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

Footstar operated the footwear departments in various Kmart stores as though they were islands. Footstar employees could only work in those departments unless they had written permission from Kmart. In 2005, a Footstar employee tried to help a customer get an infant carrier off a shelf outside the footwear department and the customer was injured. She sued. Kmart sought indemnification from Footstar and its insurer, Liberty Mutual. A magistrate judge found that Footstar and Liberty Mutual both had a duty to defend beginning the day Kmart formally requested coverage since the injury was potentially coverable under the agreement between Kmart and Footstar and the insurance policy. The Seventh Circuit reversed, holding that neither Liberty Mutual nor Footstar had a duty to indemnify Kmart because the injury did not occur “pursuant to” or “under” the agreement between Kmart and Footstar. That agreement specifically precluded Footstar employees from working outside of the footwear department, where the injury occurred, and actions taken in contravention of the agreement were not “pursuant to” or “under” it. Liberty Mutual did not deny coverage in bad faith and that Kmart did not breach the relevant notice provisions such that Liberty Mutual and Footstar could withhold defense costs. View "Kmart Corp. v. Footstar, Inc." on Justia Law

When Ameriprise Financial fired Renard, a financial adviser, for violation of the franchise agreement between the two, Ameriprise claimed that Renard owed it $530,000 on loans made to help Renard build his franchise. Renard disagreed. Ameriprise initiated arbitration under the agreement, which provides that Minnesota law governs, except “all issues relating to arbitrability,” are “governed by the terms set forth in [the] agreement, and to the extent not inconsistent with this agreement, by the rules of arbitration of” the Financial Industry Regulatory Authority. Wisconsin arbitrators rejected Renard’s counterclaims and awarded Ameriprise most of what it sought. Renard filed suit to vacate the award. The court confirmed the award and required Renard to pay additional interest. The Seventh Circuit affirmed, rejecting Renard’s argument that Ameriprise’s counsel procured the award through fraud and that the arbitrators acted in manifest disregard of the Wisconsin Fair Dealership Law and Minnesota tort law. His showing was far short of the high standard needed to upset the outcome of an arbitral proceeding. The panel did not issue a written opinion, so it was not clear how it reached its conclusions, but nothing suggested that it strayed so far that the “manifest disregard” standard was triggered. View "Renard v. Ameriprise Fin. Servs., Inc." on Justia Law

Miller, an African-American male, worked as a cook for Hospitality’s Sparx Restaurant. Miller became assistant kitchen manager and was a satisfactory employee. On October 1, 2010, Miler discovered racially offensive pictures at the kitchen cooler. Miller lodged a complaint. Two employees admitted responsibility. The manager agreed that the posting was a termination-worthy offense, but one offender was given a warning and the other was not disciplined. Soon after Miller’s complaint, supervisors began to criticize Miller’s work performance. Sparx fired Miller on October 23, 2010. The EEOC filed suit on Miller’s behalf under Title VII, 42 U.S.C. 2000e-2(a), 3(a). Before trial, Sparx had closed and Hospitality had dissolved. The court concluded that successor corporations could be liable. The jury awarded $15,000 in compensatory damages on the retaliation claim. The EEOC sought additional remedies. The district court denied the front-pay request but awarded Miller $43,300.50 in back pay (and interest) plus $6,495.00 to offset impending taxes on the award; enjoined the companies from discharging employees in retaliation for complaints against racially offensive postings; and required them to adopt policies, investigative processes, and annual training consistent with Title VII. The Seventh Circuit affirmed with respect to both successor liability and the equitable remedies. View "Equal Emp't Opportunity Comm'n v. N. Star Hospitality, Inc" on Justia Law

In 2008 Motorola agreed to make a good-faith effort to purchase two percent of its cell-phone user-manual needs from Druckzentrum, a printer based in Germany. After a year, Motorola’s sales contracted sharply. Motorola consolidated its cell-phone manufacturing and distribution operations in China, buying all related print products there. Motorola notified Druckzentrum. The companies continued to do business for a few months. After losing Motorola’s business Druckzentrum entered bankruptcy and sued Motorola, alleging breach of contract and fraud in the inducement. Druckzentrum claimed that the contract gave it an exclusive right to all of Motorola’s user-manual printing business for cell phones sold in Europe, the Middle East, and Asia during the contract period. The district judge entered summary judgment for Motorola. The Seventh Circuit affirmed. The written contract contained no promise of an exclusive right and was fully integrated, so Druckzentrum cannot use parol evidence of prior understandings. Although Motorola promised to make a good-faith effort, the contract listed reasons Motorola might justifiably miss the target, including business downturns. There was no evidence of bad faith. The evidence was insufficient to create a jury issue on the claim that Motorola fraudulently induced Druckzentrum to enter into or continue the contract. View "Druckzentrum Harry Jung GmbH v. Motorola Mobility LLC" on Justia Law

In 1999 Seltzer registered the word “Kashwére” as a trademark for chenille soft goods. In 2009, Seltzer sold his company’s assets, including the trademark, to its principal officers. They formed TMG, which granted Seltzer an exclusive license to sell chenille products under the Kashwére name in Japan, through Flat Be. TMG claims that Seltzer violated his license by creating USAJPN and transferring to it all rights conferred by his license, to create an appearance of distance between Seltzer and Flat Be. Although Seltzer owned a majority interest in USAJPN, he needed TMG’s approval for the transfer. Flat Be also created a line of fabrics, “Kashwére Re,’ that are not chenille. Seltzer’s license does not authorize use of the Kashwére name for products that are not chenille, but he claimed that a TMG owner approved the Kashwére Re project. USAJPN also failed to comply with a requirement to disclose the TMG licensee. The district judge denied TMG’s request to order the license cancelled or to enjoin future violations and award damages. The Seventh Circuit upheld summary judgment in favor of TMG on Seltzer’s and Flat Be’s counterclaims, but reversed summary judgment in favor of Seltzer and Flat Be on TMG’s claims. View "Kashwere, LLC v. Kashwere USAJPN, LLC" on Justia Law

The Everetts formerly operated a PDRI franchise. After that franchise was terminated, they violated a non-compete clause. Only Mr. Everett and the Everetts’ corporation actually signed the franchise agreement. PDRI sought to bind Ms. Everett to an arbitration award pursuant to the franchise agreement. Although Everett was a non-signatory to the franchise agreement, PDRI asserted she was subject to arbitration under the doctrine of direct benefits estoppel. The district court determined that the benefits Everett received were filtered through her ownership interest in their corporation or through her husband and were therefore indirect. The Seventh Circuit reversed, holding that Everett did receive a direct benefit. It is clear that the Everetts’ corporation was formed to gain the benefit of the franchise agreement and was used only to conduct the business of the franchise; Ms. Everett had a 50% ownership and played an active role in running the corporation.View "Everett v. Paul Davis Restoration, Inc." on Justia Law

Redbox operates automated self‐service kiosks at which customers rent DVDs and Blu‐ray discs with a debit or credit card. Redbox outsources certain functions to service providers, including Stream, which provides customer service when, for example, a customer encounters technical problems at a kiosk and requires help from a live person. If resolution of the issue requires accessing that customer’s video rental history the Stream employee will do so. Redbox has granted Stream access to the database in which Redbox stores relevant customer information. Plaintiffs challenged Stream’s ability to access customer rental histories and Stream’s use of customer records during employee training exercises as violating the Video Privacy Protection Act, which prohibits “video tape service provider[s]” like Redbox from “disclos[ing], to any person, personally identifiable information concerning any consumer of such provider,” 18 U.S.C. 2710(b)(1). The Act includes an exception for disclosure incident to the video tape service provider’s ordinary course of business, defined as debt collection activities, order fulfillment, request processing, and the transfer of ownership. The district court granted Redbox summary judgment. The Seventh Circuit affirmed, concluding that Redbox’s actions fall within the exception for disclosures in the ordinary course of business: disclosures incident to “request processing.”View "Sterk v. Redbox Automated Retail, LLC" on Justia Law

Gerdau leased a locomotive from Titan for use in switching at its Knoxville mill. Titan shipped the locomotive in 2008, but it was damaged in transit and sent for repair. It did not reach Gerdau’s plant until 2009. Gerdau rejected it, stating that it needed further repairs. While the locomotive was being repaired, Titan assigned the lease to Leasing, an affiliated business, which then used the lease as security for a loan from Wells Fargo. The loan is nonrecourse: Wells Fargo agreed to look for repayment exclusively from the stream of rentals expected from Gerdau. Leasing made several warranties. Gerdau has never made a payment on the lease. Wells Fargo has taken control of the locomotive and is attempting to sell it. The district court granted summary judgment against Wells Fargo, ruling that Leasing had kept its promises. The court looked to the lease, and then to the Uniform Commercial Code, to see whether the locomotive had been “accepted” when the lease was assigned. Gerdau had an opportunity and the lease required Gerdau to inspect before shipment. The Seventh Circuit reversed. Gerdau did not acknowledge the locomotive’s receipt; Leasing did not live up to its warranties. It must repay Wells Fargo. Titan must perform the guarantees.View "Wells Fargo Equip. Fin., Inc. v. Titan Leasing Inc." on Justia Law

Steak n Shake owns and operates 415 restaurants and grants about 100 franchises for the operation of Steak n Shake restaurants by others. The operators of franchises in Missouri, Georgia, and Pennsylvania claim that since 1939, franchisees have set their own menu prices and participated in corporate pricing promotions at their option. After a corporate takeover in 2010, Steak n Shake enacted a new policy that requires them to adhere to company pricing on every menu item and to participate in all promotions. They also must purchase all products from a single distributor at a price negotiated by Steak n Shake. The policy had an adverse effect on revenues. The franchisees sought a declaratory judgment. About a month later, Steak n Shake adopted an arbitration policy requiring the franchisees to engage in nonbinding arbitration at Steak n Shake’s request and moved to stay the federal lawsuits. The district court refused to compel arbitration. Although each franchise agreement (except one) contained a clause in which Steak n Shake “reserve[d] the right to institute at any time a system of nonbinding arbitration or mediation,” the district court concluded that any agreement to arbitrate was illusory. The Seventh Circuit affirmed, agreeing that the arbitration clauses are illusory and unenforceable under Indiana law, and declining to address whether the disputes were within the scope of the arbitration agreements or whether nonbinding arbitration fits within the definition of arbitration under the Federal Arbitration Act.View "Druco Rests., Inc. v. Steak N Shake Enters., Inc." on Justia Law

SFG, a Texas firm specializing in distressed‐asset investing, bought a loan portfolio from McFarland State Bank for $1.27 million (28.8% of the face value of the debt). Materials provided by McFarland’s agent indicated that the portfolio was secured by 19 real estate properties in Wisconsin. Both parties were well represented during negotiations. The Sale Agreement provided limited remedies in the event of a breach and disclaimed all other remedies. Soon after purchasing the portfolio, SFG learned that three of the 19 collateral properties that supposedly secured the loans had been released before the sale. SFG contacted McFarland; McFarland disputed liability. Months later, SFG sued, seeking damages beyond the remedies provided in the contract. Applying the contractual remedies limitation, a formula that resulted in zero recovery under the circumstances, the district court granted judgment for McFarland. The Seventh Circuit affirmed. Except in the most extraordinary circumstances, courts hold sophisticated parties to the terms of their bargain.View "S. Fin. Grp. LLC v. McFarland State Bank" on Justia Law