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

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For more than a decade, Van Den Heuvel received cash payments from VHC, a company founded by his father and owned by his family. These payments primarily supported Ron’s business ventures but also helped him pay personal taxes and cover other personal expenses. Ron did not pay VHC back. The company wrote down these payments as “bad debts” for which it received tax deductions. After a years-long audit, the IRS concluded that VHC never intended to be paid back and that these payments were not bona fide debts qualifying for the deduction under either 26 U.S.C 166 or 162. The Tax Court upheld this determination and rejected VHC’s alternative theories as to why the payments qualified for a deduction. The Seventh Circuit affirmed.VHC bears the burden of demonstrating that its payments to Ron were bona fide debts that arose from a debtor-creditor relationship in which it expected Ron to pay VHC back in full. VHC has not shown that it presented such evidence to the Tax Court or that the Tax Court made grave errors in its evaluation of the evidence. View "VHC, Inc. v. Commissioner of Internal Revenue" on Justia Law

Posted in: Tax Law
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Named plaintiffs filed a putative class action in Illinois, alleging that defendants made false claims about dietary supplements. The parties negotiated a settlement. Over the objection of class member Frank, the district court approved it. The Seventh Circuit reversed. In 2015, the parties submitted “the Pearson II settlement.” Three class members objected to the Pearson II settlement. Nunez had filed his own putative class action against the defendants in California. After the Seventh Circuit vacated the first Pearson settlement, Nunez wanted to represent a Pearson subclass. The Pearson parties refused to include Nunez’s counsel in their negotiations. Nunez objected to the Pearson II settlement. The district court approved it. All three objectors appealed, then dismissed their appeals. Frank moved for disgorgement of any payments made to objectors in exchange for those dismissals. Discovery showed that the objectors had received side payments in exchange for dismissing their appeals. The district court denied disgorgement. The Seventh Circuit reversed. The district court had the equitable power to order the settling objectors to disgorge for the benefit of the class the proceeds of their private settlements. “Falsely flying the class’s colors, these three objectors extracted $130,000 in what economists would call rents from the litigation process simply by showing up and objecting" to the settlement.” Settling an objection that asserts the class’s rights in return for a private payment to the objector is inequitable and disgorgement is the most appropriate remedy. Those objectors are, in essence, “not paid for anything they owned.” View "Frank v. Target Corp." on Justia Law

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Pierri began working for Medline in 2011. In 2015, Pierri’s grandfather fell ill. Pierri's supervisor, Tyler, allowed Pierri to work 10‐hour shifts four days a week in order to take his grandfather on weekly hospital trips. Six months later, Tyler told Pierri to return to five‐day, eight-hour shifts. Tyler offered to let Pierri work Tuesday through Saturday, but Pierri wanted to attend school on Saturdays. Pierri began using one day per week of Family and Medical Leave Act (FMLA) leave. Tyler harassed him and refused to assign him research and development work, on which Pierri’s bonus depended. Pierri complained to Medline’s HR department; the harassment continued. Citing stress, Pierri started full‐time FMLA leave in March 2016. In September, Medline then approved him for disability leave. In March 2017, Medline contacted Pierri’s attorney to find out whether he planned on returning. Pierri did not respond. Medline terminated his employment. Pierri had filed a charge of discrimination with the EEOC and then filed suit, citing the Americans with Disabilities Act (ADA), 42 U.S.C. 12112(b)(4), for his association with his ailing grandfather, and retaliation 42 U.S.C. 12203. The Seventh Circuit affirmed summary judgment for Medline. Pierri failed to present material facts in dispute that would show that Medline discriminated against him for his association with his grandfather or that he suffered an adverse employment action. Pierri’s failure to respond about returning to work caused his termination, not retaliation for his complaints. View "Pierri v. Medline Industries, Inc." on Justia Law

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Vaughn, a quadriplegic, has received home‐based care for over 30 years. She requires help with personal care, household maintenance, mobility exercises, transportation, medications, suctioning secretions from her tracheostomy, and use of the ventilator. When nursing shifts cannot be staffed, Vaughn has relied on friends. Indiana funded her care through two federally-reimbursed Medicaid programs: A&D waiver and core Medicaid. Vaughn could select her own caregivers to receive A&D waiver funds but could not personally direct nursing care funded through core Medicaid. In 2016, Vaughn was hospitalized with pneumonia. She was cleared to be discharged but the state could not find nurses to provide round‐the‐clock care at home at Medicaid rates Vaughn was transferred to a nursing home and filed suit under the Americans with Disabilities Act, 42 U.S.C. 12132; the Rehabilitation Act, 29 U.S.C. 794; and the Medicaid Act, 42 U.S.C. 1396a(a)(8). The court granted Vaughn summary judgment with an injunction requiring the state to “do whatever is necessary to achieve” round‐the‐clock home‐based care, fully paid for by the state. The Seventh Circuit vacated. Vaughn is not entitled to the services she has requested under Indiana’s version of the Medicaid program, as the program was structured before the state adopted a new pilot program. The state is not obligated to reimburse Vaughn’s providers at rates above the approved Medicaid caps, nor must it use funds outside the Medicaid program to comply with a rule about accommodation within the program. View "Vaughn v. Walthall" on Justia Law

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Gunn brought a putative class action against Continental, which had issued a group long-term care insurance policy to Gunn’s employer, the federal judiciary, in Washington D.C. Gunn alleged that Continental breached its contract, committed torts, and violated consumer protection laws by raising his premiums dramatically. The district court dismissed the case on the pleadings based on Continental’s assertion of a filed-rate defense, relying on the Washington state Insurance Commissioner’s approval of the new, higher premiums for individual insureds in Washington. The Seventh Circuit reversed, noting that choice of law is critical in this case, which involves employees in every state. It is unclear which state’s or states’ law creates Gunn’s causes of action, whether that jurisdiction recognizes an applicable filed-rate defense and within what contours, and which state or states have authority to approve premium rates under the group policy. The court remanded to allow the district court to address those questions. View "Gunn v. Continental Casualty Co." on Justia Law

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In 2009 Allen-Noll, who is African-American, was hired by Madison Area Technical College as a nursing instructor. Beginning in 2010, Allen-Noll was criticized for her teaching methods. Students complained that she was “rude, condescending, and defensive” in class. In 2011 complaints about Allen-Noll resurfaced from students and the tutor assigned to her class, who criticized Allen-Noll for not timely posting grades and making study guides available and for failing too many students. Allen-Noll’s clinical class also complained that she failed to follow the rules on cell phone use and did not complete paperwork. Allen-Noll was assigned a faculty mentor. Allen-Noll filed a complaint with the College, alleging discrimination and harassment based on her skin color, Complaints about Allen-Noll’s teaching continued. Other faculty said she would not participate in team meetings or volunteer for the extra service expected of full-time faculty. When her teaching contract was not renewed, Allen-Noll sued, alleging racial discrimination and harassment. After discovery, the college moved for summary judgment, but Allen-Noll failed to follow the court’s procedures. The record was largely established by the defendants’ submissions, and the college prevailed. The Seventh Circuit affirmed, finding the appeal frivolous and granting the college’s request to sanction Allen-Noll and her lawyer. View "Allen-Noll v. Madison Area Technical College" on Justia Law

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At an Illinois road construction site, a flagger abruptly turned his sign from “SLOW” to “STOP.” Roberts slammed on his breaks. Solomakha, driving a tractor-trailer truck rear-ended him, causing Roberts serious injury. Roberts sued Solomakha and the Alex transportation companies. The defendants filed a third-party complaint for contribution against the construction site's general contractor, E-K, and a subcontractor, Safety. E-K settled and was dismissed. The Alex parties also settled with the plaintiffs but continued the contribution action against Safety, arguing that the Illinois Joint Tortfeasor Contribution Act allows the court to redistribute E-K’s share of liability as determined by a jury between the Alex Parties and Safety. The statute provides: The pro-rata share of each tortfeasor shall be determined in accordance with his relative culpability. However, no person shall be required to contribute to one seeking contribution an amount greater than his pro rata share unless the obligation of one or more of the joint tortfeasors is uncollectable. In that event, the remaining tortfeasors shall share the unpaid portions of the uncollectable obligation in accordance with their pro-rata liability. The district court determined that, as a matter of Illinois law, the Alex Parties, Safety, and E-K all must appear on the verdict form so that the jury could adequately apportion fault among every party, The Seventh Circuit certified to the Illinois Supreme Court the question of whether the “obligation” of a settling party is “uncollectable” under 740 ILCS 100/3. View "Solomakha v. Safety International, LLC" on Justia Law

Posted in: Personal Injury
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Grubhub, an online and mobile food-ordering and delivery marketplace, considers its delivery drivers to be independent contractors rather than employees. The plaintiffs alleged, in separate suits, that Grubhub violated the Fair Labor Standards Act by failing to pay them overtime but each plaintiff had signed a “Delivery Service Provider Agreement” that required them to submit to arbitration for “any and all claims” arising out of their relationship with Grubhub. Grubhub moved to compel arbitration. The plaintiffs responded that their Grubhub contracts were exempt from the Federal Arbitration Act (FAA). Section 1 of the FAA provides that “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” 9 U.S.C. 1. Both district courts compelled arbitration. The Seventh Circuit affirmed. The FAA carves out a narrow exception to the obligation of federal courts to enforce arbitration agreements. To show that they fall within this exception, the plaintiffs had to demonstrate that the interstate movement of goods was a central part of the job description of the class of workers to which they belong. They did not even try to do that. View "Wallace v. Grubhub Holdings, Inc." on Justia Law

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In 2000, Indiana University student Jill Behrman went for a bike ride but never returned. The police later found her bicycle less than a mile from the home of Myers, on the north side of Bloomington. Two years later a woman (Owings) confessed to the murder. The case was reopened when a hunter came upon Behrman’s remains far from the location Owings described. Recognizing her story no longer added up, Owings recanted her confession and admitted to lying about the murder in hopes of leniency on other charges. A renewed investigation led the authorities to Myers, who was eventually charged with the murder. Multiple Indiana courts affirmed his conviction. The Seventh Circuit reversed the district court’s grant of his application for a federal writ of habeas corpus. Myers’s trial counsel was plainly deficient by promising to prove that Behrman was killed by someone else although he had to know he could not follow through on that promise and by failing to object to testimony about a bloodhound tracking Behrman’s scent. However, given the strength of the state’s case against him, including many self‐incriminating statements that Myers made to many different people, combined with other evidence, his counsel’s deficient performance did not prejudice him. View "Myers v. Neal" on Justia Law

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Howard was charged with seven crimes relating to possession, receipt, distribution, and production of child pornography, 18 U.S.C. 2252(a)(2), (a)(4). He pleaded guilty to five; the remaining counts, under section 2251(a), proceeded to trial. The statute mandates a minimum 15-year prison term for “[a]ny person who employs, uses, persuades, induces, entices, or coerces any minor to engage in … any sexually explicit conduct for the purpose of producing any visual depiction of such conduct.” Howard’s videos do not depict a child engaged in sexually explicit conduct; they show Howard masturbating next to a fully clothed and sleeping child. The government’s theory was that Howard violated the statute by “using” the clothed, sleeping child as an object of sexual interest to produce a visual depiction of himself engaged in solo sexually explicit conduct. The jury found him guilty. The Seventh Circuit vacated the convictions on the two counts. The government’s interpretation of section 2251(a) “stretches the statute beyond the natural reading of its terms considered in context.” The government’s “implausible” interpretation, taken to its logical conclusion, would not require the presence of a child on camera; the crime could be committed even if the child who is the object of the offender’s sexual interest were across the street. View "United States v. Howard" on Justia Law

Posted in: Criminal Law