author: WOOD, Chief Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. David A. RESNICK, Defendant-Appellant.
    No. 14-3791
    United States Court of Appeals, Seventh Circuit.
    Decided July 28, 2016
    David E. Hollar, Attorney, Office of the United States Attorney, Hammond, IN, for Plaintiff-Appellee.
    Joshua Sachs, Attorney, Law Office of Joshua Sachs & Associates, Evanston, IL, Raymond Wigell, Attorney, Law Offices of Raymond G. Wigell, Olympia Fields, IL, for Defendant-Appellant.
    Before WOOD, Chief Judge, BAUER, POSNER, FLAUM, EASTERBROOK, KANNE, ROVNER, WILLIAMS, SYKES, and HAMILTON, Circuit Judges.
   WOOD, Chief Judge.

On consideration of the petition, for rehearing with suggestion for rehearing en banc filed by defendant-appellant on June 7, 2016, a majority of the judges on the original panel voted to deny rehearing and a majority of the judges in active service voted to deny rehearing en banc. Judge William J. Bauer voted to grant rehearing but did not take part in the vote to rehear en banc. Judges Richard A. Posner, Joel M. Flaum, and Michael S. Kanne voted to grant rehearing en banc. Judges Bauer, Posner, Flaum, and Kanne dissented from the denial of the rehearing and rehearing en banc and filed an opinion.

The petition is therefore Denied.

BAUER, POSNER, FLAUM, and KANNE, Circuit Judges, dissenting from the denial of rehearing en banc.

The majority opinion makes two damaging admissions. The first is its statement that “our decisions have, in practice, pointed in only one direction: affirming the exclusion of polygraph evidence. There is no scientific consensus that polygraph testing is reliable, and there is a significant possibility of unfair prejudice if it is introduced into evidence at trial” (emphasis in original). The second is its statement, quoting Garmon v. Lumpkin County, 878 F.2d 1406, 1410 (11th Cir. 1989), that “because a criminal defendant’s constitutionally protected silence may not be used against her, the natural corollary to that rule is that generally a defendant’s refusal to submit to a polygraph examination cannot be .used as incriminating evidence.” In other words, “it is improper for a witness to testify whether or not a criminal defendant refused to submit to a polygraph test.” United States v. St. Clair, 855 F.2d 518, 523 (8th Cir. 1988).

Because polygraph (i.e., lie-detector) evidence is unreliable, its introduction in a trial creates a significant possibility of unfair prejudice, and a defendant therefore has a constitutional right not to have his refusal to submit to a polygraph be used in evidence against him as an admission of guilt. The government is “prohibited] ... from ‘treating] a defendant’s exercise of his right to remain silent at trial as substantive evidence of guilt.’ ” United States v. Ochoa-Zarate, 540 F.3d 613, 617 (7th Cir. 2008), quoting United States v. Robinson, 485 U.S. 25, 34, 108 S.Ct. 864, 99 L.Ed.2d 23 (1988). Therefore if a defendant refuses to testify, or invokes his Miranda rights, the prosecutor cannot comment to the jury on his refusal to take a polygraph test.

Most people, moreover, would be made nervous at the thought of having to take a lie-detector test, and this doubtless deters many law-abiding people from agreeing to take the test. For we now know that being nervous cannot be treated as a confession of guilt — that there are nervous truth-tellers as well as nervous liars, and confident liars as well as nervous bars. See Jeremy A. Blumenthal, “A Wipe of the Hands, a Lick of the Lips: The Validity of Demeanor Evidence in Assessing Witness Credibility,” 72 Nebraska L. Rev. 1157 (1993). These problems affect the reliability of polygraph evidence. See Renée McDonald Hutchins, “You Can’t Handle the Truth! Trial Juries and Credibility,” 44 Seton Hall L. Rev. 505, 524-32, 529 n. 100 (2014).

The principles that we’ve enunciated, which are endorsed by the majority, require that the judgment be vacated and the case remanded for a new trial. Against this all the majority can marshal is the doctrine of “plain error,” an exacting standard designed to enforce finality in litigation and encourage counsel to raise objections in the district court instead of waiting for a possible 'appeal. Although there is a valid interest in the finality of litigation, served by the plain-error standard, it is outweighed by the concerns presented by this case. There is too much at stake, not only for the defendant but for the criminal-trial process in general. What can be a simpler or more effective prosecutorial tactic than simply to ask the defendant whether he’ll agree to take a polygraph test, and if he refuses, as he is likely to do whether under his own steam or by advice of counsel, parade his refusal before the jury, arguing that it amounts to a confession of guilt — and if he appeals cite the decision in the present case.

We need not go so far as to advocate a ban on all polygraph evidence in criminal trials; the fact that it is unreliable doesn’t distinguish it from a lot of other sometimes unreliable evidence — eyewitness evidence for example — that is frequently admitted at trial. We contend only that if a suspect refuses to take a polygraph examination, the government shouldn’t be allowed to introduce the refusal as substantive evidence or to comment on the refusal to the jury. Adopting the narrower rule that we are suggesting would align us with the prevailing judicial recognition of an expansive right against self-incrimination, see, e.g., Griffin v. California, 380 U.S. 609, 85 S.Ct. 1229, 14 L.Ed.2d 106 (1965); Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), coupled with the concern, not limited to us, that polygraphs are unreliable trial evidence. See, e.g., United States v. Scheffer, 523 U.S. 303, 309-10, 118 S.Ct. 1261, 140 L.Ed.2d 413 (1998); United States v. Lea, 249 F.3d 632, 638-39 (7th Cir. 2001).

The government argues that because of the “overwhelming evidence of guilt” in this case the defendant can’t prove that the prosecution’s submitting and commenting on his refusal to submit to a polygraph test affected the verdict. The implication, seemingly adopted by the panel majority, is that if the government presents enough evidence of guilt it can then for good measure top off that evidence with evidence that violates a constitutional right, ignores evidentiary rules, and tempts the jury to abdicate its role as factfinder. There is no evidentiary demarcation line that when traversed with enough damning evidence of guilt permits the government and the court to deny a criminal defendant the right to a fair jury trial.

That the polygraph is at the center of this controversy is important. A polygraph is an instrument designed to determine whether the person examined is telling the truth. But polygraphs are not reliable truth-telling tools, and determining credibility is the jury’s duty. The introduction of- and comment on evidence that a suspect refused to take a polygraph test signals to the jury that polygraph evidence is reliable, though it is not, and that the suspect’s refusal to talk evidences consciousness of guilt when courts have consistently held that this is an impermissible inference. It could also signal to the jurors that their own instincts do not matter when determining credibility — that the results of a polygraph test (or the refusal of the defendant or a witness to have taken the test) supersede their common sense — and so they might as well ignore their duty as factfinders. In United States v. Scheffer, supra, 523 U.S. at 313, 118 S.Ct. 1261, a plurality of Justices agreed that “by its very nature, polygraph evidence may diminish the jury’s role in making credibility determinations.” The potential for this effect contradicts the government’s assertion that the defendant cannot show that the government’s tactics affected the jury. Rather those tactics infected the trial and rendered it unfair, no matter how “overwhelming” the evidence against the defendant.

Such tactics should not be tolerated. Reversal would send the right signal; this affirmance sends the wrong one. Resnick deserves a new trial.


source: Caselaw Access Project

license: Public Domain

text:
    S.C. JOHNSON & SON, INC., Plaintiff-Appellee, v. NUTRACEUTICAL CORPORATION and Nutramarks, Inc., Defendants-Appellants.
    No. 15-3337
    United States Court of Appeals, Seventh Circuit.
    Argued April 12, 2016
    Decided August 25, 2016

      Patricia L. Jenness, Jonathan H. Margo-lies, Katherine W. Schill, Attorneys, Michael Best & Friedrich LLP, Milwaukee, WI, for Plaintiff-Appellee.
    Peggy A. Tomsic, Kennedy Davis Nate, Attorneys, Magleby, Cataxinos & Greenwood, Salt Lake City, UT, for Defendant-Appellant.
    Before WOOD, Chief Judge, and FLAUM and WILLIAMS, Circuit Judges.
   WOOD, Chief Judge.

This case is the story of two roads, which, unlike those in the Robert Frost poem, converged in a lawsuit. See Robert Frost, The Road Not Taken, in Mountain Interval 9 (1916). Almost thirty-five years ago, Sandy Maine came out of the backwoods and entered the business of natural insect repellants. She marketed and distributed her products under the mark “BUG OFF” through a company called Sunfeather. Although her products were commercially successful, she never registered the mark. This became a problem in 1998, when Melvin Chervitz registered it. It became a much bigger problem in 2011, when S.C. Johnson & Son, Inc., which had acquired the Chervitz registration, sued Nutraeeutical (Sunfeather’s successor-in-interest) for trademark infringement.

Nutraeeutical defended on the ground of prior and continuous use. From the time the pleadings were filed through the trial, the parties all agreed that the period in dispute was before 1998. But the earth underneath Nutraeeutical shifted after the district court requested post-trial briefing in lieu of closing argument. For the first time, S.C. Johnson argued that Nutraceu-tical had failed to prove continuous use of the mark after 2012. The district court was persuaded that this was true and ruled in S.C. Johnson’s favor, granting a permanent injunction against Nutraceutical’s use of the mark and ordering it to destroy all unauthorized products. Nutraeeutical appeals, arguing that the district court erred in declining to find S.C. Johnson’s winning argument estopped or waived. Meanwhile, S.C. Johnson contends that the district court clearly erred in finding that Nutra-eeutical established continuity of use before 2012; the alleged lack of continuity, it says, provides an alternate ground for the injunction.

I

In 1979, Sandy Maine founded Sunfeather as a sole proprietorship in Potsdam, New York. In the early 1980s, while working as an Adirondack wilderness guide, she developed and bottled an all-natural bug repellant under the mark “BUG OFF.” She did not do any trademark searches before choosing the mark. In the early 1980s, Maine gave the bug repellant to some of her wilderness-guide clients for trial on the trail. The reviews came back from beyond the treeline: she had a hit on her hands among the GORP-and-granola crowd. She began selling her BUG OFF through the Potsdam Consumer Co-Op.

In 1992, Maine and Sunfeather began marketing and selling BUG OFF repellant at twice-yearly craft fairs in Maryland, West Virginia, and Virginia. The fairs each drew 80,000-60,000 attendees from around the region. Sunfeather also began selling BUG OFF through its own wholesale catalog and website around this time. The next year, Sunfeather marketed BUG OFF at trade shows in New York, Arkansas, Atlanta, California, Chicago, Denver, Miami, New York City (including at the New York International Gift Fair, now called NY NOW, see www.nynow.com), Ohio, Philadelphia, Seattle, and Tennessee. From 1992 to 1997, Sunfeather offered BUG OFF at between 24 and 40 trade shows per year. It also developed a catalog, which it distributed at trade fairs, and a website. Between 1992 and 1998, Sunfeather printed between 5,000 and 20,000 copies of its catalog per year. During this period, Sunfeather took orders for BUG OFF from every state in the union.

In 1994, Sunfeather was pleased when Smith & Hawken, a national gardening retailer, chose to carry Sunfeather’s BUG OFF products in its catalog and stores. Although those products were featured in Smith & Hawken’s brick-and-mortar stores only through 1996, they stayed in its catalog until 2004. Smith & Hawken’s catalog had a circulation of more than 200,000. To stay in the catalog, BUG OFF had to sell more than 700 units per season. Sun-feather made it into Frontier Natural Products Co-op, another catalog, starting in 1997. Frontier’s catalog was distributed to roughly 15,000 wholesalers, and featured Sunfeather’s BUG OFF products until 2007. By 1998, Sunfeather had more than $1 million in sales per year; BUG OFF products represented roughly 15 percent of the total.

The second road entered the picture on June 22, 1998, when Chervitz filed an application for the BUG OFF trademark. His application stated that the mark was first used in commerce on January 26, 1998. Just over two years later, on July 25, 2000, the U.S. Patent and Trademark Office (PTO) registered Chervitz’s mark. Six days after Chervitz’s application, on June 28, 1998, DeJay Corporation submitted an intent-to-use application to register BUG OFF. Later that summer, DeJay was acquired by Kaz, Inc. In 1999, Kaz sold millions of BUG OFF wristbands throughout the United States.

In 2001, apparently unaware of its competition for the mark, Sunfeather added several products to its BUG OFF line of natural insect repellants, including a balm, spritzer, soy candle, and soap and shampoo bar. Meanwhile, Kaz attacked Chervitz’s registration: in January 2001, it petitioned to cancel the Chervitz registration for lack of actual use in commerce.

In December 2002, Sunfeather filed three applications to register the BUG OFF mark. The PTO refused them based on the Chervitz and Kaz registrations, and the PTO’s Trademark Trial and Appeal Board affirmed over Sunfeather’s protest that its goods were different from those offered by Chervitz and Kaz. Sunfeather did not at that point assert that it owned trademark rights predating the Chervitz and Kaz registrations.

On January 29, 2003, S.C. Johnson entered the picture, filing an intent-to-use application for various bug repellant -products using the BUG OFF mark. On June 23, 2003, S.C. Johnson and Sunfeather’s paths momentarily crossed: S.C. Johnson received a letter from Sunfeather’s attorney expressing concern over the application and informing it that Sunfeather had been using the BUG OFF mark since at least 1992. The letter asked several questions intended to reveal whether there would be a likelihood of confusion if S.C. Johnson’s application was granted. In response, S.C. Johnson’s corporate counsel for pest control called Sunfeather’s attorney and told her that Sunfeather was infringing on another of S.C. Johnson’s trademarks: the “OFF!” label. Sunfeather’s attorney promised to review the company’s rights and respond, but never followed up. In July 2003, the PTO refused S.C. Johnson’s application to register “BUG OFF,” based on likelihood of confusion with the Chervitz registration and Kaz application. Meanwhile, in April 2004, the Kaz-Chervitz battle was settled: Cher-vitz assigned his rights and registration in BUG OFF to Kaz.

In 2005, S.C. Johnson began a campaign against Kaz’s registration of the BUG OFF mark. First, on July 22, it filed a petition against Kaz for cancellation of the Chervitz registration. Then, on October 25, it opposed Kaz’s application for its own registration. The Kaz application nevertheless advanced to registration in 2007. Finally, on January 18, 2007, S.C. Johnson and Kaz settled. Kaz assigned its rights in the Chervitz and Kaz registrations to S.C. Johnson for $1.1 million. S.C. Johnson then licensed the Chervitz registration back to Kaz royalty-free until December 31, 2009. In 2008, S.C. Johnson conducted a focus group for an insect repellant wristband concept and prototype, but it did not develop the potential product further.

In March 2010, S.C. Johnson began using the BUG OFF mark, placing it on nine and 11 oz. cans of “OFF! Deep Woods” spray. This represented two of S.C. Johnson’s 12 to 15 insect repellant products. The mark appeared — and continues to appear — on the back of the can, next to the OFF! mark. On August 4, 2010, an S.C. Johnson in-house paralegal advised S.C. Johnson that it should “keep using these [wristbands] in order to keep the registration [for wristbands for repelling insects] active.”

In February 2011, Sunfeather sold its assets (including the BUG OFF mark rights) to Nutraceutical for $285,000. While Sunfeather still manufactures BUG OFF soap, Nutraceutical makes all other Sunfeather BUG OFF products.

On May 17, 2011, S.C. Johnson’s application for a BUG OFF trademark for insect repellants finally advanced to registration. That August, in an internal S.C. Johnson email, an employee recommended adding the mark to insect repellant candles, pads, lamps, and candle lanterns to protect the BUG OFF mark for those products. In the meantime, Nutraceutical continued to sell and distribute Sunfeather-branded BUG OFF bug repellant soap, herbal oil, spritzer, and balm.

In September 2011, S.C. Johnson sued Nutraceutical for trademark counterfeiting, trademark infringement, false designation of origin, unfair competition under federal law, and unfair competition under Wisconsin law. Nutraceutical denied wrongdoing, alleged that it was the senior user of the BUG OFF mark, and asserted several counterclaims. In late 2013, the scope of the case took shape. According to the pretrial report, Nutraceutical relied on a prior-and-continuous use defense, while S.C. Johnson maintained that Nutraceutical could not “establish prior good faith use ... before June 22,1998.”

At the conclusion of the two-day bench trial, the district court requested post-trial briefs instead of oral argument. It was in that brief that S.C. Johnson for the first time asserted that Nutraceutical had failed to prove continuous use after 2012. The district court accepted that dramatic shift in focus, finding that while Nutraceutical had proved that “it was the senior user of the BUG OFF mark and it was using the mark nationally from ... [April 10, 1995] until June 22, 1998,” and continued sales through 2012, it did “not demonstrate continued sales after 2012, which constitutes non-use for more than one year.” Based on this finding, the district court held that Nutraceutical had failed to prove its prior- and-continuous use defense and was liable for infringement on S.C. Johnson’s trademark.

Nutraceutical filed a motion to alter the judgment. The motion argued, in relevant part, that (1) evidence of sales was unnecessary to prove continuous use, and Nutra-ceutical had provided undisputed evidence of continuous, nationwide use after 2012; (2) the district court committed legal error by requiring Nutraceutical to provide sales records to show continuous use, which Nu-traceutical had otherwise proved; and (3) the district court erred when it did not estop S.C. Johnson from presenting its argument about post-2012 continuous use. The district court denied the motion, and Nutraceutical appealed.

II

It is a “bedrock prineiple[] of trademark law” that trademark ownership “is not acquired by federal or state registration,” but rather “from prior appropriation and actual use in the market.” Allard Enterprises, Inc. v. Advanced Programming Res., Inc., 146 F.3d 350, 356 (6th Cir. 1998) (quoting Homeowners Grp., Inc. v. Home Mktg. Specialists, Inc., 931 F.2d 1100, 1105 (6th Cir. 1991)). To that end, “[r]egistration itself establishes only a re-buttable presumption of use as of the filing date.” Zazu Designs v. L’Oreal, S.A., 979 F.2d 499, 504 (7th Cir. 1992). “[A] trademark application is always subject to previously established common law trademark rights of another party.” Johnny Blastoff, Inc. v. Los Angeles Rams Football Co., 188 F.3d 427, 435 (7th Cir. 1999).

Under 15 U.S.C. § 1115(b)(5), a party rebuts that presumption by proving that the mark “was adopted without knowledge of the registrant’s prior use and has been continuously used by such party or those in privity with him from a date prior to ... the registration of the mark.” This defense is limited to “the area in which “ such continuous prior use is proved.” Id. To establish appropriation, a party “must show first, adoption, and second, ‘use in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.’ ” Johnny Blastoff, 188 F.3d at 433-34 (quoting New West Corp. v. NYM Co. of Cal., Inc., 595 F..2d 1194, 1200 (9th Cir. 1979)). This appeal centers on whether Nutraceu-tical adequately proved this defense.

In determining whether a party has established rights in a trademark, we take into account all relevant facts — the totality of the circumstances, as it is usually put. “Evidence of actual sales is not necessary to' establish ownership.” Id. at 434 (citing New West, 595 F.2d at 1200). A wide variety of sources may demonstrate “use” sufficient for public identification of a mark, including “advertising brochures, catalogs, newspaper ads, and articles in newspapers and trade publications, as well as in media outlets such as television and radio.” Id. (citations omitted). So long as the trademarked goods or services are actually provided through or in connection with it, “a website that bears a trademark may constitute a bona fide use in commerce.” Specht v. Google Inc., 747 F.3d 929, 934-35 (7th Cir. 2014) (citing N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211 (11th Cir. 2008)).

Ownership and notoriety are two different things. Thus, to prove ownership, a party need not show that the item in question has gained wide public recognition. Blue Bell, Inc. v. Farah Mfg. Co., 508 F.2d 1260, 1265 (5th Cir. 1975). “It is enough .!. if the article with the adopted brand upon it is actually a vendible article in the market, with intent by the proprietor to continue its production and sale. It is not essential that i£s use has been long continued, or that the article should be widely known, or should have attained great reputation.” Kathreiner’s Malzkaffee Fabriken Mit Beschraenkter Haftung v. Pastor Kneipp Med. Co., 82 F. 321, 326 (7th Cir. 1897); see also Sheila’s Shine Products, Inc. v. Sheila Shine, Inc., 486 F.2d 114, 123 (5th Cir. 1973) (“The mere fact that a business is small and its trade modest does not necessarily militate against its being an established business capable of acquiring goodwill and rights in a-trademark.”(citing Kathreiner’s, supra)); Blue Bell, 508 F.2d at 1265 (noting that a “single use in trade may sustain trademark rights if followed by continuous commercial utilization”); Allard Enterprises, 146 F.3d at 358 (same).

A

We might not be here if the district court had not unexpectedly allowed S.C. Johnson to shift its focus at the eleventh hour to the question whether Nutra-ceutical. proved continuous use of BUG OFF products after 2012. .We thus turn immediately to the question whether the court abused its discretion in doing so. See Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 795 (7th Cir. 2013). We evaluate de novo the related question whether S.C. Johnson waived'this argument. RK Co. v. See, 622 F.3d 846, 850 (7th Cir. 2010).

Nutraceutical accuses S.C. Johnson of pulling off a bait- and-switeh maneuver, and that is just what it did. First, S.C. Johnson admitted, in numerous pretrial filings, Nutraceutical’s continuous use of the BUG OFF mark from at least June 1998 through the present. Then, in its post-trial filing, it argued for the first time that Nutraceutical had failed to prove that its use of the BUG OFF mark was continuous from 2012 to the present.

In its complaint, S.C. Johnson alleged that Nutraceutical owned and operated Sunfeather.com, which “advertises and offers for sale numerous insect repellant products under the Infringing BUG OFF mark.” Nutraceutical admitted this allegation. Nutraceutical produced sales records showing continuous nationwide sales through 2012 during fact discovery. Later, when S.C. Johnson moved for summary judgment, it stated as an undisputed fact that “Nutraceutical Corporation has continued selling products produced by Sun-Feather, including Bug Off insect repellants.” (Indeed, Nutraceutical had said the same in its complaint.) In Nutraceutical’s opposition to summary judgment, it identified as undisputed the fact that since February 2011, Nutraceutical “distributes” BUG OFF products online and “at retail shops around the country.” It also stated that “Nutraceutical sales records demonstrate continued sale of Sunfeather BUG OFF ... through [the] present.” In its response, S.C. Johnson acknowledged these facts as undisputed, though “immaterial.”

S.C. Johnson listed the issues for trial in its pretrial report. They all related to whether Nutraceutical could “establish pri- or good faith use ... before June 22, 1998.” While S.C. Johnson mentioned continuity of use, it was only with regard to the period “prior to June of 1998.” Nowhere did it mention continuous use post-2012. Nor did Nutraceutical’s pretrial report bring up post-2012 continuous use. In its order denying S.C. Johnson summary judgment, the district court noted as a fact that “sales records demonstrate continued •sale of Sunfeather BUG OFF, from the time of acquisition to the present.” Although S.C. Johnson challenged Nutraceu-tical’s continuity and amount of sales in general during its opening statement at trial, at no point did it challenge its use of the mark post-2012.

Fact 85 of Nutraceutical’s post-trial proposed findings of fact was practically a copy-paste of the allegations and summary judgment facts that S.C. Johnson had twice previously admitted. Nutraceutical must therefore have felt bushwhacked when it read S.C. Johnson’s response. There, S.C. Johnson for the first time asserted that “there is no testimonial evidence supporting continuous use” (a false statement), and that Nutraceutical “submitted documentary evidence of sales ... only for 2011 and 2012, not for 2013 and 2014.” The district court accepted these assertions and, relying on them, granted judgment for S.C. Johnson.

S.C. Johnson contends that Nutraceutical was on notice that it would have to prove continuity between 2012 and the present because S.C. Johnson was challenging its continuity of use generally, and because it mentioned recent sales in its opening argument. It also says that a challenge to post-2012 continuity was “subsumed in and implicit in the issues” in its pretrial report.

This will not do. S.C. Johnson’s issues for trial not only failed to allude to the post-2012 period, but also expressly stated that they were limited to the pre-1998 period. If S.C. Johnson meant to include the post-2012 period, its statements did not convey that fact — indeed, they were misleading. Because issues for trial are ordinarily limited to those disputed at summary judgment, any reasonable litigant would have assumed that it was not required to prove post-2012 continuity at trial. In its summary judgment response, S.C. Johnson specifically took the position that Nutraceutical’s post-2012 facts were immaterial. By that time, it had already twice admitted the very facts it disputed for the first time post-trial, after the presentation of evidence had concluded, when Nutraceutical had no chance to respond.

S.C. Johnson also argues that its own admissions were not sufficient, to establish ' Nutraceutical’s continuity of use after 2012. Sales sufficient for use, it argues, are not the same as sales sufficient for infringement. This would be a closer call if it mattered, but it does not. The evidence at trial, coupled with the admissions, is sufficient to show use. Moreover, read in conjunction with S.C. Johnson’s pretrial report, the admissions deceptively described the scope of the issues for trial.

Whether we use the theory of waiver or estoppel, the result is the same: S.C. Johnson raised its argument about post-2012 continuity too late. Nutraceutical was entitled to rely on S.C. Johnson’s admission of the facts necessary to establish Nutraceu-tieal’s post-2012 continuous use. S.C. Johnson also affirmatively misled Nutraceutical about the scope of trial, and then struck only after Nutraceutical could no longer present relevant evidence. We cannot permit it to profit from this tactic. The district court abused its discretion in allowing S.C. Johnson to argue that Nutraceutical failed to prove continuous use post-2012.

B

Our holding that S.C. Johnson is estopped from relying on the argument that prevailed in the district court is sufficient to sustain our disposition of this case. For the sake of completeness, however, we add a few words about the merits. In short, even if we did not think S.C. Johnson’s argument estopped, our result would be the same: the district court committed reversible error in finding that Nutraceutical failed to prove continuous use after 2012.

The parties dispute the standard of review under which this conclusion should be evaluated. Nutraceutical argues that the district court applied the wrong legal standard, and thus that we must approach the ease de novo. Morisch v. United States, 653 F.3d 522, 528 (7th Cir. 2011). S.C. Johnson counters that the district court’s conclusion was actually an application of law to fact, which is reviewed for clear error. Id.

We agree with Nutraceutical. The district court relied exclusively on Nutraceu-tical’s lack of sales records proving sales after 2012, but “[e]vidence of actual sales is not necessary to establish ownership.” Johnny Blastoff, 188 F.3d at 434. Even if we characterized this as a ruling on a mixed question, it was clearly erroneous. In focusing exclusively on the Sunfeather sales records, the district court missed the forest while looking for one specific kind of tree. In fact, the record does contain evidence of sales after 2012. On cross-examination, Nutraceutical’s Executive Vice President testified that since 2011 Nutra-ceutical had sold BUG OFF products, and continued to do so through the commencement of the lawsuit. He also testified that Maine still “manufactures the soap under the SunFeather line,” and that Nutraceutical subsidiaries “manufacture! ] the BUG OFF repellant.” Although BUG OFF products , were no longer listed in Smith & Hawken and Frontier’s catalogs, they continued to be available for purchase on the Sunfeather website. These facts are sufficient in themselves to establish continuous use after 2012. S.C. Johnson admitted as much in its summary judgment response, where it said that Nutraceutical “distributes” BUG OFF products online and “at retail shops around the country,” and that “Nutraceutical sales records demonstrate continued sale of Sunfeather BUG OFF ... through [the] present.”

S.C. Johnson protests that even if these facts are sufficient to establish continuous use, they are insufficient to establish national use after 2012. It points to Sun-feather’s relatively low sales numbers through 2012. But Nutraceutical did not have to show either a high volume of sales or widespread recognition. See Kathreiner’s, 82 F. at 326. Courts do not examine public sales because they want to know if a mark is dominant in a market, but rather because “[pjublic sales let others know that they should not invest resources to develop a mark similar to one already used in the trade.” Zazu Designs, 979 F.2d at 503. With this concern in mind, the fact that BUG OFF products continued to be featured and sold on the Sunfeather website is particularly instructive: if other producers wanted to find out whether the mark was already in use, their answer was only a Google search away.

S.C. Johnson points to cases noting that sporadic or de minimis use generally may not establish trademark rights. See, e.g., Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1196 (11th Cir. 2001). But these cases are properly understood as ferreting out situations where the use “may indicate the mere intent to reserve a mark for later use rather than the present commercial utilization of the mark.” Allard Enterprises, 146 F.3d at 359 (discussing La Société Anonyme des Parfums Le Galion v. Jean Patou, Inc., 495 F.2d 1265 (2d Cir. 1974)). Such use cannot qualify as “the kind of bona fide use intended to afford a basis for trademark protection.” Id. (quoting Le Galion, 495 F.2d at 1272); see also Planetary Motion, 261 F.3d at 1196 (noting that putative owner did not make the product available “merely to a discrete or select group”); Blue Bell, 508 F.2d at 1265 (noting that “[s]ecret, undisclosed internal shipments are generally inadequate to support the denomination ‘use’ ”).

This does not describe Nutraceutical’s use. Even if sales were relatively low,“use” is not limited to sales. Not only did Nutraceutical manufacture and sell BUG OFF products, but it did so through a publicly available website. See Planetary Motion, 261 F.3d at 1196 (holding posting of software with mark on publicly available website sufficiently widespread use to establish ownership rights in mark).

Though the record contains little evidence of where sales took place during the post-2012 period, that does not matter. S.C. Johnson’s admission that Sunfeather BUG OFF products were sold at “retail shops around the country,” together with evidence of the website, does the trick. The website, while passive, was available nationwide. The district court’s decision that Nutraceutical failed to prove post-2012 continuous use was clearly erroneous.

C

While defending the district court’s decision with one hand, S.C. Johnson attacks it with the other. S.C. Johnson contends that the district court clearly erred in finding that Nutraceutical demonstrated continuing nationwide use before 2012. (We understand it to be making this argument as an alternate ground for supporting the district court’s judgment, rather than as an effort to obtain additional relief.)

S.C. Johnson does not challenge any of the district court’s underlying factual findings (and that is just as well, given the clear error standard of review that applies to them). We review the pertinent findings here. The court found that between 1995 and 1998, Sunfeather’s BUG OFF products were advertised, promoted, and sold on Sunfeather’s website. It also mailed between 7,500 and 13,333 catalogs annually to customers all across the United States. It marketed and sold BUG OFF products at trade and craft shows across the country. From 1994 through 2004, Sunfeather products bearing the mark were included in Smith & Hawken’s catalog, which had a circulation of 200,000 during that period. From 1997 through 2007, they were included biannually in Frontier’s catalogs, which were sent to 15,000 wholesalers across the country. According to Nutraceutical’s sales records, BUG OFF products were sold in 31 states during 2011 and 2012. From 2008-2012, Sunfeather BUG OFF products were sold in the following yearly amounts, and in the following numbers of states:

Year Total Unit Sales States

2008 3,586 35

2009 2,710 38

2010 2,032 40

2011 944 25

2012 501 28

Although sales certainly declined over this time, Sunfeather BUG OFF products were still being marketed and sold to a nationwide audience. The district court’s finding that Nutraceutical demonstrated nationwide, continuing use through 2012 was not clearly erroneous.

HI

The district court abused its discretion when it entertained S.C. Johnson’s post-trial argument that Nutraceutical failed to prove continuous use of the BUG OFF mark after 2012. Because the district court did not clearly err in finding that Nutra-ceutical maintained continuous use prior to 2012, S.C. Johnson’s judgment cannot be saveji We therefore ReveRSe and order that the injunction against Nutraceutical be Vaoated forthwith.


text:
    Lisa ALLEN and Misty Dalton, Plaintiffs-Appellants, v. GREATBANC TRUST CO., Defendant-Appellee.
    No. 15-3569
    United States Court of Appeals, Seventh Circuit.
    Argued April 12, 2016
    Decided August 25, 2016

      Tillman J. Breekenridge, Gregory Y. Porter, Ryan T. Jenny, Attorneys, Bailey & Glasser LLP, Washington, DC, for Plaintiff-Appellant.

      Theodore M. Becker, Julie A. Govreau, Attorneys, Drinker Biddle & Reath, LLP, Chicago, IL, for Defendant-Appellee.
    Jeffrey Hahn, Attorney, Department of Labor, Plan Benefits Security Division, Washington, DC, for Amicus Curiae.
    Before WOOD, Chief Judge, and FLAUM and WILLIAMS, Circuit Judges.
   WOOD, Chief Judge.

GreatBanc is the fiduciary for an employee stock ownership plan (“the Plan”) for employees of Personal-Touch, a home-health-care company. In that role, it facilitated a transaction in which the Plan purchased a number of shares in the company with a loan from the company itself. Unfortunately, the shares turned out to be worth much less than the Plan paid, leaving the Plan with no valuable assets and heavily indebted to the company’s principal shareholders. The Plan’s participants, all employees of Personal Touch, wound up being on the hook for interest payments on the loan. Employees Lisa Allen and Misty Dalton brought this action under section 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, raising two theories of recovery: first, that GreatBanc engaged in transactions that section 406 of ERISA prohibits, see 29 U.S.C. § 1106; and second, that GreatBanc breached its fiduciary duty under ERISA section 404, 29 U.S.C. § 1104, by failing to secure an appropriate valuation of the Personal-Touch stock. The district court initially dismissed the complaint without prejudice, but it later converted the judgment to one with prejudice after plaintiffs opted not to amend their complaint. Because the plaintiffs plausibly alleged both a prohibited transaction and a breach of fiduciary duty, we reverse the judgment of the district court and remand for further proceedings.

I

At this stage, we present the facts as alleged in the complaint in the light most favorable to plaintiffs. Employee stock ownership plans (ESOPs) are meant to be a way for companies to provide employees with a stake in the enterprise. See 29 U.S.C. § 1002. Personal-Touch, a privately held entity, is the sponsor of the Plan at issue here. See 29 U.S.C. § 1002(16)(B). Sponsors are responsible for administering ESOPs and often appoint independent trustees to carry out that job. Personal-Touch appointed GreatBanc as Trustee of the Plan in 2010 for the purpose of representing the Plan in the proposed stock-purchase transaction.

On December 9, 2010, GreatBanc instructed the Plan to acquire an unknown amount of stock from Personal-Touch’s shareholders for $60 million. Before this acquisition, Personal-Touch’s principal shareholders owned 100 percent of its shares. The plaintiffs do not know whether GreatBanc hired any financial advisors to review the transaction. The principal shareholders arranged for the Plan to finance this transaction through a loan they gave to the Plan at a 6.25% interest rate; the record does not reveal why the Plan did not use outside funding.

The ink was hardly dry on the acquisition papers when the value of Personal-Touch’s stock began to tank. Twenty-two days later, the complaint asserts and Gre-atBanc accepts for present purposes, the Plan’s stock was estimated to be worth some $13 million (almost 22%) less than what the Plan paid for it. By late 2011, the estimated value of the stock had declined by almost 50%, and by December 31, 2013, the Plan’s shares were worth only around $26.6 million. The selling shareholders, however, were relatively untouched by these developments. Rather than holding a rapidly depreciating asset in the form of the stock, they had become creditors of the Plan (and thus indirectly the employees) and the recipients of a secure flow of principal and interest payments on the original $60 million loan. The plaintiffs felt that they had drawn the short straw: they sued GreatBanc, alleging that it violated its fiduciary responsibilities under ERISA by approving a purchase of stock at too high a price and by facilitating two prohibited transactions: (1) the Plan’s purchase of stock from the company, and (2) the loan to the Plan that funded the purchase. See 29 U.S.C. § 1106(a) and (b).

The complaint alleges that GreatBanc did not conduct any inquiry into whether whoever was responsible for Personal-Touch’s financial projections had a conflict of interest, did not undertake an independent investigation of Personal-Touch’s revenues, and failed to seek any remedy for the overpayment for the stock. The complaint originally alleged that 4.25% was the customary interest rate for an ESOP transaction such as the one that took place, but it retracted that detail in sur-reply. Last, the complaint notes that GreatBanc entered into a settlement with the Department of Labor in 2014 (after the transaction), binding it to specific policies and procedures for analyzing stock valuation in ESOP transactions; the settlement, plaintiffs imply, was designed to address its record of shortcomings as a fiduciary.

The district court dismissed the complaint, finding that the plaintiffs had not sufficiently pleaded breach of fiduciary duty according to the standard outlined in Fifth Third Bancorp v. Dudenhoeffer, -— U.S.-, 134 S.Ct. 2459, 189 L.Ed.2d 457 (2014). Dudenhoeffer held that “where a stock is publicly traded, allegations that a fiduciary should have recognized from publicly available information alone that the market was over- or undervaluing the stock are implausible as a general rule, at least in the absence of special eircum-' stances.” Id. at 2471 (emphasis added). A plaintiff in this type of case must therefore point to those “special circumstances” in her complaint, in order to survive a motion to dismiss. Believing that this rule applied and that no special circumstances existed, the district court dismissed the breach-of-fiduciary-duty claim. It rejected the prohibited-transaction claim for much the same reason, finding that the question whether the Plan paid a fair price for the stock was not properly alleged.

H

We apply the usual de novo standard of review to the district court’s rulings and accept the facts as alleged for present purposes. Wilczynski v. Lumbermens Mut. Casualty Co., 93 F.3d 397, 401 (7th Cir. 1996); Alexander v. United States, 721 F.3d 418, 423 (7th Cir. 2013). No heightened pleading standard applies here; it is enough to provide the context necessary to show a plausible claim for relief. See Dudenhoeffer, 134 S.Ct. at 2471 (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-80, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554-63, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). We consider first the plaintiffs’ prohibited-transaction argument, and then their broader claim for breach of fiduciary duty.

A-

ERISA identifies a number of transactions that are flatly prohibited between a plan and a party in interest, or a plan and a fiduciary. See ERISA § 406, 29 U.S.C. § 1106. The provision at issue here are the prohibitions in section 406(a), which provides as follows:

Except as provided in section 1108 of this title:
(1) A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect—
(A) sale or exchange, or leasing, of any property between the plan and a party in interest;
(B) lending of money or other extension of credit between the plan
- and a party in interest;
(C) furnishing of goods, services, or facilities between the plan and a party in interest;
(D) transfer to, or use by or for the benefit of a party in interest, of any assets of the plan; or
(E) acquisition, on behalf of the plan, of any employer security or employer real property in violation of section 1107(a) of this title.
(2) No fiduciary who has authority or discretion to control or manage the assets of a plan shall permit the plan to hold any employer security or employer real property if he knows or should know that holding such security or real property violates section 1107(a) of this title.

29 U.S.C. § 1106(a). The exceptions found in section 408, 29 U.S.C. § 1108, include the acquisition of employer stock if it is for “adequate consideration.” 29 U.S.C. § 1108(e)(1). Section 408(b)(3) exempts a loan to an ESOP if the loan is primarily for the benefit of plan participants and beneficiaries and at an interest rate “not in excess of a reasonable rate.” 29 U.S.C. § 1108(b)(3).

The complaint alleges a purchase of employer stock by the Plan and a loan by the employer to the Plan, both of which are indisputably prohibited transactions within the meaning of section 406. Great-Banc can prevail only if it can take advantage of one of section 408’s exemptions. It never raised any such affirmative defense, however; it took the position instead that the plaintiffs have the burden of pleading facts that would negate the applicability of section 408’s exemptions and that they failed to do so. Plaintiffs counter that Gre-atBanc had the burden of both pleading and proving the applicability of a section 408 exemption.

The district court noted, correctly, that GreatBanc would carry the burden at trial of proving that the Plan had paid adequate consideration for the Personal-Touch stock. But at that point, it jumped ahead and found that both the prohibited-transaction and the fiduciary-breach claim would turn on the same question: whether the Plan paid a fair price for the stock. It found the complaint deficient on that point, criticizing it for failing adequately to allege that the interest rate provided by Personal-Touch was unreasonable. This, it concluded, was fatal to both theories plaintiffs were presenting.

There are a number of problems with this approach, but we will focus primarily on the procedural ones. A plaintiff alleging a claim arising out of a prohibited transaction involving an exchange of stock between a plan and a party in interest need not plead the absence of adequate consideration, and so here plaintiffs were under no obligation to say anything about the interest rate on the inside loan Great-Banc received from the stockholders. It was enough that the transaction was a prohibited one; fair consideration enters the picture only through section 408(b)(3) and (e)(1).

GreatBanc defends the district court’s reasoning by blending plaintiffs’ two theories together. It argues (on the assumption that the fiduciary-duty claim is inadequate) that allowing a prohibited-transaction claim to proceed based on the same facts as a dismissed fiduciary-breach claim would cause the “perverse result ... [that] a complaint may fail to state sufficient facts to support a breach of fiduciary duty claim, yet survive a motion to dismiss as to a companion prohibited transaction claim notwithstanding those same deficient facts.” But there is nothing perverse about this at all. Congress saw fit in ERISA to create some bright-line rules, on which plaintiffs are entitled to rely. Nothing compelled Congress to mimic the common law of breach of fiduciary duty in the statute.

More fundamentally, an ERISA plaintiff need not plead the absence of exemptions to prohibited transactions. It is the defendant who bears the burden of proving a section 408 exemption, Fish v. GreatBanc Trust Co., 749 F.3d 671, 685 (7th Cir. 2014); Keach v. U.S. Trust Co., 419 F.3d 626, 633 (7th Cir. 2005), and the burden of pleading commonly precedes the burden of persuasion. See Gomez v. Toledo, 446 U.S. 635, 640, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980) (burden of pleading defense rests with the defendant). The fact that this court may not have had the occasion to label the section 408 exemptions as affirmative defenses is of no moment. GreatBanc itself argued in Fish that section 408 exemptions are affirmative defenses, and therefore a plaintiff need not have actual knowledge of facts constituting a section 408 exemption in order for the statute of limitations to begin running. Evidently it has had a change of heart in this case, but it was right the first time. We now hold squarely that the section 408 exemptions are affirmative defenses for pleading purposes, and so the plaintiff has no duty to negate any or all of them. See Stuart v. Local 727, Int’l Bhd. of Teamsters, 771 F.3d 1014, 1018 (7th Cir. 2014) (“A plaintiff is not required to negate an affirmative defense in his or her complaint!.]”).

Five of our sister circuits agree with the position that section 408 exemptions are affirmative defenses, or that the defendant bears the burden of proof, or both. See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 601 n.10 (8th Cir. 2009) (“[A] plaintiff need not plead facts responsive to an affirmative defense before it is raised[.]”); Harris v. Amgen, Inc., 788 F.3d 916, 943 (9th Cir. 2015), rev’d on other grounds, — U.S.-, 136 S.Ct. 758, 193 L.Ed.2d 696 (2016) (“[T]he existence of an exemption under § 1108(e) is an affirmative defense[.]”); Elmore v. Cone Mills Corp., 23 F.3d 855, 864 (4th Cir. 1994) (proper allocation of § 408 burden waived by plaintiffs by not raising at trial); Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1215 (2d Cir. 1987) (burden on fiduciary to prove exemption); Donovan v. Cunningham, 716 F.2d 1455, 1467-68 (5th Cir. 1983) (“[W]e hold that the ESOP fiduciaries will carry their burden to prove that adequate consideration was paid[.]”). Although some of these decisions from other circuits predate Twombly and Iqbal, Dudenhoejfer postdates those cases and makes it clear that there is no special pleading regime for this part of ERISA.

GreatBanc attempts to differentiate the section 408 exemptions from affirmative defenses by reference to Twombly’s distinction between an affirmative defense and an “obvious alternative explanation.” Twombly, 550 U.S. at 567, 127 S.Ct. 1955. In the latter case, the plaintiff needs to include enough to dispel the alternative story (or more accurately, to indicate that a rational trier of fact could so find). But the exemptions from prohibited transactions do not provide alternative explanations; they assume that a transaction in the prohibited group occurred, and they add additional facts showing why that particular one is acceptable. That is how affirmative defenses work. In our case, it would make little sense to characterize payment of a fair price for employer stock or lending money to the Plan at a reasonable interest rate as an “obvious alternative explanation,” rather than as an additional fact justifying the otherwise troublesome deal.

GreatBanc’s last argument here is an appeal to policy: it argues that there will be a flood of prohibited-transaction litigation if all that must be alleged is the occurrence of a section 406 transaction. This strikes us as overwrought. Rational plans will sue only when (taking Rule 11 constraints into account, among others) there is a reason to do so. If an ESOP transaction is successful, employees who have invested in the ESOP will not have any motive to bring an ERISA lawsuit over the exchange of stock between the company and the Plan. If it fails, they are likely to give it closer scrutiny, but not all failures stem from ERISA violations. A district court has ample tools to screen frivolous claims, and the Twombly-Iqbal pleading standards require the plaintiffs to cross the line from the “possible” violation to the “plausible.”

GreatBanc fears that our holding will allow a suit any time a trustee so much as purchases something as trivial as a chair for a person to sit in, or pays a financial adviser for investment advice. But why would a beneficiary sue the trustee over a chair? And a beneficiary would have reason to sue over investment advice only if she had no reason to believe the transaction was exempt under section 408; otherwise, it would be a waste of time and resources. As the attorney for amicus curiae Department of Labor pointed out at oral argument, potential plaintiffs’ cost-benefit analyses will also weigh against bringing suits where the plaintiff cannot point to any actual harm that was caused by the prohibited transaction. Sanctions under Federal Rule of Civil Procedure 11 serve as an additional deterrent against obviously exempt prohibited-transaction claims.

If there is an administrative problem to be worried about, it is the chance that courts would start requiring plaintiffs to negate all section 408 exemptions in their complaints. Pleading the absence of the exemption in subsection (b)(19), for example, would be particularly burdensome: it exempts “cross trading” between a plan and an account managed by the same investment manager where nine specific conditions are met, some of which have further exceptions contained within them. 29 U.S.C. § 1108(b)(19). Requiring a plaintiff to demonstrate that subsection (b)(19) is not met in order to bring a prohibited-transaction claim would prematurely defeat many claims where the plaintiffs lack access to detailed information about the plan manager’s dealings with other entities. Although GreatBanc contended at oral argument that it is a Rule 11 violation “not to even ask” a defendant for information about, for instance, how stock was valued, we find it implausible that any would-be defendant would voluntarily turn over confidential financial information of that kind without the protections of the discovery process. We decline to add a pre-pleading requirement that plaintiffs ask nicely for information they need — but cannot compel access to — before filing their complaint.

ERISA is a “remedial statute to be liberally construed in favor of employee benefit fund participants.” Kross v. W. Elec. Co., Inc., 701 F.2d 1288, 1242 (7th Cir. 1983). Section 408 exemptions are affirmative defenses for the defendant, not items that a prohibited-transaction plaintiff must address in her complaint.

B

In order to state a claim for breach of fiduciary duty under ERISA, the plaintiff must plead “(1) that the defendant is a plan fiduciary; (2) that the defendant breached its fiduciary duty; and (3) that the breach resulted in harm to the plaintiff.” Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 464 (7th Cir. 2010) (citing Kannapien v. Quaker Oats Co., 507 F.3d 629, 639 (7th Cir. 2007)). The first and third elements are not at issue here; we need address only whether the plaintiffs sufficiently pleaded breach. The facts alleged must “provide sufficient detail to present a story that holds together.” Alexander, 721 F.3d at 422 (internal quotation marks omitted).

ERISA imposes duties of loyalty and prudence on a plan fiduciary. 29 U.S.C. § 1104(a)(1)(A) — (B). Loyalty requires a fiduciary to act “for the exclusive purpose” of providing benefits to participants. Id. (“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries[.]”). Prudence requires the fiduciary to act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent [person] acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” Id. This includes choosing wise investments and monitoring investments to remove imprudent ones. Tibble v. Edison Int'l, — U.S. --, 135 S.Ct. 1823, 1828-29, 191 L.Ed.2d 795 (2015). In order to assess the prudence of the fiduciary's actions, they must be evaluated in terms of both procedural regularity and substantive reasonableness. Fish, 749 F.3d at 680.

1

The -central allegation in the present complaint is that GreatBanc failed to conduct an adequate inquiry into the value of Personal-Touch’s stock. See Armstrong v. LaSalle Bank Nat. Ass’n, 446 F.3d 728 (7th Cir. 2006) (reversing district court summary judgment order on triable issue of fact of whether ESOP trustee exercised prudence in stock valuation for purposes of setting a redemption price). Although the plaintiffs could not describe in detail the process GreatBanc used, no such precision was essential. It was enough to allege facts from which a factfin-der could infer that the process was inadequate. As the Eighth Circuit explained in Braden, a district court errs in making the “assumption that [the plaintiff] was required to describe directly the ways in which appellees breached their fiduciary duties”; rather, it is “sufficient for a plaintiff to plead facts indirectly showing unlawful behavior.” 588 F.3d at 595. This is particularly true in ERISA cases because “ERISA plaintiffs generally-lack the inside information necessary to make out their claims in detail unless and until discovery commences.” Id. at 598. We agree with the Eighth Circuit: an ERISA plaintiff alleging breach of fiduciary duty does not need to. plead details to which she has no access, as long as the facts alleged tell a plausible story.

The plaintiffs met this burden: they alleged that the stock value dropped dramatically after the sale (implying that the sale price was inflated), that the loan came from the employer-seller rather than from an outside .entity (indicating that outside funding was not available), and that the interest rate was uncommonly high (implying that the sale was risky, or that the shareholders executed the deal in order to siphon money from the Plan to themselves). These facts support an inference that GreatBanc breached its fiduciary duty, either by failing to conduct an adequate inquiry into the proper valuation of the shares or by intentionally facilitating an improper transaction.

This was enough to permit the plaintiffs to move ahead with their case. GreatBanc remains free to move for summary judgment after discovery on the grounds that its process for conducting a valuation of the stock was adequate. It can also argue that a fiduciary need not be prescient about future stock-value movements. See DeBruyne v. Equitable Life Assurance Soc’y of the United States, 920 F.2d 457, 465 (7th Cir. 1990). But plaintiffs will be free to compare whatever steps GreatBanc actually took with the procedures that a prudent fiduciary would use.

GreatBanc’s (and the district court’s) reliance on Dudenhoeffer is unwarranted. In Dudenhoeffer, the Supreme Court held that ERISA fiduciaries conducting ESOP transactions can generally prudently rely on the market value of publicly traded stock, absent special circumstances. Dudenhoeffer, 134 S.Ct. at 2471. The Court suggested that the special circumstances might include something like available public information tending to suggest that the public market price did not reflect the true value of the shares. Id. at 2472. As we have just emphasized, however, the Court’s holding was limited to publicly traded stock and relies on the integrity of the prices produced by liquid markets. Private stock has no “market price,” for the obvious reason that' it is not traded on any public market. The transaction between Personal-Touch and the Personal-Touch ESOP was an exchange involving only private stock. There is no market price to explain away, and so no reason to apply any “special circumstances” rule. Additionally, another part of Dudenhoeffer1 & rationale — the need to protect fiduciaries from running up against insider trading law by relying on non-public information for stock valuation — has no application to the private stock context.

GreatBanc responds that Dudenhoeffer1 s rationale should be extended to the private-stock situation because “an unbiased, independent trusteefs]” assessment of the value of stock is at least as reliable as the stock market’s, and therefore the special circumstances pleading requirement should apply to private stock as well. But saying so does not make it so, and Great-Banc has assumed things that may or may not be true in a particular case. Was the .trustee unbiased? Was it independent? Did it have solid data behind its assessment? None of those questions is important in the case of public markets; all of them and more are for private holdings. The infer-' ence from the plaintiffs’ complaint is that GreatBanc did not rely on an unbiased, independent assessment, nor did it use an assessment that started with a trustworthy benchmark. We note as well that the Secretary of Labor, although he takes no position on the question whether the facts pleaded here are sufficient to allege a breach of fiduciary duty, urges that Du-denhoeffer does not apply to sales of nonpublic shares.

The district court said that in order for the complaint to survive, the plaintiffs needed to allege “special circumstances regarding, for example, a specific risk a fiduciary failed to properly assess.” Allen v. GreatBanc Trust Co., No. 15 C 3053, 2015 WL 5821772, at *3 (N.D. Ill. Oct. 1, 2015). There is no support, however, for such a stringent pleading requirement. All the plaintiff must do is to plead the breach of a fiduciary duty, such as prudence, and to explain how this was accomplished. Plaintiffs here accused GreatBanc of failing to conduct an independent assessment of the value of stock and relying instead on an interested party’s number. This is enough to give notice of the claim and to allow the suit to proceed.

2

GreatBanc maintains that the facts on which plaintiffs rely- — -the post-transaction decline in stock value and the 6.25% interest rate — are equally consistent with acceptable performance and breach of fiduciary duty and so not enough under Twombly and Iqbal. If drop in price were enough, GreatBanc argues, every ESOP transaction where there was any decline in value after the transaction would be subject to suit. But the complaint says more than this. It alleges that GreatBanc did not engage in a reasonable and prudent process, and notes in particular the absence of outsider financing (or any other objective benchmark of pricing) for the deal.

While the plaintiffs originally claimed that GreatBanc was aware that 4.25% was the customary interest rate for a transaction of the kind it was facilitating, they retracted that specific number in their sur-reply, which said more generally that the 6.25% interest rate was exorbitant. This was. not such an outlandish allegation that it could be dismissed out of hand. We note that on December 15, 2010, the Federal Reserve prime interest rate was 3.25%. See https://www.comptroller.tn.gov/shared/ pdf/interesttable.pdf. That aside, the retraction of the specific number is unimportant. At this stage, we are obliged to take as true the plaintiffs’ alleged facts in determining the sufficiency of the complaint, and one of the alleged facts is that the interest rate on the loan from the principal shareholders was unreasonably high. The district court should not have dismissed this claim as “conclusory,” because this was a factual claim, not a legal one. If the plaintiffs are unable after discovery to show that the rate was indeed high, Great-Banc may be entitled to summary judgment (though that will depend on the entire record at that time).

GreatBanc argues that the post-transaction decline in stock value is precisely what economists predict should happen after an ESOP transaction, and therefore it is not evidence of fiduciary breach. But whether the 22% decline in value — a decline that lasted not months but years and ballooned. to nearly 50% — 'was the result of normal economic forces or something more sinister is a matter for a later stage of litigation. We need not answer whether any post-ESOP transaction decline in stock value is enough for a complaint; the decline here was significant and accompanied by other indications of a breach of fiduciary duty.

C

We note, finally, that the 2014 settlement agreement between GreatBanc and the Department of Labor, in which Great-Banc agreed to a specific set of policies and procedures for analyzing stock valuation in ESOP transactions because of its history of failing properly to execute its fiduciary duties, has no effect on the motion to dismiss. GreatBanc points out that a settlement agreement is sometimes just a rational business decision and not an admission of any wrongdoing, that the complaint does not identify what the agreed-upon policies and procedures were, and that the complaint does not allege that GreatBanc was not previously following those policies and procedures.

Even though it may seem odd for a party to enter into a settlement agreement in which it undertakes to do exactly what, it has been doing, that is neither here nor there at this stage. The plaintiffs would like to use the agreement as evidence from which an absence of prudence could be inferred, but the plaintiffs do not need such particular evidence yet. We leave it to the district court to determine, if and when necessary, whether the settlement is admissible for evidentiary purposes.

Ill

Because the district court erred in dismissing the plaintiffs’ claims of breach of fiduciary duty and prohibited transactions in violation of' ERISA, we Reverse its judgment and Remand for additional proceedings consistent with this opinion.


author: WILLIAMS, Circuit Judge

text:
    Leroy ANDERSON, Plaintiff-Appellant, v. Matthew MORRISON and Marcus Holton, Defendants-Appellees.
    No. 14-3781
    United States Court of Appeals, Seventh Circuit.
    Submitted May 6, 2016

    Decided August 26, 2016

      Peter R. Coladarci, Attorney, Peter ,R. Coladarci, Ltd, Chicago, IL, for Plaintiff-Appellant.
    LeRoy Anderson, Pro Se.
    Christina T. Hansen, Attorney, Office of the Attorney General, Civil Appeals Division, Chicago, IL, for Defendants-Appel-lees.
    Before FLAUM, MANION, and WILLIAMS, Circuit Judges.

       After examining the briefs and the record, we have concluded that oral argument is unnec-essaiy. Thus the appeal is submitted on the briefs and the record. See Fed. R. App. P. 34(a)(2)(C).

   WILLIAMS, Circuit Judge

Leroy Anderson, an Illinois prisoner, alleges that he fell and was knocked unconscious after guards at Stateville Correctional Center ordered him to walk handcuffed down stairs covered with milk and garbage. In his complaint under 42 U.S.C. § 1983, Anderson claims that the guards violated the Eighth Amendment by subjecting him to this hazard. The district court granted the defendants’ motion to dismiss, ruling that slippery stairs do not pose a sufficiently serious risk of harm to state a claim under the Eighth Amendment. Because Anderson faced not only stairs slicked with milk, but also scattered trash and guards who required him to negotiate his descent while unaided and cuffed behind his back, the risk of serious harm was substantial. Therefore, we vacate and remand.

I. BACKGROUND

In reviewing a complaint dismissed under Federal Rule of Civil Procedure 12(b)(6), we “tak[e] all well-pleaded allegations of the complaint as true and view[ ] them in the light most favorable to the plaintiff.” Arnett v. Webster, 658 F.3d 742, 751 (7th Cir. 2011) (internal quotation marks and citation omitted). During a “shakedown” of several cells, the defendants handcuffed Anderson behind his back and ordered him to walk down a set of stairs to wait in a holding area while his cell was searched. These stairs were “covered [with] food, milk, and other garbage, and had been for several days.” The defendants refused Anderson’s request to help him walk. He slipped and fell down a flight of thirteen stairs. He was knocked unconscious and suffered “continuing and permanent” injuries.

Anderson sued the two guards who had ordered him down the stairs. He alleged that by cuffing him, leaving the greasy surface and debris in place, and refusing his request for help, they were deliberately indifferent to the obvious risk of harm the stairs posed. The district court granted the defendants’ motion to dismiss. It recognized that prison conditions violate the Eighth Amendment if they pose a substantial risk of serious harm and prison officials are deliberately indifferent to the risk. See Farmer v. Brennan, 511 U.S. 825, 837, 114 S.Ct. 1970, 128 L.Ed.2d 811 (1994). It also acknowledged that Anderson adequately alleged that the guards were deliberately indifferent to a risk of harm. But, the district judge ruled, the risk was not substantial enough. He relied heavily on our ruling in Pyles v. Fahim, 771 F.3d 403 (7th Cir. 2014), where an inmate slipped on stairs wet with water from prisoners’ shower shoes. We held that “slippery surfaces and shower floors in prison, without more, cannot constitute a hazardous condition of confinement” that violates the Eighth Amendment. Id. at 410-11.

II. ■ ANALYSIS

On appeal, Anderson persuasively distinguishes Pyles by supplying the “more.” Unlike the prisoner in that case, who was uncuffed, Anderson faced a hazard that posed, in three respects, a significant risk of severe harm. First, the stairs were not only slippery with milk, but also clogged with several days’ of accumulated food and rubbish, creating an obstacle course. Second, by handcuffing him behind his back, the guards prevented Anderson from steadying himself to avoid tripping, slipping, or tumbling down the flight of stairs. Third, even though they knew that Anderson could not steady himself, the guards refused to assist him. Anderson has thus alleged circumstances perilous enough to constitute “an unreasonable risk of serious damage to his future health,” Helling v. McKinney, 509 U.S. 25, 35, 113 S.Ct. 2475, 125 L.Ed.2d 22 (1993), and to state an Eighth Amendment claim, see Powers v. Snyder, 484 F.3d 929, 932 (7th Cir. 2007) (prison conditions that recklessly “endanger[]” a prisoner’s health state an Eighth Amendment claim); Board v. Farnham, 394 F.3d 469, 478 (7th Cir. 2005) (“known or obvious dangers” to health state a claim under Eighth and Fourteenth Amendments).

The defendants respond by arguing, unhelpfully, that the risk of slipping in a prison shower does not violate the Eighth Amendment. They cite cases in which our sister circuits have ruled that keeping a violent prisoner shackled while he uses the shower, see LeMaire v. Maass, 12 F.3d 1444, 1457 (9th Cir. 1993), and failing to drain standing water in a shower area used by an inmate on crutches, see Reynolds v. Powell, 370 F.3d 1028, 1031 (10th Cir. 2004), do not pose sufficient risks of harm to state a claim. But these cases are distinguishable for two reasons. First, plummeting down a flight of 13 steps presents a far greater risk of physical injury than does slipping on a shower floor. Second, the floors in LeMaire scad' Reynolds and the stairs in Pyles were unavoidably wet: showers necessarily produce wet floors, and in Pyles, the water on inmates’ shower shoes inevitably tracked onto the exit stairway, see Pyles, 771 F.3d at 405. But here, stairs slicked with milk and cluttered with garbage are not a necessary condition of prison. And by cleaning the stairs, the high risk of serious harm would ebb.

Prisons are not required to provide a “maximally safe environment,” Carroll v. DeTella, 255 F.3d 470, 472 (7th Cir. 2001), but they must address easily preventable, observed hazards that pose a significant risk of severe harm to inmates, see Withers v. Wexford Health Sources, Inc., 710 F.3d 688, 689 (7th Cir. 2013); Smith v. Peters, 631 F.3d 418, 420 (7th Cir. 2011); Gates v. Cook, 376 F.3d 323, 338 (5th Cir. 2004). Forcing someone to walk handcuffed and unaided down stairs needlessly strewn with easily removable milk, food, and garbage, as Anderson alleges, poses an unreasonable peril.

Of course, these are only allegations. Further proceedings must determine their truth. We encourage the district court on remand to consider recruiting counsel for Anderson. Cf. Perez v. Fenoglio, 792 F.3d 768, 784 (7th Cir. 2015) (“[WJhether there has been deliberate indifference on the part of a defendant is an issue that requires the subtle appreciation of legal causation and of the duties imposed upon state prison officials by the Eighth Amendment. Even a pro se litigant with a meritorious claim may fail to grasp these subtleties.” (citation and internal quotation marks omitted)).

III. CONCLUSION

For these reasons, we Vaoate the judgment and Remand for further proceedings.


author: POSNER, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Felipe ZAMORA and Samuel Gutierrez, Defendants-Appellants.
    Nos. 15-2193, -2762
    United States Court of Appeals, Seventh Circuit.
    Submitted August 18, 2016
    Decided August 26, 2016

      Georgia N. Alexakis, Derek Owens, Attorneys, Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee (Case No. 15-2193).
    Peter W. Henderson, Attorney, Office of the Federal Public Defender, Urbana, IL, Thomas W. Patton, Attorney, Office of the Federal Public Defender, Peoria, IL, for Defendant-Appellant (Case No. 15-2193).
    Matthew Javier Hernandez, Derek Owens, Attorney, Office of the United States Attorney, Chicago, IL, for Plaintiff-Appel-lee (Case No. 15-2762).
    Susan M. Pavlow, Attorney, Law Office of Susan M. Pavlow, Chicago, IL, for De-fendanb-Appellant (Case No. 15-2762).
    Before POSNER, EASTERBROOK, and SYKES, Circuit Judges.
   POSNER, Circuit Judge.

In 2009 the defendants, Zamora and Gutierrez, high-ranking members of the Latin Kings street gang, were charged with a variety of federal crimes. Zamora pleaded guilty to participating in both a racketeering conspiracy and a conspiracy to extort money from “miqueros,” who specialize in providing identification documents to unauthorized aliens. Gutierrez pleaded guilty to participating in the racketeering conspiracy and to possessing an illegal drug with intent to distribute it. At sentencing the district judge credited Zamora with acceptance of responsibility, but in sentencing him to 240 months in prison failed to indicate what Zamora’s guidelines range was. The court imposed a 3-year term of supervised release with all the standard conditions of supervised release plus two special conditions, one requiring Zamora to participate in an approved job-skill training program and the other requiring him to perform at least 20 hours of community service weekly if he was unemployed.

At Gutierrez’s sentencing, which took place a month after Zamora’s, the judge refused to credit him with acceptance of responsibility, on the ground that unlike his codefendant he had fallen “substantially short of accepting responsibility factually for what occurred: what he did and what was foreseeable to him, and which was part of the daily activities, as it were, of this — of the gang itself.” His acceptance of responsibility, the judge said, was directed “to his family and friends” and “totally ignores the other victims of the activities carried out” by the Latin Kings. The judge calculated Gutierrez’s guidelines range at 210 to 262 months, and sentenced him at the bottom of the range, while also imposing a 4-year term of supervised release with all the standard conditions plus special conditions requiring Gutierrez to undergo a mental-health evaluation, participate in a mental-health treatment program, take steps to obtain a GED, and if unemployed perform community service.

The defendants appealed, and in United States v. Garcia, 754 F.3d 460, 483-87 (7th Cir. 2014), we vacated their sentences— Zamora’s for the judge’s failure to calculate his guidelines range or justify what appeared to be an above-guidelines sentence, Gutierrez’s for lack of an adequate explanation by the judge for deciding to deny Gutierrez acceptance of responsibility; and so we remanded for resentencing of both defendants.

On remand the district judge commended Zamora for good behavior in prison and for showing genuine remorse for his activities as a high-ranking Latin King; calculated a guidelines imprisonment range of 168 to 210 months; imposed a prison sentence of 200 months; and reimposed the term and conditions of supervised release that he had imposed before. Gutierrez in his sentencing memorandum explained that he’d tried to “better himself’ in prison by, for example, completing “numerous classes and programs,” working as a cook in the prison kitchen, participating in vocational training as a cabinetmaker, and helping to train other inmates in masonry and carpentry. At his resentencing hearing he again apologized for belonging to the Latin Kings, but this time his apology was “to the Court,” his family, and “also to the community.” On the basis of his statement, the government recommended that he receive credit for acceptance of responsibility, which would reduce his guidelines range from 210 to 262 months to 151 to 188 months. After questioning Gutierrez at length concerning his activities as a Latin King, the judge, while not calculating a guidelines range, did reduce his sentence from 210 to 188 months, with “all other aspects of the [original] judgment ... [to] remain in effect.”

The defendants have again appealed. Both challenge the conditions of supervised release, pointing out that the judge failed to give advance notice that he was considering imposing (as he did) discretionary conditions (that is, conditions other than the standard and special conditions that the judge also imposed), that some of the conditions he did impose we have deemed overbroad and overly vague in previous decisions, and that he failed to determine the compatibility of the conditions he was imposing with the statutory sentencing factors in 18 U.S.C. § 3553(a), or to state the conditions orally. All these were errors, which have persuaded the government — and persuade us — that the sentences of the defendants must again be vacated and the cases again remanded for the full resentencing that the defendants should have received after our previous remand but did not. See, e.g., United States v. Poulin, 809 F.3d 924, 931-34 (7th Cir. 2016); United States v. Harper, 805 F.3d 818, 822 (7th Cir. 2015); United States v. Sandidge, 784 F.3d 1055, 1067-69 (7th Cir. 2015); United States v. Kappes, 782 F.3d 828, 842-52, 862-63 (7th Cir. 2015); United States v. Thompson, 777 F.3d 368, 373, 375-77, 379-81 (7th Cir. 2015).

As explained in United States v. Mobley, No. 15-2255, 833 F.3d 797, 801, 2016 WL 4275821 (7th Cir. Aug. 15, 2016), at *3, “Because a criminal sentence is normally a package that includes several component parts (term of imprisonment, fíne, restitution, special assessment, supervised release), when one part of the package is disturbed, we prefer to give the district court the opportunity to reconsider the sentence as a whole so as to ‘effectuate its sentencing intent.’ Pepper v. United States, 562 U.S. 476, 507, 131 S.Ct. 1229, 179 L.Ed.2d 196 (2011). Vacating the sentence and returning the case to the district court for imposition of a new sentence allows the district court to ‘reconfigure the sentencing plan’ so as to ‘satisfy the sentencing factors in 18 U.S.C. § 3553(a).’ Id.” See also United States v. Barnes, 660 F.3d 1000, 1007 (7th Cir. 2011), where we explained that a full resentencing allows the district court to “unbundle the sentencing package.”

With regard to Gutierrez the judge committed an additional error by failing to calculate his guidelines range (one of the errors, the reader will recall, that caused us to order Zamora resentenced). Furthermore, though we instructed the judge to reconsider on remand his ruling that Gutierrez had not accepted responsibility for the crimes he’d pleaded guilty to, we can’t tell from the sentencing transcript how the issue of acceptance of responsibility was resolved. It is true that Gutierrez’s new sentence — 188 months — would be the top of the guidelines range recommended by the defense and the government, reflecting the deduction of three offense levels for acceptance of responsibility. But the judge’s extended colloquy concerning Gutierrez’s activities as a member of the Latin Kings and apparent dissatisfaction with Gutierrez’s answers are consistent with the judge’s having reduced his sentence not because he’d accepted responsibility for his crime but because like Zamora he’d behaved well in prison. Pepper v. United States, supra, 562 U.S. at 490-93, 131 S.Ct. 1229. But that’s just a guess; for in contrast to his treatment of Zamora, the judge did not mention Gutierrez’s good behavior in prison, did not mention any of the section 3553(a) sentencing factors, and did not explain why, assuming he was sub silentio crediting Gutierrez with accepting responsibility, he nevertheless thought that unlike Zamora Gutierrez deserved to be sentenced at the high end of the applicable guidelines range. (This assumes that the judge agreed with the litigants’ guidelines calculation.)

Given that both defendants were entitled to.a full resentencing after their successful first appeals, 18 U.S.C. § 3742(g), and instead received cursory treatment by the judge, and that the government does not contest Gutierrez’s request that a different judge conduct his sentencing hearing on remand, we order that Gutierrez’s third sentencing hearing be conducted before a different judge. See 7th Cir. R. 36.

The defendants’ sentences are vacated and both cases are remanded for resen-tencing.


author: WILLIAMS, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Djuane MCPHAUL, Defendant-Appellant.
    No. 16-1162
    United States Court of Appeals, Seventh Circuit.
    Argued May 31, 2016
    Decided August 26, 2016

      Jeffrey D. Preston, Assistant U.S. Attorney, Brian L. Reitz, Attorney, Office of the United States Attorney, Indianapolis, IN, for Plaintiff-Appellee.
    Theodore J. Minch, Attorney, Sovich Minch LLP, Indianapolis, IN, for Defendant-Appellant.
    Before EASTERBROOK and WILLIAMS, Circuit Judges, and YANDLE, District Judge.

       Of the Southern District of Illinois, sitting by designation.

   WILLIAMS, Circuit Judge.

Djuane McPhaul already had a violent felony conviction on his record when he was caught driving with a loaded gun in the car, while wearing body armor. He was charged with being a felon in possession of a gun, and with being a violent felon in possession of body armor. A jury convicted him on the body armor charge but acquitted him on the gun charge. On appeal, he argues that the body armor should have been suppressed because it was discovered through an unconstitutional search. We disagree. The pat-down that revealed the body armor was lawful because officers had probable cause to stop McPhaul — for minor traffic violations, driving on a suspended license, and using a car to flee officers.

McPhaul also challenges two Sentencing Guidelines enhancements, one for using the body armor “in connection with another felony offense,” and another for attempting to obstruct justice. We reject these challenges too. McPhaul used a car to flee officers, which is a felony, and he wore the body armor while doing so. And when he was in pre-trial custody, he attempted to obstruct justice through several letters he wrote to his cousin. So we affirm his conviction and sentence.

I. BACKGROUND

Police Officer Andrew Sell saw a car turn right from the center lane on a three-lane road and then drive through private property to avoid a red light. Using his computer, Sell learned that the car was registered to Djuane McPhaul, whose license was suspended. Sell observed that the driver looked like McPhaul (the computer displayed McPhaul’s picture). Sell decided to stop the car, but the driver made some quick turns and then led the police on a mile-long “slow-speed” chase, even after Sell activated his lights and siren. When the driver finally stopped and was arrested, a pat-down revealed that he was wearing body armor, and a loaded gun was found in the car’s center console.

The driver was McPhaul, who had previously been convicted of a crime of violence. He was charged with being a felon in possession of a gun, and with being a violent felon in possession of body armor. While in pre-trial custody, he wrote letters to his cousin, telling her she could ignore a grand jury subpoena, and asking her to swear that she put the gun in his car without his knowledge.

McPhaul unsuccessfully moved to suppress the body armor, arguing it was discovered through an unconstitutional search. At sentencing, the judge applied Guidelines enhancements for using the body armor in connection with another felony offense, and for attempting to obstruct justice. McPhaul’s Guidelines range was 24-30 months and the judge imposed a 24-month sentence. McPhaul appeals.

II. ANALYSIS

A. No Abuse of Discretion in Denying Motion to Suppress Body Armor

The Fourth Amendment provides that “[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.” U.S. Const. amend. IV. Under certain circumstances, evidence gathered in violation of a defendant’s Fourth Amendment rights will be suppressed. See generally United States v. Martin, 807 F.3d 842, 845-46 (7th Cir. 2015). In reviewing the district judge’s denial of McPhaul’s motion to suppress, we review legal conclusions de novo and findings of fact for clear error. United States v. Jackson, 598 F.3d 340, 344 (7th Cir. 2010).

“As a general matter, the decision to stop an automobile is reasonable where the police have probable cause to believe that a traffic violation has occurred.” Whren v. United States, 517 U.S. 806, 810, 116 S.Ct. 1769, 135 L.Ed.2d 89 (1996); Carmichael v. Vill. of Palatine, 605 F.3d 451, 456 (7th Cir. 2010). The district court wrote that “Officer Sell observed Mr. McPhaul commit two, and possibly three, traffic infractions, and after running his license plate (which is a reasonable practice of police officers), learned that the car was registered to [a] driver with a suspended license. Officer Sell had probable cause to initiate a traffic stop.” We agree.

But McPhaul did not stop right away. Instead, as the district court wrote, “After Officer Sell turned on his police lights and siren, Mr. McPhaul did not immediately stop but instead traveled for nearly a mile and made four turns before finally coming to a stop in a gas station parking lot. These facts are sufficient probable cause for an arrest for resisting law enforcement in a vehicle.” Again, we agree. Under Indiana law, it is a felony to use a vehicle to flee from a law-enforcement officer who has activated his lights and siren in an attempt to make a stop. See Ind. Code §§ 35 — 44.1—3—1(a)(3), (b)(1)(A). Because our focus is on probable cause, McPhaul’s argument that he was not, in fact, resisting law enforcement — -he was only trying to get to a safe place before stopping — is legally irrelevant. E.g., United States v. Reaves, 796 F.3d 738, 741 (7th Cir. 2015) (“[W]e need only inquire whether the officer had probable cause to believe that a traffic violation occurred, not whether a violation actually occurred.”) (emphasis added) (internal citation and quotation marks omitted).

McPhaul says that even if there was probable cause to arrest him, the body armor was still discovered through an unreasonable search. He argues that his violations were relatively minor so they did not justify the officers’ use of their “felony stop” procedures (including removing McPhaul from the car and patting him down). The argument is fundamentally misplaced. Whether the officers acted in accordance with their departmental policies, or even state law, is irrelevant. Virginia v. Moore, 553 U.S. 164, 176, 128 S.Ct. 1598, 170 L.Ed.2d 559 (2008). Federal constitutional law — the applicable law — is clear. Having lawfully arrested McPhaul, the officers were allowed to pat him down. Id. at 176-78, 128 S.Ct. 1598; United States v. Robinson, 414 U.S. 218, 235, 94 S.Ct. 467, 38 L.Ed.2d 427 (1973) (“A custodial arrest of a suspect based on probable cause is a reasonable intrusion under the Fourth Amendment; that intrusion being lawful, a search incident to the arrest requires no additional justification.”). There was no Fourth Amendment violation, so the district judge did not err in denying McPhaul’s motion to suppress.

B. No Clear Error in Finding Body Armor Used in Connection with Another Felony Offense

The Guidelines assign a base offense level of 10 to the crime of being a violent felon in possession of body armor. U.S.S.G. § 2K2.6(a). The offense level is increased to 14 if the defendant “used the body armor in connection with another felony offense.” Id. § 2K2.6(b)(l). The district judge found that McPhaul used a vehicle to flee law enforcement, and found that the body armor was connected to that felony because McPhaul wore it as he fled. So the judge applied the enhancement. We review that decision for clear error. United States v. Schmitt, 770 F.3d 524, 538-39 (7th Cir. 2014).

The Guidelines explicitly state that the enhancement does not apply “if the body armor was merely possessed.” U.S.S.G. § 2K2.6 App. Note 1(C). Instead, to be “used,” the body armor must be “actively employed in a manner to protect the person from gunfire.” Id. We can envision an argument that MePhaul’s body armor was not “actively employed in a manner to protect [him] from gunfire,” but MePhaul made no such argument (and his lawyer explicitly confirmed at oral argument that no such argument was being advanced). Instead, McPhaul’s only argument is that he did not commit “another felony offense” because he was not trying to flee, he was only trying to get to a safe place before stopping. He stresses that his speed during the pursuit never exceeded 40 miles per hour. But he ignores the fact that he drove for almost a mile and made several turns along the way. The district judge considered the issue and found that the preponderance of the evidence supported the conclusion that MePhaul committed the Indiana felony. That finding was not clearly erroneous.

C. No Error in Finding MePhaul Attempted to Obstruct Justice

Attempting to obstruct justice earns offenders a two-level increase under the Guidelines. U.S.S.G. § 3C1.1. We review the district judge’s underlying factual findings for clear error, and we review de novo the determination that those findings support the enhancement. United States v. Taylor, 637 F.3d 812, 817 (7th Cir. 2011).

While in pre-trial custody, MePhaul wrote several letters to his cousin, Dayonia Ivey. He asked her to swear that the gun was hers and that she put it in his car without his knowledge. He tried to allay any fears she might have by telling her that the gun would not lead to serious charges for her, as she did not have a prior felony conviction. He implored, “without you I can’t win my case.” He offered to give her money, which he would earn by settling a civil suit that he intended to bring against the police. And he told her she could ignore the subpoena she had received to testify before the grand jury. (Indeed, he said the advice about skipping grand jury proceedings came from his attorney.)

Ivey listened. She skipped the. grand jury proceedings and signed an affidavit saying she put the gun in McPhaul’s car without his knowledge. Because she skipped the grand jury sitting, she was brought to court to determine whether she should be held in contempt. After the judge appointed her a lawyer, Ivey testified, retracting her claim that she was responsible for the gun.

In challenging the finding that he attempted to obstruct justice, MePhaul stresses that he was not able to cross-examine Ivey when she testified at her contempt hearing. But we agree with the district judge — the ability to cross-examine Ivey is irrelevant because the obstruction enhancement was based on McPhaul’s own statements in his multiple letters from jail. In particular, we note that urging Ivey to skip the grand jury sitting was an attempt to obstruct justice. See United States v. Monem, 104 F.3d 905, 909 (7th Cir. 1997).

III. CONCLUSION

We Affirm McPhaul’s conviction and sentence.