Seventh Circuit Applies Strong Business Judgment Rule to Reject Assertion of Demand Futility

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In a recent decision in a diversity case, the Seventh Circuit deferred to a state legislature’s “strongly pro-management version of the business judgment rule,” rejecting a derivative claim filed by shareholders in an Indiana corporation who had failed to make a demand on the corporation’s board of directors. In re: Biglari Holdings, Inc. Shareholder Derivative Litigation, No. 15-1828 (Feb. 17, 2016). The case is instructive for Wisconsin practitioners as to the Seventh Circuit’s deference to the business judgment rule embodied in many states’ corporations statutes. As emphasized in our Supreme Court’s decision in Data Key Partners v. Permira Advisers LLC, 2014 WI 86, Wisconsin, too, has a strong business judgment rule, see Wis. Stat. § 180.0828(1). And, like Indiana, Wisconsin looks for guidance to Delaware corporate-governance law when applying it.

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In re Sentinel Management: The Seventh Circuit Considers Equitable Subordination

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Equitable subordination in bankruptcy can be a powerful tool, providing a court with considerable latitude to set things right insofar as the estates of the penniless and the rights of their creditors are concerned.

But it’s also a doctrine more frequently discussed than applied (even 11 U.S.C. § 510(c)(1), the statute authorizing the remedy’s use, offers no hint as to what justifies its use), which is what makes the Seventh Circuit’s recent decision in In re Sentinel Management Group, Inc., No. 15-1309 (7th Cir. Jan. 8, 2016), worth remembering. Judge Richard Posner wrote for the court.

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Wisconsin Supreme Court Kicks Open Records Case to the Curb

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When Rebecca Bradley was appointed to the Wisconsin Supreme Court in October, the question arose what role she would play in cases argued this term before her appointment. Specifically, if the Court were otherwise split 3-3 on a case, would Justice R. Bradley participate in order to break the tie? The Court answered “No” in New Richmond News v. City of New Richmond, 2015 WI 106.

New Richmond involves the interplay between Wisconsin’s Public Records Law, Wis. Stat. ch. 19 subch. II, and the federal Driver’s Privacy Protection Act, 18 U.S.C. §§ 2721-25, which protects from disclosure “personal information” and “highly restricted personal information” in motor vehicle records (ranging from street address to social security numbers). The Court thought the question to be one of state-wide importance when it accepted the case last April through its “bypass” procedure, which is one of the ways a case can skip the court of appeals. Nevertheless, the Court sent the case back to the court of appeals when the supreme court was deadlocked 3-3 after Justice N. Patrick Crooks passed away between argument and the release of an opinion. It explained that vacating its bypass allows the court of appeals to decide it and preserves the supreme court’s ability to take it up later, under the usual review process.
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The Assignment of Visiting Federal Judges, and a Little Wisconsin Judicial History

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A decision from the U.S. Court of Appeals for the D.C. Circuit earlier this month, Wrenn v. District of Columbia, D.C. Cir. No. 15-7057, is a reminder of the crucial importance of crossing t’s and dotting i’s when it comes to the temporary assignment of federal judges to hold court outside their own districts. This situation has presented itself occasionally in Wisconsin and arises in two different ways.

Rarely, but occasionally, all the judges on the court or in the circuit will be unable to sit in a case. That happened in a bizarre case filed in 1983 by a Milwaukee lawyer, Roland J. Steinle, Jr. He sued U.S. District Judge Robert W. Warren, claiming that Judge Warren, in 1969, while Attorney General of Wisconsin, had known of and consented to a break-in of Steinle’s law office by one John Forbes, whom the Seventh Circuit described as “a professional burglar and a close friend of Steinle.”  Steinle v. Warren, 765 F.2d 95, 99 (7th Cir. 1985). Steinle said that Forbes told him (in 1971) that the purpose of the break-in was to remove Steinle’s file on his long-time client Frank Balistrieri, the reputed head of the Mafia in Milwaukee. Steinle didn’t act on the story for twelve years, until five days before Balistrieri was scheduled to go to trial before Judge Warren on gambling and tax evasion charges. Steinle admitted during oral argument in the Seventh Circuit that he sued Judge Warren for the express purpose of compelling his recusal. Id. The effort succeeded, though it did Mr. Balistrieri no good. District Judge Terence T. Evans took over the case and began the trial on the scheduled date. The jury convicted Balistrieri, Judge Evans sentenced him to four years, and the Seventh Circuit affirmed, U.S. v. Balistrieri, 779 F.2d 1191 (7th Cir. 1985). All the judges in the Seventh Circuit declined to hear the civil case against Judge Warren, so an out-of-circuit judge had to come in. This required a certificate of necessity from the Chief Judge of the Seventh Circuit and a designation and assignment by the Chief Justice of the United States of a senior judge, under 28 U.S.C. § 294(d). Chief Justice Burger assigned Senior District Judge Edward J. Devitt, from the District of Minnesota, to the case. (Judge Devitt granted summary judgment to Judge Warren and awarded him attorney’s fees for having to defend against a frivolous lawsuit; the Seventh Circuit affirmed and added an award of attorney’s fees and double costs on appeal.)

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Seventh Circuit Reins in EEOC: Agency Cannot Bypass Conciliation Requirement

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On December 17, the Seventh Circuit in U.S. Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 14-3653 (7th Cir. Dec. 17, 2015), rejected the EEOC’s aggressive effort to sue an employer without engaging in conciliation or even alleging discrimination or retaliation. Employers—at least in Wisconsin, Illinois, and Indiana—can breathe a little easier now that it’s clear that the EEOC must follow these procedures before it can bring a lawsuit.

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