Articles Posted in U.S. 7th Circuit Court of Appeals

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Spencer stopped paying her mortgage in 2008. In Wisconsin state court foreclosure proceedings, Spencer’s attorney, Nora, adopted an “object-to-everything litigation strategy and buried the state court in a blizzard of motions.” While a hearing on a summary judgment motion was pending in state court, Nora removed the case to federal court. Finding no objectively reasonable basis for removal, the district court remanded the case and awarded attorney’s fees and costs to the lender, 28 U.S.C. 1447(c). The Seventh Circuit dismissed Spencer’s appeal as frivolous; the district court did not order her to pay anything. The court affirmed the award as to Spencer “because she has not offered even a colorable argument that removal was reasonable” and ordered Nora to show cause why she should not be sanctioned for litigating a frivolous appeal. View "PNC Bank, N.A. v. Spencer" on Justia Law

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In 1952 an Illinois owner granted a pipeline operator an easement for two pipelines across the parcel. The first was built immediately; the second, if built, had to be within 10 feet of the first. The contract says that any pipeline must be “buried to such depth as will not interfere with such cultivation.” In 2012 the operator notified the owner that it planned to build a second pipeline. The owner filed a quiet-title suit, alleging that either the right to build a second line had expired or that another line would violate the farmability condition. The operator replied that 49 U.S.C. 60104(c), preempts enforcement of the farmability condition. The district court dismissed. A second pipeline has been built 50 feet from the first, using eminent domain to obtain the necessary rights, but the owner anticipates construction of a third pipeline. Vacating the judgment, the Seventh Circuit held that no construction is currently planned and the district court acted prematurely. Until details of a third pipeline’ are known, it is not possible to determine what effect it would have on agricultural use. Only if a third pipeline prevents using the land for agriculture would it be necessary (or prudent) to determine whether section 60104(c) establishes a federal right to destroy more of the land’s value than paid for in 1952. The court stated that it had no reason to think that Illinois would call the 1952 contract an option or apply the Rule Against Perpetuities. View "Knight v. Enbridge Pipelines, L.L.C." on Justia Law

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The Gagnards built a house in Los Altos, California, then sold the home to Goldman in January, 2004. Since then, Goldman has sued the Gagnards and those involved with the construction and sale of the house in various tribunals. In 2011, Goldman registered a foreign arbitral award in Illinois. She then sought citations to discover and collect assets. The district court issued denied reconsideration motions and granted a turnover order. After filing an appeal, the Gagnards paid $1.3 million to Goldman in satisfaction of the judgment. Goldman accepted the payment, and refunded money she had collected in excess of the judgment balance. The district discharged all pending citations and allowed the Gagnards to file a counterclaim against Goldman, claiming unjust enrichment, but subsequently dismissed the counter-complaint. The Seventh Circuit affirmed, based on the failure, by the Gagnards to act in a timely manner. View "Goldman v. Gagnard" on Justia Law

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Trump Tower Chicago is a 92-story building with 486 residential condominium units, 339 hotel condominium units, retail space, a health club, ballrooms, meeting rooms, restaurants, a hair salon, and other facilities. When the owner of a hotel condominium unit is not occupying the unit, building management can rent it to a visitor; rental income is divided with the owner’s share credited against his annual maintenance fee. Plaintiff, an 80-year-old CPA and financial planner, agreed to buy two hotel condominium units in 2006 for $2.2 million. She bought them as an investment and already owned other investment condominium units, including a residential unit in Trump Tower Chicago. The agreement gave TrumpOrg “the right, in its sole and absolute discretion, to modify the Condominium Documents.” Plaintiff asked TrumpOrg to give her the right to terminate the agreement and get her deposit back if she disapproved of any such changes. TrumpOrg refused. Plaintiff signed the agreement, even though TrumpOrg had already made three changes. The next year, TrumpOrg made changes that greatly curtailed owners’ rights in the hotel facilities. Plaintiff refused to close. TrumpOrg did not seek to compel her to close, but did not return her down payment, $516,000 and canceled the purchase agreement. Plaintiff sought damages under the common law of contracts, the Illinois Consumer Fraud and Deceptive Business Practices Act, the Condominium Property Act, and Illinois Securities Law. The district court ruled in favor of the defendants. The Seventh Circuit affirmed. View "Goldberg v. 401 N. Wabash Venture, L.L.C., " on Justia Law

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In 2006 Iroanyah obtained first and second mortgage loans of $192,000 and $36,000. The Disclosure Statement for each displayed the repayment schedule, including the number of payments, the amount due for each, and the due dates for the first and last payments. Neither disclosure included the dates on which each payment was due, nor did they include the frequency with which payment should be made. The Iroanyahs admitted that they understood that payments were to be made monthly. They stopped making payments in 2008. In response to foreclosure proceedings in state court, the Iroanyahs sent a rescission notice for the first loan, citing deficient disclosure statements in violation of the Truth in Lending Act. The lender denied violation, but agreed to rescind the loan upon payment of $169,015.30. The Iroanyahs sent rescission notices for the second loan, to which there was no response They filed suit. The court agreed that the disclosures violated TILA, which extended the right of rescission to three years; statutory damages were denied under a one year limitation period. The court held that failure to respond to the rescission notices violated TILA, triggering an award of statutory damages for failure to respond and actual damages for attorneys’ fees. The Iroanyahs sought awards of $38,812 and $33,849. The district court awarded fees and costs in the amount of $16,433 against one lender and $13,433 against the other. The Seventh Circuit affirmed. View "Iroanyah v. Bank of America, N.A." on Justia Law

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In 2008 the Kathreins challenged Evanston’s Affordable Housing Demolition Tax under the Fifth and Fourteenth Amendments. The Tax required a property owner seeking to demolish any residential building to pay the greater of $10,000 per building, or $3,000 per unit. The measure is to “provide a source of funding for the creation, maintenance, and improvement of safe and decent affordable housing; proceeds go to the city’s Affordable Housing Fund. The Kathreins alleged that a developer, learning of the Tax, lowered his bid on their property. The sale fell through. The Kathreins also alleged the unconstitutionality of the Tax Injunction Act (TIA), 28 U.S.C. 1341, which forbids federal courts to enjoin assessment or collection “of any tax under State law,” so long as there is a remedy in state court. The district court dismissed. A Seventh Circuit panel reversed in part, holding that the Demolition Tax was a regulatory device, not a tax under the TIA, because it provided a deterrent against demolition of residential buildings and raised little revenue. Before the district court could resolve remaining claims on remand, the Seventh Circuit, en banc, rejected the approach to identifying a tax taken in the Kathrein case, holding that an “exaction[] designed to generate revenue” was a tax, contrasted to fines “designed … to punish,” and fees that “compensate for a service,” but did not directly overrule the Kathrein decision. The district court applied the new holding and again dismissed. The Seventh Circuit affirmed, stating that the decision of the en banc court did effect an intervening change in the law. View "Kathrein v. City of Evanston, IL" on Justia Law

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Until the early 1970s, CBS (formerly Westinghouse) manufactured electrical capacitors at a Bloomington plant, using insulating fluid containing PCBs, which are carcinogens to humans and wildlife. CBS deposited defective capacitors at landfills where PCBs escaped and entered the environment and discharged PCB-laden water to a local sewage treatment plant. After PCB contamination was discovered and traced to six sites, federal, state, and municipal governments filed a Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9600, enforcement action, which resulted in a 1985 consent decree requiring CBS to dig up all PCB-contaminated materials at the sites and destroy them in a high-temperature incinerator. The Indiana legislature blocked the plan. The parties agreed on modified remedies for three sites but were unable to agree on remedies for the Lemon and Neal Landfills and Bennett’s Dump, all on CERCLA’s National Priorities List. The parties negotiated in stages to allow clean up to begin before resolution of all issues and established three phases. Stage 1 required CBS to remove sediment from the landfill contamination hot spots, to clean sediment at Bennett’s Dump to “industrial standards,” and to install caps at all three sites. After CBS completed Stage 1 in 2000, tests showed that PCBs had migrated into the bedrock and were still being released from into water and sediment. Stages 2 and 3 address current and future contamination of groundwater and sediment. In 2009 the district court approved a consent amendment in the ongoing CERCLA action and rejected citizens’ claims with respect to phases two and three. The Seventh Circuit affirmed. Section 113(h)(4) prevents the courts from reviewing claims about stages in progress, but does not bar judicial review of claims about the first remedial stage that are not affected by continuing clean-up efforts. View "Frey v. Envtl. Prot. Agency" on Justia Law

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The plaintiffs invested $3 million in a multi‐use real‐estate project in Caseyville, Illinois, called Forest Lake, having previously worked with the developers. Their agreement with the developers promised a first‐priority mortgage, but they received only a junior mortgage. Meridian Bank had acquired a mortgage on Forest Lakes ($20 million) in 2005. When the bank foreclosed in 2009, the plaintiffs lost everything. They sued Belco, which had been created to carry out title work for the Forest Lakes transactions, including the Meridian mortgage. None of the plaintiffs’ $3 million were ever escrowed with Belco, but went directly to the developer. Belco never contacted the plaintiffs, before, during, or after the closing. After the development failed, the plaintiffs alleged Illinois state‐law claims of breach of fiduciary duty against Belco, claiming that as the “closing agent” for the transaction, Belco owed a duty to disclose that they were not receiving the first‐priority mortgage. The magistrate judge granted summary judgment for Belco, finding that Belco was the plaintiffs’ agent for the purposes of the escrow and closing, but, under Illinois law, owed only the very limited duty “to act only according to the terms of the escrow instructions.” Belco complied with the terms of the escrow agreement in that the funds were disbursed according to the agreement. The Seventh Circuit affirmed. View "Edelman v. Belco Title & Escrow, L.L.C." on Justia Law

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Based on a real estate financing fraud scheme during the housing bubble, Brunt, Farano, Murphy, and Scullark were charged with mail and wire fraud; Brunt and Scullark with money laundering and Farano with theft of federal government funds, 18 U.S.C. 641, 1341, 1343, 1957(a). The scheme involved buying HUD-owned properties at a discount by using a “front” nonprofit corporation that received kickbacks. The properties were resold, with false promises that the defendants would rehabilitate the properties and find tenants. The defendants obtained the mortgages for buyers by submitting false information regarding the conditions of the properties and buyers’ assets, income, employment, and intentions to occupy the properties. A loan officer and appraisers were bribed. The judge refused to severe the trials. A jury convicted the defendants, and the judge sentenced Brunt to 151 months in prison, Farano to 108, Murphy to 72, and Scullark to 78. He ordered them all to pay restitution. The Seventh Circuit affirmed except regarding an order of restitution to refinancing lenders, which it vacated for consideration of whether the refinancing banks that are seeking restitution had based their refinancing decisions on fraudulent representations by the defendants. The court expressed concern about how long the case has taken. View "United States v. Scullark" on Justia Law

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Rymtech, a mortgage reduction program, purported to provide financial assistance to homeowners facing foreclosure. Daniel, its Vice President, recruited homeowners to place their properties in the program and instructed them to sign over title to straw purchasers called “A buyers.” Homeowners were told that title would be placed in trust, that A buyers would obtain financing to pay off the mortgage, and that they would regain clear title in five years. Daniel instructed loan officers to prepare fraudulent loan applications on behalf of A buyers. Even if Rymtech had invested all of the owners’ equity, implausibly high rates of return would have been required to make the mortgage payments. The equity was actually primarily used to operate Rymtech. When its finances started to disintegrate, Daniel continued to recruit homeowners. After the program failed Daniel was convicted of wire fraud, 18 U.S.C. 1343 and mail fraud, 18 U.S.C. 1341. The Seventh Circuit affirmed, rejecting a challenge to the sufficiency of the evidence and an argument that the court erred in rejecting his proposed instruction, requiring the jury to agree unanimously on a specific fraudulent representation, pretense, promise, or act. Unanimity is only required for the existence of the scheme itself and not in regard to a specific false representation. View "United States v. Daniel" on Justia Law