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

Schaumburg’s 2016 ordinance requires commercial buildings to send fire‐alarm signals directly to the local 911 dispatch center, NWCDS, which has an exclusive arrangement with Tyco. To send signals to NWCDS, local buildings must use Tyco equipment. Schaumburg’s notice of the ordinance referred to connection through Tyco and stated that accounts would be charged $81 per month to rent Tyco’s radio transmitters and for the monitoring service. Tyco pays NWCDS an administrative fee of $23 per month for each account it connects to the NWCDS equipment. Tyco’s competitors filed suit charging violations of constitutional, antitrust, and state tort law. The district court dismissed the case. The Seventh Circuit reversed the dismissal of the Contracts Clause claim against Schaumburg. The complaint alleges a potentially significant impairment, the early cancellation of the competitors’ contracts, and Schaumburg’s self‐interest, $300,000 it stands to gain. The court otherwise affirmed, noting that entities not alleged to have taken legislative action cannot be liable under the Contracts Clause. WIth respect to constitutional claims, the court noted the government’s important interest in fire safety. Rejecting antitrust claims, the court stated that the complaint did not allege a prohibited agreement, as opposed to an independent, legislative decision. View "Alarm Detection Systems, Inc. v. Village of Schaumburg" on Justia Law

Under a 2014 agreement, MCFI, a non-profit organization that provides medical care for individuals with brain injuries, would operate a brain-injury center in MHC’s nursing facility. MHC would handle billing and collections for MCFI's services and remit the funds collected to MCFI after taking its cut. MHC instead redirected MCFI’s funds to pay its employees and other creditors. MCFI sued MHC and MHC’s principal, Nicholson. The district court entered summary judgment against MHC for breach of contract and against Nicholson for conversion and civil theft and awarded MCFI over $2 million in damages, interest, and costs against MHC and Nicholson, jointly and severally. It also awarded MCFI over $200,000 in attorney’s fees and costs against Nicholson alone. The Seventh Circuit affirmed. MCFI had an ownership interest in the BIRC Collections. At most MCFI’s acknowledgment of the security interests of MHC’s creditors only estops MCFI from contesting the interests of those creditors; it does not prevent MCFI from asserting its ownership of the property against MHC. The duty to refrain from converting or stealing the BIRC Collections was entirely independent of the contract. It arose from the common law and Wisconsin statutes. Nicholson was personally involved in the wrongful redirection of those funds through the actions of his agent. View "Milwaukee Center for Independence, Inc. v. Milwaukee Health Care LLC" on Justia Law

The agreement gave Division the exclusive right to purchase aged and customer-returned merchandise from Finish and provided for an 18-month term “commencing on March 1, 2001” that could be extended by written agreement of the parties “prior to the expiration of the term or any extension thereof.” The agreement was twice amended. Despite the 2008 agreement’s express ending date of December 31, 2013, Finish continued to ship products to Division in 2014. Finish eventually stopped dealing with Division and began dealing with other parties. In 2015, Division wrote to Finish asserting its exclusive right under the agreement to purchase Finish’s surplus products. Finish asserted that the agreement was no longer in effect. The district court dismissed Division’s suit, concluding that the agreement did not provide for perpetual self-renewal and the 2008 Amendment did not provide for an automatic extension. Since the plain language was not ambiguous, the court refused to consider extrinsic evidence of the parties’ intent—the 2014 shipments. The Sixth Circuit affirmed. The agreement is clear and unambiguous, Division’s extrinsic evidence cannot be considered. There was no automatic extension following the 2008 amendment extension; the agreement was no longer in force after December 2013 and Finish did not commit a breach when it began dealing with third parties in 2014. View "Division Six Sports, Inc. v. Finish Line, Inc." on Justia Law

Seattle’s Duncan Place condominium complex was built in 2009, with Danze faucets in all 63 units. The faucets’ water hoses can corrode and crack in normal use. Several faucets failed, causing property damage and replacement costs. Danze’s “limited lifetime warranty” promises to replace defective parts. Danze refused to repair or replace the faucets. The Owners Association filed suit on behalf of itself, unit owners, and a proposed nationwide class, asserting claims under Washington law. The judge rejected all claims, holding that Washington’s independent-duty doctrine barred claims of negligence and strict product liability; the unjust-enrichment claim was premised on fraud but did not satisfy the FRCP 9(b) heightened pleading requirements. A Washington claim for breach of an express warranty requires that the plaintiff was aware of the warranty. Duncan Place was unable to make that allegation in good faith with respect to any unit owners.The Seventh Circuit reversed in part. The Washington Product Liability Act subsumes the negligence and strict-liability claims; the “independent duty doctrine” generally bars recovery in tort for direct and consequential economic losses stemming from the product’s failure (damages associated with the “injury” to the product itself) but does not bar recovery for damage to other property. Duncan Place alleged in general terms that the defective faucets caused damage to other condominium property, so the WPLA claim is not entirely blocked by the independent duty doctrine. View "Duncan Place Owners Associatio v. Danze, Inc." on Justia Law

In 2011 Caterpillar made serious inquiries about the possible acquisition of a Chinese mining company and its wholly‐owned subsidiary (Siwei). Caterpillar completed that acquisition in June 2012. Only after the closing did Caterpillar gain access to Siwei’s physical inventory and find that Siwei had overstated its profits and improperly recognized revenue. Caterpillar took a $580 million goodwill impairment charge just months after the acquisition. Plaintiffs, Caterpillar shareholders, filed a shareholder derivative suit alleging that several former Caterpillar officers breached their fiduciary duties by failing to conduct an adequate investigation of the Siwei acquisition, which caused Caterpillar’s loss. They made an unsuccessful demand that the Caterpillar Board bring the litigation. The district court dismissed the complaint for failure adequately to allege that the Board wrongfully refused to pursue the Plaintiffs’ claim. The Seventh Circuit affirmed. The Board’s decision not to litigate was protected by the “wide bounds of the business judgment rule.” The plaintiffs might come to a different conclusion about the strategic importance of the acquisition, the risk that litigation might cause disruption and excessive cost for Caterpillar, or the need to interview Siwei’s former CEO, but those types of business and investigative choices are exactly what the business judgment rule protects. View "Lowinger v. Oberhelman" on Justia Law

Kreg, a medical-supply company, contracted with VitalGo, maker of the Total Lift Bed®, for exclusive distribution rights in several markets. A year and a half later, the arrangement soured. VitalGo told Kreg that it had not made the minimum‐purchase commitments required by the contract for Kreg to keep its exclusivity. Kreg thought VitalGo was wrong on the facts and the contract’s requirements. The district court ruled, on summary‐judgment that VitalGo breached the agreement. The damages issue went to a bench trial, despite a last-minute request from VitalGo to have it dismissed on pleading grounds. The court ordered VitalGo to pay Kreg about $1,000,000 in lost‐asset damages and prejudgment interest. The Seventh Circuit affirmed, upholding the district court’s rulings that the agreement allowed Kreg to make minimum-purchase commitments orally; that the minimum‐purchase commitment for the original territories was made in December 2010; that VitalGo breached the agreement by terminating exclusivity in June 2011 and by failing to deliver beds in September 2011; and concerning the foreseeability of damages. View "Kreg Therapeutics, Inc. v. VitalGo, Inc." on Justia Law

ARC, a distributor of compressed gases, sold its assets to American. Because ARC leased asset cylinders to customers, it was not immediately able to identify the number of cylinders included in the purchase; the Agreement estimated 6,500 cylinders and provided that American would hold back $150,000 for 180 days to protect against a shortage of up to 1,200 cylinders, at $125 per cylinder. When American began billing the customers it acquired, it learned that many of them paid only to have cylinders refilled but did not pay rent on the cylinders they used. An audit revealed that ARC owned and transferred 4,663 asset cylinders--1,837 cylinders short of the 6,500 promised. In an ensuing breach of contract suit, ARC argued that American breached the contract because it did not complete its audit within the specified 180-day period. The district court disagreed, concluding that ARC extended that deadline and that, because only 4,663 cylinders were delivered, ARC was never entitled to receive any portion of the Cylinder Deferred Payment. The court granted American’s counterclaim for breach of contract, holding that American was entitled to the entire $150,000 and to recover $125 for each cylinder it failed to receive under the threshold of 5,300. The Seventh Circuit affirmed. Because ARC was not entitled to any of the Cylinder Deferred Payment in that it provided less than the 5,300 cylinders, it could not have been damaged by the delay in completing the audit. View "ARC Welding Supply, Co. Inc. v. American Welding & Gas, Inc." on Justia Law

Plaintiffs, 39 former employees of Infinium Capital, voluntarily converted loans they had made to their employer under the company’s Employee Capital Pool program into equity in the company. A year later their redemption rights were suspended; six months after that, they were told their investments were worthless. Plaintiffs filed suit against Infinium, the holding company that owned Infinium, and members of senior management, asserting claims for federal securities fraud and state law claims for breach of fiduciary duty and fraud. The Seventh Circuit affirmed the dismissal, with prejudice, of their fifth amended complaint for failure to state a claim. Reliance is an element of fraud and each plaintiff entered into a written agreement that contained ample cautionary language about the risks associated with the investment. Federal Rule of Civil Procedure 9(b) provides that a party alleging fraud or mistake “must state with particularity the circumstances constituting fraud or mistake,” although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Plaintiffs failed to identify the speakers of alleged misrepresentations with adequate particularity, failed to adequately plead scienter, and failed to plead a duty to speak. View "Cornielsen v. Infinium Capital Management, LLC" on Justia Law

BankDirect and Capital make loans to finance insurance premiums. In 2010, Capital, having exhausted the line of credit, approached BankDirect, which was willing to purchase Capital's loans and pay Capital to service those loans. BankDirect had a right to purchase Capital’s business after five years. If BankDirect did not purchase Capital, either party could extend the term by notice before January 4, 2016; otherwise, the agreement would terminate on January 31, 2016. Any extension could not go beyond June 1, 2018. BankDirect exercised the option in November 2015, but Capital refused to honor it. BankDirect sued. Capital sought an injunction to require BankDirect to continue purchasing loans and paying it to service them. BankDirect continued the arrangement through May 1, 2017, when it seized several Capital accounts and stated that it would no longer buy Capital's loans. BankDirect withdrew its request for specific performance. The district court concluded that Capital was entitled to a preliminary injunction so that the purchase‐and‐service arrangement would continue pending a judgment but did not address the 2018 terminal date or other disputes; failed to enter an injunction as a separate document under Fed. R. Civ. P. 65(d)(1)(C); and did not require Capital to post a bond (Rule 65(c)). The Seventh Circuit declined to address the merits or Rules 65(c) and (d), stating that the “injunction” should have contained a terminal date: June 1, 2018, and remanded for a determination of whether damages are available. View "Bankdirect Capital Finance, Inc. v. Texas Capital Bank National LLC" on Justia Law

In 2008, Fisker, a manufacturer of luxury hybrid electric cars, became part of a trend in venture capital investments toward green energy technology start-ups. The Department of Energy advanced Fisker $192 million on a $528.7 million loan, secured with assistance from the Kleiner venture capital firm, a Fisker controlling shareholder. Tech-industry rainmakers and A-list movie stars invested in Fisker, which was competing with another emerging player, Tesla. In 2009, before sales began on its first-generation vehicles, Fisker announced that its second-generation vehicles would be built in Delaware. Delaware agreed to $21.5 million in state subsidies. Vice President Biden and Delaware Governor Markell participated in Fisker’s media unveiling of the collaboration. Riding this publicity, Fisker secured funding from additional venture capital firms and high net worth investors, including the five plaintiffs, who collectively purchased over $10 million in Fisker securities. In 2011, Fisker began selling its flagship automobile. In 2012, it stopped all manufacturing. In April 2013, Fisker laid off 75% of its remaining workforce; the U.S. Government seized $21 million in cash for Fisker’s first loan payment. The Energy Department put Fisker’s remaining unpaid loan amount ($168 million) out to bid. Fisker filed for bankruptcy. In October 2016, the plaintiffs filed a class action, alleging fraud, breach of fiduciary duty, and negligent misrepresentation. The Seventh Circuit affirmed the dismissal of plaintiffs’ claims as precluded by Illinois law’s three-year limitations period. Those claims accrued no later than April 2013. View "Orgone Capital III, LLC v. Daubenspeck" on Justia Law