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

In 2008, Harris N.A. loaned Acadia money on a revolving basis. Acadia is a limited liability company consisting of members of the Hershey family and three trusts. The loan was personally guaranteed by Loren Hershey, a managing member of Acadia. The amount of the loan was enlarged to $15.5 million, again guaranteed by Hershey. The agreement enlarging the loan amount required Acadia to reduce its principal debt to Harris to less than 35 percent of the value of Acadia’s assets by the end of each quarter and to make a principal payment of $3 million by January 31, 2009. By February 2009, Acadia had not made the $3 million principal payment and was in default. After granting additional time, Harris declared a default and filed suit to collect the debt from Acadia and to enforce Hershey’s guaranty. The district court granted summary judgment in favor of Harris as to all issues except the calculation of prejudgment interest. Acadia sought bankruptcy protection and its appeal has been stayed. The Seventh Circuit affirmed as to Hershey and, finding the appeal frivolous, imposed sanctions under FRAP 8. The court noted that there was no evidence of various promises Hershey claimed were made. View "Harris N.A. v. Acadia Invs. L.C." on Justia Law

In 2004, Harmon contracted to provide Chicago Bulls rookie Gordon with financial and consulting services for the “duration of [his] playing career,” but outlining a compensation arrangement only for the length of Gordon’s rookie contract with the Bulls, which ended in 2008. In 2007, Gordon became dissatisfied with Harmon’s services, based in part on what he viewed to be a breach of a fiduciary duty relating to a bad investment, and prematurely terminated the agreement. Gordon sued first, claiming Harmon had breached a promissory note between the parties and had breached his fiduciary duties. Harmon asserted counterclaims for breach of the agreement and tortious interference with prospective business advantage. The district court dismissed Harmon’s counterclaims. Harmon refiled his breach of contract claim in Illinois state court and also alleged malicious prosecution, abuse of process, and tortious interference with prospective business advantage. After Gordon removed the case to federal court, the district court ruled in favor of Gordon, concluding that the parties had intended their agreement to last only for the length of Gordon’s rookie contract. The Seventh Circuit affirmed. View "Harmon v. Gordon" on Justia Law

Plaintiff bought a used pickup truck in 2011 for $28,000 and financed the purchase with a six-year installment contract at an interest rate of 23.9 percent. The dealer assigned the contract to AmeriCredit. After making the first installment the plaintiff sent AmeriCredit a copy of the installment contract that he had stamped “accepted for value and returned for value for settlement and closure,” and told AmeriCredit to collect the balance under the contract from the U.S. Treasury. AmeriCredit repossessed the truck, sold it, and billed the plaintiff $11,322.28 to cover the difference. The plaintiff sued AmeriCredit and its officers for $34 million in compensatory damages and $2.2 billion in punitive damages. The district judge could not make sense of the pro se complaint and dismissed it as frivolous. The Seventh Circuit vacated and remanded with directions that the judge either dismiss without prejudice or dismiss with prejudice, as a sanction; vacate the default judgment in favor of AmeriCredit on its counterclaim; and dismiss the counterclaim without prejudice. The court noted the earmarks of the “Sovereign Citizens” movement. View "Baba-Dainja El v. AmeriCredit Fin. Servs., Inc." on Justia Law

In 1999 the Sellers conveyed businesses to CT Acquisition Corp. The price was to be paid over time. The Sellers insisted on a surety bond (put up by Frontier Insurance) and personal guarantees by the principals of CT Acquisition. The Guarantors also promised to indemnify Frontier and promised to post collateral on Frontier’s demand. CT Acquisition did not pay, the Guarantors failed to keep their promise, and the Sellers turned to Frontier, which did not pay because it was in financial distress. Frontier demanded that the Guarantors post collateral. The district court read the agreement to require collateral only after Frontier’s obligation to the Sellers had been satisfied, or at least quantified. The suit was dismissed as unripe. Meanwhile the Sellers had sued Frontier and obtained judgment of $1.5 million. Frontier then filed another suit against the Guarantors. The district court concluded that, Frontier’s obligation having been quantified, the Guarantors must post collateral and, following remand, ordered the Guarantors to deposit with the Clerk $1,559,256.78, The Seventh Circuit affirmed, rejecting the Guarantors’ argument that they need not post collateral until Frontier has paid the Sellers. View "Frontier Ins. Co. v. Hitchcock" on Justia Law

Johnson Controls, a Wisconsin manufacturer of building management systems and HVAC equipment, and Edman Controls entered into an agreement giving Edman exclusive rights to distribute Johnson’s products in Panama. In 2009, Johnson breached the agreement by attempting to sell its products directly to Panamanian developers, circumventing Edman. Edman invoked the agreement’s arbitration clause. The arbitrator concluded that Johnson had breached the agreement and that Edman was entitled to damages. Johnson sought to vacate or modify the arbitral award, challenging the way in which the award took account of injuries to Edman’s subsidiaries and the arbitrator’s alleged refusal to follow Wisconsin law. The district court ruled in Edman’s favor. The Seventh Circuit affirmed and upheld the district court’s award of attorney fees. View "Johnson Controls, Inc. v. Edman Controls, Inc." on Justia Law

Wabash is a power generation cooperative. Northeastern purchases electricity from Wabash and resells it. In 1977, they entered into a contract: Northeastern agreed to purchase electricity from Wabash for 40 years at rates to be set by the Wabash board of directors “[s]ubject to the approval of the Public Service Commission of Indiana.” Revised rates would not be effective unless approved by the “applicable regulatory authorities,” and the federal Rural Electrification Administration. In 2012 Northeastern sought a state court declaratory judgment that Wabash breached the contract by taking action in 2004 that had the effect of transferring regulation of its rates from the Indiana Commission to the Federal Energy Regulatory Commission. Wabash removed the case under 28 U.S.C. § 1441(a), arguing that the claim arises under the Federal Power Act, 16 U.S.C. 791a. The district court denied remand and granted a preliminary injunction. The Seventh Circuit vacated, holding that federal courts lack subject matter jurisdiction. Northeastern’s claim is limited to construction of the contract and does not necessarily raise a question of federal law. While Northeastern may eventually use a favorable state court judgment to seek permission to terminate its obligations under the tariff filed with FERC,that cannot be achieved in this suit View "NE Rural Elec. Membership Corp. v. Wabash Valley Power Assoc." on Justia Law

In 1996 Beloit agreed to build high-speed paper-making machines for Indonesian paper companies. Two of the companies executed promissory notes in favor of Beloit reflecting a principal indebtedness of $43.8 million. The paper companies guaranteed the notes; Beloit assigned them to JPMorgan in exchange for construction financing. The machines were delivered in 1998 but did not run as specified. In 2000 the parties settled claims pertaining to the machines but preserved obligations under the notes. JPMorgan sued for nonpayment. The district court held that warranty-based claims were foreclosed by the settlement and that other defenses lacked merit; it awarded JPMorgan $53 million. After the appeal was filed, JPMorgan issued citations to discover assets. Although the companies raised an international conflict-of-law question, the district court ordered compliance with the citations. The Seventh Circuit affirmed. The settlement waived implied warranty defenses and counterclaims. The fraud defense is also mostly barred; to the extent it is not, the evidence was insufficient to survive summary judgment. The court also rejected defenses that the notes lacked consideration; that the notes were issued for a “special purpose” and were not intended to be repaid; and that JPMorgan is not a holder in due course. The discovery order was not appealable. View "JPMorgan Chase & Co., N.A. v. Asia Pulp & Paper Co., Ltd." on Justia Law

The Hancock Center in Chicago is managed by Shorenstein (several related companies). Shorenstein hired an architectural firm, MCA, to design and oversee renovation of windows and exterior walls; MCA hired a general contractor. In 2002, a scaffold fell from the 42nd floor in a high wind and killed three people in cars, severely injuring several others. Shorenstein settled with plaintiffs in 2006 for a total of $8.7 million. MCA’s contract with Shorenstein had required MCA to obtain liability insurance covering the owner, Shorenstein, and any other party specified by the owner. MCA obtained the required insurance policy from AMICO, covering “any person or organization to whom [MCA is] obligated by virtue of a written contract.” There was a dispute concerning which Shorenstein entities were covered. Shorenstein was awarded $959,866.02 by the district court. The Seventh Circuit affirmed in part and reversed in part, holding that the court erred in apportioning the award among the Shorenstein entities. The court rejected AMICO’s arguments that the claim was barred by an exclusion of coverage for injuries “due to rendering or failure to render any professional service” by an insured and that Shorenstein gave up its right to indemnity by AMICO by asking its other insurer for indemnification. View "Nat'l Union Fire Ins. Co. of Pittsburgh v. Am. Motorists Ins. Co." on Justia Law

In 2002, U.S. Health entered into a 20-year lease for a nursing home and adjacent property owned by Lock. Before mid-2006, U.S. Health assigned the lease to Americare without obtaining Lock’s written consent, a required by the lease. Two lawsuits followed. One charged that U.S. Health had violated a provision of the lease under which it was required to fund a replacement reserve and resulted in a stipulated judgment in Lock’s favor of $679,287.96, plus prejudgment interest. The next day, U.S. Health filed a motion to set aside the judgment. Days later, the parties stipulated to a new judgment of $485,430.56 with attorneys’ fees to be agreed by June 10, and entry of a supplemental judgment. After extensions, the court entered a final judgment of $485,430.56, plus post-judgment interest at 5.13 percent. The court later granted Lock’s motion for fees of $29,238.85. Weeks later, the court granted Lock’s motion under Federal Rule of Civil Procedure 60(b)(2) and (3) to modify the judgment to include Americare as a judgment debtor because it had only then learned that U.S. Health, without the necessary authorization from Lock, had assigned its lease to Americare. The Seventh Circuit affirmed, finding that it had jurisdiction. View "Lock Realty Corp. IX v. U.S. Health, LP" on Justia Law

Borrowers obtained secured loans from InBank. Their promissory notes established that InBank would calculate annual interest rates by adding a predetermined amount, usually one percent, to a variable index rate set by InBank at “its sole discretion,” which could change up to once per day. InBank stated that it would set the rate “at or around the U.S. prime rate.” Borrowers compared loan statements and found that the rate was neither consistent across customers nor close to the prime rate. After borrowers filed suit, the Illinois Department of Financial and Professional Regulation took control of InBank and appointed the Federal Deposit Insurance Corporation as receiver. MB Financial purchased InBank accounts. The borrowers filed an amended class action against MB, claiming violations of the Interest Act, 815 ILCS 205/1, and the Consumer Fraud and Deceptive Practices Act, 815 ILCS 505/1. The court granted a motion to substitute the FDIC as defendant, then dismissed. The Seventh Circuit held that dismissal was proper for failure to exhaust remedies under the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. 1821(d)(3)-(d)(13). The claims relate to InBank’s alleged acts and omissions, not MB’s, and there is no support for an assumption of liability argument.View "Farnik v. Fed. Deposit Ins. Corp" on Justia Law