Justia Commercial Law Opinion SummariesArticles Posted in US Court of Appeals for the Sixth Circuit
Geomatrix, LLC v. NSF International
Septic systems comprise a septic tank that isolates and contains the sewage; the remaining wastewater flows through a drain field, where microorganisms treat it. Customers have two options for private septic systems—aerobic treatment units (contained systems), or soil-based/open-bottom treatment systems (T&D systems). Geomatrix markets and sells a T&D system, while many of its competitors sell contained systems.Since 1970, NSF has offered certification for the wastewater treatment industry, A manufacturer needs to obtain certification before marketing products in at least 37 states. This standard is developed through a voluntary consensus process, overseen by a joint committee staffed by NSF employees, state regulatory officers, industry manufacturers, and consumers. Geomatrix obtained certification. Geomatrix alleges that competitors then began conspiring against T&D systems, questioning whether T&D systems should be entitled to certification and disparaging the efficacy of T&D systems. The alleged conspiracy affected Geomatrix’s business by preventing it from obtaining state regulatory approval, although its certification should have made it possible to do so. Ultimately, Geomatrix withdrew its NSF certification. NSF has not adopted a new standard; discussions remain ongoing.Geomatrix filed suit, alleging violations of the Sherman Act and the Lanham Act. The Sixth Circuit affirmed the dismissal of the suit. The defendants’ petitioning activity was immunized under the Noerr-Pennington doctrine. Geomatrix failed to show the proximate cause required for its unfair competition claims, and its promissory estoppel claims were based on statements that did not state a sufficiently definite promise. View "Geomatrix, LLC v. NSF International" on Justia Law
Truesdell v. Friedlander
Legacy, a small family-owned business, provides nonemergency ambulance services in several Ohio counties that border Kentucky. After receiving many inquiries from Kentucky hospitals and nursing homes, Legacy sought to expand into the Commonwealth. Kentucky required Legacy to apply for a “certificate of need” with the Kentucky Cabinet for Health and Family Services. Existing ambulance providers objected to Legacy’s request. The Cabinet denied Legacy’s application partly on the ground that these providers offered an adequate supply. Legacy sued, alleging that Kentucky’s certificate-of-need law violated the “dormant” or “negative” part of the Commerce Clause.The district court granted the defendants summary judgment. The Sixth Circuit affirmed with respect to Legacy’s request to offer intrastate ambulance transportation in Kentucky. Under the modern approach to the dormant Commerce Clause, a law’s validity largely depends on whether it discriminates against out-of-state businesses in favor of in-state ones. Legacy’s evidence suggests that the state’s limits will harm Kentucky’s own “consumers.” It has not shown a “substantial harm” to interstate commerce. The court reversed with respect to Legacy’s request to offer interstate ambulance transportation between Kentucky and Ohio. States may not deny a common carrier a license to provide interstate transportation on the ground that the interstate market contains an “adequate” supply. The bright-line rule barring states from obstructing interstate “competition” does require a finding that a state has discriminated against out-of-state entities. View "Truesdell v. Friedlander" on Justia Law
Block v. Canepa
Miller, who describes himself as “an active wine consumer,” asserts that he wants to order wine from out-of-state retailers and would like to be able to buy wine in other states and transport that wine back into Ohio for his personal use. House of Glunz is an Illinois wine retailer and alleges that it wishes to ship wine directly to Ohio consumers but cannot. Miller and Glunz challenged the constitutionality of Ohio liquor laws preventing out-of-state wine retailers from shipping wine directly to Ohio consumers and prohibiting individuals from transporting more than 4.5 liters of wine into Ohio during any 30-day period.The district court held that the Direct Ship Restriction is constitutional under binding Sixth Circuit precedent; the Director of the Ohio Department of Public Safety is entitled to Eleventh Amendment immunity from the claims; and the plaintiffs lack standing to challenge the Transportation Limit. The Sixth Circuit affirmed the Director of the Ohio Department of Public Safety’s Eleventh Amendment immunity, reversed with respect to the Direct Ship Restriction and the plaintiffs’ standing to challenge the Transportation Limit. On remand, the district court shall determine whether the challenged statutes “can be justified as a public health or safety measure or on some other legitimate nonprotectionist ground,” and whether their “predominant effect” is “the protection of public health or safety,” rather than “protectionism.” View "Block v. Canepa" on Justia Law
United States v. You
You, a U.S. citizen of Chinese origin, worked as a chemist, testing the chemical coatings used in Coca-Cola’s beverage cans. You was one of only a few Coca-Cola employees with access to secret BPA-free formulas. You secretly planned to start a company in China to manufacture the BPA-free chemical and received business grants from the Chinese government, claiming that she had developed the world’s “most advanced” BPA-free coating technology. On her last night as a Coca-Cola employee, You transferred the formula files to her Google Drive account and then to a USB drive. You certified that she had not kept any confidential information. You then joined Eastman, where she copied company files to the same account and USB drive. Eastman fired You and became aware of her actions. Eastman retrieved the USB drive and reported You to the FBI.You was convicted of conspiracy to commit theft of trade secrets, 18 U.S.C. 1832(a)(5), possessing stolen trade secrets, wire fraud, conspiracy to commit economic espionage, and economic espionage. The Sixth Circuit remanded for resentencing after rejecting You’s claims that the district court admitted racist testimony and gave jury instructions that mischaracterized the government’s burden of proof as to You’s knowledge of the trade secrets and their value to China. In calculating the intended loss, the court clearly erred by relying on market estimates that it deemed speculative and by confusing anticipated sales of You’s planned business with its anticipated profits. View "United States v. You" on Justia Law
Goodman v. Commercial Bank & Trust Co.
Goodman dealt with Martinek of Southern Risk to obtain crop insurance and later discovered that portions of his property could not be farmed. Southern denied his claim. Goodman accused Martinek and Southern of failing to obtain proper coverage. Based on a perceived moral obligation, Martinek provided Goodman with checks drawn from Southern’s Commercial Bank account–for $100,000 and $200,000. Southern’s account had insufficient funds to cover the draws. Goodman gave Martinek nothing in consideration for the checks; they never discussed a lawsuit. Goodman twice unsuccessfully attempted to cash the checks. Months later, after exchanging text messages with Martinek, Goodman was heading to Commercial Bank when Martinek sent an “everything stopped” message. Goodman asked for cashier’s checks in exchange for the Southern checks, without mentioning his past attempts to negotiate the checks. The teller did not check the balance in Southern’s account but printed “teller’s checks” payable to Goodman for $100,000 and $200,000. When the teller realized the account lacked sufficient funds, the Bank issued a stop payment order.Goodman sued to enforce the checks. The Bank counterclaimed for restitution. Under Tennessee’s Commercial Code, if Commercial Bank paid the checks by “mistake” and Goodman had taken those checks in “good faith” and “for value,” the Bank was not entitled to restitution. The district court held that Commercial Bank paid the checks by mistake and that Goodman did not give value. The Sixth Circuit affirmed summary judgment for Commercial Bank. View "Goodman v. Commercial Bank & Trust Co." on Justia Law
Lewis v. Acuity Real Estate Services, LLC
Acuity operates a website that connects people looking to buy or sell homes with a local real estate agent. Acuity’s services are free to home buyers and sellers but realtors pay a fee for referrals. The real-estate broker that employed Lewis, a real estate agent, signed up to receive Acuity’s referrals. The broker required its agents (including Lewis) to pay Acuity’s fee out of their commissions from home sales. Lewis sued, alleging that Acuity makes false claims to home buyers and sellers on its website and that this false advertising violates the Lanham Act, 15 U.S.C. 1125(a)(1)(B).The Sixth Circuit affirmed the dismissal of the suit. The Lanham Act provides a cause of action only for businesses that suffer commercial injuries (such as lost product sales) from the challenged false advertising. The Act does not provide a cause of action for customers who suffer consumer injuries (such as the cost of a defective product) from false advertising. Lewis alleges that type of consumer harm as his injury from Acuity’s allegedly false advertising: He seeks to recover the referral fee (that is, the price) he paid for Acuity’s services. View "Lewis v. Acuity Real Estate Services, LLC" on Justia Law
Electronic Merchant Systems LLC v. Gaal
In 2014, EMS entered into a payment processing agreement with Procom, a business owned by Gaal that sold historical tours. The Agreement was executed by Gaal, who signed a personal-guaranty provision. It contained terms relating to “chargebacks,” which occurred when a Procom customer’s transaction was declined or canceled after EMS had credited Procom’s account for the purchase; EMS repaid the money to the Procom customer, then charged Procom for that money plus a fee. In 2019, EMS and Procom executed a second agreement, which contained an explicit integration clause; the guaranty provision was not signed by Gaal but by another Procom employee. During the COVID-19 pandemic, many customers canceled purchases with Procom, resulting in $10 million in chargebacks. Procom is involved in Chapter 7 bankruptcy proceedings. EMS filed a creditor’s proof of claim and sued Gaal. The district court dismissed for failure to state a claim, finding that the 2019 Agreement superseded the 2014 agreement “in all material respects,” including replacing Gaal’s guaranty.The Sixth Circuit affirmed in part, upholding the district court’s consideration of the bankruptcy filing for purposes of determining when chargebacks occurred and its finding that the 2019 Agreement replaced the 2014 Agreement rather than merely supplementing it. The court reversed in part, holding that any chargeback related to transactions occurring before the execution of the 2019 Agreement arose under the 2014 Agreement. View "Electronic Merchant Systems LLC v. Gaal" on Justia Law
Caudill Seed & Warehouse Co. Inc. v. Jarrow Formulas, Inc.
Caudill's subsidiary develops nutritional supplements. Jarrow, a dietary-supplement company, solicited Ashurst, Caudill’s Director of Research, who had extensively researched the development of broccoli-seed derivatives at issue. Ashurst had signed Non-Disclosure, Non-Competition, and Secrecy Agreements, and annually signed Caudill’s employee handbook, which barred him from disclosing Caudill’s trade secrets or other confidential information. In April 2011, Ashurst, still a Caudill employee, emailed Jarrow confidential Caudill documents. Days later, Jarrow requested a file of the pertinent data. Ashurst sent a physical disc. On May 1, Ashurst began to work for Jarrow. Ashurst then submitted his resignation to Caudill. Ashurst’s Agreement with Jarrow indicated that Jarrow hired him to mimic his work for Caudill, Ashurst proposed that Jarrow adopt the process that Caudill used to manufacture the raw materials for its BroccoMax supplement. Jarrow brought an activated broccoli product into commercial production four months after hiring Ashurst. From 2012-2019, Jarrow earned $7.5 million in sales of their BroccoMax-type product.In a suit under the Kentucky Uniform Trade Secrets Act, the Sixth Circuit affirmed a judgment of $2,427,605 in damages awarded by the jury, $1,000,000 in exemplary damages, $3,254,303.50 in attorney fees, and $69,871.82 in costs against Jarrow. The court rejected arguments that Caudill failed to define one of its Trade Secrets adequately, failed to show that Jarrow acquired that Trade Secret; and did not introduce sufficient evidence attributing its damages to that misappropriation, as well as challenges to the awards of damages. View "Caudill Seed & Warehouse Co. Inc. v. Jarrow Formulas, Inc." on Justia Law
Stackpole International Engineered Products, Ltd.. v. Angstrom Automotive Group, LLC
Stackpole (Purchaser) makes car parts. Precision (Seller) makes automotive subcomponents. In 2014, Seller gave Purchaser quotes on pumps, making “[a]cceptance of order” subject to APQP [Advanced Product Quality Planning Review]. Purchaser issued a “Letter of Intent” to buy 1.1 million 10R/10L shafts and 306,000 Nano shafts. Seller's employee signed the letter, which provided that Purchaser would issue purchase orders for actual shipments. The purchase orders contained six pages of supplemental terms, allowing Purchaer to “terminate . . . this contract, at any time and for any reason, by giving written notice,” and providing that purchase orders would “not become binding” until the additional provisions were “signed and returned.” Seller did not sign the purchase orders but shipped parts to Purchaser for two years. In 2017, Seller stated that it needed a price increase or it would have to halt production. Purchaser agreed to price increases “under duress and protest,” then sued for breach of contract. Seller counterclaimed, alleging that Purchaser had impermissibly withheld its approval to make the parts by an automatic rather than manual process.The district court awarded Purchaser summary judgment, finding the parties had formed a contract “for successive performances.” “indefinite in duration.” Michigan law makes such contracts presumptively terminable upon “reasonable notification” A jury awarded $1 million. The Sixth Circuit affirmed. The Letter of Intent constituted a contract, notwithstanding the failure to engage in APQP. No contextual factor suggests a right to terminate the Letter of Intent without notice. View "Stackpole International Engineered Products, Ltd.. v. Angstrom Automotive Group, LLC" on Justia Law
United Food & Commercial Workers v. Kroger Co.
KLPI operates Kroger grocery stores throughout Tennessee. KLPI has a collective bargaining agreement (CBA) with the Union, which represents all retail employees in different retail-store configurations. The Union immediately represents the employees in any new KLPI store. In 2020, Kroger’s “Supply Chain Division” opened the Knoxville Local Fulfillment Center. After the warehouse opened, the Union filed a grievance, claiming that the Union represented employees at that facility—which the Union called the “Knoxville eCommerce Store.” The Union described how warehouse employees fill orders placed by Walgreens pharmacies and that employees who pick and deliver these orders perform “fundamental[ly] bargaining[-]unit work” like unionized employees at KLPI’s grocery stores. KLPI refused to process the grievance for itself or Kroger, claiming that the Center is a warehouse, not a grocery store, and is part of Kroger’s “supply chain network,” independent from KLPI’s retail stores; KLPI has no relationship with Fulfillment Center employees.The Union pursued arbitration under the CBA. KLPI refused to arbitrate. The district court determined the Union’s claim was arbitrable under the CBA but Kroger was not a party to the CBA; KLPI was ordered to arbitrate. The Sixth Circuit affirmed. The grievance falls within the scope of the CBA’s arbitration agreement, which does not prevent the possible inference that the fulfillment center and its employees are covered by the CBA. View "United Food & Commercial Workers v. Kroger Co." on Justia Law