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

In 2003, the SEC filed a civil suit against Custable, charging fraud involving “penny stocks” that yielded him at least $4 million. Criminal proceedings resulted in a long prison sentence for Custable. In 2010 he consented to entry of a judgment that ordered him to pay a $120,000 penalty plus $6.4 million in disgorgement of profits, 15 U.S.C. 78u(d). The SEC may either to remit the penalty money to the Treasury or to place it in the same fund as the disgorged profits, 15 U.S.C. 7246. Deciding that locating the defrauded victims would not be feasible, the Commission asked the court to allow it to pay to the Treasury all the disgorged profits that it had recovered. Hare, a purported victim of another Custable fraud and not a party, claimed to have an interest in the fund and asked the court to allow him to respond to any motion to disburse. The judge rejected Hare’s argument and granted the SEC’s motion to disburse the entire fund to the Treasury. The Seventh Circuit dismissed an appeal. Hare failed to establish that he is within an exception to the rule that forbids a nonparty to appeal; the grounds that he advanced for relief were frivolous View "Sec. & Exch. Comm'n v. Custable" on Justia Law

Valdes was traveling by train. During a layover, DEA agents approached Valdes because he fit their profile of a drug courier, searched Valdes’s luggage, and found bundles of cash totaling $239,400. Each bundle was covered with several layers of packaging. Valdes stated that the money was his and that he was traveling to purchase computers for his computer recycling business. No drugs were found in his luggage. A drug-sniffing dog alerted to the bag containing the currency. The agents did not arrest Valdes. They told him that he was free to go but seized the currency. The government filed a civil forfeiture complaint under 21 U.S.C. 881(a)(6) alleging that the currency was furnished or intended to be furnished for a controlled substance. Valdes filed a claim, asserting an ownership. His wife also filed a claim, based on a community property and innocent ownership interest. After they filed their claims, but before they answered the complaint, the government served special interrogatories. The government moved to strike the claims and answers, arguing that the claimants failed to respond to interrogatories, so that they lacked standing. The district court agreed. The Sixth Circuit reversed. By blending standing and the merits, the court nullified Civil Asset Forfeiture Reform Act of 2000 protections that put the burden on the government to prove by a preponderance of evidence that property is forfeitable, 18 U.S.C. 983(c). View "United States v. Funds in the Amount of $239,400" on Justia Law

Stars is a nude dancing establishment in Neenah, Wisconsin. When Stars opened in 2006, the County had a zoning ordinance governing Adult Entertainment Overlay Districts. Stars’s application was stalled because, all parties agree, the 2006 ordinance violated the First Amendment. Its owner sued in federal court, arguing that anything is legal that is not forbidden, and Staars was banned only by an unconstitutional ordinance: therefore, Stars was permitted in 2006 and is now a legal nonconforming use that cannot be barred by a later ordinance. The court granted summary judgment to Winnebago County, reasoning that it was possible to use the law’s severance clause to strike its unconstitutional provisions. The Seventh Circuit reversed in part, agreeing that the permissive use scheme laid out in the ordinance was unconstitutional, but reasoning that, after the constitutional problems are dealt with, the remaining questions concern state law. Their resolution depends on facts that were not developed, and on the possible existence of a power not only to sever problematic language but to revise it—a power federal courts do not have. The district court should have declined to exercise supplemental jurisdiction over the state-law claims and should have dismissed them without prejudice so that the parties may pursue them in state court. View "Green Valley Inv., LLC v. Winnebago Cnty." on Justia Law

In 2013 the Seventh Circuit held unconstitutional a provision of the Indiana Unclaimed Property Act, Ind. Code 32-34-1-1 that stated that “property” is “presumed abandoned if the owner or apparent owner has not communicated in writing with the holder concerning the property or has not otherwise given an indication of interest in the property” within a specified period varying according to the type of property. By filing a valid claim, the owner could reclaim the property up to 25 years after it was delivered to the attorney general, but was entitled only to principal and not to any interest. Several months later, the state amended the Act to provide for payment of interest. The district court dismissed the remand as moot and denied plaintiff attorneys’ fees. The Seventh Circuit reversed, opining that the judge was annoyed at the plaintiff because on remand she asked permission to file an amended complaint to convert the suit to a class action, based on intimations that the state would compensate only the plaintiff. She withdrew that request when the state amended the Act. The state’s concession did not deprive the plaintiff of her status as the prevailing party. The court also opined that the amount sought—$258,462.50 for 375.75 hours—is excessive. View "Cerajeski v. Zoeller" on Justia Law

McCormick bought a single-premium variable life-insurance policy that permits borrowing against its cash value. Loans are secured by moving an equivalent amount from sub-accounts that the policyholder can invest to a “general account” that draws 4% interest. The policyholder owes 4.7% on any borrowed sums, so the net is 0.7% per annum, plus foregoing the opportunity to exercise discretion about how to invest the borrowed sum. If the owner does not pay the annual interest, “it will be added to the principal of the loan and will bear interest.” McCormick borrowed against cash value and did not pay interest. Independence, the insurer, added the unpaid interest “to the principal of the loan” (which caused additional sums to be moved from investments into the general account) and charged interest on the higher indebtedness. Compound interest has increased the debt by $44,000, which, if not repaid, will reduce the death benefit. McCormick sought a declaration that the $44,000 is not owed, because, when unpaid interest was added to principal and moved to the general account, it was “paid” automatically. The court entered judgment for Independence. The Seventh Circuit vacated with instructions to dismiss. Removal rested on diversity of citizenship, and $75,000 is the minimum amount in controversy for that jurisdiction. View "McCormick v. Independence Life & Annuity Co." on Justia Law

Attacked by a fellow prisoner while being transported from a court hearing to an Illinois jail, Robinson, pro se, filed suit under 42 U.S.C. 1983, claiming that guards were deliberately indifferent to his safety in failing to protect him. On December 30, 26 days after the court entered final judgment dismissing the suit, Robinson moved to extend the 28-day deadline for filing a motion under Fed. R. Civ. P. 59(e) to alter or amend the judgment. Rule 6(b)(2) prohibits extending the time for filing a Rule 59(e) motion, Robinson missed the deadline. A month later the judge issued an order construing the motion as a Rule 59(e) motion and gave Robinson another 30 days to supplement it, since the motion stated no grounds for relief but just asked for more time. Two weeks after the 30-day deadline the judge denied the ‘Rule 59(e) motion.’ Robinson filed another such motion 12 days later. The judge construed it as a Rule 60(b) motion because the deadline for filing a Rule 59(e) motion had passed. Rule 60(b) lists six grounds for relief from judgment, including “any other reason.” The judge denied Robinson’s Rule 60(b) motion. The Seventh Circuit dismissed an appeal, stating no relief was available. View "Robinson v. Sweeny" on Justia Law

Taylor’s brother died in an accident. Caiarelli, the decedent’s ex-spouse and guardian of their minor child, obtained a state court declaration that the child was entitled to assets distributed to Taylor ($1.4 million). The estate assigned the judgment to Caiarelli. Taylor sought a probate court declaration that the assignment was void. Before resolution, Taylor filed for Chapter 11 bankruptcy, triggering the automatic stay. Caiarelli initiated an adversary proceeding, objecting to discharge of the judgment. The bankruptcy court dismissed, finding that Caiarelli failed to establish standing. The judgment was discharged, and Taylor’s creditors enjoined from collecting, 11 U.S.C. 524(a)(2). Caiarelli returned to probate court, which ratified the assignment. Taylor claimed that Caiarelli and her attorneys violated the discharge and plan injunctions. The bankruptcy court entered a civil contempt order and issued a damages order and judgment for $165,662.36 in attorney’s fees. While appeal was pending, Taylor notified the district court that he reached a settlement with the legal malpractice insurance carrier for Caarelli’s attorneys. The attorneys denied that a full settlement had been reached. The bankruptcy court indcated that vacatur would be approved if the parties returned to the court, so the district court denied Taylor’s motion to dismiss but reversed the contempt order, damages order, and judgment, finding no violation of the statutory discharge or plan injunctions. The Seventh Circuit affirmed, finding that the appeal was not moot. View "Taylor v. Caiarelli" on Justia Law

The Higginses visited an Indiana amusement park. The filter pump connected to the park’s lazy river malfunctioned. As staff worked to fix the problem, pool chemicals—bleach and hydrochloric acid—accumulated in the pump. When the pump restarted, the chemicals discharged into the water and a cloud of chlorine gas released into the air. The Higginses were not nearby, but their niece was, and they received a cell phone call, prompting them to head in that direction. When they arrived, Kent Higgins inhaled an unspecified amount of chemical fumes that lingered. Complaining of chest tightness, burning eyes, shortness of breath, and nausea, Higgins visited the emergency room, where he was diagnosed with “mild chemical exposure” and discharged with instructions to follow up with his primary care physician. Higgins saw a pulmonologist later that summer, but waited more than a year before consulting his primary physician. He was diagnosed with reactive airways dysfunction syndrome and chronic asthma more than 14 months after the incident. In his negligence suit, the court disqualified Higgins's expert concerning causation. The Seventh Circuit affirmed and agreed that the causation issue was too complex for an unassisted jury and that Higgins’s treating physician’s qualifications and methodology were too uncertain to permit her to opine on such matters. View "Higgins v. Koch Dev. Corp." on Justia Law

In 2013, hackers attacked Neiman Marcus and stole the credit card numbers of its customers. In December 2013, the company learned that some of its customers had found fraudulent charges on their cards. On January 10, 2014, it publicly announced that the cyberattack had occurred and that between July 16 and October 30, 2013, and approximately 350,000 cards had been exposed to the hackers’ malware. Customers filed suit under the Class Action Fairness Act, 28 U.S.C. 1332(d). The district court dismissed, ruling that the individual plaintiffs and the class lacked Article III standing. The Seventh Circuit reversed, finding that the plaintiffs identified some particularized, concrete, redress able injuries, as a result of the data breach. View "Remijas v. Neiman Marcus Group, LLC" on Justia Law

Townsend signed a note and a mortgage to purchase a condominium. After Townsend defaulted, HSBC sought foreclosure under Illinois law. Representing himself, Townsend answered the complaint. HSBC moved for summary judgment, submitting evidence of default; that Townsend owed $141,425.65; and that HSBC owned the note and mortgage. Townsend failed to respond. The court entered a judgment of foreclosure, an order finding that Townsend owed $143,569.65, and an order providing for judicial sale if Townsend did not pay before the redemption period expired. The court wrote that the judgment was “a final and appealable order” that was “fully dispositive” under Federal Rule of Civil Procedure 54(b), but retained jurisdiction to enforce or vacate (in the event of reinstatement) the judgment. The court acknowledged that it might have to hold a hearing to confirm the judicial sale under Illinois law and could decide not to confirm, if appropriate parties did not receive proper notice, if sale terms were unconscionable, if the sale was conducted fraudulently, “or … justice was otherwise not done.” The Seventh Circuit dismissed an appeal for lack of jurisdiction. The judgment of foreclosure and judicial sale posed no imminent threat of irreparable harm to Townsend. His interests are protected under Illinois law. Because entry of the Rule 54(b) judgment compelled Townsend to appeal when he did, the court ordered that costs on appeal be assessed against HSBC. View "HSBC Bank USA, N.A. v. Townsend" on Justia Law