Justia Commercial Law Opinion Summaries

Corporate citizens of Delaware, Nebraska, and Illinois, sued Americold, a “real estate investment trust” organized under Maryland law, in a Kansas court. Americold removed the suit based on diversity jurisdiction, 28 U.S.C. 1332(a)(1), 1441(b). The federal court accepted jurisdiction and ruled in Americold’s favor. The Tenth Circuit held that the district court lacked jurisdiction. The Supreme Court affirmed. For purposes of diversity jurisdiction, Americold’s citizenship is based on the citizenship of its members, which include its shareholders. Historically, the relevant citizens for jurisdictional purposes in a suit involving a “mere legal entity” were that entity’s “members,” or the “real persons who come into court” in the entity’s name. Except for that limited exception of jurisdictional citizenship for corporations, diversity jurisdiction in a suit by or against the entity depends on the citizenship of all its members, including shareholders. The Court rejected an argument that anything called a “trust” possesses the citizenship of its trustees alone; Americold confused the traditional trust with the variety of unincorporated entities that many states have given the “trust” label. Under Maryland law, the real estate investment trust at issue is treated as a “separate legal entity” that can sue or be sued. View "Americold Realty Trust v. ConAgra Foods, Inc." on Justia Law

Continental sells carbon black, a material used in rubber products. BRC makes rubber products for the automotive industry. The companies entered into a contract that stated: It is the intent of this agreement that Continental agrees to sell to BRC approximately 1.8 million pounds of carbon black annually. In 2010, Continental shipped 2.6 million pounds to BRC. In 2011, for various reasons, Continental was struggling to keep up with the total demand from all its customers. When Continental refused to confirm or ship some of BRC’s orders, BRC sued, alleging that Continental had breached and repudiated the contract. The district court entered judgment for BRC, finding that as a matter of law that the agreement was a “requirements contract,” meaning it obligated Continental to sell as much carbon black as BRC needed, and obligated BRC to buy all its carbon black exclusively from Continental. The Seventh Circuit vacated and remanded, finding that the agreement did not obligate BRC to buy any—much less all— of its carbon black from Continental. View "BRC Rubber & Plastics, Inc. v. Cont'l Carbon Co." on Justia Law

Exel, a shipping broker, sued SRT, an interstate motor carrier, after SRT lost a shipment of pharmaceutical products it had agreed to transport for Exel on behalf of Exel’s client, Sandoz. On summary judgment, the district court awarded Exel the replacement value of the lost goods pursuant to the transportation contract between Exel and SRT, rejecting SRT’s argument that its liability was limited under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. 14706. The Sixth Circuit reversed. Whether SRT had limited its liability was a question of fact for a jury. To limit its liability under the Carmack Amendment, a carrier must: provide the shipper with a fair opportunity to choose between two or more levels of liability obtain the shipper’s written agreement as to its choice of liability; and issue a receipt or bill of lading prior to moving the shipment. SRT did not meet its burden on summary judgment of establishing that it provided Sandoz with the opportunity to choose between two or more levels of liability. SRT did not explain what “classification or tariff . . . govern[ed]” the shipment, nor indicate whether it made this information available to Sandoz. View "Exel, Inc. v. S. Refrigerated Transp., Inc." on Justia Law

The manufacturer sells telecommunications equipment to telephone companies, which pay for the equipment, written instructions on using the equipment, a copy of the computer software that makes the equipment work, and the right to copy that software onto the equipment’s hard drive and use the software to operate the equipment. An almost identical transaction was previously found to satisfy the requirements of California’s technology transfer agreement statutes (Rev. & Tax. Code 6011(c)(10) & 6012(c)(10)), so that the manufacturer was responsible for paying sales taxes only on tangible portions of the transaction (equipment and instructions), but not the intangible portions (software and rights to copy and use it). The State Board of Equalization nonetheless assessed a sales tax. The manufacturer paid the taxes and sought a refund. The court of appeal held that the Board’s assessment of the sales tax was erroneous. The manufacturer’s decision to give the telephone companies copies of the software on magnetic tapes and compact discs (rather than over the Internet) does not turn the software or the rights to use it into “tangible personal property” subject to the sales tax. View "Lucent Techs., Inc. v. State Bd. of Equalization" on Justia Law

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