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Wednesday, July 19, 2006

Ind. Decisions - 7th Circuit issues three today

Biomet Orthopedics v. Tact Medical (ND Ind., Philip P. Simon, Judge) (7 pp.)

EASTERBROOK, Circuit Judge. For 12 years TACT Medical was the exclusive distributor in Japan of medical devices made by Biomet Orthopedics. At the conclusion of its distributorship in February 2001, TACT had a choice under §2.3 of the contract:
[After] this Agreement has been terminated . . . TACT may at its sole discretion continue distribution of the Products and parts which TACT owns in its inventories and/or request BIOMET to repurchase those Products and parts back at the price equal to that paid by TACT to BIOMET, with the costs of carriage, insurance, duty and charges required for such return being borne by [Biomet] . . . .
USA v. Rosby, Thomas J. (ND Ind., James T. Moody, Judge) (12 pp.)
EASTERBROOK, Circuit Judge. Monon Corporation once was among the largest manufacturers of over-the-road semi-trailers, containers, and container chassis, producing about 150 units a day. Early in 1996, however, Monon’s principal customer cut back on orders and the lost business could not be replaced. Production fell to about 100 units a day in January 1996, dropping to 60 in April and 50 in August. This decline in sales produced a liquidity crisis, as the firm’s fixed obligations and payroll could not be cut as fast as the order book shriveled. Thomas Rosby, Monon’s CEO and holder of 72% of its equity, and John Franklin, its CFO and holder of 14%, watched the finances closely.

Much of Monon’s working capital came from Congress Financial Corporation, a factor that advanced credit on the security of Monon’s inventory and receivables. Monon could draw on the credit as soon as it started production of each new unit. During 1996 Monon began a bill-ahead fraud. It would, for example, report starting 60 units on a day when only 50 actually entered production. As sales continued to decrease, however, Monon had to report more and more early starts, so that it could retire older advances. Congress was left unsecured for the difference between actual and reported production. The unsecured draw against the revolving credit increased from about $2 million in March 1996 to $5.9 million in August, when Congress discovered the fraud. After Monon filed for bankruptcy on September 1996, Congress completed many of the falsely reported units at its own expense and risk. Its net loss was about $1.8 million.

Defendants’ principal arguments in this court collapse to a single contention: that the false representations were not material because, by making prudent inquiries, the lenders could have figured out what Monon was doing.

Spilmon, Bryan E. v. USA (ND Ind., Allen Sharp, Judge)(7 pp.)
POSNER, Circuit Judge. Bryan Spilmon, a dentist, was indicted for defrauding Medicaid by submitting claims for work that he had not performed, billing for unnecessary procedures, concealing overpayments to him by Medicaid, and committing related offenses. He agreed to plead guilty and receive a 57-month sentence. As part of the plea agreement, the government dismissed charges against his wife. A couple of months after the district judge accepted the guilty plea in a hearing in which Spilmon admitted his guilt, Spilmon moved to withdraw his plea. The judge denied the motion without an evidentiary hearing which he had agreed in the plea agreement (plus three years of supervised release) as well as to pay restitution in excess of $2.4 million. Spilmon appeals from the judgment, arguing that the district judge should have allowed him to withdraw his guilty plea.

His main ground is that the plea was coerced: he says that he believed (in fact knew) all along that he was innocent but that his love for his wife had moved him to admit his guilt so that the charges against her would be dropped. “Package” plea agreements in which dismissal of charges against a spouse or other family member of the principal malefactor is part of the deal are common. They are not improper or forbidden. * * *

The cases that express particular concern about package deals operationalize their concern by requiring that the existence of such a deal be disclosed to the judge so that he can determine its voluntariness. * * * We have no quarrel with the requirement or with the cases that say that such deals must be viewed with caution by the judge; we add only that this is true of all plea deals. The requirement was satisfied in this case. * * * Affirmed.

Posted by Marcia Oddi on July 19, 2006 04:33 PM
Posted to Ind. (7th Cir.) Decisions