Justia Business Law Opinion Summaries

Metropolitan Washington Chapter, Associated Builders and Contractors, Inc. (“Metro Washington”), a corporate trade organization representing construction companies, brought this pre-enforcement challenge to the constitutionality of the District of Columbia First Source Employment Agreement Act of 1984. The statute requires contractors on D.C. government-assisted projects to grant hiring preferences to D.C. residents. Metro Washington appealed the district court’s Rule 12 dismissals of the claims under the dormant Commerce Clause, U.S. Const. and the Privileges and Immunities Clause, and the grant of summary judgment to the District of Columbia on the substantive due process claim.   The DC Circuit affirmed the district court’s Rule 12(b)(6) dismissal of Metro Washington’s dormant Commerce Clause claim and Rule 12(c) dismissal of the Privileges and Immunities Clause claim. The court also affirmed the district court’s grant of summary judgment to the District of Columbia on the inapplicability of the Privileges and Immunities Clause to a corporation. Further, although Metro Washington has Article III standing as an association, it lacks third-party standing to raise its alternative Privileges and Immunities claim based on incorporation through the Fifth Amendment, and therefore the court dismissed this alternative contention. View "Metropolitan Washington Chapter, Associated Builders and Contractors, Inc. v. DC" on Justia Law

Plaintiff, a franchisor of tax preparation services, appeals from the district court’s denying its motion for preliminary injunctive relief to enforce, among other things, covenants not to compete or solicit former clients against Defendants, its former franchisees. On appeal, Plaintiff argues that the district court erroneously applied a heightened standard for obtaining preliminary injunctive relief, failed to credit an undisputed fact that Plaintiff had grounds to terminate the franchise agreements because Defendants were violating federal tax laws, and was compelled as a matter of law to find that it would suffer irreparable harm to its goodwill and client relationships in the absence of an injunction.   The Second Circuit affirmed the order denying preliminary relief. The court concluded that the district court applied the appropriate standard, permissibly credited Defendants’ denials that they violated federal tax laws, and acted well within its discretion in concluding that Plaintiff would not suffer irreparable harm. The court reasoned that nothing in the court’s precedents compels a district court to find irreparable harm to goodwill and client relationships in covenant-not-to-compete or -solicit cases simply because irreparable harm is often found in such cases. Instead, a plaintiff must present the district court with actual evidence. On that record, the court wrote it cannot conclude that the district court’s finding that Plaintiff had failed to make a strong showing of irreparable injury represented a clear error or exceeded the court’s discretion. View "JTH Tax d/b/a Liberty Tax Service v. Agnant" on Justia Law

During an investigation into possible violations of California overtime laws by appellant Nor-Cal Venture Group, Inc. (Nor-Cal), respondent Labor Commissioner for the State of California (Commissioner) subpoenaed Nor-Cal's business records. The Commissioner ultimately issued a wage citation to Nor-Cal, seeking over $900,000 in penalties and unpaid wages for alleged misclassification of about 40 restaurant managers. Nor-Cal challenged the wage citation in an “informal” adjudicatory hearing, and while that adjudication was pending, Commissioner issued a subpoena directing Nor-Cal’s “Person(s) Most Knowledgeable” on certain topics to testify at a deposition. When Nor-Cal refused, Commissioner filed a petition to a trial court to compel Nor-Cal to comply. The trial court agreed with Commissioner and ordered Nor-Cal to comply with the deposition subpoena. On appeal, Nor-Cal challenged the trial court’s order, arguing: (1) the California Government Code did not contemplate parties to adjudicatory informal hearings taking depositions for the purpose of discovery; and (2) because, under the trial court’s reasoning, only Commissioner could issue deposition subpoenas during the pendency of an informal adjudication, the trial court’s order permitting non-reciprocal discovery violated due process. The Court of Appeal reversed the trial court's order, finding that while Commissioner had broad power to issue investigative subpoenas to a company for suspected violations of the law, "that broad power ends upon initiation of adjudicative proceedings against the company." View "Garcia-Brower v. Nor-Cal Venture Group" on Justia Law

During the tax years at issue, 2010–2013, the Taxpayers owned a New Jersey horse farm. Their Company employed several employees, none of whom had a budget. The Company paid the Taxpayers' personal expenses and lost more than $3.5 million during the years at issue and more than $11.4 million between 1998-2013. The Taxpayers contributed capital and made loans to the Company. In 2016, the Company sold a horse for nearly $1.2 million, enabling it to report a modest overall profit.In 2016, the IRS sent notices of income tax deficiencies. The Tax Court sustained the deficiency determinations, holding that the Taxpayers could not deduct Company losses because their horse breeding activity was not engaged in for profit under Internal Revenue Code section 183 and that the Taxpayers failed to substantiate net operating loss carryforwards that allegedly arose from Company activity. The Third Circuit affirmed. The Tax Court did not clearly err when it found that adverse market conditions did not explain the Company’s sustained unprofitability and correctly considered the Taxpayers’ substantial income from other sources. The profit generated from the 2016 horse sale was tempered by the fact that it occurred after the tax years at issue and after the notices of deficiency. The expertise of the Taxpayers and their advisors was the only factor that favored the Taxpayers. View "Skolnick v. Commissioner of Internal Revenue" on Justia Law

Relevent Sports, LLC, a U.S.-based soccer promoter, alleges that the Fédération Internationale de Football Association (popularly known as FIFA) and the United States Soccer Federation, Inc. adopted and enforced a geographic market division policy in 2018 that unlawfully prohibits soccer leagues and teams from playing official season games outside of their home territory. Relevent claims that the 2018 policy represents an agreement among direct competitors to restrict competition in violation of federal antitrust laws. The district court concluded that Relevent failed to allege that the challenged anticompetitive conduct stemmed from a prior agreement to enter into the 2018 policy.   The Second Circuit vacated and remanded. The court explained that a plaintiff challenging an association policy or rule that governs the conduct of the members’ separate businesses need not allege an antecedent “agreement to agree.” Because Relevent challenges the allegedly monopolistic 2018 Policy directly, it has adequately alleged concerted action. The Sherman Antitrust Act and the Clayton Antitrust Act require no further allegations of an agreement to engage in concerted action for Relevent’s complaint to survive a motion to dismiss. View "Relevent Sports v. U.S. Soccer Federation" on Justia Law

Kimball entered annexation agreements with Illinois municipalities and contracted separately with Fidelity as a surety to issue bonds securing performance on those obligations. Fidelity required Kimball to indemnify it. In 2008, Kimball filed for Chapter 11 bankruptcy relief before it satisfied its development obligations. The municipalities and Fidelity filed proofs of claim.Fidelity voted in favor of Kimball's reorganization plan. The confirmation order released the claims of every party that voted for the plan; an injunction prohibited those entities from seeking payment on their claims. Kimball’s assets, “free and clear of any and all liens, claims, encumbrances, and interests,” went into a trust that sold its development interests to TRG. The bankruptcy court later allowed the municipalities to sue Kimball to establish liability in order to recover the proceeds of the performance bonds.The municipalities sued Fidelity in state court to collect on the bonds. Fidelity interpleaded TRG. TRG asked the bankruptcy court to enforce the Kimball plan confirmation order and injunction against Fidelity and alleged “knowing and intentional violation of the confirmation order.” The bankruptcy court held Fidelity in contempt of that order, concluded that the order extinguished Kimball’s duty to indemnify Fidelity, and awarded TRG $9.5 million in sanctions, The district court and Seventh Circuit affirmed. The bankruptcy court undertook a careful and detailed analysis in finding Fidelity in contempt and assessing sanctions based on TRG's costs. There was no legal or factual error. View "Fidelity and Deposit Company of Maryland v. TRG Venture Two, LLC" on Justia Law

Plaintiffs William Kainz and GeoChemicals, LLC appealed a district court’s order granting Jacam Chemical Co. 2013, LLC’s motion to abate and an order and judgment awarding attorney’s fees to Jacam. Plaintiffs argued the district court erred by abating the action and by awarding attorney’s fees. The North Dakota Supreme Court concluded the district court misapplied the law in granting the motion to abate and abused its discretion by awarding attorney’s fees. Accordingly, judgment was reversed and the case remanded for further proceedings. View "Kainz, et al. v. Jacam Chemical Co. 2013" on Justia Law

Nodak Insurance Company (“Nodak”) appealed, and John D. Miller, Jr. d/b/a John Miller Farms, Inc. and JD Miller, Inc. (collectively, “Miller”) cross-appealed a judgment determining Miller’s insurance policy with Nodak provided coverage and awarding Miller damages. The dispute arose from Miller’s sale of seed potatoes to Johnson Farming Association, Inc. (“Johnson”). Miller operated a farm in Minto, North Dakota. During the 2015 planting season, Miller planted seed potatoes. Miller claimed a North Dakota State Seed Department representative inspected the field where the seed was being grown on July 13, July 26, and September 3, 2015, which indicated no problems with the seed crop. On or about September 3, 2015, Miller “killed the vines” in anticipation of and as required to harvest the seed crop. Miller harvested the seed crop between September 18 and September 25, 2015, and the harvested seed crop was immediately taken from the field to Miller’s storage facility south of Minto. n December 31, 2015, Miller and Johnson entered into a contract for the sale of seed potatoes. The contract for sale disclaimed any express or implied warranty of merchantability or fitness for a particular purpose and contained a limitation of consequential damages and remedies. In June or July 2016, Johnson informed Miller of problems with some of the seed potatoes he had purchased. Johnson stated an analysis definitively showed very high levels of the herbicide glyphosate, which caused the problems with the seed potatoes. The seed potatoes did not grow properly, and Johnson alleged damages as a result. It was undisputed the seed potatoes were damaged because an employee of Miller inadvertently contaminated the seed potatoes with glyphosate while they were growing on Miller’s Farm. In July 2016, Miller sought coverage for the loss from Nodak. Because the North Dakota Supreme Court concluded a policy exclusion applied and precluded coverage, the North Dakota Supreme Court reversed the district court's judgment. View "Miller, et al. v. Nodak Ins. Co." on Justia Law

The Supreme Court held that on-going, at-will, consumer-business relationships consist of the day-to-day offer and acceptance of unilateral contracts, and thus, businesses may effectively modify the non-negotiated, standardized terms governing those relationships if the business can demonstrate certain elements.The United States District Court for the District of Arizona certified to the Supreme Court the question of whether an effective modification of a consumer contract can occur when the offeror sends notice of the proposed modification to the offeree through a communication channel to which the offeree previously consented even if the offeree fails to respond. In considering the requirements for modifying the terms of at-will, on-going, business-consumer relationships, the Supreme Court held that its jurisprudence did not provide definitive guidance and that Restatement of Consumer Contracts 3 is hereby adopted to fill that void. View "Cornell v. Desert Financial Credit Union" on Justia Law

Selective denied coverage of Creation's insurance claim. Creation sued for breach of contract and won. Creation then pursued costs and fees for Selective’s vexatious and unreasonable delay under the Illinois Insurance Code, 215 ILCS 5/155. The Seventh Circuit held that the remedy was unavailable. Creation then sued Selective’s in-house lawyer, the lawyer’s supervisor, and its outside counsel, alleging they tortiously interfered with the contract between Selective and Creation.The Seventh Circuit affirmed the dismissal of the suit. The suits were an attempt at double recovery—one from the principal and one from its agents. The corporate form limits, not doubles, liability. In Illinois, tortious interference requires some sort of interloper and precludes applying the economic loss doctrine to claims for tortious interference. Illinois provides a corporation’s agents with a conditional privilege, rooted in the business judgment rule, from tortious interference suits. When an agent acts in the corporation’s interests, she is protected from liability for interfering in her principal’s contractual affairs. When an agent interferes with a contract, she is presumed to do so for the company’s benefit. Under Illinois law, overcoming the privilege was Creation’s burden to plead, and its failure to do so with more than mere conclusory allegations dooms its suit. View "Creation Supply, Inc. v. Hahn" on Justia Law