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

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The Bushes owed $100,000 in taxes. The IRS sought a 75% fraud penalty (26 U.S.C. 6663(a)); the Bushes proposed a 20% negligence penalty (section 6662(a)). On the date set for Tax Court trial, the Bushes filed for bankruptcy. The automatic stay prevented the Tax Court from proceeding. The government filed a proof of claim, proposing that the tax debt be given priority over other unsecured debts and that the penalty was nondischargeable. The Bushes initiated an adversary proceeding, asking for a 20% penalty, citing 11 U.S.C. 505(a)(1), which states that the court may determine the amount or legality of any tax, any fine or penalty relating to a tax ... whether or not contested before … [an] administrative tribunal. The IRS argued that section 505 does not grant subject-matter jurisdiction to bankruptcy judges and that only a potential effect on creditors’ distributions justifies a decision by a bankruptcy judge about any tax dispute. The Seventh Circuit held that a bankruptcy court can determine the amount of a debtor’s tax obligations. Section 505 does not address jurisdiction bu simply sets out a task for bankruptcy judges. Whether the judge should exercise that authority to determine tax liability is a distinct question. The bankruptcy is apparently done; the estate’s available assets have been used to pay debts and the stay has expired. This residual dispute should not remain with the bankruptcy judge but should be left to the Tax Court. View "Bush v. United States" on Justia Law

Posted in: Bankruptcy
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For the 100th Indianapolis 500 race in 2016, organizers engaged Karma, an event-planning company, to host a ticketed party. The party was a disappointment. Poor ticket sales prevented Karma from covering its expenses. Karma sued the racetrack for breach of contract, accusing it of failing to adequately promote the party. Karma sought $817,500 in damages, a figure apparently gleaned from conversations with Speedway officials who speculated that the party would generate $1 million in gross revenue “from ticket and table sales only.” The Speedway filed a counterclaim alleging that Karma failed to place the promised banner advertisement on Maxim’s website or provide marketing support on Maxim’s social-media channels. Karma is a licensee of Maxim’s, a men’s magazine. The district judge rejected Karma’s claim at summary judgment, ruling that the damages theory rested on speculation. A jury found Karma liable on the counterclaim, awarding $75,000 in damages. The Seventh Circuit affirmed. Karma’s evidence of damages was speculative, so its claim failed under Indiana law. The jury could award objectively foreseeable damages; it didn’t need to hear testimony on the subjective expectations of Speedway officials before awarding damages. View "Karma International, LLC v. Indianapolis Motor Speedway, LLC" on Justia Law

Posted in: Business Law, Contracts
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Salters, an Illinois pretrial detainee, swallowed cleaning fluid. He was taken to Delnor Hospital for treatment. Guards were instructed to keep him shackled. One guard, Loomis, disobeyed that order when Salters wanted to use the bathroom. Salters grabbed Loomis’s gun and escaped. While Salters terrorized the staff, patients, and visitors, Loomis ran away and hid. Salters took nurses hostage and assaulted two nurses. After three hours a SWAT team killed Salters. Plaintiffs brought 42 U.S.C. 1983 claims. Loomis moved to dismiss the complaint, citing qualified immunity. The district judge held that the complaint presented a valid claim for liability, citing the “state-created danger exception,” under which a public employee is liable for increasing the danger to which other persons are exposed. The Seventh Circuit reversed. The “state-created danger exception” is a generality that does not tell any public employee what to do, or avoid, in any situation. The appropriate level of generality would establish a rule that tells a public employee what the Constitution requires in the situation that an employee faces. No constitutional obligation to keep a prisoner under control has been “clearly established.” The Due Process Clause generally does not condemn official negligence. Plaintiffs depict themselves as frightened but not otherwise injured, and, even in tort law, negligent actors are not liable for conduct that threatens bodily harm but produces only emotional distress. View "Weiland v. Loomis" on Justia Law

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Davis, an Illinois prisoner suffering from kidney disease, received dialysis on a Saturday. He subsequently told a prison nurse that his mind was fuzzy and his body was weak. Both complaints were similar to side effects he had experienced in the past after dialysis. The nurse called Dr. Kayira, the prison’s medical director, who asked her whether Davis had asymmetrical grip strength, facial droop, or was drooling—all classic signs of a stroke. When she said “no,” Dr. Kayira determined that Davis was experiencing the same dialysis-related side effects as before rather than something more serious. He told the nurse to monitor the problem and call him if the symptoms got worse. Dr. Kayira did not hear anything for the rest of the weekend. On Monday morning he examined Davis and discovered that Davis had suffered a stroke. Davis sued, alleging deliberate indifference to his medical needs in violation of the Eighth Amendment and a state-law medical-malpractice claim. The Seventh Circuit affirmed summary judgment in favor of Kayira. The deliberate-indifference claim failed because there is no evidence that Kayira was aware of symptoms suggesting that Davis was suffering a stroke. The state-law claim failed because Davis lacked expert testimony about the appropriate standard of care. A magistrate had blocked Davis’s sole expert because he was not disclosed in time, Davis never objected to that ruling before the district court. View "Davis v. Kayira" on Justia Law

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Segal was convicted in 2004 of racketeering, mail and wire fraud, making false statements, embezzlement, and conspiring to interfere with operations of the IRS. His company, NNIB, was convicted of mail fraud, making false statements, and embezzlement. Segal and his wife, Joy, divorced after his conviction. After Segal served prison time, he was ordered to forfeit $15 million and his interest in NNIB. NNIB was ordered to pay restitution and a fine. The government initially restrained $47 million worth of assets of Segal and NNIB. Joy intervened and settled her claims with the government, which released to her about $7.7 million in restrained assets. Joy relinquished all further claims—save one contingent future interest. Liquidation proceedings continue. Segal and the government agreed on a court-approved settlement that fulfilled Segal’s $15 million personal forfeiture obligation. Segal later sought to rescind or modify that agreement. The district court denied his attempt and denied Joy’s attempt to intervene in the liquidation proceedings because her contingent future interest is not yet ripe. The Seventh Circuit affirmed. The court rejected Michael’s unconscionability argument, noting that he previously won strict enforcement of the settlement agreement, preserving his right to repurchase an interest in the Chicago Bulls. He is judicially estopped from pursuing this challenge. The court also rejected a “windfall” argument and, noting the number of appeals, stated that if there are further proceedings, the parties and their counsel will be subject to Rule 11. View "United States v. Segal" on Justia Law

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In 2001, Greco threatened to put a pipe bomb in his ex-girlfriend’s car. She obtained a protective order. He put the bomb in her car. It exploded, injuring her and destroying her car. Greco pleaded guilty to manufacturing and possessing an unregistered pipe bomb. 26 U.S.C. 5861(d) and 5861(f). The government informed the court that this was the third time in 10 years Greco had detonated a pipe bomb. Greco's 180-month prison sentence ended in 2015. Greco was to remain on supervised release until April 2018. One condition of that release was that he would “not commit another federal, state or local crime.” He violated that condition when he posted threatening Facebook messages about another ex-girlfriend despite a court order not to contact her. A federal judge approved a warrant for Greco’s arrest in March 2018. Seven months later another judge revoked his supervised release and ordered a new term of imprisonment, with a new term of supervised release. The Seventh Circuit affirmed, rejecting an argument that the court lacked jurisdiction to revoke Greco's supervised release because the warrant was not supported by probable cause. The judge received a report explaining how Greco had broken the terms of his release by violating state law, which was enough to establish probable cause. The court remanded for clarification of the conditions the court imposed for his second term of supervised release. View "United States v. Greco" on Justia Law

Posted in: Criminal Law
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In March 2009 Truitt joined the Moorish Science Temple of America, which calls itself a sovereign “ecclesiastical government” and teaches that neither the states nor the federal government have authority over its members. Members purport to hold something akin to diplomatic immunity. In late 2009, Truitt filed seven nearly identical tax returns, each falsely claiming that she was entitled to a $300,000 refund. The IRS identified six returns as fraudulent, but for unknown reasons, approved one and sent her a check for the full amount. Within weeks the IRS demanded that she return the funds. She did not respond but spent the money on jewelry, a condominium, tickets to sporting events, and an investment. Truitt was convicted of making false claims against the United States, 18 U.S.C. 287 and theft of government funds, 18 U.S.C. 641. The Seventh Circuit affirmed, rejecting Truitt’s challenge the exclusion of her expert witness, psychologist Dr. Fogel, who proposed to testify that Truitt was a member of a “charismatic group”—a cult-like organization that indoctrinates its members. Truitt argued that she lacked the requisite mens rea for the crimes. The judge properly excluded the testimony under “Daubert” and Federal Rules of Evidence 702 and 704(b), reasonably concluding that Fogel lacked the relevant expertise and his methods were not reliable. View "United States v. Truitt" on Justia Law

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Trek, a Wisconsin bicycle manufacturer, had agreements with Taiwanese companies. Trek purchases bicycles from Giant, sells them under its own brand name, and purchases bicycle parts from Formula. The purchase orders required Giant and Formula to have Trek named as an additional insured in their products-liability insurance policies with Zurich and Taian, Taiwanese insurers. Those policies agreed to indemnify the insured and its listed vendors, including Trek, for judgments, expenses, and legal costs incurred “worldwide,” allowed the insurer to control the litigation or settlement of a covered claim but did not require it to do so; included a Taiwanese choice of law provision; and required disputes to be resolved by arbitration in Taiwan. Giessler rented Trek bicycle in Texas. The front-wheel detached from the bicycle's frame, Giessler fell, and the resulting injuries rendered him a quadriplegic. Although Giant had manufactured the bicycle and Formula had manufactured the front-wheel release, neither was a party to Giessler’s lawsuit. Trek’s insurer, Lexington, defended Trek and attempted to notify the Taiwanese companies of Giessler’s lawsuit. The case settled. Lexington paid Giessler on Trek’s behalf. Lexington unsuccessfully sought reimbursement from Zurich and Taian then sued them in Wisconsin. The Seventh Circuit affirmed that the district court lacked personal jurisdiction. Lexington failed to demonstrate that either insurer made any purposeful contact with Wisconsin before, during, or after the formation of the insurance contracts. They did not solicit Trek’s business or target the Wisconsin market. They negotiated and drafted these contracts in Taiwan with Taiwanese companies. The insurers may be liable to Trek and included worldwide coverage provisions but that does not establish Wisconsin's jurisdiction. View "Lexington Insurance Co. v. Hotai Insurance Co., Ltd." on Justia Law

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The debtor obtained a commercial loan from Bank. The agreement dated March 9, 2015, granted Bank a security interest in substantially all of the debtor’s assets, described in 26 categories of collateral, such as accounts, cash, equipment, instruments, goods, inventory, and all proceeds of any assets. Bank filed a financing statement with the Illinois Secretary of State, to cover “[a]ll Collateral described in First Amended and Restated Security Agreement dated March 9, 2015.” Two years later, the debtor defaulted and filed a voluntary Chapter 7 bankruptcy petition. Bank sought to recover $7.6 million on the loan and filed a declaration that its security interest was properly perfected and senior to the interests of all other claimants. The trustee countered that the security interest was not properly perfected because its financing statement did not independently describe the underlying collateral, but instead incorporated the list of assets by reference, and cited 11 U.S.C. 544(a), which empowers a trustee to avoid interests in the debtor’s property that are unperfected as of the petition date. The bankruptcy court ruled that ”[a] financing statement that fails to contain any description of collateral fails to give the particularized kind of notice” required by UCC Article 9. The trustee sold the assets for $1.9 million and holds the proceeds pending resolution of this dispute. The Seventh Circuit reversed, citing the plain and ordinary meaning of the Illinois UCC statute, and how courts typically treat financing statements. View "First Midwest Bank v. Reinbold" on Justia Law

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On September 28, 2000, Camm, a former Indiana State Trooper, arrived home and discovered his wife lying on the garage floor, having been shot in the head. His children, Brad and Jill, were dead in his wife’s vehicle. Camm thought Brad might be alive, so he reached over Jill’s body, pulled Brad out, and began performing CPR. Jill’s blood ended up on his T-shirt. Camm called the Indiana State Police. Floyd County prosecutor Faith arrived and decided to hire an Oregon private forensics analyst, specializing in blood-spatter analysis, a subjective field he admits is only partly scientific. The analyst's assistant, Stites, arrived to document evidence and take photos. Stites is not a crime scene reconstructionist, has never taken a bloodstain-analysis course, and has almost no scientific background. Stites told investigators that the blood on Camm’s shirt was “high-velocity impact spatter” (HVIS), which occurs only in the presence of a gunshot. Stites identified HVIS bloodstains on the garage door, shower curtains, breezeway siding, a mop, and a jacket. Only the stain on the T-shirt was actually blood. Stites also stated that the blood was manipulated by a high pH cleaning substance. Faith and the investigators also found a prison-issue sweatshirt in the garage with a nickname written on the collar. The Indiana Department of Corrections has a database of inmate nicknames, but no one tried to match the nickname to a former prisoner. A palm print on Kimberly Camm’s car was not run through the system for a match. Camm’s attorney had the sweatshirt tested, uncovering a DNA profile. Faith agreed to run the profile through CODIS and stated that nothing came up; he never actually ran the test. At trial, Stites gave credentials and made statements that were indisputably false. Camm was twice convicted but was acquitted after a third trial. The DNA, nickname, and palm print had, by then, identified the actual killer. Camm sought damages under 42 U.S.C. 1983 for the 13 years he spent in custody. Reversing the district court, the Seventh Circuit held that Camm presented enough evidence for trial on the Fourth Amendment claim, as it relates to the first probable-cause affidavit. A trial is also warranted on aspects of the Brady claim: whether some defendants suppressed evidence of Stites’s lack of qualifications and their failure to follow through on a promise to run a DNA profile. View "Camm v. Faith" on Justia Law