Justia Commercial Law Opinion Summaries

In 2006 a coal-mining company borrowed $7 million from Caterpillar secured by mining equipment. The company was also indebted to Peabody, for an earlier loan, and at Peabody’s request, transferred title to the same equipment, subject to Caterpillar’s security interest, to a Peabody affiliate. In 2008, Peoples Bank lent the mining company $1.8 million secured by the same equipment and filed a financing statement. Wanting priority, the bank negotiated a subordination agreement with Peabody. After the mining company defaulted, the bank obtained possession of the assets and told Caterpillar it would try to sell them for $2.5 million. Caterpillar did not object, but claimed that its security interest was senior. The bank sold the equipment for $2.5 million but retained $1.4 million and sent a check for $1.1 million to Caterpillar. Caterpillar neither cashed nor returned the check. The district court awarded Caterpillar $2.4 million plus prejudgment interest. The Seventh Circuit affirmed. The bank’s claim of priority derives from its dealings with Peabody. The bank did not obtain a copy of a security agreement for Peabody’s loan; a security interest is not enforceable unless the debtor has authenticated a security agreement that provides a description of the collateral. View "Caterpillar Fin. Servs. v. Peoples Nat'l Bank" on Justia Law

For approximately a decade, Global NAPs, Inc. (GNAPs) had been engaged in litigation with Verizon New England, Inc. The dispute arose over access fees the companies owed each other. Verizon prevailed in the dispute in 2009, but the district court as of the date of this appeal was still overseeing a receivership sale to satisfy the judgment against GNAPs. In 2011, the district court entered a sale order authorizing the sale of assets to Quality Speaks, LLC. In 2012, the district court entered an order imposing an injunction against GNAPs' former principal, Frank Gangi, prohibiting Gangi from taking any action to interfere with the ability of the receiver to transfer purchased assets in connection with the sale, or to reduce the value of the purchased assets. Gangi appealed. The First Circuit Court of Appeals affirmed, holding that the injunction was plainly justified under longstanding equity principles. View "Global Naps, Inc. v. Verizon New England, Inc." on Justia Law

OCV supplies equipment and licenses software for in-room hotel entertainment and sought a judgment of $641,959.54 against Roti, the owner of companies (Markwell, now defunct) that owned hotels to which OCV provided services. The district judge granted summary judgment, piercing the corporate veil, but rejecting a fraud claim. The Seventh Circuit reversed. While the Markwell companies were under-funded, OCV failed to treat the companies as separate businesses and proceed accordingly in the bankruptcy proceedings of one of the companies and made no effort to determine the solvency of the companies. View "On Command Video Corp. v. Roti" on Justia Law

Since 2003, Cummins and TAS have been engaged in three separate actions regarding idle-control technologies for heavy-duty truck engines. Earlier suits concerned breach of a master license agreement between the parties. In a 2009 action, Cummins sought a declaratory judgment that claims of TAS’s 703 and 469 patents are invalid and unenforceable. The district court found that the suit was barred by the doctrine of res judicata in light of a decision in an earlier claim. The Federal Circuit affirmed. Cummins could have pursued claims regarding invalidity and unenforceability of the TAS patents in prior litigation, which featured the same parties, arose from the same group of operative facts, and resulted in a final resolution on the merits so that res judicata bars Cummins’ defenses under 35 U.S.C. 102 and 103. View "Cummins, Inc. v. TAS Distrib. Co., Inc." on Justia Law

Michigan promotes recycling of beverage containers by offering a cash refund of a 10-cent deposit to consumers and distributors. Retailers are required to accept empty containers of beverages that they sell. The Bottle Bill requires containers to indicate the state and the refund value as “MI 10ç” on each container. To address under-redemption, Michigan mandated that unclaimed deposits escheat to the state. A 1998 study estimated that fraudulent redemption of containers originating outside Michigan resulted in annual loss of $15.6 to $30 million. Michigan criminalized fraudulent redemption and, in 2008, required that, in addition to the MI 10ç designation, containers for certain beverages bear a “symbol, mark, or other distinguishing characteristic” to allow a reverse vending machine to determine whether a container is returnable. An industry association claimed violation of the Commerce Clause. The district court granted defendants summary judgment, finding that Mich. Comp. Laws 445.572a(10) is neither discriminatory nor extraterritorial and that a question of material fact existed on the extent of the burden on interstate commerce. The Sixth Circuit affirmed in part, finding that the unique mark requirement is not discriminatory. However, because that requirement forces distributors to adopt the unique labeling system, without consideration of less burdensome alternatives, it has impermissible extraterritorial effect. View "Am. Beverage Ass'n v. Snyder" on Justia Law

House of Flavors purchased equipment from Tetra and executed an agreement with Tetra to fund its installation. Under the agreement, Tetra paid for the installation, House of Flavors then transferred ownership of the installed system to Tetra, and Tetra leased the system back to House of Flavors. After House of Flavors began monthly lease payments, it sought to exercise the buy back option a year early. Notwithstanding the twelve percent estimate it quoted earlier, Tetra quoted a purchase price around forty percent of the equipment and installation costs. House of Flavors filed suit in federal district court, where it prevailed on its claims. The First Circuit Court of Appeals affirmed but remanded the case to reconsider the balance due between the parties. On remand, the judge recalculated the balance due and determined that, rather than owing House of Flavors, Tetra was in fact due $156,399. The First Circuit dismissed House of Flavors' appeal, holding (1) the attack on the recalculated figure was foreclosed by a jurisdictional objection, as the appeal was untimely; and (2) the appeal was jurisdictionally timely as to the district court's refusal to award attorneys' fees under a Utah statute, but the denial of attorneys' fees was affirmed. View "House of Flavors, Inc. v. TFG-Michigan, L.P." on Justia Law

Plaintiffs are wholesalers of beer and wine; each acted as the exclusive distributor of Miller and/or Coors brands within a defined territory under written franchise agreements. In 2007, Miller and Coors entered a Joint Venture agreement, contemplating creation of MillerCoors, restructured their respective businesses and assets, and assigned distribution agreements to the Joint Venture. MillerCoors notified the plaintiffs that it intended to terminate their distribution rights as a successor manufacturer under Ohio Rev. Code 1333.85(D). The district court found that MillerCoors is not a “successor manufacturer” under Ohio law because it is controlled by Miller and Coors, and that the Act, therefore, prohibits MillerCoors from terminating the distributorships. The Sixth Circuit affirmed. Miller and Coors exercise control over MillerCoors through their equal voting power, veto power, the appointment of directors, all of whom are present officers or employees of the joint venture partners, and who owe their fiduciary duty only to Miller or Coors, their influence over the executive team, and their funding of MillerCoors. Even under the manufacturers’ proposed definition of “control,” the evidence shows that Miller and Coors together retain the power to “direct, superintend, restrict, govern, [and] oversee” MillerCoors. View "Beverage Distrib., Inc. v. Miller Brewing Co." on Justia Law

The Scotts Company, an Ohio LLC, brought a diversity action against Seeds, Inc., a Washington corporation, in federal district court. Thereafter, Millhorn Farmers, Maple Leaf Farms, Mica Creek, and Tim Freeburg (Growers) sued Seeds and Scotts in Washington state court. Maple Leaf Farms and Mica Creek were Washington corporations, Millhorn Farms was an Idaho corporation, and Tim Freeburg was a citizen of Idaho. Scotts subsequently filed an amended complaint in federal court adding the Growers as defendants and seeking declaratory relief. The district court subsequently realigned the Growers and plaintiffs and Seeds and Scotts as defendants and held, alternatively, that it would stay the federal proceedings in favor of the related state court proceedings under either the Brillhart doctrine or the Colorado River doctrine. Because the parties' realignment resulted in the absence of complete diversity of citizenship between defendant Seeds and newly-aligned plaintiffs-Growers, the district court dismissed the action for lack of subject matter jurisdiction. The Ninth Circuit Court of Appeals reversed, holding that the district court should not have declined to entertain the claim for declaratory relief under the Brillhart doctrine, and instead, the claims should have been evaluated under the Colorado River doctrine. Remanded. View "Scotts Co., LLC v. Seeds, Inc." on Justia Law

Polar Holding was sole shareholder of PMC, a company engaged in the petroleum-additive business. PMC was in default on a loan for which it had pledged valuable intellectual property as collateral, and Polar Holding was in the midst of an internal dispute between members of its board of directors regarding business strategy for PMC. One of the directors, Socia, formed a competing company, Petroleum, for the purpose of acquiring PMC’s promissory note and collateral from the holder of PMC’s loan. Petroleum brought suit against Woodward, an escrow agent in possession of PMC’s collateral, alleging that PMC was in default on the payment of its promissory note. Polar Holding and PMC intervened and filed counterclaims against Petroleum and a third-party complaint against additional parties, including Socia. Polar Holding and PMC allleged breach of fiduciary duty, civil conspiracy, and tortious interference. After PMC filed for bankruptcy, its claims became the property of the bankruptcy trustee. Polar Holding’s claims were later dismissed. The Sixth Circuit affirmed dismissal of a tortious interference claim as addressed by the district court, but reversed dismissal of a breach-of-fiduciary-duty claim against Socia and a civil-conspiracy claim against individual third-party defendants. View "Petroleum Enhancer, L.L.C. v. Woodward" on Justia Law

EAR, a seller of manufacturing equipment, defrauded creditors by financing non-existent or grossly overvalued equipment and pledging equipment multiple times to different creditors. After the fraud was discovered, EAR filed for bankruptcy. As Chief Restructuring Officer, Brandt abandoned and auctioned some assets. Five equipment leases granted a secured interest in EAR’s equipment; by amendment, EAR agreed to pay down the leases ($4.6 million) and give Republic a blanket security interest in all its assets. Republic would forebear on its claims against EAR. The amendment had a typographical error, giving Republic a security interest in Republic’s own assets. Republic filed UCC financing statements claiming a blanket lien on EAR’s assets. After the auction, Republic claimed the largest share of the proceeds. The matter is being separately litigated. First Premier, EAR’s largest creditor, is concerned that Republic, is working with Brandt to enlarge Republic’s secured interests. After the auction, EAR filed an action against its auditors for accounting malpractice, then sought to avoid the $4.6 million transfer to Republic. The bankruptcy court approved a settlement to end the EAR-Republic adversary action, continue the other suit, divvy proceeds from those suits, and retroactively modify the Republic lien to correct the typo. First Premier objected. The district court affirmed. The Seventh Circuit affirmed. First Premier was not prejudiced by the settlement. View "First Premier Capital, LLC v. Republic Bank of Chicago" on Justia Law