Justia Business Law Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit

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The Mathews purchased an RV from a dealer which came with a warranty from the manufacturer, REV, which limited both express and implied warranties to one year from the purchase date. The warranty stated that “[i]f the repair or replacement remedy fails to successfully cure a defect after [REV] received a reasonable opportunity to cure the defect[], your sole and exclusive remedy shall be limited to Warrantor paying you the costs of having an independent third party perform repair(s).” The Mathews were told about the warranty when they bought the RV, but they were not initially given a hard copy. The Mathews say that they encountered problems with the RV almost immediately and several times thereafter. Dealerships completed some repairs; REV completed others and issued an extended goodwill warranty. The Mathews did not report all of the problems but eventually asked REV to buy back the RV. REV declined and they filed suit, alleging breaches of express and implied warranties and violations of the Indiana Deceptive Consumer Sales Act and the Magnuson–Moss Warranty Act. They claimed that REV had failed to fix numerous problems,15 U.S.C. 2310(d)(1). The Seventh Circuit affirmed summary judgment in favor of REV. Although the Mathews “bought a lemon,” they have not shown that REV failed to honor its warranties or that the warranty provisions were unconscionable, View "Mathews v. REV Recreation Group, Inc." on Justia Law

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In 2005 Paramount leased a parcel of highway-adjacent property in Bellwood, Illinois, planning to erect a billboard. Paramount never applied for a local permit. When Bellwood enacted a ban on new billboard permits in 2009, Paramount lost the opportunity to build its sign. Paramount later sought to take advantage of an exception to the ban for village-owned property, offering to lease a different parcel of highway-adjacent property directly from Bellwood. Bellwood accepted an offer from Image, one of Paramount’s competitors. Paramount sued Bellwood and Image, alleging First Amendment, equal-protection, due-process, Sherman Act, and state-law violations. The Seventh Circuit affirmed summary judgment in favor of the defendants. Paramount lost its lease while the suit was pending, which mooted its claim for injunctive relief from the sign ban. The claim for damages was time-barred, except for an alleged equal-protection violation. That claim failed because Paramount was not similarly situated to Image; Paramount offered Bellwood $1,140,000 in increasing installments over 40 years while Image offered a lump sum of $800,000. Bellwood and Image are immune from Paramount’s antitrust claims. The court did not consider whether a market-participant exception to that immunity exists because Paramount failed to support its antitrust claims. View "Paramount Media Group, Inc. v. Village of Bellwood" on Justia Law

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Schaumburg’s 2016 ordinance requires commercial buildings to send fire‐alarm signals directly to the local 911 dispatch center, NWCDS, which has an exclusive arrangement with Tyco. To send signals to NWCDS, local buildings must use Tyco equipment. Schaumburg’s notice of the ordinance referred to connection through Tyco and stated that accounts would be charged $81 per month to rent Tyco’s radio transmitters and for the monitoring service. Tyco pays NWCDS an administrative fee of $23 per month for each account it connects to the NWCDS equipment. Tyco’s competitors filed suit charging violations of constitutional, antitrust, and state tort law. The district court dismissed the case. The Seventh Circuit reversed the dismissal of the Contracts Clause claim against Schaumburg. The complaint alleges a potentially significant impairment, the early cancellation of the competitors’ contracts, and Schaumburg’s self‐interest, $300,000 it stands to gain. The court otherwise affirmed, noting that entities not alleged to have taken legislative action cannot be liable under the Contracts Clause. WIth respect to constitutional claims, the court noted the government’s important interest in fire safety. Rejecting antitrust claims, the court stated that the complaint did not allege a prohibited agreement, as opposed to an independent, legislative decision. View "Alarm Detection Systems, Inc. v. Village of Schaumburg" on Justia Law

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Under a 2014 agreement, MCFI, a non-profit organization that provides medical care for individuals with brain injuries, would operate a brain-injury center in MHC’s nursing facility. MHC would handle billing and collections for MCFI's services and remit the funds collected to MCFI after taking its cut. MHC instead redirected MCFI’s funds to pay its employees and other creditors. MCFI sued MHC and MHC’s principal, Nicholson. The district court entered summary judgment against MHC for breach of contract and against Nicholson for conversion and civil theft and awarded MCFI over $2 million in damages, interest, and costs against MHC and Nicholson, jointly and severally. It also awarded MCFI over $200,000 in attorney’s fees and costs against Nicholson alone. The Seventh Circuit affirmed. MCFI had an ownership interest in the BIRC Collections. At most MCFI’s acknowledgment of the security interests of MHC’s creditors only estops MCFI from contesting the interests of those creditors; it does not prevent MCFI from asserting its ownership of the property against MHC. The duty to refrain from converting or stealing the BIRC Collections was entirely independent of the contract. It arose from the common law and Wisconsin statutes. Nicholson was personally involved in the wrongful redirection of those funds through the actions of his agent. View "Milwaukee Center for Independence, Inc. v. Milwaukee Health Care LLC" on Justia Law

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The agreement gave Division the exclusive right to purchase aged and customer-returned merchandise from Finish and provided for an 18-month term “commencing on March 1, 2001” that could be extended by written agreement of the parties “prior to the expiration of the term or any extension thereof.” The agreement was twice amended. Despite the 2008 agreement’s express ending date of December 31, 2013, Finish continued to ship products to Division in 2014. Finish eventually stopped dealing with Division and began dealing with other parties. In 2015, Division wrote to Finish asserting its exclusive right under the agreement to purchase Finish’s surplus products. Finish asserted that the agreement was no longer in effect. The district court dismissed Division’s suit, concluding that the agreement did not provide for perpetual self-renewal and the 2008 Amendment did not provide for an automatic extension. Since the plain language was not ambiguous, the court refused to consider extrinsic evidence of the parties’ intent—the 2014 shipments. The Sixth Circuit affirmed. The agreement is clear and unambiguous, Division’s extrinsic evidence cannot be considered. There was no automatic extension following the 2008 amendment extension; the agreement was no longer in force after December 2013 and Finish did not commit a breach when it began dealing with third parties in 2014. View "Division Six Sports, Inc. v. Finish Line, Inc." on Justia Law

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Seattle’s Duncan Place condominium complex was built in 2009, with Danze faucets in all 63 units. The faucets’ water hoses can corrode and crack in normal use. Several faucets failed, causing property damage and replacement costs. Danze’s “limited lifetime warranty” promises to replace defective parts. Danze refused to repair or replace the faucets. The Owners Association filed suit on behalf of itself, unit owners, and a proposed nationwide class, asserting claims under Washington law. The judge rejected all claims, holding that Washington’s independent-duty doctrine barred claims of negligence and strict product liability; the unjust-enrichment claim was premised on fraud but did not satisfy the FRCP 9(b) heightened pleading requirements. A Washington claim for breach of an express warranty requires that the plaintiff was aware of the warranty. Duncan Place was unable to make that allegation in good faith with respect to any unit owners. The Seventh Circuit reversed in part. The Washington Product Liability Act subsumes the negligence and strict-liability claims; the “independent duty doctrine” generally bars recovery in tort for direct and consequential economic losses stemming from the product’s failure (damages associated with the “injury” to the product itself) but does not bar recovery for damage to other property. Duncan Place alleged in general terms that the defective faucets caused damage to other condominium property, so the WPLA claim is not entirely blocked by the independent duty doctrine. View "Duncan Place Owners Associatio v. Danze, Inc." on Justia Law

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In 2011 Caterpillar made serious inquiries about the possible acquisition of a Chinese mining company and its wholly‐owned subsidiary (Siwei). Caterpillar completed that acquisition in June 2012. Only after the closing did Caterpillar gain access to Siwei’s physical inventory and find that Siwei had overstated its profits and improperly recognized revenue. Caterpillar took a $580 million goodwill impairment charge just months after the acquisition. Plaintiffs, Caterpillar shareholders, filed a shareholder derivative suit alleging that several former Caterpillar officers breached their fiduciary duties by failing to conduct an adequate investigation of the Siwei acquisition, which caused Caterpillar’s loss. They made an unsuccessful demand that the Caterpillar Board bring the litigation. The district court dismissed the complaint for failure adequately to allege that the Board wrongfully refused to pursue the Plaintiffs’ claim. The Seventh Circuit affirmed. The Board’s decision not to litigate was protected by the “wide bounds of the business judgment rule.” The plaintiffs might come to a different conclusion about the strategic importance of the acquisition, the risk that litigation might cause disruption and excessive cost for Caterpillar, or the need to interview Siwei’s former CEO, but those types of business and investigative choices are exactly what the business judgment rule protects. View "Lowinger v. Oberhelman" on Justia Law

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Kreg, a medical-supply company, contracted with VitalGo, maker of the Total Lift Bed®, for exclusive distribution rights in several markets. A year and a half later, the arrangement soured. VitalGo told Kreg that it had not made the minimum‐purchase commitments required by the contract for Kreg to keep its exclusivity. Kreg thought VitalGo was wrong on the facts and the contract’s requirements. The district court ruled, on summary‐judgment that VitalGo breached the agreement. The damages issue went to a bench trial, despite a last-minute request from VitalGo to have it dismissed on pleading grounds. The court ordered VitalGo to pay Kreg about $1,000,000 in lost‐asset damages and prejudgment interest. The Seventh Circuit affirmed, upholding the district court’s rulings that the agreement allowed Kreg to make minimum-purchase commitments orally; that the minimum‐purchase commitment for the original territories was made in December 2010; that VitalGo breached the agreement by terminating exclusivity in June 2011 and by failing to deliver beds in September 2011; and concerning the foreseeability of damages. View "Kreg Therapeutics, Inc. v. VitalGo, Inc." on Justia Law

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ARC, a distributor of compressed gases, sold its assets to American. Because ARC leased asset cylinders to customers, it was not immediately able to identify the number of cylinders included in the purchase; the Agreement estimated 6,500 cylinders and provided that American would hold back $150,000 for 180 days to protect against a shortage of up to 1,200 cylinders, at $125 per cylinder. When American began billing the customers it acquired, it learned that many of them paid only to have cylinders refilled but did not pay rent on the cylinders they used. An audit revealed that ARC owned and transferred 4,663 asset cylinders--1,837 cylinders short of the 6,500 promised. In an ensuing breach of contract suit, ARC argued that American breached the contract because it did not complete its audit within the specified 180-day period. The district court disagreed, concluding that ARC extended that deadline and that, because only 4,663 cylinders were delivered, ARC was never entitled to receive any portion of the Cylinder Deferred Payment. The court granted American’s counterclaim for breach of contract, holding that American was entitled to the entire $150,000 and to recover $125 for each cylinder it failed to receive under the threshold of 5,300. The Seventh Circuit affirmed. Because ARC was not entitled to any of the Cylinder Deferred Payment in that it provided less than the 5,300 cylinders, it could not have been damaged by the delay in completing the audit. View "ARC Welding Supply, Co. Inc. v. American Welding & Gas, Inc." on Justia Law

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Plaintiffs, 39 former employees of Infinium Capital, voluntarily converted loans they had made to their employer under the company’s Employee Capital Pool program into equity in the company. A year later their redemption rights were suspended; six months after that, they were told their investments were worthless. Plaintiffs filed suit against Infinium, the holding company that owned Infinium, and members of senior management, asserting claims for federal securities fraud and state law claims for breach of fiduciary duty and fraud. The Seventh Circuit affirmed the dismissal, with prejudice, of their fifth amended complaint for failure to state a claim. Reliance is an element of fraud and each plaintiff entered into a written agreement that contained ample cautionary language about the risks associated with the investment. Federal Rule of Civil Procedure 9(b) provides that a party alleging fraud or mistake “must state with particularity the circumstances constituting fraud or mistake,” although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Plaintiffs failed to identify the speakers of alleged misrepresentations with adequate particularity, failed to adequately plead scienter, and failed to plead a duty to speak. View "Cornielsen v. Infinium Capital Management, LLC" on Justia Law