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

Turnoy sold insurance to Shiner’s in‐laws for decades. After Shiner, a Chicago lawyer, demanded that Turnoy split commissions on their new policies, Turnoy sent him a check for $149,000. Rejecting $149,000 as too little, Shiner sued for breach of contract, then brought another suit, alleging tax fraud, 26 U.S.C. 7434, by reporting to the IRS the $149,000 as income to Shiner; Shiner had not cashed the check. The judge ordered Turnoy to pay Shiner damages of $16,000 for fraud. The Seventh Circuit reversed, noting that the state court rejected Shiner’s breach of contract claim before the district court’s decision. Turnoy had placed a restrictive endorsement on the back of the check, stating that by cashing the check Shiner accepted $149,000 as full payment. U.S. Treasury regulations provide that a check received but not cashed counts as income for tax purposes only if “credited or set apart to a person without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made,” but Shiner neither asked for a new check nor otherwise communicated rejection of the check. Shiner’s inaction gave Turnoy a solid basis for believing that Shiner had accepted the check, so Turnoy’s filing of Form 1099 was not “willfully … fraudulent.” View "Shiner v. Turnoy" on Justia Law

After the IRS assessed tax deficiencies and penalties, the taxpayers filed a pro se petition for review. Acting on advice from Niehus, a lawyer who was not authorized to practice in Illinois, the couple stipulated that only half of the tax relief they sought was appropriate. Upon discovering that Niehus was not a member of the Illinois bar, they asked the court to set aside the stipulation. The Tax Court refused and entered judgment against the couple. On remand, with the couple represented by a CPA, Drobny, who was authorized to practice before the Tax Court, the court held that the couple had not been prejudiced by Niehus’s ineligibility to practice and that the advice he had given them had been valid. The Seventh Circuit affirmed, agreeing that Niehus provided “competent, valuable, diligent, and effective” assistance, and noting that there is no right to counsel in a Tax Court proceeding. View "Shamrock v. Commissioner of Internal Revenue" on Justia Law

In 2012, NITEL filed this breach of contract suit in an Illinois state court against PNC Bank. PNC Bank removed to federal court and the district court granted summary judgment for PNC Bank. This appealed stemmed from the district court's post-judgment award of Rule 11 sanctions against both NITEL and its lawyer, Robert Riffner. In this case, PNC Bank failed to comply with Rule 11(c)(2)'s requirement that a party seeking Rule 11 sanctions first to serve a proposed motion on the opposing party and to give that party at least 21 days to withdraw or correct the offending matter. PNC Bank argued that the two letters it sent containing both settlement demands and threats to seek Rule 11 sanctions if its demands were not met amounted to "substantial compliance" with Rule 11(c)(2) and thus preserved its right to move for sanctions after the district court granted summary judgment in its favor. The district court agreed and imposed sanctions. The court need not revisit here whether substantial compliance can ever satisfy the warning shot requirement of Rule 11(c)(2). In this case, the court concluded that PNC Bank's warning shot letters fell far short of even the generous target of substantial compliance. Accordingly, the court reversed the award of sanctions against Riffner. View "Northern Illinois Telecom, Inc. v. PNC Bank" on Justia Law

Plaintiffs alleged that, beginning in 1997, Swiech Group looted Krakow Business Park’s assets, diluting the value of the firm and of their shares. All of the claimed actions, including sham contracts, took place in Poland. Some of Swiech’s proceeds were allegedly funneled to Chicago‐area businesses and properties. Adam Swiech was arrested by the Polish authorities and charged with money laundering, forgery, tax evasion, and leading an organized crime ring, in connection with his conduct at the Business Park. He has been convicted on some of the charges. In a second round of litigation, plaintiffs alleged violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(d) (RICO), naming multiple defendants related to Swiech, including attorneys. The district court concluded that plaintiffs were estopped from asserting certain aspects of their claim and that nothing in the complaint plausibly asserted that the lawyer-defendants stepped over the line between representation of their clients and participation in a RICO conspiracy. The Seventh Circuit affirmed, citing the scope of its appellate jurisdiction, and reasoning that any wrongdoings in the course of lawyers' representation were outside the scope of the asserted RICO conspiracy. “Although the supplemental complaints paint a dismal picture of these attorneys’ behavior, assuming the truth of the allegations of disregard for the alleged neutrality principle, misleading billing statements, and the like, these problems must be addressed in a different forum.” View "Domanus v. Locke Lord LLP" on Justia Law

The Seventh Circuit affirmed Trudeau’s fraud conviction and his $38 million civil contempt judgment after he refused to surrender profits made from violating Federal Trade Commission orders. Trudeau claimed to be destitute. The FTC demanded that firms thought to be affiliated with Trudeau turn over business records. One such entity, Website Solutions, hired the Law Firms to represent it in connection with the demand. The district judge concluded that Website was under Trudeau’s control and appointed a receiver to marshal assets of Website and Trudeau’s other entities. The receiver collected approximately $8 million. The court approved the receiver’s plan, rejected the Firms’ request for compensation from funds in the receiver’s custody, approved the receiver’s compensation, accepted the final report, and authorized the receiver to send remaining funds to the FTC, closing the receivership. The Seventh Circuit affirmed, rejecting an argument that the Firms’ fees should be paid ahead of compensation for Trudeau’s victims. Before the Firms were hired by Website, a federal court had already directed Trudeau to turn over all proceeds of his improper commercial activities. That order created a lien on Website’s assets, senior to any claim created later. As a proxy for Trudeau, Website had no right to make commitments to pay third parties with funds belonging to Trudeau’s victims. View "Federal Trade Commission v. Trudeau" on Justia Law

In 2008, West Bend filed a legal malpractice action based on the performance of attorney Schumacher and his firm, RLGZ, in a 2005-2006 workers’ compensation matter. The parties agreed to a dismissal of that claim and entered into a tolling agreement pending the resolution of related actions. After the resolution of those claims, West Bend filed a malpractice suit against Schumacher in 2013. The district court dismissed the first and an amended complaint, concluding that the allegations were too speculative or vague. The court stated that allegations about failure to depose a doctor, failure to contact witnesses prior to the hearing, the disclosure of certain facts to opposing counsel, and that Schumacher had represented that West Bend would accept liability, did not explain “how any of these alleged acts and omissions harmed its defense.” The Seventh Circuit affirmed. The complaint did not adequately plead a claim for legal malpractice under Illinois law; it fails to allege plausibly that the outcome of the underlying action would have been more favorable to West Bend, had it not been for Schumacher’s alleged litigation conduct View "West Bend Mutual Insurance Co v. Schumacher" on Justia Law

The City of Chicago obtained a default administrative judgment of $3,540 against Plaintiff (Manistee Apartments), based upon a finding of code violations. The city registered the judgment and imposed a lien against plaintiff’s real estate. Plaintiff contends that it first received actual notice of the lien during routine title insurance review while it was preparing to sell its properties. In response to plaintiff’s effort to settle the matter, the city demanded $5,655.16, reflecting $720.34 in statutory interest plus $1,394.82 in collection costs and attorneys’ fees. Plaintiff conveyed its property, paid $5,655.16 under protest, and filed a federal class action, alleging due process violations. The court dismissed, stating that the plaintiff failed to allege facts that plausibly supported the assertion that it paid the demand under duress; because its payment was voluntary, plaintiff was not deprived of a constitutionally-protected property interest under 42 U.S.C. 1983. The Seventh Circuit affirmed, stating that the claim was more appropriate for small claims court and questioning: why would such a small amount cause the plaintiff to exert so much time and effort? The court stated that it suspected that only lawyers stood to benefit. View "Manistee Apartments, LLC v. City of Chicago" on Justia Law

Foreman alleged that Rockford police officers came to his restaurant because the man living in an upstairs apartment accused Foreman of cutting off his electricity. Foreman refused to answer questions and was arrested. Prosecutor Leisten charged Foreman with obstructing a police officer. The charge was dismissed. The court ordered Foreman to show cause why claims against Leisten should not be dismissed; the prosecutor would have absolute immunity in her individual capacity and the Eleventh Amendment bars official capacity claims. In a previous case Foreman’s lawyer, Redmond, had raised similar claims against prosecutors that were dismissed, so the court ordered Redmond to show cause why he should not be sanctioned. The court granted Leisten judgment on the pleadings, noting that Foreman had not offered a basis for challenging the existing law of prosecutorial immunity and that the official capacity claim would not fall under the Eleventh Amendment's exception for injunctive relief because Foreman’s complaint did not allege an ongoing constitutional violation. The court censured Redmond, stating that he did not argue for a change in the law until after he was faced with a recommendation of censure. The court dismissed 42 U.S.C. 1983 claims against the officers, concluding that they had probable cause to arrest Foreman. The Seventh Circuit affirmed, citing Supreme Court precedent that state prosecutors enjoy absolute immunity from suits under section 1983 for activities that are “intimately associated with the judicial phase of the criminal process.” View "Foreman v. Wadsworth" on Justia Law

In 2004, Nelms retained Katz-Crank, a Michigan lawyer with a practice in cemetery management, to assist in his acquisition of cemeteries and funeral homes in Indiana, Michigan, and Ohio. Trust funds associated with these cemeteries were valued at about $22 million. In 2007 Katz‐Crank learned that Nelms was under investigation by the Indiana Secretary of State for misappropriating cemetery trust assets. Katz‐Crank called Haskett, an investigator in that office, to offer cooperation. Haskett did not return the call. In 2008, Nelms was indicted for embezzling $22 million, pleaded guilty, and agreed to testify against Katz‐Crank. Haskett called some of Katz‐Crank’s clients and stated that Katz‐Crank was under criminal investigation. The Secretary of State and the Marion County prosecutor’s office issued press releases publicizing Katz-Crank’s arrest. A jury acquitted Katz‐Crank. Two years later Katz‐Crank sued Marion County and officials who were involved in her investigation and prosecution, under 42 U.S.C. 1983, for malicious prosecution, abuse of process, and violation of the Fourth and Fourteenth Amendments, with three federal conspiracy claims and state‐law claims for malicious prosecution, abuse of process, and intentional infliction of emotional distress. The district judge rejected all claims. The Seventh Circuit affirmed. Most of Katz‐Crank’s claims were barred by the Eleventh Amendment or prosecutorial immunity; the rest were properly dismissed for failure to state a plausible claim. View "Katz-Crank v. Haskett" on Justia Law

Doctors replaced Dobbs’s hip with a DePuy ASR artificial hip, which was defective and caused Dobbs pain and other problems. Dobbs hired McLaughlin to represent him in the DePuy ASR Hip Implant Multidistrict Litigation for a 35 percent contingency fee. A year later, DePuy proposed a “Global Settlement,” offering represented parties $250,000 and unrepresented parties $165,000. McLaughlin advised Dobbs to accept the offer because going to trial would be expensive, time consuming, and risky. Dobbs stated that he wanted to register for the settlement but that he did not want to “waive any rights to a trial,” or “be forced to accept the present settlement offer.” Dobbs moved to remove McLaughlin. McLaughlin acknowledged that he no longer represented Dobbs and withdrew as counsel. Acting pro se, Dobbs accepted the settlement; because he was considered “represented,” Dobbs received $250,000. McLaughlin asserted a lien on the award and sought attorneys’ fees under a quantum meruit theory. The district court held that the full contingency fee was a reasonable award. The Seventh Circuit vacated. The court listed the factors relevant to quantum meruit under Illinois law, but did not consider evidence related to the factors. The only factor specifically addressed was that Dobbs “undoubtedly benefitted” from McLaughlin’s work. The court did not analyze: how many hours McLaughlin spent on Dobbs’s case; the difficulty of the underlying claim; the ordinary charge for such work; or McLaughlin’s skill and standing. View "Dobbs v. McLaughlin" on Justia Law