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Seventh Circuit White Collar Litigation Update – March/April 2017

Court’s Magic Words Make Errors under the Sentencing Guidelines Unreviewable

United States v. Minhas, No. 15-3761 (March 10, 2017)

Defendants and the government fight tooth and nail about enhancements under the Sentencing Guidelines. Application of those enhancements can cause dramatic swings in the advisory sentencing ranges. So probation officers and the court spend tremendous resources dealing with those issues. And an inordinate number of appeals come from adverse Guidelines decisions. Yet, even when those rulings are clearly wrong, all too often those errors are academic. Sentencing judges have figured out in the post-Booker era of the advisory Guidelines that they can protect their records just by saying that the sentence would have been the same regardless of the technical enhancement.

Take Minhas, who was sentenced to almost ten years in prison for defrauding customers of his travel agency. The only issue he appealed was a Guidelines issue: whether his victims suffered “substantial financial hardship.” The bulk of the Seventh Circuit opinion dove into the technical questions related to that enhancement, such as what constitutes a “substantial” hardship for any particular victim. The Court ultimately found that the enhancement applied. However, in almost an afterthought, the Court noted that any error was immaterial because the sentencing judge said he would have imposed the same sentence under the statutory factors of §3553(a), as opposed to the advisory Guidelines. According to the Court, “any error buried in the weeds of the Guidelines was thus harmless.” One is left to wonder why the parties, the probation department, the district court, and the Court of Appeals gave any thought to the Guidelines question since it mattered not at all to the outcome.

Court Nixes Long-Standing Power of Expungement

United States v. Wahi, No. 15-2094 (March 2, 2017)

This Circuit had long recognized that a district court has the inherent power to expunge judicial records in closed criminal cases for equitable reasons. Finding that the precedential cases amounted to “the judicial equivalent of a rumor chain,” the Court decided to revisit the jurisdictional issue. It observed that every other circuit to address the issue held that no jurisdiction existed for expungement. Those circuits pointed to the Supreme Court’s decision in Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375 (1994), which held that ancillary (a.k.a. “inherent”) jurisdiction is limited to two narrow categories of proceedings: (1) those involving claims that are factually interdependent; and (2) those needed to allow the court to “manage its proceedings, vindicate its authority, and effectuate its decrees.” Because expungement of criminal records fits within neither category, the Court overruled its long-standing precedent, bringing circuit practice in line with the rest of the country.

Subpoenas on Local Branches of Foreign Banks Ineffective

Leibovitch v. Bank of Tokyo and BNP Paribas, No. 16-2504 (March 29, 2017)

The victims of terrorist attacks in Israel obtained a $67 million default judgment under the Antiterrorism Act against Iran for sponsoring those attacks. Plaintiffs attempted to collect by searching for Iranian assets known to be held in two large foreign banks. Although both banks had Chicago branches, custody of the Iranian accounts and assets was maintained oversees. Plaintiffs nevertheless issued Rule 45 subpoenas in Chicago seeking an order requiring the banks to reveal information concerning Iranian assets held in any of their worldwide branches. The Court affirmed an order quashing those subpoenas, holding that neither general nor specific jurisdiction existed over those banks that would allow compulsion of a subpoena for information maintained outside of the United States.

LGBTs Protected Under Title VII

Hively v. Ivy Tech Community College, No. 15-1720 (April 4, 2017)

The Court held en banc that an employee’s sexual orientation is a protected status under Title VII. The landmark ruling rejects what has been every other court’s interpretation of the Civil Rights Act since it was enacted in 1964: discrimination based on “sex” means discrimination based on gender, not on sexual orientation. Reversing that decades-long understanding, the Court has created a circuit split that is almost sure to be settled in the Supreme Court.


This article was first published in the March/April 2017 issue of the Seventh Circuit White Collar Litigation Update on the 7th Circuit Bar Association’s website.

Loeb & Loeb partner Corey Rubenstein authors this monthly newsletter containing helpful summaries and practice pointers for key Seventh Circuit Court opinions involving civil and criminal white collar matters