Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in Contracts
Coatney v. Ancestry.com DNA, LLC
This case involves a group of plaintiffs who were minors at the time their guardians purchased and activated DNA test kits from Ancestry.com. The plaintiffs, through their guardians, provided their DNA samples to Ancestry.com for genetic testing and analysis. The plaintiffs later sued Ancestry.com, alleging that the company violated their privacy rights by disclosing their confidential genetic information to another business. Ancestry.com moved to compel arbitration based on a clause in its Terms & Conditions agreement, which the plaintiffs' guardians had agreed to when they purchased and activated the test kits.The United States Court of Appeals for the Seventh Circuit, applying Illinois law, held that the plaintiffs were not bound to arbitrate their claims under the agreement between their guardians and Ancestry.com. The court reasoned that the plaintiffs neither signed the agreement nor created Ancestry.com accounts, and did not independently engage with Ancestry.com's services. Furthermore, the court refused to bind the plaintiffs to the agreement based on equitable principles, including the doctrine of direct benefits estoppel. The court noted that while the plaintiffs theoretically could benefit from Ancestry.com's services, there were no allegations that the plaintiffs had actually accessed their DNA test results.The court therefore affirmed the district court's decision denying Ancestry.com's motion to compel arbitration. The court's holding clarified that under Illinois law, a minor cannot be bound to an arbitration agreement that their guardian agreed to on their behalf, unless the minor independently engaged with the services provided under the agreement or directly benefited from the agreement. View "Coatney v. Ancestry.com DNA, LLC" on Justia Law
Green Plains Trade Group, LLC v. Archer Daniels Midland Co.
The case involves Green Plains Trade Group, LLC, who appealed the district court's dismissal of their claim for tortious interference with contract against Archer Daniels Midland Company (ADM). Green Plains alleged that ADM unlawfully manipulated the price of ethanol, causing Green Plains to receive less money for the ethanol it sold to third parties. The district court dismissed the case, saying Green Plains hadn't specified the contracts ADM interfered with or shown a breach of contract. Green Plains argued that under Nebraska law, tortious interference doesn't always require a breach and that ADM's actions made its performance under its contracts "more expensive or burdensome."The United States Court of Appeals for the Seventh Circuit vacated the district court's dismissal and remanded the case for further proceedings. The Court of Appeals found that while the district court was correct to require Green Plains to plead more than general allegations about its contracts, it may have required too much specificity. The Court of Appeals also found that the district court erred in not recognizing section 766A of the Restatement (Second) of Torts as part of Nebraska's law, which allows a plaintiff to bring a successful tortious interference with contract claim even if the contract was not breached. The Court of Appeals held that the district court must apply the law as it believes the highest court of the state would apply it if the case were now before it, and it should not fear adopting the less restrictive approach if it believes the state's highest court would adopt that approach. View "Green Plains Trade Group, LLC v. Archer Daniels Midland Co." on Justia Law
Ewing v. 1645 W. Farragut LLC
Randall Ewing and Yasmany Gomez entered into a contract with 1645 W. Farragut LLC (Farragut) to purchase a house. The house was in need of substantial renovations, but Ewing and Gomez proceeded with the contract based on Farragut's assurance that the house would be renovated and ready by closing time. Unbeknownst to Ewing and Gomez, the house was under a stop work order, which hindered their ability to secure a mortgage. When they requested their earnest money back, Farragut refused. They subsequently sued Farragut for breach of contract, common law fraud, and fraud under the Illinois Consumer Fraud Act. The United States District Court for the Northern District of Illinois found Farragut liable for fraud and breach of contract and awarded Ewing and Gomez $905,000 in damages. Farragut appealed the decision and Ewing and Gomez cross-appealed, seeking to add Farragut's principal, Erik Carrier, to the case. The United States Court of Appeals for the Seventh Circuit affirmed the District Court's decisions, finding that the record supported the damages awarded and that the District Court did not abuse its discretion in denying the motion for a new trial and the motions to amend. View "Ewing v. 1645 W. Farragut LLC" on Justia Law
Russell v. Zimmer, Inc.
Russell is an orthopedic trauma surgeon who invented numerous products such as bone substitutes and surgical devices. He, along with other inventors were shareholders in CelgenTek, a medical device firm. According to the Inventors, Russell’s creations were game-changers in the field of orthopedics. In 2015, the Inventors entered into an agreement with Zimmer as the exclusive distributor of certain CelgenTek products. CelgenTek was experiencing dire financial problems. Zimmer acquired a 10% ownership of CelgenTek for $2 million and purchased the remaining 90% in 2016. The Inventors retained the right to a small percent of the net yield on the products it developed (earnout products). Zimmer agreed that it would use “Commercially Reasonable Efforts,” as defined in the Agreement, to sell the earnout products. From the date the agreement through 2019, Zimmer paid the Inventors approximately $130,000 in earnout payments. The Inventors sued, alleging that Zimmer failed to use Commercially Reasonable Efforts.The Seventh Circuit affirmed that the Inventors failed to state a claim. Many of Zimmer's 21 complained-of actions and inactions reflect how the Inventors hoped Zimmer would have marketed and sold the earnout products or what the Inventors would have done had they not put Zimmer in charge of sales. Others allege broken promises that Zimmer purportedly made before the signing of the agreement that are not actionable due to the agreement’s integration clause. View "Russell v. Zimmer, Inc." on Justia Law
Jadair International, Inc. v. American National Property & Casualty Co.
Schmutzler, the owner and president of Jadair, was a pilot with decades of experience. Schmutzler applied to American National for an insurance policy on its Cessna airplane in 2019. The application listed Schmutzler as the Cessna’s only authorized pilot; Schmutzler indicated that he was a licensed pilot with an FAA medical certificate. The application included “Minimum Pilot Requirements,” which stated that “there is no coverage in flight unless the aircraft is being operated by the pilot(s) designated on this document who has/have at least the certificates, ratings, and pilot experience indicated, and who … is/are properly qualified for the flight involved.” Schmutzler initialed this provision. The Cessna crashed in May 2020, killing Schmutzler, who was piloting the plane. The crash was caused by a mechanical failure.American National denied coverage because Schmutzler did not have a current and valid FAA medical certificate at the time of the accident; his previous certificate had expired. The district court granted American National summary and declaratory judgment. The Seventh Circuit affirmed. The policy unambiguously excludes coverage for any accident involving the Cessna where the pilot lacks a current FAA medical certificate. That requirement is an exclusion of coverage, not a failed condition of coverage. View "Jadair International, Inc. v. American National Property & Casualty Co." on Justia Law
Beach Forwarders, Inc. v. Service By Air, Inc.
Service hired Forwarders as its agent in 2010. The Agreement had a three-year term, a continuous one-year renewal option, and a mutual nonrenewal provision. A 2013 amendment stated that the Agreement would renew perpetually for consecutive one-year terms, unless Service, in its sole discretion, notifies Forwarders of its intention to terminate the Agreement 30 days before the annual expiration date. The amendment, however, left undisturbed the Agreement’s provision that Service shall not be deemed to be in default unless Forwarders has provided written notice of an alleged material breach and has given Service an opportunity to cure, after which Forwarders may terminate. “[T]ermination of this Agreement by [Forwarders] for any other reason shall be deemed a termination without cause.”Forwarders sought a declaratory judgment that the amended Agreement was terminable at will. Service conceded that the amended Agreement was of indefinite duration and that Illinois law presumes that such contracts are terminable at will but argued the presumption was rebutted because the Agreement provided that Forwarders could end the Agreement only if Service failed to timely cure a material breach after notification. The court granted judgment on the pleadings that the termination was lawful. The Seventh Circuit affirmed. The amended Agreement lacks a clear statement that the contract can only be terminated based upon the occurrence of certain conditions or events. Service has not rebutted the Illinois law presumption that this contract of indefinite duration is terminable at will. View "Beach Forwarders, Inc. v. Service By Air, Inc." on Justia Law
Kass v. PayPal Inc.
PayPal users can transfer money to businesses and people; they can donate to charities through the Giving Fund, its 501(c)(3) charitable organization. Kass created a PayPal account and accepted PayPal’s 2004 User Agreement, including a non-mandatory arbitration clause and allowing PayPal to amend the Agreement at any time by posting the amended terms on its website. In 2012 PayPal amended the Agreement, adding a mandatory arbitration provision. Users could opt out until December 2012. In 2016, PayPal sent emails to Kass encouraging her to make year-end donations. Kass donated $3,250 to 13 charities through the Giving Fund website. Kass alleges she later learned that only three of those charities actually received her gifts; none knew that Kass had made the donations. Kass claims that, although Giving Fund created profile pages for these charities, it would transfer donated funds only to charities that created a PayPal “business” account; otherwise PayPal would “redistribute” the funds to similar charities.Kass and a charity to which she had donated filed a purported class action. The district court granted a motion to compel arbitration, then affirmed the arbitrator’s decision in favor of the defendants. The Seventh Circuit vacated. In concluding that Kass had consented to the amended Agreement, the district court erred by deciding a disputed issue of fact that must be decided by a trier of fact: whether Kass received notice of the amended Agreement and implicitly agreed to the new arbitration clause. View "Kass v. PayPal Inc." on Justia Law
Daniels v. United Healthcare Services, Inc.
The parents work for the School District. Through the District, they contracted for a self-funded health insurance plan. The District, not an outside insurer, bears sole financial responsibility for the payment of plan benefits. The District is also the plan administrator and named fiduciary but contracted with United HealthCare to serve as the third-party claims administrator, with the authority to deny or approve claims. The plan is a governmental plan, so the Employee Retirement Income Security Act does not apply, 29 U.S.C. 1003(b)(1). In 2017, daughter Megan—covered under her parents’ policy—suffered a mental health emergency. United approved Megan for 24 days of inpatient treatment and informed the family that it would not approve additional days. Her parents and Megan’s doctors disagreed and appealed internally within United. They elected to continue Megan’s inpatient treatment. They received a final denial of coverage notice, leaving most of Megan’s treatment expenses uncovered.The family sued United for breach of contract, bad faith, punitive damages, and interest under Wisconsin’s prompt pay statute but did not join the District as a defendant. The Seventh Circuit affirmed the dismissal of the suit. There was no contractual relationship between the plaintiffs and United. Wisconsin law does not permit them to sue United for tortious bad faith absent contractual privity. Wisconsin’s prompt pay statute applies only to insurers. View "Daniels v. United Healthcare Services, Inc." on Justia Law
Delisle v. McKendree University
McKendree University, like other Illinois colleges, closed its campus and switched to remote instruction in March 2020 due to the risks of COVID-19. McKendree already ran an online degree program in addition to its on-campus degree program. McKendree did not refund its in-person students for any portion of their tuition or fees. The plaintiffs. enrolled in McKendree’s on-campus program at the time of the shutdown, sued for breach of contract and unjust enrichment.The Seventh Circuit reversed the dismissal of the suit, noting its recent precedent holding that certain evidence—including a university’s course catalogs, class registration system, and pre-pandemic practices—can suffice under Illinois law to allege the existence of an implied contract between a university and its students for in-person instruction and extracurricular activities. The complaint in this case is “enough—if barely—to state a claim at the pleading stage.” Under Illinois law, the relationship between students and universities is contractual and the parties’ obligations under the contract are “inferred from the facts and conduct of the parties, rather than from an oral or written agreement.” View "Delisle v. McKendree University" on Justia Law
Dinerstein v. Google, LLC
Google and the University of Chicago Medical Center collaborated to develop software capable of anticipating patients’ future healthcare needs. The University delivered several years of anonymized patient medical records to Google, to “train” the software’s algorithms. An agreement restricted Google’s use of the records to specific research-related activities and prohibited Google from attempting to identify any patient whose records were disclosed. Dinerstein sued on behalf of himself and a class of other patients whose anonymized records were disclosed, claiming that the University had breached either an express or an implied contract traceable to a privacy notice he received and an authorization he signed upon each admission to the Medical Center. Alternatively, he asserted unjust enrichment. Citing the same notice and authorization, he alleged that the University had breached its promise of patient confidentiality, violating the Illinois Consumer Fraud and Deceptive Business Practices Act. Against Google, he claimed unjust enrichment and tortious interference with his contract with the University. He brought a privacy claim based on intrusion upon seclusion.The Seventh Circuit affirmed the dismissal of the case. To sue in federal court, a plaintiff must plausibly allege (and later prove) that he has suffered an injury in fact that is concrete and particularized, actual or imminent, and traceable to the defendant’s conduct. The injuries Dinerstein alleges lack plausibility, concreteness, or imminence (or some combination of the three). View "Dinerstein v. Google, LLC" on Justia Law