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

Spehar, hired by CMGT to assist in finding financing for its business, sued CMGT over a dispute related to this agreement and obtained a $17 million default judgment against CMGT, which had no assets. Spehar Capital devised a plan to: force CMGT into bankruptcy; convince the bankruptcy trustee to bring a malpractice action against CMGT’s law firm on the theory that but for the firm’s negligence, Spehar would not have obtained the default judgment; win the malpractice action or force a settlement; obtain a share of the payment to the bankruptcy estate. The bankruptcy trustee sued CMGT’s law firm, Mayer Brown. The district court granted Mayer Brown summary judgment, reasoning that the doctrine of judicial estoppel barred the inconsistencies in the suit, based on undisputed facts. The Seventh Circuit affirmed. If the trustee were to prevail, there would be a clear impression that a court was misled. It would be “absurd” for Spehar to recover when proving the causation element of malpractice would require the trustee to prove that Spehar was not entitled to prevail in the earlier suit. View "Grochocinski v. Mayer, Brown, Rowe & Maw, LLP" on Justia Law

Gomberg briefly represented Goyal in 2004 settlement negotiations with a former employer over his claims of retaliation for whistle-blowing and gave Goyal’s employer notice of an attorney lien on any settlement or judgment. The negotiations did not produce an agreement; Goyal later retained new counsel to pursue litigation. In 2009, without the aid of any counsel, Goyal settled with his former employer. After Goyal settled, Gomberg reappeared and demanded a share. The employer paid a portion of the settlement to Gomberg. The district court granted Goyal’s motion to quash the lien, effectively ordering Gomberg to pay Goyal. The Seventh Circuit affirmed, stating that Gomberg is not entitled to any part of the settlement funds Goyal secured and that “Gomberg’s professional conduct is questionable.” His position that he “secured” funds for Goyal when the opposing party made an unacceptable and unaccepted settlement offer is unreasonable to the point of being frivolous and possibly warranting sanctions. Gomberg’s assertion of a lien for $70,000 was far greater than 10 percent of even the employer’s unaccepted (and not yet made) offer of $375,000 and was without basis. View "Goyal v. Gas Tech. Inst." on Justia Law

Westerfield was a lawyer working for an Illinois title insurance company when she facilitated fraudulent real estate transfers in a scheme that used stolen identities of homeowners to “sell” houses that were not for sale to fake buyers, and then collect the mortgage proceeds from lenders who were unaware of the fraud. Westerfield facilitated five such transfers and was indicted on four counts of wire fraud, 18 U.S.C. 1343. She claimed that she had been unaware of the scheme’s fraudulent nature and argued that she had merely performed the typical work of a title agent. She was convicted on three counts. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence, to admission of a codefendant’s testimony during trial, and to the sentence of 72 months in prison with three years of supervised release, and payment of $916,300 in restitution. View "United States v. Westerfield" on Justia Law

The law firm represented a potential buyer in the purchase of a drugstore. Buyer and Seller executed the sales contract separately. The firm misfiled the contract executed by Buyer, however, and Seller subsequently attempted to rescind the contract, which it characterized as an offer, because it had not timely received a copy of the contract executed by Buyer. When Seller’s efforts to avoid the purported contract were successful, Buyer sent a “formal notice of claim” to the firm, which sought coverage from its professional liability insurer. That insurer concluded that the firm was not entitled to coverage because it failed to properly notify the insurer of the mistake that ultimately led to the malpractice claim. The firm sought a declaratory judgment. The district court granted the insurer summary judgment. The Seventh Circuit affirmed, finding that the firm’s knowledge of the email exchange with Seller’s counsel and of an Alabama declaratory-judgment action constituted knowledge of “any circumstance, act or omission that might reasonably be expected to be the basis of” a malpractice claim. View "Koransky, Bouwer & Poracky, P. C. v. Bar Plan Mut. Ins. Co." on Justia Law

The defendant pleaded guilty to being in the U.S. illegally after having been removed. The judge sentenced him to 84 months in prison. The statutory maximum prison sentence for illegal reentry is usually 2 years, 8 U.S.C. 1326(a), but removal after conviction for an aggravated felony (defendant had two such convictions) increases the maximum to 20 years. § 1326(b)(2). Defendant’s appellate attorney asked to be allowed to withdraw from the case on the ground that there is no colorable basis for appealing, but also stated that the district court imposed conditions beyond its authority. The Seventh Circuit modified the judgment of the district court to eliminate the post-release terms concerning the use of controlled substances, drug tests, and collection of a DNA sample, and otherwise dismissed the appeal, granting the lawyer’s motion to withdraw. View "United States v. Gutierrez-Ceja" on Justia Law

Plaintiffs filed a class action on behalf of stock purchasers, alleging that Boeing committed securities fraud under the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5. The suit related to statements concerning the new 787-8 Dreamliner, which had not yet flown, and did not specify a damages figure. At argument the plaintiffs’ lawyer indicated that the class was seeking hundreds of millions of dollars. The district court dismissed the suit under Rule 12(b)(6) before deciding whether to certify a class. Plaintiffs appealed the dismissal; Boeing cross-appealed denial of sanctions on the plaintiffs’ lawyers for violating Fed. R. Civ. P. 11. The Seventh Circuit affirmed dismissal with prejudice, but remanded for consideration under 15 U.S.C. 78u-4(c)(1), (2), of Rule 11 sanctions on the plaintiffs’ lawyers. No one who made optimistic public statements about the timing of the first flight knew that their optimism was unfounded; there is no securities fraud by hindsight. Plaintiffs’ lawyers had made confident assurances in their complaints about a confidential source, their only barrier to dismissal of their suit, even though none of them had spoken to the source and their investigator had acknowledged that she could not verify what he had told her. View "City of Livonia Emps' Ret. Sys. v. Boeing Co." on Justia Law

In 2010 the U.S. and Wisconsin sued, alleging that defendants polluted the Lower Fox River and Green Bay with PCBs, and had liability under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601, for response costs and destruction of natural resources, estimated at $1.5 billion. The Justice Department submitted a proposed consent decree, negotiated among the state, defendants (Brown County and the City of Green Bay), and Indian tribes. The U.S. offered $4.5 million because federal agencies might have contributed to the pollution. Menasha opposed the decree and counterclaimed against the U.S. for costs that Menasha would incur if found liable. Ordinarily a non-party to a consent decree is not bound by it, but approval of the consent decree would otherwise extinguish Menasha’s claims. Menasha sought information under the Freedom of Information Act, claiming that U.S. attorneys, being from defense and prosecution teams, actually have adverse interests, and that their communication concerning the case resulted in forfeiture of attorney work product privilege. The district court held that Menasha was entitled to the documents. The Seventh Circuit reversed, reasoning that Menasha’s claim actually amounted to assertion that the federal attorneys “ganged up” to reduce federal liability and that the documents are privileged. View "Menasha Corp. v. U.S. Dept. of Justice" on Justia Law

The Chicago-area law firms (Anderson) represent plaintiffs in class action lawsuits under the Telephone Consumer Protection Act-Junk Fax Prevention Act, which authorizes $500 in damages for faxing an unsolicited advertisement, 47 U.S.C. 227(b)(1)(C), (b)(3). This award triples upon a showing of willfulness, and each transmission is a separate violation. Advertisers would pay a fee, and B2B would send an ad to hundreds of fax numbers without obtaining permission from the recipients. When Anderson learned that defendants in four cases under the Act had contracted with B2B, B2B records became the focus of discovery. Despite obtaining all information necessary to certify classes in the four cases, Anderson continued pushing for B2B, and, at a deposition at which B2B was represented by Ruben, obtained the names of other B2B clients, and sent solicitation letters. Anderson attempted to give Ruben $ 5000. Defendants in new cases learned that Anderson had promised B2B confidentiality and unsuccessfully challenged class certification. The Seventh Circuit affirmed, stating that when an ethical breach neither prejudices an attorney’s client nor undermines the integrity of judicial proceedings, state bar authorities are generally better positioned to address the matter through disciplinary proceedings, rather than the courts through substantive sanction in the underlying lawsuit. View "Reliable Money Order, Inc. v. McKnight Sales Co., Inc." on Justia Law

Todd attempted to purchase claims against a collection agency (Franklin) from Fletcher. He then sued Franklin. The district court dismissed the complaint, ruling that the assignment was void because Todd was using it merely to attempt to practice law without a license and that Todd failed to state a claim for relief. The Seventh Circuit affirmed. The assignment was void as against public policy. Illinois public policy forbids the assignment of legal claims to non-attorneys in order to litigate without a license. Undisputed evidence showed that Todd created a business providing legal advice and repeatedly agreed to purchase claims in order to litigate. Even if the assignment was not void, Todd failed to state a claim. The Fair Debt Collection Practices Act preempts state-law claims, 15 U.S.C. 1681t(b)(1)(F). Todd did not attempt could not bring a claim directly under the FCRA because the section Franklin allegedly violated does not create a private right of action. View "Todd v. Franklin Collection Serv., Inc." on Justia Law

Elusta sued tChicago and police officers for excessive force, false arrest, and intentional infliction of emotional distress. He first retained Cerda and De Leon, who conducted discovery and obtained a settlement offer of $100,000. Elusta rejected this offer, apparently because his retainer contained a 40% contingent fee provision. The district court permitted the attorneys to withdraw. Elusta retained Smith and Genson. A jury found in Elusta’s favor on two counts and awarded $40,000. Smith and Genson petitioned for attorney’s fees on behalf of Elusta pursuant to 42 U.S.C. 1988. Before the court could rule, Elusta retained new attorneys, Johnson and Gentleman, to litigate the fee issue. They sought direct payment of some of the fees to Elusta, rather than to Smith and Genson. Smith and Genson’s petition languished for nearly 16 months before Cerda and De Leon filed sought fees, asserting an attorney’s lien or a right to recover under quantum meruit. The court granted Smith and Genson’s request for $82,696.50 under section1988. Cerda and De Leon had not perfected an attorneys’ lien, but the court allowed recovery of $15,000 in quantum meruit. The court rejected Elusta’s motion to have 60% of both amounts paid to him directly. The Seventh Circuit affirmed. View "Elusta v. City of Chicago" on Justia Law