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Friday, May 04, 2007

Ind. Decisions - 7th Circuit issues three decisions in Indiana cases today

In Decatur Ventures v. Stapleton Ventures (SD Ind., John Daniel Tinder, Judge), an opinion by Chief Judge Easterbrook, the question of vicarious liability of a supervisor of a “licensed trainee appraiser” under Indiana law:

The district court granted summary judgment in her [supervisor Daniel's] favor after concluding that appraisers in Indiana owe duties to lenders but not borrowers such as Decatur. Appraisers are liable to third parties only for fraud. But because Indiana treats an appraisal as an opinion rather than a fact, the representation could be fraudulent only if the appraisal’s author did not believe her own numbers. And of that, the district judge concluded, there is no evidence. This ruling wrapped up the claim against Daniel, and the district court entered a judgment under Fed. R. Civ. P. 54(b).

“Indiana follows Ultramares Corp. v. Touche, Niven & Co., 255 N.Y. 170, 174 N.E. 441 (1931) (Cardozo, J.), in limiting the liability of accountants, lawyers, and other professionals when persons receive their reports and opinions second-hand. * * * In a jurisdiction that follows Ultramares, a professional owes a duty of care only to his client plus any third party who the professional knows will see and rely on any opinion he renders. Indiana has applied this approach to appraisers. * * * Daniel’s client was either NovaStar or Stapleton (the record is not clear which), and she knew that the lender would review and rely on her reports. Lenders require appraisals to protect themselves from the people who are tempted to misrepresent the value of security in order to get their hands on more money. Nothing in the record suggests that Daniel anticipated that Decatur would rely on her work to protect himself from his own folly in believing Stapleton. Decatur does not cite (and we could not find) any case in Indiana holding an appraiser liable to a buyer for careless preparation of an opinion furnished to a lender. * * *

If Phillips and Daniel were lawyers, Rule 5.1(c)(1) would limit Daniel’s liability to specific conduct of which she has “knowledge”. The knowledge requirement shows that the supervisor is not vicariously liable for a supervised person’s fraud.

In Isaacs, Carol v. Hill's Pet Nutrition and Colgate-Palmolive (SD Ind., Larry J. McKinney, Chief Judge), EASTERBROOK, Chief Judge, writes:
Carol Isaacs worked for Hill’s Pet Nutrition, packaging pet food and preparing the bags for shipment, for more than five years. In 2002 and 2003 she filed charges of sex discrimination with the EEOC, contending that her employer violated Title VII of the Civil Rights Act of 1964. The district court granted summary judgment against Isaacs, who had sued not only Hill’s but also Colgate-Palmolive, its corporate parent. As the district court remarked, Colgate was not Isaacs’ employer, and she offers no reason why an investor should be liable for Hill’s acts. We need not mention Colgate again. * * *

A jury could infer that working conditions for female laborers at Hill’s Pet Nutrition were materially worse than the conditions for male laborers, that managers of the firm knew this, and that they did nothing because the firm deemed the men’s morale more important than the women’s welfare. That conclusion would be enough to support an award of damages under Title VII. The judgment is affirmed, except with respect to the hostile-working-conditions claim. On that subject the judgment is reversed and the case remanded for trial.

In re: Globe Building Materials (ND Ind., Rudy Lozano, Judge) is a bankruptcy case. Judge Wood writes:
This case arose as an adversary proceeding brought by Globe’s bankruptcy trustee against RDI, in which the trustee sought to recover Globe’s last payment to RDI on the ground that it was made during the preferential period before Globe’s bankruptcy filing. RDI resisted, claiming that it was entitled to the “new value” affirmative defense under 11 U.S.C. § 547(c)(4). * * *

In the end, RDI is in the same position as any creditor that receives a payment from a debtor on a pre-existing obligation during the preference period. Perhaps RDI wishes that it had not delivered those goods in November, but it had been under a duty to deliver them since the contract was signed in early 2000. The district court correctly decided that the trustee was entitled to recover the payment Globe made to RDI during the preference period, and RDI must now await compensation along with the rest of Globe’s creditors. We AFFIRM the judgment of the district court.

Posted by Marcia Oddi on May 4, 2007 12:47 PM
Posted to Ind. (7th Cir.) Decisions