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

Articles Posted in Contracts

By
The property owners, participants in the “Section 8” federal rental assistance program (42 U.S.C. 1437f(a)), sued the Wisconsin Housing and Economic Development Authority for allegedly breaching the contracts that governed payments to the owners under the program, by failing to approve automatic rent increases for certain years, by requiring the owners to submit comparability studies in order to receive increases, and by arbitrarily reducing the increases for non-turnover units by one percent. Because Wisconsin Housing receives all of its Section 8 funding from the U.S. Department of Housing and Urban Development (HUD), the Authority filed a third-party breach of contract claim against HUD. The district court granted summary judgment in favor of Wisconsin Housing and dismissed the claims against HUD as moot. The Seventh Circuit affirmed, noting that the owners’ Section 8 contracts were renewed after the challenged requirements became part of the program. “The doctrine of disproportionate forfeiture simply does not apply,” and Wisconsin Housing did not breach any contracts by requiring rent comparability studies in certain circumstances or by applying a one percent reduction for non-turnover units. View "Evergreen Square of Cudahy v. Wisconsin Housing & Economic Development Authority" on Justia Law

By
In the first case in “a long‐running and acrimonious business dispute,” Lardas claimed fraudulent inducement and breach of contract, arising from a settlement agreement, which Lardas argued was intended to deprive her nephew (Christofalos) of his ownership interest in Wauconda Shopping Center (WSC). The Seventh Circuit affirmed dismissal of Lardas’s case without prejudice, finding that Lardas lacked standing. Lardas had transferred her ownership in a predecessor entity to Christofalos. The second case involves Christofalos’s bankruptcy, in which the court authorized the sale of his interest in WSC (11 U.S.C. 363(b)). The Seventh Circuit dismissed an appeal as moot because the sale has been consummated and third parties have acted in reliance. Christofalos also challenged the denial of a discharge, based on a bankruptcy court finding under 11 U.S.C. 727(a)(4)(A), which authorizes denial of discharge where the debtor has “knowingly and fraudulently … made a false oath or account.” The Seventh Circuit affirmed, noting that Christofalos made a “host of false statements and omissions.” The court also affirmed denial of Christofalos’s “Motion to Reopen Case and Assign a Receiver” in Lardas’s case. View "Christofalos v. Grcic" on Justia Law

By
Frye was seriously injured in an accident while driving for his job. Frye accepted $100,000, the per-person limit, from the other driver’s insurer, assigning it to his lawyer and to his employer’s insurer, Auto-Owners, from which Frye had received $692,895.79 in workers’-compensation benefits. Frye’s injuries were also covered by commercial automobile and commercial umbrella policies, issued by Auto-Owners to Frye’s employer. The automobile policy required Auto-Owners to pay any compensatory damages Frye was legally entitled to recover for bodily injuries caused by an underinsured motorist. The umbrella policy afforded follow-on coverage. Auto-Owners agreed to pay Frye $1,282,314.21: $900,000 under the automobile policy ($1 million in total coverage, less $100,000 from the other insurer); and $382,314.21 under the umbrella policy ($1 million in UIM coverage, less $617,685.79 in net workers’-compensation payments). Frye argued that Indiana law required Auto-Owners to provide through its umbrella policy UIM coverage in an amount equal to the policy’s general liability limit ($5 million) and that the setoff for workers’-compensation payments was impermissible under the contract and Indiana public policy. The district court awarded AutoOwners summary judgment. The Seventh Circuit reversed. While Indiana law allowed Auto-Owners to abstain from providing UIM coverage in the umbrella policy, once it provided such coverage it was required under Section 27-7-5-2(a) to provide that coverage in limits equal to the policy’s general liability limit: $5 million. It cannot decrease that cap based on workers’ compensation payments. View "Frye v. Auto-Owners Insurance Co." on Justia Law

By
Wilson was an admissions representative, recruiting students to CEC’s culinary arts college. Wilson earned a bonus for each student that he recruited above a threshold who either completed a full course or a year of study. If a representative was terminated, he was entitled only to bonuses already earned, not including students “in the pipeline.” CEC reserved the right to “terminate or amend” the contract at any time, for any reason, in its sole discretion. The Education Department released regulations, to become effective in July 2011, prohibiting institutions participating in Title IV student financial aid programs from providing bonuses based on securing enrollment. CEC decided to pay bonuses that were earned as of February 28, 2011, depriving Wilson of bonuses that were in the pipeline. CEC raised the base salary by at least the total of 3% plus 75% of each representative’s previous two years’ bonuses. Wilson sued. The Seventh Circuit remanded, holding that Wilson must prove that CEC exercised its discretion in a manner contrary to the parties' reasonable expectations. On remand, the district court rejected an argument that cost savings, not compliance with the regulations, drove CEC’s decision. There were no cost savings to CEC. The Seventh Circuit affirmed. Even accepting Wilson’s characterization, the evidence is insufficient to allow a jury to reasonably conclude that CEC breached the implied covenant of good faith and fair dealing. View "Wilson v. Career Education Corp." on Justia Law

By
RiverStone had collective bargaining agreements (CBAs) with the union, requiring RiverStone to contribute a specified dollar amount to specified welfare and pension funds “for each hour for which an employee receives wages under the terms of this Agreement.” RiverStone’s employees voted to decertify the union. RiverStone stopped contributing to the funds, which filed suit under 29 U.S.C. 1145, the Multiemployer Pension Plan Amendments Act of 1980, seeking payment of the contributions that would have been due under the last CBA until its 2015 expiration. The Seventh Circuit affirmed summary judgment in favor of the funds. The CBA made the company’s obligations to the fund survive decertification, and a union is not the only party with standing to enforce an employer’s obligation to contribute to an employee welfare plan. Once multiemployer plans promise benefits to employees, they must pay even if the contributions they expected do not materialize, so “if some employers do not pay, others must make up the difference.” Nothing in the Employee Retirement Income Security Act (ERISA) makes the obligation to contribute depend on the existence of a valid CBA. The CBA became unenforceable by the union when the union was decertified, but the agreement did not cease to exist until its term ended. View "Midwest Operating Engineers Welfare Fund v. Cleveland Quarry" on Justia Law

By
Dana had a dealer agreement in Texas with AISCO. Unbeknownst to Dana, AISCO sold off most of its assets to newly-formed DanMar, which transferred the assets to UJoints. The name “UJoints” had been a trade name used by AISCO. Under Texas Business and Commerce Coe 57.154(a)(4), “a supplier may not terminate a dealer agreement without good cause.” Good cause exists “if there has been a sale or other closeout of a substantial part of the dealer’s assets related to the business.” Dana terminated the agreement, preventing UJoints from claiming to have been authorized to step into AISCO’s shoes and become a Dana dealer in Texas. The Seventh Circuit affirmed summary judgment in favor of Dana, finding that the transfers gave Dana good cause to terminate its dealer agreement with AISCO. The court rejected an argument that Dana entered into a “dealer agreement,” with the “new, unknown entity the identity of which the owners had concealed from Dana for a significant time.” It was natural for Dana to continue selling, for a time, to its dealer’s, AISCO’s, successor—UJoints. Those sales did not make UJoints a party to a dealer agreement. View "Texas Ujoints LLC v. Dana Holding Corp." on Justia Law

By
Aventine bought ethanol from Glacial. In 2009, the parties executed “termination agreements” that required Aventine to pay Glacial $898,000 for ethanol received before the specified termination date and required Glacial to pay Aventine $1,250,000 for commissions it would have owed for marketing the ethanol that Aventine had agreed to buy. Glacial agreed to assume Aventine’s leases and began using 473 Union Tank railcars for transporting ethanol. When Aventine declared bankruptcy, Glacial owed it $1,600,000 for commissions and railcar leases; Aventine owed Glacial $900,000 for ethanol purchased from Glacial before the termination date. Glacial refused to pay Aventine anything, while continuing to use the railcars. Bypassing Aventine, Glacial made a deal with Union Tank, without securing a release of Aventine, as required by the termination agreements. Consequently, Aventine was required by its bankruptcy plan to settle the Union Tank debt, using $2.3 million worth of Aventine stock. After the bankruptcy, Aventine sued Glacial. The district court granted Glacial summary judgment, stating that while it would be “unjust” to allow Glacial “to avoid any liability” to Aventine, the latter’s failure to make payments doomed Aventine’s claims because “performance is an essential element of its claim for breach of contract.” The Seventh Circuit reversed, holding that it was error to place all the onus on Glacial, as both parties had defaulted. View "Aventine Renewable Energy, Inc v. Aberdeen Energy, LLC" on Justia Law
By
Posted in:
Updated:

By
Prather, age 31, tore his left Achilles tendon playing basketball. He scheduled surgery for July 22. On July 21, he called the surgeon’s office complaining of swelling and that an area of the left calf was sensitive and warm to the touch. The surgery was uneventful and he was discharged from the hospital the same day. He returned to work and was doing well in a follow-up visit to his surgeon on August 2. Four days later he collapsed, went into cardiopulmonary arrest, and died as a result of a blood clot in the injured leg that had traveled to a lung. Prather’s widow applied for benefits under his Sun Life group life insurance policy (29 U.S.C. 1132(a)(1)), which limited coverage to “bodily injuries ... that result directly from an accident and independently of all other causes.” The district court granted Sun Life summary judgment. The Seventh Circuit reversed, noting that deep vein thrombosis and pulmonary embolism are risks of surgery, but that even with conservative treatment, such as immobilization of the affected limb, the insured had an enhanced risk of a blood clot. The forensic pathologist who conducted a post-mortem examination of Prather did not attribute his death to the surgery. View "Prather v. Sun Life & Health Insurance Co." on Justia Law

By
Plaintiffs filed a putative class action suit against their former employer, alleging violations of the Illinois Wage Payment and Collection Act (IWPCA), and other state wage payment statutes, including the New York Labor Law and California Labor Code. They claimed that Medline’s practice of accounting for year-to-year sales declines in calculating and paying commissions was impermissible under the terms of their employment agreements and state wage laws. The district court granted Medline summary judgment, finding that plaintiffs had not performed enough work in Illinois for the IWPCA to apply and that Medline and the plaintiffs had agreed to Medline’s method of calculating commissions, so there was no violation of state wage laws. The Seventh Circuit affirmed. Medline’s commission structure is consistent with the written agreements. The court rejected an argument that the structure was, nonetheless, a per se violation of New York and California labor law because it impermissibly recoups Medline’s business losses from its Sales Representatives, even when those losses are outside Sales Representatives’ control. Medline’s inclusion of negative growth in its commission calculation was not an unlawful deduction in disguise, but rather a valid means of incentivizing their salespeople to grow business in their assigned territories. View "Cohan v. Medline Industries, Inc." on Justia Law

By
In 2005, Duke Energy bought, from Benton, renewable energy at a price high enough to enable construction of wind turbines, and acquired tradeable renewable‑energy credits. The contract requires Duke to pay Benton for all power delivered during the next 20 years. When Benton's 100-megawat facility started operating in 2008 it was the only area wind farm. Duke paid for everything Benton could produce. The regional transmission organization, Midcontinent Independent System Operator (MISO), which implements a bidding system for the network, cleared the power to the regional grid. By 2015, aggregate capacity of local wind farms reached 1,745 megawatts, exceeding the local grid’s capacity. At times, would‑be producers must pay MISO to take power; buyers get free electricity. Initially, MISO allowed wind farms to deliver to the grid no matter what other producers (coal, nuclear, solar, hydro) were doing, which meant that such producers had to cut back. On March 1, 2013, the rules changed to put wind farms on a par with other producers. Under MISO’s new system, with Duke’s responsive bid, Benton has gone from delivering power 100% of the time the wind allowed to delivering only 59% of the time. The district court agreed with Duke that, when MISO tells Benton to stop delivering power, it does not owe Benton anything, rejecting Benton’s claim that Duke could put Benton’s power on the grid by bidding to displace other power, and that when Duke does not, it owes liquidated damages. The judge found that bidding $0 is “reasonable” cooperation. The Seventh Circuit reversed; the contract implies that Duke must do what is needed to make transmission capacity available. View "Benton County Wind Farm LLC v. Duke Energy Indiana, Inc." on Justia Law