Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in Contracts
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
North v. Ubiquity, Inc.
In 2006 Ubiquity, a California-based company, contracted with North’s Illinois firm, Associates. North executed the contract in Arizona, where he lived, on behalf of Associates. Ubiquity promised to transfer 1.5% of its outstanding shares to Associates as a “commencement fee.” Ubiquity terminated the agreement two months after signing the contract and never transferred its shares. In 2013, when Ubiquity went public, North demanded specific performance, then sued Ubiquity for breach of contract in Arizona state court. The Arizona court denied Ubiquity’s motion to dismiss for lack of personal jurisdiction.North, worried about reversal on appeal, filed an identical breach-of-contract claim in the Northern District of Illinois in 2016. Ubiquity failed to appear. The district court entered a default judgment ($7 million). Ubiquity successfully moved to vacate the default judgment and dismiss the case for lack of personal jurisdiction. The court explained that Ubiquity’s only connection to Illinois was that it had contracted with an Illinois entity and that North, by his own admissions, had negotiated, executed, and promised to perform in Arizona. North filed an appeal but obtained a stay while his Arizona litigation proceeded. That stay remained in effect until 2023; by then North’s contract claim was time-barred in every relevant jurisdiction.The Seventh Circuit affirmed. Although the district court ought to have considered transferring the case to the Central District of California (28 U.S.C. 1631) North’s own representations would have fatally undermined his transfer request. View "North v. Ubiquity, Inc." on Justia Law
Citizens Insurance Company of America v. Wynndalco Enterprises, LLC
After Wynndalco Enterprises, LLC was sued in two putative class actions for violating Illinois’ Biometric Information Privacy Act (“BIPA”), its business liability insurer, Citizens Insurance Company of America, filed an action seeking a declaration that it has no obligation under the terms of the insurance contract to indemnify Wynndalco for the BIPA violations or to supply Wynndalco with a defense. Citizens’ theory is that alleged violations of BIPA are expressly excluded from the policy coverage. Wynndalco counterclaimed, seeking a declaration to the contrary that Citizens is obligated to provide it with defense in both actions. The district court entered judgment on the pleadings for Wynndalco. The Seventh Circuit affirmed. The court explained that the narrowing construction that Citizens proposes to resolve that ambiguity is not supported by the language of the provision and does not resolve the ambiguity. Given what the district court described as the “intractable ambiguity” of the provision, the court held Citizens must defend Wynndalco in the two class actions. This duty extends to the common law claims asserted against Wynndalco in the other litigation, which, as Citizens itself argued, arise out of the same acts or omissions as the BIPA claim asserted in that suit. View "Citizens Insurance Company of America v. Wynndalco Enterprises, LLC" on Justia Law
Arun Bhattacharya v. State Bank of India
Plaintiff, a U.S. citizen and Illinois resident of Indian origin, opened a non-resident account with the State Bank of India through one of its India-based branches. When the State Bank of India retroactively changed the terms of the account, Plaintiff sued for breach of contract. The district court dismissed his complaint for lack of subject matter jurisdiction, concluding that the Foreign Sovereign Immunities Act applied to Bhattacharya’s claim and immunized the Bank from suit. The Seventh Circuit affirmed. The court held that the district court was correct to conclude that these activities are insufficient to establish a direct effect in the United States. Plaintiff’s non-resident account is maintained in India, and the relevant transactions were with the Bank’s India-based branches. The court explained that Plaintiff did not allege that his suit related to any account held with a U.S.-based branch of the Bank or was otherwise related to any actions the Bank had taken here. Nor did he point to any agreement with the State Bank of India that established the United States as the site of performance. Accordingly, the court held that Plaintiff’s contract agreement established his account with the Indian branches of the Bank. View "Arun Bhattacharya v. State Bank of India" on Justia Law