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

For some time, Broad Street Energy has owned many Ohio oil-and-gas leases. The market has changed to use of shale-drilling (fracking) to extract oil and gas from shale formations deeper than the formations from which Broad Street has extracted oil. Fracking requires leases of at least 640 acres, as opposed to the 20-to-40-acre leases that Broad Street required for conventional wells. Endeavor agreed to pay $35 million for many of Broad Street’s leases, plus wells, pipelines, and related property. Endeavor put $3.5 million in escrow. Broad Street delivered a list of assets and title limitations. Before closing, Endeavor conducted due diligence and told Broad Street that it found title defects affecting 40% of the leases and reducing the value of the assets by 55%. Endeavor did not seek more information or invoke the agreement’s dispute-resolution process, but terminated on the ground that the title defects reduced value by at least 30%. Broad Street responded several times, disputing those statements and insisting on at least implementing dispute-resolution procedures With no response, it sued. A jury awarded Broad Street the $3.5 million escrow, plus interest. The Sixth Circuit affirmed, noting the relative sophistication of the parties and that the contract did not permit Endeavor to terminate unilaterally based on its own assessment of title defects and their value. View "Broad St. Energy Co. v. Endeavor Ohio, LLC" on Justia Law

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

Slusher, an orthopedic surgeon and military reservist, worked at Heritage, a small hospital in Shelbyville, Tennessee, through a staffing service, on 30-day assignments beginning on July 20, 2010. Slusher was offered, but did not accept, a permanent position. He agreed to a one-year contract in January 2011, which could be terminated by either party for any reason upon 90 days’ notice or by Heritage, effective immediately, with 90 days’ pay instead of notice. It did not provide for renewal or extension. Heritage knew that he could be called up for deployment. On May 4, 2011, Slusher received orders. Before Slusher’s deployment, Heritage informed him that it had interviewed another physician for the orthopedic surgeon position. Heritage granted Slusher military leave. He reported for active duty on June 10. While he was in Iraq, Heritage informed Slusher that it was nearing a contract with Mosley. Slusher later signed a termination agreement, specifying that his employment would end on October 26. Slusher returned to Heritage, where Mosley had begun working, on October 3, and worked there until October 26, 2011. Slusher filed a complaint with the Veterans’ Employment and Training Service. After the Department of Labor closed its investigation, Slusher filed suit, claiming discrimination under and violation of the Uniformed Services Employment and Reemployment Rights Act, 38 U.S.C. 4301-35 and breach of contract. The Sixth Circuit affirmed summary judgment in favor of the defendants on each claim. View "Slusher v. Shelbyville Hosp. Corp." on Justia Law

Plaintiffs received internet and cable services from TWC in Chardon, Ohio. The Bureau of Criminal Investigation (BCI), conducting an online investigation to identify individuals possessing and sharing child pornography, located a suspect using a public IP address of 173.88.218.170 and found images and movie files titled consistent with child pornography. The IP address of plaintiffs’ computers was 173.88.218.70. Responding to a subpoena for subscriber information for the .170 address, TWC indicated that it was assigned to plaintiffs. While executing a search warrant for plaintiffs’ residence, BCI agents determined that the IP address assigned to plaintiffs was the .70 address, not the .170 address. The search was terminated without discovery of any evidence of criminal activity. Plaintiffs alleged that the search was extensive, destructive, and in plain sight of neighbors; that TWC’s conduct was intentional and fraudulent; that disclosure of their subscriber information without authorization violated the Stored Communications Act, 18 U.S.C. 2707(a)); and state-law claims. The Sixth Circuit affirmed denial of TWC’s claim of immunity under section 2703(e), but found that 18 U.S.C. 2707(e)’s “good faith reliance” defense barred the claims and that the state-law claims failed because the factual allegations were insufficient to establish that TWC disclosed the information intentionally, wrongfully, or in breach of contract. View "Long v. Insight Commc'ns of Cent. Ohio, LLC" on Justia Law

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