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

Defendant owned three restaurants, kept two sets of books, and underreported gross receipts. The government discovered the fraud when he listed a restaurant for sale. A fact sheet prepared by the broker calculated average monthly gross receipts at $170,000 and an average yearly operating profit of $554,840. IRS undercover agents posed as buyers. During meetings, defendant explained how he tracked actual receipts. Agents executed a warrant at the restaurants and seized weekly summary sheets and envelopes detailing nightly sales and cash payouts. The IRS concluded that additional taxes due on defendant’s personal tax returns were: $226,752 for 2001, $244,799 for 2002, $213,186 for 2003, and $152,987 for 2004, for a total tax loss of $837,724. Charged with eight counts, defendant pled guilty to four counts of making false statements in a tax return, but claimed that the government’s figure did not account for deductible expenses, such as costs of DJ/promoters, cash wages, complimentary drinks and food, and transfers to his other restaurants for supplies. He claimed the IRS lost $22,292.27. The district court held that it could not consider unclaimed deductions and imposed a sentence of 24 months (bottom of the guideline range) and ordered restitution in the amount of $837,724. The Seventh Circuit affirmed.

Petitioner was ordered removed to Mexico in 2004 and appealed to the Board of Immigration Appeals, which affirmed. Almost two years later, he moved to reopen based on ineffective assistance of counsel. A motion to reopen must be made within 90 days of the final administrative order of removal, 8 U.S.C. 1229a(c)(7)(C)(i). He did not make an equitable-tolling argument nor provide sufficient factual support for the Board to consider that argument. The Board held that the motion was time-barred. Two weeks later, moved for reconsideration, attaching new evidence for an equitable tolling argument. The Board denied the motion, holding that the evidence was insufficient and that new evidence may not be submitted with a motion for reconsideration. The Seventh Circuit dismissed an appeal for lack of jurisdiction. While a petition for certiorari was pending, the Supreme Court held that Congress intended courts to review denials of motions to reopen. On remand, the Seventh Circuit reviewed the merits and upheld the Board. Petitioner unsuccessfully moved the Board to reopen under its sua sponte authority. On appeal, he conceded that his motion was numerically barred and argued that his case presented “exceptional circumstances” under which the Board usually grants such a motion. The Seventh Circuit dismissed. The motion was committed to the Board’s discretion by law and was unreviewable.

When Sears, Roebuck & Co. merged with Kmart in 2005, the company formed as the parent (Sears) inherited directors from both. Crowley also serves on the boards of AutoNation and AutoZone; Reese is also on the board of Jones Apparel. In a derivative action, Sears shareholders claimed that the consolidated business competes with those other firms and that the Clayton Act, 15 U.S.C. 19 (section 8), forbids the interlocking directorships. Delaware usually allows investors to sue derivatively only if, after a demand for action, the board cannot make a disinterested decision. The investors filed suit without first making a demand. The district court refused to dismiss, accepting an assertion that a demand would have been futile and agreeing that section 8 can be enforced through derivative litigation, even though cooperation with a competitor should benefit the investors. The Seventh Circuit reversed, stating that the suit "serves no goal other than to move money from the corporate treasury to the attorneys' coffers," while depriving Sears of directors, freely elected and of benefit to the company. Usually serving on multiple boards demonstrates breadth of experience, which promotes competent and profitable management. The Antitrust Division and the FTC do not see a problem.

Tichenor pleaded guilty to armed robbery and discharging a firearm in connection with robbing a bank, retaining the right to appeal the applicability of the career offender sentencing guideline at U.S.S.G. 4B1.1. Although counsel initially objected to application of the guideline, he withdrew this objection at the sentencing hearing. The district court applied the enhancement, based on prior convictions for dealing hash oil and resisting law enforcement, and sentenced him to 300 months' imprisonment. The Seventh Circuit affirmed, rejecting an argument that the guideline is unconstitutionally vague and that the U.S. Sentencing Commission exceeded its authority in enacting the current definition of "crime of violence," U.S.S.G. 4B1.2(a). The Sentencing Guidelines are not susceptible to vagueness challenges.

Arizanovska, born in Macedonia, was employed part-time by Wal-Mart, as an overnight stocker. After experiencing some vaginal bleeding while pregnant, she informed Wal-Mart that her doctor told her that she could not lift more than 20 pounds. She was assigned to stock the baby food and toothbrush aisles. She miscarried. When she became pregnant again she provided a medical restriction; she was not to lift more than 10 pounds. She could no longer perform the essential lifting functions of her position as a stocker. She told human resources that she would not take a leave of absence and that she wanted to fold clothes. No such position existed. Arizanovska did not return to work and miscarried again. She filed suit, claiming violation of Title VII of the Civil Rights Act, as amended by the Pregnancy Discrimination Act, failure to accommodate her under Wal-Mart’s Accommodation in Employment Policy because of her pregnancy and/or national origin, and retaliation for filing a charge with the Equal Employment Opportunity Commission. She also claimed intentional and negligent infliction of emotional distress, negligent supervision, and liability for employees’ actions. The district court granted summary judgment against Arizanovska. The Seventh Circuit affirmed.

Investors joined together to buy property. To finance the purchase, they formed a distinct limited liability company, IPA, to negotiate and execute a loan on their behalf with Morgan Stanley. Okun was manager of IPA, which was not allowed to hold an ownership interest in any of the investors. Morgan Stanley sold the loan to an Okun-controlled entity, Lender, LLC, and agreed to offset the purchase price by the amount of funds available in escrow, reserve, and impound accounts, in which it held a security interest and which were, under the terms of the loan, required to reimburse investors for maintenance, taxes, and other property-related expenses. Lender LLC never reestablished the accounts, depriving the Investors of $1,361,184.63. Abandoning their suit against Lender, LLC, the investors claimed that Morgan Stanley breached their loan agreement and committed conversion. The district court granted summary judgment for Morgan Stanley. The Seventh Circuit affirmed. Morgan Stanley was not barred by the Note, the Mortgage, or the RSA from assigning its interest in the escrow accounts to Okun or structuring a sale of the loan as it wished; it committed neither breach of contract nor conversion.

Defendant supervised a "mule" who obtained heroin in Texas and transported it to Chicago as part of an enterprise with four confirmed participants. Following his conviction, the district court followed the recommendation of the probation service and imposed a two-level enhancement under USSG 3B1.1(c), applicable to "organizers, leaders, managers, and supervisors in an organization with fewer than five participants and not 'otherwise extensive.'" The Seventh Circuit affirmed, rejecting an argument that defendant was just a communication channel and characterizing him as a "middle manager in a drug enterprise" that was "otherwise extensive." Defendant "lucked out" to get only a 2-level enhancement; as a manager or supervisor in an "otherwise extensive" enterprise he should have received the 3-level enhancement in section 3B1.1(b).

From 2005-2007 plaintiff, an African-American, was employed as a driving instructor for defendant, a trucking company. After a number of incidents involving reported use of racial slurs and warnings about attendance, plaintiff's employment was terminated and he sued, alleging racial discrimination, harassment and retaliation in violation of 42 U.S.C. 1981 and Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e. He also alleged that the company retaliated against him for having filed a workers’ compensation claim, in violation of Indiana law. The district court granted summary judgment in favor of the employer. Plaintiff appealed only the retaliation claim. The Seventh Circuit affirmed. Plaintiff made a number of assertions, none of which could lead a reasonable jury to conclude that the stated reason for his firing was pretextual. He argued that his termination was unfair, but did not provide any evidence to refute that his cumulative exercise of leave was excessive or to demonstrate that his absences did not affect his job performance and ability to instruct.

Facing charges of conspiracy to kidnap, unlawful possession of a firearm in furtherance of a crime of violence, and conspiracy to distribute marijuana, defendant agreed to plead guilty solely to the marijuana-conspiracy charge. The district court sentenced him to 144 months’ imprisonment. The Seventh Circuit remanded for resentencing. While acknowledging that the sentence may be substantively reasonable, the court stated that the sentencing court failed to adequately address whether the violent acts by co-conspirators were foreseeable. Defendant’s coercion argument was without merit.

An episode of the animated television show, South Park, entitled “Canada On Strike,” satirized the 2007-2008 Writers’ Guild of America strike, popular viral videos, and the difficulty of monetizing Internet fame. In the episode, characters create a video that is a parody of the real world viral video, “What What (In The Butt),” Brownmark, the copyright holder for the original WWITB video, sued for copyright infringement under the Copyright Act of 1976, 17 U.S.C.101. SPDS claimed that the South Park version was fair use and attached the two works. Brownmark argued that the court could not consider fair use on a 12(b)(6) motion to dismiss. The district court dismissed. The Seventh Circuit affirmed the “well-reasoned and delightful opinion.” The court properly decided fair use on a motion; the only evidence needed to decide the issue were the original version of WWITB and the episode at issue. Under the incorporation-by-reference doctrine, reliance on the attached works did not violate Rule 12(d); if a plaintiff mentions a document in his complaint, the defendant may then submit the document to the court without converting defendant’s 12(b)(6) motion to a motion for summary judgment.