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

In 2000 the conservancy purchased property, but allowed the farmer to remain as a tenant through 2003. The farmer/seller was required to perform removal of specified substances and warranted that there were no undisclosed underground tanks. The conservancy withheld funds pending clean-up. In 2006 the conservancy sued for breach of the warranty and failure to complete the clean-up. The district court allowed the conservancy to amend and claim damages with respect to newly-discovered contamination and entered judgment in favor of the conservancy. The Seventh Circuit affirmed. The claim is within the Illinois 10-year limitations period for actions and written contracts; the doctrine of laches does not apply.

A developer was required to make public improvements to be turned over to the city and, in 2006, obtained bonds to ensure performance, as required by ordinance. Work began, but the subdivision failed and subcontractors filed mechanics' liens. The developer notified the city that three foreclosures were pending and recommended that it redeem the bonds. The insurer refused to pay. The city did not follow up, but a subcontractor sued, purporting to bring its case in the name of the city for its own benefit. The subcontractor contends that it should be paid out of the proceeds of the bonds. The case was removed to federal court. The district court dismissed, finding that the subcontractor did not have standing to assert claims on the bonds because it was not a third-party beneficiary to the bonds. The Seventh Circuit affirmed, based on the language of the contract.

Defendants were convicted of mail fraud and wire fraud (18 U.S.C. 1341, 1346) for participating in a fraudulent scheme to obtain mortgage loans. The scheme involved: recruiters, who enlisted buyers to buy properties with fraudulently obtained funds; financiers, who provided funds to buyers to facilitate the transactions; administrators, who bought fake documents to enable buyers to obtain mortgages; loan officers, who prepared fraudulent applications and sent them to lenders. Between 2003 and 2005, the group acquired more than 70 properties for which lenders provided $7.2 million in loans. Most of the properties went into foreclosure, resulting in losses to the lenders of $2.2 million. The Seventh Circuit affirmed the convictions and sentences. The use of the term "straw buyer" in the confession of a nontestifying co-defendant did not obviously refer to the defendant and violate his Sixth Amendment right of confrontation under the "Bruton" doctrine. The court properly applied a "sophisticated means" sentence enhancement and gave an "ostrich" instruction concerning defendant's knowledge.

The Railroad Revitalization and Regulatory Reform Act prevents states and their subdivisions from imposing discriminatory taxes against railroads. 49 U.S.C. 11501. In 2008, the drainage district, a subdivision of Illinois, changed its method for calculating assessments. All other owners are assessed on a per-acre formula, but railroad, pipeline, and utility land were to be assessed on the basis of "benefit," apparently based on the difference in value between land within the district and land outside the levees; annual crop rentals being paid; and agricultural production of lands within the district. Two rail carriers brought suit under a section of the Act, which prevents imposition of "another tax that discriminates against a rail carrier." The district court held that the assessment was prohibited by the Act, but concluded that it was powerless to enjoin the tax. The Seventh Circuit reversed, holding that the court has authority to enjoin the tax, but, under principles of comity, should eliminate only the discriminatory aspects, not the entire scheme. The assessment is a tax that, raises general revenues; its ultimate use is for the whole district. It imposes a proportionately heavier tax on railroading than other activities.

The railroad owns a 2.8-mile right-of-way that it has leased to the Chicago Transit Authority for almost 50 years. When the lease became too costly, the CTA sought to condemn a perpetual easement. The district court enjoined the condemnation as preempted by the Interstate Commerce Commission Termination Act, 49 U.S.C. 10501(b). The Seventh Circuit affirmed. The railroad and its right-of-way fall under the Act; the proposed state condemnation would be a regulation of railroad transportation preempted by the Act. The court employed an "as applied" analysis and concluded that the condemnation would prevent or unreasonably interfere with rail transportation by changing the relationship between the parties. Under the proposed easement, the CTA's rights would not be subject to termination for any reason. The railroad would lose property rights to reclaim the property if the CTA ceases passenger transportation operations on the Right of Way or violates any term of the lease and to oust the CTA from the Right of Way if the CTA fails to meet its lease obligations.

A developer built a subdivision in a floodplain. The developer and buyers knew that the land is low-lying and prone to flooding. The developer constructed levees, floodwalls, retention ponds, and a stormwater holding system. The company that handled construction and sale of buildings in Parcel D had the developer fill one of the retention ponds, so that it could build additional homes; it also constructed duplexes where the developer had planned single-family housing. In 2003 several homes were inundated when a retention pond overflowed. In a state court suit, the company settled with homeowners for$335,000; homeowners agreed to take $35,000 from the company and seek the rest from its insurer. A federal court concluded that the company's insurance policy did not apply, reasoning that homeowners had not suffered "property damage" as defined by the policy because the state court complaint sought changes to curtail future loss. The Seventh Circuit affirmed, noting that neither party had asked the court to apportion the settlement between losses and improvements and that it was too late to do so.

Plaintiffs, evicted from their home following a state court foreclosure judgment, sought relief in federal court. The district court rejected all claims. The Seventh Circuit affirmed. The district court correctly considered the Rooker-Feldman doctrine and concluded that the doctrine applied to only two of the 22 claims: those that claimed injury caused by the state-court judgment of foreclosure, as opposed to injury caused by the defendants’ actions in enforcing the judgment. Plaintiffs offered no evidence of discriminatory motive with respect to their race or disabilities and did not allege specific facts establishing that there were material facts in dispute.

Plaintiff purchased a house in the early 2000s and fell behind on his payments. The lender extended two forbearance agreements, but assessed late fees and reported the late payments; plaintiff was unable to refinance and, when plaintiff was unable to catch up, the lender foreclosed. Plaintiff alleged violation of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2605 and Indiana Home Loan Practices Act, IND. CODE 24-9-1-1. The district court rejected the claims on summary judgment. The Seventh Circuit affirmed. The lender acted within its contract rights and did not violate the clear terms of the forbearance agreements.

Defendant is one of several investors (underwriters) in a mortgage bankers blanket bond issued to plaintiff to insure against financial loss resulting from employee misconduct. One of plaintiff's employees engaged in a scheme by which, for a kickback, he caused plaintiff to fund mortgages below its standards. Not knowing the loans were substandard, plaintiff sold them, warranting that they met its standards. Plaintiff was forced to repurchase the loans. The underwriters denied the claim. The district court dismissed a suit, finding that the bond did not cover the loss. The Seventh Circuit affirmed. The fidelity bond at issue contains direct-loss causation language. A financial loss resulting from contract liability to third parties is not directly caused by employee misconduct, even if employee misconduct is the source of the contract liability. Plaintiff's loss resulted from its contractual repurchase obligations; the employee misconduct did not directly cause the eventual financial loss. In addition, a specific exclusion in the bond bars coverage for losses resulting from loan-repurchase obligations.

Subdivision residents claimed that a retention pond's problems with algae, mosquitoes, and flooding would be exacerbated by proposed expansion of the subdivision. The residents, most of whom are African-American, claimed that the town was unresponsive to their concerns, but responded to similar concerns from white residents of another subdivision. The district court rejected claims under 42 U.S.C. 1983. The Seventh Circuit affirmed, as modified. The residents did not have any evidence that a subdivision, similar except for the race of the residents, was treated differently, but relied solely on allegations. State law claims should have been dismissed, not remanded.