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

As Oilgear’s CEO, Hitt held restricted stock. When Hitt left his position in 2014, Oilgear exercised its option to repurchase the shares. Oilgear and Hitt agreed that he would receive $753,000: $108,000 immediately and $215,000 (plus interest) each June for the next three years. Oilgear also owes money to JPMorgan Chase Bank. Hitt, Oilgear, and the Bank signed an agreement acknowledging that Oilgear’s debt to Hitt is subordinate to Oilgear’s debt to the Bank and that Hitt will not be paid while Oilgear is in default of its obligations to the Bank. After paying the 2015 installment, Oilgear defaulted on an obligation to the Bank. The Bank agreed to waive most consequences of the default if Oilgear promised the Bank that it would not resume paying Hitt without the Bank’s consent. The Bank did not consent to the payment of Hitt’s 2016 installment. The Seventh Circuit affirmed a declaratory judgment that Oilgear is entitled to defer payment of the 2016-2017 installments. Oilgear paying Hitt without the Bank’s consent would vitiate the Bank’s waiver and a default “would exist.” View "Oilgear Co. v. Hitt" on Justia Law

In 1995, Peoria signed a lease that allowed RTC to construct and operate a gas conversion project at the city’s landfill, providing that when the lease terminated, the city had an absolute right to retain, at no cost, the “structures” and “below‐grade installations and/or improvements” that RTC installed. Years later, RTC entered bankruptcy proceedings. Banco provided RTC with postpetition financing secured with liens and security interests in effectively all of RTC’s assets. RTC defaulted. Litigation ensued. The city notified RTC that it was terminating the lease and would retain the structures and installations. After RTC stopped operating the gas conversion project, Peoria modified the system to comply with environmental regulations for methane and other landfill gasses and continued to use the property. Banco sued, alleging unjust enrichment and arguing that it had a better claim to the property because its loan was secured by a lien on all of RTC’s assets and the bankruptcy court had given its loan “super-priority” status. The Seventh Circuit affirmed summary judgment in favor of the city. No matter the priority of its claim to RTC’s assets, Banco has no claim to Peoria’s assets. By the terms of the lease between RTC and the city, the disputed structures and installations are city property. The lease gave RTC no post‐termination property interest in that property. View "Banco Panamericano, Incorporat v. City of Peoria, Illinois" on Justia Law

After the Garcias bought their Lake Station Property in 2004, it was used as an automobile repair shop and a day spa. It previously was used as a dry cleaning facility and contained six underground storage tanks: four were used for petroleum-based Stoddard solvent, one was used for gasoline, and the last for heating oil. In 1999, the dry cleaning company reported a leak from the Stoddard tanks to the Indiana Department of Environmental Management (IDEM). In 2000, a site investigation was conducted and five groundwater monitoring wells were installed. IDEM requested additional information and testing in 2001 and 2004. The Garcias claim they had no knowledge of the preexisting environmental contamination before insuring with Atlantic. A 2014 letter from Environmental Inc. brought the contamination to the Garcias’ attention. The Garcias hired Environmental to investigate and learned that Perchloroethylene solvent and heating oil still affected the property. Atlantic obtained a declaration that its Commercial General Liability Coverage (CGL) policies did not apply. The Seventh Circuit affirmed, reading a “Claims in Process” exclusion to preclude coverage for losses or claims for damages arising out of property damage—known or unknown—that occurred or was in the process of occurring before the policy’s inception. View "Atlantic Casualty Insurance Co v. Garcia" on Justia Law

Nelson, Schultz, and Rodgers formed an LLC to develop a mixed‐use luxury skyscraper on Chicago’s Magnificent Mile. The LLC’s operating agreement provided that development fees would be divided among the LLC’s managers “as they mutually agree” and that a manager of the LLC could be removed for cause by a majority vote of its owners. In 2005, Rodgers and Schultz voted to remove Nelson, allegedly causing him a loss of $1.13 million on the Ritz‐Carlton Residences. Nelson sued for breach of contract and torts. During discovery Schultz and Rodgers asked Nelson to produce bank statements and tax returns, which, they said, they needed to defend against his claims. After Nelson refused, the district court granted the defendants’ motion to compel their production and warned Nelson, twice, that it would dismiss the case if he did not produce the documents or provide an affidavit documenting a diligent search for them. Nelson did neither. The Seventh Circuit affirmed dismissal of the case for want of prosecution, rejecting an argument that the district judge erred by not assessing whether his misconduct justified dismissing the case. The judge sufficiently evaluated the matter and did not abuse his discretion by dismissing the suit after multiple warnings. View "Nelson v. Schultz" on Justia Law

In 2002, Toulon applied for Continental’s long-term care insurance policy. Continental provided a Long-Term Care Insurance Personal Worksheet to help Toulon determine whether the policy would work for her, given her financial circumstances. The Worksheet discussed Continental’s right to increase premiums and how such increases had previously been applied. Toulon did not fill out the Worksheet but signed and submitted it with her application. Toulon’s Policy stated that although Continental could not cancel the Policy if each premium was paid on time, Continental could change the premium rates. There was a rider, stating that premiums would not be increased during the first 10 years after the coverage date. In September 2013, Continental raised Toulon’s premiums by 76.5%. Toulon sued, on behalf of herself and a purported class. The Seventh Circuit affirmed dismissal, agreeing that Toulon failed to state claims for fraudulent misrepresentation because she did not identify a false statement or for fraudulent omission because Continental did not owe Toulon a duty to disclose. The court also properly dismissed Toulon’s claim under the Illinois Consumer Fraud and Deceptive Practices Act (ICFA) because she did not identify a deceptive practice, a material omission, or an unfair practice. The unjust enrichment claim failed because claims of fraud and statutory violation, upon which Toulon's unjust enrichment claim was based, were legally insufficient and an express contract governed the parties’ relationship. View "Toulon v. Continental Casualty Co." on Justia Law

SGA Pharm Lab supplied ADM Alliance Nutrition with a product used to make medicated animal feed. The parties ended their relationship by signing a termination agreement. ADM later came to believe that SGA had made false representations concerning the potency of the product while SGA was supplying it to ADM. ADM brought breach of contract and fraud claims against SGA and its president. The district court concluded that ADM had released the claims. The Seventh Circuit affirmed The termination agreement stated ADM released SGA and its officers from any and all claims, whether known or unknown, so by its terms the release includes claims for breach of contract and fraud. The agreement also stated that it superseded all prior understandings and that no representations were made to induce the other party to enter into the agreement other than those it contained. The agreement was between sophisticated commercial parties View "ADM Alliance Nutrition, Inc. v. SGA Pharm Lab, Inc." on Justia Law

Indiana law previously provided that, when school districts needed to reduce their teaching staffs, tenured teachers that were qualified for an available position had a right to be retained over non-tenured teachers. A 2012 amendment eliminated that right and orders school districts to base layoff choices on performance reviews without regard for tenure status. Madison Consolidated Schools relied on the new law to lay off Elliott, a teacher who earned tenure 14 years before the new law took effect, while it retained non-tenured teachers in positions for which Elliott was qualified. Elliott, who had been elected as president of his union, sued, claiming that the amendment violated the Contract Clause when applied to him. The Seventh Circuit affirmed summary judgment in Elliott’s favor. The statute, not the annual contracts, granted Elliott his contractual tenure rights, which became enforceable the year Elliott earned tenure. A decrease in job security necessarily impairs his rights under that contract. The change substantially disrupted teachers’ important and reasonable reliance interests. Improving teacher quality and public-education outcomes are important public interests of the highest order but even important goals and good intentions do not justify this substantial impairment of the tenure contract for already-tenured teachers. View "Elliott v. Board of School Trustees of Madison Consolidated Schools" on Justia Law

Hyatt and Shen Zhen entered into an agreement providing that Shen Zhen would renovate a Los Angeles hotel and operate it using Hyatt’s business methods and trademarks. Two years later Hyatt declared that Shen Zhen was in breach. An arbitrator concluded that Shen Zhen owes Hyatt $7.7 million in damages plus$1.3 million in attorneys’ fees and costs. The Seventh Circuit affirmed the district court’s order of enforcement, upholding the arbitrator’s refusal to issue a subpoena to Cadwalader, who represented Shen Zhen during the contract negotiations. The dispute arose two years after Cadwalader stopped working for Shen Zhen. The contract has an integration clause that forecloses resort to the negotiating history as an interpretive tool. The arbitrator also declined to disqualify Hyatt’s law firm, which Cadwalader joined about three years after the contract was signed, finding that the firm’s ethics screen ensured that no confidential information would reach Hyatt's lawyers. The court also rejected an argument that the award disregarded federal and state franchise law and should be set aside under 9 U.S.C. 10(a)(4), which covers situations in which “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” View "Hyatt Franchising, L.L.C. v. Shen Zhen New World I, LLC" on Justia Law

Bio‐Systems produced biodegradation products that use bacteria to break down waste. Customers often required certificates of analysis, so Bio‐Systems counted the bacteria in a product before its sale. Betco purchased Bio‐Systems, after visiting Bio‐Systems’s sites, speaking with personnel, and examining financial information. Betco paid Peacock $5 million and placed $500,000 in escrow, to be released two years after closing if Belco had not identified any problems. Peacock continued to run the plant. Betco instructed him to focus on sales and profits. Betco knew before closing that the bacteria yields were inconsistent at the plant; it learned within a year of closing that some products were being shipped with below‐specification bacteria counts. Betco nonetheless released the escrow early in exchange for a discount. Betco subsequently discovered that certificates of analysis were being falsified. Betco sued Peacock. The court dismissed negligent misrepresentation and breach of contract claims as time‐barred by the Agreement, and found that Betco failed to prove violation of the duty of good faith and hadn’t shown any cognizable injury from the alleged violation. The Seventh Circuit affirmed rejection of all of Betco’s claims. When Betco purchased Bio‐Systems, it expected profitability and not to face claims for shipping products with intentionally falsified certificates; it received that. Betco did not expect that it was purchasing flawless processes. Under Wisconsin law, the inquiry is not whether Betco paid the appropriate price but whether Betco received the benefits that it expected. View "Betco Corp., Ltd. v. Peacock" on Justia Law

In 2009, Bancorp, which provides checking and savings accounts to individuals, purchased a bankers’ professional liability insurance policy from Federal. The policy stated: [Federal] shall pay, on behalf of an Insured, Loss on account of any Claim first made against such Insured during the Policy Period … for a Wrongful Act committed by an Insured or any person for whose acts the Insured is legally liable while performing Professional Services, including failure to perform Professional Services" but that Federal “shall not be liable for Loss on account of any Claim … based upon, arising from, or in consequence of any fees or charges” (Exclusion 3(n)). The 2010 Swift Complaint sought damages for Bancorp's "unfair and unconscionable assessment and collection of excessive overdraft fees.” Swift sought to represent a class of all U.S. BancorpSouth customers who "incurred an overdraft fee as a result of BancorpSouth’s practice of re-sequencing debit card transactions from highest to lowest.” In 2016, Bancorp agreed to pay $24 million to resolve all the claims, $8.4 million of which was for attorney’s fees, plus $500,000 in class administrative costs. Federal denied coverage. The Seventh Circuit agreed that Exclusion 3(n) excluded from coverage losses arising from fees and affirmed the dismissal of breach of contract claims and a bad faith claim. View "BancorpSouth Inc. v. Federal Insurance Co." on Justia Law