Articles Posted in Commercial Law

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In 2004, Baker Lofts purchased an abandoned building for renovation. Loans of more than $5 million from Huntington were secured by two mortgages on the building and by personal property, including a tax-increment-financing agreement, rental income, and Baker’s liquor license. Baker defaulted in 2011. Huntington assigned the 2005 mortgage to its subsidiary, Fourteen, which foreclosed by public auction. The Notice stated that “[t]he balance owing on the Mortgage is $5,254,435.04,” but did not mention the senior 2004 mortgage, which Huntington retained. Fourteen, the only bidder, purchased the property for $1,856,250. Huntington released the 2004 mortgage. Fourteen sold the property for $2,355,000. Huntington thought that Baker still owed $3.5 million and invoked its security interests in the remaining collateral. At a public sale, Huntington bought the rights to Baker's tax-increment-financing agreement for $1,107,000; began collecting rents; and asserted its security interest in the liquor license, which Baker had sold before it declared bankruptcy. Assignees of Baker's legal claims sought a declaratory judgment that the sale of the building extinguished all of Baker’s debt. They also raised conversion and tortious interference claims and a claim under Michigan’s secured transactions statute. The Sixth CIrcuit affirmed Huntington's judgment. The district court correctly concluded that Baker’s debt exceeded the value of the foreclosed building and that excess permitted Huntington to take possession of the other property securing its loans. View "DAGS II, LLC v. Huntington National Bank" on Justia Law

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McNeil opened a business checking account with Defendant. A “Master Services Agreement,” stated: [W]e have available certain products designed to discover or prevent unauthorized transactions, …. You agree that if your account is eligible for those products and you choose not to avail yourself of them, then we will have no liability for any transaction that occurs on your account that those products were designed to discover or prevent. McNeil was not given a signed copy of the Agreement, nor was he advised of its details. McNeil ordered hologram checks from a third party to avoid fraudulent activity. McNeil later noticed unauthorized checks totaling $3,973.96. The checks did not contain the hologram and their numbers were duplicative of checks that Defendant had properly paid. Defendant refused to reimburse McNeil, stating that “reasonable care was not used in declining to use our ... services, which substantially contributed to the making of the forged item(s).” Government agencies indicated that they would not intervene in a private dispute involving the interpretation of a contract. Plaintiff filed a putative class action, citing Uniform Commercial Code 4-401 and 4-103(a), The district court dismissed, holding that the Agreement did not violate the UCC and shifted liability to Plaintiff. The Sixth Circuit reversed. Plaintiff stated a plausible claim that the provision unreasonably disclaims all liability under these circumstances; the UCC forbids a bank from disclaiming all of its liability to exercise ordinary care and good faith. View "Majestic Building Maintenance, Inc. v. Huntington Bancshares, Inc." on Justia Law

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The defendant companies, based in China, produce conventional solar energy panels. Energy Conversion and other American manufacturers produce the newer thin-film panels. The Chinese producers sought greater market shares. They agreed to export more products to the U.S. and to sell them below cost. Several entities supported their endeavor. Suppliers provided discounts, a trade association facilitated cooperation, and the Chinese government provided below-cost financing. From 2008-2011, the average selling prices of their panels fell over 60%. American manufacturers consulted the Department of Commerce, which found that the Chinese firms had harmed American industry through illegal dumping and assessed substantial tariffs. The American manufacturers continued to suffer; more than 20 , including Energy Conversion, filed for bankruptcy or closed. Energy Conversion sued under the Sherman Act, 15 U.S.C. 1, and Michigan law, seeking $3 billion in treble damages, claiming that the Chinese companies had unlawfully conspired “to sell Chinese manufactured solar panels at unreasonably low or below cost prices . . . to destroy an American industry.” Because this allegation did not state that the Chinese companies could or would recoup their losses by charging monopoly prices after driving competitors from the field, the court dismissed the claim. The Sixth Circuit affirmed. Without such an allegation or any willingness to prove a reasonable prospect of recoupment, the court correctly rejected the claim. View "Energy Conversion Devices Liquidation Trust v. Trina Solar Ltd." on Justia Law

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Alco, a vending machine company, contracted with B2B, a “fax broadcaster,” in 2005, and dealt with B2B and Macaw, a Romanian business, that worked with B2B. Each sample advertisement provided by B2B stated that the message was “the exclusive property of Macaw . . . , which is solely responsible for its contents and destinations.” According to Alco, B2B was to identify recipients from a list of businesses that had consented to receive fax advertising from B2B. Alco never saw this list, but believed that each business would be located near Alco’s Ohio headquarters, and had an existing relationship with B2B, so that the advertising would be “100 percent legal.” B2B broadcast several thousand faxes, advertising Alco. According to Alco, B2B did not inform Alco about the number of faxes, the dates on which they were sent, or the specific businesses to which they were addressed. After each broadcast, Alco received complaints of unauthorized faxes in violation of the Telephone Consumer Protection Act 47 U.S.C. 227(b)(1)(C), which it referred to B2B. Siding filed a purported class action against Alco. The district court rejected the suit on summary judgment. The Sixth Circuit reversed and remanded for determination of whether B2B broadcast the faxes “on behalf of” Alco, considering the degree of control that Alco exercised, whether Alco approved the final content, and the contractual relationship. View "Siding and Insulation Co. v. Alco Vending, Inc." on Justia Law

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Exel, a shipping broker, sued SRT, an interstate motor carrier, after SRT lost a shipment of pharmaceutical products it had agreed to transport for Exel on behalf of Exel’s client, Sandoz. On summary judgment, the district court awarded Exel the replacement value of the lost goods pursuant to the transportation contract between Exel and SRT, rejecting SRT’s argument that its liability was limited under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. 14706. The Sixth Circuit reversed. Whether SRT had limited its liability was a question of fact for a jury. To limit its liability under the Carmack Amendment, a carrier must: provide the shipper with a fair opportunity to choose between two or more levels of liability obtain the shipper’s written agreement as to its choice of liability; and issue a receipt or bill of lading prior to moving the shipment. SRT did not meet its burden on summary judgment of establishing that it provided Sandoz with the opportunity to choose between two or more levels of liability. SRT did not explain what “classification or tariff . . . govern[ed]” the shipment, nor indicate whether it made this information available to Sandoz. View "Exel, Inc. v. S. Refrigerated Transp., Inc." on Justia Law

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In 2005, the Harrises bought tens of thousands of shares in Bancorp through a TD Ameritrade account. Six years later, the Harrises sought to hold some of their Bancorp stock in another form, registered in their name and reflected in a physical copy of a certificate signifying their ownership. TD Ameritrade refused to convert the Harrises’ form of ownership, stating that all Bancorp stock was in a “global lock,” prohibiting activity in the stock, including changing the Harrises’ form of ownership. The lock was created because someone had fraudulently created hundreds of millions of invalid shares of Bancorp stock. The Harrises sued, alleging that TD Ameritrade had violated SEC Rule 15c3-3 and Nebraska’s version of the Uniform Commercial Code. The Sixth Circuit affirmed dismissal.. Neither the SEC Rule nor Nebraska’s Commercial Code creates a private right of action to vindicate the alleged problem. View "Harris v. TD Ameritrade, Inc." on Justia Law

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Best designs and markets exit signs and emergency lighting. Pace manufactured products to Best’s specifications. Best’s founder taught Pace how to manufacture the necessary tooling. There was no contract prohibiting Pace from competing with Best. By 2004, Best was aware that Pace was selling products identical to those it made for Best to Best’s established customers. Several other problems arose between the companies. When they ended the relationship, Pace was in possession of all of the tooling used to manufacture Best’s products and the cloned products, and Best owed Pace almost $900,000 for products delivered. Pace filed a breach of contract suit. Best requested a setoff of damages for breach of warranty and counterclaimed for breach of contract, tortious interference, misappropriation of trade secrets, conversion, and fraud. Pace claimed that Best had misappropriated Pace’s trade secrets and had tortiously interfered with Pace’s contracts. The district court found that Best had breached its contractual obligations by failing to pay, but that Pace was liable for breach of warranties, breach of contract, tortious interference, misappropriation of trade secrets, conversion, and false designation of origin and false advertising under the Lanham Act. The Sixth Circuit affirmed that Pace is liable for breach of contract and tortious interference, but reversed or vacated as to the trade secrets, Lanham Act, conversion, and warranties claims. View "Kehoe Component Sales Inc. v. Best Lighting Prods., Inc." on Justia Law

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Pharmacy benefit manager Medco is an intermediary between health plan sponsors (often employers) and prescription drug companies, enabling plans to offer less expensive prescription drug benefits to their members. Medco keeps an updated list of available medicines (formulary) available and sends that list to prescribers and to plan sponsors so they can keep costs down for members. Sandusky provides chiropractic services and prescribes medications to patients who are members of prescription drug plans contracted with Medco. Medco faxed part of its formulary to Sandusky in June 2010, asking Sandusky to “consider prescribing plan-preferred drugs” to “help lower medication costs. Other than listing Medco’s name and number, the fax did not promote Medco’s services and did not solicit business. Three months later, Medco sent Sandusky another fax that informed Sandusky that a certain respiratory drug brand was preferred over another brand, and could save patients money. Sandusky, on behalf of a proposed class, sued Medco, claiming that the faxes were “unsolicited advertisements” prohibited by the Telephone Consumer Protection Act, 47 U.S.C. 227(b)(1)(C). The Sixth Circuit affirmed summary judgment in favor of Medco, finding that the faxes were not advertisements as a matter of law because their primary purpose was informational rather than promotional. View "Sandusky Wellness Ctr., LLC v. Medco Health Solutions, Inc." on Justia Law

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Gordon Auto Body Parts, a Taiwanese company, was one of several early entrants into the U.S. market for replacement truck hoods. PBSI eventually entered the market for certain replacement hoods but found that it could not match the prices of Gordon and other Taiwanese firms, with which Gordon had participated in joint ventures. Believing that Gordon and the other firms were conspiring to drive it out of business with predatory prices, PBSI brought antitrust claims against Gordon. The district court granted Gordon summary judgment. The Sixth Circuit affirmed, finding that PBSI failed to make any showing that Gordon’s prices were below an appropriate measure of cost. View "Superior Prod. P'shp v. Gordon Auto Body Parts Co." on Justia Law

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Kopko ran SFS in Michigan, providing financial transaction processing and electronic funds transfers to companies engaged in e-commerce, processing those transactions through its Fifth Third account, Fifth Third discovered that FBD was processing illegal gambling funds through that account and notified SFS that it was closing SFS’s account immediately. Losing this account crippled SFS’s ability to do business. SFS went bankrupt. Kopko telephoned FBD and spoke to Bastable, FBD’s vice-president for e-commerce. According to Kopko, Bastable said FBD did not have an account in SFS’s name. Months later SFS received a grand jury subpoena related to a federal investigation of the gambling transactions done in SFS’s name. When Kopko called Bastable again to discuss the subpoena, Bastable admitted that FBD had an account in SFS’s name and that the board of directors was aware of this account. In 2012, SFS sued FBD, Bastable, and FBD’s individual directors in federal court for negligence and fraud against. The district court dismissed. The Sixth Circuit affirmed that: answering the phone calls did not establish personal jurisdiction over individual defendants; FBD owed no duty of care to SFS because SFS was not a customer; and SFS failed to adequately plead a claim of fraud. View "SFS Check, LLC v. First Bank of De." on Justia Law