Labor & Employment Law Daily Wrap Up, WORTH NOTING—Federal appeals court cases of note, (May 9, 2025)

By WK Editorial Staff

A roundup of recent published federal appeals court decisions of interest to the labor and employment law community.

5th Cir.: Procedural missteps doomed race, sex discrimination claims. A software company and its white male owner sued a Texas county and a nonprofit corporation that assisted the county in funding and operating its small business assistance program, alleging that the program’s scoring methodology, which favored “Women Owned” and “Minority Owned” businesses, violated the Equal Protection Clause of the Fourteenth Amendment and Sections 1981, 1983, and 1985. The software company and its owner were denied a grant and claimed it was due to racial and sexual discrimination. The county and nonprofit corporation argued that the denial was due to the company and owner’s failure to submit a required 2020 business tax return and moved to dismiss for lack of standing. The district court agreed, finding no evidence of injury and a lack of standing. The company and owner appealed, arguing that they should be permitted to engage in limited jurisdictional discovery to prove their standing to bring the suit. The Fifth Circuit affirmed the dismissal, noting that the owner and company failed to timely request jurisdictional discovery (DigitalDesk, Inc. v. Bexar County, Texas, No. 24-50513 (5th Cir. May 1, 2025)).

6th Cir.: City council member prosecuted for violating city charter loses appeal. A former city council member faced prosecution for allegedly violating the city charter by directing the termination of a city employee, which she claimed was part of a retaliatory conspiracy by her political opponents to violate her civil rights. The council member engaged in discussions via Facebook Messenger with the city manager and mayor, expressing dissatisfaction with the former interim city manager and suggesting his removal. Following the discovery of these messages by the city attorney—after the city manager plead guilty to misdemeanor embezzlement—the council member was recalled from office and later acquitted of criminal charges. She sued the city, council members, and city officials, alleging “retaliatory prosecution and arrest, malicious prosecution, and conspiracy to violate civil rights,” and challenged the constitutionality of the city charter provision. The district court dismissed the retaliatory prosecution and arrest, malicious prosecution, and conspiracy claims, citing the presence of probable cause, and granted summary judgment on her constitutional challenge, finding the charter provision neither vague nor overbroad. On appeal, the Sixth Circuit affirmed the district court’s decision, emphasizing that the Facebook messages provided sufficient probable cause for the alleged charter violation and that the city charter is not “unconstitutionally overbroad” (Brown v. City of Albion, Michigan, No. 24-1522 (6th Cir. Apr. 29, 2025)).

7th Cir.: One policy exclusion precluded insurance coverage for BIPA violations, other did not. A food ingredient manufacturer was sued under Illinois' Biometric Information Privacy Act for allegedly collecting and disseminating employees' biometric data without consent. The liability insurer sought a declaratory judgment to confirm it had no duty to defend or indemnify the manufacturer due to exclusions in commercial liability policies issued from 2015 to 2017. The district court initially ruled in favor of the insurer, citing two policy exclusions: the “Access or Disclosure of Confidential or Personal Information” exclusion and the “Recording and Distribution of Material or Information in Violation of Law” exclusion. On appeal, the court vacated and remanded the decision, citing precedent holding that while the Access or Disclosure Exclusion in the 2016 and 2017 policies bars coverage for BIPA claims, the Statutory Violations Exclusion did not unambiguously exclude such coverage in the 2015 policy. The court held that the insurer must defend and indemnify under the 2015 policy, contingent on the district court’s determination on remand as to whether the manufacturer gave timely notice of the lawsuit to the insurer (Citizens Insurance Co. of America v. Mullins Food Products, No. 24-1524 (7th Cir. May 2, 2025)).

7th Cir.: Rehearing denied, law professor’s First Amendment claim against school officials moves forward. A tenured professor at the University of Illinois Chicago School of Law faced backlash after including expurgated racial and gender slurs in a final exam question, which led to student complaints and a subsequent university investigation into his teaching practices. The investigation expanded to include past classroom comments, ultimately resulting in disciplinary measures against the professor, including withholding a merit raise and mandating diversity training. The professor filed a lawsuit against university officials, alleging violations of his First, Fifth, and Fourteenth Amendment rights under Section 1983. The district court dismissed these claims, but the Seventh Circuit revived the professor’s First Amendment retaliation claim, emphasizing that his speech fell within the realm of academic teaching and scholarship. Following this decision, the university officials sought a rehearing en banc. The court found that the university’s arguments did not justify a hearing en banc, and denied the application (Kilborn v. Amiridis, No. 23-3196 (7th Cir. May 2, 2025)).

7th Cir.: Company’s case against law firm who represented former employee fails for lack of damages. A litigation funding company sued a law firm and four of its attorneys alleging legal malpractice, breach of contract, breach of fiduciary duty, fraud, and fraudulent concealment, after one of the funding company’s executives resigned to launch a competing business, allegedly using the law firm’s legal counsel. The litigation funding company claimed that the law firm “impermissibly had an attorney-client relationship with the company and, at the same time, [the executive];” “breached its contract with and ethical duties to the company…by advising [the executive] on directly adverse matters…and helping her set up the competing companies;” and that the firm “committed fraud by lying about and concealing its representation of [the executive].” The district court dismissed some claims at the motion to dismiss stage and granted summary judgment on others, leading to an appeal. The Seventh Circuit upheld the district court’s rulings, emphasizing that the litigation funding company failed to demonstrate the necessary elements of legal malpractice and breach of contract, particularly damages. The court also found no error in dismissing the fraudulent misrepresentation claim (Signal Funding, LLC v. Sugar Felsenthal Grais & Helsinger LLP, Nos. 23-2714 & 24-1029 (7th Cir. May 2, 2025)).

Cases: CoverageLiability RaceDiscrimination SexDiscrimination Procedure PublicEmployees TortClaims