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

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

Illinois requires that motor carriers of property, conducting intrastate operations, obtain a license from the Illinois Commerce Commission, which requires appropriate insurance or surety coverage. A carrier complies by submitting proof of insurance or bond coverage and is then issued a public carrier certificate, stating that the holder “certifies to the Commission that it will perform transportation activities only with the lawful amount of liability insurance in accordance with 92 Ill. Admin. Code 1425.” Drivers must have a copy of the license with them at all times. It is a Class C misdemeanor offense for an operator not to produce proof of registration upon request. Three carriers were cited by the ICC police for conducting regulated activity without a license. During a follow-up investigation, the carriers refused to comply, reasoning that documents sought by the ICC would reveal their rates, routes, and services, so the requirement was preempted by the Federal Aviation Administration Authorization Act, 49 U.S.C. 14501(c). The ICC rejected the argument. The Seventh Circuit affirmed summary judgment in favor of the ICC, concluding that the document requests had no significant economic impact on rates, routes or services and, alternatively, that efforts to enforce the licensing requirement are exempted from preemption. View "Nationwide Freight Sys., Inc. v. Ill. Commerce Comm'n" on Justia Law

Most federal employees receive health benefits through the Federal Employee Health Benefits Program (FEHBP). Until the 2010 enactment of the Patient Protection and Affordable Care Act (ACA), members of the U.S. Senate and House of Representatives, and their staff members, were eligible for FEHBP insurance. The ACA limited their options to plans created under the ACA or offered through a health insurance exchange established under the ACA; they could no longer receive insurance through the FEHBP (42 U.S.C. 18032(d)(3)(D)). The Office of Personnel Management conducted notice-and-comment rulemaking and issued the final rule, 78 Fed. Reg. 60653-01. Senator Johnson and his legislative counsel sought to enjoin implementation of that rule, which, they claimed, was contrary to the ACA and other law because it allows the government to make pre-tax employer contributions to non-FEHBP plans and makes members of Congress and their staffs eligible for an ACA insurance exchange reserved for small businesses. The Seventh Circuit affirmed dismissal, finding that the plaintiffs had not identified a judicially cognizable injury that is traceable to aspects of the OPM regulation that they challenge. The court noted that the challenged regulation creates a benefit for Senator Johnson and that he is free to decline that benefit. View "Johnson v. United States Office of Pers. Mgmt." on Justia Law

From 1998 to 2012 Abbott marketed the anticonvulsant medication Depakote for applications that had not been FDA-approved (off-label uses). Physicians may prescribe drugs for off-label uses, but pharmaceutical companies are generally prohibited from marketing drugs for those same applications. Qui tam actions were filed under the False Claims Act. In 2009, Abbott disclosed in an SEC filing that the Department of Justice was investigating its marketing. Abbott pleaded guilty to illegally promoting Depakote from 2001 through 2006 and agreed to pay $1.6 billion to settle the criminal and qui tam actions. Employee benefits funds filed suit 15 months later, alleging that Abbott misrepresented Depakote’s safety and efficacy for off-label uses, paid kickbacks to physicians, established and funded intermediary entities to promote the drug for off-label uses, and concealed its role in these activities, in violation of the Racketeer Influenced and Corrupt Organizations Act. The district court dismissed, finding that the statute of limitations for the RICO claim began to run in 1998, when the funds initially reimbursed a prescription for off-label use. The court refused to toll the limitations period until the guilty plea, finding that Abbott’s concealment efforts were not designed to hinder potential lawsuits. The Seventh Circuit reversed, finding that dismissal was premature without an opportunity for discovery into when a reasonable fund should have known about its injuries from off-label marketing. View "Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., Inc." on Justia Law

France had a Chicago dental business and fraudulently billed insurers for city employees. France closed his practice after being injured in an accident and started collecting benefits from a disability income policy. In 1999, he exchanged monthly payments, for a limited time, for a lump sum of $300,000. He transferred this money to other people, including his wife, Duperon, before filing a Chapter 7 bankruptcy petition. He failed to disclose the payment or transfers. He later pleaded guilty to mail fraud, 18 U.S.C. 1341, and to knowingly making a false declaration under penalty of perjury, 18 U.S.C. 152(3). The district court sentenced France to 30 months in prison and ordered him to pay $800,000 in restitution. The bankruptcy trustee obtained title to ongoing disability insurance payments. France and Duperon divorced. A California court approved a settlement with payments for child support from the disability payments. France’s insurance company sued in California to resolve conflicting claims. The parties reached an agreement, which the bankruptcy court approved, purporting to control all other judgments, but did not mention the criminal restitution lien. The government filed Illinois citations to discover assets. France moved to quash, but the insurance company responded and began withholding $9,296 that had been going to France. The government moved to garnish the entire distribution under the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. 3613(a). The Seventh Circuit affirmed a ruling allowing the government to garnish the entire disability payment. View "United States v. France" on Justia Law

A large commercial development in Kansas City, Missouri was aborted in the middle of construction due to cost overruns. When the developer would not cover the shortfall, the construction lender stopped releasing committed loan funds, and contractors filed liens against the property for their unpaid work on the unfinished project. Bankruptcy followed, and the contractors’ liens were given priority over the lender’s security interest in the failed development, leaving little recovery for the lender. The lender looked to its title insurer for indemnification. The title policy generally covers lien defects, but it also contains a standard exclusion for liens “created, suffered, assumed or agreed to” by the insured lender. The Seventh Circuit affirmed judgment in favor of the title company. The exclusion applies to the liens at issue, which resulted from the lender’s cutoff of loan funds, so the title insurer owed no duty to indemnify. The liens arose from insufficient project funds, a risk of loss that the lender, not the title company, had authority and responsibility to discover, monitor, and prevent. View "BB Syndication Servs, Inc. v. First Am. Title Ins. Co" on Justia Law

Lodholtz was injured in the Pulliam factory and sued, seeking compensation. Pulliam filed a claim with its insurer, Granite State, which retained a claims adjuster, York. Pulliam assumed, erroneously, that Granite would provide a defense and defaulted on the state court claim. Neither Granite nor York ever had communicated to Pulliam whether they believed Granite had a duty to defend Pulliam under the terms of the policy. Pulliam subsequently entered into a settlement agreement with Lodholtz, assigning to Lodholtz any claims it had against Granite or its agents for failing to undertake a defense. The agreement also provided that Lodholtz would not seek to recover its damages from Pulliam. Granite sought a declaratory judgment that it had no duty to indemnify Pulliam. Lodholtz later filed a complaint against Granite, alleging breach of contract, bad faith, and negligence, and against York for negligence. The district court consolidated the cases. After the district court entered a final judgment in favor of York, Lodholtz appealed. The Seventh Circuit affirmed. The Court of Appeals of Indiana has held that an insurance adjuster owes no legal duty to the insured, and Lodholtz failed to establish that the Indiana Supreme Court would disagree with that decision. View "Lodholtz v. York Risk Servs. Grp., Inc." 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

Visteon, a worldwide manufacturer headquartered in Michigan, sued National Union, from which it had purchased liability insurance between 2000 and 2002. The policy excluded liability resulting from pollution caused by Visteon, except liability arising from a “Completed Operations Hazard.” In 2001, the toxic solvent TCE that was used to clean machinery in Visteon’s Connersville, Indiana plant was discovered to have leaked into the soil and groundwater. Neighboring landowners sued Visteon. National Union has refused to indemnify or defend. Indiana does not enforce standard pollution-exclusion clauses. Michigan law does enforce the more general kind of pollution-exclusion clause found in the policy. The district court ruled that Michigan law governed and held that Visteon was not entitled to coverage under the Completed Operations Hazard clause. The Seventh Circuit affirmed. The risk materialized in Indiana, but that could not have been foreseen. The Indiana victims were compensated by Visteon, and it is unclear what benefit the state would have derived from reimbursement of Visteon’s costs by National Union.” The court rejected Visteon’s argument that its “work” was “completed” each time a contract to supply products made at the plant was performed and concluded that the exception did not apply. View "Visteon Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh" on Justia Law

Jonas and his wife purchased life insurance: each owned the policy on his or her life, with the other as beneficiary. When they divorced, the court reassigned ownership: Troy owned the policy on Jennifer’s life. Each policy provided that change in ownership “does not change the Beneficiary Designation.” Troy thought it unnecessary to redesignate himself as beneficiary. Jennifer died. Troy claimed the proceeds ($1 million). State Farm did not pay, concerned that the proceeds might belong to the children (named secondary beneficiaries) or to Jennifer’s estate under Tex. Family Code 9.301, which provides that if a divorce occurs after one spouse has designated the other as beneficiary of an insurance policy, the designation lapses. Texas law requires an insurer to pay within 60 days of receiving a claim and provides for “damages” at 18% a year plus reasonable attorneys’ fees. An insurer that receives “notice of an adverse, bona fide claim” may defer payment and file an interpleader action not later than the 90th day. State Farm did not receive any other claim, but filed an “interpleader” before the 60 days had run. The district court treated concerns about the potential rights of the children and Jennifer’s estate as equivalent to a claim and disbursed the money to Troy, who argued on appeal that he was entitled to attorneys’ fees and interest at 18%. The Seventh Circuit vacated for dismissal. When the litigation began, there was no justiciable controversy. View "State Farm Life Ins. Co. v. Jonas" on Justia Law