Justia Business Law Opinion SummariesArticles Posted in US Court of Appeals for the Sixth Circuit
Lyngaas v. Curaden AG
Curaden AG, a Swiss entity, manufactures toothbrushes. Curaden USA, an Ohio corporation headquartered in Arizona, is a Curaden AG subsidiary and promotes Curaden AG products throughout the U.S. The two companies had not executed the standard written distribution agreement that typically governs the practices of Curaden AG’s subsidiary distributors. Curaden USA never presented its advertising materials to Curaden AG for review. Curaden USA purchased a list of thousands of dental professionals’ fax numbers and created the fax advertisements at issue, which displayed Curaden USA’s contact information without mention of Curaden AG. Curaden USA hired companies to send the faxes and paid for the transmission. Lyngaas, a Livonia dentist who had received two Curaden USA faxes, filed a purported class action under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227. The Sixth Circuit affirmed that Lyngaas could not pierce the corporate veil to hold Curaden AG liable for Curaden USA’s action, that faxes received by a computer over a telephone line violated the TCPA, that it had personal jurisdiction over both Curaden entities, that Curaden USA violated the TCPA but that Curaden AG was not liable as a “sender,” and that Lyngaas’s evidence and expert-witness testimony concerning the total number of faxes successfully sent were inadmissible due to unauthenticated fax records. A claims-administration process was established for class members to verify their receipt of the unsolicited fax advertisements. View "Lyngaas v. Curaden AG" on Justia Law
The Ohio State University v. Redbubble, Inc.
Redbubble operates a global online marketplace. Around 600,000 independent artists, not employed by Redbubble, upload images onto Redbubble’s interface. Consumers scroll through those images and order customized items. Once a consumer places an order, Redbubble notifies the artist and arranges the manufacturing and shipping of the product with independent third parties. Redbubble never takes title to any product shown on its website and does not design, manufacture, or handle these products. The shipped packages bear Redbubble's logo. Redbubble handles customer service, including returns. Redbubble markets goods listed on its website as Redbubble products; for instance, it provides instructions on how to care for “Redbubble garments.” Customers often receive goods from Redbubble’s marketplace in Redbubble packaging.Some of Redbubble’s artists uploaded trademark-infringing images that appeared on Redbubble’s website; consumers paid Redbubble to receive products bearing images trademarked by OSU. Redbubble’s user agreement states that trademark holders, and not Redbubble, bear the burden of monitoring and redressing trademark violations. Redbubble did not remove the offending products from its website. OSU sued, alleging trademark infringement, counterfeiting, and unfair competition under the Lanham Act, and Ohio’s right-of-publicity law. The district court granted Redbubble summary judgment. The Sixth Circuit reversed. Redbubble’s marketplace involves creating Redbubble products and garments that would not have existed but for Redbubble’s enterprise. The district court erred by entering summary judgment under an overly narrow reading of the Lanham Act. View "The Ohio State University v. Redbubble, Inc." on Justia Law
Smith v. General Motors LLC
In 2005-2006, GM changed the dashboard used for GMT900 model cars from a multi-piece design to a single-piece design, which made the dashboard prone to cracking in two places. Plaintiffs, from 25 states, alleged that GMT900 vehicles produced in 2007-2014 contained a faulty, dangerous dashboard and that GM knew of the defective dashboards before GTM900 vehicles hit the market. The complaint contained no allegation that any of the plaintiffs have been hurt by the allegedly defective dashboards. The complaint, filed on behalf of a nationwide class, alleged fraudulent concealment, unjust enrichment, and violations of state consumer protection statutes and the Magnusson-Moss Warranty Act.The Sixth Circuit affirmed the dismissal of the case. At worst, Plaintiffs suffered only cosmetic damage and a potential reduced resale value from owning cars with cracked dashboards. Although the plaintiffs claimed that routine testing, customer complaints, and increased warranty claims alerted GM to the defective dashboards and accompanying danger, that is not enough to survive a motion to dismiss without specifics about how and when GM learned about the defect and its hazards, and concealed the allegedly dangerous defect from consumers. Even accepting that GM produced defective vehicles, under the common legal principles of the several states, the plaintiffs must show that GM had sufficient knowledge of the harmful defect to render its sales fraudulent. View "Smith v. General Motors LLC" on Justia Law
Helena Agri-Enterprises, LLC v. Great Lakes Grain, LLC
Through several corporations, members of the Boersen family have farmed in Michigan for several generations. After 2016's poor crop, their corporate entities could not cover their debts. One creditor, Helena, obtained a nearly 15-million-dollar judgment against the Boersen entities and family members who ran them. Much of the farm equipment was repossessed and, unable to obtain financing, the Boersens discontinued farming until 1999, when family members Stacy and Nick formed new entities, secured financing to lease the land and remaining equipment, and resumed farming. Because the original defendants could not pay their debt, Helena sued Stacy and Nick and their new companies.The Sixth Circuit affirmed summary judgment in favor of the defendants. The leases do not transfer the debtors’ assets; none of the involved entities owes any money to Helena. Stacy and Nick’s use of the family farm’s production history to obtain crop insurance does not constitute a “transfer of assets.” Neither Stacy nor Nick was an owner, manager, or shareholder of any of the Boersen entities covered by the judgment; no Boersen legacy owner or guarantor serves as an officer of or is otherwise employed by, either new company. No original Boersen defendant received anything of value from the new companies other than fair market value payments on leases. Nor was either new company used to commit a wrong against Helena. View "Helena Agri-Enterprises, LLC v. Great Lakes Grain, LLC" on Justia Law
EPLET, LLC v. DTE Pontiac North, LLC
In 2007, GM sold a power plant to DTEPN, which leased the land under the plant for 10 years. DTEPN agreed to sell utilities produced at the plant to GM, to maintain the plant according to specific criteria, and to address any environmental issues. DTEPN’s parent company, Energy, guaranteed DTEPN’s utility, environmental, and maintenance obligations. Two years later, GM filed for bankruptcy. GM and DTEPN agreed to GM’s rejection of the contracts. DTEPN exercised its right to continue occupying the property. An environmental trust (RACER) assumed ownership of some GM industrial property, including the DTEPN land. DTEPN remained in possession until the lease expired. RACER then discovered that DTEPN had allowed the power plant to fall into disrepair and contaminate the property.The district court dismissed the claims against Energy, reasoning that RACER’s allegations did not support piercing the corporate veil and Energy’s guaranty terminated after GM rejected the contracts in bankruptcy.The Sixth Circuit reversed. Michigan courts have held that a breach of contract can justify piercing a corporate veil if the corporate form has been abused. By allegedly directing its wholly-owned subsidiary to stop maintaining the property, Energy exercised control over DTEPN in a way that wronged RACER. DTEPN is now judgment-proof because it was not adequately capitalized by Energy. RACER would suffer an unjust loss if the corporate veil is not pierced. Rejection in bankruptcy does not terminate the contract; the contract is considered breached, 11 U.S.C. 365(g). The utility services agreement and the lease are not severable from each other. Energy guaranteed DTEPN’s obligations under the utility agreement concerning maintenance, environmental costs, and remediation, so Energy’s guaranty is joined to DTEPN’s section 365(h) election. View "EPLET, LLC v. DTE Pontiac North, LLC" on Justia Law
Progressive Rail Inc. v. CSX Transportation, Inc.
Siemens shipped two electrical transformers from Germany to Kentucky. K+N arranged the shipping, retaining Blue Anchor Line. Blue Anchor issued a bill of lading, in which Siemens agreed not to sue downstream Blue Anchor subcontractors for any problems arising out of the transport from Germany to Kentucky. K+N subcontracted with K-Line to complete the ocean leg of the transportation. Siemens contracted with another K+N entity, K+N Inc., to complete the land leg of the trip from Baltimore to Ghent. K+N Inc. contacted Progressive, a rail logistics coordinator, to identify a rail carrier. They settled on CSX. During the rail leg from Maryland to Kentucky, one transformer was damaged, allegedly costing Siemens $1,500,000 to fix.Progressive sued CSX, seeking to limit its liability for these costs. Siemens sued CSX, seeking recovery for the damage to the transformer. The actions were consolidated in the Kentucky federal district court, which granted CSX summary judgment because the rail carrier qualified as a subcontractor under the Blue Anchor bill and could invoke its liability-shielding provisions. The Sixth Circuit affirmed. A maritime contract, like the Blue Anchor bill of lading, may set the liability rules for an entire trip, including any land-leg part of the trip, and it may exempt downstream subcontractors, regardless of the method of payment. The Blue Anchor contract states that it covers “Multimodal Transport.” It makes no difference that the downstream carrier was not in privity of contract with Siemens. View "Progressive Rail Inc. v. CSX Transportation, Inc." on Justia Law
ECIMOS, LLC v. Carrier Corp.
Carrier manufactures residential Heating, Ventilation, and Air Conditioning (HVAC) systems. ECIMOS produced the quality-control system that tested completed HVAC units at the end of Carrier’s assembly line. ECIMOS alleged that Carrier infringed on its copyright on its database-script source code—a part of ECIMOS’s software that stores test results. ECIMOS alleges that Carrier improperly used the database and copied certain aspects of the code to aid a third-party’s development of new testing software that Carrier now employs in its Collierville, Tennessee manufacturing facility.ECIMOS won a $7.5 million jury award. The court reduced Carrier’s total damages liability to $6,782,800; enjoined Carrier from using its new database, but stayed the injunction until Carrier could develop a new, non-infringing database subject to the supervision of a special master; and enjoined Carrier from disclosing ECIMOS’s trade secrets while holding that certain elements of ECIMOS’s system were not protectable as trade secrets (such as ECIMOS’s assembled hardware). The Sixth Circuit affirmed in part and reversed in part. There are sufficient reasons to conclude that Carrier did infringe on ECIMOS’s copyright, but Carrier’s liability to ECIMOS based on its copyright infringement and its breach of contract can total no more than $5,566,050. The district court did not err when it crafted its post-trial injunctions. View "ECIMOS, LLC v. Carrier Corp." on Justia Law
Campbell Family Trust v. J.P. Morgan Investment Management, Inc.
The plaintiffs are shareholders in mutual funds. JPMIM is paid a fee for managing the Funds’ securities portfolio and researching potential investments. The plaintiffs sued under the Investment Company Act (ICA), 15 U.S.C. 80a-1, which allows mutual fund shareholders to bring a derivative suit against their fund’s investment adviser on behalf of their fund. The plaintiffs claimed that JPMIM charged excessive fees in violation of section 36(b), which imposes a fiduciary duty on advisers with respect to compensation for services.The Sixth Circuit affirmed summary judgment in favor of JPMIM. Under section 36(b), a shareholder must prove that the challenged fee “is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” The district court considered the relevant factors in making its determination: the nature, extent, and quality of the services provided by the adviser to the shareholders; the profitability of the mutual fund to the adviser; “fallout” benefits, such as indirect profits to the adviser; economies of scale achieved by the adviser as a result of growth in assets under the fund’s management and whether savings generated from the economies of scale are shared with shareholders; comparative fee structures used by other similar funds; and the level of expertise, conscientiousness, independence, and information with which the board acts. View "Campbell Family Trust v. J.P. Morgan Investment Management, Inc." on Justia Law
Church Joint Venture, L.P. v. Earl Blasingame
The Blasingames filed for Chapter 7 bankruptcy. CJV purchased their debts to two banks, each arising from personal guarantees made to secure loans to businesses that failed. The Blasingames claimed that they owned no real property, owned personal property worth $5,700, and had a total monthly income of $888. The bankruptcy trustee and CJV successfully argued against the discharge of their debts. The bankruptcy court noted that the debtors had repeatedly concealed assets, including through the use of closely-held, interconnected corporations and trusts. CJV sued the Blasingames, their children, and those entities and trusts. CJV prevailed on two fraudulent transfer claims for transfers of money and of real property to trusts. CJV appealed the dismissal of claims based on reverse alter ego or reverse veil piercing; the denial CJV’s motion to certify to the Tennessee Supreme Court the question of whether Tennessee would recognize such theories; and the denial of CJV’s motion for leave to amend its complaint to add to its legal theories that the trusts were “self-settled.” The Sixth Circuit affirmed, finding “no persuasive data” to conclude that Tennessee’s high court would embrace the reverse piercing claims; reverse piercing is not a novel or unsettled area of law and certification was unnecessary. The failure of CJV to realize it could have made claims under a self-settled theory is not an adequate reason for a nearly five-year delay; the prejudice to defendants was apparent and substantial. View "Church Joint Venture, L.P. v. Earl Blasingame" on Justia Law
Johnson v. Morales
Johnson rented her restaurant to a private party. For unknown reasons, individuals unaffiliated with her or the party emerged from a vehicle that night and shot at the restaurant. Police were called during the shooting but never apprehended the shooters. Less than two days later, Saginaw City Manager Morales issued Johnson a notice ordering the suspension of all business activity related to her restaurant under an ordinance that permits such suspensions “in the interest of the public health, morals, safety, or welfare[.]” There was hearing three days later. More than two months after the hearing, Human Resources Director Jordan upheld the suspension. Johnson filed suit with a motion for a temporary restraining order and, alternatively, a motion for a preliminary injunction to prevent Morales from sitting on the appeal panel expected to review Jordan’s decision. The district court denied that motion. The appeal panel, which did not include Morales, held a hearing and affirmed Jordan’s decision upholding the suspension. The Sixth Circuit reversed, in part, the dismissal of Johnson’s burden-shifting, substantive due process, and equal-protection claims. Johnson adequately alleged selective enforcement and pled that the city lacked a rational basis to suspend her license. Johnson has plausibly alleged that the procedures afforded to Johnson fell short of constitutional requirements. View "Johnson v. Morales" on Justia Law