injuries and that he was denied medical treatment for those injuries and for his asthma and diabetes. He brought suit asserting those constitutional violations and attempted to proceed in forma pauperis. Unfortunately, he had three "strikes" (prior frivolous suits) and thus could not proceed in forma pauperis without relying on the "under imminent danger of serious physical injury" exception. Even more unfortunately, his judge had presided over one of those earlier "strikes" in which Fletcher alleged a failure to treat his asthma and diabetes. Fletcher's medical records in that case showed that he did not have asthma or diabetes. Judge Baker (C.D. Ill.) ruled that he therefore did not come within the exception and dismissed his complaint. Fletcher appeals.

In their opinion, Judges Bauer, Posner, and Wood affirmed. Although the Court affirmed the dismissal, it did so on different grounds. On the imminent danger exception to the three strike rule, the Court concluded that the district court erred. Although Fletcher did not have asthma or diabetes, the district court did not consider his additional allegation that he was denied treatment for injuries suffered from the excessive force. Untreated injuries could pose as much a threat as untreated illnesses and could qualify as an “imminent danger.” Nevertheless, the Court found an alternative ground to affirm the dismissal. The Prison Litigation Reform Act requires a prisoner to exhaust administrative remedies before bringing suit. The Court imagined a scenario in which a prisoner would not be required to exhaust administrative remedies -- if he is in imminent danger and no administrative remedy is available to avert that danger. Here, however, Illinois has an emergency procedure under which a grievance is directed immediately to the warden. Fletcher took advantage of that procedure but waited only two days before filing his suit. Under these circumstances, the Court concluded that he was not excused from the exhaustion requirement of the Act. 

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UNITED STATES v. CINERGY CORP. (October 12, 2010)

Cinergy Corp. (and its affiliates) owns several electric power plants in the Midwest. Years ago, the U.S. EPA charged Cinergy with violations of the Clean Air Act at several of its facilities. Specifically, the agency alleged that the company made "major" modifications that resulted in increased nitrogen oxide and sulfur dioxide emissions without obtaining a permit. In an earlier appeal, the Seventh Circuit held that the federal regulation at issue required emissions to be measured on an annual, rather than an hourly, basis. On remand to Judge McKinney (S.D. Ind.), the case was tried. A jury found that four of the alleged modifications were likely to have increased the sulfur dioxide and nitrogen oxide annual emissions and should have been permitted. Cinergy appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Rovner reversed. The Court addressed the verdict with respect to the two pollutants separately. With respect to sulfur dioxide, Indiana's implementation plan in effect at the time of the modifications did use hourly capacity rather than annual emissions to determine the necessity of a permit. This was true even though: the federal statute and regulation defined it otherwise, Indiana had agreed to revise its plan, and Indiana had actually adopted appropriate amendments to its plan -- but it failed to submit the plan for approval for several years. The Court concluded that Cinergy could not be held liable when it complied with the approved Indiana plan. With respect to nitrogen oxide, the parties agree that the annual emissions standard governs. Here, Cinergy attacks the agency's experts and the formula they used to predict those annual emissions. In effect, the expert witnesses testified that an increase in capacity would result in an equal increase in generation and pollutant emissions. The Court concluded that that formula was only appropriate in the case of a baseload generating plant, which is in almost continuous operation. It did not take into consideration the operational differences between baseload, cycling, and peaking plants. The plant at issue is a cycling plant and operated on a regular, although not continuous, schedule. Although there are methods for predicting annual emissions from a cycling plant, the Court concluded that a remand was not necessary. The agency conceded that it could not prove its case if the expert testimony was disallowed.

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WOLFE v. SCHAEFER (August 31, 2010)

Mervin Wolfe ran an unsuccessful campaign for Cumberland County State's Attorney in 2008 against Barry Schaefer, the incumbent. Wolfe brought suit against Schaefer and others (with whom he had a long history) pursuant to § 1983. He alleges that the defendants violated his Fourth and Fourteenth Amendment rights when they published the fact that he was under investigation by certain state agencies as part of their attempt to defeat his campaign. Judge Scott (C.D. Ill.) dismissed the complaint. Wolfe appeals.

In their opinion, Judges Posner, Wood, and Hamilton affirmed. The Court noted that the state law required the investigations be kept confidential. But Wolfe did not allege a violation of state law -- he alleged that the state law granted him a constitutional right. The Court recognized that a state law can create a liberty or property interest protected by the due process clause. There is also a common law breach of privacy tort, including one that protects an unreasonable interference with one's private life. The issue for the Court was whether any of this rose to the level of a protected property or liberty interest. The Supreme Court has not held that disclosure of private information violates the due process clause. In Whalen, it suggested that the disclosure of certain private information might do so -- but in Paul v. Davis held that one's reputation is not constitutionally protected. The courts of appeals have used Whalen to recognize certain constitutionally protected privacy rights. Although the Court recognized that certain situations might give rise to a constitutional right to privacy, it concluded that Wolfe's case was at the other end of the continuum. Information regarding the investigations of a candidate for public office is a matter of significant public interest. Wolfe's complaint was properly dismissed.

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HAYES LEMMERZ INTERNATIONAL v. ACE AMERICAN INSURANCE CO. (August 31, 2010)

An explosion at a plant owned by Hayes Lemmerz International-Huntington (LMIH) , a subsidiary of Hayes Lemmerz International (HLI), injured one employee and killed another. The injured employee and the widow of the deceased employee filed workers' compensation claims against both HLI and HLIH as employers and recovered. They then brought a tort suit against the same two companies. The suit did not identify either defendant as an employer. Rather, it alleged that the defendants owned and operated the plant and failed to exercise reasonable care. Apparently, they did not identify the defendants as employers because the exclusive remedy against an employer for a workplace injury is a workers’ compensation claim. HLI notified ACE American Insurance Co., its employer liability policy carrier. ACE declined to take over the defense and offered to pay only half the combined litigation expenses. HLI incurred over $250,000 in defense costs attempting to convince the state court that it was not the employer -- and therefore not liable. Ironically, it eventually discovered that Indiana, by statute, treats a parent and its subsidiaries as joint employers, for workers' compensation purposes, of each other's employees. The suit against HLI was therefore dismissed with prejudice because of the workers' compensation bar. HLI brought an action against ACE for recovery of its attorneys' fees. Chief Judge Simon (N.D. Ind.) dismissed the complaint. HLI appeals.

In their opinion, Judges Bauer, Posner, and Flaum affirmed. Under Indiana law, the duty to defend is determined by the nature of the complaint. The "nature of the complaint" includes not only the specific allegations contained therein but also facts readily ascertainable by the insurer. Here, although neither HLI nor HLIH were identified as employers in the complaint, the Indiana statute made their status as such readily ascertainable. The fact that the complaint lacked merit is irrelevant -- an insured deserves a defense to meritless complaints as well as meritorious ones. A duty to defend (or reimburse) therefore existed. However, that duty requires reimbursement only of reasonable costs of defense. HLI's failure to appreciate the existence and significance of the Indiana statute (HLI has filed a malpractice action against its lawyers) led the Court to conclude that the defense costs were unreasonable and unrecoverable. The Court also rejected HLI's argument that ACE's duty to defend included a duty to advise it about the existence of the statute. ACE had no duty to provide legal advice.

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HATMAKER v. MEMORIAL MEDICAL CENTER (August 30, 2010)

When the director of its chaplain staff died, Memorial Medical Center announced a search for her replacement. Rev. Greg Stafford, the acting director, was a candidate for the job. Forrest Hester, the Center's Human Resources Officer, solicited opinions from the staff regarding Stafford's candidacy. Janet Hatmaker, a part-time chaplain, expressed concerns about Stafford's demeanor, appropriateness, and leadership. Hatmaker remained critical of Stafford after his appointment. She told Hester that she and other women were uncomfortable with him, that she thought he was distrustful and uncomfortable with women, and that he had diminished view of younger women. Her remarks prompted Hester to conduct an investigation into the possibility of a hostile work environment. Although Hatmaker was reluctant to participate in the investigation, she ultimately did so. Hatmaker was quite opinionated in her remarks to the investigator, including negative references to Jews, Catholics, Al Sharpton, Jesse Jackson, and the Center itself. Hester and the investigator concluded that no hostile work environment existed. In fact, Hester was more concerned about Hatmaker's attitude and remarks. He instructed her to stop talking with her co-employees about Stafford and advised that she should resign if she was uncomfortable working under his leadership. When she responded with another communication indicating her preoccupation with Stafford's professional development, Hester suspended her. He later fired her. She brought suit against the Center under Title VII. Title VII prohibits discrimination against an employee because the employee has opposed an unlawful employment practice or has participated in an investigation under the statute. Judge Scott (C.D. Ill.) granted summary judgment to the Center. Hatmaker appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Evans affirmed. Title VII’s “participation” clause prohibits discrimination against an employee who participates in investigation but does not protect the employee from being fired if circumstances otherwise warrant. Here, Hatmaker was not fired because of her communications to the investigator -- she was fired for exercising poor judgment and for being preoccupied with some rather innocuous characteristics of her new supervisor. None of her comments actually accused him of discrimination or of creating a hostile work environment. Furthermore, alternatively, the Court stated that an independent ground for affirmance was the fact that Title VII's reference to an "investigation" includes only official investigations, not purely internal investigations. Since no official investigation was conducted here, the participation clause does not apply. Finally, the Court briefly addressed her "opposition" claim. An opposition claim must be based on a good faith and reasonable belief that there is a statutory violation. That belief is not present here.

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ROBINSON v. MCNEIL CONSUMER HEALTHCARE (August 11, 2010)

In early 2005, Karen Robinson purchased Children's Motrin for her child. Motrin is manufactured by McNeil Consumer Healthcare. The label, which she read before purchase, warned of a possible severe allergic reaction. Several months later, she took a dose of the Motrin for a headache. She neither reread nor recalled the warnings. The next day, Robinson developed a rash and a fever – so she took more Motrin. A doctor’s visit resulted in treatment for an allergic reaction. The doctor did not comment on her disclosure that she had taken Motrin. Her rash and fever worsened and she took a third dose of the Motrin. She was hospitalized the next day and diagnosed with toxic epidermal necrolysis (TEN). She recovered but lost much of her skin, is blind in one eye and expected to lose sight in the other, and has had multiple operations to treat organ damage. She brought a products liability suit against McNeil. The jury awarded damages of $3.5 million but also found Robinson contributorily negligent. Applying Virginia law, where contributory negligence is a complete defense to a negligence claim, Judge Holderman (N.D. Ill.) entered judgment for McNeil. Robinson appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Kanne affirmed. The Court first addressed the district court's application of Virginia law. Illinois' conflict rule is the "most significant relationship" test. In the case of a tort, that test points to the location of the injury. Here, the place of the initial injury was Virginia, although the Robinsons have since moved to Illinois where her condition worsens and her injury continues. The Court rejected a "continuation of the injury" location test. That approach would allow potential plaintiffs to relocate to favorable jurisdictions after an initial injury. Since the law was correctly applied and there was evidence of contributory negligence, the court ruled correctly. The Court then embarked on a lengthy and interesting, albeit unnecessary, analysis applying Illinois law to show that the result would be the same. In Illinois, a plaintiff's contributory negligence is only a complete defense if it exceeds the negligence of the defendant. The Court adopted a test under which the party who could have avoided the accident at a "lower cost" was the least negligent. After a discussion of the benefits of Motrin, the evidence of any causal connection between Motrin and TEN, the effect of requiring a prescription for Motrin, the role of the FDA, the warnings, and the effect of additional warnings, the Court concluded that Robinson had the lower cost of avoidance. The outcome would have therefore been the same. Finally, the Court concluded that a) the defendant's statement in closing argument that it was "not blaming" Robinson for her injuries was not so deliberate and unambiguous so as to amount to a judicial admission that she was not contributorily negligent, and b) the district court did not abuse its discretion in denying Robinson's request to reinstate her breach of warranty claim right before trial.

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GACEK v. AMERICAN AIRLINES (July 15, 2010)

John Gacek was a baggage handler for American Airlines. In December of 2005, he suffered a severe sprain to a finger on his left hand. The doctor advised him to wear a splint and to avoid lifting anything with that hand. Gacek called in sick on December 29, 30, and 31. He failed to answer or return a phone call from American on the 29th. Its suspicions aroused because of the inability to reach Gacek and the holiday timing, American hired a detective to conduct surveillance. Gacek was videotaped running errands and generally using his hands to lift and carry objects. Gacek first told American that he had the flu -- he later changed his story and asserted that he called in sick because his finger was bothering him. American fired him. He brought an action under the Illinois Workers' Compensation Act for retaliatory discharge. Judge Conlon (N.D. Ill.) granted summary judgment to American. Gacek appeals.

In their opinion, Judges Posner, Wood, and Hamilton affirmed. Although the Court quickly concluded that no reasonable jury could decide that the reason for American's action was the opening of the claim file as opposed to lying about having the flu and disobeying doctor's orders, it decided to address a recurring issue that it had previously ducked. That issue is whether the summary judgment framework in this case is provided by Illinois law or by federal law (that is, McDonnell Douglas). In the 1998 Clemons case, the Illinois Supreme Court specifically rejected McDonnell Douglas in the context of a state workers' compensation retaliatory discharge claim. It's stated rationale was that it did not want to reduce the plaintiff’s burden of proving its case. The Court noted that the application of the Illinois test could result in a different outcome. Illinois requires proof of causation, whereas a McDonnell Douglas plaintiff could potentially prevail without such proof. The Court then addressed whether, under Erie, the Illinois test is a substantive or procedural rule in order to determine whether it should be applied in a diversity case. Although recognizing that the rule was ostensibly procedural, the Court concluded that it was nevertheless substantive under Erie and should be applied in the case. It based its conclusion on the fact that the test applies to a discrete area of substantive law and was motivated by substantive concerns. Illinois simply chose not to provide the McDonnell Douglas advantage to state retaliatory discharge plaintiffs -- the federal courts must honor that policy choice and apply it in diversity cases. Here, Gacek is unable to establish causation since he presented no credible evidence that American's stated reasons for firing him were not credible.

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 RIVER OF LIFE KINGDOM MINISTRIES v. HAZEL CREST (July 2, 2010)

The Village of Hazel Crest refused to allow the River of Life Kingdom Ministries ("Ministries") to locate its church in a commercial area of the village. Ministries had a very small congregation and hoped to relocate its facilities from a dirty warehouse in Chicago Heights to Hazel Crest. The area in which it wanted to locate was designated a commercial district under the village's zoning ordinance. New noncommercial uses were excluded from the district under the ordinance. Judge Gottschall (N.D. Ill.) denied the Ministries' request for a preliminary injunction under the Religious Land Use and Institutionalized Persons Act (“RLUIPA”). On October 27, 2009, a panel of the Seventh Circuit affirmed (the intheiropinion post). On petition by Ministries, the Court granted rehearing en banc.

In their opinion, the entire court affirmed, with Judges Manion, Cudahy, Rover, and Williams concurring and Judge Sykes dissenting. The "equal-terms" provision of RLUIPA prohibits a local government from instituting a land-use regulation that treats a religious institution "on less than equal terms with" a nonreligious institution. The Court addressed two different tests - one from the Third Circuit and one from the Eleventh. The Third Circuit approach is to identify a) the ordinance’s goals and b) the nonreligious assemblies comparable to the religious assembly at issue. The ordinance is consistent with the equal terms provision if the reasons for excluding a nonreligious assembly are applicable to the religious assembly. The Eleventh Circuit approaches the equal terms provision more literally. An ordinance that permits a nonreligious assembly must permit a religious assembly. The Eleventh Circuit test does include an exception -- unequal treatment could survive if it passed a "strict scrutiny" test. Although the panel had adopted the Third Circuit approach, the en banc court rejected both approaches. The Court believed the Eleventh Circuit’s approach was overprotective of religious groups (due, in large part, to the dictionary definition of "assembly") and that the "strict scrutiny" exception had no basis in the statute. With respect to the Third Circuit's test, its focus on the regulatory purpose of the zoning regulation was problematic to the Court. Instead, the Court adopted a variation of the Third Circuit test. It replaced the "subjective and manipulable" regulatory purpose test with an "objective" zoning criteria test. The zoning criteria used by Hazel Crest include setting aside land for commercial uses in order to generate tax revenue and to provide a convenient shopping area. When it created the district, it not only excluded churches but also excluded other nonreligious assemblies that did not offer opportunities for shopping or generate tax remedy. The Court concluded that Hazel Crest's adoption of an acceptable zoning criterion -- commercial district -- and its neutral application of the regulation demonstrated that Ministries was unlikely to prevail on the merits. It thus affirmed the district court's denial of the motion for a preliminary injunction.

Judge Cudahy concurred. He wrote separately to express his view that there was little difference in the Third Circuit’s “regulatory purpose” test and the Court’s “zoning criterion” test.

Judge Manion concurred. He wrote separately to express his view that the case was rather straight forward and that the en banc court's opinion unnecessarily crafted a test to apply to more difficult cases. He also took issue with the opinion's discussion of a complicated Establishment Clause issue.

Judge Williams concurred (joined by Judges Cudahy and Rovner). Judge Williams expressed her belief that the Third Circuit's "regulatory purpose" test adopted by the panel is the proper test.

Judge Sykes dissented. She explored in detail the history of RLUIPA as well as the text of the statute, not limited to the "equal terms" provision. She also laid out the history of the "equal terms" jurisprudence in the Third, Eleventh, and Seventh Circuits. She noted that the Seventh Circuit had approved of the Eleventh Circuit approach until the panel opinion in this case. In her view, the plain language of RLUIPA prohibits any zoning regulation that treats a religious assembly on less than equal terms with a non-religious one. It contains no requirement of discriminatory motive or bias. Judge Sykes concluded that the Ministries demonstrated a likelihood of success -- the zoning regulation's allowance of gymnasiums, health clubs, and day care centers in the district where the church is not allowed is sufficient to show unequal terms.

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CW CAPITAL ASSET MANAGEMENT v. CHICAGO PROPERTIES (June 29, 2010)

Blockbuster, the movie rental company, has been hurt by increasing competition and changing business models. As a result, it has abandoned some of its stores. One of those stores was leased from Chicago Properties, a commercial landlord. Blockbuster settled the ensuing breach of lease lawsuit for $161,000, although it owed Chicago Properties future rents of $471,000. The mortgage on the property was held in trust as part of a mortgage-backed security. Bank of America is the trustee and CW Capital Asset Management is the servicer. CW Capital has been granted comprehensive power and authority with respect to the management of the trust’s assets. It brought suit under the parties' "Subordination, Non-Disturbance and Attornment Agreement" (the “Agreement”) for the $471,000. Judge Zagel (N.D. Ill) found for the defendants after a bench trial but then dismissed the suit on the grounds that CW Capital, as servicer, was not the real party in interest. CW Capital appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Evans reversed with directions (still finding for the defendants but on the merits). The Court first addressed the real party in interest issue. It concluded, based on its review of the law and the documents, that the trust held legal title to the claim but delegated equitable ownership to CW Capital. That was enough to be a real party in interest. Alternatively, even if CW Capital is not a real party in interest, the Court noted that the case should proceed under Rule 17(a)(3) since the trustee ratified CW Capital's suit in the district court. On the merits, the court noted that the Agreement defines the rights of the parties in the event of a default. Here, notwithstanding Blockbuster's breach, Chicago Properties has not defaulted. Since it continues to meet its monthly obligations, the terms of the Agreement relied on by CW Capital have not been triggered. With respect to the claims based on the mortgage itself and the owners' guaranty, the Court concluded that the settlement with Blockbuster was not a violation. Finally, the Court upheld the district court's award of attorney's fees to Blockbuster under a "prevailing party" term of the Agreement. The Court concluded that the fact that Blockbuster did not prevail on an "unimportant" counterclaim did not change its status as a prevailing party under the Agreement. Although the defendants had prevailed in the district court (on the real party in interest dismissal), the Court reversed that dismissal with directions to enter judgment on the merits for the defendants.

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JAY E. HAYDEN FOUNDATION v. FIRST NEIGHBOR BANK (June 22, 2010)

Jay Hayden died in 1985. His will established the Jay E. Hayden Foundation and named Robert Cochonour as executor. Between 1985 and 2001, Cochonour allegedly embezzled from both the Foundation and from accounts belonging to Hayden's mother and his mother’s friend. Cochonour apparently had the cooperation of First Neighbor Bank in carrying out his misdeeds. By 2002, Cochonour admitted that he had stolen some money and had resigned his state court judgeship. The trustees of the Foundation were aware that it no longer had any assets but there was no record of what happened. For several years, Cochonour and the bank took steps to prevent the plaintiffs from learning additional facts. Eventually, in May of 2008, plaintiffs brought a RICO action against the bank, two law firms, and several associated individuals. Judge Reagan (S.D. Ill.) granted defendants' motion to dismiss on statute of limitations grounds. Plaintiffs appeal.

In their opinion, Judges Posner, Rovner, and Tinder affirmed. The statute of limitations for a RICO claim, stated the Court, is four years and begins to run when the plaintiffs discover or should have discovered the injury and the injurer. Here, the Court concluded that the plaintiffs had significant suspicions by mid-2003 but may not have had sufficient information to bring suit until 2005. If the defendant engages in obstructive conduct, however, that prevents a plaintiff from obtaining sufficient information to file its complaint, the defendant is equitably stopped from pleading the statute of limitations defense for the period of obstructive behavior. Plaintiffs allege that that is what happened here. The Court recognized a split of authority regarding the impact of equitable estoppel on limitations period. Some courts have allowed an extension of a limitations period for the full amount of the delay while others have held that a plaintiff must commence the action as soon as possible after the obstruction ends. The Court decided to apply the latter rule -- particularly in a RICO case where the Supreme Court has emphasized the importance of prompt action. In applying the "as soon as possible" rule, the Court stated that plaintiffs had enough information in 2005 to complete their investigation and file suit long before the three years they actually used. Notwithstanding the Court's conclusion that the action was barred by the statute of limitations, it also addressed the defendants' alternative argument that the complaint failed to state a RICO cause of action. The Court concluded that it did not since it did not allege that the defendants used an enterprise (i.e., their conspiracy) to engage in a pattern of racketeering activity.

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LANTZ v. COMMISSIONER OF INTERNAL REVENUE (June 8, 2010)

Kathy Lantz was married to a dentist with whom she filed joint federal tax returns. Unfortunately, she was also married to a dentist who was convicted of Medicare fraud and who the IRS accused of understating their joint tax liability. When she received a notice of tax levy and information from the IRS regarding innocent spouse relief, she allowed her then estranged husband to respond. Although he requested a due process hearing and application for such relief, he died before taking any other action. In 2006, the tax obligation exceeded $1 million. The IRS applied Lantz’ 2005 income tax refund of $3200 to her tax liability. Unemployed and poor, she applied for innocent spouse relief. The IRS rejected her application because she had failed to apply within two years from the notice of intent to levy. The Tax Court invalidated the two-year deadline. The Commissioner appeals.

In their opinion, Judges Posner, Flaum, and Williams reversed and remanded. Section 6015 of the Internal Revenue Code provides several avenues of relief to innocent spouses. Subsection (b) relief requires that the spouse have had no reason to know of the understatement. Subsection (c) relief requires that the spouse no longer be married to the person with whom he or she filed. Both subsections (b) and (c) contain a statutory two-year limitations period. Subsection (f), under which Lantz applied, contains no statutory limitations period. It provides that the IRS may grant innocent spouse relief when it is not available under either subsection (b) or (c) and is otherwise equitable under all the facts and circumstances. The Treasury Department, by regulation, imposed a two-year deadline on subsection (f). The Court found nothing improper with the Department's action. First of all, the fact that Congress did not include a limitations period does not mean that it intended the statute not have one. The Court noted that borrowing a statute of limitations from another statute is a common judicial practice – so common, in fact, that Congress can be assumed to endorse it. Second, the subsection does not even require the IRS to grant relief. Since it can deny relief altogether, it can decide to deny relief to late claimants. Finally, the subsection itself begins with the phrase "under procedures prescribed" by the Treasury Department. That congressional delegation of authority to the Department certainly allows it to set a deadline for an application.

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HABITAT EDUCATION CENTER v. UNITED STATES FOREST SERVICE (May 27, 2010)

The United States Forest Service decided to allow logging on thousands of acres of national forest in Wisconsin. The winning bidder for the logging permit bid $55,000. Habitat Education Center, a nonprofit corporation whose mission is to promote environmental quality, sued to prevent the issuance of the permit. Judge Goodstein (E.D. Wis.) granted a preliminary injunction but required Habitat to post a $10,000 bond. The court rejected Habitat's argument that a non-profit should not have to post a bond. The judge later dissolved the injunction and granted summary judgment to the Forest Service. Habitat appeals -- but only from the order setting the bond.

In their opinion, Judges Posner, Ripple, and Kanne affirmed. The Court first addressed mootness and standing. The order had not become moot since Habitat can be liable to the Forest Service up to the amount of the bond. Also, it has incurred a loss, and therefore has standing, because it has lost the time value of its $10,000. On the merits, the Court agreed with the district court. Rule 65 (c) states that a court may issue an injunction "only if" the moving party posts security in an amount sufficient to cover any costs sustained by the other party if the injunction was wrongly issued. The rule does not contain an exemption for non-profits. Notwithstanding the unambiguous language of the rule, the Court noted that other courts have created at least two exceptions -- where there is simply no threat of damage to the non-moving party and where an appropriate bond would exceed the movent's ability to pay. Neither of those situations exists here. The Court also rejected Habitat's argument that the amount of the bond was excessive, given the risk of loss to the Forest Service. The loss was the delay of one year. The evidence is that the rebidding process itself will cost $2350. Although the winning bid may equal or exceed $55,000, it also may not. Given the uncertainty of the costs to be incurred by the Forest Service, the amount of the bond was appropriate.

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IN RE: SOUTH BEACH SECURITIES (May 19, 2010)

South Beach Securities, Inc. is controlled by Leon Greenblatt and was once a registered securities dealer. In the early 2000s, Greenblatt orchestrated a number of financial transactions among South Beach and other companies, including Scattered Corporation, which he controlled in whole or in part. At the time, South Beach's only potential assets were net operating losses. As a result of the transactions, Scattered became South Beach's only creditor. South Beach filed a Chapter 11 petition and submitted a plan of reorganization. The U.S. Trustee opposed confirmation of the plan. The bankruptcy court refused confirmation and dismissed the petition. Judge Lefkow (N.D. Ill.) affirmed. Scattered and South Beach appeal.

In their opinion, Judges Posner, Flaum, and Wood affirmed and issued a show-cause order. The Court first addressed the argument that the U.S. Trustee was not even authorized to oppose confirmation of the plan on the ground that its primary purpose was to avoid taxes. Although the Court thought the Internal Revenue Code's guidance is a ”mishmash," it concluded that the Trustee was a "party in interest" under § 1129(d) and authorized to oppose the plan. The Court specifically relied on § 307's grant of authority to the Trustee to "be heard on any issue." On the merits, the Court not only concluded that the proposed plan would not confer the desired tax consequences, it found at least three reasons why the plan could not be confirmed. First, a plan cannot be confirmed if its principal purpose is to avoid taxes. Second, a plan must be rejected if it is not proposed in good faith. Here, the lack of good faith is illustrated by the absence of any outside creditors or any real debt. Finally, a plan cannot be confirmed without the approval of the non-inside owners of at least one class of impaired claims. Because of Scattered's insider status, no such owners exist in this case. The Court concluded that the appeal was frivolous, invited the Trustee to apply for sanctions, and issued an order for the appellants and their lawyers to show cause why they should not be sanctioned.

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AMERICAN LAND HOLDINGS v. JOBE (May 6, 2010)

Peabody Energy Corporation is engaged in the strip mining of coal in Sullivan County in southwestern Indiana. Unfortunately for them, the owners of 62 acres of farmland right in the middle of the mining area are getting in the way. Peabody owns the coal beneath those 62 acres pursuant to a 1903 deed. Under that deed, the owners of the property transferred ownership of the coal and the right to mine it to Peabody. The deed also granted the use of the surface "as may be necessary" for certain mining operations and granted an option to purchase such surface area "as may be necessary" for the location of railroad tracks and buildings and other operations necessary for carrying on the mining business. Other parts of the deed limit Peabody's use of the surface to mining operations. Peabody brought an action for a declaration that it has a right to strip mine the land and for specific performance of its option to purchase. After a bench trial, the court entered judgment for the defendants. Peabody appeals.

In their opinion, Judges Posner, Rovner, and Tinder affirmed. The Court agreed with the district court that the deed was ambiguous in that it both granted the right to mine all the coal but put significant limits on Peabody's use of the surface. Because the deed is ambiguous, a court is allowed to look to extrinsic evidence to determine its intended meaning. Here, the district court heard evidence that, at the time of the deed, strip mining did not exist in Sullivan County and probably not in the United States. The Court concluded that the district court did not err in relying on that testimony in holding that the deed did not grant a right to strip mine – it only granted the right to mine the coal by underground mining and the right to use the surface for structures and activities related to the underground mining.

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STUART v. RECH (May 5, 2010)

Federal officers executed a search warrant at a company owned by James Stuart. Stuart filed a pro se motion seeking the return of property seized during the execution of the warrant. The matter was assigned to the magistrate judge who issued the warrant. The judge denied the motion, which he had treated as a Rule 41(g) motion for the return of property. A few months later, Stuart filed a second pleading naming only the agent who had applied for the warrant. In that pleading, Stuart sought damages for what he alleged was the unconstitutional seizure of chemical formulas worth millions of dollars. The district court denied the request on the ground that it was the equivalent of the earlier pleading. Stuart appeals.

In their opinion, Judges Bauer, Posner, and Evans affirmed. The Court began, as an aside, by noting that the magistrate judge who denied the original pleading likely had no authority to do so. The appeal, however, related only to the denial of the second pleading. The Court concluded that the district court erred in treating that pleading as an equivalent to the 41(g) motion. The second pleading is nothing more or less than a common law action for damages against a federal officer who is alleged to have violated the Constitution -- more commonly known as a Bivens action. The complaint should not have been dismissed on res judicata grounds. Notwithstanding the lower court’s mistake, the Court affirmed the dismissal on other grounds. The only basis for Stuart’s claim of unconstitutionality is the “frivolous squared” theory that the federal government has no authority outside of federal property. It has no possible merit.

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BAILEY v. PREGIS INNOVATIVE PACKAGING (April 2, 2010)

Michelle Bailey was employed by the defendant Pregis Innovative Packaging -- that is, until they terminated her for accumulating too many absenteeism points during a 12-month period. She brought suit against Pregis under the Family and Medical Leave Act. The district court granted summary judgment to Pregis. Bailey appeals.

In their opinion, Judges Posner, Manion, and Hamilton affirmed. The Court noted the two issues raised by the appeal: a) whether the 12-month period during which an employee must accumulate 1,250 hours of service to be entitled to take leave is tolled during a period of leave, and whether Pregis retaliated against Bailey by not including leave time in its own policy of removing absenteeism points twelve months after they are imposed. The Court rejected Bailey's position on the first issue. Although it found no precedent, it also found no basis for the tolling in the statute and also found comfort in the line of cases that refused to adopt an expansive definition of the term "service" in the Act. Thus, Bailey is not entitled to "service" credit for a number of days preceding the twelve month period equal to her number of days of leave. With respect to the second issue, the Court first addressed whether the employer's policy of removing absenteeism points is an “employment benefit" under the Act. Although it gave no weight to a Department of Labor opinion letter concluding that such a policy is an "employment benefit" because the letter contained no reasoning, it concluded on its own that the letter reached the right result. Even if it is an employment benefit, however, the Court noted that the Act provides that taking leave cannot result in the loss of employment benefit that has already accrued. Benefits that have not already accrued are not protected. For example, the Act specifically provides that an employee on leave does not accrue seniority. For much the same reason, an employee on leave does not accrue service days toward the twelve months after which the employer forgives an absentee day.

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WRIGHTSELL v. COOK COUNTY (March 31, 2010)

Lance Wrightsell is a former prisoner of the Cook County Jail. He brought an action against the County pursuant to § 1983. He alleged that the County's practice of making only one dentist available to the 10,000 inmates of the jail constituted cruel and unusual punishment in violation of the Eighth Amendment to the Constitution. After the district court denied his request for class certification, he agreed to an offer of judgment of $10,000 and renounced his right to appeal. John Smentek, another former inmate, also had a class action pending in the district court -- against the same defendant, alleging the same constitutional violation, and represented by the same attorney. Wrightsell, notwithstanding his renunciation, appeals the district court's denial of class certification. Smentek petitions for leave to intervene in the appeal.

In their opinion, Judges Posner, Wood, and Tinder denied the petition to intervene and dismissed the appeal. The Court addressed some of the complexities involved in class actions and appeals -- for example, the distinction between the named plaintiff as plaintiff and as class representative and the distinction between voluntary and involuntary settlements. Here, the named plaintiff, after denial of class certification, settled his individual claim and waived his right to appeal as class representative. The Court noted competing policy considerations but concluded that Wrightsell resigned his representative status when he waived his right to appeal. Thus, his appeal should be dismissed. The fact that Wrightsell settled, however, does not affect the rights of the other potential class members, including Smentek. But a potential class member who wishes to appeal the denial of class certification must first seek to intervene in the district court and must do so within the time period for filing a notice of appeal. Smentek did not -- his petition to intervene should be denied.

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AL'S SERVICE CENTER v. BP PRODUCTS NORTH AMERICA (March 26, 2010)

Al's Service Center was a gasoline service station and a franchisee of BP Products North America. In 2002, the State of Illinois decided to condemn a portion of the service station property. Although the portion of the premises subject to condemnation was small, the impact on the property was large. It would affect two of the five entrances and increase congestion. BP notified Al's of its intent to terminate the franchise relationship when the condemnation occurred. The condemnation went forward in June of 2005. Al's franchise contracts expired a month later -- BP asked Al’s to vacate the premises. Notwithstanding the condemnation, the expiration of the agreements, and BP's request to vacate, the parties continued to do business as usual. In the summer of 2006, Al's alleges that at BP failed to deliver gasoline for a period of twelve days. Later that same summer, Al’s asked BP to replace its roadside sign that that state had removed during construction. BP refused. Al's eventually abandoned its business in May 2008. It brought suit against BP for compensatory and punitive damages under both the Petroleum Marketing Practices Act and state law. The district court granted summary judgment to BP after denying Al’s request to add the state law claims. Al’s appeals.

In their opinion, Judges Posner, Rovner, and Sykes affirmed. The Court addressed the PMPA claims. Under the PMPA, a dealer is protected from termination of his franchise under certain circumstances. The Court looked for the termination. It concluded that the franchise was not terminated by the 2003 letter (there was no change in the relationship), it was not terminated by the demand to vacate the premises after the actual condemnation (although the Court concluded that BP could have terminated at that time), it was not terminated by the alleged supply interruption (although it may have been a breach of contract), and it was not terminated by the refusal to replace the sign (it did not meet the Mac’s Shell test for constructive termination). Thus, the Court concluded that the franchise came to an end when Al’s abandoned the premises on its own volition – not a violation of the PMPA. The Court also concluded that the lower court correctly refused to allow the state law claim amendments.

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CHANG v. BAXTER HEALTHCARE CORP. (March 26, 2010)

A number of residents of Taiwan brought suit against manufacturers of clotting factors. They allege that the defendants improperly processed donated blood in California and continued to sell it in foreign countries after they knew it was contaminated. The plaintiffs are mainly hemophiliacs who were infected with HIV from the contaminated clotting factors. The plaintiffs also allege that the defendants fraudulently induced a settlement agreement and they allege a breach of the settlement agreement. The district court dismissed the claims, some on the merits as untimely and others pursuant to the doctrine of forum non conveniens. The plaintiffs appeal.

In their opinion, Judges Posner, Evans, and Tinder affirmed. The Court first addressed the dismissals on the merits. It approved the district court’s conclusion that the claims were untimely both because they were filed outside the statute of limitations period and because the California court would apply the Taiwanese 10 year statute of repose (the plaintiffs were infected in the 1980s). Although the plaintiffs assert that their claims arose in California, the Court disagreed. The rule in California is there is no tort without an injury -- and the injuries occurred in Taiwan. A California court would apply the statute of repose either under its own “borrowing” statute or under a more general "balancing of interests" approach to conflict of laws. The Court next addressed the breach of settlement agreement claim which the district court dismissed on forum non conveniens grounds. The Court found that the relevant clause in the settlement agreement was ambiguous and that extrinsic evidence would be necessary. Most of the people with relevant evidence live in Taiwan. In addition, Taiwan law makes it difficult to gather evidence in Taiwan for use in another country. The Court found nothing that would favor the case being tried in United States – dismissal was proper. Another claim that was dismissed on forum non-conveniens grounds is the individual claim by a woman who claims to have been infected by her boyfriend. Although all the same considerations favored the dismissal of this claim, the Court examined it more closely because of the possibility the claim would be time-barred if brought in Taiwan. Dismissal under forum non-conveniens is improper if the other forum is inadequate and will not provide a fair hearing. Here, however, the California court would apply the Taiwanese limitations period just as the Taiwanese court would. Since the statute of limitations would be the same and the convenience factors all favor Taiwan, the Court affirmed the dismissal.

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ESTATE OF LUSTER v. ALLSTATE INSURANCE CO. (March 23, 2010)

Wavie Luster lived alone in her home in Merrillville, Indiana. In late 2001, she was hospitalized after a fall. Upon her release from the hospital, she immediately moved into an extended-care facility, where she remained until her death in 2006. A fire caused extensive damage to her home a few months after her death. Her personal representative submitted a claim on the estate's behalf to Allstate Insurance Company, which had provided insurance on the home for years. Allstate denied the claim on the basis that her home had been unoccupied for over four years. Notwithstanding the denial, Allstate continued to bill Luster's representative and he continued to pay the premiums for more than two years after the fire. In late 2008, Allstate attempted to cancel the policy retroactive to November of 2001 and returned the premiums for that period. The estate brought suit against Allstate for breach of the insurance contract. The district court granted summary judgment to Allstate. The estate appeals.

In their opinion, Judges Posner, Ripple, and Wood reversed and remanded. The Court noted four relevant policy provisions: 1) the insured had an obligation to inform Allstate of any change in the use or occupancy of the premises, 2) the policy continued in effect after the death of the insured until the end of the premium period, 3) there was no coverage for a loss caused by an increase in hazard known to the insured, and 4) there was no coverage for loss caused by vandalism if the property was unoccupied for 30 consecutive days prior to the loss. With respect to notice requirement for a change in occupancy, the Court concluded that the 4+ years in which the house stood empty constituted a change in occupancy, notwithstanding the owner's desire to return. But Luster's failure to notify did not result in a automatic termination of the insurance contract. It was merely a breach, entitling Allstate to certain remedies, which may or may not have included rescission under Indiana law. In any event, Allstate took no action upon learning of the change in occupancy. It continued billing for and receiving the premiums for two years. With respect to the second provision, the Court concluded that the death clause could not revive a policy that had already lapsed -- it merely prevents a coverage lapse upon the death of the insured. It has no application here. The third provision is the provision the district court relied on in granting Allstate summary judgment. The district court ruled that leaving the house unoccupied constituted an increase in hazard as a matter of law. But the Court rejected that conclusion, stating that there is no rule that an unoccupied home for any period of time increases the hazard as a matter of law. Rather, an evidentiary hearing is required for Allstate to prevail on this ground. Finally, with respect to the fourth provision, the Court noted that there was no finding with respect to the cause of the fire. It may well have been caused by vandalism, and, if so, it certainly occurred more than 30 days before the house became unoccupied. The Court concluded that an evidentiary hearing on remand is required to resolve that issue, as well. Before it reversed and remanded, however, the Court had to deal with the estate’s argument that Allstate's waived its right to deny coverage by collecting the premiums for more than two years after learning that the house was unoccupied. The Court rejected the argument. If Allstate was entitled to deny coverage, it was entitled to do so because of the “increase in hazard” or “vandalism” exclusions, not because it had a right to cancel the coverage entirely. Collecting the premiums is not inconsistent with enforcing the exclusions in the policy.

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DEKOVEN v. PLAZA ASSOCIATES (March 17, 2010)

Plaza Associates is a well-known debt collection agency. It sent two collection letters to DeKoven stating that it had the authority to offer a lump-sum settlement but that the offer would only be "valid for a period of thirty-five (35) days." In a different letter to a plaintiff in a related suit, Plaza Associates included the DeKoven statement and also stated that a recipient who disputed the validity of the debt with "satisfactory proof" should provide that information to Plaza. The plaintiffs filed suit under the Fair Debt Collection Practices Act. They complained about the "35 day" language and the "satisfactory proof" language. The former, they complain, might be construed by some as a final offer -- when in fact it is not. The latter, they complain, might be construed by some that a recipient must have "proof" to dispute the validity of the debt. Both plaintiffs retained the same survey expert. The expert conducted a survey but the judges in both cases considered it inadmissible. In both cases, the court below entered summary judgment for Plaza Associates. In both cases, the plaintiff appeals.

In their opinion, Judges Posner, Flaum, and Williams affirmed. The Court reviewed the circumstances of the survey. The expert surveyed 160 people in a shopping mall near Chicago. One half of the people were given the letter with both challenged clauses -- the others (the “control group”) were shown a letter with neither clause. The survey respondents were then asked a series of questions about the letters. The Court agreed with the district court in finding numerous flaws in the survey: the composition of the response group, the content of the original oral questions, and the content of the "control group" letter, among others. The Court noted that many Fair Debt Collection Practices Act cases fail because of survey flaws. It suggested that district courts consider exercising their authority to use a court-appointed expert in FDCPA cases.

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IN RE: HOWARD (March 1, 2010)

Aubrey Howard purchased a $30,000 car. He made a down payment of $4,500 and traded in his old car. Although his old car was worth $14,500, he still owed $22,500. He therefore financed $35,500 (the purchase price minus the down payment plus the $8,000 in negative equity plus $2,000 in taxes and fees). Later (within 910 days), he filed for Chapter 13 bankruptcy. An issue presented to the bankruptcy court was whether the $8,000 in negative equity was subject to the court's cramdown power. The bankruptcy court ruled that negative equity is included in a purchase money security interest and is therefore not subject to the court's cramdown power. Howard appeals.

In their opinion, Judges Posner, Flaum, and Williams affirmed. The Court began its opinion with a short lesson on bankruptcy. "Cramdown" refers to the bankruptcy court practice of determining the value of secured collateral, allowing the debtor to force the creditor to accept a payment schedule equal to the determined value, and converting any excess loan balance to an unsecured claim. Cramdown favors the debtor to the disadvantage of the creditor. In addition, cramdown creates another payment obligation and exposes the creditor to a possible second default. In response to creditors' complaints, Congress amended the bankruptcy law. The law now prohibits a cramdown in Chapter 13 cases to reduce a purchase money security interest in an automobile acquired for personal use, if the debt was incurred within 910 days of the bankruptcy filing. The Court looked to state law for the definition of a purchase money security interest. As defined in the UCC, a purchase money security interest includes the price of an item and also "obligations for expenses incurred" in connection with the acquisition of the item. For example, the Court noted that a loan could provide for the payment of attorney's fees in the event of default. In that case, the fees would be included in the purchase money security interest. The Court also cited to the Illinois Motor Vehicle Retail Installment Sales Act which, although it does not purport to prescribe what is or is not included in a purchase money security interest, does define "amount financed" as including negative equity. The inclusion of negative equity in "amount financed" was evidence to the Court that negative equity was common in automobile purchases. Finally, the Court considered what effect including negative equity in purchase money security interests would have on other creditors. Concluding that purchase money security interests need not be narrowly defined to protect other creditors and that including negative equity in purchase money security interest was important to the automobile sales market, the Court held that negative equity is not subject to cramdown power.

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UNITED STATES v. THOUVENOT, WADE & MOERSCHEN (February 18, 2010)

The Equal Access to Justice Act allows a party that prevails against the United States in litigation to recover its attorneys' fees unless the position of the United States is found to be "substantially justified." Three cases before the Court allowed it to address that standard. In the first, the United States charged an apartment complex site engineer with violating the Federal Housing Act. The trial court denied defendant's motion for summary judgment and its motions for judgment as a matter of law. After the jury returned a defense verdict, however, the court awarded fees to the defendant. Because the defendant's insurer paid for much of its defense, the insurer would receive much of the award. The United States appeals. In the second case, the court affirmed the denial of a Social Security claimant's application for benefits. After the Seventh Circuit reversed and remanded, concluding that a crucial consultant's opinion was entitled to no weight, the court denied an award of fees. The claimant appeals. In the third case, the district court reversed the administrative denial of Social Security benefits but denied the claimant's application for fees. The basis for the reversal was the administrative law judge's possible mischaracterization of some testimony and failure to fully explain the connection between the claimant's condition and his ability to work. The claimant appeals.

In their opinion, Judges Posner, Flaum, and Sykes reversed, reversed, and affirmed. The Court first noted that "substantially justified" was not defined in the statute nor, in their view, was its meaning self-evident. Relying on the title of the statute and its limited application only to persons of lesser means, the Court concluded that the government's position need not be frivolous to justify an award of fees. The Court identified a threshold between frivolous and meritorious, at which a case has a reasonable basis in law and fact, that the United States must meet to be "substantially justified." Applying that standard to the first case, the Court held that there was a presumption that the United States’ position is substantially justified if it survives summary judgment. Just because the jury ultimately decided in favor of the defendant does not mean that the government fell short of its threshold. Although the Court reversed the award of fees, it decided to provide guidance to the lower courts on the additional issue of the impact of a liability insurer on an award of fees. In its view, the Act should not be applied differently if a party otherwise entitled to a fee award his had some of its fees paid by its insuror. In the second case, the Court concluded that the lower court was wrong in denying a fee award. Even though the lower court was originally convinced of the merits of the government's position, the court must be guided by the appellate opinion. If an appellate court reverses in a case it considers a close call, the fact that the lower court was convinced of the merits may support a substantial justification finding. Here, however, the Court made it clear in its earlier opinion that the government's position was not justified. Finally, in the third case, the district court had reversed an administrative denial of benefits but refused to award fees. Like the prior case's "close call" reference, the Court concluded that the lower court was well within its discretion to reverse a denial of benefits but to conclude that the position taken was "substantially justified."

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THOROGOOD v. SEARS, ROEBUCK & CO. (February 12, 2010)

Stephen Thorogood filed a state court class-action on behalf of the purchasers of stainless steel dryers in multiple states. He alleged that the defendant’s representation that the dryers were made of stainless steel violated the consumer protection acts of those states. The defendant removed the case to federal court under the Class Action Fairness Act (CAFA). Although the district court certified a class, the Seventh Circuit reversed and ordered the class decertified (intheiropinion.com post). The Court thought the case was not only a weak candidate for class certification, but also flimsy on its own merits. On remand, the defendant made an offer of judgment, inclusive of attorneys fees, of $20,000. Finding that that offer exceeded plaintiff's maximum recovery under state law of $3,000 and therefore the amount in controversy, the district court dismissed the case as moot. Thorogood appeals.

In their opinion, Judges Posner, Kanne, and Evans affirmed. The Court first rejected plaintiff's argument that the case should have been remanded upon class decertification, relying upon its decision in Cunningham Charter (intheiropinion.com post) just three weeks earlier. Then, the Court rejected the plaintiff's argument that the case was not moot because of his entitlement to significant attorneys’ fees. First, an award of fees for value conferred beyond the relief obtained must generally be relief ordered by the court. Second, the court was within its discretion in deciding that no fees were warranted. Finally, the Court noted that most of the fees were incurred pursuing the failed class action, not the $3,000 individual action.

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MIDWEST TITLE LOANS v. MILLS (January 28, 2010)

Midwest Title Loans is a "title lender." Title loans are high-cost, high-risk loans. Car owners, generally from the lower income segment of the population, pay triple digit interest rates to borrow against their car titles. Midwest is located in Illinois but loaned to Indiana residents. All the loans were made in-person in Illinois. Midwest did advertise in Indiana and, when necessary, executed repossessions in Indiana. The State of Indiana considered Midwest's practices predatory. In 2007, it amended its Uniform Consumer Credit Code to provide the a loan is deemed to occur in Indiana if an Indiana resident enters into such loan with an out-of-state company that advertised or solicited in Indiana. Once a loan is deemed to occur in Indiana, the lender is subject to the provisions of the code, including interest rate caps and license requirements. Indiana advised Midwest of this amendment in August of 2007. Midwest was not licensed in Indiana and its products exceeded the interest rate cap. Midwest brought suit under §1983, alleging that the amendment violated the commerce clause. The district court permanently enjoined application of the amendment. Indiana appeals.

In their opinion, Judges Posner and Flaum and District Judge Der-Yeghiayan affirmed. The Court noted that the commerce clause of the Constitution has been interpreted to preclude states from erecting barriers to interstate trade. The clause is frequently applied when a state legislates in favor of its in-state businesses. Although Indiana is not discriminating in favor of its local business, that does not end the inquiry. First, a non-discriminatory statute that protects a legitimate local interest will be upheld unless the effects on interstate commerce are clearly excessive as compared to the local benefits. But second, a non-discriminatory statute that actually regulates out-of-state activities will not be upheld regardless of the balancing of the local interest. The Court concluded that out-of-state regulation was present here. Every Midwest loan was made in Illinois by a check drawn on an Illinois Bank, title was transferred in Illinois, and payments were received in Illinois. The facts that the proceeds were probably spent in Indiana, that Midwest advertised in Indiana, and that the collateral was generally located in Indiana did not change the Court’s conclusion.

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CUNNINGHAM CHARTER CORP. v. LEARJET (January 22, 2010)

Cunningham Charter Corp. brought a breach of warranty and products liability class action against Learjet in state court. Learjet removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). After the district court denied class certification for failure to satisfy the requirements of Rule 23, it remanded the case to state court. The district court concluded that the denial of certification deprived the court of federal jurisdiction under CAFA. Learjet sought leave to appeal.

In their opinion, Judges Posner, Coffey, and Flaum granted leave to appeal and reversed and remanded. CAFA, said the Court, grants federal jurisdiction to certain class actions. A class action is defined as "any civil action filed under rule 23." The statute also specifically provides that it applies before or after a class is certified. Based on these and other provisions of CAFA, as well as the principles that jurisdiction is determined at the time of filing and is generally not affected by later developments, the Court concluded that CAFA jurisdiction does not depend on class certification.
 

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CARR v. TILLERY (January 12, 2010)

Rex Carr was a lawyer in southern Illinois. He and his partners had several agreements concerning the allocation of fees earned by the firm. The agreements continued in effect after the dissolution of the firm in 2003. Significant disputes arose, and a host of lawsuits were filed, with respect to those fees. A Memorandum of Understanding (MOU) was agreed to in 2004. It was meant to control the distribution of all fees, past and future, among the partners. Notwithstanding an agreement to dismiss all pending cases, Carr actually amended a counterclaim in one of the pending actions to assert that he had been fraudulently induced to enter into the MOU. The claim was eventually dismissed and the dismissal was affirmed. While the appeal was pending, Carr brought four separate suits in state court, then brought this federal case, and then voluntarily dismissed the state cases. He brought the federal case under RICO, repeating many of the allegations of the earlier suits, including the fraudulent inducement claim. The district court dismissed the suit for failure to state a claim. Carr appeals. The defendants cross-appeal from the court's denial of their motion for sanctions.

In their opinion, Judges Posner, Ripple, and Wood affirmed in part and vacated and remanded in part. On the merits, the Court disagreed with the court below that all the claims were barred by the doctrine of res judicata. The complaint contains at least one claim that postdates the earlier dismissal. The Court held that the claims were barred, however, by Illinois' "one refiling" rule. Under that rule, a plaintiff who voluntarily dismisses a complaint may start a new action within one year or the remaining period of limitations. Illinois courts have held the rule to mean that a plaintiff may commence only one new action after a voluntary dismissal. Here, Carr filed four lawsuits in Illinois before he filed the federal lawsuit. He dismissed all of the state court suits soon after he filed a federal suit. Although each of the state court suits was based on a different theory of liability or sought different relief, they all arose from the same events. That is true even for the claim postdating the earlier dismissal, a claim that the defendants violated the MOU. The Court next considered whether the RICO claim, on which federal jurisdiction was based, was so weak so as to not support jurisdiction. Such a conclusion would lead the Court to dismiss for lack of jurisdiction rather than on the merits. Although the Court termed the claimant a "complete nonstarter," since it was so on the basis of an affirmative defense, the Court concluded that a dismissal on the merits with prejudice was more appropriate. On the cross-appeal, the Court found the denial of sanctions erroneous. Although the defendants based their motion on § 1927, which does not apply to misconduct prior to the filing of the federal complaint, the Court saw no reason why the district court could not invoke its inherent, common law power to punish attorney misconduct. The filing of multiple lawsuits, including the present frivolous one, was ground enough for the Court to direct the district court to assess a proper sanction and consider enjoining Carr from conducting further related litigation.

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WORLD OUTREACH CONFERENCE CENTER v. CITY OF CHICAGO (December 30, 2009)

In Chicago, the World Outreach Conference Center ("WOCC") operates a community center. It is a Christian organization, one of whose goals is to assist and provide relief to the needy and suffering. WOCC purchased the center in 2005 from the YMCA. Although the land was rezoned several years ago, YMCA's operations were a legal nonconforming use. WOCC wants to operate the building by renting out its many apartments – just as the YMCA did. The Center did need a single-room-occupancy (SRO) license to operate. Apparently because an alderman had wanted a financial backer to acquire the property, the City refused to grant the license. WOCC brought suit under the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), challenging the City's refusal to grant the license. Although the City eventually did grant the license, the suit continued with its claim for damages. The court dismissed the complaint. WOCC appeals.

In Peoria, the Trinity Evangelical Lutheran Church purchased property adjacent to its church. It wanted to raze the building in order to build a family center. The City, in response to a neighborhood group’s application, designated the building a landmark and blocked the demolition. Trinity brought suit under RLUIPA, alleging that the landmark designation imposed a substantial burden on religious activities. The court granted summary judgment to Peoria. Trinity appeals. 

In their opinion (in these consolidated cases), Judges Cudahy, Posner and Rovner affirmed in part and reversed in part in Chicago and affirmed in Peoria. RLUIPA prohibits government land-use regulation that imposes a substantial burden on religious activities unless it is in support of a compelling government interest and is the least restrictive means to the end. It also prohibits non-equal or discriminatory treatment directed at a religious assembly through land-use regulation. The Court first addressed and rejected Chicago’s argument that RLUIPA exceeds Congress’ authority, relying on the enforcement clause of the Fourteenth Amendment as well as Congress’ power to regulate interstate commerce. On the merits in WOCC, the Court concluded that the dismissal of WOCC’s substantial-burden claim was erroneous. WOCC was entitled to operate without the special use permit demanded by the City and the City had no basis for refusing the SRO license. The burden was substantial and there was no compelling government interest. The Court also: a) affirmed the dismissal of the discrimination claim (WOCC was badly treated – but it had nothing to do with religion), b) reversed the dismissal of the equal protection claim (on a class-of-one theory), and c) affirmed the dismissal of the damages claim for violation of the Chicago Zoning Ordinance.On the merits in Peoria, the Court concluded that the burden imposed on Trinity did not reach “substantial.” The property had value and could be sold and there are suitable alternatives for the family center.

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NIGHTINGALE HOME HEALTHCARE v. ANODYNE THERAPY (December 21, 2009)

Anodyne Therapy manufactures and sells infrared lamps designed to improve circulation. The FDA approved it for that purpose. But Anodyne allegedly marketed the lamps as a treatment for peripheral neuropathy, which the FDA never approved. Nightingale purchased several of the lamps. The FDA sent Anodyne a warning letter about their marketing claims. Several months later, Nightingale stopped using the lamps, returned them to Anodyne with a demand for a refund, but then replaced them with almost identical devices. Nightingale brought a fraud case in state court. Anodyne removed the case to federal court on diversity jurisdiction grounds. Nightingale then added a federal Lanham Act claim. The court granted summary judgment to Anodyne on the Lanham Act claim, and later granted summary judgment to Anodyne on the fraud claim. The court relied on a contractual disclaimer of warranties as well as Nightingale’s failure to establish proof of damages. Nightingale appeals.

In their opinion, Judges Posner, Kanne and Rovner affirmed. On the merits, the Court disagreed with the warranty holding. It concluded that the only contractual limitation of liability related to a breach of warranty claim – not, as here, a fraud claim. The Court agreed with the district court, however, on the damages holding. Nightingale replaced the lamps with a virtually identical product. Both products served the same purpose, performed comparably and carried similar FDA approvals. The replacement of the lamps did not result in any damage to Nightingale.

The lack of any damage not only doomed the case on the merits – it showed that the jurisdictional threshold for diversity jurisdiction was not met. Ordinarily, the Court concluded, the lack of a good faith basis for meeting the threshold would result in a case being dismissed for lack of jurisdiction, even at a late stage of the case. Here, however, the fact that Nightingale added a federal claim after removal brought the case within the court’s federal question jurisdiction. The state claims were covered by supplemental jurisdiction. Even though the federal claim was later dismissed, the court had discretion to retain the state claims.

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COLLINS v. HERITAGE WINE CELLARS (December 21, 2009)

Heritage Wine Cellars is a wholesale wine importer and distributor. It buys wines outside of Illinois (and frequently outside of the country) and brings it to Illinois for sale to retail stores. Although it controls the wine and its shipment during the entire journey, Heritage retains independent contractor carriers to bring the wine into the state. Within Illinois, it uses its own trucks and drivers to distribute the wine. Anthony Collins is one of those truck drivers employed by Heritage. He and other drivers brought an action against Heritage pursuant to the Fair Labor Standards Act (FLSA). They allege that Heritage failed to pay required overtime. The district court ruled that Collins transported the wine in interstate commerce and Heritage was therefore exempt from the overtime provisions of the FLSA. Collins appeals.

In their opinion, Judges Posner, Manion and Tinder affirmed. The Court critically noted the jurisprudence surrounding the "interstate commerce" issue. It found no fewer than seventeen "unweighted technical criteria" in the cases and regulations. Although admitting that some cases may require a more complex analysis, the Court found four criteria that allowed it to dispose of the case. Those criteria were: a) although Heritage did not have a customer for all of the wine it imported, its volume of imports was determined by customer demand, b) Heritage did not process or otherwise modify the wine at its warehouse, c) Heritage maintained control over the wine, and d) the shipper bore the ultimate responsibility for transportation charges. Under those circumstances, concluded the Court, the wholly intrastate leg of a shipment is considered to be part of interstate commerce.

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MILAM v. DOMINICK'S FINER FOODS (December 7, 2009)

Ahmad Milam is one of several African-American produce clerks at a Chicago Dominick's grocery store. Each week, Dominick's posts the produce clerks’ schedule of hours for the upcoming week. A more-senior produce clerk is allowed to "claim" the hours of a less-senior clerk. Milam and five other African-American produce clerks filed suit against Dominick's, claiming that it was guilty of race discrimination when it classified two more junior white women as produce clerks but did not include them on the schedule. The court granted summary judgment to Dominick's on the ground that plaintiffs had no evidence of damages. Plaintiffs appeal.

In their opinion, Judges Posner, Kanne and Rovner affirmed. The Court was quite critical of the district court's handling of the case. It noted that one of the women at issue was actually never a produce clerk. Although she had been offered and accepted a promotion to produce clerk, she changed her mind and never was scheduled to work as one. Dominick's presented evidence years ago that the failure to list the second woman on the produce clerk schedule was an innocent mistake. Plaintiffs never challenged the evidence as pretextual. The court should have granted summary judgment to Dominick's. With respect to the eventual order of the district court, the Court agreed that the plaintiffs presented insufficient evidence of either actual or probabilistic injury. The Court conceded that the plaintiffs' probabilistic injury theory was a proper damages theory. It requires, however, evidence of the expected benefit – which was never presented. In the end, the Court termed the case frivolous.

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MANN v. CALUMET CITY (December 7, 2009)

Calumet City passed an ordinance that requires a homeowner to conduct an inspection prior to the sale of the house to ensure its compliance with the building code. Several residents of the city brought an action challenging the constitutionality of the ordinance. The court dismissed the complaint for failure to state a claim. The residents appeal.

In their opinion, Judges Bauer, Posner and Sykes affirmed. The Court first noted that the residents challenged the ordinance as written, not relying on any particular facts regarding its application to them. The Court then reviewed the "reasonable" procedural provisions of the ordinance, concluding that the residents' challenges were frivolous.
 

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BOYER v. CROWN STOCK DISTRIBUTION, INC. (November 18, 2009)

Crown Unlimited Machine, Inc. ("Crown"), which designed and built custom machinery, was owned by the Stroup family. In 1999, the Stroups sold the company to Kevin Smith for $6 million. The $6 million consisted of $3.1 million that Smith borrowed, a $2.9 million note and only $500 directly from Smith. The Stroups split almost $600,000 in cash withdrawn from the company pre-closing as well as the $3.1 million in cash received at closing. Within about three years, the new Crown declared bankruptcy. The assets brought out $3.7 million. Most of the money was used to pay off the secured debt -- little was left to address over $1.5 million in unsecured debt. The Trustee in bankruptcy brought an action against the Stroups and the company, alleging a fraudulent conveyance. The bankruptcy court awarded over $3 million to the trustee. The district court affirmed. The Stroups appeal -- the Trustee cross-appeals, seeking the $600,000 pre-closing distribution.

In their opinion, Judges Posner, Rovner and Williams affirmed in part and reversed in part. Under the Uniform Fraudulent Transfer Act, a transfer is fraudulent if the corporation did not receive "reasonably equivalent value" and was therefore left with insufficient funds to be able to survive. Fraudulent conveyance law looks to substance rather than form -- the Court concluded that the form of the transaction was not important. Here, new Crown made payments and incurred obligations that threatened its ability to survive. It failed to receive "reasonably equivalent value" -- the bankruptcy court did not err in so finding. The Court disagreed with the bankruptcy court, however, with respect to the almost $600,000 dividend pre-closing. The evidence supported the conclusion that the dividend was part of the fraudulent conveyance rather than a normal distribution of profits. The Court reversed the bankruptcy court to the extent it denied recovery to the Trustee of the dividend.

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BANDAK v. ELI LILLY AND COMPANY RETIREMENT PLAN (November 18, 2009)

Stephen Bandak was employed by an Eli Lilly company in England, his native country, from 1978 to 1995. He participated in the company's retirement plan. He was transferred to the United States in 1995. The company told him, upon his enrollment in the U. S. company's plan, that his benefits in that plan would be based on years of employment retroactive to 1978. The plan also provided that benefits would be reduced by the actuarial equivalence of any other benefits under a “qualified defined benefit plan” maintained by an Eli Lilly company. When Bandak retired in 2004, the company took the position that his benefits under the English company's plan were benefits under a qualified defined benefit plan and were thus properly deducted from his U.S. pension benefits. Bandak sued the company under ERISA. Judgment was entered in his favor for both damages and an injunction relating to future benefit payments. The court also concluded that Lilly's position was not substantially justified and awarded attorneys’ fees. Eli Lilly appeals.

In their opinion, Judges Posner, Rovner and Williams affirmed. The Court focused on the language "qualified defined benefit plan" in the plan document. The term is a technical term and it refers to a plan that has been afforded favorable tax treatment by the Internal Revenue Service. The Court concluded that it had no meaning outside that context. The Court applied the presumption that, when a technical legal term is used in the contract, it is given its technical legal meaning. If it had no meaning outside the United States, the English plan was not such a plan and it should not have reduced his benefits. Substantial evidence in the record supported the Court's conclusion. The Court also concurred in the district court's conclusion that the company's position was not justified.

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SCHERING-PLOUGH HEALTHCARE PRODUCTS v. SCHWARZ PHARMA (October 29, 2009)

Schering-Plough makes an over-the-counter oral laxative which it sells under the trade name "MiraLAX." Its chemical name is polyethylene glycol 3350. Four other companies sell polyethylene glycol 3350 as a generic, prescription medication. The FDA requires a warning on the over-the-counter version that it should not be used for more than seven days. The FDA also requires that a generic drug be labeled the same as the original drug and be bioequivalent to the original drug. Schering-Plough brought a Lanham Act action against the defendants. It alleges that the defendants' labels stating that the drug is sold by prescription only are false, in violation of the Act. Meanwhile, the FDA is conducting proceedings to determine whether the defendants' products are mislabeled. The district court dismissed Schering-Plough's suit without prejudice, noting that it could be refiled, if appropriate, after the conclusion of the FDA proceedings. Schering-Plough appeals. The defendants cross appeal, seeking a dismissal with prejudice.

In their opinion, Judges Posner, Flaum and Rovner affirmed. The Court first addressed its jurisdiction, given that the suit was dismissed without prejudice below. The Court recognized some decisions in the past that have suggested that a dismissal without prejudice is not appealable unless the plaintiff is unable to bring a later suit. Focusing on the actual holdings in those cases as well as other authority, the Court concluded that a dismissal without prejudice is appealable unless the defect is immediately curable. On the merits, the Court looked to the provisions of the Lanham Act and the Food, Drug, and Cosmetic Act. It noted that the statutes should be read so as not to conflict with each other and to be given as much effect as possible. For example, the FD&C Act should not be read to prohibit a disclaimer that would correct a misinterpretation on which a Lanham Act claim is based. The record in the case did not make it clear, however, what the Lanham Act remedy should be. Schering-Plough was not very helpful in its suggestions. In addition, the Court believed that any change in labeling adopted by the defendants would have to be approved by the FDA. The Court therefore agreed with the district court that the FDA should be allowed to consider the misbranding issue before the Lanham Act suit is allowed to proceed. Although the Court affirmed the lower court's dismissal without prejudice, it also commented briefly on the viability of the Lanham Act claim. It questioned whether Schering-Plough's reliance on the "literal falsity" doctrine was proper in the context of the case.
 

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JAMES RIVER INSURANCE CO. v. KEMPER CASUALTY INSURANCE CO. (October 28, 2009)

James River and Kemper both issued malpractice insurance policies to a law firm. The Kemper policy covered claims made between September of 2000 and September of 2007, for acts committed between 1937 and 2002. The James River policy covered claims made between November 2004 and November 2005, for acts committed after November 2002. The malpractice suit giving rise to the dispute between the insurance companies alleged that two lawyers represented a wife in a divorce case. In December of 1999, they entered into a property settlement wherein their client was to receive a significant amount of her husband's stock options. Their attempt to document the settlement failed to accomplish the transfer of the options. A lawsuit against the husband was still pending when, in July 2001, the husband's employer declared bankruptcy, rendering the options worthless. The suit against the husband was finally dismissed in 2003. Thus, the acts complained of in the malpractice action occurred during both policies' claim periods. The James River policy contained a provision that excluded from coverage any claim that arose from the same set of circumstances as a claim under a "prior policy." James River brought a declaratory judgment action against Kemper seeking a declaration that it had no duty to defend or indemnify. The court granted summary judgment to Kemper. James River appeals.

In their opinion, Judges Posner, Manion and Tinder reversed. First, the Court concluded that the wrongful acts that occurred during the James River policy period arose from and were a continuation of the wrongful acts and decisions committed during the prior period. This was just the situation the James River exclusion addressed. Next, The Court considered the district court's ruling that the Kemper policy was not a “prior policy.” The district court had relied on the fact that the firm had purchased a five-year reporting extension on the Kemper policy. Although the policy period ended in 2002, the reporting extension allowed for a claim to be made through 2007. The Court noted, however, that the reporting extension did not extend the policy period. The Court concluded, therefore, that the Kemper policy was a "prior policy" and the James River exclusion applied. The Court remanded for the entry of the declaratory judgment requested by James River.

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SUNSTAR v. ALBERTO-CULVER CO. (October 28, 2009)

Alberto-Culver is a significant domestic producer of hair and skin-care products. In 1980, it transferred Japanese trademark registrations to Sunstar, a Japanese manufacturer of similar products. The deal required Sunstar to transfer the trademarks to Bank One Corporation in trust for 99 years. Bank One, in turn, licensed them back to Sunstar and was obligated to return the marks to Sunstar after the term of years. As trustee, Bank One could stop the use of the mark if it had reasonable grounds to think that Sunstar committed an act that created a danger to the value or validity of the marks. Alberto-Culver and Sunstar referred to the rights granted as a senyoshiyoken, the Japanese legal term describing a license under which the licensee has the exclusive right to use the marks in its geographic area and can sue infringers in its own name. Sunstar paid $10 million for the license. In 1989, Sunstar asked for permission to use a variant of one of the marks. Alberto-Culver refused. Sunstar ended up paying another $10 million for the rights to use the variant. In 1999, Sunstar again asked for permission to use a variation of one of the marks. This time, when Alberto-Culver refused, Sunstar filed suit. The suit sought a declaration that the requested variation was permitted by the license agreement. At trial, the district court refused to instruct the jury on the legal meaning of the term senyoshiyoken, concluding that it was irrelevant. The jury returned a verdict for Alberto-Culver but awarded no damages. The judge enjoined Sunstar from using the variation of the mark, terminated the agreement as a result of Sunstar's breach and ordered the marks returned to Alberto-Culver. Sunstar appeals.

In their opinion, Judges Posner, Manion and Evans vacated and remanded. The Court first disagreed with the lower court's conclusion that Japanese law was irrelevant. The Court stated that if sophisticated contracting parties use a foreign technical legal term in their contract, the presumption is that it is used in its technical legal sense. The issue for the Court, therefore, was whether the holder of the Japanese senyoshiyoken is permitted to use variants of licensed marks. The Court then criticized the general use of expert testimony to prove the content and meaning of foreign law. Noting that such testimony is not permitted when a federal court applies the law of a state or when the court of one state applies the law of another state, the Court expressed a strong preference for secondary materials over the testimony of expert witnesses. On the merits, the Court noted that American law does not consider a change in a mark's typeface or a modest change in the appearance or wording of a mark a material alteration. Japanese law is the same. Particularly here, where the license was for a period of 99 years, it may have even required modest changes in the mark over time to ensure its continued value and validity. The Court concluded that the holder of a Japanese senyoshiyoken is entitled to make minor changes in the mark. Although the Court expressed its temptation to order Alberto-Culver’s claims dismissed with prejudice, it declined to do so. Sunstar had not requested that relief and Alberto-Culver was not afforded an opportunity to respond. It did, however, vacate the judgments and remand the case.

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KAMELGARD v. MACURA (October 23, 2009)

Kamelgard and Macura are both bariatric surgeons. Kamelgard practices in New Jersey and Macura practices in New York. After Kamelgard testified against Macura in a malpractice action in New York, Macura allegedly sent similar letters of complaint to the American Society of Bariatric Surgeons in Florida and the American College of Surgeons in Chicago. The American College took no disciplinary action on the complaint. Kamelgard claims not to have known the source of the American College complaint until he learned about Macura's letter to the American Society at a convention in mid-2007. Kamelgard brought a defamation action in Chicago within a year of the convention but two years after the publication of the letter. The district court concluded that the Chicago venue was improper and dismissed the suit without prejudice. Kamelgard appeals -- Macura cross-appeals seeking a dismissal with prejudice.

In their opinion, Judges Posner, Flaum and Rovner modified the judgment of the lower court to a dismissal with prejudice. The Court expressed some confusion over the intent of the lower court's ruling. It concluded, however, that the court dismissed the claim based upon the Illinois (American College) letter for failure to state a claim because of the absence of the letter and Kamelgard’s inability to obtain it. It then dismissed without prejudice the claim based on the Florida (American Society) letter because venue was not proper in Illinois. Nevertheless, given the uncertainty of the lower court's ruling, the Court went on to address the choice of law issue presented in the appeal. Although both Illinois law (favored by the plaintiff) and New Jersey law (favored by the defendant) have a one year statute of limitations for defamation, Illinois has a discovery rule -- New Jersey does not. The Court opined that the general "most significant relation" test that looks to the place of the injury does not always fit defamation cases, particularly were a defamatory statement is communicated in many different locations. In that situation, Court concluded that the application of the law of the plaintiff's domicile makes the most sense. Even though there was no publication of the letter in New Jersey, it is the location where the plaintiff is likely to be harmed and it is the state with a substantial interest in protecting his reputation. New Jersey law should therefore apply and both defamation claims are barred by the statute of limitations. 

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ILLINOIS DUNESLAND PRESERVATION SOCIETY v. ILLINOIS DEPARTMENT OF NATURAL RESOURCES (October 14, 2009)

Illinois Beach State Park is located in northeastern Illinois on the shores of Lake Michigan. Various buildings in the park have display racks containing pamphlets on various topics. The Illinois Dunesland Preservation Society is a nonprofit corporation that supports the park. The Society created a pamphlet warning of the risk of asbestos at the park's beaches. When the park refused to display the pamphlet, the Society brought suit under § 1983 against the state officials involved in operating the park. The district court granted summary judgment to the officials. The Society appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Wood affirmed. The Court first recited some of the "forum analysis" of Supreme Court decisions but then questioned the value of that analysis to the question. Every public site, stated the Court, can be regulated to some extent depending on the circumstances and as long as the regulation is not used to stifle speech. Here, the materials displayed in the park's racks are meant to promote the park and state tourist facilities generally. The dire warning contained in the Society's pamphlet is hardly consistent with that purpose. The Court concluded that the park was not required to display, and thus tacitly endorse, the pamphlet containing the warnings. The Court added that there were other means, such as personal distribution, available to the Society to convey its message. The park's position was not an unreasonable barrier to speech.

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COONEY v. ROSSITER (September 30, 2009)

Deborah Cooney and her husband were divorced in 1998. The court granted her custody of their two sons. Her ex-husband later petitioned for a transfer of custody. The court appointed a lawyer to act as the children's representative. Cooney alleges that the representative arranged to have a psychiatrist appointed and then suggested to the psychiatrist that she suffered a particular mental illness. The psychiatrist's report did conclude that she suffered from the mental illness. Cooney alleges that her ex-husband received a copy of that report but that she did not. Based on the report, the court granted temporary custody to the ex-husband. She brought suit against the judge, the representative, the psychiatrist, the children's therapist and the ex-husband's lawyer. The court dismissed her complaint. Cooney appeals.

In their opinion, Judges Bauer, Posner and Wood affirmed. The Court first found the state court judge absolutely immune since he was acting in his judicial capacity. Next, the Court found that the psychiatrist and representative were also entitled to absolute immunity, since the acts complained of all occurred within their official duties. Finally, the Court concluded that the factual allegations against the two private persons failed to meet federal pleading standards. Although citing Bell Atlantic and Iqbal and the heightened pleading standard established therein, the Court found that Cooney's allegations were too vague to meet even the pre-existing heightened pleading requirement for conspiracy allegations.

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AGUIRRE v. TURNER CONSTRUCTION COMPANY (September 30, 2009)

Jose Aguirre was employed as a bricklayer by one of the subcontractors involved in the renovation of Chicago's Soldier Field. He was seriously injured when he fell off a scaffold. He brought this personal injury suit against the joint venture that was acting as general contractor for the project. The court first found that the general contractor had no duty to Aguirre and that Aguirre could not avail himself of res ipsa loquitur, in that the general contractor did not have exclusive control of the scaffold. It granted summary judgment to the defendants. On appeal, the Seventh Circuit reversed on both grounds, concluding that the defendants assumed a duty and that exclusive control is not an element of res ipsa loquitur. On remand, the case was tried to a defense verdict. Aguirre appeals.

In their opinion, Judges Posner, Ripple and Kanne affirmed. The general rule, stated the Court, is that a general contractor is not liable to someone injured as a result of the negligence of a subcontractor. An exception applies, however, when the contractor either by law or contract is required to care for the safety of the subcontractor's employees. Here, the general contractor took active steps to ensure the safety of all employees on the project. The exception therefore applies. Having found a duty, the Court proceeded to address the issue of whether it was breached. The subcontractor itself assembled the scaffold hours before the accident. Although the general contractor imposed strict requirements for scaffolds and inspected them frequently, the Court concluded that it did not breach its duty by not inspecting every one before it was used. The accident was caused either by the negligence of Aguirre or the subcontractor. Finally, the Court addressed the fact that the scaffold was missing a middle railing, the presence of which might have prevented the injuries by giving Aguirre something to grab as he fell. The problem with that, said the Court, is that the middle railing is not designed for that purpose. To rely on the absence of a safety measure, the injury complained of must be one that the safety measure was designed to prevent.

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THOMAS v. CITY OF PEORIA (September 3, 2009)

A lawyer for the city of Peoria sought and obtained a warrant for the arrest of Joshua Thomas. Joshua’s crime -- nine unpaid parking tickets. Sometime later, Joseph Thomas was stopped for a traffic violation. Although the names and addresses of Joshua and Joseph did not match, the driver's license number on the arrest warrant for Joshua did match that of Joseph. Joseph was arrested. He was later released when it was determined that he was, indeed, not Joshua. Joseph brought an action under § 1983 against the City and the lawyer who obtained the warrant. He alleged a deprivation of his Fourth Amendment and due process rights. The court dismissed for failure to state a claim. He then denied class certification. Thomas appeals.

In their opinion, Judges Cudahy, Posner and Tinder affirmed. The Court first addressed "zone of interest" standing. The Court explained zone of interest standing as a requirement of federal common law that limits the class of persons entitled to sue. Remoteness of injury is one of those limitations. Here, for example, assuming state law does not authorize an arrest for unpaid parking tickets and that such an arrest would therefore violate the Constitution, Joshua Thomas is the one within the class of people the policy is designed to protect. Joseph’s interest is to remote to be recognized. Alternatively, the Court went on to conclude that Joseph would fare no better even if he was within the zone of interest. The Supreme Court held in Moore that a otherwise reasonable arrest (which this is) is not unconstitutional simply because it was for an offense that does not authorize arrest. The Court easily disposed of the due process argument. Finally, the Court added that the individual defendant would in any event have absolute immunity as a prosecutor performing a prosecutorial function.

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 PRINCE v. STEWART (September 2, 2009)

The Chicago Teachers Union fired Earl Prince from his job. Prince filed an administrative discrimination charge. He then brought an action pro se for employment discrimination under Title VII before he received any response from the Illinois Department of Human Rights or the EEOC. The district court dismissed the complaint because Prince had not yet received a right-to-sue letter. Several months later, after Prince had received the letter, the district court granted his motion to reopen the case. The court vacated the order, however, a few days later at Prince's request. Months later, on the last day to sue, Prince again moved to reopen the case. This time, the judge turned him down -- and it was too late to file a new complaint. Prince appeals.

In their opinion, Judges Posner, Coffey and Manion reversed and remanded. The Court recognized Prince's mistake when he followed up the first order reopening his case with a request to reinstate the dismissal. He was simply going to be out of the jurisdiction for a short time and need not have worried about his temporary unavailability. However, the Court also recognized that no one was prejudiced by his mistake. If the second motion to reopen was filed in a timely fashion, the Court could not see any reason why it should not have been granted. The Court concluded that the district court’s lulling of the pro se litigant into believing that he did not have to refile his complaint amounted to equitable tolling.

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UNITED STATES v. APEX OIL CO. (August 25, 2009)

Years ago, a corporate predecessor of Apex Oil Co. owned a refinery near Hartford, Illinois. According to the EPA, the operation of the refinery contributed to the contamination of the groundwater in the area. The United States brought an action, pursuant to the Resource Conservation and Recovery Act (RCRA), for an injunction to require Apex to clean up the site. Apex argued that its earlier discharge in bankruptcy relieved it of any cleanup obligation. The district court issued the injunction. Apex appeals.

In their opinion, Judges Cudahy, Posner and Kanne affirmed. The Court identified the principal issue on appeal as whether the government's claim for the injunction was discharged in bankruptcy. Under the bankruptcy laws, the Court stated that a debtor is discharged from any "liability on a claim." A "claim" is further defined as a "right to payment" or a "right to an equitable remedy for breach of performance if such breach gives rise to a right to payment." The Court concluded that the natural reading of the bankruptcy provision is that an equitable claim is dischargeable if the holder can obtain a money judgment in lieu of the injunction under certain circumstances. Here, however, the statute under which the government sought the injunction (RCRA) does not authorize any form of money judgment -- the only remedy available to the government is a cleanup order. The fact that the cleanup order would require a significant payment by Apex did not convert the injunction into a money judgment. The Court distinguished the Supreme Court's opinion in Kovacs. In Kovacs, the plaintiffs were seeking money from the debtor. Apex also challenged the injunction itself on vagueness grounds. The Court actually agreed that the injunction was vague and that it has in the past insisted on compliance with the requirement that an injunction describe in some reasonable detail the acts required. However, the Court concluded that that policy applies when compliance with the rule is feasible. Here, the subject of the injunction is a complicated refinery remediation. In such cases, more leeway is necessary.

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FLYING J, INC. v. VAN HOLLEN (August 20, 2009)

A Wisconsin statute prohibits a gasoline retailer from selling its product below cost plus a defined markup. The statute contains both state and private remedies of both an injunctive and damages nature. Flying J is such a gasoline retailer. It sued the state, seeking to enjoin enforcement of the statute on the grounds that it was preempted by the Sherman Act. The district court granted the injunction. During the time period for taking an appeal, the state decided not to appeal. An association of gasoline retailers asked the district court for leave to intervene both as of right under Rule 24(a)(2) and as permissive under Rule 24(b)(1)(B). The court denied the intervention on the grounds that it was untimely and that the association's members lacked the requisite interest. The association appeals.

In their opinion, Judges Posner, Ripple and Kanne vacated. Intervention pursuant to Rule 24(a)(2) requires both that the party have an interest in the action and be within the class of persons the law is intended to protect. Here, the members of the association are the direct beneficiaries of the statute and would be directly harmed by the invalidation of the statute. The court concluded that this interest was sufficient for intervention. The Court also concluded that the association's motion was not untimely. Since their interest was simply to prosecute the appeal that the state decided to forgo, it is indeed timely. The Court did consider somewhat problematic the Rule 24(a)(2) requirement that a disposition of the action would impair the association's ability to protect its interests. The district court's injunction would not prevent one of the association's members from bringing a private action for damages or for an injunction -- although it would be a substantial inconvenience. Instead of resolving that issue, the Court turned to the request for permissive intervention. Permissive intervention does not contain the same impairment requirement. Relying on its earlier analysis of the association's interest and the timeliness of its request, combined with its conclusion that Flying J would not be prejudiced, the Court concluded that permissive intervention should be allowed. Instead of remanding to the district court, the Court treated the intervener as the appellant and ordered briefing.

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MARRS v. MOTOROLA, INC. (August 14, 2009)

Years ago, Michael Marrs developed a psychiatric condition that forced him to leave his job at Motorola and go on disability leave. Six years after he started his leave, Motorola amended its disability plan. It imposed a two-year limit on disability benefits resulting from mental, rather than physical, conditions. Marr's benefits were terminated by Motorola two years after the amendment. Marrs brought a class action under ERISA. The district court granted summary judgment to Motorola. Marrs appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Posner affirmed. ERISA limits a plan's ability to amend its terms. It provides that no amendment can adversely affect benefits with respect to periods of disability prior to the date of the amendment. The Court rejected Marrs' interpretation under which a plan could not affect any benefits for a period of disability that began before the amendment, but continues to run. The Court also addressed and rejected Marrs' argument that the Supreme Court's Glenn decision required a different outcome. Normally, the Court stated, if the plan administrator is given discretion to interpret the terms of the plan, a court will only reject its interpretation if it is unreasonable. That discretion exists in Motorola's plan. In Glenn, the Supreme Court addressed the situation when a plan administrator is laboring under a conflict of interest. Here, however, the Court concluded that the record did not establish that the administrator had a serious conflict of interest.
 

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SMITH v. DUFFEY (August 3, 2009)

Jack Smith sold his company and its intellectual property to Dade Behring, Inc. He received, as part of the consideration, options to purchase 20,000 shares of Dade Behring stock. He soon left the employ of the company. He agreed to accept $1.4 million in cash, while retaining his options. A few months later, the company entered bankruptcy. Smith's options were extinguished as part of its reorganization. Smith sued several officers of the company, alleging that they had a duty to disclose at the time of this termination agreement the fact that the company would soon enter bankruptcy. The district court dismissed his fraud claim for failure to state a cause of action. Smith appeals.

In their opinion, Judges Cudahy, Posner and Kanne affirmed. The Court stated that when the fraud alleged is the failure to disclose something, the plaintiff must establish the presence of a duty. A duty can arise in a fiduciary relationship. In the absence of relationship, it can arise when silence would be misleading because of some other statement made by the defendant. Here, the Court concluded that the defendants did not say anything that lulled Smith into thinking the company was doing well. In fact, the Court noted that the defendants advised Smith that the company was in trouble and was seeking an "exit strategy." The Court concluded that Smith's claim was without merit.

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GABBANELLI ACCORDIONS & IMPORTS, L. L. C. v. DITTA GABBANELLI UBALDO DI ELIO GABBANELLI (July 30, 2009)

Gabbenelli Accordions & Imports ("American Gabbenelli") used to be the American distributor for a predecessor of defendant Ditta Gabbenelli Ubaldo Di Elio Gabbenelli ("Italian Gabbenelli"). Disputes arose between the two companies in the 1990s. In 1999, the two companies entered into an agreement under which American Gabbenelli retained the exclusive right to use the Gabbenelli mark in North America and Italian Gabbenelli retained the exclusive right to use it in Italy. The parties further agreed that future disputes would be resolved by arbitration. Notwithstanding the arbitration agreement, Italian Gabbenelli sued American Gabbenelli in an Italian court and American Gabbenelli filed this suit in the United States. American Gabbenelli charged Italian Gabbenelli with trademark infringement. The district court first rejected Italian Gabbenelli's contention that the arbitration agreement deprived the court of jurisdiction. Nevertheless, the court stayed proceedings pending the outcome of the Italian litigation. When no decision was rendered within a few years, the court lifted the stay. American Gabbenelli served Italian Gabbenelli with requests for admissions in May of 2005. Italian Gabbenelli finally appeared through counsel in October of 2005 but did not respond to the requests for admissions. Italian Gabbenelli filed an opposition to American Gabbenelli's motion for summary judgment in June of 2007, and also asked for leave to deny the requests for admissions, which had since been deemed admitted. The court denied that request and granted American Gabbenelli's motion for summary judgment. Italian Gabbenelli appeals.

In their opinion, Judges Posner, Flaum and Wood affirmed in part, reversed in part and remanded. The Court rejected Italian Gabbenelli's appeal on liability. First, it agreed with the district court that the arbitration agreement did not deprive the court of jurisdiction. Second, it concluded that the Italian judgment (since rendered) was irrelevant because it was rendered after the district court judgment. Third, the Court concluded that the district court was within its rights in not allowing Italian Gabbenelli to reopen the requests for admissions after ignoring them for several years. The Court did reverse, however, with respect to damages. The district court awarded damages for lost profits plus statutory damages of $500 for each infringing accordion. The Lanham Act allows statutory damages only for violations on which compensatory damages are not awarded. The district court's award of lost profits and statutory damages with respect to the same accordions was improper. The Court also criticized the district court for awarding statutory damages on each individual item sold. The Act allows statutory damages on each "type of goods," not on individual goods. The Court remanded for a redetermination of damages.

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IN RE: TURNER (July 20, 2009)

Joel Turner had monthly mortgage payments of $1500 when he filed a Chapter 13 petition for bankruptcy. In computing his "projected disposable income" under the bankruptcy law, he deducted the mortgage payments. He stated in his plan, however, that he intended to stop making his mortgage payments and turn his home over to the mortgagee. The trustee objected. The $1500 monthly deduction from Turner’s disposable income would make that much unavailable to the unsecured creditors. The bankruptcy court rejected the trustee’s objection. The trustee appealed under a since superseded process for direct appeal to the court of appeals. The process required: a) the trustee to file a notice of appeal in the bankruptcy court within 30 days, b) the bankruptcy court to certify that the ruling satisfied certain statutory criteria, and c) the trustee had to petition the court of appeals for leave to appeal within 10 days of the certification. The trustee filed his notice of appeal and the court certified. The trustee never filed a petition -- but the clerk of the court transmitted the request for certification and the certification order. The Court docketed the appeal.

In their opinion, Judges Posner, Sykes (dissenting) and Van Bokkelen (concurring in part and concurring in judgment) accepted the appeal and reversed. Each of the three judges had a different approach to the jurisdictional issue. Judge Posner emphasized that the clerk of the court transmitted to the appellate court everything that a petition for review would have contained. Therefore, the filing was complete and timely. Its only possible defect was that it was transmitted by the clerk rather than by the appellant. Because it served all the purposes behind the procedural requirements, Judge Posner concluded that it fell within the "functional equivalent" test. Alternatively, Judge Posner allowed the appeal pursuant to Rule 2 of the Federal Rules of Appellate Procedure, which allows the Court to suspend appellate rules for good cause. On the merits, the Court concluded that considering what the debtor's projected income will be at the time of plan approval was more consistent with the statutory language than considering it at the time of filing. The Court emphasized that it was not approving an exercise in speculation about the future income of the debtor -- it was considering only a fixed debt that all agreed would disappear.

Judge Van Bokkelen agreed that the Court could hear the appeal, but based his decision on Judge Posner's alternative Rule 2 holding, and concurred on the merits.

Judge Sykes dissented. She concluded that the petition was a statutory jurisdictional requirement. Since the trustee never filed a petition, she would dismiss for lack of appellate jurisdiction.

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WIESMUELLER v. KOSOBUCKI (July 9, 2009)

The State of Wisconsin hosts two law schools, at Marquette University and at the University of Wisconsin. Graduates of these schools have a “diploma privilege.” That is, they are admitted to practice law in the State of Wisconsin without taking the bar exam. A graduate of any other law school in the United States must take the bar exam before being admitted to practice in Wisconsin. A group of those out-of-state graduates sued the Wisconsin Board of Bar Examiners and the Supreme Court of Wisconsin, alleging a violation of the Commerce Clause. The district court granted the defendants' motion to dismiss. The class appeals.

In their opinion, Judges Posner, Ripple and Wood reversed and remanded. The Court first addressed defendants' argument that the plaintiffs lacked standing because they challenged only that part of the Supreme Court Rule granting admission to graduates of state law schools without contending that they met a second requirement of the rule that their law school credits primarily focused on Wisconsin law. The Court concluded that the rule did not impose the latter requirement and that every class member could meet the actual requirements of the rule, as it read it. The Court next addressed the standing argument that Wisconsin could comply with an injunction by requiring all law school graduates to take the bar. This would certainly correct the problem but it would provide no relief to plaintiffs. But the Court reasoned that that was not the only outcome of such an injunction. There were numerous outcomes that would provide relief to the plaintiffs. Since the Court was unable to say that the plaintiffs have nothing to gain, they recognized their standing. On the merits, the Court conceded a state's right to regulate admission to its bar, even if the result impedes commerce. When it does, however, the regulation must be minimally reasonable. Here, the Court concluded that the record did not support any justification. It allowed the plaintiffs an opportunity on remand to establish the absence of a minimally reasonable justification.

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HERSHEY v. PACIFIC INVESTMENT MANAGEMENT CO. (JULY 7, 2009)

A number of investors sold 10-year U.S. Treasury notes short and, between May 9 and June 30, 2005, bought futures contracts in settlement of their obligations. These investors brought a class action against Pacific Investment Management Co. (PIMCO), alleging that PIMCO violated the Commodity Exchange Act by cornering the market in certain Treasury notes. The class alleges that PIMCO increased its ownership of the notes to the point where it created a monopoly price, resulting in losses to the class of more than $600 million. PIMCO challenged the class definition. It pointed out that many class members did not lose money because of the net effects of multiple trades. The district court certified the class. PIMCO appeals.

In their opinion, Judges Posner, Evans and Tinder affirmed. The Court rejected PIMCO's argument that a district court had to determine which class members suffered damages before certifying a class. The standing requirement is satisfied as long as one member of the class has a plausible damage claim. The fact that a class member ultimately is shown to have not been injured does not preclude class certification. The Court cautioned, however, that a class should not be certified if it appears that many class members have suffered no injury. Although the Court did not believe that to be the case, it invited PIMCO, on remand, to find out through a random sample of depositions. The Court also rejected PIMCO's argument that a conflict of interest existed among class members because they purchased the notes at different times. The conflict was only hypothetical and may never materialize.

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CUNNINGHAM v. MASTERWEAR CORP. (June 23, 2009
 

The Cunninghams owned a building in Martinsville, Indiana in which they operated a photographic studio from 1986 until 2004. The building next door contained a dry cleaning establishment. Soon after the Cunninghams made the building their residence, they both began to experience headaches and other physical maladies. They moved out as soon as the EPA advised them that high levels of perchloroethylene (PCE), a chemical used in dry cleaning, in their home posed a potential health risk. The Cunninghams brought an action for common law nuisance, seeking damages for both their physical injuries and their loss of property value. The court disqualified their only medical expert and barred them from testifying regarding appraisals of their property. The court then granted summary judgment to the defendant. The Cunninghams appeal.

In their opinion, Judges Posner, Manion and Kanne affirmed. Although the expert had concluded that all of the Cunningham’s symptoms were caused by exposure to PCE, the Court noted that he was not a toxicologist, and he presented no scientific theory that linked the Cunningham’s exposure level to their symptoms. The Court concluded, therefore, he presented no evidence upon which a trier of fact could rely to conclude that the exposure was the cause of the ailments. With respect to the valuation of the property, the Court stated that a property owner can testify about the value of his property if he is an expert on property values or if he has personal knowledge. Cunningham simply wanted to repeat others’ assessments of the property’s value. The Court concluded that the testimony was properly disallowed as hearsay. The Court added that, even if the testimony was allowed, there was no evidence regarding the cause of any loss in value. Since the Cunningham’s were entitled only to the loss of value that could be fairly attributed to the PCE, as opposed to market forces or otherwise, they could not have prevailed even with the testimony.

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ROTH v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY (June 5, 2009)

The plaintiffs, Bonnie and Connie Roth, were insurance agents. Each had an agency agreement with American Family Mutual Insurance Company. The agreement provided that it could be terminated for "undesirable performance" only with six months notice and an opportunity to correct. It also provided that it could be terminated without notice if an agent engaged in "dishonest, disloyal or unlawful" conduct. One of the agents signed an applicant's name on a insurance policy application at the applicant’s request. The other signed the name of a different agent on a policy certification, also with authorization. American Family terminated their agency agreements. The Roths brought suit for breach of contract. The district court granted summary judgment to American Family. The Roths appeal.

In their opinion, Chief Judge Easterbrook and Judges Posner and Wood affirmed. The Court considered whether signing another's name is "dishonest" under the agreement. The Court appreciated that neither agent gained personally by her conduct and that a typical element of dishonesty is theft. However, the Court went on to consider other meanings of dishonesty, including breach of trust and deceitful behavior. The Court concluded that the act of signing another’s name without any indication of authority was deceptive and fit within the agreement’s provision allowing termination without notice.

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FLETCHER v. CHICAGO RAIL LINK, L.L.C. (May 28, 2009)

William Fletcher was injured while driving a utility vehicle in a rail yard. He sued Chicago Rail Link under the Federal Employers Liability Act. He alleged that the accident was caused by the railroad's failure to maintain the vehicle in a safe condition. A jury awarded him $700,000 in damages but also found that he was 50% negligent himself. Under FELA, such a finding would reduce the damages by one half unless the court finds that the employer violated "any statute enacted for the safety of employees" and that the violation contributed to the accident. The district court found that Chicago Rail Link had violated an Illinois Commerce Commission regulation and awarded full damages. Chicago Rail Link appeals.

In their opinion, Judges Posner, Manion and Kanne affirmed in part and reversed in part. The Court first noted that the "any statute" language in FELA includes regulations issued by a state agency which is "participating in investigative and surveillance activities" pursuant to 49 U.S.C. § 20105. Section 20105 allows the Secretary of Transportation to prescribe investigative and surveillance activities to enforce safety regulations and provides that a state may participate in those activities when the safety practices are regulated by a state authority. The Court disagreed with the lower court's ruling that all railroad worker safety regulations are included within § 20105. Rather, the Court concluded that FELA only applies to state regulations that support or implement federal safety norms. Since the Illinois regulation at issue was not such a regulation, the Court determined that it was not "any statute" as contemplated by FELA. The Court remanded for the 50% reduction in damages.

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ABAD v. BAYER CORPORATION (May 1, 2009)

In one case, several hundred Argentine hemophiliacs brought a class action against Bayer Corporation and others, alleging that they were infected with AIDS as a result of the defendants’ negligence. In another case, Argentina plaintiffs brought suit against U.S. companies arising out of an automobile accident. Plaintiffs allege that defendants were negligent in the design and manufacture of the vehicle and its tires. Both cases were filed in federal district courts against American defendants by foreign plaintiffs for injuries sustained in Argentina. After significant discovery, the judge in each case dismissed the case based on the doctrine of forum non conveniens. The plaintiffs appealed.

In their opinion, Judges Posner, Evans and Tinder affirmed. The parties agree that the standard of review is an abuse of discretion. The Court first addressed whether the plaintiffs are entitled to a choice of forum presumption. Although the Court conceded that such a presumption is typical, it concluded that the presumption has little influence on the outcome when plaintiffs seek to maintain the litigation on the defendants’ turf while the defendants would rather engage on the plaintiffs’ turf. In those cases, district courts should simply weigh the advantages and disadvantages of the respective fora. In Gulf Oil Corp., the Supreme Court provided a long list of factors that a lower court should consider in applying forum non conveniens. The Court reviewed the circumstances of the two cases to determine whether either district judge abused his/her discretion. In the AIDS case, the Court looked at a number of factors, including the burden of translation and the cost of discovery. In the end, however, the determining factor was that Argentine law would govern, whether the cases were tried in the United States or Argentina. The Court found further support for dismissal in the fact that the case involved the application of market share liability, an uncertain area of Argentine law. The Court reached the same conclusion with respect to the automobile accident case. Again, although the legal issues were not as complex or uncertain, Argentine law would apply. An Argentine court is more competent than an American court to apply its law. The Court found no abuse of discretion.

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COLLINS v. UNITED STATES OF AMERICA (May 1, 2009)

Two private planes collided while approaching a small airport. The three people aboard all died. Air traffic control at the small airport was under the control of Midwest Air Traffic Control Services, a company hired by the Federal Aviation Administration. The representatives of the deceased brought an action against the United States under the Federal Tort Claims Act. They allege both that the air traffic controller was negligent in clearing both planes to land and that the FAA was negligent because it had not installed a radar system at the small airport. The district court entered judgment for the United States after a bench trial. The representatives appeal.

In their opinion, Judges Posner, Ripple and Evans affirmed. Before addressing the merits, the Court addressed the United States’ argument that the district court lost jurisdiction when Midwest settled the representatives’ claims. The Court recited the general Illinois rule that a principal whose liability is based on the negligence of its agent cannot be sued if the agent settles with the plaintiff. The Court concluded, however, that the rule has no application when the principal is the United States and liability is based on the Federal Tort Claims Act. Under the Act, the United States does not have a right of indemnity from the agent -- in fact, the government is exclusively liable. Under those circumstances, the rationale for the rule does not apply. On the merits, the Court quickly disposed of the controller negligence claim. The Court has held, and continues to hold, that independent contractor air traffic controllers are not employees of the United States, notwithstanding extensive FAA control. The Act therefore does not create U.S. liability. With respect to the FAA negligence issue, the Court stated that the Act does not apply to a claim related to a discretionary function of a federal agency. The Court concluded that the FAA’s consideration of a whole host of factors in determining where to install radar equipment was a quintessential discretionary function. Negligent or not, the government was shielded from liability for the FAA's failure to install radar at the airport.

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MARSHALL v. H&R BLOCK TAX SERVICES, INC. (April 30, 2009)

Suit was filed in state court against a defendant class of companies. The defendant class consisted of H&R Block Tax Services, Inc. ("TSI") and its affiliates or franchisees. The suit, brought on behalf of a plaintiff class, alleged violations of the Illinois Consumer Fraud Act. The state court certified the defendant class and originally three plaintiff classes, including people in all 50 states and the District of Columbia. On TSI's motion, the court decertified the defendant class but refused to decertify the plaintiff class, although it did narrow it to residents of only 13 states. TSI removed the case pursuant to the Class Action Fairness Act (CAFA), on the theory that the decertification of the defendant class occurred after CAFA’s effective date and increased TSI’s potential liability. The district court remanded the case to state court. TSI requested leave to appeal, which the Court granted.

In their opinion, Chief Judge Easterbrook and Judges Posner and Tinder reversed. A case that was filed before the effective date of CAFA may still become removable if a court's ruling after its effective date increases a defendant's potential liability and does not "relate back" to the original claim. The Court first explored whether the decertification increased TSI's potential liability. On the pleadings, the Court concluded that TSI's potential liability may well have increased. Before decertification, it was not liable for the unlawful acts of all class members simply because it was a corporate affiliate, or because it was a class representative. Similarly, although the original complaint alleged joint and several liability, the complaint included three other defendants. The Court could not determine whether the plaintiffs sought to hold TSI liable for all the affiliates. The Court concluded that the plaintiffs may well be attempting to hold TSI liable for the acts of all the affiliates after decertification, which would appear to increase TSI's liability. With respect to whether the change "relates back" to the original complaint, the Court looked to whether the original complaint provided sufficient notice of the scope of the claim such that the defendant should not be surprised by the increased scope. Relying on its own conclusion that TSI's original liability was significantly less than it was facing after the ruling, the Court concluded that it did not relate back.

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MADDEN v. ROLLS ROYCE CORP. (April 29, 2009)

Rick Madden, a member of the U.S. Air Force Reserve, was hired as a temporary employee at Rolls-Royce Corporation. He represented, falsely, that he was a graduate of Purdue's engineering program. He did not impress his supervisor with his skills. At the end of the temporary period for which she had been hired, Rolls-Royce let him go. He then applied for a job with Data Systems and Solutions (DS&S), without success. Madden brought suit against Rolls-Royce and DS&S, alleging that both violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by discriminating against him on the basis of his military service. The district court granted summary judgment to the defendants. Madden appeals.

In their opinion, Judges Bauer, Posner and Rovner affirmed. Even if a plaintiff under USERRA establishes that his military service was a motivating factor in his discharge or failure to be hired, the defendant is given the opportunity, and the burden, to show that its actions would have been taken even in the absence of military obligations. Here, the defendants’ evidence is compelling and barely contested. Madden’s performance at Rolls-Royce was unsatisfactory. The company was not going to retain him when it had to lay off someone and his co-worker was a better performer. With respect to DS&S, the Court concluded that the company surely would have checked his record and his resume before offering him a job. His poor performance at Rolls-Royce and his resume fraud would justify its refusal to hire.

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CONSTRUCTION AND DESIGN CO. v. UNITED STATES CITIZENSHIP AND IMMIGRATION SERVICES (April 21, 2009)

Construction and Design Co. (CDC), a small construction company with three employees, is organized as a Subchapter S Corporation. As such, its income is taxed directly to its shareholders. CDC petitioned to obtain a visa to add a Ukrainian carpenter to its staff. The Department of Homeland Security denied the petition, ruling that CDC could not afford the proposed $50,000 salary for the carpenter. The district court affirmed. CDC and the alien appeal.

In their opinion, Judges Posner, Flaum and Wood affirmed. In order to obtain a visa, an employer must demonstrate to the Department of Labor that no U.S. citizen is qualified to do the work and must satisfy the Department of Homeland Security that it can afford the proposed salary of the alien. The Court pointed out that tax returns, relied on by the government, are not reliable indicators of a company's ability to afford another employee, particularly with respect to a Subchapter S company. Tax considerations can frequently influence the way income is treated. Nevertheless, the employer has the burden of proof with respect to its ability to pay. Here, the company's gross receipts in the year in question were only $400,000, the alien was already working for CDC in a temporary capacity for $23,000 less than his proposed permanent salary, there was no evidence of new business or a new contract with which to pay the new salary, and there was very little cushion in the company’s expenses. Although the Court hypothesized several scenarios under which the hiring might make economic sense, the employer never established an evidentiary record that met its burden.

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BOWENS v. QUINN (April 2, 2009)

The Illinois Constitution allows the governor of the state to grant reprieves, commutations and pardons "on such terms as he thinks proper." An Illinois statute provides the procedural framework for the exercise of the governor's power. Twelve people who had filed petitions for clemency brought an action against the governor, alleging a violation of their due process rights under the 14th Amendment because of the governor's failure to act on their petitions within a reasonable time. While a motion to dismiss was pending, the governor acted on the petitions of nine of the plaintiffs, granting one and denying eight. The lower court denied the governor's motion to dismiss. The governor brought this interlocutory appeal.

In their opinion, Judges Posner, Kanne and Wood reversed. The Court first addressed the issue of mootness with regard to the plaintiffs whose petitions had been processed. With respect to those plaintiffs whose petitions were denied, the Court determined that the claims were not moot on the grounds that they met the "capable of repetition, yet evading review" standard of Roe v. Wade. The claim of the plaintiff whose application was granted was, on the other hand, moot. On the merits, the Court concluded that there was no ground for the denial of due process claim. The 14th Amendment does not create a property or liberty interest in obtaining a pardon. The fact that the plaintiffs are not claiming an entitlement to a pardon, but merely an entitlement to a reasonably prompt decision, does not change the result.

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UNITED STATES v. APPROXIMATELY 81,454 CANS OF BABY FORMULA (March 25, 2009)

Federal agents seized thousands of cans of powdered baby formula from a warehouse. They suspected that the cans had been stolen from retail stores. Many of the cans had altered labels - some of the cans were even past their "use by" date. The government filed a civil forfeiture suit, which is still pending in the district court. The owner of the cans asked the court for permission to sell those cans that were not yet beyond their “use by” date. The court denied the motion. The owner appeals.

In their opinion, Judges Posner, Sykes and Dow affirmed. The court first addressed the jurisdictional issue. Because the ruling on the motion was not a final appealable decision, the appellant relied on the "collateral order" doctrine. Under that doctrine, the Court noted, a party may take an immediate appeal from an order if it involves issues separate from those of the underlying litigation and there is a risk of irreparable harm. The Court found both criteria present in this case. The issues were clearly separate and, although unclear, the possibility of a monetary remedy from the government was unlikely.

On the merits, the Court noted that the procedural rules governing asset forfeiture actions were quite vague and provided no particular criteria for deciding a motion like the one presented to the court below. They do not, for example, as appellant argues, provide that the government has the burden of proof. The Court concluded that the lower court had considerable discretion in ruling on the motion. The judge below conducted an evidentiary hearing, where there was conflicting evidence concerning the threat posed by the formula. The Court could not conclude that the lower court abused its discretion in denying the motion.

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BECK v. DOMBROWSKI (March 20, 2009)

Philip Beck (and the class he represents) was a shareholder of Equity Office Property Trust ("EO"), a real estate investment trust. In late 2006, after EO agreed to be acquired by Blackstone Group, a bidding war ensued between Blackstone and Vornado. Offers and counter offers were each followed by a new proxy solicitation from EO's board. Eventually, EO accepted Blackstone's last bid. Beck brought suit under the Securities Exchange Act and SEC Rule 14a-9, as well as under state law. He alleged misrepresentations and omissions in the proxy solicitation. The district court dismissed the federal claims for a failure to plead the required state of mind with particularity. The court dismissed the state law claim under the doctrine of abstention. Beck appeals.

In their opinion, Judges Posner, Wood and Tinder affirmed. The Court first identified the erroneous basis on which the district court had dismissed the action. Rule 14a-9 does not require a state of mind for a violation -- only a misrepresentation or omission. Notwithstanding the district court's error, the Court still concluded that the complaint should be dismissed. Citing the principle of Bell Atlantic that a defendant should not have to incur the expense of discovery unless the complaint is a substantial one, the Court found that the plaintiffs’ theories were too speculative to survive. The Court also affirmed the lower court's dismissal of the state law claim under Colorado River abstention.

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TEAL v. POTTER (March 20, 2009)

Joanne Teal had been employed by the U. S. Postal Service for almost 20 years when, during an altercation, she struck her supervisor's hand. Although the Postal Service attempted to discharge her, a grievance arbitrator determined that she should be suspended instead. Before she could be reinstated, however, Teal had to demonstrate her physical and mental fitness to resume her duties. For over eight months, the Postal Service went to great lengths to accommodate Teal's needs in scheduling the examinations. Finally, in July of 2003, the Postal Service advised Teal that they were terminating her employment. In the meantime, Teal filed an EEOC complaint in January of 2003, complaining that the original termination of her employment was discriminatory. Teal sued the Postal Service pursuant to the Rehabilitation Act. The district court concluded that she had failed to exhaust her administrative remedies and granted summary judgment to the Postal Service.

In their opinion, Judges Posner, Rovner and Evans vacated and remanded. The Court that the Rehabilitation Act, like Title VII of the Civil Rights Act, requires a plaintiff to exhaust administrative remedies before bringing an action. Additionally, a plaintiff cannot complain of conduct that was not the subject of an EEOC charge. Here, Teal's EEOC charge complained of discrimination prior to her original discharge in March of 2002. The district court complaint, on the other hand, complains of her July 2003 dismissal. The 2003 dismissal was based on Teal's noncompliance with the conditions of her reinstatement, not the incident with her supervisor. The Court concluded that Teal had failed to exhaust her administrative remedies. The Court remanded the case for a dismissal without prejudice.

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MUHA v. ENCORE RECEIVABLE MANAGEMENT, INC. (March 10, 2009)

Charlotte Muha, representing a class of credit card debtors, brought an action under the Fair Debt Collection Practices Act ("FDCPA") against Encore Receivable Management, Inc. The complaint alleged that Encore violated the FDCPA by stating, in a debt collection letter, that "your original agreement with the above mentioned creditor has been revoked." Plaintiffs allege that that statement is false. The plaintiffs also claim that the statement is misleading and confusing and sought to introduce a survey to support that allegation. The lower court excluded the survey and granted summary judgment to Encore. Plaintiffs appeal.

In their opinion, Judges Posner, Kanne and Tinder affirmed in part, reversed in part and remanded. The Court first upheld the lower court's exclusion of the survey. It concluded that the survey was improper both because the questions and answers were leading and because there was no control group that was shown the letter without the language in question. Notwithstanding the exclusion of the survey (and notwithstanding the admission at oral argument that plaintiffs could not prove damages without the survey), the Court held that plaintiffs could be entitled to statutory damages. The plaintiffs have the burden of proving that the statement was misleading. Although a survey may be the best evidence of that, is not the only potential evidence. The recipients of the letter itself may testify, allowing the judge to infer that the letter is misleading within the meaning of the FDCPA. The Court then addressed the merits of the falsity argument. The issue, it stated, was not the falsity of the statement. The Court concluded that the statement obviously meant that the credit card privileges of the recipient have been revoked. Nevertheless, the plaintiffs are entitled to attempt to prove that the statement is misleading. The Court found that the statement was confusing and noted that confusing language can have an intimidating effect on an unsophisticated consumer. It did not think the evidence was so clear on that point so as to entitle the plaintiff to summary judgment, however. It reversed and remanded for further proceedings. 

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WISCONSIN ELECTRIC POWER COMPANY v. UNION PACIFIC RAILROAD COMPANY (March 2, 2009)

Wisconsin Electric Power Company (WEPCO) and the Union Pacific Railroad Company (UP) entered into a contract for the transportation of coal from Colorado coal mines to WEPCO during the years 1999 -- 2005. The rate that UP could charge WEPCO depended on whether UP was able to reload its empty railcars with shipments of iron ore destined for a steel mill in Utah. The contract provided that UP could charge the higher rate if "an event of force majeure" prevented it from reloading its rail cars with iron ore. The steel mill was bankrupt when the parties entered into the agreement, though still operating. It shut down in 2001, but did not close for good until 2004. UP declared an "event of force majeure" after the mill’s final closure in 2004. WEPCO sued UP for breach of contract, alleging that it was not liable for the higher rate under the contract and that UP failed to perform its contractual obligation to ship requested tonnage to WEPCO. The District Court granted summary judgment to UP. WEPCO appeals

In their opinion, Judges Posner, Ripple and Rovner affirmed. The Court first rejected WEPCO’s argument that UP waived its rights by not providing the “prompt notice” required by the contract. UP did not assert its rights upon the plant’s first closing. But the contract included a “no waiver” clause, which provided that a party did not waive a right by not insisting upon it. A no-waiver clause can itself be waived, said the Court, but only with clear and convincing evidence. Such evidence was not present in the case. The Court also noted the lack of any evidence that WEPCO was harmed by the late notice. There was no dispute over the existence of the plant’s closing and WEPCO presented no evidence that it could have developed less expensive alternatives had it been put on notice. The Court even noted that WEPCO saved $7 million due to UP’s decision not to give notice of force majeure in 2001.

The Court also rejected WEPCO’s claim that UP’s failure to ship 100% of its requested tonnage was a breach of the agreement. The contract required UP to make “good faith reasonable efforts” to meet WEPCO’s demand. The Court concluded that UP’s decision to ship to other customers, even ones who might be paying more for the shipments, did not constitute a lack of good faith. A lack of good faith requires evidence of lack of diligence, a willful failure to perform, abuse of power, or interference with performance – none of which were presented here.
 

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SCHMUDE v. TRICAM INDUSTRIES, INC. (February 17, 2009)

Kevin Schmude, a 350-pound man, was working on a construction project. He climbed an 8-foot ladder manufactured by Tricam Industries, Inc. (Tricam) to in order to inspect electrical connections in the space above a ceiling. He and the ladder collapsed onto the floor. One of the rivets designed to secure the rear leg was found on the floor. The leg itself had separated from the ladder. A jury found for Schmude and awarded $677,000 in damages. Tricam appeals.

In their opinion, Judges Posner, Ripple and Rovner affirmed. The Court first summarily rejected Tricam’s arguments concerning a minor discrepancy between plaintiff’s expert’s report and testimony and the expert’s demonstration using the ladder. The Court gave greater consideration to Tricam’s objection to the limitations the trial court put on its ability to impeach Schmude with evidence of a prior conviction. Schmude had been convicted in 1995 of the sale, by a felon, of firearms without a license. F.R.E. 609(b) allows evidence of the conviction of a felony more than ten years old for impeachment purposes only when the probative value outweighs the possible prejudice. The trial court ruled that Tricam could impeach Schmude with evidence of the conviction, but would not allow evidence that the felony was actually predicated on yet another, earlier felony. The Court appreciated the significance of the issue – Schmude’s testimony was the only direct evidence of the cause of the fall and the extent of his pain. The Court also appreciated the trial court’s dilemma – without approaching the issue the way he did, the jury would either hear evidence that Schmude had been convicted of two felonies or would hear no evidence of a conviction. The Court concluded that the trial judge made a reasonable choice under the circumstances. Finally, the Court also upheld the trial court’s refusal to allow Tricam to put on certain evidence of Schmude’s anti-social personality. The Court agreed that the evidence in question had no probative value and would have been extremely prejudicial to Schmude.

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HK SYSTEMS v. EATON CORPORATION (January 28, 2009)

IBP owned a large beef-processing plant in Nebraska. It wanted to replace its material handling system at the plant. Alvey and an Eaton Corporation (“Eaton”) subsidiary submitted the successful joint bid. During the contract negotiations, Eaton sold its subsidiary to HK Systems, Inc. (“HK”). The contract of sale contained broad cross-indemnities. A month later, IBP and HK entered into a contract for the purchase of the system. IBP was not satisfied with the speed at which the system operated and sued HK in state court. IBP alleged fraud, based on a system-speed representation made by Eaton before it sold its subsidiary, and breach of contract, based on a system-speed provision of the contract. The suit was settled for $8 million, $5 million from Alvey and $3 million from HK. HK brought this suit against Eaton for indemnification. Eaton argued that HK’s loss had been caused by HK’s own actions, not Eaton’s. The court originally denied summary judgment and judgment as a matter of law. A jury awarded HK $3 million. The court reconsidered the earlier motion for summary judgment and granted it. HK appeals.

In their opinion, Judges Posner, Ripple and Evans affirmed. The Court first noted that there was nothing improper in the district court’s reconsideration of it summary judgment ruling. Eaton had not preserved its argument that HK was responsible for its loss in its motion for judgment as a matter of law. Although the doctrine of the law of the case normally counsels against a judge reconsidering an earlier ruling, the district court does have discretion to do so when it is convinced that its earlier ruling was wrong and no harm will result. Here, the Court observed that the trial judge ruled on the meaning of the indemnification clause, which he considered a question of law. On reconsideration, he ruled that Eaton was not liable for HK’s loss because the contract between HK and IBP was an intervening cause. The Court agreed with the district court’s view on reconsideration, although it preferred framing the issue in terms of responsibility rather than cause. In any multiple factor case, responsibility is determined by reference to policy. Sometimes intervening acts are enough to shield one from liability – other times not. The Court referred to the contract between HK and Eaton. It contained mirror-image indemnification provisions. If Eaton was liable to HK for certain losses due to its representations, then HK was liable to Eaton for the loss it suffered because of its act – signing the contract – that occurred after the sale. The Court found that the district court’s resolution of this dilemma by adopting a narrow reading of the indemnity was consistent with the Court’s earlier decision holding that an indemnity will normally not apply, without explicit language, to a breach of contract claim for a contract entered into after the indemnity. The Court explained the policy reasons for such a holding. A party is typically in control of its contracts and performance. One should not be able to insure or acquire an indemnity to protect against liability for a breach when the one most able to protect against a breach is the very person insured. Here, HK should have made sure that its new subsidiary was capable of performing its contractual obligations to IBP before entering into the agreement. It cannot shift that liability to Eaton.

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ORLANDO RESIDENCE v. GP CREDIT (January 22, 2009)

Twenty-two years and $3 million in legal fees and this dispute continues. Samuel Hardige and Kenneth Nelson settled a dispute in the early 1980s. Hardige gave some property to Nashville Residence Corporation (“NRC”), a company belonging to Nelson, in exchange for a promissory note secured by the property and payable to Orlando Residence, Ltd. (“OR”). NRC failed to pay the note when due. OR sued NRC on the note and obtained a judgment. But NRC had already conveyed the property to Nashville Lodging Company (“NLC”), which in turn conveyed it to Metric Partners. In 1992, OR sued Nelson and several companies controlled by him, including NRC, in Tennessee state court. Fourteen years, three trials, three appeals, and two remands later, OR had final judgments against Nelson and his companies. Meanwhile, OR purchased the subject property at a judicial sale for $100,000 – which amount was deducted from his judgment. On another track, GP Credit bought NLC’s personal property at a foreclosure sale. The personal property included a lawsuit against Metric Partners. Although OR tried to reach the proceeds of that lawsuit, GP Credit prevailed in an action to clear its title (which was affirmed by the Seventh Circuit). After GP Credit cleared its title, OR obtained a default judgment against GP Credit on the theory that it was the alter ego of Nelson.

OR brought a suit in Tennessee state court to collect on its judgment. It named Nelson and his wife, a pension plan, NLC, and GP Credit. GP Credit counterclaimed for restitution, intentional interference, slander of title, and unjust enrichment. The case was removed and transferred to Wisconsin federal court. Susan Nelson brought a separate suit in the same court to quiet title to her property. The district court rejected all claims in both suits. Susan Nelson and all parties to the transferred suit appeal.

In their opinion, Judges Posner, Kanne and Rovner affirmed in part, reversed in part and remanded. The Court first addressed OR’s appeal. The district court had dismissed OR’s claim against GP Credit because it thought it conflicted with the Court’s earlier ruling on GP Credit’s appeal. The Court disagreed. The basis of OR’s earlier attempts to get the proceeds of the lawsuit was its claim against NLC. The current claim is a direct claim against GP Credit, as alter ego, to collect the judgment against Nelson. The Court saw no conflict with the earlier ruling. The Court next addressed GP Credit’s counterclaims. Its first is for the value of the property sold at the judicial sale. GP Credit claims it is worth more than the $100,000 it brought. The Court held that the Tennessee appellate court’s approval of the sale is res judicata. It specifically rejected GP Credit’s claim that the decision could be attacked collaterally because the lower court in Tennessee never had subject-matter jurisdiction. If a court authorized to decide the kind of case in which the issue arises decides a jurisdictional issue in a full and fair hearing, it is entitled to collateral estoppel effect. GP Credit’s second counterclaim arises out of Metric Partners’ offer to settle the very lawsuit to which GP Credit successfully cleared its title. Metric Partners conditioned an offer to settle on OR dissolving its receivership. When OR refused, the case settled for much less. The Court found GP Credit’s claim for the difference frivolous. OR had no obligation to dissolve the receivership solely for the benefit of GP Credit. The Court also rejected GP Credit’s slander of title and restitution claims for the same reasons it rejected the first two counterclaims. Finally, on Susan Nelson’s appeal of her action to quiet title, the Court noted that OR had filed an earlier suit in state court in an effort to reach Mrs. Nelson’s property. When two in rem suits regarding the same res are pending in different courts, the court of the later-filed suit should dismiss.

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STARK TRADING v. FALCONBRIDGE LIMITED (January 5, 2009)

Brascan Asset Management (“Brascan”) owned 41% of the common stock of Noranda, Inc. (“Noranda”). Noranda owned, in turn, 59% of Falconbridge, Inc. (“Falconbridge”). Noranda and Falconbridge were both large Canadian mining companies. In March 2005, Noranda offered the minority shareholders in Falconbridge 1.77 shares of Noranda stock for each share of Falconbridge. The offer was conditioned on being accepted by holders of more than half of Falconbridge’s shares. The plaintiffs (two hedge funds) bought Falconbridge shares in the months leading up to the tender-offer expiration date in May. The plaintiffs believed that Falconbridge was grossly undervalued. Before the expiration of the tender-offer, the plaintiffs learned of many problems in the transaction. They expressed their concerns to the Canadian regulators. They exposed a conflict of interest at the investment bank that did the valuation of Falconbridge and in the internal Falconbridge committee that considered the valuation. They also warned that Noranda overstated the value of its own shares. The plaintiffs tendered their shares and the tender-offer succeeded. A few months later, Noranda and Falconbridge merged. Shortly thereafter, another mining company offered to buy the merged company for a price substantially above the tender-offer price. The plaintiffs brought this action against both the merged company and Brascan. The suit was based on the SEC’s Rule 10b-5 and section 11 of the Securities Exchange Act. The district court dismissed the suit for failure to state a claim. Plaintiffs appeal.

In their opinion, Judges Posner, Kanne and Tinder affirmed. The Court first addressed the Rule 10b-5 fraud claims. A claim of fraud cannot be maintained without proof that the plaintiffs relied on the misleading misrepresentations or omissions of the defendant. The Court concluded that plaintiffs were not deceived. They knew Falconbridge was undervalued, they knew the offer was too low, and they knew that Noranda engaged in fraud. They did not try, however, to influence other minority shareholders or even to publicly disclose the information. What they had wanted was a higher offer. Not getting it and worried about the lack of minority shareholder protection under Canadian law, they tendered their shares. Other investors may have been deceived but the plaintiffs actually saw through the fraud. The Court agreed that they could not maintain a 10b-5 action. With respect to the §11 claim, the Court noted that it does not require reliance. A person may bring an action under §11 if the registration statement of the security contains an untrue statement or material omission. The plaintiffs fare no better under §11, however, than they did under 10b-5. The measure of damages is the difference between the purchase price paid by the plaintiff and the share price when it was sold or at the time of the suit, if still owned. Here, the value of the plaintiffs’ investment was higher at the time of the suit than when they purchased the shares.

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MIRFASIHI v. FLEET MORTGAGE (December 30, 2008)

This suit was originally brought years ago on behalf of 1.6 million people whose mortgages were owned by Fleet Mortgage Corporation (“Fleet”). The allegations of the class action complaint are that Fleet shared personal information from the class members’ mortgage files with telemarketers, in violation of the Fair Credit Reporting Act (“FCRA”) and various state laws. The class was divided into a very large class of persons whose information was shared but who purchased nothing as a result (the “non-purchasers”) and a small (~190,000) class of people who did make purchases (the “purchasers”). The court certified the class and approved a settlement in 2002. The settlement provided nothing to the non-purchasers. The Seventh Circuit reversed and remanded, at the request of two intervening objectors. On remand, the court again approved a settlement. Again, the non-purchasers received no direct benefit. The court concluded that their claims were of no value. Fleet was required, in addition to the payment to the purchasers, to make a payment of at least $243,000 to organizations concerned with consumer privacy issues. The Seventh Circuit again reversed on the grounds that the court’s valuation of the non-purchasers’ claims was inadequate. On remand, the court conducted a more thorough survey of the state consumer protection laws and, once again, concluded that the non-purchasers’ claims had no value. The court awarded class counsel $750,000 and objectors’ counsel $18,750 in fees. The objectors appeal.

In their opinion, Judges Bauer, Posner and Williams affirmed. The Court first noted that no member of the non-purchasers class suffered actual harm. Although nineteen states and the District of Columbia allow individual (not class) actions with statutory penalties ranging from $25-$10,000, the parties failed to identify one person who would bring such an action. Although the Court noted that the state law limitations on class actions may not be binding in federal court, it held that the objectors waived any right to raise that issue. The Court also held that the objectors forfeited any claim that FCRA provided a statutory penalty remedy for the non-purchasers, adding, however, that such a claim would be frivolous. Concluding that the non-purchasers’ claims were indeed worthless, the Court approved the $243,000 settlement.

The Court used objectors’ counsel’s request for additional fees to again express its frustration with the inherent conflicts in class actions. (For another recent expression of Judge Posner's frustration, see his opinion in Thorogood here and my summary here.) One of those conflicts resulted in objectors’ counsel exaggerating the value of the non-purchasers’ claims in order to be entitled to an award of fees. Here, objectors’ counsel asked that the $750,00 awarded to class counsel instead be awarded to him. The Court conceded that objectors do frequently assist the class action settlement process, but an award of fees must be balanced by their degree of success. Here, the objectors extended the litigation by years. They improved to some degree the value of the purchasers’ settlement but did not do much to improve the settlement for the non-purchasers. They did not participate constructively in the litigation – in fact, they conducted themselves irresponsibly. The Court approved as “barely justified” the fee awarded below.

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ILLINOIS BELL v. GLOBAL NAPS ILLINOIS (December 22, 2008)

Illinois Bell (“Bell”) alleged that Global NAPs Illinois (“GNI”) violated Bell’s federal tariffs, its state tariffs, and the interconnection agreement between them. Bell named as defendants GNI, its parent Ferrous Miner Holdings (“FMH”), and four other affiliated companies. The district court found it did not have personal jurisdiction over FMH and that Bell’s evidence of a “piercing the corporate veil” theory was not sufficient to confer that jurisdiction. The court dismissed FMH and entered a Rule 54(b) final judgment. Bell appeals.

In their opinion, Chief Judge Easterbrook and Judges Posner and Evans reversed and remanded. The Court first addressed a threshold jurisdictional issue. Bell asserted that federal jurisdiction existed under federal question jurisdiction – as a suit to enforce a federal tariff – and under diversity jurisdiction – as a suit between an Illinois corporation and non-Illinois parties. Although either would be sufficient to maintain the action, the Court addressed both. It noted that jurisdiction of the state law claims would be mandatory under diversity jurisdiction but merely discretionary under federal question jurisdiction. The Court quickly resolved the issue of diversity. GNI claimed that its principal place of business was Illinois because it was the only state where it was licensed to do business and had interconnection facilities. It is the location of the “nerve center” that constitutes a company’s principal place of business, said the Court. GNI admitted it had no office or employees in Illinois. Its principal place of business was Massachusetts – complete diversity existed. The Court then rejected GNI’s argument that the integration clause of the interconnection agreement foreclosed federal question jurisdiction. Although supposing that a broader integration clause could convert a federal tariff claim into a state contract claim, the Court found the integration clause between Bell and GNI too narrow to do so. In any event, its conversion into a contract claim would not affect jurisdiction. Under the well-pleaded complaint rule, the suit to enforce a federal tariff would arise under federal law.

The Court engaged in a lengthy discussion regarding the merits of a “primary jurisdiction” referral to the Illinois Commerce Commission. The Court believed that the interpretation of the interconnection agreement should be conducted there, while the federal court stayed its proceedings. However, the Court determined that referral to be premature. The Court felt obligated to first address the piercing the corporate veil issue. The Court determined that the district court misunderstood the parties’ positions. The district court addressed whether FMH’s “veil” could be pierced – but Bell wanted to pierce the veil of GNI to get to FMH. FMH argued that Bell had to prove fraud. The Court held otherwise. Delaware law permits piercing the veil upon proof of fraud or that the corporation was a mere facade. FMH did not deny that GNI had no assets. The Court concluded that Bell had produced enough evidence to bring FMH within the personal jurisdiction of the court – so that the court could determine whether to pierce its veil.

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BOIM v. HOLY LAND FOUNDATION FOR RELIEF AND DEVELOPMENT (December 3, 2008)

David Boim was a Jewish teenager living in Israel. He had dual Israeli/American citizenship. In 1996, he was killed by gunfire near Jerusalem. Boim’s parents brought suit under 18 U.S.C. § 2333(a). They alleged that defendants Muhammad Salah, Holy Land Foundation for Relief and Development (“HLF”), the American Muslim Society (“AMS”) and the Quranic Literacy Institute (“QLI”) all provided financial support to Hamas and that their son had been killed by Hamas gunmen. The district court rejected the argument that financial assistance was not international terrorism under § 2333(a) in denying defendants’ motion to dismiss. On an interlocutory appeal, the Seventh Circuit affirmed. The district court granted summary judgment on liability to plaintiffs with respect to Salah, HLF and AMS. A jury found QLI liable and assessed damages against all defendants of $52 million before trebling. On appeal, a Seventh Circuit panel vacated and remanded to redetermine liability. The plaintiffs petitioned for rehearing en banc, which was granted.

In their opinion, the Court affirmed in part, reversed in part and remanded. The Court first addressed whether the statute even applies to defendants who are alleged only to have provided financial support to those engaged in terrorism. The statute does not specifically mention secondary liability and the Supreme Court in Central Bank of Denver held that a statute that did not mention secondary liability did not create secondary liability. Instead of resolving that issue directly, however, the Court explored an alternative approach. It parsed the language of sections 2331, 2332, 2333 and 2339. Section 2333 creates a cause of action for a person injured “by reason of an act of international terrorism.” Section 2331 includes in the definition of international terrorism “acts dangerous to human life” that violate the U.S. criminal law. The Court concluded that financial assistance to Hamas is an “act dangerous to human life” and violates section 2339. Section 2339 was enacted in 1994 and makes it a crime to provide “material support” knowing that it could be used in carrying out a violation of section 2332. Section 2332 criminalizes the killing of an American citizen outside the U.S. The Court followed this chain to determine that a mere financial contribution to a terrorist organization could violate section 2333. Having determined that the defendants could be liable, the Court proceeded to examine the cause of action and its elements. On the element of intent, the Court held that the defendants must either have known or been deliberately indifferent to whether the organization they funded committed terrorist acts. Given the extreme conduct of the terrorist groups, the Court concluded that it was enough to know the character of the organization. With respect to causation, the Court held that the knowing contributors could not avoid liability on causation because, as a whole, they significantly increased the possibility that Boim would be a target of a Hamas terrorist act.

Applying these principles to the facts of the case, the Court addressed each defendant’s liability. It reversed with respect to HLF. The district court had erroneously applied principles of collateral estoppel from earlier litigation to the liability of HLF. The Court remanded for an analysis of HLF’s liability in light of its opinion. The Court reversed outright the findings as against Salah. Salah had been in custody during the period between the enactment of section 2339(a) and the shooting of Boim and could not have provided material support to Hamas during that time. The Court affirmed the findings as against defendants AMS and QLI. It found sufficient evidence that AMS knew that Hamas was a terrorist organization and that it provided material support to Hamas. QLI had elected not to participate in its trial and therefore could not object to the jury instructions or findings.

Finally, the Court addressed the lower court’s determination that the men who killed Boim were members of Hamas. The principle evidence on that point was the affidavit of an expert witness, Dr. Paz. Paz, an expert on terrorism, based his conclusion on terrorist internet sites, notes from a U.S. foreign service officer, and an Islamic-language document purporting to reflect the conviction of one of the murderers. The Court conceded that much of the evidence on which Paz relied was inadmissible. Noting that experts are not limited to admissible evidence in forming their opinions, the Court concluded that the type of evidence on which Paz relied is relied on by security and terrorism experts generally. The Court also noted that the defendants did not introduce any evidence to the contrary. The Court found no error in the lower court’s consideration of the affidavit.

Judge Rovner wrote separately, concurring in part and dissenting in part. Judge Rovner took principal exception to the majority’s conclusions with respect to causation and the Paz affidavit. She believed that the majority practically eliminated a causation requirement. She would have at least required expert testimony regarding the financial structure of Hamas and the various organizations it controlled. With respect to Paz, she criticized the majority for not only allowing the affidavit based on unproven evidence but for allowing it to support summary judgment. She noted that the defendants are not required to rebut factual propositions on which plaintiff has the burden of proof and has not properly supported. Judge Rovner would remand with respect to all defendants.

Judge Wood also wrote separately, concurring in part and dissenting in part. Judge Wood principally criticized the majority for its treatment of causation with respect to AMS and QLI. She concedes that “but-for” causation is sometimes not necessary, but she noted that the majority also eliminated the requirement for “sufficient” cause and apparently put little limitation on the remoteness of liability. Judge Wood would require at least proof that AMS and QLI contributed a “non-trivial” sum of money to an organization that was sufficiently connected to Hamas that the money indirectly supported Hamas’ terrorist mission. She also would impose a proximate cause limitation on the acts of the defendants, which the majority did not do. Judge Wood also disagreed with the majority’s statements on the scope of liability under the statute, calling it “awfully vague.” Finally, she disagreed with the treatment of the Paz affidavit and would remand to allow plaintiffs to meet the threshold requirements of Rule 702.

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ILLINOIS BELL TELEPHONE CO. v. BOX  (November 26, 2008)

Illinois Bell Telephone Co. (“Illinois Bell”) is a provider of local telephone service. The Illinois Commerce Commission (“ICC”) ordered Illinois Bell to provide certain elements of service, including access to switching centers and splitting, to competing carriers at its cost. Illinois Bell brought suit against the Commission to be relieved of that obligation. The district court granted summary judgment to Illinois Bell. The ICC and intervenor Globalcom, Inc. appeal.

In their opinion, Judges Posner, Ripple, and Evans affirmed. The Court first noted the federal interest and approach to the telecommunication industry. Congress and the FCC have established certain requirements to promote competition in the industry. Section 251 of the Telecommunications Act of 1996 (“Act”) requires carriers like Illinois Bell to provide certain services to other carriers on an unbundled basis and at cost. The FCC determines which services are included, after considering whether access is necessary and whether denial of access would impair the requesting carrier’s ability to provide its service. If the FCC decides a service meets the section 251 criteria, a carrier can request the service from carriers like Illinois Bell at its cost. Section 271 of the Act also entitles carriers to gain access to other unbundled services from “Bell Operating Companies” such as Illinois Bell. Unlike section 251, however, section 271 does not require that access be provided at cost. The FCC allows a carrier to charge a market rate for section 271 services.

The Court found that the ICC’s order that Illinois Bell provide services at cost was inconsistent with Sections 251 and 271. The Court noted that the ICC was, in effect, overruling the FCC. The Court pointed out that the savings clause of section 251 allowed state orders that were consistent with and did not prevent implementation of the section. The Court concluded that the ICC’s orders were inconsistent with and did substantially prevent the implementation of the federal policy. The Act does not specifically forbid the requirement imposed by the ICC but to allow it would defeat the goals of the FCC. The Court concluded that only network services identified by the FCC under section 251 are required to be provided at cost. Other services, even if required to be provided, can be charged at a market price. 

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SANDAGE v. BOARD OF COMMISSIONERS (November 24, 2008)

Sheena Sandage-Shofner twice called the sheriff’s department in Vanderburgh County and complained that a man named Moore was harassing her. Moore was in the sheriff’s custody, serving a prison term for robbery. Sandage-Shofner’s complaints arose at times when Moore was out of prison on work release. Two days after her second complaint, Moore murdered Sandage-Shofner and two other people and then took his own life. Christine Sandage and Arthur Shofner brought a suit under § 1983, claiming that the County’s failure to reimprison Moore deprived their decedents of their lives without due process in violation of the Fourteenth Amendment. The district court dismissed for failure to state a claim. Sandage and Shofner appeal.

In their opinion, Chief Judge Easterbrook and Judges Posner and Rovner affirmed. Relying principally on the Supreme Court’s decision in DeShaney, the Court held that there is no federal constitutional duty to protect the citizenry from private violence, nor is there a right to be rescued from a danger that was not created by the government. There is a right not to be harmed, a right illustrated, for example, by prisoner cases alleging deliberate indifference to medical needs. Here, the Court concluded, the government did not restrict Sandage-Shofner’s access to aid and it took no affirmative steps that increased the danger to Sandage-Shofner. It simply failed in its moral obligation to protect its citizens from private harm, for which there is no federal constitutional remedy.

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MUHAMMAD v. OLIVER (November 10, 2008)

The Dennis Muhammad Community and Economic Development Corporation (“MDC”) is a Chicago-based minority business enterprise. It entered into a joint venture agreement with CDA Management (“CDAM”). The purpose of the venture was to bid on a contract to install air conditioners in Chicago Housing Authority (“CHA”) buildings. Their bid was successful but the relationship quickly soured. In 2002, MDC sued CDAM and the related non-profit Chicago Dwellings Association (“CDA”). MDC alleged, in a state court action, that the defendants breached the joint venture agreement by not allowing MDC to do the work it had agreed to do. The court granted CDA’s motion to dismiss on the ground that CDA was not a party to the agreement. Later, on MDC’s own motion, the court dismissed MDC’s complaint against CDAM without prejudice. In 2007, MDC brought suit in federal court against CDA, CDAM, and Christine Oliver. Oliver was the CEO of both CDA and CDAM. MDC repeated the same allegations it had made in the earlier state court suit. It added an allegation under § 1981 that the defendants had used MDC as a “minority front” to increase their chances of success on the bid for the CHA contract. The district court dismissed CDA and CDAM on res judicata grounds and dismissed Oliver because she was not a party to the joint venture. MDC appeals.

In their opinion, Judges Cudahy, Posner, and Rovner affirmed. The Court observed that, although the two complaints relied to some extent on different legal theories, they did both arise out of the same facts. When a prior case arising out of the same facts is abandoned after an adverse ruling, as the Court concluded the state court suit was, the judgment generally bars a later suit. When there are multiple defendants, as is here, the bar against one operates as a bar against all, if they arose out of the same facts. The Court found that all three defendants were alleged to be in violation of § 1981 for the identical conduct. The Court concluded that the earlier suit barred the federal complaint against all defendants. The Court also rejected MDC’s argument that there had been a stipulation to reserve all rights upon dismissal. The Court concluded that there was no evidence, or even allegation in the complaint, of such an agreement. Finally, the Court rejected MDC’s claim that the lower court erred by dismissing on res judicata grounds when a) the defendants never raised it and b) it is not one of the FRCP 12(b) defenses that are allowed to be raised by motion . The Court held that the dismissal was proper. The application of res judicata eliminates unnecessary lawsuits. It can be raised by the court on its own motion. Also, when an affirmative defense like res judicata is shown on the face of the complaint, it can be dismissed on motion.

The Court did conclude that the court below erred in dismissing Oliver on the grounds that she was not a party to the joint venture agreement. A claim of tortious interference with contractual rights on account of race does state a cause of action under § 1981. Nevertheless, Oliver is still entitled to dismissal. First, the Court pointed to its prior discussion of res judicata. The dismissal of the state court complaint barred a cause of action against any defendant arising out of the same facts. Oliver’s does. Second, when liability rests on the doctrine of respondeat superior, as it does here, the plaintiff cannot bring an action against the “servant” (Oliver) when judgment has already been entered for the “master” (CDA, CDAM). Third, and most significantly, the Court concluded that the complaint did not actually allege tortious interference on account of race. The Court stated that the allegation that the defendants included MDC to gain a bidding advantage, and then cheated them out of that advantage, did not allege racial discrimination. The Court observed that it was greed, not discrimination, that drove the defendants’ decision. The district court’s result was correct. 

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ATKINS v. CITY OF CHICAGO (November 10, 2008)

William Atkins was a passenger in a car driven by his brother Adam in October, 2003. A Chicago police officer stopped the car and arrested William on a parole violation warrant with his name. William professed his innocence. He continued to insist he was the “wrong man” but never asked to see a lawyer or took any legal action. He was released – thirty seven days later. He brought an action under 42 U.S.C. § 1983 against the arresting officers and prison guards, among others. He alleged that his arrest was unlawful, that he was mistreated in prison, and that the Department of Corrections lacked procedures for identifying cases of mistaken identity. Adam joined in the suit as far as it complained of the arrest. Both Atkins brothers were represented by the same lawyer. In December of 2006, the lawyer filed a document captioned a “Motion to Substitute” that alerted the court to the untimely death of William. The lawyer stated that he was going to open an estate so that William’s wife Brandie could continue the lawsuit. The district court denied the motion. There was no one yet with proper status to substitute. After 90 days, the defendants moved to dismiss on the grounds that no substitution had been made within 90 days of a “suggestion of death.” The court allowed an additional month for a proper substitution. The day before the new deadline, Atkins’ lawyer filed a motion to substitute Mrs. Atkins, but she was still not yet named as his personal representative. The district court dismissed William’s case. An Illinois probate court appointed Mrs. Atkins as personal representative of William’s estate about ten days later. Mrs. Atkins appeals the district court’s dismissal.

In their opinion, Judges Posner, Flaum, and Evans reversed and remanded. The Court rejected Mrs. Atkins' arguments that the delay was excusable and that the suggestion of death did not start the 90-day clock because it was unauthorized. The Court did hold, however, that the suggestion of death did not start the clock because FRCP 25(a) requires service. Although the rule does not specifically identify the non-parties on whom service is required, the Court concluded that it certainly includes the deceased’s successors or personal representatives. Since Mrs. Atkins had the largest stake in maintaining the case, she had to be served. The Court recognized that Mrs. Atkins clearly knew of her husband’s death and it saw no indication that the Motion for Substitution was filed without her knowledge or authorization. Nevertheless, the rule requires service and her knowledge does not excuse the lack of service. The 90-day clock has not started. Mrs. Atkins should be allowed to proceed as plaintiff.

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U.S.O. CORP. v. MIZUHO HOLDING CO. (October 28, 2008)

U.S.O. Corp. (“USO”) is incorporated in Delaware but is the wholly-owned subsidiary of a Japanese company. Its headquarters are in Japan. USO invested in a limited partnership. Like USO, the partnership was incorporated in Delaware. It also had its principal place of business in Japan and the partners all had addresses in Japan. The partnership invested in another partnership, which acquired a building in Chicago, Illinois. The partnership held the building investment for ten years. USO sued Mizuho Holding Co. (“Mizuho”) and alleged that Mizuho failed to pay the amounts due to USO during its investment and misappropriated USO’s portion of the proceeds of the sale of the building, almost $7 million. The acts complained of occurred mostly in Japan. Most of the witnesses and record evidence exists in Japan. Mizuho brought a declaratory judgment suit in Japan raising the same issues, albeit eight months after USO sued in the United States. The district court dismissed the suit based on forum non conveniens. USO appeals.

In their opinion, Judges Posner, Ripple, and Evans affirmed. The Court thought that Mizuno’s case that it would be unreasonably burdened to have to defend in the United States was “compelling.” USO argued that its choice of forum, particularly as an American company, should not be rejected lightly. The Court did not question the existence of a presumption in favor of plaintiff’s choice of forum. But it also noted the many legal principles that limit a plaintiff’s choice – jurisdiction, venue, and removal, to name a few. The Court looked to the Supreme Court’s decision in Piper Aircraft Co. v. Reyno for guidance. There, the Supreme Court held that dismissal is proper, even for an American company, if the balance of conveniences demonstrates that the defendant would be burdened by being forced to litigate in the plaintiff’s chosen forum. The deference to Americans is not based on nationalism but on the assumption that a home forum is more convenient to an American than it likely would be to a foreign company. The Court noted that USO was not really “American” except through incorporation. The assumption of convenience did not apply in its case. Here, the Court listed a host of reasons to dismiss: a) the presence of witnesses and documents in Japan, b) the need for interpreters and translators if litigated in the U.S., c) the probable application of Japanese law, d) the pending, “well-advanced” case in Japan, and e) the refusal of the Japanese court to abate its case in favor of a U.S. case. Piper also directed the Court to look at how the public’s interest is affected. The public interest considerations include burdening an American jury with a wholly foreign dispute and forcing a court to struggle with Japanese law. The balance of conveniences and the public interest in this case clearly favor a dismissal.

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WOOLARD v. WOOLARD (October 29, 2008)

John F. Woolard established a trust in 1983. His infant son, John C. Woolard, was the sole beneficiary. John F. named his brother Robert as trustee. The Trust Agreement allowed Robert to distribute its assets for the sole benefit of John C. The trust allowed Robert to apply payments directly for John C.’s benefit or, in his sole discretion, directly to John C. , to John C.’s legally appointed guardian, or to a Uniform Gifts to Minors Act custodian. It did not specifically allow direct payments to John F., although it did prohibit loans to him. John F. initially funded the trust with $500. At one point, it contained over $800,000. When John F. died in 2002, the value of the trust was $18,000. Between 1990 and 2001, Robert distributed more than $850,000 directly to John F. Robert kept no record of the purpose of the distributions and never asked John F. for receipts. John C. brought an action against Robert for mismanagement of the trust. The district court granted John C.’s motion for summary judgment. The court found that Robert had breached the express terms of the trust and had violated his statutory and fiduciary duties. Robert appeals.

In their opinion, Judges Bauer, Cudahy, and Williams affirmed. The Court found that Robert’s reliance on certain aspects of the Illinois Trusts and Trustees Act (“Act”) was misplaced. The Act simply provides default rules applicable to a trust that otherwise does not specify the trustee’s rights and duties. John F.s trust did specifically limit the trustee’s powers. Robert’s distributions to John F. were not allowed. In making those distributions, Robert breached the express terms of the trust. The Act requires a trustee to provide an annual accounting to the beneficiaries. The accounting must give the status of the funds, list all receipts and disbursements, and provide the source and purpose of all payments. A trustee’s failure to provide an accounting, observed the Court, is an independent cause of action. The Court rejected Robert’s argument that the monthly brokerage account statements were sufficient to constitute the accounting. The brokerage records did not indicate the purpose of any distribution from the account. Therefore, they cannot constitute an adequate accounting under the Act. Finally, the Court agreed that the record amply supported the finding that Robert breached his fiduciary duty. A trustee has an obligation to manage the trust pursuant to its terms and be as diligent as he would with his own affairs. The Court noted that Robert never even asked John F. for receipts or for an explanation of what he was doing with the money. The Court made a special note of the six months when John C. was seventeen when Robert distributed over $300,000 to John F. The record did not support any semblance of diligence by Robert.

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THOROGOOD V. SEARS, ROEBUCK & CO.  (October 28, 2008)

Steve Thorogood bought a dryer at Sears, Roebuck & Co. (“Sears”). Sears’ point-of-sale literature stated that the drum inside the dryer was made of stainless steel. In fact, part of Sears’ dryer drum was made of a coated, non-stainless steel. Thorogood filed a class action on behalf of himself and other purchasers of the dryer in 28 states and the District of Columbia. He alleged that he thought that the entire drum was made of stainless steel, that the non-stainless part rusted and stained his clothes, and that Sears’ advertising was deceptive. Thorogood based his claim on the Tennessee Consumer Protection Act. The district court certified the class. Sears appeals.

In their opinion, Judges Posner, Kanne, and Evans reversed and remanded for decertification. The panel started by observing some of the benefits of the class action procedure, as well as some of its downsides. One particular downside of some class actions, according to the Court, is the undermining of federalism. Thorogood’s case presented a good example. Thorogood was attempting to litigate 500,000 claims of residents of 29 jurisdictions in one federal court. These claims would be “wrested from the control” of those jurisdictions and their laws. The Court was troubled that certain procedural rules that govern the relief to which those 500,000 claimants would be entitled would be ignored. Specifically, for example, Tennessee’s consumer protection act does not allow a class action in state court. Although the Court recognized that the Tennessee rule did not prevent the class action from proceeding under federal law, the expansion of available relief did trouble the Court. The Court’s concerns led it to approach the class action aspect of the case with caution.

The Court found the case to be a particularly poor candidate for class action treatment. Not only did common issues of fact not predominate over individual issues of fact, the Court stated that there were no common issues of fact. Thorogood’s concerns about rust were “idiosyncratic.” The Court doubted that any of the other 500,000 claimants believed as he did. Each class member would have to individually establish, at a hearing, his or her: a) understanding of the meaning of the stainless steel advertising, b) reliance on the advertising’s meaning that the stainless steel drum would prevent rust stains, and c) damages. Since there was no common, single understanding of the advertising, the class should not have been certified. The Court did note a certain difficulty in determining individual relief as well. That difficulty could have been managed through an aggregate class relief approach, had the case been otherwise suitable for class treatment.  

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LEISTER v. DOVETAIL, INC.  (October 23, 2008)

Sandra Leister and Michelle and Evan Peterson worked together at a company that provided employee assistance programs to employers. In 1997, the Petersons purchased some of their employer’s program contracts and formed Dovetail to administer those contracts. They hired Leister, a psychologist, to work for Dovetail. As one of the benefits of employment, they agreed to deposit a percentage of her salary into a 401(k) account. They complied with their promise for about a year and then began diverting Leister’s money to their own benefit. They also refused to provide Leister with documentation of her rights under the plan. Leister brought this action under ERISA to recover the contributions that Dovetail was obligated to make to her account and for statutory penalties. The district court found a willful breach of the defendants’ fiduciary duties and awarded Leister $82,741 for the contributions not made. The court declined to impose statutory penalties for the Peterson’s failure to provide plan documents, relying on their dire financial circumstances. The defendants and Leister each appeal.

In their opinion, Judges Bauer, Posner, and Williams affirmed in part, reversed in part, and remanded. The Court first addressed two preliminary matters – whether there was enough of a writing to satisfy ERISA and the impact of Leister’s failure to name the plan as a defendant – and resolved each of them in Leister’s favor. It then proceeded to the statute of limitations issue. ERISA complaints are governed by two limitations provisions. Complaints for breach of a fiduciary duty under sections 1101 to 1114 must be brought within the shorter of six years from the breach or three years from the date when the plaintiff had actual knowledge of the breach. Complaints for benefits due under the plan pursuant to section 1132(a)(1)(b) are governed by the most analogous state limitations period, in this case Illinois’ ten-year statute for breach of a written contract. Leister sought relief under both sections 1104 and 1132(a)(1)(b), but the district court based its judgment only on section 1104. Since Leister’s complaint was filed more than six years after the defendants’ first breach, her recovery would be limited under 1104. The Court found that a) she was entitled to relief under both sections, b) she was entitled to more relief under section 1132(a)(1)(b), and c) she met the ten-year statute of limitations. Under 1132(a)(1)(b), Leister was entitled to the unpaid contributions as well as a reasonable estimate of their investment growth over time. The Court accepted Leister’s cross-appeal argument that the district court erred in not considering the tax-free status of the contributions. It directed the court to recalculate the benefits on remand.

Leister also “shoehorn[ed]” a claim for sales commissions into her ERISA claim. The Court found that the district court erred in treating it as an ERISA claim even though Leister alleged that she would have deposited the commissions into her 401(k) account. Nevertheless, the Court noted that the claim was also pleaded as a state law claim and would be considered in that context on remand. The Court offered guidance to the district court on the state law claim: a) it has a shorter limitations period than the ERISA claims because it is not a written contract, b) Leister cannot recover tax benefits as if she would have deposited the money into her 401(k), and c) an Illinois statute may allow for an award of attorneys’ fees. Lastly, the Court addressed Leister’s argument that the court erred in not awarding statutory penalties. The Court observed that penalties, in whatever form, are meant to deter. Although deterrence can be achieved with smaller awards against poorer defendants, an award of no penalties against a solvent defendant who commits a willful breach is unreasonable. The district court’s decision was an abuse of discretion.

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ORTH v. WISCONSIN STATE EMPLOYEES UNION  (October 22, 2008)

Ron Orth retired in 1998. The collective bargaining agreement covering his employment required his employer to provide health insurance to retirees. It also required the employer to pay 90% of the premium. Finally, it stated that the monetary value of an employee’s unused sick leave upon retirement, if any, would be used to pay the employee’s share of the premium. Notwithstanding these provisions, the benefits plan of Orth’s former employer deducted all of the premium amounts from Orth’s sick leave account, using it up in eight years. Orth brought this action, with his wife, against his former employer and its benefits plan, alleging that they violated ERISA. The defendants admitted that the terms of the written plan were as alleged by the Orths but maintained that the plan had been modified through the conduct of the parties over time. The district court granted summary judgment to the Orths and awarded attorneys’ fees. The defendants appeal.

In their opinion, Judges Bauer, Posner, and Williams affirmed. The Court observed the general rule that a contract can be modified by the subsequent dealings of the parties. ERISA, however, requires that plans be in writing. The Court held that amendments to plans must be in writing as well. The ERISA plan, therefore, could not be amended by conduct. The Court went on to consider whether the fact that the plan was a creature of a collective bargaining agreement made a difference. Collective bargaining agreements are often modified orally or by subsequent dealings. Employees are not even parties to the agreements. A collective bargaining agreement can be modified without an employee’s consent, as it was here. The union does owe a fiduciary duty to its members, but the Orths do not complain of a breach of the union’s fiduciary duty. But, the Court went on, the welfare plan also owes a fiduciary duty to its participants. Although the plan can be changed without the consent of the participants, the change in this case was made without notice to the participants. That, said the Court, is a violation of the plan manager’s fiduciary duty to the participants (as well as a violation of law).

The defendants also quarrel with the award of damages and fees. The Court agreed that ERISA does not allow consequential damages, but it declined defendants’ invitation to characterize the award of premiums the Orths paid to maintain coverage after their sick leave account was drained as consequential damages. The Court roundly rejected defendants’ argument that the district court erred when it awarded fees on a finding of “no substantial justification” for their position. To the contrary, the Court said, it questioned whether the district court was even correct in its opinion that the defendants acted in good faith. Finally, the Court found no merit in defendants’ argument that the $41,000 fee award was excessive given that the damages awarded to the Orths was about the same. The Court found no error, remarking that one reason fee awards exist is to allow people with small losses the ability to recover those losses.

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CLASSIC CHEESECAKE CO. v. JP MORGAN CHASE BANK  (October 17, 2008)

Classic Cheesecake Co. (“Classic”) is a bakery that successfully generated some interest from several Las Vegas casinos and hotels in its products. It needed additional capital to fund its expansion. In July of 2004, Classic’s principals made a pitch to Dowling, a vice president at JP Morgan Chase Bank (“Bank”). After receiving documentation, Dowling assured Classic that its loan would be approved, provided that one of its principals repaid an old student loan. Dowling continued to provide assurances to Classic as late as September 19. Meanwhile, as early as August 19, Dowling’s superior at the Bank advised her that he was “still declining” the request for funds. Dowling finally advised Classic on October 12 that the loan was not approved. [These are allegations of the complaint, taken as true.] Classic brought suit under the Equal Credit Opportunity Act (“ECOA”) and for breach of contract under Indiana law. It alleged losses of more than $1 million. The district court resolved the ECOA claim in Classic’s favor (with only modest relief) but dismissed the breach of contract claim.  Classic appeals. 

In their opinion, Judges Posner, Flaum, and Evans affirmed. The Court first rejected Classic’s attempts to cast the controversy as one of simple promissory estoppel or fraud. It limited Classic to its breach of contract remedy. The Court turned to the Indiana statute of frauds. Although the statute of frauds requires that contracts to lend money be in writing, Indiana courts have created an exception. Oral agreements unenforceable under the statute of frauds will be enforced if a failure to enforce the agreement would create an “unjust and unconscionable injury and loss” that is independent of the benefit of the bargain. The Court’s task was to decide whether the allegations of Classic’s complaint could meet that standard. The task was not an easy one, given the “vague . . . and redundant” nature of the test and the relative dearth of case law. The Court explored some history of the exception to the statute of frauds:

• The California Supreme Court’s (Traynor, J.) 1950 decision in Monarco that first allowed promissory estoppel as a defense to the statute of frauds but only if “unconscionable injury or unjust enrichment” would otherwise result
• Restatement (Second) of Contracts section 139(1) which allows promissory estoppel as a defense if “injustice” is avoided but which Indiana has not embraced
• The only two cases (Madison Tool & Die and Keating) that survived summary judgment under the Indiana formula

The Court noted that Monarco contained an element of unjust enrichment but neither Madison nor Keating did. Each of the cases contained significant “reliance” losses beyond the loss of the contract bargain, but the Court said that simple reliance losses (i.e., promissory estoppel) certainly does not meet the Indiana test. The Court held that the Indiana test, a compromise between the policy behind the statute of frauds and the desire to protect reasonable reliance, requires proof of "enhanced" reliance. The common thread among Monarco, Madison, and Keating was a time factor. In each case, the reliance continued for a longer time (20, 3, and 1.5 years) than the few months at issue for Classic. The Court also observed that Classic’s reliance may not have been totally reasonable. The Court concluded that Classic did not meet the enhanced promissory estoppel test and the complaint was properly dismissed.

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STEVO v. KEITH (October 1, 2008)

Allen Stevo would like to enter the 2008 race for a seat in the U.S. Congress from the Tenth Congressional District in Illinois as an independent candidate. Illinois law generally requires an independent candidate to submit with his or her petition a number of signatures equal to 5% of the number of votes cast in the district in the last election. This requirement does not apply, however, in the first election after each decennial census. Each census is followed by a redistricting, which prevents the application of the 5% rule since there is no prior voting history for the newly drawn districts. For these elections, Illinois requires a flat 5,000 signatures. The 2008 election is not such an election. A resident of the district challenged Stevo’s petition on the ground that it failed to meet the 5% requirement. Stevo admits that he does not meet the 5% target, but it is undisputed that he submitted in excess of 5,000 signatures. He filed suit, claiming that the 5% requirement denies equal protection of the laws and that the 5,000 signature requirement should be applied to all elections. The district court dismissed the complaint for failure to state a claim. Stevo appeals.

In their opinion, Judges Cudahy, Posner, and Flaum affirmed. The panel notes that Stevo does not challenge the 5% requirement in a vacuum. Instead, he argues that it is the acceptability of the 5,000 signature target in some circumstances that makes the 5% target arbitrary. Thus, the Supreme Court’s decision in Jenness v. Fortson, which held that a 5% requirement is permissible, does not control. The state’s position is that it must have a proxy for the 5% target after redistricting because it would be impossible to calculate in a newly drawn district. The Court, however, cited favorably to an Indiana procedure in which the votes from the individual precincts making up the new district are used to arrive at a fairly good approximation of the district vote. There are other reasons, however, for the state’s approach. The Court referred to the “disorienting” nature of a redistricting event, requiring both candidates and voters to adjust. It may be more difficult to get signatures in such an environment and thus Illinois imposes the reduced flat 5,000 signature requirement. The Court considered the approach Illinois took to reduce the signature requirement to be “crude.” In fact, in one district, the flat 5,000 signature requirement is actually more difficult to meet than the 5% would have been, because of the low number of voters in the district. Nevertheless, the Court considered Stevo’s solution at least as arbitrary, if not more so. The imperfect Illinois solution is now used only once in every ten years. Stevo would apply it to every congressional election. Not only is Stevo’s proposal not so far superior to the State’s as to implicate the Constitution, the Court found that is likely less superior.

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GUSTAFSON v. ZUMBRUNNEN  (October 1, 2008)

George Skille, a citizen of Wisconsin, left most of his estate to his grandchildren and appointed one of them, Georgia Gustafson, his personal representative. After his death, Gustafson sued Skille’s widow (his second wife) in state court to recover money from a joint bank account for the estate. That suit was settled. Gustafson then brought suit in federal court seeking the balance of the account, attorneys’ fees from the first suit, and punitive damages. The suit named Skille’s lawyer (and the lawyer’s firm) and the bank where Skille and his wife had a joint account. The suit alleged that the lawyer had “tortiously interfered” with the grandchildren’s expectation of inheritance and that the bank had been negligent. The defendants were all citizens of Wisconsin, but none of the grandchildren were. The defendants moved to dismiss for lack of diversity on the ground that a legal representative of an estate is treated as a citizen of the state in which the decedent was a citizen under 28 U.S.C. §1332(c)(2). Gustafson responded by seeking leave to amend her complaint to name each of the eight grandchildren as plaintiffs, but none in a representative capacity. Once she realized that that would result in the individual demands falling below the jurisdictional threshold, she instead filed an amended complaint in which only one grandchild (Susan Gustafson) was named as a plaintiff, suing on behalf of the estate but not as a legal representative. The district court dismissed for lack of federal jurisdiction. Susan Gustafson appeals.

In their opinion, Judges Bauer, Posner, and Wood affirmed. The Court noted that Wisconsin law allows suits for tortious interference in these circumstances. It also allows a person with an interest in an estate to sue on behalf of the estate to recover assets for the estate - but only in the situation in which the personal representative has failed to do so. In that case, the suit would not be a suit by a legal representative and §1332(c)(2) would not apply. Here, although Georgia removed herself from the suit and is “failing” to recover assets that allegedly belong to the estate, she is doing so in collusion with Susan and Susan’s suit is on behalf of the estate. The Court also held that 28 U.S.C. §1332(c)(2) is not limited in its application to one person. Instead, it treats any legal representative of an estate as having the citizenship of the deceased. If it were otherwise, the Court warned, any estate could artificially manufacture or destroy diversity by naming a representative with the correct citizenship – a result counter to the purpose of the statute.

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