Justia Commercial Law Opinion Summaries

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

Licensees entered into a licensing agreement with Safeblood Tech for the exclusive rights to market patented technology overseas. After learning that they could not register the patents in other countries, Licensees sued Safeblood for breach of contract and sued Safeblood, its officers, and patent inventor for fraud, constructive fraud, and violations of the Arkansas Deceptive Trade Practices Act (ADTPA), Ark. Code 4-88-101 to -115. The district court dismissed the fraud claims at summary judgment. The remaining claims proceeded to trial and a jury found for Licensees, awarding them $786,000 in contract damages and no damages for violations of the ADTPA. The district court awarded Licensees $144,150.40 in prejudgment interest. The Eighth Circuit reversed as to the common-law fraud claim and the award of prejudgment interest, but otherwise affirmed. Licensees produced sufficient evidence that the inventor made a false statement of fact; the district court did not abuse its discretion when it gave the jury a diminution-in-product-value instruction; and Licensees waived their inconsistent-verdict argument. View "Yazdianpour v. Safeblood Techs., Inc." on Justia Law

Select Comfort manufactures and sells Sleep Number bedding, which has inflatable air chambers that adjust to vary mattress firmness; it sells those beds through its own retail stores. In 2005, Sleepy’s, a bedding retailer, and Select executed an agreement making Sleepy’s a Sleep Number authorized retailer only for Select’s “Personal Preference” line. Sales were disappointing. In response to reports that Select salespeople were disparaging Sleepy’s and its Personal Preference line, Sleepy’s began conducting “secret shops.” Sleepy’s contends its undercover shopping revealed a pattern of disparagement. In 2007, Sleepy’s confronted Select; the parties executed a Wind-Up Agreement. Sleepy’s sued, alleging that Select breached the agreement by failing to provide “first quality merchandise,” and by violating a non-disparagement clause. Sleepy’s also asserted fraudulent inducement, slander per se, breach of the implied covenant of good faith and fair dealing, unfair competition, and violation of the Lanham Act. The district court granted judgment for Select, finding that the contract had expired on September 30, 2006 and that Sleepy’s had consented to the allegedly slanderous statements. The Second Circuit vacated, except with respect to the “first quality merchandise” claim. The court erred in treating “expiration” and “termination” as interchangeable terms referring to the end of the contract term. View "SleepyÂ’s, LLC v. Select Comfort Wholesale Corp." on Justia Law

In 2008 Motorola agreed to make a good-faith effort to purchase two percent of its cell-phone user-manual needs from Druckzentrum, a printer based in Germany. After a year, Motorola’s sales contracted sharply. Motorola consolidated its cell-phone manufacturing and distribution operations in China, buying all related print products there. Motorola notified Druckzentrum. The companies continued to do business for a few months. After losing Motorola’s business Druckzentrum entered bankruptcy and sued Motorola, alleging breach of contract and fraud in the inducement. Druckzentrum claimed that the contract gave it an exclusive right to all of Motorola’s user-manual printing business for cell phones sold in Europe, the Middle East, and Asia during the contract period. The district judge entered summary judgment for Motorola. The Seventh Circuit affirmed. The written contract contained no promise of an exclusive right and was fully integrated, so Druckzentrum cannot use parol evidence of prior understandings. Although Motorola promised to make a good-faith effort, the contract listed reasons Motorola might justifiably miss the target, including business downturns. There was no evidence of bad faith. The evidence was insufficient to create a jury issue on the claim that Motorola fraudulently induced Druckzentrum to enter into or continue the contract. View "Druckzentrum Harry Jung GmbH v. Motorola Mobility LLC" on Justia Law

SEB distributes household products under several brand names, including electric steam irons sold under the Rowenta brand name. Euro-Pro distributes household appliances under the Shark brand name. The Shark packaging states: “MORE POWERFUL STEAM vs. Rowenta®†† at half the price.” The “††”refers to a fine-print footnote on the package’s bottom, stating that the claim is “††[b]ased on independent comparative steam burst testing to Rowenta DW5080 (grams/shot).” The packaging also asserts “#1 MOST POWERFUL STEAM*” with a fine-print reference on the bottom stating it “*[o]ffers more grams per minute (maximum steam setting while bursting before water spots appear) when compared to leading competition in the same price range, at time of printing.” SEB directed its internal laboratory to conduct tests, which showed that the Rowenta performed the same as the Shark. SEB commissioned an independent laboratory to conduct tests, which showed that the Rowenta outperformed the Shark. SEB claimed false advertising under the Lanham Act, 15 U.S.C. 1125(a), and unfair competition under Pennsylvania common law. The Third Circuit affirmed entry of an injunction, agreeing that the packaging’s definition of a claim term applies to the claim’s explicit message and that the court properly disregarded consumer survey evidence offering alternative meanings. View "Groupe SEB USA Inc v. Euro Pro Operating, LLC" on Justia Law

In 2004, Paint Rock Turn, LLC purchased a sod farm and related farm equipment. To partially finance the purchase, Paint Rock borrowed $1,706,250 from First Jackson Bank. The loan was secured by a mortgage on the sod farm and a security interest in the equipment used on the farm. By February 2009, reflecting in part a drop in demand for sod caused by the collapsing market for new homes, Paint Rock had defaulted on the loan. In early 2009, Paint Rock filed a Chapter 11 bankruptcy petition. The filing of the petition operated as an automatic stay and precluded First Jackson from foreclosing on the sod farm or retaking the equipment. The bankruptcy petition was dismissed later that year, and a few months later, First Jackson moved forward with its intent to foreclose by publishing the first of three notices of a foreclosure sale on the Paint Rock property. On the morning of the scheduled sale, Paint Rock filed a second bankruptcy petition, which stayed the sale. This second petition was dismissed a month later for failure to file the proper schedules and statements. First Jackson published another notice that the foreclosure sale was rescheduled for December 30, 2009. December 26, Paint Rock filed a third bankruptcy petition. Four days later, the bankruptcy court lifted the automatic stay, expressly finding that Paint Rock misused the bankruptcy process to "hinder and delay First Jackson's efforts to foreclose its mortgage and security agreement." First Jackson was the high bidder at the sale, purchased the property, and sent Paint Rock a letter demanding possession of the sod farm. In early 2010, First Jackson filed an ejectment action. The same day, Paint Rock demanded access to the farm to recover "emblements in the form of sod which is being grown on the real property recently foreclosed upon ...." Paint Rock also requested the return of its equipment. First Jackson denied Paint Rock's request. Paint Rock, relying on a section of the Alabama Code that permits a tenant at will to harvest its crop, counterclaimed for damages for harm suffered as the result of being unable to harvest the sod. Paint Rock also sought damages for conversion of "plats of sod" contained on the sod farm. First Jackson sold the sod farm to Mrs. Goodson, subject to any claim Paint Rock may have to the emblements growing on the property. Paint Rock filed a joint third-party complaint against First Jackson and Mr. and Mrs. Goodson, alleging conversion and detinue, as well as the emblements claim. After the trial court denied motions for a summary judgment filed by First Jackson and the Goodsons, the case proceeded to trial. At the close of Paint Rock and Jones's case, the trial court granted a motion for a JML filed by First Jackson and the Goodsons on Paint Rock's counterclaim for emblements on the ground that Paint Rock was not an at-will tenant. After Paint Rock withdrew its detinue claims and the trial court granted a JML on the wantonness claims, leaving only the conversion and negligence claims. The jury awarded Paint Rock damages against First Jackson for conversion of a sod cutter and cut sod that had been loaded on a tractor-trailer when First Jackson took possession of the property. The jury also awarded Paint Rock damages against the Goodsons for conversion of business property and equipment. Paint Rock appealed the JML in favor of the defendants on the emblements claim; First Jackson cross-appealed the judgment awarding Paint Rock damages for conversion of the cut sod. The Supreme Court affirmed with regard to Paint Rock's emblements claim, but reversed on the conversion of the cut sod claim. View "Paint Rock Turf, LLC v. First Jackson Bank et al. " on Justia Law

In 1999 Seltzer registered the word “Kashwére” as a trademark for chenille soft goods. In 2009, Seltzer sold his company’s assets, including the trademark, to its principal officers. They formed TMG, which granted Seltzer an exclusive license to sell chenille products under the Kashwére name in Japan, through Flat Be. TMG claims that Seltzer violated his license by creating USAJPN and transferring to it all rights conferred by his license, to create an appearance of distance between Seltzer and Flat Be. Although Seltzer owned a majority interest in USAJPN, he needed TMG’s approval for the transfer. Flat Be also created a line of fabrics, “Kashwére Re,’ that are not chenille. Seltzer’s license does not authorize use of the Kashwére name for products that are not chenille, but he claimed that a TMG owner approved the Kashwére Re project. USAJPN also failed to comply with a requirement to disclose the TMG licensee. The district judge denied TMG’s request to order the license cancelled or to enjoin future violations and award damages. The Seventh Circuit upheld summary judgment in favor of TMG on Seltzer’s and Flat Be’s counterclaims, but reversed summary judgment in favor of Seltzer and Flat Be on TMG’s claims. View "Kashwere, LLC v. Kashwere USAJPN, LLC" on Justia Law

The dispute pending before the United States Court of Appeals for the Second Circuit centered on the effect of a UCC termination statement – a “UCC-3 termination statement” – filed with the Delaware Secretary of State on behalf of General Motors Corporation. That termination statement, by its plain terms, purported to extinguish a security interest on the assets of General Motors held by a syndicate of lenders, including JPMorgan Chase Bank, N.A. But neither JPMorgan nor General Motors subjectively intended to terminate the term loan security interest when General Motors filed the termination statement. General Motors’ counsel for a separate “synthetic lease” financing transaction, Mayer Brown LLP, had inadvertently included the term loan security interest on the termination statement that it filed in the process of unwinding the synthetic lease. According to JPMorgan, no one at General Motors, Mayer Brown, or Simpson Thatcher Bartlett LLP (JPMorgan’s counsel for the synthetic lease transaction) noticed this error, even though individuals at each organization reviewed the filing statement before the termination statement was filed. After General Motors filed for reorganization under Chapter 11 of the Bankruptcy Code, JPMorgan informed the unofficial committee of unsecured creditors that a UCC-3 termination statement relating to the term loan had been inadvertently filed. The Creditors Committee commenced a proceeding against JPMorgan in the United States Bankruptcy Court for the Southern District of New York seeking, among other things, a determination that the filing of the UCC-3 termination statement was effective to terminate the term loan security interest and thus render JPMorgan an unsecured creditor on par with the other General Motors unsecured creditors. JPMorgan contested that argument, asserting that it had not authorized the termination statement releasing the term loan security interest, and that the statement was erroneously filed because no one at General Motors, JPMorgan, or the law firms working on the synthetic lease transaction recognized that the unrelated term loan security interest had been included on the statement. On cross-motions for summary judgment, the Bankruptcy Court found for JPMorgan on various grounds, including that JPMorgan had not empowered Mayer Brown to act as its agent in releasing the term loan security interest in the sense that it had only authorized Mayer Brown to file an accurate termination statement that released security interests properly related to the synthetic lease transaction. The Second Circuit certified a question of Delaware law to the Supreme Court in order to resolve the appeal of this case before it: "Under UCC Article 9(as adopted into Delaware law by Del. Code Ann. tit. 6, art. 9), for a UCC-3 termination statement to effectively extinguish the perfected nature of a UCC-1 financing statement, is it enough that the secured lender review and knowingly approve for filing a UCC-3 purporting to extinguish the perfected security interest, or must the secured lender intend to terminate the particular security interest that is listed on the UCC-3?" The Delaware Supreme Court answered under the assumption that the term "effectively extinguish" as used by the Second Circuit centered on whether reviewing the termination statement and knowingly approving it for filing had the effect specified in section 9-513 of the Delaware’s version of the Uniform Commercial Code (UCC), which is that “the financing statement to which the termination statement relates ceases to be effective." On that assumption, the Delaware Court answered that "the unambiguous provisions of Delaware’s UCC dictate that the answer is that 'it [is] enough that the secured lender review and knowingly approve for filing a UCC-3 purporting to extinguish the perfected security interest.'" Under the Delaware UCC, parties in commerce are entitled to rely upon a filing authorized by a secured lender and assume that the secured lender intends the plain consequences of its filing. View "Official Committee of Unsecured Creditors of Motors Liquidation Co. v. JP Morgan Chase Bank" on Justia Law

Gerdau leased a locomotive from Titan for use in switching at its Knoxville mill. Titan shipped the locomotive in 2008, but it was damaged in transit and sent for repair. It did not reach Gerdau’s plant until 2009. Gerdau rejected it, stating that it needed further repairs. While the locomotive was being repaired, Titan assigned the lease to Leasing, an affiliated business, which then used the lease as security for a loan from Wells Fargo. The loan is nonrecourse: Wells Fargo agreed to look for repayment exclusively from the stream of rentals expected from Gerdau. Leasing made several warranties. Gerdau has never made a payment on the lease. Wells Fargo has taken control of the locomotive and is attempting to sell it. The district court granted summary judgment against Wells Fargo, ruling that Leasing had kept its promises. The court looked to the lease, and then to the Uniform Commercial Code, to see whether the locomotive had been “accepted” when the lease was assigned. Gerdau had an opportunity and the lease required Gerdau to inspect before shipment. The Seventh Circuit reversed. Gerdau did not acknowledge the locomotive’s receipt; Leasing did not live up to its warranties. It must repay Wells Fargo. Titan must perform the guarantees. View "Wells Fargo Equip. Fin., Inc. v. Titan Leasing Inc." on Justia Law

Burzlaff bought a “Stallion” motorized tricycle from Thoroughbred Motorsports in 2009 for $35,000. When Burzlaff reported the first problems to Thoroughbred, the company instructed him to take his vehicle to a Ford dealer for warranty repairs. Burzlaff did so repeatedly. After the vehicle had been out of service for repairs for 71 days during the first year, Burzlaff demanded, under the Wisconsin Lemon Law, that Thoroughbred replace the vehicle or refund his purchase price. Thoroughbred refused. Further efforts to repair the vehicle at the Thoroughbred factory in Texas failed to correct the defects. Burzlaff sued Thoroughbred under the federal Magnuson-Moss Warranty Act, 15 U.S.C. 2301, and the Wisconsin Lemon Law, Wis. Stat. 218.0171. The district court awarded double damages plus costs and attorney fees for a total judgment of $95,000 under the more generous provisions of the state law. The Seventh Circuit affirmed, rejecting challenges to the jury instructions on the Lemon Law claim, the sufficiency of the evidence on that claim, and the submission of the Magnuson-Moss claim to the jury. View "Burzlaff v. Thoroughbred Motorsports Inc." on Justia Law