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

In 1998 IGF bought Continental’s crop-insurance business at a price to be determined at either side’s option by the exercise of a put or call. In 2001 Continental exercised its put option; under the contractual formula, IGF owed Continental $25.4 million. Around that same time, IGF sold its business to Acceptance for $40 million. The Symons, who controlled IGF, structured the purchase price: $16.5 million to IGF; $9 million to IGF's parent companies Symons International and Goran in exchange for noncompetition agreements; and $15 million to Granite, an affiliated Symons-controlled company, for a reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer. The court found for Continental and pierced the corporate veil to impose liability on the controlling companies and individuals. The Seventh Circuit affirmed, finding Symons International liable for breach of the 1998 sale agreement; Symons International, Goran, Granite, and the Symons liable as transferees under the Indiana Uniform False Transfer Act; and the Symons liable under an alter-ego theory. The Symons businesses observed corporate formalities only in their most basic sense. The noncompetes only made sense as a fraudulent diversion of the purchase money, not as legitimate protection from competition. The reinsurance treaty. which was suggested bySymons and outside industry norms, was unjustified and overpriced. View "Cont'l Cas. Co. v. Symons" on Justia Law

Great Lakes, which automotive service stores throughout the Midwest, filed for Chapter 11 bankruptcy. The unsecured creditors’ committee filed an adversary action against T.D., which had leased two oil-change stores to Great Lakes. Great Lakes had negotiated the termination of the leases 52 days before it declared bankruptcy, and the creditors’ committee contends that the termination was either a preferential (11U.S.C. 547(b)) or a fraudulent (11 U.S.C. 548(A)(1)) transfer of the leases to T.D. The bankruptcy judge rejected that claim. The Seventh Circuit reversed and remanded for determination of the value of Great Lakes’ transfer to T.D. and whether T.D. has any defenses to the creditors’ claims. View "In re: Great Lakes Quick Lube, LP" on Justia Law

An association of Indiana convenience stores filed suit seeking to invalidate a state law that restricts the sale of cold packaged beer. The suit claims the law violates the Equal Protection Clause because some kinds of stores may sell cold beer but grocery and convenience stores may not. The district court upheld the law; the Seventh Circuit affirmed. While rejecting the state’s argument that the Twenty-first Amendment gives it “nearly absolute” authority to regulate alcohol sales, the court held that the cold-beer statute is subject to rational-basis review and survives that lenient standard. To succeed on its claim, the Association would have to “negative every conceivable basis which might support” the statutory scheme. The Association’s policy arguments for allowing cold-beer sales by grocery and convenience stores are matters for the Indiana legislature, not the federal judiciary. View "IN Petroleum Mkters & Convenience Store Ass'n v. Cook" on Justia Law

This appeal was the most recent appeal in a series of lawsuits that have arisen over the sale of bonds by a corporation wholly owned by the Lac du Flambeau Band of Lake Superior Chippewa Indians (collectively, “the Tribal Entities”). In a prior action, the Seventh Circuit held that a bond indenture constituted an unapproved management contract under the Indian Gaming Regulatory Act (“IGRA”) and was therefore void. Following more than three years of litigating the validity of other bond-related documents in federal and state court, the Tribal Entities instituted a tribal court action seeking a declaration that the bonds are invalid under the IGRA as well as tribal law. Certain “Financial Entities” and Godfrey & Kahn S.C. sought an injunction in the Western District of Wisconsin to preclude the Tribal Entities from pursuing their tribal court action. The district court preliminarily enjoined the Tribal Entities from proceeding against the Financial Entities but allowed the tribal action to proceed against Godfrey. The Seventh Circuit affirmed in part and reversed in part, holding that the district court (1) did not abuse its discretion in enjoining the tribal court action against the Financial Entities; but (2) made several errors of law in assessing whether Godfrey had established a likelihood of success on the merits. Remanded. View "Stifel, Nicolaus & Co., Inc. v. Lac Du Flambeau Band of Lake Superior Chippewa Indians" on Justia Law

Continental sells carbon black, a material used in rubber products. BRC makes rubber products for the automotive industry. The companies entered into a contract that stated: It is the intent of this agreement that Continental agrees to sell to BRC approximately 1.8 million pounds of carbon black annually. In 2010, Continental shipped 2.6 million pounds to BRC. In 2011, for various reasons, Continental was struggling to keep up with the total demand from all its customers. When Continental refused to confirm or ship some of BRC’s orders, BRC sued, alleging that Continental had breached and repudiated the contract. The district court entered judgment for BRC, finding that as a matter of law that the agreement was a “requirements contract,” meaning it obligated Continental to sell as much carbon black as BRC needed, and obligated BRC to buy all its carbon black exclusively from Continental. The Seventh Circuit vacated and remanded, finding that the agreement did not obligate BRC to buy any—much less all— of its carbon black from Continental. View "BRC Rubber & Plastics, Inc. v. Cont'l Carbon Co." on Justia Law

Plaintiff, a stockholder in DeVry, which operates for-profit colleges and universities, filed a shareholders’ derivative suit against DeVry’s board of directors. A 2005 incentive plan authorized awards of stock options to key employees, including the CEO. The plan limited awards to 150,000 shares per employee per year. Nonetheless, the company granted Hamburger, who became its CEO in 2006, options on 184,100 shares in 2010, 170,200 in 2011, and 255,425 in 2012. DeVry, discovering its mistake, reduced each grant under the 2005 plan to 150,000 shares, but allocated Hamburger 87,910 shares available under the company’s 2003 incentive plan, which held shares that had not been allocated. Only the company’s Plan Committee, not the Compensation Committee, was authorized to grant stock options under the 2003 plan; there was no Plan Committee in 2012. The grant of 87,910 stock options was approved by the Compensation Committee, and then by the independent directors as a whole. The Seventh Circuit affirmed dismissal. The directors who approved the Compensation Committee’s recommendation were disinterested: the recommendation was a valid exercise of business judgment. Administration of the 2003 plan by the Compensation Committee, given the nonexistence of the Plan Committee, was not “a clear or intentional violation of a compensation plan,” View "Donnawell v. Hamburger" on Justia Law

In 1920 Peoples Gas and Beazer’s predecessor entered into a contract, Beazer agreed to to operate a plant for coke by-products and carbureted water gas (Chicago Coke), at Crawford Station, Chicago, using its patented coke-oven technology. Peoples agreed to purchase all of the gas and coke manufactured at the plant for distribution to consumers. Chicago Coke opened in 1921. Seven years later, Peoples acquired its assets. Later, Peoples purchased Coke’s stock and took over operations until 1956. Some of the land is still owned by Peoples. Peoples worked with the U.S. EPA and the Illinois EPA to investigate environmental contamination at the Crawford site and entered into agreements with the EPA. For investigation and removal at Crawford, Peoples incurred over $70,000,000 in costs. Peoples sued Beazer to recover costs under CERCLA, 42 U.S.C. 9607(a) and 42 U.S.C. 9613(f)(3)(B). The district court dismissed in part, finding that Peoples had resolved its liability to the government via administrative settlement and, therefore, only had a claim for contribution; that each consent order was subject to the three-year limitations period under 42 U.S.C. 9613(g)(3)(B); and that a contribution claim under the 2011 consent order was barred by Beazer’s operator liability. The court denied Beazer’s motion as to claim ownership liability. The Seventh Circuit affirmed: the 1920 agreement bars Peoples’ contribution claims against Beazer. View "Peoples Gas Light & Coke Co, v. Beazer East Inc." on Justia Law

Child Craft manufactured furniture. Bienias owns Summit. The parties had a long-standing business relationship. Child Craft contracted with Summit to supply raw wood for a planned line of high-end baby furniture, the “Vogue Line.” Summit sourced the goods from an Indonesian manufacturer, Cita. At Bienias’s request, Child Craft did not have direct contact with Cita. In 2008-2009 Child Craft issued purchase orders to Summit, worth about $90,000. Each included detailed specifications, including that the moisture content of the wood needed to be between 6% and 8%. The goods never conformed to its specifications, in spite of Bienias’s assurances that they would. Child Craft identified the goods as defective upon receipt and refused to pay for shipments. It spent considerable time trying to re-work the products. Child Craft was never able to sell the Vogue Line and ceased operations in 2009. Summit sued for breach of contract and conversion based on refusal to pay. Child Craft counterclaimed for breach of contract and negligent misrepresentation, seeking to $5 million in compensatory damages plus punitive damages of $5 million. Only Child Craft’s counterclaim for negligent misrepresentation against Bienias personally was tried. A judge awarded $2.7 million, against Bienias and Summit. The Seventh Circuit reversed the award. Under Indiana law, a buyer who has received non-conforming goods cannot sue a seller for negligent misrepresentation to avoid the economic loss doctrine, which limits the buyer to contract remedies for purely economic loss. There is no basis for transforming the breach of contract claim into a tort claim to hold the seller’s president personally liable. View "JMB Mfg., Inc. v. Harrison Mfg., LLC." on Justia Law

Northbound generates and sells life insurance leads, using the brand name “Leadbot,” but ran out of cash with a frozen line of credit and revenue that did not support its overhead. Norvax generates and sells health insurance leads. An asset purchase agreement was signed in 2009, “by and between” Northbound and Leadbot LLC, a subsidiary of Norvax that was formed to purchase the assets of Northbound. Under the agreement, Leadbot LLC was obligated to use the assets it acquired from Northbound in furtherance of the Leadbot brand. The purchase price was not paid in cash. Instead Northbound would receive an “earn-out” calculated as a percentage of the monthly net revenue of Leadbot LLC. The agreement also contained an Illinois choice-of-law clause. Northbound claims that Leadbot LLC and Norvax violated the agreement. The district court dismissed some claims and granted summary judgment for defendants on the remainder. The Seventh Circuit affirmed, reasoning that Norvax was not actually a party to the contract that was allegedly breached, nor is there any basis for holding Norvax liable for any breach by a subsidiary. View "Northbound Grp., Inc. v. Norvax, Inc." on Justia Law

ManWeb, an Indianapolis engineering and installation company, entered into an asset purchase agreement with Tiernan, another Indianapolis electrical contractor. Unlike ManWeb, Tiernan was party to a collective bargaining agreement with a union, under which it contributed to a multiemployer pension fund. After the asset purchase, Tiernan ceased operations. Although ManWeb continued to do the same type of work in the jurisdiction, ManWeb did not make contributions. Counsel for the Plan sent a letter to Tiernan’s former address, stating that the company had effectuated a complete withdrawal from the Plan and, under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001–1461, the Plan had assessed withdrawal liability against Tiernan of $661,978.00. The letter was forwarded to ManWeb’s address and signed for by a ManWeb employee. No payments were made, nor was review or arbitration requested, despite the availability of both under the statute. The Plan filed a collection action, adding ManWeb as a defendant under a theory of successor liability. The district court granted the Plan partial summary judgment, finding that Tiernanr had waived its right to dispute the assessment of withdrawal liability, but rejected the claim of successor liability. The Seventh Circuit reversed to allow the district court to address the successor liability continuity requirement. View "Tsareff v. Manweb Services, Inc." on Justia Law