Justia Commercial Law Opinion Summaries

Sleepyʹs purchased beds from the Select Comfort for resale in Sleepyʹs stores and suspected that Select Comfort was disparaging Sleepyʹs stores and the particular line of Select Comfort beds it sold. Sleepy’s sued, alleging slander per se, breach of contract, unfair competition, breach of the implied covenant of good faith and fair dealing, and the Lanham Act. After a bench trial, the district court dismissed. On remand, a different district judge entered a judgment for Select Comfort on the merits and concluded that attorneyʹs fees were warranted because the case was ʺexceptionalʺ under the Lanham Act. The Second Circuit vacated the dismissal of Sleepyʹs slander claims. That dismissal had been on the ground that the publication element cannot be met under New York law when the statement in question is only made to the plaintiffʹs representatives--”secret shoppers” sent into Select Comfort stores by Sleepy’s. The Second Circuit remanded for a determination of whether the plaintiff consented to the slanderous statements by engaging the secret shoppers. The district court was directed to apply the “Octane Fitness” standard for evaluating whether a Lanham Act claim is ʺexceptional.ʺ The district court erred by not sufficiently explaining or justifying the amount of the defendantsʹ attorneyʹs fees. View "Sleepy's LLC v. Select Comfort Wholesale Corp." on Justia Law

The Supreme Court vacated the judgment of the intermediate court of appeals (ICA) affirming the circuit court’s order and granting summary judgment for Defendant in this case arising out of the uncompleted sale of one business to another, holding that the plaintiff raised genuine issues of material fact as to its unfair method of competition (UMOC) claim.Specifically, the Court held (1) to raise an issue of material fact as to the nature of the competition requirement of a UMOC claim following the close of discovery, a plaintiff must demonstrate that the defendant’s alleged anticompetitive conduct could negatively affect competition, but the plaintiff need not prove that the defendant in fact harmed competition; (2) to survive summary judgment, a plaintiff may generally describe the relevant market without resort to expert testimony and need not be a competitor of or in competition with the defendant; and (3) the plaintiff in this case raised genuine issues of material fact as to the first and second elements of a UMOC claim, and the circuit court erred erred in holding that the plaintiff was estopped from asserting the UMOC claim based on waiver, judicial estoppel and collateral estoppel. View "Field v. National Collegiate Athletic Ass’n" on Justia Law

In 2007, OFTI sold a mill to TAK. During the financial crunch, Goldman Sachs cut $19 million from the financing. OFTI had promised clean title, but with the reduced financing, was unable to pay off all security interests. TAK agreed to issue negotiable notes, aggregating about $16 million, to OFTI, which would offer them as substitute security. The creditors accepted the notes. The transaction closed. OFTI promised to pay the notes. The lenders who released their security had the credit of both companies behind the notes. TAK was to hire an OFTI construction firm to build new mills; if TAK did not arrange for this construction and did not pay the notes, OFTI could cancel the notes and acquire a 27% interest in TAK. Neither paid the notes. The new mills did not materialize. OFTI demanded a 27% equity interest in TAK. Some formerly secured creditors have not been paid and retain promissory notes; OFTI does not possess any of the notes. The Seventh Circuit affirmed the denial of relief. A hold-harmless agreement effectively prevents OFTI from enforcing the notes against TAK; whatever TAK gave to OFTI would be returned in indemnification. The notes were designed as security for third parties, not as compensation for OFTI. Additionally, under Wisconsin’s UCC applicable to negotiable instruments, OFTI is not entitled to enforce the notes because it is not their holder, is not in possession of them, and is not entitled to enforce them under specified sections. If OFTI could use nonpayment as a reason to cancel the notes, they would be worthless to the creditors. View "Tissue Technology LLC v. TAK Investments LLC" on Justia Law

Connecticut imposed liability for breaches of contract when attended by deception. Unhappy with flanges purchased under a contract with PM Engineered Solutions, Inc. (“Powdered Metal”), Bosal Industries-Georgia, Inc. (“Bosal”) decided to switch suppliers and terminate the contract. After a five-day bench trial, the district court found that the termination was not only wrongful in breach of the contract, but that it was deceptive in violation of the Connecticut Unfair Trade Practices Act. Because Connecticut law applied and the district court’s findings rested on a permissible view of the evidence, the Sixth Circuit affirmed except as to the calculation of postjudgment interest on damages. View "Premium Freight Mgmt. v. PM Engineered Solutions" on Justia Law

JTE, distributed products for Bimbo around Chicago under an agreement with no fixed duration that could be terminated in the event of a non-curable or untimely-cured breach. New York law governed all disputes. According to JTE, Bimbo began fabricating curable breaches in 2008 in a scheme to force JTE out as its distributor and install a less-costly distributor. Bimbo employees filed false reports of poor service and out-of-stock products in JTE’s distribution area and would sometimes remove products from store shelves, photograph the empty shelves as “proof” of a breach, and then return the products to their shelves. Once, a distributor caught a Bimbo manager in the act of fabricating a photograph. Bimbo assured JTE that this would never happen again. In 2011, Bimbo unilaterally terminated JTE’s agreement, citing the fabricated breaches, and forced JTE to sell its rights to new distributors. JTE claims that it did not learn about the scheme until 2013-2014. The district court dismissed JTE’s suit for breach of contract and tortious interference. The Seventh Circuit affirmed. Under the primary-purpose test, the agreement qualifies as a contract for the sale of goods, governed by the UCC’s four-year statute of limitations, not by the 10-year period for other written contracts. With respect to tortious interference, the court reasoned that JTE knew about the shelving incidents and should not have “slumber[ed] on [its] rights” until it determined the exact way in which it was harmed. View "Heiman v. Bimbo Foods Bakeries Distribution Co." on Justia Law

Sabafon, a telephone company based wanted cards to provide prepaid minutes of phone use plus a game of chance. Both the number for phone time and the symbols representing prizes were to be covered by a scratch-off coating. Emirat promised to supply Sabafon with 25 million high-security scratch-off cards. Emirat contracted with High Point Printing, which, in turn, engaged WS to do the work. Emirat paid High Point about $700,000. Three batches of the cards tested as adequately secure, but the testing company indicated that, under some circumstances, the digits and game symbols could be seen on some cards in a fourth batch. Emirat rejected the whole print run. High Point was out of business. Emirat sued WS, arguing that its settlement agreement with WS, after an initial run of cards was not correctly shipped, subjects WS to Emirat's contract with High Point. The Seventh Circuit affirmed summary judgment for WS, noting that with a sufficiently high-tech approach, any security can be compromised, but no one will spend $1,000 to break the security of a card promising $50 worth of phone time. The contract is silent and does not promise any level of security, except through the possibility that usages of trade are read into every contract for scratch-off cards. Even if WS assumed High Point’s promises, neither promised any higher level of security than was provided. WS’s cards passed normal security tests repeatedly. View "Emirat AG v. WS Packaging Group, Inc." on Justia Law

In 2010, BRC and Continental entered into a five‐year agreement. Continental was to sell to BRC approximately 1.8 million pounds of prime carbon black, annually, in approximately equal monthly quantities, with baseline prices for three grades, including N762, “to remain firm throughout the term.” Continental could meet any better offers that BRC received. Shipments continued regularly until March 2011, when demand began to exceed Continental’s production ability. Continental notified its buyers that N762 would be unavailable in May. BRC nonetheless placed an order. The parties dispute the nature of subsequent communications. Continental neither confirmed BRC’s order nor shipped N762. BRC demanded immediate shipment. Continental responded that it did “not have N762 available.” BRC purchased some N762 from another supplier at a higher price. Days later, Continental offered to ship N762 at price increases, which BRC refused to pay. After discussions, Continental sent an email stating that Continental would continue "shipping timely at the contract prices, and would not cut off supply” and would “ship one car next week.” Continental emphasized that the Agreement required it to supply about 150,000 pounds per month and that it already had shipped approximately 300,000 pounds per month. Continental shipped one railcar. Within a week, Continental emailed BRC seeking to increase the baseline prices and to accelerate payment terms.BRC sued, seeking its costs in purchasing from another supplier following Continental’s alleged repudiation. The Seventh Circuit rejected the characterization of the agreement as a requirements contract. On remand, BRC, without amending its complaint, pursued the alternative theory that the agreement is for a fixed-amount supply. The Seventh Circuit reversed summary judgment and remanded, finding the agreement, supported by mutuality and consideration, enforceable. The agreement imposed sufficiently definite obligations on both parties and was not an unenforceable "buyer's option." BRC can proceed in characterizing the contract as for a fixed amount. BRC altered only its legal characterization; its factual theory remained constant and Continental is not prejudiced by the change. View "BRC Rubber & Plastics, Inc. v. Continental Carbon Co." on Justia Law

The Amex credit card companies use a two-sided transaction platform to serve cardholders and merchants. Unlike traditional markets, two-sided platforms exhibit “indirect network effects,” because the value of the platform to one group depends on how many members of another group participate. Two-sided platforms must take these effects into account before making a change in price on either side, or they risk creating a feedback loop of declining demand. Visa and MasterCard have structural advantages over Amex. Amex focuses on cardholder spending rather than cardholder lending. To encourage cardholder spending, Amex provides better rewards than the other credit-card companies. Amex continually invests in its cardholder rewards program and must charge merchants higher fees than its rivals. To avoid higher fees, merchants sometimes attempt to dissuade cardholders from using Amex cards (steering). Amex places anti-steering provisions in its contracts with merchants.The Supreme Court affirmed the Second Circuit in rejecting claims that Amex violated section 1 of the Sherman Antitrust Act, which prohibits "unreasonable restraints” of trade. Applying the "rule of reason" three-step burden-shifting framework, the Court concluded the plaintiffs did not establish that Amex’s anti-steering provisions have a substantial anticompetitive effect that harms consumers in the relevant market. Evidence of a price increase on one side of a two-sided transaction platform cannot, by itself, demonstrate an anticompetitive exercise of market power; plaintiffs must prove that Amex’s anti-steering provisions increased the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition. They offered no evidence that the price of credit-card transactions was higher than the price one would expect in a competitive market. Amex’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price. The Court noted that Visa and MasterCard’s merchant fees have continued to increase, even where Amex is not accepted. The market actually experienced expanding output and improved quality. View "Ohio v. American Express Co." on Justia Law

Many states tax the retail sales of goods and services in the state. Sellers are required to collect and remit the tax; if they do not in-state consumers are responsible for paying a use tax at the same rate. Under earlier Supreme Court decisions, states could not require a business that had no physical presence in the state to collect its sales tax. Consumer compliance rates are low; it is estimated that South Dakota lost $48-$58 million annually. South Dakota enacted a law requiring out-of-state sellers to collect and remit sales tax, covering only sellers that annually deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions for the delivery of goods or services into the state. State courts found the Act unconstitutional. The Supreme Court vacated, overruling the physical presence rule established by its decisions in Quill (1992), and National Bellas Hess (1967). That rule gave out-of-state sellers an advantage and each year becomes further removed from economic reality and results in significant revenue losses to the states. A business need not have a physical presence in a state to satisfy the demands of due process. The Commerce Clause requires “a sensitive, case-by-case analysis of purposes and effects,” to protect against any undue burden on interstate commerce, taking into consideration the small businesses, startups, or others who engage in commerce across state lines. Without the physical presence test, the first inquiry is whether the tax applies to an activity with a substantial nexus with the taxing state. Here, the nexus is sufficient. Any remaining Commerce Clause concerns may be addressed on remand. View "South Dakota v. Wayfair, Inc." on Justia Law

In 2003, Pain Center contracted with SSIMED for medical-billing software and related services. In 2006, the parties entered into another contract, for records-management software and related services. In 2013, Pain Center sued SSIMED for breach of contract, breach of warranty, breach of the implied duty of good faith, and four tort claims, all arising out of alleged shortcomings in SSIMED’s software and services. The district judge found the entire suit untimely. The Seventh Circuit affirmed on all but the claims for breach of contract. The judge applied the four-year statute of limitations under Indiana’s Uniform Commercial Code (UCC), holding that the two agreements are mixed contracts for goods and services, but the goods (i.e., the software) predominate. The Seventh Circuit disagreed. Under Indiana’s “predominant thrust” test for mixed contracts, the agreements in question fall on the “services” side of the line, so the UCC does not apply. The breach-of-contract claims are subject to Indiana’s 10-year statute of limitations for written contracts and are timely. Pain Center licensed SSIMED’s preexisting, standardized software but received monthly billing and IT services for the life of both contracts. View "Pain Center of SE Indiana, LLC v. Origin Healthcare Solutions LLC" on Justia Law