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

In 2008 the city levied fines against plaintiff, arising from a parcel of real estate that he no longer owned. When he did not pay those fines, the city retained defendant to collect. The district court dismissed his suit under the Fair Debt Collection Practices Act, 15 U.S.C. 1692-1692p, finding that fines are not "debts" covered by the FDCPA. For purposes of the statute, a "debt" can arise only from a "transaction in which money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes." The Seventh Circuit affirmed, stating that fines cannot reasonably be understood as debts arising from consensual consumer transactions for goods and services.

Defendant is a captive insurer owned by plaintiff plans across the nation. In 2003 healthcare providers filed class action suits in Florida against all of those plans. Twelve plans, which had errors-and-omissions insurance from defendant, asked it to assume the defense and indemnify. Defendant declined, and the plans demanded arbitration. Acting under the Federal Arbitration Act, 9 U.S.C. 5, the district court held that the arbitrators could determine whether arbitration of a class action or consolidated arbitration were authorized by contract and appointed a third arbitrator. The court dismissed the appeal of the court's first ruling for lack of jurisdiction and affirmed the appointment. If defendant wanted a judge to decide whether the plans' demands should be arbitrated jointly or separately, it should have refused to appoint an arbitrator. Both sides appointed arbitrators, however, and the proceeding got under way. Nothing in the Federal Arbitration Act authorizes anticipatory review of the arbitrators' anticipated decisions on procedural questions.

Defendant was managing member of a partnership that built a warehouse and began receiving rent. In 2000, plaintiff acquired a 10% interest in the business that garnered about 45% of its net cash flow. A year later, plaintiff was in an accident and suffered brain injury. In 2002 plaintiff had his guardianship terminated, representing that he was able to manage his own affairs. Weeks later, defendant notified plaintiff that the warehouse tenant was in bankruptcy. In 2003, defendant purchased plaintiff's interest for $600,000. In a complaint filed more than five years later, plaintiff claimed breach of fiduciary duty; that he sold his interest only because defendant represented that the tenant was delinquent on rent. The district court granted defendant summary judgment, applying the Illinois discovery rule with respect to the limitations period, and holding that plaintiff could not rely on his self-serving affidavit to create an issue of material fact when his deposition testimony contradicted his representations about his ability to verify the tenant's payment of rent. The court held that defendant a basis for indemnity by plaintiff. The Seventh Circuit affirmed, finding that plaintiff waived any claim of legal disability and that the 2000 agreement unambiguously provided for an award of fees.

On June 17, 2006, wife applied for a $500,000 life insurance policy. She paid $100 and signed a conditional receipt agreement for immediate coverage, subject to conditions that "on the Effective Date the Proposed Insured(s) is (are) insurable exactly as applied for under the Company’s printed underwriting rules for the plan, amount and premium rate class applied for; ... (C) the Proposed Insured(s) has/have completed all examinations and/or tests requested by the Company." On June 28, wife was examined and submitted specimens. Her cholesterol level and urine sample raised concerns. The company sought medical records from her physician and a second urine specimen. On July 22, 2006, wife was diagnosed with a brain tumor. On August 9, the company declared wife uninsurable based on her brain surgery. About a year later, she died. Husband claimed that the request for the second urine specimen was communicated in a untimely and ineffective fashion. The district court entered summary judgment for the insurance company on claims of breach of contract, estoppel, bad faith, and negligence. The Seventh Circuit affirmed, finding no evidence of purposeful misconduct; if there was no contract, any duty of good faith did not come into play.

Defendant, a native of Mexico, became a lawful permanent resident of the U.S. in 1978. In 1996, he filed an Application for Naturalization, disclosing that he had been arrested for a marijuana crime in the 1980s, and for disorderly conduct and trespassing in the 1990s, but that all charges had been dismissed. He did not reveal was that he had recently committed additional marijuana-related offenses for which he had not yet been charged. In 1998 he became a citizen and, weeks later, was charged with possession with intent to distribute 196 pounds of marijuana (21 U.S.C. 841(a)(1)) and conspiracy to possess with intent to distribute marijuana (21 U.S.C. 846). His sentence of 88 months was affirmed on appeal. Approximately three years after defendant was released from prison, the government sought to revoke his naturalization (8 U.S.C. 1451(a)). The district court granted judgment in favor of the U.S., finding that defendant was barred from establishing good moral character. The Seventh Circuit affirmed, declining to commit a "loophole" for those who evade detection and conviction until after they are naturalized.

Defendant was sole owner of a corporation that was a contractor for several Illinois governmental entities. After an audit disclosed irregularities and falsified documents, defendant pled guilty to two counts of mail fraud and one count of submitting false documents; the corporation pled guilty to one count of mail fraud (18 U.S.C. 1001, 1341). Sentences included restitution of $10 million. The Seventh Circuit affirmed, rejecting a claim that defendants were entitled to a "full, dollar-for-dollar credit for the value of the monies and securities" deposited with the Clerk of Court at the time of their deposit, pre-judgment, and that the diminution in value of those securities after their deposit could not be attributed to defendants. Neither the court, the clerk, nor the government exercised authority to remove the funds or securities before sentencing and entry of judgment. Defendant chose to deposit securities, rather than cash, and the deposit did not constitute actual payment of restitution, but only security for eventual payment.

Plaintiff sued individual defendants and a bank alleging violations of Wisconsin Statute section 134.01, which prohibits conspiracies to willfully or maliciously injure the reputation, trade, business or profession of another. Defendants had caused appointment of a receiver for plaintiff's business and had sued, claiming that plaintiff "looted" the business. A jury verdict against plaintiff was reversed. The receivership is still on appeal. The district court dismissed plaintiff's subsequent suit for failure to state a claim. The Seventh Circuit affirmed. While plaintiff did plead malice adequately to support a claim, the claim was barred by issue preclusion. Plaintiff was attempting to relitigate whether the imposition and ends of the receivership were proper.

In 1995 a jury convicted petitioner of cocaine­ trafficking and tax-fraud. Direct appeals were unsuccessful. He later discovered that a member of the jury had called in sick one day in the middle of deliberations. The government maintained that the rest of the jury was sent home and did not deliberate that day. After the district judge sent an investigator to interview the jurors, the court denied a habeas corpus petition, holding that petitioner procedurally defaulted his claim by failing to raise it in direct appeal. The court also found insufficient proof of improper deliberations. The Seventh Circuit affirmed, first holding that the 12-person jury claim was not defaulted. Petitioner was not aware of the situation during direct appeal and adequately raised it in his habeas petition. The investigator's testimony about interviews with jurors, who gave inconsistent information, was inadmissible, but the court's finding was based on normal judicial procedures and was not clearly erroneous. The court pointed out that the temporary absence of a juror, who returned before the verdict, might be subject to harmless error review.

The appellate court reversed plaintiff's murder conviction. He filed suit under 42 U.S.C. 1983, accusing officers of violating his rights by influencing a witness to identify him as the killer. The Seventh Circuit affirmed judgment against him. Four years later, plaintiff filed a new suit against defendants he had sued before, plus prosecutors and the governmental entities that employed them. He had, in the meantime, obtained a "certificate of innocence," under 735 ILCS 5/2–702, enacted in 2008. The district court dismissed the claims against the original three defendants on the basis of claim preclusion and the claims against the others based on the two-year limitations period. The court also concluded that claims against the prosecutors under state law must be dismissed for lack of subject-matter jurisdiction, because federal courts follow state immunity rules and Illinois wants claims of this kind to be presented to its Court of Claims. The Seventh Circuit affirmed, holding that the state-issued certificate did not create a new claim, restarting the clock and overriding the rules of issue and claim preclusion.

A tax employee of defendant, terminated after reporting an alleged tax fraud scheme to the company and federal enforcement agencies, filed suit asserting claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(c) and 1962(d). The district court dismissed, finding that the predicate acts alleged were either unrelated or did not proximately cause plaintiff's injuries. The Seventh Circuit reversed. The retaliatory actions were related to the alleged tax fraud scheme, under the Supreme Court's "continuity plus relationship" test. Since enactment of the Sarbanes-Oxley Act, 18 U.S.C. 1513(e) retaliation against an employee constitutes racketeering. Retaliatory acts are inherently connected to the underlying wrongdoing exposed by the whistleblower, even though they occur after the coverup is exposed. In this case, the retaliatory acts were not isolated events, separate from the tax fraud. Plaintiff properly alleged that his termination was proximately caused by a RICO predicate act of retaliation.