Articles Posted in US Court of Appeals for the Seventh Circuit

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In 2010, BRC and Continental entered into a five‐year agreement. Continental was to sell to BRC approximately 1.8 million pounds of prime carbon black, annually, in approximately equal monthly quantities, with baseline prices for three grades, including N762, “to remain firm throughout the term.” Continental could meet any better offers that BRC received. Shipments continued regularly until March 2011, when demand began to exceed Continental’s production ability. Continental notified its buyers that N762 would be unavailable in May. BRC nonetheless placed an order. The parties dispute the nature of subsequent communications. Continental neither confirmed BRC’s order nor shipped N762. BRC demanded immediate shipment. Continental responded that it did “not have N762 available.” BRC purchased some N762 from another supplier at a higher price. Days later, Continental offered to ship N762 at price increases, which BRC refused to pay. After discussions, Continental sent an email stating that Continental would continue "shipping timely at the contract prices, and would not cut off supply” and would “ship one car next week.” Continental emphasized that the Agreement required it to supply about 150,000 pounds per month and that it already had shipped approximately 300,000 pounds per month. Continental shipped one railcar. Within a week, Continental emailed BRC seeking to increase the baseline prices and to accelerate payment terms. BRC sued, seeking its costs in purchasing from another supplier following Continental’s alleged repudiation. The Seventh Circuit rejected the characterization of the agreement as a requirements contract. On remand, BRC, without amending its complaint, pursued the alternative theory that the agreement is for a fixed-amount supply. The Seventh Circuit reversed summary judgment and remanded, finding the agreement, supported by mutuality and consideration, enforceable. The agreement imposed sufficiently definite obligations on both parties and was not an unenforceable "buyer's option." BRC can proceed in characterizing the contract as for a fixed amount. BRC altered only its legal characterization; its factual theory remained constant and Continental is not prejudiced by the change. View "BRC Rubber & Plastics, Inc. v. Continental Carbon Co." on Justia Law

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Carter, through broker Perkins, opened a commodities trading account to secure the prices his Wyoming ranch would receive for its cattle using financial instruments (hedging). After Perkins changed offices, those accounts were part of a “bulk transfer” to Straits. Carter did not sign new agreements. At Perkins’s request, Carter opened another Straits account to speculate in other categories. After Carter and Perkins split a $300,000 profit, Carter instructed Perkins to close the account. Perkins did not do so but continued speculating on Treasury Bond futures, losing $2 million over three months. Straits liquidated Carter’s livestock commodities holdings to satisfy most of the shortfall and sued for the deficiency. Carter established his right to the seized funds and an award of attorney fees but the court significantly reduced damages, finding that Carter failed to mitigate by not closely reading account statements and trading confirmations. The Seventh Circuit affirmed the interpretation of the contract but remanded for recalculation of damages. Finding Carte responsible for losses resulting from Perkins's fraud would apply a guarantee or ratification that was never given. Fraud victims are not responsible for their agent’s fraud before they learn of unauthorized activity. Under Illinois law, the injured party must have actual knowledge before it must act to mitigate its damages. The court affirmed the attorney fee award under the Illinois Consumer Fraud and Deceptive Business Practices Act. View "Straits Financial LLC v. Ten Sleep Cattle Co." on Justia Law

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Pronschinske entered into a Mining Leasing Agreement, giving Kaw the right to mine the sand, stone and rock products on the Pronschinske land but providing that it was not obligated to extract any materials or sell any product. Kaw decided not to mine the land and terminated the lease through its provisions. Pronschinske filed suit alleging that Kaw owed $400,000 as payment of a Commencement Royalty credit and a Minimum Production Royalty. The district court granted Kaw summary judgment. The Seventh Circuit affirmed as to production royalties. Pronschinske argued that paragraph 6 reflected a stand‐alone requirement of a minimum annual payment of $75,000 beginning with the first anniversary of the Effective Date, regardless of what actions are taking place on the property, reading “[n]otwithstanding anything to the contrary contained herein” as meaning that its location in paragraph 6 is irrelevant and that it represents a minimum annual payment unconnected to Production Royalties generally. Kaw argued that the “notwithstanding” language references the paragraph in which it is found, and means that notwithstanding the calculation of Production Royalties in this paragraph, a minimum payment of $75,000 is owed once the Production Royalty provision is triggered. The court characterized the contract as unambiguous and concluded that the provision’s placement and the term “Production Royalty,” indicate it is inapplicable before the mining commences. View "Pronschinske Trust v. Kaw Valley Companies, Inc." on Justia Law

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In 2006, Entertainment USA sold cellular telephones and service contracts in central Pennsylvania through a network of retail dealers. Moorehead, an Indiana company, sought to break into that geographic market by offering dealers the chance to sell Verizon products and services. Without counsel, the two companies signed a two‐page “referral agreement” connecting Moorehead with several Entertainment USA dealers. The agreement promised a “referral fee” for every Verizon activation or upgrade that resulted. Six years later, Entertainment alleged that Moorehead breached the agreement by discontinuing the referral payments. The district court agreed but found that Entertainment failed to prove the amount of its damages with reasonable certainty and awarded no damages. The Seventh Circuit affirmed. Neither side’s estimate of damages contained citations to the docket or trial record, making verification of the underlying methods nearly impossible. Since the court’s liability findings did not accord with the assumptions built into any of the calculations, the parties left the court without reliable guidance in finding a supportable figure somewhere between $20,600 and $2.28 million. View "Entertainment USA, Inc. v. Moorehead Communications, Inc." on Justia Law

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Lowe’s expanded its retail home improvement stores into Mexico. Lowe’s Mexico contracted with Karum to provide private-label credit card services there. The program failed to meet expectations. Karum sued, claiming breach of contract. Early on, Karum disclosed its summary “damages model,” a 37-page estimate of damages with hundreds of figures contained in charts and graphs. Karum intended to have its Chairman and former CEO Johnson and/or its current CEO and CFO Ouchida present the damages model at trial as lay opinion testimony. Karum never retained a damages expert. Two months before trial, Lowe’s moved to preclude Johnson and Ouchida from testifying as to the damages model because any testimony regarding the model required the specialized knowledge of an expert. The district court granted the motion, finding that Karum had never properly disclosed an expert pursuant to Federal Rule of Civil Procedure 26(a)(2). Since this was a case-dispositive sanction, the court granted judgment in favor of Lowe’s. The Seventh Circuit affirmed. The plain meaning of Rule 26(a)(2) demands a formal designation for expert disclosures. Although Lowe’s deposed Johnson about the model and knew Karum intended to call him to testify about its content, Lowe’s should not have to assume a particular witness will testify as an expert. View "Karum Holdings LLC v. Lowe's Companies, Inc." on Justia Law

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Knopick purchased a Jayco recreational vehicle from an independent Iowa dealer for $414,583, taking title through an LLC he alone controlled. Jayco’s two-year limited manufacturer’s warranty disclaims all implied warranties and “does not cover … any RV used for rental or other commercial purposes,” explains that an RV is “used for commercial and/or business purposes if the RV owner or user files a tax form claiming any business or commercial tax benefit related to the RV, or if the RV is purchased, registered or titled in a business name,” and states that performance of repairs excluded from coverage are "goodwill" repairs and do not alter the warranty. Almost immediately, Knopick claims, the RV leaked, smelled of sewage, had paint issues, and contained poorly installed features, including bedspreads screwed into furniture and staples protruding from the carpet. Knopick drove it to Jayco’s Indiana factory for repairs. He later picked up the RV to drive to his Texas home. Concerned about continuing problems, Knopick left it at a Missouri repair facility, from which a Jayco driver took it to Indiana for further repairs. Jayco later had a driver deliver the coach to Knopick in Arkansas. Knopick remained unsatisfied and sued for breach of warranty under state law and the Magnuson-Moss Warranty Act, 15 U.S.C. 2301. The Seventh Circuit affirmed summary judgment for Jayco, finding that Knopick had no rights under the warranty because the RV was purchased by a business entity. View "Knopick v. Jayco, Inc." on Justia Law

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Sutula‐Johnson sold office furniture. In 2010, OfficeMax adopted a compensation plan that paid a commission rate depending on the sale’s profit. Commissions were earned either when a customer paid or 90 days after the customer was invoiced, whichever came first. Sutula‐Johnson negotiated better terms and earned commissions upon invoicing. OfficeMax and Office Depot merged in 2013. Office Depot continued paid Sutula‐Johnson and her colleagues under the terms of the old OfficeMax plan. In July 2014, Office Depot announced a new compensation plan for furniture sales, effective immediately. Sutula‐Johnson claims she did not receive a copy of the new plan for several weeks. The new plan significantly changed how Sutula‐Johnson was paid and reduced her total pay. She initially refused to sign it, complaining about its application to sales already in the works but not yet invoiced. Sutula‐Johnson continued working for Office Depot for more than a year. In 2015 Sutula‐Johnson resigned and sued for breach of contract and violations of the Illinois Wage Payment and Collection Act, 820 ILCS. 115/1. The Seventh Circuit affirmed summary judgment for Office Depot on the breach of contract claims but reversed as to the statutory claims. Sutula‐Johnson accepted the new terms by continuing to work but offered evidence that Office Depot violated the Wage Act by failing to pay her commissions monthly and by failing to pay her commissions earned before she resigned. View "Sutula-Johnson v. Office Depot, Inc." on Justia Law

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Fiorentini is the owner and president of a small technology company. When cancer treatment left him unable to perform his job, he received total disability benefits under a Paul Revere policy. Five years later, after Fiorentini was back at work and exercising full control of the company, Paul Revere notified him that he no longer qualified for the benefits. Fiorentini argued that he still satisfied the policy’s requirements for total disability because, although he could perform most of his job duties, he was unable to do what it takes to generate new business. Paul Revere rejected that argument, encouraging him to apply for “residual disability benefits,” which would have required Fiorentini to show that he was either unable to perform “one or more of the important duties” of his occupation or could only perform his important job duties for “80% of the time normally required to perform them” and that he earned at least 20% less than he did predisability. Fiorentini instead sued for breach of contract. The Seventh Circuit affirmed summary judgment for Paul Revere. The total disability provision does not cover the insured who has a diminished ability to perform his occupation, but rather the insured who is unable to continue it. View "Fiorentini v. Paul Revere Life Insurance Co." on Justia Law

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Simpkins began working for DuPage Housing Authority (DHA) in 2009 under an “Independent Contractor Agreement” for “general labor” to rehabilitate vacant properties to make them suitable for occupants. In 2011, the rehab work slowed and Simpkins began working primarily at Ogden townhome community, for which DHA served as on‐site management. Ogden’s property manager and maintenance supervisor, DHA employees, gave Simpkins instructions and prioritized the order in which he needed to complete tasks. In May 2012, Simpkins and DHA entered into another “Independent Contractor Agreement,” covering “general labor” at Ogden. Simpkins worked full‐time and exclusively for DHA; reported his hours by invoice; and was paid bi‐weekly via check. DHA issued Simpkins 1099‐MISC tax forms, while others received W‐2 forms. Simpkins knew that DHA considered him an independent contractor and repeatedly requested to become an employee. DHA did not provide him with pension, insurance, or other benefits. In 2015, Simpkins was injured in a car accident; his relationship with DHA ended. He filed suit, claiming that DHA had repeatedly failed to pay him overtime and was required to provide him with disability benefits. The district court ruled that Simpkins was not an employee under the Fair Labor Standards Act and rejected all of his federal claims. The Seventh Circuit reversed, finding genuine issues of fact as to the control exercised by DHA, questions concerning the origin of tools and material, and ambiguity as to the termination date of the second contract. View "Simpkins v. DuPage Housing Authority" on Justia Law

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In 2003, Pain Center contracted with SSIMED for medical-billing software and related services. In 2006, the parties entered into another contract, for records-management software and related services. In 2013, Pain Center sued SSIMED for breach of contract, breach of warranty, breach of the implied duty of good faith, and four tort claims, all arising out of alleged shortcomings in SSIMED’s software and services. The district judge found the entire suit untimely. The Seventh Circuit affirmed on all but the claims for breach of contract. The judge applied the four-year statute of limitations under Indiana’s Uniform Commercial Code (UCC), holding that the two agreements are mixed contracts for goods and services, but the goods (i.e., the software) predominate. The Seventh Circuit disagreed. Under Indiana’s “predominant thrust” test for mixed contracts, the agreements in question fall on the “services” side of the line, so the UCC does not apply. The breach-of-contract claims are subject to Indiana’s 10-year statute of limitations for written contracts and are timely. Pain Center licensed SSIMED’s preexisting, standardized software but received monthly billing and IT services for the life of both contracts. View "Pain Center of SE Indiana, LLC v. Origin Healthcare Solutions LLC" on Justia Law