Justia Business Law Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
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Evergreen manufactured RVs and sold 21 RVs to several affiliated Boat-N-RV dealers. After delivering those RVs, Evergreen went out of business. The invoices for the 21 RVs totaled $808,663. The dealers resold at least 20 of them to retail customers but did not pay Evergreen or its secured creditor. Evergreen’s lender, with a first-priority blanket security interest in all Evergreen assets, including accounts receivable, filed suit. The lender assigned its rights to Evergreen’s owner.The district court found that the lender’s successor had standing as a secured party and had proven that the dealers had breached the contracts. The court granted the dealers certain setoffs for warranty and rebate claims, and denied prejudgment interest on the net amounts the dealers owed. The Seventh Circuit affirmed. The parties did not intend to erase the security interest at the heart of the transaction and the assignment transferred a priority security interest in the RVs, making the successor the proper plaintiff. Holding the dealers liable for the purchase prices of the RVs but to allowing them setoffs for the rebates and warranty payments that Evergreen ow was the right solution for Evergreen’s failures to pay rebates and warranty obligations; the dealers were not entitled to setoffs for diminished value. View "KR Enterprises, Inc. v. Zerteck Inc" on Justia Law

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In 1986 Deibel, Hoeg, and Steffen founded Hy-Pro Corporation. Deibel, its president, received 2,500 shares, representing 12.5% of the authorized stock. Deibel guaranteed Hy-Pro’s payment of a $100,000 debt to a bank. Within a year Deibel demanded that Hoeg leave. When Hoeg refused, Deibel quit but held onto his stock even. A state court suit settled, but the settlement was not reduced to writing. Deibel insists that under the settlement Hy-Pro would pay $15,000 and arrange with the bank to release his guarantee. Hoeg and Steffen assert that Deibel was also to surrender his shares.Almost 30 years later, Deibel filed a federal suit. HyPro was sold in 2017 for about $20 million; a 12.5% share would exceed $2.5 million. Indiana has a two-year period of limitations for such claims. The Seventh Circuit affirmed the dismissal of the suit as untimely, rejecting Deibel’s claims that he was still an investor when the firm was sold, and, if not, that a firm’s refusal to recognize him as an investor was a “continuing wrong.” When Deibel did not return his shares, Hy-Pro canceled Deibel’s stock. Deibel has not been on the company’s books as a shareholder since 1992. Deibel received multiple letters from various parties, including the IRS, notifying him of that fact; his claim accrued no later than 1998. View "Deibel v. Hoeg" on Justia Law

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Next makes office equipment and refers potential customers to reviews that rate its products highly. Next's competitor, Beyond, published reviews critiquing Next’s standing desks. Instead of pursuing a claim under the Lanham Act, 15 U.S.C. 1125, Next sued in federal court under diversity jurisdiction, relying on Wisconsin’s common law of defamation. The district judge treated product reviews and political commentary as equivalent and cited the Constitution, holding that because Next is a “limited-purpose public figure”—made so by its own efforts to sell its wares—all criticism by a competitor is constitutionally protected unless the statements are knowingly false or made with reckless indifference to their truth. The court concluded that the standard was not met. The Seventh Circuit affirmed on other grounds, stating that it was “skeptical” about the trial court’s use of the Constitution. On the district court’s approach, few claims under the Lanham Act ever could succeed, and commercial advertising would be treated just like political campaigning. Next failed to state a claim under Wisconsin law. “Whatever one can say about whether both gray paint and polished metal should be called ‘silver,’ or whether two circuit boards are as good as one, these are not ‘false assertions of specific unfavorable facts.’” View "Next Technologies, Inc. v. Beyond the Office Door LLC" on Justia Law

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In 2005-2007, Merchant purchased Michigan hotel properties from NRB and financed the purchases through NRB, using corporate entities as the buyers. Merchant sold interests in those entities to investors. The hotels had been appraised at inflated amounts and sold for about twice their fair values. When the corporate entities defaulted on their loan payments, NRB foreclosed in 2009. Merchant claimed that NRB’s executives colluded with an appraiser to sell overvalued real estate to unsuspecting purchasers, wait for default, foreclose, and then repeat the process.In 2010, an investor sued Merchant, Merchant’s companies, NRB, and 12 others for investor fraud. In 2014 the FDIC took NRB into receivership and substituted for NRB as a defendant. Merchant and his companies brought a cross-complaint, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and state laws. A Fifth Amended Cross-Complaint raised 14 counts against 10 defendants, including two law firms that provided NRB’s legal work. The district court dismissed several counts; others remain active.The Seventh Circuit affirmed the dismissal of claims against the law firms. The counts under state law are untimely under Illinois’s statute of repose. The cross-complaint effectively admits that one firm played no role in NRB’s alleged fraud perpetrated against Merchant in 2005-2007. The cross-complaint failed to allege that either law firm conducted or participated in the activities of a RICO enterprise; neither firm could be liable under 18 U.S.C. 1962(c). View "Muskegan Hotels, LLC v. Patel" on Justia Law

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Sterling Bank purchased Damian Services. The stock purchase agreement set up a two-million-dollar escrow to resolve disputes arising after the purchase and established comprehensive rights, obligations, remedies, and procedures for resolving disputes. After the purchase, a former Damian employee called some of Damian’s clients to tell them of a billing practice that the sellers had instituted years earlier. When Sterling learned of the situation, it investigated with the help of a forensic accountant. Sterling concluded that under the sellers’ management, Damian had overcharged its clients by over one million dollars. Sterling refunded the overpayments to its current clients, then unsuccessfully demanded indemnification from the escrow, claiming that the sellers had misrepresented Damian’s liabilities and vulnerability to litigation.The district court granted the sellers summary judgment, reasoning that Sterling missed the deadline for claiming indemnification under the stock purchase agreement. The court denied the sellers’ request for statutory interest on the escrow money.The Seventh Circuit reversed. Whether Sterling’s demand for indemnification was late depends on disputed facts. Even if the demand was late, however, the agreement’s elaborate terms provide that any delay could be held against Sterling only “to the extent that [sellers] irrevocably forfeit[] rights or defenses by reason of such failure.” Undisputed facts show that the sellers have not irrevocably forfeited any claims or defenses. View "Sterling National Bank v. Block" on Justia Law

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The defendants sell shaker tubes in grocery stores across the country, with labels advertising “100% Grated Parmesan Cheese.” The products are not 100 percent cheese but contain four to nine percent added cellulose powder and potassium sorbate, as indicated on the ingredient list on the back of the package. Plaintiffs claim that these ingredient lists show that the prominent “100%” labeling is deceptive under state consumer-protection laws. The Judicial Panel on Multidistrict Litigation transferred numerous similar actions to the Northern District of Illinois for consolidated pretrial proceedings. That court ultimately dismissed the plaintiffs’ deceptive labeling claims (100% claims) with prejudice.The Seventh Circuit reversed in part. Plaintiffs have plausibly alleged that the prominent “100%” labeling deceives a substantial portion of reasonable consumers, and their claims are not preempted by federal law. An accurate fine-print list of ingredients does not foreclose as a matter of law a claim that an ambiguous front label deceives reasonable consumers. Many reasonable consumers do not instinctively parse every front label or read every back label before purchasing groceries. For reasons specific to multidistrict litigation, the court concluded that it lacked appellate jurisdiction to review the dismissal of the 100% claims in two complaints because the appeals were filed too late. View "Bell v. Albertson Companies, Inc." on Justia Law

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Between 1983-2015, Heneghan was an associated person (AP) of 14 different National Futures Association (NFA)-member firms. Troyer invested hundreds of thousands of dollars in financial derivatives through NFA Members. The first interaction between Troyer and Heneghan was in 2008. After receiving an unsolicited phone call from Heneghan, Troyer invested more than $160,000. Despite changes in Heneghan’s entity affiliation, his working relationship with Troyer remained constant. At one point, Heneghan’s then-firm, Statewide, withdrew from the NFA following an investigation. Heneghan was the subject of a four-month NFA approval-hold in 2012. Troyer began sending money to Heneghan personally in 2013, allegedly to obtain trading firm employee discounts; these investments totaled $82,000. Troyer neither received nor asked for any investment documentation for this investment. In 2016-2015, NFA investigated Heneghan’s then-firm, PMI, Despite Troyer’s alleged substantial investment, no PMI accounts were listed for either Troyer or Heneghan. In 2015, Troyer directed Heneghan to cash out the fund; “all hell broke loose.” In 2016, the NFA permanently barred Heneghan from NFA membership. Troyer filed suit under the Commodities Exchange Act. 7 U.S.C. 25(b).The Seventh Circuit affirmed the summary judgment rejection of Troyer’s claim. NFA Bylaw 301(a)(ii)(D), which bars persons from becoming or remaining NFA Members if their conduct was the cause of NFA expulsion, is inapplicable. Statewide’s agreement not to reapply represented a distinct sanction from expulsion and did not trigger Bylaw 301(a)(ii)(D). View "Troyer v. National Futures Association" on Justia Law

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BRC and Continental signed a five-year contract. Continental agreed to supply BRC with “approximately 1.8 million pounds of prime furnace black annually” taken in “approximately equal monthly quantities.” The price of carbon black consists of a baseline price and “feedstock” adjustments. The contract listed baseline prices with instructions for calculating feedstock adjustments. In 2010, BRC bought 2.6 million pounds of carbon black. In early 2011, BRC bought about 1.3 million pounds. In April 2011, supplies were tight. Continental tried to increase baseline prices. BRC replied that the price increase would violate the contract. BRC placed new orders relying on the contract’s prices. Continental did not respond to BRC's protests. On May 11, Continental missed a shipment to BRC. Continental would not confirm future shipment dates or tell BRC when to expect a response. On May 16, BRC formally invoked U.C.C. 2-609, asking for adequate assurance that Continental would continue to supply carbon black under the existing contract, requesting a response by May 18. Continental gave contradictory responses and continued to demand that BRC accept the price increase. On June 2, BRC notified Continental that it was terminating the contract and had filed suit. BRC proceeded to “cover” by buying from another supplier at higher prices.The Seventh Circuit affirmed an order that Continental pay damages. The district court properly applied U.C.C. 2-609 to find that Continental gave BRC reasonable grounds for doubting that it would perform and that Continental repudiated by failing to provide adequate assurance that it would continue to perform. The court properly applied U.C.C. 2-712 to find that cover was commercially reasonable and awarded prejudgment interest. View "BRC Rubber & Plastics, Inc. v. Continental Carbon Co." on Justia Law

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Applecars is a member of a network of Wisconsin used-car dealerships. McCormick owned a majority share in each dealership. Each dealership received management services from Capital M, which McCormick also owned. Capital M tracked shared dealership inventory, held employee records, and issued identical employee handbooks for each dealership; Capital M’s operations manager hired and fired each dealership’s general manager. The employees of each dealership gathered as one for events several times per year. The dealerships advertised on a single website, which included some language suggesting a single entity and some indicators that each dealership is a separate entity. Each dealership properly maintained corporate formalities and records. Capital M billed each dealership separately. Each dealership had a distinct general manager, bank accounts, and financial reports. The dealerships separately filed and paid taxes, paid employees, and entered into contracts.Prince worked at Applecars for several months before he was fired. Prince claims his firing was retaliatory and sued Applecars and its affiliates for racial discrimination under Title VII of the 1964 Civil Rights Act. The court granted the defendants summary judgment, noting that Applecars had fewer than 15 employees and was not subject to Title VII. The Seventh Circuit affirmed. There is insufficient evidence to support Prince’s theory that the court should pierce the corporate veil of the network, aggregating the number of employees such that Title VII would apply. View "Prince v. Appleton Auto LLC" on Justia Law

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Dzierzawski was vice-president of Forsyth's vineyard company. When Forsythe declined an opportunity to produce a custom wine for the Meijer grocery chain, Dzierzawski formed Vinifera and began doing business with Meijer, while continuing to work for Forsythe. Forsythe eventually became aware of the scope of Dzierzawski’s operation and filed suit.The district court granted summary judgment in favor of Dzierzawski on the corporate opportunity theory. A jury found Dzierzawski liable on the unfair competition contention but rejected unjust enrichment, fiduciary duty, and breach of the duty of good faith theories. The jury left the damages section on the verdict form blank. The court polled the jurors, who unanimously responded that it was their intention to award no damages. Forsyth did not object to the verdict at that time but later moved for a new trial. The court denied that motion but granted Forsyth’s request for disgorgement as alternative relief, and ordered Dzierzawski to pay $285,731, reasoning that “the jury’s verdict is merely advisory on the issue of equitable disgorgement, as it is an equitable remedy to be imposed by the Court.” The Seventh Circuit affirmed. The evidence does not support that Dzierzawski stole a corporate opportunity from his company and there was no reversible error in the disgorgement order. View "Continental Vineyard LLC v. Dzierzawski" on Justia Law