Valpo Law Blog

Analysis of current legal issues and cases in the Seventh Circuit Court of Appeals

Category: General (page 1 of 5)

Too Close to the Sun

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Zach Melloy
Juris Doctor Candidate, 2016
Valparaiso University Law

In the airline industry, it’s not uncommon for an airline that sells international tickets to arrange for another airline to handle service over part of the route. But if that bridge airline experiences a substantial delay, who is responsible for the resulting damages to the passengers?

On February 4, 2016, the Seventh Circuit Court of Appeals consolidated two appeals dealing with this exact situation in Baumeister v. Deutsche Lufthansa, AG. Both cases dealt with the liability stemming from bridge carriers, and in both cases the plaintiffs’ appeals were denied.

In the first case, German plaintiff Baumeister had purchased a ticket from Lufthansa Airlines to fly from Stuttgart, Germany to San Francisco, California. He also had a connecting flight to Munich, Germany, operated by a now-defunct regional German airline called Augsburg Airways. The Ausburg flight was cancelled, however, and Lufthansa was forced to substitute transportation for the passengers.

Baumeister finally made it to San Francisco, but 17 hours later than expected. He then sued in the United States District Court for the Northern District of Illinois, claiming that under a certain European Union regulation, Lufthansa was contractually obligated for the damages arising from the flight’s delay.

Judge Richard Posner viewed the regulation (comically citing to Wikipedia), and determined that even if Baumeister could sue to enforce a foreign regulation in the United States, he had sued the wrong company. The European Regulation placed liability on the operating carrier whose flight was delayed or cancelled, which in this case was Augsburg, not Lufthansa. As a result, Baumeister had no claim against Lufthansa, and the Seventh Circuit affirmed the lower court’s grant of summary judgment.

The second case involved an American couple (the Varsamises) who purchased roundtrip tickets from Dallas, Texas to Venice, Italy, whose connecting flight in Rome was delayed. The company that sold the tickets was American Airlines, but the operating airline for the delayed flight was a Spanish airline named Iberia. The Varsamises eventually made it back to Dallas 21 hours later than expected, and sued Iberia in the United States District Court for the Northern District of Illinois.

The Varsamises claimed that Iberia had breached their contract by allowing the flight to be delayed, and as a result they were entitled to damages from that delay. However, as Judge Posner noted, the contract was between the Varsamises and American Airlines, not Iberia. As a result, the Varsamises had no reason or standing to sue Iberia for breach of contract. The Seventh Circuit then affirmed the lower court’s decision granting summary judgment.

These two cases demonstrated the difficulty of determining liability, especially when that liability is affected by foreign and international regulations. And in an ever-increasingly globalized society, cases involving airline liability will likely only get murkier, so it’s important to stay informed when your next flight may be delayed.

Smiling in the Face of Religious Adversity

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Zach Melloy
Juris Doctor Candidate, 2016
Valparaiso University Law

An employee filed suit against her employer, the Circuit Court of Cook County, Illinois, alleging that they had subjected her to a hostile work environment on the basis of her religion and national origin.

Fozyia Huri, a native of Saudi Arabia and a practicing Muslim, began working in 2000 for the Circuit Court of Cook County as a childcare attendant. She was to work under Sylvia McCullum, a devout and vocal Christian who did not bother to introduce herself to Huri until Huri had been there for two weeks. According to Huri, McCullum was unfriendly from the moment they were introduced. Over eight years, McCullum repeatedly told Huri, who routinely wore a hijab, that one of her colleagues was a “good church-going Christian” and that the she and the chief judge were both “good Christians.”

In 2009, McCullum started becoming more and more vocal, telling her co-workers to work with a “good Christian” rather than Huri, whom McCullum described as “evil.” McCullum also began treating Huri resentfully; she made false claims against her, subjected her to different rules than her co-workers, screamed at her, and subjected her to stricter scrutiny than her co-workers. McCullum also asked the other office attendants to holds hands and say a prayer “in the name of Jesus Christ.”

A year later, Huri was transferred to the Court Reporters’ Office at the Cook County Circuit Court. Her new supervisors, however, treated her just as badly as McCullum had. Huri was prohibited from entering her office early, although other employees have 24-hour access. She was also prohibited from letting her daughter wait in the lobby, although children of non-Muslim, non-Arab employees are allowed in the lobby and the office. She was also excluded from departmental social gatherings, and was also denied time off for an Islamic holiday. Huri complained to the Chief Judge’s Office, but never heard anything.

As a result of this harassment, Huri filed a pro se claim against the Circuit Court of Cook County pursuant to Title VII of the Civil Rights Act of 1964 and 42 U.S.C. § 1983, alleging that she had been subjected to a hostile work environment, because she is Muslim and an Arab. The United States District Court for the Northern District of Illinois dismissed the action, and Huri filed an appeal with the Seventh Circuit Court of Appeals.

The Seventh Circuit held that the District Court’s analysis was “replete with error.” The District Court had dismissed the entire case for two reasons: failure to exhaust administrative remedies, and failure to state a claim. However, as the Seventh Circuit noted, Huri had already filed three complaints with the Equal Employment Opportunity Commission before going to court.

The Seventh Circuit also held that Huri’spro se complaint accurately stated a claim under Title VII. In order to state a Title VII hostile work environment claim, a plaintiff must allege that they were subject to unwelcome harassment based on a reason forbidden under Title VII. Huri alleged the basis for her harassment and discrimination was her religion and national origin, both of which are forbidden under Title VII.

In addition to unwelcome harassment and a forbidden reason under Title VII, a plaintiff must also allege that the harassment was so severe or pervasive that it created a hostile or abusive working environment, and that there is a basis for employer liability. The Seventh Circuit held that Huri met this requirement, stating that “[i]t is enough to say that it is plausible that the screaming, prayer circles, social shunning, implicit criticism of non-Christians, and uniquely bad treatment of Huri and her daughter could plausibly be abusive.” As a result, the District Court erred when it dismissed Huri’s claim.

The Seventh Circuit then reversed the District Court’s decision and remanded the case for further proceedings. Huri will still have to overcome the burden to produce evidence to prove her claim, but now she will finally be able to demonstrate the religious harassment and discrimination she’s suffered for over a decade.

No Wonder People Do Not Like Insurance Agents

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By: Jeremy M. Schmidt
J.D. Candidate, 2017
Valparaiso University School of Law

Ohio National Life Assurance Corp. v. Douglas W. Davis, et al. came before the Seventh Circuit on appeal from a summary judgement decision at the trial court. Mavash Morady (Morady), a defendant in this case, was a contracted insurance agent with Ohio National Life Assurance Corp. (Ohio National). Douglas Davis (Davis), another defendant in this case, was working with Morady to defraud Ohio National by using an investment strategy known as Stranger-Owned Life Insurance (STOLI).

Davis and Morady devised a scheme where they chose people that were older because they believed that they would be prime candidates for their scheme. It would begin by Davis approaching an individual, and then asking them to take out a life insurance policy. These people would receive a compensation from Davis for taking out a life insurance policy.

Morady, being the life insurance agent, would meet with the chosen people and have them fill out all of the forms to apply for life insurance. Morady would then fraudulently alter the documents to make these potential clients look like they are younger, and healthier, than they actually were. Ohio National would confirm that these prospective clients were actually people, but they did not check further into any of the clients to ensure the paperwork was completely accurate.

Davis and Morady then would contact the clients about a month after the life insurance went into force. The two then would have the clients sign the policy over to a irrevocable trust that was managed by a company that Morady’s husband owned. The life insurance policy then was owned by the company, and the beneficiary was also the company. The clients never paid any of the premiums because the company paid the premiums for them. The company then would sell the life insurance polices to investors. By doing this, Morady was violating her employment contract with Ohio National because the employment contract does not allow for an agent to sell policies that will be involved in a scheme where a third party will pay the premium, and will thus benefit from the death of the insured.

Once Ohio National found about the scheme Davis and Morady had been carrying out, they voided out all the policies that were involved. Ohio National then filed a complaint against Davis, Morady, Morady’s husband, and other investors. The two sides filed briefs that had a common fact pattern, which means that there was no dispute to the events and how they happened. Ohio National filed a motion for summary judgement, which the court granted in their favor. The court gave Ohio National everything they asked for with the exception for the judgment against Steven Egbert (Egbert). The court reasoned that Egbert was an innocent bystander in the scheme when he made an investment into a life insurance policy, and could not have known the policy was created through fraudulent acts.

The Seventh Circuit decided that summary judgement in favor of Ohio National was correct and the damages awarded were reasonable because Davis and Morady were found to have committed a tort of civil conspiracy.

Weighing the Options of Care

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By: Duke Truong
J.D. Candidate, 2017
Valparaiso University School of Law

Over 23,000 mentally disabled people were on the waiting list to receive housing and medical care from any of the eight state-operated developmental centers (SODC) in Illinois.  Another 600 were in emergency situations awaiting services. The State of Illinois could not provide essential services to those on the waitlist because it already cared for nearly 25,000 people.  In 2012, Illinois planned to close roughly a third of its SODCs to save costs. The state chose to close the Warren G. Murray Development Center, an SODC. Residents of Murray faced relocation due to the planned closure. The state tried to shift the residents of the SODCs to community-based facilities because it is cost effective.

Before the residents are moved, the state must assess their fitness. The assessment determines what kind of facility the disabled person will be placed in. Standing in the state’s way were the guardians of the Murray residents; the guardians wanted to prohibit the state from carrying out the assessment without their consent. The Illinois League of Advocates for the Developmentally Disabled represented the plaintiffs. They sued the Illinois Department of Human Services under 42 U.S.C. § 12132 of Title II of the American with Disabilities Act.  Plaintiffs alleged discrimination by a public entity.

The guardians claimed treatment of residents at community-based facilities are worse than at SODCs.  In addition, the guardians claimed the state left them with no other choice but to accept the relocation of the wards. Plaintiffs filed for a preliminary injunction against the assessment and transfer of the wards.  The case went before the district court of Northern Illinois.  The district court denied the plaintiff’s request.  Plaintiffs appealed to the Seventh Circuit Court of Appeals.

Judge Posner, Manion, and Hamilton presided over Illinois League of Advocates for the Developmentally Disabled, et al. v. Illinois Department of Human Services, et al. and affirmed the district court’s holding.  Plaintiffs failed to prove mistreatment of their wards at community-based facilities. The judges relied on factors such as emotional benefits of community-based facilities, the likelihood of residents having his or her own room, and the lack of irreparable harm on the plaintiffs in affirming the decision.

First, the judges reasoned that community-based facilities are emotionally beneficial for the residents. Being near stores, parks, restaurants, or movie theaters bring emotional benefits that allows them to feel free. Second, the chances of residents having his or her own room is better than at SODCs where less than 29 percent have their own room. Community-based facilities are less crowded than SODCs.  Finally, the judges thought that granting the preliminary injunction would impose irreparable harm on the state because of the financial distress.

SODCs are isolated medical centers cut off from society. Although the mentally disabled are severely hindered in life, it does not mean that they cannot experience the joy of being a part of the community. Academic studies show that severely disabled persons feel less isolated at community-based facilities.  Yes, parents or guardians should have the ultimate say in the care of their wards, but at times the state is in a better position to know what’s best in weighing the options of care.

No Attorney’s Fees for Surviving Family Members Under Indiana’s General Wrongful Death Statute

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Azariah Jelks
Juris Doctor Candidate, 2016
Valparaiso University Law

The Indiana Supreme Court recently held that attorney’s fees are not recoverable under the state’s general wrongful death statute in SCI Propane v. Frederick. The issue was one of first impression for the court.

The lawsuit was brought against South Central Indiana Rural Electric Membership Corporation (“SCI”) after an explosion occurred at the home of the Kindle family, one of SCI’s customers, as a result of a gas leak. Stephan Frederick was killed in the accident, but his wife and young son survived. Frederick’s estate initiated the suit, and argued that it could received attorney’s fees under the Indiana General Wrongful Death Statute. Wrongful death statutes allow a spouse or family members of an individual to sue the person or entity that caused their death. Most statutes require the death to be an intentional killing, the result of negligence, or some other misconduct.

The Indiana Supreme Court held that attorney’s fees could not be recovered as compensatory damages if a spouse or dependents survived the decedent. The court analyzed the language of the statute and divided decedents into two categories: those with surviving spouses, dependents, and family members, and those without any survivors. When a person dies without any survivors, the decedent’s personal representative is allowed to bring a wrongful death claim on their behalf. In this case, any monetary damages go toward paying expenses or persons who provided services related to the death. Personal representatives who sue are also permitted to collect attorney’s fees because of their decision to prosecute misconduct, and because the estate directly bears the burden of paying such costs due to the absence of any survivors.

In considering the first category of wrongful death claims—those brought by the decedent’s survivors—the court looked to the purpose of the wrongful death statute. After looking to the purpose of the statute, which is to compensate survivors who may suffer some form of loss from the decedent, such as loss of companionship or financial contributions, the court reasoned that attorney’s fees were unavailable to survivors. According to the court, this is because “the fees do not evolve from the deprivation to a survivor”. The court also explained that the estate must pay the attorney’s fees since Indiana follows the American Rule. The American Rule requires each side to pay their own attorney’s fees. Attorney’s fees are available under the American rule in many instances.

However, due to the Indiana General Wrongful Death Statute’s unique purpose of providing compensation for damages directly resulting from the decedent’s loss, attorney’s fees do not quite fit the bill as applied to survivors who bring suits.

This decision ultimately limits the amount of money plaintiffs’ attorneys could receive from litigating cases involving surviving spouses and family members. Do you think this will have any effect on attorneys’ willingness to take on these types of cases, or will contingency fees be satisfactory enough?

Inconsistent Story Brings Nothing But Trouble and a Frivolous Law Suit

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By: Jeremy M. Schmidt
J.D. Candidate, 2017
Valparaiso University School of Law

The Seventh Circuit decided on Afram Boutros v. Avis Rent A Car System, LLC, which serves as an important reminder for all attorneys to carry out their due diligence before filing a suit (or appeal), because they could be sanctioned for filing a frivolous suit or appeal.

Afram Boutros (Boutros) worked for Avis Rent a Car System (Avis) as a courtesy bus driver at the company’s O’Hare Airport location. In May, 2008, Boutros informed a shift manager that a fire extinguisher inexplicably discharged next to the drivers seat of the bus he was driving. Boutros claimed that a passenger had knocked it over, even though it was found there were no passengers aboard. The shift manager told him to take the bus to the mechanic’s area to have them clean the bus, and that if there was no mechanic available to take the bus out of service. The shift manager concluded by instructing Boutros to use a different bus to finish his shift.

During the same shift, Boutros told another shift manager what happened, and the shift manager told him to do the same as the first shift manager instructed. However, Boutros stated that the fire extinguisher fell by itself, and was not knocked over by a passenger this time. Secondly, he stated that the fire extinguisher sprayed him on his pants and his face. Finally, Boutros said that he cleaned the bus by himself because there were no mechanics available.

Avis offered medical assistance to Boutros the night the incident occurred. Boutros declined. The next day Boutros requested immediate medical assistance so Avis sent him to a local clinic. Boutros ended up in an emergency room because he claimed the clinic doctors sent him there with concerns about cancer caused by the chemicals used in making fire extinguishers. It turned out that there were no cancer concerns and the doctors at the clinic did not tell Boutros to go to an emergency room.

Avis launched an investigation into this incident. Avis interviewed both shift managers that Boutros discussed the incident with. Avis also had the fire extinguisher inspected and it was determined that only 5.5 oz were discharged, which conflicted with Boutros claim that a lot was discharged from the fire extinguisher. Avis determined that there were multiple mechanics available at the time to clean the bus, and that Boutros should have never cleaned it himself. Avis concluded the investigation with firing Boutros for dishonesty and insubordination.

Boutros filed suit alleging that he was fired for his race, which violates Title VII. At the end of the trial, the jury found for Avis on all claims. Boutros fired his attorney, and then hired an attorney who filed the appeal with the seventh circuit. Avis asked the seventh circuit to dismiss the appeal because it was frivolous. The seventh circuit declined to dismiss a case on a procedural error, but instead would rather decide a case on its merits.

Boutros claimed that the lower court erred in the limiting instructions to the jury. The seventh circuit found that there was no error because Boutros agreed to the instructions. Finally, Boutros claimed that the lower court erred in not allowing his motion for a new trial to succeed. The seventh circuit found no error here because this case was found to be frivolous on appeal.

The seventh circuit concluded that the lower court did not error in any of the  rulings during trial, and did not error on any of the post trial motions as well. Additionally, the seventh circuit invoked Rule 38 which requires attorneys show good cause in why sanctions should not be issued for filing a frivolous appeal.

“Partisan Balance Statute” Ruled Unconstitutional

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Scott Johnson
Juris Doctor Candidate, 2016
Valparaiso University Law

The Seventh Circuit issued a ruling last week that held that the means by which Marion County elects its judges is unconstitutional. In Common Cause Indiana v. Individual Members of the Indiana Election Commission the court invalidated Indiana Code § 33-33-49-13 known as the ‘”Partisan Balance Statute” because the law violated the First Amendment right of political association. The statue applies only to judges in Marion County and is a uniquely distinctive election system (as neither party could cite any similar voting process in the entire country).

Under the law, Republican and Democratic parties may nominate up to half of the open positions each election year for Marion Superior Court judgeships. Once a judge wins in the primary election, he or she is essentially guaranteed to win the general election as a result of there being as many candidates on the ballot as there are open positions. For example, if there are twenty open positions, voters receive a ballot where they can vote for ten Democrats and ten Republicans while only ten each are listed on the ballot.

Another problem with the election law is that it enabled a pay-to-play party “slating” system, in which both parties “slate” those ballot positions with candidates who make substantial financial contributions to the party, or conform to party ideals. “Such a system creates the perception that a judge is chosen within the primaries, not the general election, and if a judicial candidate’s eventual election is dependent solely on the primary, the candidate’s chances of being elected improve the more he or she appears to espouse the ideals of the party,” Judge Theresa Springmann wrote.

Common Cause contends this process makes the general election pointless because whoever wins the primary is assured a victory in the general election. “So long as each candidate votes for himself or herself, as he or she presumably will, actions taken by other voters in the general election are meaningless, as they lack any opportunity to affect the outcome,” wrote Judge Springmann.

Therefore, the only people who can cast meaningful votes are eligible primary voters. The result is that people who have no political affiliation are excluded from the election of judges in Marion County because they cannot vote in the primary.

The State defended the Partisan Balance Statute as a constitutional exercise of its power to regulate elections. The State argued the election law serves an important government interest in maintaining fairness and impartiality.  According to the State, if one party were able to sweep and control all the seats in a judicial election, litigants of other political affiliations would feel disadvantaged. However, the court did not buy this argument, reasoning that the fact there is an equal amount of liberal and conservative judges says little about the impartiality of individual judges.

While the Supreme Court has ruled that not every voting regulation is subject to strict scrutiny, regulations that substantially burden voters must be narrowly tailored to advance a state interest of compelling importance. Here, the Seventh Circuit determined the statute burdens the right of qualified voters to cast their votes effectively because the winning candidates for judge have been effectively determined in the primary election without the participation of the full electorate.

In the forty years since the Partisan Balance Statute was adopted, there have been only two elections where a candidate that is not a Republican or Democrat appeared on the general election ballot. Five candidates from the Libertarian Party appeared on the ballot in 2000 and one Libertarian candidate appeared on the ballot in 2002. This begs the bigger question of whether there should be partisan judicial elections at all?

The judicial branch is expected to apply the law impartially yet also be accountable to voters. Justice Ginsburg wrote in her dissent in Minnesota v. White “Judges perform a function fundamentally different from that of elected representatives where legislative and executive officials act on behalf of the voters who placed them in office while judges represent the law.”

A 2013 study by the American Constitution Society titled “Justice At Risk” found a significant correlation between business lobbyist contributions to state supreme court justices and the voting of those justices in cases involving business matters. So far thirteen states choose their judges in entirely nonpartisan elections.

Judicial partisan elections seem to even contradict judicial ethics. The Indiana Code of Judicial Conduct states that judges must “uphold and apply the law fairly and impartially and not engage prejudice in regards to gender, religion, national origin, ethnicity, disability, age, sexual orientation, marital status, socioeconomic status, or political affiliation. Nevertheless, this decision makes elections for judges in Marion County more democratic.

Conflict Over Contraceptive Mandate Drags On

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By: Duke Truong
J.D. Candidate, 2017
Valparaiso University School of Law

On Sept. 4, 2015, the Seventh Circuit decided, yet again, on the issue of whether the contraceptive mandate violates the sincere beliefs of nonprofit religious groups.  Nonprofit religious groups continue to challenge the mandate while seeking for an “exemption” instead of an “accommodation.”  The plaintiffs in Grace Schools et al. v. Burwell argued the Patient Protection and Affordable Care Act  of 2010 (ACA) places undue burdens on the free exercise of their First Amendment right and that it violates the Religious Freedom and Restoration Act of 1993 (“RFRA”).  Plaintiffs insist the mandate infringes on their sincere religious exercise against facilitating a wrongful act of others (i.e., the use of birth control by employees through health plans funded by religious employer).

After the district court granted plaintiff’s preliminary relief against the mandated coverage on Dec. 3, 2014, the government appealed to the Seventh Circuit.  The parties’ dispute centered on the “substantial burden” of the law.  When a law burdens a person’s exercise of religion, the government must proceed in the “least restrictive means” in order to further a “compelling interest.”  The plaintiffs objected to the mandate’s complicit orders because they believe their connection to destroying an embryo is an immoral act that imposes a substantial burden which violates the RFRA.  The Seventh Circuit denied this argument and stood firm with prior decisions.

The Seventh Circuit denied arguments of the University of Notre Dame and Wheaton College, decided May and July, 2015, respectively, where both schools sought preliminary injunctions on grounds that the ACA violated their religious beliefs and the First Amendment in providing birth controls of any kind to its employees and students.  In both cases, the court employed the substantial burden analysis and determined the contraceptive mandate did not infringe on their religious exercise.  A particular kind of religious belief – facilitating another person’s wrongful act – has no protection under the RFRA, declared the court.  But does the government have any business in discriminating against a certain belief and not others?  Should the court shift its focus to whether the government has pressured the religious group to give up a certain belief?

The government contends the contraceptive mandate imposes no substantial burden because it allows plaintiffs to opt for an “accommodation.”  To avoid fines, nonprofits who opposes the mandate must contact the Department of Health and Human Services and voice their objection or submit a EBSA Form 700.  After a nonprofit protest, the contracted insurers or third-party administrators are obliged to provide contraceptive coverage for the employees without co-pay.  However, the nonprofits are at odds with the accommodation because their health plans are used to fund contraceptive services to which they object.

In a forceful dissent, Judge Manion said the religious groups has no relief under the contraceptive provisions because the coverage is connected to the health plans that depended on their actions.  Judge Manion proclaimed, “the government’s stated interest is overbroad, underinclusive, and marginal at best.”  As the conflict over contraceptive mandate drags on, are decisions handed down by the court of appeals an unequal treatment of religious exercises?

When Counsel Becomes a Barrier

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Zach Melloy
Juris Doctor Candidate, 2016
Valparaiso University Law School

For the most part, lawyers come in all shapes and forms. Some are brilliant advocates for their clients, others use shrewd procedural strategy and a specific knowledge of bureaucracy to their advantage. But what happens when your lawyer fumbles during your trial and you’re sentenced to almost 10 years longer than required?

On August 25, 2015, the 7th Circuit Court of Appeals took a hard look at this exact situation in the case Ramirez v. U.S. However, the issue in the case ultimately ended up being much more complex than a simple “ineffective counsel” claim.

Israel Ramirez originally pleaded guilty in the United States District Court for the Southern District of Illinois to the crime of possession of marijuana with intent to distribute, which normally carries a penalty ranging from 151 to 188 months. However, due to his two previous convictions in the state of Texas, the government argued that Ramirez was in fact a “career offender.” The District Court agreed, and as a result Ramirez’s sentence was enhanced to between 262 and 327 months. Ramirez’s trial lawyer never objected to the “career offender” status.

Ramirez and his trial counsel appealed the decision, but due to structure of the plain-error standard, Ramirez was required to show that his previous convictions were not crimes of violence. Ramirez was unable to provide evidence, because his trial lawyer never sent out subpoenas to the courts in Texas. As a result, Ramirez’s appeal was denied and his sentence remained.

Ramirez retained new counsel and filed a motion with the District Court to vacate his sentence. Ramirez asserted that his trial counsel was ineffective because the lawyer failed to object to his  “career offender” status. The District Court judge denied the motion, stating that Ramirez still had not proffered any evidence to establish that his convictions were not crimes of violence. Ramirez’s new attorney did not  convey this decision to him, did not file any post-judgment motions, and also failed to file an appeal.

After being let down by two different attorneys, Ramirez filed a pro-se appeal with the 7th Circuit, claiming that his trial counsel and post-conviction counsel were ineffective and he was unfairly prejudiced by their negligence.

The 7th Circuit held that Ramirez’s original motion to vacate could stand on its own merits, as it followed the normal procedural rules with a newer Supreme Court interpretation of the Federal Rules of Civil Procedure. The Court of Appeals stated that such a motion to vacate is fundamentally equitable in nature, and thus requires that a court look at all the surrounding circumstances. If the circumstances are extraordinary, then a motion to vacate is likely to be granted.

The Court of Appeals held that the actions of Ramirez’s trial and post-conviction attorneys amounted to ineffective counsel, and because of the extraordinary circumstances surrounding Ramirez’s motion to vacate, the 7th Circuit held that the District Court had abused its discretion in denying the motion. The case was remanded back to the District Court, with instructions that Ramirez’s motion be granted and his conviction reviewed.

With this decision, the 7th Circuit has recognized that there are certain points where attorney’s negligence has simply gone too far. The moral of the story is that, while lawyers all come in different shapes and forms, all must be prepared to fight for their client to the best of their ability. No one deserves to be poorly represented, especially when liberty is at stake.

The Not-So Merry Gentleman: A Critically Acclaimed Flop

By: Jonathan E. Joseph, MBA, CPA
Juris Doctor Candidate, 2016
Valparaiso University School of Law

Who is to blame when a motion picture receives critical acclaim yet is a commercial failure? In Merry Gentlemen, LLC v. George and Leona Productions, Inc. & Michael Keaton, Merry Gentleman, LLC blamed leading man and director Michael Keaton and George and Leona Productions, Inc. for the fact that the  2009 film The Merry Gentleman failed to show a profit and tried to use breach of contract to make the point.

The plaintiff argued that Keaton violated his directing contract by (1) failing to prepare the first cut of the film in a timely fashion; (2) submitting a first cut that was incomplete; (3) submitting a revised cut that was not ready for the producers to watch; (4) communicating directly with officials at the Sundance Film Festival and threatening to boycott the festival, if they did not accept his director’s cut instead of the producers’ preferred cut; (5) failing to cooperate with the producers during the post-production process; and (6) failing to promote the film adequately. The plaintiff asked the Court for its full investment of $5.5 million.

Had the case gone to trial, it would have been difficult to prove the plaintiff’s claims that his actions amounted to breach of contract. Keaton did complete the film, which was subsequently accepted at the prestigious Sundance Film Festival. It received critical praise—Roger Ebert, for example, gave it 3.5 stars out of 4 and called it “original, absorbing and curiously moving.” And the film’s executive producer, Paul Duggan, admitted during his deposition that he was “unaware of any director who did more publicity than Keaton did for a movie with a comparable budget.” Instead, Keaton moved for summary judgment on the “narrow ground that the plaintiff had failed to produce sufficient evidence that his alleged breaches of the directing contract caused it damages. On appeal, the district court assumed that Keaton had breached the contract and examined the issue of damages, as well as the causation of resulting harm from the alleged breach of contract.

Under Illinois law, a “party injured by another’s breach or repudiation of a contract usually seeks recovery in the form of damages based on his ‘expectation interest,’ which involves obtaining the ‘benefit of the bargain,’ or his ‘reliance interest,’ which involves reimbursement for loss caused by reliance on a contract.” With this being said, in essence, the plaintiffs were seeking the amount of the movie’s budget in full—or in other words, a free movie. The court held in Keaton’s favor, finding that the plaintiff had failed to present a genuine issue of material fact regarding causation and resulting damages.

The plaintiff might have received part of its investment, if it had claimed that Keaton’s performance slowed production, accrued extra costs, or caused other negative financial consequences. Instead, The plaintiff asked for its entire investment as damages for breach of contract, which was impossible to justify because Keaton had not walked away from his contract. They were merely making he argument that they had relief on Keaton’s performance with the expectation interest of receiving a profitable movie.

Recovering one’s investment is a theory of reliance damages. Extra costs would also look like a theory of reliance damages in the sense that increased costs could affect any expected downstream profits (this is really complicated, because downstream profit is actually a form of consequential damage that could be thought of as reliance). As for expectation, it is possible for someone to perform his contract duties so poorly, that the expectation interest is completely frustrated. This all needs to be related to the legal standards given above about expectation and reliance damages in a more clear way, if, in fact, that was what the court’s concern.

He had made the movie and it had generated critical acclaim. If the court had sided with the plaintiff and awarded the damages it was seeking, the plaintiff would have had more than it started with; it would have been awarded a free film. More specifically, the plaintiff would have received back the money it put out in reliance on Keaton’s promise, so it would be put back in the status quo ante. Even if Keaton had breached, there was still some benefit the plaintiff received the form of a movie that was a critical success and earned some money.

On appeal, the Court found that the plaintiff “effectively wants to shift the entire cost—and risk—of producing The Merry Gentleman to Keaton for his alleged breaches, giving it a windfall and placing it in a better position than it would have been in had the contract never been signed.Reliance damages are not insurance. Courts “will not ‘knowingly put the plaintiff [receiving a reliance recovery] in a better position than he would have occupied had the contract been fully performed.’” In general, reliance damages are capped by the expectation interest and this is the  reasoning the court used.

The Court dryly noted that the plaintiff might have been able to recover some damages for specific failures by Keaton, but in this case it “shot for the moon and missed.” Keaton fulfilled his contract and made a movie.  The plaintiff was not entitled to something for nothing. Its investment – and its contract with Keaton – involved a degree of risk, and it was unreasonable for the plaintiff to expect the court to find in its favor simply because it didn’t like the final result.

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