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

Farnolo helped his clients file short‐form complaints in the multidistrict “Cook” litigation, involving product liability claims alleging injuries caused by Cook’s medical device—a filter designed to prevent pulmonary embolism. The case management order instructed all plaintiffs to complete a profile form with general personal and medical background information and details about their device and alleged injuries. In May 2019, the defendants notified attorney Farnolo that they did not have forms from his four clients. By late June, the forms still had not been filed. Farnolo never responded to the defendants' motion to dismiss.The district court dismissed the cases on July 19, 2019. Farnolo learned about the dismissal not by monitoring the docket, but from his client more than a year later. On August 18, 2020, he moved for reconsideration and reinstatement of the cases, claiming that he did not receive an electronic docket notification of the motion to dismiss; he attributed his delay in asking for reconsideration to his email inbox sending the dismissal order to his junk folder. The district court denied Farnolo’s motion as both untimely and meritless. The Seventh Circuit affirmed; all Rule 60(b) motions must be made within a “reasonable time” and Rule 60(c)(1) specifically requires requests for reconsideration predicated on excusable neglect to be brought within one year of entry of judgment. Inexcusable attorney negligence is not an exceptional circumstance justifying relief. View "Sides v. Cook Medical Inc." on Justia Law

Okada, “a titan of the gambling industry,” hired Bartlit to represent him in a multi-billion-dollar lawsuit against Wynn Resorts. The litigation settled in Okada’s favor for $2.6 billion. Okada refused to pay the $50 million contingent fee specified in the parties’ engagement agreement, which included an arbitration clause. Bartlit initiated arbitration before CPR in Chicago, the agreed-upon forum. Okada participated in the arbitration for over a year.Less than 72 hours before the evidentiary hearing, Okada informed the arbitrators that he would not be attending. The Panel stated that it would proceed without him and that his nonattendance could subject him to default. Okada replied that he rejected the validity of the engagement agreement and was unable to make the journey from Japan to Chicago for undisclosed medical reasons. Okada announced that he would not authorize his attorneys to participate in the arbitration, and canceled all witnesses, reservations, and services. The Panel held him to be in default and found that Okada owed the firm $54.6 million, including a $963,032 sanction for the costs and fees of the proceeding.Okada moved to vacate the award, arguing that he had been deprived of a fundamentally fair proceeding when the Panel decided the case without his participation or his evidence. The district court and Seventh Circuit rejected his argument. The Panel had several reasonable bases for proceeding without him and there was nothing unfair about the proceeding. View "Bartlit Beck, LLP v. Okada" on Justia Law

The Seventh Circuit upheld the bankruptcy court's ruling that the costs of plaintiff's attorney disciplinary proceedings imposed by the Wisconsin Supreme Court were not dischargeable under a provision of the Bankruptcy Code, 11 U.S.C. 523(a)(7). The court explained that, although there are several types of proceedings in which the Wisconsin Supreme Court may order costs, see Wis. S.C.R. 22.24(1), attorney discipline uniquely requires a "finding of misconduct" as a precondition for doing so. The court stated that the structure of Rule 22.24(1m) unambiguously singles out attorney discipline as a penal endeavor, and that conclusion has a statutory consequence under section 523(a)(7). Furthermore, the cost order amounts to compensation for actual pecuniary loss under section 523(a)(7). Finally, the court's conclusion that plaintiff's disciplinary costs are nondischaregable under section 523(a)(7) finds firm support in Supreme Court precedent and the court's own case law. View "Osicka v. Office of Lawyer Regulation" on Justia Law

In 2017, Freydin, a Chicago lawyer, posed a question on Facebook: “Did Trump put Ukraine on the travel ban list?! We just cannot find a cleaning lady!” After receiving online criticism for the comment, Freydin doubled down. People angered by Freydin’s comments went to his law firm’s Facebook, Yelp, and Google pages and left reviews that expressed their negative views of Freydin. Various defendants made comments including: An “embarrassment and a disgrace to the US judicial system,” “unethical and derogatory,” “hypocrite,” “chauvinist,” “racist,” “no right to practice law,” “not professional,” “discriminates [against] other nationalities,” do not “waste your money.,” “Freydin is biased and unprofessional attorney,” “terrible experience,” “awful customer service,” “disrespect[],” and “unprofessional[ism].” None of the defendants had previously used Freydin’s legal services.The Seventh Circuit affirmed the dismissal of Freydin’s suit, which alleged libel per se, “false light,” tortious interference with contractual relationships, tortious interference with prospective business relationships, and civil conspiracy. None of the reviews contained statements that are actionable as libel per se under Illinois law; each was an expression of opinion that could not support a libel claim. Freyding did not link the civil conspiracy claims to an independently viable tort claim. View "Law Offices of David Freyd v. Chamara" on Justia Law

Nichols prevailed in a discrimination action against his employer. The district court awarded Nichols $300,000 in compensatory damages and various forms of equitable relief, including back pay and pension contributions as well as reinstatement. Two years later, the district court awarded his attorney (Longo) $774,645.50 on a post‐trial motion for statutory attorney’s fees. While Longo’s appeal proceeded, Nichols filed a district court motion to adjudicate attorney’s fees and for other relief. He had executed a contingency fee agreement before filing the underlying discrimination action, and he challenged Longo’s assertion that he had a right to 45% of the entire relief, including the total monetary award and all equitable relief. Longo contended that he was entitled to that amount under the contingency fee arrangement in addition to the entire statutory attorney fees award. Nichols argued that Longo’s fee demand is excessive and violates Illinois Supreme Court Rule 1.5 because the contingency agreement itself was unconscionable.The district court, while expressing concern about Longo’s position, determined that its jurisdiction did not extend to attorney fee disputes after the case has been dismissed and jurisdiction has been relinquished. The Seventh Circuit affirmed the statutory attorney fee award. The district court correctly determined that the contingency contract dispute is not within its jurisdiction. View "Nichols v. Longo" on Justia Law

Wegbreit founded Oak Ridge, a financial-services company, and worked with attorney Agresti to reduce his tax liability. At Agresti’s suggestion, Wegbreit transferred his Oak Ridge interest to a trust that would convey that interest to an offshore insurance company as a premium for a life insurance policy benefitting the trust. Agresti, as trustee, acquired a variable life insurance policy from Threshold (later Acadia), which shares a U.S. office with Agresti’s law firm. The Wegbreits leveraged the policies by means of policy loans and purchases by shell companies. Acadia, at Samuel’s direction, sold his Oak Ridge interest for $11.3 million. The proceeds were wired directly to Agresti, who conveyed them to Acadia; the Wegbreits did not report any taxable income from the sale. After an audit, the IRS determined that the trust income and policy gains, including those from the Oak Ridge sale, were taxable to the Wegbreits, who had underreported their 2005-2009 income by $15 million. The Wegbreits disputed that conclusion in the tax court. After discovery revealed suspicious documents related to the trust and policies, the IRS asserted civil fraud penalties.The judge found that the trust was a sham lacking economic substance that should be disregarded for tax purposes, agreed with the IRS assessment of tax liability, and imposed fraud penalties. The Seventh Circuit affirmed, noting that the Wegbreits had previously “stipulated away” their assertions, and ordering the Wegbreits’ attorney to show cause why he should not be sanctioned under Rule 38 for filing a frivolous appeal. View "Wegbreit v. Commissioner of Internal Revenue" on Justia Law

Robbins defaulted on a debt to a hospital for services provided to her children. After MED-1, hired to collect the debt, filed a small-claims action, Robbins paid the $1,499 debt but refused to pay $375 attorney’s fees as required by the agreement she signed with the hospital. MED-1 then incurred more attorney’s fees (fees-on-fees) attempting to recover the initial attorney’s fees. The Indiana small-claims court ordered Robbins to pay both the initial attorney’s fees and the fees-on-fees. Robbins’s appeal initiated a de novo proceeding, so MED-1 filed a new complaint.Robbins filed a federal suit against MED-1 under the Fair Debt Collection Practices Act, 15 U.S.C. 1692–1692p. A magistrate stayed the case pending the outcome of the state case, which was eventually dismissed for failure to prosecute. In federal court, Robbins raised res judicata, arguing that the state court’s dismissal precluded MED-1 from claiming that the contract required her to pay attorney’s fees and fees-on-fees. Alternatively, she advanced an argument that she was not required to pay fees-on-fees and that MED-1 violated the Act by trying to collect sums she did not owe. The Seventh Circuit affirmed judgment for MED-1. The Indiana court’s dismissal does not have preclusive effect. Because Robbins’s contract with the hospital required her to pay all collection costs, including attorney’s fees, MED-1 did not violate the FDCPA by attempting to collect fees-on-fees. View "Robbins v. Med-1 Solutions, LLC" on Justia Law

Vega, a Hispanic woman, sued the Park District based on its investigation and termination of her employment for allegedly falsifying her timesheets, citing national origin discrimination and retaliation under 42 U.S.C. 1983 and Title VII. A jury returned a verdict for Vega on the discrimination claims, but not the retaliation claims, and awarded $750,000. The judge reduced the award to Title VII’s statutory maximum of $300,000, ordered the District to reinstate Vega, pay backpay, provide her with the cash value of lost benefits, and pay prejudgment interest and a tax component. The Seventh Circuit affirmed except for the tax-component award,Vega submitted a fee petition totaling $1,073,901.25, with a 200-page document listing details. Vega’s counsel submitted evidence to support her current hourly rate of $425 for general tasks and $450 for in-court work. The district court granted Vega’s petition in the amount of $1,006,592, noting the District’s “scorched-earth litigation approach.” Vega filed a second fee petition totaling $254,635.69 for work following the first petition. The district court awarded $218,221.69 and granted Vega a tax-component award of $49,224.30. The Seventh Circuit affirmed, stating that the award was “rather high for the type of litigation and monetary and equitable relief that Vega achieved,” but that the district court’s analysis and reasoning demonstrate an appropriate exercise of its discretion. View "Vega v. Chicago Park District" on Justia Law

The Consumer Financial Protection Bureau, the federal government’s primary consumer protection agency for financial matters under the 2010 Dodd-Frank Act, 12 U.S.C. 5511(a)–(b), lacks “supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law under the laws of a State in which the attorney is licensed.”The Bureau sued two companies and four associated lawyers that provided mortgage-assistance relief services to customers across 39 states. The firms had four attorneys at their Chicago headquarters and associated with local attorneys in the states in which they conducted business. The bulk of the firms’ work was performed by 30-40 non-attorneys (client intake specialists), who enrolled customers, gathered and reviewed necessary documents, answered consumer questions, and submitted loan-modification applications. The "specialists" and attorneys worked off scripts. The firms charged each customer a retainer, followed by recurring monthly fees. On average, the firms collected $3,375 per client. Customers paid separately for additional work, such as representation in foreclosure or bankruptcy, An attorney at headquarters reviewed each loan modification file and forwarded it to an attorney in the customer’s home state. The local attorneys were paid $25-40 for each task. Most reviews took five-10 minutes. Local attorneys almost never communicated directly with customers. One firm obtained loan modifications for 1,369 out of 5,265 customers; the other obtained loan modifications for 190 out of 1,116. The companies ceased operations in 2013.The district court partially invalidated sections of the attorney exemption and granted summary judgment against the defendants for charging unlawful advance fees, failing to make required disclosures, implying in their welcome letter to customers that the customer should not communicate with lenders, implying that consumers current on mortgages should stop making payments, and misrepresenting the performance of nonprofit alternative services. The tasks completed by the firms’ attorneys did not amount to the “practice of law.” The court ordered restitution and enjoined certain defendants from providing “debt relief services.” The Seventh Circuit agreed that the firms and lawyers were not engaged in the practice of law; further proceedings are necessary concerning remedies. View "Consumer Financial Protection Bureau v. Consumer First Legal Group, LLC" on Justia Law

In his employment discrimination action, Nichols obtained a judgment of $1.5 million in damages (later reduced to the statutory cap of $300,000) and $952,156 in equitable relief. His attorney, Longo petitioned for $1,709,345 in attorneys’ fees and $4,460.47 in costs under Title VII’s fee-shifting provision, 42 U.S.C. 2000e-5(k). He submitted that his hourly rate was $550 and that he had worked 3,107.9 hours on Nichols’s case; he requested a 15% upward adjustment, arguing that Nichols’s case was “risky”; the successful outcome; and the deterrent impact of a large award.The Seventh Circuit affirmed an award of $774,584.50 in fees and $4,061.02 in costs. Relying on other then-recent fee awards for Longo, the court set the reasonable hourly rate at $360 for attorney work and $125 for paralegal work. The court reduced Longo’s request by 962.1 hours, including 109.2 hours that Longo had billed for trips from his office to the courthouse; 18.5 hours for paralegal work billed at an attorney’s rate; a 10% reduction (298.0 hours) for excessive billing for clerical work; and another 20% reduction (536.4 hours) for general excessive billing. The court permitted Longo 2,145.8 hours at an attorney’s rate and 18.5 hours at a paralegal’s rate and denied Longo fees for litigating the fee petition, noting Longo’s lack of billing judgment and overly voluminous petition. View "Nichols v. Illinois Department of Transportation" on Justia Law