Justia Business Law Opinion Summaries

The Kepleys owned 30% of ATA’s outstanding capital stock. Lanz bought one share of Series A Convertible Preferred Stock in the corporation and a right to purchase common stock. At that time, Lanz, ATA, and its shareholders entered into an agreement, prohibiting sale of restricted shares (including Lanz’s share) to ATA’s competitors. In 2010, the Kepleys learned that Lanz sought to sell his share and purchase option to Crimson, an ATA competitor, for $2,799,000. The Kepleys sued, contending that Crimson’s president told them that they could not afford the Lanz shares or litigation and that Crimson would “shut it down or squeeze them out.” The Kepleys sold their shares to Crimson. Lanz did not complete the sale of his stock and remained a shareholder in ATA, 30 percent of which Crimson then owned. The Kepleys sought the difference between the sale price and the fair market value of the shares. The district court dismissed, finding that the Kepleys lacked standing because their alleged injury amounted to diminution in stock value, suffered by the corporation, and only derivatively shared by the Kepleys. The Sixth Circuit reversed, holding that the Kepleys, who are no longer shareholders and cannot pursue derivative claims, have standing for a direct suit. View "Kepley v. Lanz" on Justia Law

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

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

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

Park sells art from its gallery, online, by catalog, and by phone, and conducts auctions in different cities and on cruise ships. Franks, CEO of Global Fine Art Registry, published online articles alleging that Park engaged in suspect business practices and sold inauthentic art. Park sued, claiming defamation, tortious interference, interference with prospective business advantage, and civil conspiracy to destroy goodwill and reputation. During trial, the district court gave several warnings and sanctioned Franks’s counsel for failure to honor rulings regarding improper lines of questioning. Despite repeated instances of misconduct, Park did not request a mistrial. The jury returned a verdict in favor of defendants on defamation, tortious interference with business expectancies, and civil conspiracy, but did not find in favor of defendants on counterclaims. The jury found in favor of GFAR on its Lanham Act counterclaim and awarded $500,000.00. The district court decided that the misconduct was serious enough that there was a reasonable probability that the verdict was influenced and granted a new trial. The Sixth Circuit affirmed denial of a motion to reinstate the verdict. Failure to seek a mistrial based on misconduct occurring during the trial did not waive Park’s right to seek a new trial under FRCP 59. View "Park West Galleries, Inc. v. Hochman" on Justia Law

Plaintiffs are wholesalers of beer and wine; each acted as the exclusive distributor of Miller and/or Coors brands within a defined territory under written franchise agreements. In 2007, Miller and Coors entered a Joint Venture agreement, contemplating creation of MillerCoors, restructured their respective businesses and assets, and assigned distribution agreements to the Joint Venture. MillerCoors notified the plaintiffs that it intended to terminate their distribution rights as a successor manufacturer under Ohio Rev. Code 1333.85(D). The district court found that MillerCoors is not a “successor manufacturer” under Ohio law because it is controlled by Miller and Coors, and that the Act, therefore, prohibits MillerCoors from terminating the distributorships. The Sixth Circuit affirmed. Miller and Coors exercise control over MillerCoors through their equal voting power, veto power, the appointment of directors, all of whom are present officers or employees of the joint venture partners, and who owe their fiduciary duty only to Miller or Coors, their influence over the executive team, and their funding of MillerCoors. Even under the manufacturers’ proposed definition of “control,” the evidence shows that Miller and Coors together retain the power to “direct, superintend, restrict, govern, [and] oversee” MillerCoors. View "Beverage Distrib., Inc. v. Miller Brewing Co." on Justia Law

Polar Holding was sole shareholder of PMC, a company engaged in the petroleum-additive business. PMC was in default on a loan for which it had pledged valuable intellectual property as collateral, and Polar Holding was in the midst of an internal dispute between members of its board of directors regarding business strategy for PMC. One of the directors, Socia, formed a competing company, Petroleum, for the purpose of acquiring PMC’s promissory note and collateral from the holder of PMC’s loan. Petroleum brought suit against Woodward, an escrow agent in possession of PMC’s collateral, alleging that PMC was in default on the payment of its promissory note. Polar Holding and PMC intervened and filed counterclaims against Petroleum and a third-party complaint against additional parties, including Socia. Polar Holding and PMC allleged breach of fiduciary duty, civil conspiracy, and tortious interference. After PMC filed for bankruptcy, its claims became the property of the bankruptcy trustee. Polar Holding’s claims were later dismissed. The Sixth Circuit affirmed dismissal of a tortious interference claim as addressed by the district court, but reversed dismissal of a breach-of-fiduciary-duty claim against Socia and a civil-conspiracy claim against individual third-party defendants. View "Petroleum Enhancer, L.L.C. v. Woodward" on Justia Law

Plaintiffs, Lewis, Ross and Jennings, were limited guarantors of loans owed by River City, which filed for bankruptcy. Defendant acquired the original lender’s position and reported to credit reporting agencies that the plaintiffs were obligated in the full amount of the underlying loans rather than in limited amounts. In a suit under the Fair Credit Reporting Act 15 U.S.C.1681–1681x, defendant counterclaimed on the guaranty agreements. The district court found defendant liable to each plaintiff for FCRA violations and the plaintiffs in breach of their guaranty agreements. The court awarded Lewis $30,000 in actual damages and $120,000 in punitive damages and each remaining plaintiff $25,000 in actual damages and $100,000 in punitive damages. The court jointly awarded plaintiffs $20,024.55 in costs and $218,674.00 in attorney’s fees. On the breach of guaranty claims, the court found Lewises liable for $256,797.29, Jennings liable for $255,367.29, and Ross liable for $306,726.14. Defendant objected to Lewis’s garnishment, arguing that defendant was the net judgment creditor because the proper method of calculation required the court to: add the amounts defendant owed plaintiffs (including attorney’s fees and costs); add the amount paintiffs collectively owed defendant; then set off the former sum from the latter. The district court rejected the argument. The Sixth Circuit affirmed. View "Lewis v. United Joint Venture" on Justia Law

Principals of Cybercos defrauded lending institutions out of more than $100 million in loan. In 2002, Huntington granted Cyberco a multi-million-dollar line of credit, and Cyberco granted Huntington a continuing security interest and lien in all of Cyberco's personal property, including deposit accounts. After discovering the fraud, the government seized approximately $4 million in Cyberco assets, including $705,168.60 from a Huntington Bank Account. Cyberco principals were charged in a criminal indictment with conspiring to violate federal laws relating to bank fraud, mail fraud, and money laundering. Count 10 issued forfeiture allegations against individuals regarding Cyberco assets, including the Account. In their plea agreements, defendants agreed to forfeit any interest they possessed in the assets or funds. The district court entered a preliminary order of forfeiture with regard to the assets, including the Account. Huntington filed a claim, asserting ownership interest in the forfeited Account. The district court found that Huntington did not have a legal claim. On remand, the district court again denied the claim. The Sixth Circuit reversed. A party who takes a security interest in property, tangible or intangible, in exchange for value, can be a bona fide purchaser for value of that property interest under 21 U.S.C. 853(n)(6)(B). View "United States v. Huntington Nat'l Bank" on Justia Law

Plaintiff rented a car, drove 64 miles in one day, refilled the fuel tank, and returned the car to the same location from which he rented the car. In addition to rental and other fees that he does not dispute, he was charged a $13.99 fuel service fee that he challenged by filing a putative class action, claiming breach of contract, fraud, and unjust enrichment. Defendant claimed that, because plaintiff drove fewer than 75 miles during the rental period, to avoid the charge he was required to return the car with a full fuel tank and to submit a receipt. The district court dismissed, finding that the contract was not ambiguous. The Sixth Circuit affirmed, citing the voluntary payment doctrine.