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| Docket: 13-1956 | Opinion Date: December 23, 2013 |
| Judge: Flaum |
| Areas of Law: Contracts, Landlord - Tenant, Real Estate & Property Law |
Menzies, an air cargo handling business, leased CenterPoint’s 185,280-square-foot warehouse near O’Hare Airport. Another tenant used the building to store airplane parts until 2006. Under the lease, Menzies is responsible for repairing the “floor,” while CenterPoint is responsible for repairing the “foundation.” CenterPoint constructed improvements costing $1.4 million, at Menzies’ request, including increasing the number of dock doors from two to 38 and installing 45,000‐pound dock levelers. When Menzies began moving its operations into the building in November 2007, the six‐inch concrete slab did not exhibit any visible damage. By January 2009, the slab had begun to deteriorate. The damage was not consistent with typical wear and tear. The slab could not support Menzies’ equipment. CenterPoint paid $92,000 for repairs, then stopped doing so and did not submit an insurance claim. The slab is so damaged that it must be replaced, at an estimated cost of $966,000 to $1.23 million. Menzies sued CenterPoint for breach and CenterPoint counterclaimed. The district court held that neither party was entitled to recover because the slab had a “dual nature as both floor and foundation,” but “the damage at issue was related to the slab’s function as a floor.” The Seventh Circuit affirmed.
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| Docket: 12-2675 | Opinion Date: December 23, 2013 |
| Judge: Hamilton |
| Areas of Law: Civil Rights, Constitutional Law, Labor & Employment Law |
Manitowoc police brought in a man suspected of stabbing a police officer. The suspect apparently refused to eat, and officers believed he was mentally unstable. Police Chief Kingsbury arranged for the suspect’s mother to bring him a home-cooked meal, but the chief’s wishes were not communicated until after officers, including Swetlik, had already taken the suspect to the county jail for booking. Kingsbury called the jail and spoke with Swetlik. Swetlik told other police officers that Kingsbury had told him to lie to the jailers and had threatened him and reported the same to a deputy chief. The police union later took a vote of no confidence in Kingsbury and compiled a list of grievances, including Swetlik’s complaint. A private firm was engaged to investigate and ultimately recommended that both Swetlik and Kingsbury be terminated, concluding, based on a recording of the call, that Swetlik lied about the incident. The city council voted to bring termination charges against both. Swetlik was placed on paid leave until a hearing officer recommended dismissal of the charge. Swetlik was reinstated, but sued, claiming retaliation in violation of the First Amendment by bringing charges against him for his complaints about Kingsbury. The district court rejected the claim, finding that Swetlik’s statements were not protected speech because they did not address a matter of public concern. The Seventh Circuit affirmed, holding that the defendants were justified in bringing the charge based on the investigation.
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| Docket: 13-1277 | Opinion Date: December 23, 2013 |
| Judge: Hamilton |
| Areas of Law: Bankruptcy, Real Estate & Property Law |
The debtors borrowed money secured by mortgages on real estate. The mortgages were recorded by the lenders to ensure the priority of their liens. The recorded mortgages did not state the maturity date of the secured debt or the interest rate. Those terms were included in the promissory notes, which were incorporated by reference in the mortgages. The debtors filed for bankruptcy. The trustees filed adversary complaints under 11 U.S.C. 544(a)(3), seeking to avoid the mortgages because they did not state the maturity dates or interest rates. In one case, the bankruptcy court granted summary judgment in favor of the trustee, but the district court reversed and granted judgment for the lender. In the other case, the bankruptcy court granted summary judgment in favor of the lender. The Seventh Circuit held that the trustee’s so-called “strong-arm” power to “avoid … any obligation incurred by the debtor that is voidable by—a bona fide purchaser of real property … from the debtor” could not be used to avoid the mortgages under a 2013 amendment to the Illinois statute on the form for recorded mortgage, 765 Ill. Comp. Stat. 5/11.
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| Docket: 13-1148 | Opinion Date: December 23, 2013 |
| Judge: Rovner |
| Areas of Law: Constitutional Law, Criminal Law |
After receiving complaints of drug trafficking, police arranged an undercover controlled purchase of crack cocaine from a lower level apartment in Rockford. Days later, they obtained a warrant to search the “lower apartment.” The police knew that hours earlier, a shooting occurred at the residence and that aggressive pit bulls lived on the premises. After knocking and receiving no response, investigators forced their way into a foyer with two open doors: one led to the first floor apartment, the other led to ascending stairs. A dog ran from officers and up a few steps, before turning and charging the officer, who shot and killed the dog and proceeded up the stairs to perform a protective sweep. As he ran through the upper kitchen, he saw large chunks of an off-white substance on the counter with scales. In the bedroom he discovered Starnes. The officer detained and escorted him downstairs. While other officers were seeking a warrant for the upper apartment, other detectives searched the lower apartment and seized semi-automatic rifles, ammunition magazines, a loaded hand gun, and drug paraphernalia. After executing a warrant on the second floor, they seized Starnes’ photo identification cards, 290 grams of cocaine, 72.5 grams of cocaine base, $36,186 in cash, and more drug paraphernalia. The court declined to suppress evidence from the second floor; Starnes entered a conditional plea to possession with intent to distribute cocaine, 21 U.S.C. 841(a)(1), possessing a firearm as a felon, 18 U.S.C. 922(g)(1) and possessing a firearm in furtherance of a drug trafficking offense, 18 U.S.C. 924(c)(1)(A). The Seventh Circuit affirmed.
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| Docket: 13-2739 | Opinion Date: December 23, 2013 |
| Judge: Posner |
| Areas of Law: Banking, Government & Administrative Law, Real Estate & Property Law, Tax Law |
The Seventh Circuit considered appeals by Illinois and Illinois counties and a Wisconsin county of district court holdings that those governmental bodies cannot levy a tax on sales of real property by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Although both are now private corporations, the relevant statutes provide that they are “exempt from all taxation now or hereafter imposed by any State … or local taxing authority, except that any real property of the corporation shall be subject to State … or local taxation to the same extent as other real property,” 12 U.S.C. 1723a(c)(2), 12 U.S.C. 1452(e). The Seventh Circuit affirmed. A transfer tax is not a tax on realty. After 2008 Fannie Mae owned an immense inventory of defaulted and overvalued subprime mortgages and is under conservatorship by the Federal Housing Finance Agency. The states essentially requested the court to “pierce the veil,” in recognition of the fact that if the tax is paid, it will be paid from assets or income of Fannie Mae or Freddie Mac, but their conservator is the United States, and the assets and income are those of entities charged with a federal duty.
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