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

More than 500 female employees at an Indiana Rolls Royce plant were denied class certification under Rule 23 (b)(2) and the court entered summary judgment, rejecting their discrimination claims on the merits. The Seventh Circuit affirmed, first noting that appeal was a risky strategy because it could result in different decisions on certification and the merits, causing individuals to be barred from bringing legitimate claims. After reviewing the evidence, the court found that the there were no sex-based differences in pay or promotions. The named plaintiffs' claims and defenses were not typical of the class; some named plaintiffs had authority over compensation of male and female workers. The court noted that there might be less variance in a suit seeking only injunctive relief, but the suit sought damages. The Rule under which certification was sought, improperly, according to the court, does not permit plaintiffs to opt out, but calculating damages in this case would require 500 hearings. The district court acted within its discretion in denying a motion to substitute named plaintiffs.

The company was established in 1998 to develop systems for high-speed Internet connections for home computers. After a decision to not respond to an acquisition offer, the company was in financial trouble by 2000 and took an $11 million loan for 90 days and a second loan for $9 million, on which it defaulted. The company exchanged its assets for stock in an amount that would have satisfied creditors and preferred stockholders. The stock, the company's only asset in bankruptcy, fell to a value less than the claims of creditors. Common shareholders brought suit. The district court entered summary judgment for the defendants. The Seventh Circuit reversed and remanded, stating that the company's failure was not likely solely the result of the "burst of the dot-com bubble." Even if the directors were excused from liability for failure to exercise due care, as permitted by Delaware law, there was evidence of disloyalty, which was not excused. Evidence of disloyalty switched the burden of proving "entire fairness" with respect to the loans on the directors. There was enough evidence of causation and that certain preferred stockholders (venture capital groups) aided and abetted the directors to submit the question to a jury.

After selling a subsidiary, the company no longer had employees participating in the multi-employer pension plan and sought to withdraw. The underfunded plan claimed that the company owed about $5 million. An arbitrator determined that the company did not have withdrawal liability. The district court agreed. The Seventh Circuit affirmed. The plan argued that the company had closed other plants, outsourcing work, so that the sale was not solely responsible for the company not continuing contributions. A company is not liable for withdrawal under 29 U.S.C. 1384 if withdrawal is "solely" because of a bona fide sale. The court stated that there was evidence to support the arbitrator's finding that the sale was not part of a plan by the company to withdraw in stages and that the focus must be the transaction at issue: a sale to an ongoing business that is willing and able to continue contributions.

The Board of Education laid off about 1,300 teachers in 2010. When additional funds became available, the Board recalled 715 teachers, but did not have any policy on recalls. The union obtained an injunction rescinding the discharges and requiring the board to work with the union to establish procedures by which those teachers can attempt to show that they are qualified for new vacancies as they arise. The Seventh Circuit ordered that the injunction be modified to delete the requirement of cooperation with the union, which is not required by the Illinois School Code provisions concerning recall, 105 ILCS 5/34-18. Illinois law gives tenured teachers a property interest in continued employment and, while pre-termination due process is not required for good-faith economic layoffs, there is a legitimate expectation that laid-off teachers will be considered for vacancies for a reasonable amount of time. To comply with due process requirements, the Board must develop procedures by which teachers can prove their qualifications for those vacancies.

Plaintiffs, injured in a 1997 Jerusalem suicide bombing, obtained a $71 million default judgment against the Republic of Iran for its role in the attack. They registered the judgment in Illinois in order to attach antiquities on loan to a university and property owned by museums. The court held that Iran was required to appear to assert a defense under the Foreign Sovereign Immunities Act, 28 U.S.C. 1330(a). When Iran appeared, plaintiffs served discovery requests for the locations of all Iranian assets in the United States. The district court allowed the discovery. The Seventh Circuit reversed. The orders were subject to immediate appeal because of possible intrusion on sovereign immunity. The Act provides that property of a foreign state shall be immune from attachment unless an enumerated exception applies. The district court did not address the exceptions, but issued a blanket order that was contrary to the presumption of immunity. That there has been a determination of liability does not nullify the protections of the Act with respect to execution. Based on the presumption of immunity, Iran was not required to appear to assert the defense in the first place. The court noted provisions of the Act, under which federal agencies may assist plaintiffs in collecting judgments against foreign states.

Residents of Missouri contracted with a Texas franchisor to operate tax preparation franchises near St. Louis. The contract contained an arbitration clause and identified Texas as the forum for both arbitration and litigation. When the businesses failed, the franchisees sued the Texas company in Illinois. The district court dismissed. The Seventh Circuit affirmed. The court noted that the parties had not briefed Texas law, but that the Illinois Franchise Act, 815 ILCS 705/4, allows out-of-state arbitration agreements, despite disallowing forum selection; the Federal Arbitration Act, 9 U.S.C. 1, strongly favors agreements for arbitration. Even if the Texas company knowingly authorized a franchise in Illinois, the arbitration clause justified dismissal. The district court did not have jurisdiction to order arbitration outside the district, but the issue was not waived. The court rejected claims of fraudulent inducement and unconscionability.

Defendant was convicted of possession with intent to distribute cocaine (21 U.S.C. 841(a)(1) and 842(b)(1)(C); possession of a firearm in furtherance of drug trafficking (18 U.S.C. 924(c)(1)(A)); and being a felon in possession of a firearm (18 U.S.C. 922(g)(1)). The sentencing report included enhancement for obstruction of justice, based on perjury at trial, for a total offense level of 36. With his criminal history, this resulted in a guidelines range of 188 to 235 months for Counts 1 and 2.The court gave concurrent below-guidelines sentences of 180 months on Counts 1, 2, 3, and 5, plus the mandatory minimum of a consecutive 60 months for possession of a firearm in furtherance of drug trafficking. The Seventh Circuit affirmed, holding that there was sufficient evidence to establish, beyond a reasonable doubt, that defendant aided and abetted in a drug deal. After participating in an earlier deal, during which he handled crack cocaine, he rented a car and drove on the night in question. The jury's contradictory findings about the amount of drugs was irrelevant; the sentence imposed was allowable regardless of the quantity of drugs. The court's findings concerning commission of perjury justified enhancement of the sentence.

Three white police officers, in good standing, resigned and later sought to be rehired. They were required to reenter the force as entry-level officers with respect to compensation and seniority. An African-American officer who had resigned was subsequently rehired. The city enacted an ordinance, in the interest of diversity, granting him credit for past service. The union filed suit. A state court determined that the union lacked standing. A state suit later filed by the individuals was dismissed as untimely. The officers filed in federal court, which first applied the "paycheck rule," under which each discriminatory paycheck is a separate act that resets the limitations period, but entered judgment for the city when that rule was rejected by the Supreme Court. In 2009, while appeal was pending, Congress enacted the Ledbetter Fair Pay Act, amending Title VII (42 U.S.C. Sec. 2000e-5(e)(3)(A)), reinstating the paycheck rule. The Act is expressly retroactive. The Seventh Circuit concluded that Title VII and Equal Protection claims, based on actions after the state court's decision, were not barred. The compensation system need not be intrinsically discriminatory under Title VII. The court concluded that the paycheck rule also applies to the Equal Protection claims, the limitations period for which began to run when the officers requested equal treatment. The state court decision did not have preclusive effect because it dealt only with the limitations period and did not address discrimination.

The Seventh Circuit affirmed the Tax Court holding that the Coles omitted income from their 2001 return and imposed a fraud penalty. Because the Coles had not maintained adequate records of income from a "confusing maze of entities and financial dealings," the IRS reconstructed their income. The Coles did not rebut the presumption of accuracy with respect to the reconstruction. An argument that certain entity income was not attributable to the Coles was "spurious," according to the court, and a claim that the Coles did not benefit from certain loans was a "nonstarter." The court particularly noted the Coles' control over the entities at issue. There was clear and convincing evidence of fraud: Jennifer Cole has worked as an accountant and Scott is a licensed attorney, yet they failed to keep records, commingled funds, and funneled assets into entities that had no business purpose.

After arguing by phone, Graff, who was having an affair with Kerr's wife, went to Kerr's house. Neighbors called the police, but Kerr sent them away, claiming that Graff was a friend. Kerr subsequently shot and killed Graff. After Kerr exhausted Wisconsin state court appeals with respect to his conviction for first-degree intentional homicide, a federal trial court denied habeas corpus. The Seventh Circuit vacated and remanded after rejecting a claim that Kerr's attorneys provided ineffective assistance by not presenting a defense of adequate provocation. The state court had already rejected the argument, stating that there was no reasonable interpretation of the evidence that would lead to a conclusion that Kerr completely lost self-control. The attorneys did argue self-defense and reckless, rather than intentional, actions, and failure to present the provocation defense fell within the range of competent assistance. The court remanded for an evidentiary hearing on claims based on the attorneys' advice to forego a plea and go to trial. The state court's rejection of the claim was procedural, not on the merits, and Kerr presented some evidence that he had inaccurate information about sentencing.