Judge Posner on Bankruptcy’s "Clean-Up" Jurisdiction


Most bankruptcy lawyers might think that the dismissal of a bankruptcy proceeding and the revesting of the bankruptcy estate’s assets in the debtor bring an end to the bankruptcy court’s jurisdiction.

Not (necessarily) so, according to the Seventh Circuit in In re Sweports, Ltd., No. 14-2423 (7th Cir. Jan. 9, 2015), a decision written by Judge Posner in which Judges Williams and Tinder joined. There exists a form of “clean-up” jurisdiction (or “ancillary” jurisdiction, as the court acknowledged “it is commonly called”) that allows a bankruptcy court “to take care of minor loose ends,” even after the case has been dismissed.

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Seventh Circuit Requires "Cash on the Barrelhead" from Interpleaders


Judge Easterbrook and his colleagues on the U.S. Court of Appeals for the Seventh Circuit aren’t about to exercise jurisdiction over a civil action of interpleader merely on credit or promises to pay. The plaintiff has to pony up the goods.

This was the holding of the Seventh Circuit’s recent decision in State Farm Life Ins. Co. v. Jonas, No. 14-1464 (7th Cir. Dec. 31, 2014), an opinion authored by Judge Easterbrook, in which Judges Flaum and Kanne joined. Specifically, 28 U.S.C. § 1335 provides federal courts with jurisdiction over certain interpleader actions, but it requires (1) minimal diversity and (2) that “the plaintiff has deposited such money or property . . . into the registry of the court.” Without that “cash on the barrelhead,” the Seventh Circuit held that it lacked jurisdiction.

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A Reminder from the Seventh Circuit on the Importance of Creating a Record


When the court makes an evidentiary ruling off the record, it is required to enter on the record an explanation of the reasoning behind its decision. See, e.g., United States v. Nolan, 910 F.2d 1553, 1559 (7th Cir. 1990); 28 U.S.C. § 753(b). But what is a party’s recourse on appeal if the court failed to meet this requirement and the party didn’t object at the time?

None. So explained the Seventh Circuit in United States v. Lawson, No. 14-1233 (7th Cir. Jan. 20, 2015), a case which should serve as an important reminder about preserving off-the-record rulings for appeal in civil and criminal cases alike.

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Seventh Circuit Speaks Again on How the Wisconsin Fair Dealership Law Applies in Arbitration


A few months ago, we commented on an aspect of the interaction between the Wisconsin Fair Dealership Law (WFDL), Wis. Stat. ch. 135, and arbitration, as discussed by the Seventh Circuit in Everett v. Paul Davis Restoration, Inc., No. 12-3407 (7th Cir. Nov. 3, 2014). That case dealt with the doctrine of direct benefits estoppel, under which a nonsignatory to an arbitration clause was nonetheless held bound to arbitrate. The second issue in the case was whether the WFDL barred the use of arbitration clauses in dealership agreements, and the court made clear that it did not.

The Everett dealership was located in Wisconsin, and the dealership agreement provided for application of the WFDL, which would have been the default rule anyway (§ 135.02(1) defines a dealer under the law as “a person who is the grantee of a dealership situated in this state,” and § 135.025(3) invalidates any contractual provision that seeks to vary the effect of the WFDL). Similarly, the dealership in Reynard v. Ameriprise Financial Services, Inc., No. 14-1730 (7th Cir. Jan. 30. 2015), was located in Wisconsin, so that it, too, was presumptively subject to the WFDL’s terms, one of which requires notice and an opportunity to cure before a dealership may be terminated. § 135.04. But the arbitrators upheld a termination that didn’t meet these terms, so the terminated dealer sought to have the arbitration award vacated on the ground that they had acted in “manifest disregard of the law.” This non-statutory ground for vacating arbitral awards is still recognized by the Seventh Circuit, even though it is far from clear that it survived the Supreme Court’s decision in Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008).

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Is There a Constitutional Right to 12% Interest?


Central bankers have been the bane of a saver’s return for awhile now, but Wisconsin’s court of appeals appears to have carved out a place for litigants to earn a market-beating return. In a decision issued by District II (written by Chief Judge Brown and joined by Judges Reilly and Gundrum), the court recently decided that it was unconstitutional for the legislature to change, retroactively, the rate of pre-judgment interest that applies to offers of settlement. Johnson v. Cintas Corp. No. 2, 13AP2323 (Wis. Ct. App. Jan. 14, 2015).

An offer of settlement” is a statutory cost-shifting procedure in Wisconsin designed to encourage settlement. Under Wis. Stat. § 807.01, a party can serve an “offer of settlement” on an adverse party, and, if the offeree accepts within 10 days, the court enters judgment in the amount of the offer. The case is over. If the offeree does not accept, however, it makes that choice at its own peril, for the statute shifts litigation costs to that party if it fails to secure a judgment more favorable than the offer. When a plaintiff is the offeror, § 807.01 also tacks on pre-judgment interest, calculated based on the final amount of the judgment and running from the time of the offer until the time that the judgment is paid.

Pre-judgment interest became part of the statute in 1980 and was set at 12% annual interest—a nominal amount in the days of the Volcker Fed and its battle against stagflation, but a rate of return that Wall Streeters lust after now. That rate remained at 12% until 2011, when the legislature changed it to 1% plus the prime interest rate in effect at the time the judgment is entered.

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