Justia Commercial Law Opinion Summaries

In this case, the plaintiff bank sought to foreclose on a residential property in Vermont after the defendant defaulted on a $365,000 loan originally issued by Countrywide Home Loans, Inc. The mortgage was assigned to the plaintiff, and the bank alleged it was the holder of the note. However, the copy of the note attached to the complaint was made out to the original lender and lacked any indorsement. Over the years, the case was delayed by mediation, bankruptcy, and various motions. At trial, the plaintiff produced the original note with an undated indorsement in blank, but could not establish when it became the holder of the note.The Vermont Superior Court, Windsor Unit, Civil Division, denied the plaintiff’s initial summary judgment motion, finding that the plaintiff had not established standing under the Uniform Commercial Code. A later summary judgment was vacated due to procedural errors. After a hearing, the court found the plaintiff was currently a holder of the note and that the defendant had defaulted, but concluded that the plaintiff failed to prove it had the right to enforce the note at the time the complaint was filed, as required by U.S. Bank National Ass’n v. Kimball. Judgment was entered for the defendant, and the plaintiff’s post-judgment motion to designate the judgment as without prejudice was denied.On appeal, the Vermont Supreme Court affirmed the lower court’s decision. The Court held that a foreclosure plaintiff must demonstrate standing by showing it had the right to enforce the note at the time the complaint was filed, declining to overrule or limit Kimball. The Court also declined to address whether the judgment should be designated as without prejudice, leaving preclusion consequences to future proceedings. View "The Bank of New York Mellon v. Quinn" on Justia Law

Pro-Mark Services, Inc., a general contracting construction company, obtained payment and performance bonds from Hartford Accident and Indemnity Company as required by the Miller Act. To facilitate this, Pro-Mark and other indemnitors entered into a General Indemnity Agreement (GIA) with Hartford, assigning certain rights related to bonded contracts. Later, Pro-Mark entered into two substantial business loan agreements with Capital Credit Union (CCU), secured by most of Pro-Mark’s assets, including deposit accounts. Recognizing potential conflicts over asset priorities, Hartford and CCU executed an Intercreditor Collateral Agreement (ICA) to define their respective rights and priorities in Pro-Mark’s assets, distinguishing between “Bank Priority Collateral” and “Surety Priority Collateral,” and specifying how proceeds should be distributed.After Pro-Mark filed for chapter 7 bankruptcy in the United States Bankruptcy Court for the District of North Dakota, CCU placed an administrative freeze on Pro-Mark’s deposit accounts and moved for relief from the automatic stay to exercise its right of setoff against the funds in those accounts. Hartford objected, claiming a superior interest in the funds based on the GIA and ICA. The bankruptcy court held hearings and, after considering the parties’ briefs and stipulated facts, granted CCU’s motion, allowing it to set off the funds. The bankruptcy court found CCU had met its burden for setoff and determined Hartford did not have a sufficient interest in the deposited funds, focusing on the GIA and North Dakota’s Uniform Commercial Code, and not the ICA.On appeal, the United States Bankruptcy Appellate Panel for the Eighth Circuit held that while the bankruptcy court had authority to adjudicate the priority dispute, it erred by failing to analyze the parties’ respective rights under the ICA, which governed the priority of distributions. The Panel reversed the bankruptcy court’s order and remanded the case for further proceedings consistent with its opinion. View "Hartford Accident and Indemnity Company v. Capital Credit Union" on Justia Law

Two parties, both experienced in the grocery business, negotiated the sale of a grocery store’s inventory, stock, and equipment for $175,000. The agreement was reached orally and memorialized with a handshake, but no written contract was signed. Following the oral agreement, the buyers took control of the store, closed it for remodeling, met with employees, and were publicly identified as the new owners. However, within two weeks, the buyers withdrew from the deal, citing issues with a third-party wholesaler. The sellers, having already closed the store and lost perishable goods, were unable to find another buyer and subsequently filed suit.The sellers brought ten claims in the Lee County Circuit Court, including breach of contract, estoppel, and negligent misrepresentation. The buyers moved to dismiss, arguing that the Statute of Frauds barred enforcement of the oral agreement because the sale involved goods valued over $500 and no signed writing existed. The circuit court agreed, dismissing the contract and estoppel-based claims, as well as the negligent misrepresentation claim, but allowed other claims to proceed. The sellers appealed the dismissal of the contract and estoppel claims.The Supreme Court of Mississippi reviewed the case de novo. It held that the sellers’ complaint plausibly invoked two exceptions to the Statute of Frauds under Mississippi law: the merchants’ exception and the part-performance exception. The Court found that, at the motion to dismiss stage, it could not determine as a matter of law that no valid contract existed under these exceptions. Therefore, the Supreme Court of Mississippi reversed the circuit court’s dismissal of claims (1) through (7) and remanded the case for further proceedings. View "Palmer's Grocery Inc. v. Chandler's JKE, Inc." on Justia Law

Several plaintiffs, including an individual, an investment fund, and a limited partnership, engaged in trading derivatives tied to the Sterling London Interbank Offered Rate (Sterling LIBOR). They alleged that a group of major banks conspired to manipulate Sterling LIBOR for their own trading advantage. The plaintiffs claimed that the banks coordinated false submissions to the rate-setting process, sometimes inflating and sometimes deflating the benchmark, which in turn affected the value of Sterling LIBOR-based derivatives. The plaintiffs asserted that this manipulation was orchestrated through internal and external communications among banks and with the help of inter-dealer brokers.The United States District Court for the Southern District of New York reviewed the case and dismissed the plaintiffs’ claims under the Sherman Act and the Commodity Exchange Act (CEA). The district court found that two plaintiffs lacked antitrust standing because they were not “efficient enforcers” and had not transacted directly with the defendants, resulting in only indirect and remote damages. The court also determined that the third plaintiff, a limited partnership, lacked the capacity to sue and had not properly assigned its claims to a substitute entity. Additionally, the court found that one plaintiff failed to adequately plead specific intent for the CEA claims.On appeal, the United States Court of Appeals for the Second Circuit affirmed the district court’s dismissal, but on a narrower ground. The Second Circuit held that none of the plaintiffs plausibly alleged actual injury under either the Sherman Act or the CEA. The court explained that because the alleged manipulation was multidirectional—sometimes raising and sometimes lowering Sterling LIBOR—the plaintiffs did not show that they suffered net harm as a result of the defendants’ conduct. Without specific allegations of transactions where they were harmed by the manipulation, the plaintiffs’ claims could not proceed. The judgment of dismissal was affirmed, and the cross-appeal was dismissed as moot. View "Sonterra Cap. Master Fund, Ltd. v. UBS AG" on Justia Law

Three individuals, including the appellant, formed a limited liability company (LLC) to design and sell firearms products, later adding two more members to a second LLC. The first LLC did not have a formal operating agreement, while the second adopted one in early 2019, setting a low company valuation. The appellant’s behavior became erratic and disruptive, leading to accusations against a key business partner and other members, which damaged business relationships and led to the loss of significant contracts. The remaining members of both LLCs unanimously voted to dissociate the appellant, citing his conduct as making it unlawful to continue business with him. The appellant disputed the validity of the operating agreement in the second LLC and challenged the valuation of his interests in both companies, also alleging wrongful dissociation, defamation, and conversion of property.The Eleventh Judicial District Court, Flathead County, granted summary judgment to the defendants on all claims. The court found the appellant was properly dissociated from the first LLC under Montana’s Limited Liability Company Act due to the unanimous vote and the unlawfulness of continuing business with him. It also held that the second LLC’s operating agreement was valid and permitted dissociation by unanimous vote. The court valued the appellant’s interests according to the operating agreement for the second LLC and based on company assets for the first LLC. The court denied the appellant’s motion to extend expert disclosure deadlines and partially denied his motion to compel discovery. It also granted summary judgment to the defendants on the conversion claim, finding no evidence of unauthorized control over the appellant’s property.The Supreme Court of the State of Montana affirmed the lower court’s rulings on dissociation and valuation regarding the second LLC, as well as the summary judgment on the conversion claim. However, it reversed the valuation of the appellant’s interest in the first LLC, holding that the district court erred by failing to consider the company’s “going concern” value as required by statute. The case was remanded for further proceedings on that issue. View "Herbert v. Shield Arms" on Justia Law

Fire Protection Service, Inc. (FPS), a Texas business, served as a non-exclusive dealer for Survitec Survival Products, Inc., which manufactures and distributes marine safety products, including life rafts. These life rafts, each valued at over $15,000 and capable of accommodating up to 30 people, are required by federal law and international treaties to be installed on various types of navigable vessels used in industries such as offshore oil and gas, commercial fishing, and maritime shipping. In August 2017, Survitec terminated its dealership agreement with FPS without citing cause and did not repurchase FPS’s unsold inventory.FPS filed suit in the United States District Court for the Southern District of Texas, alleging that Survitec’s actions violated the Texas Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act (“Dealer Act”). After a bench trial, the district court granted Survitec’s Rule 52(c) motion, ruling that the life rafts did not qualify as “Equipment” under the Act, and therefore the Act did not apply to the parties’ agreement.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the district court’s legal conclusions de novo. The Fifth Circuit held that Survitec’s life rafts are “Equipment” under the Dealer Act because they are used “in connection with” commercial activities covered by the Act, including construction, maintenance, mining (which encompasses oil and gas extraction), and industrial activities. The court found that the Act’s language and legislative intent support a broad interpretation, and that the life rafts meet the statutory definition. Accordingly, the Fifth Circuit reversed the district court’s judgment and remanded the case for further proceedings consistent with its opinion. View "Fire Protection v. Survitec Survival" on Justia Law

A Canadian corporation specializing in industrial heaters sought a new supplier and entered negotiations with a South Dakota manufacturer to custom-build 30 heaters. The parties initially agreed to the purchase and sale of 21 units, with a 20% down payment, and later extended the agreement to include the remaining nine units, for a total of 30 heaters at a set price per unit. The manufacturer began production and delivery as payments were made. However, after partial delivery and payment, the buyer stopped making payments, citing performance issues with the heaters and ultimately notified the manufacturer of its intent to terminate the relationship. Despite complaints about the heaters, the buyer did not reject or return any units but continued to accept and sell them until the manufacturer withheld further shipments due to nonpayment.The Circuit Court of the Fifth Judicial Circuit, Day County, South Dakota, granted summary judgment in favor of the manufacturer, finding that there was no genuine dispute of material fact regarding the existence of a contract for 30 heaters and that the buyer breached the agreement by failing to pay and by terminating the contract. The court also found that the manufacturer had taken reasonable steps to mitigate damages and that the buyer had not properly rejected the goods under the Uniform Commercial Code (UCC).On appeal, the Supreme Court of the State of South Dakota reviewed the case de novo. The Supreme Court held that there was no genuine issue of material fact regarding the existence of a contract for the sale of 30 heaters. However, the Court found that there were genuine issues of material fact as to whether the alleged defects in the heaters substantially impaired the value of the whole contract, which could excuse the buyer’s nonperformance under the UCC. The Supreme Court affirmed the lower court’s finding of contract formation, reversed the grant of summary judgment on the breach issue, and remanded for further proceedings. View "Anderson Industries v. Thermal Intelligence" on Justia Law

Two companies, HBKY and Elk River, each claimed rights to thousands of acres of timber in Kentucky based on their respective contracts with a third party, Kingdom Energy Resources. Kingdom had entered into a timber sales contract with Elk River, allowing Elk River to cut and remove timber from certain land. Separately, Kingdom obtained a $22 million loan from a group of lenders, with HBKY acting as their agent, and mortgaged several properties—including the timber in question—as collateral for the loan. Kingdom later breached both agreements: it ousted Elk River from the land, violating the timber contract, and defaulted on the loan, leaving both HBKY and Elk River with competing claims to the timber.After HBKY secured a judgment in a New York federal court declaring Kingdom in default, it registered the judgment in the United States District Court for the Eastern District of Kentucky and initiated foreclosure proceedings on the collateral, including the timber. Elk River and its president, Robin Wilson, were joined as defendants due to their claimed interest. The district court granted summary judgment to HBKY, finding that Elk River did not obtain title to the timber under its contracts, did not have a superior interest, and was not a buyer in the ordinary course of business under Kentucky law.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. The court held that the loan documents did not authorize a sale of the timber free of HBKY’s security interest, as the mortgage explicitly stated that the security interest would survive any sale. The court also found that Elk River failed to provide sufficient evidence to establish its status as a buyer in the ordinary course of business. Accordingly, the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of HBKY. View "HBKY, LLC v. Elk River Export, LLC" on Justia Law

Rhode Island Truck Center, LLC (RITC) filed a protest against Daimler Trucks North America, LLC (DTNA) for allegedly violating Rhode Island General Laws § 31-5.1-4.2(a). DTNA had granted a franchise to Advantage Truck Raynham, LLC (ATG Raynham) in Raynham, Massachusetts, which RITC claimed was within its "relevant market area" as defined in their franchise agreement. RITC argued that DTNA failed to provide the required statutory notice before establishing the new dealership.The Dealers' Hearing Board determined it lacked jurisdiction over RITC's protest, citing the dormant Commerce Clause of the United States Constitution. RITC then filed an administrative appeal in the Superior Court, which DTNA removed to the United States District Court for the District of Rhode Island. The District Court concluded that the Dealer Law could not be applied extraterritorially without violating the Commerce Clause. The United States Court of Appeals for the First Circuit certified a question to the Rhode Island Supreme Court to determine whether a "relevant market area" under § 31-5.1-4.2(a) could extend beyond Rhode Island's borders.The Rhode Island Supreme Court reviewed the certified question de novo and concluded that the statute's plain language and legislative intent allowed a "relevant market area" to extend beyond state borders. The Court noted that the statute's definition of "relevant market area" includes a 20-mile radius or the area defined in the franchise agreement, whichever is greater, without limiting it to within Rhode Island. The Court emphasized that the legislature's intent was to provide dealers with a protective area that could extend beyond state lines, especially given Rhode Island's small geographic size. Thus, the Court answered the certified question in the affirmative, allowing the "relevant market area" to extend beyond Rhode Island's borders. View "Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC" on Justia Law

Golden View Ready-Mix, LLC (Golden View) supplied concrete to Grangaard Construction, Inc. (Grangaard) for a bridge project. Golden View alleged that Grangaard failed to pay for the concrete, breached the implied obligation of good faith and fair dealing, and committed fraud. A jury found in favor of Golden View on the breach of contract and good faith claims, awarding damages and punitive damages, but found no liability for fraud. Grangaard appealed the punitive damages award and the decision to submit the fraud issue to the jury.The Circuit Court of the First Judicial Circuit, McCook County, South Dakota, presided over the case. Grangaard moved for partial summary judgment on the fraud claim, arguing there was no independent tort duty outside the contract. The court denied this motion, allowing the fraud claim to proceed. During the trial, the court permitted the jury to consider punitive damages based on the breach of the implied obligation of good faith, despite Grangaard's objections.The Supreme Court of the State of South Dakota reviewed the case. The court determined that punitive damages are only recoverable for breaches of obligations not arising from a contract, as per SDCL 21-3-2. The court found that the implied obligation of good faith arises from the contract itself and does not constitute an independent tort that could support punitive damages. Consequently, the court vacated the punitive damages award. However, the court affirmed the lower court's judgment in all other respects, concluding that the error regarding punitive damages did not affect the jury's decision on the breach of contract and good faith claims. View "Goldenview Ready-Mix, LLC v. Grangaard Construction, Inc." on Justia Law