Justia Business Law Opinion Summaries

PPG, a Pittsburgh company, developed a new kind of plastic for airplane windows, “Opticor™ A former PPG employee, Rukavina, agreed to share proprietary information concerning Opticor with TMG, a China-based manufacturer. TMG contacted the PPG subcontractor that made Opticor window molds, asking it to manufacture the same molds, attaching photographs and drawings from a proprietary report. The subcontractor alerted PPG, which notified the FBI, which executed warrants to search Rukavina’s email account and residence. Rukavina was charged with criminal theft of trade secrets.PPG filed a civil action against TMG, under RICO, 18 U.S.C. 1962(c)-(d) and Pennsylvania law. TMG did not respond to the complaint, nor did it answer requests for admissions. More than a year after TMG should have appeared the clerk entered a default. PPG asserted actual damages of $9,909,687.31. Four months later, TMG appeared and unsuccessfully moved to set aside the default. The court held that PPG had sufficiently established TMG’s liability and was entitled to treble damages, an injunction, and attorneys’ fees, costs, and expenses. The court found that $8,805,929 of the claimed actual damages were supported by sufficient evidence and entered judgment for $26,417,787.The Third Circuit affirmed. TMG effectively conceded the complaint’s allegations. Under the Uniform Trade Secrets Act, it can be appropriate to measure unjust enrichment from a misappropriated trade secret by looking at development costs that were avoided but would have been incurred if not for the misappropriation. The district court carefully analyzed such evidence; its methodology and conclusion are sound. View "PPG Industries Inc v. Jiangsu Tie Mao Glass Co Ltd" on Justia Law

Under Pennsylvania law, a court may appoint a custodian to take control of a corporation if the corporation’s board of directors is deadlocked or if the directors’ acts are illegal, oppressive, fraudulent, or wasteful. The eight-person FRBK Board of Directors became evenly split into two factions until one of the Hill Directors died. The Madonna Directors immediately used their new numerical advantage to start rearranging the bank’s leadership and took steps to fill the Board vacancy with an ally.The Hill Directors sued. Within hours, the district court ordered the Madonna Directors to cease their actions. Nine days later, without an evidentiary hearing or fact-finding, the court appointed a custodian to take control of FRBK and to hold a special shareholders’ meeting to fill the vacant Board seat. The following month, the court – without prompting from any shareholder or Board member – directed the custodian to add a Board seat and to fill that seat at the special shareholders’ meeting.The Third Circuit reversed. The decision to displace the corporate governance structure of a publicly-traded company did not reflect the required caution, circumspection, or justification for such a drastic step. FRBK’s bylaws describe how the Board should proceed after the death of a director. The Madonna Directors followed those instructions. The court abused its discretion by hastily supplanting the Bylaws with its own process. There was no deadlock, illegality, oppression, or any other ground for appointing a custodian. View "Hill v. Cohen" on Justia Law

In 2007, Transit was awarded an exclusive license to bring telecommunications services to 277 New York City subway stations. Transit subcontracted with Fiber-Span, to develop remote fiber nodes to amplify telecommunication signals in the first six subway stations to receive service. Fiber-Span agreed to subsidize certain developmental costs, hoping to be selected as the contractor for the remaining 271 subway stations. Transit agreed that, if Fiber-Span was not selected to supply nodes for the remaining stations, Transit would reimburse those front-loaded costs. The relationship deteriorated. Transit asserted that Fiber-Span remained in breach of contract even after attempts to remediate problems but nevertheless took the network live. Transit insisted that Fiber-Span replace the nodes. Fiber-Span said it would do so only after it was awarded a contract for the remaining stations. Transit continued to use the nodes for two more years, then sued in New York state court. Fiber-Span filed for bankruptcy.The Third Circuit concluded Transit’s decision to keep using the nodes was consistent with the acceptance of non-conforming goods. Fiber-Span breached the contract; the damages must reflect the difference in value between what Transit received and what it was promised, which is less than what the bankruptcy and district courts awarded. Transit was not required to compensate Fiber-Span for not selecting it to provide nodes for the remaining subway stations. Transit’s claim to the payment on Fiber-Span's performance bond is time-barred. View "In re: Fiber-Span Inc" on Justia Law

Navient serviced the student loans of Matthew Panzarella. Matthew listed his mother (Elizabeth) and brother (Joshua) as references on student loan applications and promissory notes and provided their cell phone numbers. He became delinquent on his loans and failed to respond to Navient’s attempts to communicate with him. Call logs show that over five months, Navient called Elizabeth's phone number four times (three calls were unanswered) and Joshua's number 15 times (all unanswered), using “interaction dialer” telephone dialing software developed by ININ.The Panzarellas filed a putative class action, alleging violation of the Telephone Consumer Protection Act, 47 U.S.C. 227, by calling their cellphones without their prior express consent using an automatic telephone dialing system (ATDS). Navient argued that its ININ System did not qualify as an ATDS because the system lacked the capacity to generate and call random or sequential telephone numbers. The Third Circuit affirmed summary judgment for Navient, without deciding whether Navient’s dialing equipment qualified as an ATDS. Despite the text’s lack of clarity, Section 227(b)(1)(A)’s context and legislative history establish it was intended to prohibit making calls that use an ATDS’s auto-dialing functionalities; the record establishes that Navient did not rely on random- or sequential number generation when it called the Panzarellas. View "Panzarella v. Navient Solutions Inc" on Justia Law

Host operates airport concessions. MarketPlace is the landlord at Philadelphia International Airport (PHL). After competitive bidding, Host won PHL concession spots, planning to open a coffee shop and a restaurant. MarketPlace insisted on a lease term allowing it to grant “third-parties exclusive or semi-exclusive rights to be sole providers" of certain foods and beverages, including a “pouring-rights agreement” (PRA), “granting a beverage manufacturer, bottler, distributor or other company (e.g., Pepsi or Coca-Cola) the exclusive control over beverage products advertised, sold and served at [PHL].”Host abandoned the deal and sued, alleging that MarketPlace would receive payoffs from a “big soda company” courtesy of an exclusive PRA. The complaint alleged an unlawful tying arrangement and an illegal conspiracy and agreement in restraint of trade, in violation of Section 1 of the Sherman Act. The district court dismissed the case with prejudice, finding Host failed to adequately plead a relevant geographic market. The Third Circuit affirmed. Host lacks antitrust standing and has not adequately pled a violation of the Sherman Act. Host alleged harm only to itself; failure to secure preferred contractual terms is not an antitrust injury. Host was not being forced to purchase any product. MarketPlace’s control over the non-alcoholic beverage suppliers at PHL does not stem from market power but from its role as a landlord. View "Host International Inc v. MarketPlace PHL LLC" on Justia Law

TitleMax provides vehicle loans at interest rates as high as 180%. The entire process occurs at a TitleMax brick-and-mortar location. The borrower receives “a check drawn on a bank outside of Pennsylvania,” The borrower grants TitleMax a security interest in the vehicle. TitleMax records its lien with the appropriate state authority. Borrowers can make payments from their home states. TitleMax does not have any offices, employees, agents, or brick-and-mortar stores and is not licensed as a lender in Pennsylvania. TitleMax claims that it never solicited Pennsylvania business and does not run television ads within Pennsylvania.Pursuant to the Consumer Discount Company Act and the Loan Interest and Protection Law, Pennsylvania’s Department of Banking and Securities issued a subpoena requesting documents regarding TitleMax’s interactions with Pennsylvania residents. TitleMax then stopped making loans to Pennsylvania residents and asserts that it has lost revenue.The district court held that Younger abstention did not apply and that the Department’s subpoena’s effect was to apply Pennsylvania’s usury laws extraterritorially in violation of the Commerce Clause.The Third Circuit reversed. Applying the Pennsylvania statutes to TitleMax does not violate the extraterritoriality principle. TitleMax receives payments from within Pennsylvania and maintains an actionable security interest in vehicles located in Pennsylvania; its conduct is not “wholly outside” of Pennsylvania. The laws do not discriminate between in-staters and out-of-staters. Pennsylvania has a strong interest in prohibiting usury. Applying Pennsylvania’s usury laws to TitleMax’s loans furthers that interest and any resulting burden on interstate commerce is, at most, incidental. View "TitleMax of Delaware Inc v. Weissmann" on Justia Law

For 20 years, the vendor (SDM) provided food services at Drexel University in Philadelphia. In 2014 the university announced that it would competitively bid the contract for on-campus dining. The same vendor ultimately won that competition but about two years into the contract’s 10-year duration, the vendor sued the university for fraud, multiple breaches of contract, and alternatively for unjust enrichment. The university responded with fraud and breach-of-contract counterclaims. Only a few of the vendor’s breach-of-contract claims and portions of the university’s breach-of-contract claim survived summary judgment. The parties referred the remaining claims and counterclaims to arbitration and jointly moved to dismiss them. The district court granted that motion and entered final judgment, which the parties appealed, primarily to dispute the summary judgment ruling.The Third Circuit affirmed summary judgment in Drexel’s favor on SDM’s unjust enrichment and punitive damages claims, summary judgment in SDM’s favor on Drexel’s fraudulent inducement claim, and the district court’s decision to deny Drexel’s motion to strike declarations by SDM witnesses under the sham affidavit rule. The court vacated an order granting summary judgment to Drexel on SDM’s claims for fraudulent inducement, breach of contract for failure to renegotiate in good faith, and breach of a supplemental agreement for the Fall 2016 Semester. The surviving claims were remanded to the district court. View "SodexoMAGIC LLC v. Drexel University" on Justia Law

Vitamin Energy is the defendant in 5-hour Energy’s 2019 lawsuit under the Lanham Act for trademark infringement, false designation of origin, false advertising, and trademark dilution; 5-hour also made claims under Michigan law for trademark infringement, indirect trademark infringement, and unfair competition. Vitamin Energy was insured by Evanston. In a declaratory judgment action, the district court decided Evanston had no duty to defend. The Third Circuit vacated. Pennsylvania law imposes on insurers a broad duty to defend lawsuits brought against those they insure. An insured’s burden to establish its insurer’s duty to defend is light, and Vitamin Energy has carried it. The policy excludes coverage for Advertising Injury, defined as an injury “arising out of oral or written publication of material that libels or slanders.” While some allegations of the complaint involve disparagement, others do not. An underlying complaint need only contain at least one allegation that falls within the scope of the policy’s coverage for the duty to defend to be triggered. The duty to defend is broader than the duty to indemnify. Similarly, exclusions for suits based on “Intellectual Property,” “Incorrect Description,” “Failure to Conform,” and “Knowing” actions do not defeat the duty to defend. View "Vitamin Energy LLC v. Evanston Insurance Co" on Justia Law

In 2019, Mallet learned that Bundy was its newest competitor in the sale of baking release agents, the lubricants that allow baked goods to readily separate from the containers in which they are made. Bundy was well-known for other commercial baking products when it launched a new subsidiary, Synova, to sell baking release agents. Synova hired two Mallet employees, both of whom had substantial access to Mallet’s proprietary information. That information from Mallet helped Synova rapidly develop, market, and sell release agents to Mallet’s customers.Mallet sued, asserting the misappropriation of its trade secrets. The district court issued a preliminary injunction. restraining Bundy, Synova, and those employees from competing with Mallet. The Third Circuit vacated and remanded for further consideration of what, if any, equitable relief is warranted and what sum Mallet should be required to post in a bond as “security … proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” A preliminary injunction predicated on trade secret misappropriation must adequately identify the allegedly misappropriated trade secrets. If the district court decides that preliminary injunctive relief is warranted, the injunction must be sufficiently specific in its terms and narrowly tailored in its scope. View "Mallet & Co., Inc. v. Lacayo" on Justia Law

Cohen entered into a work-for-hire agreement with SLP, a special purpose entity formed by TWC to make the film, Silver Linings Playbook. Cohen was to receive $250,000 in fixed initial compensation and contingent future compensation of roughly 5% of the movie’s net profits. The movie was released to critical acclaim in 2012. TWC purports to own all the rights pertaining to the movie, including the Cohen Agreement.In 2017, following a flood of sexual misconduct allegations against its co-founder, Harvey Weinstein, TWC filed for Chapter 11 bankruptcy. The bankruptcy court approved TWC’s Asset Purchase Agreement with Spyglass, 11 U.S.C. 363. Spyglass sought a declaratory judgment that the Cohen Agreement and had been sold to Spyglass. If the Cohen Agreement were an executory contract, assumed and assigned under section 365, Spyglass would be responsible for approximately $400,000 in previously unpaid contingent compensation. If Spyglass instead purchased the Cohen Agreement as a non-executory contract, Spyglass would be responsible only for obligations on a go-forward basis. Other writers, producers, and actors with similar works-made-for-hire contracts made similar arguments.The bankruptcy court granted Spyglass summary judgment. The district court and Third Circuit affirmed. Cohen’s remaining obligations under the Agreement are not material and the parties did not clearly avoid New York’s substantial performance rule; the Cohen Agreement is not an executory contract. View "The Weinstein Co. Holdings, LLC v. Spyglass Media Group, LLC." on Justia Law