Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

MERV, an LLC formed to purchase and operate an antique mall, encountered difficulties paying its mortgage loan and entered into a forbearance agreement with the Bank. MERV later defaulted and filed a Chapter 11 Bankruptcy Petition. Although a plan of reorganization was confirmed, MERV again defaulted. The Bank foreclosed its mortgage on the property. Before the bankruptcy case closed, MERV retained special counsel and filed an adversary proceeding against some of its founders and the Bank. The claims against the Bank alleged breach of contract, “facilitation of fraud and theft”, and equitable subordination of the Bank’s claim. MERV sought punitive damages. The bankruptcy court granted summary judgment, agreeing with the Bank that MERV had executed a release of all of the claims as part of the forbearance agreement. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding that the Bank offered prima facie evidence of a complete affirmative defense to the complaint by showing that MERV executed a Release of all claims. MERV did not demonstrate a genuine issue of material fact as to the validity of that Release. MERV did not file a motion or a Rule 56(d) affidavit or declaration with the bankruptcy court requesting more time for discovery. View "In re: MERV Props., LLC" on Justia Law

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

Bulgarelli’s 36-foot boat ran aground on Lake St. Clair. Bulgarelli contacted a tow service, which dispatched a salvage vessel commanded by Captain Leslie. Leslie claims that he quoted the price of $250 per foot of length. Bulgarelli insists that the quoted price was $1,000–$1,200, and that Leslie assured him that insurance would pay. Bulgarelli signed the contract, which did not include a printed price, but has “$250.00 FT” scrawled in its bottom margin. Bulgarelli claims that handwriting was not present when he signed the paper and Leslie had exclusive possession of the sole copy of the contract. Calling this a “hard” grounding in high winds and very rough waters, Leslie claimed that the work took 29 minutes. Bulgarelli and a corroborating witness stated that the wind and water were calm, and that Leslie pulled the vessel free in less than 10 minutes. The tow company sought enforcement of a maritime lien. Bulgarelli counterclaimed for fraud, innocent misrepresentation, and reformation. Finding Bulgarelli and his corroborating witness credible, while finding Leslie not credible, the court made a finding that Leslie had quoted the price of $1,000–$1,200, intending to bill Bulgarelli’s insurance company for $9,000, and added the handwritten margin note after Bulgarelli signed the contract. The Sixth Circuit affirmed. View "St. Clair Marine Salvage, Inc. v. Bulgarelli" on Justia Law

The Cleveland Indians hired National to produce Kids Day events at baseball games, with attractions, including an inflatable bouncy castle and inflatable slide. The contract required National to secure a five-million-dollar comprehensive liability policy. National submitted an Application to Doodson Insurance Brokerage, stating on the application that the Kids Day events would include inflatable attractions. Doodson arranged for National to obtain a policy, but it excluded from coverage injuries caused by inflatable slides. Johnson admiring a display at a 2010 Indians game, was crushed by an inflatable slide that collapsed onto him. He died of his injuries. Johnson’s estate won a $3.5 million state court default judgment against National. The Sixth Circuit held that the insurance policy did not cover Johnson’s injuries. National and the Indians sued Doodson and obtained settlements. Johnson’s estate, which has not collected on the default judgment against National, sued Doodson, alleging negligence and breach of contract. The Sixth Circuit affirmed dismissal. Under Michigan law, the broker’s contractual duty to its client to protect the client from negligence suits, without more, does not create a tort duty to an injured party who brings such suits and Johnson was neither a party to nor an intended third-party beneficiary of the contract between the broker and National. View "Johnson v. Doodson Ins. Brokerage" on Justia Law

Leonor, a Michigan dentist, suffered an injury that prevented him from performing dental procedures. At the time of his injury, he spent about two-thirds of his time performing dental procedures and approximately one third managing his dental practices and other businesses that he owned. After initially granting coverage, his insurers denied total disability benefits after they discovered the extent of his managerial duties. Leonor sued, alleging contract and fraud claims. The district court granted summary judgment to Leonor on his contract claim, holding that “the important duties” could plausibly be read to mean “most of the important duties” and resolving the ambiguity in favor of Leonor under Michigan law. The Seventh Circuit affirmed, stating that the context of the policy language in this case permits a reading of “the important duties” that is not necessarily “all the important duties.” View "Leonor v. Provident Life & Accident Co." on Justia Law

Ramsey applied for $2 million in life insurance from Penn. His application indicated that he was a Cleveland firefighter and had last seen his physician for a checkup in 2006. During a medical examination by a nurse, Ramsey disclosed that he suffered from chronic ulcerative colitis; in 1984 a colorectal surgeon had surgically removed Ramsey’s colon to alleviate his symptoms. After reviewing his medical records, in mid-April, Penn offered him a policy with one of the lowest ratings Penn offers and an above-average premium. On April 28, Ramsey was examined at the Cleveland Clinic. Having had no treatment for 10-12 years, his visit was precipitated by “frequent bloody [bowel movements] and feel[ing] bad.” On June 1, Penn drafted and Ramsey signed amendments, changing the policy value to $500,000. Ramsey stated: I have not had a colon[o]scopy since 2004 and have had no gastrointestinal problems since that time. Ramsey was soon diagnosed with stage IV metastatic rectal cancer and died in September 2011. Penn denied an application for benefits, rescinded the policy, and returned $14,761.45 in premiums. The district court granted Penn summary judgment, finding Ramsey had failed to inform Penn of a change in the status of his health before the delivery of his policy, breaching a representation in the contract. The Sixth Circuit reversed, finding a genuine dispute as to whether Ramsey misrepresented the state of his health by failing to disclose his rectal bleeding and doctor visits. View "Ramsey v. Penn Mut. Life Ins.Co." on Justia Law

Under a consent decree in a lawsuit relating to employee retirement benefits, Navistar contributes to a Supplemental Benefit Trust managed by SBC. The size of its contributions is determined by a formula based on Navistar’s economic performance. Navistar must regularly provide data to the SBC to permit it to evaluate whether Navistar is applying the formula correctly. The agreement provides for arbitration before an accounting firm if SBC disputes the “information or calculations” Navistar provides. SBC claimed that Navistar was improperly classifying aspects of its business activities and structuring its business to evade its profit-sharing obligations under the agreement. Navistar claimed that under the accountant arbitration mechanism, which applies to disputes over the “information or calculations” provided by Navistar, SBC’s claims were subject to arbitration. The district court held that the claims were subject to arbitration, but that Navistar’s conduct before and during litigation waived its right to arbitrate the claims. The Sixth Circuit held that the claims were subject to arbitration and that Navistar had not waived its right. While Navistar may bear some responsibility for the long duration of its dispute with the SBC, its behavior with regard to arbitration does not satisfy the particular elements of waiver. View "Supplemental Benefit Comm. v. Navistar, Inc." on Justia Law

American Express sent Wise a credit card and “Agreement.” Wise accepted the offer by using the credit card. The Agreement provides that it is governed by the laws of Utah and provides that, upon default: “You agree to pay all reasonable costs, including reasonable attorneys’ fees, incurred by us.” Wise defaulted on the account, and American Express retained a law firm, which filed suit in Ohio state court. Wise filed for bankruptcy, staying that lawsuit, then filed a putative class action lawsuit against the attorneys, seeking to represent consumers from whom they demanded attorney’s fees. Noting that Ohio law bars contracts that would require payment of attorney’s fees on the collection of consumer debt, Wise alleged violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692,and the Ohio Consumer Sales Practices Act (OCSPA), Ohio Rev. Code 1345.02, 1345.03. The district court applied Utah law and determined that: the case fell outside the scope of the arbitration clause; OCSPA did not apply; Utah law allowed for the collection of attorney’s fees: and there was no FDCPA violation. The Sixth Circuit reversed in part. The pleadings do not resolve which law would govern the attorney’s-fee question. On the state law claim, the court affirmed. View "Wise v. Zwicker & Assocs., PC" on Justia Law

Plaintiff offered to sell 3 million pounds of scrap copper to the defendant. The defendant negotiated the core terms of the sale but did not object to a fee-shifting provision: “In the event purchaser shall default in his obligations hereunder, purchaser shall be liable for [the plaintiff]’s costs of collection, including attorney’s fees.” The contract was negotiated between two experienced and sophisticated commercial entities. There was no duress. In a suit between the two, the otherwise victorious plaintiff appealed the district court’s ruling that the unilateral fee-shifting clause for attorney’s fees was unenforceable under Ohio law as a matter of public policy. The district court relied on Sixth Circuit precedent, holding that the Ohio Supreme Court would not enforce similar fee-shifting clauses. The Sixth Circuit reversed, noting that the Ohio Supreme Court has since clarified that it would enforce such unilateral or one-sided fee-shifting contract provisions. View "Allied Indus. Scrap, Inc. v. OmniSource Corp." on Justia Law

Under a 2007 “Purchase Agreement – Public Sale” Eagle agreed to pay $4,812,874.65 to purchase Louisville property owned by the Kentucky Transportation Cabinet. Eagle paid a good faith deposit of $962,574.93 to “KY STATE TREASURER.” The Agreement was assigned by Eagle to Shelbyville Road Shoppes, the debtor. Two days before the expiration of an 18-month extension to close the transaction, the debtor filed a voluntary Chapter 7 petition. The bankruptcy trustee unsuccessfully sought return of the good faith deposit from the Cabinet. The bankruptcy court found that neither the Agreement nor state law granted the debtor the right to have the deposit returned. The district court affirmed, finding: that the debtor had no right to possess or use the deposit prior to filing for relief, so the trustee had no right to request turnover under section 542; that the deposit was not held in escrow; that the transaction was not a contract for deed; and that the debtor did not retain an equitable right to the deposit as a vendee. The Sixth Circuit affirmed. The debtor did not possess either a legal or an equitable property interest in the deposit at the time of the Chapter 7 petition. View "Lawrence v. Kentucky" on Justia Law