Justia Commercial Law Opinion Summaries

This appeal arose from a judgment entered after a demurrer by three banks to plaintiff’s second amended complaint was sustained without leave to amend. The three banks were US Metro Bank, Wilshire State Bank, and Pacific City Bank. An employee of a corporation with responsibility to gather incoming checks made payable to the corporation and deposit those checks into the corporation’s bank account (in this case, the corporation’s accounting manager) stole some of the incoming checks and took them to a check cashing service where she forged the signature of one of the officers of the corporation and received hard cash in return. After discovery of the thefts, the corporation fired the accounting manager and tried to recoup at least some of its losses. In this case, the corporation’s recoupment effort included suing its own bank, the three check cashing services where the employee took the checks, and the three banks which received those checks from the check cashing services for deposit into those companies’ own accounts. The legal issue presented in this appeal was one of first impression in California: Does the interposition of the check cashing services between (a) the employee who stole the checks and (b) the three banks who took the checks from three check cashing companies and credited the accounts of those check cashing companies, relieve the banks of all duty of care under section 3405 of California’s Commercial Code? The Court of Appeal concluded the answer was no: the three banks were the first banks to process the checks through the banking system, and, as “first banks,” they had a duty of care in the processing of those checks “‘to make certain all endorsements [were] valid; banks subsequently taking the paper have a right to rely on the forwarding bank.’” Check cashing companies are not banks, and should not be treated as banks for purposes of California’s Uniform Commercial Code. View "HH Computer Systems v. Pacific City Bank" on Justia Law

Plaintiff, Appalachian Leasing, Inc., purchased four coal trucks from Defendants, Mack Trucks, Inc. and Worldwide Equipment, Inc.. Claiming that each of the trucks were defective, Plaintiff filed a complaint grounded on Article 2 of the West Virginia Uniform Commercial Code, alleging that Defendants breached both express and implied warranties relating to the four trucks. For relief, Plaintiff sought revocation of acceptance of the vehicles, a refund of the purchase price, and incidental and consequential damages. The circuit court granted summary judgment in favor of Defendants, concluding that Defendants had satisfied their obligations under the trucks’ express warranty and that the implied warranties had been disclaimed. The Supreme Court reversed, holding that although the implied warranties were validly disclaimed, genuine issues of material fact existed concerning whether Defendants satisfied their obligations under the trucks’ express warranty. Remanded. View "Appalachian Leasing, Inc. v. Mack Trucks, Inc." 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

Whirlpool purchased injection-molded plastic knobs and decorative metal stampings from Grigoleit. In 1992 Whirlpool told Grigoleit that it would start using products made by Phillips. Grigoleit believed that Phillips was using a method protected by its patents. Ultimately Grigoleit licensed its patents to Whirlpool and Phillips; instead of royalties Grigoleit got Whirlpool’s business for the “Estate” and “Roper” brand lines and a promise of consideration for other business. The agreement and the patents expired in 2003. An arbitrator concluded that Whirlpool had failed to consider Grigoleit’s parts for some lines of washers and dryers and was liable for payment of money royalties or damages. Grigoleit demanded the profit it would have made had Whirlpool purchased its requirements of knobs exclusively from Grigoleit. The district court concluded that a reasonable royalty fell in the range of 1¢ to 12¢ per part and the parties then agreed that royalties would then be $140,000. The Seventh Circuit affirmed, reasoning that lost profits differ from royalties. The caption on the contract is “LICENSE AGREEMENT” and the heading on paragraph 3 is “Royalties.” The agreement is a patent license; the court was not obliged to treat it as a requirements contract. View "Grigoleit Co. v. Whirlpool Corp." 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

uPI and Richtek design and sell DC-DC controllers that convert direct current from one voltage to another, and are embodied in chips for downstream devices such as computer motherboards. uPI was founded by former Richtek employees; its chips are imported into the U.S. either directly or as incorporated in downstream devices. Richtek complained to the International Trade Commission that uPI misappropriated Richtek’s trade secrets and infringed Richtek’s U.S. patents, in violation of the Tariff Act, 19 U.S.C. 1337. uPI offered to enter into a consent order and to cease importation of products produced using or containing Richtek’s trade secrets or infringing Richtek’s patents. Over Richtek’s objection, the ALJ entered the consent order substantially as drafted by uPI. The Commission terminated the investigation. A year later Richtek filed an Enforcement Complaint. An ALJ distinguished between products that were accused in the prior investigation and products allegedly developed and produced after entry of the Consent Order, finding violations as to the formerly accused products and that the post- Consent Order products infringed two patents, but were independently developed and not produced using Richtek’s trade secrets. The Commission affirmed with respect to the formerly accused products and reversed in part with respect to the post-Order products. The Federal Circuit affirmed concerning the formerly accused products, but reversed the ruling of no violation as to the post-Consent Order products.View "UPI Semiconductor Corp. v. Int'l Trade Comm'n" on Justia Law

In 2010, at the request of domestic interested parties, the Department of Commerce initiated review under 19 U.S.C. 1675(a) on an outstanding antidumping duty order on stainless steel bar from India 2009-2010 and issued Mukand questionnaires to obtain product-specific cost information necessary to calculate Mukand’s dumping margin and ensure that comparison of similar products. Mukand’s response assigned the same production costs across all product sizes. Commerce informed Mukand that it did not consider this approach reasonable and asked that Mukand produce size-specific information, regardless of whether it normally tracked such information or to “quantify and explain” any reasons for believing that size-based cost differentials are insignificant. Mukand responded with a brief statement that where product grade and type of finishing operation are the same, direct material costs do not vary with size. After a fourth questionnaire, Mukand still declined to report size-specific costs, but never contacted Commerce for clarification or assistance. Commerce determined that Mukand’s responses were deficient, resorted to facts otherwise available, and applied an adverse inference against Mukand. The Court of International Trade and Federal Circuit affirmed. Without cost data broken down by product size, Commerce was unable to differentiate between different types of steel bar products and could not calculate an accurate constructed value for any of Mukand’s products. View "Mukand, Ltd. v. United States" on Justia Law

Trek was the importer of record for 72 entries of men’s suits in 2004. Mercantile was the consignee. Shadadpuri is president and sole shareholder of Trek, and a 40% shareholder of Mercantile. Trek and Mercantile provided fabric “assists” to manufacturers outside the U. S. (items incorporated in the imported merchandise, 19 U.S.C. 1401a(h)(1)(A)(i)). Customs determined that the entry documentation failed to include the cost of the fabric assists in the price paid for the suits which lowered the amount of duty payable by Trek. Shadadpuri had previously failed to include assists in entry declarations when acting on behalf of a corporate importer. The Court of International Trade found Shadadpuri liable for gross negligence in connection with the entry of imported merchandise and imposed penalties under 19 U.S.C. 1592(c)(2). The Federal Circuit reversed the penalty, but, on rehearing en banc, affirmed. What Shadadpuri did comes within the commonsense understanding of the “introduce” language of the statute. While suits invoiced to one company were in transit, he “caused the shipments of the imported merchandise to be transferred” to Trek. Himself and through his aides, he sent invoices to the customs broker for use in completing the entry filings to secure release of the merchandise into U.S. commerce. Applying the statute to Shadadpuri does not require piercing the corporate veil. View "United States v. Trek Leather, Inc." on Justia Law

CPZ imported tapered roller bearings by selling them to an unaffiliated U.S. importer, which then sold them to CPZ’s U.S. affiliate which resold them to unaffiliated U.S. customers. The Department of Commerce requested that CPZ identify whether its sales were export price (EP) sales or constructed export price (CEP) sales for purposes of calculating CPZ’s antidumping duty margin. CPZ provided CEP data. It did not provide EP data. Timken, an intervening domestic bearing producer, urged Commerce to calculate CPZ’s margin on an EP basis. Commerce did not require CPZ to submit the EP data, but calculated CPZ’s margin on a CEP basis, using the data provided. After Commerce issued the Preliminary Results, Timken again submitted comments. In its Final Results, Commerce changed course and calculated CPZ’s margin on an EP basis, using limited EP data previously provided, relating to a small subset of the imported bearings. Commerce calculated a margin of 92.84%. The Court of International Trade remanded. On remand, Commerce twice requested EP data. CPZ responded that it had been sold and the new owners had not maintained that data. After a second remand, under protest, Commerce calculated a 6.52% margin using the CEP data, without applying adverse facts available. The Court of International Trade affirmed. The Federal Circuit vacated. Commerce’s application of adverse facts available in its First Remand Redetermination was supported by substantial evidence; the Trade Court should reinstate Commerce’s application of adverse facts available and its calculation of CPZ’s margin in its First Remand Redetermination. View "Peer Bearing Co. - Changshan v. United States" on Justia Law

The Department of Commerce sets cash deposit rates associated with imported goods to curb “dumping,” i.e., exporting goods far below typical market prices, 19 U.S.C. 1673e(a)(3). Commerce found that a U.S. industry was threatened with material injury by reason of imports of certain cased pencils from China, imposed anti-dumping duties, and later initiated administrative reviews for 2008-2009 and 2009-2010. During the 2008-2009 review period, Michaels imported cased pencils manufactured by three producers in China and exported by three different exporters. The producers participated in the review process, but two withdrew. None of the Chinese exporters participated. The producers’ rates were established for the two review periods. Commerce assigned Michaels’ exporters a country-wide anti-dumping cash deposit rate, as opposed to lower rates obtained by the pencils’ producers. Michaels argued that it was entitled to the producer rate based on 19 C.F.R. 351.107(b)(2), which states that “if the Secretary has not established previously a combination cash deposit rate . . . for the exporter and producer in question or a noncombination rate for the exporter in question, the Secretary will apply the cash deposit rate established for the producer.” The Federal Circuit affirmed, reasoning that section 351.107(b)(2) is informed by section 351.107(d), which establishes an initial noncombination rate for all producers and exporters in nonmarket economy countries. View "Michaels Stores, Inc. v. United States" on Justia Law