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

Spencer stopped paying her mortgage in 2008. In Wisconsin state court foreclosure proceedings, Spencer’s attorney, Nora, adopted an “object-to-everything litigation strategy and buried the state court in a blizzard of motions.” While a hearing on a summary judgment motion was pending in state court, Nora removed the case to federal court. Finding no objectively reasonable basis for removal, the district court remanded the case and awarded attorney’s fees and costs to the lender, 28 U.S.C. 1447(c). The Seventh Circuit dismissed Spencer’s appeal as frivolous; the district court did not order her to pay anything. The court affirmed the award as to Spencer “because she has not offered even a colorable argument that removal was reasonable” and ordered Nora to show cause why she should not be sanctioned for litigating a frivolous appeal. Several months later, noting Nora’s similar behavior in another case, the court imposed an increased sanction of $2,500, suspended until the time, if ever, that Nora submits further inappropriate filings, and directed the clerk of court to forward a copy of the order and earlier opinion to the Office of Lawyer Regulation of the Wisconsin Supreme Court. View "PNC Bank v. Spencer" on Justia Law

HSBC initiated a Wisconsin foreclosure action on the Rinaldi’s mortgage. The Rinaldis counterclaimed, alleging that the mortgage paperwork had been fraudulently altered and that HSBC lacked standing to enforce the mortgage. The Rinaldis lost at summary judgment and did not appeal. The court later vacated its foreclosure judgment after HSBC agreed to modify the loan. The Rinaldis filed a new state lawsuit reasserting their counterclaims. Before the court ruled on the defendants’ motion to dismiss, the Rinaldis filed for bankruptcy. In those proceedings, HSBC filed a proof of claim for the mortgage. The Rinaldis objected and filed adversary claims, alleging fraud, abuse of process, tortious interference, breach of contract, and violations of RICO and the Fair Debt Collection Practices Act. The bankruptcy court found in favor of HSBC and recommended denial of the adversarial claims. The district court agreed, noting the Rinaldis’ failure to comply with Federal Rules. The court dismissed the Rinaldis’ adversary claims as meritless and warned that the Rinaldis would face sanctions if they filed additional frivolous filings because their tactics had “vexatious and time- and resource-consuming” and their filings “nigh-unintelligible.” After additional filings of the same type, the Rinaldis voluntarily dismissed their bankruptcy. Their attorney filed additional frivolous motions. The court ordered the attorney to pay $1,000. The Seventh Circuit upheld the sanction. View "Nora v. HSBC Bank USA, N.A." on Justia Law

Sprinkle applied for supplemental social security income. After exhausting administrative remedies, Sprinkle sought judicial review of a final decision that he was not disabled. The district court held that the agency failed to properly evaluate evidence of Sprinkle’s disability and reversed. Sprinkle sought attorney’s fees under the Equal Access to Justice Act. While the EAJA contains a presumptive rate cap of $125 an hour, courts may award enhanced fees if justified because of an increase in the cost of living. The court found that Sprinkle was entitled to fees, but rejected his request for a cost-of-living enhancement. The Seventh Circuit vacated. An EAJA claimant seeking an adjustment need not offer proof of the effects of inflation on the particular attorney’s practice or proof that no competent attorney could be found for less than the requested rate. The claimant may rely on a readily available measure of inflation such as the Consumer Price Index, as well as proof that the requested rate does not exceed the prevailing market rate in the community for similar services by lawyers of comparable skill and experience. An affidavit from a single attorney testifying to the prevailing market rate may suffice to meet that burden. View "Sprinkle v. Colvin" on Justia Law

Rojas sued under 42 U.S.C. 1983, claiming that Cicero fired him because he supported a political opponent of the town president. A jury awarded him $650,000 in damages, but the judge granted a new trial, concluding that Kurtz, Rojas’s lawyer, had engaged in misconduct by making misleading statements, eliciting hearsay responses to prejudice the defendants even though the judge would strike them, arguing in a way that informed the jury about excluded evidence, and undermining the credibility of a defense witness by asking questions that presented him in a bad light, without a good-faith basis for the questions. The parties settled, providing Rojas with $212,500 compensation for the discharge and Kurtz with fees of $287,500. The settlement did not resolve motions for sanctions under 28 U.S.C. 1927, which authorizes sanctions against lawyers who needlessly multiply proceedings, and under FRCP 26(g)(3) based on not revealing bankruptcy proceedings that could have affected whether Rojas was a proper plaintiff. The judge denied sanctions, reasoning that Rojas and Kurtz lost about $400,000 apiece when the settlement replaced the verdict. The Seventh Circuit affirmed with respect to section 1927, but vacated with respect to the rule, which does not afford judges the same discretion. View "Rojas v. Town of Cicero" on Justia Law

In 2009 defendant was sentenced to 24 months in prison, with 3 years of supervised release, as a felon in possession of a gun. After his 2011 release, he violated probation and was sentenced to five months in prison plus 30 months more of supervised release. After subsequent violations, the judge ordered 45 days of home confinement with electronic monitoring and enrollment in a mental health treatment program. In 2013, the probation officer advised the judge that defendant had committed five traffic offenses in one day. The judge revoked supervised release, imposing a five-month sentence of imprisonment with two more years of supervised release. He was released; his probation officer advised the court that defendant had again violated. Although the recommended range was 5 to 11 months, the government asked for 15 months. Counsel noted that defendant had young children and that prior employers would rehire him. The judge sentenced him to 15 months with no more supervised release. After supplemental briefing, the Seventh Circuit vacated, after learning that the prosecutor in an earlier matter involving the defendant became the judge who sentenced him. The possibility that a conscious or unconscious recollection influenced the sentence cannot be excluded. View "United States v. Smith" on Justia Law

Bell sued attorney Ruben and his firm, alleging that they negligently and fraudulently mismanaged her trust, causing a loss of $34 million. Before arbitration, Ruben filed for Chapter 7 bankruptcy. Bell filed an adversary complaint opposing discharge of Ruben’s fraud-based debt to her, 11 U.S.C. 523(a)(2)(A), (4). The bankruptcy judge granted Ruben a discharge of his other debts, but not of that fraud debt. Ruben’s liability insurance did not cover fraud. Bell settled her negligence claims against Ruben and all claims against the other defendants in arbitration. The arbitration panel ruled, with respect to the fraud claim, that “damages proven to be attributable to the actions of [Ruben] have been compensated,” but ordered Ruben to pay administrative fees and expenses of the American Arbitration Association (AAA) totaling $21,200.00 and that compensation and expenses of the arbitrators, advanced by Bell, totaling $150,304.54 would be borne by Ruben. AAA rules, which governed the arbitration, provide that expenses of arbitration “shall be borne equally” unless the parties agree otherwise or the arbitrator assesses expenses against specified parties. Ruben refused to pay. The bankruptcy judge entered summary judgment in favor of Ruben. The district court reversed, in favor of Bell. The Seventh Circuit affirmed. View "Ruben v. Bell" on Justia Law

The Nelsons sued Chicago law firm Freeborn & Peters for malpractice, seeking $1.3 million in damages and were awarded more than $1 million. The malpractice claim arose from a transaction that the law firm handled involving acquisition of a shopping center under construction in Algonquin, Illinois. The law firm represented both the contract purchaser and the Nelsons, who invested in the venture, which suffered losses following the downturn of September 2008. The Seventh Circuit affirmed, finding that any error in the allocation of damages did not hurt the law firm or any creditors. View "Nelson Bros. Prof'l Real Estate, LLC v. Freeborn & Peters, LLP" on Justia Law

In 2006 Bey was convicted for making false statements in a bankruptcy proceeding and received a below-guidelines sentence of three months. The Seventh Circuit affirmed her conviction found that the sentence was too low and remanded for resentencing. After remand by the Supreme Court, the district court resentenced Bey to 24 months in prison and ordered her to self-surrender. After the second extension, Bey’s lawyer, Anderson, mailed her a letter enclosing the court’s order resetting her surrender date to December 2008. When Bey did not surrender, an arrest warrant was issued. After a year, she was arrested and charged with knowingly failing to surrender to serve her sentence, 18 U.S.C. 3146(a)(2). Bey moved to dismiss her indictment and to suppress evidence that attorney Anderson notified her of the self-surrender date because, she asserted, it was a privileged communication. The district court denied the motion. At trial Bey objected to testimony from Anderson about any conversations they had and to the admission of his letter to Bey. The judged redacted part of the letter, admitting three sentences from it. The Seventh Circuit affirmed. A lawyer’s communication of the defendant’s surrender date is not a privileged communication. View "United States v. Bey" on Justia Law

Defendants manufacture vitamins and nutritional supplements, including glucosamine pills, designed to help people with joint disorders, such as osteoarthritis. Several class action suits were filed under the Class Action Fairness Act, 28 U.S.C. 1332(d)(2), claiming violations of states’ consumer protection laws by making false claims. Eight months later, class counsel negotiated a nationwide settlement that was approved with significant modifications. The settlement requires Rexall to pay $1.93 million in fees to class counsel, plus $179,676 in expenses, $1.5 million in notice and administration costs, $1.13 million to the Orthopedic Research and Education Foundation, $865,284 to the 30,245 class members who submitted claims, and $30,000 to the six named plaintiffs ($5,000 apiece) Class members, led by the Center for Class Action Fairness, objected. The Seventh Circuit reversed, characterizing the settlement as “a selfish deal between class counsel and the defendant.” While most consumers of glucosamine pills are elderly and bought the product in containers with labels that recite the misrepresentations, only one-fourth of one percent of them will receive even modest compensation; for a limited period the labels will be changed, in trivial respects. The court questioned: “for conferring these meager benefits class counsel should receive almost $2 million?” View "Pearson v. NBTY, Inc." on Justia Law

Illinois insurance regulators permitted WellPoint to acquire RightCHOICE health insurance. WellPoint caused RightCHOICE Insurance to withdraw from the Illinois market. WellPoint offered the policyholders costlier UniCare policies as substitutes. Those who chose not to pay the higher premiums had to shop for policies from different insurers, which generally declined to cover pre-existing conditions. Former RightCHOICE policyholders filed a purported class action. The district court declined to certify a class and entered judgment against plaintiffs on the merits. No one appealed. Absent certification as a class action, the judgment bound only the named plaintiffs. Their law firm found other former policyholders and sued in state court. Defendants removed the suit under 28 U.S.C. 1453 (Class Action Fairness Act); the proposed class had at least 100 members, the amount in controversy exceeded $5 million, and at least one class member had citizenship different from at least one defendant. Plaintiffs sought remand under section 1332(d)(4), which says that the court shall “decline to exercise” jurisdiction if at least two-thirds of the class’s members are citizens of the state in which the suit began and at least one defendant from which “significant relief” is sought is a citizen of the same state. The district court declined remand, declined to certify a class, and again rejected the case on the merits. The Seventh Circuit affirmed, stating that “Counsel should thank their lucky stars that the district court did not sanction them under 28 U.S.C. 1927 for filing a second suit rather than pursuing the first through appeal."View "Phillips v. Wellpoint Inc." on Justia Law