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

Articles Posted in Legal Ethics

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The Seventh Circuit held, in 2012, that the plaintiffs, injured by a 2007 flood in Bagley, Wisconsin, had forfeited an argument concerning Wis. Stat. 88.87, which concerns liability for negligent design and maintenance of a railroad grade that causes an obstruction to a waterway. Plaintiffs’ counsel identified new plaintiffs and refiled the same litigation in Arkansas state court to pursue that argument. The new suit was removed to the Western District of Wisconsin, which dismissed. The defendant asked the court to sanction plaintiffs’ counsel under FRCP 11 or 28 U.S.C. 1927 for pursuing frivolous claims and engaging in abusive litigation tactics. The court denied that request, reasoning that although the claims were all but foreclosed by the 2012 decision, they were not frivolous. The Seventh Circuit affirmed the dismissal, but reversed the denial of sanctions. The record indicated that counsel unreasonably and vexatiously multiplied the proceedings by filing suit in Arkansas, which had no connection to the case. On rehearing, the Seventh Circuit noted its inherent authority to sanction willful abuse of the judicial process. Stombaugh long had notice of the conduct on which BNSF sought sanctions, and had multiple opportunities make his case against the award of sanctions. View "Boyer v. BNSF Ry. Co." on Justia Law

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Fowler pleaded guilty in Indiana to unlawful possession of a firearm by a “serious violent felon” who was also a habitual offender. The judge sentenced him to 15 years’ imprisonment for the possession offense and 15 extra based on his criminal history. While his case was on appeal, the Supreme Court of Indiana held (Mills) that a prior conviction used to establish “serious violent felon” status cannot also be used to establish habitual offender status. Fowler’s appellate lawyer did not raise Mills before the appellate court, which affirmed his sentence. On collateral review, the same court held that Fowler’s plea bargain waived reliance on the approach that Mills adopted. Fowler then sought federal relief under 28 U.S.C. 2254, claiming ineffective assistance of counsel. The district court denied this petition, relying on the state judiciary’s conclusion that Fowler had waived the benefit of Mills. The Seventh Circuit vacated, noting that Judge Magnus-Stinson, who denied Fowler’s federal collateral attack, had also sentenced Fowler during her time on the state’s bench; 28 U.S.C. 455(a) requires the case to be heard by a different federal judge. Section 2254 is designed to ensure that a fresh pair of eyes looks at the matter, from a different perspective. View "Robertson v. Butts" on Justia Law

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On behalf of Lightspeed, which operates websites purveying online pornography, attorneys Hansmeier, Steele, and Duffy sued a John Doe defendant in Illinois state court under the Computer Fraud and Abuse Act, 18 U.S.C. 1030, then served ex parte subpoenas, demanding that Internet service providers (ISPs), provide personally identifiable information of more than 6,600 “co‐ conspirators.” They filed similar actions in several states, apparently hoping to extract quick settlements from individuals whose personal information was revealed. The ISPs removed the Illinois case to federal court. Meanwhile, a California court imposed sanctions on the attorneys in a similar case; they began voluntarily dismissing cases. After the Lightspeed case was dismissed, a defendant sought attorney’s fees. The court imposed sanctions of $261,025.11, jointly and severally, against the attorneys. They failed to pay. The court scheduled a show‐cause hearing. The attorneys, who claimed insolvency, did not comply with interrogatories and requests for production. After the attorneys attempted to interfere with their financial institutions’ compliance with subpoenas, the court held them in contempt. The Seventh Circuit affirmed. The attorneys continued their "shenanigans." The Lightspeed defendants discovered efforts to hide assets; the district court again imposed contempt and discovery sanctions. The Seventh Circuit dismissed Hansmeier’s appeal, noted that Duffy is now deceased, and affirmed the discovery sanction, but vacated the contempt sanction for Steele. View "Lightspeed Media Corp. v. Smith" on Justia Law

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Attorney Turza sent fax advertisements to accountants. In 2013, the Seventh Circuit affirmed that these faxes violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227, but reversed a plan to distribute a $4.2 million fund to the class members and donate any remainder to charity. Meanwhile, Turza posted a $4.2 million supersedeas bond. Invoking the common-fund doctrine, the district judge awarded class counsel about $1.4 million. TCPA authorizes an award of up to $500 per improper fax. The court ordered two-thirds of that sent to every class member. If some members fail to cash their checks or cannot be found, there would be a second distribution. The maximum paid out per fax would be $500. If money remains, the residue returns to Turza. The Seventh Circuit reversed in part. This is not a common-fund case; suits under TCPA seek recovery for discrete wrongs. If a recipient cannot be located, or spurns the money, counsel are not entitled to be paid for that fax. TCPA is not a fee-shifting statute. Turza is not required to pay the class’s attorneys just because he lost the suit. Distributing more than $500 per fax ($333 to the recipient and $167 to counsel) would either exceed the statutory cap or effectively shift legal fees to Turza. The $4.2 million represents security for payment, so once the debt is satisfied, the surplus can be returned to Turza. View "Holtzman v. Turza" on Justia Law

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Indiana Rules for the Admission to the Bar and the Discipline of Attorneys state: “No person who advocates the overthrow of the government of the United States or this state by force, violence or other unconstitutional or illegal means, shall be certified to the Supreme Court of Indiana for admission to the bar of the court and a license to the practice of law.” Plaintiff intends to engage in “revolutionary advocacy,” as by distributing the Charter of Carnaro and Marx and Engels’ Communist Manifesto. He challenged the Rule, without stating that he intends to advocate the overthrow of the government. The Seventh Circuit affirmed dismissal of the suit as premature. Plaintiff has not applied for admission to the Indiana bar and lacks standing. The rule will harm him only if he would be admitted to the Indiana bar were the rule to be invalidated: “that is highly unlikely,” given “his tempestuous relations with the Illinois bar authorities,” who deemed him unfit to practice law, citing his failure to acknowledge on his applications his multiple arrests and firings over the previous decade. View "Otrompke v. Skolnik" on Justia Law

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Attorney Conour stole more than $4.5 million from clients’ trust funds, was convicted of fraud, and is serving 10 years in prison. Shortly before Conour’s crimes came to light, attorney Devereux left Conour Law Firm, taking clients with him to Ladendorf’s law firm. These clients ultimately produced attorneys’ fees aggregating some $2 million. The money was claimed by Devereux and the Ladendorf Firm (the Lawyers), several of Conour’s victims, and the lender on a loan to the Conour Firm to finance contingent-fee cases. The district court concluded that the Conour Firm was entitled to about $775,000 under principles of quantum meruit and that the lender had priority over the victims. The Seventh Circuit reversed, first holding that the Lawyers owe the Conour Firm less than the current value of the Conour Firm’s indebtedness to the lender and substantially less than what Conour owes to the victims. Conour converted the victims’ funds before taking the loan; victims of a lawyer’s breach of trust have a remedy notwithstanding the later grant of a security interest to a commercial lender, as reflected in Indiana Code 30-4-3-22(c)(2). That priority applies notwithstanding that Conour’s firm was an LLC, a separate entity. View "ACF 2006 Corp v. Devereux" on Justia Law

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In 2005, FedEx delivery drivers, represented by Defendants (lawyers), filed suit, alleging that FedEx had misclassified them as independent contractors, citing the Illinois Wage Payment and Collection Act (IWPCA), 820 ILCS 115/1. In 2011, after the court granted partial summary judgment, holding that plaintiffs were IWPCA employees, Rocha joined the action. His agreement with Defendants limited the scope of representation because he was pursuing other claims against FedEx on behalf of his company with separate representation by Johnson (his spouse). The agreement affirmed Rocha’s right to accept or reject any settlement. In 2012, the parties notified the court of a tentative settlement. Defendants told Rocha and Johnson that FedEx required “a release of all claims against FedEx both individually and on behalf of any associated corporation,” but reasserted Rocha’s right to not join the settlement. After the court approved the settlement, it allowed Defendants to withdraw as Rocha's counsel, dismissed the case with prejudice for all named plaintiffs except Rocha, and dismissed Rocha's case without prejudice. Rocha was not required to pay attorney’s fees or expenses. The district court later dismissed Rocha’s separate suit. Before filing his state‐court complaint (still pending), Rocha sued Defendants, claiming breach of contract, malpractice, fraud, and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The Seventh Circuit affirmed dismissal, finding no plausible grounds for relief. View "Rocha v. Rudd" on Justia Law

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Herrera-Valdez became a permanent resident of the U.S. in 1990. In 1992, Herrera-Valdez was charged under 21 U.S.C. 846, 841(b)(2), pled guilty to conspiracy to possess with intent to distribute cocaine, and was sentenced to 70 months in prison. After his 1997 release, INS took custody of Herrera-Valdez. At a removal hearing, Herrera-Valdez admitted that he was convicted of an aggravated felony. The IJ denied his request for a waiver and ordered Herrera-Valdez deported. The Chicago District Counsel of the INS at the time was DerYeghiayan, who later became a judge in the Northern District of Illinois. The Board of Immigration Appeals dismissed an appeal and a motion to reopen because Herrera-Valdez did not follow technical requirements. In 2003, Herrera-Valdez returned to Mexico. In 2008, he re-entered the U.S. In 2009, he was arrested for the manufacture and/or delivery of 15-100 grams of cocaine, and being a convicted felon in possession of a firearm. In 2012, Herrera-Valdez was indicted for illegal reentry, 8 U.S.C. 1326(a). The case was assigned to Der-Yeghiayan, who had left INS in 2000. Herrera-Valdez filed a motion to disqualify under 28 U.S.C. 455, which was denied. The Seventh Circuit reversed his conviction, finding that the judge should have granted the motion to disqualify. View "United States v. Herrera-Valdez" on Justia Law

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Bell, a practicing attorney and professional photographer, filed a copyright infringement action against 46 defendants including Lantz, based on their website publication of Bell’s photograph of the Indianapolis skyline. Eventually, Bell confirmed that Lantz had not infringed his copyright, and voluntarily dismissed his claim with prejudice. Lantz moved, as the prevailing party, for costs and attorney’s fees under 17 U.S.C. 505, the Copyright Act. The district court considered the nonexclusive factors outlined in Supreme Court precedent and concluded that the action was frivolous, that Bell’s motivation was questionable, that the action was objectively unreasonable, and that awarding fees would advance the considerations of compensation and deterrence. The Seventh Circuit vacated and remanded for recalculation of the award, finding no support for the attorney’s hourly rate. View "Bell v. Lantz" on Justia Law

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After the Bank foreclosed on the hotel housing Trade Well’s leased furnishings and started searching for buyers, Trade Well demanded the return of its property. The Bank refused. Trade Well sued. While the replevin action was pending, Trade Well’s attorney, Salem, filed a “Notice of Lien” on the hotel with the Sauk County Register of Deeds. Salem refused to withdraw the notice. The court held Salem in contempt of court and revoked his pro hac vice admission as a sanction, referred him for disciplinary action, and allowed the Bank to file a counterclaim, alleging slander of title and seeking damages, costs, attorney’s fees, and a declaratory judgment. The Seventh Circuit vacated the contempt order and imposition of sanctions. Meanwhile, Trade Well had not secured alternative representation and, due to its corporate status, was unable to appear without counsel. The district court dismissed Trade Well’s claims with prejudice and entered a default judgment against Trade Well on the Bank’s counterclaim. With Salem back as its representative, Trade Well moved to vacate the default judgments.The district court expressed skepticism about Trade Well’s efforts to find alternate counsel. The Seventh Circuit affirmed denial of the motion to vacate, noting Trade Well’s delay in bringing the motion and the district court’s credibility determinations. View "Trade Well Int'l v. United Central Bank" on Justia Law