Articles Posted in US Court of Appeals for the Seventh Circuit

by
Lester and William Lee created LIA in 1974 as a public company. William’s sons (Lester's nephews) later joined the business. LIA subsequently bought out the public shareholders, leaving Lester owning 516 shares; William owned 484. William created the Trust to hold his shares. The nephews served as trustees. Lester encountered difficulties with another company he owned, Maxim. He proposed that Maxim merge with LIA; William rejected this idea. Lester told the nephews, “I will screw you at every opportunity,” and made other threats, then, as majority shareholder, approved a merger of LIA and another company. The Trust asserted its rights under Indiana’s Dissenters’ Rights Statute. Lester gutted LIA to prevent the Trust from collecting the value of its LIA shares. He bought property from LIA on terms favorable to him and realized substantial profits. LIA subsidiaries were transferred for little or no consideration to Lester’s immediate family. Lester also perpetrated a collusive lawsuit, resulting in an agreed judgment that all LIA assets should be transferred to him and his companies. Lester did not disclose these actions to the nephews. In 2008, the Jennings Circuit Court conducted an appraisal in the dissenters’ rights action. Between the trial and the judgment, Lester dissolved LIA. The court entered a $7,522,879.73 judgment for the Trust. In 2012, Lester petitioned for Chapter 7 bankruptcy. The Trust initiated a successful adversary proceeding to pierce LIA’s corporate veil and hold Lester personally liable for the judgment. The Seventh Circuit affirmed, noting the facts were undisputed. View "William R. Lee Irrevocable Trust v. Lee" on Justia Law

by
In 2002 a Greyhound bus struck and killed Claudia. Her daughter, Cristina, age seven, witnessed the accident. In 2016 Cristina settled claims against Greyhound and other potentially responsible persons for $5 million. Klein, Cristina’s stepfather, believes that Cristina allocated too much of the settlement to herself as damages for emotional distress and not enough to him. His suit under 42 U.S.C. 1983 alleged that Cristina conspired with state judges, law firms, Greyhound, and others, to exclude him from financial benefits. Klein sued as the purported administrator of Claudia’s estate although he had not been appointed as administrator. Klein and Cristina became co-administrators, but Klein was soon removed by a state judge. Defendants asked the federal judge to dismiss the suit as barred by the Rooker-Feldman doctrine, under which only the U.S. Supreme Court may review the civil state court judgments. The Seventh Circuit affirmed dismissal on the merits. Collateral litigation in federal court is blocked by principles of preclusion and by Rooker's holding that errors committed in state litigation cannot be treated as federal constitutional torts. The court noted that the “long and tangled history" of the case was caused by Klein’s (or his lawyer’s) "inability or unwillingness to litigate as statutes and rules require.” They had neither briefed the proper issue on appeal nor attached the judgment, as required. “They are not entitled to divert the time of federal judges” and will be penalized for any further attempts. View "Xydakis v. O'Brien" on Justia Law

by
In 2002 a Greyhound bus struck and killed Claudia. Her daughter, Cristina, age seven, witnessed the accident. In 2016 Cristina settled claims against Greyhound and other potentially responsible persons for $5 million. Klein, Cristina’s stepfather, believes that Cristina allocated too much of the settlement to herself as damages for emotional distress and not enough to him. His suit under 42 U.S.C. 1983 alleged that Cristina conspired with state judges, law firms, Greyhound, and others, to exclude him from financial benefits. Klein sued as the purported administrator of Claudia’s estate although he had not been appointed as administrator. Klein and Cristina became co-administrators, but Klein was soon removed by a state judge. Defendants asked the federal judge to dismiss the suit as barred by the Rooker-Feldman doctrine, under which only the U.S. Supreme Court may review the civil state court judgments. The Seventh Circuit affirmed dismissal on the merits. Collateral litigation in federal court is blocked by principles of preclusion and by Rooker's holding that errors committed in state litigation cannot be treated as federal constitutional torts. The court noted that the “long and tangled history" of the case was caused by Klein’s (or his lawyer’s) "inability or unwillingness to litigate as statutes and rules require.” They had neither briefed the proper issue on appeal nor attached the judgment, as required. “They are not entitled to divert the time of federal judges” and will be penalized for any further attempts. View "Xydakis v. O'Brien" on Justia Law

by
Richard and Kathryn are the beneficiaries of their parents’ multi‐million dollar trust, which is administered by Richard, Kathryn, and a corporate trustee. When their father died, the two fell into “irreconcilable” disputes. Kathryn hired Oxford to advise her. The trust paid Oxford’s fees. Oxford advised Kathryn to create one trust for Kathryn and her children, and another for Richard and his. Richard agreed. They moved the trust's situs from Indiana to South Dakota. Ultimately, they could not agree on the terms. When Kathryn refused to sign Richard’s proposed agreement, he unsuccessfully petitioned a South Dakota state court to order the trust's division. Richard alleges that he suffered financial losses and that his sister refused to sign the agreement because she received negligent advice from Oxford. Richard sued Oxford on behalf of the trust, asserting his capacity as a beneficiary and a co‐trustee. The complaint identified Kathryn as an “involuntary plaintiff.” The Seventh Circuit affirmed dismissal, finding that Richard lacks capacity to bring suit on behalf of the trust under either Illinois or South Dakota law, which prohibits a trust beneficiary from suing a third party on behalf of a trust (absent special circumstances that were not alleged). State law and the trust agreement require a majority of trustees to consent to such a suit; that consent was missing. View "Doermer v. Oxford Financial Group, Ltd." on Justia Law

by
Givens, a Missouri resident, suffered from renal failure, was on dialysis for about 10 years and had experienced multiple strokes. In 2009, she suffered an additional injury from gadolinium dye, a substance used in MRIs, joined a class action related to the dye, and received about $255,000 in settlement proceeds. Givens signed an agreement allowing the National Foundation for Special Needs Integrity to manage a trust for her benefit while she lived. Givens named herself as the only beneficiary. Givens died a month after funding the trust, leaving more than $234,000. Givens failed to specify a remainder beneficiary. The Foundation claimed that the agreement entitled it to retain any remaining trust assets. Givens’s Estate claimed that it is entitled to the money for the benefit of Givens’s children, arguing that the agreement is ambiguous and should be construed against the Foundation, or that the court should use its equitable power. The district court rejected the Estate’s arguments. The Seventh Circuit reversed, finding the agreement ambiguous on the key question. The overwhelming weight of evidence shows that Givens intended that any remaining assets pass to her children rather than to the Foundation. The court did not address equitable theories or a laches defense. View "National Foundation For Special Needs Integrity, Inc. v. Reese" on Justia Law

by
Catherine’s parents, Mary and Henry, settled an inter vivos trust with real estate as the trust property. The trust document included a standard spendthrift provision meant to shield the trust’s future benefits from the reach of beneficiaries and their creditors and directed the trustee to evenly divide all remaining principal among their three children at the time of the surviving spouse’s death. Any share belonging to a child who did not survive the surviving spouse by 60 days would go to the child’s successors. The trustee was given the discretion to delay the distribution for six months. Henry survived Mary and died in July 2012. Catherine and her husband filed for Chapter 7 bankruptcy seven months later in February 2013. They claimed $30,000 for “Wife’s Father’s Estate” as property exempt from liquidation under 11 U.S.C. 522. The bankruptcy trustee objected, arguing that her father’s death gave Catherine an immediate and unconditional right to receive her interest in the trust property, which removed the interest from the purview of the trust’s spendthrift provision. The bankruptcy court, district court, and Seventh Circuit agreed. Catherine’s trust interest fully vested before the bankruptcy filing, so the property belongs to the bankruptcy estate. View "Carroll v. Takada" on Justia Law