Justia Legal Ethics Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
United States v. Filer
Barsanti was delinquent on $1.1 million of senior secured debt it owed to BMO Harris Bank. Barsanti’s owner, Kelly, hired attorney Filer and Gereg, a financing consultant. After negotiations with BMO failed, Filer introduced Gereg to BMO as a person interested in purchasing Barsanti’s debt. Filer created a new company, BWC, to purchase the loans. BWC purchased the loans from BMO for $575,000, paid primarily with Barsanti’s accounts receivable. Barsanti also owed $370,000 in delinquent benefit payments to the Union Trust Fund. Filer, Kelly, and Gereg used BWC’s senior lien to obtain a state court judgment against Barsanti that allowed them to transfer Barsanti’s assets beyond the reach of the Union Fund, using backdated documents to put confession-of-judgment clauses into the loan documents and incorrectly claiming that Barsanti owed BWC $1.58 million. Filer then obtained a court order transferring Barsanti’s assets to BWC, which then transferred the assets to Millwork, another new entity, which continued Barsanti’s business after the Illinois Secretary of State dissolved Barsanti for unpaid taxes. Gereg was Millwork's nominal owner in filings with the Indiana Secretary of State. Barsanti filed for bankruptcy. Filer instructed others not to produce certain documents to the bankruptcy trustee.After a jury convicted Filer of wire fraud 18 U.S.C. 1343., the district court granted his motions for a judgment of acquittal. The Seventh Circuit reversed and remanded. The evidence was sufficient to support the jury’s verdicts. View "United States v. Filer" on Justia Law
Koch v. Jerry W. Bailey Trucking, Inc.
Two drivers sued Bailey Trucking for violations of the Fair Labor Standards Act (FLSA), 29 U.S.C. 216(b), and Indiana wage laws by failing to pay drivers for time spent working before and after hauling jobs. The employees’ first attempt at class/collective certification was unsuccessful; the court concluded that class counsel Weldy’s disciplinary record precluded him from representing the class. On reconsideration, the court conditionally certified an FLSA collective and certified a Rule 23 class. Almost four years later, the court decertified the class and collective; finding the number of plaintiffs too small for collective resolution to provide any efficiency above simple joinder. The employees amended their complaint to add nine plaintiffs. The court granted the employees partial summary judgment. The parties negotiated settlements.The court approved a settlement that reflected a full recovery of claimed damages for the two-year period preceding the suit, plus a partial recovery for the third year of damages that would have been available if the employees proved a willful FLSA violation, concluding that an immediate partial recovery outweighed the time and risk of trial. The employees sought an award of more than $200,000 in attorney’s fees under FLSA. The court awarded $70,000. The Seventh Circuit affirmed. The district court did not abuse its discretion when it lowered the fee award after concluding that Weldy overbilled his hours and the employees obtained only partial success. View "Koch v. Jerry W. Bailey Trucking, Inc." on Justia Law
Simon v. Cooperative Educational Service Agency #5
In 2014, Cooperative, a Wisconsin-based governmental entity that services 35 public-school districts, hired Simon as an Alternative Program Lead Teacher at REACH Academy. Simon taught, managed paraprofessionals, developed integrated education plans, and communicated with parents, school districts, social workers, and law enforcement officials. In 2016, a student kicked a door into Simon’s head, which caused a concussion. Simon took Family and Medical Leave Act (FMLA) leave and was cleared to return to full-time work with no restrictions weeks later. Cooperative did not allow Simon to return to her previous position, having determined that doing so would present an “unreasonable risk.” Cooperative placed her in a support position with duties resembling those of a paraprofessional and requiring her to split her time between schools. Although Simon received the same salary and benefits in her new role, it involved significantly less responsibility, independence, and discretion.The district court found that Cooperative had violated the FMLA by not returning Simon to an equivalent position following her leave and that only declaratory—rather than injunctive—relief was appropriate based on Cooperative’s hiring trends, the unavailability of Simon’s previous role, and Simon’s new job elsewhere, and awarded Simon attorney’s fees of $59,773.62. The Seventh Circuit affirmed. The FMLA’s use of the term “equitable relief” encompasses declaratory relief. Simon suffered prejudice from Cooperative’s failure to return her to an equivalent position. The district court did not err in finding that attorney’s fees were available under the circumstances. View "Simon v. Cooperative Educational Service Agency #5" on Justia Law
USA Gymnastics v. Liberty Insurance Underwriter, Inc.
Larry Nassar, who was affiliated with USAG, sexually assaulted hundreds of female athletes. After Nassar’s conduct was revealed, USAG faced multiple lawsuits and investigations. USAG and its insurers, including Liberty, litigated questions about insurance coverage in an adversary proceeding before a bankruptcy court. In a previous appeal, the Seventh Circuit affirmed the decision that Liberty had a duty to defend USAG. There were ancillary disputes over the amounts of attorneys’ fees that Liberty owed USAG. While an appeal was pending, USAG sought to enforce the order entitling it to reimbursement. Liberty resisted, asserting that large portions of the fees USAG claimed were not reasonable and necessary. The bankruptcy court recommended that the district court award USAG nearly all the requested fees. The district court adopted most of the bankruptcy court’s findings and entered judgment for USAG.The Seventh Circuit affirmed. The lower courts correctly concluded that USAG was entitled to a presumption that the fees it incurred were reasonable and necessary despite Liberty’s challenges to the nature of USAG’s supervision of outside counsel and the proportion of fees paid by USAG. The particular form of supervision suggested by Liberty and the policyholder’s full payment of all the fees it incurred are not prerequisites for that presumption. Liberty failed to rebut the presumption. View "USA Gymnastics v. Liberty Insurance Underwriter, Inc." on Justia Law
Duro, Inc. v. Walton
The Seventh Circuit affirmed the judgment of the district court concluding that the terms of a settlement resulted in a de facto assignment of a corporation's theoretical legal malpractice claim to Amit Shah by using the corporation as his alter ego, holding that there was no error.In 2013, Shah and another minority shareholder of Duro, Inc. brought this action against Duro and its third shareholder, alleging money laundering and racketeering. In 2015, Plaintiffs added a shareholder derivative claim of legal malpractice, nominally on behalf of Duro, against a law firm and its attorneys (May Oberfell), who had represented Defendants in the case. In 2017, Plaintiffs settled their claims, preserving any claims Duro might have against May Oberfell. Shah subsequently took effective control of Duro and transferred all of Duro's assets except the legal malpractice claim. Thereafter, Shah, through Duro, filed a complaint against May Oberfell. The district court granted summary judgment for May Oberfell, concluding that the legal malpractice claim had undergone a "de facto" assignment, and therefore, the claim was barred under Indiana law. The Seventh Circuit affirmed, holding that May Oberfell was entitled to summary judgment. View "Duro, Inc. v. Walton" on Justia Law
Lane v. Person
Lane was detained on state criminal charges at the LaPorte County, Indiana jail. Lane sued Person, a doctor at the jail, for deliberate indifference to Lane’s medical condition, 42 U.S.C. 1983. While in jail, Lane sought medical care for an acoustic neuroma (non-cancerous tumor). Person did not order surgical removal of the tumor, which Lane believes was required. He later had the surgery. Nelson, a doctor who also treated Lane, testified that Person appropriately addressed Lane’s condition by ordering multiple MRIs and a consultation with a specialist. Person prevailed at summary judgment and was awarded $4,000 in costs; $2,750 was a one-day witness fee for Nelson,The Seventh Circuit affirmed but modified. The court noted that more than 30 days passed between the denial of Lane's motion to reconsider the summary-judgment decision and his notice of appeal, so the appeal was limited to a review of the decision on costs. There is a presumption under Rule 54(d) that a prevailing party recovers costs that are enumerated in 28 U.S.C. 1920. Although section 1920 includes witness fees, another statute, 28 U.S.C. 1821, more specifically addresses the allowable amount to $40 per day, and no other authority allows more. Person may recover total costs of $1,307.59. View "Lane v. Person" on Justia Law
Shannon v. United States
In a jury trial before District Judge Bruce, Shannon was convicted of 19 counts of sexually exploiting a child, 18 U.S.C. 2251(a) and (e), and one count of distributing child pornography, sections 2252A(a)(2)(A) and (b)(1). The charges arose from Shannon’s relationship with J.W., a minor; the two originally met when J.W. was around eight years old. Shannon was in his forties at the time. Judge Bruce sentenced Shannon to 720 months in prison.Shannon challenged those convictions under 28 U.S.C. 2255, arguing that his trial counsel was ineffective and that he did not receive a fair trial before an unbiased judge. The motion was assigned to District Judge Shadid, who denied relief. The Seventh Circuit affirmed. Given the extensive and powerful evidence against Shannon, even if his trial counsel’s performance was deficient, he has failed to show that he was prejudiced by any deficiency. On the judicial-bias claim, the court found that ex-parte communications between Judge Bruce and staff of the U.S. Attorney’s office do not warrant a new trial on guilt or innocence. Based on those ex parte communications and comments by Judge Bruce at Shannon’s sentencing that implicitly discouraged an appeal, the court concluded that Shannon must be resentenced before a different judge. View "Shannon v. United States" on Justia Law
Ashley W. v. Holcomb
When the Indiana Department of Child Services identifies a situation that involves the apparent neglect or abuse of a child, it files a “CHINS” (Children in Need of Services) petition that may request the child’s placement with foster parents. Minors who are or were subject to CHINS proceedings sought an injunction covering how the Department investigates child welfare. The district court denied a request to abstain and declined to dismiss the suit. The Seventh Circuit reversed, noting that only two plaintiffs still have live claims and that it is improper for a federal court to issue an injunction requiring a state official to comply with existing state law. Indiana subsequently filed a bill of costs under Fed. R. App. P. 39(a)(3), against the next friends who represented the minors’ interests. The Seventh Circuit denied that petition. Next friends are not parties to suits in which they assist minors or incompetent persons. Rule 39(a) authorizes awards against losing litigants, not against their agents (which may include lawyers and guardians ad litem as well as next friends). The next friends in this litigation are neither the children’s natural parents nor their foster parents and are not generally responsible for the children’s expenses. View "Ashley W. v. Holcomb" on Justia Law
Petri v. Stericycle, Inc.
Following a False Claims Act lawsuit against Stericycle, customers were leaving and the price of Stericycle’s common stock dropped. On behalf of the company’s investors, Florida pension funds filed a securities fraud class action against Stericycle, its executives, board members, and the underwriters of its public offering, alleging that the defendants had inflated the stock price by making materially misleading statements about Stericycle’s fraudulent billing practices. The parties agreed to settle for $45 million. Lead counsel moved for a fee award of 25 percent of the settlement, plus costs. Petri, a class member, objected to the fee award, arguing that the amount was unreasonably high given the low risk of the litigation and the early stage at which the case settled. Petri moved to lift the stay the court had entered while the settlement agreement was pending so that he could seek discovery regarding class counsel’s billing methods, the fee allocation among firms, and counsel’s political and financial relationship with a lead plaintiff, a public pension fund.The district court approved the settlement and the proposed attorney fee and denied Petri’s discovery motion. The Seventh Circuit vacated. The district court did not give sufficient weight to evidence of ex-ante fee agreements, all the work that class counsel inherited from earlier litigation against Stericycle, and the early stage at which the settlement was reached. The court upheld the denial of the objector’s request for discovery into possible pay-to-play arrangements. View "Petri v. Stericycle, Inc." on Justia Law
File v. Kastner
Under rules adopted and enforced by the Wisconsin Supreme Court, Wisconsin lawyers must join and pay dues to the State Bar of Wisconsin. Active membership in the association is “a condition precedent to the right to practice law” in the state. This regulatory regime, often called an “integrated, mandatory[,] or unified bar,” authorizes the State Bar to use membership dues to aid the courts in the administration of justice, conduct a program of continuing legal education, and maintain “high ideals of integrity, learning, competence… public service[,] and high standards of conduct” in the bar of the state.Attorney File contends that requiring him to join and subsidize the State Bar violates his First Amendment free speech and associational rights. Recognizing that Supreme Court precedent forecloses this claim (Keller v. State Bar of Cal. (1990)), File argued that the Court’s more recent cases—particularly “Janus” (2018)--implicitly overruled Keller. The district court rejected this argument. The Seventh Circuit affirmed. Keller “may be difficult to square with the Supreme Court’s more recent First Amendment caselaw, but on multiple occasions and in no uncertain terms, the Court has instructed lower courts to resist invitations to find its decisions overruled by implication.” View "File v. Kastner" on Justia Law