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

The Telephone Consumer Protection Act, 47 U.S.C. 227, curtails use of automated dialers and prerecorded messages to cell phones, whose subscribers often are billed for the call. AT&T hired a bill collector to call cell phone numbers at which customers had agreed to receive calls. The collection agency used a predictive dialer that works autonomously until a human voice answers. Predictive dialers continue to call numbers that no longer belong to the customers and have been reassigned to individuals who had not contracted with AT&T. The district court certified a class of individuals receiving automated calls after the numbers were reassigned and held that only consent of the subscriber assigned the number at the time of the call justifies an automated or recorded call. The Seventh Circuit affirmed.

Trostel was founded in 1858. By 2007 the founder's relations still owned about 11 percent of its stock. Smith, which owned the rest, decided to acquire remaining shares by freezeout merger. Trostel became Smith's wholly owned subsidiary. Notz, one of the Trostel great-grandchildren, who owned 5.5 percent of the stock, rejected proffered compensation of $11,900 per share (about $7.7 million). The rest of the outside investors accepted. In an appraisal action (Wis. Stat. 180.1330(1)), the district court denied Nost's motion to dismiss for lack of subject matter jurisdiction and concluded that fair value of the stock on the merger date was $11,900 per share. The Seventh Circuit affirmed. Wisconsin's corporate is legislative, not contractual and does not block corporations from availing themselves of diversity jurisdiction.

Plaintiff, a self-described tax consultant, worked for the county board of review (property tax assessments) for 10 years, until 2002. In his suit under 42 U.S.C. 1983 and RICO, 18 U.S.C. 1962c, he alleged that defendants, elected and appointed board employees, flagged his clients' files and ran the board as a "pay for play" racketeering enterprise to extort campaign donations and consulting work from him. The district court dismissed. The Seventh Circuit affirmed. Plaintiff did not identify any statute, regulation, or contract that suggests his work as a consultant for private clients might be a constitutionally protected property interest. His allegations of improper treatment were implausible, negating both constitutional and RICO claims.

At age 56, plaintiff left his position as a partner in a law firm and enrolled in school. Employees who depart at age 55 or older may withdraw money from the employer's retirement plan. They must pay income tax, but a 10 percent additional tax imposed on most withdrawals before age 59½ does not apply to distributions "made to an employee after separation from service after attainment of age 55," 26 U.S.C. 72(t)(1), (2)(A)(v). Plaintiff moved the funds from the plan to an individual retirement account then withdrew about $240,000. A rollover is not taxable 26 U.S.C. 402(c). Plaintiff paid income tax. The IRS claimed he owed the 10 percent additional tax, plus a penalty for substantial underpayment of taxes. The Tax Court held that he owed the tax on money not used for tuition. The Seventh Circuit affirmed; the distribution was made to an IRA, not to the employee. Section 6662 excuses the taxpayer if there was substantial authority for the tax return's treatment, but there was no authority for plaintiff's position.

An Illinois statute makes it a felony to audio record any part of any conversation unless all parties consent and applies regardless of whether the conversation was intended to be private. The offense is elevated to a class 1 felony, with a possible prison term of 4 to 15 years, if a recorded individual is performing duties as a law-enforcement officer. 720 ILCS 5/14-2(a)(1). Illinois does not prohibit taking silent video of officers performing duties in public. The ACLU has not implemented its planned Chicago police accountability program for fear of prosecution. The district court held that the First Amendment does not protect a right to audio record. The Seventh Circuit reversed and remanded with instructions to enter a preliminary injunction blocking enforcement as applied to recording of the kind at issue. The statute restricts a medium commonly used for communication of information and ideas, triggering First Amendment scrutiny. Any governmental interest in protecting conversational privacy is not implicated when officers are performing duties in public places. Even under the more lenient intermediate standard of scrutiny applicable to content- neutral burdens on speech, this application of the statute "very likely flunks." The law restricts more speech than necessary to protect legitimate privacy interests.

Plaintiffs, hourly steel workers, argued that the employer violated the Fair Labor Standards Act, 29 U.S.C. 201 by failing to compensate for time spent putting on and removing work clothes in a locker room and walking to and from the locker room. The union contract does not require such compensation. Plaintiffs argued that the Act requires compensation and overrides contractual provisions. The district court ruled that the Act does not require compensation for changing time, but may require that walking time be compensated, and refused to dismiss. The Seventh Circuit held that the suit has no merit and should be dismissed. The court included a picture of the clothing and stated: "From a worker's standpoint any time spent on the factory grounds is time 'at work' in the sense of time away from home or some other place where he might prefer to be … But it is not time during which he is making steel, and so it is not time for which the company will willingly pay. If the workers have a legal right to be paid for that time, the company will be less willing to pay them a high wage for the time during which they are making steel."

Plaintiffs in consolidated cases claim that, during their tenures as pharmaceutical sales representatives employed by Lilly and Abbott, they were misclassified as exempt employees and denied overtime pay in violation of the Fair Labor Standards Act, 29 U.S.C. 201-19. The employers argued that the administrative exemption and the outside sales exemptions removed the sales representatives from overtime protections. The two district courts reached opposite conclusions. After considering an amicus brief from the Department of Labor, the Seventh Circuit held that, under regulations of the Department of Labor, the pharmaceutical sales representatives are classified properly within the administrative exemption to overtime requirements. The court did not address the outside sales exemption. The sales representatives were compensated on a salary basis and their work is directly related to the general business operations of the pharmaceutical companies; they were required to exercise a significant measure of discretion and independent judgment, despite the constraints placed on them, and on all representatives of the pharmaceutical industry, by the regulatory environment in which they work.

Defendant owned tobacco stores. Currency sales accounted for roughly half of the revenue. He directed employees to separate currency from credit-card and check receipts. He used currency to pay employees and suppliers and failed to report currency receipts on federal and state tax forms from 2002 to 2009. He channeled much of the currency (more than $60 million) to bank accounts in Lebanon, his homeland. He pleaded guilty to mail fraud, 18 U.S.C. 1341, and impeding administration of the Internal Revenue Code, 26 U.S.C. 7212(a). With an upward adjustment of 2 levels for using sophisticated means, U.S.S.G. 2B1.1(b)(10)(C), 2T1.1(b)(2), he was sentenced to 76 months. The Seventh Circuit affirmed. Although defendant did not create phony corporations, use fake names to open accounts, or employ technology to conceal assets, his conduct was sophisticated because he directed employees to separate currency receipts, he withheld funds from corporate bank accounts, and concealed the magnitude of his sales. He secreted money into foreign accounts by carrying currency and cashier’s checks during his travels, avoided reporting by depositing currency in multiple transactions (structuring or smurfing) 31 U.S.C. 5324; and washed money through the accounts of relatives and associates.

Defendants operated auto dealerships, and from 1995 to 2005, more than half their sales were to drug traffickers, who preferred to deal with defendants because they were willing to accept large cash payments in small bills without question. They falsified sales contracts and liens, ignored federal tax-reporting requirements, and arranged bank deposits to avoid triggering federal bank-reporting requirements. Defendants were convicted of 97 counts of RICO conspiracy, money laundering, mail fraud, illegal transaction structuring, bank fraud, and aiding and abetting a drug conspiracy. The Seventh Circuit affirmed, rejecting challenges to management of the trial and sufficiency of the evidence. The court rejected an argument that conviction of money-laundering, 18 U.S.C. 1956(a), required to proof that defendants engaged in specified financial transactions for the purpose of laundering the "proceeds" of an underlying crime, and that "proceeds" means net profit of the underlying crime, not gross receipts. They were convicted of concealment and transaction-avoidance forms of money-laundering. At the time of trial, it was unclear whether proof of “proceeds” in a concealment or avoidance prosecution required proof that defendant laundered net profits of the underlying criminal activity.

Petitioner was arrested after a traffic stop and vehicle search. Charges were dropped when lab results revealed that plant material found in the vehicle was not marijuana. Petitioner filed suit under 42 U.S.C. 1983, claiming the officers lacked probable cause. The officers claimed to be following up on an anonymous tip. A jury returned a verdict in favor of the officers. The judge granted petitioner's motion for a new trial, without giving the officers an opportunity to respond. He ruled that the verdict was against the manifest weight of the evidence, reasoning that the officer had fabricated the tip and that other officers offered false testimony to support this fabrication. The judge then recused himself and the case was reassigned. The judge granted reconsideration and reinstated the verdict. The Seventh Circuit affirmed. The judge did not abuse his discretion by reconsidering the new trial grant, a non-final order, and determining that the verdict was not against the manifest weight of the evidence. There was no direct evidence contradicting testimony about the tip; the jury was able to weigh inconsistencies and make credibility determinations.