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

In 2009, lender issued plaintiff a four-month trial loan modification, under which it agreed to permanently modify the loan if she qualified under Home Affordable Mortgage Program guidelines, implemented by the Department of the Treasury to help homeowners avoid foreclosure during the decline in the housing market. Plaintiff filed a putative class action, claiming that she did qualify and that lender refused to grant her a permanent modification. She alleged violations of Illinois law under common-law contract and tort theories and under the Illinois Consumer Fraud and Deceptive Business Practices Act. The district court dismissed, finding that HAMP does not confer a private federal right of enforcement action on borrowers. The Seventh Circuit affirmed in part and reversed in part. Plaintiff stated viable claims under Illinois law for breach of contract or promissory estoppel, fraud, and unfair or deceptive business practices. Claims of negligent misrepresentation or concealment were not viable. HAMP and its enabling statute (12 U.S.C. 5219(a)) do not contain a federal right of action, but neither do they preempt otherwise viable state claims.

The Illinois company sells title insurance through its attorney title agent program, in which it pays the consumer's real estate attorney to conduct title examination and determine whether title is insurable. Plaintiffs contend that the payment is designed to compensate for referrals, not actual services, and that the program violates Section 8 of the Real Estate Settlement Procedures Act, 12 U.S.C. 2601(a), which prohibits kickbacks and fee splitting. The district court twice denied class certification under FRCP 23(b)(3), concluding that an individual determination of liability would be required for each class member. The Seventh Circuit affirmed, noting that class actions are rare in RESPA Section 8 cases and that plaintiffs cannot establish the sole recognized exception, namely that the company split fees with attorneys who performed no services on a class-wide basis.

Redbox rents DVDs, Blu-ray discs, and video games from automated retail kiosks and was sued under the Video Privacy Protection Act, 18 U.S.C. 2710. The district court held that Act provisions requiring destruction of records containing personally identifiable information can be enforced by suit for damages. After deciding to accept the interlocutory appeal because it will materially advance the ultimate termination of the class action, the Seventh Circuit reversed. The court noted the placement of the damages remedy in the statute, after description of a prohibitions on knowing disclosure of personally identifiable information, but before prohibition on use of such information before tribunals or the record-destruction mandate. The court also noted the "unsuitability" of those provisions to damage awards.

Plaintiffs filed a class action suit, charging racial discrimination in employment in violation of Title VII of the Civil Rights Act and 42 U.S.C. 1981 and sought class certification (FRCP 23(b)(2) and 23(c)(4)) for deciding whether defendant engaged in practices that have a disparate impact on members of the class. The district court denied certification. After determining that appeal was timely, based on a renewed motion for certification made in reliance on the Supreme Court's 2011 decision, Wal-Mart Stores, Inc. v. Dukes, the Seventh Circuit reversed. Whether defendant's company-wide policies put blacks at a disadvantage is a question common to the class. While individual suits may be necessary to determine damages, that question could be resolved in a single proceeding, making limited class action treatment appropriate.

Under the Individuals with Disabilities Education Act, 20 U.S.C. 1400, states receive federal funding for education of disabled children if local schools provide a "free appropriate public education" to all resident children with disabilities. Local districts must identify children with disabilities, determine whether they require special-education services, and develop individualized education programs (IEPs) tailored to each student's specific needs. In 2001, students with disabilities sued Milwaukee Public Schools and the Wisconsin Department of Public Instruction, alleging IDEA violations. The case became focused on "child find" requirements. DPI settled by agreeing to order MPS to meet compliance benchmarks. The district court approved the settlement over MPS's objection and ordered MPS to set up a court-monitored system to identify disabled children who were delayed or denied entry into the IEP process, implement hybrid IEP meetings, and craft compensatory-education remedies. The Seventh Circuit vacated the class-certification order and liability and remedial orders. IDEA claims are highly individualized, making the case unsuitable for class-action treatment. The claims lack commonality required by Rule 23(a)(2). DPI's settlement was vacated as requiring more of MPS than DPI had the statutory authority to demand.

Plaintiffs filed a class action, alleging violation of the Fair Labor Standards Act, 29 U.S.C. 216(b), and the Illinois Minimum Wage Law, 820 ILCS 105/1, based on denial of overtime pay. For the IMWL claim, the district court certified two classes: "hourly" and "assistant branch manager." The Seventh Circuit affirmed, rejecting an argument that the certification order did not comply with the commonality requirement of FRCP 23(c)(1)(B). The court referred to the 2011 Supreme Court decision, Wal-Mart Stores, Inc. v. Dukes, and concluded that the defendant's unofficial policy concerning overtime provided the "common answer" that will potentially resolve the case.

Plaintiff entered into a two-year wireless service agreement with First Cellular in 2005. The company was acquired by defendant, which began dismantling and reorganizing. Plaintiff initially agreed to defendant's terms, but later filed a class action, claiming breach of contract for rendering his phone and equipment useless and refusing to honor the features and prices of the First Cellular Agreement. He also claimed deceptive rade practices under Illinois law and civil conspiracy. The district court denied defendant's motion to compel arbitration. The Seventh Circuit reversed, finding that defendant's arbitration clause applies because part of the claims are based on services and products received under defendant's contract. Defendant's contract unambiguously covers any dispute "arising out of" or "relating to the services and equipment." If a contract provides for arbitration of some issues, any doubt concerning the scope of the arbitration clause is resolved in favor of arbitration as a matter of federal law, 9 U.S.C. 2.

The Federal Trade Commission found that a merger between a health system and a hospital violated the Clayton Act, 15 U.S.C. 18. Plaintiffs sought treble damages and certification of a class of patients and third-party payors who allegedly paid higher prices for care. Under FRCP 23(b)(3), a class may be certified only if questions of law and fact common to members predominate over questions affecting only individuals in the class. Plaintiffs proposed to rely on economic and statistical methods used by the FTC and defendant's economic experts to analyze antitrust impact. The "difference-in-differences" method estimates price increases resulting from exercise of market power rather than from other factors. The district court denied certification, concluding that the expert had not shown that his methodology could address impact on a class-wide basis. The Seventh Circuit granted interlocutory appeal, vacated, and remanded. Although plaintiffs' expert initially believed that the health system did increase prices uniformly across all services, he acknowledged that it might not have done so, and explained how his methodology could show impact to the class despite such complications. The degree of uniformity the court demanded is not required; "it is important not to let a quest for perfect evidence become the enemy of good evidence."

Class actions charged defendant, a credit-reporting agency, with violating the Fair Credit Reporting Act, 15 U.S.C. 1681, by selling consumer credit information to advertisers. The actions were consolidated and settled for $75 million. Class counsel appealed approval of a settlement with members of the class who filed individual claims in state court, that allowed defendant, after paying the settlements, to be reimbursed out of the $75 million class settlement fund. The law firm (Watts) that represented the individual claimants, did nothing to create the fund out of which the settlements will be paid, but stands to receive from $10 to $15 million in attorneys’ fees out of the class settlement fund. Class counsel argued that it should receive a portion of Watts' fees on the ground that class counsel contributed to the creation of the fund. The Seventh Circuit deemed Watts' motion as one to add it as a party and granted the motion. Watts wants to be an appellee to defend its right to attorneys' fees from the fund that its clients (individual claimants) agreed to pay, according to the court, but doesn't want to be a party that could be ordered to disgorge some of the fees, should class counsel prevail.

The Seventh Circuit consolidated two cases involving transfer to courts in another country. One is an appeal from an order to transfer cases involving vehicular accidents allegedly caused by tires installed on vehicles in Latin America, from the Southern District of Indiana to the courts of Mexico. Its i a suit by Mexican citizens arising from the death of another Mexican citizen in an accident in Mexico. The second involves transfer, to Israel, of suits against manufacturers of blood products used by hemophiliacs, which turned out to be contaminated by HIV; it was brought by Israeli citizens infected by the products in Israel. The Seventh Circuit affirmed the transfers. Noting the existence of apparently dispositive precedent, the court referred to "ostrich-like tactic of pretending that potentially dispositive authority against a litigant's contention does not exist."