Articles Posted in U.S. 10th Circuit Court of Appeals

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David Richison began a payroll processing company in the 1990s in Oklahoma with his niece and nephew, Shannon and Chad Richison. The company was called "Ernest Group, Inc." and did business under the name "Paycom Payroll." David wrote two software programs for use at the company. The first program, ("BOSS") was assigned to Ernest Group in 1999. The second was called "Independence." David left Ernest Group and moved to Maryland where he formed his own payroll company, "Period Financial Corporation." David wrote a third program, "Indy," based in part on Independence. In 2009, Ernest Group filed a copyright infringement suit against David and Period, alleging that Indy infringed on Ernest Group's copyright in BOSS. Shortly after filing its complaint, Ernest Group registered a copyright in Independence, calling it a work-for-hire. By 2011, David had written a fourth program, "Cromwell," which would become a new basis for Ernest Group's lawsuit. The parties ultimately settled and agreed to the entry of a consent decree. All of Ernest Group's claims were released, except a claim for injunctive relief based on infringement. All rights to Independence were assigned to Ernest Group, and the parties agreed that a special master be assigned to determine whether Cromwell infringed on BOSS or Independence. The parties could not agree, however, which version of Cromwell should have been the subject of the special master's analysis. The special master ultimately found copyright infringement occurred, and the district court adopted the special master's report. David and his company appealed. Upon review, the Tenth Circuit found the special master did not document his application of each step of the abstraction-filtration-comparison test, and that "[h]is report reads consonantly with the misconception that an infringement analysis begins and ends with 'copying in fact.'" The Court therefore vacated the district court's order adopting the report and remanded with instructions for the district court to request a more thorough report with which to analyze Ernest Group's infringement claim. View "Paycom Payroll, et al v. Richison, et al" on Justia Law

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Plaintiffs filed this complaint on behalf of a class of all persons and entities who purchased or otherwise acquired Chesapeake common stock from 2009 to 2012, and who were damaged from those purchases/acquisitions. The complaint alleged that Defendants materially misled the public through false statements and omissions regarding two different types of financial obligations: (1) Volumetric Production Payment transactions (under which Chesapeake received immediate cash in exchange for the promise to produce and deliver gas over time); and (2) the Founder Well Participation Program (under which Chesapeake CEO Aubrey McClendon was allowed to purchase up to a 2.5% interest in the new gas wells drilled in a given year). With respect to the "VPP program," Plaintiffs alleged Defendants touted the more than $6.3 billion raised through these transactions but failed to disclose that the VPPs would require Chesapeake to incur future production costs totaling approximately $1.4 billion. Plaintiffs contended the failure to disclose these future production costs was a material omission that misled investors into believing there would be no substantial costs associated with Chesapeake’s obligations to produce and deliver gas over time. The district court granted Defendants’ motion to dismiss the complaint, holding that Plaintiffs had failed to plead with particularity facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act of 1995. Viewing all of the allegations in the complaint collectively, the Tenth Circuit was not persuaded they gave rise to a cogent and compelling inference of scienter. Accordingly, the Court affirmed the district court's dismissal of the case. View "Weinstein, et al v. McClendon, et al" on Justia Law

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The plaintiffs in this case were David and Barbara Green, their three children, and the businesses they collectively owned and operated: Hobby Lobby Stores, Inc. and Mardel, Inc. As owners and operators of both Hobby Lobby and Mardel, the Greens organized their businesses with express religious principles in mind. As was particularly relevant to this case, one aspect of the Greens’ religious principles was a belief that human life begins when sperm fertilizes an egg. In addition, the Greens believed it was immoral for them to facilitate any act that caused the death of a human embryo. Plaintiffs brought an action to challenge portions of the Patient Protection and Affordable Care Act (ACA) whereby employment-based group health plans covered by the Employee Retirement Income Security Act (ERISA) were required provide certain types of health services for women that implicated contraceptive methods, sterilization procedures, and patient education and counseling (without cost-sharing by plan participants or beneficiaries) - all "abortifacients" that went against plaintiffs' religious beliefs. Plaintiffs filed suit to challenge the contraceptive-coverage requirement of the ACA under the Religious Freedom Restoration Act (RFRA), the Free Exercise Clause of the First Amendment, and the Administrative Procedure Act. Plaintiffs simultaneously moved for a preliminary injunction on the basis of their RFRA and Free Exercise claims. The district court denied that motion. Plaintiffs appealed the denial of the injunction. After review by the Tenth Circuit Court of Appeals, the Court held that Hobby Lobby and Mardel were entitled to bring claims under RFRA, established a likelihood of success that their rights under statute were substantially burdened by the contraceptive-coverage requirement, and established an irreparable harm. However, the case was remanded back to the district court for further proceedings on two remaining factors governing the grant or denial of a preliminary injunction. View "Hobby Lobby Stores, et al v. Sebelius, et al" on Justia Law

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MMS Construction & Paving, L.L.C. entered into a subcontract with Head, Inc. to pave asphalt runway shoulders at Altus Air Force Base in Oklahoma. The project was delayed and MMS, expressing concern that Head had not been making agreed payments, quit the job. MMS also complained that completing the job would be more expensive than it originally believed because certain requirements were being imposed that Head said would be waived. After MMS quit, Head finished the job, relying on other subcontractors. MMS sued Head on state-law claims of breach of contract, tortious breach of contract, quantum meruit, and misrepresentation, and brought a claim under the federal Miller Act on Head’s surety bond for the project. Head filed a counterclaim, alleging that MMS breached the contract. After a jury trial, MMS was awarded damages and attorney fees. Head filed a motion for judgment as a matter of law or for a new trial, both of which the district court denied. Head appealed, arguing: (1) the evidence at trial was insufficient to show that Head breached the contract; (2) if there was a breach, it was not material; (3) an Oklahoma statute limited MMS’s breach-of-contract damages to the amount unpaid plus interest; (4) the evidence was not sufficient to establish MMS’s alleged lost-profits damages for breach of contract; (5) MMS did not present sufficient evidence to prove misrepresentation or any damages from misrepresentation, MMS waived the misrepresentation claim, and the award of misrepresentation damages duplicated the award of damages for breach of contract; and (6) MMS was not entitled to attorney fees from Head because the Miller Act does not allow recovery of those fees. Upon careful consideration of the district court record, the Tenth Circuit reversed damages award based on the misrepresentation claim because the jury’s award was not supported by any evidence at trial. On all other issues, the Court affirmed. View "MMS Construction & Paving v. Head, Inc., et al" on Justia Law

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The contracts at issue in this case related to Z3 Technology's design and manufacturing of circuit board modules for use in Digital Ally, Inc.'s products. The first contract, called for Z3 to design, manufacture, and deliver to Digital 1,000 modules incorporating Texas Instruments' DM355 computer chip. The second contract involved a larger quantity of modules that would use Texas Instruments' next-generation DM365 chip. Both contracts were signed by Robert Haler, who was then Digital's Executive Vice President of Engineering and Production. The contracts were described as "Production License Agreement[s]," and they expressly provided that the modules would be licensed, not sold, to Digital. The contracts both stated they would "be governed by and interpreted in accordance with the laws of the State of Nebraska, without reference to conflict of laws principles." Upon review of the contracts at issue in this case, the Tenth Circuit reversed and remanded for the district court to award prejudgment interest to Z3 on a damages award and unpaid design fees. All other portions of the district court's judgment were affirmed. View "Digital Ally, et al v. Z3 Technology, et al" on Justia Law

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Plaintiff Higby Crane Service, LLC (Higby) entered into a Contract with Defendant DCP Midstream, LP that covered crane work to be done at the gas processing plant of DCP's wholly owned subsidiary National Helium, LLC (collectively, "DCP"). A fire negligently started by DCP damaged Higby's crane. The other Plaintiff, National Interstate Insurance Co. had issued Higby a commercial inland marine (CIM) policy covering direct physical loss to certain property. National paid Higby under the policy, and Plaintiffs then sued DCP for the loss. DCP counterclaimed that Higby had breached the contract by failing to obtain a commercial general liability (CGL) policy that would have indemnified DCP for its negligence and therefore Higby should bear the loss from the damage to the crane. The United States District Court for the District of Kansas granted summary judgment to Plaintiffs, and DCP appealed. Upon review, the Tenth Circuit reversed and remanded for further proceedings to determine whether the required CGL policy would have protected DCP from liability. View "National Interstate Insurance, et al v. National Helium, et al" on Justia Law

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Defendants-Appellants Chesapeake Exploration, L.L.C., and Chesapeake Investments appealed a district court judgment awarding Plaintiff-Appellee BP America Production Company $22,265,302 plus interest, and a district court order compelling Chesapeake to pay $1,403,669.38 in attorneys' fees and disbursements. BP cross-appealed the district court order confirming an arbitration award. This dispute arose out of a purchase and sale agreement ("PSA") entered into by Chesapeake as seller and BP as purchaser of oil and gas properties for $1.75 billion. The PSA contained three arbitration provisions. After closing, the parties agreed on title defects. Less the aggregate threshold, the parties agreed BP was owed $81,234,556. At the same time, disputed title defects and benefits were submitted to title arbitration. BP sought approximately $46 million for disputed title defects, and Chesapeake sought approximately $22 million for disputed title benefits and "credits." While the title arbitration was pending, BP submitted a proposed final accounting statement reflecting the agreed title defects of approximately $80 million. Chesapeake responded with an exception report changing the $80 million to $58 million. When BP asked why, Chesapeake responded that it had applied a $22 million offset based on its pending claims in the title arbitration; Chesapeake did not dispute the $80 million in agreed title defects, but temporarily withheld the $22 million because it might recover that amount in title arbitration. Though the accounting arbitration ended, the title arbitration continued. The arbitration panel issued an award finding $11,526,434 in title defects (favoring BP), and $3,727,031 in title benefits (favoring Chesapeake). The arbitration panel noted that it made no determination of whether these amounts exceeded the aggregate threshold, or whether its ruling would actually cause any money to exchange hands. If the parties could not agree on the effect of the panel's ruling on the ultimate purchase price adjustment, they could submit their positions on that issue to further arbitration. Shortly thereafter, BP requested payment from Chesapeake. Because a $3 million in title benefits awarded to Chesapeake did not exceed the aggregate threshold, Chesapeake received no price adjustment to offset the $22 million it previously withheld. The parties filed competing motions to confirm in the district court. The court ultimately entered judgment in favor of BP for $22,265,302 plus interest. Chesapeake appealed that judgment. The district court later granted in part BP's motion for attorneys' fees and costs and awarded $1,403,669.38 against Chesapeake for fees and disbursements. Chesapeake appealed that judgment too. Upon review of the matter, the Tenth Circuit affirmed both awards in Chesapeake's direct appeals and dismissed BP's cross-appeal. View "BP America Production Company v. Chesapeake Exploration, LLC, et al" on Justia Law

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J. Hoyt Stephenson incorporated National Financial Systems Management, Inc. (NFSM) in Utah. The same day, the NFSM Employee Stock Ownership Plan was created. The Plan has always owned 100% of NFSM’s stock. Stephenson was one of the Plan’s trustees. In June 2006, Stephenson, along with his wife and children, moved from Utah to Wyoming, and as a result, Stephenson became a Wyoming citizen. About a year later, Stephenson sold one of his companies, National Financial Systems, Inc. (NFS) to NFSM. Then he sold another one, Metronomics Inc. to NFSM. In June 2009, Stephenson and his family went back to Utah. The issue before the Tenth Circuit in this case centered on whether Stephenson became a Utah citizen when he moved back. Brent Middleton, the Stock Plan's trustee, and several others (all Utah citizens), brought several federal-law claims Stephenson in the federal district court. Stephenson fought back with state-law counterclaims and a third-party complaint asserting state-law claims against multiple third-party defendants. The district court dismissed those counterclaims and third-party claims, concluding that it lacked diversity jurisdiction to hear them because Stephenson also was from Utah. The Tenth Circuit concluded that the district court did not clearly err in finding that Stephenson was a Utah citizen. View "Middleton, et al v. Stephenson, et al" on Justia Law

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In June 2012, the United States District Court for the District of Utah dismissed the claims of J. Hoyt Stephenson (a man the district found to be a Utah citizen), for lack of diversity jurisdiction. Less than three months later, Stephenson assigned his interests in various stock and real property to a new company of his creation, National Fitness Holdings, Inc., a Wyoming corporation of which Stephenson was the sole director, officer and shareholder. Four days later, National Fitness sued Grand View Corporate Centre, LLC in federal district court. The district court once again dismissed for lack of subject-matter jurisdiction, this time finding that Stephenson had impermissibly made the assignments to manufacture diversity jurisdiction. Upon review of the appeal of that decision, the Tenth Circuit concluded the district court did not err in finding it lacked jurisdiction. Accordingly, the Court affirmed the district court's decision. View "National Fitness Holdings v. Grandview Corporate Center, et al" on Justia Law

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Judy Knight appealed the dismissal of her lawsuit against Mooring Capital Fund. “Most of [the Tenth Circuit’s] reasons for affirmance are routine.” But the Court took the opportunity of this case to comment on Knight’s federal Racketeer Influenced and Corrupt Organizations Act (RICO) claims based on alleged misconduct in a prior litigation. With regard to her RICO claim, Knight argued that defendants made misrepresentations to the district court through pleadings and testimony that increased the cost of litigating her prior case, and caused the district court to rule against her. She alleged that that activity violated wire-fraud and mail-fraud statutes, thereby constituting a pattern of racketeering in violation of RICO. Because Knight did not identify any arguments she would have made regarding few and costs had it not been for defendants’ fraud, because she did not offer any specific explanation if how defendants’ litigation misconduct affected her ability to litigate he issues in the prior litigation, and because Knight did not allege there was evidence of misconduct that was unavailable while that prior litigation was pending, the Tenth Circuit affirmed the district court’s dismissal on this RICO claim too. View "Knight, et al v. Mooring Capital Fund LLC, et al" on Justia Law