Justia Commercial Law Opinion Summaries

The Supreme Court reversed the order of the district court granting summary judgment on Plaintiff's claim to an accounting and recovery of surplus proceeds on the resale of her mobile home after she returned it to RJC Investment, Inc. holding that the district court erred in holding that Article 9 of the Uniform Commercial Code (UCC) was inapplicable in this case.Plaintiff entered into an installment sale contract and security agreement to purchase a mobile home. The contract was assigned to RJC. Plaintiff later allowed RJC to take possession of the mobile home and signed a full release of contract relinquishing all rights to the mobile home. After RJC resold the mobile home RJC failed to provide an accounting of the sale and did not refund any surplus to Plaintiff. Plaintiff sued RJC. The district court granted summary judgment for RJC. The Supreme Court reversed, holding (1) the release between Plaintiff and RJC did not terminate application of the UCC's requirement for an accounting and surplus after RJC sold the collateral; (2) the district court erred in granting RJC summary judgment on the ground that RJC satisfied the elements of the acceptance of collateral in full satisfaction pursuant to Mont. Code Ann. 30-9A-620; and (3) RJC was not entitled to summary judgment on other grounds. View "Hutzenbiler v. RJC Investment, Inc." on Justia Law

Sanchelima contracted to serve as Walker’s exclusive distributor of silos in 13 Latin American countries. Walker agreed not to sell silos directly to third parties in those countries. The contract contained a limited remedies provision and a damages disclaimer and was subject to Wisconsin law. Walker assigned a representative to work with Sanchelima, but otherwise did not market its products in the relevant countries. In 2014, Walker nonetheless sold silos for a factory in Mexico and to a Nicaraguan company. In 2015, Walker sold silos to a Mexican plant; in 2017, Walker sold tanks to a Mexican company. Sanchelima notified Walker that it considered the sales a breach of the agreement, then filed suit. Walker terminated the agreement without cause. Sanchelima sought lost profits of more than $600,000. Walker cited the limited remedies provision as an affirmative defense. It explicitly precludes recovery of “any lost profits … arising out of or in connection with the Distributor Agreement.” The district court held that provision violates Wisconsin’s version of the UCC 2‐719, Wis. Stat. 402.719: Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in chs. 401 to 411... Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Because the limited remedy provision provided no relief for Walker’s breach of the exclusivity provision, the court held it failed of its essential purpose and awarded Sanchelima $778,306.70. The Seventh Circuit affirmed. The Wisconsin Supreme Court has interpreted UCC's limited remedy provisions; other states have interpreted those provisions differently. The Seventh Circuit declined to overturn state precedent as inconsistent with modern trends, “until and unless the Wisconsin Supreme Court decides to overturn it.” View "Sanchelima International, Inc. v. Walker Stainless Equipment Co., KKC" on Justia Law

The First Circuit affirmed the judgment of the district court granting Defendant's motion to dismiss this suit brought by the insurer (Insurer) of a chicken products manufacturer seeking damages from the manufacturer's chicken supplier (Supplier) for claims under Maine law of breach of warranty and strict product liability, holding that the district court did not err in dismissing the claims.Insurer sought to recoup the money it paid to the manufacturer for the losses the manufacturer incurred when its products were recalled following a salmonella outbreak. Insurer's complaint against Supplier alleged that the manufacturer received raw chicken from Supplier that was contaminated with salmonella and was therefore defective under Maine law. The district court dismissed all claims, concluding that the allegations in the complaint did not plausibly allege that the raw chicken sent by Supplier to the manufacturer was defective and that the strict liability claim was independently barred by the economic loss doctrine. The First Circuit affirmed, holding (1) as to the breach of warranty claims, Insurer failed to plausibly allege that the raw chicken at issue was contaminated with a type of salmonella that would persist despite proper cooking; and (2) Insurer's strict liability claim was properly dismissed because the complaint failed to allege facts that could suffice to show that the chicken was defective. View "Starr Surplus Lines Insurance Co. v. Mountaire Farms Inc." on Justia Law

The Supreme Court affirmed the decision of the district court granting summary judgment in favor of Greater Omaha Packing Company, Inc. (GOP) as to Meyer Natural Foods LLC’s breach of contract action following a purported E. coli contamination of beef owned by Meyer and processed by GOP, holding that although the district court incorrectly applied the Uniform Commercial Code (UCC) in regard to Meyer’s acceptance of adulterated meat under the parties’ processing agreement, the court nevertheless arrived at the correct result.Under the agreement, GOP would slaughter Meyer’s cattle, process the beef, and fabricate the beef into various beef productions. After testing resulted in a very high percentage of presumptive positive findings for E. coli, Meyer filed suit against GOP. The district court granted summary judgment for GOP. The Supreme Court affirmed, holding that the court erred in finding that Meyer had accepted the contaminated beef under the agreement or under the UCC, but the court’s ultimate conclusion was correct, as Meyer failed to adhere to the terms to properly reject products under the agreement. View "Meyer Natural Foods v. Greater Omaha Packing Co." on Justia Law

Kreg, a medical-supply company, contracted with VitalGo, maker of the Total Lift Bed®, for exclusive distribution rights in several markets. A year and a half later, the arrangement soured. VitalGo told Kreg that it had not made the minimum‐purchase commitments required by the contract for Kreg to keep its exclusivity. Kreg thought VitalGo was wrong on the facts and the contract’s requirements. The district court ruled, on summary‐judgment that VitalGo breached the agreement. The damages issue went to a bench trial, despite a last-minute request from VitalGo to have it dismissed on pleading grounds. The court ordered VitalGo to pay Kreg about $1,000,000 in lost‐asset damages and prejudgment interest. The Seventh Circuit affirmed, upholding the district court’s rulings that the agreement allowed Kreg to make minimum-purchase commitments orally; that the minimum‐purchase commitment for the original territories was made in December 2010; that VitalGo breached the agreement by terminating exclusivity in June 2011 and by failing to deliver beds in September 2011; and concerning the foreseeability of damages. View "Kreg Therapeutics, Inc. v. VitalGo, Inc." on Justia Law

Plaintiff, a provider of short term loans to automobile dealers, who still retained the title certificates for the vehicles and believed it had a perfected security interest, filed suit against defendant for the amounts that plaintiff should have been paid by the dealerships (i.e., the loan amounts due) upon the sale of the subject vehicles.The Court of Appeal held that the trial court prejudicially erred by finding in defendant's favor, because the circumstances of this case were sufficiently close and/or analogous to those in Quartz of Southern California, Inc. v. Mullen Bros., Inc. (2007) 151 Cal.App.4th 901, to warrant its application here. The court explained that, here, as in Quartz, plaintiff was in rightful possession of the title certificates to the vehicles that were sold by the dealerships to consumers under conditional sales contracts; the dealerships went out of business without paying what was owed to plaintiff concerning said vehicles; and defendant as finance lender took assignment of the conditional sales contracts without requiring production of the title certificates or ascertaining who held title and how much was owed to obtain it. The court reversed and remanded to the trial court to determine the precise amount of money defendant must pay plaintiff for the title certificates to the vehicles in question, after which a new judgment shall be entered in favor of plaintiff. View "Ron Miller Enterprises, Inc. v. Lobel Financial Corp." on Justia Law

The four plaintiffs in this interpleader action (MDQ entities) are limited liability companies that hold production rights or are producers in different territories of a Tony-award winning Broadway musical, "Million Dollar Quartet." MDQ entities filed a complaint in interpleader, alleging conflicting claims by Cleopatra and Gilbert Kelly for those portions of distributions owed to Mutrux that had not otherwise been assigned to Katell Productions. MDQ entities deposited the distributions and undertook to add any future distributions not owed and remitted to Katell Productions to the interpleaded funds.At issue on appeal was which adverse claimant was entitled to the interpleaded funds: a judgment creditor with a properly recorded judgment lien, or an assignee who did not file a financing statement with respect to distributions irrevocably assigned to it by the judgment debtor before the judgment lien was recorded. The court held that, although the assignment created a security interest, the judgment creditor was entitled to the interpleaded funds because its recorded judgment lien had priority over the unperfected security interest.In this case, there was no error in the trial court's judgment releasing the interpleaded funds to Cleopatra and ordering the MDQ entities to pay all subsequent monies otherwise payable to Mutrux, except those allocated to Katell Productions, to Cleopatra, until the judgment was satisfied. The court also held that the trial court did not abuse its discretion in ordering Gilbert Kelly to pay attorney fees and costs. View "MDQ, LLC v. Gilbert, Kelly, Crowley & Jennett LLP" on Justia Law

ARC, a distributor of compressed gases, sold its assets to American. Because ARC leased asset cylinders to customers, it was not immediately able to identify the number of cylinders included in the purchase; the Agreement estimated 6,500 cylinders and provided that American would hold back $150,000 for 180 days to protect against a shortage of up to 1,200 cylinders, at $125 per cylinder. When American began billing the customers it acquired, it learned that many of them paid only to have cylinders refilled but did not pay rent on the cylinders they used. An audit revealed that ARC owned and transferred 4,663 asset cylinders--1,837 cylinders short of the 6,500 promised. In an ensuing breach of contract suit, ARC argued that American breached the contract because it did not complete its audit within the specified 180-day period. The district court disagreed, concluding that ARC extended that deadline and that, because only 4,663 cylinders were delivered, ARC was never entitled to receive any portion of the Cylinder Deferred Payment. The court granted American’s counterclaim for breach of contract, holding that American was entitled to the entire $150,000 and to recover $125 for each cylinder it failed to receive under the threshold of 5,300. The Seventh Circuit affirmed. Because ARC was not entitled to any of the Cylinder Deferred Payment in that it provided less than the 5,300 cylinders, it could not have been damaged by the delay in completing the audit. View "ARC Welding Supply, Co. Inc. v. American Welding & Gas, Inc." on Justia Law

Dimond was hired by a Chinese manufacturer to “rig, dismantle, wash, and pack,” and ship used automotive assembly-line equipment to China. Dimond, which lacked experience in international shipment, hired BDP. Dimond asserted that BDP did not disclose that it was not a licensed Ocean Transport Intermediary by the Federal Maritime Commission. In May 2011, BDP informed Dimond that it had obtained a ship and sent a booking note to Dimond. Between May and October 2011, Dimond dismantled and weighed the equipment and prepared a “preliminary" packing list. BDP allegedly provided the preliminary packing list when it obtained quotes from third-party contractors to load the Equipment. In October 2011, BDP notified Dimond that the ship was no longer available. Dimond asserted that BDP “without Dimond’s knowledge, consent or approval” hired Logitrans to perform BDP’s freight forwarding duties. BDP and Logitrans hired a ship. As a result of many ensuing difficulties, Dimond became involved in multiple lawsuits, including suits with its Chinese customer and the stevedores. Dimond sued BDP in July 2013 but never served BDP with the complaint. When the summons expired, the district court dismissed without prejudice. In August 2017, Dimond filed a Motion to Amend and Praecipe for Issuance of Amended Summons for its 2013 suit. The Sixth Circuit affirmed the denial of the motion. The suit was not timely filed within the one-year statute of limitations set forth in the Carriage of Goods by Sea Act. View "Dimond Rigging Co. v. BDP International, Inc." on Justia Law

Innovation sold 5-Hour Energy. In 2004, it contracted with CN to manufacture and package 5-Hour. Jones, CN's President and CEO, had previously manufactured an energy shot. When the business relationship ended, CN had extra ingredients and packaging, which Jones used to continue manufacturing 5-Hour, allegedly as mitigation of damages. The companies sued one another, asserting breach of contract, stolen trade secrets or intellectual property, and torts, then entered into the Settlement, which contains an admission that CN and Jones “wrongfully manufactured” 5-Hour products and forbids CN from manufacturing any new “Energy Liquid” that “contain[s] anything in the Choline Family.” CN received $1.85 million. CN was sold to a new corporation, NSL. Under the Purchase Agreement, NSL acquired CN's assets but is not “responsible for any liabilities ... obligations, or encumbrances” of CN except for bank debt. The Agreement includes one reference to the Settlement. NSL, with Jones representing himself as its President, took on CN’s orders and customers, selling energy shots containing substances listed in the Choline Family definition. Innovation sued. Innovation was awarded nominal damages for breach of contract. The Sixth Circuit affirmed the rejection of defendants’ antitrust counterclaim, that NSL is bound by the Settlement, and that reasonable royalty and disgorgement of profits are not appropriate measures of damages. Jones is not personally bound by the Agreement. Upon remand, Innovation may introduce testimony that uses market share to quantify its lost profits. The rule of reason provides the proper standard for evaluating the restrictive covenants; Defendants have the burden of showing an unreasonable restraint on trade. View "Innovation Ventures, LLC v. Nutrition Science Laboratories, LLC" on Justia Law