Articles Posted in U.S. 6th Circuit Court of Appeals

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Grigoleit supplied knobs for Whirlpool’s washing machines and dryers for several years, and sought to increase prices and amend the parties’ purchase contracts in 2004. The parties reached an amended agreement in 2005, which Whirlpool terminated later that year. When Grigoleit demanded final payment, Whirlpool sued, arguing the contract was unenforceable. The district court upheld the contract but found some aspects of it unconscionable. The Seventh Circuit agreed that the contract was enforceable. Under Michigan law both substantive and procedural unconscionability are required to hold an agreement unenforceable. Refusing to certify questions to the state’s supreme court, the Sixth Circuit reversed the holding that a $40,000 flat fee and 8% increase are unconscionable. Whirlpool created the urgent and unfavorable conditions under which it proposed these terms, and had ample time and opportunity to negotiate more favorable terms. Whirlpool had the resources, experience, and ability to avoid the terms entirely, yet chose not to do so. View "Whirlpool Corp. v. Grigoleit Co." on Justia Law

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Cogent sued, alleging that Hyalogic was disseminating false information regarding Cogent’s product Baxyl, an “oral, liquid HA supplement that is sold into the human natural products market.” Shortly after the filing, the parties entered into a settlement agreement. Cogent moved to enforce the settlement agreement, claiming that Hyalogic caused false and misleading videos to be uploaded to You Tube and by statements made at a conference. The district court found no breach of the settlement agreement and denied the motion. The Sixth Circuit affirmed. The contract unambiguously refers to a clear statement “about the other Party’s product.” Statements that refer to preservatives that can be found in a number of products, including Cogent’s products, are not statements “about the other Party’s products.” View "Cogent Solutions Grp, LLC v. Hyalogic, LLC" on Justia Law

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The Whites were dealers of Kinkade’s artwork. The parties agreed to arbitrate disputes in accordance with the Commercial Arbitration Rules of the American Arbitration Association. In 2002, they commenced arbitration in which Kinkade claimed that the Whites had not paid hundreds of thousands of dollars, and the Whites counterclaimed that they had been fraudulently induced to enter the agreements. Kinkade chose Ansell as its arbitrator; the Whites chose Morganroth. Together Ansell and Morganroth chose Kowalsky as the neutral who would chair the panel. The arbitration dragged on; in 2006, Kinkade discovered that the Whites’ counsel, Ejbeh, had surreptitiously sent a live feed of the hearing to a hotel room. Ejbeh’s replacement departed after being convicted of tax fraud. The Whites did not comply with discovery requests, but after closing arguments and over objections, the panel requested that the Whites supply additional briefs. The Whites and their associates then began showering Kowalsky’s law firm with business. Kinkade objected, to no avail. A series of arbitration irregularities followed, all favoring the Whites. Kowalsky entered a $1.4 million award in the Whites’ favor. The district court vacated the award on grounds of Kowalsky’s “evident partiality.” The Sixth Circuit affirmed. View "Thomas Kinkade Co. v. White" on Justia Law

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Glassman is a car dealer in Southfield, Michigan and an authorized Kia dealer, under an Agreement that states that Glassman’s rights are not exclusive. Glassman agreed to assume certain responsibilities in its Area of Primary Responsibility, an area undefined in the Agreement, but agreed “that it has no right or interest in any [Area of Primary Responsibility] that [Kia] may designate” and that “[a]s permitted by applicable law, [Kia] may add new dealers to … the [Area of Primary Responsibility].” Michigan’s Motor Dealers Act grants car dealers certain limited territorial rights, even when the dealer has a nonexclusive franchise, and requires manufacturers to provide notice to an existing dealer before establishing a new dealer within a certain distance of the existing dealer’s location. Receipt of notice gives the existing dealer a cause of action to challenge the proposed new dealer. Kia and Glassman entered into their Agreement in 1998, when the distance for notice was 6 miles. A 2010 amendment increased the distance to 9 miles. The district court found that the parties did not agree to comply with the 2010 Amendment and that the 2010 Amendment is not retroactive. The Sixth Circuit affirmed, holding that the 6-mile distance applies. View "Kia Motors Am., Inc. v. Glassman Oldsmobile Saab Hyundai, Inc." on Justia Law

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Wyko sold parts to tire manufacturers, but in the U.S., provided parts for steel tire-assembly machines only for Goodyear. Wyko contracted with HaoHua, owned by the Chinese government, to supply parts unlike any it had previously built. Goodyear used machines like those Wyko needed. Goodyear asked Wyko to repair tire-assembly machines. Wyko sent engineers. Before their visit, both signed agreements that they might have access to trade secrets or other confidential information and that they would not disclose that information. A security guard reminded them that no cameras were allowed inside the factory. Unescorted for a few minutes, one engineer used his cell-phone camera to take photos that were forwarded to the design team. Wyko’s IT manager forwarded the e-mail to Goodyear. Goodyear notified the FBI. Convicted of theft of trade secrets (18 U.S.C. 1832(a)) and wire fraud (18 U.S.C. 1343, 1349), the engineers were sentenced to four months of home confinement, community service, and probation. The Sixth Circuit affirmed the convictions, rejecting an argument that the photographs did not meet the statutory definition because Goodyear did not take “reasonable measures” to protect secrecy. The court reversed the sentences because the court had not adequately explained its calculation of loss. View "United States v. Howley" on Justia Law

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Georgia-Pacific sued Four-U-Packaging, alleging that Four-U’s supply of off-brand paper towels for use in Georgia-Pacific paper-towel dispensers infringed on its trademarks. Four-U distributes paper and janitorial supplies; it does not manufacturer commercial paper systems. Four-U argued that the claims were barred by the ruling in a similar case brought by Georgia-Pacific in Arkansas against a different distributor of generic paper towels. The district court granted summary judgment to Four-U. The Sixth Circuit affirmed. All of the elements of issue preclusion are met and applying the doctrine poses no risk of creating inconsistent rulings. View "Georgia-Pacific Consumer Prods., LP v. Four-U-Packaging, Inc." on Justia Law

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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

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GTI went bankrupt after it purchased OAI, a subsidiary of Onkyo for $13 million in cash and $12 million in three-year promissory notes. Onkyo filed a proof of claim for $12 million. GTI responded by suing Onkyo under the theory that the OAI purchase was a fraudulent, voidable transaction. The bankruptcy court agreed, finding that OAI was worth $6.9 million at the time of the transaction, not $25 million. The court voided GTI’s obligation to pay the remainder of the purchase price and ordered Onkyo to repay GTI $6.1 million. The district court and Sixth Circuit affirmed. The bankruptcy court’s determination that the indirect benefits were insubstantial was valid without the necessity of providing calculations; its adoption of GTI’s expert’s value based on the comparable transactions method was not clearly erroneous. Once the bankruptcy court determined that the sale of OAI had been a fraudulent transfer and Onkyo was a good-faith transferee, awarding GTI relief was a simple matter of subtraction. View "Onkyo Europe Elec., GMBH v. Global Technovations Inc." on Justia Law

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LE, creator of the “5-hour ENERGY” energy shot, asserted that N.V.E., creator of the “6 Hour POWER” energy shot, infringed its trademark, under the Lanham Act. 15 U.S.C. 125(a). LE distributed a “recall notice” stating that NVE’s “‘6 Hour’ energy shot” had been recalled. NVE claims that the notice constituted false advertising in violation of the Lanham Act and anti-competitive conduct in violation of the Sherman Act, 15 U.S.C. 2. The district court first found that a likelihood of confusion did not exist between “6 Hour POWER” and “5-hour ENERGY” and held that the recall notice did not constitute false advertising or a violation of the Sherman Act. The Sixth Circuit reversed with respect to trademark infringement and false advertising claims, but affirmed with respect to Sherman Act claims. The “5-hour ENERGY” mark is suggestive and protectable, but the factors concerning likelihood of confusion were closely balanced, making summary judgment in appropriate. There were also unresolved questions of fact as to whether the “recall notice” was misleading, but there was no Sherman Act violation because it was relatively simple for NVE to counter it by sending notices that “6 Hour POWER” had not been recalled. View "N.V.E., Inc. v. Innovation Ventures, LLC" on Justia Law

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Customers who rent rooms from the online travel companies pay those companies a higher “retail” rate; the online travel companies pay the hotels an agreed-upon “wholesale” rate, plus any taxes applicable to the “wholesale” price. Ohio allows municipalities and townships to levy excise taxes on “transactions by which lodging by a hotel is or is to be furnished to transient guests.” Ohio Rev. Code 5739.08.The municipalities alleged that the online travel companies violated local tax laws by failing to pay the local occupancy tax on the revenue they collect in the form of the difference between the “wholesale” room rate and the higher “retail” rate charged by the online travel companies. In granting the travel companies’ motion to dismiss, the district court determined that the companies had no obligation under any of the ordinances, regulations, or resolutions to collect and remit guest taxes because the laws created tax-collection obligations only for “vendors,” “operators,” and “hotels.” The Sixth Circuit affirmed. The language of the laws is aimed expressly at taxing the cost of furnishing hotel lodging, and does not purport to tax the additional fees charged by the online travel companies. View "City of Columbus v. Hotels.com, L.P." on Justia Law