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

Brown filed a class action complaint, alleging that she contacted Defender by telephone in response to its advertisement for a home security system; that, during several calls, she provided Defender with personal information; and that Defender recorded those calls without her permission and without notifying her of the recording. Brown claimed violations of California Penal Code 632, which prohibits the recording of confidential telephone communications without the consent of all parties. Defender owned a commercial general liability insurance policy issued by First Mercury, covering “personal injury” and “advertising injury.” In a separate definitions section, the policy defined both “advertising injuries” and “personal injuries” as those “arising out of … [o]ral or written publication of material that violates a person’s right of privacy.” The parties eventually reached a settlement. Defender provided First Mercury with timely notice of the Brown suit. First Mercury denied coverage and refused to defend. The Seventh Circuit affirmed dismissal of Defender’s suit against First Mercury. Defender’s Policy requires “publication,” which was neither alleged nor proven. View "Defender Sec. Co. v. First Mercury Ins. Co." on Justia Law

Avila bought his Chicago home with a $100,500 CitiMortgage loan. Five years later, a fire made the house uninhabitable. Avila’s insurance carrier paid out $150,000. CitiMortgage took control of the proceeds and paid $50,000 to get the restoration underway. CitiMortgage later inspected the work and found that it needed to be redone. By then Avila had missed several mortgage payments. CitiMortgage applied the remaining $100,000 toward Avila’s outstanding mortgage loan. Avila’s home was not repaired. CitiMortgage never claimed that restoration was economically infeasible or would reduce its security interest. Nor had any of three special conditions described in the mortgage occurred. Avila sued, alleging breach of fiduciary duty and the mortgage contract, seeking to represent a class of defaulting CitiMortgage borrowers whose insurance proceeds had been applied to their mortgage loans rather than repairs. The district court dismissed, reasoning that the allegations did not support a fiduciary duty on CitiMortgage’s part and Avila was barred from pursuing his contract claim because he had materially defaulted on his own obligations. The Seventh Circuit agreed that allegations of a fiduciary relationship were inadequate as a matter of law, but held that a claim that the mortgage agreement remained enforceable after his missed payments was plausible in light of the agreement’s structure and the remedies it prescribes in the event of default. View "Avila v. CitiMortgage, Inc." on Justia Law

Michels is a member of the Pipe Line Contractors Association (PLCA), a trade association that negotiates collective bargaining agreements (CBAs) on behalf of its employer members with unions. In 2006, the PLCA and the Union entered into a CBA in “effect until January 31, 2011, and thereafter from year to year unless terminated at the option of either party after sixty (60) days’ notice.” The CBA required contributions to the Central States multiemployer pension plan, 29 U.S.C. 1000(2), (3), (37). In August 2010, the PLCA informed the Union that it intended to terminate the 2006 CBA on January 31, 2011, and begin negotiations for a new agreement; the parties signed eight extensions, the last ending November 15, 2011. Michels contributed to the pension plan throughout those extensions. The parties agreed that the employers would cease making contributions to the plan as of November 15, 2011; that they would make comparable payments to an escrow fund until a “mutually acceptable” fund was designated; and that they would otherwise extend the terms of the 2006 CBA until December 31, 2011. The fund claimed that the obligation to make contributions had not ended. The Seventh Circuit reversed the district court holding that this was not sufficient to end the duty to contribute. View "Michels Corp. v. Cent. States, SE & SW Areas Pension Fund" on Justia Law

In 2011, the two companies signed an agreement under which Life Plans would broker and Security Life would insure life insurance policies financed through arbitrage. Four months later, Security Life terminated the agreement. Life Plans then sued for breach of contract and of the implied covenant of good faith and fair dealing for refusing to offer the policies. The district court granted summary judgment, reading the contract to grant Security Life the right to terminate at any time. The Seventh Circuit reversed, finding that the evidence presented genuine disputes of material facts. The language of the agreement was ambiguous as to whether Security Life could terminate at will during the first three years. The extrinsic evidence of meaning was in conflict, so summary judgment was not appropriate on the breach of contract claim. The facts are also disputed concerning whether Security Life’s review and approval of the product was required and whether approval was received. The implied covenant claim under Delaware law also should not have been resolved on summary judgment. A reasonable jury could find that Security Life’s conduct was arbitrary and unreasonable and had the effect of denying Life Plans the fruits of its bargain. View "Life Plans Inc. v. Sec. Life of Denver Ins. Co." on Justia Law

Plaintiff produced the motion picture The Merry Gentleman, which was released in 2009. Despite some critical acclaim, the film was a commercial flop, for which the plaintiff blames Michael Keaton, the film’s lead actor and director. It filed a breach of contract action against Keaton and Keaton’s “loan-out company” that he uses for professional contracting, alleging that Keaton failed to timely prepare the first cut of the film; submitted an incomplete first cut; submitted a revised cut that was not ready to watch; communicated directly with Sundance Film Festival and threatened to boycott the festival if it did not accept his director’s cut instead of the producers’ preferred cut; failed to cooperate with the producers during the post-production process; and failed to promote the film. The Seventh Circuit affirmed summary judgment in favor of Keaton, agreeing that the plaintiff failed to produce evidence from which a reasonable trier of fact could find that Keaton’s alleged breaches caused the damages sought: all $5.5 million spent producing the movie. View "Merry Gentleman, LLC v. George & Leona Prods., Inc." on Justia Law

Child Craft manufactured furniture. Bienias owns Summit. The parties had a long-standing business relationship. Child Craft contracted with Summit to supply raw wood for a planned line of high-end baby furniture, the “Vogue Line.” Summit sourced the goods from an Indonesian manufacturer, Cita. At Bienias’s request, Child Craft did not have direct contact with Cita. In 2008-2009 Child Craft issued purchase orders to Summit, worth about $90,000. Each included detailed specifications, including that the moisture content of the wood needed to be between 6% and 8%. The goods never conformed to its specifications, in spite of Bienias’s assurances that they would. Child Craft identified the goods as defective upon receipt and refused to pay for shipments. It spent considerable time trying to re-work the products. Child Craft was never able to sell the Vogue Line and ceased operations in 2009. Summit sued for breach of contract and conversion based on refusal to pay. Child Craft counterclaimed for breach of contract and negligent misrepresentation, seeking to $5 million in compensatory damages plus punitive damages of $5 million. Only Child Craft’s counterclaim for negligent misrepresentation against Bienias personally was tried. A judge awarded $2.7 million, against Bienias and Summit. The Seventh Circuit reversed the award. Under Indiana law, a buyer who has received non-conforming goods cannot sue a seller for negligent misrepresentation to avoid the economic loss doctrine, which limits the buyer to contract remedies for purely economic loss. There is no basis for transforming the breach of contract claim into a tort claim to hold the seller’s president personally liable. View "JMB Mfg., Inc. v. Harrison Mfg., LLC." on Justia Law

Castro-Cortes was working for Astro, a subcontractor of JRJ, when he fell through a hole on the jRJ property. He sued JRJ for personal injury in Illinois state court. After being served in that suit, JRJ’s two members, Panfil and Michelon, filed a report with Nautilus under a general commercial liability policy. Nautilus refused to defend, citing three grounds: that the underlying lawsuit was against JRJ, but the named insureds were Panfil and Michelon; the “Contractor-Subcontracted Work Endorsement;” and the “Employee Exclusion.” The JRJ parties filed a federal suit for breach of contract. On summary judgment, the district court determined that Nautilus breached its duty to defend because there was at least the potential for coverage of the underlying lawsuit. The Seventh Circuit affirmed, stating that it is a close case and that the bar to finding a duty to defend is low. The court construed the language of the exclusions in favor of JRJ, noting that the burden of proving that a claim falls within an exclusion rests on the insurer. View "Panfil v. Nautilus Ins. Co." on Justia Law

Bible defaulted on a loan under the Federal Family Education Loan Program, but entered into a rehabilitation agreement. She remains current on her reduced payments, but a guaranty agency assessed $4,500 in collection costs. Bible’s loan terms were governed by a Stafford Loan Master Promissory Note (MPN), approved by the Department of Education, incorporating the Higher Education Act, and providing for “reasonable collection fees and costs” in default, as defined by regulations promulgated under the Act. Bible sued, alleging breach of contract and violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961, arguing that federal regulations prohibit assessment of collection costs and that the guaranty agency committed mail fraud and wire fraud in assessing collection costs despite its representations that her “current collection cost balance” and “current other charges” were zero. The court dismissed, finding both claims “preempted” by the Higher Education Act, which permits collection costs and that Bible had not shown “a scheme to defraud; commission of an act with intent to defraud; or the use of mails or interstate wires in furtherance of a fraudulent scheme.” The Seventh Circuit reversed. The contract claim does not conflict with federal law. The Secretary of Education interprets the regulations to provide that a guaranty agency may not impose collection costs on a borrower who is in default for the first time and has complied with an alternative repayment agreement. Bible’s RICO claim is not preempted. View "Bible v. United Student Aid Funds, Inc." on Justia Law

The Richers filed for bankruptcy. Morehead, who had invested in commercial real estate owned by a trust controlled by Richer, filed an unsecured claim for $945,000 in the proceeding. The Richers filed an adversary action claiming that Morehead’s only lawful interest in the property was to receive a share of the net proceeds of the property if and when it was sold. The bankruptcy judge, the district court, and the Seventh Circuit upheld Morehead’s claim. The 2005 “Equity Participation Agreement” provided no security for Morehead, but did give him “the sole and exclusive option to convert his Participation Interest to a Demand Note payable within one hundred eighty (180) days of conversion.” Four years later, Morehead sent Richer by certified mail, a letter purporting to convert Morehead’s participation interest to a demand note for $700,000 (plus interest), effective the day after the letter was mailed, November 25, 2009—the anniversary date. The court rejected an argument that the letter had to be mailed or otherwise communicated to them on November 25, the anniversary date, neither before nor after. The Agreement provides that “the Conversion Option is exercised on the … anniversary date,” not that communication must occur on that date. View "Richer v. Morehead" on Justia Law

JHM rents commercial laundry machines to Chicago-area apartment buildings. Firestone made four loans to JHM, totaling $254,114.99. JHM defaulted on each. Firestone sued. JHM filed an answer, asserting a counterclaim of promissory estoppel, alleging that after Firestone’s first two loans to JHM, Firestone vice president McAllister had represented that his company “wanted to expand [its] investment in the laundry business,” and that it “would create a $500,000 line of credit” to fund equipment purchases, which “induced JHM into purchasing equipment” that it would not otherwise have purchased and that it was unable to pay for. As a result, JHM’s equipment supplier (Maytag) refused to sell it laundry equipment, resulting in substantial losses. JMH raised affirmative defenses, including promissory estoppel and prior breach of contract. Defense counsel withdrew from the case. JMH did not obtain substitute counsel, so the court granted Firestone default judgment, on grounds that corporations are required to have legal counsel under Illinois law. The court later dismissed the counterclaims as facially implausible and entered summary judgment on a breach of guaranty claim. The Seventh Circuit vacated; the plausibiity standard does not allow a court to question or otherwise disregard nonconclusory factual allegations simply because they seem unlikely. View "Firestone Fin. Corp. v. Meyer" on Justia Law