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

A Chester, Illinois grain bin exploded, injuring three workers. A jury awarded almost $180 million in compensatory and punitive damages against ConAgra, which owned the facility, part of a flour mill, and West Side, which ConAgra had hired about a month before the explosion to address problems in the bin. The injured workers were working on the bin’s problems. On appeal, West Side did not contest liability to the workers but claimed that it did not have to reimburse ConAgra for the cost of repairing the facility. Both maintained that damages were excessive. The Seventh Circuit reversed the judgment against ConAgra and the award of punitive damages against West Side, but affirmed awards of compensatory damages against West Side and remanded for consideration of indemnification and contribution. West Side was an independent contractor in a commercial relation with ConAgra and normal rules of contract and tort law apply. Having hired an expert in hot bins, ConAgra was entitled to assume that West Side would ask for whatever information it needed. Admission of evidence that referred to insurance was harmless; the verdicts so far exceeded $3 million that the jury’s belief that West Side carried that much insurance cannot have played a material role.View "Jentz v. Conagra Foods, Inc." on Justia Law

Washington Group, an engineering, construction and management services company, offered Abraham a position as a “lead scheduler” for a project in Wisconsin. After negotiations, Washington Group sent Abraham a letter offering him the title of “project control manager,” a higher position higher in the chain of command. Abraham, who worked for the company for about a year, pursuant to his written contract before leaving the company and filing suit, claimed that Washington Group and its parent, URS, also promised him that he would perform the duties of a project control manager and then breached that promise. The defendants claim that Abraham understood that it would give him the title of project control manager for purposes of increasing his salary but he would perform the functions of a lead scheduler on a day-to-day basis. The district court entered summary judgment for the defendants. The Seventh Circuit affirmed, stating that Abraham received all of the promises set forth in his unambiguous written contract.View "Abraham v. Washington Grp. Int'l, Inc." on Justia Law

Steak n Shake owns and operates 415 restaurants and grants about 100 franchises for the operation of Steak n Shake restaurants by others. The operators of franchises in Missouri, Georgia, and Pennsylvania claim that since 1939, franchisees have set their own menu prices and participated in corporate pricing promotions at their option. After a corporate takeover in 2010, Steak n Shake enacted a new policy that requires them to adhere to company pricing on every menu item and to participate in all promotions. They also must purchase all products from a single distributor at a price negotiated by Steak n Shake. The policy had an adverse effect on revenues. The franchisees sought a declaratory judgment. About a month later, Steak n Shake adopted an arbitration policy requiring the franchisees to engage in nonbinding arbitration at Steak n Shake’s request and moved to stay the federal lawsuits. The district court refused to compel arbitration. Although each franchise agreement (except one) contained a clause in which Steak n Shake “reserve[d] the right to institute at any time a system of nonbinding arbitration or mediation,” the district court concluded that any agreement to arbitrate was illusory. The Seventh Circuit affirmed, agreeing that the arbitration clauses are illusory and unenforceable under Indiana law, and declining to address whether the disputes were within the scope of the arbitration agreements or whether nonbinding arbitration fits within the definition of arbitration under the Federal Arbitration Act.View "Druco Rests., Inc. v. Steak N Shake Enters., Inc." on Justia Law

The Developer converted a vacant building into a residential condominium by gutting and refitting it. The Developer purchased Commercial Lines Policies covering bodily injury and property damage from Nautilus, covering periods from June 1998 through June 2000. The policies define occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” but do not define accident. The policies exclude damage to “that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations;” eliminate coverage for damage to “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it;” and contain an endorsement entitled “Exclusion—Products-Completed Operations Hazard.’ Construction was completed in 2000; the Developer transferred control to a board of owners. By May 2000, one homeowner was aware of water damage. In 2005, the Board hired a consulting firm, which found that the exterior brick walls were not fully waterproofed and concluded that the deterioration had likely developed over many years, even prior to the condominium conversion, but that the present water penetration was the result of inadequate restoration of the walls. The Board sued the Developer. Nautilus denied coverage and obtained a declaratory judgment. The Seventh Circuit affirmed, reviewing the policy and finding that the shoddy workmanship, of which the board complained, was not covered by the policies; that Nautilus did not unduly delay pursuing its declaratory suit; and that the alleged damage to residents’ personal property occurred after the portions of the building were excluded from coverage.View "Nautilus Ins. Co. v. Bd. of Dirs. of Regal Lofts Condo Ass'n" on Justia Law

SFG, a Texas firm specializing in distressed‐asset investing, bought a loan portfolio from McFarland State Bank for $1.27 million (28.8% of the face value of the debt). Materials provided by McFarland’s agent indicated that the portfolio was secured by 19 real estate properties in Wisconsin. Both parties were well represented during negotiations. The Sale Agreement provided limited remedies in the event of a breach and disclaimed all other remedies. Soon after purchasing the portfolio, SFG learned that three of the 19 collateral properties that supposedly secured the loans had been released before the sale. SFG contacted McFarland; McFarland disputed liability. Months later, SFG sued, seeking damages beyond the remedies provided in the contract. Applying the contractual remedies limitation, a formula that resulted in zero recovery under the circumstances, the district court granted judgment for McFarland. The Seventh Circuit affirmed. Except in the most extraordinary circumstances, courts hold sophisticated parties to the terms of their bargain.View "S. Fin. Grp. LLC v. McFarland State Bank" on Justia Law

Goodwill filed suit against PNC seeking a declaratory judgment that it does not owe a prepayment charge in excess of $300,000 under the terms of its agreement with PNC. The court affirmed the district court's conclusion that Goodwill owed PNC a prepayment fee. Because Goodwill gave notice of its intent to make prepayment during the ten-year period of the loan during which interest on the outstanding principal was accruing at the Initial Rate of 4.79 percent per year, Goodwill owed a prepayment charge. View "Land of Lincoln Goodwill Indus. v. PNC Bank, NA" on Justia Law

Plaintiff filed a putative class action against United, alleging that United breached the terms of its frequent-flyer program. Plaintiff argued that United breached the program contract by crediting him for mileage determined by the distance between the airports, instead of the number of miles the airplanes actually flew (including such things as weather diversions and landing delays). The court concluded that plaintiff failed to state a claim for breach of the program because United has discretion to interpret the meaning of "mileage" and the interpretation United gave that term was reasonable. Accordingly, the court affirmed the district court's dismissal of the complaint with prejudice. View "Han v. United Continental Holdings, et al." on Justia Law

Gamesa contracted with Minnesota-based Outland Renewable Energy to provide maintenance for Gamesa wind turbines. Iberdrola operated Gamesa-made turbines at the Cayuga Wind Farm in Illinois. While servicing a Cayuga urbine, Outland employee McCoy was electrocuted when the turbine unexpectedly reenergized. McCoy filed a personal injury case in state court against Iberdro and Gamesa. The case was removed to federal court on diversity of citizenship grounds. Iberdro impleaded Outland to seek indemnification based on contract and the Illinois Joint Tortfeasor Contribution Act. Outland raised 22 counterclaims: including indemnification; federal and state antitrust claims (Illinois, Minnesota, and Texas law); and other state law claims. Outland unsuccessfully sought a preliminary injunction against Gamesa’s allegedly unfair competitive practices. The district court dismissed all but one of Outland’s counterclaims. Only the indemnification claim survived. McCoy, Gamesa, and Outland settled. The district court accepted the settlement, protecting Outland and Gamesa from further contribution claims under the Illinois JTCA; all claims arising from the accident among those parties were dismissed. Only the original personal injury dispute between McCoy and Iberdrola remained, but the court had not issued a final judgment. About six months after the dismissal, Outland sought leave to amend, arguing for the first time that the substantive law of Minnesota should apply. The district court determined that Outland had waived that issue and denied leave to amend based on futility and undue delay. The proposed amended counterclaims arose from Gamesa’s 2011 attempt to acquire Outland. The Seventh Circuit affirmed. Outland’s third-party counterclaims are not part of the original case, so Outland needed an independent basis for federal subject matter jurisdiction to assert them in this lawsuit. The court characterized Outland’s arguments as “desperate.” View "McCoy v. Iberdrola Renewables, Inc." on Justia Law

In 2007 the McDonalds opened a J.P. Morgan Bank investment account and a brokerage account with its affiliate, J.P. Morgan Securities (JPMS). Different contracts governed the accounts. The Bank managed the money in the investment account, while the McDonalds directed the funds in their JPMS brokerage account. By the end of 2008, the McDonalds had lost $1.5 million from the Bank investment account. The money held in the JPMS account produced a profit. The McDonalds filed an arbitration demand, alleging breach of fiduciary duty, self-dealing, and other misrepresentation and mismanagement. They did not name the Bank, but named only JPMS and Bank employees who set up and oversaw the accounts. The McDonalds claimed that the employees ignored their stated investment goals by putting nearly all their money in an illiquid proprietary hedge fund. The claim charged JPMS (not the Bank) with vicarious liability for failing to supervise. JPMS is registered with the Financial Industry Regulatory Authority, as are the employees. FINRA is an industry self-regulatory organization, and under its rules JPMS and the employees were subject to arbitration at the McDonalds’ request, an obligation reiterated in the contract governing the JPMS account. The Bank is not a member of FINRA; the Bank’s contract did not provide for arbitration. The Bank sought to prevent arbitration. The district court dismissed, finding that the Bank lacked standing to block the arbitration to which it was not a party and that the two employees were indispensable parties. The Seventh Circuit reversed. The Bank has standing to sue because the arbitration would violate a forum-selection clause in its contract with the McDonalds. The McDonalds cannot avoid that clause by naming only an affiliate and the employees, who are not necessary parties.View "J.P. Morgan Chase Bank, N.A. v. McDonald" on Justia Law

Fellowes filed a breach-of-contract suit against Changzou Fellowes, a business established in China, under the international diversity jurisdiction, 28 U.S.C. 1332(a)(2). Without discussing subject-matter jurisdiction, the district court entered a preliminary injunction in favor of Fellowes, despite the court’s assumption that Changzhou Fellowes had not been served with process. The Seventh Circuit vacated, reasoning that diversity jurisdiction is proper only if Changzhou Fellowes has its own citizenship, independent of its investors or members. Deciding whether a business enterprise based in a foreign nation should be treated as a corporation for the purpose of section 1332 can be difficult. Given the parties’ agreement that Changzhou Fellowes is closer to a limited liability company than to any other business structure in the U.S., it does not have its own citizenship and it does have the Illinois citizenship of its member Hong Kong Fellowes, which prevents litigation under the diversity jurisdiction. View "Fellowes Inc. v. Changzhou Xinrui Fellowes Office Equip. Co." on Justia Law