Justia Business Law Opinion Summaries

Peterson, a Madison Wisconsin entrepreneur, owned a polyurethane scrap-foam material company and a development company, with Shapiro and Spahr. Peterson made unauthorized intercompany loans and used corporate funds to pay off his personal gambling debts. Eventually all of his businesses failed, the companies defaulted, and federal agents investigated. Peterson was indicted on 13 counts: bank fraud, making false statements to banks, money laundering, and pension theft. The judge entered judgment of acquittal on two counts and at sentencing imposed a within-guidelines prison term of 84 months on the remaining six. The Seventh Circuit rejected claims of evidentiary and instructional error and his arguments for judgment of acquittal or a new trial as having no merit; the evidence was easily sufficient to support the jury’s verdict. The court also upheld the joinder of the pension-theft count for trial with the others. The court vacated the sentence. The judge correctly calculated the gross receipts Peterson derived from his fraud; because he was the sole perpetrator, all proceeds of the fraud were properly attributed to him. But Peterson repaid in full a $300,000 wire transfer before detection of his fraud, so that sum should not have been included in the total loss amount. View "United States v. Peterson" on Justia Law

In 2003, a closely held corporation purchased a United life insurance policy on Clark, then its President. Buck, its COO, was the beneficiary. Clark thought that the $1 million death benefit would enable Buck to buy out his stock from Clark’s family. The policy was amended so that the benefit would go to the corporation. In 2005 Clark retired and sold his interest to Holtz, the firm’s new President. Buck remained as COO. Holtz owned 61% of the stock and Buck the rest. Holtz received a copy of the policy, including the amendment naming the corporation as the beneficiary. Another copy was in corporate files. Clark died in 2011. Buck told Holtz that the company was the beneficiary, but United paid the money to Buck. When Buck tried to use the proceeds to buy Holtz’s stock, he was removed from the board and quit as COO. The corporation sued. United conceded that the corporation was the beneficiary, but argued that the corporation knew the truth and allowed Buck to claim the money, carrying out the plan devised by Clark and Buck. During discovery,the corporation then admitted finding the amendment earlier. The judge entered summary judgment in favor of United. The Seventh Circuit affirmed, rejecting an argument that Holtz was misled by United’s error and had no reason to think that the corporation was the beneficiary. The corporation’s knowledge, not Holtz’s, is dispositive. View "Samaron Corp. v. United of Omaha Life Ins. Co." on Justia Law

Hyson USA and Hyson 2U are food distributors. Hyson USA is wholly owned by its president, Tansky, and has operated since 2006. Kaminskas was one of its managers. In 2012, Hyson USA encountered serious financial difficulty, culminating in the loss of its liability insurance, forcing the company to suspend operations. Months later, Kaminskas established Hyson 2U. Hyson USA transferred its branded inventory and equipment to the new company. Hyson 2U leased the warehouse from which Hyson USA had operated. Tansky then switched roles with Kaminskas and went to work at the new company. Hyson 2U operated in the same manner and in the same markets as Hyson USA. In 2014, Tansky was fired. He and Hyson USA, again operational, sued Hyson 2U and Kaminskas alleging trademark infringement under the Lanham Act. The judge dismissed the trademark claims, citing acquiescence, and relinquished supplemental jurisdiction over the state-law claims. The Seventh Circuit reversed, stating that acquiescence is a fact-intensive equitable defense that is rarely capable of resolution on a motion to dismiss. View "Hyson USA Inc. v. Hyson 2U, Ltd." on Justia Law

Knauf Insulation, the Delaware subsidiary of a German corporation, has its principal place of business in Indiana. SBI was a distributor of Knauf’s insulation; the Dowds are SBI’s principals. For many years SBI was delinquent in paying Knauf. By 2012, when Knauf filed suit , SBI owed Knauf more than $3.5 million. The district judge granted Knauf summary judgment with interest on the debt. The Seventh Circuit affirmed, rejecting arguments that the Dowds’ 2003 guaranty, of SBI’s debts to Knauf did not “intend or contemplate being sued by Knauf in Indiana on its much larger claims against SBI, arising more than four years later,” and that despite the forum‐ selection clause “SBI, an out‐of‐state distributor doing business in the southeast, did not have such minimum contacts with Indiana as would subject it to Indiana’s jurisdiction.” The size disparity between the firms did not render the guaranties unconscionable or unenforceable. The statute of limitations barred a purported counter-claim. View "Knauf Insulation, Inc. v. S. Brands, Inc." on Justia Law

ACL manufactures and operates tow boats and barges that operate in U.S. inland waterways. Lubrizol manufactures industrial lubricants and additives, including a diesel‐fuel additive, LZ8411A. VCS distributed the additive. Lubrizol and VCS jointly persuaded ACL to buy it from VCS. Before delivery began, Lubrizol terminated VCS as a distributor because of suspicion that it was engaging in unethical conduct: a Lubrizol’s employee had failed to disclose to his employer that he was also a principal of VCS. Lubrizol did not inform ACL that VCS was no longer its distributor. No longer able to supply ACL with LZ8411A, VCS substituted an additive that ACL contends is inferior to LZ8411A. VCS didn’t inform ACL of the substitution. According to ACL, Lubrizol learned of the substitution, but did not inform ACL. When ACL discovered the substitution, it sued both companies. ACL settled with VCS. The district judge dismissed Lubrizol. The Seventh Circuit affirmed, rejecting claims that Lubrizol had a “special relationship” that required it to disclose ACL’s conduct, that VCS was Lubrizol’s apparent agent, and of “quasi contract” between ACL and Lubrizol. View "Am. Commercial Lines, LLC v. Lubrizol Corp." on Justia Law

ACL manufactures and operates tow boats and barges that operate in U.S. inland waterways. Lubrizol manufactures industrial lubricants and additives, including a diesel‐fuel additive, LZ8411A. VCS distributed the additive. Lubrizol and VCS jointly persuaded ACL to buy it from VCS. Before delivery began, Lubrizol terminated VCS as a distributor because of suspicion that it was engaging in unethical conduct: a Lubrizol’s employee had failed to disclose to his employer that he was also a principal of VCS. Lubrizol did not inform ACL that VCS was no longer its distributor. No longer able to supply ACL with LZ8411A, VCS substituted an additive that ACL contends is inferior to LZ8411A. VCS didn’t inform ACL of the substitution. According to ACL, Lubrizol learned of the substitution, but did not inform ACL. When ACL discovered the substitution, it sued both companies. ACL settled with VCS. The district judge dismissed Lubrizol. The Seventh Circuit affirmed, rejecting claims that Lubrizol had a “special relationship” that required it to disclose ACL’s conduct, that VCS was Lubrizol’s apparent agent, and of “quasi contract” between ACL and Lubrizol. View "Am. Commercial Lines, LLC v. Lubrizol Corp." on Justia Law

In 1998 IGF bought Continental’s crop-insurance business at a price to be determined at either side’s option by the exercise of a put or call. In 2001 Continental exercised its put option; under the contractual formula, IGF owed Continental $25.4 million. Around that same time, IGF sold its business to Acceptance for $40 million. The Symons, who controlled IGF, structured the purchase price: $16.5 million to IGF; $9 million to IGF's parent companies Symons International and Goran in exchange for noncompetition agreements; and $15 million to Granite, an affiliated Symons-controlled company, for a reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer. The court found for Continental and pierced the corporate veil to impose liability on the controlling companies and individuals. The Seventh Circuit affirmed, finding Symons International liable for breach of the 1998 sale agreement; Symons International, Goran, Granite, and the Symons liable as transferees under the Indiana Uniform False Transfer Act; and the Symons liable under an alter-ego theory. The Symons businesses observed corporate formalities only in their most basic sense. The noncompetes only made sense as a fraudulent diversion of the purchase money, not as legitimate protection from competition. The reinsurance treaty. which was suggested bySymons and outside industry norms, was unjustified and overpriced. View "Cont'l Cas. Co. v. Symons" on Justia Law

In 1998 IGF bought Continental’s crop-insurance business at a price to be determined at either side’s option by the exercise of a put or call. In 2001 Continental exercised its put option; under the contractual formula, IGF owed Continental $25.4 million. Around that same time, IGF sold its business to Acceptance for $40 million. The Symons, who controlled IGF, structured the purchase price: $16.5 million to IGF; $9 million to IGF's parent companies Symons International and Goran in exchange for noncompetition agreements; and $15 million to Granite, an affiliated Symons-controlled company, for a reinsurance treaty. Continental, still unpaid, sued for breach of contract and fraudulent transfer. The court found for Continental and pierced the corporate veil to impose liability on the controlling companies and individuals. The Seventh Circuit affirmed, finding Symons International liable for breach of the 1998 sale agreement; Symons International, Goran, Granite, and the Symons liable as transferees under the Indiana Uniform False Transfer Act; and the Symons liable under an alter-ego theory. The Symons businesses observed corporate formalities only in their most basic sense. The noncompetes only made sense as a fraudulent diversion of the purchase money, not as legitimate protection from competition. The reinsurance treaty. which was suggested bySymons and outside industry norms, was unjustified and overpriced. View "Cont'l Cas. Co. v. Symons" on Justia Law

Great Lakes, which automotive service stores throughout the Midwest, filed for Chapter 11 bankruptcy. The unsecured creditors’ committee filed an adversary action against T.D., which had leased two oil-change stores to Great Lakes. Great Lakes had negotiated the termination of the leases 52 days before it declared bankruptcy, and the creditors’ committee contends that the termination was either a preferential (11U.S.C. 547(b)) or a fraudulent (11 U.S.C. 548(A)(1)) transfer of the leases to T.D. The bankruptcy judge rejected that claim. The Seventh Circuit reversed and remanded for determination of the value of Great Lakes’ transfer to T.D. and whether T.D. has any defenses to the creditors’ claims. View "In re: Great Lakes Quick Lube, LP" on Justia Law

An association of Indiana convenience stores filed suit seeking to invalidate a state law that restricts the sale of cold packaged beer. The suit claims the law violates the Equal Protection Clause because some kinds of stores may sell cold beer but grocery and convenience stores may not. The district court upheld the law; the Seventh Circuit affirmed. While rejecting the state’s argument that the Twenty-first Amendment gives it “nearly absolute” authority to regulate alcohol sales, the court held that the cold-beer statute is subject to rational-basis review and survives that lenient standard. To succeed on its claim, the Association would have to “negative every conceivable basis which might support” the statutory scheme. The Association’s policy arguments for allowing cold-beer sales by grocery and convenience stores are matters for the Indiana legislature, not the federal judiciary. View "IN Petroleum Mkters & Convenience Store Ass'n v. Cook" on Justia Law