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

In 2004 GEA, a German company, agreed to sell a subsidiary, DNK, to Flex‐N‐Gate, a U.S. manufacturer for €430 million. The contract required arbitration of all disputes in Germany. The sale did not close. GEA initiated arbitration before the Arbitral Tribunal of the German Institution of Arbitration. The arbitration was pending in 2009 when GEA filed suit in an Illinois federal district court, against Flex‐N‐Gate and its CEO, Khan, alleging that the defendants had fraudulently induced it to enter into the contract; that Khan stripped the company of assets so that it would be unable to pay any arbitration award; and that Khan was Flex‐N‐Gate’s alter ego. GEA then asked the district judge to stay proceedings, including discovery. The judge declined to stay discovery. GEA filed a notice of appeal after the German arbitration panel awarded GEA damages and costs totaling $293.3 million. The Seventh Circuit dismissed GEA’s appeal as moot, but the German Higher Regional Court in vacated the arbitration award. GEA renewed its motion. The district judge again denied the stay, stating that he was unsure how the arbitration would affect the case before him and didn’t want to wait to find out. The Seventh Circuit reversed. The district judge then imposed a stay, which it later lifted for the limited purpose of allowing Khan to conduct discovery aimed at preserving evidence that might be germane to GEA’s claims against him in the district court suit. The Seventh Circuit affirmed, first holding that it had appellate jurisdiction.View "GEA Group AG v. Baker" on Justia Law

Menzies, an air cargo handling business, leased CenterPoint’s 185,280-square-foot warehouse near O’Hare Airport. Another tenant used the building to store airplane parts until 2006. Under the lease, Menzies is responsible for repairing the “floor,” while CenterPoint is responsible for repairing the “foundation.” CenterPoint constructed improvements costing $1.4 million, at Menzies’ request, including increasing the number of dock doors from two to 38 and installing 45,000‐pound dock levelers. When Menzies began moving its operations into the building in November 2007, the six‐inch concrete slab did not exhibit any visible damage. By January 2009, the slab had begun to deteriorate. The damage was not consistent with typical wear and tear. The slab could not support Menzies’ equipment. CenterPoint paid $92,000 for repairs, then stopped doing so and did not submit an insurance claim. The slab is so damaged that it must be replaced, at an estimated cost of $966,000 to $1.23 million. Menzies sued CenterPoint for breach and CenterPoint counterclaimed. The district court held that neither party was entitled to recover because the slab had a “dual nature as both floor and foundation,” but “the damage at issue was related to the slab’s function as a floor.” The Seventh Circuit affirmed. View "Aeroground, Inc. v. CenterPoint Props. Trust" on Justia Law

Immunosciences developed and sold medical tests and testing materials. In 2007, NeuroSciences wanted to expand its offerings. Immunosciences and NeuroScience decided to collaborate, but the relationship fell apart within two years. Immunosciences sued. In the first trial, a jury rejected a claim that NeuroScience did not pay what it had contracted to pay for medical testing materials, but the district judge ordered a new trial, concluding that the verdict was undermined by flawed special verdict questions. The jury in the second trial found for Immunosciences but awarded much less money than it was seeking. NeuroScience appealed, claiming that the court’s grant of a new trial was an abuse of discretion. Immunosciences argued that the court abused its discretion by allowing NeuroScience to argue in the new trial that the parties had orally modified their written contract and that NeuroScience breached a separate confidentiality agreement by continuing to use Immunosciences’ testing methods after the parties ended their business relationship. The jury in the first trial had awarded nearly $1.2 million on that claim, but the district court granted judgment as a matter of law for NeuroScience, explaining that Immunosciences had relied on an impermissible damages theory. The Seventh Circuit affirmed. View "Vojdani v. Pharmasan Labs, Inc." on Justia Law

Horsfall worked as a real estate agent for First Weber, 2001-2002, and was the listing agent on First Weber’s contract with Call, who was trying to sell property. The contract gave First Weber exclusive rights collect commissions for sale of the property during the listing period and an exclusive right to collect commissions from sales to defined “protected buyers” for one year after the listing expired. The Acostas made an offer on the property and became “protected buyers.” Call’s contract with First Weber ended in August and at the same time, Horsfall left First Weber to establish his own brokerage, Picket Fence. In October, the Acostas contacted Horsfall. Without involving First Weber, Horsfall resuscitated the transaction with Call. The Acostas and Call executed a sales contract for the Call property. Picket Fence received a $6,000 commission, inconsistent with Horsfall’s status as First Weber’s agent under the earlier contract and in violation of Wisconsin real estate practice rules. Six years later, First Weber sued Horsfall in state court, asserting r breach of contract, tortious interference, and unjust enrichment. The state court entered a judgment against Horsfall for $10,978.91. Horsfall filed for Chapter 7 bankruptcy, listing First Weber as a creditor. First Weber responded that its judgment was non‐dischargeable under 11 U.S.C. 523(a)(6), as involving “willful and malicious injury.” The bankruptcy court, district court, and Seventh Circuit found the debt dischargeable. View "First Weber Grp., Inc. v. Horsfall" on Justia Law

Phusion manufactures and distributes an alcoholic beverage called “Four Loko.” Its original formula contained energy stimulants, such as caffeine, guarana, taurine, and wormwood. Phusion purchased a commercial general liability insurance policy and a umbrella policy from members of the Liberty Mutual Group. The policies include identical provisions, excluding coverage for bodily injury or property damage when the insured may be held liable by reason of causing or contributing to intoxication. Plaintiffs sued Phusion in separate state court actions, alleging injuries caused by consumption of Four Loko. Two cases involved traffic accidents, one involved a shooting, another involved paranoid behavior resulting in accidental death, and a fifth claim involved a death from heart trouble. Phusion notified Liberty, which sought a declaratory judgment regarding the scope of coverage. The district court examined the underlying cases in the context of comparable automobile exclusions and ruled that four of the five cases fell within the Liquor Liability Exclusion. The Seventh Circuit affirmed. The Liquor Liability Exclusions in the policies are unambiguous and apply to Phusion. The allegations of simple negligence raised by the plaintiffs in the underlying complaints are not sufficiently independent from the allegations that Phusion caused or contributed to the intoxication of any person. View "Netherlands Ins.. Co. v. Phusion Projects, Inc." on Justia Law

In 1994, Norem purchased a “Flexible Premium Variable Life Insurance Policy” from Lincoln Benefit. With variable life insurance, part of the premium is allocated to the insurer’s investment funds, called subaccounts. Policyholders may move their investments within the subaccounts and the death benefit, which is guaranteed not to fall below a certain amount. With variable universal life, the policyholder may easily invest and alter insurance coverage. The policy is comprised of the policy value, which represents the investment component, and its net amount at risk, which represents the insurance component. Norem purchased his policy because he wanted both life insurance and an investment vehicle for the proceeds from the sale of his ownership of a medical business. The policy has a “cost of insurance” (COI) charge deducted monthly from the policy. The policy explains how the COI rate is calculated. Norem filed a putative class action on behalf of himself and other similarly situated policyholders, claiming that Lincoln Benefit breached the terms of its policies in its method of calculating the COI rate.Before deciding on class certification, the district court granted summary judgment to Lincoln Benefit, concluding that its calculation of COI rates did not breach the contract. The Seventh Circuit affirmed. View "Norem v. Lincoln Benefit Life Co." on Justia Law

Wells Fargo sued the Younans for breach of contract. The defendants moved for dismissal for lack of subject matter jurisdiction, lack of personal jurisdiction over Sherry Younan because of lack of minimum contacts in Illinois and insufficient service of process. The district court ruled that the opposing parties were not of diverse citizenship and that it lacked subject matter jurisdiction. Instead of amending, Wells Fargo moved, nine months after filing its original complaint, to be allowed to dismiss without prejudice. The defendants asked that dismissal be conditioned on Wells Fargo’s paying their legal expenses of $56,000. The judge dismissed, conditioned on Wells Fargo reimbursing defendants for $11,000 in legal expenses incurred in seeking dismissal. The Seventh Circuit affirmed, noting that the defendants did not justify their “extravagant‐seeming request, which included more than $9,000 for two briefs each of which was just half a page long and merely incorporated by reference another lawyer’s brief.” View "Wells Fargo Bank, NA v. Younan Props., Inc." on Justia Law

In 2007, Professor Ortony of Northwestern University, asked Dean Peterson, for a year’s leave to visit another university. Peterson proposed to authorize paid leave during calendar year 2008 and the 2011–12 academic year, if Ortony would teach during the intervening time and then retire. Peterson’s letter stated: “At your request, I will accept your resignation ... effective with your retirement on August 31, 2012” and specified when Ortony would be on paid leave and when he would carry a full teaching load. Ortony signed the letter in June, 2007. In 2011 Ortony did not want to retire and insisted that he had not agreed to do so. He filed an EEOC charge under the Age Discrimination in Employment Act, 29 U.S.C. 626, and subsequently filed suit. The district court granted the University judgment on the pleadings. The Seventh Circuit affirmed. Northwestern did not terminate Ortony: it bought out his tenure by promising him five years’ pay for three years’ work. That he changed his mind does not make the 2007 contract less binding. The court rejected Ortony’s argument that he “construed the [contract] to set out a tentative plan under which he could leave the University, if he chose to do so, in five years.” View "Ortony v. Northwestern Univ." on Justia Law

The NECA-IBEW Health and Welfare Fund provides health benefits to members of a local union of electrical workers. The Fund negotiated a Local Agreement with Sav-Rx, a provider of prescription-drug benefits, under which Sav-Rx reimburses pharmacies for dispensing medication and then invoices the Fund for some of its costs. The Local Agreement does not call for arbitration. A few months later, Sav-Rx negotiated a different agreement with the national organization of the IBEW, with which the local is affiliated. The National Agreement offers locals reduced charges and more services than the Local Agreement and contains a mandatory arbitration clause. Local unions and funds could opt into the National Agreement, but the Fund's trustees never voted on the matter. Over the next eight years the Fund accepted from Sav-Rx services provided by the National Agreement. The Fund sued Sav-Rx for invoicing the Fund at rates not authorized by either the Local or National Agreement. The district court dismissed, finding that Fund had accepted the benefits of the National Agreement and was bound to it; Sav-Rx established that the Fund knew it was accepting benefits under the National Agreement. The Seventh Circuit affirmed. View "NECA-IBEW Rockford Local Union 364 Health & Welfare Fund v. A&A Drug Co." on Justia Law

Apex, a manufacturer of electronics, and Sears entered into an agreement in 2003. In 2004, Sears implemented a program to create a return reserve on Apex’s account. The return reserve was an internal accounting mechanism used to place a negative dollar deduction on Apex’s account; Sears would hold back payment to Apex until the amount showing owed by Sears exceeded the amount of the reserve. In 2009 Apex filed suit, alleging that Sears breached the contract by refusing to pay $8,185,302 owed for goods delivered. The district court granted Sears summary judgment, finding that the action was barred by the four-year statute of limitations in Section 2–725 of the Uniform Commercial Code. The Seventh Circuit affirmed. Apex was on notice that Sears was not going to pay the deductions after each invoice and even marked these “wrongful” deductions in its own Invoice Report. For more than four years, Apex sat on its right to sue. View "Apex Digital, Inc. v. Sears, Roebuck & Co." on Justia Law