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

Freight entering the port of Savannah was trucked to Schneider Logistic’s building, unloaded on one side, sorted, and reloaded on the other side of the building onto outgoing trucks; such reloading is called “cross-docking.” Scheider hired Prime to do the cross‐docking work. Prime was usually not paid timely and not paid enough to break even. Prime complained about that and about a lack of communication from Schneider concerning assignments. Schneider’s failed, without explanation, to pay Prime $82,464.71 for services rendered. Prime removed its employees from Schneider’s Savannah building; and filed suit for $289,059.95. Schneider responded that Prime’s repudiation of the contract had caused Schneider damages of $853,401.49. A jury found that Prime had repudiated its contract but that Schneider had no damages. Schneider successfully sought a new trial under FRCP 59, limited to damages, in the “interest of justice.” A second jury awarded Schneider $853,401.49. reduced to $564,341.54. The Seventh Circuit vacated. A rational jury could find that a zero damages award would fairly compensate Schneider. The first jury may have concluded that Schneider had failed to mitigate its damages by paying Prime what it owed, “peanuts” to such a large firm as Schneider.. In the second trial, the judge arbitrarily excluded evidence favorable to Prime. View "Prime Choice Services Inc. v. Schneider Logistics Transloading & Distribution, Inc." on Justia Law

Lexington Insurance denied a claim by its insured, Double D Warehouse, for coverage of Double D’s liability to customers for contamination of warehoused products. One basis for denial was that Double D failed to document its warehousing transactions with warehouse receipts, storage agreements, or rate quotations, as required by the policies. PQ was a customer of Double D whose products were damaged while warehoused there. PQ settled its case against Double D by stepping into Double D’s shoes to try to collect on the policies. PQ argued that there were pragmatic reasons to excuse strict compliance with the policy’s terms. The Seventh Circuit affirmed summary judgment in favor of Lexington. PQ accurately claimed that the documentation Double D actually had (bills of lading and an online tracking system) should serve much the same purpose as the documentation required by the policies (especially warehouse receipts), but commercially sophisticated parties agreed to unambiguous terms and conditions of insurance. Courts hold them to those terms. To do otherwise would disrupt the risk allocations that are part and parcel of any contract, but particularly a commercial liability insurance contract. PQ offered no persuasive reason to depart from the plain language of the policies. View "PQ Corp. v. Lexington Insurance Co." on Justia Law

In 1999, the Dribbens purchased a home from the Favres on 42 acres in a four‐parcel development near Saint Louis, Missouri. Davidson represented the Favres in that purchase. Davidson was also one of the developers and owned one parcel. The development has a 30‐acre artificial lake; the dam creating that lake is located on the Dribbens parcel. In a 2006 lawsuit, the Dribbens alleged that Davidson failed to disclose that the original owners/developers had never obtained a permit from the Illinois Department of Natural Resources, which amounted to fraudulent concealment and consumer fraud. Davidson tendered the suit to Diamond State, which had issued her professional liability errors and omissions policy. In 2011, the Dribbens filed a second suit, alleging a pattern of harassment, intimidation, and interference with the Dribbens’ property rights by the Davidsons. Davidson tendered the 2011 lawsuit to Madison Mutual, which had provided her homeowner’s insurance and umbrella coverage. Diamond State refused to supply a defense to the 2011 litigation. Madison Mutual sought a declaratory judgment that Diamond State has breached its duty to defend in the 2011 suit and had a duty to reimburse Madison Mutual. The Seventh Circuit affirmed summary judgment in favor of Diamond State. The 2011 suit does not potentially assert a claim that is plausibly within the Diamond State professional liability coverage. View "Madison Mutual Insurance Co. v. Diamond State Insurance Co." on Justia Law

APS is a broker for the purchase and sale of accounting practices, working through brokers who are treated as independent contractors and are assigned exclusive sales territories. Burford became an APS broker in 2003, under a contract with a “minimum yearly sales volume” requirement. Burford did not meet this requirement for four consecutive years. In 2010, APS’s owner, Holmes spoke with Burford about his poor performance. Burford failed to meet his minimum yearly sales volume requirements again in 2010 and 2011. In 2012, APS terminated Burford’s contract and reassigned his sales territory. Burford filed suit. The district court granted summary judgment in favor of the defendants, reasoning that Burford’s contract was terminable at will. On remand, a jury found for APS. The Seventh Circuit affirmed, rejecting arguments that the trial court erred by supposedly allowing APS to change the legal theory for its defense in violation of the “mend‐the‐hold” doctrine in Illinois law and abused its discretion by denying admission of an exhibit. The court also rejected an argument that the verdict was contrary to the weight of the evidence on whether APS waived its right to enforce the minimum sales requirement. View "Estate of Burford v. Accounting Practice Sales, Inc" on Justia Law

In the first case in “a long‐running and acrimonious business dispute,” Lardas claimed fraudulent inducement and breach of contract, arising from a settlement agreement, which Lardas argued was intended to deprive her nephew (Christofalos) of his ownership interest in Wauconda Shopping Center (WSC). The Seventh Circuit affirmed dismissal of Lardas’s case without prejudice, finding that Lardas lacked standing. Lardas had transferred her ownership in a predecessor entity to Christofalos. The second case involves Christofalos’s bankruptcy, in which the court authorized the sale of his interest in WSC (11 U.S.C. 363(b)). The Seventh Circuit dismissed an appeal as moot because the sale has been consummated and third parties have acted in reliance. Christofalos also challenged the denial of a discharge, based on a bankruptcy court finding under 11 U.S.C. 727(a)(4)(A), which authorizes denial of discharge where the debtor has “knowingly and fraudulently … made a false oath or account.” The Seventh Circuit affirmed, noting that Christofalos made a “host of false statements and omissions.” The court also affirmed denial of Christofalos’s “Motion to Reopen Case and Assign a Receiver” in Lardas’s case. View "Christofalos v. Grcic" on Justia Law

Richard, Father, Mother, and sister (Kathryn) formed the family Corporation in 1990. Under its articles of incorporation and bylaws, each family member served as a lifetime director. Mother died in 2000. In 2010, the remaining family members elected Phyllis to a three-year term on the board. Father died in 2010. Phyllis’s term expired in 2013. Under Indiana Code 23-17-12-3, a nonprofit corporation must be governed at all times by at least three directors. Richard claimed that when Phyllis’s term expired, the Corporation was no longer lawfully constituted and the two remaining board members could not act on the Corporation’s behalf or exercise corporate powers. Indiana law provides that when a nonprofit director’s term expires without further action by the board: “the director continues to serve until … a successor is elected, designated, or appointed and qualifies.” That language is reflected in the Corporation’s bylaws and the 2010 resolution appointing Phyllis to the board. Kathryn and Phyllis voted in 2013 to elect Phyllis to a second term. The board then took several actions over Richard’s objections, including authorizing gifts to Saint Francis (on whose board Kathryn also serves) and electing Kathryn’s son as a fourth board member. Richard filed suit, as an individual and derivatively. The Seventh Circuit affirmed dismissal. Under Indiana law, only a shareholder or member of a corporation may bring a derivative action on the corporation’s behalf. Richard is neither a shareholder nor a member. The Corporation’s articles of incorporation provide that it “shall have no members.” Richard’s purported individual claims for money judgment belong to the Corporation and his other individual claims failed on their merits. View "Doermer v. Callen" on Justia Law

Gubala subscribed to Time Warner’s cable services in 2004 and, as required, provided Time Warner with his date of birth, address, telephone numbers, social security number, and credit card information. In 2006, he cancelled his subscription. In 2014, upon inquiring, Gubala learned that all of his personal information remained in the company’s possession; none had been destroyed. Gubala filed a class-action suit for alleged violations of the Cable Communications Policy Act, 47 U.S.C. 551(e), which provides that a cable operator “shall destroy personally identifiable information if the information is no longer necessary for the purpose for which it was collected and there are no pending requests or orders for access to such information [either by a cable subscriber, seeking access to his own information] … or pursuant to a court order.” The district judge dismissed the suit for lack of standing, stating that even if Gubala had standing, he failed to state a claim. He could not obtain an injunction, the only remedy he sought, because he had an adequate remedy at law (damages), but did not seek damages. The Seventh Circuit affirmed, stating that the lack of any concrete injury inflicted or likely to be inflicted on Gubala precluded the relief sought. View "Gubala v. Time Warner Cable, Inc." on Justia Law

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