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

KDC had cash flow problems and, in 2004, hired Johnson. Johnson retained the law firm (GPM) of his acquaintance, Tenenbaum. GPM sent KDC an engagement letter that included conflict‐waiver language regarding Johnson and a company affiliated with Johnson. Johnson soon resigned and joined First Products. GPM resigned as KDC’s counsel. KDC filed for Chapter 11 bankruptcy. Its assets were purchased at auction by First Products. No other bids were received; the bankruptcy court approved the sale. The bankruptcy was later converted to a Chapter 7 liquidation proceeding. The bankruptcy trustee hired Sullivan as special counsel. Sullivan had filed a shareholder derivative action before KDC filed for bankruptcy, alleging that directors and officers of KDC had conspired to defraud the company of its intellectual property by driving KDC out of business and purchasing its assets at bargain prices. In 2010, a Wisconsin state judge entered judgment, finding some defendants, including Johnson, had engaged in a civil conspiracy to defraud KDC and steal its assets. In 2012, KDC, through its bankruptcy trustee, brought claims against GPM, alleging involvement in the scheme to defraud KDC orchestrated by Johnson. On summary judgment, the district court determined that the remaining claims were barred by the six‐year Wisconsin statute of limitations because KDC was on notice of GPM’s alleged fraud by 2006, when Sullivan received KDC’s client file. The Seventh Circuit affirmed.View "KDC Foods, Inc. v. Gray, Plant, Mooty, Mooty & Bennett, P.C." on Justia Law

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. View "PNC Bank, N.A. v. Spencer" on Justia Law

Davis retained Fenton to represent her in a home foreclosure proceeding. Davis later sued Fenton for malpractice. Davis claimed that, although she paid Fenton several thousand dollars, he did virtually nothing to help her and that he targeted her for inferior service based on her race, in violation of the Fair Housing Act, 42 U.S.C. 3601. That case is stayed pending arbitration. Fenton brought his own lawsuit in state court, against Davis’s lawyers: Dudley and Sidea, alleging that they intentionally spread false information about him to clients and business associates. Fenton also alleged that Sidea, who had previously worked at Fenton’s law office, had improperly obtained confidential information about Fenton’s clients and shared it with Dudley. The complaint claimed conversion, tortious interference with a business relationship, and defamation. Dudley and Sidea filed a notice of removal in federal court, citing the general removal statute, 28 U.S.C. 1441, and the civil rights removal statute, 28 U.S.C. 1443. Days later, despite the ongoing removal proceedings, the Cook County Court entered an ex parte preliminary injunction against Dudley and Sidea. The district court found that the case did not meet the removal requirements under either 28 U.S.C. 1441 or 1443 and remanded, The Seventh Circuit affirmed. View "Fenton v. Dudley" on Justia Law

Lightspeed operates online pornography sites and sued a defendant, identified only Internet Protocol address, which was allegedly associated with unlawful viewing of Lightspeed’s content, using a “hacked” password. Lightspeed identified 6,600 others (by IP addresses only) as “co‐conspirators” in a scheme to steal passwords and content. Lightspeed, acting ex parte, served subpoenas on the ISPs (then non‐parties) for the personally identifiable information of each alleged coconspirator, none of whom had been joined as parties. The ISPs moved to quash and for a protective order. The Illinois Supreme Court ultimately ruled in favor of the ISPs. Lightspeed amended its complaint to name as co‐conspirator parties the ISPs and unidentified “corporate representatives,” alleging negligence, violations of the Computer Fraud and Abuse Act, 18 U.S.C. 1030 and 1030(g), and deceptive practices. Lightspeed issued new subpoenas seeking the personally identifiable information. The ISPs removed the case to federal court. The district judge denied an emergency motion to obtain the identification information. After several “changes” with respect to Lightspeed’s lawyers, the court stated that they “demonstrated willingness to deceive … about their operations, relationships, and financial interests have varied from feigned ignorance to misstatements to outright lies … calculated so that the Court would grant early‐discovery requests, thereby allowing [them] to identify defendants and exact settlement proceeds.” After granting Lightspeed’s motion for voluntary dismissal, the court granted attorney’s fees under 28 U.S.C. 1927, stating that the litigation “smacked of bullying pretense.” Failing to pay, the lawyers were found to be in civil contempt and ordered to pay 10% of the original sanctions award to cover costs for the contempt litigation. The Seventh Circuit affirmed.View "Duffy v. Smith" on Justia Law

Defendant pleaded guilty to using the telephone to facilitate his possession of cocaine with intent to distribute, 21 U.S.C. 843(b), and was sentenced to 24 months of probation. The sentencing judge imposed 18 conditions of probation and stated: “we’ll see what the next two years are going to bring in terms of your ability to conform …, because if you don’t, the 24 months of probation is going to be 24 months in prison,” meaning that if defendant violated any condition, he would be in prison for 24 months. Two months later, the probation service sought to revoke his probation. Defendant admitted: driving without a valid driver’s license; failing to attend a drug treatment program; and thrice submitting urine samples that tested positive for cocaine. Although the guidelines range for his probation violations was seven to 13 months, U.S.S.G. 7B1.4(a), the statutory maximum for his crime of conviction, the judge recalled the comments made at sentencing, and ordered 24 months’ custody. Defendant’s lawyer, stating that he had no non-frivolous ground for appealing the sentence, filed an Anders brief, to which defendant did not respond. The Seventh Circuit denied the Anders motion, stating that there is no authority indicating that a judge may treat a warning of consequences as creating a contract requiring him to impose those consequences should there be a violation. View "United States v. Tatum" on Justia Law

Montanez sued the City of Chicago and Officers Fico and Simon, alleging that Fico used excessive force while arresting him for drinking on a public way and Simon failed to intervene. He sustained minor injuries and sought damages under 42 U.S.C. 1983 and state-law. The state-law claims were dismissed as time-barred. The city conceded its obligation to indemnify, so the section 1983 claims proceeded to trial. Fico was found liable, Simon was cleared, and the jury awarded $1,000 in compensatory damages and $1,000 in punitive damages. Montanez’s lawyers submitted a bill for more than $426,000 in attorneys’ fees and about $6,500 in costs and expenses. The judge scrutinized the bill line-by-line, discounted entries where more than one partner oversaw the same activities, or where the lawyers researched or drafted motions that were never filed, excluded hours spent on a full-day mock trial and entries related to matters that were essentially administrative matters, and reduced the hourly billing rates. After these and other reductions, the final award of costs was $3,051.94 and the court awarded $108,350.87 in fees. The Seventh Circuit affirmed, referring to the city’s “scorched-earth” defense strategy and the need for trial judges to exercise their broad discretion to adjust bloated bills for attorney’s fees after the fact and case-management authority during the litigation. View "Montanez v. Simon" on Justia Law

Huon, a lawyer representing himself, sued his former employer Johnson & Bell, and its attorneys, for intentional discrimination based on race (Asian) and national origin (Cambodian) in violation of Title VII of the 1964 Civil Rights Act, 42 U.S.C. 2000e-2(a), and 42 U.S.C. 1981. After remand, the district court granted the defendants judgment on the pleadings, concluding that Huon’s suit was barred by claim preclusion because it arose out of the same “series of connected transactions” as claims that he previously litigated in state court. The Seventh Circuit affirmed, holding that the claims mirrored those raised in state court.View "Huon v. Johnson & Bell, Ltd." on Justia Law

Hill formed Blythe Corporation to acquire vacant lots in Chicago and was Blythe’s sole owner and employee. Blythe entered into a contract with Flawless Financial, which was to acquire the lots; Blythe agreed to pay legal fees of $50,000 to the attorney recommended by Flawless (DeAngelis) and deliver a $25,000 retainer fee. Blythe signed a representation agreement that had been drafted by DeAngelis, an employee of Brown Udell, on Brown Udell letterhead, but never informed Brown Udell of the representation. Blythe remitted a $25,000 check, payable to DeAngelis which was deposited into the “John A. DeAngelis Client Fund Account.” DeAngelis never shared fees received from Blythe with Brown Udell. Blythe investors transferred $250,000 to the DeAngelis Client Fund Account. Following Hill’s instructions, DeAngelis transferred $249,978 to a Flawless account. None of those funds were ever used to purchase lots on behalf of Blythe. Forte, a Blythe investor, contributed an additional $250,000. DeAngelis submitted an Application for Purchase of Redevelopment Project Area Property to obtain the vacant lots. The Department of Planning and Development reviewed the application and indicated steps necessary to move forward. Blythe, however made no effort to amend its application or to pursue necessary approvals. Blythe did not respond to inquiries by DeAngelis; Hill “[could] not recall” what happened to the funds received from Forte. Blythe sued DeAngelis and Brown Udell, claiming legal malpractice and unjust enrichment. The district court entered summary judgment for the defendants. The Seventh Circuit affirmed. View "Blythe Holdings, Inc. v. DeAngelis" on Justia Law

Lewis was injured in an automobile accident and her health plan paid $180,000 for her medical treatment Lewis filed a tort suit against the driver (her son-in-law), represented by Georgia lawyer Lashgari, and obtained a $500,000 settlement. Lashgari knew the plan had a subrogation lien, but split the proceeds between himself and Lewis. He claimed that the plan was owed nothing. The plan filed suit under ERISA to enforce the lien, 29 U.S.C. 1132(a)(3). The defendants argued that because the settlement funds have been dissipated, the suit was actually for damages, not authorized by ERISA. The district judge ordered the defendants to place $180,000 in Lashgari’s trust account pending judgment. The defendants did not comply. A year later, the defendants having neither placed any money in a trust account nor produced any evidence of their inability to pay, the judge held them in civil contempt, ordered them to produce records that would establish their financial situations, and ordered Lashgari to documents relating to the contempt to the General Counsel of the State Bar for possible disciplinary proceedings against him. The defendants appealed the contempt order. The Seventh Circuit dismissed, characterizing the appeal as frivolous and the defendants’ conduct as outrageous. View "Cent. States, SE & SW Areas Health & Welfare Fund v. Lewis" on Justia Law

In 2008, defendant faxed tens of thousands of unsolicited advertisements, violating the Telephone Consumer Protection Act, 47 U.S.C. 227. After defendant’s insurer intervened, a second proposed class action settlement was reached. The insurer, Continental, agreed to make $6.1 million available to class members. The total is approximately equal to the number of faxes sent (110,853) times per-fax damages offered by Continental ($55.03) with an attorney fee award of 1/3 the total amount: $2,033,333.33. The district court preliminarily approved the settlement and 24,389 of the 28,879 class members were successfully notified; five requested exclusion. None objected. Only 1,820 returned a claim form, seeking damages for 7,222 unlawful fax transmissions, so that Continental would pay out only $397,426.66 of the $6.1 million, with the remainder, less attorney fees and incentive awards, to revert. Despite the relatively meager final payout to class members, plaintiffs’ attorneys continued to demand more than $2 million. The district court employed the lodestar method, rather than the percentage method, applying a risk multiplier of 1.5 to arrive at a final fee award of $1,147,698.70. After arguments on appeal, the attorneys sought to dismiss. The Seventh Circuit declined to dismiss and affirmed the reduced fee award. View "Americana Art China Co., Inc. v. Foxfire Printing & Packaging, Inc." on Justia Law