Justia Business Law Opinion Summaries

The case involves two nonprofit organizations, the National Federation of the Blind of Texas and Arms of Hope, which use donation boxes to collect items for fundraising. The City of Arlington, Texas, enacted an ordinance regulating the placement and maintenance of these donation boxes, including zoning restrictions and setback requirements. The nonprofits challenged the ordinance, claiming it violated the First Amendment by restricting their ability to place donation boxes in certain areas of the city.The United States District Court for the Northern District of Texas reviewed the case. The court granted summary judgment in favor of Arlington on several counts, including the constitutionality of the setback requirement and the ordinance not being overbroad or a prior restraint. However, the court ruled in favor of the nonprofits on the zoning provision, finding it was not narrowly tailored and thus violated the First Amendment. The court enjoined Arlington from enforcing the zoning provision against the nonprofits.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the ordinance was content-neutral and subject to intermediate scrutiny. It found that the zoning provision, which limited donation boxes to three of the city's 28 zoning districts, was narrowly tailored to serve Arlington's significant interests in public health, safety, welfare, and community aesthetics. The court also upheld the setback requirement, finding it did not burden more speech than necessary and left ample alternative channels of communication. The court concluded that the ordinance's permitting provisions did not constitute an unconstitutional prior restraint.The Fifth Circuit vacated the district court's judgment regarding the zoning provision and rendered judgment in favor of Arlington on that part. The rest of the district court's judgment was affirmed. View "National Federation of the Blind of Texas, Incorporated v. City of Arlington" on Justia Law

Plaintiffs-Appellants, a group of produce suppliers, sold produce to Lonestar Produce Express, LLC, a produce broker started by Leonidez Fernandez III and Eric Fernandez. Their father, Leonidez Fernandez Jr., frequently assisted them. By mid-2019, Lonestar owed approximately $221,000 to Plaintiffs-Appellants for unpaid produce invoices. Plaintiffs-Appellants sought relief under the Perishable Agricultural Commodities Act (PACA), which requires produce buyers to hold produce or proceeds from its sale in trust for unpaid suppliers until full payment is made. If the merchant's assets are insufficient, others who had a role in causing the breach of trust may be held secondarily liable.The United States District Court for the Western District of Texas held a bench trial to determine whether Leonidez Fernandez Jr. could be held individually liable under PACA. The court found that Leonidez Jr. was not a member, manager, or employee of Lonestar and did not have control over its financial operations. Consequently, the district court concluded that Leonidez Jr. did not owe a fiduciary duty under PACA and was not liable for Lonestar's debts.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that individuals who are not members of an LLC can still be held secondarily liable under PACA if they have control over the trust assets. However, the court found that Leonidez Jr. did not have the requisite control over Lonestar's PACA trust assets. He was not authorized to direct payments, was not a signatory on the bank account, and did not contribute financially to Lonestar. Therefore, the Fifth Circuit affirmed the district court's decision, concluding that Leonidez Jr. was not liable under PACA. View "A & A Concepts v. Fernandez" on Justia Law

This case involves a dispute between Gibson, Inc., a Delaware corporation, and Armadillo Distribution Enterprises, Inc., a Florida corporation, along with Concordia Investment Partners, L.L.C. Gibson, a well-known guitar manufacturer, brought trademark-infringement and counterfeiting claims against Armadillo and Concordia, alleging that they infringed on Gibson's trademarked guitar body shapes, headstock shape, and word marks. After a ten-day trial, the jury found in favor of Gibson on several counts of infringement and counterfeiting but also found that the doctrine of laches applied to limit Gibson’s recovery of damages.The district court had excluded decades of third-party-use evidence that Armadillo and Concordia submitted in support of their genericness defense and counterclaim. Armadillo and Concordia appealed this exclusion order, arguing that the evidence was relevant to their defense that Gibson's trademarks were generic and thus not entitled to protection.The United States Court of Appeals for the Fifth Circuit reversed the district court's decision. The appellate court held that the district court abused its discretion by excluding all pre-1992 third-party-use evidence without examining its possible relevance. The court noted that third-party-use evidence is often relevant to show the genericness of a mark, and a mark that is generic is not entitled to trademark protection. The court concluded that the district court's error affected Armadillo’s substantial rights to put on its primary defense to the infringement and counterfeiting claims against it. Therefore, the court remanded the case for a new trial. View "Gibson, Inc. v. Armadillo Distribution Enterprises, Inc." on Justia Law

Baylor Scott & White Holdings (BSW), the largest nonprofit health system in Texas, purchased a specialized commercial property insurance policy from Factory Mutual Insurance Co. (FM) to cover its facilities. The policy covered two types of claims—“Property Damage” and “Time Element” claims, which are synonymous with “business interruption” loss. BSW submitted a claim under the policy for its business interruption losses as a result of COVID-19, totaling over $192 million. FM denied the claim, stating that the only coverage under the policy for losses arising from COVID-19 came from the Communicable Disease Response Extension and the Interruption by Communicable Disease Extension, which had already been exhausted.FM moved to dismiss the amended complaint for failure to state a claim. The district court granted FM’s motion to dismiss, finding that BSW had not plausibly alleged “physical loss or damage” under the policy, and that the Contamination Exclusion and Loss of Use Exclusion barred BSW’s recovery under the policy. BSW appealed the district court’s dismissal order.The United States Court of Appeals for the Fifth Circuit affirmed the decision of the district court. The court held that, in the context of COVID-19 commercial-insurance coverage disputes, COVID-19 does not physically harm property. The court found that the alleged uniqueness of the policy’s language did not change this determination. The court also rejected BSW's contention that its complaint was wrongly dismissed because it included specific factual allegations of demonstratable, measurable, and tangible alteration of property caused by COVID-19. The court concluded that, as a matter of law, COVID-19 does not affect property in a “physical” way. View "Baylor Scott & White v. Factory Mutual" on Justia Law

The case involves the National Association of Manufacturers and Natural Gas Services Group, Incorporated (plaintiffs-appellants) against the United States Securities and Exchange Commission (SEC) and Gary Gensler, in his official capacity as Chair of the SEC (defendants-appellees). The dispute arose after the SEC, in 2020, adopted a rule regulating businesses that provide proxy voting advice to institutional shareholders of public corporations. Two years later, the SEC rescinded this rule. The appellants challenged the rescission in district court, arguing that the SEC arbitrarily and capriciously failed to provide an adequate explanation for its abrupt change in policy. The district court rejected the appellants’ contentions and granted summary judgment in favor of the SEC.The United States Court of Appeals for the Fifth Circuit reversed the district court's decision. The court found that the SEC's explanation for rescinding the 2020 rule was arbitrary and capricious, and therefore unlawful. The court held that the SEC failed to provide an adequate justification for contradicting its prior factual finding that the 2020 Rule did not threaten the timeliness and independence of proxy voting advice. The court also found that the SEC failed to provide a reasonable explanation why these risks were so significant under the 2020 Rule as to justify its rescission. The court vacated the 2022 rescission in part and remanded the case back to the SEC. View "National Association of Manufacturers and Natural Gas Services Group, Inc. v. Securities and Exchange Commission" on Justia Law

The case involves Jennifer Sugg, a student who was dismissed from her Certified Registered Nurse Anesthesiology (CRNA) program at Midwestern University after failing several required courses. Sugg sued Midwestern University and EmergencHealth (EH), alleging breach of contract and fraud. The United States District Court for the Southern District of Texas granted summary judgment in favor of the defendants on all causes of action, and Sugg appealed.Sugg enrolled in Midwestern's CRNA program in 2016. She failed a course in her first semester and was placed on academic leave. After retaking the course and receiving a passing grade, she was placed on academic probation due to her low GPA. Sugg later failed her first clinical rotation course and was dismissed from the program. She appealed the decision, and the dismissal was overturned so she could retake the course. However, after failing another course, she was dismissed again. Sugg appealed this decision as well, but it was upheld by the university's Promotion and Graduation Committee and the Dean of the College of Health Sciences.The United States Court of Appeals for the Fifth Circuit affirmed the lower court's decision. The court found that Midwestern University did not breach the contract as it followed its guidelines and dismissed Sugg based on her academic performance. The court also found that Sugg failed to show that the university's decision was a substantial departure from accepted academic norms. Regarding the claims against EH, the court found that EH did not interfere with Sugg's contract with Midwestern University and did not make any false or misleading statements. Therefore, the court affirmed the summary judgment in favor of the defendants. View "Sugg v. Midwestern University" on Justia Law

The case involves a challenge to a rule adopted by the Securities and Exchange Commission (SEC) aimed at enhancing the regulation of private fund advisers. The rule was designed to protect investors who invest in private funds and to prevent fraud, deception, or manipulation by the investment advisers to those funds. The petitioners, a group of associations representing private fund managers, challenged the rule, arguing that the SEC exceeded its statutory authority in adopting it.The case was heard in the United States Court of Appeals for the Fifth Circuit. The petitioners argued that the SEC had overstepped its authority under the Investment Advisers Act of 1940 and the Dodd-Frank Act. They contended that the rule imposed requirements that were not authorized by these statutes and that the SEC had failed to adequately consider the rule's impact on efficiency, competition, and capital formation.The SEC, on the other hand, argued that it had the authority to adopt the rule under sections 206(4) and 211(h) of the Advisers Act. It contended that these provisions authorized it to define and prescribe means to prevent fraudulent, deceptive, or manipulative acts by investment advisers.The Fifth Circuit sided with the petitioners, holding that the SEC had exceeded its statutory authority in adopting the rule. The court found that the rule was not authorized by the relevant provisions of the Advisers Act and that the SEC had failed to establish a close nexus between the rule and the prevention of fraud or deception. As a result, the court vacated the rule. View "NA of Private Fund Managers v. SEC" on Justia Law

The case involves Tammy O’Connor and Michael Stewart (the Sellers) who sold their company, Red River Solutions, LLC, to Atherio, Inc., a company led by Jason Cory, Greg Furst, and Thomas Farb (the Executives). The agreement stipulated that the Sellers would receive nearly half of their compensation upfront, with the rest—around $3.5 million—coming in the form of ownership units and future payments. However, Atherio went bankrupt and the Sellers received none of the promised $3.5 million. The Sellers sued the Executives, alleging fraud under federal securities law, Delaware common law, and the Texas Securities Act.The district court granted summary judgment to the Executives on all claims. The Sellers appealed the decision, arguing that the district court erred in applying the summary-judgment standard to the federal securities law and Delaware common law claims.The United States Court of Appeals for the Fifth Circuit affirmed the district court's decision on the extracontractual and Texas Securities Act fraud claims, but reversed the summary judgment grants on the federal securities law and Delaware common law claims. The court found that there was a genuine dispute as to whether the Executives' misrepresentation of Farb's role as CFO was a substantial factor in the Sellers' loss. The case was remanded for further proceedings. View "Cory v. Stewart" on Justia Law

During the 2008 financial crisis, Highland Capital Management, L.P., an investment manager, faced numerous redemption requests from investors of the Highland Crusader Fund. The Fund was placed in wind-down, and a dispute arose over the distribution of assets. This led to the adoption of a Joint Plan of Distribution and the appointment of a Redeemer Committee to oversee the wind-down. The Committee accused Highland Capital of breaching its fiduciary duty by purchasing redemption claims of former investors. An arbitration panel ruled in favor of the Committee, ordering Highland Capital to pay approximately $3 million and either transfer or cancel the redemption claims.Before the Committee could obtain a judgment for the award, Highland Capital filed for Chapter 11 bankruptcy. CLO HoldCo, a creditor, filed a claim for approximately $11 million, asserting it had purchased interests in the redemption claims. However, after a settlement agreement between Highland Capital and the Committee led to the cancellation of the redemption claims, CLO HoldCo amended its claim to zero dollars.After the bankruptcy court confirmed Highland Capital's reorganization plan, CLO HoldCo filed a second amended proof of claim, asserting a new theory of recovery. It argued that the cancellation of the redemption claims resulted in a credit for Highland Capital, which it owed to CLO HoldCo. The bankruptcy court denied the motion to ratify the second amended proof of claim, a decision affirmed by the district court.The United States Court of Appeals for the Fifth Circuit affirmed the lower courts' decisions. It held that post-confirmation amendments require a heightened showing of "compelling circumstances," which CLO HoldCo failed to provide. The court found that the bankruptcy court did not abuse its discretion in denying CLO HoldCo's motion to ratify the second amended proof of claim. View "CLO Holdco v. Kirschner" on Justia Law

The case involves a dispute between BMC Software, Inc. (BMC) and International Business Machines Corporation (IBM) over a Master Licensing Agreement (MLA) and an Outsourcing Attachment. BMC, a software company, and IBM, an information technology company, directly compete in developing and selling mainframe software. However, IBM also provides necessary outsourcing services to BMC and its customers, including AT&T. In 2008, IBM and BMC entered into an MLA and an Outsourcing Attachment, which were amended in 2013 and 2015. The dispute centers around the 2015 amendment, particularly three provisions that govern IBM's use of BMC's software.The case was first heard in the United States District Court for the Southern District of Texas. The district court awarded summary judgment to IBM on the claim for breach of Section 1.1 of the 2015 amendment, but denied IBM's motion for summary judgment on BMC’s Section 5.1 breach-of-contract claim. The court concluded that Section 5.4 of the 2015 amendment unambiguously prevented IBM from “displacing” BMC products with IBM software. The court granted partial summary judgment to BMC because IBM “displaced BMC Customer Licenses with IBM products when it implemented Project Swallowtail at AT&T.” After a bench trial, the district court awarded BMC approximately $1.6 billion in damages.The case was then appealed to the United States Court of Appeals for the Fifth Circuit. The appellate court disagreed with the district court's interpretation of Section 5.4 of the 2015 amendment. The court held that “other valid business reasons” under Section 5.4 supported IBM’s service in effecting AT&T’s switchover, which partially included IBM software. The court concluded that IBM did not breach Section 5.4 by agreeing to provide IT services to perform this task. Therefore, the judgment of the district court was reversed. View "BMC Software v. IBM" on Justia Law