In Their Opinion

Drug Manufacturer Fails To Meet The Levine "Clear Evidence" Preemption Test

Michael Rigney — Fri, 12 Mar 2010 12:35:24 -0500

MASON v. SMITHKLINE BEECHAM (February 23, 2010)

Two days after twenty-three year old Tricia Mason began taking an antidepressant drug manufactured by defendant, she committed suicide. Mason's parents sued the manufacturer, alleging that it was negligent for not warning of an increased suicide risk. The district court granted summary judgment to the defendant, holding that the claims were preempted by federal law. The Masons appeal.

In their opinion, Circuit Judges Evans and Sykes and District Judge Simon reversed and remanded. The Court noted that conflict preemption was the type of preemption at issue in the case. The Supreme Court addressed conflict preemption in Levine, which was decided a year after the district court granted summary judgment. In Levine, the Supreme Court rejected the argument that state law failure-to-warn claims were generally preempted as a result of the FDA's drug labeling responsibilities. The Supreme Court stated that preemption could exist if a drug manufacturer presented "clear evidence" that the FDA would have rejected the proposed warning in the label but held that preemption did not exist in Levine. Since the Supreme Court did not clarify what it meant by "clear evidence," the Court simply compared the administrative history of the defendant's drug with the drug at issue in Levine. After that comparison, the Court concluded that the defendant had not met the burden established by Levine.

Middleton Factors Support Conclusion That Statutory Amendment Is Clarifying

Michael Rigney — Fri, 12 Mar 2010 10:16:25 -0500

MILLER v. LASALLE BANK (February 19, 2010)

In 2001, individuals entered into a mortgage on an Indiana property with LaSalle Bank's predecessor. The mortgage was recorded -- but the acknowledgment had a technical defect. In 2007, the individuals petitioned for Chapter 13 bankruptcy. The Trustee initiated an adversary proceeding against La Salle to avoid the mortgage. Indiana law provides that a "properly acknowledged" mortgage is constructive notice of the mortgage to later bona fide purchasers (BFPs). Prior to 2007, Indiana courts held that a mortgage with a technical defect in the acknowledgment did not amount to constructive notice. The Indiana legislature amended the statute in 2007 to overrule the case law and allow constructive notice even with certain technical defects. The legislature amended the statute again in 2008 to provide that the statute applied to all mortgages, regardless of the date of recording. The dispute in the adversary proceeding centered on whether, prior to the 2008 amendment, the 2007 amendment applied to mortgages recorded prior to 2007. The bankruptcy court concluded that the 2007 amendment applied only to mortgages recorded after its effective date. The district court reversed. The Trustee appeals.

In their opinion, Judges Cudahy, Wood, and Evans affirmed. The Court began with the statute and the Indiana rules of statutory construction. Concluding that both parties' constructions of the language of the statute were reasonable, the Court held that the statute was ambiguous and proceeded to apply rules of interpretation. One such rule is the presumption that an amendment to a statute is intended to change the meaning of the statute unless it is clear that the legislature intended to clarify its original intent. The Court applied the factors set forth in Middleton (intheiropinion.com post) to determine whether the 2008 amendment amended or clarified the 2007 amendment. It concluded that the 2008 amendment was a clarifying amendment under Middleton because: a) they were enacted in the same legislative session and sponsored by many of the same legislators, b) the 2007 amendment was ambiguous, and c) the bankruptcy trustees were actively seeking to avoid mortgages on technical grounds after the 2007 amendment.

A "Substantially Justified" Position Has A Reasonable Basis In Fact And Law

Michael Rigney — Thu, 11 Mar 2010 13:28:05 -0500

UNITED STATES v. THOUVENOT, WADE & MOERSCHEN (February 18, 2010)

The Equal Access to Justice Act allows a party that prevails against the United States in litigation to recover its attorneys' fees unless the position of the United States is found to be "substantially justified." Three cases before the Court allowed it to address that standard. In the first, the United States charged an apartment complex site engineer with violating the Federal Housing Act. The trial court denied defendant's motion for summary judgment and its motions for judgment as a matter of law. After the jury returned a defense verdict, however, the court awarded fees to the defendant. Because the defendant's insurer paid for much of its defense, the insurer would receive much of the award. The United States appeals. In the second case, the court affirmed the denial of a Social Security claimant's application for benefits. After the Seventh Circuit reversed and remanded, concluding that a crucial consultant's opinion was entitled to no weight, the court denied an award of fees. The claimant appeals. In the third case, the district court reversed the administrative denial of Social Security benefits but denied the claimant's application for fees. The basis for the reversal was the administrative law judge's possible mischaracterization of some testimony and failure to fully explain the connection between the claimant's condition and his ability to work. The claimant appeals.

In their opinion, Judges Posner, Flaum, and Sykes reversed, reversed, and affirmed. The Court first noted that "substantially justified" was not defined in the statute nor, in their view, was its meaning self-evident. Relying on the title of the statute and its limited application only to persons of lesser means, the Court concluded that the government's position need not be frivolous to justify an award of fees. The Court identified a threshold between frivolous and meritorious, at which a case has a reasonable basis in law and fact, that the United States must meet to be "substantially justified." Applying that standard to the first case, the Court held that there was a presumption that the United States’ position is substantially justified if it survives summary judgment. Just because the jury ultimately decided in favor of the defendant does not mean that the government fell short of its threshold. Although the Court reversed the award of fees, it decided to provide guidance to the lower courts on the additional issue of the impact of a liability insurer on an award of fees. In its view, the Act should not be applied differently if a party otherwise entitled to a fee award his had some of its fees paid by its insuror. In the second case, the Court concluded that the lower court was wrong in denying a fee award. Even though the lower court was originally convinced of the merits of the government's position, the court must be guided by the appellate opinion. If an appellate court reverses in a case it considers a close call, the fact that the lower court was convinced of the merits may support a substantial justification finding. Here, however, the Court made it clear in its earlier opinion that the government's position was not justified. Finally, in the third case, the district court had reversed an administrative denial of benefits but refused to award fees. Like the prior case's "close call" reference, the Court concluded that the lower court was well within its discretion to reverse a denial of benefits but to conclude that the position taken was "substantially justified."

Defendant's Offer Of Judgment In Excess Of Maximum Recovery Renders Case Moot

Michael Rigney — Thu, 11 Mar 2010 09:59:46 -0500

THOROGOOD v. SEARS, ROEBUCK & CO. (February 12, 2010)

Stephen Thorogood filed a state court class-action on behalf of the purchasers of stainless steel dryers in multiple states. He alleged that the defendant’s representation that the dryers were made of stainless steel violated the consumer protection acts of those states. The defendant removed the case to federal court under the Class Action Fairness Act (CAFA). Although the district court certified a class, the Seventh Circuit reversed and ordered the class decertified (intheiropinion.com post). The Court thought the case was not only a weak candidate for class certification, but also flimsy on its own merits. On remand, the defendant made an offer of judgment, inclusive of attorneys fees, of $20,000. Finding that that offer exceeded plaintiff's maximum recovery under state law of $3,000 and therefore the amount in controversy, the district court dismissed the case as moot. Thorogood appeals.

In their opinion, Judges Posner, Kanne, and Evans affirmed. The Court first rejected plaintiff's argument that the case should have been remanded upon class decertification, relying upon its decision in Cunningham Charter (intheiropinion.com post) just three weeks earlier. Then, the Court rejected the plaintiff's argument that the case was not moot because of his entitlement to significant attorneys’ fees. First, an award of fees for value conferred beyond the relief obtained must generally be relief ordered by the court. Second, the court was within its discretion in deciding that no fees were warranted. Finally, the Court noted that most of the fees were incurred pursuing the failed class action, not the $3,000 individual action.

Money Damages Are Available Against The United States For A Fair Credit Reporting Act Violation

Michael Rigney — Fri, 05 Mar 2010 10:09:00 -0500

TALLEY v. UNITED STATES DEPARTMENT OF AGRICULTURE (February 12, 2010)

Wayne Talley used to have a loan from the United States Department of Agriculture. Although he repaid it, the Department reported to a credit bureau that he was delinquent. Four times he complained to the credit bureau -- four times the credit bureau investigated -- four times the Department reported that the loan was repaid – four times the credit bureau fixed his credit report. Each time, however, the Department followed up with the another report of delinquency. Tally brought an action under the Fair Credit Reporting Act for damages for the Department's inaccurate reporting. The Department did not deny that it violated the Act but contended that sovereign immunity precluded any monetary relief. The district court awarded $10,000 in compensatory damages and $20,000 in attorney's fees. The Department appeals.

In their opinion, Chief Judge Easterbrook and Judges Rovner and Tinder affirmed. The Court first addressed jurisdictional issues, both at the district court and appellate court level. The Tucker Act has provisions allocating jurisdiction both at the lower court level (between the district court and the Court of Federal Claims) and at the appellate level (between regional circuits and the Federal Circuit). In order to determine the impact of the Tucker Act, the Court fleshed out the specific argument of the Department. On appeal, the Department conceded an argument that it had made at the lower court that the Department was not a "person" under the Act. It argued simply that the Fair Credit Reporting Act did not expressly authorize monetary relief against the United States. The Court concluded, however, that the Tucker Act waived sovereign immunity generally and authorized money damages for a statutory claim. Although that resolved the merits, the Court now had to circle back to see if there was jurisdiction. The Tucker Act provides that the case should be brought in the Court of Federal Claims if the plaintiff seeks in excess of $10,000. The Court concluded that the $20,000 in attorney's fees should be classified as costs under the Fair Credit Reporting Act and not counted toward the $10,000 threshold. Therefore, the district court had jurisdiction. With respect to appellate jurisdiction, the Tucker Act sends a case to the Federal Circuit if jurisdiction in the district court depended "in whole or in part" on the Tucker Act. The Court concluded that, although the Tucker Act could be a basis for jurisdiction, Talley did not invoke it as such. Because he relied on section 1331 and on the Fair Credit Reporting Act's jurisdictional provisions, appellate jurisdiction was present.

Plan Administrator's Interpretation That Contravenes Plain Language Of Plan Is Arbitrary And Capricious

Michael Rigney — Thu, 04 Mar 2010 11:39:00 -0500

GREEN v. THE UPS HEALTH AND WELFARE PACKAGE (February 10, 2010)

UPS negotiates collective bargaining agreements (CBAs) covering its employees who are members of the International Brotherhood of Teamsters (“IBT”). It actually negotiates with the international union and also directly and separately negotiates with some large locals, including Local 705. Under the 2002-2008 CBA with Local 705, UPS agreed to provide health care to Local 705 retirees. The benefit was outlined in the Summary Plan Description (SPD), which applied to all IBT retirees. The SPD set a monthly contribution for each retiree and provided that, if the cost of coverage exceeded a certain threshold, each retiree would share in the excess cost “by making an additional contribution.” It also stated that additional contributions would not be implemented until after the “current” CBA expired. The cost threshold was exceeded in 2006. In October 2007, UPS issued a Summary of Material Modification (SMM) advising all IBT retirees of that fact and imposing an additional contribution for each retiree effective January 1, 2008. Before implementing the additional contribution, however, UPS agreed with both the international and local unions to delay implementation until their respective CBAs expired. UPS sent a revised SMM to Local 705 retirees in December 2007 advising that increased contributions “well be effective” after the expiration of the “current” CBA. After the Local 705 CBA expired in mid-2008, UPS notified Local 705 retirees that it would implement an additional contribution effective February 2009. Local 705 retirees brought a class action, alleging that the collection of additional contributions violated the Plan and ERISA because a) the retirees were not sharing equally since the international retirees were not yet contributing, and b) the SPD stated that contributions would not be implemented until the expiration of the “current” plan and the Local 705 current plan now expired in 2013. The district court agreed with Local 705 on the first argument but agreed with the Plan on the second – and enjoined further collection of contributions until further order of the court. The retirees and the Plan appeal.

In their opinion, Judges Cudahy, Wood, and Evans affirmed. The Court agreed with the district court that the collection of contributions from Local 705 retirees only controverted the plain language of the Plan and was, therefore, arbitrary and capricious. The Court rejected UPS’ contrary interpretation of the “share equally” language and rejected its plea to consider extrinsic evidence under the doctrine of extrinsic ambiguity. Although the Court was more receptive to the use of the extrinsic ambiguity doctrine with respect to the meaning of “current” in the SPD, it concluded that it need not. Instead, it held that the December 2007 revised SMM modified the SPD and made it clear that the “current” CBA referred to was the 2002 CBA.

Telecommunications Act's "In Writing" Requirement Is Satisfied By An Explanation That Allows For Meaningful Review

Michael Rigney — Wed, 03 Mar 2010 11:55:53 -0500

HELCHER v. DEARBORN COUNTY (February 9, 2010)

Cincinnati Bell Wireless provides wireless services to, among others, the people of Dearborn County, Indiana. In order to improve signal coverage in the area, Cincinnati Bell decided it needed a new cell phone tower. It selected a piece of agriculturally zoned property for the tower and applied for a conditional use permit. The company worked with two consultants to the local Zoning Board in completing its application. The consultants recommended that the granting of the permit, although it was the first time they had recommended the construction of a new tower over the co-location of transmitters onto existing structures. The Board met and heard from the consultants, Bell, and a number of local landowners who opposed the tower. The Board denied the application. At a later meeting, the Board denied Bell's request to reconsider the denial and approved the minutes of the earlier meeting. Bell sued the Board, alleging several violations of the Telecommunications Act of 1996. Specifically, Bell alleged that the decision was not based on substantial evidence, that the Board minutes did not constitute a sufficient written decision, that the Board unreasonably discriminated against Bell, and that the decision effectively denied wireless services. The district court granted summary judgment to the defendants. Bell appeals.

In their opinion, Judges Flaum, Rovner, and Wood affirmed. Bell raised the same four arguments. The Court started with the "in writing" requirement of the Telecommunications Act, a question of first impression in the Seventh Circuit. Other circuits' holdings range from allowing a "Denied" stamp on an application to demanding detailed conclusions linked to specific evidence. Noting that the purpose of the requirement is to ensure meaningful judicial review, the Court joined several other circuits in concluding that the requirement is met if there is a sufficient explanation of the Board's reasons to allow a court to evaluate the supporting evidence. Here, the "writing" is the seventeen pages of minutes. The Court concluded that they were sufficient under the Act. They described the issues, the evidence presented by both sides, the concerns of the Board, and the specific Ordinance provisions on which the Board based its denial. On the Court’s review of Bell’s argument that the denial was not supported by substantial evidence, it considered each of the three Ordinance provisions separately. Although the Court found the evidence in support of one of the Ordinance violations thin, it concluded that the other two were supported by substantial evidence. Finally, the Court rejected the “effectively prohibit” and “unreasonably discriminates” arguments. On the former, Bell failed to show that alternatives did not exist. On the latter, Bell presented no evidence of another carrier that was treated more favorably.

Circumstances Warrant Recognizing Next Friend's Pro Se Motion

Michael Rigney — Tue, 02 Mar 2010 10:47:25 -0500

ELUSTRA v. MINEO (February 9, 2010)

Three sisters and their friends were enjoying a night at Buffalo Wild Wings restaurant in the summer of 2007. A dispute arose over the girls' bill. The police were called and the girls were arrested on charges of disorderly conduct. The charges were dropped. The sisters brought an action against the restaurant, its owner, and the responding police officer. The girls' mother, Christine Lopez, appeared as next friend of the two minor girls. The magistrate held a settlement conference, attended by the plaintiffs, Lopez, their attorney, and the defendants' attorneys. Although the conference was off the record, the magistrate judge reported that the parties agreed to a $6000 settlement. The girls' father, a nonparty, argued with the girls' attorney and declared that he would find new representation. At that point, the family left, although their attorney remained. The Magistrate Judge entered a recommendation to the district court to dismiss the case with prejudice in accordance with the settlement agreement. At a hearing a short time later before the district court, the girls' attorney appeared again and advised the district court that the girls' recollection was that was no agreement. The district court dismissed the case with prejudice. Ten business days later, Lopez filed a handwritten pro se “Motion to vacate and Reinstate.” Newly retained counsel supplemented the motion nine days later. The district court did not recognize the pro se filing as a Rule 59(e) motion and treated counsel’s motion as a Rule 60(b) motion and denied it. The girls appeal.

In their opinion, Judges Flaum, Wood and Sykes affirmed. The Court first considered its scope of review. If Lopez' handwritten motion is considered as a timely Rule 59(e) motion, then the time to appeal the underlying judgment did not begin to run until that motion was denied and the Court can consider the merits. If not, the Court can only review the denial of the motion to reconsider. The problem with the first motion is that it was brought pro se by Christine Lopez. Normally, next friends and other representative parties may not appear pro se. Although the Court determined that federal law controlled whether Lopez’ filing should be allowed, it found guidance within Illinois state law. The Court cited several Illinois cases where the court applied a flexible rule, particularly where the filing simply preserved a party's right to go forward, as opposed to a more general prosecution of a suit. The Court also emphasized that the purpose of the rule is to protect the rights of the represented party. The Court concluded that the circumstances of the case -- where the parties had counsel through judgment, where the parties retained counsel to litigate the Rule 59(e) and later proceedings, where the parties were only unrepresented for a short time, but where the next friend filed a pro se motion during that time to preserve their appellate rights -- warranted a recognition of the motion. The Court also concluded that the motion met the requirements of Rule 7(b)(1), notwithstanding its brevity. It was in writing, it stated the grounds for seeking the order, and it stated the relief sought. Having reached the merits, however, the Court rejected the girls' position. An oral settlement agreement is valid if there is an offer, acceptance, and meeting of the minds. Here, the only contemporaneous evidence is the magistrate judge’s statement on the record that the parties understood the consequences of their agreement and reached a settlement. That is enough to conclude that there was a meeting of the minds.

Acts Of Harassment Occuring Outside The Limitations Period Should Be Considered In A Hostile Workplace Claim If Any Act Falls Within The Period

Michael Rigney — Mon, 01 Mar 2010 14:08:00 -0500

TURNER v. THE SALOON (February 8, 2010)

Paul Turner was a waiter at The Saloon restaurant. After working there for several years, Turner and one of his supervisors carried on a sexual relationship that lasted for about nine months. According to Turner, the supervisor retaliated against him after she ended the relationship. He alleges that she changed his table assignments, disciplined him without cause, and sexually harassed him on a number of specific occasions. Turner also alleges that he was discriminated against because of his psoriasis. He wears no underwear as a result of that condition and therefore occasionally exposes himself while changing clothes. He claims that his supervisors failed to accommodate his condition. Instead, he was forced to change in a “vile” men’s room. One day, in the middle of a shift and with no other waiters on duty, Turner left the restaurant to run an errand. When he returned, he was fired. Turner sued the restaurant and several managers for gender and disability discrimination under Title VII and the Americans with Disabilities Act. He also made a claim for overtime. The court granted summary judgment to the defendants. Turner appeals.

In their opinion, Judges Manion, Rovner, and Sykes reversed and remanded in part in affirmed in part. The Court first addressed the Title VII sexual harassment claim. It concluded that the district court erred in not considering most of the alleged acts of harassment because they occurred outside the limitations period. Under the Supreme Court's decision in Morgan, whether an alleged act of harassment is considered by a court depends on whether the claim is for employment discrimination or for hostile work environment. In an employment discrimination claim, discrete acts outside the limitations period should not be considered. However, in a hostile work environment claim, all acts can be considered as long as one act contributing to the hostile environment took place during the limitations period. Taking all the alleged acts into account, the Court had little difficulty in finding that they were sufficient to survive summary judgment. The Court noted the presence of at least five discrete acts, three of which were aggressively physical. Since the district court did not reach the issue of employer liability, the Court left the issue for remand. The court next addressed Turner's claim that his termination was in retaliation for his complaints about the harassment. The Court concluded that Turner was unable to establish a prima facie case under either the direct or indirect method. It noted a series of at least ten serious reprimands in the eight or nine months preceding his termination as well as the fact that he left his job in the middle of the shift. The serious performance problems as well as the passage of time since his harassment complaint belie a causal connection between the complaint and his termination. The Court summarily rejected Turner's ADA discrimination claim -- his psoriasis is not a disability under the Act since it does not limit any major life activity. The fact that he is not disabled does not preclude his ADA retaliation claim. Since he did raise such a claim with his employer, his employer is not allowed to retaliate. He does not prevail on that claim, however, for the same reasons he could not prevail on his Title VII retaliation claim. Finally, the Court rejected Turner's wage claims as wholly unsupported by the evidence presented.

Class-Of-One Equal Protection Claim Fails Without Evidence Of Similarly Situated Person

Michael Rigney — Mon, 01 Mar 2010 09:33:59 -0500

REGET v. LA CROSSE (February 8, 2010)

John Reget has operated an auto restoration and body shop business in La Crosse, Wisconsin for several decades. For almost as long, he and the City have been at odds. In 1980, the City condemned his building and gave him the funds to relocate and remodel his current building. In the early 1990s, the City cited Reget a number of times for ordinance violations pertaining to junk dealers. All the citations were ultimately dismissed. In the mid-1990s, the City threatened to rezone the area of Reget's current building. The move would have forced Reget to relocate yet again. The City backed down -- but only after Reget promised to comply with the ordinances, build a fence, and limit his nighttime operations. Both sides claim the other failed to live up to its bargain. Reget filed a lawsuit alleging a violation of his Equal Protection rights as a result of the City's selective enforcement of its ordinances. The district court granted summary judgment to the City. Reget appeals.

In their opinion, Chief Judge Easterbrook and Judges Williams and Sykes affirmed. The Court noted that Reget's Equal Protection claim was of the class-of-one variety. For such a claim to prevail, a plaintiff must prove that he or she has been treated differently than others similarly situated and that no rational basis exists for such differentiation. The Court concluded that he failed to identify a similarly situated business with respect to any of his claims of discriminatory treatment.

Government Employee Who Serves "At The Pleasure" Has No Property Interest In Employment

Michael Rigney — Fri, 26 Feb 2010 13:17:33 -0500

COVELL v. MENKIS (February 8, 2010)

The Illinois Deaf and Hard of Hearing Commission (the "Commission") was created several years ago to provide services for and advocate on behalf of the hard of hearing. Gerald Covell served as its Director from 1998 until 2003. In July of that year, the Commissioners terminated him. Covell filed suit under § 1983, alleging that defendants violated both his property and liberty interests. Specifically, he alleged that he was let go without any pre-or post-termination process in violation of a property interest. He also alleges that defendants circulated false information about him, without providing him an opportunity to clear his name, in violation of his liberty interest. The district court granted summary judgment to the defendants, concluding that Covell had no property interest in this position and that he failed to demonstrate that any particular defendant circulated negative information. Covell appeals.

In their opinion, Judges Bauer, Manion and Williams affirmed. The Court first addressed the existence of a property interest. Although a property interest can arise from state law, a person must identify a specific statute, rule, or contract that limits the ability of the state to terminate him. The rules governing Covell's position states that he "shall serve at the pleasure of the Commission." The Court rejected Covell's position that an inconsistent right was somehow incorporated into the regulation by its reference to the Personnel Code. Since he had no property interest, he had no right to due process. With respect to his liberty interest claim, the Court stated that the plaintiff must show that he was stigmatized by publicly disclosed information and that he suffered a tangible loss. Specifically, the plaintiff must show that a named defendant made the public disclosure. Here, Covell contends only that the disclosure was made by someone in the government. Without evidence that the disclosure was made by a named defendant, Covell's claim fails.

Court Declines To Revisit Newsome Malicious Prosecution Holding

Michael Rigney — Fri, 26 Feb 2010 11:03:06 -0500

PARISH v. CHICAGO (February 3, 2010)

Michael Parish was arrested in May of 2005 and held in custody until June of 2007, when he was acquitted of a murder charge. Parish brought suit against the City of Chicago and several police officers under § 1983, claiming malicious prosecution in violation of the Fourth Amendment. He alleged, among other findings, that the officers suppressed favorable evidence, prepared false reports, and fabricated evidence. Parish conceded in the district court that the prevailing Seventh Circuit precedent of Newsome precluded his claim. The district court dismissed. Parish appeals

In their opinion, Judges Coffey, Evans, and Williams affirmed. In Newsome, the Seventh Circuit held that the existence of a state law malicious prosecution claim precludes a constitutional tort under the due process clause. Parish concedes as much but seeks reconsideration of Newsome in light of a footnote in the Supreme Court's subsequent opinion in Wallace. In that footnote, the Supreme Court stated that it had never and was not evaluating a §1983 Fourth Amendment malicious prosecution claim. The Court noted that it had already once rejected an invitation to revisit Newsome in Johnson v. Saville. It saw no reason to do so now. However, as an aside, the Court stated that Newsome did not preclude a Brady-type due process claim. Given Parish's allegations, he may well have had such a claim after his acquittal.

CAFA's Home-State Exception Requires Evidence, Not Intuition

Michael Rigney — Thu, 25 Feb 2010 15:28:55 -0500

IN RE: SPRINT NEXTEL (January 28, 2010)

Sprint Nextel, a Kansas corporation, was sued in Kansas state court for allegedly conspiring with its competitors to impose artificially high prices for text messaging. The suit was brought as a class action on behalf of "all Kansas residents" who purchased the relevant services from Sprint Nextel or any of its competitors and a) who had a Kansas cell phone number and b) who received their cell phone bill at a Kansas address. Sprint Nextel removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). The district court remanded the case to the Kansas state court under CAFA's home-state exception. Sprint Nextel petitioned for leave to appeal.

In their opinion, Judges Flaum, Evans, and Sykes granted the petition to appeal, vacated the order, and remanded. Under the home-state exception in CAFA, a district court must decline jurisdiction if both the defendant and two-thirds of the proposed class members "in the aggregate" are citizens of the state in which the action was originally filed. The Court first addressed Sprint Nextel’s argument that the "in the aggregate" language meant that two-thirds of proposed class members in this suit and in suits with similar allegations (of which there are many) must be Kansas citizens. Relying on the inclusion of identical language in a separate section under which Sprint Nextel's argument makes no sense, the Court joined the First Circuit in rejecting that interpretation. Instead, the Court concluded, the language simply refers to the possibility of multiple subclasses. The Court next reviewed the district court's conclusion that the plaintiffs' careful definition of the class left "little doubt" that two-thirds of the class members were Kansas citizens. The Court noted the plaintiffs had the burden to establish they were entitled to remand under the home-state exception. Yet they actually presented no evidence. The Court agreed with the district court’s “sensible guesswork” in concluding that the class met the two-thirds threshold through the use of Kansas cell phone numbers and mailing addresses in the definition of the class. Nevertheless, the Court concluded that it should not draw such conclusions without actual evidence and vacated the order of remand. It suggested the plaintiffs could present statistical evidence based on a representative sampling of potential class members or it could even limit the class to Kansas citizens (instead of residents) by definition.

Commerce Clause Prohibits State From Regulating Out-Of-State Loans To Its Residents

Michael Rigney — Thu, 25 Feb 2010 13:24:44 -0500

MIDWEST TITLE LOANS v. MILLS (January 28, 2010)

Midwest Title Loans is a "title lender." Title loans are high-cost, high-risk loans. Car owners, generally from the lower income segment of the population, pay triple digit interest rates to borrow against their car titles. Midwest is located in Illinois but loaned to Indiana residents. All the loans were made in-person in Illinois. Midwest did advertise in Indiana and, when necessary, executed repossessions in Indiana. The State of Indiana considered Midwest's practices predatory. In 2007, it amended its Uniform Consumer Credit Code to provide the a loan is deemed to occur in Indiana if an Indiana resident enters into such loan with an out-of-state company that advertised or solicited in Indiana. Once a loan is deemed to occur in Indiana, the lender is subject to the provisions of the code, including interest rate caps and license requirements. Indiana advised Midwest of this amendment in August of 2007. Midwest was not licensed in Indiana and its products exceeded the interest rate cap. Midwest brought suit under §1983, alleging that the amendment violated the commerce clause. The district court permanently enjoined application of the amendment. Indiana appeals.

In their opinion, Judges Posner and Flaum and District Judge Der-Yeghiayan affirmed. The Court noted that the commerce clause of the Constitution has been interpreted to preclude states from erecting barriers to interstate trade. The clause is frequently applied when a state legislates in favor of its in-state businesses. Although Indiana is not discriminating in favor of its local business, that does not end the inquiry. First, a non-discriminatory statute that protects a legitimate local interest will be upheld unless the effects on interstate commerce are clearly excessive as compared to the local benefits. But second, a non-discriminatory statute that actually regulates out-of-state activities will not be upheld regardless of the balancing of the local interest. The Court concluded that out-of-state regulation was present here. Every Midwest loan was made in Illinois by a check drawn on an Illinois Bank, title was transferred in Illinois, and payments were received in Illinois. The facts that the proceeds were probably spent in Indiana, that Midwest advertised in Indiana, and that the collateral was generally located in Indiana did not change the Court’s conclusion.

District Court Improperly Excluded Expert Medical Testimony

Michael Rigney — Wed, 24 Feb 2010 12:35:57 -0500

GAYTON v. MCCOY (January 28, 2010)

India Taylor had a life-threatening heart condition. She took six different medications to treat the condition. The six drugs were not the only drugs Taylor took – she was also a heroin user. Taylor was arrested on four different occasions in the summer of 2003. As a result, personnel at the Peoria County Jail became very familiar with her condition and her medications. Both her medical history and her prescriptions became part of her file. She was arrested again in October. Because she complained of chest pain, she was taken for a medical examination. Nurse Radcliffe knew her history and medications and asked her brother to bring her medications to the jail. She also made a notation that Taylor should see the doctor the next day if her medications did not arrive. The next day, Taylor complained of nausea on multiple occasions. By mid-afternoon, she was vomiting violently. The guards called the nurse, and even collected her vomit in a bag. Nurse Hibbert suspected that Taylor was faking her symptoms in order to get drugs and refused to see her. Although her name was on the list to see the doctor the next day, she died during the night. Lester Gayton, her brother and administrator of her estate, brought a wrongful death action pursuant to §1983. He named the sheriff, the jail superintendent, the doctor, three nurses, and the outsourced health care provider at the jail. The district court excluded the testimony of the plaintiff's medical expert and granted summary judgment to the defendants. Gayton appeals.

In their opinion, Judges Flaum and Williams and District Judge Lawrence affirmed in part and reversed in part. The Court started with the district court’s exclusion of the medical expert, Dr. Weinstein. First, the Court concluded that the lower court erred in finding Weinstein unqualified to opine on the cause of death. In fact, Weinstein did not testify as to cause of death -- he simply adopted the other experts' conclusion that Taylor died of nonspecific heart failure. Next, the Court stated that the fact that Weinstein was not a cardiologist did not make him unqualified. Finally, with respect to the reliability of his specific conclusions, the Court considered each conclusion individually: a) the lower court properly barred the conclusion that Taylor might have lived had she been given her medication since he gave no basis for his opinion and claims no specific expertise regarding the medication, b) the court improperly barred his testimony that the combination of her vomiting and certain medications might have contributed to her heart failure since that opinion requires no specialized expertise, and c) although the court did not address it, Weinstein is an expert in prison healthcare and is qualified to give his opinion that prison medical personnel fell short of accepted standards of medical care.

The Court next addressed summary judgment. A cause of action for failure to provide adequate medical care requires a showing of a serious medical condition, deliberate indifference, and causation. The deliberate indifference element itself requires knowledge of the health risk and a disregarding of that risk. Given Taylor's serious heart condition, her complaints of chest pain and nausea, and her excessive vomiting, the Court had little difficulty in finding enough evidence of a serious medical condition to overcome summary judgment. On the issue of deliberate indifference, the Court analyzed each defendant separately: a) summary judgment was proper for the sheriff, the doctor, and the superintendent since they had no contact with Taylor and did not know of her request for medical attention, b) summary judgment was proper for the outsourced medical care organization since the plaintiff conceded that the medical policies were sufficient, thus precluding Monell liability, c) summary judgment was proper for two of the three nurses in that one acted reasonably and the other, although negligent, was not deliberately indifferent, and d) summary judgment in Nurse Hibbert’s favor was improper since a jury could find that her refusal to see Taylor despite strong indications that she was in need of medical treatment amounted to deliberate indifference. Finally, the Court also found sufficient evidence in the record on which a jury could find proximate causation between Nurse Hibbert’s conduct and a delay in treatment that exacerbated Taylor’s suffering.

Court May Not Remand Case If Any Part Remains Within Its Jurisdiction

Michael Rigney — Wed, 24 Feb 2010 09:29:20 -0500

BERGQUIST v. MANN BRACKEN, LLP (January 26, 2010)

Sandra Bergquist owed money to the bank that issued her a credit card. The bank retained the law firm of Mann Bracken to collect the debt. The firm arbitrated the dispute before the National Arbitration Forum, as provided in the credit card agreement. The bank prevailed at the arbitration and a state court entered judgment enforcing the arbitration award. Bergquist was suspicious of the connection between Mann Bracken and the National Arbitration Forum. She asked the state court to set aside its judgment enforcing the award. It did so and dismissed the case with prejudice. She also filed a class-action on behalf of all persons who were pursued by Mann Bracken and had their claims arbitrated before the National Arbitration Forum. The defendants removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). The district court remanded, concluding that the Rooker-Feldman doctrine precluded federal jurisdiction of the claim. Defendants appeal.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Rovner vacated and remanded. The Court first rejected the argument that CAFA trumps Rooker-Feldman. Although CAFA expands federal jurisdiction with respect to class actions, it does not change the Rooker-Feldman limitation on collateral attacks of state court decisions. The Court concluded, however, that the Rooker-Feldman doctrine had no application in the case. First, although the district court recognized the inapplicability of the doctrine to Bergquist's individual claim (because the state case had been dismissed with prejudice), it nevertheless remanded because Bergquist sought relief on behalf of others who had lost in state court. The Court found this to be error. The district court was not allowed to remand the entire case because some portion of it did not belong in federal court. A federal court must exercise the jurisdiction that does exist. Second, it was not apparent to the Court that any claim need be remanded. The Court identified three possible subclasses: those who won in state court, those who lost in state court, and those who neither won nor lost. The class can be defined to eliminate those who lost in state court, the only persons in the class with a Rooker-Feldman problem. The Court remanded for a determination of whether the jurisdictional requirements were met under that revised class definition.

Federal Jurisdiction Under The Class Action Fairness Act Does Not Depend On Class Certification

Michael Rigney — Tue, 23 Feb 2010 13:20:20 -0500

CUNNINGHAM CHARTER CORP. v. LEARJET (January 22, 2010)

Cunningham Charter Corp. brought a breach of warranty and products liability class action against Learjet in state court. Learjet removed the case to federal court pursuant to the Class Action Fairness Act (CAFA). After the district court denied class certification for failure to satisfy the requirements of Rule 23, it remanded the case to state court. The district court concluded that the denial of certification deprived the court of federal jurisdiction under CAFA. Learjet sought leave to appeal.

In their opinion, Judges Posner, Coffey, and Flaum granted leave to appeal and reversed and remanded. CAFA, said the Court, grants federal jurisdiction to certain class actions. A class action is defined as "any civil action filed under rule 23." The statute also specifically provides that it applies before or after a class is certified. Based on these and other provisions of CAFA, as well as the principles that jurisdiction is determined at the time of filing and is generally not affected by later developments, the Court concluded that CAFA jurisdiction does not depend on class certification.

Absence Of "Substantial Control" Defeats Title IX Liability

Michael Rigney — Tue, 23 Feb 2010 10:35:16 -0500

DOE-2 v. MCLEAN COUNTY UNIT DISTRICT NO. 5 (January 22, 2010)

Jane Doe-2 was an elementary school student in the Urbana School District between 2005 and 2007. She alleges that she was sexually harassed by one of her teachers. She also alleges that: a) the same teacher was employed by the McLean County School District from 2002 to 2005, b) the teacher sexually harassed McLean County students during that time, c) McLean County school officials were aware of the harassment, and d) school officials concealed the harassment and provided a positive letter of recommendation. In fact, the teacher pleaded guilty to aggravated criminal sexual abuse of students in both school districts in 2007. Doe-2 brought suit against both school districts and district officials. The Urbana defendants settled. Against the McLean defendants, Doe-2 asserts a federal Title IX claim and a state court claim. The court dismissed the claims. Doe-2 appeals.

In their opinion, Judges Cudahy, Wood and Tinder affirmed. Although the Court recognized the existence of a private right of action under Title IX, it also noted its reluctance, pursuant to Supreme Court precedent, to expand implied statutory remedies. In order to state a Title IX claim, a victim of sexual harassment must establish that a school district had actual knowledge of the harassment and had substantial control over both the person and context of the harassment. Since the McLean defendants had no control over the teacher while he was employed in Urbana, the Court concluded that the Title IX requirements were not met. The Court also rejected Doe-2’s theory in which liability rested on the defendant's conduct while the teacher was still a McLean employee and under defendants’ control. The Court held to its requirement that the acts of harassment be under the defendants’ control. Addressing the plaintiff's state law claim of willful and wanton misconduct, the Court focused on the element of duty. One does not normally have a duty to protect another from an attack by a third person. Such a duty can sometimes arise out of a special relationship between the plaintiff and defendant. In fact, a school district sometimes does have a duty to protect its students. The Court was aware of no precedent, however, finding the existence of a duty where the student and the location of the offense were beyond the defendants' authority.

References To Due Date And Default Provisions In A Demand Note Do Not Make It Ambiguous

Michael Rigney — Mon, 22 Feb 2010 12:47:59 -0500

REGER DEVELOPMENT v. NATIONAL CITY BANK (January 20, 2010)

Reger Development is an Illinois real estate development company. In 2007, the company opened a $750,000 line of credit with National City Bank. The company signed a promissory note and provided the personal guarantee of its principal, Kevin Reger. In several places, the note makes reference to the fact that it is payable "on demand." The company made its payments in a timely manner for the first year. Nevertheless, the bank asked it to pay down $125,000 of principal. Reger did so. A month later, the bank advised Reger that it was reducing the amount of the line of credit and also wanted to restructure some of the principal and secure it with a mortgage. The bank told Reger that it was possible that they would demand payment of the entire amount if he did not agree to the modifications. Reger brought suit, alleging breach of contract and fraud. The district court dismissed the case for failure to state a claim. Reger appeals.

In their opinion, Judges Flaum, Williams, and Sykes affirmed. The Court noted that Illinois law generally implies a covenant of good faith and fair dealing in a contract. It does not apply, however, to demand notes. Reger argued that general references to due dates and default provisions in the note were inconsistent with a demand instrument. The Court noted the repeated and explicit references in the instrument to National City's right to demand payment at any time. The note is clearly and unambiguously a demand note, concluded the Court. Since it is a demand instrument, the bank's insistence on modifications did not amount to a breach. With respect to the fraud count, the Court focused on the intent element. It stated that Reger must establish that the bank intended to and did induce him. In order to meet that element, Reger asked the court to infer that the bank intentionally drafted ambiguous documents so as to mislead him. The Court had already considered the ambiguity of the document with respect to the breach of contract claim. Not only had it not found it ambiguous, it found it rather straightforward. Reger failed to allege the element of intent with the particularity necessary in a fraud count -- the dismissal of that count is affirmed.

Court's Reduction Of Rate And Hours In Calculating Fee Award Was Not An Abuse Of Discretion

Michael Rigney — Mon, 22 Feb 2010 09:21:11 -0500

GASTINEAU v. WRIGHT (January 19, 2010)

James and Christy Gastineau were plaintiffs in a Fair Debt Collection Practices Act (FDCPA) case. They were represented by Robert Duff. Although Duff was not their original counsel and did not become so until about three years into the case, he did negotiate the settlement of the case on the first day of trial. He asked for attorney's fees of approximately $140,000. The district court judge awarded approximately $50,000, reducing both the number of hours and the hourly rate in setting that amount. Duff appeals.

In their opinion, Judges Kanne and Tinder and District Judge Griesbach affirmed. The Court first noted that an award of attorney's fees is reviewed on a "highly deferential" version of the already deferential abuse of discretion standard. The district court concluded that Duff’s hours were excessive. He noted that Duff was inexperienced in FDCPA cases and became involved fairly late in the case, after most of the discovery and motion practice had been completed. Much of the time spent was learning the law. The court also concluded that Duff’s rate was excessive for the subject matter. He relied on an affidavit of an experienced lawyer in the area who believed that to be so. The Court found no impediment to the combined reduction of both hours and rate. Having found no abuse of discretion, the Court affirmed.