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

BROADDUS v. SHIELDS (December 21, 2011)

As of 2001, Bret Broaddus and Kevin Shields were partners in Will Partners, LLC. Broaddus was in a bad car accident in November of that year. Between February and September 2002, a legal guardian conducted Broaddus' affairs. In early 2003, Shields purchased Broaddus’ interest in Will Partners for $600,000. In May 2008, Broaddus brought suit against Shields for breach of fiduciary duty, alleging that Shields lied to him about the company’s financial health. The suit was filed five years and two months after the sale. Shields moved for summary judgment on statute of limitations grounds. Judge St. Eve (N.D. Ill.) granted the motion, rejecting Broaddus’ invocation of the discovery rule. The court also granted summary judgment to Shields on his counterclaims for contractual indemnification and fee shifting. The court awarded approximately $800,000 in attorneys fees. Broaddus appeals.

In their opinion, Seventh Circuit Judges Flaum and Manion and District Judge Magnus-Stinson affirmed. The Court first concluded that Broaddus waived his legal disability argument in that he raised it for the first time on appeal. The Court also concluded that Broaddus waived his discovery rule argument. Although he raised and argued it in the district court, he did not raise it in his opening brief on appeal. The Court also rejected the discovery rule argument on its merits. Broaddus had the burden of proving the date of discovery. His evidence on that point was generally inadmissible and unreliable. Turning to the counterclaims, the Court noted that Broaddus’ sole argument was that his agreements to indemnify Shields only applied to third party claims. Relying on the contractual language, the general definition of indemnify, and Delaware law, the Court agreed with the district court that the indemnification provisions were enforceable. Finally, the Court found Broaddus’ challenges to the fee award without merit.

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KAWASAKI HEAVY INDUSTRIES v. BOMBARDIER RECREATIONAL PRODUCTS (October 21, 2011)

In 2006 and 2007, Kawasaki and Bombardier were embroiled in a patent dispute that led to several federal lawsuits. Kawasaki brought suit in Texas and Bombardier brought suits in both Florida and Texas. The parties reached a settlement in late 2007, pursuant to which they agreed to dismiss the lawsuits, agreed not to bring a future suit for patent infringement, and agreed to resolve any controversy arising out of the settlement through various alternative dispute mechanisms, including binding arbitration. The agreement also required Bombardier to cause its security agreements with its bank to be subordinated to the settlement agreement. Kawasaki executed the agreement in March of 2008, after receiving assurances from Bombardier that its bank had agreed to the subordination. In fact, Bombardier's bank refused to subordinate its security interests. Kawasaki returned to federal court in Texas and asked the court to vacate the earlier dismissal and require Bombardier to comply with the settlement agreement. The court refused. Kawasaki appealed but also engaged, with Bombardier, in court-ordered mediation. Kawasaki later dismissed the appeal and filed a new action in the Southern District of Illinois requesting specific performance of the settlement agreement's obligations. Kawasaki also brought claims against Bombardier's attorneys and its bank. Bombardier moved to dismiss or, in the alternative, to stay the claims pending arbitration. Chief Judge Herndon (S.D. Ill.) denied the motion. Bombardier appeals.

In their opinion, Seventh Circuit Judges Flaum, Manion, and Sykes reversed as to the Bombardier claims and vacated as to the other claims. The Court noted that the arbitration agreement was broad enough to cover the dispute between the parties. The only reason to deny Bombardier's request to arbitrate, then, would be that it waived that right. The district court so concluded, citing Bombardier's participation in the Texas district court litigation, the appeal, and the court-ordered mediation. The Court recognized that a party can waive a contractual arbitration right, and that the waiver can be explicit or inferred. In order to infer such a waiver, however, a court must determine the party acted inconsistent with its right to arbitrate, given all the circumstances. Relevant considerations include a party's diligence, delay, participation in court proceedings, and prejudice. Although the Court conceded that Bombardier participated in the court proceedings and mediation, it concluded that its participation was not inconsistent with exercising its right to arbitrate. All of its actions were in response to Kawasaki's actions and it never agreed to allow the Texas court to resolve the dispute -- it never even addressed the merits. Had it not participated in the proceedings or mediation, it risked a default judgment. Likewise, although there has been some delay, the delay is not inconsistent with Bombardier's right to arbitrate. It has consistently asserted its right to arbitrate the dispute, and it is Kawasaki's dispute that is an issue. Bombardier was not required to take any affirmative steps. It is enough for it to continue to assert its willingness to arbitrate and forgo any participation in substantive litigation. The district court erred in denying the motion to dismiss or stay. With respect to the other parties, the Court vacated the district court's order. First, Bombardier has no standing to protect the rights of the other defendants. Second, the issue whether the arbitration clause applies to the non-signatories is not ripe for review. Kawasaki does not want to arbitrate those claims and the non-signatories have not indicated their desire, one way or the other.

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MARCAVAGE v. CITY OF CHICAGO (October 4, 2011)

In July of 2006, Chicago played host to the seventh annual Gay Games, which consisted of a number of athletic and cultural events over several days. A number of volunteers from Repent America, a Christian ministry, appeared at various Gay Game venues to share their particular message about homosexuality. On July 15, the volunteers demonstrated around Soldier Field, where the opening ceremonies were taking place. A Chicago police officer directed the group off a public sidewalk and onto an adjacent gravel field. On July 16, volunteers arrived at Navy Pier for a similar demonstration. Again, Chicago police officers directed the group away from Navy Pier and the adjacent Gateway Park because they did not have a permit. A few volunteers were ultimately arrested. On July 22, one of the volunteers paced back and forth on the sidewalk outside of Wrigley Field, where the closing ceremonies were taking place. A Chicago police officer arrested him when he refused to stop his demonstration and "keep walking." The Repent America volunteers filed suit against the City of Chicago, several police officers, and the Metropolitan Pier and Exposition Authority (which owns Navy Pier and Gateway Park). They alleged violations of the First Amendment, the Fourteenth Amendment’s equal protection clause, the Fourth Amendment, the Illinois Religious Freedom Restoration Act, and state law. Judge Shadur (N.D. Ill.) granted summary judgment to the defendants. Plaintiffs appeal.

In their opinion, Seventh Circuit Judges Bauer, Manion, and Hamilton affirmed in part and reversed in part. The Court first addressed the First Amendment and equal protection claims related to the activities at Soldier Field and Wrigley Field. The Court conceded that the public sidewalks outside these two venues are traditional public forums and that access could not be broadly denied. But the time, place, and manner of activities at those locations can be regulated if the regulation: a) is content neutral, b) is narrowly tailored in support of a significant government interest, and c) allows for alternatives. The Court found that the police conduct at Soldier Field and Wrigley Field met those requirements. Plaintiffs presented no evidence of any police hostility to their message and, at both venues, they were simply directed away from busy pedestrian sidewalks and into locations where they could, and did, deliver their message. There was no First Amendment violation. The Court also concluded that there was no equal protection violation, in that plaintiffs were unable to identify similarly situated individuals that received preferential treatment. The Court also concluded that the arrest at Wrigley Field was not a Fourth Amendment violation. There was probable cause to believe that the volunteer was committing the offense of disorderly conduct. The Court turned to the allegations concerning the demonstration at Navy Pier and Gateway Park. The MPEA has a written policy for public expression at those venues. The policy requires a permit. The Court upheld the policy with respect to Navy Pier. Navy Pier is principally a private enterprise with some public benefits. The Policy for permits is first-come, first-served and viewpoint neutral. The volunteers never applied for a permit and there is no evidence in the record that the MPEA was hostile toward their views. Unlike Navy Pier, Gateway Park is a traditional public forum. The policy must be considered under the content neutral, narrowly tailored, ample alternative test. The Court was particularly troubled by the requirement that a group as small as five had to apply for a permit and give seven days notice and that a group smaller than five (including, apparently, an individual) also had to apply for a permit but without any notice requirement. The Court noted that five of its sister circuits have found permit requirements for groups as small as 10 constitutionally suspect. Ultimately, the Court concluded that the constitutionality of the Gateway Park permit requirement had to be considered in light of all the facts and circumstances, which were not addressed below. It remanded the claim for further proceedings. For much the same reasons as applied to the Soldier Field and Wrigley Field claims, the equal protection and Fourth Amendment summary judgment orders relating to Navy Pier and Gateway Park were affirmed.

Judge Hamilton concurred with the parts of the opinion relating to Soldier Field, Wrigley Field, and Navy Peer. He dissented from that portion of the opinion remanding the Gateway Park claims to the district court. He posited that plaintiffs waived the argument by not presenting it in a timely manner in the district court.

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HARVEY v. TOWN OF MERRILLVILLE (July 11, 2011)

The mostly African-American residents of a Merrillville, Indiana subdivision were unhappy with their retention pond. It frequently flooded and they thought it attracted mosquitoes. When town officials considered a subdivision expansion, the residents became even more concerned. They attempted to express those concerns to town officials. They claim that the officials ignored them, subjected them to racial slurs, and were generally less responsive than they were to the white residents of a different subdivision. Several of the residents filed suit pursuant to § 1983 alleging a violation of the Fourteenth Amendment’s equal protection clause. They also brought many state law claims. They named as defendants the Town, the town engineer, and a large number of other town employees. In a December 2, 2010 order, Judge Van Bokkelen (N.D. Ind.) granted summary judgment to the defendants (but failed to mention the engineer) on the ground that plaintiffs failed to identify a similarly situated class. He also declined to exercise supplemental jurisdiction over the state law claims and "remanded" the case to state court. After the engineer sought clarification, the court issued an order the following day pursuant to Rule 60(a) granting summary judgment to the engineer. A few months later, the district court entered Rule 58 judgment as to all defendants. Plaintiffs appealed the December 2 order, but mentioned all defendants. The plaintiffs did not file a notice of appeal with respect to the December 3 order or the later judgment.

In their opinion, Judges Cudahy, Kanne, and Tinder affirmed as modified. The Court first rejected the engineer's arguments that: a) plaintiffs failed to effectively appeal summary judgment in his favor because they did not appeal from the December 3 order or the later judgment, and b) plaintiffs waived their argument as to him by not developing it adequately. With respect to the former, the Court noted that failed attempts to comply with Federal Rule of Appellate Procedure 3  are generally not fatal if the appellee is not harmed. Here, the appellant's identified the engineer by name and even included a copy of the judgment in their brief, which also named him. Their technical noncompliance does not prevent the Court from having jurisdiction. With respect to the latter, the Court acknowledged many deficiencies in the briefing but concluded that plaintiffs addressed the engineer enough to avoid waiver. On the merits, the Court agreed that plaintiffs failed to make out an equal protection claim sufficient to get past summary judgment. To do that, the plaintiffs had to present evidence that they were in a protected class, that they were similarly situated to others in an unprotected class, and that they were treated differently. They did present some evidence of similarities with the residents of another subdivision but they failed to carry the day. There was more evidence of substantial differences between the groups, including subdivision zoning differences and the fact that the other subdivision did not even have a retention pond. In addition, plaintiffs failed to present evidence, other than their pleadings, that the other residents even belonged to an unprotected class. And finally, the record seems to show that the other residents group was actually treated less favorably than the plaintiffs. The district court did err, however, in remanding the case to state court. The case did not originate in state court and cannot be remanded there. The district court should have dismissed without prejudice.

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MATTHEWS v. WISCONSIN ENERGY CORP. (June 1, 2011)

After almost 20 years at Wisconsin Energy Corporation, Bernadine Matthews left the company in 1999. In 2003, Matthews and WEC settled a lawsuit that she had brought regarding reference requests. As part of a settlement, WEC agreed to respond to any reference requests in accordance with its policy existing at the time of the request and agreed not to say that she had been fired. In 2005, Matthews filed suit alleging that WEC breached the agreement twice in 2004. At about the same time that she filed suit, Matthews hired a consultant, Howard Schwartz, to help her find a job through a federal program for disabled persons. She gave Schwartz permission to contact third parties, including her former employers, to gather personal information. Schwartz sent a letter to WEC requesting work history confirmation and job performance comments. He advised WEC that he was assisting Matthews in her job search and that she had authorized the release of the information. One of WEC's attorneys responded. She told Schwartz that she would only provide basic work history, not performance comments. She also told him that Matthews had sued the company regarding their responses to reference requests. The district court granted WEC's motion for summary judgment and awarded attorneys’ fees. The Seventh Circuit affirmed for the most part, but reinstated the breach of contract claim based on the conversation Schwartz had with WEC's lawyer. That count was tried to a jury. The jury found for WEC and Judge Stadtmueller (E.D. Wis.) again awarded fees. Matthews appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Evans affirmed. The Court first addressed Matthews' position that the district court erred in allowing WEC to argue that she waived the provisions when she allowed Schwartz to gather personal information. It rejected both her arguments: a) WEC was not required to plead the affirmative defense of waiver because Matthews did not include the facts giving rise to the defense in her complaint (in fact, the conversation had not yet occurred), and b) the settlement agreement's writing requirement applies only to joint waivers that would affect the meaning of the contract, not to a party’s unilateral right to waive a contract term. Second, with respect to the breach and damages instruction, the Court reviewed the substantive jury instructions as a whole and found no error. Third, the Court concluded that the evidence was sufficient to support an instruction that the jury could find that Schwartz was acting as Matthews agent. Matthews submitted the instruction in a joint pretrial report, she put into evidence a stipulation that presumed agency, and she granted Schwartz broad authority to gather information on her behalf. Although the Court concluded that the evidence was not enough to establish agency as a matter of law, it was enough for the jury to find agency. Finally, the Court affirmed the district court’s award of almost $600,000 in attorneys fees. Since the fee shifting provision was in a contract and not a statute, the Court applied a "commercially reasonable" standard. Given that WEC paid the fees before the jury verdict and that Matthews' final settlement demand was $500,000, the fees are commercially reasonable. The Court declined to reduce the amount of fees on the ground that WEC did not prevail in every single respect or on the ground that the award created a financial hardship for Matthews.

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LEWIS v. CHICAGO (May 13, 2011)

In 1995, applicants for Chicago's Fire Department took a written examination. The City divided the applicants into three categories, based on their test scores. Applicants scoring 64 or less were rated not qualified. Applicants scoring 89 or more were rated highly qualified. The middle group was rated qualified but told in January of 1996 that they were not likely to be hired. The City hired applicants on 11 different occasions between May 1996 and November 2001. Each time, it chose at random from the well-qualified pool. An applicant in the qualified pool filed a charge of discrimination in March of 1997. The charge claimed that the 89 cut-off had a disparate impact on African-Americans. Several applicants later filed a class-action. Judge Gottschall (N.D. Ill.) concluded that the charge was timely, notwithstanding the fact that it was filed more than 300 days after qualified applicants were told that they were not likely to be hired. She also rejected the City's business necessity defense and awarded relief to the class. On appeal, the Seventh Circuit reversed, concluding that the charge was not timely. The Supreme Court reversed the Seventh Circuit, concluding that the 300-day clock starts anew in disparate impact litigation whenever the employer makes a hiring decision based on the challenged test. The Supreme Court's decision made the charge timely with respect to each hiring event except the first. The Supreme Court remanded for consideration of: a) whether the City preserved an argument that the charge was untimely with respect to the first hiring event, and b) whether the City preserved an argument that the plaintiffs failed to prove disparate impact arising from any particular use of the test.

In their opinion, Chief Judge Easterbrook and Judges Power and Posner affirmed the original district court opinion as modified to eliminate any relief based on the first hiring event. The Court first concluded that the City preserved both arguments identified by the Supreme Court. Since the City preserved its argument that the charge was untimely with respect to the first hiring event, and since the Supreme Court concluded that it was untimely, the Court reversed the District Court with respect to any relief arising from that event. Although the Court concluded that the City preserved its argument that the plaintiffs failed to prove any particular disparate impact, the Court rejected the argument on its merits. First, the City had conceded that the 89 cut-off had a disparate impact. Because each hiring event was a random selection from the well-qualified pool, each event resulted in the same disparate impact as the list as a whole. The Court rejected the City's argument that since it could treat the original creation of the pool as legal (because of the delayed charge), then each use of the pool was legal. In a disparate impact case, which does not require evidence of discriminatory intent during the charging period, the use of the test can be unlawful even if the original creation of the highly qualified pool was not.

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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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HERNANDEZ v. COOK COUNTY SHERIFF'S OFFICE (February 24, 2011)

Several Cook County Jail inmates escaped in February of 2006. Jail authorities immediately suspected that the escapees had inside help. One guard admitted his involvement. Six additional guards came under suspicion. Internal and criminal investigations were conducted. Several of the guards were suspended with pay. The guards also claimed they were treated harshly during the investigation and discouraged from contacting the union or an attorney. Ultimately, one guard was suspended for five days and two left the department. Administrative charges were dropped against the other three. The six guards brought suit against the Sheriff's office alleging a violation of their First Amendment rights, and included state law intentional infliction of emotional distress and false imprisonment claims. They claimed that the investigation was in retaliation for their safety complaints (the plaintiffs allegedly complained about security and overcrowding problems in the jails) and political views (the head of their unit was running for Sheriff against the incumbent sheriff's Chief of Staff). The defendants moved to dismiss the constitutional claims on qualified immunity grounds and the state law claims on statutory immunity grounds. The court never ruled on that motion. The defendants later moved for summary judgment, but only briefly argued qualified immunity and did not argue statutory immunity in their opening brief. Judge Guzman (N.D. Ill.) a) granted summary judgment on the merits on the retaliation claim based on safety complaints, b) denied summary judgment on the retaliation claim based on political views, c) denied the request for qualified immunity, concluding that defendants had waived it, and d) denied summary judgment with respect to the state law claims. Defendants appeal only the denial of qualified immunity on the constitutional claims.

In their opinion, Judges Cudahy, Flaum, and Wood reversed and remanded. The Court noted that the denial of a motion for summary judgment is ordinarily not appealable. It is, however, when the requested grounds for summary judgment is qualified immunity and when the denial involves only legal issues. Since a finding of waiver is a legal issue, the Court has jurisdiction to entertain the appeal. The Court seemed to have little difficulty in concluding that the district court erred in finding waiver. Although an underdeveloped argument can amount to waiver, it does so only when it provides inadequate notice of the argument. Here, defendants have argued qualified immunity from the beginning of the case. They argued in their motion to dismiss, they argued unambiguously (albeit briefly) in their opening summary judgment brief in a section captioned "Qualified Immunity," and they argued it at length in their reply brief. Arguments raised for the first time in reply briefs are generally considered waived, but arguments more fully developed in reply briefs do not necessarily suffer the same fate. The plain fact is that plaintiffs were on notice of the argument and defendants treatment of it did not constitute a waiver. Finding no waiver, the Court addressed the merits of the argument. The familiar test has two prongs -- whether the defendants violated a constitutional right and, if so, whether that right was clearly established at the time. When the constitutional violation concerns a public employee's First Amendment rights, a court first must determine whether the speech involves a matter of public concern. If it does, the court applies a balancing test. If it does not, the employee is not entitled to constitutional protection. Based on the district court's findings on the safety complaint retaliation claims, the Court was able to determine as a matter of law that the speech did not involve a matter of public concern. The plaintiffs were acting in response to their duties as employees and are not entitled to constitutional protection. Therefore, there was no constitutional violation, and the defendants are entitled to qualified immunity. With respect to the political retaliation claim, however, the Court was unable to reach such a conclusion. The district court failed to identify the disputed and undisputed facts, nor did it make any findings regarding materiality. The Court remanded for that purpose.

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RIGHI v. SMC CORPORATION (February 14, 2011)

SMC Corporation employed Robert Righi as a sales representative from 2004 until 2006. Righi worked out of his home in Henry, Illinois, where he lived with a roommate and his ailing mother. His principal methods of communicating with his sales manager was his cell phone and e-mail. Righi was attending a training session in Indianapolis on July 11, 2006 when he received a call that his mother was in a coma. He immediately returned home. Although he advised a colleague of his plans and asked the colleague to inform others, he did not inform his sales manager of the situation until the next morning. In fact, he turned his cell phone off and missed several calls from his sales manager on July 11. He sent his sales manager an e-mail on the morning of July 12. He stated that he needed "the next couple days off" to care for his mother, that he had vacation time, or that "I could apply for the family care act, which I do not want to do at this time." Over the next several days, Righi's sales manager attempted to reach him by phone multiple times. Righi did not answer or return the calls. His roommate finally answered one of the calls and took a message that the sales manager needed to speak with Righi as soon as possible. Righi finally called his sales manager -- after nine days of silence. SMC terminated Righi's employment the next day for violating its leave policy. The leave policy required prior approval for a leave and provided that two days absence without notification was grounds for termination. Righi brought suit against SMC pursuant to the Family and Medical Leave Act, alleging that SMC interfered with his statutory rights. Judge McDade (C.D. Ill.) granted summary judgment to SMC on two grounds: that Righi was not entitled to FMLA protection because he stated in his e-mail that he did not want it, and that he was not entitled to FMLA protection because he did not comply with the Act's regulations requiring notification of a return date. Righi appeals.

In their opinion, Judges Flaum, Wood, and Sykes affirmed. In order to be entitled to protection under the FMLA, employee must notify his or her employer of a desire to take leave and of a projected return date. With respect to the former, the Court disagreed with the district court's conclusion. Very little is required of an employee to trigger the FMLA protection. Putting an employer on notice of a basis for leave is sufficient. An employee can waive FMLA protection, but only by a clear expression of intent to do so. The Court concluded that Righi met the notice requirements with his July 12 e-mail. It mentioned the “family care act” and left open, at least, the possibility that he could choose to use it. The Court also concluded that his expressed desire not to use it was not a clear expression of a waiver. The Court agreed with the district court, however, with respect to its alternate grounds for summary judgment. Righi was obligated under the FMLA and its regulations to keep SMC informed of his anticipated return date. The regulations require him to provide that information within two working days. Here, Righi never provided that notice and, in fact, ignored all of SMC's attempts to obtain additional information. He is not entitled to the FMLA's protection.

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BUSSON-SOKOLIK v. MILWAUKEE SCHOOL OF ENGINEERING (February 10, 2011)

Dustin Busson-Sokolik attended the Milwaukee School of Engineering. In 1999, he signed a promissory note with the school in the amount of $3000. In the note, he promised to repay the money and to pay all reasonable collection costs. The School sued Busson-Sokolik in 2005 to recover the unpaid amount and obtained a default judgment of almost $6000. Busson-Sokolik filed for bankruptcy shortly thereafter. An adversary proceeding in the bankruptcy court determined that the debt was non-dischargeable. The School obtained a judgment of over $16,000 that included costs and fees. Busson-Sokolik appealed the decision to the district court, where the proceedings became rather contentious. Busson-Sokolik accused the School of false statements. The School moved to strike a portion of Busson-Sokolik's reply brief because it raised arguments not raised in the bankruptcy court or in his opening brief. Chief Judge Clevert (E.D. Wis.) denied Busson-Sokolik's motion for sanctions, granted the School's motion to strike portions of the brief and motion for costs and fees, and affirmed the bankruptcy court's judgment on the merits. He awarded over $80,000. Busson-Sokolik and his attorney appeal.

In their opinion Judges Power, Flaum, and Hamilton affirmed in all respects except that it reduced the sanction portion of the award by half. The Court noted that bankruptcy proceedings generally discharge all of a debtor's financial obligations. There are exceptions, however. One exception is for an educational loan under § 523(a)(8)(A). The Court rejected Smith's argument that the $3000 was not a loan. In order for there to be a loan, there must be a) a contract, b) the transfer of money, and c) a promise to repay the money at a later date. Those three elements are all present here. The Court also rejected Smith's argument that the loan was not educational. The Court acknowledged that some courts apply a "use" test while others apply a "purpose" test. It adopted the "purpose" test as being more consistent with the statutory language in the broader statutory goals. Here, the purpose test was satisfied because Smith was a student, he had to be a student to qualify for the loan, the money was deposited into his student account, and the loan was part of a total financial assistance package. The purpose of the loan was educational and the district court was correct in concluding that the loan was not discharged. The Court also affirmed the award of fees and costs. Although fees and costs are normally not awarded in American litigation, they are where there is a statute or a contract, unless otherwise prohibited. The promissory note contained Busson-Sokolik’s promise to pay these costs. That promise is enforceable. The Court did not consider Busson-Sokolik's arguments that fees and costs were improper under the merger doctrine. Smith did not raise that argument in either the bankruptcy court or in his initial district court brief. Thus, he has waived it twice and no exceptional circumstances exist that would compel the Court to overlook the waivers. The Court found no error in the denial of Busson-Sokolik's motion for sanctions, in that he failed to honor the safe harbor provision of Rule 9011. The Court also found ample evidence in support of the district court’s award of sanctions against Busson-Sokolik and his attorney. They ignored deadlines, filed baseless pleadings, ignored procedural requirements, and made duplicative filings. But they did not necessarily act in bad faith and the appeal was not necessarily frivolous. The merits of the merger argument was never considered because of waiver and it does have some basis in law. In light of all that and also considering Busson-Sokolik’s status as a student who has filed for bankruptcy, the Court exercised its discretion to reduce the sanctions by half.
 

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HOWELL v. MOTOROLA (January 21, 2011)

Motorola has a ERISA defined-contribution pension plan that it offers its employees. The Plan Administrator, called the Profit Sharing Committee, was appointed by the Board of Directors. The Committee selected the investments that the plan offered and monitored the plan. The participants in the plan had complete authority over their investment choices. Before 2000, the plan offered four investment options, one of which was a Motorola Stock Fund. After 2000, nine options were available, still including a Motorola Stock Fund. Motorola stock had done quite well in the 1990s, increasing in value tenfold. It was trading around $30 in May 2000. It was in May 2000 that Motorola filed an SEC report in which it reported a significant agreement with a Turkish company. The report failed to mention that Motorola had provided almost $2 billion in financing to the company. The Turkey project did not go well. By May 2001, Motorola stock was trading at about $15 a share. Bruce Howell, a former Motorola employee and plan member, filed suit in 2003. Stephen Lingis and others later intervened. The suit alleges three breaches of fiduciary duty: a) imprudence in offering the Motorola Stock Fund, b) misrepresentation or failure to disclose information about the Turkey project, and c) failure to appoint and monitor competent fiduciaries. The defendants included Motorola, the Profit Sharing Committee, and a number of individual defendants. Judge Pallmeyer (N.D. Ill.) certified a class, dismissed Howell's claims on the grounds that he signed an enforceable release, and granted summary judgment to the defendants. She concluded that no defendant breached an ERISA duty and that the defendants were entitled to the section 404(c) safe harbor. Howell and the plaintiff class appeal.

In their opinion, Judges Bauer, Wood, and Tinder affirmed. The Court first addressed Howell's appeal. He had signed a General Release as part of a severance program in 2001. The release specifically included ERISA claims but excluded claims under the "employee benefits plan" and claims which could not be released by law. Howell claimed that the release was either not voluntary or fit within one of the exclusions. On the voluntariness point, the Court concluded that Howell failed to create an issue of fact. The Court addressed the "benefits plan" exclusion as a contract matter and concluded that the only rational reading of the clause was that Howell reserved the right to assert a claim for benefits already accrued but waived the right to challenge the plan as a whole. Finally, the Court rejected the argument that the release was an agreement that purported to relieve a fiduciary from responsibility prohibited under ERISA § 410(a). The release does not relieve any fiduciary of responsibility, it merely settles claims he might have. Turning to the merits of the class appeal, the Court identified three issues: a) which of the defendants were fiduciaries, b) whether there was a breach of a fiduciary duty, and c) whether the class was harmed. On the question of which defendants were fiduciaries, the Court addressed them in categories. With respect to Motorola and the Committee, as entities, the Court identified some thorny issues. Since it would later conclude that there was no breach, it assumed that both the company and the Committee fiduciaries. The Court then concluded that each of the individual defendants was an ERISA fiduciary, either as a Committee member, a Board member responsible for selecting Committee members, or as the Vice President of benefits. The Court thus turned to the evidence of a breach. It addressed each of the three theories of liability separately. On the theory that the fiduciaries were imprudent in even offering the Motorola Stock Fund, the Court found that the “safe harbor" did not apply. The safe harbor only protects a fiduciary from responsibility as a result of choices made by someone beyond his control. The choice of funds to offer, however, is exclusively within the fiduciary's control -- the safe harbor is unavailable. It found the class' evidence on the imprudence theory quite thin, however. The participants were always provided with other options, they were almost always allowed to move investment money out of the Motorola Stock Fund, and Motorola was a fundamentally sound company. It concluded that offering a Motorola Stock fund was not a breach. The class’ failure to disclose theory is that the fiduciaries breached a duty by failing to provide information on the Turkey project to the plan participants. The same failure to provide information, argued the class, defeats their safe harbor argument. In fact, the Court accepted the district court's approach that basically equated the two standards. The Court concluded, however, that the class presented insufficient evidence of an intentionally misleading statement or material omission. Therefore, the defendants did not violate a fiduciary duty and were entitled to the safe harbor. Finally, on the failure to monitor allegations, the Court found that the same safe harbor analysis it undertook with respect to disclosure theory applied. Even without safe harbor, there would be no liability as the Court thought the allegations were close to frivolous.

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UNIVERSITY OF WISCONSIN v. PHOENIX INTERNATIONAL SOFTWARE (December 28, 2010)

The Court withdrew this opinion on February 10, 2011 and granted Phoenix’ Petition for Rehearing limited to the sovereign immunity issue. Supplemental briefing and oral argument will focus on:
       Whether the district court erred in concluding that plaintiff‐appellee Board of Regents of the University of Wisconsin (Wisconsin) did not waive any sovereign immunity it may have had
to the counterclaims asserted by defendant‐appellant Phoenix International Software (Phoenix),
or otherwise consent to their adjudication in this case?
       Whether the counterclaims brought by Phoenix against Wisconsin are compulsory or
permissive counterclaims under FED. R. CIV. P. 13? 

Phoenix International Software and the University of Wisconsin each registered the mark CONDOR with the Patent and Trademark Office. Phoenix has used the mark since 1978 and registered it in 1997. Wisconsin registered its mark in 2001. Each mark refers to computer software, although the Phoenix system is designed principally for mainframe systems and the Wisconsin system is designed principally for individual computers. Phoenix petitioned the Trademark Trial and Appeal Board to cancel Wisconsin's mark on the ground that it creates confusion. The Board granted the petition and canceled the mark. Wisconsin challenged the Board's decision by filing an action in federal district court. Phoenix counterclaimed for trademark infringement and false designation of origin. Judge Crabb (W.D. Wis.) reversed the Board’s determination on Wisconsin's motion for summary judgment and also dismissed Phoenix's counterclaims on sovereign immunity grounds. Phoenix appeals.

In their opinion, Seventh Circuit Judges Flaum, Wood (dissenting in part), and Tinder reversed and remanded for trial on the likelihood of confusion issue but affirmed on the sovereign immunity issue. The Court first addressed the likelihood of confusion issue and specifically the standard of review. Wisconsin had two choices to challenge the Board's decision: a direct appeal to the Federal Circuit limited to the record below and decided on a substantial evidence standard, or a new action in the district court allowing it to supplement the record below. Since Wisconsin chose the latter course, the Court's standard of review is layered. The Board's findings are owed typical administrative appeal deference while the new evidence is treated like a typical summary judgment record and viewed in the light most favorable to the non-moving party. That required the Court to distinguish the Board's findings from new evidence below. The Court concluded that the district court erred in reversing the Board. The principal issue in the case is the likelihood of confusion. The Board considered the actual nature and use of the software while the district court focused its analysis on the description of the products in their registration materials. But whether the public may be confused (i.e., attribute the products to a single source) is the real focus of the multiple factor likelihood of confusion test. The district court was wrong when it focused principally on the products' similarities and matters of use (and doubly wrong when it focused exclusively on the written descriptions). On the other hand, the Board was right when it focused on the facts that the marks were identical, their functions were similar, and sophisticated purchasers were likely to believe that their sources were related. The Court reinstated the Board's findings. It considered Wisconsin's new evidence but found it not sufficient to overcome those findings and compel summary judgment in Wisconsin's favor. It therefore remanded for a trial on likelihood of confusion. The Court next considered Phoenix's counterclaims, which the district court dismissed on sovereign immunity grounds. There are two exceptions to the Eleventh Amendment's grant of sovereign immunity. The first is when Congress regulates state behavior pursuant to the Fourteenth Amendment. The second is when a state waives its immunity and consents to suit. The Court noted that the Supreme Court has already found unconstitutional the Patent Remedy Act's creation of state liability for patent infringement in Florida Prepaid. Given the similarities between the two statutes, the Court found the decision controlling. With respect to waiver, the Court first rejected the argument that Wisconsin's participation in the regulated trademark process amounted to waver, again relying on Florida Prepaid. Lastly, the Court addressed and rejected the argument that Wisconsin voluntarily waived its sovereign immunity when it chose to challenge the Court's decision by filing a suit in the district court. The Court distinguished the Supreme Court's Lapides decision, in which Georgia was not allowed to invoke sovereign immunity after it removed a case from state court. Here, Wisconsin's filing simply reflected its choice of a forum for judicial review. It did not alter the nature of the proceedings in any way.

Judge Wood agreed with the majority on the likelihood of confusion with issue and also with respect to whether Wisconsin's participation in a federal regulatory program constituted a waiver of sovereign immunity. She dissented, however, on the issue of whether Wisconsin's district court challenge to the Board’s decision constituted a waiver. The issue is not, she said, whether the state is a defendant, a plaintiff, an intervenor, or an appellant. It is, instead, the voluntariness of the decision and its consequences. Here, Wisconsin chose to file a case. Lapides controls -- Wisconsin has waived sovereign immunity. Wisconsin was not even required to appeal. It could have accepted that the Board's decision. Similarly, it could have appealed to the Federal Circuit, where Phoenix would not have been able to file a counter court. Instead, Wisconsin chose to gain a litigation advantage by filing in the district court. Just like in the Lapides case, Wisconsin was using its sovereign immunity to gain a litigation advantage. Finally, Judge Wood wrote at length suggesting that it may be time to reconsider a "commercial act" exception to the scope of sovereign immunity.

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JACKSON v. PARKER (December 3, 2010)

On a spring afternoon in 2006, Wayne Jackson was southbound on Chicago’s Lake Shore Drive ("Urban America's Most Beautiful Roadway") in his pickup truck. Unfortunately, his truck was licensed as a commercial vehicle and therefore prohibited on the Drive. Chicago police officer Joe Parker noticed the plates and also observed Jackson making two illegal lane changes. Parker stopped Jackson's car and then observed a windshield crack, another ordinance violation. He also administered field sobriety tests and a breathalyzer, which he claims Jackson failed. Jackson was released after approximately 12 hours at the police station. Although his arrest report lists DUI, the prosecutor later amended the charge to negligent driving. At trial, Jackson was found guilty of improper lane usage and failing to notify the state of an address change and was found not guilty of negligent driving and driving an unsafe vehicle charges. Jackson brought a § 1983 charge against Parker, claiming a Fourth Amendment false arrest violation. Jackson claimed that Parker falsified the DUI test results. He also presented evidence that Parker regularly reported such false information as part of a scheme to increase his compensation and that he was being internally investigated for his conduct. Judge Conlon (N.D. Ill.) granted summary judgment to Parker, concluding that the unlawful lane change provided sufficient probable cause for the arrest. In the face of that probable cause, Jackson could not prevail whether or not there was probable cause for a DUI arrest. Jackson appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Posner and Tinder affirmed. The Court agreed with the district court and noted that Jackson implicitly agreed as well. Parker had reason to believe that Jackson was violating the law by even being on the roadway in a commercial vehicle. Even though he was never charged with that offense, and even if he had an illicit motivation, the arrest is reasonable. Apparently recognizing that his false arrest claim was not going to survive the appeal, Jackson's counsel reconstituted his argument as a unreasonable detention rather than a false arrest. Unfortunately for Jackson, arguments that are not presented to the district court are normally forfeited on appeal unless the interests of justice require otherwise. The Court concluded that this was not such a case.

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CLIFFORD v. CROP PRODUCTION SERVICES (November 29, 2010)

John Clifford, III, had a contract with Monsanto to farm seed corn. One of the strains he planted in 2007 was a sensitive to two herbicides. When he noticed weeds in his corn and sought advice from Monsanto, however, he was told that there were no herbicide restrictions. Clifford went to Crop Production Services (“CPS”) for the proper treatment. CPS recommended a blend of the very two herbicides to which this particular strain was sensitive. CPS mixed a custom blend on several occasions and dispensed it into a tank that it had loaned Clifford for the season. Clifford applied the herbicide himself. Within a week, Clifford noticed corn damage. He eventually destroyed all the corn in one field and some of the corn in another. Pat Geneser, a Monsanto employee, inspected the fields and suspected that the damage was caused by glyphosphate, an ingredient in a different Monsanto herbicide. Laboratory tests confirmed trace amounts of glyphosphate in the corn. Clifford brought suit against CPS for negligence. CPS defended on four grounds: a) that the glyphosphate did not cause the harm, b) that if the glyphosphate did cause the harm, it did not come from CPS, c) that if CPS was the source of the glyphosphate and it did cause the harm, CPS did not breach a duty of care, and d) the claim was barred by the economic loss doctrine. Clifford did not disclose Geneser (or anyone else) as an expert witness within the time limitations, CPS moved for summary judgment on all four of its defenses, specifically relying on the absence of expert testimony for the first three. Magistrate Judge Bernthal (C.D. Ill.) concluded that Geneser's testimony was expert testimony and that it was inadmissible because of Clifford's failure to disclose. He granted summary judgment to CPS on the grounds that Clifford could not establish causation or breach of duty. Clifford appeals.

In their opinion, Seventh Circuit Judges Posner and Wood and District Judge Adelman affirmed. The Court first concluded that Clifford waived his arguments that Geneser was a lay witness and that, even if he was an expert, his failure to disclose him was harmless. Clifford never even responded to CPS's waiver argument in its briefs. Alternatively, the Court concluded that it would affirm the summary judgment ruling even if it considered Geneser’s testimony. To defeat summary judgment, Clifford had to present sufficient testimony in three areas: that glyphosphate caused the harm, that CPS was the source of the glyphosphate, and that the harm would have been prevented had CPS exercised reasonable care. Even if admitted, Geneser's testimony would not permit a reasonable trier of fact to infer that CPS was the source of the glyphosphate or that it breached a duty of care. In fact, Clifford offered no evidence on a standard of care or its breach. To the extent that Clifford was invoking the doctrine of res ipsa loquitor, the Court stated that it was not a proper case for that doctrine. 

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BONTE v. U.S. BANK (October 19, 2010)

Travis and Jolene Bonte own a home in the small village of Woodville in west-central Wisconsin. In late 2005, they took out a third mortgage on the home. A few years later, the Bontes brought an action for rescission. They alleged that there were ten discrepancies between the HUD-1 settlement statement and the Truth in Lending Act (TILA) statement and disclosures. U.S. Bank, the mortgage holder, moved to dismiss for failure to state a claim. It argued that none of the errors alleged related to a “material” disclosure as required for TILA rescission. In response, the Bontes simply restated their allegations and the applicable legal standard. Judge Crocker (W.D. Wis.) dismissed the complaint, holding that the Bontes waived their opposition to the motion by failing to respond but also concluding that U.S. Bank was correct. The Bontes appeal.

In their opinion, Judges Posner, Rovner, and Sykes affirmed. The Court agreed with U.S. Bank’s statement of the applicable law – that rescission (at least after three days) requires proof of a “material” non-disclosure. Regulation Z identifies eighteen required disclosures and names five of them as material: the APR, the finance charge, the amount financed, the total of payments, and the payment schedule. The Court noted that the Bontes alleged that the ten errors related to the APR, the finance charge, and the amount financed. But U.S. Bank went through each of the errors and showed how they did not related to any material disclosure. The Bank provided citations and reasons why each did not qualify as a material disclosure. The Court noted that the Bontes failed to respond to any of the Bank’s arguments. Just as they did in the district court, they merely restated their conclusory allegation that the errors related to material disclosures. Iqbal requires a two-step approach. The Bontes meet the first step – a “short and plain statement” of their claim. But they failed, said the Court, to satisfy the second prong – demonstrating a plausible entitlement to relief. Just because they couched their allegation of materiality as a factual allegation, a court is not required to accept it as true. It is, in fact, a legal conclusion – not a factual allegation. By failing to respond to the Bank’s arguments, they have waived any argument that the errors related to material disclosures.

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RK CO. v. SEE (September 22, 2010)

Dr. Jackie See founded Harvard Scientific Corporation (HSC) and was very active in its efforts to develop and market a product to treat sexual dysfunction. In 1997, the FDA discovered that HSC had falsified some findings in its new drug application. The FDA began an audit and instructed HSC to cease its clinical studies. Throughout 1997 and 1998, however, HSC continued to make public statements claiming that it was moving forward with its product and that the FDA had approved further clinical trials, when it had not. In mid-1998, RK Co. purchased $500,000 worth of HSC stock. By mid-1999, HSC was bankrupt and RK’s stock was worthless. RK sued HSC, Dr. See, and other HSC employees. After lengthy litigation, Dr. See (the last remaining defendant) and RK consented to a bench trial before a magistrate judge. Magistrate Judge Keys (N.D. Ill.) found for RK on each of the claims. See appeals.

In their opinion, Judges Bauer, Rovner, and Williams affirmed. The Court first rejected See's argument that RK was not the "real party in interest" because it was not a true legal entity for several reasons: a Rule 17 (a) "real party in interest" objection may be waived, See waived it by not bringing it up until midway through the trial, the fact that he may not have known until trial is not excused since over seven years had elapsed since the complaint's filing, and the only consequence of a more timely objection would have been a substitution of parties. The Court also rejected See's standing arguments. It concluded that RK easily met the minimum requirements for constitutional standing (injury in fact, causation, and redressability) and that See waived the prudential standing argument. Next, the Court held that the magistrate judge did not err in finding that the evidence was sufficient to support the claims. See challenged the lower court's decision to admit certain deposition testimony but failed to include in the record the transcript of the proceedings below. The Court dismissed his challenge, being unable to meaningfully review the court's reasoning. Finally, the Court found no abuse of discretion in the lower court's award of prejudgment interest and attorney's fees. Prejudgment interest is presumptively available and See failed to specify any particular objections to the fees.

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WEBER v. UNIVERSITIES RESEARCH ASSOCIATION (September 2, 2010)

Katherine Weber had been employed at Universities Research Association (URA) for almost twenty years when she received a negative performance review. She believed the review was unfair and filed a grievance. The grievance was ultimately resolved in her favor and the negative review was removed from her record. Weber claims that a number of bad things began to happen to her after the grievance, ultimately including the elimination of her position in early 2004. She accepted another position with the organization under a new supervisor. Weber had difficulty with her new supervisor from the beginning. She complained that she was the victim of retaliation and that her new supervisor treated her differently than other employees. Her supervisor complained that she was not getting her work completed and became suspicious of her computer usage. URA decided to monitor her Internet usage. The results of its trace showed that Weber spent more than 16 hours in one workweek visiting websites unrelated to her work. Her usage included accessing dog-related sites and her personal e-mail accounts in connection with her dog training business. URA terminated Weber's employment for violating its policies: a) requiring disclosure and authorization of outside employment and b) prohibiting the use of URA computer equipment in connection with outside employment. Weber brought suit pursuant to Title VII for gender discrimination and retaliation. Judge Andersen (N.D. Ill.) granted summary judgment to URA. Weber appeals.

In their opinion, Judges Bauer, Kanne, and Tinder affirmed. The Court first concluded that Weber waived both claims under the direct method of proof by not sufficiently developing them in the district court. Since Weber does not challenge the district court's decision with respect to the retaliation claim under the indirect method, the only other issue before the Court was the discrimination claim under the indirect method. Weber attempted to meet the "similarly situated" element of her prima facie case by identifying a number of male co-workers who had unauthorized outside employment, who accessed the Internet for personal and outside employment use, and who accessed the Internet to view pornography. The Court concluded that Weber did not meet the "similarly situated" element. To meet that requirement, she must identify employees who engaged in similar conduct in the absence of circumstances that would distinguish their conduct from hers. The Court acknowledged that she identified multiple instances of policy violations but distinguished those violators. Weber presented no evidence that the violators had trouble finishing their work or that any of them violated a company policy "with the same reckless abandon" as Weber.

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HALE v. CHU (August 9, 2010)

Plaintiffs Hale and others filed a derivative action against China Online, Victor Chu, and others. They alleged that the defendants breached certain fiduciary duties owed to China Online and its shareholders. Chu removed, asserting that diversity exists if China Online is ignored -- and China Online should be ignored because it was fraudulently joined. Plaintiffs moved to remand and Chu moved to dismiss. Judge Kendall (N.D. Ill.) denied the former and granted the latter. The court relied on the fact that the company’s dissolution terminated plaintiffs' status as shareholders and their ability to bring a derivative action. Alternatively, the court stated that it would dismiss for plaintiffs' failure to make the requisite demand or show futility. Plaintiffs appeal.

In their opinion, Judges Bauer, Flaum, and Tinder affirmed. On appeal, the plaintiffs conceded that they had no right to bring a derivative action in the name of China Online. For the first time, they asked the Court to treat the complaint as a direct claim brought by China Online against the same defendants. The Court refused to so. An issue not raised before the district court is waived on appeal. The Court noted that the plaintiffs failed to raise the argument even after the district court invited supplemental briefs on the issue of derivative actions and dissolved corporations.

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HABITAT EDUCATION CENTER v. U.S. FOREST SERVICE (June 29, 2010)

The federal government has been managing over 1,000,000 acres of forest in the Chequamegon-Nicolet National Forest in northern Wisconsin for almost 100 years. In the last eight years, the U.S. Forest Service has proposed 17 different timber sale projects. Habitat Education Center has administratively challenged almost every project. One of those projects is the Twentymile sale, announced in 2004, covering almost 9,000 acres. The Center argued that the sale, particularly in conjunction with a prior sale on immediately adjacent property, would have a negative impact on wildlife. The Forest Service authorized the project in February of 2007 over the Center's objections. The Center's administrative appeal was also unsuccessful. They filed suit in June 2007, contending that the Forest Service' environmental impact statement failed to consider the cumulative impacts of "past, present, and reasonably foreseeable future actions," in violation of the National Environmental Policy Act (NEPA). In November of 2008, just before argument on cross motions for summary judgment, the Forest Service announced another sale, the Twin Ghost project, on immediately adjacent property. Judge Adelman (E.D. Wis.) asked for supplemental briefing but ultimately concluded that the project was not "reasonably foreseeable" under NEPA at the time of the Twentymile project authorization and granted summary judgment to the Forest Service. The Center appeals.

In their opinion, Circuit Judges Flaum and Wood and District Judge St. Eve affirmed. The Court first addressed the Forest Service's argument that the Center forfeited any claim with respect to the Twin Ghost project by not raising it in the administrative process. Instead of addressing the Center's possible forfeiture, the Court concluded that the Forest Service waived the forfeiture argument by not raising it sufficiently in the district court in the supplemental briefing. On the merits, the Court noted that several of its sister circuits (specifically citing cases from the 1st, 3rd, 9th, and 11th) have held that the effects of a contemplated project need not be discussed if there is not yet a meaningful basis for assessing the impact of the project. The Court concurred with that approach. At the time the Twentymile project was approved, the Service had not even identified the goals of the Twin Ghost project. Of course, as the Court noted, the Twin Ghost project assessment must include a thorough analysis of the cumulative effects of the Twin Ghost and Twentymile projects. Any negative cumulative effects can be addressed during that process. Finally, the Court did concede that the better practice would have been for the Service to disclose the current state of contemplated future projects, even if a thorough analysis was not possible.  

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UNITED STATES v. 5443 SUFFIELD TERRACE (June 9, 2010)

Customs officials first discovered Richard Connors smuggling Cuban cigars in 1996. They confiscated over 1100 cigars from him as he attempted to enter the United States. He continued to smuggle. He continued to get caught. On March 15, 1997, local police confiscated more cigars from Connors' home at 5443 Suffield Terrace in Skokie, Illinois. They turned them over to federal officials the following day. Finally, in late 1999, federal officials again seized hundreds of cigars from the Suffield Terrace home. Connors was convicted of several offenses. On March 14, 2002, the United States filed a civil forfeiture action to seize Connors' house. They alleged two grounds: that the house was paid for with proceeds of the smuggling operation and that the house was used to facilitate the smuggling operation. Connors moved to dismiss, arguing that the five-year statute of limitations began to run in 1996, when the United States first discovered his smuggling activity. Judge Gettleman (N.D. IL) denied the motion and granted summary judgment to the United States. Connors appeals.

In their opinion, Judges Posner, Kanne, and Rovner affirmed. The civil forfeiture statute requires that an action be filed within five years "after the time when the alleged offense was discovered." The Court found the meaning of "alleged offense" unambiguous. It refers to the offense that gives rise to the right of forfeiture. Where there are several such offenses, nothing in the statute prohibits a forfeiture action when at least one of the offenses falls within the five-year period of limitations. The civil forfeiture action in this case is based on the March 15, 1997 offense. The action is therefore not time-barred. On the merits, the Court found that Connors waived the argument that he had additional sources of income not considered by the court because he failed to raise it properly below.

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WALLACE v. MCGLOTHAN (MAY 26, 2010)

Tracey Wallace had trouble reading small print and driving at night. She decided to have surgery so that she would not need to wear contacts or glasses. She went to Dr. McGlothan for LASIK surgery. Unfortunately, the surgery was not successful. A complication arose first during the procedure on her right eye. Notwithstanding the complication, Dr. McGlothan nevertheless performed the same procedure on her left eye -- with the same result. Wallace sought treatment from Drs. Connor and Price. They treated her for years, with some improvement. She continues, however, to suffer the effects of the unsuccessful surgery. The Indiana Medical Review Panel concluded that McGlothan was negligent but only with respect to the left eye. Wallace and her husband brought suit. Judge McKinney (S.D. Ind.) granted partial summary judgment. He relied on the Panel’s opinion in finding that McGlothan violated the standard of care with respect to her left eye but was not liable for any damage to her right. A jury trial was held on damages. The defendant moved for judgment as a matter of law at the close of the evidence, arguing that Wallace failed to prove the permanence of the injury. After a jury verdict of approximately $700,000, McGlothan renewed his motion with respect to the permanence of the injury and also addressed an allegedly undisclosed pre-existing condition. The court denied the motion. McGlothan appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Tinder affirmed. First, the Court rejected Wallace's argument that McGlothan waived the pre-existing condition argument by failing to include it in his pre-verdict motion. The Court agreed that McGlothan improperly included in his Rule 50 (b) motion an argument that was not included in his pre-verdict motion. Although the plaintiffs could have objected, they did not. They therefore waived their waiver argument. The Court then proceeded to uphold the decision on the merits. First, it concluded that the objections to the expert testimony were forfeited. Second, it found the testimony of the experts sufficient for the jury to conclude that the damage was permanent. Third, it concluded that the testimony of the experts was sufficient for the jury to find a causal link between the surgery and Wallace's condition, unrelated to a pre-existing condition. Fourth, it concluded that the evidence linking the condition to the left eye as opposed to the right eye, although sparse, was sufficient. Finally, the Court rejected defendant's complaints about discovery abuse and perjury.

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SERAFINN v. LOCAL 722 (March 12, 2010)

Mark Serafinn is a member of Local 722 of the International Brotherhood of Teamsters. In fact, he served three terms as its president. Serafinn is also a member of the Teamsters for a Democratic Union ("TDU"), a large and active dissident group opposed to the current international leadership. Serafinn alleges that the presidents of the union and the joint council, which is a group of leaders from locals in the same region, colluded to have internal disciplinary charges brought against him. The joint council suspended Serafinn and ordered restitution. Serafinn brought an action against both the local union and the joint council under the Labor Management Reporting and Disclosure Act. He alleged that the actions taken against him were taken without due process in retaliation for his exercise of free speech and assembly rights, all in violation of the Act. The district court granted summary judgment to the joint council. The claim against the local union proceeded to a jury trial, where Serafinn was awarded $50,000 in compensatory damages and $55,000 in punitive damages. After trial, the court denied a motion by Serafinn for relief from the summary judgment granted to the joint council on the grounds of newly discovered evidence. The court also awarded attorneys fees to Serafinn, but in a lesser amount than requested. The union local appeals. Serafinn cross appeals.

In their opinion, Judges Bauer, Evans, and Tinder affirmed. The Court first addressed the local's contention that the district court should have given a mixed-motive instruction. The district court had instructed the jury that Serafinn's exercise of free speech had to be a "but for" cause, not just a motivating factor. In that situation, the Court stated, a mixed-motive instruction would be inappropriate. The Court noted that some courts have approved of mixed-motive liability theories in cases under the Act but that the Supreme Court's decision in Gross overruled that approach. The Court then addressed the local's challenge to a limiting instruction with respect to a witness’ misdemeanor convictions. Although the convictions may be admissible for some purposes, Rule 609 prohibits their admission to attack general character for truthfulness. Here, the lower court properly allowed the convictions into evidence for some purposes but erred when it allowed the jury to consider them for improper impeachment purposes. Nevertheless, the Court found no prejudice from the error and declined to order a new trial. Addressing Serafinn's cross-appeal, the Court concluded that his "new evidence" was simply cumulative. Finally, the Court found no abuse of discretion in the district court's consideration and decision with respect to the award of attorney's fees.

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IN RE: RAY (March 8, 2010)

Mark Ray and Berwick Black Cattle Company bought, sold, and raised cattle until involuntary Chapter 11 bankruptcy petitions were filed against them. A committee was formed to represent their creditors. The Committee retained Becker & Poliakoff (“Becker”) as litigation counsel. Even after most of their assets were liquidated, unsecured claims remained. Becker represented the Committee in adversary complaints seeking recovery of preferences and fraudulent transfers. Becker filed an interim fee application in September of 2008. The next month, the Becker lawyer responsible for representing the Committee left the firm and his new firm substituted for Becker as Committee counsel. In December of 2008, the bankruptcy court conducted a hearing to consider a number of pending motions, including a motion to dismiss filed by the debtors. Becker neither appeared at the hearing nor responded to any motions. In January 2009, the court dismissed the case. Becker filed two emergency motions seeking reconsideration of the court's ruling, which were denied. The firm appealed to the district court. Although the district court concluded that Becker had standing, it affirmed the dismissal order. Becker appeals.

In their opinion, Circuit Judges Ripple and Rovner in District Judge St. Eve vacated the judgment and remanded with instructions to dismiss for lack of standing. Before reaching the merits of the dismissal, the Court had to determine if Becker had standing. Before it reached the merits of standing, it had to determine if the lack of a cross-appeal resulted in a waiver. Unlike Article III standing, bankruptcy (or "prudential") standing may be waived by a failure to raise the issue. Even if waived, however, a court may raise bankruptcy standing on its own -- and the Court chose to do so here. On the merits of the standing issue, the Court stated that bankruptcy standing lies only with one who is affected pecuniarily by a court order and has attended and objected at a court proceeding. Becker concedes that it did not appear and object until it filed its motion to reconsider. Nevertheless, it claims that it met this requirement either because Committee counsel represented its interest at the hearing directly, or because it actually qualified as an administrative claimant and was therefore represented by Committee counsel at the hearing, or because of its motions to reconsider. The Court found no evidence of the first or second and rejected the third as a matter of law.

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NARDUCCI v. MOORE (July 9, 2009)

Many years ago, the Bellwood, Illinois comptroller became concerned that some finance department employees were making personal phone calls on village time and also were subjected to harassing phone calls from irate village residents. The village approved a proposal to begin recording department phone calls. Nicholas Narducci took over as controller several years later. When he learned about the recording, he advised village trustees that it was illegal, he alerted the FBI and he directed the Chief of Police to discontinue the activity. In 2001, he brought an action against the village, the mayor, and the police chief on behalf of a class of finance department employees whose calls were recorded. He brought a Fourth Amendment claim under § 1983 and an illegal wiretapping claim under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, as well as state law claims. The mayor and the police chief moved for summary judgment on qualified immunity grounds. The district court denied the motion with respect to the § 1983 claims and some of the Title III claims. The mayor and the police chief appeal.

In their opinion, Judges Flaum, Williams and Lawrence affirmed. The issue on appeal, whether the defendants were entitled to qualified immunity, required the Court to examine whether there had been a violation of a constitutional right and, if so, whether it was "well-established." With respect to the Fourth Amendment violation, the Court looked to the totality of the circumstances. It first found, drawing all reasonable inferences in Narducci's favor, that he had demonstrated a reasonable expectation of privacy. The Court next concluded that Narducci presented enough evidence to survive summary judgment, given that the recording lasted more than six years with no notice to the employees. Although the Court realized that no Supreme Court or prior Seventh Circuit decision squarely addressed the issue, it concluded based on decisions of other circuits that the right was sufficiently clear to preclude qualified immunity. Lastly, the Court rejected the defendants' qualified immunity defense to the Title III claims. The Court concluded that the lower court did not err in holding that defendants waived the argument by not presenting it in their opening brief. 

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ASKEW v. SHERIFF OF COOK COUNTY (May 18, 2009)

Carl Askew alleges that he was the victim of excessive force at the hands of Officer Lopez while a pretrial detainee in the Cook County Jail. He filed a lawsuit naming Lopez and the Sheriff. He included two theories of relief under a 42 U.S.C. § 1983 -- that Lopez used excessive force and that Lopez was deliberately indifferent to his safety. The district court dismissed his complaint on the grounds that he failed to name Cook County as a defendant. Askew appeals.

In their opinion, Judges Flaum, Rovner and Wood vacated and remanded. The Court concluded that the district court misapplied Rule 19. Rule 19 draws a distinction between joinder of parties when it is feasible and joinder of parties when it is not feasible -- because it would defeat jurisdiction or the party is beyond the personal jurisdiction of the court or the party could make an objection to the venue. Rule 19 (a)(1) addresses a "required party" whose joinder is feasible. Once such a party is identified, Rule 19 (a)(2) requires a court to order that the person be made a party. Here, the Court concluded that the lower court was correct in finding that Cook County was a required party, at least part of it. It correctly read Carver II for the proposition that an Illinois county is a necessary party in any suit seeking damages from its sheriff. Ironically, Askew waived his claim against the Sheriff in his appellate brief. Although he did so under the mistaken impression that the lower court was correct in dismissing the claim against the Sheriff, he is bound by his waiver. The case may still proceed against Lopez, however. The county is not an indispensable party in the case against Lopez. Any judgment entered against Lopez would be entered against him in his individual capacity notwithstanding any right on his part to recover the judgment from the county.

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HAMPTON v. FORD MOTOR COMPANY (April 6, 2009)

Collette Hampton worked the night shift Ford's Chicago assembly plant. In the summer of 2004, she allegedly experienced sexual harassment and discrimination on her job. She filed a charge of discrimination in late 2005. While awaiting a resolution of her charge, she learned that Ford was offering a buyout package to eligible employees. The program was system wide, with the goal of reducing Ford's hourly workforce. The buyout came with a lump sum payment of $100,000 in exchange for a waiver of "all rights or claims" against Ford and a promise "not to institute any proceedings of any kind" against Ford. Hampton, knowing that she was scheduled to be laid off in 2006 anyway, applied for the package. She received a written description of the program, was invited to an informational meeting, and was instructed to consult with the company or her union if she had any questions. Hampton received and cashed Ford's check and left Ford's employ. Meanwhile, however, after she applied for the program and signed the release but before she received the check, she brought an action against Ford, alleging sexual discrimination and harassment in violation of Title VII. The district court granted summary judgment to Ford, holding that Hampton had released her Title VII claims as a matter of law. Hampton appeals.

In their opinion, Judges Kanne, Evans and sites affirmed. The Court first addressed Hampton’s argument that she never intended to waive her Title VII claims. The Court found no ambiguity in the waiver language. Relying on the principle, that an unambiguous contract must be enforced as written, the Court concluded that both the waiver language and the covenant language covered and barred her Title VII claims. Next, the Court addressed Hampton’s argument that her waiver was not knowing and voluntary. The Court agreed that the release of a federal right must be knowing and voluntary but concluded that Hampton failed to present enough evidence in support of her assertion. The Court relied on Hampton’s education, the clarity of the document, the time she had to consider it, her concurrent representation by counsel and the explanations provided or offered in concluding that her waiver was knowing and voluntary.

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DELTA CONSULTING GROUP v. R. RANDLE CONSTRUCTION (February 5, 2009)

R. Randle Construction Company and Ronald Randle (“Randle”) acted as a general contractor on a high school construction project. Disputes and delays resulted in Randle suffering a loss on the project. He retained Delta Consulting Group (“Delta”) to prepare and present a Request for Equitable Adjustment (“REA”). Delta estimated that the cost of their services would be $34,000. Delta prepared and presented an REA for $1.6 million. It was rejected. Delta prepared and submitted a second REA, this one for $1.7 million. Delta and Randle met with the school’s representatives to discuss the REA. Again, the school rejected the REA as unsupported by adequate documentary evidence. Randle met with the school once again, this time without Delta. He was again unsuccessful. Randle paid Delta’s periodic invoices through March 9, 2004, several days after this last meeting. Randle ultimately paid Delta a little more than $60,000 out of $144,000 billed. Randle and the school ultimately settled their dispute for $450,000. In October of 2004, Randle’s auditors sent a letter to Delta asking it to confirm an amount owed to Delta by Randle of $89,000. Delta replied to the letter – correcting the amount to $81,000. Randle did not object. When Delta sought to collect, Randle expressed his dissatisfaction with Delta’s services. Delta sued for the $81,000. Randle counterclaimed for breach of contract, alleging that Delta did not adequately present the REA. The district court granted summary judgment to Delta and awarded prejudgment and postjudgment interest. Randle appeals.

In their opinion, Judges Bauer, Wood and Tinder affirmed on the merits and remanded for recalculation of interest. The Court upheld the district court’s finding of an account stated. An account stated, said the Court, establishes the amount of a debt when two parties agree that an account exists representing the transaction between them. When one party states the amount and the other acquiesces by not objecting within a reasonable time, the amount is acknowledged and an agreement to pay is implied. The lower original estimate of Delta does not affect the outcome. Randle a) did not contract for the estimated amount, b) continued to pay invoices over the estimate, c) asked Delta to stop collection efforts while he tried to resolve the dispute through litigation, and d) asked Delta (through his auditors) to confirm the amount it believed it owed. Delta’s reply to the auditors’ letter and Randle’s failure to object is sufficient to create an account stated. The Court also rejected Randle’s argument that he was not personally liable. He never raised the defense in the district court and, in fact, counterclaimed in both his corporate and individual capacity. The Court concluded he waived any objection. The Court also agreed with the district court that Randle waived his breach of contract counterclaim, relying on the same facts and inferences – that Randle never objected to an invoice, never asked for the return of money, and continued to pay invoices. Finally, the parties agreed that the district court erred in applying Illinois, rather than federal, standards for postjudgment interest. The Court remanded for a recalculation.

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ARMSTRONG v. LASALLE NATIONAL BANK (January 13, 2009)

A number of lawsuits were initiated in several different federal district courts by participants in Amsted Industries, Inc.’s (“Amsted”) Employee Stock Ownership Plan (“ESOP”). The complaints allege violations of ERISA, breach of contract, breach of fiduciary duty and conversion. The Judicial Panel on Multidistrict Litigation (“Panel”) consolidated the cases for pretrial proceedings in the Northern District of Illinois. That court ordered the cases consolidated into two groups – retiree claims and non-retiree claims. The non-retirees added LaSalle Bank as a defendant. All the claims eventually were resolved except the non-retiree claims against LaSalle. The non-retiree plaintiffs and LaSalle participated in pretrial proceedings, including the setting of a trial date. A few weeks before the pretrial order was due, the plaintiffs moved to remand their claims. LaSalle objected. The court granted the remand, reluctantly and with some consternation. It also certified two questions under 28 U.S.C. § 1292(b): a) whether filing an amended complaint agreeing to jurisdiction and venue and adding a defendant that can only be sued in the transferee court constitutes consent to trial in the transferee court, and b) whether waiver of a right to remand under § 1407 requires evidence of a “deliberate relinquishment of a known right.” LaSalle appeals.

In their opinion, Judges Ripple, Rovner and Tinder affirmed. The Court began with the statute. Section 1407(a) provides that cases transferred and consolidated by the Panel “shall be remanded” to the transferor court after pretrial proceedings, unless otherwise terminated. The Court mentioned the Supreme Court’s emphasis on the plain meaning of the statute in Lexecon vs. Milberg Weiss, in which the Supreme Court struck down the practice of district courts transferring a case to itself. The analysis did not stop with Lexecon, however. The Court recognized that § 1407(a) is a venue statute. Since a party can consent to venue and waive its right to remand, the Court addressed waiver. The Court found no authority on the proper standard to apply in a § 1407(a) waiver context. It found its jurisprudence on the waiver of a right to arbitrate instructive. In Halim v. Great Gatsby’s Auction Gallery, the Court held that the standard to determine waiver of the right to arbitration is whether, under all the circumstances, the party alleged to have waived has acted inconsistently with that right. The focus should be on the party’s actions as a whole, not any one action. The Court suggested that the standard for a § 1407(a) waiver should be higher than for a right to arbitrate, noting the statutory source of the remand right as well as the mandatory language. The Court did not actually decide the issue since it concluded that LaSalle could not even get over the “acted inconsistently” hurdle. On the merits of the waiver, the Court stated that only two actions of the plaintiffs were cited as supporting a waiver – its statement in the consolidated complaint that venue was proper in the transferor court and its participation in pretrial proceedings in which trial dates were set. Neither, in the Court’s view, amounted to a waiver. With respect to the venue statement, the Court noted that the consolidated complaint was filed at the request of the court and that venue, in fact, was proper in that court. Nothing about the statement was inconsistent with a desire for a remand. With respect to the plaintiffs’ participation in pretrial proceedings in which trial dates were set, the Court admitted that much aggravation could have been avoided had the plaintiffs made their intentions more clear. However, the conduct was not inconsistent with a desire for a remand.

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WHITE EAGLE COOPERATIVE v. CONNER (January 12, 2009)

Congress enacted the Agricultural Marketing Agreement Act of 1937 (“AMAA”) to regulate the milk producing industry. The AMAA establishes a minimum uniform price for milk in a particular region without regard to its end use. The Department of Agriculture (“USDA”) promulgates milk marketing orders in the different regions. The marketing orders identify the plants and handlers that are regulated. They also determine whether a particular supply of milk is included in the calculation of the blended price for the milk and whether a particular supply receives that price. A diversion limit is the maximum amount of milk a handler can divert to a plant not participating in the program and still be entitled to the blended price. In early 2005, the USDA began a rulemaking addressed at reducing the diversion limit standards. White Eagle Cooperative, a cooperative of milk producers, opposed the amendment. The USDA conducted a hearing in March and issued a interim rule on an emergency basis in July. The interim rule did reduce the diversion limits and became effective in October. A similar final rule was issued in 2006. White Eagle filed a complaint in federal district court. White Eagle alleged that the USDA: a) violated due process by allowing employees of the program administrator to participate in the rulemaking process, b) violated the Regulatory Flexibility Act (“RFA”) by failing to do the proper analysis and support its certification, c) violated the Administrative Procedure Act (“APA”) by failing to support its emergency rule, d) improperly delegated rulemaking authority, e) violated the AMAA by considering end use in its rulemaking, and f) violated the APA by making a decision without adequate record support. The district court granted summary judgment to the USDA. White Eagle appeals.

In their opinion, Judges Ripple, Kanne and Williams affirmed. The Court first addressed the due process argument. White Eagle argued that employees of the organization administering the milk marketing order were biased in favor of the producers because the producers could vote to eliminate the order and, it follows, their jobs. The Court found that White Eagle waived its argument. White Eagle knew as early as February 2005 that these employees were involved in the multi-day hearings and promulgation of the interim rule and yet did nothing. The APA required White Eagle to raise its concerns of bias in a timely manner. The Court next addressed White Eagle’s argument that the USDA failed to address the impact of the regulation on small businesses, as required by the RFA. The Court, noting that it had not yet addressed RFA standing, reviewed the jurisprudence developed in the D.C. Circuit. The Court followed that body of law and concluded that a small entity must be directly regulated by the program to have standing. Since the AMAA regulates handlers, not producers, the Court concluded White Eagle has no standing under the RFA.

The Court addressed two procedural arguments and two substantive arguments on the merits. With respect to the USDA’s support for its emergency rulemaking, the Court did criticize the agency for its lack of specific findings but found its identification of the problem “marginally sufficient” support for the rule. The Court also found no improper delegation of the Secretary’s authority. The Court rejected White Eagle’s substantive arguments: a) it found no support for White Eagle’s claim that the USDA could not consider the end-use of the product in promulgating a regulation, and b) it concluded that the USDA did not “dismiss” White Eagle’s arguments – it simply found them unpersuasive.

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