Justia Business Law Opinion SummariesArticles Posted in US Court of Appeals for the Sixth Circuit
Evoqua Water Technologies, LLC v. M.W. Watermark, LLC
The parties manufacture and sell equipment that removes water from industrial waste. Gethin founded Watermark's predecessor, “J-Parts,” after leaving his position at JWI. JWI sued Gethin and J-Parts for false designation of origin, trademark dilution, trademark infringement, unfair competition, unjust enrichment, misappropriation of trade secrets, breach of fiduciary duties, breach of contract, and conversion. The parties settled. A stipulated final judgment permanently enjoined Watermark and Gethin and “their principals, agents, servants, employees, attorneys, successors and assigns” from using JWI’s trademarks and from “using, disclosing, or disseminating” JWI’s proprietary information. Evoqua eventually acquired JWI’s business and trade secrets, technical and business information and data, inventions, experience and expertise, other than software and patents, and JWI’s rights and obligations under its contracts, its trademarks, and its interest in litigation. Evoqua discontinued the J-MATE® product line. Watermark announced that it was releasing a sludge dryer product. Evoqua planned to reintroduce J-MATE® and expressed concerns that Watermark was violating the consent judgment and improperly using Evoqua’s trademarks. Evoqua sued, asserting copyright, trademark, and false-advertising claims and seeking to enforce the 2003 consent judgment. The district court held that the consent judgment was not assignable, so Evoqua lacked standing to enforce it and that the sales agreement unambiguously did not transfer copyrights. A jury rejected Evoqua’s false-advertising claim but found Watermark liable for trademark infringement. The Sixth Circuit vacated in part. The consent judgment is assignable and the sales agreement is ambiguous regarding copyrights. View "Evoqua Water Technologies, LLC v. M.W. Watermark, LLC" on Justia Law
Swanigan v. Fiat Chrysler Automobiles U.S., LLC
The UAW negotiates collective-bargaining agreements (CBAs) with automotive manufacturers including Fiat Chrysler (FCA). Plaintiffs claim that FCA officials bribed UAW officials to get a more company-friendly CBA. The scandal resulted in federal convictions and indictments. Plaintiffs filed a purported class action, alleging violations of Labor-Management Relations Act (LMRA) section 301, 29 U.S.C. 185. The Second Amended Complaint named individuals formerly employed by both FCA and UAW, alleges that “FCA executives and FCA employees agree[d] ... and willfully paid and delivered, money and things of value to officers and employees of the UAW,” and that plaintiffs have been unable to discover the complete extent of defendants’ collusive conduct because of the secrecy of the ongoing federal criminal investigations. The complaint refers to a “hybrid 301 claim” and raises two counts: violation of the LMRA and breach of the LMRA duty of fair representation, both of which must be properly alleged in a hybrid claim. The Sixth Circuit affirmed the dismissal of the complaint. A section 301 “hybrid claim” requires evidence of the violation of a contract or CBA and the complaint explicitly does not allege that defendants violated any CBA provision. Plaintiffs failed to allege that they exhausted internal union remedies and CBA grievance procedures and did not establish proximate cause between defendants’ alleged malfeasance and plaintiffs’ injuries. View "Swanigan v. Fiat Chrysler Automobiles U.S., LLC" on Justia Law
Thomas v. Bright
Tennessee’s Billboard Act, enacted to comply with the Federal Highway Beautification Act, 23 U.S.C. 131, provides that anyone intending to post a sign along a roadway must apply to the Tennessee Department of Transportation (TDOT) for a permit unless the sign falls within one of the Act’s exceptions. One exception applies to signage “advertising activities conducted on the property on which [the sign is] located.” Thomas owned a billboard on an otherwise vacant lot and posted a sign on it supporting the 2012 U.S. Summer Olympics Team. Tennessee ordered him to remove it because TDOT had denied him a permit and the sign did not qualify for the “on-premises” exception, given that there were no activities on the lot to which the sign could possibly refer. Thomas argued that the Act violated the First Amendment. The Sixth Circuit affirmed that the Act is unconstitutional. The on-premises exception was content-based and subject to strict scrutiny. Whether the Act limits on-premises signs to only certain messages or limits certain messages from on-premises locations, the limitation depends on the content of the message. It does not limit signs from or to locations regardless of the messages. The provision was not severable from the rest of the Act. View "Thomas v. Bright" on Justia Law
Posted in: Business Law, Communications Law, Constitutional Law, US Court of Appeals for the Sixth Circuit, Zoning, Planning & Land Use
Knight Capital Partners Corp. v. Henkel AG & Co.
KCP, the plaintiff, had hoped to act as a middleman in a potential distribution deal for a novel cleaning product and targeted Henkel, a large consumer products company as a potential distributor. KCP and Henkel entered into a non-disclosure agreement (NDA) to aid in the negotiations of a distribution deal. KCP provided Henkel with confidential information about the product. Following a year of exchanging information and engaging in negotiations, the NDA lapsed, and no deal was consummated. KCP asserts that Henkel’s parent company, Henkel KGaA, used confidential information it acquired through the NDA to develop the product on its own and also interfered with the potential distribution deal. The district court granted summary judgment in favor of KGaA. As to a breach of contract claim, the court found that KGaA was not a party to the NDA and could not be liable for its breach. As to a tortious interference claim, the court found that KGaA is the parent company of Henkel, so the parent-subsidiary privilege immunizes it from a tortious interference claim involving its subsidiary; the court found that the narrow “improper motive” exception to that privilege did not apply. The Sixth Circuit affirmed summary judgment in favor of KGaA, KCP has not presented sufficient evidence of any improper motive or means to pierce the parent-subsidiary privilege. View "Knight Capital Partners Corp. v. Henkel AG & Co." on Justia Law
Louisiana-Pacific Corp. v. James Hardie Building Products, Inc.
Louisiana-Pacific produces “engineered-wood” building siding—wood treated with zinc borate, a preservative that poisons termites; Hardie sells fiber-cement siding. To demonstrate the superiority of its fiber cement, Hardie initiated an advertising campaign called “No Wood Is Good,” proclaiming that customers ought to realize that all wood siding—however “engineered”—is vulnerable to damage by pests. Its marketing materials included digitally-altered images and video of a woodpecker perched in a hole in Louisiana-Pacific’s siding with nearby text boasting both that “Pests Love It,” and that engineered wood is “[s]ubject to damage caused by woodpeckers, termites, and other pests.” Louisiana-Pacific sued Hardie, alleging false advertising, and moved for a preliminary injunction. The Sixth Circuit affirmed the denial of the motion. Louisiana-Pacific failed to show that it would likely succeed in proving the advertisement unambiguously false under the Lanham Act and the Tennessee Consumer Protection Act. View "Louisiana-Pacific Corp. v. James Hardie Building Products, Inc." on Justia Law
Posted in: Business Law, Civil Procedure, Commercial Law, Communications Law, Consumer Law, US Court of Appeals for the Sixth Circuit
Power Investments, LLC v. SL EC, LLC
Becker, a Missouri citizen, wanted to buy the St. Louis Ashley Power Plant. Through a Missouri corporation, SL, he secured financing from Power Investments, a Nevada corporation with one member, Miller, who lives and practices law in Kentucky. Power loaned SL $300,000. Becker called, texted, and emailed Miller extensively, seeking funds and making allegedly false assurances. Becker (through another Missouri entity, Ashley) signed a purchase agreement. The sale fell apart. Power bought Becker’s interest in Ashley, assuming the obligation of the power-plant deal. Power now owns the plant. Miller sued in Kentucky, alleging fraudulent misrepresentation and unjust enrichment. Becker sued in Missouri, alleging breach of contract and fraudulent conveyance. Becker successfully moved to dismiss the Kentucky case for lack of personal jurisdiction. The Sixth Circuit reversed. Becker “transact[ed] . . . business” and made “a telephone solicitation” within the meaning of Kentucky's long-arm statute. Under the Due Process Clause, a state can exercise jurisdiction over an out-of-state defendant only if that defendant has “minimum contacts” with the state sufficient to accord with “traditional notions of fair play and substantial justice.” This case turns on specific jurisdiction, based on the “affiliation between the forum and the underlying controversy.” Becker initiated the relationship. He communicated with Miller extensively; Becker’s alleged misrepresentations in these communications constitute the core of Miller’s fraud claims. Becker “purposefully avail[ed] himself of the privilege of acting in [Kentucky] or causing a consequence” there. View "Power Investments, LLC v. SL EC, LLC" on Justia Law
Fox v. Amazon.com, Inc.
Fox used Amazon.com to order a hoverboard equipped with a battery pack. Although Fox claims she thought she was buying from Amazon, the hoverboard was owned and sold by a third-party that used Amazon marketplace, which handles communications with the buyer and processes payments. The board arrived in an Amazon-labeled box. The parties dispute whether Amazon provided storage and shipment. In November 2015, following news reports of hoverboard fires and explosions, Amazon began an investigation. On December 11, Amazon ceased all hoverboard sales worldwide. Approximately 250,000 hoverboards had been sold on its marketplace in the previous 30 days. Amazon anticipated more fires and explosions, scheduling employees to work on December 26, to monitor news reports and customer complaints. On December 12, Amazon sent a "non-alarmist" email to hoverboard purchasers. Fox does not recall receiving the email but testified that she would not have let the hoverboard remain in her home had she known all the facts. On January 9, Matthew Fox played with the hoverboard and left it on the first floor of the family’s two-story home. When a fire later broke out, caused by the hoverboard’s battery pack, two children were trapped on the second floor. Everyone escaped with various injuries; their home was destroyed. The Sixth Circuit affirmed the summary judgment rejection of allegations that Amazon sold the defective or unreasonably dangerous product (Tennessee Products Liability Act) and caused confusion about the source of that product (Tennessee Consumer Protection Act of 1977) but reversed a claim that Amazon breached a duty to warn about the defective or unreasonably dangerous nature of that product under Tennessee tort law. View "Fox v. Amazon.com, Inc." on Justia Law
Posted in: Business Law, Commercial Law, Personal Injury, Products Liability, US Court of Appeals for the Sixth Circuit
AES-Apex Employer Services, Inc. v. Rotondo
Rotondo was the sole owner of Apex, which wholly owned four limited liability companies (Directional Entities). Apex and the Directional Entities provided services, such as human resources, to different clients. Rotondo sold the Directional Entities’ key asset, customer lists, to AES, which agreed to pay Rotondo a share of its gross profits in the form of “Consulting Fees.” Two entities sought to collect Rotondo’s Consulting Fees: Akouri loaned money to one of Rotondo’s other companies and had a security interest in Apex’s assets and a judgment against Rotondo and Apex for $1.4 million. Rotondo also owes the IRS $3.4 million. The IRS filed several notices of tax liens against Rotondo, Apex, and the Directional Entities. AES filed an interpleader action. The Sixth Circuit affirmed summary judgment in favor of the IRS. The timing of a federal tax lien is measured by when the IRS gave notice of its lien, 26 U.S.C. 6323(a), (f); the timing of state security interests, like Akouri’s, is measured by when they become “choate”—i.e., complete or perfected. Akouri’s interest would be choate as of 2019, but the IRS’s tax liens date to before 2019. The court rejected Akouri’s attempt to recategorize the customer list assets as originally belonging to Apex rather than the Directional Entities. View "AES-Apex Employer Services, Inc. v. Rotondo" on Justia Law
Billy F. Hawk, Jr., GST Non-Exempt Marital Trust v. Commissioner of Internal Revenue
After Hawk died, his wife, Nancy, decided to sell the family business, Holiday Bowl and made a deal with MidCoast, which claimed an interest in acquiring companies with corporate tax liabilities that it could set off against its net-operating losses. Holiday first sold its bowling alleys to Bowl New England, receiving $4.2 million in cash and generating about $1 million in federal taxes. Nancy and Billy’s estate then sold Holiday Bowl to MidCoast for about $3.4 million,"in essence exchanging one pile of cash for another minus the tax debt MidCoast agreed to pay." MidCoast never paid the taxes. The United States filed a transferee-liability action against Nancy and Hawk’s estate. The Tax Court ruled for the government. The Sixth Circuit affirmed, reasoning that the Hawks were transferees of a delinquent taxpayer under 26 U.S.C. 6901, and that Tennessee has adopted the Uniform Fraudulent Transfer Act, which provides remedies to creditors (like the United States) when insolvent debtors fraudulently transfer assets to third parties. Holiday Bowl owed taxes. “Congress, with assistance from the courts, has constructed a formidable defense against taxpayer efforts to traffic in net operating losses and other corporate tax benefits.” View "Billy F. Hawk, Jr., GST Non-Exempt Marital Trust v. Commissioner of Internal Revenue" on Justia Law
In re Nicole Gas Production, Ltd.
Fulson owned Nicole Gas, which entered bankruptcy proceedings, and became dissatisfied with the Trustee’s handling of claims that Nicole Gas held against its competitors. With the help of attorneys Sanders and Lowe, Fulson sought relief in state court under the Ohio Corrupt Practices Act (Ohio civil RICO) against the competitors that allegedly put his business into bankruptcy. The Trustee alleged that he had appropriated claims and filed a claim, alleging that Fulson, Sanders, and Lowe violated the automatic stay. The Bankruptcy Court agreed, held the three in contempt, and entered a judgment for roughly $91,000. The Bankruptcy Appellate Panel and the Sixth Circuit affirmed. The court explored the principles of the derivative suit in corporate law, the function of the automatic stay in bankruptcy, and the extent and construction of a specific state’s RICO laws to conclude that the Ohio RICO statute does not give the sole shareholder of a bankrupt corporation standing to circumvent the automatic stay and individually sue a competitor. Fulson and his attorneys should have sought either the trustee’s cooperation or relief from the automatic stay in order to file the complaint. View "In re Nicole Gas Production, Ltd." on Justia Law