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

Articles Posted in Civil Procedure

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The Plaintiffs, purportedly the assignees of certain private insurers (Medicare Advantage Organizations), brought a putative class action against State Farm to recover payments State Farm allegedly should have made to them as reimbursement for certain medical costs. The district court dismissed the action with prejudice, and imposed sanctions under Federal Rule of Civil Procedure 11 against one of the plaintiffs, MSP. and its attorneys. The Seventh Circuit concluded that the district court erred in dismissing plaintiffs’ case with prejudice, when the problem was a fundamental lack of Article III standing so that the court lacked jurisdiction to decide the case. However, the court acted within its discretion when it denied plaintiffs a third opportunity to cure the defects in their pleadings. The court’s order, in substance, was a jurisdictional dismissal without prejudice with denial of leave to amend dismissal is without prejudice. The district court exceeded the bounds of its discretion when it imposed Rule 11 sanctions on Recovery Claims and its attorneys. View "MAO-MSO Recovery II, LLC v. State Farm Mutual Automobile Insurance Co." on Justia Law

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The Prison Litigation Reform Act (PLRA) “three strikes” provision, 28 U.S.C. 1915(g), specifies that a prisoner may not proceed in forma pauperis if she “has, on [three] or more prior occasions, while incarcerated or detained in any facility, brought an action or appeal in a court of the United States that was dismissed on the grounds that it is frivolous, malicious, or fails to state a claim upon which relief may be granted.” Many courts require prisoner‐litigants to identify their entire litigation histories. The Northern District of Illinois’s form requires 42 U.S.C. 1983 inmate-plaintiffs to list the name of each case, assigned judge and court, docket number, filing date, all plaintiffs (with aliases), all defendants, a description of claims made, the disposition and date of disposition. In cases consolidated on appeal, the district court concluded that inmate-plaintiffs committed fraud. The Seventh Circuit vacated. District courts must ensure that a prisoner’s negligent or even reckless mistake is not improperly characterized as an intentional and fraudulent act. Even prisoners with no incentive to lie may not have ready access to their litigation documents and may not remember all of the details. When viewed in the liberal light appropriate for pro se pleadings, one inmate’s explanation of his mental health issues and illiteracy indicated he did not fully understand what was being asked of him; the omissions were inadvertent. None of the cases omitted by the inmates met applicable standards for materiality. View "Johnson v. Dalke" on Justia Law

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Unions set up a pension plan under the Employment Retirement Income Security Act, 29 U.S.C. 1001, with electrical contractors (Revcon) sharing ownership. Revcon withdrew from the plan in 2003. The Multiemployer Pension Plan Amendments Act, 29 U.S.C. 1381, requires employers who withdraw from underfunded pension plans to pay withdrawal liability. The trustees notified Revcon of $394,788 in withdrawal liability and demanded quarterly payments of $3,818. Revcon missed several payments. The trustees accelerated the outstanding liability (29 U.S.C. 1399(c)(5)) and filed suit. Revcon offered to cure its defaults and resume payments. The trustees agreed and voluntarily dismissed the suit under FED. R. CIV. P. 41(a). Revcon made some payments, then defaulted again. The trustees again sued. Revcon again promised to cure; the trustees again voluntarily dismissed. This cycle repeated in 2011, 2013, and 2015. In 2018, after another default, the trustees filed this case, which, unlike previous complaints, only the payments that Revcon had missed since the 2015 dismissal. Revcon argued claim preclusion because the previous complaints demanded the entire liability, which necessarily includes the defaulted payments at issue. The “two dismissal rule” of Rule 41(a)(1)(B) therefore barred any claims arising from that liability, and, because the trustees sought to collect the entire debt in 2008, the six-year limitations period had expired. The trustees countered that they revoked the 2008 acceleration with each dismissal and that the two dismissal rule did not apply because all parties consented to the previous dismissals. The Seventh Circuit found the case untimely, noting that the earlier complaints all stated the withdrawal liability was accelerated in 2008, contradicting an argument that acceleration had been revoked. The statute makes no mention of such a deceleration mechanism. View "Bauwens v. Revcon Technology Group, Inc." on Justia Law

Posted in: Civil Procedure, ERISA

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In 1880, the Sisters, a Roman Catholic organization, founded OSF, which provides healthcare to indigent patients. The Sisters maintain authority through OSF’s governing documents and canonical and civil guidelines pertaining to church property. OSF merged with another Catholic hospital with the permission of the Holy See. Both offered employee pension plans before the merger. The Plans, with 19,285 participants, are now closed to new participants. Smith, a former employee and OSF plan participant, sued, claiming that the plans are not eligible for the church plan exemption under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 because they are administered by Committees that are not “principal-purpose organizations” and that the exemption itself is unconstitutional. She alleged that OSF allowed the plans to become severely underfunded; failed to follow notice, disclosure, and managerial requirements; and breached its fiduciary duties. The district court granted the defendants summary judgment despite plaintiff’s Federal Rule of Civil Procedure 56(d) motion to postpone the decision so that she could complete further discovery. The Seventh Circuit vacated. The summary judgment motion was filed long before discovery was to close; plaintiff was pursuing discovery in a diligent, sensible, and sequenced manner; and the pending discovery was material to summary judgment issues. The court’s explanation for denying a postponement overlooked earlier case-management and scheduling decisions and took an unduly narrow view of relevant facts. View "Smith v. OSF Healthcare System" on Justia Law

Posted in: Civil Procedure, ERISA

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Sterling owed Southlake Health Club outstanding fees ($250). In 2001, Southlake's counsel, Austgen, instituted a state court collection action. A federal bankruptcy court discharged Sterling’s debt to Southlake in 2010. Although Sterling notified Southlake of the discharge, no one notified Austgen or the Indiana court. Sterling failed to appear in the state-court collection proceedings; that court issued a warrant for her arrest. A year later, Sterling was arrested and jailed for two days. Southlake and Austgen dropped pursuit of the debt. Sterling instituted adversary proceedings in bankruptcy court, seeking to have Southlake and Austgen held in contempt for continuing to collect a debt that had been discharged, 11 U.S.C. 524. The bankruptcy court and the district court ruled against Sterling. The Seventh Circuit affirmed in part; Austgen’s lack of knowledge of the discharge prevents it from being held in contempt. Southlake, however, must be held liable for the actions taken by counsel on its behalf. Southlake, a sophisticated party, had knowledge of the discharge yet turned a blind eye to the progress of Sterling’s case. Holding otherwise “would create a loophole in the law through which creditors could avoid liability simply by remaining ignorant of their agents’ actions or by failing to notify their agents of debtors’ bankruptcy proceedings.” View "In re: Sterling" on Justia Law

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Evans, a state prisoner with multiple health issues, alleged that he developed nasal polyps and that the prison medical staff refused to authorize surgery, the only effective remedy. He sued under 42 U.S.C. 1983, alleging Eighth Amendment violations. The district court dismissed Evans’s case with prejudice as a discovery sanction. Kayira, one of the defendants, attempted to depose Evans. Kayira noticed the deposition by mail on February 16, for February 21. Evans swears that he did not receive that notice until February 22. When, on the 21st, he was taken from his cell to meet with the defendants’ lawyers, he says that he had no idea why they were there and was feeling ill and could not sit for the deposition. Evans refused to be sworn or to answer questions. The Seventh CIrcuit reversed. Although dismissal is sometimes the proper sanction for a discovery violation, it is one of the harshest sanctions a court can impose. Courts must be especially careful before taking that step. If a party appears for his deposition but refuses to cooperate, the proper procedure is to obtain a Rule 37(a) order, directing him to be sworn and testify. The order permitting Evans’s deposition was far from an order compelling Evans to do anything. In addition, Evans was entitled at least to actual notice. View "Evans v. Griffin" on Justia Law

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Mapes was arrested for trespassing after being refused service at a CVS store. He sued the state, CVS, and several individual defendants asserting a long list of grievances under federal and state law. Mapes asserted the need for pro bono representation based on his poor hearing, social anxiety, a speech disorder, and an unidentified mental disability. The district judge denied Mapes’s request to recruit counsel, dismissed Mapes’s complaint without prejudice for failure to state a claim, and suggested several amendments to the complaint. The judge informed Mapes that his amended complaint “should set forth what happened during the incident and the facts that support his belief that CVS refused to serve him because of his disability.” She explained that Mapes should identify the people who harmed him and describe how they did so. The Seventh Circuit affirmed the judge’s refusal to recruit counsel. The inquiry into the plaintiff’s capacity to handle his own case is a practical one, made in light of whatever relevant evidence is available on the question. Mapes demonstrated that he was physically able to file a complaint and mentally able to recall the relevant events. The judge was not required to offer legal guidance. View "Mapes v. Indiana" on Justia Law

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Doherty and Farano formed Worth. The bank loaned Worth $400,000, with their personal guaranties. The bank extended the loan’s maturity date multiple times. Worth defaulted. The bank sued Worth, Farano, and Doherty. Doherty, an attorney, filed an appearance on behalf of himself and Worth and raised affirmative defenses, including that the bank extended the loan without authorization and charged fees and an interest rate not agreed upon. The court entered a default judgment for the loan balance against Farano. Doherty later received a report from a forensic document examiner, opining that his signature had been forged on loan extension paperwork. The bank dismissed its claims against Worth and Doherty without prejudice. Over a year later, Doherty sued the bank and individuals, alleging breach of contract, forgery, excessive fees, fraud, legal malpractice, and malicious prosecution. The trial court dismissed, holding that most of Doherty’s claims were barred by res judicata because he should have brought them in the guaranty action. Before Doherty’s appeal was heard, the bank went into the FDIC receivership. The FDIC removed this action to federal district court, which adopted the Illinois court’s decision. The Seventh Circuit vacated. Res judicata does not bar Doherty’s claims. None of the cited Illinois cases address this situation; similar cases suggest that applying the doctrine would be inappropriate. Applying res judicata here neither advances the purposes of res judicata nor meaningfully serves the interests of judicial economy. View "Doherty v. Federal Deposit Insurance Corporation" on Justia Law

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RMG sued Harmelech in 2006. Attorney Mac Naughton represented Harmelech in that suit for 10 weeks. The relationship ended in a fee dispute. After he withdrew, the case settled with a consent judgment against Harmelech. Mac Naughton pursued Harmelech by acquiring rights to that judgment. In 2014, Mac Naughton and his company, Casco sued Harmelech to collect the RMG judgment and to set aside a conveyance. In 2015, Judge Holderman disqualified Mac Naughton from attempting to collect the judgment personally and from representing Casco in its collection efforts. Mac Naughton defied that order. In 2018, Judge Feinerman dismissed the 2014 claims predicated on the RMG judgment as a sanction for willful defiance of the Holderman Order. In 2016, Mac Naughton sued third parties to collect for himself money owed to Harmelech. Judge Blakey dismissed that case as a sanction for violating court orders. In 2017, Mac Naughton sued Harmelech to set aside another property conveyance. Judge Durkin dismissed the case on the same grounds. The Seventh Circuit affirmed in the consolidated cases. The Holderman Order disqualified Mac Naughton. It barred him from pursuing his former clients to collect on the RMG judgment. Mac Naughton willfully defied disqualification. The judges were within their discretion in sanctioning Mac Naughton by dismissing the actions he should not have brought. Regardless of whether Mac Naughton agreed with the Holderman Order, he had to follow it until it was undone through proper channels. View "Mac Naughton v. Harmelech" on Justia Law

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Cash Depot underpaid employees for their overtime work. Fast filed suit under the Fair Labor Standards Act, 29 U.S.C. 203 (FLSA), on behalf of himself and other Depot employees. Depot hired an accountant to investigate. The accountant tallied Depot’s cumulative underpayments at less than $22,000. Depot issued checks to all underpaid current and former employees covered by the suit and issued checks to Fast for his underpaid wages, for liquidated damages under the FLSA, and for Fast’s disclosed attorney fees to that point. Fast and his attorney never cashed their checks. The district court denied a motion to dismiss because Fast contested whether Depot correctly calculated the amount it owed but granted partial summary judgment for Depot, “to the extent that [it] correctly calculated” what it owed Fast. Eventually, Fast conceded that Depot correctly paid the missing wages and urged that only a dispute over additional attorney fees remained. After Fast’s demand for additional attorney fees went unanswered, he filed a motion for attorney fees. The court determined that because Fast was not a prevailing party for the purposes of the FLSA, he was not entitled to attorney fees, and granted Depot summary judgment. The Seventh Circuit affirmed. Fast never received a favorable judgment. View "Fast v. Cash Depot, Ltd." on Justia Law