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

The Illinois Business Brokers Act of 1995 requires brokers for the sale of businesses in the state to register. Brokerage agreements must be in writing. Promises to pay unregistered brokers for their services are unenforceable. Global Technology, apparently unaware of the statute, orally agreed with Satyam Computer Services (based in India) to act as a broker in the purchase of Bridge Strategy, an Illinois business. Global brokered the acquisition, but Satyam refused to pay. Global sued, seeking a 3% commission ($600,000). Satyam contended that Bridge had compensated Global for its services as an intermediary and that it had never promised any additional compensation. When the litigation was four years old, Satyam moved for summary judgment with a new argument: that Global is not registered under the Act. Global argued that the Act is an affirmative defense, which under Fed. R. Civ. P. 8(c) had to appear in Satyam’s answer. Finding that Global had not suffered prejudice, the court excused Satyam’s delay and entered judgment in its favor. The Seventh Circuit affirmed. Rule 8(c) does not provide a consequence for delay. District judges have authority to authorize a litigant to assert an affirmative defense despite its omission from the answer. View "Global Tech. & Trading, inc. v. Tech Mahindra Ltd." on Justia Law

Durukan America, a Texas candy company, sued Rain Trading, an Illinois wholesaler, and its president, Canbulat, breach of contract and deceptive practices for allegedly refusing to pay for $86,000 in merchandise. To prove service, Durukan filed with the court two affidavits from a process server. After a month passed without an answer from the defendants, the district court entered a default judgment for Durukan. About a year later, after Canbulat was arrested for failing to respond to a citation to discover evidence, the defendants moved to vacate the default judgment, submitting an affidavit and records to show that they were never served. Canbulat provided corroboration that he was not at the location where service purportedly occurred. Without holding a hearing to address the dueling affidavits, the district court denied the motion. The Seventh Circuit vacated and remanded, holding that the district court should have held a hearing to resolve the factual conflict in the affidavits. View "Durukan Am., LLC v. Rain Trading, Inc." on Justia Law

Burford agreed to facilitate the purchase and sale of accounting practices for APS. The parties initially signed a contract assigning Louisiana to Burford. They later orally agreed that Burford should also cover Alabama, Mississippi, Tennessee, and Kentucky. APS terminated the contract. Burford sued for breach of contract; APS filed a counterclaim under the Lanham Act, 15 U.S.C. 1051, claiming that Burford started a rival business, “American Accounting Practice Sales,” after APS terminated his contract. APS obtained summary judgment on the contract claim, arguing that the contract was terminable at will. APS voluntarily dismissed its counterclaim with prejudice. As the prevailing party on the Lanham Act claim, Burford sought attorney fees. The district court denied the motion, reasoning that APS’s Lanham Act claim could have been pursued by a rational party seeking to protect its trademark. The Seventh Circuit reversed grant of summary judgment on the contract claim, but affirmed the denial of attorney fees. The contract provided that it could be terminated by APS only if Burford violated the terms of the agreement; even if it was indefinite in duration, the parties contracted around the default rule making such contracts terminable at will. View "Burford v. Accounting Practice Sales, Inc" on Justia Law

Hess, an attorney, had worked on a number of medical-malpractice cases before his law firm, Kanoski terminated his employment. Many of these cases settled after Hess’s termination, and Hess was not compensated. He sued under his employment agreement and under the Illinois Wage Payment and Collection Act, adding claims of tortious interference, wrongful discharge, unjust enrichment, and quantum meruit. In 2011, the district court dismissed each of Hess’s claims. On remand the district court held that Hess was not entitled to compensation for the post-termination settlements. The Seventh Circuit affirmed, based on its interpretation of Hess’s employment contract provisions that Hess would receive bonus pay in the amount of 15 percent of all fees “generated over the base salary (or $5,000 per month),” that the bonus shall increase to 25 percent “on all fees received annually in excess of $750,000.00,” and that that, “where the Corporation retains clients upon Employees [sic] termination that Employee has no proprietary interest in fees to be earned since the Employee is to be fully compensated through his salary and/or bonus for all work done while an Employee of the Corporation.” View "Hess v. Kanoski & Associates" on Justia Law

In 2001, representatives from the Moody Bible Institute of Chicago and Sysix Financial signed a master agreement, laying the groundwork for future leases of equipment from Sysix to Moody. In 2008, two lease schedules for computer items were executed; they appeared to have been signed by Moody’s vice president and Sysix’s president. Sysix assigned its interest in both leases to Rockwell, which acquired loans from PNB to finance the leases. PNB procured indemnification coverage for those loans from RLI in the form of a financial institution bond. Sysix’s president had forged the signature of Moody’s vice president on both lease schedules. Moody never agreed to either schedule nor did it ever receive any of the promised equipment. PNB notified RLI of its potential loss, but PNB itself soon went under. As receiver for PNB, the FDIC sued RLI. The district court granted summary judgment in FDIC’s favor. The Seventh Circuit affirmed, finding that the plain language of the bond covered FDIC’s losses The Financial Institutions Reform Recovery and Enforcement Act limitations period applies,12 U.S.C. 1821(d)(14), so the suit was timely. View "Fed. Deposit Ins. Corp. v. RLI Ins. Co." on Justia Law

Chivalry contracted with Rehtmeyer to develop and manufacture a board game. Chivalry paid Rehtmeyer over $128,000, but the relationship deteriorated. Rehtmeyer never produced the game. Chivalry sued for breach of contract and won a judgment of $168,331.59, plus $621.25 in costs in Illinois state court. Rehtmeyer never paid. Chivalry issued a citation to discover assets. At the citation examination, Rehtmeyer testified that she had no ownership interest in any real estate; securities, stocks, bonds or similar assets; office or electronic equipment; nor a personal checking or savings account. Because Rehtmeryer had not produced required documents, Chivalry continued the citation and filed a motion to compel production, which was granted. She did not comply. The state court twice more ordered her to produce all the documents required by the citation. Months later, Chivalry sought a rule to show cause. The day before the scheduled hearing, Rehtmeyer filed a Chapter 7 bankruptcy petition. Chivalry appeared to object to the discharge of the debt owed to it, claiming that Rehtmeyer had concealed her assets and income during the citation proceedings. The bankruptcy court denied Chivalry’s objection. The district court affirmed. The Seventh Circuit reversed, finding that Rehtmeyer concealed assets with the requisite intent. View "Jacobs v. Marcus-Rehtmeyer" on Justia Law

In 2005, a Union Pacific freight train carrying steel injection molds to Plano Molding in Illinois derailed in Oklahoma; the molds broke through the floor of their shipping container, causing that train car and many behind it to derail. The molds had been manufactured in China and shipped to the U.S. before being transferred to the train. Three companies that were involved in the shipment and that sustained losses sued Plano, claiming that a company Plano hired packed the molds improperly, causing the floor of the container to break and ultimately causing the derailment, so that Plano was liable for breach of a warranty found in the “World Bill of Lading,” which provided shipping terms. Plano argued that the molds were properly packed and that they fell through the floor of the container because the container was defective. The district court found in favor of Plano, finding that the derailment was caused by deficiencies in the container. The Seventh Circuit affirmed. Plano had no obligation to explain why the accident occurred. Once the court found that plaintiffs had not met their burden of proving that Plano had breached the warranty, the actual cause of the accident became legally irrelevant. View "Kawasaki Kisen Kaisha, Ltd. v. Plano Molding Co." on Justia Law

Footstar operated the footwear departments in various Kmart stores as though they were islands. Footstar employees could only work in those departments unless they had written permission from Kmart. In 2005, a Footstar employee tried to help a customer get an infant carrier off a shelf outside the footwear department and the customer was injured. She sued. Kmart sought indemnification from Footstar and its insurer, Liberty Mutual. A magistrate judge found that Footstar and Liberty Mutual both had a duty to defend beginning the day Kmart formally requested coverage since the injury was potentially coverable under the agreement between Kmart and Footstar and the insurance policy. The Seventh Circuit reversed, holding that neither Liberty Mutual nor Footstar had a duty to indemnify Kmart because the injury did not occur “pursuant to” or “under” the agreement between Kmart and Footstar. That agreement specifically precluded Footstar employees from working outside of the footwear department, where the injury occurred, and actions taken in contravention of the agreement were not “pursuant to” or “under” it. Liberty Mutual did not deny coverage in bad faith and that Kmart did not breach the relevant notice provisions such that Liberty Mutual and Footstar could withhold defense costs. View "Kmart Corp. v. Footstar, Inc." on Justia Law

MileagePlus, United’s frequent flyer program, rewards customers with free flights and seat upgrades. Its Rules have always allowed United to change the terms of the program unilaterally, without notice. In 1997 United announced a new Million-Mile Flyer status: Lifetime Premier Executive status. “Mileage Plus members who have earned a total of one million paid flight miles on United will retain the benefits and privileges of Premier Executive status for life.” After merging with Continental, United changed the status levels and moved the Million-Mile Flyers from Premier Executive status to the new system. United decided that the Premier Gold level was equivalent, but Gold customers receive only a 50% bonus on miles flown, not 100%, and do not have regional and system-wide upgrades that Million-Mile Flyers previously received. Lagen enrolled in MileagePlus in 1993 and became a Million-Mile Flyer in 2006 after switching his airline loyalty from British Airways. He sued for breach of contract under the Class Action Fairness Act, 28 U.S.C. 1332(d)(2)(A). The district court granted United summary judgment, finding that no rational trier of fact could conclude that United had a distinct Million-Mile Flyer program that was not part of MileagePlus, subject to unilateral change. The Seventh Circuit affirmed. View "Lagen v. United Cont'l Holdings, Inc." on Justia Law

In 2008 Motorola agreed to make a good-faith effort to purchase two percent of its cell-phone user-manual needs from Druckzentrum, a printer based in Germany. After a year, Motorola’s sales contracted sharply. Motorola consolidated its cell-phone manufacturing and distribution operations in China, buying all related print products there. Motorola notified Druckzentrum. The companies continued to do business for a few months. After losing Motorola’s business Druckzentrum entered bankruptcy and sued Motorola, alleging breach of contract and fraud in the inducement. Druckzentrum claimed that the contract gave it an exclusive right to all of Motorola’s user-manual printing business for cell phones sold in Europe, the Middle East, and Asia during the contract period. The district judge entered summary judgment for Motorola. The Seventh Circuit affirmed. The written contract contained no promise of an exclusive right and was fully integrated, so Druckzentrum cannot use parol evidence of prior understandings. Although Motorola promised to make a good-faith effort, the contract listed reasons Motorola might justifiably miss the target, including business downturns. There was no evidence of bad faith. The evidence was insufficient to create a jury issue on the claim that Motorola fraudulently induced Druckzentrum to enter into or continue the contract. View "Druckzentrum Harry Jung GmbH v. Motorola Mobility LLC" on Justia Law