Justia Legal Ethics Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
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LHO owns a downtown hotel that it rebranded as “Hotel Chicago” in 2014. In 2016, Rosemoor renamed its existing westside hotel as “Hotel Chicago.” LHO sued Rosemoor for trademark infringement and unfair competition under the Lanham Act and for deceptive advertising and common-law trademark violations under Illinois law. The district court denied preliminary injunctive relief, finding that “LHO has failed, at this juncture, to show that it is likely to succeed in proving secondary meaning" and was unlikely to show that “Hotel Chicago” was a protectable trademark. LHO appealed but successfully moved to voluntarily dismiss its claims with prejudice before briefing.Rosemoor requested more than $500,000 in attorney fees, arguing that the case qualified as “exceptional.” The district court denied the request under the Seventh Circuit's “abuse-of-process” standard. The Seventh Circuit held that the district court should have evaluated Rosemoor’s attorney-fee request under the Supreme Court’s “Octane Fitness” holding. On remand, Rosemoor filed a renewed request for more than $630,000 in fees, arguing that the weakness of LHO’s position on the merits, LHO’s motives in bringing suit, and its conduct in discovery, made the case exceptional under Octane Fitness. The Seventh Circuit affirmed the denial of the request. The district court applied the Octane Fitness standard and reasonably exercised its discretion in weighing the evidence before it. View "LHO Chicago River, L.L.C. v. Rosemoor Suites, LLC" on Justia Law

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In 2005-2007, Merchant purchased Michigan hotel properties from NRB and financed the purchases through NRB, using corporate entities as the buyers. Merchant sold interests in those entities to investors. The hotels had been appraised at inflated amounts and sold for about twice their fair values. When the corporate entities defaulted on their loan payments, NRB foreclosed in 2009. Merchant claimed that NRB’s executives colluded with an appraiser to sell overvalued real estate to unsuspecting purchasers, wait for default, foreclose, and then repeat the process.In 2010, an investor sued Merchant, Merchant’s companies, NRB, and 12 others for investor fraud. In 2014 the FDIC took NRB into receivership and substituted for NRB as a defendant. Merchant and his companies brought a cross-complaint, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and state laws. A Fifth Amended Cross-Complaint raised 14 counts against 10 defendants, including two law firms that provided NRB’s legal work. The district court dismissed several counts; others remain active.The Seventh Circuit affirmed the dismissal of claims against the law firms. The counts under state law are untimely under Illinois’s statute of repose. The cross-complaint effectively admits that one firm played no role in NRB’s alleged fraud perpetrated against Merchant in 2005-2007. The cross-complaint failed to allege that either law firm conducted or participated in the activities of a RICO enterprise; neither firm could be liable under 18 U.S.C. 1962(c). View "Muskegan Hotels, LLC v. Patel" on Justia Law

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O’Donnell, represented by attorney Horn, challenged the Social Security Administration’s (SSA) denial of her application for disability insurance benefits. A magistrate remanded the case, awarding O’Donnell $7,493.06 in Equal Access to Justice Act (EAJA), 28 U.S.C. 2412(b), fees, paid to Horn. On remand, an ALJ found that O’Donnell was disabled. SSA determined that she was eligible for benefits dating back several months and withheld 25% of O’Donnell’s past-due benefits, $14,515.37, for possible future payment of fees under 42 U.S.C. 406(a), which authorizes SSA to award a “reasonable fee” to persons who successfully represent claimants in administrative proceedings.Horn filed an unopposed motion for authorization to collect $14,515.37 in section 406(b) fees; having already received the $7,493.06 EAJA award, Horn proposed to keep the EAJA fee, with SSA to pay the balance ($7,022.31), leaving $7,493.06 with SSA for future payment of section 406(a) fees. The magistrate’s order stated that Horn was awarded $14,515.37 under section 406(b), payable by the SSA from the past-due benefits and that “Horn will refund" to O'Donnell $7,493.06, equal to the EAJA award, so that Horn would have to look to O’Donnell, not SSA, to satisfy any future section 406(a) fees. An ALJ subsequently awarded Horn $4,925.21 under section 406(a); he had to seek that amount from O’Donnell. The Seventh Circuit affirmed. No statute requires that the court order netting; the Savings Provision contemplates a refund by the attorney. View "O'Donnell v. Saul" on Justia Law

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In 1997, Plaintiffs co-founded Gray Matter Holdings. A 1999 Withdrawal Agreement with Gray Matter entitled Plaintiffs to royalties on the sales of “Key Products.” In 2003, Gray Matter sold some assets to Swimways. After that sale, Plaintiffs took Gray Matter to arbitration four times over their royalty rights. The third arbitration determined that Gray Matter did not transfer its royalty obligations under the Withdrawal Agreement to Swimways but only transferred its intellectual property rights; Gray Matter, not Swimways, remained responsible for any royalty compensation owed to Plaintiffs. The fourth arbitration found no evidence to support Plaintiffs’ claim that Swimways tendered fraudulent filings to the Patent and Trademark Office regarding the intellectual property rights in the Key Products and that all intellectual property rights in the Key Products at issue had been transferred to Swimways.Plaintiffs filed suit, alleging that they were entitled to royalties for the Key Products and that Swimways tendered the alleged fraudulent filings. The Seventh Circuit affirmed the dismissal of the complaint and the imposition of $271,926.92 in sanctions. The claims were barred by principles of res judicata and the arbitrations were “binding and final” under the Withdrawal Agreement. An accounting showed that attorneys and staff spent 273.1 hours, charging an average rate of about $1,000 per hour, preparing the motions to dismiss and for sanctions. View "Matlin v. Spin Master Corp." on Justia Law

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A confidential source, “Bonz” told Champaign Police that he knew a crack cocaine dealer named Moe. Over a few months, the department conducted five controlled buys from Moe, consistent with information from Bonz. After reviewing the video of the transactions, officers identified Moe as Orr, who was on parole after being convicted of unlawful possession of a controlled substance with intent to deliver. Bonz identified a picture of Orr. Officers tied the involved vehicle and apartment to Orr. Pursuant to a warrant, officers searched Orr’s apartment. They found a semi-automatic pistol with ammunition, approximately 22 grams of crack cocaine, approximately 15 grams of powdered cocaine, and drug paraphernalia. Orr voluntarily admitted that the gun and cocaine were his. Indicted for possessing a firearm as a felon, 18 U.S.C. 922(g), Orr unsuccessfully moved to suppress the evidence, asserting Bonz was an unreliable source.Orr testified that he had no reason to possess a firearm. The prosecutor presented evidence of Orr’s drug involvement. The jury found Orr guilty. Before sentencing, the Judicial Council of the Seventh Circuit determined that Judge Bruce had breached the Code of Conduct for U.S. Judges by engaging in improper ex parte communications in other cases with members of the U.S. Attorney’s Office. Although the Council found no evidence that those communications affected the outcome of any case, it suspended Bruce from all criminal matters involving the U.S. Attorney’s Office for one year. Orr’s case was transferred to another judge. The Seventh Circuit vacated Orr’s conviction. Judge Bruce’s conduct “cast a pall over certain decisions" that "required the exercise of substantial discretion.” This was not harmless error. View "United States v. Orr" on Justia Law

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Quincy’s Prevagen® dietary supplement is sold through brick‐and‐mortar stores and online. Ellishbooks, which was not authorized to sell Prevagen® products, sold dietary supplements identified as Prevagen® on Amazon.com, including items that were in altered or damaged packaging; lacked the appropriate markings that identify the authorized retail seller; and contained Identification and security tags from retail stores. Quincy sued under the Lanham Act, 15 U.S.C. 1114. The court entered a $480,968.13 judgment in favor of Quincy, plus costs, and permanently enjoined Ellishbooks from infringing upon the PREVAGEN® trademark and selling stolen products bearing the PREVAGEN® trademark.The Seventh Circuit affirmed and subsequently awarded $44,329.50 in sanctions under Federal Rule of Appellate Procedure 38. Ellishbooks’s arguments “had virtually no likelihood of success” on appeal and it appeared that Ellishbooks attempted to draw out the proceedings for as long as possible. View "Quincy Bioscience, LLC v. Ellishbooks" on Justia Law

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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

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Day was indicted for conspiracy to commit wire fraud after participating in a fraudulent “credit repair” scheme. The government offered Day a plea deal that would have yielded a probable sentencing range of 51-63 months’ imprisonment. Day’s federal defender advised him to accept the deal. His father urged him to consult a private lawyer—an acquaintance with no experience in criminal law. That lawyer brought in an attorney experienced in federal criminal law. The two told Day that he was not guilty and should reject the offer. Day hired the two lawyers. The federal defender withdrew and offered to make her file available. The government extended the same offer six weeks before trial. Though they had not yet reviewed the case materials, Day’s new lawyers advised him to reject it. Day declined the deal. At the final pretrial hearing, Day again rejected the plea offer. The lawyers later told Day he would lose at trial. Day told them to get the best deal they could. They instead advised him to throw himself on the mercy of the court.Day pleaded guilty without an agreement, facing a sentencing range of 87-108 months. The district judge imposed a 92-month sentence. Day sought relief under 28 U.S.C. 2255, arguing that his attorneys were constitutionally ineffective. The Seventh Circuit vacated. The government conceded the deficient-performance element of Day’s Sixth Amendment claim. The facts set forth in his motion, if proven, could establish prejudice. View "Day v. United States" on Justia Law

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In 2015, Cartwright sued his former employer, alleging discrimination based on his race and sex under Title VII, 42 U.S.C. 2000e; discrimination based on race, 42 U.S.C. 1981; and age discrimination, 29 U.S.C. 623. The judge appointed counsel for the limited purpose of settlement negotiations. The parties did not reach an agreement. The attorney was relieved of the limited representation. Cartwright failed to respond to discovery requests and filed many motions. The judge recruited a lawyer to represent him pro bono but later permitted the attorney to withdraw. The judge recruited another pro bono lawyer. After 14 months and more than 530 hours of work, the third attorney moved to withdraw citing substantial, irreconcilable disagreements with Cartwright. The judge granted the defendants partial summary judgment. Cartwright responded with multiple motions, accusing the judge of bias. The defendants moved to dismiss the case with prejudice for failure to prosecute. The judge recruited another pro bono attorney, then denied the motion as moot. Counsel later was allowed to withdraw. After four years and repeated warnings, the judge dismissed the case. The Seventh Circuit affirmed, reminding "judges that they need not and should not recruit volunteer lawyers for civil claimants who won’t cooperate ... Pro bono representation of indigent civil litigants is a venerable tradition ... courts must be careful stewards of this limited resource.” View "Cartwright v. Silver Cross Hospital" on Justia Law

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Apple owns Madison, Wisconsin vitamin stores. Knott, a former Apple employee, was fired in 2017. Knott founded his own vitamin shop, Embrace Wellness, in Middleton, Wisconsin. Embrace allegedly shared design features and a similar layout with Apple’s locations and carried comparable products. Apple sued, alleging infringement of its trademark, trade dress, and copyrights. The defendants filed counterclaims for tortious interference and retaliation. Apple sought a preliminary injunction on the trademark and trade dress claims, which the court denied, explaining that Apple had failed to show a likelihood of irreparable harm. Apple then moved to dismiss its own claims without prejudice. Because the defendants had already expended resources litigating an injunction, the court ordered Apple to withdraw its motion or accept dismissal with prejudice, expressing its opinion that no party’s claim was strong. Apple agreed to dismiss its claims with prejudice.The court subsequently denied defendants’ motion for fees; they appealed with respect to the copyright claims. The Seventh Circuit affirmed. Apple’s copyright claims were frivolous—common-law copyright was abolished in 1976—but the totality of the circumstances did not warrant fees. There was no evidence that Apple had filed suit with an improper motive, and no need to deter future frivolous filings. The case was primarily about trademark and trade dress. no motions were filed related to copyright. Apple dismissed the copyright claims voluntarily before defendants had to argue against them. View "Timothy B. O'Brien LLC v. Knott" on Justia Law