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

Rogers is a tax lawyer. The Seventh Circuit previously characterized as an “abusive scam” a scheme Rogers implemented for the 2003 tax year. He implemented a similar scheme for later tax years: Rogers forms a partnership (Sugarloaf) that he uses to acquire severely-distressed accounts receivables from Brazilian retailers. For tax purposes, the partnership carries the receivables at their face amount, not at fair value. The partnership then conveys the receivables to U.S. taxpayers, who deem them uncollectible and deduct from their income the associated “loss.” A 2004 Tax Code amendment prohibits such partnerships from transferring built-in-losses on uncollectible receivables to U.S. taxpayers in this manner, 118 Stat.1589. Rogers modified his scheme to involve a trust in which Sugarloaf was both the grantor and beneficiary and additional maneuvering. Under the IRS’s sham determination, the Brazilian retailers’ purported contribution of receivables to Sugarloaf was recharacterized as a sale of assets; Sugarloaf’s original basis in the receivables was reduced to fair value—nearly nothing. The Tax Court and Seventh Circuit affirmed that Sugarloaf was a sham partnership; even if Sugarloaf were a legitimate partnership, the Brazilian retailers’ redemptions of their interest in the partnership was, in substance, a sale of receivables. A 40% penalty applied (26 U.S.C. 6662(h)(1); (2)(A)(1)) to Sugarloaf’s tax underpayment resulting from its gross misstatement of the 2004 cost-of-goods-sold expense, and a 20% penalty applied (section 6662(a), (b)(1) & (2)) to underpayments attributable to its negligence when failing to include certain income and taking disallowed business expense deductions. View "Sugarloaf Fund, LLC v. Commissioner of Internal Revenue" on Justia Law

After pleading guilty to preparing false tax returns for her clients, 26 U.S.C. 7206(2), Johnson was sentenced to 18 months in prison plus $79,325 in restitution—the amount that Johnson’s clients unlawfully avoided paying (with respect to the counts of conviction) that had not been collected from the taxpayers before sentencing. The Seventh Circuit affirmed, rejecting Johnson’s argument that the prosecution should have told the judge how much more it might collect from her clients, which she characterized as exculpatory material that should have been revealed under "Brady." The collections were not concealed. The presentence report showed that the government already had collected substantial sums (the original loss exceeded $150,000) and was trying to obtain the balance from taxpayers. Johnson was free to ask how much more had been collected by the date of sentencing but did not. Brady does not apply when information is available for the asking. The restitution statute, not the Constitution, determines the prosecution’s duty—one of credit against the judgment, not of disclosure during the sentencing hearing. Johnson will receive credit against the restitution award for whatever the government collects from the taxpayers; it was unnecessary to disclose the details of collection activities before the judge determined the base restitution award. View "United States v. Johnson" on Justia Law

Ross worked as a coal miner for approximately 30 years. He smoked cigarettes for almost as long but was able to quit after his first heart attack. Ross continued to work as a coal miner even though he suffered another heart attack and had difficulty breathing at work. Approximately six years after Ross stopped working in the coal mines, his breathing problems became severe. In 2012, Ross sought benefits under the Black Lung Benefits Act, 30 U.S.C. 901. The Department of Labor’s Benefits Review Board vacated a denial. On remand, the ALJ granted Ross’s claim. The Board affirmed. The Seventh Circuit enforced the decision. Rejecting a due process argument, the court noted the employer had the opportunity to argue its case twice before the ALJ and twice before the Board, including the chance to submit supplemental medical opinion evidence. A theory that something must be amiss because the ALJ changed his mind on remand is particularly unpersuasive here because the parties submitted five additional medical opinions after the Board’s second decision. Ross proved by a preponderance of the evidence that he was totally disabled. View "Consolidation Coal Co. v. Director, Office of Workers’ Compensation Programs, United States Department of Labor" on Justia Law

Lee is serving sentences totaling 100 years’ imprisonment. A state judge found that Lee and Manley forcibly abducted L.M., struck and raped L.M., and displayed a pistol to make her more cooperative. L.M. escaped and ran naked to a house. Police took pictures of L.M.’s bloody face. Lee, the only defense witness, said that L.M. entered the car voluntarily and that he did not touch her sexually—though before trial Lee said that he and L.M. had consensual oral sex. The state judge found that L.M.’s testimony was “very credible” and that the pictures showing her injuries, and the testimony of the person who opened the door to L.M., negated the defense of consent. Lee’s convictions were affirmed on direct and collateral review. Lee’s federal petition under 28 U.S.C. 2254 claimed ineffective assistance of counsel. He asserts that before trial his lawyer received five affidavits that corroborated Lee’s story or provided exculpatory details, but that counsel did not interview the affiants. In Lee’s post-conviction proceedings the state judiciary did not hold an evidentiary hearing, concluding that the affidavits were not necessarily inconsistent with guilt. The federal district judge held that the state court’s decision was not unreasonable. The Seventh Circuit vacated. It is impossible to say that Lee has “failed to develop [in state court] the factual basis of” his claim. The absence of evidence about what the trial would have been like, had the affiants testified, is attributable to the state court's failure to hold a hearing. View "Lee v. Kink" on Justia Law

Mars was the getaway driver to an armed robbery by Snyder and Higgins-Vogt. Days later, Mars’s body was found. While in jail on robbery charges, Higgins-Vogt never met with his appointed attorney but requested to meet with Brown. Brown was employed by a private entity, providing “counseling.” Higgins-Vogt had met Brown while incarcerated as a juvenile. Brown held no licenses in the field of mental health. Higgins-Vogt told Brown that he murdered Mars. Brown promised confidentiality but stated that she wanted the victim’s family to have closure. Higgins-Vogt eventually told Brown that he wanted to meet with Detective Patton about the weapon. After Higgins-Vogt waived his right to have his attorney present, the parties (including Brown and the State's Attorney) moved into an interview room so the questioning could be recorded. Higgins-Vogt provided the gun's location but claimed the information came from Snyder. Brown did not contradict Higgins-Vogt or state that he had confessed but elicited incriminating admissions. Police recovered the gun. Later, Higgins-Vogt told a Correctional Officer that he wanted to confess to a murder. On an inmate request form, Higgins-Vogt wrote: “I want to confess to the Paige Mars murder.” He told Brown that the confession was triggered by a conversation with his girlfriend. During a second interview with Detective Patton, Higgins-Vogt confirmed that he knew his rights and confessed to killing Mars. Higgins-Vogt later unsuccessfully moved to suppress the statements, arguing that Brown pressured him to confess. Brown denied any role in assisting law enforcement. Higgins-Vogt pleaded guilty and was sentenced to 60 years’ imprisonment. The Seventh Circuit affirmed while expressing its “strong disapproval” of Brown’s role at the jail. Higgins-Vogt, separate and apart from his interactions with Brown, voluntarily chose to confess to the murder. View "United States v. Higgins-Vogt" on Justia Law

Schmidt admitted to murdering his wife but argued the Wisconsin-law defense of “adequate provocation” to mitigate the crime from first- to second-degree homicide. A state judge held a pretrial hearing on that substantive issue, allowing Schmidt’s counsel to attend but not to speak or participate. The judge questioned Schmidt directly and ruled that Schmidt could not present the adequate provocation defense at trial. A jury convicted Schmidt of first-degree intentional homicide. The Wisconsin Court of Appeals held that the trial court did not violate Schmidt’s Sixth Amendment right to counsel. The Seventh Circuit initially granted habeas corpus relief, but, acting en banc, reversed itself and upheld the conviction. A state‐court decision can be a reasonable application of Supreme Court precedent even if it is an incorrect application, if the result is clearly erroneous, and if the petitioner presents “a strong case for relief.” While emphasizing that it did not endorse the constitutionality of the trial court’s “unusual ex parte, in camera examination” without counsel’s active participation, the court noted that the Supreme Court has “never addressed” a case like this. Even assuming this case involves a critical stage, Schmidt cannot establish that he was so deprived of counsel as to mandate the presumption of prejudice. A fair‐minded jurist could conclude that these facts were not “so likely to prejudice the accused” as to warrant the presumption of prejudice. View "Schmidt v. Foster" on Justia Law

Dockery was arrested after a domestic dispute at his girlfriend’s Joliet, Illinois apartment. Sergeant Blackburn and Officer Higgins took him to the police station for booking on charges of trespass and criminal damage to property. He grew confrontational while being fingerprinted. The officers stated that he would be handcuffed to a bench for the rest of the booking process. Dockery pulled away, fell over, and kicked wildly at the officers. Before the officers handcuffed him, Blackburn used her Taser four times. A security camera recorded the incident. Dockery sought damages under 42 U.S.C. 1983, alleging excessive force. The officers moved for summary judgment, claiming qualified immunity based on the incontrovertible facts captured on the recording. The Seventh Circuit reversed the denial of the motion. An excessive-force claim requires assessment of whether the officer’s use of force was objectively reasonable under the circumstances; based on the irrefutable facts preserved on the video, the officers are entitled to qualified immunity. The video shows that Blackburn deployed the Taser when Dockery was flailing and kicking and actively resisting being handcuffed; she used it three more times to subdue and gain control over Dockery as he kicked, attempted to stand up, and resisted commands to submit to authority. No case clearly establishes that an officer may not use a Taser under these circumstances. View "Dockery v. Blackburn" on Justia Law

For 25 years, Wrolstad worked at CUNA, eventually becoming a financial reporting manager. In 2009 his position was eliminated in a corporate restructuring. He was 52 years old. At his supervisor’s suggestion, Wrolstad applied for vacant positions at the company, including a job as a pension participant support specialist. CUNA hired a 23-year-old for that position. Wrolstad signed a severance agreement waiving all claims in exchange for 50 weeks of severance pay. Months later Wrolstad filed a complaint with the Madison Equal Opportunities Commission, claiming age discrimination. An investigator dismissed the complaint. CUNA sent Wrolstad a letter explaining that it would sue to enforce the waiver if he did not drop his appeal. Wrolstad refused. CUNA filed a breach-of-contract. Wrolstad filed a second complaint with the Commission, claiming retaliation. Both claims were transferred to the EEOC, which issued a right-to-sue notice. Wrolstad then sued CUNA under the Age Discrimination in Employment Act, 29 U.S.C. 621. A district judge granted CUNA summary judgment, ruling that the age-discrimination claim lacked evidentiary support and the retaliation claim was time-barred. The Seventh Circuit affirmed. Wrolstad’s effort to revive his age-discrimination claim cited new arguments and evidence that he did not bring to the district judge’s attention. The arguments were forfeited and fail on the merits. The retaliation claim accrued when CUNA sent the letter announcing its unequivocal decision to enforce the severance agreement. View "Wrolstad v. CUNA Mutual Insurance Society" on Justia Law

In 2002, in Texas, Dr. Phillips performed a laparoscopic hysterectomy on Bramlett, a 36-year-old mother. While hospitalized, Bramlett suffered internal bleeding and died. Her family filed a wrongful death lawsuit against the hospital and Dr. Phillips, who held a $200,000 professional liability insurance policy with MedPro. He notified MedPro of the lawsuit. In 2003, the hospital settled with the Bramletts for approximately $2.3 million. The Bramletts wrote to Dr. Phillips’s attorney, Davidson, with a $200,000 Stowers demand; under Texas law, if an insurer rejects a plaintiff's demand that is within the insured’s policy limit and that a reasonably prudent insurer would accept, the insurer will later be liable for any amount awarded over the policy limit. MedPro twice refused to settle. The family won a $14 million verdict. The Supreme Court of Texas capped Dr. Phillips’s liability. The family sued MedPro, which settled. MedPro was insured by AISLIC, which declined to cover MedPro’s settlement. The district court granted AISLIC summary judgment, concluding that coverage was excluded because MedPro should have foreseen the family’s claim. An exclusion precluded coverage for “any claim arising out of any Wrongful Act” which occurred prior to June 30, 2005, if before that date MedPro “knew or could have reasonably foreseen that such Wrongful Act could lead to a claim.” The Seventh Circuit reversed in part, finding genuine issues of material fact regarding whether MedPro’s failure to settle was a Wrongful Act and whether MedPro could have foreseen a "claim" before the malpractice trial. View "Medical Protective Co. of Fort Wayne, Indiana v. American International Specialty Lines Insurance Co." on Justia Law

Ofem, age 18, was arrested for a misdemeanor and taken to Chicago lockup. During rounds, officers asked him screening questions. Ofem displayed no signs of pain, injury, or infection; he did not appear to be under the influence of drugs or alcohol or showing signs of withdrawal; he did not seem to be despondent or irrational, and was not carrying medication. Ofem refused food in lockup. At 1:10 p.m., on Ofem’s second day in lockup, a guard glanced at the video monitor and saw Ofem hanging from a horizontal bar in his cell. Guards immediately went to the cell, approximately 15 feet away, where Ofem had used his jeans to hang himself. Ofem was transported to a hospital where he died the following day. His mother sued the city under 42 U.S.C. 1983, for failing to prevent her son’s death. The Seventh Circuit affirmed summary judgment in favor of the city, noting the lack of evidence that the city was deliberately indifferent to the risk of suicide for detainees held in lockups or that the city’s policies and practices were the cause of Ofem’s death. Illinois Lockup Standards were in effect at the time of Ofem’s death. Ofem’s estate focused on the narrow circumstances of Ofem’s death rather than on official policies or unofficial but wide-spread practices or customs. View "Lapre v. City of Chicago" on Justia Law