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

WCPP is a risk purchasing group for commercial property insurance. MGSA, an insurance broker, acts as WCPP’s program administrator, representing more than 600 properties. In 2011, MGSA sought renewal coverage for the WCPP properties. MGSA contracted with MC, which engaged NCAIG, which had previous insurance‐placement experience with Ward and his company JRSO. The chain of brokers for the WCPP renewal was: from MGSA, to MC, to NCAIG, to Ward and JRSO. In reality, Ward had created a fictitious policy for WCPP that was not actually backed by a legitimate insurer. Ward was convicted of wire fraud, sentenced to 10 years in prison, and ordered to pay restitution. One of the property groups in the WCPP program, Myan, had a history of losses, so MC had split it off from the main WCPP group for placement directly with JRSO for insurance. The Myan coverage used Norman-Spencer as program administrator, at the recommendation of NCAIG. Norman‐Spencer was paid $25,000 and issued policies for Myan’s coverage. Norman-Spencer wanted, but never obtained, additional contracts from WCPP. Norman-Spencer discovered an order issued against Ward and JRSO that could implicate Ward’s ability to bind coverage and, when Norman asked for a copy of Ward’s reinsurance agreement, Ward delayed for over a month and produced an agreement that contained irregularities. Norman‐Spencer did not inform WCPP or MGSA about these problems. None of the proposals or pricing information for WCPP came through Norman‐Spencer. MC and NCAIG received a commission from the WCPP premium; Norman‐Spencer did not. After Ward’s fraud was discovered, MGSA and WCPP sued Norman-Spencer. The Seventh Circuit affirmed summary judgment in favor of Norman-Spencer, concluding that Norman-Spencer owed no duty of care to either company. View "M.G. Skinner and Associates v. Norman-Spencer Agency, Inc" on Justia Law

Dana had a dealer agreement in Texas with AISCO. Unbeknownst to Dana, AISCO sold off most of its assets to newly-formed DanMar, which transferred the assets to UJoints. The name “UJoints” had been a trade name used by AISCO. Under Texas Business and Commerce Coe 57.154(a)(4), “a supplier may not terminate a dealer agreement without good cause.” Good cause exists “if there has been a sale or other closeout of a substantial part of the dealer’s assets related to the business.” Dana terminated the agreement, preventing UJoints from claiming to have been authorized to step into AISCO’s shoes and become a Dana dealer in Texas. The Seventh Circuit affirmed summary judgment in favor of Dana, finding that the transfers gave Dana good cause to terminate its dealer agreement with AISCO. The court rejected an argument that Dana entered into a “dealer agreement,” with the “new, unknown entity the identity of which the owners had concealed from Dana for a significant time.” It was natural for Dana to continue selling, for a time, to its dealer’s, AISCO’s, successor—UJoints. Those sales did not make UJoints a party to a dealer agreement. View "Texas Ujoints LLC v. Dana Holding Corp." on Justia Law

Micrins Surgical went out of business in 2009, without paying all of its taxes. Eriem Surgical was incorporated the same day, purchased Micrins’ inventory, took over its office space, hired its employees, used its website and phone number, and pursued the same line of business, selling surgical instruments. Teitz, the president and 40% owner of Micrins, continued to play a leading role in Eriem, though its sole stockholder is Teitz’s wife. Eriem uses “Micrins” as a trademark. The IRS treated Eriem as a continuation of Micrins and collected almost $400,000 of Micrins’ taxes from Eriem’s bank accounts and receivables. Eriem filed wrongful levy suit, 26 U.S.C. 7426(a)(1). The Seventh Circuit affirmed judgment in favor of the IRS, concluding that Eriem is a continuation of Micrins. The Supreme Court has never decided whether state or federal law governs corporate successorship when the dispute concerns debts to the national government; the Internal Revenue Code says nothing about corporate successorship. Illinois law uses a multi‐factor balancing standard to determine successorship. Rejecting an argument that the change in ownership should be dispositive, the court upheld the district court’s conclusion that Mrs. Teitz serves is proxy for her husband, so that there has not been a complete change of ownership. View "Eriem Surgical, Inc. v. United States" on Justia Law

Plaintiffs filed a putative class action suit against their former employer, alleging violations of the Illinois Wage Payment and Collection Act (IWPCA), and other state wage payment statutes, including the New York Labor Law and California Labor Code. They claimed that Medline’s practice of accounting for year-to-year sales declines in calculating and paying commissions was impermissible under the terms of their employment agreements and state wage laws. The district court granted Medline summary judgment, finding that plaintiffs had not performed enough work in Illinois for the IWPCA to apply and that Medline and the plaintiffs had agreed to Medline’s method of calculating commissions, so there was no violation of state wage laws. The Seventh Circuit affirmed. Medline’s commission structure is consistent with the written agreements. The court rejected an argument that the structure was, nonetheless, a per se violation of New York and California labor law because it impermissibly recoups Medline’s business losses from its Sales Representatives, even when those losses are outside Sales Representatives’ control. Medline’s inclusion of negative growth in its commission calculation was not an unlawful deduction in disguise, but rather a valid means of incentivizing their salespeople to grow business in their assigned territories. View "Cohan v. Medline Industries, Inc." on Justia Law

NMEPT, a joint venture, was formed to sell environmental equipment in China. Nalco owned 55% of the venture, Chen 40%, and a third party 5%. When NMEPT encountered business problems, Nalco paid its creditor and sued Chen for his 40% share of the outlay. The district court awarded Nalco more than $2 million, rejecting Chen's counterclaim that Nalco’s subsidiary, NMI, had caused the joint venture to borrow $300,000 without Chen's approval, even though the agreement required all investors’ consent for borrowing. Chen also claimed that the creditor petitioned the joint venture into bankruptcy under Chinese law, on behalf of NMI, in an effort to avoid a clause requiring the investors’ unanimous consent for bankruptcy proceedings. Nalco wanted to wind up the unprofitable venture, but Chen preferred to keep it alive (if dormant) to protect its intellectual property. Chen did not appeal, but filed a new suit in China, against Mobotec. The Seventh Circuit affirmed an injunction, prohibiting Chen from pursuing the Chinese litigation. Rejecting an argument that Mobotec was not a party to and could not benefit from the Illinois judgment, the court stated: “That would be a questionable proposition even if Mobotec were a distinct entity, for federal courts no longer require mutuality in civil litigation.” The district court found that NMI and Mobotec are the same entity. View "Nalco Co. v. Chen" on Justia Law

From 1992-2013, a Milwaukee ordinance limited taxicab permits to those in existence on January 1, 1992 that were renewed. The ordinance lowered the ceiling over time by virtue of the nonrenewals. By 2013 the number of permits had diminished from 370 to 320. The price of permits on the open market soared as high as $150,000. In 2013, after a successful equal protection and substantive due process challenge, the city conducted a lottery, which attracted 1700 permit seekers. Milwaukee had only one taxicab per 1850 city residents, a much lower ratio than comparable cities. The city eliminated the cap in 2014. In the meantime, “ridesharing” companies such as Uber, had diminished the profitability of the existing taxi companies. Plaintiffs, cab companies, alleged that the increased number of permits has taken property without compensation. The Seventh Circuit affirmed dismissal. The taxi companies were aware that there was no guarantee that the ordinance would remain in force indefinitely, and that, were it repealed, they would be faced with new competition that would threaten their profits. The ordinance gave them no property right; its repeal invaded no right conferred by the Constitution. The court similarly rejected state-law claims of breach of contract, promissory estoppel, and equitable estoppel. View "Joe Sanfelippo Cabs, Inc. v. City of Milwaukee" on Justia Law

Darren's parents began operating S&N Fireworks in the 1970s and obtained a Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) license (18 U.S.C. 842(f)) to import explosives. Darren founded DCV in 2004, intending to eventually buy out S&N. DCV shared S&N’s Lincoln, Illinois place of business and obtained its own ATF import license. From 2004-2011, S&N ordered fireworks from DCV, which imported them from China and immediately transferred them to S&N, which packaged and sold fireworks for shows. Darren was employed by S&N and was listed as a “responsible person” on S&N’s license. DCV was not storing any explosives during this period and had no ATF violations. S&N, however, was cited for numerous violations in a 2006 inspection, relating to records and storage of fireworks. A 2009 inspection revealed multiple violations. Darren attended a meeting and signed a report acknowledging the violations. ATF notified S&N that its license would not be renewed. S&N voluntarily surrendered its license. DCV bought out S&N’s inventory, equipment, and contracts Darren delegated substantial responsibility to his brother, who had been responsible for many of S&N’s problems. ATF inspected in 2013, found multiple violations, and notified Darren that it did not intend to renew DCV’s license. DCV argued that its violations should not be deemed willful given its perfect compliance record before 2013. The agency responded that S&N and DCV were essentially the same operation and equated the S&N violations with DCV. After a hearing, the license was not renewed. The Seventh Circuit upheld the decision as supported by substantial evidence. View "D.C.V. Imports, L.L.C. v. Bureau of Alcohol, Tobacco, Firearms & Explosives" on Justia Law

Clorox decided to sell the largest-sized containers of its products only to discount warehouses such as Costco and Sam’s Club. Ordinary grocery stores, including Woodman’s, could only obtain smaller packages. Arguing that package size is a promotional service, Woodman’s sued Clorox for unlawful price discrimination under the Robinson-Patman Act, 15 U.S.C. 13(e). The district court denied Clorox’s motion to dismiss. On interlocutory appeal, the Seventh Circuit reversed. Only promotional “services or facilities” fall within subsection 13(e). Size alone is not enough to constitute a promotional service or facility for purposes of subsection 13(e); any discount that goes along with size must be analyzed under subsection 13(a). The convenience of the larger size is not a promotional service or facility. View "Woodman's Food Mkt, Inc. v. Clorox Co." on Justia Law

Witter contends that in August 2007 he telephoned Skelton, an employee of his broker, TransAct, with instructions to cancel several standing orders. Skelton did not do so, and Witter lost $23,000 on the resulting market position. Skelton claims that Witter never told him to cancel all seven of the working orders at issue. Witter filed a complaint with the Commodity Futures Trading Commission, 7 U.S.C. 18(a), which found no violation. The judgment officer refused to draw an adverse inference based on TransAct’s failure to produce a recording of the “one crucial conversation” because TransAct was not required to record the call; he found that Skelton’s version was more plausible and Witter had a “propensity to confuse trading terms” like “position” and “order.” The Seventh Circuit affirmed, finding the Commission’s decision was supported by the evidence. Federal regulations require that, before buying or selling a commodity, a merchant must receive either “specific authorization” or “authorization in writing,” 17 C.F.R. 166.2. No regulation requires the merchant to record phone calls to cancel previously authorized orders to buy or sell. View "Witter v. Commodity Futures Trading Comm'n" on Justia Law

In 2012 Walgreens acquired a 45 percent equity stake in Alliance, plus an option to acquire the rest of Alliance’s equity for a mixture of cash and Walgreens stock. Walgreens later announced its intent to purchase the remainder of Alliance and engineer a reorganization whereby Walgreens would become a wholly-owned subsidiary of a new corporation, Walgreens Boots Alliance. Within two weeks after Walgreens filed a proxy statement seeking shareholder approval, a class action was filed; 18 days later, less than a week before the shareholder vote, the parties agreed to settle. The settlement required Walgreens to issue several requested disclosures and authorized class counsel to request $370,000 in attorneys’ fees, without opposition from Walgreens. The Seventh Circuit reversed approval of the settlement, calling the supplemental disclosures “a trivial addition to the extensive disclosures already made in the proxy statement.” “The oddity of this case is the absence of any indication that members of the class have an interest in challenging the reorganization.... The only concrete interest suggested … is an interest in attorneys’ fees.... Certainly class counsel, if one may judge from their performance in this litigation, can’t be trusted to represent the interests of the class.” View "Hays v. Berlau" on Justia Law