Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Articles Posted in March, 2012
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FS and AOS discussed working together to develop a pump motor to prevent entrapment of swimmers by suction created by pool drains. FS sent a letter discussing specific features. After months of correspondence, FS sent another letter, with test results from a previous unsuccessful design and desired features. None of the correspondence mentioned confidentiality. Eventually FS signed the AOS standard one-way confidentiality agreement, stating that FS was a supplier of research consulting services. FS did not require AOS to enter into a confidentiality agreement. After signing the agreement FS shared more details. The relationship broke down when the companies began discussing a formal marketing agreement. AOS eventually introduced and marketed pump motors that FS claims incorporated its trade secrets. FS sued for misappropriation of trade secrets and unjust enrichment under Wisconsin law. The district court granted summary judgment in favor of AOS, finding the misappropriation claim barred by a three-year statute of limitations and that FS failed to take reasonable steps to protect claimed trade secrets. Voluntary disclosure of information defeated the unjust enrichment claim. The Seventh Circuit affirmed.

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In 2010 the Seventh Circuit held that California law applied to plaintiff’s securities fraud claims and remanded because California, unlike federal securities law, permits a person who did not purchase or sell stock in reliance on a fraudulent representation to sue for damages. On remand the district court dismissed, ruling that the complaint did not adequately allege defendants' state of mind and plaintiff's reliance on particular false statements. The Seventh Circuit affirmed. Plaintiff never explained how he could have avoided loss on his shares, had there been earlier disclosure. Mismanagement, not fraud, caused the loss. Any fraud just delayed the inevitable and affected which investors bore the loss. Plaintiff cannot show that earlier disclosure would have enabled him to sell and shift the loss to others before the price dropped.

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The Atomic Energy Act, 42 U.S.C. 2011, requires that nuclear generators implement access authorization programs. Many employees at privately-owned nuclear power plants must receive a security clearance with "unescorted access" privileges. When such access is denied or revoked, the Nuclear Regulatory Commission requires owner-licensees to provide the aggrieved worker with a review procedure. From 1991 to 2009, the Commission took the position that labor arbitrators could review access denials at unionized facilities. Courts agreed. In 2009, the Commission completed post-9/11 overhaul of security requirements. New language was ambiguous as to whether the Commission had changed its policy to prohibit arbitral review. The district court entered declaratory judgment that the amendments prohibited arbitration of access denial decisions. The Seventh Circuit reversed, concluding that the Commission did not "flip-flop on an important, longstanding, and controversial policy without clearly indicating either in the text of the rule or at any point in the rulemaking history that it was doing so."

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A new customer of the bank (Ott) obtained a loan to finance the purchase of a motor home from the dealership that Ott himself owned. Ott presented the certificate of origin and pledged the motor home as collateral. When Ott defaulted two years later, the bank discovered that the certificate of origin was a fake and the motor home did not exist. The bank’s insurer denied recovery because the fake certificate of origin did not meet the insurance bond definition of "Counterfeit." The district court ruled in favor of the insurer. The Seventh Circuit affirmed. The certificate of origin did not imitate an actual, original certificate of origin for a 2007 motor home because there never was an actual, valid, original certificate for the vehicle pledged as collateral: the manufacturer never produced the vehicle described.

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Plaintiff received 24 parking tickets over a 14-month period. All arrived by mail, typically in batches. All were written by Chicago Police Department Unit 253. Some were inconsistent, implying that the Toyota was in two places at once or was simultaneously double-parked and parked on the sidewalk. All 13 tickets attributed to one officer issued on four dates, had sequential numbers, and recorded the time as 10:00 p.m. Four issued after plaintiff sold the Toyota. Because none were legitimate, all were dismissed, but plaintiff had to go to court seven times. Plaintiff complained to the supervisor, the Internal Affairs Division, and Independent Police Review, then contacted the Chicago Tribune, which ran several stories. The Internal Affairs Division began an investigation that resulted in a recommendation to fire several officers. The district court dismissed a 42 U.S.C. 1983 case. The Seventh Circuit affirmed with respect to a substantive due process claim, stating that plaintiff did not plead facts suggesting a deprivation that meets the high threshold for such claims. The court reversed dismissal of a class-of-one equal protection claim and related civil conspiracy claim, stating that the disturbing pattern, without reasonable explanation, adds up to deliberate and unjustified official harassment.

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While on patrol, Officer Turner spoke to a man who reported that someone had just broken into his home and fondled his two daughters, who had been sleeping. A short time later, Turner interviewed the girls, who described the intruder as wearing camouflage cargo shorts and a dark baseball cap. Turner left the house and stopped a man walking a dog in an alleyway near the house (plaintiff). Plaintiff was wearing camouflage cargo shorts and a black baseball cap. No one else was in the area. Plaintiff agreed to stay in the police cruiser, Turner re-interviewed the girls, called the state's attorney's office for advice, arrested plaintiff, and conducted a "show-up," where the girls identified plaintiff as the intruder. The state court later dismissed charges for lack of evidence. The district court entered summary judgment for defendants in plaintiff’s suit under 42 U.S.C. 1983, and Illinois state law. The Seventh Circuit affirmed with respect to a false arrest claim against Turner and an indemnification claim against the county (Local Governmental Tort Immunity Act, 745 ILCS 10/1-101).

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The company, formed in 2003 to franchise stores, was forced into reorganization bankruptcy under Chapter 11. The bankruptcy judge granted a motion to convert to Chapter 7 liquidation, over objection by a five percent shareholder who had been the company’s president (Wallis). The judge rejected allegations of fraud and a request that the court compel franchisees to pay what Wallis claimed they owed. The district court and Seventh Circuit affirmed, first holding that it had jurisdiction although the bankruptcy case has not been closed. The court rejected an argument that, because creditors’ claims were based on contracts that were subject to arbitration, they were outside the jurisdiction of bankruptcy court. The court noted that Wallis has filed eight appeals to the district court and five to the Seventh Circuit, "all pro se and frivolous. Enough is enough. The next time he files a frivolous appeal he will be sanctioned."

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In 1996 defendant and his cousin formed companies that bought, stored, and sold grain, and provided farming services. In 1999, the cousins obtained bank loan by falsely representing that valuable contracts existed for future grain deliveries from one company to the other and inflating balances of bank accounts by writing bad checks between accounts. Charged with loan fraud and check-kiting (18 U.S.C. 1344) that cost the bank more than $2.5 million, the cousin pled guilty. Defendant testified that the transactions were in good faith, but was convicted and sentenced to 70 months in prison and restitution in the amount of $1,967,055.30, the outstanding balance on the loans. The Seventh Circuit affirmed, rejecting arguments that the indictment was multiplicitous; that there was insufficient evidence of guilt beyond a reasonable doubt; that sentencing under 2009 guidelines violated the ex post facto clause; that loss and restitution amounts were miscalculated; that an enhancement for obstruction of justice was improper; and that the disparity between defendant’s sentence and that of his cousin was improper.

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Plaintiff is serving time in a state prison, but was transferred to county jail to attend court proceedings. During two stays, the jail applied a policy of making “nutriloaf” the exclusive diet of prisoners who had been in segregation at the time of transfer, regardless of behavior in the jail. After two days, plaintiff began vomiting and experiencing stomach pains and constipation. He stopped eating nutriloaf and subsisted for eight days on bread and water, losing 8.3 percent of his weight during two stays. A jail infirmary nurse gave him antacids and a stool softener. Upon return to prison he was diagnosed with an anal fissure. In response to his 42 U.S.C. 1983 suit, defendants submitted only a "preposterous affidavit from a sheriff's officer" indicating that nutriloaf is nutritious. The district court dismissed. The Seventh Circuit reversed, in part, noting that defendants' decision "to defy rather than to defend" make it impossible to know the part diet played in making plaintiff sick. It is possible that jail officials were aware that nutriloaf was sickening him yet decided to do nothing, showing deliberate indifference to a serious health problem in violation of the Eighth Amendment. The court suggested sanctions against defendants.

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Defendant discarded a loaded handgun during a foot chase with police and was arrested for unlawfully possessing a firearm as a felon. He signed a Miranda waiver and began giving a statement, but soon invoked his right to counsel. Officers halted the interview and summoned a guard to take defendant to his cell. Defendant changed his mind and asked to speak without counsel present. The interview was recorded. After new Miranda warnings, officers asked if he wanted a lawyer. He replied, “Yeah, I do, but you ....” Officers reminded him that they could not talk if he was asking for counsel. After a long pause, defendant stated unambiguously that he wanted to continue without a lawyer and gave a statement. The district court denied a motion to suppress, defendant was convicted, and, based on designation as an armed career criminal because of three prior felony convictions, was sentenced to 252 months. The Seventh Circuit affirmed the conviction, but vacated the sentence. Officers did not violate the Miranda/Edwards rule. A conviction for the Illinois crime of making insulting or provoking physical contact with a peace officer is not a violent felony under the ACCA.