Justia Business Law Opinion Summaries

Eric Shapiro founded Hyperheal Hyperbarics, Inc., a medical provider offering hyperbaric oxygen therapy and wound care. He served as a director, controlled day-to-day operations, and was employed as a certified HBOT technician. Hyperheal's charter required indemnification for directors and officers to the fullest extent permitted by Maryland law. Hyperheal sued Shapiro, alleging misconduct that led to significant financial losses. The claims included intentional misrepresentation and common law indemnification, asserting that Shapiro breached fiduciary duties as a director and engaged in improper conduct to increase profits.The Circuit Court for Baltimore County dismissed Shapiro's indemnification claim on summary judgment, concluding that the corporation's claims were based solely on his actions as an employee, not as a director. The Appellate Court of Maryland reversed this decision, finding that the allegations implicated Shapiro's fiduciary duties as a director, thus triggering indemnification under the statute. The Appellate Court held that the claims bore a sufficient nexus to Shapiro's status as a director.The Supreme Court of Maryland affirmed the Appellate Court's judgment. The court held that the indemnification required under subsection 2-418(d) of the Corporations and Associations Article applies when a director is sued "by reason of service" in his capacity as a director and prevails. The court determined that the requisite nexus requirement is established if any of the factual allegations, causes of action, or legal theories implicate the individual's role or status as a director. Therefore, Shapiro was entitled to indemnification for his legal expenses incurred in defending the lawsuit. View "Hyperheal Hyperbarics v. Shapiro" on Justia Law

Nyzier Fourqurean, a member of the University of Wisconsin-Madison's football team, challenged the National Collegiate Athletic Association (NCAA) under § 1 of the Sherman Act. He argued that the NCAA's Five-Year Rule, which restricts student-athletes to four seasons of competition within a five-year period, unreasonably restrained trade by preventing him from playing a fifth season. The district court granted a preliminary injunction, allowing Fourqurean to play an additional season, reasoning that the Supreme Court's decision in NCAA v. Alston suggested that men's NCAA Division I Football Bowl Subdivision (FBS) football is a relevant market and that the Five-Year Rule likely had anticompetitive effects.The district court concluded that Fourqurean was likely to succeed on the merits of his claim, citing Alston and the trend in the law since that decision. The court found that the NCAA's Five-Year Rule excluded student-athletes from the market when their marketability for name, image, and likeness (NIL) income was at its peak. The court also acknowledged the rule's procompetitive benefit of linking athletic careers to degree progression but suggested that the NCAA could achieve this with less restrictive means.The United States Court of Appeals for the Seventh Circuit reviewed the case and reversed the district court's decision. The appellate court held that Fourqurean failed to define the relevant market independently and did not establish that the Five-Year Rule had anticompetitive effects. The court emphasized that exclusion from the market alone does not suffice to show anticompetitive effects and that Fourqurean did not demonstrate how the rule harmed competition or created, protected, or enhanced the NCAA's dominant position in the market. Consequently, the court found that Fourqurean did not show a likelihood of success on the merits of his Sherman Act claim. View "Fourqurean v. National Collegiate Athletic Association" on Justia Law

Lackie Drug Store, Inc. filed a putative class action against OptumRx, Inc. and other pharmacy benefit managers (PBMs), alleging violations of several Arkansas statutes due to the PBMs' failure to disclose, update, and notify pharmacies of changes to their Maximum Allowable Cost (MAC) lists. Lackie claimed this resulted in under-reimbursement for prescriptions. The case was initially filed in Arkansas state court and later removed to federal court. Lackie amended its complaint to include five claims, and OptumRx moved to dismiss the complaint on various grounds, including failure to state a claim and failure to exhaust administrative remedies.The United States District Court for the Eastern District of Arkansas dismissed two of Lackie's claims but retained three. The court also denied OptumRx's motion to dismiss based on the argument that Lackie failed to comply with pre-dispute procedures outlined in the Network Agreement. OptumRx later filed an answer and participated in discovery. After Lackie amended its complaint again, adding two new claims and tailoring the class definition to OptumRx, OptumRx moved to compel arbitration based on the Provider Manual's arbitration clause.The United States Court of Appeals for the Eighth Circuit reviewed the case. The court held that OptumRx waived its right to compel arbitration for the original three claims by substantially invoking the litigation machinery before asserting its arbitration right. However, the court found that OptumRx did not waive its right to compel arbitration for the two new claims added in the amended complaint. The court also held that the district court erred in addressing the arbitrability of the new claims because the Provider Manual included a delegation clause requiring an arbitrator to decide arbitrability issues.The Eighth Circuit affirmed the district court's decision in part, reversed it in part, and remanded the case with instructions to grant OptumRx's motion to compel arbitration for the two new claims. View "Lackie Drug Store, Inc. v. OptumRx, Inc." on Justia Law

Seville Industries, LLC, a business providing services to the oil and gas sector, applied for a Paycheck Protection Program (PPP) loan during the COVID-19 pandemic. The company included payments to independent contractors in its payroll costs calculation, resulting in a loan amount of $2,578,351. The Small Business Administration (SBA) later reviewed Seville's loan and determined that the inclusion of independent contractor payments was incorrect, leading to a partial forgiveness of the loan amount.The United States District Court for the Western District of Louisiana reviewed Seville's appeal against the SBA's decision. The district court granted summary judgment in favor of the SBA, upholding the decision to deny full loan forgiveness based on the inclusion of independent contractor payments in the payroll costs.The United States Court of Appeals for the Fifth Circuit reviewed the case and affirmed the district court's decision. The court held that the CARES Act's definition of "payroll costs" does not include payments made to independent contractors by businesses. The court emphasized that the statutory text and structure clearly distinguish between payroll costs for employees and income for independent contractors or sole proprietors. The court also rejected Seville's claims that the SBA's interim final rule changed the meaning of "payroll costs" and that the SBA should be equitably estopped from denying full forgiveness. The court concluded that Seville was not entitled to include payments to independent contractors in its payroll costs calculation for PPP loan forgiveness. View "Seville Industries v. SBA" on Justia Law

In November 2023, Media Matters for America, a nonprofit organization, published articles critical of X Corp. and its CEO, Elon Musk, alleging that advertisements from popular brands were placed next to harmful content on the X platform. This led to significant losses for X as advertisers withdrew. X sued Media Matters and its employees in the federal district court for the Eastern District of Texas, alleging interference with contract, business disparagement, and interference with prospective economic advantage. Media Matters moved to dismiss the complaint for lack of personal jurisdiction, improper venue, and failure to state a claim, but the district court denied the motion. Media Matters then sought to certify the personal jurisdiction question for immediate appeal, which was also denied.The district court denied Media Matters' subsequent motion to transfer venue to the Northern District of California, citing untimeliness and a pattern of gamesmanship. Media Matters then filed a petition for writ of mandamus with the United States Court of Appeals for the Fifth Circuit, seeking a venue transfer based on 28 U.S.C. §§ 1404 and 1406.The United States Court of Appeals for the Fifth Circuit reviewed the petition and found that the district court had not properly considered the eight public- and private-interest factors required for a venue transfer analysis. The appellate court granted Media Matters' petition in part, vacated the district court's order denying the transfer, and remanded the case for a proper venue analysis. The court also held Media Matters' interlocutory appeal in abeyance pending the resolution of the remand. View "In Re: Media Matters for America" on Justia Law

The case involves plaintiffs-appellees, trustees of the Peter and Elizabeth C. Tower Foundation, who brought claims against UBS Financial Services, Inc. and Jay S. Blair (collectively, the "UBS Defendants") under the Investment Advisers Act of 1940 and New York state law. The plaintiffs allege that the UBS Defendants breached their fiduciary duties in managing the Foundation's investment advisory accounts. Specifically, they claim that John N. Blair, the father of Jay Blair, improperly used his position to place the Foundation’s assets with his son's investment firm, which later became affiliated with UBS.The United States District Court for the Western District of New York denied the UBS Defendants' motion to compel arbitration. The court found that the plaintiffs had presented sufficient evidence to question the validity of the arbitration agreement, warranting a trial on that issue. The UBS Defendants had previously moved to stay or dismiss the action under the Colorado River abstention doctrine, which was also denied.The United States Court of Appeals for the Second Circuit reviewed the case. The court applied the Supreme Court's 2022 decision in Morgan v. Sundance, Inc., which held that courts may not impose a prejudice requirement when evaluating whether a party has waived enforcement of an arbitration agreement. The Second Circuit concluded that the UBS Defendants waived their right to compel arbitration by seeking a resolution of their dispute in the District Court first, thus acting inconsistently with the right to arbitrate. Consequently, the Second Circuit affirmed the District Court’s denial of the UBS Defendants’ motion to compel arbitration on the alternative ground of waiver. View "Doyle v. UBS Financial Services, Inc." on Justia Law

Veltor Underground LLC, a construction business, applied for a $125,000 loan under the Paycheck Protection Program (PPP) during the COVID-19 pandemic, claiming it had six employees. However, the Small Business Administration (SBA) later discovered that these "employees" were actually independent contractors. Consequently, the SBA denied Veltor's request for loan forgiveness, as payments to independent contractors do not qualify as "payroll costs" under the CARES Act.The United States District Court for the Eastern District of Michigan granted summary judgment in favor of the defendants, the SBA and associated individuals. The court found that Veltor's payments to independent contractors did not meet the statutory definition of "payroll costs," which is a requirement for loan forgiveness under the PPP.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the district court's decision. The appellate court held that the CARES Act's definition of "payroll costs" includes only payments to employees and not to independent contractors. The court reasoned that the Act distinguishes between businesses with employees and self-employed individuals, including sole proprietors and independent contractors, and that the term "payroll costs" does not encompass payments made to independent contractors by businesses. Therefore, Veltor was not entitled to loan forgiveness and must repay the loan. View "Veltor Underground, LLC v. SBA" on Justia Law

Mark Schena operated Arrayit, a medical testing laboratory in Northern California, which focused on blood tests for allergies. Schena marketed these tests as superior to skin tests, despite their limitations, and billed insurance providers up to $10,000 per test. To maintain a steady flow of patient samples, Schena paid marketers a percentage of the revenue they generated by pitching Arrayit’s services to medical professionals, often misleading them about the tests' efficacy. During the COVID-19 pandemic, Schena transitioned to COVID testing, using similar deceptive marketing practices to bundle allergy tests with COVID tests.The United States District Court for the Northern District of California denied Schena’s motion to dismiss the EKRA counts, arguing that his conduct did not violate the statute as a matter of law. The jury convicted Schena on all counts, including conspiracy to commit healthcare fraud, healthcare fraud, conspiracy to violate EKRA, EKRA violations, and securities fraud. The district court sentenced Schena to 96 months in prison and ordered him to pay over $24 million in restitution.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed Schena’s convictions. The court held that 18 U.S.C. § 220(a)(2)(A) of EKRA covers payments to marketing intermediaries who interface with those who do the referrals, and there is no requirement that the payments be made to a person who interfaces directly with patients. The court also concluded that a percentage-based compensation structure for marketing agents does not violate EKRA per se, but the evidence showed wrongful inducement when Schena paid marketers to unduly influence doctors’ referrals through false or fraudulent representations. The court affirmed Schena’s EKRA and other convictions, vacated in part the restitution order, and remanded in part. View "United States v. Schena" on Justia Law

During the COVID-19 pandemic, K7 Design Group, Inc. (K7) offered to sell hand sanitizer to Walmart, Inc., doing business as Sam’s Club (Sam’s Club). K7 and Sam’s Club discussed and agreed upon the product, price, quantity, and delivery terms for various hand sanitizer products through email communications. K7 delivered over 1,000,000 units of hand sanitizer to Sam’s Club, which paid approximately $17.5 million. However, Sam’s Club did not collect or pay for the remaining hand sanitizer, leading to storage issues for K7.The United States District Court for the Western District of Arkansas held a jury trial, where the jury found in favor of K7 on its breach of contract claim and awarded $7,157,426.14 in damages. Sam’s Club’s motions for judgment as a matter of law and for a new trial were denied by the district court.The United States Court of Appeals for the Eighth Circuit reviewed the case. Sam’s Club argued that K7 failed to present sufficient evidence of an obligation to pay for the products, the jury’s verdict was against the weight of the evidence, and the district court abused its discretion in instructing the jury. The Eighth Circuit affirmed the district court’s decision, holding that the communications between K7 and Sam’s Club constituted binding orders under Arkansas’s Uniform Commercial Code (UCC). The court found that the evidence supported the jury’s verdict and that the district court did not abuse its discretion in its jury instructions or in denying Sam’s Club’s motions. The court also affirmed the district court’s award of prejudgment interest and attorney fees and costs. View "K7 Design Group, Inc. v. Walmart, Inc." on Justia Law

Anderson & Koch Ford, Inc., a Ford dealership in North Branch, Minnesota, operates under a Ford Sales and Service Agreement. In late 2022, Ford announced plans to establish a new dealership in Forest Lake, Minnesota, and to reassign half of Anderson & Koch’s designated sales area to the new dealership. Anderson & Koch filed a lawsuit in state court, alleging violations of the Minnesota Motor Vehicle Sale and Distribution Act (MVSDA), specifically sections 80E.13(k) and (p). Ford removed the case to federal court and moved to dismiss the claims.The United States District Court for the District of Minnesota partially granted Ford’s motion to dismiss, ruling that Anderson & Koch failed to state a claim under sections 80E.13(k) and (p) regarding the establishment of the new dealership. However, the court allowed Anderson & Koch to challenge the proposed change to its designated sales area under the same sections. Anderson & Koch then appealed the dismissal of its claims related to the new dealership.The United States Court of Appeals for the Eighth Circuit reviewed the case de novo and affirmed the district court’s decision. The appellate court agreed that Anderson & Koch could not challenge the establishment of the new dealership under sections 80E.13(k) or (p) of the MVSDA. The court held that the establishment of a new dealership did not modify the existing franchise agreement, as required by section 80E.13(k), nor did it arbitrarily change the dealer’s area of sales effectiveness under section 80E.13(p). The court also noted that Anderson & Koch had dismissed its claims regarding the change to its sales area, leaving only the challenge to the new dealership on appeal. View "Anderson & Koch Ford, Inc. v. Ford Motor Company" on Justia Law