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

Derek Mesenbring, an employee of Industrial Fumigant Company, LLC (IFC), died after inhaling a toxic dose of methyl bromide at work. His widow, Melissa Mesenbring, sued IFC and its parent company, Rollins, Inc., for wrongful death. Rollins, as IFC's parent company, had some authority over IFC's revenue goals and certain expenditures, and also leased IFC's facility. However, IFC managed its own day-to-day operations, including safety and regulatory departments, and trained its employees on the safe use of fumigants like methyl bromide.The case was initially filed in Illinois state court but was moved to federal court under diversity jurisdiction. Mrs. Mesenbring dismissed IFC from the suit due to workers' compensation benefits she was receiving, leaving Rollins as the sole defendant. Rollins moved for summary judgment, arguing that it was not liable for IFC's acts under Illinois law. The district court granted Rollins' motion, ruling that Rollins did not specifically direct an activity that made the accident foreseeable, nor did it control or participate in IFC's use of and training on methyl bromide, thus foreclosing direct participant liability. Mrs. Mesenbring appealed this decision.The United States Court of Appeals for the Seventh Circuit affirmed the district court's decision. The appellate court agreed that under Illinois law, a parent company is not liable for the acts of its subsidiary unless it specifically directs an activity where injury is foreseeable. The court found that Rollins did not surpass the level of control typical of a parent-subsidiary relationship and did not specifically direct or authorize IFC's use of or training on methyl bromide. Furthermore, there was no evidence that Rollins foresaw that safety would be compromised as a result of its budgetary restrictions over IFC. Therefore, the court concluded that Rollins could not be held liable for IFC's acts under a theory of direct participant liability. View "Mesenbring v. Rollins, Inc." on Justia Law

The case revolves around a dispute between Zimmer Biomet, a medical-device manufacturer, and six of its former sales distributors. The dispute arose from a compensation agreement that guaranteed the distributors a lifetime of long-term commissions on all sales made within their distributorship after retirement. As the company grew and acquired competitors, a disagreement emerged over which product categories fell within the distributorship and were thus subject to the long-term commission agreement.The district court found the agreement ambiguous and sent the case to trial. The jury returned a split verdict, finding that Biomet owed long-term commissions on some products but not others. Biomet appealed the denials of its motions for summary judgment and judgment as a matter of law, and the distributors cross-appealed the dismissal of two counts of their complaint.The United States Court of Appeals for the Seventh Circuit affirmed the district court's decisions. The appellate court agreed that the distributorship agreement was ambiguous regarding the specific categories of products it covered. It also found that the trial record supported the jury’s verdict in favor of the distributors on their Indiana breach-of-contract claim. The court rejected Biomet's argument that the agreement unambiguously limited long-term commissions to reconstructive products, finding that the agreement did not provide clear guidance on which product categories were covered. The court also upheld the dismissal of two counts in the distributors’ complaint, finding that they either lacked a contractual basis or were duplicative of another count. View "Hess v. Biomet, Inc." on Justia Law

The case revolves around Lee Hofmann, who controlled multiple businesses, including Games Management and International Supply. Games Management borrowed approximately $2.7 million from Citizens Equity First Credit Union (the Lender), with Hofmann guaranteeing payment. When Games Management defaulted and Hofmann failed to honor his guarantee, the Lender obtained a judgment against Hofmann. In 2013, Hofmann arranged for International Supply to pay the Lender $1.72 million. By 2015, International Supply was in bankruptcy, and a trustee was appointed to distribute its assets to creditors.The bankruptcy court held a trial, during which expert witnesses disagreed on whether International Supply was solvent in 2013. The Trustee's expert testified that it was insolvent under two of three methods of assessing solvency, while the Lender's expert testified that it was solvent under all three methods. The bankruptcy judge concluded that International Supply was insolvent in August 2013 and directed the Lender to pay $1.72 million plus interest to the Trustee. The district court affirmed this decision.The case was then brought before the United States Court of Appeals for the Seventh Circuit. The Lender argued that the only legally permissible approach to defining solvency is the balance-sheet test. However, the court disagreed, stating that the Illinois legislation does not support this view. The court also noted that the Lender had not previously argued for the balance-sheet test to be the exclusive approach, which constituted a forfeiture. The court concluded that the bankruptcy judge was entitled to use multiple methods to determine solvency. The court affirmed the district court's decision, requiring the Lender to pay $1.72 million plus interest to the Trustee. View "Stone v. Citizens Equity First Credit Union" on Justia Law

AsymaDesign, LLC, a company that operated a virtual-reality ride in a shopping mall, entered into a lease with CBL & Associates Management, Inc. Following complaints about noise from the ride, CBL relocated it within the mall, as permitted by the lease. The new location proved unprofitable, leading AsymaDesign to stop paying rent, resulting in eviction and subsequent dissolution under the Illinois Limited Liability Company Act. Nearly four years later, George Asimah, the former owner of the LLC, filed a lawsuit against CBL under 42 U.S.C. §1981 and state contract law, alleging racial discrimination when CBL did not allow the LLC extra time to pay its rent.The district court dismissed the suit on the grounds that Asimah was not the real party in interest, as the lease was held by AsymaDesign, not Asimah personally. An amended complaint added AsymaDesign as an additional plaintiff, but this was also dismissed as untimely. The court ruled that although Illinois law allows a dissolved LLC a "reasonable time" to wind up its business, AsymaDesign had not begun to litigate until almost five years after its dissolution, exceeding the benchmark allowed by Illinois law.In the United States Court of Appeals for the Seventh Circuit, AsymaDesign filed a notice of appeal. However, the notice was signed only by George Asimah, who is not a lawyer and therefore cannot represent AsymaDesign or anyone other than himself. The court ruled that only a member of the court's bar (or a lawyer admitted pro hac vice) can represent another person or entity in litigation. AsymaDesign's sole argument was that anyone may represent an Illinois corporation in federal court, which the court dismissed as misguided. Consequently, the appeal was dismissed. View "Asimah v. CBL & Associates Management, Inc." on Justia Law

This case revolves around a real estate Ponzi scheme run by Jerome and Shaun Cohen through their companies, EquityBuild, Inc. and EquityBuild Finance, LLC (EBF), from 2010 to 2018. The Cohens sold promissory notes to investors, each note representing a fractional interest in a specific real estate property. The properties were mostly located in underdeveloped areas of Chicago and were secured by mortgages. As the scheme became unsustainable, the Cohens began offering opportunities to invest in real estate funds. BC57, LLC, a private lender and investor, lent approximately $5.3 million to EquityBuild, allegedly in exchange for a first mortgage on five properties already owned by EquityBuild and subject to preexisting liens from individual investors.The Securities and Exchange Commission (SEC) filed suit against the Cohens, EquityBuild, and EBF after the scheme collapsed in 2018. A court-appointed receiver developed a plan for the recovery and liquidation of all remaining, recoverable receivership assets. The receiver sold the five properties and now holds the proceeds, over $3 million, pending the resolution of the claims process. The individual investors whose loans BC57’s investment purportedly paid off claim priority to those proceeds, arguing that they never received payment or released their interests, despite the releases signed by Shaun Cohen. BC57 disagrees and asserts that it has priority. The district court awarded priority to the individual investors, finding that the mortgage releases were facially defective and that EBF lacked the authority to execute them.The United States Court of Appeals for the Seventh Circuit affirmed the district court's decision. The court found that under the Illinois Mortgage Act, payment alone does not extinguish any pre-existing interest absent a valid release. The court also found that the releases purportedly executed by EBF were facially invalid. The court concluded that the individual investors maintain their interests in these five properties. View "SEC v. BC57, LLC" on Justia Law

This case involves a dozen gas stations in the Green Bay, Wisconsin area, who alleged that Costco Wholesale Corporation violated a Wisconsin law prohibiting the sale of gasoline below a statutorily defined cost. The plaintiffs sought an injunction to prevent Costco from selling gasoline below that level and damages of over half a million dollars each. Costco argued that it lowered its prices to match a competitor's price, which the statute allows, and that the plaintiffs failed to establish the causal element of the statutory claim.The case was initially heard in the United States District Court for the Eastern District of Wisconsin, which sided with Costco and awarded it summary judgment. The plaintiffs appealed this decision, challenging both the summary judgment and an evidentiary ruling made earlier in the proceedings.The United States Court of Appeals for the Seventh Circuit affirmed the lower court's decision. The court found that for 238 of the 256 days in question, Costco was immune from liability under the "meeting competition" exception in the Wisconsin law. For the remaining 18 days, the court found that the plaintiffs failed to show that they were injured or threatened with injury as a result of Costco's actions. The court also upheld the lower court's denial of the plaintiffs' request to supplement their expert report. View "Pit Row, Inc. v. Costco Wholesale Corporation" on Justia Law

The case involves a dispute between GeLab Cosmetics LLC, a New Jersey-based online nail polish retailer, and Zhuhai Aobo Cosmetics, a China-based nail polish manufacturer. The founders of GeLab, Xingwang Chen and Shijian Li, are both Chinese citizens. The dispute centers around the ownership of GeLab and allegations of trade secret theft. According to Chen, he and Li founded GeLab with Chen owning 60% and Li 40%. They entered a joint venture with Zhuhai, which was supposed to invest in GeLab for an 80% ownership stake. However, Chen alleges that Zhuhai never sent the money and instead began using low-quality materials for GeLab's products, selling knock-off versions under its own brand, and fraudulently claiming majority ownership of GeLab. Zhuhai, on the other hand, asserts that Chen was its employee and that it owns 80% of GeLab.The dispute first began in China, where Li sued Chen for embezzlement. Chen then sued Li, Zhuhai, and Zhuhai's owners in New Jersey state court, alleging that he had a 60% controlling interest in GeLab and that Zhuhai had no ownership interest. The state defendants counterclaimed, seeking a declaratory judgment that Zhuhai owns 80% of GeLab. GeLab then filed a second action in New Jersey against Li alone. The state court consolidated the two cases.While the New Jersey proceedings were ongoing, GeLab filed a federal lawsuit in the U.S. District Court for the Northern District of Illinois against Zhuhai and its owners, alleging violations of the federal Defend Trade Secrets Act and the Illinois Trade Secrets Act. The defendants responded that Zhuhai owns GeLab and that it cannot steal trade secrets from itself. The district court stayed the federal case, citing the doctrine of Colorado River Water Conservation District v. United States, reasoning that judicial economy favors waiting for the New Jersey court to determine who owns the company. GeLab appealed the stay.The United States Court of Appeals for the Seventh Circuit affirmed the district court's decision to stay the proceedings. The court found that the federal and state cases were parallel as they involved substantially the same parties litigating substantially the same issues. The court also found that exceptional circumstances warranted abstention, with at least seven factors supporting the district court's decision. These factors included the inconvenience of the federal forum, the desirability of avoiding piecemeal litigation, the order in which jurisdiction was obtained by the concurrent fora, the source of governing law, the adequacy of state-court action to protect the federal plaintiff's rights, the relative progress of state and federal proceedings, and the availability of concurrent jurisdiction. View "GeLab Cosmetics LLC v. Zhuhai Aobo Cosmetics Co., Ltd." on Justia Law

This case involves a dispute over unpaid rent for a department store in an Illinois mall. The store was operated by CPS Partnership, which leased the retail space from WEC 98C-3 LLC. Saks Inc. guaranteed that it would pay the rent if CPS could not. However, when CPS stopped paying rent, Saks did not make any payments to WEC. This led to WEC defaulting on its mortgage, and the property was purchased by 4 Stratford Square Mall Holdings, LLC (“Stratford”) at a foreclosure auction. Initially, WEC sued Saks for damages. Later, Stratford intervened with its own claim for damages. The district court ruled only on Stratford’s claim for unpaid rent, finding that it was entitled to payment from Saks.The district court's decision was appealed to the United States Court of Appeals for the Seventh Circuit. Saks argued that Stratford lacked standing to sue, that the district court erred in certifying its judgment for immediate appeal, and that the district court erred in rejecting Saks’s affirmative defenses. The appellate court found that Stratford did have standing to sue Saks, and the district court properly certified its judgment for appeal. On the merits, the appellate court concluded that Saks could not mount any of its desired defenses as it had waived its right to present affirmative defenses to liability in the guaranty that it signed. Therefore, the appellate court affirmed the district court’s judgment. View "WEC 98C-3 LLC v. SFA Holdings Inc." on Justia Law

The case involves Circle City Broadcasting I, LLC, a local television broadcasting network operating in Indianapolis, which owns two local television stations—WISH-TV and WNDY. The company is majority-owned by DuJuan McCoy, a Black man. The dispute arose when DISH and DirecTV Network declined to pay broadcast fees to Circle City for rights to carry the company’s two Indianapolis-based television stations. Circle City alleged that the decisions reflected discrimination against its majority owner, DuJuan McCoy, and thus discrimination against the company itself.Previously, the United States District Court for the Southern District of Indiana entered summary judgment for DISH and DirecTV, concluding that Circle City failed to identify evidence permitting a jury to find that the decisions not to pay the broadcast fees reflected anything other than lawful business choices responsive to dynamics of the television broadcast market.The United States Court of Appeals For the Seventh Circuit affirmed the lower court's decision. The court found that Circle City failed to produce evidence that would allow a jury to find that DISH or DirecTV's conduct during the contractual negotiations reflected racial discrimination. The court concluded that DISH and DirecTV declined to pay fees for rights to broadcast WISH and WNDY because Circle City—unlike Nexstar—as the new owner of both stations lacked the market power to demand the fees. The court also found that Circle City fell short of demonstrating any pretext in DISH and DirecTV’s explanations for choosing not to pay retransmission fees. View "Circle City Broadcasting I, LLC v. DISH Network L.L.C." on Justia Law

The case involves a dispute between the Trustee for the bankrupt company BWGS, LLC and BMO Harris Bank N.A. and Sun Capital Partners VI, L.P. The Trustee sought to avoid a payment made by BWGS to BMO Harris, which was used to finance the acquisition of BWGS by Sun Capital's subsidiary. The Trustee argued that the payment constituted a constructively fraudulent transfer under the U.S. Bankruptcy Code and Indiana state law.The United States Court of Appeals for the Seventh Circuit had to address two novel issues: whether Section 546(e) of the Bankruptcy Code, which protects certain transactions made “in connection with a securities contract,” applies to transactions involving private securities; and, if so, whether it also preempts state law claims seeking similar relief.The Court held that Section 546(e) does apply to transactions involving private securities and does preempt state law claims seeking similar relief. Consequently, the Trustee's attempt to avoid the payment under the Bankruptcy Code and Indiana law was barred by Section 546(e). The Court also rejected the Trustee's argument that he could recover the value of the payment from Sun Capital under a different provision of the Bankruptcy Code, holding that this claim was also preempted by Section 546(e). The Court thus affirmed the lower court's decision to dismiss the Trustee's complaint with prejudice. View "Petr v. BMO Harris Bank N.A." on Justia Law