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

Articles Posted in Professional Malpractice & Ethics
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Plaintiffs, a start‐up company and its founder (Marlowe), sued the company’s former chief legal officer, Fisher, to recover losses from an arbitration award that held them liable for years of unpaid wages owed to Fisher himself. The award comprised unpaid wages and statutory penalties totaling $864,976 and an additional $366,460 because Fisher did not receive written notice of his contract nonrenewal. Plaintiffs alleged that Fisher advised them to enter into what they now say was an illegal agreement to defer Fisher’s compensation until the company was able to secure more funding.The Seventh Circuit affirmed the dismissal of the suit. Even if Marlowe was Fisher’s client regarding her own compensation agreement and a decision not to purchase directors and officers insurance, the plaintiffs failed to plead any plausible malpractice claims arising from those matters. Plaintiffs did not allege that they would have opted against using the compensation agreements had Fisher fully advised them. The company violated the Illinois Wage Act by failing to pay Fisher as agreed. The agreement did not aggravate or add to those violations; it made sense as an interim measure to forestall litigation by acknowledging the obligation and committing the company to one way to satisfy it. View "UFT Commercial Finance, LLC v. Fisher" on Justia Law

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Woodson received prenatal treatment from Dr. Ramsey at NorthShore Health Centers. Ramsey informed Woodson that she would likely need to deliver her baby by C-section. Ramsey delivered P.W. vaginally at Anonymous Hospital. Woodson noticed immediately that something was wrong with P.W.’s left arm. P.W.’s arm did not improve.NorthShore is a Federally-qualified health center (FQHC) that receives federal money (42 U.S.C. 1396d(l)(2)(B)); its employees are deemed Public Health Service employees, covered against malpractice claims under the Federal Tort Claims Act (FTCA), 42 U.S.C. 233(g). NorthShore appears in the federal government's online public database of federal funding recipients whose employees may be deemed Public Health Service employees. Woodson’s attorney, Sandoval, failed to recognize NorthShore’s status as an FQHC. Sandoval reviewed the Indiana Department of Insurance (IDOI) and Indiana Patient’s Compensation Fund online databases and learned that Ramsey and Anonymous Hospital were “qualified” providers under the Indiana Medical Malpractice Act. The IDOI forwarded Woodson’s complaint to Ramsey and his insurance carrier. Those claims remain pending.On December 16, 2015, NorthShore informed Sandoval that NorthShore was a federally funded health center. Woodson filed administrative tort claims, which were denied. Nearly three years after P.W.’s birth, Woodson filed suit against the government and Anonymous Hospital. The Seventh Circuit affirmed that the claims accrued on December 7, 2013, the day P.W. was born, and were untimely under the FTCA’s two-year statute of limitations. Woodson had enough information shortly after P.W.'s birth to prompt her to inquire whether the manner of delivery caused P.W.’s injury. The FTCA savings provision does not apply because the IDOI never dismissed the claims. Neither Ramsey nor NorthShore had a duty to inform Woodson of their federal status. View "P.W. v. United States" on Justia Law

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Cutchin’s wife and daughter were killed in an automobile accident that occurred when another driver, Watson, age 72, struck their vehicle. Cutchin alleges that Watson’s driving ability was impaired by medications she had been prescribed, including an opioid. Cutchin filed a malpractice suit against Watson’s healthcare providers, charging them with negligence for an alleged failure to warn Watson that she should not be driving given the known motor and cognitive effects of those medications. After the providers and their malpractice insurer agreed to a settlement of $250,000, the maximum amount for which they can be held individually liable under the Indiana Medical Malpractice Act (MMA), Cutchin sought further relief from the Patient’s Compensation Fund, which acts as an excess insurer. The Fund argued that the MMA does not apply to Cutchin’s claim and that he is barred from seeking excess damages from the Fund. The district court agreed.The Seventh Circuit certified to the Indiana Supreme Court the questions: Whether Ithe MMA prohibits the Fund from contesting the Act’s applicability to a claim after the claimant concludes a court‐approved settlement with a qualified healthcare provider, and whether the MMA applies to claims brought against individuals (survivors) who did not receive medical care from the provider, but who are injured as a result of the provider’s negligence in providing medical treatment to someone else. View "Cutchin v. Robertson" on Justia Law

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A confidential source, “Bonz” told Champaign Police that he knew a crack cocaine dealer named Moe. Over a few months, the department conducted five controlled buys from Moe, consistent with information from Bonz. After reviewing the video of the transactions, officers identified Moe as Orr, who was on parole after being convicted of unlawful possession of a controlled substance with intent to deliver. Bonz identified a picture of Orr. Officers tied the involved vehicle and apartment to Orr. Pursuant to a warrant, officers searched Orr’s apartment. They found a semi-automatic pistol with ammunition, approximately 22 grams of crack cocaine, approximately 15 grams of powdered cocaine, and drug paraphernalia. Orr voluntarily admitted that the gun and cocaine were his. Indicted for possessing a firearm as a felon, 18 U.S.C. 922(g), Orr unsuccessfully moved to suppress the evidence, asserting Bonz was an unreliable source.Orr testified that he had no reason to possess a firearm. The prosecutor presented evidence of Orr’s drug involvement. The jury found Orr guilty. Before sentencing, the Judicial Council of the Seventh Circuit determined that Judge Bruce had breached the Code of Conduct for U.S. Judges by engaging in improper ex parte communications in other cases with members of the U.S. Attorney’s Office. Although the Council found no evidence that those communications affected the outcome of any case, it suspended Bruce from all criminal matters involving the U.S. Attorney’s Office for one year. Orr’s case was transferred to another judge. The Seventh Circuit vacated Orr’s conviction. Judge Bruce’s conduct “cast a pall over certain decisions" that "required the exercise of substantial discretion.” This was not harmless error. View "United States v. Orr" on Justia Law

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Their father set up a trust for the benefit of Elizabeth and Thomas, giving the siblings equal interests; if either died without children, the other would receive the remainder of the deceased sibling’s share. Thomas approached Elizabeth after their father's death, wanting to leave a portion of his share to his wife, Polly. In 1998, Elizabeth retained the defendants to terminate the trust; the representation letter made no mention of a life estate for Polly or a subsequent remainder interest for Elizabeth. The settlement agreement did not mention Polly or a life estate, nor did it restrict what either sibling could do with the trust funds. The agreement contained a liability release and stated that it was the only agreement among the parties. In 1999, Elizabeth signed the agreement and the petition to dissolve the trust. In 2000, the probate court granted the petition. Elizabeth and Thomas each received more than a million dollars. Thomas died in 2009 without children; his will devised his assets to Polly. When Polly died in 2015, she left her estate to her children. Elizabeth filed a malpractice claim.The Seventh Circuit affirmed summary judgment for the defendants, holding that the two-year Indiana statute of limitations began running no later than 2000 and that if Elizabeth had practiced ordinary diligence, she could have discovered then that her wishes had not been followed. View "Ruckelshaus v. Cowan" on Justia Law

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Day was indicted for conspiracy to commit wire fraud after participating in a fraudulent “credit repair” scheme. The government offered Day a plea deal that would have yielded a probable sentencing range of 51-63 months’ imprisonment. Day’s federal defender advised him to accept the deal. His father urged him to consult a private lawyer—an acquaintance with no experience in criminal law. That lawyer brought in an attorney experienced in federal criminal law. The two told Day that he was not guilty and should reject the offer. Day hired the two lawyers. The federal defender withdrew and offered to make her file available. The government extended the same offer six weeks before trial. Though they had not yet reviewed the case materials, Day’s new lawyers advised him to reject it. Day declined the deal. At the final pretrial hearing, Day again rejected the plea offer. The lawyers later told Day he would lose at trial. Day told them to get the best deal they could. They instead advised him to throw himself on the mercy of the court.Day pleaded guilty without an agreement, facing a sentencing range of 87-108 months. The district judge imposed a 92-month sentence. Day sought relief under 28 U.S.C. 2255, arguing that his attorneys were constitutionally ineffective. The Seventh Circuit vacated. The government conceded the deficient-performance element of Day’s Sixth Amendment claim. The facts set forth in his motion, if proven, could establish prejudice. View "Day v. United States" on Justia Law

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The cause of Cory's 2006 death was undetermined. The police later reopened the investigation. A grand jury indicted her husband, Lovelace, an Illinois criminal defense lawyer. Lovelace's first trial resulted in a hung jury. In his 2017 retrial, a jury found him not guilty. In a suit against under 42 U.S.C. 1983, Lovelace claimed that the defendants fabricated evidence, coerced witnesses, and concealed exculpatory evidence. The case was assigned to Judge Myerscough. A year later, the case was reassigned to Judge Bruce. Months later, the plaintiffs successfully moved to disqualify Bruce. The case was reassigned back to Myerscough, who informed counsel about circumstances that might seem relevant to her impartiality, her usual practice. Myerscough's daughter had just been hired as an Exoneration Project attorney. The plaintiffs’ law firm funds the Project and donates the time of its attorneys. The plaintiffs’ attorney stated that she worked with the judge’s daughter at the Project but did not supervise her and was not responsible for her compensation. Screening was implemented. Myerscough had recently attended a fundraiser for Illinois Innocence Project, where her daughter previously worked. The fundraiser recognized “exonerees,” including Lovelace. Defendants unsuccessfully requested that Myerscough disqualify herself under 28 U.S.C. 455(a).The Seventh Circuit denied a mandamus petition. There was no reasonable question as to Myerscough’s impartiality; no “objective, disinterested observer” could “entertain a significant doubt that justice would be done” based on the fundraiser. Section 455(b) requires recusal only if a judge’s close relative is “acting as a lawyer in the proceeding” or is known “to have an interest that could be substantially affected.” Nothing beyond the bare fact of the daughter’s employment poses a risk of bias. View "Gibson v. Myerscough" on Justia Law

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In a 2007 RICO action, Needle (a Pennsylvania sole practitioner) and Illinois attorneys represented the plaintiffs under a contingent fee agreement. The Illinois attorneys withdrew; Needle recruited Illinois attorney Royce as local counsel. They eventually settled the case for $4.2 million. The settlement agreement did not address attorney’s fees, costs, or expenses. Needle wanted $2.5 million, leaving the plaintiffs with $1.7 million. The attorneys also disagreed over the division of the fee between themselves. Royce filed an interpleader action. Needle “routinely and unapologetically tested the district court’s patience, disregarded court orders, and caused unnecessary delays.” The court repeatedly sanctioned Needle, ultimately following the written fee agreement. The Seventh Circuit affirmed an award of attorneys’ fees of one-third of the settlement, with Needle 60 receiving percent and Royce 40 percent of the aggregate.During the dispute, Needle was without counsel and was on the verge of a default judgment, when three partners from the O’Connor law firm stepped in to represent Needle P.C. Less than three months after appearing as counsel, O’Connor “understandably” withdrew due to irreconcilable differences and a total breakdown of the attorney-client relationship. O’Connor sought compensation under a quantum meruit theory and perfected an attorney’s lien. The district court granted O’Connor’s petition to adjudicate and enforce the lien. The Seventh Circuit affirmed. O’Connor is entitled to recover in quantum meruit and the district court properly concluded that the petitioned fees were reasonable. View "Michael Needle, P.C. v. Cozen O'Connor" on Justia Law

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In the underlying 2007 civil RICO action, Needle (a Pennsylvania sole practitioner) and two Illinois attorneys represented the plaintiffs. The attorneys executed a contingent fee agreement with their clients. The Illinois attorneys later withdrew from the representation, so Needle recruited Illinois attorney Royce as local counsel. Needle and Royce agreed to split half of any fee equally and the other half proportional to the time each spent on the matter. Needle and Royce litigated the suit for several years before successfully settling the case for $4.2 million. The settlement agreement did not address attorney’s fees, costs, or expenses. All payments were made to Royce as escrow agent. Needle wanted $2.5 million, leaving the plaintiffs with $1.7 million. Needle and Royce also disagreed over the division of the attorney’s fee between themselves.Royce filed an interpleader action. The Seventh Circuit described what followed as “a long, tortured history” based on an “objectively frivolous" position; Needle “routinely and unapologetically tested the court’s patience, disregarded court orders, and caused unnecessary delays.” The court repeatedly sanctioned Needle for “obstructionist and vexatious” tactics. The district court followed the written fee agreement and awarded attorneys’ fees of one-third of the settlement, then awarded Needle 60 percent and Royce 40 percent of the aggregate. The Seventh Circuit affirmed: The district court’s rulings were correct, the sanctions were appropriate, and Needle’s other arguments are baseless. View "Royce v. Needle" on Justia Law

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Ahmed co‐owned an LLC that owned a condominium building. Ahmed recruited individuals to pose as buyers for the building's units and to submit fraudulent loan applications to lenders, including Fifth Third. The participants split the loan proceeds; no payments were made on the loans. Kaufman was the seller's attorney for every closing. The closings were conducted by Traditional Title at Kaufman’s law office. Traditional received closing instructions from Fifth Third to notify it immediately of any misrepresentations and to suspend the transaction if “the closing agent has knowledge that the borrower does not intend to occupy the property.” Kaufman concealed the buyers’ misrepresentations and instructed closing agents to complete closings even when buyers were purchasing multiple properties. Ahmed and Kaufman extended the scheme to other buildings. Although Kaufman testified that he was not aware of the fraud, Ahmed testified that Kaufman knew the buyers were part of the scheme. Two closing agents testified that they informed Kaufman about misrepresentations in loan applications. The Seventh Circuit affirmed a fraud judgment for Fifth Third. Kaufman participated individually in each closing as counsel and personally directed Traditional’s employees to conceal the fraud from Fifth Third, for his personal gain. The judgment against Kaufman was not derived solely from Traditional’s liability, based on his membership in the LLC, so the Illinois LLC Act does not bar his liability. Kaufman is not shielded by being the attorney for the seller in the fraudulent transactions. View "Fifth Third Mortgage Company v. Kaufman" on Justia Law