Seventh Circuit Review

What happens to a 910 creditor’s claim under the BAPCPA where a Chapter 13 debtor surrenders the 910 vehicle to the creditor? Bankruptcy courts are divided—both among and within circuits—resulting in costly litigation between parties unsure of the approach to which the particular court subscribes. The Seventh Circuit, in In re Wright, became the first Court of Appeals to address this issue and concluded that where a debtor surrenders the 910 vehicle, the creditor is allowed to bifurcate its claim into a secured and unsecured portion. Specifically, if the amount of the claim exceeds the value of the surrendered vehicle, the 910 creditor is entitled to an unsecured claim in the amount of the deficiency. This article analyzes whether the Seventh Circuit properly allowed bifurcation of the creditor’s claim despite the BAPCPA’s explicit prohibition of application of the Bankruptcy Code’s bifurcation statute to the claims of 910 creditors. [Hide Abstract]

In Bennett v. Southwest Airlines Co., the Seventh Circuit was asked to rule on the contours of federal question jurisdiction. In the court’s analysis, it offered a recitation of the evolution of the boundaries of federal question jurisdiction where federal issues are embedded in state law claims. This history, especially in the Supreme Court, has been characterized by change. Much of the first 100 years of federal question jurisdiction, governed by the statutory grant of § 1331, was more broadly defined than the recent interpretation represented by the "Modern Test" announced by the Supreme Court’s 2005 decision in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing. The trend on the national level appears to be moving towards greater restrictions on the types of cases that gain access to the federal courts. In particular, the recent introduction of caseload factors into the jurisdictional calculus, through the second prong of the Modern Test, raises questions as to whether these restrictions may have gone too far. This Note discusses the Seventh Circuit’s application of the Supreme Court's new Modern Test and reviews the implications of the caseload prong. [Hide Abstract]

According to the “American rule,” litigants must bear their own litigation costs, including attorneys’ fees, absent statutory authorization allowing otherwise. With the emergence of fee-shifting provisions in various statutes, particularly in the area of civil rights, a court may award a prevailing party its attorneys’ fees and other costs. Deciding whether a party prevailed for purposes of a fee-shifting statute, however, requires courts to engage in an analysis of the benefit the plaintiff has received from his judgment. Recently, in Karraker v. Rent-A-Center, the Seventh Circuit held that a plaintiff class prevailed for purposes of the American with Disabilities Act's fee-shifting provision where it obtained an injunction ordering Rent-A-Center to find and destroy prohibited medical examination results. Although the Seventh Circuit failed to apply the prevailing party standard correctly as formulated by the Supreme Court, the Seventh Circuit ultimately reached the correct conclusion in holding that the plaintiffs had prevailed. This Note will argue that the Supreme Court should create a per se rule that plaintiffs that have obtained a final judgment against the defendants, such as the plaintiff class in Karraker, should automatically be considered a prevailing party for three reasons. First, the per se rule will be more efficient in resolving fee-shifting litigation. Second, the rule is consistent with Congress’ private attorney general rationale underlying fee-shifting provisions in civil rights statutes. Third, the per se rule is a logical and incremental extension of the current Supreme Court precedent deciding whether a plaintiff has prevailed. [Hide Abstract]

Public officials, as well as public employees, owe the public the fiduciary duty of providing their honest services. The mail fraud statute, 18 U.S.C. § 1341, proscribes using the mails to carry out “any scheme or artifice to defraud.” It further defines, in § 1346, “any scheme or artifice to defraud” to include “a scheme or artifice to deprive another of the intangible right of honest services.” In passing these statutes, Congress never defined the terms “scheme or artifice,” “intangible right” or “honest services.” Because of this failure, the appellate courts have adopted limiting principles to prevent minor breaches of fiduciary duties from becoming federal crimes. The Seventh Circuit adopted the limiting principle “misuse of office for private gain” in United States v. Bloom. Recently, the court refined the Bloom standard in United States v. Thompson holding that “neither an increase in salary for doing what one's superiors deem a good job, nor an addition to one's peace of mind, is a ‘private benefit.’” This holding conflicts with previous case law from the District Court for the Northern District of Illinois, concluding that one’s job or the prospect of future employment can be a private gain under Bloom. Because the Seventh Circuit appears to have distinguished Thompson from the cases in the Northern District of Illinois rather than overruling them, the court may have inadvertently created a loophole through which public employees can engage in “subtle schemes” and not be punished under § 1346. This Note concludes that the Seventh Circuit could have distinguished Thompson from the Northern District cases on the grounds that a “scheme,” as defined in its normal usage, existed is those cases, but did not exist in Thompson. The Note further argues that had the court made a threshold determination of whether or not a “scheme” existed in Thompson, it would not have had to reach the private gain issue, thereby preventing the problems raised after Thompson. [Hide Abstract]

For almost a century, the Supreme Court has recognized the substantive due process right of individuals to be free from government intrusion into the control and management of their families. From its inception, however, the Supreme Court’s jurisprudence related to this constitutional right has been ambiguous, as its rhetoric has outstripped its application and explication of this fundamental liberty interest. The Court’s most recent decision on familial rights, Troxel v. Granville, also failed to provide lower courts with proper guidance as to how to apply and protect this due process right.

In the context of this confused Supreme Court jurisprudence, the Seventh Circuit, in United States v. Hollingsworth, has adopted and applied a test that balances the fundamental right to familial relations against the government’s interest in protecting children from harm or abuse. This test recognizes the Supreme Court’s ambivalence toward familial rights and provides a flexible tool for courts to protect this liberty interest while ensuring the safety and well-being of children. Hollingsworth's expansive interpretation of government interest beyond preventing harm to a child to include the investigation of drug crime corresponds with the Supreme Court’s attitude toward familial rights. This case serves as a predictive measure of how the Seventh Circuit will analyze and protect future familial rights claims. [Hide Abstract]

In the span of four months, the Seventh Circuit reversed the same district court judge, Judge Samuel Der-Yeghiayan, in three separate employment discrimination opinions. In all three cases, the district court had granted the employers’ motions for summary judgment in their entirety. However, the Seventh Circuit held that the majority of these rulings were improper due to the district judge’s inattention to critical details in the record and his misplaced reliance on minor technical rulings that sidestepped the cases’ glaring issues of credibility and contested fact. This Comment reviews the common themes in the Seventh Circuit’s criticisms of the district judge and questions whether these critiques harbor a broader meaning. In light of the fact that the district judge was recently appointed by President George W. Bush, who is often criticized for his disregard for employment discrimination rights, this Comment first explores whether the Seventh Circuit’s opinions contain a political subtext. Rejecting this hypothesis due to the tempered language of the Seventh Circuit’s criticism and the conservative makeup of the panels that decided and authored these opinions, this Comment concludes that the Seventh Circuit’s criticisms can be explained as a form of socialization of a newly appointed district court judge. In that sense, these criticisms can be understood as an attempt to bring a district judge more in line with the tendencies of the Seventh Circuit’s employment discrimination jurisprudence. [Hide Abstract]

Approximately half of American consumers take at least one prescription drug a day. However, the United States has significantly higher drug prices than most other countries, and many American consumers struggle to pay for the drugs they need. A legislative response to America’s drug-pricing problem has been slow to transpire, and consumers have turned elsewhere to cut their costs. Some consumers personally import from countries abroad that sell the drugs they need at discounted prices. The drugs these consumers receive may not be of the same quality they expect from drugs bought in the United States, but they are willing to take the chance in order get cheaper drugs—some potentially unsafe drugs are better than no drugs at all. One potential way to decrease costs for consumers would be to allow parallel importation of drugs manufactured abroad to safely enter the United States. However, in its recent decision in United States v. Genendo, the Seventh Circuit interpreted a provision of the Food, Drug and Cosmetic Act in a way that effectively prevents these imports. This Comment discusses the implications of the Seventh Circuit’s decision for the future of drug importation, drug pricing and drug safety. [Hide Abstract]

No one knows precisely why Congress used the phrase “based upon” in the Public Disclosure Bar of the False Claims Act, but the phrase’s meaning has confounded the circuit courts. In United States ex rel. Fowler v. Caremark Rx, LLC, the Seventh Circuit reaffirmed its narrow, minority definition of “based upon.” In its brief decision, the court skipped over a complex analysis of the Public Disclosure Bar. Yet, through that statute, Congress tried to keep opportunists from abusing the qui tam provision, which lets private citizens pursue billions of dollars lost to government fraud. After reexamining the Seventh Circuit’s method of statutory interpretation, this Note recommends that the court reevaluate its minority standard because the court failed to consider all available sources of Congress’s meaning of “based upon.” [Hide Abstract]

In the midst of the Great Depression, Congress created the Office of Thrift Supervision (“OTS”) to oversee and regulate the federally chartered thrift industry. Congress granted the OTS the power to create regulations to examine thrifts, ensure they were sound, and to preempt state laws affecting their operations, but not the power to provide remedies to a thrift’s customers. Over the next 70 years, the courts consistently interpreted Congress’ grant of regulatory authority as plenary—preempting almost any state law that affected, even minimally, the operation of a federal thrift. The Seventh Circuit, in In re Ocwen Loan Servicing, LLC Mortgage Servicing Litigation, reinterpreted the regulations governing when a state law may incidentally affect thrift operations. More importantly, the court went further than other courts in opening the door to state regulation. While nominally applying the same precedent, the court fluidly interprets the meaning of what it means to “incidentally affect” lending operations of a federal thrift. The court’s analysis allows it to nominally follow precedent while increasing court and state oversight of federal thrifts. The court effectively cracks the door to a more active role for the states in ensuring consumers are protected and that banks are ultimately held accountable when they fail to uphold fair business ethics. [Hide Abstract]

In 1994, the DNA Identification Act permitted the government to establish a national database (CODIS) where it could collect DNA samples from those convicted of certain violent crimes. In the last few years, DNA collection statutes have been repeatedly expanded, to the point where some now require samples upon arrest. Not surprisingly, the federal DNA collection statute has been challenged repeatedly on Fourth Amendment grounds. In the Seventh Circuit, this issue was most recently addressed in United States v. Hook, a case in which a white-collar criminal on supervised release challenged the federal DNA collection statute. The court held that the collection was not an unconstitutional search under the Fourth Amendment. In doing so, however, the court used the “special needs” test—a test that the majority of other circuits do not use and, more importantly, a test that had been effectively disclaimed by the Supreme Court and by two prior Seventh Circuit panels. This Comment argues that the Seventh Circuit improperly applied the “special needs” analytical framework. Instead, the court should have used the “reasonableness” or “totality of the circumstances” balancing test endorsed by the Supreme Court. Further, this Comment argues that the Seventh Circuit must take a close look at the balancing required under the reasonableness test, since courts engaging in a reasonableness analysis have routinely overlooked considerations unique to DNA collection. In doing so, the court may conclude that DNA collection for those on federal supervised release or probation is unconstitutional under the Fourth Amendment. [Hide Abstract]

In Krieg v. Seybold, Robert Krieg challenged the City of Marion, Indiana’s, policy of random drug testing as it applied to his job as a heavy-equipment operator in the Department of Streets and Sanitation. While the Fourth Amendment normally would require the City to have a reasonable suspicion that Krieg used drugs before it could require him to submit to a drug test, the Supreme Court has created a “safety” exception to this rule. This exception permits government employers to test certain safety-sensitive employees for drugs without suspicion where a characteristic of the workplace makes suspicion-based testing impractical.

The Seventh Circuit held that the safety-sensitive nature of Krieg’s job fit within this exception and therefore affirmed summary judgment in favor of the city. Because the Seventh Circuit failed to identify any circumstance that would make suspicion-based testing impractical, this Note will argue that the court improperly created a bright-line rule that all safety-sensitive workers can be subject to suspicionless drug tests. Further, this Note will argue that the Seventh Circuit failed to create a principled distinction between the safety concerns raised by Krieg’s job and those raised by other blue-collar positions. As a result, the court’s bright line will have a far-reaching effect, depriving many blue-collar workers of the normal protection of the Fourth Amendment. [Hide Abstract]

In the case of Apouviepseakoda v. Gonzales, the majority and the dissent of the Seventh Circuit heavily criticized the immigration judge’s behavior during the removal hearing. Yet, the majority seemed to go out of its way to affirm denial of asylum. The majority held that, although the IJ’s behavior during the asylum hearing was inappropriate, it did not amount to reversible error. The majority would reverse only if the IJ’s behavior were so inappropriate that it frazzled the asylum applicant or barred large portions of the applicant’s testimony. What this decision does not account for is the fact that the IJ, who was openly hostile towards the asylum applicant, was making a subjective finding regarding the asylum applicant’s truthfulness and believability. In such a situation, the Seventh Circuit’s rule requiring actual prejudice in addition to IJ bias will frequently result in the denial of otherwise valid asylum claims. Where the IJ exhibits bias against the asylum applicant, the ability of the IJ to serve as a fact-finder is compromised. When the basis for the denial of an asylum application is an adverse credibility determination, the threshold for a finding of reversible error should be much lower where the IJ exhibits bias against the asylum applicant. [Hide Abstract]

It is axiomatic that trademark rights are acquired through commercial use and not registration. This requirement, however, has failed to deter the trademark troll, who adopts, registers and warehouses a mark without the intent to use of the trademark himself, but to use his trademark registration to extort licensing fees out of innocent parties who make rightful use of the mark. This practice runs contrary to the statutory mandate of the Lanham Act and the policies that trademark law was designed to serve.

Recently, the Seventh Circuit had the opportunity to rule on this issue when one such trademark entrepreneur filed an infringement suit seeking to enforce his rights in a mark. The problem, however, was that the plaintiff could not provide evidence of any commercial use, despite claiming to have used the mark for almost fifteen consecutive years. In Central Manufacturing v. Brett Brothers, the court affirmed the United States District Court for the Northern District of Illinois’ invocation of two powerful tools to combat the wrongful exploitation of the legal system by a plaintiff: The court ordered the cancellation of the plaintiff’s registration and awarded all attorneys' fees and costs to the defendants. Not only did the Seventh Circuit approve of the district courts’ decision to cancel the plaintiff’s mark, the court stated that “where . . . a registrant’s asserted rights to a mark are shown to be invalid, cancellation is not merely appropriate, it is the best course.”

This Comment reviews Central Manufacturing and proposes that other courts should follow the lead of the Seventh Circuit. The combination of mark cancellation and the award of attorneys' fees and costs to the prevailing party creates a powerful situation, which may deter trademark trolls, such as the plaintiff in Central Manufacturing, from filing or threatening to file meritless suit against innocent parties for use of a mark for which they lack valid ownerships rights. Accordingly, the cancellation-as-best-course rule should become the norm rather than the exception. The practical as well as policy consequences of this proactive approach are also discussed. [Hide Abstract]