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

The case revolves around a dispute over the estate of Dr. Lester Frank Sumrall, who founded a church that grew into a global evangelical empire, LeSEA, Inc. After his death, his son and grandson, Lester Sumrall, claimed they should have inherited part of his estate, including copyrights to his works and his right of publicity. They alleged that LeSEA, now controlled by other family members, had wrongfully taken ownership of these assets.The case was initially heard in the United States District Court for the Northern District of Indiana. The district court dismissed the claims brought by Lester Sumrall and the Lester Sumrall Family Trust against LeSEA and its affiliates, ruling in favor of LeSEA on all counts. The court found that the copyright claims were untimely and that LeSEA owned the copyright to a particular photograph, the "Traveler Photo," taken by Lester Sumrall. The court also dismissed various state law claims for damages under the doctrine of laches, citing inexcusable delay in asserting rights and prejudice to the adverse party.Upon appeal, the United States Court of Appeals for the Seventh Circuit affirmed the district court's decision. The appellate court agreed that the copyright claims were untimely and that LeSEA owned the copyright to the Traveler Photo. The court also upheld the application of laches to the state law claims, noting that laches is equally applicable in suits at law in Indiana. Finally, the court dismissed the claim for LeSEA's alleged use of Dr. Sumrall's right of publicity, as the Trust failed to plead the required half-ownership. View "Sumrall v. LeSEA, Inc." on Justia Law

The United States Bankruptcy Court for the Northern District of Illinois ruled that all assets held by the Soad Wattar Revocable Living Trust—including the Wattar family home—were part of the bankruptcy estate of Richard Sharif. Sharif was the son of Soad Wattar, now de‐ ceased. As the sole trustee of the Wattar trust. Sharif’s sisters, Haifa and Ragda Sharifeh, soon launched an effort to keep the trust proceeds out of their brother’s bankruptcy estate. At issue in these appeals are the bankruptcy court’s rulings on three motions: (1) Haifa’s 2015 motion to vacate the court’s decision that all trust assets belonged to the bankruptcy estate; (2) the sisters’ joint 2016 motion for leave to sue the Chapter 7 trustee assigned to Sharif’s bankruptcy for purported due process violations; and (3) Ragda’s motion seeking both reimbursement of money she allegedly spent on the family home and the proceeds from Wattar’s life insurance policy, which the court had found to be an asset of the trust and therefore part of the bankruptcy estate.   The Seventh Circuit affirmed. The court held that even if Haifa were really the executor, she simply waited too long to assert the estate’s rights. In the bankruptcy and district courts, the trustee raised the equitable defense of laches, which cuts off the right to sue when (1) the plaintiff has inexcusably delayed bringing suit and (2) that delay harmed the defendant. Next, the court held that the bankruptcy court correctly concluded that the motion did not set forth a prima facie case for a right to relief against the trustee. View "Estate of Soad Wattar v. Horace Fox, Jr." on Justia Law

Allen earned a Ph.D. in physics from Yale University in 1965 and embarked on a successful career in the aerospace industry. He retired in 2004 and granted a financial power of attorney to his daughter, Key, when he and his wife experienced declining health and he could no longer manage their finances. For several years Key used the power of attorney to make withdrawals from Allen’s investment accounts held by affiliated investment firms (Brown). Five years later Allen revoked the power of attorney and sued Brown, raising contract and fiduciary-duty claims under Maryland law. He alleged that Key’s withdrawals (or some of them) were not to his benefit and that the investment companies should not have honored them.The Seventh Circuit affirmed the dismissal of the suit. The Maryland Court of Appeals has clarified that a plaintiff may plead a claim for breach of fiduciary duty even when another cause of action (like breach of contract) is available to redress the conduct. . Still, the power of attorney shields Brown from liability for breach of fiduciary duty just as it does for breach of contract. Brown had no fiduciary obligation to refuse to carry out transactions authorized by the power of attorney. View "Allen v. Brown Advisory, LLC" on Justia Law

The Heitings’ Revocable Trust, administered by BMO, filed no tax returns; the Heitings reported its gains and losses on their returns. With respect to two stocks, BMO had no discretionary power to take any action, including any sale or purchase of the stock. Nonetheless, in 2015 BMO sold the restricted stock, incurring a taxable gain of $5,643,067.50. The Heitings included that gain on their 2015 personal tax return. BMO subsequently realized that the sale was prohibited, and in 2016, purchased shares of the restricted stock with the proceeds from the earlier transaction.The Heitlings sought to invoke the claim of right doctrine. 26 U.S.C. 1341 to claim a deduction on their 2016 return: A taxpayer must report income in the year in which it was received, even if the taxpayer could later be required to return the income but would then be entitled to a deduction in the repayment year; alternatively, taxpayers may recompute their taxes for the year of receipt of the income. The Seventh Circuit affirmed the dismissal of the Heitings’ suit. Under section 1341(a)(2), the Heitings had to show that the repayment occurred because “it was established after the close of such prior taxable year" that the taxpayer "did not have an unrestricted right to such item.” It was not established that the Trust did not have an unrestricted right to the income item. The Heitlings never challenged the purchase or sale of the restricted stock. View "Heiting v. United States" on Justia Law

Linda and her husband Milton set up an estate plan with the help of attorney Roth. Milton created a trust and designated himself as sole trustee. Upon his death, Linda and his accountant, Sanders, would become cotrustees. Milton’s assets included a $1.5 million Vanguard account. Milton later changed the Vanguard account and other accounts to transfer on death directly to Linda as the sole primary beneficiary. Milton died in 2016. Linda believed that Roth was still her attorney. Roth and Sanders convinced Linda to waive her rights as co-trustee and to disclaim her interest in the Vanguard account; they suggested that she had acquired these interests through wrongdoing. Roth then transferred the disclaimed Vanguard account directly to Milton’s son, David, instead of to the trust. David sued Linda and obtained an Indiana state court judgment that she exerted undue influence on Milton and that the trust was the proper owner of certain assets Milton had transferred to Linda.Linda sued in federal court, asserting fraud, conspiracy, and malpractice against Roth and Sanders, claiming the two “duped” her into disclaiming certain assets and that Roth committed malpractice by transferring the account to David rather than the trust. The Seventh Circuit affirmed the dismissal of the suit; issue preclusion based on the Indiana judgment foreclosed Linda’s claims because the Indiana jury’s finding of undue influence showed that Roth and Sanders’s advice to disclaim her illegally-obtained interests was neither negligent nor fraudulent. View "Bergal v. Roth" on Justia Law

In 2012, Bernard’s mother died, leaving a $3 million estate entirely to Bernard’s homeless, mentally ill sister, Joanne, who had lived in Denver. Bernard and his wife, Katherine are professors at Northwestern University School of Law. Bernard had himself appointed Joanne’s conservator and redirected the inheritance to himself. Bernard’s cousin, Wrigley, found Joanne in New York. Bernard and Wrigley each sought appointment as guardian of Joanne’s property in New York.Joanne’s guardian ad litem discovered that Bernard had diverted much of Joanne’s inheritance and hired Kerr, a forensic accountant, to investigate Bernard and Pinto, Joanne’s representative payee, who had withdrawn funds from her account. The Denver probate court suspended Bernard as Joanne’s conservator and ordered that Pinto provide a complete accounting, Wrigley allegedly made threats against Katherine. The Denver court entered a $4.5 million judgment against Bernard.Katherine wrote to the New York court on Northwestern University letterhead, alleging “misappropriation of Joanne’s assets by Pinto.” Wrigley then called the deans at Northwestern’ to complain about Katherine.Katherine sued Wrigley and Kerr, alleging defamation and intentional infliction of emotional distress. The court rejected Katherine’s attempt to fire her attorney and present her own closing argument and accused Katherine of “gamesmanship,” stating that it could not “trust [her] to follow the rules” based on her performance as a witness. Her attorney claimed to be physically ill and the judge then granted a continuance. Ultimately, the jury rejected Katherine’s claims. The Seventh Circuit affirmed, rejecting challenges to the court’s evidentiary decisions, including overruling Katherine’s objections to closing arguments, and to jury instructions. View "Black v. Wrigley" on Justia Law

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

Lester and William Lee created LIA in 1974 as a public company. William’s sons (Lester's nephews) later joined the business. LIA subsequently bought out the public shareholders, leaving Lester owning 516 shares; William owned 484. William created the Trust to hold his shares. The nephews served as trustees. Lester encountered difficulties with another company he owned, Maxim. He proposed that Maxim merge with LIA; William rejected this idea. Lester told the nephews, “I will screw you at every opportunity,” and made other threats, then, as majority shareholder, approved a merger of LIA and another company. The Trust asserted its rights under Indiana’s Dissenters’ Rights Statute. Lester gutted LIA to prevent the Trust from collecting the value of its LIA shares. He bought property from LIA on terms favorable to him and realized substantial profits. LIA subsidiaries were transferred for little or no consideration to Lester’s immediate family. Lester also perpetrated a collusive lawsuit, resulting in an agreed judgment that all LIA assets should be transferred to him and his companies. Lester did not disclose these actions to the nephews. In 2008, the Jennings Circuit Court conducted an appraisal in the dissenters’ rights action. Between the trial and the judgment, Lester dissolved LIA. The court entered a $7,522,879.73 judgment for the Trust. In 2012, Lester petitioned for Chapter 7 bankruptcy. The Trust initiated a successful adversary proceeding to pierce LIA’s corporate veil and hold Lester personally liable for the judgment. The Seventh Circuit affirmed, noting the facts were undisputed. View "William R. Lee Irrevocable Trust v. Lee" on Justia Law

In 2002 a Greyhound bus struck and killed Claudia. Her daughter, Cristina, age seven, witnessed the accident. In 2016 Cristina settled claims against Greyhound and other potentially responsible persons for $5 million. Klein, Cristina’s stepfather, believes that Cristina allocated too much of the settlement to herself as damages for emotional distress and not enough to him. His suit under 42 U.S.C. 1983 alleged that Cristina conspired with state judges, law firms, Greyhound, and others, to exclude him from financial benefits. Klein sued as the purported administrator of Claudia’s estate although he had not been appointed as administrator. Klein and Cristina became co-administrators, but Klein was soon removed by a state judge. Defendants asked the federal judge to dismiss the suit as barred by the Rooker-Feldman doctrine, under which only the U.S. Supreme Court may review the civil state court judgments. The Seventh Circuit affirmed dismissal on the merits. Collateral litigation in federal court is blocked by principles of preclusion and by Rooker's holding that errors committed in state litigation cannot be treated as federal constitutional torts. The court noted that the “long and tangled history" of the case was caused by Klein’s (or his lawyer’s) "inability or unwillingness to litigate as statutes and rules require.” They had neither briefed the proper issue on appeal nor attached the judgment, as required. “They are not entitled to divert the time of federal judges” and will be penalized for any further attempts. View "Xydakis v. O'Brien" on Justia Law

Richard and Kathryn are the beneficiaries of their parents’ multi‐million dollar trust, which is administered by Richard, Kathryn, and a corporate trustee. When their father died, the two fell into “irreconcilable” disputes. Kathryn hired Oxford to advise her. The trust paid Oxford’s fees. Oxford advised Kathryn to create one trust for Kathryn and her children, and another for Richard and his. Richard agreed. They moved the trust's situs from Indiana to South Dakota. Ultimately, they could not agree on the terms. When Kathryn refused to sign Richard’s proposed agreement, he unsuccessfully petitioned a South Dakota state court to order the trust's division. Richard alleges that he suffered financial losses and that his sister refused to sign the agreement because she received negligent advice from Oxford. Richard sued Oxford on behalf of the trust, asserting his capacity as a beneficiary and a co‐trustee. The complaint identified Kathryn as an “involuntary plaintiff.” The Seventh Circuit affirmed dismissal, finding that Richard lacks capacity to bring suit on behalf of the trust under either Illinois or South Dakota law, which prohibits a trust beneficiary from suing a third party on behalf of a trust (absent special circumstances that were not alleged). State law and the trust agreement require a majority of trustees to consent to such a suit; that consent was missing. View "Doermer v. Oxford Financial Group, Ltd." on Justia Law