Justia Commercial Law Opinion Summaries

In 2005, the Harrises bought tens of thousands of shares in Bancorp through a TD Ameritrade account. Six years later, the Harrises sought to hold some of their Bancorp stock in another form, registered in their name and reflected in a physical copy of a certificate signifying their ownership. TD Ameritrade refused to convert the Harrises’ form of ownership, stating that all Bancorp stock was in a “global lock,” prohibiting activity in the stock, including changing the Harrises’ form of ownership. The lock was created because someone had fraudulently created hundreds of millions of invalid shares of Bancorp stock. The Harrises sued, alleging that TD Ameritrade had violated SEC Rule 15c3-3 and Nebraska’s version of the Uniform Commercial Code. The Sixth Circuit affirmed dismissal.. Neither the SEC Rule nor Nebraska’s Commercial Code creates a private right of action to vindicate the alleged problem. View "Harris v. TD Ameritrade, Inc." on Justia Law

Graco manufactures fast-set spray foam equipment (FSE) and sells it to distributors, who resell to consumers like Insulate. In 2005 and 2008 Graco purchased competing FSE manufacturers, ultimately raising its market share “to above 90%.” In 2007, Graco sent a letter to its distributors citing the “best efforts” clause in its distributor agreements, stating: It is our opinion that taking on an additional competitive product line may significantly reduce the “best efforts” of a Graco distributor.” In 2009, Foampak, a Graco distributor, considered carrying Gama products but chose not to after Graco threatened to end its distributorship. Graco sued Gama, alleging theft of trade secrets; Gama counterclaimed that Graco had unilaterally monopolized the FSE market (Sherman Act, 15 U.S.C. 2). In 2013, the FTC accused Graco of unlawfully acquiring its competitors (Clayton Act, 15 U.S.C. 18). Graco and the FTC entered a consent agreement which confirmed Graco would not engage in any practice “that has the purpose or effect of achieving Exclusivity with any Distributor.” The agreement did “not constitute an admission by [Graco] that the law ha[d] been violated.” Insulate filed suit. The Eighth Circuit affirmed dismissal on the pleadings. Insulate did not adequately plead concerted action in the existence of written anticompetitive contracts or implied exclusivity agreements. View "Insulate SB, Inc. v. Advanced Finishing Sys., Inc." on Justia Law

Grand Rios purchased a Brooklyn Park, Minnesota hotel and waterpark, assuming $4.61 million of the debt owed to Northeast Bank by the original owner, and purchased insurance from Hanover Insurance. The roof was damaged by a snowstorm. Sill was hired to handle the claim. Hanover issued checks totaling $350,000 made jointly payable to Grand Rios, Northeast, and Sill. Without Northeast’s endorsement, knowledge, or consent, Wells Fargo Bank paid the full amount of the checks to Grand Rios. Months later, Northeast and Grand Rios entered into a Settlement Agreement under which Grand Rios agreed to a voluntary foreclosure, assigned all insurance proceeds to Northeast, paid $50,000 to Northeast, and allowed a state court to appoint a receiver for the hotel and waterpark. Hanover made additional insurance payments of approximately $1.2 million. Ultimately Northeast received approximately $200,000 more than the debt Grand Rios owed and sold the property to CarMax. Northeast sued Hanover and Wells Fargo. The district court dismissed Hanover and granted summary judgment in favor of Northeast against Wells Fargo.. The Eighth Circuit reversed. While the payment constituted conversion under the UCC, Minn. Stat. 336.3-420, Northeast has not suffered any damages because it was subsequently paid the full amount of the debt for which the checks were security. View "Northeast Bank v. Wells Fargo Bank, N.A." on Justia Law

Best designs and markets exit signs and emergency lighting. Pace manufactured products to Best’s specifications. Best’s founder taught Pace how to manufacture the necessary tooling. There was no contract prohibiting Pace from competing with Best. By 2004, Best was aware that Pace was selling products identical to those it made for Best to Best’s established customers. Several other problems arose between the companies. When they ended the relationship, Pace was in possession of all of the tooling used to manufacture Best’s products and the cloned products, and Best owed Pace almost $900,000 for products delivered. Pace filed a breach of contract suit. Best requested a setoff of damages for breach of warranty and counterclaimed for breach of contract, tortious interference, misappropriation of trade secrets, conversion, and fraud. Pace claimed that Best had misappropriated Pace’s trade secrets and had tortiously interfered with Pace’s contracts. The district court found that Best had breached its contractual obligations by failing to pay, but that Pace was liable for breach of warranties, breach of contract, tortious interference, misappropriation of trade secrets, conversion, and false designation of origin and false advertising under the Lanham Act. The Sixth Circuit affirmed that Pace is liable for breach of contract and tortious interference, but reversed or vacated as to the trade secrets, Lanham Act, conversion, and warranties claims. View "Kehoe Component Sales Inc. v. Best Lighting Prods., Inc." on Justia Law

Stonebridge, an engraver of promotional pocket knives, sued its former distributor Cutting-Edge and its members; competitor knife engraver TaylorMade and its sole member and manager Taylor, a former Stonebridge employee; and Massey, a TaylorMade employee and former Stonebridge employee, arising from Massey’s copying Stonebridge’s computer files and using those files to solicit business from Stonebridge customers. Stonebridge brought claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968; the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101; and Arkansas common law. The district court partially found for Stonebridge on its fraud and conversion claims, dismissed the remaining eight claims, and denied the parties’ motions for attorney fees. The Eighth Circuit upheld: the finding that defendants converted the copies of certain files created by Stonebridge; an award of damages for unjust enrichment; a finding Stonebridge did not establish the existence of a business expectancy under Arkansas law; a finding Cutting-Edge fraudulently induced Stonebridge to send sample knives while intending to employ TaylorMade as its engraver on the orders placed as a result of seeing the samples; and dismissal of the RICO and ADTPA claims. View "Stonebridge Collection, Inc. v. Carmichael" on Justia Law

Carhart and Halaska own CHI. CHI terminated its sales agent, MRO, which filed a federal suit for breach of contract. Carhart bought MRO’s claim for $150,000 and became the plaintiff in a suit against a company of which he was a half owner. Halaska then sued Carhart in Wisconsin state court for breach of fiduciary duties to CHI and Halaska by becoming the plaintiff and by writing checks on CHI bank accounts without approval, depositing payments owed CHI into Carhart’s own account, and withholding accounting and other financial information from Halaska. A receiver was appointed, informed the federal court that CHI had no assets out of which to pay a lawyer, and consented to entry of a $242,000 default judgment (the amount sought by Carhart), giving Carhart a potential profit of $92,000 on his purchase of MRO’s claim. In Carhart’s suit to execute that judgment, CHI’s only asset was its Wisconsin suit against Carhart. The court ordered the sale of CHI’s lawsuit at public auction; Carhart, the only bidder, bought it for $10,000, ending all possibility that CHI could proceed against him for his alleged plundering of the company. The Seventh Circuit reversed. Auctioning off the lawsuit placed Carhart ahead of CHI’s other creditors. Carhart was not a purchaser in good faith. No valid interest is impaired by rescinding the sale, enabling CHI to prosecute its suit against Carhart. View "Carhart v. Carhart-Halaska Int'l, LLC" on Justia Law

Pharmacy benefit manager Medco is an intermediary between health plan sponsors (often employers) and prescription drug companies, enabling plans to offer less expensive prescription drug benefits to their members. Medco keeps an updated list of available medicines (formulary) available and sends that list to prescribers and to plan sponsors so they can keep costs down for members. Sandusky provides chiropractic services and prescribes medications to patients who are members of prescription drug plans contracted with Medco. Medco faxed part of its formulary to Sandusky in June 2010, asking Sandusky to “consider prescribing plan-preferred drugs” to “help lower medication costs. Other than listing Medco’s name and number, the fax did not promote Medco’s services and did not solicit business. Three months later, Medco sent Sandusky another fax that informed Sandusky that a certain respiratory drug brand was preferred over another brand, and could save patients money. Sandusky, on behalf of a proposed class, sued Medco, claiming that the faxes were “unsolicited advertisements” prohibited by the Telephone Consumer Protection Act, 47 U.S.C. 227(b)(1)(C). The Sixth Circuit affirmed summary judgment in favor of Medco, finding that the faxes were not advertisements as a matter of law because their primary purpose was informational rather than promotional. View "Sandusky Wellness Ctr., LLC v. Medco Health Solutions, Inc." on Justia Law

Luitpold is a New York corporation that develops and markets drugs and medical devices, including dental implant products. Geistlich, a Swiss corporation that develops and manufactures dental products, now owns the patents and trademarks for the Bio-Oss and Bio-Glide dental products, which are used to aid bone and tissue growth in patients following dental procedures. In 1994,, following failed attempts to market its products in the United States through other companies, Geistlich and Luitpold entered into interdependent commercial and license agreements to establish a distribution relationship for the sale of Geistlich’s dental products throughout the United States and Canada. The parties later entered into additional agreements and amendments. In 2010, Geistlich declared its intent to terminate the distribution relationship, without compensation to Luitpold, as of 2011. Geistlich did not allege breach of the agreements, but declared that the agreements had been in effect for a “reasonable” time and that under New York law, Geistlich could unilaterally terminate them upon reasonable notice. Luitpold sought declaratory relief, specific performance, damages, and prejudgment attachment of Geistlich patents and trademarks. The district court rejected all claims. The Second Circuit vacated and remanded, finding that material issues of fact precluded dismissal or summary judgment on certain claims. View "Luitpold Pharm., Inc. v. Ed. Geistlich Sohne A.G." on Justia Law

Iqbal bought a gasoline service station and contracted with S-Mart Petroleum for gasoline. Iqbal then hired Patel to conduct the business, ceding operational control to him. He chose Patel on the recommendation of Johnson, S-Mart’s president. Patel ran the business but did not pay for the gasoline, leading S-Mart to sue. The Indiana state court entered a judgment of more than $65,000 against Iqbal as guarantor. Under a settlement, Iqbal gave S-Mart a note, secured by a mortgage on the business premises. When he still did not pay, a state court entered a second judgment against him, and the property was sold in a foreclosure auction. Iqbal filed a federal suit, alleging that Patel and Johnson acted in cahoots to defraud him out of his business and seeking treble damages under 18 U.S.C. 1964, the Racketeer Influenced and Corrupt Organizations Act (RICO). The district court dismissed the complaint as barred by the Rooker-Feldman doctrine because it challenged the state court’s judgments. The Seventh Circuit reversed, reasoning that Iqbal seeks damages for activity that (he alleges) predated the state litigation and caused injury independently of it. View "Iqbal v. Patel" on Justia Law

Butler sells agricultural and construction equipment, primarily for Caterpillar. In 2002, Butler formed North Central to take over its leasing operations. The companies are ultimately controlled by the same family and share space. Butler performs North Central’s accounting and ordering functions and initially pays the wages of its employees. Caterpillar assigned separate dealer codes, but Butler used its code to order equipment for itself and North Central. Under North Central's like-kind-exchange (LKE) program, North Central sold its used equipment to third parties, who paid a qualified intermediary, Accruit, which forwarded proceeds to Butler; Butler purchased new Caterpillar equipment for North Central and transferred it to North Central via Accruit, charging the same amount that Butler paid for the equipment. Butler's LKE transactions facilitated favorable Caterpillar financing terms. Butler essentially received a six-month, interest-free loan from each exchange. From 2004-2007 North Central claimed nonrecognition treatment of gains from 398 LKE transactions under IRC 1031, so that the gain was not included in gross income at the time of actual sale or gain. The IRS declared that the transactions were not entitled to nonrecognition treatment, reasoning that North Central structured the transactions to avoid the related-party exchange restrictions of section 1031(f). The district court analyzed Butler's unfettered access to the cash proceeds and the relative complexity of the transactions and entered judgment in favor of the government. The Eighth Circuit affirmed. View "North Cent. Rental & Leasing, LLC v. United States" on Justia Law