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

Dunnet, a highway construction company, is prequalified to bid and work on Illinois Department of Transportation (IDOT) projects and competes for federally assisted highway construction contracts. Dunnet is owned and controlled by two white males. Between 2007 and 2009, its average annual gross receipts were over $52 million. To receive federal-aid funds for highway contracts, IDOT must have a “disadvantaged business enterprise” (DBE) participation program. A DBE is a for-profit small business concern that is at least 51% owned and controlled by one or more socially and economically disadvantaged individuals. There is a rebuttable presumption that women and members of racial minority groups are socially and economically disadvantaged, but an individual owner of any race or gender may qualify as “socially and economically disadvantaged.” A firm is not an eligible DBE if the firm (including affiliates) has had average annual gross receipts over its previous three fiscal years, greater than $22.41 million. Illinois has not met its DBE participation goals. Dunnet was denied a goal waiver and was not awarded a major expressway project. The Seventh Circuit affirmed summary judgment rejecting Dunnet’s claim that IDOT’s DBE Program discriminates on the basis of race, concluding that Dunnet lacked standing to raise an equal protection challenge based on race and that the Program survived the constitutional and other challenges. View "Dunnet Bay Constr. Co. v. Borggren" on Justia Law

Since 1989 Sveum and his brother owned a Wisconsin home-building company, Kegonsa. Kegonsa’s creditor, Stoughton Lumber had sued Sveum and his brother and Kegonsa under Wisconsin law, alleging breach of contract and theft by contractors. Under Wisconsin law, money paid to a contractor by an owner for improvements, constitutes a trust fund in the hands of the contractor until all claims have been paid. The use of such money by a contractor for any other purpose until claims have been paid, is theft by contractor. The suit settled for $650,000. Sveum violated the settlement agreement. Stoughton sued again and obtained a $589,638.10 default judgment. Sveum filed for Chapter 7 bankruptcy, seeking to discharge his debts, including the debt to Stoughton. Stoughton responded with an adversary proceeding, claiming that Sveum’s debt to Staughton was not dischargeable. The bankruptcy judge agreed and denied discharge. The district court affirmed. The Seventh Circuit affirmed, noting Sveum’s false representations and use of funds held in trust for Stoughton to pay other creditors ahead of Stoughton. The Bankruptcy Code forbids discharge of a debt under those circumstances, 11 U.S.C. 523(a)(4).“ View "Stoughton Lumber Co., Inc. v. Sveum" on Justia Law

In 2004, Miller sought to build a four-unit condominium project on her Monona lot. The process stalled while Miller bought another lot, amended the plan, and abated an unexpected asbestos problem. She had unsuccessful negotiations with her neighbor, a former mayor, who trespassed on her property at the direction of city officials and took photographs for use at a planning commission meeting to oppose her project. Citations were issued for creating a public nuisance and working without a proper permit; the Wisconsin Department of Natural Resources issued a “stop work” order because of asbestos; Miller was required to erect a fence; and she was told that weeds were too high and was ordered to remove various structures. A court rejected three out of four citations issued against her, stating that, although “some of the efforts to enforce compliance were unreasonable,” Miller had not pointed to any similarly situated person who had been treated differently. Monona refused to adjust the taxes on Miller’s property to reflect the demolitions. Officials continued to trespass by parking cars on her property. In 2010, Miller filed suit, asserting equal protection violations. The district court dismissed, finding that Miller had not identified a suitable comparator and that there was no evidence that Miller had been treated unfairly because of her sex. The Seventh Circuit affirmed, noting conceivable rational reasons for various actions and requirements. View "Miller v. City of Monona" on Justia Law

A large commercial development in Kansas City, Missouri was aborted in the middle of construction due to cost overruns. When the developer would not cover the shortfall, the construction lender stopped releasing committed loan funds, and contractors filed liens against the property for their unpaid work on the unfinished project. Bankruptcy followed, and the contractors’ liens were given priority over the lender’s security interest in the failed development, leaving little recovery for the lender. The lender looked to its title insurer for indemnification. The title policy generally covers lien defects, but it also contains a standard exclusion for liens “created, suffered, assumed or agreed to” by the insured lender. The Seventh Circuit affirmed judgment in favor of the title company. The exclusion applies to the liens at issue, which resulted from the lender’s cutoff of loan funds, so the title insurer owed no duty to indemnify. The liens arose from insufficient project funds, a risk of loss that the lender, not the title company, had authority and responsibility to discover, monitor, and prevent. View "BB Syndication Servs, Inc. v. First Am. Title Ins. Co" on Justia Law

CBD designs and builds restaurants. Its client, Mongolian House, wanted to renovate an upscale Chicago restaurant called “Plan B.” CBD designed the interior and in 2006 filed blueprints to obtain a “repair and replace” building permit. CBD completed the construction work in 2007. In 2008 a CBD employee visited the city’s offices on other business and chanced upon blueprints for Plan B that were labeled with another architect’s name. The city refused to provide a copy, saying the blueprints were exempt from disclosure. Mongolian House defaulted on payments to CBD. In 2009 the city issued a new building permit for Plan B based on the 2008 blueprints. In 2012 CBD sued, alleging copyright infringement and state-law claims. The district court dismissed the claims under the Copyright Act’s three-year statute of limitations, 17 U.S.C. 507(b), reasoning that CBD was on “inquiry notice” of a possible copyright violation when its employee happened upon the 2008 blueprints. The Seventh Circuit reversed. The Supreme Court recently clarified that the Act’s limitations period establishes a “separate accrual rule” so that “each infringing act starts a new limitations period.” CBD’s complaint alleges potentially infringing acts within the three-year look-back period from the date of suit.View "Chicago Bldg. Design, P.C. v. Mongolian House Inc." on Justia Law

Brothers Daniel and John owned four companies that offered remodeling services to homeowners. They provided honest work on construction jobs for cash customers, but duped numerous people into refinancing their homes and paying the loan proceeds directly to their companies, then left the jobs unfinished. They targeted neighborhoods on the South and West sides of Chicago, using telemarketers who looked for “elderly, ignorant homeowners,” and had customers sign blank contracts. They referred homeowners to specific loan officers and required the homeowners to sign letters of direction, so the title companies sent checks directly to the companies. From 2002 to 2006, the brothers collected about $1.2 million from more than 40 homeowner-victims. They were convicted of wire fraud, 18 U.S.C. 1343. The district court found that the loss calculation was more than $400,000 but less than $1,000,000 and accordingly increased the offense level, then applied enhancements because the conduct involved: vulnerable victims; violation of a prior court order; sophisticated means; mass-marketing; and leadership or organization of the scheme. The district court sentenced each brother to 168 months’ imprisonment. The Seventh Circuit affirmed. The district court reasonably estimated the amount of loss and properly enhanced the offense level further for the other five aggravating factorsView "United States v. Sullivan" on Justia Law

After leaving Gensler, an architectural firm with projects throughout the world, where he had been a Design Director, Strabala opened his own firm, 2Define Architecture. Strabala stated online that he had designed five projects for which Gensler is the architect of record. Gensler contends that Strabala’s statements, a form of “reverse passing off,” violated section 43(a) of the Lanham Act, 15 U.S.C.1125(a). The district court dismissed, ruling that, because Strabala did not say that he built or sold these structures, he could not have violated section 43(a), reading the Supreme Court decision Dastar Corp. v. Twentieth Century Fox (2003), to limit section 43(a) to false designations of goods’ origin. The Seventh Circuit vacated, reasoning that Gensler maintains that Strabala falsely claims to have been the creator of intellectual property.View "M. Arthur Gensler, Jr. & Assocs., Inc. v. Strabala" on Justia Law

The Developer converted a vacant building into a residential condominium by gutting and refitting it. The Developer purchased Commercial Lines Policies covering bodily injury and property damage from Nautilus, covering periods from June 1998 through June 2000. The policies define occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” but do not define accident. The policies exclude damage to “that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations;” eliminate coverage for damage to “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it;” and contain an endorsement entitled “Exclusion—Products-Completed Operations Hazard.’ Construction was completed in 2000; the Developer transferred control to a board of owners. By May 2000, one homeowner was aware of water damage. In 2005, the Board hired a consulting firm, which found that the exterior brick walls were not fully waterproofed and concluded that the deterioration had likely developed over many years, even prior to the condominium conversion, but that the present water penetration was the result of inadequate restoration of the walls. The Board sued the Developer. Nautilus denied coverage and obtained a declaratory judgment. The Seventh Circuit affirmed, reviewing the policy and finding that the shoddy workmanship, of which the board complained, was not covered by the policies; that Nautilus did not unduly delay pursuing its declaratory suit; and that the alleged damage to residents’ personal property occurred after the portions of the building were excluded from coverage.View "Nautilus Ins. Co. v. Bd. of Dirs. of Regal Lofts Condo Ass'n" on Justia Law

Moeser was a commercial loan officer at a Milwaukee bank and, in 2004, prepared a presentation on behalf of co-conspirator Woyan for a $790,000 construction loan. Woyan operated PARC, which planned to build townhouses. Other conspirators included the project’s manager, architect, and real estate agent. Moeser told his superiors that the project’s land would serve as collateral and that PARC would provide the land up front. The bank approved the loan. Before closing, Moeser learned that Woyan did not own the land and did not have the funds to purchase it. Rather than informing his superiors, Moeser loaned Woyan $30,500 to purchase the land; Woyan paid Moeser back, plus $15,000 in interest, using funds from the loan’s initial disbursement of $111,299. Although Moeser learned that the project was not progressing and that disbursements were being used for other purposes, he continued to deceive his superiors. The project was never completed and PARC defaulted on its loan. Three contractors and a lumber supplier were never fully paid. The bank foreclosed. Moeser was charged with bank fraud, corrupt acceptance of money, fraud of a financial institution by an employee, and making false statements during an investigation. Moeser and his co-defendants pleaded guilty to conspiracy to commit bank fraud, 18 U.S.C. 1344. The district court gave Moeser a below-guidelines sentence of two years’ probation, which Moeser did not appeal, but found him jointly and severally liable for full restitution. The Seventh Circuit affirmed, rejecting an argument that he should be liable for a lesser share. View "United States v. Moeser" on Justia Law

The Gagnards built a house in Los Altos, California, then sold the home to Goldman in January, 2004. Since then, Goldman has sued the Gagnards and those involved with the construction and sale of the house in various tribunals. In 2011, Goldman registered a foreign arbitral award in Illinois. She then sought citations to discover and collect assets. The district court issued denied reconsideration motions and granted a turnover order. After filing an appeal, the Gagnards paid $1.3 million to Goldman in satisfaction of the judgment. Goldman accepted the payment, and refunded money she had collected in excess of the judgment balance. The district discharged all pending citations and allowed the Gagnards to file a counterclaim against Goldman, claiming unjust enrichment, but subsequently dismissed the counter-complaint. The Seventh Circuit affirmed, based on the failure, by the Gagnards to act in a timely manner. View "Goldman v. Gagnard" on Justia Law