David Shiner v. Bernard Turnoy
Filed opinion of the court by Judge Posner. The judgment of the district court is reversed and the case remanded with directions to grant summary judgment for Turnoy. Richard A. Posner, Circuit Judge; Diane S. Sykes, Circuit Judge and David F. Hamilton, Circuit Judge. [6826223-1]  [14-2999]
United States Court of Appeals
For the Seventh Circuit
DAVID B. SHINER,
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:13‐cv‐05867 — Milton I. Shadur, Judge.
ARGUED MARCH 1, 2017 — DECIDED MARCH 16, 2017
Before POSNER, SYKES, and HAMILTON, Circuit Judges.
POSNER, Circuit Judge. Bernard Turnoy, the appellant, is
an insurance broker who had sold insurance policies to Da‐
vid Shiner’s in‐laws for decades. After Shiner (a successful
lawyer in Chicago whose practice focuses on tax and estate
planning) demanded that Turnoy split with him the com‐
missions on new policies on the life of Shiner’s mother‐in‐
law, Turnoy sent him a check for $149,000, which was about
half the commissions that Turnoy had thus far obtained. In‐
sisting that $149,000 was too little, Shiner sued Turnoy in an
Illinois state court for breach of contract. While that suit was
pending, Shiner brought a second suit against Turnoy, this
one a suit in federal district court, charging that Turnoy had
committed tax fraud, in violation of 26 U.S.C. § 7434 by re‐
porting to the IRS on Form 1099 his payment of the $149,000
to Shiner as income to Shiner when in fact, Shiner argued, he
(Shiner) had refused to accept the check because had he
done so he would have forfeited his claim to be owed more
than $149,000 by Turnoy.
The district judge, convinced by this very weak argument
and unaccountably hostile to Turnoy, ruled in favor of Shin‐
er and ordered Turnoy to pay Shiner damages of $16,000 for
the alleged fraud. That ruling was erroneous, because the
state court had rejected Shiner’s breach of contract claim the
day before the district court’s decision (though in fairness to
the district judge, we point out that he would not yet have
been aware of the state court’s decision), thus establishing
that Shiner was entitled to no more than the $149,000 that
he’d already received from Turnoy.
It’s true that Turnoy had placed a restrictive endorse‐
ment on the back of his check to Shiner, stating that by cash‐
ing the check Shiner accepted $149,000 as the full payment
he was owed by Turnoy. U.S. Treasury regulations provide
that a check received but not cashed (Shiner did not cash the
check) counts as income for tax purposes only if “credited or
set apart to a person without any substantial limitation or
restriction as to the time or manner of payment or condition
upon which payment is to be made,” Treas. Reg.
§ 1.6041‐1(h), and Shiner argued in the district court that the
restrictive endorsement constituted a “substantial limitation
or restriction.” But Turnoy had filed the Form 1099 more
than a month after sending the check to Shiner, and during
that time Shiner had neither asked Turnoy for a new check—
a check without a restrictive endorsement—nor otherwise
communicated to Turnoy a rejection of the check. Shiner’s
inaction gave Turnoy a solid basis for believing that Shiner
had accepted the check Turnoy had sent him despite the re‐
strictive endorsement, so Turnoy’s filing of the Form 1099
could not have been “willfully … fraudulent,” as required
by 26 U.S.C. § 7434.
But as there was the district court’s decision to reckon
with despite its manifest deficiencies, Turnoy appealed to
us—and Shiner hasn’t bothered to defend the district court’s
ruling. In fact he’s told us he’s not filing a brief, or anything
else (a motion for example), because he believes the case to
be moot. The case is not moot (if it were, we wouldn’t have
jurisdiction to hear the appeal). Shiner’s groundless litiga‐
tion against Turnoy, culminating in the district judge’s angry
unsound judgment in Shiner’s favor, has by branding
Turnoy a tax fraud prevented him (he tells us without con‐
tradiction from Shiner) from obtaining errors and omissions
insurance that he needs as an insurance broker. His contin‐
ued interest in clearing his name of the judgment prevents
the case from being moot even though he has discharged in
bankruptcy his liability for the $16,000 of damages imposed
on him by the district judge. “So long as the appellate court
can fashion some form of meaningful relief to the prevailing
party, an appeal is not moot, and the appellate court retains
the jurisdiction to consider it.” McKinney v. Indiana Michigan
Power Co., 113 F.3d 770, 772 (7th Cir. 1997).
The judgment of the district court is reversed and the
case remanded with directions to grant summary judgment
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?