Justia Commercial Law Opinion Summaries

In this dispute, an Argentine construction company issued dollar-denominated convertible debt notes to two trusts as part of a capital-raising effort. The parties entered into an indenture agreement, later amended in December 2019, which authorized the company’s Board of Directors to convert the notes into equity if certain financial thresholds were met. Section 1301 of the indenture vested the Board with authority to determine if these conditions were satisfied, provided their determination was free from “manifest error.” In 2020, the Board concluded that the threshold for conversion had been reached, relying on the company’s increased net equity following the issuance of new preferred shares. The trusts disagreed, contending the Board’s calculation was manifestly erroneous and that the actual value of equity sold did not meet the $100 million threshold required by the indenture.The United States District Court for the Southern District of New York presided over a bench trial. The court dismissed the trusts’ claims regarding improper amendment and bad faith, focusing solely on the manifest error claim. After reviewing the evidence, the District Court concluded that the Board had manifestly erred by using metrics not contemplated by the indenture—specifically, shareholder equity changes and liquidation preferences—rather than the actual value of shares sold. The court found that the threshold for mandatory conversion had not been met, and GCDI breached the agreement by ceasing interest payments on the notes.The United States Court of Appeals for the Second Circuit reviewed the District Court’s factual findings for clear error and its legal conclusions de novo. The Second Circuit affirmed the District Court’s judgment, holding that the Board’s determination constituted a manifest error under New York law because it failed to value the equity sold as required by the indenture’s plain terms. The judgment awarding damages to the trusts was affirmed. View "Tennenbaum Living Tr. v. GCDI S.A." on Justia Law

A truck dealership and a manufacturer entered into a contract permitting the dealership to sell and service the manufacturer’s trucks in specified regions, with the manufacturer holding the right to appoint additional dealers in those regions at its sole discretion when it determined such appointments were warranted. The manufacturer appointed a new dealer within the dealership’s area, citing customer support needs and concerns about the dealership’s performance. Internal documents revealed the manufacturer had a plan to consolidate its dealer network for efficiency and improved sales, and had previously denied the dealership’s request to expand its franchise. Despite the appointment of the new dealer, the original dealership retained its nonexclusive right to sell trucks in its area.Prior to the current suit, the dealership protested before the Rhode Island Dealer Board, alleging statutory notice failures and bad faith denial of expansion, but the Board dismissed the protest as extraterritorial application of Rhode Island law. The dealership sought reversal in Rhode Island Superior Court, and the case was removed to the United States District Court for the District of Rhode Island, which granted summary judgment to the manufacturer. The United States Court of Appeals for the First Circuit affirmed summary judgment on certain claims and certified a question to the Rhode Island Supreme Court, which clarified statutory interpretation. Based on that, the First Circuit affirmed the district court’s summary judgment on the statutory-notice claim.Upon de novo review, the United States Court of Appeals for the First Circuit held that the manufacturer acted within its contractual discretion in appointing a new dealer, as the contract only required the manufacturer to have a reason related to its business objectives, not to market conditions. The court also held there was no breach of the implied covenant of good faith and fair dealing, as the manufacturer’s actions were consistent with the contract’s objectives. The court affirmed the district court’s grant of summary judgment in favor of the manufacturer. View "Rhode Island Truck Ctr., LLC v. Daimler Trucks North America, LLC" on Justia Law

A founder of a Delaware start-up, after personally paying a consultant for services due to lack of company funds, negotiated with the consultant to resolve claims for unpaid fees. The consultant agreed to accept a reduced cash payment and a warrant entitling her to purchase one percent of the company's common stock, with the percentage measured at the time of exercise. The founder, acting as CEO, executed this warrant, though he had not fully read the revised terms provided by the consultant’s lawyer. Later, when the consultant needed funds for a personal legal issue, the founder loaned her $20,000, secured by her only company warrant. The security agreement described the collateral as "a warrant to purchase Common Stock...for one million shares," even though the warrant was in fact for a percentage, not a fixed number of shares.When the loan matured and the consultant defaulted, the founder caused the warrant to be transferred into his name without the consultant’s notice, and later partially exercised it. Following a merger, the founder converted some of the resulting shares and retained the rest, selling them after a lock-up period for significant proceeds. The consultant disputed the validity of the transfer and exercise, arguing that the collateral description in the pledge agreement was insufficient and that the founder’s actions constituted conversion.The Court of Chancery of the State of Delaware held the warrant was valid and enforceable as a contract for one percent of the company’s stock at exercise, but found the collateral description insufficient under the Delaware UCC, ruling that no security interest attached and the founder’s actions constituted conversion, resulting in a large damages award.The Supreme Court of the State of Delaware affirmed that the warrant was valid and enforceable, but reversed the finding that no security interest attached. The Court held that, despite the inaccurate description of "one million shares," the security agreement reasonably identified the collateral because the consultant had only one such warrant, satisfying the UCC’s requirements. The matter was remanded for further proceedings. View "Patterson v. Cannon," on Justia Law

A commercial meat supplier delivered frozen meat products to a distributor over a series of transactions, each accompanied by an invoice. The distributor did not pay all of the invoices, claiming that some of the meat was spoiled, while the supplier insisted that the distributor simply failed to pay what was owed and invented the spoiled-meat justification later. The supplier sued for breach of contract and, alternatively, for quantum meruit (an equitable claim for the value of goods or services provided), seeking payment for the unpaid invoices. The distributor counterclaimed for breach of contract, alleging damages from the spoiled meat.At trial in a Texas district court, the jury was asked whether the distributor failed to comply with the agreements to pay for the meat and answered no. However, the jury found in favor of the supplier on its quantum meruit claim and awarded damages. The jury found that a reasonable attorney’s fee for the supplier’s attorneys was $0. The trial court entered judgment for the supplier on the quantum meruit claim and awarded the supplier its requested attorney’s fees, disregarding the jury’s finding. The Fourth Court of Appeals affirmed the trial court’s judgment on both quantum meruit and attorney’s fees.The Supreme Court of Texas concluded that the supplier’s provision of meat was covered by express agreements between the parties and, as a matter of law, quantum meruit recovery is barred when a valid contract governs the subject matter. Because the supplier was not entitled to recover in quantum meruit, it also could not recover attorney’s fees. The Supreme Court of Texas reversed the relevant portions of the court of appeals’ judgment and rendered a take-nothing judgment in favor of the distributor. View "CHAMPION FOOD SERVICE, INC. v. PROALAMO FOODS, L.L.C." on Justia Law

A major equity investor contributed $65 million to a joint venture formed to acquire and develop a luxury residential tower in New York City. The project was financed with significant loans, including a $325 million mezzanine loan from Apollo entities. After construction cost overruns put the mezzanine loan in default, Apollo and the joint venture entered a forbearance agreement splitting the loan and securing a portion with the joint venture’s equity. Apollo later assigned the junior mezzanine loan to Spruce Capital Partners, which then initiated a strict foreclosure under the Uniform Commercial Code. This process extinguished the joint venture’s equity—including the plaintiff’s investment—while allegedly allowing the project sponsor to retain a role and equity interest. The investor claimed that Apollo, Spruce, and the sponsor colluded to cut it out of the project’s value through assignment and foreclosure.The Supreme Court, New York County, dismissed the investor’s breach of implied covenant claim against Spruce but allowed the claim against Apollo to proceed, while dismissing tortious interference claims. The Appellate Division, First Department, reversed in part by dismissing the implied covenant claim against Apollo, holding that Apollo’s sole discretion to assign the loan foreclosed such a claim, and otherwise affirmed the dismissal of the tortious interference claims.The New York Court of Appeals held that a party’s sole discretion to assign a loan does not exempt it from the implied covenant of good faith and fair dealing. The Court concluded that the plaintiff sufficiently pleaded that Apollo may have exercised its assignment right as part of a bad faith scheme to deprive the investor of the benefit of its bargain, reviving the implied covenant claim against Apollo. The Court affirmed the dismissal of the tortious interference claims for insufficient pleading. The case was remitted to Supreme Court for further proceedings on the implied covenant claim. View "111 W. 57th Inv. LLC v 111 W57 Mezz Inv. LLC" on Justia Law

This case involves two individuals who guaranteed loans for their business by executing promissory notes and trust deeds, which conveyed several real properties as security to a bank. After the business defaulted on the loans and entered bankruptcy, the bank sold both the business and the individuals’ properties through judicial foreclosure and trustee sales. The bank subsequently sought a deficiency judgment against the guarantors for the remaining debt, asserting that they owed over $3 million, while the guarantors argued that they should receive credit for the fair market value of the properties sold, in accordance with Nebraska’s antideficiency statute.The District Court for Johnson County granted summary judgment to the bank, finding the guarantors liable under their guarantees without credit for the property values. The court relied on a waiver provision in the guarantees, which stated that the guarantors waived any defense based on the bank not obtaining the fair market value of the collateral. The court also denied the guarantors’ motion for reconsideration or new trial, prompting the guarantors to appeal.The Nebraska Supreme Court reviewed the case de novo. It held that the antideficiency statute, Neb. Rev. Stat. § 76-1013, applies not only to borrowers but also to guarantors when their obligation is secured by a trust deed and a trustee sale occurs. The court determined that the waiver provision in the guarantees was unenforceable as a matter of public policy, given the legislative mandate of § 76-1013. Furthermore, the court found that evidence such as assessed values and appraisals raised a genuine issue of material fact regarding the fair market value of the properties at the time of the trustee sales. The court reversed the district court’s grant of summary judgment and remanded for further proceedings. View "American Exch. Bank v. Topp" on Justia Law

An Ohio resident and an Illinois wine retailer challenged two Ohio laws regarding wine importation. The first law prohibits out-of-state retailers from shipping wine directly to Ohio consumers, while permitting in-state retailers to do so. The second law bars Ohio residents from personally bringing more than six bottles of wine purchased outside Ohio into the state within any thirty-day period, though it allows up to 288 bottles if purchased inside Ohio. The plaintiffs argued that both laws discriminate against out-of-state businesses and consumers, violating the Commerce Clause of the U.S. Constitution.The case was first heard in the United States District Court for the Southern District of Ohio. That court found the shipping restriction constitutional under the Twenty-first Amendment and concluded that the plaintiffs lacked standing to challenge the transportation limit. On appeal, the United States Court of Appeals for the Sixth Circuit reversed, clarifying that the appropriate test comes from Tennessee Wine & Spirits Retailers Association v. Thomas, and remanded for further proceedings. On remand, after additional discovery, the district court again granted summary judgment to the defendants, evaluating the restrictions as part of Ohio’s three-tier alcohol regulatory system and finding the restrictions justified.The United States Court of Appeals for the Sixth Circuit reviewed the case and held that the plaintiffs had standing. The court found that the challenged restrictions were not essential components of Ohio’s three-tier system and must be evaluated independently under the Tennessee Wine test. The court concluded that Ohio’s justifications for the restrictions—public health, safety, price control, and temperance—were speculative or undermined by evidence that Ohio allows similar activities by other out-of-state entities. The court held that both laws are unconstitutional because their predominant effect is economic protectionism, not the protection of public health or safety. The district court’s judgment was reversed and the case remanded for further proceedings consistent with this opinion. View "Block v. Canepa" on Justia Law

The case involves a dispute between a credit union and borrowers who defaulted on a retail installment contract for a vehicle. After the borrowers defaulted, the credit union repossessed and sold the vehicle, then sued the borrowers for the remaining balance. The borrowers responded with a counterclaim alleging that the credit union failed to provide proper notice before and after repossession and sale, in violation of the Uniform Commercial Code (UCC) Article 9 and the Retail Installment Sales Financing Act (RISFA). The borrowers sought statutory damages under both statutes and also moved to certify their counterclaim as a class action.The Superior Court, Judicial District of Waterbury, granted summary judgment to the credit union on the borrowers’ counterclaim, reasoning that both the UCC and RISFA claims were subject to the one-year statute of limitations for penal statutes found in Connecticut General Statutes § 52-585. The court found the claims time-barred because they were filed more than one year after the alleged violations. Based on this conclusion, the court also denied the borrowers’ motion for class certification.On appeal, the Supreme Court of Connecticut concluded that the trial court applied the wrong statute of limitations. The Supreme Court held that both the UCC Article 9 and RISFA provisions at issue are remedial, not penal, and are thus not governed by the one-year limitation for penal statutes. Instead, it determined that the three-year statute of limitations for tort actions under § 52-577 applies, because the borrowers’ counterclaims arose from statutory violations rather than breach of contract. The Supreme Court reversed the trial court’s summary judgment and remanded the case for further proceedings, instructing the lower court to apply the three-year limitation and reconsider class certification. View "Connex Credit Union v. Madgic" on Justia Law

A manufacturer of specialized products for road construction and a supplier had a longstanding business relationship, with the supplier relying heavily on the manufacturer’s goods for government paving projects. In 2021, the manufacturer faced supply chain disruptions and increased material costs due to the COVID-19 pandemic, leading to missed deliveries and eventually an ultimatum: the supplier must accept significant price increases on existing contracts or the business relationship would end. The supplier rejected the increases, deemed the manufacturer in breach, and procured substitute products from other vendors at prevailing market rates, which were significantly higher than the manufacturer’s proposed increased prices.The Iowa District Court for Cedar County held a bench trial, finding that contracts existed and were breached by the manufacturer when it refused to honor the original prices. The court awarded damages to both parties for breaches but offset the sums, ultimately finding the supplier’s cover purchases reasonable under the circumstances. Both parties appealed. The Iowa Court of Appeals affirmed the district court’s findings regarding contract formation, breach, and damages, including the reasonableness of the supplier’s cover purchases, but remanded for correction of prejudgment interest calculations.The Iowa Supreme Court reviewed only the question of whether the supplier’s procurement of substitute goods constituted reasonable “cover” under Iowa Code section 554.2712, given the manufacturer’s post-breach offer to fill the orders at a higher price. The court held that a buyer is not obligated to accept a breaching seller’s new terms to mitigate damages and that “cover” does not require dealing with the breaching seller. Substantial evidence supported the lower court’s finding that the supplier’s cover purchases were reasonable, even though they cost more than the manufacturer’s increased prices. The district court’s judgment was affirmed in relevant part, except regarding double prejudgment interest, which was remanded for correction. View "CMT Highway, LLC v. Logan Contractors Supply, Inc." on Justia Law

After Jet Midwest International Co., Ltd. made a $6.5 million loan to Jet Midwest Group, LLC (JMG) for the purchase of a Boeing 737-700, JMG defaulted on repayment. Jet Midwest sued for breach of contract, and when it could not collect on its judgment due to JMG’s lack of funds, Jet Midwest brought claims under the Missouri Fraudulent Transfer Act against several individuals and entities (the Ohadi/Woolley defendants), alleging the improper transfer of assets to avoid payment. Following a bench trial, Jet Midwest prevailed on its claims, and the district court awarded money damages, interest, and set a schedule for further motions on attorney’s fees and costs.Previously, the United States District Court for the Western District of Missouri awarded Jet Midwest over $6.5 million in attorney’s fees and costs. The United States Court of Appeals for the Eighth Circuit vacated this award, finding the district court had not properly performed a lodestar calculation for attorney’s fees and had not analyzed which costs were recoverable under federal law. On remand, Jet Midwest reduced its fee request but sought a multiplier; the district court ultimately awarded $5.8 million in attorney’s fees, granted prejudgment interest at 14 percent, and included expert witness fees and other litigation costs. Both sides appealed aspects of this award.The United States Court of Appeals for the Eighth Circuit held that the district court properly calculated and awarded $5.8 million in attorney’s fees but erred in awarding expert witness fees as part of attorney’s fees, as Jet Midwest failed to provide sufficient evidence that such fees were recoverable under the relevant standards. The Eighth Circuit also held that the district court erred in applying a 14 percent prejudgment interest rate and ordered that Missouri’s statutory rate of nine percent should apply. Additionally, the court clarified that, after August 6, 2020, the federal postjudgment interest rate under 28 U.S.C. § 1961(a) governs. The case was affirmed in part, reversed in part, and remanded for further proceedings consistent with these rulings. View "Jet Midwest International Co., Ltd v. Ohadi" on Justia Law