Justia Commercial Law Opinion Summaries

A company that provides employee training filed suit against a client, claiming breach of contract based both on alleged failure to pay a gain sharing fee and breach of confidentiality provisions.It sought an accounting for disclosures or uses of its materials inconsistent with the copyright license provided by the agreement. The court granted summary judgment for the client. The First Circuit affirmed, finding that the training company did not support its figures with respect to the fee or the breach of confidentiality.

At issue in this extraordinary writ proceeding was whether Nev. Rev. Stat. 11.259(1) compels dismissal where the initial pleading in an action alleging nonresidential construction malpractice was served without filing the attorney affidavit and expert report required by Nev. Rev. Stat. 11.258(1) and (3). The Supreme Court granted the writ, holding that a defective pleading served in violation of section 11.258 is void ab initio and of no legal effect and, thus, cannot be cured by amendment. The Court held that because the initial pleadings served by certain real parties in interest in this case did not include the attorney affidavit and expert report as required by section 11.258, those pleadings were void ab initio, and the district court did not have discretionary authority to allow the parties to amend their pleadings to cure their failure to comply with section 11.258.

In 2004 HD contracted with plaintiff, to develop an inventory classification system, called a taxonomy,for HD’s database. Plaintiff would own the intellectual-property rights and would license HD to use it at no-cost as long as plaintiff remained HD's data-pool vendor and HD continued paying for services. In 2008 HD began to develop an in-house database, incorporating the taxonomy that plaintiff had created. Plaintiff learned of the plan and registered a copyright. HD sent notice terminating the relationship, with a check for $100,000 to purchase a perpetual license, pursuant to the contract. HD notified suppliers to transmit their product data to its in-house system rather than to plaintiff, which returned the check and filed suit. The district judge dismissed. The Seventh Circuit affirmed, concluding that HD did not violate copyright law and that the case did not belong in federal court. HD acted in accordance with its contract rights.

Debtor, a limited liability company, was formed by five members, who made up a Board of Managers. Forte had a 12% interest. After his requests to inspect of business records were denied, Forte sued Lynch, the member with the highest percentage interest. In the six months before filing for Chapter 11 bankruptcy, the company paid Forte $215,000 as part of the settlement. The bankruptcy court found that Forte qualified as an "insider" (11 U.S.C. 547(b)(4)(B)) and that the trustee could void and recover the transfers. The district court and Seventh Circuit affirmed. Insider status is not just a matter of title; Forte retained voting rights in the company, held a formal position on the Board, and did not resign until after he received the transferred funds.

Debtor, a waste disposal firm, borrowed from FFC, giving FFC a security interest before filing a Chapter 11 petition in 2003. In 2005 a trustee, appointed to run the business, moved to convert to a Chapter 7 proceeding and assented to having Allied service debtor's customers. The court granted the motion and lifted the equitable stay to allow FFC to sell secured equipment. FFC later foreclosed against additional property, which it sold to City Sanitation. A consultant who had been retained by the trustee to assist in operating the business went to work for Allied. In 2007 City Sanitation sued Allied and the consultant, purportedly as the debtor's successor in interest, alleging conversion. The bankruptcy court reopened the bankruptcy case to allow the trustee to take over the case against Allied. The district court and First Circuit affirmed. The right to pursue commercial tort claims cannot be passed to a secured creditor as proceeds of original collateral. The court rejected an argument that FFC's security interest conferred the right to prosecute claims arising from interference with the collateral. The alleged wrongdoing occurred while the consultant was in debtor's employ; any harm was to debtor and belongs to the estate.

Sheryl Crasco secured three payday loans from three different lenders. After the payor banks returned the checks for insufficient funds, the payday lenders assigned the checks to Credit Service, a collection agency. Credit Service filed an action against Crasco to recover the face value of the checks, a service fee per check, and bad check penalties of $500 per check. The county justice court concluded (1) Crasco must pay to Credit Service the face amount of each check and the service charge on each check, (2) Credit Service could not collect the bad check penalties, and (3) Crasco could recover damages for Credit Service's illegal pursuit of the bad check penalties. The district court reversed, determining that Credit Service could collect the bad check penalties. The Supreme Court reversed, holding a collection agency cannot charge bad check penalties for checks assigned to it from payday lenders when the payday lenders themselves are statutorily prohibited from charging such penalties. Remanded to determine whether the justice court incorrectly awarded Crasco damages.

Appellant Stivers Automotive of Lexington, Inc. (Stivers) and Respondent South Carolina Federal Credit Union (SCFCU) were parties to a Dealer Agreement (Agreement), under which SCFCU agreed to purchase sales contracts between Stivers and purchasers of its vehicles. Among other provisions in the Agreement, Stivers warranted certain representations made in connection to its sales contracts assigned to SCFCU. Hiram Riley (Riley) sought to purchase a vehicle from Stivers but was unable to qualify for financing. Stivers' salesman, Tom Roper (Roper), indicated that Riley could get the car if he found a co-signer. Riley contacted his sister, Mildred Higgins (Higgins), who agreed to co-sign for the car. Roper then visited Higgins at her home to sign the appropriate paperwork. After Roper thoroughly explained the documents, Higgins indicated she understood and signed the paperwork. As it turned out, the paperwork was drafted so that Higgins was the sole purchaser of the car, not a co-signer. Ultimately, SCFCU approved the loan to Higgins for the purchase price. Riley picked up the vehicle, with the understanding that he was to make the payments. Riley eventually stopped making payments on the car, stopped driving it, and told SCFCU where it could recover the car. SCFCU hired an agent to repossess the vehicle. SCFCU filed a complaint against Higgins, given that her name was on the loan. Higgins denied the allegations in the complaint, stating that she was incompetent at the time of the execution of the contract. Subsequently, SCFCU amended its complaint, alleging Stivers breached the Agreement. The trial court granted SCFCU's motion for a directed verdict against Stivers, finding Higgins lacked capacity to contract and Stivers breached the Agreement in that regard. The court also held that Stivers breached all contract warranties. Upon review, the Supreme Court found that the trial court erred by directing a verdict against Stivers on the issue of capacity. Additionally, the Court held that the trial court erred in granting a directed verdict to SCFCU as to the other warranties contained in the contract, as well as the amount of damages due SCFCU.

Plaintiff filed a voluntary Chapter 13 bankruptcy petition and successfully sought to avoid a lien on her manufactured home held by defendant. The Bankruptcy Appellate Panel and Sixth Circuit affirmed. The mortgage did not originally cover the manufactured home, which was personal property until 2007,when a state court entered an in rem judgment and order of sale converting it to an improvement to real property. After that, the home was covered by the mortgage. The conversion, unlike the mortgage, was involuntary as to the plaintiff, so she had standing under 11 U.S.C. 522(h) to avoid the lien.

Plaintiff sued the bank after it refused to honor cashier's checks it thought he had obtained by fraud. One check, for $100,000, had previously bounced, another was a starter check for $80,000 and was dated five months earlier. The bank had communication with plaintiff's former employer, indicating fraud. The district court granted summary judgment to the bank. The Sixth Circuit affirmed. Under the Uniform Commercial Code as enacted in Michigan, the bank's actions were lawful even absent any finding of fraud. The checks were not supported by consideration, plaintiff was not a person entitled to enforce the instruments, and plaintiff was not harmed.

Plaintiff appealed the district court's grant of summary judgment to defendant on his claim of malicious prosecution under Arkansas law. The district court held that plaintiff failed to present evidence sufficient to withstand summary judgment on two of the five elements necessary to sustain his claim. The court held that the district court erred in holding that the evidence was insufficient as a matter of law to sustain plaintiff's claim that defendant brought suit against him on the guaranty without probable cause. The court also held that a jury must decide what was defendant's motive or purpose in suing plaintiff if it in fact understood it had no reasonable chance of prevailing on the merits of its claim against plaintiff.